August 23/Trump demands the wall or else he shuts down government/gold rises by $3.35 and silver rises by 9 cents/This ought to scare you: the world’s largest ad company (WPP) reports lousy earnings /and guidance for the rest of the year: awful!/New homes sales down 10% month/month/

GOLD: $1289.00  UP $3.35

Silver: $17.07  UP 9 CENTS

Closing access prices:

Gold $1290.40

silver: $17.08

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: $1290.86 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1283.95

PREMIUM FIRST FIX:  $6.91

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SECOND SHANGHAI GOLD FIX: $1292.59

NY GOLD PRICE AT THE EXACT SAME TIME: $1285.60

Premium of Shanghai 2nd fix/NY:$6.99

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1285.10

NY PRICING AT THE EXACT SAME TIME: $1285.90

LONDON SECOND GOLD FIX  10 AM: $1286.65

NY PRICING AT THE EXACT SAME TIME. $1287.65???

For comex gold:

AUGUST/

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

TOTAL NOTICES SO FAR: 4584 FOR 458,400 OZ  (14.258 TONNES)

For silver:

AUGUST

 15 NOTICES FILED TODAY FOR

75,000  OZ/

Total number of notices filed so far this month: 1104 for 5,520,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

end

 

As I have mentioned we are in options expiry week and you should expect pressure on gold/silver for the next 7 trading days. Gold and silver got a break today as Trump demanded his wall.  If he does not get the secured funding for the wall, he will shut down government as there will not be a signed budget agreement for 2018.  The USA has only 86 billion dollars left in the kitty and they burn around 3 billion per day. So they may run out by Sept 22 or Sept 23. Should be a very interesting September.

Let us have a look at the data for today

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In silver, the total open interest FELL by only 1400 contracts from 188,627 down to 187,227 with THE DROP IN PRICE THAT SILVER UNDERTOOK WITH  YESTERDAY’S TRADING (DOWN 3 CENTS). THE LOSS IN OI IS SMALLER IN COMPARISON TO THE LOSS IN OI IN GOLD AND THE CONSTANT TORMENT CAUSED BY OUR BANKERS.  THE BANKERS INITIATED THE PRICE DROP YESTERDAY WITH PAPER SHORTS AND THIS CAUSED SOME OF OUR NEWBIE SPECS TO EXIT. BUT GENERALLY THE ENTIRE SILVER COMPLEX REMAINS CALM 

RESULT: A SLIGHTLY LOWER OI WITH A LOWER PRICE.

 In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e.  0.936 BILLION TO BE EXACT or 134% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 15 NOTICE(S) FOR 75,000  OZ OF SILVER

In gold, the open interest FELL BY A CONSIDERABLE 5,386 CONTRACTS WITH THE FALL  in price of gold ($5.20 LOSS  YESTERDAY .). The new OI for the gold complex rests at 500,443.  THE BANKERS INITIATED A RAID YESTERDAY AS THEY INITIALLY SUPPLIED THE SHORT PAPER TO LOWER THE GOLD PRICE.  SOME OF OUR NEWBIE SPECS EXITED THE GOLD ARENA AND THE BANKERS COVERED A TINY PORTION OF THEIR  SHORTS.

Result: A LOSS IN OI with LOSS IN PRICE IN GOLD.

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

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

GLD:

Today, no changes in gold inventory:

Inventory rests tonight: 799.29 tonnes

IN THE LAST 28 TRADING DAYS: GLD SHEDS 37.68 TONNES YET GOLD IS HIGHER BY $56.50 .

SLV

Today:  WE HAD NO CHANGES IN SILVER INVENTORY TONIGHT:

INVENTORY RESTS AT 334.407 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 1400 contracts from 188,627 DOWN TO 187,227 (AND now A LITTLE FURTHER FROM THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) DESPITE YESTERDAY’S 3 CENT LOSS IN TRADING. SILVER REMAINED QUITE RESILIENT AND REFUSED TO LOWER IN PRICE DESPITE THE RAID INITIATED BY THE CROOKS. SOME NEWBIE LONGS EXITED THE ARENA BUT NOT MUCH. THE BANKERS STILL REFUSE TO SUPPLY THE NECESSARY SHORT PAPER! RESULT:  SLIGHTLY LOWER OI WITH A TINY LOWER PRICE.

(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 TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 2.52 POINTS OR 0.08%   / /Hang Sang CLOSED HOLIDAY/ The Nikkei closed UP 50.80 POINTS OR 0.26%/Australia’s all ordinaires CLOSED DOWN 0.21%/Chinese yuan (ONSHORE) closed UP at 6.6631/Oil DOWN to 47.71 dollars per barrel for WTI and 51.59 for Brent. Stocks in Europe OPENED RED , Offshore yuan trades  6.6667 yuan to the dollar vs 6.6631 for onshore yuan. NOW THE OFFSHORE MOVED STRONGER  TO THE ONSHORE YUAN/ ONSHORE YUAN STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE WEAKER DOLLAR. CHINA IS  HAPPY TODAY

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA//USA

Seems Kim is not stopping in his pursuit of nuclear weapons.  In this latest photo, Kim is inspecting new missiles.

( zero hedge)

b) REPORT ON JAPAN

c) REPORT ON CHINA

4. EUROPEAN AFFAIRS

Bill Blain of Porridge fame, highlights two areas of huge concern:

  1. The Provident subprime mess that I reported to you on yesterday.
  2.  Today’s big shocker of global ad giant WPP reporting on huge fall in earnings as well as poor guidance

( Bill Blain/MintPartners)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)Russia

Now it is Russia’s turn to give its response to the illegal North Korean sanction hoisted upon this country

( zero hedge)

 

ii)EGYPT

Egypt snubs Kushner as they cancel a meeting with him after Trump “delays” $300 million aid pkg that Obama initiated when in office.  Will this sever relations with the USA and will Egypt seek other allies destabilizing the middle east..

( zero hedge)

 

6 .GLOBAL ISSUES

Canada

Looks like Justin has found religion: he is going to stop the migrants from entering Canada

(courtesy zero hedge)

7. OIL ISSUES

i)Gasoline inventories draw down but oil still retreats due to huge production surges in crude

( zero hedge)

8. EMERGING MARKET

 

VENEZUELA

The following could be the crippling blow which could cause the ousting of Maduro: the blocking of anybody (through sanctions) that buys Venezuelan bonds

( zerohedge)

9.   PHYSICAL MARKETS

i)Politicians enter Fort Knox for the first time in 40 years yet do not ask the right questions

( GATA/AP)

ii)Mnuchin confirms that there has not been a gold audit since 1953

( GATA/Bloomberg)

iii)GATA chairman Murphy claims correctly that the press is not any freer than the markets

(courtesy Bill Murphy/ gata/Reluctant Preppers)

iv)This is interesting:  will Estonia be the first country to issue its own digital currency?

 

( zerohedge)

v)Back in December 2016, I highlighted the fact that 300 tonnes of gold stored at the FRBNY was shipped to Frankfurt and that the only thing that remained was 91 tonnes of gold stored in Paris. Today the Bundesbank announced that all 374 tonnes asked for has been sent to Frankfurt which now has 50.6% of its gold stored domestically. The big  question is why the hurry to complete the repatriation 3 yrs early?

( zero hedge)

10. USA Stories

i a)Soft data reporting of USA services soars to highest levels since 2015.  However soft data manufacturing slumps.

pay no attention to this data.
(courtesy zerohedge)
i b)This is a harbinger of things to come;  the world’s largest ad company WPP crashes after poor earnings as well as more discerning news of a “terrible guidance” forward.  Remember that the major USA companies, like Google and Facebook etc need ad revenue for their profits
( zero hedge)..
important read..

i c)The following shows the huge rut the uSA is in with respect to their economy. New home sales plunged by a monstrous 9.9% last month.  This follows June’s huge plunge in new household formations as millennials continue to live with their parents.

( zero hedge)

ii)An analysis of Trump’s Afghanistan speech, Monday night.  It seems that the neocons won this battle and the USA will be in this quagmire for years

( Adams/Mises Institute)

iii)The market certainly does not like this:  bad blood is spilling between Trump and McConnell as their relationship disintegrates. McConnell doubts whether Trump can save the Presidency .

( zero hedge)

iv)Very strange: former USA Attorney states that there is something every odd in the indictment on the Awan.

see for yourself..

( zero hedge)

v)The USA has had 2 collisions with their fleet with the latest being the SS John S McCain. Could there be a possibility that the ships were whacked?  Could it be China who does not want the USA patrolling the South China Seas

( Mac Slavo.SHTFPlan.com)

vi)Odds of a government shutdown just increased as Trump desires 1 billion dollars of secured funds and that is to be included into the 2018 budget.  If he does not get it, Trump will never sign anything and thus a shutdown

( zerohedge)

vii)Dave Kranzler weighs in on this huge 10% drop in new home sales plus the huge problems facing the USA consumer with revolving debt (credit cards), auto loans and student loans( Dave Kranzler/IRD)

Let us head over to the comex:

The total gold comex open interest FELL BY CONSIDERABLE 5,386 CONTRACTS DOWN to an OI level of 500,443 WITH THE GOOD SIZED FALL IN THE PRICE OF GOLD ($5.20 with YESTERDAY’S trading).This time the bankers did supply the necessary gold short paper to initiate the raid.  Newbie longs got caught up in this continued shenanigans and were forced out probably through stop losses. The bankers relied on ASSISTANCE from their HFT friends which helped the bankers cover a tiny portion of their shortfall.

Result: lower open interest and a bigger fall in the price of gold.

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 93 contract(s) to stand at 739 contracts. We had notices filed on YESTERDAY so we LOST 93 contracts or an additional 9300 oz will NOT stand at the comex and 93 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 49 contracts DOWN to 1315.

The next active contract month is Oct and here we saw a LOSS of 10 contracts DOWN to 52,180.

The very big active December contract month saw it’s OI LOSE 5394 contracts DOWN to 390,087.

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

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And now for the wild silver comex results.  Total silver OI FELL BY SMALLER THAN EXPECTED 1400 CONTRACTS FROM 188,627 TO 187,227 DESPITE YESTERDAY’S 3 CENT LOSS IN PRICE (AND RAID). THE BANKERS AGAIN WERE RELUCTANT TO ADD TO THEIR SHORTFALL DESPITE THE RAID INITIATED BY THE CROOKS. WE LOST A FEW NEWBIE SPEC LONGS WHO GOT CAUGHT UP IN THE RAID.
RESULT: SLIGHT LOSS IN OI AND A LOSS IN PRICE.

We are now in the next big non active silver contract month of August and here the OI GAINED 1 contract UP TO 24. We had 14 notice(s) filed yesterday.  Thus we GAINED ANOTHER 15 contract(s) or an additional 75,000 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 5008 contacts down to 75,306.  The next non active contract month for silver after September is October and here the OI gained 10 contacts up TO 488. After October, the big active contract month is December and here the OI GAINED by 3518 contracts UP to 98,664 contracts.

We had 15 notice(s) filed for  75,000 oz for the AUGUST 2017 contract

VOLUMES: for the gold comex

ESTIMATED VOLUME TODAY: 223,749 WHICH IS VERY GOOD

YESTERDAY’S confirmed volume was 276,046 which is VERY GOOD

volumes on gold are STILL HIGHER THAN NORMAL!

Initial standings for AUGUST

 August 23/2017.

 inventory movements not available today because the crooks are having trouble cooking their cooks
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
nil oz
Deposits to the Dealer Inventory in oz    nil oz
Deposits to the Customer Inventory, in oz 
  nil oz
No of oz served (contracts) today
 
3 notice(s)
300 OZ
No of oz to be served (notices)
736 contracts
(73,600 oz)
Total monthly oz gold served (contracts) so far this month
4584 notices
458,400 oz
14.258 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   34,462.5  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; 0  oz
We had 0 customer withdrawal(s)
 i
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 3  contract(s)  of which 0 notices were stopped (received) by j.P. Morgan dealer and 0 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account.

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To calculate the initial total number of gold ounces standing for the AUGUST. contract month, we take the total number of notices filed so far for the month (4584) x 100 oz or 458,400 oz, to which we add the difference between the open interest for the front month of AUGUST (739 contracts) minus the number of notices served upon today (3) x 100 oz per contract equals 532,300  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 (4584) x 100 oz  or ounces + {(739)OI for the front month  minus the number of  notices served upon today (3) x 100 oz which equals 532,000 oz standing in this  active delivery month of AUGUST  (16.547 tonnes)
 we LOST 93 contracts or an additional 9300 oz will NOT stand for delivery and 90 EFP’s for August were issued.(FOR FIAT BONUS PLUS ANOTHER DELIVERABLE CONTRACT WHICH MOST LIKELY IS A LONDON BASED FORWARD)
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Total dealer inventory 753,311.027 or 23.43 tonnes  (dealer gold continues to disappear)
Total gold inventory (dealer and customer) = 8,697,722.75 or 269.91 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 269.91 tonnes for a  loss of 32  tonnes over that period.  Since August 8/2016 we have lost 83 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  83 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE AUGUST DELIVERY MONTH
August initial standings
 August 23  2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
7046,510 oz
CNT
Deposits to the Dealer Inventory
nil  oz
Deposits to the Customer Inventory 
641,459.610
oz
HSBC
No of oz served today (contracts)
15 CONTRACT(S)
(75,000 OZ)
No of oz to be served (notices)
9 contracts
( 45,000 oz)
Total monthly oz silver served (contracts) 1104 contracts (5,520,000 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 3,265,727.9 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 1 customer withdrawal(s):
 i) Out of CNT: 7046.510 oz
TOTAL CUSTOMER WITHDRAWALS: 7046.510 oz
We had 1 Customer deposit(s):
 i)  HSBC:  641,459.610 oz was deposited into HSBC
***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: 641,459.610 oz
 
 we had 0 adjustment(s)
The total number of notices filed today for the AUGUST. contract month is represented by 15 contract(s) for 75,000 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 1104 x 5,000 oz  = 5,520,000 oz to which we add the difference between the open interest for the front month of AUGUST (24) and the number of notices served upon today (15) x 5000 oz equals the number of ounces standing
 

 

.
 
Thus the INITIAL standings for silver for the AUGUST contract month:  1104 (notices served so far)x 5000 oz  + OI for front month of AUGUST(24 ) -number of notices served upon today (15)x 5000 oz  equals  5,565,000 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 15 contracts or an additional 75,000 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 23/2016 we had 68,374 contracts standing vs this yr at 75,306.
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
ESTIMATED VOLUME TODAY:  97,449 WHICH IS EXCELLENT
YESTERDAY’s  confirmed volume was 106,944 contracts which is OUT OF THIS WORLD
FRIDAY’S CONFIRMED VOLUME OF 106,944 CONTRACTS WHICH EQUATES TO 534 MILLION OZ OF SILVER OR 76% 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:  38.318 million (close to record low inventory  
Total number of dealer and customer silver:   215.932 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.5 percent to NAV usa funds and Negative 6.8% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.5%
Percentage of fund in silver:37.5%
cash .+0.0%( August 23/2017) 
2. Sprott silver fund (PSLV): STOCK   NAV FALLS TO -0.57% (August 23/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES TO -0.27% to NAV  (August 23/2017 )
Note: Sprott silver trust back  into NEGATIVE territory at -0.57%/Sprott physical gold trust is back into NEGATIVE/ territory at -0.27%/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 23/no change in gold inventory at the GLD/Inventory ests at 799.29 tonnes

August 22/no change in gold inventory at the GLD/Inventory rests at 799.29 tonnes/

AUGUST 21/this is good!! a huge deposit of gold into the GLD to the tune of 3.85 tonnes/Inventory rests at 799.29 tonnes

August 18/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 795.44 TONNES

August 17/late last night, a deposit of 4.43 tonnes of gold at the GLD/inventory rests at 795.44 tonnes/the bleeding of gold has stopped.

August 16/no change in gold inventory at the GLD. Inventory rests at 791.01 tonnes

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

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August 23 /2017/ Inventory rests tonight at 799.29 tonnes
*IN LAST 218 TRADING DAYS: 150.59 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 157 TRADING DAYS: A NET  6.84 TONNES HAVE NOW BEEN ADDED INTO  GLD INVENTORY.
*FROM FEB 1/2017: A NET  9.97 TONNES HAVE BEEN WITHDRAWN.

end

Now the SLV Inventory

August 23/no change in silver inventory at the SLV/Inventory rests at 334.407 million oz

August 22/no change in silver inventory at the SLV/inventory rests at 334.407 million oz.

AUGUST 21/no change in silver inventory/inventory rests at 334.407 million oz/

August 18/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY REST AT 334.407 MILLION OZ

August 17/A WITHDRAWAL OF 1.418 MILLION OZ LEAVES THE VAULTS OF THE SLV (WITH SILVER UP 25 CENTS YESTERDAY?)/INVENTORY RESTS AT 334.407 MILLION OZ

August 16/no change in silver inventory at the SLV/Inventory rests at 335.825 million oz/

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

August 23.2017:

Inventory 334.407  million oz
end
  • 6 Month MM GOFO

    Indicative gold forward offer rate for a 6 month duration

    + 1.33%
  • 12 Month MM GOFO
    + 1.50%
  • 30 day trend

end

Major gold/silver trading/commentaries for WEDNESDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Global Financial Crisis 10 Years On: Gold Rises 100% from $650 to $1,300

– Gold up over 100% in major currencies since financial crisis
– Gold up 100% in dollars, 124% in euros and surged 200% in sterling 
– Gold has outperformed equity, bonds and most assets
– Gold remains an important safe- haven in long term

Gold prices from August 9th 2007  to August 9th 2017

It has been ten years since the global financial crisis began to take hold. At the time few would have known that BNP Paribas’ decision to freeze three hedge funds was the signal for the deepest recession in living memory and a near-collapse of the financial system.

