June 5/In a very surprise move, the CFTC lays charges against that junior trader from Deutsche bank/Gold up $3.10 and silver up 6 cents but gold/silver equity shares flounder/Another Islamist attack in London/Saudi Arabia, Egypt, Bahrain and others cut off all diplomatic relations with Qatar/Qatar has no land borders to which to obtain food/Banco Popular;s yield curve inverts plus record levels of default swaps indicate that this bank is in trouble/

GOLD: $1279.30  up $3.10

Silver: $17.55  up 6  cent(s)

Closing access prices:

Gold $1279.95

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: $1287.16 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  1279.70

PREMIUM FIRST FIX:  $7.46

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SECOND SHANGHAI GOLD FIX: $1288.54

NY GOLD PRICE AT THE EXACT SAME TIME: 1280.30

Premium of Shanghai 2nd fix/NY:$8.24

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1280.70

NY PRICING AT THE EXACT SAME TIME: $1281.25

LONDON SECOND GOLD FIX  10 AM: $1279.95

NY PRICING AT THE EXACT SAME TIME. $1280.15

For comex gold:

JUNE/

NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH:  57 NOTICE(S) FOR 5700  OZ. 

 TOTAL NOTICES SO FAR: 1912 FOR 191200 OZ    (5.9471 TONNES)

For silver:

For silver: JUNE

 229 NOTICES FILED TODAY FOR 1,145,000  OZ/

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

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

 

 

END

 

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

.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest ROSE BY 931  contract(s) UP to 206,681 WITH THE RISE IN PRICE OF SILVER THAT TOOK PLACE WITH FRIDAY’S TRADING (UP 25 CENT(S).   In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.0330 BILLION TO BE EXACT or 148% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 229 NOTICE(S) FOR 1,145,000  OZ OF SILVER

In gold, the total comex gold ROSE BY A HUMONGOUS 18,338 contracts WITH THE SHARP RISE IN THE PRICE OF GOLD ($9.80 with FRIDAY’S TRADING). The total gold OI stands at 463,152 contracts.

we had 57 notice(s) filed upon for 5700 oz of gold.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD:

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

Inventory rests tonight: 851.00 tonnes

.

SLV

Today: a huge changes in inventory/ a withdrawal of 1.371 million oz

THE SLV Inventory rests at: 339.605 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 ONLY 931 contracts UP TO 206,681 (AND now A LITTLE  CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787), WITH THE SHARP RISE IN PRICE FOR SILVER WITH FRIDAY’S TRADING  ( UP 25 CENTS). NO QUESTION THAT WE AGAIN HAD FAILED SHORT COVERING BY THE BANKERS ALONG WITH CONSIDERABLE BANKER DELTA HEDGING WITH THE STRONGER PERFORMANCE FROM SILVER .

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

 

3. ASIAN AFFAIRS

i)Late SUNDAY night/MONDAY morning: Shanghai closed DOWN 13.88 POINTS OR 0.45%   / /Hang Sang CLOSED DOWN 61.06 POINTS OR 0.24% The Nikkei closed DOWN 6.46 POINTS OR 0.03%/Australia’s all ordinaires  CLOSED DOWN  0.50%/Chinese yuan (ONSHORE) closed  UP at 6.8042/Oil UP to 47.48 dollars per barrel for WTI and 49.77 for Brent. Stocks in Europe OPENED ALL IN THE RED (EXCEPT LONDON)     ..Offshore yuan trades  6.7843 yuan to the dollar vs 6.8042 for onshore yuan. NOW  THE OFFSHORE IS MUCH STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS STRONGER 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

Japan is now holding evacuation drills as this country is growing quite concerned with North Korea’s missile tests

( MacSlavo/SHFTPlan.com

c) REPORT ON CHINA

The following commentary is an essential one for you to read from top to bottom.

In a nutshell, China is about to hit its Minsky Moment. I have underlined the essential parts

( zerohedge)

 

4. EUROPEAN AFFAIRS

i)ENGLAND/LONDON

Another Islamist attack: this time in London

( zerohedge)

ii)SPAIN

Banco Popular, the 6th largest Spanish bank has just witnessed it’s stock crash the most on record accompanied by a huge run on the bank.  It seems that no buyer  has come forth to buy the insolvent bank

( zero hedge)

iii)Germany/Turkey/NATO

This is not good;  Germany pulls its troops from strategic Incirlik airbase as relations between Germany and Turkey hit rock bottom:

 

(zero hedge)

 

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)Saudi Arabia/Egypt, UAE, Bahrain and Qatar

Wow!! this happened fast!.  Saudi Arabia, Egypt, UAE, and Bahrain have cut off diplomatic ties and shut all borders with Qatar blaming this tiny country of sponsoring terrorism.  It looks like Qatar is being scapegoated and this will cause oil to drop as OPEC will have less of an influence

( zero hedge)

ii)Nobody saw this coming.  The shock sends Qatari stock market down 8% as all land based border points have now been cut off. Seems that Trump is having a huge influence with respect to the terrorism sponsored by Iran.  However the pipeline link from Qatar through Saudi Arabia and onto Syria then the rest of Europe is not dead..

( zero hedge)

iii)Saudi Arabia shuts down Qatari based Al Jazeera for promoting plots of terrorist groups.

A question and answer session in this report is a must read..

(courtesy zero hedge)

iv)The trigger behind today’s Gulf Scandal:  Qatar paid Al Qaeda and Iran one billion to release members of the royal family who were hunting in Iraq.

( zero hedge)

 

6 .GLOBAL ISSUES

This did not last long: Vancouver’s real estate bubble returns:

( zero hedge)

7. OIL ISSUES

 

8. EMERGING MARKET

9.   PHYSICAL MARKETS

i)Trump is considering Marvin Goodfriend, an advocate of negative interest rates to the Federal Reserve Board.  My goodness!

( London’s Financial Times/GATA)

ii)What bozos!! Williams purges more comprehensive market rigging if they cannot obtain their 2% inflation gauge!

( Bloomberg/gata)

iii)India to tax gold by 3% on top of the import duties of 10%. This would cause  gold smuggling to rise even more than it is.
( Reuters/gata)

iv)Gold coins from the last of the Roman empire was discovered in the Netherlands

( DutchNews/Amsterdam/Netherlands/gata)

v)This is a surprise:  the CFTC launches lawsuits against the junior trader convicted of fraud and manipulation of the precious metals, namely gold and silver

( Ted Butler)

vi)An excellent commentary from Bill Holter as the touches just about all of things I have been harping  about especially, the EFP’s

plus an interview of Bill Holter/X22

( Bill Holter/Holter-Sinclair collaboration/

vii)This is a surprise:  India’s gold imports in May 103 tonnes and that does not include smuggling which some suggest it may be around 250 tonnes a year

( Reuters/Radhav)

10. USA stories

i)I knew that the B/D plug number would be a high percentage of “added” growth in employment but I didn’t think it would be this high: 93%

( zero hedge)

ib)Michael Snyder reports that the true unemployment number of Americans that do not have a job:  103 million and thus the true unemployment rate: 22%

(courtesy Michael Snyder)

ii)A superb commentary from Adam Taggart of Peak Prosperity.  He outlines the 4 areas where the average citizen is losing.

It is the final area of financial repression or real negative interest rates that is killing the average person on the street.

 

a must read..

 

( Adam Taggart/PeakProsperity.com)

iii)This is not what Janet wants to see: USA productivity stalls again for the 2nd straight quarter:

( zero hedge)

iv)Another good indicator that the USA economy is heading for the glue factory:  factory orders drop in April as durable goods have faltered the most in 14 months;

( zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE BY A HUMONGOUS 18,338 CONTRACTS UP  to an OI level of 463,152 WITH THE RISE IN THE PRICE OF GOLD ($9.80 with FRIDAY’S trading). The bankers were supplying the short comex gold paper and the longs just gobbled them up with reckless abandon.

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 952 contract(s) FALLING TO  1792.  We had 739 notices filed on Friday so we LOST 213  contracts or an additional 21,300 oz will  NOT stand for delivery in this very active delivery month of June AND WITHOUT A SHADOW OF DOUBT THESE 213 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 STUBBORN LONGS WHO ARE REMAINING STOIC ARE SO FAR REFUSING THAT FIAT BONUS 

Below is a little background on the EFP contracts  initiated by our bankers:
We now know for certain 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 182 contracts to stand at 2348 contracts. The next big active month is August and here the OI gained a whopper of a number: 18,002 contracts up to 340,227.

We had 57 notice(s) filed upon today for 5700 oz

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
And now for the wild silver comex results.  Total silver OI ROSE BY ONLY 831 contracts FROM  205,750 UP TO 206,681 WITH FRIDAY’S 25 CENT GAIN.  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 LOST 158 contract(s) FALLING TO 241 contracts. We had 392 notices served upon yesterday so we AGAIN GAINED 234 CONTRACTS OR AN ADDITIONAL  1,170,000 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 1364 contracts DOWN to 134,726 as we start to wind down before first day notice Friday, June 30.  July will be interesting to watch in silver as we witness fewer players pitching for EFP contracts than with gold.

The month of August, a non active month picked up its 2nd contract to stand at two.  The next big active delivery month for silver will be September and here the OI already jumped by another 1438 contracts up to 33,830.

I will give you a snapshot as to what happened last year at the exact number of days before first day notice:

June 6.2016:  194,908 contracts were still outstanding vs 135,168 contracts June 5.2017

At the conclusion of June, the final standing for physical silver was 3,080,000 oz and we have already surpassed that number this year  (3,435,000 oz).

 

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 229 notice(s) filed for 1,145,000 oz for the June 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 131,854 contracts which is FAIR

Yesterday’s confirmed volume was 285,543 contracts  which is GOOD

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for JUNE
 June 5/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 nil oz
Deposits to the Dealer Inventory in oz nil  oz

 

Deposits to the Customer Inventory, in oz 
 nil oz
No of oz served (contracts) today
 
57 notice(s)
5700 OZ
No of oz to be served (notices)
2735 contracts
273,500 oz
Total monthly oz gold served (contracts) so far this month
1912 notices
191,200 oz
5.9471 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 0 customer withdrawal(s)
total customer withdrawal: nil  oz
 we had 0 adjustments:
For JUNE:

Today, 0 notice(s) were issued from JPMorgan dealer account and 2 notices were issued from their client or customer account. The total of all issuance by all participants equates to 57  contract(s)  of which 0 notices were stopped (received) by jPMorgan dealer and 28 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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 (1912) x 100 oz or 191,200 oz, to which we add the difference between the open interest for the front month of JUNE (2792 contracts) minus the number of notices served upon today (57) 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 (1912) x 100 oz  or ounces + {(2792)OI for the front month  minus the number of  notices served upon today (57) x 100 oz which equals 464,700 oz standing in this  active delivery month of JUNE  (14.454 tonnes)
.
WE LOST 213 CONTRACTS OR AN ADDITIONAL 21,300 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 5. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
14,926.730 oz
 DELAWARE
Deposits to the Dealer Inventory
NIL oz
Deposits to the Customer Inventory 
 1,417,122.200 oz
JPMORGAN
SCOTIA
No of oz served today (contracts)
 229 CONTRACT(S)
(1,145,000 OZ)
No of oz to be served (notices)
12 contracts
( 60,000 oz)
Total monthly oz silver served (contracts) 676 contracts (3,380,000 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 1,960,557.3 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: NIL  oz
we had Nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 1 customer withdrawal(s):
i) Out of Delaware:  14,926.730 oz
TOTAL CUSTOMER WITHDRAWALS:  14,926.730  oz
 We had 2 Customer deposit(s):
i) Into JPMorgan:  1,260,064.800  oz
ii) Into Scotia:  157,057.420 oz
***deposits into JPMorgan have now resumed 
In the month of March and February, JPMorgan stopped (received) almost all of the comex silver contracts.
why is JPMorgan bringing in so much silver??? why is this not criminal in that they are also the massive short in silver
total customer deposits  1,417,122.200 oz
 
 we had 1 adjustment(s)
i) Out of Scotia:  9952.520 oz was adjusted out of the customer and this landed into the dealer account of Scotia
The total number of notices filed today for the JUNE. contract month is represented by 229 contract(s) for 1,145,000 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 676 x 5,000 oz  = 3,380,000 oz to which we add the difference between the open interest for the front month of JUNE (241) and the number of notices served upon today (229) x 5000 oz equals the number of ounces standing

 

.
 
Thus the initial standings for silver for the JUNE contract month:  676(notices served so far)x 5000 oz  + OI for front month of JUNE.(241 ) -number of notices served upon today (229)x 5000 oz  equals  3,440,000 oz  of silver standing for the JUNE contract month.
We gained 234 contracts or an additional 1,170,000 oz will stand for delivery. WE ALSO HAD 0 EFP CONTRACTS THAT WERE ISSUED AS THE LONGS REFUSED A FIAT BONUS: THEY WANT THEIR PHYSICAL SILVER.
 
 
Volumes: for silver comex
 
Today the estimated volume was 52,000 which is excellent
Yesterday’s  confirmed volume was 111,601 contracts which is GIGANTIC
FRIDAY’S ESTIMATED VOLUME OF 111,601 CONTRACTS EQUATES TO 558 MILLION OZ OF SILVER OR 80% 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:  34.315 million (close to record low inventory  
Total number of dealer and customer silver:   203.632 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
 
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 7.5 percent to NAV usa funds and Negative 7.4% to NAV for Cdn funds!!!! 
Percentage of fund in gold 61.7%
Percentage of fund in silver:38.2%
cash .+0.1%( June 5/2017) 
 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 5.2017/no changes at the GLD/Inventory remain at 851.00 tonnes

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 5 /2017/ Inventory rests tonight at 851.00 tonnes
*IN LAST 165 TRADING DAYS: 97.13 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 108 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 5/a huge change at the SLV/a withdrawal of 1.371 million oz /

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 5.2017: Inventory 339.605  million oz
 end

Major gold/silver trading/commentaries for MONDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Terrorist attacks see Gold Stay Firm

A summer evening on London Bridge and in Borough Market ended in terror on Saturday as attackers killed seven people and injured 48.

This is the second terrorist attack on British soil in less than two weeks and the the third this year. The attack was immediately labelled as a terrorist attack. In the hours that followed police arrested a further 12 people who were suspected of having links to the horrendous incident.

As was seen following the Manchester attack there has been a slight uptick in risk aversion over night. This morning the British pound slipped in Asian trading, both the Yen and gold have retained earlier gains. After dropping 0.7 percent last week the dollar index did edge higher earlier but remains close to 96.654, its lowest since the US election results.

On Friday gold hit its highest in over 6 weeks due to disappointing US jobs data. The Non-Farm Payrolls report showed the labour market was losing momentum. Unemployment is at a 16 year low of 4.3% but data showed below-forecast hiring and wage growth.

This morning gold has not improved on the 1.1% climb achieved on Friday. All eyes now look to the UK elections. Each of the European elections have seen some uptick in safe haven demand for gold but not at panic buying levels.

The London attack comes less than four days before the UK general election. As per the Manchester attack election campaigning was suspended by the majority of parties. It is expected to resume today, with party leaders stating that if we lose democracy then ‘they’ win.  Since the attack a fortnight ago, Theresa May’s lead in the polls has reduced significantly.

Unsurprisingly both parties are now focusing on terrorism and counter-extremism polices. Theresa May is considered to be tougher on terrorism than the Labour Party but she has still felt the need to up the ante in her language. Following the London attacks she stepped away from her usual tolerance based rhetoric and stated that ‘enough was enough.’

“There is, to be frank, far too much tolerance of extremism in our country,” she said. “So we need to become far more robust in identifying it and stamping it out — across the public sector and across society. That will require some difficult and often embarrassing conversations.”

Labour are keen to remind voters that no matter what May says the sad fact remains that she has the worst record on countering terrorism. Despite officially suspending campaigning Jeremy Corbyn (previously considered to be weaker on policy regarding terror) used Saturday night’s events as ammunition to attack the Conservatives, who he accused of trying to “protect the public on the cheap”.

Barbs continued to be exchanged across parties, no doubt leading to more confusion and anger from the electorate. Just in time for Thursday’s vote which is looking increasingly close.

Tensions run high after terrorist attacks

Concerns over terrorism are clearly worldwide. We have been reminded of this not only in London where tourists were among the victims but also because of events in the Phillipines and Kabul.

Trump’s visit to the Middle East has also brought the conversation on terror back to the fore. This has already made an impact in the region, one which is likely to lead to upset and instability.  This morning Saudi Arabia, Egypt, Bahrain, the United Arab Emirates and Yemen have announced they  each cut diplomatic ties with Qatar.

Qatar is accused of destabilising the region due to its relationship with Iran. Qatar called the move “unjustified” with “no basis in fact”. This morning the United Arab Emirates gave Qatari diplomats 48 hours to leave the country. Abu Dhabi accuses Qatar of ‘supporting, funding and embracing terrorism, extremism and sectarian organisations.’

Trump also had something to say about London’s attacks when he tweeted, ‘”At least 7 dead and 48 wounded in terror attack and Mayor of London says there is ‘no reason to be alarmed!’”

Mayor Khan’s team said he had “more important things to do than respond to Mr Trump.” Whilst a few tweets might not mean very much they are a good example of the increasingly frayed relations and opinions between global leaders when it comes to approaching terrorism.

Markets look beyond London

Markets do not feel a significant impact following terrorism events. This is a sad fact as it suggests they are something that are just becoming a part of life. However markets should not be so laissez-faire.Consumer sentiment is very vulnerable, this combined with an already fragile economy and increasingly noisy financial markets could mean a spate of terrorist attacks will negatively impact markets to an extent not seen for many years.

Expect some turbulence in the gold price in the coming days as we approach not only the UK election but also the Federal Reserve meeting. Whichever way the decision goes we might see an uptick in the gold price, traditionally it responds to a dovish tone from the central bank but following recent rate hikes it has reacted positively.

