Sept 22A/Senator McCain ditches last attempt at reap of Obamacare and that sends gold and silver higher/ Gold ends the day up $1.70 but silver down 5 cents/ Both gold and silver COT is good for a rebound in pricing come this week/Kim Jong Un threatens the west with a Hydrogen bomb test/

 

GOLD: $1294.45 UP   $1.70

Silver: $16.95  DOWN 5 CENT(S)

Closing access prices:

Gold $1297.50

silver: $17.02

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: $1303.72 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1295.85

PREMIUM FIRST FIX:  $7.87  (premiums getting larger)

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SECOND SHANGHAI GOLD FIX: $1306.41

NY GOLD PRICE AT THE EXACT SAME TIME: $1296.60

Premium of Shanghai 2nd fix/NY:$9.81  (premiums getting larger)

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LONDON FIRST GOLD FIX:  5:30 am est  $1297.00

NY PRICING AT THE EXACT SAME TIME: $1296.80

LONDON SECOND GOLD FIX  10 AM: $1291.80

NY PRICING AT THE EXACT SAME TIME. 1291.80

For comex gold:

SEPTEMBER/

NOTICES FILINGS TODAY FOR SEPT CONTRACT MONTH: 0 NOTICE(S) FOR  NIL  OZ.

TOTAL NOTICES SO FAR: 83 FOR 8300 OZ  (0.2581 TONNES)

For silver:

SEPTEMBER

 130 NOTICES FILED TODAY FOR

650,000  OZ/

Total number of notices filed so far this month: 6,236 for 31,180,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

end

 Today the GLD rose again by 6.21 tonnes despite being up only by one dollar.  The trend for GLD inventory is on a rise and this bodes well for our gold metal.
John McCain has decided not to cast his vote in the affirmative for the repeal of Obamacare. Gold and silver caught immediate bids as it will be very difficult for Trump to pass any legislation.

Let us have a look at the data for today

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest FELL BY A RATHER SMALL 2286 contracts from  192,251 DOWN TO 189,965 WITH THE CONSIDERABLE FALL IN PRICE THAT SILVER UNDERTOOK IN YESTERDAY’S TRADING (DOWN 29 CENTS ). THE RAID INITIATED AFTER THE COMEX CLOSED ON WEDNESDAY CONTINUED INTO THURSDAY.  THE CONSTANT TORMENT FOR 9 STRAIGHT DAYS, COULD NOT KNOCK OFF ANY APPRECIABLE SILVER LEAVES FROM THE SILVER TREE.

RESULT: A SMALL FALL IN OI COMEX  DESPITE THE 29 CENT PRICE FALL.  THE BANKERS WERE AGAIN UNSUCCESSFUL IN THEIR ATTEMPT TO FORCE SILVER LONGS TO DEPART THE COMEX.

 In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e.  0.9505 BILLION TO BE EXACT or 135% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 225 NOTICE(S) FOR 1,125,000  OZ OF SILVER

In gold, the open interest FELL BY A LESS THAN EXPECTED 13,149 CONTRACTS WITH THE  HUGE FALL  in price of gold ($19.95 LOSS WITH YESTERDAY’S COMEX TRADING/ GOLD DROPPED BADLY ALSO IN THE ACCESS MARKET TRADING/WEDNESDAY).  The new OI for the gold complex rests at 561,275. AFTER 9 CONSECUTIVE TRADING DAYS THE BANKERS HAD A MILD SUCCESS IN CAUSING GOLD OPEN INTEREST TO DEPART THE COMEX BUT THE FAILED AGAIN IN SILVER. 

Result: A MEDIOCRE DECREASE IN OI WITH THE  HUGE FALL IN PRICE IN GOLD ($19.95). BANKERS HAVE A SMALL SUCCESS IN CAUSING GOLD OPEN INTEREST TO LEAVE THE GOLD CASINO BUT FAILED MISERABLY IN SILVER.

we had: 0 notice(s) filed upon for NIL oz of gold.

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

GLD:

Tonight , we got this huge news: we had a  change in gold inventory:

a monstrous deposit of 6.21 tonnes. this came with gold up only $1.00 on the day..great sign that the bankers are in trouble

Inventory rests tonight: 852.24 tonnes

SLV

Today: no changes in inventory.

INVENTORY RESTS AT 324.915 MILLION OZ

end

.

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

1. Today, we had the open interest in silver FELL BY A SMALL 2286 contracts from 192,251  DOWN TO 189,965 (AND now A LITTLE FURTHER FROM THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) DESPITE YESTERDAY’S 29 CENT LOSS IN TRADING.AFTER 9 CONSECUTIVE TRADING DAYS OF TORMENT, OUR BANKERS FAILED IN THEIR ATTEMPT TO CAUSE A MAJOR OUTFLOW OF SILVER OPEN INTEREST.

