GOLD: $1331.55 DOWN $15.05
Silver: $17.84 DOWN 19 CENT(S)
Closing access prices:
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: $1342.23 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1337.40
PREMIUM FIRST FIX: $4.83
SECOND SHANGHAI GOLD FIX: $1339.31
NY GOLD PRICE AT THE EXACT SAME TIME: $1336.40
Premium of Shanghai 2nd fix/NY:$2.91
LONDON FIRST GOLD FIX: 5:30 am est $1338.75
NY PRICING AT THE EXACT SAME TIME: $1338.60
LONDON SECOND GOLD FIX 10 AM: $1334.20
NY PRICING AT THE EXACT SAME TIME. 1334.50
For comex gold:
NOTICES FILINGS TODAY FOR SEPT CONTRACT MONTH: 0 NOTICE(S) FOR 0 OZ.
TOTAL NOTICES SO FAR: 51 FOR 5100 OZ (0.1586 TONNES)
388 NOTICES FILED TODAY FOR
Total number of notices filed so far this month: 4,476 for 22,380,000 oz
The hurricanes Harvey and Irma have been deadly to the housing sector in the Texas market and Florida and no doubt we will have problems in Charleston. Hundred’s of thousands of homes have been destroyed and must be replaced. The problem is that 85% of the home owners are not insured. Loans from FEMA will not help as the consumer is already maxed out.
As for gold/silver, the bankers are seeing a huge OI in gold but it is silver that is bothering them. In London, we now have backwardation Sept over December which should give you the comfort that physical silver is scarce over there. On this side of the pond, we again have an increase in physical silver standing at the comex.
Let us have a look at the data for today
In silver, the total open interest ROSE BY STEADY 1189 contracts from 187,152 UP TO 188,341 WITH THE TINY SIZED DROP IN PRICE THAT SILVER UNDERTOOK IN YESTERDAY’S TRADING (DOWN 1 CENT(S). AFTER THURSDAY’S FAILED FLASH CRASH, MORE NEWBIE SILVER LONGS BECAME EMBOLDENED ON FRIDAY TO TAKE ON THE BANKERS. THE BANKERS HOWEVER DID NOT WANT TO SEE SILVER’S PRICE BREAK AWAY FROM THEM SO AGAIN, ONCE LONDON WAS PUT TO BED, ORCHESTRATED FLASH CRASH AND THEY CONTINUED THE ASSAULT WITH ANOTHER FLASH CRASH AT 6:10 EST SUNDAY NIGHT
RESULT: A GOOD RISE IN OI COMEX DESPITE THE 1 CENT PRICE LOSS.
In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e. 0.941 BILLION TO BE EXACT or 135% of annual global silver production (ex Russia & ex China).
FOR THE NEW FRONT MAY MONTH/ THEY FILED: 388 NOTICE(S) FOR 1,940,000 OZ OF SILVER
In gold, the open interest FELL BY A MODEST 2137 CONTRACTS DESPITE THE SMALL GAIN in price of gold ($1.10 GAIN ON FRIDAY). The new OI for the gold complex rests at 577,444.
AGAIN, THE NUMBER OF NEWBIE SPECS ENTERING THE GOLD ARENA INCREASES WITH EACH PASSING DAY, AND OUR COMMERCIALS AGAIN SUPPLYING THE NECESSARY PAPER. ONCE LONDON (AND CHINA) WERE PUT TO BED, THE BANKERS FLASH CRASHED AGAIN ON FRIDAY WHICH HAD NO REAL EFFECT. THAT IS WHY THEY ORCHESTRATED ANOTHER FLASH CRASH SUNDAY NIGHT/MONDAY MORNING.
Result: A MODEST SIZED LOSS IN OI DESPITE THE RISE IN PRICE IN GOLD ($1.15). THE COMMERCIALS SUPPLIED THE NECESSARY SHORT PAPER. MORE NEWBIE LONGS ENTERED THE COMEX CASINO WILLING TO TAKE ON THE BANKERS. ONCE THE PHYSICAL TIME ZONE WAS OVER, ANOTHER FLASH CRASH WAS INITIATED WITH LITTLE EFFECT. THE BANKERS ORCHESTRATED ANOTHER FLASH CARASH ON MONDAY AS THEIR CRIMINAL ACTIVITY INTENSIFIES.
we had: 0 notice(s) filed upon for NIL oz of gold.
With respect to our two criminal funds, the GLD and the SLV:
Tonight , we had a huge change in gold inventory: a withdrawal of 2.37 tonnes and no doubt that this paper gold was used in the raid today.
Inventory rests tonight: 834.50 tonnes
Today: no change in inventory.
INVENTORY RESTS AT 327.088 MILLION OZ
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver ROSE BY A STEADY 1189 contracts from 187,152 UP TO 188,341(AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) DESPITE YESTERDAY’S 1 CENT LOSS IN TRADING. SILVER ROSE IN PRICE NICELY ON FRIDAY ONLY TO BE FLASH CRASHED SOUTHBOUND AS SOON AS THE PHYSICAL ZONE TRADING FINISHED. THE BANKERS CONTINUED WITH ANOTHER FLASH CRASH TODAY.
RESULT: A HIGHER OI AT THE COMEX DESPITE THE SLIGHT FALL IN PRICE OF 1 CENT. ANOTHER BANKER FLASH CRASH FAILED ON FRIDAY SO THEY INITIATED ANOTHER FLASH CRASH TODAY..
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
3. ASIAN AFFAIRS
i)Late SUNDAY night/MONDAY morning: Shanghai closed UP 11.18 POINTS OR 0.33% / /Hang Sang CLOSED UP 286.66 POINTS OR 1.04%/ The Nikkei closed UP 286.66 POINTS OR 1.04%/Australia’s all ordinaires CLOSED UP 0.62%/Chinese yuan (ONSHORE) closed DOWN at 6.5260/Oil DOWN to 47.82 dollars per barrel for WTI and 53.62 for Brent. Stocks in Europe OPENED GREEN EXCEPT LONDON. Offshore yuan trades 6.5315 yuan to the dollar vs 6.5260 for onshore yuan. NOW THE OFFSHORE MOVED MUCH WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN MUCH WEAKER (TO THE DOLLAR) AND THE OFFSHORE YUAN IS A LOT WEAKER TO THE DOLLAR AND THIS IS COUPLED WITH THE STRONGER DOLLAR. CHINA IS NOT VERY HAPPY TODAY
3a)THAILAND/SOUTH KOREA/NORTH KOREA
The USA continues to get weaker by the day: they now are proposing a watered down North Korean sanctions in order to appease China and Russia
b) REPORT ON JAPAN
c) REPORT ON CHINA
Kyle Bass the last big short on the Chinese yuan states that China’s credit system is reaching a boiling point. The total debt for China now surpasses 40 trillion dollars.
4. EUROPEAN AFFAIRS
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
ii)ISRAEL/SAUDI ARABIAIt seems that Israel’s mortal enemy, Saudi Arabia and its Crown Prince paid a “secret” visit to Israel. For centuries, Israel’s enemy has been Iran. Saudi Arabia, a Sunni nation is also extremely worried about the Shia crescent being formed whereby Iran flexes its muscle in both Lebanon and Syria. The fact that Asad is still in power is the reason for the secret visit and the bombing a few days ago in Syria is no coincidence. Expect further trouble now in the Shia dominated middle east.
( zero hedge)
6 .GLOBAL ISSUES
7. OIL ISSUES
8. EMERGING MARKET
9. PHYSICAL MARKETS
i)China’s 2nd biggest bitcoin exchange reports that Beijing is set on shutting down all virtual exchanges
( zero hedge)
ii)Same story as above, with Reuters reporting a shutdown in all virtual currencies
( Bullionstar/Ronan Manly)
iv)Andrew Maguire discusses the fact that Goldman Sachs and 2 other bankers have abandoned the gold/silver cartel. This has been further accentuated by perma gold bear Jeffrie Currie going positive on gold
( Andrew Maguire/Kingworldnews)
10. USA Stories
Miami under water:
ii)IRMA’s DEVASTATION: HALF OF ALL FLORIDA IS WITHOUT POWER. SEVENTY FIVE PERCENT OF ALL OF FLORIDA’SLIGHT AND POWER UTILITY IS WITHOUT ELECTRICITY AND IT WILL TAKE WEEKS TO RESTORE AND WILL BE COSTLY.
ESTIMATE OF DAMAGE AROUND $50 BILLION
( ZERO HEDGE)
iii)A must read…America simply cannot afford to rebuild. It has too much debt
iv)A terrific article from Charles Hugh Smith who discusses the costs and tribulations facing the flooded victims in both Houston and many parts of Florida.
( CHARLES HUGH SMITH/(OF TWO MINDS.COM)
vi)Republicans are furious after Trump’s Dept of Justice declines to charge IRS Lois Lerner( zerohedge)
vii)The huge cut in Whole Foods pricing has lead to a huge 25% surge in new customers.
the Amazon effect continues to have a devastating effect on our bricks and mortar operations
Let us head over to the comex:
The total gold comex open interest FELL BY A MODEST 2137 CONTRACTS DOWN to an OI level of 577,444 DESPITE THE SMALL SIZED GAIN IN THE PRICE OF GOLD ($1.10 GAIN IN FRIDAY’S trading). On Friday, more newbie longs entered the casino, oblivious to the high OI in place. These specs seem emboldened to take on the bankers who will supply the necessary paper until their dying day. Once London was put to bed, the bankers orchestrated another flash crash which ended in failure as the bankers wanted a bigger fall in price and their wish for more gold leaves to fall was roundly defeated. THE BANKERS PERSISTENCE IN TRYING TO KNOCK OPEN INTEREST DOWN, PROCEEDED WITH ANOTHER FLASH CRASH SUNDAY NIGHT/MONDAY MORNING.
Result: a MODEST SIZED open interest DECREASE with an SMALL sized RISE in the price of gold.
The new non active September contract month saw it’s OI FALL BY 4 contracts DOWN to 828. We had 0 notices filed on FRIDAY so we LOST 4 contracts or an additional 400 oz will NOT stand AND 4 EFP’s WERE ISSUED which entitles them to a fiat bonus plus a deliverable contract on a different exchange and most likely that would be London. These are private deals so we do not get to see the makeup of these deals only the number of EFP’s issued.
The next active contract month is Oct and here we saw a LOSS of 2361 contracts DOWN to 42,789.
The November contract saw A GAIN OF 70 contracts UP to 257.
The very big active December contract month saw it’s OI LOSS OF 2151 contracts DOWN to 454,725.
We had 0 notice(s) filed upon today for NIL oz
We are now in the active contract month of September (and the last active month until December). Today we witness Sept. OI FALL by 319 contacts DOWN to 1301. We had 388 notices filed on Friday, so we again gained 69 contracts or an additional 345,000 oz will stand for delivery. This phenomenon has been happening in silver for the past 5 months whereby the amount standing increases on each and every delivery day. This queue jumping highlights the huge demand for silver that we have been witnessing around the globe. The next non active contract month for silver after September is October and here the OI GAINED 94 contacts UP TO 1066. November saw a GAIN of 23 contract(s) and thus ADVANCING to 56. After November, the NEXT big active contract month is December and here the OI GAINED 86 contracts UP to 162,901 contracts.
We had 388 notice(s) filed for 1,940,000 oz for the SEPT. 2017 contract
VOLUMES: for the gold comex
ESTIMATED VOLUME TODAY: 178,251 CONTRACTS WHICH IS FAIR
FRIDAY’S confirmed volume was 413,409 which is excellent
volumes on gold are STILL HIGHER THAN NORMAL!
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz||
|Deposits to the Dealer Inventory in oz||nil oz|
|Deposits to the Customer Inventory, in oz||
includes 4 kilobars
|No of oz served (contracts) today||
|No of oz to be served (notices)||
|Total monthly oz gold served (contracts) so far this month||
|Total accumulative withdrawals of gold from the Dealers inventory this month||NIL oz|
|Total accumulative withdrawal of gold from the Customer inventory this month||9,193.0 oz|
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 0 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.
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||
|Deposits to the Dealer Inventory||
|Deposits to the Customer Inventory||
|No of oz served today (contracts)||
|No of oz to be served (notices)||
|Total monthly oz silver served (contracts)||4476 contracts (22,380,000 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||4,150,053.7 oz|
NPV for Sprott and Central Fund of Canada
Sprott’s hostile 3.1 billion bid to take over Central Fund of Canada
Sprott makes hostile $3.1 billion bid for Central Fund of Canada
Submitted by cpowell on Thu, 2017-03-09 01:19. Section: Daily Dispatches
From the Canadian Press
via Canadian Broadcasting Corp. News, Toronto
Wednesday, March 8, 2017
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.
And now the Gold inventory at the GLD
Sept 11/Today we had a rather large 2.37 tonnes of gold removed from the GLD/Inventory rests at 834.50 tonnes
Sept 8/we had a tiny withdrawal of .34 tonnes and probably that would be to pay for fees like insurance etc.
Inventory rests at 836.87 tonnes
Sept 7./no changes in gold inventory at the GLD/Inventory rests at 837.21 tonnes
SEPT 6/WE HAD ANOTHER DEPOSIT OF 5.91 TONNES INTO THE GLD/IN THE LAST TWO DAYS: 20.69 TONNES/INVENTORY RESTS AT 837.21 TONES
Sept 5/we had a huge deposit of 14.78 tonnes into the GLD/Inventory rests at 831.21 tonnes
Sept 1/ no change in gold inventory at the GLD/Inventory rests at 816.43 tonnes
AUGUST 31/no change in gold inventory at the GLD. Inventory rests at 816.43 tonnes
August 30/another deposit of 2.07 tonnes into the GLD inventory/inventory rests at 816.43 tonnes
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
Now the SLV Inventory
Sept 11.2017: no change in silver inventory at the SLV/Inventory rests at 327.088 million oz/
Sept 8/no change in silver inventory at the SLV/Inventory rests at 327.088 million oz/
Sept 7/STRANGE!! WITH DEMAND FOR SILVER HUGE WE HAD ANOTHER 945,000 OZ WITHDRAWN. NO DOUBT THAT THIS IS CRIMINAL ACTIVITY AS SILVER IS WITHDRAWN AND USED TO CONTAIN THE RISE IN PRICE/INVENTORY RESTS AT 327.088 MILLION OZ/
SEPT 6/STRANGE WITH A HUGE DEMAND FOR SILVER THROUGHOUT THE WORLD THESE DOORKNOBS WITHDRAW A HUGE 3.148 MILLION OZ OF SILVER FROM THE SLV/INVENTORY RESTS AT 328.033 MILLION OZ
Sept 5/2017: no change in silver inventory at the SLV/Inventory rests at 331.178 million oz/
Sept 1/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 331.178 MILLION OZ
AUGUST 31/STRANGE!! a huge withdrawal of 2.019 million oz with silver up today./INVENTORY RESTS AT 331.178 MILLION OZ
August 30/no change in silver inventory at the SLV/inventory rests at 333.178 million oz
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
Indicative gold forward offer rate for a 6 month duration+ 1.37%
Major gold/silver trading/commentaries for MONDAY
Conor McGregor – Worth His Weight In Gold?
