June 12/GOLD DOWN $2.40 WITH SILVER DOWN 28 CENTS/FOR THE 8TH CONSECUTIVE TRADING DAY THE AMOUNT OF SILVER STANDING INCREASES!!/ANDREW MAGUIRE WARNS THAT THERE WILL BE MAJOR DEFAULTS IN GOLD DELIVERIES IN 28 DAYS/ANOTHER SPANISH BANK IN TROUBLE/DEFICIT FOR THE USA ECONOMY RISES TO $88 BILLION IN MAY

GOLD: $1266.10  down $2.40

Silver: $16.91  down 28  cent(s)

Closing access prices:

Gold $1266.20

silver: $16.95

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: $1275.32 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1267.15

PREMIUM FIRST FIX:  $8.17

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SECOND SHANGHAI GOLD FIX: $1274.98.00

NY GOLD PRICE AT THE EXACT SAME TIME: $1267.35

Premium of Shanghai 2nd fix/NY:$7.63

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1269.25

NY PRICING AT THE EXACT SAME TIME: $1269.85

LONDON SECOND GOLD FIX  10 AM: $1266.40

NY PRICING AT THE EXACT SAME TIME. $1266.20 

For comex gold:

JUNE/

NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH:  62 NOTICE(S) FOR 6200  OZ.

TOTAL NOTICES SO FAR: 2180 FOR 218,000 OZ    (6.5878 TONNES)

For silver:

For silver: JUNE

 29 NOTICES FILED TODAY FOR 145,000  OZ/

Total number of notices filed so far this month: 812 for 4,060,000 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. It is up for the 8th consecutive trading day. 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

This is where we are heading:  (JB Slear/Jim Sinclair)

According to JB Slear, this is what the future holds. Why should I write words. Get into the cellar as fast as you can!

Jim

unnamed

In silver, the total open interest FELL BY ONLY 291  contract(s) DOWN to 205,028 DESPITE THE NASTY FALL IN PRICE OF SILVER THAT TOOK PLACE WITH FRIDAY’S TRADING (DOWN 20 CENT(S). In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.0260 BILLION TO BE EXACT or 147% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 29 NOTICE(S) FOR 4145,000  OZ OF SILVER

In gold, the total comex gold FELL BY ANOTHER  11,301 contracts WITH THE GOOD SIZED WHACKING GOLD TOOK  ($7.80 with FRIDAY’S TRADING). The total gold OI stands at 477,082 contracts.

we had 62 notice(s) filed upon for 6200 oz of gold.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD:

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

Inventory rests tonight: 867.00 tonnes

.

SLV

Today: no changes in inventory/

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 FELL BY A TINY 291 contracts DOWN TO 205,028 (AND now A LITTLE  FURTHER FROM THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787), DESPITE THE NASTY FALL IN PRICE FOR SILVER WITH FRIDAY’S TRADING  ( DOWN 20 CENTS). NO QUESTION THAT WE AGAIN HAD CONTINUED FAILED SHORT COVERING BY THE BANKERS ALONG WITH CONSIDERABLE BANKER DELTA HEDGING AS SILVER IS GIVING THEM NIGHTMARES

(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 18.52 POINTS OR 0.59%   / /Hang Sang CLOSED DOWN 322.25 POINTS OR 1.24% The Nikkei closed DOWN 104.64 POINTS OR 0.52%/Australia’s all ordinaires  CLOSED UP 0.01%/Chinese yuan (ONSHORE) closed DOWN at 6.7991/Oil UP to 46.11 dollars per barrel for WTI and 48.81 for Brent. Stocks in Europe OPENED IN THE RED       ..Offshore yuan trades  6.7951 yuan to the dollar vs 6.7991 for onshore yuan. NOW  THE OFFSHORE IS WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN A LITTLE WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS A LITTLE WEAKER TO THE DOLLAR AND THIS IS COUPLED WITH THE MUCH WEAKER DOLLAR. CHINA IS HAPPY TODAY WITH THE FALL IN THE USA DOLLAR 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA

 

b) REPORT ON JAPAN

c) REPORT ON CHINA

Trump is urging China to impose a first round of sanctions against any Chinese firm trading with North Korea:

( zero hedge)

 

4. EUROPEAN AFFAIRS

i)SPAIN

Last week we witnessed that Spain’s 6th largest bank, Popular succumb.  Now another Spanish bank is close to default: Liberbank

(two commentaries/WolfStreet/WolfRichter/Don Quijones/zero hedge)

ii) UK

The British election was based on everything but BREXIT  and as such BREXIT will not change:

(courtesy MishShedlock/Mishtalk)

iii)ITALY

 

The 5 star anti EU party performed awful in elections and this caused Italian bond yields to plunge.  However the country still has a massive banking crisis that they cannot solve:

(courtesy zero hedge)

 

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)RUSSIA

Putin warns that nobody will survive a nuclear holocaust

( Mac Slavo/SHFTPlan)

ii)QATAR/GERMANY

Yesterday, German’y foreign minister Sigmar Gabrile warns that the ongoing isolation of Qatar could lead to War!!

( zero hedge)

iii)IRAN/QATAR/OMAN/

Iran sends 2 warship to the area as well as flying food  (fruits and meats to Qatar:

( zero hedge)

( zero hedge)

v)RUSSIA/USA

This should complicate the narrative that Trump is a lackey for Putin: Russia is set to retaliate against those 35 Obama expulsions of Russian diplomats and the seizing of Russian property in NY and Maryland.  Putin plans to seize USA properties in Moscow as well as creating havoc for the Anglo American school in Moscow

( zero hedge)

6 .GLOBAL ISSUES

the Canadian dollar rises when the Bank of Canada begins questioning itself on the need for more stimulus

( zero hedge)

7. OIL ISSUES

 

8. EMERGING MARKET

Total chaos on the streets of Venezuela:

( MacSlavo/SHFTPlan.com)

9.   PHYSICAL MARKETS

i)Andrew Maguire comments that the huge gold price suppression would not last another month;  He states after 26 days, the suppression will end;

( Andrew Maguire/Kingworldnews)

ii)At one time mining companies certainly let governments know of suppression.  That seems to have ended:

( GATA)

please view the two pieces:
( Chris Powell/GHATAP)

iv)The problem here is that they talk about gold receivables as real gold which it is not( zero hedge)

v) Bitcoin surpasses 3,000 dollars USA per coin

 

10. USA Stories

i)Continued devastation in the bricks and mortar businesses in the USA. Landlords are in trouble as commentators suggest that 1/4 malls will be completely vacant in 5 years. Tenants are also scared.  They wish shorter leases as low as 1 yr as they are uncertain of the business climate they are facing

( zero hedge)

French writes about the huge commercial mortgages and loans outstanding holding up the bubble of real estate assets.  The bubble is waiting to be pricked

( Doug French/LewRockwell.com)

iii)Apple Corp slides and Japanese firm Mizuho downgrades the company and cuts it’s price target.  Apple is a good example of how global growth is stymied

 

( zero hedge)

iv)Outlays totaled 329 billion dollars, resulting in a $88.4 deficit for May. Year to date for 8 months: $433 billion deficit.  However the rate of change in government spending is not rising and has private sector loan creation has slowed dramatically, government spending is just not enough to keep the uSA out of a recession

 

(courtesy zero hedge)

 

Let us head over to the comex:

The total gold comex open interest FELL BY A GOOD SIZED 11,301 CONTRACTS DOWN  to an OI level of 477,082 WITH THE  FALL(WHACK) IN THE PRICE OF GOLD ($7.80 with FRIDAY’S trading). AGAIN, the bankers were expecting more gold leaves to fall from the gold tree and as such they could not cover as much as they wanted.

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  LOSS OF 216 contract(s) FALLING TO  1781.  We had 13 notices filed yesterday so we LOST ANOTHER 203  contracts or an additional 20,300 oz will NOT stand for delivery in this very active delivery month of June AND WITHOUT A SHADOW OF DOUBT THESE 203 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 94 contracts to stand at 2,352 contracts. The next big active month is August and here the OI LOST 11,328 contracts DOWN to 352,225,  as the bankers trying to keep this month down to manageable size.

We had 62 notice(s) filed upon today for 6200 oz

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
And now for the wild silver comex results.  Total silver OI FELL BY A TINY 291 contracts FROM 205,319 down to 205,028 DESPITE YESTERDAY’S BIG 20 CENT LOSS.  IT SURE LOOKS LIKE OUR BANKERS ARE DESPERATELY TRYING TO COVER THEIR SHORTS IN SILVER BUT TO NO AVAIL. WE ALSO NO DOUBT HAVE CONSIDERABLE EVIDENCE OF SOME DELTA HEDGING BY THE BANKERS TRYING TO OFFSET THAT HUGE SHORT POSITION THEY HAVE BEEN BURGEONING OVER THE YEARS.
We are in the NON active delivery month is JUNE  Here the open interest SOMEHOW LOST ONLY 55 contract(s) FALLING TO 36 contracts. We had 84 notices served upon yesterday so we AGAIN GAINED 46 CONTRACTS OR AN ADDITIONAL  230,000 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. THIS IS THE 8TH CONSECUTIVE DAY THAT THE AMOUNT OF SILVER STANDING ADVANCED FROM FIRST DAY NOTICE. 

The next big active month will be July and here the OI LOST 6109 contracts DOWN to 116,347 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 9 contracts to stand at 37.  The next big active delivery month for silver will be September and here the OI already jumped by another 5087 contracts up to 48,108.

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

 Monday, June 13.2016:  94,437 contracts were still outstanding vs 116,347 contracts June 12.2017

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  (3,945,000 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 29 notice(s) filed for 145,000 oz for the June 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 94,481 contracts which is POOR

Yesterday’s confirmed volume was 227,555 contracts  which is GOOD

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for JUNE
 June 12/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 168,600.000 oz
Scotia
Deposits to the Dealer Inventory in oz nil  oz
Deposits to the Customer Inventory, in oz 
 nil oz
No of oz served (contracts) today
 
62 notice(s)
6200 OZ
No of oz to be served (notices)
1719 contracts
171,900 oz
Total monthly oz gold served (contracts) so far this month
2180 notices
218,000 oz
6.7807 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   272,415.8 oz
Today we HAD  1 kilobar transaction(s)/ 
We had 0 deposit into the dealer:
total dealer deposits: nil oz
We had NIL dealer withdrawals:
total dealer withdrawals:  NIL oz
we had no dealer deposits:
total dealer deposits:  nil oz
we had 0  customer deposit(s):
total customer deposits; nil  oz
We had 1 customer withdrawal(s)
 i) out of Scotia:  128,600.000 oz
(4000 kilobars)
total customer withdrawal: 128,600.000  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 62  contract(s)  of which 0 notices were stopped (received) by j.P. Morgan dealer and 35 notice(s) was (were) stopped/ Received) by j.P.Morgan 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 (2180) x 100 oz or 218,000 oz, to which we add the difference between the open interest for the front month of JUNE (1781 contracts) minus the number of notices served upon today (62) x 100 oz per contract equals 389,900  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 (2180) x 100 oz  or ounces + {(1781)OI for the front month  minus the number of  notices served upon today (62) x 100 oz which equals 389,900 oz standing in this  active delivery month of JUNE  (12.127 tonnes)
.
WE LOST 203 CONTRACTS OR AN ADDITIONAL 20300 OZ WILL NOT STAND AT THE COMEX.  HOWEVER THESE GUYS (203 CONTRACTS) 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. YOU CAN NOW SEE WHY THE COT REPORTS ARE DISTORTED DUE TO THE ISSUANCE OF THESE EFP CONTRACTS 
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Total dealer inventory 900,191.813 or 27.99 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,647,133.659 or 268.96 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 272.96 tonnes for a  loss of 34  tonnes over that period.  Since August 8/2016 we have lost 85 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 10 MONTHS  85 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE MAY DELIVERY MONTH
 
June INITIAL standings
 June 12 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
 375,399.300  oz
JPM
Deposits to the Dealer Inventory
NIL oz
Deposits to the Customer Inventory 
 582,065.600 oz
HSBC
No of oz served today (contracts)
 29 CONTRACT(S)
(145,000 OZ)
No of oz to be served (notices)
7 contracts
( 35,000 oz)
Total monthly oz silver served (contracts) 812 contracts (4,060,000 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 2,670,742.8 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 JPMorgan:  375,399.300 oz
TOTAL CUSTOMER WITHDRAWALS:  375,399.300  oz
 We had 1 Customer deposit(s):
 i) Into HSBC:
582,065.600 oz
***deposits into JPMorgan have now stopped
In the month of March and February, JPMorgan stopped (received) almost all of the comex silver contracts.
why is JPMorgan bringing in so much silver??? why is this not criminal in that they are also the massive short in silver
total customer deposits 582,065.600 oz
 
 we had 0 adjustment(s)
The total number of notices filed today for the JUNE. contract month is represented by 29 contract(s) for 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 812 x 5,000 oz  = 4,060,000 oz to which we add the difference between the open interest for the front month of JUNE (36) and the number of notices served upon today (29) x 5000 oz equals the number of ounces standing
 

 

.
 
Thus the initial standings for silver for the JUNE contract month:  812 (notices served so far)x 5000 oz  + OI for front month of JUNE.(36 ) -number of notices served upon today (29)x 5000 oz  equals  4,095,000 oz  of silver standing for the JUNE contract month.
 
We gained 46 contracts or an additional 230,000 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 34,804 which is FAIR
Yesterday’s  confirmed volume was 86,349 contracts which is HUGE
YESTERDAY’S ESTIMATED VOLUME OF 86349 CONTRACTS EQUATES TO 431 MILLION OZ OF SILVER OR 62% 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:   204.684 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 7,8 percent to NAV usa funds and Negative 8.3% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.0%
Percentage of fund in silver:37.9%
cash .+0.1%( June 12/2017) 
 SPROTT PHYSICAL SILVER TRUST FUND NOT READY FOR PUBLICATION
2. Sprott silver fund (PSLV): STOCK  6.53%!!!! NAV  ??? (june 12/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to -0.49% to NAV  (June 12/2017 )
Note: Sprott silver trust back  into POSITIVE territory at -?? /Sprott physical gold trust is back into NEGATIVE/ territory at -0.49%/Central fund of Canada’s is still in jail  but being rescued by Sprott.

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

(courtesy Sprott/GATA)

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

 Section: Daily Dispatches

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

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 12/No change in gold inventory at the GLD/Inventory rests at 867.00 tonnes

June 9/no change in inventory at the GLD/Inventory rests at 867.00 tonnes

June 8/AN ADDITION OF 3.07 TONNES OF GOLD ADDED TO THE GLD/INVENTORY RESTS AT 867.00 TONNES

June 7 a huge change in inventory/a deposit of 13.93 tonnes/inventory rests at 864.93 tonnes

June 6/ no changes in inventory at the GLD/Inventory remains at 851.00 tonnes

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 12 /2017/ Inventory rests tonight at 867/00 tonnes
*IN LAST 170 TRADING DAYS: 80.13 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 112 TRADING DAYS: A NET  47.30 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: A NET  60.64 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

June 12/no change in silver inventory at the SLV/Inventory rests at 339.605 million oz/

June 9/no change in silver inventory at the SLV/Inventory rests at 339.605 million oz/

June 8/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 339.605 MILLION OZ/

June 7/no change in inventory at the SLV/inventory rests at 339.605 million oz/

June 6/no change in inventory at the SLV/Inventory rests at 339.605 million oz.