RESULT:  A SMALL SIZED DROP IN SILVER OI  AT THE COMEX DESPITE THE LARGE LOSS IN PRICE OF 29 CENTS IN YESTERDAY’S TRADING. 

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late THURSDAY night/FRIDAY morning: Shanghai closed DOWN 5.28 POINTS OR 0.16%   / /Hang Sang CLOSED DOWN 229.80 POINTS OR 0.82%/ The Nikkei closed DOWN 51.03 POINTS OR 0.25%/Australia’s all ordinaires CLOSED UP 0.42%/Chinese yuan (ONSHORE) closed  DOWN at 6.5920/Oil UP to 50.46 dollars per barrel for WTI and 56.45 for Brent. Stocks in Europe OPENED ALL GREEN . Offshore yuan trades  6.5741 yuan to the dollar vs 6.5920 for onshore yuan. NOW THE OFFSHORE MOVED MUCH STRONGER  TO THE ONSHORE YUAN/ ONSHORE YUAN SLIGHTLY WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE WEAKER  DOLLAR. CHINA IS HAPPY TODAY 

 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

i)North Korea

 Kim threatens the USA with a Hydrogen bomb test:( zerohedge)

ii)Initial trading last night…gold jumps a bit on news of a Hydrogen Bomb test

( zerohedge)

iii)Trump responds to Kim Jong un’s threat.  He also threatens the 4 Republicans to vote for the Graham-Cassidy repeal and replace of Obamacare health bill

(courtesy zerohedge)

b) REPORT ON JAPAN

c) REPORT ON CHINA

China fears sanctions brings out more nuclear tests by North Korea which in turn brings on more sanctions as the vicious circle continues:

( zerohedge)

4. EUROPEAN AFFAIRS

i)UK/UBERIt is believed that the private Uber’s company shares are worth around 70 billion dollars.  Today they got a shock with the revoking of Uber’s operating license:  the company states it will challenge them in court:

( zero hedge)

ii)No real news on the BREXIT scene except that it will take 2 years and that there is considerable headwinds for the pound.  It fail on the news

( zero hedge)

iii)In a totally surprised move after 5 pm, Moody’s downgrades UK from Aa1 down to Aa2 to which our Pound flash crashed.

(courtesy zerohedge)

iv)SPAIN/CATALONIA

Rajoy is sending in the police trying to prevent the referendum from taking place.  It is having unintended consequences.  Those who were originally voting no, upon seeing signs that they were going back to Francoism, have now decided to vote in the positive.

( zerohedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)IRAN

Iran unveils new ballistic missile with multiple warheads and capable of travelling 1200 miles enough to strike Israel and much of the middle east.  They state that they will not seek permission to produce defensive weapons.

( zerohedge)

ii)ISRAEL/SYRIA
Israel strikes at a Damascus ammunition depot just outside the capital city’s airport.  Israel destroys an Iranian made Syrian drone along the Golan heights.  Both hits were from the Lebanese side of the border as Israel is careful not to cause any problems with the Russians.  Israel wants to eliminate the Hezballoh/Iranian forces inside Syria
(courtesy zerohedge)

6 .GLOBAL ISSUES

 

7. OIL ISSUES

Oil over 50 dollars as uSA rig count continues to slide which will eventually cause supply to fall

( zerohedge)

8. EMERGING MARKET

9.   PHYSICAL MARKETS

i)Two articles for you to read

the first one by Macleod is a must read.  He states that we are now entering the expansionary phase of the credit cycle and the area that will be most effected will by Europe and rising rates will bring down the entire European banking sector

( Macleod/Goldmoney/GATA)

and Hugo Salinas Price on the new Yuan petro dollar which will cause gold to rise

(Hugo Salinas Price/GATA)

ii)Quite a story:  Fact or fiction:  Marcos’ gold bars:  real or fiction

(  Gerry Liro/ABS-CBN NEWS)

iii)Bitcoin slides again as Jamie Dimon doubles down again on cryptocurrency concerns.

