August 29/GOLD ADVANCES BY $3.95 UNTIL HIT WITH HEAVY BANK CARTEL SELLING DUE TO OPTIONS EXPIRY ON THURSDAY/KIM’S RHETORIC INTENSIFIES/HURRICANE HARVEY CONTINUES TO WRECK HAVOC ON HOUSTON: THE ESTIMATE OF DAMAGE: $100 BILLION/ISRAEL WARNS RUSSIA THAT THEY MAY HAVE TO BOMB ASSAD IN SYRIA DUE TO INCREASED IRANIAN INFLUENCE/

GOLD: $1313.50  UP $3.95 *BREAKS RESISTANCE OF $1300.00

Silver: $17.45  UP 0 CENTS *BREAKS RESISTANCE OF $17.25

Closing access prices:

Gold $1309.50

silver: $17.40

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: $1299.64 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1204.25

PREMIUM FIRST FIX:  $5.38

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SECOND SHANGHAI GOLD FIX: $1324.74

NY GOLD PRICE AT THE EXACT SAME TIME: $13.17.60

Premium of Shanghai 2nd fix/NY:$5.03

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LONDON FIRST GOLD FIX:  5:30 am est  $1323.40

NY PRICING AT THE EXACT SAME TIME: $1324.90 ???

LONDON SECOND GOLD FIX  10 AM: $1318.95

NY PRICING AT THE EXACT SAME TIME.

For comex gold:

AUGUST/

NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 179 NOTICE(S) FOR  17,900  OZ.

TOTAL NOTICES SO FAR: 4801 FOR 480,100 OZ  (14.933 TONNES)

For silver:

AUGUST

 0 NOTICES FILED TODAY FOR

nil  OZ/

Total number of notices filed so far this month: 1248 for 6,240,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

end

We have already surpassed options expiry on the Comex, so the only one left is the LBMA/OTC options which expire on the 31st of August at around 10-11 am. You could bet the farm that the crooks will try and go after gold/silver tomorrow trying to get gold below $1300 and silver below $17.25. Prior to Hurricane Harvey and North Korea’s launch of a missile over Japan, it looked like smooth sailing for the bankers to pocket again underwritten options…. let is see what happens tomorrow

 

 

Let us have a look at the data for today

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In silver, the total open interest ROSE BY AN APPRECIABLE 1913 contracts from 188,145 UP TO 190,058 WITH THE HUGE RISE IN PRICE THAT SILVER UNDERTOOK WITH  YESTERDAY’S TRADING (UP 38 CENTS).HOWEVER WHEN YOU COMPARE WITH THE MAMMOTH INCREASE IN GOLD OI YOU CAN BE COMFORTED THAT THE BANKS ARE QUITE RETICENT TO SUPPLY ANY PAPER. NO DOUBT THAT WE LOST SOME PAPER PLAYER LONGS TO EFP’S BUT THAT WAS QUICKLY REPLACED WITH NEWBIE LONGS AGAIN TAKING ON THE BANKERS.  AS SOON AS SILVER BROKE RESISTANCE AT $17.25 THEY POURED ON THE JUICE WITH RECKLESS ABANDON.  SOME LONG SPECS EXITED WITH A PAPER PROFIT.

RESULT: A SMALLER HIGHER OI (THAN GOLD) WITH A HUGE PRICE INCREASE 

 In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e.  0.962 BILLION TO BE EXACT or 137% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 0 NOTICE(S) FOR nil  OZ OF SILVER

In gold, the open interest ROSE BY AN UNBELIEVABLE  22,957 CONTRACTS WITH THE  HUGE RISE  in price of gold ($16.95 GAIN YESTERDAY .). The new OI for the gold complex rests at 537,503.

AS IN SILVER, THE GEOPOLITICAL LANDSCAPE WITH TRUMP THREATENING TO CLOSE GOVERNMENT IF HE DID NOT GET HIS WALL , THE DOVISH SPEECHES BY BOTH DRAGHI AND YELLEN ON FRIDAY AT JACKSON HOLE, THE HOUSTON FLOODING & NORTH KOREA FIRING MORE MISSILES CAUSED A HUGE NUMBER OF NEWBIE SPECS TO AGAIN ENTER THE GOLD ARENA WITH THE COMMERCIALS SUPPLYING THE NECESSARY PAPER LIKE DRUNKEN SAILORS. ONCE 1300 DOLLAR GOLD WAS PIERCED, MORE NEWBIE LONGS CAME EMBOLDENED CONTINUING THEIR QUEST OF TAKING ON THE BANKERS WHO RECIPROCATED IN KIND WITH THE PAPER. SOME OLD SPECS LEFT FOR A PROFIT WITH THE HUGE RISE IN PRICE

Result: A HUMONGOUS GAIN IN OI WITH A HUGE RISE IN PRICE IN GOLD AND THE PIERCING OF RESISTANCE LEVEL $1300

we had: 179 notice(s) filed upon for 17,900 oz of gold.

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

GLD:

Tonight , we had another big  change in gold inventory: a deposit of 9.16 tonnes into the GLD inventory.  I doubt very much if this is physical gold/probably a paper gold entry:

Inventory rests tonight: 814.36 tonnes

IN THE LAST 32 TRADING DAYS: GLD SHEDS 22/61 TONNES YET GOLD IS HIGHER BY $81.25 .

SLV

Today:  WE HAD NO CHANGES IN SILVER INVENTORY TONIGHT:

INVENTORY RESTS AT 333.178 MILLION OZ

end

.

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

1. Today, we had the open interest in silver ROSE BY 1913 contracts from 188,145 UP TO 190,058 (AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) WITH YESTERDAY’S 38 CENT GAIN IN TRADING. SILVER RESPONDED TO 1) THE GEOPOLITICAL CLIMATE WHEREBY TRUMP THREATENED TO SHUT DOWN GOVERNMENT UNLESS HE GOT HIS WALL , 2) THE TWO DOVISH SPEECHES BY YELLEN 3) NORTH KOREA FIRING MORE MISSILES,4) THE HOUSTON FLOODING AND 5 THE PIERCING OF THE HUGE RESISTANCE LEVEL OF $17.25. WE PROBABLY HAD A FEW PAPER PLAYERS TENDERING SOME OF THEIR LONGS FOR SEPT. EFP’S (BUT THAT OBLIGATION STILL RESTS WITH THE BANKERS BUT ON A DIFFERENT EXCHANGE LONDON). HOWEVER THE GAIN IN NEWBIE LONGS FAR OUTDISTANCED THOSE PAPER PLAYERS EXITING.  THE BANKERS CONTINUE TO BE RETICENT IN SUPPLYING THE SHORT PAPER

RESULT:  A HIGHER OI AT THE COMEX,(BUT MUCH SMALLER THAN GOLD) WITH A HUGE PRICE INCREASE.

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

 i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 2.54 POINTS OR 0.08%   / /Hang Sang CLOSED DOWN 98.28 POINTS OR 0.35%/ The Nikkei closed DOWN 87,35 POINTS OR 0.45%/Australia’s all ordinaires CLOSED DOWN 0.65%/Chinese yuan (ONSHORE) closed UP at 6.5960/Oil DOWN to 46.61 dollars per barrel for WTI and 51.51 for Brent. Stocks in Europe OPENED DEEPLY IN THE RED. Offshore yuan trades  6.6020 yuan to the dollar vs 6.5960 for onshore yuan. NOW THE OFFSHORE MOVED SLIGHTLY WEAKER  TO THE ONSHORE YUAN/ ONSHORE YUAN MUCH STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE EXTREMELY WEAKER DOLLAR. CHINA IS VERY HAPPY TODAY

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)NORTH KOREA/USA/SOUTH KOREA

South Korea orders a show of overwhelming force reacting to North Korea’s launch of a missile travelling over Japan

( zero hedge)

ii)South Korea releases footage of a new ballistic missile which shows it is capable of a massive retaliation

( zero hedge)

iii)The maniac Kim blasts at the UK and states they they will face “a miserable end” if they join the “war maniacs, USA and South Korea

 

( zero hedge)

iv)Bill Blain discusses:

 

  1. North Korea
  2. Brexit
  3. Hurricane Harvey

( Bill Blain/Mint Partners)

v)Nomura:  probability of a North Korean war breaking out is 35%

( zerohedge)

 

b) REPORT ON JAPAN

c) REPORT ON CHINA

Now it is China’s turn to weigh in on the North Korean situation as they are trying to avoid provocations. Russian states that sanctions have been exhausted.

( zerohedge)

4. EUROPEAN AFFAIRS

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Israel/Syria/Assad
Israel warns Russia that it may bomb Assad’s palace.  i.e. assassinate him. Israel cannot have Iranian forces inside Syria next to its borders
( zero hedge)

6 .GLOBAL ISSUES

7. OIL ISSUES

The Aramco public offering will be a huge geopolitical game of thrones.  China is turning towards Saudi Arabia and they will be willing to pay higher than real worth in order to come closer to this large oil country.

(Cyril Widdershoven/OilPrice.com)

 

8. EMERGING MARKET

VENEZUELA

9.   PHYSICAL MARKETS

i)Von Greyerz states (and probably he is correct) that central banks will not audit their gold because it is either gone or deeply impaired

( Von Greyerz/Kingworldnews)

ii)According to this fellow, the dollar’s fall signals the fact that USA rates will not rise and that should propel gold/silver northbound

( Sperandeo/Kingworldnews)

iii)China is planning a crackdown on cryptotocurrency exchanges: they are calling it illegal funding!!

( zero hedge)

iv)This is what gold should be trading at if it were not for manipulation; Bitcoin at $4,600.00

( zero hedge)

10. USA Stories

i a)All options with respect to North Korea are on the table is the official response from Trump.

( zero hedge)

i  b)And now Nikki Haley: Enough is enough

( zero hedge)

 

ii)The tally for the emergency funding for Hurricane Harvey may exceed 100 billion dollars and may not be an easy bill fir Congress to pass:

( zerohedge)

iii)The disaster scene in Houston.  This will no doubt be the most expensive disaster in USA history

( zero hedge)

iv)This is not good:  Brazoria County which is just south of Houston warns everybody to get out due to a levee breach at Columbia Lakes

 

( zero hedge)

v)Insurance companies could face losses of up to $1/2 trillion during a crisis like downturn similar to what we faced in 2008

( zerohedge)

vi)Now authorities warn that bridges are not safe as they start to crumble to the weight of the floodwaters.

 

( zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE BY A HUMONGOUS 22,957 CONTRACTS UP to an OI level of 537,503 WITH THE HUGE GAIN IN THE PRICE OF GOLD   ($16.5 GAIN / YESTERDAY’S trading).  This time the bankers did supply the necessary gold short paper when newbie longs took on our criminal bankers realizing that the geopolitical climate in the states was getting to their liking as Trump threatened to close government unless he got his wall plus the two dovish speeches by Yellen and Draghi at Jackson Hole, THE FLOODING OF HOUSTON , and the firing of those North Korean missiles. Once gold pierced the 1300 dollar resistance level, the bankers realized the trouble they were in but had no choice but to supply all the necessary comex paper short to satisfy the longs . The bankers looked for divine intervention but got none.

Result: a  MAMMOTH open interest increase with an huge rise in the price of gold with the piercing of resistance level of $1300.00 

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 52 contract(s) to stand at 615 contracts. We had 38 notices filed YESTERDAY so we LOST ONLY 14 contracts or an additional 1400 oz will NOT stand at the comex and 14 EFP’s were issued in August 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 LOSS OF 9 contracts DOWN to 1158.

The next active contract month is Oct and here we saw a HUGE LOSS of 657 contracts DOWN to 51,147.

The very big active December contract month saw it’s OI gain 13,990 contracts up to 417,701.

We had 179 notice(s) filed upon today for  17,900 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 2016 CONTRACT MONTH 44.358 TONNES STOOD FOR DELIVERY. THIS YEAR, WE INITIALLY HAD 25.85 TONNES STANDING ON AUGUST 1/2017 AND WE WILL END UP WITH PROBABLY 16.33 TONNES.

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And now for the wild silver comex results.  Total silver OI ROSE BY 1913 CONTRACTS FROM 188,145 UP TO 190,058 WITH  YESTERDAY’S STRONG 38 CENT GAIN IN PRICE. SILVER RESPONDED TO THE GEOPOLITICAL CLIMATE WITH TRUMP THREATENING TO SHUT DOWN GOVERNMENT UNLESS HE GETS HIS WALL, THE TWO DOVISH SPEECHES BY YELLEN AND DRAGHI AT JACKSON HOLE, THE FLOODING OF HOUSTON AND THE FIRING OF THOSE NORTH KOREAN MISSILES. SOME SMALL NUMBER OF PAPER PLAYERS TENDERED  THEIR SEPT. LONGS FOR SEPT. EFP’S (BUT THAT OBLIGATION STILL RESTS WITH THE BANKERS BUT ON A DIFFERENT EXCHANGE LONDON).HOWEVER ONCE THE HUGE RESISTANCE LEVEL OF $17.25 WAS PIERCED, NEWBIE LONGS BECAME EMBOLDENED TO TAKE ON THE BANKERS BUT THIS TIME THE BANKERS HAD NO CHOICE BUT TO SUPPLY THE SHORT PAPER BUT AT A LOWER LEVEL THAN GOLD. SOME OLD SPECS EXITED WITH A PROFIT
RESULT:  A GOOD SIZED INCREASE IN OI WITH A HUGE GAIN IN PRICE (BUT LESS OF A PERCENTAGE BASIS THAN GOLD). WE HAD A SMALL TRANSFER OF LONGS FOR ANOTHER PHYSICAL DELIVERY PRODUCT PROBABLY A LONDON FORWARD.

