April 24/French Macron Victory sends global stocks soaring/Gold hit on options expiry but not silver/Huge battle in the USA between Trump and the Democrats: Trump wants his Wall/Democrats wants huge additional funding for Obamacare and yet both parties cannot seem to get together as a government shutdown looms/

Gold: $1275.80  DOWN 11.60

Silver: $17.85  UP 2  cents

Closing access prices:

Gold $1275.60

silver: $17.93!!!

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

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

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

SHANGHAI FIRST GOLD FIX: $1285.37 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  1273.40

PREMIUM FIRST FIX:  $11.97

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SECOND SHANGHAI GOLD FIX: $1288.56

NY GOLD PRICE AT THE EXACT SAME TIME: 1271,30

Premium of Shanghai 2nd fix/NY:$17.26

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1271.80

NY PRICING AT THE EXACT SAME TIME: $1271.50

LONDON SECOND GOLD FIX  10 AM: $1269.40

NY PRICING AT THE EXACT SAME TIME. 1269.70 

For comex gold:

APRIL/

NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH:  10 NOTICE(S) FOR 1000 OZ. 

 TOTAL NOTICES SO FAR: 728 FOR 72800 OZ    (2.2643 TONNES)

For silver:

For silver: APRIL

14 NOTICES FILED TODAY FOR 70,000 OZ/

Total number of notices filed so far this month: 906 for 4,530,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

END

The open interest in silver slightly declined with today’s reading at 234,558 contracts (and close to Friday’s new record) or about 10000 contracts ABOVE the record set last year.   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

 

 

Today, silver responded beautifully to the attack on gold  and it looked like our managed money remained stoic again as they refused to buckle when whacked..

We will know for sure with tomorrow’s data as my guess is an increase in open interest and a new record..

 

For those of you who just cannot wait until tomorrow night, I will update the preliminary OI for gold and silver  and the front May month for silver after 11 pm est, right at this spot….  . So just dial into the 24th of April commentary late tonight (after ll pm).

 

xxxxx

 

Preliminary data for tomorrow;

first Gold:

the preliminary OI for Tuesday:  485,890 contracts for a gain of 1,496′

for silver:

the preliminary OI for Tuesday:  229,221 contracts for a huge loss of 5,337 contracts

the front May contract month; 57,523 OI for a loss of only 10,835.

it sure looks like the bankers have capitulated in silver as they have started to cover their huge shortfall in earnest.

 

or this:

the OI in silver collapsed by 5,337 contracts down to 229,221 despite silver’s gain of 2 cents.
for the past two years, we have witnessed always the collapse of OI as we approach first day notice of an active delivery month whether it is gold and silver.
James Turk has discovered the utilization of an obscure EFP contract which allows a long holder to enter a private deal to receive a fiat bonus and a futures long contract such that he would not stand for delivery.  It sure looks like that this procedure was orchestrated again.
What is even more fascinating is the huge amount of gold still standing for May:  57,523 contracts with 3 days to go.
Last yr with 3 days to go: 41,000 contracts.

 

 

xxxxx

 

Let us have a look at the data for today

.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest FELL SLIGHTLY BY 227 contracts DOWN to 234,558 DESPITE THE RATHER LARGE  FALL IN PRICE ( 16 CENTS) WITH RESPECT TO FRIDAY’S TRADING. THE HEDGE FUNDS (MANAGED MONEY) CONTINUE TO REMAIN STEADFAST WITH THEIR POSITIONS ON DOWNDRAFT DAYS LIKE YESTERDAY WHILE  ADDING TO THEIR LONGS ON GOOD DAYS. THE BANKERS ARE DESPERATELY TRYING TO COVER THEIR EVER BURGEONING SHORTS (OVER 555 MILLION OZ) BUT TO NO AVAIL.  In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.173 BILLION TO BE EXACT or 168% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MARCH MONTH/ THEY FILED: 14 NOTICE(S) FOR 70,000  OZ OF SILVER

In gold, the total comex gold ROSE BY A HUGE 8,376 contracts WITH THE RISE IN THE PRICE OF GOLD ($5.50 with FRIDAY’S TRADING). The total gold OI stands at 482,394 contracts.

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD:

We had  A HUGE change in tonnes of gold at the GLD: A DEPOSIT OF 1.48 TONNES OF GOLD INTO THE GLD

Inventory rests tonight: 860.17 tonnes

.

SLV

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

THE SLV Inventory rests at: 326.308 million oz

end

.

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

1. Today, we had the open interest in silver FELL BY A TINY 229 contracts DOWN TO  234,558,( AND REMAINING CLOSE TO THE NEW COMEX RECORD SET ON FRIDAY AT 234,787) DESPITE THE  FALL IN  SILVER ON FRIDAY (16 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 8,376 contracts WITH the accompanying RISE in price by $5.50

(report Harvey

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

 

3. ASIAN AFFAIRS

i)Late  SUNDAY night/MONDAY morning: Shanghai closed DOWN 43.62 POINTS OR 1.37%/ /Hang Sang CLOSED UP 97.46 POINTS OR 0.41%.  The Nikkei closed UP 255.13 OR 1.37% /Australia’s all ordinaires  CLOSED UP .26%/Chinese yuan (ONSHORE) closed UP at 6.8853/Oil UP to 49.98 dollars per barrel for WTI and 52.27 for Brent. Stocks in Europe  IN THE GREEN   ..Offshore yuan trades  6.8844 yuan to the dollar vs 6.8853 for onshore yuan. NOW  THE OFFSHORE IS SLIGHTLY STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN SLIGHTLY STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN ALSO MUCH STRONGER AND THIS IS COUPLED WITH THE MUCH WEAKER DOLLAR. CHINA IS HAPPY

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA

North Korea arrests another uSA citizen.  It now holds 3 of them as they threaten to sink the USA carrier Vinson.  Japan is getting quite nervous as it deploys Warships to assist the Carl Vinson:

( zero hedge)

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

i)Sunday night

Last night Chinese stocks did not go along with European euphoria (French election)

( ZEROHEDGE)

ii)Chinese President tells Donald Trump to exercise restraint with respect to North Korea

( zerohedge)

iii)China threatens retaliation if Trump follows through on its steel protectionism:

( zero hedge)

4. EUROPEAN AFFAIRS

i)FRANCE

Macron and Le Pen move to the 2nd round.  The following explains what happens next;

( zero hedge)

ii)Germany/Target 2 balances

Mish Shedlock our resident expert on the Target 2 balances explains what happens when outsiders sell their “club med” bonds. It is a double whammy as the sellers will take their Euros and place them in strong hands like Germany and Netherlands.  This causes a massive buildup in target 2 imbalances..with Germany, Netherlands and Austria with strong positive balances and the club boys with huge negative imbalances.  Shedlock explains that these in essence are secret bailouts and somebody down the road is going to have to pay:

( Mish Shedlock/Mishtalk)

iii)Spain/banking system

Spain is now witnessing major problems with its banks.  Popular is in trouble as it needs 4 billion euros to shore up its balance sheet even though market cap is 2.7 billion euros.TURKEY ALSO HAS BANK PROBLEMS WITH MAJORITY SPANISH OWNER BBVA FORCED TO LOWER RATES AND NOW MARGINS ARE KILLING THEM. Spain’s largest bank is having trouble with their largest market Mexico if Trump orchestrates its border tax.

(courtesy Don Quijones)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Syria/USA

USA sanctions 271 Syrians for their “sarin” attack on civilians.  The USA will freeze probably non existent assets of theirs.

(courtesy zerohedge)_

6 .GLOBAL ISSUES

As many of you know,  I like to use the Baltic Dry Index as an indicator for global growth.  It is simply a measure to ship dry goods  (not oil) by boat. On Friday it collapsed by 4% with the biggest loss since mid December.  Activity of the high seas is faltering badly

(courtesy Reuters)

7. OIL ISSUES

8. EMERGING MARKETS

Venezuela’s currency is now hyperinflating as their economy is in total ruins

( zero hedge)

9.   PHYSICAL MARKETS

i)Nine hundred thirteen gold sovereigns found inside a piano

( John Rubino)

ii)GoldSeek interviews Gata Secretary, Chris Powell)

( Chris Powell/GATA)

iii)Mike Kosares explains that he notices a big change in the gold market where raids are having less of an effect.  This will no doubt embolden the players to increase their purchases of paper and convert that into real metal. We are all of the opinion that the physical market is beginning to dominate over the paper markets

( Mike Kosares/GATA)

iii)The Russians know that the dollar is America’s weapon and also its vulnerability.  If the world refuses the use the dollar then it is a dagger in their heart

(Tass/GATA)

iv)GATA conference in May at the International Metal Writers Cobnference , Vancouver

( Chris Powell/GATA)

10. USA stories

i)Trading last night: after the French first voting run off:

( zerohedge)

ii)Sunday/Monday morning

A< Should be a fun week:  Trump wants money for the Mexican border wall.  The Democrats needs money for Obamacare payments (7 billion USA).  Trump has offered to include Obamacare money in the continuing resolution if the Democrats allow money for the Wall and so far they are refusing; if no settlement by this Saturday then the Government shuts down.

( zerohedge)

BThis ought to be good:  Trump is pushing with Goldman Sachs boys to cut the corporate tax rate to 15% and then added a huge 2 trillion in extra debt to its load

I am sure that this will pass with flying colours:

( zero hedge)

iii)A record number of stores  (8,640) is projected to close in 2017

( zero hedge)

iv)Two big data disappointments today:
  1. Chicago National mfg Activity index
  2.  Dallas Fed

both disappoint

( zero hedge)

v)Very popular Michael Snyder offers 11 facts to prove that the 2017 uSA economy is in far worse shape than in 2016:

( Michael Snyder/Economic Collapse)

vi)If things are so good why are bond yields tumbling;

( zerohedge)

vii)The French voting on Sunday which will probably hand the Presidency to Macron was enough to push the chances for a June fed hike to 69%

( zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE BY A HUGE 8,376 CONTRACTS UP to an OI level of 482,394 WITH THE  RISE IN THE PRICE OF GOLD ( $5.50 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 218 contract(s) FALLING TO 554. We had 51 notices served yesterday so we LOST 167 contracts or 16,700 oz that 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 159 contract(s) and thus its OI is 1880 contracts. The next big active month is June/2017 and here the OI ROSE by 6745 contracts UP to 348,758.

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
And now for the wild silver comex results.  Total silver OI FELL BY A TINY 229 contracts FROM 234,787 DOWN TO 234.558  DESPITE FRIDAY’S  16 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 are 229 contracts away from the record set on Friday:
THUS WE HAVE A NEW RECORD HIGH SET FRIDAY APRIL 21/2017:  235.787.
 

We are in the NON active delivery month is APRIL  Here the open interest GAINED 25 contracts RISING TO 25 contracts. We had 0 notices filed yesterday so we  gained 125,000 additional silver ounces ( 25 contracts) that will stand 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 18,365 contracts DOWN to 68,358 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 4 trading days before first day notice. The non active June contract GAINED 160 contracts to stand at 460. The next big active month will be July and here the OI GAINED 16,979 contracts UP to 131,014.

FOR COMPARISON SAKE, ON   APRIL 25/2016 WE HAD 48,767 CONTRACTS STANDING FOR DELIVERY. SO YOU CAN VISUALIZE FOR YOURSELF THE HUGE DIFFERENCE BETWEEN 2016 AND THIS YEAR.

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 14 notice(s) filed for 70,000 oz for the APRIL 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 180,691  contracts which is fair.

Yesterday’s confirmed volume was 236,768 contracts  which is good.

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for APRIL
 April 24/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 514.416 oz
 Brinks
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
 nil
No of oz served (contracts) today
 
10 notice(s)
1000 OZ
No of oz to be served (notices)
544 contracts
54,400 oz
Total monthly oz gold served (contracts) so far this month
728 notices
72800 oz
2.2643 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:
For APRIL:

Today, 0 notice(s) were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 10 contract(s)  of which 0 notices were stopped (received) by jPMorgan dealer and 8 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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 (728) x 100 oz or 72,800 oz, to which we add the difference between the open interest for the front month of APRIL (553 contracts) minus the number of notices served upon today (10) x 100 oz per contract equals 127,200 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 (728) x 100 oz  or ounces + {(554)OI for the front month  minus the number of  notices served upon today (10) x 100 oz which equals 127,200 oz standing in this non active delivery month of APRIL  (3.956 tonnes)
we LOST 168 contracts or an additional 16,800 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!!
 
 
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
 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.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
I have now gone over all of the final deliveries for this year and it is startling.
First of all:  in 2015 for the 13 months: 51 tonnes delivered upon for an average of 4.25 tonnes per month.
Here are the final deliveries for all of 2016 and the first 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: 3.956
total for the 16 months;  248.76 tonnes
average 15.547 tonnes per month
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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.
 
IN THE LAST 10 MONTHS  76 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE APRIL DELIVERY MONTH
APRIL INITIAL standings
 April 24. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
 1,191,732.848 oz
SCOTIA
DELAWARE
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
597,615.020 oz
JPMorgan
629,639.200 oz
Scotia
895,536.990 oz
Brinks
total:  2,122,791.210oz
No of oz served today (contracts)
 14 CONTRACT(S)
(70,000 OZ)
No of oz to be served (notices)
11 contracts
(55,000  oz)
Total monthly oz silver served (contracts) 906 contracts (4,530,000 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  14,052,178.2 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: 597,615.02 oz
ii) Out of Delaware:  594,117.828 oz
TOTAL CUSTOMER WITHDRAWALS: 1,191,732.848 oz
 We had 2 Customer deposits:
i) Into JPMorgan:  597,615.02 oz
ii) Into Brinks:  895,536.990 oz
iii) Into Scotia: 629,639.200 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; 2,122,791.848 oz
 
 we had 0 adjustment(s)
The total number of notices filed today for the APRIL. contract month is represented by 14 contract(s) for 70,000 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 906 x 5,000 oz  = 4,530,000 oz to which we add the difference between the open interest for the front month of APRIL (25) and the number of notices served upon today (14) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the APRIL contract month:  906(notices served so far)x 5000 oz  + OI for front month of APRIL.(25 ) -number of notices served upon today (14)x 5000 oz  equals  4,585,000 oz  of silver standing for the APRIL contract month. 
We gained another 125,000 oz  standing for delivery in this non active delivery month of April. NO CONTRACTS WERE CASH SETTLED THROUGH THE EFP ROUTE.  
 

FOR COMPARISON

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 54,529 which is very good 
Yesterday’s  confirmed volume was 143,210 contracts which is humongous
(TODAY’S EST. VOLUME OF 143,210 CONTRACTS EQUATES TO 716 MILLION OZ OF SILVER OR 102% OF ANNUAL GLOBAL PRODUCTION OF SILVER EX CHINA EX RUSSIA)
 
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
 
end

NPV for Sprott and Central Fund of Canada

will update later tonight the central fund of Canada figures

1. Central Fund of Canada: traded at Negative 5.9 percent to NAV usa funds and Negative 6.0% to NAV for Cdn funds!!!! 
Percentage of fund in gold 61.1%
Percentage of fund in silver:38.8%
cash .+0.1%( April 24/2017) 
 
2. Sprott silver fund (PSLV): Premium FALLS TO   -.33%!!!! NAV (April 24/2017) 
3. Sprott gold fund (PHYS): premium to NAV FALLS to +0.14% to NAV  ( April 24/2017)
Note: Sprott silver trust back  into NEGATIVE territory at -.33% /Sprott physical gold trust is back into POSITIVE/ territory at +0.14%/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

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

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

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

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

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

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

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

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

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

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

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

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

 

end

 

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

And now the Gold inventory at the GLD

April 24/a deposit of 1.48 tonnes of gold into the GLD/inventory rests at 860.17 tonnes

 

April 21/A DEPOSIT OF 4.44 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT 858.69 TONNES

APRIL 20/A WITHDRAWAL OF 6.51 TONNES FROM THE GLD/INVENTORY RESTS AT 854.25 TONNES

April 19/ A DEPOSIT OF 11.84 TONNES INTO THE GLD/INVENTORY RESTS AT 860.76 TONNES

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

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

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

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

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

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

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

this tonnage no doubt is off to Shanghai

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

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
April 24 /2017/ Inventory rests tonight at 860.17 tonnes
*IN LAST 136 TRADING DAYS: 87.96 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 79 TRADING DAYS: A NET  39,47 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: A NET  64.90 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

April 24/no changes in inventory at the SLV/Inventory rests at 325.361 million oz/

April 21/A WITHDRAWAL OF 719,000 OZ OF SILVER AT THE SLV/INVENTORY RESTS AT 325.361 MILLION OZ/

APRIL 20/NO CHANGES IN INVENTORY AT THE SLV/INVENTORY RESTS AT 326.308 MILLION OZ

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 24.2017: Inventory 325.361  million oz
 end

 

Major gold/silver trading/commentaries for MONDAY

GOLDCORE/BLOG/MARK O’BYRNE.

Gold Sovereigns – ‘Treasure’ Trove Found In UK – Don’t Be The Piano Owner

Gold Sovereigns – ‘Life Changing’ ‘Treasure’ Trove Found In UK

The gold sovereigns – semi-numismatic gold coins made up of both gold sovereigns and half gold sovereigns dating from the reigns of Victoria, Edward VII and George V – were discovered inside an old piano after it was donated to a school last year.

