March 29/Silver refuses to buckle/Silver open interest on the comex climbs above 201,000 contracts/Yesterday’s confirmed silver volume: 83,588 contracts or 417 million oz/GLD loses 1.78 tonnes but the SLV gains 1.136 million oz/North Korea ready for another nuclear test/UK signs Article 50 and thus BREXIT officially begins/Three cities: LA, Chicago and NY to fight in court the sanctuary defunding/

Gold: $1253.40  DOWN $1.90

Silver: $18.22  UP 0  cents

Closing access prices:

Gold $1253.40

silver: $18.25!!!

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

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: 1261.07 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  1248.20

PREMIUM FIRST FIX:  $12.87

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SECOND SHANGHAI GOLD FIX: 1262.83

NY GOLD PRICE AT THE EXACT SAME TIME: 1249.37

Premium of Shanghai 2nd fix/NY:$13.46

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LONDON FIRST GOLD FIX:  5:30 am est  1252.90

NY PRICING AT THE EXACT SAME TIME: 1252.95

LONDON SECOND GOLD FIX  10 AM: 1251.15

NY PRICING AT THE EXACT SAME TIME. 1252.95

For comex gold:

MARCH/

NOTICES FILINGS TODAY FOR MARCH CONTRACT MONTH:  10 NOTICE(S) FOR 1000 OZ.  TOTAL NOTICES SO FAR: 143 FOR 14,300 OZ    (0.4447 TONNES)

For silver:

For silver: MARCH

30 NOTICES FILED TODAY FOR 150,000 OZ/

Total number of notices filed so far this month: 3855 for 19,275,000 oz

We have now entered options expiry week so expect gold and silver to be subdued from today forward.

 

The OTC/LBMA options expiry is the morning of March 31.

I would expect the bankers to raid tomorrow, probably beginning in the access market and continuing on into first day notice on Friday. They will be hugely concerned if the open interest for silver is another strong gain.

Let us have a look at the data for today

.

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In silver, the total open interest  ROSE BY A HEALTHY 3,748 contracts UP to 201,829  with the  RISE IN PRICE ( 14 CENTS) WITH RESPECT TO YESTERDAY’S TRADING. THE HEDGE FUNDS (MANAGED MONEY) CONTINUES TO SLOWLY ADD TO THEIR POSITIONS WITH THE BANKERS TRYING TO COVER THEIR EVER BURGEONING SHORTS (OVER 555 MILLION OZ). In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.009 BILLION TO BE EXACT or 144% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MARCH MONTH: THEY FILED: 30 NOTICE(S) FOR 150,000 OZ OF SILVER

In gold, the total comex gold also FELL BY A HUGE 22,987  contracts DESPITE THE SLIGHT FALL IN THE PRICE OF GOLD ($0.10 with YESTERDAY’S TRADING).We thus continue with the strange events that every time we enter an active month, the open interest obliterates, rather than rolling to the next active month. The total gold OI stands at 449,418 contracts.

we had 10 notice(s) filed upon for 1000 oz of gold.

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

GLD:

We had another change in tonnes of gold at the GLD: this time a withdrawal of 1.78 tonnes out of the GLD.

This gold no doubt is heading over to Shanghai.

Inventory rests tonight: 833.51 tonnes

.

SLV

We had a big change in inventory at the SLV/a deposit of 1.136 million oz of silver into the SLV/

THE SLV Inventory rests at: 333.640 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 3748 contracts UP TO  to 201,829 AS SILVER WAS UP 14 CENT(S) with YESTERDAY’S trading. The gold open interest FELL BY A HUGE 22,987 contracts DOWN to 449,418 DESPITE THE SLIGHT FALL IN THE PRICE OF GOLD OF $0.10  (YESTERDAY’S TRADING).

(report Harvey

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 11.66 POINTS OR .36%/ /Hang Sang CLOSED UP 46.18 POINTS OR 0.19% . The Nikkei closed UP 14.61 OR 0.08% /Australia’s all ordinaires  CLOSED UP 0.86%/Chinese yuan (ONSHORE) closed DOWN at 6.8879/Oil ROSE to 48.61 dollars per barrel for WTI and 51.56 for Brent. Stocks in Europe ALL MIXED   ..Offshore yuan trades  6.8679 yuan to the dollar vs 6.8879 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  NARROWS AGAIN/ ONSHORE YUAN WEAKER AND THE OFFSHORE YUAN  IS  WEAKER AND THIS IS  COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA IS SATISFIED WITH WASHINGTON’S RESPONSE 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA

Just what the world needs right now: North Korea is actively preparing for another nuclear test.  And they have a bozo nut head for a leader, Kim Jong-UN

( zero hedge)

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

4. EUROPEAN AFFAIRS

i)UK

Brexit letter is now signed and thus article 50 is triggered:

( zero hedge)

ii)Donald Trusk receives article 50 letter from the UK.  The following explains what happens next:

( zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6.GLOBAL ISSUES

7. OIL ISSUES

Oil rises higher on a smaller and expected crude build.  However uSA crude production, the most important data point rose again to its highest level since 2016

( zero hedge)

8. EMERGING MARKETS

9.   PHYSICAL MARKETS

i)Chris Powell goes on the air in India.  He correctly states that a free market in gold would enrich their country greatly due to their 24,000 tonnes of private gold owned by citizens and temples

( Chris Powell/GATA)

ii)Shandong gold mines says that it found a huge gold deposit equivalent to 383 tonnes (12,3 million oz)and may reach over 550 tonnes (17.6 million oz) over the life of the mine.

(Bloomberg/GATA)

10. USA stories

i)The following is a must read as David Stockman talks about the budgetary resolution and reconciliation process that the Republicans now face.  Stockman states (and he is the former budgetary director for the Reagan administration) that this will be impossible and there will be no money at all for any of Trump’s new wishes for tax cuts and infrastructure spending as well as money for defense.

in a nutshell, the uSA is in a mess..

a must read..

( David Stockman/Daily Reckoning)

ii)It looks like there will not be funding for Trump’s wall in this fiscal year 2017. It may force a government shutdown

( zero hedge)

iii)Deutsche bank now gives odds of a government shutdown on April 28 at an extremely high 40%.

( zero hedge)

iv)The major cities of Los Angeles, New York and Chicago are now vowing to defy Trump’s santuary defunding through the courts.

( zero hedge)

v)Pending home sales with a massive beat up 5.55 month over month vs 2.5% expectations.

( zero hedge)

vi)Trump may get his wish as the Obamacare explosion may come as early as May 22.  Trump has to decide whether to fund subsidies in a cost sharing exercise.  The Republicans sued and won in court but Obama appealed.  That appeal is coming up on May 22 and if Trump negates the funding Obamacare is dead.

( zero hedge)

vii)Dave Kranzler talks about 3 black swans that can bury the economy:

  1. the Debt ceiling
  2. the mess in the USA bricks and mortar/shopping malls
  3.  the looming pension (underfunding) problem

( Dave Kranzler/IRD)

viii)Republicans state that they are going to try another Obamacare vote next week. Good luck to them. It will not happen

( zero hedge)

ix) Lululemon plunges 17% on poor guidance.

So much for the higher “soft data” consumer confidence!

( zero hedge)

Let us head over to the comex:

The total gold comex open interest COLLAPSED BY A HUGE 22,987 CONTRACTS DOWN to an OI level of 449,418 DESPITE THE SLIGHT FALL IN THE PRICE OF GOLD ( $0.10 with YESTERDAY’S trading). We continue to witness the same events as the open interest obliterates once we are about to enter an active delivery month. 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 57 contract(s) FALLING TO  13. We had 51 contact(s) served YESTERDAY, so we LOST 6 gold contracts or an additional 600 oz will not stand for delivery in this non active delivery month of March. The next active contract month is April and here we saw it’s OI LOST 45,222 contracts DOWN TO 78,683 contracts.

For comparison purposes, the April 2016 contract at this time had an OI of 87,565 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 GAINED 422 contract(s) and thus its OI is 2008 contracts. The next big active month is June and here the OI ROSE by 21,182 contracts up to 260,178.

We had 10 notice(s) filed upon today for 1000 oz

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
 And now for the wild silver comex results.  Total silver OI ROSE BY 3748 contracts FROM 198,081 UP TO 201,829 WITH YESTERDAY’S 14 CENT GAIN.  THE BANKERS SUPPLIED THE NECESSARY CONTRACTS TO OUR HEDGE FUND LONGS WHO CONTINUE TO PILE INTO SILVER ON THE LONG SIDE.  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 ONLY 22,000 CONTRACTS AWAY FROM RECORD HIGHS IN OI AND YET WE ARE $2.30 BELOW THE PRICE OF $20.44 WHEN THAT RECORD WAS SET.

We are in the active delivery month is March and here the OI decreased by 0 contracts falling to 47 contracts. We had 30 notices served yesterday so we  gained 30 silver contracts or an additional 150,000 oz of silver that will 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 LOST 175 contract(s) to 775 contracts. The next active contract month is May and here the open interest GAINED 852 contracts UP to 147,748 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 30 notice(s) filed for 150,000 oz for the MARCH 2017 contract.

VOLUMES: for the gold comex

Today the estimated volume was 197,757  contracts which is fair.

Yesterday’s confirmed volume was 363,743 contracts  which is excellent.(many rolls)

volumes on gold are getting higher!

INITIAL standings for MARCH
 March 29/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 nil oz
Deposits to the Dealer Inventory in oz nil oz

 

Deposits to the Customer Inventory, in oz 
 2636.300 oz
Scotia
82 kilobars
No of oz served (contracts) today
 
10 notice(s)
1000 oz
No of oz to be served (notices)
3 contracts
300 oz
Total monthly oz gold served (contracts) so far this month
143 notices
14300 oz
0.4447 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 122,843.3 oz
Today we HAD 1 kilobar transaction(s)/
Today we had 0 deposit(s) into the dealer:
total dealer deposits: nil oz
We had nil dealer withdrawals:
total dealer withdrawals:  nil oz
we had 1  customer deposit(s):
 i) Into Scotia: 2636.300 oz
Scotia
82 kilobars
total customer deposits; 2636.300   oz
We had 0 customer withdrawal(s)
total customer withdrawal: nil  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 10 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 (143) x 100 oz or 14,300 oz, to which we add the difference between the open interest for the front month of MARCH (13 contracts) minus the number of notices served upon today (10) x 100 oz per contract equals 14,600 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 (143) x 100 oz  or ounces + {(13)OI for the front month  minus the number of  notices served upon today (10) x 100 oz which equals 14,600 oz standing in this non active delivery month of MARCH  (.4541 tonnes)
we lost 6 contracts or an additional 600 oz that will not stand for delivery in March.
 
 
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On first day notice for MARCH 2016, we had 2.146 tonnes of gold standing. At the conclusion of the month we had 2.311 tonnes standing.
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I have now gone over all of the final deliveries for this year and it is startling.
First of all:  in 2015 for the 13 months: 51 tonnes delivered upon for an average of 4.25 tonnes per month.
Here are the final deliveries for all of 2016 and the first month of January 2017
Jan 2016:  .5349 tonnes  (Jan is a non delivery month)
Feb 2016:  7.9876 tonnes (Feb is a delivery month/deliveries this month very low)
March 2016: 2.311 tonnes (March is a non delivery month)
April:  12.3917 tonnes (April is a delivery month/levels on the low side
And then something happens and from May forward deliveries boom!
May; 6.889 tonnes (May is a non delivery month)
June; 48.552 tonnes ( June is a very big delivery month and in the end deliveries were huge)
July: 21.452 tonnes (July is a non delivery month and generally a poor one/not this time!)
August: 44.358 tonnes (August is a good delivery month and it came to fruition)
Sept:  8.4167 tonnes (Sept is a non delivery month)
Oct; 30.407 tonnes complete.
Nov.    8.3950 tonnes.
DEC.   29.931 tonnes
JAN/     3.9004 tonnes
FEB/ 18.734 tonnes
March: 0.4541 tonnes
total for the 15 months;  244.684 tonnes
average 16.312 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 1022,342.417 or 31.799 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,976,446.085 or 279.205 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 279.205 tonnes for a  loss of 24  tonnes over that period.  Since August 8/2016 we have lost 75 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 8 MONTHS  75 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE MARCH DELIVERY MONTH
MARCH INITIAL standings
 March 29. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
90,859.400 oz
 Scotia
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
 4,196.037 oz
 Delaware
No of oz served today (contracts)
30 CONTRACT(S)
(150,000 OZ)
No of oz to be served (notices)
17 contracts
(85,000  oz)
Total monthly oz silver served (contracts) 3855 contracts (19,275,000 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  4,727,753.1 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 1 customer withdrawal(s):
i) Out of Scotia: 90,859.400 oz
TOTAL CUSTOMER WITHDRAWALS: 90,859.400 oz
 We had 1 deposits:
i) Into Delaware: 4,196.037 oz
***deposits into JPMorgan have now STOPPED.
In the month of March and February, JPMorgan stopped (received) almost all of the comex silver contracts.
total customer deposits; 4,196.037   oz
 
 we had 0 adjustment(s)
The total number of notices filed today for the MARCH. contract month is represented by 30 contract(s) for 150,000 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 3855 x 5,000 oz  = 19,275,000 oz to which we add the difference between the open interest for the front month of MAR (47) and the number of notices served upon today (30) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the March contract month:  3855(notices served so far)x 5000 oz  + OI for front month of Mar.( 47 ) -number of notices served upon today (30)x 5000 oz  equals  19,360,000 oz  of silver standing for the Mar contract month. This is  now average for an active delivery month in silver.  We gained 150,000 silver ounces standing in this active delivery month of March.
 