( zerohedge)

iv)Fame author Martin Katusa sees a rush into physical gold as de-dollarization intensifies:  a must read and view

( Martin Katusa/Mac Slavo/SHFTPlan)

10. USA Stories

i)Another public pension system in trouble as OPERS face pension cuts as they are deeply underfunded
( zero hedge)

ii)Now the main stream media is going after the supposed Russian ads on Facebook.  These ads were supposedly trying to sway the election towards Trump.  The problem is that Russian authorities claim no responsibility for the ads and also claim that they would not even know how to place those ads etc..

courtesy zero hedge)

iii)It seems that Cuba used a new Sci Fi weapon at USA diplomats which caused hearing loss and memory loss and other debilitating effects.  USA plans a strong response:

( Mac Slavo.SHFTPlan.com)

iv)Soft data USA manufacturing PMI drops for the first time since March

( zerohedge)

v) Shear devastation in Puerto Rico as they have no power and no cell phone towers on top of total destruction of homes and businesses

( zerohedge)

v b)After the markets closed we got this bad news for Puerto Rico: two dams have failed which will cause massive flooding

( zerohedge)

vi)David Stockman on the economy:  he gives it 3 months before the crash starts:( David Stockman/Daily Reckoning)

vii)Trump’s last ditch effort to repeal Obamacare fails as McCain votes no the Graham-Cassidy bill.  After Sept 30, they will need 60 votes which will be impossible

( zerohedge)

viii)A little difficult to understand  but the upshot of Kaplan’s comments is that the Fed may not have anymore room to raise rates as the economy will buckle over on two or three small rate rises

(courtesy zerohedge)

ix)A 5.7 magnitude earthquake hits off the coast of California  (off of Eureka)

( zerohedge)

Let us head over to the comex:

The total gold comex open interest FELL BY A MEDIOCRE 13,149 CONTRACTS DOWN to an OI level of 561.275 WITH THE HUGE FALL IN THE PRICE OF GOLD  ($19.55 LOSS IN YESTERDAY’S TRADING). AFTER 9 DAYS OF TORMENT, OUR BANKERS WERE MILDLY SUCCESSFUL IN FORCING OUT SOME OF OUR GOLD LONGS. THEY WERE UNSUCCESSFUL IN SILVER.

Result: a  MEDIOCRE SIZED open interest DECREASE WITH THE HUGE FALL IN THE PRICE OF GOLD TO THE TUNE OF $19.95. 

 The new non active September contract month saw it’s OI FELL BY 78 contracts DOWN to 628.   We had 29 notices filed UPON YESTERDAY so we LOST 49 contracts or an additional 4900 oz will not stand for delivery in this non active month of September.  We had 49 EFP’s 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 9333 contracts DOWN to 23,280.

The November contract saw A GAIN OF 99 contracts UP to 678.

The very big active December contract month saw it’s OI LOSS OF 11,461 contracts UP to 439,574.

We had 0 notice(s) filed upon today for  NIL oz

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And now for the wild silver comex results.  Total silver OI FELL BY A SMALL 2286 CONTRACTS FROM 192,251 DOWN TO 189,965 DESPITE YESTERDAY’S HUGE  29 CENT LOSS IN PRICE. WE HAVE HAD  CONSTANT TORMENT FROM THE BANKERS THIS PAST 9 DAYS, BUT STILL OUR LONGS REMAIN RESOLUTE DETERMINED TO TAKE ON OUR BANKERS AS NO SILVER LEAVES AGAIN FELL FROM THE SILVER TREE. OUR BANKER FRIENDS DECIDED TO RETREAT TO HIGHER GROUND ONLY TO ATTACK IMMEDIATELY AFTER THE FOMC ANNOUNCEMENT OF  BALANCE SHEET REDUCTION AND A POSSIBLE RATE HIKE IN DECEMBER.  WE AGAIN WITNESS THE AMOUNT STANDING FOR SILVER DELIVERY INCREASE AND THIS TIME BY A WHOPPING 670,000 OZ.  WE HAVE BEEN WITNESSING THIS PHENOMENA FOR THE PAST 5 MONTHS.  (SEE BELOW). BANKERS ORCHESTRATE ANOTHER RAID YESTERDAY, TRYING TO FORCE SILVER LEAVES TO FALL FROM THE SILVER TREE.
RESULT:  A SMALL DECREASE IN OI AT THE COMEX  DESPITE A 29 CENT LOSS IN PRICE. DEMAND FOR PHYSICAL SILVER RISES AGAIN AS THE AMOUNT STANDING INCREASES FOR THE SEPT CONTRACT MONTH BY A GOOD SIZED 670,000 OZ.SILVER DEMAND REMAINS EXTREMELY STRONG/THE RAID HAD NEGLIGIBLE EFFECT ON OUR RESOLUTE LONGS.

We are now in the active contract month of September (and the last active month until December). Today we witness Sept. OI LOSS OF 91 contacts DOWN to 278. We had 225 notices filed yesterday, so we again gained 134 contracts or an additional 670,000 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 18 contacts UP TO 1052. November saw a GAIN of 4 contract(s) and thus RISING TO  73. After November, the NEXT big active contract month is December and here the OI LOST 2413  contracts DOWN to 151,569 contracts.