As the French bank blamed a “complete evaporation of liquidity” on its decision the ECB flooded its the market with billions of euros of emergency cash as it worked to prevent a seizure in the financial system.

Very few realised how much the financial and investment landscape was set to change.

In the proceeding decade we have seen unprecedented intervention by central banks which in turn has created a punishing financial landscape for savers and investors.

For those who were unfortunate to experience bank bailouts first hand or a collapse in a housing market, an instant lesson was learnt about the importance of protecting your savings.

That would have been a savvy lesson to learn. Any investors feeling the ripples of the financial crisis and looking to protect their wealth may well have looked to gold as an option. By adding gold to their portfolio they would currently be looking at some extremely healthy returns.

For those who were slower on the uptake of portfolio protection, they still would have benefited from gold’s decade climb and its performance alongside other major asset classes.

Gold’s decade long climb

Gold continues to be dismissed by the mainstream as an important asset-class for investors. However the decade long-climb for the precious metal is example enough of it’s strong performance against a backdrop of financial and political turmoil.

The yellow metal has outperformed a number of key assets and is up at least 100% in major currencies.

Gold price up by over 100% in major currencies

Gold priced in sterling, euro and (US) dollar is up by at least 100%. Gold in a sterling a whopping 200%.

In contrast many major asset classes have not performed to the same extent, or met expectations.

For example, MSCI’s main world equity index might currently be on course for its longest monthly winning streak since 2003, but this is only 22% above levels in 2007.

Plus, as central banks actively stockpiled bonds, yields on 10-year government debt benchmarks have more than halved.

In the decade since the financial crisis gold has been one of the top performing assets. The table below shows the best performing asset classes in the last ten years.

It is clear to see that gold (when priced in sterling) has outperformed the majority of bonds and many equities (when priced in dollar and euro). The precious metal has held its own throughout a decade of financial confusion and distress.

This should come as no surprise to gold investors who are aware of gold’s ability to act as a long-term safe haven during times of crisis.

What is most interesting about the last ten years however is that the mainstream media and politicians are keen to promote the idea that the crisis is over. Yet, in many instances the situation is the same or, arguably, worse.

The financial environment is still an unattractive one for the average investor and saver.

A huge amount of leverage remains in the system, stocks are at unsustainable highs and geopolitical risks grow by the day.

It is clear to see that the global recovery is not the win that so many governments wish us to believe.

Was cash king?

For many savers, the idea of investing in markets following the financial crisis may have seemed too risky. Instead they may have opted to hold cash than they would have previously.

In times of crisis many argue that cash is king. This has certainly been evident in the short-term. However those who decided to hold cash over the last decade, as a form of insurance, will be hurting today.

A saver putting away £5,000 each year into the average UK savings account over the last decade would have only seen their savings grow by a stomach-churning 1.2% to £50,619.

Cash has been significantly devalued thanks to ongoing monetary easing programs by central banks. Savers have also lost out massively due to record low interest rates.

Low interest rates have been good news for borrowers. Rates have been low for so long that we are now faced with a generation of borrowers who have never experienced an interest rate rise.

For the UK we have not see interest rates above 5.5% for over ten years. This is great for those looking to get on the housing ladder or borrow for university but this will not be the norm.

Savers who have already been pushed through low rates may soon see further punishment once rates begin to rise and borrowers can no longer service their debts. How banks will cope is a question few people are able to answer.

Low interest rates are not the only impact from the financial crisis on cash savers. Negative rates are the true issue along with bank bail-ins of which few people are aware.

To see more on how well gold has performed next to cash, see our recent coverage.

Counterparty risk: the only lesson to be learnt

Gold has stood strong and held its own in the face of pumped up asset classes, low interest rates and increased risk. This is largely thanks to its sovereignty in the marketplace.

As we have repeatedly stated gold carries little counterparty risk and serves as a form of financial insurance whilst the walls of both the political and financial system grow increasingly weak.

It is a myth that the worst of the financial crisis is over. The trigger to the collapse may well be different to that which took place a decade ago but the situation is very similar. Gold’s long-term rise and strong performance is not over as sadly the financial and geopolitical crises are still ongoing.

-END-

END

Politicians enter Fort Knox for the first timein 40 years yet do not ask the right questions

(courtesy GATA/AP)

After 40 years Fort Knox opens famed vault to (select) civilians

 Section: 

But mainstream financial news organizations miss their best chance yet to ask critical questions about the government’s surreptitious activity in the gold market.

* * *

By Adam Beam
Associated Press
via Washington Post
Monday, August 21, 2017

https://www.washingtonpost.com/national/after-40-years-fort-knox-opens-v…

LOUISVILLE, Kentucky — Inside the famed vaults at Fort Knox, Senate Majority Leader Mitch McConnell held a 27-pound gold bar in his hands today as part of the first civilian delegation to see most of the country’s bullion reserves in more than 40 years.

But being surrounded by more than $186 billion worth of gold was no sweat for one of the country’s most powerful politicians

“It’s not even the annual funding level for some of our large departments in the federal government,” he said

McConnell was part of a delegation of Kentucky politicians allowed inside the United States Bullion Depository at Fort Knox for the first time since 1974. U.S. Treasury Secretary Steven Mnuchin initiated the visit, along with U.S. Rep. Brett Guthrie and Gov. Matt Bevin.The depository holds more than 147 million ounces of gold, which puts its market value at more than $186 billion. While primarily known as a vault for gold, the depository also held the Declaration of Independence and the U.S. Constitution during World War II.

Mnuchin said it was the first time Fort Knox opened its vaults to outsiders since a Congressional delegation and some journalists were let in to view the gold for the first time in 1974. McConnell said he had never thought about visiting Fort Knox before, but jumped at the chance when Mnuchin offered to take him.

“It just kind of came up as a result of a casual conversation,” McConnell said.

A movie producer before becoming treasury secretary, Mnuchin told a group of Louisville business leaders earlier in the day it was important for him to see the gold to attest that “it is part of our national assets.”

“I assume the gold is still there,” he said. “It would really be quite a movie if we walked in and there was no gold.”

In an interview, McConnell said he could not say much about the visit for security reasons. But Bevin, speaking on WHAS radio, divulged a few more details. He said it took “quite a bit of time” to get in and out of the facility, and said officials had to cut a seal to open the vault for them.

In addition to the gold bricks, Bevin said he got to hold a 1933 double eagle, a $20 gold coin that was never circulated. Bevin, who said he collected coins as a child, compared it to “seeing a leprechaun on a unicorn.”

“All I will say is that it is freakishly well secured,” he said. “The gold is safe.”

END

Mnuchin confirms that there has not been a gold audit since 1953

(courtesy GATA/Bloomberg)

Treasury secretary notes there’s been no gold audit since 1953

 Section: 

Mnuchin’s Fort Knox Quip: “I Assume the Gold Is Still There’

Saleha Mohsin and Alister Bull
Bloomberg News
Monday, August 21, 2017

https://www.bloomberg.com/news/articles/2017-08-21/mnuchin-to-visit-fort…

U.S. Treasury Secretary Steven Mnuchin paid a rare official visit Monday to Fort Knox to check out the nation’s gold stash — while keeping an open mind for future film projects.

“I assume the gold is still there,” the former Hollywood producer quipped to an audience in Louisville, Kentucky, 40 miles north of the U.S. Bullion Depository. “It would really be quite a movie if we walked in and there was no gold.” After the visit, he playfully reassured Americans the treasure was still secure.

“Glad gold is safe!” he wrote in a post on Twitter.

.Fort Knox has been seared into the public imagination since the 1964 James Bond movie “Goldfinger,” in which the British spy, played by Sean Connery, foiled a plot to contaminate the nation’s bullion.

Mnuchin, whose action-film credits include “Mad Max: Fury Road,” “The Lego Batman Movie,” and “Suicide Squad,” said that he would be only the third secretary of the Treasury to go inside the vault since it was created in 1936 by President Franklin Delano Roosevelt.

“We have approximately $200 billion of gold at Fort Knox,” Mnuchin said. “The last time anybody went in to see the gold, other than the Fort Knox people, was in 1974 when there was a congressional visit. And the last time it was counted was actually in 1953.”

END

GATA chairman Murphy claims correctly that the press is not any freer than the markets

(courtesy Bill Murphy/ gata/Reluctant Preppers)

Press isn’t any freer than the markets, GATA chairman says

 Section: 

9:07a ET Tuesday, August 22, 2017

Dear Friend of GATA and Gold:

In an interview Monday with Dunagun Kaiser of Reluctant Preppers, GATA Chairman Bill Murphy asserts that gold price suppression by the U.S. government and its allies demonstrates that there is no free press in the United States and there are no free markets. Murphy also describes the removal of GATA from the Wall Street Journal’s August 10 story about suspicion of surreptitious intervention by governments in the gold market, though GATA had provided the newspaper with introductions to most of the experts it quoted:

http://www.gata.org/node/17562

The interview is 23 minutes long and can be heard at YouTube here:

https://www.youtube.com/watch?v=MGNXEYc5Ejk&feature=youtu.be

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

END

This is interesting:  will Estonia be the first country to issue its own digital currency?

 

(courtesy zerohedge)

Will Estonia Be The First Country To Issue Its Own Digital Currency?

Nearly three years after Estonia introduced its “e-residency” program, becoming the first country on Earth to allow foreigners to become “digital citizens,” the tiny Baltic republic is considering another proposal that would further cement its reputation as a digital pioneerBecoming the first country to launch its own Initial Coin Offering.

In a Medium post published Tuesday, Kaspar Korjus, managing director of Estonia’s e-residency program, explained how such a virtual token – which he has tentatively named Estcoin – would function as a new type of investment allowing investors a “pure play” investment in its development. In this case, the money raised from the IPO would be administered by a public-private trust, and used to improve the country’s already formidable digital infrastructure.

Depending on how quickly the country follows through with this proposal (assuming they do pursue it) Estonia would become the first country to publicly launch a digital currency. The Chinese are developing a prototype called “ChinaCoin,” or “DigitalRMB,” but central-bank authorities say it could be another 10 years before it’s finished and launched.

As Korjus explains, Estonia would have “a clear advantage” in launching a digital token because of its “advanced digital infrastructure” and its e-residency program.

“No other country has come close to developing both the technology and the legal frameworks that would enable them to introduce and securely manage tradable crypto assets globally.”

Korjus said the idea was workshopped with input from Ethereum creator Vitalik Buterin. Buterin, Korjus says, envisions the estcoin as a new way to directly invest in a country’s future, rather than buying stocks, bonds or businesses.

“Ethereum founder Vitalik Buterin has a keen interest in Estonia’s development as a digital nation and has provided valuable feedback for the estcoin proposal.

 

He believes estcoins could be used to incentivise investors to support the success of a country in a way that is not currently possible through existing means of raising international finance.

 

An ICO within the e-Residency ecosystem would create a strong incentive alignment between e-residents and this fund, and beyond the economic aspect makes the e-residents feel like more of a community since there are more things they can do together,’ says Buterin.”

The coins would give investors “a bigger stake in the future of our country,” Korjust said, something that he hopes would help Estonia crowdsource ideas to improve its digital infrastructure.

“We already know that many people become e-residents simply because they are fans of our country, our technology and our ideas, and being an e-resident enables them to show their support.

 

A government-supported ICO would give more people a bigger stake in the future of our country and provide not just investment, but also more expertise and ideas to help us grow exponentially.”

Aside from being purely an investment, the coins, if issued on top of a blockchain, could be used in smart contracts, or otherwise as a transfer of value. Meanwhile, the money raised in the offering would be managed by a public-private partnership tasked with helping to build a “new digital nation.”

“The funds raised through Estcoins could be managed through a Public Private Partnership (PPP) and only used as described in the agreement to actually help build the new digital nation. This would enable Estonia to invest in new technologies and innovations for the public sector, from smart contracts to Artificial Intelligence, as well as make it technically scalable to benefit more people around the world. Estonia would then serve a model for how societies of the future can be served in the digital era.

 

In addition, a large proportion of the funds could be used as a community-run VC fund on behalf of investors. The money could then be used to support Estonian companies, including those established by other e-residents.”

Right now, Estcoin is still just an idea. The next step would be fleshing out the project in greater detail with a White Paper, which means the ICO, if it happens, could still be a few months away. But it’s difficult to imagine an argument for not pursuing it. Even if the coins tank on the secondary market, Estonia will be left with a giant pile of crypto-capital to spend. ICOs have already raised $1.3 billion since the beginning of the year, and analysts at Pitchbook believe that the total for 2017 will be somewhere around $1.7 billion. Earlier this month, a company called Protocol Labs raised nearly $250 million in an exclusive “presale” followed by a public ICO for its Filecoin project – all without a viable product.

Surely, an ICO with a country behind it could make an equally attractive pitch.

Back in December 2016, I highlighted the fact that 300 tonnes of gold stored at the FRBNY was shipped to Frankfurt and that the only thing that remained was 91 tonnes of gold stored in Paris. Today the Bundesbank announced that all 374 tonnes asked for has been sent to Frankfurt which now has 50.6% of its gold stored domestically. The big  question is why the hurry to complete the repatriation 3 yrs early?
(courtesy zero hedge)

German Central Bank Completes Repatriation Of $28 Billion In Gold Three Years Ahead Of Schedule

On January 16, 2013, the Bundesbank – one of the biggest gold holder in the world, with 3,378 tonnes – shocked the world: out of the blue, the German central bank announced that by December 31, 2020, it intends to store half of Germany’s gold reserves in its own vaults in Frankfurt, up from only 31% at the time. The plan would mean repatriating a total of 674 tonnes of gold, 300 from the New York Fed’s gold vault, and another 374 from the Bank of France. The transfer, the Bundesbank explained, was meant to “build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centers abroad within a short space of time.”

The “politically correct” motives for the transfer, as well as the logistics and the mechanics behind it were explained in a March 2015 video released by the Bundesbank…

… the real reasons, however, is that following several reports on this website which cast doubts on Germany’s gold holdings, in late 2012 the German Court of Auditors demanded that the Bundesbank undertake an audit of its gold reserves. Specifically, the court wanted to ensure that the nearly 3400 tons of gold, of which more than 2,000 tonnes held offshore, is in fact in existence – ‘because stocks have never been checked for authenticity and weight‘.  The move to repatriate was only accelerate following rumors that much of the offshore-held gold might have been “rehypothecated”, and not be there anymore, that it might have been melted down, leased, or sold.

Ironically, at the time, Bundesbank Board member Carl-Ludwig Thiele told the Handelsblatt that these moves were a “trust-building” measure, and he tried vigorously to put the rumors about the missing gold to rest. Of course, repatriating your gold from foreign central banks is precisely the opposite of a “demonstration of confidence.”

Even more ironic is that speaking to Forbes, a Bundesbank spokesman said in Jan 2013 that “we have no intention to sell gold,” adding that “[the relocation] is in case of a currency crisis.”  A mildly paradoxical argument since the officially stated reason for the repatriation the gold was to “build trust and confidence domestically, and to have the ability to sell gold quickly If needed.”

What made matters worse is that at the end of 2013, the Bundesbank announced it had managed to repatriate only 37 tonnes of the total 700 scheduled for redemption, further spooking the local population and suggesting that conspiracy theories that the gold was missing were in fact accurate.

As a result, following blowback from both the media and the public, the Bundesbank accelerated its activity, and repatriated 120 tonnes in 2014, 210 in 2015, and another 216 in 2016, implying that the Bundesbank’s faith in its foreign central bank peers had declined in inverse proportion to the accelerating redemption schedule.

Finally, Germany’s push to redomicile its gold also prompted a similar partial gold repatriation by the Netherlands.

* * *

So fast forward to August 23, 2017 when in what appears to have been a very big hurry, and well over three years ahead of schedule, the Bundesbank today announced it had “completed its gold transfer process earlier than originally planned.”

The news should not come as a surprise: back in February the Bundesbank announced that it had already concluded the transfer of all the planned gold from New York, leaving only French gold to be repatriated. And, as of today, that too has been completed. From the press release:

The Bundesbank has completed its gold transfer process earlier than originally planned. After the gold in New York was able to be transferred ahead of schedule in 2016, roughly 91 tonnes of gold still remained in Paris. This was relocated to Frankfurt this year and as a result, there are no longer any German gold reserves in Paris. “This closes out the entire gold storage plan – around three years ahead of the time we were aiming for,” reported Carl-Ludwig Thiele, Member of the Bundesbank’s Executive Board, referring to the gold storage plan unveiled in 2013. This plan saw the Bundesbank storing half of Germany’s gold reserves in its own vaults in Frankfurt am Main from 2020 onwards, requiring the phased transfer of approximately 300 tonnes of gold from New York and about 374 tonnes of gold from Paris.