Markets remain uncertain and often fragile. The uncertain political climate both in the UK and the United States its negatively impacting currencies. Concerns over the fragility of both the economy but also the security of countries’ citizens will lead to continuing demand for safe haven gold.

News and Commentary

London attackers kill seven, PM May says ‘enough is enough’ (Reuters)

Gold hits highest in over six weeks as U.S. jobs data disappoints (Reuters)

Bonds Rise With Gold, Asia Stocks Slip on Economy (Bloomberg)

Major decline in gold smuggling cases after demonetisation: Customs (Business Standard)

India says to levy 3 pct tax on gold under new regime, industry relieved (Reuters)

Gold Seen Rising to Four-Year High as Fed ‘Gentle’ on Rates (Bloomberg)

Sell Economic Ignorance, Buy Gold (ZeroHedge)

Deutsche Bank Trader Admits To Rigging Precious Metals Markets

Pound Slips After London Attack, Gold Holds Gains (Bloomberg)

Summer Storm Keeps Building as Second Dip of Great Recession Approaches (GoldSeek)

end

 

Trump is considering Marvin Goodfriend, an advocate of negative interest rates to the Federal Reserve Board.  My goodness!

(courtesy London’s Financial Times/)

 

Trump considers negative rates advocate for Federal Reserve role

Section:

By Sam Fleming and Demetri Sevastopulo
Financial Times, London
Friday, June 2, 2017

WASHINGTON — Donald Trump is considering a former Federal Reserve economist who has advocated the use of negative rates to join its board of governors as he prepares for a series of appointments to the central bank, according to a White House official.

Marvin Goodfriend, a professor at Carnegie Mellon University, is in contention to fill one of three vacancies on the board, alongside Randal Quarles, a former Treasury Department official. Mr Goodfriend has a reputation as a free thinker who has been critical of some of the Fed’s crisis-era interventions but also willing to contemplate radical monetary policy.

Mr. Quarles, meanwhile, is being considered to take over the financial regulatory functions of the Fed’s board, previously discharged by Daniel Tarullo. The administration has been saying that it wishes to ease the burden of some of the regulations that were imposed on Wall Street in the aftermath of the financial crash.

Mr. Trump is preparing for a major shake-up of the Fed with a series of vacancies coming free on the Fed’s board in Washington. Next year the term of Janet Yellen, Fed chair, expires and the president has left open whether he will reappoint her or seek a new appointee for the position. …

… For the remainder of the report:

https://www.ft.com/content/7c2f182c-47f3-11e7-8519-9f94ee97d996

END

What bozos!! Williams purges more comprehensive market rigging if they cannot obtain their 2% inflation gauge!

(courtesy Bloomberg)

 

San Fran Fed Prez urges more comprehensive market rigging

There’s a New Way to Control Inflation

By Peter Coy
Bloomberg News
Saturday, June 3, 2017

The Federal Reserve would never get a medal in archery. Since January 2012, when it publicly adopted a target of 2 percent for annual inflation, it has undershot in 59 of 63 months. John Williams, president of the Federal Reserve Bank of San Francisco, believes there’s a way to help the institution improve its aim.

The Fed would still try to keep prices rising at 2 percent a year, but if it fell short one year, it wouldn’t just try harder to hit 2 percent the next year, as it does now. Instead, it would try to jack inflation above 2 percent temporarily to get back on track. The Fed would be like the driver of a car who makes up for getting stuck in traffic by speeding up—or slows down when she realizes she’s gotten ahead of her intended pace.

Williams laid out the justification for what he calls “flexible price-level targeting” in a speech in New York on May 5 to a group called the Shadow Open Market Committee, an independent group of economists that comments on Federal Reserve policy. In a phone interview on May 27 he explained why he thinks that now is the right time for an idea he concedes has been around for a while.

If price-level targeting caught on, businesspeople and consumers would be able to predict with confidence how high prices would be in 10, 20, or even 30 years. …

… For the remainder of the report:

https://www.bloomberg.com/news/articles/2017-05-31/a-new-way-to-control-…

* * *

Section:
END
India to tax gold by 3% on top of the import duties of 10%. This would cause  gold smuggling to rise even more than it is.
(courtesy Reuters)

India to levy 3% tax on gold under new regime; industry relieved

Section:

By Sankalp Phartiyal and Rajendra Jadhav
Reuters
Saturday, June 3, 2017

MUMBAI — India will tax gold at a rate of 3 percent under a new nationwide sales tax that comes into effect on July 1, the government said today.

The goods and services tax on gold, which was lower than industry expectations of around 5 percent, will replace a number of federal and state levies.

“In the case of gold, keeping various factors in mind, because there was an extensive debate. … We finally reached a consensus of taxing gold at 3 percent,” Finance Minister Arun Jaitley told reporters in New Delhi after a meeting of the GST Council. …

The India head of the World Gold Council said the government’s decision on gold was an encouraging step and would help stabilise an industry in which millions are employed.

But with customs duty of 10 percent, the total tax on gold is still high and will continue to have an impact on the jewellery industry, Somasundaram PR, managing director, India, World Gold Council, said in a statement. …

… For the remainder of the report:

https://www.reuters.com/article/india-tax-idUSL3N1J005G

end

 

Gold coins from the last of the Roman empire was discovered in the Netherlands

(courtesy DutchNews/Amsterdam/Netherlands)

Hoard of Roman gold coins found at former burial site in Netherlands

Section:

From Dutch News, Amsterdam, Netherlands
Friday, June 3, 2017

A hoard of coins dating from the final days of the Roman Empire has been found in an orchard in Gelderland. Experts believe the fortune was buried by a Frankish military leader in the second half of the fifth century, when the area was part of the Western Roman Empire, which collapsed in 476 A.D.

Some of the 41 gold pieces unearthed in Lienden, near Veenendaal, bear the image of Majorian, one of the empire’s last rulers, who reigned for four years from 457. “On that basis we think this treasure was buried in around 460,” said Nico Roymans, professor of archaeology at the Vrije Universiteit in Amsterdam. …

… For the remainder of the report:

http://www.dutchnews.nl/news/archives/2017/06/hoard-of-roman-coins-found

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Flight to safety: good reason why the boys are trying to pull gold and silver down today

(courtesy zero hedge)

Bitcoin Soars Back Towards Record Highs

Despite no specific catalyst, except perhaps some flight to safety seen also seen in precious metals post-Qatar-chaos, the price of Bitcoin is surging once again back towards its record highs.

Having fallen notably early last week, the cyrptocurrency has recovered almost all its losses as it tests back above $2600 this morning.

Catalysts for this jump appear to correspond to MidEast chaos but buying pressure in South Korea and Japan remains strong.

As we noted previously,GBTC (Bitcoin Trust) continues to trade at an extreme premium to the underlying Bitcoin price (but we note it is coming back a little today (trading down from $511 to $500 as Bitcoin rallies).

end

This is a surprise:  India’s gold imports in May 103 tonnes and that does not include smuggling which some suggest it may be around 250 tonnes a year

(courtesy Reuters/Radhav)

India’s May gold imports surge four-fold from year ago – GFMSA salesperson attends to a customer (not pictured) inside a jewellery showroom, during Akshaya Tritiya, a major gold-buying festival, in Mumbai, India April 28, 2017. REUTERS/Shailesh Andrade/Files

A salesperson attends to a customer (not pictured) inside a jewellery showroom, during Akshaya Tritiya, a major gold- buying festival, in Mumbai, India April 28, 2017. REUTERS/Shailesh Andrade/Files

By Rajendra Jadhav | MUMBAI

India’s gold imports in May surged fourfold from a year ago to 103 tonnes as jewellers increased purchases to replenish inventory and stock up ahead of the rollout of the Goods and Services Tax (GST), provisional data from consultancy GFMS showed.

The rise in imports by the world’s second-biggest consumer of the precious metal will likely support global prices that are near their highest in six weeks, but could widen the South Asian country’s trade deficit.

“Jewellers were aggressively buying after good sales during Akshaya Tritiya,” Sudheesh Nambiath, a senior analyst with GFMS, a division of Thomson Reuters, said on Monday.

Indians in the last week of April celebrated the annual Hindu and Jain holy festival of Akshaya Tritiya, when buying gold is considered auspicious.

India had imported 25.3 tonnes gold in May 2016.

“Some jewellers were building inventory fearing a higher GST (Goods and Services Tax) rate,” said a Mumbai-based dealer with a private bank.

On Saturday, India said it will tax gold at a rate of 3 percent under the GST, which was lower than industry expectations of around 5 percent.

The long-awaited GST is hailed as the country’s biggest tax overhaul since independence in 1947. The GST will replace a slew of central and state levies from July 1, transforming Asia’s third-largest economy into a single economic zone with common indirect taxes.

The price correction also prompted jewellers to raise purchases in May, said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler based in Kolkata.

In the second week of May gold prices dropped to an eight-week low as safe-haven demand softened in the wake of Emmanuel Macron’s victory in the French presidential election.

India’s gold imports in the first five months of 2017 surged 144 percent from a year ago to 424.1 tonnes, according to provisional data from GFMS.

The country’s gold imports could plunge during the traditional period of peak demand in the second half of the year, after jewellers have aggressively restocked inventory ahead of the new national sales tax.

(Reporting by Rajendra Jadhav; Editing by Subhranshu Sahu)

http://in.reuters.com/article/india-gold-imports- idINKBN18W16T

This is a surprise:  the CFTC launches lawsuits against the junior trader convicted of fraud and manipulation of the precious metals, namely gold and silver

(courtesy Ted Butler)

Surprise CFTC Announcement

Theodore Butler

|

June 5, 2017 – 9:36am

I was shocked by Friday’s announcement by the CFTC of an order and simultaneous settlement of manipulation charges in COMEX gold and silver futures. I first saw it in a Zerohedge article and subsequent articles on Bloomberg and in the Wall Street Journal, but all those accounts were somewhat off target compared to the CFTC announcement itself. This was one of those rare cases where the source announcement was much clearer than the articles describing it. I would ask you to take the time to read and reread the actual announcement from the CFTC, including both the press release itself and the complete order.

http://www.cftc.gov/PressRoom/PressReleases/pr7567-17#PrRoWMBL

http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/legalpleading/enfdavidlieworder060217.pdf

In essence, for the first time in history, the Commodity Futures Trading Commission has brought charges against someone for manipulating the gold and silver markets exactly in the manner I have described for decades. This is so astounding on its face, that I hardly know where to begin. In addition, I am writing this less than 24 hours after reading the announcement, so I reserve the right to alter my opinion as time evolves. But there is much to say at this point.

While it is true that the agency brought these charges against a former junior trader of an unnamed foreign bank (said to be Deutsche Bank), the price manipulation occurred during the time of the CFTC’s infamous five-year formal silver investigation. You’ll remember that the original investigation by its Enforcement Division previously concluded that there were no manipulation charges worthy of pursuing. Clearly, something changed the CFTC’s mind. Also, please note that all the alleged price manipulation took place on the cesspool also known as the COMEX and not on any of the foreign exchanges often bandied about.

Further, as the press release makes abundantly clear, this is no one-off by the agency. I don’t think I am exaggerating in the slightest to say that the press release reads more like an open solicitation for others to step forward to provide information pertaining to COMEX gold and silver futures manipulation. Again, please read the documents. I don’t know what I am more shocked by – the announcement of manipulation in COMEX gold and silver futures or the very obvious intent by the Commission to pursue this further.

As for what persuaded the Commission to, effectively, change its mind about a precious metals manipulation centered on the COMEX, I don’t know where to start, since I have been petitioning the CFTC for decades about this very matter. But this isn’t about me and instead involves the long term occurrence of the most serious market crime possible – price manipulation. So let me put this on fast-forward in trying to explain why the CFTC chose now to wake up to a manipulation it should have seen more than 30 years ago, when I first began to petition the agency about a COMEX silver manipulation. I think it has to do with one man (not me).

A little less than two months ago, I took the occasion of two new appointments at the CFTC to petition the agency again to intervene in the ongoing silver manipulation and I also asked others to write in as well. I did so on these pages and in a public article, titled “Another Opportunity”. Once again, I thank the many hundreds of readers that took the time to write to the agency.

http://silverseek.com/commentary/another-opportunity-16489

Unless I’m badly misreading what is occurring, it looks to me as if our collective efforts may have finally paid off. If you read the CFTC’s press release, you’ll undoubtedly note that the official quoted is James McDonald, the new Director of the Enforcement Division and one of the two new officials we wrote to. In addition, I also send McDonald all my articles, as I have always done with past Enforcement Directors.

In a subsequent article (on April 19), I wrote how I had received private comments attesting to McDonald’s high level of integrity and hoped out loud that he might be the one to break away from the Commission’s prior recalcitrance for seeing the silver manipulation as it really was. Again, unless I’m mistaken badly, my hopes may have been fulfilled.

When I decided to write to the CFTC, yet again, on the occasion of the new appointments, I had three potential outcomes in mind. The first was that nothing much would change, meaning the new appointments would quietly fall into line with the previous position that no manipulation existed or could possibly exist in COMEX silver. In that case, we would all be out the time it took to write to the agency, not a particularly serious downside.

I also thought it possible that if a new high-level CFTC appointee became convinced of the merits of my allegations and saw that he was up against an agency that should, but wouldn’t address this most serious matter, that someone with a high level of integrity might quickly resign his position. It wasn’t my primary goal to back an honest man into a corner, but hey, I wasn’t causing the manipulation, nor did I have anything to do with anyone being appointed.

Finally, I thought that if an honest man did become convinced that my allegations had merit and decided not to resign, but instead live up to the deep responsibilities entrusted to him, then that man would endeavor to do the right thing. And truth be told, I thought that should this be the outcome, then there would only be a fairly short period of time before that would become apparent, something like a month or two. After all, how long would an honest man wait before acting against the most serious market crime possible that was in conflict with the agency’s prime mission? I would submit that James McDonald is that honest man and yesterday’s press release certifies that.

Not for a minute do I think that yesterday’s case against the junior trader was initiated after McDonald’s appointment, as such cases necessarily involve long lead times. What I am suggesting is something else – yesterday’s announcement would have never taken place were it not for McDonald. That’s because the announcement was shocking and not in keeping with prior agency findings; it was either bring the case or McDonald was out of there. Further, the announcement was more of an open invitation for others to step forward to drive an investigation into silver manipulation than it was anything else.

Some may ask why the CFTC is going after junior level traders when the crime of manipulation is as institutional as it gets. This looks quite measured and deliberate. Let’s face it – the CFTC has dropped the ball on going after the silver manipulation for decades and because of that has dug itself into a deep hole. It would be nice if the agency just came out and said that it blew it by not reacting years earlier, but there was never any realistic chance of that. This is the best it can do at this point and fits in perfectly.

If you read the announcement, I hope you are struck by the description of what the junior trader is alleged to have done wrong and the similarity to what I allege on these pages twice a week. The order didn’t reference managed money technical funds being snookered by the commercials, yet that is exactly what the junior trader is accused of. The announcement even uses the word “induced” to describe the intent of the spoofing and fake price signals, same as the words I use regularly.

McDonald is no dummy; if he knows some traders are inducing others to buy and sell so that those manipulative traders can position themselves against the duped participants (as is clearly spelled out in the complaint), then he also knows that is proven in COT data. There is little doubt in my mind that the announcement is a “shot across the bow” for the institutional manipulators, like JPMorgan and Bank of Nova Scotia. He is taking a bottoms up approach – getting smaller traders to turn on larger fish up the food chain, when he could just as easily use the COT data to prove the manipulation. And he is doing so for very good reason, namely, because the CFTC can’t come out and admit they blew it for three decades. They have to find another way – pretending to go after little fish is a way of telling the big crooks that the jig is up.

Nearly eight years ago, I wrote an article entitled “The Bomb Squad” in which I described the plight of then-CFTC Chairman Gary Gensler in trying to defuse the price bomb created by the silver price manipulation. I warned that he must be very careful, as trying to dismantle the manipulation could blow up in his and the agency’s face. Gensler failed for a number of other reasons, but the sad part is that the market terrorists at JPMorgan, while coming to protect itself with its massive physical silver accumulation, has only added a lot more explosives to a silver bomb that still must be detonated someday.

http://www.investmentrarities.com/ted_butler_comentary11-03-09.shtml

I’m convinced that McDonald and the agency now realize things have gone too far and it’s time to try to arrange the best outcome possible. Having missed it all these years, the options still open to the agency are now quite limited. The best alternative for the CFTC may be to signal to the big manipulators, like JPMorgan, that the game is up and let the crooked commercials on the COMEX resolve matters for themselves so that the agency can pretend the manipulation is unwinding of its own accord. This way the CFTC can maintain the cloak of deniability and finally end a completely broken price discovery process that has now come to infect other important markets. The time for instituting legitimate position limits which would have ended the manipulation many years ago has long past.

Besides, how does the Commission get around the secret and illegal agreement made between JPMorgan and the US Government when the bank rescued Bear Stearns in 2008? The simple answer is by an end run. Whatever that agreement entailed, it was never intended to last in perpetuity. Nine years of looking the other way is long enough, at least for an honest man. Perhaps the only way to demonstrate to the big COMEX commercial crooks that enough is enough is to do what the CFTC just announced – a deepening investigation into the COMEX silver manipulation as fair warning to end the scam.

As I said, maybe I’m all wet and James McDonald is not the conscientious and honest regulator that I’ve made him out to be. In that case, the silver manipulation may not be coming to a head, as I’ve suggested. Time will tell. Interestingly, the key factor is still will the stone-cold crooks at JPMorgan sell aggressively short into the next silver rally? Still, I can’t see how yesterday’s announcement isn’t a blockbuster event.

