Gold: $1255.10  UP 1.80

Silver: $16.83  up 1  cent(s)

Closing access prices:

Gold $1256.90

silver: $16.83!!!










Premium of Shanghai 2nd fix/NY:$11.15


LONDON FIRST GOLD FIX:  5:30 am est  $1255.80




For comex gold:




For silver:

For silver: MAY


Total number of notices filed so far this month: 2713 for 13,565,000 oz



In Feb we had $7,841,000 worth of gold housed at the FRBNY valued at 42.21 dollars per oz

Last month: we had the same;  $7,841,000  of gold valued at 42.21

thus 0 oz of gold moved out.


The key event today is the rising amount of silver that is standing for metal at the comex.  It has now risen above what was standing on day one, April 30.  On that day 16.8 million oz stood for delivery and for two consecutive days it has risen to close to 18.2 million oz.  We have not seen that before.



Let us have a look at the data for today





In gold, the total comex gold FELL BY 5,451 contracts WITH THE FALL IN THE PRICE OF GOLD ($11.80 with YESTERDAY’S TRADING). The total gold OI stands at 465,336 contracts.

we had 8 notice(s) filed upon for 800 oz of gold.


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


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

Inventory rests tonight: 853.36 tonnes



Strange!!! We had another huge change in silver inventory at the SLV today..a massive deposit of 3,502 million oz with silver in the doldrums these past few days??????)

THE SLV Inventory rests at: 334.921 million oz



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

1. Today, we had the open interest in silver FELL BY ONLY 1,892 contracts DOWN TO 194,123, (AND NOW FURTHER FROM  THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21 AT 234,787), WITH THE  FALL IN PRICE FOR SILVER ON FRIDAY (38 CENTS). It sure looks like we are witnessing the power of that obscure EFP contract.  For the past few years, strangely we have seen the open interest collapse as we enter first day notice. The EFP allows the longs to liquidate his delivery contract month for a fiat bonus and the receipt of a future contract month once first day notice has occurred.

(report Harvey


2.a) The Shanghai and London gold fix report



2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

2c) Federal Reserve Bank ear marked gold movement



i)Late MONDAY night/TUESDAY morning: Shanghai closed DOWN 10.95 POINTS OR .35%  OR / /Hang Sang CLOSED UP 81.00 PONTS OR .33% .  The Nikkei closed UP 135.18 OR 0.70% /Australia’s all ordinaires  CLOSED DOWN .08%/Chinese yuan (ONSHORE) closed DOWN at 6.8953/Oil UP to 49.25 dollars per barrel for WTI and 52.03 for Brent. Stocks in Europe OPENED IN THE GREEN   ..Offshore yuan trades  6.8920 yuan to the dollar vs 6.8953 for onshore yuan. NOW  THE OFFSHORE IS A LITTLE WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN SLIGHTLY WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN  A LITTLE STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE WEAKER DOLLAR. CHINA IS HAPPY



More rhetoric from Kim as he is furious after the USA and Sout Korea deployed lancer bombers in war exercises conducted off the Korean peninsula

( zero hedge)





China angry at the USA deployment of the THAAD anti missile defense system in South Korea. They warned of consequences

( zero hedge)


China unleash an oil embargo on North Korea which would cripple the country:



i)ITALY/Air Alitalia

It does not look good for Itays national carrier as they have filed for bankruptcy protection for the 2nd time in 9 years.  Nobody is setting up to the plate to provide financing for the airline

( zero hedge)

ib)The Italian Government approves the Alitalia bankruptcy as it bonds collapse into the teens.  A complete liquidation will cause 12,000 people to lose their jobs as well as a big hit the Italy’s GDP

this will be a continuing story..

(courtesy zero hedge)


Greece is going to be raped some more as they settle for more austerity measures in return for bailout money.  Why they do not leave the EU is beyond me!

(zero hedge)



Non Germans make up 10% of the population yet they account for 30.5% of all crimes in the country in 2016

( Kern/Gatestone Institute)




Putin and Trump hold their phone call and both are asking for restraint in dealing with Syria and North Korea;

( zero hedge)


i)The run on Home Capital has now spread to another Canadian Mortgage lender, Equitable Group

( zero hedge)

ii)At the end of today, Apple reported:

They missed on revenue due to declining sales in China.  This should have a damper effect on global trading for tomorrow

(courtesy zero hedge)


i)Saudi Prince sends crude tumbling below $47.50

( zerohedge)

ii)It now seems that the OPEC production cut deal has backfired as the Saudis lose more market share to Iran and Iraq

( Paraskova/

iii)Then at the end of the day we  got a surprise drawdown on crude and gasoline and this caused both to rise in price

(courtesy zero hedge)



i)USA GOLD  news and views on gold’s undervaluation

( Mike Kosares/USAGold/GATA)

ii)Data from Switzerland shows that India is now again showing its love for gold having imported 55.6 tonnes in March. They may overtake China as the number one consumer of gold.  I would also like to point out that these numbers do not include smuggled gold into India.

(Lawrie Williams/Sharp’s Pixley)

10. USA stories

i)The Republicans are at least one vote shy from failure to repealing Obamacare with many on the sidelines

It looks like it will fail for the 3rd time

( zero hedge)

ii)The hawks in Washington will be visibly upset as the Senate drops the new Russian sanctions bill;

( zero hedge)

iii) trading in NY/30 yr bond yield drops below 3% due to the auto bloodbath!
iv)The auto bloodbath which caused the markets in the uSA to tumble

(courtesy zerohedge)


Let us head over to the comex:

The total gold comex open interest FELL BY 5,451 CONTRACTS DOWN to an OI level of 464,123 WITH THE  FALL IN THE PRICE OF GOLD ( $11.80 with YESTERDAY’S trading).   The longs still continue to remain stoic as they refused to liquidate any of their contracts despite the constant torment experienced yesterday. However we may have had some banker short covering.  We are now in the contract month of MAY and it is one of the POORER delivery months  of the year. In this MAY delivery month  we had A LOSS OF 17 contract(s) FALLING TO 418. We had 12 notices filed yesterday so we again lost 5 contracts or an additional 500 oz were cash settled through the EFP route where they receive a cash bonus plus a future gold contract.

The next big active month is June/2017 and here the OI LOST 6,381 contracts DOWN to 323,713.  The non active July contract gained another 9 contracts to stand at 34 contracts. The next big active month is August and here the OI gained 599 contracts up to 55,254.

We had 8 notice(s) filed upon today for 800 oz

And now for the wild silver comex results.  Total silver OI FELL BY 1,892 contracts FROM  196,015 DOWN to 194,123  WITH YESTERDAY’S 38 CENT PRICE LOSS.
We are in the active delivery month is MAY  Here the open interest LOST 574 contracts FALLING TO 1464 contracts. MY GOODNESS!! IT HAPPENED AGAIN!! We had 757 notices filed on SECOND day notice so we gained another  183 notices or an additional 915,000 oz will stand for delivery. In the last few years, I do not believe I have ever seen an active month increase in amount standing on day 2 and day 3 of the delivery cycle. No wonder JPMorgan is getting reading for a physical attack at the comex.

The non active June contract GAINED 203 contracts to stand at 1017. The next big active month will be July and here the OI SURPRISINGLY  GAINED 1920 contracts UP to 151,200.

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)

The line in the sand is $18.50 for silver and again it has been defended by the criminal bankers.  Once this level is 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. THE NEW RECORD HIGH IN OPEN INTEREST WAS SET FRIDAY APRIL 21/2017 AT:  234,787.

We had 535 notice(s) filed for 2,675,000 oz for the MAY 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 171,263 contracts which is fair.

Yesterday’s confirmed volume was 209,781 contracts  which is good.

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for MAY
 May 2/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 nil oz
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
3,665.214 oz
No of oz served (contracts) today
8 notice(s)
800 OZ
No of oz to be served (notices)
410 contracts
41000 oz
Total monthly oz gold served (contracts) so far this month
35 notices
3500 oz
.1088 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   23,338.2 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 1  customer deposit(s):
i) Into Brinks: 3,665.214 oz
total customer deposits; 3665.214 oz  oz
We had 0 customer withdrawal(s)
total customer withdrawal: nil oz
 we had 0 adjustments:
For MAY:

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

To calculate the initial total number of gold ounces standing for the MAY. contract month, we take the total number of notices filed so far for the month (35) x 100 oz or 3500 oz, to which we add the difference between the open interest for the front month of MAY (418 contracts) minus the number of notices served upon today (8) x 100 oz per contract equals 44000 oz, the number of ounces standing in this  active month of MAY.
Thus the INITIAL standings for gold for the MAY contract month:
No of notices served so far (35) x 100 oz  or ounces + {(418)OI for the front month  minus the number of  notices served upon today (8) x 100 oz which equals 44500 oz standing in this non active delivery month of MAY  (1.3841 tonnes).  We lost 5 contracts or an additional 1000 oz were cash settled through the EFP route where they received a fiat bonus plus a futures contract in a private deal with the bankers.
I have now gone over all of the final deliveries for this year and it is startling.
Here are the final deliveries for all of 2016 and the first 5 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
Nov.    8.3950 tonnes.
DEC/2016.   29.931 tonnes
JAN/2017     3.9004 tonnes
FEB/ 18.734 tonnes
March: 0.5816 tonnes
April/2017: 2.8678
MAY:2017/  1.3841 TONNES
total for the 17 months;  249.0226 tonnes
average 14.648 tonnes per month
Total dealer inventory 914,233.183 or 28.43 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,934,663.902 or 277.90 tonnes 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 277.90 tonnes for a  loss of 25  tonnes over that period.  Since August 8/2016 we have lost 76 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
And now for silver
MAY INITIAL standings
 May 2. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
30,038.200 oz
24,852.140 oz
total:  54,890.340 oz
Deposits to the Dealer Inventory
499,033.580 oz
Deposits to the Customer Inventory 
0 oz
101,625.287 oz
998.000 oz ???
total: 102,623.287 oz
No of oz served today (contracts)
(2,675,000 OZ)
No of oz to be served (notices)
929 contracts
( 4,645,000 oz)
Total monthly oz silver served (contracts) 2713 contracts (13,565,000 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  1,908,422.1 oz
today, we had  1 deposit(s) into the dealer account:
 i) Into CNT:  499,033.58 0z
total dealer deposit: 499,033.58  oz
we had Nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 2 customer withdrawal(s):

i) Out of Scotia:  40,175.02 oz

ii) Out of HSBC: 2,154.610 oz
 We had 0 Customer deposits:
***deposits into JPMorgan have now stopped for the first time in quite a while.
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  nil oz
 we had 1 adjustment(s)
Out of the CNT vault:
24,865.700 oz was adjusted out of the dealer and this landed into the customer account of CNT
The total number of notices filed today for the MAY. contract month is represented by 535 contract(s) for 2,675,000 oz. To calculate the number of silver ounces that will stand for delivery in MAY., we take the total number of notices filed for the month so far at 2713 x 5,000 oz  = 13,565,000 oz to which we add the difference between the open interest for the front month of MAY (1464) and the number of notices served upon today (535) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the MAY contract month:  2713(notices served so far)x 5000 oz  + OI for front month of APRIL.(1464 ) -number of notices served upon today (535)x 5000 oz  equals  18,210,000 oz  of silver standing for the MAY contract month.
We actually gained another 183 contracts or an additional 915,000 oz will stand for delivery and again nobody wished to accept an EFP contract for a fiat bonus. It may mean that the entire 18 million oz that is standing wants its physical metal and are willing to take on our bankers. Let us see how this will play out for the rest of the month!!  WE HAVE NEVER HAD AN INCREASE IN PHYSICAL AMOUNT SILVER STANDING FOR DELIVERY ON BOTH DAY 2 and day 3 OF THE DELIVERY CYCLE.  
Volumes: for silver comex
Today the estimated volume was 64,890 which is excellent 
Yesterday’s  confirmed volume was 82,633 contracts which is huge
Total dealer silver:  32.506 million (close to record low inventory  
Total number of dealer and customer silver:   196.524 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44

NPV for Sprott and Central Fund of Canada


1. Central Fund of Canada: traded at Negative 7.4 percent to NAV usa funds and Negative 7.5% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.0%
Percentage of fund in silver:37.9%
cash .+0.1%( May 2/2017) 
2. Sprott silver fund (PSLV): Premium FALLS TO   -.37%!!!! NAV (May 2/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to -0.49% to NAV  ( May 2 /2017)
Note: Sprott silver trust back  into NEGATIVE territory at -.37% /Sprott physical gold trust is back into NEGATIVE/ territory at -0.49%/Central fund of Canada’s is still in jail  but being rescued by Sprott.

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

(courtesy Sprott/GATA)

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

 Section: Daily Dispatches

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

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

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

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

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

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

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

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

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

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

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

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



And now the Gold inventory at the GLD

May 2/no change in inventory at the GLD/Inventory rests at 853.36 tonnes

May 1/ no changes in inventory at the GLD/inventory rests at 853.36 tonnes

April 28/no changes in inventory at the GLD/Inventory rests at 853.36 tonnes

April 27/a small withdrawal of .89 tonnes/Inventory is now at 853.36 tonnes

APRIL 26/we had no changes at the GLD/Inventory rests at 854.25 tonnes


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

May 2 /2017/ Inventory rests tonight at 853.36 tonnes


Now the SLV Inventory

May 2/extremely strange again/a huge 3.502 million oz deposit into the SLV despite silver being in the toilet for the past several trading days.

may 1/extremely strange/with silver being walloped these past several days, the inventory rises again by a huge 1.136 million oz/(maybe someone can explain this phenomena??)

April 28/Strange again!! no change in inventory at the SLV/Inventory remains at 330.283 million oz  (no liquidation with a drop in silver price??)

April 27.2017/Strange!! no change in inventory at the SLV/Inventory remains at 330.283 million oz  (no liquidation???)

APRIL 26/2017/another huge deposit of 2.934 million oz into the SLV/Inventory rests at 330.283 million oz

April 25/a huge deposit of 1.98 million of into inventory/inventory rests at 327.349 million oz/

April 24/no changes in inventory at the SLV/Inventory rests at 325.361 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
May 2.2017: Inventory 334.921  million oz

Major gold/silver trading/commentaries for TUESDAY


London Property Bubble Vulnerable To Crash

– London property market vulnerable to crash
– House prices in London are falling
– London property up 84% in 10 years (see chart)
– House prices have risen over 450% in 20 years

– Brexit tensions as seen over weekend and outlook for U.K. economy to impact property
– Global property bubble fragile – Risks to global economy
– Gold bullion a great hedge for property investors

by Jan Skoyles, Editor Mark O’Byrne

For the bargain price of 36 AED (£5) I can buy Global Property Scene magazine, here in Dubai. This month it is running the headline ‘ Could Brexit be the making of the UK Property market?’