– Conor McGregor, MMA champion has gold statue made of him
– If McGregor was cast in investment grade gold bullion he would be worth …
– If Mayweather were cast in gold he would be worth $2.7m
– Ali once fought equivalent of MMA fighter and nearly lost use of his legs
– Gold continues to be seen as the ultimate prize in sport
– Gold a great prize but true value is as a safe haven
At the moment there are some heated debates going on about statues that some believe should no longer stand.
Many of the figures previously cast in bronze, gold or stone are no longer seen as heroes. Time has changed some people’s perspective on what were once seen as heroic endeavours and achievements.
Today we have different measures of success and while statues of now divisive historical figures are being pulled down, statues of modern millennial heroes are being raised. Last week a statue was created of the ‘Notorious’, world champion Mixed Martial Arts (MMA) fighter, Dublin-born Conor McGregor.
In one of the most hyped fights of all time last week, McGregor was defeated by the 50-times unbeaten boxing champion Floyd Mayweather in Las Vegas.
McGregor’s achievement of stepping out of his comfort zone and his actual sport and taking on the legend that is Floyd Mayweather was applauded by most and it is something that has not gone unnoticed by Irishman Eamon Heneghan.
Last week Heneghan unveiled a life-size gold statue of Conor McGregor, ‘I’m such a big fan and find him so inspirational.’ the amateur sculptor told the Irish Independent.
Heneghan is currently out of work. He saw that McGregor has a keen interest and penchant for gold and gold statues and decided that he would make one for him.
His hopes are that the MMA champion will notice it. We hope he does as statues are getting bad rep at the moment and this one was only made out of admiration for someone who has made history.
The gold-sprayed chicken wire and papier-mâché statue has been called a mixture of things but it was definitely one headline that declared the statue ‘belongs in the pantheon of horrible sports sculptures’ that grabbed my attention.
Whatever you think of the statue you have to admire the effort that went into it. We thought we would look at some other headline-grabbing sports statues and look at what may have happened if they had been cast in gold.
A lot of sports stars have been confronted with statues that perhaps aren’t the most…flattering.
One of the most famous is Ronaldo.
The bust was cast out of bronze, but we suspect if Ronaldo had ben cast in gold he might feel a little happier about it.
Is Ronaldo worth his weight in gold? Ronaldo was bought by Real Madrid for €94 million in 2009. At the time his weight in gold was worth €1.76m, today he is worth over €2.8m in gold. This is nothing to do with Ronaldo’s performance, instead the simple climb in price of gold.
How does that compare to the other competitor for world’s best footballer, Lionel Messi. The Barcelona Forward €250m. Weighing in at 72kg, Messi’s weight in gold today is worth €2.25m.
In 2011, Andy Murray was ‘honoured’ with a Terracotta Army statue in Shanghai.
The Chinese are obviously known for their love of gold. Had they decided to make Andy’s 84kg frame into a gold statue in 2011 then it would have fallen slightly from £2.856m to £2.688m.
Murray’s statue in Shanghai was in good company. Just the year before Roger Federer had been gifted with a statue in a similar style. In contrast to Murray’s 2011 statue, Federer’s 2010 statue has climbed in value from £2.295m to £2.72m. It shows what difference a year can make.
All about the gold
What’s most interesting about the coverage surrounding this new statue is that it wouldn’t have happened if Heneghan hadn’t decided to paint it in gold.
If he’d not painted it at all or just gone for a plain colour then no-one would be interested.
We have a fascination with gold that means it makes headlines. Most people have an interest in gold.
We reward people in gold. Last week the belt McG and Mayweather were fighting for was made of 1.5kg gold (plus 3,360 diamonds 600 sapphires and 160 emeralds).
The desire to reward and be rewarded in gold has been around since time immemorial. It is not a recent phenomenon of rising gold prices or flashy Instagram photos.
We know deep down inside that to be rewarded in gold is to be rewarded with something that will last long past the victories and should even secure your financial future.
Watch gold in the long-term
The last few examples of how gold can change in over time are merely short-term ones.
To bring it back to Mayweather we can take each of his fighting weights from his 50 fights and see how the equivalent weight in gold has climbed since.
The graph below shows the percentage gain in the gold price since Mayweather’s first fight in 1996 and in 2017. Since his 1996 fight against Roberto Apodaca the price of gold has climbed by over 226%.
Gold hasn’t demonstrated as big gains if you bought in recent years but the lesson here is that gold takes its time. A bit like property or indeed fine wine.
Conclusion: Gold’s the champion but it takes its time and doesn’t show off
The most famous boxer of all time is of course Muhammad Ali.
What’s interesting about Ali in light of the Mayweather vs McGregor fight is that the legendary boxer once took on a similar challenge.
In 1976 Ali fought Antonio Inoki, a Japanese professional wrestler. The fight was fought under special rules and is seen as a precursor to the MMA sport which McGregor is famous for today.
The result was a draw but Ali was arguably left worse off. He was left with two blood clots in his legs. These hindered him for the rest of his career with amputation even being discussed at one point. The fight is considered one of the most embarrassing of Ali’s career.
Ali was so convinced that he could show that he was ‘The Greatest’ that he stepped out of his comfort zone and into unfamiliar territory. As a result he nearly ruined his entire sporting future and his health.
An analogy can be drawn with Ali’s challenge with what we see today in the financial world and governments controlling the monetary system. They feel they are infallible. They are taking on riskier and riskier matches, with rules that are unfamiliar and the consequences known.
What has survived the test of time and all of the risk taking and speculative punts whether in sports or finance?
Gold has. Gold cannot be beaten to a pulp whether figuratively or literally. It has stood strong through financial crisis and crashes throughout history and will continue to protect people in the coming uncertain years.
Conor McGregor has done very well financially in recent years and is believed to have made €100 million from the Mayweather fight alone.
We sincerely hope that in order to protect his financial well being, he diversifies into physical gold bullion.
News and Commentary
Gold Prices (LBMA AM)
08 Sep: USD 1,350.90, GBP 1,026.82 & EUR 1,120.71 per ounce
07 Sep: USD 1,340.45, GBP 1,026.52 & EUR 1,119.54 per ounce
06 Sep: USD 1,340.15, GBP 1,028.03 & EUR 1,122.11 per ounce
05 Sep: USD 1,331.15, GBP 1,029.51 & EUR 1,120.43 per ounce
04 Sep: USD 1,334.60, GBP 1,030.98 & EUR 1,120.53 per ounce
01 Sep: USD 1,318.40, GBP 1,020.18 & EUR 1,107.98 per ounce
31 Aug: USD 1,305.80, GBP 1,013.17 & EUR 1,098.31 per ounce
Silver Prices (LBMA)
08 Sep: USD 18.21, GBP 13.80 & EUR 15.09 per ounce
07 Sep: USD 17.79, GBP 13.59 & EUR 14.85 per ounce
06 Sep: USD 17.77, GBP 13.62 & EUR 14.90 per ounce
05 Sep: USD 17.88, GBP 13.80 & EUR 15.03 per ounce
04 Sep: USD 17.80, GBP 13.75 & EUR 14.95 per ounce
01 Sep: USD 17.50, GBP 13.53 & EUR 14.69 per ounce
31 Aug: USD 17.34, GBP 13.47 & EUR 14.62 per ounce
Recent Market Updates
– ‘Things Have Been Going Up For Too Long’ – Goldman CEO
– Physical Gold In Vault Is “True Hedge of Last Resort” – Goldman Sachs
– Bitcoin Falls 20% as Mobius and Chinese Regulators Warn
– Gold Surges To $1338 as U.S. Warns of ‘Massive’ Military Response
– Precious Metals Outperform Markets In August – Gold +4%, Silver +5%
– 4 Reasons Why “Gold Has Entered A New Bull Market” – Schroders
– Gold Reset To $10,000/oz Coming “By January 1, 2018” – Rickards
– Gold Surges 2.6% After Jackson Hole and N. Korean Missile
– Diversify Into Gold On U.S. “Political Instability” Advise Blackrock
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China’s 2nd biggest bitcoin exchange reports that Beijing is set on shutting down all virtual exchanges
(courtesy zero hedge)
China’s 2nd Biggest Bitcoin Exchange Responds To Report Beijing Is Shutting All Virtual Exchanges
… there is still far more confusion than clarity about what is really going on in China: so far there has been no official statement from either the PBOC or China’s financial regulator, confirming or denying the report, which spooked millions of Chinese bitcoin (and ethereum and litecoin) holders into dumping their digital currencies. As a reminder, this is the gist of the Caixin report:
The central government’s office overseeing internet financial risks has ordered local authorities to shut down virtual exchanges trading digital currencies with the yuan, a source close to the office told Caixin. The order will affect major Bitcoin platforms such as OKCoin, Huobi and BTC China.
To be sure, it’s not like a Chinese government bureaucracy to i) allow such a major leak and ii) not make a validating (or denying) statement over a day later.
The confusion was further exacerbated by the report’s seeming contradictions, as in the same report that claimed Chinese Bitcoin exchanges would be halted, also said that the proposed regulation (which has yet to be unveiled) is not meant to be a crackdown on bitcoin itself or actual trading: “the source added that the crackdown targets unauthorized trading at virtual currency exchanges, rather than Bitcoin and the underlying blockchain technology.”
So until we wait an official statement from Beijing, which risks the wrath of millions of bitcoin daytraders should it confirming the Caixin trial balloon, moments ago China’s second biggest bitcoin exchange, BTC China issued the following statement in response to the Caixin report:
BTCChina Response to News Article On “Banning Bitcoin Exchanges”
We have received a large number of questions from customers following the publication of a news article by Caixin alleging that Chinese regulators would stop bitcoin trading.
Our response is as follows:
- BTCChina operates in strict accordance with Chinese regulations. If the Caixin report is accurate, we will continue acting in strict accordance with regulators, and continue protecting the safety of customers’ funds.
- The Caixin report says that regulators have not said bitcoin itself is illegal, and have not decided to prohibit private, one-on-one bitcoin transactions. If the report is accurate, BTCChina will stop all BTC/CNY trading, and change its business model to become an information service provider for private, one-on-one digital asset trading.
Many people regard digital assets, of which bitcoin is the embodiment, as the necessary result of recent advances in internet technology and the largest scale practical application of blockchain technology. In additional, bitcoin’s blockchain may have a far-reaching positive impact on the economy, becoming a foundational layer upon which other revolutionary software projects are based. We believe digital assets will have a far-reaching impact on the global economy.
BTCChina thanks you for your support, and will continue working to provide the best service for all customers.
Saturday, September 9th, 2017
What is notable about BTC China’s response, aside from its promise to pivot its business model should Caixin’s report be accurate, is that it appears that there has yet to be any official confirmation. Could someone be using the highly respected financial outlet as a fake “trial balloon” to push the price of bitcoin lower and load up on the cheap before the PBOC denies the late Friday report? We should know the answer by Monday.
Meanwhile, it is worth noting that while China was once the world’s largest Bitcoin marketplace, accounting for nearly 90% of global trading, this was followed by a series of crackdowns and regulations.
To be sure, Chinese exchange problems with the central bank are nothing new: at the start of this year, the People’s Bank of China launched an investigation into major bitcoin exchanges including Huobi, BTC China and OKCoin, and issued warnings about possible risks on their platforms. In response, Huobi and OKCoin ended zero-fee trading and margin-trading services, which let customers borrow yuan or bitcoin from the exchanges to boost their bets. The exchanges also suspended bitcoin withdrawals, and only reactivated them about three months ago.
These moves ended China’s dominance of the global bitcoin market, as measured by trading volume. As a result, China’s share in bitcoin trading has slid to less than a third of global trading. The three largest exchanges, OKCoin, BTC China and Huobi, account for 60% of Bitcoin trading in the country.
On Friday night, after the Caixin news, Bitcoin value traded at Huobi and BTC China declined nearly 20% to around 23,000 yuan. Bitfinex remains the most active and popular bitcoin exchange in the world.
(courtesy Bullionstar/Ronan Manly)
(courtesy Andrew Maguire/Kingworldnews)
In KWN interview, Maguire notes Goldman’s warning against ‘paper’ gold
Submitted by cpowell on Sat, 2017-09-09 14:15. Section: Daily Dispatches
10:15a ET Saturday, September 9, 2017
Dear Friend of GATA and Gold:
London metals trader Andrew Maguire, interviewed today by King World News, calls attention to the assertion by a Goldman Sachs trader that anyone buying gold should buy metal in a vault rather than “paper” gold. Maguire’s comments are excerpted at KWN here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Your early MONDAY morning currency, Asian stock market results, important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight
1 Chinese yuan vs USA dollar/yuan MUCH WEAKER 6.5260 (REVALUATION NORTHBOUND /OFFSHORE YUAN MOVES SLIGHTLY WEAKER TO ONSHORE AT 6.5315/ Shanghai bourse CLOSED UP 11.18 POINTS OR 0.33% / HANG SANG CLOSED UP 286.66 POINTS OR 1.04%
2. Nikkei closed UP 279.95 POINTS OR 1.41% /USA: YEN RISES TO 108.53
3. Europe stocks OPENED GREEN ( /USA dollar index RISES TO 91.49 AND BREAKS RESISTANCE OF 92.00/Euro DOWN to 1.2012
3b Japan 10 year bond yield: FALLS TO -+.010%/ GOVERNMENT INTERVENTION !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 108.87/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!
3c Nikkei now JUST BELOW 17,000
3d USA/Yen rate now well below the important 120 barrier this morning
3e WTI:: 47.82 and Brent: 53.62
3f Gold DOWN/Yen DOWN
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS AND SELLING THE SHORT END
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil DOWN for WTI and DWON for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO +.330%/Italian 10 yr bond yield DOWN to 1.95%
3j Greek 10 year bond yield RISES TO : 5.4720???
3k Gold at $1335.50 silver at:17.78 (8:15 am est) SILVER NEXT RESISTANCE LEVEL AT $18.50
3l USA vs Russian rouble; (Russian rouble UP 23/100 in roubles/dollar) 57.14-
3m oil into the 47 dollar handle for WTI and 53 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 FAIR SIZED DEVALUATION SOUTHBOUND
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 108.53 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 0.9507 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1409 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017
3r the 10 Year German bund now POSITIVE territory with the 10 year RISING to +0.330%
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 2.094% early this morning. Thirty year rate at 2.708% /POLICY ERROR)GETTING DANGEROUSLY HIGH
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Global Stocks Roar Back To All-Time Highs As Irma, North Korea Fears Fade
And we’re back at all time highs.
With traders paring back risk positions on Friday ahead of a weekend full of potential risk events, Monday has seen a global “risk-on” session in which global stocks rose back to record highs and US futures jumped, the dollar gained, Treasuries retreated, while VIX and dollar slumped as appetite for risk returned to global markets after North Korean failed to conduct an anticipated missile test failed to materialize and Hurricane Irma appears to have struck the U.S. with less force than feared. The MSCI All-Country World Index increased 0.3% to the highest on record with the largest climb in more than a week, while that “other” trade also outperformed, as the MSCI Emerging Market Index increased 0.4% to the highest in about three years. Safe havens such as the yen and Swiss franc all also fell.
Amid the risk-on tone, the dollar registered its biggest gains in the currency markets in ten days. It added 0.5 percent against its perceived safe-haven Japanese counterpart the yen JPY and clawed back ground against the high-flying euro as an ECB policymaker flagged caution about the single currency’s recent rise.
