April 21/Silver and gold have been whacked every day this week/Comex silver’s OI again reaches another record level of just under 235,000 contracts/gold rebounds up nicely by $5.50 today but silver retreats down 16 cents/Satellite images suggests that North Korea may undergo another nuclear test/France hit with another Islamist attack just two days before the election//Fitch downgrades Italy’s sovereign debt to BBB from BBB+

Gold: $1287.40  UP $5.50

Silver: $17.83  DOWN 16  cents

Closing access prices:

Gold $1284.60

silver: $17.94!!!










Premium of Shanghai 2nd fix/NY:$8.55


LONDON FIRST GOLD FIX:  5:30 am est  $1281.50




For comex gold:



 TOTAL NOTICES SO FAR: 718 FOR 71800 OZ    (2.233 TONNES)

For silver:

For silver: APRIL


Total number of notices filed so far this month: 892 for 4,460,000 oz



The open interest in silver continues to advance with today’s reading at 234,787 contracts a new record) or about 11000 contracts ABOVE the record set last year AND 6000 CONTRACTS ABOVE THE RECORD SET YESTERDAY.   It seems that the boys want to attack our precious metals as they are quite nervous about silver and its gigantic high OI for the front month of May.

Our precious metals will be under much pressure from today until Friday April 28 as we enter options expiry week

Comex options expiry Tuesday night.  LBMA/OTC options Friday morning at around 11 am



Let us have a look at the data for today





In gold, the total comex gold ROSE BY A HUGE 5968 contracts WITH THE RISE IN THE PRICE OF GOLD ($0.50 with YESTERDAY’S TRADING). The total gold OI stands at 477,965 contracts.

we had 51 notice(s) filed upon for 5100 oz of gold.


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


We had  A HUGE   changes in tonnes of gold at the GLD: A DEPOSIT OF 4.44 TONNES OF GOLD INTO THE GLD

Inventory rests tonight: 858,69 tonnes



We had no changes in silver inventory at the SLV today/

THE SLV Inventory rests at: 326.308 million oz



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

1. Today, we had the open interest in silver ROSE BY A HUGE 5,560 contracts UP TO  234,787, A NEW COMEX RECORD DESPITE THE  FALL IN  SILVER YESTERDAY (15 CENTS). We no doubt had some attempted short covering which badly failed as the longs keep piling on making it difficult for them to cover and overpowered the bankers. Our managed money sector (the hedge funds) continue to remain steadfast in their conviction as they added to their positions again with yesterday’s attempted raid. In gold, the open interest ROSE by 5,968 contracts WITH the accompanying RISE in price by $0.50

(report Harvey


2.a) The Shanghai and London gold fix report



2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

2c COT report



i)Late  THURSDAY night/FRIDAY morning: Shanghai closed UP 1.05 POINTS OR 0.03%/ /Hang Sang CLOSED DOWN 14.96 POINTS OR 0.06%.  The Nikkei closed UP 190.26 OR 1.03% /Australia’s all ordinaires  CLOSED UP .53%/Chinese yuan (ONSHORE) closed DOWN at 6.8857/Oil DOWN to 50.66 dollars per barrel for WTI and 52.92 for Brent. Stocks in Europe  MOSTLY MIXED   ..Offshore yuan trades  6.8870 yuan to the dollar vs 6.8857 for onshore yuan. NOW  THE OFFSHORE IS MUCH WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN SLIGHTLY WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN ALSO MUCH WEAKER AND THIS IS COUPLED WITH THE STRONGER DOLLAR. CHINA IS NOT HAPPY


i)North Korea/South Korea

South Korea and China are on alert as North Korea prepares for a major event:

( zerohedge)

ii)North Korea

New satellite images seems to suggest that North Korea is preparing to a nuclear test

( zero hedge)


none today



none today



Again!! another Islamist attack in Paris as the attackers targeted police officers.  One officer is dead, one wounded.  One of the perpetrates is dead and the other is on the loose.  This should have some effect on the French election on Sunday:

( zero hedge)


none today


none today


i)Very popular Art Berman explains why the oil markets are far from recovery:

  1. strong production from the uSA
  2.  the WTI price structure is in backwardation which induces much selling
  3. demand is weak

( Art Berman/OilPrice.com)

ii)Hedge funds are bailing..crude crashes below 50 dollars per barrel

( zero hedge)

iii)Rig counts continue to rise as USA production is now at 20th month highs

( zerohedge)



The poor in Venezuela are too hungry to protest..

( zero hedge)


i)A good commentary from Ted Butler as he hypothesizes that there is a secret agreement which allows JPMorgan to continue with their criminal activity.

( Ted Butler)

ii)An excellent commentary from Alasdair Macleod as he suggests how China will prepare for the end game and gold is the principal beneficiary

( Alasdair Macleod/GoldMoney)

iii) Russia adds a larger an expected 25 tonnes to its official reserves in March

( JSMineset/George King Cassell, george.king.cassell@spglobal.com)

iv)Lawrie Williams also weighs in on the huge 800,000 oz addition to Russia’s reserves: (24.88 tonnes)

( Lawrie Williams/Sharp’s Pixley)

10. USA stories

i)Even soft data plunges;  Today Manufacturing PMI and Service PMI form Markit shows a huge downdraft.

( zerohedge)

ii)David Stockman provides a dandy for us to close out the week

( David Stockman/Daily Reckoning

Let us head over to the comex:

The total gold comex open interest ROSE BY 5,968 CONTRACTS UP to an OI level of 474,018 DESPITE THE TINY  RISE IN THE PRICE OF GOLD ( $0.50 with YESTERDAY’S trading). The bankers again were certainly not shy in supplying the necessary paper to our newbie longs and our stoic hedge funds. We are now in the contract month of APRIL and it is one of the BETTER delivery months  of the year. In this APRIL delivery month  we had A LOSS OF 71 contract(s) FALLING TO 772. We had 1 notices served yesterday so we LOST 70 contracts or 7000 oz will NOT stand for delivery in the active delivery month of April AND THESE GUYS WITHOUT A DOUBT WERE CASH SETTLED THROUGH THE OBSCURE EFT ROUTE DESCRIBED BY JAMES TURK. 

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/2017 contract month LOST 125 contract(s) and thus its OI is 2039 contracts. The next big active month is June/2017 and here the OI ROSE by 5522 contracts UP to 342,013.

We had 51 notice(s) filed upon today for 5100 oz

And now for the wild silver comex results.  Total silver OI ROSE BY 5,560 contracts FROM   229,227 UP TO 234,787  DESPITE YESTERDAY’S  15 CENT PRICE LOSS.  In both gold and silver, the bankers had no choice as they supplied the necessary paper to contain both of our precious metal’s excitement
The line in the sand is $18.50 for silver.  Once pierced, the monstrous billion oz of silver shorts will blow up. The bankers are defending the Alamo with their last stand at the $18.50 mark.
We HAVE NOW SURPASSED  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.  EVEN THOUGH WE HAVE SET ANOTHER RECORD HIGH TODAY IN OI,  WE ARE STILL $2.54 BELOW THE PRICE OF $20.44 WHEN THE PREVIOUS RECORD WAS SET LAST YEAR.

We are in the NON active delivery month is APRIL  Here the open interest LOST 62 contracts LOWERING TO 0 contracts. We had 62 notices filed yesterday so we neither gained nor lost any silver ounces (contracts) that are standing in this non active month of April and nothing was lost through the EFP route.

The next active contract month is May and here the open interest  LOST ONLY 15,517 contracts DOWN to 86,723 contracts which is astonishingly high. It is this front month that the crooked bankers are targeting as they must be frightened to see such a mammoth amount of contracts still standing for metal. We have only 5 trading days before first day notice. The non active June contract GAINED 109 contracts to stand at 300. The next big active month will be July and here the OI gained 19,735 contracts up to 114,015


For those keeping score, the initial amount of silver oz that stood for delivery for the May 2016 contract month: 28.01 million oz.  By conclusion of the month only 13.58 million oz stood and the rest was cash settled.(EFP ROUTE)


We had 0 notice(s) filed for NIL oz for the APRIL 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 89,574  contracts which is poor.

Yesterday’s confirmed volume was 253,920 contracts  which is very good.

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for APRIL
 April 21/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 514.416 oz
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
No of oz served (contracts) today
51 notice(s)
5100 OZ
No of oz to be served (notices)
721 contracts
72,100 oz
Total monthly oz gold served (contracts) so far this month
718 notices
71800 oz
2.233 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   453,188.2 oz
Today we HAD 0 kilobar transaction(s)/
Today we had 0 deposit(s) into the dealer:
total dealer deposits: nil oz
We had NIL dealer withdrawals:
total dealer withdrawals:  NIL oz
we had 0  customer deposit(s):
total customer deposits; nil  oz
We had 1 customer withdrawal(s)
i) Out of brinks: 514.416 oz
total customer withdrawal: 514.416 oz
 we had 0 adjustments:

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 51 contract(s)  of which 0 notices were stopped (received) by jPMorgan dealer and 33 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

To calculate the initial total number of gold ounces standing for the APRIL. contract month, we take the total number of notices filed so far for the month (718) x 100 oz or 71,800 oz, to which we add the difference between the open interest for the front month of APRIL (772 contracts) minus the number of notices served upon today (51) x 100 oz per contract equals 143,900 oz, the number of ounces standing in this  active month of APRIL.
Thus the INITIAL standings for gold for the APRIL contract month:
No of notices served so far (718) x 100 oz  or ounces + {(772)OI for the front month  minus the number of  notices served upon today (51) x 100 oz which equals 143,900 oz standing in this non active delivery month of APRIL  (4.4758 tonnes)
we LOST 70 contracts or an additional 7000 oz will NOT  stand and THESE were cash settled via the PRIVATE EFP route. IT SURE SEEMS THAT THE COMEX IS OUT OF PHYSICAL METAL TO SUPPLY TO OUR LONGS. THE COMEX IS NOW ONE BIG JOKE!!
 We had 21.206 tonnes of gold initially stand for delivery in April 2016.  By the month’s conclusion we had only 12.39 tonnes stand.
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 4 months of  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/2016.   29.931 tonnes
JAN/2017     3.9004 tonnes
FEB/ 18.734 tonnes
March: 0.5816 tonnes
April/2017: 4.4758
total for the 16 months;  249.29 tonnes
average 15.580 tonnes per month
Total dealer inventory 992,396.791 or 30.867 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,952,104.94 or 278.44 tonnes 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 278.44 tonnes for a  loss of 25  tonnes over that period.  Since August 8/2016 we have lost 76 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
And now for silver
 April 21. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
 1,428,054.307 oz
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
597,943,200 oz
1,098,460.230 oz
2010.64 oz
total:  1,698,414.070 oz
No of oz served today (contracts)
No of oz to be served (notices)
0 contracts
(nil  oz)
Total monthly oz silver served (contracts) 892 contracts (4,460,000 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  12,860,446.4 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil oz
we had Nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 2 customer withdrawal(s):
i) Out of Scotia: 668,395.910 oz
ii) Out of Delaware:  759,658.397 oz
 We had 2 Customer deposits:
i) Into JPMorgan:  597,943.200 oz
ii) Into Delaware:  2010.64 oz
iii) Into Scotia: 1,098,460.230 oz
***deposits into JPMorgan have now resumed.
In the month of March and February, JPMorgan stopped (received) almost all of the comex silver contracts.
why is JPMorgan bringing in so much silver??? why is this not criminal in that they are also the massive short in silver
total customer deposits; 1,698,414.070  oz
 we had 0 adjustment(s)
The total number of notices filed today for the APRIL. contract month is represented by 0 contract(s) for NIL oz. To calculate the number of silver ounces that will stand for delivery in APRIL., we take the total number of notices filed for the month so far at 892 x 5,000 oz  = 4,460,000 oz to which we add the difference between the open interest for the front month of APRIL (0) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the APRIL contract month:  892(notices served so far)x 5000 oz  + OI for front month of APRIL.(0 ) -number of notices served upon today (0)x 5000 oz  equals  4,460,000 oz  of silver standing for the APRIL contract month. 
We neither gained nor lost any silver ounces standing for delivery in this non active delivery month of April. NO CONTRACTS WERE CASH SETTLED THROUGH THE EFP ROUTE.  


Initially for the April 2016 contract1,180,000 oz stood for delivery.  At the end of April 2016: 6,775,000 oz stood as bankers needed much silver to fill major holes elsewhere.

Volumes: for silver comex
Today the estimated volume was 51,921 which is very good 
Yesterday’s  confirmed volume was 168,161 contracts which is humongous
Total dealer silver:  30.532 million (close to record low inventory  
Total number of dealer and customer silver:   194,574 million oz
The total open interest on silver is  now at record levels of 227,498 contracts with the price of $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
 I will update the NPV for Sprott and Central fund later tonight at around 11 pm

NPV for Sprott and Central Fund of Canada

will update later tonight the central fund of Canada figures

1. Central Fund of Canada: traded at Negative 5.9 percent to NAV usa funds and Negative 6.1% to NAV for Cdn funds!!!! 
Percentage of fund in gold 61.1%
Percentage of fund in silver:38.8%
cash .+0.1%( April 21/2017) 
will update later tonight
2. Sprott silver fund (PSLV): Premium RISES TO   -.32%!!!! NAV (April 21/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to +0.47% to NAV  ( April 21/2017)
Note: Sprott silver trust back  into NEGATIVE territory at -.32% /Sprott physical gold trust is back into POSITIVE/ territory at +0.47%/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: Daily Dispatches

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


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

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

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

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

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

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

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

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

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

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

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


I will update gold inventory and silver inventory (GLD and SLV) at 11 pm tonight.

And now the Gold inventory at the GLD




April 18/no changes at the GLD/Inventory remains at 848.92 tonnes

April 17/no changes at the GLD/Inventory remains at 848.92 tonnes

April 13/a deposit of 6.51 tonnes into the GLD/Inventory rests at 848.92 tonnes

this no doubt is a paper deposit/

APRIL 12/no changes in gold inventory at the GLD/Inventory rests at 842.41 tonnes

April 11/a huge deposit of 4.12 tonnes into inventory/Inventory rests at 842.41 tonnes

this would no doubt be a paper gold entry. It would be difficult to find that amount of physical gold.

April 10/1.77 tonnes added into inventory at the GLD/inventory rests at 838.29 tonnes

April 7/a small withdrawal of .28 tonnes from the GLD/Inventory rests at 836.49 tonnes

April 6/no change in gold tonnage at the GLD/Inventory rests at 836.77 tonnes

April 5/no change in gold tonnage at the GLD/Inventory rests at 836.77 tonnes

April 4/no change in gold tonnage at the GLD/Inventory rests at 836.77 tonnes

April 3.2017: a huge deposit of 4.45 tonnes of gold into the GLD/Inventory rests at 836.77 tonnnes

March 31/another withdrawal of 1.19 tonnes of gold inventory fro the GLD/this inventory would no doubt be heading for Shanghai/GLD inventory: 822.32 tonnes

March 30/no changes in gold inventory at the GLD/Inventory rests at 833.51 tonnes

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 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

April 21 /2017/ Inventory rests tonight at 858.69 tonnes


Now the SLV Inventory



April 19/a withdrawal of 1.893 million oz/inventory rests at 326.308 million oz/

April 18/no changes in inventory at the SLV/Inventory rests at 328.201 million oz

April 17/no changes in inventory at the SLV/Inventory rests at 328.201 million oz

April 13/no changes in inventory at the SLV/Inventory rests at 328.201 million oz

April 12/no changes in inventory at the SLV/Inventory rests at 328.201 million oz/

April 11/a paper deposit of 11.131 million oz into the SLV/no doubt yesterday’s entry of a withdrawal of 11.231 million oz was in error/328.201 million oz

April 10/ a paper withdrawal of 11.231 million oz of silver from the SLV and this silver was used in the raid today. Inventory rests at 317.231 million oz

April 7./ a withdrawal of 947,000 oz of silver from the SLV/Inventory rests at 328.201 million oz.

April 6/a tiny withdrawal of 136,000 oz of silver from the SLV/Inventory rests at 329.148 million oz

April 5/ a withdrawal of 1.042 million oz from the SLV/Inventory rests at 329.284 million oz

April 4/no change in inventory at the SLV/Inventory rests at 330.326 million oz/

April 3.2017; a withdrawal of 568,000 oz from the SLV/Inventory rests at 330.326

million oz/

March 31/no change in inventory at the SLV/Inventory rests at the SLV/Inventory rests at 330.894 million oz/
March 30/a huge withdrawal of 2.746 million oz from the SLV/inventory rests at 330.894 million oz/
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/
April 21.2017: Inventory 325.361  million oz
COT reports:
At 3:30 pm est we receive the COT report which gives us position levels of our major players
Let us see what the bankers did in this latest report  (ending Tuesday April 18)
Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
279,311 83,543 48,361 97,769 308,833 425,441 440,737
Change from Prior Reporting Period
26,307 3,205 -9,129 -350 23,350 16,828 17,426
181 84 73 47 60 255 192
Small Speculators  
Long Short Open Interest  
46,822 31,526 472,263  
-696 -1,294 16,132  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, April 18, 2017

Our large speculators:

Those large speculators that have been long in gold added a huge 26,307 contracts to their long side

those large speculators that have been short in gold added 3205 contracts to their short side

Our criminal commercials:

those commercials that have been long in gold pitched a tiny 350 contracts from their long side

those commercials that have been short in gold added another 23,350 contracts to their short side

Our small specs:

those small specs that have been long in gold pitched 696 contracts from their long side’

those small specs that have been short in gold covered 1294 contacts from their short side.

