August 15/ANOTHER RAID BY THE CROOKED BANKERS: GOLD DOWN $11.00 AND SILVER DOWN 44 CENTS/KIM AND TRUMP SILENT ON THE NORTH KOREAN POWDER KEG/CHINA REINS IN ITS SHADOW BANKING SECTOR AND WE SHOULD EXPECT BANK RUNS SHORTLY/CARNAGE IN THE USA RESTAURANT BUSINESS AND BRICKS AND MORTAR/

GOLD: $1273.70  DOWN $11.00

Silver: $16.70  DOWN 44 cent(s)

Closing access prices:

Gold $1271.90

silver: $16.64

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: $1281.93 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1274.90

PREMIUM FIRST FIX:  $5.02

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SECOND SHANGHAI GOLD FIX: $1279.81

NY GOLD PRICE AT THE EXACT SAME TIME: $1274.15

Premium of Shanghai 2nd fix/NY:$5.66

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1274.60

NY PRICING AT THE EXACT SAME TIME: $1274.80 

LONDON SECOND GOLD FIX  10 AM: $1282.30

NY PRICING AT THE EXACT SAME TIME. $1282.30 

For comex gold:

AUGUST/

NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 26 NOTICE(S) FOR  2600  OZ.

TOTAL NOTICES SO FAR: 4547 FOR 454700 OZ (14.14 TONNES) 

For silver:

AUGUST

 70 NOTICES FILED TODAY FOR

350,000  OZ/

Total number of notices filed so far this month: 900 for 4,500,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

end

 

Today, the bankers succeeded in their raid on both gold and silver. The open interest in silver continues to fall despite a rise in price (yesterday) and it sure looks like banker capitulation as they try to extricate themselves from their mess. It will be important to see how much open interest in both gold and silver evaporated.  It will get the numbers late tonight  (after 11 pm) and I will insert them between the xxx’s

 

 

xxxxxxxxx

preliminary OI for tonight 11 pm est
GOLD:  480,069 DOWN ONLY 74
SILVER: 188,266 DOWN ONLY 639
 xxxxxxx

Let us have a look at the data for today

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest SURPRISINGLY FELL AGAIN BY  573 contracts from 189,478 DOWN TO 188,905 DESPITE THE  RISE IN THE PRICE THAT SILVER TOOK WITH RESPECT TO YESTERDAY’S TRADING (UP 6 CENT(S) AND THE FAILED RAID. SIMPLE EXPLANATION SAME STORY AS YESTERDAY: THE BANKERS HAVE CAPITULATED….THEY ARE TRYING TO COVER THEIR SHORTFALL AT HIGHER AND HIGHER PRICES. THE BANKERS ARE HAVING EXTREME DIFFICULTY IN SUPPLYING ADDITIONAL SHORT PAPER AND LONGS CONTINUE TO ADVANCE TAKING ON THE BANKER SHORTS. THE BATTLE OF WATERLOO WILL BE FAST APPROACHING 

 In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e.  0.945 BILLION TO BE EXACT or 135% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 70 NOTICE(S) FOR 350,000  OZ OF SILVER

In gold, the open interest FELL by A TINY 772 WITH the FALL in price of gold ($3.10 GAIN YESTERDAY.)  The new OI for the gold complex rests at 480,143. A raid was called upon by the bankers and it failed.  The bankers supplied the short paper but just as many longs entered the arena as banker shorts covered.  Thus a small gain in open interest.

we had: 26 notice(s) filed upon for 2600 oz of gold.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD:

Today, no changes in gold inventory:

Inventory rests tonight: 791.01 tonnes

IN THE LAST 22 TRADING DAYS: GLD SHEDS 45.96 TONNES YET GOLD IS HIGHER BY $35.85 . 

SLV

Today: : WE NO CHANGES IN SILVER INVENTORY TONIGHT:

INVENTORY RESTS AT 335.825 MILLION OZ

end

.

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

1. Today, we had the open interest in silver FALL BY 573 contracts from 189,478 down to 188,905 (AND now A LITTLE FURTHER FROM THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787). THE FALL IN OPEN INTEREST WAS ACCOMPANIED BY A SMALL RISE IN PRICE AND FOR THE FIRST TIME WE ARE WITNESSING BANKER CAPITULATION.  BANKERS ARE LOATHE TO SUPPLY NEW SHORT PAPER AND THE LONGS CONTINUE TO ENTER THE ARENA PURCHASING WHATEVER SILVER THEY CAN AND WILLING TO TAKE ON OUR CROOKED BANKERS. 

(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 MONDAY night/TUESDAY morning: Shanghai closed UP 13.90 POINTS OR 0.43%   / /Hang Sang CLOSED DOWN 75.27 POINTS OR 0.28% The Nikkei closed UP 216.21 POINTS OR 1.11%/Australia’s all ordinaires CLOSED UP 0.43%/Chinese yuan (ONSHORE) closed DOWN at 6.6817/Oil DOWN to 47.37 dollars per barrel for WTI and 50.36 for Brent. Stocks in Europe OPENED DEEPLY IN THE GREEN , Offshore yuan trades  6.6930 yuan to the dollar vs 6.6817 for onshore yuan. NOW THE OFFSHORE IS WEAKER  TO THE ONSHORE YUAN/ ONSHORE YUAN WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH WEAKER TO THE DOLLAR AND THIS IS COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA IS NOT HAPPY TODAY 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA//USA

Mattis warns that the North Korean standoff could escalate into war very quickly

( zero hedge)

ii)Kim is briefed on the Guam attack plan but he then backs off his threat of an imminent missile launch

( zerohedge)

iii)We now have independent scientists who now claim that the payload was light and thus the trajectory of North Korea’s latest launch was higher and thus longer that it ought to be.  Basically these guys suggest that North Korea does not have the capability to hit the USA(courtesy zerohedge)

 

b) REPORT ON JAPAN

c) REPORT ON CHINA

 i)The USA is angry at China’s theft of intellectual property.  However they have put off tariffs for a year as Wilbur Ross is set to study the situation and report back.  China is threatening retaliation if the uSA damages trade ties

 

( zero hedge)

ii)Approximately 2 months ago China announced that it was going to rein in its shadow banking industry which totals 9 trillion USA or approximately equates to its GDP. Last night the POBC announced a 64 billion yuan  (9.58 billion USA) drop in outstanding loans. While it looks like the move by the POBC is bearing fruit, the contraction will mostly likely spur a run on all of its banks

( zerohedge)

4. EUROPEAN AFFAIRS

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)IRAN

It seems like  Trump is gearing up to end the nuclear agreement with Iran in October but there will be consequences with its European partners

 

(courtesy ISN Security Watch/OilPrice.com)

ii)To add to the mess globally, Iran will now send a warship flotilla to the West Atlantic as they will build their arsenal.  No doubt they are using the hostage money to build up their weapons.

( zerohedge)

6 .GLOBAL ISSUES

 

(courtesy zero hedge)

7. OIL ISSUES

i)As rig counts continue to rise, production seems to be rising in the Permian basin.  Will this push oil prices down to 40$ per barrel

( I. Slav/Oil Price.com)

ii)WTI lifts towards $48.00 after a huge draw

( zerohedge)

8. EMERGING MARKET

9.   PHYSICAL MARKETS

i)Overnight, bitcoin after reaching $4400 drops 500 to hit $3900

( zerohedge)

ii)James Turk seems to support my thinking that central bank suppression is about to break for silver

( James Turk/Kingworldnews)

iii)The geopolitical landscape, especially the Korean situation plus USA home grown problems is causing the dollar’s fall and this may precipitate into further declines
( Kimberley/South China Morning post, Hong Kong)

10. USA Stories

 

i)I have been highlighting to you the 3 major debt categories inside household debt for uSA citizens:

i) revolving credit (credit card debt)

ii) student loan debt

iii) auto loan debt

although mortgages represents the largest category for household debt, it is the above 3 that are signalling trouble for citizens. The Fed has now sounded the alarm bell on the above

( zerohedge)

ii)the USA restaurant business is now in a mess as people just shy away from eating out.  As far are discretionary spending is concerned, this seems to be the first to take a hit.

Can someone explain then how could the BLS report an increase in bartenders and waitresses with this going on?

 

( zero hedge)

iii)We have been also highlighting to you the plight of used car prices. The lower the prices for used car means trouble selling brand new cards.  They have to offer incentives in order to sell.

 

e.g. a brand new car selling for $40,000 as 0 dollars down and 80 months at 0 interest

real problems in the auto sector

( zerohedge)

iv) Retail sales rebound in July but it must be due to huge incentives offered by the auto dealers and dept stores

 

( zero hedge)

v)One analyst just does not believe those retail numbers today

( zerohedge)

vi)Take this with a grain of salt:  the New York Manufacturing Fed surges the highest in 3 years despite profit margins getting crushed

( NYFed Manufacturing Index/zerohedge)

vii)Bricks and Mortar operations continue on its death knell

( zerohedge)

 

viii)Dick’s CEO claims that the retail industry is now in panic mode as they cut prices to stay alive

 

( zerohedge)

ix)The CBO states that if Trump does not pay the Obamacare subsidies in 2018, then premiums will surge around 20% per year and worse: Trump will be blamed

 

( zerohedge)

Let us head over to the comex:

The total gold comex open interest FELL BY A tiny 772 CONTRACTS UP to an OI level of 480,143 WITH THE FALL IN THE PRICE OF GOLD ($3.10 with MONDAY’S trading). NEWBIE LONGS ENTERED THE ARENA ESPECIALLY NOTICING THE FAILED RAID IN YESTERDAY’S TRADING.  THE BANKERS CONTINUE TO SUPPLY THE SHORT PAPER. NEWBIE SPEC SHORTS ARE NOW COMPLETELY OUT OF THEIR POSITIONS. AS I MENTIONED YESTERDAY: “THE HUGE RISE IN OPEN INTEREST THESE PAST COUPLE OF DAYS WILL BE ADDITIONAL FODDER FOR THE CROOKS TO RAID IN THE COMING WEEK.”

We are now in the contract month of August and it is the 3rd best of the delivery months after December and June.

The active August contract LOST 187 contract(s) to stand at 1069 contracts. We had 34 notices filed on YESTERDAY so we LOST A HUGE 153 contracts or an additional 15,300 oz will NOT stand at the comex and 153 EFP’s were issued which entitles the long holder to a fiat bonus plus a futures contract and most probably that would be a London based forward.

The non active September contract month saw it’s OI LOSE 141 contracts DOWN to 1444.

The next active contract month is Oct and here we saw a GAIN of 520 contracts UP to 50,726.

The very big active December contract month saw it’s OI GAIN 1425 contracts UP to 373,043.

We had 26 notice(s) filed upon today for   2600 oz

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

LAST YEAR WE HAD A MONSTROUS 44.7 TONNES OF GOLD INITIALLY.  BY THE CONCLUSION OF THE AUGUST CONTRACT MONTH 44.358 TONNES STOOD FOR DELIVERY.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
And now for the wild silver comex results.  Total silver OI SURPRISINGLY FELL BY 573 CONTRACTS FROM 189,478  DOWN TO 188,905 DESPITE YESTERDAY’S 4 CENT GAIN.  THERE IS NO QUESTION THAT WE ARE HAVING CONTINUAL BANKER CAPITULATION AS THEIR HUGE SHORTS IN SILVER ARE CHOKING THEM TO DEATH. I HAVE WARNED YOU, THE NOOSE IS GETTING TIGHTER AROUND OUR FRIENDLY BANKERS’ NECKS. NO DOUBT THAT THE HUGE DELAY IN SILVER DELIVERIES (IN LONDON) ACCOMPANIED WITH THE HUGE GLOBAL DEMAND FOR SILVER IS FINALLY WEIGHING IN ON OUR CROOKS.  NEWBIE SPEC LONGS ENTERED THE SILVER COMPLEX YESTERDAY WITNESSING THE FAILED RAID. ON THE SUPPLY SIDE: THE BANKERS WERE JUST PLAIN FRIGHTENED TO SUPPLY THE NECESSARY PAPER. THUS A  DECLINE IN SILVER OI WITH A SMALL SIZED RISE IN PRICE.

We are now in the next big non active silver contract month of August and here the OI ROSE 21 contracts UP TO 140. We had 20 notice(s) filed yesterday.  Thus we GAINED A MONSTROUS 41 contract(s) or an additional 205,000 oz will stand for delivery in this non active month of August and AGAIN zero EFP’s were issued for the August contract month. Please note that in gold we continually see EFP’s issued but not in silver!!

The next active contract month is September (and the last active month until December) saw it’s OI fall by 2075 contacts down to 101,652.  The next non active contract month for silver after September is October and here the OI gained 16 contacts up TO 112. After October, the big active contract month is December and here the OI GAINED by 1,598 contracts UP to 76,332 contracts.

We had 70 notice(s) filed for 350,000 oz for the AUGUST 2017 contract

VOLUMES: for the gold comex

YESTERDAY’S confirmed volume was 249,054

volumes on gold are STILL HIGHER THAN NORMAL!

Initial standings for AUGUST

 August 15/2017.

Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
nil oz
Deposits to the Dealer Inventory in oz   oz
Deposits to the Customer Inventory, in oz 
nil oz
No of oz served (contracts) today
 
26 notice(s)
2600 OZ
No of oz to be served (notices)
1043 contracts
(104,300 oz)
Total monthly oz gold served (contracts) so far this month
4547 notices
454,700 oz
14.14 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   19,750.2  oz
Today we HAD  0 kilobar transaction(s)/ 
total dealer deposits: nil oz
We had nil dealer withdrawals:
total dealer withdrawals:  0 oz
we had 0  customer deposit(s):
total customer deposits;  nil  oz
We had 0 customer withdrawal(s)
total customer withdrawals;  nil oz
 we had 0 adjustment(s)
 
For AUGUST:

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 26  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.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
To calculate the initial total number of gold ounces standing for the AUGUST. contract month, we take the total number of notices filed so far for the month (4547) x 100 oz or 454,700 oz, to which we add the difference between the open interest for the front month of AUGUST (1069 contracts) minus the number of notices served upon today (26) x 100 oz per contract equals 559,000  oz, the number of ounces standing in this active month of AUGUST.
 
Thus the INITIAL standings for gold for the AUGUST contract month:
No of notices served so far (4547) x 100 oz  or ounces + {(1069)OI for the front month  minus the number of  notices served upon today (26) x 100 oz which equals 559,000 oz standing in this  active delivery month of AUGUST  (17.387 tonnes)
 we lost 153 contracts or an additional 15300 oz will not stand for delivery and 153 EFP’s for August were issued.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Total dealer inventory 758,510.492 or 23.59 tonnes  (dealer gold continues to disappear)
Total gold inventory (dealer and customer) = 8,632,167.752 or 268.49 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 268.49 tonnes for a  loss of 34  tonnes over that period.  Since August 8/2016 we have lost 85 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best.
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 12 MONTHS  85 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE AUGUST DELIVERY MONTH
 
August initial standings
 August 15 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
94,277.15 oz
Brinks
CNT
Deposits to the Dealer Inventory
nil  oz
Deposits to the Customer Inventory 
2943.700
oz
CNT
No of oz served today (contracts)
70 CONTRACT(S)
(350,000 OZ)
No of oz to be served (notices)
70 contracts
( 350,000 oz)
Total monthly oz silver served (contracts) 900 contracts (4,500,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  NIL oz
Total accumulative withdrawal  of silver from the Customer inventory this month 2,150,413.6 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil   oz
we had 0 dealer withdrawals:
total dealer withdrawals: NIL oz
we had 3 customer withdrawal(s):
ii) out of Brinks: 1,000.000 oz ???
ii) out of Delaware:  3038.483 oz
iii) out of Scotia: 741,685.48 oz
TOTAL CUSTOMER WITHDRAWALS:  745,723.963 oz
We had 2 Customer deposit(s):
 i) Into Brinks:  235,300.328 oz
ii) Into Scotia:  642,090.95
***deposits into JPMorgan have 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: 877,391.270 oz
 
 we had 0 adjustment(s)
The total number of notices filed today for the AUGUST. contract month is represented by 70 contract(s) for 350,000 oz. To calculate the number of silver ounces that will stand for delivery in AUGUST., we take the total number of notices filed for the month so far at 900 x 5,000 oz  = 4,500,000 oz to which we add the difference between the open interest for the front month of AUGUST (140) and the number of notices served upon today (70) x 5000 oz equals the number of ounces standing
 

 

.
 