“The good news was that the eye of Hurricane Irma took a path west of Miami and has since weakened to a Category 1 storm so that damage in Florida – whilst still severe… appears not to be quite as catastrophic as had been feared last week,” said Daiwa Capital Markets strategist Chris Scicluna. “And thankfully there was no bad weekend news out of North Korea either.”
As Bloomberg summarizes the post-weekend action, it was marked by the unwind of risk-off related hedges after the impact of Hurricane Irma is smaller than initially feared and North Korea does not conduct any military activity over the weekend. JPY and CHF consequently underperform; Yuan continues to weaken after PBOC removed reserve requirement on FX forwards. DXY retraces overnight rally to trade flat, EMFX rallies against USD. European equity markets rally strongly from the open, insurance sector leads relief rally followed by financial services. Bund and UST curves both bear steepen, 10Y futures gap lower and stay within a tight range, similar move in spot gold. Industrial metals rally after China inflation data; Brent-WTI spread tightens after Friday’s sharp widening move.
Gold sank 0.7 percent to $1,337.62 an ounce, the biggest dip in almost four weeks, although it still remains at notably elevated levels as shown below.
The Stoxx Europe 600 Index jumped the most in more than a week, rising for the fourth day, as all the region’s major stock gauges advanced and almost every sector gained. Earlier, equities across Asia traded in the green. Oil advanced as Gulf Coast refining capacity continued to recover after getting hit by Harvey. Stoxx 600 up 0.95% to 379.08, with insurers leading gains after three straight weeks of declines, amid relief that any impact from storm damages in the U.S. may be less than anticipated.
In Asia, the MSCI Asia-Pacific Index jumped 0.6 percent to hit the highest since December 2007. The Topix index advanced 1.2 percent at the close in Tokyo, its steepest advance since early June. Japan’s Nikkei rose 1.4 percent after Pyongyang held a massive celebration to congratulate the nuclear scientists and technicians who steered the country’s sixth and largest nuclear test a week earlier. South Korea’s Kospi index rose 0.7 percent as did the S&P/ASX 200 Index in Sydney. Hong Kong’s Hang Seng Index rose 1 percent, while gauges in China fluctuated. The Japanese yen sank 0.6 percent to 108.44 per dollar, the biggest dip in almost four weeks.
“It’s too early to say the (North Korean) risks are gone, but one thing for sure is that market players now think the situation won’t get worse as it did some weeks ago,” said Lee Kyung-min, a stock analyst at Daishin Securities in Seoul. Lee said many foreign investors and domestic institutions were purchasing South Korean tech and chemicals shares as quarterly earning season neared.
Continuing Friday’s action, the onshore yuan headed for its biggest decline in 8 months, with sentiment taking a hit after China’s central bank removed trading curbs on foreign-exchange forwards.
“The removal potentially makes it easier for traders to purchase the USD, easing the pressure for yuan appreciation,” said analysts at ANZ in a note. “The change likely signals some discomfort about the stronger yuan and its impact on Chinese exports.”
As a result, the CNY weakened 0.55% to 6.5246 per dollar, set for the biggest drop since January on a closing basis. The PBOC strengthenedthe daily reference rate for 11th day, longest run since 2005; sets it 0.05% stronger at 6.4997 per dollar, however, this was weaker than the 6.4834 average forecasts from a survey of 16 traders and analysts. In offshore markets, the CNH dropped 0.51% to 6.5290 per dollar in Hong Kong. Perhaps in an attempt to limit losses, the central bank once again intervened by boosting margin costs, and the overnight CNH Hibor rose 78 basis points, the most since June 1, to 2.29433%. One- month CNH borrowing cost climbs 50 basis points to 3.60633%.
Also in China, August inflation readings were above market on Saturday and confirmed the rise in pricing pressure seen in the PMI data earlier in the week. The CPI rose +0.4% mom, lifting annual growth to +1.8% yoy (vs. +1.6% expected), which is the fastest pace since January. This partly reflects a smaller deflationary contribution from the food sector (prices now down just -0.2% yoy). However, non-food inflation picked up three-tenths to +2.3% yoy. Elsewhere, a +0.9% mom rise in August PPI saw through-year inflation measured at the producer level rise to +6.3% yoy (vs. +5.7% expected).
There were also reports Beijing was planning to shut down local crypto-currency exchanges, dealing a blow to bitcoin’s recent stellar rally. Bitcoin was quoted at $4,300 BTC=BTSP on the BitStamp platform, off a recent record high of nearly $5,000.
In commodity markets, gold softened 0.7 percent to $1,337.81 an ounce, away from a one-year peak of $1,357.54. Oil prices regained a little ground after the Saudi oil minister discussed the possible extension of a pact to cut global oil supplies beyond March 2018 with his Venezuelan and Kazakh counterparts. The news of the talks on Sunday helped offset the downward pressure on oil prices amid worries that energy demand would be hit hard by Hurricane Irma.
In rates, the yield on 10-year Treasuries gained three basis points to 2.09 percent. Germany’s 10-year yield climbed one basis point to 0.33 percent. Britain’s 10-year yield increased three basis points to 1.018 percent.
- S&P 500 futures up 0.5% to 2,475.25
- STOXX Europe 600 up 0.9% to 379.08
- MSCI Asia up 0.5% to 162.41
- MSCI Asia ex Japan up 0.5% to 536.22
- Nikkei up 1.4% to 19,545.77
- Topix up 1.2% to 1,612.26
- Hang Seng Index up 1% to 27,955.13
- Shanghai Composite up 0.3% to 3,376.42
- Sensex up 0.8% to 31,924.11
- Australia S&P/ASX 200 up 0.7% to 5,713.15
- Kospi up 0.7% to 2,359.08
- German 10Y yield rose 2.2 bps to 0.334%
- Euro down 0.1% to $1.2022
- Brent Futures down 0.5% to $53.52/bbl
- Italian 10Y yield rose 3.4 bps to 1.668%
- Spanish 10Y yield fell 0.2 bps to 1.542%
- Gold spot down 0.7% to $1,336.69
- U.S. Dollar Index up 0.1% to 91.46
Bulletin Headline summary from RanSquawk:
- Risk-on theme as North Korea refrains from missile tests, insurers outperform on lower damage estimates from hurricane
- ECB’s Coeure and Mersch speak; both mention subdued inflation pressures
- Looking ahead, highlights include UN vote on North Korean sanctions, UK vote on Brexit Bill, US 3y note auction
Top Overnight News
- Irma Weakens After Pummeling Miami, Reducing Damage Forecast
- Irma Cuts Power to 4.5 Million, Shuts Ports and Imperils Crops
- Delta Eyes Limited Florida Service, Atlanta Hub Cancellations
- Europe’s Reinsurers Jump as Florida Avoids Worst From Irma
- ECB’s Coeure: monetary policy never acts in isolation on the exchange rate and in periods of recovery the positive confidence and stimulus effects of monetary policy are likely to offset, at least in part, the disinflationary effects of a stronger currency coming from expectations of tighter policy
- El Mundo: German govt wants Weidmann to be next ECB President; current Spanish Economy Minister De Guindos well placed to be new Vice President
- Austria: EUR 100y bond mandated for syndication, dependent on investor feedback
- NHC: Irma continuing to weaken; hurricane warning changed to tropical storm warning
- China Aug. CPI y/y: 1.8% vs 1.6% est; PPI 6.3% vs 5.7% est.
- North Korean Sanctions: U.S-drafted resolution for UN Security Council drops proposed oil embargo which was opposed by China and Russia, according to people familiar: Reuters
- Trump Debt Limit Deal Undermines Trust Among GOP on Tax Overhaul
- Teva Picks Lundbeck’s Schultz to Revive Israeli Drugmaker
- North Korea Warns U.S. of ‘Greatest Pain’ if Sanctions Pass
- Boeing to Design, Build Medium Earth Orbit Satellites for SES
- Pilgrim’s Pride Is Said to Near Deal for U.K. Producer Moy Park
- Blackstone Is Said to Bid for Americold, New York Post Says
Asia bourses began the week on the front-foot amid a relief rally after North Korea refrained from firing a missile over the weekend and instead launched a tirade of threats towards the US. Although there were widespread expectations for a possible missile test to commemorate its Founding Day, North Korea abstained from any action which underpinned both ASX 200 (+0.8%) and Nikkei 225 (+1.4%), with exporters in the latter further underpinned by JPY weakness. Chinese markets ignored the PBoC’s continued skip of open market operations, as Hang Seng (+1.0%) and Shanghai Comp. (+0.1%) conformed to the positive risk sentiment which was also supported higher than expected China CPI and PPI data that suggested stronger economic activity. 10yr JGBs were lower with demand weighed amid the positive risk tone across the region and a lack of Rinban announcement by the BoJ. PBoC set CNY mid-point at 6.4997 (Prev. 6.5032); 11th consecutive firmer fix which is the longest streak since 2005. PBoC will no longer require financial institutions to set aside funds when purchasing USD on behalf of clients through forwards. China inflation data printed over the weekend, coming stronger on the back of higher food and commodity prices:
- Chinese CPI (Aug) M/M 0.4% vs. Exp. 0.3% (Prev. 0.1%).
- Chinese CPI (Aug) Y/Y 1.8% vs. Exp. 1.6% (Prev. 1.4%)
- Chinese PPI (Aug) Y/Y 6.3% vs. Exp. 5.7% (Prev. 5.5%)
Top Asian News
- Hedge Fund Bridgewater Is Said to Consider China Onshore Fund
- China Latest Bond Default Is a Cautionary Tale for Investors
- IndusInd Is Said to Discuss $2.2 Billion Bharat Financial Deal
- China Thinks the U.S. Holds Key to Solve North Korea Crisis
- Blackstone to Buy Stake in India’s Distressed Assets Firm: Mint
- China May Unveil Car Emissions Rules This Week, Association Says
- Bank Indonesia Sees Rupiah at 13,420/USD by Year-End: Kontan
- China’s Three-Year Focus on Preventing Yuan Slump Is Over: HSBC
In European markets, risk on tone has also dictated early trade, as geopolitical concerns were slowed, with North Korea refraining from conducting any missile tests over the weekend. European bourses trade in the green across the board – financials lead the all green charge, buoyed by insurance names, as concerns of Hurricane Irma’s damage have softened, with the estimate damage reduced by USD 49bln, from USD 200bln to USD 151bln, according to Enki Research. A gap lower was observed in the Eurex open, with both the Bund and now Gilts trading around session lows. Limited volatility has been witnessed however, with subdued trade evident, as many are likely to await a slew of CPI data this week, joined by the latest BoE interest rate decision on Thursday. Outperformance has been seen in the longer term BTP, helped by slight relief at the Tesoro’s opting to tap the 10/36 instead of the new 3/48. 30y BTPs are 5bps tighter to Bunds, and near 2bps tighter to Bonos, as they lead the eurozone market. Elsewhere, a rare Monday US note auction is due later, with USD 24bln 3y notes set to be auctioned on a week that sees 3s, 10s and 30s.
Top European News
- Italy Production Unexpectedly Rises In Sign of Faster Recovery
- London to Remain Center of Europe Private Equity, Huth Tells HB
- May Senses Victory on Brexit Bill That Faces Tougher Times
- Goldman Sachs to Expand Retail Banking Business to U.K., FT Says
- Astra Doubles Down on Cancer Research Despite Key Trial Setback
- Brookfield May Be Sole Bidder for Arqiva Auction: Sunday Times
- Nordea’s ECB Move Unlikely to Boost Dividends on Capital Relief
- Lundbeck CEO Shock Resignation a Large Negative: Credit Suisse
In commodities, comments from ECB’s Coeure were initially ignored by the market, however, as his speech was digested, some jumped on his
comments stating that the policy-relevant horizon – The “Medium Term” concept in our monetary policy strategy – is likely to be
longer given the persistence of subdued inflationary pressures. The marginal dovish swing, did see a brief break through 1.20,
however, normal theme has resumed in EUR/USD, breaking back inside Friday’s trading range. The JPY is weaker amid the risk-on sentiment following the lack of any missile test from North Korea with USD/JPY holding firm
Early volatility was witnessed in the NOK, as Norway’s CPI and Core Inflation figures missed across the board. EUR/NOK shot
through September’s high, as buyers continue to control the pair following the strong support seen around the 9.22 area. Today’s
election in Norway could also gain some attention with polls to close to call, although results are not expected until the early hours
of Tuesday morning.
In currencies, WTI and Brent crude futures do trade off highs in recent trade, despite comments over the weekend from Saudi’s Falih, stating that
discussions have begun with Venezuela and Kazakhstan on the possibility of extensions on the global oil supply cut beyond 2018.
Precious metals have suffered throughout Asian and early European trade, a result of the increased risk tone and the lack of North
Korean action over the weekend.
US Event Calendar
- Nothing major scheduled
DB’s Jim Reid concludes the overnight wrap
It’s been a busy couple of weeks since markets fully emerged from the summer lull but this week should see a renewed focus on the data as we’ve got a busy week ahead for global CPI reports which should test the inflation pulse once again. The highlight will likely be this Thursday when we receive the US CPI report for August but in the meantime we’ve got CPI due in Norway and Denmark this morning, Sweden and the UK tomorrow, Germany (final) and Spain on Wednesday along with the final readings for France and Italy on Thursday. PPI in the US on Wednesday is also worth a watch given that the healthcare component is used as an estimator for the same component in the core PCE deflator. Over the weekend we’ve already received a slightly stronger than expected CPI and PPI print in China. More on that shortly.
Of those above, the US CPI report takes on a little bit more focus this week not only for the slightly dampened Fed outlook right now but also because core CPI has disappointed by missing consensus expectations for the last five months. Our US economists and the market have the headline and core readings pegged at +0.3% mom and +0.2% mom respectively. It’s worth noting though that should the core reading finally print in-line, the YoY rate is still likely to slip one-tenth to +1.6% which would put it at the lowest since January 2014. Indeed, our US economists are of the view that the core reading may not bottom out until Q1 2018 before then tracking back towards the Fed’s 2% target.
In markets, it feels like another disappointing report will likely see 10y Treasury yields test below 2% having closed at 2.051% on Friday. After touching at a high of 2.395% back on July 7th yields have fallen 34bps in just over two months and DB’s Dominic Konstam now thinks that the next level is a move lower to 1.8%. Dominic mentioned in his weekly on the weekend that there are three broad themes driving markets currently including geopolitical/politics, the Fed overkill-low inflation equilibrium nexus and an emerging concern for a still small but rising US recession probability associated with liquidity and balance sheet reduction. The ‘R’ word hasn’t been frequently used of late but Dominic notes that standard recession probability monitors of <10% are understating the odds over the next 12 months. He thinks the number should be closer to 20% given that C&I loan growth is slowing in a fashion typically seen during a recession and core inflation ex-shelter is exceptionally low. One to ponder.
Before we get to all that data, with regards to the weekend news, sadly all the focus is on the shocking impact from Hurricane Irma which struck Florida on Sunday morning. It was categorised as a Category 4 storm as it struck the State having already left a trail of destruction through the Caribbean. Following the largest mass evacuation in US history, the extent of the damage will likely not be known for days and the concern now is about the storm surge which has followed, with early reports suggesting the 3 million people are without power and the lowlying Florida Keys area being devastated. There is some suggestion though that the worst-case scenario has not played out after the Storm shifted west and the worst of it avoided the highly populous city of Miami.