Volumes: for silver comex
 
Today the estimated volume was 27,459 which is fair
Yesterday’s  confirmed volume was 83,588 contracts  which is gigantic!!.
 
Total dealer silver:  41.276 million (close to record low inventory  
Total number of dealer and customer silver:   191.402 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 29/a withdrawal of 1.78 tonnes of gold out of the GLD/Inventory rests tongith at 833.51 tonnes

March 28/this is good!! A deposit of 2.67 tonnes of gold into the GLD/Inventory rests at 835.29 tonnes.

March 27/no changes in gold inventory at the GLD/Inventory rests at 832.62 tonnes

March 24/another withdrawal of 1.78 tonnes from the GLD/Inventory rests at 832.62 tonnes

March 23/no change in gold inventory at the GLD/Inventory rests at 834.40 tonnes

March 22/no changes in gold inventory at the GLD/Inventory rests at 834.40 tonnes

March 21/a deposit of 4.15 tonnes of gold into the GLD/Inventory rests at 834.40 tonnes

March 20/WE HAD A MASSIVE 6.81 TONNE WITHDRAWAL FROM THE GLD/INVENTORY RESTS AT 830.25 TONNES/THIS GOLD MUST BE ON ITS WAY TO SHANGHAI.  WITH GOLD RISING THESE PAST FEW DAYS, IT MAYS NO SENSE WHATSOEVER ON GOLD LIQUIDATION.

March 17/a huge withdrawal of 2.37 tonnes from the GLD/Inventory rests at 837.06 tonnes

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

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March 29 /2017/ Inventory rests tonight at 833.51 tonnes
*IN LAST 118 TRADING DAYS: 114.59 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 62 TRADING DAYS: A NET  12.84 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: A NET  38.27 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory
March 29/a deposit of 1.136 million oz into the SLV/Inventory rests at 333.640 million oz
March 28/no changes in inventory at the SLV/Inventory rests at 332.504 million oz/
March 27/no changes in inventory at the SLV/Inventory rests at 332.504 million oz/
March 24/no change in inventory at the SLV/Inventory rests at 332.504 million oz/
March 23/no change in inventory at the SLV/Inventory rests at 332.504 million oz
March 22/no change in inventory at the SLV/Inventory rests at 332.504 million oz
March 21/no change in inventory at the SLV/Inventory rests at 332.504 million oz/
March 20/a gain of 1.232 million oz of silver into the SLV/inventory rests at 332.272 million oz/
March 17/no change in silver inventory/SLV inventory rests at 331.272 million oz
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/
March 29.2017: Inventory 333.640  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 6.3 percent to NAV usa funds and Negative 6.6% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.3%
Percentage of fund in silver:39.5%
cash .+0.1%( Mar 29/2017) 
2. Sprott silver fund (PSLV): Premium RISES  to -32%!!!! NAV (Mar 29/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to – 0.32% to NAV  ( Mar 29/2017)
Note: Sprott silver trust back  into NEGATIVE territory at -32% /Sprott physical gold trust is back into NEGATIVE territory at -0.32%/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 WEDNESDAY

GOLDCORE/BLOG/MARK O’BYRNE.

‘Most Secure Coin In the World’ ?

– New pound coin ‘most secure coin in world’ ? 
– New British £1 coins much harder to counterfeit
– Pound coin uses “secret” cutting edge technology
– Coins uses ‘iSIS’ technology which may involve RFID tags
– Central banks, governments may be able to track coins
– Libertarians and privacy advocates will have concerns
–  “Secure coin” yes but real risk is that savings not secure due to currency debasement
– Now new risk to bank deposits as all digital wealth exposed to hacking and cyber fraud
– Sound as a pound? Safer to stick with true “coin of the realm”
– Gold and silver Sovereigns and Britannias  (VAT and CGT free) are only truly secure coins

The UK launched what is being touted as the “most secure coin in the world” yesterday – the day before Brexit day.

People have reacted with mixed emotions regarding the introduction of the newly designed pound coin which entered circulation yesterday. The new coins have been created using “cutting edge technology” by the Royal Mint

The new 12-sided coin will replace the current one, which has been in use for three decades. The current pound coin will remain legal tender alongside the new coin for just over six months until 15 October this year, after which retailers are under no obligation to accept it.

The pound coin will be harder to counterfeit. In May 2015, a survey by the Royal Mint found that some 2.5% of pound coins had been faked.

As we told Fox News SciTech correspondent James Rogers yesterday:

“The coin’s many anti-counterfeiting features are interesting and they sound like they will be quite effective. High quality forgeries can be made of most coins these days but it will be very expensive for forgers to try and mint such high quality coins that will fool the authorities.

A few coins might be “passed off” and fool the public or retailers but it would likely be few and given the degree of work and very high cost involved, it likely would not be worth the intense effort.”

The hidden high-security feature which is built into the coin itself is a well kept secret. Informed speculation is that it is some form of physical layer within the coin itself which will allow the coins to be scanned and verified in order to find fakes.

This may involve radio-frequency identification (RFID) technology which uses electromagnetic fields to automatically identify and track objects including coins which have been tagged. The tags contain electronically stored information.

It has been reported that the coin has Integrated Secure Identification Systems (iSIS) technology which was previously only available in paper bank notes.

However, there is confusion and different reporting regarding whether Integrated Secure Identification Systems (iSIS) is a technology developed by the Royal Mint or whether it is a security technology company or both.

The Independent reported yesterday that:

The Government has employed a security technology company called Integrated Secure Identification System (iSIS) to fit the new coins with a special plating that can contain electromagnetic signatures. It’s also said to be especially hard to remove.

However there is some confusion about this as nearly exactly a year ago The Mirror reported that the Royal Mint themselves had been forced to change the name of the hi-tech security feature – ‘ISIS’ – in the new £1 coin. They said that it was an “unfortunate coincidence”, that Integrated Secure Identification Systems shares an acronym with the terrorist group.

It is believed that the iSIS technology can be inserted as a physical security layer within each coin. This mean that thousands of coins could be scanned and verified for authenticity within seconds.

This means that central banks and governments may have valuable data in terms of being able to track the coins and currency in real time and see the ‘flow’ of capital. Libertarians and privacy advocates would have concerns about this as in the hands of a totalitarian government, such technology could be abused.

The security features likely mean that it is more attractive for criminals to attempt to counterfeit more high value paper bank notes such as £100 bank notes, $100 dollar bills and the €500 euro notes which are being phased out by the end of 2018.

In this digital age, where currency is increasingly digital and we move towards a cashless society, the real threat comes from more serious tech savvy criminals in the form of the hackers who are increasingly focusing on hacking computers, iphones and ipads in order to raid bank, brokerage accounts and other forms of digital wealth including digital bullion vault platforms.

In a world where the New York Federal Reserve can be hacked and have over $100 million dollars stolen as happened to some foreign exchange reserves of the central bank of Bangladesh… few online accounts are completely safe.

Individuals, companies and nations need to be aware of, cautious of and pro active about such risks. Cyber criminality is a real risk to the wealth of people and indeed nations.

A far greater risk than a few fake pound, euro or dollar coins or indeed bank notes.

Finally, the new pound coin may be “the most secure coin in the world.” However, given Brexit, the pound sterling alas is unlikely to be the most secure currency in the world.

Gold in sterling terms surged over 30% in 2016 and the pound is likely to see further weakness in 2017 due to Brexit concerns.

In a world where currencies continue to be debased to quite a significant degree, to talk about a ‘secure’ coin or paper currency which can be minted or printed at will seems like a bit of an oxymoron.

Legal tender coins and paper notes are very difficult to forge today, however central banks can create them at will and in the process debase the coinage, notes and electronic currency and devalue our currencies and savings.

It is interesting that the new pound coins have kept the traditional gold and silver colours and have the look of gold and silver coins. They are bimetallic and actually made of two base metals. The gold-colour is on the outer ring is nickel-brass and the silver colour on the inner ring is nickel-plated alloy.

Human beings instinctually realise the rarity and intrinsic value of gold and silver and therefore trust gold and silver coins or even debased coinage that looks like gold and silver coins.

Classic currency debasement continues and underlines the importance of being diversified and having an allocation to physical gold and silver coins and bars.

The new pound is not as ‘sound as a pound’. Far safer for savers to own true “coin of the realm” which are legal tender bullion coins.

In the UK, these remain tried and tested gold sovereigns and gold and silver Britannias (VAT and CGT free) … the only truly secure coins.

 

END

Chris Powell goes on the air in India.  He correctly states that a free market in gold would enrich their country greatly due to their 24,000 tonnes of private gold owned by citizens and temples

(courtesy Chris Powell/GATA)

 

In broadcast to India, GATA secretary says free market in gold would enrich the country

Section:

3:50p SST Wednesday, March 29, 2017

Dear Friend of GATA and Gold:

In a broadcast from Singapore yesterday, CNBC’s news channel affiliate in India, CNBC-TV18, gave your secretary/treasurer six minutes to assert that for the time being the gold price will be determined largely by surreptitious trading by central banks and that India’s government should stop fighting the desire of its people for golden money. Your secretary/treasurer argued that while India is a developing country, with an estimated 24,000 tonnes of the monetary metal in private and temple possession, it might become the richest country if gold was allowed to trade without central bank interference.

CNBC-TV18 has posted video of the interview at its internet site, MoneyControl.com, here:

http://www.moneycontrol.com/news/business/markets-business/gold-prices-i…

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

END

Shandong gold mines says that it found a huge gold deposit equivalent to 383 tonnes (12,3 million oz)and may reach over 550 tonnes (17.6 million oz) over the life of the mine.

(Bloomberg/GATA)

 

Shandong Gold says it may have found China’s biggest gold mine

Section:

From Bloomberg News
Tuesday, March 28, 2017

Shandong Gold Group Co., China’s No. 2 producer by output, said it discovered deposits in eastern China that could be the nation’s largest discovery as it pushes to add reserves.

The Xiling mine in Shandong province told local authorities it had found 382.58 tons of gold reserves and that the volume could reach more than 550 tons once exploration is completed in two years, which would make it China’s largest mine, according to a statement today that cited the company on sdchina.com, a website supervised by the provincial government. Operating at full capacity, the mine would have a life of 40 years, according to the statement.

Chinese gold companies have been stepping up their search for domestic deposits and eyeing acquisitions as the nation seeks to increase reserves by 3,000 tons to as much as 14,000 tons by 2020, the Ministry of Industry and Information Technology said last month. …

… For the remainder of the report:

https://www.bloomberg.com/news/articles/2017-03-29/shandong-gold-says-it…

END

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

 
 

1 Chinese yuan vs USA dollar/yuan WEAKER AT  6.8879(  SMALLER DEVALUATION SOUTHBOUND   /OFFSHORE YUAN MOVES WEAKER FROM ONSHORE AT   6.8679/ Shanghai bourse DOWN 11.66 POINTS OR .36%   / HANG SANG CLOSED UP 46.18 POINTS OR 0.19% 

2. Nikkei closed UP 14.61 POINTS OR 0.08%   /USA: YEN FALLS TO 110.88

3. Europe stocks opened ALL MIXED      ( /USA dollar index FALLS TO  99.78/Euro DOWN to 1.0791

3b Japan 10 year bond yield: RISES TO   +.058%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.88/ 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::  48.61 and Brent: 51.56

3f Gold UP/Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO  +.371%/Italian 10 yr bond yield DOWN  to 2.131%    

3j Greek 10 year bond yield FALLS to  : 6.751%   

3k Gold at $1252.85/silver $18.15 (8:15 am est)   SILVER  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 12/100 in  roubles/dollar) 56.93-

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

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

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 110.88 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  0.9944 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0729 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/ARTICLE 50 COMMENCES MARCH 29/2017 (TODAY)

3r the 10 Year German bund now POSITIVE territory with the 10 year FALLS to  +.371%

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 2.405% early this morning. Thirty year rate  at 3.011% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Global Stocks, S&P Futures Little Changed On Brexit Day

 

Brexit day has finally arrived, and despite this major “risk event”, European and Asian stocks are trading mixed, while S&P futures are just fractionally lower as a bounce on optimism over the American economy appears to have fizzled and President Trump continues to struggle to pass his legislative agenda. The pound first dipped then rose as the U.K. is set to begin its life outside the EU.

Prime Minister Theresa May will notify EU Council President Donald Tusk in a letter shortly after 1pm CET that Britain really is quitting the bloc it joined in 1973, pitching the United Kingdom into the unknown and triggering years of uncertain negotiations. The start of the formal Brexit process comes a day after the Scottish Parliament backed a bid to hold a second independence referendum that would break up the UK, adding another layer of uncertainty for investors to navigate. “Details are everything now. We could be in for a rough ride today as currency traders react to the contents of the letter being delivered to Brussels and the language May uses in parliament,” Neil Wilson, senior market analyst at ETX Capital, told Reuters adding that “a truly hard Brexit has not been priced into sterling. We could see it move lower still if negotiations take a sour turn.”