Ted Butler

June 5, 2017

For subscription information please go to www.butlerresearch.com

 

 

end

An excellent commentary from Bill Holter as the touches just about all of things I have been harping  about especially, the EFP’s

 

(courtesy Bill Holter/Holter-Sinclair collaboration/

 Critical junctures! (Please post subscription)

Both gold and the dollar are at critical junctures but I believe the dollar has already tipped its hand.  Starting with the dollar, a critical technical level was right at 98.  We tested that level multiple times before breakdown below that a couple of weeks back.  Looking for fundamentals to support the breakdown need look no further than what China has been doing, namely making trade deals without the dollar involved in settlement.  The writing of a much weaker dollar is in bold print on the global settlement wall!

As for gold, the downtrend line going back 5 1/2 years is right here at roughly $1,290.  A penetration above this level with a weekly close (monthly would be better) will be full confirmation the fundamental undervaluation of gold is ending in a trend change.  All sorts of paper games have been played to keep gold and silver under wraps.  The latest admission (amongst many) that gold has been manipulated can be seen with this guilty plea by an employee of none other than Deutsche Bank http://www.zerohedge.com/news/2017-06-02/deutsche-bank-admits-guilt-fraud-conspiracy-rig-precious-metals-markets

As an update of June’s COMEX open interest, what looked like potential fireworks evaporated in nearly complete evisceration.  With only two days left before first notice day there were still roughly 12 million ounces open.  That dropped to just over six million with one day left and dropped to 533,000 ounces standing on first notice day.  James Turk’s theory that much of this demand is being satisfied via premiums paid and settlement via EFP’s out of London can be seen here; http://jamesturkblog.blogspot.com/2017/04/paper-shorts-are-scrambling.html .  I believe this has merit as the way to discourage and divert settling directly from the paltry COMEX inventories.  EFP’s were used in the old days to sort out problem positions, over time it has evolved into the giant paintbrush used to hide true demand.  I believe EFP’s are your giant smoking gun.

We know by “price” that the dollar and gold are at critical levels, I believe they are also confirmed by the overall backdrop.  Explaining this, the Fed has been blustering for several years about interest rates normalizing and they “shrinking” their balance sheet.  Today’s weak 138,000 jobs number (and another 608,000 out of the workforce/downward revisions of the last two months) puts the Fed further into a box.  How can they possibly raise rates (or shrink their balance sheet?) with a weak economy and bloated financial system as a backdrop?  The answer is they cannot.  Should either of these be attempted, markets will rebel with immediate obliteration.

As a visual, please look at this chart:

Please print this chart Harriett file:///C:/Users/bholt/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/Velocity%20of%20US%20Money%20Supply.pdf
THIS is what the Fed is fighting, and a losing battle it is!  The chart illustrates a couple of things.  First, the “use” of the dollar worldwide for settlements is shrinking and thus the velocity is dropping.  It also illustrates the “feeling” of not enough money on the streets.  In other words, even though the Fed has pumped trillions into the system, much of the money has been hoarded by banks and ended up in stock/bonds/real estate.  Very little has reached the real economy.  It is important to understand, the real economy is choking under too much debt while the “fuel” has been diverted to “assets” and created our current bubble world.  The signs of inflation are there for all to see …but it is seen as “good inflation”.

From here, two things can happen and neither good.  Velocity can continue downwardand the “tight feeling” in the real economy will get worse, or …velocity can turn upward.  I would caution hoping for this because it would mean dollars being “dislodged” and being sent back to the U.S. from foreigners.  When this occurs, hyperinflation will set in faster than you can flush your toilet.

To finish this, it would be good to reiterate the “inflation vs. deflation” argument.  We will have both at the same time and depending on what you use as a yardstick.  Count on the things you “have” losing value (stocks, bonds, real estate etc.) as these are the things with debt either attached or used to make purchase.  The things you “need” or use on a daily basis will become much more dear.  As for yardsticks, I am speaking of either dollars or gold.  Everything will “cost more” in dollar terms while costing less in terms of gold.  The great reset will see the greatest deflation versus gold in all of history while the hyperinflationary event in dollar terms may rival the great ones such as Zimbabwe.

We have waited a very long five years and watched as logic was trashed by derivative chains painting all markets.  The meme of the central banks being all powerful is about to be sternly challenged.  As is the U.S. dollar with its reserve currency/global settlement status.  The long and arduous trends in both the dollar and gold are changing and reversing.  I believe the movements will be beyond belief once market participants understand these markets have both turned.  Heaven help those who are out of position and do not have capital out of the system and in physical form.

Standing watch,

Bill Holter

Holter-Sinclair collaboration

end

My latest interview with X-22 Spotlight.
(courtesy Bill Holter)_

end

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

 
 

1 Chinese yuan vs USA dollar/yuan  STRONGER  6.8042(REVALUATION NORTHBOUND   /OFFSHORE YUAN MOVES  STRONGER TO ONSHORE AT   6.7843/ Shanghai bourse CLOSED DOWN 13.88 POINTS OR .45%  / HANG SANG CLOSED DOWN 61.06 POINTS OR 0.24% 

2. Nikkei closed DOWN 6.46 POINTS OR 0.03%   /USA: YEN RISES TO 110.58

3. Europe stocks OPENED IN THE RED        ( /USA dollar index RISES TO  96.91/Euro DOWN to 1.1241

3b Japan 10 year bond yield: FALLS TO   +.050%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.58/ 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::  47.48 and Brent: 49.77

3f Gold UP/Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO  +.286%/Italian 10 yr bond yield UP  to 2.275%    

3j Greek 10 year bond yield FALLS to  : 6.03???  

3k Gold at $1280.50/silver $17.53 (8:15 am est)   SILVER BELOW  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 2/100 in  roubles/dollar) 56.65-

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 REVALUATION NORTHBOUND 

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 110.58 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  0.9657 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0856 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  +0.286%

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 2.179% early this morning. Thirty year rate  at 2.834% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Qatar Crashes In Escalating Gulf Crisis; Oil Fails To Rebound As Global Stocks Dip

S&P futures point to a slightly lower open ahead of today’s US non-mfg ISM and Service PMI data. European shares fall, while Asian shares are little changed. Several European countries, including Germany, are closed for Whit Monday leading to subdued trading. Crude futures have reversed overnight gains following the latest unexpected Gulf Crisis overnight, in which Gulf nations cut all diplomatic relations with Qatar amid striking allegations of funding terrorism, as reported overnight.

Looking at other asset classes, the AUD/USD continues grinding higher after a stronger than expected Chinese services PMI and inventories data reduces chances of negative GDP print, iron ore futures +2.0%; GBP/USD fills gap to Friday close, after opening lower in Asia following Saturday’s attacks Bloomberg observes. European equity markets lower from the open, oil-related stocks underperform given heightened political uncertainty. Banco Popular in Spain trades -11% after reports of liquidity pressure due to deposit withdrawals. Core fixed income markets edge lower, German long-end steepens, some focus on wage pressures within PMI data. MXN leads EMFX higher as ruling party is projected to win state election.

European stocks are down, with the Stoxx Europe 600 lower by 0.2% with miners the biggest losers following a downgrade, while zinc and tin led base metals lower. Europe was dragged lower by the Basic Resources index which drops as much as 1.3% to one-month low, making biggest decline of 19 industry groups, after HSBC cuts valuations for London-traded mining companies, downgrades Antofagasta, Kaz Minerals. Antofagasta is biggest decliner in sector, falls 2.8%, Centamin -2%, ArcelorMittal -1.6%, Anglo American -1%. HSBC cuts LSE equities valuations by 4%-9% on assumption of stronger GBP/USD conversion rate, used to convert USD-denominated cash flows to GBP, bank’s analysts write in note Monday.

The big event of the session was the sharp shift in Gulf balance of power with geopolitics surging to the top of the agenda as investors digest the move by Saudi Arabia, Bahrain, the United Arab Emirates and Egypt to suspended air and sea travel to and from Qatar. Saudi Arabia cited Qatar’s support of “terrorist groups aiming to destabilize the region.” Which is ironic considering that a leaked memo by Hillary Clinton last year exposed both Saudi Arabia and Qatar as the two big state sponsors of regional terrorism.

Following the report, Qatar stocks have plunged over 7%, the biggest one day drop since December 2014 to the lowest since January 2016…

… while Qatar bond yield have surged in the worst day in 7 months…

… and Qatar CDS spiked to 2 month highs.

Terror was also in focus in Europe following an attack at a popular London nightlife spot days before a national election.

Crude initially recovered some of Friday’s slump, although it has since filled the gap, while stocks in Qatar plunged as the market digested the fallout from the unexpected diplomatic twist.

Treasury yields remained near the lowest in seven months after U.S. jobs data missed forecasts last week. The peso rallied on signs the ruling PRI was ahead in the governor’s election for the key state of Mexico.

While the Fed has entered a blackout period ahead of next week’s rate decision, there is plenty of data in the coming days, with the headline being former FBI Director James Comey’s testimony before Congress following his dismissal by Donald Trump. U.K. voters go to the polls Thursday. Surveys of voters over the past few weeks have indicated a tightening race, increasing the chance that Prime Minister Theresa May might not get an increased majority.

Policy decisions from central banks in India and Australia are due during the week, as well as data on Chinese trade and inflation, U.S. factory orders, European industrial output figures and GDP reports for Australia, Japan and the euro area.

In Fx, the Bloomberg Dollar Spot Index dropped 0.2 percent, adding to a 0.4 percent decline on Friday. The yen fell 0.1 percent to 110.53 per dollar. Japan’s currency climbed 0.9 percent Friday after the U.S. data. The Mexican peso soared 1.6 percent, reversing an earlier drop. President Enrique Pena Nieto’s party is narrowly ahead in the election for governor of Mexico’s largest state in an official quick count, throwing it a lifeline ahead of next year’s general vote. Follow more on the vote here. The pound traded 0.1 percent weaker, paring its earlier loss. The euro also fell 0.1 percent to $1.1268.

In commodities, WTI crude was 0.5% lower to $47.46, after dropping 1.5 percent on Friday. Gold rose as much as 0.2 percent to $1,282.1 an ounce, hitting the highest since April. Tin fell 1 percent to $20,090 a ton and zinc traded 1.4 percent lower at $2,494.5 a ton on the London Metal Exchange.

In rates, the yield on 10-year Treasury notes rose one basis point to 2.17 percent after dropping five basis points on Friday. U.K. benchmark yields climbed two basis points.

Bulletin Headline Summary from RanSquawk

  • Middle east tensions see crude prices jump as several nations cut ties with Qatar
  • European equities trading in subdued fashion with many participants away for Whit Monday
  • Looking ahead, highlights include: US ISM Non-Manufacturing PMI and Factory Orders.

Market Snapshot

  • STOXX Europe 600 down 0.2% to 391.75
  • STOXX Europe 600 down 0.2% to 391.75
  • German 10Y yield rose 1.2 bps to 0.286%
  • Euro down 0.1% to 1.1266 per US$
  • Brent Futures up 0.8% to $50.33/bbl
  • Italian 10Y yield rose 0.4 bps to 1.966%
  • Spanish 10Y yield fell 0.5 bps to 1.567%
  • MXAP up 0.03% to 155.39
  • MXAPJ up 0.2% to 503.72
  • Nikkei down 0.03% to 20,170.82
  • Topix down 0.1% to 1,609.97
  • Hang Seng Index down 0.2% to 25,862.99
  • Shanghai Composite down 0.5% to 3,091.66
  • Sensex up 0.2% to 31,338.30
  • Australia S&P/ASX 200 down 0.6% to 5,754.87
  • Kospi down 0.1% to 2,368.62
  • German 10Y yield rose 1.2 bps to 0.286%
  • Euro down 0.1% to 1.1266 per US$
  • Italian 10Y yield rose 0.4 bps to 1.966%
  • Spanish 10Y yield fell 0.5 bps to 1.567%

Top Overnight Headlines via BBG

  • Saudi Arabia, UAE, Egypt and Bahrain cut diplomatic ties with Qatar; shut down sea, airspace and land crossings to the country
    • European May Service PMIs:
    • Spain 57.3 vs 57.5 est;
    • Italy 55.1 vs 55.3 est;
    • France 57.2 vs 58.0 est;
    • Germany 55.4 vs 55.2 est;
    • Euro zone 56.3 vs 56.2 est;
  • Markit note services firms faced another strong rise in costs, linked in many cases to salary pressures
  • Italy: President Gentiloni says parliament should decide between general election as early as September, or wait until the beginning of next year to hold fresh elections
  • U.K. May Services PMI: 53.8 vs 55.0 est.
  • Russia does not see not see any impact on oil output cut deal from Qatar tensions
  • China May Caixin services PMI 52.8 vs 51.5 prev; composite PMI 51.5 vs 51.2

Looking at regional markets, we start in Asia which dismissed the positive Wall St. close on Friday, to trade with a cautious tone after Saturday’s terrorist attack in London and as the region reacted to the miss on US NFP data. ASX 200 (-0.7%) underperformed with financials heavily weighing on the index amid weakness across banks, while Nikkei 225 (+0.1%) recovered from opening losses after USD/JPY rebounded from its lows. Elsewhere, Shanghai Comp. (-0.5%) and Hang Seng (-0.3%) failed to benefit from an improvement in Caixin Services and Composite PMI figures, as the PBoC remained steadfast in its prudent and neutral policy stance. Specifically, PBoC Deputy Governor Chen stated the PBoC will neither be tight or loose in terms of monetary policy and will remain neutral and prudent. Also in China, the Caixin Services PMI for May printed at 52.8 (Prey. 51.5); a 4-month high; Chinese Caixin Composite PMI (May) 51.5 (Prey. 51.2) PBoC injected CNY 40bIn in 7-day reverse repos and CNY 30bIn in 28-day reverse repos. PBoC set CNY mid-point at 6.7935 (Prey. 6.8070) Finally, 10yr JGBs were mildly higher alongside the cautious tone in markets, although upside was capped following a lack of Rinban announcement from the BoJ, while the curve slightly flattened amid outperformance in the super long-end.

Top Asian News

  • Korean Air 2Q Traffic Is ‘Higher’ Than Expected, President Says
  • Shenhua, China Guodian Said to Mull $267 Billion Power Giant
  • Noble Group Said to Ask Lenders to Extend Key Credit Facility
  • Thailand Central Bank Eases Some Currency Rules as Baht Climbs
  • YLG Bullion Sees Thailand’s Gold Imports Rising 15% This Year
  • Baht Rises After Central Bank Relaxes FX Rules: Kasikornbank
  • Qatar Bonds Drop as GCC Governments Cut Diplomatic Ties on Iran
  • Nomura Adds to India 7.68% 2023 Bond Position Ahead of RBI Meet
  • The Hard-to-Believe Steel Shortage That’s Unfolding in China

In Europe it has been a relatively quiet affair amid market closures due to Whit Monday. Additionally, investors are hovering on the sidelines as they await key releases later in the week (UK election and ECB decision). As such, EU bourses have been directionless, with focus on tensions rising in the middle east as several nations including Saudi Arabia cut diplomatic ties with Qatar, after they are alleged to support terrorists. Subsequently, crude prices jumped over 1% in Asian trade with speculation that this might lead to an impact on oil and LNG supplies. Similarly, fixed income markets are also subdued with Bunds off by around 20 ticks, taking the lead from USTs, while the German curve is showing some modest steepening. Levels of support to the downside reside around 162.45 with the former high situated at 162.15

Top European News

  • Germany and France Keep Euro-Area Growth Pace at Six-Year High
  • The London Attack Didn’t Stop the Social Media Election
  • Inflation Squeeze, Election Jitters Take Toll on U.K. Services
  • Popular Said to Meet ECB as It Weighs Options for Liquidity
  • Putin Says He’s Not Aware of Kushner’s Russia Channel Proposal
  • Sasa Reappraises Lands at Higher Values, Shares Advance
  • Juventus Slumps After Champions League Final Loss
  • London Cops Adjust to New Terror Reality With Guns, Choppers
  • EDP Falls as Prosecutor Investigates CMEC Compensation Regime

In currencies, it has been relatively subdued this morning in FX, with some of the expectant market drivers not playing out as one would expect. Given the terror attack in London and some of the latest election polls showing gap narrowing (to a significant degree in some cases), GBP held up well this morning, perhaps in anticipation of a strong UK services PMI number. However, this came in softer than expected, though remains comfortably in the expansionary zone, printing 53.8 vs 55.8 previously. Cable has since pushed above 1.2900 again, tentatively so as yet, but EUR/GBP is also lower to test initial support ahead of 0.8700. The data alone was cause near term GBP weakness, so we can only put these moves down to an expected Tory victory on Thursday. Elsewhere, Oil prices have risen due to the severing of diplomatic ties with Qatar from some of the leading Arab countries. Allegations over links to terrorism have prompted this, and the push up in WTI and Brent have assisted CAD and NOK to a moderate degree. As for the USD majors, near term trade is extremely tight, with EUR/USD refusing to give up ground in the mid 1.1200’s, while USD/JPY continues to find buyers ahead of 110.00. Treasury yields stagnant, albeit at lower levels.

In commodities, the focus is on Oil this morning as the allegations of terrorism links made on Qatar have led to six Arab countries including Saudi and Egypt to sever diplomatic ties. Qatar has denied this, but uncertainty has lifted Oil price levels to a modest degree, with supply side concerns still weighing on WTI to keep trade below the mid USD48.00 mark. Brent is above USD50.00, but is struggling to maintain a foothold, so the inventory data this week could be significant after the notable draw downs reported last week. These latest developments have also put a fresh bid under precious metals, as Gold is now eyeing a move into the upper USD1280’s. Silver has tipped over USD17.50. Base metals remain heavy though, with Zinc the underperformer today. Nickel still pressured since its loss of the 9000 handle, but off the lows. Copper is still hemmed inside USD2.50-2.60, with a test on the lower end of the limits rebuffed for now.