June 5/a huge change at the SLV/a withdrawal of 1.371 million oz /inventory rests at 339.605 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 12.2017: Inventory 339.605  million oz
end
We are going to provide GOFO rates  (gold) each day and shortly silver
courtesy of Bron Suchecki of Monetary Metals
and here is today’s figures:

The actual figures can be found on our home page https://monetary-metals.com/

with this box in the left side

GOFO

6 month: 1.25%

12 month:  1.43%

Libor:

6 month:  1.20

12 month: 1.51

BRON SUCHECKI | VP Operations
Unlocking the Productivity of Gold
MONETARY METALS & CO
M: +61 4 1210 1912 | bron@monetary-metals.com
Skype: bron.suchecki
Twitter: @bronsuchecki
Website: monetary-metals.com
Use this link to encrypt and safely send confidential documents to Monetary Metals®
https://cloud.sookasa.com/upload_page/f840a3c3-54e5-42b0-85b4-15c9e94ea5e

 end

Andrew Maguire comments that the huge gold price suppression would not last another month;  He states after 26 days, the suppression will end;

(courtesy Andrew Maguire/Kingworldnews)

Gold price suppression won’t last another month, Maguire tells KWN

Section:

1:24p ET Friday, June 9, 2017

Dear Friend of GATA and Gold:

London metals trader Andrew Maguire tells King World News today that gold price suppression in London is unlikely to last more than another month as governments, central banks, and institutions are draining liquidity from the paper market, timing their physical purchases to smashes of the paper price. Maguire’s comments are excerpted at KWN here:

http://kingworldnews.com/andrew-maguire-major-event-to-create-massive-go…

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

end

At one time mining companies certainly let governments know of suppression.  That seems to have ended:

(courtesy GATA)

please view the two pieces:
(courtesy Chris Powell/GHATAP

GATA secretary’s presentation at Intl. Metal Writers Conference in Vancouver

Section:

10:34a ET Sunday, June 11, 2017

Dear Friend of GATA and Gold:

Video of your secretary/treasurer’s presentation on May 28 at the International Metal Writers Conference in Vancouver has been posted at You Tube here:

https://www.youtube.com/watch?v=8EbuMbelzUo

It’s 19 minutes long but the conclusion of the section showing New York Federal Reserve Bank President William Dudley’s evasion of a question about the Fed’s involvement in gold swaps has been inadvertently cut out. The full Dudley video is a minute and 15 seconds long and has been posted at You Tube here:

https://youtu.be/p0JYoJ_rKxQ

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

end

 

The problem here is that they talk about gold receivables as real gold which it is not

(courtesy zero hedge)

State investors stock up on record gold reserves amid uncertainty

Section:
By Attracta Mooney
Financial Times, London
Sunday, June 11, 2017The gold reserves of the world’s biggest public sector investors reached an 18-year high as they hoarded the precious metal after Donald Trump’s election and the Brexit vote added to geopolitical uncertainty.State investors increased their net gold holdings by 377 tonnes to an estimated 31,000 tonnes last year — the highest level since 1999, according to a study of 750 central banks, public pension plans and sovereign wealth funds with $33.5 trillion in assets.Danae Kyriakopoulou, chief economist at the Official Monetary and Financial Forum, the central bankers’ forum that compiled the research, said state investors had flocked to the precious metal because of its status as a “haven asset” and to take advantage of rising prices.”There was a lot of political uncertainty in the past year. There were big political shocks with Brexit and Trump, which have driven investors back to gold,” she said.The price of gold surged after the unexpected Brexit vote in June and immediately after the election of Mr. Trump in November, although it fell in the final weeks of the year.Alistair Hewitt, head of market intelligence at the World Gold Council, said state-backed investors had also increased their gold stores as a hedge against the stronger dollar. The dollar is up 15 percent against the pound over the past year.”Central banks and public institutions have been adding to their strategic gold holdings for a number of years,” Mr. Hewitt said. “A lot of emerging market central banks hold significant amounts of US dollars, and they have bought gold as a hedge against this concentrated currency exposure.” ……For the remainder of the report:https://www.ft.com/content/57e3b9a8-4d36-11e7-a3f4-c742b9791d43

Major gold/silver trading/commentaries for MONDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Pension Funds, Sovereign Wealth Funds, Central Banks “Stock Up” on Gold “Amid Uncertainty”

Pension Funds, Sovereign Wealth Funds and Central Banks “Stock Up” on Gold “Amid Uncertainty”

By Attracta Mooney
Financial Times, London
Sunday, June 11, 2017

The gold reserves of the world’s biggest public sector investors reached an 18-year high as they hoarded the precious metal after Donald Trump’s election and the Brexit vote added to geopolitical uncertainty.

State investors increased their net gold holdings by 377 tonnes to an estimated 31,000 tonnes last year — the highest level since 1999, according to a study of 750 central banks, public pension plans and sovereign wealth funds with $33.5 trillion in assets.

Danae Kyriakopoulou, chief economist at the Official Monetary and Financial Forum, the central bankers’ forum that compiled the research, said state investors had flocked to the precious metal because of its status as a “haven asset” and to take advantage of rising prices.

“There was a lot of political uncertainty in the past year. There were big political shocks with Brexit and Trump, which have driven investors back to gold,” she said.

The price of gold surged after the unexpected Brexit vote in June and immediately after the election of Mr. Trump in November, although it fell in the final weeks of the year.

Alistair Hewitt, head of market intelligence at the World Gold Council, said state-backed investors had also increased their gold stores as a hedge against the stronger dollar. The dollar is up 15 percent against the pound over the past year.

“Central banks and public institutions have been adding to their strategic gold holdings for a number of years,” Mr. Hewitt said. “A lot of emerging market central banks hold significant amounts of US dollars, and they have bought gold as a hedge against this concentrated currency exposure.” …

Remainder of report via FT: State investors stock up on record gold reserves amid uncertainty

In 2013, the global monetary think-tank, the Official Monetary and Financial Institutions Forum (OMFIF),  warned in a wide-ranging analysis of the world monetary system of “twin shocks” to the dollar and the euro and of a “coming dollar shock” and pointed out how gold would be a safe haven in a dollar crisis.

Demand for physical gold is likely to rise as the world heads towards a multi-currency reserve system under the impact of uncertainty impacting the stability of the dollar and the euro, the main currencies held by central banks and sovereign wealth funds.
See here: “Gold Will Prove A Haven From Currency Storms” – OMFIF Study

News and Commentary

Gold Rally Limited to U.K. as Impact of Political Turmoil Muted (Bloomberg.com)

State investors stock up on record 31k tonnes of gold reserves – highest since 1999 (Gata.org)

Law Will Oblige Travelers Entering US to Declare Digital Currency Holdings (AltCointToday.com)

Sibanye Gold say South Africa wildcat strike continues, 138 arrested (Reuters.com)

Nevada Becomes First US State to Block Blockchain Taxes (CoinTelegraph.com)

The Strange Secret History of Operation Goldfinger (NewYorker.com)

Bringing 1/2 of Germany’s Gold Back (Handelsblatt.com)

Barack Obama – The $600 Billion Man (BonnerAndPartners.com)

Santander acquistion of Banco Popular shows “financial system insane” (ValueWalk.com)

Another Day of Salami Slicing in Silver and Gold (GoldSeek.com

END

Bitcoin surges above 3,000 per coin

(courtesy zerohedge)

Bitcoin Surges Above $3000 As Asian Premium Collapses

Bitcoin prices (in dollars) have surged above $3000 for the first time in history this morning as CoinTelegraph reports that South Korea and Japan, the third and fourth largest Bitcoin exchange markets, are no longer showing Bitcoin price premiums.

Source: BitcoinWisdom.com

Having reached over KRW4 million in late May (well north of $3600 when Bitcoin in dollars was trading at around $2400), the premium for Bitcoin in Korea (via Korbit) has collapsed to zero

Source: Korbit

It seems the gains in dollar-Bitcoin-exchanges vs non-dollar-Bitcoin-exchanges have helped the former in lieu of the latter (as arbs appears), and as CoinTelegraph notes the factors behind the extreme premium rates are starting to fade.

South Korea and Japan’s extreme premium rates did not dematerialize overnight. It began with the stabilization of the Chinese market and the resumption of withdrawals led by the big three Bitcoin exchanges in China – Huobi, OKCoin and BTCC.

 

As the global market stabilized and the Chinese Bitcoin exchange market recovered, premiums started to decrease. Chinese exchanges, which used to process Bitcoin trades around 25 percent lower than the global average price, began to process trades at a value higher than the global average Bitcoin price.

 

During that time, liquidity in the Japanese and South Korean markets also increased drastically. Some of the largest companies in Japan, including the multi-billion dollar internet conglomerate GMO, opened a Bitcoin exchange to address the rapidly increasing demand for Bitcoin and South Korean exchanges also began to focus on providing higher liquidity toward traders.

 

Ultimately, the recovery of the Chinese market acted as a catalyst for global Bitcoin exchange market stabilization and standardization.

While much has been written on the ‘bubble’ in virtual currencies, Acting-Man’s Pater Tenebrarum provides some good color on how we got here and what happens next…

The Crypto-Bubble – A Speculator’s Dream in Cyberspace

When writing an article about the recent move in bitcoin, one should probably not begin by preparing the chart images. Chances are one will have to do it all over again. It is a bit like ordering a cup of coffee in Weimar Germany in early November 1923. One had to pay for it right away, as a cup costing one wheelbarrow of Reichsmark may well end up costing two wheelbarrows of Reichsmark half an hour later. These days the question is how many wheelbarrows of US dollars one may need to pay for a bitcoin.

 

Is it real? (As our readers know, the nature of reality poses certain problems).  When we started writing this, bitcoin had just moved up by more than $600 in one week to its then level of $2,400 –  within a little more than a day it reached an interim peak of $2,760, then plunged to an interim low of around $1850 in just two trading days, only to rally to a new high of $2,930 over the next two weeks. Currently it trades at $2,750 (don’t hold it against us if these figures are no longer true by the time this post is published).

 

Naturally, the increasingly parabolic look of the bitcoin chart raises the question  whether it represents a bubble, and if so, how large it will become. A good answer to the second part of the question is usually “larger than anyone thinks possible”. As to the first part, it may be fair to say that it has been in a bubble since shortly after its birth. At one point in 2009 the currency could be bought for 1/100 of 1 US cent (USD 0,0001). It rallied to 5 cents by 2010, which is quite a big move. We dimly remember a story about a pizza restaurant selling Margheritas for BTC 20,000 apiece at the time. In 2011 it reached a peak of $18.50 – and so on, and so forth.

In recent weeks we occasionally watched in mute fascination as bitcoin fluctuated in ranges of several hundred dollars in the space of a few hours. On May 22 it had a little dip just below the $2,000 mark to give everyone a good entry point. But would it really be worth it? What if the bubble was about to collapse? Three days later the courageous dip buyers were up by almost 40%. Given how overbought bitcoin looks, one would have thought it a good idea to take the money and run, but of course we have no idea how crazy things will still get before everybody really starts dialing 1-800-GETMEOUT.

A competing crypto-currency by the name of Ethereum (what a name!) has gained more than 2,400% this year, rising from $10 in January to $258 in early June. The move from $80 to $258 took just three weeks. So yes, it is a bubble of sorts, with an almost Tulipomania-like air about it. It is a speculator’s dream in many ways – BTC and ETH are undoubtedly great trading sardines. What interests us though is why this is happening. What is driving it?

 

Fractal Patterns

One interesting thing about the chart of bitcoin is that it has a text-book Elliott wave shape (we have not labeled the chart, but it seems obvious to us that it lends itself to such labeling). This applies to the weekly chart shown further below as well and also to other time frames. Regardless of what one thinks of Elliott wave theory, price trends in financial markets definitely have fractal characteristics.

Empirically they consist of sequences of patterns that are recurring over and over again in every conceivable time frame, i.e., the same patterns (or rather, very similar patterns, such as for instance triangles) that form on daily, weekly or monthly charts, also form on one minute, ten minute and hourly charts. These patterns appear to reflect various stages in the evolution of market psychology within the time frames captured by these charts.

R.N. Elliott cataloged such recurring patterns in the stock market and tried to find out if they followed rules that could be defined and used for forecasts. Obviously such an endeavor is fraught with many difficulties. Particularly the validity of the theoretical framework that was created after the empirical identification of said patterns and the promulgation of the technical rules governing the Elliott wave principle seems questionable.

But that is not really what we want to discuss here. One doesn’t necessarily have to believe that the Elliott wave principle is valid or useful for making accurate market forecasts in order to recognize that its leading practitioners have gathered a number of useful empirical insights.

In this particular case we mention it mainly because typically,“textbook” Elliott wave patterns only emerge in markets with broad participation. Since these patterns reflect the predominant mood of market participants, or if you will, the “market mind”, recognizable shapes only tend to form in liquid markets with a large number of participants. While we cannot say what precisely the threshold is, i.e., at what point pure randomness is replaced with something that resembles a more orderly arrangement, the price chart itself conveys the information that the threshold has been crossed.

The bid/ask spread of bitcoin is usually quite tight as well, although it has tended to widen amid the recent increase in volatility. We observed trading activity at one of the larger exchanges while it traded around $2,400 and a the time the bid/ask spread fluctuated from as little as 30 cents to short term wides of up to $7 when short term volatility spiked. Even at its widest the spread was therefore just ~0.2%, which also shows that this is market with broad participation. Keep in mind that we just observed the spread over a limited time window, it is therefore possible that it will occasionally be wider, but probably not by much.

 

Bitcoin, weekly. In this time frame one can also clearly discern the Elliott wave shape of the bitcoin chart, which is currently in its fifth major bubble–like move since 2009. The earliest bubble phases are not really discernible on this linear chart, but in percentage terms they were actually far larger than the two big moves that can be immediately recognized. In other words, the biggest profits were actually made  from 2009 to 2013 – click to enlarge.

In short, a large number of market participants evidently regards bitcoin at the very least as a legitimate investment asset. Everything we write here will ultimately lead to the one question we really want to discuss, namely bitcoin’s status as “money”. We will get to that in Part 2, but we can tell you already that we continue to regard it as a secondary medium of exchange.

 

Exchanges in Trouble with Correspondence Banks – Honi Soit Qui Mal Y Pense!

 

Honi Soit Qui Mal Y Pense (shame on anyone who thinks ill of it). The motto appears on a representation of the garter surrounding the Shield of the Royal coat of arms of the United Kingdom. It already appeared in the 16th century on the coat of arms of John of Gaunt.

 

One of the things that make bitcoin so attractive is that it allows anonymous, untraceable payments to be made, without middlemen. We actually have to amend that a bit: there are middlemen, since transactions have to be processed, or rather “confirmed” by bitcoin miners, and they charge a fee for that. These fees have recently risen sharply as the number of transactions has spiked, while the technical capabilities of the blockchain to handle them in a timely manner remains limited (a.k.a. the scalability problem).

In fact, bitcoin first came to the broader public’s attention when it was revealed that the “Silk Road” market for illegal drugs and unregistered weapons on the darkweb used bitcoin as its medium of exchange. When news of this were reported in the press for the first time, the third bitcoin bubble got going.

We actually don’t believe such marketplaces should even be illegal, as we have grave reservations regarding the prohibitions that make them so, but obviously, the anonymity of bitcoin transactions is a helpful feature for shadow economy entrepreneurs. When people learned about this, their assessment of bitcoin’s potential to become a legitimate medium of exchange, i.e., money, changed drastically.

It is little surprise that bitcoin exchanges have often turned out to be somewhat opaque institutions as well. The formerly biggest one, Mt. Gox, found an ignominious end in 2013, with most of its customers bitcoins ending up stolen. Two of the largest (by volume) exchanges today are BTC-e and Bitfinex. No-one even knows where the servers of BTC-e are physically located, and only the first names of its owners are publicly known (they sound Russian). The exchange is as anonymous as a botcoin wallet, so to speak. And yet, it is the second-largest bitcoin exchange in the world.

Bitfinex is located in Taiwan and has been at great pains to project an image of legitimacy, but that hasn’t helped it from being hampered by one of the interfaces with the world outside of bitcoin it urgently needs to actually function in the long run. To be precise, what happened was that its US correspondence bank Wells Fargo stopped servicing Bitstamp and its customers.

At the same time Wells Fargo also withdrew from servicing Tether and its customers. Tether issues the “Tether Dollar” (USDT) – a crypto-currency that is backed 1:1 with US dollars, but can be used for transactions over blockchain type wallets and has become a popular replacement for USD on bitcoin exchanges. Although every USDT in issue seems indeed backed by one dollar, it has become impossible to exchange them unless one is a resident of Taiwan.

In the meantime these problems have spread to other bitcoin exchanges and several of them now find themselves unable to transfer or receive US dollars. This has created a very interesting situation. In a way, Bitfinex has become a closed system, as most of the dollars that are already deposited there will have to remain there for the time being.

In response to this development, many traders exchanged their dollars at Bitfinex for bitcoin, as bitcoin balances can of course still be transferred to bitcoin wallets without a hitch. Banking cartel members cannot get in the way, nor can anyone else. This has caused bitcoin to temporarily trade at premiums of more than $100 at Bitfinex and was no doubt a major factor in fueling the recent rally.

 

The contents of the Bitfinex “cold wallet” – the third richest bitcoin address in the world, which holds the bitcoin of Bitfinex customers. The plunge in the wallet’s balance in April was triggered by the exchange’s banking problems. There seems to be hope that the problem will be resolved eventually, so balances have slightly increased again from their previous low point. Moreover, clients based in Taiwan are not affected by the correspondence bank issue and can still withdraw or deposit any currency they like.

 

In the meantime many speculators in Asian countries, from Korea to Japan to China seem to have become active in the bitcoin market and are adding more fuel to the fire, but we suspect that the increasing problems with getting US dollars or other fiat currencies in and out of numerous bitcoin exchanges is actually the major factor driving the rally.

At the same time it has become known that Fidelity is now a bitcoin miner, accepts bitcoin as payment in its cafeteria and has hooked up with Coinbase, another bitcoin exchange. We have not yet heard about Coinbase experiencing correspondence bank problems, so it looks almost as if traders are herded into specific exchanges. As we said above: Honi soit qui mal y pense!