That seems to be helping support a more positive tone in markets this morning. As we type, US equity futures are up +0.49% while across Asia the Nikkei is up +1.38%, Kospi is +0.75%, ASX 200 is +0.79% and Hang Seng is +0.95%. The usual safe havens have weakened on the other hand with the Swiss Franc and Yen down half a percent, Treasury yields up +4bps and Gold -0.64%. Meanwhile after fears were for another possible missile test, it seems that the lack of one by North Korea over the weekend is also helping to support sentiment although there has been some focus on a release by the state-run Korean Central News Agency warning the US of retaliation for tougher UN sanctions. Elsewhere in Asia this morning, the Chinese Yuan was down as much as -0.50% after the PBoC announced that it was removing a reserve requirement on banks trading USD forwards for clients. The details revealed cutting the deposit from 20% to 0%. The move follows a strong recent run for the Yuan, suggesting perhaps that the PBoC was getting a bit uncomfortable at the pace of recent appreciation.
Moving on. In terms of markets on Friday, equity markets finished slightly mixed with the S&P (-0.15%), Stoxx 600 (+0.15%) and FTSE (-0.26%). Core bond yields increased modestly in the US and Europe, with 10y US (+1.0bp), Bunds (+0.6bp) and Gilts (+2.2bp). Peripherals underperformed post the rally on Thursday, with Italian yields up +4.3bps and Portugal (+4.8bp) and Spain (+3.8bp) also weaker. In commodities, WTI Oil fell -3.28%, partly reflecting potential drags from Hurricane Irma, while futures on orange juice rose +5.23%. Base metals such as Zinc and Copper fell -2.27% and -2.63% respectively. Elsewhere, the US Dollar index dipped -0.34%.
Away from markets, the final Fed speakers before the blackout period were a bit more hawkish than compatriots from earlier in the week. The NY Fed’s William Dudley spoke again on Friday to repeat his message of higher interest rates over time, but added that it was possible that Hurricane Harvey and Irma could impact the timing of the next move. Elsewhere, the Kansas City’s Esther George (who will vote next year), said “we will need to move interest rates to more normal levels”, and “it is time to continue to move that interest rate higher. It is not an attempt to tighten or slow down the economy”. That said, she also reiterated that “the Committee has committed to a very gradual approach (on rates)” and that “I think that is appropriate”.
Closer to home, Reuters reported on Friday that ECB officials discussed options which could include cutting asset purchases to “€40bn or €20bn a month”. The fact that there was some chatter about a possible reduction to as low as €20bn was seen as a bit hawkish. As a reminder, our economists expect an announcement at the October meeting, extending until mid-2018 at the slower rate of €40bn per month.
Before looking at the week ahead, datawise in the US on Friday the final reading for wholesale inventories was slightly above expectations at +0.6% mom (vs. +0.4% expected). Elsewhere, consumer credit for July rose $18.5bln (vs. $15bln expected), which nudges through-year growth up a tenth to +5.9% yoy. Over in Asia, China’s August inflation readings were above market on Saturday and confirmed the rise in pricing pressure seen in the PMI data earlier in the week. The CPI rose +0.4% mom, lifting annual growth to +1.8% yoy (vs. +1.6% expected), which is the fastest pace since January. This partly reflects a smaller deflationary contribution from the food sector (prices now down just -0.2% yoy). However, non-food inflation picked up three-tenths to +2.3% yoy. Elsewhere, a +0.9% mom rise in August PPI saw through-year inflation measured at the producer level rise to +6.3% yoy (vs. +5.7% expected).
Across Europe, there were the July industrial production prints for UK, France and Spain. In the UK, the IP was in line at +0.2% mom. However, July manufacturing production was above market at +0.5% mom (vs. +0.3% expected), lifting annual growth to +1.9% yoy (vs. +1.7% expected), which is the strongest reading in four months. Over in France, IP was broadly in line at +0.5% mom and +3.7% yoy, but manufacturing production was lower than expected at +0.3% mom (vs. +0.6% expected) and +3.9% yoy (vs. 4.2% expected). Spain’s IP fell a disappointing -0.3% mom but is still +1.9% yoy. Elsewhere, the UK’s July trade deficit of £2.9bn was little changed from the previous month and slightly smaller than the market had expected (vs. £3.25bn expected).
3. ASIAN AFFAIRS
i)Late SUNDAY night/MONDAY morning: Shanghai closed UP 11.18 POINTS OR 0.33% / /Hang Sang CLOSED UP 286.66 POINTS OR 1.04%/ The Nikkei closed UP 286.66 POINTS OR 1.04%/Australia’s all ordinaires CLOSED UP 0.62%/Chinese yuan (ONSHORE) closed DOWN at 6.5260/Oil DOWN to 47.82 dollars per barrel for WTI and 53.62 for Brent. Stocks in Europe OPENED GREEN EXCEPT LONDON. Offshore yuan trades 6.5315 yuan to the dollar vs 6.5260 for onshore yuan. NOW THE OFFSHORE MOVED MUCH WEAKER TO THE ONSHORE YUAN/ ONSHORE YUAN MUCH WEAKER (TO THE DOLLAR) AND THE OFFSHORE YUAN IS A LOT WEAKER TO THE DOLLAR AND THIS IS COUPLED WITH THE STRONGER DOLLAR. CHINA IS NOT VERY HAPPY TODAY
3a)THAILAND/SOUTH KOREA/NORTH KOREA
The USA continues to get weaker by the day: they now are proposing a watered down North Korean sanctions in order to appease China and Russia
US To Propose Watered Down North Korea Sanctions To Appease China And Russia
In the latest indication that the US is desperate to reach a diplomatic compromise over North Korea, even if it means appeasing Beijing and Moscow, Reuters reports that while the UN Security Council is set to vote on Monday afternoon on a U.S.-drafted resolution to impose new sanctions on North Korea over latest nuclear test, as discussed on Friday, the new draft no longer proposes blacklisting North Korean leader Kim Jong Un, while also dropping a proposed oil embargo – something Beijing had vocally opposed – and instead intends to impose a ban on condensates and natural gas liquids, a cap of 2m barrels a year on refined petroleum products, and a cap on crude oil exports to North Korea at current levels.
In short: the US has materially weakened its proposed North Korea sanctions, “in an attempt to appease” Pyongyang’s allies Beijing and Moscow following negotiations over the past few days. In order to pass, a resolution needs nine of the 15 Security Council members to vote in favor and no vetoes by any of the five permanent members — the United States, Britain, France, Russia and China.
Some more details:
- the draft resolution no longer proposes an asset freeze on the military-controlled national airline Air Koryo. The new draft resolution also drops a bid to remove an exception for trans shipments of Russian coal via the North Korean port of Rajin. In 2013 Russia reopened a railway link with North Korea, from the Russian eastern border town of Khasan to Rajin, to export coal and import goods from South Korea and elsewhere.
- the new language drops a bid to remove an exception for trans-shipments of Russian coal via the North Korean port of Rajin, and it no longer proposes an asset freeze on the military-controlled national airline Air Koryo
- while the original draft resolution would have authorized states to use all necessary measures to intercept and inspect on the high seas vessels that have been blacklisted by the council, the final draft text calls upon states to inspect vessels on the high seas with the consent of the flag state, if there’s information that provides reasonable grounds to believe the ship is carrying prohibited cargo.
- the final draft text to be voted on Monday by the council would require the employment of North Korean workers abroad to be authorized by a Security Council committee. However, this rule would not apply to “written contracts finalized prior to the adoption of this resolution” provided that states notify the committee by Dec. 15 of the number of North Koreans subject to these contracts and the anticipated date of termination of these contracts. some diplomats estimate that between 60,000 and 100,000 North Koreans work abroad. A U.N. human rights investigator said in 2015 that North Korea was forcing more than 50,000 people to work abroad, mainly in Russia and China, earning between $1.2 billion and $2.3 billion a year. The wages of workers sent abroad provide foreign currency for the Pyongyang government.
- There is new political language in the final draft urging “further work to reduce tensions so as to advance the prospects for a comprehensive settlement” and underscoring “the imperative of achieving the goal of complete, verifiable and irreversible denuclearization of the Korean Peninsula in a peaceful manner.”
Ahead of the report of watered down sanctions, North Korea had warned that “in case the U.S. eventually does rig up the illegal and unlawful ‘resolution’ on harsher sanctions, the DPRK shall make absolutely sure that the U.S. pays due price,” the spokesman said in a statement carried by the official KCNA news agency. “The world will witness how the DPRK tames the U.S. gangsters by taking a series of actions tougher than they have ever envisaged,” the unnamed spokesman said.
South Korean President Moon Jae-in said last week during a visit to Russia that shutting off North Korea’s supply of oil was inevitable this time to bring Pyongyang to talks and he called for Russian President Vladimir Putin’s support. Putin has remained firm however that such sanctions on oil would have negative humanitarian effects on North Koreans.
Meanwhile, China, the North’s lone major ally, emerged as the most critical in deciding if oil sanctions go ahead because it controls an oil pipeline that industry sources say provides about 520,000 tonnes of crude a year to the North. Chinese Foreign Ministry spokesman Geng Shuang stressed the need for consensus and maintaining peace.
“I have said before that China agrees that the U.N. Security Council should make a further response and necessary actions with respect to North Korea’s sixth nuclear test,” he told reporters.
“We hope Security Council members on the basis of sufficient consultations reach consensus and project a united voice. The response and actions the Security Council makes should be conducive to the denuclearization of the peninsula, conducive to safeguarding the peace and stability of the peninsula, and conducive to push forward the use of peaceful and political means to resolve the peninsula nuclear issue.”
Since 2006, the Security Council has unanimously adopted eight resolutions ratcheting up sanctions on North Korea over its ballistic missile and nuclear programs. The Security Council last month imposed new sanctions over North Korea’s two long-range missile launches in July. The Aug. 5 resolution aimed to slash by a third Pyongyang’s $3 billion annual export revenue by banning coal, iron, lead and seafood.
According to Reuters, the latest draft of the resolution reflects the challenge in imposing tough sanctions on the North by curbing its energy supply and singling out its leader for a financial and travel ban, a symbolic measure at best but one that is certain to rile Pyongyang.
It will also be a disappointment to South Korea, which has sought tough new sanctions that would be harder for Pyongyang to ignore, as it said dialogue remained on the table.
“We have been in consultations that oil has to be part of the final sanctions,” South Korean Foreign Minister Kang Kyung-wha told a news conference, saying Pyongyang was on a “reckless path”.
“I do believe that whatever makes it into the final text and is adopted by consensus hopefully will have significant consequences on the economic pressure against North Korea.”
That no longer appears to be the case, what however has clearly emerged is that when it comes to the political fate of North Korea, even the US now admits that China and Russia are calling the shots.
Crackdown Begins: Chinese Banks Are Suspending North Korean Transactions
In what may be a major breakthrough in the diplomatic and political stalemate over North Korea if confirmed officially, Japan’s Kyodo newspaper reported overnight that Chinese state banks have started suspending transactions through accounts held by North Koreans, making it nearly impossible to do business between the two countries. Furthermore, Kyodo News has confirmed that branch offices of at least three major state banks – the Bank of China, China Construction Bank and Agricultural Bank of China – in the northeastern border city of Yanji have also banned North Koreans from opening accounts.
The Chinese banks have yet to freeze the accounts, meaning that North Koreans can still withdraw money from them – similar to bitcoins held in Chinese exchanges – but they are now prevented from making deposits or remittances, according to the sources quoted by Kyodo.
“This is being influenced by international sanctions against North Korea,” an employee of one bank said.
The bank restrictions, which the sources said from April were also starting to be put in force in Liaoning Province – the main region of trade between China and North Korea – suggest that China may have become more serious about curbing its nuclear ambitions, something we hinted at last week in “It Looks Like North Korea Is No Longer Playing To The Chinese Script“. The restrictions also appear to be intended to help major Chinese banks avoid being hit by sanctions imposed by the United States and other countries.
In late June, the administration of U.S. President Donald Trump labeled a regional bank based in the northeastern border city of Dandong “a foreign bank of primary money laundering concern,” and unilaterally sanctioned another Chinese firm and two Chinese individuals for links to Pyongyang’s arms development; China’s reaction was understandably angry, which is why it is even more surprising that Beijing has volunteered to proceed with such a unilateral crackdown on its own.
On Monday, the United States will seek to impose the toughest U.N. sanctions possible on North Korea in the wake of its sixth nuclear test a week ago and calling on China to do more to rein in its defiant neighbor, although according to overnight reports by Reuters, the sanction proposed by the US will be watered down to exclude oil trade with China and a freeze of Kim Jong Un’s assets (more details here).
China, which accounts for about 90 percent of North Korea’s official trade and is its major oil supplier, has long opposed taking excessively strict measures against the country, out of fear of triggering a refugee crisis on the border. China’s official data show that its exports to North Korea of petroleum products, including gasoline and light oil but excluding crude oil, fell 75 percent in three months through July from a year earlier to about 19,700 tons.
One source said the main reason for the decline was that North Koreans were having difficulty paying for petroleum product imports because of the banking restrictions. As reported at the time, In North Korea gasoline prices shot up in April and remain high.
North Korean officials told Kyodo News in July that economic activity was not in a state of confusion and prices were not rising continuously. But they said the government had encouraged North Koreans to use public transportation and bicycles to conserve fuel.
If China is now aggressively pushing to cut off North Korea, it will accelerate the denouement: either Kim will crack, and submit to US and Chinese “parental supervision”, or having nothing left to lose, he will proceed with more launches and nuclear tests in hopes that the final provocation drags him, and his country down in flames.
b) REPORT ON JAPAN
c) REPORT ON CHINA
Kyle Bass the last big short on the Chinese yuan states that China’s credit system is reaching a boiling point. The total debt for China now surpasses 40 trillion dollars.
Kyle Bass: “China’s Credit System Is Reaching A Boiling Point”
Fresh on the heels of the biggest-ever two-week drop in onshore dollar-yuan, noted China bear Kyle Bass gave an interview where he addressed one of the most exasperating aspects of the short-selling business, and an issue that he is no doubt grappling with at this very moment: What to do when confidence in your investing thesis is undermined by uncooperative markets.
It’s been about three years since Bass first announced a massive bet against the Chinese yuan, a position that he has been forced to justify to his increasingly nervous investors, as the Chinese currency’s more than 6% surge since May – and its nearly 8% climb against the dollar so far this year – has more than reversed the currency’s largest one-year decline since 1994.
To be sure, he’s still willing to explain how ballooning assets in shady Chinese wealth management products, which have swollen to more than $40 trillion in aggregate, are destined to collapse in a cascade of bad debt, taking the country’s banking system down in the process.
He discussed his views on China – while also answering a few questions about events in his life that helped shape his investing outlook during an interview on “Adventures in Finance.”
After being asked about events in his life that inspired him, Bass shared a story about his upbringing in working class Texas, where he said he started working at the age of 13 and eventually paid his own way through school.
His family didn’t have money for little extras like eating out. This inspired Bass to be very diligent about saving.
“We never had enough capital to do the things other people were doing like go out to dinner a couple of nights a week…I’m not saying material success or anything but enough to live the life you want to live.
I started working when I was young and I kept working nonstop.
One day I was literally trying to scrape change together to eat and I said this will never happen to me another day in my life. That was a moment where I felt like I had gotten myself into a situation where I was spending more than I could earn and that was partly because I was pushing through an education and that inspired me.