Managed money (hedge funds)

a subset of the large/small specs

those long added 19,160 contracts to their long side and those short added 935 contracts so the net addition is 18225

the hedge funds piled into gold like there was no tomorrow.


what criminals;  the commercials go net short by 23,700 contracts which is bearish.


And now silver:

Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
128,378 24,491 26,918 46,878 163,710
-3,591 -1,963 8,116 -22 2,396
98 43 49 33 40
Small Speculators Open Interest Total
Long Short 227,984 Long Short
25,810 12,865 202,174 215,119
3,309 -737 7,812 4,503 8,549
non reportable positions Positions as of: 155 118
Tuesday, April 18, 2017   © SilverSeek.com

Our large speculators:

those large speculators that have been long in silver pitched 3591 contracts from their long side

those large speculators that have been short in silver covered 1963 contracts from their short side

Our commercials:

those commercials that have been long in silver pitched a tiny 22 contracts from their long side

those commercials that have been short in silver added a tiny 2396 contracts to their short side

Our small specs;

those small specs that have been long in silver added 3319 contracts to their long side

those small specs that have been short in silver covered 737 contracts from their short side

Managed money (hedge funds)

here those hedge funds who have been long in silver pitched 3960 contracts from their long side

those hedge funds who have been short in silver covered 1760 contracts from their short side

thus managed money went net short by 2200 contracts


as we approached record levels in open interest, the commercials were very reluctant to supply the short paper as they went short by a tiny 2418 contracts

this is bullish!





Major gold/silver trading/commentaries for FRIDAY


Silver, Platinum and Palladium as Investments – Research Shows Diversification Benefits

– Silver, platinum and palladium see increased role as investment vehicles
– Increase in academic output on the white precious metals is in line with this
– Silver and particularly gold are safe haven assets
– Silver was a safe haven at times during which gold failed to be
– Platinum and palladium less so but have diversification benefits
– Silver manipulation is possible and indications of, if not legal proof
– Benefits platinum and palladium could provide as money not been fully addressed
– Main focus in investment drivers is price – not on drivers of physical demand
– Platinum, palladium and silver have different relationships with other assets and divergent abilities in hedging risk
– White precious metal investors should employ a buy-and-hold strategy
– Silver markets have become more efficient since 1977
– White precious metals are increasing in investment importance
– Research shows hedging role and diversification benefits of precious metals

by Jan Skoyles, Editor Mark O’Byrne

A review of the academic literature on the financial economics of silver, platinum and palladium has recently been conducted by Vigne, Lucey, O’Connor and Yarovaya.

The review surveys and covers the findings on a wide variety of topics in relation to the White Precious Metals including Market Efficiency, Forecast-ability, Behavioral Findings, Diversification Benefits, Volatility Drivers, Macroeconomic Determinants, and their relationships with other assets.

For those asking whether or not they should invest in precious metals or to increase their allocation, it can be of use to read some academic research into the role the white metals can play in hedging risk in their investment and pension portfolios. There are many strongly held opinions regarding gold and silver and precious metals and some mathematical and economic analysis can go a long way in helping us to understand how and why we should consider investing in these less popular precious metals.

How efficient are the white metal markets?

Given that silver is traded 24 hours a day, across the globe one would, argue the authors, expect to find a market that is ‘constantly involved in price discovery and adhere closely to the Efficient Markets Hypothesis’. This expectation has lead to a number of studies seeking to address this question.

Below we summarise the authors’ findings. The papers featured look at not only the efficiencies of the markets but the effectiveness of futures markets at predicting spot prices and also market manipulation.

Key findings across the literature, relevant for investors include:

  • Speculation in silver
    Solt and Swanson’s (1981) research – soon after silver’s massive bull market in the 1970s which propelled prices from below $1.50/oz to nearly $50/oz – led them to conclude that silver markets are more speculative than other investment markets
  • What role do futures markets play in making predictions?
    Varela’s (1999) regression model finds closest to delivery silver futures are a good predictor of the future cash price, showing efficient links between these markets
  • Mutafoglu et al.’s (2012) work looks at whether open futures positions can predict platinum and silver spot prices movements. They find that white precious metal market returns explain trader’s positions
  • How efficient? More efficient
    Charles et al. (2015) looks at the efficiencies of both the daily spot prices of platinum and silver between 1977 and 2013. They find that that the markets have gradually become more efficient during this period
  • Silver price manipulation
    Silver price manipulation is a hot topic among investors and banks have been guilty of manipulating the gold and silver markets in recent years and so it is something important for academics to study. Batten et al. (2016), looking at the 5 minute tick data between the 1st of January 2010 and the 30th of April 2015, finds evidence of ‘possible manipulation’ but warns that the ‘evidence provided is merely indicative and not a legal prove for foul play’
  • Exogenous shocks – gold or silver?
    Looking at silver prices between 1975 and 2013, Gil-Alana et al. (2015a), find shocks send silver higher but ‘exogenous shocks will affect real silver prices less intensely than gold prices’
  • The impact of ETPs and precious metal and gold ETFs.
    Fassas (2012) finds a significant correlation between silver returns and the flows into silver Exchange-Traded Products exists and further find that ETP flows are a driving factor for platinum and palladium prices
  • When it comes to the Global Financial Crisis, we know that gold deviated from its fundamentals but Figuerola-Ferretti and McCrorie (2016) find that in the same period silver and palladium were rather affected by the launch of ETFs rather than the financial crisis as such.
  • Which trading strategy should I use?
    By examining the daily price of silver between January 1968 and March 2016 and the daily price observations of platinum and palladium between April 1990 and March 2016, Almudhaf and Al Kulaib (2016) conclude that a traditional buy-and-hold strategy outperforms an attempted market timing strategy

Pricing data

 There has been a lot of work done by academics trying to model price data. For some investors it will not add much to the conversation. However there are a couple of key takeaways from the review:

  • Silver twice as volatile as gold; gold not that volatile
    Morales and Andreosso-O’Callaghan (2011) ‘the standard deviation of daily silver returns is more than twice the standard deviation of gold and if the precious metals only palladium has a higher standard deviation than silver.’
  • Caporin et al. (2015) find that ‘platinum is found to be the least liquid and least volatile metal of the precious metals considered.’

How should I split my portfolio?

Since 2003, we have recommended that investors hold precious metals as part of a balanced, diversified portfolio. But that doesn’t mean there is a simple answer for how much you should hold.

  • Silver low correlation with stocks
    Jaffe (1989) finds that silver prices between 1971 to 1987 had a “very low correlation of 0.134” with stocks showing its “usefulness in a diversified portfolio.’
  • Silver as a portfolio hedge
    Kocagil and Topyan (1997) uncover ‘a positive relationship between risk premium and daily futures trading and to a negative relation- ship with the S&P 500, pointing towards silver’s role as an portfolio hedge.’
  • A long-term portfolio hedge
    McCown and Zimmerman (2007) find that ‘silver is a less volatile investment than the market in the short- run, and that it moves in opposite direction than the market on the long-run – arguments in support of silver’s ability to be used as a hedging tool against stock markets.’
  • Platinum or silver?
    Belousova and Dorfleitner (2012) conclude that ‘Adding silver or platinum to a portfolio [of stocks, sovereign bond and the money market instruments] during bull markets reduces volatility and enhances return. During bear markets silver only reduces portfolio risk…but platinum loses its diversifying ability.’
  • A higher proportion to gold
    Hammoudeh et al. (2013) when looking at different make-ups of portfolio decides ‘an optimal portfolio should hold a higher proportion of gold than any other asset (even though silver was the best performing asset over the time frame observed), and that overall, the pure precious metal portfolio proved to be the least efficient’
  • During tough times hold silver, gold and platinum
    When looking at periods of high volatility and poor returns of stock markets, Hillier et al. (2006) concludes ‘silver’s hedging abilities were found to be to be stronger than those of platinum.’ But this was not the recommendation ‘when looking at what metals to optimally hold in a portfolio, silver did not perform as well as both gold and platinum which scored higher returns over the period.’
  • Financial stress
    Reboredo and Uddin (2016) when looking at the impact of financial stress and policy uncertainty finds that ‘financial stress has a positive effect on gold and silver prices, in contrary to platinum and palladium’
  • Which one is the safe haven?
    When looking at all four precious metals’ role as a safe haven between 1989 and 2013, against the S&P 500 and US 10 year bonds, Lucey and Li (2015) find that ‘silver was a safe haven at times during which gold failed to be, but also during far more quarters than both platinum and palladium. Empirically however, gold should be considered the better safe haven investment for it acts as one more often than white precious metals.’

What happens when there is volatility?

  • Silver is sensitive in the short-run
    Hammoudeh and Yuan (2008) find that between 1990 and 2004 ‘silver is found to have a low sensitivity to bad news in the short run, giving it safe haven like qualities. Increases in interest rates reduce silver price volatility. Oil price shocks have the effect of cooling precious metals volatility, making them good diversifiers in a commodity portfolio.’
  • Are macroeconomic factors important?
    Chen (2010) finds that ‘the importance of global macroeconomic factors in explaining silver and platinum price volatility has increased over the time period observed…A similar picture is observed for platinum.’
  • The metals affect one another
    Sari et al (2007) finds that ‘over the long run gold accounts for 16% of silvers variance’ in a similar vein Lucey and Tully (2006) find ‘silver is found to explain 23% of gold price volatility. In the short-run, unexpected shocks to gold, platinum and palladium prices have a positive and significant impact on the price of silver and vice versa. Silver explains about 10% of the variations of both platinum and palladium prices, while platinum and palladium explain about 22% of their respective price fluctuations.’
  • The silver price means little to platinum and palladium
    However Balcilar et al. (2015) disagree with Sari et al (2007), they find ’the impact of change of the gold price on silver is about 1.25%; against an impact of about 0.07% from silver on gold. The impact of change of the gold price on both platinum and palladium is of about 0.8%, while the impact of change of silver prices is practically non-existent for both platinum and palladium prices.’

How does the macroeconomy affect the white precious metals?

  • Platinum and palladium in the long-run
    Using data from 1914 to 1996 to assess the inflation hedging ability of the white precious metals Taylor (1998) finds that platinum and palladium ‘served as a long-run inflation hedge, while evidence also points towards the short-run hedging abilities of platinum.’
  • Silver good in the long and short-run
    Adrangi et al. (2003) finds there is ‘a positive relationship between silver and the CPI in the long-run and the short-run is observed.’
  • Two factors driving the silver price before 1989
    Radetzki (1989) concludes ‘that two factors drive the price of silver: demand from industry and private inventories. Oil prices and official inventories are not believed to be amongst the major driving forces of the silver price, even though they are seen here as important in determining the price of gold.’
  • Negative impact on silver prices
    Elder et al. (2012) look at the impact of US macroeconomic news announcements on the return, volatility and trading volume of gold, silver and copper futures. ‘Advance retail sales, changes in nonfarm payrolls, durable goods orders, business in- ventories, construction spending, and new home sales announcements have a statistically significant negative influence on silver futures prices; only trade balance announcements are positively associated with silver futures prices.’
  • Silver doesn’t worry about monetary nor financial market variables
    Batten et al (2010) ’neither monetary nor financial market variables are significant for silver price volatility. Instead, the volatility from the other precious metals markets has an effect on silver price volatility.’
  • Silver has a strong relationship with US factors
    Fernandez (2017) On a monthly basis, a strong relationship is identified between white precious metals and US industrial production as well as US monetary supply…a very strong relationship is identified between the prices of gold and silver on a weekly basis during bullish environments, while platinum and palladium have a strong relationship with silver during bearish periods.’
  • The white precious metals are increasing in importance
    Fernandez (2017) also finds that the rise in importance of the price of white precious metals and consumer confidence and exchange rates in the United States, [is] in line with the rise in importance of white precious metals as an investments asset.’

Conclusion – White metals have a key role to play

When we are told that we should invest in precious metals then we primarily think of gold and silver. The truth is, that we should consider platinum and palladium which are, like silver, industrial commodities and can play a significant and beneficial role in portfolio diversification.

As we have seen, there is not as much research into the white precious metals and their role as investments as there is for gold. However, given the increasing demand for them we are now reading far more research. This suggests that they will continue to play not only a key role in investment portfolios but in the wider macro-economy.

There is a strong case for having an allocation of some 20% to 30% of an investment or savings portfolio in physical precious metals. The majority of this should be in gold and silver but as we have seen the academic research shows that having smaller allocations – maybe 5% and 5% – to platinum and palladium – will also have diversification benefits.

Investors would be prudent to consider an allocation to all four precious metals, and rebalance when there is outperformance, in order to maximise the safe have aspect and return of their portfolio.

Download and Read ‘The Financial Economics of White Precious Metals – A Survey’ here





A good commentary from Ted Butler as he hypothesizes that there is a secret agreement which allows JPMorgan to continue with their criminal activity.

(courtesy Ted Butler)

A Secret and Illegal Agreement

Theodore Butler


April 20, 2017 – 9:26am

There certainly doesn’t seem to be a shortage of outrageous behavior recently, when looking at reports of an older Asian-American doctor being dragged off a plane. But where visual images cap a sense of outrage that has crept into the flying experience, sometimes bad behavior is not always captured on phone cameras. Sometimes you have to step back and think about things by reading and considering all the facts.

Last week, I asked you to consider writing to the CFTC and your elected representatives yet again in regard to a letter I sent to the two key appointees who are primarily responsible for guarding against market manipulation. In the letter, I highlighted the case for a silver manipulation. Today, I would like to point out just how upside down this whole thing has become.

The CFTC’s main purpose or primary mission is to prevent manipulation and ensure market integrity. Neither you nor I chose this as the agency’s prime mission, it was assigned by congress and commodity law. While not large by government standards, the CFTC is allocated more than $250 million annually and employs around 700 full time employees to fulfill its mission against manipulation and fraud in the regulated commodity markets.

To advance its prime mission, the agency actively solicits tips from the public in its quest to uncover wrongdoing and has instituted a formal whistleblower program designed to reward those who step forward to report wrongdoing. Sounds like a fairly formidable effort against market manipulation and fraud – a quarter of a billion taxpayer dollars annually, 700 full time employees and programs designed to generate tips and complaints from the public. One might think with resources like that, market manipulation wouldn’t stand a chance. Think again.

Those raising the allegations of a silver manipulation, like myself and others, have, basically, zero funds and zero employees budgeted towards raising the allegations of a silver manipulation. The allegations are driven simply by observing price action and COMEX positioning changes, as reported in the COT reports. Despite the programs designed to encourage and generate tips from the public, the record indicates that the CFTC has become downright hostile and unwilling to openly discuss any allegations of a COMEX silver manipulation, even though the allegations are based upon Commission data. Talk about upside down.

The easiest and most practical course of action for the CFTC is simply to address the issues in an open and forthright manner. No muss, no fuss and no great expenditure of taxpayer resources. Explain why the agency’s own guidelines on concentration are ignored on the short side of COMEX silver futures. Explain how it is legitimate for large speculative traders to be setting the price and for real silver producers, consumers and investors to play little, if any role in the price discovery process. Explain how it could possibly be legal for the largest short seller, JPMorgan, to also be the largest physical stopper at the same time – not how it could be done (we know how), but how that could be legal. Explain how JPMorgan never taking a loss on a newly added short COMEX silver position for nine years didn’t raise agency suspicions.

There has to be a good reason why the CFTC won’t openly address the clear evidence of a COMEX silver manipulation, as well as why JPMorgan and the CME Group would turn away from direct accusations of wrongdoing that would constitute slander and libel if such allegations weren’t true. Something has to be holding the CFTC back from addressing that which should and must be addressed. Actually, I think there are two reasons.

One, as I’ve long held concerns the agency rejecting any thought of a COMEX silver manipulation early on, more than 30 years ago when I first alleged such a manipulation. Basically, it’s nothing more than a continued doubling down of manipulation denial because how does a government agency openly admit to failing in its prime mission for decades despite increasingly clear evidence of such failure? This denial doubling down is reflected in the unusual circumstance of the agency being forced to argue with every single point I ever raised about silver. But it’s simply not possible that everything I say about silver to be 100% incorrect. At a minimum, that would be insulting to those who find value in what I write. Besides, I rely, almost exclusively, on the agency’s own data to make the case and it almost ends up with the agency arguing against its own data.

But there’s an even more compelling reason for the CFTC to deny allegations of a silver manipulation that burst onto the scene nine years ago – the takeover of Bear Stearns by JPMorgan in March 2008. As the public record indicates, this was at the start of the financial crisis and came about with the US Treasury Dept. and the Federal Reserve requesting JPMorgan’s assistance in rescuing Bear Stearns. You can be sure that since JPMorgan was being asked by the US Government to, in effect, do it and the country a favor in taking over Bear that the bank would, in return, solicit and arrange for as many protections for JPM as possible. JPMorgan’s CEO, Jamie Dimon, has since lamented that he ever agreed to the takeover, but when it came to subsequent dealings in COMEX silver over the next nine years, it’s hard for me to see how it could have turned out any better than it did for the bank.