What makes this interesting to us is the fact that one of the reasons why bitcoin functions as a secondary medium of exchange is precisely the fact that it is considered “liquid”, i.e., that it can be exchanged for fiat currencies at any time at a reasonably small bid/ask spread. We currently don’t believe that all bitcoin exchanges will be cut off from the fiat money system, but some sort of concerted attempt at suppression of these exchanges is clearly underway.

 

“Moneyness”

It may well be that Wells Fargo and other banks are merely concerned about potential regulatory issues if they continue to work with bitcoin exchanges – but why now all of a sudden and not before? In any case, the issue is important in connection with the potential for bitcoin and other crypto currencies to become genuine media of exchange, i.e., money that is accepted widely for the final payment for other goods and services in the economy without reservations.

In Part 2 we will return to discussing bitcoin in the context of monetary theory. We already pointed out in past articles that a good case can be made that bitcoin does not conflict with Menger’s theory on the origin of money or the related regression theorem of Ludwig von Mises. We have given the issue some more thought in the meantime and have come up with a few new ideas in this context which we think support this argument.

We still prefer gold as the premier “stateless” money – or let us rather say, monetary asset, since gold is nowadays not really money in the strictest definition of the term, even though the markets of course treat it as they would any other currency. But that doesn’t mean that bitcoin is not a viable contender for “moneyness” as well – particularly as it is a creature of the free market, just as gold money is.

The fact that assorted fiat monies have recently declined faster against bitcoin than against gold is irrelevant in this context. In our opinion gold still enjoys advantages bitcoin cannot hope to match. More on this in part 2.

Addendum and Bonus Chart

As we finish writing this article, bitcoin trades at $2855 – it hasn’t taken very long for it to gain another $100. And here is a daily chart of the closest bitcoin competitor ethereum (ETH-USD) – which as you might guess, has risen a bit further as well:

 

Ethereum, daily – from $10 earlier this year to over $300 today – click to enlarge.

 

 

end

 

More on the conviction of that manipulator of gold and silver trader

(courtesy MonetaryMetals)

Hell Freezes Over: CFTC Finds Trader Guilty of Metals Price Rigging

It must have been painfully awkward for the Commodity Futures Trading Commission (CFTC).

Last year, Deutsche Bank settled a civil suit involving blatant market rigging and turned over reams of information, including chat logs and voice recordings. The trove contained plenty of damning evidence which had gone overlooked by the CFTC.

CFTC investigators supposedly spent 5 years searching for illegal market manipulation, but somehow, managed to find nothing.

The cheating became hard to ignore after Deutsche Bank turned over voice recordings and 350,000 pages of documents which revealed bank trading desks being run like the back office of a crooked casino.

Here is one of the chat log gems between David Liew (Trader B) and an accomplice at UBS, where they coordinate trades and joke about it with a plan on the timeless Ghostbusters song:

UBS [Trader A]: and if u have stops…
UBS [Trader A]: oh boy
Deutsche Bank [Trader B]: HAHA
Deutsche Bank [Trader B]: who ya gonna call!
Deutsche Bank [Trader B]: STOP BUSTERS
Deutsche Bank [Trader B]: deh deh deh deh dehdehdeh deh deh deh deh dehdehdeh
Deutsche Bank [Trader B]: haha16

This and records of many other similarly incriminating exchanges left CFTC officials little choice but to reverse themselves and finally take some action. On June 2nd, the Commission announced a settlement with a single trader named David Liew.

Nevertheless James McDonald, the CFTC’s Director of Enforcement, seemed proud. He announced, “Today’s enforcement action demonstrates that the Commission will aggressively pursue individuals who manipulate and spoof in our markets.”

 

Nowhere in his statement will you find him giving proper credit to the cheated bank clients who did the actual heavy lifting. After making complaints to the CFTC, they hired some attorneys and pursued the civil action which produced the mountains of evidence the CFTC relied upon.

In any event, more enforcement action may be on the way. A number of other traders and banks have been implicated in market rigging.

 

Insolvenc

More stuff that will be hard for the bureaucrats and Wall Street job seekers at the CFTC to ignore.

The sanctions against David Liew do represent a small step toward more honest metals markets. We’ll get more excited if we see high level executives being prosecuted and banks losing their licenses to trade. But we aren’t holding our breath.

The civil courts have a much better chance of making the crooked banks accountable than the captured CFTC.

https://www.moneymetals.com/news/2017/06/12/cftc- metals-price-rigging-001091

-END-

this is why Germany brought back 50% of its gold stored abroad

(courtesy Handlesblatt)

Bringing Gold Back to Germany

The German central bank is currently repatriating much of its overseas gold, but part of the reserves is going to stay abroad.

Published on 11. June 2017, 13:00gold_72000976_dpaGold. Something Germany isn’t short of. Source: Bundesbank/dpa

It was a scare from Germany’s Federal Audit Office that the public actually paid attention to. In 2012 financial controllers said they were unsure whether the gold reserves of Germany’s Bundesbank actually physically existed.

The Federal Audit Office demanded the central bank make regularly spot checks so that gold reserves abroad should be “physically counted and their authenticity and weight” confirmed. We’re not talking peanuts here. Following the United States, Germany has the world’s largest gold reserve, constituting two-thirds of German currency reserves. And in 2012, around 70 percent of the total of 3,378 tons of the precious metal (total value around €119 billion or $132.98 billion) was in the vaults of foreign central banks.

The Bundesbank took the suggestion to heart and discretely transferred 300 tons of gold stored in the vaults of the US Federal Reserve to Frankfurt over the past years. Over 100 tons were brought home in 2016 alone.

This year, the plan is to continue to increase gold reserves at home. To make that happen, the Bundesbank is removing its complete reserves from neighboring France. It has planned to cart 91 tons of gold under the strictest security conditions from the Banque de France to Wilhelm- Epstein-Strasse in Frankfurt by the end of this year. Altogether the Bundesbank wants to have close to 680 tons from abroad back in Germany’s own vaults.

22 WiWo p38 Sitting on Gold-01

That means 50 percent of Germany’s gold will still be stored abroad. It’s a deliberate decision. While intention was once to safeguard the precious metal from Soviet access during the Cold War, today it serves as a national shield against possible currency crises.

The Bundesbank states for the record that its storage plan is based on “the two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centers abroad within a short space of time.” This means that in case of a severe currency crisis, it can sell or pawn the gold remaining abroad in the US and the United Kingdom for hard currency. Since France is part of the euro zone, the storage space at the Banque de France has no strategic value, thus why it’s been eliminated.

Germany’s gold reserves are a legacy of the Bretton Woods monetary system agreed to in 1944, and named after the little town in New Hampshire where 44 nations gathered to hammer out the rules for commercial and financial relations, the so-called gold exchange standard.

On the one hand, this standard established a set exchange rates for each currency tied to the US dollar. On the other, the US Fed was obligated to exchange the dollar reserves of the member states for gold at any given time for a fixed purchase price of $35 dollars per troy ounce (about 31.1 grams).

In this system, which lasted until the beginning of the 1970s, trade surpluses resulted in mounting gold reserves. Since Germany was already exporting more than it imported back then, its gold reserves quickly multiplied.

The gold reserves in France and Great Britain also trace back to trade surpluses and were created primarily in the 1950s within the framework of the European Payments Union (EPU). The bilateral surpluses and deficits of each member state were accounted for in the EPU. Member states with outstanding debts were required to pay a certain amount of the debt in gold. Driven by Germany’s rapid economic recovery (or “Wirtschaftswunder”), the Bundesbank’s gold reserves skyrocketed from 24.6 tons at the end of 1951 to 1,514.6 tons in 1958.

Stored today in the strongrooms of the Bundesbank’s headquarters, which has been being guarded around the clock by the German federal police since 2015, are close to 270,000 bars. In past years, the Bundesbank has only sold around 0.1 percent of its reserves annually. The buyer was the finance ministry that minted coins with it. According to the Bundesbank, other sales are out of the question and this is a strategy considered sensible by economists, although gold does not yield steady returns.

“In a major crisis or a breakdown of the monetary system, the demand for gold, and therefore its price, would shoot up. The Bundesbank’s gold would then be worth so much that it could save the euro solely based upon the confidence the markets place in it,” says economist Jörg Guido Hülsmann from the University of Angers. The Bundesbank prefers to express this with a bon mot: Gold is “worth the most when it doesn’t have to be turned into cash.”

A version of this article first appeared in business weekly WirtschaftsWoche. To contact the author: mona.fromm@wiwo.de

https://global.handelsblatt.com/finance/bringing-gold- back-to-germany-777876

-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  WEAKER 6.7990(DEVALUATION SOUTHBOUND   /OFFSHORE YUAN MOVES  WEAKER TO ONSHORE AT   6.7951/ Shanghai bourse CLOSED DOWN 18.52 POINTS OR 0.59%  / HANG SANG CLOSED DOWN 322.25 POINTS OR 1.24% 

2. Nikkei closed DOWN 104.68 POINTS OR 0.52%   /USA: YEN FALLS TO 109.99

3. Europe stocks OPENED IN THE RED        ( /USA dollar index FALLS TO  97.14/Euro UP to 1.1213

3b Japan 10 year bond yield: RISES TO   +.058%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.99/ 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::  46.11 and Brent: 48.81

3f Gold UP/Yen UP

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  +.253%/Italian 10 yr bond yield DOWN  to 2.029%    

3j Greek 10 year bond yield FALLS to  : 5.93???  

3k Gold at $1268.15  silver at:17.13 (8:15 am est)   SILVER BELOW  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 1/100 in  roubles/dollar) 57.04-

3m oil into the 46 dollar handle for WTI and 48 handle for Brent/

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

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.99 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  0.9680 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  +0.253%

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 2.209% early this morning. Thirty year rate  at 2.862% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

“Tech Wreck” Goes Global Dragging Worldwide Markets Lower; Cable, USDJPY Slide

First the bad news: following Friday’s “tech wreck” European equity markets have opened lower, with the Stoxx 600 sliding 0.9% and back under the 50DMA for the first time since December, dragged by selloff in tech shares, mirroring Asian markets as Friday’s “FAAMG” volatility in U.S. markets spreads globally, battering shares from South Korea to the Netherlands. European banks lag as the Spanish regulator stepped in to prevent another bank collapse, this time of LiberBank which we profiled yesterday, by banning short-selling in the regional commercial bank to mitigate Popular-related contagion.

Samsung Electronics, ASML Holding and Tencent Holdings led declines in Europe and Asia, dragging down benchmark indexes according to Bloomberg. U.S. stock futures, which ignored Friday’s tech move, also fell as markets continue to digest the Nasdaq 100’s plunge on Friday. Europe’s tech index fell as much as 2.8% to put it on track for its biggest one-day loss since October. The index had reached a 15-year high earlier this month and has soared around 40 percent over the last year

As discussed over the weekend, the sudden slide in tech stocks, which was responsible for nearly half the YTD gains in the S&P helped send global equities to repeated record levels this year, blindsided many investors after markets largely brushed aside last week’s trio of risk events. The question now, according to BBG, is whether the drops represent merely a pause or a more fundamental crack in the U.S. stock bull market.

“There’s a chance U.S. internet technology stocks that have propelled a global stock rally will now serve as a buzz kill,” said Mitsuo Shimizu, deputy general manager at Japan Asia Securities in Tokyo.

In an ominous note over the weekend, Goldman warned that “The Last Time The Market Acted Like This Was At The Tech Bubble Peak” suggesting more pain may be in store for tech stocks.

Now the good news: Italian BTPs rally from the open, with the spread to bunds tightening 6bps due to poor performance from populist party in Italian local election, further reducing chances of early national elections. It spurred on debt markets. Italian government bond yields fell to their lowest since January.  “Macron doing well in the first round of the French parliamentary elections bodes well for him getting a majority,” said Lyn Graham-Taylor, fixed income strategist at Rabobank. “The fact that 5-Star did poorly in local elections in Italy also suggests a setback for populism in Europe.”

A similar reaction was observed in French bonds, where the spread to Bunds has dropped to 36 bps after yesterday’s landslide victory for Macron’s party in the first round of the French presidential election.

In other key moves, the USD/JPY has broken back below 110.00 as USD weakens, AUD/USD also supported by overnight rally in iron ore futures +2.6%. The short sterling strip bull flattens, with cable finally cracking below 1.27 after some initial support as markets continue to re-evaluate political certainty and Brexit implications of U.K. election.

Meanwhile, the Washington drama continues, with reports over the weekend that AG Jeff Sessions offered to speak to the Senate Intelligence Committee to answer questions about alleged Russian meddling in the 2016 presidential election. On Wednesday the Federal Reserve is set to lift rates, leading a pack of central banks that are mostly nodding in the direction of removing ultra-accommodative policy.

The euro rose back to $1.1225 in the currency markets before fading modestly, where anticipation is also building ahead of Wednesday’s conclusion of a two-day FOMC meeting. The central bank is widely expected to nudge up U.S. interest rates by another quarter point, but economists will be watching to see whether the recent dip in economic data and wave of uncertainty surround Donald Truump has weighed on confidence.

Britain’s sterling also remained in focus as it began to backslide again. It was hovering at $1.2730 and 88.08 pence per euro as Prime Minister Theresa May attempted to prop up her position after her party’s last week’s damaging election. “The political risks are mounting,” said Kathleen Brooks, head of research with City Index in London.

In commodities, crude oil prices extended gains after rising on Friday when a pipeline leak in major producer Nigeria overshadowed supply worries weighing on the market. U.S. crude and Brent were both 0.6 percent higher at $46.10 and $48.45 a barrel, respectively, while copper rose for a fourth straight session and gold XAU= snapped a three-day losing streak to climb to 1,269 an ounce

Bulletin Headline Summary from RanSquawk

  • European equities softer amid the fall in tech names post the sell off late on Friday’s session
  • Italian and French spreads tighten against their German counterpart amid alleviating political concerns in Europe
  • Today’s session sees a lack of tier 1 data releases

Market Snapshot

  • S&P 500 futures down 0.3% to 2,424.25
  • STOXX Europe 600 down 0.7% to 387.87
  • MXAP down 0.3% to 154.36
  • MXAPJ down 0.8% to 500.82
  • Nikkei down 0.5% to 19,908.58
  • Topix down 0.01% to 1,591.55
  • Hang Seng Index down 1.2% to 25,708.04
  • Shanghai Composite down 0.6% to 3,139.88
  • Sensex down 0.7% to 31,048.15
  • Australia S&P/ASX 200 up 0.02% to 5,677.80
  • Kospi down 1% to 2,357.87
  • German 10Y yield fell 1.6 bps to 0.248%
  • Euro up 0.2% to 1.1218 per US$
  • Brent Futures up 0.4% to $48.32/bbl
  • Italian 10Y yield fell 9.0 bps to 1.794%
  • Spanish 10Y yield fell 3.3 bps to 1.411%
  • Brent Futures up 0.4% to $48.32/bbl
  • Gold spot up 0.2% to $1,269.07
  • U.S. Dollar Index down 0.2% to 97.12

Key Overnight Headlines

  • Italy: populist Five Star Movement suffers heavy setbacks in local mayoral elections; fails to even make runoffs in the four top races
  • France: strong performance for Macron’s party in French parliamentary elections, wins 32.3% of the vote, 13ppts ahead of the Republicans
  • Spain: government sees 2017 GDP at least 3.2%, consensus is growing that official growth forecast of 2.7% is too cautious: El Mundo
  • Spanish Banks: market regulator bans short-selling in Liberbank stock to avoid market contagion after Banco Popular rescue
  • U.S. Banks: U.S. Treasury Department to propose modest revisions to post-crisis banking regulations; calls for the removal of the Consumer Financial Protection Bureau’s authority to directly examine banks: Politico
  • Citrix Sale Plans Said to Stall as Bain, Thoma Balk at Price
  • Stay Braced for Two More Fed Hikes in 2017, Economists Say
  • Qatar Says Pockets Deep Enough to Defend Riyal Amid Crisis
  • U.S. Stocks Still Best for Vanguard Founder After 400% Gains
  • Microsoft Aims Xbox One X at Hardcore Gamers for Holidays
  • Uber to Add Independent Director as Board Responds to Crises

Asia equities traded subdued following a mixed US close on Friday, in which tech underperformed as Apple and FANG stocks dropped over 3%, with participants also cautious ahead of this week’s FOMC meeting where the Fed are expected to hike rates by 25bps. In Asia, ASX was closed for public holiday while Nikkei 225 (-0.5%) was dampened by a mildly stronger JPY and after disappointing machinery orders. Shanghai Comp. (-0.5%) and Hang Seng (-1.1%) conformed to the downbeat risk tone with underperformance also seen in HK’s tech stocks and after a lacklustre CNY 40bIn injection by the PBoC. Finally, 10yr JGBs were lower to track losses in T-notes and amid an absence of a BoJ Rinban announcement today, while the curve was mixed with underperformance in the belly. PBoC injected CNY 10bIn in 7-day reverse repos and CNY 30bIn in 28-day reverse repos. PBoC set CNY mid-point at 6.7948 (Prey. 6.7971)

Top Asian News

  • China Holds Firm to $5 Trillion Anchor as Fed, ECB Seek Exit
  • Banks to Lose Sway Over China Index Just as Stocks Recover
  • Tokyo Needs More Hedge Funds to Become Global Financial Hub: CS
  • Economists See Strong Chance of Second Term for BOJ’s Kuroda
  • Oasis Says Amended Panasonic Offer for PanaHome Still Unfair
  • Chinese Brokerages Fall Amid Slowing Pace of IPO Approvals
  • Sun Hung Kai Halts Sales of Service Apartments in Shanghai: SCMP
  • Freeport Calls Talks With Indonesian Government ‘Constructive’

In Europe, exit polls from the first round of France’s parliamentary election suggest Macron’s La Republique En Marche party is to win between 415-455 seats (out of 577), Republicans 70-110 seats and National Front with 1-5 seats. (Newswires) Note, 289 seats are require for an absolute majority. These results also exceed those expected by pollsters with the Sopra Steria poll forecasting 385-415 seats.
Italy’s maverick 5-Star Movement looked set to suffer a severe setback in local elections on Sunday, failing to make the run-off vote in almost all the main cities up for grabs, early results and exit polls said

European trade has seen a quiet morning this morning, as traders look ahead to a week of central banks. Following Friday’s sell off in tech names late in the US session, European suppliers of Apple have notably underperformed this morning. Politics continue to influence markets, as fallouts from the UK election continue, noticeably, UK PM May has stated that she intends to stay as Prime Minister despite the cabinet reshuffle. The cabinet shake up has seen Michael Gove back to an influential position, as the new environment secretary. The uncertainty continues in regards to Brexit negotiations are evident in Moody’s commentary, stating that the election results open up consideration for a softer Brexit. However, did state that the outcome will complicate and possibly delay negotiations.