We are now in the next big non active silver contract month of August and here the OI LOST 70 contract DOWN TO 0. We had 70 notice(s) filed yesterday.  Thus we GAINED 0 contract(s) or an additional NIL 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 throughout the delivery month but not in silver!! HOWEVER WE DID HAVE A SMALL NUMBER OF LONGS IN SEPTEMBER RECEIVE EFP’S IN EXCHANGE FOR THEIR DEPARTED LONG POSITIONS. THESE GUYS RECEIVE A FIAT BONUS PLUS A DELIVERABLE PRODUCT ON ANOTHER EXCHANGE.

The next active contract month is September (and the last active month until December) saw it’s OI fall by 11,433 contacts down to 28,784.  The next non active contract month for silver after September is October and here the OI GAINED 90 contacts UP TO 842. After October, the big active contract month is December and here the OI GAINED by 12,860 contracts UP to 144,535 contracts.

We had 0 notice(s) filed for  NIL oz for the AUGUST 2017 contract

VOLUMES: for the gold comex

ESTIMATED VOLUME TODAY: 265,579 WHICH IS EXCELLENT

YESTERDAY’S confirmed volume was 370,913 which is HUGE

volumes on gold are STILL HIGHER THAN NORMAL!

Initial standings for AUGUST

 August 29/2017.

Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
17,182.227 oz
Delaware,
International Delaware,
Manfra
Deposits to the Dealer Inventory in oz    nil oz
Deposits to the Customer Inventory, in oz 
  5826.44 oz
Scotia
No of oz served (contracts) today
 
179 notice(s)
17,900 OZ
No of oz to be served (notices)
436 contracts
(43,600 oz)
Total monthly oz gold served (contracts) so far this month
4801 notices
480,100 oz
14.933 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   52,673.5  oz
Today we HAD  3 kilobar transaction(s)/ 
total dealer deposits: nil oz
We had nil dealer withdrawals:
total dealer withdrawals:  0 oz
we had 1 customer deposit(s):
 i) Into Scotia: 5,826.44 oz
total customer deposits; 5826.44  oz
We had 3 customer withdrawal(s)
i) Out of Delaware: 3582.772 oz
ii) Out of I-D: 4533.15 oz (141 kilobars)
iii)Out of Manfra: 9066.300 oz
total customer withdrawals;  17,182.222 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 179  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 (4804) x 100 oz or 480,400 oz, to which we add the difference between the open interest for the front month of AUGUST (615 contracts) minus the number of notices served upon today (179) x 100 oz per contract equals 523,800  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 (4804) x 100 oz  or ounces + {(615)OI for the front month  minus the number of  notices served upon today (179) x 100 oz which equals 523,700 oz standing in this  active delivery month of AUGUST  (16.289 tonnes)
 we LOST 14 contracts or an additional 1400 oz will NOT stand for delivery and 14 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 735,302.365 or 22.87 tonnes  (dealer gold continues to disappear)
Total gold inventory (dealer and customer) = 8,686,141.9 or 270.17 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 270.17 tonnes for a  loss of 33  tonnes over that period.  Since August 8/2016 we have lost 84 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  84 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE AUGUST DELIVERY MONTH
August final standings
 August 29  2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
31,012.570 oz
CNT
DELAWARE
Deposits to the Dealer Inventory
nil  oz
Deposits to the Customer Inventory 
 658,931.13 oz
CNT
Delaware
Scotia
No of oz served today (contracts)
0 CONTRACT(S)
(NIL OZ)
No of oz to be served (notices)
0 contracts
( NIL oz)
Total monthly oz silver served (contracts) 1248 contracts (6,240,000 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 3,959,871.6 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil   oz
we had 0 dealer withdrawals:
total dealer withdrawals: nil oz
we had 2 customer withdrawal(s):
i) Out of CNT: 29,946.97 oz
ii) Out of DELAWARE: 1065.600 oz
TOTAL CUSTOMER WITHDRAWALS: 31,012.57 oz
We had 3 Customer deposit(s):
 I) INTO CNT:  58,783.200 OZ
ii) Into Delaware: 1095.200 oz
iii) Into Scotia: 599.052.73 oz
***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: 658,931.13 oz
 
 we had 1 adjustment(s)
 i) from Scotia:  56,078.960 was removed from the customer account  as a counting error.
The total number of notices filed today for the AUGUST. contract month is represented by 0 contract(s) for NIL 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 1248 x 5,000 oz  = 6,240,000 oz to which we add the difference between the open interest for the front month of AUGUST (0) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing.
 

 

.
 
Thus the FINAL standings for silver for the AUGUST contract month:  1248 (notices served so far)x 5000 oz  + OI for front month of AUGUST(0 ) -number of notices served upon today (0)x 5000 oz  equals  6,240,000 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. 
(TO GIVE YOU AN IDEA OF THE HUGE DEMAND FOR PHYSICAL IN THIS AUGUST NON ACTIVE DELIVERY MONTH WE HAD INITIALLY 1.965 MILLION OZ STAND FOR DELIVERY ON AUGUST 1. WE HAVE ENDED WITH 6.240 MILLION OZ EVENTUALLY STAND.)
We GAINED 0 contracts or an additional NIL oz wishes to stand for delivery in this non active month of August and 0 EFP’s were issued for the silver August month. We may have had a tiny number of Sept EFP’s issued.
At this point in the delivery cycle last year on August 29/2016 we had 23,748 contracts standing vs this yr at 28,784. JUDGING FROM WHAT WE HAVE BEEN EXPERIENCING IN SILVER, THIS WEEK’S FIRST DAY STANDING WILL BE A DILLY!!
Last yr on the first day notice for the Sept silver 2016 contract we had 17.070 million oz stand for delivery.
By month end:  16.075 million oz/
 
Volumes: for silver comex
ESTIMATED VOLUME TODAY: 105,742 WHICH IS OUT OF THIS WORLD
FRIDAY’s  confirmed volume was 158,092 contracts which is OUT OF THIS WORLD
FRIDAY’S CONFIRMED VOLUME OF 158,092 CONTRACTS WHICH EQUATES TO 790 MILLION OZ OF SILVER OR 113% 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:  38.363 million (close to record low inventory  
Total number of dealer and customer silver:   217.654 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 7.0 percent to NAV usa funds and Negative 6.9% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.4%
Percentage of fund in silver:37.6%
cash .+0.0%( August 29/2017) 
2. Sprott silver fund (PSLV): STOCK   NAV FALLS TO -0.43% (August 29/2017) 
3. Sprott gold fund (PHYS): premium to NAV FALLS TO -0.55% to NAV  (August 29/2017 )
Note: Sprott silver trust back  into NEGATIVE territory at -0.43%/Sprott physical gold trust is back into NEGATIVE/ territory at -0.55%/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 29/a huge deposit of 9.16 tonnes of probable paper gold/inventory rests at 814.36 tonnes

AUGUST 28/a huge deposit f 5.91 tonnes of gold into GLD inventory/inventory rests at 805.20 tonnes

AUGUST 25/NO CHANGE IN GOLD INVENTORY/INVENTORY RESTS AT 799.29 TONNES

AUGUST 24/no change in gold inventory at the GLD/inventory rests at 799.29 tonnes

August 23/no change in gold inventory at the GLD/Inventory rests 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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
August 29 /2017/ Inventory rests tonight at 814.36 tonnes
*IN LAST 222 TRADING DAYS: 135.52 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 160 TRADING DAYS: A NET  21.91 TONNES HAVE NOW BEEN ADDED INTO  GLD INVENTORY.
*FROM FEB 1/2017: A NET  5.10 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

August 29/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 333.178 MILLION OZ

AUGUST 28/no change in silver inventory at the SLV/Inventory rests at 333.178 million oz/

AUGUST 25/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 333.178 MILLION OZ

AUGUST 24/A HUGE WITHDRAWAL OF 1.229 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 333.178 MILLION OZ

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

 

August 29.2017:

Inventory 333.178  million oz
end
  • 6 Month MM GOFO

    Indicative gold forward offer rate for a 6 month duration

    + 1.35%
  • 12 Month MM GOFO
    + 1.49%
  • 30 day trend

end

Major gold/silver trading/commentaries for TUESDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Gold Surges 2.6% After Jackson Hole and N. Korean Missile

– Gold surges as N. Korea fires ballistic missile over Japan
– Safe haven buying sees gold break out to 10-month high after Jackson Hole and rising North Korea risk of attack on Guam
– South Korea’s air force dropped eight MK 84 bombs near Seoul;  simulating the destruction of North Korea’s leadership

– Gold rises from $1,291 to $1,325; Silver surges 3.2% from $17.05 to $17.60
– Volatility as seen in VIX surges as stocks fall; FTSE -1.1%
– Yen rises in short term but no safe haven in long term with gold haven risen 9.8% per annum in JPY (see chart)

– Gold was moving higher after Jackson Hole and had broken through crucial $1,300/oz level
– Asian geopolitical risk allied to U.S. political instability increasing safe haven bid
– $20 trillion U.S. debt ceiling storm looms

Editor: Mark O’Byrne

This morning the price of gold has rallied to its highest point since the Trump’s election. North Korea’s firing of a missile over Northern Japan which landed in waters off Hokkaido in the Pacific, has sharply escalated tensions in the Korean peninsula and in Asia.

This latest move by Kim Jong Un was intended to show that an attack on Guam is possible at any time, according to North Korea’s Mun-hwan.

Source: Yonhap via ZeroHedge

There had previously been concern that the war of words between Trump and Kim Jon-Un would result in others getting caught in the crossfire. This was confirmed this morning when Japan was made a clear target.

“North Korea’s reckless action is an unprecedented, serious and a grave threat to our nation”
– Japanese Prime Minister Shinzo Abe

Immediately after the missile launch was detected the Japanese government’s J-Alert system interrupted radio and TV to warn citizens of the possible missile and urged them to take refuge in solid buildings or underground shelters. Bullet train services were temporarily halted and warnings went out over loudspeakers in towns in Hokkaido.

South Korea’s air force has staged a live-fire drill simulating the destruction of North Korea’s leadership. Earlier this morning four South Korean fighter jets bombed a military firing range north of Seoul after President Moon Jae-in asked the military to demonstrate capabilities in a show of strength to North Korea.

North Korea refers to these missile launches as ‘tests’. But they are more than tests of the equipment, they are also tests on the patience, nerves and self-control of those who feel threatened by Kim Jong-Un. Observers and surrounding countries believe this saber-rattling is growing ever more serious and dangerous by the day.

As Yonhap notes, “the North’s provocation is another slap in the face to Moon and U.S. President Donald Trump as they have sought to resume dialogue, and could bring tensions on the peninsula to a new high.”

Trump is also left red in the face after his comments that Kim Jong Un “is starting to respect us.” Yet another idiotic comment from the current incumbent of the White House.

Safe havens rise as risk assets fall from record highs

Fear in the markets has been expressed by the climb in price of gold and the ongoing support for the Japanese Yen, Swiss Franc and US Dollar.

While the yen has risen in the short term, the notion that it is a ‘safe haven‘ in the real sense of that term – as a medium and long term hedge for investors – is inaccurate. This is clearly seen in the table above and the chart below which show that the yen has fallen nearly 10% per year versus gold in the last 15 years.

Gold rose in yen prior to the crisis from 2002 to 2007 and again during the height of the crisis from 2009 to 2012.

Seeing as Japan is at risk of a nuclear attack and being sucked into a war – wars are expensive things – the yen is actually vulnerable and will likely fall in the coming months.

Gold in JPY – 15 Years – Goldprice.org

The rise in the price of both gold and silver is expected given the events of last night, however they do not come without support elsewhere.

The outcome of Jackson Hole and growing concern over the looming US debt ceiling have been providing growing support for the climb in gold and silver.

Where does it end?

Currently there are two major drivers for the price of gold, both of them related to President Donald Trump himself.

These are: US political instability and tensions in Asia including with North Korea.

Following Trump’s election markets had expected Trump’s plans for fiscal stimulus to do great things for the economy. A planned $500 billion infrastructure spending program was expected to lead to strong US economic expansion, higher interest rates and a more robust dollar.

However, nothing has materialised and Trump now has the problem of a potential government standoff as the $20 trillion debt ceiling issue looms in September.

Many might argue that Trump inherited these huge economic challenges that will likely lead to political instability. But, one problem he has definitely made worse and arguably added to (in the short-term) is that of North Korea.

A major difference with the North Korea problem is that for the first time in modern history the US has a president who is happy to be confrontational and threatening. He does not appear to want to be conciliatory and work to find a multi-lateral solution. With this in mind it is near impossible for investors to know how this will end.

At the time of writing there has been no official response from the White House or tweets from President Trump. How the situation with North Korea will unfold relies heavily on what happens in Washington. No doubt, If Trump decides to tweet and escalate the matter the situation will become even messier prompting a sharp sell off in risk assets.

Uncertainty drives the gold price

Once again the short-term support for gold is being solidified by uncertainty. This combined with the long-term support that is driven by the irrevocable damage governments have done to our markets and currencues, means that we are left with a strong basis for an ongoing climb in the gold price.

Investors are turning to gold today because one of the world’s most advanced economies is under threat by one of the last closed-dictator regimes.

The situation will be helped or hindered by others in the western world who are also concerned for their own country’s safety. We are very much on the brink of something which could affect lives for generations to come, much like the last two major wars that dragged every corner of the globe into them.

In previous scenarios when countries’ safety and sovereignty have been under threat, gold has acted as a safe haven for those who are concerned about the safety of their assets, currencies and wealth. They have invested in gold, safe in the knowledge that it cannot be deleted by a cyber attack or told it cannot be used when they cross borders. They know that it is the ultimate safe haven.

The market reaction to events overnight shows again that diversification is key. Gold should be treated as a currency and added to a balanced, diversified portfolio to ensure financial insurance in the coming months and years.