What no one knows is what private guarantees and assurances were granted to JPMorgan that have left it immune from the CFTC moving against JPM’s clearly illegal activities in silver over the past nine years. There’s no other way to explain how the crooks at JPMorgan continue to manipulate and fraudulently abuse the silver market for its own gain. Undoubtedly, JPMorgan was given a free get out of jail card from future violations of commodity law when it came to it agreeing to acquire Bear Stearns. But after nine years of JPMorgan dominating the silver market in every way possible, was JPM’s immunity from having to behave legally in silver granted in perpetuity?

The last time the CFTC addressed the silver manipulation in detail was May 13, 2008, when it released a 16 page denial that included many specifics, including the issue of concentration on the short side.


About the only thing that the CFTC reported that was true, to my knowledge, was that it had received numerous letters, emails and phone calls about a silver manipulation for 20 to 25 years to that time (I know this to be true since I did most of the writing and calling). However, the most egregious omission was that less than two months prior to the date of the report, the largest COMEX concentrated silver short seller, Bear Stearns, went under and needed to be taken over by JPMorgan. Nothing could have been more important to the issue of concentrated short selling in COMEX silver than the sudden failure of the largest concentrated short. Funny how the CFTC’s public report missed the most important COMEX silver event ever.

Now that I’ve had time to reflect on it, the financial failure of the largest concentrated COMEX silver short seller in March 2008, just as the price of silver had climbed to its highest level in nearly 30 years (to around $21) was not only the seminal COMEX event, but also the explanation for why the Commission won’t act against the manipulation and, particularly, against the main agent of that manipulation – JPMorgan. While I’m not usually a conspiracy advocate, in hindsight it is crystal clear that JPMorgan was given great leeway to continue the silver manipulation when the US Government called upon it to rescue Bear Stearns. It may also be possible that the USG had granted leeway to Bear Stearns to manipulate the silver price prior to it failing financially, but that looks like small beer at this point.

Think of all that has transpired since JPMorgan agreed to acquire Bear Stearns in 2008 and was granted immunity from the laws governing price manipulation. For one thing, it has resulted in the evisceration of the CFTC as the principle agent in the fight against market manipulation and fraud. The reason the regulatory world is upside down, with the CFTC resisting bona fide allegations of silver manipulation is because of the secret agreement with JPMorgan arranged by Treasury and the Fed. The CFTC has been relegated to being a do nothing, good for nothing waste of taxpayer money when it comes to its most important mission – dealing with market manipulation, not even capable of responding to substantive public claims of market abuse. I’ve become convinced that JPMorgan’s secret agreement with the USG led to Gary Gensler’s failure to enact position limits and his subsequent resignation as well as having succeeded in shutting up the formerly loquacious Bart Chilton.

But how long does the agreement allowing JPMorgan’s illegal control of the silver market extend – forever? And is any secret agreement valid if it permits illegal activity? That’s a question that should be facing new CFTC employees when they are first confronted with these facts.

I’m told from those who know of him personally, that the new director of the Enforcement Division, James McDonald, is as straight and honorable as a June day is long. Certainly his public service record attests to that. McDonald has a strong legal background and, get this, his last position at the US Attorney’s office in New York involved successful prosecution against public corruption. Sounds like his experience might be put to good use should he not succumb to orders from above to forget about the silver manipulation. Someday, someone new at the agency will refuse to go along with orders from above to ignore what is a market crime in progress. Hopefully, McDonald will prove up to the task.

If the CFTC has been rendered useless in moving against JPMorgan because of some secret and likely illegal agreement given nine years ago, perhaps the only remedy is to involve your local elected officials. The CFTC answers to senators and congressmen even if won’t respond to the public complaints it supposedly solicits. It was just such CFTC correspondence with elected officials that revealed that JPMorgan took over Bear Stearns’ illegal dealings in COMEX silver initially. Please write to your representatives with this and anything of mine on this matter.

As a way of explanation to valued subscribers, I may make this article public because it is in all our interests for as wide a public effort to pressure the CFTC as is possible. I’m keenly aware you are paying for something that I am turning around and making public, but if I wasn’t convinced it was the right thing to do, I wouldn’t. And neither do I want it to be a secret that I accuse JPMorgan and the CME of criminal activities in the silver market. If they or anyone has a problem with it, I’m not a hard guy to find.

I know it’s frustrating and infuriating that the silver manipulation has lasted as long as it has, but it would be much worse if there was no good explanation for it. Fortunately, the mechanics of the manipulation – COMEX futures positioning – and JPMorgan’s leading role are more widely understood than ever. The only ones not acknowledging it are the manipulation deniers, sadly now led by CFTC. This is something that can’t be tolerated or allowed to continue.

As always, I approached the Commission in a professional and straight forward manner, asking for responses to substantive questions based upon the public data, much of it from the agency itself. There was nothing about what I wrote that was rude or offensive. The last time the Commission responded in detail, nine years ago, the public record indicates that it lied about there being nothing unusual with the short side concentration in COMEX silver. Since then, the agency has continued to see no evil, even though the evil has grown worse, particularly concerning JPMorgan. Unless someone with personal integrity within the CFTC steps up to the plate and does the right thing, the only practical means of pressuring the agency into doing what it is already supposed to be doing is by enlisting help from elected officials. It’s about time we learned about the secret and illegal deal made with JPMorgan that allows the bank to continue to manipulate the silver market.

Ted Butler

April 19, 2017



An excellent commentary from Alasdair Macleod as he suggests how China will prepare for the end game and gold is the principal beneficiary

(courtesy Alasdair Macleod/GoldMoney)


America’s financial war strategy


America’s renewed desire to escalate military tensions is a front for America’s continual financial war, this time directed at North Korea, Syria and possibly Iran. This is likely to be the opinion of China’s strategic advisors. We analyse the geopolitics and economics behind America’s war strategy from China’s perspective, concluding that it is entering its final phase. China’s exit plan appears to be to tie the pricing of energy and then other major commodities to gold, returning to the pre-1971 status quo, when the dollar was just a settlement link between commodity prices and gold. Except this time, the dollar itself will be side-lined, so far as China is concerned, which will use the yuan instead for its empire, which will be far larger than that of the US in time, measured by GDP.


The day President Trump assumed office, it appeared that at last there would be détente with Russia, leading to America’s withdrawal from unwinnable conflicts and towards a new peaceful agreement between these long-term enemies. However, within the traditional presidential bedding-down period of one hundred days, Trump has gone from his electoral platform of disengagement from foreign ventures to overt aggression in multiple locations.

Something major has changed his thinking. Trump has committed no less than five acts of foreign aggression in that short time, with a sixth pending. The first was a joint operation with Emirati commandos in Yemen, which backfired, leading to the death of a Navy SEAL. The second was the recent attack on a Syrian airfield, in response to an alleged poison gas attack. The third is the escalation of military threats against North Korea. The fourth is the bombing of a cave network in Eastern Afghanistan. And the fifth is the deployment of more troops to Northern Iraq and Eastern Syria to step up the fight against ISIS. The rhetoric is also being ramped up against America’s long-term bogeyman, Iran.

The three theatres of war that offer the best prospects for further escalation are Syria, Korea, and Iran. They are in two regions where significant quantities of dollars are owned and invested, offering the potential for capital flight, which should be kept in mind, when reading this article.

Trump is also seeking congressional approval for an increase in defence spending totalling $54bn, a massive increase which, to put it in perspective, compares with Russia’s total defence budget of $66bn.

The default assumption is that American military power and weapons technology guarantees battlefield objectives will be achieved. This hasn’t usually been the case since the first Iraq invasion in 1990. Since then, any initial success has been more than outweighed by subsequent failures and unintended consequences. It is because of American-led operations in Iraq, Afghanistan, Libya and Syria that Europe is flooded with refugees, bringing undercover terrorists with them. There can be little doubt that a dispassionate analyst would recommend America abandons military action, so there must be other reasons behind America’s war-mongering.

China, itself a long-time strategic target for American aggression, is sure to be worried about the escalation of threats to North Korea, and with good reason. In terms of trade, South Korea is now an important trading partner, and for that reason, China will not want to see the situation on the Korean peninsula deteriorate. She will also not want America securing territory which abuts her border. Russia has a small border with North Korea as well and is likely to share that view. However, Russia’s trade is not so much with South Korea, but she is a major arms supplier to the North.

The only leader with good access to North Korea’s president, Kim Jong-un, is Russia’s President Putin. When Trump was first elected, negotiations with North Korea were a realistic option, and there was even talk of Trump meeting Kim Jong-un to negotiate. The route to negotiations was always through Putin, and if that is not actually closed, it is made much more difficult, because of America’s action launching missiles against Russia’s interests in Syria.

While the renewal of hostilities in Korea threatens to resume (they never officially ended in 1953), China and Russia are sure to avoid escalating the situation. President Xi will have made his own assessment of President Trump to this end, which was probably the most important reason for the meeting at Mar-a-Lago, from Xi’s point of view. The rather casual way in which Xi is reported to have been told about the missile strike against Syria over chocolate cake looks like a businessman’s power-play to impress an opponent. It was not an action of statesmanship. Xi is likely to have thought it amateurish, even a sign of weakness, and might have given Putin a debrief of the meeting including this view.

The relationship between Russia and China is strong, and they are likely to coordinate their strategic responses to American aggression in both Korea and Syria. The question is, if America continues to escalate its bellicose actions against North Korea, Syria, and possibly Iran, what will their response be? For clues, we should look at this from China’s point of view. The People’s Liberation Army’s most influential strategist, Major-General Qiao Liang laid out his overall strategic philosophy at a book-study forum of the Communist Party’s Central Committee in Autumn 2015. His view can be taken to be that of the Chinese leadership.i

China’s working assumptions

Qiao’s economic analysis and conclusions are both interesting and important, but it should be read for what is not said, as much as what is said. His paper will have been examined and cleared by China’s leadership, before being made publicly available. To that extent, there is likely to be an element of disinformation involved as well. It will also have been intended to be studied by foreign governments, alerting them to America’s true motives.

With these cautions in mind, we can proceed. Qiao’s principal thesis is that America uses the dollar to manage external trade and finance for its domestic benefit. Many of us are familiar with the proposition that by exporting dollars and dollar-denominated bank credit, America creates wealth for both the US government and the major American banks, and that the dollar’s reserve status is accordingly vital to the US economy. But Qiao takes this much further, claiming that since the dollar’s peg to the gold price was abandoned, America has initiated a cycle of economic boom and bust among foreign users of the dollar for its own benefit. As Qiao puts it:

The U.S. avoided high inflation by letting the dollar circulate globally. It also needs to restrain the printing of dollars to avoid a dollar devaluation. Then what should it do when it runs out of dollars?


The Americans came up with a solution: issuing debt to bring the dollar back to the U.S. The Americans started to play a game of printing money with one hand and borrowing money with the other hand. Printing money can make money. Borrowing money can also make money. This financial economy (using money to make money) is much easier than the real (industry-based) economy. Why will it bother with manufacturing industries that have only low value-adding capabilities?


Since August 15, 1971, the U.S. has gradually stopped its real economy and moved into a virtual economy. It has become an “empty” economy state. Today’s U.S. Gross Domestic Product (GDP) has reached US$18 trillion, but only $5 trillion is from the real economy.

By issuing debt, the U.S. brings
a large amount of dollars from overseas back to the U.S.’s three big markets: the commodity market, the Treasury Bills market, and the stock market. The U.S. repeats this cycle to make money: printing money, exporting money overseas, and bringing money back. The U.S. has thus become a financial empire.


In other words, America’s wealth is sustained by a pump-and-dump operation facilitated by the dollar’s reserve status, replacing genuine industrial production. It is worth clarifying one point: foreign owned dollars never leave the US, only their function. It is more correct to state that the US Government causes dollars to be diverted from foreign trade and investment in manufacturing, to be invested in Treasuries. It can do this by increasing the risks of other uses compared with owning US Treasuries, which are deemed to be “risk free”.

The first cycle identified by Qiao was the expansion of dollars aimed at creating a boom in Latin America in the mid-seventies. Bank credit expanded on the back of a weak dollar. America then raised interest rates to strengthen the dollar when inflation threatened, leading to dollars being switched from riskier uses into safe-haven Treasuries. A widespread financial crisis in Latin America ensued. This allowed American investors subsequently to buy productive assets at rock-bottom prices (the Brady bonds). Meanwhile, the US stock market rose strongly from 1981 onwards, as interest rates subsequently declined.

The second cycle was aimed at South-East Asia, which expanded on the back of a dollar that weakened from 1986 onwards. From 1995, the dollar began to strengthen, culminating in a bear-raid on the Thai baht, which spread to Malaysia, Indonesia and other countries in the region. The Asian Tiger phenomenon was created and destroyed, not by the countries themselves, but by the flood and ebb of dollar ownership and investment. Qiao notes that China escaped being caught up in this US-inspired operation. Again, dollars flowed back into US assets, this time fuelling the tech boom, which had another two years to run.

Qiao goes so far to state that the most important event in the twentieth century was not the two world wars, but America’s abandonment of the gold standard in 1971. This is some statement. While he explains the events that led up to this event convincingly, the flaw in Qiao’s analysis is to assume that America deliberately added the pump-and-dump money-making strategy to the benefits of exporting dollar ownership when freed from the discipline of gold. US strategists in the Deep State almost certainly lacked the degree of control necessary over events.

The real reason US interest rates rose in 1980-81 was to stop runaway domestic inflation, which was getting out of control. The collapse of Latin America was unintended. The Asian crisis was mostly the result of bad investment and outright theft of capital, not the premeditated actions of the American government. Qiao claims that the way dollars were deliberately diverted from foreign investment is by America issuing Treasury debt. While the benefits to America of this pump-and-dump cycle might be obvious expressed in Qiao’s description, the expansion of the quantity of Treasuries being issued is primarily tied to credit cycles, not the result of some devious dealings by the Deep State. But we can at least agree that the consequences of America’s mismanagement of her own financial affairs match Qiao’s observations.

Where Qiao’s analysis gets less easy to criticise is in subsequent American actions. He claims that Saddam Hussein was overthrown because he instituted a policy of selling oil for euros, not dollars. That was true, and there is little doubt that the threat to dollar hegemony was discouraged. He claims the break-up of Yugoslavia was to undermine the status of the new euro. The euro lost 30% of its value from that time and was damaged as a settlement option for global trade. As Qiao goes on to say, “after the first cruise missiles exploded in Kabul, the Dow Jones index jumped up 600 points in one day”.

Qiao then turns his attention to the contemporary cycle (in 2015) of dollar management, claiming it was now aimed at China. In his words,

It was as precise as the tide; the U.S. dollar was strong for six years. Then, in 2002, it started getting weak. Following the same pattern, it stayed weak for ten years. In 2012, the Americans started to prepare to make it strong. They used the same approach: create a regional crisis for other people.


Therefore, we saw that several events happened in relation to China: the Cheonan sinking event, the dispute over the Senkaku Islands (Diaoyu Islands in Chinese), and the dispute over Scarborough Shoal (the Huangyan Island in Chinese). All these happened during this period. The conflict between China and the Philippians over Huangyan Island and the conflict between China and Japan over the Diaoyu Islands, might not appear to have much to do with the U.S. dollar index, but was it really that case? Why did it happen exactly in the tenth year of the U.S. dollar being weak?


Unfortunately, the U.S. played with too much fire [in its own mortgage market] earlier and got itself into a financial crisis in 2008. This delayed the timing of the U.S. dollar’s hike a bit.


If we acknowledge that there is a U.S. dollar index cycle and the Americans use this cycle to harvest from other countries, then we can conclude that it was time for the Americans to harvest China. Why? Because China had obtained the largest amount of investment from the world. The size of China’s economy was no longer the size of a single county; it was even bigger than the whole of Latin America and about the same size as East Asia’s economy.


At the time Qiao presented his paper to the CCP’s Central Committee, the Shanghai stock market was collapsing, and ever since then, there have been bouts of capital flight, which the Chinese authorities have had difficulty containing. The main-stream media in the US has been consistently negative. From Qiao’s perspective, everything points to a pump-and-dump aimed at China. However, China has protected herself from America’s financial attacks through its national ownership of the banks and by capital controls. Consequently, only foreigners can sell yuan to buy dollars, or withdraw dollars from their own operations to invest in Treasuries. Therefore, the damage was always going to be limited.

China also bends with the wind. While America increases her Naval domination of the Pacific region, instead of fighting it she merely increases her influence towards the West. This is the basis of the One Belt One Road project, which is already running goods trains as far as Madrid and London.

China prefers her trade partners to take yuan in payment, and will lend them yuan if called upon. In time, yuan payments will have convertibility into gold using the Shanghai Gold Futures Market when it gains greater depth, making it superior to the dollar as a settlement currency, though Qiao is silent on this point. More on this below. Embedded in Qiao’s analysis is an understanding that the Chinese empire will not only become far larger than the US in terms of trade, but by understanding the weaknesses of American financial imperialism, it will be more enduring.

Solving the US debt limit

These future events are implicit in Qiao’s thesis. Let us assume for a moment that his thesis is valid, then Trump’s threats to escalate a regional war over North Korea and/or Syria/Iran takes on a wholly different light. While it is a stretch of the imagination to believe that the US’s Deep State planned to “harvest” Latin America, followed by South-East Asia in the late nineties, we are entitled to assume that the US government’s own strategic advisors would have learned that manipulating the dollar’s exchange rate in this way is a powerful financial weapon, benefiting America’s domestic finances and keeping its enemies under control. By threatening North Korea, dollar investment is likely to flow out of trade and investment in South Korea and Japan, back to US Treasuries.