Property here in Dubai is a big deal, everywhere you look there are cranes and in the middle of the Malls developers have spent a small fortune placing a stand with a 3D model of their latest development.

The Emirate is looking to position itself as the financial safe haven of the Middle East and with that, they know, comes a solid property market.

London property has long been the poster child for countries such as the UAE who are looking to develop what has for a while appeared to be an indestructible real estate market.

Since 2011 London house prices have climbed by 65%. Between 2006 and 2016, average house prices in the capital grew from £257,000 to £474,000 or by a very substantial 84.4%. These large gains were ‘built’ on the back of the very large appreciation that was seen in prices between 1996 and 2006 (see chart below).

Average house prices in London in 1997 were below £85,000 meaning that in 20 years prices have risen over 450%.

This has created an air around the city’s property markets – residential and commercial – that they are invincible and that they are a safe haven.

House Prices: UK & London Average (KPMG, March 2017)

But London property values might not be as invincible as the world thinks.

UK’s Land Registry data for three London boroughs shows transaction volumes in London — the number of houses being bought and sold — are at an all-time low. Back in December asking prices in London dropped 4.3% in December with inner London down 6%, more exclusive areas dropped by as much as 10%.

The slump continued into the first quarter this year, a survey by the Royal Institution of Chartered Surveyors found that more agents than not reported price drops in March. London is now one of the five-slowest growing cities in the UK.

London property has for some time had many of the signs of a bubble. However, it is always very hard to pinpoint when a bubble might burst. We are certainly seeing signs that the overheated market is beginning to cool. Of course, all ‘good’ things must come to an end, but what is driving this particular scenario?

In a world of uncertainty what is tipping which scale can be confusing, but there are some factors at play here that are most likely responsible for the downturn we are witnessing.

Does a downturn or bursting of the London property market matter for the wider UK, or the world? Certainly, as with previous bubble bursts, these things are mere tips of much more dangerous icebergs.

Is the market even affordable?

UK house prices are nearly 8.5 times average earnings, a level that the ratio has not been seen at since the last property boom. Yet, on average it has never been financially easier to get a mortgage – with interest rates at record lows in recent years debt servicing levels remain affordable… for now

House Prices to Earnings (KPMG, March 2017)

While KPMG’s research suggests that the house-price-to-earnings ratio is currently below the peak-to-peak trend, it is concerning that it has reached now back at all time record highs.

So as long as interest rates stay ultra ultra low, new borrowing could keep the property market going and keep UK house prices buoyant at least for a while longer.

Since 2013 the average value of London property has risen rapidly relative to rents. For first time buyers and working immigrants the decision to buy comes down to rent prices versus the cost of borrowing, this drives house prices.

So when buyers are optimistic about future house prices, they are generally happy to cover more expensive interest rate payments over rent, if they expect to see a return. This, combined with dinner party conversation over the infallibility in the London housing market, pushes buyers to buy property today terrified in the belief that prices will only get higher.

If record high rents begin to fall – which seems probable given the many global geo-political, financial and economic risks and indeed the risks posed by Brexit to the UK economy – then first time buyers and indeed buy to let investors might decide to hold off buying.

Also, as earnings are not increasing in line with ether inflation or house prices, factors such as Brexit and interest rates (both of which are wrapped up in uncertainty) are beginning to cast a shadow over the London property market. Something which could be disastrous for the UK economy.

Brexit blues dim London property

During the UK’s EU referendum, there were lots of on-the-street interviews with voters arguing that a post-Brexit world would impact the country’s property market. Post-Referendum we are still in a weird limbo as we await to see the result of Brexit negotiations.

In the meantime the rest of world’s financial markets and investors speculate over various uncertainties. This in turn will inevitably impact real estate prices.

The most immediate data we have that shows the impact of Brexit is the slowing of immigration into the UK by those looking to study or work. This was the case even in the run up to the referendum.

This fact is one of the contributors to the cooling off in London house prices. There is a slow-down in demand for not only property to buy but also to rent. Potential buy-to-let purchasers are seeing a slow-down in demand, which reduces the return on their investments.

But international investors (as opposed to immigrants) might not be put off just yet by the London property market. To those holding US dollars or euro, the capital’s real estate might seem to be quite the bargain. In dollar terms property is 16% cheaper 11% so for euro buyers than they were before the referendum due to the sharp fall in sterling. Providing they are comfortable with the considerable currency risk.

As was seen over the weekend and still very high tensions between the May government and the EU, Brexit uncertainties are set to continue. It is the impact of these, and likely further weakening in the pound, which may create further issues for the UK economy.

Is Brexit really an issue?

There is no doubt that Brexit has created some uncertainty in the UK housing market. The recent property prices speak for themselves. Should the Conservatives win the majority in the June election there could be less uncertainty although the negotiations with the EU are likely to be long and hard. There is no guarantee that they will be successfully wound up in even two years time and there is the real risk that they  lead to a significant deterioration in relations between the UK and EU powers and leading EU nations.

A bigger concern for the UK housing market is interest rates. The cost of borrowing has been at record lows for several years. Central banks’ easy money policies, including the Bank of England, have meant that we have seen property prices increase around the world.

The era of record low interest rates was always going to come to an end and the finale is now on the horizon. The Bank of England warned back in February that the post-Brexit value of the sterling which is expected to send inflation to 2.7% this year, will prompt a hike in interest-rates.

If it costs more for buyers to borrow money then this quite simply means that there is less money to be spent on property. The market is already built on the sandy foundations of massive debt suggesting that this is a house of cards that can’t take another layer.

Even where there is real money playing a role, the amount required for a deposit is rapidly becoming unobtainable. First-time buyers are dropping like flies given the increase in deposit amounts; first-time buyer deposits have reached £34,000 across the UK, and nearly £100,000 in London.

In the last few years buyers (both property investors and first-time buyers) have been enjoying the merry-dance of borrow money at a low yield and spending it on the higher-yielding property market. And this isn’t just happening in London, it is happening across the global property market.

The dance has been going on for some time, but it looks as though the jig is about to come to an end, soon these same savvy investors might find themselves with an expensive lump of debt to service, a falling yield on rents and an asset which is worth far less than they had expected.

A problem only to be borne by foreign investors?

Back in January Catherine Mann, the OECD’s chief economist, spoke of vulnerabilities in asset markets. In regard to the UK property market she said this would be good for the country if the fall in prices was borne by foreign investors.

“[What’s] interesting in terms of the implications for the UK economy is who bears the burden – who bears the adjustment cost. If it’s a non-resident then lower house prices could actually be good for the UK.”

However, it is next to impossible that the UK will not feel the pain of the property bubble bursting. Aside from those buyers who will likely be left facing negative equity, unserviceable levels of debt and possible bankruptcy we also need to consider the impact of those who are still borrowing to buy property.

Local councils in the UK aren’t known for their investing prowess.

You just need to look at the Icelandic banking scandal that resulted in UK council being bailed out, for an example. This time around the councils have decided that their local property markets are ones worthy of a punt or two. They may well have been witnessing the optimism that remains amongst estate agents, with more respondents to the RICS survey than not saying they expect prices to climb in the next year.

Local councils are so confident about the strength of the property market that they are borrowing from the Public Works Loan Board (part of the Treasury). Most recently the Isle of Wight has borrowed a whopping £100 million in order to bet on property. Lord Oakshott, Chairman of Olim Property told the Financial Times, “English councils punting on property is an accident waiting to happen.”

“There are real echoes here of Northern Rock, where many punters were lent all the purchase price of a property, and the Icelandic bank scandals, where councils played a market they didn’t understand for short-term income gain.”

Councils overextending themselves (as we saw with Iceland) is not a cost that is later borne by foreign investors. It is borne by those who have to bail them out – the tax payer. We have been here before.

What about supply?

The RICS Chief Economist referred to the ‘flat trend in transaction levels.’ We can spend as much time as we want referring to buyers’ deposits, cost of borrowing and the impact of Brexit but we only do so in reference to demand. This over-heated market was also driven by levels of supply.

A small drop in prices, at levels mentioned in the beginning, means that supply is also likely to slow-down as owners fear they won’t get much return on their investment if they sell now, instead hoping to sit it out and wait for a correction.

Hometrack data shows supply is not keeping pace with sales in Birmingham and Manchester, despite prices set to increase. In London, a stall in prices is more or less inevitable as buyers aren’t purchasing houses at the same rate they’re being put on the market.

A brief check on a major property website by ZeroHedge found that there might be call for nervousness among sellers and estate agents. Despite discounts on Kensington and Chelsea properties by as much as 40% on those that have been listed for over a year, the number of listings appears to have doubled and little seems to be shifting.

Conclusion – Gold good hedge for property investors

Since the Second World War, UK house prices have only crashed three times, the second time was just ten years ago, then again in 2009 when they hit rock bottom. Since 2013 they have been unstoppable, especially in London.

The belief that they are unstoppable comes from the same drunken optimism the credit crisis came from – one of immortality and the mass delusion at nothing could threaten the property boom we were seeing. Data is now slowly revealing a different picture from the one so many people have been imagining for the last few years.

The property market is certainly seeing a serious cooling down and the question is whether this is the start of serious correction or a crash.

This is not just an event that will be kept local to London. Other “international cities” and major property markets such as Singapore and New York looks bubbly and vulnerable to sharp corrections.

Now would be a pertinent time for investors to review their portfolio allocation to property markets. Even if you do not hold property other than your own home, the bursting of the bubble will no doubt impact the global financial system, not to mention the national economies to which they are so intrinsically tied.

If property market corrects sharply or crashes, companies, councils and irresponsible lenders will need to be bailed out. Who will be footing the bill? We will. For reasons already explained by events played out during the financial crisis,  it would be prudent for readers to consider how much exposure they have to not only the property market but also the banking system and the banks that have considerable exposures to property markets.

It is difficult to hedge property investments effectively. However, in our modern globalised world where interest rates and economic cycles are increasingly correlated, gold will likely become an excellent hedge for property investors in the coming years.

Property prices look over valued in many markets internationally today and in the event of price falls, gold is likely to act as a hedge and preserve wealth as it has done throughout history.

Investors should decide on a reasonable allocation to gold bullion, held in allocated and segregated storage in less debt laden jurisdictions.

Owning these assets outside of the digital and the financial system, away from the shaky, debt-fuelled banking system funding the overheated property markets will soon be seen as prudent



USA GOLD  news and views on gold’s undervaluation

(courtesy Mike Kosares/USAGold/GATA)


USAGold’s News & Views for May notes gold’s undervaluation


1:15p ET Monday, May 1, 2017

Dear Friend of GATA and Gold:

USAGold’s News & Views letter for May, written and edited by proprietor Mike Kosares and published today, provides interesting data about what seems like gold’s substantial undervaluation, at least by the standards that applied before surreptitious intervention in the gold market by central banks became pervasive.

Indeed, it’s disappointing if no longer so surprising that the gold mining industry, financial journalists, and market analysts who disparage gold for its failing to keep up with inflation decline to inquire into the causes of gold’s seeming undervaluation. They might find an important story.

The May letter is posted at USAGold here:

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





Data from Switzerland shows that India is now again showing its love for gold having imported 55.6 tonnes in March. They may overtake China as the number one consumer of gold.  I would also like to point out that these numbers do not include smuggled gold into India.

(Lawrie Williams/Sharp’s Pixley)

LAWRIE WILLIAMS: March Swiss gold exports show India no.1 again

The latest export figures for gold for the month of March from the Swiss Customs Administration show that India, once again, was easily the top recipient, taking 55.6 tonnes – more than gold flows from Switzerland to Hong Kong and China combined. Hong Kong imported 24.3 tonnes and the Chinese Mainland 24.0 tonnes directly. These latter figures confirm our now oft-stated observation that Hong Kong gold flows can no longer be considered a proxy for total Chinese imports with perhaps 40-50% now flowing directly into the Chinese Mainland by avoiding Hong Kong altogether.

See the excellent chart below from which sets out the principal recipients of the Swiss gold exports on a country- by-country basis. Note also that India, Hong Kong and China alone accounted for around 74% of Switzerland’s total gold exports, while Asia and the Middle East accounted for just under 88%, emphasising the continuing flows of gold from West to East.

As for India itself, this is very much a continuation of the pattern seen earlier in the year suggesting that gold demand in the country, which used to be the world’s No. 1 consumer, is picking up significantly from the very low levels of a year ago when they were affected by a prolonged jewellers strike and the withdrawal of 100 and 50 rupee notes (India is very much a country which runs on cash). March is the third month in a row where India has topped the list of recipients of Swiss gold exports and has taken in 119 tonnes of Swiss gold in the first quarter of the year. (See: Over 80% of Switzerland January gold exports headed to Asia and Middle Eastand Swiss gold exports to India top the table in February).

While we may well see a reduction in Indian gold imports from Switzerland in April now that the Akshaya Tritya Festival (seen as a particularly auspicious time to buy gold) is behind us, wedding demand will probably mean that imports will remain at a positive level.

Also note that we reported that official figures from India itself also support the premise that its gold imports are indeed running stronger – See: Indian gold imports picking up?. This latter article showed that total February gold imports totaled over 89 tonnes in February. With only 37.2 tonnes being sourced from Switzerland that meant that nearly 60% of Indian gold imports were sourced from countries other than Switzerland during that month which puts an additional new complexion on likely total Indian gold imports for the year.

Indeed, in the rather restricted way that specialist precious metals consultancies like GFMS calculate gold consumption, India could well be rated by them as the world’s No.1 gold consumer again this year. Metals Focus, the other big London precious metals consultancy, follows a somewhat similar line to GFMS, although has been a bit more positive on China’s consumption, and with it providing data to the World Gold Council it will be interesting to see what position the latter takes in its next Gold Demand Trends report. The media tends to hang on the WGC figures as definitive and this could easily also suggest that India is back in first place among global gold consumers. But we will still reckon on China being No.1 regardless as the major consultancies do not seem to rate gold consumption by the financial sector as being relevant, while we do in terms of overall gold flows.