Thus the INITIAL standings for silver for the AUGUST contract month:  900 (notices served so far)x 5000 oz  + OI for front month of AUGUST(140 ) -number of notices served upon today (70)x 5000 oz  equals  4,850,000 oz  of silver standing for the AUGUST contract month. This is extremely high for a non active delivery month. Silver is being constantly demanded at the silver comex and we witness again the amount of silver increases daily right from the get go.
We GAINED ANOTHER 21 contracts or an additional 205,000 oz wishes to stand for delivery in this non active month of August and  0 EFP’s were issued for the silver August month.
At this point in the delivery cycle last year on August 15/2016 we had 108,939 contracts standing vs this yr at 101,974.
Last yr on the first day notice for the Sept silver contract we had 17.070 million oz stand for delivery.
By month end:  16.075 million oz/
 
 
 
 
Volumes: for silver comex
YESTERDAY’s  confirmed volume was 81,192 contracts which is OUT OF THIS WORLD
FRIDAY’S CONFIRMED VOLUME OF 108 994 CONTRACTS WHICH EQUATES TO 405 MILLION OZ OF SILVER OR 58% 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:  38.348 million (close to record low inventory  
Total number of dealer and customer silver:   216.113 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 7.4 percent to NAV usa funds and Negative 7.7% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.4%
Percentage of fund in silver:37.6%
cash .+0.0%( August 15/2017) 
2. Sprott silver fund (PSLV): STOCK   NAV FALLS TO +0.53% (August 15/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES TO -0.50% to NAV  (August 15/2017 )
Note: Sprott silver trust back  into POSITIVE territory at +0.53/Sprott physical gold trust is back into NEGATIVE/ territory at -0.50%/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

August 15/no change in gold inventory at the GLD/inventory rests at 791.01 tonnes

August 14/this is good!!: a gain of 4.14 tonnes of gold into the GLD inventory/the removal of GLD gone to the east has now stopped probably because there is no physical to send/inventory rests at 791.01 tonnes

August 11/no change in gold inventory/Inventory rests at 786.87 tonnes

August 7/no changes in gold inventory at the GLD/Inventory rests at 787.14 tonnes

AUGUST 4/ANOTHER LOSS OF 4.48 TONNES OF GOLD FROM GLD INVENTORY/INVENTORY RESTS AT 787.14 TONNES.THIS IS A HUGE CRIME SCENE!!

August 3/no change in gold inventory at the GLD/Inventory rests at 791.88 tonnes

August 2/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 791.88 TONNES

Aug 1/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 791.88 TONNES

July 31/NO CHANGES AT THE GLD/INVENTORY RESTS AT 791.88 TONNES

July 28/ANOTHER MASSIVE WITHDRAWAL OF 3.54 TONNES OF GOLD WITH GOLD UP $9.15/INVENTORY RESTS AT 791.88 TONNES

July 27/LATE LAST NIGHT, A HUGE WITHDRAWAL OF 5.03 TONNES WITH GOLD UP $10.45 ON THE DAY/INVENTORY RESTS AT 795.42 TONNES

July 26/NO CHANGE IN GLD INVENTORY WITH GOLD DOWN $2.55/INVENTORY RESTS AT 800.45 TONNES

July 25/A MASSIVE 9.17 TONNES OF GOLD WITHDRAWN FROM THE GLD/INVENTORY RESTS AT 800.45 TONNES

July 24/A massive 9.62 tonnes withdrawal and yet the price remains constant (down only 25 cents)..inventory drops to 809.62 tonnes

July 21/with gold up $8.75 again, we had no changes in gold inventory at the GLD/inventory rests at 816.13 tonnes

July 20/WITH GOLD UP AGAIN TODAY ($3.50) WE HAD NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 816.13 TONNES

jULY 19/STRANGE!! AGAIN WITH GOLD UP $0.50 WE HAD ANOTHER HUGE 5.32 TONNES WITHDRAWAL FROM THE GLD/INVENTORY RESTS AT 816.13 TONNES  THIS GOLD IS HEADING TO SHANGHAI

July 18/STRANGE AGAIN/WITH GOLD UP $7.50 WE HAD ANOTHER HUGE 5.62 TONNES WITHDRAWAL FROM THE GLD/INVENTORY RESTS AT 821.45 TONNES

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
August 15 /2017/ Inventory rests tonight at 791.01 tonnes
*IN LAST 213 TRADING DAYS: 158.87 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 151 TRADING DAYS: A NET  1.44 TONNES HAVE NOW BEEN WITHDRAWN FROM  GLD INVENTORY.
*FROM FEB 1/2017: A NET  18.25 TONNES HAVE BEEN WITHDRAWN.

end

Now the SLV Inventory

August 15/no change in silver inventory at the SLV/Inventory rests at 335.825 million oz.

August 14./no change in silver inventory/inventory rests at 335.825 million/

August 11/no change in silver inventory tonight.  However we lost 3,781 million oz from Tuesday through Thursday. Inventory rests at 335.825 million oz/

August 7/no change in silver inventory at the SLV/Inventory rests at 339.606 million oz

AUGUST 4/A WITHDRAWAL OF 945,000 OZ/INVENTORY RESTS AT 339.606 MILLION OZ

August 3/A WITHDRAWAL OF 1,181,000 OZ FROM THE SLV/INVENTOR RESTS AT 340.551 MILLION OZ/

August 2/NO CHANGES IN SILVER INVENTORY AT THE SLV

INVENTORY RESTS AT 341.732 MILLION OZ/

August 1/A HUGE WITHDRAWAL OF 945,000 OZ/INVENTORY RESTS AT 341.732 MILLION OZ/

July 31/no change in silver inventory at the SLV/inventory rests at 342.677 million oz

July 28/ A HUGE WITHDRAWAL OF 1.15 MILLION OZ OF SILVER LEAVES THE SLV DESPITE SILVER BEING UP 11 CENTS TODAY/INVENTORY RESTS AT  342.677 MILLION OZ

July 27/NO CHANGE IN SILVER INVENTORY/INVENTORY RESTS AT 343.812 MILLION OZ WITH SILVER UP 13 CENTS TODAY.

July 26/NO CHANGE IN SILVER INVENTORY/INVENTORY RESTS AT 343.812 MILLION OZ

July 25/A MASSIVE 3.309 MILLION OZ OF INVENTORY WITHDRAWN FROM THE SLV DESPITE SILVER’S 10 CENT RISE TODAY.

July 24/no change in silver inventory despite its 4 cent drop/inventory remains at 347.121 million oz

July 21/STRANGE! WITH SILVER UP AGAIN TODAY (11 CENTS), NO CHANGE IN SILVER INVENTORY AT THE SLV/inventory 347.121 million oz/

July 20/STRANGE! WITH SILVER UP AGAIN TODAY, THE SLV INVENTORY LOWERS BY 945,000 OZ/INVENTORY RESTS AT 347.121 MILLION OZ/

July 19/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 348.066 MILLION OZ

July 18/a huge 946,000 oz withdrawal from the SLV despite silver’s 16 cent gain!

Inventory rests at 348.066 million oz

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

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.

August 15.2017:

 Inventory 335.825  million oz
end
  • 6 Month MM GOFO

    Indicative gold forward offer rate for a 6 month duration

    + 1.32%
  • 12 Month MM GOFO
    + 1.48%
  • 30 day trend

end

Major gold/silver trading/commentaries for TUESDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Diversify Into Gold Urges Dalio on Linkedin – “Militaristic Leaders Playing Chicken Risks Hellacious War

– Don’t let “traditional biases” stop you from diversifying into gold – Dalio on Linkedin
– “Risks are now rising and do not appear appropriately priced in” warns founder of world’s largest hedge fund
– Geo-political risk from North Korea & “risk of hellacious war”
– Risk that U.S. debt ceiling not raised; technical US default
– Safe haven gold likely to benefit by more than dollar, treasuries
– Investors should allocate at least 5% to 10% of assets to gold
– “If you don’t have 5-10% of your assets in gold as a hedge, we’d suggest that you relook at this”
– “If you do have an excellent analysis of why you shouldn’t have such an allocation to gold, we’d appreciate you sharing it with us …”

Image courtesy of Quotefancy


by Ray Dalio via Linkedin

There are returns, and there are risks. We think of them individually, and then we combine them into a portfolio.

We think of returns and opportunities as coming from those things we’d bet on, and we think of risks as the adverse market consequences of us being wrong due to our being out of balance. We start with our balanced beta portfolio—i.e., that portfolio that would most certainly fund our intended uses of the money.

Everyone should have their own based on their own projected uses of money, though more generally, it’s our All Weather portfolio.

We then create a balanced portfolio of opportunity/alpha bets based on what we think is likely to happen. We then combine them.

We bet on the events/outcomes that we think we have an edge in understanding. For events/outcomes where we don’t think we have a particular edge—e.g., political events—we aim to construct our portfolio to be relatively neutral or balanced to those risks.

Risk and Volatility

As a rule, periods of lower risk/volatility tend to lead to periods of greater risk/volatility. That is reflected in our aggregate market volatility gauge (see below), and markets are pricing in volatility to remain low next year too.

As a related rule, people adapt to the circumstances they have experienced and are then surprised when the future is different than the past.

In other words, most people are inclined to assume that the circumstances they have recently encountered will persist, which leads them to change what they are doing to be consistent with that recently experienced environment.

For example, low-volatility periods in which credit is readily available tend to lead people to assume that it’s safe to borrow more, which leads them to lever up their positions, which contributes to greater volatility and hurts them when things change.

That appears to be the case now—i.e., prospective risks are now rising and do not appear appropriately priced in because of a) a backward looking at risk and b) corporate leveraging up has been high because interest rates are low relative to many companies’ projected ROEs and because past risks have been low.

The emerging risks appear more political than economic, which makes them especially challenging to price in.

Most immediately, during the calm of the August vacation season, we are seeing

1) two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war, and

2) the odds of Congress failing to raise the debt ceiling (leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system) rising.

It’s hard to bet on such things, one way or another, so the best that one can do is be neutral to such possibilities.

When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble. We know that we don’t have a unique insight that we’d choose to bet on.

Most importantly, we aim to stay liquid, stay diversified, and not be overly exposed to any particular economic outcomes.

We like to hedge our bets, though we are never completely hedged. We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit, so if you don’t have 5-10% of your assets in gold as a hedge, we’d suggest that you relook at this. 

Don’t let traditional biases, rather than an excellent analysis, stand in the way of you doing this (and if you do have an excellent analysis of why you shouldn’t have such an allocation to gold, we’d appreciate you sharing it with us).

Full article by Dalio on Linkedin here
Follow GoldCore on Linkedin here

News and Commentary

Gold inches lower as N.Korea tensions ease (Reuters.com)

Asian markets bounce back as North Korean threat recedes (MarketWatch.com)

Paulson And Other Hedge Funds Rewarded as Angst Fuels Gold (Bloomberg.com)

Bitcoin Surges Past $4,000 on Speed Breakthrough (Bloomberg.com)

Stocks Surge, Havens Retreat as Korea Fears Wane: Markets Wrap (Bloomberg.com)

 Source: Bloomberg.com

S&P 500’s Biggest Pension Plans Face $382 Billion Funding Gap (Bloomberg.com)

HONG KONG IS HAVING ANOTHER GO AT GOLD TRADING – HERE’S WHY IT WILL SUCCEED THIS TIME (SCMP.com)

Collecting metal: the inner and outer worlds of jewelry, coins, bullion bits, and odd shiny things (UneNumerated)

Black Sky Hazards: Feds To Wargame “Widespread Power Outages” And “Cascading Infrastructure Failures” (ZeroHedge.com)

This Gold Coin Built the Smithsonian (SmithSonIanMag.com)

Gold Prices (LBMA AM)

15 Aug: USD 1,274.60, GBP 986.92 & EUR 1,084.05 per ounce
14 Aug: USD 1,281.10, GBP 987.34 & EUR 1,085.48 per ounce
11 Aug: USD 1,288.30, GBP 993.67 & EUR 1,096.47 per ounce
10 Aug: USD 1,278.90, GBP 985.39 & EUR 1,091.67 per ounce
09 Aug: USD 1,267.95, GBP 974.80 & EUR 1,079.79 per ounce
08 Aug: USD 1,261.45, GBP 967.78 & EUR 1,068.20 per ounce
07 Aug: USD 1,257.55, GBP 963.41 & EUR 1,065.90 per ounce

Silver Prices (LBMA)

15 Aug: USD 16.89, GBP 13.12 & EUR 14.38 per ounce
14 Aug: USD 16.97, GBP 13.09 & EUR 14.39 per ounce
11 Aug: USD 17.09, GBP 13.18 & EUR 14.53 per ounce
10 Aug: USD 17.08, GBP 13.14 & EUR 14.57 per ounce
09 Aug: USD 16.59, GBP 12.76 & EUR 14.14 per ounce
08 Aug: USD 16.39, GBP 12.57 & EUR 13.87 per ounce
07 Aug: USD 16.13, GBP 12.35 & EUR 13.67 per ounce


Recent Market Updates

– Gold Has Yet Another Purpose – Help Fight Cancer
– Gold Up 2%, Silver 5% In Week – Gundlach, Gartman and Dalio Positive On Gold
– Great Disaster Looms as Technology Disrupts White Collar Workers
– Gold Sees Safe Haven Gains On Trump “Fire and Fury” Threat
– Silver Mining Production Plummets 27% At Top Four Silver Miners
– Gold Consolidates On 2.5% Gain In July After Dollar Has 5th Monthly Decline
– Gold Coins and Bars See Demand Rise of 11% in H2, 2017
– Greenspan Warns Stagflation Like 1970s “Not Good For Asset Prices”
– What Investors Can Learn From the Japanese Art of Kintsukuroi
– Bitcoin, ICO Risk Versus Immutable Gold and Silver
– This Is Why Shrinkflation Is Making You Poor
– Gold A Good Store Of Value – Protect From $217 Trillion Global Debt Bubble
– Why Surging UK Household Debt Will Cause The Next Crisis

END

Overnight, bitcoin after reaching $4400 drops 500 to hit $3900

(courtesy zerohedge)

Crypto-Carnage – Bitcoin Is Down $500 From Overnight Highs

Cryptocurrencies are crashing this morning…

After a 70% surge following the fork to a new record high at $4400, Bitcoin is getting battered this morning…

 

Dow $500 from overnight highs…

 

As a reminder, Goldman Sachs’ chief technician Sheba Jafari increased her forecast for Bitcoin to over $4800… but warned that the virtual currency could then drop to $2221…

Now that the market is getting closer to reaching this level, it’s going to be important to take note of any/all signs of trend exhaustion.

 

There is of note a 2.618 extension which runs as far as $4,827.

 

 

Once a full 5-wave sequence is in place, the market should in theory enter a corrective phase.

 

This can last at least one third of the time it took to complete the preceding advance and retrace at least 38.2% of the entire move.

 

From current levels, that would measure out to ~2,221.

end

 

James Turk seems to support my thinking that central bank suppression is about to break for silver

(courtesy James Turk/Kingworldnews)

Silver is about to break free of central bank suppression, Turk tells KWN

 Section: 

8:52p ET Monday, August 14 2017

Dear Friend of GATA and Gold:

Silver seems about to break free of the long-term suppression of monetary metals prices by central banks, GoldMoney founder and GATA consultant James Turk tells King World News tonight. Turk produces some price charts in explanation. The interview is excerpted at KWN here:

http://kingworldnews.com/james-turk-this-catalyst-will-trigger-the-price…

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

END
The geopolitical landscape, especially the Korean situation plus USA home grown problems is causing the dollar’s fall and this may precipitate into further declines
(courtesy Kimberley/South China Morning post, Hong Kong)

US dollar’s fall could become a self-fulfilling prophecy

 Section: 

By Neal Kimberley
South China Morning Post, Hong Kong
Tuesday, August 15, 2017

Evidence of rising Asian central bank reserves could be the catalyst for another leg down in the US dollar. The currency markets may rationally conclude and react to the notion that such accruals will be accompanied by reserve diversification, as the central banks sell some of their new holdings of the greenback for other major currencies.

