June 2/HORRENDOUS JOBS REPORT SENDS GOLD AND SILVER MUCH HIGHER/GOLD SHARES HOWEVER MUCH SUBDUED/TWO BANKING CRISIS MOMENTS TODAY: ONE FROM ITALY AND ONE FROM SPAIN/GYMBOREE IN THE USA READY TO FILE FOR BANKRUPTCY PROTECTION AS IT MISSES ITS INTEREST PAYMENT/

GOLD: $1276.20  up $9.80

Silver: $17.49  up 25  cent(s)

Closing access prices:

Gold $1279.00

silver: $17.57

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: $127073 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  1262.90

PREMIUM FIRST FIX:  $7.83

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SECOND SHANGHAI GOLD FIX: $1268.01

NY GOLD PRICE AT THE EXACT SAME TIME: 1260.00

Premium of Shanghai 2nd fix/NY:$7.01

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LONDON FIRST GOLD FIX:  5:30 am est  $1260.95

NY PRICING AT THE EXACT SAME TIME: $1260.50

LONDON SECOND GOLD FIX  10 AM: $1274.95

NY PRICING AT THE EXACT SAME TIME. $1275.20

For comex gold:

JUNE/

NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH:  739 NOTICE(S) FOR 73900  OZ. 

 TOTAL NOTICES SO FAR: 1855 FOR 185500 OZ    (5.7698 TONNES)

For silver:

For silver: JUNE

 392 NOTICES FILED TODAY FOR 1,960,000  OZ/

Total number of notices filed so far this month: 447 for 2,235,000 oz

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END

FEDERAL RESERVE BANK OF NY EAR MARKED GOLD REPORT

LAST MONTH WE HAD 7,841 MILLION DOLLARS WORTH OF GOLD VALUED AT 42.22 DOLLARS PER OZ

THIS MONTH:  WE HAVE 7841 MILLION DOLLARS WORTH OF GOLD VALUED AT $42.22 PER OZ

AMOUNT OF GOLD MOVED FROM NY:  0

END

 

The jobs report (see below) was horrendous.  As soon as it was published gold and silver got caught bids with gold ending higher in the session by $9.80 at 1276.20 and silver was ready to breach $17.50 closing up 25 cents at $17.49.  In the access market gold resumed its northerly trajectory with gold finishing at $1279 and silver at $17.57.  At the GLD another 3.55 tonnes was added.

 

Over at the comex, the amount standing for the silver metal again rose in similar fashion to what we witnessed last month and also in April.  we certainly have a determined entity trying to get its hands on whatever silver is available.

Let us have a look at the data for today

.

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In silver, the total open interest ROSE BY 1304  contract(s) UP to 205,750 DESPITE THE FALL IN PRICE OF SILVER THAT TOOK PLACE WITH YESTERDAY’S TRADING (DOWN  13 CENT(S).   In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.0280 BILLION TO BE EXACT or 147% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 392 NOTICE(S) FOR 1,960,000  OZ OF SILVER

In gold, the total comex gold ROSE BY A STRONG 1,836 contracts DESPITE THE FALL IN THE PRICE OF GOLD ($5.00 with YESTERDAY’S TRADING). The total gold OI stands at 444,814 contracts.

we had 739 notice(s) filed upon for 73,900 oz of gold.

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

GLD:

We had a huge change in tonnes of gold at the GLD: a deposit of 3.55 tonnes into the GLD

Inventory rests tonight: 851.00 tonnes

.

SLV

Today: no changes in inventory

THE SLV Inventory rests at: 340.976 million oz

end

.

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

1. Today, we had the open interest in silver ROSE BY 1,304 contracts UP TO 205,750 (AND now A LITTLE  CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787), WITH THE FALL IN PRICE FOR SILVER WITH YESTERDAY’S TRADING  (13 CENTS). NO QUESTION THAT WE HAD FAILED SHORT COVERING BY THE BANKERS ALONG WITH SOME BANKER DELTA HEDGING WITH THE STRONGER PERFORMANCE FROM SILVER OF LATE.

(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

2c) Federal Reserve Bank of NY Ear Marked Gold Report

(Harvey)

3. ASIAN AFFAIRS

i)Late THURSDAY night/FRIDAY morning: Shanghai closed UP 2.91 POINTS OR 0.09%   / /Hang Sang CLOSED UP 114.83 POINTS OR 0.44% The Nikkei closed UP 317.25 POINTS OR 1.60%/Australia’s all ordinaires  CLOSED UP  0.84%/Chinese yuan (ONSHORE) closed  DOWN at 6.8205/Oil DOWN to 47.07 dollars per barrel for WTI and 49.33 for Brent. Stocks in Europe OPENED ALL IN THE GREEN     ..Offshore yuan trades  6.7927 yuan to the dollar vs 6.8205 for onshore yuan. NOW  THE OFFSHORE IS MUCH WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS HUGELY  WEAKER TO THE DOLLAR AND THIS IS COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA NOT HAPPY WITH THE NEWS THAT ITS DEBT HAS BEEN DOWNGRADED

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA

b) REPORT ON JAPAN

c) REPORT ON CHINA

i)A very important article written by Byron King.  It sure looks like the Chinese are anxious to purchase oil from Saudi Arabia only if this country accepts yuan as payment.  Saudi Arabia knows that this would be the death knell of the uSA reserve currency and end the one full swoop the petro-dollar scheme

( Byron King/DailyReckoning.com)

ii)A terrific commentary from Jim Rickards as he describes how China has been able to maintain high growth rates but that is leading to a death spiral:

( Jim Rickards/DailyReckoning)

4. EUROPEAN AFFAIRS

i)ITALY

The banking crisis in Italy is just not going away.  Italy has almost 360 billion euros of non performing loans on banking balance sheets or 18% of total loans.  The government is seeking a bailout and not a bail in as huge numbers of moms and pops bought debt/equities because they thought the investments were sound. A bail in would crush huge numbers of Italian citizens.  This is why the government is pushing for a bail out but the EU states that a bail in is mandatory. No wonder we are witnessing a huge run on Italian banks

( zero hedge)

ii)SPAIN

OHOh!! Spain’s sixth largest bank, Banco Popular in trouble and needs a huge cash infusion of which nobody is willing. Investors are dumping bonds and stock like crazy because they do not want to be long over the weekend

(courtesy zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6 .GLOBAL ISSUES

For the first time, the balance sheet of the Bank of Japan and the ECB exceed that of the Fed.  We know know that the Fed wants to roll off its balance sheet and not repurchase debt with dollars earned.  In essence this is tightening and with both the Bank of Japan lessening its purchases along with the ECB, what is going to fuel the global stock markets?

 

( zerohedge)

7. OIL ISSUES

WTI holds its value just below $48.00 per barrel and yet USA oil rig counts rise for the 20th consecutive week which should increase production exponentially

( zero hedge)

 

8. EMERGING MARKET

9.   PHYSICAL MARKETS

i)We know have a Deutsche bank trader convicted to rigging the precious metals
( zerohedge)
ii)Tom Schoenberg of Bloomberg on the above story:
(courtesy Bloomberg/GATA/Schoenberg)
iii)Raoul Pal is one smart cookie.  In this commentary, it debunks the theory that Bitcoin is a store of value(courtesy Sprott money/Raoul Pal;)

10. USA stories

i)A bloodbath in the USA auto sector as inventories climb despite the huge incentives given out already in May. The auto sales is the lowest in the past 3 years.  The dealers are stuffed to the gills in autos

( zerohedge)

ib)After reporting on the disaster for the big auto manufacturers, Hyundai has not escaped the damage:

( WolfStreet/WolfRichter)

ii)Trump finally asks the Supreme Court to restore his travel ban

( zero hedge)

iii)JOBS REPORT

a)Gold rises on a terrible jobs report where only 138,000 jobs were added in May.  April was revised much lower and the most important component: wages also disappointed.

( zerohedge)

b)Trading right after the jobs report: 10 yr bond rate plunges to 2.156%, the dollar sinks as does the stock market.  Gold and silver gain

(courtesy zerohedge)

c)AND NOW THE REAL STORY ON THE JOBS REPORT

THE NUMBER OF PEOPLE NOT IN THE LABOUR FORCE SOAR BY A HUGE 608,000 WHICH EXPLAINS WHY THE UNEMPLOYMENT RATE LOWERED FROM 4.4 DOWN TO 4.3%

(courtesy zero hedge)

d)Here is another metric that Janet will not like:  full time jobs tumble by 367,000 the biggest in 3 years: this was offset by a gain of 133,000 part time jobs.

Construction jobs lowered by 1,000 but our good old bartenders and waiters added another 30,000 jobs despite massive closings of restaurants.

( zero hedge)

e)Two thirds of all the gains this month was in the minimum wage jobs such as bartenders and waiters

( zerohedge)

f)Now where would our job report be unless we report on our job gains for America’s waiters and bartenders.

just look at the graph below and marvel:

(courtesy zerohedge)

g)Hatzius has now commented that the Fed will no doubt push back on the latter rate hikes due to slowing job growth and weak inflation

(Goldman Sachs/Hatzius/zerohedge)

238,000 jobs.  It is easy to explain the Birth Death model.  If one loses his job, it is “death”.  However the BLS believes that these guys become entrepreneurs and start new businesses and hire more people that are unemployed.  This is the “birth”.  It is total made up.

( Dave Kranzler/IRD)

 

iii)As expected, Gymboree misses their interest payment and they will now prepare for bankruptcy filings.

( zero hedge)

iv)Craig Wilson comments on Stockman’s Fox interview with Stuart Varney where he reiterates that the USA has no chance of reaching 4% growth with the mountain of debt incurred

 

( Wilson/Stockman/Daily Reckoning)

v)Michael Snyder offers us his 12 signs that shows that we are now experiencing an economic slowdown

( Michael Snyder/EconomicCollapseBlog)

Let us head over to the comex:

The total gold comex open interest ROSE BY A STRONG 1,836 CONTRACTS UP  to an OI level of 444,814 WITH THE RISE IN THE PRICE OF GOLD (($5.00 with YESTERDAY’S trading).

We are now in the contract month of JUNE and it is one of the BETTER delivery months  of the year. In this JUNE delivery month  we had A  HUGE LOSS OF 784 contract(s) FALLING TO  3744.  We had 308 notices filed upon yesterday so we LOST 476  contracts or an additional 47,600 oz will  NOT stand for delivery in this very active delivery month of June AND WITHOUT A SHADOW OF DOUBT THESE 476 CONTRACTS RECEIVED AN EFP CONTRACT WHICH ENTITLES THEM TO A FIAT BONUS PLUS A FUTURE GOLD CONTRACT/OR A LONG CALL OR MOST LIKELY A LONDON BASED FORWARD GOLD CONTRACT. THESE EFP’S ARE PRIVATE OFF COMEX TRANSACTIONS. THE REMAINING LONGS ARE REMAINING STOIC AND ARE REFUSING THAT FIAT BONUS 

Below is a little background on the EFP contracts  initiated by our bankers:
We now know for certainty that private EFP contracts are given by the bankers when faced with an upcoming active delivery month and they state that this is for emergency purposes only and that they do not have actual physical metal to deliver upon in the front month.  We just do not know the makeup of that private deal.  It is my contention that the longs in GOLD FOR INSTANCE at the end of MAY(for June contracts) were given a fiat bonus plus a long “in the money” call for a  future July contract or a August FUTURE contract or MAYBE EVEN A LONDON BASED FORWARD GOLD CONTRACT. . and this is why the total comex open interest complex obliterates as we enter first day notice.  So now everything makes sense: the obliteration of OI as we enter first day notice has not really occurred in the real sense but replaced with a future long contract call and/or an off -comex London based gold contract  with some bonus money for their effort.

The non active July contract GAINED 19 contracts to stand at 2166 contracts. The next big active month is August and here the OI gained 2,021 contracts up to 322,225.

We had 739 notice(s) filed upon today for 73900 oz

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And now for the wild silver comex results.  Total silver OI ROSE BY 1,304 contracts FROM 204,446 UP TO 205,750 WITH YESTERDAY’S 13 CENT LOSS.  IT SURE LOOKS LIKE OUR BANKERS ARE DESPERATELY TRYING TO COVER THEIR SHORTS IN SILVER BUT TO NO AVAIL. WE ALSO NO DOUBT HAVE CONSIDERABLE EVIDENCE OF SOME DELTA HEDGING BY THE BANKERS TRYING TO OFFSET THAT HUGE SHORT POSITION THEY HAVE BEEN BURGEONING OVER THE YEARS.
We are in the NON active delivery month is JUNE  Here the open interest GAINED 19 contract(s) RISING TO 399 contracts. We had 18 notices served upon yesterday so we AGAIN GAINED 37 CONTRACTS OR AN ADDITIONAL 185,000 OZ OF SILVER WILL STAND FOR DELIVERY IN THIS NON ACTIVE DELIVERY MONTH OF JUNE.  IT SEEMS WE ARE CONTINUING WHERE WE LEFT OFF LAST MONTH IN SILVER AS INVESTORS ARE WILLING TO FORGO THE FIAT PROFIT JUST TO SECURE PHYSICAL SILVER METAL.

The next big active month will be July and here the OI LOST 561 contracts DOWN to 136,090. the month of August, a non active month picked up its first contract to stand at one.  The next big active delivery month for silver will be September and here the OI already jumped by another 514 contracts up to 32,392.

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 392 notice(s) filed for 1,960,000 oz for the June 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 165,426 contracts which is FAIR

Yesterday’s confirmed volume was 216,891 contracts  which is GOOD

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for JUNE
 June 2/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 64.30 oz
2 kilobars
Deposits to the Dealer Inventory in oz nil  oz

 

 

Deposits to the Customer Inventory, in oz 
 nil oz
No of oz served (contracts) today
 
739 notice(s)
73,900 OZ
No of oz to be served (notices)
3005 contracts
300,500 oz
Total monthly oz gold served (contracts) so far this month
1855 notices
185500 oz
5.7698 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   65,073.4 oz
Today we HAD  1 kilobar transaction(s)/ 
We had 0 deposit into the dealer:
total dealer deposits: nil oz
We had NIL dealer withdrawals:
total dealer withdrawals:  NIL oz
we had no dealer deposits:
total dealer deposits:  nil oz
we had 0  customer deposit(s):
total customer deposits; nil  oz
We had 1 customer withdrawal(s)
 i Out of Manfra:  64.30 oz
2 kilobars
total customer withdrawal: 64.30  oz
 we had 1 adjustments:
i Out of Delaware:  2399.99 oz was adjusted out of the customer and this landed into the dealer account of Delaware
For JUNE:

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 739  contract(s)  of which 0 notices were stopped (received) by jPMorgan dealer and 303 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

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To calculate the initial total number of gold ounces standing for the JUNE. contract month, we take the total number of notices filed so far for the month (1855) x 100 oz or 185,500 oz, to which we add the difference between the open interest for the front month of MAY (3744 contracts) minus the number of notices served upon today (739) x 100 oz per contract equals 486,000  oz, the number of ounces standing in this active month of JUNE.
 
Thus the INITIAL standings for gold for the JUNE contract month:
No of notices served so far (1855) x 100 oz  or ounces + {(3744)OI for the front month  minus the number of  notices served upon today (739) x 100 oz which equals 486,000 oz standing in this  active delivery month of JUNE  (15.116 tonnes).
WE LOST 476 CONTRACTS OR AN ADDITIONAL 47,600 OZ WILL NOT STAND AT THE COMEX.  HOWEVER THESE GUYS WERE GIVEN EFP CONTRACTS WHICH ENTITLES THEM TO A FIAT BONUS PLUS A FUTURES GOLD CONTRACT OR A LONG CALL ON A GOLD CONTRACT OR MOST LIKELY A LONDON BASED GOLD FORWARD CONTRACT.  
 