Therefore, I always said that from the day I graduated college, I would save 50 cents of every dollar I ever earned. My parents we had a great family but they had their shortcomings and those shortcomings really drove me to save.”
Bass said he was lucky to be exposed to “some of the world’s best short sellers” early in his career, adding that the first stock he ever shorted went straight to zero…an experience that he ironically described as one of the worst things to happen to him.
“My second answer to your question is when I got into investing…I was covering event-driven accounts on the sell side for special situations and I was working with some of the world’s best short sellers and early on, one of the very first positions I ever took was I put a short position on a company – remember when East and West Germany came together and a lot of the East German companies were being subsidized, and yet they moved their way into the western capital markets and they went public and there was this shipping company…and if you looked through the numbers the executives were taking the revenue and subsidies and buying yachts and planes and cars…basically embezzling.
“The worst thing that happened to me was the first company I ever shorted it went from $100 to $80 to $60 to $40 to $20 – it just fell apart, which by the way, is the worst thing that can happen when you’re young and you’ve done a lot of work and you say to yourself ‘this is just easy.’”
I was wanting to conquer the world and conquer Wall Street and it was this beautiful complex jungle that you could navigate through.”
Brimming with confidence from his first big payday, Bass found another company that he believed was certain to fail…even confronting an executive who had abruptly left about possible malfeasance and illegality.
But unfortunately for Bass, this time, markets were less cooperative, and he lost everything.
“So, then the next position I took was we had worked with a bunch of accountants and combed through many balance sheets and income statements that we could and we found this company…Their income statement didn’t add up and their chief operating officer had just resigned for personal reasons and I made it my mission to track him down. I finally tacked him down and I said I just want to ask you a few questions about your income statement and why you resigned…he said he left that company because the CEO asked him to zero out some cost of goods sold line items so it could stay within its debt covenants and I wasn’t willing to break that ethical and legal barrier. And I said ‘oh my goodness we’ve got them.’
I said have you spoken with the authorities. He said he hadn’t yet. And I said he needed to call the SEC right away.
We live in a world of imperfect information, but for those people who want to dig and do a lot of the work and get to a place where you end up getting as much information as you can and acting on it.”
Thinking it the firm’s stock was headed for an imminent collapse, Bass put all his money – hundreds of thousands of dollars – into a short position. But then the unexpected happened: an influential letter writer dubbed the stock a buy, and it soared. As Bass recalls, he got margin called “all the way up,” leaving him bankrupt.
“If you remember, during the tech craze there were all these momentum buyers…we had fully positioned ourselves and a letter writer named Carlton Lutz who wrote the technology markets letter of the day dubbed the company the son of Intel and the stock went promptly from about $16 a share to $40. I got margin called out all the way up until I was completely wiped out.
I was apoplectic I thought the world was going mad. Some of my well-heeled clients actually shorted more and the I remember that like it was yesterday and that was the greatest thing that ever happened to me, losing all of my money on something where I knew I was right.
From an investing perspective getting completely wiped out when it was so near and dear to me and thinking that it was the end of the world and that I was an abject failure and that the investing thing wasn’t for me…and looking back at it, it couldn’t have happened at a better time in my life. You want that to happen as early in your career as you can. You want it to be devastating…to teach you to bring humility to investing. You should never set yourself up for the knockout punch. You should never put 100% of your assets in anything.”
In another example of how difficult it can be to correctly time a short play, Bass recounted the story of Avanti, a software company whose executives eventually went to prison for IP theft. From the beginning of the process to the end, it took seven years for the stock to drop.
“There was a company called Avanti that was designed by a couple of Cadence Design employees. The CEO was violently competitive so he wanted to launch a company to compete with them. So, what did they do? They stole the company’s software downloaded it onto their hard drives and left.
They put typos in the code so if anyone stole the code, it would be obvious…authorities had them cold. But it took the stock seven years to get obliterated. Those are big lessons because some of those lessons are hard to learn.”
Which finally brings us to China. Bass says he’s spent the last three years intently studying China’s credit system. But even though he’s convinced it’s one of the largest bubbles in financial history, calling the timing of the collapse has proven incredibly difficult.
“I’ve dedicated the last three years of my life to understanding China’s credit system. I would say we understand it as well as anyone in the world does. And it’s the biggest bubble we have ever seen in the history of financial markets. $40 trillion of assets in a system with $2 trillion in equity.”
We wrote our magnum opus on this in 2016 and here we are in 2017 and it hasn’t happened.”
Aside from China’s credit bubble, the simmering conflict in North Korea and tensions between the US and China related to the latter’s insistence on building in the Spratly Islands also threaten China’s economy, as well as global risk assets.
“We’re now in a bubble of epic proportions for Chinese credit…everything seems to be bubbling to the top and reaching a boiling point almost concurrently.”
To be sure, there are a lot of powerful interests around the world that would suffer if China’s economy collapsed. But despite this, because he believes in the position, Bass is going to stay on his side of the trade – even as other longtime China bears like Mark Hart announced this week that he was abandoning a seven-year long bet on a massive yuan devaluation.
“People so want for everything to be okay. Nobody in their right mind wants us to be right because if I’m right were going to see a global growth slowdown you think about the concentric circles of how it affects each participant. The economy may really slow down and we might have additional problems…so I’m going to keep investing the way I am and hope it all works out.”
5. RUSSIA AND MIDDLE EASTERN AFFAIRS
Israeli Jets Rattle Lebanon And Raise Tensions With Syria
In what Lebanese media reported as a deeply provocative act, an Israeli jet did a high speed and low altitude flyover of the city of Saida in the country’s South on Sunday. Lebanese citizens and security sources also reported sonic booms which broke windows and shook buildings. Lebanese social media mentioned possible injuries due to falling glass and regional outlets showed images of damaged buildings and momentary panic in the area under the fly-by. The region has been the site of major military incursions by Israel over the past years, especially during the last major Israeli bombing of the country in 2006.
An Associated Press reporter witnessed multiple Israeli jets while locals captured photographs of planes at higher altitudes just prior to the low fly-by. The AP’s account is as follows:
An Associated Press reporter in Sidon heard two sonic booms and saw four jets flying overhead at various altitudes on Sunday. Lebanon’s state-run National News Agency reported one sonic boom caused by a low-flying Israeli jet.
…Lebanon’s Foreign Ministry said Saturday it was filing a complaint against Israel at the U.N. Security Council for violating its national airspace to strike targets inside Syria.
Video footage purporting to show the flyover circulated widely, and was even picked up by some international media outlets, but was later proven to be fake.
Last week Israel attacked a Syrian military base just across Lebanon’s border, which was carried out by jets flying over Lebanese airspace. As we previously reported the flagrant act of aggression was likely designed to provoke a response as Israeli leadership is concerned that Assad has not only survived but appears to be winning the war in Syria. Lebanon barely has an air force and further lacks adequate or high tech missile defense systems.
According to regional media, “Lebanese security officials told a Hezbollah-affiliated radio station the Israeli sorties were part of a large-scale training exercise the IDF is currently holding in northern Israel meant to prepare for a future war with the Shiite terror organization.” Middle East historian As’ad AbuKhalil noted after the incident that the Lebanese government recorded over 7000 Israeli violations of Lebanese Airspace in the first decade of the 2000’s alone.
It is likely that Sunday’s stunt was also meant to send a direct message to Syria: Israel has this summer consistently declared a “red line” warning of repercussions should Iranian and Hezbollah troops not leave Syria.
It seems that Israel’s mortal enemy, Saudi Arabia and its Crown Prince paid a “secret” visit to Israel. For centuries, Israel’s enemy has been Iran. Saudi Arabia, a Sunni nation is also extremely worried about the Shia crescent being formed whereby Iran flexes its muscle in both Lebanon and Syria. The fact that Asad is still in power is the reason for the secret visit and the bombing a few days ago in Syria is no coincidence. Expect further trouble now in the Shia dominated middle east.
(courtesy zero hedge)
Breaking News of Saudi Crown Prince’s “Secret” Visit To Israel Brings Embassy Scramble
Clearly the war in Syria and the international push for regime change against Assad has created strange alliances in the Middle East over the past few years. Among the strangest bedfellows are the Israelis and Saudis. It’s no secret that common cause in Syria of late has led the historic bitter enemies down a pragmatic path of unspoken cooperation as both seem to have placed the break up of the so-called “Shia crescent” as their primary policy goal in the region. But that’s perhaps why few pundits seemed overly shocked when Israeli media late last week began reporting that a Saudi prince made a secret visit to Israel, in spite of the fact that the kingdom does not recognize the Jewish state, and the two sides do not have diplomatic relations.
Last Wednesday (9/6) Israel’s state funded Kol Yisrael radio service made cryptic reference to the “secret” yet historic visit while withholding names and specifics. “An emir of the Saudi royal court visited the country secretly in recent days and discussed with senior Israeli officials the idea of advancing regional peace,” the station reported. It added further that, “Both the Prime Minister’s Office and the Foreign Ministry refused to comment on the issue.”
Left: Israeli Prime Minister Netanyahu, Right: Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman
The visit is said to have occurred the same week Israeli Prime Minister Benjamin Netanyahu confirmed “unprecedented” relations with the Arab world. Netanyahu made the comments before members of the foreign ministry and said, “Things that are happening today between Israel and the Arab world are unprecedented. Cooperation on a wide range of issues are occurring behind the scenes, more than at any time in Israel’s history.”
But on Sunday reports began to emerge that the unidentified Saudi royal in question is no less than Crown Prince Mohammad bin Salman, which would indeed be shocking news:
On Sunday, the IUVM Online Arabic news outlet identified the Saudi official who reportedly visited Israel as Crown Prince Mohammad bin Salman, the Defense Minister of Saudi Arabia and heir apparent to the throne.
The IUVM Online report cited a United Arab Emirates intelligence officer, who claimed that bin Salman was the member of the Saudi royal family who met with Israeli officials in last week’s secret meeting.
Western journalists also began on Sunday to report the dignitary as being Crown Prince Salman – something which could have huge geopolitical consequences for the region given that such a high level meeting would possibly take place at all.
The reports were immediately disputed and subject to disbelief and controversy. As bin Salman’s name continued to circulate Sunday, the Saudi Embassy in Washington D.C. attempted to shut down news of the visit. A senior Saudi diplomatic officialtook to Twitter with a simple “Nope” in reference to the allegations.
Of course, if true such a dramatic move between the countries would signify a monumental shift in relations and outlook. On Sunday Israeli media was also broadly advancing bin Salman’s name as the Saudi emir in question.
Multiple Israeli outlets on Sunday identified Deputy Crown Prince Mohammed bin Salman as having met with senior Israeli officials early last week.
Though initial reports in Israeli media speculated that it could mean positive momentum on the Palestinian issue, it is unlikely that the future king of Saudi Arabia himself would suddenly pay a personal visit to Israel over an issue which has stalemated regional diplomacy for decades. It also doesn’t appear that Israeli policy on settlements has undergone any significant on the ground change. If true, public knowledge of the visit will certainly result in embarrassment for both countries, especially on the Saudi domestic front.
The initial Israeli public radio report referenced the visit of “an emir of the Saudi royal court” on Wednesday while saying the trip took place “in recent days”. As both Israel and Saudi Arabia have been so heavily invested in pursuing regime change in Syria, and at a time when other world powers seem to be backing off, it is inconceivable that Syria wasn’t high on the agenda during the unprecedented visit.
The timing of the meeting also seems more than just coincidental in relation to last week’s Israeli airstrike on a Syrian military facility, which took place in the middle of the night Wednesday (or more precisely Thursday morning at 3:00 am). As we reported at the time, Israel’s brazen act of aggression was designed to provoke a response from Syria. As the Syrian government stands poised to be victorious in the more than 6-year long conflict while rapidly regaining more and more territory, Israel seems desperate to keep the war going and is still making last ditch efforts to draw external powers deeper into Syria, though framing its aggression as “humanitarian”.
Could the two powers have been engaged in face to face talks over renewed efforts at ramping up the stalled war for regime change in Syria? After all, Israel’s declarations of its willingness to do anything to prevent an enduring Iranian presence in Syria have reached a new erratic pitch of late. During Netanyahu’s recent contentious summit with Vladimir Putin in Sochi, the Israeli leader reportedly warned Putin that Israel would not tolerate an enlarged and stronger Shia sphere of influence along Israel’s border. Yet the current trajectory of the war in Syria ensures just that, especially after the US-Russia brokered Astana agreement seemed to give tacit approval of Iranian troop presence in parts of Syria, while placing Russia in the driver’s seat. It was further revealed that 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 Astana de-escalation deal.
As for Saudi Arabia, while its deep embroilment in inter-GCC diplomatic war with Qatar seems to have tempered what used to be routine calls for Assad’s departure, it must be remembered that the current unraveling of the GCC is ultimately benefiting Iran. It is entirely possible that the Iran issue alone might drive the kingdom into direct engagement with Israel no matter the risks and political embarrassment (for example, news of the visit hands Iran a propaganda victory and likely more influence on the so-called Arab street, even perhaps within Saudi’s own domestic population).
Saudi Arabia could also be worried about future blowback from its well-documented actions in Syria. A WikiLeaks cable released in 2015 as part of the “Saudi Leaks” trove of internal leaked Saudi diplomatic memos speaks to just this scenario. Though the memo’s exact date is unknown, it was drafted sometime in early 2012 based on internal references in the Arabic text. It spells out the kingdom’s internal long term rationale on Syria: that should the Syrian regime “be able to pass through its current crisis in any shape or form” then increased “danger for the Kingdom” means Saudi Arabia must “seek by all means available and all possible ways to overthrow the current regime in Syria.” A full translation of the key passage reads as follows:
“In what pertains to the Syrian crisis, the Kingdom is resolute in its position and there is no longer any room to back down. The fact must be stressed that in the case where the Syrian regime is able to pass through its current crisis in any shape or form, the primary goal that it will pursue is taking revenge on the countries that stood against it, with the Kingdom and some of the countries of the Gulf coming at the top of the list. If we take into account the extent of this regime’s brutality and viciousness and its lack of hesitancy to resort to any means to realize its aims, then the situation will reach a high degree of danger for the Kingdom, which must seek by all means available and all possible ways to overthrow the current regime in Syria.“
Newly Translated WikiLeaks Saudi Cable: Overthrow Syria, but Play Nice with Russia http://levantreport.com/2016/02/25/newly-translated-wikileaks-saudi-cable-overthrow-the-syrian-regime-but-play-nice-with-russia/ …
Whether or not it was in fact Crown Prince Salman that himself went to Israel, the timing of the high level delegation’s visit is simply impossible to ignore. Simply put, Syria was without a doubt discussed… and shortly thereafter Syria was bombed. Such direct and closer relations among perennial enemies could be a sign of more escalation and desperate measures to come in the region. This is certainly not – as Israeli media reported – a sign of regional peace.
