May 15/GOLD RISES BY $4.60 AND SILVER FOLLOWS SUIT BY 20 CENTS/SILVER OPEN INTEREST RISES AGAIN TO 212,364 CONTRACTS/THE AMOUNT STANDING AT THE SILVER COMEX IS 22.5 MILLION OZ/NORTH KOREA FIRES ANOTHER BALLISTIC MISSILE AND THIS TIME A LONG RANGE ONE WITH NUCLEAR CAPABILITIES/CHINA REPORTS DISMAL RESULTS ON 4 MAJOR CATEGORIES THIS MORNING/FALLOUT FROM RANSOMWARE EFFECTS EUROPE/NOW VARIANTS OF THE RANSOMWARE APPEAR/

GOLD: $1230.65  UP $4.60

 

Silver: $16.62  UP 20  cent(s)

Closing access prices:

Gold $1230.75

silver: $16.65

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

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

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

SHANGHAI FIRST GOLD FIX: $1240.44 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  1229.66

PREMIUM FIRST FIX:  $10.75

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SECOND SHANGHAI GOLD FIX: $1247.58

NY GOLD PRICE AT THE EXACT SAME TIME: 1231.40

Premium of Shanghai 2nd fix/NY:$16.18

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1231.50

NY PRICING AT THE EXACT SAME TIME: $1231.50

LONDON SECOND GOLD FIX  10 AM: $1231.30

NY PRICING AT THE EXACT SAME TIME. $1231.40

For comex gold:

MAY/

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

 TOTAL NOTICES SO FAR: 483 FOR 48300 OZ    (1.5023 TONNES)

For silver:

For silver: MAY

22 NOTICES FILED TODAY FOR 110,000  OZ/

Total number of notices filed so far this month: 4439 for 22,195,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

END

For 11 consecutive days, the amount standing for physical has risen.  On First day notice 16.8 million oz were standing; tonight 22.56 million oz. It looks to me that sovereign China wants its silver back.

stay tuned on this development..

 

On another front we witnessed a huge withdrawal of gold from the comex of 128,600.541 oz or 4 tonnes of gold. May is a non active month and this removal means that somebody is scared and wants his gold out of the comex. It was customer gold that left.

 

The XAU contract was up only 16 cents to 85.16 and as such the gold-silver equity shares did not participate in today’s precious metals rally.  Generally this means that a raid is upon us tomorrow/

Let us have a look at the data for today

.

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In silver, the total open interest  ROSE again BY a HUMONGOUS 5,597  contracts UP to 212,364  WITH THE  RISE IN PRICE OF SILVER THAT TOOK PLACE ON FRIDAY’S TRADING (UP  21 CENT(S). In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.062 BILLION TO BE EXACT or 151% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 22 NOTICE(S) FOR 110,000  OZ OF SILVER

In gold, the total comex gold FELL BY A SMALLISH 1,116 contracts DESPITE THE RISE IN THE PRICE OF GOLD ($3.80 with FRIDAY’S TRADING). The total gold OI stands at 433,356 contracts.

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

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

GLD:

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

Inventory rests tonight: 851.89 tonnes

.

SLV

Today: inventory rose by 2.369 million oz!!!!

THE SLV Inventory rests at: 340.976 million oz

it is also strange that during these past two weeks of torment, no silver left the silver vaults and now from May 10 until today almost 6 million oz has been added. However this would be a “paper” addition.

end

.

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

1. Today, we had the open interest in silver ROSE BY 5,597 contracts UP TO 212,364, (AND NOW CLOSER TO  THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21 AT 234,787), WITH THE GOOD SIZED  RISE IN PRICE FOR SILVER ON FRIDAY  (21 CENTS).

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late SUNDAY night/MONDAY morning: Shanghai closed UP 6.71 POINTS OR .22%  OR / /Hang Sang CLOSED UP 215.25 POINTS OR 0.86% .  The Nikkei closed DOWN 14.05 POINTS OR 0.07%/Australia’s all ordinaires  CLOSED DOWN .04%/Chinese yuan (ONSHORE) closed UP at 6.8969/Oil UP to 49.14 dollars per barrel for WTI and 52.19 for Brent. Stocks in Europe OPENED IN THE GREEN    ..Offshore yuan trades  6.8917 yuan to the dollar vs 6.9010 for onshore yuan. NOW  THE OFFSHORE IS  STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS A LITTLE BIT STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE  WEAKER DOLLAR. CHINA IS A LITTLE HAPPIER THIS MORNING

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA

SATURDAY

Kim Jong-Un fires another ballistic missile which flew 700 kilometers and landed in the Sea of Japan.

 

( zero hedge)

( zerohedge)

iii) The new missile can travel great distances and deliver nuclear warheads.

( zero hedge)

b) REPORT ON JAPAN

c) REPORT ON CHINA

i)Four huge data misses from China

( zerohedge)

ii)India has now backed out of China’s silk road project claiming costs are too high and the route will only benefit China.  The real reason for India’s temper tantrum: the road is going through Kasmir

( zero hedge)

4. EUROPEAN AFFAIRS

i)Sunday/Europol

Europol expects more computers to be have infected once Europe returns to theIR desks on Monday

(zerohedge)

ii)GERMANY

Quite a story:  Germany confiscates homes for migrant use:

(courtesyKern /GatestoneInstitue)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

The USA state department has now accused the Assad government of covering of mass killings and burning the bodies with their newly built crematorium

( zero hedge)

6 .GLOBAL ISSUES

The fallout from the global coordinated ransomware attack is unprecedented.  It has now spread to China, car factories in France, hospitals in the UK and countless over critical businesses and infrastructure.

( zero hedge)

7. OIL ISSUES

As we have explained to you on previous occasions, the math just does not work as the shale boys are increasing production and just about everybody else is increasing.  So expect weaker prices

(courtesy zerohedge)

8. EMERGING MARKETS

The sorry state of affairs inside Venezuela:

( William Burke/Knowledge @Wharton

9.   PHYSICAL MARKETS

i)It seems that Trump will allow the new Alaskan gold mine, Pebble limited Partnership a division of Northern Dynasty to extract gold, silver copper and Mo. Obama refused to allow production to commence because of environmental concerns

( Washington/GATA/Eiperin/Brady Dennis)

ii)Craig Hemke interviews Bill Murphy of GATA on the market rigging of gold and silver:

( GATA/Chris Powell)

iii)Ted Butler expects an explosion in silver but Gata asks will they allow citizens to keep their silver…will there be confiscation.  My opinion: there will be no confiscation of silver.

TedButler/GATA/two commentaries)

iv)Bill Holter is interviewed by SGT

( SGT/Bill HOlter)

v)Interesting:  a state department memo has surfaced which explains fully the USA policy to drive gold out of the financial system;

( GATA/ChrisPowell)

vi)Chris Waltzek of Goldseek interviews Bill Murphy:

( Goldseek/Bill Murphy)

vii)This once thriving nation produced over 100 tonnes of gold each year.  Now only 7 tonnes is produced and all at a loss as almost all mining companies have all left Zimbabwe, the former Rhodesia. The following is a report on how the country subsists:

( Mhlanga/Standard, Harare Zimbabwe)

viii) Crooks!!

(zerohedge)

ix)Last month  the hedge funds dumped longs by 6 billion dollars in the futures.  This would be the April gold contract month and yes the amount of gold held for standing was less than 2 tonnes instead of the average of around 15 tonnes.  This happened on 3 other occasions and just look what happened to the gold price since the event

(zero hedge)

10. USA stories

i)We are going to see a flood of used cars hitting the markets due to the huge number of leases underwritten in the past 3 years.  This should hurt new car sales”

( zero hedge)

ii)Last week , we highlighted the fact that subprime auto loans were in increasing levels of delinquencies, how we find that prime auto loans are having the same fate:

( zero hedge)

( zero hedge)

iv)Puerto Rico under the new law will be forced under SEC jurisdiction

( Simon Black/SovereignMan)

v)Soft data, NY manufacturing survey plunges as new orders collapse

(courtesy zerohedge)

Let us head over to the comex:

The total gold comex open interest FELL BY A SMALLISH 1,116 CONTRACTS DOWN to an OI level of 433,356 WITH THE  RISE IN THE PRICE OF GOLD ( $3.80 with YESTERDAY’S trading).   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 1 contract(s) LOWERING TO  41. We had 8 notices filed yesterday so we GAINED 7 contracts or an additional 700 oz are standing for delivery and no contracts 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 6566 contracts DOWN to 212,157.  The non active July contract GAINED another 216 contracts to stand at 684 contracts. The next big active month is August and here the OI gained 3,880 contracts up to 123,202.

To give you a good idea of the devastation of open interest contracts, last year on May 16 2016 we had at this exact time:    330,125 contracts of JUNE 2016 CONTRACTS OPEN.( compared to JUNE 2017: 212,157)

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

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And now for the wild silver comex results.  Total silver OI ROSE BY A HUGE 5,597 contracts FROM  206,767 UP TO 212,364  WITH FRIDAY’S 21 CENT PRICE GAIN. It seems that the EFP’s calls are now being exercised for July contracts and thus the reason for the huge OI gain in the silver complex.
We now know for certainty that private EFP contracts are given by the bankers when faced with an upcoming active delivery month.  We just do not know the makeup of that private deal.  It is my contention that the longs in silver at the end of April were given a fiat bonus plus a long “in the money” call for a  future May contract or a July contract. They were told not to exercise for a new contract until at least the first week of May is over so it would not look like a paper settlement which in reality it surely is.
So now everything makes sense: the obliteration of OI as we enter first day notice has not really occurred but replaced with a future contract with some bonus money for theie effort. No doubt by the end of May, the open interest in the silver contract month will be close to the OI we had around mid April/2017.
We are in the active delivery month is MAY  Here the open interest LOST 109 contracts FALLING TO 95 contracts. MY GOODNESS!! IT HAPPENED AGAIN!! We had 131 notices filed yesterday, so we gained another 22 notices or an additional 110,000 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 for 10 straight days of the delivery cycle starting immediately after first day notice. No wonder JPMorgan is getting ready for a physical attack at the comex. I have never seen anything like this!!

The non active June contract GAINED 4 contracts to stand at 954. The next big active month will be July and here the OI  gained 4,019 contracts up to 161,712.(this is where some of the EFP’s entered back into the silver arena)

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 22 notice(s) filed for 110,000 oz for the MAY 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 184,958 contracts which is fair

Yesterday’s confirmed volume was 232,214 contracts  which is very good.

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for MAY
 May 15/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
128,904.301  oz
DELAWARE
Scotia
MANFRA
( INCL 6 kilobars)
Deposits to the Dealer Inventory in oz 599.985 oz

BRINKS

 

Deposits to the Customer Inventory, in oz 
nil oz
No of oz served (contracts) today
 
10 notice(s)
1000 OZ
No of oz to be served (notices)
31 contracts
3100 oz
Total monthly oz gold served (contracts) so far this month
483 notices
48300 oz
1.5023 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   204,922.2 oz
Today we HAD  1 kilobar transaction(s)/
total dealer deposits: nil oz
We had NIL dealer withdrawals:
total dealer withdrawals:  NIL oz
we had one dealer deposit:
i) Into Brinks: 599.985 oz
total dealer deposits:  599.985 oz
we had 0  customer deposit(s):
total customer deposits; nil  oz
We had 3 customer withdrawal(s)
i) out of Scotia: 128,904.301 oz
this is real gold leaving and this is a non active month..somebody must be scared!
ii) Out of Manfra: 192.90 oz
6 kilobars
iii) Out of Delaware: 191.96 oz
total customer withdrawal: 128,904.301 oz
 we had 1 adjustments:
i) out of Scotia; 38,716.056 oz was adjusted out of the dealer and this landed into the customer account of Scotia.
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 10 contract(s)  of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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 (483) x 100 oz or 48300 oz, to which we add the difference between the open interest for the front month of MAY (41 contracts) minus the number of notices served upon today (10) x 100 oz per contract equals 51,400 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 (483) x 100 oz  or ounces + {(41)OI for the front month  minus the number of  notices served upon today (10) x 100 oz which equals 51,400 oz standing in this non active delivery month of MAY  (1.5980 tonnes).  We gained 10 contracts or an additional 1000 oz are standing for delivery and 0 contracts were cash settled through the EFP route where they received a fiat bonus plus a futures contract in a private deal with the bankers.
 
 
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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/  1.5980 TONNES
total for the 17 months;  249.5110 tonnes
average 14.677 tonnes per month
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Total dealer inventory 877,817.092 or 27.303 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,772,194.932 or 273.85 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 273.85 tonnes for a  loss of 29  tonnes over that period.  Since August 8/2016 we have lost 80 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 12 MONTHS  80 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE APRIL DELIVERY MONTH
MAY INITIAL standings
 May 15. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
30,067.37 oz
Scotia
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
 604,920.510  oz
scotia
No of oz served today (contracts)
 22 CONTRACT(S)
(110,000 OZ)
No of oz to be served (notices)
73 contracts
( 365,000 oz)
Total monthly oz silver served (contracts) 4439 contracts (22,195,000 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  5,671,718.0 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil  oz
we had Nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 1 customer withdrawal(s):
ii) Out of Scotia: 30,067.37 oz
TOTAL CUSTOMER WITHDRAWALS: 30,067.37  oz
 We had 1 Customer deposits:
i) Into scotia: 604,920.510 oz
***deposits into JPMorgan have now stopped 
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  604,920,510 oz
 
 we had 0 adjustment(s)
The total number of notices filed today for the MAY. contract month is represented by 22 contract(s) for 110,000 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 4439 x 5,000 oz  = 22,195,000 oz to which we add the difference between the open interest for the front month of MAY (95) and the number of notices served upon today (22) x 5000 oz equals the number of ounces standing

 

.
 
Thus the initial standings for silver for the MAY contract month:  4439(notices served so far)x 5000 oz  + OI for front month of APRIL.(95 ) -number of notices served upon today (22)x 5000 oz  equals  22,560,000 oz  of silver standing for the MAY contract month.
We actually gained another 22 contracts or an additional 110,000 oz will stand for delivery and again nobody wished to accept an EFP contract for a fiat bonus. It probably means that the entire 22.56 million oz that are standing wants only physical metal and refuses a fiat bonus. This is identical to backwardation where the investor will not accept to roll to a futures month and receive a sure fiat profit (THROUGH THE EFP) but instead that investor holds onto his physical because he is not sure in the future he would receive his metal back if he engages in that future contract.  We have now had on 11 trading consecutive days, an increase in amount standing for silver.  For the past several years, this has never happened during an active silver delivery month.  Ladies and gentlemen:  the silver comex is being attacked for its physical metal and the attacker is Sovereign China. 
 
 
Volumes: for silver comex
 
Today the estimated volume was 79,519 which is huge
Yesterday’s  confirmed volume was 64,923 contracts which is also huge
FRIDAY’S CONFIRMED. VOLUME OF 64,923 CONTRACTS EQUATES TO 324 MILLION OZ OF SILVER OR 46% OF ANNUAL GLOBAL PRODUCTION OF SILVER EX CHINA EX RUSSIA). IN OUR HEARINGS THE COMMISSIONERS STRESSED THAT THE OPEN INTEREST SHOULD BE AROUND 3% OF THE MARKET.  
 
Total dealer silver:  33.986 million (close to record low inventory  
Total number of dealer and customer silver:   19.026 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
 
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.5 percent to NAV usa funds and Negative 6.5% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.1%
Percentage of fund in silver:37.8%
cash .+0.1%( May 15/2017) 
 
2. Sprott silver fund (PSLV): Premium FALLS TO   +.05%!!!! NAV (May 15/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to -0.48% to NAV  ( May 15 /2017)
Note: Sprott silver trust back  into POSITIVE territory at +.05% /Sprott physical gold trust is back into NEGATIVE/ territory at -0.48%/Central fund of Canada’s is still in jail  but being rescued by Sprott.

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

(courtesy Sprott/GATA)

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

 Section: Daily Dispatches

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

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

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

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

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

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

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

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

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

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

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

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

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

 

end

 

And now the Gold inventory at the GLD

May 15/no change in the GLD inventory/inventory rests at 851.89 tonnes

May 12/no changes in GLD/inventory rests at 851.89 tonnes

may 11/no changes in GLD inventory/inventory rests at 851.89 tonnes

May 10/no changes in GLD inventory/inventory rests at 851.89 tonnes/

May 9/a withdrawal of 1.19 tonnes from the GLD/Inventory rests tonight at 851.89 tonnes

May 8/no change in inventory at the GLD/Inventory rests at 853.08 tonnes

May 5/no changes in inventory at the GLD/Inventory rests at 853.08 tonnes

May 4/A tiny change in inventory at the GLD /a withdrawal of .28 tonnes to pay for fees/inventory rests at 853.08 tonnes

May 3/no change in inventory at the GLD/Inventory rest at 853.36 tonnes

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 25/2017/A WITHDRAWAL OF 5.92 TONNES OF GOLD FROM 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 21/A DEPOSIT OF 4.44 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT 858.69 TONNES

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

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

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

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

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

this no doubt is a paper deposit/

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

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

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

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

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

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

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

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

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

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

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

March 29/a withdrawal of 1.78 tonnes of gold out of the GLD/Inventory rests tongith at 833.51 tonnes

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
May 15 /2017/ Inventory rests tonight at 851.89 tonnes
*IN LAST 151 TRADING DAYS: 96.24 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 94 TRADING DAYS: A NET  31.19 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: A NET  56.53 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

May 15/no changes in silver inventory/inventory rests at 340.979 million oz/

May 12/a huge change in silver: a deposit of 2.369 million oz/inventory rests at 340.979 million oz

May 11/no changes in silver inventory at the SLV/Inventory rests at 338.610 million oz

May 10/ a gigantic 3.833 million oz of silver added to the SLV and this occurred with the constant whacking of silver for the past 17 trading sessions/inventory rests at 338.610 million oz

may 9Again, no movement of inventory at the SLV. Inventory rests at 334.777 million oz

May 8/no change in silver inventory at the SLV/inventory rests at 334.777 million oz/

May 5/Strange!! no change in silver inventory at the SLV/Inventory rests tonight at 334.777 million oz

May 4/a very tiny withdrawal of 144,000 oz to pay for fees/inventory rests tonight at 334.777 million oz/

May 3/strange!! with the drop in price of silver we had no change in inventory at the SLV/inventory rests at 334.921 million oz

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.Inventory 334.921 million oz

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

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

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

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

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

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

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

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

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

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

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

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

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

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

million oz/

March 31/no change in inventory at the SLV/Inventory rests at the SLV/Inventory rests at 330.894 million oz/
March 30/a huge withdrawal of 2.746 million oz from the SLV/inventory rests at 330.894 million oz/
March 29/a deposit of 1.136 million oz into the SLV/Inventory rests at 333.640 million oz
May 15.2017: Inventory 340.979  million oz
 end

Major gold/silver trading/commentaries for MONDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Cyber Attacks Show Vulnerability of Digital Systems and Digital Currencies

 

Cyber Attacks Show Vulnerability of Digital Systems and Digital Currencies

– Cyberattacks expected to spread today in “second phase”
– UK intelligence says scale of threat significant
– Microsoft slams NSA for letting hacking tools cause global malware epidemic

– Ransomware attack already crippled more than 200,000 computers in 150 countries
– 1.3 million computer systems believed to be at risk
– Europol warns many computer systems simply won’t start
– Businesses, banks and government agencies around world told to prepare
– Renault, FedEx among companies affected by cyber-attack
– Banks in China including ATMs were affected

– Hackers could shut down banks and cut off power and water supplies
– “Biggest threat to civilisation” since the Second World War – Cyber security expert
– Risks posed to digital deposits and digital wealth are the “new case for gold”

The threat posed by cyber attacks, cyber terrorism and cyber war to our increasingly complicated, technologically dependent financial system is something we have covered numerous times and becomes more clear by the day.

British and US agents have carried out mock cyber attack or ‘cyber war games’ on the Bank of England and commercial banks in the City of London and on Wall Street as part of tests on critical, but vulnerable financial infrastructure.

Should banks be hacked and customers deposit accounts compromised then the vista of potential bail ins becomes a real one. In June of 2015, JP Morgan Chase were hacked by unknown parties who stole the personal details of 83 million customers.