Politics also dictate fixed income markets, as the German-Italian spread falls around 14.8bps with the 10yr BTP yield at its lowest since January, as 5-star movement party suffers a severe setback. Elsewhere, the German-French spread slips 4.5bps as exit polls show Macron’s party winning a large majority of 415-455 in the parliamentary elections.

Top European News

  • Macron Tightens Grip on French Assembly as Old Guard Ejected
  • U.K.’s Davis: I’M Getting on With Leaving EU Single Market
  • Anti-Euro Five Star Movement Suffers Italian Election Setbacks; Italy Stocks Outperform; Local Vote Provides Big Surprise: Citi
  • Popular Takeover Turns Attention to Weak Spanish Bank Rivals
  • Auto Trader Falls Amid Report Amazon to Sell Cars in Europe
  • VW Is Considering Rehiring Opel’s Neumann, Reuters Reports
  • K+S Rises After Report on Belaruskali-Uralkali Talks
  • Spain’s Liberbank Rebounds After Regulators Ban Short Sales
  • Italy’s Industrial Production Declines, Dimming Year’s Outlook
  • U.K. Consumer Spending Drops for First Time in Four Years

In commodities, oil prices continue to flounder, but amid some reports of decent selling interest this morning, buyers have contained the move ahead of the lower half of the USD45.00’s in WTI, but there looks to be limited prospect of a notable recovery as the demand and supply dynamics continues to dictate. Russia’s energy minister said the market to re-balance by 1Q 2018 after meeting with Saudi Arabian counterpart over weekend. Hedge funds boost bullish WTI bets ahead of flat price crash, with Brent data due later Monday. The overhang of US shale production eats away at the prospective imports, and this will weigh on prices for the foreseeable future. Against this, we have seen a strong showing in Copper this morning, moving back into the mid USD2.60’s. Nothing fresh to note from the demand side, ie China, so this may be a period of technical relief/recovery more than anything else. Gold consolidates the recent pullback from near USD1300.00 levels, while Silver is underperforming and looking a little heavy in the low USD17.00’s.

In currencies, there is not too much conviction in the FX markets this morning, and we include GBP in this given the heightened uncertainty over the next government make up, their stance going into the EU negotiations and the bargaining talks themselves. We pay little attention to the overhyped soft and hard Brexit scenarios being touted by all and sundry, and the tight price action is testament to this.
Cable is testing the lows ahead of 1.2700 as NY traders filter in, but early London has been happy to maintain steady ranges a little higher up, preferring to express any weak GBP sentiment through the EUR cross rate. The latter stalled just ahead of 0.8860 last week, and this looks to be the next port of call, with pre 0.8900 expected also at some point. This is also down to the buoyant tone in the EUR/USD, which has re-establised a foothold above 1.1200 as the resistance ahead of 1.1300 is still the target. A breach looks unlikely ahead of the FOMC this week, and much of the hesitation to commit this morning is largely down to this.

 

US Event Calendar

  • 2pm: Monthly Budget Statement, est. $87.0b deficit, prior $52.5b deficit

* * *

DB’s Jim Reid concludes the overnight wrap

If a working lifetime starts from leaving university at 21 and ends with retirement at 65 then today’s birthday marks the halfway stage of my career which seems quite daunting. My wife informed me last night that she hasn’t managed to get me a birthday card or present yet as she’s been exhausted. She was 25 weeks pregnant yesterday and is already bigger than when she delivered at full term with Maisie. While I’m clearly hoping for a hot summer, I’m not sure it’ll be worth it for me given the extra work i’ll have to do!

Anyway, talking of university and linking it into the political shockwave that the UK delivered last week. I distinctly remember being at university back in the early 1990s and seeing pictures on the walls of students marching en masse on our campus at various causes in the 1970s. Some pictures saw them occupying buildings in huge numbers in some kind of protest or another. Fast forward 15-20 years to my time at uni and none of us had the appetite, enthusiasm or much cause for protest. I always wondered whether this was structural or cyclical. A combination of looking back through history and looking at the early data from last Thursday’s election suggests that it was cyclical. In the PDF today we show a graph of voter turnout of 18-24 years olds and over 65 year olds in every election since 1964 in the UK. As you can see the turnout for the eldest demographic has been steady between 70-80% over the 50+ years we have data. Up until 1992, 18-24 year old turnout was a lower but relatively steady 60-68%. Then in 1997, 2001, 2005 and 2010 it was at 54%, 40%, 38% and 52% respectively. Early data from Thursday have put this group’s turnout at around 70% – possibly the highest in at least two generations.

If confirmed this has major ramifications for politics and financial markets over the next few years in the UK and possibly further afield. In the UK we have huge intergenerational wealth issues (e.g. young in debt and can’t afford to buy a house and the old with large wealth in their house and other asset) but if the young don’t vote and the elderly do its difficult to see how this changes. However if the youth are now waking from their apathetic slumbering then policy surely has to be more redistributionary. Given that you can’t alienate the grey vote then the real difficulty is that politicians will struggle to tax the old but need to give the young more of a helping hand. This is not a recipe for austerity and debt reduction – both are looking increasingly like political suicide. As we’ve stated many times before over the last 12 months we think that over a long sweeping cycle we’re at an inflexion point. In short Governments can possibly be forced to spend more across the developed world until bond markets rebel at the high level of debts that this implies and then central banks would be forced to monetise this debt. Thursday’s election makes helicopter money more likely in my opinion. This is different from QE as its central banks buying bonds that are attached to fresh spending rather than independent of it.

Staying with politics, new French President Macron is set for a big National Assembly majority (as per Reuters) in the first round of the legislative elections held yesterday. The second round will take place next week but markets are likely to be cheered that this will give him a mandate to make the reforms he’s campaigned about. It seems mildly ironic that as France moves away from the Socialist party, the UK is a small political mishap from fresh elections at any time and possibly electing the most socialist government for at least 40 years. We’ll look at the market reaction to the UK election below but first we should highlight that in two days we have the small matter of the June FOMC to look forward to. The Fed is widely expected to raise interest rates 25 basis points and reiterate its intention to hike again once more before year end. They will also release updated economic and financial forecasts with DB expecting only minor cosmetic changes with perhaps median 2017 headline and core inflation estimates nudged down a tenth but all other estimates, including the trajectory for interest rates likely to remain broadly similar. DB also expect Yellen to discuss tapering of reinvestments in her post-meeting press conference. While she will not likely commit to any specific details DB expect her to guide financial markets toward a September announcement, which would be consistent with the minutes from the May 3 FOMC meeting.

Onto markets and the big story on Friday outside the UK election was the late sell-off in US tech which saw one measure of the sector down -2.7% with the NASDAQ -1.8%.Apple (-3.9%), Facebook (-3.3%) and Alphabet (-3.4%) were high profile losers on the day. It looked more like rotation than an out and out selloff as the DOW (+0.4%) climbed and the S&P (-0.1%) was nearly unchanged. Asian markets are starting the week on the soft side weighed down by Friday’s US tech sell off. The Nikkei is -0.6%, the Hang Seng -1.2% and Shanghai Comp -0.45% lower as we type.

Elsewhere Sterling retreated amid the political turmoil (-1.6% on Friday but flat overnight) with Gilt yields lower across the maturity spectrum (2Y: -2bps; 10Y: -3bps). However UK equities were boosted by the falling currency as the FTSE 100 ended the day up +1.0% to end a string of four days of losses. European indices were higher (DAX +0.8% and the CAC 0.7%) and credit markets saw iTraxx Main and Crossover both tighten by -1bp and -4bps respectively, while CDX IG and HY were flat and -2bps.

Turning to government bond markets, Friday saw German 2Y and 10Y yields both tick up by +1bp, while US Treasury yields rose (2Y +2bps; 10Y +1bps). French 10Y yields were unchanged although the 2Y  yields ticked up by +3bps, while BTPs rallied across maturities (10Y: -8bps). Across commodities markets, oil prices (and energy broadly) caught the risk rally as well (WTI +0.7%). At the other end of the risk  spectrum gold fell for a third straight day (-0.6%). FX markets aside from the moves in GBP saw the US dollar broadly gain by +0.3% while the Euro fell by -0.1%.

While the primary focus on Friday was on the UK election outcome, there was also a bit of data to follow. Over in Europe we got disappointing industrial production prints out of France and the UK. French industrial production numbers unexpectedly turned negative in April (-0.5% mom vs. +0.2% expected) and the UK data was also softer than expected (+0.2% mom vs. +0.7% expected). We also got trade data out of Germany and the UK, where the trade surplus for the former shrunk more than expected to 18.1bn (vs. 23.0bn expected; 25.4bn previous) as imports grew more than expected at 1.2% mom (vs. -0.5% expected).

The trade balance data out of the UK served to temper weak industrial production data as the total deficit narrowed to GBP -2.05bn in April (vs. -3.5bn expected; -3.9bn previous). It was a quiet day on the data front over in the US with the only data of note being wholesale inventories which fell by more than expected (-0.5% mom vs. -0.3% expected).

Turning to the week ahead now. It’s a quiet start to the week for data today with the Bank of France business sentiment for May due this morning, while across the pond this afternoon we’ll get the US monthly budget statement for May. Kicking off Tuesday will be the UK where we are due to receive the May CPI/PPI/RPI prints, followed closely by the June ZEW survey in Germany. Over in the US on Tuesday the early release is the May NFIB small business optimism reading while the May PPI report will be due out later in the afternoon. The early focus on Wednesday morning is in China where the May retail sales, fixed asset investment and industrial production data is due. Japan will also release April industrial production data. In Europe on Wednesday we are due to get the final CPI revisions in Germany in May along with UK employment data for April and May, and Euro area industrial production in April. Over in the US on Wednesday the early focus is the May CPI report and retail sales data for May, followed later on by the outcome of the FOMC meeting. Turning to Thursday, with little of note in Asia the early focus in Europe will be the final May CPI revisions in France. UK retail sales for May and Euro area trade data for April follow, before the BoE meeting at midday. In the US on Thursday we are due to receive the import price index reading for May, initial jobless claims, empire manufacturing for June, Philly Fed manufacturing survey for June, industrial production for May and NAHB housing market index reading for June. We end the week on Friday in Asia with the BoJ policy meeting. In Europe we end with May CPI for the Euro area. In the US the week finishes with May housing starts and building permits, and the preliminary University of Michigan consumer sentiment reading for June.

Away from the data the only Fedspeak this week comes on Friday when Kaplan is scheduled to speak in the evening. The ECB’s Knot speaks tomorrow morning. We’ll also hear from Yellen and Kuroda after their respective policy meetings. Euro area finance ministers are also due to gather on Thursday to discuss Greece debt relief options.

3. ASIAN AFFAIRS

i)Late SUNDAY night/MONDAY morning: Shanghai closed DOWN 18.52 POINTS OR 0.59%   / /Hang Sang CLOSED DOWN 322.25 POINTS OR 1.24% The Nikkei closed DOWN 104.64 POINTS OR 0.52%/Australia’s all ordinaires  CLOSED UP 0.01%/Chinese yuan (ONSHORE) closed DOWN at 6.7991/Oil UP to 46.11 dollars per barrel for WTI and 48.81 for Brent. Stocks in Europe OPENED IN THE RED       ..Offshore yuan trades  6.7951 yuan to the dollar vs 6.7991 for onshore yuan. NOW  THE OFFSHORE IS WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN A LITTLE WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS A LITTLE WEAKER TO THE DOLLAR AND THIS IS COUPLED WITH THE MUCH WEAKER DOLLAR. CHINA IS HAPPY TODAY WITH THE FALL IN THE USA DOLLAR 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

b) REPORT ON JAPAN

c) REPORT ON CHINA

Trump is urging China to impose a first round of sanctions against any Chinese firm trading with North Korea:

(courtesy zero hedge)

US Urges Beijing To Impose First Round Of Sanctions Against Chinese Firms Trading With North Korea

The Trump administration has asked Beijing to impose what would be the first round of sanctions against nearly 10 Chinese companies and individuals that trade with North Korea, part of a strategy to starve, and ultimately shut down, Kim’s nuclear program, the WSJ reports.

Recall that while U.S. sanctions on North Korea target virtually the nation’s entire economy; U.N. sanctions are less stringent and still allow for significant nonmilitary trade, especially between the isolated nation and its biggest trading partner, China. While there is no firm deadline, senior US officials cited as sources by WSJ indicated that the Treasury Department could impose unilateral sanctions on some of these entities before the end of the summer if Beijing doesn’t act.

The Journal did not name the entities being targeted, however clues to their identities can be found in a report released Monday by a Washington-based nonpartisan research group, C4ADS, that identifies several Chinese entities of concern in the hopes of exposing illicit trading networks. Those include a Chinese businessman and his sister said to be connected to a ship intercepted by Egypt last year while smuggling 30,000 North Korean rocket-propelled grenades. US officials told WSJ that the report reflects part of its strategy towards North Korea.

While thousands of Chinese firms trade with North Korea, many are interconnected through parent companies or shared ownership. Shutting down even a handful of these connected networks would make it harder for North Korean leader Kim Jong Un to finance and supply his nuclear program, or so the thinking goes.

Meanwhile, the reason for the urgency is that as noted above, Pyongyang conducts roughly 90% of its recorded foreign trade through China, per Chinese trade data.

We’ve told the Chinese we hope they’ll act against certain companies and people,” said a senior U.S. official briefed on North Korea policy.

 

“But we’ve also said that we’re prepared to act alone and can reach North Korea if we choose.

Beijing has said repeatedly that while it implements United Nations sanctions on North Korea, it is opposed to unilateral action and favors a negotiated solution.

C4ADS said Chinese corporate and trade records show 5,233 local companies traded with North Korea between 2013 and 2016. Many of them share Chinese owners, addresses or other identifying features, it said.

“You need to deny these networks access to Chinese markets and more broadly the international financial system,” David Thompson, author of the C4ADS report, told the Journal.

Conceding that much of China’s trade with North Korea is legal, the report identified several Chinese companies exporting potential “dual use” items that could be used either for civilian purposes or in North Korea’s missile programs.  C4ADS said Dandong Dongyuan Industrial Co., one firm suspected to be on the government’s list, was the biggest exporter of potential “dual use” items in its sample and that last year they included navigational apparatus in a category that could be used in vehicles or in ballistic missile guidance systems.

“Once charted, not only do links between top firms become more apparent, but it becomes much more apparent that a very small number of key executives control a disproportionate share of the trade [with North Korea],” said C4ADS.

The owner of that company, Chinese businessman Sun Sihong, had agreed to meet with a Journal reporter, but soon afterward a dozen of his staff pulled over the reporter’s taxi, boxed it in with their vehicles and called local police, who briefly detained the reporter.