 

The following table gives an overview of the gold transferred.

 

 

The Bundesbank had verification measures in place throughout the entire transfer process – from when the gold was removed from the storage locations abroad until it was placed back in storage in Frankfurt am Main – to ensure that it was Germany’s gold reserves that were being transferred. Once they arrived in Frankfurt am Main, all the transferred gold bars were thoroughly and exhaustively inspected and verified by the Bundesbank. When the inspections of transfers had been concluded, no irregularities came to light with regard to the authenticity, fineness or weight of the bars.

 

In spring 2018, the Bundesbank will publish an updated version of its gold bar list as at 31 December 2017 on its website.

And so, Germany’s repatriation of 674 tonnes of gold – or 53,780 bars of gold – is complete, lifting the amount of gold held domestically to 1,710 tonnes or 50.6% of the total. Going forward, Germany will still have 1,236 tonnes held at the NY Fed, and another 432 tonnes of gold at the Bank of England.

Why this unexpected scramble to repatriate $28 billion in physical gold 3 years ahead of the stated schedule, remains a “mystery.


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

 
 

1 Chinese yuan vs USA dollar/yuan STRONGER 6.6630 (REVALUATION NORTHBOUND   /OFFSHORE YUAN MOVES MUCH STRONGER TO ONSHORE AT   6.6667/ Shanghai bourse CLOSED DOWN 2.52 POINTS OR 0.08%  / HANG SANG CLOSED 

2. Nikkei closed UP 50.80 POINTS OR 0.26%    /USA: YEN FALLS TO 109.28

3. Europe stocks OPENED IN THE RED     ( /USA dollar index FALLS TO  93.38/Euro UP to 1.1789

3b Japan 10 year bond yield: FALLS  TO  +.038%/ 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::  47.71 and Brent: 51.59

3f Gold UP/Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO  +.396%/Italian 10 yr bond yield DOWN  to 2.117%    

3j Greek 10 year bond yield FALLS to  : 5.578???  

3k Gold at $1290.35  silver at:17.08 (8:15 am est)   SILVER BELOW  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 3/100 in  roubles/dollar) 59.11-

3m oil into the 47 dollar handle for WTI and 51 handle for Brent/

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

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.28 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  0.9678 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1411 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017 

3r the 10 Year German bund now POSITIVE territory with the 10 year FALLING to  +0.396%

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 2.2080% early this morning. Thirty year rate  at 2.7816% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

Stocks Slide After Trump Threatens Government Shutdown Over Wall Funding, Killing NAFTA

Yesterday, when stocks surged at the market open following Politico’s report that Trump is unexpectedly “making strides” on tax reform, we warned that it can all be wiped away as soon as tonight, when Trump will deliver a speech to his “base”, in which he may promptly burn any of the goodwill he created with capital markets following his far more conventional Afghanistan speech last night.”Well, that’s precisely what happened, because on Tuesday night, in another fiery campaign rally, Trump fiercely defended his response to violence in Charlottesville, made passing remarks from a teleprompter about the need for unity and inclusion before veering off-script to attack the news media, Democrats and even Republicans in the Senate whom he accused of distorting his response and blocking his agenda.

But what spooked markets, and what has sent both US futures and European stocks lower, was Trump’s threat to bring the U.S. government to the brink of a shutdown if needed to pressure Congress into funding the border wall that was a centerpiece of his 2016 campaign, stoking renewed fears that the debt ceiling debate will be far more contentious that the market expects.

Delivering a warning to Democratic lawmakers who have objected to his plans to construct a wall along the U.S.-Mexico frontier, Trump called them “obstructionists” and said that it was time for the U.S. to crack down on illegal immigration. If we have to close down our government, we’re building that wall,” Trump told thousands of supporters gathered in Phoenix for a campaign-style rally. “One way or the other, we’re going to get that wall.” As Trump spoke, S&P500 futures reversed gains to slip as much as 0.3% as Trump spoke.

As Bloomberg notes, Trump has asked for $1.6 billion to begin construction of the wall, with Congress under pressure to pass some kind of spending bill to keep the government open after Sept. 30. But Republicans in Congress haven’t shown much appetite for fighting to spend potentially billions more on a border barrier either. The funding would add to the deficit at the same time Republicans are trying to figure out how to pay for tax cuts.

Separately, the yen strengthened, while the Mexican peso weakened 0.2 percent as the president also said he might terminate the North American Free Trade Agreement at some point: “Personally, I don’t think we can make a deal because we have been so badly taken advantage of. They have made such bad deals, both of the countries, but in particular Mexico, that I don’t think we can make a deal. So I think we’ll end up probably terminating Nafta at some point. I personally don’t think we can make a deal without termination, but we’ll see.”

“His comments on the NAFTA negotiations once again brings the general direction toward obstructing free trade, and raises concerns over its impact on global trade,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities Co. in Tokyo.

Still, despite the latest Trump bluster, the hope for tax reform wasn’t completely killed: during his speech Trump repeated his call for a historic tax cut, promising to pass the “first major tax reform in over 30 years.” While he provided no details of any planned legislation, he urged congressional Democrats to support it. Democratic senators in states he won should be particularly wary, Trump said. Most Senate Democrats have said they’ll refuse to support any tax legislation that provides a tax cut to the highest earners. “The Democrats are going to find a way to obstruct,” Trump said. If so, he told his supporters, they’ll be preventing Americans from receiving a “massive tax cut.” Unlike healthcare, tax reform is a less divisive issue among Republicans and could represent Trump’s first major legislative victory, if it were to pass, although in light of recent reports of a collapse in relations between Trump and Mitch McConnell, even that now looks improbable.

* * *

Putting it all together, on Wednesday morning S&P futures are down 0.24%, alongside with European shares and oil. The Yen gained versus all G-10 peers as investors sought safer assets afterTrump threatened to bring the U.S. government to the brink of a shutdown if needed to pressure Congress into funding the border wall that was a centerpiece of his 2016 campaign, and threatened to terminate Nafta at some point.

“The Nafta hot air may be as much an excuse to take a step back after Wall Street’s surge yesterday, as it is a legitimate concern about the president not appreciating nuances of inter-dependence embedded in trade deals,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The ‘she loves me, she loves me not’ thought process could lead to on-off markets”

Elsewhere, treasury futures marginally firmer; the Kiwi fell sharply after New Zealand cut growth and budget forecasts; the Korean won climbed for third day. HKEX cancels trading due to Typhoon Hato; The Nikkei rose for first time in six days. In China, the PBOC drained net 40 billion yuan in open market operations although the overnight money market rate spike to two-year high turned out to be inaccurate due to a “faulty print” although iron ore slumps 5.2% after steel rebar sinks.  WTI crude drifts sideways near $47.70;

The euro was the standout gainer in an otherwise listless day in markets, as strong European data boosted confidence in the region’s growth, while a speech by Mario Draghi, seen as a preview to his Jackson Hole address, did not unveil any new dovish message/policy shift, and instead underscored the recent European strength. Gold and yen benefited as comments from President Donald Trump provoked another bout of investor caution. The surprise gain in the European PMI index, however, did little to spur the Stoxx Euro 600 Index, which retreated led by WPP Plc after the world’s largest advertising company cut its revenue forecast.

European Markit flash prints:

  • EU Markit Comp Flash PMI (Aug) 55.8 vs. Exp. 55.5 (Prey. 55.7)
  • EU Markit Services Flash PMI (Aug) 54.9 vs. Exp. 55.4 (Prey. 55.4)
  • EU Markit Manufacturing Flash PMI (Aug) 57.4 vs. Exp. 56.3 (Prey. 56.6)
  • German Markit Comp Flash PMI (Aug) 55.7 vs. Exp. 54.7 (Prey. 54.7)
  • German Markit Manufacturing Flash PMI (Aug) 59.4 vs. Exp. 57.7 (Prey. 58.1)
  • German Markit Services Flash PMI (Aug) 53.4 vs. Exp. 53.3 (Prey. 53.1)
  • French Markit Services Flash PMI (Aug) 55.5 vs. Exp. 55.8 (Prey. 56.0)
  • French Markit Manufacturing Flash PMI (Aug) 55.8 vs. Exp. 54.5 (Prey. 54.9)

Despite the strong survey data, European stocks traded lower across the board, with the Stoxx Europe 600 Index down 0.2% in early trading. The U.K.’s FTSE 100 Index gained less than 0.05%, while Germany’s DAX Index fell 0.1 percent.

Meanwhile, geopolitical events continue to escalate in the background: Trump also said that North Korean leader Kim Jong Un is beginning to respect the U.S., the latest comments that suggest his administration is moving closer to seeking talks over Pyongyang’s nuclear arsenal. But the U.S. tightened its financial restrictions on North Korea, slapping sanctions on Chinese and Russian entities it accused of assisting Pyongyang’s development of nuclear weapons and ballistic missiles.

In rates, Italian BTPs sell off heavily for a second day, continution of carry trade unwinds and auction setups; USTs lower with bunds following PMI data and German supply

Economic data include MBA mortgage applications, PMIs and new home sales. RBC, Lowe’s, HP and Eaton Vance are among companies reporting earnings.

Bulletin Headline Summary from RanSquawk

  • President Trump says he will probably terminate NAFTA at some point and happy to shut government to build the wall
  • EUR supported by positive PMI data. Draghi’s speech refrains from mentioning current monetary policy
  • Looking ahead, highlights include US PMIs, DoEs, and Fed’s Kaplan

Market Snapshot

  • S&P 500 futures down 0.2% to 2,447.2
  • STOXX Europe 600 down 0.3% to 374.84
  • German 10Y yield rose 1.2 bps to 0.412%
  • Euro up 0.2% to $1.1783
  • Italian 10Y yield rose 6.7 bps to 1.809%
  • Spanish 10Y yield rose 2.6 bps to 1.598%
  • MSCI Asia up 0.07% to 159.74
  • MSCI Asia ex Japan down 0.07% to 527.31
  • Nikkei up 0.3% to 19,434.64
  • Topix up 0.3% to 1,600.05
  • Hang Seng Index up 0.9% to 27,401.67
  • Shanghai Composite down 0.08% to 3,287.71
  • Sensex up 0.5% to 31,432.36
  • Australia S&P/ASX 200 down 0.2% to 5,737.16
  • Kospi up 0.05% to 2,366.40
  • Brent futures down 0.5% to $51.63/bbl
  • Gold spot up 0.08% to $1,286.14
  • U.S. Dollar Index down 0.1% to 93.41

Top Overnight News

  • Trump Threatens Government Shutdown Over Border Wall Funding
  • German economic growth is set to exceed 2% this year for the first time since 2011, a report from IHS Markit shows
  • Mario Draghi said that while central bank policy over the last decade has strengthened the global economy, it is important to be open minded in preparing for new challenges
  • German Chancellor Angela Merkel rejected the caricature of her party as obsessed with debt, while her main election challenger attacked her as too accommodating toward Trump
  • Paris or Frankfurt? BofA Executives Debate Trading Hub Location
  • Pay MiFID Research Costs Yourselves, Wealth Managers Tell Funds
  • New Mountain Is Said to Hire Financial Advisers for Sale of IRI
  • WPP Shares Slump as Ad Giant Cuts Forecast on Waning Spending
  • Clarion Call for Metal Bulls as Citigroup Hails China Reform
  • Steinhoff Plans IPO of Africa Retail Assets by End of September
  • Mueller Uses Classic Prosecution Playbook Despite Trump Warnings

Asian equity markets traded mixed as the region somewhat failed to sustain the impetus from Wall St, where the Nasdaq led the surge after rebounding from a 3-day losing streak. ASX 200 (-0.23%) and Nikkei 225 (+0.26%) were both initially higher with outperformance in the Japanese bourse due to early JPY weakness. However, majority of gains were later pared amid comments from President Trump regarding shutting down the government to build the wall, while ASX 200 slipped into the red as losses in Healthscope and IAG post-earnings dampened healthcare and financials. Shanghai Comp. (-0.08%) traded choppy despite a firmer liquidity injection by the PBoC of CNY 180bln via reverse repos, as this still amounted to a daily net drain once maturing repos were taken into account, while Hang Seng remained closed due to Typhoon Hato.

Top Asian News

  • Shanghai Stocks Edge Lower While Typhoon Hato Shutters Hong Kong
  • Saudi Wealth Fund Is Said to Hire Head of $111 Billion Portfolio
  • Citigroup Sees ‘Significant’ Inflows Into China Bond Market
  • Bank of Thailand Gets Baht Help From First Trade Gap Since 2015
  • Unicom to Pump as Much as $11.3 Billion Into Hong Kong Unit
  • Jokowi’s Dream GDP Target Seen Out of Reach by Finance Ministry
  • China’s VIPKid Raises $200 Million From Tencent, Sequoia China
  • BOT Unlikely to Introduce New Measures to Curb Baht Gains: Citi
  • Mongolia, Anyone? Junkiest Sovereign Debt Pays Less Than 6%
  • Japan Shares Gains Capped by Trump’s Nafta, Wall-Funding Remarks

On a broad basis EU Bourses are trade with little in the way of firm direction, (Eurostoxx50 flat) following President Trump’s stormy speech in which he stated he would shut down Government in order to build a wall in-between USA and Mexico, while also commenting he could get rid of NAFTA. In stock specific news WPP shares are on course for its worst trading session in 19 years, falling 10% after the company cut its year outlook. Bund yield ticking higher this morning following the aforementioned better than expected German PMI readings, while slight outperformance has been seen in the short run end of the curve. Peripheral debt continues to underperform its German counterpart with Italian spreads wider by 3.9 bps. This morning has also seen the absorption of UK and GE supply which was relatively well received.

Top European News

  • Draghi Says Central Banks Must Be Open-Minded to Meet Challenges
  • Surviving Oil Crash, Norway’s PM Builds Hope for Second Term
  • Euro-Area Factories Feed Best Growth Spell for Economy in Years
  • London Home Prices to Remain Stalled for Years, Economists Say
  • German Economy Set to Break Through 2% Growth Hurdle in 2017
  • French Manufacturing Propels Economic Growth as Services Slow
  • Pound Drops to Near Two-Month Low as U.K. Softens Brexit Stance
  • Euro Reverses Drop on PMIs as Draghi Doesn’t Express FX Concern
  • Macron Gets Down to Business in EU Tour to Curb Cheap Labor
  • Merkel Rebuts Image of Debt-Obsessed Germany in Campaign Pitch

In currenciues, there were no fireworks from Draghi at the Lindau meeting as the President does not address future policy or economic outlook in his speech. EUR edging higher this morning amid firm PMI readings from the Eurozone’s two largest economies, Germany and France. GBP slightly lower today, although much of the focus is on the GBP TWI, which is now at a fresh 2017 low at 74.90. Subsequently, suggesting that the outlook for import prices could be back on the rise. Today will set to soften its stance today on new legal laws, requesting to only end ‘direct jurisdiction’ of the ECJ after Brexit. NZD is the worst performer, slipping by 0.8% after the NZ governments pre-election fiscal update, in which they cut their GDP forecast, while cross related buying seen through AUD/NZD had also kept NZD pressured as the cross breached 1.09. MXN notably softer this morning following comments from President Trump who stated that the US would probably scrap NAFTA at some point (Mexico are to hold 2nd round of talks in September). Additionally, Trump also promised a government shutdown in order to build Mexico border wall, subsequently pushing USD/MXN higher by 0.5%.

In commodities, WTI & Brent crude futures are marginally lower this mornings, despite the headline drawdown in the API Crude report, however there had been a sizeable build in Gasoline and Distillate inventories. Gold prices tracking higher by around 0.1% given the slight softness observed in equity markets.

Looking at the day ahead, the Markit PMIs on manufacturing, services and composite are out for Eurozone, Germany and France, with stronger mfg numbers offset by weaker service data. In the US, there is the MBA mortgage applications and new home sales data (0% mom expected) for July. Onto other events, Draghi will speak at Lindau (Germany), potentially providing an update on the QE. The Fed’s Kaplan will also speak.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior 0.1%
  • 9:45am: Markit US Manufacturing PMI, est. 53.5, prior 53.3; Services PMI, est. 55, prior 54.7; Composite PMI, prior 54.6
  • 10am: New Home Sales, est. 610,000, prior 610,000; Sales MoM, est. 0.0%, prior 0.8%

DB’s Jim Reid concludes the overnight wrap:

Welcome to Jackson Hole Eve. As we said earlier this week, expectations have been dialled down a bit through August as to how hawkish central banks can afford to be at this juncture. Yes the Fed may hike in December and yes the ECB may announce a further taper for 2018 in October but recent events (softer inflation, softer market sentiment and the strong Euro for the ECB) may mean that now might not be the time they choose to guide markets towards such an outcome. On balance I think the risks are more skewed towards higher yields post the symposium as an increasing amount of investors have relaxed over the likely central bank message. We’ll see. Before we get to the main event, today sees the important flash PMI numbers and Mr Draghi will be the keynote speaker at the Lindau symposium in Germany at 9:25am CET. He is  expected to speak about the “interaction between research and monetary policy decision making”. All before checking in to his transatlantic flight to the US.