02 May 2017 rie-williams-march-swiss-gold-exports-show-india-no1- again_266934.html


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



2. Nikkei closed UP 135.18 POINTS OR 0.70%   /USA: YEN RISES TO 112.21

3. Europe stocks OPENED ALL IN THE GREEN        ( /USA dollar index FALLS TO  99.04/Euro UP to 1.0913


3c Nikkei now JUST BELOW 17,000

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

3e WTI::  49.25 and Brent: 52.03

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 FALLS TO  +.338%/Italian 10 yr bond yield DOWN  to 2.328%    

3j Greek 10 year bond yield FALLS to  : 6.116%   

3k Gold at $1255.80/silver $16.95 (8:15 am est)   SILVER ABOVE  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 4/100 in  roubles/dollar) 57.03-

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 DEVALUATION SOUTHBOUND 


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  .9946 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0853 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.338%

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 2.336% early this morning. Thirty year rate  at 3.017% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Global Stocks Hit All Time High As Fed Meeting Begins


With the Fed set to begin its latest 2-day meeting (no rate hike is expected), S&P futures are little changed with European and Asian stocks higher after the VIX dropped to a 10 year low and the Nasdaq rose to record highs, sending the MSCI All-Country Index back to all time highs, as global markets reopen after holiday with investors focusing on stronger corporate earnings, while ignoring weaker than expected “hard” economic data and geopolitical concerns. The yen extended losses, with the USDJPY rising to the highest since March 21; gold slid and WTI crude futures rose while Treasury yields climbed after Steven Mnuchin said it “could absolutely make sense” for the U.S. to sell ultra-long bonds.

The MSCI All-Country World Index was poised for another all time high, as global market cap once again rose above $50 trillion. European shares advanced after the May 1 holiday, as BP jumped after posting stronger than expected earnings. European government bonds fell across the board. The Nasdaq Composite index hit a record high on Monday as the world’s five largest companies by market capitalization — Apple, Alphabet, Microsoft, Amazon and Facebook — all hit intraday or closing highs.

“Risk assets are performing well and investors are clearly bullish,” Claudio Piron, strategist at Bank of America Merrill Lynch wrote in a client note. “Nevertheless, we advise caution and this month is especially notorious for its refrain to ’Sell in May’,” he added, although lately it appears that nothing can dent the bullish mood on Wall Street, where the VIX “fear gauge” closed at its lowest since before the global financial crisis on Monday.

The MSCI All-Country World Index rose 0.1 percent as of 10:35 a.m. in London.

The Stoxx Europe 600 Index increased 0.2 percent, with BP climbing 1.6 percent, and the banking sub-index was up 0.4 percent, showing no reaction to comments from U.S. President Donald Trump, who told Bloomberg Television he was actively considering breaking up big banks.

The Topix index rose 0.7 percent to the highest since March 21 as the yen weakened. Japanese markets will be closed for holidays over the next three days.  MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.5 percent to its highest level since June 2015, as many of the region’s markets also reopened after a long holiday weekend. Japan’s Nikkei rose 0.7 percent after some robust earnings. South Korea paced gains, with the Kospi briefly topping its 2011 peak.

Much of the market’s attention has fallen on forecast-beating corporate earnings which have helped push shares higher across the globe this year. First-quarter profits at S&P 500 companies are expected to rise 13.6 percent, the strongest rise since 2011, according to Thomson Reuters I/B/E/S. European equivalents are seen up 13.9 percent.

“Higher corporate earnings and tax reform seem to be more important to the market than any off-the-cuff remark from Trump. That means people are not buying protection in the options market to protect themselves from a drop in the market,” said Neil Wilson, senior market analyst at ETX Capital.

Strong earnings have outweighed concern over patches of weak economic data. An official survey on Tuesday showed Chinese factory activity growth slowed more than expected in April.

The ISM measure of U.S. manufacturing activity also undershot forecasts on Monday.

“Soft” data in Europe was better with Euro-area factories expanding output at the fastest pace since 2011. The Markit Manufacturing PMI gauge rose to 56.7 in April from 56.2 the previous month, IHS Markit reported on Tuesday. An April 21 preliminary estimate was for an increase to 56.8.  “Companies are benefiting from the historically weak euro, improved growth in key export markets, rising domestic demand and ongoing central-bank stimulus including record-low interest rates,” said Chris Williamson, chief economist at IHS Markit. “Optimism about the year ahead, meanwhile, appears unaffected by political worries.”

The dollar hit a one-month high against the safe-haven Japanese yen on some signs of easing tensions over North Korea and as U.S. bond yields rose after U.S. Treasury Secretary Steven Mnuchin said the government was looking into issuing ultra-long debt of maturities in excess of 30 years. Greek government bond yields fell after Greece and its lenders reached a long-awaited deal on reforms required to release further bailout funds.

U.S. 30-year Treasury yield were 1 basis point higher at 3.02 percent, just below Monday’s three-week high, after Mnuchin told Bloomberg issuing ultra-long bonds “can absolutely make sense”. “Mnuchin’s comments have at least stabilized the long end of the curve,” said Lee Hardman, a currency economist with Japan’s MUFG. “But the dollar is still on the defensive in the near term. The data from the U.S. has been coming in on the disappointing side and the Fed is likely to acknowledge that at this week’s meeting.”

The yield on 10-year Greek government bonds fell 30 basis points to 6.18 percent, their lowest since October 2014, after the deal with its lenders, which followed half a year of talks. Oil prices rose as investors weighed rising production in Libya and elsewhere and expectations that the OPEC producers group and others will extend output curbs. Brent crude last traded 29 cents higher at $51.81.

Companies due to report earnings include Apple, Pfizer, Merck and Aetna. Wards total vehicle sales may rise.

Global Market Snapshot

  • S&P 500 futures down 0.1% to 2,384.75
  • MXAP up 0.4% to 150.04
  • MXAPJ up 0.6% to 490.83
  • Nikkei up 0.7% to 19,445.70
  • Topix up 0.7% to 1,550.30
  • Hang Seng Index up 0.3% to 24,696.13
  • Shanghai Composite down 0.4% to 3,143.71
  • Sensex up 0.02% to 29,924.82
  • Australia S&P/ASX 200 down 0.1% to 5,950.37
  • Kospi up 0.7% to 2,219.67
  • STOXX Europe 600 up 0.2% to 387.44
  • German 10Y yield rose 1.2 bps to 0.329%
  • Euro up 0.2% to 1.0915 per US$
  • Brent Futures up 0.6% to $51.81/bbl
  • Italian 10Y yield rose 3.7 bps to 1.987%
  • Spanish 10Y yield rose 2.2 bps to 1.67%
  • Brent Futures up 0.6% to $51.81/bbl
  • Gold spot down 0.1% to $1,255.34
  • U.S. Dollar Index down 0.02% to 99.05

Bulletin Headline Summary from RanSquawk

  • European equities trade modestly higher with BP earnings helping to lift the FTSE 100
  • GBP finds support after surprise rise in UK Mfg. PMI
  • Looking ahead, highlights include US vehicle sales data

Top Overnight News From Bloomberg

  • Trump Says He’d Meet North Korea’s Kim If Conditions Right
  • Trump Weighs Breaking Up Wall Street Banks, Raising Gas Tax
  • Barclays Falls for Third Day as Trump Suggests Bank Breakup
  • IAC to Buy Angie’s List in Deal Valued at Over $500 Million
  • Soros Says It’s ‘Disappointed’ by Terms of Proposed KWE Deal
  • Euro-Area Manufacturing Expands at Fastest Pace in Six Years
  • Monsanto Abandons Deal With Deere as Merger With Bayer Looms
  • Boeing Had 15 Orders Incl. 13 for 737s in Week Ended April 30
  • McDonald’s Japan Says ‘Gran’ Burger, McFlurry Drove April Sales
  • Discovery, ProSiebenSat.1 Start Joint German Streaming Service
  • Infosys Plans to Hire 10,000 American Workers Over Next 2 Years
  • AstraZeneca Approval Unlikely a Big Commercial Opportunity: JPM
  • Liberty Interactive Buying HSN May Lead to 10% Accretion: BofAML

Asian equities traded mixed as the majority of the region returned from public holiday and digested the weaker than expected Chinese PMI data. ASX 200 (-0.3%) was led lower by miners and financials after gold prices declined and following earnings from Big 4 bank ANZ Bank which missed expectations despite showing H1 cash earnings rose 23%. Nikkei 225 (+0.7%) traded positive on a weaker currency, while Shanghai Comp. (-0.3%) and Hang Seng (+0.3%) were mixed with the mainland bourse pressured after the PBoC refrained from open market operations and as participants mulled over the latest PMI data in which the Official and Caixin Manufacturing PMIs missed estimates to print 6-month and 7-month lows, respectively. 10yr JGBs traded flat with slightly weaker demand seen in today’s enhanced-liquidity auction for 2yr, 5yr, 10yr and 20yr JGBs, while the curve was mixed with mild underperformance seen in the long-end. RBA kept the Cash Rate unchanged at 1.50% vs. Exp. 1.50% (Prey. 1.50%), while it reiterated that unchanged policy is consistent with sustainable growth and achieving inflation target. RBA also commented that higher commodity prices give significant support to Australia’s national income and that a broad-based pick up was seen globally since last year.

Top Asian News

  • China’s $11 Trillion Economy and Markets Are in a Tug of War
  • DBS Profit Beats Forecasts, Helped by Wealth-Management Fees
  • Pimco Warns of Credit Risks as Asia Bond Sales at Record
  • Guangzhou R&F Halted Pending 1Q Results Release
  • Hong Kong Stocks Fluctuate; Belle Surges While Developers Drop
  • India’s Sensex Holds Close to Record; Reliance, Tata Motors Fall
  • Asia’s FX Laggards Turn Leaders of Pack as Ringgit Rebounds
  • Modi Adviser Says Bad Bank Not Needed to Solve Loan Mess
  • Japan Stocks Rise to 6-Week High as Yen Weakens Before Holiday
  • RBA Statement’s Unwritten Line: Baton Handed to Fiscal Stimulus

European equities have started the holiday-shortened week on the front-foot in the wake of the largely positive sentiment seen on Wall Street yesterday. More specifically, the FTSE 100 (+0.5%) outperforms its peers as a positive earnings update from BP (+1.4%) props up energy names across the continent with gains otherwise relatively broad-based in what has otherwise been a relatively light morning for stock specific newsflow. Fixed income markets trade modestly lower alongside some of the upside seen in European bourses with prices also relatively unreactive to the latest slew of largely in-line core Eurozone manufacturing PMIs. More specifically, French paper has been relatively steady as Macron continues to maintain his lead over Le Pen ahead of tomorrow’s televised debate and Sunday’s election results. Elsewhere, peripheral focus has been on Greece with a notable decline in yields after the Greek government has managed to strike a deal with creditors regarding austerity measures.

Top European News

  • Greek Debt-Relief Talks Move Closer After Late-Night Athens Deal
  • May Says Juncker Clash Shows Brexit Talks Will ‘Not Be Easy’
  • Italian Joblessness Unexpectedly Increases as More Seek Work
  • U.K. Manufacturing Growth Surges to Fastest in Three Years
  • Soros Says It’s ‘Disappointed’ by Terms of Proposed KWE Deal
  • Macron Tells Le Pen, Melenchon Voters He Hears Their Anger
  • A $1 Trillion Asset Management Boom Is a Guide to Nordic Banking

In currencies, the yen slid 0.3 percent to 112.21 per dollar, the lowest since March 21, following a 0.3 percent slide on Monday. The euro rose 0.2 percent to $1.0917, while the British pound was little changed. The Bloomberg Dollar Spot Index was flat.  The early price action in London this morning favoured the USD despite some data misses reported in yesterday’s holiday thinned markets. USD personal income and spending and ISM manufacturing PMIs all came in softer than expected, buy we saw the greenback on the front foot against a selection of currencies. USD/JPY was standout as we broke above 112.00, with some suggesting this was partly in the short term plug in the US finding gap, though we prefer the correlation to equities. UST yields still looking buoyed to maintain support through the figure, but upside momentum is clearly lacking. Gains also seen against the CAD and GBP, but Oil prices have recovered modestly to fend off a move to 1.3700 for now, but the spot rate remains poised for another push higher. GBP was trading on the backfoot as all things Brexit are back at the fore. Cable had slipped below 1.2880 from the mid-upper 1.2900’s seen late last week, but was given a boost this morning from the much better than expected UK manufacturing PMIs — at 57.3.

In commodities, West Texas Intermediate crude rose 0.4 percent to $49.04, erasing earlier losses. Oil fell 1 percent Monday as Libyan output surged, more rigs were added in the U.S. and Saudi Arabia cut prices to Asian customers. Oil prices initially took another dip, and any support coming in for WTI and Brent at predominantly based on hopes of the production cut agreement being extended into H2. Plenty of talk that there is strong intent, but we are unlikely to see a notable pick up until this is rubber stamped. Copper prices have risen on fresh strikes in Indonesia, with supply concerns outweighing demand issues emanating from the softer China PMIs. Nickel and Zinc keeping up with Copper this morning. Gold will likely find some support as the market looks to the French election this weekend, but little negative impact on the EUR as Le Pen softens her tone on the single unit.

Looking at the day ahead, this morning in Europe we’ll get the final April manufacturing PMI readings along with a first look at the data for the UK and the periphery. We’ll also get the Euro area wide unemployment rate for March. The only data due out in the US this evening is vehicle sales data for April. Away from the data the ECB’s Nouy is set to speak at two separate events today while Nowotny also speaks this evening. Germany’s Merkel is also due to meet Russia’s Putin which might be worth keeping an eye on. On the earnings front we’ve got 43 S&P 500 companies reporting including Merck, Pfizer (both at the open) and Apple (after the close).

US Event Calendar

  • Wards Total Vehicle Sales, est. 17.1m, prior 16.5m
  • Wards Domestic Vehicle Sales, est. 13.3m, prior 13m

DB’s Jim Reid concludes the overnight wrap

Perhaps the highlight of a light US session last night was the VIX closing at the lowest level since February 16th 2007, a span of nearly 123 months. The index closed at 10.11 which compares to the close on Friday of 10.82. It did actually touch an intraday low of 9.90 yesterday which is only the second time this year that the index has fallen below 10.00 (it touched 9.97 intraday in early February). To put yesterday’s closing level in context, in the 6871 business days since the inception of the VIX (going back to 1990) we have only ever seen the index close lower than last night’s level on 14 occasions. Quite impressive stats.

Given the holidays around the globe it won’t come as a surprise to hear then that price action in US equities wasn’t hugely exciting yesterday. The S&P 500 (+0.17%) and Dow (-0.13%) both faded into the close despite the Nasdaq (+0.73%) notching up a new record high. Initially sentiment was boosted by that news of a tentative agreement by Congress on a near $1.2tn spending bill, which is likely to be voted on in the coming days. In fact politics largely dominated yesterday’s session with banks under the spotlight after President Trump said in an interview with Bloomberg News that he is actively considering a breakup of Wall Street Banks and specifically calling for a “21st century” version of the 1933 Glass-Steagall law. Any weakness in bank stocks was short lived however with JP Morgan (+0.10%), Morgan Stanley (+0.88%) and Bank of America (+1.24%) all finishing up. In addition to the bank comments, Trump also added that he is open to increasing the US gasoline tax rate with additional revenues to be used to fund infrastructure development.