6 .GLOBAL ISSUES
7. OIL ISSUES
8. EMERGING MARKET
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings MONDAY morning 7:00 am
Euro/USA 1.2012 DOWN .0019/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/HOUSTON FLOODING/EUROPE BOURSES ALL IN THE GREEN
USA/JAPAN YEN 108.53 UP 0.741(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 1.3217 UP .0034 (Brexit March 29/ 2017/ARTICLE 50 SIGNED
THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS
USA/CAN 1.2100 up .0010 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA)
Early THIS MONDAY morning in Europe, the Euro FELL by 19 basis points, trading now ABOVE the important 1.08 level FALLING to 1.2012; / Last night the Shanghai composite CLOSED UP 11.18 POINTS OR 0.33% / Hang Sang CLOSED UP 286.66 POINTS OR 1.04% /AUSTRALIA CLOSED UP 0.62% / EUROPEAN BOURSES OPENED ALL IN THE GREEN
The NIKKEI: this MONDAY morning CLOSED UP 270.95 POINTS OR 1.41%
Trading from Europe and Asia:
1. Europe stocks OPENED IN THE GREEN
2/ CHINESE BOURSES / : Hang Sang CLOSED UP 286.66 POINTS OR 1.04% / SHANGHAI CLOSED UP 11.18 POINTS OR 0.33% /Australia BOURSE CLOSED UP 0.62% /Nikkei (Japan)CLOSED UP 270.95 POINTS OR 1.41% / INDIA’S SENSEX IN THE GREEN
Gold very early morning trading: 1336.00
Early MONDAY morning USA 10 year bond yield: 2.094% !!! UP 4 IN POINTS from FRIDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%.
The 30 yr bond yield 2.708, UP 3 IN BASIS POINTS from FRIDAY night.
USA dollar index early MONDAY morning: 91.49 UP 14 CENT(S) from FRIDAY’s close. AND BREAKS RESISTANCE OF 92.00
This ends early morning numbers MONDAY MORNING
And now your closing MONDAY NUMBERS
Portuguese 10 year bond yield: 2.818% UP 2 in basis point(s) yield from FRIDAY
JAPANESE BOND YIELD: +.010% UP 3/5 in basis point yield from FRIDAY/JAPAN losing control of its yield curve/NOW NEGATIVE
SPANISH 10 YR BOND YIELD: 1.566% UP 2 IN basis point yield from FRIDAY
ITALIAN 10 YR BOND YIELD: 1.968 UP 2 POINTS in basis point yield from FRIDAY
the Italian 10 yr bond yield is trading 50 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.336% UP 2 IN BASIS POINTS ON THE DAY
IMPORTANT CURRENCY CLOSES FOR MONDAY
Closing currency crosses for MONDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM
Euro/USA 1.1962 DOWN .0068 (Euro DOWN 68 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 109.08 UP 1.3000(Yen DOWN 130 basis points/
Great Britain/USA 1.31745 DOWN 0.0007( POUND DOWN 7 BASIS POINTS)
USA/Canada 1.2136 UP .0044 (Canadian dollar DOWN 44 basis points AS OIL ROSE TO $48.05
This afternoon, the Euro was DOWN by 68 basis points to trade at 1.1962
The Yen FELL to 109.08 for a LOSS of 130 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016
The POUND FELL BY 7 basis points, trading at 1.31745/
The Canadian dollar FELL by 44 basis points to 1.2136, WITH WTI OIL RISING TO : $48.05
Your closing 10 yr USA bond yield UP 7 IN basis points from FRIDAY at 2.121% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 2.741 UP 7 in basis points on the day /
Your closing USA dollar index, 91.86 UP 51 CENT(S) ON THE DAY/1.00 PM/BREAKS RESISTANCE OF 92.00
Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for MONDAY: 1:00 PM EST
London: CLOSED UP 35.99 POINTS OR 0.49%
German Dax :CLOSED UP 171.26 POINTS OR 1.39%
Paris Cac CLOSED UP 63.22 POINTS OR 1.24%
Spain IBEX CLOSED UP 193.00 POINTS OR 1.91%
Italian MIB: CLOSED UP 357.45 POINTS OR 1.69%
The Dow closed UP 13.01 OR 0.06%
NASDAQ WAS closed DOWN 37.68 POINTS OR 0.59% 4.00 PM EST
WTI Oil price; 48.05 1:00 pm;
Brent Oil: 53.70 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 57.18 DOWN 18/100 ROUBLES/DOLLAR (ROUBLE HIGHER BY 18 BASIS PTS)
TODAY THE GERMAN YIELD RISES TO +0.336% FOR THE 10 YR BOND 4.PM EST EST
This ends the stock indices, oil price, currency crosses and interest rate closes for today
Closing Price for Oil, 5 pm/and 10 year USA interest rate:
WTI CRUDE OIL PRICE 5:00 PM:$48.10
USA 10 YR BOND YIELD: 2.131% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 2.744%
EURO/USA DOLLAR CROSS: 1.1952 DOWN .0079
USA/JAPANESE YEN:109.38 UP 01.587
USA DOLLAR INDEX: 91.95 UP 59 cent(s)/
The British pound at 5 pm: Great Britain Pound/USA: 1.3166 : DOWN 17 POINTS FROM LAST FRIDAY NIGHT
Canadian dollar: 1.211 down 18 BASIS pts
German 10 yr bond yield at 5 pm: +0.336%
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM FOR THE DAY
“Could’ve Been Worse”-Weekend Sparks Buying-Panic Sending Stocks To Record Highs
The last month has seen “Fire & Fury” threats, Gary Cohn resignation concerns, North Korean missiles over Japan, Hurricane Harvey, North Korean Hydrogen Bomb tests, and now Hurricane Irma… and stocks are higher…
All the worries are gone for stocks…
But bullion and bonds remain the biggest gainers since Trump’s “Fire & Fury” threat… (note that the S&P just scrambled green)
As stocks soared today – because no missiles were fired and, hey, only 6 million people in Florida are without power…
Huge opening gap then stocks pretty much went nowhere… almost like some all-knowing hand wanted to prove that everything was awesome before the market participants had a chance to decide... “Standard 1% Rally on everything”
S&P biggest rally since April, closes at a record high.
VIX was dumped today also to make sure stocks rallied amid total chaos. Notably, implied vol is at its lowest premium to realized vol since October….
Banks were the biggest gainers…
All thanks to a big huge short-squeeze at the open…
Insurers give a perfect example of the relief as they soared above Harvey highs…
FANG Stocks best day since July 17th (Netflix earnings rip)…
Treasury yields rose on the day, but still remain lower post-Korea’s H-Bomb test…
With 10Y stalling at pre-payrolls levels…
The Dollar Index to Thursday’s ISM levels…
Helped by a collapse in JPY… This is the biggest spike in USDJPy in 8 months!
Just like after Harvey’s brief tumble (and remember that occurred as Korea flew missiles over Japan), Kuroda came to the rescue…
And as USDJPY surged, so Gold dumped…
WTI bounced on chatter about renewed extension of OPEC cuts but while it rebounded, RBOB ended lower on demand concerns…
Finally, because the world did not end, the odds of a December rate hike soared today…
Miami under water:
“There Is No Seawall Whatsoever”: Downtown Miami Flooded; Two Cranes Collapse
Update: Another crane has collapsed on NE 30th St and is dangling from an unfinished high rise tower. As a reminder, while winds in Miami are still relatively tame, these cranes were meant to be able to withstand Cat 4 winds. So far 2 of roughly 25 have failed to do so.
* * *
The National Weather Service reported that a crane has collapsed in Miami as strong wind from Hurricane Irma blows in. The weather service’s Miami office said in a Tweet that one of its employees witnessed the crane boom and counterweight collapse in downtown Miami. The employee captured video of the collapse.
The crane fell onto a high-rise building that’s under construction. It’s in a bayfront area filled with hotels and high-rise condo and office buildings, near AmericanAirlines Arena. According to AP, Miami-Dade County Director of Communications Mike Hernandez said emergency personnel couldn’t immediately respond to the scene because of high winds. Authorities urged people to avoid the area after the Sunday morning collapse. It wasn’t clear if there were any injuries. Miami City Manager Daniel Alfonso said the approximately two-dozen other cranes in the city are still upright and built to withstand significant wind gusts.
The cranes were thought to be able to withstand the direct hit of a Category 4 hurricane, however, Irma’s winds in Miami are just at the Category 1 level. About 25 cranes remained up before the storm approached South Florida.
It wasn’t immediately clear if the collapse caused damage or injuries.
The boom of the crane snapped off and is currently still connected to the tower, but is hanging off the side of the building. “All we care about is the safety of everyone right now,” the building’s developer, PMG, said in a statement. “We will have a crew over to secure the crane as soon as the weather permits.”
As reported previously, the cranes have been a concern even though construction sites across Irma’s potential path in Florida were locked down to remove or secure building materials, tools and debris that could be flung by Irma’s winds.
https://www.instagram.com/p/BY3QSm-glqW/embed/?cr=1&wp=625#%7B%22ci%22%3A0%2C%22os%22%3A2709%7DBut the horizontal arms of the tall tower cranes remained loose despite the potential danger of collapse. According to city officials, it would have taken about two weeks to move the cranes and there wasn’t enough time.
Meanwhile, as of noon ET, Miami’s financial center appears to now be flooding as ocean water enters city streets as part of the storm’s surge.
As one Instragram user, filming from downtown Miami comments, “there is no Seawall whatsoever” along Brickell Avenue.
https://www.instagram.com/p/BY3W7_6FTF_/embed/?cr=1&wp=625#%7B%22ci%22%3A1%2C%22os%22%3A2720%7DAccording to Reuters, several blocks of flooding crept up on and around Brickell Avenue in Miami, which cuts through the heart of the city’s financial district and newly-built high rises. “There’s water everywhere,” said Chaim Lipskar, rabbi at the Rok Family Shul that is sheltering a few families through the hurricane.
IRMA’s DEVASTATION: HALF OF ALL FLORIDA IS WITHOUT POWER. SEVENTY FIVE PERCENT OF ALL OF FLORIDA’SLIGHT AND POWER UTILITY IS WITHOUT ELECTRICITY AND IT WILL TAKE WEEKS TO RESTORE AND WILL BE COSTLY.
ESTIMATE OF DAMAGE AROUND $50 BILLION
(COURTESY ZERO HEDGE)
Half Of Florida Without Power As State Braces For “Lengthiest Restoration In US History”
After hammering the Florida Keys, Miami, Naples and a large swath of the southernmost part of the state – leaving some 5 million Florida homes and businesses without electricity – the still-formidable Hurricane Irma weakened to a category one storm as it traveled over the Tampa Bay area.
According to NBC, no deaths were confirmed Sunday after the storm twice made landfall in Florida, first in Cudjoe Key, then again on Marco Island just southwest of the city of Naples. Florida’s largest utility – Florida Power & Light Co. – reported that the storm had knocked out power to nearly three-quarters of its customers. All told, FP&L estimates that some 10 million Floridians will be effected by the power outages – a full 50% of the state’s population.
In fact, officials from the utility say the damage in the southwestern part of the state is so extensive, it could take weeks to fully repair, after Irma shredded powerlines, flooded streets and destroyed homes, according to ABC. One officials said it could be the costliest and most extensive infrastructure-rebuilding effort in US history.
“What we think we’ll see on the west coast is a wholesale rebuild of our electric grid,” Robert Gould, Florida Power & Light’s vice president and chief communications officer, told ABC News. “That will take weeks.”
“This thing is a monster,” he added.
FPL had requisitioned 17,000 restoration workers from about 30 states in preparation for the storm. But even with an army of workers, the recovery effort will be time-consuming and incredibly costly.
“Gould estimated that FPL positioned “17,000 restoration workers from about 30 states” in anticipation of repair efforts before the storm arrived, but said that flooding from storm surges and traffic congestion as residents return home this week would delay the project.
“This is going to be a very, very lengthy restoration, arguably the most lengthy restoration and most complex in U.S. history,” he said, asking that customers be patient.
On the east coast of the state, which avoided a direct hit from the eye of the storm, Gould expects repairs to last “probably a week or more.”
Meanwhile, as of 5 am ET Monday, Irma had sustained winds of 75 mph as it continued to move inland. It was recently traveling about 60 mph north of Tampa, with what’s left of the storm ultimately headed for Georgia and Alabama. In an incredibly fortunate development, Tampa appears to have been largely spared by the storm. Some trees, power lines and signs were down but there was no widespread damage and no signs of flooding downtown – this after city officials worried that Tampa could experience its own “Katrina moment” due to the city’s woefully inadequate storm infrastructure.
Of course, the damage from the 400-mile-wide storm isn’t over yet. A storm surge warning remains in effect for some parts of the state, including Tampa Bay, though the warnings were ended for parts of south Florida. As we noted yesterday, the storm surge is a wall of water from the ocean as well as nearby lakes, bays, estuaries and wetlands created by a storm’s hurricane force winds. It can form suddenly – like it did in Naples on Sunday when the NHC reported that floodwaters climbed seven feet in just 90 minutes.
Hurricane-force winds were extending outward up to 60 miles from Irma’s center, and tropical-storm-force winds were being felt up to 415 miles away, the National Hurricane Center said early Monday.
While Irma has repeatedly contradicted expectations, most memorably when the storm shifted westward on Saturday, setting up the southwestern part of the state for a direct hit, here’s what forecasters expect from the storm on Monday, according to NBC.
- Irma hit the lower Florida Keys with winds of up 130 mph just after 7 a.m. ET Sunday. It made landfall on Cudjoe Key around 2 hours later. It weakened to a Category 1 storm early Monday.
- It passed the Tampa Bay area early Monday on its way to northern Florida.
- The Florida Keys could get 10 to 20 inches of rain, and the western peninsula could get 10 to 15 inches.
- The center of Irma was expected to cross the eastern Florida Panhandle into southern Georgia on Monday afternoon before later heading into eastern Alabama.
- Tornados were possible in northeast Florida and the southeast portions of Georgia and South Carolina through Monday night.
While it avoided the direct hit that some were expecting, the city of Miami still experienced catastrophic winds and flooding. Many streets remain submerged, and three construction cranes collapsed in Miami and Fort Lauderdale.
As of about 5 am, the eyewall of the storm – the most-dangerous area where windspeeds are often the highest – was hammering the city of Jacksonville. According to one meteorologist, the surge at Mayport was among the highest he’d seen from any NOS gauge. The city had received eight inches of rain, with 80-90 mph gusts. According to NHC, Irma is expected to weaken to a tropical storm this morning and a tropical depression by Tuesday afternoon.
Much of downtown Jacksonville, including the Hyatt Regency Hotel, has already experienced extensive flooding…
…As a record storm surge caused the Saint Johns river to overflow:
Here’s some video from Jacksonville…
Already, damage estimates suggest that Irma could enter the pantheon of costliest hurricanes in US history just two weeks after Hurricane Harvey accomplished a similar feat in the Gulf of Mexico. According to Bloomberg, Enki Research estimates for total damages dropped to $49 billion from $200 billion earlier.
Some residents in and around the Miami area were beginning to venture outside, despite the downed power lines and debris, as rains stopped and sunshine returned.
“This had the potential to be catastrophic,” said Gladys Ibarra, 51, who works in finance at a shipping company, as she wandered an inland stretch of Coral Gables, where tree limbs littered the ground, but buildings looked little damaged. “We were very scared, and we were very lucky.”
And I bet you all thought that Irma would cause no more damage: guess again: Charleston South Carolina and Jacksonville are under water:
(courtesy zero hedge)
Downtown Charleston Under Water: Irma Flash Flood Emergency Declared
While Hurricane Irma, which was reclassified as a tropical storm early Monday, spared Miami from a “worst case” scenario, the former hurricane saved some of its worst storm surge impacts for northeast Florida, coastal Georgia, and South Carolina.