Of course, geopolitical concerns could intrude on market sentiment but even then investors make rational, if hurried, decisions. As rising tensions in the Korean peninsula re-emerged last week, the currency markets were quick to look for safe havens, selling US dollars against, among others, the Swiss franc.

But those decisions are by definition reactive whereas for most of 2017 the currency markets have been pro-active in selling the US dollar, and as the greenback has fallen, Asian central bank reserves have been increasing. …

… For the remainder of the report:

http://www.scmp.com/business/article/2106812/us-dollars-fall-could-becom…

END


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

 
 

1 Chinese yuan vs USA dollar/yuan WEAKER 6.6817 (DEVALUATION SOUTHBOUND   /OFFSHORE YUAN MOVES WEAKER TO ONSHORE AT   6.6930/ Shanghai bourse CLOSED UP 13.90 POINTS OR 0.43%  / HANG SANG CLOSED DOWN 75.27 POINTS OR 0.28% 

2. Nikkei closed UP 216.21 POINTS OR 1.11%    /USA: YEN RISES TO 110.40

3. Europe stocks OPENED DEEPLY IN THE GREEN     ( /USA dollar index RISES TO  93.73/Euro DOWN to 1.1757

3b Japan 10 year bond yield: FALLS  TO  +.050%/ 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::  47.39 and Brent: 50.36

3f Gold DOWN/Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO  +.444%/Italian 10 yr bond yield UP  to 2.072%    

3j Greek 10 year bond yield FALLS to  : 5.53???  

3k Gold at $1274.20  silver at:16.86 (8:15 am est)   SILVER BELOW  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 2/100 in  roubles/dollar) 59.92-

3m oil into the 47 dollar handle for WTI and 50 handle for Brent/

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

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 110.40 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  0.9710 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1423 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 RISING to  +0.444%

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 2.250% early this morning. Thirty year rate  at 2.8347% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

VIX Tumbles, Global Stocks And Dollar Rally As Korea Tensions Ease

Overnight bulletin summary

  • Global equities trade higher amid easing geopolitical tensions
  • Pound tumbles on weaker than expected inflation data
  • Today’s calendar includes US retail sales, Empire Fed, import prices, NAHB, and API crude oil inventories

Global stocks and US futures are up for a second day, with the VIX sliding 0.65 vols to 11.68 (-5.2%) and haven assets dropping, after a KCNA report report suggested North Korea had pulled back its threat to attack Guam after days of increasingly bellicose “fire and fury” rhetoric with President Trump, and hours after China took its toughest steps to support U.N. sanctions against Pyongyang, while the possibility of a Sino-American trade war was played down. The report, from KCNA on Tuesday, said Kim praised the military for drawing up a “careful plan” to fire missiles toward Guam. Kim was cited by KCNA saying he would watch the U.S.’s conduct “a little more.”

“There is a more relaxed attitude being taken towards the Korean situation in markets. With the report North Korea has put its plans on hold, there is a sense of stepping back from the brink,” Rabobank analyst Lyn Graham-Taylor said.

Notably, risk aversion has not totally gone away, as Defence secretary Mattis also warned earlier that if NK fired missiles at Guam, it would be “game on” and “could escalate into war quickly”. That said, he was vague about what would happen if missiles splashed into the sea near Guam.

The result was a continuation of yesterday’s “risk-on” sentiment: the USD bounced, the USDJPY spiked as hugh as 110.45, while the pound tumbled on poor UK inflation data, while the EUR was dragged lower on what is a holiday across continental Europe. However, as some trading desks warn, this return of risk appetite may be temporary as the US and South Korea have joint military exercises scheduled for next week, which could spark things off again. For now however, traditional haven assets including gold and core bonds across Europe and TSYs slumped.

Global stocks were roughly unchanged, with the MSCI All-Country World Index declined less than 0.05 percent, while Europe was broadly if modestly higher with the Stoxx Europe 600 Index up 0.1%. Germany’s DAX Index jumped 0.3 percent, as did the U.K.’s FTSE 100 Index. S&P Futures are up 0.2%.

In Asia, Japan’s Topix index finished the day 1.1% higher driven by the sharp drop in the Yen, and Australia’s S&P/ASX 200 Index gained 0.5% at the close. Hong Kong’s Hang Seng index dropped 0.3% following a bout of last hour selling, even as the Shanghai Composite Index rose 0.4%. Markets in South Korea and India are closed Tuesday for holidays. The yen fell 0.7% to 110.41 per dollar, the biggest drop in three weeks.

While the overnight session was generally quiet, aside from the previously noted UK inflation miss which sent sterling tumbling, another indication that Europe may be rolling over was German Q2 GDP data, which missed at 0.6%, below the 0.7% expected, as imports outpaced exports following the recent surge in the Euro.

After hawkish comments from Dudley and UST yields doing well, there is a broad USD bid, even though South Korean markets was closed for national holiday. As noted above, the yen dropped on easing of N.Korean tensions, while the pound weakened after U.K. inflation data missed estimates, and Sweden’s krona gained as headline inflation reached the highest level since 2011.

“We have North Korea saying they will wait, and Trump not saying anything at all, compared to his past promise of ‘fire and fury,'” said Mitsuo Imaizumi, chief FX strategist at Daiwa Securities.  “That added up to good news for the dollar, bad news for the yen,” he said.

Also overnight, China’s credit growth came in higher than expected even as broad M2 plunged to a new all time low of 9.2% (exp. 9.4%): new yuan loans printed 825bn vs 800bn expected while aggregate financing came in at 1220bn vs 1000bn. However both measures of credit growth decreased sharply from June, where aggregate financing was 1776bn and new yuan loans increasing 1540bn.

In rates, the yield on 10-year Treasuries advanced three basis points to 2.25 percent.  Germany’s 10-year yield gained two basis points to 0.43 percent.  Britain’s 10-year yield climbed three basis points to 1.01 percent.

Gold fell 0.6 percent to $1,274 an ounce. Oil prices steadied somewhat after falling more than 2.5 percent on Monday to its lowest in about three weeks on the strength of the dollar and reduced refining in China. Brent was last down 2 cents at $50.71 a barrel.

Market Snapshot

  • S&P 500 futures up 0.2% to 2,467.25
  • U.S. 10Y Treasury yield: +3bps to 2.25%
  • EUR/USD: -0.2% to 1.1758
  • USD/JPY: +0.7% at 110.40
  • GBP/USD: -0.5% at 1.2901
  • STOXX Europe 600 up 0.07% to 376.41
  • MSCI Asia up 0.2% to 158.72
  • MSCI Asia ex Japan up 0.07% to 520.98
  • Nikkei up 1.1% to 19,753.31
  • Topix up 1.1% to 1,616.21
  • Hang Seng Index down 0.3% to 27,174.96
  • Shanghai Composite up 0.4% to 3,251.26
  • Sensex up 0.8% to 31,449.03
  • Australia S&P/ASX 200 up 0.5% to 5,757.48
  • Kospi up 0.6% to 2,334.22
  • German 10Y yield rose 1.5 bps to 0.421%
  • Euro down 0.2% to $1.1752
  • Italian 10Y yield fell 0.9 bps to 1.73%
  • Spanish 10Y yield rose 0.2 bps to 1.44%
  • Brent futures down 0.1% to $50.68/bbl
  • Gold spot down 0.6% to $1,274.68
  • U.S. Dollar Index up 0.3% to 93.68

Top Overnight News

  • South Korean President Moon Jae-in said that any military action against Kim Jong Un’s regime requires his nation’s approval, and vowed to prevent war at all costs
  • EU says frictionless trade with the U.K. is not possible outside the Single Market and Customs Union
  • U.K. Brexit Secretary David Davis says he won’t give a figure for Britain’s divorce bill by October
  • Germany’s top judges have put the legality of the European Central Bank’s 2.3 trillion euros ($2.7 trillion) bond-buying program in doubt in a ruling that asks the European Court of Justice for guidance in five cases targeting the policy
  • Intel CEO Becomes Third Chief to Quit Trump Business Council
  • Trump Denounces White Supremacists Amid Backlash to Response
  • Mattis Warns It’s ‘Game On’ If North Korea Strikes Guam
  • U.K. Seeks Interim Customs Union With EU to Smooth Brexit
  • New McDonald’s China Owners to Speed Up Expansion to Catch KFC
  • Danone Is Said to Be Targeted by Activist Investor Corvex
  • Transocean Agrees to Acquire Songa Offshore for $1.2 Billion
  • Wrangler Jeans Owner Will Buy Dickies Maker for $820 Million
  • WebMD Sued by Investor Seeking to Block $2.8 Bln KKR Sale
  • Paulson And Other Hedge Funds Rewarded as Angst Fuels Gold
  • Teva Cedes Spot as Israel’s Biggest Firm in Blow to Prestige
  • ECB’s QE Questioned by German Judges Asking for EU Court Review

Asian stock markets traded higher following the gains in US where the NASDAQ led the advances on continued tech outperformance, while global sentiment was also lifted as geopolitical concerns abated after comments from North Korean leader Kim that they will not strike Guam yet. ASX 200 (+0.47%) and Nikkei 225 (+1.11%) were boosted as tensions de-escalated, with markets in Japan the biggest gainer on JPY weakness. KOSPI is shut for holiday while Hang Seng (-0.28%) and Shanghai Comp (+0.43%) for the majority of the session conformed to the upbeat tone after the PBoC released around CNY 400b1n in MLF loans.

Top Asian News

  • South Korea to Prevent War at All Costs, President Moon Says
  • Hedge Fund Betting on 70% Yuan Devaluation Digs In Amid Gain
  • China Money Supply Growth Slips Again as Leverage Crunch Goes On
  • China’s Economic Speed Bump May Reignite Bond Default Wave
  • Fund Managers’ Positioning Remains Pro-Risk, BofAML Survey Shows
  • Unmarried Indonesians Happier Than Those in Wedlock, Index Shows
  • Modi Says More Indians Paying Tax After Cash Ban, GST Regime

European equities have started the session off strongly (Eurostoxx +0.3%), as geopolitical tensions appear to have abated from the escalation seen last week. More specifically, North Korean leader Kim Jong Un discussed the Guam strike plan with officers and said they will not attack Guam yet, but could have a change of mind based on US actions. On a sector specific basis, energy and material names are the only sectors in the red with WTI back below USD 48.00 and gold losing ground amid the return of risk appetite. To the upside, Danone (+1.8%) are one of the notable gainers in Europe amid Corvex building a USD 400mln stake in the company. In fixed income, price action has largely been dictated by the broader risk-sentiment in the market in what is a week particularly void of EU sovereign supply amid summer-thinned trading conditions. More specifically, core paper is trading circa higher by 1.5bps with peripheral spreads higher by between 0.5-1.0bps. Note: the German Constitutional Court has declined to hear challenge of ECB’s QE programme and will refer case to the European Court of Justice

Top European News

  • German Economy Extends Growth Spurt as Nation Heads for Election
  • Merkel Jeered on Campaign Trail as Refugee Tensions Boil Up
  • Swedish Inflation Hits Target for First Time in Almost Six Years
  • U.K. Inflation Unexpectedly Holds Steady as Pound Drop Unwinds
  • U.K. Growth, Inflation Outlook Cut, Weakening BOE Rate- Hike Case
  • Schibsted Plunges to 8-Month Low as Facebook Expands Marketplace
  • Bank of Russia Sells All 150b Rubles of 3-Month Bills
  • Danone Undervalued, Scope for Margin Improvement, Bernstein Says
  • Next Falls as Berenberg Says Rally Provides Shorting Opportunity

In currency markets, the main data release this morning has come in the form of the latest UK inflation report. Despite expectations for Y/Y CPI to edge towards 3.0% by the year-end, today’s metric fell short of consensus (2.6% vs. Exp. 2.7%) and saw GBP/USD fall circa 40 pips from 1.2950 to 1.2910 with the metric possibly dampening some expectations for a rate hike by the BoE in the short-term. Elsewhere, the USD remains firm against its major counterparts amid hawkish rhetoric yesterday from Fed’s Dudley as well as gaining ground against JPY as JPY suffered from safe-haven outflows. Going forward, focus will likely be on NZD with the upcoming NZ dairy auction (futures pricing in a 4% increase in WMP).

In commodities, metals markets have seen a mixed performance with gold (-0.5%) pressured amid safe-haven outflows as geopolitical concerns subsided while Copper benefited from the upbeat risk tone. WTI failed to make any significant recovery from yesterday’s losses in which prices languished below USD 48/bbl after a bearish Genscape report, OPEC sources and comments from the EIA.

Looking at the day ahead, there will be quite a lot of data, including: July retail sales, import / export price index for July (0.1% mom and 0.3% mom expected respectively), empire manufacturing stats (10 expected), the NAHB housing market index and US foreign net transactions for June. Further, Home depot will report its results today.

US Event Calendar

  • 8:30am: Import Price Index MoM, est. 0.1%, prior -0.2%; 8:30am: Import Price Index YoY, est. 1.5%, prior 1.5%
    • Export Price Index MoM, est. 0.2%, prior -0.2%; 8:30am: Export Price Index YoY, prior 0.6%
  • 8:30am: Empire Manufacturing, est. 10, prior 9.8
  • 8:30am: Retail Sales Advance MoM, est. 0.3%, prior -0.2%; Retail Sales Ex Auto MoM, est. 0.3%, prior -0.2%
    • Retail Sales Ex Auto and Gas, est. 0.4%, prior -0.1%; Retail Sales Control Group, est. 0.4%, prior -0.1%
  • 10am: NAHB Housing Market Index, est. 64, prior 64
  • 10am: Business Inventories, est. 0.4%, prior 0.3%
  • 4pm: Total Net TIC Flows, prior $57.3b; Net Long-term TIC Flows, prior $91.9b

DB’s Jim Reid concludes the overnight wrap

Can we get back to August yet? Unless you are well connected to Kim Jong-un or to a lesser extent Mr Trump then it’s impossible to answer. However a lack of escalation over the weekend and more reassuring words from a top US general has been a big relief for markets. As it’s the 15th today we’re clearly at the midmonth point that the North Korean leader previously suggested was his timetable to potentially launch missiles at Guam although as we’ll see below NK state media has suggested overnight that he is reviewing his plans and will watch the US first. It will be difficult for markets to fully recover their poise until we’re out of this mid-month window with no new provocations (or worse). However every day that no news breaks should help markets recover to where they were before last Monday evening’s “fire and fury’ tweet after the earlier Washington Post story that Pyongyang has produced a nuclear warhead small enough to fit inside one of its missiles.

Following the calmer words from Defence Secretary Mattis and CIA’s director Pompeo over the weekend talkshows, US’s Marine General, Chairman of the Joint Chief of Staff Dunford followed up and told South Korean President Moon that “…everyone hopes to resolve the current situation without going to war…”. Today, President Moon spoke at a separate function and said “there will be no war repeated on the Korean peninsula” and emphasised the need for diplomatic efforts.

The reduced prospect of a US-NK conflict boosted US markets overnight with Asian markets broadly higher this morning. The Kospi (+0.6%), Nikkei (+1.3%), Hang Seng (+0.3%) and Chinese bourses (+0.2%-0.7%) are all higher as we type. Elsewhere, the Korean Won is up 0.5%.

Notably, risk aversion has not totally gone away, as Defence secretary Mattis also warned earlier that if NK fired missiles at Guam, it would be “game on” and “could escalate into war quickly”. That said, he was vague about what would happen if missiles splashed into the sea near Guam. On the other side of the fence, according to the Korean central news agency, Kim Jong-Un has reviewed his missile strike plans and will watch what the US is doing “a little more”.

Looking away from geopolitics, the US’s July retail sales will be out later today. DB’s economist Brett Ryan expect sturdy gains on both headline (+0.6% forecast vs. -0.2% previously) and ex-automobile sales (+0.6% vs. -0.2%) following two consecutive monthly declines. Note that there has been only one other occasion in the current business cycle when ex-auto sales fell for three consecutive months and that was due  to unusually harsh winter weather in late 2014 / early 2015. Elsewhere, US data on June business inventories (+0.4% expected), US foreign net transaction, empire manufacturing (10 expected) and the NAHB housing market index are also due today, all of which should provide us with some clues on the US’s 2H GDP outlook.