WSJ said that Mr. Sun and his staff then came to the police station and answered a few questions in the presence of several officers before leaving with his entourage. He denied doing any trade with North Korea.

Dandong Dongyuan reported that it was exporting to North Korea in corporate filings from 2010 on but removed the reference in November 2016. From 2011 to 2016, it had approval to export trucks and in 2015 it was allowed to join a trade exhibition in Pyongyang, according to Chinese government notices.

The Trump administration has been seeking in recent months to increase economic pressure on North Korea beyond just China. This has included dispatching top diplomats on missions to Europe, the Middle East, Southeast Asia, and Africa, all places where the North Koreans have conducted trade.

“When countries are under extended sanctions…they look for the cracks and seams,” said a senior U.S. diplomat involved in North Korea policy. “So everything goes to unlikely spots in the world where they are less likely to be tracked down.

Juding by the now weekly provocative launches of North Korean ballistic missiles, which either explode on launch or splash into the sea and are mostly innocuous, and remain an embarrassing thorn in Trump’s side, any so-called economic pressure has so far failed to yield any results.  What will be more interesting is how China responds to this first intervention by the US into Beijing’s domestic affairs. For the answer, keep refreshing the front page of the Global Times. We expect China’s reaction will be quite angry.

end

4. EUROPEAN AFFAIRS

Last week we witnessed that Spain’s 6th largest bank, Popular succumb.  Now another Spanish bank is close to default: Liberbank

(two commentaries/WolfStreet/WolfRichter/Don Quijones/zero hedge)

Is Another Spanish Bank About To Bite The Dust?

Authored by Don Quijones via WolfStreet.com, 

Stockholders and junior bondholders fear another “bail-in.”

After its most tumultuous week since the bailout days of 2012, Spain’s banking system is gripped by a climate of fear, uncertainty and distrust. Rather than allaying investor nerves, the shotgun bail-in and sale of Banco Popular to Santander on Tuesday has merely intensified them. For the first time since the Global Financial Crisis, shareholders and subordinate bondholders of a failing Spanish bank were not bailed out by taxpayers; they took risks in order to make a buck, and they bore the consequences. That’s how it should be. But bank investors don’t like not getting bailed out.

Now they’re worrying it could happen again. As Popular’s final days showed, once confidence and trust in a bank vanishes, it’s almost impossible to restore them. The fear has now spread to Spain’s eighth largest lender, Liberbank, a mini-Bankia that was spawned in 2011 from the forced marriage of three failed cajas (savings banks), Cajastur, Caja de Extremadura and Caja Cantabria.

This creature’s shares were sold to the public in May 2013 at an IPO price of €0.40. By April 2014, they were trading above €2, a massive 400% gain. But by April 2015, shares started sinking. By May 2017, they were trading at around €1.20.

But since the bail-in of Popular, Liberbank’s shares have seriously crashed as panicked investors fled. Scenting fresh blood, short sellers were piling in. On Friday alone, shares plunged another 17%. At one point, they were down 38% before bouncing at the close of trading, much of it driven by the bank’s own share buybacks:

In the last three weeks a whole year’s worth of steadily rising gains on the stock market have been completely wiped out. The main causes of concern are the bank’s high risk profile and low coverage rate. By the close of the first quarter of 2017, Liberbank’s default rate had reached 13%, over three percentage points higher than the national average (9.8%), while its unproductive asset coverage rate was just 42.1%, compared to 47% for Banco Sabadell, 48% for Bankia, 50% for CaixaBank and 55% for Unicaja.

Worse still, the vast bulk of the bank’s unproductive assets are real estate investments. After Popular, it is the Spanish entity with most exposure to toxic real estate assets, according to the financial daily El Confidencial — a remarkable feat given the bank already had the lion’s share of its impaired real estate assets transferred onto the balance sheets of Spain’s “bad bank,” Sareb.

It’s not just the bank’s shares that are feeling the pressure. With the memory of what happened to holders of Popular’s junior, subordinate and convertible debt still fresh in their mind, investors are divesting their exposure to Liberbank’s subordinate debt. On Friday alone the bank’s most recent issuance, dating back to March 2017, generated losses of 9.8%.

Liberbank’s management has responded the only way it can — with a slew of denials. The bank is nothing like Popular, it says. It is solidly solvent and its deposits are safe, which is probably true: even the deposits of Popular’s customers are now safe despite the fact the bank had hemmorhaged €18 billion of deposits in the last few weeks of its truncated existence. It was this frantic run on deposits that ultimately sealed its fate, prompting the ECB to conclude that the bank was “failing or likely to fail.”

Banco Popular’s demise is a stark reminder that Europe’s banking woes are far from resolved, despite the trillions of euros thrown at them. “The message the market is sending is that you have to buy solvent banks and stay away from those that pose high risks,” said Rafael Alonso, an analyst at Bankinter, one of Spain’s more solvent banks.

Another Spanish bank that could be considered to pose high risks is Unicaja, the product of another merger of failed cajas that is (or at least was) scheduled to launch its IPO some time in June or July. As things currently stand, the timing could not be worse. The greater the uncertainty over Liberbank’s future, the lower the projected valuation of Unicaja’s IPO falls. Before Popular’s forced bail-in and acquisition, the Unicaja was valued at around €2.3 billion; now, just days later, it’s valued at less than €1.9 billion. If the trend continues, the IPO will almost certainly be shelved.

As for Liberbank, if things don’t improve soon and investor nerves aren’t steadied, it too could find itself on the ECB’s Single Resolution Board’s chopping board. Perhaps it too will be sold for €1 to a much larger bank that, like Santander, is able to raise billions of euros of new funds at the drop of a hat, with other too-big-to-fail banks like UBS and Citibank more than happy to lend a helping hand. And just like that, another smaller bank would bite the dust while the biggest banks get bigger and ever more dominating in the market.

Many Banco Popular investors wiped out. Taxpayers off the hook. What it means for Italy. Read…  “Bail-In” Era for Europe’s Banking Crisis Begins

end

(courtesy zero hedge)

You Know It’s Bad In Spain’s Banking System When…

…The regulator bans short sales.

Following our discussion of the collapse of LiberBank’s stock and bond prices as investors quickly identify the next domino to fall in Spain’s crumbling financial system, Bloomberg reportsregulators imposed an emergency ban on short selling the stock.

Spanish securities regulator CNMV, backed by the European Securities and Markets Authority, on Monday banned the sale of borrowed shares for a month.

“Market confidence has deteriorated in relation to a part of the local banking sector,” ESMA said, citing CNMV.

The ban prohibits investors from starting new short positions or to adding to existing ones, a person familiar with the information at the regulator said. About 1.4 percent of Liberbank’s shares were on loan short sellers as of May 26, according to latest available data at CNMV.

The result – as always – is a kneejerk spike higher in the stock price (up almost 30% today…

And bonds spiked 4.6pts (selling opportunity?)

Chief Executive Officer Manuel Menendez cleared up all the confusion in a statement sent by the bank late Sunday.

Liberbank is a solid bank as its solvency ratios exceed regulatory requirements and we have a liquidity position that’s among the best within the Spanish traded banks.

 

Recent volatility in the shares has been affected by external elements, of speculative nature, as there haven’t been any facts that justify such an abrupt change in the price of shares.”

So everything is awesome, don’t worry.

 

Popular’s bail-in, “has greatly increased the sensitivity of the Spanish market and of international investors,” ESMA said.There is a risk that possible similar cases could arise in the future.”

end

The British election was based on everything but BREXIT  and as such BREXIT will not change:

(courtesy MishShedlock/Mishtalk)

Brexit Still Means Brexit! May’s Mistake Not What Most Suggest

Authored by Mike Shedlock via MishTalk.com,

Contrary to what many are saying, the Tory election debacle was not about Brexit. Rather, the election was about everything but Brexit.

Sure, the youth vote, turned out en masse for Corbyn, but Labour and Corbyn himself had already admitted the Brexit reality.

Tory MP Jacob Rees-Mogg explains nicely in This election created no mandate for watering down Brexit. There must be no backsliding.

Negotiations are about to start, and the nation cannot afford to show weakness across the channel. Already, people who never wanted to leave the European Union are calling for a change of tune, by which they mean a reversal of the referendum. “Hard” and “soft” Brexit are code words for leaving or staying in the EU, rather than for the terms of our departure. No such denial of the people’s will can be permitted.

 

Indeed, the essence of our strength is in the negotiating reality that no deal really is better than a bad deal. By the end of March 2019, if nothing has been agreed, we leave with all our money, laws and border controls, and the ability to trade with the EU the way we successfully do with everyone else. This is rather an attractive position, and much preferable to being a European satrapy. Mrs May seems to be aware of the strength of this position, and that is a good reason for her to remain.

 

As for the claim that this result means Mrs May must now drop her approach to Brexit and seek to keep Britain inside the European Economic Area, that is simply wrong. Although the Tory party hoped that the general election of 2017 would be about Brexit, it was not. Indeed, it was about everything except Brexit – social care, grammar schools, foxhunting – and the cleverness of Labour’s campaign was to leave Brexit alone. It is clear that voters did not want to be asked the same question twice; one decision was made in 2016, and fresh ones were to be made on Thursday. Similarly, the Scots showed they did not want to be asked the same question multiple times, hence the SNP’s decline.

 

This means that there is no mandate at all from this election for undermining Brexit. Remainers kept quiet during the campaign because they knew the matter was settled – with the exception of the Lib Dems, who, despite getting a few seats, are irrelevant.

 

The Labour Party likewise made no serious challenge to the outline set out by the Prime Minister. This election was therefore a tacit endorsement of Mrs. May’s Brexit strategy, for voters showed no desire to change it; it is better that she should carry it out.

MP Daniel Hannan Tweets

Far from rejecting Brexit, we have just elected a House of Commons 90 per cent of whose members are pledged to leave.http://www.dailymail.co.uk/debate/article-4590468/DANIEL-HANNAN-Don-t-panic-strong-deal.html 

Photo published for DANIEL HANNAN: Don't panic! We can still get a strong deal

DANIEL HANNAN: Don’t panic! We can still get a strong deal

More than 90 per cent of MPs have just been returned for parties that are promising to leave the EU, namely the Conservatives, Labour and the Democratic Unionist Party.

dailymail.co.uk

“So, by my calculation, Labour got more votes and more seats, which makes us the winners!”

SNP: “We got the most seats in Scotland, so we won. The Tories got the most seats overall, so they should, er, stand aside!”

It has only now hit me that the Conservative Government will be propped up by Scottish MPs. There’s a sentence I never expected to write.

SNP: “We got the most seats in Scotland, so we won. The Tories got the most seats overall, so they should, er, stand aside!”

It has only now hit me that the Conservative Government will be propped up by Scottish MPs. There’s a sentence I never expected to write.

Reflections on Hannan

If MP @DanielJHannan ran for any office in the US, I would vote for him. His strongest positive: free trade. http://mishtalk.com/2017/06/11/brexit-still-means-brexit/ 

May’s Mistake Not What Most Suggest

May’s mistake was not early elections. Her mistake was letting Corbyn steal the fight, pushing it to social care. http://mishtalk.com/2017/06/11/brexit-still-means-brexit/ 

The youth vote turned out, en masses, demanding “free stuff”.

 

END

ITALY

 

The 5 star anti EU party performed awful in elections and this caused Italian bond yields to plunge.  However the country still has a massive banking crisis that they cannot solve:

(courtesy zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

RUSSIA

Putin warns that nobody will survive a nuclear holocaust

(courtesy Mac Slavo/SHFTPlan)

Putin Warns Of “Hot War” And Nuclear Holocaust: “I Don’t Think Anyone Would Survive”

Authored by Mac Slavo via SHTFplan.com,

With tensions among the world’s super powers mounting in places like Ukraine, Syria, North Korea and  most recently Qatar and Iran, it may only be a matter of time before someone pushes the red button.

When they do, all bets are off, and as we’ve learned from the assassination of Archduke Ferdinand in June of 1914, once the trigger is pulled there’s no going back and hundreds of millions of lives, perhaps billions, will hang in the balance.

Considering that Russia is closely allied with Syrian President Assad, has a direct interest in maintaining control of Ukraine’s former Crimea region, and its ties to Iran, ignoring the possibility of a global war in coming years could be a devastating oversight.

We are, in fact, at war right now. But just as was the case from the 1960’s through the end of the 1980’s, it is a “cold war.” There have been no direct troop engagements that we know of between the Russians and the United States. But look to cyber space and it should be clear that there is a battle taking place on a daily basis. Moreover, as we’ve previously reported, nuclear war may well be on the horizon, because the confrontations taking place on the geo-political stage are no longer just talk.

Action has already been taken by both sides:

Putin and the Russian people believe the U.S.’s actions are going to lead to a nuclear conflict initiated by the United States.  The leadership of the U.S. is made up of politicians who began their careers as Marxist-Socialists.  Traitors now have their fingers on the triggers of the nuclear warheads, aided by “yes-men” of the general staffs who will not remember their oaths to the Constitution of the United States and the American people.  They will ignore that these charges take precedence above any orders given by a petty, dope-smoking, Marxist community organizer of dubious citizenship who was “emplaced” into office to destroy the country.

 

Instead of statesmen and diplomats, we now have self-interested, politically-motivated belligerents backing Russia and other nations into corners and pushing them toward war.  How long the war of words will be continued is unknown; however, when the missiles begin to fly you can be certain of something.  You can rest assured that the men who spoke those words will be in bunkers and other safe places and out of harm’s way…paid for by the American taxpayer.

 

Full Report: Nuclear War Is On The Horizon: “This Is Not Just Talk… Action Has Been Taken”

Indeed, those who push the buttons will likely be in bunkers well before the missiles hit their targets. That’ll likely be the case on both sides.

For the rest of us?

Vladimir Putin has made clear how it will play out:

The Putin Interviews between the Russian leader and the Oscar-winning director, which will be screened on Showtime, were shot between summer 2015 and February this year and give an extraordinary insight into one of the most powerful men in the world.

Stone asked Putin whether the US would be ‘dominant’ in the event of a ‘hot war’ between the two nuclear powers.

‘I don’t think anyone would survive such a conflict,’ Putin said.

Earlier this year the hacking collective Anonymous issued a frightening warning about World War III, highlighting the fact that while we are all busy enjoying the good times, elite Deep State insiders are planning for what comes next:

All the signs of a looming war on the Korean Peninsula are surfacing… we’re watching as each country moves strategic pieces into place… but unlike past world wars… although there will be ground troops the battle is likely to be fierce, brutal and quick.

 

It will also be globally devastating on the environmental and economic levels.

 

 

This is a real war with real global consequences… With three super powers drawn into the mix… Other nations will be coerced into choosing sides.

 

 

The citizen will be the last to know…

 

Video

And because the citizen will be the last to know, now may be a good time to review your nuclear war preparedness strategies and stock up on survival essentials that should include FDA approved anti-radiation pills and NBC rated tactical gas masks.

The elite will have plenty to go around in their bunkers, but you can be 100% assured that none of the supplies they’ve been stockpiling for the last decade will ever make their way to the general population.

Prepare accordingly.

end

QATAR/GERMANY

Yesterday, German’y foreign minister Sigmar Gabrile warns that the ongoing isolation of Qatar could lead to War!!

(courtesy zero hedge)

Germany’s Gabriel Warns Qatar Crisis “Could Lead To War” As Qatar Emissary Flies To Moscow

Germany’s foreign minister Sigmar Gabriel warned that the ongoing isolation of Qatar by Saudi Arabia and its allies could lead to a war in the Gulf region, according to an interview he gave to Germany’s Frankfurter Allgemeine Sonntagszeitung, although he added that he still saw a chance to defuse the tension.

“There is a danger that this dispute could lead to war,” Gabriel said citing what he called adramatic” harshness in relations between allied and neighbouring countries in the Gulf.

The foreign minister said personal talks this week with his counterparts from Saudi Arabia, Qatar and Turkey, and phone calls with the foreign ministers of Iran and Kuwait underscored his concerns.

“After my talks this week, I know how serious the situation is, but I believe there are also good chances to make progress.”

Gabriel also said that he had a phone conversation with Secretary of State Rex Tillerson on the Gulf situation on Friday and said that Tillerson showed a “very wise and prudent attitude” that has contributed to calming the conflict.

Yet while Tillerson was “calming” the conflict, during a press conference on Friday Trump appeared to be adding fire to it, when the president accused Qatar of being a “high level” funder of terrorism even as the Pentagon and Tillerson cautioned against the military, commercial and humanitarian effects of a blockade imposed by Arab states and others.