Ahead of Mr Draghi’s double bill, the flash PMIs today in the Euro area and for Germany and France will make interesting reading. Growth has been very robust on these measures but there has been some signs over the last couple of months that we’ve peaked out for now. For example, focusing on the composite index, current expectations are running a bit lower than their recent peak, with Germany at 54.7 (vs. 57.3 recent peak), the Eurozone (55.5 vs 56.8) and in France (55.4 vs 57.6). The strong Euro of late might cement that trend and it was interesting that yesterday’s German ZEW survey, whilst strong in terms of current economic conditions (best reading since Jan 2008), saw expectations falling to 10, which is the lowest level since October.

This morning in Asia, Japan’s preliminary Nikkei manufacturing PMI for August was released at 52.8 (vs. 52.1 previous). After initially following the risk on from yesterday, bourses in the region are slipping after Mr Trump has been discussing ending NAFTA and also shutting down the government if he can’t get funding for his Mexican border wall. Another dimension to think about as we get closer to the budget ceiling stand off over the next couple of months. So markets are off their highs for the session but have still broadly followed the positive lead from US, with the Nikkei (+0.33%), Kospi (flat), but the ASX 200 dipped 0.25% while the Hang Seng was closed for the morning due to a typhoon.

US equity markets had a stronger day as it was a good day in terms of political newsflow with regards to Mr Trump gaining momentum on his tax reform agenda. The Politico reporting that Trump’s top aides and congressional lawmakers have found common ground on some of the ways to pay for personal and corporate tax cuts. Some of the funding options touted include: capping mortgage interest deduction for home owners, scrapping state and local tax deductions, eliminate businesses’ ability to deduct interest while allowing the phase-in of full expensing for small businesses. The corporate tax rate is expected to fall to 22%-25%, but unlikely to be less than 20%.

On the back of this, US equities strengthened, albeit on light volume. The S&P was up +0.99%, the Dow up +0.90% and the Nasdaq increased +1.36%. Within the S&P, only the real estate sector was in the red. Notable gains elsewhere included: IT (+1.45%), materials (+1.20%) and health care (+1.17%). European markets also increased, with the Stoxx 600 up 0.83% and all sectors increased. Elsewhere, the Dax (+1.35%), FTSE 100 and CAC (both up c0.9%) were higher, but Italy’s FTSE MIB dipped 0.11%. The VIX fell 14% to 11.5. Over in the bond markets, yields modestly increased in the US and Europe.

The UST 10Y yields were up 3bps (2Y: +2bps; 10Y: +3bps), while bunds were flattish (2Y: -0.4bp; 10Y: unch) and Gilts (2Y: -1bp; 10Y: +1.5bps) and French OATs (2Y: -0.5bp; 10Y: +0.5bp) up slightly at the longer end of the curve. The Italian BTPs had more action, with the curve sharply steeper (2Y: +2bps; 10Y: +7bps). A potential catalyst may have been reports that former PM Berlusconi who leads the centre-right Forza Italia party, has indicated his support for the introduction of a parallel currency in Italy. The idea itself is not new, but does highlight concerns about broader anti-euro sentiment in Italy, as the country heads into elections next year.

Turning to currencies, the US dollar index strengthened 0.5% overnight. Conversely, the Euro/USD and Sterling/USD fell 0.5% and 0.6% respectively, while the Euro/Sterling was little changed. In commodities, WTI Oil has pared gains this morning (-0.4%), after API reported US crude stockpiles fell last week, but increasing gasoline supplies offset this development. Elsewhere, the joint OPEC and non-OPEC committee will meet again in late September to review production curbs. Iron ore dipped 0.4% after a c9% rise over the prior three days. Precious metals were slightly down (Gold -0.5%, Silver -0.1%), while other metals have also softened this morning with copper (-0.1%), aluminium (-0.6%) and zinc (-1.2%).

Away from the markets, San Francisco Fed President Williams said there’s no sign of recession near term and that in regards to the Fed’s plan to unwind its balance sheet, he said “we’re trying to make it boring”.

Elsewhere, DB’s Winkler and Harvey have written on the looming US debt ceiling debate. They argue that even if a technical default is highly unlikely, the issue is likely to become an increasing focus for markets and so they examine potential  tail risks for the US dollar. On the fiscal side, the main risk concerns are any fiscal conditionality attached to a debt ceiling increase. The experiences of 2011 and 2013 show that debt ceiling debates have the potential to become important fiscal turning points. On the monetary policy side, it would likely be too early for the Fed to take into account developments in Washington at their 20 September meeting.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the Richmond Fed manufacturing index was steady mom but higher than expected at 14 (vs. 10), suggesting a manufacturing ISM reading in the 55-60 range. The FHFA house price index for June was slightly lower at 0.1% (vs. 0.5% expected), lowering the through-year growth to 6.5% yoy. In Germany, the ZEW expectations index was lower than expected at 10 (vs. 15.0), partly impacted by concerns that the rising Euro will weigh on the economy as well as the widening diesel car scandal. Over in the UK, the CBI’s  Industrial Trends survey again painted a positive picture, with the output expectations and orders indices both edging higher and thus remaining at historically elevated levels. Elsewhere, the July borrowing data was lower than expected, with public sector net borrowing at -0.8bn (vs. 0.3bn expected) and private sector net borrowing for July at -0.2bn (vs. 1.0bn expected).

Looking at the day ahead, the Markit PMIs on manufacturing, services and composite will be out for the US (53.4 expected for manufacturing and 54.9 for services), Eurozone, Germany and France. The Eurozone’s advance consumer confidence for August will also be out. Over in the US, there is the MBA mortgage applications and new home sales data (0% mom expected) for July. Onto other events, Draghi will speak at Lindau (Germany), potentially providing an update on the QE. Over in the US, the Fed’s Kaplan will also speak.

 END

3. ASIAN AFFAIRS

i)Late TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 2.52 POINTS OR 0.08%   / /Hang Sang CLOSED HOLIDAY/ The Nikkei closed UP 50.80 POINTS OR 0.26%/Australia’s all ordinaires CLOSED DOWN 0.21%/Chinese yuan (ONSHORE) closed UP at 6.6631/Oil DOWN to 47.71 dollars per barrel for WTI and 51.59 for Brent. Stocks in Europe OPENED RED , Offshore yuan trades  6.6667 yuan to the dollar vs 6.6631 for onshore yuan. NOW THE OFFSHORE MOVED STRONGER  TO THE ONSHORE YUAN/ ONSHORE YUAN STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE WEAKER DOLLAR. CHINA IS  HAPPY TODAY 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA/USA

Seems Kim is not stopping in his pursuit of nuclear weapons.  In this latest photo, Kim is inspecting new missiles.

(courtesy zero hedge)

b) REPORT ON JAPAN

end

c) REPORT ON CHINA

 

4. EUROPEAN AFFAIRS

Bill Blain of Porridge fame, highlights two areas of huge concern:

  1. The Provident subprime mess that I reported to you on yesterday.
  2.  Today’s big shocker of global ad giant WPP reporting on huge fall in earnings as well as poor guidance

(courtesy Bill Blain/MintPartners)

Bill Blain On Provident’s Suprime Shock: “Can’t Get Much Worse You’d Think? Oh Yes It Can”

By Bill Blain of Mint Partners

Blain’s Morning Porridge

Provident Financial. What a mess. Is it an opportunity?

Provident has become the story of the week. In case you missed it: the stock has been hammered and its bonds are trading massively down on the back of multiple bad news bullets: an FCA investigation into the Vanquis credit card and loan repayment options, a failed new technology introduction and new staffing approach that caused a leap in defaults from 10% to 43% (!), suspended dividends and the departure of the CEO.

Ouch.

For years Provident was a respected name, secure in its niche supplying credit to the bottom of the UK credit pool. Its experienced independent door-to-door salesmen managed their clients pragmatically – a personal touch that kept defaults low and recoveries high. Earlier this year the model was turned on its head. The independent door-to-door guys were replaced by I-pad wielding scripted staff controlled by head office. The system appears to have collapsed overnight. Defaults soared.

The firm threw away control of its clients.

Muppets.

Provident has been described as “uninvestable”.

It looks like a case of classic management incompetence. Replace a tried and tested functional business model with something new that doesn’t work. But there is more to it. It should remind fixed income investors of the importance of cash-flow – and exactly how cash is collected and overseen. Years of experience has taught us that firms with a tight control of their credit processes and sustainable businesses are the ones to invest in.

Apply that test across your credit portfolio.

It’s a classic wake up and smell the coffee moment re any secured deal secured or senior debt based around cash flow generative business models. If you wish, apply the same model to High Yield, but make sure there is a defibrillator in the room first.

The second lesson is more general – Provident is not the only corporate in more trouble than we thought. This morning WPP is on the wires as tumbling global advertising revenues means a profit warning is merited. Which leads one to wonder what that might mean for firms like Facebook as the younger teen and pre-teen generations abandon the social media site because it’s for their grandparents.

Do not ignore the risks generated by trends and society… and just about everything else.. And, the recall the classic adage: invest in companies where you understand the model and are confident the management also understand the risks, the environment and the threats and can deliver.

I’m told Provident is secure – although its got a shed-load of debt coming due in coming months through to 2023 (over £1 bln with an average maturity of 2.34 years), the new management is confident it can cover the debt losses, and the likely FCA fine. It’s got bank lines in place to repay £120mm debt due in October.

However, the lesson of 2007 was collapsing confidence in a financial’s liquidity is what kills it. Witness Northern Rock – where it wasn’t afflicted by credit losses, but a drying up of liquidity. To recover, Provident will not only have to reverse the current credit losses, but also persuade highly sceptical market it is again investible. That is a 2-3 year process with a new management… not convinced it can happen. Alternatively, perhaps the major shareholders will step in to finance the firm through rehabilitation.

As the UK’s best known sub-prime lender spins into a death spiral, what are the implications for mainstream UK banks? The regulators are all over consumer lending like the proverbial cheap suit. There is a risk they will see the opportunity to impose greater hurdles on lending to “persistent debtors”. Bloomberg says 3 million UK credit card holders are in debt trap.

Can’t get much worse you’d think.. Oh yes it can.

The bottom line is the UK is debt-addicted. Provident may have had its flaws, but the model of door-to-door paternalistic lending worked. Who fills their boots? Therein lies opportunity – but it’s an area where regulators just can’t resist the urge to get involved. I can’t help but suspect the regulators are so keen to control and restrict sub-prime they’d rather see it stopped completely, rather than promote lending to the social classes that need it most. They’d rather starve the population than risk food poisoning…

5. RUSSIA AND MIDDLE EASTERN AFFAIRS

Russia

Now it is Russia’s turn to give its response to the illegal North Korean sanction hoisted upon this country

(courtesy zero hedge)

Russia Vows “Inevitable Response” Over “Illegal” North Korea Sanctions

Yesterday, the Trump administration slapped a new round of sanctions on Chinese and Russian entities accused of aiding the North Korean nuclear program. The Treasury Department’s Office of Foreign Assets Control said it would target 10 entities and six individuals who help already sanctioned people to aid North Korea’s missile program, or who “deal in the North Korean energy trade.” Predictably, the Russian and Chinese government’s were less than pleased, with spokespeople for both governments claiming the sanctions are illegitimate because they were not approved by the United Nations.

A representative for the Russian government meanwhile promised that a “response” is in the works,” according to Russia Today.

Just like China, which immediately slammed the Trump administration, demanding that the “mistake” be fixed asap, the Russian government is just as angry with this latest round of sanctions and, as they have done many times in the recent past, the Russians threatened retaliation. Russian Deputy Foreign Minister Sergey Ryabkov issued a statement expressing disappointment, and warning Washington that Russia was working on a response.

“Against such a depressing backdrop, the lip service from American representatives about the desire to stabilize bilateral relations is extremely unconvincing,” Ryabkov said. “We have always and will always support resolving our existing differences through dialogue. In recent years, Washington in theory should have learned that for us the language of sanctions is unacceptable, and the solutions to real problems are only hindered by such actions. So far, however, there doesn’t seem to be an understanding of such obvious truths.

While the exact nature of the “inevitable response” has yet to be decided, Ryabkov said he hopes “our American colleagues” will soon understand the “futility” of using sanctions to prod the Russian government, or Russian entities, into cooperation.

“Nevertheless, we do not lose our hope that the voice of reason will sooner or later prevail,and that our American colleagues will be aware of the futility and detrimental nature of further sliding down the spiral of sanctions. “In the meantime, we are beginning to work out the inevitable response to this situation.”

The companies targeted by the sanctions include Gefest-M, a Moscow-based firm accused of acquiring metals on behalf of a North Korean company, and Mingzheng International Trading, a Chinese and Hong Kong-based bank that allegedly conducted transactions on behalf of North Korea. Andrey Klimov, a senior Russian senator, criticized the sanctions against Gefest-M and the other Russian entities as illegitimate.

“These sanctions are illegal in themselves, because the only thing recognized by international law is the sanctions of the UN Security Council,” Klimov told Interfax. “We must react in principle to this insane and confrontational policy. The toolbox is rich, let’s hope that we will act consistently, reasonably, professionally and effectively.”

The Chinese government appeared to echo Klimov’s words as a spokesperson said Beijing “opposes unilateral sanctions out[side] of the UN Security Council framework.”

“We strongly urge the US to immediately correct its mistake, so as not to impact bilateral cooperation on relevant issues,” the spokesperson said, as quoted by the Financial Times.

As part of the latest sanctions, the US DOJ filed complaints demanding that two Asian companies forfeit over $11 million for allegedly laundering funds for North Korea. The charge alleges that the two companies violated the international sanctions against North Korea and indirectly supporting its missile and nuclear weapons programs.

“The United States filed two complaints today seeking imposition of a civil money laundering penalty and to civilly forfeit more than $11 million from companies that allegedly acted as financial facilitators for North Korea.”

Proceedings have been launched against Velmur Management Pte Ltd., based in Singapore, as well as the Chinese company Dandong Chengtai Trading Co. Ltd. The Trump administration has aggressively pursued sanctions as a cudgel in its battle to curb North Korea’s nuclear program. As tensions between Kim Jong Un and the US continue to escalate, expect more to come.

end

Again?

 

Russian Ambassador To Sudan Found Dead, Drowned In Own Pool

Eight months after the Russian ambassador to Turkey, Andrei Karlov, was shot dead in broad daylight, on Wednesday yet another Russian ambassador has died. According to Russian news agency RIA Novosti, the Ambassador of the Russian Federation to the Republic of Sudan, Mirgayas M. Shirinskiy, was found dead in his home in Khartoum Wednesday.

Al Arabiya adds that the ambassador was found drowned in the swimming pool at his home.

Employees of the embassy discovered Shirinsky at his residence around 6pm local time, the press secretary of the Sudan mission, Sergey Konyashin, according to RT. The diplomat, who was 62 years old, appeared to have symptoms consistent with a serious heart seizure, Konyashin said, adding that doctors were immediately called to the scene, but were unable to save his life.


Russian embassy in Khartoum

According to Sputnik, before taking his post in Sudan, Shirinskiy served at the Russian embassies in Egypt, Yemen, Saudi Arabia and Rwanda. The diplomat’s body was taken to a morgue in a Khartoum hospital, the spokesman said, adding that procedures are now in place to arrange for its return to Russia.

The Russian Foreign Ministry confirmed the death:

“We inform you with regret that Russian Ambassador to Sudan Mirgayas Shirinsky died in Khartoum on August 23,” the Russian ministry said. “Immediately after receiving detailed information from employees at the Russian embassy in Khartoum, we will inform you about the circumstances of our colleague’s death,” the ministry said.

The Sudanese Ministry of Foreign Affairs also praised Shirinskiy’s “friendly and sincere efforts to develop relations between the two countries and their peoples in various fields.”

The death of Shirinskiy marks the 9th Russian diplomat who has died in the past year. Here is a list of the more prominent recently deceased Russian diplomats:

  1. Sergei Krivov, 63, a Russian diplomat at the Russian Consulate in New York was found dead on November 8. Krivov served as duty commander involved with security affairs, according to Russian news reports 
  2. Russia’s Ambassador to Turkey, Andrei Karlov — assassinated by a police officer at a photo exhibit in Ankara on December 19.
  3. On the same day, another diplomat, Peter Polshikov, was shot dead in his Moscow apartment. The gun was found under the bathroom sink but the circumstances of the death were under investigation. Polshikov served as a senior figure in the Latin American department of the Foreign Ministry.
  4. Russia’s Ambassador to the United Nations, Vitaly Churkin, died in New York in May. Churkin was rushed to the hospital from his office at Russia’s UN mission. Initial reports said he suffered a heart attack, and the medical examiner is investigating the death, according to CBS.
  5. Russia’s Ambassador to India, Alexander Kadakin, died after a “brief illness January 27, which The Hindu said he had been suffering from for a few weeks.
  6. Russia’s Consul in Athens, Greece, Andrei Malanin, was found dead in his apartment January 9. A Greek police official said there was “no evidence of a break-in.” But Malanin lived on a heavily guarded street. The cause of death needed further investigation, per an AFP report. Malanin served during a time of easing relations between Greece and Russia when Greece was increasingly critiqued by the EU and NATO.
  7. Ex-KGB chief Oleg Erovinkin, who was suspected of helping draft the Trump dossier, was found dead in the back of his car December 26, according to The Telegraph. Erovinkin also was an aide to former deputy prime minister Igor Sechin, who now heads up state-owned Rosneft.
  8. The top official of Russia’s space agency, 56-year-old Vladimir Evdokimov, was found dead in his prison cell (where he was being questioned on charges of embezzlement). Investigators found two stab wounds on Evdokimov’s body, but no determination had been made of whether they were self-inflicted.