Moving back to markets. Remember that steady increase in the S&P we talked about a couple of weeks back. Well before yesterday, it was 77 trading days since the S&P increased by more than 1% in any one day. Clearly the +1.00% S&P gain overnight has just prevented this run continuing. All we needed was 3 more days to beat the prior record set back between November 06 and March 07 (79 trading days). Perhaps we’ll now wait another 10 years before the record is threatened again.

In terms of markets performance, lower risk aversion was evident across the board yesterday with the Vix down 21% to 12.3, gold falling 0.6% and the Swiss franc -0.2%. US equities strengthened, with the S&P up 1%, the Dow (+0.6%) and the Nasdaq (+1.3%). Within the S&P, only the energy sector was in the red (-0.3%), while all other sectors rose, particularly real estate (+1.7%) and IT (+1.6%). European markets were also up, with the Stoxx 600 +1.1% higher, with gains in every sector, particularly real estate and utilities (both +1.8%). Elsewhere, the DAX (+1.3%), FTSE 100 (+0.6%), CAC (+1.2%) and FTSE MIB (+1.7%) were also up.

Government bond yields rose modestly reflecting lower risk aversion, with core yields up 1-3bp at the longer end of the curve, including: German bunds (2Y: unch; 10Y: +2bps), Gilts (2Y: +1bp; 10Y: +1bps) and French OATs (2Y: +2bp; 10Y: +3bps). Peripheral bond yields outperformed as tensions eased with Italian BTPs (2Y: -1bp; 10Y: -1bp) and Portugal (2Y: +2bp; 10Y: -4bp) generally rallying. Across the pond, UST 10Y has increased 3bps this morning to 2.25%.

Turning to the currency markets, the USD dollar index gained 0.4% yesterday, supported by the Fed Dudley’s comments on rates outlook (discussed later). Conversely, both the Euro and Sterling dipped 0.4% versus the USD, while the Euro/Sterling was broadly flat. In commodities, WTI oil fell 2.5% following concerns for slowing Chinese demand (softer IP data) and EIA raising forecasts that US shale output will reach an all-time high in September. Elsewhere, precious metals were slightly lower (Gold -0.6%; Silver -0.2%), while base metals were broadly unchanged, with Copper (+0.2%), Zinc (-0.4%), although aluminium fell -1.6% after a strong 9% rise in the prior week.

Away from the markets, NY Fed president Dudley told the AP he expects inflation to move somewhat higher as the labour market tightens further and suggested the Fed will announce its taper plan next month. On the rates outlook, he said “If (economic forecasts) evolves in line with my expectations … I would be in favour of doing another rate hike later this year.” Elsewhere, he said White House economic adviser Gary Cohn is a “reasonable candidate” to head the Fed if Trump does not name Yellen for a second term.

Following on with the economic outlook, Bloomberg surveyed 38 economists recently, ~76% of them expect congress will pass tax cut legislations by November 2018, albeit the tax cuts are likely to be lower than what the Trump administration had originally promised. The potential policy changes are expected to add 0.2ppt to the pace of GDP expansion in 2018.

The latest ECB CSPP holdings were released yesterday. They bought €1.11bn last week which compares to €1.54bn, €0.79bn, €0.72bn, €1.43bn over the previous four weeks. These continue to be low numbers and this week’s equate to an average of €221mn per day (vs. €354mn/day since CSPP started). The CSPP/PSPP ratio was 11.4% (previous weeks 12.8%, 8.1%, 6%, 10.4%) which is slightly below the average since the April taper begun but the average since this point of 12.8% is still higher than the pre-taper ratio of 11.6%. So the evidence is still in favour of CSPP having been trimmed less than PSPP since April even if there have been some softer weeks of late. The ECB probably did a little front loading to account for summer credit liquidity being worse than in govt. bonds.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. Adding onto our comments yesterday for the slightly lower than expected July industrial production data in China, our China research term believes that slower growth was mainly driven by surprisingly weak data from the property sector. (eg: growth of property sales cooled to 4.8% yoy in July after a strong rebound to 30.3% yoy in June). Overall, our team think that the slowdown in July is unlikely to change the government policy stance in Q3 (ie: they do not expect a visible loosening of monetary or fiscal policy). With GDP growth at 6.9% in H1, they argue that the government can afford to allow growth to drop moderately in Q3. Elsewhere, the Eurozone’s June industrial production was slightly lower than expected at -0.6% mom (vs. -0.5%) and 2.6% (vs. 2.8% yoy).

Looking at the day ahead, as our note is published, Germany’s preliminary 2Q GDP will be released, with 0.7% qoq and 1.9% expected. Then the UK’s July CPI (0% mom and 2.7% yoy expected), PPI output and retail price index are due. Over in the US, there will be quite a lot of data, including: July retail sales, import / export price index for July (0.1% mom and 0.3% mom expected respectively), empire manufacturing stats (10 expected), the NAHB housing market index and US foreign net transactions for June. Further, Home depot will report its results today.

 END

3. ASIAN AFFAIRS

i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 13.90 POINTS OR 0.43%   / /Hang Sang CLOSED DOWN 75.27 POINTS OR 0.28% The Nikkei closed UP 216.21 POINTS OR 1.11%/Australia’s all ordinaires CLOSED UP 0.43%/Chinese yuan (ONSHORE) closed DOWN at 6.6817/Oil DOWN to 47.37 dollars per barrel for WTI and 50.36 for Brent. Stocks in Europe OPENED DEEPLY IN THE GREEN , Offshore yuan trades  6.6930 yuan to the dollar vs 6.6817 for onshore yuan. NOW THE OFFSHORE IS WEAKER  TO THE ONSHORE YUAN/ ONSHORE YUAN WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH WEAKER TO THE DOLLAR AND THIS IS COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA IS NOT HAPPY TODAY 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA/USA

Mattis warns that the North Korean standoff could escalate into war very quickly

(courtesy zero hedge)

Mattis Warns, North Korea Standoff “Could Escalate Into War Very Quickly”

Less than a day after Joseph Dunford, the commander of the Joint Chiefs of Staff, told South Korean President Moon Jae-in that the US isready to use “the full range of military capabilities to defend our allies and the U.S. homeland,” Defense Secretary and retired Gen. James Mattis told reporters that the situation with North Korea “could escalate into war” if the isolated country fires a missile at the US.

“If they fire at the United States, it could escalate into war very quickly,” Mattis said, according to Reuters.

Mattis also assured reporters that the US would destroy any missiles fired at the US by the North Korean regime, saying the US would know the trajectory of the missile “within moments.”

If a missile is assessed to be headed toward Guam – North Korea has repeatedly threatened the territory – Mattis said “we will take it out.”

Though it’s unclear how, exactly, the US would be able to guarantee the neutralization of an incoming missile.

While the US THAAD missile shield, which has been deployed around the world, has a solid testing record, it’s designed to target intermediate range missiles, not ICBMs. While the US has completed successful tests of ground-based anti-ICBM capabilities, its testing record for those, and for sea-based interceptors, is shaky. Some experts have compared shooting down an ICBM to “hitting a bullet with a bullet.”

In an op-ed published in the Wall Street Journal late Sunday, Mattis and Secretary of State Rex Tillerson argued that the era of “strategic patience” was over, and the era of “strategic accountability” had begun.

“The object of our peaceful pressure campaign is the denuclearization of the Korean Peninsula. The U.S. has no interest in regime change or accelerated reunification of Korea. We do not seek an excuse to garrison U.S. troops north of the Demilitarized Zone. We have no desire to inflict harm on the long-suffering North Korean people, who are distinct from the hostile regime in Pyongyang.

In the editorial, they also noted that while diplomacy is the US’s top priority, “it is backed by military options.”

“While diplomacy is our preferred means of changing North Korea’s course of action, it is backed by military options. The U.S. alliances with South Korea and Japan are strong. But Pyongyang has persistently rebuffed Seoul’s attempts to create conditions whereby peaceful dialogue can occur, and has instead proceeded on its reckless course of threats and provocation. As a result of these dangers, South Korea’s new government is moving forward with the deployment of U.S. Terminal High-Altitude Area Defense against the threat. We commend South Korea’s decision to deploy this purely defensive capability.”

Tensions between the US and North Korea started escalating this year as North Korea accelerated the pace of its missile testing: It has already engaged in 14 such tests this year, including its July 4 test of an intermediate-range missile that could have reached Alaska. Not only is the North now capable of launching an ICBM that can hit the US mainland, US intelligence has confirmed that it’s likely the North possesses a nuclear warhead small enough to fit inside of one of these missiles. The latest round of back-and-forth sniping between the US and the North began after the United Nations passed new sanctions against the North Korean regime with the full blessing of Russia and China, though those sanctions are expected to come down hardest of North Korean laborers and fishermen.

Kim is briefed on the Guam attack plan but he then backs off his threat of an imminent missile launch
(courtesy zerohedge)

Kim Jong-Un “Briefed On Guam Attack Plan”, Backs Off Threat Of Imminent Missile Launch

While global stock markets breathed a sigh of dip-buying relief today that the world did not end, North Korea just ratcheted up the rhetoric one more time with state media reporting the North Korean leader is “being briefed on the Guam attack plan” today, adding that “if a second Korean War breaks out, it would inevitably be a nuclear war.”

According to the state run KCNA news agency, North Korean leader Kim Jong-un “examined the plan for a long time” on Monday during his inspection to the command of the Strategic Force. North Korea said last week that it will finalize by mid-August its detailed plan to fire four intermediate-range ballistic missiles around Guam and report it to its leader for approval.

As KCNA notes, the North Korean leader received a report from his army on its plans to strike the area around Guam and said he will watch the actions of the United States for a while longer before making a decision.”

According to the WSJ interpretation of this oddly-worded report, theNorth Korean leader has decided not to launch a threatened missile attack on Guam but warned that he could change his mind “if the Yankees persist in their extremely dangerous reckless actions.”

As a result, the report “could help dial back tensions that had spiraled last week following an exchange of threats between North Korea and U.S. President Donald Trump.”

North Korean state media said in its report Tuesday that Mr. Kim had made his decision not to fire on Guam after visiting a military command post and examining a military plan presented to him by his senior officers.

Then again, the alternative to that wording would have been for KCNA to say that Kim had decided to launch an attack on Guam, forcing him to do so, which would hardly have achieved any desired outcome.

In any case, trading desks quickly absorbed the WSJ’s interpretation of the KCNA announement as suggestive of conflict de-escalation, and have sent the USDJPY surging by 50 pips in a broad risk-on, stop hunt triggering move, which has also sent gold sliding.

Also, while Kim said he had decided not to launch the attack on Guam “yet“, he advised the U.S. “to take into full account” whether the current standoff was to its benefit. He also said it was incumbent on the U.S. to “stop at once arrogant provocations against the DPRK and unilateral demands and not provoke it any longer.”

Yet Kim ultimately left the ball in Trump’s court, saying “the United States should first make the right decision and show through actions if they wish to ease tensions on the Korean peninsula and prevent a dangerous military clash,” Kim was quoted by KCNA.

Finally, the report contained the usual dose of pleasantries: Kim said that “if the Yankees persist in their extremely dangerous reckless actions on the Korean Peninsula and in its vicinity, testing the self-restraint of the DPRK, the [North] will make an important decision as it already declared.” The N.Korean leader also added that the planned launch could still be carried out at any moment, and said that such a strike would be a “most delightful historic moment” that would “wring the windpipes of the Yankees and point daggers at their necks.”

 

KCNA chose a subtle title for their story… “The US Wants To Kill Itself”

Pyongyang, August 14 (KCNA) (via Google Translate)

The U.S. Defense Department on August 11 announced that the U.S.-south Korea joint military drill Ulchi Freedom Guardian would start on August 21 as scheduled.

 

It declared it would send nuclear carrier strike groups, nuclear strategic submarine and other war hardware to the Korean peninsula in advance and dispatch 12 F-16 fighters and huge armed forces to the U.S. bases in south Korea for the drill.

 

Shortly ago, the commander-in-chief of the U.S. forces and the south Korean chief executive had phone talks over the joint military drill.

 

It is clear what does the start of large nuclear war drill mean under the worst situation on the Korean peninsula.

 

No matter what rhetoric they let out about “annual, regular and defensive drills”, they cannot cover up the danger of a war outbreak.

 

If any accidental case would be sparked, though unwanted, it would never avert a war.

 

What matters is that when a second Korean war breaks out, it would be a nuclear war.

 

The DPRK has already declared in the statement of its government that it would not hesitate to use any form of ultimate means.

 

The U.S. should think twice about the consequences.

 

The Strategic Force of the Korean People’s Army announced that it would finally complete the plan for enveloping fire at Guam until mid August and report it to the commander-in-chief of the DPRK Nuclear Force and wait for his order.

 

The nuclear force of the DPRK is strong in its guts and no one can guess its muscle as the flight trajectory of medium-to-long ballistic rocket Hwasong-12, firing data and the correct hitting-point are made public at home and abroad.

 

Within three days after the publication of the statement of the DPRK government, nearly 3.5 million youth and students and working people volunteered to join or rejoin in the Korean People’s Army. This fact clearly shows the will of the Korean people to finally conclude the standoff with U.S.

 

If the U.S. goes reckless by wielding a nuclear stick before its rival armed with nukes despite the repeated warnings of the DPRK, it would precipitate its self-destruction.

 

We are watching every move of the U.S.

And finally, here are the three dates when NKorea risk could spike:

  • Tomorrow is the National Liberation Day of the Koreas (both North and South). In South Korea, markets are closed.
  • August 21-31 is when South Korea and the US hold a joint annual military exercise. As we reported over the weekend, satellite photos suggest North Korea may be preparing a submarine launched ballistic missile test, as it did two days after the start of last year’s joint drill.
  • September 9, the anniversary of the founding of North Korea: Last year North Korea conducted its fifth nuclear bomb test on this day.

We await President Trump’s “Kelly-approved” response

 

 

end

 

We now have independent scientists who now claim that the payload was light and thus the trajectory of North Korea’s latest launch was higher and thus longer that it ought to be.  Basically these guys suggest that North Korea does not have the capability to hit the USA

(courtesy zerohedge

“Independent Rocket Scientists” Claim North Korea’s Nuclear Missile Claims Are A Hoax

Authored by James Holbrooks via TheAntiMedia.org,

President Donald Trump continued his blustery North Korea rhetoric on Friday, tweeting that the U.S. military was “locked and loaded” and later telling reporters that Kim Jong-un had better not make any “overt threats” against the United States.

“This man will not get away with what he is doing,” Trump told reporters from his golf club in New Jersey, adding that if Kim makes a move against the U.S. or its allies “he will truly regret it and he will regret it fast.”

In the midst of this spike in tension between the United States and the Hermit Kingdom, a team of independent rocket experts published a paper Friday asserting that North Korea’s two July test firings of supposed intercontinental ballistic missiles (ICBMs) were, in fact, “a carefully choreographed deception by North Korea to create a false impression” that the country has missiles capable of striking the continental U.S.

In other words, it was “a hoax,” as one of the experts explained to Newsweek.

The team consisted of Theodore Postol, professor of science, technology, and national security policy at the Massachusetts Institute of Technology (MIT), and German missile engineers Markus Schiller and Robert Schmucker of Schmucker Technologie. Postol has previously disputed official reports on the parties responsible for chemical weapons attacks in Syria.

They opened their paper,  published in the Bulletin of the Atomic Scientists and titled “North Korea’s ‘not quite’ ICBM can’t hit the lower 48 states,”  by highlighting that the July 3 launch was “trumpeted by the US mainstream press” as proof that the United States was vulnerable to an attack from North Korea.

But the Western press jumped the gun, the team argues in their paper:

“The rocket carried a reduced payload and, therefore, was able to reach a much higher altitude than would have been possible if it had instead carried the weight associated with the type of first-generation atomic bomb North Korea might possess.

 

 

Experts quoted by the press apparently assumed that the rocket had carried a payload large enough to simulate the weight of such an atomic bomb, in the process incorrectly assigning a near-ICBM status to a rocket that was in reality far less capable.”