News and Commentary

Gold climbs to 9-1/2 month high on rising North Korea tensions (Reuters.com)

Gold Jumps on Haven Demand as N. Korea Lobs Missile Across Japan (Bloomberg.com)

Asian markets jolted by North Korean missile test over Japan (Marketwatch.com)

North Korea fires missile over Japan, sharply escalating tensions (Reuters.com)

Stocks Drop, Yen Jumps After Korea Missile Launch (Bloomberg.com)

Source: Marketwatch

Gold rise is “trend we’ll continue to see until data or politics changes” – Stepek (MoneyWeek.com)

Finland’s Largest Pension Funds Dumps US Stocks Because “There Is No President In The US” (Bloomberg.com)

Unloading Dollar Assets Would Be Most Effective – Chinese State Media Unveils Trade War ‘Countermeasures’ (ZeroHedge.com)

Are You Prepared for These Potentially Disruptive Economic Storms? (GoldSeek.com)

One look at this chart and even the haters might be tempted to buy some gold (MarketWatch.com)

Gold Prices (LBMA AM)

29 Aug: USD 1,323.40, GBP 1,020.34 & EUR 1,097.36 per ounce
28 Aug: No LBMA prices today as UK holiday
25 Aug: USD 1,287.05, GBP 1,003.90 & EUR 1,090.90 per ounce
24 Aug: USD 1,285.90, GBP 1,003.26 & EUR 1,090.44 per ounce
23 Aug: USD 1,286.45, GBP 1,004.33 & EUR 1,091.68 per ounce
22 Aug: USD 1,285.10, GBP 1,000.71 & EUR 1,091.95 per ounce
21 Aug: USD 1,287.60, GBP 999.82 & EUR 1,096.52 per ounce

Silver Prices (LBMA)

29 Aug: USD 17.60, GBP 13.59 & EUR 14.62 per ounce
28 Aug: No LBMA prices today as UK holiday
25 Aug: USD 17.02, GBP 13.26 & EUR 14.40 per ounce
24 Aug: USD 16.93, GBP 13.20 & EUR 14.36 per ounce
23 Aug: USD 17.06, GBP 13.32 & EUR 14.48 per ounce
22 Aug: USD 17.02, GBP 13.27 & EUR 14.48 per ounce
21 Aug: USD 17.02, GBP 13.20 & EUR 14.48 per ounce


Recent Market Updates

– Diversify Into Gold On U.S. “Political Instability” Advise Blackrock
– Trump Presidency Is Over – Bannon Is Right
– The Truth About Bundesbank Repatriation of Gold From U.S.
– Cyberwar Risk – Was U.S. Navy Victim Of Hacking?
– Global Financial Crisis 10 Years On: Gold Rises 100% from $650 to $1,300
– Mnuchin: I Assume Fort Knox Gold Is Still There
– Buffett Sees Market Crash Coming? His Cash Speaks Louder Than Words
– Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High
– Must See Charts – Gold Hedges USD Devaluation, Rise in Oil, Food and Cost of Living Since Nixon Ended Gold Standard
– World’s Largest Hedge Fund Bridgewater Buys $68 Million of Gold ETF In Q2
– Diversify Into Gold Urges Dalio on Linkedin – “Militaristic Leaders Playing Chicken Risks Hellacious War”
– Gold Has Yet Another Purpose – Help Fight Cancer
– Gold Up 2%, Silver 5% In Week – Gundlach, Gartman and Dalio Positive On Gold

END

 

Von Greyerz states (and probably he is correct) that central banks will not audit their gold because it is either gone or deeply impaired

 

 

(courtesy Von Greyerz/Kingworldnews)

Central banks won’t audit their gold because it’s gone or impaired, von Greyerz says

 Section: 

11:35a ET Monday, August 28, 2017

Dear Friend of GATA and Gold:

Central banks forbid independent audits of their gold reserves, gold fund manager Egon von Greyerz notes today in an interview with King World News, because much of that gold is either missing entirely or impaired by leases and swaps. For example, von Greyerz adds, the gold supposedly still being kept in the United States by Germany’s Bundesbank rather than repatriated to Germany is probably long gone.

Von Greyerz does not cite it specifically, but anyone who doubts what he says should review the March 1999 secret staff report of the International Monetary Fund, which confirmed that central banks refuse to report their gold swaps and leases because doing so would interfere with their surreptitious interventions in the gold and currency markets:

http://www.gata.org/node/12016

Von Greyerz’s interview with KWN is excerpted here:

http://kingworldnews.com/greyerz-this-is-when-the-global-panic-begins/

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

 

 

END

 

 

According to this fellow, the dollar’s fall signals the fact that USA rates will not rise and that should propel gold/silver northbound

 

(courtesy Sperandeo/Kingworldnews)

 

Dollar’s fall signals that rates won’t rise, Sperandeo tells KWN

 Section: 

2p ET Monday, August 28, 2017

Dear Friend of GATA and Gold:

Fund manager Victor Sperandeo tells King World News today that the monetary metals are soaring because China’s stock market is up and China is a big buyer of the metals and because the U.S. dollar’s sharp fall signifies that higher interest rates in the United States are now out of the question. Sperandeo’s comments are excerpted at KWN here:

http://kingworldnews.com/alert-former-soros-associate-just-warned-this-i…

Of course there may be other explanations, such as that the Trump administration wants dollar devaluation to gain advantages for U.S. industry because gaining advantage through tariffs would violate international agreements. Or maybe governments that want the gold price suppressed are at last running out of more metal than they care to lose.

No one who doesn’t know how governments themselves are doing their own secret trading today knows for sure.

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

 

END

 

China is planning a crackdown on cryptotocurrency exchanges: they are calling it illegal funding!!

(courtesy zero hedge)

China Is Planning ICO Crackdown, Threatens Life In Prison For Crypto Fund Fraud

Earlier this year, Chinese digital currency exchanges temporarily halted customer withdrawals to upgrade their AML controls at the behest of financial regulators. The halt, which lasted for months, caused a temporary chill in the local bitcoin market, causing China to forfeit its position as the world’s largest bitcoin market. Now, Chinese regulators have signaled that they intend to stage a similar crackdown on initial coin offerings, the latest blockchain-related investing craze.

According to CoinDesk, draft legislation meant to curb so-called “illegal fundraising” includes a provision that targets ICOs.

Here’s more from CoinDesk (translation theirs).

“If the department overseeing illegal fundraising activities found a fundraising without proper permission, or a fundraising that violates the relevant provisions of the State, and if one of the following circumstances is found, the department shall launch an administrative investigation. Other relevant departments shall cooperate with the investigation.

(2) to raise funds in the name of issuing or transferring equity, raising funds, selling insurance, or engaging in asset management activities, virtual currency, leasing, credit cooperation and mutual funds…”

According to CoinDesk, the draft would require the government to establish an interdepartmental committee to combat illegal fundraising. It also clarified that participants of illegal fundraising would be responsible for their own losses. The release of the draft legislation follows widespread outrage directed at cryptocurrency-related scams. Last month, several college graduates in Tianjin, China were found dead after being imprisoned and assaulted by members of a pyramid-selling organization.

Two Chinese laws presently govern how criminal courts handle unlawful fundraising.  According to CoinTelegraphthe crime of illegally absorbing public deposits carries a maximum penalty of 10 years of imprisonment. The crime of fund fraud, meanwhile, carries a maximum sentence of life in prison.

Now the question is, if such heavy-handed penalties are tied to the law currently under consideration, will the law have a chilling effect on the ICO market? Or will it successfully eliminate fraud and abuse?

According to a team of analysts at Pitchbook, ICO have raised more than $1 billion this year, and are expected to raise as much as $1.7 billion. Earlier this month, the SEC ruled that tokens produced in ICOs meet the definition of a security, and therefore must be registered with the commission. Though exactly how ICOs will be regulated in the US remains somewhat vague.

END

This is what gold should be trading at if it were not for manipulation; Bitcoin at $4,600.00

(courtesy zero hedge



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

 
 

1 Chinese yuan vs USA dollar/yuan STRONGER 6.5960 (REVALUATION NORTHBOUND   /OFFSHORE YUAN MOVES SLIGHTLY WEAKER TO ONSHORE AT   6.6020/ Shanghai bourse CLOSED UP 2.54 POINTS OR 0.08%  / HANG SANG CLOSED DOWN 98.28 POINTS OR 0.35% 

2. Nikkei closed DOWN 87.35 POINTS OR 0.45%    /USA: YEN FALLS TO 108.58

3. Europe stocks OPENED DEEPLY IN THE RED     ( /USA dollar index FALLS TO  91.77/Euro UP to 1.2042

3b Japan 10 year bond yield: FALLS  TO  +.009%/ GOVERNMENT INTERVENTION    !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 114.34/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!

3c Nikkei now JUST BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  46.61 and Brent: 51.51

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 RISES TO  +.336%/Italian 10 yr bond yield UP  to 2.093%    

3j Greek 10 year bond yield FALLS to  : 5.540???  

3k Gold at $1320.70  silver at:17.55 (8:15 am est)   SILVER NEXT RESISTANCE LEVEL AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 27/100 in  roubles/dollar) 58.71-

3m oil into the 46 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 BIG SIZED REVALUATION NORTHBOUND 

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 108.58 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  0.9442 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1368 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  +0.336%

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 2.107% early this morning. Thirty year rate  at 2.712% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

6. USA CASH BALANCES ON HAND: $59 BILLION

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

European Stocks Tumble To 6 Month Lows As Euro Surges Above 1.20; VIX, Havens Surge

“Financial markets think the only realistic option for the U.S. and North Korea will be to sit down and talk at some point because other options are too costly for everyone involved. But no one can rule out the risk of accidents. Markets think the chicken game will continue for now and North Korea will remain a risk.”

– Masayoshi Kichikawa, chief strategist at Sumitomo Mitsui.

Following last night’s “unprecedented” North Korea missile launch over Japan, which was a clear taunt to Donald Trump, the biggest moves this morning are not to be found in South Korea, where the Kospi index closed Tuesday just 0.2% lower after falling as much as 1.6% as local BTFD spirits were ignited late in the session, or in Japan where the Nikkei pared much of its losses to end down 0.5% as the BOJ bought a few billion more in ETFs (but not before hitting a 4 month low), but across developed markets where the Euro finally surged above the “profit crushing” psychological barrier of 1.20 for the first time since January 2015, sending European stocks reeling to 6 month lows as exporters, mostly in Germany, were slammed. The VIX was up over 20% in early trading, jumping 2.42 vols to 13.74.

None other than chancellor Angela Merkel commented on the Euro this morning, and when asked about the impact of the euro’s rise on Germany’s trade surplus, says it’s a simple fact that the euro’s exchange rate has an impact on terms of trade. “I don’t decide about the euro’s exchange rate”: Merkel says at news conference in Berlin. Clearly that’s Mario Draghi’s responsibility. “Personally, I don’t see the trade surplus as so dramatic” she added. We’ll see if German investors agree.

“The market is still digesting Draghi’s comments from Jackson Hole and the U.S. outlook is looking difficult with concerns around the budget and a looming shutdown,” said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.

Meanwhile, in a broader move, world stocks tumbled and safe-haven assets jumped on Tuesday on worries the North Korea situation could devolve into an all out military conflict. S&P futures fell as much as 0.7% to the lowest in more than seven weeks. The European STOXX 600 index fell more than 1% to a six-month low.

North Korea military tensions also sent both European, Japanese and US Treasury yields tumbling, with the 10Y Bund down to 0.33%, the lowest in two months, the 10Y Treasury tumbling as much as 2.10%, the lowest in 10 months, and the benchmark JGB sliding back to Japan’s target of 0.0%. The risk off tone has spurred a broad flight into other safe-havens, with JPY, CHF and gold surging higher.

Some of course, tried to spin the overnight news: “the North Korean escalation has triggered a significant risk-off move,” Alessandro Balsotti, head of asset management at JCI Capital Limited, said in his daily note to clients. “However … observers believe it won’t be enough to trigger a material reaction from the United States-South Korea axis. It wouldn’t be surprising, then, if investors take advantage of this geopolitical fear to buy the dips.

Meanwhile, equities dropped and volatility surged across the globe in classic risk-off moves, with U.S. stock futures also tumbling, down 17 at pixel time. Japan called Kim Jong Un’s latest provocation an “unprecedented, grave and serious threat.” Gold surged to the highest this year, while the Swiss franc and the yen were the best-performing major currencies.

In Europe, the Stoxx Europe 600 Index sank 1.5% to the lowest in almost seven months, as the EURUSD crossing 1.20 has spooked investors, worried that exporter profits are about to be wiped out. In the UK, the U.K.’s FTSE 100 Index declined 1.3% to the lowest in 16 weeks on a closing basis ahead of grueling, and chaotic, Brexit negotiations. Germany’s DAX Index decreased 1.7% to the lowest in more than five months, led by sliding exporters.

As Bloomberg writes,
Tuesday’s launch thrust the confrontation between the U.S. and North Korea back to the fore after the hermit kingdom had been praised by Secretary of State Rex Tillerson last week for its “restraint.” Tillerson said that North Korea hadn’t carried out “provocative acts” since the UN Security Council imposed new sanctions earlier this month, and that Pyongyang’s temperance might lead to negotiations “in the near future.” Kim Jong Un last tested a missile on July 28.

Oops.

“Some observers had thought the U.S. and North Korea were pursuing discussions behind closed doors, but it turns out North Korea continues to pursue missile development,” said Chihiro Ohta, a Tokyo-based senior strategist at SMBC Nikko Securities. “The risk-off stance is likely to continue even if the U.S. responds calmly.”

The dollar was down 0.6 percent at 108.63 yen after hitting its lowest level since mid-April despite Japan’s proximity to North Korea. Also the safe-haven Swiss franc strengthened, with the dollar falling 0.6 percent to a one-month low against the Swiss currency. Across EM, Predictably, Russia’s ruble (due to ongoing Harvey-related oil price woes) and South Korea’s won (for obvious reasons) led losses among emerging-market currencies after North Korea fired a ballistic missile over Japan on Tuesday, damping appetite for riskier assets.  The Ruble falls 0.6% against dollar, most among 24 major peers tracked by Bloomberg as oil price weakens 2nd day. The South Korean won fell the most in 2 weeks, even as the Kospi wiped out most trading losses to close only 0.2%.