A gold sovereign from that period is currently valued at between £200-250, with a half sovereign worth between £100-200. A pouch contains just a sampling of the 913 coins composing the hoard.  Image © Trustees of the British Museum via Coin World

The largest ‘hoard’ of gold sovereigns found in the UK ever has been declared ‘treasure’.

A piano tuner who discovered £500,000 (€590,000 or $640,000) worth of semi numismatic gold coins, gold sovereigns (0.2354 troy ounce) and half gold sovereigns (0.1167 troy ounces) inside the piano will get to keep half the cash – but the couple who owned the piano for 33 years won’t get a penny.

The piano’s new owners, Bishop’s Castle Community College, Shropshire which is near Birmingham, will split the £500,000 with the piano tuner Martin Backhouse.

The gold sovereigns are expected to be claimed by the British Museum, but the cash will be split between the school and Mr Backhouse, a inquest has ruled.

Meg and Graham Hemmings, who owned the piano for 33 years before donating it when they downsized, won’t get any of the money.

John Ellery, Shropshire’s Coroner, used an inquest to seek the original owners of the gold sovereigns, but despite more than 40 people claiming the gold sovereigns, none could prove they belonged to them.

The coroner said the gold sovereign hoard qualifies as ‘treasure’ because:

(1) It is substantially made of gold or silver
(2) It was deliberately concealed by the owner with a view to later recovery
(3) The owner, or his or her present heirs or successors, remain unknown

The story clearly shows the value of gold coins and the financial benefit and financial security they can bring to their owners – providing they are owned in the safest way possible.

Conclusion
Owning and taking possession of physical gold and silver coins and bars brings its own set of risks and should only be done by those who feel secure in their own home and or are very sure of the non vault place where they hide their gold coins or bars.

If storing at home rather than in the some of the securest vaults in the world as provided by GoldCore, you need to consider the risks.

These risks are that you may forget where you have hidden your coins or bars – unlikely though this may sound it has happened – that you may lose access to their hiding place or indeed that you may have them stolen. Informing loved ones and next of kin by way of a solicitor or lawyer, trusted bullion dealer or other trusted counter party would be a way of addressing this.

We encourage clients to take delivery of some of their bullion coins and bars providing they feel secure in their own home and have given some thought to these risks. The majority of a precious metal allocation is safer owned in the allocated and segregated storage in some of the safest vaults in some of the safer jurisdictions in the world.

Having the option to take delivery within days is vital in this regard. This means that you can take possession in the event of a worst case scenario of a collapse of the banking, financial and or monetary system – for whatever reason.

Possession is nine tenths of the law and hence the need to always consider how securely you own your gold and silver investments and how you maintain that possession and ownership.

This interesting story shows how gold and silver buyers and investors need to give serious consideration as to how securely their safe haven coin and bar assets are held.

Don’t be the piano owner …

News and Commentary

-END-

 

Nine hundred thirteen gold sovereigns found inside a piano

(courtesy John Rubino)

 

Don’t Let This Happen To You

Authored by John Rubino via DollarCollapse.com,

Some lives were changed recently:

Gold Treasure Found Inside A British Piano

(Mercury News) — British officials say they’ve been unable to trace the rightful heirs to a trove of gold coins found stashed inside a piano and worth a “life-changing” amount of money.

 

 

The Shropshire school that owns the piano and the tuner who found the gold are now in line for a windfall after a coroner investigating the find declared it treasure. The couple who owned the piano for three decades before donating it to the school will likely miss out.

 

Coroner John Ellery said Thursday that, despite a thorough investigation and a public appeal for information, “we simply do not know” who concealed the coins.

 

The 913 gold coins which were found in a piano, are displayed at Ludlow Museum in Ludlow, England Thursday April 20, 2017, where they are being kept under lock and key.

 

The hoard was discovered last year when the piano was sent for tuning. Under the keyboard — neatly stacked in hand-stitched packages and pouches — were 913 gold sovereigns and half-sovereigns minted in the 19th and early 20th centuries.

 

Piano tuner Martin Backhouse said when he found the pouches and slit open the stitching, he thought: “Ooh, it looks like there’s rather a lot of gold in this.”

 

The hoard, which weighs 13 pounds, has not been formally valued. But Peter Reavill of the British Museum has said it is worth a “potentially life-changing” amount.

 

Revenue from items declared “treasure” is generally split between the owner — in this case, Bishops Castle Community College — and the finder.

 

The piano was owned for 33 years by Graham and Meg Hemmings, who donated it last year to the school close to their home, near the Welsh border about 45 miles west of Birmingham. Meg Hemmings said she’s not bitter at missing out on treasure that was right under her nose.

 

“The sadness is, it’s not a complete story,” she said. “They’ve looked and searched for the people and they unfortunately haven’t come forward.

——————

Man Discovers $2.4 Million in Gold in Ex-Army Tank

(Popular Mechanics) – A tank collector in the United Kingdom was in for a surprise when he and his mechanic opened one of his tank’s diesel fuel tanks. Inside were gold bars totaling approximately $1.2 million dollars.

 

The tank came into possession of Nick Mead, a tank collector and owner of Tanks Alot, a company that offers tanks and other armored vehicles for driving classes, private events, and television and film appearances. Mead found the tank, an ex-Iraqi Army Type 69, on sale on eBay and traded it for an Abbot self-propelled howitzer and a British Army truck.

 

Mead and his mechanic, Todd Chamberlain, were filming the opening of the fuel tank because they had already found machine gun ammunition in the armored vehicle and wanted video proof in case more ammunition was found. They pulled out five gold bars weighing about twelve pounds worth an estimated $2.4 million. The gold was handed over to authorities, and Mead has placed a receipt for the bars of bullion in a safe deposit box.

There are two ways to react to such stories. The first is from the point of view of the finder, which is obviously “AWESOME!!!”

The second is to consider the person who hid the gold in the first place and realize what a horrendous failure it represents. Someone saves for a lifetime (or audaciously steals or otherwise acquires real wealth), and rather than trusting the banking/currency system, hides that wealth in physical form, either for their own future enjoyment or their descendants’ security. This kind of wealth really can change the course of many future generations.

But they made a big mistake. They didn’t tell anyone, or they told the wrong person, or they failed to plan for some other event that broke the link between gold hoard and owner/beneficiary. And so the gold is lost until found by strangers.

This is both profoundly sad and an object lesson for anyone who hears and takes to heart the idea that “gold in hand” is the only truly safe way to store real wealth. Because while true in theory, it involves serious challenges in practice. How, for instance, do you hide gold and silver so that it’s both undetectable by the wrong people and accessible to the right ones? Whom do you tell so that it will never be stolen but also never lost and forgotten?

These are questions with different answers for every situation. But they have to be asked and correctly answered for gold in hand to be truly a safe.

 

end

 

GoldSeek interviews Gata Secretary, Chris Powell)

(courtesy Chris Powell/GATA)

In GoldSeek Radio interview, GATA secretary reviews gold price suppression policy

Section:

9:07a ET Friday, April 21, 2017

Dear Friend of GATA and Gold:

GoldSeek Radio’s Chris Waltzek yesterday interviewed your secretary/treasurer about many of the details of the longstanding policy of Western governments to suppress the price of gold, policy that is documented in many places in government archives but remains a prohibited subject with mainstream financial news organizations. The interview is 27 minutes long and can be heard at GoldSeek Radio here:

http://radio.goldseek.com/nuggets.php

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

 

 

END

 

Mike Kosares explains that he notices a big change in the gold market where raids are having less of an effect.  This will no doubt embolden the players to increase their purchases of paper and convert that into real metal. We are all of the opinion that the physical market is beginning to dominate over the paper markets

(courtesy Mike Kosares/GATA)

Mike Kosares: The past few days have been a fractal event for the gold market

Section:

3:25p ET Friday, April 21, 2017

Dear Friend of GATA and Gold:

USAGold’s Mike Kosares writes today that smashes in the paper gold market are having less effect and the repulse of one this week may prove to be a “fractal event,” something that gets noticed and emboldens buyers of real metal. While the paper market is controlling the price for the time being, Kosares adds, the physical market will win in the end, very possibly causing a quick transformation of the price, an explosion.

Even so, this isn’t any reason to be less indignant about market rigging and the largely surreptitious interventions against gold by governments and central banks. For while gold, free markets, and transparent and limited government may win eventually, human lifespans are tightly limited, cheating and fraud are in the here and now, justice delayed is justice denied, and justice doesn’t come about by itself. It arrives only through great struggle, and it will not arrive in time to do any good for many people who would like to have faith in it today. They will die unrewarded after many years of “buying opportunities.”

Kosares’ commentary is headlined “Past Few Days a Fractal Event for the Gold Market” and it’s posted at USAGold here:

http://www.usagold.com/cpmforum/2017/04/21/past-few-days-a-fractal-event…

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

 

END

The Russians know that the dollar is America’s weapon and also its vulnerability.  If the world refuses the use the dollar then it is a dagger in their heart

(Tass/GATA)

Russians know that the dollar is both America’s weapon and vulnerability

Section:

Kremlin Adviser Reveals ‘Cure for U.S. Aggression’

From TASS, Moscow
Friday, April 21, 2017

YALTA, Crimea, Russia — The only way to stop the United States’ aggression is to get rid of dollar addiction, a Kremlin advisor said on Friday.

“The more aggressive the Americans are the sooner they will see the final collapse of the dollar as the only way for the victims of American aggression to stop this aggression is to get rid of the dollar. As soon as we and China are through with the dollar, it will be the end of the United States’ military might,” Sergey Glazyev said in an interview with TASS.

Commenting on the policy of the new U.S. president, Glazyev noted that Donald Trump is doing what the ruling elite expects him to do.

“I had no illusions about him, that he will change the policy. First, America’s aggressiveness in the world is rooted in the aspiration to preserve America’s hegemony in a situation when they have already ceded leadership in the economy to China,” he said.

“The United States has no tools to make all others use the dollar other than a truncheon. That is why they are indulging in a hybrid war with the entire world to shift the burden on their debts onto other countries, to confine all to the dollar and weaken territories they cannot control.” …

… For the remainder of the report:

http://tass.com/politics/942643

END

 

GATA conference in May at the International Metal Writers Cobnference , Vancouver

(courtesy Chris Powell/GATA)

Join GATA in May at the International Metal Writers Conference in Vancouver

Section:

9:32a ET Sunday, April 23, 2017

Dear Friend of GATA and Gold:

GATA will return to Vancouver at the end of May for Cambridge House’s International Metal Writers Conference, which is being billed as the largest gathering of investment newsletter writers from around the world.

The conference will be held Sunday and Monday, May 28 and 29, at the East Building of the Vancouver Convention Centre at Canada Place in Vancouver, British Columbia, Canada.

Among the speakers will be GATA Board of Directors member Ed Steer, publisher of Ed Steer’s Gold & Silver Digest letter, and your secretary/treasurer. Following the conference GATA Chairman Bill Murphy will preside at GATA’s reception from 5-8 p.m. at the Lions Pub, 888 West Cordova St., a short walk from the convention center.

Admission to the conference is free for those who register in advance. Admission at the door will be C$20.

GATA’s reception will be open to all except central bankers. It will feature a cash bar and, for those who beat the GATA delegation there, free snacks.

GATA favorites speaking at the conference include Frank Holmes of U.S. Global Investors, Peter Schiff of Euro Pacific Capital, David Morgan of Silver-Investor.com and The Morgan Report, Rick Rule of Sprott U.S. Holdings, Jeff Berwick of The Dollar Vigilante, and Thom Calandra of The Calandra Report.

Dozens of resource companies will be exhibiting at the conference.

The conference has arranged a discounted room rate for conference attendees at the Fairmont Waterfront hotel across the street from the convention center.

To register and learn more about the conference, please visit its internet site here:

http://cambridgehouse.com/event/68/international-metal-writers-conferenc…

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

END

Please watch,  my latest interview with Greg Hunter

http://usawatchdog.com/captains-of-dollar-are-panicked-bill-holter/

 

END

The chicken or the egg?

 

Please note this is $3.6 trillion annualized rate so far this year.
Of particular note is this chart:
What jumps out at you should be the quadrupling of the their balance sheets since 2007 from $3.5 trillion to over $14 trillion.
So what exactly does this mean?  Basically, to keep the system from imploding upon itself the world’s central banks had to “create” over $10 trillion of liquidity by purchasing assets onto their balance sheets.  This is puts forth a “chicken or the egg” question, or actually two as you will soon see.
  First, central banks have been buying everything …including stocks, to prevent the markets from turning down.  It is safe to say they understand that with the leverage and derivatives outstanding they cannot allow markets to correct (or God forbid actually enter bear markets).  They understand the “size” of the derivatives markets is so large, NO ONE can withstand a downturn and actually be called upon to perform their “insurance payments”.
  So the central banks have a problem here, they are now “forced” to purchase assets to prevent market downturns but one should ask the question “who will they eventually sell to”?  The answer of course is “no one” because there is no one large enough to take these assets off their books.  Chicken or the egg question number one; did the central banks create the bubble going in to 2008 or did the bubble of 2008 create the current central bank balance sheet bubble?
  While you are pondering that question, let’s look at another, much more important chicken or the egg question.  Central banks “create money” via credit.  They are now buying all sorts of assets from “pristine” (sovereign debt) to “ugly” (junk debt to get it off of bank balance sheets) to truly “stupid” (stocks).  Also, please keep in mind central banks for the most part are the issuers of currencies, their balance sheets and what they are comprised of “backs” the currency.  They have put themselves in the position of buying assets they know they can never sell.  They can never sell because there are no buyers large enough to buy, AND, they would then be creating the downturn in markets they originally denied if they ever stopped buying let alone selling assets.
  With the above in mind, what does this mean for the currencies they issue?  Won’t they be forced to continually purchase ever more assets to prevent markets from collapsing?  And doesn’t an ever larger balance sheet mean money supplies expanding and thus more currency units outstanding versus basically static amounts of real goods available?  Do you see where this is going?
  OK, chicken or the egg question number two; the central banks by definition create inflation (via currency and credit), does the continual creation of their “product” (fiat) in order to prevent the destruction (deflation)
(fiat) in order to prevent the destruction (deflation) of their product…actually destroy their product? Simplified, because “money” must be created at ever greater amounts to avoid deflation, are the central banks forced to ultimately destroy their currency? The answer of course is YES.
Central banks are forced in the exact same mathematical manner as any Ponzi scheme..to issue currency in an exponential manner.
What has actually happened was entirely predictable since 1913. At some point the USA (and thus the entire world as the dollar is the reserve currency) would reach debt saturation by definition.  We did so in the 2006-2007 era.  The only balance sheets left to “reflate” at that point were the sovereign treasuries/central banks themselves. They by result have destroyed their own balance sheets over the last 10 years.  It is only a matter of time until this is fully recognized by the investing/consuming public and thus lose confidence in the central banks themselves.  At this point, central banks will destroy their own currency by doing what they do..creating currency and credit.  From here, the faster they run, the faster the boogeyman catches them.
 
Standing watch,
Bill Holter
Holter-Sinclair collaboration
Comments welcome   bholter@hotmail.com
END

 

 

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

 
 

1 Chinese yuan vs USA dollar/yuan STRONGER  6.8853(   REVALUATION NORTHBOUND   /OFFSHORE YUAN MOVES STRONGER TO ONSHORE AT   6.8844/ Shanghai bourse DOWN 43.62 POINTS OR 1.37%   / HANG SANG CLOSED UP 97.46 POINTS OR 0.41%

2. Nikkei closed UP 255.13 POINTS OR 1.37%   /USA: YEN RISES TO 110.23

3. Europe stocks opened IN THE GREEN       ( /USA dollar index FALLS TO  99.09/Euro UP to 1.0853

3b Japan 10 year bond yield: RISES TO   +.022%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.23/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  49.98 and Brent: 52.27

3f Gold DOWN/Yen DOWN

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

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

3h Oil UP for WTI and 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  +.337%/Italian 10 yr bond yield DOWN  to 2.187%    

3j Greek 10 year bond yield FALLS to  : 6.46%   

3k Gold at $1270.12/silver $17.81 (8:15 am est)   SILVER ABOVE  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 76/100 in  roubles/dollar) 55.90-

3m oil into the 49 dollar handle for WTI and 52 handle for Brent/

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

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 110.23 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  .9951 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0680 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017 

3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.337%

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 2.305% early this morning. Thirty year rate  at 2.948% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Euphoria Returns: European Stocks Soar, Dax Hits Record; S&P Futs Surge In “French Relief Rally”

 

Risk is definitely on this morning as European shares soar, led by French stocks and a new record high in Germany’s Dax, after a “French relief rally” in which the first round of the country’s presidential elections prompted investors to bet that establishment candidate Emmanuel Macron will win a runoff vote next month, and who is seen as a 61% to 39% favorite to defeat Le Pen according to the latest just released Opinionway poll.

For those who may have missed yesterday’s events, here is a quick recap from DB:

The fact that Macron and Le Pen have made it through to the second round was in line with the most likely scenario for the last several weeks and is a big market positive given their head-to-head polling numbers but make no mistake viewed over a longer-term horizon its another political shockwave as the two mainstream party’s candidates have been eliminated in the first round for the first time under the 5th Republic.