As DB’s Jim Reid summarizes today’s events, “the official process is expected to start at just after 12.30pm GMT when British ambassador to the EU, Sir Tim Barrow, presents May’s letter of withdrawal to the European Council President Donald Tusk. Perhaps more significant for markets, PM May will then address lawmakers in London this afternoon so it’s worth seeing if anything comes out of that. All this of course follows the news out of Scotland yesterday where lawmakers in Parliament voted by a majority of 69 to 59 to allow First Minister Nicola Sturgeon to go through the legalities of holding a second independence referendum by spring 2019. Its likely to be blocked by Westminster but stand by for lots of noise on this over the coming weeks and months.”

The Stoxx Europe 600 Index and futures for the S&P 500 erased early gains to trade little changed. Sterling pared losses of as much as 0.6 percent to edge higher before a letter formally triggering Britain’s departure from the European Union is delivered. The South African rand weakened further as traders await clarity on the fate of Finance Minister Pravin Gordhan.

Still, despite the overnight wobble in risk trades, global stocks remain on course for a fifth straight month of gains as the reflation trade triggered by Trump’s election proves its resilience. As the MSCI All-Country World Index shows, despite the imminent Brexit, risk-on mood prevails around the globe and global equities trade just shy of all time highs.

Germany’s DAX was up 0.6 percent, hitting 2 year highs, driven by broker upgrades and results. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent and back toward recent 21-month peaks, while Japan’s Nikkei added 0.1 percent. The Dow Jones snapped an eight-day losing streak on Tuesday, its longest run of losses since 2011, in part as a survey showed consumer confidence surged to a more than 16-year high.

“Economic fundamentals still remain exceedingly sound here in 2017 and you do not need Trump’s pro-growth fiscal agenda for this to be one of the best years for growth since the recovery started,” argued Tom Porcelli, chief U.S. economist at RBC Capital Markets. “We still think tax reform happens, but you are better off thinking about the timing as an end of year event at best.”

“Trump and markets are moving on, with the help of better U.S. data,” Societe Generale SA strategists, led by Ciaran O’Hagan, wrote in a client note, referring to the rebound in risk appetite after last week’s failed health-care bill curbed reflation bets.

Some further thoughts from SocGen’s Kit Juckes on today’s key risk event(s):

The British Government’s decision to trigger Article 50 and start the process of leaving the EU is making all the headlines, of course. But the wider market story is that yet again, volatility has collapsed. Both the Vix, and Deutsche Bank’s CVIC FX volatility index, are back below their 50, 100 and 200-day moving averages. The excitement that was caused by the failure of President Trump’s healthcare bill has been washed away as bond yields stabilise. A 2.42% 10-year Note yield is neither too hot nor too cold, consistent with a couple more rate hikes this year but not with the Fed’s famous dots that take rates to 3% in due course. Rates stay below the nominal growth rate of the economy and asset prices take comfort. Both the dampening effect on volatility and the over-correlation of financial markets that Helene Rey described as the result of too-low rates are back as the dominant force behind markets. In FX, that’s a recipe for yield-hungry, risk-tolerant investors to take the lead.

Vix and CVix are back under the easy money cosh

Elsewhere in currencies, the euro was down a quarter of one percent at $1.0785 and the USDJPY was being supported by 111. The dollar bounced from 4-month lows as a top Federal Reserve official talked of more rate hikes to come. Fed Vice Chairman Stanley Fischer, one of the more influential policymakers with markets, said two more rate increases this year seemed “about right”. The Bloomberg Dollar Spot Index gained 0.45% on Tuesday, the most since March 2.

In China, the onshore yuan declined 0.11%, or the most since March 8, to 6.8899 after the central bank cuts its daily fixing by 0.19% amid broad dollar strength. Additionally, the PBOC continued to soak up liquidity, skipping reverse-repurchase operations for the fourth day in a row, leading to a net withdrawal of 70 billion yuan on Wednesday due to maturities. The overnight repo rate rises 11 basis points to 2.52%; the seven-day repo rate climbs 19 basis points to 2.84%. The one-year interest-rate swaps climb for the first time in six days, adding five basis points to 3.60%.

In commodity markets, base metal prices bounced on more upbeat economic news from China with copper CMCU3 gaining 0.8 percent overnight to add to Tuesday’s 2 percent rise. Oil prices gained after a severe disruption to Libyan oil supplies and as officials suggested the Organization of the Petroleum Exporting Countries and other producers could extend output cuts to the end of the year.  U.S. crude added 1 percent to $48.83 a barrel, while Brent LCOc1 also rose 1 percent to $51.80.  Spot gold was little changed at $1,250 an ounce.

In rates, European bonds mostly edged higher, with a one-basis point decline in the yield of 10-year Spanish bonds among the largest moves. Treasuries gained, with the yield on the benchmark note due in a decade falling one basis point to 2.41 percent. The yield advanced four basis points Tuesday.

* * *

Bulletin Headline Summary From RanSquawk

  • EU bourses have shrugged off any potential uncertainty from today’s key risk event to trade higher ahead of the US open
  • UK PM May signed the Article 50 letter, in preparation to hand to Europe. The letter is expected to be handed to EU President Tusk later today at 1230BST
  • Looking ahead, highlights include DoE crude oil and UK Brexit developments

Market Snapshot

  • S&P 500 futures little changed at 2,351.50
  • STOXX Europe 600 up 0.1% to 377.81
  • MXAP down 0.2% to 148.78
  • MXAPJ up 0.3% to 482.84
  • Nikkei up 0.1% to 19,217.48
  • Topix down 0.2% to 1,542.07
  • Hang Seng Index up 0.2% to 24,392.05
  • Shanghai Composite down 0.4% to 3,241.31
  • Sensex up 0.4% to 29,519.45
  • Australia S&P/ASX 200 up 0.9% to 5,873.52
  • Kospi up 0.2% to 2,166.98
  • German 10Y yield fell 0.4 bps to 0.384%
  • Euro down 0.2% to 1.0791 per US$
  • Brent Futures up 1% to $51.84/bbl
  • Italian 10Y yield fell 3.6 bps to 2.161%
  • Spanish 10Y yield fell 0.9 bps to 1.671%
  • Brent Futures up 1% to $51.84/bbl
  • Gold spot down 0.1% to $1,250.37
  • U.S. Dollar Index up 0.2% to 99.86

Top Overnight News from Bloomberg

  • Britain Heads Into Unknown as May Gets Ready to Trigger Brexit
  • Trump Said to Meet With Cohn on Thursday to Discuss Tax Overhaul
  • Judge Narrows Precious Metal Manipulation Case Against Firms
  • House Clears Measure to Scrap FCC Broadband Privacy Rule
  • U.S., Japan Test Xi With Taiwan Moves Ahead of Trump Summit
  • EU Blocks Deutsche Boerse’s $14 Billion Takeover of Rival LSE
  • Toshiba Sees Record Loss as Westinghouse Unit Files Bankruptcy
  • BlackRock Said to Cut Jobs, Fees in Revamp of Active- Equity Unit
  • Huntsman Eyes Merger After Spinoff of Titanium-Dioxide Unit
  • Delta, Korean Air Sign MOU to Expand Partnership
  • Yield Hunters Cut Euro Credit ETF Holdings on Political Risk
  • Athene Upsized Secondary Share Offering Priced at $48.50-Share
  • Roche Multiple Sclerosis Drug Wins FDA Approval
  • AMC Entertainment CEO Sees Making Small Acquisitions in U.S.
  • Vertex Says Cystic Fibrosis Combo Met Goals in Phase 3 Studies

Asian equities traded mostly higher following the rebound on Wall Street where stocks were led by strength in financials and energy sectors, as well as encouraging data with consumer confidence at a 16-year high. ASX 200 (+0.9%) outperformed with broad-based gains and was similarly led by strength in the aforementioned sectors, while Nikkei 225 (+0.%) failed to benefit from a weaker JPY, as poor retail sales data overshadowed sentiment before seeing some mild reprieve heading into the close. Financials outperformed in the Hang Seng (+0.2%) after AgBank kick-started the Big 4 earnings reports with an encouraging result, while upside in the Shanghai Comp. (+0.1%) was limited after the PBoC refrained from open market operations for the 4th consecutive day which resulted to a daily net drain of CNY 70bIn. 10yr JGBs were flat despite an indecisive tone seen in Japanese stocks, while underperformance was observed in the 5yr after the BoJ’s Rinban announcement in which it reduced buying in 3yr-5yr maturities to JPY 380b1n from JPY 400BN. PBoC refrained from open market operations for a fourth consecutive day, for a net daily drain of CNY 70bIn.

Top Asian News

  • Thailand Holds Key Rate in Rebuff to IMF Call for Easing
  • HNA Unit Plans $1.2 Billion Share Sale to Fund Land Purchases
  • From Silk to Bees and Back? Hedge Fund Battles 144-Year Old Firm
  • Vietnam’s GDP Expands 5.1% in First Quarter; Est. 6.25%
  • Bailouts Fail to Rescue India Farmers Trapped in Debt Spiral
  • Anglo’s New Billionaire Investor Agarwal Says He’s No Activist
  • Billionaire Solomon Lew’s Premier Buys 10.77% Stake in Myer
  • Agarwal: No Intention to Buy Anglo Assets in South Africa
  • Turkey’s Halkbank Plunges After U.S. Probe Extends to Lender
  • Topix Index Declines as Ex-Dividend Impact Outweighs U.S. Data

European bourses have shrugged off any potential uncertainty from today’s key risk event to trade higher, with the weak GBP and higher commodities prices may be providing the FTSE (+0.3%) a lift. Elsewhere, mining names are performing well with BHP Billiton shares gapping up at the open off the back of a rebound in base metals prices. Finally, EU anti-trust regulators have blocked the proposed Deutsche Boerse (DB1 GY) and LSE (LSE LN) merger (as expected). The UK/German 10YR spread has pushed up in the last couple of sessions and is holding around 81.5bps but this kind of price action is to be expected with Brexit looming. Risk sentiment overall seems to be in the risk on side which is pushing core EU products lower this morning.

Top European News

  • Britain Heads Into Unknown as May Signs Brexit Letter
  • U.K. Mortgage Approvals Fall to 68,315 in Feb. Vs. Est. 69,100
  • Morgan Stanley Favors Buying Pound as Excessive Pessimism Priced
  • Italy Consumer Confidence Rises to 107.6 in March; Est. 106.6
  • EDF’s Bailout Leaves Nuclear, Power-Price Challenges Intact

In currencies,  the British pound trimmed earlier losses to trade 0.1 percent lower. The euro weakened 0.2 percent. The Bloomberg Dollar Spot Index was little changed. South Africa’s rand slipped 0.7 percent. Price action in GBP/USD was initially bearish with price printing below the 1.24 handle only to find support at 1.2380. It will be hard to read price action on a day like today due to the aforementioned risk event. USD/JPY looks to have found support with the USD looking like the key beneficiary of safe haven flows, keeping an eye on levels there is a resistance level on the horizon at 111.55 where price was supported multiple times during February. The EUR remains out of favour amid month-end flows, concerns over the EU in the wake of Brexit and Greece’s repayment plan. Elsewhere, commodity currencies have received a boost this morning with strength across all the major commodities pushing AUD & CAD higher against the USD. AUD/USD bounced off the 0.7600 support and looks to me aiming for the recent consolidation mean value area of 0.7669 and USD/CAD has struggled after 1.34 was rejected with the next key support lying around the 1.33 area.

In commodities, WTI rose 0.7% to $48.69, extending Tuesday’s 1.3% advance as an unexpected disruption in Libyan crude output helps investors shrug off record U.S. stockpiles.Gold rose less than 0.1%  to $1,252.70. Base metals this morning have been stealing the show as zinc trades higher by 1%. The bounce in the base metals has been attributed to the rise is US consumer confidence yesterday, with analysts at ANZ commenting that some of the Tump woes may be fading off the back of the strong reading. Early Friday morning will be a real test for metals in the form of Chinese Manufacturing PMI but it is expected to remain flat at 51.6 so any surprise could boost prices further. WTI (+ USD 0.36) and Brent crude (+USD 0.42) futures are trading positively after a smaller build than last week was noted in last night’s report. Today we will be looking out for the DOE inventory levels which is also surly set to inspire some volatility. Gold prices are slightly subdued and prices look to be consolidating between USD 1262/oz and USD 1246.98/oz.

Looking at the day ahead now, it’s quiet in the US with pending home sales data the only release of note. Away from the data, the Fedspeak today consists of Evans at 9.20am, Rosengren at 11:30pm and Williams at 1.15 pm. The ECB’s Praet is also due to speak at 4.50pm GMT. Also of note today is the aforementioned  Article 50 trigger by UK PM Theresa May.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior -2.7%
  • 10am: Pending Home Sales MoM, est. 2.45%, prior -2.8%; NSA YoY, prior 2.7%

Central Banks

  • 9:20am: Fed’s Evans Speaks on Economy and Policy in Frankfurt
  • 11:30am: Fed’s Rosengren Speaks at Economic Club of Boston
  • 1:15pm: Fed’s Williams Speaks to Forecaster’s Club of New York

DB’s Jim Reid concludes the overnight wrap

The failed healthcare bill hasn’t destroyed markets so far this week with the S&P 500 (+0.73% yesterday) now back at the highest level for just over a week after Banks yesterday (+1.56%) rebounded strongly for the sector’s biggest gain since March 1st. The Dow (+0.73%) also brought to an end a run of 8 consecutive daily losses and the longest run since 2011. It is worth noting however that the loss during  that period was only -1.91% (of which most came last Tuesday) so yesterday’s rally has already recovered nearly 40% of that. At the same time the VIX also plummeted to a new one week low last night after dropping nearly 8% to 11.53. That is having touched the highest level since November just two days ago.