Away from this Treasury yields crept higher as the session progressed with the curve steepening too. 10y yields finished the day up 3.8bps at 2.319% while 30y yields rose a little over 5bps to close back above 3.000% again. Much of that move reflected comments from Treasury Secretary Steven Mnuchin who said that ultralong bond issuance “could absolutely make sense”. He added that the Treasury currently “have a working group looking at it”. Meanwhile, following the soft Q1 GDP print last week the Atlanta Fed released their initial first estimate of Q2 growth which they have pegged at 4.3%.

Staying with the macro, the main focus of the data yesterday was the ISM manufacturing reading which came in at a slightly disappointing 54.8 for April (vs. 56.5 expected) from 57.2 in March. At face value the index still remains firmly in expansion territory and points to much stronger growth than what the initial Q1 real GDP figures suggest. However there were some disappointing aspects within the details of the report. Ahead of payrolls this week the employment component tumbled 6.9pts to 52.0 which is essentially the biggest one-month decline since July 2011 when there were concerns about the US debt ceiling. The new orders component was soft too, falling 7.0pts to 57.5, albeit still at an elevated level. There was however some improvement seen in components for production and exports.

In terms of other data, the final manufacturing PMI for April was confirmed at 52.8 which was unchanged relative to the flash reading. Away from that personal spending in March came in flat after consensus was for a +0.2% mom rise. The February reading was also revised down a tenth while personal income was also below market (+0.2% mom vs. +0.3% expected). Meanwhile, as expected the PCE deflator (-0.2% mom) fell while the PCE core (-0.1% mom) was also down and in line with expectations. That has pushed the YoY rate down two-tenths to +1.6%.

This morning in Asia and with the exception of China we’ve seen most major bourses advance in early trading. The Nikkei (+0.70%), Hang Seng (+0.27%) and Kospi (+0.84%) are all up with the latter briefly edging above its all time record close at one stage. In China the Shanghai Comp (-0.35%) is in the red perhaps in response to a disappointing run of data in recent days. After the official PMIs were confirmed as weakening in April over the weekend this morning we saw the Caixin manufacturing PMI come in at 50.3 for April which is both down from 51.2 the month prior and also well below expectations for 51.3. Meanwhile in Australia the Aussie Dollar (+0.34%) is firmer after the RBA left rates on hold as expected.

Moving on. Today brings the latest monthly ECB purchasing data where hopefully we’ll get a much better guide to how the ECB is splitting their taper between corporate and government bonds. April was full of holidays which distorted the weekly data but viewed over the month we should get some guidance. Given the bank holidays yesterday in Europe we thought it would be worth quickly recapping some of the main news from the weekend which we touched on in yesterday’s EMR. In Italy former PM Renzi won the Democratic Party Primary with over 70% of votes which will likely be seen as a strong mandate ahead of next year’s general election. In France recent polls still point to a 20pp lead for Macron over Le Pen ahead of this weekend’s second round election. Finally the European Council released the guidelines intended to govern the EU’s Brexit negotiations with the UK after they were unanimously backed in Brussels. EU President Tusk noted that the unanimous support gives the EU a “strong political mandate for negotiations”. We also had a wrap up of what has been a decent earnings season so far on both sides of the pond.

Looking at the day ahead, this morning in Europe we’ll get the final April manufacturing PMI readings along with a first look at the data for the UK and the periphery. We’ll also get the Euro area wide unemployment rate for March. The only data due out in the US this evening is vehicle sales data for April. Away from the data the ECB’s Nouy is set to speak at two separate events today while Nowotny also speaks this evening. Germany’s Merkel is also due to meet Russia’s Putin which might be worth keeping an eye on. On the earnings front we’ve got 43 S&P 500 companies reporting including Merck, Pfizer (both at the open) and Apple (after the close).

In terms of the remainder of this week, kicking things off tomorrow will be Germany where the April unemployment numbers are due to be released. Shortly after that we’ll get Euro area PPI for March and then the advanced Q1 GDP report for the Euro area. In the US tomorrow we’ll get the ADP employment change report in April and the final April PMIs and ISM non-manufacturing reading. In the evening on Wednesday all eyes then turn over to the Fed meeting. In Asia on Thursday the early data is out of China with the remaining April Caixin PMIs. In Europe we’ll also get the remaining April services and  composite PMIs as well as Euro area retail sales in March and UK money and credit aggregates data. In the US on Thursday the data includes initial jobless claims, Q1 nonfarm productivity and unit labour costs, March trade balance, March factory orders and the final revisions to March durable and capital goods orders. With little of note in Europe on Friday the main focus will be on the US where we’ll get the April employment report including nonfarm payrolls.

Away from the data, this week’s Fedspeak is reserved for Friday when we’ll hear separately from Fischer, Williams and Yellen, as well as a panel debate with Rosengren, Evans and Bullard. Over at the ECB, in the remainder of this week we are due to hear from Lautenschlaeger, Praet, Draghi and Mersch on Thursday. Other important events this week include Wednesday’s live televised debate between French presidential candidates Macron and Le Pen, Wednesday’s meeting between President Trump and Palestinian Authority President Abbas and UK local elections on Thursday. Finally, on the earnings front a total  of 131 S&P 500 companies report this week and 85 Stoxx 600 companies report. Amongst those still to report from tomorrow are BNP Paribas, Facebook, Tesla, Time Warner, HSBC, BMW, Shell and VW.


i)Late MONDAY night/TUESDAY morning: Shanghai closed DOWN 10.95 POINTS OR .35%  OR / /Hang Sang CLOSED UP 81.00 PONTS OR .33% .  The Nikkei closed UP 135.18 OR 0.70% /Australia’s all ordinaires  CLOSED DOWN .08%/Chinese yuan (ONSHORE) closed DOWN at 6.8953/Oil UP to 49.25 dollars per barrel for WTI and 52.03 for Brent. Stocks in Europe OPENED IN THE GREEN   ..Offshore yuan trades  6.8920 yuan to the dollar vs 6.8953 for onshore yuan. NOW  THE OFFSHORE IS A LITTLE WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN SLIGHTLY WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN  A LITTLE STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE WEAKER DOLLAR. CHINA IS HAPPY



More rhetoric from Kim as he is furious after the USA and Sout Korea deployed lancer bombers in war exercises conducted off the Korean peninsula

(courtesy zero hedge)

Furious North Korea Threatens “Final Doom” After US Deploys Strategic Bombers

Another day, another jawboning escalation out of North Korea, which on Tuesday accused the US of pushing the Korean peninsula “to the brink of nuclear war” after two strategic U.S. bombers flew training drills with the South Korean and Japanese air forces in another show of strength. As Reuters reports, the two supersonic B-1B Lancer bombers were deployed amid rising tensions over North Korea’s pursuit of its nuclear and missile programs.

North Korea said the bombers conducted “a nuclear bomb dropping drill against major objects” in its territory at a time when Trump and “other U.S. warmongers are crying out for making a preemptive nuclear strike” on the North.

“The reckless military provocation is pushing the situation on the Korean peninsula closer to the brink of nuclear war,” the North’s official KCNA news agency said on Tuesday.

“Any military provocation against the DPRK will precisely mean a total war which will lead to the final doom of the US.”

A pair of B-1B Lancer bombers

The US air force said in a statement the bombers had flown from Guam to conduct training exercises with the South Korean and Japanese air forces.

The DoDBuzz website first reported yesterday that two Air Force B-1B Lancer bombers flew near the Korean Peninsula Monday, just days after North Korea conducted another failed ballistic missile launch.

The bombers departed Andersen Air Force Base, Guam, to conduct “bilateral training missions with their counterparts from the Republic of Korea and Japanese air forces,” said Lt Col Lori Hodge, PACAF public affairs deputy director. Hodge did not specify how close the bombers flew to the Korean Demilitarized Zone, known as the DMZ, but said they were escorted by South Korean fighter jets.


When asked if the bombers were carrying weapons, the command wouldn’t disclose, citing standard operating policy. In September, the service put on a similar show of force over South Korea, deploying B-1B bombers alongside South Korean fighter jets after another nuclear test from North Korea. The U.S. military has maintained a deployed strategic bomber presence in the Pacific since 2004.


While Hodge said the training was routine, the recent flyover marks another in a series of events the U.S. has taken to deter North Korea’s Kim Jong Un from additional ballistic missile tests — the latest which occurred April 28.

Ironically, the flight of the two bombers on Monday took place roughly at the same time as Donald Trump said he would be “honored” to meet North Korean leader Kim Jong Un in the right circumstances, and as his CIA director landed in South Korea for talks. South Korean Defense Ministry spokesman Moon Sang-gyun told a briefing in Seoul that Monday’s joint drill was conducted to deter provocations by the North.

Also overnight, Reuters reported that the U.S. military’s THAAD anti-missile defense system has reached operational capacity in South Korea, although they added that it would not be fully operational for some months. China has repeatedly expressed its opposition to the system, whose powerful radar it fears could reach inside Chinese territory. Foreign Ministry spokesman Geng Shuang again denounced THAAD on Tuesday.   

 “We will resolutely take necessary measures to defend our interests,” Geng said, without elaborating.

Asked about Trump’s suggestion he could meet Kim, Geng said China had noted U.S. comments that it wanted to use peaceful means to resolve the issue. Trump has been recently been full of praise of Chinese President Xi Jinping’s efforts to rein in its neighbor. “China has always believed that using peaceful means via dialogue and consultation to resolve the peninsula’s nuclear issue is the only realistic, feasible means to achieve denuclearisation of the peninsula and maintain peace and stability there, and is the only correct choice,” Geng told a daily news briefing.

It was widely feared North Korea could conduct its sixth nuclear test on or around April 15 to celebrate the anniversary of the birth of the North’s founding leader, Kim Il Sung, or on April 25 to coincide with the 85th anniversary of the foundation of its Korean People’s Army. The North has conducted such tests or missile launches to mark significant events in the past. Instead, North Korea conducted an annual military parade, featuring a display of missiles on April 15 and then a large, live-fire artillery drill 10 days later.

So far the joint US-Chinese deterrence appears to be having an effect on the Kim regime.




China unleash an oil embargo on North Korea which would cripple the country:


Further North Korea Nuclear Testing May Goad China Into Oil Embargo

Authored by Zainab Calcuttawala via,

Chinese diplomatic analysts believe further nuclear tests by North Korea could push Beijing over the edge, prompting an oil embargo that would deal a devastating blow to Pyongyang’s stability.

US Secretary of State Rex Tillerson told Fox News that he had been informed that “China would be taking sanctions actions on their own,” should Pyongyang conduct another nuclear test.

Crude oil is very likely to be included as part of new U.N. sanctions if North Korea continues with its provocative nuclear tests, and China will almost certainly endorse such an effort,” Sun Xingjie, an expert on North Korea from Jilin University said on the matter.

International sanctions against North Korea have been in place for the past several years, with the most recent United Nations-backed round targeting the country’s shipping network. A Chinese oil embargo would likely debilitate Kin Jong-un’s government.

“Instead of an oil embargo of just one or two months, which is unlikely to have a major impact on North Korea’s strategic oil reserves, we are talking about a halt in Chinese crude oil supplies for at least six months. That would be a real nightmare for Kim, said Sun.

The expert said Beijing would likely require a mandate from the U.N. to take new actions against Pyongyang absent further nuclear activity.

Gasoline prices in North Korea jumped by as much as 83 percent this week on the back of reports that China is mulling over crude sanctions for the unruly neighbor.

While China has historically supported—above all—the stability of the Pyongyang regime as a means of avoiding a refugee crisis should the political system there collapse, now it is putting equal weight on regime stability and the denuclearization of that same regime.



none today



China angry at the USA deployment of the THAAD anti missile defense system in South Korea. They warned of consequences

(courtesy zero hedge)

China Demands “Immediate Halt” Of US Missile Shield Deployment In South Korea

As we pointed out earlier today, Reuters cited US military officials who said that the U.S. military’s THAAD anti-missile defense system has “reached initial intercept capability” in South Korea, although they added that it would not be fully operational for some months. Just hours after the announcement, Beijing lashed out at DC and demanded an “immediate halt” to the controversial US missile shield. China’s Foreign Ministry spokesperson Geng Shuang voiced the government’s position against the move during a briefing on Tuesday.

“We oppose the deployment of the US missile system to South Korea and call on all parties to immediately stop this process. We are ready to take necessary measures to protect our interests,” he said according to AFP, adding that “China’s position on the THAAD issue has not changed.”

THAAD missile captured during launch

As Reuters noted earlier, the spokesperson didn’t specify what “necessary measures” China had in mind. However, responding to the THAAD installation, last week China announced on Thursday that it will stage live-fire exercises and test new weapons to protect its security.

Curiously, while on one hand Beijing lashed out at the shield’s deployment, on the other, the foreign ministry expressed support for US President Donald Trump’s surprise comments that he would be “honored” to meet North Korean leader Kim Jong-Un under the right conditions.

Asked about Trump’s remarks, Geng said that China “has always believed that dialogue and consultation… is the only realistic and viable way to achieve denuclearisation.”

“We also said many times that the US and DPRK… should make political decisions at an early date, take action and show good faith so that we can create a better atmosphere for resuming the peace talks and settling the issue,” he added.

Beijing has previously expressed loud concerns over the THAAD system and joint US-South Korean drills near the Korean Peninsula, consistently urging all the parties involved to find a peaceful solution to the volatile situation in the region. Backed by Russia, it also proposed a halt to military drills in exchange for an end to Pyongyang’s missile and nuclear tests during a United Nations Security Council (UNSC) session held in New York on Friday.

Moscow likewise considers the stationing of the THAAD system to be an “additional destabilizing factor for the region” amid alarmingly increasing tensions. It has called on Washington and Seoul to reconsider the decision.

Beijing has imposed a host of measures seen as economic retaliation against the South for the THAAD deployment, including a ban on tour groups. Retail conglomerate Lotte, which previously owned the golf course, has also been targeted, with 85 of its 99 stores in China shut down, while South Korea’s biggest automaker Hyundai Motor has said its Chinese sales have fallen sharply. The THAAD deployment comes as tension soars on the Korean peninsula following a series of missile launches by the North and warnings from the administration of US President Donald Trump that military action is an “option on the table.”

Further complicating matters, Trump stunned Seoul last week when he suggested South Korea should pay for the $1 billion THAAD system. “I informed South Korea it would be appropriate if they paid. It’s a billion-dollar system,” Trump was quoted as saying in a published report. “It’s phenomenal, shoots missiles right out of the sky.”

Seoul retorted that under the Status of Forces Agreement that governs the US military presence in the country, the South would provide the THAAD site and infrastructure while the US would pay to deploy and operate it.

Meanwhile, Thomas Karako, the director of the Missile Defense Project at the Center for Strategic and International Studies, noted that South Korea’s sole THAAD battery does not quite have the range to cover the entire country. But he called it an important first step. “This is not about a having a perfect shield, this is about buying time and thereby contributing to the overall credibility of deterrence,” Karako told AFP.