All these assumptions worked out great for the Kim regime, the researchers write:

“From the point of view of North Korean political leadership, the general reaction to the July 4 and July 28 launches could not have been better. The world suddenly believed that the North Koreans had an ICBM that could reach the West Coast of the United States and beyond.”

But these beliefs aren’t based in truth, Postol and his colleagues write:

“In reality, the North Korean rocket fired twice last month — the Hwasong-14 — is a ‘sub-level’ ICBM that will not be able to deliver nuclear warheads to the continental United States.”

The analysts concluded that North Korea is likely “years away from completion” of a nuclear-tipped missile that could reach the continental United States.

The team’s full report, containing the details of their scientific methods, can be found here.

end

b) REPORT ON JAPAN

end

c) REPORT ON CHINA

The USA is angry at China’s theft of intellectual property.  However they have put off tariffs for a year as Wilbur Ross is set to study the situation and report back.  China is threatening retaliation if the uSA damages trade ties

(courtesy zerohedge)

China Threatens With Trade War Retaliation If US “Damages Trade Ties”

Just hours after President Trump authorized an inquiry into China’s alleged theft of intellectual property, China’s Ministry of Commerce said it would take action to defend its interests if the United States damages trade ties.

“This is just the beginning, I want to tell you that. This is just the beginning,” Trump told reporters, and after signing an executive memorandum giving his trade representative, Robert Lighthizer, the power to explore ways to challenge China’s alleged theft of intellectual property and forced transfer of technology – the Trump administration estimates that theft of intellectual property by China could be worth as much as $600 billion – China said the US should “respect objective facts, act prudently, abide by its World Trade Organization pledges, and not destroy principles of multilateralism”, an unidentified spokesman of China’s Ministry of Commerce said in a statement according to Reuters.

“If the U.S. side ignores the facts, and disrespects multilateral trade principles in taking actions that harms both sides trade interests, China will absolutely not sit by and watch, will inevitably adopt all appropriate measures, and resolutely safeguard China’s lawful rights.” The ministry also said the United States should “treasure” the cooperation and favorable state of China-U.S. trade relations, and warned that any U.S. action to damage ties would “harm both sides trade relations and companies”.

The Commerce Ministry complained Trump’s order was “strong unilateralism” that violated the spirit of multinational trade agreements. “We believe the U.S. side should strictly adhere to commitments and should not become the destroyer of multilateral rules,” said the statement.

Ahead of Monday’s order, the Chinese foreign ministry appealed to Trump to avoid a “trade war.” A state newspaper, the China Daily, said an investigation could “intensify tensions,” especially over intellectual property. State news agency Xinhua said the U.S. investigation is a unilateralist “baring of fangs” that will hurt both sides.

More than 20 percent of 100 American companies that responded to a survey by the U.S.-China Business Council, an industry group, said they were asked to transfer technology within the past three years as a condition of market access, according to Jake Parker, the group’s vice president for China operations the AP reported. “We don’t believe market access should be contingent on transferring technology,” said Parker. “It goes counter to China’s WTO commitments.”

In a preemptive move to allay US probe findings, China said it was continuously strengthening its administrative and judicial protections for intellectual property. That said, China’s policy of forcing foreign companies to turn over technology to Chinese joint venture partners and failure to crack down on intellectual property theft have been longstanding problems for several U.S. administrations.  

Meanwhile, experts on China trade policy said the long lead time could allow Beijing to discuss some of the issues raised by Washington without being seen to cave to pressure under the threat of reprisals. China repeatedly rebuffed attempts by previous U.S. administrations to take action on its IP practices, and has insisted it rigorously protects intellectual property.

Jacob Parker, vice president of China operations at the U.S.-China Business Council said Trump’s memo is only the beginning of the process, but that he expected a decision on how to move forward from the administration in 60-90 days. “I think it will be much faster than a year,” Parker said.

In any case, the investigation is likely to cast a shadow over U.S. relations with China, its largest trading partner, just as Trump is asking it to put more pressure on North Korea to give up its nuclear program. Trump has told Beijing he would be more amenable to going easy on China over trade if it were more aggressive in reining in North Korea. China responded by saying the issues of trade with the United States should not be linked to the North Korea problem. Ken Jarrett, president of the American Chamber of Commerce in Shanghai, said in a statement on Tuesday that trade and North Korea should not be linked, but that the investigation was a “measured and necessary step”.

“The president’s executive order reflects building frustration with Chinese trade and market entry policies, particularly those that pressure American companies to part with technologies and intellectual property in exchange for market access,” he said. “Chinese companies operating in the United States do not face this pressure.”

* * *

In an article in the Financial Times timed to coincide with the announcement, Trump’s commerce secretary, Wilbur Ross, accused Beijing of being a “primary culprit” for the theft, piracy and espionage of US intellectual property. Ross claimed China’s government and companies were deliberately targeting US companies pioneering technologies that China lacked as part of a plan known as “Made in China 2025”. “[Trump] is the first president to take any meaningful steps toward dealing with this hugely important issue,” Ross wrote.

At the same time, critics accused Trump of not going far enough. “Unfortunately, the failure to move robustly is another White House mistake in its already long history of troubled dealings with Beijing,” Gordon Chang, a China hawk known for his book The Coming Collapse of China, wrote in the Daily Beast. “From a trade point of view alone, Trump’s action, despite his calling it ‘a very big move,’ looks exceedingly weak.”

Until last week Trump had been expected to announce a so-called ‘section 301’ case against China, which he accused of “raping” the US economy during his presidential campaign. This would have allowed the US to impose tariffs or other trade restrictions on China under the 1974 trade act.  Experts had predicted such a move could draw a “very aggressive” response from Beijing and might even cause a full-blown trade war with potentially huge global ramifications.

Instead, Trump has asked Lighthizer to consider whether this kind of move is necessary, a process that will take up to a year. Trump’s decision to land a far softer blow on China than expected means a trade war between the world’s top two economies is contingent on China’s ongoing behavior; to be sure the relationship between the two nations appears increasingly fraught with US secretary of state, Rex Tillerson, warning earlier this month that ties were at a historic “pivot point” .

On the eve of the announcement, a Chinese state-run newspaper had warned the move would “poison the overall US-China relationship” and on Monday a spokesperson for China’s foreign ministry said there would be “only losers in a trade war”.

end

Approximately 2 months ago China announced that it was going to rein in its shadow banking industry which totals 9 trillion USA or approximately equates to its GDP. Last night the POBC announced a 64 billion yuan  (9.58 billion USA) drop in outstanding loans. While it looks like the move by the POBC is bearing fruit, the contraction will mostly likely spur a run on all of its banks

(courtesy zerohedge)

China’s $9 Trillion Shadow Banking System Shrinks For The First Time In 9 Months

On the surface, the latest Chinese credit data reported overnight by the PBOC was not particularly memorable: new loans tumbled from the near record 1.540TN Yuan in June to only 825.5BN in July, just above the 820BN expected, while Total Social Financing also declined substantially from June’s 1.78TN to 1.22TN, also beating the 1TN estimate. While both July prints were a steep drop from June – reflected in Monday’s miss in retail sales, industrial production and capex – they were a significant increase from the year ago numbers. At the same M2 dropped to a new record low, sliding from June’s 9.4% to 9.2% in July, missing expectations of a modest rebound to 9.5%.

And while there are more details on the various constituent components below, there was one remarkable aspect to last night’s number: for the first time in 9 months China’s $9 trillion Shadow Banking Industry – defined as the sum of Trust Loans, Entrusted Loans and Undiscounted Bank Loans – contracted. These three key components combined resulted in a 64BN yuan drain in credit from China’s economy, the first negative print since October, seen by analysts as more evidence that Beijing’s campaign to contain shadow banking and quash risks to the financial system, is starting to bear fruit.

At the same time, conventional forms of crediting enjoyed a surge, with net corporate bond issuance jumping as non-financial corporations opt for cheaper sources of finance than borrowing in the shadow banking sector, where costs have soared amid the government crackdown on shadow banks: in July Corporate Bond issuance jumped by 284BN following June’s 17BN contraction. This was the highest monthly increase since November.

Furthermore, while on the surface TSF declined sequentially (if not year over year), there was RMB 754 bn issuance of local government bonds in July compared with RMB 461 bn in June, according to WIND data. After including this local government bond net issuance, total adjusted TSF stock grew at 14.8% yoy in July, higher than 14.2% in June. The implied month-on-month growth of adjusted TSF was 21.1% SA ann, higher than 9.7% in June according to Goldman estimates, suggesting that while the government may be phasing out shadow debt, it is replacing it with other, conventional forms of credit, which more than compensate for the transition.

Below is the full breakdown of the latest broad credit data, via Barclays:

  • New loans recorded CNY826bn in July, compared with CNY464bn a year ago, with y/y outstanding growth accelerating to 13.2% from 12.9% previously. Both corporate loans and household loans increased greater than last year. New corporate loans advanced to CNY354bn from a decline of CNY3bn a year ago, with long-term corporate loans contributing CNY433bn (a year ago: CNY151bn) and short-term loans adding CNY63bn (a year ago: CNY-201bn). New household loans registered CNY562bn, compared with CNY458bn a year ago. While short-term household loans added CNY107bn (a year ago: CNY-20bn), long-term household loans (mostly mortgage loans) slowed to CNY454bn, from CNY477bn a year ago. We think the softening momentum in long-term household loans is likely to persist given the government’s tightening measures on the housing market will continue to exert downward pressure on new sales. In addition, M2 growth further decelerated to 9.2% in July (June: 9.4%), but M1 growth slightly rebounded to 15.3% from 15.0% in June (Figure 5).

  • Total Social Financing reached CNY1220bn in July (a year ago: CNY479bn), and its y/y growth rate accelerated to 13.2% (June: 12.8%), the highest since November 2016 (consensus: CNY1000bn,). New loans to the real economy (excluding loans to non-bank financial institutions) rose to CNY915bn from CNY455bn a year ago. This, combined with the loan data, suggests that loan demand from both households and corporates remains strong. Notably, corporate bond financing strongly rebounded to CNY284bn in July (June: CNY-17bn, a year ago: CNY221bn), reflecting the recovering sentiment in the bond market following the improved regulatory policy coordination in recent months (Figure 8). The recovering bond financing may have also crowded out some off-balance-sheet lending, which contracted by CNY64bn in July (June: CNY224bn, a year ago: -CNY313bn). The contraction came from a drop of CNY204bn in undiscounted bankers acceptance bills (July 2016: -CNY512bn), while trusted loans and entrusted loans still expanded by CNY16bn and CNY123bn, respectively.

Finally, some interesting observations from Goldman’s

  • The fall in the level of RMB loans and TSF was completely seasonal. Adjusting for seasonality, growth of total social financing and RMB loans both accelerated in July from the previous month. The acceleration in broad local government debt adjusted TSF to 20% annualized level was particularly meaningful. There has been a rotation away from shadow bank to traditional banking financing in recent months as a part of the government’s attempt to control shadow banking related risks and leverage while maintaining growth stability at the same time. Reflecting this tendency, loan supply has beaten market expectations for 4 months in a row.
  • M2 growth surprised to the downside. Among the drivers of M2 growth, (1) RMB loan growth was robust, (2) FX flows (which contribute to M2 growth when foreign currencies are converted into domestic currency) were likely largely steady so didn’t contribute to the M2 weakness either, (3) net fiscal spending (fiscal deposits held by the government are excluded from M2) made a negative contribution to M2 growth. June’s fiscal policy stance was particularly loose compared to a normal year while July’s was modestly tight. But this contribution was relatively small and not the main driver of slower M2 growth. This means the residual shadow banking products likely made the biggest (negative) contribution. The recent behavior of the economy suggests the impact of the slowdown in these shadow products on real activity is relatively modest, as long as broad TSF growth holds up–although other factors (such as strong external demand) have provided support as well.
  • While July’s activity growth data surprised on the downside, we do not see the need to be overly concerned about the growth outlook as the growth rate in June (particularly strong) and July (particularly weak) combined was at a robust level of 10% ann. Although the higher-than-normal July temperatures would tend to bias IP stronger than otherwise, this is still a healthy level of growth, consistent with loose financial conditions domestically and firm exports growth externally.
  • We expect the authorities to fine tune policy stance on a real time basis to ensure growth stability at least before the end of the Party Congress. Even after the Party Congress this policy put will not disappear, it will just not be as strong as it is now.

Finally, there unspoken question is this: if China’s massive, unregulated and largely uncontrollable shadow banking industry, which was roughly $9 trillion at last check, or not much smaller than China’s GDP,  is now shrinking and thus destroying capital, how long before the current “calm, cool and collected” snaps and the ongoing deleveraging morphs into a bank run, with dire consequences for the nearly $40 trillion Chinese financial sector?

4. EUROPEAN AFFAIRS

5. RUSSIA AND MIDDLE EASTERN AFFAIRS

IRAN

It seems like  Trump is gearing up to end the nuclear agreement with Iran in October but there will be consequences with its European partners

 

(courtesy ISN Security Watch/OilPrice.com)

Is Trump Gearing Up To End The Iran Nuclear Deal?

Authored by ISN Security Watch via OilPrice.com,

Jack Thompson and Oliver Thränert argue that President Trump´s administration is laying the groundwork for the U.S. to withdraw from the Iran nuclear deal. However, they suggest that if the U.S. were to end its participation in the Joint Comprehensive Plan of Action (JCPOA) on Iran’s nuclear program, it would severely damage transatlantic relations and the nuclear non-proliferation regime. As a result, Thompson and Thränert urge European governments to talk with Trump’s most influential advisers and convince them that a unilateral withdrawal from the JCPOA will leave the U.S. isolated.

U.S. President Trump seems determined to kill the nuclear deal with Iran. European leaders should strive to prevent this, as it would severely damage transatlantic relations and the nuclear non-proliferation regime.

Key Points

The Joint Comprehensive Plan of Action (JCPOA) of 2015, which would have been impossible without close transatlantic cooperation, brought Iran back into compliance with the Nuclear Non-Prolifera¬tion Treaty (NPT).

 

U.S. President Trump and some of his political advisors are preparing to end participation in the JCPOA, possibly as early as October 2017. Iran is gaining ever more influence in the Middle East, they contend, which is why sanctions need to be reinforced, not lifted.

 

If the U.S. were to withdraw from the JCPOA, it would deal another blow to U.S.-European ties and could weaken the NPT.

 

Hence, European governments need to talk to Trump’s most influential advisers and convince them that withdrawal from the JCPOA would leave the U.S. isolated

One of the most successful examples of transatlantic cooperation in recent years was the conclusion of the Joint Comprehensive Plan of Action (JCPOA), which was finalized in July 2015. The deal imposes strict constraints on Iran’s nuclear program, and provides for enhanced transparency, in return for relief from international sanctions.

However, that deal is now under threat. U.S. President Donald Trump, who as a candidate called the JCPOA the “stupidest deal of all time”, is convinced that it does little to prevent Iran from developing nuclear weapons. Therefore, the White House is laying the groundwork for withdrawal, possibly as early as October 2017.1 If the U.S. were to unilaterally withdraw from the JCPOA, this would antagonize the European signatories who, through their early and intense diplomatic engagement, made the JCPOA possible in the first place. With transatlantic relations already under strain, mostly as a result of the Trump administration’s ambivalence about NATO and, more broadly, the liberal world order, the termination of the JCPOA would constitute yet another significant blow to U.S.-European relations.Furthermore, ending the deal would lift the present limitations on Iran’s nuclear program and weaken the entire nuclear non-proliferation regime. Therefore, decisive European action is required to stop the Trump administration from abandoning the JCPOA.

Divisions in the Trump Administration

Two factors are likely influencing the thinking of Trump and other hardliners.

Partisanship is one. For many conservatives, the Iran deal was emblematic of what they viewed as Barack Obama’s feckless foreign policy, and Trump has been adept at channeling conservative anger at the former president.

 

Second, Trump and other critics emphasize Tehran’s extensive involvement in Syria and Iraq and its support for Hamas and Hezbollah. As a result, they argue, Iran is gaining ever more influence in the Middle East. To stop Iran, goes the argument, sanctions have to be reinforced, not lifted. Intense lobbying by the Saudi and Israeli governments has reinforced the administration’s anti-Iran tendencies.