In July of 2014 Bloomberg reported that malware had been detected in the system of the Nasdaq exchange. Its purpose was unclear but it was believed to have been embedded there by Russian hackers.

There is also the alleged hacking of Sony Pictures by North Korea and the alleged hacking of Facebook, Instagram and Tinder. In 2012, Iran is alleged to have devastated the computer network of Saudi Aramco in a similar attack.

We can see a panorama of human activities which grow more vulnerable as hackers and cyber-warfare grow more sophisticated.

Banks have been hacked, stock exchanges have been hacked and critical infrastructure have been hacked in recent years. It is likely that many of these small scale attacks have been merely testing of  defenses.

A concerted attack on the western financial system would likely include attempts at disabling various exchanges including stock markets and foreign exchange markets. Banks could be attacked in such a way that ATMs and wire transfers are disabled and bank balances, which are merely digital figures, could be erased.

In such an environment, our modern world, which is so dependent on technology and the monetary system, would be economically paralysed. The primary wealth would longer be primarily digital – cash, stocks and bonds – and tangible wealth would become more important.

Tangible assets include gold and silver bullion, agricultural land, water and property. We are not predicting such an outcome. We are simply looking at the facts as they are, in the context of intense geopolitical tensions, and surmising that it would be prudent to take necessary precautions and diversify into physical gold.

Related Content

Cyber Attacks Growing In Frequency – Entire Western Financial System Is Vulnerable

Cyber Fraud At SWIFT – $81 Million Stolen From Central Bank


“Cyber Security Loophole”- Bank Hackers “Unfettered Access” To Accounts

Number One Reason To Buy Gold and Silver Is “Cyber Financial Warfare”

News and Commentary

Gold firm on weak U.S. data, North Korea concerns (Reuters.com)

British hospitals, Spanish firms among targets of global ‘ransomware’ attack (Reuters.com)

Dollar starts week under shadow of underwhelming data, North Korea (Reuters.com)

Asian markets largely surge ahead despite global risks (MarketWatch.com)

Spain’s Banco Popular to sell off assets to boost depleted capital (Reuters.com)

Investors Should Care About China In 1 Simple Chart (ZeroHedge.com)

Commercials Cover All-Time Record Number Of Silver Short Positions (KingWorldNews.com)

Hit by Run on Deposits, Spain’s 6th Largest Bank Denies it’s Looking for Rushed Takeover to Avert Collapse (WolfStreet.com)

Join Buffett- Sit on your hands and avoid stock bubble (MoneyWeek.com)

Macron’s victory has opened a can of euro worms (MoneyWeek.com)

end

It seems that Trump will allow the new Alaskan gold mine, Pebble limited Partnership a division of Northern Dynasty to extract gold, silver copper and Mo. Obama refused to allow production to commence because of environmental concerns

(courtesy Washington/GATA/Eiperin/Brady Dennis)

Obama blocked this controversial Alaskan gold mine but Trump just gave it new life

Section:

By Juliet Eiperin and Brady Dennis
Washington Post
Friday, May 12, 2017

The Environmental Protection Agency has reached a legal settlement with a Canadian company hoping to build a massive gold, copper, and molybdenum mine in Alaska’s Bristol Bay watershed, clearing the way for the firm to apply for federal permits.

The settlement reached late Thursday between the EPA and the Pebble Limited Partnership, a subsidiary of Northern Dynasty Minerals Ltd., could revive a controversial project that was effectively scuttled under the Obama administration. And it underscores how President Trump’s commitment to support mining extends far beyond coal, to gold, copper and other minerals.

While the move does not grant immediate approval to the Pebble Mine project, which will have to undergo a federal environmental review and also clear state hurdles before any construction takes place, it reverses the agency’s 2014 determination that a large-scale mine in the area be barred because it would imperil the region’s valuable sockeye salmon fishery.

In a statement, EPA Administrator Scott Pruitt said that the agreement “will not guarantee or prejudge a particular outcome, but will provide Pebble a fair process for their permit application and help steer EPA away from costly and time-consuming litigation.” …

… For the remainder of the report:

https://www.washingtonpost.com/news/energy-environment/wp/2017/05/12/oba…

 

END

Last month  the hedge funds dumped longs by 6 billion dollars in the futures.  This would be the April gold contract month and yes the amount of gold held for standing was less than 2 tonnes instead of the average of around 15 tonnes.  This happened on 3 other occasions and just look what happened to the gold price since the event:

(courtesy zero hedge)

Hedge Funds Dump Gold Longs By The Most On Record

Hedge funds dumped almost $6 billion notional in gold futures last week.

That is the largest drop in hedge fund longs in the history of CFTC data.. and the precious metal has stabilized since.

While this is the largest drop on record, there were three other weeks when this approximate selling level was achieved and here is what happened next… 3/6/07 (+9.6%), 3/6/12 (+3.25%), 5/24/16 (+14.6%).

One wonders what happens next?

 

 

end

Craig Hemke interviews Bill Murphy of GATA on the market rigging of gold and silver:

(courtesy GATA/Chris Powell)

TF Metals Report interviews GATA chairman about market rigging

Section:

10:27a ET Friday, May 12, 2017

Dear Friend of GATA and Gold:

The TF Metals Report this week interviewed GATA Chairman Bill Murphy, discussing, among other things, the latest smashing of monetary metals futures prices on the New York Commodities Exchange, the depression in the monetary metals mining sector, whether there is any limit to the suppression of monetary metals prices, and whether the anti-trust litigation against the big investment banks that have been accused of rigging silver prices will have any effect. The interview is 44 minutes long and can be heard at the TF Metals Report here:

http://www.tfmetalsreport.com/podcast/8330/a2a-bill-murphy-gata

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

 

 

END

Ted Butler expects an explosion in silver but Gata asks will they allow citizens to keep their silver…will there be confiscation.  My opinion: there will be no confiscation of silver.

(courtesy TedButler/GATA/two commentaries)

Ted Butler expects silver explosion soon, but GATA has questions

Section:

1:14p ET Friday, May 12, 2017

Dear Friend of GATA and Gold:

Silver market rigging investigator Ted Butler explains today why he thinks price suppression in silver is likely to end soon in an explosion because of the extreme and concentrated short position in the monetary metal.

GATA can only hope that Butler’s commentary will flow from his keyboard to the Great Market Manipulator’s ear (and we don’t mean Yellen). But we wouldn’t bet too heavily on Butler’s assertion that “all price manipulations come to an end,” an assertion that may be of no more value than the Infinite Monkey Theorem, which holds that with an infinite number of monkeys and keyboards, in infinite time at least one of them will type out “King Lear” or even Shakespeare’s complete works:

https://en.wikipedia.org/wiki/Infinite_monkey_theorem

For of course the human lifespan is not infinite but tightly limited, time remains money, and justice delayed remains justice denied. The theoretical inevitability of justice is of little use or consolation to the dead.

Besides, even if the explosion in silver were to happen tomorrow there would be no guarantee of profits to silver investors.

If silver goes to, say, $100 per ounce, what’s to prevent a government from reclassifying it as a strategic national resource and confiscating it as gold was once confiscated in the United States?

Other than recognition of government’s administrative incompetence, which is always on display at the U.S. Veterans Administration and at state motor vehicles departments, what’s to prevent governments from nationalizing the mines?

What’s to prevent governments from imposing windfall profits taxes?

What’s to prevent governments from openly outlawing markets? Governments are already destroying them surreptitiously.

Governments have done all this stuff before.

This is not to disparage Butler’s work; far from it. It is to argue that Butler’s work — the pursuit of truth, liberty, limited and accountable government, and free and transparent markets — is, like GATA’s work, never to be concluded. Someone will be needed to do it long after Butler and those gathered in and around GATA are gone. For power always corrupts and thereby creates the nature of government: to oppress as much as to assist, to conceal the nefarious as much as to be accountable for it.

In such circumstances there is no inevitability, only possibility, and the monetary metals are important less for their intrinsic worth than for being liberty’s weapons, which is why governments will always fear and seek to suppress them.

Butler’s commentary today is headlined “Expecting the Unexpected” and is posted at GoldSeek’s companion site, SilverSeek, here:

http://silverseek.com/commentary/expecting-unexpected-16585

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

end

Expecting the Unexpected

Theodore Butler

|

May 12, 2017 – 11:48am

I am convinced that silver will soon explode in price in a manner of unprecedented proportions, both in terms of previous silver rallies and relative to all other commodities. By unprecedented, I mean that the price of silver will move suddenly and shockingly higher in a manner never witnessed previously, including the great price run ups in 1980 and 2011. The highest prior price level of $50 will quickly be exceeded.

 

By “soon”, I mean that the move can commence at any time, but more likely before many weeks or months have gone by. I know that the price of silver has been declining on a daily basis nonstop for three weeks now, itself an unprecedented move, but I also know the reason for the decline and how the sharply improved COMEX market structure has always guaranteed a rally in a reasonable period of time. The only question is whether on the next silver price rally will JPMorgan add aggressively to its COMEX short positions. I’m suggesting JPMorgan is not likely to add to short positions on the next rally.

 

At the heart of the unprecedented move higher in the price of silver is the manner in which it will occur. It will be a price move like no other. It will be the greatest short covering rally in history. That’s guaranteed because the COMEX silver short position is the largest and most concentrated short position in history. There is no buying force in the financial markets more powerful than panicky buying by those forced to cover short positions. The largest short position ever holds the potential for the greatest short covering rally ever. For more than 30 years, COMEX silver futures have had the largest short position of any commodity in terms of real world production and inventories. Yet while silver prices have had some notable rallies over the decades, none have included a genuine short covering panic. In fact, the uniquely large and concentrated nature of the COMEX silver short position (meaning it is held by just a few traders) is the mechanism by which silver has been manipulated in price all these years.

 

The concentrated short position in COMEX silver futures and the price manipulation are one and the same. All price manipulations must come to an end. In silver that means that at some point the concentrated COMEX short position no longer increases, but instead gets covered for the first time on rising prices. The main reason is a subtle yet distinct change in the composition of the big concentrated short position in COMEX silver.

 

JPMorgan has amassed a physical stockpile of silver of at least 600 million ounces by my calculations at an average cost of around $20 an ounce, all while continuing to make hundreds of millions of dollars in manipulative COMEX short selling. This epic accumulation has changed the composition of the concentrated COMEX short position more than any single factor.

 

No longer is the largest COMEX silver short subject to extreme financial damage should silver prices explode. Instead, JPMorgan has pulled off the accumulation of the largest silver hoard in world history on declining prices. The bank has never been better positioned for a silver price explosion. In other words, there has never been a better time, from the selfish perspective of JPMorgan, for the price of silver to rip higher or a worse time for the other big shorts. And the recent deliberate price takedown has further reduced JPMorgan’s COMEX short position, greatly enhancing the prospects that JPMorgan won’t be adding to its COMEX short position whenever the next silver rally gets rolling.

 

Should JPMorgan not add to its COMEX short position on the coming silver price rally, then it will be only a matter of time before the remaining big COMEX shorts wake up to the fact that they are toast. By “a matter of time” I am referring to days and weeks. When silver prices rise sufficiently, the remaining shorts will panic and begin to try to cover their short positions. This buying will send silver prices skyward and then touch off all sorts of other buying, including investment buying and then industrial user buying, perhaps the most potent buying of all. The best analogy I can come up with is an atomic bomb on top of a hydrogen bomb on top of a neutron bomb.

 

The big shorts, apart from JPMorgan, appear to be mostly foreign banks according to CFTC data. The speculating foreign banks are precisely the type of short sellers most likely to panic when silver prices start to rally and it begins to take hold on them that JPMorgan is no longer the shorts’ protector and short seller of last resort.

 

Even after the recent selloff, the short position in COMEX silver is still at astronomically high levels relative to all other commodities. The seven biggest shorts (ex JPM) are still short around 350 million ounces (70,000 contracts). It is impossible to imagine such an amount being purchased except at prices $20 to $30 higher, at a minimum.

 

Then other forces will kick in, such as ETF buying, which has largely been somnolent for the past six years. On a rally where silver prices jump to $20 or $30, it would not be unreasonable to imagine $2 to $3 billion of investment demand coming from investors excited by rising prices. That’s not much of an investment in dollar terms, but it happens to equate to 100 million ounces of physical silver. I have trouble visualizing where that much silver would come from, particularly when this physical demand would likely occur as the seven big banks (dead men walking) are buying back in a panic. Then add buying by industrial users who face delivery delays caused by investment buying.

 

The whole silver manipulation has become more obvious than ever, particularly this last deliberate selloff. The concentrated short position hit an all-time extreme a few weeks back on a rally to only $18.50 – the largest such short position at the lowest price ever. You have to ask where this thing is headed. How much longer can a manipulation last that is obvious to more observers than ever before? The name of the biggest manipulator is openly called out and the primary regulator can’t address the most basic questions about the illegal nature of the biggest bank in America holding the price of silver down on paper while it scoops up a huge hoard of physical silver. Something has to give soon and when it does, it will go down in history.

 

Ted Butler

 

May 12, 2017

end

Bill Holter is interviewed by SGT

(courtesy SGT/Bill HOlter)

Attachments area

Preview YouTube video END OF THE EMPIRE — Bill Holter

END OF THE EMPIRE — Bill Holter
 end

Interesting:  a state department memo has surfaced which explains fully the USA policy to drive gold out of the financial system;

(courtesy GATA/ChrisPowell)

State Dept. memo explains U.S. policy to drive gold out of financial system

Section:

10:33a ET Saturday, May 13, 2017

Dear Friend of GATA and Gold:

A long memorandum written in March 1974 by a U.S. State Department official for Secretary of State Henry Kissinger and copied to future Federal Reserve Chairman Paul Volcker, then the Treasury Department’s undersecretary for monetary affairs, describes the desire of the United States and its options to prevent European countries from increasing the use of gold in the international financial system.

The memo, titled “Gold and the Monetary System: Potential U.S.-E.C. Conflict,” was recently discovered in the State Department archive by GoldMoney Vice President John Butler and brought to GATA’s attention this week by GoldMoney research chief Alasdair Macleod. It emphasizes the longstanding U.S. government policy of subverting gold as a reserve currency in favor of the Special Drawing Rights issued by the International Monetary Fund, an agency then and now largely controlled by the United States.

The memo’s author, Sidney Weintraub, deputy assistant secretary of state for international finance and development, wrote:

“To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price, and encourage the gradual disposition of monetary gold through sales in the private market.

“An alternative route to demonetization could involve a substitution of SDRs for gold with the IMF, with the latter selling the gold gradually on the private market, and allocating the profits on such sales either to the original gold holders or by other agreement.”

Weintraub copied his memo to Volcker just a month before Secretary Kissinger met with his assistant undersecretary of state for economic and business affairs, Thomas O. Enders, to hear a similar argument. Whichever nation or group of nations controls the most gold, Enders explained to Kissinger, can control the currency markets by changing gold’s value periodically. Thus, Enders said, replacing gold as an international reserve with SDRs was in the interest of the United States.

GATA often has called attention to a transcript of Kissinger’s conversation with Enders, which remains in the State Department’s archives:

http://www.gata.org/node/13310

As GATA always pleads, if vainly, none of this stuff is mere “conspiracy theory.” It is extensively documented U.S. government policy based on the most obvious national interest that endures to the present, even if it can’t be discussed in polite company, in financial journalism, or even in the monetary metals mining industry, whose crippling it ensures.

Control of the currency markets long has been and remains the primary mechanism of imperialism.

Weintraub’s memo is posted at the State Department archive here —

https://history.state.gov/historicaldocuments/frus1969-76v31/d61

— and in PDF format at GATA’s internet site here:

http://www.gata.org/files/WeintraubMemo-03-06-1974.pdf

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

 

 

end

 

Chris Waltzek of Goldseek interviews Bill Murphy:

(courtesy Goldseek/Bill Murphy)

GoldSeek Radio’s Chris Waltzek interviews GATA Chairman Bill Murphy

Section:

6:18p ET Saturday, May 13, 2017

Dear Friend of GATA and Gold:

GoldSeek Radio’s Chris Waltzek today interviews GATA Chairman Bill Murphy, just returned from the retirement dinner in Toronto for Sprott Asset Management founder and monetary metals advocate Eric Sprott, and they discuss the metals’ prospects and their competition with bitcoin for investor interest. The interview begins at the 6:20 mark at GoldSeek Radio here:

http://radio.goldseek.com/

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

end

 

This once thriving nation produced over 100 tonnes of gold each year.  Now only 7 tonnes is produced and all at a loss as almost all mining companies have all left Zimbabwe, the former Rhodesia. The following is a report on how the country subsists:

(courtesy Mhlanga/Standard, Harare Zimbabwe)

 

Report from another gold-rich country insisting on being poor

Section:

Black Market Thrives as Banks Run Dry

By Blessed Mhlanga
The Standard, Harare, Zimbabwe
Sunday, May 14, 2017

https://www.thestandard.co.zw/2017/05/14/black-market-thrives-banks-run-…

Harare’s Road Port has become the unofficial bank of last resort, never short of cash, no queues, and a multicurrency platform.

The money market at this busy bus terminus now plays the role that the formal banking sector has failed. It is effectively making a mockery of the Reserve Bank of Zimbabwe (RBZ).

Bundles of bond notes, hard United States dollars, and the South African rand openly exchange hands here without any fear of the police who mill around everywhere.

Most of the dealers are poor and do not own the huge heaps of money that they carry around. The money belongs to some big shots in the corridors of the financial institutions, government, and business owners — mostly Chinese nationals who pour hard cash on the market every day.

John Chitera said top government officials, supermarket owners, and service stations were behind the thriving black market, which is never short of cash.

“We get cash from government ministers and big bosses from banks. Most of it comes in bond notes and our job is to convert the money into US dollars and other currencies like the [South African] rand and the [Botswanan] pula,” he said.

Chitera said they also get close to $8 in [Zimbabwean] bond notes if they manage to get their hands on US$100 and US$50 notes.

“A US$100 or US$50 note is sold for $108 or $54 respectively in bond notes. It’s mostly our Chinese clients who want the solid US dollar notes because they are easy to carry or store as opposed to the smaller denominations,” he said.

The black market is awash with dollars and rands, which exchange hands on a daily basis, supplying cross-border traders and dealers who continue to smuggle cash across Zimbabwe’s porous borders.

Top government ministers also reportedly get cash from the black market and import expensive cars and electronic gadgets.

Tonderai Mutambudzi said car dealers, fuel importers, and other business people were being kept in business by the Road Port runners, who now reliably supply hard currency needed by businesses to stay afloat.

“You know that it takes nearly a month or more for a telegraphic transfer to clear at the bank. Sometimes it’s even denied. But here we offer quick solutions. We convert the bond notes and provide hard currency, which is tradable outside Zimbabwe,” Mutambudzi said.

He said some ministers collect cash to pay fees for their children abroad and for their upkeep.

In the absence of industry and with failing production, Zimbabweans have taken to selling cash and not goods, as if to spite RBZ governor John Mangudya, who appears to have run out of steam in attempting to solve the bleeding cash crisis.

In Harare’s central business district, especially after 5 p.m., fuel stations refuse to accept plastic money, forcing motorists to buy in cash, which they in turn allegedly pour on the black market.

In Banket and Chinhoyi, service stations visited by this reporter were refusing to accept plastic money, saying management was insisting on cash payments only.

“We have not been using swipe for over two months now. The bosses have given us an instruction just to receive cash,” said a fuel attendant at the Zuva Petroleum service station in Banket.

Mangudya said such practices were acts of indiscipline in the economy.

“That practice reflects the high level of indiscipline that has crept into our beloved economy, which needs a national Zimbabwean approach to exorcise it. Fuel dealers do not export, but yet they are the largest users of foreign exchange that is generated mainly by tobacco and gold producers. Not accepting plastic money, especially after hours, by these traders is not only irresponsible and absurd but also a clear sign of a high appetite to externalise funds,” he said.

Mangudya warned that the central bank would deal with indiscipline, although he said all Zimbabweans needed to join hands to fight this indiscipline.

“Traders need to adhere to normal business practice, which is beyond reproach. We have put teams comprised of the bank, Zimra [the Zimbabwe Revenue Authority], and the police to deal with such malpractice. We have also established a whistleblower or hotline facility to enhance peer policing through reporting illicit dealings,” he said.