“South Korea with THAAD helps communicate to the North that today is not a good day to attack. It doesn’t mean that they could not do a lot of damage — they would — but it strengthens the overall posture.”

That, however, is irrelevant to China which sees the THAAD deployment as drastically shifting the regional balance of power; as such look forward to aggressive moves by Beijing which will now seek to enforce its own national interest, even if it means destabilizing South Korea, while boosting Kim’s regime.



Kyle Bass sees trouble ahead with China’s Wealth Management Products which total 4 trillion out of a total 34 trillion debt market

(courtesy Bloomberg)

I urge you all to see the video at Bloomberg

Kyle Bass Sees China’s Wealth Management Products as Key Risk

May 2, 2017, 12:51 PM EDT



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Hayman’s Kyle Bass Sees Signs of Credit Crisis in China

Kyle Bass, Hayman Capital Management’s chief investment officer and managing partner, discusses China’s economy and the global risks to financial markets with Bloomberg’s Erik Schatzker at the Milken Institute Global Conference. (Source: Bloomberg)

Kyle Bass, founder of Hayman Capital Management, warned that ballooning assets in Chinese wealth management products are another sign of a looming credit crisis in the nation.

“Some of the longer-term assets aren’t doing very well,” Bass said on Bloomberg TV from the annual Milken Institute Global Conference in Beverly Hills, California. “As soon as liabilities have problems all hell breaks loose.”

The wealth management products, or WMPs, have swelled to $4 trillion in assets in the last few years, he said. Bass has been sounding the alarm for some time that debt-burdened Chinese banks need to be restructured.

For a QuickTake on WMPs, click here

The credit system expanded “too recklessly and too quickly,” the hedge fund manager said. It’s beginning to unravel, he said, but doesn’t know how long that will take.

Early last year, Bass called for a 30 percent devaluation in the yuan against the dollar, and he’s since opened two Asia-focused funds to wager on the imbalances in the region, which he said could extend to Hong Kong and Taiwan.

His flagship Hayman Capital master fund returned almost 25 percent last year on bets placed across global rates, currencies and commodities, Bloomberg reported in January.




It does not look good for Itays national carrier as they have filed for bankruptcy protection for the 2nd time in 9 years.  Nobody is setting up to the plate to provide financing for the airline

(courtesy zero hedge)

Italy’s National Carrier Alitalia Files For Bankruptcy

As was widely expected, on Tuesday Italy’s national carrier Alitalia filed for its second bankruptcy in 9 years, after its board decided to formally ask the ministry of economic development to put the money-losing carrier, partly owned by UAE’s Etihad, under special administration after workers rejected its latest rescue plan meant to unlock much-needed financing.

As discussed previously, a majority of the company’s workers last week voted against a restructuring plan that envisaged cuts to jobs and salaries, making it impossible for the loss-making airline to secure funds to keep its aircraft flying. In retrospect, many more workers will now have lost not only much of their compensation but also their jobs, even if for the time being the airline’s flight schedule would remain unchanged.

Once Alitalia is put under administration, the Rome government will appoint one or several commissioners who will assess whether it can be overhauled – either as a standalone company or through a partial or total sale – or should be wound up.

A worst-case scenario was presented by Italy’s Economic Development Minister, who on Sunday said that a sudden collapse of the loss-making national carrier “would be a great shock for Italy’s economy.” Rome has given the crisis-hit airline a short-term lifeline, a bridge loan of up to €400 million to see it through a process whereby an administrator will decide if it can be sold as a going concern or should be liquidated.

However, it is the worst case outcome that has Italian government officials spooked. “A [sudden closure] would be a shock for GDP much greater than the scenario that we are looking at: a brief period of six months covered by a bridging loan from the government so as to find a buyer who could provide services that Italians need as travelers,” he said in an interview with Sky TG24 television.

Making matters worse, rival airlines have shown little interest in buying Alitalia and creditors have refused to lend more money after workers last Monday rejected the above mentioned rescue plan that would have reduced pay and cut 1,700 jobs. It is unclear how yet another “shock” to Italy’s GDP would reverberate across Europe, although even without this adverse development, Italy’s unemployment rose from 11.5% to 11.7% in March according to government data released earlier.





The Italian Government approves the Alitalia bankruptcy as it bonds collapse into the teens.  A complete liquidation will cause 12,000 people to lose their jobs as well as a big hit the Italy’s GDP

this will be a continuing story..

(courtesy zero hedge)


Italian Government Approves Alitalia Bankruptcy, Bonds Collapse

Earlier we reported that Italy’s national carrier, Alitalia, did what many expected it to do after last week’s rescue plan, which would have cut 1,700 jobs and slashed pay, failed and filed for bankruptcy. What was less expected is that just hours after filing, the Italian government approved the bankruptcy process following a short cabinet meeting, an outcome that will lead to either Alitalia’s sale or liquidation, raising the possibility that Alitalia it will follow in the path of KLM and Iberia in ending a storied history as one of Europe’s major standalone airlines.

Why the speedy decision to grant administration proceedings caught many investors, and certainly bondholders by surprise, is that as we noted earlier, the carrier is losing about €1 million ($1.1 million) a day and without government support risks running out of cash by the middle of May. The government has already thrown it a short-term lifeline, a bridging loan of up to 600 million euros to see it through the bankruptcy process. Absent a sale – which looks highly unlikely – or a nationalization, up to 12,000 workers are likely to lose their jobs, potentially resulting in another major shock to the Italian economy.


This is precisely the scenario that the Italian Economic Development minister warned about last Sunday:  “A [sudden closure] would be a shock for GDP much greater than the scenario that we are looking at: a brief period of six months covered by a bridging loan from the government so as to find a buyer who could provide services that Italians need as travelers,” he said in an interview with Sky TG24 television.

On the other hand, outraged at repeated bailouts that have cost taxpayers more than 7 billion euros over a decade, many Italians are urging the government to resist the political temptation to rush to its rescue again. They got their wish, if only for now.

As the FT reports, the centre-left Italian government — led by prime minister Paolo Gentiloni — said it would provide the carrier a €600m bridge loan that will allow the airline to operate for about six months or longer, likely until just after next year’s Italian elections. Carlo Calenda, economic development minister, said the €600m was the “maximum” the government could afford. He said administrators would be tasked with being “open to potential acquirers” and to “guarantee services, routes and personnel” while ensuring the government spend the least amount of public money possible.

Once the bridge loan runs out, unless a willing buyer has emerged, a liquidation becomes an all too real option.

Still, the government may change its mind: Gentiloni’s government has so far ruled out nationalising the airline and returning it to state control, amid polls showing that Italians would rather let it collapse. The terms of such a government loan have already been the subject of informal talks with the EU competition authorities, which would have to make sure it does not violate Brussels’ rules on state aid.

Of course, his predecessor Matteo Renzi also said Italy would never bail out Monte Paschi… until it did last December.

Some more perspective on the company’s fall from grace courtesy of FT:

The decision to enter administration proceedings caps a sharp reversal in Alitalia’s fortunes since the summer of 2014, when Etihad took a 49 per cent stake in the Italian airline as part of its drive towards global expansion. But since then, it has been hobbled by its high cost base and rising competition from low-cost rivals in the European market, especially Ryanair.


Alitalia adopted an aggressive restructuring plan in March, which was negotiated with trade unions, but it was rejected by the airline’s nearly 12,000 employees in a vote last month. This meant that the airline’s main investors, including Italian banks UniCredit and Intesa Sanpaolo, could no longer commit to a €2bn financing package to give Alitalia another lease of life.

Ultimately, Italy may have no choice but to bail out yet another insolvent company. Despite polls showing most Italians would favour a folding of Alitalia, rather than any new bailout, the sight of several thousand workers in key hubs such as Rome and Milan being laid off could be problematic for Mr Gentiloni’s government.

The matter has quickly risen to the top of the political agenda with Matteo Renzi. The former prime minister, who was re-elected on Sunday to the helm of the ruling Democratic party, has vowed to come up with a plan to keep Alitalia afloat by the middle of the month.

Yet while the final fate of Alitalia remains to be decided, bondholders aren’t sticking around for the answer, and after trading north of par in November, expecting that this outcome would never materialize, the bonds have since crashed into the teens, suggesting what is left of the company has liquidation value at best.




Greece is going to be raped some more as they settle for more austerity measures in return for bailout money.  Why they do not leave the EU is beyond me!

(courtesy zero hedge)


“There Was White Smoke”: Greece Reaches Deal With Lenders, Promising Even More Austerity

Greek government bond yields fell after Greece and its lenders said they reached a long-awaited deal on reforms required to release further bailout funds. With a promise to further cut pensions and give taxpayers fewer breaks, Greece paved the way for the disbursement of further rescue funds from international lenders and possibly opened the door to reworking its massive debt Reuters reported.

The deal was reached early on Tuesday morning, when officials from both sides said they had agreed on a package of bailout-mandated reforms, ending six months of staff-level haggling. Greek Finance Minister Euclid Tsakalotos announced it with a term associated with papal elections. “There was white smoke,” he told reporters.

As part of the reforms, Athens has promised to cut pensions in 2019 and cut the tax-free threshold in 2020 to produce savings worth 2 percent of gross domestic product. If Greece outperforms targets, it will be allowed to activate a set of measures offsetting the impact of the additional austerity, which includes mainly lowering taxes. Athens also agreed to sell coal-fired plants and coal mines equal to about 40% of its dominant power utility Public Power Corp’s capacity.

On the budgetary target level, the lenders are now likely to decide among themselves on Greece’s medium-term primary surplus targets, a key element for granting further debt relief.


In a draft document seen by Reuters, the IMF says Greece can reach a primary surplus – the budget balance excluding debt repayments – of 2.2 percent in 2018 and aim at 3.5 percent annually in 2019-2021. It suggests the primary surplus target be reduced to 1.5 percent of GDP thereafter.

Euro zone lenders, however, believe Greece must sustain a 3.5 percent GDP primary surplus target over a longer period.

Last year’s Greek primary surplus was 4.2 percent, according to the lenders. Whether that can be maintained is unclear.

In a statement after the deal, European Commissioner for Economic Affairs Pierre Moscovici said that the “agreement reached overnight in Athens on the Greek Stability Support Program is a very positive development following months of complex negotiations” adding that “swift implementation of these commitments should enable the Eurogroup to endorse this agreement at its next meeting.”

He also said that a second review is strategic for Greece as it not only delivers on key reforms to modernize the Greek economy but also secures a credible fiscal path for the years to come, beyond the ESM program.

“It is now for all partners to reach an understanding on the question of Greece’s debt in the coming weeks.”

Now comes the hard part, however, as Greece needs to put the new measures, which also include opening up the energy market to competition, into law before euro zone finance ministers approve the disbursement of loans, probably at the next scheduled Eurogroup meeting on May 22. Athens needs the funds urgently to repay €7.5 euros in debt maturing in July.

The Eurogroup meeting, meanwhile, may mark the first formal discussion of debt relief for Greece, an issue that means different things to each side. As has been the case for the past two years, the IMF believes that Greek debt is unsustainable at 179% of gross domestic product and is reluctant to participate in further funding without a debt relief agreement. EU lenders, on the other hand, have ruled out forgiving the debt and refused to discuss such things as cutting repayment rates until after a reform-for-cash deal is cut. Both groups of lenders have differed markedly about what Greece’s budget is capable of sustaining.

Which means that the still “deal” remains a blank check. Nonetheless, the Greek government hailed Tuesday’s agreement as now allowing the yet-to-be-defined relief go ahead. “The government believes that this road, despite the difficulties, will lead to the country’s exit from bailouts,” Interior Minister Panos Skourletis told ERT TV. “What’s important after closing the bailout review is to have a roadmap for debt relief.”

Skourletis repeated Greece’s mantra that demanding increasing amounts of austerity risks alienating great swathes of EU citizens. “The consequences for every government, including ours, that is obliged to implement bailout measures, is the risk of damaging the relationship with society, particularly the groups that you want to represent,” he said, well aware of the risks of promising more austerity and being unable to deliver.

Should the Greek population revolt at even more austerity imposed upon it, the current government may face a turbulent summer in which labor strikes once again drag down the depressed economy, potentially ushering in the New Democracy party back in power, and reseting the Greek process back to square one.





German Migrant Crime Spiked In 2016

Non Germans make up 10% of the population yet they account for 30.5% of all crimes in the country in 2016

(courtesy Kern/Gatestone Institute)

Authored by Soren Kern via The Gatestone Institute,

  • Although non-Germans make up approximately 10% of the overall German population, they accounted for 30.5% of all crime suspects in the country in 2016.
  • Nearly 250,000 migrants entered the country illegally in 2016, up 61.4% from 154,188 in 2015. More than 225,000 migrants were found living in the country illegally (Unerlaubter Aufenthalt) in 2016.
  • The Berlin Senate launched an inquiry into why migrants disproportionally appear as criminals in the city-state compared to Germans.

An official annual report about crime in Germany has revealed a rapidly deteriorating security situation in the country marked by a dramatic increase in violent crime, including murder, rape and sexual assault.

The report also shows a direct link between the growing lawlessness in Germany and Chancellor Angela Merkel’s decision to allow in more than one million mostly male migrants from Africa, Asia and the Middle East.

The report — Police Crime Statistics 2016 (Polizeiliche Kriminalstatistik, PKS) — was compiled by the Federal Criminal Police Office (Bundeskriminalamt, BKA) and presented by Interior Minister Thomas de Maizière in Berlin on April 24.

The number of non-German crime suspects (nichtdeutsche Tatverdächtige) legally residing in Germany jumped to 616,230 in 2016, up from 555,820 in 2015 — an increase of 11% — according to the report. Although non-Germans make up approximately 10% of the overall German population, they accounted for 30.5% of all crime suspects in the country in 2016, up from 27.6% in 2015.

In this year’s report, the BKA created a separate subcategory called “migrants” (Zuwanderer) which encompasses a combination of refugees, pending asylum seekers, failed asylum seekers and illegal immigrants.

According to the BKA, the number of migrant crime suspects (tatverdächtiger Zuwanderer) in Germany in 2016 jumped to 174,438 from 114,238 in 2015 — up 52.7%. Although “migrants” made up less than 2% of the German population in 2016, they accounted for 8.6% of all crime suspects in the country — up from 5.7% in 2015.

In terms of non-German crime suspects residing legally in Germany, Turks were the primary offenders in 2016, with 69,918 suspects, followed by Romanians, Poles, Syrians, Serbs, Italians, Afghans, Bulgarians, Iraqis, Albanians, Kosovars, Moroccans, Iranians and Algerians.

In terms of migrant crime suspects, Syrians were the primary offenders, followed by Afghans, Iraqis, Albanians, Algerians, Moroccans, Serbs, Iranians, Kosovars and Somalis.