Meanwhile, in its now traditional mirror response to the sliding dollar, the Yuan climbed for the 10th consecutive day, rising above 6.60 to a new 14-month high. Both onshore and offshore yuan extend gains against dollar to beyond 6.60 and to strongest for both since June 2016; in onshore markets, the CNY was up 0.14% at 6.5920 vs USD, climbed 0.7% overnight, the most since Jan. 17, after the PBOC strengthened the fixing for a second day to 6.6293 from 6.6353. The Yuan was the best performer among 11 Asian currencies tracked by Bloomberg over past month, gaining 2.1% vs U.S. dollar.

In rates, bund futures opened higher and extended the recent rally, with 30y yields breaking below 1.10%. US Treasuries outperformed, with price action pointing to stops on the break below 2.10%, the lowest level since mid-November. Curves bull flatten as swap spreads snap wider, in typical risk-off fashion after North Korea fires missile over Japan. Germany’s 10-year yield decreased five basis points to 0.33 percent, the lowest in two months. Britain’s 10-year yield declined six basis points to 0.992 percent, the lowest in almost 11 weeks.

Meanwhile, gold prices jumped 0.85% to $1,321 an ounce, hitting its highest level in more than nine months and rising for a third straight session. The metal also drew support from uncertainty surrounding the Trump administration after remarks last week raised fears of a government shutdown.

Crude oil bounced back on the back of supply disruptions in Colombia and Libya, a day after U.S. crude futures dropped on worries that refinery shutdowns caused by flooding could boost inventory. WTI crude futures rose 0.26% to $46.69 a barrel after falling to as low as $46.15 in the previous session. Gasoline price, which surged as much as 7 percent to a two-year peak of $1.7799 a gallon on Monday, traded at $1.7263 in early Tuesday trade as storm Harvey picked up strength again after inundating refineries along the Texas coast.

Today’s economic data include Conference Board Consumer Confidence Index for August. Bank of Montreal, Bank of Nova Scotia, Best Buy and H&R Block are among companies reporting earnings.

Bulletin Headline Summary from RanSquawk

  • Tensions on the Korean peninsula rises after N.Korea fires a missile over Japan.
  • Risk off tone spurs flow into safe-havens with JPY, CHF and gold surging higher.
  • Looking ahead, highlights include Fed’s Evans and API Crude Report

Market Snapshot

  • S&P 500 futures down 0.8% to 2,423.90
  • STOXX Europe 600 down 1.4% to 366.98
  • MSCI Asia down 0.1% to 160.27
  • MSCI Asia ex Japan down 0.5% to 528.40
  • Nikkei down 0.5% to 19,362.55
  • Topix down 0.2% to 1,597.76
  • Hang Seng Index down 0.4% to 27,765.01
  • Shanghai Composite up 0.08% to 3,365.23
  • Sensex down 1.2% to 31,370.01
  • Australia S&P/ASX 200 down 0.7% to 5,669.01
  • Kospi down 0.2% to 2,364.74
  • Brent futures up 0.2% to $51.80/bbl
  • Gold spot up 1.1% to $1,325.06
  • U.S. Dollar Index down 0.6% to 91.661
  • The VIX is up 2.42 to 13.74
  • German 10Y yield fell 4.8 bps to 0.328%
  • Euro up 0.6% to $1.2052
  • Italian 10Y yield fell 2.0 bps to 1.789%
  • Spanish 10Y yield fell 2.4 bps to 1.577%

Top Overnight News

  • Kim Jong Un’s rattled Asian markets as the U.S. and its allies weighed a response to Kim Jong Un’s latest provocation.
  • South Korean President Moon Jae-in ordered a show of force in response to North Korea’s ballistic missile, with four F-15K jet fighters conducting bomb-dropping drills.
  • Tropical Storm Harvey drifted into the Gulf of Mexico, poised to recharge before crashing ashore again Wednesday on the Texas-Louisiana border.
  • President Donald Trump promised swift emergency funding to help Texas recover from Hurricane Harvey, but Republicans in Congress will have the ultimate say over how much aid is delivered — and how quickly it begins to flow
  • Lloyd’s of London insurers dropped amid speculation that they will suffer losses from Tropical Storm Harvey that’s battering Houston, the epicenter of the U.S. oil industry
  • Google faces a Tuesday deadline to tell the European Union how it plans to comply with an order to stop discriminating against rival shopping search services under threat of new fines that would add to a record 2.4 billion-euro ($2.9 billion) penalty
  • Gilead Sciences Inc.’s acquisition of Kite Pharma Inc. has brought it back to a familiar — and contentious — dilemma: How much should a drugmaker charge for a novel drug that has the potential to cure a disease
  • Insurers got burned badly in the 2008 financial crisis. So almost a decade later, BlackRock Inc. scoured the industry’s $5 trillion in U.S. investments to figure out how they would fare if markets crash so hard again. The answer: Worse
  • Buyout Firm Leonard Green Agrees to Purchase Cinven’s CPA Global
  • Statoil Strikes Out at Norway’s Biggest Arctic Prospect
  • TPG’s Bonderman to See $425 Million Windfall in Kite Pharma Sale
  • Foot Locker Falls, Shoe Stocks May Move as Finish Line Cuts View
  • Smallest Hedge Funds Will Be Quick to Drop Research Under MiFID
  • Indonesia Wrests Ownership of Top Copper Mine From Freeport
  • BMW Softens Electric i3 City Car’s Boxy Look to Counter Tesla
  • EU’s Juncker Slams U.K.’s Brexit Position Papers as Talks Resume
  • Brexit Branching Logjam Looms at BOE as EU Banks Consider Moves
  • Ghana Banks on IMF Backing as Country Seeks Ambitious Growth

Asian equities traded mostly lower as markets were spooked by the latest North Korean provocation, after it fired a suspected
intermediate ballistic missile that flew over Japan and landed in the waters off Hokkaido. This sparked condemnation from its
neighbours with Japan branding it an unprecedented and grave threat, while South Korea conducted bomb dropping drills as a
show of force and stated that the US is considering deploying assets to the Korean peninsula. As such, the region’s bourses were
pressured with ASX 200 (-1.0%), Nikkei 225 (-0.6%) and KOSPI (-0.8%) all negative, although Australian gold miners and South
Korean defence stocks outperformed with the former underpinned after the precious metal settled above USD 1300/oz for the first
time since November. Elsewhere, Chinese markets were mixed as the Hang Seng (-0.4%) conformed to the negativity, while
downside in Shanghai Comp. (+0.1%) was stemmed and later reversed due to strong earnings results. Finally, both Tnotes and
10yr JGBs began marginally higher as the risk averse tone spurred demand for safe-havens, although JGBs then pared some of its
gains following the enhanced liquidity auction for super-long JGBs in which the b/c declined from prior.

Top Asian News

  • Axiata Is Said to Near $1 Billion Deal for Veon Pakistan Towers
  • Freeport to Invest $17-20 Billion in Indonesia Through 2031
  • Freeport Agrees to Divest Majority Stake in Indonesian Unit
  • This Is the Only Asian Stock Market That’s Surging Today
  • Hyundai Halts Production at Four China Plants on Parts Shortage
  • China’s $1 Trillion Power Industry Overhaul Is Just Starting

European shares have hit their worst level in 6-months (Eurostoxx -1.2%) as rising tensions over North Korea weigh on
sentiment. All sectors are trading with losses, in particular media names as Prosiebensat plunges after the company stated that
they may consider a separate stock market listing for their content production and digital commerce businesses. Elsewhere, gold
miners are performing well this morning with, Rangold Resources and Fresinllo supported by the rise in gold prices, which has
soared to its highest level YTD. Flight to quality flow this morning has supported EGBs with bunds up over half a point. The German curve has
also bull flattened with 2s/10s flatter by 3.7bps and 10s/30s 1.4bps flatter. Peripheral bonds modestly weaker as spreads in the
Portuguese 10Y are wider by 8.1bps, while Italy is wider by 5.1bps against its German counterpart.

Top European News

  • Unwind of ECB Set-Up Evident as Hike Pricing Pushes More Dovish
  • ProSiebenSat.1 Drops as European TV Giants Hit by Soft Ad Market
  • Denmark’s $450 Billion Covered-Bond Market Draws Record Demand
  • U.K. House-Price Growth Slows in Line With Weakening Economy
  • Carmignac Says Russian CPI-Linked Bonds Offer ‘Unusual’ Return

In FX, Reports that North Korea had fired an intermediate range missile over Japan prompted safe-haven flows during Asia-Pac trade, with USD/JPY dropping below 109.00 before stabilising, as markets await a clear response from the UN, Japan and US President Trump. Bids are said to be building around 108.50 but IFR note that Japanese institutional investors are not committed to buying the dips in the pair. There are not any huge option expiries today although there are strikes at 108.35-50 (430mln) and 109.00 (282mln).  EUR/USD has risen to its highest level since Jan’15 after tripping stops above 1.20. Some also suggest that the rise in EUR has been due to Draghi neglecting to talk down the currency in his Jackson Hole speech on Friday. Additionally, cross related buying has been observed in EUR/GBP, which is currently testing 93.00 to the upside, further resistance lies at 93.65 (Oct’16 high). The CHF benefitted from safe haven demand following the missile test with USD/CHF dropping to 0.9500 before finding some support at the level. Cable has been relatively unperturbed by the North Korean missile launch and has been holding around the 55DMA of 1.2934. Comments from the latest round of Brexit negotiations have failed to provide the pair with a catalyst for a move in either direction as talks continue between UK Brexit Secretary Davis and EU Chief Negotiator Barnier.

In commodities, gold prices been further underpinned by safe-haven flows, after the precious metal had already settled above the
USD 1300/oz level for the 1st time since November. Elsewhere, copper was steady in which prices held around its best levels in
nearly 2 years. Crude prices off worst levels with WTI up 0.6% to approach USD 47.00 to the upside.

Looking at the day ahead, there is the Conference Board consumer confidence index for August and the June Case-Shiller house price indices.

US Event Calendar

  • 9am: S&P CoreLogic CS 20-City MoM SA, est. 0.1%, prior 0.1%; CS 20-City YoY NSA, est. 5.6%, prior 5.69%; 20-City NSA Index, prior 199
  • 10am: Conf. Board Consumer Confidence, est. 120.7, prior 121.1; Present Situation, prior 147.8; Board Expectations, prior 103.3

* * *

DB’s Jim Reid concludes the overnight wrap

The bank holiday in the UK yesterday and a damp squib of a Jackson Hole on Friday meant that markets were a bit quiet yesterday although news of another ballistic missile launch by North Korea, only this time over Japan, has seen activity pick up a bit overnight. Late last night reports emerged that North Korea had fired several ballistic missiles including one that flew over Japan(Northern island of Hokkaido) and eventually landed in the Pacific Ocean with no reports of damage. Japan’s PM Abe said “a missile passing over Japan is an unprecedented and serious threat” and has asked the UN Security Council to hold an  emergency meeting. Abe also said that he has spoken to President Trump and agreed to increase the pressure on North Korea. Markets in Asia broadly sold-off following the news with the Nikkei (-0.61%), Kospi (-1.13%), ASX 200 (-0.87%) and the Hang Seng (-0.40%) all still in the red as we type. The Yen (+0.39%) and Gold (+0.48%) have firmed while US equity futures are down half a percent.

So once again geopolitics is front and centre for markets at the start of a new week. In terms of the rest of the week for the benefit of those in the UK out yesterday we’ve included the remainder of the week ahead at the end again. Payrolls and PCE inflation data highlight the back-end of the week but one event worth keeping an eye on today is the slated four-week T-Bill auction in the US given that the maturity lines up nicely with the debt ceiling deadline of September 29th that Treasury Secretary Steven Mnuchin called “critical”. It’ll be interesting to see what the demand is given some of the selling pressure in that part of the curve last week. For what it is worth a fairly packed day of Treasury auctions yesterday passed without any issues for the bond market.

Back to yesterday where the main price action came in the commodity complex and specifically in energy markets in reaction to the awful flooding in the state of Texas following Tropical Storm Harvey. The latest update is that around 30 inches of rain has already fallen but the suggestion is that we could see double that by the end of the week. In terms of the movers the standout was Gasoline which initially surged well over +6% at the open before paring that move as the day progressed but still finished up +2.74% and at the highest level in 4 months. It has extended that move this morning too to be up another +1.57%. The huge flooding hit the supply side of the equation hard with a number of key pipelines closed and over 2 million barrels of crude and condensate capacity in the state of Texas shutdown. Royal Dutch Shell and Exxon Mobil were among those to shutdown plants. On the other hand, WTI Oil fell -2.72% and the most in 7 weeks reflecting the huge drop off in crude oil demand. This morning, WTI has recovered some losses to be +0.52%.

It still appears to be far too early to assess the economic impact of the damage caused by Harvey but Bloomberg reported yesterday that costs could surpass $100bn. To put it in perspective Katrina – which was the most expensive hurricane to hit the US – cost nearly $120bn and Sandy cost about $75bn. Based on the experiences of prior hurricanes DB’s Brett Ryan has just published a note looking at the potential economic impacts from Harvey. He noted that Harvey could potentially drag on 2H real GDP growth by c.20bp mainly through disruption to exports, but the timing of these disruptions are difficult to be precise. Notably, some of the hit to economic growth will likely be offset by a boost to construction spending as rebuilding efforts get under way. Hence, the net impact will not likely affect the overall trajectory of the economy.

So while energy stocks closed down, gains for the more defensive sectors helped US equity markets broadly close flat. The S&P 500 ended +0.05% and the Dow -0.02%, with listed refiners based away from Texas up c.9%. Prior to this, markets in Europe finished a tad weaker albeit on thin volumes. The Stoxx 600 closed -0.48%. A late afternoon surge for the Euro didn’t help with the single currency adding to Friday’s gains by closing up +0.46% and at the highest (1.1979) since January 2015. Away from that both Treasuries (10y -1bp yesterday and -3bp this morning) and significantly Gold (+1.5%) – which passed $1300/oz for the first time since November – were well bid which seemed to reflect a slight risk off tone but also the lack of any hawkish surprises from Yellen on Friday.