Bond notes, which had been prescribed as a panacea to the flight of hard currency from Zimbabwe, have failed to stamp out the cash crisis.

The Zimbabwean economy has an estimated $400 million cash in circulation, half of it in bond notes, which are not supposed to leave the country because they are not tradable.

A reputable economist who refused to be named said with the majority of Zimbabweans living on less than a dollar a day and those employed earning below poverty datum line salaries, a few elites control the cash flow.

“The majority just need money to get by and as long as they buy groceries, pay fees, and have transport money, they are OK. They don’t even have savings to talk about, so it’s out of the question that they can be hoarding cash, but they are the worst affected,” he said.

Former Finance minister Tendai Biti said the cash crisis was a creation of the government, which was funding the black market by mopping up the US dollars in the country.

“The system is creating shortages. These guys have failed so they have created a cash crisis, but they are desperate for foreign currency now, so government itself is the dealer in the money black market. Those people you see holding thousands of US dollars in cash and bond notes at Road Port, they are actually acting for and on behalf of the government. They are not taking that money from bank queues,” he said.

Biti said Zimbabwe had a total of $5 billion in deposits but only 5 percent cash was in circulation instead of 35 percent, creating the shortages that have hit the economy.

He accused the government of taking the bond notes out of the banking system and using them as bait to fish out US dollars from the pockets of people to feed their own greed.

“Zanu PF [the ruling political party] is like a cat fish. They can’t hunt in clear water. They have muddied the waters so that they can make a catch. Bond notes have no value. They are like leaves, but they are now being used as bait, the rubber worms to catch the fish called the US dollar,” Biti said.

Vice President Emmerson Mnangagwa defended the introduction of $200 million worth of bond notes last year, saying they would deal with the cash crisis, but this has not happened as things have actually got worse.

end

Crooks!

(zerohedge)

A “Mysterious Antenna” Emerges In An Empty Chicago Field; Billions Depend On It

Readers are familiar with the various microwave and laser arrays located at the real New York Stock Exchange in Mahwah, New Jersey, both of which we have written about in the past.

Microwave tower located next to the NYSE in Mahwah, NJ.

This article, however, is not about the familiar antennas off Route 17 in New Jersey. Instead, demonstrating to what lengths the high frequency traders will go for just a few millisecond advantage – which in the HFT world makes all the difference between billions in profits and losses – Bloomberg reports that a mysterious antenna has emerged in an empty field in Aurora, near Chicago, and a trading fortune depends on it.

Strange? Of course: as BBG’s Brian Louis admits “it was an odd transaction from the outset: $14 million, double the going rate, for a 31-acre plot of flat, undeveloped land just west of Chicago. In the nine months since, the curious use of the space has only added to the intrigue. A single, nondescript pole with two antennas was erected by a row of shrubs. Some supporting equipment was rolled in. That’s it.”

As it turns out, those antennas – as readers may imagine – were anything but ordinary. Same goes for the buyer of the property: anything but your typical land investor, although the name will be all too familiar to those who have followed our reporting on HFT over the years: it was Jump Trading LLC, “a legendary and secretive trading firm that’s a major player in some of the most important financial markets.”


Equipment on land purchased by an affiliate of Jump Trading

Jump Trading affiliate World Class Wireless purchased the 31-acre lot for $14 million, according to county records. “They paid probably twice as much as it’s worth,” said David Friedlandof Cushman & Wakefield. “I don’t see anyone else paying close to that price.”

There was a reason why Jump overpaid so much: it was an investment into guaranteed future returns.

Because ultimately the purchase was all about the location: just across the street lies the data center for CME Group, the world’s biggest futures exchange. By placing its antennas so close to CME’s servers, Jump hopes to shave maybe a microsecond off its reaction time, enough to separate a winning from a losing bid in trading that takes place at almost the speed of light. Enough to make billions in profits if done successfully millions of times every minute for year.

As Bloomberg describes the land grab, “it was the latest, and perhaps boldest, salvo in an escalating war that’s being waged to stay competitive in the high-speed trading business.”

The war is one of proximity — to see who can get data in and out of CME the quickest. A company called McKay Brothers LLC recently won approval to build the tallest microwave tower in the area while another, Webline Holdings LLC, has installed microwave dishes on a utility pole just outside the data center.

“It tells you how valuable being just a little bit faster is,” said Michael Goldstein, a finance professor at Babson College in Babson Park, Massachusetts. “People say seconds matter. This is microseconds matter.”

It also tells you something else: at its core, modern trading is simply about being faster than your competition: no thinking goes into the trade, only reaction times matter. That, and frontrunning your competition. Some more details about this literal land grab:

In October 2015, McKay Brothers, a company that sells access to its microwave network to high-speed traders, leased land diagonal to the CME data center, under the name Pierce Broadband LLC, according to DuPage County property records.

 

Last month, the county gave McKay approval to erect a 350-foot high microwave tower that could be 600 feet closer to the data center than its current location, records show. Two trading firms, IMC BV and Tower Research Capital LLC, own minority stakes in McKay. Co-founder Stephane Tyc said his firm may never build the tower but it would be part of the firm’s continual efforts to speed transmission time.

 

Then there’s Webline Holdings. In November 2015, it was granted a license to operate microwave equipment on a utility pole just outside the data center, according to Federal Communications Commission records. Webline has licenses for a microwave network stretching from Aurora to Carteret, New Jersey, where Nasdaq Inc.’s data center is located. Messages left for Webline were not returned.

Back to the mysterious antenna: according to Bloomberg, the license for the transmission dishes is held by a joint venture between World Class and a unit of KCG Holdings, another HFT trading firm that was recently acquired by Virtu Financial. In other words, the “who is who” of HFT has been unleashed on an empty field near Chicago, and to the builder will go the spoils.

It could be billions in revenues.

* * *

After all this frentic building of microwave tower, who is closest to the CME servers? It is unclear. Trading data first leaves CME computers via fiber cable, and then to nearby antennas that send it by microwave to other towers until it reaches New Jersey, where all the major U.S. stock exchanges house their computers. The moves in Aurora are intended to reduce the time that the data is conveyed through cable; the practical impact is shaving off a millisecond or maybe even a few nanoseconds.

At its core, the race is about latency arbitrage, and not being the slowest firm on the block – a recipe for financial ruin. Sending data back and forth between the U.S. Midwest and East Coast allows high-frequency traders to profit from price differences for related assets, including S&P 500 Index futures in Illinois and stock prices in New Jersey. Those arbitrage opportunities often last only tiny fractions of a second.

Ironically, all the land grab and overpriced land purchases could be made obsolete with one simple decision: a microwave tower could be installed on the roof of the CME data center to eliminate the need for jockeying around the site, the same way the NYSE has a microwave tower next to its NJ headquarters. The exchange is indeed looking at allowing roof access, along with CyrusOne, the company that bought the data center last year, CME said in a statement. Traders being traders, however, they may continue to battle, this time for the most advantageous position on the microwave tower itself.

“We are confident the CME can provide an alternate and better solution which offers a level playing field to all participants,” said McKay’s Tyc.

Which is ironic because at its core, modern High Frequency Trade is about everything but a level playing field: after all there are millions of traders to be front run, take that away, and the HFT parasites of the world have no advantage whatsoever.

end

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

 
 

1 Chinese yuan vs USA dollar/yuan A LITTLE STRONGER  6.8969(REVALUATION NORTHBOUND   /OFFSHORE YUAN MOVES A TOUCH STRONGER TO ONSHORE AT   6.8917/ Shanghai bourse CLOSED UP 6.71 POINTS OR .22%   / HANG SANG CLOSED UP 215.25 POINTS OR 0.86% 

2. Nikkei closed DOWN 14.05  POINTS OR 0.07%   /USA: YEN RISES TO 113.47

3. Europe stocks OPENED ALL IN THE GREEN        ( /USA dollar index FALLS TO  98.91/Euro UP to 1.0965

3b Japan 10 year bond yield: FALLS TO   +.044%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 113.47/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  47.97 and Brent: 50.45

3f Gold UP/Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO  +.407%/Italian 10 yr bond yield DOWN  to 2.263%    

3j Greek 10 year bond yield RISES to  : 5.71% ???  

3k Gold at $1232.60/silver $16.62 (8:15 am est)   SILVER BELOW  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 71/100 in  roubles/dollar) 56.27-

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 A SMALL SIZED REVALUATION NORTHBOUND 

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 113.47 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  1.0075 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0957 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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

3r the 10 Year German bund now POSITIVE territory with the 10 year FALLS to  +0.407%

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 2.331% early this morning. Thirty year rate  at 2.994% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Oil Surges After Saudis, Russians Agree To 9 Month OPEC Output Cut Extension; US Futures Flat

 

In an otherwise quiet session in which European shares dropped, Asian equities rose and S&P500 futures were little changed, crude oil surged above $49 on high volume, after the Saudi and Russian energy ministers said in Beijing they favor extending the OPEC production cut for 9 months, though the end of Q1 2018.

WTI rose more than 3%, rising above the 50DMA, climbing to the highest intraday price in almost two weeks after the comments, with subsequent comments by Putin pushing crude to session highs, and Brent above both its 200 and 50 DMA.

While output curbs that started Jan. 1 are supposedly working according to the Saudi and Russian energy ministers – clearly debatable considering there has barely been any reduction in the record global inventory glut during the first 4 months of the OPEC production cut – global inventories aren’t yet at the level targeted by OPEC and its allies, Saudi Energy Minister Khalid Al-Falih said in Beijing alongside his Russian counterpart, Alexander Novak.

“The agreement needs to be extended as we will not reach the desired inventory level by end of June,” Saudi Arabian minister Khalid Al-Falih said at event with Russian counterpart Alexander Novak. “Therefore we came to the conclusion that ending will probably be better by the end of first quarter 2018”

The ministers agreed the deal should be extended through the first quarter of 2018 at the same volume of reductions, which however according to many analysts won’t be enough to decidedly lower inventories considering the recent rebound in Libya and Nigeria production as well as a the near-record production out of the US. For now, however, it was enough to send oil surging wiping out more than 2 weeks of losses.

“This recovery in the oil and gas sector could well continue this morning on reports that Saudi Arabia and Russia have agreed to do ‘whatever it takes’ to keep a floor under oil,” Michael Hewson, chief market analyst at CMC Markets, told Reuters. “(That) has prompted oil prices to extend last week’s gains.”

“The foundation for the morning has been laid but it’s still managing to build on the initial gains we saw,” said Ole Hansen, head of commodities strategy at Saxo Bank. “It’s back in a bit of a sweet spot again”

Oil got a second win overnight, when moment ago President Vladimir Putin spoke at news conference in China, saying that he met with management of Russian oil and gas producers, and confirmed that Russia supports extending accord with OPEC on limiting oil output.

“I think it’s right that the decision was made not for two, three, four months but for nine months — until the middle of next year. That is the most important condition for stability.” The Russian leader also said that he sees good chance for extending cooperation with OPEC as Saudi Arabia is interested in price stability and is complying with obligations

As a result of the overnight oil fireworkes, Brent crude set fresh day high at $52.52/bbl, up 3.3% just after 6am ET; above the 50-day MA of $52.32, after earlier breaking above the 200-day MA, which is now at $51.73. WTI also sets fresh day-high, rising as much as 3.4% to $49.45, and also set to rise above its 50-day MA at $49.49.

“While this announcement should allay some concerns in the market and lead to a short-covering rally, given the current bearish tint to sentiment, there is no guarantee of a sustained rally,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London.

Meanwhile the elephant in the room, global oil demand, continues to decline, and there is no amount of OPEC jawboning that can do anything about that.

demand growth is slowing and may be only +185,000 bpd this year, says JBC , vs +290,000 in 2016 ( @IEA )

The crude gains offered some respite after what’s been a miserable few weeks for many commodities, amid Trump’s struggle to get his infrastructure plan underway and tightening credit in China. Meanwhile, investors are sifting various macro events in a bid to gauge the strength of the global economy. During the weekend and overnight, China’s President Xi Jinping laid out a sweeping framework for Chinese-style globalization before data showed the country’s factory output and investment slowed in April. Numbers on American retail sales and inflation also cast a shadow on growth.

At a time when central bank policymakers are wondering if they have successfully got consumer prices moving upward again, oil has been rising steadily for two weeks and may again start to boost headline rates of inflation in the months ahead.

Looking at global stock markets, Asian stock markets shrugged off worries over the ‘ransomware’ cyber attack to reach a two-year high. Hong Kong shares gained 0.9 percent and their mainland equivalents 0.4 percent, after Beijing soothed market fears of tighter regulation saying bank risks were “completely controllable.” China shares trading in Hong Kong rallied to the highest level since March, as President Xi Jinping’s plans for an international infrastructure program overshadowed data showing slower growth in factory output and investment. Tokyo shares almost erased earlier losses as the yen weakened and investors assessed a wave of corporate earnings.

The Stoxx Europe 600 was slighlty in the red London, after touching the highest level since August 2015 last week. A blowout victory for Angela Merkel’s conservatives in a regional election in Germany’s most populous state also helped share indices in London, Frankfurt and Madrid inch higher in early trade.

S&P 500 futures were little changed, up less than 0.1%, after cash equities dropped 0.4% last week, posting their first back-to-back drop since mid-April as investors awaited earnings reports this week.

As European bond markets got going on Monday, U.S. Treasury yields gained less from the oil bounce than their German equivalents.

“The shadow of Friday’s softer U.S. CPI and retail sales data hangs over markets this morning,” Societe Generale analyst Kit Juckes said in a note to clients. “The inability of the dollar to gain more … reflects the changing global landscape as recovery elsewhere drives rates and yields a bit higher. With a thin U.S. data calendar, there’s not much to propel yields or the dollar back up.”

His key excerpted observations are below:

The shadow of Friday’s softer US CPI and retail sales data hangs over markets this morning with 10-year Treasuries at 2.33%. 10year TIIPS are at 47bp and have now recorded three peaks since November at 0.7%, 0.6% and 0.5%. The corresponding levels for DXY are 103.2, 102.2 and 99.7. The inability of the dollar to gain more from that last move up in yields reflects the changing global landscape as recovery elsewhere drives rates and yields a bit higher. With a thin US data calendar (highlight housing starts and industrial production tomorrow), there’s not much to propel yields or the dollar back up. That December DXY high looks pretty safe. There’s a good chance that we see EUR/USD break 1.10 again this week.

 

Economic data include Empire Manufacturing for May. Forterra, Premium Brands are among companies scheduled to publish results. The most important U.S. data point will be industrial production on Tuesday, which will provide useful insight into how the factory sector is performing, particularly now that auto sales appear to have peaked for the cycle.

Bulletin Headline Summary

  • Energy has been seen higher throughout the European session as Saudi and Russia look to commit to further output cuts
  • This initially supported European equities before gains were shed alongside the firmer EUR in what’s been a particularly quiet session thus far
  • Looking ahead, highlights include NY Empire State Manufacturing

Global Market Snapshot

  • S&P 500 futures up 0.1% to 2,390
  • STOXX Europe 600 down 0.2% to 394.91
  • MXAP up 0.2% to 151.07
  • MXAPJ up 0.5% to 495.06
  • Nikkei down 0.07% to 19,869.85
  • Topix down 0.04% to 1,580.00
  • Hang Seng Index up 0.9% to 25,371.59
  • Shanghai Composite up 0.2% to 3,090.23
  • Sensex up 0.4% to 30,315.80
  • Australia S&P/ASX 200 up 0.03% to 5,838.40
  • Kospi up 0.2% to 2,290.65
  • German 10Y yield rose 2.2 bps to 0.413%
  • Euro up 0.1% to 1.0946 per US$
  • Brent Futures up 3.3% to $52.52/bbl
  • Italian 10Y yield fell 4.2 bps to 1.957%
  • Spanish 10Y yield rose 3.5 bps to 1.662%
  • Gold spot up 0.1% to $1,229.71
  • U.S. Dollar Index down 0.2% to 99.07

Top Overnight News from Bloomberg

  • Saudi Arabia and Russia said they favor prolonging oil- output cuts by global producers through the end of the first quarter of 2018, setting a firmer timeframe for a likely extension of the curbs into next year. Crude prices jumped.
  • An unrivaled global cyber attack is poised to continue, claiming victims Monday as people return to work and turn on their desktop computers, even as hospitals and other facilities gained the upper hand against the first wave.
  • Chancellor Angela Merkel is picking up a tailwind for Germany’s election in September, strengthening her position at home and on the global stage ahead of a series of summits with fellow leaders including President Donald Trump.
  • Thermo Fisher Said in Talks to Buy Drug Ingredient Maker Patheon
  • Fox Said Willing to Make Concessions to Win Approval for Sky Bid
  • Indonesia Eyes End-June for Conclusion of Talks With Freeport
  • New Wave of Ransom Threats Seen in Unprecedented Attack
  • Microsoft Comments on Implications of ’WannaCrypt’ Attacks
  • Vodafone Sells $2.6 Billion Safaricom Stake to S. African Unit
  • Benettons’ Atlantia Makes $17.9 Billion Bid to Buy Abertis
  • JPMorgan Agrees to Acquire Dublin Office Block From KWE Venture
  • Avis President, CFO Resigns After Weak Results; Shares Down
  • GE Sees No Change to Engine Output Plans After 737 Grounding
  • U.S. Co. Said to Be Frontrunner for Aramco JV Partner: Reuters

Asian equity markets traded mixed amid renewed geopolitical concerns after North Korea conducted another missile test, while participants also digested a slew of disappointing Chinese data. Nikkei 225 (-0.1%) and ASX 200 (flat) were initially weighed on by following the missile test which was said to be a new type of missile capable of carrying a large nuclear warhead before recovering into the close. Shanghai Comp. (+0.2%) and Hang Seng (+0.9%) were positive with sentiment underpinned by strong lending data and after China pledged USD 124b1n investment for the Belt and Road initiative, although upside was capped after Industrial Production and Retail Sales disappointed. Finally, 10yr JGBs traded with mild gains amid a cautious tone in the region, while the curve flattened as the long-end outperformed.

Top Asian News

  • MUFG Sees Profit Rising 2.5% as Japan Bank Withstands Low Rates
  • Sumitomo Mitsui Joins Mizuho in Forecasting Decline in Profit
  • Mizuho Sees Profit Falling 8.9% as Negative Rates Sap Earnings
  • China Said to Plan 6% Cap on Gas Sellers’ Investment Returns
  • Orix Targets 300b Net Income This Year, in Line With Estimates
  • Xi Pushes Chinese-Led Globalization After Pledging $78 Billion
  • Man Who Helped Bury Lehman Turns to Saving Troubled Trader Noble
  • Nomura Real Estate Shares Surge as Japan Post Said to Seek Stake
  • Iskandar Waterfront Surges After Bandar Malaysia Stake Report
  • Vietnamese Emperor’s Rolex Sells for Record $5 Million in Geneva

European sentiment has been driven by the surge in oil prices, higher by over 3%, after Russia and Saudi Arabia agree to extend oil output cuts to March 2018. As such, global equities began the week on a firmer note with large energy names leading the charge, subsequently offsetting the rising geopolitical political concerns surrounding N. Korea after they launch another ballistic missile. Alongside this, the DAX reached all time highs with the index also supported by Merkel’s key state victory over the ruling Social Democrats in North Whine Westphalia (largest state by population), lifting hopes that Merkel will retain power in Septembers election. However, gains have been shed heading into the North American crossover alongside a firmer EUR and light newsflow. In credit markets, global bond yields tick higher in light of the upside in EU bourses this morning, bund curve has seen some modest bear steepening. Slight underperformance in the periphery market with bono’s and PGB’s up 3.4 and 3.3bps respectively, focus will be on comments from Draghi, Praet and Constancio throughout the week as participants will scrutinise as to whether Friday’s Der Spiegel article was really ‘a signal’ of the board converging towards tapering starting in January 2018.