As we discussed in yesterday’s EMR, many here at DB think that Trump trades had already been priced out to a large degree and therefore the disappointment over Friday’s news may be limited. Firm global growth being the most important factor in where markets are trading. Trump reforms are still very important though especially if global growth slows. Without a big reform package the US is unlikely to be able to pick up the slack if any slowdown occurs. So we certainly don’t want to downplay the political events but their ramifications may not be immediate.

On that note it was interesting to see the surge in yesterday’s consumer confidence print in the US to 125.6 (+9.5pts) in March and the highest since December 2000. The present conditions gauge also increased to the highest since August 2001 at 143.1 and a measure of consumer expectations for the next six months hit the highest since September 2000 at 113.8. It is worth noting however that the sample period of data being collected had a cutoff date of March 16th and obviously prior to the healthcare bill debacle. While the recent trend is clearly encouraging (largest five-month gain since 2011-12) it’s probably worth waiting until next month’s data to see how much of impact last week’s developments have had, if at all. The data did however help the Greenback to spike higher with the US Dollar index closing up +0.55% for its strongest day since March 1st. 10y Treasury yields also rose 4bps to 2.419% and are back to Friday’s closing levels while Gold (-0.24%) retraced a bit. Comments from the Fed’s Fischer saying that two more rate hikes this year “seems about right” probably also contributed to some of those moves.

DB’s Washington expert Frank Kelly yesterday hosted a client call on the political implications of last week’s events. He suggested that the surprise withdrawal of the Republican healthcare bill on Friday is a sign of the continued division within the Republican Party and is perhaps a precursor to growing political and policy risks in the US. Even before considering the difficulties involved in passing President Trump’s tax reforms, there exists a very real possibility of a government shutdown on April 28 when the current continuing resolutions set to expire. There is a significant chance that the Freedom Caucus will reject a new continuing resolution due to their opposition to the continued funding of Planned Parenthood and Obamacare, while Trump’s spending plans for a border wall will see opposition from both Democrats and Republicans in the Senate. Frank estimates the probability of a government shutdown at roughly 40% and notes that the next 2 weeks will be critical to watch. Beyond the risks of a government shutdown, policy uncertainty continues to manifest itself in the form of questions surrounding Trump’s tax reform bill: Frank expects that the controversial Border Adjustment Tax (BAT) will not even make it into the final bill (at least not in its current form) and that the new corporate tax rate will likely be closer to 25% rather than the expected 15-20% range. Also despite the failure of the healthcare bill there is unlikely to be any acceleration in the proceedings on tax reform to fill the gap. The bill remains likely to go to Congress sometime in the first two weeks of May, and will likely only be picked up by the Senate in September. Given these developing uncertainties, Frank suggests that markets should downgrade their expectations of progress going forward.

Staying with politics but jumping to this side of the pond, today the two-year clock for negotiations will officially start when UK PM Theresa May invokes Article 50. The official process is expected to start at just after 12.30pm GMT when British ambassador to the EU, Sir Tim Barrow, presents May’s letter of withdrawal to the European Council President Donald Tusk. Perhaps more significant for markets, PM May will then address lawmakers in London this afternoon so it’s worth seeing if anything comes out of that. All this of course follows the news out of Scotland yesterday where lawmakers in Parliament voted by a majority of 69 to 59 to allow First Minister Nicola Sturgeon to go through the legalities of holding a second independence referendum by spring 2019. Its likely to be blocked by Westminster but stand by for lots of noise on this over the coming weeks and months.

To markets again now where the positive momentum which swept through Wall Street last night seems to have stalled a bit in Asia this morning. While the ASX (+0.89%) is higher, the Nikkei, Kospi, Shanghai Comp and Hang Seng are all little changed as we go to print, despite there being little in the way of any new newsflow this morning. In FX sterling has been the big mover again, deepening yesterday’s losses ahead of the Article 50 trigger later today. The Pound is down about -1.20% over the last 24 hours now versus the Dollar.

Moving on. In terms of the remainder of the moves in markets yesterday, here in Europe sentiment was also generally positive as evidenced by the decent gains for the Stoxx 600 (+0.61%) and DAX (+1.28%), amongst others. Sovereign bonds were a bit more mixed but moves were fairly modest while the biggest mover and shaker in commodities was Oil with WTI (+1.34%) rising back above $48/bbl following reports of a curb on shipments in Libya.

The remaining data was a bit of a wash in the US. The Richmond Fed manufacturing index rose 5pts in March to 22 after expectations were for a modest retreat. Wholesale inventories were reported as  rising a bit more than expected in February (+0.4% mom vs. +0.2% expected) while the advance goods trade balance reading for February revealed a slight narrowing in the deficit to $64.8bn. The S&P/Case-Shiller house price index for January also revealed that house prices rose +0.9% mom from December. Meanwhile there wasn’t much else to take away from the remaining Fedspeak. Fed Chair Yellen didn’t comment directly on monetary policy in her speech but did highlight the unevenness of labour market improvement. Kansas City Fed President George said that it is important to remove accommodation in “a gradual but deliberate fashion” while Governor Powell spoke after the close and said that the Fed should be “moving slowly toward a more neutral stance” and that it will be appropriate to start reducing the balance sheet when the “economy has significant momentum”.

Looking at the day ahead now, this morning in Europe we’ll be kicking off in France where the consumer confidence reading for March will be out. Shortly after that we turn over to the UK with the February money and credit aggregates data due out along with February mortgage approvals data. It’s quiet in the US this afternoon with pending home sales data the only release of note. Away from the data, the Fedspeak today consists of Evans at 1.20pm GMT, Rosengren at 3.30pm GMT and Williams at 5.15pm GMT. The ECB’s Praet is also due to speak at 4.50pm GMT. Also of note today is the aforementioned  Article 50 trigger by UK PM Theresa May.

 

3. ASIAN AFFAIRS

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 11.66 POINTS OR .36%/ /Hang Sang CLOSED UP 46.18 POINTS OR 0.19% . The Nikkei closed UP 14.61 OR 0.08% /Australia’s all ordinaires  CLOSED UP 0.86%/Chinese yuan (ONSHORE) closed DOWN at 6.8879/Oil ROSE to 48.61 dollars per barrel for WTI and 51.56 for Brent. Stocks in Europe ALL MIXED   ..Offshore yuan trades  6.8679 yuan to the dollar vs 6.8879 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  NARROWS AGAIN/ ONSHORE YUAN WEAKER AND THE OFFSHORE YUAN  IS  WEAKER AND THIS IS  COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA IS SATISFIED WITH WASHINGTON’S RESPONSE 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA

Just what the world needs right now: North Korea is actively preparing for another nuclear test.  And they have a bozo nut head for a leader, Kim Jong-UN

(courtesy zero hedge)

Satellite Imagery Suggests North Korea Actively Preparing For Nuclear Test

Satellite imagery of North Korea’s Punggye-ri Nuclear Test Site taken on March 28, and published by 38 North, shows a contingent of 70-100 people standing in formation in an administrative area. Such a gathering suggests a nuclear test may be imminent: as 38 North notes, it had not observed such a formation at the test venue seen since Jan. 4, 2013, shortly prior a nuclear test on Feb. 12 of that year.

According to the Johns Hopkins University website, North Korea knows when commercial satellites are passing overhead and typically tries to avoid activities during that time. It adds that “the fact these formations can be seen suggests that Pyongyang is sending a political message that the sixth nuclear test will be conducted soon.” On the other hand, “it may be engaged in a well-planned game of brinkmanship.”

More details from 38 North:

Heightened Activity at North Korea’s Punggye-ri Nuclear Test Site

New commercial satellite imagery of the Punggye-ri Nuclear Test Site from March 28 shows a heightened level of activity over the past few days. Despite the recent snowfall, there has been continued pumping of water out of the North Portal, presumably to keep the tunnels dry for communications and monitoring equipment; the removal of material (probably rubble) and dumping on the tailings pile immediately to the east of the portal; and the probable removal of one or more vehicles or equipment trailers from in front of the portal.

Figure 1. Continued activity at the North Portal.

Figure 2. Material dumped at the North Portal tailings pile.

This activity is consistent with previous reports, while the rest of the Punggye-ri Nuclear Test Site has been generally quiet. However, there is now one vehicle and a large contingent (70-100) of people standing in formation or watching in the courtyard of the Main Administrative Area. Such a gathering hasn’t been seen since January 4, 2013, which was followed by a nuclear test on February 12.

Figure 3. Formations seen in the Main Administrative Area, similar to what was seen in lead up to 2013 nuclear test. (an interactive before and after image can be found on the source website).

The North Koreans know when commercial satellites are passing overhead and typically try to avoid activities during that time. The fact these formations can be seen suggests that Pyongyang is sending a political message that the sixth nuclear test will be conducted soon. Alternatively, it may be engaged in a well-planned game of brinkmanship.

b) REPORT ON JAPAN

c) REPORT ON CHINA

4. EUROPEAN AFFAIRS

UK

Brexit letter is now signed and thus article 50 is triggered:

(courtesy zero hedge)

Theresa May Signs Brexit Letter: What Happens Once Article 50 Is Triggered?

Moments ago, Theresa May signed the letter to European Council President Donald Truk which will invoke Article 50 and Trigger Brexit.

SUN FRONT PAGE: ‘Dover & out’

 

What happens next? 

Here is a summary of next steps courtesy of Jack Davies, consultant editor of Trading Floor, courtesy of Saxo Group

  • The UK government triggers Article 50 starting the Brexit process Wednesday
  • Two years of negotiations to be set in motion to uncouple UK from EU
  • Sterling has plunged circa 15% since the night of the Brexit vote
  • Future of EU workers in the UK and visa-versa yet to be decided

The British government is set to formally invoke Article 50, the clause within the European Union’s de facto constitution that almost didn’t make it into the final draft because what it allows for – the exit of a member state from the EU – was thought by many too awful to be permitted.

But allowed it was and now what had been thought unthinkable is to happen Wednesday, a member state has begun what will undoubtedly be an excruciating divorce from the bloc.

How is Article 50 triggered and what happens next?

Triggering Article 50 is easy. In theory, it could be as simple as somebody in Whitehall sending an email to somebody in Brussels. In the end, the UK’s ambassador to the EU informed Donald Tusk that it would come in letter form to his office on March 29. But even as late as mid-March, eurocrats were still scratching their heads as to whether letter or email was more appropriate and if so who should be sending and receiving the memo.

But if they struggled with protocol, it doesn’t get much simpler from here. Under the Lisbon Treaty, member states wishing to leave the European Union have two years from the day they trigger Article 50 to negotiate their exit. In theory, if after 24 months a compromise has not been reached, then the state in question is dumped from all EU institutions and frameworks instantly and without any phasing out to cushion the fall.

Interdependency is hardcoded into the union, so this kind of cold-turkey exit is something both sides will be keen to avoid. If they are to do so, the bulk of the negotiations will have to have been concluded within 18 months of Article 50 being invoked, so as to allow enough time for both parliaments to approve the final deal.

The clock’s likely to run even tighter than that though, as the EU has said it won’t begin negotiating with Westminster until the UK settles a bill estimated to be as high as $64 billion.

v
Cracks in the EU edifice will look sharper after Wednesday


What will happen to sterling when Article 50 is triggered?

Britain’s vote to leave the EU last summer trashed sterling, which lost 16 cents against the dollar overnight, and the pound has since plummeted to even lower depths. One slight consolation for sterling buyers will be that the pound will likely have little or no reaction to the invocation of Article 50, which has already been priced in by the market.

So much so in fact that many view the pound as undervalued, given the relative strength of the British economy, which is expected to grow by 2% over the coming year.

j
Source: SaxoTraderGO


What happens to FTSE 100 after Article 50 is triggered?

Saxo Bank’s head of equities Peter Garnry says that while general volatility will increase “simply because of the noise”, the triggering of Article 50 should not have a major immediate impact on equity markets since the event has already been discounted by them.

That said, what comes next could hold another story. As Garnry points out, “triggering starts the noisy political negotiations which will be a recurrent theme over the next two years.”

The FTSE 100’s high concentration in financials, mining and export-driven consumer staples companies (such as BAT, Diageo, Unilever and RB) makes the index vulnerable “should the GBP go up again on improving sentiment or even worse in tandem with falling commodity prices,” Garnry warns.

What will happen to EU nationals in Britain and vice versa?

As we have pointed out before, the four million people most vulnerable in a showdown between Brussels and Number 10 are the EU nationals living in the UK and British citizens making their living on the continent.

The British parliament recently voted down a proposal to safeguard the presence of EU nationals already in Britain regardless of the outcome of the next two years’ negotiations.