Speaking on CNN’s State of the Union in May during the peak of the Trump Russian witchhunt, Former Director of National Intelligence and Trump’s arch-nemesis, James Clapper, discussed the “pattern” of dead Russians:

“Well, this obviously has been a curious pattern… We have had difficulty, though, in actually generating an evidentiary trail that could equate convincingly and compellingly in a court of law a direct connection between certain figures that have been eliminated who apparently ran afoul of Putin.” Clapper said it is an “interesting pattern. I will put it that way.”

 

The wife of one of Putin’s most prominent critics, activist and journalist Vladimir Kara-Murza, said her husband had been poisoned again, after experiencing kidney failure and being put in a medically induced coma in February. She reportedly said the doctors diagnosed him with an “acute poisoning by an unidentified substance.”

Perhaps the former head of US intelligence was merely projecting US tactics onto the Russians.

end

EGYPT

Egypt snubs Kushner as they cancel a meeting with him after Trump “delays” $300 million aid pkg that Obama initiated when in office.  Will this sever relations with the USA and will Egypt seek other allies destabilizing the middle east..

(courtesy zero hedge)

Egypt Snubs Kushner, Cancels Meeting After US Yanks $300 Million In Aid

Trump’s son-in-law and the White House “global peace” adviser, Jared Kushner, arrived in Cairo on Wednesday only to learn that his top-level meeting with Egyptian officials had apparently been cancelled, as Egypt lashed out at the Trump administration’s decision to slash aid to the country.

One day after Reuters reports that the US canceled (or at least delayed) nearly $300 million in aid meant for Egypt on the grounds that its strongman ruler Abdel Fattah al-Sisi “hasn’t been respecting human rights and democratic norms” the Egyptian government responded by canceling a meeting between its foreign minister and Trump son-in-law Jared Kushner that was set for today. Kushner is famously responsible for the administration’s dealings in the Middle East. However, President Abdel Fattah al-Sisi’s office said the president would still meet the U.S. delegation, led by Kushner, later in the day as scheduled, according to Reuters.

Top Egyptian officials believe the US’ decision to deny the aid package was “insensitive” to the valuable strategic relationship that the two countries have shared for decades. Or, simply stated, Egypt wants the periodic handouts established under the Obama administration to continue.

In a statement released Wednesday, just prior to the confusion over Kushner’s meetings with the foreign minister, the Ministry of Foreign Affairs hinted that the significant reduction in aid money from Washington could impact cooperation in many areas, and that withdrawing the aid money lacked “an accurate understanding of the importance of supporting Egypt’s stability.

“Egypt considers this step as a misjudgment of the nature of the strategic relations that binds the two countries over decades,” the ministry statement said. It also underestimates the size and nature of the economic and security challenges facing the Egyptian people, and implies a mixing of cards that may have negative repercussions on achieving Egyptian-American common interests.”

Egypt’s reason for concern is clear: the north African nation is the second largest recipient of military aid from the United States after Israel, receiving about $1.3 billion annually and the officials noted that the U.S. has provided nearly $80 billion in military and economic assistance to Egypt over the past 30 years. They said the U.S. would continue to support Egypt’s efforts to defeat extremists and terrorism as well as the country’s economic development.

Egyptian military and law enforcement authorities have battled for months a deadly insurgency by a local ISIS affiliate, along with other jihadist groups, based in the restive Sinai Peninsula. The ISIS group there has carried out many attacks in Egypt, primarily targeting police and religious minorities, including Christians.

Cairo was the latest stop on Kushner’s Mideast trip aimed at exploring the possibilities of reviving the long-dormant Palestinian-Israeli peace talks.  

Kushner’s trip comes in the wake of a July crisis between the Israelis and Palestinians at the site of a major Jerusalem holy shrine after Israel installed metal detectors at its entrance after an attack there killed two Israeli officers. The move incensed the Muslim world, triggering some of the worst Israeli-Palestinian clashes in years. Israel later removed the detectors.

 

Before Egypt, Kushner and the U.S. officials traveled on Tuesday to Jordan, where they met with King Abdullah II, according to the state-run Petra News Agency. The king acknowledged the importance of U.S.  involvement and Trump’s commitment to reach a peace agreement between the Israelis and Palestinians, the agency said.

In an attempt to save face, Kushner’s office said that the meeting with Shoukry had never been set in stone because “the schedule was never fixed.” Since seizing power from a Hillary Clinton and Muslim Brotherhood-backed government in a July 2013 military coup, al-Sisi’s government had maintained an uneasy peace with the Obama Administration, which was quick to stifle any criticism over al-Sisi’s dictatorial methods. It now appears that the pent up ill-will is about to bubble to the surface, perhaps pushing Egypt even deeper into the clutches of an anti-US Middle east axis; since there are several these days, Egypt will even have the option of choosing…

end

6 .GLOBAL ISSUES

Canada

Looks like Justin has found religion: he is going to stop the migrants from entering Canada

(courtesy zero hedge)

Justin Trudeau To Refugees: There’s “No Advantage” To Entering Canada Illegally

Eight months.

That’s how long it took for Canadian Prime Minister and liberal hero Justin Trudeau to realize his promise to welcome all immigrants and refugees to Canada may have been a little short-sighted. After the prime minister proudly proclaimed on Twitter back in January that Canada would welcome all those fleeing “persecution and war,” the prime minister changed his tone this week when he warned refugees crossing into Canada from the US that sneaking into the country illegally wouldn’t fast-track the process of granting asylum.

To those fleeing persecution, terror & war, Canadians will welcome you, regardless of your faith. Diversity is our strength 

In the months that have passed since Trudeau made his famous promise, the number of refugees streaming over the border into the Canadian province of Quebec surged dramatically, straining local resources available to process their claims of asylum and provide necessities like food and shelter. The asylum seekers are primarily Haitians who fear that the Trump administration might revoke a special protected status implemented after the 2010 earthquake.

Here’s Trudeau, who was speaking at – of all places – a news conference before Montreal’s Pride parade:

“If I could directly speak to people seeking asylum, I’d like to remind them there’s no advantage,” Trudeau said at a news conference Sunday in Montreal.

 

“Our rules, our principles and our laws apply to everyone.”

 

Trudeau also stressed that anyone seeking refugee status will have to go through Canada’s “rigorous” screening process.

The surge of migrants has overwhelmed both the Canadian legal system and the capabilities of local agencies tasked with aiding refugees. We reportedearlier this month that Canada sent soldiers to a popular crossing site in upstate New York to help build a small encampment for newly arriving refugees. But beads have quickly filled up. According to CBC Newsmore than 3,800 people walked over the border into the province during the first two weeks of August, compared to the 2,996 who crossed throughout all of July.

As CBC notes, Unlike in the United States, Haitians have no special status in Canada, and about half of Haitians seeking refugee status in Canada have already been denied during the past couple of years.

Trudeau critic Michelle Rempel said the Canadian government too willingly ignored the brewing refugee crisis on its doorstep, and continues to play down the need to deal with the problem.

“Conservative immigration critic Michelle Rempel said Trudeau is downplaying the urgent need to deal with the surge in people crossing the border.

 

“They knew it was going to be a problem this summer. And their response has been building tent cities on the U.S./Canada border,” she said in an interview with CBC News.”

Too help alleviate the problem, Rempel says the federal government should increase funding for the IRB, the board that evaluates all asylum claims. Even before the surge at the border, the IRB was hopelessly backlogged, ensuring that claimants could remain in the country in a legal limbo while they waited for their hearing.

Allowing the department to process claims more quickly would remove this incentive for asylum seekers to cross illegally.

Still, given his professed love for immigration and multiculturalism, we wonder just how far Trudeau will go to stanch the tide of refugees. Will there be more soldiers and more camps? Or will Trudeau hire an army of claims processers to start kicking people out of the country – or at least ensure that those allowed to remain deserve to do so?

One thing’s for sure: He’s going to need to do something.

7. OIL ISSUES

Gasoline inventories draw down but oil still retreats due to huge production surges in crude

(courtesy zero hedge)

WTI Algos Uncertain After Gasoline Inventories Draw But Crude Production Surges

WTI crude prices managed to scramble back up to pre-API-tumble levels ahead of DOE’s data dump this morning with all eyes on gasoline inventories, which did not disappoint showing a small draw (in line with expectations) along with crude’s draw which was roughly in line with API and expectations. Production continues to rise to highest since July 2015.

 

API

  • Crude -3.595mm (-3.5mm exp)
  • Cushing -462k (+300k exp)
  • Gasoline +1.402mm (-1mm exp)
  • Distillates +2.048mm

DOE

  • Crude -3.33mm (-3.5mm exp)
  • Cushing -503k (+300k exp)
  • Gasoline -1.22mm (-1.25mm exp)
  • Distillates +28k

Builds in products (gasoline and distillates) according to API is weighing on markets (and a big shift from last week’s massive crude draw), but DOE data showed a draw for gasoline (in line with expectations) and a draw for crude (in line with expectations)

Total Crude Oil Inventories dropped to the lowest since Jan 2016… But as is very clear, remains dramatically over-stocked relative to pre-2015 norms…

One crucial data point that Bloomberg’s Javier Blas notes: total U.S. oil stocks (which includes crude, refined products and the volatile “other oils” category) were unchanged last week. That’s not what the bulls need.

Amid all the bluster, we found it ironic that Crude imports from Venezuela climbed 52 percent to 987,000 barrels a day, also the most since April.

U.S. Fuel Demand Fell 0.72% in Past Four Weeks

Despite stabilization in rig counts, US crude production continues to trend higher, jumping to its highest since July 2015 last week…

 

A weak dollar and some BTFDing in stocks managed to scramble WTI up to the pre-API levels ahead of the DOE data… (NOTE: futures puked a little right before the print). After the data, the machines were confused but the trend for now is higher as $48 stops are run…

But its mostly noise as the algos cant decide which way to trend for now.

Bloomberg Intelligence energy analyst Vince Piazza sums up the mixed picture:

The crude stockpile drop was basically in line with mean estimates.

 

The net draw across the petroleum value chain is a modest positive.

 

However, a drop in refinery utilization foretells ebbing of demand, as driving season comes to an end.

 

The bearish view is reinforced by output above 9.5 million barrels a day and pushing higher, based on management commentary from 2Q earnings calls.

end

8. EMERGING MARKET

VENEZUELA

The following could be the crippling blow which could cause the ousting of Maduro: the blocking of anybody (through sanctions) that buys Venezuelan bonds

(courtesy zerohedge)

Venezuela Bonds Tumble On Report U.S. To Ban Trading

Venezuela bonds are tumbling after the WSJ reported that the US government was considering a ban on trading in the country’s debt. PDVSA’s 12.75% 2022s were trading at 44.75 this morning,down from around 45.65 at Tuesday’s close and two points weaker than levels seen earlier in the week, according to MarketAxess. Bond traders also sold PDVSA’s 6% 2026s, which had fallen about a point to 30.00.

On Tuesday evening, the WSJ reported that the U.S. government is considering “restricting trades in Venezuelan debt as it seeks to punish President Nicolás Maduro for undermining the country’s democracy” and that “the unprecedented move would temporarily ban U.S.-regulated financial institutions from buying and selling dollar-denominated bonds issued by the Republic of Venezuela and state oil company Petróleos de Venezuela SA, according to a person who was briefed on the proposal.”

One option being considered is banning the trading in just some papers issued by the state oil company to limit its access to external funds, said a third person. The ban would be the first step against the Venezuelan financial system since Mr. Trump promised “swift economic action” against Mr. Maduro for installing a parallel parliament staffed with loyalists earlier this month.

Then again, Trump may not have to lift a finger to accelerate Venezuela’s default. As reported last week, following the recent sanctions against Maduro’s socialist paradise, foreign banks are shutting out Venezuelan companies and are refusing to provide the country’s oil tankers with the letters of credit they need to offload oil, and replace it for one commodity most needed in Venezuela: hard dollars.  As a result, the decline in PDVSA’s (and Venezuela’s) dollar reserves is accelerating with every day, a pace which roughly tracks the recent plungein Venezuela bonds.

Or not.

Not everyone is convinced that Venezuela is facing an imminent default. In a separate report, the WSJ writes that one large holder of Venezuelan debt, Ashmore Group PLC, thinks investors have come to the wrong conclusion.

Mr. Maduro’s political power “has just increased dramatically,” said Jan Dehn, head of research at the emerging-market fund, which has $56 billion under management. The July vote, which was widely seen as fraudulent, convened a powerful new assembly aligned with Mr. Maduro that will be able to override other institutions and redraft the constitution.

 

Mr. Maduro’s administration has prioritized paying bondholders, even as the wider economy has shrunk, sparking widespread unrest and food shortages. As long as he retains a tight grip on power, that is unlikely to change, Mr. Dehn believes.

According to Dehn, Maduro’s political strength is one of three factors that should mean the country “can continue to service the debt indefinitely.” The other two are that oil remains above $40 a barrel and that state-owned oil company Petróleos de Venezuela SA, PdVSA, retains access to working capital.

Additionally, Maduro is afraid what would happen to PDVSA assets once the country defaults (not to mention to the army’s support of his regime, which has been solid as long as the money keeps flowing):

Most analysts and investors believe that this is because the government wants to keep the oil flowing. PdVSA is responsible for half of Venezuela’s fiscal income and some 90% of its exports, according to Standard & Poor’s.  For some analysts, Venezuela’s fear is that a debt default would push investors to try to seize PdVSA’s foreign assets.

 

Mr. Dehn has another theory over what is behind that fear: that PdVSA’s so-called joint venture partners, such as Russia’s Rosneft and China, would pull lines of credit if the country defaulted. That would starve it of working capital and prevent it from producing oil.

 

“If he stops [servicing the debt]…oil production will stop. The government will fall,” said Mr. Dehn.

In thie case, one can imagine why Maduro would do everything in his power to delay default until the bitter end, both for creditors and his administration, which has so far had the support of the army but will promptly lose it once the cash flow tries up. That’s also why many Venezuelan bonds rebounded since the Constitutional Assembly vote.

However, if the Journal is correct and the US is about to block trading of Venezuela bonds, that could well be the tipping point that forces creditors to finally give up on the Caracas regime, leading to a prompt default and the fall of Maduro, in the process Washington will once again have succeeded in toppling a foreign regime, this time without firing a single shot.

 

end

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

Euro/USA   1.1789 UP .0028/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP HEALTH CARE DEFEAT//ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/ /USA FALLING INTEREST RATES AGAIN/EUROPE BOURSES RED

USA/JAPAN YEN 109.28 DOWN 0.457(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/   

GBP/USA 1.2814 DOWN .0008 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS

USA/CAN 1.2570 UP .0004 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS WEDNESDAY morning in Europe, the Euro ROSE by 28 basis points, trading now ABOVE the important 1.08 level  RISING to 1.1789; / Last night the Shanghai composite CLOSED  DOWN 2.52 POINTS OR 0.08%     / Hang Sang  CLOSED  HOLIDAY /AUSTRALIA  CLOSED DOWN 0.21% / EUROPEAN BOURSES OPENED IN THE RED  

The NIKKEI: this WEDNESDAY morning CLOSED UP 50.80 POINTS OR 0.26%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED  HOLIDAY  / SHANGHAI CLOSED DOWN 2.52 POINTS OR 0.08%   /Australia BOURSE CLOSED DOWN 0.21% /Nikkei (Japan)CLOSED UP 50.80  POINTS OR 0.26%   / INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: 1289.50

silver:$17.06

Early WEDNESDAY morning USA 10 year bond yield:  2.2080% !!! UP 0   IN POINTS from TUESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

The 30 yr bond yield  2.7816, UP 0  IN BASIS POINTS  from TUESDAY night.

USA dollar index early WEDNESDAY morning: 93.38 DOWN 17  CENT(S) from TUESDAY’s close.