Police in Bremen, Germany frisk a North African youth who is suspected of theft. (Image source: ZDF video screenshot)

The report’s other findings include:

  • Violent crime surged in Germany in 2016. These include a 14.3% increase in murder and manslaughter, a 12.7% increase in rape and sexual assault and a 9.9% increase in aggravated assault. The BKA also recorded a 14.8% increase in weapons offenses and a 7.1% increase in drug offenses.
  • Non-German crime suspects committed 2,512 rapes and sexual assaults in Germany in 2016 — an average of seven a day. Syrians were the primary offenders, followed by Afghans, Iraqis, Pakistanis, Iranians, Algerians, Moroccans, Eritreans, Nigerians and Albanians. German authorities have repeatedly been accused of underreporting the true scale of the migrant rape problem for political reasons. For example, up to 90% of the sex crimes committed in Germany in 2014 do not appear in the official statistics, according to André Schulz, the head of the Association of Criminal Police (Bund Deutscher Kriminalbeamter, BDK).
  • Non-German crime suspects committed 11,525 robberies in Germany in 2016 — an average of 32 a day. Moroccans were the primary offenders, followed by Algerians, Syrians, Georgians, Tunisians, Albanians, Afghans, Serbs, Iraqis and Iranians.
  • Non-German crime suspects committed 56,252 aggravated assaults in 2016 — an average of 154 a day. Syrians were the primary offenders, followed by Afghans, Iraqis, Iranians, Moroccans, Algerians, Somalis, Albanians, Eritreans and Pakistanis.
  • Bavaria was the German state most affected by non-German criminality, followed by North Rhine-Westphalia, Baden-Württemberg, Hesse, Berlin, Lower Saxony, Rhineland-Palatinate, Saxony, Hamburg, Schleswig-Holstein, Saxony-Anhalt, Brandenburg, Mecklenburg-Vorpommern, Saarland, Bremen and Thüringen.
  • Berlin was the German city most affected by non-German criminality, followed by Munich, Hamburg, Frankfurt, Cologne, Düsseldorf, Hanover, Stuttgart, Dortmund, Bremen, Leipzig, Nürnberg, Essen, Duisburg, Mannheim, Karlsruhe, Dresden, Freiburg im Breisgau, Chemnitz, Aachen, Bielefeld, Wuppertal, Augsburg, Bonn, Bochum, Gelsenkirchen, Wiesbaden, Münster, Kiel, Halle, Krefeld, Braunschweig, Mainz, Lübeck, Mönchengladbach, Erfurt, Oberhausen, Magdeburg and Rostock.
  • The BKA also recorded 487,711 violations of German immigration laws (ausländerrechtliche Verstöße), up 21.1% from 402,741 violations in 2015. Nearly 250,000 migrants entered the country illegally in 2016, up 61.4% from 154,188 in 2015. More than 225,000 migrants were found living in the country illegally (Unerlaubter Aufenthalt) in 2016.

The new data contradicts claims made by the BKA in December 2016 — just four months before the current report — that migrant criminality was actually decreasing.

During a press conference in Berlin on April 24, Interior Minister Thomas de Maizière admitted:

“The proportion of foreign suspects, and migrants in particular, is higher than the average for the general population. This cannot be sugarcoated. There is an overall rise in disrespect, violence and hate. Those who commit serious offenses here forfeit their right to stay here.”

Separately, officials in Bavaria revealed that the number of crimes committed by asylum seekers and refugees there increased by 58% in 2016. They accounted for 9.6% of all crimes committed in the state, up from 3.2% in 2015 and 1.8% in 2012. Syrians were the primary offenders, followed by Afghans, Iraqis and Nigerians.

“The increase in crime in Bavaria in 2016 is mainly due to foreign suspects, especially immigrants,” said Bavarian Interior Minister Joachim Herrmann.

At the same time, officials in Baden-Württemberg noted a 95.5% increase in the number of physical assaults involving at least one migrant in 2016.

Meanwhile, the Berlin Senate launched an inquiry into why migrants disproportionally appear as criminals in the city-state compared to Germans. In 2016, 40% of all crime suspects in the German capital were non-Germans.

None of this seems to be having an impact on the German elections set for September 24, 2017. Polls show that if the election for German chancellor were held today, Angela Merkel, who is largely responsible for the migration crisis, would be re-elected with 37% of the vote. Martin Schulz, the Social Democrat candidate who has pledged to increase migration to Germany even further, would win 29% of the vote and the anti-immigration Alternative for Germany would win 8%. For now, German voters appear to believe that the alternatives to Merkel are all worse.

Finally, we note Vijeta Uniyal’s comments that illustrate perfectly the level of cognitive dissonance among European officials at this crisis…

At the height of the European migrant crisis in early 2016, when masses of migrants were pouring into Europe, the German Green Party Chairwoman Katrin Göring-Eckardt could not control her joy.


“We have just received an unexpected gift in the form of people,” she told her fellow Germans, reminding them to be grateful.


This gift, she said, was going to make the country “more religious, more colourful, more diverse and younger.”


It was a gift, it turns out, that keeps on giving.




This is just out:  the EU wants 100 billion euros from the UK for breaking way.

As my good friend Robert stated to me:  “they are dreaming in technicolour”

(courtesy London’s Financial Times) and special thanks to Robert for sending this to us

Brussels hoists gross Brexit ‘bill’ to up to €100bn
The EU has raised its opening demand for Britain’s bill to an upfront gross payment of up to €100bn, according to Financial Times analysis of new stricter demands driven by France and Germany.

Read more




Putin and Trump hold their phone call and both are asking for restraint in dealing with Syria and North Korea;

(courtesy zero hedge)

Trump, Putin Hold Phone Call, Discuss North Korea, Syria; Agree To Set Up Meeting

As the White House announced late on Monday, today shortly after noon. Russia’s Vladimir Putin and U.S. President Donald Trump held a phone conversation in which they agreed to try to meet in July and work together to try to strengthen a shaky ceasefire in Syria, the Kremlin said in a statement.

“Vladimir Putin has called for restraint and decreasing of the level of tensions on the Korean peninsula” the statement said. “It has been agreed to work jointly on a diplomatic solution that will settle the crisis.”

The Kremlin called the talks between Putin and Trump business-like and constructive, and said the two leaders had emphasized coordinating their actions to fight international terrorism, the traditional cop out when the real topic of discussion is something entirely different.

Putin and Trump decided to “activate the dialogue between the heads of the foreign ministries of both countries who will seek variants to secure the ceasefire regime, stabilize it and control it,” the statement says. “The goal is to create the background that would help launch a real peace process in Syria. This means that Russia’s foreign minister and the US secretary of state would inform their leaders about progress in this regard.”

On North Korea, the Kremlin said Putin called for restraint and that the two leaders had agreed to work together to make diplomatic progress there too. The two presidents also spoke in favor of organizing a face-to-face meeting around the time of the G20 summit in Hamburg July 7-8.

Separately, a White House statement said that the two leaders agreed that “all parties must do all they can to end the violence” in Syria and that Trump and Putin also discussed working together against Islamic militants throughout the Middle East.

“The conversation was a very good one, and included the discussion of safe, or de-escalation, zones to achieve lasting peace for humanitarian and many other reasons,” a White House statement said.

The White House statement said Washington will send a representative to Syrian cease-fire talks in Astana, Kazakhstan, on Wednesday and Thursday. “They also discussed at length working together to eradicate terrorism throughout the Middle East. Finally, they spoke about how best to resolve the very dangerous situation in North Korea,” the statement said.


The run on Home Capital has now spread to another Canadian Mortgage lender, Equitable Group

(courtesy zero hedge)


Contagion: Home Capital Bank Run Spreads To Another Canadian Mortgage Lender

As discussed first thing this morning, the fate of Canada’s largest alternative mortgage lender, Home Capital Group, appears to have been decided over the weekend, when in the span of just one week, over 70% of the company’s deposit base had been withdrawn, effectively mothballing the business, leaving just a sale or liquidation as the two possible outcomes even as a $2 billion emergency line of credit keeps the company afloat, at least until HCG’s $12.8 billion in GICS mature some time over the next 30 to 60 days.

Predictably, the news of the ongoing bank run once again spooked shareholders, who sent its stock sliding by 10%, and wiping out two-thirds of the company’s market cap in under 2 weeks.

A bigger red flag emerged when concerns about possible contagion appeared to have been justified Canada’s Equitable Group, another alternative mortgage lender, said Monday it had started seeing “an elevated but manageable” decrease in deposit balances, traditionally a polite way by management to admit a bank jog is taking place. The company said that customers had withdrawn an average C$75 million each day between Wednesday and Friday, and while the withdrawals so far are modest, and represented 2.4% of the total deposit base, the recent HCG case study showed how quickly such a bank run could escalate. And while liquid assets remained at roughly C$1 billion after the outflows, the company also announced that it had taken out its own C$2 billion credit line with a group of Canadian banks, just in case the bank run was only getting started.

Having taken preemptive action, Equitable’s loans terms were more favorable than Home Capital’s, which as reported last week is paying an effective rate of 22.5% on the first half of the C$2 billion credit line that it tapped Monday from the Healthcare of Ontario Pension Plan.

According to Bloomberg, Equitable is paying a far more modest 1.25% interest rate on the drawn portion, and a 0.75% commitment fee and a 0.5% standby charge.

Trying to mitigate concerns, Andrew Moor, CEO of Equitable said that “the issues affecting the well-known trust company in Toronto are their issues alone, and it’s unfortunate the banking industry has been dragged into it.” He spoke on a call to discuss earnings, which were published almost two weeks earlier than planned due to the Home Capital selloff.

To be sure, looking at historical credit losses, Equitable would be deemed quite safe, barely ever having seen any, which in retrospect may be troubling: another company which is in the same boat is none other than Home Capital Group.

Following news of the Equitable loan, a relief rally sent shares of the lender soaring by 26% to C$46 in Toronto, helping recoup some of the 41% drop from last week. Other Canadian bank stocks that had fallen last week also recovered Monday. First National Financial Corp., a mortgage lender, jumped 2 percent. Bloomberg notes.

So while Canada’s nervous investors, not to mention its regulators, exhaled a breath of relief today hoping that things are back to normal even as they continue to keep a close watch on Equitable and other alt-lenders to see if the panic has subsided, attention turned to Home Capital’s bonds. Bloomberg reports that Home Capital’s bonds maturing in December next year were trading little changed at 90.6 cents on the dollar on Monday, according to Bloomberg data, yielding about 10 percent, compared with less than 3 percent on April 19. Home Capital also has C$325 million in 2.35 percent bonds maturing on May 24.

“Things are perhaps all right from the bondholder’s perspective, but not certain and the bonds reflect that,” said Mark Carpani, a portfolio manager at Ridgewood Capital Asset Management, with C$1.1 billion in assets. He said he doesn’t hold any Home Capital bonds and declined to comment at what level he’d consider buying them.

While an optimistic outlook may be warranted, the biggest risk as explained this morning, remains with HCG’s C$12.8 billion in GIC deposits which are essential to fund its mortgage business, and which represents 1 percent of the Canadian mortgage market. Withdrawals could accelerate as these short-term deposits mature.

What is the worst case scenario?  Declining deposits could lead to a windup of the company, which would be monitored by the federal bank regulator, the Office of the Superintendent of Financial Institutions, according to Bloomberg. The lender said Thursday it has hired BMO Capital Markets and RBC Capital Markets to conduct a review of strategic options, signaling that a sale may be on the table.

“OSFI maintains ongoing relationships with the financial institutions it supervises,” Annik Faucher, an OSFI spokeswoman, said by email. “While we are prevented by law from discussing the affairs of the individual financial institutions we regulate, or our ongoing supervisory work, I can confirm that OSFI is continuing to monitor the situation closely.”

Concern about the viability of HCG has extended to the Canadian government itself, with Finance Minister Bill Morneau saying in a statement that he has been monitoring the Home Capital situation “very closely.”

“I was pleased to see Home Capital’s funding issues resolved by market participants,’’ Morneau was quoted as saying. “What I’ve seen over the last few days is proof the system is working as it should, where institutions facing challenges find market-based solutions.”

Actually, the funding issues are anything but resolved, as the next 30-60 days may reveal.

However, it is perhaps the hint of a government backstop that prompted Home Capital’s biggest investor to announce he is sticking with the company, adding to its position. Toronto-based Turtle Creek Asset Management Inc., which owned 14% of Home Capital as of the end of February, praised the lender for its low loss rate and underwriting practices.

“To be clear, we have not sold shares; indeed, the opposite is the case,” according to an investor letter, signed by Chief Executive Officer Andrew Brenton, managing partner Jeffrey Cole, and managing partner Jeffrey Hebel. “We are obviously not happy with recent developments at Home Capital, but we remain focused on long-term value creation for you, our fellow investors.

Well, as long as the “fellow investors” are fine with the short-term value destruction, all should be well. Ironically, for investors like Brenton, the “best” possible outcome would be the worst one, or runaway contagion and bank runs, which would force the government to step in and do what the US government did nearly a decade ago: bail out not only Canada’s housing market, but also its insolvent mortgage lenders, as well as any other banks and financial institutions that would be slammed by the bursting of Canada’s housing bubble



At the end of today, Apple reported:

They missed on revenue due to declining sales in China.  This should have a damper effect on global trading for tomorrow

(courtesy zero hedge)


Apple Slides After Missing Revenue, iPhones; China Sales Disappoint

With Apple trading at all time highs (and with a quarter trillion in cash on the books), the market was wondering if AAPL can once again surprise to the upside as well as guide what it plans to do with its cash hoard.  It tried, but it couldn’t quite get there.

Apple reported Q2 earnings which while beating on the bottom line, missed on revenue, and also missed on iPhone sales, as Apple sold 50.8 million iPhones, below the 51.4 million expected, and also down 0.8% from a year ago, and also missed on ASPs while Chinese revenues disappointed once again declining by 14% Y/Y. The company also forecast $43.5 billion to $45.5 billion in revenue for the current quarter, below analysts’ estimates of $45.7 billion.

Earnings of $2.10 were higher than the $2.01 expected, on revenue of $52.9 billion, which missed expectations of $53.4 BN expected, although still 4.9% higher than a year ago.

While sales grew across the globe as usual, revenue in China declined by 14% in the quarter, the 5th consecutive quarterly decline in a row.

The results in a nutshell:

  • Q1 EPS: $2.10 Exp. $2.02
  • Q1 Revenue: $52.9, Exp. $53.1Bn
  • Gross margin: 38.9%, just above the Exp. 38.3%
  • iPhone unit sales: 50.8 milion, Exp. 51.4 million. iPhone sales generated $33.2 billion in revenue, 63 % of total.
  • iPhone average selling price: $655 , Exp. $666

Putting Apple’s numbers in context: in Q1 2017 iPhone sales generated 63% of the company’s total revenue, down from 69% last quarter but well above the 2.5% in Q1 2008.