We had 130 notice(s) filed for  650,000 oz for the SEPT. 2017 contract

VOLUMES: for the gold comex

ESTIMATED VOLUME TODAY: XX CONTRACTS / NOT PROVIDED

YESTERDAY’S confirmed volume was 444,031 which is EXCELLENT

volumes on gold are STILL HIGHER THAN NORMAL!

INITIAL standings for SEPTEMBER

 Sept.22/2017.

Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
nil oz
Deposits to the Dealer Inventory in oz    nil oz
Deposits to the Customer Inventory, in oz 
 nil oz
No of oz served (contracts) today
 
0 notice(s)
NIL OZ
No of oz to be served (notices)
628 contracts
(62,800 oz)
Total monthly oz gold served (contracts) so far this month
83 notices
8300 oz
0.2587 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month   NIL oz
Total accumulative withdrawal of gold from the Customer inventory this month   39,885.0  oz
Today we HAD  0 kilobar transaction(s)/ 
 WE HAD 0 DEALER DEPOSIT:
total dealer deposits: nil oz
We had nil dealer withdrawals:
total dealer withdrawals:  0 oz
we had 0 customer deposit(s):
 i) Into Scotia: nil oz
total customer deposits; nil  oz
We had 0 customer withdrawal(s)
total customer withdrawals; nil oz
 we had 0 adjustment(s)
For SEPT:

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.

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To calculate the initial total number of gold ounces standing for the SEPTEMBER. contract month, we take the total number of notices filed so far for the month (83) x 100 oz or 8300 oz, to which we add the difference between the open interest for the front month of SEPT. (628 contracts) minus the number of notices served upon today (0) x 100 oz per contract equals 71,100  oz, the number of ounces standing in this active month of SEPT.
 
Thus the INITIAL standings for gold for the SEPTEMBER contract month:
No of notices served so far (83) x 100 oz  or ounces + {(628)OI for the front month  minus the number of  notices served upon today (0) x 100 oz which equals 71,100 oz standing in this  active delivery month of SEPTEMBER  (2.218 tonnes)
We LOST 49 contracts OR AN ADDITIONAL 4900 OZ WILL NOT STAND FOR GOLD and 49 EFP’s were issued for September which gives the long holder a fiat bonus plus a deliverable product on another exchange and that most likely will be London.
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Total dealer inventory 716,132.702 or 22.277 tonnes  (dealer gold continues to disappear)
Total gold inventory (dealer and customer) = 8,697,4211.592 or 270.51 tonnes 
 
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 13 MONTHS  83 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE AUGUST DELIVERY MONTH
September initial standings
 Sept 22  2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
 501,932.140 oz
Scotia
Deposits to the Dealer Inventory
 nil oz
Deposits to the Customer Inventory 
 991.000 oz
Delaware
???
No of oz served today (contracts)
130 CONTRACT(S)
(650,000 OZ)
No of oz to be served (notices)
148 contracts
(740,000 oz)
Total monthly oz silver served (contracts) 6236 contracts (31,180,000 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 6,299,020.0 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil   oz
we had 0 dealer withdrawals:
total dealer withdrawals: nil oz
we had 1 customer withdrawal(s):
i) out of Scotia: 501,932.140 oz
TOTAL CUSTOMER WITHDRAWALS: 501,932.140  oz
We had 1 Customer deposit(s):
 i) Into Delaware: 991.000 oz ???
***deposits into JPMorgan have stopped  again
In the month of March and February, JPMorgan stopped (received) almost all of the comex silver contracts.
why is JPMorgan bringing in so much silver??? why is this not criminal in that they are also the massive short in silver
total customer deposits: 991.000  oz
 
 we had 0 adjustment(s) 
The total number of notices filed today for the SEPTEMBER. contract month is represented by 130 contract(s) for 650,000 oz. To calculate the number of silver ounces that will stand for delivery in SEPTEMBER., we take the total number of notices filed for the month so far at 6236 x 5,000 oz  = 31,180,000 oz to which we add the difference between the open interest for the front month of SEPT (278) and the number of notices served upon today (130) x 5000 oz equals the number of ounces standing.
 

 

.
 
Thus the INITIAL standings for silver for the SEPTEMBER contract month:  6236 (notices served so far)x 5000 oz  + OI for front month of SEPTEMBER(278 ) -number of notices served upon today (130)x 5000 oz  equals  31,920,000 oz  of silver standing for the SEPTEMBER contract month. This is excellent for this active delivery month. Silver is being constantly demanded at the silver comex and we witness again the amount of silver demanded daily increase right from the get go. (ON AUGUST 31 (FIRST DATE NOTICE) WE HAD 20.15 MILLION OZ STAND. THUS IN THE FIRST 19 DAYS OF SEPTEMBER, WE HAVE HAD A HUGE INCREASE OF  11.9 MILLION OZ STAND FOR DELIVERY AS DEALERS JUMP QUEUE TRYING TO FIND THE NECESSARY SILVER TO SUPPLY TO OUR LONGS.)
 