Key political advisors in the administration, such as Chief Strategist Steve Bannon and Deputy Assistant to the President Sebastian Gorka, have played a role in convincing the president to put more pressure on Tehran, to end the JCPOA, and to enforce sanctions. At the same time, most of the president’s principal national security advisors – with the notable exception of CIA Director Mike Pompeo – oppose leaving the JCPOA. Though some of them are critical of the agreement, unilateral withdrawal would leave the U.S. isolated, they believe, and would remove any ability it would have to influence the development of Iran’s nuclear program. This group includes Secretary of Defense James Mattis, National Security Advisor H.R. McMaster, Chairman of the Joint Chiefs of Staff General Joseph Dunford, and Secretary of State Rex Tillerson. But this faction appears to be losing the battle on the Iran deal. Instead, ideologues such as Bannon, Gorka, and Stephen Miller, a Senior Advisor to the president, appear to have scored an important victory. These aides are skeptical of the national security establishment, which they view as the embodiment of the corrupt Washington “swamp” that is in need of draining, and as hostile to Trump’s presidency.

Even though the president has openly stated that he advocates direct abrogation of the deal, some of his advisors reportedly favor a subtler approach. They believe that it would be preferable to find a way to goad Tehran into withdrawing from the agreement or, alternatively, into taking steps that could be portrayed as being in violation of the JCPOA. The most likely option at present is that the International Atomic Energy Agency (IAEA), which is responsible for conducting inspections under the JCPOA, would be convinced to request unrestricted access to all of Tehran’s military sites. This thinking reflects a complete misunderstanding of international organizations, such as the IAEA, on the part of Trump and his followers: Their purpose is not to serve narrowly defined U.S. national interests, but to implement provisions agreed to by all parties. Furthermore, the IAEA would be well advised to ask for access to particular sites only if it has information that hint at anomalies not compatible with the JCPOA. The U.S. is in the process of attempting to gather intelligence that would convince its allies and the IAEA of the need to inspect these sites. In any event, to gain access to additional military sites, a step that Tehran would likely resist, the U.S. would need the support of a majority of the other JCPOA signatories.

The JCPOA and its Implementation

To be sure, the JCPOA is imperfect. Particularly controversial is the fact that it allows Iran to maintain its entire nuclear infrastructure, and to continue conducting research. Moreover, the deal is of limited duration. Iran can return to full-scale uranium enrichment – a dual-use technology that can be used for the production of bomb-grade fissile material – once special restrictions in the JCPOA are removed, beginning about eight years from now. Because Tehran probably knows how to build nuclear explosive devices, it is what nuclear proliferation experts call a “threshold state”: A country that has the knowledge and the infrastructure available to become a nuclear state in a short period of time. Moreover, the JCPOA does not limit Iran’s right to develop and test ever more sophisticated missiles. It is therefore free to perfect its delivery systems, which could be fitted with nuclear weapons.

In spite of such flaws, the JCPOA is a remarkable achievement. It is the only example of a determined violator of the Nuclear Non-Proliferation Treaty (NPT) having been brought back into full compliance without using military force. This was made possible by the creation of an international coalition, which was initiated by the three main European powers – France, United Kingdom and Germany – in October 2003. In an intense diplomatic effort, this troika and the EU joined forces with an initially hesitant George W. Bush administration, as well as with Russia and China. The E3/EU plus 3, or P-5 plus 1, orchestrated, beginning in July 2006, the adoption of a series of UN Security Council resolutions directed against the Iranian nuclear program, including sanctions. When Barack Obama became president, the US immediately took the lead in these diplomatic efforts, which eventually led to the JCPOA.

Unsurprisingly, Iran has tested the limits of the agreement. For instance, its heavy water production exceeded the cap defined by the JCPOA. But this issue has been addressed through the Joint Commission that was set up as a negotiating channel between the E-3/EU plus 3 and Iran. So far, the IAEA apparently has not inspected Iranian military sites, because it did not feel this to be necessary, given that Iran’s plutonium reactor at Arak remains filled with concrete; 15,000 centrifuges for uranium enrichment remain locked under IAEA supervision; and Tehran continues to provide inspectors with timely access across the entire uranium chain. At this point, in contrast to Trump and the hawks in his administration, representatives of the E-3/EU plus 3 and the IAEA believe that the JCPOA is working.2

The Threat of Nuclear Proliferation

The cornerstone of international efforts to prevent the proliferation of nuclear weapons, the Nuclear Non-Proliferation Treaty (NPT), has been under stress for some time. Many non-nuclear weapons states contend that the disarmament pace prescribed by this treaty is too slow. The recent adoption in the UN of a treaty on the prohibition of nuclear weapons will further complicate matters. All nuclear weapon states, and those that shelter under the U.S. nuclear umbrella, have boycotted this agreement – a split which is heightening divisions within the NPT community.3Furthermore, one of the few things that NPT members agree upon is continued implementation of the JCPOA, which many see as essential.

Hence, if the Trump administration were to abandon the JCPOA, this would weaken the nuclear nonproliferation norm. Iran’s nuclear program would be freed from the special JCPOA constraints.Moreover, more states may consider the nuclear option. For instance, Iran’s archrival Saudi Arabia might seek to develop a nuclear capability, which would further destabilize the Middle East. In addition, at a time when North Korea is in the process of developing intercontinental ballistic missiles that it could fit with nuclear warheads, Japan and South Korea have already begun to question U.S. security guarantees. They note that, in the event of a military confrontation with Pyongyang, Washington would have to reckon with the possibility of a nuclear strike on its west coast. This has bolstered those in both countries, especially in South Korea, who wish to establish an independent nuclear deterrent. Until now, the very existence of the NPT has served as a check on these arguments. But within the context of a weakened NPT, South Korea – and other states such as Japan – going nuclear could become more likely.4

Europe: Time for Action

In the upcoming months, European governments should do their utmost to convince the Trump administration to not abolish the JCPOA. This will require intensive dialogue with the right people in Washington. These are no longer representatives of the State Department, who seem to have entirely lost their influence. Rather, European officials need to approach national security professionals that value transatlantic cooperation, such as Secretary Mattis. However, if possible, a dialogue with Trump advisers such as Bannon and Gorka might also be useful. Furthermore, Congress needs to be brought into the loop. Influential figures such as Republican Bob Corker, Chairman of the Senate Foreign Relations Committee, seem to be more flexible than the hardliners.

European officials should emphasize four points.

First, they should reassure their counterparts that they would continue to support Washington in any meaningful effort to ensure that Iran implements all of the JCPOA provisions, including verification, but that the respective regulations should not be abused.

 

Second, the Europeans need to make it clear that they continue to support U.S. sanctions that are directed against human rights abuses and the Iranian missile program. Such was the case in August 2017, when the U.S., joined by the UK, France and Germany, sent a joint letter to the UN Security Council and the Secretary General. Iran’s launch of a missile that carried a satellite into orbit, the letter noted, was inconsistent with UNSCR 2231, which codified the JCPOA.5

 

Third, European policymakers should seek to convince the White House that they would not allow Tehran to withdraw from the JCPOA, and thereby win the blame game, by arguing that sanctions directed against the Iranian missile program contradict the JCPOA.

 

Fourth, however, Europe must leave no room for doubt: unilateral withdrawal from the JCPOA, let alone military action against Iran, would leave the U.S. isolated.

 end
To add to the mess globally, Iran will now send a warship flotilla to the West Atlantic as they will build their arsenal.  No doubt they are using the hostage money to build up their weapons.
(courtesy zerohedge)

Iran To Send Warship Flotilla To West Atlantic Amid Massive New Military Build Up

Tehran is preparing to send a flotilla of Iranian warships to the western Atlantic Ocean following the announcement of a massive $500 million investment in war spending, according to Iranian leaders, who say the military moves are in response to recent efforts by the United States to impose a package of new economic sanctions on Iran, the Free Beacon reports.

With tensions over sanctions and Iran’s compliance with the nuclear agreement growing, Iranian parliamentary members voted to increase war spending by over half a billion dollars (it was unclear if the cash is from the ransom paid by Obama to free several US hostages one year ago). This is at least the second recent cash infusion to Iran’s military since the landmark nuclear deal that unfroze billions in Iranian assets and saw the United States awarding Tehran millions in cash. As BBC adds, Iranian lawmakers shouted “death to America” as they voted; the new measure proposes that the government allocates an additional $260MM for the “development of the missile programme” and the same amount to Iran’s Quds Force, a branch of the country’s Revolutionary Guards Corps, the official state news agency Irna said.

Iran said the funding for its missile defence was “not in violation” of a 2015 nuclear deal

Parliamentary speaker Ali Larijani said the move was meant to counter Washington’s “terrorist and adventurist activities” in the Middle East, AFP news agency reports. The 27-point bill will also impose sanctions on US military and intelligence officials in the region.

Michael Rubin, a former Pentagon adviser and expert on rogue regimes, said that Iran’s recent behavior shows the regime has not moderated since the nuclear deal was implemented. The Obama administration sold the deal in part on promises that it could help bring Tehran into the community of nations.

 

“Every time the Islamic Republic has cash, it chooses guns over butter,” Rubin told the Washington Free Beacon. “What the [nuclear deal] and subsequent hostage ransom did was fill Iran’s coffers, and now we see the result of that.”
And with the funding procured, Iran wasted no time in delineating plans on how to spend it. Speaking at a military cereomny in Tehran, Real Admiral Habibollah Sayyari said American commanders should not underestimate the capabilities of the Iranian Navy, promising to let his fleet set sail for the western part of the Atlantic in the near future. “No military official in the world thought that we can go around Africa to the Atlantic Ocean through the Suez Canal, but we did it as we had declared that we would go to the Atlantic and its western waters,” the admiral was quoted by Iranian media over the weekend.

Iranian destroyer Alborz

Sayyari also said that in a recent program on CNN US officials had tried to portray the Iranian Navy as weak and unable to operate over large distances: “[In a program aired] on CNN, they [the Americans] drew a line from Bandar Abbas [an Iranian seaport] to the Atlantic and said Iran is by no means is capable of entering the ocean and passing through it,” he added.

“We moved into the Atlantic and will go to its Western waters in the near future,” Sayyari said.

Sayyari has said previously that the redeployment of Iranian Navy forces to the Atlantic was one of his priorities. “Redeployment in the Atlantic Ocean, intelligence superiority, development of communications, progress in the development of the Makran coast and building new vessels are among the navy’s plans this year,” Fars quoted Sayyari in April.

In recent years, Iran’s Navy has been increasing its presence in international waters to protect naval routes and provide security for trade vessels and tankers. The Islamic Republic has repeatedly asserted that its overseas naval presence is meant to convey a message of peace and friendship to other countries. Iranian officials and commanders have repeatedly underlined that all military exercises and trainings of the Iranian Armed Forces are merely meant to serve deterrent purposes.

 end

6 .GLOBAL ISSUES

7. OIL ISSUES

As rig counts continue to rise, production seems to be rising in the Permian basin.  Will this push oil prices down to 40$ per barrel

(courtesy I. Slav/Oil Price.com)

(courtesy zerohedge)

WTI Lifts Towards $48 After Biggest Crude Inventory Draw Since September

WTI slipped back to almost a $46 handle today before bouncing modestly into the close ahead of tonight’s API report, with all bullish eyes hoping last week’s surprise gasoline build was a ‘blip’. API reported a much larger than expected crude draw (biggest since Sept 2016) and while WTI rallied on the print, it was a very modest move (that for now failed to achieve $48) as we suspect the fact thatgasoline saw another surprise build weighed on sentiment.

 

API

  • Crude -9.2mm (-472k exp) – biggest draw since Sept 2016
  • Cushing +1.7mm (+700k exp)
  • Gasoline +301k (-450k exp) – second weekly build in a row
  • Distillates -2.1mm (-250k exp)

Last week’s surprising gasoline inventory build was overwhelmed by a much larger than expected crude draw reported by API… and the same appears to have happened this week – big crude draw, modest gasoline build…

Additionally, the DOE confirmed it will sell 14 million barrels of crude from the SPR later this month.

 

WTI was hovering around $49 ahead of last week’s API data and is hovering just above $47 into today’s print… futures rose very modestly as the crude draw exuberance was offset by the gasoline build.

“As much as oil inventories have been coming down in the U.S., which is something that is seasonally normal, the fact that U.S. shale production is very resilient and is again confirmed by this EIA Drilling Productivity Report, that is something that is weighing on the market’s mind,” says Harry Tchilinguirian, hea

8. EMERGING MARKET

VENEZUELA

end

end

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

Euro/USA   1.1757 DOWN .0019/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 ALL IN THE GREEN 

USA/JAPAN YEN 110.40 UP 0.472(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/   HELICOPTER MONEY  ON THE TABLE AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST/LABOUR PARTY LOSES IN LOCAL ELECTIONS

GBP/USA 1.2874 DOWN .0091 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS

USA/CAN 1.2739 UP .0010 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS TUESDAY morning in Europe, the Euro FELL by 19 basis points, trading now ABOVE the important 1.08 level  FALLING to 1.1757; Europe is still reacting to Gr Britain HARD BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and now the Italian referendum defeat AND NOW THE ECB TAPERING OF ITS PURCHASES/ THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE AND NOW THE HUGE PROBLEMS FACING TOO BIG TO FAIL DEUTSCHE BANK + THE ELECTION OF TRUMP IN THE USA+ TRUMP HEALTH CARE BILL DEFEAT AND MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED  UP 13.90 POINTS OR 0.43%     / Hang Sang  CLOSED DOWN 75.27 POINTS OR 0.28% /AUSTRALIA  CLOSED UP 0.43% / EUROPEAN BOURSES OPENED  DEEPLY IN THE GREEN 

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

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

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

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

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

The NIKKEI: this TUESDAY morning CLOSED UP 216.21 POINTS OR 1.11%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 75.27 POINTS OR 0.28%  / SHANGHAI CLOSED UP 28.92 POINTS OR 0.90%   /Australia BOURSE CLOSED UP 0.43% /Nikkei (Japan)CLOSED UP 216,21  POINTS OR 1.11%   / INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: 1274.60

silver:$16.88

Early TUESDAY morning USA 10 year bond yield: 2.250% !!!  UP 3   IN POINTS from MONDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.8347, UP 2  IN BASIS POINTS  from MONDAY night.

USA dollar index early TUESDAY morning: 93.73 UP 31  CENT(S) from MONDAY’s close.

This ends early morning numbers  TUESDAY MORNING

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And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 2.840% UP 3 in basis point(s) yield from MONDAY 

JAPANESE BOND YIELD: +.05%  DOWN 4/5   in   basis point yield from MONDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.473% UP 4   IN basis point yield from MONDAY 

ITALIAN 10 YR BOND YIELD: 2.048 UP 3 POINTS  in basis point yield from MONDAY 

the Italian 10 yr bond yield is trading 58 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.433% UP 2  IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR TUESDAY

Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/5:00 PM 

Euro/USA 1.1733 DOWN .0042 (Euro DOWN 42 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 110.48 UP 0.551(Yen DOWN 55 basis points/ 

Great Britain/USA 1.2865 DOWN  0.0098( POUND DOWN 98 BASIS POINTS)

USA/Canada 1.2762 UP .0033 (Canadian dollar DOWN 33 basis points AS OIL FELL TO $47.54

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This afternoon, the Euro was DOWN  by 42 basis points to trade at 1.1733

The Yen FELL to 110.48 for a LOSS of 55  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 98  basis points, trading at 1.2865/ 

The Canadian dollar FELL by 33 basis points to 1.2762,  WITH WTI OIL FALLING TO :  $47.54

The USA/Yuan closed at 6.6855/
the 10 yr Japanese bond yield closed at +.050%  DOWN 4/5 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 6  IN basis points from MONDAY at 2.262% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.839 UP 5 in basis points on the day /

Your closing USA dollar index, 93.85  UP 43 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 TUESDAY: 1:00 PM EST

London:  CLOSED UP 21.50 POINTS OR 0.29%
German Dax :CLOSED UP 11.92 POINTS OR 0.10%
Paris Cac  CLOSED UP 18.58 POINTS OR 0.36% 
Spain IBEX CLOSED UP  20.30 POINTS OR 0.19%

Italian MIB: CLOSED 

The Dow closed UP 5.28 OR 0.02%

NASDAQ WAS closed DOWN 7.22  POINTS OR 0.11%  4.00 PM EST

WTI Oil price;  47.52 at 1:00 pm; 

Brent Oil: 50.85 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  59.76 DOWN 13/100 ROUBLES/DOLLAR (ROUBLE HIGHER BY 13 BASIS PTS)

TODAY THE GERMAN YIELD RISES TO  +0.433%  FOR THE 10 YR BOND  4.PM EST EST

END

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

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

WTI CRUDE OIL PRICE 5:00 PM:$47.70

BRENT: $50.95

USA 10 YR BOND YIELD: 2.273%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.848%

EURO/USA DOLLAR CROSS:  1.1734 down .0042

USA/JAPANESE YEN:110.63  UP  0.703

USA DOLLAR INDEX: 93.84  up 43  cent(s) 

The British pound at 5 pm: Great Britain Pound/USA: 1.2862 : down 102 POINTS FROM LAST NIGHT  

Canadian dollar: 1.2754 down 26 BASIS pts 

German 10 yr bond yield at 5 pm: +0.433%

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, & Black Gold Slump As Dollar Jumps Most In 3 Months

Tepper tells us “we’re nowhere near bubble levels in the stock market” – so buy… what’s to worry about?