Moving on. The first day of the next round of Brexit talks kicked off yesterday and it didn’t go smoothly. EU’s chief negotiator Michael Barnier said he is “concerned” about the progress of the talks and urged the UK to start “negotiating seriously”. Barnier welcomed the UK government’s position papers but noted “we need UK papers that are clear in order to have constructive negotiations”. His mandate effectively means the UK has to reach an agreement of its share of the EU’s 2014-20 budget, the Irish border and EU citizen rights before discussing a future relationship with the EU. One EU diplomat said many countries were ready to wait until the end of the year for the divorce deal, rather than the early autumn as the British had hoped.

Away from politics, yesterday we received the latest ECB CSPP data. As of August 25th, the ECB held €106.2bn which meant net purchases settled last week of €0.94bn. The average daily run rate was €188m which compares to a €348m average since the program started while the CSPP/PSPP ratio was 10.3% (versus previous weeks’ 9.6%, 11.4%, 12.8% and 6.1%). So another week of below average purchases but unsurprising in the context of the summer markets so not much to read into.

With regards to the other remaining data yesterday. In the US, the August Dallas Fed manufacturing activity index was in line with expectations at 17. Within the details, the hiring index slipped modestly from last month’s 19-month high, but the capex index rose to its highest level since January. Elsewhere, the July wholesale inventories were slightly higher than expected at 0.4% mom (vs 0.3% expected), while retail inventories fell 0.2% mom. Over in Europe, the Eurozone’s July M3 money supply was modestly lower than expected at 4.5% (vs. 4.9% expected as per Bloomberg Cons). In Italy, the August consumer confidence index increased 3.9pts to 110.8 (vs 106.9 expected), which is the highest reading for this year. Manufacturing confidence was in line at 108.1, while the economic sentiment indicator strengthened to 107 (vs. 105.6 previous), the highest reading since November 2007.

Looking at the day ahead, UK’s August Nationwide house price index (2.5% yoy expected) will be out in early morning, followed by Germany’s consumer confidence index (10.8 expected). Then France’s preliminary 2Q GDP stats (0.5% qoq and 1.8% yoy expected) and consumer spending for July are due. In the US, there is the Conference Board consumer confidence index for August and the June Case-Shiller house price indices.

 END

3. ASIAN AFFAIRS

i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 2.54 POINTS OR 0.08%   / /Hang Sang CLOSED DOWN 98.28 POINTS OR 0.35%/ The Nikkei closed DOWN 87,35 POINTS OR 0.45%/Australia’s all ordinaires CLOSED DOWN 0.65%/Chinese yuan (ONSHORE) closed UP at 6.5960/Oil DOWN to 46.61 dollars per barrel for WTI and 51.51 for Brent. Stocks in Europe OPENED DEEPLY IN THE RED. Offshore yuan trades  6.6020 yuan to the dollar vs 6.5960 for onshore yuan. NOW THE OFFSHORE MOVED SLIGHTLY WEAKER  TO THE ONSHORE YUAN/ ONSHORE YUAN MUCH STRONGER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS MUCH STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE EXTREMELY WEAKER DOLLAR. CHINA IS VERY HAPPY TODAY 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA/USA/SOUTH KOREA

South Korea orders a show of overwhelming force reacting to North Korea’s launch of a missile travelling over Japan

(courtesy zero hedge)

South Korea Orders Show Of “Overwhelming Force”, Conducts “Live Bombing” Drill As Kospi Tumbles

While we await Donald Trump’s response to the second consecutive North Korean provocation in four days, both on twitter and elsewhere, South Korean President Moon Jae-in has already ordered his troops to demonstrate their capability for “strong retaliation” and put on a show of “overwhelming force”, after his office convened a National Security Council session.

According to Yonhap, President Moon ordered his country’s military to display its capabilities that can “overwhelm” North Korea should the communist state decide to attack, the presidential office  The show of overwhelming force involved the dropping of eight Mark 84 or MK84 multipurpose bombs by four F15K fighter jets at a shooting range near the inter-Korean border in Taebaek, Moon’s chief press secretary, Yoon Young-chan, told reporters.

“The NSC standing committee denounced North Korea for violating the U.N. Security Council resolutions by again launching ballistic missiles despite stern warnings,” Yoon told a press briefing.

Yoon also said that in a telephone conversation that also took place shortly after the latest North Korean missile provocation, South Korean Foreign Minister Kang Kyung-wha and her U.S. counterpart Rex Tillerson agreed to push for additional sanctions by the U.N. Security Council.

Futhermore, Gen. Jeong Kyeong-doo, chairman of South Korea’s Joint Chiefs of Staff, and his American counterpart Gen. Joseph Dunford agreed to take related measures at the earliest possible date, which apparently include the temporary dispatch of U.S. strategic assets like long-range bombers to Korea.

Chung Eui-yong, Moon’s top security adviser, also held a telephone conversation with the White House’s National Security Adviser H.R. McMaster to discuss the allies’ joint measures against the North’s latest missile provocation. “McMaster said President Donald Trump fully supported President Moon’s North Korea policy and the South Korean government’s measures against North Korean provocations,” Yoon said.

As Yonhap concludes, “it’s quite unusual for the secretive nation to fire a ballistic missile from its capital, another sign that it’s diversifying launch areas to dodge external surveillance and a possible pre-emptive strike.”

Meanwhile, unlike previous launch instances, so far the S.Korean Kospi stock index has failed to rebound (yet), and was down 1.3% at last check…

… while the Kospi VIX, along with most Asian stock vol indicators, spiked in early trading.

Meanwhile, the Korean Won, which has become quite immune to Apocalyptic outcomes, sat near sessions lows, if well above where it was just ten days ago.

Discussing the resilience of the South Korean currency, Koon How Heng, head of markets strategy at United Overseas Bank Group said the won is “failing to properly price in risks surrounding North Korea and trade talks with the U.S.” He added that “risk remains that KRW will weaken and lift USD/KRW back towards the top end of the trading range” although it remains to be seen just what event – clearly a North Korean violation of Japanese airspace is not quiet “it” – will be sufficient to dislodge the currency from its perch.

Finally, in a curious tangent, while certainly not in Kim’s field of sight, Australian stocks just went negative for the year.

end

 

South Korea releases footage of a new ballistic missile which shows it is capable of a massive retaliation

 

(courtesy zero hedge)

 

 

South Korea Releases Footage Of Ballistic Missile Test Capable Of “Mass Retaliation”

Just hours after North Korea fired a ballistic missile across Japan, South Korea has released footage of its testing of a new ballistic missile, in a show of “overwhelming force.”


While The White House has yet to respond to North Korea’s provocation, South Korea’s Blue House has stated that:

“We are considering the development of strategic assets in the US and we will consult with the United States.”

US strategic weapons include B-1B strategic bombers, B-52 long-range nuclear bombers, stealth fighters, Aegis destroyers, and nuclear propulsion submarines.

But not wanting to rely solely on Trump, Yonhap reports the release of the following 86-second-long video clip showing the test-firing of a 500-kilometer-range ballistic missile with improved warhead power and that of another one with a range of 800 km. 

The footage shows the missile being fired and accurately hitting mock targets on the ground and in the water.

It was released by the state-run Agency for Defense Development (ADD)…

We conducted the last flight test on the 24th to deploy the new 500-km ballistic missile and the 800-km ballistic missile, which are being developed under the leadership of the National Defense Science Institute.”

 

We are building a Korean three-axis system to respond to North Korea’s threats. To achieve this, we have developed a new ballistic missile (BM) with increased range and increased accuracy through diversification of warheads and improved accuracy. ”

 

The 500-kilometer ballistic missile is “a new type of ballistic missile capable of accurately penetrating and destroying all of North Korea’s core facilities and is a key force in mass retaliation.”

 

 

end

 

 

The maniac Kim blasts at the UK and states they they will face “a miserable end” if they join the “war maniacs, USA and South Korea

 

(courtesy zero hedge)

 

 

UK Faces “A Miserable End” If It Joins “War Maniacs” US And South Korea

Ahead of tonight’s missile launch across Japan, North Korea warned that The UK “faces a miserable end” should it decide to join the joint military exercises being conducted by the US and South Korea that began last week, according to local media reports cited by Russia Today.

The annual Ulchi Freedom Guardian drills, which have been conducted every year since the Korean War ended in an uneasy ceasefire, involve nearly 20,000 troops and have long provoked the ire of North Korea’s leaders.

In a statement, North Korea’s official KCNA news agency denounced Washington and Seoul as “warmongers” and said the drills are proof of their intention to invade the North. It also branded its enemies as “war maniacs” and “dull immature infants.”

“The reality vividly shows that the US ambition for stifling the DPRK [North Korea] remains unchanged no matter how much water may flow under the bridge and the puppet group’s ambition for invading the North remains unchanged,” it said.

“We solemnly warn not only the US and puppet group, but also satellites, including the UK and Australia, which are taking advantage of the present war maneuvers against the north, that they would face a miserable end if they join in play with fire by tiger moths of war.”

For its part, the UK hasn’t said anything about taking part in the drills.

KCNA dismissed South Korea’s claim that the annual exercises are meant to be defensive, saying “formations of strategic bombers loaded with nuclear bombs are always ready for sorties.”

Meanwhile, an editorial in North Korea’s Sinmun newspaper said the joint military exercise is “the most explicit expression of hostility against us, and no one can guarantee that the exercise won’t evolve into actual fighting.”

It added that the exercises were tantamount to “pouring gasoline on fire and worsening the state of the [Korean] peninsula.”

The UK could formally refuse a call to help the US fight a war against North Korea as long as North Korean leader Kim Jong Un doesn’t strike the US, according to RT.

“Although Article 5 of the North Atlantic Treaty states that an attack on one NATO member is an act of aggression against the entire military alliance, the application of this provision is limited only to attacks on member states’ territories in North America, Europe and the Atlantic.”

If Kim’s warheads were to strike US military bases in the Pacific, the US could ask for Britain’s assistance, but would be unable to compel the UK and other NATO allies to join in the fight against the North.

Responding to the earlier missile launch, UK foreign secretary Boris Johnson said he is “outrgaed” by the “reckless provocation” of North Korea’s latest missile launch.

 

END

Bill Blain discusses:

 

  1. North Korea
  2. Brexit
  3. Hurricane Harvey

(courtesy Bill Blain/Mint Partners)

 

Bill Blain: “North Korea Is Waving A Red Flag In The Bull’s Face. What Will Donald Do?”

Submitted by Bill Blain of Mint Partners

Mint – Blain’s Morning Porridge – August 23rd 2017

“Out on the road today, I saw a deadhead stick on a Cadillac.. A little voice inside my head said, “Don’t look back. You can never look back.””

Interesting start to the last week of summer: a nasty dose of considered North Korean provocation, disbelief at what Hurricane Harvey is doing to Texas, handbags betwixt UK and EU on “negotiating seriously” over Brexit, and all these before we even get a whiff of this week’s EU data and US payrolls on Friday. I won’t even bother about Jackson Hole last week – yawn – we’ll talk about Central banks come September.

The market reaction to the latest North Korean missile flight tells us everything we need to know: Risk Off. Equities wobble, gold up, bond yields down and gold higher. Markets understand the reality: the Trump Jump is now well and truly over – Treasury yields are right back down there, the dollar is down 10%, stock markets have gone short, yet the US populace. But if there was a snap election tomorrow….. Don’t even think about it..

Deliberately firing a missile on a trajectory over Northern Japan sends clear messages from the Kim Jong Un regime: 1) we are able to do it, and 2) but, we didn’t fire it in the direction of US Guam. Although the ballistics would have been well understood (ie it wasn’t going to hit Japan), it ratcheted up the fear by triggering alerts. It demands a US response – which will keep markets on tenterhooks. Firing the rocket from a site near downtown Pyongyang’s airport also sends the US a clear challenge about limits on what a “measured” response might mean.

So much for the Northerners wanting to negotiate – as the Americans were telling us just last week. You’d almost think the N Koreans were trying to wind up Trump?

Exactly.

They are waving a red flag in the Bull’s face to force a reaction. The S Koreans have already sent a couple of bombers to aggressively practice bomb drops – calm and measured. What will Donald do? After last week’s “Fire and Fury” rant, the N Koreans are expecting him to fulminate, look stupid, make some further angry comments – in short more bluster. They will continue to goad him into doing something “angry”… at which point America gets the blame, and China can step in as peacemaker.

Exactly how this plays out is going to keep markets guessing. Add it to the general head-shaking re US market prospects.

Meanwhile, Tropical Storm Harvey is proving another difficult challenge for Donald.

The storm is circling back, powering up again over the warm Gulf waters, and could well prove a double whammy if/when it hits the coast again on Wednesday. $20 bln insurance hit. However, I’m told not to worry about oil supply disruption – ports, pipes and refineries are simple to fix and reopen, and there is plenty of oil in store. Houston is a big place – and much more than just an oil city – its probably the number one centre re Medicine. The costs and the dislocation to a major part of the US economy are bound to have a short-term impact on the economic data, and sting the insurers, but these Texans are a resilient bunch.

What’s potentially more interesting is what Donald now says about Global Warming. Historically big storms flatten the Gulf Coast on a predictable basis – Houston has been flattened before – but sea temperatures are rising, making storms more violent and difficult to predict and prepare for. Maybe it will take a big one hitting the White House South to persuade his Donaldness that Climate Change is a serious matter..?