On today’s calendar, we will get the remaining PMIs as well as final revisions to Q1 unit labour costs and nonfarm productivity, ISM non-manufacturing for May, factory orders for April and final durable and capital goods orders revisions for April

US Event Calendar

  • 8:30am: Nonfarm Productivity, est. -0.2%, prior -0.6%; Unit Labor Costs, est. 2.4%, prior 3.0%
  • 9:45am: Markit US Services PMI, prior 54; US Composite PMI, prior 53.9
  • 10am: ISM Non-Manf. Composite, est. 57.1, prior 57.5
  • 10am: Labor Market Conditions Index Change, est. 3, prior 3.5
  • 10am: Factory Orders, est. -0.2%, prior 0.2%; Factory Orders Ex Trans, prior -0.3%
  • 10am: Durable Goods Orders, est. -0.5%, prior -0.7%; Durables Ex Transportation, prior -0.4%
  • 10am: Cap Goods Orders Nondef Ex Air, est. 0.1%, prior 0.0%; Cap Goods Ship Nondef Ex Air, prior -0.1%

DB’s Jim Reid concludes the overnight wrap

A sobering weekend for Londoners. Was very shocked at the attack on London Bridge on Saturday especially as I walked across it on Friday. As I was walking I was remembering the shocking Westminster Bridge attack in March and thought that the pedestrian walkway was so wide and so easy to access from the road that this could sadly be an easy target for a copycat attack. I even moved well away from the side of the road and closer to the river to be what I thought at the time was excessively cautious and paranoid. So I was quite shocked that just over 24 hours later the attackers chose that area to terrorise the capital. I heard the news seconds after watching the most heart-warming film I’d seen for a while called Lion. If you need cheering up then watch it and I challenge anyone not to have at least one tear in the eye at some point during the film.

Anyway life goes on and although this tragic event will get headlines markets will move on to what is a busy week. As we dubbed it last week we have super Thursday to look forward to with the UK election, the ECB meeting where hints of a policy shift may take place and also the testimony from Comey before the Senate that could be embarrassing as a minimum for Mr Trump. We’ll preview the ECB in more detail on Thursday but in brief our economists have changed their ECB call. They now think the balance of probabilities have shifted away from a change to forward guidance so soon with the soft May flash inflation print last week perhaps helping to offset confidence in the growth outlook. They still expect some soft exit expectations management, for example, talking up economic growth and tasking the internal committees to consider the options for forward guidance, deposit rate and QE.

Before this today we’ll see the final services PMIs from around the globe and the equivalent ISM in the US. This morning we’ve already had the Caixin release out of China where, in contrast to the disappointing manufacturing reading, the services print rose by an impressive 1.3pts to 52.8 in May and the highest since January. That reading has helped support a rise in the composite to 51.5 from 51.2. This, combined with the rest of the data today will be another good real time gauge of activity after a confusing payroll report on Friday which led to a strong end to the week for fixed income.

Before we recap that though, it’s worth noting that the other breaking news to report this morning is that Saudi Arabia, UAE, Bahrain and Egypt have all cut diplomatic ties with Qatarwith air and sea travel to the Gulf state also suspended. According to Bloomberg the move is related to Qatar’s backing of Iranian-backed terrorism activity in the region. It’s a developing story so the details are fairly light as we go to print though. There’s been some reaction in markets. WTI (+1.28%) and Brent Oil (+1.22%) had already moved higher prior to the headlines hitting but are now even firmer while Gold is +0.10%. Equity markets in  Asia are however flat to slightly weaker with financials lagging under the pressure of falling bond yields. Middle Eastern bourses are not yet open. In FX Sterling is down -0.20% following the weekend events.

Back to payrolls. The data revealed headline growth of just 138k for May which compared to the consensus estimate of 182k, while there was a further net 66k of downward revisions to the prior two months also made. That means that over the last three months the average increase in nonfarm payrolls is just 121k, down from as high as 201k in February. The current three-month moving average is also at the lowest reading since July 2012. The difference now however is that the unemployment rate is much lower with the rate down to just 4.3% in May (from 4.4% in April) and the lowest since May 2001. The move lower last month was partly helped by a two-tenths decline in the participation rate to 62.7% however it’s worth noting that this rate has largely stayed in a 62.5-63.0% range for 20 months now despite some month to month volatility. So while a disappointing headline payrolls figure, it does possibly reflect the struggle to hire as we get closer to full employment. As our US economists also note, there simply is not enough excess slack left in the labour market to produce the sort of job gains that we have experienced in the past so employment growth is poised to slow further going forward.

To that point, the Dallas Fed’s Kaplan said following the employment report that “there are dramatically more skilled job openings in the US than there are workers” and that “while there is slack, it is dwindling”. It’s worth also noting that the other important element of the employment report – wages growth – was a bit soft in May. While average hourly earnings rose +0.2% mom and matching expectations, April was revised down a tenth and the annual rate held steady at +2.5% yoy versus expectations for a one-tenth rise to +2.6%.

As mentioned earlier fixed income markets seemingly picked up on some of the softer elements of the data with 5y, 10y and 30y Treasury yields falling 4.3bps, 5.2bps and 5.3bps respectively, while the USD index also hit the lowest since October last year. The short end of the Treasury curve did however pare back an initial move lower with 2y yields eventually closing unchanged. With Bloomberg’s calculator also showing that a June rate hike is around 90% priced in this morning, the data hasn’t yet influenced the market’s expectations of next week’s FOMC too much as yet. Meanwhile core yields were also lower in Europe on Friday. Benchmark yields in Germany, France, UK and Netherlands were between 2bps and 4bps lower although the periphery was a little weaker with yields 1bp to 3bps higher.

As we noted last week most bond markets are either at or very close to the bottom end of the three-month range for yields. In fact despite US equities hitting new highs on Friday (S&P 500 +0.37% and +0.96%  for the week, Dow +0.29% and +0.60%) and European markets also enjoying a solid end to the week (Stoxx 600 +0.23% and +0.31%), last week was actually a pretty strong one for most bond markets too which more than likely reflects some of the benign inflation data we got. Benchmark 10y Treasury yields were 8.7bps lower over the week and at the lowest yield this year (2.159%) while 10y Bund yields were down 5.6bps over the week and have now fallen for 4 weeks in a row. At 0.272% they still have a bit of work to do to get down to the 2017 lows of 0.156% but they are down from as high as 0.452% just last month. Last week was a similar story too for the likes of France (-4.7bps), Switzerland (-5.9bps) and the Netherlands (-5.1bps). Two markets which stand out for bucking that trend though are BTPs (+16.4bps) and Gilts (+2.5bps) where domestic political situations continue to dominate those markets.

With regards to the latter, the last couple of opinion polls continue to point towards a tighter race ahead of Thursday. The latest YouGov/Times poll conducted over 1-2 June shows the Tories as holding a 4%  lead over Labour at 42-38% which is unchanged from the last poll. Meanwhile the Survation/Mail on Sunday poll (conducted on 3 June) showed a lead of just 1% for the Tories at 40-39%. That is the smallest lead for the Conservatives of any opinion poll we’ve seen so far. Other polls continue to have a bigger lead for the Tories but the gap has seemingly narrowed over the course of the campaign.

The only other news to report from the weekend is the latest World Bank economic forecasts. Released yesterday, the World Bank expects the global economy to grow 2.7% in 2017 driven by a recovery in US, Europe and advanced economies, followed by 2.9% in 2018. Those forecasts are unchanged versus the January estimates.

In terms of the other news from Friday, Philadelphia Fed President Harker (a voter this year) reiterated his call for a further two rate hikes this year. He said that concern about recent lower than expected inflation outcomes was unwarranted and also that payrolls gains in the range of roughly 100k a month is all that is required to achieve full-employment. Meanwhile there was a bit of focus on a NY Times article which suggested that President Trump is likely to nominate monetary economist Marvin Goodfriend and former Treasury Department official Randal Quarles to fill two of the three vacant Governor positions on the Fed’s board. The article suggested that Quarles would likely become a leading figure in the administration’s efforts to roll back financial regulation and also be nominated to serve as the Fed’s vice-chair for  supervision. Meanwhile Goodfriend, who is also a former Fed official, is said to support a more rules based policy approach.

To the week ahead now. This morning we’re kicking off in Europe with the remaining services and composite May PMIs which will also include a first look at the data for the UK and periphery. Over in the US this afternoon we also receive the remaining PMIs as well as final revisions to Q1 unit labour costs and nonfarm productivity, ISM non-manufacturing for May, factory orders for April and final durable and capital goods orders revisions for April. With little of significance in Asia on Tuesday we are straight to Europe with the June Sentix investor confidence reading and April retail sales for the Euro area. In the US tomorrow we are due to get JOLTS job openings for April. Wednesday kicks off in Germany with April factory orders, while in the UK we get the May house prices data. The only data due in the US on Wednesday is April consumer credit. China will also release May foreign reserves data at some stage. The early focus in Asia on Thursday is in Japan with the final Q1 GDP revisions, while the latest trade data will also be released. Over in Europe on Thursday we also receive the final Q1 GDP revisions for the Euro area, while industrial production in Germany for April and trade data in France is also due. The big event in Europe on Thursday comes just after midday with the ECB meeting which will be closely followed by Draghi’s press conference. The only release due in the US on Thursday is initial jobless claims. China will also release May trade data at some stage on Thursday.

We end the week in Asia on Friday with the May CPI and PPI prints in China. Over in Europe we’ll get April trade data in Germany, industrial production in France, and industrial production and trade data in the UK. We finish the week in the US with the final April wholesale inventories print.

With the Fed into the blackout period now there’s no Fedspeak this week while over at the ECB, along with Draghi’s press conference we’ll also hear from Nowotny on Friday. The big event this week is likely to be the UK election this Thursday which will include exit polls just after polling stations close at 10pm BST. Results will then be released through the night. Also worth keeping an eye on is former FBI director James Comey’s testimony before the Senate on Thursday. Other things to note are the RBA meeting on Tuesday, RBI meeting on Wednesday and OECD 2017 outlook on Wednesday.

3. ASIAN AFFAIRS

i)Late SUNDAY night/MONDAY morning: Shanghai closed DOWN 13.88 POINTS OR 0.45%   / /Hang Sang CLOSED DOWN 61.06 POINTS OR 0.24% The Nikkei closed DOWN 6.46 POINTS OR 0.03%/Australia’s all ordinaires  CLOSED DOWN  0.50%/Chinese yuan (ONSHORE) closed  UP at 6.8042/Oil UP to 47.48 dollars per barrel for WTI and 49.77 for Brent. Stocks in Europe OPENED ALL IN THE RED (EXCEPT LONDON)     ..Offshore yuan trades  6.7843 yuan to the dollar vs 6.8042 for onshore yuan. NOW  THE OFFSHORE IS MUCH STRONGER TO THE ONSHORE YUAN/ ONSHORE YUAN STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS STRONGER 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

Japan is now holding evacuation drills as this country is growing quite concerned with North Korea’s missile tests

(courtesy MacSlavo/SHFTPlan.com

Japan Holds Evacuation Drills Amid Growing Concerns Over North Korea’s Missile Tests

Authored by Mac Slavo via SHTFplan.com,

The Japanese are no longer taking any chances against the rogue North Korean regime and Kim Jong-Un’s insistence on the continued testing of ballistic missiles. Japan is now participating in more frequent evacuation drills in the event that they are attacked by North Korea.

Although drills of this type aren’t the first in Japan this year, they are increasing in frequency.Sunday’s evacuation drill in the town of Abu, Yamaguchi prefecture, is showing how concerned the Japanese are about a potential North Korean attack. The town of about 3,500 people some 760 km (475 miles) west of Tokyo involved a simulated North Korean missile attack. And more Japanese towns and cities are taking steps to brace for what they hope will never happen.

North Korea has been increasing the number of its missile test launches in recent months. Launching 12 so far this year and three last month, with many splashing into the Sea of Japan, the Japanese are rightly concerned. Some of North Korea’s missiles have even landed inside Japan’s exclusive economic zone, which extends up to 200 miles from its shores.

Tokyo has repeatedly condemned the test launches, which are in violation of United Nations resolutions, yet it’s become clear that North Korea’s volatile leader, Kim Jong-Un doesn’t care about the rules imposed upon him. Prime Minister Shinzo Abe’s government earlier this year instructed municipalities to hold evacuation drills, heightening a sense of urgency among the public. Although security experts in Japan have said that the drills won’t save everyone, they could save some, and that’s better than not having a plan.  “It’s hard to say how many people will be saved and how much effect it will have. But, with awareness raised and basic procedure understood, the survival rate will definitely be higher,” retired Vice Admiral Yoji Koda said.

The Japanese government is actively attempting to help the public prepare for the worst by putting on its website a list of tips in case a missile lands in Japanese territory. The tips include “take shelter in a robust building nearby” and “move away from windows or, if possible, move to a room without windows.”  The government has previously stated that the Japanese public would only have ten minutes to react if North Korea launches a missile their way – minus the few minutes it would take for the government to alert the public to the attack.

The preparation by Japan is due to the short window of opportunity should North Korea attack the island nation. The Japanese in range of the so far hypothetical missile would have very little time to seek refuge, and the loss of life could be staggering. With schoolchildren also taking place in these drills, it’s safe to say that the Japanese are concerned, but not willing to take chances, especially on towns on Japan’s western coast.

Being prepared is going to help the Japanese in the event of an attack. Although Japan is refusing to panic, they also want to be prepared.  It is important to mention, however, that North Korea has not specifically threatened the Japanese, yet.  But many believe that a North Korean missile program is a threat to the nation.

end

c) REPORT ON CHINA

 

The following commentary is an essential one for you to read from top to bottom.

In a nutshell, China is about to hit its Minsky Moment. I have underlined the essential parts

(courtesy zerohedge)

Reuters Goes To China, Discovers “Ghost Collateral”

Back in 2014, a scandal erupted when media reports confirmed what many had previously speculated about China’s banking system: namely that much of China’s staggering loan issuance had been built (literally) upon air and that billions (or trillions) in loan collateral had been “rehypothecated” between two, three or many more debtors – or never even existed – forcing banks to accept that they would never recover much if any of the pledged collateral – in most cases various commodities – if the economy were to suffer a hard-landing resulting in mass defaults. The most famous example involved collateral fraud at China’s 3rd largest port, Qingdao, where numerous borrowers were found to have “pledged” the same collateral of steel and copper to obtain funding from various banks.

For those unfamiliar there is an extensive selection of stories covering the topic, which peaked three years ago, and then quietly faded away as China did everything in its power to deflect attention from what some have said is the biggest threat facing its economy: a giant hole . Below we link to some of our more comprehensive articles on the topic:

To be sure, the story briefly resurfaced last month, when we reported that “Some Chinese Banks Suspend “Interbank Business” As Regulator Demands That Collateral “Actually Exists”, however it then quickly  fizzled again, for two reasons: i) China watchers assumed that Beijing no longer had a “collateral problem” which had been somehow fixed after all the noise rehypothecation stories from in 2014, and ii) China now seemingly has even bigger problems on its hands, such as finding the right balance between maintaining the latest housing bubble, keeping capital outflows in check and its currency stable at a time when China’s debt (all 300% of GDP) was downgraded by Moody’s for the first time in 28 years, while its gargantuan shadow debt powder keg is one big red headline away from a $9 trillion shadow bank run.

And while the latter is certainly accurate, the former couldn’t possibly be further from the truth.

That’s what a fantastic expose by Reuters discovered, when its reporters went to China to determine the current status of China’s long-standing collateral problem. What it found was thatghost collateral” continues to haunt countless loans across China’s debt-laden banking system, which is a problem because as we explained in 2014, and as Reuters notes “lax lending practices and overvalued collateral spurred the U.S. financial crisis in 2008. Now, banks in China face risks of their own as fraudulent borrowers and corrupt bankers burden the financial system with loans lacking genuine collateral.”

The story, while familiar to regular readers, may be a surprise to some, so here are some key excerpts.

The banker at the other end of the phone line was furious, recalled Shanghai lawyer Wang Chaoyu. A pile of steel pledged as collateral for a loan of almost $3 million from his bank, China CITIC, had vanished from a warehouse on the outskirts of the city. Just several months earlier, in mid-2013, Wang and the banker had visited the warehouse and verified that the steel was there. “The first time I went, I saw the steel,” recalled Wang, an attorney at Beijing DHH Law Firm, which represents the Shanghai branch of CITIC.

 

“Afterwards, the banker got in contact with me and said, ‘The pledged assets are no longer there.’”

As Jon Corzine might say, “it vaporized.” 

The trouble had begun in 2012, after CITIC loaned the money to Shanghai Hanning Iron and Steel Co Ltd, a privately held steel trader. Hanning failed to meet payments, according to a mediation agreement reviewed by Reuters, and CITIC took ownership of the steel. It was when CITIC moved to retrieve the collateral that the banker visited the warehouse and discovered that the 291-tonne pile of steel was no longer there, Wang said. The bank is still in court trying to recoup its losses.

 

The missing collateral is a setback for CITIC. But it is indicative of a much wider problem that could endanger the health of China’s financial system – fraudulent or “ghost” collateral. When bank auditors in China go looking, they too often find that collateral recorded on the books simply isn’t there.

At risk of spoiling the surprise, what has been going on in China, either in conventional asset-backed lending, as well as among the more esoteric, complex commodity-funded deals, which we discussed extensively in the early part of 2013

 

… is nothing less than pure fraud: in some cases, collateral that has been pledged simply doesn’t exist. In others, it disappears as borrowers in financial distress sell the assets. There are also instances in which the same collateral has been pledged to multiple lenders, i.e. rehypothecated. “One lawyer said he discovered that the same pile of steel was used to secure loans from 10 different lenders” Reuters reports.