While the proposal was motivated by the Kantian precept that person should be used as a means to an end (in this case a bargaining chip in the messiest international negotiations since the second world war), British MPs sided with the government, which argued that while it was in favour of allowing EU citizens to remain, it did not want to give that concession away unconditionally.

And so, with neither side having ruled out a “hard Brexit” (the UK government has announced it’s currently drawing up plans for the outcome), those four million people appear to be as vulnerable right now as they fear.

Saxo’s head of forex strategy John J Hardy recently told TradingFloor that due to reciprocal rights for EU and UK nationals being such a potent bargaining chip, we could be well into 2018 before negotiators arrive at any meaningful accord on the issue.

* * *

Finally, here is Saxo’s head of macro analysis Christopher Dembik, who summarizes the salient points in the following video. Here are the key points:

  • “Brexit will have clearly a deep impact on the [British] market in the medium term,” says Saxo’s head of macro analysis Christopher Dembik, who is based in the Danish bank’s Paris office.
  • “For the British economy, I am not positive. There is no reason to believe that Brexit would have [only] a slight impact on the economy.
  • “Brexit would have a strong impact because it would block investments as soon as investors understand that the UK doesn’t have a strong strategy to negotiate and that the EU won’t make it easy for the UK to leave.”
  • He does not expect much to happen in terms of significant negotiations between the UK and EU until after the German federal election in September. However, Dembik says that British prime minister
  • Theresa May could surprise many and pull a snap election to gain greater support – something former PM Gordon Brown failed to do when he succeeded Tony Blair and later lost a general election to the Conservative Party’s David Cameron.
  • “Theresa May will face probably many challenges in order to negotiate with the European Union,” adds Dembik.
  • “I do believe she will have no other choice than for calling for an early election in order to have enough popular support to try to negotiate with the European Union.”
  • Despite these issues, Dembit says that in the longer term, the “strong” UK “will succeed and have a bright future.”

 

END

Donald Trusk receives article 50 letter from the UK.  The following explains what happens next:

(courtesy zero hedge)

Brexit Officially Begins: EU Receives Article 50 Notice From The UK; What Happens Next

There is no going back now: moments ago the EU’s Tusk received the signed Brexit notification letter from UK envoy, triggering two-year countdown to British withdrawal from EU and marking the first ever withdrawal of an EU member state in its 60-year history.

The EU has received the letter from UK that will trigger Article 50 & formally begin the processhttp://bbc.in/2nzKvC9 

After nine months the UK has delivered.

Commemorating the event, Theresa May said this is “a historic moment from which there can be no turning back.”

This is “a historic moment from which there can be no turning back,” Theresa May says http://bloom.bg/2ngokNX 

And it appears Mark Cudmore may have been right that the official start of Brexit may be bullish for cable, prompting the cover of record sterling short:

  • GBP/USD ERASES LOSSES AS TUSK SAYS EU RECEIVES BREXIT NOTICE
  • GBP/USD ADVANCES TO TOUCH 1.2476 SESSION HIGH ON BREXIT NOTICE

* * *

Speaking to Parliament over this historic event, Theresa May said that the move would implement “the democratic will” of the people of the United Kingdom who voted to leave the EU.

Tim Barrow, the UK’s EU ambassador, delivered a letter to Donald Tusk, president of the European Council in Brussels, invoking Article 50 of the Lisbon Treaty, nine months after Britain voted in a referendum to leave the bloc. “After nine months the UK has delivered”, said European Council president Donald Tusk.

May will inform MPs of her negotiating priorities for the next two years of Brexit talks. The prime minister is expected to strike a moderate tone, after ministers have signalled in recent days that she is increasingly open to compromise in order to prevent Britain’s 44-year relationship with the EU ending in acrimonious divorce.

The prime minister informed the cabinet of the letter’s contents at a specially-convened meeting on Wednesday morning. Speaking shortly before that meeting, chancellor Philip Hammond told the BBC that “we are going to get a deal” with the EU, the FT reported.

In remarks that are likely to frustrate Tory Eurosceptics, Hammond said that the UK government had accepted that it could not “cherry-pick”, and that leaving the EU would have “consequences”.

“We will not be members of the European single market, we will not be full members of the European customs union, and not being members of those entities has some consequences, it carries some significance,” he said. “By deciding to leave the European Union and negotiate a future relationship with the EU as an independent nation, there will be certain consequences of that, and we accept those.”

Mr Hammond also indicated that the government would regard the completion of negotiations with the EU in 2019 as the cut-off date for the rights of EU nationals living in the UK. It had been suggested that the UK could treat the triggering of Article 50 as its cut-off date.

* * *

What happens next?

Below, courtesy of Bloomberg is an 18 point Q&A on the main items to keep an eye on in the weeks and months ahead.

Nine months after Britain voted to leave the European Union, Prime Minister Theresa May plans to open divorce proceedings on March 29. The negotiations could turn “vicious,” according to Irish Prime Minister Enda Kenny. European Commission President Jean-Claude Juncker says they will be “very, very, very difficult.” Both the EU and the U.K. will have to determine what is and isn’t negotiable.

1. Didn’t Brexit already happen?

No. The June 2016 referendum, in which 52 percent of British voters chose to leave the EU, was just the start of a lengthy process. If May has her way, the actual split will occur in the first half of 2019. Its contours are about to be negotiated.

2. What does Brexit actually mean?

Britain is exiting the 28-country bloc, which it joined in 1973. Initially envisaged as a free-trade zone that now includes 500 million consumers, the EU is, in the eyes of many Britons, too bureaucratic, out of touch, expensive and an obstacle to clamping down on immigration. Free movement of citizens is a basic tenet of EU law.

3. How does the exit process work?

Article 50 of the Lisbon Treaty, the EU’s guiding document, details how a country leaves the bloc. It’s never been activated and is only about 260 words long. It gives the departing country up to two years to negotiate “its future relationship with the Union.” So Britain will be out of the bloc by April 2019.

4. When did the two-year clock start ticking?

It starts on Wednesday afternoon when the U.K.’s envoy to the EU, Tim Barrow, hands EU President Donald Tusk a letter from May formally invoking Article 50. May will address the U.K. Parliament about the same time. The delay since the referendum was caused by May, who insisted she needed time to form a negotiating team and take a position. Then the U.K. Supreme Court ruled that she didn’t have the authority to trigger Article 50 by herself, forcing her to obtain permission from Parliament. A law was then passed on March 16 to allow the prime minister to act.

5. How quickly will talks start?

Tusk will read out a statement at 1:45 p.m. in Brussels on Wednesday, a move that may give some clarity. He has indicated the EU will respond within 48 hours by publishing draft guidelines for Michel Barnier, the European Commission’s chief negotiator. EU leaders will convene a summit on April 29 to sign off on those. Officials have said the bloc may wait until June to fully engage although September elections in Germany will be a distraction.

6. What will May push for?

She intends to pull the U.K. out of the single market for goods and services — a “hard” Brexit that prioritizes securing control of immigration, laws and her budget over economic concerns. May wants the “best possible deal” for trading with the bloc although she seeks the liberty she now lacks to negotiate trade deals with non-EU countries such as the U.S.

7. What will Europe demand?

The remaining EU members don’t want the U.K. to “cherry pick” the benefits of membership with none of the responsibilities (like agreeing to the free movement of people) for fear it will encourage others to leave as well. Many European countries are going to seek a guarantee of the rights of their citizens already living in Britain. May wants the same for Britons living abroad and says this is an issue to resolve early on. Ireland, an EU member, says it will fight any attempt to restore a so-called hard border with Northern Ireland, which is part of the U.K. Then there’s the question of the bill the U.K. will be asked to pay.

8. Wait — there’s a bill?

The EU says there is. Barnier has indicated he wants the British to cover budget commitments they agreed to, pensions promised to EU officials from the U.K., guarantees on loans such as the bailout of Ireland and pending infrastructure projects. Juncker says the sum in question is about 50 billion pounds ($63 billion). British Trade Secretary Liam Fox rejected the notion of a bill as “absurd” and Brexit Secretary David Davis said the amount will be “nothing like” the sums floated. A House of Lords panel also questioned whether the U.K. is under any legal obligation to pay. Still, EU officials say they won’t discuss the trade deal May is after until the issue is resolved. They may also be willing to force the issue in front of the International Court of Justice. Such threats mean May might agree to contribute something, although a big check would draw ire domestically.

9. How will the talks be structured?

Barnier wants to focus first on the separation — settling the bill, resolving citizenship rights and establishing borders. The arrangement for that needs to be endorsed by a “super qualified majority” or at least 72 percent of the member states. Only after that would the EU turn to trade, and any trade deal will require the support of every member. The British would prefer to discuss the split and the future arrangement at the same time to win trade-offs, grant certainty to businesses and maintain support back home for Brexit.

10. How long will the talks take?

Article 50 allows two years, which could be extended if all members of the EU, including the U.K., agree. Both sides estimate that they really have until the end of 2018 to reach an accord, because the resulting deal would need to obtain the consent of the European and British parliaments. EU officials have said even in the best-case scenario it will take until early 2018 to work out the financial side of the split.

11. What happens if no deal is reached?

Britain will leave the EU in two years regardless of whether it’s secured a new trade deal. In that case, disagreements may end up in the courts and U.K.-EU commerce will be exposed to World Trade Organization tariffs, following decades of duty-free trade. That could mean a levy of about 10 percent on cars alone. Davis says this is an “unlikely scenario” and not “frightening.” But it’s one Britain must prepare for, he says, although he conceded in March that the government hasn’t yet analyzed the economic fallout. John Kerr, the diplomat who wrote Article 50, says the chance of a breakdown in talks is more than 30 percent. Businesses worry about a “cliff edge” in which the U.K. falls or walks out of the EU with tariffs and without certainty over the future. May repeats no deal is better than a bad deal.

12. What could help avert a ‘cliff edge’?

Without a trade deal, there is unlikely to be anything to break the fall over the cliff. However, the U.K. and EU could agree to a transitional phase in which the existing relationship remains in effect. Businesses would get time to adjust to any new rules, which May says should be phased in, or leaders would have more time to craft a fresh relationship. Barnier wants to wait to discuss the stopgap until the outlook is clearer. The question is whether the two sides can agree before businesses, especially banks based in the U.K., shift jobs and services to elsewhere in the EU. Another concern for May is whether the EU might try to force the U.K. to remain under the oversight of the European Court of Justice.

13. How will the U.K. untangle the EU’s laws?

The government plans to introduce the “Great Repeal Bill,” misnamed legislation given that it won’t repeal anything and is instead a cut and paste of EU law onto the British statute book. The aim is to give businesses and investors certainty. Future governments will be able to “amend, repeal and improve any law it chooses,” according to May. The House of Commons library estimates there are 899 EU directives and 5,155 regulations among almost 19,000 pieces of EU-related legislation currently in force. Ministers will also have to find appropriate U.K. bodies to take on regulatory roles currently held by EU agencies. A potential obstacle to all this is that the bill will include powers for ministers to change regulations as they’re transferred, something opposition Labour Party leader Jeremy Corbyn said he’ll challenge.

14. How has the economy fared since the referendum?

The economy has performed much better than anticipated by the likes of the U.K. Treasury and the International Monetary Fund, both of which warned ahead of the referendum that a vote for Brexit could trigger a recession. The economy has been helped by a slump in the pound and strong consumer spending. But most economists still predict economic growth will slow in time as the parameters of Brexit take shape.

15. Does May have any leverage?

The U.K. loses some power after invoking Article 50 because it starts the countdown clock, limiting the time available to strike a deal. May has argued it would be “economically rational” for the EU to sign up to a free-trade accord since Britons buy so many of its goods. She has warned that the U.K. could provide less security to the region or transform Britain into a low-tax, light-regulation haven for business. She could also try to exploit differences between European capitals.

16. What about Scotland?

Scottish First Minister Nicola Sturgeon has used Brexit to declare she wants a second independence referendum to make Scotland an independent country and lawmakers in Edinburgh have backed her. In the 2016 Brexit referendum, Scottish voters chose overwhelmingly to remain in the EU and Sturgeon says they should have a chance to break with England sometime between the fall of 2018 and the spring of 2019. But May says “now is not the time” for another referendum and Sturgeon still needs permission from lawmakers in London to move forward.

17. Is Article 50 irrevocable?

Once Article 50 is triggered, there’s no chance of Britain staying in the EU, according to Justice Secretary Liz Truss. But Kerr said a country can change its mind “while the process is going on.” A court case is starting soon that may inform the debate.

18. Why does all this matter for the rest of the world?

French presidential candidate Marine Le Pen is running on a Brexit-like platform of euro-skepticism. In the U.S., President Donald Trump’s administration has registered its dislike of multilateral organizations like the EU and may be tempted to offer the U.K. a generous free-trade deal. Russian President Vladimir Putin will likely welcome anything that divides and distracts the EU. Finally, China will be following closely to see if the U.K. remains an attractive investment partner as it raises barriers with the rest of the EU.

end

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6.GLOBAL ISSUES

7. OIL ISSUES

Oil rises higher on a smaller and expected crude build.  However uSA crude production, the most important data point rose again to its highest level since 2016

(courtesy zero hedge)

WTI/RBOB Spike On Inventories Data, Despite Production Surge To 14 Month Highs

WTI and RBOB prices have drifted higher after modest weakness following API’s inventory data overnight and then spiked after DOE reported a smaller than expected crude build, and bigger than expected gasoline and distillate draws. Following the lage rig count data, US crude production rose once again to its highest since Feb 2016.