 
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Total dealer inventory 945,273.113 or 29.40 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,798,342.109 or 273.66 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 273.66 tonnes for a  loss of 28  tonnes over that period.  Since August 8/2016 we have lost 79 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  79 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE MAY DELIVERY MONTH
June INITIAL standings
 June 2. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
526,645.077 oz
CNT
SCOTIA
HSBC
Deposits to the Dealer Inventory
573,288.670 oz
Deposits to the Customer Inventory 
 621,976.710 oz
 HSBC
No of oz served today (contracts)
 392 CONTRACT(S)
(1,960,000 OZ)
No of oz to be served (notices)
7 contracts
( 35,000 oz)
Total monthly oz silver served (contracts) 447 contracts (2,235,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  NIL oz
Total accumulative withdrawal  of silver from the Customer inventory this month 1,945,630.6 oz
today, we had  1 deposit(s) into the dealer account:
 i) Into CNT:  573,288.670 oz
total dealer deposit: 573,288.670  oz
we had Nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 2 customer withdrawal(s):
i) Out of CNT: 39,812.457 oz
ii) out of Scotia: 329,773.120 oz
iii) out of HSBC: 157,059.500 oz
TOTAL CUSTOMER WITHDRAWALS:  526,645.077  oz
 We had 1 Customer deposit(s):
i) Into HSBC:  573,288.670  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  526,645.077 oz
 
 we had 1 adjustment(s)
i) Out of CNT:  168, 873.915 oz was adjusted out of the customer and this landed into the dealer account of CNT
The total number of notices filed today for the JUNE. contract month is represented by 392 contract(s) for 1,960,000 oz. To calculate the number of silver ounces that will stand for delivery in JUNE., we take the total number of notices filed for the month so far at 447 x 5,000 oz  = 2,235,000 oz to which we add the difference between the open interest for the front month of JUNE (399) and the number of notices served upon today (392) x 5000 oz equals the number of ounces standing

 

.
 
Thus the initial standings for silver for the JUNE contract month:  447(notices served so far)x 5000 oz  + OI for front month of JUNE.(399 ) -number of notices served upon today (392)x 5000 oz  equals  2,270,000 oz  of silver standing for the JUNE contract month. WE ALSO HAD 0 EFP CONTRACTS THAT WERE ISSUED AS THE LONGS REFUSED A FIAT BONUS: THEY WANTED THEIR SILVER. WE GAINED ANOTHER 185,000 ADDITIONAL OUNCES OF SILVER STANDING FOR DELIVERY.
 
 
Volumes: for silver comex
 
Today the estimated volume was 86,150 which is huge
Yesterday’s  confirmed volume was 79,201 contracts which is HUGE
FRIDAY’S ESTIMATED VOLUME OF 79,201 CONTRACTS EQUATES TO 396 MILLION OZ OF SILVER OR 57% 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:  34.305 million (close to record low inventory  
Total number of dealer and customer silver:   202.230 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
This report takes us to May 30 which is one day before the huge liquidation by the longs
so i do not expect to see much;
gold cot
Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
250,542 83,452 35,549 103,751 286,970 389,842 405,971
Change from Prior Reporting Period
8,790 1,467 -27,879 -8,363 565 -27,452 -25,847
Traders
172 81 74 46 55 247 186
 
Small Speculators  
Long Short Open Interest  
44,404 28,275 434,246  
-874 -2,479 -28,326  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, May 30, 2017
OUR LARGE SPECULATORS:
those large speculators (and right up to May 30) who are long in gold saw an increase of 8790 contracts
those large speculators who are short in gold added 1467 contracts to their short side
OUR COMMERCIALS:
those commercials who are long in gold pitched 8363 contracts from their long side
those commercials who are short in gold added a tiny 565 contracts to their short side
OUR SMALL SPECS
those small specs that have been long in gold pitched a tiny 874 contracts from their long side
those small specs that have been short in gold covered 2479 contracts from their short side
CONCLUSIONS:
commercials go net short by 8928 contracts.  As you can see there is nothing here that would indicate why the specs longs would dump over 31,000 contracts the next day.  No question about it;  EFP’s totally distort the COT report and you will see it first hand next Friday.
Silver COT
Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
96,568 35,154 32,131 52,861 123,943
37 -10,204 4,169 -334 6,761
Traders
99 45 46 36 38
Small Speculators Open Interest Total
Long Short 205,235 Long Short
23,675 14,007 181,560 191,228
-2,096 1,050 1,776 3,872 726
non reportable positions Positions as of: 152 117
Tuesday, May 30, 2017
OUR LARGE SPECULATORS
those large specs that have been long in silver added a tiny 37 contracts to their long side
those large specs that have been short in silver covered a monstrous 10,204 contracts from their short side
OUR COMMERCIALS:
those commercials that have been long in silver pitched 334 contracts from their long side
those commercials that have been short in silver added 6761 contracts to their short side
OUR SMALL SPECS
those small specs that have been long in silver pitched 2096 contracts from their long side
those small specs that have been short in silver added 1050 contracts to their short side
CONCLUSIONS:
commercials go net short by 7115 contracts and that is probably bearish
next week we will get a clearer picture as we had some EFP’s issued.

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.6 percent to NAV usa funds and Negative 6.6% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.1%
Percentage of fund in silver:37.8%
cash .+0.1%( June 2/2017) 
 Sprott physical gold/silver fund NAV’s not available tonight.
 
2. Sprott silver fund (PSLV): Premium FALLS TO   -.22%!!!! NAV (june 2/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to -0.35% to NAV  (June 2/2017 )
Note: Sprott silver trust back  into NEGATIVE territory at -0.22% /Sprott physical gold trust is back into NEGATIVE/ territory at -0.35%/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

June 2/2017/a huge deposit of 3.55 tonnes of gold into the GLD/Inventory rests at 851.00 tonnes

June 1/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 847.45 TONNES

May 31./ no change in gold inventory at the GLD/Inventory rests at 847.45 tonnes

May 30/no change in gold inventory at the GLD/Inventory rests at 847.45 tonnes

May 26./no change in inventory at the GLD/Inventory rests at 847.45 tonnes

May 25./no change in inventory at the GLD/Inventory rests at 847.45 tonnes

May 24/no change in inventory at the GLD/inventory rests at 847.45 tonnes

May 23/a paper withdrawal of 5.03 tonnes of gold from the GLD/Inventory rests at 847.45 tonnes

May 22/A DEPOSIT OF 1.77 TONNES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 852.48 TONNES

May 19/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 850.71 TONNES

May 18/a withdrawal of 1.18 tonnes of gold from the GLD/Inventory rests at 850.71

May 17/no change in the GLD inventory/inventory rests at 851.89 tonnes

May 16./ no change in the GLD inventory/inventory rests at 851.89 tonnes

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
June 2 /2017/ Inventory rests tonight at 851.00 tonnes
*IN LAST 164 TRADING DAYS: 97.13 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 107 TRADING DAYS: A NET  30,3 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: A NET  55.64 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

June 2/no change in silver inventory at the SLV/Inventory rests at 340.976 million oz/

June 1/NO CHANGE IN INVENTORY AT THE SLV/INVENTORY RESTS AT 340.976 MILLION OZ

May 31./ no change in silver inventory at the SLV/inventory rests at 340.976 million oz/

May 30/no change in silver inventory at the SLV/inventory rests at 340.976 million oz

May 26/another paper withdrawal of 946,000 oz of silver from the SLV with silver rising/inventory rests at 340.976 million oz

May 25/no change in silver inventory at the SLV/Inventory rests at 341.922 million oz

May 24./a “paper” withdrawal of 1.893 million oz from the SLV/inventory rests tonight at 341.922 million oz

May 23/no change in silver inventory at the SLV/inventory rests at 343.815 million oz

May 19/no change in silver inventory at the SLV/Inventory rests at 343.815 million oz.

may 18/2017/another big deposit of 1.42 million oz added to the SLV/inventory rests at 343.815 million oz.

may 17/no change in silver inventory at the SLV/Inventory rests at 342.395 million oz/

May 16./we had a huge addition of 1.416 million oz of silver into the SLV/inventory rests at 342.395 million oz

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??)

June 2.2017: Inventory 340.976  million oz
 end

Major gold/silver trading/commentaries for FRIDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Trust in the Bigger Picture, Trust in Gold

  • Trump pulls out of Paris Climate Accord
  • Gold pauses ahead of non-farm payrolls data
  • In Gold We Trust 2017 released
  • Reports on the ‘Everything Bubble’
  • On average gold is up 5.88% ytd, since start of 2017.
  • Trump ‘was the trigger of the sudden reverse thrust of the gold price’
  • Reorganization of the global monetary order considered a ‘grey swan’

Trump’s announcement late yesterday that the US would be pulling out of the landmark 2015 Paris climate accord saw gold prices retreat. Markets are now awaiting the release of the non-farm payroll data. General consensus is that 210,000 new positions were added in May. However, this could be an underestimation given the stronger ADP number yesterday.

The Paris climate deal, jobs numbers, elections and terrorist attacks are all important ingredients in the tale of an economy. But they should not be considered individually when considering the gold price or gold investment. They all come together to form a far more complex story, which is the global financial and geopolitical system.

Yesterday Incrementum’s widely respected In Gold We Trust report was released. The authors do a stellar job of considering not only the wider picture but also what we can learn from history. This is refreshing in an age when many mainstream, day-to-day analyses look for individual bullish and bearish signs for gold, when in reality all the signs need to be considered together.

The report covers a multitude of angles and considers even more economic, financial and political factors. As we often conclude, investors should not focus on small events but rather look at what they all point to and why they are happening. This is in contrast to the mainstream media who often can’t be considered to do this. Perhaps we should not be surprised by this, an academic study released last month found journalists have ‘a lower than average ability to regulate emotions, suppress biases, solve complex problems, switch between tasks, and think flexibly and creatively.’ Oh dear!

Perhaps we can now understand a little better why we fail to spot much coverage in the mainstream of the underlying dangers in the financial system and how investors and savers can protect themselves. With this in mind we suggest you enjoy the highlights of the In Gold We Trust Report, below and continue to take the mainstream financial media with a pinch of salt.

Frustrated with gold? Blame Trump

The gold price was having a great time in the first half of last year. Long-term we believe we know where it is headed and it looked like, in 2016, that it was well on its way. Then something happened and it changed its mind. Why? Incrementum’s authors Ronald-Peter Stoeferle and Mark Valek argue that ‘ironically’ Trump ‘was the trigger of the sudden reverse thrust of the gold price.’

Ironic on account of Trump’s anti-Wall Street rhetoric and the seeming mutual distrust between the then President-elect and the financial industry. However Trump won by giving new hope to ‘ a class of society that had lost its trust in the economic system and political institutions.’

As a result of this new found euphoria in the US and global economy, ‘stocks received another boost, and the increase in the gold price was (temporarily) halted… A fantastic first half [for the gold price] was followed by a disastrous second half, where the newly won confidence was brutally destroyed. Gold bulls were being tested again, with the market turning into a “pain maximiser”.’

‘The big caesura in the performance had to do with the election of Donald Trump.’

Trump is merely one character in this play, he came to the stage when the story had already been laid out – an economy of bubbles, inflationary monetary policy etc etc. Trump could be seen as someone merely hurrying along the inevitable. Stoeferle and Valek both recognise this and consider the other characters, props and scene changes in what may well turn out to be a tragedy.

The Everything Bubble

One of the major areas that was inevitable no matter who is in the White House is the US Equity market. Rarely do you hear gold investment advocates recommend the classic investment portfolio which ‘calls for shares to satisfy the risk appetite and bonds as safety net.’ When people invest in gold it is not to get rich quickly, it is to diversify their portfolio, hold some financial insurance and to own a safe haven with zero counterparties.

The authors of the In Gold We Trust believe the classic investment portfolio ‘must be critically questioned’ on account of a bubble which reaches beyond individual areas. Renowned analyst Jesse Felder calls this the “Everything Bubble.”

‘The valuation level of the US equity market is nowadays ambitious, to put it mildly – both in absolute numbers and in terms of the economic output. This prompts the conclusion that the U.S. is caught up for the third time within two decades in an illusionary bubble economy created by money supply inflation and equipped with an expiry date. In comparison with the earlier two bubbles, however, the excess is not limited to certain sectors (technology in 2000, credit in 2008), but it is omnipresent and includes various asset classes, especially also bonds and (again) property.’

The Everything Bubble means very little remains untouched by the excess in the system. It means there is heightened risk and very little chance of the bubble deflating without drama. Whilst the gold price might appear unresponsive at present, gold investors with segregated, allocated gold should feel assured that they are holding one of the few assets that cannot vanish as a result of a bubble imploding.

Mainstream is wrong about recession

“It is widely acknowledged that a US recession represents one of the greatest extant risk factors for international investors. In our opinion, financial market participants currently display a suspiciously pronounced degree of complacency.”

The authors identify five key measurements that point towards a likely recession, despite mainstream opinion.

  1. Rising interest rates
  2. Artificial asset price inflation
  3. Consumer debt and slowing credit expansion
  4. The duration of the current upswing
  5. Stagnating tax revenues

For obvious reasons, a recession is positive environment for gold but it is also the fear of a recession which will send the price higher:

‘Upcoming recession fears resulting in a U-turn by the Fed, and the consequential depreciation of the US dollar would probably finalise the entry into a new age of inflation. This will be the moment in which gold will begin to shine again.’

Look out for Grey Swans

We know all about white swans and we know all about black swans (or we don’t, that’s the whole point) but Incrementum introduce us to the concept of grey swans. Grey swans are events which have ‘strong potential to become relevant at some point.’

The main grey swan considered is stagflation, as caused by a US recession, this would have a positive affect on gold. The authors consider the following grey swans and their impact on both the US Dollar and gold:

On a lighter note…beer

Each In Gold We Trust features a look at the “beer purchasing power” of gold. Whilst it may seem a light bit of fun, it is in fact a fantastic way to measure real inflation given official government measures are often misleading. Just by using this simple measure one can quickly appreciate the fake value in fiat money and where the real value lies – gold (and beer, of course).

‘While a liter of beer (a “Maß” in German) at the Munich Oktoberfest in 1950 cost the equivalent of EUR 0.82, the average price in 2016 was EUR 10.55.The annual price inflation of beer since 1950 thus amounts to 4.2%. If one looks at the price of beer relative to the gold price, then one ounce of gold could buy 111 liters of beer in 2016. Historically the average is 87 liters – thus the “beer purchasing power” of gold is currently slightly above the long-term average. The peak was however reached in 1980 at 227 liters per ounce. We believe it is quite possible that similar levels will be reached again.’

So, good news for those who own gold and enjoy a pint or litre or two, as ‘Beer drinking gold aficionados should therefore expect the metal’s beer purchasing power to increase.’

Conclusion

There is a huge amount of information and analysis in this report, all of which is vital to understand the outlook for gold. Gold demand, the gold price and the overall outlook for the metal cannot be fairly considered without an extensive viewpoint.

Unsurprisingly, reports such as this and well-researched commentary such as our own point to a lot of ‘what if’ scenarios. These should be considered by all readers and those considering any kind of investment. Ultimately the conclusion is the same – we don’t know where this will end up or what the final act will even look like. For these very reasons, gold serves as an excellent form of financial insurance in your portfolio.

Luckily educated and balanced research will use not only a number of ‘what if’ scenarios but it will also base a lot of its recommendation and conclusion on history, maths and overall experience. This is the difference between well-informed, critical research and the policies and reports of the mainstream today. Because of this major difference investors are advised to hold gold and silver as we face unknown outcomes, with very few options that will allow us to protect ourselves before reality strikes.