Top European News

  • RWE Leads DAX to Record as Utility Pledges Dividend Return
  • Popular Denies News Reports on ECB Inspection, Comments
  • Deutsche Bank: Broeksmit Probe Brought ‘No Significant Findings’
  • 888 Plunges as U.K. Regulator Reviews Problem-Gambling Controls
  • ECB to Start Publishing Additional Data on Securities Lending
  • Czech Premier Rejects ANO Party’s Candidate for Finance Minister

In currencies, the Bloomberg Dollar Spot Index slipped 0.2 percent after falling 0.4 percent Friday. The yen fell 0.2 percent, and the euro added 0.1 percent to $1.0945. It has been a relatively active morning in the FX market, as we factor in the impact of the Oil price rise on the CAD. News of an extension deal in principle from Saudi Arabia have given the ailing CAD some much needed relief, but tech traders have limited the spot sell off to 1.3625/7 or so, as 1.3600 is now support. The JPY is on the back foot as risk sentiment is also boosted by the above developments, with USD/JPY rising against the tide of general USD softness after the inflation/retail sales numbers last week continue to weigh on US Tsy yields. 114.00 looks out of reach, cross JPY gains look a little more comfortable under the circumstances. EUR/USD is edging higher again, but may face some congestion circa 1.0950 as we have 2 yards of expiries at this level which will prompt some 2 way flow from the options market. Cable is also back on the front foot as GBP losses in the wake of the BoE meeting and QIR were arrested ahead of 1.2800. It looks like we may be in for another test on 1.3000, but we have plenty of key data releases out of the UK this week, so caution may set in. This is pulling EUR/GBP lower again as a result, but very slowly.

In commodities,  WTI jumped over 3% to $49.40 a barrel, after climbing 3.5 percent last week. Gold rose 0.1 percent to $1,230.20 an ounce, extending gains to a third day. Copper increased 0.8 percent while aluminum rose 0.7 percent. Zinc added 0.7 percent after a three-day slide. The big news today was the Saudi/Russia agreement (in principle) of a 9 month extension to the current output cut deal, and this has breathed fresh life into Oil prices as WTI moves onto a USD49.00 handle. Brent has reclaimed USD52.00, but tech based play in the former will see WTI grappling with offers ahead of USD50.00. Elsewhere, metals look to have gained a bid on the broader risk mood emanating from the above, but with another China data miss — industrial production — we would expect this to peter out, but Copper edging back into the mid USD2.50’s in the meantime. Aluminium and Platinum the outperformer this morning. Tentative gains seen in Gold and Silver as Treasuries gain post US CPI. The impact of positive risk sentiment, should slow gains through USD1230.00, with USD losses likely to be moderated into June. Russia Energy Minister Novak said that Russia and Saudi Arabia agree output cuts need to be extended for 9 months. Novak also commented that more countries are invited to the May meeting in Vienna, while Saudi Energy Minister Al¬Falih stated that they recommend extending at the same terms.  Some OPEC members are pushing for deeper cuts or including new participants to join the cuts, including Turkmenistan & Egypt, according to sources. There were also source reports that Venezuela told other OPEC members that it wants deeper cuts of up to 5mln BPD, which didn’t gather support.

It’s a quiet start to the week today: the May empire manufacturing reading is due along with the NAHB housing market index for May.

US Event Calendar

  • 8:30am: Empire Manufacturing, est. 7.3, prior 5.2
  • 10am: NAHB Housing Market Index, est. 68, prior 68
  • 4pm: Total Net TIC Flows, prior $19.3b
  • 4pm: Net Long-term TIC Flows, prior $53.4b

DB’s Jim Reid concludes the overnight wrap

Congratulations to those in Portugal for winning Eurovision. After a weekend of a global hacking epidemic through 150 countries I can’t help but think that maybe the UK really won but that the votes were hacked!!

One vote that saw a resounding outcome was the state elections in North Rhine- Westphalia Germany. Mrs Merkel’s CDU party took home 33% of the votes (compared to 26% in 2012) based on preliminary estimates while the CDU’s closest rival and the previous controlling party in the region, the SPD, took 31% of the votes (compared to 39% in 2012) which was their worst result in the postwar era in the state. The SPD’s coalition party, the Green’s, took home 6% of the votes, while the FDP got 13%. Meanwhile the anti-immigration AfD – which had been running at as much as 11% in opinion polls in the region and  was aiming for 10% – secured just 7% of votes. The SPD’s leader, Martin Schulz, called the outcome “a tough day for the SPD and also tough for me personally”. There’s no doubt that the result is a big boost for Merkel with that victory also coming ahead of her meeting with the newly inaugurated French President Emmanuel Macron today. The Euro is little changed in the early going this morning.

There are a few other bits n bobs of news to report from the weekend. North Korea’s state-run KCNA news service has confirmed the latest missile test which was conducted on Sunday morning. This is also the first test since South Korea elected their new President Moon Jae-in on May 10th. Meanwhile there’s plenty of focus on China this morning too following the US-China 100-day plan press release on Friday. China’s President, Xi Jingping, has also described the Belt and Road Initiative (building infrastructure that will link China more closely with Asia, Europe and Africa) as “the project of the century” at a two-day summit with delegates from over 100 countries yesterday. Our economists in China wrote on Friday that the details in the 100-day plan press release will not materially resolve the trade imbalance, but they indicate that the two countries are indeed trying to cooperate with each other. The team therefore believe the chance for a full fledged US-China trade war has declined and they wonder if other countries  would also push China for trade concessions in the same way.

Staying with China briefly, the April activity indicators data is out this morning with the data suggesting a softer start in Q2. Retail sales growth slowed two-tenths to +10.7% yoy (vs. +10.8% expected), industrial production growth slowed to +6.5% yoy (from +7.6%; +7.0% expected) and fixed asset investment growth slowed three-tenths to +8.9% yoy (vs. +9.1% expected). Bourses in China appear unfazed by that data with the Shanghai Comp (+0.24%) and CSI 300 (+0.53%) both slightly higher this morning.

Finally, the communiqué released from the G7 finance ministers meeting on Saturday said that officials were “working to strengthen the contribution of trade to our economies”. According to the FT this was a weaker pledge relative to the statement from G20 leaders last year in which officials agreed to avoid protectionism in all its forms.

In terms of other markets this morning, the Nikkei (-0.21%) and ASX (-0.07%) are both in the red although moves have been pretty modest, while the Hang Seng (+0.51%) and Kospi (+0.20%) are following markets in China higher. Meanwhile WTI Oil is +1.63% after headlines broke on Bloomberg a short time ago suggesting that Russia and Saudi Arabia are in favour of extending the OPEC supply production agreement to the end of Q1 2018 (an extension of 9 months on the current agreement). The Saudi energy minister suggested that a decision will be made at the upcoming May 25th OPEC meeting.

Back to Friday. While it may have been another dull day for equity markets with the S&P 500 succumbing to a small -0.15% decline, the main price action was away from this in bonds and FX following the latest US inflation report. While headline CPI was revealed as rising +0.2% mom in April as expected (which in turn lowered the annual rate two-tenths to +2.2%), the core came in at a disappointing +0.1% mom (vs. +0.2% expected) after medical care costs fell unexpectedly. As a result the annual rate slipped one-tenth to +1.9% yoy with three and six month annualized rates also slowing. That annual rate has now fallen every month since January when it stood at +2.3% yoy. In addition to this, the University of Michigan survey revealed a dampening in 5-10y inflation expectations to 2.3% (from 2.4%), although 1y ahead expectations did nudge up a tenth to 2.6%. It’s worth noting that the Fed’s Evans spoke just after the inflation report and warned that inflation “downside risks still predominate”.

Over in markets, Treasuries caught a tailwind following that inflation data. 2y yields ended the day down 4.4bps at 1.292% while 10y yields finished 6.2bps lower at 2.327% and 30y yields 3.7bps at 2.989%. Gold also nudged up +0.28% while the USD index weakened -0.37%. Sovereign bond yields in Europe were also sharply lower with 10y Bund yields down a little over 4bps to 0.386%. It’s worth also noting that the US 5y5y breakeven rate closed at 1.980% on Friday which is the lowest this year. Base metals were more mixed while Oil ended the day flat. The other important data out on Friday was the April retail sales data in the US. The numbers ended up being a bit of a wash though. While headline sales rose +0.4% mom and a bit less than expected (+0.6% expected), the March figure ended up being revised up three-tenths to +0.1% mom which appeared to offset any disappointment. It was a similar story with the ex auto and gas print (+0.3% mom vs. +0.4% expected) where the March reading was also revised up three-tenths to +0.4% mom. Retail control was confirmed as rising +0.2% mom (vs. +0.4% expected) with March revised up two-tenths to +0.7%. Elsewhere, the University of Michigan’s consumer sentiment reading printed at 97.7 for May in the flash estimate which is up 0.7pts from April. Current conditions were unchanged but the expectations component was up over a point. Finally business inventories printed at +0.2% mom for March.

In Europe Q1 GDP in Germany was revealed as growing +0.6% qoq which matched the consensus estimate. Headline CPI of 0.0% mom was also unrevised from the earlier flash reading. Staying in Europe for a second, on Friday our European economists revised up their growth forecasts with the French election now out the way. In the near term, they now see the euro area maintaining a 0.5% qoq growth rate in Q2, helping to lift growth in 2017 to 1.8% from 1.3% estimated previously. They have lifted their estimate of growth next year to 1.6% from 1.5% previously. They continue to expect a recovery in underlying euro area inflation beginning in the second half of this year. A gradual ECB exit will follow accordingly: they expect forward guidance to change in June, tapering to be preannounced in September and a one-off deposit rate hike in December.

Wrapping up the data, after we went to print on Friday China released their April money and credit aggregates data. Total financing was reported as rising CNY1.39tn which was a little ahead of expectations however M2 money supply growth slowed a tenth to +10.5% yoy (vs. +10.8% expected). Before we move onto this week’s calendar, Friday was another day rough day for the US retail sector with share prices for Macy’s (-3.04%), Nordstrom (-10.84%), Gap (-2.68%) and Kohl’s (-1.80%) amongst those down sharply. It was a similar story in credit too with 5y CDS for Macy’s and Nordstrom 18bps and 10bps wider respectively on Friday alone. Shopping mall REITS are also feeling the pain too, evidenced by Simon Property Group which saw its share price fall -2.68% on Friday and CDS close 8bps wider. In the next couple of days we’ll get more retail earnings with Home Depot, TJX and Staples reporting tomorrow, followed by Target on Wednesday and Wal-Mart on Thursday. So it’ll be well worth keeping an eye on those. That sector has been a damp spot in what has otherwise been a bright reporting season so far. Indeed as of Friday 91% of the S&P 500 had reported Q1 results with 75% beating the mean EPS estimate (compared to the 5- year trailing average of 68%) and 64% beating the mean sales estimate according to Factset. Blended EPS growth is 13.6% which if it holds, will be the highest YoY earnings growth since Q3 2011.

To the week ahead now. It’s a quiet start to the week today with no significant data to highlight, while in the US the May empire manufacturing reading is due along with the NAHB housing market index for May. On Tuesday, with little of note in Asia it’ll be straight to Europe where the final April CPI revisions are due in France along with the April CPI/RPI/PPI data docket in the UK. Euro area Q1 GDP and March trade data follows, while the May ZEW survey is also due in Germany. Over in the US tomorrow we’re due to receive April housing starts, building permits and industrial production data. We’re kicking off Wednesday in Japan where the March industrial production print is due. In the UK we’ll get March and April employment data, while April CPI for the Euro area is also due. There is no data of note in the US on Wednesday. Thursday kicks off in Japan again with the Q1 preliminary GDP report, while in China we’re also due to get April property prices data. In France on Thursday we’ll get Q1 employment data while in the UK we’ll get April retail sales. Over in the US on Thursday the data includes initial jobless claims, Philly Fed business outlook for May and Conference Board’s leading index for April. It’s a quiet end to the week on Friday. In Germany we get April PPI while in the afternoon session we get the flash consumer confidence reading for the Euro area in May. There is no data in the US on Friday.

Away from the data the Fed’s Bullard and Mester are scheduled to speak on Thursday, with Bullard also speaking on Friday. ECB President Draghi also speaks on Thursday along with Nowotny and Lautenschlaeger. Praet and Constancio speak on Friday. The NY Fed releases its Q1 US household debt and credit report on Wednesday. UK politicians excluding PM May take part in a televised election debate on Thursday.

END

3. ASIAN AFFAIRS

i)Late SUNDAY night/MONDAY morning: Shanghai closed UP 6.71 POINTS OR .22%  OR / /Hang Sang CLOSED UP 215.25 POINTS OR 0.86% .  The Nikkei closed DOWN 14.05 POINTS OR 0.07%/Australia’s all ordinaires  CLOSED DOWN .04%/Chinese yuan (ONSHORE) closed UP at 6.8969/Oil UP to 49.14 dollars per barrel for WTI and 52.19 for Brent. Stocks in Europe OPENED IN THE GREEN    ..Offshore yuan trades  6.8917 yuan to the dollar vs 6.9010 for onshore yuan. NOW  THE OFFSHORE IS  STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS A LITTLE BIT STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE  WEAKER DOLLAR. CHINA IS A LITTLE HAPPIER THIS MORNING

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA

Saturday

Kim Jong-Un fires another ballistic missile which flew 700 kilometers and landed in the Sea of Japan.

(courtesy zero hedge)

North Korea Test-Fires 7th Ballistic Missile Of 2017, Projectile Flew 700Km, Landed In Sea Of Japan

Update: Japanese Chief Cabinet Secretary Yoshihide Suga said on Sunday that North Korea’s firing of a ballistic missile was a violation of U.N. resolutions and that Japan strongly protested the action. Additionally:

  • *MISSILE MAY BE NEW TYPE: KYODO CITES JAPAN DEFENSE MINISTER
  • *MISSILE EST ALTITUDE 2,000KM, KYODO NEWS REPORT
  • *S. KOREA WILL DEAL STERNLY WITH N. KOREA PROVOCATIONS: YOON
  • *S. KOREA PRESIDENT STILL OPEN TO DIALOGUE WITH N. KOREA: YOON

*  *  *

As we detailed earlier, on the eve of a summit in Beijing, and just hours after Pyongyang’s chief nuclear negotiator said North Korea is ready to hold talks with the United States “if the conditions are mature”, South Korea’s Yonhap reports that North Korea has fired a projectile believed to be a ballistic missile, from a region named Kusong located northwest of Pyongyang, where the North previously test-launched its intermediate-range missile.

The nature of the projectile was not immediately clear, a South Korean military official told Reuters.

The ballistic missile firing is North Korea’s seventh this year.

The launch comes just hours after The South China Morning Post reports Choe Son-hui, head of the North Korea’s Foreign Ministry’s North America bureau, offered the assurance in the Chinese capital after an informal meeting in Norway with Thomas Pickering, a former US ambassador to the United Nations.

“If conditions are mature, we will hold dialogue with the Donald Trump administration,” she said.

 

Choe made the remarks just days after Trump said he would be willing to meet North Korean leader Kim Jong-un “under the right circumstances”.

 

But the comments also came as the US embassy in Beijing told China’s foreign ministry that North Korea’s attendance at the top-level gathering for the “Belt and Road Initiative” could send the wrong message as the world was trying to pressure Pyongyang over its ­repeated missile and nuclear tests. The foreign ministry said Beijing welcomed the participation of all countries in the summit.

South Korea’s Yonhap News confirms North Korea has fired what appears to be a ballistic missile from its west coast, the South Korean military reported early Sunday. The launch would be the first in two weeks since the last attempt to fire a missile ended in a failure just minutes into flight. It would also be the first launch since a new, liberal president took office in South Korea on Wednesday saying dialogue as well as pressure must be used to ease tensions on the Korean peninsula and stop the North’s weapons pursuit. The new president Moon has said he is willing to engage in dialogue with his northern neighbor.

Weapons experts and government officials, cited by Reuters, “believe the North has accomplished some technical progress with those tests.”

South Korean Military has now confirmed it was a ballistic missile that flew 700 km.

The Japanese government confirms the missile flew 30 minutes and landed in The Sea of Japan.

Kim claimed in January to be in the final stages of preparations to test-fire an intercontinental ballistic missile, and has since launched several intermediate-range projectiles with varying degrees of success.

The action provides an early test for South Korean President Moon Jae-in, who came to office on May 10 saying he would visit Pyongyang under the “right circumstances” to bring peace to the peninsula. Moon convened a meeting of the national security council Sunday morning, according to the Presidential Blue House.

*  *  *

Today’s launch should not be a total surprise: In a interview earlier in the week with by Sky News, in response to a question “is a sixth nuclear test now imminent”, the answer of the North Korean Ambassador to the UK, Choe Il was “In regards to the sixth nuclear test, I do not know the scheduled time for it, as I am here in the UK, not in my home country. However, I can say that the nuclear test will be conducted at the place and time as decided by our supreme leader, Kim Jong-Un.”

Asked if he is afraid of a possible US military response, the ambassador answers that “we are developing our nuclear strength to respond to that kind of attack by the US. If the US attacks us, our military and people are fully ready to respond to any kind of attack. I do not think the US are considering a military attack against us.” 

Asked what would North Korea’s response be to a preemptive strike, he answer that: “The US cannot attack us first. If the US moves an inch, then we are ready to turn to ashes any available strategic assets of the US.”

(courtesy zerohedge)

 

The new missile can travel great distances and deliver nuclear warheads.

(courtesy zero hedge)

North Korea: Latest Missile Test Successful, Can Deliver “Nuclear Warheads”

Two days after the latest provocative missile test by North Korea, in which it launched a “new type” of ballistic missile, one which experts warned had a substantially longer range than any existing rocket North Korea had fired, on Monday morning North Korea announced that it had successfully conducted a mid-to-long range missile test on Sunday supervised by leader Kim Jong Un which was aimed at verifying the capability to carry a “large scale heavy nuclear warhead.”

The country’s KCNA news agency further said that the Hwasong-12 missile was launched at the highest angle so as not to affect the security of neighboring countries and flew 787 kilometers reaching an altitude of 2,111.5 kilometers.

In an earlier article, we explained how and why the ballistic missile used may have been the most advanced one tested by North Korea yet.

end

b) REPORT ON JAPAN

c) REPORT ON CHINA

Four huge data misses from China

(courtesy zerohedge)

“Peak China”: Chinese Data Misses Across The Board As Housing Bubble Returns

Following months of warnings that China’s economy is slowing down as a result of not only a collapse in China’s credit impulse but also tighter monetary conditions, as well as rolling over loan growth which has pressured both CPI and PPI – i.e., the global “reflation trade” – as the following chart from Bloomberg’s David Ingels shows…

… and culminating over the weekend with a warning in no uncertain terms from Citi, which said that at least four key economic indicators are “starting to wave red flags” among which:

  • The Markit PMI is starting to turn over
  • China’s Inflation Surprise Index – a leading indicator to global inflation metric – has posted a recent sharp drop
  • China’s import trade has likewise tumbled after surging recently
  • Chinese Iron Ore imports into Qingado port have plunged

… moments ago China’s National Bureau of Statistics validated the mounting fears, when it reported misses across all key economic categories for the month of April, as follows:

  • Retail Sales 10.7% Y/Y, Exp. 10.8%, Last 10.9%
  • Fixed Asset Investment 8.9% Y/Y, Exp. 9.1%, Last 9.2%
  • Industrial Output 6.5% Y/Y, Exp. 7.0%, Last 7.6%
  • Industrial Production YTD 6.7% Y/Y, Exp. 6.9%, Last 6.8%

Additionally, confirming that China is backsliding into its old, “polluting, excess industrial capacity ways, China’s coal output rose to 294.5m tons last month, or up 9.9% Y/Y despite China’s so-called production curbs for “dirty industries”, even as oil processing declined by 0.6% Y/Y while out output fell 3.7% Y/Y, confirming that more pain may be in store for OPEC as Chinese demand continues to wane, forcing OPEC to cut even more output. In a sliver of silver lining, the NBS also reported that April power output rose +5.4% to 476.7b kwh while natgas output rose +15% to 12.2b cubic meters.

Finally, in yet another indication that Chinese bubble creation and capital misallocation is back front and center, the NBS also reported that new property construction in April surged 482MM square meters, or +11.1%Y/Y for the Jan-April YTD period, while April home sales jumped 7.7% Y/Y.