 

API

  • Crude +1.91mm (+2mm exp)
  • Cushing -576k
  • Gasoline -1.104mm (-2mm exp)
  • Distillates -2.035mm

DOE

  • Crude +867k (+2mm exp)
  • Cushing -220k (+1mm exp)
  • Gasoline -3.747mm (-2mm exp)
  • Distillates -2.483mm (-1.2mm exp)

The trend of gasoline and distillate draws continue and a much smaller than expected build in crude was a surprise…

Cushing’s draw holds it just below record highs. While Distillate inventories have come down a long way from the nearly six-year high of 170.75 million barrels we saw in early February, Total Crude Inventories rose to another record high.

Crude stocks rose +0.9 million bbl to 534 million bbl last week, in line with normal seasonal behaviour.

Putting the inventory number in context, Reuters notes that still total commercial inventories are still +54 million bbl higher than at start of year compared with +52 million 2016 and 10-yr avg of +32 million.

Bloomberg’s Javier Blas notes that one bearish factor is that U.S. crude imports remain very high, showing no sign of the OPEC production cuts. Over the last four weeks, imports have averaged 8 million barrels a day, roughly the same level. Last week they were at 8.2 million barrels a day, down only 83,000 b/d from the previous week.

Where are the OPEC production cuts? Oil imports from Saudi Arabia remain very strong, running at 1.16 million barrels a day, only down by 119,000 b/d from the previous week. And imports from Iraq were actually UP, running last week at 625,000 barrels a day, up by 74,000 barrels a day. In total, imports came in at 8.2 million b/d last week.

Production continues to trend higher (highest since Feb 2016) with the lagged rig count…

 

WTI and RBOB prices moved higher from overnight lows following API data, then spiked on the DOE data…

 

We suspect this momnetum will fade as Bloomberg’s Javier Blas notes that Crude stocks build by 0.9 million barrels despite a big increase in refinery intake (+425,000 b/d last week to 16.2 million b/d, ahead of seasonal trends) and a huge jump in crude exports (nearly double from last week to 1.01 million b/d). With domestic processing sharply up and exports also booming, the stock build suggests the U.S. market remains awash with crude.

8. EMERGING MARKETS

end

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

Euro/USA   1.0791 DOWN .0025/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP HEALTH CARE DEFEAT//ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/USA RAISING INTEREST RATES/EUROPE BOURSES mixed

USA/JAPAN YEN 110.88 DOWN 0.353(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 1.2453 UP .0037 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

USA/CAN 1.3358 DOWN .0019 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU)

Early THIS WEDNESDAY morning in Europe, the Euro FELL by 25 basis points, trading now BELOW the important 1.08 level  FALLING to 1.0791; 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+ TRUMP HEALTH CARE BILL DEFEAT AND MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED DOWN 11.66 POINTS OR 0.36%     / Hang Sang  CLOSED UP 46.18 POINTS OR 0.19% /AUSTRALIA  CLOSED UP 0.86%  / EUROPEAN BOURSES MIXED

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

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

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

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

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

The NIKKEI: this WEDNESDAY morning CLOSED UP 14.61 POINTS OR 0.08%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 46.18 POINTS OR 0.19% / SHANGHAI CLOSED DOWN 11.66 OR .36%/Australia BOURSE CLOSED UP 0.86%/Nikkei (Japan)CLOSED UP 14.61 OR 0.08%  / INDIA’S SENSEX IN THE  GREEN

Gold very early morning trading: $1253.85

silver:$18.16

Early WEDNESDAY morning USA 10 year bond yield: 2.405% !!! DOWN 2 IN POINTS from TUESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. THE RISE IN YIELD WITH THIS SPEED IS FRIGHTENING

 The 30 yr bond yield  3.011, DOWN 1 IN BASIS POINTS  from TUESDAY night.

USA dollar index early WEDNESDAY morning: 99.78 UP 10  CENT(S) from TUESDAY’s close.

This ends early morning numbers WEDNESDAY MORNING

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And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield: 4.000%  DOWN 7  in basis point yield from TUESDAY 

JAPANESE BOND YIELD: +.058%  par  in   basis point yield from TUESDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.643%  DOWN 4 IN basis point yield from TUESDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.137 DOWN 2 POINTS  in basis point yield from TUESDAY 

the Italian 10 yr bond yield is trading 50 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.344% DOWN 4 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR WEDNESDAY

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

Euro/USA 1.0755 DOWN .0061 (Euro DOWN 61 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 111.09 DOWN: 0.137(Yen UP 14 basis points/ 

Great Britain/USA 1.2404 DOWN 0.0012( POUND DOWN 12 basis points)

USA/Canada 1.3373 DOWN 0.0005(Canadian dollar UP 5 basis points AS OIL ROSE TO $49.29

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This afternoon, the Euro was DOWN by 61 basis points to trade at 1.0755

The Yen ROSE to 111.09 for a GAIN of 14 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND FELL BY 12  basis points, trading at 1.2404/

The Canadian dollar ROSE by 5 basis points to 1.3373,  WITH WTI OIL RISING TO :  $49.29

The USA/Yuan closed at 6.8878/
the 10 yr Japanese bond yield closed at +.058% par IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 1  IN basis points from TUESDAY at 2.389% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.999 UP 1  in basis points on the day /

Your closing USA dollar index, 100.10 UP 12  CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED UP 30.30 OR 0.41% 
German Dax :CLOSED UP 53.58 POINTS OR 0,44%
Paris Cac  CLOSED UP 22.84 OR 0.45%
Spain IBEX CLOSED DOWN 21.40 POINTS OR 0.21%
Italian MIB: CLOSED DOWN  53.62 POINTS OR 0.26%

The Dow closed DOWN 42.18 OR 0.20%

NASDAQ WAS closed UP 22.41 POINTS OR 0.38%  4.00 PM EST
WTI Oil price;  49.79 at 1:00 pm; 

Brent Oil: 52.22  1:00 EST

USA /RUSSIAN ROUBLE CROSS:  56.62  up 43/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD FALLS TO +0.344%  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:$49.49

BRENT: $52.38

USA 10 YR BOND YIELD: 2.380%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.988%

EURO/USA DOLLAR CROSS:  1.0767 down .0050

USA/JAPANESE YEN:111.00   down .223

USA DOLLAR INDEX: 99.94  up 27  cents ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2433 : down .0017  OR 17 BASIS POINTS.

Canadian dollar: 1.3332  down .0046

German 10 yr bond yield at 5 pm: +.344%

END

END

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

TRADING IN GRAPH FORM FOR THE DAY

Bonds & Bullion Bid But Banks Skid As Stock Traders BTFD Again

 

Seriously, this is too easy…

 

Dow and Trannies were lower on the day as the Nasdaq just kept chugging higher (Nasdaq Composite up 14 of the last 17 days)

 

On the week The Dow is the laggard (but still green)

 

For the 6th day in a row, stocks opened weak and ramped non-stop all day…BTFD Much?

 

NOTE VIX was not playing along today…

 

Banks closed lower (except JPM)…

 

Post healthcare vote – Dollar’s down; but Bonds, Stocks, and Gold are up…

 

Bonds erased most of yesterday’s losses – and are now back lower post-healthcare vote (except for 2Y)

 

With 30Y back below 3.00%…

 

The Dollar index traded in an extremely narrow range for most of the day but ironically, after good housing data and very hawkish FedSpeak, the dollar began to sink! Back below post-healthcare-vote close…

 

On the week, EUR and Cable are weakest offset by a stronger AUD…

 

WTI and RBOB jumped on inventory data (despite a new cycle high in production) but copper and PMs flatlined…

 

Finally – this is not how it its supposed to work… not at all…

end

Early USA/European trading this morning: Euro falters, bond yields tumble (bond prices rise

(courtesy zero hedge)

EURUSD, Bond Yields Tumble After ECB Walks Back Policy Shift: “Wary Of Upsetting Investors”

The Euro and European bond yields tumbled this morning after Reuters reported ‘sources’ saying the ECB is wary of fresh policy change (i.e. the expected quasi-tightening) before the June meeting, because it is worried about bond yield spikes.

Via Reuters:

European Central Bank policymakers are wary of making any new change to their policy message in April after small tweaks this month upset investors and raised the specter of a surge in borrowing costs for the bloc’s indebted periphery.

 

One ECB source said the bank has been overinterpreted by markets at its March 9 meeting.

 

Taken aback when markets started to price in an interest rate hike early next year, policymakers are keen to reassure investors that their easy-money policy is far from ending, suggesting reluctance change message before June, six sources in and close to the Governing Council indicated.

 

While the current level of bond yields remains acceptable, a further increase would be problematic, particularly in places like Italy, Spain and Portugal, where debt payments are a major cost item and rising yields would curb spending and thwart growth.

 

With the euro zone economy on its best run in almost a decade and conservative policymakers# keen to start winding down stimulus, the ECB gave a small nod to improvement with a tweak of its guidance in early March, axing a reference to being ready to act with all available instruments.

But that message did not come across as hoped.

“We wanted to communicate reduced tail risk but the market took it as a step to the exit,” one of the sources said. “The message was way overinterpreted.”

Not exactly reasuring.

And sure enough – bonds are bid…

 

and the Euro is offered…

 

But we thought Europe was doing so well? Record PMIs? Asset-gatherers exclaiming how ‘cheap’ it is and why investors should pile their money into Europe? It seems The ECB just realized its own omnipotent control is all that is holding the thin facade of Europe’s Potemkin Village capital markets up after all.

end

 

The following is a must read as David Stockman talks about the budgetary resolution and reconciliation process that the Republicans now face.  Stockman states (and he is the former budgetary director for the Reagan administration) that this will be impossible and there will be no money at all for any of Trump’s new wishes for tax cuts and infrastructure spending as well as money for defense.

in a nutshell, the uSA is in a mess..

a must read..

(courtesy David Stockman/Daily Reckoning)

Trump Faces Even Bigger Debacle than Health Care

 

[Ed. Note: To see exactly what this former Reagan insider has to say about Trump and the fiscal threats from politics and the debt ceiling, David Stockman is sending out a copy of his book Trumped! A Nation on the Brink of Ruin… And How to Bring It Back to any American willing to listen – before it is too late. To learn how to get your free copy CLICK HERE.]

 

The mules of Wall Street were back at it again yesterday, buying the dips after the overnight whoosh in the futures market.

Apparently, it will take an actual 2×4 between the eyes to break a habit that has been working for 96 months now since the March 2009 post-crisis bottom.

I think it is plain as day, however, that we are in a new ball game that the “stimulus” blinded mules don’t see coming at all. They have been juiced for eight years running by the Keynesian apparatchiks at the Fed who have run the printing presses full-tilt or rescued the market with a new round of QE or an extension of ZIRP whenever the indices began to wobble.

But now even the money printers have made it clear that they are done for this cycle, anyway; and that they will be belatedly but consistently raising interest rates for what ought to be a truly scary reason.

That is, the denizens of the Eccles Building have finally realized that they have not outlawed the business cycle after all, and need to raise rates toward 2-3% so that they have headroom to “cut” next time the economy slides into the ditch.

In effect, the Fed is saying to Wall Street: “price-in” a recession because we are!

After all, our monetary central planners are not reluctantly allowing interest rates to lift off the zero bound because they have become converts to the cause of honest price discovery — nor are they fixing to liberate money rates, debt yields and the prices of stocks and other financial assets to clear on the free market.

Instead, they are merely storing up monetary ammo for the next downturn.

But the Wall Street mules keep buying the dips anyway because they are under the preposterous delusion that one source of “stimulus” is just as good as the next. And since the gamblers have now decreed that the “stimulus” baton be handed off to fiscal policy, it only remains for Congress and the White House to shape up and get the job done with all deliberate speed.

But they won’t. Not in a million years. The massive Trump tax cut and infrastructure stimulus is DOA because Uncle Sam is broke and the U.S. economy has slithered into rickety old age.

In that context, it’s not remotely plausible that the Fed will flood the canyons of Wall Street with cash by buying another $80 billion of bonds with digital credits conjured from thin air.

Au contraire.

Fiscal policy is inherently an exercise in herding cats, and an especially impossible one when the cupboards are bare.

The Trump-GOP coalition currently in nominal control of the Imperial City will not be able to generate any fiscal stimulus at all. And ignore the “grow your way out” foolishness that a greying band of supply siders and a desperate throng of Wall Street punters would like to believe.

There is no realistic possibility of passing a tax bill or even an infrastructure spending boondoggle.

Hammering out a budget resolution, passing it in each house and reconciling the differences in conference would take months under the best of circumstances. But given the parlous state of Uncle Sam’s fiscal condition and the partisan acrimony that already suffuses Washington in the era of Trump, passage of a budget resolution by summer  would be a miracle in itself.

Indeed, even the thought of surmounting this next daunting legislative obstacle course puts to rest this week’s particular Wall Street fantasy.

Namely, that after being burned by the Freedom Caucus on Obamacare Lite, the Trump White House will now “pivot” to the middle and form a coalition with the Democrats to make a deal on corporate tax cuts and infrastructure spending.