News and Commentary

Gold slips as US data lifts dollar, boosts rate hike prospects (Reuters)

Fed’s Powell Has an Eye on Inflation as He Calls for Rate Hikes (Bloomberg)

Gold steadies as U.S. private-sector jobs data bolsters dollar (Reuters)

Trump to Withdraw U.S. From Climate Accord to Seek Better Deal (Bloomberg)

U.S. factory activity edges up; private payrolls surge (Reuters)

66-year chart of beer vs gold price may lead to (heavy) drinking (Mining.com)

Deutsche Bank Calculates The “Fair Value Of Gold” And The Answer Is…(ZeroHedge)

Hedge Funds Pile Into Gold At Fastest Pace Since 2007 (ZeroHedge)

Want to Know Where Gold Is Headed? Keep an Eye on the Japanese Yen (Bloomberg)

Perth Mint’s monthly gold, silver sales rise in May (Times of India)

end
We know have a Deutsche bank trader convicted to rigging the precious metals
(courtesy zerohedge)

Tom Schoenberg of Bloomberg on the above story:

(courtesy Bloomberg/GATA/Schoenberg)

Monetary metals market rigger learned how to do it at Deutsche Bank

Section:

Trader in Spoofing Case May Be Tied to Deutsche Bank

By Tom Schoenberg
Bloomberg News
Friday, June 2, 2017

A trader who admitted Thursday to conspiring to manipulate futures contracts in precious metals committed those actions while working at Deutsche Bank AG, according to a person familiar with the matter.

The trader, David Liew, pleaded guilty in federal court in Chicago to a fraud conspiracy over the spoofing of futures contracts for gold, silver, platinum, and palladium futures, according to court papers. Along with spoofing — which is placing orders without the intent of executing them in an attempt to manipulate the price — he acknowledged front-running customers’ orders.

The matter indicates more potential trouble for Deutsche Bank as it attempts to shake the financial and reputational drag of more than a half-dozen settlements in recent years with U.S. authorities over wrongdoing. The documents state that Liew worked on his own but also with at least three other traders at the bank hundreds of times in coordinated spoofing. Liew admitted that he learned spoofing practices from others at Deutsche Bank. Because Liew is cooperating with the investigation, prosecutors examining the metals market could take action against other traders at Deutsche Bank. …

The case against Liew also provides the deepest insights yet into a federal criminal investigation of whether traders at some of the world’s biggest banks conspired to manipulate prices in precious-metals markets. Liew’s cooperation, and allegations that he conspired with a trader at another global bank, suggests that prosecutors continue to press forward with the probe. ...

Liew joined the bank in July 2009 after receiving his bachelor’s degree as part of the bank’s global analyst program, according to the court documents. Later that year he was installed at the bank’s metals trading desk in the Asia-Pacific region.

Until February 2012 Liew worked with other traders at the bank to rig precious metals futures by transmitting orders to the Chicago Mercantile Exchange that they never intended to fill, according to the court papers.

Liew and the conspirators sought to create a false sense of supply or demand in order to cause other market participants to react and drive the price of precious metals futures contracts down or up or artificially increase the number of participants willing to transact at the existing price, according to the plea agreement. Liew and his conspirators could profit or mitigate losses by executing their positions before the spoof order, the agreement states.

On one occasion, Liew and his colleagues initiated transactions after getting information about a large metals trade to be executed for a customer of the bank “in an effort to benefit improperly from the anticipated movement in price that would result from the execution of the customer’s trade,” according to the court filing.

… For the remainder of the report:

https://www.bloomberg.com/news/articles/2017-06-02/trader-pleading-guilt…

end

 

Raoul Pal is one smart cookie.  In this commentary, it debunks the theory that Bitcoin is a store of value

(courtesy Sprott money/Raoul Pal;)

Raoul Pal Slams Bitcoin: “It’s Not The Store of Value People Thought It Was”

by Sprott Money

Jun 2, 2017 3:22 PM

Raoul Pal Slams Bitcoin: “It’s Not The Store of Value People Thought It Was”

Written by Peter Diekmeyer (CLICK HERE FOR ORIGINAL)

Raoul Pal, one of the most effective critics of mainstream economics, is cashing in his Bitcoins. Gold is a better wealth preservation tool, says Real Vision Television’s co-founder.

Yesterday Pal, who once thought that Bitcoins could eventually be worth as much as $1 million each, informed Real Vision Publications subscribers that he was selling the digital currency.

“Bitcoin not a store of value people thought it was,” he told Sprott Money News, in a telephone interview this morning from his Cayman Islands home. “If core developers are talking about changing the Bitcoin code or how it works, what happens if – at some future point they decide to allow the number of coins to expand?”

Pal also cited lack of a Bitcoin “killer app,” and the commoditization of blockchain technology – as new players chip away at the market as motivating his thinking.

Those who have been following Pal’s advice regarding Bitcoin, which he has been pushing hard on Real Vision TV through the prominence that he has given sector advocates, such as Trace Mayer haven’t done that badly.

The digital currency is up more than tenfold in the last two years.

Mainstream economics “does not work in the real world”

 

However, Pal’s dimming view of Bitcoin is particularly important to gold investors, because he and partner Grant Williams, in their legacy platforms and the recently-launched Adventures in Finance podcast series, have been among the global financial system’s most astute critics.

Pal is particularly vociferous about the opaque econometric models pushed by mainstream academics and central bankers, who don’t sufficiently warn the public of the dangers involved.

He cites economists’ use of the qualification “ceteris paribus” (which means “all other things being equal”, but which, Pal jokes, really means “it does not work in the real world”).

This, despite the fact that while insiders understand the jargon, profession politicians and the public are left insufficiently informed by economists about the risks of policies such as rising debts and quantitative easing.

Bitcoin: like gold, except . . .

Pal’s call is also important for another reason: if Bitcoin’s allure as a store of value and a hedge against systemic collapse is dimmed, this would increase the relative value of other solutions.

That includes gold, for which Pal’s partner Grant Williams has been a particularly strong backer.

Pal’s fascination with Bitcoin echoes that of many alternative investors, who seek a hedge from what some suspect is a “Krugman Con” – sustained long-term increasing government spending, borrowing and money printing at a pace that exceeds economic growth.

Bitcoin met many of those hedging characteristics. Despite its wild fluctuations, the digital currency provided a partial store of value outside the banking system and its encryption technology reportedly kept away prying eyes.

Bitcoins fraught with increasing risks

However Pal’s concerns with the digital currency barely scratch the surface of the increasing risks that Bitcoin investors face – particularly at a time when its hockey stick chart pattern practically screams “bubble.”

(According to chart compiled by Coinmarketcap.com, the market capitalization of the top ten cryptocurrencies as of June 2, 2017 exceeded $75 billion).

For one, an astonishing number of investors – including this writer have a hard time getting their minds around key Bitcoin concepts.

These range from how data mining (the process through which Bitcoins are created) is done, to who is behind the various Bitcoin exchanges (this writer could not find a single Canadian operator to speak on record for a recent article), and how good the platform’s encryption is.

(Note: America’s National Security Agency, which few journalists fully understand, is almost certainly making hacking digital currencies its number one priority. In fact, (in this writer’s opinion) it has likely already succeeded).

Despite Pal’s pessimism about Bitcoin’s future, the alternative investment guru admits that the digital currency “may go up in price, maybe a lot more,” before its ultimate future is decided.

But Pal won’t be going along for that last leg.

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

 
 

1 Chinese yuan vs USA dollar/yuan  WEAKER  6.8205(DEVALUATION SOUTHBOUND   /OFFSHORE YUAN MOVES  WEAKER TO ONSHORE AT   6.7927/ Shanghai bourse CLOSED UP 2.91 POINTS OR .09%  / HANG SANG CLOSED UP 114.83 POINTS OR 0.44% 

2. Nikkei closed UP 317,25 POINTS OR 1.60%   /USA: YEN RISES TO 111.49

3. Europe stocks OPENED IN THE GREEN        ( /USA dollar index RISES TO  97.25/Euro UP to 1.1217

3b Japan 10 year bond yield: RISES TO   +.055%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 111.49/ 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::  47.07 and Brent: 49.33

3f Gold DOWN/Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO  +.289%/Italian 10 yr bond yield UP  to 2.245%    

3j Greek 10 year bond yield FALLS to  : 6.09???  

3k Gold at $1262.70/silver $17.20 (8:15 am est)   SILVER BELOW  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 20/100 in  roubles/dollar) 56.61-

3m oil into the 47 dollar handle for WTI and 49 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 GOOD SIZED DEVALUATION SOUTHBOUND 

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 111.49 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  0.9712 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0893 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  +0.289%

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 2.209% early this morning. Thirty year rate  at 2.861% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Stocks Set For New All-Time Highs, Nikkei Rises Above 20,000, Oil Slides

The day after Trump pulled out of the Paris Climate Accord, stocks are set for new all time highs with S&P futures up 0.2%, boosted by green markets across Europe and Asia, where the Nikkei rose above 20,000 for the first time since 2015. World stocks are set for new record highs, having already gained 11% so far this year, ahead of today’s US nonfarm payrolls which are expected to increase by 185,000 jobs after surging 211,000 in April.

In Asia, the MSCI Asia Pacific Index climbed 0.9% to the highest since April 2015. The Nikkei 225 Stock Average rallied 1.6% and topped 20,000 for the first time since December 2015. Stocks in Europe joined the party with euro zone blue-chips up 0.6% and UK’s FTSE 100 up 0.4% and hovering near its highest-ever levels. Futures on the S&P 500 rose 0.2%. The S&P 500, the Nasdaq Composite and Nasdaq 100 indexes each closed at fresh records on Thursday. The dollar has clawed back some of recent losses after coming off its worst fortnight in a year on concern about the Trump administration’s ability to deliver a substantial boost to growth.

After the recent Chinese currency fireworks, which saw the biggest 4-day rally in the Yuan in 12 years, China’s offshore yuan tumbled the most since February amid signs that the recent funding crunch is beginning to abate and that the PBOC may have found a new equilibrium level for the currency. The onshore currency slipped 0.2 percent, breaking a four-day rally, while the offshore yuan tumbled 0.6% to 6.7930 per dollar, although it was still set for weekly gain of 0.5%. Separately, the offshore yuan overnight Hibor overnight rate declined 34.14% points, the most since January, to 8.68%. It rose more than 35% points on Wednesday and Thursday as the PBOC set off to crush yuan bears. Additionally, the CNH overnight deposit rate dropped for the first time in three days, down 21 percentage points to 2%, while CNH tomorrow- next forward points decline 60 to 5 as the offshore market has stabilized, if only for now.

In other currencies, the British pound dropped 0.1 percent to $1.2869, while the euro edged higher by 0.1 percent to $1.1221. The yen slipped 0.1 percent to 111.45 per dollar, after falling 0.5 percent on Thursday. The Bloomberg Dollar Spot Index added 0.1 percent, extending a 0.2 percent advance in the previous session.

“The move this morning is in dollar yen,” said Niels Christiansen, a strategist with Sweden’s Nordea Bank. “Good numbers yesterday and the record highs in equities if anything are dollar positive. The data hasn’t done a great deal for the dollar recently, but we’ll certainly be looking at the wage numbers today – that is crucial for inflation and the rate outlook.”

Even as stocks pushed on into record territory, oil prices resumed their slide with key futures contracts down more than 2 percent amid worries that Donald Trump’s decision to abandon a global climate pact could spark more crude drilling in the United States, stoking a persistent glut in global supply. Brent fell to $49.63 a barrel, while WTI dropping below $47, and set for the biggest weekly drop since May 5, while industrial metals including copper declined, driving the Bloomberg Commodity Index to the lowest in more than a year.

All eyes will be on today’s payrolls report: data showing a healthy uptick in private sector hiring and factory activity during May bolstered expectations that the U.S. economy was picking up speed and lifted stocks on Wall Street after two days of losses.

Bulletin Headline Summary

  • Oil bears have sparked some volatility into a historically dull NFP Friday. WTI and Brent Crude futures both trade near session lows
  • Not too much FX price action this morning, as one would expect ahead of the non farm payrolls release this afternoon
  • Looking ahead, highlights include US jobs report, Fed’s Harker and Kaplan

Market Snapshot

  • S&P 500 futures up 0.2% to 2,433.25
  • STOXX Europe 600 up 0.6% to 393.83
  • MXAP up 1% to 154.57
  • MXAPJ up 0.6% to 501.55
  • Nikkei up 1.6% to 20,177.28
  • Topix up 1.6% to 1,612.20
  • Hang Seng Index up 0.4% to 25,924.05
  • Shanghai Composite up 0.09% to 3,105.54
  • Sensex up 0.4% to 31,268.86
  • Australia S&P/ASX 200 up 0.9% to 5,788.11
  • Kospi up 1.2% to 2,371.72
  • Brent Futures down 2% to $49.64/bbl
  • Gold spot down 0.3% to $1,262.41
  • U.S. Dollar Index unchanged at 97.20
  • German 10Y yield fell 1.3 bps to 0.292%
  • Euro up 0.1% to 1.1224 per US$
  • Brent Futures down 2% to $49.64/bbl
  • Italian 10Y yield rose 5.3 bps to 1.962%
  • Spanish 10Y yield fell 2.9 bps to 1.534%

Top Overnight News from Bloomberg

  • Trump’s Paris Exit Leaves Him Isolated From C-Suites to Capitals
  • Glaxo Submits First 2-Drug HIV Regimen to FDA, EMA
  • JPMorgan’s Dimon Says ‘Absolutely Disagree’ on Paris Withdrawal
  • Blue Apron Gets Ready to Prove Food-Delivery Chops on IPO Trail
  • Citigroup Names Munir Nanji Global Subsidiaries Head for APAC
  • PennTex Committe Recommends Unitholders to Accept ETP’s Offer
  • Lehman Brothers Moves Closer to Resolving Mortgage Claims
  • International Shipholding Receives Reorganization Plan Approvals
  • KBL Merger IV Reports Pricing of IPO at $10 a Unit
  • General Motors: End of Operations in Venezuela ‘Irreversible’
  • Cook Says He Tried to Persuade Trump to Remain in Paris Accord
  • U.S. Gas Exports to Mexico Down Amid Kinder NGPL Force Majeure
  • Cardinal Energy to Buy Assets From Apache for C$330m in Cash
  • Goldman’s Blankfein: Climate Decision ‘Setback for Environment’
  • Cliffs CEO Praises Trump on Paris Climate Accord Withdrawal
  • Charter Financial to Buy Resurgens Bancorp for About $26.3m
  • Broadcom Indicates Ramp for New IPhone Slower Than in Past

Asia stock markets traded mostly higher following the positive lead from US, where all 3 major indices printed fresh record highs amid encouraging data including better than expected ADP jobs figures. This spurred momentum in the ASX 200 (+0.9%) and Nikkei 225 (+1.6%), with the latter also underpinned by a weaker currency to break above 20,000 for the 1st time since 2015. Chinese markets were mixed as the Hang Seng (+0.4%) conformed to the upbeat tone, while the Shanghai Comp. (+0.1%) lagged after a weaker daily liquidity operation and tighter conditions from the recent surges in money market rates. 10yr JGBs were flat with a lack of demand seen amid gains in riskier assets, although downside was stemmed following a firm Rinban announcement in which the BoJ were in the market for JPY 1 .13tln in government debt with maturities of 10yr and under. PBoC injected CNY 30bIn in 7-day reverse repos and CNY 20bIn in 14-day reverse repos, for a net weekly injection of CNY 30bIn vs. Prev. CNY 30bIn drain last week.