WE HAD AN INCREASE OF 134 CONTRACTS OR AN ADDITIONAL 670,000 OZ OF SILVER WILL STAND FOR DELIVERY IN THIS ACTIVE CONTRACT MONTH OF SEPTEMBER. THIS HAS BEEN THE 5th CONSECUTIVE MONTH THAT WE HAVE WITNESSED EITHER AN INCREASE (95% OF THE TIME) OR STANDING PAT (THE OTHER 5%).  WE HAVE NOT HAD A DECREASE IN STANDING I.E. AS THEY DELIVERY MONTH PROCEEDS NOBODY WISHES AN EFP PRODUCT IN EXCHANGE FOR A DEPARTING LONG.SOMEBODY BIG WANTS SILVER IN A VERY BIG WAY.
Last yr on the first day notice for the Sept silver 2016 contract we had 17.070 million oz stand for delivery.
By month end:  16.075 million oz/
 
Volumes: for silver comex
ESTIMATED VOLUME TODAY: XX CONTRACTS
NOT PROVIDED
YESTERDAY’s  confirmed volume was 153,482 contracts which is EXCELLENT
YESTERDAY’S CONFIRMED VOLUME OF 153,482 CONTRACTS WHICH EQUATES TO 767 MILLION OZ OF SILVER OR 109% OF ANNUAL GLOBAL PRODUCTION OF SILVER EX CHINA EX RUSSIA). IN OUR HEARINGS THE COMMISSIONERS STRESSED THAT THE OPEN INTEREST SHOULD BE AROUND 3% OF THE MARKET.
 
Total dealer silver:  38.674 million (close to record low inventory  
Total number of dealer and customer silver:   218.190 million oz
The record level of silver open interest is 234,787 contracts set on April 21./2017  with the price at that day at  $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 7.1 percent to NAV usa funds and Negative 6.8% to NAV for Cdn funds!!!! 
Percentage of fund in gold 62.8%
Percentage of fund in silver:37.2%
cash .+0.0%( Sept 22/2017) 
2. Sprott silver fund (PSLV): STOCK   NAV RISES TO -0.740% (Sept 22/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES TO -0.23% to NAV  (Sept 22/2017 )
Note: Sprott silver trust back  into NEGATIVE territory at -0.23%/Sprott physical gold trust is back into NEGATIVE/ territory at -0.740%/Central fund of Canada’s is still in jail  but being rescued by Sprott.

Sprott’s hostile 3.1 billion bid to take over Central Fund of Canada

(courtesy Sprott/GATA)

Sprott makes hostile $3.1 billion bid for Central Fund of Canada

 Section: Daily Dispatches

From the Canadian Press
via Canadian Broadcasting Corp. News, Toronto
Wednesday, March 8, 2017

http://www.cbc.ca/news/canada/calgary/sprott-takeover-bid-central-fund-c…

Toronto-based Sprott Inc. said Wednesday it’s making an all-share hostile takeover bid worth $3.1 billion US for rival bullion holder Central Fund of Canada Ltd.

The money-management firm has filed an application with the Court of Queen’s Bench of Alberta seeking to allow shareholders of Calgary-based Central Fund to swap their shares for ones in a newly-formed trust that would be substantially similar to Sprott’s existing precious metal holding entities.

The company is going through the courts after its efforts to strike a friendly deal were rebuffed by the Spicer family that controls Central Fund, said Sprott spokesman Glen Williams.

“They weren’t interested in having those discussions,” Williams said.

 Sprott is using the courts to try to give holders of the 252 million non-voting class A shares a say in takeover bids, which Central Fund explicitly states they have no right to participate in. That voting right is reserved for the 40,000 common shares outstanding, which the family of J.C. Stefan Spicer, chairman and CEO of Central Fund, control.

If successful through the courts, Sprott would then need the support of two-thirds of shareholder votes to close the takeover deal, but there’s no guarantee they will make it that far.

“It is unusual to go this route,” said Williams. “There’s no specific precedent where this has worked.”

Sprott did have success last year in taking over Central GoldTrust, a similar fund that was controlled by the Spicer family, after securing support from more than 96 percent of shareholder votes cast.

The firm says Central Fund’s shares are trading at a discount to net asset value and a takeover by Sprott could unlock US$304 million in shareholder value.