And while China was able to brush off its “ghost collateral” problems three years ago when it still had substantial debt incurrence capacity, and debt/GDP was about 100% lower, now that it is becoming increasingly difficult to keep the Ponzi scheme – by definition – running, especially with the recent crackdown on shadow banking, the pervasive collateral problems are about to become a huge headache for Beijing again: with the mainland facing its slowest growth in over a quarter of a century, defaults are mounting as borrowers struggle to repay their loans.

The danger of fraudulent collateral in this situation, say economists, is that it exacerbates the problem of bad debt for China’s banks, increasing the risk of financial turmoil.

 

As growth slows, lenders can expect more nasty surprises, said Xin Qingquan, professor of accounting at Chongqing University. More instances of fake collateral will arise, he said.

Things were going fine until May 24, when out of the blue Moody’s downgraded China’s credit ratings for the first time in almost three decades, saying it expects the financial strength of the economy will erode in the coming years as economic growth slows and debt continues to rise.  Naturally, the last thing China needed was the unexpected spotlight on its breathtaking debt load, and the excess scrutiny outside on what is for all intents and purposes, the world’s biggest debt bubble.

Ironically, the US already learned its lesson almost a decade ago that any financial system is only as strong as its weakest collateral: the 2008 global financial crisis showed how the combination of lax lending standards and overvalued collateral can lead to disaster. The catalyst for that meltdown was the collapse in the value of housing in the United States that served as security for a mountain of highly leveraged lending, the so-called subprime mortgages. Now, banks in the world’s second-biggest economy face their own collateral risks. Fraudulent borrowers, corrupt bankers, poor risk assessment and a weak legal system are conspiring to load China’s financial system with loans lacking genuine collateral.

* * *

But back to Reuters, whose reported Engen Tham writes that his review of dozens of court cases involving collateralized loans and interviews with lawyers, regulators and 30 bankers in China “reveal that fraudulent collateral – in the form of buildings, private apartments, copper and steel – is haunting loans across a wide swath of business and industry.

The bankers interviewed by Reuters said they had encountered multiple methods by which loans were fraudulently secured, including the use of fake land certificates and bogus warehouse receipts. Most of the bankers said that kickbacks were prevalent, with loan officers turning a blind eye to the quality of collateral and knowingly accepting dubious and even fraudulent documents. Two of the bankers said they themselves had taken bribes to smooth the approval of loans.

Overall, 23 of the 30 bankers described the existence of ghost collateral as a serious problem and expected more instances to emerge as the Chinese economy slows. The bankers interviewed come from 13 banks in China, including some of the nation’s biggest lenders.

HUGE ISSUE

There are no official statistics or estimates of the problem. But fraudulent collateral is “a huge issue,” said Violet Ho, senior managing director and co-head of Greater China Investigations and Disputes Practice at Kroll, which conducts corporate investigations on the mainland. “Often you also see that the paperwork around collateral may be dodgy, and the bank loan officer knows, the intermediary knows, and the goods owner knows – so it’s essentially a Ponzi scheme.”

Making matters worse for China is that its financial system is only fractionally less corrupt than its legal system.

Even when banks resort to the courts, there’s no guarantee they’ll get their money back. Inadequate legal protections for collateral and the complexity of some borrowers’ business dealings can make it difficult for lenders to foreclose. That’s what happened to CITIC after it made the $2.71 million loan to Hanning Steel. When Hanning defaulted, CITIC won a court order freezing the collateral, after which the parties entered into mediation, lawyer Wang Chaoyu said. But the collateral is still missing.

In response to questions from Reuters, CITIC said that the case was still being enforced in the courts and that it had since strengthened its risk management procedures. Representatives of Hanning did not respond to questions. When Reuters visited Hanning’s registered Shanghai address, there was no sign of a company office there.

Meanwhile, total debt in China rose to 277% of GDP at the end of 2016, according to UBS, and 300% according to the IFF. That’s twice the figure eight years ago.

Additionally, bad loans are mounting fast: while officially, just 1.74% of commercial bank loans were classified as non-performing at the end of March most analysts admit the true figure is much higher. Recently Fitch Ratings estimated non-performing loans in China’s financial system could be as high as 15 percent to 21%, or trillions of dollars. This in a banking sector that has undergone a massive credit expansion. The value of outstanding bank loans ballooned to $17.2 trillion at the end of April from $5.8 trillion at the end of 2009. The total size of China’s financial system is roughly $35 trillion, more than double the size of the US. In September last year, the Bank for International Settlements warned that excessive credit growth in China meant there was a growing risk of a banking crisis in the next three years.

In a report last September, Fitch Ratings estimated that it would cost as much as $2.1 trillion to clean up China’s bad debt – almost a fifth of annual Chinese economic output. According to our estimates, the number was substantially higher: nearly $8 trillion. By comparison, during the global financial crisis, the direct cost of rescuing U.S. banks was about eight percent of gross domestic product.

Adding to the problems is the implied assumption of virtually infinite moral hazard within China’s financial system: the fact that China’s banking system has been shielded by the expectation of government bailouts means lenders haven’t developed the risk assessment tools needed to judge loan exposure as banks elsewhere have. It is this challenge of assessing the creditworthiness of borrowers that explains why physical collateral is so important for banks in China.

QINGDAO

As we reported first three years ago, big foreign (or domestic) banks have not been immune to the risks of fraudulent collateral. In a high-profile case that came to light in June 2014, banking giants including HSBC, Standard Chartered and others were exposed to potential losses totaling several billion dollars on loans to Decheng Mining, a private metals trading company in Qingdao. The company faked warehouse receipts for the same batch of metal, using it as security for multiple loans. 

To be sure, it’s not hard to dupe bankers and lawyers in a physical inspection of collateral. Warehouses often contain hundreds of piles of steel or copper, making it difficult for an untrained observer to identify the specific pile that is serving as security for a loan their bank has issued. “One pile of iron ore looks exactly like every other pile of iron ore, so I may say it’s mine, but it could be anyone’s,” says Kroll’s Violet Ho.

The value and quality of security in China’s real estate sector is a concern for bankers in China. Fitch Ratings has mentioned “wildly misleading” property valuations as one reason why high collateral coverage may not protect banks. Another is a sudden fall in property prices. According to Fitch’s Grace Wu, over 60 percent of financing in China uses property as collateral in some way.

 

The lack of a consistent and open nationwide property registration system also increases the prevalence of fraudulent collateral.

“There is a complete lack of transparency of information,” says Ho. The United States, she notes, has open property records that buyers can search to ascertain the true owner of a building. “You can’t do that in China. There is no easy way to verify the information, so you have to take people’s word for it.”

“DEAD PIGS AREN’T AFRAID OF BOILING WATER”

Bankers say borrowers often provide them with fake cash-flow statements, so property buyers can be more leveraged than they appear. The falsification of mortgage certificates is also a problem, they say.   That’s how the International Finance Corporation (IFC), the World Bank’s investment arm, got taken for tens of millions of dollars by one of China’s richest men.

As Reuters describes this fascinating story, the deception began in 2007, after the IFC lent the money to Hong Kong-listed Zhejiang Glass Co Ltd, then owned by Chinese tycoon Feng Guangcheng. Two years later, the IFC made an unpleasant discovery: In discussions with other banks it found that the collateral for the IFC loan had also been pledged to other lenders, according to a person with direct knowledge of the case. Anxious IFC officials hurriedly dispatched lawyers to the land and company registration authorities in Zhejiang Province, where they made another startling discovery: The stamps on the mortgage certificates for the land, properties and industrial machinery used to secure the loan were fake, people familiar with the case said.

Concluding they’d been swindled, IFC officials traveled to the eastern city of Hangzhou in late 2009 to confront Zhejiang Glass’s chairman. Feng, who sat at the head of the table with a junior by his side, didn’t want to dwell on the loan, recalled one person who attended the meeting. He admitted right away that the documents were fake and quickly tried to move the discussion along.

“His attitude was, ‘Dead pigs aren’t afraid of boiling water’,the person said, using a Chinese proverb to describe Feng’s attitude: Any attempt to punish him was futile because the loan was already lost.

In 2010, a court ruled that Zhejiang Glass should repay the loan to the IFC. That never happened. In 2012, local media reported that Feng was convicted in a separate fraud case and was sentenced to eight-and-a-half years in prison. The company was declared bankrupt the next year and delisted in Hong Kong. Ultimately, the IFC recovered only 2 percent of its loan, according to a person familiar with the case. In response to questions from Reuters, the IFC called the case an isolated incident related to the larger fraud perpetrated by Zhejiang Glass.

One thing is 100% certain: there are hundreds if not thousands Feng Guangcheng in China, pledging the same collateral multiple times, ultimately putting banks on the hook for billions in losses.

INSIDE JOBS

Sometimes it is the banks themselves who are facilitators of collateral fraud. In 2015 the former vice president of Agricultural Bank of China Ltd, Yang Kun, was sentenced to life imprisonment for accepting bribes of more than 30 million yuan ($4.4 million) in connection with loans, among other things, according to local media reports.

In another case from 2015, a 37-year-old man named Lou Zhenshen, who controlled a trading company, was convicted of bribing the president of a branch of CITIC Bank with 50,000 yuan (about $7,250) in cash and supermarket vouchers worth 10,000 yuan. According to court records, the judge said Lou had used fake warehouse receipts to apply for loans and had repeatedly used the same metal as collateral. Lou was also convicted of paying a 200,000 yuan bribe to a credit officer at China Minsheng Bank.

While “kickbacks for loan approvals is routine,” said Gary Tian, a professor at Macquarie University in Sydney who has researched corruption and bank lending in China, “near-infinite rehypothecation” of the same collateral – as Goldman explained it several years ago – however is not.

So are China’s collateral problems fixed…

CITIC Bank said that in the past two years it has focused on managing employee behavior, strengthening accountability and raising the cost for employees who violate rules. Still, more than three years since lawyer Wang Chaoyu took the phone call from the incensed CITIC banker about the missing collateral from Hanning Iron and Steel, the lender is still trying to get back some of its money. CITIC is now trying to sell several apartments that were put up as part of the security for the ill-fated loan.

… or is it just getting started?

Four years ago we called China’s collateral fraud “a Bronze Swan.” As Reuters has discovered, contrary to conventional opinion, nothing has been fixed and the problem remains however it has been deftly swept under the rug of trillions in new debt as China’s ponzi scheme continues to grow. And yet, if and when the day comes that the Chinese debt creation machinery grinds to a halt, or – worse – goes into reverse, that’s when all the abovementioned problem, which we contend are the weakest link in China’s financial system, will re-emerge, prompting the world’s most furious scramble to recover collateral first. It will also be the catalyst that finally tips China’s financial system, which for years now has been in the ponzi finance phase, over into the inevitable, and terminal, “Minsky moment.

4. EUROPEAN AFFAIRS

ENGLAND/LONDON

Another Islamist attack: this time in London

(courtesy zerohedge

“This Is For Allah” – Seven Killed In London Terrorist Rampage; Three Assailants Shot

The latest:

  • Seven people have been killed and at least 48 injured in a van and stabbing terrorist attacks took place in London on Saturday night
  • The first attack took place on London Bridge followed shortly by an attack in Borough Market

  • Three attackers were shot dead. One was seen with canisters strapped to his body.
  • The Met Police say they believe all bridge attackers have been killed
  • The attacks started when a white van drove into Pedestrians on London Bridge around 10:30pm on Saturday.
  • A BBC eyewitness said ‘They shouted ‘this is is for Allah’, as they stabbed indiscriminately’
  • ‘I saw a man with a large blade’: witnesses describe the attack after the van attack.
  • Theresa May and the Met Police have declared the attacks are being treated as acts of terror
  • Donald Trump told London “we are with you” after the terror attacks.
  • This is the third terror attack in the UK since March:
    • On 22 May, 22 people were killed and 116 injured in a suicide bombing at Manchester Arena.
    • On 22 March, six people died, including the attacker, and at least 50 people were injured in an attack near the Houses of Parliament.

Timeline of London events via Telegraph (local time)

  • 10.07pm Ambulance services were called to reports of a vehicle ploughing through pedestrians on London Bridge, arriving within six minutes.
  • 10.08pm Police are called to the scene. Officers then attended a second incident at nearby Borough Market after reports of stabbings.
  • 10.16pm Within eight minutes, three male suspects were shot dead in Borough Market by police marksman. The men were wearing what looked like explosive vests but these were later found to be hoaxes.
  • 12.25am on Sunday Both incidents were declared by the Metropolitan Police as terror attacks.
  • 4am Police confirm six people were killed in the rampage.
  • 9.30am Seven people have died, Metropolitan Police Commissioner Cressida Dick confirms

* * *

Update 11:20 pm: ‘They could be anywhere, this is out of control’

Speaking to the NYT, eyewitness Danny Farre said: “this is a complete nightmare, we are stuck here while there are maniacs on the loose and nobody is helping us. They could be anywhere, this is out of control.”

Les Hunter, 33, from Liverpool, who was visiting a friend in London, stepped out of a pub as the incident unfolded at 10.15 pm. “We saw people running out of Borough Market and straight after heard gunshots,” he said. “We went back into the pub and people starting running in telling us to get down and hide,” he recalled. “I ran up to the gents and hid, but when I looked out the window I saw a guy with blood all over his face and T-shirt.”?

* * *

10:53 pm. A total of six people were killed in London attacks, three terrorism suspects shot.

London Police have announced that six people have been killed and 20 injured in the attack. Three attackers have been shot dead by police, Scotland Yard said. Police said they believed there were no more than three attackers. “Armed response officers then responded very quickly and bravely and confronted the three male suspects who were shot and killed on Borough Market,” Mark Rowley, Britain’s top anti-terrorism officer, said. “Sadly, six people have died in addition to the three attackers shot by police,” he said. “The suspects had been confronted and shot by police within eight minutes of the first call. The suspects were wearing what looked like explosive vests but these were later established to be hoaxes.”

Meanwhile, London Ambulance says the number of people taken to hospital has risen from 20 to more than 30.

Below is the full statement from Met Police assistant commissioner Mark Rowley.

“Since late yesterday evening [Saturday, 3 June], the Metropolitan Police Service has been responding to incidents in the London Bridge and Borough Market areas of south London. We are treating this as a terrorist incident and a full investigation is already underway, led by the Met’s Counter Terrorism Command.

“You will understand that our knowledge of the incident is still growing but what we understand at the present time is:

  • At 22:08hrs yesterday evening we began to receive reports that a vehicle had struck pedestrians on London Bridge.
  • The vehicle continued to drive from London Bridge to Borough Market.
  • The suspects then left the vehicle and a number of people were stabbed, including an on-duty British Transport Police officer who was responding to the incident at London Bridge. He received serious but not life-threatening injuries. His family has been informed.
  • Armed officers responded very quickly and bravely, confronting three male suspects who were shot and killed in Borough Market. The suspects had been confronted and shot by the police within eight minutes of the first call. The suspects were wearing what looked like explosive vests but these were later established to be hoaxes.

“The ongoing operation is led by the Met, working closely with British Transport Police, City of London Police, the London Ambulance Service and the London Fire Brigade.

“At this stage, we believe that six people have died in addition to the three attackers shot dead by police. And at least 20 casualties have been taken to six hospitals across London.

“I’d like to repeat our request for the public to avoid the following areas: London Bridge and Borough Market. This is to allow emergency services to deal with this incident.

“The investigation is being led by the Counter Terrorism Command and we would ask anybody who has images or film of the incident to pass those to police by uploading it at www.ukpoliceimageappeal.co.uk.

“Our thoughts are with all those involved and those responding to both incidents. Those who are concerned about a loved one can contact the Casualty Bureau on 0800 0961 233.

“We are reviewing and planning to strengthen our policing stance across London over the forthcoming days, and there will be additional police and officers deployed across the Capital.

“I would like to ask the public to remain vigilant and let us know if they see anything suspicious that causes them concern and dial 999 immediately.”

Met Police’s Mark Rowley on what police know so far about London attack and how it happened http://bbc.in/2qMsMGp 

Update 10:54pm: How the London Bridge attack played out

BBC correspondent Tom Symonds outlines how events unfolded on Saturday night, saying witnesses described seeing a van crashing into pedestrians on the southern side of London Bridge.

Eyewitnesses said three people – armed with knives – were seen jumping out of the van and they began attacking. Mr Symonds said a police shooting followed the attack but it was not clear who was shot, nor how many. Some eyewitnesses claimed they saw one attacker dead or not moving, and another on the ground who may have been alive. The alleged attackers ran round the corner from where the van hit the people on the bridge to Borough Market, he said.  Explosions were heard coming from the bridge, Mr Symonds says. He suspects it was a controlled explosion but nothing has been confirmed by police. From being at the scene, Mr Symonds said he did not think the incident was continuing.

* * *

Update 10:51 pm. ‘All they wanted to do was kill people’

Cited by the Telegraph, eyewitness Gerard Vowls said he was near the Borough market when he saw three attackers.

“All they wanted to do was kill people,” he said. “It’s the hardest thing I’ve ever seen,” he told the Wall Street Journal.

* * *

Update 10:49 pm.  President Trump spoke with British PM Theresa May, offers “the full support of the United States”

* * *

Update 10:33 pm. An eyewitness on London Bridge, told the BBC he saw three men stabbing people indiscriminately, shouting “this is for Allah”.

“I saw these three Muslim guys run up and started stabbing this girl. They attacked her and stabbed another guy. They started running up the road, stabbed the bouncer at the Tavern. “I was throwing bottles at them, pint glasses, stools, chairs, but I was defenceless.

“They were running up saying ‘this is for Allah’.”

“They stabbed this girl maybe ten, 15 times. She was saying ‘help me, help me’.” He claimed he had hit one of the attackers on the back of the head by throwing things at him, and was chased, but escaped unharmed.