Apple also provided the following guidance for its fiscal 2017 second quarter:

  • revenue between $43.5 billion and $45.5 billion, below the exp. $45.7BN
  • gross margin between 37.5 percent and 38.5 percent, in line with the exp. 38.3%
  • operating expenses between $6.6 billion and $6.7 billion

Tim cook was predictably happy:

“We generated strong operating cash flow of $12.5 billion and returned over $10 billion to our investors in the March quarter,” said Luca Maestri, Apple’s CFO. “Given the strength of our business and our confidence in our future, we are happy to announce another $50 billion increase to our capital return program today.”

Some more silver lining: Tim Cook has sought to highlight Apple’s services business, the fastest growing part of the company last year. Sales of offerings like iCloud, the App Store and Apple Music grew 18% to $7.04 billion in the quarter (or about 13% of total revenue) however declined modestly from last quarter. Apple said earlier this year that it aims to double annual services revenue to more than $50 billion by fiscal 2021.

Shareholders, however, were more focused on the iPhone sales number and the stock slid afterhours.

Perhaps to assuage their pain, Apple also announced that its Board of Directors has authorized an increase of $50 billion to the Company’s program to return capital to shareholders and is extending the program timeframe by four quarters. Under the expanded program, Apple plans to spend a cumulative total of $300 billion by the end of March 2019.

The company also said that as part of the latest update to the program, the Board has increased its share repurchase authorization to $210 billion from the $175 billion level announced a year ago.

The result in chart format:

While Apple Net Income grew 4.9% Y/Y, a more troubling metric was the modest 0.8% decline in iPhone sales in Q2.

Q2 Revenue of $52.9 billion missed expectations of $53.1 billion.

Product sales: the biggest red flag, was the decline in iPhone sales.  Apple also announces it sold 8.9 million iPads in Q217, a 13% drop from the 10.3 million units in the year-ago quarter.  Apple also said it sold 4.2 million Macs in Q217, compared to 4.034 million units in the year ago quarter. This represents 4% year-over-year unit sales growth.

Regional breakdown: sales grew in every region expect China where they declined by 14%

Finally, while the company’s record cash hoard grew once more, rising to $256 billion total, the cash number net of debt actually declined modestly to $158 billion. As a reminder, most of this cash remains locked outside of the US.

For now, shareholders are not impressed.


Saudi Prince sends crude tumbling below $47.50

(courtesy zerohedge)

Oil Suddenly Drops To 6-Month Lows After Saudi Prince Comments

Driven by both a technical level break and comments from Saudi crown prince bin Salman, WTI Crude just tumbled to below $47.50 – its lowest since early November

Breaking below last week’ slows, testing stops below early March’s lows…


WTI broke down to pre-OPEC deal levels…

After Saudi Crown Prince Mohammed bin Salman commented… saying OPEC and Non-OPEC deal was unprecedented, and that the optimistic scenario for oil prices if $55, and $45 is lowest.


And we also note that RBOB (Gasoline) prices have tumbled to 8-month lows…

(courtesy Paraskova/

OPEC Deal Backfires: Saudis Lose Market Share To Iran, Iraq

Authored by Tsvetana Paraskova via,

Since the start of OPEC’s production cuts, oil market analysts and experts have been focusing on how U.S. shale would respond to the relatively higher and stable oil prices, possibly eating up some of the cartel’s global market share while the cuts last.

The market share war is also going on a micro level within OPEC itself – a diverse group of producers, with each pushing and pursuing their own agenda in every meeting and collective decision. This time around it is no different.

Saudi Arabia, OPEC’s biggest producer and de facto leader, is losing market share, while Iran and Iraq have so far emerged as winners of the cuts with in the cartel in a battle for market share, according to Christof Ruehl, former chief economist at BP who is currently Global Head of Research at the Abu Dhabi Investment Authority (ADIA).

“If you’re talking about winners, you can count Iran and Iraq,” Ruehl said at a Dubai conference last week, as quoted by Bloomberg.

The Saudis were aware that they would be ceding some market share with the OPEC deal, but opted for higher and more stable oil prices by signing up to a deal that allowed Iran to slightly lift its output, while others— especially Riyadh—would have to cut.

The lower-for-longer oil prices have led to a considerable deficit in Saudi Arabia’s budget, and the Kingdom had to draw from reserves and increase the issue of debt to finance the gaps in its oil-dependent government revenues.

The Saudis now need higher oil prices if they want their oil giant Aramco to be valued in next year’s IPO anywhere in the vicinity of US$1 trillion, let alone the US$2-trillion valuation that Deputy Crown Prince Mohammed bin Salman has mentioned.

The Saudi 2017 budget sees higher oil prices this year lifting oil revenues by 46 percent compared to the 2016 estimates.

So, the Saudis entered the OPEC production cut deal knowing that Iran might use the leeway it was given to slightly raise its production, and Iraq might not fully comply with the cuts.

As per OPEC’s agreement, Saudi Arabia had to cut output by 486,000 bpd to a ceiling of 10.058 million bpd. OPEC’s no.2 producer, Iraq, promised to cut 210,000 bpd to a level of 4.351 million bpd, while Iran — the cartel’s no.3 and bitter regional rival of Saudi Arabia — was allowed to raise its output to 3.797 million bpd.

While the Saudis have overcomplied with the cuts and kept output below 10 million bpd since January, as per OPEC’s secondary sources, Iran has been pumping as much as it was allowed, and exceeded its quota in February. Iraq, for its part, has failed to comply with the cuts in each of the months through March for which data are available.

Iran and Iraq are looking beyond the cuts and taking steps to raise their output, taking advantage of Saudi Arabia’s current play of overcomplying with cuts and compensating for rogue members.

“The Saudis are losing out because other countries are able to squeeze out more production,” Edward Bell, commodities analyst at Dubai-based lender Emirates NBD PJSC, told Bloomberg.

Saudi Arabia is trying to preserve its market share amid the cuts and has been lowering the official selling price for Arab Light and Arab Extra Light varieties for Asia for two months now. The Saudis are expected to slash Arab Light prices to Asia for June to the lowest pricing in nine months, as the Middle East benchmark Dubai crude is falling due to oversupply, according to a Reuters survey of five Asian refiners.

Saudi Arabia is also said to be trying to lure buyers from European markets by changing the way it prices its oil in order to make it easier for hedging.

In a sign that the higher oil prices are helping Saudi budget revenues, reports suggested last week that Saudi Arabia had reinstated perks for civil servants, after revenues for the first quarter turned out higher than expected.

Now the oil market and analysts are waiting to see whether OPEC will decide to roll over the production cuts until the end of the year. The current Saudi rhetoric to the market is that there seems to be a consensus over extending the cuts beyond June, but further discussions need to be held, including with non-OPEC Russia.

The Saudis may demand that Iran also cuts output and insist that non-complying members (such as Iraq) finally get in line as a condition to roll over the cuts,S&P Global Platts reported in March, citing people familiar with the Saudi thinking. With Iran unlikely to concede to any cuts now that it has regained the market share it had lost to the Western sanctions, the Saudis may find it difficult to impose such a deal. But with the possibility that oil prices may fall below US$40 if the deal is not extended, in the end Saudi Arabia may once again choose higher oil prices over market share.



Then at the end of the day we  got a surprise drawdown on crude and gasoline and this caused both to rise in price

(courtesy zero hedge)

WTI/RBOB Pop After Biggest Crude Draw Since 2016, Surprise Gasoline Draw

Following last week’s surprise builds in Gasoline and Distillates, API reported a bigger than expected crude draw of 4mm barrels (whioch will be the biggest since 2016 if it holds for DOE). Furthermore, RBOB jumped after gasoline (and distillates) inventories fell (against expectations of a modest build)


Crude -4.158mm (-3.5mm exp) – biggest since 2016
Cushing -215k
Gasoline -1.93mm (+1mm exp)
Distillates -436k
Inventory draws across the board…

And the reaction was a kneejerk higher – after an ugly day (thanks to comments from the Saudi crown prince) for WTI (6mo lows) and RBOB (8mo lows)…

Notably, Russian announced production cuts right before the data hit and stated that it favored extending the OPEC production cut deal.




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



GBP/USA 1.2918 UP .0023 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED


Early THIS TUESDAY morning in Europe, the Euro ROSE by 5 basis points, trading now ABOVE the important 1.08 level  RISING to 1.0913; 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 10.95 POINTS OR .35%     / Hang Sang  CLOSED UP 81.00 POINTS OR .33% /AUSTRALIA  CLOSED DOWN .08% / EUROPEAN BOURSES CLOSED 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 TUESDAY morning CLOSED UP 135.18 POINTS OR 0.70%

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


Gold very early morning trading: $1255.50


Early TUESDAY morning USA 10 year bond yield: 2.336% !!! UP 1 IN POINTS from MONDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  3.017, UP 1  IN BASIS POINTS  from MONDAY night.

USA dollar index early TUESDAY morning: 99.04 DOWN 3  CENT(S) from MONDAY’s close.

This ends early morning numbers TUESDAY MORNING


And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 3.564%  up 2  in basis point(s) yield from MONDAY 

JAPANESE BOND YIELD: +.021%  UP 3/5   in   basis point yield from MONDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.654%  UP 1  IN basis point yield from MONDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.307 UP 3  POINTS  in basis point yield from MONDAY 

the Italian 10 yr bond yield is trading 66 points HIGHER than Spain.





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

Euro/USA 1.0908 DOWN .0004 (Euro DOWN 4 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 112.14 UP  .321 (Yen DOWN 32 basis points/ 

Great Britain/USA 1.2921 UP 0.0025( POUND UP 25 basis points)

USA/Canada 1.3727 UP 0.0051(Canadian dollar DOWN 51 basis points AS OIL FELL TO $48.34


This afternoon, the Euro was DOWN by 4 basis points to trade at 1.0908


The POUND ROSE BY 25  basis points, trading at 1.2921/

The Canadian dollar fell by 51 basis points to 1.3727,  WITH WTI OIL FALLNG TO :  $48.34

The USA/Yuan closed at 6.8959/
the 10 yr Japanese bond yield closed at +.021% UP 3/5 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 2 IN basis points from MONDAY at 2.302% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.99 DOWN 2  in basis points on the day /

Your closing USA dollar index, 99,11 UP  3  CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED UP   46.11 POINTS OR .64%
German Dax :CLOSED UP 69.89 POINTS OR .56% 
Paris Cac  CLOSED UP 36.82 POINTS OR .70% 
Spain IBEX CLOSED  UP 104.50 POINTS OR .98%

Italian MIB: CLOSED  UP 124.09 POINTS/OR .60%

The Dow closed UP 36.43 OR 0.17%

NASDAQ WAS closed UP 3.77 POINTS OR 0.06%  4.00 PM EST
WTI Oil price;  48.34 at 1:00 pm; 

Brent Oil: 51.09 1:00 EST




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

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


BRENT: $50.92


USA 30 YR BOND YIELD: 2.969%

EURO/USA DOLLAR CROSS:  1.0928 up .0019

USA/JAPANESE YEN:111.97  UP 0.156

USA DOLLAR INDEX: 98.93  down 14  cents ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2933 : up .0036  OR 36 BASIS POINTS.

Canadian dollar: 1.3708  UP .0034 (CAN DOLLAR DOWN 34 BASIS PTS)

German 10 yr bond yield at 5 pm: +.328%


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


Bonds Bid On Dismal Data, Crashing Carmakers, And Crude Carnage


Macro data suddenly collapsing, Auto sales slumping, consumer spending rolling over, lending falling, and earnings expectations limping lower… stocks flat into The Fed…


So this happened…


And car sales slumped (down over the last 2 years…)


Ahead of AAPL earnings and The Fed tomorrow, stocks were panic-bid into the close to ensure Nasdaq closed at a new high…



VIX briefly tried to push back to single-digits but drifted higher for most of the day… until teh close when iut was hti to ensure a green close for Nasdaq

The dismal auto sales data sent carmakers tumbling… even Tesla!!!


Banks dropped again (after a bounce) as break-up chatter continued…


Bonds rallied notably after yesterday’s “odd” run back above 3.00% for 30Y (as VIX collapsed)…catching back down to stocks..


The entire Treasury complex rallied today pushing yields out to 7Y back below unch for the week…


The Dollar Index trod water yet again, coiling ahead of The Fed statement tomorrow…



Copper slipped today but remains higher on the week (despite weak China PMIs), Crude and Silver tumbled…


The Energy complex was a bloodbath today with WTI at 6-mo lows and RBOB at 8 mo lows…


Energy Stocks tumbled to the lowest since Nov 2nd – down 5 days in a row… (down 15% from its highs on 12/12/16)


Gold and silver were marginally lower today as Gold bounced off its 50-day moving-average…


Gold continues to outperform Silver – back to the Brexit plunge levels…


SLV – the Silver ETF – is now down 12 days in a row, the longest streak on record…


trading NY:

auto sales miss which causes the 30 yr treasury to fall below 3.00%

(courtesy zero hedge)

30Y Treasury Yield Drops Back Below 3.00% As Economic Data Implodes

Following the recent trail of disastrously disappointing ‘hard’ and ‘soft’ macro data…

Today’s slew of narrative-crushing auto-sales misses has hit stocks and bonds, sending 30Y Yields back below the all-important 3.00%…


Still we are sure that NASDAQ offers investors a safe bet – or shorting VIX here?



The auto bloodbath which caused the markets in the uSA to tumble

(courtesy zerohedge)


Auto Bloodbath: Every OEM Misses April Sales Estimates As Inventories Continue To Soar

After an abysmal March print and growing speculation on wall street that auto sales are looking less like a “plateau” (Ford’s label not ours) and more like a debt-fueled bubble on the verge of an epic collapse, auto investors were looking toward April auto sales for signs of hope.  Unfortunately, the “hope” trade failed to materialize as every single, major auto OEM missed their April sales estimates in fairly spectacular fashion.

Here’s a summary of the April carnage:



According to GM estimates, April SAAR came in at 17.0mm units, down 2.9% YoY, which was well below the JD Power estimate released last week of 17.3 mm.


Inventory Days:

Meanwhile, inventory days are still trending higher as OEMs continue to push product on to dealer lots even though sale through to end customers has seemingly stalled.

GM, one of the few OEMs to actually disclose dealer inventories in monthly sales releases, reported that April inventories increased to 100 days (935,758 vehicles) from 98 days at the end of March and just 71 days (681,402 vehicles) in April 2016.  But please don’t worry because GM would like for you to know that their soaring inventories are normal and “reflect strong sales”…no really, here’s the quote from their press release:

“As planned, GM’s inventories reflect strong sales, lower car production and strategic, launch-related growth in truck and crossover stocks.”