Thinking ahead, this could solve two pressing problems: the first is to persuade Congress to sanction an increase in the deficit limit, it always being easier to persuade Congress to finance a government at war, and the second is to attract the necessary dollar-denominated capital to buy Treasury debt, without having to increase interest rates. The US Government is bound to be aware that higher interest rates must be capped to minimise the risk of triggering a full-blown debt crisis.

As was the case with the Asian crisis, it seems China will avoid being undermined by these negative capital flows. Unknown to the public, America has already failed in its financial war against China, and needs new victims, which is why the attention has switched to the Korean peninsula as well as the Middle East. Trump now realises the only way his presidency can prosper is to encourage capital flight into America from abroad, and have the debt limit raised to accommodate it. This, surely, is behind his Damascene conversion.

Japan and South Korea will most probably have studied Qiao’s paper, becoming wise to America’s true motives, and are therefore more likely to distance themselves from trading in dollars thereafter. Their private sectors will be slow to understand these financial dynamics, so will remain victims. But for governments and large corporations, the American gaff has been blown. This is likely to lead us into a new world, where the dollar’s decline as a reserve and trade currency accelerates, as America runs out of its pump-and-dump victims. And when that happens, the dollar is almost certain to rapidly lose its purchasing power, leading to a global currency reset and a far higher dollar price for gold.

Gold’s glaring omission

A clue that Qiao’s report was censored is the absence of any mention of China’s gold accumulation strategy. While Qiao was quick to notice the importance of the link between gold and the dollar in the Bretton Woods years, there is no mention of why China has been amassing gold, ever since the original regulations were promulgated in 1983, appointing the Peoples Bank for this function. There is no mention of why gold was promoted to ordinary citizens after the Shanghai Gold Exchange opened in 2002, no mention of why China has invested in gold mining to the point where it is now the largest producer in the world by far, and no mention of why the government retains a monopoly on refining, even buying doré from other countries to refine and accumulate. There is no mention that leads us to understand why Chinese state refined gold bars are hardly ever seen outside China.

China places a great emphasis on hoarding gold, both for itself and its citizens. The public has acquired an estimated 12,000-14,000 tonnes since 2002, and this writer has speculated that the Government has hoarded in various accounts as much as a further 20,000 tonnes since 1983. For the government, this represents an average annual accumulation of less than 600 tonnes a year, mostly at contemporary prices far lower than the current dollar level.

But China has gone even further, seeking to control the global market by making the Shanghai Gold Exchange the largest physical exchange by far. She has now introduced yuan gold futures contracts, which will be followed by yuan oil futures contracts in time. This ensures that foreign traders in commodities and wholesale goods can sell forward the yuan they receive in return for gold, increasing the attractiveness of trade finance and settled in yuan compared with dollars. And when the yuan oil contract is introduced, oil importers will use the yuan contracts to sell oil for gold.

In one simple action, China is ready to change the pricing of oil to gold instead of dollars. All she needs to do is pull the trigger, presumably when she has sold down her own dollar reserves to stockpile industrial commodities. And when oil is effectively settled in gold through the futures markets, we can expect other commodities to follow.

This should come as no surprise to the American state, close to being declared check-mate by China on the geopolitical chess board. The dollar price of gold is likely to rise sharply, reflecting the loss of purchasing power for the dollar, and it will end the American dollar’s exorbitant privilege, enjoyed since the end of the gold standard in 1971. It is potentially the coup-de grace for both the paper dollar and American imperialism.


China is thinking ahead, and has its own unique understanding of how America manages its financial empire for the benefit of its domestic economy, at the expense of everyone else. China has protected herself, and attempts by America to undermine China’s economy have already failed. Attention is now focused elsewhere. The latest war-mongering against North Korea, Syria and possibly Iran has much to do with persuading Congress to raise the debt ceiling, and to encourage capital flight back into a new wave of US Treasuries without interest rates being raised. This neatly explains Trump’s change of heart over foreign adventures.

The current attempt to pump-and-dump the economies of Japan and South Korea by escalating tension over North Korea, as well as countries with dollar balances in the Middle East by escalating Syria, Northern Iraq and Iran, will likely be the last such attempt. China’s publication of Qiao’s analysis has alerted government strategists everywhere to the use of this tactic, reducing its efficacy. America is running out of fools to fleece.

The end game for the dollar and America’s harvesting of foreign countries is therefore in sight, and it will likely end with a final dollar crisis. China could bring this about at a time of its own choosing, simply by introducing the planned oil futures yuan contract alongside the gold futures yuan contract. When liquid enough, oil producers will be able to sell oil for gold, effectively restoring the pre-1971 price relationships. This explains the dynamics being played out at the highest levels, and America has the most to lose. But because China still owns large quantities of US Treasuries and dollar reserves, for the moment she might prefer more time before executing the coup de grace.

But execute it, she will. Her fundamental objective is to remove America’s ability to profit from having everything priced in dollars. Logically, that means getting oil and other key commodities referenced in gold, as they were before the Nixon shock in 1971, with fiat currencies merely being the settlement media. America must be careful not to bring forth the date of her own demise by attacking North Korea, Syria, or Iran.

iFor a summary of Qiao Liang’s speech, see http://chinascope.org/archives/6458/76


Russia adds a larger an expected 25 tonnes to its official reserves in March

(courtesy JSMineset/George King Cassell, george.king.cassell@spglobal.com)

Russia adds 25 mt of gold to official reserves in March

London (Platts)–20 Apr 2017 818 am EDT/1218 GMT


Russia added around 800,000 oz (25 mt) of gold to its official reserves in March, data released by the country’s central bank indicated Thursday.

The figure is up from 300,000 oz (9 mt) reported in February, but below 1 million oz (31 mt) for January.

Russia’s central bank reports gold reserves initially in monetary value before releasing the volume on the International Monetary Fund website at a later date, but additions can be calculated using the month-end London Bullion Market Association gold price.

It takes total gold holdings to around 1,680 mt, making it the world’s seventh-largest holder of gold reserves, according to the IMF, behind the US, Germany, the IMF itself, Italy, France and China.

Russia has been the world’s largest central bank purchaser of gold in recent years, adding around 200 mt of gold to its reserves in 2016.

China’s central bank, the next largest buyer in recent years, added 80 mt of gold in 2016 but has made no new additions since October.

Other notable buyers include Turkey and Kazakhstan, which have added 36 mt and 5.6 mt so far this year, respectively.

Last year saw Turkey’s gold holdings decline by up to 140 mt, according to the IMF, largely due to a change in the way it reports gold in its reserve requirements.

Kazakhstan added 36 mt in 2016.

–George King Cassell, george.king.cassell@spglobal.com
–Edited by Maurice Geller, maurice.geller@spglobal.com


Lawrie Williams also weighs in on the huge 800,000 oz addition to Russia’s reserves: (24.88 tonnes)

(courtesy Lawrie Williams/Sharp’s Pixley)

LAWRIE WILLIAMS: Russia adds another big tranche of gold to its reserves

Russia continues to close the gap on China as being the world’s fifth largest holder of gold in its official reserves. In March figures from the Russian central bank have shown it added some 800,000 ounces – 24.9 tonnes – to its gold reserves bringing them to around a total of 1,679 tonnes – now only some 164 tonnes light of China’s officially reported figure. With China having not added to its gold reserves since October, if this pattern continues Russia could surpass China’s official gold reserve figure by the end of the current year. See graphical representation of Russia’s monthly gold reserve increases over the past 10 years from Nick Laird’s www.goldchartsrus.com website below:

Russia’s March figure is comfortably higher than the 9.3 tonnes it added to its reserves in February, but well below the 31.1 tonnes it added in January after a zero addition month in December last year. Overall the nation has added a little over 65 tonnes in Q1 which is commensurate with taking in virtually all its mined gold over the period. Last year, according to estimates by Metals Focus in its recent Gold Focus 2017 report, Russia mined some 274.4 tonnes of gold (See: Top 20 Gold Producing Nations See Small Gain in Output in 2016) so the Q1 figure reported is just short of a quarter of the 2016 year’s total.

While it appears that Russia may be catching up with China in terms of total reported gold reserves, we have commented here before that perhaps one shouldn’t take the Chinese figures at face value and they may indeed be far higher than the official figures suggest. China has a track record of under-reporting its gold reserves and only started announcing its purported monthly gold reserve increases in July 2015 ahead of the Renminbi’s inclusion in the IMF’s Special Drawing Rights in October last year – supposedly in the light of transparency. But since the inclusion of the Chinese currency in the SDR the country has not reported any reserve increases. A cynic might suggest it has returned to its old ways and will only report any gold reserve build-up when it suits it to do so. (See: Chinese CB reports zero addition to gold reserves in March – back to its bad old ways.) In the past this was at five or six year intervals!


Your early FRIDAY 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  6.8857(   DEVALUATION SOUTHBOUND   /OFFSHORE YUAN MOVES WEAKER TO ONSHORE AT   6.8870/ Shanghai bourse UP 1.05 POINTS OR 0.03%   / HANG SANG CLOSED DOWN 14.96 POINTS OR 0.06%

2. Nikkei closed UP 190.26 POINTS OR 1.03%   /USA: YEN FALLS TO 109.13

3. Europe stocks opened MOSTLY MIXED       ( /USA dollar index RISES TO  99.91/Euro DOWN to 1.0695


3c Nikkei now JUST BELOW 17,000

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

3e WTI::  50.66 and Brent: 52.92

3f Gold UP/Yen PU

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO  +.237%/Italian 10 yr bond yield DOWN  to 2.253%    

3j Greek 10 year bond yield FALLS to  : 6.66%   

3k Gold at $1283.60/silver $17.99 (8:15 am est)   SILVER ABOVE  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 13/100 in  roubles/dollar) 56.28-

3m oil into the 50 dollar handle for WTI and 52 handle for Brent/

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


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  .9988 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0683 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.237%

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 2.239% early this morning. Thirty year rate  at 2.890% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

European, US Stocks In Eerie Calm As French Vote Looms

Global markets were oddly calm on Friday, the last day of trading before the first round of France’s closely fought presidential election, with European stocks posting modest declines ahead of Sunday’s main event, Asian shares rising, and set for first weekly gain in the past month, while U.S. futures were unchanged. French bond yields hit three-months low even as the euro has seen some recent weakness.

The long awaited French Presidential Election is now nearly upon us with the first round taking place this Sunday. We’ll likely get exit polls soon after polls close at 7pm local time (8pm BST) with any delays caused by the fact that a few stations are open for an extra hour. In terms of the how the polls are looking, yesterday there was a lot of focus on a Harris poll which showed that support for Macron was running at 24.5% in the first round (compared to 23% ish in other polls) and support for Le Pen is at 21% (versus 22-23% in other polls). Melenchon and Fillon came in with support at 19% and 20% respectively. French assets had a strong day yesterday and outperformed other European assets on the back of that Harris poll. The CAC closed +1.48% for its best day since March 1st. That compared to a much smaller +0.22% gain for the Stoxx 600.

Trading along with the latest polls, the euro has shown little signs of anxiety days before the crucial vote as Le Pen has fallen behind centrist Emmanuel Macron in recent polls.

The fatal attack on a police officer in Paris overnight caused investors some immediate jitters, with the gap between French and German 10-year borrowing costs rising sharply in the first few minutes of trading. Traders said this was on concern the attack could sway the vote in favor of Marine Le Pen. But that move reversed as the session wore on, with the yield on 10-year French government debt hitting its weakest since mid-January and the gap between it and its German equivalent falling to its tightest in three weeks. The stated reason for the move back was that the market assumed any gains for Le Pen would come at the expense of Melenchon.

The murder of a policeman on the Champs-Elysees also forced an early end to campaigning ahead of Sunday’s vote in France. Investors are bracing for a period of uncertainty until a victor emerges on May 7.

“The need to hedge the downside risks on the euro without capping the upside potential, has mostly pushed investors toward the currency options through the week,” Ipek Ozkardeskaya, a market analyst at London Capital Group  wrote in a note. Heightened stock volatility has been spurred by investors’ need to protect against political risk into and following the first round, she said.

Despite Friday’s seeming calm, in recent weeks European stock volatility has seen a pick up, rising to the highest level since Brexit last summer.

Away from the French elections, Europe had something to cheer about with a slew of upbeat PMI reports this morning suggesting a pick up in the economy across the Eurozone. According to Markit, Eurozone PMI hit a 6 year high in April, suggesting the reflation trade is alive and well in Europe, which continues to shrug off any political uncertainties, and continues to be a headache for Mario Draghi who needs some justification to keep extra easy monetary conditions.

There was some less attractive data out of the UK, where the big data release was the March UK retail sales release, which posted the worst Q1 data since 2010, although there was little follow through in GBP selling as Cable buyers stood resolute ahead of 1.2750 and EUR/GBP buyers will find little reprieve ahead of the French elections this weekend.

Futures on the S&P 500 rose 0.1 percent as of 6:20 a.m. in New York. The cash index rose 0.8 percent Thursday, with American Express surging nearly 6 percent to pace gains in the financial group after its results topped estimates. European stocks were little changed, with the STOXX 600 index up 0.01% at 6:40am ET.

“So far markets have been pretty sanguine in the face of the (French) presidential election, which was flagged as one of the potential banana skins for markets in this year and I think that may be partly a result of political fatigue,” said Hargreaves Lansdown analyst Laith Khalaf, in London. But options markets suggested investors remain worried about strong results for Le Pen and/or hard-left challenger anti-EU Jean-Luc Melenchon that would point to the risk of another major political shock for Europe in two weeks time.

“It is kind of reminiscent of the big events last year where people know that it is a binary outcome so the best approach is to remain as cautious as possible,” said Simon Derrick, head of the global markets research team at Bank of New York Mellon in London. France’s CAC stock index fell 0.9%, though it was only around 2 percent off its highest levels since mid-2015.

French 10-year yields fell two basis points to 0.92 percent. Bunds also gained, with the yield on the benchmark due in a decade one basis point lower at 0.24 percent. U.S. government debt fell, as the yield on the 10-year note rose one basis point to 2.24 percent, climbing for a third straight day.

In Asia stocks ended the week on a positive note, unscathed by a U.S. trade probe on Chinese steel exports. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5 percent, but was down 0.4 percent on the week. Asian steelmakers were mostly steady or higher, as investors dismissed for now any negative impact from the launch of a U.S. trade probe against Chinese steel exporters, although Chinese companies shed some of their earlier gains. The move sent their U.S. counterparts surging over 8 percent overnight. Japan’s Nikkei advanced 1 percent, posting a weekly gain of 1.6 percent. Chinese shares in Shanghai added 0.1 percent but recorded a 2.2 percent weekly drop, their worst since mid-December.

“The U.S. accounts for a small proportion of China’s steel exports,” said Yang Kunhe, steel analyst at Northeast Securities in Beijing, adding Northeast Asia and Africa have been growing markets for Chinese steel over the past few years.   “But if Trump’s probe translates into actions, it would increase the chance of trade friction, and hurt market sentiment.”

Markets also mostly shrugged off White House comments that the U.S. may consider tit-for-tat tariffs on imports, and concerns raised by the International Monetary Fund that U.S. tax cuts could fuel financial risk-taking and increase public debt.

The Bloomberg Dollar Spot Index fell for a second week after President Donald Trump said this month the currency is getting too strong. Rebounding commodities propelled gains in European mining stocks while oil rose.

In commodities, oil prices edged lower and were on course for the biggest weekly drop in a month, over doubts that an OPEC-led production cut will restore balance to an oversupplied market. Front-month Brent futures were at $52.95 a barrel and set for a 5.2 percent weekly drop, the most since the week of March 10. Gold was flat at $1,280.91 an ounce. Meahwhile, iron ore futures climbed 5.1 percent.

Economic data include existing home sales, manufacturing PMI. GE, SunTrust are among companies scheduled to publish results.