John Stokes, London bus tour guide, said he counted eight people lying in the road or pavement receiving medical treatment on London Bridge.

He had arrived on the scene with a bus full of tourists moments after the attack, initially thinking it was a one-off traffic accident before seeing the number of casualties. After the police arrived, he said, an office banged on the bus door and told everyone on the bus to run towards Monument. “All the tourists on our bus ran for their lives,” he said.

* * *

Update 10:20 pm. A picture has emerged ot the London Bridge attack vehicle: according to BBC, this is a picture of the white van Hertz van which is seen crashed into what looks like railings.

* * *

Update 10:18 pm:. UK Muslim Council “appaleged and angered”

In a statement, Harun Khan, Secretary General of the Muslim Council of Britain, said: “I am appalled and angered by the terrorist attacks at London Bridge and Borough Market, in my home city. These acts of violence were truly shocking and I condemn them in the strongest terms.

“Muslims everywhere are outraged and disgusted at these cowards who once again have destroyed the lives of our fellow Britons. That this should happen in this month of Ramadan, when many Muslims were praying and fasting only goes to show that these people respect neither life nor faith.

“My prayers are with the victims and all those affected. I commend the work of our emergency services working hard to keep us safe and cope with the ensuing carnage.”

* * *

Update 10:14 pm: According to Sky News, the London police are still trying to locate one suspect.

London Ambulance Service says at least 20 people have been taken to six hospitals across London

Sky Sources: Police are still trying to locate one suspect

Update 10:07 pm: The NYPD is saying there there are no specific, credible threats in New York City following London’s terror attack. The U.S. Department of Homeland Security issued a statement saying they are “monitoring” the situation in Britain.

‘We are working with our interagency partners and foreign counterparts to gain further insight into reported attacks against civilians on London Bridge and in the surrounding area,” the statement read. “U.S. citizens in the area should heed direction from local authorities and maintain security awareness. We encourage any affected U.S. citizens who need assistance to contact the U.S. Embassy in London and follow Department of State guidance.”

The twitter account of the NYPD Counterrrorism unit has tweeted that “while there are no specific/credible threats to #NYC, our Critical Response Command is deployed at heavily travelled pedestrian locations”

* * *

Update 10:01 pm. London Ambulance issued a statement about the incident in London Bridge according to which “we have taken at least 20 patients to six hospitals across London.”

end

 

 

SPAIN

Banco Popular, the 6th largest Spanish bank has just witnessed it’s stock crash the most on record accompanied by a huge run on the bank.  It seems that no buyer  has come forth to buy the insolvent bank

(courtesy zero hedge)

 

“Don’t Panic” Banco Popular Tells Employees After Stock Crashes Most On Record

It is increasingly likely that Italy (which has been busy bailing out various insolvent banks while pretending it isn’t) won’t be the first nation to try out Europe’s new BRRD “bail-in” insolvency directive. Instead, that honor may go to Spain where the sixth-largest bank, Banco Popular plunged the most in 28 years amid investor concerns that the bad debt-laden bank may have to liquidate as neither a buyer nor a new capital raise appear likely.

As discussed yesterday, the underlying problem with Popular, as with most European banks, is familiar: the bank has been unable to sell €37 billion of nonperforming 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, which has prompted concerns about a deposit run, and – in circular fashion – sent the bank’s asset prices crashing, which in turn is prompting depositors to pull even more money out of the bank, and so on…

But besides depositors, the plunge appears to have also spooked the bank’s own employees, and today Spain’s Expansion paper reports that Banco Popular Chairman Emilio Saracho sent a letter to staff assuring them the bank remains solvent after Friday’s stock crash. In the letter, Saracho says the bank is facing “difficult circumstances, but we’re making the greatest effort to overcome them.” Furthermore, the Chairman says that Popular has a number of options, citing a possible capital increase or corporate deal. What he didn’t say is that the reason why the stock is where it is, is because the market no longer believes either of these options is credible.

More from the latter, courtesy of Expansion, google translated:

“From the management we are aware that the information that is being published affects the work and the spirit of each one of you, but our obligation as professionals is to focus on the day to day and on the clients, since the activity of the bank must continue as it has so far” begins the statement, whose target is the Professional Association of Directors Banco Popular.

 

The central message of this letter sent yesterday is the following: “Banco Popular remains solvent and has positive net worth”.

 

Our bank is in a difficult situation,” says Saracho. “For this reason and in order to meet the regulatory requirements that the European Central Bank demands for next year and guarantee our strength and future, we are working on different alternatives.

 

“Our customers and our shareholders are the most important thing for us, and for this reason we must send them a message of confidence and confidence that we are making every effort to overcome this situation,” the letter concludes.

In short, Saracho urged the bank’s group of 1,800 managers to continue working hard; saying business activity should go on as normal, and that it was important to instill confidence in clients and shareholders. Unfortunately, one look at the bank’s recent surge in default risk as seen in its senior bond CDS, suggests that “those who panic first”, may be doing the smart thing…

(courtesy zero hedge)

Spanish Banking Crisis Spreads As Banco Popular Credit Curve Inverts

Having told its employees “don’t panic” over the weekend (at the crashing stock and bond prices of Spain’s 6th largest bank), it appears investors are ignoring that message as Banco Popular’s credit curve has inverted for the first time since 2012 in the biggest red flag yet that Spain’s banking crisis is systemic and about to test the EU’s bail-in laws.

Banco Popular Chairman Emilio Saracho sent a letter to staff assuring them the bank remains solvent after Friday’s stock crash, courtesy of Expansion, google translated:

“From the management we are aware that the information that is being published affects the work and the spirit of each one of you, but our obligation as professionals is to focus on the day to day and on the clients, since the activity of the bank must continue as it has so far” begins the statement, whose target is the Professional Association of Directors Banco Popular.

 

The central message of this letter sent yesterday is the following: “Banco Popular remains solvent and has positive net worth”.

 

Our bank is in a difficult situation,” says Saracho. “For this reason and in order to meet the regulatory requirements that the European Central Bank demands for next year and guarantee our strength and future, we are working on different alternatives.

 

“Our customers and our shareholders are the most important thing for us, and for this reason we must send them a message of confidence and confidence that we are making every effort to overcome this situation,” the letter concludes.

In short, Saracho urged the bank’s group of 1,800 managers to continue working hard; saying business activity should go on as normal, and that it was important to instill confidence in clients and shareholders. Unfortunately, one look at the bank’s recent surge in default risk as seen in its senior bond CDS, suggests that “those who panic first”, may be doing the smart thing.. and now the curve has inverted (lower pane) for the first time since 2012’s crisis peak…

As WolfStreet.com’s Don Quijones asks (and answers), has the time finally come to test the EU’s bail-in law?

The shares of Spain’s sixth biggest bank, Banco Popular, plunged 36% last week to €0.43, reducing the bank’s market capitalization to €1.7 billion. Just three weeks ago, when there was still a glimmer of hope that things could be turned around, it was worth almost double that. Its shares traded at €15 ten years ago, before the collapse of Spain’s mind-boggling housing bubble that left Popular holding billions of euros of real estate assets.

Popular may not be a systemically important institution, but it’s nonetheless an institution of great import. It has the largest portfolio of small business customers in Spain and enjoys the patronage of one of Spain’s most influential institutions, Opus Dei. Its well-heeled members are among the bank’s most important shareholders and investors, and they stand to lose a lot of money if a last-minute buyer is not found soon.

This is an outcome that can no longer be discounted, especially after reports emerged on Thursday that senior officials of the ECB’s regulatory arm, the Single Supervisory Mechanism, had warned the bank could be wound down if it fails to find a buyer. But the EU agency charged with overseeing bank failures later issued a statement saying it “never issues warnings about banks.”

But the damage has already been done. And it’s not just Opus Dei, or Popular’s thousands of long-suffering retail investors, that could end up paying a heavy price. Popular’s investors also include PIMCO, one of the world’s largest asset managers, which owned €279 million of Popular’s outstanding €1.25 billion of face value in AT1 bonds at the end of March, making it by far the largest holder at the time.

These AT1 bonds go by another more familiar name: contingent convertible bonds, or Co-Co bonds. These are financial instruments that pay high coupons, because they come with a high risk, designed as they are to absorb losses at times of distress, by converting to equity or being written down when the lender’s capital ratio falls below a certain point.

Popular’s second batch of Co-Cos, worth €750 million, dropped to 59 cents on the euro, the lowest point ever reached by a bank Co-Co bond.

So far, despite their high-risk nature, no AT1 bond has ever been bailed in. But Popular, as a mid-sized bank that has arguably exhausted all its possibilities of resurrection, is in a terribly weak position.

“It would be the first triggering of an AT1,” Lloyd Harris, an analyst at Old Mutual, told the FT. “These types of events are more likely for Popular than they ever were for Deutsche Bank,” he added, referring to Deutsche Bank’s Co-Cos that got trampled last year.

If a triggering occurs, PIMCO and other investors would take a hit. If Popular were wound down, many more wealthy global investors, particularly in Latin America, would also be hit hard. They include the Luksic, Chile’s richest family, which bought 3% of Popular’s shares at the beginning of May in an operation then valued at €87 million. It’s now worth little over half of that. Another investor that stands to lose big time is the Mexican billionaire Antonio del Valle, who invested €450 million in Popular in 2013.

In recent weeks rumors have abounded that a loose consortium of Latin American investors is planning to take over the bank, once its share price has tanked low enough. But for the moment, they are just rumors.

By now, the only bank that appears to still have a passing interest in buying Popular is Spain’s biggest bank, Santander, which would like nothing more than to get its hands on Popular’s retail business, in particular that massive portfolio of small business clients. But for that to happen, Popular’s over €30 billion of impaired real estate assets would have to be neutralized, almost certainly involving taxpayer funds. Something would also have to be done to nullify the class action law suits mushrooming on the other side of the Atlantic over Popular’s alleged misleading of investors in the lead-up to its last capital expansion, in 2016 (What’s the matter with these investors that bought the capital-expansion hype? Don’t these people read WOLF STREET?)

The big question is whether the ECB and the European Commission would lend their approval to such a takeover, especially if billions of euros of public funds are required. Having just awarded Italy’s Monte dei Paschi a last-minute reprieve, prompting accusations that even banks that are not too big to fail are still getting bailed out in Europe 10 years after the financial crisis, they may feel that the time has finally come to test out the EU’s bail-in law.

And if they do, a lot of investors, rather than taxpayers, could end up losing their shirts, which would be a welcome change, while market players may even begin questioning just how safe Spain’s saved banking system really is. By Don Quijones.

Banco Popular “itself cannot at this point make a rough calculation” of what its value is, “and if they can’t, neither can we.”Read…  Banco Popular’s Co-Co Bonds Plunge as Balance Sheet Chaos Revealed in Potential Forced Sale

end

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Wow!! this happened fast!.  Saudi Arabia, Egypt, UAE, and Bahrain have cut off diplomatic ties and shut all borders with Qatar blaming this tiny country of sponsoring terrorism.  It looks like Qatar is being scapegoated and this will cause oil to drop as OPEC will have less of an influence

(courtesy zero hedge)

Saudi Arabia, Egypt, UAE, & Bahrain Cut Diplomatic Ties, Shut All Borders With Qatar

Just days after president Trump left the region, a geopolitical earthquake is taking place in the Middle East tonight as the rift between Qatar and other members of the (likely extinct)Gulf Cooperation Council explodes with Bahrain, UAE, Saudi Arabia, and Egypt cutting all diplomatic ties with Qatar accusing it of “speading chaos,” by funding terrorism and supporting Iran.

The dispute between Qatar and the Gulf’s Arab countries started over a purported hack of Qatar’s state-run news agency. It has spiraled since, and appears to be climaxing now… just days after President Trump left the region.

As Al Arabiya reports, Bahrain has announced it is cutting diplomatic ties with Qatar, according to a statement carried on Bahrain News Agency.

The statement on Monday morning said Bahrain decided to sever ties with its neighbor “on the insistence of the State of Qatar to continue destabilizing the security and stability of the Kingdom of Bahrain and to intervene in its affairs”.

 

The statement also said Qatar’s incitement of the media and supporting of terrorist activities and financing groups linked to Iran were reasons behind the decision.

 

“(Qatar has) spread chaos in Bahrain in flagrant violation of all agreements and covenants and principles of international law Without regard to values, law or morals or consideration of the principles of good neighborliness or commitment to the constants of Gulf relations and the denial of all previous commitments,” the statement read.

 

Qatari citizens have 14 days to leave Bahraini territories while Qatari diplomats were given 48 hours to leave the country after being expelled. Meanwhile, Bahrain has also banned all of its citizens from visiting or residing in Qatar after the severance of ties.

Additionally, Bahrain has has closed both air and sea borders with Qatar.

Saudi Arabia then confirmed the same – cutting ties and shutting down all sea, airspace, and land crossings with Qatar as well as dissolving Qatar’s role in the Saudi-led coalition fighting against Yemen. Emirates, Etihad, Saudia, Gulf Air, and Egypt Air are no longer allowed to fly to Qatar and Saudi Arabia is providing facilities, services to Qatari pilgrims

Egypt then followed, confirming it was cutting diplomatic ties with

Then UAE confirmed it would cut ties, shut down all sky, water, and land crossings, and expel all Qataris within 48 hours.

The Maldives also just cut diplomatic ties with Qatar.

All of this happens within 24 hours of Iran calling out ‘The West’ for ignoring the real sponsors of terrorism around the world and UK’s Labor party leader outright name-shaming Saudia Arabia’s funding of terrorism.

Qatari officials did not immediately respond to a request for comment.

As a reminder, documents obtained by Middle East Eye show strategic alliance includes pledge by Ankara to protect Gulf state from external threats…

In December 2015, Turkey announced, to the surprise of many, that it planned to establish a military base in Qatar. Behind the scenes, the agreement was about forming a major strategic alliance.

 

After a 100-year hiatus, Turkey is militarily back in the Gulf and ramping up its presence overseas. In January, Ankara announced that it would also establish a military base in Somalia.

 

Specific details about the Qatar agreement, which Turkey described as an alliance in the face of “common enemies”, remain scant, but Middle East Eye has acquired copies of the agreements, as well as further details, which include a secret pledge by Ankara to protect Qatar from external threats.

Did Qatar just get scapegoated in the ‘war on terror’? One thing seems clear, support for a Syrian gas pipeline will be dwindling and with it the need for a Syrian war.

Notably, this raises further doubts about OPEC’s stability. As Bloomberg notes, while Middle East ructions have historically added risk premia to oil prices, discord here could theoretically put downward pressure on prices as OPEC members struggle to maintain unity and compliance on production cuts.

 

 

end

 

Nobody saw this coming.  The shock sends Qatari stock market down 8% as all land based border points have now been cut off. Seems that Trump is having a huge influence with respect to the terrorism sponsored by Iran.  However the pipeline link from Qatar through Saudi Arabia and onto Syria then the rest of Europe is not dead..

(courtesy zero hedge)

 

(courtesy zero hedge)

It’s A “Geopolitical Earthquake”: A Stunned World Responds After Saudi Alliance Cuts All Ties With Qatar

Virtually nobody saw it coming.

Late on Sunday night, the Saudi-led alliance of Gulf Arab states, Saudi Arabia, the UAE and Bahrain including Egypt, shocked the world when they announced they had severed ties and closed borders with one of the Gulf’s wealthiest, if smallest, neighbors Qatar, a (now former) member of the Gulf Cooperation Council in what we called a “geopolitical earthquake” and what Bloomberg dubbed an unprecedented move designed to punish one of the region’s financial superpowers for its ties with Iran and Islamist groups in the region.”

As we noted first last night, just days after president Trump left the region, a “geopolitical earthquake” took place in the Middle East as the rift between Qatar and other members of the Gulf Cooperation Council exploded with Bahrain, UAE, Saudi Arabia, and Egypt cutting all diplomatic ties with Qatar accusing it of “spreading chaos,” by funding terrorism and supporting Iran. Saudi Arabia, Bahrain, the United Arab Emirates and Egypt all said they will suspend air and sea travel to and from the Gulf emirate. Saudi Arabia will also shut land crossings with its neighbor, potentially depriving the emirate of imports through its only land border.

It was not immediately clear when the proposed measures would be implemented. Saudi Arabia said it would “begin immediate legal measures with friendly, sisterly countries and international companies to implement that measure as quickly as possible for all types of transit from and to the state of Qatar.”

Saudi Arabia cited Qatar’s support of “terrorist groups aiming to destabilize the region,” including the Muslim Brotherhood, Islamic State and al-Qaeda. It accused Qatar of supporting “Iranian-backed terrorist groups” operating in the kingdom’s eastern province as well as Bahrain.  Saudi Arabia, along with Bahrain and the U.A.E., gave Qatari diplomats 48 hours to leave.


Donald Trump meets Qatar’s ruler Sheikh Tamim bin Hamad al-Thani in Riyadh in May

Qatar responded by saying it regrets the “unjustified” decision of the gulf nations to sever ties and called the accusations “baseless”, saying they were part of a plan to “impose guardianship on the state, which in itself is a violation of sovereignty.”

The first hints that not all is well emerged just three days after Trump left Riyadh as part of his first international trip in May – during which the US president and Saudi King Salman singled out Iran as the world’s main sponsor of terrorism – when the state-run Qatar News Agency carried comments by Qatari ruler Sheikh Tamim bin Hamad Al Thani criticizing mounting anti-Iran sentiment. Officials quickly deleted the comments, blamed them on hackers and appealed for calm, however it was too late and Saudi and U.A.E. media outlets then launched verbal assaults against Qatar, which intensified after Sheikh Tamim’s phone call with Iranian President Hassan Rouhani over the weekend in apparent defiance of Saudi criticism.