 

Trannies were top today, Small Caps slammed as Dow, S&P, and Nasdaq trod water… before closing weak… (Boeing and Apple saved The Dow, adding 30 points between them today as HD removed 30)

 

VIX was lower once again on all the major indices…Small Cap vol remains notably elevated relative to the rest…

 

By the close, gold and bonds were unchanged from the retail sales print but Nasdaq was lower…

 

Retailer stocks crashed again today (despite surging retail sales?)

 

Leaving XRT hovering at critical support…

 

With record low correlation to the market…

 

AAPL hit a new record high today as the rotation from FANG stocks continues…

 

Credit ain’t buying the equity bounce...

 

December rate hike odds retraced the entire CPI-miss-drop...

 

Treasury yields roller-coastered today… but the trend continues as we suspect rate-locks and marginal rotation for the AMZN issue were a big driver…

 

30Y yields extended yesterday’s rise overnight as the market prepared for a yuuge AMZN debt issue, spiked higher on Retail Sales, but immediately reversing having tagged 2.87% (last week’s highs) before tumbling… but ending up 3bps…

 

Still despite US bonds pushing higher in yields, Spain hit a new record low (2Y at -33.3bps) and the world’s volume of negative-yielding debt soared back to its highest since Oct 2016…

 

 

The Dollar Index rose for the second day in a row – this is the biggest 2-day jump in over 3 months… (NOTE that like TSYs, USD spiked on the retail sales dats then immediately tumbled back)…

 

The question is – what happens next?

 

EURUSD certainly looks a little rich here…

 

Bitcoin saw some serious vol intraday – dropping $650 from its record $4400 highs, it quickly ramped back up to $4150 by the close…

 

Gold sank once again today…but rebounded off the retail sales dump…

 

And notably GDX short interest surged to its hghest since Feb 2016…

 

Having tagged $50 late last week, WTI traded down to $47 today before bouncing a little ahead of tonight’s API inventory data…

 

And finally, the 1987 analog is stil holding…

 

Maybe this is the catalyst?

 

 

end

 

Early trading this morning:

Dollar Spikes To 3-Week Highs, Nasdaq Dips After Retail Sales Beat

The market’s reaction to this morning’s retail sales beat is mixed. The Dollar is surging, gold is tanking, and while The Dow is unch, Nasdaq is sliding…

Gold, Bonds, and Tech stocks are sinking post-data…

 

But the dollar is surging…

 

We wonder if this is the start of 2016 deja vu all over again…

 

end

 

I have been highlighting to you the 3 major debt categories inside household debt for uSA citizens:

i) revolving credit (credit card debt)

ii) student loan debt

iii) auto loan debt

although mortgages represents the largest category for household debt, it is the above 3 that are signalling trouble for citizens. The Fed has now sounded the alarm bell on the above

(courtesy zerohedge)

 

The Fed Issues A Warning As Household Debt Hits New All Time High

After we first reported last week that US credit card debt hit a new all time high with both student and auto loans rising to fresh records with every new report…

… it won’t come as a surprise that according to the just released latest quarterly household debt and credit report by the NY Fed, Americans’ debt rose to a new record high in the second quarter on the back of an increase in every form of debt: from mortgage, to auto, student and credit card debt. Aggregate household debt increased for the 12th consecutive quarter, and are now $164 billion higher than the previous peak of $12.68 trillion set in Q3, 2008. As of June 30, 2017, total household indebtedness was $12.84 trillion, or 69% of US GDP: a $114 billion (0.9%) increase from the first quarter of 2017 and up $552 billion from a year ago. Overall household debt is now 15.1% above the Q2 2013 trough.

Mortgage balances, the largest component of household debt, increased again during the first quarter to $8.69 trillion, an increase of $64 billion from the first quarter of 2017. Balances on home equity lines of credit (HELOC) were roughly flat, and now stand at $452 billion. Non-housing balances were up in the second quarter. Auto loans grew by $23 billion and credit card balances increased by $20 billion, while student loan balances were roughly flat.

  • Confirming the slowdown in mortgage activity, mortgage originations in Q2 declined to $421 billion from $491 billion. Meanwhile, there were $148 billion in auto loan originations in the second quarter of 2017, an uptick from the first quarter and about the same as the very high level in the 2nd quarter of 2016.
  • Auto loan balances increased by $23 billion, continuing their 6-year trend. Auto loan delinquency rates increased slightly, with 3.9% of auto loan balances 90 or more days delinquent on June 30. The aggregate credit card limit rose for the 18h consecutive quarter, with a 1.6% increase.
  • Outstanding student loan balances rose modestly, and stood at $1.34 trillion as of June 30, 2017. The second quarter typically witnesses slow or no growth in student loan balances due to the academic cycle. As discussed previously, a perilously high 11.2% of aggregate student loan debt was 90+ days delinquent or in default in 2017 Q2.

In a troubling development, the report noted that the distribution of the credit scores of newly originating mortgage and auto loan borrowers shifted downward somewhat, as the median score for originating borrowers for auto loans dropped 8 points to 698, and the median origination score for mortgages declined to 754. For now this credit score decline has not impacted the credit market: about 85,000 individuals had a new foreclosure notation added to their credit reports in the second quarter as foreclosures remained low by historical standards.

And while much of the report was in line with recent trends, and the overall debt that was delinquent, at 4.8%, was on par with the previous quarters, the NY Fed did issue a red flag warning over the transitions of credit card balances into delinquency, which the New York Fed said “ticked up notably.”

Discussing the troubling deterioration in credit card defaults, first pointed out here in April, the New York Fed said that credit card balance flows into both early and serious delinquencies increased from a year ago, describing this as “a persistent upward movement not seen since 2009.” As shown in the chart below, the transition into 30 and 90-Day delinquencies has, over the past two quarters, surged to the highest rate since the first quarter of 2013, suggesting something drastically changed in the last three quarters when it comes to US consumer behavior.

“While relatively low, credit card delinquency flows climbed notably over the past year,” said Andrew Haughwout, senior vice president at the New York Fed. “This is occurring within the context of loosening lending standards, as borrowers with lower credit scores recover their ability to access credit cards. The current state of credit card delinquency flows can be an early indicator of future trends and we will closely monitor the degree to which this uptick is predictive of further consumer distress.

That bolded statement, is the first official warning by the Fed that the US consumer is sick, and the Fed has no way reasonable explanation for this troubling jump in delinquencies. Timestamp it, because this will certainly not the be the last time the Fed warns about the dangerous consequences of all-time high credit card debt.

As for the “further uptick in consumer distress”, we are just guessing but the fact that credit card defaults are jumping at a time when sales at fast food and other restaurants have declined for 17 consecutive quarters, and when $250 billion in US household savings was just “revised” away, may all be connected.

end

 

 

the USA restaurant business is now in a mess as people just shy away from eating out.  As far are discretionary spending is concerned, this seems to be the first to take a hit.

Can someone explain then how could the BLS report an increase in bartenders and waitresses with this going on?

 

(courtesy zero hedge)

 

U.S. Restaurant Industry Stuck In Worst Collapse Since 2009

Shortly after we reported that the “restaurant industry hasn’t reported a positive month since February 2016“, we can add one more month to the running total: according to the latest update from Black Box Intelligence’s TDn2K research, in July both same-store sales and foot traffic declined once again, and this time the slide was more pronounced, tumbling by -2.8% and -4.7% compared to declines of “only” -1% and -3% in June, respectively, in the process extending the stretch of year-over-year declines for the US restaurant industry to 17 consecutive months – the longest stretch since the financial crisis.

Source: @GS_CapSF

Sales rose in only 12 markets while declining in 183 with the Midwest – the worst region in the US – suffering a 3.6% and 5.2% decline in sales and traffic respectively, while even the best region, California”, posted a decline in both sales (-0.7%) and traffic (-3.6%).

Source: TDn2K

Unlike last month, not even Black Box Intelligence’s TDn2K research tried to spin the data, noting that the “sales rebound optimism was short lived” as “July restaurant sales tumbled.”

“July proved to be a tough month for chain restaurants,” said Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K.

“Based on recent trends, we were cautiously optimistic that the tide was turning a bit, especially since brands were comparing against weaker comps in 2016.” But not so much any more.

According to Black Box, calculated on a two-year basis, sales in July 2017 were down -4.2% compared with July of 2015, in other words there has been no growth in over two years. The data is even worse for same-store traffic, which was down -8.7% for that same period. These are the weakest two-year growth rates in over three years, additional evidence that the industry has not reversed the downward trend that began in early 2015.

In light of the surprisingly poor monthly results, the consultant appear to have not only given up on any recovery in the restaurant sector, but are now extrapolating the weakness to the broader economy.

“While the economy keeps growing at a moderate pace and job gains remain strong, the consumer seems to be on vacation – literally and figuratively,” said Joel Naroff, President of Naroff Economic Advisors and TDn2K economist whose Industry Snapshot tracks sales at 27,000 restaurant units from 155 brands, generating $67 billion in annual revenue. That’s about 10% of total “eating and drinking places” revenues as tracked by the Commerce Department

One of the clearest indicators that households are spending cautiously is the softening of big-ticket purchases. In July, for the eleventh month out of the last twelve, vehicle sales were below the rate posted the year before. Home sales, while still trending up, are now expanding at a decelerating pace.”

While food and alcohol sales were down, prices once again rose, with the the average amount per check rising 1.8% in July, which once again was not enough to make up for the decline in customer count, confirming that restaurants have little to no pricing power to even stay up with inflation. Black Box adds that the growth in check averages has slowed in recent months “as brands fight the tide of continuing traffic declines.”

Check increases in 2015 and 2016 were largely an effort to maintain margins in the face of higher labor costs. The slowdown in check growth may be a combination of value platforms and increased deal activity aimed at increasing visitation frequency. It may also be recognition that top-line increases are under more scrutiny despite the potential impact to operating margins. Given that grocery prices have been dropping year over year, it is no surprise that restaurants have been compelled to review their value proposition

More troubling, Naroff pointed out something we first observed two weeks ago: the dramatic revision lower in the US personal savings rate, which wiped out $250 billion from what the Department of Commerce had previously calculated was a healthy personal savings backdrop:

Households are currently maintaining their lifestyles by reducing their savings rate and that is likely restraining spending on discretionary goods. We may have to wait until the fall or early winter, assuming wage gains accelerate by then, to see any pick up in restaurant sales.”

Here, as Wolf Richter laconically adds, “everyone is waiting for wage increases for the lower 80% of the wage earners that will finally outgrow inflation. That’s all it would take to crank up the economy, and even the restaurant business. People have been waiting for years for these real wage increases. But it’s just not happening.”

Furthermore, it goes without saying that the above assumption is a substantial problem for the roughly half of American households who have no savings in which to “dip” and fund discretionary purchases.

Meanwhile, as the vast majority of the US population struggles to make ends meet and digs into their meager savings, the far smaller group of high wage earners continue to spend generously at fine dininf establishments. Indeed, fine dining was the only segment up in July (0.4 percent) even as upscale casual was down fractionally. Still, the slowdown in fast casual sales noted in the past continued in July, as did softness for quick service. While much of fast casual’s headwinds are a result of rapid segment growth, the steady performance decline in lower PPA segments will be important to follow. Both segments outperformed the industry in 2015 and 2016, but trail through July of this year.

As reported last month, the pain among chain restaurants is due to a combination of factors, including:

  • The surge of independent restaurants, from high-end to delis.
  • “Grab-and-go” prepared foods available at every grocery store.
  • VC-funded meal replacement kits, such as Blue Apron, one of the most anticipated IPOs this year that has now totally crashed.
  • Convenience stores and food trucks

Meanwhile, as the government reported recently, June sales for “food service and drinking places” held at $56.0 billion, were flat with November 2016, a period of 8 months without growth. They were down 0.6% from January but still up 1.7% year-over-year. This weakness in nominal sales is also evident in the latest retail sales data which has been on a steady decline for the past two years.

… a fact corroborated by Bank of America’s internal spending data

Ironically, in addition to challenges from falling guest counts, the inability to pass through price increases, rising competition and declining overall spending, strong challenges continue to confront restaurants in both staffing and retaining enough qualified workers.   We say ironically, because as we showed after the latest jobs report, restaurant/fast food/waiter/bartender hiring remains the only strong spot in the US labor market. As the chart below shows, starting in March of 2010 and continuing through June of 2017, there have been 89 consecutive month of payroll gains for America’s waiters and bartenders, an unprecedented feat and an all time record for any job category. Putting this number in context, total job gains for the sector over the past 7 years have amounted to 2.4 million or over 14% of the total 16.7 million in new jobs created by the US over the past 89 months. Needless to say, these jobs fall within leisure and hospitality, that sector pays the worst wages, an average of $13.35 an hour, and $331.08 a week

And yet, according to BlackBox, restaurant operators are pessimistic regarding the difficulty of recruiting in the upcoming quarters. According to TDn2K’s People Report, 63 percent of companies reported an increase in difficulty recruiting qualified employees to staff their restaurants during the second quarter of 2016. Additionally, the expectations component of the index predicts continued job growth for the industry, with 47 percent of restaurant companies anticipating an increase in their number of hourly jobs. 42 percent reported an expected increase in their net number of restaurant management jobs.

As a result, retention continues to be a major challenge for the industry. Both restaurant management and hourly employee turnover increased again during June. However, the latest indicators may be hinting that increasing turnover rates are beginning to taper off. Still, even if turnover rates reach a plateau at their current levels, which is likely to be the best case scenario, they will remain at record high levels and continue to be a source of headaches for restaurant operators forced to keep raising wages to retain waiters and bartenders.

Putting it all together, we give the last word to Wolf Richter who summarizes the unsustainable situation as follows: “so credit card debt, at $1.02 trillion, has hit an all-time high. Auto loan balances, at $1.13 trillion, have far surpassed any prior all-time high. Housing costs are eating up an ever larger share of incomes. Healthcare costs are soaring. Households with kids in college are paying a big price. Many millennials, even those with good jobs, are buckling under their student loans, which have skyrocketed 164% over the past ten years to $1.45 trillion. And inflation-adjusted discretionary spending such as for restaurants by people at the lower 80% of the income scale is taking a hit. Something has to give. It’s the description of a messed-up economy.”

end

 

 

We have been also highlighting to you the plight of used car prices. The lower the prices for used car means trouble selling brand new cards.  They have to offer incentives in order to sell.

 

e.g. a brand new car selling for $40,000 as 0 dollars down and 80 months at 0 interest

real problems in the auto sector

(courtesy zerohedge)

 

 

 

Used Car Prices Crash To Lowest Level Since 2009 Amid Glut Of Off-Lease Supply

The U.S. auto market is at an interesting crossroads with used car prices crashing to new lows every month while new car prices continue to defy gravity courtesy of a somewhat ‘frothy’, if not suicidal, lending market that has seemingly decided that anyone with a pulse is financially qualified for a $0 down, 0% interest, 80 month loan on a brand new $40,000 luxury vehicle of their choice.

As the Labor Department’s consumer-price index data showed last Friday, used car prices once again dropped in July to the lowest level since the ‘great recession’ of 2009.  In fact, since the end of 2015, the cost of used vehicles has dropped in all but three months and are now roughly 10% off their 2013 high.