This ends early morning numbers  WEDNESDAY MORNING

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And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield: 2.817% UP 4 in basis point(s) yield from TUESDAY 

JAPANESE BOND YIELD: +.038%  DOWN 1/2   in   basis point yield from TUESDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.572% UP 0   IN basis point yield from TUESDAY 

ITALIAN 10 YR BOND YIELD: 2.119 UP 2  POINTS  in basis point yield from TUESDAY 

the Italian 10 yr bond yield is trading 55 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.378% DOWN 2  IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR WEDNESDAY

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

Euro/USA 1.1799 UP .0037 (Euro UP 37 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 109.14 DOWN 0.594(Yen UP 59 basis points/ 

Great Britain/USA 1.2787 DOWN  0.0035( POUND DOWN 35 BASIS POINTS)

USA/Canada 1.2559 DOWN .0007 (Canadian dollar UP  7 basis points AS OIL ROSE TO $48.38

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This afternoon, the Euro was UP  by 37 basis points to trade at 1.1799

The Yen ROSE to 109.14 for a GAIN of 59  Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND FELL BY 35  basis points, trading at 1.2787/ 

The Canadian dollar ROSE by 7 basis points to 1.2559,  WITH WTI OIL RISING TO :  $48.38

The USA/Yuan closed at 6.6590/
the 10 yr Japanese bond yield closed at +.039%  DOWN 1/2 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 3  IN basis points from TUESDAY at 2.185% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.7640 DOWN 2 in basis points on the day /

Your closing USA dollar index, 93.30  DOWN 25 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 WEDNESDAY: 1:00 PM EST

London:  CLOSED UP 0.91 POINTS OR 0.01%
German Dax :CLOSED DOWN 55.04 POINTS OR 0.45%
Paris Cac  CLOSED UP 16.47 POINTS OR 0.32% 
Spain IBEX CLOSED UP  21.70 POINTS OR 0.69%

Italian MIB: CLOSED DOWN 109.20 POINTS OR 0.50% 

The Dow closed DOWN 87.80 OR 0.40%

NASDAQ WAS closed DOWN 19.07  POINTS OR 0.30%  4.00 PM EST

WTI Oil price;  48.38 at 1:00 pm; 

Brent Oil: 52.34 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  59.06 DOWN 2/100 ROUBLES/DOLLAR (ROUBLE HIGHER BY 2 BASIS PTS)

TODAY THE GERMAN YIELD FALLS TO  +0.378%  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:$48.38

BRENT: $52.52

USA 10 YR BOND YIELD: 2.169%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.746%

EURO/USA DOLLAR CROSS:  1.1812 UP .0051

USA/JAPANESE YEN:108.96  DOWN  0.768

USA DOLLAR INDEX: 93.17  DOWN 38  cent(s) 

The British pound at 5 pm: Great Britain Pound/USA: 1.2800 : DOWN 22 POINTS FROM LAST NIGHT  

Canadian dollar: 1.2548 UP 18 BASIS pts 

German 10 yr bond yield at 5 pm: +0.378%

END

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

TRADING IN GRAPH FORM FOR THE DAY

Shutdown Shivers Sink Stocks But Bonds, Bullion, & Black Gold Bounce

US stock market investors as the debt ceiling deadline looms… (if you just looked up, you’d see it coming)

 

Surveying the post-Trump damage…

Trump’s government shutdown guffawing overnight sparked more debt ceiling anxiety…

 

And the inflection is getting worse…

As Treasury cash dwindles…

Trump also trounced the Mexican Peso on border wall/NAFTA talk (but MXN was bid as soon as the US equity market opened and then went dead once Europe closed)…

*  *  *

Bonds and golds rallied today as stocks and the dollar unwound yesterday’s exuberant tax-hype… (NOTE: Dollar is below yesterday’s lows, Gold above yesterday’s highs, and TSY yields below yesterday’s lows… while stocks were only modestly lower)

 

 

Stocks did not retrace all of yesterday’s gains…

 

Trannies were worst…

 

The S&P 500 failed to hold last night’s close above the 50-day moving-average…

 

Small Caps continue to underperform, flashing big red warnings signals that we have seen before…

 

Implied Vols picked up across all the major equity indices…

 

Treasury yields tumbled today, erasing all of yesterday’s losses…

 

With 30Y yields back below 2.75% – the lowest since Draghi’s hawkish comments in June…

 

The Dollar Index round-tripped all of yesterday’s gains…

 

USDJPY broke back below 109.00…

 

Gold gained on the day as the dollar fell after shutdown chatter erased the tax hope losses…

 

And WTI Crude bounced after inventory draws…

 

Early USA trading..

Stocks Retrace Tax Bounce As Trump Raises Debt-Ceiling Doubts Overnight

Stocks are rapidly erasing yesterday’s “making strides on taxes” gains as Trump’s government shutdown threats remind investors just how fragile this whole facade is. The ‘risk-off’ trade is evident everywhere with Treasury and Bund yields tumbling, gold up, and USDJPY sliding.

Bond yields are tumbling – erasing all of yesterday’s losses – Gold is back at yesterday’s highs, and the dollar is leaking lower…

 

As we noted earlier, yesterday, when stocks surged at the market open following Politico’s report that Trump is unexpectedly “making strides” on tax reform, we warned that “it can all be wiped away as soon as tonight, when Trump will deliver a speech to his “base”, in which he may promptly burn any of the goodwill he created with capital markets following his far more conventional Afghanistan speech last night.” That’s precisely what happened, because on Tuesday night, in another fiery campaign rally, Trump fiercely defended his response to violence in Charlottesville, made passing remarks from a teleprompter about the need for unity and inclusion before veering off-script to attack the news media, Democrats and even Republicans in the Senate whom he accused of distorting his response and blocking his agenda.

But what spooked markets, and what has sent both US futures and European stocks lower, was Trump’s threat to bring the U.S. government to the brink of a shutdown if needed to pressure Congress into funding the border wall that was a centerpiece of his 2016 campaign, stoking renewed fears that the debt ceiling debate will be far more contentious that the market expects.

 

And the inflection is getting worse…

end
Soft data reporting of USA services soars to highest levels since 2015.  However soft data manufacturing slumps.
pay no attention to this data.
(courtesy zerohedge)

US Services Economy Soars To Highest Since April 2015 As Manufacturing Slumps

The US Manufacturing economy continues to languish near one-year lows (in line with the collapse in ‘hard data’ in recent months) but US Services are soaring to their highest level since April 2015.

Manufacturing was ugly across the board…

Weaker increases in both output and new orders were key factors weighing on the headline manufacturing PMI in the latest survey period. Production volumes expanded at the slowest rate for 14 months in August, while new business growth weakened from July’s four-month high. Consequently, purchasing activity rose at a softer pace while firms also registered slower increases in inventory levels. Latest data signalled a further pick up in the rate of input price inflation at US goods producers.

But everything is anecdotally awesome in Services-land…

According to anecdotal evidence, strong economic conditions and an improvement in client demand had driven the latest upturn in activity. The latter was highlighted by a sharp and accelerated rise in new business received by services companies, with the rate of new order growth reaching a 25-month high in August. Greater intakes of new work and rising activity levels led firms to hire more staff in August.

Judging by the collapse in ‘real’ economic data, we suspect manufacturing survey respondents are on to something…

 

Commenting on the flash PMI data, Rob Dobson, Director at IHS Markit said:

The US economic growth story remained a tale of two sectors in August. The overall rate of expansion accelerated to a 27-month record, driven higher by strong and improved growth of business activity in the vast services economy. In contrast, the performance of manufacturing remained sluggish in comparison, with production volumes rising to the weakest extent in over a year.

 

“Nonetheless, the acceleration signaled for the economy as a whole suggests that GDP growth is still gaining momentum during the third quarter. With new order inflows also strengthening and job creation equalling its best pace in the year-to-date, economic growth should remain on course to outperform relative to the second quarter.

 

The principal weak spot in the economy placing downside risk on that outcome remains exports. Foreign goods orders fell – albeit only marginally – for the second month in a row, often blamed on the strength of the dollar. The domestic demand picture should hopefully remain relatively bright to offset such risks, however.”

Is GDP hope driving surveys?

end
The following shows the huge rut the uSA is in with respect to their economy. New home sales plunged by a monstrous 9.9% last month.  This follows June’s huge plunge in new household formations as millennials continue to live with their parents.
(courtesy zero hedge)

New Home Sales Crash In July Following Plunge In Household Formations

New Home Sales crashed in July (down a shocking 9.4% MoM compared to expectations of unchanged) following the collapse of household formations in June.

The 8.9% year-over-year plunge in home sales is the worst since June 2014…

As it appears higher mortgage rates, stagnant wages, and soaring prices have finally caught up to one another.

 

As a reminder, household formation collapsed in June…

 

Probably the right time to be hiking rates some more.

end

Dave Kranzler weighs in on this huge 10% drop in new home sales plus the huge problems facing the USA consumer with revolving debt (credit cards), auto loans and student loans

(courtesy Dave Kranzler/IRD)

The Debt Bubble Is Beginning To Burst

August 23, 2017Financial MarketsHousing MarketMarket ManipulationU.S. Economy

There will be numerous excuses issued today by perma-bull analysts and financial tv morons explaining away the nearly 10% drop in new home sales.  Wall Street was looking for the number of new homes, as reported by the Census Bureau, to be unchanged from June. June’s original report was revised higher by 20,000 homes (SAAR basis) to make this month’s huge miss look a little better.  The primary excuse will be that new homebuilders can’t find qualified labor to build enough new homes to meet demand.

But that’s nonsense.  The reason that home builders can’t find “qualified” labor is because they don’t pay enough to compete with easier alternatives, like being an Uber driver, which can pay nearly double the wages paid to construction workers.  I had a ride with a Lyft driver, a family man who moved to Denver from Venezuela, who  took a job in construction when he moved here.  As soon as he got his driver’s license, he switched to Lyft because it was easier on his body and paid a lot more.  If builders raise their wages to compete with alternatives,  they’ll be able to find plenty of qualified workers but their profitability will go down the drain unless they raise their selling price, in which case their sales will go down the drain…which is beginning to happen anyway.

Toll Brothers, which revised its next quarter sales down when it reported yesterday, stated that new home supply is not an issue in the market for new homes.  No kidding.  I look at the major public builders’ inventories every quarter and every quarter they reach a new record high.

The real culprit is the record high level of household debt that has accumulated since 2010. The populace has run out of its capacity to take on new debt without going quickly into default on the debt already issued.  Mortgage purchase applications are a direct reflection of this.  Mortgage purchase applications declined again from the previous week, according to the Mortgage Bankers Association.  In fact, mortgage applications have declined 14 out of the last 20 weeks.  Please note that this was during a period which is supposed to be the seasonally strongest for new and existing home sales.  Furthermore, since the beginning of March, the rate on the 10-yr bond has fallen over 40 basis points, which translates into a falling mortgage rates.  Despite the lower cost of financing a home purchase, mortgage purchase applications have been dropping consistently on a weekly basis and at a material rate.

The NY Fed released its quarterly report on household debt and credit last week. In that report it stated, “Flows of credit card balances into both early and serious delinquencies climbed for the third straight quarter—a trend not seen since 2009.”

The graph above is from the actual report (the black box edit is mine). You can see that the 30-day delinquency rate for auto loans, credit cards and mortgages is rising, with a sharp increase in credit cards. The trend in auto loans has been rising since Q1 2013. The 90-day delinquency graph looks nearly identical.

I’m not going to delve into the student loan situation. Between the percentage of student loans in deferment and forbearance, it’s impossible to know the true rate of delinquency or the true percentage of student loan debt that is unpayable. Based on everything I’ve studied over the past few years, I would bet that at least 60% of the $1.2 billion in student loans outstanding are technically in default (i.e. deferred and forbearance balances that will likely never be paid anyway). In and of itself, the student loan problem is growing daily and the Government finds new ways to kick that particular can down the road. At some point it will become untenable.

The auto loan situation is a financial volcano that rumbles louder by the day. Equifax reported last week that “deep subprime” auto delinquencies spiked to a 10-year high. Deep subprime is defined as a credit score (FICO) below 550. The cumulative rate of non-performance for loans issued between 2007 and Q1 2017 ranges from 3% (Q1 2017 issuance) to 30%. The overall delinquency rate for deep subprime loans is at its highest since 2007. To make matters worse, in 2016 deep subprime loans represented 30% of all subprime asset-backed securitizations.

Combined, the percentage of auto, credit card and student loan delinquencies and rate of default is as big or bigger than the subprime mortgage problem that led to the “Big Short.” To compound the problem, the nature of the underlying collateral is entirely different. A home used as collateral has some level of value. Automobiles have collateral value but a shockingly large number of borrowers have taken out loans well in excess of the assessed value of the care at the time of purchase. Unfortunately for auto lenders, used values are in a downward death spiral. Credit card and student loan debt have zero collateral value.

NOTE: The stock market has not priced in the coming debt apocalypse nor has it begun to price in at all the upcoming Treasury debt ceiling/budget fight that is going to engulf Capitol Hill before October. The Treasury apparently will run out of cash sometime in October. Supposedly the Fed has a back-up plan in case the issue can’t be resolved before the Government would be forced to shut-down, but any scenario other than a smooth resolution to the debt ceiling issue will reek havoc on the dollar, which in turn will send the stock market a lot lower. In my view, between now and just after Labor Day weekend is a great time to put on shorts.

http://investmentresearchdynamics.com/the-debt-bubble-is- beginning-to-burst/

***

This is a harbinger of things to come;  the world’s largest ad company WPP crashes after poor earnings as well as more discerning news of a “terrible guidance” forward.  Remember that the major USA companies, like Google and Facebook etc need ad revenue for their profits
(courtesy zero hedge)..
important read..

World’s Largest Ad Company Crashes After Dismal Earnings, “Terrible” Guidance

If yesterday’s tape bomb came courtesy of the most prominent UK subprime lender, Provident Financial, which plunged over 70% after it gave a “clearly awful” business update coupled with the resignation of its CEO, today’s market shock belongs to ad giant, WPP, whose shares crashed the most since 2000 after the world’s largest advertising company cut full-year revenue forecast amid lower spending by customers, while reporting dreadful Q2 earnings.

In a clear warning to ad-dependent tech behemoths such as Google and Facebook, or rather their shareholders, WPP stock plunged as much as 12% after the company again slashed its revenue guidance, which is now expected to be between zero and 1% in 2017.

That’s down from an earlier 2% forecast. Just five months ago, in March, WPP,  which owns advertising agencies such as Ogilvy & Mather, Grey Global, and JWT, suffered its biggest drop since the financial crisis when it gave its initial forecast for 2% growth, the slowest pace since 2009. Now that number is down to 0%.

Source: Bloomberg

It wasn’t just the company’s forecast: in the second quarter, WPP’s “like-for-like” net sales fell 0.5% with July declining 2.6% and North America and Western Continental Europe were the poorest performing regions, according to Bloomberg. Worse, constant currency billings plunged 4.7% Y/Y, confirming just how little pricing power even the biggest market players in the field have. Q2 results confirmed unexpectedly weaker industry trends highlighted previously by U.S. competitor Interpublic.

The company, which according to analysts laid out dismal earnings and “terrible guidance”, blamed populist politics in the UK and US, fake news on platforms like Facebook and Google, and short-term thinking in business, for the terrible start to the year.

WPP also blamed “technological disruption, cheap money, activist investors and zero-based budgeting models, which focus incumbents on short-term profitability and cost control,” for putting companies off advertising and marketing. WPP said this is particularly an issue in the consumer goods sector, which accounts for a third of its revenues. As a result, 2017 has so far been “much tougher” than 2016, which was a record year for the business.

In the last year or so, growth has become even more difficult to find, perhaps due to increasing social, political and economic volatility, for example with the rise of populism typified by surprise election results in the United Kingdom and the United States and bumpy growth in three of the bigger BRIC countries of Brazil, Russia and China, although India continues to develop rapidly, despite introductions of demonetisation and a General Sales Tax.

 

Even the growth of the digital marketplace has been dogged by issues such as measurability, viewability, fraud, and fake news, let alone the duopoly of Google and Facebook and the growing dominance of Amazon in so many spheres, including, but not exclusively, ecommerce, retail, cloud computing and content.

 

In a slower growth world, both more recently and post-Lehman, inflation has been negligible, perhaps also suppressed by digital deflation. As a result, clients have markedly less pricing power and finance and procurement departments are very focused on cost. In this world, it is, perhaps, not surprising that clients have reduced spending.

It’s not just WPP: advertising companies worldwide have been hit as brand clients like Unilever and Procter & Gamble focus on cost-cutting to cope with sluggish global economic growth and technological disruption. WPP singled out a decline in ad spending on consumer goods – items such as laundry detergent and toothpaste that make up about one-third of its revenue – as coming under particular pressure. As previously reported, Unilever, one of WPP’s biggest customers, said earlier this year that it would cut ad spending by up to 30% and cut the number of creative agencies it works with to 1,500 from 3,000. That followed a failed takeover bid by Kraft-Heinz, which was the “seminal” moment in the first quarter, according to WPP Chief Executive Officer Martin Sorrell.

“That sent a shock-wave through the industry,” Sorrell told Bloomberg by phone. “It obviously had an effect in terms of people spending, particularly in the packaged goods sector.”


Martin Sorrell, WPP Chairman and CEO

Following the dismal news, WPP comp Publicis dropped 2.9% in Paris, while IPG and Omnicom are set for a lower open in the US. Shares of European television companies including TF1, ProSiebenSat.1 Media SE and ITV Plc declined as well.

Meanwhile back to WPP, the company has already seen its shares slide 12% YTD amid “a difficult economic climate and pressure on its businesses in North America.” Today’s plunge has chopped off 20% of its market cap in 2017 while its biggest rivals, including Interpublic Group of Cos., Publicis Groupe SA and Omnicom Group Inc., are each down more than 8% this year. So far, names like Google and FaceBook have remained unscathed but one wonders how long before cost-cutting advertisers slash online spending next.

In the most troubling sign, however, and reminiscent of what Dick’s CEO said when he warned about the pricing and market share “panic” gripping retailers, the ad giant blamed also said that competitors are turning to discounts and inducements to try and win business, saying: “These practices cannot last and will only result eventually in poor financial performance and further consolidation, the premium being on long-term profitable growth. Our industry may be in danger of losing the plot.

“For the short-term, therefore, we have to weather the storm,” CEO Martin Sorrell said hoping to focus on efficiency, new high-growth markets, digital marketing, and “technology, data, and content.”

Whether or not it can achieve that depends on both the economy, and what its competitors do. And while we wait to find out, here is a recap of the sellside’s unhappy response to WPP’s numbers, courtesy of BLoomberg.

EXANE

  • Results “a clear miss” on organic growth and net sales; margins up less than expected
  • Margin improvement guidance not sustainable if growth remains slow into 2018, keeping talent and investing will be costly and required
  • Estimate revisions likely to be modest with recent positive currency exchange rates and unchanged margin guidance
  • Remains cautious on stock and generally the industry

SHORE

  • Results show pressure on client spend and a weaker performance across all regions and segments
  • Deteriorating trading conditions are a concern; “minded to trim” FY pretax profit forecasts by 4%-5% to reflect the weaker outlook
  • Current valuation already reflects a weakening outlook following recent share price decline

CITI

  • Scale of the negative surprise is “unwelcome”
  • Nature of pressure is relatively narrow, even if deeper than originally feared
  • Even as headline shock is painful, the impact on consensus estimates is likely to be comparatively limited
  • Notes margin outlook maintained, which speaks to “relatively orderly” pressure on revenue, co. being comparatively well prepared
  • Sees 2%-3% downgrade risk to consensus EPS

JEFFERIES

  • Some of the weakness expected, report still “an incremental disappointment”
  • 2Q organic net sales disappointing, July weak and behind the budget

GOLDMAN SACHS

  • Results confirm weak trends seen across advertising companies/TV, with ad spending cuts in fast-moving consumer goods being the common driver
  • Key question whether pick-up in organic growth from 2H is credible
  • Goldman sees new organic growth guidance as “achievable,” based on comments by several consumer goods companies on higher ad spending in 2H, easier comparables, recent improvement in WPP’s new business performance
 An analysis of Trump’s Afghanistan speech, Monday night.  It seems that the neocons won this battle and the USA will be in this quagmire for years
(courtesy Adams/Mises Institute)

Ron Paul Institute Statement On Trump’s Afghanistan Speech

Authored by Daniel McAdams via The Mises Institute,

Like me, many of you watched President Trump’s train wreck of a speech on Afghanistan earlier tonight. It’s nearly midnight and I am still reeling.

I guess it was too much to ask to hear him admit the obvious and draw the obvious conclusions:  

After 16 years – the longest war in US history – no one even remembers what we are fighting for in Afghanistan.

 

The war is over.

 

Not another American (or innocent Afghan) life for one of the most convoluted and idiotic wars in history!

Trump of 2012 and 2013 said just that. Candidate Trump said just that.

Then tonight he told us that once you sit in that chair in the Oval Office you see things differently.

What does that mean?

Once elected you betray your promises so as to please the deep state? Here’s the truth that neither President Trump nor his newfound neocon coterie can deny:

1) A gang of radical Saudis attacked the US on 9/11. Their leader, Osama bin Laden, was a CIA favorite when he was fighting the Soviets in Afghanistan. He clearly listed his grievances after he fell out with his CIA sponsors: US sanctions in Iraq were killing innocents; US policy grossly favored the Israelis in the conflict with Palestinians; and US troops in his Saudi holy land were unacceptable.

 

2) Osama’s radicals roamed from country to country until they were able to briefly settle in chaotic late 1990s Afghanistan for a time. They plotted the attack on the US from Florida, Germany, and elsewhere. They allegedly had a training camp in Afghanistan. We know from the once-secret 28 pages of the Congressional Intelligence Committee report on 9/11 that they had Saudi state sponsorship.

 

3) Bin Laden’s group of Saudis attacked the US on 9/11. Washington’s neocons attacked Afghanistan and then Iraq in retaliation, neither of which had much to do with bin Laden or 9/11. Certainly not when compared to the complicity of the Saudi government at the highest levels.

 

4) Sixteen years — and trillions of dollars and thousands of US military lives — later no one knows what the goals are in Afghanistan. Not even Trump, which is why he said tonight that he would no longer discuss our objectives in Afghanistan but instead would just concentrate on “killing terrorists.”

Gen. Mike Flynn had it right in 2015 when he said that the US drone program was creating more terrorists than it was killing. Trump’s foolish escalation will do the same. It will fail because it cannot do otherwise. It will only create more terrorists to justify more US intervention. And so on until our financial collapse. The US government cannot kill its way to peace in Afghanistan. Or anywhere else.

 

 END
The market certainly does not like this:  bad blood is spilling between Trump and McConnell as their relationship disintegrates. McConnell doubts whether Trump can save the Presidency .
(courtesy zero hedge)

McConnell Doubts “Trump Can Save Presidency” As Relationship “Disintegrates”

According to a new bombshell report from the NYT, the relationship between President Trump and Senate Majority Leader Mitch McConnell has “disintegrated” in recent week “to the point that they have not spoken to each other in weeks”, prompting the Kentucky senator to express doubts if Trump can succeed in office and “salvage the presidency” after a summer of controversies and crises.

The relationship between President Trump and Senator Mitch McConnell, the majority leader, has disintegrated to the point that they have not spoken to each other in weeks, and Mr. McConnell has privately expressed uncertainty that Mr. Trump will be able to salvage his administration after a series of summer crises.

 

What was once an uneasy governing alliance has curdled into a feud of mutual resentment and sometimes outright hostility, complicated by the position of Mr. McConnell’s wife, Elaine L. Chao, in Mr. Trump’s cabinet, according to more than a dozen people briefed on their imperiled partnership. Angry phone calls and private badmouthing have devolved into open conflict, with the president threatening to oppose Republican senators who cross him, and Mr. McConnell mobilizing to their defense.

In a phone call on Aug. 9, Trump blamed McConnell for the Senate’s troubled efforts to repeal and replace the Affordable Care Act. The Times said the call descended into shouting and profanity.

During the call, which Mr. Trump initiated on Aug. 9 from his New Jersey golf club, the president accused Mr. McConnell of bungling the health care issue. He was even more animated about what he intimated was the Senate leader’s refusal to protect him from investigations of Russian interference in the 2016 election, according to Republicans briefed on the conversation. Mr. McConnell has fumed over Mr. Trump’s regular threats against fellow Republicans and criticism of Senate rules, and questioned Mr. Trump’s understanding of the presidency in a public speech. Mr. McConnell has made sharper comments in private, describing Mr. Trump as entirely unwilling to learn the basics of governing.

While McConnell was reportedly troubled by Trump’s remarks that placed equal blame on hate groups and counterprotesters, that was just the tip of the iceberg of the pent up animosity between the two.  The Senator also signaled his unease with Trump’s comments to business leaders who quit their posts on presidential advisory councils in recent days, the NYT reports. But the straw that broke the camel’s back was last month’s failure by the Republican controlled Senate to pass Obamacare repeal, a humiliating defeat for Trump’s main campaign promise.

McConnell said in a speech earlier this month that Trump had “excessive expectations” about moving his legislative agenda through Congress. That led Trump to repeatedly lash out at McConnell on Twitter, questioning why McConnell has not been able to accomplish longtime GOP campaign promises.  Trump went so far as to suggest to reporters at his Bedminster, N.J. golf club that, if McConnell is unable to pass healthcare reform, tax reform and an infrastructure bill through the Senate, he should consider stepping aside from his leadership role.

for the two GOP heavyweights walking into a month of serious major political maelstroms with the debt ceiling, spending bill, tax reform, and a retry at healthcare looming–among other fights. Both Trump and McConnell themselves refused comment for the Times story, but McConnell spokesman Don Stewart said the president and majority leader had “shared goals” including “tax reform, infrastructure, funding the government, not defaulting on the debt, passing the defense authorization bill.”

But while the bad blood between the two is hardly news, the question is how will the allegedly tamer, and Bannon-free Trump react to the previously unreported news that McConnell has wondered whether Trump’s presidency will survive:

In offhand remarks, Mr. McConnell has expressed a sense of bewilderment about where Mr. Trump’s presidency may be headed, and has mused about whether Mr. Trump will be in a position to lead the Republican Party into next year’s elections and beyond, according to people who have spoken to him directly. While maintaining a pose of public reserve, Mr. McConnell expressed horror to advisers last week after Mr. Trump’s comments equating white supremacists in Charlottesville, Va., with protesters who rallied against them. Mr. Trump’s most explosive remarks came at a news conference in Manhattan, where he stood beside Ms. Chao.

As the NYT adds, McConnell will no longer be silent should Trump use the bully pulpit for future attacks. Instead, McConnell is now fully committed to firing back at Trump, and protecting his GOP senators.

In a show of solidarity, albeit one planned well before Mr. Trump took aim at Mr. Flake, Mr. McConnell will host a $1,000-per-person dinner on Friday in Kentucky for the Arizona senator, as well as for Senator Dean Heller of Nevada, who is also facing a Trump-inspired primary race next year, and Senator Deb Fischer of Nebraska. Mr. Flake is expected to attend the event.

It’s not just the Senate majority leader: McConnell allies like former Sen. Judd Gregg of New Hampshire and former Republican National Committee finance chair Al Hoffman are quoted as well, making ominous predictions about Trump.

“Failure to do things like keeping the government open and passing a tax bill is the functional equivalent of playing Russian roulette with all the chambers loaded,” Gregg said of Trump, blaming him for in the Times’ words “undermining” congressional leaders, adding that if Trump “can’t participate constructively” the House and Senate would take matters into their own hands.

“Ultimately, it’s been Mitch’s responsibility, and I don’t think he’s done much,” Hoffman said, slightly critical of McConnell before adding that he believes McConnell will outlast Trump in this stalemate. “I think he’s going to blow up, self-implode,” Hoffman said of the president, per the Times. “I wouldn’t be surprised if McConnell pulls back his support of Trump and tries to go it alone.”

Whatever Trump’s kneejerk reaction following the conclusion of tonight’s Phoenix rally, the biggest loser may be the market which today surged on a Politico report that Trump’s tax reform suddenly looks like it has a chance of passing. If the NYT report confirms one thing, it is that when it comes to Trump’s legislative agenda, any chance of success in the through the Senate is virtually nil.

END

 

The USA has had 2 collisions with their fleet with the latest being the SS John S McCain. Could there be a possibility that the ships were whacked?  Could it be China who does not want the USA patrolling the South China Seas

(courtesy Mac Slavo.SHTFPlan.com)

 

Chief Of Naval Operations “Looking Into” Possibility Ships Were Hacked

Authored by Mac Slavo via SHTFplan.com,

Tragedy struck the USS John S. McCain on Monday, when the destroyer collided with a merchant ship off the coast of Singapore, leaving 10 sailors missing and five injured. The US Navy is still struggling to find all of the remains of the missing sailors, and has ordered an operational pause for all naval fleets around the world as investigators try to figure out exactly why this terrible accident occurred.

Among the possible causes that are being looked into, one has a raised a few eyebrows. Over the summer there have been two accidental collisions involving the 7th fleet, and a total of 4 similar incidents this year. This has led some Navy officials to suspect that a cyber attack may have been responsible for the crash, as well as other recent Naval accidents.

The Navy has not ruled out an intentional action behind the latest deadly collision between a Navy destroyer and a merchant ship, the chief of naval operations told reporters Monday.

 

“That’s is certainly something we are giving full consideration to but we have no indication that that’s the case—yet,” Adm. John Richardson, the CNO, said at the Pentagon.

 

“But we’re looking at every possibility, so we’re not leaving anything to chance,” he said.

 

Asked if that includes the possibility the electronic defenses on the guided missile destroyer USS John S. McCain were hacked in a cyber attack, Richardson said investigators will look into all possible causes.

 

“We’ll take a look at all of that, as we did with the Fitzgerald,” the four-star admiral said, referring to another Navy warship collision with a merchant ship in June near Japan.

So far the Navy has made it clear that there currently isn’t any evidence that the neither USS McCain, nor any other naval vessel, has suffered from a cyber attack. However, there are quite a few top notch cyber security experts who think that all of these collisions probably have something in common.

“There’s something more than just human error going on because there would have been a lot of humans to be checks and balances,” Jeff Stutzman, an ex-information warfare specialist in the Navy, who now works at a cyber threat intelligence company, told McClatchyDC.

“When you are going through the Strait of Malacca, you can’t tell me that a Navy destroyer doesn’t have a full navigation team going with full lookouts on every wing and extra people on radar,” he said.

Itay Glick, the founder of cyber security firm Votiro, told news.com.au that the possibility of cyber interference was the first thing that came to his mind when he heard about the incident.

“I don’t believe in coincidence,” Glick told the website.

“Both USS McCain and USS Fitzgerald were part of the 7th Fleet, there is a relationship between these two events and there may be a connection,” he added.

The only other question that remains is, if these collisions were caused by cyber attacks, who is responsible? One likely culprit seems to be China. For years the Chinese government has complained about the US Navy’s presence in the South China Sea, which they claim as their territorial waters. In fact, following the USS McCain’s accident, the Global Times, which is effectively a mouthpiece of the government, claimed that Chinese citizens were celebrating the collision.

It’s also important to consider the fact that many US Naval vessels are riddled with counterfeit parts from China. A Senate led investigation in 2012 found that our ships contained over a million counterfeit parts, mostly of Chinese origin. Obviously, this raises the possibility that the Chinese government may have used black markets to secretly funnel parts to the US Navy, which contain backdoors that are easily exploitable.

But perhaps what’s most telling, is how a state-run Chinese media outlet responded to the USS McCain collision, by suggesting that the US Navy has become a dangerous presence for commercial shipping in the South China Sea.

BEIJING (Reuters) – The U.S. navy’s latest collision at sea, the fourth in its Pacific fleet this year, shows it is becoming an increasing risk to shipping in Asia despite its claims of helping to protect freedom of navigation, an official Chinese newspaper said…

…The state-run China Daily said in an editorial on Tuesday that people will wonder why such a sophisticated navy keeps having these problems.

“The investigations into the latest collision will take time to reach their conclusions, but there is no denying the fact that the increased activities by U.S. warships in Asia-Pacific since Washington initiated its rebalancing to the region are making them a growing risk to commercial shipping,” it said.

There’s no proof that China has been hacking our ships, but the possibility can’t be ruled out.

Very strange: former USA Attorney states that there is something every odd in the indictment on the Awan.

see for yourself..

(courtesy zero hedge)

Former U.S. Attorney On Awan Indictment: “There Is Something Very Strange Going On Here”

We’ve written frequently over the past couple of months about the litany of unanswered questions surrounding the mysterious case of Debbie Wasserman Schultz’s (DWS) IT staffers.  Why did DWS seeminglythreaten the chief of the U.S. Capitol Police with “consequences” for holding equipment that was confiscated as part of an ongoing legal investigation?  Why did DWS keep Awan on her taxpayer funded payroll all the way up until the day he was arrested by the FBI at Dulles airport while trying to flee the country to Pakistan?  What, if anything, does the Awan family know about the DNC hacks that may have caused DWS to act in this way?

Now, Andrew McCarthy III, the former assistant U.S. attorney for the Southern District of New York who led the prosecution against Sheikh Omar Abdel Rahman and eleven others for the 1993 World Trade Center bombing, says there is “something very strange” about the recent indictment filed against Imran Awan and his wife Hina Alvi in the District of Columbia.

In a National Review article, McCarthy points out that it’s not what’s in the indictment that is necessarily surprising but rather what is seemingly intentionally omitted.  For instance, McCarthy points out that“the indictment appears to go out of its way not to mention” that Imran was apprehended while in the process of fleeing the country,a fact that would seem to be the best evidence available to prove the fraud charges.

Let’s say you’re a prosecutor in Washington. You are investigating a husband and wife, naturalized Americans, who you believe have scammed a federal credit union out of nearly $300,000. You catch them in several false statements about their qualifications for a credit line and their intended use of the money. The strongest part of your case, though, involves the schemers’ transferring the loot to their native Pakistan.

 

So . . . what’s the best evidence you could possibly have, the slam-dunk proof that their goal was to steal the money and never look back? That’s easy: One after the other, the wife and husband pulled up stakes and tried to high-tail it to Pakistan after they’d wired the funds there — the wife successfully fleeing, the husband nabbed as he was about to board his flight.

 

Well, here’s a peculiar thing about the Justice Department’s indictment of Imran Awan and Hina Alvi, the alleged fraudster couple who doubled as IT wizzes for Debbie Wasserman Schultz and many other congressional Democrats: There’s not a word in it about flight to Pakistan. The indictment undertakes to describe in detail four counts of bank-fraud conspiracy, false statements on credit applications, and unlawful monetary transactions, yet leaves out the most damning evidence of guilt.

 

In fact, the indictment appears to go out of its way not to mention it.

 

Why would prosecutors leave that out of their indictment? Why give Awan’s defense a basis to claim that, since the indictment does not allege anything about flight to Pakistan, the court should bar any mention of it during the trial? In fact, quite apart from the manifest case-related reasons to plead instances of flight, a competent prosecutor would have included them in the indictment simply to underscore that Awan is a flight risk who should have onerous bail conditions or even be detained pretrial.

DWS

 

Then there is the case of Imran’s wife, Hina Alvi.  When she fled the country back in March she was detained by U.S. Customs and Border Protection agents with over $12,000 cash in her luggage, technically a crime by itself if not properly disclosed, but was allowed by the FBI to leave the country despite having been under investigation for months.

We must also ask, again: Why did the FBI allow Alvi to flee? Before she boarded her March 5 flight to Qatar (en route to Pakistan), agents briefly detained her. U.S. Customs and Border Protection agents had already searched her baggage and found $12,400 in cash. As I have pointed out, it is a felony to move more than $10,000 in U.S. currency out of the country unless one completes the required government report (see sections 5316 and 5322 of Title 31, U.S. Code). There was no indication that she did so in the complaint affidavit submitted to the court when Awan was arrested last month (see FBI complaint affidavit, pages 8–9).

 

By the time Alvi fled, the Awans had been under investigation by various federal agencies for at least three months. The FBI was sufficiently attuned to the Awans’ criminality that its agents went to the trouble of chasing Alvi to the airport. If she didn’t fill out the required form, she should have been arrested for the currency violation. Is it possible that, rather than arresting her, federal agents instructed her to complete the form on the spot? One would hope not, but even in such an unlikely event, Alvi would undoubtedly have made false statements about the provenance of the cash. That would also have been a felony, providing more grounds for her arrest. Why let her go, especially when, as its agent told the court in the aforementioned affidavit, the FBI “does not believe that ALVI has any intention to return to the United States”?

And then there is just the continued secrecy surrounding the case.  Why did the U.S. Attorney’s office decide against filing a press release in a case that has garnered significant national attention?  Why was the case filed in a district where DWS’s brother has been an assistant U.S. attorney for many years? 

To begin with, it is not the easiest thing to get one’s hands on the indictment. The case is being handled by the U.S. Attorney’s Office for the District of Columbia. There is no press release about the indictment on the office’s website, though U.S. attorneys’ offices routinely issue press releases and make charging documents available in cases of far less national prominence. (I found the indictment through the Orlando Sentinel, which obtained and posted it in conjunction with the paper’s report on the filing of charges.)

 

By the way, the U.S. attorney’s office is currently led by Channing D. Phillips, an Obama holdover who was never confirmed. Still awaiting Senate confirmation is Jessie Liu, nominated by President Trump in June. Meanwhile, Steven Wasserman, Representative Wasserman Schultz’s brother, has been an assistant U.S. attorney in the office for many years. I have seen no indication that he has any formal role in the case, notwithstanding some cyberspace speculation to the contrary. What is clear, however, is that the office is low-keying the Awan prosecution.

 

The indictment itself is drawn very narrowly. All four charges flow from a financial-fraud conspiracy of short duration. Only Imran Awan and his wife are named as defendants. There is no reference to Awan-family perfidy in connection with the House communications system.

Of course, we’re sure it’s probably nothing but at least one former U.S. Attorney says “there is something very strange going on here.”

The full Grand Jury indictment can be viewed here:

Odds of a government shutdown just increased as Trump desires 1 billion dollars of secured funds and that is to be included into the 2018 budget.  If he does not get it, Trump will never sign anything and thus a shutdown
(As an aside, the USA government has 86 billion usa dollars left in the kitty.  They use 3 billion net per day and they cannot issue any more new debt.  So they may be out on Sept 23 and not Sept 29. (Harvey)
(courtesy zerohedge)

Compass Point: “Odds Of A Government Shutdown Are Now Dramatically Higher”

Over the weekend, Morgan Stanley reminded its clients that the biggest threat facing markets over the coming weeks is the “three-headed policy monster” inside Washington: raising the debt ceiling, passing a budget and embarking on tax reform. As MS cross-asset strategist Andrew Sheets noted, “none are easy, but we see the debt ceiling as the most immediate test.”

He then cautioned that while the most likely outcome is that, after some tension, the debt ceiling gets raised “we don’t think it will be easy, or smooth, and it may require some form of market pressure to get different sides to fall in line. I’ve spoken to investors who are comforted by FOMC transcripts from 2011 that discussed prioritization of debt payments in order to avoid default. I am not. First, I worry that this reduces the urgency of what remains a serious issue. Second, this prioritization would require delaying payments to programmes like Social Security and Medicare, with real human and economic cost. And third, while the mechanics of this prioritisation may work, it is untested in a live environment.”

As reported earlier, the market’s concerns about a potential debt ceiling crisis, so far mostly contained, have once again started to bubble to the surface, with the Oct. 5 T-Bill rate rising to the highest level since August 1st, suggesting that bond traders see rising odds of a “worst case outcome” and partially answering our question from Monday whether “Markets Are Sleepwalking Into A Debt Ceiling Crisis: Mnuchin Issues Another Warning.

Additionally, the yield spread between the Sept 28 and Oct 5 Bills is now the widest on record:

The blowout has come after the latest warning by Treasury Secretary Steven Mnuchin, who on Monday said that “we need to raise the debt limit and it’s my strong preference is that there’s a clean raise of the debt limit.”

However, as of this morning, it’s not just the debt ceiling that traders have to worry about, because as discussed overnight, a new potential problem emerged last night when Trump told a Phoenix rally that he is commited to securing funds for a border wall, even if it results in a government shutdown.

While last night’s rally audience loved the threat, Democrats promptly blasted it: on Wednesday, Chuck Schumer ripped Trump for threatening to shutdown the government: “If the President pursues this path, against the wishes of both Republicans and Democrats, as well as the majority of the American people, he will be heading towards a government shutdown which nobody will like and which won’t accomplish anything,” Schumer said on Wednesday. Including funding for a physical wall is considered a non-starter for Democrats, whose votes will be needed to get a government funding bill through the Senate.

We doubt a warning from the Senate Minority Leader, or any other Democrat or Republican for that matter, will have much of an impact on Trump’s decision-making if he has indeed set his mind on procuring border wall funding. Which is also why in a note from Compass Point released this morning, strategists Isaac Boltansky and Lukas Davaz warn that not only is the risk of a government shutdown bigger than the debt limit, but that Trump’s commitment to securing funds for a border wall, together with Trump’s “injurious relationship” with GOP leaders – best demonstrated by last night’s NYT bombshell article laying out the open war between Trump and Senate Majority Leader Mitch McConnell – “dramatically raises the spectre of a shutdown in October.” Here are the highlights of their note, courtesy of Bloomberg:

  • The prospect of a govt shutdown “still poses a potentially serious downside risk for investors,” even as “our firm belief that the debt ceiling will be lifted removes a profound political risk from the landscape”
  • Trump’s commitment to securing funds for a border wall “dramatically raises the spectre of a shutdown in October” and his “injurious relationship” with Congressional Republican leadership “further complicates the underlying calculus”

Compass Point adds that four factors increase the potential for an equity market sell-off as government shutdown risks intensify:

  • Further delays confirmations, which would affect Trump’s deregulatory agenda;
  • Delivers a “psychological blow” to markets, serving as a “concrete symbol” of Washington’s inability to govern;
  • Delays legislative progress on tax reform;
  • Alters Fed’s policy normalization trajectory

In summary, while Compass Point says that lawmakers will promptly raise the debt ceiling in mid-September, or less than a month from now – something which Morgan Stanley and others find hard to believe – a government shutdown in October suddenly all too likely.

Then, shortly after the note was released, rating agency Fitch also chimed in and warned that if the U.S. debt limit is not raised in a timely manner, it would review the U.S. sovereign rating, with potentially negative implications. In other words, Fitch is warning that a repeat of August 2011 – when S&P infamously downgraded the US to AA+ after the failure to raise the debt ceiling resulted in a brief technica default0 is now on the table. The silver lining: Fitch said that a government shutdown following a debt ceiling increase, such as the one envisioned by Compass Point, would not direct affect on U.S. AAA rating.

Finally, for those who are still on the fence about the likelihood of a shutdown and are otherwise unhedged, one month ago Bank of America put together a “costless” spread collar trade, should volatility surge in the coming weeks as a debt ceiling/government funding deal emerges as unlikely. Here again is how to make money should the US government shut down in just over a month.

Trade idea: VIX Oct 12/14/19 call spread collar for zero-cost upfront

 

We are comfortable selling VIX puts to leverage a likely floor in volatility, particularly ahead of the debt ceiling, and using the premium collected to the cheapen the cost of portfolio protection. For example, investors may consider selling the VIX Oct 12 put vs. the 14/19 call spread, indicatively zero-cost upfront with a net delta of +54 (Oct fut ref 13.35).

 

The trade leverages the facts that (i) VIX 3M ATMf implied volatility, while low, is not necessarily cheap compared to the level of the VIX 3M future (Chart 14), and (ii) VIX 3M call skew is currently very steep, in the 92nd percentile since Sep-09 (Chart 15).

 

More critically, while VIX call spread collars have been challenged by recent sub-11 VIX settlement values, they can be successful, low-cost hedges when there are defined macro catalysts on the calendar to provide support to volatility, as seen from the US election and more recently the first round of the French election.

 

Lastly, we are comfortable capping upside via the call spread as the VIX 1M and 2M futures have not closed above 20 since Brexit over one year ago.

end

Chris Whalen is one of the analysts who saw the housing crisis in 2008.  He is one smart cookie.

 

Today he describes the uSA housing scene as:”Winter is here” as buyers are just thinning out due to lack of income.

 

(courtesy zero hedge/Chris Whalen/Institutional Risk)

“Winter Is Here” For Housing – Whalen Warns “The Crowd Of Buyers Is Thinning”

Following this morning’s plunge in new home sales…

 

After household formation collapsed in June…

It appears Institutional Risk Analyst’s Chris Whalen is spot on with his mortgage finance update: “Winter Is Here”…

After several weeks on the road talking to mortgage professionals and business owners, below is an update on the world of housing finance.  We hope to see all of the readers of The Institutional Risk Analyst in the mortgage business at the Americatalyst event in Austin, TX, next month.

The big picture on housing reflected in the mainstream media is one of caution, as illustrated in The Wall Street Journal. Borodovsky & Ramkumar ask the obvious question:  Are US homes overvalued? Short answer: Yes.  Send your cards and letters to Janet Yellen c/o the Federal Open Market Committee in Washington.  But the operating environment in the mortgage finance sector continues to be challenging to put it mildly.

As we’ve discussed in several forums over the past few years, home valuations are one of the clearest indicators of inflation in the US economy.  While members of the tenured world of economics somehow rationalize understating or ignoring the fact of double digit increases in home prices along the country’s affluent periphery, sure looks like asset price inflation to us.

In fact, since WWII home prices in the US have gone up four times the official inflation rate.

“Houses weren’t always this expensive,” notes CNBC. “In 1940, the median home value in the U.S. was just $2,938. In 1980, it was $47,200, and by 2000, it had risen to $119,600. Even adjusted for inflation, the median home price in 1940 would only have been $30,600 in 2000 dollars, according to data from the U.S. Census.”

Inflation, just to review, is defined as too many dollars chasing too few goods, in this case bona fide investment opportunities.  A combination of slow household formation and low levels of new home construction are seen as the proximate cause of the housing price squeeze, but higher prices also limit the level of existing home sales.  Many long-time residents of high priced markets like CA and NY cannot move without leaving the community entirely. So they get a home equity line or reverse mortgage, and shelter in place, thereby reducing the stock of available homes.

Two key indicators that especially worry us in the world of credit is the falling cost of defaults and the widening gap between asset pricing and cash flow.  Credit metrics for bank-owned single-family and multifamily loans are showing very low default rates.  More, loss-given default (LGD) remains in negative territory for the latter, suggesting a steady supply of greater fools ready to buy busted multifamily property developments above par value.  We can’t wait for the FDIC quarterly data for Q2 2017 to be released later today as we expect these credit metrics to skew even further.

Single-family exposures are likewise showing very low default rates and LGDs at 30-year lows, again suggesting a significant asset price bubble in 1-4 family homes.  The fact that many of these properties are well under water in terms of what the property could fetch as a rental also seasons our view that we are in the midst of a Fed-induced investment mania.

For every seller in high priced states that finds current prices impossible to resist, there are several ready buyers. But the crowd of buyers is thinning. Charles Kindleberger wrote in his classic book, “Manias, Panics and Crashes,” in 1978:

“Financial crises are associated with the peaks of business cycles. We are not interested in the business cycle as such, the rhythm of economic expansion and contraction, but only in the financial crisis that is the culmination of a period of expansion and leads to downturn.”

One of the interesting facts about the mortgage sector in 2017 is that even though average prices have more than recovered from the 2008 financial crisis, much of the housing stock away from the desirable periphery has not really bounced.  This is yet another reason why existing home sales at a bit over a million properties annually have gone sideways for months.  The 600,000 or so new housing starts is half of the peak levels in 2005, but today’s level may actually be sustainable.

We had the opportunity to hear from our friend Marina Walsh of the Mortgage Bankers Association at the Fay Servicing round table in Chicago last week.  Mortgage applications have been running ahead of last year’s levels, yet overall volumes are declining because of the sharp drop in refinancing volumes.  We disagree with the MBA about the direction of benchmarks such as the 10-year Treasury bond.  They see 3.5% yields by next year, but we’re still liking the bull trade.  But even a yield below 2% will not breath significant life into the refi market.

Though prices in the residential home market remain positively frothy in coastal markets, profitability in the mortgage finance sector continues to drag.  Large banks earned a whole 15 basis points on mortgage origination in the most recent MBA data, while non-banks and smaller depositories fared much better at around 60-70bps.  But few players are really making money.

During our conversations over the past several weeks, we confirmed that the whole residential housing finance industry is suffering through some of the worst economic performance since the peak levels of 2012. The silent crisis in non-bank finance we described last year continues and, indeed, has intensified as origination margins have been squeezed by the market’s post-election gyrations.

Looking at the MBA data, if you subtract the effects of mortgage servicing rights (MSR) from pre-tax income, most of the industry is operating at a significant loss.  The big driver of the industry’s woes is regulation, both as a result of the creation of the Consumer Finance Protection Bureau and the actions of the states.

Regulation has pushed the dollar cost of servicing a loan up four fold since 2008.  From less that $100 per loan in 2008, today the full-loaded cost of servicing is now $250, according to the MBA.  The cost of servicing performing loans is $163 vs over $2,000 for non-performing loans.

Source: MBA

As one colleague noted at the California Mortgage Banker’s technology conference in San Diego, “every loan is a different problem.” But nobody in the regulatory community seems to be concerned by the fact that the cost of servicing loans has quadrupled over the past eight years.  The elephant in the room is compliance costs, which accounts for 20% of the budget for most mortgage lending operations.

Technology Driving Down Costs

To some degree, technology can be used to address rising costs.  But when it comes to unique events spanning the range from legitimate consumer complaints to a phone call to follow-up on a past request or spurious inquiries, none of these tasks can be automated.  The obsession with the wants and needs of the consumer has led the mortgage industry to some truly strange behaviors, like Nationstar (NYSE:NSM) deciding to rename itself “Mr. Cooper.”

Driven by the atmosphere of terror created by the CFPB, the trend in the mortgage industry is to automate the underwriting and servicing process, and make sure that all information used is documented and easily retrieved. The better-run mortgage companies in the US use common technology platforms to ensure a compliant process, but leave the compassion and empathy to humans.

By using computers to embed the rules into a business process that is compliant, big steps are being made in terms of efficiency. Trouble is, this year many mortgage lenders are seeing income levels that are half of that four and five years ago.  Cost cutting can only go so far to addressing the enormous expense inflation resulting from excessive regulation and revenue compression due to volatility in the bond market.

Avoiding errors and therefore the possibility of a consumer complaint (and a regulatory response) is really the top priority in the mortgage industry today. As one CEO opined: “Sometimes the best customer experience is consistency in terms of answering questions and quickly as possible and communicating in a courteous and effective fashion.”

All of this costs time and money, and then more money.  Our key takeaway from a number of firms The IRA spoke with over the past three weeks is that response time for meeting the needs of consumers and regulators is another paramount concern.

Being able to gather information, solve problems and then document the response to prove that the event was handled correctly is now required in the mortgage industry.  But as one senior executive noted: “Sometimes people are easier to change than systems.”

So in addition to the FOMC, banks and mortgage companies can also thank the CFPB and aspiring governors in the various states for inflating their operating costs for mortgage lending and servicing by an order of magnitude since the financial crisis.  This is all done in the name helping consumers, you understand, but at the end of the day it is consumers who pay for the inflation of living costs like housing.  Investors and consumers pay the cost of regulation.

Over the past decade since the financial crisis, the chief accomplishment of Congress and regulators has been to raise the cost of buying or renting a home, while decreasing the profitability of firms engaged in any part of housing finance.  We continue to wonder whether certain large legacy servicing platforms — Walter Investment Management (NYSE:WAC) comes to mind — will make it to year-end, but then we said that last year.

Like the army of the dead in the popular HBO series “Game of Thrones,”the legacy portion of the mortgage servicing industry somehow continues to limp along despite hostile regulators and unforgiving markets.  Profits are failing, equity returns are negative and there is no respite in sight.  Even once CFPB chief Richard Cordray picks up his carpet bag and scuttles off to Ohio for a rumored gubernatorial run, business conditions are unlikely to improve in the world of mortgage finance. Winter is here.

end

I will see you Thursday  night

Harvey.

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