Central Fund did not have any immediate comment on the unsolicited offer. Williams said Sprott had not yet heard from Central Fund on the proposal but that some shareholders had already contacted them to voice their support.

Sprott’s existing precious metal holding companies are designed to allow investors to own gold and other metals without having to worry about taking care of the physical bullion.

end

And now the Gold inventory at the GLD

Sept 22/with gold up only 1 dollar on the day we had a massive 6.21 tonnes of gold added to the GLD/.this is a good sign that gold will advance nicely this coming week.

Sept 21/no change in gold inventory tonight/inventory rests at 846.03 tonnes

Sept 20/no change in gold inventory tonight/inventory rests at 846.03 tonnes

Sept 19/another deposit of 2.07 tonnes of gold into the GLD/inventory rests at 846.03 tonnes

Sept 18/a huge 5.32 tonnes of gold deposit into the GLD despite gold’s whack today/inventory rests at 843.96 tonnes

Sept 15./strange!!no change in GLD after the whacking of gold/inventory remains at 838.64 tonnes

Sept 14./no changes at the GLD/inventory rests at 838.64 tonnes

Sept 13/late last night a huge 4.14 tonnes of gold was added to the GLD inventory/inventory rests at 838.64 tonnes.

Sept 12/as of 5: 40 pm est, no changes in gold inventory at the GLD/Inventory rests at 834.50 tonnes

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.

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Sept 22 /2017/ Inventory rests tonight at 852.24 tonnes
*IN LAST 236 TRADING DAYS: 88.86 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 171 TRADING DAYS: A NET  68.57 TONNES HAVE NOW BEEN ADDED INTO  GLD INVENTORY.
*FROM FEB 1/2017: A NET  37.18 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory

Sept 22/no change in silver inventory at the SLV/Inventory rests at 324.915 million oz/

Sept 21/no change in silver inventory at the SLV/Inventory rests at 324.915 million oz

Sept 20/no changes in silver inventory/Inventory remains at 324.915 million oz

Sept 19/strange!! another withdrawal of 1.134 million oz despite the rise in silver/inventory rests at 324.915 million oz

Sept 18/a withdrawal of 1.039 million oz from the SLV/Inventory rests at 326.049 million oz

Sept 15./no change in silver inventory at the SLV/Inventory rests at 327.088 million oz/

Sept 14/no change in silver inventory at the SLV/Inventory rests at 327.088 million oz/

Sept 13/no change in silver inventory at the SLV/Inventory rests at 327.088 million oz/

Sept 12.2017/no change in silver inventory at the SLV/Inventory rests at 327.088 million oz/

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

Sept 22.2017:

Inventory 324.915  million oz
end
  • 6 Month MM GOFO

    Indicative gold forward offer rate for a 6 month duration

    + 1.31%
  • 12 Month MM GOFO
    + 1.55%
  • 30 day trend

end

At 3:30 pm est we receive the COT report which gives us position levels of our major players.

last week if you will recall, on both gold and silver the boat was lopsided with the large specs, small specs on the long side and the commercials supplying most of the short paper.

The report is from Tuesday Sept 11 through to Sept 18

this report would be in the middle of our torment 9 day period

First gold COT

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
330,646 94,557 63,976 129,222 382,263 523,844 540,796
Change from Prior Reporting Period
-20,846 -2,175 6,804 5,924 -13,133 -8,118 -8,504
Traders
179 104 77 53 61 272 208
 
Small Speculators  
Long Short Open Interest  
46,252 29,300 570,096  
-2,392 -2,006 -10,510  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, September 19, 2017

our large speculators

those large speculators who have been long in gold were fleeced out of 20,846 contracts

those large speculators who have been short in gold covered 2174 contracts from their short side.

commercials go net short 23,000 contracts

our commercials

those commercials who are long in gold added 5924 contracts to their long side.

those commercials who are short in gold covered 13,133 contracts from their short side

commercials go net long by 19,000 contracts

our small speculators

those small specs that have been long in gold pitched 2392 contracts from their long side

those small specs that have been short in gold covered 2006 contracts from their short side.

Conclusions:  the commercials used the constant raid to cover a net 19000.  This is still in the middle of the torment period but I would have expected a higher number of covering of shortfalls.

and now for our silver cot

Silver COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
99,687 31,884 21,619 47,905 126,313 169,211 179,816
-2,556 4,628 5,530 1,973 -4,300 4,947 5,858
Traders
87 54 44 34 36 150 111
Small Speculators  
Long Short Open Interest  
23,783 13,178 192,994  
-160 -1,071 4,787  
non reportable positions Change from the previous reporting period
COT Silver Report – Positions as of Tuesday, September 19, 201

our large speculators

those large specs who have been long in silver were fleeced by only 2556 contracts.

those large specs who have been short in silver added 4628 contracts to their short side.

large specs go net short by 7000 contacts

our commercials

those commercials who have been long in silver added 1973 contracts to their long side

those commercials who have been short in silver covered 4300 contracts from their short side

commercials go net long by 6,200 contracts…as they could not cover as much as they wanted

our small speculators

those small specs that have been short in silver pitched a tiny 160 contracts from their long side

those small specs that have been short in silver covered 1071 contracts from their short side.