 

A reminder that the polls have suggested that in a run-off Macron has consistently been 20-30% ahead of Marine Le Pen. It would take a numerical shock perhaps 5-10 times larger than Brexit or Trump for Le Pen to win. It does seem that the prefirst round polls have been relatively accurate so Macron should rightly be red hot favourite now. The fact that many of the losing candidates (not Melenchon) have been throwing their support behind Macron helps reinforce this.

 

So this was a big anti-establishment vote but a tame one for now due to the fact that a market friendly candidate made it through and is very much expected to win. The first round polls were close enough that you couldn’t have ruled out a very market unfriendly Le Pen/Melenchon run-off but now that risk has been eliminated the second round is perhaps more straight forward. The latest numbers with 97% counted are Macron 23.9%, Le Pen 21.4%, with Fillon and Melenchon with just over 19% each.

Asian stocks also surged, expect for China, which suffered its biggest drop of the year, down 1.4%, ending the streak of losses no greater than 1% going back to December. The dollar has tumbled against the euro, while crude oil rises. In the US, S&P futures surged 1.2% to 2,374.5, again approaching an all time high, on the heels of the favorable France vote and as Trump vowed to announce tax reforms this week.

Back to Europe where French stocks led gains in European equities as traders speculated that candidate Emmanuel Macron will win the country’s presidential election after he made it through to the second round. Led by gains in French banks, the CAC 40 Index surged 4.4% at 11 a.m. in Paris, poised for its best advance since June 2012, while the Euro Stoxx 50 Index jumped 3.2 percent and the broader Stoxx Europe 600 Index rose 2 percent, both heading for their highest levels since August 2015. Banks were the biggest winners among Stoxx 600 groups. The Euro Stoxx Banks Index surged 6.7 percent, heading for its highest level since December 2015.

As shown in the chart below, the CAC 40 is poised to close at its highest level in more than nine years. It could outperform Germany’s DAX Index by 3 percent to 4 percent within a few days, Natixis strategist Sylvian Goyon told Bloomberg. The French benchmark had advanced less than the DAX in the year through Friday’s close, before outperforming on Monday.

Commenting on the move, Andrea Tueni, a trader at Saxo Bank, said that “the result will bring some relief to the market. This confirms the ‘central scenario’ that was mostly priced in already, so I don’t expect euphoria on the markets. Banking stocks could outperform after their recent weakness.” And yet euphoria is precisely what has been unleashed looking at not only the CAC but also Germany’s Dax, which is trading at record highs this morning.

Germany’s DAX Index rallied in sympathy to a new all time high.

More on the “unexpcted” euphoria: every industry group in the Europe 600 Index rose, volatility fell the most since 2005, and the cost of insuring against losses on French banks’ junior debt fell by the most in almost seven years. The VStoxx Index of euro-area volatility slumped 30% , poised for a record decline. France’s VCAC Index tumbled 36%. Gold was on course for its biggest drop in seven weeks and the yen was the worst performer among major currencies. Hinting that early euphoria may have been overdone, the euro scaled back gains after it’s best open on record.

“Macron will not only help stabilize the European Union, but also help build stronger support mechanisms,” Azad Zangana, senior economist for Europe at Schroders Plc in London, wrote in a note to clients. “The contest is not over yet, but investors are likely to take comfort and to begin to think about the more attractive valuations that European equities offer.”

The spread between German and French 10Y yields, aka “le spread” plunged by over17 bps, and has dropped to under 50 bps as fears of a French shock evaporate. The spread was just under 80bps in February when fears of a Le Pen win peaked, and has since narrowed to the lowest level since late 2016.

While Europe and the rest of the world soared, China tumbled, and a selloff in Chinese stocks deepened after the Shanghai Composite plunged 1.4%, the most in four months, amid the previously noted concern authorities will step up measures to crack down on leveraged trading. The Composite suffered its biggest one-day loss since Dec. 12, as industrial companies and material producers led losses. The ChiNext small-cap gauge slipped 1.6 percent to 1,809.91, its lowest closing level since September 2015.

China’s authorities are taking advantage of a strengthening economy to reduce financial-system risk by tightening the screws on leverage. The banking regulator said late Friday it will strengthen a crackdown on irregularities in the financial sector, echoing comments by the securities watchdog just days earlier, while the top insurance official is being investigated on suspicion of “severe” disciplinary violations. The Shanghai Composite has slumped almost 5 percent since closing at a 15-month high on April 11, the biggest loss among global gauges.

“Market sentiment has been damped by recent tightening supervision on all fronts such as the banking commission, insurance commission, securities regulator,” said Ben Kwong, executive director of KGI Asia Ltd. in Hong Kong. “They expressed concern about bubbles and credit defaults. The deleveraging process is still in progress.”

 

The declines dented optimism in Hong Kong, where the Hang Seng Index rose 0.4 percent, paring an earlier gain of as much as 0.7 percent that had come amid global risk appetite on bets that pro-growth centrist Emmanuel Macron will be France’s next president. The Hang Seng China Enterprises Index climbed 0.6 percent at the close, trimming an advance of 1.1%.

However, China’s potential tightening was not enough to dent today’s global euphoria which spilled out from equities and across all risk assets, including most currencies even as the dollar dropped as safe haven trades were unwound, dragging Treasurys lower.

With France in the rearview mirror, there will be some focus on potential other big events this week. As we ended last week the market mood was improved with reports of both a renewed push for Trump tax reform and also talk of another healthcare vote occurring sooner rather than later. Trump used his media on choice – twitter – to proclaim on Saturday that “Big TAX REFORM AND TAX REDUCTION will be announced next Wednesday”. The capitals are his emphasis and he is not turning the dial down much from his “phenomenal” tax plan comment on February 9th. However that one he promised within 2-3 weeks. The consistent certainty and hyperbole make it a nightmare for markets as how do you analyse how realistic delivery is? It would be hard for credibility if this week brings nothing of note but this is a way of doing things that is unique to Mr Trump’s presidency and with it the uncertainty level is high. Over the weekend Mick Mulvaney, director of the Office of Management and Budget suggested that Wednesday will bring the administration’s “principles” and “some of the ideas that we like, some of the ideas we don’t like” and intimated that the full plan won’t be released until June. So we’ll have to wait and see.

Meanwhile, the euro climbed 1.3 percent to $1.0863 as of 10:18 a.m. in London. It soared as much as 2 percent earlier. Other European currencies rallied, with the Swedish krona and the Norwegian krone each increasing at least 1.8 percent. The yen fell 0.9 percent to 110.06 per dollar, after capping the first weekly loss in three on Friday. The Bloomberg Dollar Spot Index slipped 0.7 percent, trading at the lowest level since the U.S. election in November.

In rates, French 10-year notes dropped 11 basis points to 0.84 percent. Portuguese and Spanish bonds also rallied. Meanwhile, Europe’s “safe” German benchmark yields climbed 10 basis points and those in the U.K. added eight basis points. In the US, Treasury 10-year yields rose six basis points to 2.31%, rising back over the key support leve of 2.30%.

In commodities, WTI climbed back over $50, rising 1% to 50.10 as gold slipped 1% to $1,271.92, its biggest drop since Mar. 2.

Economic data Monday includes Chicago Fed Nat Activity. Alcoa, Halliburton are among companies scheduled to publish results.

Global Markets Snapshot

  • S&P 500 futures up 1.2%2 to 2,374.50
  • STOXX Europe 600 up 2% to 385.57, highest since Decembr 2015
  • France’s CAC 40 up 4.3%
  • Germany’s DAX up 2.8%
  • U.K.’s FTSE 100 up 1.9%
  • MXAP up 0.4% to 147.57
  • MXAPJ up 0.6% to 481.24
  • Nikkei up 1.4% to 18,875.88
  • Topix up 1% to 1,503.19
  • Hang Seng Index up 0.4% to 24,139.48
  • Shanghai Composite down 1.4% to 3,129.53
  • Sensex up 1% to 29,646.34
  • Australia S&P/ASX 200 up 0.3% to 5,871.78
  • Kospi up 0.4% to 2,173.74
  • Brent Futures up 0.8% to $52.37/bbl
  • Gold spot down 1% to $1,271.73
  • U.S. Dollar Index down 1% to 99.03
  • German 10Y yield rose 9.4 bps to 0.347%
  • Euro up 1.3% to 1.0863 per US$
  • Italian 10Y yield fell 0.6 bps to 1.968%
  • Spanish 10Y yield fell 8.2 bps to 1.613%

Top overnight news from Bloomberg

  • French Establishment in Disarray as Le Pen, Macron in Runoff
  • Euro Rises to Five-Month High as Macron, Le Pen Win French Vote
  • Freeport to Start Concentrate Exports From No. 2 Copper Mine
  • Actelion Says J&J Deal on Track to Close Toward End of 2Q 2017
  • Trump Plans Top-Level Briefing With Senators on North Korea
  • Jimmy Choo Puts Itself Up for Sale as JAB Shifts From Luxury
  • LafargeHolcim CEO Olsen Resigns Amid Probe on Syria Dealings
  • India Top Court Issues Notice to Google on Antitrust Body Plea
  • Top Iron Ore Forecaster Says Prices Will Sink Back Below $50
  • Creditors Lose Bankruptcy Lawsuit Over Lyondelbasell Merger
  • L&T Tech, Microsoft Win Multi-Million Dollar Project in Israel
  • Blackstone, RWE Won’t Start New German Plants Before 2021: BDEW

Asian equities traded mostly higher amid heightened risk sentiment across asset classes following the French Presidential election 1st round. ASX 200 (+0.2%) was led by financials although underperformance in gold miners limited gains, while Nikkei 225 (+1.4%) outperformed on JPY weakness. Shanghai Comp (-1.4%) and Hang Seng (+0.4%) underperformed with heavy losses in the mainland after the PBoC reduced its liquidity injection and amid regulatory concerns after the CIRC warned of key risks and called for prudent investment plans. T-notes dropped 20 ticks and 10yr JGBs were also weighed as safe-havens suffered from the French election, while slight pressure was also seen following the BoJ Rinban announcement where it reduced its buying in 3yr-5yr maturities. PBoC injected CNY 10bIn in 7-day reverse repos, CNY 10bIn in 14-day reverse repos and CNY 10bIn in 28-day reverse repos. PBoC set CNY mid-point at 6.8673 (Prey. 6.8823). China’s CIRC warned on risks facing the insurance industry and stated that companies must guard against liquidity risks with regular cash flow tests and called for a prudent investment scheme to be established to strengthen asset and liability management. Furthermore, there were separate reports that China is expected to implement further deleveraging measures.

Top Asian News

  • Shandong to Continue Work on Barrick Mine Bid, Australian Says
  • Consortium Will Allow Further Dividend Payments to Tatts Holders
  • Jack Ma Sees Decades of Pain as Internet Upends Older Economy
  • Massacre of Soldiers by Taliban Spurs Afghan Minister to Resign
  • China Bonds Extend Drop as 10-Year Yield Rises to 20-Month High
  • PLDT in Talks for Manila Electric Stake, May Close Deal in 1H
  • Nikon Sues ASML and Carl Zeiss Over Semiconductor Patents

European equities started off the week by surging notable outperformance in the CAC 40 (+4.0%) amid the fallout of last night’s French Presidential election 1st round. Given that Macron has made it into the second round on Sunday May 7th and is widely touted to defeat Le Pen, this has spurred risk on sentiment with the financial sector the main beneficiary as French banks opened higher by 8-10%. This positive sentiment has spilled into other European financials with Commerzbank (+9.1%) and Deutsche Bank (+6.0%) supported as markets keep half an eye on the ramifications of upcoming domestic elections later this year. Fixed income markets have followed a similar vain to equities with French paper a key focus for markets with the GE-FR spread narrowing to circa 45bps as investors re-enter French bonds amid an unwind of political concerns. Conversely, USTs, Bunds and Gilts trade lower in more of a risk-play while peripheral markets have tightened against their core counterparts. Interestingly, Jun’17 BTPs have printed fresh contract highs despite Friday’s downgrade by Fitch.

Top European News

  • German Business Confidence Climbs to Highest Since July 2011
  • Draghi Seen Choosing Faster Exit Once French Hurdle Cleared
  • Top Kazakh Bank on the Block for Under $1 May Need $738 Million
  • Europe Banks in Biggest Relief Rally as Electoral Clouds Clear
  • Romania Is Considering Policy Tightening, Central Banker Says

In currencies, it’s been a quiet morning with the EUR gap contracting slightly, but all pairs still significantly higher from late Friday. Emmanuel Macron is now expected to win the second round vote, as his marginal lead over Le Pen will be enhanced to some degree by the backing from Fillon and Hamon first and foremost. EUR/USD looks comfortable in the mid 1.0800’s for now, as does EUR/GBP in the mid 0.8400’s, but EUR/JPY is now 1 big figure off its best levels. German IFO was supportive based on the business climate and current conditions. Risk sentiment will remain heavy on the weekend developments surrounding North Korea, who continue to sound off warnings to all and sundry in response to the US presence in the region. USD/JPY gapped to just under 110.00 before an eventual and brief look above 110.50, but the pair is looking heavy at these levels despite the pick up in US Treasury yields — 10yr is 2.30%+ this morning.  The commodity currencies are all moving higher in tandem as the risk element supports all in equal measure. Marginal outperformance in the CAD as WTI moves above USD50.00 again, with the USD rate having tested through 1.3500 at the end of last week in the wake of the softer Canadian inflation read. Strong resistance seen through here, and we are now looking on a move on 1.3400. AUD/USD is hitting highs around 0.7580 this morning, but we note strong selling interest from 0.7600 higher up. NZD/USD trade extremely tight but gains now testing resistance just above 0.7050, more seen ahead of 0.7100.

In commodities, outside of the risk events affecting all markets at the present time, it is the usual mix of supply issues which have been impacting on metals and Oil. Gold is naturally lower in the wake of the Macron win, with favourable conditions for the second round vote conspiring to send the yellow metal back under USD1270, but we have since recovered back above there as the USD index softens a little. Silver suffered the bulk of losses last week, but remains firmly camped below USD18.00. Oil prices have slipped on inventory levels again, with the DoE report instrumental in pushing WTI below USD50.00. USD45-55.00 is now the range the market looks comfortable with ahead of any proposed extension to the production cuts. Base metals higher with the equity market lift, but Copper lagging as Grasberg output set to resume. Iranian oil minister Zanganeh said that OPEC & non-OPEC producers have sent positive signals regarding an extension of production cuts. Zanganeh added that Iran would second any decision made unanimously by OPEC. members and commented that one shouldn’t be hopeful about oil prices beyond USD 60/bbl for the time being.

Looking at today’s calendar, it’s a fairly quiet start to the week today with the only data in Europe this morning being the April IFO survey in Germany and CBI total orders data in the UK. In the US we have the April Dallas Fed manufacturing activity survey.

US Event Calendar

  • 8:30am: Chicago Fed Nat Activity Index, est. 0.5, prior 0.3
  • 10:30am: Dallas Fed Manf. Activity, est. 17, prior 16.9
  • 11:30am: Fed’s Kashkari Speaks at UCLA in Los Angeles
  • 3:15pm: Fed’s Kashkari Participates in Q&A at Claremont McKenna

DB’s Jim Reid concludes the overnight wrap

Straight to France this morning. The fact that Macron and Le Pen have made it through to the second round was in line with the most likely scenario for the last several weeks and is a big market positive given their head-to-head polling numbers but make no mistake viewed over a longer-term horizon its another political shockwave as the two mainstream party’s candidates have been eliminated in the first round for the first time under the 5th Republic. A reminder that the polls have suggested that in a run-off Macron has consistently been 20-30% ahead of Marine Le Pen. It would take a numerical shock perhaps 5-10 times larger than Brexit or Trump for Le Pen to win. It does seem that the prefirst round polls have been relatively accurate so Macron should rightly be red hot favourite now. The fact that many of the losing candidates (not Melenchon) have been throwing their support behind Macron helps reinforce this. So this was a big anti-establishment vote but a tame one for now due to the fact that a market friendly candidate made it through and is very much expected to win. The first round polls were close enough that you couldn’t have ruled out a very market unfriendly Le Pen/Melenchon run-off but now that risk has been eliminated the second round is perhaps more straight forward. The latest numbers with 97% counted are Macron 23.9%, Le Pen 21.4%, with Fillon and Melenchon with just over 19% each. The Euro was the biggest early beneficiary, rising around 2% as soon as the exit polls were released and trading at around 5 month highs but as we go to print is now +1.1% at 1.0847 vs. the USD.

Equity markets are firm outside of China without being euphoric. The Nikkei is 1.3% higher with US futures +0.8% higher. China is beating to its own drum and off over a percent following on from losses last week on market regulation worries. Treasury yields are 6bps higher. In credit Main, Senior Financials and Crossover are 5.75, 10.25 and 19bps tighter in overnight trading.

To be fair markets hadn’t aggressively priced in the alternative high risk scenario so there will likely be a limit to the inevitable risk-on from this first round result. Perhaps VSTOXX (vol on EU equities) has been as big a mover as any pre-election and may therefore be the main beneficiary. Expect Bunds to sell-off notably today (5-10bps??), OATs to out-perform, and Euro risk to perform well. The risk-on will be limited by the fact that as we discussed there hadn’t been a huge amount of risk-off ahead of the event and also because a lot of the recent global softness was more due to recent US political and data disappointments.