Bottom line: the economy is once again slowing down as China’s unprecedented excess liquidity is once again focusing on blowing bubbles, whether in old, inefficient industries or more disturbingly, housing.

It also means that the PBOC is once again trapped, as any attempts to ease monetary conditions will result in a blow off top in China’s housing bubble, its third for the past 4 years, which also risks yet another housing hard-landing, wiping out trillions in “household net worth” for China’s citizens.

end

 

India has now backed out of China’s silk road project claiming costs are too high and the route will only benefit China.  The real reason for India’s temper tantrum: the road is going through Kasmir

(courtesy zero hedge)

Scandal At China’s Grand Silk Road Summit As India Skips, Warns Of “Unsustainable Debt”

It was supposed to be China’s day of celebrating massive infrastructure spending for the sake of spending (read ghost towns, only now outside China’s borders) as Xi Jinping pledged $124 billion on Sunday for his new Silk Road plan to forge “a path of peace, inclusiveness and free trade” while calling for the abandonment of old models based on rivalry and diplomatic power games. However, it did not go quite as smoothly as expected.

A celebration years in the making, Xi hosted dozens of world leaders – including a piano-playing Vladimir Putin – on Sunday for the country’s biggest diplomatic showcase of the year, touting his vision of a new “Silk Road” that opens trade routes across the globe. Xi used the summit to “bolster China’s global leadership ambitions” as U.S. President Donald Trump promotes “America First” and questions existing global free trade deals.

After scoring 2 hat tricks in Sochi, Putin returns to Moscow where he places 1st in annual Van Cliburn competition

 

In total, leaders from 29 countries attended the forum, including some of China’s close allies and partners such as Russian President Vladimir Putin, Cambodian Prime Minister Hun Sen, Kazakh President Nursultan Nazarbayev, Turkey’s quasi-dictator Tayyip Erdogan, as well as the heads of the United Nations, and the CapEx leeches from the IMF and World Bank.

“We should build an open platform of cooperation and uphold and grow an open world economy,” China’s president Xi told the opening of the two-day gathering in Beijing.

Over the past four years, China touted what it formally calls the “One Belt, One Road” initiative as a new way to boost globalization and global development, aiming to expand links between Asia, Africa, Europe and beyond underpinned by billions of dollars in infrastructure investment. In other words, another way to boost China’s GDP only this time diluted among more Asian nations, who just have to take China’s word that it will ultimately be for their benefit.

Xi also said the world must create conditions that promote open development and encourage the building of systems of “fair, reasonable and transparent global trade and investment rules”. China’s president also pledged an anchor funding boost to the new Silk Road, including an extra 100 billion yuan ($14.50 billion) into the existing Silk Road Fund, 380 billion yuan in loans from two policy banks and 60 billion yuan in aid to developing countries and international bodies in countries along the new trade routes, according to Reuters. Some however, were concerned that this was nothing more than just Chinese grandstanding: Xi did not give a time frame for the new loans, aid and funding pledged on Sunday.

* * *

Alas, the meticulously scripted plan to showcase China’s growing economic and trade dominance did not go off quite as smoothly as Xi had planned.

First, just hours before the summit opened, North Korea launched its latest ballistic missile, provoking Beijing and further testing the patience of China, its chief ally. Ironically, the United States had complained to China on Friday over the inclusion of a North Korean delegation at the event.

Then, in a sign that China’s rampant, credit-fuelled growth is making some just a little uncomfortable, some Western diplomats expressed unease about both the summit and the plan as a whole, seeing it as an attempt to promote Chinese influence globally according to Reuters. They are also concerned about transparency and access for foreign firms to the scheme.

Australian Trade Minister Steven Ciobo said Canberra was receptive to exploring commercial opportunities China’s new Silk Road presented, but any decisions would remain incumbent on national interest. Responding to criticism, Xi said that  China is willing to share its development experience with all countries” and added “we will not interfere in other countries’ internal affairs. We will not export our system of society and development model, and even more will not impose our views on others.”

But the biggest surprise was India, the world’s fastest growing nation and the second most populous in the world, which did not even bother to send an official delegation to Beijing and instead criticised China’s global initiative, warning of an “unsustainable debt burden” for countries involved.

Indian foreign ministry spokesman Gopal Baglay, asked whether New Delhi was participating in the summit, said “India could not accept a project that compromised its sovereignty.”

India is incensed that one of the key Belt and Road projects passes through Kashmir and Pakistan. The nuclear-armed rivals have fought two of their three wars over the disputed region, Reuters notes. “No country can accept a project that ignores its core concerns on sovereignty and territorial integrity,” Baglay said.

Furthermore, he also warned of the danger of debt. One of the criticisms of the Silk Road plan is that host countries may struggle to pay back loans for huge infrastructure projects being carried out and funded by Chinese companies and banks. “Connectivity initiatives must follow principles of financial responsibility to avoid projects that would create unsustainable debt burden for communities,” Baglay said.

As well as the corridor through Pakistan, India is worried more broadly about China’s economic and diplomatic expansion through Asia, and in particular across countries and waterways that it considers to be its sphere of influence.

As China proceeds to flex its economic and geopolitical muscles further in the coming years, we expect many more such similar antagonisms between China and India in the near future.

Finally, in what may be perhaps the best summary of the regional sentiment – and antagonism – over the Silk Road, is this fictional postcard, written by Chris Andrew over at Clarmond.

4. EUROPEAN AFFAIRS

Sunday/Europol

Europol expects more computers to be have infected once Europe returns to theri desks on Monday:

(courtesy zerohedge)

 

Europol Fears Computers Simply Won’t Start Monday: Over 200,000 Infected In “Unprecedented” Global Cyberattack

There was a silver lining in what has been dubbed the “world’s biggest ransomware attack” – it struck on Friday mid-afternoon (in Europe), just as businesses were winding down for the weekend, and as a result the full impact of the forced system shutdowns would not be fully felt over the weekend when businesses and infrastructure are generally operating at a subdued pace. However, with the weekend coming to a close, the full extent of the inflicted damage may become apparent in just a few hours.

That was the warning by Europol Executive Director Rob Wainwright who on ITV’s “Peston on Sunday” broadcast, said that additional disruptions are likely as people return to work Monday and turn on their desktop systems, and as a result the “unrivaled” global cyberattack is poised to continue claiming victims.

Speaking to ITV’s, Wainwright added the attack was indiscriminate across the private and public sectors.

At the moment we are in the face of an escalating threat, the numbers are going up, I am worried about how the numbers will continue to grow when people go to work and turn their machines on Monday morning.”

 

“The latest count is over 200,000 victims in at least 150 countries. Many of those will be businesses including large corporations.”

“We’ve seen the rise of ransomware becoming the principal threat, I think, but this is something we haven’t seen before — the global reach is unprecedented,” Wainwright also said. He also said that organisations across the globe, including investigators from the National Crime Agency (NCA), are now working non-stop to hunt down those responsible for the ransomware.

As we reported on Saturday, the initial attack was halted when a security researcher disabled a key mechanism used by the worm to spread, but experts said the hackers were likely to mount a second attack because so many users of personal computers with Microsoft operating systems couldn’t or didn’t download a security patch released in March that Microsoft had labeled “critical. Microsoft said in a blog post Saturday that it was taking the “highly unusual“ step of providing the patch for older versions of Windows it was otherwise no longer supporting, including Windows XP and Windows Server 2003.

 

As the WSJ confirms, the attacks could worsen on Monday morning because of how the virus works.

The virus contains two parts. One is the ransomware, which locks the computer files and displays a message saying that the files will be locked and eventually destroyed unless the user sends payment over the internet to the hacker.

 

The other part is known as the “spreader.” Once the virus makes its way onto one computer–perhaps when a user opens an infected email attachment–the spreader transmits itself to other computers on the network.

 

The British researcher, who wishes to be identified only as MalwareTech, found a kill switch in the spreader. The spreader was designed to contact a web address to see whether it should further spread itself, but hackers hadn’t bought that web address. So MalwareTech did, and effectively stopped the virus’s spread. It meant that one computer in a network could be infected, but the worm wouldn’t spread to the rest of the network.

 

Cybersecurity experts expect the latest versions of the worm to have no kill switch for the spreader. So when workers return to the office Monday morning and turn on their computers, they might open an infected email attachment or connect an already-infected laptop to their organization’s non-security-patched network and spread the worm.

There was some good news: having tipped their hand on Friday, and allowing hacking countermeasures to be implemented, about 97% of U.K. facilities and doctors disabled by the attack were back to normal operation, Home Secretary Amber Rudd said Saturday after a government meeting. As reported on Friday, at the height of the attack Friday and early Saturday, 48 organizations in the NHS were affected, and hospitals in London, North West England and Central England urged people with non-emergency conditions to stay away as technicians tried to stop the spread of the malicious software.

“There will be lessons to learn from what appears to be the biggest criminal cyber-attack in history,” Rudd said cited by Bloomberg in response to a letter from Jonathan Ashworth, the shadow secretary of state for health.

Meanwhile, according to Tom Robinson, chief operating officer and co-founder of Elliptic Enterprises Ltd., a ransomware consultant that works with banks and companies, victims have already paid about $30,000 in ransom so far, with the total expected to rise substantially next week, said . Robinson, in an interview by email, said he calculated the total based on payments tracked to Bitcoin addresses specified in the ransom demands. The number, which is likely a conservative estimate, will only embolden the hackers to become even more aggressive in their next attack.

Ransomware is a particularly stubborn problem because victims are often tricked into allowing the malicious software to run on their computers, and the encryption happens too fast for security software to catch it. Some security expects calculate that ransomware may bring in as much as $1 billion a year in revenue for the attackers.

According to Bloomberg, last year an acute-care hospital in Hollywood paid $17,000 in bitcoin to an extortionist who hijacked its computer systems and forced doctors and staff to revert to pen and paper for record-keeping.

On one hand, it is probable that the weekend gave many companies the opportunity to prepare for the next ransomware attack: “While any sized company could be vulnerable, many large organizations with robust security departments would have prioritized the update that Microsoft released in March and wouldn’t be vulnerable to Friday’s attack.”

Even so, it does not explain why some of the world’s biggest corporations were so strikingly unprepared for Friday’s events.

A spokesman for Spain’s Telefonica SA said the hack affected some employees at its headquarters, but the phone company is attacked frequently and the impact of Friday’s incident wasn’t major. FedEx said it was “experiencing interference,” the Associated Press reported.

 

Renault halted production at some factories to stop the virus from spreading, a spokesman said Saturday, while Nissan’s U.K. car plant in Sunderland, in northeast England, was affected without causing any major impact on business, an official said.

 

In Germany, Deutsche Bahn faced “technical disruptions” on electronic displays at train stations, but travel was unaffected, the company said in a statement on its website. Newspaper reports showed images of a ransomware message on display screens blocking train information.

 

Russia’s Interior Ministry, with oversight of the police forces, said about “1,000 computers were infected,” which it described as less than 1 percent of the total, according to its website.

 

Indonesia’s government reported two hospitals in Jakarta were affected.

Meanwhile, the latest anti-Russia narrative is growing.

“There is a high probability that Russian-language cybercriminals were behind the attack” said Aleks Gostev, chief cybersecurity expert for Kaspersky Labs. “Ransomware is traditionally their topic,” he said. “The geography of attacks that hit post-Soviet Union most also suggests that.” In retrospect, what more convenient confluence of events could there be than having a handy justification for Q2 GDP missing again – just blame it on the computer virus – and accusing Russia of being responsible for the latest global slowdown.

end

GERMANY

Quite a story:  Germany confiscates homes for migrant use:

(courtesyKern /GatestoneInstitue)

Germany Confiscating Homes To Use For Migrants

Authored by Soeren Kern via The Gatestone Institute,

  • In an unprecedented move, Hamburg authorities confiscated six residential units in the Hamm district near the city center. A trustee appointed by the city is now renovating the properties and will rent them — against the will of the owner — to tenants chosen by the city. District spokeswoman Sorina Weiland said that all renovation costs will be billed to the owner of the properties.
  • Similar expropriation measures have been proposed in Berlin, the German capital, but abandoned because they were deemed unconstitutional.
  • Some Germans are asking what is next: Will authorities now limit the maximum amount of living space per person, and force those with large apartments to share them with strangers?

Authorities in Hamburg, the second-largest city in Germany, have begun confiscating private dwellings to ease a housing shortage — one that has been acutely exacerbated by Chancellor Angela Merkel’s decision to allow more than two million migrants into the country in recent years.

City officials have been seizing commercial properties and converting them into migrant shelters since late 2015, when Merkel opened German borders to hundreds of thousands of migrants from Africa, Asia and the Middle East. Now, however, the city is expropriating residential property units owned by private citizens.

In an unprecedented move, Hamburg authorities recently confiscated six residential units in the Hamm district near the city center. The units, which are owned by a private landlord, are in need of repair and have been vacant since 2012. A trustee appointed by the city is now renovating the properties and will rent them — against the will of the owner — to tenants chosen by the city. District spokeswoman Sorina Weiland said that all renovation costs will be billed to the owner of the properties.

The expropriation is authorized by the Hamburg Housing Protection Act (Hamburger Wohnraumschutzgesetz), a 1982 law that was updated by the city’s Socialist government in May 2013 to enable the city to seize any residential property unit that has been vacant for more than four months.

The forced lease, the first of its kind in Germany, is said to be aimed at pressuring the owners of other vacant residences in the city to make them available for rent. Of the 700,000 rental units in Hamburg, somewhere between 1,000 and 5,000 (less than one percent) are believed to be vacant, according an estimate by the Hamburg Senate.


Hamburg, Germany. (Images source: Morris MacMatzen/Getty Images)

Socialists and Greens in Hamburg recently established a “hotline” where local residents can report vacant properties. Activists have also created a website — Leerstandsmelder (Vacancy Detector) — to identify unoccupied real estate in Hamburg and other German cities.

It remains unclear why the landlord in Hamm left his apartments vacant for more than five years. Some have posited that, given the location of the properties, the renovation costs may have been too high and probably would not have been offset by the rental income.

Others are blaming city officials for not approving more building permits to allow for the construction of new residential units. A study conducted in 2012 — well before the migrant crisis reached epic proportions — forecast that by 2017, Hamburg would have a deficit of at least 50,000 rental properties.

In 2016, however, only 2,433 new residential units came onto the market, while only 2,290 new building permits were approved, according to statistics provided by the City of Hamburg. These numbers were up slightly from 2,192 new units and 2,041 new permit approvals in 2015.

In 2012, Hamburg’s Socialist government presented a plan to build 6,000 new residential units per year. The plan never materialized, however, because prospective builders were constricted by government-imposed rental caps which would have made it impossible for them to even recover their construction costs.

Since then, the city has turned to seizing private property to resolve its self-inflicted housing crisis.

On October 1, 2015, the Hamburg Parliament (Hamburgische Bürgerschaft) approved a new law that allows the city to seize vacant commercial real estate (office buildings and land) and use it to house migrants.

City officials said the measure was necessary because, at the time, more than 400 new migrants were arriving in Hamburg each day and all the existing refugee shelters were full. They said that because the owners of vacant real estate refused to make their property available to the city on a voluntary basis, the city should be given the right to take it by force.

The measure was applauded by those on the left of the political spectrum. “We are doing everything we can to ensure that the refugees are not homeless during the coming winter,” said Senator Till Steffen of the Green Party. “For this reason, we need to use vacant commercial properties.”

Others have argued that efforts by the state to seize private property are autocratic and reek of Communism. “The proposed confiscation of private land and buildings is a massive attack on the property rights of the citizens of Hamburg,” said André Trepoll of the center-right Christian Democratic Union (CDU). “It amounts to an expropriation by the state.” He said the proposed measure is a “law of intimidation” that amounts to a “political dam-break with far-reaching implications.” He added: “The ends do not justify any and all means.”

Katja Suding, the leader of the Free Democrats (FDP) in Hamburg, said that the proposed law is an “unacceptable crossing of red lines… Such coercive measures will only fuel resentment against refugees.”

Similar expropriation measures have been proposed in Berlin, the German capital, but abandoned because they were deemed unconstitutional.

In November 2015, lawmakers in Berlin considered emergency legislation that would have allowed local authorities to seize private residences to accommodate asylum seekers. The proposal would have authorized police forcibly to enter private homes and apartments without a warrant to determine their suitability as housing for refugees and migrants.

The legislation, proposed by Berlin Mayor Michael Müller of the center-left Social Democrats (SPD), would have amended Section 36 of Berlin’s Public Order and Safety Law (Allgemeine Gesetz zum Schutz der öffentlichen Sicherheit und Ordnung, ASOG), which currently allows police to enter private residences only in extreme instances, to “avert acute threats,” that is, to fight serious crime. Müller wanted to expand the scope for warrantless inspections to include “preventing homelessness.”

The proposal was kept secret from the public until the leader of the Free Democrats (FDP) in Berlin, Sebastian Czaja, warned the measure would violate the German constitution. He said:

“The plans of the Berlin Senate to requisition residential and commercial property without the consent of the owner to accommodate refugees is an open breach of the constitution. The attempt by the Senate to undermine the constitutional right to property and the inviolability of the home must be resolutely opposed.”

Since then, both the mayor’s office and the Senate appear to have abandoned their plans.

Following an investigation, Gunnar Schupelius, a columnist with the Berlin newspaper BZ, wrote:

“A strange report made the rounds at the weekend: The Senate would authorize the police to enter private homes to house refugees, even against the will of the owner. I thought it was only satire, then a misunderstanding, because the Basic Law, Article 13, states: ‘The home is inviolable.’

 

 

“So I went on a search for the source of this strange report and found it. There is a ‘proposal’ which the Senate Chancellery (Senatskanzlei) has apparently circulated among the senators. The Senate Chancellery is another name for the mayor’s office. The permanent secretary is Björn Böhning (SPD)…

 

“The proposal is clear: The police can enter private property without a court order in order to search for housing for refugees when these are threatened with homelessness. You can do that ‘without the consent of the owner.’ And not only should the police be allowed to do this, but also the regulatory agencies.

 

“This delicate ‘proposal’ attracted little public attention. Only Berlin FDP General Secretary Sebastian Czaja spoke up and warned of an ‘open preparation for breach of the constitution.’ Internally, there should have been protests. The ‘proposal’ suddenly disappeared from the table. Is it completely gone or will it return?”

It remains unclear why no one has challenged the constitutionality of Hamburg’s expropriation law.

Meanwhile, some Germans are asking what is next: Will authorities now limit the maximum amount of living space per person, and force those with large apartments to share them with strangers?

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

The USA state department has now accused the Assad government of covering of mass killings and burning the bodies with their newly built crematorium

(courtesy zero hedge)

State Department Accuses Assad Of Covering Up Mass Killings In Syria

Just over a month after the US launched a cruise missile attack at Syria, US relations with Syria are deteriorating rapidly once more after the State Department accused the Syrian government of carrying out mass killings of thousands of prisoners and burning the bodies in a large crematorium outside the capital.

According to Reuters, Stuart Jones, the acting assistant secretary of near eastern affairs, told reporters on Monday that the State Department believes that about 50 detainees a day are being hanged at Saydnaya military prison, about 45 minutes from Damascus. Many of the bodies, it said, are then being burned in the prison’s crematorium in order to hide evidence of mass murder.

“We now believe that the Syrian regime has installed a crematorium in the Saydnaya Prison Complex which could dispose of detainees remains with little evidence,” Stuart Jones said. “Credible sources have believed that many of the bodies have been disposed in mass graves.” It was not immediately clear what he considers credible sources.

He added that “although the regimes’ many atrocities are well-documented, we believe that the building of a crematorium is an effort to cover up the extent of mass murders taking place in Saydnaya prison.” Jones added that the regime will put up to 70 prisoners in a cell designed to hold five people before they are killed.

The State Department released the additional information in order to put pressure on Russia, which has provided Assad with crucial support. “Russia holds tremendous influence over Bashar al-Assad,” State Department spokeswoman Heather Nauert said Monday. “The killing and devastation has gone on for far too long in Syria.”

The department released commercial satellite photographs showing what it said is a building in the prison complex that has been modified to support the crematorium. That said, the department conceded that photographs taken over the course of several years, beginning in 2013, do not definitely prove the building is a crematorium, but they show construction consistent with such use. One photograph taken in January 2015 shows one area of the building’s roof cleared of snow due to melt.