Market Snapshot

  • S&P 500 futures up 0.1% to 2,354
  • STOXX Europe 600 down 0.2% to 377.30
  • MXAP up 0.7% to 147.03
  • MXAPJ up 0.5% to 478.58
  • Nikkei up 1% to 18,620.75
  • Topix up 1.1% to 1,488.58
  • Hang Seng Index down 0.06% to 24,042.02
  • Shanghai Composite up 0.03% to 3,173.15
  • Sensex down 0.4% to 29,307.65
  • Australia S&P/ASX 200 up 0.6% to 5,854.14
  • Kospi up 0.7% to 2,165.04
  • Brent Futures down less than 0.1% to $52.98
  • Gold spot little changed at $1,281.44
  • U.S. Dollar Index little changed at 99.79
  • German 10Y yield fell 0.6 bps to 0.238%
  • Euro up 0.03% to 1.0720 per US$
  • Brent Futures up 0.1% to $53.06/bbl
  • Italian 10Y yield fell 0.7 bps to 1.974%
  • Spanish 10Y yield rose 0.3 bps to 1.703%

Top Overnight News from Bloomberg

  • SNC-Lavalin Expands Reach With $2.7 Billion Deal for Atkins
  • Deutsche Bank Is First Bank Busted for Breaking Volcker Rule
  • U.S. FDA Finds Incomplete Lab Data at Sun Pharma’s Dadra Plant
  • Sony Reports Preliminary Profit Above Forecast on Savings
  • Kuroda Says Current Purchase Pace to Continue for Some Time
  • Samsung Biologics in Talks for 15 Contracts Amid Pharma Boom
  • Reckitt Benckiser Sales Flatten on Home-Brand Slump in U.S.
  • Freeport May Get Indonesia Nod to Export Concentrate Tuesday
  • GM Sees Low Single-Digit Growth for China Auto Industry in 2017
  • Mckesson Gets Conditional Belgian Nod to Buy Belmedis, Others
  • Pence Announces $10b in Deals in Indonesia With U.S. Companies

Asian equity markets traded higher across the board as the region took the impetus from the upbeat US close where stocks benefitted from optimism regarding tax and healthcare reforms. ASX 200 (+0.7%) was underpinned by outperformance in miners after increases in copper and iron ore prices as Dalian iron ore futures surged by 7% in early trade. Nikkei 225 (+1.0%) was benefitted from a weaker currency in which USD/JPY reclaimed 109.00, while Hang Seng (+0.1%) and Shanghai Comp. (+0.1%) gained after the PBoC continued to inject funds into the interbank market which resulted to a net weekly injection of CNY 170bIn vs. Prey. CNY 70bIn injection last week. 10yr JGBs traded flat with demand dampened amid a positive risk tone across the region, while the BoJ’s Rinban announcement also failed to spur demand as it was widely in line with expectations and heavily concentrated on T-bills. PBoC injected CNY 60bIn in 7-day reverse repos, CNY 20bIn in 14-day reverse repos and CNY 20bIn in 28-day reverse repos, for a net weekly injection of CNY 170bIn vs. last week’s CNY 70bIn net injection.

Top Asian News

  • Netmarble to Raise $2.3 Billion After Pricing IPO at the Top
  • GNI Seeks 13.6b Yen From Warrant Sale to Morgan Stanley MUFG
  • KKR Sells Entire 8.4% Stake in India’s Dalmia Bharat
  • Sunac Said to Weigh $1.1b Joint Investment in Faraday: QQ.com
  • Bullish Options Active on India Cement Stocks on Sales Outlook

Europe’s final trading day of the week has seen equities yet again struggling to find any real direction as participants prepare themselves for the 1st round results of the much-anticipated French election, subsequently volumes are on the lighter side. Europe has had something to cheer about with a slew of upbeat PMI reports this morning suggesting a pick up in the economy across the Eurozone. In fixed income markets, DE-FR spread had been wider by some 8bps at the open with reports out last night of another terror attack in France, consequently heightening tensions regarding the election, however since the open, the spread has tightened to around 65bps. While the move higher in OATs has spilled over into gilts which kicked of the session on a firmer footing, with a further move higher attributed by the weak retail sales data.

Top European News

  • Euro-Area Economic Activity Accelerates to Fastest in Six Years
  • U.K. Retail Sales Post Biggest Quarterly Drop Since Early 2010
  • Philips Lighting CEO Says LED Demand Growth Faster Than Expected
  • Dortmund Soccer Team Attacker Hoped to Gain From Share Drop

In currencies, The Bloomberg Dollar Spot Index was little changed and is poised for a weekly decline of 0.2 percent. The euro weakened 0.2 percent to $1.0693. Sterling also fell 0.2 percent to $1.2787. The big data release this morning was the March UK retail sales release, but despite posting the worst Q1 data since 2010, we saw little follow through in GBP selling as Cable buyers stood resolute ahead of 1.2750 and EUR/GBP buyers will find little reprieve ahead of the French elections this weekend. Trading is still relatively tight however, but the longer the Pound holds up, the more we expect this GBP revival to continue. Switching to the main event in front of us, and a number of pundits are highlighting the modest risk premium priced into Euro assets — specifically French stocks — but also as the EUR as a whole. That said, we have seen EUR/USD dip back to 1.0700 more recently, as traders throw in the towel on an intra day push lower in GBP. Most of the pre weekend positioning is said to be in place — very likely through the options market — as the prospect of a market friendly result in the first round vote could spell a strong relief rally in the EUR. From a USD perspective, it is hard to argue against a lower (EUR/USD) rate near term, with US Treasury yields recovering somewhat. 1.0600 is a key fair value point and this is a potential target for later today. USD/JPY is not getting the upside traction however, and this is likely to cross rate activity which sees EUR/JPY back in the mid 116.00’s, but less so of a retreat in GBP/JPY to highlight the resilience in the Pound noted above. The BoJ maintains that it is too early to talk about exit strategy, but to little effect on the JPY all round.

In commodities, some modest respite for the reflation trade gave base metals a modest fillip yesterday following comments from Trump’s administration over healthcare and tax reform. Copper gains have stalled north of USD2.55, but we continue to hold off USD2.50 as tight range looks set to extend into the weekend as traders all focus on the French elections, and broader risk sentiment as a result. Price action looks to be uniform across the field this morning, but Copper outperforms modestly. Precious metals have based out, with little fresh weakness to note despite a small pick up in UST yields. Naturally the risk factor dominates for now, keeping Gold above USD1280.00, but Silver has since slipped below USD18.00. WTI is back under USD51.00 again, but ahead of fresh OPEC talks which will focus on a potential extension to production cuts, we should expect some near term ‘noise’ to play out.

Looking at the day ahead, the focus in the morning session in Europe will almost certainly be the release of the flash April PMIs. Market consensus is for the composite Euro area reading to hold steady at 56.3, with the final print coming in stronger at 56.7 Away from that, this morning we will also get UK retail sales data for March. Over in the US this afternoon the flash PMIs will also be released alongside March existing home sales data. Away from the data, the Fed’s Kashkari is due to speak this afternoon while the BoE’s Saunders is also scheduled to speak. Also of note is the start of the spring meetings of the World Bank Group and IMF which will continue into the  weekend. Lagarde and Mnuchin are amongst the scheduled speakers. Earnings wise today its quiet with just 9 S&P 500 companies reporting including Schlumberger and General Electric.

US Event Calendar

  • 9:45am: Markit US Manufacturing PMI, est. 53.8, prior 53.3; Services PMI, est. 53.2, prior 52.8; Composite PMI, prior 53
  • 10am: Existing Home Sales, est. 5.6m, prior 5.48m; MoM, est. 2.19%, prior -3.7%

DB’s Jim Reid concludes the overnight wrap

The long awaited French Presidential Election is now nearly upon us with the first round taking place this Sunday. Speaking to our expert Marc De-Muizon yesterday he informed me that we’ll likely get exit polls soon after polls close at 7pm local time (8pm BST) with any delays caused by the fact that a few stations are open for an extra hour. It’s also possible we’ll get some earlier exit polls from across the border during the afternoon as they’ll be banned in France while polls are open. Marc thinks that the only way we won’t have a good idea of the rankings of the leading candidates within an hour or two is if all four main protagonists are clustered around the same mark. Quite possible.

In terms of the how the polls are looking, yesterday there was a lot of focus on a Harris poll which showed that support for Macron was running at 24.5% in the first round (compared to 23% ish in other polls) and support for Le Pen is at 21% (versus 22-23% in other polls). Melenchon and Fillon came in with support at 19% and 20% respectively. It is probably worth handicapping this poll however given that the sample size was less than 1000 people and also that the poll is also a lot less regular than some of the more reliable ones including Opinionway, Ifop and Ipsos. Indeed if we look at the last 3 polls run by those pollsters then the spread between the four candidates is at an average of 4.5%. Macron’s average is 23.3%, Le Pen 22.3%, Fillon 19.7% and Melenchon 18.8%. So as we remark earlier it’s quite possible that these 4 candidates will be clustered together given that the spread is within the margin of error from previous elections. It’s worth noting that French assets had a strong day yesterday and outperformed other European assets on the back of that Harris poll. The CAC closed +1.48% for its best day since March 1st. That compared to a much smaller +0.22% gain for the Stoxx 600. Before the day ahead we highlight that our Euro equity strategist doesn’t think too much risk premium is priced in. In bonds 10y OATs were also 2.9bps lower at 0.914% compared to a 4.0bps move higher for similar maturity Bunds.

Unfortunately just 3 days prior to Sunday’s vote Paris was home to what is being called a terror attack last night following the fatal shooting of a police officer on the Champs-Elysees. Two others have been injured. President Francois Hollande said that “we are convinced that the leads in the investigation are terror related”. Fillon and Le Pen have cancelled campaign appearances scheduled for today following the attack.

The French Election story was overshadowed a little yesterday by renewed interest in both the Healthcare bill and perhaps more importantly positive sounding rhetoric from Treasury Secretary Mnuchin on tax  reform. Specifically Mnuchin said that “we’re pretty close to being able to bring forward what is going to be major tax reform” regardless of whether or not health care reform gets done. Mnuchin also said that he hoped passing such tax overhaul will not take “till the end of the year”. President Trump separately said at a joint news conference with Italian PM Gentiloni that he hopes that the House can vote on healthcare reform again next week. Those comments seemed to bring some life back to US risk assets. The S&P 500 closed up +0.76% with Banks alone up +1.81%. Industrials also had a strong day which more than likely reflected the comment from Trump that the US was moving one step closer towards imposing tariffs on steel imports. Earnings helped at the margin with the standout being a better than expected quarterly report from American Express which sent shares up nearly 6%.

Credit markets in the US also had a decent day in line with the largely positive sentiment. CDX IG closed 1.7bps tighter for its strongest day in over a month. Meanwhile US Treasury yields inched a little bit higher with 10y yields up another 1.8bps to 2.233%. That means yields are now up some 7bps from Tuesday’s intraday lows. Meanwhile in commodities it was a decent day for base metals with the likes of iron ore (+1.18%), copper (+1.21%), aluminium (+2.10%) and zinc (+3.30%) all higher. The tumble lower for WTI Oil abated somewhat after holding just below the $51/bbl mark. Meanwhile in FX the most  notable move was that for the Yen which weakened -0.42% after BoJ Governor Kuroda said that the BoJ will continue with very accommodative monetary policy and continue with the current pace of QE for some time. He noted that this reflects the still benign inflation backdrop despite an improving economy.

This morning in Japan both the Nikkei (+0.86%) and Topix (+0.98%) are leading gains following those Kuroda comments, while a strengthening in Japan’s manufacturing PMI to 52.8 (from 52.4) is also helping sentiment. Elsewhere in Asia the Hang Seng (+0.30%), Shanghai Comp (+0.07%), Kospi (+0.91%) and ASX (+0.91) are also higher. US equity index futures are also showing modest gains.

Moving on. We have published a Credit Bite this morning which provides a brief overview of floater issuance dynamics in the EUR IG space, showing a breakdown by maturity for corporates and financials separately. The recent surge in supply comes largely on the back of investors starved for floaters amidst concerns about the direction of interest rates. It should be in your inbox, email Michal.Jezek@db.com if not.

In terms of other news yesterday, over at the Fed we heard from Governor Powell who said that he favoured some form of reassessment around financial regulation. Meanwhile Dallas Fed President Kaplan reiterated that he thinks the median of three rate hikes this year remains an appropriate baseline. In terms of data, in the US the headline business conditions index in the Philly Fed’s manufacturing survey declined 10.8pts to 22.0 in April. Meanwhile initial jobless claims edged up a small 10k to 244k last week while the conference board’s leading index came in at +0.4% mom for March. In Europe the European Commission’s flash consumer sentiment reading for April was reported as improving 1.4pts to -3.6 and in the process equally the post-financial crisis high set in March 2015.

Before we look at today’s calendar, ahead of the first round of the French elections on Sunday, our equity strategist Sebastian Raedler notes that despite the tightening of the poll numbers among the four front-runners, European equities show little sign of pricing in a meaningful political risk premium. While equities fell 8% ahead the UK referendum last June and 4% ahead of the US elections in November, they have remained close to their recent highs this time around – and now trade around 3% above the fair-value levels suggested by our strategists’ models. European banks have also held up well despite falling bond yields, with their price relative around 5% above the level implied by the German 10-year yield. Our strategists expect only moderate upside for European equities in case of a Macron/Fillon victory in the second round on May 7th (~3%), moderate downside in case of a Mélenchon win (~3%) and significant downside in case of a Le Pen victory (~15%). Contact Sebastian.Raedler@db.com for the full report.

Looking at the day ahead, the focus in the morning session in Europe will almost certainly be the release of the flash April PMIs. Market consensus is for the composite Euro area reading to hold steady at 56.4. Away from that, this morning we will also get UK retail sales data for March. Over in the US this afternoon the flash PMIs will also be released alongside March existing home sales data. Away from the data, the Fed’s Kashkari is due to speak this afternoon while the BoE’s Saunders is also scheduled to speak. Also of note is the start of the spring meetings of the World Bank Group and IMF which will continue into the  weekend. Lagarde and Mnuchin are amongst the scheduled speakers. Earnings wise today its quiet with just 9 S&P 500 companies reporting including Schlumberger and General Electric.


i)Late  THURSDAY night/FRIDAY morning: Shanghai closed UP 1.05 POINTS OR 0.03%/ /Hang Sang CLOSED DOWN 14.96 POINTS OR 0.06%.  The Nikkei closed UP 190.26 OR 1.03% /Australia’s all ordinaires  CLOSED UP .53%/Chinese yuan (ONSHORE) closed DOWN at 6.8857/Oil DOWN to 50.66 dollars per barrel for WTI and 52.92 for Brent. Stocks in Europe  MOSTLY MIXED   ..Offshore yuan trades  6.8870 yuan to the dollar vs 6.8857 for onshore yuan. NOW  THE OFFSHORE IS MUCH WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN SLIGHTLY WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN ALSO MUCH WEAKER AND THIS IS COUPLED WITH THE STRONGER DOLLAR. CHINA IS NOT HAPPY


North Korea/South Korea

South Korea and China are on alert as North Korea prepares for a major event:

(courtesy zerohedge)

South Korea On Heightened Alert As North Prepares For Major Army Event

Just two days after China warned that April 25 is the “highest probability” day for a North Korean nuclear test, South Korea said on Friday that it was on heightened alert ahead of another important anniversary in North Korea, with a large concentration of military hardware amassed on both sides of the border amid concerns about a new nuclear test by Pyongyang.

Recall that on Wednesday, Boxun News cited a Chinese source who said that “China believes there is the “highest possibility” of a nuclear test on April 25, but “does not leave out the possibility it might take action in early May.”

North Korea test-fired what the United States believed was a mid-range missile on Sunday. It blew up almost immediately. The failed launch came a day after the 105th anniversary of the birth of North Korea’s founding father, Kim Il Sung, the current leader’s grandfather. Now, there is concern the North will use the next big day on its calendar, April 25, to show off its strength again.

“Although North Korea attempted a missile launch but failed on April 16, considering the April 25 anniversary of the Korean People’s Army, there are concerns that it can make another provocation again at any time,” South Korea’s acting president Hwang Kyo-ahn told top officials on Thursday. He called on the military to maintain readiness.

Additionally, as discussed yesterday, Beijing is not taking any chances: U.S. officials said on Thursday there was a higher-than-usual level of activity by Chinese bombers, signaling a possible heightened state of readiness by China, although the officials played down concern and left open a range of possible reasons. At the same time a Kremlin spokesman declined to comment on media reports that Russia was moving military hardware and troops toward the border with North Korea, the RIA news agency quoted him as saying.

U.S. and South Korean officials have been saying for weeks that the North could soon stage another nuclear test in violation of United Nations sanctions, something both the United States and China have warned against. That test could likely take place on April 25, when North Korea marks the 85th anniversary of the foundation of its Korean People’s Army, an important anniversary that comes at the end of major winter military drills, South Korea’s Unification Ministry spokesman Lee Duk-haeng said.

As Reuters reports, top envoys from the United States, South Korea and Japan on North Korea are due to meet on Tuesday, South Korea’s foreign ministry said, to “discuss plans to rein in North Korea’s additional high-strength provocations, to maximize pressure on the North, and to ensure China’s constructive role in resolving the North Korea nuclear issue”. South Korea and the United States have also been conducting annual joint military exercises, which the North routinely criticizes as a prelude to invasion.

“It is a situation where a lot of exercise equipment is amassed in North Korea and also a lot of strategic assets are situated on the Korean peninsula because of the South Korea-U.S. military drills,” Lee told a briefing adding that “we are closely watching the situation and will not be letting our guards down.”

On Thursday Donald Trump praised Chinese efforts to rein in “the menace of North Korea”, after North Korean state media warned the United States of a “super-mighty preemptive strike”.

Trump told a news conference “some very unusual moves have been made over the last two or three hours“, and that he was confident Chinese President Xi Jinping would “try very hard” to pressure North Korea over its nuclear and missile programs. Trump did not provide details of what the moves might be.

Fanning speculation, Chinese Foreign Ministry spokesman Lu Kang referred questions about the air force to the Defence Ministry, which has yet to publicly comment. Asked about Trump’s comment about Xi trying hard, Lu said Xi and Trump had had a full and deep discussion about North Korea when they met this month.

“I can only say that via deep communications between China and the U.S. at various levels including at the highest levels, the U.S. now has an even fuller and more correct understanding of China’s policy and position and has a more rounded understanding of China’s efforts. We feel very gratified about this.”

An official Chinese newspaper said there was optimism about persuading the North to end its pursuit of a nuclear program without the use of force, “now that even the once tough-talking Donald Trump is onboard for a peaceful solution”.