On that, with the first round of the French election out the way, there will be some focus on potential other big events this week. As we ended last week the market mood was improved with reports of both a renewed push for Trump tax reform and also talk of another healthcare vote occurring sooner rather than later. Mr Trump used his media on choice – namely twitter – to proclaim on Saturday that “Big TAX REFORM AND TAX REDUCTION will be announced next Wednesday”. The capitals are his emphasis and he is not turning the dial down much from his “phenomenal” tax plan comment on February 9th. However that one he promised within 2-3 weeks. The consistent certainty and hyperbole make it a nightmare for markets as how do you analyse how realistic delivery is? It would be hard for credibility if this week brings nothing of note but this is a way of doing things that is unique to Mr Trump’s presidency and with it the uncertainty level is high. Over the weekend Mick Mulvaney, director of the Office of Management and Budget suggested that Wednesday will bring the administration’s “principles” and “some of the ideas that we like, some of the ideas we don’t like” and intimated that the full plan won’t be released until June. So we’ll have to wait and see.

We should also note that Friday marks the deadline to avoid a government shutdown and agree a new spending plan, and Saturday marks Trump’s first 100 days in office. Ryan was bullish on avoiding the shutdown over the weekend and things will heat up on all things US governmental from tomorrow after House members return from a two week recess. So a very busy week ahead in Washington.

The ECB will also get a lot of focus given their meeting on Thursday. As DB’s Mark Wall has recently discussed, senior ECB Council members have for now shut down the debate on an early deposit rate hike with the normalization of inflation as yet unconvincing. However assuming France avoids a political shock, Mark expects the market to refocus on euro area reflation risks this summer but this meeting is too early for there to be too much change in language or emphasis outside of acknowledgment of an improving outlook, especially during the French campaign where Le Pen remains a runner. If Macron wins in 2 weeks, Mark thinks that with their inflation models and leading indicators consistent with underlying inflation rising in H2 we’ll see more hawkish ECB behaviour from June onwards. They are keeping their baseline expectation for ECB exit largely intact. Based on their forecasts for growth and inflation, they expect forward guidance to be adjusted in June, tapering to be pre-announced in September and a oneoff deposit rate hike in December; the probably of the latter has declined but it remains our baseline. They expect tapering in H1 2018 and the first refi hike around the end of 2018.

Rounding off last week, global markets were largely muted and remained cautious on Friday ahead of the French elections. Both the S&P 500 reversed some of its gains from Thursday (-0.3%) while the STOXX  (+0.02%) was broadly flat on the day, with the indices ending the week up +0.8% and down -0.65% respectively. The CAC (-0.37%) ended the day slightly lower, having dipped on the open by about 1% but recovering thereafter later in the day. French OAT 10Y yields at were also little changed at 0.94% (+1bp) in line with the bund move 10yr USTs were 1.5bps higher. Gold rose a touch to end the week nearly flat but Oil fell over 2% on Friday and fell from around $53 to $49.62 over the course of the week closing below $50 for the first in April. FX markets were also fairly quiet on Friday: the Euro (-0.4%) and Sterling (-0.1%) were lower on the day while the dollar ticked up by +0.1%. Over in commodity markets.

Taking a look at data out of Europe on Friday, we saw flash PMI numbers for April for France, Germany and the Eurozone. The Eurozone numbers as a whole were positive with manufacturing and services rising to 56.8 (vs. 56.0 expected) and 56.2 (vs. 55.9 expected) respectively. Numbers out of France beat expectations across both manufacturing (55.1 vs. 53.1 expected) and services (57.7 vs. 57 expected). Nevertheless markets seemed reluctant to respond immediately as the weekend election risks took centre stage. Over in Germany the data was a little more mixed with manufacturing PMIs roughly in line with expectations (58.2 vs. 58.0 expected) while services fell (54.7 vs. 55.5 expected). Away from PMIs, we also saw UK retail sales data for March which recorded its largest monthly decline since 2010, falling -1.8% mom (vs. -0.5% expected; +1.7% previous). Over in the US we also saw Markit Flash PMI numbers for April, with both manufacturing (52.8 vs. 53.8 expected; 53.3 previous) and service PMIs (52.5 vs. 53.2 expected; 52.8 previous) falling on the month. Existing home sales data for March was however positive (5.71m vs. 5.60m expected).

Looking at this week’s calendar, it’s a fairly quiet start to the week today with the only data in Europe this morning being the April IFO survey in Germany and CBI total orders data in the UK. In the US we’ll get the April Dallas Fed manufacturing activity survey. Kicking Tuesday off will be France where we get the April confidence indicators. Shortly after that its worth keeping an eye on the ECB’s bank lending survey before we then get public sector net borrowing data in the UK. Over in the US tomorrow we get the S&P/Case-Shiller house price index, FHFA house price index, new home sales in March, conference board consumer confidence for April and the Richmond Fed manufacturing survey for April. Turning to Wednesday, it look set to be a pretty quiet day with Japan machine tool orders, French consumer confidence and US retail sales revisions the only prints of note. In China on Thursday we get March industrial profits data. The main focus in the Asia session though will be the BoJ policy meeting outcome. During the European session we’ll get Germany CPI in April, Euro area consumer confidence and of course the ECB rate decision around midday with Draghi due to speak after. It looks set to be a busy session in the US  on Thursday too with March durable and capital goods orders data, wholesale inventories,  advance goods trade balance, pending home sales, initial jobless claims and Kansas City Fed’s manufacturing survey. We close the week out in Japan on Friday with a bumper day of data including CPI, retail sales, jobless rate and industrial production. In Europe we’ll get CPI, PPI and Q1 GDP in France, along with Q1 GDP for the UK and CPI and money and credit aggregates data for the Euro area. We finish with a bumper afternoon of data in the US on Friday including Q1 GDP, core PCE, Chicago PMI and University of Michigan consumer sentiment.

Away from the data, the Fedspeak this week consists of just Kashkari today and Harker on Friday. Away from that, Russia is due to hold talks with the US and UN today to discuss the Syrian peace process. UK PM Theresa May hosts EC President Juncker and EU’s Brexit negotiator Michal Barnier on Wednesday. President Trump also hosts Argentina President Mauricio Macri on Thursday. Earnings will be the other big focus this week with 194 S&P 500 companies due.

3. ASIAN AFFAIRS

i)Late  SUNDAY night/MONDAY morning: Shanghai closed DOWN 43.62 POINTS OR 1.37%/ /Hang Sang CLOSED UP 97.46 POINTS OR 0.41%.  The Nikkei closed UP 255.13 OR 1.37% /Australia’s all ordinaires  CLOSED UP .26%/Chinese yuan (ONSHORE) closed UP at 6.8853/Oil UP to 49.98 dollars per barrel for WTI and 52.27 for Brent. Stocks in Europe  IN THE GREEN   ..Offshore yuan trades  6.8844 yuan to the dollar vs 6.8853 for onshore yuan. NOW  THE OFFSHORE IS SLIGHTLY STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN SLIGHTLY STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN ALSO MUCH STRONGER AND THIS IS COUPLED WITH THE MUCH WEAKER DOLLAR. CHINA IS HAPPY

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA

North Korea arrests another uSA citizen.  It now holds 3 of them as they threaten to sink the USA carrier Vinson.  Japan is getting quite nervous as it deploys Warships to assist the Carl Vinson:

(courtesy zero hedge)

North Korea Arrests US Citizen, Threatens To Sink US Aircraft Carrier As Japan Deploys Warships

A third US citizen has been arrested and remains in custody in North Korea, according to South Korean news agency Yonhap. A man, a Korean-American professor in his 50s, identified by the surname Kim, had been in North Korea for a month to discuss relief activities and was detained at Pyongyang International Airport just as he was leaving North Korea, the agency reported.

The man was a former professor at Yanbian University of Science and Technology (YUST), Yonhap said, citing unnamed sources. YUST, a university in neighboring China, has a sister university in Pyongyang. An official at South Korea’s National Intelligence Service said it was not aware of the reported arrest. The reason for his arrest is still unclear, and there has been no comment from the US authorities so far. South Korea’s spy agency, the National Intelligence Service, said it “was not aware” of Kim’s arrest, according to Yonhap.

North Korea, which has been criticized for its human rights record, has in the past used detained Americans to extract high-profile visits from the United States, with which it has no formal diplomatic relations. North Korea already holds two Americans. Ahn Chan-il, director of the World North Korea Research Center in Seoul, said that the North “seems to be intending to use professor Kim as leverage in negotiations” amid the current bad relations between the two countries.

Pyongyang airport

According to Reuters, Otto Warmbier, a 22-year-old student, was detained in January last year and sentenced to 15 years of hard labor by a North Korean court for attempting to steal a propaganda banner. In March 2016, Korean-American Kim Dong Chul, 62, was sentenced to 10 years hard labor for subversion. U.S. missionary Kenneth Bae was arrested in 2012 and sentenced to 15 years hard labor for crimes against the state. He was released two years later.

Since 2009, over 10 U.S. citizens have been detained in North Korea on charges of anti-state and other unspecified crimes. The widespread view has been that Pyongyang uses the detentions as bargaining chips in its negotiations with Washington.

* * *

Meanwhile, one day after North Korea lashed out at its biggest supporter in the region China, threatening Beijing with “catastrophic consequences” for siding with the U.S. over sanctions, North Korea said on Sunday it was ready to sink a U.S. aircraft carrier steaming toward the Korean penninsula to demonstrate its military might, as two Japanese navy ships joined a U.S. carrier group for exercises in the western Pacific.

“Our revolutionary forces are combat-ready to sink a U.S. nuclear-powered aircraft carrier with a single strike,” the Rodong Sinmun, the newspaper of the North’s ruling Workers’ Party, said in a commentary. The paper compared the aircraft carrier to a “gross animal” and said a strike on it would be “an actual example to show our military’s force”. The commentary was carried on page three of the newspaper, after a two-page feature about leader Kim Jong Un inspecting a pig farm.

North Korea says its nuclear program is for self-defense and has warned the United States of a nuclear attack in response to any aggression. It has also threatened to lay waste to South Korea and Japan.

Additionally, as discussed previously, North Korea will mark the 85th anniversary of the foundation of its Korean People’s Army on Tuesday when some speculate it may set off a nuclear test.

Donald Trump ordered the USS Carl Vinson carrier strike group to sail to waters off the Korean peninsula in response to rising tension over the North’s nuclear and missile tests, and its threats to attack the United States and its Asian allies. The United States has not specified where the carrier strike group is as it approaches the area. U.S. Vice President Mike Pence said on Saturday it would arrive “within days” but gave no other details.

* * *

Adding to the growing military tension in the region, two Japanese warships, the Samidare and Ashigara, left western Japan on Friday to join the Carl Vinson and will “practice a variety of tactics” with the U.S. strike group, the Japan Maritime Self Defense Force said in a statement according to Reuters.

The Japanese force did not specify where the exercises were taking place, but by Sunday the destroyers could have reached an area 2,500 km (1,500 miles) south of Japan, which would be east of the Philippines. From there, it could take three days to reach waters off the Korean peninsula. Japan’s ships would accompany the Carl Vinson north at least into the East China Sea, a source with knowledge of the plan said. U.S. and South Korean officials have been saying for weeks that the North could soon stage another nuclear test, something the United States, China and others have warned against.

Japan’s show of naval force reflects growing concern that North Korea could strike it with nuclear or chemical warheads. Some Japanese ruling party lawmakers are urging Prime Minister Shinzo Abe to acquire strike weapons that could hit North Korean missile forces before any imminent attack.

Japan’s navy, which is mostly a destroyer fleet, is the second largest in Asia after China’s.

South Korea has already put its forces on heightened alert. China, North Korea’s sole major ally, opposes Pyongyang’s weapons programs and has appealed for calm. The United States has called on China to do more to help defuse the tension. Last Thursday, 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 pre-emptive strike”

end

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

Sunday night

Last night Chinese stocks did not go along with European euphoria (French election)

(COURTESY ZEROHEDGE)

Chinese Stocks Are Plunging

Despite a liquidity injection and the rest of the world in ‘risk-on’ mode over the French election results, Chinese markets are tumbling…

On Friday, we asked “Is China Trying To (Slowly) Burst Another Stock Market Bubble?” as Chinese monetray conditions were tightening dramatically…

And, as Bloomberg reports, it seems the catalyst is further crackdowns on shadow-banking.

China’s banking regulator, which said late Friday it will focus on guarding against financial risks, has ordered local units to assess cross-guaranteed loans, according to a Caixin report.

Having gone 86 trading days without a loss of more than 1% on a closing basis, the longest stretch since the market’s infancy in 1992…

It seems they might be… (or The National Team is going to have to work very hard today)…

 

As Shanghai Composite breaks below ist 200-day moving-average withe the biggest intraday drop since Dec 12th…

 

CHINEXT (China’s Nasdaq) is also getting hammered – testing its lowest levels since February 2015….

(courtesy zerohedge)

China threatens retaliation if Trump follows through on its steel protectionism:

(courtesy zero hedge)

China Threatens Retaliation To Trump’s Steel “Protectionism”

Days after Donald Trump signed an executive order to probe steel imports, mostly from China, Beijing responded warning such a move could trigger a trade dispute between the United States and its major trading partners, who are likely to take retaliatory steps, the official China Daily said in an editorial on Monday.

“By proposing an unjustified investigation into steel imports in the guise of safeguarding national security, the U.S. seems to be resorting to unilateralism to solve bilateral and multilateral problems,” the China Daily said. The probe could result in efforts by the United States to curb imports that will affect the interests of a number of its major trade partners, including China, the editorial warned.

“If the U.S. does take protectionist measures, then other countries are likely to take justifiable retaliatory actions against U.S. companies that have an advantage … in fields such as finance and high-tech, leading to a tit-for-tat trade war that benefits no one,” it said.

The article called on the United States, the world’s top economy, to use the settlement mechanism under the World Trade Organization to resolve the dispute over steel. Reducing imports will not alter the weak competitiveness of U.S. steelmakers, help restore U.S. manufacturing or bring back jobs, as President Trump hopes, it said.

As Reuters puts it, “the article was the strongest official response yet to U.S. President Donald Trump on Thursday launching an investigation of China and other steel producers for dumping cheap steel products into the United States.”  It was a marked shift from official comments on Friday. China’s Foreign Ministry spokesman Lu Kang said in a briefing the country needed to ascertain the direction of any U.S. investigation before it could make a judgment.

In addition to China, in Japan, the world’s second-biggest steel producer after China, the head of its steelmakers’ group expressed concern over Trump’s protectionist policy.

“We are greatly concerned over Trump’s protectionism, although we hear he has softened his tone on some issues with a grasp of reality,” Japan Iron and Steel Federation chairman Kosei Shindo told a news conference on Monday.

* * *

Separately, in a parallel move yet one which appears to justify Trump’s threat to curb Chinese steel imports, 29 Chinese steel firms had their licenses revoked as Beijing kept up its campaign to tackle overcapacity in the sector. Nonetheless, analysts quoted by Reuters said the revocations were unlikely to be a direct response to Trump’s plan, but rather a part of China’s reform measures aimed at reducing surplus steel capacity that many estimate at around 300 million tonnes, about three times Japan’s annual output.


An employee works at a steel factory in Dalian, Liaoning Province, China

China’s Ministry of Industry and Information Technology released a list on Monday of 29 firms that will be removed from its official register of steel enterprises. Most have already stopped producing steel, but some had illegally expanded production or violated state closure orders.

“It’s all enveloped in this strategy to improve the financial condition of the industry which has been weighed down by excess capacity for some time, partly as a result of inefficient operations,” said Daniel Hynes, commodity strategist at ANZ.

As reported before, China has been aiming to shed between 100 million to 150 million tonnes of excess capacity over the 2016-2020 period, although recent reports showed that much of the capacity that had been planned to be taken offline had in fact remained operational. It also plans to shut around 100 million tonnes of low-grade steel production by the end of June.

On Monday, another 40 steel firms have been asked to make changes in areas such as environmental protection and safety. The majority of the companies were accused of failing to comply with emergency output restrictions during heavy pollution periods, and they must fully “rectify” their violations within a prescribed period, the industry ministry said, without giving a specific time frame. Hynes said China may take a more gradual approach in shutting inefficient mills rather than force “a lot of closures at once” and cause a spike in steel prices, which is what happened in the third quarter last year.

Some more details from Reuters:

China set up an official steel firm register in 2009 to impose order on the poorly regulated industry and to help companies during price negotiations with iron ore suppliers overseas. The register was also supposed to identify the mergers and closures required to meet a target to put 60 percent of China’s steel capacity in the hands of its 10 biggest producers by the end of 2015.

 

However, industry consolidation rates actually fell to 34.2 percent over the 2011-2015 period, from 48.6 percent in the previous five-year period, and China has now pushed back the 60 percent target until 2025.

 

According to figures published by the official China Metallurgical News earlier this month, 292 out of a total of 635 firms in 12 provinces and cities have already ceased production or shut down completely.

As explained previously, the worry in Beijing is that as more legacy industries are “consolidated” it could lead to mass layoffs, and social instability. Last Wednesday, China’s cabinet said that risks of mass unemployment in some regions and sectors have increased and pledged more fiscal and monetary- policy support to address the potential rise in the jobless rate.

The government plans to cut further excess and inefficient capacity in its mining sector and “smokestack” industries this year, part of efforts to upgrade its economy and reduce pollution, but the move threatens to throw millions more out of work.

The State Council said China faces “intensified structural conflicts” in its current job market, but it must place employment as a top policy priority and address the new challenges to keep its employment rate stable.