As expected, on Saturday Saudi Arabia and Bahrain welcomed Trump’s demand for Qatar to stop supporting terrorism, but did not respond to a U.S. Department of State call for them to ease pressure on the Gulf state. After severing ties with Qatar on Monday, Saudi Arabia said it was committed to “decisive and swift action to cut off all funding sources for terrorism” in a statement carried by state news agency SPA, attributed to “an official source”.

In a separate statement issued on Friday, the United Arab Emirates praised Trump’s “leadership in challenging Qatar’s troubling support for extremism”.

A separate SPA report on Saturday acknowledged Tillerson’s call for Qatar to curtail support for terrorism, but did not mention his remarks that the crisis was hurting ordinary Qataris, impairing business dealings and harming the U.S. fight against the Islamic State militant group. Saudi Arabia said its action followed the conclusions of last month’s Arab Islamic American Summit in Riyadh, where Trump delivered a speech about Islamic extremism.

Trump said he helped plan the move against Qatar, although a senior administration official told Reuters earlier this week that the U.S. had no indication from the Saudis or Emiratis during the visit that they would sever ties with Qatar.

Meanwhile, adding further fire to the situation, on Saturday Turkish President Recep Erdogan vowed to continue supporting Qatar. “Now, there are ones who are bothered because of us being together with our Qatari brothers or sending and exporting food supplies, drugs etc – no matter if they are in hunger or thirst – should excuse us. We will continue to give all our support to Qatar,Erdogan said at an iftar (fast-breaking meal) with members of his AK Party in Istanbul, quoted by RT.

Echoing Tillerson, the Turkish urged Saudi Arabia, as “the largest and most powerful state in the Gulf,” to reduce tensions and lift sanctions. “It is wrong to add more troubles on top of everything in the term that the Muslim world is already struggling with a lot of problems,” he said. “I am calling you: There won’t be any winners in the brother’s fight.”

“You have to work for bringing brothers together. This is what we expect from Saudi, the Custodian of the Holy Mosques [in Mecca and Medina],” Erdogan added.

Separately, Turkey’s foreign minister Mevlut Cavusoglu said Erdogan, who met with Bahrain’s Foreign Minister Sheikh Khalid Bin Ahmed Bin Al Khalifa in Istanbul on Saturday, said a solution to the dispute needs to be found by the end of the month of Ramadan.

* * *

Also on Saturday, Moscow – where Qatar’s foreign minister met with his Russian colleague – called for dialogue between Qatar and its neighbors in the Gulf, promising help in mediating the crisis, as Russia’s foreign minister met his Qatari counterpart.

 

“We have observed with concern the news of this escalation,” Russian Foreign Minister Sergei Lavrov said in opening remarks of his meeting with Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al-Thani in Moscow.

“We cannot be happy in a situation when the relations between our partners are worsening. We are in favor of resolving any disagreements through… dialogue.”

Lavrov said that Russia is “ready to try to do everything in its power” to help resolve the crisis and said unity is needed to fight terrorism. “For us, unity is clearly necessary for maximum effect on this front (against terrorism),” he said.

Qatar has denounced the allegations against it, and Al-Thani during his meeting with Lavrov called the measures against the country “illegal.”

Finally, speaking of last week’s CNN report which alleged that Russian hackers helped spark the crisis but Moscow has dismissed this as a “stale claim” with “zero evidence.

END

 

IRAN/QATAR/OMAN/

Iran sends 2 warship to the area as well as flying food  (fruits and meats to Qatar:

(courtesy zero hedge)

Iran Sends 2 Warships To Oman, Flies Food To Qatar

If there was any confusion on which side of the Qatar crisis Iran found itself, it was swept away today after Iran’s Tasnim news, cited by Turkey’s Anadolu Agency, reported that Iran plans to send two warships to Oman on Sunday. The two ships will depart using Iran’s southern waters off the port city of Bandar Abbas for an overseas mission to the Arab Peninsula state and then on to international waters.

On Sunday, the 47th flotilla, comprised of an Alborz destroyer and Bushehr logistic warship, set sail from the southern port city of Bandar Abbas, Tasnim reported. From Oman, the ships will then head to the Gulf of Aden and international waters north of the Indian Ocean. At the same time, Iran’s 46th flotilla consisting of a Sabalan destroyer and Lavan logistic warship, is due to return to Iran on Sunday after completing a two-month mission to secure naval routes and protect merchant vessels and oil tankers in the Gulf of Aden.

Separately, Reuters reported that amid food shortages after Qatar’s biggest suppliers severed ties with the import-dependent country, Iran has dispatched four cargo planes of food to Qatar and plans to provide 100 tonnes of fruit and vegetable every day. Qatar has been holding talks with Iran and Turkey to secure food and water supplies after Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut links, accusing Doha of supporting terrorism. Qatar, which has claimed the terrorism-funding allegations are lies, on Friday hired John Ashcroft to serve as a PR crisis mediator in the US and to defend against terrorism accusations, for which he will be paid $2.5 million for 90 days of his time.

“Following the sanctions … on Qatar, IranAir has so far transported food and vegetables to this country by four flights,” Shahrokh Noushabadi, head of public relations at Iran’s national airline, was quoted as saying by Fars news agency. The head of the industries, business and trade organization in the Fars province was also quoted by the Tasnim news agency as saying on Sunday the first planes carrying food to Qatar had flown from the southern city of Shiraz.

“Every day we will export 100 tonnes of fruits and vegetables to Qatar,” Ali Hemmati said, with Reuters providing more details:

An Iranian diplomat in Doha said three cargo planes from Iran were landing in Qatar each day, bringing mostly fruit and vegetables. The diplomat also said small boats were bringing some less perishable produce.

 

Dozens of Iranian businesses are ready to help Qatar with more goods if they are needed,” the diplomat said.The head of Iran’s livestock exporters said on Sunday they had exported 66 tonnes of meat to Qatar in the last two days.

 

“We will also be sending 90 tonnes of meat in the coming week,” Fars quoted Mansour Pourian as saying.

Why the push by Iran and Turkey to prop up Qatar in the ongoing spat? According to Lebanon’s ex-parliamentary speaker Ili al Farzali, “If Qatar loses its influence in the Middle East, so will Turkey.”

Interviewed by Sputnik, Farzali said that Tte current crisis over Qatar is just the tip of the iceberg of the ongoing struggle for influence in the Sunni world.

“I see this conflict around Qatar also as a war against Turkey in the Sunni world. Assuming that Qatar is indeed a sponsor of terrorism, namely the Muslim Brotherhood, which is the most influential Sunni party both in and outside the Arab world. If Qatar stops supporting it, this would also have a negative impact on Turkey, which has until now been building up its influence in the Arab world,” Ili al Farzali said.

“The Americans want oil and money and they just don’t care about what is going on there. Trump has made this perfectly clear,” Ili al Farzali noted. Meanwhile, Turkish President Recep Tayyip Erdogan promised to expand his country’s cooperation with Qatar and pledged every effort to seek a diplomatic solution to the conflict.

Also commenting on the situation, Turkish ex-ambassador to the United States Faruk Logoglu said that Ankara should be careful not to take sides in the ongoing crisis.

Turkey has found itself in a very difficult situation as it maintains close ties with the countries, which have broken off diplomatic relations with Doha. Moreover, we have signed a defense pact with Qatar and are going to open our first overseas military base there. This means that much now depends on the policies Turkey is going to pursue under the circumstances,” Logoglu told Sputnik Turkey.

He said that Ankara should watch its step in this conflict because everything is it says or does could eventually backfire. “Despite its close ties to Qatar, Turkey should avoid taking sides and do what it needs to do if this crisis continues,” Faruk Logoglu noted.

So far the diplomatic fallout from the initial crisis has been contained, although with both Turkey and Iran taking hardline positions against the Saudi alliance by siding with Qatar, this may change quickly (and perhaps violently) in the coming days.

Finally, to avoid confusion, here is a map of the “complicated” relationship among the key players in the ongoing crisis, courtesy of BofA.

(courtesy zero hedge)

 

Iran Claims To Have Proof Of “Direct US Support” For ISIS

Days after Trump issued a characteristically undiplomatic statement on last week’s s terrorist attack in Iran by ISIS which killed 17 people and which the US president accused Tehran of basically provoking by stating that “states that sponsor terrorism risk falling victim to the evil they promote”, which prompted Iran to slam the “repugnant WH statement… as Iranians counter terror backed by US clients…. Iranian people reject such US claims of friendship”, on Sunday senior Iranian officials responded by accusing the US of supporting the Islamic State and effectively forming an alliance with it, claiming that Tehran possesses documents to prove the allegations.

Tbe deputy Chief of Staff of the Iranian Armed Forces Major General Mostafa Izadi, said that Iran is “facing a proxy warfare in the region as a new trick by the arrogant powers against the Islamic Republic,” according to Fars News Agency.

“As the Supreme Leader of the Islamic Revolution (Ayatollah Seyed Ali Khamenei) said, we possess documents and information showing the direct supports by the US imperialism for this highly disgusting stream (the ISIL) in the region which has destroyed the Islamic countries and created a wave of massacres and clashes,” he added.


Deputy Chief of Staff of the Iranian Armed Forces Major General Mostafa Izadi

So far, however, Iran has yet to present any evidence.

Izadi’s statement echoed remarks made by Iran’s Parliamentary Speaker Ali Larijani on Friday, who condemned the Wednesday terrorist attacks in Tehran, and said that Washington is behind most of the terrorist acts in the world.

“The United States has aligned itself with the ISIL in the region,” Larijani said on Friday, addressing a funeral ceremony held for the victims of ISIL’s Wednesday terrorist attacks on the Iranian parliament and the holy shrine of late Imam Khomeini in Tehran. Larijani’s was addressing a funeral ceremony of the victims of Wednesday terrorist attacks in Tehran. Larjani added that “The terrorist attacks indicated that the terrorist groups had failed to achieve their main goal and targeted the parliament and Imam Khomeini Mausoleum, finally resorted to martyring the innocent people and the staff at the parliament.”

Thousands of Iranians had gathered to commemorate the dead, shouting “Death to Saudi Arabia” and “Death to America.”

Also on Friday Iran’s supreme leader, Ayatollah Ali Khamenei – whose clerical protege recently lost the Iranian presidential elections – said the attacks would only increase Tehran’s hatred against the US and its “stooges,” including Saudi Arabia. He is not wrong.

END

 

RUSSIA/USA

This should complicate the narrative that Trump is a lackey for Putin: Russia is set to retaliate against those 35 Obama expulsions of Russian diplomats and the seizing of Russian property in NY and Maryland.  Putin plans to seize USA properties in Moscow as well as creating havoc for the Anglo American school in Moscow

(courtesy zero hedge)

Russia Retaliates Against Obama Expulsions, Plans To Seize US Property In Moscow

One of the last acts of Obama’s presidency was to “impose costs” on Russia over election-hacking allegations (so far unproven) by expelling 35 Russian diplomats and seizing two compounds in NY and MD. Putin initially warned of “proportional response” but then surprised many by “refusing to sink to ‘kitchen’ diplomacy.” However, six months later, Reuters reportsRussia may seize U.S. diplomatic property in Moscow.

23 days before the end of his USA presidency, and just as the post-election Russia-blaming paranoia was getting going, Obama unleashed sanctions against Russia

Statement by the President on Actions in Response to Russian Malicious Cyber Activity and Harassment

 

Today, I have ordered a number of actions in response to the Russian government’s aggressive harassment of U.S. officials and cyber operations aimed at the U.S. election. These actions follow repeated private and public warnings that we have issued to the Russian government, and are a necessary and appropriate response to efforts to harm U.S. interests in violation of established international norms of behavior.

 

All Americans should be alarmed by Russia’s actions. In October, my Administration publicized our assessment that Russia took actions intended to interfere with the U.S. election process. These data theft and disclosure activities could only have been directed by the highest levels of the Russian government. Moreover, our diplomats have experienced an unacceptable level of harassment in Moscow by Russian security services and police over the last year. Such activities have consequences. Today, I have ordered a number of actions in response.

 

 

The State Department is also shutting down two Russian compounds, in Maryland and New York, used by Russian personnel for intelligence-related purposes, and is declaring “persona non grata” 35 Russian intelligence operatives.

Russia’s initial reaction was to warn of a “proportional response”

“The US sanctions against Russia and the expulsion of 35 diplomats in 72 hours are the signs of a real paranoia. Without any grounds for it another round of extremely aggressive steps towards our country are being made basing only on mere assertions.”

But Putin quickly took a different tack… saying it would wait to see if relations improved under the incoming U.S. president, Donald Trump.

Although we have the right to retaliate, we will not resort to irresponsible ‘kitchen’ diplomacy but will plan our further steps to restore Russian-US relations based on the policies of the Trump Administration.

And with that one statement, Obama lost the diplomatic war with Russia.

However, six months later, it appears Russia has had enough of playing the ‘diplomat’ and as Reuters reports, according to the daily Kommersant, Russia may seize U.S. diplomatic property in Moscow and complicate life for an Anglo-American school unless Washington hands back two diplomatic compounds in the United States before July.

Kommersant, citing unnamed diplomatic sources, said on Friday that Moscow wanted the compounds back before a possible meeting at the G20 in Germany in July between Russian President Vladimir Putin and Trump.

 

If that did not happen, the newspaper cited the sources as saying Russia could retaliate by seizing a U.S. diplomatic dacha, or country house, in Serebryany Bor in north-west Moscow and a U.S. diplomatic warehouse in Moscow.

 

It said that Russian authorities could also complicate life for Moscow’s Anglo-American school by altering its legal status.

 

Maria Zakharova, a spokeswoman for the Russian Foreign Ministry, said on Thursday that Moscow was still waiting for the return of its U.S. compounds and could retaliate in kind if that did not happen.

What happens next is anyone’s guess. But one thing is for sure, this renewed potential for US-Russia tensions will not be taken by the media or the left as any indication that Trump is anything less than Putin’s puppet… because that would blow the entire narrative (just like Comey’s testimony did this week).

end

 

Gazprom is set for a 2nd Turkish stream gas pipelines which will totally bypass the Ukraine (and uSA interests)

(COURTESY NEWEUROPE/GEROPOULOS)

Gazprom plans 2nd Turkish Stream pipe to bypass Ukraine

Russia’s Gazprom, Greece’s DEPA, and Italy’s Edison have signed an agreement of cooperation that envisages joint efforts aimed at establishing a southern route for gas supplies from Russia to Europe, which will run across Turkey and Greece to Italy


Russia’s Gazprom, Greece’s DEPA, and Italy’s Edison have signed an agreement of cooperation in St Petersburg that envisages joint efforts aimed at establishing a southern route for gas supplies from Russia to Europe, which will run across Turkey and Greece to Italy.The three companies said in a press release on June 2, “they would coordinate the development and implementation of the Turkish Stream gas pipeline project and of the Poseidon project from the Turkish/Greek border to Italy, in full compliance with relevant applicable legislative framework”. In addition, the agreement formalises the arrangements on expanding cooperation in the field of Russian gas deliveries.“Gazprom already begun the construction of the first pipeline of Turkish Stream and there is also an idea of beginning of construction of second pipeline,” Konstantin Simonov, director of the independent National Energy Security Fund in Moscow, told New Europe by phone, arguing that it has not been decided yet whether the Russian gas via the second pipeline “will come to Greece through Turkey or the gas will come to Greece through Bulgaria”.Simonov said the Russian company signed the memorandum with DEPA and Edison because the IGI Poseidon “pipeline can be the most interesting project for Gazprom”.He noted, however, that the decision to build IGI Poseidon is not final because the project is seen as a rival to the Trans Anatolian Pipeline (TANAP) and the Trans Adriatic Pipeline (TAP) that initially plan to transport 10 billion cubic metres (bcm) of gas from Azerbaijan to Italy.According to Simonov, Italy’s ENI and Snam have lobbied for increasing TAP’s capacity and using the expanded pipeline to transit gas to Italy via Greece without constructing IGI Poseidon. Gazprom could bid to use TAP’s extra capacity when the pipeline is expanded after 2020.Simonov argued, however, that Gazprom prefers IGI Poseidon, first supported by the EU as a way to bring Caspian gas to Europe, for its own use.“If Gazprom agrees to build ITGI or to use extra capacity of TAP, there will not be enough gas to supply all consumers: Italy, Greece, Bulgaria, Balkan area and Hungary so it means, that for example, Hungary and Serbia will still be dependent of Ukrainian transit flows,” Simonov said.“It’s a possible scenario because (Gazprom CEO Alexey) Miller said that Gazprom can still transit 15 bcm after the end of the contract with Ukraine but, of course, the best scenario for Gazprom is to build before the end of 2019 alternative pipeline routes to have this capacity to deliver the gas without Ukraine to all the countries,” Simonov said, reminding that Gazprom is also planning to build Nord Stream-2 to Germany.The European Commission wants at least some of the Russian gas transit via Ukraine to be maintained. “I understand, of course, there will be serious pressure from European Commission and some European countries but Gazprom can say: ‘Okay, we will transit 15 bcm, but it’s better to have alternative routes with enough capacity than not to do it,’” Simonov said, adding that if Gazprom has alternative routes after 2020 it will be able to solve possible gas transit problems down the road. “It doesn’t matter whether Ukraine will still be a transit country or not, but it’s better to have possibility to deliver the gas to the south of Europe without Ukraine,” Simonov argued.follow on twitter @energyinsider

END

6 .GLOBAL ISSUES

the Canadian dollar rises when the Bank of Canada begins questioning itself on the need for more stimulus

(courtesy zero hedge)

Loonie Spikes To 2-Month Highs As BoC Questions Need For Stimulus

USDCAD plunged to a 1.33 handle after The Bank of Canada indicated it is looking at the possibility of raising interest rates as the nation’s economic recovery picks up steam.