“Qatar is right in the middle of the GCC countries and it has tried to pursue an independent foreign policy,” said Peter Sluglett, director of the Middle East Institute of the National University of Singapore quoted by Bloomberg. “The idea is to bring Qatar to heel.”

Qatar’s geopolitical importance can not be underscored, not only for its vast wealth, but because Qatar is one of the biggest producer of liquefied natural gas (and arguably the source of the 6 year long Syrian proxy war, due to Qatar’s documented desires to pass a natgas pipeline into Europe through Syria), and also hosts the forward headquarters of CENTCOM, the U.S. military’s central command in the Middle East.

And speaking of Qatar’s wealth, while the country has a population smaller than Houston, it has one of the world’s largest sovereign wealth funds with over $335 billion investments in companies from Volkswagen, to Rosneft, Barclays, Credit Suisse and Tiffany’s.

The economic fallout loomed immediately, as Abu Dhabi’s state-owned Ethihad Airways, Dubai’s Emirates Airline and budget carrier Flydubai said they would suspend all flights to and from Doha from Tuesday morning until further notice. Qatar Airways said on its official website it had suspended all flights to Saudi Arabia.

* * *

What prompted the surprising move by the Gulf-states?

According to some, emboldened by “warmer” ties with the US under President Trump, the Saudi-led alliance is seeking to stamp out any opposition to forming a united front against Shiite-ruled Iran. And while Monday’s escalation is unlikely to hurt energy exports from the Gulf, it threatens to have far-reaching effects on Qatar according to Bloomberg.

“There are going to be implications for people, for travelers, for business people. More than that, it brings the geopolitical risks into perspective,” Tarek Fadlallah, the chief executive officer of Nomura Asset Management Middle East, said in an interview to Bloomberg Television. “Since this is an unprecedented move, it is very difficult to see how it plays out.”

The stunned confusion explains the sudden, adverse reaction in Qatar assets, which saw the Qatar QE Index of stocks plunge tumble 8%, the most since 2009 to the lowest since January 2016…

… while Dubai’s index fell 1.2%. Separately, Qatar bond yields surged in the worst day in 7 months as Qatar CDS spiked to 2 month highs.

There were also fireworks in the FX arena, where forward contracts for the Qatari riyal soared by over 200bps  to 4.05%, suggesting a currency devaluation may be imminent as a result of the economic blockade.

While Brent initially rose as much as 1.6% to $50.74 a barrel, it has since pared all gains as concerns that the tenuous OPEC alliance may be about to collapse, resulting in a fresh flood of crude in the market. That said, keep an eye on the Straits of Hormuz: heightened tensions between Saudi Arabia, the world’s biggest crude exporter, and Iran typically draw market attention to the tight waterway through which about 30% of the seaborne oil trade passes.

Politicians, largely behind the curve, chimed in and U.S. Secretary of State Rex Tillerson said it’s important that the Gulf states remain unified and encouraged the various parties to address their differences. Speaking at a news conference in Sydney, he said the crisis won’t undermine the fight on terrorism. “What we’re seeing is a growing list of some irritants in the region that have been there for some time,” Tillerson said. “Obviously they’ve now bubbled up to a level that countries decided they needed to take action in an effort to have those differences addressed.”

Making the matter a particular headache for the US State Department is that all five countries involved in the dispute are U.S. allies, and Qatar has committed $35 billion to invest in American assets. The Qatar Investment Authority, the country’s sovereign wealth fund, plans to open an office in the Silicon Valley.

Then there is the issue of the 2022 World Cup: As Reuters notes, “the diplomatic broadside threatens the international prestige of Qatar, which hosts a large U.S. military base and is set to host the 2022 World Cup. It has for years presented itself as a mediator and power broker for the region’s many disputes. Kristian Ulrichsen, a Gulf expert at the U.S-based Baker Institute, said if Qatar’s land borders and air space were closed for any length of time “it would wreak havoc on the timeline and delivery” of the World Cup.”

* * *

Not the First Time

As Bloomberg reminds us, this is not the first time Qatar has been singled out and disagreements among the six GCC members have flared in the past; tensions with Qatar could be traced to the mid-1990s when Al Jazeera television was launched from Doha, providing a platform for Arab dissidents to criticize autocratic governments in the region except Qatar’s.

The Gulf nation also played a key role in supporting anti-regime movements during the Arab Spring, acting against Saudi and U.A.E. interests by bankrolling the Muslim Brotherhood’s government in Egypt. Qatar also hosts members of Hamas’s exiled leadership and maintains ties with Iran.

In 2014, Saudi Arabia, the U.A.E. and Bahrain temporarily withdrew their ambassadors from Qatar. That dispute centered on Egypt following the army-led ouster of Islamist President Mohamed Mursi, a Muslim  Brotherhood leader. This time the measures are more severe than during the 2014 incident, when Saudi Arabia, Bahrain and the UAE withdrew their ambassadors from Doha, again alleging Qatari support for militant groups. At that time, travel links were maintained and Qataris were not expelled.

In 2011, Qatar used its media and political clout to support long-repressed Islamists in the “Arab Spring” uprisings in several Arab countries. Muslim Brotherhood groups allied to Doha are now mostly on the backfoot in the region, especially after a 2013 military takeover in Egypt ousted the elected Islamist president.

The former army chief and now president, Abdel Fattah al-Sisi, along with the new government’s allies in Saudi Arabia and the UAE, blacklist the Brotherhood as a terrorist organization. Egypt, the Arab world’s most populous nation, said on its state news agency that Qatar’s policy “threatens Arab national security and sows the seeds of strife and division within Arab societies according to a deliberate plan aimed at the unity and interests of the Arab nation.”

The crisis comes just weeks after Moody’s cut Qatar’s credit rating by one level to Aa3, the fourth-highest investment grade, citing uncertainty over its economic growth model.

“Qatar is economically and socially most vulnerable from food and other non-energy imports,” said Paul Sullivan, a Middle East expert at Georgetown University. “If there is a true blockade, this could be a big problem for them. Rules stopping citizens of the U.A.E., Saudi Arabia and Bahrain from even transiting via Qatar could cause significant disruptions.”

Iran also chimed in, with an official saying the Gulf crisis is a fallout from Trump Saudi visit: “Rift and crumbling of unity” among Gulf nations “first result of the sword dance in Riyadh,” Hamid Aboutalebi, a deputy chief of staff for political affairs, said on Twitter.  The comments were a reference to Donald Trump’s Saudi visit last month, when he took part in a ceremonial sword dance with Saudi officials

“Time for sanctions has ended, cutting diplomatic ties, closing borders, blockading nations” is not the way to end crisis, the Iranian added and said that Saudi, UAE, Egypt, Bahrain need to choose “democracy at home and talks in the region.”

A Russian envoy in Vienna, Vladimir Voronkov, was cited by RIA saying that that tensions between Qatar, Middle Eastern nations are a sign of political destabilization in region.

Finally, with confusion still rampant over last night’s events, here courtesy of Bloomberg is a recap of key reactions by various analysts and investors who believe the damaged diplomatic ties will lead to increased volatility and pessimism toward Middle Eastern assets. Here are some views on the move by market participants:

Tarek Fadlallah, chief executive officer of Nomura Asset Management Middle East:

  • “Clearly this is going to rattle investors, mostly foreign investors, that have to play a key role in regulation reform and investment program.”
  • “Political uncertainty, particularly given recent headlines on Trump’s visit, make investors wary of investing not just in Qatar specifically, but in region more broadly”
  • Expect spike in volatility, followed by downward move in markets in general

Marwan Shurrab, head of high net worth and retail equities brokerage at Al Ramz in Dubai

  • Sees volatility increasing in the very short-term
  • Investors will watch for any kind of announcement, or further clarification coming from governments or companies
  • Investors will assess which companies have the biggest exposure to the region and therefore, have potential revenues at risk
  • Some long-term investors could find opportunities if any signal of potential recovery

Majd Dola, senior research analyst at Al Ramz Capital in Dubai

  • Many U.A.E. companies have operational exposure to Qatar ranging from mid- to-large size projects, sees some “negative economic impact on already struggling companies”
  • Notes Drake & Scull has 500m dirhams worth of projects in Qatar; Arabtec has two joint ventures, pending legal cases, and receivables; DAMAC announced a 500m-dirham tower in Doha recently
  • While hard to quantify the direct impact on those companies, it won’t be positive in short- term
  • “If we take this one step further, Qatar is set to host World Cup 2020, which created a massive potential pipeline for U.A.E. developers and contractors”
  • Qatar investment funds might also be under pressure to liquidate U.A.E. holdings
  • Companies like DXBE (11% owned by Qatar investment) might face further pressure if things moved further in negative direction

Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital Ltd.

  • Expects some initial impact on Qatari bonds.
  • “A lot of them are held in hold-to-maturity books so I don’t expect a major pullback.”
  • Still, expects a small narrowing of bond spreads
  • Doesn’t expect move to affect bonds across the GCC at this point since they are “relatively cheap” for their ratings
  • Given the lull in market due to summer and Ramadan, technicals are probably supportive in terms of new issuance

Peter Sluglett, director of the Middle East Institute of the National University of Singapore

  • “Desire of the Trump administration is that nobody in that region should have any sort of relations with Iran. Qatar is right in the middle of the GCC countries and it has tried to pursue an independent foreign policy. So the idea is to bring Qatar to heel”

As for the biggest question of all: is Qatar’s ambition for a trans-Syrian nat gas pipeline now officially over, the jury is still out…

end

Saudi Arabia shuts down Qatari based Al Jazeera for promoting plots of terrorist groups.

A question and answer session in this report is a must read..

(courtesy zero hedge0

(courtesy zero hedge)

6 .GLOBAL ISSUES

This did not last long: Vancouver’s real estate bubble returns:

(courtesy zero hedge)

The Biggest Real Estate Bubble Of All Time Just Did The Impossible

One month ago, we said that “the Vancouver housing bubble Is back, and it’s (almost) bigger than ever.”

Fast forward to today, when we can scrap the almost part: according to the latest data from the Real Estate Board of Greater Vancouver, nearly a year after British Columbia implemented a 15% property tax targeting foreign buyers, in May the biggest real estate bubble of all time did the impossible and in a testament to the persistence of Chinese oligarchs, criminals, money launderers and pretty much anyone who is desperate to park their cash as far away as possible, after a modest drop following last summer’s tax the Vancouver housing bubble has bounced right back to new all time highs, as prices of detached, attached houses and apartment all surged to new record highs.

According to the Real Estate Board, rhe breakdown in prices by category was as follows:

  • For condominiums, the benchmark price was C$571,300 last month, a 17.8% jump over the past 12 months and 3.1% more than April 2017.
  • The benchmark price of an attached unit was C$715,400, 13.1% more than a year ago, and a 1.9% increase compared to April 2017.
  • The benchmark price for detached properties was $1,561,000, an 3.1% increase over the last 12 months and a 2.9% increase compared to April 2017.

The only thing that did fall in May was the number of actual transactions, as residential property sales in the region totaled 4,364 in May 2017, a decrease of 8.5% from the 4,769 sales in May 2016, an all-time record.

In other words, all that the 15% surtax achieved was to drastically slowdown the rate of transactions (or perhaps home flipping). Meanwhile, as sellers held out to find more aggressive buyers, they were in luck as the new wave of buyers has emerged, and undeterred by the 15% premium, they have been slowly but surely lifting all available offers.

While there is little we can add to this month’s update that we didn’t already say a month ago, below we again put Canada’s housing market, and bubble, in perspective with some of our favorite charts, first showing total Canadian household debt compared to the US. Most of this is in the form of mortgages.

Next, despite Canada’s low rates, the debt service ratio of an average Canadian household is nearly 40% higher than when compared to the US.

And finally, the punchline: indexed home prices in Canada compared to the US. This needs to commentary.

In retrospect, perhaps Canada was lucky that the attempt to deflate the Vancouver housing bubble failed, had it succeeded and spread across the nation leading to a historic crash and collapse in collateral values and widespread defaults, the “mean-reversion” outcome would have been devastating for the Canadian banking sector. Which of course, is not to say that Canada’s problem has been fixed, but at least for the time being, the can has been kicked once again, courtesy of Chinese buyers who would rather park their cash in Canada than at home.

7. OIL ISSUES

 

 

8. EMERGING MARKET

end

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

Euro/USA   1.1240 DOWN .0038/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 RED EXCEPT LONDON 

USA/JAPAN YEN 110.58 UP 0.224(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 1.2902 DOWN .0020 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

USA/CAN 1.3478 UP .0003 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS MONDAY morning in Europe, the Euro FELL by 38 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  DOWN 13.88 POINTS OR .45%     / Hang Sang  CLOSED  DOWN 61.06 POINTS OR 0.24% /AUSTRALIA  CLOSED DOWN 0.50% / EUROPEAN BOURSES OPENED ALL IN THE RED EXCEPT LONDON

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

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

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

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

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

The NIKKEI: this MONDAY morning CLOSED DOWN 6.46 POINTS OR 0.03%

Trading from Europe and Asia:
1. Europe stocks  OPENED ALL IN THE RED EXCEPT LONDON 

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 61.06 POINTS OR 0.24%  / SHANGHAI CLOSED DOWN 13.88 POINTS OR .45%   /Australia BOURSE CLOSED DOWN 0.50% /Nikkei (Japan)CLOSED DOWN 6.46 POINTS OR 0.03%    / INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: 1280.45

silver:$17.55

Early MONDAY morning USA 10 year bond yield: 2.179% !!! UP 2 IN POINTS from FRIDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.834, UP 2  IN BASIS POINTS  from FRIDAY night.

USA dollar index early MONDAY morning: 96.91 UP 20  CENT(S) from FRIDAY’s close.

This ends early morning numbers MONDAY MORNING

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And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield: 3.054%  UP 2 in basis point(s) yield from FRIDAY 

JAPANESE BOND YIELD: +.05%  DOWN 1/2  in   basis point yield from FRIDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.579%  UP 1/2 IN basis point yield from FRIDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.274 UP 1   POINTS  in basis point yield from FRIDAY 

the Italian 10 yr bond yield is trading 75 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.287% UP 1 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR MONDAY

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

Euro/USA 1.1251 DOWN .0027 (Euro DOWN 27 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 110.45 UP  0.091 (Yen DOWN 9 basis points/ 

Great Britain/USA 1.2920 UP 39( POUND UP 39 basis points)

USA/Canada 1.3484 UP .0009 (Canadian dollar UP 9 basis points AS OIL FELL TO $47.23

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This afternoon, the Euro was DOWN by 27 basis points to trade at 1.1251

The Yen FELL to 110.45 for a LOSS  of 9  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 39  basis points, trading at 1.2920/

The Canadian dollar FELL by 9 basis points to 1.3484,  WITH WTI OIL FALLING TO :  $47.23

The USA/Yuan closed at 6.8040/
the 10 yr Japanese bond yield closed at +.050% DOWN 1/2 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 2  IN basis points from FRIDAY at 2.173% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.832  UP2 in basis points on the day /

Your closing USA dollar index, 96.82 UP 11 CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED DOWN 21.87 POINTS OR 0.29%
German Dax :CLOSED HOLIDAY
Paris Cac  CLOSED DOWN  35.52 POINTS OR 0.66% 
Spain IBEX CLOSED  DOWN 21.20 POINTS OR 0.19%

Italian MIB: CLOSED  DOWN 207.20 POINTS/OR 0.99%

The Dow closed DOWN 22.25 OR 0.10%

NASDAQ WAS closed DOWN 10.11 POINTS OR 0.16%  4.00 PM EST
WTI Oil price;  47.23 at 1:00 pm; 

Brent Oil: 49.30 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  56.64 DOWN 1/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD RISES T0  +0.287%  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:$47.34

BRENT: $49.41

USA 10 YR BOND YIELD: 2.181%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.84%

EURO/USA DOLLAR CROSS:  1.1255 DOWN .0023

USA/JAPANESE YEN:110.48  UP 0.124

USA DOLLAR INDEX: 96.81  UP 10  cent(s) ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2902 : UP .0020  OR 20 BASIS POINTS.

Canadian dollar: 1.3473 DOWN 4 BASIS pts 

German 10 yr bond yield at 5 pm: +.287%

END

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

TRADING IN GRAPH FORM FOR THE DAY

Stocks & Bonds Slip As US Macro Slumps To 16-Month Lows

 

So… we have another terror attack in London, the biggest geopolitical earthquake in the Middle East in years, US macro data is dreadful… and stocks don’t budge…

 

Another day of dismal data and US Macro data declined once again to its lowest levels since early Feb 206 – amid fears of a global recession…

 

The S&P, Dow, and Nasdaq traded in an extraordinaily tight range today as Small Caps underperformed notably… notable weakness into the close…

 

Interestingly both bonds and stocks were sold in that last 30 mins (is RP starting to delever?)

 

VIX tested back near record lows at 9.60 intraday

 

GOOGL topped $1000…joining AMZN

 

AAPL shareholders were thoroughly unimpressed by AAPL’s Homepod…

 

Despite marginally higher rates, bank stocks rolled over to almost erase their gains by the close…

 

The Dollar index leaked lower, extending the post-payrolls losses. This is the lowest close for the dollar since Oct 5th.

 

AUD strength and EUR weakness battled each other for control of the dollar today…

 

The Mexican peso rallied notably to its strongest level in seven months after the ruling party’s victory in local elections.

 

Treasury yields limped higher all day… all remaine below pre-payrolls levels.

 

Gold and Silver were flat on the day…

 

But crude slipped lower after Qatar chaos hit (amid OPEC cooperation concerns)

 

Finally, this…

I knew that the B/D plug number would be a high percentage of “added” growth in employment but I didn’t think it would be this high: 93%

(courtesy zero hedge)

93% Of All Jobs “Created” Since 2008 Were Added Through The Birth/Death Model

According to the prevailing narrative, job growth in the US, where GDP over the past decade has been on par with that in the 1930s, is one of the otherwise brighter economic indicators in a time when much of the economic data such as capital spending, productivity and especially wage growth (so critical for the Fed’s future plans) has been a chronic disappointment. Today, for example, headlines blast that the US has enjoyed 80 months of continuous jobs growth with unemployment hitting 4.3% – the lowest since 2001. However, there is more to this “strong” number than meets the untrained eye.