In presenting the photographs, Jones said Syrian President Bashar Assad’s government “has sunk to a new level of depravity” with the support of Russia and Iran and called on both countries to use its influence with Syria to establish a credible ceasefire and begin political talks.

Today’s report suggests that the recently proposed plan to implement “de-escalation zones” in Syria is rapidly falling part.

“In light of the information about the mass killings, Jones said that Russia’s calls for “de-escalation zones” in the country would be met with “skepticism” and added that  “the (Assad) regime must stop all attacks on civilian and opposition forces. And Russia must bear responsibility to ensure regime compliance.

Jones detailed the information about Assad’s crematorium as part of a condemnation of Russia’s “apparent tolerance of Syrian atrocities” as they support Assad. “We hope that we will now be able to work with the Russians in a constructive way to put pressure on the regime to end these atrocities,” he said.

While we doubt Russia will bother changing its pro-Syria policy as a result of today’s announcement, the bigger question is whether today’s disclosure is the preamble for more strikes aimed at Syria: the answer will likely depend on how desperate the administration is for another distraction from the various ongoing scandals and dead-ends involving the Trump increasingly more shaky domestic policy.

end

6 .GLOBAL ISSUES

The fallout from the global coordinated ransomware attack is unprecedented.  It has now spread to China, car factories in France, hospitals in the UK and countless over critical businesses and infrastructure.

(courtesy zero hedge)

24 Hours Later: “Unprecedented” Fallout From First Global, Coordinated Ransomware Attack

24 hours after it first emerged, it has been called the first global, coordinated ransomware attack using hacking tools developed by the NSA, crippling over a dozen hospitals across the UK, mass transit around Europe, car factories in France and the UK, universities in China, corporations in the US, banks in Russia and countless other mission-critical businesses and infrastructure.

According to experts, “this could be one of the worst-ever recorded attacks of its kind.” The security researcher who tweets and blogs as MalwareTech told The Intercept, “I’ve never seen anything like this with ransomware,” and “the last worm of this degree I can remember is Conficker.” Conficker was a notorious Windows worm first spotted in 2008; it went on to infect over 9 million computers in nearly 200 countries.

The fallout, according to cyber-specialists, has been “unprecedented”: it has left unprepared governments, companies and security experts from China to the United Kingdom on Saturday reeling, and racing to contain the damage from the audacious cyberattack that spread quickly across the globe, raising fears that people would not be able to meet ransom demands before their data are destroyed.

As reported yesterday, the global efforts come less than a day after malicious software, transmitted via email and stolen from the National Security Agency, exposed vulnerabilities in computer systems in almost 100 countries in one of the largest “ransomware” attacks on record. The cyberattackers took over the computers, encrypted the information on them and then demanded payment of $300 or more from users in the form of bitcoin to unlock the devices.

The ransomware was subsequently identified as a new variant of “WannaCry” that had the ability to automatically spread across large networks by exploiting a known bug in Microsoft’s Windows operating system.

The ransomware has been identifed as WannaCry

The hackers, who have not come forward to claim responsibility or otherwise been identified, likely made it a “worm”, or self spreading malware, by exploiting a piece of NSA code known as “Eternal Blue” that was released last month by a group known as the Shadow Brokers (see “Hacker Group Releases Password To NSA’s “Top Secret Arsenal” In Protest Of Trump Betrayal“) , researchers with several private cyber security firms said.

“This is one of the largest global ransomware attacks the cyber community has ever seen,” said Rich Barger, director of threat research with Splunk. The extremely well coordinated attack first emerged in the United Kingdom around noon on Friday and spread like wildefire around the globe. According to the Times “it has set off fears that the effects of the continuing threat will be felt for months, if not years” and raised questions about the intentions of the hackers: Did they carry out the attack for mere financial gain or for other unknown reasons?

The animated map below shows the speed and scale of the global infestation which took just a few hours to cover the globe:

Animated map of how tens of thousands of computers were infected with ransomware http://nyti.ms/2qbjre1 

Meanwhile, some of the world’s largest institutions and government agencies have been affected, including the Russian Interior Ministry, FedEx in the United States and Britain’s National Health Service. As people fretted over whether to pay the digital ransom or lose data from their computers, experts said the attackers might pocket more than $1 billion worldwide before the deadline ran out to unlock the machines.

Across Asia, several universities and organizations said they had been affected. In China, the virus hit the computer networks of both companies and universities, according to the state-run news media. News about the attack began trending on Chinese social media on Saturday, though most attention was focused on university networks, where there were concerns about students losing access to their academic work. The attack, however, focused on the UK and Europe where in addition to the British healthcare system, companies like Deutsche Bahn, the German transport giant; Telefónica, a Spanish telecommunications firm; and Renault, the French automaker, said some of their systems had been affected.

“Seeing a large telco like Telefonica get hit is going to get everybody worried,” said Chris Wysopal, chief technology officer with cyber security firm Veracode.

The British National Health Service said that 45 of its hospitals, doctors’ offices and ambulance companies had been crippled — making it perhaps one of the largest institutions affected worldwide. Surgical procedures were canceled and some hospital operations shut down as government officials struggled to respond to the attack.

“We are not able to tell you who is behind that attack,” Amber Rudd, Britain’s home secretary, told the British Broadcasting Corporation on Saturday. “That work is still ongoing.”

Things only got worse on Saturday as auto production facilities across Europe have been shuttered, including car plants in the UK and France, in the aftermath of the cyberattack.

Renault says production halted at French sites after cyberattack

Sky News understands production at the Nissan factory in Sunderland has been affected as a result of a cyber attack

In total, more than 75,000 computers in 99 countries were compromised in Friday’s attack, with a heavy concentration of infections in Russia and Ukraine, according to Dutch security company Avast Software BV. Russia’s Interior Ministry, with oversees the country’s police forces, said “around 1,000 computers were infected,” which it described as less than 1 percent of the total, the New York Times reported. The ministry said technicians had stopped the attack and were updating the department’s “antivirus defense systems,” according to the Times. Russia’s RIA reported that the central bank said on Saturday it had detected “massive” cyber attacks on domestic banks, which successfully thwarted them.

* * *

There has been some good news: an ingenious discovery appears to have halted the spread of the virus for now.

As part of the digital attack, the hackers included a way of disabling the malware in case they wanted to shut down their activities, Ars Technica reported. To do so, the assailants included code in the ransomware that would stop it from spreading if the virus sent an online request to a website created by the attackers. The kill switch would stop the malware from spreading as soon as the website went online and communicated with the spreading digital virus.

A British-based researcher, who declined to give his name, registered a
domain that he noticed the malware was trying to connect to, limiting
the worm’s spread. When the 22-year-old British researcher, whose Twitter handle is @MalwareTechBlog, confirmed his involvement but insisted on anonymity because he did not want the public scrutiny, saw that the kill switch’s domain name — a long and complicated set of letters — had yet to be registered, he bought it himself. By making the site go live, the researcher shut down the hacking attack before it could fully spread to the United States.

However, this temporary workaround will only last for a few days if not hours.

“I will confess that I was unaware registering the domain would stop the malware until after I registered it, so initially it was accidental,” wrote the @MalwareTechBlog researcher. “So long as the domain isn’t revoked, this particular strain will no longer cause harm, but patch your systems ASAP as they will try again.

I will confess that I was unaware registering the domain would stop the malware until after i registered it, so initially it was accidental.

 

“The kill switch is why the U.S. hasn’t been touched so far,” said Matthieu Suiche, founder of Comae Technologies, a cybersecurity company in the United Arab Emirates. “But it’s only temporary. All the attackers would have to do is create a variant of the hack with a different domain name. I would expect them to do that.”

Adds Reuters: “We are on a downward slope, the infections are extremely few, because the malware is not able to connect to the registered domain,” said Vikram Thakur, principal research manager at Symantec.

“The numbers are extremely low and coming down fast.” But the attackers may yet tweak the code and restart the cycle. The British-based researcher who may have foiled the ransomware’s spread told Reuters he had not seen any such tweaks yet, “but they will.”

* * *

Meanwhile, questions are mounting why code created by the NSA. has i) fallen in the wrong hands and ii) is being used to hold the world hostage. As the NYT notes, the ability of the cyberattack to spread so quickly was partly because of its high level of sophistication.

The malware, experts said, was based on a method that the N.S.A. is believed to have developed as part of its arsenal of cyberweapons. Last summer, a group calling itself the “Shadow Brokers” posted online digital tools that it had stolen from the United States government’s stockpile of hacking weapons.  The connection to the N.S.A. is likely to draw further criticism from privacy advocates who have repeatedly called for a clampdown on how the agency collects information online.

Brian Lord, a former deputy director for intelligence and cyber operations at Government Communications Headquarters, Britain’s equivalent to the N.S.A., said that any investigation, which would include the F.B.I. and the National Crime Agency of Britain, would take months to name the potential attackers, if it ever does. And by focusing the attacks on large institutions with a track record of not keeping their technology systems up-to-date, global criminal organizations were cherry-picking easy targets that were highly susceptible to such hacks, according to Mr. Lord.

 

“Serious organized crime is looking to these new technologies to the maximum effect,” Mr. Lord said. “With cybercrime, you can operate globally without leaving where you already are.”

 

He added of this attack: “It was well thought-out, well timed and well coordinated. But, fundamentally, there is nothing unusual about its delivery. It is still fundamentally robbery and extortion.”

For now, the victims – both actual and potential – may have bought themselves some time. As part of the efforts to combat the attack, Microsoft, whose Windows software lies at the heart of the potential hacking vulnerability, released a software update available to those affected by the attack and others who could be potential targets. Microsoft took the “highly unusual” step of securing early operating systems in the wake of a massive ransomware attack that wreaked havoc on global computer networks, including the UK’s National Health Service. Overnight, Microsoft XP received the new security patch three years after the computer giant discontinued support for the OS.

“Seeing businesses and individuals affected by cyberattacks, such as the ones reported today [Friday], was painful,” a Microsoft statement read. “We are taking the highly unusual step of providing a security update for all customers to protect Windows platforms that are in custom support only, including Windows XP, Windows 8, and Windows Server 2003.”

Security experts however said the upgrade came too late for many of the tens of thousands of machines that were locked out and whose data could be erased if people did not pay the ransom. Earlier this year, Microsoft created a patch called MS17-010 to guard against the virus. But older, unsupported operating systems were not included in the update.

Making matters worse, government officials and industry watchers also warned on Saturday that other hackers might now try to use the global ransomware attack for their own means, potentially tweaking the code and developing their own targets for new cyberattacks.

* * *

Finally, there is the question who is behind this coordinated global attack. Not surprisingly, Russia has been named. There is a high-probability that Russian-language cyber-criminals were behind the attack, said Aleks Gostev, chief cybersecurity expert for Kaspersky Labs. “Ransomware is traditionally their topic,” he said cited by Bloomberg. “The geography of attacks that hit post-Soviet Union most also suggests that.”

Whoever is the responsible party behind this first, global, coordinated ransomware attack, the have demonstrated one thing: the world is thoroughly unprepared for cyberwar.

“As with everything in cyber, we’re now waiting for the next type of attack,” Paul Bantick, a cyber security expert at Beazley, a global insurance underwriter, told the NYT.

“Ransomware like this has been on the rise over the last 18 months,” he added. “This represents the next step that people were expecting.”

As such, it is only a matter of time now before an even greater, more destructive cyberattack is unleashed on the world.

end

 

That did not take long; a new variant of “ransomware” begins to spread like weeds”

(courtesy zero hedge)

New Variant Of ‘Ransomware’ Begins To Spread: “We’ve Never Seen Anything Like This”

Emerges Infecting 3,600 Computers Per Hour

Update: according to the latest data from Check Point Software, cited by Reuters, a new variant of the WannaCry ransomware is now infecting on average 3,600 computers per hour.

BREAKING: Check Point Software says it found new variant of ‘WannaCry’ virus infecting 3,600 computers an hour

* * *

Governments and companies around the world began to gain the upper hand against the first wave of the unrivaled global cyberattack this morning.

More than 200,000 computers in at least 150 countries have so far been infected, according to Europol, the European Union’s law enforcement agency. The U.K.’s National Cyber Security Centre said new cases of so-called ransomware are possible “at a significant scale.”

 

“For now, it does not look like the number of infected computers is increasing,” said a Europol spokesman. “We will get a decryption tool eventually, but for the moment, it’s still a live threat and we’re still in disaster recovery mode.”

The initial attack was stifled when a security researcher disabled a key mechanism used by the worm to spread, but experts warned the hackers were likely to mount a second attack because so many users of personal computers with Microsoft operating systems couldn’t or didn’t download a security patch released in March that Microsoft had labeled “critical.”

“I will confess that I was unaware registering the domain would stop the malware until after I registered it, so initially it was accidental,” wrote the researcher, who uses the Twitter name @MalwareTechBlog.

 

“So long as the domain isn’t revoked, this particular strain will no longer cause harm, but patch your systems ASAP as they will try again.”

But the world is still digging out…

Europol executive director Rob Wainwright told Britain’s ITV television on Sunday that the attack had been “unprecedented”. “We’ve never seen anything like this,” he said.

 

In China, “hundreds of thousands” of computers were affected, including petrol stations, cash machines and universities, according to Qihoo 360, one of China’s largest providers of antivirus software. The malware affected computers at “several” unspecified Chinese government departments, the country’s Cyberspace Administration said on its WeChat blog Monday. Since that initial attack, agencies and companies from the police to banks and communications firms have put preventive measures in place, while Qihoo 360 Technology Co., Tencent Holdings Ltd. and other cybersecurity firms have begun making protection tools available, the internet overseer said.

 

French carmaker Renault said its Douai plant, one of its biggest sites in France employing 5,500 people, would be shut on Monday as systems were upgraded.

 

At Germany’s national Deutsche Bahn railroad, workers were laboring under “high pressure” Monday to repair remaining glitches with train stations’ electronic departure boards, a spokesman said.

 

In Japan, Hitachi Ltd. said that some of its computers had been affected.

 

In South Korea, CJ CGV Co., the country’s largest cinema chain, said advertising servers and displays at film theaters were hit by ransomware. Movie servers weren’t affected and are running as normal, it said in a text message Monday.

 

Indonesia’s government reported two hospitals in Jakarta were affected.

 

About 97 percent of U.K. facilities and doctors disabled by the attack were back to normal operation, Home Secretary Amber Rudd said Saturday after a government meeting. At the height of the attack Friday and early Saturday, 48 organizations in the NHS were affected, and hospitals in London, North West England and Central England urged people with non-emergency conditions to stay away as technicians tried to stop the spread of the malicious software.

As Microsoft’s president and chief legal officer, Brad Smith, said in a blog post Sunday:

“An equivalent scenario with conventional weapons would be the US military having some of its Tomahawk missiles stolen,” Smith wrote.

 

“The governments of the world should treat this attack as a wake up call.”

And waking up they seem to be…(as Axios notes)

President Trump’s homeland security adviser, Tom Bossert, said that Friday’s global cyberattack is something that “for right now, we’ve got under control” in the U.S., reports AP:

 

“Bossert tells ABC’s ‘Good Morning America’ that the malware is an “extremely serious threat” that could inspire copycat attacks. But Microsoft’s security patch released in March should protect U.S. networks for those who install it.”

 

“Micrsoft’s top lawyer has criticized U.S. intelligence for ‘stockpiling’ software code that can aid hackers. Cybersecurity experts say the unknown hackers behind the latest attacks used a vulnerability exposed in U.S. government documents leaked online.”

 

“Bossert said ‘criminals’ are responsible, not the U.S. government. Bossert says the U.S. hasn’t ruled out involvement by a foreign government, but that the recent ransom demands suggest a criminal network.”

However, new variants of the rapidly replicating malware were discovered Sunday. One did not include the so-called kill switch that allowed researchers to interrupt the malware’s spread Friday by diverting it to a dead end on the internet.

As Bloomberg reports that Matt Suiche, founder of United Arab Emirates-based cyber security firm Comae Technologies warns a new version of the ransomware may have also been spreading over the weekend.

About 50% of machines that would have spread the infection by the second variation of the malware have Russian I.P. addresses, according to Suiche.

Over 40,000 machines appear to have been infected by the second variation of the malware already.

Ryan Kalember, senior vice president at Proofpoint Inc., which helped stop its spread, said the version without a kill switch could spread. It was benign because it contained a flaw that prevented it from taking over computers and demanding ransom to unlock files but other more malicious ones will likely pop up.

“We haven’t fully dodged this bullet at all until we’re patched against the vulnerability itself,” Kalember said.

end

 

Canada has not witnessed a bank run like this in decades.  Home Capital saw 96% of its deposit base wiped out

(courtesy zero hedge)

“Canada Hasn’t Seen A Bank Run Such As This In Decades” – Finance Minister Says Home Capital Bailout Is Possible

When we first said three weeks ago that the spectacular, sudden implosion of Canada’s largest alt-lender Home Capital Group or HCG – whose fate we had followed closely since 2015 – was Canada’s own “New Century Moment“, the parallels were more than just the obvious: like in the US, it took the market nearly a year to realize the full implications of the subprime collapse which first manifested in the failure of New Century and its subprime lender peers. When all was said and done, the world’s central banks had to pump (and still do) trillions into the financial system to stop it from disintegrating.

Slowly but surely, Canada is starting to appreciate just how serious the Home Capital failure is, and how the unprecedented bank run that has led to 94% of retail deposits fleeing the troubled lender…

… is just the first step of what will likely be a very painful process, which will likely culminate with either a government bailout, or a financial system on the verge of panic.

Today, the Globe and Mail has published an in-depth report putting the HCG pieces together, or as the G&M itself puts it, the “dramatic story of a financial institution’s near-collapse.”

How quickly can a financial institution go from seemingly healthy and solvent to being on the verge of liquidation? The answer: hours. Here is the background:

It was late in the evening on Sunday, April 30, when lawyers working for Home Capital Group Inc. dialled into a call with lawyers representing the company’s new lending syndicate. The troubled mortgage lender had negotiated a $2-billion credit line just days earlier, emergency money the board felt was needed to survive after a high-profile run on deposits at subsidiary Home Trust. The company planned to draw down the first $1-billion from it the next morning, May 1.

 

But the deal was getting bogged down in a last-minute dispute over details of the funding, according to two sources familiar with the talks. As the conversation proceeded late on Sunday, it became increasingly evident that the fate of the financing was hanging in the balance. Another call at 2 a.m. on Monday ended badly with no agreement, a source said.

 

There was no room for error. Home Capital was hours from the start of its business day, and it was critically low on capital. The board had determined the company could not open its doors for business Monday morning without the financing in place, the sources said.

 

As the dispute continued, officials from Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), were on standby to launch a process to take control of the company Monday, a move that would have almost certainly forced some form of wind-up of Home Capital’s business, the sources said.

 

In the end, some time prior to 7 a.m., the lawyers hammered out a deal on final terms of the loan, allowing the first $1-billion to be transferred Monday. When business started a couple of hours later, only a small circle of exhausted insiders knew how close the company had come to collapse.

The collapse started on April 19…

much of the unrelenting focus on the company is also due to the rarity of a financial institution failing in this country. Canada Deposit Insurance Corp. (CDIC), which insures deposits in the event of a bank failure, hasn’t paid a claim since 1996.

 

Many commentators have pinpointed April 19 as a pivotal date when the Ontario Securities Commission unveiled an explosive enforcement case against the company and three of its executives, accusing them of making misleading disclosure to investors about mortgage underwriting problems in 2014 and 2015.  But if the OSC announcement sparked a conflagration at Home Capital, it was only because there was so much dry tinder already in place to ignite. The case landed amid a broader backdrop of concern about the company’s financial condition, a loss of faith in senior management and the board, and extreme nervousness about the vulnerability of a non-prime mortgage lender deeply exposed to Toronto’s overheated housing market.

… but the seeds of failure had been planted years ago, roughly around the time we first noticed HCG and accused it of issuing “liar loans.” It took regulators two years to catch up.