Bloomberg reports that in a speech she’s delivering in Winnipeg, Manitoba, Senior Deputy Governor Carolyn Wilkins highlighted how the nation’s recovery is broadening across regions and sectors, giving policy makers “reason to be encouraged.”

“As growth continues and, ideally, broadens further, Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required,” Wilkins said in the text of a speech she’s giving Monday.

 

“At present, there is significant monetary policy stimulus in the system.”

Which prompted the Loonie to rally near 2-month highs…

 

Some key excerpts from her speech…

“ If you saw a stop light ahead, you would begin letting up on the gas to slow down smoothly. You do not want to have to slam on the brakes at the last second. Monetary policy must also anticipate the road ahead.”

 

“An important aspect of our inflation assessment is that the economic drag from lower oil prices is now largely behind us.”

 

“The adjustment to lower oil prices is now largely behind us, and we are looking for signs that the sources of growth are broadening across sectors and regions,” Wilkins said. “The signs are encouraging.”

We wonder how long before another BoC member comes out and says the exact opposite?

end

7. OIL ISSUES

.

8. EMERGING MARKET

Total chaos on the streets of Venezuela:

(courtesy MacSlavo/SHFTPlan.com)

“It’s Madness” – Massive Anti-Government Protests In Venezuela Worsen, Patterns Emerge

Authoired by Mac Slavo via SHTFplan.com,

As protests against Venezuela’s “democratic socialist” government roll into their third month, Dr. Henrique Montbrun, who oversees the triage post in the municipality of Baruta, says the violence in the country has reached unprecedented levels. “It’s madness,” he says.

As more people take to the streets to demand their freedom back in a nation where tyranny took a firm hold shortly after the election of self-proclaimed socialist, Nicolaus Maduro, the country descended into complete government control, and the only people with money, are now those in the government.  Socialism is fair that way; as no system more equally distributes poverty, except maybe communism. But a pattern is now emerging in the battle for basic human rights and minimal freedoms.

The clashes between the demonstrators and security forces are entering their third month, and even doctors say that they can no longer predict the type of violence to prepare for, but they can predict that there will be increasing numbers of injuries and death.

The only pattern emerging is one of even more violence.

Dr. Montbrun says that the injuries sustained at the beginning of protests were largely superficial, usually buckshot wounds. More recently, however, as protesters have gone up against an increasingly desperate government, protestors have been treated for 5cm-deep holes caused by metal marbles shot at close range.

“Violence doesn’t surprise me but the level of hatred security forces are showing towards average citizens and the use of non-conventional weapons like loading tear gas canisters with nails and marbles does take me aback,” Dr. Montbrun says.

According to the public defender’s office, 67 people (including minors, students, passersby, and national guards) have died during or as a result of the protests. On Wednesday, an 18-year-old died of an explosive-related wound to the chest and a national guard was murdered causing a rash of even more anti-government protests. And yet, despite the escalation of violence, protesters remain in the streets trying to demand their freedom.

“I am not afraid,” says Rosmery Indare, 19, who arrived barely conscious at the triage post. “They threw several gas bombs and we all ran. I tried to go into a nearby mall but most shops had closed and I was cornered.”

 

Rosmery described how two national guards clubbed her in the legs and knees while threatening to jail her. “They’re not going to stop me from marching,” she says.

 

I haven’t had a chance to enjoy my country because they stole it from us but this time, I am sure, we will recover [it].” –The Guardian

As the Venezuelan government continues to starve its own people through regulations and kill for protesting their own starvation, the resolves of those living under the oppression of socialism seem to continue to harden. Venezuela destroyed their own economy with socialist policies, which are carryovers from Hugo Chavez’s reign of terror. With inflation rising by 800% in 2016 while the economy shrank by 18.6% over the same period, according to the central bank, crime has soared with over 28,479 homicides in 2016.  That leaves Venezuela with one of the highest murder rates in the world, and the worst economy. Finding food or medicine has become nearly impossible, except for the very few who can afford black market prices and the risk of death.

Unfortunately, it looks as though Venezuela’s situation will worsen before it improves.

end

 

HUMOUR STORY OF THE DAY:

The entire world was trying to figure out the meaning of the latest tweet from the Deputy Press Secretary: can you figure it out?  the answer is at the bottom of this tweet.

(courtesy zero hedge)

White House Deputy Press Secretary Has “Covfefe” Moment (Or Did She?)

Just a week after President Trump’s “mysterious” late-night tweet of codeword ‘covfefe’, it appears Deputy White House Press Secretary Sarah Huckabee Sanders has also sent an ‘accidental’ tweet message to the world…

What does it all mean? Should there be a hearing to investigate?

However, while conspiracy theorists across the web are desperately diving the hidden message within Sanders tweet – a clear signal to Putin that all is well in The White House – the deputy press secretary has a less sinister explanation…

But then again, how do we know if her 3-year child is not a puppet of Putin too?

 

 

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   1.1213 UP .0019/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  

USA/JAPAN YEN 109.99 DOWN 0.345(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 1.2689 DOWN .0053 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

THERESA MAY FORMS A NEW GOVERNMENT

USA/CAN 1.3439 DOWN .0024 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS MONDAY morning in Europe, the Euro ROSE by 19 basis points, trading now ABOVE the important 1.08 level  RISING to 1.1213; 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 18.52 POINTS OR 0.59%     / Hang Sang  CLOSED DOWN 322.25 POINTS OR 1.24% /AUSTRALIA  CLOSED UP 0.01% / EUROPEAN BOURSES OPENED ALL IN THE RED

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 104.68 POINTS OR 0.52%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 322.25 POINTS OR 1.24%  / SHANGHAI CLOSED DOWN 18.52 POINTS OR 0.52%   /Australia BOURSE CLOSED UP 0.01% /Nikkei (Japan)CLOSED DOWN 104.68 POINTS OR 0.52%    / INDIA’S SENSEX IN THE RED

Gold very early morning trading: 1268.55

silver:$17.14

Early MONDAY morning USA 10 year bond yield: 2.209% !!! UP 1 IN POINTS from FRIDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.862, UP 1  IN BASIS POINTS  from FRIDAY night.

USA dollar index early MONDAY morning: 97.14 DOWN 13  CENT(S) from THURSDAY’s close.

This ends early morning numbers MONDAY MORNING

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield: 2.984%  DOWN 3 in basis point(s) yield from FRIDAY 

JAPANESE BOND YIELD: +.058%  UP 1/5  in   basis point yield from FRIDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.445%  DOWN 0 IN basis point yield from FRIDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.02 DOWN 7   POINTS  in basis point yield from FRIDAY 

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

GERMAN 10 YR BOND YIELD: +.249% DOWN 1 IN  BASIS POINTS ON THE DAY

END

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

IMPORTANT CURRENCY CLOSES FOR MONDAY

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

Euro/USA 1.1203 UP .0008 (Euro UP 8 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 109.74 DOWN  0.594 (Yen UP 59 basis points/ 

Great Britain/USA 1.2651 DOWN 86 ( POUND DOWN 86 basis points) AND DOWN 250 POINTS FROM ELECTION NIGHT

USA/Canada 1.3405 DOWN .0060 (Canadian dollar UP 60 basis points AS OIL ROSE TO $46.16

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 8 basis points to trade at 1.1203

The Yen ROSE to 109.74 for a GAIN of 59  Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND FELL BY 86  basis points, trading at 1.2651/ AND DOWN 250 BASIS POINTS FROM THE ELECTION. 

The Canadian dollar ROSE by 60 basis points to 1.3405,  WITH WTI OIL RISING TO :  $46.16

The USA/Yuan closed at 6.7982/
the 10 yr Japanese bond yield closed at +.058% UP 1/5 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 1 IN basis points from THURSDAY at 2.195% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.852  DOWN 1  in basis points on the day /

Your closing USA dollar index, 97.28 DOWN 1 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 15.46 POINTS OR 0.21%
German Dax :CLOSED DOWN 125.28 POINTS OR 0.98%
Paris Cac  CLOSED DOWN  59.12 POINTS OR 1.12% 
Spain IBEX CLOSED  DOWN 135.90 POINTS OR 1.24%

Italian MIB: CLOSED  DOWN 212.19 POINTS/OR 1.05%

The Dow closed DOWN 36.30 OR 0.17%

NASDAQ WAS closed DOWN 32.45 POINTS OR 0.52%  4.00 PM EST
WTI Oil price;  46.06 at 1:00 pm; 

Brent Oil: 48.34 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  57.03 UP 1/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD RISES T0  +0.247%  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:$46.00

BRENT: $48.21

USA 10 YR BOND YIELD: 2.214%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.869%

EURO/USA DOLLAR CROSS:  1.1204 UP .0010

USA/JAPANESE YEN:109.85  DOWN 0.479

USA DOLLAR INDEX: 97.19  DOWN 9  cent(s) ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2654 : DOWN 82 POINTS FROM FRI NIGHT  

Canadian dollar: 1.3320 UP 141  BASIS pts 

German 10 yr bond yield at 5 pm: +0.247%

END

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

TRADING IN GRAPH FORM FOR THE DAY

Bitcoin Battered As Stock Ca-Tech-strophe Continues, US Macro Data Dumps

Dude!! What’s wrong with you brah?

 

While everyone wants to talk about what a great opportunity today was to BTFD in FANG stocks, we wanted to note one quick thing – US Macro data has crashed to 16 month lows…

 

S&P Technology sector is down over 5% in the last 2 days – biggest 2-day drop since Brexit and FANG Stocks sank once again (after trying to stage a comeback) dropping most since Feb 2016... Note – BTFD’ers managed to get FANG back to unchanged briefly into the European close.

 

Nasdaq extended its losses (with small losses for everything else but Trannies)…buying panic into the close (as always thanks to ETFs)

 

But only the S&P and Nasdaq are red over the last two days…

 

AAPL was clubbed like a baby seal again…

 

Growth notably underperformed Value once again…

 

An early BTFD effort faded fast in FANGs…

 

Treasury yields ended the day very marginally higher (less than 1bps) despite equity weakness as we suspect some level of Risk-Parity deleveraging was hitting flows…NOTE – considerable underperformance in 2Y…

 

Which sent the 2s10s curve back near cycle lows…

 

The Dollar Index dropped for the first time in 3 days… (though we note the dollar has been falling non-stop since the UK Election…)

 

Bank of Canada comments about pulling back on stimulus sent the Loonie soaring to its strongest agains the dollar in 2 months…

 

Cable slumped to post-election lows…this is the weakest for the pound since May called the snap election

 

Crude managed to hold on to early gains, gold was unchanged as silver and copper dipped…

 

Finally we note that Cryptocurrencies crumbled today, Ethereum down hard and Bitcoin tumbling almost 15%...

And Ethereum tanked after tagging $400…

 

end

 

Continued devastation in the bricks and mortar businesses in the USA. Landlords are in trouble as commentators suggest that 1/4 malls will be completely vacant in 5 years. Tenants are also scared.  They wish shorter leases as low as 1 yr as they are uncertain of the business climate they are facing

(courtesy zero hedge)

 

Mall Tenants Seek Shorter Leases As America’s Relics Of The 80’s Teeter On The Brink

As if things weren’t bad enough for America’s mall owners, what with the having to filling their retail space with high schools, grocers and churches, it seems that retailers have grown so uncertain about the future of these 1980s relics that they’re only willing to sign 1-2 leases these days.

As Bloomberg points out this morning, leases renewals used to be 5-10 years in length but are increasingly only being signed with 1-2 year terms.  Meanwhile, thousands of stores are closing each year and it’s only expected to get worse over time.

After more than a dozen bankruptcies this year contributed to thousands of store closures, visibility for the industry is so poor that retailers are pushing for lease renewals as short as a year or two — down from five to 10 years.

 

“You’re certainly seeing the renewals geared toward the shorter term, rather than the five-year renewal,” said Andrew Graiser, head of A&G Realty Partners. Retailers are now struggling to figure out how many stores they actually need, he added, and landlords are looking at them “with a much closer eye than they did before.”

 

Somewhere between 9,000 and 10,000 stores will close in the U.S. this year, said Garrick Brown, vice president of Americas retail research for commercial broker Cushman & Wakefield — more than twice as many as the 4,000 last year. He sees this figure rising to about 13,000 next year.

 

“Everyone’s trying to figure out where the bottom of the market’s going to be,” Brown said. He estimates it could occur in 2018 or early 2019.

 

Not surprisingly, retailers are finding it difficult to sign long-term leases in an environment where 26% of malls around the country are expected to close their doors over the next five years.

Further complicating the lease-length dilemma is the question of which shopping centers will still be around in a decade. Cushman & Wakefield’s Brown sees about 300 of 1,150 U.S. malls shutting down in the next five years.

 

Perry Mandarino, senior managing director and head of corporate finance at B. Riley & Co., predicts that retail bankruptcies and restructurings will further accelerate in 2018. Some of this will be the result of a long-overdue shakeout of the surfeit of U.S. store space, but the downturn is also compounded by shifts to online shopping and consumers spending on experiences rather than physical stuff, he said.

Meanwhile, landlords are trying to fight back, though it’s a fairly difficult task both arms tied behind their backs.

Landlords “have their backs against the wall, so they’ve been fighting back, hard,” he said. “What you have is a game of chicken up to the end.”

 

“With all this excess inventory, landlords are trying to do whatever they can to keep malls occupied,” Agran said. “The more empty spaces, the more difficult it is to attract new tenants.”

Frankly, it’s shocking that Abercrombie wouldn’t jump at the opportunity to scoop up some prime square footage in this mall…it already has the Chili’s awning and everything.

Mall

French writes about the huge commercial mortgages and loans outstanding holding up the bubble of real estate assets.  The bubble is waiting to be pricked

(courtesy Doug French/LewRockwell.com)

Bank Failures Hither and Yon

By: Douglas French

Grant’s Almost Daily reports that despite the seemingly calm economic winds, “Banco Popular has managed to run the ship aground. In order to shore up their sickly balance sheet, the acquiring [Banco] Santander will issue a €7 billion rights offering to shareholders. Banco Popular’s equity and junior debt are wiped out, to the tune of €3.3 billion.”

While America breathlessly waited for former FBI Director Comey to boast daytime TV ratings, the  “announcement that Banco Popular Espanol SA will be absorbed by the sounder Banco Santander under the auspices of the European Central Bank for considerations of €1 harkens back to March 2008, Bear Stearns and J.P. Morgan,” writes Philip Grant.

Have the world’s financial dominoes started falling on that side of the pond?

Here in the good old USofA. the DJIA rocks while Tesla and Amazon shares roll, but “Total US business bankruptcies in May rose 4.7% year-over-year to 3,572 filings, according to the American Bankruptcy Institute. That’s up 40% from May 2015 and up 10% from May 2014.”

Buy Gold at Discounted Prices

Wolf Richter points out that bankruptcies are seasonal.  Fewer of the hopelessly indebted normally throw in the towel in May. However, this year, “Total US bankruptcy filings by consumers and businesses in May rose 5.3% year-over-year to 69,668, the highest May since May 2014.”

Credit card debt is now a trillion dollars, auto debt is $1.12 trillion and student loan debt now totals $1.44 trillion.  A trillion here, a trillion there.  It starts to add up. And all of this doesn’t include the big driver of consumer bankruptcies, medical costs.

Meanwhile Green Street’s Commercial Property Index has rolled over, falling 0.4% in May to the lowest level since May 2016.  Plus, over the first four months of this year, Commercial real estate transactions dropped 17% year-over-year, to $121 billion, plunging 30% from the same period in 2015, according to Real Capital Analytics.

This matters because, “$14 trillion of real-estate debt is why real estate can trigger financial crises, and why real estate bubbles, when they implode, are so pernicious,” writes Richter.

Homes mortgages make up $10.3 trillion of the total real estate debt, with the rest being commercial real estate loans, the majority of which are held by small banks–$1.2 trillion. Regulators have warned about another bubble but banks are loading up on commercial real estate anyway–especially apartments.