Conclusions: commercials could only cover 6200 contracts as we are smack in the middle of torment.

 

Major gold/silver trading/commentaries for FRIDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms

– £1 trillion crisis looms as pensions deficit and consumer loans snowball out of control
– UK pensions deficit soared by £100B to £710B, last month
– £200B unsecured consumer credit “time bomb” warn FCA
– 8.3 million people in UK with debt problems
– 2.2 million people in UK are in financial distress
– ‘President Trump land’ there is a savings gap of $70 trillion
– Global problem as pensions gap of developed countries growing by $28B per day

Editor: Mark O’Byrne

There is a £1 trillion debt time bomb hanging over the United Kingdom. We are nearing the end of the timebomb’s long fuse and it looks set to explode in the coming months.

No one knows how to diffuse the £1 trillion bomb and who should be taking responsibility. It is made up of two major components.

  • £710 billion is the terrifying size of the UK pensions deficit
  • £200 billion is the amount of dynamite in the consumer credit time bomb

How did the sovereign nation that is the United Kingdom of Great Britain and Northern Ireland get itself so deep in the red?

This is not a problem that is bore only by the Brits. In the rest of the developed world a $70 trillion pensions deficit hangs heavy.

We are all in this boat because we apparently didn’t learn from the massive man made crisis that was the 2008 financial crisis.

The ‘we’ is referring to UK individuals who are on average holding £14,367 of debt. It refers to the pension fund managers who are ignoring the fact they hold more liabilities than assets. It refers to banks and mortgage and loan providers who give loans to people who are already indebted and who will struggle to pay the debt back. It refers to a compliant media who do not have ask hard questions about irresponsible lending practices and cheer lead property bubbles due to getting significant revenues from the banking and property sectors.

And,  ultimately the ‘we’ is the government who peddled such terrible monetary policy that it has brought us as close to nuclear financial disaster as we have been since 2008.

In the red, everywhere

In the United Kingdom we are running a deficit not only in our day-to-day lives but also in our future lives.

Unsecured consumer credit is now at 2008 levels. There is £200 billion of unsecured credit. The FCA’s Andrew Bailey has put this dangerous issue at the top of the regulator’s agenda.

unsecured consumer credit

However it is not just for the FCA to be dealing with. There is no one organisation responsible for the huge levels of personal debt that will eventually cause this financial system to implode.

There are 8.3 million people in the UK with debt problems. The number of debtors falling behind on payments increased by 40% in the first half of this year.

The problem shows no sign of improving: 45% of the £65 billion of credit card debt is managed using the 0% transfer balance offers. But with half of those that transfer, the balance remains the same at the end of the period.

Earlier this year the Bank of England’s director for Financial Stability  warned lending standards were at risk of going ‘from responsible to reckless very quickly’. This comes to mind when you consider that 86% of cars are now bought on PCP (personal contract purchase).

So concerned are financial observers with the UK’s personal debt crisis that in July this year Moody’s downgraded the outlook on bonds backed by credit card customers, buy-to-let mortgages and car loans.

Greg Davies, Moody’s assistant vice president warned:

“Household debt is high and still growing, leaving consumers vulnerable to an economic downturn, while higher inflation, weaker wage growth and levels of indebtedness leaves those in lower-income brackets the most exposed.”

So in our day-to-day lives we are over £200bn in debt. How on earth could we possibly save for our futures?

Sadly, this is a struggle as well. Not just because of our debt but thanks to the rising cost of inflation and stagnant wages and underfunded pension pots in both public and private sectors.

Nest egg isn’t looking so cosy

Ageing populations, low birth rates and dire monetary policy means that over 27 million people in the UK will not be receiving adequate pensions once they retire.

These 27 million are those relying on a a defined-benefit (DB) pension – such as a proportion of final salary, index-linked to inflation for life.

Those who aren’t relying on a DB pension are in just as dire straits.

Savers in modern defined-contribution (DC) plans – where there are no guarantees about what the pension will ultimately pay out – are at risk of not saving enough to avoid poverty in old age.

This is particularly bad when you consider that  listed companies may need to meet their increased DB obligations and so DC investors will see their own investments grow more slowly.

In the UK it is estimated that more than one-in-five people are not saving for their pensions. Even more are  uninformed about how much they will need in retirement.