Back this side of the pond…

Having spent the weekend in France and getting less than 1 Euro to the pound out the cashline machine, I am increasingly worried about the outlook for the UK. The EU is “exasperated” by the UK approach to Brexit – which is triggering all kinds of doom and gloom. Meanwhile, the Labour Party has adopted a policy on Brexit… whatever it might be. They are making the assumption the Europeans would be willing to accept transitions agreements.. but, hey, if it makes Theresa look more isolated, its worth pursuing..

Meanwhile, Dodgy’s Brexit Team has presented Brussels with a whole series of position papers (ah, the persuasive power of Powerpoint), and proposals calling for flexibility and pragmatism and giving us what we ask for. The EU say the proposals are “light” on details and sequencing. Brussels has a clear agenda and isn’t prepared to accept any ambiguity in the process.

Either we Brits are being geniuses in our approach, or it’s another example of how we simply don’t understand Europe. If we were dealing with 27 individual countries, then sure; each one would come to mutually beneficial agreements on new trade arrangements.

But we aren’t dealing with 27 countries.

We are dealing with One.

We are dealing with the unelected, unrepresentative representative of these countries; the self-perpetuating nomenklatura of the EU. It would be a massive mistake for our negotiators to assume the will of the EU somehow represents the collective will of the member countries. (I really should have used the “One ring to bind them all” quote from LoTRs as my quote-line this morning…)

I have a sneaking suspicion this won’t end well. While individual countries and leaders may be sympathetic to the UK, they won’t be in meeting where Sauron, sorry Junkers/Barnier, hold the floor and Macron is juggling for European hegemony with a French accent.

Finally, at last a crypto-currency I understand.

The Whoppercoin allows you to save and trade cyber tokens earned when you buy the burger (but only in Russia thus far). Forget Bitcoin mining or such nonsenses.. buy lunch, wallet the digital token, and expect the Whoppercoin to appreciate 500% by tea-time… isn’t that what all crypto-currencies do?

Back to the day job…

END

Nomura:  probability of a North Korean war breaking out is 35%

 

(courtesy zerohedge)

 

Nomura: “Probability Of North Korean War Breaking Out Is 35%”

The latest missile launch by North Korea on Tuesday will elevate tensions for some time, but it will be contained, writes Kwon Young Sun, a senior economist at Nomura International.

Quoted by Bloomberg, Kown writes that Tuesday’s provocation has reignited market concerns just as tensions were seen easing through mid-August. As a result, “tensions between N.Korea and the U.S. reached levels unseen since 1994.” He adds that another spike is plausible, considering the military drill between the U.S. and S.Korea is still ongoing.

Oddly enough, as we discussed earlier, despite the latest geopolitical shock, the South Korean stock market and currency were barely shaken. However, according to the Nomura strategist, unless the dollar keeps weakening, other drivers that could limit KRW’s strength include Korea’s relations with China, trade tensions with the U.S., local capital outflows and intervention by the authorities

More apropos to what is bother markets this morning, Kwon writes that “although it is hard to predict”, three early warning signals may suggest imminent U.S. military action:

  • U.S. orders for evacuation of U.S. citizens in S.Korea
  • U.S. military builds up large scale force near the Korean peninsula
  • U.S. elevates defense readiness condition to level 3 from level 4

Finally, he writes that the “probability for war ultimately breaking out on the Korean peninsula is about 35%”, although the number is most likely to change going forward.

b) REPORT ON JAPAN

end

c) REPORT ON CHINA

Now it is China’s turn to weigh in on the North Korean situation as they are trying to avoid provocations. Russian states that sanctions have been exhausted.

(courtesy zerohedge)

China Warns North Korea Tensions At “Tipping Point”, Russia Says “Sanctions Exhausted”

Following North Korea’s firing a ballistic missile across Japan overnight, China has warned that tensions on the Korean peninsula have reached the “tipping point” and urged all sides to avoid provocations.

Seems pretty provocative to us…

As ChannelNewsAsia reports, Foreign ministry spokeswoman Hua Chunying urged all sides to avoid provocations and repeated Beijing’s call for the North to suspend missile tests in return for a halt to US-South Korean military exercises.

The situation is “now at a tipping point approaching a crisis. At the same time there is an opportunity to reopen peace talks,” Hua told a regular news briefing.

 

“We hope relevant parties can consider how we can de-escalate the situation on the peninsula and realise peace and stability on the peninsula,” she added.

 

Hua said the United States and South Korea “held one round after another of joint military exercises and they exerted military pressure on the DPRK (North Korea)”.

 

“After so many rounds and vicious cycles, do they feel they are nearer to peaceful settlement of the issue?

 

“The facts have proven that pressure and sanctions cannot fundamentally solve the issue,” she said, referring to UN sanctions imposed against North Korea.

China has backed the sanctions but also called for peace talks, but as Russia explains, sanctions pressure appears exhausted.

As if this was not clear enough, Russia has also stepped up its rhetoric, with Reuters noting that a senior Russian lawmaker said on Tuesday that North Korea’s latest missile test shows its threat to fire four missiles into the waters near the U.S. Pacific territory of Guam was not a bluff.

“Alas, Pyongyang has demonstrated that its threats to the U.S. base on Guam are not a bluff,” Konstantin Kosachev, chairman of the upper house of parliament’s international affairs committee, said on social media.

 

Kosachev also said that a United Nations Security Council resolution regarding North Korea’s missile program which passed this month had failed to achieve its objective, “because the situation has turned into a bilateral standoff between North Korea and the United States”.

Additionally, Russian Foreign Minister Sergey Lavrov, who is visiting the UAE, insisted North Korea back down…

“Regarding North Korea and the missile tests it is conducting, we stick to the resolutions of the U.N. Security Council and we insist on the fact that our North Korean neighbours should fully respect those resolutions,” Lavrov said.

 

“We base our position on these statements during discussions in the Security Council and will do the same in the session, which as far as we understand is being planned now and which will be dedicated to discussing the last missile launches from North Korea.”

Finally, Russian Deputy Foreign Minister Ryabkov told reporters that while we can expect new sanctions pressure on the DPRK after the last launch, such pressure is exhausted..

“Judging by how colleges from the US and other countries acted in similar situations, the US allies – of course, we can expect new steps towards strengthening the sanctions regime,” he said.

“But it will not solve the problems, it is already obvious that the resource of sanctions pressure on the DPRK has been exhausted.”

 

“It is no longer possible to adopt resolutions in the UN Security Council that do not contain a clear indication that there can not be a military solution to the problem, but only a political one. A provision that would rule out additional unilateral sanctions beyond those that are collectively taken by the UN Security Council, “the Russian diplomat continued.

Either way, it appears Russia and China are pushing back to Trump to ‘do something’.

end

4. EUROPEAN AFFAIRS

5. RUSSIA AND MIDDLE EASTERN AFFAIRS

Israel/Syria/Assad
Israel warns Russia that it may bomb Assad’s palace.  i.e. assassinate him. Israel cannot have Iranian forces inside Syria next to its borders
(courtesy zero hedge)

Israel Threatens To Bomb Assad’s Presidential Palace

More information has emerged from Israeli Prime Minister Netanyahu’s meeting with President Putin last week. The two met in the Black Sea resort town of Sochi on August 23rd to discuss recent developments in Syria. According to new shocking reports in both Arab and Israeli media, a senior Israeli official accompanying Netanyahu on the trip threatened to assassinate Syrian President Assad by bombing his palace in Damascus, while further adding that Israel will seek to derail the US-Russia brokered de-escalation deal reached in Astana, Kazakhstan earlier this summer.

According to the Jerusalem Post:

A senior Israeli official warned the Russian government that if Iran continues to extend its reach in Syria, Israel will bomb Syrian President Bashar Assad’s palace in Damascus, according to reports in Arab media.

 

Israel also warned that if serious changes do not happen in the region, Israel will make sure the ceasefire deal, reached by the United States and Russia in Astana, Kazakhstan, will be nullified.

 

A senior Israeli source told the Al-Jadida newspaper that no understanding was reached between the Israelis and the Russians. Prime Minister Benjamin Netanyahu did, however, make it clear to Putin that its concerns must be met or Israel will be forced to act.

 

The warnings occurred in a meeting between Netanyahu and Russian President Vladimir Putin last week.

As we noted at the time, Netanyahu’s brazen words to Putin that ‘preventative’ escalation in Syria to destroy what Israeli defense officials commonly call the “Iranian land bridge” (or the so-called ‘Shia crescent’reveals increased desperation as even the West is now seeming to ignore Netanyahu’s repeatedly declared “red lines”. While Netanyahu’s public statements in Sochi were provocative enough – openly threatening direct military escalation in Syria should his demand for Iranian forces withdrawal not be met – the newly revealed threat of assassinating the sitting head of a sovereign U.N. member state takes the war of words to a whole new level.

Israel has warned Russia it will bomb Assad’s palace if Iran continues to expand in Syria, according to officials http://m.jpost.com/Israel-News/Israeli-Official-If-Iran-extends-in-Syrian-well-bomb-Assads-palace-503597 

Photo published for Israeli Official: If Iran extends in Syrian, we'll bomb Assad's palace

Israeli Official: If Iran extends in Syrian, we’ll bomb Assad’s palace

Israel warned Russia of dire consequences if Iran is allowed to continue on its current path in Syria.

jpost.com

The Israeli Prime Minister also shared intelligence with Putin which purports to reveal Iranian plans for long-term presence in Syria. It appears Netanyahu is now making his case before world media, with new BBC and other international headlines reading, “Iran building missile factories in Syria and Lebanon: Netanyahu”.

The Jerusalem Post details exactly which officials accompanied Netanyahu in Russia:

The prime minister, accompanied by Mossad head Yossi Cohen, the newly appointed head of the National Security Council, Meir Ben-Shabbat, and Likud minister Ze’ev Elkin who served as his translator, flew to Sochi on the Black Sea for the meeting, returning to Israel shortly after it ended.

We further explained that Israel has long been at open war with Syria, in spite of the fact that both Israeli officials and international media rarely acknowledge it. In 2013 Israel launched a massive missile attack against a Syrian defense technology facility in Jamraya outside of Damascus. And yet more brazen was the 2016 attack targeting Damascus International Airport, which killed a well-known Hezbollah commander. In a significant admission earlier this month, the head of Israel’s air force acknowledged nearly one hundred IDF attacks on convoys inside Syria over the course of the past 5 years.

Netanyahu himself was recently caught on a hot mic bragging that Israel had struck Syrian targets at least “a dozen times”. And this is to say nothing of Israel’s covert support to al-Qaeda linked groups in Syria’s south, which has reportedly involved weapons transfers and treatment of wounded jihadists in Israeli hospitals, the latter which was widely promoted in photo ops involving Netanyahu himself. As even former Acting Director of the CIA Michael Morell once directly told the Israeli public, Israel’s “dangerous game” in Syria consists in getting in bed with al-Qaeda in order to fight Shia Iran.


Assad’s presidential office building – New Shaab Palace – sits above central Damascus. Image source: Flickr/Nawar-2012

While Israel has for years played more of a quiet ‘long game’ in Syria outside the media spotlight: providing tacit support to al-Qaeda terrorists in Syria along its Golan border (in Netanyahu’s words to Putin: Israel prefers the “Sunni sphere” over “bringing in Shi’ites” which reflects a disturbing widely held view among Israeli officials that ISIS is the ‘lesser evil’) as well semi-regularly bombing select targets, its increased willingness to loudly and unreservedly voice its intentions to the world is the result new realities it appears unprepared to accept.

What new realities in the region are now pushing Israeli officials to incautiously leak threats of Assad’s assassination to the Arab press?

First, the Syrian government and its allies Russia, Iran, and Hezbollah are winning the war. In Israel’s thinking the Astana agreement potentially means Iranian presence will now be backed by Russian air power. It also appears that in the United States’ backing of ‘de-escalation zones’ which necessarily involves Iranian enforcement, the US is giving tacit approval to Iranian troop presence in Syria. This is Israel’s worst nightmare: it invested so heavily in toppling Assad in the first place in order to roll back what it claims is ‘Iranian and pro-Shia expansion’ in the region.

Secondly, the US has essentially signaled to Israel: you are on your own when it comes to Syria policy. Trump shut down the CIA program to topple Assad – a program which had the assistance of Israeli intelligence. Other world leaders like France’s Macron have further stated that Assad is here to say for the near future.

Third, Hezbollah has just finished wiping up ISIS on the Lebanese-Syrian border and now appears more confident than ever. Israel went all in with the Sunni insurgency fighting Assad as that insurgency also threatened the existence of Hezbollah, which Israeli defense officials understand to be the most formidable foe right across Israel’s border. On Monday Hezbollah General Secretary Hassan Nasrallah declared August 28 as Lebanon’s “Second Day of Liberation” in a televised address celebrating Lebanon’s military victory over ISIS in the country’s northeast. As we reported recently, it’s an ‘open secret’ that US special forces advisers are indirectly coordinating with Hezbollah through the Lebanese Army, though politically sensitive as Lebanon depends heavily on US military aid.

And finally, Israel senses that international opinion is shifting quickly now that ISIS is rapidly folding. It knows that world opinion will not stomach another Iraq style invasion for regime change in the Middle East. And yet such a prospect of regime change in Syria is now all the more difficult as Russian air defenses are so deeply entrenched. Israel now finds itself isolated and Netanyahu’s brazenness stems from this realization. His screams grow louder from a position of weakness.

Now, the only question that remains is: on the remote chance that Israel does escalate militarily in Syria, what will Russia let it get away with?

END

6 .GLOBAL ISSUES

7. OIL ISSUES

The Aramco public offering will be a huge geopolitical game of thrones.  China is turning towards Saudi Arabia and they will be willing to pay higher than real worth in order to come closer to this large oil country.