A record water surge flooded downtown Jacksonville, leading the National Weather Service to issue a flash flood emergency as the water level rose sharply. Hours of strong winds blowing the ocean inland, and preventing water from the St. Johns River from escaping back into the ocean worsened the flood situation. The flooding, while predicted, is reportedly some of the worst the city has seen. Despite being weaker than Hurricane Matthew was when it passed by the city in 2016, Tropical Storm Irma helped push a greater amount of water onshore, and it struck right at the time of high tide. This caused the city to see its highest storm surge flooding on record.
Meanwhile, a flash flood emergency was issued for Charleston County in South Carolina, which includes the city of Charleston, as as widespread flooding driven by Tropical Storm Irma engulfs the city. The ocean in Charleston reached its third-highest level, coming up short of the surge seen in Hurricane Hugo in 1989.
According to the National Weather Service, the combination of extremely high tides combined with heavy rain has resulted in dangerous flooding throughout the downtown area. Areas from Calhoun Street south to the Battery are severely flooded and travel into the downtown Charleston area is not advised. The flash flood emergency is set to last until 8:15 p.m. Just before 1 p.m. the flooding exceeded levels seen during Hurricane Matthew last year, weather.com meteorologist Christopher Dolce said.
The surge put White Point Garden under water and sent water coursing through downtown Charleston’s historic neighborhoods, the Charleston Post and Courier reports. Residents could be seen wading through hip-deep water; a john boat with four people aboard cruised down South Battery, sending a wake into people’s yards. Flooding was so severe that police in Charleston told people to avoid downtown until floodwaters recede.
According to the National Weather Service, the combination of high tides and heavy rain has resulted in dangerous flooding throughout the downtown area.
In Mount Pleasant, the parking lots on both sides of Shem Creek were underwater, swamping some cars whose owners had the bad luck to park there. “I’ve never seen anything like it,” Town Administrator Eric DeMoura told the Post and Courier.
The rising water breached dunes at Edisto Beach and several water rescues have already taken place in the area, the National Weather Service reports, as Tropical Storm Irma lashes the Palmetto State. According to The Associated Press, more than 190,000 customers are without power statewide, including more than 26,000 in the coastal county of Beaufort and more than 46,000 in Charleston.
Earlier this week McMaster ordered Hilton Head Island and six of the state’s other barrier islands to evacuate ahead of the storm, according to the Associated Press. Approximately 44,457 South Carolina residents were affected by the orders, and McMaster told the Post and Courier that “compliance, as far as we can tell, has been good” though the state does not have a current count of how many people ignored the order and remained on the islands.
Videos posted on twitter showed just how significant and dangerous the flash flood is:
A number of people have argued over the past few days that Hurricane Harvey will NOT boost the US housing market. As if any such argument would or should be required. Hurricane Irma will not provide any such boost either. News about the ‘resurrection’ of New Orleans post-Katrina has pretty much dried up, but we know scores of people there never returned, in most cases because they couldn’t afford to.
And Katrina took place 12 years ago, well before the financial crisis. How do you think this will play out today? Houston is a rich city, but that doesn’t mean it’s full of rich people only. Most homeowners in the city and its surroundings have no flood insurance; they can’t afford it. But they still lost everything. So how will they rebuild?
Sure, the US has a National Flood Insurance Program, but who’s covered by it? Besides, the Program was already $24 billion in debt by 2014 largely due to hurricanes Katrina and Sandy. With total costs of Harvey estimated at $200 billion or more, and Irma threatening to cause far more damage than that, where’s the money going to come from?
It took an actual fight just to push the first few billion dollars in emergency aid for Houston through Congress, with four Texan representatives voting against of all people. Who then will vote for half a trillion or so in aid? And even if they do, where would it come from?
Trump’s plans for an infrastructure fund were never going to be an easy sell in Washington, and every single penny he might have gotten for it would now have to go towards repairing existing roads and bridges, not updating them -necessary as that may be-, let alone new construction.
Towns, cities, states, they’re all maxed out as things are, with hugely underfunded pension obligations and crumbling infrastructure of their own. They’re going to come calling on the feds, but Washington is hitting its debt ceiling. All the numbers are stacked against any serious efforts at rebuilding whatever Harvey and Irma have blown to pieces or drowned.
As for individual Americans, two-thirds of them don’t have enough money to pay for a $500 emergency, let alone to rebuild a home. Most will have a very hard time lending from banks as well, because A) they’re already neck-deep in debt, and B) because the banks will get whacked too by Harvey and Irma. For one thing, people won’t pay the mortgage on a home they can’t afford to repair. Companies will go under. You get the picture.
There are thousands of graphs that tell the story of how American debt, government, financial and non-financial, household, has gutted the country. Let’s stick with some recent ones provided by Lance Roberts. Here’s how Americans have maintained the illusion of their standard of living. Lance’s comment:
This is why during the 80’s and 90’s, as the ease of credit permeated its way through the system, the standard of living seemingly rose in America even while economic growth rate slowed along with incomes. Therefore, as the gap between the “desired” living standard and disposable income expanded it led to a decrease in the personal savings rates and increase in leverage. It is a simple function of math. But the following chart shows why this has likely come to the inevitable conclusion, and why tax cuts and reforms are unlikely to spur higher rates of economic growth.
There’s no meat left on that bone. There isn’t even a bone left. There’s only a debt-ridden mirage of a bone. If you’re looking to define the country in bumper-sticker terms, that’s it. A debt-ridden mirage. Which can only wait until it’s relieved of its suffering. Irma may well do that. A second graph shows the relentless and pitiless consequences of building your society, your lives, your nation, on debt.
It may not look all that dramatic, but look again. Those are long-term trendlines, and they can’t just simply be reversed. And as debt grows, the economy deteriorates. It’s a double trendline, it’s as self-reinforcing as the way a hurricane forms.
Back to Harvey and Irma. Even with so many people uninsured, the insurance industry will still take a major hit on what actually is insured. The re-insurance field, Munich RE, Swiss RE et al, is also in deep trouble. Expect premiums to go through the ceiling. As your roof blows off.
We can go on listing all the reasons why, but fact is America is in no position to rebuild. Which is a direct consequence of the fact that the entire nation has been built on credit for decades now. Which in turn makes it extremely vulnerable and fragile. Please do understand that mechanism. Every single inch of the country is in debt. America has been able to build on debt, but it can’t rebuild on it too, precisely because of that.
There is no resilience and no redundancy left, there is no way to shift sufficient funds from one place to the other (the funds don’t exist). And the grand credit experiment is on its last legs, even with ultra low rates. Washington either can’t or won’t -depending on what affiliation representatives have- add another trillion+ dollars to its tally, state capitals are already reeling from their debt levels, and individuals, since they have much less access to creative accounting than politicians, can just forget about it all.
Not that all of this is necessarily bad: why would people be encouraged to build or buy homes in flood- and hurricane prone areas in the first place? Why is that government policy? Why is it accepted? Yes, developers and banks love it, because it makes them a quick buck, and then some, and the Fed loves it because it keeps adding to the money supply, but it has turned America into a de facto debt colony.
If you want to know what will happen to Houston and whatever part of Florida gets hit worst, think New Orleans/Katrina, but squared or cubed -thanks to the 2007/8 crisis.
A terrific article from Charles Hugh Smith who discusses the costs and tribulations facing the flooded victims in both Houston and many parts of Florida.
(COURTESY CHARLES HUGH SMITH/(OF TWO MINDS.COM)
SUNDAY, SEPTEMBER 10, 2017
FEMA map courtesy of correspondent David E.
Septembergeddon? 27 Major Disasters Have Already Happened So Far This Month
Two major hurricanes, unprecedented earthquake swarms, and wildfires roaring out of control all over the northwest United States – what else will go wrong next?
When I originally pointed to the month of September as a critical time, I had no idea that we would see so many catastrophic natural disasters during this time frame as well. Hurricane Harvey just broke the all-time record for rainfall in the continental United States, Hurricane Irma is so immensely powerful that it has been called “a lawnmower from the sky”, vast stretches of our country out west are literally being consumed by fire, and the magnitude-8.2 earthquake that just hit Mexico was completely unexpected. As I have stated so many times before, our planet is becoming increasingly unstable, but most people simply do not understand what is happening.
My good friend Zach Drew posted the best summary of the major disasters that we have been experiencing so far this month that I have seen anywhere…
California is on fire.
Oregon is on fire.
Washington is on fire.
British Columbia is on fire.
Alberta is on fire.
Montana is on fire.
Nova Scotia is on fire.
Greece is on fire.
Brazil is on fire.
Portugal is on fire.
Algeria is on fire.
Tunisia is on fire.
Greenland is on fire.
The Sakha Republic of Russia is on fire.
Siberia is on fire.
Texas is under water
India, Nepal, Pakistan, and Bangladesh, experience record monsoons and massive death toll.
Sierra Leone and Niger experience massive floods, mudslides, and deaths in the thousands.
Italy, France, Spain, Switzerland, Hungary, Poland, Romania, Bosnia, Croatia, and Serbia are crushed in the death grip of a triple digit heat wave, dubbed Lucifer.
Southern California continues to swelter under triple digit heat that shows no sign of letting up.
In usually chilly August, the city of San Francisco shatters all-time record at 106 degrees, while it reaches 115 degrees south of the city. Northern California continues to bake in the triple digits.
(()) Yellowstone volcano is hit with earthquake swarm of over 2,300 tremors since June, recording a 4.4 quake on June 15, 20017 and 3.3 shaker on August 21, 2017.
(()) 5.3 earthquake rumbles through Idaho
(()) Japan earthquake 6.1 possible tsunami.
(()) Mexico earthquake 8.2 imminent tsunami. Beach lines are receded atleast 50+ meters
Hurricanes Harvey, Irma (biggest ever recorded), Jose and Katia are barreling around the Atlantic with 8 more potentials forming
And last but not least an X10 C.M.E solar flare two nights ago. The highest recorded solar flare ever!
For much more from Zach, you can follow his work regularly at TruNews.com.
Some are describing what is happening to us as a “perfect storm”, and they are wondering if even more major disasters are coming in the very near future.
Let us hope not, because there is a tremendous amount of concern that we may not be able to pay for the disasters that have happened already. The following comes from Politico…
Harvey and Irma could be a breaking point. At $556 billion, the Houston metropolitan area’s economy is bigger than Sweden’s. New Jersey could easily fit inside the region’s sprawling footprint, where Harvey dumped 34 trillion gallons of water, as much as the three costliest floods in Texas history combined. The Harvey response alone eventually could double the $136 billion in government aid spent after Hurricane Katrina flooded New Orleans.
And as of Friday, an estimated $1.73 trillion worth of real estate was in the path of Irma’s hurricane-force winds, according to the University of Wisconsin’s Cooperative Institute for Meteorological Satellite Studies.
We won’t know the true extent of the damage that has been caused down in Florida for many days, but we do know that much of the state is already without power…
More than 3.3 million homes and businesses and counting have lost power in Florida as Hurricane Irma moves up the peninsula. The widespread outages stretch from the Florida Keys all the way into central Florida. Florida Power & Light, the state’s largest electric utility, said there were nearly 1 million customers without power in Miami-Dade County alone. The power outages are expected to increase as the storm edges further north. There are roughly 7 million residential customers in the state.
In the end, the federal government will likely step in and spend a lot of money that it does not have to rebuild and restore the communities that Hurricane Harvey and Hurricane Irma have destroyed.
But we are already 20 trillion dollars in debt, and it is being projected that we will continue to add another trillion dollars to that total every year for the foreseeable future.
At some point all of this debt will simply become completely unsustainable.
Of course the major disasters will just inevitably keep on coming. As Politico has pointed out, major natural disasters seem to just keep on getting bigger, and they seem to be hitting us more frequently than in the past…
The disasters are arriving with greater frequency.Counting Harvey, the U.S. this year has experienced 10 weather-related events each costing $1 billion or more. The country averaged fewer than six big-dollar storms, flood, fires and freezes a year between 1980 and 2016, according to the National Oceanic and Atmospheric Administration. Between 2012 and 2016, however, weather catastrophes occurred almost twice as often.
I know that I have been writing about these hurricanes a lot in recent weeks, and I promise to get back to focusing on the economy in the days to come.
But it is absolutely imperative that we all begin to understand that something has fundamentally changed. Our world has become much less stable, and “apocalyptic events” are starting to hit us one after another.
So will things start to calm down in the months ahead?
Goldman Slashes Q3 GDP By 30% Due To Hurricane Disaster
Yesterday, when commenting on the impact of Hurricanes Harvey and Irma, we noted that even before the two devastating storms were set to punish Texas, Florida and the broader economy, erasing at least 0.4% GDP from Q3 GDP according to BofA and costing hundreds of billions in damages (contrary to the best broken window fallacy, the lost invested capital more than offsets the “flow” benefits from new spending, which is why the US does not bomb itself every time there is a recession to “stimulate growth“), things were turning south for the US economy, which in turn prompted Deutsche Bank to point out that (adjusted) recession risk, at roughly 20%, is now the highest in the past decade, and that it was quite prudent for the Fed, which expects to hike rates at least once more in 2017, to pause its current tightening, especially since a period of both economic and market weakness is imminent.
It didn’t take long for one of the most bullish on the US economy banks to follow in BofA’s footsteps, and overnight in a note from Goldman’s chief economist, Jan Hatzius, announced the he was slashing his Q3 GDP estimate by a whopping 30%, or 0.8%, to 2.0% annualized, to wit:
Given the potentially sizeable growth effects from Harvey—and with Irma risks now moving to center stage—we lowered our Q3 GDP tracking estimate by 0.8pp to +2.0%…
But fear not, because like all good Keynesian acolytes of the “broken window fallacy”, Goldman is confident that the flawed perpetual engine of growth, namely destruction – after all, why else is the world’s gearing for global war – will kick in, and more than offset the Q3 GDP loss, by boosting the next 3 quarters by a cumulative 1.1%:
… However, we expect this weakness to reverse over the subsequent three quarters, more than recouping the lost output. Accordingly, we are also increasing our respective quarterly growth forecasts by 0.4pp, 0.2pp and 0.4pp for Q4, Q1, and Q2, (to +2.7%, +2.5%, and +2.4%). We will revisit these estimates once reliable information about the toll from Irma becomes available. We stress that the overall impact of the hurricane on second-half growth is uncertain, as the negative effects are likely to be offset by an increase in business investment and construction activity once the storms have passed.
Some additional detail on what Goldman expects will happen in the coming months to the US economy:
We find that major natural disasters are associated with a temporary slowdown in most major growth indicators. We also find that costly and broad-based natural disasters are associated with particularly large declines in economic activity, but also sharper subsequent rebounds. Modeling these effects, we estimate that hurricane-related disruptions could reduce 3Q GDP growth by as much as 1 percentage point. We believe the main channels for these GDP effects are consumption, inventories, housing, and the energy sector.
We expect a meaningful drag on key growth indicators over the next two months (detailed herein), including a temporary drag on September payrolls growth of 20k—or as much as 100k if severe storm effects persist into next week (the payrolls reference period). We also expect a near-term boost to headline inflation (around 0.2pp on the yoy rate) due to higher gasoline prices, and a possible modest boost to core inflation (worth less than 0.05pp), due to the destruction of some of the automotive capital stock.