University graduates and workers from sectors affected by capacity cuts such as steel, coal, and coal-fired power were identified as “key groups” that needed extra support, the guidelines said. Data from the Ministry of Human Resources and Social Security showed 7.95 million students are expected to graduate from university this year in June, 300,000 more than in 2016. Graduates will be encouraged to diversify their employment options, such as working in less-developed countryside areas and working for small enterprises. China will also appropriately reallocate affected workers, it said.

China’s official unemployment rate – which only accounts for urban, registered residents – has held around 4 percent for years, despite a slowdown that has seen growth cool from the double-digits to quarter-century lows of under 7 percent. In a guideline post on its website that sets the policy tone on employment issues, the State Council said provincial governments in those regions should take measures such as increasing the stipend for firms under job-shedding pressures.

“If new urban jobs shrink or jobless rate jumps, (China) should step up fiscal and monetary policy support,” it said.

Which, of course, would send China right back to square one of its debt-funded doom loop: more stimulus, more debt, more economic inefficiencies, more bubbles, more capital outflows, rinse, repeat.

end

An excellent commentary by Brown who shows that the next nation that will face deflation is China and explains why:

(courtesy Andrew brown/ShoreVest Partners)

China’s Credit Excess Is Unlike Anything The World Has Ever Seen

 

By Andrew Brown, a partner for macro and strategy at ShoreVest Capital Partners, as posted originally in the South China Morning Post.

From a global macroeconomic perspective, we encourage readers to consider that the world is experiencing an extended, rolling process of deflating its credit excesses. It is now simply China’s turn.

For context, Japan started deflating their credit bubble in the early 1990s, and has now experienced more than 20 years of deflation and very little growth since. The US began its process in 2008, and after eight years has only recently been showing signs of sustainable recovery. The euro zone entered this process in 2011 and is still struggling six years onward. We believe China is now entering the early stages of this process.

Having said that, we believe that Chinese authorities have a viable plan for deflating their credit excess in an orderly fashion. Please stay posted as we will review this multi-pronged, market-based approach in our next column.

For now, let’s turn our attention to the size of the credit excess that China created and why we estimate it to be the largest in the world.

A credit excess is created by the speed and magnitude of credit that is created – if too much is created in too short a time period, excesses inevitably occur and non-performing loans (NPLs) emerge.

To illustrate the credit excess that has been created in China, let’s review several key indicators, including the: 1) flow of new credit; 2) stock of outstanding credit; 3) credit deviation ratio (i.e., excess credit); 4) incremental capital output ratio (efficiency of credit allocation).

The chart below shows the amount of credit created as a percentage of GDP during the five years prior to major downturns globally.

The US created 58 per cent of GDP between 2002-07, and the global financial crisis followed.

Japan created credit equivalent to the entire size of its economy between 1985-90 and subsequently experienced more than 20 years of deflation (admittedly reflecting the lack of restructuring).

Thailand created a significant real estate bubble between 1992-97 and ended up with about 45 per cent NPL ratios.

Spain created credit equivalent to 116 per cent of GDP between 2002-07 and still is trying to address a 20 per cent unemployment rate.

China created 139 per cent of GDP in new credit between the first quarter of 2009 and the third quarter of 2014 (when GDP growth peaked), far greater than what was created in other major credit bubbles globally.

This unprecedented flow of new credit was predominantly in infrastructure and corporate credit. The result is that China’s corporate debt-to-GDP is too high and must be addressed, which authorities are now doing.

Another important measure to assess the amount of credit in the economy which is “excessive” is the credit-to-GDP gap, as reported by the Bank of International Settlements. This ratio measures the difference between the current credit-to-GDP ratio in an economy against its long-term trend of what is necessary to optimally support long-term GDP growth. It is akin to measuring the amount of credit that is productively deployed into an economy.

This metric is used by the Basel III framework in determining countercyclical capital buffers for a country’s banking system when credit creation becomes too fast (i.e., high credit growth requires higher capital ratios for banks).

A credit-to-GDP gap above 10 per cent of GDP is considered risky and requires the maximum additional 2.5 per cent of tier one capital as a countercyclical buffer under Basel III. A credit-to-GDP gap above 10 per cent of GDP is increasingly problematic as any new credit extended above that level produces progressively less GDP and is a source of future NPLs.

Out of the 43 countries currently measured by the BIS, China has the largest credit-to-GDP gap (by orders of magnitude) at 30 per cent of GDP. This is equivalent to US$3.1 trillion in excess credit.

Finally, to show that the pace of credit creation will necessarily slow, thereby exposing misallocated credit and driving the emergence of new NPL formation, we turn to the deterioration in China’s incremental capital output ratio.

This ratio is the measure of the number of units of input required to produce one unit of GDP.

For the 15 years prior to the credit impulse in 2009-14, China’s incremental capital output ratio has been consistently between two and four. Meaning that two to four yuan in fixed asset investment created one yuan in GDP.

But as a result of the credit-driven economic growth model, and the excessive credit that has been created (and the subsequent excess capacity in the industrial economy), China’s investment efficiency has deteriorated to the point that its incremental capital output ratio is now over 13.

Said another way, every 1 yuan in new fixed asset investment is now creating only 7 fen in GDP. Meaning that new credit creation is having an increasingly lower transmission into GDP growth. Simply put, credit growth must necessarily slow and be redirected towards more productive activities.

end

4. EUROPEAN AFFAIRS

Macron and Le Pen move to the 2nd round.  The following explains what happens next;

(courtesy zero hedge)

Macron And Le Pen Move To The 2nd Round: What Happens Next, According To Goldman And Citi

Most of the results are in, and while it remains close, Macron will likely be the winner of the first French presidential round and is set to face Marine Le Pen in the runoff.

What does that mean for various asset markets and the bigger macro picture?  Here are two forecasts, just released from Goldman and Citi.

First, Goldman Sachs:

  • Emmanuel Macron will face Marine Le Pen in the run-off of the Presidential election on May 7, according to exit polls. We maintain our view that mainstream candidate Mr. Macron will likely win the French Presidential election.
    • In the two week-period before the run-off, both Mr. Macron and Ms. Le Pen will resume their campaign. A televised debate between both candidates will be held on May 3 (9pm Paris time).
    • Polls carried out prior to the outcome of the first round indicate that Mr. Macron has a 25pp lead over Mr. Le Pen. Reflecting France’s political realignment between mainstream pro-European and populist Eurosceptic voters, we expect the gap in polls between Mr. Macron and Ms. Le Pen to widen in favour of Mr. Macron in the run-up to the second round.
    • We expect the ECB to maintain its existing refinancing facilities (namely the fixed-rate full allotment (FRFA) and the emergency liquidity provision (ELA) via the Bank of France) in the coming weeks, to sustain market functioning and continuity of pricing in the systematically relevant market segments. In the face of a politically-induced spread widening, this is also likely to be accommodated through its asset-purchase programmes, as long as it proves to be temporary.
  • We think the equity market has already largely priced the outcome and concerns about the elections have not prevented European equities and the CAC 40 from performing well on an absolute basis since the beginning of the year (+5% YTD for both).
    • We expect European equities to remain broadly flat during the two rounds of the election given that the outcome of the first round corresponds to what was broadly expected, and given that the probability of Ms. Le Pen winning the election cannot be completely ruled out.
    • While we think Emmanuel Macron will win the presidential election on 7 May, we think this outcome has the potential to lift European equities only slightly (about +2%-3%), given our view that very little ‘election risk premium’ has been discounted in European equities (unlike in the bond and the equity derivatives markets).
    • The French election has not prevented European equities and the CAC 40 from performing well on an absolute basis since the beginning of the year (+5% YTD for both). Likewise, the performance of European equities versus the US has reflected pretty accurately the positive moves in fundamentals. Europe has seen inflows from US investors (after a year of selling in 2016) and has started to outperform the US.
    • Since the beginning of the year, the equity risk premium has declined by 40bp in Europe, while it has risen by 50bp in the US.
    • ‌There is also evidence that European equities have moved in line with economic fundamental data, as they have recently started to outperform the US when earnings expectations have started to rise more rapidly in Europe than in the US
    • ‌In the event Ms. Le Pen is elected in the second round (not our base case), European equities would be particularly vulnerable given how little this scenario seems to have been discounted.
    • We estimate that the equity derivatives market is pricing a 5% absolute move for the SX5E for the election. Based on our assumption that it reflects a 20% probability of Ms. Le Pen being elected, it implies a 12% downside move for the SX5E and a 15%-16% downside move for the FTSE MIB and the CAC 40 if this scenario were to materialise.
  • We expect today’s results to generate some relief for the FTSE MIB, French and Italian banks and a very minor relief for the CAC 40. That said, as this has largely been the central expectation priced into the markets, we would expect any rally to be modest. French domestic stocks and the CAC 40 have not underperformed significantly as of late, and we do not expect them to rally materially following today’s results, or after the second round of the election.
    • That said, as this has largely been the central expectation priced into the markets, we would expect any rally to be modest
    • French domestic stocks and the CAC 40 have not underperformed significantly as of late and we do not expect them to rally materially following today’s results, or after the second round of the election.
  • In rates space, French bonds had incorporated some political risk premium, and traded more idiosyncratically. We expect the 10-year OAT-Bund spread to narrow by as much as 15bp on short covering, to around 50-55bp – or within 1 standard standard deviation above our macro-econometric model measure of ‘fair value’. We would expect the daily correlation with German Bunds to remain somewhat below the 90% observed since the beginning of the ECB’s PSPP on account of residual uncertainties in the run-up to the second round. We would expect a similar re-pricing in intra-EMU spreads in the periphery markets, where BTPs and Bonos spreads to Bunds could go back to trading closer to a range of 170-190bp in the coming weeks (from around 200bp on Friday’s close) and 120-130bp (from around 140bp on Friday) respectively. We think that political uncertainty around the Italian political outlook will weigh on BTPs.
  • Our FX analysis suggests that a sizeable decrease (to close to 0 percent) in the probability that investors assign to Ms. Le Pen becoming President, or to a break-up of the Euro area, that is close to its lows in July 2014 could push the EUR higher versus the USD and the JPY, pushing EUR/USD close to 1.13.
    • That said, how positive and persistent the market reaction will be after the election will depend on other factors, including the economic and inflation outlook and communication from the ECB at this week meeting and other central banks on the near-term policy stance. Political uncertainty and the threat of a break-up of the Euro area will remain a latent risk that is likely to resurface at times, with the next pressure point being the Italian elections, which are likely to take place in 2018Q1.

And here is Citi’s take:

Polls were right: preliminary results show Macron and Le Pen through to the second round: According to partial estimates based on votes counted social liberal Emmanuel Macron (~24%) and Far Right Marine Le Pen (~22%) are through to the second round of the French presidential election to be held on 7 May. Fillon and Mélenchon are joint third (~20%), while Hamon came in a distant fifth place with ~6%. We expect Macron to win the second round and to become the next French president, on the basis that the candidate closest to the centre of the political spectrum has the best chance to win.

Narrow gap between the top four candidates: The gap between the top two candidates is ~2pp, while the gap between second and third/fourth place was 2pp, meaning that the top four are within the four points indicated by the average of polls before the election. These small margins imply potential risks in terms of legitimacy.

Turnout was on the low side: Estimates of turnout are around 77%, compared to the 79.5% in the first round in 2012 and 83.8% in 2007. We know from the 2007 and 2012 Presidential elections that while the turnout typically increases between the two rounds, the number of valid ballots drops by around 1 million. Some voters choose to deface their ballot, perhaps expressing their frustration about having to make a choice between two finalists that they don’t have much affinity for. In 2002, however, the number of valid ballots rose by 2.5mn in the second round between Le Pen’s father and Chirac, showing that the prospect of a National Front President mobilised mainstream voters. For the second round in two weeks, we expect turnout to be slightly higher (but the number of valid ballots to be lower) in keeping with the historical trend.

Declarations of support from defeated candidates are important: Fillon has announced his support for Macron (on the grounds that voters should do not abstain, and vote against Le Pen and therefore in favour of Macron). Hamon is also supporting Macron while Mélenchon has not said anything yet, but seems unlikely to support the National Front.

‎The margin of victory for Macron in the second round is likely to be sizeable – Our calculations show that the likely gap between the finalists in the second round could be around 25% (62.5% vs. 37.5%), assuming that Le Pen could convince around 35% of undecided voters to cast a ballot in her favour. Even if Le Pen managed to convince 100% of the 6.2mn of undecided voters (according to the various scenarios tested for the second round), Le Pen would still fail to defeat Macron and create a surprise in the second round. Note that an average of eight polls testing the second round combination of Macron vs. Le Pen showed that Macron would be on 63.5% to Le Pen’s 36.5%, with 21% of voters undecided.

  • June legislative elections likely to yield co-habitation – Based on the relative share of the mainstream Left vs. Mainstream Right, the most likely outcome of the legislative elections (11 & 18 June) would be a ‘co-habitation’, meaning that Macron might have to choose a probable centre-right Prime Minister supported by the reformist part of the Socialist Party.
  • A newly elected President Macron would likely be able to carry out some of his reforms, but political fragmentation could be an issue – We suspect that the strict deficit targeting approach championed by Macron would be implemented, and that the government would be able to push on relatively quickly with its reform of the public sector, albeit not on the scale favoured by the Right. Co-habitation would probably take some getting used to and lead to increased uncertainty in the first few months of governing. This might dampen business confidence somewhat.
  • Economic baseline to be marginally adjusted – Based on the issues discussed above, we might be tempted to shave a couple of decimal points off our 2017-18 real GDP growth trajectory in the next forecast round (currently 1.4% 2017F, 1.7% 2018F), but acknowledge that there are also some upside risks to our forecasts based on stronger surveys.
  • Relationship with Germany likely to be strengthened – A Macron presidency could mean potentially a strengthened relationship with Berlin, especially if Martin Schulz were to become the next German Chancellor in the Federal elections to be held in September.
  • The future of Europe now looks more stable given a likely mainstream win – This French presidential election has the potential to have far-reaching consequences for Europe. Given Macron’s pro-EU platform, the outlook for Europe ought to be strengthened, in our view. The Italian election (likely to be held in February 2018), is the next big political risk for Europe
  • Next steps: polls for the second round will restart on Monday, as will the campaign. The next and final televised debate will be held on Wed 3 May, co-organised by TF1 and France2.

 

end

Germany/Target 2 balances

Mish Shedlock our resident expert on the Target 2 balances explains what happens when outsiders sell their “club med” bonds. It is a double whammy as the sellers will take their Euros and place them in strong hands like Germany and Netherlands.  This causes a massive buildup in target 2 imbalances..with Germany, Netherlands and Austria with strong positive balances and the club boys with huge negative imbalances.  Shedlock explains that these in essence are secret bailouts and somebody down the road is going to have to pay:

(courtesy Mish Shedlock/Mishtalk)

Target2 & Secret Bailouts: Will Germany Be Forced Into Fiscal Union With Rest Of Eurozone?

Authored by Mike Shedlock via MishTalk.com,

Project Syndicate writer, Hans-Werner Sinn, explains why the ECB’s asset purchases and Target2 imbalances constitute “Europe’s Secret Bailout”.

Under the ECB’s QE program, which started in March 2015, eurozone members’ central banks buy private market securities for €1.74 trillion ($1.84 trillion), with more than €1.4 trillion to be used to purchase their own countries’ government debt.

 

The QE program seems to be symmetrical because each central bank repurchases its own government debt in proportion to the size of the country. But it does not have a symmetrical effect, because government debt from southern European countries, where the debt binges and current-account deficits of the past occurred, are mostly repurchased abroad.

 

For example, the Banco de España repurchases Spanish government bonds from all over the world, thereby deleveraging the country vis-à-vis private creditors. To this end, it asks other eurozone members’ central banks, particularly the German Bundesbank and, in some cases, the Dutch central bank, to credit the payment orders to the German and Dutch bond sellers. Frequently, if the sellers of Spanish government bonds are outside the eurozone, it will ask the ECB to credit the payment orders.

 

In the latter case, this often results in triangular transactions, with the sellers transferring the money to Germany or the Netherlands to invest it in fixed-interest securities, companies, or company shares. Thus, the German Bundesbank and the Dutch central bank must credit not only the direct payment orders from Spain but also the indirect orders resulting from the Banca de España’s repurchases in third countries.

 

The payment order credits granted by the Bundesbank and the Dutch central bank are recorded as Target claims against the euro system.

 

For the GIPS countries [Greece, Italy, Portugal, and Spain], these transactions are a splendid deal. They can exchange interest-bearing government debt with fixed maturities held by private investors for the (currently) non-interest-bearing and never-payable Target book debt of their central banks – institutions that the Maastricht Treaty defines as limited liability companies because member states do not have to recapitalize them when they are over-indebted.

 

If a crash occurs and those countries leave the euro, their national central banks are likely to go bankrupt because much of their debt is denominated in euro, whereas their claims against the respective states and the banks will be converted to the new depreciating currency. The Target claims of the remaining euro system will then vanish into thin air, and the Bundesbank and the Dutch central bank will only be able to hope that other surviving central banks participate in their losses. At that time, German and Dutch asset sellers who now hold central bank money will notice that their stocks are claims against their central banks that are no longer covered.