The first alert about the OSC case, for example, emerged late on a Friday afternoon on Feb. 10, when many had already left for the weekend. Home Capital Group issued a two-paragraph release revealing it had received an enforcement notice from the OSC, relating to disclosures in 2014 and 2015 about an internal investigation that found information on some loan applications had been falsified, leading to suspensions of 45 mortgage brokers. The enforcement notice said OSC staff had reached a preliminary conclusion about problems at the company, but Home Capital still had an opportunity to respond before the commission decided whether to launch disciplinary proceedings.

Why were regulators confused for so long: the answer is that unlike many comparable companies, the “ponzi scheme” at Home Capital worked at an extremely efficient pace, which created an image of stability as long as the money flowed in. However, once it stopped, all bets were off: This is precisely what emerged in February:

Home Capital had no trouble writing a growing number of new mortgages for non-prime borrowers in a hot housing market last year, but it also saw many of those customers leave at the first opportunity when their mortgages came up for renewal. Borrowers at Home Capital typically sign on for one-year or two-year mortgages in the hopes of moving to a mainline bank with a cheaper lending rate once their credit history is established. That leaves Home Capital facing constant churn, analyst Jeff Fenwick of Cormark Securities said, making its retention data one of its most closely watched metrics.

 

Of the $13.3-billion in residential mortgages on Home Capital’s books at the start of 2016, Mr. Fenwick estimates $6-billion or 45 per cent “rolled off” during the year – a rate of attrition far higher than faced by bank lenders, whose customers tend to opt for five-year mortgages.

 

This is one disadvantage for a lender like Home – there is a consistent treadmill of origination activity that needs to happen in order to prevent the mortgage book from shrinking,” he said.

 

In a statement in February, Mr. Reid said the attrition rate was disappointing, telling analysts that performance in 2016 was “muted” by lower-than-expected renewals. He said improving retention would be a priority in 2017.

Then the bank jog started:

Canadian Imperial Bank of Commerce made a decision that would prove important, at least in hindsight. The bank issued an internal directive to financial advisers on March 28, telling them to limit their clients’ exposure in Home Trust’s GICs to the $100,000 limit insured by Canada Deposit Insurance Corp. The decision meant financial advisers had to shift assets above that cap to other institutions. Around the same time, Royal Bank of Canada made a similar move for clients of its full-service brokerage division. Bank of Montreal also imposed caps, but will not say when it introduced the limits.

 

Home Capital would later disclose that savings account withdrawals began to mount at the end of March, around the same time that these policies were implemented.

Meanwhile, Home Capital’s shares started to plunge, as short sellers pounced:

During the same period, short-sellers moved into overdrive to fan fears about Home Capital, while filling social-media sites with speculative claims and half-truths. Short-sellers, who bet that a company’s share price will fall, have targeted Home Capital aggressively since the summer of 2015, making it consistently one of the most-shorted companies in Canada.

 

“The short-sellers to their credit were enormously successful in raising fear,” said a Toronto-based fund manager who held Home Capital shares. “If the short-seller’s job is to sow fear and confusion, they were very successful in doing it.”

But the reak crackdown started on April 19:

It was amid this worry, less than a week after the April 13 share price drop, that the OSC unveiled its allegations in the evening of April 19. While many of the main issues laid out in the statement of allegations had been previously disclosed by Home Capital, there were new details about the volume of material the company had collected in an internal investigation into its mortgage loan problems from mid-2014 to early 2015, but had not reported publicly until July, 2015, when pushed by the OSC to provide disclosure to investors. When markets opened the following morning, April 20, Home Capital’s share price began to crater.

 

A key concern was that the release came just hours before the Ontario government unveiled a series of measures to cool off Toronto’s housing market on the morning of April 20, including imposing a new 15-per-cent tax on foreign buyers. The combination of both was seen as a double-whammy, hitting Home Capital at a vulnerable time in the housing cycle.

The bank jog then became a silent bank run, first for the bank’s core providers of funding: other banks.

On the morning of Friday, April 21, as investors scrambled out of Home Capital shares, a message popped up on financial advisers’ computer screens at Scotiabank. It was an internal notification from ScotiaMcLeod head Rob Djurfeldt, announcing that as part of an “ongoing review of 3rd-party products,” the bank would no longer allow the sale of Home Trust GICs. While some other banks had already limited sales of Home Trust products to the $100,000 CDIC cap, the memo suggested Scotiabank was going even further to cut off sales entirely. It was taken by many – including Home Capital itself – as a signal of a loss of faith in the company.

 

Over the subsequent weekend, however, Scotia abruptly changed course and put Home Trust back on its platform with a $100,000 limit per client. Some players in the market jumped to their own conclusions that a regulator was involved in the reversal.

This was the first regulatory intervention. It wouldn’t be the last:

“When Scotia dropped Home Trust on a Friday, only to put them back on the following Monday, everyone connected the dots,” that regulators were involved somehow, said Lee Matheson, managing director with Toronto-based hedge fund Broadview Capital Management Inc., which has had a short position in Home Capital for the past 18 months. Alex Besharat, senior vice-president at Scotia Wealth Management Canada, was part of the discussions held internally at Scotia that weekend about whether to put Home Trust’s GICs back on its platform. “There was a lot to that decision – it wasn’t just sort of a one-dimensional decision,” he said in an interview.

 

OSFI turned down multiple requests for comment, saying it is prohibited from commenting on institutions it supervises or its supervisory work.

By this point, retail depositors realized things were going south fast, and proceeds to start pulling their own money out of the bank at an accelerating pace.

By Monday morning, April 24, Home Capital was facing a raft of withdrawals from depositors. The public nature of Scotiabank’s move was part of the reason for the rush, with Home Capital itself announcing Monday morning that the bank had put its products back onto its platform. The announcement served to ensure any financial advisers still unaware that other banks had quietly limited client exposure weeks earlier were now fully aware of at least one major bank’s moves to cap deposits at Home Trust. Many brokers and financial advisers quickly moved client funds to other institutions, unwilling to jeopardize their deposits for a slightly higher interest rate offered by Home Trust’s high-interest accounts.

 

Home Capital officials watched the pace of client withdrawals climb quickly on Monday, and decided they needed to do more to reassure the markets. That same day, the company announced that Mr. Soloway – Home Capital’s founder, who had remained on the board after stepping down as CEO in 2016 – would depart entirely as a director “when a replacement with recognized expertise in financial services is named.” However, the company said Mr. Soloway would still stand for re-election at the annual meeting, which was then scheduled for May 11, but has since been delayed until June 29.

 

It also announced Mr. Morton would step down as CFO, but only after the first-quarter financial results were filed. He would take on a new role as head of special projects, and would be replaced by Robert Blowes as interim CFO. Board chair Kevin Smith said the changes were aimed at rebuilding market confidence in the company. But the moves were again too little, and too late.

The first admission by HCG itself that it was on the verge came on April, duly noted here.

On Wednesday, April 26, the company made its first disclosure to alert the markets about the run on Home Trust’s savings accounts, saying deposits in high-interest savings accounts were down by almost $600-million to $1.4-billion from $2-billion at the end of March.

 

The announcement sparked a far broader panic, and was the first indication that many in the public had of the size of the company’s problems. Savings account withdrawals would accelerate rapidly through the subsequent days, leading to a classic unstoppable run on the bank caused by depositor panic. The company most recently revealed Home Trust has just $125-million left in its high-interest savings accounts, a decline of over 90 per cent since late March.

And the punchline of what until now was not known: the regualtor intervention amd the last minute rescue attempt:

Canada hasn’t seen a run on a bank such as this in decades, and many in the current crop of regulators have no personal experience dealing with the sort of crisis that unfolded in late April at Canada’s largest alternative mortgage lender. A source said regulators began co-ordinating discussions “early on” in the crisis, before Home Capital was front page news, but no one anticipated the company was so vulnerable. Last summer, OSFI had no concerns with the company’s capital levels, liquidity or stress test results, according to another person familiar with the matter.

 

But as the week of April 24 progressed, regulators grew worried they may not be able to halt the company’s slide. At one meeting involving officials from OSFI, CDIC and the federal finance department, there was discussion that Home Capital could collapse by early May, based on the pace of withdrawals and its remaining capital, the source said. Participants even discussed a scenario where Home Trust could fail, which would require Finance Minister Bill Morneau to sign an order giving OSFI control of the bank, the source said.

 

In the first two weeks of the crisis, top leaders and their staff – including OSFI, the Bank of Canada and Canada Deposit Insurance Corp. – were on the phone “every hour” to discuss their response, the first source said. At one point, a meeting at one regulator’s headquarters was interrupted repeatedly as officials left the room in a steady stream to answer urgent calls about Home Capital, the source said.

 

A focus of regulators has been on ensuring Home Capital remains “orderly,” the two sources said, and especially that there is no contagion to other institutions, including other specialty lenders such as Equitable Bank. Key regulators who monitor system risks in the financial system – including the federal finance department – have also held Sunday morning conference calls to discuss plans for the week ahead, with the heads of the organizations typically on the calls.

The rest of the story is mostly known to regular readers: for now it concludes with Brenda Eprile, the company’s new Chair and former OSC executive director, trying to instill confidence.

Ms. Eprile said a committee of the board is also actively talking to new CEO and CFO candidates as one of the next top priorities. She said she feels “a real sense of optimism” that Home Capital is now stabilizing, especially after strong new directors like Mr. Hibben joined the board last week and immediately rolled up their sleeves to tackle a host of issues.

 

“There’s a real sense that we can make it,” she said. “We just have to be very hunkered down and do our plan, and the company can be restored to a very positive future.”

And if that doesn’t work, there are always Canada’s taxpayers.

In a separate interview, the Globe and Mail spoke to Canada’s Finance Minister who said he expects a private solution to the crisis at Home Capital which still has “strong assets”, and added that the government is very focused on Home Capital Group, and repeated that he doesn’t see Home Capital’s problems as being a broader real-estate market problem. The punchline: while he believes a bailout is “unlikely to be necessary”, he won’t rule out a bailout of Home Capital Group.

For the full Home Capital sage, there is much more in the full Globe and Mail article.

7. OIL ISSUES

As we have explained to you on previous occasions, the math just does not work as the shale boys are increasing production and just about everybody else is increasing.  So expect weaker prices

(courtesy zerohedge)

The Math Behind OPEC’s Revised Production Cut Still Does Not Work

“Whatever it takes.”

Saudi Energy Minister Khalid al-Falih and Russia’s Energy Minister Alexander Novak

That’s what Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak said in a statement overnight in Beijing they would do to reduce the global oil inventory overhang, using the immortal phrase coined by ECB’s Mario Draghi five years ago in his successful bid to defend the euro. For OPEC, however, “whatever it takes” may not be enough.

As reported earlier oil surged today, with Brent rising above its 50 and 200 DMA, after Saudi Arabia and Russia announced an agreement that the OPEC production cuts of 1.2MMbbls agreed upon last year in Vienna, should be extended through the end of the first quarter of 2018, effectively assuring that the May 25 OPEC summit later this month will agree on the same. There is, however, a problem: based on the simple math, a simple extension will not be nearly enough to bring the oil market back into balance.

First there is the problem of excess supply, and not just resurgent US shale production, which is set to surpass an all time high 10 million barrels per day in the near future.

Over the weekend, Libya – the OPEC member with Africa’s largest crude reserves – announced it was pumping more than 814,000 barrels a day, thanks mostly to rising output from two fields that re-started last month, Jadalla Alaokali, a board member at the National Oil Corp., told Bloomberg on Sunday. At the end of April, Libya was producing about 700,000 barrels a day.

While output from the politically divided country is at its highest since October 2014 when it pumped 850,000 barrels a day, in an ideal world its output could grow substantially from here. Prior to the Arab Spring uprising, Libya – which together with Iran and Nigeria was exempted from OPEC’s cuts due to internal strife – pumped as much as 1.6 million barrels a day. It’s targeting production of 1.32 million barrels a day by the end of this year, the NOC said last week in a statement, some 500kb/d higher.

Then there is Nigeria, where the Forcados pipeline came back online last week and the Qua Iboe pipeline is being tested currently, with both together allowing output to reach its pre-disruption level of 1.8 mb/d. The oil ministry said that Nigerian oil output averaged 1.45mb/d suggesting an increase of 300kb/s in the near future is all too possible absent another set of production disruptions.

Of course, in the interim, North American output is booming, and where according to Baker Hughes, the number of US rigs has risen for 17 consecutive weeks, the highest level since the week of April 17, 2015, and the longest stretch of increases in six years.

 

Furthermore, the U.S. DOE recently published a new forecast that revised the country’s oil output up yet again. And yes, it was revised higher. Crude-oil production is now expected to rise by 960,000 barrels a day between December 2016 and December 2017. That compares with a 210,00 barrel a day increase it foresaw just before OPEC’s November gathering. Add in a 470,000 barrel a day ramp up in the production of natural gas liquids, and OPEC’s entire cut is more than offset.

Then there is OPEC’s own forecast, according to which the cartel trimmed its estimate of the need for OPEC crude this year by 300,000 barrels a day. At that level of production – 31.92 million barrels a day – inventories will remain static, assuming demand and non-OPEC supply forecasts are correct. As a reminder, based on secondary sources, OPEC produced 31.74 million barrels a day in April. According to Bloomberg’s Julian Lee, simply rolling that level forward for another six months will exhaust the excess at an average rate of 722,000 barrels a day in the second half and will see about 120 million barrels removed from inventories in the nine months begun at the end of March. “That may seem like a lot, but OPEC puts the excess at the end of the first quarter at 276 million barrels — and that’s just in the developed countries of the OECD.”

Then there is the question of demand.

We look at India first, where as Reuters’ Christopher Johnson points out, citing JBC numbers, oil demand growth continues to slow and is now expected to be only 185,000bpd this year, vs 290,000 in 2016.

demand growth is slowing and may be only +185,000 bpd this year, says JBC , vs +290,000 in 2016 ( @IEA )

Then there is China, where oil imports likewise declined from record highs according to the latest trade data. Buying by China, which overtook the U.S. during the first quarter as the world’s biggest importer, averaged 8.4 million barrels a day in April, down 8.8% from a record the previous month. At the same time, net exports of oil products fell almost 49% from March to 1.01 million tons

The import decline from a record in March was due to seasonal refining maintenance picking up and independent processors, known as teapots, reaching their buying quotas, according to Jean Zou, an analyst at Shanghai-based commodities researcher ICIS-China. “Teapot buying in April eased a bit after the high level in March,” Zou said. Imports last month by the independent refiners in Shandong province, where the majority are based, dropped to about 7.8 million metric tons, from 9.9 million in March, she said.

However, even that may mask the true level of underlying demand.

According to researcher SCI99, crude inventories at major ports in Shandong province in East China rose to 9-month high last week, suggesting that much of the newly imported oil is simply being held in inert storage with little downstream demand. Echoing what Zou said, energy research consultancy Energy Aspects said that the increase of crude inventories at major ports in Shandong is linked to uncertainty over import quotas for teapot refiners. “The quotas are a key factor in this build-up,” analyst Michal Meidan said in emailed response to questions Friday, and added that refinery maintenance could also be a factor.

Making matters worse, according to a BMI Research note on Monday, a second round of quotas for Chinese independent refiners won’t provide a “significant” boost to nation’s imports. As a result, the scope for government-set quotas surprising to the upside remains low as Beijing moves to gradually curb import quotas allocated to domestic refiners to manage a persistent refined fuels glut at home.

More to the matter at hand, China’s decision to keep restrictions on teapots from exporting refined fuels independently for 2nd consecutive quarter could also lead to lower crude runs, as exporting fuels through state-owned cos. is both costly and cumbersome, and as competition intensifies in domestic market.

And with a mini-glut of upstream crude already piled up, Chinese demand over the next few months will surely dip, especially if recent teapot quotas are not restored.

* * *

As a result, simply adding up the supply increases among Libya, Nigeria, Iran and US production, offset by the demand reduction in India and China means that merely extending the cuts won’t bring oil inventories anywhere close to their five-year average level by the end of December, or even end of March. And, as Bloomberg’s Lee also notes, “let’s set aside the fact that the five-year average has been inflated by two years of surplus, which means stockpiles will have to come down significantly below that to return to normal levels.”

So what does OPEC need to do in addition to extending production cuts? The answer: it needs to double them.

According to Bloomberg calculations, OPEC’s own numbers show the group needs to limit its total production to 30.88 million barrels a day from July to deplete the excess OECD inventory – a decrease of 900,000 barrels a day from current levels. But with Libya and Nigeria, which are exempt from the supply-reduction deal, both restoring production after months-long disruptions, deeper cuts will be required still.

Lee’s conclusion: “If OPEC wants to drain surplus inventories by the end of the year, its members are going to have to accept some real pain. Even then, the risk is that their actions spur more supply from U.S. shale. It’s time for some tough decisions.”

Finally, none other than Goldman confirmed as much in a note earlier today, when it specified the two conditions OPEC’s production cut will need to meet for the revised extension cuts to work:

For the strategy to work we believe that (1) compliance needs to remain high and (2) long-term oil prices need to remain low to prevent shale producers from ramping up investment significantly more. In fact, an extension of the cuts should go hand in hand with guidance of future production increases by low cost producers, in our view, with an already notable emphasis by Saudi and others that oil prices will likely remain in a $45-55/bbl long-term range, in line with our forecasts

It will take the market time to digest the unrevised math, not to mention the Saudi unwillingness to “accept some real pain.” Until then, we expect algos to ignite a buying frenzy every time bullish OPEC headlines cross the tape, as has been the case for the past year. In the meantime, having flipped from near-record long positions, futures specs have seen their net long positions tumble in recent weeks. We expect this to reverse as the momentum resumes chasing price higher once again, until yet another surge in bullishness leads to mass liquidations, resulting in yet another mini flash crash such as the one observed two weeks ago when Pierre Andurand – one of the world’s biggest oil bulls and largest oil hedge fund traders – ended up liquidating his long positions.

8. EMERGING MARKETS

The sorry state of affairs inside Venezuela:

(courtesy William Burke/Knowledge @Wharton)

 

Has Venezuela’s Crisis Reached A Tipping Point?

Authored by William Burke-White and Dorothy Kronick via Knowledge@Wharton,

Venezuela’s ongoing economic and humanitarian crisis has assumed graver proportions over the past five weeks and pressure is mounting for a regime change, even as doubts persist over the likelihood of the next presidential elections, originally set for October 2018. Fresh protests broke out after President Nicolas Maduro earlier this month signed an order aimed at forming a new constituent assembly of some 500 members and rewriting the country’s constitution to reshape his powers and those of legislators.

Many Venezuelans clearly saw Maduro’s ruling as a way to snatch powers from the opposition-led National Assembly and consolidate it in a constituent assembly over which he might have a better hold. “[Maduro] tried to do this as a way to unite the country, but it was seen as an attempt to retain power and sparked the latest round of protests,” said William Burke-White, director of the Perry World House and professor at the University of Pennsylvania Law School.

Venezuela’s crisis has probably hit a tipping point and Maduro’s days in power are numbered, said Burke-White. “The path forward is Maduro will be pushed out of power, or there will be a repressive, horrible crackdown where the death tolls keep mounting,” he noted. “It may be better to be moving in that direction [towards Maduro’s ouster] than be in an ongoing political quagmire that we have been in for the last few years.”

According to Dorothy Kronick, a political science professor at the University of Pennsylvania, “The best way forward for Venezuela would be elections and having a new government in power.” She noted that 2017 is the fourth consecutive year of negative GDP growth for Venezuela; last year, its economy contracted by more than 17%. “There are devastating shortages of food and medicine, and inflation is above 300%. And there is tremendous suffering.”

Burke-White and Kronick discussed the scenarios likely to emerge in Venezuela in the foreseeable future on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)

Move to Consolidate Power

The recent crisis had its first flash point on March 29, when the country’s Supreme Court passed a ruling to assume the functions of the National Assembly, but strong protests forced it to subsequently backtrack. Meanwhile, protestors continued calling for elections and a regime change. Maduro, who was elected in 2013 after the death of Hugo Chavez, signed the executive order to form a new constituent assembly and rewrite the constitution on May 1. “We must modify this state, especially the rotten National Assembly that’s currently there,” he had said.

Opposition leaders are pressing for a removal of the Supreme Court justices who issued the March 29 ruling, general elections in 2017, the creation of a humanitarian channel for medicine imports and the release of all political prisoners, according to a BBC report.