 

Unfortunately, the outlook for the used market is only expected to get worse with the volume of lease returns expected to soar to nearly 4mm units by 2018.

Auto Leases

 

Meanwhile, despite modest weakness over the past two months, new car prices have held up fairly well…

 

…even as the domestic auto OEM’s continue to flood dealer lots with new inventory that isn’t moving.

 

Of course, logic would dictate that some level of substitution would have to take over at some point as the financial benefits of buying a used car eventually outweigh the social indignity of cruising around town in a 3-year old clunker.

That said, those innovative “Low Credit Score” discounts do make new car buying very attractive…

Truck

 

end

Retail sales rebound in July but it must be due to huge incentives offered by the auto dealers and dept stores

 

(courtesy zero hedge)

 

Retail Sales Rebound In July – Biggest Jump Since Dec 2016 On Record Auto Incentives

After declining for two straight months, US Retail Sales in July rebounded dramatically to a 0.6% MoM gain – the most since Dec 2016 – driven a surge in motor vehicles (record incentives) and department stores (more inventives?). Year-over-year saw upward revisions and a rebound to a 4.2% rise in July.

The last two month’s declines in Retail Sales have been revised away magically and we have now gone 5 months without a decline…

 

Everything rose except clothing stores (-0.2%), electronics and appliance stores (-0.5%) and gasoline stations (-0.4%)

How sustainable is this? Record automaker incentives and a desperate ‘retailer’/department store business slashing prices to maintain some revenues?

 

END

One analyst just does not believe those retail numbers today

(courtesy zerohedge)

One Analyst Throws Up On Today’s Retail Sales Data: Here’s Why

Two weeks ago we reported that July auto sales were a disaster: recall sales for bloated with inventory GM were down 15% YoY, Ford off 7% and Chrysler down 11% – despite record incentive spending – as overall auto sales declined and disappointed for yet another month. And yet, according to this morning’s retail sales report from the Census Bureau, sales for “motor vehicle & parts stores” rose much more robustly than anyone had anticipated, rising 1.2%, the fastest pace since December.

This number was so bizarre, and so out of context with recent sales data, that SouthBay Research threw up all over it in its morning note today. Here’s why:

  • Retail Sales m/m: 0.6%
  • Retail Sales ex Autos m/m: 0.45%
  • Retail Sales ex Autos & Amazon m/m: 0.3%

Consumer Retail Spending was Actually Mild, As Expected

  • Auto Sales growth unbelievable
  • Amazon Prime Day juiced the results

 

Don’t believe the auto sales data.  Per the BEA, unit sales were flat m/m (+90K).  Meanwhile, per JD Power, July average retail prices were $950 lower than June’s as auto dealers struggled to make sales and incentives averaged $3.9K, the highest on record and $100 higher than June.

  • Hmmm, no rise in auto sales per the real world and the BEA.  Coupled with a fall in net prices. But in fantasy land, the Census Bureau announces a $1.2B m/m jump in sales and a 7%+ y/y rise.

 

Amazon Prime Day Was Huge…and will Cut August Sales

  • Nonstore Retail Sales jumped $700M m/m.  That’s the Amazon Prime Day effect. I modeled it lower and that’s the source of my miss this month

 

Reasons for Caution: Government Data is Overstating Reality

  • The Retail strength does reinforce my view that macro data favors the US in 2H and that the dollar is oversold. But the Retail headline figure is wrong and analysts were correct: consumer spending as captured by Retail is sluggish.  The fact that reality is badly captured by the Retail figures is concerning insofar as it affects the Fed’s decision making.

 

The opportunity is to recognize that consumer spending in the real world will pull back and it will also be missed by the official data.  With Consensus unprepared for the pull back, it will deliver a greater shock.

Meanwhile, here’s a quick look at SouthBay’s proprietary “Vice Index.”

For those who are unfamiliar, the vice index tracks US consumer spending on alcohol, marijuana, prostitution and gambling, Vices are a special form of discretionary spending that is highly sensitive to near-term
economic conditions: i) Cash based: depends on free cash flow; ii) Luxury spending: wants not needs; iii) Significant dollar amount: not pricey but not cheap. Vice spending is broadly representative of the US consumer: i) Broad-based: Every socioeconomic and demographic group participates; ii) High-volume transactions: Over 100M discrete events per year.

The reason why this index is of particular interest, is because vices predict retail spending with a 4-month lead. Luxury spending is the 1st thing to be affected by changes in household finances.

This is what the index shows:

 

 

END

 

Take this with a grain of salt:  the New York Manufacturing Fed surges the highest in 3 years despite profit margins getting crushed

 

(courtesy NYFed Manufacturing Index/zerohedge)

New York Fed Manufacturing Surges To Highest In Three Years But Profit Margins Crushed

The August Empire State Manufacturing Index printed at a blistering 25.2, reversing last month’s plunge to 9.8, smashing expectations of a 10.0 print, and the highest print since September 2014.

The surge was driven by the new orders index which rose seven points to 20.6 and the shipments index, which hit 12.4. Meanwhile, delivery times continued to lengthen suggesting growing capacity problems in the supply chain, while inventory levels declined. More good news came from labor market indicators, which pointed to an increase in employment and hours worked.

However, the biggest red flag was for corporate margins, as prices paid spiked 9.7, from 21.3 to 31.0 while prices received declined -4.8, from 11.0 to 6.2, keeping a lid on profits. The spread between the Prices Received and Prices Paid, a proxy for corporate profits, declined to the lowest in 5 years.

That above, however, did not dent firms’ optimism, and after the Empire State “Hope” Index plunged last month to an 8 month low, it rebounded in August, with indexes assessing the six-month outlook suggested that firms were quite optimistic about future conditions. The index for future business conditions rose ten points to 45.2, and the index for future new orders moved up eight points to 41.3. Employment was  expected to increase modestly, though the average workweek was expected to decline slightly.

Finally, not even the traditionally optimistic outlook had anything good to say about an increase in corporate spending: the future capex index slipped to 11.6, the lowest in almost one year.

 

 

END

 

This is not good:  the huge increase in auto inventories causes the Inventory/sales ratio to jump to its highest level since Nov 16

 

(courtesy zero hedge)

Business Inventories-To-Sales Ratio Jumps To Highest Since Nov ’16 As Auto Inventories Spike

Once again motor vehicles dominated the rise in inventories in June (up 0.7% MoM) as retail inventories rose 0.6% MoM but sales lagged at just 0.3%. This mismatch pushed the aggregate inventory-to-sales ratio back to its highest since Nov 2016 at 1.38 months.

 

But it’s autos that remain near ex-crisis highs in inventories…

 

end

 

Bricks and Mortar operations continue on its death knell

(courtesy zerohedge)

Chain-Store Stock Carnage Continues (Despite Biggest Jump In Retail Sales Since 2016)

Oh the irony – as bulls celebrate the best jump in retail sales since 2016, the scene for retailer stocks is an utter bloodbath

Earlier today, US Retail Sales in July rebounded dramatically to a 0.6% MoM gain – the most since Dec 2016 – driven a surge in motor vehicles (record incentives) and department stores (more inventives?). Year-over-year saw upward revisions and a rebound to a 4.2% rise in July.

The last two month’s declines in Retail Sales have been revised away magically and we have now gone 5 months without a decline…

 

But one glimpse at the carnage in chain-store stocks tells a very different story… Following a week of disappointing earnings from J.C. Penney Co. and Macy’s Inc., the drumbeat resumed Tuesday as results from Advance Auto Parts Inc., Coach Inc. and Dick’s Sporting Goods Inc. sent their shares crashing

 

As Bloomberg notes, at this rate, the group is poised for the worst annual decline in share prices since the financial crisis.

“Everybody is being burned in retail and people are just questioning, ‘Is there any place that’s Amazon-free?’”Gary Bradshaw, a Dallas-based fund manager for Hodges Capital Management Inc., said by phone.

 

“There will be some winners in retail but boy, it’s just a land mine.”

However, Vitaliy Katsenelson more accurately states It’s not just Amazon’s fault. Changing consumer habits are killing old retail biz…

Retail stocks have been annihilated recently, despite the economy eking out growth. The fundamentals of the retail business look horrible: Sales are stagnating and profitability is getting worse with every passing quarter.

 

Jeff Bezos and Amazon get most of the credit, but this credit is misplaced. Today, online sales represent only 8.5 percent of total retail sales. Amazon, at $80 billion in sales, accounts only for 1.5 percent of total U.S. retail sales, which at the end of 2016 were around $5.5 trillion. Though it is human nature to look for the simplest explanation, in truth, the confluence of a half-dozen unrelated developments is responsible for weak retail sales.

 

Our consumption needs and preferences have changed significantly. Ten years ago we spent a pittance on cellphones. Today Apple sells roughly $100 billion worth of i-goods in the U.S., and about two-thirds of those sales are iPhones.

 

Consumer income has not changed much since 2006, thus over the last 10 years $190 billion in consumer spending was diverted toward mobile phones. Between phones and their services, this is $340 billion that will not be spent on T-shirts and shoes.

 

But we are not done. The combination of mid-single-digit health-care inflation and the proliferation of high-deductible plans has increased consumer direct health-care costs and further chipped away at our discretionary dollars. Health-care spending in the U.S. is $3.3 trillion, and just 3 percent of that figure is almost $100 billion.

 

Then there are soft, hard-to-quantify factors. Millennials and millennial-want-to-be generations (speaking for myself here) don’t really care about clothes as much as we may have 10 years ago.

 

All this brings us to a hard and sad reality: The U.S. is over-retailed. We simply have too many stores. Americans have four or five times more square footage per capita than other developed countries. This bloated square footage was created for a different consumer, the one who in in the ’90s and ’00s was borrowing money against her house and spending it at her local shopping mall.

But the bottom line, as we noted previously, is that America’s malls, retail stores, and fast-food restaurants are hugely overbuilt.

 

 

END

 

Dick’s CEO claims that the retail industry is now in panic mode as they cut prices to stay alive

 

(courtesy zerohedge)

Dick’s CEO: “The Retail Industry Is In Panic Mode”

With Dick’s stock crashing after reporting dreadful results this morning, in which both comp sales and EPS missed as the company slashed its full year guidance below even the lowest sellside forecast (it now sees full year EPS of $2.80 to $3.00, below the previous guidance of $3.65 to $3.75 and the Wall Street estimate of $3.62 ), the management team had no reason to hold back on today’s earnings call, and luckily – unlike many other retailers who still hold out hope that the worst is behind them – it did not, for an unvarnished look into the retail space.

Confirming just how little pricing power retailers have, CEO Ed Stack said “we have conducted extensive consumer research, and the customers have told us they feel our prices are not competitive in today’s environment” in which everyone is slashing price to capture market share, and as a result the company is “intentionally joining this battle, and we will aggressively be promoting our business to drive market share to our stores and online.”

Stack said he observed heavier promotions and price cuts particularly on athletic apparel, electronics, and hunting, fishing and camping gear which started as early as Father’s Day. “We started to see this happening a little bit before Father’s Day, and it continued to be very promotional, not only from retailers but also from some of the brands on a direct-to-consumer basis.”

Having no other choice, Dicks has joined the battle of the “deep discounters”, and has also launched a “best price guarantee” in which it promises customers that if they find a lower price on a product, Dick’s will match it. Of course, by doing so, the retailer assures that both Dick’s and its peers margins and net income shrink even more in the coming quarters.

Another major concern on the call – and to management – was the recent partnership between Amazon and Nike. Asked “how can you ensure that your positioning is still differentiated from that of the Amazon offering” the CEO responded: “We’ll see how this goes. They’ve been transparent talking to us about this test, and I suspect it will probably go well, and then Nike will decide what they want to do about it and how they want to handle the balance of the market. Our relationship with Nike has been – has always been very good. It continues to be very good. We continue to work with them on shops, on our footwear decks and exclusive products. They are a strategic vendor of ours and we’ve got great relationship and what we’re going to test and what they’ll do ultimately we’ll deal with that when it happens.”

Speaking to CNBC, SW Retail Advisors’ Stacey Widlitz said that “Dick’s is another example of Amazon becoming the new middleman… Here we go down the gross margin rabbit hole just in time for the holidays.”

Of course, if Nike ultimately decides to go exclusively with Amazon at least Dick’s terminal suffering will be greatly shortened. Meanwhile, as the call went on, there was the following striking admission by the CEO:

There’s a lot of people right now, I think, in retail and in this industry in panic mode. There’s been a difficult environment. I think people, I’m not going to speculate what they’re thinking, but they seem to be in panic mode with how they’re pricing product, and we think it’s going to continue to be promotional and at times, irrational going forward.

* * *

Just in case the message was not clear the first time, there was more panic: “People need to get rid of the inventory, and then some people are panicked as to what’s going to happen with their business from a growth standpoint.

* * *

And then, to top it off,  just a little more: “What’s going on in the marketplace right now is that it’s just very promotional, almost panicked in some cases, I think, especially in the hunt, fish categories. There’s a lot of inventory in the pipeline, and people need to move it out, and it’s going to continue to be promotional until this inventory gets moved out of the pipeline”

* * *

Finally, one can’t possibly use the word “panic” 4 times in a conference call without also adding the occasional “perfect storm”, and sure enough:

“So I think it’s just a perfect storm right now in retail, and I think sporting goods is in the center of it right now. There’ll be further consolidation. We’re seeing Gander Mountain closing right now. We’ll see what happens with some other retailers, but it’s a perfect storm right now. We’re not particularly happy that we’re in it.”

Meanwhile, as the legacy retail sector implodes and as US households drown under a record amount of debt (the two may be connected), the Fed is confused why credit card defaults as mysteriously surging at a time when the US economy is supposed to be recovering

end

 

The CBO states that if Trump does not pay the Obamacare subsidies in 2018, then premiums will surge around 20% per year and worse: Trump will be blamed

 

(courtesy zerohedge)

CBO Blames Trump: Sees 20% Surge In 2018 Obamacare Premiums If Subsidies Removed

At the request of Nancy Pelosi, the Congressional Budget Office has just released a study intended to better understand the potential economic impacts that would result from the cancellation of taxpayer funded Obamacare subsidies (a.k.a. “cost-sharing reductions” or “CSRs”).  The report is entitled “The Effects of Terminating Payments for Cost-Sharing Reductions,” and, among other things finds that cutting CSRs would cause a 20% spike in Obamacare premiums in 2018 and result in a $194 billion increase in the deficit from 2017 through 2026.

Here are the highlights:

– The fraction of people living in areas with no insurers offering nongroup plans would be greater during the next two years and about the same starting in 2020;

 

– Gross premiums for silver plans offered through the marketplaces would be 20 percent higher in 2018 and 25 percent higher by 2020—boosting the amount of premium tax credits according to the statutory formula;

 

– Most people would pay net premiums (after accounting for premium tax credits) for nongroup insurance throughout the next decade that were similar to or less than what they would pay otherwise—although the share of people facing slight increases would be higher during the next two years;

 

– Federal deficits would increase by $6 billion in 2018, $21 billion in 2020, and $26 billion in 2026; and ? The number of people uninsured would be slightly higher in 2018 but slightly lower starting in 2020.

Or, put more simply…if Trump decides to cut taxpayer-funded subsidies for a completely failed Obama-era piece of legislation then all future premium hikes are his fault

While Obama has yet to offer an official statement on the CBO’s report, we imagine it would go something like this:

Obama

 

Of course, according to data from the Department of Health and Human Servicesthe average individual purchaser of health insurance across the United States saw their premiums increase from $232 per month in 2013 to $476 per month in 2017, a ‘modest’ increase of over 100% in just a few years.

Ironically, that equates to a constantly annualized growth rate of exactly 20% per year.

 

Said another way, the CBO predicts that, without the benefit of taxpayer subsidies, Obamacare premiums would increase in 2018 at the exact same rate they’ve increased for each of the past 4 years…except they managed to find a convenient excuse for the continued collapse of a failed policy and a scapegoat…President Trump.

Well played, Nancy…well played.

Nancy

 

The full report from the CBO can be read here:

 

WELL THAT ABOUT DOES IT FOR TONIGHT

I will see you Wednesday night

Harvey.

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