Incentive Spending:

Meanwhile, GM’s incentive spending also soared YoY to 11.7% of their average transaction price (ATP) versus 10.3% last year. And Ford also announced on their sales call that average incentive spending was up about $300 YoY.

And, as one industry observer notes, the combination of rising inventory levels, higher incentive spending and pending model changeovers in coming months could imply that the auto industry could unravel in fairly short order.

Most dealers keep unsold used car inventory for 60 days before sending it to auction. There’s a perfect storm brewing and it’s pointing

to a very specific point in time. If new car retail numbers miss by the degree that I’m concerned about; it’s going to cause a huge day

day supply problem. Two things will happen as a result: Dealers will decline inventory from manufacturers and manufacturers will respond

with even larger incentives. This will all be happening during the 60 day period that I pointed out relating to unsold used car inventory.

At about the 60 day mark you will also be at the beginning of model year end clearance. This is the time when rebates are at a peak to get

rid of prior model year new cars. I believe that new car incentives will put massive pressure on used car values in that time period.


OEM Commentary:

Of course, despite the abysmal numbers, OEMS still tried to paint a rosy picture for their industry.

  • GM: “When you look at the broader economy, including a strong job market, rising wages, low inflation and low interest rates, and couple them to low fuel prices and strong consumer confidence, you have everything you need for auto sales to weather headwinds and remain at or near historic highs.”
  • Ford“We’re maintaining our industry guidance for the year of 17.7 million vehicles. To put things into perspective, it’s important to note that we’ve seen a plateauing industry, basically last year and this year, and when you have that kind of an industry, you’re going to have variations, both up and down, month-to-month.”

But while OEM mgmt teams remain optimistic, it seems that investors are getting slightly concerned as both the OEMs…


…and suppliers all tanked on today’s sales figures.


The Republicans are at least one vote shy from failure to repealing Obamacare with many on the sidelines

It looks like it will fail for the 3rd time

(courtesy zero hedge)

Republicans Just One Vote Away From Failing To Repeal Obamacare, Again

While one can debate if last week’s failed attempt by Trump to pass the GOP healthcare vote before the expiration of his 100 days in office counts as attempt #2 by the administration to repeal Obamacare, the Republicans are now back to square one, because based on the latest whip count by The Hill, the GOP again appears to lack sufficient votes to pass its Healthcare bill in the House, despite earlier reports from GOP leaders and the White House that it might be approved by the lower chamber this week.

The Hill’s most recent whip list reveals 22 Republicans – mostly moderates – who oppose the bill, the maximum number of GOP defections that can be afforded, meaning the GOP is just one vote away from another failure.

The latest Republican to announce his opposition is Rep. Billy Long (Mo.), a staunch conservative who often says he was “Tea Party before Tea Party was cool.” He told The Hill he wouldn’t support the bill because of the impact it could have on people with preexisting conditions.

“I have always stated that one of the few good things about ObamaCare is that people with pre-existing conditions would be covered,” Long said in a statement to The Hill. “The MacArthur amendment strips away any guarantee that pre-existing conditions would be covered and affordable.”

Reps. Brian Fitzpatrick of Pennsylvania, Daniel Webster of Florida and Chris Smith of New Jersey will also vote against the current bill, making their decisions public in succession Monday afternoon.

Adding to the confusion, Trump himself, who earlier in the day was optimistic the House could pass a bill Wednesday, “muddied the waters” by suggesting the measure may still be changed.  “I want it to be good for sick people. It’s not in its final form right now,” he said during an Oval Office interview Monday with Bloomberg News. “It will be every bit as good on pre-existing conditions as Obamacare.” Heading into a Republican whip meeting Monday afternoon, some of the members going in still didn’t know how they would personally vote for the health care bill: Reps. Kevin Yoder, David Valadao, Erik Paulson, Elise Stefanik, and Adam Kinzinger all were undecided.

As a reminder, the fight over how pre-existing conditions are covered is at the center of the fight. Trump said Sunday the White House is pushing forward, and that the GOP plan “guarantees” coverage for Americans with pre-existing conditions. “Pre-existing conditions are in the bill. And I mandate it. I said, ‘Has to be,'” Trump said on CBS’s “Face the Nation” Sunday.

An amendment authored by Rep. Tom MacArthur (R-N.J.) would allow states to apply for waivers to two ObamaCare provisions: essential health benefits, which mandates what services insurers must cover, and “community rating,” which essentially bans insurers from charging people with preexisting conditions more for coverage.  While the AHCA keeps an ObamaCare provision banning insurers from denying coverage to people with preexisting conditions, allowing states to waiver out of community rating means insurers could charge sick people more.

Trump said that “we actually have a clause that guarantees” coverage for those with pre-existing conditions and added that the health care legislation is “changing.” Unlike the mandate under Obamacare, however, under the GOP bill insurers could charge them higher rates than others in the plan if they allow their coverage to lapse.

The Hill’s whip list includes some Republicans who were ready to vote for the bill before changes made the language backed by MacArthur and Rep. Mark Meadows (R-N.C.), the Freedom Caucus chairman.

They include Reps. Adam Kinzinger (Ill.) and Fred Upton (Mich.).  Rep. Mike Coffman (R-Colo.) went from being a yes on the bill to a no. And four members of the GOP Whip team, Reps. David Valadao (Calif.), Erik Paulsen (Minn.), Elise Stefanik (N.Y.) and Kevin Yoder (Kansas) are undecided on the bill. Rep. Kathleen Rice (D-N.Y.) told CNN that she’s talked to centrist Republicans who say they won’t back the bill because they don’t like it, and because they don’t think it will be approved by the Senate even if it does pass the House.

“They’re being asked to walk the plank on a bill they know won’t survive,” she said.

It didn’t end there, as the Hill elaborates:

In another bad sign for the GOP’s whip count, Appropriations Committee Chairman Rep. Rodney Frelinghuysen (R-N.J.) on Monday refused to say if it had his support.


Frelinghuysen came out against the bill shortly before it was pulled from the floor last month and told reporters Monday he was “still looking” at the changes.


“I’m focusing on the appropriations bill for 2017, so that’s my focus,” he said.


“My position is that I’m focused on the appropriations process, trying to get the bill across the finish line. I haven’t been focused on anything else.”

The Republican  leadership’s focus remains trying to help those moderates get comfortable with the new MacArthur amendment. Over the weekend, House leaders, as well as Pence and Health and Human Services Secretary Tom Price, spoke with members hoping to flip enough votes to move the bill forward. Leadership aides emphasize that there isn’t much room to change the proposal at this point, but many deputy whips are trying to get members to keep the process in perspective.

“You remind them there is a United States Senate, and it will change things. What we send over there isn’t going over there on stone tablets,” said Rep. Tom Cole, R-Oklahoma.

“Going back to the drawing board would be death to repeal and replace,” one aide said.

Of course, if just one more Republican flips, the latest attemp to repeal would be dead anyway. That, increasingly appears to be the most likely scenario because after last week’s discussion, many moderates are frustrated with the process. Some say they see their party making the same kind of mistakes Republicans criticized Democrats for making back in 2010.

“We didn’t learn anything from their mistakes,” said Rep. Mark Amodei, a moderate Republican from Nevada told CNN. “We learned nothing from their mistakes.”

As to promises the bill will be changed once it’s in the Senate? “Seriously, you want me to go back and tell the people in my fourth of Nevada ‘the Senate will make it better?'” Amodei said. “What the hell?”





The hawks in Washington will be visibly upset as the Senate drops the new Russian sanctions bill;

(courtesy zero hedge)

Senate Quietly Drops Russian Sanctions Bill, Focuses On Iran Crackdown

Much to the likely chagrin of the mainstream media, and Democratic Party blame narratives everywhere, Politico reports that the leaders of the Senate Foreign Relations Committee have reached a decision that’s sure to disappoint Russia hawks: They’re not taking up a Russia sanctions bill anytime soon.

“We’re not going to do a Russia sanctions bill,” Corker told POLITICO on Monday.

Instead, Committee Chairman Bob Corker of Tennessee and ranking Democrat Ben Cardin of Maryland have agreed to move forward on a measure to counter Russian influence in Eastern Europe without using sanctions as well as an Iran sanctions bill.

“The ranking member and I are in strong agreement on a pathway forward and that’s what we’re going to do. We’re going to do an Iran sanctions bill. It’ll be done toward the end of this work period. We’re also working together on a bill to push back against Russia in Europe and what they’re doing, and those are the two courses of action that we’re taking.”

The measure to counter Russian influence is expected to draw from a bill put forward by Cardin in January but will strip the measure of its sanctions. The Iran sanctions bill was introduced in March by Corker and has bipartisan support. It’s in retaliation for Iran’s ballistic missile development, support for U.S.-designated terrorist groups and human rights violations. Cardin’s sanctions bill is co-sponsored by 10 Republican defense hawks, including Sens. John McCain of Arizona, Lindsey Graham of South Carolina and Marco Rubio of Florida. Cardin spokesman Sean Bartlett confirmed the agreement in an email.

“Senator Cardin stands by the series of proposals he’s laid out on Russia but looks forward to working with Chairman Corker on this bill as an initial step to hold Russia accountable for its destabilizing activities,” Bartlett said.

Rubio, a member of the Foreign Relations panel, indicated Monday he was unhappy with the decision to table the Russia sanctions measure for now.

“I think anytime is a good time for Russia sanctions given everything they’ve done,” Rubio said.

Of course the timing of the Senate’s shift away from the ‘Putin is Hitler’ narrative, given President Trump’s phone call with the Russian president today, is intriguing.




I will leave you tonight with another important commentary courtesty of David Stockman


(courtesy David Stockman/Daily Reckoning)

Wall Street’s Earnings Hopium


This time IS different. Normally they don’t ring a bell at the top, but right now the bell couldn’t be any louder. Or clearer.

Indeed, anyone left in the casino needs a powerful hearing aid.

The record stock market made a record run during the Donald’s first 100 Days — a period in which the vaunted Trump Stimulus on which it is all depended has sunk into the Imperial City’s swamp…

Trump’s tax proposal amounted to a $7.5 trillion add-on to the nation’s crushing public debt over the coming decade. That means there is no possible GOP majority to pass it. It also included $6.5 trillion of tax relief to business and the top 5%. That means that Dems won’t touch it with a ten-foot pole, either.

The very idea that there is going to be smooth hand-off of the “stimulus” baton to a giant Trump tax cut is by now just ludicrous. Its persistence is evidence we’ve reached the stage in the bubble cycle where Wall Street stock pushers have already gone full George Orwell.

They are now claiming a deflating economy is bounding back and that soft earnings are blowing the lights out. That is to say, when the bubble reaches its manic peak, the lies and hopium become outright comical.

That was evident in the alleged “blow-out” earnings of bellwether stocks like Amazon last week, which were nothing of the kind. Actually, they stunk.

Likewise, I heard some knucklehead from Morgan Stanley on Bloomberg yesterday morning urging not to be troubled at all by the tiny 0.7% annualized first quarter GDP gain because it was all temporary and the economy would come bounding back at 3% + in the next quarter.

My goodness, Wall Street economists have been saying that for six years now. But the ballyhooed arrival of “escape velocity” has never happened — notwithstanding that we are supposedly recovering from the worst recession of the post-war period. The rebound should have been greater on a purely statistical basis alone.

In fact, real GDP for the last quarter was up 1.9% year-over-year (Y/Y). And that compared to a 1.6% Y/Y gain in Q1 2016… a 3.3% Y/Y for Q1 2015… and 1.6% for Q1 2014.

This hardly looks like a sustained breakout after each periodic lull.

So the latest Y/Y growth blip was actually a tad weaker than the average Y/Y rate during the previous six years (2011 thru 2016). That has averaged 2.1% — despite repeated assurances by the Morgan Stanleys that every bout of sluggish growth during that period was just “temporary.”

So what we got again in Q1 was more of the same low growth rut. There’s no evidence for an energetic, sustainable recovery that could possibly justify a 24X valuation multiple on the S&P 500 at month 95 of a weak recovery.

But no matter. The Wall Street earnings narrative has become so corrupted that there really isn’t any need at all for actual economic growth. It has literally become the case that “down” is the new “up.”

For instance, Amazon’s operating earnings actually fell during Q1. It reported an operating margin of 3.7% for Q1 2016. That figure was down to 2.8% during the quarter just completed.

Nevertheless, the Wall Street propaganda machine, which is pleased to call itself the financial press, gushed all the same:

While retailers continue to struggle and dead malls pile up in characterless suburbs across America, Amazon just keeps cashing in, as the e-commerce and media behemoth delivered first-quarter earnings that blew past expectations, sending its stock up 4% in after-hours trading.

It’s certainly true that retailers are struggling and dead malls pile up in characterless suburbs across America. (I covered the topic extensively in yesterday’s Daily Reckoning.)

And it’s true that Amazon is bringing down the entire house of retail cards. What remains of the the brick-and-mortar industry is resorting to ever more desperate competitive responses.

But as the rally in Amazon stock certainly demonstrates, “down” is indeed the new “up.”

My point is not merely to expose the absurdity of Amazon’s valuation.

The point is that the casino is now so unhinged that the robo-machines added $12 billion to Amazon’s market cap in the face of stunning evidence that its earnings have vaporized entirely.

Amazon has become a profitless engine of retail mass destruction. Because the wild west casino enabled by the Fed has abolished honest price discovery and radically suppressed the cost of risk to the gamblers and structured finance speculators who operate there, Amazon has become egregiously overvalued.

So Amazon’s extreme valuation is just plain irrational exuberance having one more fling. Spasms like this $12 billion gain are absolutely reminiscent of final days before the tech collapse of April-May 2000.

In case I haven’t made myself clear: Amazon is not a profit-making enterprise in any meaningful sense of the word and its stock price measures nothing more than the raging speculative juices in the casino.

In an honest free market, real investors would never give a near one-half trillion dollar valuation to a business that refuses to make a profit, never pays a dividend and is a piker in the free cash flow department — that is, in the very thing that capitalist enterprises are born to produce.

But there is more. The Amazon rampage through the brick and mortar world of retail is not remotely a case of “creative destruction” where new technologies, innovative entrepreneurs and better mousetraps demolish the old and usher in the new to the benefit of rising output and higher standards of  living for all.

Au contraire. Amazon is not only hideously over-valued on the stock market. It is also an economic mutant that is destroying wealth and capitalist prosperity because of the perverted incentives for cancerous “growth” at any price that have been fostered by the Fed’s destructive regime of Bubble Finance.

I can’t say it any louder or any clearer: if you haven’t already, get out of the casino while you still can.

The pin is closing in fast.


David Stockman
for The Daily Reckoning




Well that about does it for tonight

I will see you tomorrow night



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