Yes, and if dogs could whistle the world would be a chorus. That is to say, there is no conceivable fiscal policy menu that could be agreed upon by Speaker Ryan, Nancy Pelosi, Chuck Schumer and the Donald, and then be shoe-horned into a 10-year budget resolution.

Yet without a budget resolution and reconciliation instructions there is no fiscal stimulus and no grand bipartisan compromise on building airports and slashing corporate tax rates.

So what lies directly ahead, therefore, is another bumbling attempt by the White House and Congressional Republicans to hammer out an FY 2018 budget resolution and what amounts to a 10-year fiscal plan. And it is there where the whole fantasy of the Trump Stimulus comes a cropper.

The necessary budget resolution must start with the Congressional Budget Office’s (CBO) projection of current law, which generated $10 trillion in new deficits over the next decade and would take the public debt to $30 trillion in 2027 — before even a single dime of the $5 trillion Trump Stimulus ($4 trillion of tax cuts and $1 trillion of infrastructure) is laid on the budgetary table.

So there flat-out must be big-time deficit offsets or there will not be close to 218 votes for what would otherwise be upwards of $15 trillion in added public debt over the coming decade.

Nor can the above baseline picture be significantly ameliorated by assuming a robust Reaganesque economic forecast in lieu of CBO’s. The latter long ago embraced Rosy Scenario and therefore has already built-in an implausibly strong economy for the next ten years.

This includes the credulous assumption that there will not be an economic recession for 206 months — or double the longest expansion in history — and that the nominal GDP will grow by nearly 4% over the next decade or nearly one-third faster than the 2.9% rate of the last decade.

But 5% nominal GDP growth — or 67% faster than that last decade — is not remotely plausible. Even then, the current law deficit would exceed $8 trillion over FY 2018-2027.

And there are not 218 GOP votes for what would be a $12-13 trillion add to the national debt with the Trump Stimulus program over the next decade.

To be sure, this is why the GOP Congressional leadership stoutly insists on a deficit-neutral tax cut. They are keenly aware of the debt monster they have been kicking down the road — even if the headline reading robo-traders of Wall Street are not.

The baseline Federal spending level for 2018 is $4.09 trillion, according to CBO’s January update. But about $300 billion of that is net interest, and even the Donald will end up urging that be paid; and another $2.6 trillion consists of entitlements and mandatory spending — almost the entirety of which the Donald has taken off the table.

So that puts nearly 70% of the budget out of reach. But what’s actually worse is that the remaining $1.2 trillion of so-called discretionary or appropriated spending mostly amounts to Trump priorities!

That’s right, the current CBO baseline includes $600 billion is for defense and another $250 billion for Trump’s nondefense priorities including veterans, infrastructure, law enforcement, border control and homeland security.

Moreover, the Donald’s partial and preliminary fiscal plan, or the so-called “skinny budget” actually increased this $850 baseline by about $60 billion per year. Therefore, they would need to cut the tiny $350 billion corner of the budget that is left by 17% just to break-even.

That is, before generating even a single dime to pay for the $5 trillion Trump Stimulus.

In short, the whole enterprise amounts to budgetary madness and demonstrates the monumental magnitude of the Debt Trap that has enveloped the Imperial City.

And the “buy the dip” crowd will soon be getting that 2×4 between the eyes.

Regards,

David Stockman
for The Daily Reckoning

END

It looks like there will not be funding for Trump’s wall in this fiscal year 2017. It may force a government shutdown

(courtesy zero hedge)

 

 

Trump’s Border Wall May Force Government Shutdown

With attention finally shifting to next major – and potentially damaging – catalyst for the Trump administration and the governing Republicans, namely the all too real threat of a government shutdown on April 28, which falls on Day 100 of the Trump presidency, the most immediate casualty of the mounting financial considerations may be Trump’s marquee project, the “Great Big Wall” with Mexico.  Specifically, Trump’s demand for $1.5 billion this year to fund the initial phase of wall construction along the Mexican border could be in jeopardy as fellow Republicans in Congress are delaying a decision on the request, according to Reuters; previously the news wire reported that the wall could end up costing as much as $21.6 billion, far more than the $12 billion Trump cited.

At a press conference on Tuesday, Senator Roy Blunt (R-Missouri), a senior member of the Appropriations Committee, confirmed that he had received the $1 billion request for supplemental funding that would build an estimated 62 miles of the border wall, according to The Hill. It also includes a $2.8 billion request for border infrastructure and technology for next year as well.

Blunt, a member of the GOP leadership, told reporters on Tuesday that money for the wall likely would not be coupled with a spending bill that must pass by April 28 to avoid shutting down federal agencies whose funding expires then.  Blunt also said he was not willing to commit to the supplemental funding request. “All of the committees, House and Senate leaderships, are working together to try to finalize the rest of the FY17 bill,” he added. My guess is that “comes together better” without Trump’s additional request for the border wall and military programs and could be considered “at a later time.”

Senate Majority Whip John Cornyn (R-Texas) echoed a similar sentiment, telling Politico that funding the wall “remains to be seen…. What I would like to see is a plan for how the money would be spent and a good faith discussion about what border security is really composed of,” he said in an interview. “We haven’t had that.” Delaying the bill is meant to avoid a showdown between Democrats and Republicans that could result in a government shutdown. However, Cornyn remained positive that “there’s not going to be a shutdown.”

Representative Mario Diaz-Balart also expressed skepticism about Congress’ ability to approve funds for the wall, given the super-majority vote needed in the Senate for most major legislations. Asked about the wall, Diaz-Balart, a senior member of the House of Representatives’ Appropriations Committee and a leading voice on immigration policy, said: “I’m always willing to look at other things we can do to try to get that 60-vote threshold” on border and interior security.

In addition to threatening to withhold funding, the initiative has also faced resistance among Republicans, including lawmakers representing some border towns. The federal government would have to purchase land in many locations in order to construct the edifice, which could make construction costs soar.

While the Republican opposition comes as a surprise, it was to be expected that Democrats would oppose Trump’s project, and sure enough they have threatened to block the bill funding federal agencies from April 29 to Sept. 30, the end of the current fiscal year, if money for the border wall is included. Furthermore, Democrats say the Trump wall is poorly planned and that there already are other border security measures constructed or under consideration.

Meanwhile, House Speaker Paul Ryan removed another potential land mine on Tuesday when he said a Republican drive to end federal funding for women’s healthcare provider Planned Parenthood would be best accomplished on legislation other than the upcoming funding bill. Democrats have vowed to stop the must-do money bill if it ended Planned Parenthood’s federal funds. Some conservative Republicans have called it yet another concession by Ryan and the GOP to an otherwise weak Democratic party.

end

Deutsche bank now gives odds of a government shutdown on April 28 at an extremely high 40%.

(courtesy zero hedge)

Government Shutdown Odds Rise To 40% According To Deutsche Bank

With rumblings growing about a possible Washington shutdown on April 28 when the current continuing resolution expires, Deutsche Bank’s Washington expert Frank Kelly yesterday hosted a client call on the political implications of last week’s events.

He suggested that the surprise withdrawal of the Republican healthcare bill on Friday is a sign of the continued division within the Republican Party and is perhaps a precursor to growing political and policy risks in the US, and as discussed yesterday, he notes that even before considering the difficulties involved in passing President Trump’s tax reforms, there exists a very real possibility of a government shutdown on April 28 when the current continuing resolutions set to expire.

According to Kelly, there is a significant chance that the Freedom Caucus will reject a new continuing resolution due to their opposition to the continued funding of Planned Parenthood and Obamacare, while Trump’s spending plans for a border wall will see opposition from both Democrats and Republicans in the Senate.

As a result, Frank estimates the probability of a government shutdown at roughly 40% and notes that the next 2 weeks will be critical to watch.

Beyond the risks of a government shutdown, policy uncertainty continues to manifest itself in the form of questions surrounding Trump’s tax reform bill: Frank expects that the controversial Border Adjustment Tax (BAT) will not even make it into the final bill (at least not in its current form) and that the new corporate tax rate will likely be closer to 25% rather than the expected 15-20% range. Also despite the failure of the healthcare bill there is unlikely to be any acceleration in the proceedings on tax reform to fill the gap. The bill remains likely to go to Congress sometime in the first two weeks of  May, and will likely only be picked up by the Senate in September.

Given these developing uncertainties, Frank suggests that markets should downgrade their expectations of progress going forward.

Meanwhile, in its latest morning note JPM takes the opposite view and writes that the risks of a shutdown are falling as Republicans will propose a bill void of some of the more controversial spending proposals, and it sounds like the GOP could be moving towards a “small” tax bill (note that Gary Cohn is expected to brief Trump on tax options this Thurs 3/30). As a result, and unlike DB’s recommendation to trim optimism, JPM suggests that “the broader domestic equity macro backdrop remains the same as before.”

end

The major cities of Los Angeles, New York and Chicago are now vowing to defy Trump’s santuary defunding through the courts.

(courtesy zero hedge)

 

Trump may get his wish as the Obamacare explosion may come as early as May 22.  Trump has to decide whether to fund subsidies in a cost sharing exercise.  The Republicans sued and won in court but Obama appealed.  That appeal is coming up on May 22 and if Trump negates the funding Obamacare is dead.

 

(courtesy zero hedge)

Obamacare ‘Explosion’ Could Come On May 22nd, Here’s Why

After a stunning healthcare defeat last week, delivered at the hands of his own party no less, Trump took to twitter to predict the imminent ‘explosion’ of Obamacare.

ObamaCare will explode and we will all get together and piece together a great healthcare plan for THE PEOPLE. Do not worry!

The Democrats will make a deal with me on healthcare as soon as ObamaCare folds – not long. Do not worry, we are in very good shape!

 

As it turns out, that ‘explosion’ could come faster than anyone really expects as legislators and health insurers have to make several critical decisions about the 2018 plan year over the next 2 months which could seal Obamacare’s fate.

As the Atlanta Journal Constitution points out today, the Trump administration has until May 22nd to decided whether they will continue to pursue the Obama’s administration’s appeal to provide subsidies to insurers who participate in the federal exchanges.

As background, in 2014, House Republicans sued the Obama administration over the constitutionality of the cost-sharing reduction payments (a.k.a. “taxpayer funded healthcare subsidies”), which had not been appropriated by Congress.  Republicans won the initial lawsuit but the Obama administration subsequently appealed and now Trump’s administration can decided whether to pursue the appeal or not.  The CBO estimates the payments would total roughly $10 billion in 2018.

One key to insurers selling plans in the marketplace are reimbursements they receive called cost-sharing reductions. These aren’t the same as the tax credits that people receive to help pay their premiums; it is financial assistance to help low-income people pay their out-of-pocket costs, such as deductibles. The Congressional Budget Office projected those payments would add up to $7 billion this year and $10 billion in 2018.

 

But for insurers, there’s a question over how long that money will be delivered, due to an ongoing political and legal dispute about whether the cost-sharing money should be distributed at all.

 

In 2014, House Republicans sued the Obama administration over the constitutionality of the cost-sharing reduction payments, which had not been appropriated by Congress. The lawmakers won the lawsuit, and the Obama administration appealed it. Late last year, with a new administration on the other end of the suit, the House sought to pause the proceedings — with a deadline for a status update in late May.

 

The Trump administration and House lawmakers have to report to the judge this spring. If the Trump administration drops the appeal, it would mean the subsidies would stop being paid — a huge blow to the marketplaces and millions of people. If lawmakers wanted the payments to continue, they would have to find a way to fund them. One opportunity for that is coming up fast, the continuing resolution that must be passed by April 28. If the Trump administration continues the lawsuit, it will be in the odd position of fighting its own party.

As we’ve noted before, several large insurers, including UnitedHealth Group and Aetna, have already made the decision to exit Obamacare due to financial losses.  Now, Molina Healthcare is pondering whether it would be able to continue to participate in the absence of federal subsidies.

Big insurers like UnitedHealth Group and Aetna have mostly left the individual market over the years, citing financial reasons. Several counties across the country only have one insurer offering ObamaCare plans.

 

Now Molina Healthcare is signaling it may downsize its presence in the market, or pull out altogether, if Congress or the administration doesn’t act to stabilize it. Molina has 1 million exchange enrollees in nine states this year.

 

“We need some clarity on what’s going to happen with cost-sharing reductions and understand how they’re going to apply the mandate,” said Molina CEO Dr. Mario Molina.

 

Asked if Molina would leave ObamaCare if the payments are stopped, the CEO said: “It would certainly play into our decision. We’ll look at this on a market-by-market basis. We could leave some. We could leave all.”

 

Mario Molina, chief executive of Molina Healthcare, predicted that if the cost-sharing reductions are not funded, it could result in premium increases on the order of 10 to 12 percent.

While all this uncertainty swirls, health insurers must decide — soon — whether to make rate filings to sell insurance in 2018. The deadline varies by state, but for those that have marketplaces run by the federal government, it is June 21. Filing doesn’t mean that insurers will participate; they’ll have months more to negotiate and could still drop out. But it’s the first step toward offering plans in 2018 and should provide a signal about what the marketplaces are likely to look like.