Burke-White did not expect elections to happen anytime soon. He noted that Maduro had indicated that fresh elections would be held as part of the new constitution. “His [United] Socialist Party [of Venezuela] would lose those elections if they were held today,” he said. “Much of this is a move to push those elections out indefinitely.”

Maduro’s plan for the new constituent assembly is to have about half of its 500 members elected directly from among all sections of Venezuelan society, including workers, youth, women, peasants and indigenous people, according to a CNN report. The other half would be made up of delegates chosen from among businesses and workers’ collectives. Kronick noted that the provisions in the rewritten constitution would “undoubtedly … favor the government.” She also predicted that the Maduro government would try to ensure that the convention “is full of delegates that are its supporters.”

Even so, with Maduro’s low approval ratings, Maduro is taking a big risk, according to Kronick. “His approval ratings are so low that even with electoral rules that are extremely favorable to the government, the opposition could potentially gain control of this constitutional convention,” she said. “That could be very dangerous to the government and lead to regime change.”

With growing protests, Maduro had his back against the wall, according to Burke-White. “He didn’t have many cards left,” he said. “This was a tactic that was legal within the constitutional structure — that the president can call for a new constitution — which you wouldn’t undertake if you weren’t in this moment of desperation.”

An Economy Embattled

Along with those political uncertainties, Venezuela’s economy is also in a sorry state. Oil accounts for 96% of the country’s exports, according to World Bank data, and low oil prices have taken a huge toll. Venezuela has the world’s largest proven supply of oil reserves, but much of that oil has high extraction costs, noted Burke-White. “When oil prices fall, those are the first to cease production because it is economically unviable to do so.” What makes that situation worse is the country has lost both technical talent (fired by the Chavez and Maduro governments) and investors, after foreign investments in the sector were nationalized. “They have lost a great deal of oil extraction capacity, which has both increased the cost of production and decreased the ability to keep production up,” he said. “The oil industry is no longer able to provide the economic support that Maduro needs to consolidate, or buy off, power.” Added Kronick: “Chavez had a windfall when oil prices rose, and raked in hundreds of millions of dollars, but they were not well invested and were squandered.”

In addition to low oil prices, the Maduro government’s decisions “to maintain some destructive and expensive exchange control measures, and price controls” are responsible for the food and medicine shortages, Kronick said. “Economists have been urging Maduro to introduce “common sense” reforms for years such as lifting price controls, she added, noting that “price controls create shortages.”

Pressures Closing in on Maduro

Meanwhile, Maduro could face other threats as he tries to cling to power. For one, it is critical for him to ensure the military’s support. However, as the economic misery widens, it also affects the families of members of the military, Burke-White noted. “It is much harder to maintain a military-based regime when you have to point your guns at your own people,” he said. “Maduro realizes that that’s the support base he can’t let slip, and if it does slip, it could well be the end of his regime.” Kronick noted that a popular chant during protests translates from Spanish to English as: “Soldier, listen. Join the protest, join the fight.”

Expectations run high that the Trump administration could impose sanctions on the Maduro government. Sanctions might not work well on an economy that is “already devastated,” and “very much isolated and closed from the rest of the world,” Burke-White said. However, if sanctions are targeted at specific individuals or supporters of the Maduro regime, they might work, he added. “Many of those people have bank accounts and condominiums in Miami, and getting them to feel some of the pain a little bit more might work.” However, targeted sanctions against Maduro’s supporters “could raise exit costs for members of the regime” said Kronick. “If they were to leave power, they won’t be able to go to Miami and enjoy their post-government life, and that could actually make regime change more unlikely.”

The U.S. does not seem to have sufficient “diplomatic capacity” to engage with Venezuela, given the understaffed State Department, said Burke-White. But he did note Thomas A. Shannon, Jr., undersecretary for political affairs, is well versed with the region’s problems. In February, Donald Trump and Mike Pence met with Lilian Tintori, the wife of jailed Venezuelan opposition leader Leopoldo López. “The Trump administration is much more willing to be much more openly critical of Venezuela than the Obama administration was,” he added.

U.S. involvement in working with the Venezuelan opposition or trying to influence a regime change could backfire and strengthen Maduro’s hand, Kronick said. “Certain actions [the U.S.] might take against the government help [Maduro] to be able to more credibly say, ‘This is the imperialist U.S. that is responsible for the problems of the country.’”

Pressure could build up on Maduro also within the region. Venezuela has been an important trading and energy partner in the northern part of South America, and it has provided aid to many countries in the region in the form of oil or cash. But its current status has left it unable to drive economic growth in the region. It has socialist-leaning countries as neighbors, including Cuba, “but those countries are leaning in different directions at the moment,” said Burke-White. He expected Cuba to be more susceptible to U.S. pressure “not to be as supportive a trading, economic or even health care partner for Venezuela” as it has been in the past. Kronick said pressure could come on Maduro from regional forums such as the Organization of American States.

Indeed, some of that has begun. Burke-White noted that the Argentine foreign minister has openly criticized Maduro’s call for a new constitution. “That is unusual given that Latin American and South American states have traditionally been hesitant to criticize one another,” he said. “We’re starting to see the edges of that tacit alliance begin to crack.”

end

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

Euro/USA   1.0965 UP .0037/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP HEALTH CARE DEFEAT//ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/ /USA RAISING INTEREST RATES/EUROPE BOURSES MOSTLY IN THE GREEN

USA/JAPAN YEN 113.47 UP 0.139(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA:  HELICOPTER MONEY  ON THE TABLE AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST

GBP/USA 1.2929 UP .0052 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

USA/CAN 1.3624 DOWN .0078 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS MONDAY morning in Europe, the Euro ROSE by 37 basis points, trading now ABOVE the important 1.08 level  RISING to 1.0965; Europe is still reacting to Gr Britain HARD BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and now the Italian referendum defeat AND NOW THE ECB TAPERING OF ITS PURCHASES/ THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE AND NOW THE HUGE PROBLEMS FACING TOO BIG TO FAIL DEUTSCHE BANK + THE ELECTION OF TRUMP IN THE USA+ TRUMP HEALTH CARE BILL DEFEAT AND MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED UP 6.71 POINTS OR .22%     / Hang Sang  CLOSED  UP 215.25 POINTS OR 0.86% /AUSTRALIA  CLOSED DOWN .04% / EUROPEAN BOURSES OPENED IN THE GREEN 

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

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

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

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

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

The NIKKEI: this MONDAY morning CLOSED DOWN 14.05 POINTS OR 0.07%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 215.25 POINTS OR 0.86%  / SHANGHAI CLOSED UP 6.71 POINTS OR .22% /Australia BOURSE CLOSED DOWN .04% /Nikkei (Japan)CLOSED  DOWN 14.05 POINTS OR 0.07%    / INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: $1231.60

silver:$16.62

Early MONDAY morning USA 10 year bond yield: 2.331% !!! UP 1 IN POINTS from FRIDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.994, UP 1  IN BASIS POINTS  from FRIDAY night.

USA dollar index early MONDAY morning: 98.91 DOWN 34  CENT(S) from FRIDAY’s close.

This ends early morning numbers MONDAY MORNING

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And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield: 3.379%  UP 1  in basis point(s) yield from FRIDAY 

JAPANESE BOND YIELD: +.044%  DOWN 3/10   in   basis point yield from FRIDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.632%  UP 1/2  IN basis point yield from FRIDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.277 UP 2   POINTS  in basis point yield from FRIDAY 

the Italian 10 yr bond yield is trading 65 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.420% UP 3 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR MONDAY

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

Euro/USA 1.0974 UP .0046 (Euro UP 46 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 113.59 up  .259 (Yen DOWN 26 basis points/ 

Great Britain/USA 1.2908 UP 0.0030( POUND UP 30 basis points)

USA/Canada 1.3647 DOWN 0.0055(Canadian dollar DOWN  55 basis points AS OIL ROSE TO $49.12

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This afternoon, the Euro was UP by 46 basis points to trade at 1.0974

The Yen FELL to 113.59 for a LOSS of 26 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND ROSE BY 30  basis points, trading at 1.2908/

The Canadian dollar ROSE by 55 basis points to 1.3647,  WITH WTI OIL RISING TO :  $49.12

The USA/Yuan closed at 6.8935/
the 10 yr Japanese bond yield closed at +.044% DOWN 3/10  IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 1  IN basis points from FRIDAY at 2.336% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.005  UP 1 in basis points on the day /

Your closing USA dollar index, 98,90 DOWN 35  CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED UP 18.98 POINTS OR .26%
German Dax :CLOSED UP 36.93 POINTS OR .29% 
Paris Cac  CLOSED UP 11.98 POINTS OR 0.22% 
Spain IBEX CLOSED  UP 60.80 POINTS OR 0.56%

Italian MIB: CLOSED  UP 129.01 POINTS/OR 0.60%

The Dow closed UP 85.33 OR 0.41%

NASDAQ WAS closed up 28.44 POINTS OR 0.46%  4.00 PM EST
WTI Oil price;  49.12 at 1:00 pm; 

Brent Oil: 52.04 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  56.34 UP 75/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD RISES T0  +0.420%  FOR THE 10 YR BOND  4.PM EST EST

END

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

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

WTI CRUDE OIL PRICE 5:00 PM:$47.88

BRENT: $50.85

USA 10 YR BOND YIELD: 2.326%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.987%

EURO/USA DOLLAR CROSS:  1.09.31 up .0067

USA/JAPANESE YEN:113.35  up 0.460

USA DOLLAR INDEX: 99.19  DOWN  44  cents ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2887 : DOWN .0001  OR 1 BASIS POINTS.

Canadian dollar: 1.3711  up .0007(CAN DOLLAR down 7 BASIS PTS)

German 10 yr bond yield at 5 pm: +.420%

END

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

TRADING IN GRAPH FORM FOR THE DAY

Fleshwound? Stocks Soar To Record Highs After Global Cyberattack, World Economic Data Crashes

Investors piled into stocks today after the biggest global cyber attack in history struck over 100 nations, Chinese economic data disappointed and fell, America faces a “constitutional crisis” if the media is to be believed, and US economic data dumped… Only one clip is needed…

 

So Chinese data dumped, European data disappointed, and US data was dismal… sending the global macro surprise index to its lowest since November

 

All major stock indices closed green…the entire day’s gains were in the overnight as stock went nowhere from the opening gap…

 

With Energy and Financials best (though the former rolled over hard as oil did)…

 

Interestingly VIX was up early, but as the S&P desperately clung to 2,400, VIX was clubbed back lower…

 

S&P closed above 2,400 for the first time ever, as closed below 11 for the 16th day in a row

 

Yet another new record streak…

 

The last time the US equity market had a longer stretch of calmness was February 1969.

 

 

Of course oil was the big news of the day as WTI managed a mere 2% surge on the back of chatter of a Russia/Saudi agreement to extend the production cuts… by the end of the day, sellers were back as the machines ran the stops… RBOB closed back below 1.60 and WTI never made it to $50…

 

And that helped provide cover for desperate stock buyers…

 

 

The Dollar Index extended its losses after CPI missed on Friday…

 

Treasury yields rose modestly on the day with 30Y back marginally above 3.00%

 

Silver is now up 4 days in a row (after falling for 16 straight) and gold is also up 4 in a row – back above its 100dma..

 

Silver has outperformed gold for the last few days…

end

 

We are going to see a flood of used cars hitting the markets due to the huge number of leases underwritten in the past 3 years.  This should hurt new car sales”

(courtesy zero hedge)

“Flood Of Off-Lease Vehicles” Set To Wreak Havoc On New Car Sales

The percentage of new car ‘sales’ moving off dealer lots via leases has nearly tripled since late 2009 when they hit a low of just over 10%.  Over the past 6 years, new leases, as a percent of overall car sales, has soared courtesy of, among other things, low interest rates, stable/rising used car prices and a nation of rental-crazed citizens for whom monthly payment is the only metric used to evaluate a “good deal”…even though leasing a new vehicle is pretty much the worst ‘deal’ you can possibly find for a rapidly depreciating brand new asset like a car…but we digress.

Of course, what goes up must eventually come down.  And all those leases signed on millions of brand new cars over the past several years are about to come off lease and flood the market with cheap, low-mileage used inventory.  As Reuters noted, the flood of used vehicles is already starting to impact used car dealers:

Recently, though, a computer search for available used vehicles within 150 miles of Reel revealed an eye-popping figure: 668 Escapes. That’s enough to put more than 40 percent of the inhabitants of this small northeastern Ohio town, population 1,600, into the popular crossover.

 

A search for the Chevrolet Equinox, a comparable crossover, showed 461 available.

 

“The automakers have flooded the market,” said Reel, owner of Reel’s Auto in Orwell, Ohio, about 40 miles east of Cleveland.

 

By the end of 2019, an estimated 12 million low-mileage vehicles are coming off leases inked during a 2014-2016 spurt in new auto sales, according to estimates by Atlanta-based auto auction firm Manheim and Reuters.

 

And, of course, that kind of supply is already starting to take it’s toll on used car prices…

Chief Executive Mike Jackson said rising off-lease car numbers means “a higher supply of pre-owned vehicles at a more attractive price.”

 

Consumers seeking great deals are in luck. Used-vehicle prices at auction fell about 3 percent last year, according to Carmel, Indiana-based KAR Auction Services Inc (KAR.N), which facilitated the sale of 5.1 million used and salvaged vehicles in 2016. Used prices should drop around 3 percent annually for the next couple of years, according to KAR’s chief economist Tom Kontos.

 

General Motors Co (GM.N) and Ford Motor Co (F.N) say prices for its used vehicles, which consist largely of nearly-new ones coming off lease to consumers, fell 7 percent in the first quarter versus the same period in 2016. GM says it expects a 7 percent decline for 2017 compared to last year.

…and, as Morgan Stanley recently pointed out, we’re just getting started as they see used car prices dropping by up to 50% over the next 5 years.

 

So what happens next?  Unstable used car prices will almost certainly reduce OEM reliance on leases as the implied 3-year depreciation (or residual values, if you prefer) will make them all but completely uneconomical…remember, Americans only care about that monthly payment.  Meanwhile, the relative value between used and new cars will tilt heavily in favor of the used market.  Thankfully Americans will still be able to buy that Mercedes they require to get back and forth from their minimum wage jobs, while maintaining a monthly payment of $500 or less, but it will just have to have 30,000 miles on it.

Of course, the OEMs of the world won’t admit that their game is over until it’s way too late.  So, they’ll keep right on producing new cars to cover a 17-18mm SAAR environment up until the point they face an outright revolt from their dealer networks.  At that point, however, dealer inventories will be so high that Detroit will be forced to shutdown for months on end while new car prices are slashed to reduce the massive inventory glut.  Tanking new car prices will put even more pressure on used car prices which will mark the beginning of the death spiral that will result in a new round of inevitable auto bankruptcies…but that’s just a hunch.

end

 

Last week , we highlighted the fact that subprime auto loans were in increasing levels of delinquencies, how we find that prime auto loans are having the same fate:

(courtesy zero hedge)

 

 

(courtesy zero hedge)

Puerto Rico Could Be Forced Under SEC Jurisdiction

Submitted by Simon Black of Sovereign Man

What happened:

Puerto Rico has long been a safe haven for businesses and investors weary of the Securities and Exchange Commission. Despite the fact that Puerto Rico’s public sector is going through bankruptcy, the private sector has enjoyed relative freedom from the intrusive hands of the U.S. government.

That will change if a bill making its way through Congress becomes law.

Companies formed in Puerto Rico (and other U.S. territories) have always been exempted from the Investment Company Act of 1940 if they only offer investments inside the territory. This means the SEC doesn’t have a say in how investment funds are structured and managed.

But the U.S. Territories Investor Protection Act of 2017 will end the exemption. The act has passed the house and is now being debated in the Senate.

The bill will give the SEC jurisdiction over Puerto Rico and other U.S. territories. The supposed purpose is to prevent companies from making risky investments, or defrauding their investors.

What this means:

Initially that might sound like a good thing, to extend protection to investors in Puerto Rico.  But the issue is that the SEC doesn’t have the best track record, and investors may be specifically looking for markets not under their jurisdiction.

For example, the SEC gave Enron a clean bill of health, failing to discover their cooked books before it was too late to save investors. That type of regulation is worse than none at all, because it gives people a false sense of security. If investors know there is no organization watching out for them, they will do it themselves.

In the end it was James Chanos, a short seller, who did the digging into Enron and found out about the fraud. So an entire government agency missed what a single investor discovered. And we trust the SEC to protect investors?

If this bill passes, it means more companies brought under the umbrella of the SEC, limiting choice, and taking power away from the individuals involved. Many of those investors are perfectly capable of doing their own research–and may see a benefit in going with riskier or unique investments.

Alternatively, it also means that various hedge funds who have focused on Puerto Rico as an SEC-exempt territory, and opened domestic offices, will no longer find special exclusion rights and could depart, taking away significant sources of capital away with them.

END

 

Soft data, NY manufacturing survey plunges as new orders collapse

(courtesy zerohedge)

 

‘Soft’ Data Slumps – Empire Fed Plunges Into Contraction As New Orders Collapse

Having surged to its highest since Oct 2014 early in the year on the back of Trumptopian exuberance, Empire Fed’s manufacturing survey crashed back to -1.0 in May

4 standard deviations below expectations.

 

This is the worst (and first) contractionary print since October 2016 as New Orders crash from 7-year highs to 7-month lows.

 

Prices paid and received both fell (deflationary threat from China), inventories shrank (bad for GDP), average workweek and number of employees dropped (not making America great again), and future capex expectations plunged to 7 month lows.

All in all – a perfect reflection of the death of animal spirits and why paying attention to the the spikes in these surveys – while ignoring ‘hard’ data – is a fool’s errand.

Record Global Debt Will Pop Record Bubbles-Michael Pento

By Greg Hunter On May 14, 2017 In Market Analysis

“Early Sunday Release”

Money manager Michael Pento sees records being set in the financial markets. but not in a good way. Pento explains, “Let’s be positive here. I don’t root for bad things to happen. So, for the first time in history, we’re going to have bubbles that don’t pop? Does that make any sense to anybody? This is the first time in history we have a record level of debt and a record distortion in asset prices. Again, a record amount of debt that, by the way, is 300% of global GDP. That’s $230 trillion, and that’s supposed to turn out just dandy? I don’t believe it.”

So, what would it look like if the central banks and the elite lost control of the markets and interest rates and the derivative market? Pento contends, “I think you have to stop saying ‘if.’ I think ‘if’ is not in question. It is a matter of ‘when.’ . . . . Let me tell you why I say it’s not ‘if,’ it’s when. When central banks are successful, and there has never been a central bank that hasn’t been successful in creating what they want to create, what do all central bankers want to create today? It’s inflation. When they get their inflation, what do they do? They try to pull back and reverse course. They believe that they have solved all of our problems . . . and they think that inflation is going to stop at 2% or 3% or 4% or much higher. In Japan, they are going to have a bond crisis. I wrote a book about this called ‘The Coming Bond Market Collapse.’ When that big inflation occurs, that is the big cathartic mechanism. When they lose control over inflation, interest rates will mean revert (or go back to historical averages). When you have mean reversion of interest rates, that will pop real estate, stock and bond bubbles. That’s when the globe gets a massive reality check. It’s not ‘if,’ it’s ‘when.’ . . . . In the U.S . . . . You could have very easily $3 trillion annual deficits if interest rates just mean revert . . . . That’s going to send a very sharp spear for these bubbles and these manipulators of assets.”

Join Greg Hunter as he goes One-on-One with Michael Pento, founder of Pento Portfolio Strategies.

(There is much more in the video interview.)

Video Link

http://usawatchdog.com/record-global-debt-will-pop- record-bubbles-michael-pento/#more-18977

 

end

 

Well that about does it for tonight

I didn’t think I would be able to provide tonight’s commentary

but I am glad I did

 

see you tomorrow

Harvey

 

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3 comments

  1. Something crazy is happening here, just looked at the COMEX website and they’re showing OI at 214,229 compared to Harvey’s 212,364 contracts. I took the liberty of taking a screenshot to track the COMEX. Rob Kirby was absolutely correct in his observation

    Like

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