(Cyril Widdershoven/OilPrice.com)

8. EMERGING MARKET

VENEZUELA/USA

end

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

Euro/USA   1.2042 UP .0077/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 DEEPLY IN THE RED

USA/JAPAN YEN 108.58 DOWN 0.135(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 1.2951 UP .0025 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS

USA/CAN 1.2467 DOWN .0044 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS TUESDAY morning in Europe, the Euro ROSE by 77 basis points, trading now ABOVE the important 1.08 level  RISING to 1.2042; / Last night the Shanghai composite CLOSED  UP 2.54 POINTS OR 0.08%     / Hang Sang  CLOSED  DOWN 98.28 POINTS OR 0.35% /AUSTRALIA  CLOSED DOWN 0.65% / EUROPEAN BOURSES OPENED DEEPLY IN THE RED  

The NIKKEI: this TUESDAY morning CLOSED DOWN 87.35 POINTS OR 0.45%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 98.28 POINTS OR 0.35%  / SHANGHAI CLOSED UP 2.54 POINTS OR 0.08%   /Australia BOURSE CLOSED DOWN 0.65% /Nikkei (Japan)CLOSED DOWN 87.35  POINTS OR 0.45%   / INDIA’S SENSEX IN THE RED

Gold very early morning trading: 1320.25

silver:$17.55

Early TUESDAY morning USA 10 year bond yield:  2.107% !!! DOWN 5   IN POINTS from MONDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.

The 30 yr bond yield  2.712, DOWN 4  IN BASIS POINTS  from MONDAY night.

USA dollar index early TUESDAY morning: 91.77 DOWN 43  CENT(S) from MONDAY’s close.(BREAKS RESISTANCE  OF 92.00)

This ends early morning numbers  TUESDAY MORNING

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And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 2.850% DOWN 1 in basis point(s) yield from MONDAY 

JAPANESE BOND YIELD: +.009%  DOWN 1/5   in   basis point yield from MONDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.562% DOWN 4   IN basis point yield from MONDAY 

ITALIAN 10 YR BOND YIELD: 2.066 DOWN 3  POINTS  in basis point yield from MONDAY 

the Italian 10 yr bond yield is trading 51 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.342% DOWN 3  IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR TUESDAY

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

Euro/USA 1.2016 UP .0057 (Euro UP 53 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 109.08 up 0.351(Yen down 35  basis points/ 

Great Britain/USA 1.2934 UP  0.0008( POUND UP 8 BASIS POINTS)

USA/Canada 1.2523 UP .0011 (Canadian dollar DOWN 11 basis points AS OIL FELL TO $45.99

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This afternoon, the Euro was UP  by 53 basis points to trade at 1.2016

The Yen fell to 109.08 for a GAIN of 8  Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND ROSE BY 8  basis points, trading at 1.2934/ 

The Canadian dollar FELL by 11 basis points to 1.2523,  WITH WTI OIL FALLING TO :  $45.99

The USA/Yuan closed at 6.596/
the 10 yr Japanese bond yield closed at +.009%  DOWN 1/5 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield down 5  IN basis points from MONDAY at 2.1273% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.739 down 3 in basis points on the day /

Your closing USA dollar index, 92.004  DOWN 20 CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED DOWN  64.03 POINTS OR 0.87%
German Dax :CLOSED DOWN 177.59 POINTS OR 1.46%
Paris Cac  CLOSED DOWN 47.83 POINTS OR 0.94% 
Spain IBEX CLOSED DOWN 93.30 POINTS OR 0.91%

Italian MIB: CLOSED DOWN 317.59 POINTS OR 1.46% 

The Dow closed DOWN 5.27 OR 0.02%

NASDAQ WAS closed UP 17.37  POINTS OR 0.28%  4.00 PM EST

WTI Oil price;  45.99 at 1:00 pm; 

Brent Oil: 51.67 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  58.69 UP 25/100 ROUBLES/DOLLAR (ROUBLE LOWER BY 25 BASIS PTS)

TODAY THE GERMAN YIELD FALLS TO  +0.342%  FOR THE 10 YR BOND  4.PM EST EST

END

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

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

WTI CRUDE OIL PRICE 5:00 PM:$46.37

BRENT: $51.94

USA 10 YR BOND YIELD: 2.128%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.739%

EURO/USA DOLLAR CROSS:  1.1967 UP .0004

USA/JAPANESE YEN:109.72  up  0.995

USA DOLLAR INDEX: 92.38  UP 18  cent(s)  

The British pound at 5 pm: Great Britain Pound/USA: 1.2917 : UP 4 POINTS FROM LAST NIGHT  

Canadian dollar: 1.2527 DOWN 15 BASIS pts 

German 10 yr bond yield at 5 pm: +0.342%

END

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

TRADING IN GRAPH FORM FOR THE DAY

‘Traders’ Panic-Buy Stocks, Shrug Off Nuclear Armaggedon, Debt Ceiling, & Biblical Flood Fears

If NKorea doesn’t launch a rocket tonight, stocks may sell off tomorrow

Blink and you missed it…

The message from the plunge/panic protection team is clear…

 

For a few brief hours overnight – until the bell rang at 0930ET on the NYSE – investors were anxious about North Korea’s most provocative yet missile launch, the terrible flooding disaster in Texas, and lest we forget, the looming debt ceiling debacle. But all of that was instantly forgotten as the machines took control and lifted stocks higher practically all day on a sea of USDJPY-ignited momentum.

200 Point ramp in The Dow from overnight lows, but Nasdaq’s 90 point explosion is ridonculous!

Spot The Odd One Out…

 

Trannies were best on the day, followed by Nasdaq…

 

FANG Stocks soared over 2.1% off the opening lows…

 

S&P algos were utterly desperate to get it to close back above its 50DMA…but failed

 

All thanks to a triple-pump-short-squeeze…

 

Treasury yields ended the day lower but well off the lows of the day…

 

10Y Yields touched 2.08% intraday – lowest level since the election – before bouncing back to 2.14%., just above June’s 2017 low close…

 

The Dollar Index – like everything else – U-turned today at the US open – magically – elevating off lowest levels since 2014…

 

JPY and EUR were the weakest as the dollar soared back to life…

 

Just look at USDJPY!!

And it appears Kuroda’s magical hand was at play as JPY-carry pulled stocks all day…

 

WTI was lower again today (testing $45 handle) and RBOB jumping to another new high, ahead of tonight’s API data…

 

Gold ended the day lower…

 

Bitcoin surged overnight, but didn’t give much back…

end

All options with respect to North Korea are on the table is the official response from Trump.

(courtesy zero hedge)

Trump Responds To North Korea Launch: “All Options Are On The Table”

After an uncharacteristically long, “Gen. Kelly-mediated” delay, Donald Trump finally issued an official response to last night’s North Korean launch which flew over Japanese airspace. And, instead of tweeting, perhaps indicative of the gravity of the situation, moments ago the White House issued an official statement saying that “all options are on the table.”

Full statement below:

Statement by President Donald J. Trump on North Korea

 

The world has received North Korea’s latest message loud and clear: this regime has signaled contempt for its neighbors, for all members of the United Nations, and for minimum standards of acceptable international behavior.

 

Threatening and destabilizing actions only increase the North Korean regime’s isolation in the region and among all nations of the world. All options are on the table.

While that may be, judging by North Korea’s repeated provocations, at least Kim is convinced that Trump really has no options. Indeed, as Bill Blain commented earlier, “What will Donald do? After last week’s “Fire and Fury” rant, the N Koreans are expecting him to fulminate, look stupid, make some further angry comments – in short more bluster. They will continue to goad him into doing something “angry”… at which point America gets the blame, and China can step in as peacemaker.

In other words, North Korea – and China – appear to have set a trap for the US president. Will Trump avoid the temptation to walk straight in it, or – in an attempt to “boost ratings” – will Trump do what Gens Kelly and McMaster are telling him to do? One more launch by North Korea may be all it takes to find the answer.

END

And now Nikki Haley: Enough is enough

(courtesy zero hedge)

 

Nikki Haley: “Something Serious Has To Happen… Enough Is Enough”

While we are confident that both Trump and Kim would be delighted to just keep trading insults at each other for the indefinite future, even as North Korea launches the occasional ballistic missile, that time may be over. Speaking at the UN, the US Ambassador to the United Nations Nikki Haley said on Tuesday that North Korea’s launch of a missile over Japan was “absolutely unacceptable and irresponsible” and that the Security Council now needed to take serious action.

“No country should have missiles flying over them like those 130 million people in Japan. It’s unacceptable,” Haley told reporters. North Korea has “violated every single U.N. Security Council resolution that we’ve had and so I think something serious has to happen,” she added, quoted by Reuters.

Saying “enough is enough,” Haley said she hoped China and Russia would continue to work with the rest of the U.N. Security Council when it meets on Tuesday afternoon to discuss what more can be done about North Korea’s nuclear and missile programs.

Of course, even if Russia and China do side with the rest of the Security Council as they did during the recent sanctions vote, it is unclear just what additional economic punishments and “harsh language” the UN can impose on the Kim regime to prevent him from doing what he has been merrily doing so far, oblivious of the consequences.

end

The tally for the emergency funding for Hurricane Harvey may exceed 100 billion dollars and may not be an easy bill fir Congress to pass:

 

(courtesy zerohedge)

 

Trump Faces Showdown With Congress Over Harvey Emergency Funding Bill

The totality of the damage from Hurricane Harvey isn’t yet known, and as it continues to rain in Texas and Louisiana, it will likely be a few days before officials can start tallying up the damage but President Donald Trump has already promised Texans that he will swiftly pass an emergency funding bill to help offset what’s likely to be tens of billions of dollars in damages.

But while Trump may hope that emergency funding is swiftly approved, Bloomberg points out that Congress has final say over the details of any relief bill. And lawmakers, who are not only facing a particularly hectic legislative calendar next month but don’t have the – let’s just say – best relationship with Trump these days, might not get the job done as quickly as the president would like.

According to Bloomberg, conservative lawmakers could turn obstructionist unless the plan is offset by domestic spending cuts.

“After previous storms, lawmakers have usually demanded detailed spending plans for emergency funds, while conservatives have argued that disaster funding should be offset by domestic spending cuts.With Harvey still expected to dump rain over Texas and Louisiana for several days, the full scope of the damage isn’t yet known.”

While Trump said he’s already spoken with members of Congress, he has yet to submit a formal spending request for additional relief funds.

“The real number, which will be many billions of dollars, will go through Congress,” Trump said Monday at a news conference ahead of a planned visit Tuesday to Texas to meet with local officials involved in the response. “It will happen very quickly.”

Meanwhile, at least one Texas lawmaker has promised to add relief measures to a temporary spending bill that must be passed if Republicans want to avert a government shutdown after the current spending resolution expires on Sept. 30. However, Republicans haven’t said whether they will bring such a measure up for debate after Congress returns from its summer vacation.

“As the scale of damage from the storm became apparent, Texas Democrat Sheila Jackson Lee said she will draft a “robust” relief measure to be added to a spending bill on the House floor next week. Republican leaders, however, haven’t committed to a swift debate. A spokeswoman for House Speaker Paul Ryan of Wisconsin, AshLee Strong, said Congress “will help those affected by this terrible disaster.”

 

“The first step in that process is a formal for resources from the administration,” she said.”

One option before Congress is to approve a “down payment request” on the cleanup effort in Texas as part of the spending bill, before passing a more comprehensive measure later.

“The stopgap bill could be a natural place to add in disaster relief funding, even if it’s just a down payment ahead of a more comprehensive relief measure later in the year. That’s how Congress handled Hurricane Katrina in 2005, when it approved $10 billion in immediate aid while most members were still on August recess. It followed up months later with a $51 billion package.”

However, the administration hasn’t yet determined how much additional funding will be needed beyond what FEMA is already planning on spending.

“So far, the Trump administration hasn’t determined whether additional funds will be needed, acting Homeland Security Secretary Elaine Duke said Monday on Bloomberg Television. She said if additional funds are needed, the Department of Homeland Security will work with Congress to obtain them.”

And with $3.3 billion in the bank, FEMA may have enough money in its disaster relief fund to start the cleanup effort, but nowhere near enough to finish it.

“A House Republican aide said that the Federal Emergency Management Agency has sufficient, disaster relief funding for now. FEMA said it has $3.3 billion in the disaster relief fund as of Monday, which includes money that can be shifted from longer-term priorities. Costs associated with Harvey are “quickly drawing down the remaining balance” in the fund, said Stephanie Moffett, a FEMA spokeswoman.”

Ironically, this time Democrats are alligned with Trump: Nancy Pelosi has already called on Democrats to support any Harvey related legislation… assuming it’s not tied to a bill that further restricts abortion rights, or funding for Trump’s border wall.

“House Minority Leader Nancy Pelosi of California issued a statement Monday saying, “Republicans must be ready to join Democrats in passing a timely relief bill that makes all necessary resources available through emergency spending.”

However, with the storm expected to cause some $30 billion in damages, including the impact on the labor force, power grid, transportation and other elements that support the region’s energy sector, more relief funding will likely be necessary – and soon. Chuck Watson, a disaster modeler with Enki Research, said in an email Monday that Harvey could be one of the top eight hurricanes to ever strike the US. David Havens, an insurance analyst at Imperial Capital, said the final tally might be as high as $100 billion, a total that could potentially threaten insurers’ balance sheets.

As of now, Harvey is on track to become the fourth most-expensive storm in US history, though this is based on an incomplete assessment of the damages.

While we wait to see how this latest Congressional drama unfolds, Trump – who is still due a response on the latest North Korea launch – says he has been in frequent contact with the Republican governor of Texas, Greg Abbott and is taking pains to show the public that he’s actively engaged in the federal response to the storm. He and Melania Trump are planning to travel to Texas on Tuesday even as Harvey, now a tropical storm but expected to regain hurricane status shortly, continues to deluge the region. An airspace restriction issued by aviation authorities suggests Air Force One will land in Corpus Christi, away from the worst ongoing flooding in the Houston region

end

 

The disaster scene in Houston.  This will no doubt be the most expensive disaster in USA history

(courtesy zero hedge)

There Is “Eight Feet Of Water” On Houston Roads, And It’s About To Get Much Worse

Amid desperate efforts to save stranded citizens – police report over 3,000 rescues alone – and the arrival of the so-called‘cajun navy’ to assist, Harvey continues to pummel Texasparalyzing Houston as the region braces for yet more rain after the Tropical Storm recharged over warm waters and heading back in-land.