Meanwhile, it seems pretty likely that Obamacare couldn’t survive another collapse in coverage like we saw in 2017 (charts per the New York Times):

2016 healthcare insurance carriers by county:

Obamacare 2016

 

2017 healthcare insurance carriers by county:

Obamacare 2017

 

The first step is admitting you have a problem.

end

Dave Kranzler talks about 3 black swans that can bury the economy:

  1. the Debt ceiling
  2. the mess in the USA bricks and mortar/shopping malls
  3.  the looming pension (underfunding) problem

(courtesy Dave Kranzler/IRD)

The Market Has Its Head Buried Deep In The Sand

Several “black swans” are looming which could inflict a financial nuclear accident on the U.S. markets and financial system.   I say “black swans” in quotes because a limited audience is aware of these issues – potentially catastrophic problems that are curiously ignored by the mainstream financial media and financial markets.

The most immediate problem is the Treasury debt ceiling.  The Treasury is now projected to run out of cash by mid-summer.  Of course, in the spurious manner in which the markets evaluate the next trade, July may as well be a decade away.  My best guess is that the “market” assumes that, after drawn out staging of DC’s version of Kabuki Theatre, Congress will raise the debt ceiling, probably up to $22 trillion.  Then the Fed will extend its highly secretive “swap” operations to foreign “ally” Central Banks (hint:  Belgium and Switzerland) in order to fund the onslaught of Treasury issuance that will ensue.  Problem solved…or is it?

(Note:  Plan B would be another one of Trump’s bewildering Executive Orders removing the debt ceiling.  Plan B is another form of “fiat” currency issuance)

The second “black swan” seen by some but invisible to most is the ongoing collapse the shopping mall business model, erroneously blamed on the combative growth of online retailing.  But when I look at the actual numbers, that argument smells foul.

Is Online Retailing Actually The Cause Of Brick/Mortar Retail Apocalypse?

More than 3,500 stores are scheduled to be shuttered in the next few months. JC Penny,
Macy’s, Sears, Kmart, Crocs, BCBC, Bebe, Abercrombie & Fitch and Guess are some of the
marquee retailing names that will be closing down mall and strip mall stores. The Limited is going out of business and closing down all 250 of its stores.

The demise of the mall “brick and mortar” retail store is popularly attributed to the growth in online retail sales. To be sure, online retailing is eating into the traditional retail sales
distribution mechanism – but not as much as the spin-meisters would have have you believe. At the beginning of 2015, e-commerice sales were about 7% of total retail sales. By the end of 2016, that metric rose to 8.3%. However, looking at the overall numbers reveals that nominal retail sales have increased for both brick/mortar stores and online. In Q4 2015, total nominal retail sales were $1.186 trillion. Brick/mortar was $1.096 trillion and online was 89.7 billion, which was 7.6% of total retail sales. In Q4 2016, total sales were $1.235 trillion with brick/mortar $1.133 trillion and online $102.6 billion, which was 8.3% of total retail sales.

As you can see, there was nominal growth for both brick/mortar and online retailers. My point here is that the spin-meisters present the narrative that online retailers are eating alive the brick/mortar retailers. That’s simply not true.   Part of the problem that the total retail sales “pie” is shrinking, especially when analyzing the inflation-adjusted numbers.  I created a graph on from the St. Louis Fed’s “FRED” database that surprised even me (click to enlarge):

The graph above shows the year over year percentage change in nominal (not inflation-adjusted) retail sales on a monthly basis from 1993 (as far back as the retail sales data goes) thru February 2017, ex-restaurant sales, vs. outstanding consumer credit. As you can see, since 1994 the growth in nominal retail sales on a year over year basis has been in a downtrend, while the level of consumer credit outstanding as been in a steady uptrend. Since 2014, the rate of growth in debt has exceeded the rate of growth in retail sales. If we were to adjust the retail sales using just the Government-reported CPI measure of “inflation” retail sales would be outright declining.

The problem with the mall business model is debt.  The mall-anchor retailers who are vacating mall space like cockroaches vacate a kitchen when the light is flipped on have been leveraged to the hilt by the financial engineers who control them who in turn have been enabled by the most permissive Federal Reserve in U.S. history.   Too be sure, online retailing is cutting into the margins of Macy’s, JC Pennies, Sears, Dillards, etc.  But these companies would have no problem “fighting back” if they were not over-leveraged to the eyeballs.

Layer on top of that the leverage employed by the mall REITs and the recipe for a financial crisis larger than the 2008 “big short” mortgage/housing crisis has been created.  To compound this problem, mall owners are now starting to mail in the keys to financially troubled malls:   More mall landlords are choosing to walk away from struggling properties, leaving creditors in the lurch and posing a threat to the values of nearby real estate…[as] some of the largest U.S. landlords are calculating it is more advantageous to hand over ownership to lenders than to attempt to restructure debts on properties with darkening outlooks (LINK).

But it gets worse. I referenced the consumer’s ability to borrow in order to spend money. Economic activity in the United States has relied heavily on an increasing amount of debt issuance for several decades. At some point consumer borrowers reach a point at which they can no longer support taking on more debt, whether in the form of mortgages, auto loans/leases or credit cards. The problem for the U.S. financial system is that there will be widespread defaults on the consumer debt that’s already been issued.   The average U.S. household has “hit a wall” on the amount of debt it can absorb.  This is why restaurant and retail sales are dropping and why auto sales have rolled over.  All three will get worse this year.

This Will Crush The Pensions

Finally, the third “invisible” black swam is the looming pension crisis.  A colleague of mine who works at a pension fund did a study last year in which he concluded that, because of the extreme degree of public pension underfunding, a 10% decline in the stock market for a sustained period – i.e. more than 3 or 4 months – would cause every single public pension fund to blow up.  As he has access to better data than most, he also surmised that the degree of underfunding is 2-3x greater than is publicly acknowledged by the mainstream media (see this article for instance:  Bloomberg claims $1.9 trillion underfunding).

Circling back to the mall/REIT ticking time-bomb, while the Fed can keep the stock market propped up as means of preventing an immediate nuclear melt-down in U.S. pensions (all of which are substantially “maxed-out” in their mandated equities allocation), the collapse of commercial mortgage-back securities (CMBS) will have the affect of launching a nuclear sub-missile directly into the side of the U.S. financial system.

The commercial mortgage market is about $3 trillion, of which about $1 trillion has been packaged into asset-backed securities and stuffed into yield-starved pension funds. Without a doubt, the same degree of fraud of has been used to concoct the various tranches in these CMBS trusts that was employed during the mid-2000’s mortgage/housing bubble, with full cooperation of the ratings agencies then and now.   Just like in 2008, with the derivatives that have been layered into the mix, the embedded leverage in the commercial mortgage/CMBS/REIT model is the financial equivalent of the Fukushima nuclear power plant collapse.

It’s a  matter of time before a lit match hits one of the three lethal powder-kegs described above.  This is why the bank stocks were hit particularly hard last week when the Dow was in the middle of its 8-day losing streak.  Of course, all it took to spike the Dow/SPX higher was a couple of immaterial “consumer confidence” reports in order to reflate the stock market with some “hope.”   Don’t forget, the last time consumer confidence high-ticked was in 1999, right before the tech bubble imploded.

Unfortunately, the next financial catastrophe that is going hit the system, and for which the Fed is helpless to prevent, will make everyone yearn for just the tech bubble or “big short” bubble collapses.   Meanwhile, the stock market and its collective universe of “investors” will continue sticking its head deeper into the sand, oblivious to the sling blade that is swings closer to its neck.

end

Republicans state that they are going to try another Obamacare vote next week. Good luck to them. It will not happen

(courtesy zero hedge)

Republicans To Try Another Obamacare Vote Next Week

In an otherwise quiet day on the political front, moments ago Bloomberg dropped the surprising news of the day with a report that House Republicans are considering another try next week at passing the health-care bill they abruptly pulled last Friday in an embarrassing setback to their efforts to repeal Obamacare.

Speaking to Bloomberg, two Republicans said that leaders are discussing holding a vote, even staying into the weekend if necessary, although it was unclear what changes would be made to the GOP’s health bill. The ray of hope for Trump and Ryan is that members of the Freedom Caucus, which was instrumental in derailing the bill, have been talking with some Republican moderate holdouts in an effort to identify changes that could bring them on board with the measure.

A renewed attempt to pass Obamacare repeal would come after President Trump and Republican leaders in Congress said they would move on to issues like a tax overhaul in the wake of last week’s drama, when the long-awaited bill was pulled 30 minutes ahead of a scheduled floor vote. Asked if the GOP health bill will come up again, House Majority Leader Kevin McCarthy said, “Yes. As soon as we figure it out and get the votes.”

Quoted by Bloomberg, Kevin McCarthy said nothing is currently scheduled and didn’t indicate how leadership would resolve divisions between the Freedom Caucus and moderates in the so-called Tuesday Group. “Lot of people are talking,” he said. “Lot of people are working.”

Meanwhile, Paul Ryan is encouraging members to continue talking to each other about health care to “get to a place of yes” on a plan to repeal and replace Obamacare, according to his spokeswoman AshLee Strong. She didn’t have any updates on the timing on a future vote. House Freedom Caucus Chairman Mark Meadows, a North Carolina Republican, has been negotiating with colleagues on a compromise.

“There’s a real commitment among members he’s been speaking with to not give up and move expeditiously toward a path forward,” his spokeswoman, Alyssa Farah, said. “But he doesn’t want to constrain himself to artificial deadlines like ‘before recess.’”

 

The discussion of a new vote comes with House Republican leaders and other key lawmakers leery of playing up talk of a redo. To set such expectations — only to again not have a vote occur — could be even more awkward for members when they leave Washington next week for a two-week recess.

That said, republicans appear to be making the same mistake again, and withholding information from the rank and file: “other Republicans said they’re unaware of any plans to act on health care, and the remaining disagreements on the measure could be very difficult to resolve.”

“I haven’t heard anything as to what leadership is doing,” said RepresentativeWalter Jones of North Carolina. “The issue is very complex.”

 

Multiple House Republicans said they’ve heard from constituents who want to still repeal the Affordable Care Act and hope the issue isn’t dead.

 

“I’m very optimistic we can get something done in the real near future. And when I say in the near future, it may be two weeks, it may be a month,” said Representative Robert Aderholt of Alabama. “I do think it will come up again, the question is when. The form will have to change some,” said Representative Morgan Griffith of Virginia, adding that there remains a strong desire among conservative activists to undo the law. “If both the Freedom Caucus and the Tuesday Group can agree on some things, then we’re in good shape,” he said.

 

He said failing to achieve meaningful change would hurt Republicans in 2018. “If we just sit up here and play tiddlywinks, it’ll hurt us,” he said.

If Republicans are serious about a second attempt, they have to hurry: the House is scheduled to begin a two-week recess starting April 7, and Republicans would like to return home having passed their health-care measure. Even so, it would mark quite a turnaround for a measure that had been declared dead.

Greg Walden, a Republican from Oregon and former Energy and Commerce Committee chairman, went downright religious on Tuesday.  

“We’re approaching the Easter season,” he said. “Some things rise from the dead.”

While we applaud Walden’s optimism, which has also led to a record outpouring of animal spirits and a historic split between “hard” and “soft” economic data, it is time for the GOP to bring some tangible results, and reincarnating Obamacare repeal from the dead would be a good place to start.

Finally, it is unclear how fast the market narrative would have to change again: recall that after last Friday, it was suddenly spun as “bullish” that the GOP failed to pass its healthcare law, instead  allowing “Trump to focus” only on tax reform. However, we are confident that the power of the narrative will shine through again, and no matter the outcome, it will once again lead to a new all time highs for stocks even as the Fed itself is now warning that stocks appear just a little “frothy.”

end

Lululemon plunges 17% on poor guidance.

So much for the higher “soft data” consumer confidence!

(courtesy zero hedge)

Lululemon Plunges Over 16% On Poor Guidance

Tyler Durden's picture

LULU shareholders may be stunned, but at least someone at United Airlines is smiling.

Moments ago Lululemon reported Q4 earnings of $0.99, missing consensus estimates of $1.01 by 2 cents, hardly a disaster.

However, it was LULU’s guidance that shocked Wall Street.

According to the press release, for Q1 the company now expects net revenue to decline, and be in the range of $510 million to $515 million based on a total comparable sales decrease in the low-single digits on a constant dollar basis. Wall Street had expected the company to generate $552.8 million in revenue in the quarter.

Worse, the company guided to Q1 EPS of $0.25 to $0.27, far below the consensus estimate of $0.39, and below even the lowest Wall Street forecast of $0.34. LULU noted that the guidance assumes a 31.2% tax rate (perhaps it should simply lower its effective tax rate by reincorporating in Ireland).

For the full fiscal 2017, LULU said it expects net revenue to be in the range of $2.550 billion to $2.600 billion based on a total comparable sales increase in the low-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $2.26 to $2.36 for the full year, modestly higher than the $2.16 estimate however Wall Street does not appear to have some doubts about this longer-term forecast.

While LULU did not explain what caused the sharp slowdown in demand for the company’s products – one doubts the recent United Airlines scandal had a dramatic adverse effect –  LULU warned that 1Q comp sales would be down low-single digits, confirming that there is something very strange when it comes to consumer demand in the current quarter, and which certainly does not jive with reports of soaring consumer confidence.

Needless to say, the market is not happy with LULU’s sudden pivot away from being a growth stock, sending it over 17% lower in after hours trading.

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