 

One should not assume that anyone is actively striving for a crash. But, in view of the negotiations – set to begin in 2018 – on a European fiscal union (implying systematic transfers from the EU’s north to its south), it wouldn’t hurt if Germany and the Netherlands knew what would happen if they did not sign a possible treaty. As it stands, they will presumably agree to a fiscal union, if only because it will enable them to hide the expected write-off losses in a European transfer union, rather than disclosing those losses now.

Target2 Answer

I had been struggling to understand the precise relationship between Target2 liabilities, including those within the ECB itself, and the ECB’s QE program. The above explanation appears to provide the answer.

Regardless, euro-denominated debts that cannot possibly be paid back keep piling up.

Target2 Liabilities

If Greece were to leave the Eurozone and pay back its debts in Drachmas, either the ECB would have to print €71.0 billion to cover the default, or the other eurozone nations would have to split the bill based on their percentage weight in the EMU.

If Italy left the eurozone, the shared liability would be €386.1 billion.

Responsibility Percentages

That table refers to ESM commitments. Percentage responsibilities apply should there be a default.

What If?

If Italy were to default, its 17.9% would have to be redistributed proportionally to the other countries or the ECB would have to violate its treaty and print the euros.

My conclusion is not the same as  Hans-Werner Sinn who concludes As it stands, they [Germany and the Netherlands] will presumably agree to a fiscal union, if only because it will enable them to hide the expected write-off losses in a European transfer union, rather than disclosing those losses now.”

I strongly suspect the ECB would violate the treaty agreements and print euros to cover a default. Germany and the Netherlands would go along.

end

 

Spain/banking system

Spain is now witnessing major problems with its banks.  Popular is in trouble as it needs 4 billion euros to shore up its balance sheet even though market cap is 2.7 billion euros.TURKEY ALSO HAS BANK PROBLEMS WITH MAJORITY SPANISH OWNER BBVA FORCED TO LOWER RATES AND NOW MARGINS ARE KILLING THEM. Spain’s largest bank is having trouble with their largest market Mexico if Trump orchestrates its border tax.

(courtesy Don Quijones)_

 

Just How Safe is Spain’s Banking System?

Investment bank Mediobanca warns of “clear risk of contagion.”

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

“The Cover of La la Land with a Potential Horror Story” is the title of a report about Spanish banks, authored by analysts at Italian investment bank Mediobanca. The shares of many Spanish banks have surged in recent months, some as much as 50%, hence La La Land. “Banco Popular [the teetering bank we’ve written so much about] seems to be the only exception to a truly happy world, but the current situation could take a nosedive with clear risk of contagion for the rest of the sector.”

Spain’s sixth biggest bank, Banco Popular, remains on the verge of either collapsing or being gobbled up by a bigger bank before it collapses. The bank lost over 60% of its market cap last year and it’s already 30% down so far this year. Popular has become a favorite target of short-selling hedge funds. Moody’s has just downgraded its senior debt two notches to B1 (junk), with negative outlook due to the bank’s “weak solvency levels” and worsening capital position.

For Popular to remain a going concern beyond 2017, it must pull off another capital expansion, this time of around €4 billion. That’s a big ask for a bank with a market cap of just €2.9 billion, and that has already burnt through the lion’s share of the €5.4 billion it raised in its three previous rights issues. Popular’s long-term investors are smarting. Some are even threatening to sue Popular for intentionally misleading them in last year’s rights sale.

It’s not just investors who are unhappy. So, too, are the bank’s depositors, many of whom are voting with their feet by moving their money elsewhere. Last year the bank lost 6.5% of its deposit base. According to a report by the financial daily El Confidencial, the deposit outflow is swelling from a trickle into a deluge.

The bank is responding by doing the only thing it can: make its deposits more attractive than everyone else’s. A fix that’s virtually guaranteed to backfire. Popular’s deposit rates now range between 0.75% and 4%. It may be enough to hold on to just enough of its deposit base for a little while longer, but with the eurobor sticking steadfastly to 0%, offering such enticing rates will obliterate Popular’s wafer-thin margins.

The more the situation at Popular worsens, the more likely it is to affect other banks in the sector. As Mediobanca points out, “23% of Spain’s banks are lining up for an IPO or rights issue.” If a bank the size of Popular begins to collapse in a disorderly fashion, it’s likely to drag down valuations for potential newcomers such as Unicaja. Some might even postpone their public launch indefinitely.

 

Erdogan’s Big Squeeze

Small banks are not the only ones with big problems. Spain’s second largest bank, BBVA, racked up gross operating losses of €608 million in the domestic market last year. This is the same bank whose chairman, Francisco González, warned last year that the ECB’s negative interest rate policy is “killing us.”

The bank has carved out a sizable presence in more lucrative albeit high-risk markets, such as Turkey, where it owns a majority stake in one of the country’s largest banks, Garanti. In 2016 BBVA’s Turkish operations produced gross operating profits of €1.76 billion — just over a quarter of the group’s total global profits of €6.39 billion.

Such fortunes may not last. The Turkish Lira is among the most volatile currencies this year and margins are getting squeezed across Turkey’s mortgage market. In August last year, President Recep Tayyip Erdogan called on private banks to slash their rates. The banks, including Garanti, obliged. Since then, their borrowing costs have risen sharply, a move they’re not passing on to home buyers.

Some banks are even taking direct losses on their real estate lending. It’s a problem that’s likely to get worse, not better, as Erdogan strengthens his hold over Turskish institutions.

Betting the Bank on Emerging Markets

It’s not just Turkey that BBVA needs to worry about. The bank’s most profitable national market, by a long shot, is Mexico, which last year contributed €2.67 billion (just under 45%) to the group’s global profits. Like Turkey, Mexico is a fertile land of opportunity for those who can stomach the risks. But things could turn sour at any moment, especially with public debt spiraling out of control and relations with its biggest trading partner, the U.S., balanced on a knife edge.

According to a new report by JP Morgan Chase, if Trump pushes on with plans to impose a border adjustment tax of 20% on imports coming into the US, it could end up shaving as much as 2.7% off Mexico’s annual GDP.

Mexico and Turkey accounted for over two-thirds of BBVA’s global operating profits in 2016. Emerging markets as a whole (with Peru, Colombia, Chile, and Argentina also at the fore) represented just over 90% of the group’s pretax profits last year. That’s a hell of lot of risk exposure for one bank to have, especially given recent warnings about the scale of emerging market debt.

Spain’s biggest bank, Santander, is officially too big to fail, and it’s embarking on the mother of all debt binges. In the coming months, it faces headaches in two of its biggest markets: the potential complications posed by Brexit to its UK operations, and the exposure of its subsidiary, Santander Consumer USA, to the now deflating US subprime auto bubble, though neither headache is big enough to topple the bank.

Investors remain remarkably sanguine about the risks posed both to and by Spain’s banking sector, presumably on the assumptions that Spanish banks were already bailed out and cleaned up once and, if that wasn’t enough, that the ECB has their back. By Don Quijones.

From the Doom Loop to the Black Hole. Read…  Three More Reasons to Worry about the Euro’s Future

end

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

USA sanctions 271 Syrians for their “sarin” attack on civilians.  The USA will freeze probably non existent assets of theirs.

(courtesy zerohedge)_

US Sanctions 271 Syrians, Freezes Their US Assets

 

Two weeks after launching missile strikes on Syria, the U.S. Treasury announced it has sanctioned 271 employees of Syria’s Scientific Studies and Research Center in response to the alleged sarin attack conducted by the Assad regime on Kahn Sheikhoun. It’s one of the largest sanction actions in U.S. history.

The action was announced in a statement by the Treasury Department, and Treasury Security Steve Mnuchin simultaneously briefed reporters at the White House.

The action – which takes place in lieu of a probe demanded by Russia and Syria to determine if Assad was indeed responsible for the recent sarin attack – freezes the individuals’ U.S. assets – which we doubt exist – and generally prohibits U.S. persons from dealing with them

WATCH: At WH briefing, Treasury Sec. Steven Mnuchin announces new sanctions to be imposed on 271 people in Syria http://cbsn.ws/1UJwwDb 

The sanctioned employees “have expertise in chemistry and related disciplines and/or have worked in support of SSRC’s chemical weapons program since at least 2012” said Treasury Secretary Steven Mnuchin, and added that “These sweeping sanctions target the scientific support center for Syrian dictator Bashar al-Assad’s horrific chemical weapons attack on innocent civilian men, women, and children.”

On the surface, the move seeks impact by targeting officials with expertise needed for developing these weapons and those who may seek to travel and use financial system outside of Syria, according to administration official quoted by Bloomberg.

The new sanctions are the latest U.S. response to Assad’s alleged use of chemical weapons, most recently in rebel-held northern Idlib, in an attack that killed more than 80 civilians. The U.S. retaliated earlier this month by launching missiles against a Syrian airfield.

* * *

Full statement from the Treasury below

Treasury Sanctions 271 Syrian Scientific Studies and Research Center Staff in Response to Sarin Attack on Khan Sheikhoun

Action Targets Syrian Government Agency Responsible for Developing Chemical Weapons and the Means to Deliver Them

Washington – Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is taking action in response to the April 4, 2017 sarin attack on innocent civilians in Khan Sheikhoun, Syria, by the regime of Syrian dictator Bashar al-Assad.  In one of the largest sanctions actions in its history, OFAC is designating 271 employees of Syria’s Scientific Studies and Research Center (SSRC), the Syrian government agency responsible for developing and producing non-conventional weapons and the means to deliver them.  These 271 SSRC employees have expertise in chemistry and related disciplines and/or have worked in support of SSRC’s chemical weapons program since at least 2012.

“These sweeping sanctions target the scientific support center for Syrian dictator Bashar al-Assad’s horrific chemical weapons attack on innocent civilian men, women, and children.  The United States is sending a strong message with this action that we will hold the entire Assad regime accountable for these blatant human rights violations in order to deter the spread of these types of barbaric chemical weapons,” said Treasury Secretary Steven T. Mnuchin.  “We take Syria’s disregard for innocent human life very seriously, and will relentlessly pursue and shut down the financial networks of all individuals involved with the production of chemical weapons used to commit these atrocities.”

Today’s action follows OFAC and the Department of State’s sanctions announced on January 12, 2017 against 18 senior regime officials and five branches of the Syrian military, along with entities associated with its chemical weapons program, in response to findings by the Organization for the Prohibition of Chemical Weapons – United Nations Joint Investigative Mechanism, that the Syrian regime was responsible for three chlorine gas attacks in 2014 and 2015.

Today’s designation, less than three weeks after the attack on Khan Sheikhoun, more than doubles in a single action the number of individuals and entities sanctioned by the United States pursuant to Syria-related Executive Orders (E.O.s).  These sanctions are intended to hold the Assad regime and those who support it – directly or indirectly – accountable for the regime’s blatant violations of the Chemical Weapons Convention and UN Security Council Resolution 2118.

Today’s action was taken pursuant to E.O. 13582, which targets the Government of Syria and its supporters.  The named individuals are designated for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services in support of, and having acted or purported to act for or on behalf of, directly or indirectly, the Government of Syria.  As a result of today’s action, any property or interest in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked, and U.S. persons are generally prohibited from dealing with them.

For identifying information on the individuals designated today, click here:

https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20170424.aspx

end

6 .GLOBAL ISSUES

As many of you know,  I like to use the Baltic Dry Index as an indicator for global growth.  It is simply a measure to ship dry goods  (not oil) by boat. On Friday it collapsed by 4% with the biggest loss since mid December.  Activity of the high seas is faltering badly

(courtesy Reuters)  and special thanks to Robert H for sending this to me

 

Baltic Dry Index Falls Almost 4%, Biggest Loss Since Mid-December

dry cargo ship
Photo: Norden AS

ReutersApril 21 (Reuters) – The Baltic Exchange’s main sea freight index marked its biggest percentage decline since mid-December on Friday as rates for larger vessels dipped due to limited activity.

The Baltic index, which tracks rates for ships carrying dry bulk commodities, was down 3.86 percent.

The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, was down 48 points at 1,195, its weakest since March 22.

“Capesize and panamax vessels remain under pressure to close the week as both the Pacific and Atlantic markets remain rather quiet,” Clarksons Platou Securities analysts said in a note.

The capesize index lost 161 points, or 8.09 percent, to their lowest since March 10, at 1,830 points.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $1,291 to $13,369, also the lowest since March 10.

The panamax index was down 59 points, or 3.8 percent, at 1,494 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $466 to $11,982.

Among smaller vessels, the supramax index was down 4 points at 895 points, while the handysize index rose three points to 575 points. (Reporting by Swati Verma in Bengaluru; Editing by Shounak Dasgupta)

(c) Copyright Thomson Reuters 2017.

end

Finally the streak is over with caterpillar posting its first positive retail sales in over 4 years.  The reason:  a huge 46% surge in total machine sales to China; that is unsustainable!

 

(courtesy zerohedge)

The Streak Is Over: Caterpillar Posts First Positive Retail Sales After 51 Months Of Declines

After 51 consecutive months, the dead CAT spell is finally over.

On Monday, traditionally just ahead of earnings, Caterpillar reported that in March its world retail sales rose 1% Y/Y, the first increase since November 2012. The reason: Asia/Pacific, also known as China, which saw a 46% surge in total machine sales, up from 39% last month, and the best Asian performance going all the way back to April 2011. Aside from China, however, the drought remained as every other region posted a decline in annual sales, led by Latin America (down 25%), North America (down 13%) and EAME (down 3%).

Looking at a breakdown of what kinds of machines drove the global rebound, it was all construction related machinery, which rose 7%, once again entirely due to China, where sales soared by 56% as all other geographic regions posted negative sales. Elsewhere, the contraction among resource industries continued, with world sales down 19%, and even China declining by 1%. The only region higher, perhaps predictably, was EAME where sales of resource machines rose 23% in March.

Finally, looking at the type of Energy and Transportation machines sold, Power Gen, Industrial and Transportation all declined( -7%, -6% and -3%, respectively), while Oil and Gas rose by 15% in March.

Putting it all together, the following chart of CAT global retail sales.

As a reminder, the last cycle peaked in early 2011, just as the latest Chinese credit impulse peaked and rolled over, something it has also done in recent weeks. As such, CAT retail sales may be the best concurrent, or slighly lagging, indicator of the Chinese reflation trade, which as UBS explained recently is the fundamental driver behind the global reflation impulse.

end

7. OIL ISSUES

8. EMERGING MARKETS

Venezuela’s currency is now hyperinflating as their economy is in total ruins

(courtesy zero hedge)

Venezuela On The Verge Of Revolution As Hyperinflated Currency Crashes To New Record Low

Venezuela, a country with only $10 billion left in reserves to run on, is in trouble. As the currency hyperinflates to new record lows against the dollar…

 

James Holbrooks points out that the people are starving. The government has gone full-on authoritarian, and now desperate human beings are dying in the streets. From an Associated Pressreport on Friday:

“Authorities in Venezuela say 12 people were killed overnight following looting and violence in the South American nation’s capital amid a spiraling political crisis.”

Continuing, the report further highlighted the gravity of the situation:

“Most of the deaths took place in El Valle, where opposition leaders say 13 people were hit with an electrical current while trying to loot a bakery protected by an electric fence.”

These are people without options, forced to turn to thievery to stay alive. And they died because of it.

On April 6, The Economistreported that over the past year, 74 percent of Venezuelans lost an average of 20 pounds. Venezuela, incidentally, has toppedBloomberg’s Economic Misery Index for the past three years.

The country began its slide downward into chaos with the election of President Nicolas Maduro, who immediately began implementing socialist programs and has since taken extreme measures to secure his position.

At the end of March, for instance, Maduro effectively shut down Venezuela’s congress — his primary political opposition — and gave those legislative duties to his puppet Supreme Court.

The latest news coming out of the South American nation — aside from the deaths of people trying to steal bread to live — is that General Motors, whose Venezuelan production facility was overtaken by local authorities, has now ceased all operations in the country.

To put that in perspective, consider that in 2016, only 3,000 vehicles were sold in Venezuela, a country of 30 million people.

The U.S. Southern Command has floated the idea of using the United States’ military to contain unrest in Venezuela, though historically American intervention in South America is both widely unpopular in the region and wildly unsuccessful.

As we look on at the continuing horrors in the Middle East and what seems, at the moment, to be the makings of World War III in Asia, let’s not lose sight of the fact that right now, the people of Venezuela are in pain.

 

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

Euro/USA   1.0853 UP .0136/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP HEALTH CARE DEFEAT//ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/ /USA RAISING INTEREST RATES/EUROPE BOURSES IN THE GREEN

USA/JAPAN YEN 110.23 UP 1.357(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA:  HELICOPTER MONEY  ON THE TABLE AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST

GBP/USA 1.2817 UP .0015 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

USA/CAN 1.3428 DOWN .0052 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU)

Early THIS MONDAY morning in Europe, the Euro ROSE by 136 basis points, trading now ABOVE the important 1.08 level  RISING to 1.0853; Europe is still reacting to Gr Britain HARD BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and now the Italian referendum defeat AND NOW THE ECB TAPERING OF ITS PURCHASES/ THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE AND NOW THE HUGE PROBLEMS FACING TOO BIG TO FAIL DEUTSCHE BANK + THE ELECTION OF TRUMP IN THE USA+ TRUMP HEALTH CARE BILL DEFEAT AND MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED DOWN 43.62  POINTS OR 1.37%    / Hang Sang  CLOSED UP 97.46 POINTS OR 0.41%/AUSTRALIA  CLOSED UP .26% / EUROPEAN BOURSES IN THE GREEN 

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

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

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

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

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

The NIKKEI: this MONDAY morning CLOSED UP 255.13 POINTS OR 1.37%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 97.46 OR 0.51%  / SHANGHAI CLOSED DOWN 97.46 POINTS OR 0.41%/Australia BOURSE CLOSED UP .26% /Nikkei (Japan)CLOSED UP 255.13OR 1.37%  / INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: $1271.00

silver:$17.81

Early MONDAY morning USA 10 year bond yield: 2.305% !!! UP 6 IN POINTS from FRIDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.948, UP 4  IN BASIS POINTS  from FRIDAY night.