And here is how Goldman justifies the sharp economic surge that follows natural disasters:
In Exhibit 5, we summarize the historical growth experience around these 43 events using the “monthly GDP growth” measure developed by Stock and Watson (discussed here; we use a similar series from Macroeconomic Advisers after 2010. This measure interpolates the official quarterly GDP data using the same monthly source data used to construct it. In addition to the average evolution of monthly GDP across the 43 disasters, the graph shows averages across the top 10 costliest, longest, and most broad-based disasters (based on the earlier measures). On average, costly and broad-based natural disasters produce particularly large declines in economic activity, but also sharper subsequent rebounds. We find that long-lived disasters are not particularly notable (relative to the sample average), but note their subsequent growth rebounds are sometimes more muted.
Economic Data Are Particularly Sensitive to Costly Natural Disasters and Those that Affect a Large Share of the Population
The best news is that the above estimates only take Harvey into account: once the damage from Irma is added, the rebound will be even greater, potentially unleashing another Golden Age for the US economy… or something. Which of course, once again begs the rhetorical question: if the US is in dire need of growth, why not just nuke itself and end up with even more economic growth than prior to said nuking (please don’t answer, as we have said previously, “contrary to the best broken window fallacy, the lost invested capital more than offsets the “flow” benefits from new spending, which is why the US does not bomb itself every time there is a recession to “stimulate growth“, unfortunately few “economists” can grasp this simple logic.)
Sarcasm aside, here are some further observations from Goldman and its “handbook” attempt to quantify the Harvey damage:
We conclude with a “handbook” quantifying the potential impact of Hurricane Harvey on upcoming US economic data. We base these estimates on regression models as well as the average evolution of these indicators around past national disasters, with special emphasis given to Katrina observations. Exhibit 10 summarizes these potential impacts, including their “bottom-up” implications for Q3 and Q4 GDP growth (at-0.8pp and +1.1pp, respectively). The main channels for these effects are likely to be consumption, inventories, housing, and the energy sector, where we previously estimated that declining petroleum refining and energy output could by itself depress Q3 growth by as much as 0.2pp (these estimates remain valid, given continued outages in many areas).
Hurricane Handbook: Harvey Could Shift the Composition of Growth from 3Q into 4Q/1Q, Particularly if Irma fears are Realized
* * *
For those who wish to ignore Goldman’s commentary and merely focus on its data interpolations and forecasts, here are some additional observations and, more importantly, charts. First, on Harvey’s estimated damage:
Hurricane Harvey hit the Gulf Coast region of the United States on Friday, August 25, resulting in heavy rains, widespread flooding, and significant property damage. As shown in Exhibit 1, many estimates of Harvey damages rose sharply during the first week after landfall; however, most have now settled in the $70-100bn range (we assume $85bn in our analysis). The uncertainty around these figures remains high, but it seems clear that Harvey’s aftermath will be particularly severe.
Exhibit 1: Harvey Damage Estimates Rose Sharply and Have Settled in the $60-100bn Range
Next, on Harvey’s damage in historical context: “Costly, Widespread, and Potentially Long-Lasting”
To place Harvey in historical context, we revisit some of our previous studies in order to construct a dataset of comparable natural disasters. We include the 35 largest hurricanes in the Billion-Dollar Weather Disasters dataset from the National Oceanic and Atmospheric Administration (NOAA). We then add major earthquakes, floods, and tornado events whose cost exceeded 0.05% of GDP (an additional 8 observations).
As shown in Exhibit 2, Harvey’s approximately $85bn in damages would represent 0.44% of GDP, which would make it the 2nd largest natural disaster since World War II in terms of domestic property damage. Hurricane-related losses also seem likely to rise further in coming weeks given possible damages associated with Hurricane Irma in Florida and other parts of the Southeast. Some estimates of insured losses for that storm range from $60bn to $180bn (implying total losses could exceed $100-200bn). Given that estimates for Irma remain tentative and particularly unreliable at this stage, we focus our attention on what we know about Harvey instead.
While widely cited, property losses are only one dimension of a disaster’s impact on the economy (and on society more generally). To complement this metric, we construct two complementary measures of severity, specifically, the duration and the societal breadth of a given storm’s disruptions.
* * *
For our measure of breadth, we calculate the share of the US population in counties with disaster declarations (directly related to the given storm event). As shown in Exhibit 3, Hurricane Harvey severely impacted nearly 5% of the US population based on this classification. This is a bit above the median (17th out of 44), just behind Katrina (16th).
For our measure of duration, we use the length of the federal “natural disaster declaration period” for each disaster, as shown in the left panel of Exhibit 4. Harvey made landfall only two weeks ago, so we cannot yet estimate the duration of the storm’s impact on this basis. But given the extent of the flooding and the continued weakness in electricity consumption (see right panel of Exhibit 4), we believe it is reasonable to expect Harvey’s duration could be longer than average (the median national disaster declaration in our dataset is 27 days). Electricity supplied also fell sharply in Louisiana after Hurricane Katrina struck that state in August 2005, with DOE data showing that electricity sales declined on a year-over-year basis for six consecutive months. If Harvey’s natural disaster declaration continues through the end of October, its duration would move to 6th out of 44 disasters (Katrina is 5th).
We find that temporary soft patches tend to be common for “hard” indicators such as nonfarm payrolls, retail sales, industrial production, and housing starts, as well as for soft indicators like the ISM Manufacturing Index and Conference Board Consumer Confidence. For payrolls, we find an average deceleration of 23k relative to recent averages but a wide range (that likely depends on the timing of the payrolls reference period). The trade balance also tends to widen in these episodes, as export growth tends to slow more quickly than import growth (and rebound more slowly).
One perhaps surprising aspect of the above relationships is the muted rebound in housing and in capital equipment in the months following major disasters (on average). We suspect this reflects the long lags typical of the rebuilding process. The experience following Katrina illustrates this point: it took 7 months for New Orleans residential building permits to return to their pre-Hurricane levels and another few quarters before they were materially higher. And while Congress has already allocated an additional $15 billion of hurricane relief funds, it’s important to remember that federal emergency spending on construction tends to ramp up gradually over years as opposed to months (see right panel).
Lastly, in terms of the inflation impact around natural disasters, we do not find a compelling historical pattern for either headline or core inflation (neither PCE nor CPI). In the case of Harvey in particular, we nonetheless expect a near-term boost to headline inflation from higher gasoline prices, themselves a result of disruptions to petroleum refining and the energy sector more broadly. We also note the possibility that the destruction of some of the automotive capital stock—our autos team estimates as many as 1.1mn cars destroyed by Harvey—could reduce downward pressure on new and used car prices. This and potential energy-price pass through (i.e. to airfares) could provide a modest boost to core inflation.
Putting it all together, here is Goldman’s summary assessment of why a Hurricane may be precisely what the Keynesian Doctor ordered:
In Exhibit 8, we attempt to estimate the impact of natural disasters on monthly GDP growth. Given the relatively small sample size (43 major disasters) and the lack of geographic granularity for nearly all growth indicators, the timing and the magnitude of disaster effects are difficult to estimate empirically. The fact that we have three different measures of storm severity increases this difficulty.
We restrict the regression sample to periods around natural disasters and find statistically significant and economically meaningful storm effects. Our results are generally consistent with the message from Exhibit 5. Specifically, the share of the population affected and the amount of property losses are associated with larger declines in output in the month of and the month after the storm. We also find that longer-lived disasters may be associated with more muted growth rebounds, whereas broad-based storms are associated with fairly rapid rebounds.
Costly and Broad-Based Disasters Are Associated with Sharper GDP Growth Decelerations (but Also Sharper Rebounds)
In terms of the growth impact from Harvey, this “top-down” model would suggest a sharp drag on 3Q GDP growth of as much as 1.4 percentage points (qoq ar, relative to baseline)—reflecting Harvey’s huge property losses and the relatively broad-based societal footprint. Importantly though, the model would also suggest a rebound commencing in 4Q (+0.5pp impact) that we believe would likely continue into 1H18. As shown in Exhibit 9, higher-frequency real activity data in regions and sectors levered to the Houston area has already weakened considerably.
And the best news of all from this analysis on Harvey: just wait until the “economic boost” from the Irma devastation That should really unleash America’s growth potential.
Republicans are furious after Trump’s Dept of Justice declines to charge IRS Lois Lerner
Republicans Furious After Trump’s DOJ Declines To Charge Lois Lerner
In what amounts to another act of inexcusable negligence by the Department of Justice, former IRS bureaucrat Lois Lerner – the woman who President Barack Obama put in charge of weaponizing the agency as a tool to suppress Tea Party groups – has escaped being charged for her role in the wide-ranging conspiracy, which involved at least five other employees.
The decision is the culmination of five years of lawsuits brought by conservative groups against Lerner and the IRS, which successfully forced the agency to release the names of 426 nonprofit groups that were systematically targeted for additional scrutiny. The scandal was first disclosed to the public in 2012, but evidence obtained by conservative groups revealed that Lerner and another high-ranking IRS official knew about it years before.
Predictably, conservatives are outraged by the decision – a rage that’s compounded by the DOJ’s reluctance to investigate former FBI Director James Comey and former Attorney General Loretta Lynch for possibly colluding to quash the investigation into Hillary Clinton’s mishandling of classified information, though Congress has nominally launched an investigation into the latter.
In the following statement, Judicial Watch President Tom Fitton asked that Trump intervene and order a complete review of the scandal:
“I have zero confidence that the Justice Department did an adequate review of the IRS scandal. In fact, we’re still fighting the Justice Department and the IRS for records about this very scandal. Today’s decision comes as no surprise considering that the FBI collaborated with the IRS and is unlikely to investigate or prosecute itself.
President Trump should order a complete review of the whole issue. Meanwhile, we await accountability for IRS Commissioner Koskinen, who still serves and should be drummed out of office.”
In a news release about the decision, Judicial Watch recounted how litigation forced the IRS first to say that emails belonging to Lerner were supposedly missing and later declare to the court that the emails were on IRS back-up systems, exposing a proliferation of “record-keeping problems” at the agency.
Here’s a timeline of civil actions and disclosures related to the scandal:
“In June 2014, the IRS claimed to have “lost” responsive emails belonging to Lerner and other IRS officials.
In July 2014 Judge Emmett Sullivan ordered the IRS to submit to the court a written declaration under oath about what happened to Lerner’s “lost” emails. The sworn declarations proved to be less than forthcoming.
In August 2014, Department of Justice attorneys for the IRS finally admitted Judicial Watch that Lerner’s emails, indeed all government computer records, are backed up by the federal government in case of a government-wide catastrophe. The IRS’ attorneys also disclosed that Treasury Inspector General for Tax Administration (TIGTA) was looking at several of these backup tapes.
In November 2014, the IRS told the court it had failed to search any of the IRS standard computer systems for the “missing” emails of Lerner and other IRS officials.
On February 26, 2015, TIGTA officials testified to the House Oversight and Government Reform Committee that it had received 744 backup tapes containing emails sent and received by Lerner. This testimony showed that the IRS had falsely represented to both Congress, Judge Sullivan, and Judicial Watch that Lerner’s emails were irretrievably lost.The testimony also revealed that IRS officials responsible for responding to the document requests never asked for the backup tapes and that 424 backup tapes containing Lerner’s emails had been destroyed during the pendency of Judicial Watch’s lawsuit and Congressional investigations.
In June 2015, Judicial Watch forced the IRS to admit in a court filing that it was in possession of 6,400 “newly discovered” Lerner emails. Judge Emmet Sullivan ordered the IRS to provide answers on the status of the Lerner emails the IRS had previously declared lost. Judicial Watch raised questions about the IRS’ handling of the missing emails issue in a court filing, demanding answers about Lerner’s emails that had been recovered from the backup tapes.
In July 2015, U.S District Court Judge Emmet Sullivan threatened to hold John Koskinen, the commissioner of the Internal Revenue Service, and Justice Department attorneys in contempt of court after the IRS failed to produce status reports and recovered Lerner emails, as he had ordered on July 1, 2015.”
According to the Washington Examiner, after being asked by Republicans in April to take a “fresh look” at the case against Lerner, the Trump administration responded Friday that it had reviewed the case and decided against it.
Some Republicans in Congress openly questioned Attorney General Jeff Sessions’s judgment:
“[T]he Department determined that reopening the criminal investigation would not be appropriate based on the available evidence,” Assistant Attorney General Stephen Boyd wrote in a letter to Kevin Brady, the chairman of the House Ways and Means Committee.
Boyd added that the department had “carefully reviewed” its original 2015 decision not to prosecute, and had new attorneys independently review the investigation. He said that to convict Lerner, it would be necessary to prove that she intentionally discriminated against the groups based on their political views.
“I assure you that the Department has carefully studied the law, given the evidence the utmost consideration, and thoroughly reviewed the prior investigation from an objective perspective,” he wrote.
In his response, Ways and Means Chairman Brady called it a “terrible decision” that suggested political appointees were not being held accountable under the law.
“I have the utmost respect for Attorney General [Jeff] Sessions, but I’m troubled by his Department’s lack of action to fully respond to our request and deliver accountability,” the Texas lawmaker said in a statement.
Peter Roskam, chairman of the House’s tax subcommittee, also criticized the decision, calling it “a miscarriage of justice.”
Lawmakers had previously suggested that the Obama Department of Justice had declined to prosecute Lerner in 2015 because it was taking political cues from Obama. In 2014, their committee had voted to refer Lerner to the Justice
Department for prosecution for her role in the targeting scandal. Now Obama is gone, but the DOJ continues to protect his henchmen. The DOJ’s excuse – used many times recently – that proving intent would be too difficult, seems flimsy.
Not to mention being a political black eye for an administration already struggling to appease Republicans in Congress.
The huge cut in Whole Foods pricing has lead to a huge 25% surge in new customers.
the Amazon effect continues to have a devastating effect on our bricks and mortar operations
Whole Foods Price Cut Leads To 25% Surge In Customers, Channel Checks Reveal
Curious what the impact was of those dramatic price cuts by Amazon at Whole Foods? We now have the answer.
As a reminder, at the end of August, just as the Amazon purchase of Whole Foods closed, Jeff Bezos slashed prices at his newest retail acquisition by up to 43%. As Bloomberg calculated, some of the more prominent examples were as follows:
- organic fuji apples were marked down to $1.99 a pound from $3.49 a pound;
- organic avocados went to $1.99 each from $2.79;
- organic rotisserie chicken fell to $9.99 each from $13.99;
- banana prices were slashed to 49 cents per pound from 79 cents.
And while such splashy price cuts almost certainly resulted in negative margins and a loss on most sales, it also led to pervasive publicity and hype as every single media outlet covered the dramatic price cut which sent the grocery store index tumbling. Think of its as marketing spend.
But how impactful was it?
Well, according to just announced channel checks courtesy of Bloomberg, the grocer saw a traffic bump of 25% nationally in the first two days after the Amazon takeover, compared with the same period a week earlier, according to data from Foursquare Labs, Inc. At stores in Chicago, the customer surge was even higher: 35%.
Now the question is whether this surge in tarffic will last, or if once the initial coolness factor wears off, customers will revert back to their old spending ways. For now, the retail sector is not impressed and even as stocks are soaring to new all time highs, the XRT appears to have found a sudden air pocket following the report.
that about does it for tonight
I will see you TUESDAY night