Top Asian News

  • Chinese Firm Buys 253-Year-Old French Crystal Maker Baccarat
  • Nikkei 225 Tops 20,000 as Investors Take Second Look at Japan
  • India Tea Exports Seen Climbing as Drought Hurts Top Shipper
  • Copper Traders Most Bearish in a Year on Signs of China Slowdown
  • Steel Tycoon Mulls Foray Into Indian Non-Bank Finance Sector
  • Some Bond Buyers Say Thanks for Indonesia Upgrade, Now Adieu

In Europe, oil bears sparked some volatility into a historically dull NFP Friday. WTI and Brent Crude futures both trade near session lows, down around a dollar on the session, as an aftermath from the United States’ withdrawal of the Paris Accord has been evident. An increase in US shale oil production could counteract attempts from OPEC and Russia to stabilize prices, with some touting that the US could add up to 1.5mln BPD to global oil production in 2018. The oil selling has resulted in Energy to lag, and the only S&P European sector to trade in the red, down around 0.50%. The financial sector leads European bourses to trade in the green, with the likes of RBS, Deutsche Bank, Credit Agricole and CS all leading their respective indices. Strong UK Construction PM! data failed to add to the risk sentiment, with traders seemingly brushing off the large beat seen in the figure, as no immediate bullish pressure was seen in the FTSE nor GBP. The risk appetite seen in equity markets has failed to faze fixed income markets, as subdued trade has been clear as we approach today’s NFP report. The Bund future found bids above 162.10, following the gap seen in the futures open, now trading up around 14 ticks on the session, looking towards the gap seen on 21st April..

Top European News

  • U.K. Housing Lifts Construction Growth to Strongest Since 2015
  • Bank of Russia May Raise GDP Forecast in June, Nabiullina Says
  • Evonik New CEO Raises Profit Target, Pledges to Rejig Portfolio
  • Renewed OPEC Deal Paradoxically Locked in Oil Slump: Rosneft CEO
  • May Considers Replacing Brexit Secretary after Election: Times
  • Blankfein Tweets, Iger Quits Trump Council in Climate Fury
  • SocGen Sees More Upside for European Stocks on Fundamentals

In currencies, there has been not too much FX price action this morning, as one would expect ahead of the non farm payrolls release this afternoon. What we have seen is largely reflective of the moves seen in the commodity markets, and to that end, the CAD has been suffering as WTI falls to USD47.00 on the implications on US shale production from the US exit from the Paris Climate Agreement. USD/CAD has tested 1.3550, but as we noted first thing, we see strong resistance into 1.3600, some consolidation seen since.  EUR/USD continues to hold the low 1.1200’s, as dip buyers are keen not to miss out on the ECB QE taper move —some anticipating a signal next week. 1.1150-60 is initial support lower down should be break 1.1200. USD/JPY continues to hold the mid 111.00’s, as a positive US jobs report will spur a move on 112.00 again.

In commodities, across the board, we see losses in most commodities this morning, with focus on Oil once again as the production levels of US Shale dominate the headlines, and have been exacerbated by the US announcement to withdraw from the Paris Climate Agreement, effectively freeing their hand on output levels. WTI losses have now extended into the low USD47.00’s, and momentum has taken Brent back under USD50.00, completely undermining the attempts by OPEC/non-OPEC week to contain price weakness. Support levels in Light Texas come in around USD46.00-45.0, but the mood has soured significantly, and selling is relentless. This may have contributed to the weakness elsewhere, but metals/iron ore losses are largely based on Chinese demand, and this is back in question after some soft PMI releases. Copper is back under USD2.55, with losses matched in Zinc, while Nickel extends the sell-off through USD9000 to over USD250. This may turn the risk mood sour again, but as yet, little pick up seen in Gold.

Looking at the day ahead, unsurprisingly the focus for today will come this afternoon with the May employment report. As well as payrolls it’s also worth keeping an eye on the unemployment rate (expected to hold steady at 4.4%) and average hourly earnings (expected to rise +0.2% mom and +2.6% yoy). Away from the employment report we’ll also get the April trade balance reading. Away from the data we’ve got the Fed’s Harker and Kaplan both scheduled to speak.

US Event Calendar

  • 8:30am: Change in Nonfarm Payrolls, est. 182,000, prior 211,000; Unemployment Rate, est. 4.4%, prior 4.4%;
    Average Hourly Earnings MoM, est. 0.2%, prior 0.3%; Average Hourly Earnings YoY, est. 2.6%, prior 2.5%; Average Weekly Hours All Employees, est. 34.4, prior 34.4
  • Labor Force Participation Rate, est. 62.93%, prior 62.9%; Underemployment Rate, prior 8.6%
  • Trade Balance, est. $46.1b deficit, prior $43.7b deficit
    12:45pm: Fed’s Harker Speaks About the Economic Outlook
  • 1pm: Fed’s Kaplan Speaks in Dallas

DB’s Jim Reid concludes the overnight wrap

Welcome to another payrolls Friday. DB expects a well above consensus 235k  print (market at 182k) which Joe LaVorgna notes is supported by a strong 253k ADP print yesterday. He thinks there was evidence of retail jobs stabilising in the report after a difficult period for the sector. Other reasons for Joe’s call is that  the four-week moving average of jobless claims during the May survey period was 241k, which was the lowest for any employment survey week since July 1973 (240k). Also he argues that withheld income tax receipts are tracking up close to 7% compared to a year ago, which points to rising income growth. Since tax receipts are a direct function of employment, hours and wages, the recent acceleration in income growth should at least partly be reflected in the pace of job gains. Joe remains less confident in wages, where the growth rate remains soft relative to the sub-5% level of the unemployment rate. After some recent data apathy if Joe is right on payrolls there will be some renewed excitement in markets.

As interesting as today is though, next Friday we may be in need of a cold towel and a lie down as by then it’ll be the morning after the night before in terms of knowing the results of the UK election, digesting a potentially pivotal ECB meeting and dealing with the aftermath of former FBI Director Comey testifying to the Senate Intelligence Committee. A super Thursday. Just on Comey, the Committee confirmed that the former FBI Director will firstly appear in an open session in the morning followed then by a closed meeting with the panel later in the day.

Over in markets, the first day of June was a welcome one as investors dissected a slew of largely solid PMIs in Europe and then the better than expected employment data and PMIs in the US. The S&P 500 (+0.76%) clocked up another new record high and had its strongest day since April 24th. The Dow (+0.65%) also closed at a record high while in Europe the Stoxx 600 (+0.43%) finally brought to an end a run of five consecutive daily declines. The positive tone came despite the news that President Trump is to take the US out of the Paris climate accord which he said was a deal “that punishes the US” at the expense of China and India. That said the President did leave the door open to a possible renegotiation of the current accord on more favourable terms or even a completely new agreement. It was noted though that the UN body that governs the Paris accord has said that the agreement is a historic treaty and “cannot be renegotiated based on the request of a single party”.

Over in bond markets the impact of the data was a small nudge up in the probability of a June rate hike to 88% from 84% just prior to the data based on Bloomberg’s calculator. 10y Treasuries (+0.9bps to 2.212%) stayed range bound while bond markets in Europe were a bit mixed again with Bunds flat, BTPs weaker (+5bps) and Portugal bonds stronger (-5bps). Meanwhile the big mover in commodities again was Iron Ore (-1.84%) which took another leg lower following that soft China PMI print yesterday. After reaching a high of nearly $95/tn back in February, Iron Ore has now tumbled 41% to $56/tn. Away from that Oil ended little changed despite being up over 1.70% intraday at one stage, while Gold (-0.23%) faded a bit.

This morning in Asia the positive momentum from Wall Street last night has largely continued into the Asia session. The Nikkei (+1.63%) has been the big mover, passing 20,000 for the first time since 2015,  while the Hang Seng (+0.30%), Kospi (+0.95%) and ASX (+0.95%) have also rallied. Bourses in China are however down about half a percent, perhaps still weighed down by yesterday’s soft PMI. In other news, overnight President Trump has asked the Supreme Court to immediately reinstate his travel ban on six countries. Meanwhile there’s a bit of focus on a Telegraph article last night suggesting that Amber Rudd will replace Philip Hammond as the UK Chancellor should the Tories win next week’s election with a majority. The FX market has largely ignored the headlines however.

Wrapping up, in terms of the other US data yesterday initial jobless claims were confirmed as rising a fairly modest 13k to 248k last week, while construction spending slipped -1.4% mom in April but only after March was revised up to a +1.1% gain from a previously negative reading. Total vehicle sales also declined to an annualised rate of 16.6m from 16.8m. All told the Atlanta Fed have now raised their Q2 GDP estimate to 4.0% from 3.8% previously. The only other thing to note was comments from the Fed’s Jerome Powell. Largely seen as a centrist, the Governor said that he sees two more rates this year as being  appropriate but also warned that the Fed must careful watch inflation for signs it is moving closer to target.

Looking at the day ahead, unsurprisingly the focus for today will come this afternoon with the May employment report in the US. As well as payrolls it’s also worth keeping an eye on the unemployment rate  (expected to hold steady at 4.4%) and average hourly earnings (expected to rise +0.2% mom and +2.6% yoy). Away from the employment report we’ll also get the April trade balance reading. This morning in Europe it’s pretty quiet with Euro area PPI for April the only release scheduled. Away from the data we’ve got the Fed’s Harker (5.45pm BST) and Kaplan (6pm BST) both scheduled to speak. Finally, UK PM  Theresa May and Labour leader Corbyn are to answer audience questions in a special BBC TV programme tonight.

3. ASIAN AFFAIRS

i)Late THURSDAY night/FRIDAY morning: Shanghai closed UP 2.91 POINTS OR 0.09%   / /Hang Sang CLOSED UP 114.83 POINTS OR 0.44% The Nikkei closed UP 317.25 POINTS OR 1.60%/Australia’s all ordinaires  CLOSED UP  0.84%/Chinese yuan (ONSHORE) closed  DOWN at 6.8205/Oil DOWN to 47.07 dollars per barrel for WTI and 49.33 for Brent. Stocks in Europe OPENED ALL IN THE GREEN     ..Offshore yuan trades  6.7927 yuan to the dollar vs 6.8205 for onshore yuan. NOW  THE OFFSHORE IS MUCH WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS HUGELY  WEAKER TO THE DOLLAR AND THIS IS COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA NOT HAPPY WITH THE NEWS THAT ITS DEBT HAS BEEN DOWNGRADED  

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA/SOUTH KOREA

b) REPORT ON JAPAN

c) REPORT ON CHINA

A very important article written by Byron King.  It sure looks like the Chinese are anxious to purchase oil form Saudi Arabia only if this country accepts yuan as payment.  Saudi Arabia knows that this would be the death knell of the uSA reserve currency and end the one full swoop the petro-dollar scheme

(courtesy Byron King/DailyReckoning.com)

Is This China’s Next Step To Destroy The Dollar?

Authored by Byron King via DailyReckoning.com,

China is currently modifying the terms of its oil trade with Saudi Arabia. Specifically, China is working on a deal to pay for Saudi oil using Chinese yuan. This effort poses a direct threat to the security of the dollar.

If this China-Saudi deal happens — yuan for oil — it’s another step closer to the grave for the petrodollar, which has dominated global finance since 1974.You can revisit Jim Rickards article about the Assault on the Dollar, here.

To recap, the petrodollar is weakening because the dollar is losing power as the world’s reserve currency. This is similar to the way pounds sterling gradually fell out of favor during the decline of the British Empire. The decline may take a long time, but what we’re seeing today is another step in the death march of the dollar.

Since 1974, Saudi has accepted payment for almost all of its oil exports — to all countries — in dollars. This is due to an agreement between Saudi and the U.S., dating back to the days of President Nixon.

Beginning about 15 years ago, China ceased being self-sufficient in oil, and began buying Saudi oil. As per all Saudi customers, China had to pay in dollars. Even today, China still pays for Saudi oil in U.S. dollars and not yuan, which perturbs China’s leaders.

Since 2010, China’s total oil imports have nearly doubled. According to Bloomberg News, China has surpassed the U.S. as the world’s largest oil importing nation. Here’s a chart, showing the trend.

Dollar Gold New Levels Bloomberg

As China imports more and more oil, the idea of paying for that oil in yuan instead of dollars becomes more critical. China does not want to use dollars to buy oil. So, China is beginning to squeeze Saudi over the form of currency in which their oil trade is conducted. China is doing this by steadily lowering its oil purchases from Saudi.

Presently, China’s three top oil suppliers are Russia, Saudi and the West African nation of Angola. Backing-up these three key suppliers are a combination of sources in Iran, Iraq and Oman, which help to diversify China’s oil-supply chain.

In the past few years, China has shifted oil purchases away from Saudi, and Russia’s oil exports have risen from 5% to 15% of the Chinese total.

China imports more oil from Russia, Iran, Iraq and Oman; less from Saudi.

Saudi’s share of Chinese imports has dropped from over 25% in 2008, to under 15% now. Meanwhile, Saudi competitors Russia, Iran, Iraq and Oman are selling more oil to China.

Saudi would like to reverse this declining trend of oil-trade with China. However, these kind of major oil flows don’t just happen in a vacuum.

There’s a good reason why Russian oil sales to China are increasing. As you’ll see in Nomi’s article, trade and financial services are often closely linked. Over the past few years, China has deepened its trading roots with Russia — now, China pays for Russian oil in yuan. Russia, in turn, uses yuan to buy goods from China.

Beyond trade in goods, within the past six months Russia has set up a branch of the Bank of Russia in Beijing. From there, Russia can use its Chinese yuan to buy gold on the Shanghai Exchange. In a sense, Chinese-Russian oil trade is now backed-up by a “gold standard.”

Looking ahead, Saudi Arabia will find itself more and more locked-out of the Chinese oil market if it won’t sell oil for yuan. But to do this, the Saudis must move away from U.S. dollars— and from petrodollars — if Saudi wants to maintain and increase access to China’s oil market.

We’ll know more about the likelihood of this after Donald Trump’s tour of the Middle East.

If Saudi begins accepting yuan for oil, all bets are off on the petrodollar. Yuan-for-oil will entirely change the monetary dynamics of global energy flows. I expect the U.S. dollar to weaken severely when that news breaks.

Much of this oil-for-yuan news is public information. Yet, for some strange reason, there’s a form of blindness within western policymaking and media circles concerning the implications of yuan-for-oil. The idea is so “off-the-wall” that many policy leaders simply ignore it.

Ignore away. But we could wake up one morning in the midst of a massive currency crisis, in which dollar values are falling and oil prices in dollars are soaring.

end

 

A terrific commentary from Jim Rickards as he describes how China has been able to maintain high growth rates but that is leading to a death spiral:

(courtesy Jim Rickards/DailyReckoning)

The Chinese Economic “Death Spiral”

China has reported annual growth rates since the panic of 2008 of between 6.7% and 12.2%, with a steady downward trend since early 2010. If China’s growth engine is running out of steam, as I’ve described, how has China managed to maintain such relatively high growth rates?

The answer is contained in three key words: debt, deflation and waste.

Waste is a blunt word referring to non-productive investment. The investment component of China’s GDP is about 45% of the total. Most major economies show about 25% to 35% for investment.

But at least half the Chinese investment is wasted. It goes to projects that will never produce an adequate return, either on an absolute basis or relative to alternative uses of the funds.

If this wasted investment is subtracted from GDP, similar to a one-time write off under general accounting principles, then 8% growth would be 6.2%, and 6% growth would be 4.7%. There are other distortions in Chinese growth figures, but wasted investment is one of the most glaring.

A simple example will make the point. During a recent visit to China I took the high-speed train from Beijing to Nanjing and passed through the magnificent new Nanjing South train station.

The train had the smoothest, quietest ride I’ve ever experienced even at speeds of 305 kph. The noisy clickity-clack of Amtrak’s Acela service from New York to Washington seems like a Wells Fargo stagecoach ride through the Old West compared to the Chinese railroad.

The train station was over a quarter-mile from one entrance to the other side, and had marble floors, high ceilings, expensive boutiques and over 128 escalators that all functioned perfectly.

There’s only one problem. My ticket cost about $30. Tickets on Amtrak for a ride of similar duration cost about $250, and Amtrak losses money.  There’s no way China can pay the costs of building and operating its railroad system with such inexpensive tickets.

But the Nanjing South train station project did create 20,000 construction jobs for over two years. That really is the point. China needs to find jobs for the millions of worker arriving from the countryside looking for work.

Failure to generate those jobs could result in social instability, riots, and attacks on the legitimacy of the ruling Communist Party of China. As a result, China borrows the equivalent of billions of dollars to finance white elephant and prestige projects that create jobs with little thought given to how the debt will be repaid.

How the Chinese Economy Grows

This brings us to the next element in China’s non-sustainable growth formula — debt. Any economy can produce short-term growth by incurring debt and using the proceeds as government spending, tax cuts, investment, or grants. This is nothing more than the classic Keynesian fiscal stimulus with its mystical “multiplier” effect that produces more than $1.00 in aggregate demand for every $1.00 borrowed and spent.

In fact, there’s ample evidence that the Keynesian multiplier only exists when an economy is in recession or the very early stages of an expansion, and when its debt levels are relatively low and sustainable. Highly indebted economies in the late stages of an expansion do not conform to Keynes’ theory of a multiplier.

Unfortunately for China, it is both highly indebted and has not suffered a recession for eight years. China should therefore expect the GDP multiplier on new debt used for spending or infrastructure to be less than 1.

That is exactly what the data shows. The chart below measures credit intensity defined as the number of units of local currency needed to produce one unit of growth. The local currency metric is a measured by central bank money printing to monetize debt, and is therefore a proxy for the debt itself.

The chart shows that in China today, it takes $4.00 of money printing to produce $1.00 of growth. This is up significantly from 2008 when it took $1.70 of money printing to produce $1.00 of growth. This shows that the Keynesian multiplier is less than 1, in fact it’s 0.25 in China today. (Only Europe shows a true multiplier where less than one unit of new money can produce a unit of growth).

The chart also shows that China’s situation is growing worse. It takes more and more debt to produce less and less growth. This is a non-sustainable dynamic that can only end in a debt crisis, a recession, or both.

Chinese Economic Growth

China and the U.S. China are in the worst position, where 4 units of debt are needed to create 1 until of growth. This suggests a debt “death spiral” ending in a credit crisis, recession, or both.

China is now trapped in a debt death spiral. It cannot afford for growth to slow because that would cause unemployment, bankruptcies, and social unrest. But, it cannot continue growing without massive borrowing and spending programs.

China is Ground Zero for Deflation

This debt problem points to the third element in China’s growth formula, which is deflation. Persistent deflation and disinflation is caused globally by a combination of demographics, debt, deleveraging, and technology.

China is ground zero for global deflation because of its cost structure and its cheap currency that exports deflation to trading partners.

Real growth is calculated as nominal growth minus inflation. A simple example would be an economy with 5% nominal growth and 2% inflation. The real growth would be 3%, (5 – 2 = 3).

Deflation is really “negative inflation.” In converting from nominal to real growth, you are subtracting a negative, which is like adding. For example, an economy with 1% nominal growth and 2% deflation, would have 3% real growth, (1 – (-2) = 3).

This “growth through deflation” dynamic has been playing out in China is recent years. This can produce higher real growth, but it does so with lower nominal growth.

The problem is that debt repayments are nominal. While real growth can be strong in a deflationary period (like in the U.S. in the 1870s), the lack of nominal growth makes it harder to pay off nominal debt. Deflation makes the real value of debt go up, which compounds an already dangerous debt situation.

On the earlier visit to Nanjing, I met with provincial Communist Party officials who took me on a tour of a massive multi-city construction project with office parks, skyscrapers, apartment buildings, hotels, recreational facilities and transportation links for each of the cities. It was all empty.

When we returned for tea in the provincial officials’ offices, I asked how they expected to repay the debt used to fund the construction. The head official answered matter-of-factly, “Oh, we can’t repay it. Beijing will have to bail us out.”

Similarly, a Bloomberg reporter recently interviewed a Chinese bank customer who had just purchased a Wealth Management Products (WMP) from her bank. The reporter asked the customer if she was worried about the credit quality of the loans backing-up her WMP. She replied, “No, not at all. If anything goes wrong, Beijing will bail us out.”

This blind faith in Beijing’s ability to bail out every bad debt in the world’s second largest economy raises the question of Beijing’s willingness and ability to do so.

Higher interest rates will ultimately bankrupt Chinese companies and lead to higher unemployment and slower growth. Look for the Chinese banking system to weaken.

In less than six months, the yuan could finally undergo a maxi-devaluation.

All the best,

Jim Rickards
for The Daily Reckoning

4. EUROPEAN AFFAIRS

ITALY

The banking crisis in Italy is just not going away.  Italy has almost 360 billion euros of non performing loans on banking balance sheets or 18% of total loans.  The government is seeking a bailout and not a bail in as huge numbers of moms and pops bought debt/equities because they thought the investments were sound. A bail in would crush huge numbers of Italian citizens.  This is why the government is pushing for a bail out but the EU states that a bail in is mandatory. No wonder we are witnessing a huge run on Italian banks

(courtesy zero hedge)

Stunning: Italy says NO to bail-in scenario’s

italy 3

Whereas most bank clients accepted a bail-in as one of the risks associated with depositing cash on a bank account, Italy doesn’t seem to be too sure about forcing its banks to do so.

We all know the never-ending issues related to Banca Monte Dei Paschi, but that bank wasn’t Italy’s only problem. Two smaller banks, Banco Popolare di Vicenza and Vento Banca also need to be rescued. Although these banks are definitely smaller than Monte Paschi, and wouldn’t have a huge impact on the international banking system, it definitely is an issue which has to be solved.

Italy 2

Source: economist.com

According to the European Commission, both banks would need to find a 1 billion Euro cash injection from the private markets before the Italian government would be allowed to even think about providing additional state aid, but as you can imagine, there isn’t a lot of risk capital available for two failing banks.

The main question now is whether or not the state-supported Atlante-fund could be considered to be a private cash injection. If that would be the case, the state fund could inject the required billion Euro, and then let the Italian government deal with the mess. But Atlante has already ‘invested’ 3.4B EUR (investing might be a bad choice of words, as we don’t think putting money in a failing bank is an investment but rather a ‘speculation’) in both Venetian banks, and might be unwilling to throw more cash at it. Additionally, the larger banks in the country (Intesa SanPaolo and Unicredit) have publicy confirmed they aren’t willing to throw (more) good money at the failing banks, so they won’t be part of any solution.

Italy 1

Source: thecorner.eu

Not only is there a very thin line between considering a state-supported investment vehicle to be ‘private’ money and thus meeting the requirement of the European Commission, it’s also uncertain what the punishment for Italy would be if it wouldn’t apply the European rules to this situation.

After all, the Italian government seems to be radically against a bail-in of debt holders and account holders, even though this is the preferred (read: ‘mandatory’) solution of the European politicians.  The Italian government thinks a bail-in might make things even worse, as the fears of this bail-in might spread to other banks and other institutions inside the Italian system.

A very valid assumption, but this puts Italy on collision course with the other European countries and the ECB which have been pushing the member states towards using a bail-in as a first solution. And with a capital hole of in excess of 6B EUR, there simply isn’t a clear solution for the Venetian banks. After all, who’d be willing to invest that much money in failing banks?

Italy 4

Source: bsic.it

The 6.4B EUR might actually be just the starting point. Italians aren’t stupid, and several deposit holders have already started to empty their accounts. We aren’t talking about a ‘pure’ bank run, but the amount of money which is needed now might be just a very temporary solution. If more deposit holders withdraw cash, more money will be needed to protect the capital ratios of the two banks.

So whilst we acknowledge there’s no easy solution, something will have to be done. And if Italy refuses to apply the bail-in principles, the European Union and the Eurozone might have bigger issues than you’d think…

A new fundamental crisis seems to be just around the corner

end

 

SPAIN

OHOh!! Spain’s sixth largest bank, Banco Popular in trouble and needs a huge cash infusion of which nobody is willing. Investors are dumping bonds and stock like crazy because they do not want to be long over the weekend

(courtesy zero hedge)

Spain’s Sixth Largest Bank Crashes Most In 28 Years On Liquidation Fears

Even as attention has turned once again to Italy as the next possible source of European financial contagion, Spain’s sixth largest bank has found itself in freefall over the past few days as concerns grow that the bank may be liquidated unless a last-minute buyer, or source of capital, emerges. In addition to the shares of Banco Popular crashing as much as 27%, the biggest intraday drop since 1989, its perpetual bonds have likewise been in freefall mode as investors liquidate securities which “they do not want to hold going into the weekend”, according to Ignacio Cantos, of ATL Capital in Madrid, quoted by Bloomberg.

The latest twist in the ongoing saga of the bad debt-saddled Spanish bank was revealed yesterday, when El Confidencial reported that Banco Popular asked Deutsche Bank to come up with a plan for the troubled Spanish lender to raise capital after its previous adviser Morgan Stanley resigned. The paper reported that Popular was testing investor appetite for a capital increase of between €4 billion and €5 billion if its plans to find a merger partner or buyer fail. So far nobody has stepped up to throw more good money after bad. 

Earlier in the week, the European banking watchdog, the Single Resolution Board (SRB), warned European Union officials that Popular may need to be liquidated, or bailed-in, if it fails to find a buyer, according to Reuters.

The underlying problem with Popular, as with most European banks, is familiar: the bank has been unable to sell €37 billion of soured property loans fast enough, and is racing to find a partner after Spain’s Economy Minister Luis de Guindos declined to consider a public bailout, while a capital increase has faced resistance from existing shareholders. The bank has said previously it could extend a June 10 deadline for binding takeover offers. So far none have emerged.

Meanwhile, the government urged citizens to keep “complete calm”, and not to sell because, get this, the bankpassed its stress tests.  (HARVEY: ???)Alas, “passing stress tests” did not help either Bankia or Dexia, two other famously insolvent European banks. From Reuters:

The solution for troubled Spanish lender Banco Popular is either a capital raise or a sale, a spokesman for Spain’s government said on Friday, adding that it was not worried about the situation.”

 

(Popular) passed its stress tests … it is in the process of a sale or a capital raise, nothing more. Complete calm. We are going to wait for the next steps,” Inigo Mendez de Vigo told a news conference.

Of course, the alternative to “complete calm” is a bank run, which Spain – and the ECB – would prefer to avoid.

For those who are unfamiliar with the developing situation, Bloomberg recently posted a handy Q&A on what may soon be Europe’s biggest bank liquidation in years.

Banco Popular Espanol SA’s admission that it’s short of capital and may consider a sale caused turmoil in Spain’s banking industry, which wants to think its real-estate problems are in the past. Popular, with a balance sheet still groaning under the weight of toxic property assets, is a throwback to the boom-to-bust cycle that forced Spain to seek a bailout for its banking industry in 2012. A potential sale of Popular would hand its competitors the chance to buy a bank with a strong franchise in lending to small and medium-sized businesses. It also would allow the government to claim that Spain’s banking clean-up is finally complete.

 

1. Why is Popular so unpopular?

 

Short answer: real estate. Popular’s woes stem from the loans it made in the years before a housing crash pitched the economy into a five-year slump starting in 2008. Founded in 1926, Popular had prided itself on efficient management that made it one of the world’s most profitable banks. That story started to sour in 2007 as confidence in Spanish real estate ebbed away; Popular’s shares began a long slide from their peak to lose 98 percent of their value. Popular shunned the chance to take state aid in 2012, when a stress test uncovered a capital shortfall. Instead, it embarked on a series of share sales that so far have raised 5.5 billion euros. Angel Ron, who had run Popular as chairman since 2004, left the bank earlier this year to make way for Emilio Saracho, a former JPMorgan Chase & Co. vice-chairman charged with stemming losses and fixing its balance sheet.

 

2. Is a sale the likely next step?

 

Nobody knows for sure. Saracho told shareholders in April that the bank would need to raise more capital, with another option being a corporate transaction. Popular said earlier this month that some banks had expressed interest in combining businesses and that it had asked competitors to say whether they’d be interested in buying it. The bank says no final decision has been made about a sale versus other ways to raise money.

 

3. Who could buy Popular?

 

Banco Santander SA has hired Citigroup Inc. to analyse a purchase, people familiar with the plans said this month, while Banco Bilbao Vizcaya Argentaria SA is working with Rothschild to analyze the deal, according to newspaper Expansion. Economy Minister Luis de Guindos has said that Bankia SA, which is state-owned after being bailed out in 2012, is also looking.

 

4. What obstacles are there to a sale?

 

Despite years of taking charges to cover real-estate losses, the lender’s attempts to mop up all the soured assets are far from complete. It still has 37 billion euros of non-performing assets, booked a 3.6 billion-euro loss in 2016 and a further 137 million euros loss in the first quarter. Any bank that buys Popular would itself have to raise a lot of capital to absorb it. Societe Generale SA said in a report that Santander would need 12.5 billion euros, BBVA 9.3 billion euros and CaixaBank SA 7.5 billion euros. At 7.33 percent, Popular’s fully-loaded CET1 ratio, a measure of solvency, is one of the weakest in Western Europe.

 

5. Is there any urgency?

 

There could be. The bank said its first-quarter results, published May 5, showed only a modest 1 percent drop in customer deposits. Even so, Popular’s plight has generated plenty of headlines in the Spanish press since then, perhaps unnerving customers. The bank and its advisers may want to try to resolve its future before Spain’s long August break. A coupon payment on Popular’s riskiest bonds due in July is another focus of attention for investors. The bank has said it will make the payment as scheduled. It will cost about 30 million euros, based on Bloomberg data.

 

6. What’s attractive about Popular?

 

It has about 34 billion euros of performing loans to small and medium-sized enterprises, a high-margin business based on carefully crafted personal relationships. And who doesn’t like a bank with a bit of mystery to it? Popular is well-known in Spain for having close links to the Roman Catholic organization Opus Dei. The bank itself doesn’t say much on the subject. However, when Luis Valls, a former co-chairman Popular died in 2006, the lender said he had been a member.

end

 

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6 .GLOBAL ISSUES

For the first time, the balance sheet of the Bank of Japan and the ECB exceed that of the Fed.  We know know that the Fed wants to roll off its balance sheet and not repurchase debt with dollars earned.  In essence this is tightening and with both the Bank of Japan lessening its purchases along with the ECB, what is going to fuel the global stock markets?

 

(courtesy zerohedge)

BoJ, ECB Balance Sheets Exceed The Fed’s For First Time Ever – What Happens Next?

For the first time in history, both the ECB and BoJ balance sheets have grown larger than the Fed’s.

The BoJ’s balance sheet topped the JPY500tn (USD4.48tn) mark at the end of May, central bank data showed today.

 

Furthermore, the latest data also shows the pace of the increase in BoJ’s holdings has slowed considerably in recent months.

At the end of May, the central bank’s holding was up JPY70.7tn from a year earlier, more than 10% below the BoJ’s official guideline of an annual increase of JPY80tn.

However, its the ECB and BOJ buying that is keeping the world’s equity markets alive since The Fed ended QE3.

So what happens next?

The Fed has attempted to make the market believe that it will run down the balance sheet as it matures… Which will be a lumpy tightening in monetary conditions…

And unless someone steps up, the global central bank balance sheet will collapse, and that will not end well for global equity markets.

Is this what happens next?

remember last time BoJ tried to reduce balance sheet?

or will the world lose faith in its reserve currency before?

end

7. OIL ISSUES

WTI holds its value just below $48.00 per barrel and yet USA oil rig counts rise for the 20th consecutive week which should increase production exponentially

(courtesy zero hedge)

 

WTI Holds Below $48 As US Oil Rig Count Rises For 20th Week In A Row

Leading crude production to 21-month highs, the number of US oil rigs rose (Up 11 to 733) for the 20th straight week to its highest since April 2015.

  • *U.S. OIL RIG COUNT UP 11 TO 733 , BAKER HUGHES SAYS :BHI US

 

Lower 48 production continues to rise… to the highest in 21 months…

With Permian leading the way…

And given the lag to the surge in rig counts, Rystad Energy says U.S. crude production will exceed 10 million barrels a day before year-end, echoing sentiment from other analysts. 

Which helps explain the post-OPEC-Deal drop…

 

And while prices keep falling, oil permabulls keep pushing… As Bloomberg reports, contrary to the “sea of negative sentiment” in crude markets, global inventories should fall at a higher pace in the second half of 2017,Astenbeck Capital Management LLC’s Andy Hall says in latest investor letter. U.S. inventories continue to drop and EIA data suggest production gains have been slower than initially estimated, Hall says in letter obtained by Bloomberg News. OPEC’s extension of supply cuts will focus on exports this time, not just production, and thus drive down stockpiles in areas that drive the market.

“Inventories will fall at an accelerating rate over the balance of the year even with continued strong growth in U.S. oil production,” Hall writes.

 

“The unprecedented cooperation between Saudi Arabia and Russia to ‘do whatever it takes’ should not be underestimated.”

He may be right this time… or not, but what’s another margin call between friends?

8. EMERGING MARKET

end

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

Euro/USA   1.1217 UP .0004/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 ALL IN THE GREEN 

USA/JAPAN YEN 111.49 UP 0.041(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 1.2849 DOWN .0035 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

USA/CAN 1.3531 UP .0016 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS FRIDAY morning in Europe, the Euro ROSE by 4 basis points, trading now ABOVE the important 1.08 level  RISING to 1.1217; 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 2.91 POINTS OR .09%     / Hang Sang  CLOSED  UP 114.83 POINTS OR 0.44% /AUSTRALIA  CLOSED UP 0.84% / EUROPEAN BOURSES OPENED ALL 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 FRIDAY morning CLOSED UP 31735 POINTS OR 1.60%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 114.83 POINTS OR 0.44%  / SHANGHAI CLOSED UP 2.91 POINTS OR .09%   /Australia BOURSE CLOSED UP 0.84% /Nikkei (Japan)CLOSED UP 317.25 POINTS OR 1.60%    / INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: 1263.20

silver:$17.20

Early FRIDAY morning USA 10 year bond yield: 2.209% !!! UP 0 IN POINTS from TUESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.861, UP 0  IN BASIS POINTS  from THURSDAY night.

USA dollar index early THURSDAY morning: 97.25 UP 5  CENT(S) from THURSDAY’s close.

This ends early morning numbers FRIDAY MORNING

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And now your closing FRIDAY NUMBERS

Portuguese 10 year bond yield: 3.035%  UP 5 in basis point(s) yield from THURSDAY 

JAPANESE BOND YIELD: +.055%  UP 4/5  in   basis point yield from THURSDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.573%  UP 1 IN basis point yield from THURSDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.261 UP 1/2   POINTS  in basis point yield from THURSDAY 

the Italian 10 yr bond yield is trading 70 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.274% DOWN 3 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR FRIDAY

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

Euro/USA 1.1271 UP .0059 (Euro UP 59 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 110.42 UP  1.031 (Yen UP 103 basis points/ 

Great Britain/USA 1.2843 UP 0( POUND UP 0 basis points)

USA/Canada 1.3488 DOWN .0029 (Canadian dollar UP 29 basis points AS OIL FELL TO $47.95

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This afternoon, the Euro was UP by 59 basis points to trade at 1.1215

The Yen ROSE to 110.42 for a GAIN  of 103  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 0  basis points, trading at 1.2843/

The Canadian dollar ROSE by 29 basis points to 1.3488,  WITH WTI OIL FALLING TO :  $47.95

The USA/Yuan closed at 6.81000/
the 10 yr Japanese bond yield closed at +.055% UP 4/5  IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 6  IN basis points from THURSDAY at 2.154% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.812  DOWN 6 in basis points on the day /

Your closing USA dollar index, 96.75 DOWN 45 CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED UP 3.86 POINTS OR 0.05%
German Dax :CLOSED UP 158.02 POINTS OR 1.25% 
Paris Cac  CLOSED UP  24.74 POINTS OR 0.47% 
Spain IBEX CLOSED  UP 24.90 POINTS OR 0.23%

Italian MIB: CLOSED  DOWN 7.83 POINTS/OR 0.06%

The Dow closed UP 62.11 OR 0.29%

NASDAQ WAS closed UP 58.97 POINTS OR 0.94%  4.00 PM EST
WTI Oil price;  47.95 at 1:00 pm; 

Brent Oil: 50.09 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  56.62 DOWN 22/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD FALLS T0  +0.274%  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:$47.77

BRENT: $50.06

USA 10 YR BOND YIELD: 2.159%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.81%

EURO/USA DOLLAR CROSS:  1.1279 UP .0066

USA/JAPANESE YEN:110.36  DOWN 1.084

USA DOLLAR INDEX: 96.68  DOWN 52  cent(s) ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2882 : UP .0004  OR 4 BASIS POINTS.

Canadian dollar: 1.3476 DOWN 39 BASIS pts 

German 10 yr bond yield at 5 pm: +.274%

END

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

TRADING IN GRAPH FORM FOR THE DAY

Stocks Hit Record Highs; Shrug Off “Transitory” Covfefe In US Macro Data

So stocks looked on the bright side of life’s terrible jobs data…

 

So this happened today… bad news was great news for stocks as shitty jobs data capping a dismal week for US macro sent equity markets to record highs…

 

It seems fairly clear that Risk-Parity leverage is running the show here on the back of 100s of billions of central bank dollars each month…

 

“Transitory” collapse in macro data…

 

Ugly week for ‘hard’ and ‘soft’ data… (soft data is down 6 of the last 7 weeks to six month lows)

As Bloomberg’s Vince Cignarella notes, a big downside miss by the May jobs report failed to dent probabilities the Fed will hike rates in June, but slow wage growth and tempered inflation reduced odds of further hikes in 2017. While a Fed rate hike in less than two weeks appears virtually baked in, FX and fixed income traders have not fully bought in. The dollar weakened, with the JPY reaching a two-week high, and Treasuries advanced with precious metals after the data showed non-farm payrolls rose by 138,000 jobs vs estimates of 182,000; April’s figures were also revised lower by 37,000 jobs. Some of the weakness in the jobs report may have been due to difficulties adjusting the data for the end of the school year, economists said. All three major stock averages continued to advance.

All Greed, No Fear…

The short week started off slow, then exploded into a short-squeeze frenzy as US macro data tumbled…

 

Stocks hit record highs led by Utes and healthcare (not exactly ‘bullish’ growthy ideas) as Financials and Energy suffered…

 

VIX pressed down to 9.58 intraday lows (among the top 10 lowest prints ever)…

 

Trannies and Small Caps bounced off unchanged for the year but Nasdaq just keeps soaring…

 

Factor Tilts immediately after Trump’s election are being unwound dramatically…

 

Bank stocks stumbled on the week (MS was unch but JPM, GS, and BAC all down 3-4%)…

 

as the yield curve plunged…

 

While 2Y was unch on the week, the rest of the Treasury complex surged higher in price with 30Y yields 11bps tumble the biggest weekly drop since July 2016 (right after Brexit)

 

The Treasury curve has collapsed with 2s30s at its flattest since early September (and 2s10s at its flattest since early October).

 

The Dollar Index fell to its lowest weekly close since before the election

 

EURUSD was the week’s best performer (among the majors), just outperforming Yuan strength…

 

Gold rose for the 4th week in a row with some notable intraday surges…

 

Short week ended badly for WTI and RBOB… extending losses post-OPEC…

 

Finally, there’s this… GBTC (Bitcoin Trust) is trading at a Bitcoin equivelent price of $5110!!! a 131% premium to NAV!!?? Borrow anyone?

END

 

JOBS REPORT

Gold rises on a terrible jobs report where only 138,000 jobs were added in May.  April was revised much lower and the most important component: wages also disappointed.

(courtesy zerohedge)

Huge Miss: Only 138K Jobs Added In May; April Revised Much Lower As Wages Disappoint

As previewed last night, the jobs “whisper” risk was to the downside, and in what was a very disappointing print released moments ago by the BLS, the whisper was spot on with only 138K jobs added in May, far below the 185K estimate, and below the lowest estimate of 140K. This was the second lowest print going back all the way to last October. Additionally, April’s big beat of 211K was revised substantially lower to only 174K, suggesting that any expectation the Fed may have had of “evidence” the recent economic slowdown was transitory was just crushed.

The change in total payrolls for March was revised down from +79,000 to +50,000, and the change for April was revised down from +211,000 to +174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported. This means that over the past 3 months, job gains have averaged 121,000 per month, a far cry from the 181,000 average jobs added over the past 12 months.

Not helping the Trump agenda, manufacturing jobs declined sharply, posting the weakest growth of 2017.

Looking at the Household survey revealed an even uglier picture as the number of employed workers declined by 233K to 152,923, the lowest since March.

Even worse for wage watchers, while the average hourly earnings rose by 0.2% monthly, the annual increase also missed printing at 0.2%, with April revised from 0.3% to 0.2%, while the annual increase was 2.5%, also missing the expectations of a 2.5% print. This was the lowest annual increase in average hourly earnings since March 2016.

While there was a silver lining in the unemployment rate which declined again to 4.3% from 4.4%, a bigger problem emerged in the participation rate which took a big step lower from 62.9% to 62.7%.

More details from the report:

Total nonfarm payroll employment increased by 138,000 in May, compared with an average monthly gain of 181,000 over the prior 12 months. In May, job gains occurred in health care and mining.

 

Employment in health care rose by 24,000 in May. Hospitals added 7,000 jobs over the month, and employment in ambulatory health care services continued to trend up (+13,000). Job growth in health care has averaged 22,000 per month thus far in 2017, compared with an average monthly gain of 32,000 in 2016.

 

Mining added 7,000 jobs in May. Employment in mining has risen by 47,000 since reaching a recent low point in October 2016, with most of the gain in support activities for mining.

 

In May, employment in professional and business services continued to trend up (+38,000). The industry has added an average of 46,000 jobs per month thus far this year, in line with the average monthly job gain in 2016.

 

Employment in food services and drinking places also continued to trend up in May (+30,000) and has grown by 267,000 over the past 12 months.

 

Employment in other major industries, including construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, and government, showed little change over the month.

 

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in May. In manufacturing, the workweek also was unchanged at 40.7 hours, while overtime edged up by 0.1 hour to 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.6 hours.

 

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.22. Over the year, average hourly earnings have risen by 63 cents, or 2.5 percent. In May, average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents to $22.00.

 

The change in total nonfarm payroll employment for March was revised down from +79,000 to +50,000, and the change for April was revised down from +211,000 to +174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported. Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors. Over the past 3 months, job gains have averaged 121,000 per month.

 

 

end

 

Trading right after the jobs report: 10 yr bond rate plunges to 2.156%, the dollar sinks as does the stock market.  Gold and silver gain

(courtesy zerohedge)

Bond Yields Plunge Through Key Technical Level As Dismal Jobs Data Sinks Stocks, Dollar

The market’s reaction to the dismal jobs data was uniform in its disappointment – while June rate-hike odds remain near 100%, September dipped a little (at just 30%), the dollar dropped, stocks fell, and bond yields tumbled.

‘Hard’ datas is collapsing again to 13 month lows as soft data catches down…

 

And September rate hike odds are stuck around 30%…

10Y Yields tumbled to 2.15 intraday – the lowest level since November 10th 2016… and broke below the key 200-day moving average

 

The Dollar Index tumbled, testing the 2017 lows…

 

Gold jumped to 6-week highs, bouncing off its 50dma…

 

And stocks double-dipped back into the red…

 

END

AND NOW THE REAL STORY ON THE JOBS REPORT

 

THE NUMBER OF PEOPLE NOT IN THE LABOUR FORCE SOAR BY A HUGE 608,000 WHICH EXPLAINS WHY THE UNEMPLOYMENT RATE LOWERED FROM 4.4 DOWN TO 4.3%

(courtesy zero hedge

People Not In Labor Force Soar By 608,000

While the payrolls report (and wage gains) was an unmitigated disaster for anyone seeking “evidence” of an economic rebound (i.e., the Federal Reserve), there was some good news in the Unemployment rate which declined from 4.4% to 4.3%, the lowest going back to 2001.

There is just one problem with the above “silver lining”: the unemployment rate declined for all the wrong reasons, because contrary to expectations, the Household Survey reported that the number of employed Americans actually declined by 233K to 152.923 million, the lowest going back to February.

So how could the unemployment rate decline as the number of employed Americans tumbled? Simple: the labor force plunged, with the BLS reporting that the total labor force declined by 429,000 Americans in the month of May. This was the result of a whopping 608,000 American exiting, as the number of people not in the labor force soared to 94.983 million, up from 94.375 million in April.

As a result, the labor participation rate tumbled once again, sliding to 62.7%, the lowest print since 2016.

In sum, between the huge payrolls miss and downward revisions, the disappointing wage growth, and the droves of people leaving the labor force, this may have been one of the ugliest jobs reports in recent years

END

Here is another metric that Janet will not like:  full time jobs tumble by 367,000 the biggest in 3 years: this was offset by a gain of 133,000 part time jobs.

Construction jobs lowered by 1,000 but our good old bartenders and waiters added another 30,000 jobs despite massive closings of restaurants.

(courtesy zero hedge)

Full-Time Jobs Tumble By 367,000, Biggest Drop In Three Years

While on the surface, the payrolls report, the wage growth and the unemployment rate (which dropped for all the wrong reasons) were disappointing, a quick look inside the underlying data reveals even more troubling trends, such as that in addition to the number of employed workers dropping by 233K according to the household survey, the composition of these jobs raised even more red flags because in May the US lost 367,000 full time jobs offset by the gain of 133,000 part time jobs.

Putting this number in context, it was the biggest drop in full-time jobs going back to June 2014.

And in this context, we are happy to announce that while manufacturing jobs once again declined by 1,000, the waiter and bartender recovery continues to hum along, with 30,000 workers added in “food services and drinking places.”

end

 

Two thirds of all the gains this month was in the minimum wage jobs such as bartenders and waiters

(courtesy zerohedge)

Where The May Jobs Were: It Was All About Minimum Wage Again

If May was supposed to be the “tiebreaker” month, after a disastrous March and a solid (if now downward revised) April, then the US economy is not doing well: with only 138K jobs added in the past month, while over 200K actual jobs were lost (per the Household Survey), it was no surprise that the biggest missing link of the so-called recovery, wage growth, was simply not there again.

How is it that with the labor market supposedly near full employment, and the unemployment rate sliding to a post 2001 low of 4.3%, wages simply can not rise?

The answer was once again to be found in the quality of jobs added because in addition to the previously noted plunge in full-time jobs, the biggest in three years, the granular detail from the BLS revealed that all the jobs growth was again in low or minimum-wage sectors such as education and health, which added 47,000, leisure and hospitality up 31,000 jobs of which food services and drinking places workers, aka waiters and bartenders, added another +30,300. Temp help services, by definition the lowest paying job category, added another 12,900 jobs. Combined, these three minimum-wage categories accounted for two-thirds of all April job gains.

Looking at retail workers, which have suffered steep job losses recently as a result of the widespread shuttering of bricks-and-morter outlets, the BLS revised the reported rebound in the last two months, converting it into a job loss. As a result, retail workers have dropped for 4 consecutive months, and at 15.836 million, have dropped to 11 month lows.

Another notable observation: after rising by 11,000 last month, manufacturing workers declined once again, down 1,000 jobs, the first drop in the sector since last October.

Some further observations on the job breakdown, courtesy of Southbay Research:

  • Healthcare (+32K): As expected, with ACA repeal dead, Healthcare hiring returns
  • Leisure/Hospitality (+31K): As expected, restaurant demand kicks in
  • Professional Services ex temp (+25K): As expected, relatively mild Temp worker demand
  • Construction (+11K): Mild weather pulled in payrolls, leaving little for May
  • Financial (+11K): Housing boom continues to drive financial payrolls
  • Transportation (+4K): Supply chain pressure and manufacturing pause slowed demand for trucking
  • Manufacturing (-1K): Factories hit the pause button (Trump rhetoric not yet translating into actual activity boost)
  • Wholesale (-2K): Consistent with general macro trends (lack of inflation, retail supply chain pressure, inventory pressure)
  • Retail (-6K): Grocery store and brick-and-mortar store pressure

 

The complete breakdown of changes in key job categories in April and May is shown below.

just look at the graph below and marvel:

(courtesy zerohedge)

With 87 Months Of Consecutive Job Gains, This Is By Far The “Best” Job In The U.S.

Well over 5 years ago, we first dubbed the economy under Barack Obama as the “Waiter and Bartender recovery”, because while most other job categories had grown at a moderate pace at best, the growth in the category defined by the BLS as “Food Service and Drinking Workers” has been nothing short of spectacular.

How spectacular? As the chart below shows, starting in March of 2010 and continuing through April of 2017, there have been 87 consecutive month of payroll gains for America’s waiters and bartenders, an unprecedented feat and an all time record for any job category. Putting this number in context, total job gains for the sector over the past 7 years have amounted to 2.378 million or just under 15% of the total 16.4 million in new jobs created by the US over the past 87 months.

As a tangent, putting the “waiter and bartender” recovery in the context of America’s manufacturing sector, the following chart shows that while nearly 816,000 “food service and drinking places” jobs were created since 2014, over the same period the number of manufacturing jobs created has been just 107,000. Also, after six months of increases, in May manufacturing jobs posted their first drop since last October.

Source: BLS

end

(Goldman Sachs/Hatzius/zerohedge)

238,000 jobs.  It is easy to explain the Birth Death model.  If one loses his job, it is “death”.  However the BLS believes that these guys become entrepreneurs and start new businesses and hire more people that are unemployed.  This is the “birth”.  It is total made up.

(courtesy Dave Kranzler/IRD)

There IS No B.S. Like The BLS

 

 

Bureau of Labor Statistics. It has an Orwellian ring to it. I guess it should stand for “Bureau of Lying Statistics.” A quick glance at today’s non-farm payroll report suggests that the economy likely lost hundreds of thousands of jobs in May. The headline 138k number was well below Wall St’s consensus estimate and below even the lowest estimate (140k).

The highly deceitful “Birth/Death” model gave the BLS 238k “newly created” jobs from alleged new business formation in excess of jobs lost from failed businesses in May. This number is shown before it’s sent through the BLS’ “X-13ARIMA-SEATS software developed by the U.S. Census Bureau.” No one knows exactly how that statistical sausage grinder produces the alleged jobs added and lost by new business formation – not even the Census Bureau. Then that number is blended into the overall headline number.

In truth, it’s quite likely that the U.S. economy lost jobs in May. A report showing less working age people employed would be a better fit with the state of the economy as reflected by private-sector reports, such as retail sales and construction/capital formation spending. The BLS covers up this fact by “finding” a large number of “new” part-time jobs to offset the loss of 367,000 full-time jobs.

And for its coup de grace, the BLS reports that 608,000 people in the working age population decide to stop looking for a job, for whatever reason, and quit working. They are no longer considered to be part of the labor force. This concept makes absolutely no sense when privately-generated surveys show that less than 50% of all households do not have the ability to write a check for $500 in the event of an emergency. Perhaps 608,000 people just decided that they were tired of buying food and paying bills and quite working altogether.

Regardless of how you want to slice and dice the phony numbers, the “labor force participation rate” fell to 62.7% of the working age population. This means that 37.3% of the entire U.S. population between the ages of 15 and 64 decided that they couldn’t be bothered with working or looking for a job. That metric alone completely invalidates anything the BLS reports about the U.S. “employment situation.” Perhaps a better title for the monthly report would “The Government’s Interpretation of U.S. Employment.”

http://investmentresearchdynamics.com/there-is-no-b-s- like-the-bls/

 

end

A bloodbath in the USA auto sector as inventories climb despite the huge incentives given out already in May. The auto sales is the lowest in the past 3 years.  The dealers are stuffed to the gills in autos

(courtesy zerohedge)

Auto Bloodbath: Lowest Domestic Auto Sales In Three Years Despite Record Inventories And Incentives

After abysmal March and April prints and growing speculation on Wall Street that auto sales are looking less like a “plateau” (Ford’s term) and more like a debt-fueled bubble on the verge of a “2007-like” collapse (Bloomberg’s term), analysts were looking toward May auto sales for signs of hope. Unfortunately, the “hope” fizzled for the 5th straight month as overall auto sales declined again, with domestic light vehicles sales printing at an annualized 12.59 million,the lowest sales number going back more than three years, with GM missing badly even as its dealer inventory rose to a post-bankruptcy record “channel stuffing” high, while those car makers who did beat expectations, did so by using record incentives and discounted sales to rental and other fleet customers (such as Ford).

Here’s the math: domestic car sales continued their decline on a year-over-year basis, although there was a silver lining within SUVs and pickup trucks, which rose for many manufacturers. May car sales came in at an annualized 4.50 million units (according to Stone McCarthy calculations), compared to April’s pace of 4.80 million, and last May’s 4.98 million. Light truck sales declined in May to 8.09 million compared to the 8.32 million selling pace reached in April, and below the 8.13 million units sold a year ago. In total, May domestic light vehicle sales fell to 12.59 million units, below expectations and far below April’s 13.12 million selling pace. In fact, as shown in the chart below (blue column) this was the worst monthly print going back more than three years.

This was the worst six month drop in domestic light vehicle sales going back to the depths of the financial crisis.

A breakdown in units by OEM, shows another similarity to 2007: while domestic car sales plunged by almost 8%, light truck sales continued to grow as more Americans once again buy SUVs instead of sedans, a growing problem for Hyundai, which saw a 19% drop in its car sales (even if its light truck sales also tumbled).

While every US automaker posted an annual decline, one name stood out, Ford, which reported a 2.3% increase in total light vehicles sold. There was a reason for that: without discounted deliveries to bulk customers, Ford’s sales would have dropped in May, as actual consumers cut back on purchases.

Describing the May number, Jessica Caldwell, executive director of Edmunds, said “it’s a bit of smoke and mirrors” as car makers “really pushed the deals over the holiday weekend to prop up their May numbers.”

According to Bloomberg data, the industrywide selling rate including imports, slipped in May to about 16.8 million light vehicles, compared with 17.2 million a year ago. This would mark the third straight month of a sales pace short of 17 million, which last happened in 2014, and the fifth months in a row of declines. The ongoing slump reinforces estimates for the U.S. auto market’s first annual contraction since 2009 while on a year-over year basis, the Y/Y decline was the worst since 2011.

Auto

 

There’s more bad news.

All of the above numbers would have been far worse if not for generous incentives, and automakers spending what amounted to a record sum on incentives to support slumping sales and clear growing dealer inventory. According to J.D Power, incentive spending reached a record of $3,583 per vehicle in May.

And yet, despite all that discounts and incentives, inventories keep growing, and in May the average number of days a vehicle spends on dealers’ lots has topped 70 for the first time since 2009, during the depths of the industry’s crisis. “Continued elevated incentives reflect the challenges of balancing record levels of inventory and are likely to remain elevated unless production is adjusted to meet consumer demand,” said Deirdre Borrego, senior vice president of automotive data and analytics at J.D. Power.

As Bloomberg notes, “while a pace of more than 16 million is historically strong and plenty profitable, slower sales have saddled automakers with too much inventory and precipitated bigger discounts. “We will see more production cuts, particularly in passenger cars,” Autotrader’s Michelle Krebs said. And nowhere will the cuts be more acute than at GM, which as reported earlier ended May with a record 963K units in dealer inventory, or 101 days of supply.

“After seven years of growth, sales were bound to reach a plateau” Krebs added, and despite OEMs’ refusal to accept reality, what happens next is clear: it’s all downhill from here.

END

After reporting on the disaster for the big auto manufacturers, Hyundai has not escaped the damage:

(courtesy WolfStreet/WolfRichter)

 

Haunting Photos of #Carmageddon: Hyundai Gets Crushed, as GM, Ford, Others Struggle

Factory-fresh Hyundai cars stored on vast new gravel lots near the Mexican border.

Industry experts had lowered their forecasts for May auto sales, having been overoptimistic every month this year, always figuring that there would be a year-over-year sales increase, when in fact sales fell every month. So for May, they became practically gloomy, but not gloomy enough.

J.D. Power and LMC Automotive forecast that new vehicle sales in May would inch up 0.5% year-over-year to 1.54 million cars and light trucks. Edmunds predicted that sales would edge up 0.3% to 1.53 million units. And Kelley Blue Book forecast that sales would be essentially flat year-over-year at 1.525 million:

And this is what the industry got:

  • Total new vehicle sales fell 0.5% in May to 1.519 million light cars and trucks, according to Autodata  (number of vehicles sold and delivered by dealers to their customers, or delivered by automakers to their large fleet customers).
  • The fifth month in a row of year-over-year declines.
  • Year-to-date sales are down 2%.
  • New car sales plunged 9.3% to 548,000 and are down 11% year-to-date.
  • New truck sales rose 6% to 935,170 and are up 4.7% year-to-date. After the April disaster for pickups, Chevy dealers offered discounts of $12,000 on Silverado pickups and Ford dealers offered discounts of $10,000 or more on 2017 model-year F-series pickups and over $14,000 on 2016 F-series pickups – which shows just how fat profit margins are on pickups.
  • The Seasonally Adjusted Annual Rate of sales (SAAR) in May fell 3% year-over-year, to 16.66 million light cars and trucks, the third month in a row below the 17-million mark.
  • The 71 days’ supply of unsold vehicles on dealer lots was the highest since July of collapse-year 2009.
  • Even the highest incentives for any May, estimated at nearly $3,600 per unit sold, could not stem the sales declines.

 

GM sales fell 1.4% to 237,156 vehicles, with car sales plunging 11.5% and light truck sales rising 3.1%. Fleet sales made up 19% of its total sales. Its inventories on dealer lots rose to 963,448 vehicles (from 935,758 in April), the highest since November 2007, at the eve of the collapse of the US auto industry. Days’ supply reached a dreadful 101 days.

Ford sales rose 2.3% to 240,250, with car sales down 10% and truck sales up 7.3%, after a massive surge in fleet sales (rental car companies and other fleets) that reached 34% of total sales, which is huge. Powered by these fleet sales, Ford edged past GM. Its inventory on dealer lots fell to 59 days’ supply, which is about normal.

Winners among the other large automakers:

  • Honda sales rose 0.9% to 148,414; cars down 3.6%, trucks up 5.9%.
  • Nissan sales rose 3.0% to 137,471; cars down 10.1%, trucks up 18.5%.
  • Subaru sales jumped 12.1% to 56.135, with car sales surging 20% (!) to 31,605.
  • Volkswagen Group sales (Volkswagen, Audi, Bentley, Lamborghini) rose 3.8% to 49,525.

And the losers:

  • Toyota sales fell 0.5% to 218,248; cars plunged 13.8%, trucks jumped 12.4%.
  • Fiat Chrysler sales down 0.9% to 193,040; cars plunged 24.3%; trucks up 3.9%. As an aside, Fiat sales dropped 16% to just 2,670 units.
  • Kia sales (which is part-owned by Hyundai) down 7%, to 58,507.
  • Daimler sales (Mercedes-Benz, Maybach, Smart) down 7% to 30,290.
  • BMW sales (BMW, Mini, Rolls Royce) down 11% to 29,987, but Rolls sales surged 49% to a phenomenal 109 units.
  • Mazda sales fell 8.1% to 26,047, as car sales plunged 33.7% and truck sales rose 26%.

And then there’s Hyundai.

The Korean automaker has been very successful in the US, after coming out of nowhere in 1986 with cheap cars that quickly acquired a reputation as being cheap. But overtime, cars became more reliable, nicer, and more expensive. And its product line moved upscale. Now in terms of volume, it is behind the Big Three American automakers and the Big Three Japanese automakers, but way ahead of the others.

Heavily focused on cars, it has run into the buzz saw of crashing car sales in the US. Its car sales plunged 19.1% in May to 39,567. Even its truck sales fell 7.5% to 20,444. Total sales sagged 15.5%, by far the worst among the major automakers.

And its inventory of unsold cars is piling up, but not only on dealer lots!

The photos below show Hyundai cars starting to fill up especially created gravel lots just north of the Otay border crossing to Mexico (Tijuana).

The photos were taken by a person who has been driving on this road (Alta Road) for many years, but who doesn’t want to be identified because the photos were taken in a delicate area near the border, leading to Donovan Prison and San Diego County jails. The road is marked with “no stopping,” “no parking,” and “no standing” zones, the source says.

“For 10 years there have been signs selling land with no takers, but in the last six months, acres of gravel lots are appearing where there was once chaparral,” the source said. “Now they’re filling them with factory-fresh Hyundais. The lots are getting bigger and bigger and the cars dustier and dustier.”

This photo shows one of the vast new gravel lots. Note the security lights. The first Hyundais have started to show up (click to enlarge):

Below is another lot that is filling up with Hyundais. The hills in the background are in Mexico. The cars go all the way to the left close to the structures of a prison complex.

“This is a closely watched area half a mile north of the triple fence at Otay,” the source said. “So photography is ‘discouraged’ by the ever present border patrol, police, sheriff, prison officers, and helicopter overflights,” the source said (click to enlarge):

Note the white foil still on the hoods and roofs of these cars. The foils are put on the cars at the factory to protect horizontal surfaces during transport. After an automaker delivers a vehicle to the dealer, it goes through dealer prep, a procedure required by the automaker, during which all protective foils are removed. That the foils are still in place means that these cars have not even been delivered to dealers but are stuck in the automaker’s distribution channel.

In other words, they’re not counted as “inventory on dealer lots.” They’re shadow inventory. They’re a sign of massive overproduction hitting an unexpected slowdown in sales.

No one stores brand-new cars on specially created gravel lots unless they absolutely have to because the dust and dirt will get into everything. This is reminiscent of what Asian automakers did during the financial Crisis with cars being offloaded at US ports and no place to go; they were piling up everywhere. This is not a good sign for Hyundai.

The #Carmageddon data is just relentless. Read…  Used Vehicle Trade-in Values Sink, Hit New Vehicle Sales

Trump finally asks the Supreme Court to restore his travel ban

(courtesy zero hedge)

Trump Administration Asks Supreme Court To Restore Travel Ban

Four months after threatening he would take his immigration travel ban all the way to the Supreme Courty, Trump’s administration did just that on Thursday night when it asked SCOTUS to revive his plan to temporarily ban travelers from six Muslim-majority nations after it was blocked by lower courts that found it was discriminatory.

“We have asked the Supreme Court to hear this important case and are confident that President Trump’s executive order is well within his lawful authority to keep the nation safe and protect our communities from terrorism,” Justice Department spokeswoman Sarah Isgur Flores said in a statement.

The American Civil Liberties Union, one of the legal groups challenging the ban, tweeted in response: “We’ve beat this hateful ban and are ready to do it again.”

The administration filed emergency applications with the nine high court justices seeking to block two different lower court rulings that went against Trump’s March 6 order barring entry for people from Iran, Libya, Somalia, Sudan, Syria and Yemen for 90 days while the U.S. government implements stricter visa screening, Reuters reported. The move came after the Richmond, Virginia-based 4th U.S. Circuit Court of Appeals on May 25 upheld a Maryland judge’s ruling blocking the order. The administration also filed a separate appeal in that case.

Among other considerations, the nine supreme court justices are set to weigh whether Trump’s harsh election campaign rhetoric can be used as evidence that the order was intended to discriminate against Muslims. Previously, the government had argued that the court should not take into account Trump’s comments during the 2016 U.S. presidential race since he made them before he took office on Jan. 20. But the appeals court rejected that view, saying they shed light on the motivations behind Trump’s order.

The SCOTUS decision will also be a test of the ideological sway of Trump’s recent conservative bench appointee, Neil Gorsuch. At least five votes are needed on the nine-justice court in order to grant a stay. The court has a 5-4 conservative majority, with Justice Anthony Kennedy – a conservative who sometimes sides with the court’s four liberals – the frequent swing vote. If the government’s emergency requests are granted, the ban would go into effect immediately.

Some more details from Reuters:

The court first has to act on whether to grant the emergency applications, which could happen within a fortnight. Then, the justices will decide whether to hear the government’s full appeal. The Supreme Court is not required to hear the case but is likely to due to its importance and the fact that the request is being made by the U.S. government.

 

The Justice Department has asked the court to expedite the case so that the justices could hear it at the beginning of their next term, which starts in October. That means, if the court allows the ban to go into effect, the final decision would be issued long after the 90 days has elapsed.

 

In the court filings, Acting Solicitor General Jeff Wall highlighted the unprecedented nature of courts second-guessing the president on national security and immigration. “This order has been the subject of passionate political debate. But whatever one’s views, the precedent set by this case for the judiciary’s proper role in reviewing the president’s national-security and immigration authority will transcend this debate, this Order, and this constitutional moment,” he wrote.

During the campaign, Trump campaign called for a “total and complete shutdown of Muslims entering the United States.” His administration has argued that the travel ban is needed to prevent terrorism in the United States.

Federal courts in both Maryland and Hawaii issued rulings suspending key parts of the ban. The appeals court in Virginia upheld the Maryland ruling. A San Francisco-based appeals court is currently considering the Hawaii case. The administration is asking the Supreme Court to throw out the injunction imposed in both cases.

end

 

As expected, Gymboree misses their interest payment and they will now prepare for bankruptcy filings.

(courtesy zero hedge)

Gymboree Misses Interest Payment, Prepares For Bankruptcy Filing

Another company on the infamous Fitch “retail death list” has taken its first step toward bankruptcy.

On Thursday, distressed children’s clothing retailer Gymboree elected not to make the interest payment due June 1 on its outstanding 9.125% notes due in 2018, Debtwire reported, with Moody’s downgrading the company to D from CC on Friday, as it does not expect Gymboree to make the interest payment, “or any other payments on its debt obligations, and sees a general default given ongoing lender negotiations.”

While not exactly news – the WSJ previewed the inevitable Chapter 11 at the beginning of May – a Gymboree bankruptcy filing is now assured over the next month, and certainly by July 1 when the grace period expires. In March, the company posted a $324.9 million loss for its fiscal second quarter; same-store sales fell 5% in the period while EBITDA crashed.

In early May, the WSJ reported that Gymboree was looking to close 350 of its 1,200 stores as part of a broader restructuring under Chapter 11 protection. Buckling under its debt, the company has been in talks with its lenders who may or may not agree on a prepackaged bankruptcy. According to the WSJ, the company has contacted firms known for liquidating inventories and other assets during store closures.

Gymboree was taken private in a $1.8 LBO buyout by Bain Capital in 2010, at which point the PE firm stripped out the assets, and loaded the company up with debt, $1.06 billion as of June 28, an amount company founder Joan Barnes described to Bloomberg as “horrendous.” Meanwhile, LTM EBITDA was cut by more than half from the mid-$60 million to negative most recently, explaining the upcoming filing. Walmart, Children’s Palace, and online retailers have put the squeeze on sales and margins. In recent years, Gymboree scrambled to raise cash by mortgaging its distribution center in 2015. In 2016, it sold Gymboree Play and Music to Zeavion Holding, a Bain investor. But in its fourth quarter, the company lost $325 million, and the CEO was sacked.

In an attempt to control the post-petition equity, Bloomberg reported that Bain Capital has been buying up Gymboree’s crashing bonds to have more leverage during the upcoming bankruptcy process and participate in what Bain hopes will be Gymboree’s revival. After plunging to 4 cents on the dollar in April, prices on Gymboree’s fulcrum 9.125s of 2018 have rebounded to roughly 8 cents.

Some still see value here: “It was one of the first aspirational brands to cater to the preschool market,” said founder Joan Barnes who is now an adviser to Gymboree Play and Music.

“There is no reason it can’t be again” Barnes added, although Jeff Bezos surely disagrees.

 

Meanwhile, other retailers who have filed for bankruptcy recently include Rue 21, Marsh and Central Grocers. According to Fitch, many more are coming.

  • Sears Holdings
  • Gymboree
  • Nine West Holdings
  • 99 Cents Only Stores
  • True Religion Apparel
  • Charlotte Russe
  • Charming Charlie
  • NYDJ Apparel
  • Vince.A
  • Claire’s Stores
  • Chinos Intermediate Holdings (J Crew Group)

end

Craig Wilson comments on Stockman’s Fox interview with Stuart Varney where he reiterates that the USA has no chance of reaching 4% growth with the mountain of debt incurred

 

(courtesy Wilson/Stockman/Daily Reckoning)

Stockman Warns Trump “Not A Snowball’s Chance In Hell Of Reaching 4% Growth”

Authored by Craig Wilson via DailyReckoning.com,

Stuart Varney, the Fox Business economic host, started out his discussion based around the presentation of Ronald Reagan’s presidency. In his initial discussion layout, Varney identified that during Reagan’s tax cut policy ranging from January 1983 until Reagan’s exit in 1989 the U.S economy grew at an annual rate of 4.8%.

When beginning his discussion with David Stockman, Varney asked about the various disagreements on what economic growth can experienced from tax cuts. Stockman directed on the 4.8% quote,

“That’s selective data. We had a massive and deep recession in 1981 and 1982. The Federal Reserve had to slam on the breaks because of double digit inflation because of President Jimmy Carter.”

“The economy then did bound back when Volcker finally got the inflation job done and took his foot off the break to allow the financial system to start expanding where tax cuts helped. Beyond that they were funded by massive deficits. We added $1.8 trillion so between the monetary ease and the massive deficits we got growth. We can’t ignore the reasons for that growth.”

When asked whether he would expect growth because of potential Trump tax cuts he urged,

“Absolutely not. There’s not a snowball’s chance because it didn’t happen then. If you take 1981 to 1989 as a whole, growth was 3.4%. That’s pretty good but the same growth rate that we had from 1953 to 1980 with no change.”

 

“What we have now is an economy that is so impaired with debt, currently reaching $64 trillion, not one or two. We have a government that is so buried in deficits and debt that it couldn’t do the kind of massive deficit finance tax cuts that accidently happened under Ronald Reagan. He wanted a balanced budget. He wasn’t a Keynesian, he tripled the national debt by accident.”

When Varney pressed back that it was the Democratic party members in Congress who would not negotiate on budgetary means Stockman told a different story. He began, “As the former Budget Director I have more credibility on that than anyone else. I can tell you right now that the Republicans wouldn’t cut it either.”

“All the things that Donald Trump wants to cut today I left in the vault at OMB as failed cuts from 1981. Republican’s wouldn’t cut it.”

 

 

end

Michael Snyder offers us his 12 signs that shows that we are now experiencing an economic slowdown

(courtesy Michael Snyder/EconomicCollapseBlog)

12 Signs The Economic Slowdown The Experts Have Been Warning About Is Now Here

By Michael Snyder, on June 1st, 2017

Since the election there has been this perception among the American public that the economy is improving, but that has not been the case at all. U.S. GDP growth for the first quarter was just revised up to 1.2 percent, but that is even lower than the average growth of just 1.33 percent that we saw over the previous ten years. But when you look even deeper into the numbers a much more alarming picture emerges. Commercial and industrial loan growth is declining, auto loan defaults are rising, bankruptcies are absolutely surging and we are on pace to break the all-time record for most store closings in a single year in the United States by more than 20 percent . All of these are points that I have covered before, but today I have 12 new facts to share with you. The following are 12 signs that the economic slowdown that the experts have been warning about is now here…

#1 According to Challenger, the number of job cuts in May was 71 percent higherthan it was in May 2016.

#2 We just witnessed the third worst drop in U.S. construction spending in the last six years.

#3 U.S. manufacturing PMI fell to an 8 month low in May.

#4 Financial stocks have lost all of their gains for the year, and some analysts are saying that this is “a terrible sign”.

#5 One new survey has found that 39 percent of all millionaires “plan to avoid investing in the coming month”. That is the highest that figure has been since December 2013.

#6 Jobless claims just shot up to a five week high of 248,000.

#7 General Motors just reported another sales decline in May, and it is being reported that the company may be preparing for “more job cuts at its American factories” .

#8 After an initial bump after Donald Trump’s surprise election victory, U.S. consumer confidence is starting to fall .

#9 Since Memorial Day, Radio Shack has officially shut down more than 1,000 stores.

#10 Payless has just increased the number of stores that it plans to close to about 800.

#11 According to the Los Angeles Times, it is being projected that 25 percent of all shopping malls in the United States may close within the next five years .

#12 Over the past 12 months, the number of homeless people living in Los Angeles County has risen by a staggering 23 percent.

And in case those numbers have not persuaded you that the U.S. economy is heading for rough times, I would encourage you to go check out my previous article entitled“11 Facts That Prove That The U.S. Economy In 2017 Is In Far Worse Shape Than It Was In 2016” for even more eye-popping statistics.

During a bubble, it can feel like the good times are just going to keep rolling forever.

But that never actually happens in reality.

The truth is that we are in the terminal phase of the greatest debt bubble of all time, and the evidence is starting to mount that this debt bubble has just about run its course. The following comes from Zero Hedge

A recurring theme on this website has been to periodically highlight the tremendous build up in US corporate debt, most recently in April when we showed that “Corporate Debt To EBITDA Hits All Time High.” The relentless debt build up is something which even the IMF recently noted, when in April it released a special report on financial stability, according to which 20% of US corporations were at risk of default should rates rise. It is also the topic of the latest piece by SocGen’s strategist Andrew Lapthorne who uses even more colorful adjectives to describe what has happened since the financial crisis, noting that ” the debt build-up during this cycle has been incredible, particularly when compared to the stagnant progression of EBITDA.”

Lapthorne calculates that S&P1500 ex financial net debt has risen by almost $2 trillion in five years, a 150% increase, but this mild in comparison to the tripling of the debt pile in the Russell 2000 in six years. He also notes, as shown he previously, that as a result of this debt surge, interest payments cost the smallest 50% of stocks in the US fully 30% of their EBIT compared with just 10% of profits for the largest 10% and states that “clearly the sensitivity to higher interest rates is then going to be with this smallest 50%, while the dominance and financial strength of the largest 10% disguises this problem in the aggregate index measures.”

The same report noted that net debt growth in the U.S. is quickly headed toward negative territory, and the last time that happened was during the last recession.

We see similar things when we look at the 2nd largest economy on the entire planet. According to Jim Rickards, China “has multiple bubbles, and they’re all getting ready to burst”…

China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year.

China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn.

The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account.

We just got the worst Chinese manufacturing number in about a year, and it looks like economic conditions over there are really starting to slow down as well.

Just like 2008, the coming crisis is going to be truly global in scope.

It is funny how our perspective colors our reality. Just like in 2007, many are mocking those that are warning that a crisis is coming, but just like in 2009, after the crisis strikes many will be complaining that nobody warned them in advance about what was ahead.

And at this moment it may seem like we have all the time in the world to get prepared for the approaching storm, but once it is here people will be talking about how it seemed to hit us so quickly.

My hope is that many Americans will finally be fed up with our fundamentally flawed financial system once they realize that we are facing another horrendous economic crisis, and that in the aftermath they will finally be ready for the dramatic solutions that are necessary in order to permanently fix things.

http://theeconomiccollapseblog.com/archives/12-signs-the- economic-slowdown-the-experts-have-been-warning-about-is- now-here

-END-

 

Let us wrap up the week with this offering, courtesy of Greg hunter of USAWatchdog

 

(courtesy Greg hunter)

Trump Destroys Climate Accord, Economic Update, Hillary in Denial

By Greg Hunter On June 2, 2017 In Weekly News Wrap-Ups

President Trump not only backed out of the so-called Paris Climate Accord, but he destroyed it. The climate accord is bad for America and the working class the Democrats now shun. Trump says it will cost millions of U.S. jobs and does not clean up the climate. China, one of the biggest polluters on the planet, gets to not only keep on polluting, but increase it along with India until the year 2030. Maybe this is why Trump says, “This Agreement is less about climate and more about other countries gaining a financial advantage over the United States.” The Left and propaganda MSM media have gone berserk, but still do not attack Trump on his facts, and that says it all. The Climate Accord, brokered by Obama, is a very bad deal for America. (For full Trump climate text, click here.) For Trump speech video, click here.)

The Economy has some bright spots under President Trump, but there is unpayable debt everywhere. This week, Moody’s and S&P downgraded the debt of Illinois to the lowest level ever for a U.S. state. Illinois debt is rated near “junk.” There is no wonder as the state now has a whopping $14.5 billion in unpaid bills. Other states, like California, are also in deep financial trouble. This is just a small part of the debt picture in America. Everywhere you look, from the Federal government to individual debt, is out of control.

Hillary Clinton went off on the DNC data operation. That’s rich from a person who used unprotected private servers and destroyed more than 30,000 emails after getting a subpoena to produce them to Congress. Hillary Clinton was speaking at the “Code Conference” this week and blamed the poor DNC data operation on her 2016 Presidential loss. Clinton also said the “DNC was Bankrupt,” and “On the edge of insolvency.” Clinton also claimed, “I had to inject money into it, the DNC, to keep it running.” Is Hillary Clinton in denial about her short comings or is she afraid of being shunned by the DNC after her second failed presidential bid?

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

Video Link

http://usawatchdog.com/trump-destroys-climate-accord- economic-update-hillary-in-denial/

After the Wrap-Up:

The “Early Sunday Release” will feature Clif High of HalfPastHuman.com. Clif will go into detail about his Latest data mining report. High talks about crypto currencies such as Bitcoin. Which crypto currencies will survive and which will die? Clif High dives deep to come up with the gold. By the way, when Bitcoin was several hundred dollars a unit High predicted that Bitcoin would take off in price. It is now more than $2,000 per Bitcoin.

-END-

 

Well that about does it for tonight

I will see you Monday night

h.

 

 

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