As our friends at Morningside Hill calculate, a full 93% of the new jobs reported since 2008 – 6.3 million out of 6.7 million – and 40% of the jobs in 2016 alone were added through the business birth and death model – a highly controversial model which is not supported by the data. On the contrary, all data on establishment births and deaths point to an ongoing decrease in entrepreneurship.

Here are the details of how over 90% of the jobs created in the past decade were nothing more than a “statistical” adjustment in some BLS model.

The controversial birth death adjustments

In order to account for jobs created or lost by new business formations or bankruptcies each month, the BLS introduced the birth/death adjustment. It started during the Reagan administration as Reagan was complaining that the bureau was undercounting the jobs he created. The birth-death model used to have a terrible name – the “bias adjustment factor.” This adjustment is computed using a model based on probability-based sampling methodology.

The table below shows the number of jobs that were added through birth/death adjustments over the past 17 years and the percentage of jobs added through the birth/death model

Let’s analyze the data.

  • Before 2003 few jobs were added through the adjustment, despite the fact that net business formations were much stronger back then (see data below).
  • Then, what strikes us as odd, is that according to the BLS in the depths of the 2007-2009 recession, the birth/death adjustment continued to add a lot of jobs – 904,000 jobs were added in 2009 alone. One would assume that in the nadir of the Great Recession when business defaults skyrocketed, the birth and death adjustment would be a net negative and subtract from the overall jobs number instead of adding to it.
  • Lastly, it turns out that a full 30% of jobs created since 2010 or 4.5 million out of 15 million jobs were added via the birth/death adjustment. It is also interesting to note that 40% of the jobs added in 2016 came through the adjustment.

The reason the BLS wanted to include this adjustment was a perception that they were undercounting jobs created through new start-up business formations (that were too young and too small to show up in the Establishment Survey). Those start-ups would eventually appear in their data, but with a few months’ lag. Therefore, if there was a steady supply of new start-up businesses and no sudden shifts in the trend, no adjustment would be necessary. Logically, it would only make sense to apply the adjustment if there is a significant increase in the rate of start-up formations, which has not materialized. On the contrary, multiple studies track a consistent decline in new business creation. Literally every study we have found documents the consistently deteriorating entrepreneurial environment in the US.

The following charts trace a clear downward trend in both employment gained from private sector births and the number of business births per year. Notice the suppressed level of births after 2008.

Furthermore, self-employed persons as a percentage of the working age population and the number of jobs created by establishments less than one year old are also declining.

A study by Harvard Business School entitled “Problems unsolved and a nation divided” summarizes the findings of its multi-year long project called “The US competitiveness project.” The study is a “fact-based effort to understand the disappointing performance of the American economy.” We found this project to be well worth the read and have selected the following chart (below to the left) depicting the multi-decade slowdown in new business formation. Further supporting the Harvard study findings, a Brookings Institution paper called “Declining business dynamism in the United States: a look at states and metros” shows that business formations slowed down and business deaths accelerated after the crisis of 2008 (below to the right).

Below to the left we have a chart from the Economic Innovation Group showing the net annual change in the number of US firms. Notice the significant slowdown after 2008, including 3 negative years. This is clearly not captured by the data from the Bureau of Labor Statistics. Below to the right we have a few charts from the Wall Street Journal summarizing some data points that confirm these trends.

With the data on new business formations and deaths in mind let us now go back to the BLS’s official birth / death adjustments. We have charted the net jobs added through the BLS model and ran a linear trend line to see if it captures the deteriorating entrepreneurial environment. In the chart below, the upward-trending line representing net jobs added through the adjustment is in complete dissonance with all the other data.

The Bureau of Labor Statistics (BLS) seems to be alone in its belief that the entrepreneurial environment in the US is improving. We believe that the BLS has been artificially inflating the monthly payroll numbers via the birth and death adjustment. This overstatement is not trivial in nature – the adjustment added 30% of all jobs reported since 2010.

h/t Morningside Hill

 

end

Michael Snyder reports that the true unemployment number of Americans that do not have a job:  103 million and thus the true unemployment rate: 22%

(courtesy Michael Snyder)

The Real Unemployment Number: 102 Million Working Age Americans Do Not Have A Job

Authored by Michael Snyder via The Economic Collapse blog,

Did you know that the number of working age Americans that do not have a job right now is far higher than it was during the worst moments of the last recession?  For example, in January 2009 92.6 million working age Americans did not have a job, but we just found out that in May the number of working age Americans without a job increased to just a shade under 102 million.  We’ll go over those numbers in more detail in a moment, but first I want to talk a bit about the difference between perception and reality.  According to the bureaucrats in the federal government, the “unemployment rate” in May was the lowest that we have seen in 16 years.  At just “4.3 percent”, we are essentially at “full employment”, and so according to them anyone that really wants a job should be able to find one pretty easily.

Of course that is a load of nonsense.  John Williams of shadowstats.com tracks what our economic numbers would look like if honest numbers were being used, and according to his calculations the unemployment rate is currently 22 percent.

So what accounts for the wide disparity between those numbers?

Well, the truth is that the official “unemployment rate” that the mainstream media endlessly hypes is so manipulated that it has essentially lost all meaning at this point.

In May, we were told that the U.S. economy added 138,000 jobs, but that is not even enough to keep up with population growth.

However, when you look deeper into the numbers some major red flags quickly emerge.  You won’t hear it on the news, but in May the U.S. economy actually lost 367,000 full-time jobs.  That is an absolutely nightmarish figure, and it confirms the fact that economic activity is starting to dramatically slow down.

But somehow the “unemployment rate” in May fell from “4.4 percent” to “4.3 percent”.

How in the world can they do that?

Well, for years the government has been taking large numbers of people from the basket known as “officially unemployed” and dumping them into another basket known as “not in the labor force”.  Since those that are “not in the labor force” do not count toward the official unemployment rate, they can make things look better than they actually are by moving people into that category.

In May, the government added a staggering 608,000 Americans into the “not in the labor force” category.  So now the number of working age Americans “not in the labor force” has reached a total of 94.98 million.  When you add that total to the number of Americans that are “officially” unemployed (6.86 million), you get a grand total of 101.84 million.

In other words, when you round up to the nearest million you get a grand total of 102 million Americans that do not have a job right now.

If you go back to January 2009, there were 81.02 million Americans that were “not in the labor force” and 11.61 million Americans that were considered to be “officially unemployed”.  And so that means that according to the federal government there were 92.63 million working age Americans that did not have a job at that point.

So if the number of working age Americans without a job has risen by 9.21 million since January 2009, are we really doing so much better than we were during the depths of the last recession?

Another way to look at this is by examining the civilian employment-population ratio.  Just before the last recession, about 63 percent of the working age population had a job, but then during the recession that number fell to between 58 and 59 percent for quite a while.  We have finally gotten back to the 60 percent mark, but we are still far, far below the level that we were at before the last recession struck.

And of course all of the above assumes that the numbers that the government is giving us accurately reflect reality, and that is highly questionable.

For example, according to one recent analysis the “business birth and death model” has accounted for 93 percent of all “new jobs” reported by the government since 2008

As our friends at Morningside Hill calculate, a full 93% of the new jobs reported since 2008 – 6.3 million out of 6.7 million – and 40% of the jobs in 2016 alone were added through the business birth and death model – a highly controversial model which is not supported by the data. On the contrary, all data on establishment births and deaths point to an ongoing decrease in entrepreneurship.

In essence, government bureaucrats pull a number out of the air and add jobs to the report based on an estimate of how many new businesses they think are being created in America in a particular month.

Is it possible that there is a chance that they are being overly optimistic when they make this estimate?

Most people have no idea that the “official numbers” that we get from the government are highly speculative, and there is always a temptation to make things look better than they actually are.

There is no way in the world that we are anywhere near “full employment”.  I hear from people all over the country that say that it is exceedingly difficult to find good jobs where they live.  And according to a brand new report that was just released, the number of job cuts in May 2017 was 71 percent higher than it was in May 2016.

We also know that over the past ten years the average rate of economic growth in the United States exactly matches the average rate of economic growth that the U.S. experienced during the 1930s.

I don’t see how anyone can possibly claim that the U.S. economy is doing well.  Just prior to the last recession there were 26 million Americans on food stamps, and now we have 44 million.  We are on pace to absolutely shatter the all-time record for store closings in a single year, and the number of homeless people living in Los Angeles County has risen by 23 percent over the past 12 months.

But once again, it is a battle of perception vs. reality.  Their televisions are endlessly feeding them the message that everything is just fine, and most Americans seem to be buying it, at least for now…

A superb commentary from Adam Taggart of Peak Prosperity.  He outlines the 4 areas where the average citizen is losing.

It is the final area of financial repression or real negative interest rates that is killing the average person on the street.

 

a must read..

 

(courtesy Adam Taggart/PeakProsperity.dcom)

Less Than Zero: How The Fed Killed Saving

Authored by Adam Taggart via PeakProsperity.com,

The other day I was in my local branch of a Too Big To Fail bank where I have a few accounts. One of them is a savings account in which I keep some of my “dry powder” cash stored.

It had been a while since I had checked what kind of return the savings account offered. I knew it was pretty low, but there have been a few Fed rate hikes since the last time I had checked. So I asked the teller to look up the current rate the account was yielding.

Any guesses?

It’s 0.06%.

Not 0.6%. And definitely not the 6% I remember receiving when I was a teenager. 0.06%.

As in, put $100,000 into your savings account and get back a whopping $60 per year.

Are you kidding me? $60 to have a hundred grand parked in an account subject to withdrawal restrictions and penalties, along with the usual smattering of administrative fees both overt and hidden? At a bank that stumbled mightily during the Great Financial Crisis? One with the potential to legally confiscate your savings through a “bail in” should another crisis hit?

Oh, and if you factor in the government’s trailing 12-month inflation rate of 2.2%, your “savings” account has a negative (-2.14%) real rate of return. Your compounded savings actually loses purchasing power over time. And as we all know the official inflation rate is farcically understated, your loss of purchasing power is even more dire than it at first appears.

“Thank” The Fed 

Savings accounts were created to provide an incentive for people to plan for the future. Put money away today, let it grow through the miracle of compounding interest, and have more tomorrow.

Prudent savings is essential to a healthy economy. It offers resilience during downturns, and provides seed capital for productive enterprise.

But we are no longer a nation of savers. Not only does our culture indoctrinate us to spend and consume — and makes it possible to do so by spending future prosperity today through the use of debt (the very opposite of saving) — but the Federal Reserve has very intentionally driven down interest rates to historic lows.

To show just how far, let’s take a look at historic interest rates savers have enjoyed over the past few decades.

Here’s a chart of the return offered on 6-month banks CDs, from the Fed’s own data. Returns plummeted from 10% in the mid-1980s to less than 1% after the Great Recession began:

Notice how the data series was discontinued in 2013. Perhaps the Fed was concerned the picture it painted showed too clearly the war being waged against savers?

But a new similar data series was begun afterwards, which shows that the carnage continued. Between 2009 and today, 6-month CD returns have declined by a further 90%:

So there’s no incentive remaining to save your money in a “safe” place. As mentioned, you lose purchasing power due to today’s negative real rates. Plus, you have bank risk (bail ins, etc) on top of that.

As we write about extensively on PeakProsperity.com, this is not an accident of fate. The Federal Reserve has very deliberately engineered this situation. It has chosen to sacrifice the many — the savers and those dependent on a fixed income — to benefit an elite few. Rock-bottom interest rates are greatly helpful to the banks, as well as the financial assets that the bankers and their wealthy clients own.

And just to add to the outrage factor here, when your local TBTF bank stores its own money at the Fed, the Fed pays it a full 1% in interest — nearly 20 times what your bank is paying you. Your bank simply pockets the rest as pure risk-free profit. (Don’t believe it? Watch Chris explain in this video)

The data clearly shows that this suppression of interest rates, combined with the central banking cartel’s Herculean efforts to flood the world with liquidity (to the tune of $1 trillion so far in 2017), accrues benefits in a grossly lopsided and unfair manner to those at the top of the wealth pyramid:

Meanwhile, while the income prospects for everyone in bottom 90% have stagnated, the cost of living has skyrocketed. The masses are getting badly abused in both directions.

Financial Repression

As mentioned earlier, this is NOT accidental. As we have written about time and time again, the fundamental economic predicament facing the world is having Too Much Debt.

This is a situation societies have found themselves in before. In fact, it has happened so often throughout history that there’s actually a playbook (for the government) when you get to this stage. It’s called Financial Repression.

Here’s a summary from our excellent podcast interview on the topic with Dan Amerman:

To understand financial repression, we have to understand that we’ve been there before. Many nations have gone through periods in the past where they’ve had very high levels of government debt. And there are four traditional ways of dealing with that.

 

One of them is austerity. Everyone understands that. You raise the tax rates. You lower the government spending. This is a painful choice. It can last for decades. And what do you think the voters think about that?

 

There is another option and this we can call this the Argentina option. And that’s defaulting on government debts. It’s radical. Everybody understands it. How do the voters feel about it?

 

There is a third option is rapidly destroying the value of currency. Creating high rates of inflation that very quickly wipe out the true value of a national debt. But that also wipes out the true value of everyone else’s savings and salaries and so forth. It is such an obvious process you can’t really hide it. So how do the voters feel about that?

Those first three – they all work. They’ve all been done before. But they’re all very painful and make the voters very angry.

 

Now there is a fourth way of doing this. There’s nothing controversial about its existence; it’s not the slightest bit controversial for professional economists or people who have studied economics extensively. It’s financial repression. And it works. It’s what the advanced western nations did after World War II. It was a process that took 25 to 30 years, depending on the country. The West went from an average debt as a percentage of national economy from over 90% to under 30%. So we know it works in practice.

 

To understand what this fourth alternative is where governments like to go is that there are no political repercussions. It’s actually just as painful for the population as a whole. You’ve got to get the money one way or another. But financial repression is, for most people, just complex enough that the average voter never gets it. And because they don’t get it, they’re paying the penalty, but they don’t realize it. And they don’t see anyone to blame. That’s really good if you want to stay in office.

 

The key is a concept called negative real interest rates. If the rate of inflation is higher than the interest payments you are taking in, savers are losing purchasing power every year. Remember, this is a zero sum game between the borrower and the saver — with the saver funding the borrower. Every dollar in purchasing power that the savers, which are you and I, are losing every year — that goes to the benefit of the borrower, which in this case is the Federal government.

0.06% savings rates in a world of 2.2% (and actually much higher) inflation? That’s a clear sign we’re living in the era of negative real interest rates right now. The purchasing power of our savings is being siphoned off to sustain the government’s debt orgy, making the elites filthy rich in the process. The financial repression playbook is well underway.

But while financial repression extends the lifetime of an over-indebted economic system, it does not avoid the consequences of Too Much Debt. It merely serves to shift the worst of the inevitable losses from the government onto the public.

As von Mises’ guarantees:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final or total catastrophe of the currency system involved.

~ Ludwig von Mises

Negative interest rates are a milestone down the slippery slope of the latter: currency destruction. The central banks are intentionally devaluing their currencies, but betting that they can do so at a controlled pace.

But as von Mises warns and as history has shown again and again, currency regimes burdened by too much debt eventually reach a critical failure point where a uncontrollable cascading collapse becomes inevitable.

Know Your Enemy

At this stage, it’s now critical for investors to ask: What are the central banks most likely to do next, and what will the repercussions be?

If you haven’t read our latest report Understanding The Fed’s Endgame Is Key To Protecting Your Wealth, you really should do so now. In addition to negative real interest rates, it reveals the many other clandestine steps the Fed is performing in the shadows to separate the American people from their hard-earned wealth, and place it in the pockets of the bankers and their cronies. In most instances, it’s a case of doing exactly the opposite of what it is publicly promising. You can read that report here(free executive summary, enrollment required for full access)

end

 

This is not what Janet wants to see: USA productivity stalls again for the 2nd straight quarter:

(courtesy zero hedge)

 

US Productivity Growth Stalls As Real Compensation Drops For Second Quarter In A Row

Despite weaker growth than the preliminary 3.0% print, Unit Labor Costs rebounded in Q1 (from Q4 -4.6% QoQ to +2.2% QoQ in Q1), but we note that for the second consecutive quarter real compensation fell (-0.3% QoQ).

Producitivty very modestly beat expectations in Q1 but remains unchanged from Q4…

 

Unit Labor Costs rose 2.2% (below expectations of a 2.4% jump and well below the preliminary print of +3.0%).

However, in real terms the average american in suffering for the second quarter in a row…

 

Another good indicator that the USA economy is heading for the glue factory:  factory orders drop in April as durable goods have faltered the most in 14 months;

(courtesy zero hedge)

‘Hard’ Data Dumps – Factory Orders Drop In April As Durable Goods Tumble Most In 14 Months

After 4 straight months of gains, Factory Orders declined 0.2% MoM in April with Durable Goods New Orders tumbling 0.5% (final April print) – the worst drop since Feb 2016.

Despite notable upward revisions for March (from +0.2% to +1.0%), April Factory orders dropped 0.2% MoM (in line with expectations), breaking the recent streak of improvements.

 

Worse still for the ‘hard’ data hopers, the final print for April’s Durable Goods New Orders tumbled 0.5% MoM – the biggest drop since Feb 2016 (amid global recession fears)…

 

Hard data is now at its weakest since May 2016 and Soft data has dropped to 6-month lows. Not what Mr Trump (or Mr Market) was hoping for.

 

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