Boston Fed President Eric Rosengren says,

Over the past year, holdings of commercial mortgages by the banking sector have increased 8.9%, while bank holdings of multifamily mortgages have increased 12.0%.

This growth has occurred while bank supervisors have been cautioning about the potential risks emanating from the high valuations in some sectors of the real estate market.

Here in the U.S., six banks have failed this year, one more than all of 2016.  While four of the banks were small, one was a billion dollar bank and First NBC Bank of New Orleans had $4.75 billion in assets. First NBC survived just over a decade, having started in 2006, with a who’s who of backers, including Peyton and Eli Manning, the New Orleans-born star NFL quarterbacks. The bank set a Louisiana record for capital raised by a start-up bank.

Growing a bank from zero to nearly $5 billion in ten years is beyond aggressive, not to mention First NBC had a taste for the exotic. As Richard Thompson reports for The New Orleans Advocate the bank would not only fund construction projects that generated tax credits (say low-income apartments), but would invest depositor money in those tax credits as well.

Of course, for tax credits to have value, the bank must be earning significant profits and paying large tax bills.  First NBC had no such burden.

When the bank’s loan portfolio was written down by regulators, this led to a devaluation of the bank’s deferred tax credits, whatever profits were expected evaporated and — poof — the bank’s capital was gone. With fractionalized banking an auditor’s recognition of dodgy assets leads to failure overnight.

However, the bank’s founder, Ashton Ryan, believed the press was the problem. He “blamed The Advocate’s reporting at the time for the bank’s troubles, saying the news coverage sowed more unease than the bank’s admissions themselves,” Thompson wrote.

Murray Rothbard anticipated the Ashton Ryan’s of the banking world, writing “the entire fractional-reserve system is held together by lies and smoke and mirrors; that is, by an Establishment con…. The banking system, in short, is a house of cards … Banking is not a legitimate industry, providing legitimate service, so long as it continues to be a system of fractional-reserve banking.”

A few bank failures hither and yon do not a trend make. However, needles are everywhere, waiting to pop the bubbles keeping banks afloat.

END

Apple Corp slides and Japanese firm Mizuho downgrades the company and cuts it’s price target.  Apple is a good example of how global growth is stymied

 

(courtesy zero hedge)

Apple Slides After Mizuho Downgrade, Price Target Cut

Suddenly the penguins knives are out for the world’s biggest company, and exactly one week after Pacific Crest downgraded Apple to “Sector Weight” and a $145PT, perhaps a harbinger of what was to come later in the week, overnight another bank, Japan’s Mizuho, has also taken the machete to its own growth forecasts of Tim Cook’s juggernaut, and downgraded the iPhone maker to neutral from buy, cutting the price target from $160 to $150, claiming the best case scenario is now priced into the shares.

Of course, the analyst is merely the first of many price and momentum chasers who has adjusted his sentiment based on what the market does, and after last Friday’s tech sector drubbing we expect many more such downgrades in the days to come.

Here are the summary highlights from Lamba’s note:

We are downgrading Apple to Neutral from Buy while adjusting our PT to $150 from $160. The stock has meaningfully outperformed on a YTD basis and we believe enthusiasm around the upcoming product cycle is fully captured at current levels, with limited upside to estimates from here on out. Our sensitivity work indicates bull case EPS of around $11 which, along with a cycle-peak multiple, indicates limited upside to the stock. Our LTVC work suggests more muted gains as well. As such, we move to the sidelines despite our expectations of a strong iPhone 8 cycle

And the key points:

Still expect strong iPhone 8 cycle. We concur that the upcoming product cycle is likely to drive a strong holiday season following into early next year; however, we believe strength is anticipated and see very limited upside to estimates from here. A few things make us cautious on consensus FY18 numbers: 1) potential pull-in of demand creating tough comps in the following year; 2) growth driven primarily by replacements vs. net new customers, limiting expansion of installed base; 3) initial supply constraints due to complexities around product ramp; 4) potentially higher ASPs for high-end SKU driving demand elasticity; 5) risk to out-year gross margins.

 

 

 

Sensitivity analysis and supply chain checks indicate limited upside to FY18. Current consensus for iPhone shipments, iPhone ASP, consolidated margins and EPS are at 242mm (up 12% Y/Y), $680 (up 3%), ~27% and $10.43, respectively. We think consensus expectations for FY18 do not leave much room for upside, rather, based on our current checks, we see potential downside risk to current forecasts. Our most bullish case yields earnings of about $11 for FY18, which is only ~$0.50 above consensus.

 

 

 

Other areas’ contribution unlikely to drive significant growth uptick. China is likely to remain weak in the n-t. We find that recent developments in India are a step in the right direction; however, affordability continues to be constrained limiting n-t contribution from the country.

 

 

On services, while we acknowledge the company’s intent to double the line-item by 2020, we believe ongoing penetration of developing countries (where attach is lower) could weigh on meaningful expansion from current levels. Additionally, consensus is expecting 30% growth in services revenue/user over the next 2 years, which seems high.

The summary:

Downgrading to Neutral from Buy; adjusting PT to $150 from $160. At 15x and 11x NTM EPS and FCF, the stock is trading near the upper-end of its recent valuation range and we believe it is tough to expect the multiple to expand. With limited upside to EPS or FCF estimates, we think the stock is fully valued.

The stock is not impressed with the downgrade, and this morning AAPL was down another 2%, down to $146, after trading at $155 on Friday morning.

END

 

We have another Madoff Ponzi scheme to reveal and this has been brought to the forefront than none other Harry Markopolos who uncovered the Madoff scheme

 

(courtesy zero hedge)

‘Madoff Whistleblower’ Harry Markopolos Has Uncovered A New Fraud

Authored by Robert Huebscher via Advisor Perspectives,

Harry Markopolos, the investigator who exposed the Bernie Madoff Ponzi scheme, has uncovered a new fraud. The unfunded status of the pension fund of the Boston Transit Authority (the “MBTA”) is $500 million bigger than previously thought, according to Markopolos. This will have a significant impact on the municipal bond market, especially if it turns out that the MBTA’s problems are endemic among similar pension funds.

The unfunded status of a pension fund is the market value of the assets minus the present value of the liabilities, discounted at an actuarially determined interest rate. For most public pension plans, this number is negative; the liabilities exceed the assets and it is underfunded.

Although the full details are not yet known, Markopolos said the $500 gap is due to bad investments, fraudulent accounting and unrealistic actuarial assumptions.

Markopolos spoke on June 9 at Northfield Information Service’s 22nd annual summer seminar, held in Newport, RI. Northfield is a provider of advanced analytics to institutional investment managers and wealth managers. Its CEO, Dan diBartolomeo, worked with Markopolos in the Madoff investigation and is helping with the MBTA case.

Markopolos called what is left of the MBTA’s pension a “Tender Vittles retirement plan,” meaning (sarcastically) that its participants would be eating cat food.

The underlying cause of the MBTA’s problems was poor management and oversight. “No good outcomes result when you mix politics and money,” Markopolos said.

The problems began with failed investments in two hedge funds and culminated in the more widespread problems that Markopolos uncovered.

Buddy Fletcher

The troubles at the MBTA began in 2012, when it was revealed that it had lost $25 million in an investment in Fletcher Asset Management, a hedge fund run by Alphonse “Buddy” Fletcher. The MBTA had been hiding this loss until it was exposed by an investigative reporter from The Boston Globe.

Fletcher had promised guaranteed returns of 12%, similar to Madoff’s sales pitch. It was nothing more than a Ponzi scheme. In addition to the MBTA, three Louisiana pension funds lost $100 million in the scheme.

What made the Fletcher loss so galling, according to Markopolos, was that its chief investment officer, Karl White, had been the executive director of the MBTA pension fund. One year after leaving the MBTA, he convinced it to fund Fletcher.

“There are a lot of Ponzis,” Markopolos said, “and they are stealing customers from legitimate managers.”

Fletcher used the money it raised to invest in a movie, Violet and Daisy, which his brother was making and in a “penny stock” called ANTS, on which it booked a 1,000% return over a 16-day period. At one point, Fletcher reported 127 months of positive returns without a down month; it later revised this to show 14 down months.

The Fletcher irregularities went unnoticed by the MBTA’s board, which Markopolos said consisted of mostly non-college graduates – union members who worked on or operated the city’s busses and subways. The board had one person with an MBA and a couple of lawyers, who Markopolos said were not experts in investing.

Neither the MBTA’s auditor, KPMG, nor Marco Consulting, its pension consultant, reported any problems with the Fletcher investment.

Weston Capital

In 2013, the MBTA invested approximately $10 million in Weston Capital, a hedge fund run by Jason Galanis, whose father had run a big Ponzi scheme in the 1970s, stealing approximately $400 million from mostly Hollywood investors.

Markopolos said in 2007 that Galanis bought shares in Penthouse magazine, filed a false 10Q with forged signature, and had caused its auditor, Deloitte, to resign. All this happened before the MBTA made its investment in 2009.

“How much due diligence do you have to do to invest with Weston Capital?” Markopolos asked, rhetorically.

By the end of 2013, the MBTA had written off the value of its Weston investment.

Galanis, Markopolos said, would look for struggling RIAs. He would overpay for an ownership interest in firm, with the stipulation that its minority interest not be disclosed on its form ADV (which is illegal). He would then arrange to invest all or a portion of the RIA’s fixed-income portfolio with a promise of 8-9% returns. He would then raid those funds to pay Ponzi-style interest, Markopolos said.

Markopolos warned that fraudulent schemes to buy struggling RIAs are ongoing. RIAs should be aware that the damage goes beyond the firm’s assets, he said. A good criminal defense starts at $1 million, according to Markopolos, and even if you beat the charge anyone will be able to Google the result.

The larger problem

After recounting the Fletcher and Weston debacles, Markopolos described the larger problem facing the MBTA.

Based on audited financials, he said that the MBTA plan’s assets are only 29% of its liabilities, an underfunding of approximately $470 million. But Markopolos claims the actual number is closer to $1 billion.

The gap is due to overstating of asset values and returns, underestimating employee’s life expectancies and using an unrealistic discount rate for its liabilities.

The MBTA is “one bear market away from disaster,” Markopolos said.

Markopolos presented data from the MBTA’s 2012 and 2013 annual reports, when its market value jumped by $200 million. The most alarming aspect in those years was the outperformance of its public equity (large-cap, small-cap and emerging markets) and fixed-income holdings. Equities outperformed their benchmark by 6.28% and 5.63%; bonds beat its benchmark by 7.60% and 2.86%, respectively in the two years. Similar returns were reported for the MBTA’s real estate holdings.

That degree of outperformance is highly unusual, since the MBTA was using multiple asset managers in both its equity and fixed-income allocations. Across all asset classes, it used 71 asset managers. According to diBartolomeo, a single manager might achieve such outstanding results, but the chances of a team of managers performing that well was “essentially zero.”

The investigation is ongoing as to how the MBTA was able to report such spectacular results. Most likely, it was due to accounting manipulations. The MBTA may have switched the accounting standard it used (such as GAAP or GASB) in order to report the most favorable result. It may also have used provisions which allows pension plans to report performance smoothed over a five-year period to inflate its numbers.

By contrast, the MBTA reported dismal results for the 20% of its assets held in alternative funds – private equity, hedge funds and something it called “diversified beta.” Each of those fund categories underperformed their benchmarks in 2012 and 2013 by between 9% and 17%.

Markopolos questioned the due diligence procedures that led to such poor investments and why those managers had not been fired after achieving such poor results.

“Why did it keep investing in alternatives?” he asked, rhetorically.

The MBTA used actuarial tables from 1994 to determine the expected lifetimes of its employees. This resulted in shorter lifetimes than the rest of the pension industry, which was using tables from 2000. By assuming its employees would have shorter lifetimes, it was able to artificially reduce its projected liabilities and underfunded status. This represents approximately $105 million of the half-billion shortfall.

Long-term implications

Of the roughly $500 million shortfall, Markopolos calculated that $106 million is due to using an unreasonable discount rate to calculate the present value of its liabilities. The MBTA used an 8% discount rate and had increased its rate in 2012 by 0.5%, when almost all pension plans were decreasing their rate or leaving it constant.

The use of unreasonable discount rates is well-known and its impact widely estimated. The plans justify the use of an unreasonably high rate by claiming adherence to an actuarial standard; in reality, the economically appropriate discount rate – one which reflects the riskiness of the liabilities – is much lower. Markopolos said it should be about 4.5%.

The more troubling problems uncovered by Markopolos are driven by other factors, such as poor due diligence on its investments, overstating of returns, overstating of asset values and faulty life-expectancy estimates. These problems appear to be driven by a pension board that, at best, was unable or unwilling to scrutinize its investments or, at worst, willingly investing its assets with known criminals and past employees.

Nobody knows how widespread problems like these are.

The MBTA falls into the category of multi-employer public pension plans, which are among the smaller state-run plans. According to diBartolomeo, there are approximately $3 trillion in assets in about 6,000 smaller plans, roughly about 30% of the total assets in public pension plans. Markopolos said there are “plenty of other plans in Massachusetts with similar problems.”

Don’t expect help from supporting vendors. In addition to KPMG and Marco, Markopolos said that neither State Street Bank, the MBTA’s custodian, nor Buck Consultants, the plan’s actuarial consultant, warned of any problems.

KPMG should have found the discrepancies. But Markopolos said its auditors are typically “22-year olds who catch more colds than frauds.”

The investigation into the MBTA plan will continue. But if the plan fails – as Markopolos warned – it will surely have an impact on the municipal market. If the state of Massachusetts needs to bail out the plan, it will need to raise money through the bond market. It would be politically unpopular to let the plan fail, since the blue-collar MBTA workers are unwitting victims of the fraud and incompetence.

If problems like this are endemic among multi-employer state pension plans, it will mean higher rates for municipal bonds.

 

end

 

Outlays totaled 329 billion dollars, resulting in a $88.4 deficit for May. Year to date for 8 months: $433 billion deficit.  However the rate of change in government spending is not rising and has private sector loan creation has slowed dramatically, government spending is just not enough to keep the uSA out of a recession

 

(courtesy zero hedge)

US Government Spending Surges 17%, Pushing May Deficit 70% Higher; There Is Just One Problem

When the Treasury reported its monthly receipts and outlays data for the month of May at 2pm today, it was more of the same: far more spending than receipts, resulting in a 68.4% surge in the US budget deficit compared to a year ago. Specifically, outlays of $329 billion soared 19% compared to a year ago, offset by a modest 7% increase in receipts, resulting in a $88.4 billion deficit in May, more than the $87 consensus estimate, and well above the $52.5 billion a year earlier. The reason: government spending in areas such as Medicaid and defense rose at a far faster pace than revenue.

 

Year-to-date, the US deficit was $433 billion for the first 8 months of the year compared to $405 billion last year, with year-to-date receipts rising 1.4%, or roughly 60% of the 2.3% increase in outlays.

There was one silver lining: after contracting for 4 consecutive months at the beginning of the year, 12-month cumulative government receipts managed to eek out two consecutive months of growth, and rose 0.4% in May.

There was a notable footnote: the Treasury received $8.4b from the Fed in May in deposits of earnings, and $56.5 billion year-to-date as the biggest Pyramid scheme of all time continued, with the Fed remitting billions to the Treasury, artificially boosting the government’s “tax revenues.”

And yet, despite the ongoing growth in the US budget deficit as tax receipts fail to keep up with government spending, a problem has emerged: as shown in the chart below, on an LTM basis, government outlays – the same outlays which soared during the financial crisis to pull the US out of the 2008/2009 hole – have been sliding, and after growing at a 5% annual pace three years ago, are almost back at the flatline as the government, believe it or not, is not spending nearly enough to keep the economy growing.

At the current rate, government “stimulus” is poised to turn negative some time in the next few quarters, if not months, effectively resulting in a drag on the US economy, one which comes at the same time as private sector loan creation is also set to turn negative as we highlighted over the weekend.

In other words, with the US economy potentially on the verge of a recession, government spending is, surprisingly, not enough to keep the economy from contracting. And making matters worse, with Trump in charge, and a deeply polarized Congress, any possibility of a sharp spending boost if and when the needs arises, appears very much in question. In other words: keep a close eye on government outlays – as big as they are, they may not be big enough to keep the US from sliding into the next recession.

END

We will see you Monday night

Harvey.

Advertisements

4 comments

  1. …press covfefe. Twitter-style abbreviation. Cov is obviously [to me, anyway] coverage. Fefe is an actual word from the prison community. Look it up. Press coverage is fefe. The usual locker room expression from Twit-in-Chief. Anyone involved with with prison culture would have recognized fefe immediately and snorted their coffee out their nostrils laughing. But why has no one said anything?

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: