July 17/Gold rises $4.20/silver up another 17 cents/GLD loses another 1.77 tonnes despite gold’s gain!!/Chinese small caps crash last night/Italy cannot handle any more migrants: gives the EU an ultimatum!/Turkey bombs USA ally: the Syrian Kurds in Syria/Israel is against the ceasefire between USA forces and Russian forces!/USA has a $250 billion in 2017 and 2018 budget with huge ramifications!/ Paul Brodsky outlines two huge red flags! FINAL DRAFT

GOLD: $1234.50  UP $4.20

Silver: $16.13  UP 17  cent(s)

Closing access prices:

Gold $1234.50

silver: $16.13

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: $1241.75 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1231.60

PREMIUM FIRST FIX:  $10.15

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SECOND SHANGHAI GOLD FIX: $1241.37

NY GOLD PRICE AT THE EXACT SAME TIME: $1231.00

Premium of Shanghai 2nd fix/NY:$10.37

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LONDON FIRST GOLD FIX:  5:30 am est  $1229.85

NY PRICING AT THE EXACT SAME TIME: $1230.45 

LONDON SECOND GOLD FIX  10 AM: $1234.10

NY PRICING AT THE EXACT SAME TIME. $1234.45

For comex gold:

JULY/

NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH:  3 NOTICE(S) FOR 300  OZ.

TOTAL NOTICES SO FAR: 120 FOR 12000 OZ    (.3732 TONNES)

For silver:

JULY

 51 NOTICES FILED TODAY FOR

255,000  OZ/

Total number of notices filed so far this month: 2866 for 14,330,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

end

Let us have a look at the data for today

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In silver, the total open interest ROSE BY A TINY 233 contract(s) UP to 206,591 DESPITE THE GOOD RISE IN PRICE THAT SILVER TOOK WITH FRIDAY’S TRADING (UP 21 CENT(S). EVEN WITH THE DATA ON FRIDAY (COT SHOWING SPECS GOING NET SHORT AND COMMERCIALS NET LONG FOR THE PAST 10 DAYS ENDING LAST TUESDAY) , THE ONLY EXPLANATION THAT I CAN THINK OF IS SOMETHING HAS SCARED OUR BANKERS TO NO END AND THEY STARTED TO COVER THEIR SHORTFALL IN EARNEST ALONG WITH OUR BANKER SHORTS. HOWEVER THE BANKERS ARE HAVING AN AWFUL TIME TRYING TO SHAKE THE SILVER LEAVES FROM THE SILVER TREE. 

 In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.034 BILLION TO BE EXACT or 148% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 51 NOTICE(S) FOR 255,000  OZ OF SILVER

In gold, the total comex gold SURPRISINGLY FELL BY A RATHER LARGE 3,770 CONTRACTS DESPITE THE HUGE RISE IN THE PRICE OF GOLD  ($12.00 with FRIDAY’S TRADING). The total gold OI stands at 483,827 contracts. AGAIN, AS IN SILVER SOMETHING HAS SCARED OUR BANKERS AS THEY STARTED TO COVER THEIR GOLD SHORTS IN EARNEST ALONG WITH THE NEWBIE SPECULATOR SHORTS. THE PLETHORA OF DATA RELEASED ON FRIDAY SHOWING RETAIL SPENDING BASICALLY COLLAPSING ALONG WITH SMALLER INFLATION NUMBERS MUST BE SCARING THESE GUYS TO DEATH.

we had 3 notice(s) filed upon for 300 oz of gold.

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

GLD:

Today a huge  change in tonnes of gold at the GLD/strange!! a withdrawal of 1.77 tonnes with gold up $4.20

Inventory rests tonight: 827.07 tonnes

.

SLV

Today: : , WE HAD NO CHANGES AT THE SLV/

INVENTORY RESTS AT 349.012 MILLION OZ

end

.

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

1. Today, we had the open interest in silver  ROSE BY A TINY 233 contracts  UP TO 206,591 (AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787), DESPITE THE GOOD SIZED RISE IN PRICE FOR SILVER WITH FRIDAY’S TRADING  (UP 21 CENTS ). JUDGING FROM WHAT HAPPENED IN GOLD, OUR BANKERS TRIED TO COVER THEIR SHORTS TO NO AVAIL.  THE LONGS STOOD STOIC AND THE SHORTS (BOTH NEWBIE SPECS AND BANKERS) ARE TRAPPED AND CANNOT GET OUT OF THEIR MESS.

(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 45.95 POINTS OR 1.43%   / /Hang Sang CLOSED UP 81.35 POINTS OR 0.31% The Nikkei closed HOLIDAY/Australia’s all ordinaires CLOSED UP 0.14%/Chinese yuan (ONSHORE) closed UP at 6.7680/Oil DOWN to 46.45 dollars per barrel for WTI and 48.87 for Brent. Stocks in Europe OPENED MIXED,, Offshore yuan trades  6.7628 yuan to the dollar vs 6.7680 for onshore yuan. NOW THE OFFSHORE IS HIGHER  TO THE ONSHORE YUAN/ ONSHORE YUAN  STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA IS VERY HAPPY TODAY 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA

b) REPORT ON JAPAN

c) REPORT ON CHINA

i)SUNDAY/before markets open)

China delivers a surprisingly good economic data but nobody believes them.

( zero hedge)

Chinese small cap stocks crash to its lowest level since 2015 as it seems that most are deleveraging.  This will become a selling panic

( zero hedge)

( zero hedge)

4. EUROPEAN AFFAIRS

i)ITALY
This is a big story.  Italy cannot handle all the migrants coming to their shores. You will recall that Austria has closed its borders to these migrants.  Italy wants help but the EU remains silent.  Italy is ready to issue the nuclear option i.e. giving these migrants visas to travel throughout Europe.  This will no doubt hurt the Schengen accord as European nations will not allow these migrants into their country. If Italy does issue the nuclear option, the EU and ECB will respond financially: probably cutting off the purchase of worthless Italian bonds
a  must read..
( zero hedge)

ii)Amazing 95% of all Europeans reject the EU’s effort to “decash”( Don Quijones/WolfStreet)

iii)ENGLAND/BANK OF ENGLAND

A recipe for trouble:  Britishers are now taking out 35 yr mortgages which the Bank of England states will shackle them with a lifetime of debt.  The Bank of England is now worried about the huge increase in credit card debt.  When the pound fell against the dollar when BREXIT was announced, inflation started to seep through their economy.  Prices are rising and yet interest on savings is negligible which is forcing citizens to take on more debt:

(courtesy zerohedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)Iran

 This is nuts!! Iran first captures a USA citizen and then sentences him to 10 yrs for spying!!Iran has captured many citizens who hold dual passports immediately after the dumbo Obama paid $1.7 billion for those USA hostages. It is obvious that Iran wants more of the USA’s printing machine
( zero hedge)
ii)Turkey
Not good:  USA ally Turkey bombs USA backed Kurds in Syria
( zero hedge)

(courtesy zero hedge)

6 .GLOBAL ISSUES

CANADA

Canada’s housing bubble has burst coinciding with the Bank of Canada’s increase in rates. Canada’s mortgage rates have been rising and there is nothing better to burst a bubble than rising rates.  The problem here is two-fold:

  1. Canada has the highest debt/GDP in the world
  2.  Canada’s banking sector holds the majority of this debt

trouble ahead for Canada

( zero hedge)

7. OIL ISSUES

As we predicted; USA shale production has just hit its all new highs ever:

( zerohedge)

8. EMERGING MARKET

9.   PHYSICAL MARKETS

i)The civil war between two factions inside Bitcoin intensfies as the August 1 deadline approaches.
see below..
SATURDAY
BITCOIN PLUNGES
( zerohedge)

ii)SUNDAY

ETHERUM PLUNGES

( zerohedge)

iii)We are seeing the same thing over on this side of the bond:  huge trays of scrap jewellery going to the melting pot
( London Telegraph/GATA)

iv)Once bullion coin backed by gold/silver and adopting the block chain method of verification will the dominate exchange bypassing the LME

( Sanderson/London’s Financial times)

10. USA Stories

i)The following is extremely important: the White House budgetary director Mick Mulvaney reveals that the budget deficit for 2017 and 2018 will be increased by $250 billion with approximately $100 billion added to this year and $150 billion next year. The big difference noted was due to less tax receipts as people are earning less and a mistake in calculating health care costs for the military. Also it includes the write off for student loans uncollectible as well as housing uncollectible loans. The deficit for 2017 will be $702 billion.

With tax revenues running noticeably behind budget as well as the student loan miss, we may run into the debt ceiling problem much earlier than thought.

( zero hedge)

ii)We have two officials who have knowledge of the Clintons and the Clinton Foundation have been found dead:

i) Klaus Eberwein who had knowledge of the criminal activity inside the Clinton foundationii) Dmitri Noonan, the pilot of Janet Lynch whom Bill Clinton visited on the tarmac in Phoenix has was to give a Fox interview.

( MacSlavo/SHFTPlan)

iii)Second: Dmitri Noonan

(Ourlandofthefree.com)

iv)Rand Paul states that as I and others have stated to you that the Republicans will not pass the health bill or any tax reform bill:

( zero hedge)

v)Soft data, NY Mfg Fed survey tumbles from 19.8 down to 9.8 but this time it is the”hope” that hits an 8 month low( zero hedge)

vi)My goodness, we now get details on massive fraud on subprime auto loans orchestrated by Chrysler and Spanish giant bank: Santander

( zero hedge)

vii)Paul Brodsky  warns of these red flags. Brodsky is one smart cookie:

( Paul Brodsky/Macro-Allocation.com)

Let us head over to the comex:

The total gold comex open interest FELL BY A RATHER LARGE 3,770 CONTRACTS DOWN to an OI level of 483,827 DESPITE THE GOOD SIZED RISE IN THE PRICE OF GOLD ($12.00 with FRIDAY’S trading). THE RISE IN PRICE OF GOLD ON FRIDAY WAS DUE TO SPECULATOR SHORT COVERING ALONG WITH ATTEMPTED SHORT COVERING BY THE BANKERS.

We are now in the contract month of JULY and it is one of the POORER delivery months  of the year. .

The non active July contract GAINED 9 contract(s) to stand at 41 contracts. We had only 2 notices filed YESTERDAY morning, so we GAINED 11 contracts or an additional 1100 oz will stand in this non active month of July.  Thus 0 EFP notice(s) was given which gives the long holder a fiat bonus plus a futures contract for delivery and most likely these are London based forwards.  The contracts are private so we do not get to see all the particulars. The next big active month is August and here the OI LOST 17,322 contracts DOWN to 229,258, as this month winds down prior to first day notice.  The next non active contract month is September and here they GAINED another 68 contracts to stand at 544. The next active delivery month is October and here we gained 412 contracts up to 22,467.  October is the poorest of the active gold delivery months as most players move right to December.

We had 3 notice(s) filed upon today for 300 oz

For those keeping score: in the upcoming front delivery month of August:

On July 19.2016:  open interest for the front month: 306,757 contracts compared to July 17.2017:   229,258.

However last yr at this time we had a record OI in gold at 655,000 contract for the entire complex.

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And now for the wild silver comex results.  Total silver OI  ROSE BY A TINY 233 contracts FROM 206,358 UP TO 206,591 DESPITE FRIDAY’S STRONG 21 CENT GAIN (AND DESPITE CONSTANT TORMENT THESE PAST FEW WEEKS). OUR BANKER FRIENDS ARE DESPERATELY TRYING TO COVER THEIR SHORTS IN SILVER BUT AS YOU CAN SEE  THEY HAVE NOT BEEN AS SUCCESSFUL AS THEY WOULD HAVE LIKED. THE SPECULATORS WERE ALSO TRYING TO COVER THEIR SHORTS ALONG WITH THE BANKERS AND THIS PROPELLED SILVER NORTHBOUND IN PRICE. THE COMMERCIALS WERE LOATHE TO SUPPLY NEW SHORT PAPER AS NO DOUBT THEY WERE TOTALLY SHOCKED WITH THE DATA RELEASED ON FRIDAY (RETAIL SALES/SPENDING/SMALL INFLATION). THIS EXPLAINS THE TINY RISE IN OPEN INTEREST DESPITE THE GOOD SIZED RISE IN PRICE OF SILVER.

We are now in the next big active month will be July and here the OI GAINED 39 contracts UP to 149. We had 8 notices served  yesterday so we gained 47 notices or an additional  235,000 oz will stand at the comex, and 0 EFP contracts were issued which entitles them to receive a fiat bonus and a future delivery contract (which no doubt is a London based forward).

The month of August, a non active month LOST 114 contracts to stand at 494.  The next big active delivery month for silver will be September and here the OI already LOST ANOTHER 1533 contracts DOWN to 153,487.

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.

As for the July contracts:

Initial amount that stood for silver for the July 2016 contract:  14.785 million  oz

Final standing JULY 2016:  12.370 million with the difference being EFP’s taking delivery in London.  Thus we have an increasing amount of silver standing in comparison to what happened a year ago

amt standing tonight: 14.820 million oz.

We had 51 notice(s) filed for 255,000 oz for the June 2017 contract

VOLUMES: for the gold comex

Today the estimated volume was 105.179 contracts which is fair/

Yesterday’s confirmed volume was 310,953 contracts  which is excellent

volumes on gold are STILL HIGHER THAN NORMAL!

Initial standings for JULY
 July 17/2017.
Inventory movements not available today due to the length of time to cook the books
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
nil oz
Deposits to the Dealer Inventory in oz NIL  oz
Deposits to the Customer Inventory, in oz 
nil oz
No of oz served (contracts) today
 
3 notice(s)
300 OZ
No of oz to be served (notices)
38 contracts
3800 oz
Total monthly oz gold served (contracts) so far this month
120 notices
12000 oz
.3732 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   28,599.8 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 0 customer withdrawal(s)
total customer withdrawals; 0 oz
 we had 0 adjustment(s)
 
For JULY:

Today, 0 notice(s) were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 3  contract(s)  of which 0 notices were stopped (received) by j.P. Morgan dealer and 0 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account.

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To calculate the initial total number of gold ounces standing for the JULY. contract month, we take the total number of notices filed so far for the month (120) x 100 oz or 12,000 oz, to which we add the difference between the open interest for the front month of JUNE (41 contracts) minus the number of notices served upon today (3) x 100 oz per contract equals 15,800  oz, the number of ounces standing in this NON active month of JULY.
 
Thus the INITIAL standings for gold for the JULY contract month:
No of notices served so far (120) x 100 oz  or ounces + {(41)OI for the front month  minus the number of  notices served upon today (3) x 100 oz which equals 15,800 oz standing in this  active delivery month of JULY  (0.4914 tonnes)
We GAINED 11 contracts or AN ADDITIONAL 1100 oz will stand and 0 EFP contract(s) was issued as described as above.
.
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Total dealer inventory 696,226.154 or 21.655 tonnes  (dealer gold continues to disappear)
Total gold inventory (dealer and customer) = 8,522,223.757 or 265.07 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 265.07 tonnes for a  loss of 38  tonnes over that period.  Since August 8/2016 we have lost 89 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 11 MONTHS  86 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
Again inventory levels not available today as the CME had extreme trouble cooking the books
AND NOW THE June DELIVERY MONTH
 
JULY INITIAL standings
 July 17 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
nil oz
Deposits to the Dealer Inventory
nil  oz
Deposits to the Customer Inventory 
nil oz
No of oz served today (contracts)
51 CONTRACT(S)
(255,000 OZ)
No of oz to be served (notices)
98 contracts
( 490,000 oz)
Total monthly oz silver served (contracts) 2866 contracts (14,330,000 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 874,711.7 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 0 customer withdrawal(s):
TOTAL CUSTOMER WITHDRAWALS:   nil oz
We had 0 Customer deposit(s):
***deposits into JPMorgan have now stopped again
In the month of March and February, JPMorgan stopped (received) almost all of the comex silver contracts.
why is JPMorgan bringing in so much silver??? why is this not criminal in that they are also the massive short in silver
total customer deposits: nil oz
 
 we had 1 adjustment(s)
i) out of CNT:  79,431.146 oz was adjusted out of the dealer and this landed into the customer side of CNT
The total number of notices filed today for the JULY. contract month is represented by 51 contract(s) for 255,000 oz. To calculate the number of silver ounces that will stand for delivery in JULY., we take the total number of notices filed for the month so far at 2866 x 5,000 oz  = 14,330,000 oz to which we add the difference between the open interest for the front month of JULY (149) and the number of notices served upon today (51) x 5000 oz equals the number of ounces standing
 

 

.
 
Thus the INITIAL standings for silver for the JULY contract month:  2866 (notices served so far)x 5000 oz  + OI for front month of JULY.(149 ) -number of notices served upon today (51)x 5000 oz  equals  14,820,000 oz  of silver standing for the JULY contract month.
We gained ANOTHER 47 contracts for an additional 235,000 oz  that will stand at the comex and 0 EFP’s were issued. THE DELIVERY CYCLE IN JULY IS BEHAVING EXACTLY LIKE THE PREVIOUS MONTHS OF MAY, AND JUNE AS THE AMOUNT STANDING INCREASES EVERY SINGLE DAY AS IT ALSO SURPASSES WHAT WAS STANDING FOR METAL ON THE FIRST DAY OF THE MONTH (12.115 MILLION OZ)
 
 
 
 
Volumes: for silver comex
Today the estimated volume was 36,375 which is good
YESTERDAY’s  confirmed volume was 98,459 contracts which is  HUGE
YESTERDAY’S CONFIRMED VOLUME OF 98,459 CONTRACTS EQUATES TO 492 MILLION OZ OF SILVER OR 70% 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:  38.423 million (close to record low inventory  
Total number of dealer and customer silver:   213.282 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.6 percent to NAV usa funds and Negative 6.5% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.9%
Percentage of fund in silver:37.0%
cash .+0.1%( July 17/2017) 
2. Sprott silver fund (PSLV): STOCK   NAV RISES TO +0.62% (July 17/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES TO -0.53% to NAV  (July 17/2017 )
Note: Sprott silver trust back  into POSITIVE territory at +0.62/Sprott physical gold trust is back into NEGATIVE/ territory at -0.53%/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

July 17/strange again! with gold up $4.20 we had another huge withdrawal of 1.77 tonnes/inventory rests at 827.07 tonnes

July 14/strange@!!with gold up $12.00 today, we had a huge withdrawal of 3.55 tonnes/inventory rests at 828.84 tonnes

July 13/no change in gold inventory at the GLD/inventory rests at 832.39 tonnes

JULY 12/no change in gold inventory at the GLD/inventory rests at 832.39 tonnes

July 11/strange!@! we had a big withdrawal of 2.96 tonnes despite gold’s advance today/inventory rests tonight at 832.39 tonnes

July 10/no changes in gold inventory at the GLD/inventory rests at 835.35 tonnes

July 7/a massive withdrawal of 5.32 tonnes of paper gold were removed and this was used in the attack today/inventory rests at 835.35 tonnes

July 6/no changes in tonnage at the GLD/Inventory rests at 840.67 tonnes

July 5/A MASSIVE 5.62 TONNES OF GOLD LEFT THE GLD AND NO DOUBT WAS USED IN THE RAID THIS MORNING/INVENTORY REST

July 3/ A MASSIVE 7.37 TONNES OF GOLD LEAVE THE GLD/INVENTORY RESTS AT 846.29 TONNES

June 30/no change in gold inventory at the GLD/Inventory rests at 853.66 tonnes

June 29/no change in inventory at the GLD/inventory rests at 853.66 tonnes

June 28/no change in inventory at the GLD/Inventory rests at 853.66 tonnes

June 27.2017/a deposit of 2.64 tonnes into the GLD/inventory rests at 853.66 tonnes

June 26/a withdrawal of 2.66 tonnes from the GLD and this gold no doubt was part of the raid/Inventory rests at 851.02

June 23/no change in gold inventory at the GLD/Inventory rests at 853.68 tonnes

June 22/no change in gold inventory at the GLD/Inventory rests at 853.68 tonnes

June 21/no change in gold inventory at the GLD/Inventory rests at 853.68 tonnes

June 20/no  change in gold inventory at the GLD//Inventory rests at 853.68 tonnes

June 19/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 853.68 TONNES

June 16/no changes in gold inventory at the GLD/Inventory rests at 853.68 tonnes

June 15/ a monstrous “paper” withdrawal of 13.32 tonnes/Inventory rests at 853.68 tonnes

June 14./NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 867.00 TONNES

June 13. No change in gold inventory at the GLD/Inventory rests at 867.00 tonnes

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

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July 17 /2017/ Inventory rests tonight at 827.07 tonnes
*IN LAST 191 TRADING DAYS: 120.06 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 131 TRADING DAYS: A NET  7.37 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: A NET  20.46 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

July 17/no change in silver inventory at the SLV/Inventory rests at 349.012 millionoz

July 14/no change in silver inventory/inventory rests at 349.012 million oz/

July 13/no change in silver inventory/inventory at the SLV rests at 349.012 million oz/

JULY 12/another massive 1.986 million oz of silver added into the SLV/inventory rests at 349.012 million oz/the last 3 days saw 7.281 million oz added into the SV

July 11/ANOTHER MASSIVE INCREASE OF 2.364 MILLION OZ into the SLV inventory/inventory rests at 347.026 million oz

July 10/ A HUGE INCREASE OF 2.931 MILLION OZ OF SILVER DESPITE THE EARLY HIT ON SILVER THIS MORNING/INVENTORY RESTS AT 344.662 MILLION OZ.

July 7/Strange: no change in inventory (compare that with gold) Inventory rests at 341.731 million oz

July 6/ANOTHER MASSIVE DEPOSIT OF 2.126 MILLION OZ INTO THE SLV INVENTORY/INVENTORY RESTS AT 341.731 MILLION OZ.

July 5/STRANGE! NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 339.605 MILLION OZ

July 3/strange! with the huge whacking of silver we got an increase of 379,000 oz into inventory.

June 30/no change in silver inventory at the SLV/Inventory rests at 339.226 million oz

June 29/no change in silver inventory at the SLV/Inventory rests at 339.226 million oz/

June 28/ a small withdrawal of 662,000 oz form the SLV/Inventory rests at 339.226 million oz/

June 27/no change in the silver inventory at the SLV/Inventory rests at 339.888 million oz/

June 26/no change in the silver inventory at the SLV/Inventory rests at 339.888 million oz/

June 23/no change in silver inventory at the SLV/Inventory rests at 339.888 million oz

June 22/ a big change; a huge deposit of 2.175 million oz into the SLV/Inventory rests at 339.888 million oz

June 21/no change in silver inventory at the SLV/inventory rests at 337.713 million oz

June 20/a deposit of 1.513 million oz/inventory rests at 337.713 million oz/.

June 19/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 336.200 MILLION OZ

June 16/no changes in inventory at the SLV/inventory rests at 336.200 million oz

June 15/ a massive “paper withdrawal” of 3.405 million oz of silver/Inventory rests at 336.200 million oz/

June 14/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 339.605 MILLION OZ/

June 13/no change in silver inventory at the SLV/Inventory rests at 339.605 million oz

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

July 17.2017:
 Inventory 349.012  million oz
end
  • 6 Month MM GOFO

    Indicative gold forward offer rate for a 6 month duration

    + 1.14%
  • 12 Month MM GOFO
    + 1.42%
  • 30 day trend

end

Here is a review of the 3 latest comex waterfall (whacks) on gold and silver not including the current one we are undergoing.  I have taken the nadir of the gold price before it started to rise again and compared it to OI in both gold and silver with the OPEN INTEREST.  The OI readings are the following day but we are always one day behind so this compares exactly to the nadir price.
First waterfall ended Oct 6 2016/ Nadir price of gold at that date Oct 6 2016 : $1254.70 / OI for gold Oct 7/2016: 511,340//OI for silver/Oct 7.2016: 194,811
Second waterfall ended Dec 15.2016:Nadir Price of gold Dec 15.2016:      $1128.20              //OI for gold Dec 16/2016 401,798// OI for silver: Dec 16/16 161,570
Third waterfall ended May 10/2017: Nadir Price of gold May 10 2016:   $1220.95              //  OI for gold May 11: 425,252//  OI for silver May 11/17: 199,826
and for comparison while we are undergoing another waterfall these past several weeks
 Today’s price of gold $1235.00                                                                                                    OI for gold today: 483,827//Oi for silver  206,358
The first waterfall corresponds to a silver price of $17.30 on Oct 6
The second waterfall corresponds to a silver price of $15.90 on Dec 15
The third waterfall corresponds to a silver price of $17.37 on May 10
and today:  silver price of $16.16
Since the bottom of the second waterfall the price of gold at its nadir is about the same ($1220 and $1226), but the OI for gold is much higher along with silver OI also much higher. (425,252 and 483,827 OI for gold) accompanying  199,826 and 206,358 for silver)
It seems the data suggests power manipulation to control the price through paper!

END

Major gold/silver trading/commentaries for MONDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

“Bigger Systemic Risk” Now Than 2008 – Bank of England

– Bank of England warn that “bigger systemic risk” now than in 2008
– BOE, Prudential Regulation Authority (PRA) concerns re financial system
– Banks accused of “balance sheet trickery” -undermining spirit of post-08 rules
– EU & UK corporate bond markets may be bigger source of instability than ’08
– Credit card debt and car loan surge could cause another financial crisis

– PRA warn banks returning to similar practices to those that sparked 08 crisis
– ‘Conscious that corporate memories can be shed surprisingly fast’ warns PRA Chair

Bank of England sees bigger financial risks than in 2008

Editor Mark O’Byrne

Stark warnings have been issued by the Bank of England and its regulatory arm, the Prudential Regulation Authority (PRA).

In less than one week the two bodies issued papers and speeches to warn industry members that many banks are showing signs of making the same mistakes that led to the 2008 financial crisis – the outcomes of which are predicted to be worse than those seen just nine years ago.

Increased risks have been noted at different ends of the financial system, from the European corporate bond markets right through to retail lenders.

The Bank of England’s ‘Stimulating Stress Across the Financial System’ was released last week. It looks at how it will assess risk in future studies on the European corporate bond market. It concludes that the corporate bond market could create more instability during the next financial shock than it did in the crisis of 2008.

Just two days before this stark warning, the PRA’s chief-executive Sam Woods told lenders that they were on thin ice with their innovations designed to reduce their capital requirements and buoy earnings. Woods said that whilst their innovations “might meet the letter of the regulation” they must not be “designed to circumvent the spirit” of banking rules.

Bank of England’s Woods accused banks of engaging balance sheet trickery to “circumvent the spirit” of post-financial crisis rules.

Both warnings over both sets of practices is yet another reminder of the stark difference of interests between taxpayers, regulators and the banking industry.

News of institutions circumventing regulations and non-bank corporate lenders creating more risk in the system begs the question if the financial system as we know it will ever be fit for purpose in terms of looking after the needs of borrowers and savers. It also rises concerns about how safe the banks are for depositors and whether banks are ‘safe for savers?’

Balance sheet shenanigans

One of the ‘innovations’ being used by banks is the very same that was used in the run-up to and exacerbated the 2008 financial crisis. It is the use of special purpose vehicles which are used to hold riskier assets in order to free up capital.

Woods told the news conference:

“We have noticed that some institutions are now moving on-balance-sheet financing to off-balance-sheet formats using special purpose vehicles, derivatives, agency structures or collateral swaps.”

Practices such as these are being done in order to reduce the burden of new rules which have come or are coming into play. The Bank of England and the regulatory authorities are close to completing and implementing the reforms that were agreed to following the 2008 crisis.

However the changes designed to make banks less risky have meant margins are being squeezed from two directions, both by new regulations and record low interest rates.

The regulators’ concerns over these practices are that they circumvent a regulation designed to protect taxpayers from yet another bank bailout. These are the ring fencing rules much lauded about following the financial crisis. They require that those banks and building societies with more require financial institutions with more than £25bn of deposits to tie off their retail divisions from the riskier investment banking units by 2019.

This is the most costly of the reforms being put into place, rumoured to have a price tag of billions of pounds.

Widespread illiquidity leads to panic

Meanwhile, on the other side of the market (but still as entwined and as risky as banks’ circumvention tactics) the Bank of England study has shown that they have some significant concerns about the effects of non-bank lenders in a stressed market, particularly on corporate funding rates and their impact on the real economy.

The central bank is primarily concerned that those dealers making markets in bonds will not be able to cope with panic-selling levels by investors. The study found that 2008 levels of weekly mutual fund redemptions  (1 percent of assets under management) could increase corporate bond interest rates for companies with high credit ratings by about 40 basis points.

Dealers might struggle to absorb these sales if redemptions are only a third higher, an event which the study described as “an unlikely, but not impossible, event”.

Whilst the study states that this was an incomplete exercise in assessing the risk in the system, it was clear that it had raised cause for concern namely due to such risks creating a feedback loop between individually safe parts of the market that amplified the shock.

“Nevertheless, it has allowed a scenario to be explored in which large-scale redemptions from open-ended investment funds trigger sales by those funds, with resulting spillover effects to dealers and hedge funds.”

Concerns over how widespread illiquidity can lead to panic amongst investors is fresh in regulators’ and institutions’ minds following the episode post-Brexit vote when there was a run on real estate funds and a temporary ban was placed on withdrawals following the surge in redemption requests.

There is little reason why, given the right set of economic circumstances, such an event wouldn’t happen in the corporate bond market.

Currently there are two events in the near future which could prompt a sell-off in corporate bonds.

The first is a potential reduction in the monthly €60 billion of securities the ECB currently buys. Should they decide to reduce these then investors may dump bonds in favour of equities, cash or gold.

The second potential problem is of course Italy. The general election is due to happen before next May and should Eurosceptic party, the Five Star Movement, win then we are likely to see panicked bond selling.

Worries about corporate bond markets or balance sheet shenanigans by banks do not seem to be causing much concern amongst the UK electorate and savers. But a quick snapshot of how finances look at a household level should be provide a much needed wakeup call.

A decade on, what damage can be done

Woods’s speech about the state of banks’ clever balance sheets was ultimately about their desires to return ‘to the punchbowl’ as they try to boost credit and risk. The chief executive said that his organisation had seen”a shift in credit risk appetite as lenders compete with each other to find ways of widening the pool of available borrowers, increasing the size of loans available to them, or reducing the credit premium charged for inherently more risky loans.”

The state of the things at a retail level is somewhat terrifying. Household lending is growing at 10.3% a year – outpacing the 2.3% rise in household income. The total credit owed by UK consumers at the end of April 2017 was £198 billion, with credit card borrowing at a record £67.7 billion. The BOE is so concerned that it has told lenders to set aside £11.4 billion to protect against defaults.

More concerning about the state of household debt is that Bank of England data shows 15.75pc of all new mortgages taken out in the first quarter of 2017 were for terms of 35 years or more.

But, the latest growing area of debt is car financing. £58 billion of car dealership finance. Just £24 billion of this comes from banks. The rest is from other lenders, such as dedicated motor finance firms. They do not have to follow the strict lending rules on having capital buffers to cover losses like banks do – a development the Bank of England is concerned about.

It has been ten years since the last interest rate hike. A decade is a long-time, enough time for the market to welcome in a new generation of borrowers who are unfamiliar with higher interest rates and the dangers of borrowing. Most concerning is it seems no matter who they borrow from, they are disinterested in the state of regulatory demands.

It has been more than a decade since 60+ banks and building societies were issued a similar warning in 2004. Many failed to listen to the warnings given.

“As survivors, societies here today ought to be well aware of the warning signs, but I’m conscious that corporate memories can be shed surprisingly fast…I would observe that part of the reason why only 44 societies are attending this conference rather than the 60+ that came to its equivalent in 2004 lies in the fact that many of those societies were unaware of, or failed to control, the risks they were taking.”

– Sam Woods of PRA

Similarly aware of this lack of insight, the Bank of England recently asked lenders how these new borrowers affected the banks’ credit-scoring models, as the banks themselves are the first line of defence when it comes to protecting the economy (and taxpayers) against increased risk.

Sam Woods’s speech last week suggest that banks and building societies are most likely unconcerned with the risk these new borrowers bring to the system.

In May, the British households borrowed £1.7 billion in May, higher than the £1.4 billion that forecasters expected and the £1.438 billion borrowed in April. This rapid growth of consumer credit will pose a risk to banks when the economy falters and borrowers struggle to repay the loans.

Conclusion

These warnings from the Bank of England and the PRA just serve to remind us that there is little in the financial system which is not exposed to the highly speculative and risky lending practices of those charged with looking after our savings and investments.

Even if some banks are listening to the warning cry of the regulators, the level of debt in the financial system in the UK and most western countries is completely unsustainable.

Ultimately all of the above means that your personal finances and your savings held in deposit accounts are at risk. The risk is that when authorities move to bailout the next bank who enjoyed the punch a bit too much, your savings may be confiscated in bank deposit bail-ins.

Why do we like physical gold and silver? Because when you buy it in the right way, you own it outright.

When you own physical gold and silver coins and bars which is allocated, segregated and in your name, it cannot suffer a ‘haircut’ or be confiscated by bankrupted financial entities. Bullion coins and bars are yours and carry no counter party risk if you take insured delivery or store in the safest vaults in the world.

Sources

Credit market a bigger systemic risk than during 2008 crisis: BOE – Reuters

Bank tackles lenders balance sheet trickery – FT Adviser

Related Content

“Financial Crisis” In 2017 Or By End Of 2018 – Prepare Now

UK At ‘Edge of Worst House Price Collapse Since 1990s’

UK Inflation is no longer in stealth mode

News and Commentary

Gold inches up as prospects for slower U.S. rate hikes weigh on dollar (Reuters.com)

Gold marks highest settlement of the month, up 1.5% for the week (MarketWatch.com)

Asia shares rise on accommodative Fed (Reuters.com)

Dollar Bears’ Case Grows Stronger as Wagers on Fed Hikes Fade (Bloomberg.com)

ECB Expected to Use July Decision to Quell Investors’ Taper Temper (Bloomberg.com)

Gold and Silver Gain Over 1% and 2% on the Week (SilverSeek.com)

Speculators Sour On Gold And silver, Which Means The Bottom Is Near (DollarCollapse.com)

Hedge Funds Are Losing Faith in Precious Metals (Bloomberg.com)

Financial-Crisis-Style Carmageddon Descends on Houston (WolfStreet.com)

Chinese Silk Road Advances – Purchases Ports Worth $20B In Year (FT.com)

Gold Prices (LBMA AM)

17 Jul: USD 1,229.85, GBP 940.71 & EUR 1,074.03 per ounce
14 Jul: USD 1,218.95, GBP 940.54 & EUR 1,067.92 per ounce
13 Jul: USD 1,221.40, GBP 944.51 & EUR 1,071.05 per ounce
12 Jul: USD 1,219.40, GBP 947.60 & EUR 1,064.29 per ounce
11 Jul: USD 1,211.90, GBP 938.98 & EUR 1,063.68 per ounce
10 Jul: USD 1,207.55, GBP 938.63 & EUR 1,060.11 per ounce
07 Jul: USD 1,220.40, GBP 944.47 & EUR 1,068.95 per ounce

Silver Prices (LBMA)

17 Jul: USD 16.07, GBP 12.30 & EUR 14.02 per ounce
14 Jul: USD 15.71, GBP 12.11 & EUR 13.76 per ounce
13 Jul: USD 15.95, GBP 12.34 & EUR 14.00 per ounce
12 Jul: USD 15.83, GBP 12.31 & EUR 13.82 per ounce
11 Jul: USD 15.51, GBP 12.02 & EUR 13.61 per ounce
10 Jul: USD 15.22, GBP 11.82 & EUR 13.36 per ounce
07 Jul: USD 15.84, GBP 12.29 & EUR 13.88 per ounce


Recent Market Updates

– Video – “Gold Should Probably Be $5000” – CME Chairman Duffy
– India Gold Imports Surge To 5 Year High – 220 Tons In May Alone
– “Silver’s Plunge Is Nearing Completion”
– China, Russia Alliance Deepens Against American Overstretch
– Silver Prices Bounce Higher After Futures Manipulated 7% Lower In Minute
– Precious Metals Are “Best Defence” Against Bail-ins In Economic Crisis
– Buy Gold Near $1,200 “As Insurance” – UBS Wealth
– UK House Prices ‘On Brink’ Of Massive 40% Collapse
– Gold Up 8% In First Half 2017; Builds On 8.5% Gain In 2016
– Pensions Timebomb In America – “National Crisis” Cometh
– London Property Bubble Bursting? UK In Unchartered Territory On Brexit and Election Mess
– Shrinkflation – Real Inflation Much Higher Than Reported
– Goldman, Citi Turn Positive On Gold – Despite “Mysterious” Flash Crash

 end
The civil war between two factions inside Bitcoin intensfies as the August 1 deadline approaches.
see below..
SATURDAY
BITCOIN PLUNGES
(courtesy zerohedge)

Bitcoin Battered Below $2000, Ether Tumbles As August 1st Scaling Deadline Looms

It’s another ugly day in cryptocurrency land. As anxiety over the looming ‘civil war’ deadline of August 1st grows, so it appears the entire virtual currency space is being derisked, with Bitcoin down over 10% today (below $2000) and Ether down 6% (at around $175).

As Bloomberg reports, it’s time for bitcoin traders to batten down the hatches.

The notoriously volatile cryptocurrency, whose 160 percent surge this year has captivated everyone from Wall Street bankers to Chinese grandmothers, could be headed for one of its most turbulent stretches yet.

Blame the bitcoin civil war. After two years of largely behind-the-scenes bickering, rival factions of computer whizzes who play key roles in bitcoin’s upkeep are poised to adopt two competing software updates at the end of the month. That has raised the possibility that bitcoin will split in two, an unprecedented event that would send shockwaves through the $41 billion market.

While both sides have big incentives to reach a consensus, bitcoin’s lack of a central authority has made compromise difficult. Even professional traders who’ve followed the dispute’s twists and turns aren’t sure how it will all pan out. Their advice: brace for volatility and be ready to act fast once a clear outcome emerges.

“It’s a high-stakes game of chicken,” said Arthur Hayes, a former market maker at Citigroup Inc. who now runs BitMEX, a bitcoin derivatives venue in Hong Kong. “If you’re a trader, there’s a lot of uncertainty as to what happens. Once there’s a definitive signal about what will be done, the price could move very quickly.”

Once again it is the so-called ‘civil war’ that is weighing on the entire virtual currency space as we noted previously,behind the conflict is an ideological split about bitcoin’s rightful identity…

Bitcoin is back below $2000 – two month lows…

As CoinTelegraph reports,the knock-on effects for altcoins in the top 10 were as palpable as ever, with Ethereum, Litecoin and others following Bitcoin downhill.

Ethereum has fared particularly badly over the past week, with monthly losses to its market cap now nearly $18 bln.

As always, internal reactions with cryptocurrency were mixed, some despairing while others are eyeing a keen buying opportunity.

$5.5million of new  short positions have opened up within the last 12hrs on Bitfinex

While a general consensus points to the upcoming hard fork probability as the principal motivation for market uncertainty, mainstream media have been quick to sound the alarm about Bitcoin once again.

“Rival factions of computer whizzes who play key roles in Bitcoin’s upkeep are poised to adopt two competing software updates at the end of the month,” Bloomberg reported Friday, announcing Bitcoin could be “nearing a total meltdown.”

“That has raised the possibility that Bitcoin will split in two, an unprecedented event that would send shockwaves through the $41 bln market.”

As areminder, below is an outline of the main events that could unify or divide bitcoin:

By July 21: SegWit2x software is released and supporters begin using it.

July 21 to July 31: The community monitors how many miners deploy SegWit2x:

If more than 80 percent deploy it consistently, that should signal community-wide adoption of SegWit and the avoidance of a split, at least for now.

But if a majority do not deploy, expect anxiety within the community to grow as the focus shifts to the Aug. 1 deadline.

Aug. 1: UASF is deployed by its supporters, who begin checking if bitcoin transactions are compliant with SegWit.

If a majority of miners still do not deploy SegWit2x or otherwise accept SegWit, and if UASF supporters do not back down, then two versions of bitcoin’s blockchain could come into existence: a UASF-backed one where only SegWit transactions are recognized, and another where all trades — SegWit and non-SegWit — are recognized.

If a split occurs, bitcoin will likely begin existing on both blockchains in parallel, resulting in two versions of the cryptocurrency. Expect traders to quickly re-price the value of both, likely leading to massive volatility.

“It’s moderates versus extremists,” said Atlanta-based Stephen Pair, chief executive officer of BitPay, one of the world’s largest bitcoin wallets. “It depends on how much a person values the majority of people staying on one chain at least for a little while longer, versus splitting and allowing each pursuing their own vision for scaling.”

As a reminder, investing legend Michgael Novogratz recently noted, that he’s looking to add more ether if it falls between $200 and $150… and more bitcoin if it falls to $2,000.

END

SUNDAY

ETHERUM PLUNGES

(courtesy zerohedge)

Bitcoin, Ethereum Plunge Accelerates As Scaling Deadline Looms

Yesterday it was Bitcoin, today it is Ethereum that is taking the brunt of selling pressure (down 20%) but the dumping of virtual currencies is evident across the entire crypto space with the biggest market cap coins tumbling to 2-month lows

Once again it is the so-called ‘civil war’ that is weighing on the entire virtual currency space as we noted previously, behind the conflict is an ideological split about bitcoin’s rightful identity…

Bitcoin traded as low as $1830 early this morning to two-month lows… as one veteran of the cryptocurrency trading space told us, “shit’s getting real, no one is sure what happens after August 1st , so traders are taking profits, squaring positions into the scaling deadline.”

But Ethereum is getting battered today, down 20% overnight to 2-month lows…

While the main driver of this selloff is undoubtedly anxiety over the looming scaling deadline on August 1st, we note that, as CoinTelegraph reports, none other than the Albanian central bank has joined the chorus warning about the dangers to the public of virtual currencies… Bitcoin and other cryptocurrencies have been making headlines around the world, and with the recent sell-off this week, more is sure to be said. Central banks and governments continue to make statements regarding the dangers of digital currencies, or, conversely, extolling their benefits. The most recent bank to issue such a warning is the central bank of Albania. The bank issued a strong statement warning citizens that digital currencies were not under the direct purvey of the country’s banking sector regulations and that such vehicles carried extremely high levels of risk.

The Albanian authorities stated:

“We appeal to the Albanian public to be mature and responsible in the administration of savings or liquidity they possess. One should orient investments toward financial products and instruments offered by institutions licensed and supervised by the Bank of Albania and the Financial Supervisory Authority.”

The anonymity and decentralization provided by Bitcoin made nefarious activity not only possible, but probable, and the bank warned against the clear risks taken by those choosing to invest. Bitcoin enthusiasts would clearly point out that a centralized bank is the very essence of what Bitcoin is seeking to distance itself from, and so a less than glowing review would be expected.

While a general consensus points to the upcoming hard fork probability as the principal motivation for market uncertainty, mainstream media have been quick to sound the alarm about Bitcoin once again.

“Rival factions of computer whizzes who play key roles in Bitcoin’s upkeep are poised to adopt two competing software updates at the end of the month,” Bloomberg reported Friday, announcing Bitcoin could be “nearing a total meltdown.”

“That has raised the possibility that Bitcoin will split in two, an unprecedented event that would send shockwaves through the $41 bln market.”

As areminder, below is an outline of the main events that could unify or divide bitcoin:

By July 21: SegWit2x software is released and supporters begin using it.

July 21 to July 31: The community monitors how many miners deploy SegWit2x:

If more than 80 percent deploy it consistently, that should signal community-wide adoption of SegWit and the avoidance of a split, at least for now.

But if a majority do not deploy, expect anxiety within the community to grow as the focus shifts to the Aug. 1 deadline.

Aug. 1: UASF is deployed by its supporters, who begin checking if bitcoin transactions are compliant with SegWit.

If a majority of miners still do not deploy SegWit2x or otherwise accept SegWit, and if UASF supporters do not back down, then two versions of bitcoin’s blockchain could come into existence: a UASF-backed one where only SegWit transactions are recognized, and another where all trades — SegWit and non-SegWit — are recognized.

If a split occurs, bitcoin will likely begin existing on both blockchains in parallel, resulting in two versions of the cryptocurrency. Expect traders to quickly re-price the value of both, likely leading to massive volatility.

“It’s moderates versus extremists,” said Atlanta-based Stephen Pair, chief executive officer of BitPay, one of the world’s largest bitcoin wallets. “It depends on how much a person values the majority of people staying on one chain at least for a little while longer, versus splitting and allowing each pursuing their own vision for scaling.”

As a reminder, investing legend Michgael Novogratz recently noted, that he’s looking to add more ether if it falls between $200 and $150… and more bitcoin if it falls to $2,000.

 END
We are seeing the same thing over on this side of the bond:  huge trays of scrap jewellery going to the melting pot
(courtesy London Telegraph/GATA)

Gold shops: Coming to a high street near you?

 Section: 

By Jon Yeomans
The Telegraph, London
Sunday, July 16, 2017

At Baird & Co.’s gold refinery, boss Nick Hammond is sorting through a tray of scrap jewellery. Bracelets, necklaces, a horse pendant (called a “banger” because it is hollow, and could explode under high heat) and a military medallion dated 1895 are all destined for the furnace. “It’s sad, but we can’t hold them back — they all go in the pot,” Hammond says, pointing out that Baird would have paid around L30,000 to pawn brokers and other dealers for the contents of the tray.

Baird’s high-security factory, on an industrial estate in East London, is home to the UK’s only gold refinery. The family-held business, which celebrates its 50th anniversary this year, is a supplier of gold bars to the Royal Mint and one of the UK’s biggest producers of gold wedding bands. It has just opened a showroom and vault in the Hatton Garden area of London, hoping to lure new customers into the world of gold. “If you want long-term exposure to gold, you have to make the case for physical gold,” says Hammond.

The yellow metal is famed for its status as a safe haven and a store of wealth in times of uncertainty, but is there really a growing demand for physical gold? And how are companies exploiting the opportunity? …

… For the remainder of the report:

http://www.telegraph.co.uk/business/2017/07/16/gold-shops-coming-high-st…

END
Once bullion coin backed by gold/silver and adopting the block chain method of verification will the dominate exchange bypassing the LME
(courtesy Sanderson/London’s Financial times)

LME hopes gold futures contract will be blueprint for reform

 Section: 

By Henry Sanderson
Financial Times, London
Monday, July 17, 2017

The London Metal Exchange is looking to its first gold futures contract in 30 years as a blueprint for an overhaul of the 140-year-old exchange, which has been struggling in the face of fierce competition and tough market conditions.

The LME’s gold futures contract saw good volume in its first week of trading, with a total of 25,590 lots, or more than 2.5 million troy ounces of the metal traded, surprising many who thought the contract would fail to gain traction. In contrast, a London-based contract launched in February by CME Group has barely traded.

The LME’s gold offering contains many of the features that the exchange hopes it can roll out across its market-leading copper, aluminium, and nickel contracts as it strives to maintain its dominance in global metals trading. …

… For the remainder of the report:

https://www.ft.com/content/88d77534-6a07-11e7-bfeb-33fe0c5b7eaa

END

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

 
 

1 Chinese yuan vs USA dollar/yuan  STRONGER 6.7680(REVALUATION NORTHBOUND   /OFFSHORE YUAN MOVES STRONGER TO ONSHORE AT   6.7628/ Shanghai bourse CLOSED DOWN 45.95 POINTS OR 1.43%  / HANG SANG CLOSED UP 81.35 POINTS OR 0.31% 

2. Nikkei closed    /USA: YEN FALLS TO 112.41

3. Europe stocks OPENED MIXED TO RED       ( /USA dollar index RISES TO  95.18/Euro UP to 1.1464

3b Japan 10 year bond yield: REMAINS  AT  +.083%/ GOVERNMENT INTERVENTION    !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 114.34/ 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::  46.45 and Brent: 48.87

3f Gold UP/Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO  +.575%/Italian 10 yr bond yield UP  to 2.265%    

3j Greek 10 year bond yield FALLS to  : 5.30???  

3k Gold at $1233.90  silver at:16.15 (8:15 am est)   SILVER BELOW  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 26/100 in  roubles/dollar) 59.27-

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 GOOD SIZED REVALUATION NORTHBOUND 

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 112.41 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  0.9596 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1008 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 FALLING to  +0.575%

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 2.314% early this morning. Thirty year rate  at 2.899% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Sleepy Overnight Session Interrupted By Chinese Market Turmoil

Another new week, another day with not much going on. So much, or rather little so, that in its daily wrap Citi starts off with the following: “Pop Art pioneer Andy Warhol, who once said “I like boring things”, would have been a huge fan of today’s session thus far. Though several events of note linger on the horizon for later this week, G10 is firmly on the beach as of this morning.”

While it was indeed a generally quiet session (with Japan markets closed), US equity futures continued their run into record territory (ES up 0.1% to 2,458.50), and Europe fractionally lower, the early Monday focus was on the previously discussed turmoil for Chinese marketswhere despite a solid set of Chinese data small caps tumbled, selling off into the close after further warnings of regulatory scrutiny and deleveraging, and sending the ChiNext index of Chinese small caps down over 5% to the lowest level since January 2015.

European equity markets also weaker from the open, with the industrial sector underperforming after several Scandinavian companies fell heavily after earnings. Offsetting this was some early strength from mining stocks which lifted the FTSE 100 following the strong China indsutrial production and fixed investment data. Gilts rally, supporting bunds and USTs, unwinding Friday sell-off linked to rate-locking prior to expected corporate issuance, peripheral spreads also tighten. USD holds small overnight gains; NZD underperforms after dovish RBNZ comments overnight.

Benefiting from China’s strong data, Bloomberg reports that zinc and iron ore were the biggest winners and precious metals joined the advance. However, the jump in miners failed to spur the Stoxx Europe 600 Index, however, which reversed an advance as a report showed June consumer prices in the euro area were unchanged from a month earlier at 1.3%, missing “whisper estimates.” And while European data was largely in line with expectations, investors were reported to be locking in gains according to Bloomberg after a three-day rally and ahead of an ECB meeting this week.  Stoxx Europe 600 index down 0.1% at 10:20 a.m. in London, was little changed before data, index rose toward 50-DMA earlier in session, but failed to cross above it. With underlying inflation still relatively weak, all eyes on ECB’s meeting this week when the central bank is expected to “hold fire” and wait until September before slowing the pace of its bond-buying program. The dollar strengthened against almost all its G-10 peers and was poised to end a five-day losing streak. Treasury yields slipped.

Outside of China, Asian shares hit a 2-year high overnight. As discussed, the overnight action was entirely in China, where despite the strong GDP data the Shanghai Composite Index retreated 1.4% amid concerns over the implications of a weekend meeting where President Xi Jinping said the central bank would play a greater role in defending against risks. The kiwi fell after the deputy governor of New Zealand’s central bank said a lower currency would help rebalance growth. Japanese markets were closed for Marine Day. South Korea’s Kospi Index advanced to an all-time high.

Not surprisingly, complacency has returned with the Citi global risk aversion macro index back to its pre-crisis average.

In currencies, the Aussie dollar hit its highest level in over two years before it pulled back to $0.7813, while the Canadian dollar touched a one-year high before it settling at around C$1.2659. Britain’s Sterling and the euro both eased against the dollar having jumped on Friday as officials from both sides prepared to for Brexit talks in Brussels. Specifically, the pound fell from a 10-month high against the dollar on concern that discord within the U.K. government is worsening before the nation starts the second round of Brexit negotiations with the European Union. Sterling snapped a three-day advance ahead of the talks that are likely to focus on protecting citizens’ rights, which has been a key sticking point so far, Bloomberg reports. The Chancellor of the Exchequer Philip Hammond exposed tensions within the British cabinet at the weekend by stating that transitional arrangements at the end of talks are likely to last a couple of years, far longer than the couple of months suggested by Trade Secretary Liam Fox.

In commodities, oil rose again following the Chinese data, extending gains made last week on signs of lower U.S. inventories and stronger demand. U.S. crude rose 0.3 percent to $46.66 a barrel, while global benchmark Brent added 0.3 percent to $49.07.  Gold gained too, rising to $1,229.90 an ounce in London, though it was copper that shone brightest of the metals as it climbed 1 percent to $5,983.50 a tonne, having earlier struck its highest since March 2.

“I’m still bullish on copper. The property backdrop is still good; China economy and industrial production numbers are still good. Orders are coming through from state grid,” said analyst Dan Morgan at UBS in Sydney.

In rates, the 10Y held steady at 2.31%, after dropping as much as 2.279% on Friday as the dollar inched 0.1% higher versus the yen to 112.635 yen. Eurozone govt bonds also barely budged, biding their time ahead of this week’s European Central Bank meeting for the latest signals on how the central bank plans to scale back its ultra-loose monetary policy. The Bank of Japan too is expected to keep its ultra accommodative policy unchanged when it meets on Wednesday and Thursday. Germany’s benchmark 10-year bond yield was at 0.52 percent – down from 18-month highs of 0.58 percent hit a week ago.

Today focus will also shift to earnings season, which will ramp up with the likes of Microsoft Corp. and Unilever set to report.

Top overnight news

  • Eurozone Jun. F CPI unrevised y/y: 1.3%; Core CPI unrevised 1.1%
  • U.K. Chancellor Hammond: transitional period on Brexit deal is likely to be “couple of years,” rather than “couple of months
  • Italian Finance Minister: Italy has exited the tunnel of crisis; government will soon revise growth estimates upward
  • China 2Q GDP 6.9% vs 6.8% est; Jun. Retail Sales 11.0% vs 10.6% est; Industrial Output 7.6% vs 6.5% est.
  • China weekend meeting on finance founds new panel, boosts PBOC
  • Turkish senior adviser: army is preparing for action against Kurdish-run region of Afrin on Syrian border; military buildup on the border is “serious”
  • China’s Growth Beats Amid Reforms; Trump’s Approval Rating Slumps; U.A.E. Orchestrated Qatar Attacks
  • China’s economy grew faster than expected in the second quarter, putting the nation on track to meet its growth target this year and giving backing to officials in their campaign to corral oncoming financial risk
  • President Donald Trump is planning to shake up his legal team and is also evaluating options for his communications shop as the FBI and congressional investigations into his campaign’s possible ties to Russia heat up
  • Senate Republicans anxiously awaiting a key analysis of their revised health bill have more time to wait, and debate on the controversial measure that had been expected this week will also be delayed following a medical scare involving one of its potential backers
  • Green Courte Partners, a private equity and real estate investment firm, is considering a sale of parking operator The Parking Spot
  • Amid a stalled turnaround, General Cable Corp. said it’s hired investment bank JPMorgan Chase & Co. to pursue a potential sale of the company
  • The European Central Bank is on track to unwind its stimulus next year but it’s likely to drag out the process, economists say
  • China plans to punish billionaire Wang Jianlin’s Dalian Wanda Group Co. for breaching the nation’s restrictions on overseas investments by cutting off funding and denying the conglomerate with necessary regulatory approvals

Market Snapshot

  • S&P 500 futures up 0.1% at 2,458.50
  • STOXX Europe 600 down 0.1% to 386.31
  • U.S. Dollar Index up 0.1% to 95.27
  • MXAP up 0.2% to 157.74
  • MXAPJ up 0.3% to 519.97
  • Nikkei up 0.09% to 20,118.86
  • Topix up 0.4% to 1,625.48
  • Hang Seng Index up 0.3% to 26,470.58
  • Shanghai Composite down 1.4% to 3,176.47
  • Sensex up 0.2% to 32,084.90
  • Australia S&P/ASX 200 down 0.2% to 5,755.47
  • Kospi up 0.4% to 2,425.10
  • German 10Y yield fell 1.2 bps to 0.585%
  • Euro down 0.2% to 1.1449 per US$
  • Brent Futures little changed at $48.90/bbl
  • Italian 10Y yield fell 4.1 bps to 1.994%
  • Spanish 10Y yield fell 2.9 bps to 1.622%
  • Gold spot up 0.1% to $1,230.30

Asia equity markets somewhat recovered from the early volatility in China to approach the close mostly higher after Friday’s gains on Wall St. where the S&P 500 and DJIA printed fresh record highs, while better than expected Chinese data also provided support. The Asia-Pac region was spooked in early trade as the ChiNext board fell as much as 5% after a profit warning from its largest weighted stock Leshi which expects a net loss for H1. This led to similar declines in the Shenzhen Comp. (-1.7%) while the Shanghai Comp. (-0.1%) fell over 2% before better than expected GDP, Industrial Production and Retail Sales data provided much-needed relief. Finally, ASX 200 (-0.1%) was restricted by weakness in telecoms and financials, while Hang Seng (+0.6%) benefited from a firm liquidity injection by the PBoC, and Japanese markets were shut for Ocean Day holiday.

Top Asian News

  • China Weekend Meet on Finance Founds New Panel, Boosts PBOC
  • China Is Said to Punish Wanda for Breaching Investment Rules
  • China’s Stocks Slump Amid Regulatory Concern; Small Caps Plunge
  • China Insurers Jump as Policy Seen Helping Traditional Players
  • India Govt Cos to Invest $42b in 60m Tons/y West Coast Refinery
  • USD/INR 1-Mo Volatility Near Lowest Since 2008, Traders Cite RBI
  • One Country, Two Markets: Hong Kong Shares Jump Amid China Rout
  • Goldman Sees EM Slowdown Coming, Recommends Carry Over Stocks

European bourses pared its initial upside to trade marginally in the red through the morning, as summer, subdued trade has been evident. The Stoxx 600 sectors have followed in the indecision with IN outperforming in the FTSE, following the confirmation of Carolyn McCall as the new CEO. The energy sector also supports the indices, as WTI trades through 46.00/bbl. The strong Chinese data overnight has helped bolster the materials sector, up half a percent, as Anglo-American follow IN in the FTSE. Brexit concerns have re-emerged, with commentary from both Hammond and Fox. The latter stating that there are contingency plans across the UK government’s departments in the scenario that no deal is reached. Fixed income markets opened with a slight bid across Europe, as the aforementioned concerns are clear. The curve has flattened we do approach the summer trading season: Germany 10/30 curve has flattened from 81.5bps to 73bps, France 10/30 from 107bps to 102.5bps, Italy 10/30 curve flatter from 115bps to 108bps and Spain 10/30 is also flatter from 134.5bps to 126/5bps.

Top European News

  • Souring U.K. Data May Put Paid to Pound’s Strength: Markets Live
  • Gilts’ Gain Helps Support Bunds; Unwinds in 20y UST, Data Show
  • Centrica May Sell Shares in New Gas Production Company
  • European Miners Lead Stock Gains After Boost From China GDP Data
  • John Wood, Tullow Oil, Morrison, Outokumpu Short Sellers Active
  • Boris Johnson: U.K. Govt Has Made a Serious Offer on Citizens
  • Eurofins Reports Potential Launch of New Sr EU500M Bond

In commodities, gold continues to recede near Friday’s highs, following the poor CPI data out of the US. Gold has bolstered the precious metals all to trade in the green today, as markets do not seem too optimistic towards the continuing Brexit negotiation talks. The metal complex has also followed, trading in the green; buoyed Asian trade as the strong Chinese overnight figures have benefited not only China, but also Australasia.

In currencies, FX markets have felt the effect of slow summer conditions, with volatility not helped by the lack of tier one data due today. Much anticipation will be on the ECB later in the week, as central bank speech is light amid the pending decision as well as the Fed blackout period.

After the excitement of China’s data dump this morning there isn’t a
huge amount left over the course of the day with final June CPI report
for the Euro area and the July empire manufacturing print in the US the
only data of note

US Event Calendar

  • 8:30am: Empire Manufacturing, est. 15, prior 19.8

DB’s Jim Reid concludes the overnight wrap

In my household there are two important dates this summer. One the birth of the twins and secondly the premier of the new series of Game of Thrones which occurred last night. It aired at 2am in the UK (and perhaps 3am in Europe) so I’ll be very impressed if anyone outside of the US readers of this note (aired last night) have seen it yet. No spoilers please as we’ll be watching tonight but I’d love to hear from anyone in Europe that got up in the middle of the night to watch it. Had the premier been a couple of months later then I’m sure being awake in the middle of the night wouldn’t have been a problem!

So as the battle for the seven Kingdoms intensifies, another slightly less epic battle is playing out around financial markets at the moment and that’s the one between inflation and central bankers. Friday’s 4th successive US CPI miss relative to expectations was a frustration to many but the potential Fed dovishness it might imply helped herald a fresh record high in the S&P 500 (+0.47%), the Dow (+0.39%) and saw the Nasdaq (+0.61%) close within a whisker of its alltime high. So the recovery is complete in US equity markets after Draghi’s Sinatra speech and the earlier tech sell-off. Although European markets had their best week for just over two months they still remain 2-3% off their highs perhaps held back by a more hawkish ECB and a stronger currency of late. The inflation vs. central bank battle continues in earnest this week with Europe and UK seeing inflation data today and tomorrow followed by the ECB meeting and press conference on Thursday.

Within the ECB the battle is perhaps between Draghi and the rest of the committee as the President was certainly more hawkish in Sintra on June 27th than he was when he spoke for the committee at the last meeting on June 8th. For this week’s meeting DB highlights that the main point of interest is seeing how much authority Draghi has over the Governing Council. This will be judged by the strength of the signal at the press conference. According to our economists, the more that Draghi’s new “confidence, persistence, prudence” mantra makes it into the press statement, the more confident the market will be about the Council converging to Draghi’s more constructive view. DB expect Draghi to open the door to a September decision on QE without any pre-commitment.

So all to look forward to. In the meantime the week has already started with a bit of a bang following the latest data dump out of China as well as a number of China-related headlines over the weekend. Starting with the data, the latest June numbers were overall positive. Q2 GDP printed at 6.9% yoy unchanged versus Q1 but ahead of market expectations for 6.8% yoy. In addition, retail sales (+11.0% yoy vs. +10.6% expected; +10.7% previously) and industrial production (+7.6% yoy vs. +6.5% expected; +6.5% previously) both rose more than expected. Fixed asset investment held steady at +8.6% yoy, albeit one-tenth above consensus.

Chinese equity markets had initially sold off at the open ahead of the data. The Shanghai Comp, CSI 300 and Shenzhen were down was much as -2.60%, -2.30% and -4.50% respectively at one stage. That seemed to reflect weekend news about the investigation into a former Communist Party chief for violating party regulations, as well as the PBoC conference over the weekend where more prudent financial regulation was stressed (see more below). However, bourses have recovered somewhat following the data with the CSI 300 now flat, Shanghai Comp now -0.48% and Shenzhen -2.38%. The rest of Asia is largely firmer. The Nikkei (+0.09%), Hang Seng (+0.52%), Kospi (+0.36%) and ASX (+0.14%) are all up.

Back to that conference quickly. Our China economists note that a committee was set up to oversee regulatory issues in the financial sector which in our colleagues’ mind should help the coordination of the regulators in the long term but is unlikely to cause a visible change of policies in the short term. Our economists’ key takeaways were: (1) financial regulation may become more coordinated (2) the government aims to control financial risks without sacrificing growth (3) the effectiveness of the new institutional setup would depend on who will lead this committee and the PBoC (4) President Xi reiterated opening up of the financial sector and promoting RMB internationalization.

The remainder of the weekend newsflow has been fairly light. The FT is running  a story about how President Trump’s approval rating has fallen to 36% and down 6pts from April. On a related subject the CBO has also announced that it won’t release its verdict on the Republican health care bill today after Majority leader McConnell announced that he’s postponing plans to begin the Senate debate in the next few days.

Back to that US data on Friday. As noted above, the June inflation numbers disappointed with both headline (0.0% mom vs. +0.1% expected) and core (+0.1% mom vs. +0.2% expected) readings printing below expectations. That now puts the annual rates at +1.6% yoy (down three-tenths) and +1.7% yoy (unchanged) respectively. It’s worth noting also that the six-month annualized core rate is now down to +1.3%. The big driver for the core appeared to be declines in prices for airfares, apparel and new cars which offset higher prices for shelter and medical care. Following the disappointing data our US economists have now lowered their 2017 forecast for core inflation to 1.7% yoy.

That wasn’t all though with the June retail sales stats in the US also coming in a little disappointing. Headline retail sales fell -0.2% mom (vs. +0.1% expected) while both the core ex auto and gas (-0.1% mom vs. +0.4% expected) and control group (-0.1% mom vs. +0.3% expected) components also printed big misses. In addition, the University of Michigan consumer sentiment survey for July declined 2pts from June to 93.1 (vs. 95.0 expected) driven by and large by a fall in the expectations component to 80.2 (from 83.9). The current conditions index did however nudge up to 113.2 (+0.7pts). Interestingly, in contrast to what we saw in the June CPI report, both 1y and 5-10y inflation expectations actually nudged up one-tenth each to 2.7% and 2.6% respectively (the latter is actually the highest since January).

There was one bit of good news to come from the data on Friday though and that was the June industrial production reading which printed at a better than expected +0.4% mom (vs. +0.3% expected) while the May reading was also revised up one-tenth to +0.1%. For completeness, business inventories came in bang on the money at +0.3% mom. All told the Atlanta Fed revised down their Q2 GDP forecast on Friday following all that data to 2.4% from 2.6%. Over in markets, while equities surged to new highs, Treasury yields plummeted lower in the aftermath of the CPI report with the 10y touching 2.277% (down 6.7bps) and to the lowest this month, although interestingly did complete a near u-turn into the close to finish at 2.333% (down 1.3bps).That rebound appeared to be more technically driven than anything else. Bond markets in Europe were broadly down 1-6bps but also saw a similar bounceback into the close. The Dollar stayed lower however with the Dollar index finishing -0.60% and suffering its weakest day since June 27th. Against that we saw a decent rally in EM currencies with the likes of the South African Rand (+1.37%), Russian Ruble (+1.31%) and Polish Zloty (+1.08%) all up over 1%. Gold (+0.91%) also had its strongest day for a month a bit. It’s worth noting that the market pricing (based on Bloomberg’s calculator) for a rate hike by the Fed in September and December is down to 10% and 43% respectively (from 16% and 50% the day prior).

The other story for markets on Friday and which will likely be a growing theme in the weeks ahead was the start of US earnings season. On Friday all eyes were on the banks with JP Morgan, Citi and Wells Fargo all reporting Q2 results which were largely in line to slightly better than expected at both the revenue and earnings lines. As has been the theme in recent quarters however that was against a backdrop of market expectations which have been ramped down in recent weeks. Case in point being JP Morgan where consensus for Q2 EPS was $1.58 (vs. $1.71 reported) after being as high as $1.65 two months ago. Share prices for all 3 banks were anywhere from a half to one percent lower however (and in line with the wider sector) which partly reflects the soft CPI report and lower yields but also some of the more cautious outlook  commentary. Wells Fargo focused on weakness in lending volumes while JPM watered down its loan growth outlook and net interest income for the remainder of the year. CEO Jamie Dimon also had some choice words for the lack of policy progress in the US with the analyst call including some colourful language. Dimon added that “it’s almost an embarrassment being an American citizen travelling around the world” and referred to “political stupidity” in Washington.

To the week ahead now. After the excitement of China’s data dump this morning there isn’t a huge amount left over the course of the day with final June CPI report for the Euro area and the July empire manufacturing print in the US the only data of note. Tuesday is busy though and we kick off with China property prices data in the morning. In Europe we’ll get the ECB’s bank lending survey for Q2 followed by the  June CPI/RPI/PPI data docket in the UK before we end with the July ZEW survey in Germany. Over in the US tomorrow we’ll get the June import price index reading and July NAHB housing market index print. With nothing of note in Europe or Asia on Tuesday, the focus will be on the US with June housing starts and building permits data. Thursday kicks off in Japan where the overnight data includes the June trade data, but the bigger focus will be on the BoJ meeting outcome. During the European session we’ll get Germany PPI and UK retail sales, shortly before the ECB meeting just after midday. In the US on Thursday we’ll get initial jobless claims, Philly Fed business outlook and conference board’s leading index. It’s a quiet end to the week on Friday with UK public sector net borrowing data the only release of note.

With the Fed entering the blackout period there is no Fedspeak scheduled this week, while over at the ECB and BoE there are also no scheduled speakers. Other events to note however include the EU’s Barnier and UK’s David Davis meeting for a second round of Brexit talks, kicking off today. The inaugural meeting of the US China comprehensive economic dialogue on Wednesday in Washington where the first gathering is due to cover economic and trade issues between the two nations. Finally earnings season ramps up in the US with 69 S&P 500 companies due to report including Netlfix (Monday), Goldman Sachs, BofA, IBM,  Johnson & Johnson (Tuesday), Morgan Stanley (Wednesday), Microsoft, eBay (Thursday) and GE (Friday).

 END

3. ASIAN AFFAIRS

i)Late SUNDAY night/MONDAY morning: Shanghai closed DOWN 45.95 POINTS OR 1.43%   / /Hang Sang CLOSED UP 81.35 POINTS OR 0.31% The Nikkei closed HOLIDAY/Australia’s all ordinaires CLOSED UP 0.14%/Chinese yuan (ONSHORE) closed UP at 6.7680/Oil DOWN to 46.45 dollars per barrel for WTI and 48.87 for Brent. Stocks in Europe OPENED MIXED,, Offshore yuan trades  6.7628 yuan to the dollar vs 6.7680 for onshore yuan. NOW THE OFFSHORE IS HIGHER  TO THE ONSHORE YUAN/ ONSHORE YUAN  STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA IS VERY HAPPY TODAY 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA

b) REPORT ON JAPAN

end

c) REPORT ON CHINA

SUNDAY/before markets open)

China delivers a surprisingly good economic data but nobody believes them.

(courtesy zero hedge)

Chinese small cap stocks crash to its lowest level since 2015 as it seems that most are deleveraging.  This will become a selling panic

(courtesy zero hedge)

(courtesy zero hedge)

4. EUROPEAN AFFAIRS

ITALY
This is a big story.  Italy cannot handle all the migrants coming to their shores. You will recall that Austria has closed its borders to these migrants.  Italy wants help but the EU remains silent.  Italy is ready to issue the nuclear option i.e. giving these migrants visas to travel throughout Europe.  This will no doubt hurt the Schengen accord as European nations will not allow these migrants into their country. If Italy does issue the nuclear option, the EU and ECB will respond financially: probably cutting off the purchase of worthless Italian bonds
a  must read..
(courtesy zero hedge)

Italy Threatens EU With “Nuclear Option”: Give 200,000 Migrants EU Visas, Sending Them North

Two weeks after Italy reacted with anger to Austria’s deployment of troops and armored vehicles to the border between the two nations, while reactivating border controls at the Brenner Pass over concerns that Italy will be unable to handle the roughly 85,000 migrants and refugees who have entered the country so far in 2017, the Italian government has threatened to retaliate in way that assures an imminent migrant crisis as well as an escalation of tensions between the two EU nations.

According to The Times, an Italian minister and a senator have threatened to issue temporary EU visas to thousands of migrants in an effort to “resolve” Italy’s escalating migrant and refugee crisis, which would then allow the refugees to travel north. The move, which has been described as a ‘nuclear option,’ would allow the nearly 200,000 migrants currently stranded in Italy, to travel across Europe using a Brussels directive loophole.

Paolo Gentiloni, the prime minister, is livid that the rest of Europe has refused to take its fair share of migrants and that they have closed ports to rescue ships as the number of refugees attempting the treacherous crossing from Libya to the Continent has surged.

Italy previously called on its EU neighbors to help with the escalating humanitarian crisis but it has been disappointed by their complete lack of action. The face off prompted former Italian Prime Minister Matteo Renzi to shock the European liberal establishment, when last Friday he released excerpts from a new book in which he said that “we need to free ourselves from a sense of guilt. We do not have the moral duty to welcome into Italy people who are worse off than ourselves” adding that “we need to escape from our ‘do gooder’ mentality.

Migrants disembark from the Medecins Sans Frontiers ship Vos Prudence after
being 
rescued at sea, at Salerno’s harbor, Italy, on Friday

Renzi also warned last Friday that Rome would look to curb funding to EU nations that had refused to offer help. “They are shutting their doors. We will block their funds,” he said, sounding suspiciously like Turkey’s Erdogan who has so far prevented a new refugee crisis in Europe by gating some 2 million migrants inside Turkey’s borders.

One week later, not even Renzi’s dramatic reversal has prompted a reaction from the EU, leaving Italy in the same place as before, which as a reminder is that due to its geographic location, Italy has been one of the first entry points  for people fleeing from the south to reach Europe. More than 86,000 migrants have crossed the Mediterranean to Italy already this year, leaving the nation scrambling – and struggling – to cope with the huge increase of people fleeing north Africa.

Meanwhile, hundreds of asylum seekers are packed into overcrowded centers – dubbed ‘human warehouses’ by locals  – scattered across small villages throughout the country.  Mattia Toaldo, a senior analyst at the European Council on Foreign Relations, told The Times: If migrants continue to arrive and Italy decides to give them papers to cross borders and leave Italy it would be a nuclear option.

And since “Italians have lost any hope of getting help from the EU” they may say, “If you won’t make it a common challenge, we will” Toaldo added.

This is precisely what some in Gentiloni’s government are already doing: Mario Giro, Italy’s deputy foreign minister, and Luigi Manconi, a senator with the ruling Democratic Party, told The Times that issuing migrants with temporary visas was under discussion. Giro believes that Italy can exploit European Council Directive 2001/55, developed after the Balkans conflict to give temporary European entry permits to a large number of displaced people.

Needless to say, if Italy pursues this course of action, and ultimately activates the “nuclear option”, support for the Schengen scheme, which allows all EU citizens to travel freely across the Continent, may be in jeopardy. Worse, since for most of the migrants the final destination will be Germany, it may rekindle the same migrant crisis which at the end of 2015 saw Angela Merkel’s approval rating plummet as her countrymen slammed her “Open Door” (since shut) policy.


The Italian rescue ship Vos Prudence arrives in the port of Salerno carrying 935 

migrants, including 16 children and 7 pregnant women on Friday

The move will also drastically escalate tensions with not only Austria, but neighboring France, which have used dogs and the threat of armoured vehicles to push back migrants who try to enter through Italy’s northern border. France 24 reports that perhaps in anticipation of such a move, vast white tents erected in a former military zone on the outskirts of the tiny village of Conetta, house some 1,400 men from across Africa, packed onto endless rows of bunks.

“I used to call this place a modern lager,” Cona mayor Albero Panfilio told AFP, referring to concentration camps. The commune of Cona includes the little village of Conetta. “After two years this is (still) a place where human beings are squashed in together, with no hope for the future.”

“Now I call it a human warehouse. The migrants arrive, they don’t know where to put them, they have a warehouse, they dump them here.” He added that the asylum seekers were treated “like garbage.”

Meanwhile, 10 kilometers away, in Bagnoli di Sopra, 700 migrants are crowded into another former military base surrounded by barbed wire fences with no access to journalists.

Finally, a question emerges: with Europe helpless to prevent Italy from pursuing this path should Rome choose to do so, will Brussels activate its own “nuclear response” in retaliation. Recall that in 2011, a “united Europe” and the ECB removed then-PM Sylvio Berlusconi almost overnight when the former premier threatened to exit the Eurozone, by sending yields on Italian bonds soaring above 10%. While this time Italy’s economy is (relatively) sound, should Rome proceed to dump 200,000 unwanted migrants in Europe’s lap, the one certain response would be a financial one, with Mario Draghi sending a very clear message if not to his native country, then certainly the current government, which will immediately be blacklisted by Europe, with any and all measures taken to remove it.

end

Amazing 95% of all Europeans reject the EU’s effort to “decash”

(courtesy Don Quijones/WolfStreet)

95% Of Europeans Reject EU Efforts To “De-Cash” Their Lives

Authored by Don Quijones via WolfStreet.com,

But the IMF has suggestions on how to win the War on Cash…

In January 2017 the European Commission announced it was exploringthe option of imposing upper limits on cash payments, with a view to implementing cross-regional measures as soon as 2018. To give the proposal a veneer of respectability and accountability the Commission launched a public consultation on the issue. Now, the answers are in, but they are not what the Commission was expecting.

A staggering 95% of the respondents said they were opposed to a cash ceiling at EU level. Even more emphatic was the answer to the following question:

“How would the introduction of restrictions on payments in cash at EU level benefit you, or your business or your organisation (multiple replies are possible)?”

In the curious absence of an explicit “not at all” option, 99.18% chose to respond with “no answer.” In other words, less than 1% of the more than 30,000 people consulted could think of a single benefit of the EU unleashing cross-regional cash limits.

Granted, 37% of respondents were from Germany and 19% from Austria (56% in total), two countries that have a die-hard love for physical lucre. Even among millennials in Germany, two-thirds say they prefer paying in cash to electronic means, a much higher level than in almost any other advanced economy with the exception of Japan. Another 35% of the survey respondents were from France, a country that is not quite so enamored with cash and whose government has already imposed a maximum cash limit of €1,000.

By its very nature the survey almost certainly attracted a disproportionate number of arch-defenders of physical cash. As such, the responses it elicited are unlikely to be a perfect representation of how all Europeans would feel about the EU’s plans to introduce maximum cash limits. Nonetheless, the sheer strength of opposition should (but probably won’t) give the apparatchiks in Brussels pause for thought.

Respondents cited a number of objections to EU-wide cash restrictions, chief among them the convenience of using cash and the limited impact the measure would probably have on achieving its “stated” objectives of curbing terrorism, tax evasion, and money laundering. Of course, there are many other reasons to worry about living in a cashless (or “less cash”) society that were not offered as an option in the survey, including the vastly increased power it would give to political and monetary authorities as well as the near-impossibility of ever escaping from the clutches of the banking system or central banks’ monetary experiments.

The biggest cited concern for respondents was the threat the cash restrictions would pose to privacy and personal anonymity. A total of 87% of respondents viewed paying with cash as an essential personal freedom. The European Commission would beg to differ. In the small print accompanying the draft legislation it launched in January, it pointed out that privacy and anonymity do not constitute “fundamental” human rights.

Be that as it may, many Europeans still clearly have a soft spot for physical money. If the EU authorities push too hard, too fast in their war on cash, they could provoke a popular backlash. In Germany, trust in Europe’s financial institutions is already at a historic low, with only one in three Germans saying they have confidence in the ECB. The longer QE lasts, the more the number shrinks.

Bundesbank president Jens Weidmann has already warned that it would be “disastrous” if people started to believe cash would be abolished — an oblique reference to the risk of negative interest rates and the escalating war on cash triggering a run on cash. The IMF has also waded into the debate with a working paper full of sage advice for governments keen on “de-cashing” – as the IMF calls this procedure – their economies against the will of their citizenry (emphasis added):

The private-sector-led de-cashing seems preferable to the public-sector-led decashing. The former seems almost entirely benign (e.g., more use of mobile phones to pay for coffee), but still needs policy adaptation. The latter seems more questionable, and people may have valid objections to it. De-cashing of either kind leaves both individuals and states more vulnerable to disruptions, ranging from power outages to hacks to cyberwarfare. In any case, the tempting attempts to impose de-cashing by a decree should be avoided, given the popular personal attachment to cash.

A targeted outreach program is needed to alleviatesuspicions related to de-cashing; in particular, that by de-cashing the authorities are trying to control all aspects of peoples’ lives, including their use of money, or push personal savings into banks.

It basically involves making it easier and cheaper for people to use electronic payment methods while subtly turning the screw on those who would prefer to continue using cash (for perfectly valid reasons, as the IMF itself admits), presumably by making it more difficult and expensive to do so. In many places it’s already happening.

But a surprisingly large number of people still appear to have a strong sense of attachment to physical money, particularly in Europe’s most important economy, Germany. And if the survey is any indication, they have little interest in changing those habits.

END

iii)ENGLAND/BANK OF ENGLAND

A recipe for trouble:  Britishers are now taking out 35 yr mortgages which the Bank of England states will shackle them with a lifetime of debt.  The Bank of England is now worried about the huge increase in credit card debt.  When the pound fell against the dollar when BREXIT was announced, inflation started to seep through their economy.  Prices are rising and yet interest on savings is negligible which is forcing citizens to take on more debt:

(courtesy zerohedge)

BOE Warns Popular 35-Year Mortgages Shackle Consumers With “Lifetime Of Debt”

Consumers in the UK have been on a credit binge since the Bank of England cut its benchmark interest rate to an all-time low as investors braced for the widely anticipated economic shock of Brexit – a shock that, unsurprisingly, has yet to arrive, despite warnings from the academic establishment that a “leave” vote would trigger an imminent economic catastrophe. And now, with total credit growth rising at 10% a year, the BOE is warning that the increase in unsecured lending is becoming increasingly unsustainable.

While the central bank is less concerned with mortgage debt than credit-card debt and other types of consumer credit, some at the bank are beginning to worry that the growing demand for long-term mortgages will shackle borrowers with a lifetime of debt, according tothe Telegraph.

British families are signing up for a lifetime of debt with almost one in seven borrowers now taking out mortgages of 35 years or more, official figures show.

Rapid house price growth has ­encouraged borrowers to sign longer mortgage deals as a way of reducing monthly payments and easing affordability pressures.

Bank of England data shows 15.75pc of all new mortgages taken out in the first quarter of 2017 were for terms of 35 years or more. While this is slightly down from the record high of 16.36pc at the end of 2016, it has climbed from just 2.7pc when records began in 2005.”

The steady rise has triggered alarm bells at the BOE, prompting regulators to warn that the trend risks storing up “problem[s] for the future” if lenders ignore the growing share of households prepared to borrow into retirement. Indeed, bank figures show one in five mortgages today are between 30 and 35 years, up from below 8% in 2005, as the traditional 25-year mortgage becomes less popular.

There’s also the unaffordability question. That borrowers are opting for longer mortgage terms means they’re finding rent and mortgages are growing increasingly unaffordable, a worrying sign as credit expands.

David Hollingworth, a director at mortgage broker London & Country, said the trend showed that an increasing share of borrowers were “struggling with affordability pressures, and deciding that lengthening the term will offer leeway” as house price growth continues to outpace pay rises.

Sam Woods, the chief executive of the Prudential Regulation Authority, has said policymakers are watching developments closely.

“If lenders become too narrowly preoccupied with the profile of the loan in the first five years” and not look at the entire profile of the loan when assessing affordability “this could store up a problem for the future,” he said in a speech.

While interest rates are expected to stay low, the pound’s 15% drop against the dollar since the last year is driving up the price of consumer goods, adding to the pressure on borrowers. Prices of consumer staples are growing at an annualized rate of 3%, far more than interest rates on savings accounts.

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Iran

 This is nuts!! Iran firs captures a USA citizen and then sentences him to 10 yrs for spying!!Iran has captured many citizens who hold dual passports immediately after the dumbo Obama paid $1.7 billion for those USA hostages. It is obvious that Iran wants more of the USA’s printing machine
(courtesy zero hedge)

Iran Sentences US Citizen To 10 Years For Spying

With diplomatic relations between the US and Iran – a state Donald Trump has repeatedly accused of being a “state sponsor of terrorism” – alrady near rock bottom, on Sunday they took another turn for the worse after a United States citizen accused of “infiltration” in Iran was sentenced to 10 years in prison.

“This person, who was gathering information and was directly guided by America, was sentenced to 10 years in prison, but the sentence can be appealed,” deputy judiciary chief Gholamhossein Mohseni Ejeie said in a televised press conference quoted by Reuters, adding that “rhe person was identified and arrested by the intelligence forces.” The foreigner holds dual nationality of the United States and another country, he said, promising to give more details once the appeals court confirms the sentence.


Deputy judiciary chief Gholamhossein Mohseni Ejeie

As Reuters adds, it was not immediately clear whether Mohseni Ejei was referring to Nizar Zakka, a Lebanese citizen with permanent U.S. residency, who has been sentenced to 10 years in prison and a $4.2 million fine after he was found guilty of collaborating against the state, according to his U.S.-based lawyer who spoke to reporters in September.

Early in January, Tehran’s chief prosecutor said as many as 70 “spies” were serving sentences in the city’s prisons, the identities of only a handful of which have been made public. Most are thought to be Iranians who hold another passport from Europe or the United States. As we reported at the time, last October, US-Iranian business consultant Siamak Namazi and his 80-year-old father Baquer, a former UNICEF official, were given 10 years in prison for “espionage and collaboration with the American government”.


Iranian-American consultant Siamak Namazi (R) is pictured 
with his father Baquer Namazi, via Reuters

Emboldened by Obama’s “negotiating” tactics, which as the WSJ reported last summer involved the stealthy payment of $1.7 billion all-cash payment to secure the release of four US hostages, Iran demanded the payment of “several billions of dollars” to release the Namazis:

As the Washington Free Beacon first reported, senior Iranian officials, including the country’s president, have been floating the possibility of further payments from the United States for months. Since the White House agreed to pay Tehran $1.7 billion in cash earlier this year as part of a deal bound up in the release of American hostages, Iran has captured several more U.S. citizens.

Iranian news sources close to the country’s Revolutionary Guard Corps, or IRGC, which has been handling prisoner swaps with the United States, reported on Tuesday that Iran expects “billions of dollars to release” those U.S. citizens still being detained.”

“We should wait and see, the U.S. will offer … several billions of dollars to release” American businessman Siamak Namazi and his father Baquer, who was abducted by Iran after the United States paid Iran the $1.7 billion, according to the country’s Mashregh News outlet, which has close ties to the IRGC’s intelligence apparatus. That amount may have been just the beginning: according to the WFB, “Future payments to Iran could reach as much as $2 billion, according to sources familiar with the matter, who said that Iran is detaining U.S. citizens in Iran’s notorious Evin prison where inmates are routinely tortured and abused.”

It was not immediately clear if a similar demand would be made this time to accelerate the release of the unknown US citizen.

Meanwhile, on Sunday morning, the US has already called for the immediate release of the detained US citizens.

 US calls for Iran’s immediate release of detained US citizens

 end
Turkey
Not good:  USA ally Turkey bombs USA backed Kurds in Syria
(courtesy zero hedge)

Turkey Begins Bombing US-Backed YPG Positions In Syria

It started two weeks ago, when Turkey warned publicly it was preparing for military intervention in Syria, while accusing the US of creating a “terrorist army” (it wasn’t referring to ISIS, but US-backed Syrian Kurdish militia YPG). As a reminder, YPG forms a major part of the U.S.-backed campaign to capture Islamic State’s stronghold of Raqqa, and whose forces are seen as a terrorist organization by Turkey. The group currently controls a pocket of territory in Afrin, about 200 km (125 miles) west of Raqqa.

Tensions between Turkish forces and the YPG have been mounting in the Afrin region in recent weeks: Turkey’s military, which launched an incursion last August into part of northern Syria which lies between Afrin and a larger Kurdish-controlled area further east, has said that it has returned fire against members of YPG militia near Afrin several times in the last few weeks.

Furthermore, last month the Turkish defence ministry slammed the Pentagon decision to arm theYPF, and mocking Washington’s assurances that it would retrieve weapons provided to the YPG after Islamic State fighters were defeated: “There has never been an incident where a group in the Middle East has been armed, and they returned the weapons,” Kurtulmus said. The United States “have formed more than a terrorist organisation there, they formed a small-scale army.”

Then overnight, Ilnur Cevik, a senior adviser to President Recep Tayyip Erdogan, spoke to Bloomberg and said that while Turkey has no immediate plans for an operation in the Syrian Kurdish-run region of Afrin, its army is preparing for action and the military buildup on the border is “serious.” 

 “PYD militants are also harassing the people of Idlib to the south and the people in the areas which Turkey liberated from Daesh,” Cevik says and alleged that PYD’s goal is to “dislodge Turkey from areas that the Free Syrian Army and Turkey liberated,” making their actions “an elevated threat.”

“They want to create a string of cantons in northern Syria and they feel the areas that were liberated with the Euphrates Shield operation should be theirs”; says group wants to “throw Turkey out of there and connect all their cantons in northern Syria and create a mini state. It’s not only Afrin, the threat comes from Kobani, the threat comes from Qamishli, the areas to the east of the Euphrates river until the Iraqi border from areas controlled by the PYD/YPG. Turkey feels threatened from that area as well but the immediate concern is Afrin.”

He concluded by cryptically saing that while “Turkey does not have immediate plans to enter Afrin but Turkey feels that sooner or later we have to do something. This buildup is necessary. And the president said that we are not going give a date or anything, but suddenly one night we may do something there.”

Or perhaps during the day, because according to Rudaw, just hours after Celik’s interview, Turkey commenced bombing YPG positions in Azaz, roughly 5 miles northeast of Afrin in north east Syria, and in immediate proximity to the Turkish border.

: Turkey bombs  positions near Azaz in  — Turkish army.

Separately Conflict News reported that on Monday morning there has been heavy Turkish artillery shelling of US-backed Syrian YPG/SDF forces in the region:

VIDEO: Heavy Turkish artillery shelling of US-backed SDF in Ain Daqnah, N.  – @QalaatAlMudiq

So far there has been no response from either the US or NATO, to what appears to be increasing hostilities between NATO member Turkey and US-ally YPG.

(courtesy zero hedge)

Israel Rejects Cease-fire Deal Between U.S. And Russia In South Syria

One month after the WSJ reported that Israel had been secretly funding the Syrian rebel opposition to Assad’s regime for years in hopes of keeping the Syrian political situation unstable and preventing the Syrian – and Iranian – regime’s military from becoming a substantial threat, overnight Israel Prime Minister Benjamin Netanyahu told reporters after his meeting with French President Emmanuel Macron on Sunday that Israel opposes the cease-fire agreement in southern Syria that the United States and Russia reached “because it perpetuates the Iranian presence in the country.”

Quoted by Haaretz, a senior Israeli official said Israel “is aware of Iranian intentions to substantially expand its presence in Syria”, and added that Iran is not only interested in sending advisers to Syria but also in dispatching extensive military forces including the establishment of an airbase for Iranian aircraft and a naval base. “This already changes the picture in the region from what it has been up to now,” the official said.

Which considering that most if not all of Syria’s victories in the ongoing parallel proxy wars with both ISIS and the various “moderate” and not so “moderate” rebel groups were courtesy of Iran and specifically the IRGC, is to be expected. Still, by openly voicing his opposition to one of the most significant moves the United States and Russia have made in Syria in recent months, Netanyahu made public a major disagreement between Israel and the two great powers that had until now been kept under wraps and expressed only through quiet diplomatic channels. Netanyahu said he had discussed the cease-fire deal with U.S. Secretary of State Rex Tillerson by phone Sunday night.

As a reminder, Donald Trump and Vladimir Putin agreed on the cease-fire on the sidelines of the G20 summit in Hamburg last week. In a tweet published shortly after the truce came into effect last week, Trump tweeted: “We negotiated a ceasefire in parts of Syria which will save lives. Now it is time to move forward in working constructively with Russia!”

One week later, however, the truce faces the daunting hurdle of Trump’s biggest ally in the region openly opposing what may be the US president’s biggest diplomatic achievement to date.

In addition to the ceasefire, the U.S.-Russian deal included establishing de-escalation zones, otherwise known as safe zones, along Syria’s borders with both Jordan and Israel.

According to Haaretz, over the past month, Israel had held talks on this agreement with senior American officials, including Brett McGurk, America’s special envoy for the battle against ISIS, and Michael Ratney, the special envoy for Syria, both of whom visited Israel several times. During these talks, Israel presented a list of demands and voiced several reservations about the emerging agreement. Among others, Israel said that the de-escalation zones must keep Iran, Hezbollah and other Shi’ite militias away from the Israeli and Jordanian borders and must not enable Iran to consolidate its presence in Syria. Israel also told the Americans it objected to having Russian troops policing the cease-fire in the safe zones near its border.

Curiously, Haaretz notes that Israel was a vocal member of the negotiations that took place over the Syrian ceasefire, and in the days before the United States and Russia announced the cease-fire deal for southern Syria, Netanyahu spoke by telephone with both Tillerson and Russian President Vladimir Putin to reiterate Israel’s positions on the agreement. At the start of the cabinet meeting on July 9, Netanyahu said that both Putin and Tillerson had told him they understand Israel’s position and will take its requirements into account.  However, when Jerusalem obtained the text of the deal, it discovered to its surprise that the Americans and Russians “had ignored Israel’s positions almost completely.

“The agreement as it is now is very bad” one senior Israeli official said. “It doesn’t take almost any of Israel’s security interests and it creates a disturbing reality in southern Syria. The agreement doesn’t include a single explicit word about Iran, Hezbollah or the Shi’ite militias in Syria.”

* *  *

What Israel’s opposition to the Syrian ceasefire means, is unclear. While the deal is surprisingly still holding one week after its implementation, perhaps the longest period of time a Syrian ceasefire has held for the duration of the country’s 6-year war, with Israel voicing its non-compliance, it is possible that it will be none other than Netanyahu who breaches the terms of the agreement should Israel feel “threatened” by Hezbollah, or other Shi’ite militias.

Whether that will force Trump to choose between Putin and Netanyahu is open to debate.  However, it likely means that now that the Syrian war is slowly fading away, the region’s longest-simmering, dominant conflict, that between Iran and Israel, is about to retake its rightful place.

6 .GLOBAL ISSUES

CANADA

Canada’s housing bubble has burst coinciding with the Bank of Canada’s increase in rates. Canada’s mortgage rates have been rising and there is nothing better to burst a bubble than rising rates.  The problem here is two-fold:

  1. Canada has the highest debt/GDP in the world
  2.  Canada’s banking sector holds the majority of this debt

trouble ahead for Canada

(courtesy zero hedge)

Canadian Home Sales Crash In June

The Canadian Real Estate Association says home sales in June posted their largest monthly drop since 2010, with the Greater Toronto market leading the decline.

This is the third monthly decline in a row…

Under the covers, it’s Toronto that is suffering the most…

Toronto existing home sales drop 37.7% y/y

  • Average Toronto existing home price fell 5.8% m/m
  • Average Toronto existing home price up 6.3% y/y

Vancouver existing home sales drop 12.2% y/y

  • Average Vancouver existing home price fell 3.2% m/m
  • Average Vancouver existing home price up 2.7% y/y

And as a reminder, there appears to be plenty of room for this to fall further…

Looking at the chart above, last month Bloomberg said:

On a real basis, Canadian housing prices experienced a much smaller, shorter decrease in prices during the financial crisis and a much larger, longer increase in prices during the recovery. When you couple this unfathomable rise in housing prices with near-record high household debt-to-income ratios, the Canadian housing bubble starts to look scary should the tide turn.

… and added:

No one knows when insanity like this will come to an end. Bubbles are like an avalanche. The longer they build up, the worse they will be when they eventually destabilize.

Well, nobody may know, but as Harley Bassman said yesterday, one can make an educated assumption, and as he said it most likely will be the result of higher rates… which reminds us of last week’s decision by the Bank of Canada to hike its rates for only the first time since 2010.

And as US homebuyers from the time period 2004-2006 remember all too vividly, there is nothing that will burst a housing bubble faster than a spike in mortgage rates.

Which is why while Torsten Slok’s original warning that “Canada Is In Serious Trouble” two years ago may have been premature, this time it appears all too real thanks to none other than the Canadian central bank, which may just have done the one thing that will finally burst the country’s gargantuan housing bubble.

Finally, for those skeptical, here is David Rosenberg explaining why he is ‘skeptical’ about BoC’s view of a robust economy ahead

7. OIL ISSUES

As we predicted; USA shale production has just hit its all new highs ever:

(courtesy zerohedge)

US Shale Production Just Hit A New All Time High

One month ago, we reported that based on recent data, June oil output from shale producers would post the first double-digit production growth since July of 2015, when oil prices tumbled and a substantial portion of US production was briefly taken offline. While the final data has yet to be tabulated, it is safe to say that this is now the case.

Indicatively, while over the past year total U.S. production was up roughly 525kb/d, virtually all of it, or 98.5%, was the result of horizontal rig production in the Permian Basin, where output rose by just over half a million barrels per day.

The Permian basin has been leading the increase in horizontal oil rig count (+184%)

Also of note is that while US rig shows not signs of slowing yet, in its latest Weekly Oil Rig Monitor, Goldman predicted that $45/bbl is the price below which shale output would finally slow, although that price may also prove a substantial hurdle for many gulf budgets, whose all in cost of production – including mandatory and discretionary government outlays – is roughly the same if not higher.

Rig count (lhs), WTI spot prices (rhs, $/bbl, 3-mo lag)

But what is more notable, is that according to the June EIA Drilling Prodctivity Report forecast, in July total shale (note: not total) basin output would rise by 127kb/d from May’s 5.348mmb/d, and hit 5.475 mmb/d, surpassing the previous record of 5.46 mmb/d reached in March 2015. Today the EIA released its latest Drilling Productivity Report, and while the number is not official just yet, it is safe to say that as of July, the total US shale basin is producing a record amount of crude oil, which the EIA pegged at 5.472mmb/d, up almost exactly as predicted, and is expected to rise by a further 113kb/d in August to a new all time high of 5.585mmb/d.

A look at the productivity breakdown, reveals the following picture:

Looking beyond the immediate production horizon, over the weekend Goldman’s commodity team predicted that “assuming the US oil rig count stays at the current level, we estimate US oil production would increase by 840 kb/d between 4Q16 and 4Q17 across the Permian, Eagle Ford, Bakken and Niobrara shale plays”, a number that is slighly higher than the 835kb/d Goldman predicted one week ago. Goldman also notes that annual average US production would increase by 320 kb/d yoy on average in 2017. The yoy production would rise by 490 kb/d in 2017 if we account for the impact of the estimated remaining county-level well backlog being gradually brought back online between May and Dec-17.”

And, as we said last month, this is bad news for OPEC, which continues to price itself out of the market by not only keeping prices high enough to make production profitable for US companies, but by allowing shale to capture an increasingly greater market share.

Worse news is that shale is just getting started: both the Energy Information Administration, OPEC and the International Energy Agency have chronically underestimated the contribution of U.S. crude oil supplies in their forecasts. As Shale River notes, each has significantly increased their estimates for 2017 U.S. crude oil production during the year, with recent upward revisions larger than prior increases. In fact, the EIA recently conducted its 11th consecutive upward revision of its 2017 estimate.

But the worst news – for OPEC yet again – is in the long-term, where if 5.5mmb/d is considered a record, just wait until shale hits more than double that amount, or over 12mmb/d, which Goldman expects will be achieved some time in the 2020s.

The reason: shale breakeven costs are dropping on a monthly, if not weekly basis, and which over the next 4 years Goldman expects will plunge to prices where US production will become competitive with the lowest-cost OPEC producers: Saudi, Iran and Iraq.

Impossible? The chart below showing the collapse in breakevens in the past 9 years suggests otherwise:

Here is Goldman:

We believe the Big 3 shale plays (Permian Basin, Eagle Ford Shale and Bakken) combined with Cana Woodford plays (SCOOP/STACK) and the DJ Basin can together drive on average 0.8 mn bpd of annual production growth through 2020 and 0.7 mn bpd of annual production growth in 2021-25. We see production plateauing towards the end of the next decade at present. Importantly, as described below, we  still see room for additional productivity gains; our estimates incorporate expectations for 3%-10% productivity gains per year through 2020.

While rest of the world is finding ways to move breakevens down towards $50/bbl WTI, we still see shale as the dominant source of growth and as a critical source of short cycle production. Our global cost curve from our recent Top Projects report shows continued decline in shale breakevens, though at a smaller pace vs. in past years. Outside of shale, we increasingly see industry – majors, national oil companies (NOCs) and governments – working to accommodate new projects that break even at $50/bbl WTI or less with a goal of becoming more competitive with shale. This largely is occurring through a combination of improved tax/royalty terms by host governments, more limited scale by producers (smaller projects that come online more quickly) and cost reduction/efficiency gains. We still see production from new projects falling off towards the end of the decade as a result of the reduction in investment after oil prices collapsed post-2014. As such, we expect shale will continue to be a critical source of marginal supply because shale along with OPEC spare capacity are the principal sources of short-cycle supply.

The bad news for OPEC is that it is trapped when it comes to oil prices: on the bottom by plunging state revenues and booming budget deficits, which spell out austerity, social instability and eventually revolution if prices are not boosted, and on the top by shale technological advances, which consistently reduce breakeven prices, and allow shale to stale market share from OPEC the longer prices are kept artificially high.

The solution, short-term as it may be at least according to Goldman, is that oil prices “need to stay lower for longer.” That however is a non-starter with Saudi Arabia, which for obvious reasons, is rushing to IPO Aramco before math and physics finally declare victory over cartel-controlled supply, and oil prices crash. It remains to be seen if it is successful.

END

8. EMERGING MARKET

end

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

Euro/USA   1.1464 UP .0011/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP HEALTH CARE DEFEAT//ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/ /USA RISING INTEREST RATES AGAIN/EUROPE BOURSES MIXED LEANING TO RED 

USA/JAPAN YEN 112.41 UP 0.032(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/LABOUR PARTY LOSES IN LOCAL ELECTIONS

GBP/USA 1.3061 DOWN .0035 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS

USA/CAN 1.2661 UP .0032 (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 11 basis points, trading now ABOVE the important 1.08 level  RISING to 1.1464; 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 45.95 POINTS OR 1.43%     / Hang Sang  CLOSED UP 81.35 POINTS OR 0.31% /AUSTRALIA  CLOSED UP 0.14% / EUROPEAN BOURSES OPENED MIXED LEANING TO 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 HOLIDAY

Trading from Europe and Asia:
1. Europe stocks  OPENED MIXED /RED 

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 81.35 POINTS OR 0.31%  / SHANGHAI CLOSED DOWN 45.95 POINTS OR 1.43%   /Australia BOURSE CLOSED UP 0.14% /Nikkei (Japan)CLOSED  POINTS HOLIDAY    / INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: 1231.85

silver:$16.11

Early MONDAY morning USA 10 year bond yield: 2.314% !!! DOWN 2 IN POINTS from FRIDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.899, DOWN 2  IN BASIS POINTS  from FRIDAY night.

USA dollar index early MONDAY morning: 95.18 UP 2  CENT(S) from FRIDAY’s close.

This ends early morning numbers MONDAY MORNING

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And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield: 3.101%  DOWN 6 in basis point(s) yield from FRIDAY 

JAPANESE BOND YIELD: +.083%  DOWN 0  in   basis point yield from FRIDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.592% DOWN 17   IN basis point yield from FRIDAY 

ITALIAN 10 YR BOND YIELD: 2.237 DOWN 6 POINTS  in basis point yield from FRIDAY 

the Italian 10 yr bond yield is trading 64 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.596% UP 1 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR MONDAY

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

Euro/USA 1.1473 UP .0019 (Euro UP 19 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 112.73 UP  0.289(Yen DOWN 29 basis points/ 

Great Britain/USA 1.3060 DOWN  0.0037( POUND DOWN 37 basis points) 

USA/Canada 1.2667 UP .0035 (Canadian dollar DOWN 35 basis points AS OIL FELL TO $46.24

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This afternoon, the Euro was UP  by 19 basis points to trade at 1.1473

The Yen FELL to 112.73 for a LOSS of 29  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 37  basis points, trading at 1.3060/ 

The Canadian dollar FELL by 35 basis points to 1.2667,  WITH WTI OIL FALLING TO :  $46.24

The USA/Yuan closed at 6.7700/
the 10 yr Japanese bond yield closed at +.083%  DOWN 0/10  IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 0 IN basis points from FRIDAY at 2.3140% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.898  DOWN 0 in basis points on the day /

Your closing USA dollar index, 95.17  UP  2 CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED UP 25.74 POINTS OR 0.35%
German Dax :CLOSED DOWN 44.56 POINTS OR 0.35%
Paris Cac  CLOSED DOWN 5.14 POINTS OR 0.10% 
Spain IBEX CLOSED UP 39.00 POINTS OR 0.04%

Italian MIB: CLOSED  DOWN 7.45 POINTS/OR 0.03%

The Dow closed DOWN 8.02 OR 0.04%

NASDAQ WAS closed UP 1.07  POINTS OR 0.03%  4.00 PM EST
WTI Oil price;  46.24 at 1:00 pm; 

Brent Oil: 48.72 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  59.37 UP 36/100 ROUBLES/DOLLAR (ROUBLE LOWER BY 36 BASIS PTS)

TODAY THE GERMAN YIELD RISES TO  +0.596%  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: $48.34

USA 10 YR BOND YIELD: 2.314%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.904%

EURO/USA DOLLAR CROSS:  1.1476 UP .0023

USA/JAPANESE YEN:112.62  up  0.183

USA DOLLAR INDEX: 95.13  DOWN 3  cent(s) 

The British pound at 5 pm: Great Britain Pound/USA: 1.3052 : down 45 POINTS FROM LAST NIGHT  

Canadian dollar: 1.2696 down 63 BASIS pts 

German 10 yr bond yield at 5 pm: +0.596%

END

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

TRADING IN GRAPH FORM FOR THE DAY

Bonds, Bullion, & Bitcoin Bid As S&P Suffers Lowest Volume Since 2005

 

Judging by the volume and volatility today, this is the market’s attitude…

Volume in the S&P 500 ETF (SPY) was its lowest non-holiday day since 2005!!

“Great” China data overnight seems to have triggered a sell-the-news moment in commodities and commodity currencies. China stocks also tumbled overnight after regulators warned of more deleveraging to come…This drove China Small Caps to their lowest since Jan 2015 (down 10% in the last week)…

US ‘soft’ data dipped today…

But the summer doldrums appear to be here in the states, as S&P, Dow, and Nasdaq barely budged all day (though Trannies and Small Caps did move)…FDX was the big weight on Trannies (as airlines outperformed)

VIX dropped to 9.71 intraday but could not ignite any momentum in stocks…and dared to lift back above 10 in the last hour

FANG Stocks dared to drop today… a dip to buy?

Retail was a big performer again (and Utes rallied) as the rest of the S&P sectors flatlined…Financials underperformed

Tesla had a tough day after Autopilot Crash headlines and Musk said the share price didn’t deserve to be this high… as the day wore on Musk tried to save the day – *MUSK: TESLA STOCK IS “LOW IF YOU BELIEVE IN TESLA’S FUTURE” but investors didn’t buy it… and then said that the driver didn’t blame autopilot.

Blue Apron was Amazon’d…

Bonds were bid today with Treasury yields bull-flattening (30Y -3-4bps on the day)… (Japan was closed)

Today was the biggest 2s30s flattening in a month.

The Dollar Index gained very modestly on the day (but this was still the best day for the dollar in two weeks)…

Commodity-currencies weakened notably (AUD/CAD), as did Cable…

WTI crude leaked lower today (despite a flat dollar and ‘strong’ China) but managed to cling to $46.00 as it settled…

Gold and Silver are up 5 of the last 6 days…

Finally, after an ugly weekend, Bitcoin bounced back notably today…from 1830 to 2150!

Seems like Goldman “nailed it” – They predicted bitcoin would see a big drop before running to another record high. In a note to clients sent out Sunday, Sheba Jafari, the head of technical strategy at Goldman Sachs, suggested that while bitcoin’s correction hadn’t run its course, the cryptocurrency was ultimately heading higher. Jafari wrote bitcoin was “still in a corrective 4th wave” that “shouldn’t go much further than 1,857.” Which is almost exactly where it bottomed; and bitcoin enthusiasts shouldn’t worry too much, according to Jafari, because from there she sees the fifth wave of the move taking the cryptocurrency to a record high.

“From current levels, this has a minimum target that goes out to 3,212 (if equal to the length of wave I),” Jafari wrote.

“There’s potential to extend as far as 3,915 (if 1.618 times the length of wave I). It just might take time to get there.”

end

The following is extremely important: the White House budgetary director Mick Mulvaney reveals that the budget deficit for 2017 and 2018 will be increased by $250 billion with approximately $100 billion added to this year and $150 billion next year. The big difference noted was due to less tax receipts as people are earning less and a mistake in calculating health care costs for the military. Also it includes the write off for student loans uncollectible as well as housing uncollectible loans. The deficit for 2017 will be $702 billion. 

With tax revenues running noticeably behind budget as well as the student loan miss, we may run into the debt ceiling problem much earlier than thought.

(courtesy zero hedge)

White House Reveals Budget Deficit Will Be $250 Billion Greater Due To “Mistake”

On Thursday, we first discussed that in its latest monthly budget report for the month of June, the US Treasury reported a massive outlier that has largely been ignored by the general press: in June total US government spending hit $429 billion, the biggest one-month outlay on record, and 33% higher than the $323 billion spent a year ago.

As explained,  the main reason for the outlier print was that outlays increased by roughly $60 billion in “other” items relative to baseline because the Treasury revised up its estimates of the subsidy cost of student loans, and to a lesser extent housing, it guarantees. And, as we further noted, based on the CBO revisions, “it appears that the deficit for the fiscal year, which has three months left, will be in the $650 billion to $700 billion range, if not even higher, mostly due to the surge in “subsidy costs of housing and student loans” guaranteed by the Treasury.”

This was troubling: as we stated “what the unexpected surge in government spending means is that quietly and mostly behind the scenes, the student debt bubble has begun to burst, and the Treasury is “provisioning” for it in real time, with all US taxpayers once again on the hook.

There was more: while outlays surged, revenue growth failed to keep up…

…which taken together led to our conclusion that “while many analysts had a deficit base case for fiscal 2017 at roughly $575BN (the year ends on Sept 30), the CBO recently revised its projection for the fiscal 2017 up by $134 billion to $693 billion. Most of the CBO revision reflects weaker than expected revenues, which means it will be even more surprised when it finds out what is going on with outlays.

As it turns out we were right, because just one day later, the Director of the Office of Management and Budget, Mick Mulvaney, warned that the budget deficit for Trump’s first two years in office will be nearly $250 billion higher than initially estimated “due to a shortfall in tax collections and a mistake in projecting military healthcare costs,” according to Reuters.

The problem first emerged in late May, when Mulvaney submitted the OMB’s first spending plan to Congress. It now appears that, as Thursday’s data confirmed, the projections were overly optimistic and on Friday Mulvaney said the deficit projected for the current fiscal year has increased by $99 billion, or 16.4 percent, to $702 billion, a miss which was virtually in line with what we calculated two days ago. It doesn’t stop there, however, and Mulvaney said that for 2018, the deficit will be $149 billion more than first expected, increasing by 33 percent to $589 billion.

In other words, a budgeting “mistake” just shy of $250 billion.

In an amusing twist, AP added that the White House kept its budget report to a bare-bones minimum and cast blame on “the failed policies of the previous administration” although whether this gambit of “blaming Obama” for budget errors, even as the president is all too happy to take credit for the market’s all time highs, will work remains to be seen.

As Reuters further adds, the figures come as the administration is facing “widespread doubts among economists and analysts that it can erase government deficits largely by boosting economic growth and changing laws like the Affordable Care Act. ACA reform is facing a difficult path in Congress, and the Congressional Budget Office on Thursday said the administration’s growth and deficit reduction plans were optimistic.”

Worse, it means that far from balancing the budget, as the Trump administration had hoped to do over the next decade, the budget will drift well wide of even the latest “optimistic” CBO projections, which saw Trump’s proposed budget cutting on the baseline number by a cumulative 33% over the next ten years.

And while spending took a back seat in Mulvaney’s letter, he blamed the bulk of the budget shortfall this year and next on lower-than-expected tax collections. Specifically, individual and corporate income taxes and other collections for this year are expected to be $116 billion less than the administration anticipated in May. Tax receipts in 2018 are expected to be $140 billion less than initially estimated.

We also touched on this two days ago when we said that “one theory explaining the shortfall in revenues reflects taxpayers delaying the recognition of income in 2016, anticipating tax cuts this year. That revenue should eventually be recovered” however as we cautioned, this may be an overly optimistic scenario, and the underlying reality may be that tax receipts are set for a structural decline as US workers and corporations earn less, and as a result, remit less in the form of taxes. According to the Mulvaney letter, it was this more adverse case, that is emerging as the likely explanation.

The OMG chief did touch on spending, which he said in 2017 would be $17 billion less than expected, and would have been even lower if not for the use of “erroneous outlay rates” used in estimating costs of health programs for the U.S. military, i.e., another mistake, and one which did not take into account the surge in subsidy costs for student loans, i.e., the marking-to-market of student loan writeoffs and discharges which the government will be forced to do over the coming years as the student loan bubble bursts.  Furthermore, costs for the defense health program will be $19 billion higher in 2017 and $9 billion higher in 2018 than initially expected. As a result, overall spending in 2018 will rise by $10 billion; our calculations suggest the final number will be substantially greater.

There is still a chance that the latest budget “mistake” will be rectified: the latest estimates are “based on existing law and do not include any proposed changes to health, welfare or other programs” however with virtually all policies proposed by Trump halted by the gridlock in Congress, it is unlikely that many, if any, proposed changes will be implemented.

END

We have two officials who have knowledge of the Clintons and the Clinton Foundation have been found dead:

i) Klaus Eberwein who had knowledge of the criminal activity inside the Clinton foundation

ii) Dmitri Noonan, the pilot of Janet Lynch whom Bill Clinton visited on the tarmac in Phoenix has was to give a Fox interview.

(courtesy MacSlavo/SHFTPlan)

First; Eberwein

Haiti Official Who Exposed The Clinton Foundation Is Found Dead

Authored by Mac Slavo via SHTFplan.com,

The mainstream media’s silence over Klaus Eberwein’s death is deafening.

Eberwein was a former Haitian government official who was expected to expose the extent of Clinton Foundation corruption and malpractice next week.

He has been found dead in Miami at the age of 50.

The circumstances surrounding Eberwein’s death are also nothing less than unpalatable. According to Miami-Dade’s medical examiner records supervisor, the official cause of death is “gunshot to the head.“ Eberwein’s death has been registered as “suicide” by the government. But not long before his death, he acknowledged that his life was in danger because he was outspoken on the criminal activities of the Clinton Foundation. 

Eberwein was a fierce critic of the Clinton Foundation’s activities in the Caribbean island, where he served as director general of the government’s economic development agency, Fonds d’assistance économique et social, for three years. “The Clinton Foundation, they are criminals, they are thieves, they are liars, they are a disgrace,” Eberwein said at a protest outside the Clinton Foundation headquarters in Manhattan last year. Eberwein was due to appear on Tuesday before the Haitian Senate Ethics and Anti-Corruption Commission where he was widely expected to testify that the Clinton Foundation misappropriated Haiti earthquake donations from international donors. But this “suicide” gets even more disturbing…

Eberwein was only 50-years-old and reportedly told acquaintances he feared for his life because of his fierce criticism of the Clinton Foundation.  His close friends and business partners were taken aback by the idea he may have committed suicide. “It’s really shocking,” said friend Gilbert Bailly. “We grew up together; he was like family.”

During and after his government tenure, Eberwein faced allegations of fraud and corruption on how the agency he headed administered funds. Among the issues was FAES’ oversight of the shoddy construction of several schools built after Haiti’s devastating Jan. 12, 2010, earthquake.  But, according to Eberwein, it was the Clinton Foundation who was deeply in the wrong – and he intended to testify and prove it on Tuesday.

According to Eberwein, a paltry 0.6 percent of donations granted by international donors to the Clinton Foundation with the express purpose of directly assisting Haitians actually ended up in the hands of Haitian organizations. A further 9.6 percent ended up with the Haitian government. The remaining 89.8 percent – or $5.4 billion – was funneled to non-Haitian organizations. –WND

Eberwein was expected to testify against the Clinton Foundation in court and ends up committing suicide shortly before.  Where have we heard this before?

Untimely deaths seem to follow the Clinton’s around, and this one especially is probably something – considering since the mainstream media is silent about this death.

end

Second: Dmitri Noonan

(Ourlandofthefree.com)

Running 'Cause I Can't Fly

Is there really any ‘there‘, there?

Source: Ben Garrison

Rand Paul states that as I and others have stated to you that the Republicans will not pass the health bill or any tax reform bill:
(courtesy zero hedge)

Rand Paul Says Senate Health-Care Bill Doesn’t Have The Votes

Senator Rand Paul took to the Sunday talk shows again this week todiscuss the fate of Senate Health care bill 2.0., and in news that will surprise almost no one who’s been following along, the conservative Kentucky senator said Sunday on Fox and Friends that he doesn’t think Senate Majority Leader Mitch McConnell has the votes to pass the healthcare bill in its current form, according to the Hill.

Senate Majority Leader Mitch McConnell released a new version of a healthcare plan earlier this week, which, among other things, incorporates demands from Senator Ted Cruz (R-TX) and Senator Mike Lee (R-UT) to allow insurers to sell low-cost, skimpier plans all in an effort to draw conservative support for the new bill.

Yet apparently the revisions weren’t enough to win over Paul, one of the senate’s most dedicated conservatives.

“I don’t think right now he does,” Paul, a vocal critic of the Senate’s healthcare plan, said on “Fox News Sunday.”

Paul, who said that dozens of Republicans won thanks to their campaigning against Obamacare, again floated the idea of first repealing, and later replacing it. There is significant resistance to that plan among other senators, including Republicans, though the White House has indicated President Trump is open to it.

“What I’ve suggested to the president … if this comes to an impasse, I think if the president jumps into the fray and says ‘Look guys, you promised to repeal it, let’s just repeal what we can agree to,” Paul said.

“And then we can continue to try to fix, replace or whatever has to happen afterwards,” he continued.

Republicans should try to repeal as many of the taxes, regulations and mandates as possible, Paul said.

Paul was later pressed on whether he would rather keep ObamaCare than pass the current GOP’s healthcare legislation. He said that the current system is “terrible.”

“The death spiral of ObamaCare is unwinding the whole system, and it will continue to unwind, but I don’t think Republicans should put their name on this key part of ObamaCare,” Paul said.

“And then we’re going to be blamed for the rest of the unwinding of ObamaCare. It’s a really bad political strategy and it’s not going to fix the problem.”

McConnell on Saturday announced Senate consideration of the healthcare legislation would be delayed while Sen. John McCain recovers from surgery, according to the Hill.

During a separate interview on CBS’s “Face the Nation,” Paul said he thinks more conservative Republicans will realize the Senate GOP’s healthcare bill does not actually repeal ObamaCare and drop their support for the bill the longer the proposal is out there. McConnell this week delayed the upcoming vote until Sen. John McCain recovers from surgery for a blood clot.

“I think the longer the bill’s out there, the more conservative Republicans are going to discover that it’s not repeal,” Paul said.

“And the more that everybody’s going to discover that it keeps the fundamental flaw of ObamaCare.”

When asked about McConnell’s decision to delay the vote while Sen. John McCain recovers from surgery, Paul said he didn’t think McCain’s presence would sway the vote one way or another.

Paul said the bill in its current form keeps insurance mandates that “cause the prices to rise, which chase young, healthy people out of the marketplace.”

“And leads to what people call adverse selection, where you have a sicker and sicker insurance pool and the premiums keep rising through the roof,” Paul said.

“And one of the amazing things to me is, for all the complaints of Republicans about ObamaCare, we keep that fundamental flaw.”

END

Soft data, NY Mfg Fed survey tumbles from 19.8 down to 9.8 but this time it is the”hope” that hits an 8 month low

(courtesy zero hedge)

New York Fed Manufacturing Survey Tumbles As ‘Hope’ Hits 8-Month Low

While all eyes focused on the ISM/PMI ‘soft’ survey data to support the fantasy of a strong economy (as ‘hard’ data crashes to two-year lows), The New York Fed just poured some cold water on the hype. Empire State Manufacturing survey tumbled in July with ‘hope’ plunging to its lowest since Nov 2016.

While the headline priont dropped (from 19.8 to 9.8, missing expectations of 15.0), it was the expectations index that really plunged (from 41.7 to 34.9 – lowest since Nov 2016)…

Almost across the baord weakness was seen in the underlying components – new orders, employment, inventories, shipments, and average workweek all plunged in July. Only pricesd paid rose modestly, perhaps signaling more stagflationary pressures looming.

As a reminder, soft data had been picking up recently (even as hard data crashed)…

Fool me once…

end

My goodness, we now get details on massive fraud on subprime auto loans orchestrated by Chrysler and Spanish giant bank: Santander

(courtesy zero hedge)

Auto Defaults Soar On The Back Of “Hasty Loans And, At Times, Outright Fraud”

In the years after its 2009 bankruptcy, Chrysler looked for a dedicated lender to help customers “finance their cars quickly”…which was code for a lender who could help the struggling OEM expand their market share by making extremely risky loans to subprime borrowers all while laying off the credit risk to unsuspecting pension funds.  As such, Chrysler ultimately picked Santander due to its expertise in “automated decisioning”which was code for the ability to advance credit without actually performing income verification tests on borrowers.

For a time, Chrysler and Santander enjoyed a perfect symbiotic relationship as it offered Santander an opportunity to aggressively expand in the U.S. subprime loan market, and Chrysler, the perennial third wheel among the “Big Three,” was able to target customers that were previously deemed untouchable by lenders.  Of course, as Bloomberg points out today, the problems surfaced almost from the start.

Many of them, detailed in the settlement between Santander and authorities in Delaware and Massachusetts, recall some of the excesses of the subprime housing era.

Attorneys general in both states alleged Santander enabled a group of “fraud dealers” to put buyers into cars they couldn’t afford, with loans it knew they couldn’t repay. It offloaded most of the debt, which often had rates over 15 percent, reselling them to yield-hungry ABS investors.

State authorities also said an internal Santander review in 2013 found that 10 out of 11 loan applications from a Massachusetts dealer contained inflated or unverifiable incomes(It’s not clear whether this particular case involved a Chrysler dealer.)

Santander kept originating the dealer’s loans anyway, even as they continued to default “at a high rate,” the authorities said.

Some dealerships even asked Santander to double-check customers’ incomes because they didn’t trust their own employees, the authorities said. They also said the lender didn’t always oblige because that would put it at a “competitive disadvantage.” At the time of the settlement, Santander said it was “totally committed to treating its customers fairly.”

All of which at least partially explains why auto defaults are soaring to post-crisis highs even as equity markets continue to shrug off bad data.

Of course, it wasn’t just a few dealers in Delaware and Massachusetts that caused auto defaults to soar.  As we pointed out back in May, the problems at Santander were pervasive with the lender apparently only verifying income on roughly 8% of the loans they subsequently dumped into ABS facilities and sold off pension and insurance companies. 

Santander Consumer USA Holdings Inc., one of the biggest subprime auto finance companies, verified income on just 8 percent of borrowers whose loans it recently bundled into bonds, according to Moody’s Investors Service.

The low level of due diligence on applicants compares with 64 percent for loans in a recent securitization sold by General Motors Financial Co.’s AmeriCredit unit. The lack of checks may be one factor in explaining higher loan losses experienced by Santander Consumer in bond deals that it has sold in recent years, Moody’s analysts Jody Shenn and Nick Monzillo wrote in a May 17 report, which reviewed data required of asset-backed bond issuers that’s recently been made available.

Limited verification of loan applicants’ stated incomes and employment “creates more uncertainty around whether borrowers will be able to afford their monthly payments, which becomes particularly important if they have poor credit records and risky loan terms,” the analysts wrote.

Of course, Wall Street’s voracious appetite for high-yield investments has kept the loans – and the subprime ABS bonds – coming.  You can’t possibly expect those overpaid, ivy league-educated financial analysts to be discerning when it comes to credit risk.

In recent years, lending practices in the subprime auto industry have come under increased scrutiny. Regulators and consumer advocates say it takes advantage of people with nowhere else to turn.

For investors, the allure of subprime car loans is clear: securities composed of such debt can offer yields as high as 5 percent. It might not seem like much, but in a world of ultra-low rates, that’s still more than triple the comparable yield for Treasuries. Of course, the market is still much smaller than the subprime-mortgage market which triggered the credit crisis, making a repeat unlikely. But the question now is whether that premium, which has dwindled as demand soared, is worth it.

“Investors seem to be ignoring the underlying risks,”said Peter Kaplan, a fund manager at Merganser Capital Management.

But, just like with the subprime mortgage bubble, we suspect the extra 50 bps of yield garnered from moving down the credit quality curve will ultimately prove to be slightly less than sufficient compensation.  Luckily, much of the losses will reside with America’s already bankrupt pension funds which means that taxpayer will get the opportunity to step in and fix everything.

end

Paul Brodsky  warns of these red flags. Brodsky is one smart cookie:

(courtesy Paul Brodsky/Macro-Allocation.com))

Brodsky: This Is A Red Flag Warning

Authored by Paul Brodsky via Macro-Allocation.com,

Red Flag Warning

Two identifiable dynamics may signal significant market shifts imminently:

1. The US debt ceiling will be debated soon and signs point towards a messy outcome.

2. Recent economic data have been weak, confirming our thesis that US economic growth is slowing and will not be reversed until a recession is acknowledged.

Debt Ceiling

Excessive debt has a way of catching up with people and institutions, and the first true test for the US government may be at hand. Congress was expected to raise the debt ceiling by October or else Treasury could not fund all the government’s programs and current obligations. Yet talk of Trump tax reform in 2016 may have given taxpayers incentive to defer their liabilities. As a result, Treasury received about 3 percent less in revenues than expected, accelerating the timetable to debate and raise the debt ceiling.Progress on raising the ceiling will unlikely be made in August, as Congress is in recess.

Meanwhile, the political atmosphere in the Republican Party has splintered further under President Trump. The conservative wing, which tried to block raising the ceiling in the past, has signaled it will again dig in its heels to force the government to begin balancing its budgetThough it caved in the past, the conservative caucus’ resolve should not be doubted this time, judging by its will and ability to so far block health care reform that does not absolutely repeal the Affordable Care Act.

Treasury Secretary Mnuchin has stated that the Department has options if Congress does not raise the ceiling, but has not been forthcoming with specifics. If a cash flow shortfall develops in the fourth quarter, principal and interest payments on Treasury debt would be prioritized so that the government would avoid default. Payments to government contractors, however, would be delayed. If the ceiling is not raised in due time, then government contracts would have to be re-structured and services pared back.

There would be meaningful economic consequences were the US government to become unable to pay its bills on time. The most palpable would be a reduction in output growth. Government spending accounts for about 21 percent of US GDP. Curtailing payments to government contractors would reduce GDP growth, which is already lethargic and decelerating (see Declining Economic Prospects, below).

Since the financial crisis, government outlays as a percent of GDP have fallen while real (inflation-adjusted) GDP growth has struggled to break above 2 percent. Real GDP growth of 1.6 percent in 2016 does not provide a comfortable cushion to protect economy growth from falling into negative territory.

The curtailment of government payments to contractors could also have an inflationary impact on the general price level of goods and services, as contractors seek to overcome diminished sales volume with higher sales margins.

But perhaps the most obvious and immediate impact of suspending government contracts and payments would likely be the optics associated with American global leadership and the US dollar’s hegemony, which have kept its exchange rate stronger than it would otherwise be. If Congress were to fail to raise the debt ceiling, the dollar would likely fall vis-à-vis the currencies of American trade partners, which would help US exporters and hurt US consumers, as prices of imported goods would rise in dollar terms.

We have argued that US (and global) output growth would continue to fall and ultimately contract into recession, and so our antennae has been sensitive to financial events that could potentially act as catalysts for a public shift in expectations – from continued slow growth to contraction. The impact of diminished US government spending would immediately raise the specter of recession among economists and policymakers, and would likely have an immediate impact on asset prices.

Declining Economic Prospects

As it stands, the US economy is not a model of strength and does not seem to have improving prospects, an economic outlook that is becoming increasingly difficult to challenge. June retail sales data released Friday disappointed consensus expectations meaningfully, dropping for the second month in a row. Economists often emphasize trends over specific data points; however, Friday’s report was very weak across the board. As consumption accounts for nearly 70 percent of GDP, estimates for second quarter growth are in the process of being revised lower. The economy grew only 1.4 percent in Q1. Previous estimates had been as high as 3 percent for Q2, which reflected excessive optimism in our view. One need only consider the accelerating shift in consumer behavior towards vastly more efficient online shopping and delivery to understand the forceful downward impact on GDP.

Meanwhile, an expected rebound from a dismal Industrial Production report also fell flat on Friday, as US industry only gained back half of its precipitous May decline. Year-over-year growth slowed for the first time since January. Lower lows and lower highs makes a worrying trend. Zero Hedge noted the irony: ““Industrial Production remains 1.4 percent below its Nov 2014 peak, but the Dow Jones “Industrial” Average is up 21 percent since then…””

Consumer prices are certainly not signaling demand growth – in fact, just the opposite. As graph 3 below shows, median goods and service prices are rising at the lowest rate since 2010 – 1.1 percent. This suggests that an imminent rise in overall inflation – the Fed’s economic rationalization for normalizing rates and its budding attempt to reduce the size of its balance sheet – is not being borne out by the data.

It is also not surprising that “soft data” measuring consumer health has begun to roll over. The Bloomberg Consumer Comfort Index has weakened in the last two weeks and the University of Michigan Consumer Confidence index has dropped to levels last seen prior to Trump’s election. The honeymoon may be over.

The latest economic data raise questions about the robustness of the US economy and the implied optimism expressed in equity markets. We have repeatedly questioned whether the Fed’s current rate hike regime was data driven, arguing it’s motivation was more related to maintaining a strong dollar to attract global capital in a weakening global economy. If the rate of inflation does not begin rising soon, the Fed will be left without a reasonable economics-based argument for hiking rates.

Impact on Assets

The Treasury bond market rallied on Friday following the slew of weak reports. As you may know, one of our highest conviction trades has been to own long duration Treasuries and to be short high yield credit in anticipation of a slowing US and global economy.

A messy debt ceiling debate (or worse, the failure to raise it) in combination with a weakening economy could be toxic for the US and global economies. Financial assets would likely adjust swiftly and substantially as the economic tide goes out. The dollar would also be prone to weaken abruptly in such a scenario and the Fed would find itself in a most precarious position: either continue its rate and quantitative tightening regime or reverse its normalization policy to be accommodative in the face of economic weakening. The Fed would have no choice but to respond to market weakness by trying to support asset prices, which support liability values, which, in turn, support bank capital values.

Gold and cryptocurrencies would likely benefit from dollar weakness against a backdrop of slower US and global output growth, especially if the Fed is shown to be ineffective in predicting economic outcomes and unable to protect against bad ones. The magnitude and duration of the rise in the exchange rates of alternative money forms vis-à-vis dollars and other fiat currencies would depend on whether the Fed and other central banks would be able to elicit confidence in savers and investors that the public float of the currencies they oversee will not be hyper-inflated. They succeeded from 2009 to the present.

We do not have an opinion as to how broad equity market indexes might react following an initial swoon. As we have seen, equity market benchmark pricing seems to have a life of its own when the public perceives underlying economic and financial stability. If the perception of stability is reinforced, then they might again begin a recovery phase, as happened from 2009 to the present. If not, then they would likely revert to pricing based off the bottom-up revenue and earnings of their components. We think alpha in the equity markets would be generated by businesses that produce positive real returns on capital.

end

Let us close with another dandy from David Stockman:

Stockman On Peak Bull: Fake Economy And Fake News

Authored by David Stockman via The Daily Reckoning,

The American economy has been mangled by decades of assault on capitalist prosperity.

Growth is now dying because the Federal Reserve’s hit on corporate America that has strip-mined its balance sheets to feed the halls of Wall Street. Trillions of dollars have been thrown into financial engineering (stock buybacks, M&A deals and leveraged recaps) while neglecting real investment and productivity in Flyover America.

The single most important thing that speculators and bulls on Wall Street should be looking at now is where we came from. If Wall Street understood this, they wouldn’t continue to expect the “born again” Reagan stimulus that has been imagined since Trump’s inauguration.

The extent of what actually happened during the Reagan era is also important to examine. In the eight years after Reagan’s tax bill got handed out, the national debt and defense budget exploded. We had more red ink during in that eight year period than during the first 190 years of the Republic – in fact it doubled.

The national debt, which you can see starting in 1980 went from around $800-900 billion to well over $3 trillion. The share of GDP soared during that period.

This is how the Reagan defense and tax cuts were funded. The move left the nation’s fiscal accounts in a dramatically different condition than when it started. Even Ronald Reagan, with his best of intentions, went in believing he was going to end up with less national debt and balanced budgets – though he ended up adding $1.8 trillion.

The system in Washington is not as logical, rational and methodical as some of these Wall Street analysts want to believe.

The fact is that what actually happened with the Reagan tax cuts were dramatically bigger than anything that Donald Trump proposed during the campaign or had been found in the one page tax outline from April. The bars on the chart above show, sequentially, the size of the tax cuts relative to GDP over the following decade because it took 10 years to become effective.

When it became fully effective, the tax cut seen in the chart were 6-6.2% of GDP by the end of the decade. It took the federal share of GDP in terms of revenue down from a projected 23% to about 16%.

That is far beyond what anybody from the administration is talking about today. If you were to put this tax cut in today’s economic scale, it would amount to a $1.2 trillion per year tax reduction, when fully effected.

Yes, that would be a jolt in the economy.

At the same time, it would add to the massive debt levels already, which is something we can’t afford.

The idea that if a tax bill was to be revenue neutral, or at the very least a version of what Trump talked about for a lowered corporate tax, the plan still doesn’t hold a candle to the wind.

Such a move would be less than 2% of GDP – and likely at a level of 1%. That is nothing like what actually happened during Reagan. What actually happened then was the tax cut was so massive, the deficit exploded to over $200 billion.

For a while that forced interest rates higher as the Treasury plunged into the bond market to try to finance the unintended deficit. Interest rates were being pushed above 10.5%. The Reagan miracle would have fallen on his face had the Fed allowed the market to clear and interest rates to balance supply and demand.

Then a new element came into the equation. Alan Greenspan was appointed Chairman of the Fed, exactly at the end of the chart above.

Greenspan then discovered the printing press in the basement of the Federal Reserve’s Eccles Building.  He began to heavily monetize the debt. That means when the Treasury was buying bonds with money from “out of thin air” that is then put into the account of the bond dealers who sell the debt to the Fed.

The move altered the supply and demand equation. Think of it as putting a fat thumb on a scale that attempts to save the country from withering deficits while running up yields. The policy crowded out of private investments and the free market activity that happened before a dishonest Federal Reserve stepped in again in 1987.

The Fed’s now reached a level of $4.5 trillion on its balance sheet. This has suppressed yields, prevented debt movement created from a short economic effect and created a feedback mechanism for politicians in the modern age.

Greenspan inaugurated the era of bubble finance and deferred the day of financial reckoning.

As you can see, actual real GDP over the eight years of Reagan’s term. The blue arrow at the top represents the average growth rate of GDP from the end of 1953 to the end of 1980.

That’s not a cycle or a short dislocation. That’s the trend rate of growth that was 3.5% and underneath it is there were eight years of the Reagan era and the average growth rate of GDP.

By that time that Paul Volcker took over at the Federal Reserve the U.S was facing double digit inflation, in the midst of a recession that was deemed unavoidable.  Real GDP in the U.S had declined but under the Fed’s guidance the economy bounced back after Volcker succeeded with having inflation purged from the system.

At the beginning of that recession, we were about 10% inflation. By the time Volcker got to the end of the cycle, the Consumer Price Index (CPI) was down to nearly 3-3.5%.

Politicians, too afraid to act, feared the bond vigilantes and a run up of interest rates. It caused the small business men, the big corporations and just about everybody else that they responded to complain that they were being crowded out of the market by Uncle Sam’s borrowing.

This evidence above shows the balance sheet of the Fed. At the bottom you can see that the U.S Federal Reserve had around $200 billion in spending when Greenspan took over. It then was driven increasingly higher until the great crisis in 2008. We then saw Fed Chair Bernanke and Yellen climb the mountain to the $4.5 trillion today.

Nominal GDP has now grown by 6 times the point then to extend from $3 trillion to $18 trillion. The total credit outstanding (debt on the US economy) has soared 13 times over, reaching from $5 trillion to $64 trillion.

Our overall economy has now reached a point of peak debt. The peak bull has now arrived and it is utterly unsafe to be in the casino.

This time when the elevator that hurtles into the downshaft after the break, the ride down will be even steeper and more violent. There will be no monetary catapult at the bottom to rescue those who stay on for the rebound.

Harvey.

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