“Beijing has demonstrated due enthusiasm for Washington’s newfound interest in a diplomatic solution and willingness to work more closely with it,” the state-run China Daily said in an editorial.

It’s not just China. As we showed previously, in Russia’s Ear East, some media have cited residents as saying they have seen military hardware being moved toward North Korea but Kremlin spokesman Dmitry Peskov said deployment of Russian troops inside Russia were not a public matter.

Meanwhile, North Korea has said it would test missiles when it sees fit and a South Korean analyst said he believed they would do so.

“Without crossing the red line such as a nuclear test or a test launch of an intercontinental ballistic missile, until the April 25 anniversary of the Korean People’s Army, North Korea is expected to continue to launch mid-range missiles,” said Cheong Seong-chang, a senior research fellow at Sejong Institute outside Seoul.

The April 25 date would coincide with another key event: that is when the USS Carl Vinson aircraft carrier strike group is expected to reach the Korean Peninsula. Additionally, the joint U.S.-South Korea military exercises are due to finish at the end of April.



New satellite images seems to suggest that North Korea is preparing to a nuclear test

(courtesy zero hedge)

Satellite Images Suggest North Korea May Have Resumed Nuclear Test Preparations

Satellite images of the Punggye-ri Nuclear Test Site from April 19 indicate that North Korea may have resumed preparations for a possible imminent nuclear test.

According to 38 North, a North Korea analysis program at the Johns Hopkins University, probable trailers have been spotted near the North Portal, the tunnel that North Korea appears to have been preparing for a nuclear test. While no recent dumping is observed, there are at least five mining carts along the tracks leading to the spoil pile and one probable small equipment trailer adjacent to the support building. A net canopy remains in place, presumably concealing equipment, and the pumping of water out of the tunnel to maintain an environment optimal for instrumentation and stemming seems to have ceased.

Figure 1. Probable trailers observed near the North Portal.

At the Main Administrative Area, no volleyball games are observed, but the outline of the court in the north courtyard is still visible. There is a small truck or van present in the south courtyard along with several unidentified objects and activities. While the imagery is not high enough resolution to determine what these objects are, some may be supplies or equipment with tarps or netting draped over them.

Figure 2. Several unidentified objects and activities observed at the Main Administrative Area.

No activity of significance is noted at the West Portal, South Portal, Command Center Area or elsewhere in the facility.

As 38 North concludes, “It is unclear if the noted activity represents a “tactical pause” before a forthcoming nuclear test, a broader more prolonged “stand down” from testing or normal facility operations. Regardless, satellite imagery continues to indicate that the Punggye-ri nuclear test site appears able to conduct a sixth nuclear test at any time once the order is received from Pyongyang.

As a reminder, earlier today Reuters reported that South Korea was on a heightened state of alert ahead of a major army event in the North, set for next Tuesday, April 25.

“Although North Korea attempted a missile launch but failed on April 16, considering the April 25 anniversary of the Korean People’s Army, there are concerns that it can make another provocation again at any time,” South Korea’s acting president Hwang Kyo-ahn told top officials on Thursday.

Also woth noting: April 25 is when the USS Carl Vinson is scheduled to arrive off the coast of the Korean Penninsula.






Again!! another Islamist attack in Paris as the attackers targeted police officers.  One officer is dead, one wounded.  One of the perpetrates is dead and the other is on the loose.  This should have some effect on the French election on Sunday:

(courtesy zero hedge)

Police Officer, Kalashinikov-Yielding Shooter Killed In Paris “Terrorist” Attack; ISIS Claims Responsibility

  • One police officer has been killed in a shooting on the Champs Elysees in Paris
  • The shooting suspect, who was armed with a Kalashnikov rifle, has been shot dea
  • An arrest warrant has been issued for the second suspect who arrived from Belgium by train
  • One shooting suspect is thought to be a 39-year-old man from a suburb east of Paris
  • ISIS has claimed the attack and has identified the attacker as Abu Yusuf al-Beljiki
  • A ‘War weapon’ was used in attack
  • Central Paris remains on in lockdown
  • Attack comes three days before presidential election

* * *

Update 13: French BFM TV reports that the attacker had boasted of wanting to kill police on the Telegram messaging service.

Meanwhile, Francois Fillon has called for this Sunday’s presidential election first round to be suspended following the Paris attack. 

* * *

Update 12: Through its news agency Amaq, ISIS has claimed the attack on French police in #Paris France, and has identified the attacker as Belgian Abu Yusuf al-Beljiki

Through ‘Amaq, claimed the attack on French police on Champs-Élysées in , identified attacker as Abu Yusuf al-Beljiki

* * *

Update 11: A witness quoted by the Telegraph said he saw the gunman fire six times and then hide behind a truck. “He fired at the police and then he crouched behind the lorry. Then he got up and ran and was shot by the police.”

Forensics officers in white boiler suits with hoods were deployed on the Champs-Elysées.

Meanwhile, President Hollande said: “We are convinced the motive is likely to be terrorism.” Both Marine Le Pen and Francois Fillon have cancelled campaign trips tomorrow.

* * *

Update 10: According to a French government spokesman the Paris assailant used a “war weapon” to fire on officers, previously identified as a Kalashnikov rifle.

Cyril, 40, a witness, said: “I was on the corner beside Marks and Spencer and Zara, waiting in my car for a friend, 10 or 15 metres from a police van. I saw a man all in black approaching the van as if he was asking for information, and he took out a Kalashnikov and fired, with his right hand.”

He added: “I started my car and pushed three or four other cars so I could do a U-turn. I’m totally certain he meant to kill the police. He was wearing a big black quileted coat and had hidden the gun under it.”

Paris is engulfed in Darkness. “He came out with a Kalashnikov and started shooting”

Update 9: The French police have issued an arrest warrant for a second suspect in Paris shooting who arrived from Belgium by train, Reuters reports.

* * *

Update 8: In conflicting reports, the French Interior Ministry now says that no other terror events occured, adds that a second policeman was not killed and that the gundman has not been “precisely identified”. Additionally, police have reportedly stated that the dead attacker appeared to be alone.

* * *

Update 7: A police helicopter is said to be patrolling the area of the shooting. A police source said it was equipped with a huge searchlight to help track down any attackers that might be on the run.

* * *

Update 6: A bomb disposal team is checking the attacker’s vehicle according to the French Interior Ministry. Meanwhile, security forces are searching the home of the dead gunman in the east of Paris.

* * *

Update 5: French anti-terrorist prosecutors have opened an investigation, confirming that the motive is believed to have been terrorism, and the attacker was known to the intelligence services, security sources said. They added that he had been flagged as a serious threat to national security.

Meanwhile, Reuters reports that the second policeman injured in shooting has died of his wounds, police sources told Reuters.

President Hollande has called an emergency security meeting. Bernard Cazeneuve, the prime minister, has joined President Hollande at the Elysée Palace for the meeting.

* * *

Update 4: French BFM TV reports that at least one assailant was known to French authorities.

* * *

Update 3: BREAKING – Shots fired at new location near Champs Elysees Avenue in Paris: police source. Meanwhile, FranceTV Info reports that there were several assailants in the original shooting, some of whom were still at large.

* * *

Update 2:  An Interior Ministry spokesman says on BFM TV that officers were deliberately targeted in Paris shooting.

* * *

Update: A robbery apparently took place at same time as shooting

Pierre-Henry Brandet, the interior ministry spokesman, said one police officer was killed and two seriously wounded. “The attacker was shot dead by police and the area remains cordoned off,” Mr Brandet said.

A car stopped near a police van before the attack and was found abandoned. It was suspected that the gunman used it to reach the scene of the attack.

Mr Brandet said a robbery may have been carried out at the same time as the attack. It was unclear if the two were linked.


* * *

With just days until the first round of the French presidential election, one policeman was killed and another wounded in a shooting incident on the historic Champs-Elysees in Paris.

The shootout took place around 21:00 (local time) near the Franklin D. Roosevelt metro station in the 8th district of the French capital, in front of a Marks and Spencer store, French RTL TV and BFM TV reported.

The who fired on police on the Champs-Elysees shopping boulevard just days ahead of France’s presidential election has been killed, the source said. A police source also said there had been two assailants, and a witness told Reuters that one man got out of a car at the scene and began shooting with a Kalashinkov machine gun.

Police state there were at least two people involved in the shooting, one of them has been killed. One of the suspects got out of a car and began shooting “with a Kalashnikov”, hitting a policeman, an eyewitness has told Reuters.

The officer killed was apparently in a car stopped at a red light.

Yvan Assioma of the police union Alliance said:

The exact circumstances are still unclear but I can confirm the tragic death of one of our colleagues. Our thoughts are very much with the family. One or several attackers have been shot dead by the police. Some officers were hit but the bullets were stopped by their bulletproof vests, but two were hit.

French police say shooting in the Champs-Elysees area of Paris in which one police officer has been killed was probably “a terrorist act”

French TV channel BFM broadcast footage of the Arc de Triomphe monument and top half of the Champs Elysees packed with police vans, lights flashing and heavily armed police shutting the area down after what was described by one journalist as a major exchange of fire nears a Marks and Spencers store.

The incident came as French voters prepared go to the polls on Sunday in the most tightly-contested presidential election in living memory.

France has lived under a state of emergency since 2015 and has suffered a spate of Islamist militant attacks that have killed more than 230 people in the past two years.

As Reuters adds, earlier this week, two men were arrested in Marseille whom police said had been planning an attack ahead of the election.

A machine gun, two hand guns and three kilos of TATP explosive were among the weapons found at a flat in the southern city along with jihadist propaganda materials according to the Paris prosecutor.


Trump suggests that the Paris Islamist attack will have a big effect on the election.  French police are still hunting for the second suspect as he is on the loose

(courtesy zerohedge)

Trump Says Paris Attack “Will Have Big Effect On Election” As French Police Hunt Second Suspect

President Trump tweeted on Friday morning that this week’s “terrorist attack in Paris” will have “a big effect” on the country’s presidential election set for Sunday.

Another terrorist attack in Paris. The people of France will not take much more of this. Will have a big effect on presidential election!

On Thursday, a gunman was shot dead after opening fire on officers along the Champs Elysees, killing one and wounding another. ISIS claimed responsibility for the attack which overshadowed the last day of campaigning for Sunday’s presidential election first round, bringing raw issues surrounding Islamist militancy to the fore.

Trump did not mention any of the presidential contenders in France’s election by name. Eleven candidates are running, with four seen as have the best chances for making a run-off of two, which would be held May 7.  Trump’s tweet comes the day after he offered “condolences from our people to the people of France” during a press conference at the White House.

And while markets remain in a holding pattern, trying to decide if Thursday’s attack will have an impact on the outcome of Sunday’s race, the French probe into the shooter and his accomplice continued.

As reported last night, the man who shot dead a French policeman in an Islamist militant attack had served time for armed assaults on law enforcement officers, police sources said on Friday, as authorities sought a second suspect flagged by Belgian security services. The gunman, identified as Karim Cheurfi, opened fire on a police vehicle parked on the Champs Elysees in Paris late on Thursday, killing one officer and injuring two others before being shot dead.

Cheurfi, a French national who lived in the eastern Paris suburb of Chelles, had been convicted for previous armed assaults on law enforcement officers going back 16 years, the sources said, and was well known to authorities. In addition to the assault rifle used in the attack, he had a pump action shotgun and knives in his car, the sources said. Three of his family members have been placed in detention, the French interior ministry announced on Friday.

While in detention, Cheurfi had also shot and wounded a prison officer after seizing his gun. Eventually freed after serving most of his sentence, he was arrested again this year on suspicion of preparing an attack on police – but released for lack of evidence.

A French interior ministry spokesman confirmed on Friday that a manhunt was underway for a second individual, based on information from Belgian security services. “It’s too early to say how or whether he was connected to what happened on the Champs Elysees,” ministry spokesman Pierre-Henry Brandet said. “There are a certain number of leads to check. We are not ruling anything out.”

A potential second suspect was identified as Youssouf El Osri in a document seen by Reuters. Belgian security officials had warned French counterparts before the attack that El Osri was a “very dangerous individual en route to France” aboard the Thalys high-speed train.

The warning was circulated more widely among French security services in the hour following the Champs Elysees attack.

Islamic State claimed responsibility for the Champs Elysees shooting hours after the attack, in a statement identifying the attacker as “Abu Yousif the Belgian.” El Osri’s connection with either Cheurfi or the man named in Islamic State’s statement remained unclear on Friday.

Coming just days after police said they had foiled another planned Islamist attack, arresting two men in the southern city of Marseille, the Champs Elysees shooting dominated the final day of election campaigning. Conservative candidate Francois Fillon and Marine Le Pen, leader of the far-right National Front, both talked up their tough law-and-order stances while centrist front-runner Emmanuel Macron stressed he was also up to the challenge.


Deutsche Bank Fined $157MM After Its Traders Were Found To Still Use Chat Rooms To Rig FX Trading

Another day, another fine for the bank that no matter what, just can’t play by the rules.

On Thursday, the Federal Reserve fined Deutsche Bank $156.6 million for violating foreign exchange rules and running afoul of the Volcker Rule, suggesting it was likely trading FX out of its own account in violation of Dodd-Frank.

In levying the FX fine on Deutsche Bank, the Fed said it found “deficiencies in the firm’s oversight of, and internal controls over, FX traders who buy and sell U.S. dollars and foreign currencies for the organization’s own accounts and for customers.”

Additionally, and stunningly, years after it became clear that FX chat rooms are about the worst possible idea for currency traders, the Fed said Deutsche Bank failed to detect and address that its traders were still “using electronic chatrooms to communicate with competitors about their trading positions.” The order requires Deutsche Bank to improve its senior management oversight and controls relating to the firm’s FX trading.

As further detailed in the C&D order, during the four year review Period:

  • Deutsche Bank lacked adequate governance, risk management, compliance, and audit policies and procedures to ensure that Deutsche Bank’s Covered FX Activities complied with safe and sound banking practices and applicable internal policies;
  • FX traders in the spot market at Deutsche Bank routinely communicated with FX traders at other financial institutions through chatrooms on electronic messaging platforms accessible by traders at multiple institutions;

Fed officials are “requiring the firm to cooperate in any investigation of the individuals involved in the conduct underlying the FX enforcement.”

Having clearly learned its lesson – for real this time – Deutsche Bank said “we are pleased to resolve these civil enforcement matters with the Federal Reserve.”

Separately, the Fed said it “found gaps in key aspects of Deutsche Bank’s compliance program for the Volcker rule, which generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund.”

The Board also found that the firm failed to properly undertake certain required analyses concerning its permitted market-making related activities. The consent order requires Deutsche Bank to improve its senior management oversight and controls relating to the firm’s compliance with Volcker rule requirements.

The FX violations were discovered during a four-year-old review of dealings at the bank, the Fed said in a consent order reached with Deutsche Bank.

Deutsche Bank has bank agreed to improve its oversight of foreign exchange trades as part of the agreement with the Fed.

We are “confident” this this will be the last time we ever hear of Deutsche Bank rigging markets and violating trading rules.

Fitch Downgrades Italy To BBB From BBB+

Having largely disappeared from the market’s scope for the past 6 months, ever since Europe “bent” its rule allowing the bailout of Monte Paschi and several smaller banks despite Italy having the greatest amount of disclosed NPLs of any European nation, moments ago Fitch decided to drag Italy right back in the spotlight when it downgraded Italy to BBB from BBB+, citing “Italy’s persistent track record of fiscal slippage, back-loading of consolidation, weak economic growth, and resulting failure to bring down the very high level of general government debt has left it more exposed to potential adverse shocks. This is compounded by an increase in political risk, and ongoing weakness in the banking sector which has required planned public intervention in three banks since December.

And some more:

Italy has missed successive targets for general government debt/GDP, which increased by 0.5pp in 2016 to 132.6%. This is 11.2% of GDP higher than the target in the Stability Programme of 2013, the year Fitch downgraded Italy’s Long-Term IDRs to ‘BBB+’, and compares with the current ‘BBB’ range median of 41.5% of GDP. Fitch forecasts general government debt to peak at 132.7% of GDP in 2017, falling only gradually to 129.3% in 2020 in our debt sensitivity projections.


Fitch’s rating Outlook for the Italian banking sector is Negative, primarily reflecting the challenge of reducing the high level of un-provisioned non-performing loans (NPLs), alongside weak profitability and capital generation. The rate of new NPLs edged down to 2.3% in 4Q16, and there is some greater impetus for disposals and write-downs, which has slightly reduced total NPLs. However, sofferenze, the worst category of loans, increased to EUR203 billion in February, from EUR199 billion in October. Total NPLs amount to close to 17.5% of loans and 20% of GDP, and just over half are provided against.


In our view, political risks have increased since Fitch’s previous rating review. Current polls point to a further hollowing out of support for more centrist parties and to a fragmented political landscape that could result in minority government. Risks of weak or unstable government have increased, as has the possibility of populist and eurosceptic parties influencing policy. Greater populism may dampen political appetite for reform, increase the pressure for fiscal loosening, and weigh on investor sentiment.

With France – and much of Europe – already on edge due to populist tensions, is Italian sovereign – and bank – risk about to make a grand reapparance? For the answer, check in when Europe opens on Monday.

Meanwhile, Italian CDS trades at 190bps, wider than Russia, Croatia and almost as wide as South Africa.

Full report:

Fitch Downgrades Italy to ‘BBB’; Outlook Stable

Fitch Ratings-London-21 April 2017: Fitch Ratings has downgraded Italy’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to ‘BBB’ from ‘BBB+’. The Outlooks are Stable. The issue ratings on Italy’s senior unsecured foreign- and local-currency bonds have also been downgraded to ‘BBB’ from ‘BBB+’. The Country Ceiling has been revised down to ‘AA’ from ‘AA+’. The Short-Term Foreign- and Local-Currency IDRs have been affirmed at ‘F2’. The issue ratings on Italy’s short-term local-currency bonds have also been affirmed at ‘F2’.


The downgrade of Italy’s Long-Term IDRs reflects the following key rating drivers and their relative weights:


Italy’s persistent track record of fiscal slippage, back-loading of consolidation, weak economic growth, and resulting failure to bring down the very high level of general government debt has left it more exposed to potential adverse shocks. This is compounded by an increase in political risk, and ongoing weakness in the banking sector which has required planned public intervention in three banks since December.

Italy has missed successive targets for general government debt/GDP, which increased by 0.5pp in 2016 to 132.6%. This is 11.2% of GDP higher than the target in the Stability Programme of 2013, the year Fitch downgraded Italy’s Long-Term IDRs to ‘BBB+’, and compares with the current ‘BBB’ range median of 41.5% of GDP. Fitch forecasts general government debt to peak at 132.7% of GDP in 2017, falling only gradually to 129.3% in 2020 in our debt sensitivity projections.

The general government deficit fell to 2.4% of GDP in 2016 from 2.7% in 2015, with reductions in capital expenditure of 0.7pp and interest costs of 0.17pp more than offsetting lower revenues/GDP due to indirect labour tax cuts. The 2016 structural deficit widened by 0.6% of GDP, based on European Commission methodology. The current Stability Programme targets a 2017 fiscal deficit of 2.1% of GDP, 0.3pp higher than was targeted a year ago, and 1.3pp higher than two years ago. Fitch forecasts a 2017 deficit of 2.3% of GDP, which incorporates the 0.2% of GDP structural measures required to avoid the opening of EU excessive deficit procedures.

The government has maintained its 2018 fiscal deficit target of 1.2% of GDP, and is expected to announce by September new measures to avoid the activation of VAT safeguard clause hikes. Fitch expects a smaller reduction in the deficit next year, to 1.7% of GDP, as the government seeks to limit fiscal tightening ahead of the elections.

Banking sector weakness adds to downside risks to the economy and public finances, and plans are being put in place for sovereign recapitalisations in three banks. Recourse to the EUR20 billion (1.2% of GDP) Precautionary Recapitalisation Fund established in December would negatively impact public finances in 2017. Monte Paschi di Siena is expected to draw EUR6.6 billion (factoring in EUR2.2 billion of burden sharing), higher than the EUR5 billion it unsuccessfully sought to raise privately. The mid-sized banks Banca Popolare di Vicenza and Veneto Banca, are expected to call on a further EUR5 billion. We consider additional public support for the sector may be needed in the absence of greater bank restructuring efforts.

Fitch’s rating Outlook for the Italian banking sector is Negative, primarily reflecting the challenge of reducing the high level of un-provisioned non-performing loans (NPLs), alongside weak profitability and capital generation. The rate of new NPLs edged down to 2.3% in 4Q16, and there is some greater impetus for disposals and write-downs, which has slightly reduced total NPLs. However, sofferenze, the worst category of loans, increased to EUR203 billion in February, from EUR199 billion in October. Total NPLs amount to close to 17.5% of loans and 20% of GDP, and just over half are provided against.

In our view, political risks have increased since Fitch’s previous rating review. Current polls point to a further hollowing out of support for more centrist parties and to a fragmented political landscape that could result in minority government. Risks of weak or unstable government have increased, as has the possibility of populist and eurosceptic parties influencing policy. Greater populism may dampen political appetite for reform, increase the pressure for fiscal loosening, and weigh on investor sentiment.

The 59% ‘No’ vote in December’s constitutional reform referendum has left a weakened interim government less able to implement new policy this side of elections. In failing to streamline the legislative process, there will also be a less conducive environment for economic reform in the medium term.

Italy’s ‘BBB’ IDRs also reflect the following key rating drivers:

Fitch forecasts GDP will grow by 0.9% in 2017, the same rate as last year, and by 1.0% in 2018, which would leave real GDP still more than 5% below the 2007 level. Consumer spending growth is expected to moderate from 1.3% in 2016 to 0.9% in both 2017 and 2018 in light of continued nominal wage restraint and higher inflation. Italy’s GDP growth has averaged -0.6% over the last five years, compared with the ‘BBB’ median rate of 3.2%.

Italy’s creditworthiness is supported by a large, diversified, and high value-added economy, with GNI per capita almost twice the median of the ‘BBB’ range. Governance indicators remain stronger than the ‘BBB’ median, and private sector debt moderate. Ultra-loose ECB monetary policy is supporting very low sovereign financing costs, with an average yield for new issuances of 0.55% in 2016 and 0.76% in 1Q17.

Italy’s current account surplus rose to 2.6% of GDP in 2016, from 1.4% in 2015, which compares with a ‘BBB’ median of -1.8%. A EUR12 billion increase in the primary income balance and EUR10 billion increase in goods exports accounted for the higher surplus in 2016. Depreciation of the euro, resource reallocation during Italy’s downturn, and some unit labour cost adjustment, have led to a moderate recovery in Italy’s competitiveness, despite investment falling by more than 25% since 2007. However, net external debt, at above 55% of GDP, compares unfavourably with the ‘BBB’ median of 1%.


The following factors may, individually or collectively, result in negative rating action:

  • Political developments negatively affecting economic and fiscal policies.
  • A rise in general government gross debt/GDP.
  • Adverse developments in the banking sector increasing risks to the real economy or public finances.

The following factors may, individually or collectively, result in positive rating action:

  • A track record of falling general government gross debt/GDP.
  • A stronger economic recovery and greater confidence in medium-term growth prospects, particularly if supported by the implementation of effective structural reforms.
  • Reduction in banking sector risks.


  • Our 2017 general government debt forecast incorporates only a 0.1% of GDP positive stock-flow adjustment for bank recapitalisations as we assume they are largely financed through the Treasury cash reserve (which increased EUR7.5 billion in 2016). Our forecast does not incorporate any further public recapitalisation of banks.
  • Fitch’s long-run debt sustainability calculations are based on average annual GDP growth of 1.0% from 2017-2026, GDP deflator inflation rising to 1.8%, an average primary surplus of 2.0% of GDP, no stock-flow adjustments for privatisations, and a steady increase in marginal interest rates from 2017.
  • Italy remains a member of the EU and the eurozone.





Very popular Art Berman explains why the oil markets are far from recovery:

  1. strong production from the uSA
  2.  the WTI price structure is in backwardation which induces much selling
  3. demand is weak

courtesy Art Berman/OilPrice.com)

Don’t Believe The Hype: Oil Markets Far From Recovery

Authored by Arthur Berman via OilPrice.com,

Global oil inventories are falling because of OPEC and non-OPEC production cuts, but the road to market balance will be long.

Production cuts have removed approximately 1.8 million barrels per day (mmb/d) of liquids from the world market since November 2016 (Figure 1).

(Click to enlarge)

Figure 1. OPEC-NOPEC Have Cut 1.8 mmb/d Liquids Since November 2016. Source: EIA April 2017 STEO, EIA International Data and Labyrinth Consulting Services, Inc.

Saudi Arabia has cut 619 kb/d (35 percent of total) and the Gulf States Cooperation Council—including Saudi Arabia—has cut 1,159 kb/d (65 percent of the total). Other significant contributors outside the GCC include Iraq (12 percent), Russia (12 percent) and Mexico (9 percent) (Table 1). Nigeria’s cuts are probably involuntary since it was exempted from the OPEC agreement. Iran and Libya–also exempted–and both increased production.

Table 1. Summary table of OPEC-Non OPEC production cuts, November 2016 through March 2017. Source: EIA April 2017 STEO, EIA International Data and Labyrinth Consulting Services, Inc.

Inventories and The Forward Curve

OECD inventories began falling in July 2016, four months before the OPEC production cuts were finalized. Stock levels have declined approximately 107 mmb according to recently revised EIA STEO data (Figure 2). That includes the January 2017 increase recently noted in the April IEA Oil Market Report.

(Click to enlarge)

Figure 2. OECD inventories have fallen more than 100 million barrels since July 2016. Source: EIA April 2017 STEO and Labyrinth Consulting Services, Inc.

Although this represents progress toward market balance, stocks must fall at least another 260 mmb to reach the 5-year average level to support oil prices in the $70 per barrel range.

Almost three-quarters (73 percent) of OECD decline was from non-U.S. inventories. Perhaps the intent of OPEC’s November cuts was to stimulate a decrease in U.S. inventories (about 45 percent of the OECD total). U.S. stocks and comparative inventories were increasing at the time of the cuts and did not start to fall until February 2017 (Figure 3). Since mid-February, U.S. stocks and comparative inventory have each declined 20 percent.

(Click to enlarge)

Figure 3. U.S. Comparative Inventories Have Fallen 20 percent Since Mid-February 2017. Source: EIA and Labyrinth Consulting Services, Inc.

Still, U.S. inventories must fall another ~143 mmb to reach the 5-year average (Figure 4).

(Click to enlarge)

Figure 4. U.S. Crude Oil + Refined Product Inventories Must Fall 143 Million Barrels. Source: EIA and Labyrinth Consulting Services, Inc.

The immediate results of the OPEC cuts were an increase in oil prices and an important change in the term structure of crude oil futures contracts. Before the cuts were announced, the term structure of the WTI oil futures curve was in contango (prices are higher in the near-future). That favored storing rather than selling oil and contributed to growing inventory levels (Figure 5).

(Click to enlarge)

Figure 5. The Term Structure of WTI Futures Contracts Changed From Contango To Backwardation After the OPEC Production Cut in Late November 2016. Source: CME and Labyrinth Consulting Services, Inc.

In early March 2017, however, oil prices fell as investors lost confidence that the cuts were working. Forward curves moved into weak backwardation (prices are lower in the near-future). Now, prices have increased with outages in Canada and Libya, and the forward curve has moved into stronger backwardation. That favors selling rather than storing crude oil and contributes to decreasing inventory levels.

Market Balance, Supply and Demand

The latest IEA Oil Market Report stated, “It can be argued confidently that the market is already very close to balance.” What does that mean?

Market balance means that production and consumption are approximately equal. That is an important first step for a market in which production has exceeded consumption for most of the last 3 years but it hardly means that $70 oil prices are around the corner.

Market balance must be expanded to be useful: production is not the same as supply, and consumption is not the same as demand. Supply is production plus inventory. Demand is the quantity of oil the market is willing to buy at a certain price–it may be either more or less than production.

Oil prices collapsed in 2014 because demand wasn’t great enough at $100 per barrel to absorb the output from the 2010-2014 production bubble. Prices collapsed to $30 per barrel before a transformed market began a weak and uneven recovery, and production surpluses began to decrease slowly (Figure 6).

(Click to enlarge)

Figure 6. Critical Supply & Demand Are In Approximate Balance. Source: EIA April 2017 STEO, IEA OMR, OPEC MOMR and Labyrinth Consulting Services, Inc.

Demand did not increase enough until July 2016 to require critical supply withdrawals from inventory–a small subset of total supply. U.S. inventories did not begin to decline until after the OPEC cuts took effect in February 2017.

In the real world, the 5-year average inventory level represents a dynamic proxy for market balance. Comparative inventory is the measure of how far the present market must rise or fall to reach that level. IEA data indicates that inventories are 330 mmb above the 5-year average although revised EIA data suggests that levels are closer to 260 mmb higher than that important benchmark. In either case, it will take 6 months to a year to approach the 5-year average.

Demand Growth

Weakening demand growth is the potential barrier to continued inventory reduction and price recovery assuming that OPEC production cuts hold and are extended. Annual demand growth has declined to 1.25 mmb/d from the comparatively robust 2 mmb/d growth in 2015 and 1.62 mmb/d in 2016 (Figure 7). IEA forecasts continued weak demand growth for 2017. Related: Iran Ready To Join OPEC’s Production Cut Extension

Figure 7. 2017 Demand Growth Has Fallen To 1.25 mmb/d. Source: EIA April 2017 STEO, IEA OMR, OPEC MOMR and Labyrinth Consulting Services, Inc.

The problem, of course, is that demand is highly price-sensitive in a global economy that is burdened by unmanageable debt. Demand lags price and demand growth reflects the full spectrum of economic headwinds. In early 2016, oil prices reached the lowest level in a decade-and-a-half. After that, year-over-year demand and oil prices increased through November 2016 and yet, demand growth in 2016 was lower than in 2015. Since then, $45 to $55 per barrel prices appear to have depressed demand growth to annual levels of about 1.25 mmb/d.

The OPEC cuts are accelerating the reduction of global inventories but continued progress toward the 5-year average will push oil prices higher. Higher prices may collide with weak demand growth in a stagnant economy that simply needs less oil. The long road to market balance may be slower and bumpier than bullish analysts predict.




Hedge funds are bailing..crude crashes below 50 dollars per barrel

(courtesy zero hedge)

WTI Crude Crashes Below $50 As Hedgies Lose Faith In OPEC

Oil is headed for its biggest weekly loss since early March as signs that OPEC will continue with output reductions are offset by growing U.S. production and inventory gluts. Having tried and failed to spark some momentum yesterday (via Saudi jawboning and Goldman confidence), WTI Crude just plunged below $50 for the first time since March.

“It all comes down to whether OPEC can deliver inventory cuts,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said by telephone. “So far we haven’t seen a lot of evidence that they’re succeeding.”

It seems Goldman’s muppets aren’t buying it this time.

Erasing 70% of the early April bounce…

“We are once again seeing the emerging stalemate between OPEC and non-OPEC cutting efforts on one side and rising U.S. production on the other,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “We are currently testing the lower end of the range. This market is unlikely to go anywhere for the foreseeable future.”

OPEC has lost the confidence of the hedge funds.


Rig counts continue to rise as USA production is now at 20th month highs

(courtesy zerohedge)

Rig Count Rise Continues To Lead US Crude Production To 20-Month Highs

With WTI prices back below $50, it appears stocks and NOPEC production are trumping any OPEC hype/hope and today’s Baker Hughes’ rig count merely adds to those concerns. For the 13th week in a row, the number of US oil rigs rose (up 5 to 688, the highest since April 2015).


Though the rig count iuncreased, it is the smallest rise in 3 months…


US Crude production reaches its highest since August 2015 as it tracks the lagged rig count higher…

At this pace, US crude production will be at record highs (above 9.6mm b/d) by August. And while the U.S. shale sector continues to be the hottest spot in natural resources investment, OilPrice.com’s Dave Forest notes that news this week suggests America’s oil and gas industry may have a new rival — as shale in a completely different part of the world gets ready to go commercial.

In Argentina.

The governor of Argentina’s Neuquen province Omar Gutierrez said in a statement Monday that shale production is about to begin in earnest in his territory. With ExxonMobil reportedly about to push the button on a major project in the Vaca Muerta shale here over the coming weeks.

Governor Gutierrez noted that he was in Houston last week meeting with Exxon management. Who reportedly told him the company will enter the “production phase” on the company’s Vaca Muerta projects this May.

Gutierrez didn’t give additional detail on the specific projects that will be put into full-scale production. And Exxon itself hasn’t made any announcements — but the move to commercial production would make sense, given that the firm launched a pilot project for shale production in the Vaca Muerta last year.

If the major is indeed going ahead, it would be one of the biggest developments we’ve seen for international shale. With Governor Gutierrez saying that Exxon’s investment in the Vaca Muerta by the end of 2017 will have already amounted to a full $750 million.

The Governor also said Exxon plans to ramp up production quickly here — noting that the major aims to hit 5 million cubic meters (176.5 million cubic feet) per day over the next two to three years.

That kind of production growth would clearly point to Argentina as the “next big thing” in shale. And would show that local gas pricing — where producers are currently being offered $7.50/MMBtu — is working in supporting development.

Watch for confirmation from Exxon on plans for the Vaca Muerta. And for increasing activity in the play, with a tender for 56 new oil and gas blocks here currently in market by Argentina officials.




The poor in Venezuela are too hungry to protest..

(courtesy zero hedge)

“All I Have Is Hunger” – Many Venezuelans Too Weak To Protest Despite Maduro Misery

While tens of thousands of angry Venezuelans turned out for the ‘mother of all protests’ yesterday, facing an increasingly hostile military/police state, the numbers could have been significantly larger but for the fact that legions of poor Venezuelans are simply too frail from starvation to protest.

Some say they are intimidated by armed pro-government militias who scour the slums for signs of dissent. Others say they are afraid to lose the few food handouts the cash-strapped government still provides.

“We wear our protest on the inside for the fear of losing our bag of food,” said San Félix resident Luisa Gutiérrez, a single mother of three.

As The Wall Street Journal reports, President Nicolás Maduro has lost support among the legions of poor Venezuelans that once backed the late Hugo Chávez, but they have largely shown little interest in joining the opposition-led protests that have convulsed the country the past three weeks. Many of the impoverished residents of the vast slums that ring Caracas and other major cities are angry about a collapsing economy and food shortages. But Venezuela’s political unrest remains mostly confined to middle-class enclaves, underscoring the struggle the opposition here faces in trying to unseat an increasingly authoritarian government.

“All I have is hunger—I don’t care if the people protest or not,” said laborer Alfonzo Molero in a slum in Venezuela’s second-largest city, Maracaibo. “With what strength will I protest if my stomach is empty since yesterday?”

Until the slums rise up, Mr. Maduro will likely hang on, analysts say…

Almost two-thirds of Venezuela’s poor, as defined by a variety of socioeconomic factors, want Mr. Maduro to leave, up from 40% when he took office in early 2013, according to pollster Delphos.


The lower classes have also been instrumental in giving the opposition alliance a record two-thirds congressional majority in the last electoral contest, held in December 2015. Polls show the poor would hand the government a drubbing in any vote held this year.

Yet that growing disillusionment hasn’t translated into organized protest, said pollster Luis Vicente León.

Without support in the shantytowns, many opposition supporters fear the current protests will end like the previous wave of unrest in 2014, when three months of demonstrations in middle-class neighborhoods left 43 people dead—without achieving any political change. The failure of those protestshas demoralized and fractured the opposition alliance for years.

“For the masses to come out, they need to feel that they are at a point of no return,” said Félix Seijas Jr., director of pollster Delphos. “We’re still some ways away from that.”

Judging by the eating flamingos, suffering with no toilet paper or soap, and martial law controlling and repressing any anti-government sentiment, we suspect the clock is ticking… as the black-market Bolivar shows…

As Bloomberg details, Venezuela’s black market bolivar is trading at a record low of 4,709 per dollar, according to dolartoday.com, after at least two people were killed when security forces confronted protests against Nicolas Maduro’s increasingly-dictatorial regime with bullets and tear gas. Its weakness is a measure of both the shortage of dollars in the country, and the desperation of Venezuelans to buy food, medicine and other basics, most of which are imported. The official exchange rate is still fixed at around 10, while the legal market-based rate has been allowed to devalue at a controlled pace to 714 per dollar, a 5.8 percent devaluation this year compared with 33 percent on the black market.

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



GBP/USA 1.2774 DOWN .0025 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED


Early THIS FRIDAY morning in Europe, the Euro FELL by 18 basis points, trading now BELOW the important 1.08 level  FALLING to 1.0695; 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 UP 1.05  POINTS OR 0.03%    / Hang Sang  CLOSED DOWN 14.96 POINTS OR 0.06%/AUSTRALIA  CLOSED UP .53% / EUROPEAN BOURSES MOSTLY 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 FRIDAY morning CLOSED UP 190.36 POINTS OR 1.03%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 14.96 OR 0.06%  / SHANGHAI CLOSED UP 1.05 POINTS OR 0.03%/Australia BOURSE CLOSED UP .53% /Nikkei (Japan)CLOSED UP 190.26 OR 1.03%  / INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1284.00


Early FRIDAY morning USA 10 year bond yield: 2.239% !!! UP 1 IN POINTS from THURSDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.89, UP 1  IN BASIS POINTS  from THURSDAY night.

USA dollar index early FRIDAY morning: 99.91 UP 13  CENT(S) from FRIDAY’s close.

This ends early morning numbers FRIDAY MORNING


And now your closing FRIDAY NUMBERS

Portuguese 10 year bond yield: 3.743%  DOWN 3  in basis point(s) yield from THURSDAY 

JAPANESE BOND YIELD: +.016%  DOWN 2/5   in   basis point yield from THURSDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.695%  DOWN 1/ 2 IN basis point yield from THURSDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.262 DOWN 1/ 2  POINTS  in basis point yield from THURSDAY 

the Italian 10 yr bond yield is trading 56 points HIGHER than Spain.





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

Euro/USA 1.0688 DOWN .0026 (Euro DOWN 26 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 109.01 DOWN: 0.371 (Yen UP 37 basis points/ 

Great Britain/USA 1.2796 DOWN 0.0003( POUND DOWN 3 basis points)

USA/Canada 1.3508 UP 0.0034(Canadian dollar DOWN 3 4 basis points AS OIL FELL TO $49.55


This afternoon, the Euro was DOWN by 26 basis points to trade at 1.0688


The POUND FELL BY 3  basis points, trading at 1.2796/

The Canadian dollar FELL by 34 basis points to 1.3508,  WITH WTI OIL FALLING TO :  $49.55

The USA/Yuan closed at 6.8859/
the 10 yr Japanese bond yield closed at +.016% DOWN 2/5 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 4 IN basis points from THURSDAY at 2.216% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.87 DOWN 4  in basis points on the day /

Your closing USA dollar index, 99,96 UP 18  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 FRIDAY: 1:00 PM EST

London:  CLOSED DOWN 3.99 POINTS OR 0.06% 
German Dax :CLOSED UP 21.25 POINTS OR .18% 
Paris Cac  CLOSED DOWN 18.71 POINTS OR 0.37%
Italian MIB: CLOSED DOWN 107.69 POINTS OR 0.54%

The Dow closed DOWN 30.95 OR 0.15%

NASDAQ WAS closed DOWN 6.25 POINTS OR 0.11%  4.00 PM EST
WTI Oil price;  49.55 at 1:00 pm; 

Brent Oil: 51.73 1:00 EST




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

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


BRENT: $51.94


USA 30 YR BOND YIELD: 2.904%



USA DOLLAR INDEX: 99.86  UP 8  cents ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2802 : UP .0003  OR 3 BASIS POINTS.

Canadian dollar: 1.3496  UP .0023 (CAN DOLLAR DOWN 23 BASIS PTS)

German 10 yr bond yield at 5 pm: +.253%


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


Stocks Surge On The Week As Investors Shrug Off France Fears, Crude Carnage, & Macro Massacre



Stocks soared on the week… (2nd biggest short-squeze in 4 months)

  • Trannies (orange) best week in 4 months
  • Small Caps (red) best week in 4 months
  • Nasdaq (black) best week in 2 months
  • S&P (green) best week in 2 months
  • Dow (blue) best week in 7 weeks


Seemingly completely ignorant of the fact that this week saw the biggest drop in US Macro data in 6 years…


‘Soft’ Data suffered the worst week since August and ‘Hard’ Data tumbles for the 3rd week in a row, remaining well below pre-Trump levels…


VIX saw its biggest weekly drop (over 1ppt) since the first week of January…

Interestingly most of the rally from  “greatest tax cut ever” from Trump was erased by the close…even as VIX was pressured


The Dollar Index ended the week lower, buffetted up and down by various comments from Trump, Mnuchin, and Stan Fischer… This was the lowest weekly close for the dollar since the election.


Cable was the strongest against the greenback (on May’s surprise election news) and CAD weakest (energy dump)…


Despite Equity strength, Treasury yields ended the week lower (with 30Y worst at unchanged)…seles active inthe US day session all week


Despite the USD ending the week lower, commodities were sold…


Especially industrials…


Crude suffered its biggest weekly drop since early March, back below $50; and RBOB tumbled over 9% – its worst week since Sept 2016


Gold was hit into the London Fix every day this week (Monday holiday but machines still hit it)


And back to where we started…



Even soft data plunges;  Today Manufacturing PMI and Service PMI form Markit shows a huge downdraft.

(courtesy zerohedge)

‘Soft’ Data Bloodbath – Manufacturing/Services PMI Plunge Below Trump Election Lows

Having now plunged for three straight months, Markit’s PMI surveys for Manufacturing and Services plunged back below pre-election lows in April, crushing the dreams of ‘soft’ survey hopers as Markit notes the latest data “suggest the US economy lost further momentum at the start of the second quarter.”

The Composite flash PMI for April printed 52.7 – the lowest since September 2016. 

What happens next?


Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The PMI data suggest the US economy lost further momentum at the start of the second quarter. The surveys are signalling a GDP growth rate of 1.1% after 1.7% in the first quarter.


“The vast services economy saw the weakest monthly expansion for seven months and the manufacturing sector showed signs of growth slowing further from the two-year high seen at the start of the year, despite export orders lifting higher.


“The labour market also continued to soften. The surveys signalled a marked step-down in the pace of hiring in March which has continued into April. The latest survey data are consistent with only around 100,000 non-farm payroll growth.


“The survey responses indicate that some froth has come off the economy since the post-election bounce seen at the end of last year. However, with inflows of new business picking up slightly in April and business optimism about the year ahead also brightening, there’s good reason to believe that growth could revive again in coming months.”



David Stockman provides a dandy for us to close out the week

(courtesy David Stockman/Daily Reckoning)

Donald Trump’s Big Fat Ugly Bubble Is Ready to Pop

[Urgent Note: The nation’s future hangs in the balance as Trump approaches his first 100 days. That’s why I’m on a mission to send my new book TRUMPED! A Nation on the Brink of Ruin… and How to Bring It Back to every American who responds, absolutely free. Click here for more details.]

There have been numerous eruptions of irrational exuberance since Alan Greenspan launched the modern era of monetary central planning in response to the 25% crash of the stock market in October 1987.

But for my money, the Trump-O-Mania since the wee hours of election night is the greatest folly of all.

That’s because Donald Trump is destined to be history’s Great Disruptor — not the 11th hour savior of the mutant financial system and giant bubbles that have been generated by our Wall Street/Washington rulers over the past three decades.

The latter is a product of massive financial asset inflation fueled by the Fed’s cheap debt, falsified financial prices and the tidal wave of Wall Street speculation they have induced.

But the Fed (and its convoy of central bank imitators around the world) is finally out of dry powder. If it resumes quantitative easing (QE) preemptively to thwart the now incipient recession, it will generate a panicked sell-off — stoking fears in the casino that it “knows” something the gamblers don’t.

Likewise, if it even hints at reversing course toward sub-zero interest rates, it will bring the aroused populations of Flyover America, which elected Donald Trump, descending upon the Imperial City with torches and pitchforks.

The savers and retirees of America have already been so severely savaged by 96 months of zero interest rates (ZIRP) that they are not about to take it any more or have their savings flat-out confiscated by the elitist fools who inhabit Eccles Building.

In short, after having impaled itself on the zero bound and hideously bloating its balance sheet — from $900 billion to $4.4 trillion since the Lehman event in September 2008 — the Fed has no capacity whatsoever to forestall the oncoming recession or reflate the economy and financial markets once it begins.

The market should currently be in panicked retreat because it is inconceivable that the Donald will appoint to the Fed even more aggressive money-pumpers than the paralyzed posse currently in command, led by clueless Janet Yellen.

But in one of the most ludicrous stick saves ever confected in the bowels of Wall Street, the day traders and robo-machines have been induced to slam the “buy” button on a theory so preposterous that even CNBC’s chief circus barker, Jim Cramer, could not have invented it.

That is, the notion that Donald Trump is the second coming of Ronald Reagan and that a huge deficit-fueled “stimulus” is just around the corner is just plain nuts.

There will be no such thing.

Trump-O-Mania is the greatest eruption of irrational exuberance yet because it occurred in the wake of an election outcome that is a repudiation of the very regime of Bubble Finance from which it took flight.

Donald Trump’s shocking election victory was in fact due to the fact that the nation’s economic prospects and future growth potential has dimmed dramatically since 1987.

Since the Greenspan era of Bubble Finance began in October 1987, the value of corporate equities owned by households has soared from $1.8 trillion to nearly$15 trillion, representing a 7.5%annual gain.

That means that equity values have increased 65% faster than the 4.5% annual gain in GDP during the same 29-year period.

There’s a word for that sort of imbalance: unsustainable. Does anyone with a pair of brain cells to rub together think it can last much longer?

But the greatest headwind Trump faces is his wildly inconsistent and irresponsible fiscal program. It will not result in a smooth hand-off the “stimulus” baton from the Fed to fiscal policy and the vaunted “Trump Stimulus” as Wall Street so blithely expects.

Instead, it will actually produce a political conflagration and Fiscal Bloodbath like the Imperial City has never before witnessed. Trump’s already facing Congressional opposition to his spending plans and Inauguration Day is still two weeks off.


Consequently, the current extreme stock market euphoria will give way to its opposite as the casino gamblers come to recognize that the jig is up. With the debt ceiling holiday bomb ticking toward its March 15 ignition date, the message from the beltway will become increasingly cacophonous and disconcerting.

Namely, it will become obvious there is no known combination of Congressional votes — Republican, Democratic or mixed — that the Trump White House will be able to marshal on behalf of deep corporate and personal tax cuts, a major defense spending increase, a huge infrastructure program, more money for veterans, border control, the Mexican Wall, domestic law enforcement and homeland security — while given a free pass to the giant retirement entitlement programs, social security and medicare at $1.6 trillion per year.

That’s because the current public debt of nearly $20 trillion will grow by $1 trillion per year to upwards of $25 trillion during the Great Disrupter’s first term, and that’s before one dime of the ballyhooed Trump Stimulus is added to the equation. To add $500 billion per year or more of additional red ink to the equation is beyond the pale.

That’s true even for the spenders who inhabit the Imperial City — especially after they realize the bond vigilantes who keep careful watch of federal spending were not extinguished back in 1994, but only went into a long hibernation that is now over as the era of central bank money printing has reached its end game.

So unless Donald Trump can accomplish the seeming impossible — get Congress to raise the public debt ceiling on March 15 to $25 trillion or higher in one fell swoop, his entire and largely misbegotten fiscal stimulus program will be stillborn.

It will simply disappear amidst endless budget battles and debt ceiling showdowns/government shutdowns which will make the budgetary fireworks of August 2011 look like a Sunday School picnic in comparison.

And that gets us back to the whole idea that the Reagan Boom of 1983-1984 can be replicated from a cold start at the very end of a long-in-the-tooth business cycle. The fact is, the original event was not a supply side miracle in the slightest.

It was a “borrow and spend” eruption that depended upon a massive expansion of the Federal deficit from 2% of GDP under the outgoing Carter budget to an unprecedented 5-6% of GDP during the Gipper’s first term.

Even then, the celebrated Morning in America boom during 1983-1984 was not remotely what it is cracked-up to be by Trump’s aging posse of supply siders like Stephen Moore and Larry Kudlow.

During the six quarters of 1983 through Q2 1984, fully 27% of the real GDP growth of 7.8% was accounted for by a huge but one-time restocking of business inventories— after they had been flushed out of the system by Volcker’s 20% interest rate medicine during the 1980-1982 battle against inflation.

That is not remotely relevant today because inventories stand at cyclical highs, and are virtually certain to be liquidated — not restocked — in the period ahead. Moreover, the investment and business side of the U.S. economy actually contributed nothing on net to the so-called Reagan boom (as is discussed in my book Trumped!).

Even the housing surge happened during this interval because mortgage rates were plummeting after the crushing double-digit rates generated by the Volcker anti-inflation campaign.

Self-evidently, after 8 years of ZIRP, mortgage rates will now be rising, not falling, as far as the eye can see. In fact, the Fed’s 100 basis point interest rate increase since last summer’s lows have already put a crimp into the tepid rate of residential housing activity as represented by new contract signings and new permits.

Finally, when the Reagan boom began, the stock market’s price/earnings (PE) ratio had been hammered down into single digits by the prior decade of soaring inflation. So it had nowhere to go except up — the very opposite of today’s 25X multiple, which flirts with PE ratios normally associated with those preceding violent market crashes.

In short, the greatest Sucker’s Rally in history is now nearly over. And the Wall Street casino is about to feel the full brunt of the Great Disrupter — and one of an altogether different kind than that invented by the Wall Street brokers on election night.

As a contra-Cramer might say, there will never be better time to sell, sell, sell!


David Stockman
for The Daily Reckoning


Let us close out the week with this wrap up courtesy of Greg Hunter of USAWatchdog

North Korea Threat Turns Hot, FBI & CIA Look for Traitor, Economic Update

By Greg Hunter’s USAWatchdog.com
(WNW 280 4.21.17)

North Korea made the most provocative and dangerous threat yet through the state media when it said Kim Jong-Un may order a “super-mighty preemptive strike” against South Korea and the U.S. The U.S. says it is sending an armada to deal with the provocation. China and Russia, which both border North Korea, reportedly have deployed troops there. The threat is the worst ever for the Korean Peninsula as the North now has nuclear weapons that it did not have in the Korean War in the early 1950’s.

The CIA and the FBI are now looking for a “traitor” that worked on the inside that leaked intelligence to WikiLeaks. They say it is “one of the worst breaches in CIA history which exposed thousands of top-secret documents.” Meanwhile, it’s reported that the U.S. is preparing charges to seek the arrest of WikiLeaks founder Julian Assange. The U.S. authorities are no longer calling WikiLeaks a news organization but a “non-state intelligence service.” Assange maintains he has 1st Amendment rights and is a journalist.

The economy continues to signal the continuation of a vicious downturn. The Atlanta Fed recently revised the GDP down to just .5%. Another sign the economy is losing steam is this week’s announcement that Subway is closing down nearly 360 stores nationwide. It is the first time in the company’s history that it is closing stores and shrinking its business.

Join Greg Hunter as he looks at these stories and more in the Weekly News Wrap-Up.

(There is much more in the video newscast.)

After the Wrap-Up:

Bill Holter of JSMineset.com will be the guest on the “Early Sunday Release.



Well that about does it for this week

I will see you Monday night


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