USA dollar index early MONDAY morning: 99.06 DOWN 91  CENT(S) from FRIDAY’s close.

This ends early morning numbers MONDAY MORNING

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And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield: 3.558%  DOWN 19  in basis point(s) yield from FRIDAY 

JAPANESE BOND YIELD: +.022%  UP 3/5   in   basis point yield from FRIDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.605%  DOWN 9  IN basis point yield from FRIDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.181 DOWN 8   POINTS  in basis point yield from FRIDAY 

the Italian 10 yr bond yield is trading 57 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.329% UP 7 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR MONDAY

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

Euro/USA 1.0852 UP .0135 (Euro UP 135 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 109.74 UP: 0.921 (Yen DOWN 92 basis points/ 

Great Britain/USA 1.2783 DOWN 0.0020( POUND DOWN 20 basis points)

USA/Canada 1.3519 UP 0.0039(Canadian dollar DOWN 39 basis points AS OIL FELL TO $49.30

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 135 basis points to trade at 1.0852

The Yen FELL to 109.74 for a  LOSS of 92 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND FELL BY 20  basis points, trading at 1.2783/

The Canadian dollar FELL by 39 basis points to 1.3519,  WITH WTI OIL FALLING TO :  $49.20

The USA/Yuan closed at 6.8847/
the 10 yr Japanese bond yield closed at +.022% UP 3/5 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 6 IN basis points from FRIDAY at 2.271% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.918 UP 5  in basis points on the day /

Your closing USA dollar index, 99,16 DOWN 82  CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED UP 150.13 POINTS OR 2.11% 
German Dax :CLOSED UP 406,41 POINTS OR .37% 
Paris Cac  CLOSED UP 209.65 POINTS OR 4.14%
Spain IBEX CLOSED UP 389.80 POINTS OR 3.76%
Italian MIB: CLOSED UP 942.66 POINTS OR 4.47%

The Dow closed UP 216.13 OR 1.05%

NASDAQ WAS closed UP 73.30 POINTS OR 1.24%  4.00 PM EST
WTI Oil price;  49.20 at 1:00 pm; 

Brent Oil: 51.63 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  55.85 UP 81/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD RISES TO +0.329%  FOR THE 10 YR BOND  4.PM EST EST

END

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

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

WTI CRUDE OIL PRICE 4:30 PM:$49.21

BRENT: $51.52

USA 10 YR BOND YIELD: 2.273%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.926%

EURO/USA DOLLAR CROSS:  1.0866 UP .0149

USA/JAPANESE YEN:109.76  up 0.888

USA DOLLAR INDEX: 99.04  down 94  cents ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2791 : down .0011  OR 11 BASIS POINTS.

Canadian dollar: 1.3502  UP .0023 (CAN DOLLAR DOWN 23 BASIS PTS)

German 10 yr bond yield at 5 pm: +.329%

END

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

TRADING IN GRAPH FORM FOR THE DAY

Le Pen ‘Loss’ Sparks VIX-Driven Stock-Buying-Panic But Bond Yields, Crude, & Dollar Drop

The next two weeks in France…

 

According to the bookies, it’s a done deal…

Stocks Up, Oil Down

So stocks soared… Trannies best on the day but Nasdaq hit a new record high, desperately trying to tag 6,000…

 

and legged higher in the last hour as machines misintepreted Le Pen stepping down as head of the National Front as some bullish factor for markets (that was the big volume spike) which hit about 15 mins after WSJ reported Trump chatter of a 15% tax rate…

 

With VIX slammed back to a 10 handle…But that did nothing for the S&P…

 

And VIX crashed most since Aug 2011 (more than Trump’s election) – think about that – Anti-establishment Trump wins, VIX collapse; Establishment-ist Macron wins, VIX collapse

 

But it seems all the action was pre-market as stocks flatlined from the initial cash print…

 

Thanks to a yuuge short squeeze…

 

NOTE – the last few times the S&P has gapped up on a huge VIX collapse has not ended well…

 

So stocks surge on hedge unwinds BUT bonds are bid, yield curve flattens, the dollar drops, and crude tumbles as the reflation trade is entirely missing

 

Oh and The Dollar tumbled despite a surge in rate hike odds…

 

So, bond yields rolled over all day and the yield curve flattened… but bank stocks were bid!?

The kneejerk move was EUR bid and JPY offered but all day long that reversed – the dollar index remained lower on the day…

 

Still EURJPY remained positive on the day

 

USDJPY ended at the LoD…

 

For the 7th day in a row, spot gold was hit right before the London Fix…

 

But while Gold closed red, it staged two solid bounces intraday…

 

Crude was clobbered again – having erased 75% of the bounce… (chatter of some big liquidations overnight)

 

*  *  *

So stocks love a Le Pen loss…BUT…There’s just a couple of problems…

Macro data is collapsing…

 

Earnings expectations are falling

 

And debt ceiling concerns are growing…

 

 

Trading last night: after the French first voting run off:

(courtesy zerohedge)

Dow Jumps 200 Points, Gold Drops As Futures Open After French Vote

A Macron ‘win’ in the first round of the French elections has (judging by the initial reactions) allayed many fears of imminent doom. Dow futures are up around 200 points, Bond futures are down, gold is down (despite USD weakness) but is pulling back off the lows…

Stocks back at 3-week highs as gold sinks…

 

EURUSD is clinging to 1.09 as Treasury prices drop…

end

 

At least one trader is surprised at today’s market euphoria when the result was everybody’s base case:

(courtesy zero hedge)

One Trader Is Surprised At Market Euphoria From A “Result That Was Everybody’s Base Case”

The risk of a Eurozone breakdown now appears to be taken off the table after a French election that has led to a dramatic repricing in European risk assets. And yet the outcome – which was largely expected – has prompted Bloomberg’s Richard Bresow to muse just how much was truly priced in:

“I guess it shouldn’t come as a huge surprise. It truly unnerved the commentariat that the unpredictable seemed to be unpredictable. The second vote is apparently now knowable with certainty. Europe is saved. Populism is about to be vanquished. A strong euro is a good thing for the economy. And ECB President Draghi can begin normalizing rates. Presto chango. Not bad for a result that was everybody’s base case.”

And yet, as Breslow adds, the wholesale reaction leaves something to be desired:

Gold is interesting. I’d have expected it to leak more than it did. It may require Treasury yields to push higher. As we speak, they left a nasty gap and sit right where the bulls were hoping they wouldn’t have to see anytime soon. This may be the most interesting asset of all.

 

Equities are happy. Think of all that hard-earned wealth creation. And they get to ignore the Shanghai meltdown and potential U.S. government shutdown. Make tax cuts, not war. Another one-half percent higher in the E-mini and dreams of new all-time highs will be dancing in traders’ heads.

For now, however, it is “springtime in Paris”, and all other concerns can be put on the backburner, if only for the next few days.

The full note from Richard Breslow, a former FX trader and fund manager who writes for Bloomberg

* * *

It’s Morning Time for Springtime in Paris

 

And they get to ignore the Shanghai meltdown and potential U.S. government shutdown. Make tax cuts, not war. Another one-half percent higher in the E-mini and dreams of new all-time highs will be dancing in traders’ heads.

 

It’s Morning Time for Springtime in Paris

 

The pollsters won the first round of the French presidential election. In other news, Emmanuel Macron and Marine Le Pen have advanced to the next phase. There were times last night when there seemed to be as much relief from the forecasts being accurate as the diminished likelihood that one of the extremists will win the ultimate prize. Despite the far-right representative coming second and ahead of either of the main party candidates.

 

I guess it shouldn’t come as a huge surprise. It truly unnerved the commentariat that the unpredictable seemed to be unpredictable. The second vote is apparently now knowable with certainty. Europe is saved. Populism is about to be vanquished. A strong euro is a good thing for the economy. And ECB President Draghi can begin normalizing rates. Presto chango. Not bad for a result that was everybody’s base case.

 

Some of the other big winners include SNB President Thomas Jordan as EUR/CHF made a new high on the year. This is a good one to keep an eye on as 1.0850, where it peaked, is where heavy technical resistance begins. If the “everything is right with the world” meme is to hold, the cross needs to show it. Game theory would suggest it wouldn’t be a bad time for him to give it a little nudge.

 

The BOJ has to be feeling a bit better. And will feel a whole lot more sanguine if EUR/JPY can stick above the really pivotal 120 level. It was just last Monday that 115 was under threat. The U.S. can’t really fault the Japanese for this yen weakness, as they will be referred to the French ministry.

 

Gold is interesting. I’d have expected it to leak more than it did. It may require Treasury yields to push higher. As we speak, they left a nasty gap and sit right where the bulls were hoping they wouldn’t have to see anytime soon. This may be the most interesting asset of all.

 

Equities are happy. Think of all that hard-earned wealth creation. And they get to ignore the Shanghai meltdown and potential U.S. government shutdown. Make tax cuts, not war. Another one-half percent higher in the E-mini and dreams of new all-time highs will be dancing in traders’ heads.

 

Springtime in Paris can indeed be very enchanting.

 

 

end

 

If things are so good why are bond yields tumbling;

(courtesy zerohedge)

Don’t Look Now But Bond Yields Are Tumbling

If everything’s so awesome, why are Treasuries so bid?

Heavy demand for Treasuries this morning after two notable data disappointments

 

Banks are ripping higher (though some context below may help), even as bond yields roll over…

 

And despite the collapse in VIX, stocks are flat since the open…

end
Two big data disappointments today:
  1. Chicago National mfg Activity index
  2.  Dallas Fed

both disappoint

( zero hedge)

Double Data Disappointment Today Follows Worst Macro Week In 6 Years

Following the worst week for US macro data in six years, The Chicago Fed (National Activity) and now The Dallas Fed (regional) have both disappointed and fallen this morning.

It was a rough week for ‘hope’ last week…

 

And this week has not started well…

March Chicago Fed national activity index printed 0.08 versus an estimated 0.50 (range -0.1 to 0.75) and February was revised lower to 0.27 from 0.34. Furthermore, 48 of the 85 monthly individual indicators made positive contributions, while 37 indicators deteriorated.

 

And then Dallas Fed disappointed, printing 16.8 against expectations of 17.0…

 

But it’s the respondents comments that shed light on the ugly reality under the surface…

  • The global economies and the U.S. economy are very weak and uncertain
  • I keep reading and hearing that things are swinging in a favorable direction. I don’t see it yet. Steel consumption is still soft.
  • We have never seen our construction industry in North Texas busier than it is right now, going back nearly 50 years
  • We continue to be optimistic about the future; however, it still seems to be a slow thaw to the winter doldrums. We are busier in April than March, and hopefully this trend continues.
  • We are still looking for some tax relief to expand faster and hire more people faster. In this labor market it is getting hard to find quality candidates, and salaries are increasing. The labor regulations and rules are starting to be less burdensome for the first time in a long time, improving the hiring outlook and allowing us to pay people more. The business sector is still suffering from too much bureaucracy and governmental red tape. We are becoming more concerned about future trade interruptions due to international conflicts. We are hoping for improved trade conditions, lower barriers, reduced tariffs and improved ease of commerce between countries.
  • Oil and gas has little or no impact in our business. The one exception is that fewer workers are needed, as some roles have been replaced by more advanced equipment. Fewer workers means fewer families can afford craft and art supplies for themselves and their children. As we are in the art and craft business, this is not a cheery outlook.

It is clear that ‘soft’ data is reverting fast… now down to 2-month lows.

 

 

 

end

 

 

 

 

 

Sunday/Monday morning

Should be a fun week:  trump wants money for the Mexican border wall.  The Democrats needs money for Obamacare payments (7 billion USA).  Trump has offered to include Obamacare money in the continuing resolution if the Democrats allow money for the Wall and so far they are refusing; if no settlement by this Saturday then the Government shuts down.

(courtesy zerohedge)

Border Wall Showdown: Team Trump Threatens Government Shut Down Over ‘Beautiful’ Wall

President Trump and Congress have until this Saturday to strike a budget deal or face a government shut down.  Not surprisingly, Trump decided to kick off what will undoubtedly be a week of tense negotiations with some opening shots across the bow via Twitter:

ObamaCare is in serious trouble. The Dems need big money to keep it going – otherwise it dies far sooner than anyone would have thought.

The Democrats don’t want money from budget going to border wall despite the fact that it will stop drugs and very bad MS 13 gang members.

Eventually, but at a later date so we can get started early, Mexico will be paying, in some form, for the badly needed border wall.

The two fake news polls released yesterday, ABC & NBC, while containing some very positive info, were totally wrong in General E. Watch!

The Wall is a very important tool in stopping drugs from pouring into our country and poisoning our youth (and many others)!

 

Throughout his campaign Trump touted several policies which would require massive increases in government spending including his infrastructure plan, new military funding and the border wall.  That said, at least in this round of Congressional bickering, it looks like the border wall will be key issue which could leave 1,000s of federal government employees with a little extra paid vacation time in 2017.

As negotiations continue, the White House says it has offered to include $7 billion in Obamacare subsidies that allow low-income people to pay for health insurance in exchange for Democratic backing for $1.5 billion in funding to start construction of the U.S.-Mexico border wall. Congressional negotiators have also offered to cut back Trump’s proposed $30 billion increase in defense spending.

“The question is, how much of our stuff do we have to get? How much of their stuff are they willing to take?” budget director Mick Mulvaney said on Bloomberg Television. “We’d offer them one dollar” of Obamacare payments, he added, “for one dollar of wall payments right now.”

 

Democrats called Mulvaney’s Obamacare offer a non-starter, saying they refuse to include any funds for a wall in the spending bill that would finance the government through September, the end of the fiscal year.

While Republicans control Congress, any budget deal will have to be passed on a bipartisan basis as members of the Freedom Caucus typically refuse to support unbalanced budgets in the House and Senate approval will require 60 votes while Republicans hold only 52 seats.

It’s a rare moment when the Democrats have leverage in the Republican-controlled House, since it’s likely that Republican leaders would need at least some Democratic votes to offset Republican defections on the budget — as has been the case for a series of budget fights in recent years.

 

One thing is certain: any spending deal must be a bipartisan one. Even though Republicans control both houses of Congress and the White House, Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan know they’ll both need Democratic votes to pass a government funding measure.

 

The Senate needs 60 votes to advance legislation, meaning the 52 Republicans will need help from at least eight Democrats. In the House, conservatives led by the Freedom Caucus and other fiscal hawks have regularly bolted on spending bills and Democrats have provided enough votes for passage.

Not surprisingly, Chuck Schumer described Trump’s border wall is the only “fly in the ointment” to getting a budget deal done.

Senate Minority Leader Chuck Schumer’s spokesman, Matt House, complained that the White House in recent days brought a “heavy hand” into what he said were smooth-going talks between congressional Republicans and Democrats.

 

“If the administration would drop their 11th-hour demand for a wall that Democrats, and a good number of Republicans, oppose, congressional leaders could quickly reach a deal,” House said in a statement Friday.

 

“The only fly in the ointment is that the president is being a little heavy handed, and mixing in and asking for things such as the wall,” Schumer said.

Meanwhile, House Minority Leader Nancy Pelosi went on Chuck Todd’s “Meet the Press” over the weekend to start playing the “blame game” over who’s responsible for a government shut down that hasn’t yet occurred.

“The democrats do not support the wall.  And I think the Republicans in the border states do not support the wall.  The Republicans have the votes in the House and the Senate and the White House to keep government open. The burden to keep it open is on the Republicans.”

 

“The wall, in my view, is immoral, expensive and unwise….”

 

And here is Budget Director Mick Mulvaney speaking with Bloomberg:

 

Of course, the budget showdown comes just as Trump continues to pressure Congress to vote on a new healthcare deal this week and has promised to release his tax plan on Wednesday…both of which would be a poke in the eye of Democrats just as he’s trying to win their support on a budget deal.  Should be a fun week with lots of flip flops.

 

end

This ought to be good:  Trump is pushing with Goldman Sachs boys to cut the corporate tax rate to 15% and then added a huge 2 trillion in extra debt to its load

I am sure that this will pass with flying colours:

(courtesy zero hedge)

 

Trump To Order Corporate Tax Rate Cut To 15%, Load Up To $2 Trillion In Extra Debt

Ahead of Trump’s much anticipated tax announcement on Wednesday, the WSJ reports that the president has ordered his (mostly ex-Goldman) White House aides to accelerate efforts to create a tax plan “slashing the corporate rate to 15% and prioritizing cuts in tax rates over an attempt to not increase the deficit” which means that without an offsetting source of revenue, Trump is about to unleash the debt spigots, a proposal which will face fierce pushback from conservatives as it is nothing more than a continuation of the status quo under the Obama administration, and may well be DOA.

The WSJ adds that during an Oval Office meeting last week, “Trump told staff he wants a massive tax cut to sell to the American people” and that it was “less important to him if the plan loses revenue.”

Hoping to add a sense of dramatic urgency – after all his 100 day deadline hits on Saturday – Trump told his team to “get it done,” in time to release a plan by Wednesday.

Translation: Trump’s massive tax cut will be funded by debt, and as a result, will be at best temporary as it will be in breach of the revenue constraints in the reconciliation process; at worst it will never happen as it will now require Democrat votes.

Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn are scheduled to meet Tuesday to discuss Mr. Trump’s tax proposals with Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan, Senate Finance Chairman Orrin Hatch and House Ways and Means Chairman Kevin Brady of Texas. The meeting comes in advance of a Wednesday announcement by Mr. Trump about his principles for tax policy.

While Trump promised to cut corporate rates to 15% from 35%, with the BAT now out of the picture, there aren’t enough business tax breaks that could be repealed to offset the fiscal cost, meaning such a move would increase budget deficits, the WSJ notes. Roughly, each percentage-point cut in the tax rate lowers federal revenue by $100 billion over a decade, so a 20-point cut would cost the government $2 trillion, according to the congressional Joint Committee on Taxation.

And, as we noted above, the fact that Trump has flip-flopped on revenue offsets may have also doomed Trump’s tax plan: as the WSJ points out:

any plan that adds to budget deficits would be difficult to advance on Capitol Hill, for both procedural and partisan reasons. The president’s fellow Republicans, who control both the House and Senate, are aiming to pass a tax bill through a process known as reconciliation, which means they wouldn’t need votes from Democrats. However, bills passed under reconciliation can’t increase deficits beyond the typical 10-year time frame against which tax and spending policies are projected.”

In other words, that makes it “difficult if not impossible for Republicans to pass a deficit-financed tax cut that doesn’t expire without getting Democratic votes in the Senate. Democrats are against large tax cuts for corporations, especially at a time when Mr. Trump is proposing cuts to government spending programs they prioritize, like housing, arts and the environment.”

It also means that as Compass Point’s Isaac Boltansky wrote earlier today, Trump’s release of tax details on Wednesday will likely deliver only “a vague generalization” of his goals in coming tax reform effort; and, if the WSJ is correct in laying out Trump’s uber-ambitious plan, the generalizations will also be impossible to be implemented, effectively killing most if not all hope of tax reform for the foreseeable future as the bickering between Democrats and Republicans will be effectively insurmountable

 

 

END

 

A record number of stores  (8,640) is projected to close in 2017

(courtesy zero hedge)

“The Retail Bubble Has Now Burst”: A Record 8,640 Stores Are Closing In 2017

“Thousands of new doors opened and rents soared. This created a bubble, and like housing, that bubble has now burst.”

Richard Hayne, Urban Outfitters CEO, March 2017

The devastation in the US retail sector is accelerating in 2017, and in addition to the surging number of brick and mortar retail bankruptcies, it is perhaps nowhere more obvious than in the soaring number of store closures.

While the shuttering of retail stores has been a frequent topic on this website, most recently in the context of the next “big short”, namely the ongoing deterioration in the mall REITs and associated Commercial Mortgage-Backed Securities and CDS, here is a stunning fact from Credit Suisse:“Barely a quarter into 2017, year-to-date retail store closings have already surpassed those of 2008.”

According to the Swiss bank’s calculations, on a unit basis, approximately 2,880 store closings were announced YTD, more than twice as many closings as the 1,153 announced during the same period last year. Historically, roughly 60% of store closure announcements occur in the first five months of the year. By extrapolating the year-to-date announcements, CS estimates that there could be more than 8,640 store closings this year, which will be higher than the historical 2008 peak of approximately 6,200 store closings, which suggests that for brick-and-mortar stores stores the current transition period is far worse than the depth of the credit crisis depression.

As the WSJ calculates, at least 10 retailers, including Limited Stores, electronics chain hhgregg and sporting-goods chain Gander Mountain have filed for bankruptcy protection so far this year. That compares with nine retailers that declared bankruptcy, with at least $50 million liabilities, for all of 2016. On Friday, women’s apparel chain Bebe Stores said it would close its remaining 170 shops and sell only online, while teen retailer Rue21 Inc. announced plans to close about 400 of its 1,100 locations.

Broken down by retailer, either in bankruptcy or not yet:

Another striking fact: on a square footage basis, approximately 49 million square feet of retail space has closed YTD. Should this pace persist by the end of the year, total square footage reductions could reach 147M square feet, another all time high, and surpassing the historical peak of 115M in 2001.

There are several key drivers behind the avalanche of “liquidation” signs on store fronts.

The first is the glut of residual excess retail space. As the WSJ writes, the seeds of the industry’s current turmoil date back nearly three decades, when retailers, in the throes of a consumer-buying spree and flush with easy money, rushed to open new stores. The land grab wasn’t unlike the housing boom that was also under way at that time.

“Thousands of new doors opened and rents soared,” Richard Hayne, chief executive of Urban Outfitters Inc., told analysts last month. “This created a bubble, and like housing, that bubble has now burst.”

The excess retail space means that North America has a glut of retail outlets, as well as far too many shopping malls, something which is becoming apparent as sales per capita decline. On a per capita basis, the US has roughly 24 square feet of retail space per capita, more than twice the space of Australia and 5 times that of the UK.

 

The over-storing, including the influx of fast-fashion and off-price chains, has resulted in a brutally competitive landscape that made difficult for retailers to raise prices. “A pair of men’s dress pants costs less today than they did a decade ago,” Manny Chirico, chief executive of Calvin Klein and Tommy Hilfiger parent PVH Inc., said in a recent interview.

* * *

Then there are retail rental rates, which across top US markets, such as New York, remain the highest in the world. For years, retailers could afford the egregious demands by landlords. But as overall traffic and volumes have declined, this has also prompted an exodus of outlets even among the most desired locations, leading to a surge in “fors rent or lease” signs popping up in unexpected places like Madison Avenue’s “golden mile.”

 

According to the FT, on New York’s Fifth Avenue, the world’s most expensive shopping street, vacancy rates have jumped from 10 per cent a year ago to 16 per cent, according to Cushman & Wakefield. Rents there have fallen for the first time since the recession “and the trend is not over”, the consultancy warns. Vacancy rates across SoHo have climbed to 18 per cent, from 12 per cent a year ago, according to Jones Lang LaSalle.

The newfound caution among retailers has had a “very significant and fast” negative impact on retail property, says Chris Conlon, chief executive of Acadia Realty, a real estate investment trust.

 

It is not just prestigious streets that have been hit. Malls are also hurting, as chains from Sears to Macy’s shut hundreds of stores. Analysts at Green Street Advisors argue that “low growth is the new normal”, while market rents are becoming decoupled from tenants’ revenue growth as more sales move online.

“[Rents] are at a price point now that exceeds what retail sales can perform,” says Spencer Levy, global head of research for CBRE. He notes that a stronger US dollar also hurts sales in New York, where deep-pocketed foreigners historically flock for deals.

* * *

Then there is the online migration, which recently made Jeff Bezos, owner of Amazon, the world’s second richest man.

As the WSJ adds, as retailers rushed to expand their physical footprint, the internet was gearing up to do to apparel companies what it had already done to booksellers: sap profits and eliminate what little pricing power these chains commanded.

Despite the view that shoppers prefer to try on clothing in physical stores, apparel and accessories are expected this year to overtake computers and consumer electronics as the largest e-commerce category as a percentage of total online sales, according to research firm eMarketer.

 

Helena Cawley, 37 years old, said she used to be a “die-hard” department-store shopper. But with two small children, the Manhattan entrepreneur doesn’t have time to visit physical stores the way she once did. “I buy much more online now,” she said. “With free returns and free shipping, it’s so easy.”

Ironically, that shift to online shopping has come at a high cost to retailers. It is less profitable to do business online than in a brick-and-mortar store, largely due to the higher shipping, customer-acquisition and technology costs of the digital world. Retail margins on average fell to 9% last year from 10.5% in 2012, according to consulting firm AlixPartners LP. Over that period, e-commerce sales increased to 15.5% of total sales from 10.5%. The internet has also made it easier for consumers to comparison shop, thereby erasing any pricing leverage retailers may have had. “The internet has acted as the great price equalizer,” said Joel Bines, the co-head of Alix’s retail practice.

* * *

Yet while the retail bubble may have burst, does that mean the conventional brick-and-mortar industry is doomed? Perhaps not:

Retailing has gone through shakeouts before, whether it was the superstores such as Wal-Mart Stores Inc., Target Corp. and Kmart that killed mom-and-pop shops, or category killers like Barnes & Noble Inc. and Toys “R” Us Inc. that did the same to smaller booksellers and toy chains. And even today, there are chains that continue to grow, such as off-price retailer TJX Co s., which is opening hundreds of stores under its Marshalls, T.J. Maxx and HomeGoods banners, as it steals market share from Macy’s Inc. and other traditional department stores.

 

“This is not the end of retailing as we know it,” Mr. Bines said. “People are not going to stop going to stores.”

He’s right, however in the meantime there will be an avalanche of defaults: compounding the retail decline is the debt that retailers have added to their balance sheets in recent years, either through leveraged buyouts or to fund share buybacks. That leverage has become a problem as profits dry up. According to Moody’s Investors Service, the amount of debt coming due for 19 distressed retailers is set to more than double over the next two years.

Many retailers were slow to seize on the significance of these changes. When business was bad during the 2015 holiday season, many chains blamed unusually warm weather. But when the most recent holiday season once again failed to produce robust sales growth, “retailers realized this was a structural change,” Credit Suisse analyst Christian Buss said.

With all that in mind, is Amazon assured of becoming the world’s first trillion-dollar stock, perhaps hitting the milestone even before Apple? Perhaps, then again, chains such as Wal-Mart have stepped up their game. In a bid to better compete with Amazon.com , the giant retailer has been scooping up e-commerce startups, including Jet.com and ModCloth. And just this past week, PetSmart Inc. bought Chewy.com, a fast-growing online rival.

Others have given up waiting for a recovery that seems always out of reach and are settling into what appears to be the new normal. “We’re planning as if the environment is not going to improve,” Jerry Storch, chief executive of Saks Fifth Avenue and Lord & Taylor parent Hudson’s Bay Co., told analysts earlier this month. In the meantime, expect more store closures, more bankruptcies (recall “According To Fitch These Eight Retailers Will File For Bankruptcy Next“), and, of course, far lower asset prices, both for retail equities and mall REITs, as well as the underlying CMBS securities that for years funded the US retail (and especially mall) bubble, which has now violently burst.

The French voting on Sunday which will probably hand the Presidency to Macron was enough to push the chances for a June fed hike to 69%

(courtesy zero hedge)

June Rate Hike Odds Soar To 69% As Debt Ceiling Looms

It appears the hope that a centrist candidate will win the French election is enough to trump tumbling macro-economic data, disappointing earnings, and flailing inflation in the US economy. June rate hike odds have spiked to 69% overnight (even as debt ceiling risks begin to price in… and the dollar drops)

So The Fed gets the all-clear from the market to hike in June…

 

Even as the Treasury Bill curve inverts over debt ceiling fears…

 

And the Dollar is not buying it at all…

Very popular Michael Snyder offers 11 facts to prove that the 2017 uSA economy is in far worse shape than in 2016:

(courtesy Michael Snyder/Economic Collapse)

11 Facts That Prove The 2017 US Economy Is In Far Worse Shape Than It Was In 2016

Authored by Michael Snyder via The Economic Collapse blog,

There is much debate about where the U.S. economy is ultimately heading, but what everybody should be able to agree on is that economic conditions are significantly worse this year than they were last year.  It is being projected that U.S. economic growth for the first quarter will be close to zero, thousands of retail stores are closing, factory output is falling, and restaurants and automakers have both fallen on very hard times.  As economic activity has slowed down, commercial and consumer bankruptcies are both rising at rates that we have not seen since the last financial crisis.  Everywhere you look there are echoes of 2008, and yet most people still seem to be in denial about what is happening.

The following are 11 facts that prove that the U.S. economy in 2017 is in far worse shape than it was in 2016…

#1 It is being projected that there will be more than 8,000 retail store closings in the United States in 2017, and that will far surpass the former peak of 6,163 store closings that we witnessed in 2008.

#2 The number of retailers that have filed for bankruptcy so far in 2017 has already surpassed the total for the entire year of 2016.

#3 So far in 2017, an astounding 49 million square feet of retail space has closed down in the United States.  At this pace, approximately 147 million square feet will be shut down by the end of the year, and that would absolutely shatter the all-time record of 115 million square feet that was shut down in 2001.

#4 The Atlanta Fed’s GDP Now model is projecting that U.S. economic growth for the first quarter of 2017 will come in at just 0.5 percent.  If that pace continues for the rest of the year, it will be the worst year for U.S. economic growth since the last recession.

#5 Restaurants are experiencing their toughest stretch since the last recession, and in March things continued to get even worse

Foot traffic at chain restaurants in March dropped 3.4% from a year ago. Menu prices couldn’t be increased enough to make up for it, and same-store sales fell 1.1%. The least bad region was the Western US, where sales inched up 1.2% year-over-year and traffic fell only 1.7%, according to TDn2K’s Restaurant Industry Snapshot. The worst was the NY-NJ Region, where sales plunged 4.6% and foot traffic 6.3%.

 

This comes after a dismal February, when foot traffic had dropped 5% year-over-year, and same-store sales 3.7%.

#6 In March, U.S. factory output declined at the fastest pace in more than two years.

#7 According to the Bureau of Labor Statistics, not a single person is employed in nearly one out of every five U.S. families.

#8 U.S. government revenues just suffered their biggest drop since the last recession.

#9 Nearly all of the big automakers reported disappointing sales in March, and dealer inventories have now risen to the highest level that we have seen since the last recession.

#10 Used vehicle prices are absolutely crashing, and subprime auto loan losses have shot up to the highest level that we have seen since the last recession.

#11 At this point, most U.S. consumers are completely tapped out.  According to CNN, almost six out of every ten Americans do not have enough money saved to even cover a $500 emergency expense.

Just like in 2008, debts are going bad at a very alarming pace.  In fact, things have already gotten so bad that the IMF has issued a major warning about it

In America alone, bad debt held by companies could reach $4 trillion, “or almost a quarter of corporate assets considered,” according to the IMF. That debt “could undermine financial stability” if mishandled, the IMF says.

 

The percentage of “weak,” “vulnerable” or “challenged” debt held as assets by US firms has almost arrived at the same level it was right before the 2008 crisis.

We are seeing so many parallels to the last financial crisis, and many are hoping that our politicians in Washington can fix things before it is too late.

On Monday, the most critical week of Trump’s young presidency begins.  The administration will continue working on tax reform and a replacement for Obamacare, but of even greater importance is the fact that if a spending agreement is not passed by Friday a government shutdown will begin at the end of the week

Trump has indicated that he wants to tackle the repeal and replacement of Obamacare and introduce his “massive” tax plan in the next week, all while a shutdown of parts of federal government looms Friday.

 

By attempting three massive political undertakings in one week, investors will have a sense of whether or not Trump will be able to deliver on pro-growth policies that would be beneficial for markets.

 

If Trump can pull off the trifecta, it could restore faith that policy proposals like tax cuts and infrastructure spending are on the way. If not, look out.

Members of Congress are returning from their extended two week spring vacation, and now they will only have four working days to get something done.

And I don’t believe that they will be able to rush something through in just four days. 

The Republicans in Congress, the Democrats in Congress, and the Trump administration all want different things, and ironing out all of those differences is not going to be easy.

For example, the Trump administration is insisting on funding for a border wall, and the Democrats are saying no way.  The following comes from the Washington Post

President Trump and his top aides applied new pressure Sunday on lawmakers to include money for a wall on the U.S.-Mexico border in a must-pass government funding bill, raising the possibility of a federal government shutdown this week.

 

In a pair of tweets, Trump attacked Democrats for opposing the wall and insisted that Mexico would pay for it “at a later date,” despite his repeated campaign promises not including that qualifier. And top administration officials appeared on Sunday morning news shows to press for wall funding, including White House budget director Mick Mulvaney, who said Trump might refuse to sign a spending bill that does not include any.

And of course the border wall is just one of a whole host of controversial issues that are standing in the way of an agreement.  Those that are suggesting that all of these issues will be resolved in less than 100 hours are being completely unrealistic.  And even though the Trump administration is putting on a brave face, the truth is that quiet preparations for a government shutdown have already begun.

The stock market bubble is showing signs of being ready to burst, and an extended government shutdown would be more than enough to push things over the edge.

Let us hope that this government shutdown is only for a limited period of time, because an extended shutdown could potentially be catastrophic.  In the end, either the Trump administration or the Democrats are going to have to give in on issues such as funding for Obamacare, the border wall, Planned Parenthood, defense spending increases, etc.

It will be a test of the wills, and it will be absolutely fascinating to see who buckles under the pressure first.

Still not convinced? After climbing to its highest in 3 years earlier in 2017, Citi’s Economic Surprise index — which gauges how well data come in better than expected — has sagged badly lately. In fact, this week saw the biggest drop in US Macro data in 6 years(after poor readings on job creation, inflation, housing starts and car sales)

well that is all for tonight

I will see you tomorrow night

or late tonight, if your curiosity gets the best of you

H.

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