“This is, if not the largest, it has to be categorized as one of the largest disasters America has ever faced,” Texas Gov. Greg Abbott declared at a press conference Monday afternoon.

https://video-api.wsj.com/api-video/player/v3/iframe.html?guid=1B683924-F778-4E17-9F6E-33C52637BB2B&shareDomain=null

Houston’s main water-way, Buffalo Bayou, shows over 30 inches of rain and it’s about to get a lot worse. Buffalo Bayou is the main waterway that snakes through the heart of Houston, and the water levels of two reservoirs that feed into it are particularly concerning.

“The reality is the water is continuing to rise,” Mr. Turner said. “The water level along Buffalo Bayou in all likelihood will increase.”

Forecasters say Harvey will move slowly to the northeast throughout the week and shower some parts of the state with another 15 to 20 inches of rainfall by the end of Thursday. Additionally, The Post reports that certain areas to the west of Houston could see as much as 50 inches of rain by the time the storm is over — which would be the largest recorded total in Texas history.

 

The death toll remains unclear.

WSJ notes that on Monday evening, Mayor Sylvester Turner said three deaths in Houston had occurred during the storm but could not confirm reports that a family of six had died in their vehicle.

View image on TwitterView image on Twitter

: Aerial photos from our rescue crews earlier today.   @USNationalGuard

Authorities said they fear the death toll will rise.

Roads surrounding Houston’s Vintage and Sugar Land hospitals “have eight feet of water,” said Michael Covert, senior vice president of Catholic Health Initiatives’s Texas operations. “They have become islands of humanity.”

Citizen rescuers also jumped in to help fellow residents, using private motor boats and even kayaks to ferry stranded people to safety as thousands poured into shelters around the state.

With waters continuing to rise, some people panicked as they waited for rescue.

“They’re making it difficult for us to rescue them,” said Clyde Cain, a member of the Louisiana-based Cajun Navy rescue force. “You have people rushing the boat. Everyone wants to get in at the same time. They’re panicking. Water is rising.”

FEMA officials said they expected to see at least 30,000 people show up to shelters by the end of the slow-moving storm.

“It is imperative that we do everything possible to protect the lives and safety of people across the state of Texas as we continue to face the aftermath of this storm,” Gov. Abbott said.

President Trump will touch down in Corpus Christi, Texas, at noon Tuesday to survey the flood damage with his wife, Melania. “Protecting the lives of our people is my highest priority,” he said at a press conference Monday. “Every asset at my command is at the disposal of local officials.” …

Meanwhile, The Post reports that FEMA Administrator Brock Long said he expects about 450,000 people will file for disaster relief, adding the agency will “be here for several years helping you guys recover.”

“There are several factors that make it worse than Katrina. For one, there is the scope of the flooding. Harris County and the surrounding areas are so saturated,” Brown told the Houston Chronicle.

 

“Also, the amount of damages will continue to grow. There will be mold and structural damages adding up.” Brown said when Tropical Storm Harvey finally goes away, it will leave an incredible bill for taxpayers to pick up.

 

“This will be unfathomably expensive for both the private sector and taxpayers,” Brown said. “This will be easily the most expensive natural disaster in American history.”

One look at this image and we suspect his unprecedented statement may still be understatement…

end

 

This is not good:  Brazoria County which is just south of Houston warns everybody to get out due to a levee breach at Columbia Lakes

 

(courtesy zero hedge)

Brazoria County Urges “GET OUT NOW” After Columbia Lakes Levee Breached

Levees at Columbia Lakes in Brazoria County have been breached, according to the official Brazoria County website.

Live Feed…

 

FLASH FLOOD WARNING western Brazoria county until 5:45 PM. Brazos levee at Columbia Lakes has breached. All residents urged to evacuate now

 

“Get out now,” the alert reads.

Portions of Brazoria County, due south of Houston, had been under a mandatory evacuation notice since Sunday.

 

this will wipe out maybe 3 million vehicles.

( zerohedge)

Hurricane Harvey Likely To Destroy More Cars Than Katrina: “This Is Bad; Real Bad”

Hurricane Harvey’s historic flooding in Texas is set to wreak havoc on the auto industry and its insurers with analysts now predicting the storm could damage more vehicles than Hurricane Katrina.  In August 2005, Katrina wiped out some 500,000-600,000 vehicles but William Armstrong of CL King warns that Houston has about 5x more people than New Orleans did at the time.

Hurricane Harvey could damage more vehicles than Hurricane Katrina, driving business to the salvage auctions operated by Copart and KAR Auction Services, CL King analyst William Armstrong wrote in a note.

 

Katrina damaged 500,000-600,000 vehicles in August 2005, and the greater Houston MSA is five times as populous as pre-Katrina New Orleans.

 

The cost of dealing with catastrophes can be higher than normal given vehicle extraction, towing and temporary storage and auction locations, though both companies have grown their physical presence in Texas over the last year, which should lower the need for temporary locations.

 

It may be 2-3 months or longer until damaged vehicles are sold at auction.

Cars

 

Of course, storms of this magnitude bring not only millions in salvage-related charge offs for the auto industry but a loss of critical “selling days” for one of the biggest markets in the country.  As CNBC points out this morning, Citi analyst Itay Michaeli figures Hurricane Harvey could knock about 500,000 units off the August auto SAAR to be reported later this week.

Given the widespread flooding that will swamp dealerships and kill potential sales, analysts are bringing down estimates for the August new vehicle sales in the U.S.

 

Citi analyst Itay Michaeli has cut his estimate for the rate of monthly auto sales in August, which are reported on Friday. He estimates Harvey will affect some 125 counties in Texas and about 60 percent of the state’s auto sales.

 

Before Harvey, Michaeli estimated the August sales pace for the country was going to be in the mid-$16 million range. As the storm lingers over the area, Michaeli has dropped his estimate.

 

“Our analysis suggests that Hurricane Harvey could push this down to the low-$16 million unit range,” Michaeli wrote in a note to clients.

In terms of the publicly traded used car dealers, Stephens analyst Rick Nelson notes that Group 1 Automotive has the heaviest exposure to Hurricane Harvey, with ~37% of revenues from Texas, followed by Sonic (~25%) and AutoNation (~21%).  Meanwhile, Autonation CEO Marc Cannon appeared on CNBC this morning to discuss the devastation:

“This is bad; real bad,” said Marc Cannon, an AutoNation executive vice president. “Right now, we are focused on making sure all of our employees are safe and taken care of. At the same time, we’re focusing on getting all of our stores up and running.”

 

AutoNation’s 18 dealerships in the Houston area are shut down. Widespread flooding has not only swamped thousands of buildings in the Houston area, it’s likely damaged hundreds, perhaps thousands of new cars and trucks parked on dealership lots.

 

“We’re holding calls with our staff every three hours,” Cannon said. “We have reopened our stores in Corpus Christi and Austin, but some of the Houston stores may take some time.”

Then, for the ‘less reputable’ used car dealers, no good crisis can be allowed to go to waste.  As carfax points out, if previous hurricanes are any example, roughly half of the cars flooded by Hurricane Harvey will eventually be sold with no flood label to unsuspecting consumers.

 

Of course, when the auto OEMs report abysmal sales this Friday they will undoubtedly also tell you how Hurricane Harvey is great for long-term sales because of all the salvaged cars that have to be replaced.

end

 

Now authorities warn that bridges are not safe as they start to crumble to the weight of the floodwaters.

 

(courtesy zero hedge)

(courtesy zerohedge)

Insurance Companies Could Face Staggering $500 Billion Loss During A Crisis-Like Downturn

Here’s one more example of how central banks’ global coordinated monetary stimulus in the wake of the financial crisis has increased systemic risk in the US: According to an analysis conducted by BlackRock, insurers are more vulnerable to a market downturn now than they were ten years ago.

The reason? Ultra low interest rates have forced insurers to venture into markets with higher yielding assets, forcing them to stomach more risk along the way. Whereas insurers once tended to adhere to only the safest types of fixed-income products – typically highly rated government and corporate debt – they’re increasingly buying exposure to risky high yield and EM products, along with illiquid private equity funds, to try and boost their earnings back to pre-crisis levels.

These products carry a potentially higher reward for insurers, but heightened risks are also omnipresent. In a downturn similar to the 2008 crisis, BlackRock estimates that US insurers’ holdings would drop by 11% – even more than they did during the crisis. Such a drop would be tantamount to $500 billion in losses.

“The world’s largest money manager mined regulatory filings of more than 500 insurance companies and modeled their portfolios in a similar downturn. Their stockpiles – underpinning obligations to policyholders across the nation – would drop by 11 percent on average, according to its calculations. That’s significantly steeper, BlackRock estimates, than the group’s “mark-to-market” losses during the depths of the crisis.

 

The reason is simple. Insurers needed to make up shortfalls after the crisis. But in a decade of low interest rates they had to venture beyond their traditional holdings of vanilla bonds. They now own vast amounts of stocks, high-yield debt and a variety of alternative assets – a bucket that can include hard-to-sell stakes in private equity investments, hedge funds and real estate.”

Even as interest rates rise, Zach Buchwald, head of BlackRock’s financial-institutions group for North America, said that the insurers’ appetite for riskier assets will remain because “many of the allocations are hard to reverse.”

‘There is more risk being put into these portfolios every year,’ Zach Buchwald, the head of BlackRock’s financial-institutions group for North America, said in an interview. And such shifts may become permanent, especially because many of the allocations are hard to reverse, he said.”

Which is a problem because, even though insurers claim they’re offsetting risk by “diversifying” into different types of risky assets, big losses can accrue if all of these assets were to drop at the same time – as one might expect during a “risk off” flight to quality.

“The new diversity should provide a huge benefit, according to Buchwald. After all, it was concentrations of investments in mortgage-backed securities and certain equities that proved the biggest pitfalls during the crisis, a study by the Organization for Economic Co-operation and Development found.

 

But even piles of investments that appear diverse can suffer big losses if care isn’t taken to ensure the assets won’t drop at the same time.”

The BlackRock study was an attempt to market its new “Aladdin” analytics software.

“BlackRock examined the insurers’ holdings as it pitches a service called Aladdin. It’s trying to sell the companies analytics and advice, helping them test how complex portfolios may perform under various conditions, so they can design them to withstand catastrophe.”

According to Bloomberg, the study has been published at an “interesting time” for markets.

“The assessment comes at an interesting time. With U.S. stocks trading near record highs and the Federal Reserve starting to unwind years of extreme measures, there’s a raging debate on Wall Street over whether a big correction is looming – and if so, whether unforeseen faults in financial markets might crack open, as they did a decade ago.”

Mohamed El-Erian, chief economic adviser at German insurance conglomerate Allianz, warned that “non-banks” are increasingly reaching for high-yield bonds without regarding the risks.

“The strong ‘quest for yield’ remains visible in non-banks,” Allianz SE Chief Economic Adviser Mohamed El-Erian said in a Bloomberg View column this month. The group, which typically includes insurers, has pushed into asset classes “including what most deem to be a stretched market for high-yield bonds.”

Some insurers, like Athene Holding, have bragged about the outsized returns from their riskiest investments.

“Athene Holding Ltd., an insurer that leans on Apollo Global Management to oversee investments, is wagering on complex, hard-to-sell debt. Its alternatives portfolio, representing about 5 percent of total holdings, posted a 12.3 percent return on an annualized basis in the second quarter.

 

It’s among a handful of insurers backed by private equity firms betting they can earn better returns than peers focusing on traditional investments. But even MetLife Inc. and Prudential Financial Inc., two of the oldest and largest life insurers in the U.S., have said they’re pushing into commercial property bets and private market debt in search for yield.”

When insurers invest in illiquid products like a private equity fund, they need to hold more capital on their books to offset the risk – money, that, as Bloomberg points out, “isn’t free.” After adjusting for the reverse capital, BlackRock found that the high-flying PE returns weren’t as spectacular as some insurers believed.

“BlackRock’s study showed that the industry’s forays into alternative investments haven’t always delivered yields on par with what the underlying money managers project. Insurers have to hold large amounts of capital against the investments they make — money that isn’t free. When adjusting for those charges, private equity returns are generally less than 4 percent, whereas they would have been above 6 percent.

 

That, according to BlackRock, indicates insurers would probably earn more on investments in mezzanine real estate debt and high-risk equity investments in global real estate and other real-asset financing.”

Since the crisis, insurers have increased PE investments by 50%, despite the lower risk-adjusted returns highlighted by BlackRock. Maybe some of them SHOULD consider buying the asset-manager’s new software…

“After experimentation with different assets, some insurers have shifted wagers. By the end of last year, the industry’s funds held in private equity had soared 56 percent to $56 billion from 2008. That trend is leveling off, Buchwald said.

 

Real estate investments, meanwhile, hit a seven-year high in 2015, then dropped by $7 billion the next year to $42 billion. Hedge fund holdings spiked to $24 billion in 2015, only to drop to $18 billion the next year. MetLife and American International Group Inc. were among those that began changing strategies.

 

The key is to find “other, more predictable income generators,” Buchwald said, ‘things like infrastructure and real estate.’”

Whatever their risk tolerance, a growing number of market strategists believe that the next sharp downturn in markets could begin as soon as this year. This would mark the first real test of insurers’ capital cushions since the crisis. And, particularly if it triggers a wave of defaults in the high-yield sector (or even among European sovereigns), a market rout could wipe out trillions of dollars worth of insurance company holdings.

Let’s hope that – for their sake – when the other shoe drops, insurers are ready. With Republicans controlling the White House and both chambers of Congress, failing insurers likely won’t receive the same type of bailout that AIG did during the crisis.

END

I will see you Wednesday  night

Harvey.

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