Low interest rates are clearly greatly exacerbating this crisis as pensions dependent on yields from bonds have seen yields fall to near zero and sometimes go to zero.

Sadly there is little sign of a let-up. In the United Kingdom the pensions deficit grew by £190bn last year. In the last month it has jumped by another £100bn to £710bn.

This is leading to lower-than-expected returns on both corporate and government bonds. The low corporate bond yield has significantly contributed to the growing pension deficit.

Interest rates have been at record lows for over ten years thanks to easy monetary policy.

Thank you Bank of England, ECB and Federal Reserve.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, told the Express:

“Current monetary policy may have kept the economy going but it is killing pension schemes, with disastrous consequences, both for any employers sponsoring a final salary scheme and for any individuals looking to buy an annuity.”

Developed nations with underdeveloped pensions

This is not a problem unique to the UK. Currently the world’s leading economies are dealing with a $70 trillion deficit. The World Economic Forum (WEF) was that this could increase to $224 trillion by 2050.

If you add in India and China then this gap hits $400 trillion in 2050.

Size of retirement savings gap

The United States has the largest shortfall of the countries measured, followed closely by the United Kingdom. In the land of President Trump there is a savings gap of $70 trillion. It is growing at a rate of $3 trillion per year (5 times the annual defence budget).

The overall savings gap, of the eight countries assessed, is predicted to grow at a rate of $28 billion per day. Unsurprisingly it is in India and China where the gaps will widen the quickest. 10% and 7% respectively.

The global situation is so bad that the WEF has referred to the pensions deficit as ‘the financial equivalent of climate change.’

The OECD recommends pensioners have a retirement income of 70% of their earnings. This is a ‘crude’ assessment according to the WEF who argue low-income workers need closer to 100%.

This is also a sex issue. According to a report in 2014, 50% more women than men cannot afford to contribute to their pensions. It is so bad for the female of the species that 30-40% of global retirement balances are lower for women than men.

Where is the deficit coming from? The WEF’s report looked both public and corporate pensions. It was the government and public pensions that were the most unhealthy looking, accounting for 75% of the under funding.

Breakdown of pensions gap

The WEF seemed little concerned that the largest corporate pension markets were in the UK and US, where there are over $4 trillion in liabilities. The organisation reassures itself that the market is highly regulated and the deficit ‘is modest compared to other components of the pension system’.

Corporates and individuals should not rest on their laurels

No matter what the WEF thinks, the corporate pension market in both the U.S. and Europe is in serious bother.

A report by MSCI found North American and European companies have the largest pension underfunding levels compared with revenues.

This is not surprising. Corporations are struggling to maintain pension pots for the very same reasons the WEF believe there is a major pensions shortfall:

  • Rapidly ageing populations
  • Falling birth rates
  • Poor access to pension products & poorly performing products with high charges

The final one is a huge one and the one which the majority of pension fund managers are unlikely to have foreseen. Individual savers even less so.

According to OECD measures the UK’s shortfall is higher than £6.2 trillion, set to increase by 4% per year. This will be over £25 trillion in 2050.

Take responsibility

The final reason the WEF gave for the current pensions disaster was ‘High degree of individual responsibility to manage pension’.

The WEF argue that the information given to individuals was not enough to expect them to understand how their pensions would work in the future and what was required of them now.

It is vital that individuals take responsibility for their pensions. You must ask questions about it as soon as possible.

Particularly, you should ask if you can invest in gold as part of your pension.

The traditional mix of equities and bonds that make up pension funds has under performed in the last 15 to 20 years.

Stock and bond markets have done well in the short term and they are artificially overvalued thanks to the easy monetary policy of central banks.

It is clear that pension funds’ overexposure to bonds and stocks has impacted pension investors returns over the long term.

With that in mind it’s sensible to allocate some of your pension to gold. Internationally, the trend for doing this is extremely low which is surprising given the role it has played in preserving and growing pension wealth.

Dr. Constantin Gurdgiev, formerly an adviser to GoldCore, says the following about the importance of having gold in your pension:

“Gold is a long-term risk management asset, not a speculative one.

As such it should be analysed and treated predominantly in the context of its role as a part of a properly structured, risk-balanced and diversified portfolio spanning the full life-cycle of the investment and pension horizon for individual investors and those with pensions.

Whether they be SIPPs in the UK or IRAs in the USA.”

Investors in the UK and Ireland, the US, the EU can invest in gold bullion in their pension, through self-administered pension funds.

UK investors can invest in gold bullion through their Self-Invested Personal Pensions (SIPPs), Irish investors can invest in gold in  Small Self Administered Schemes (SSAS) and US investors can invest in gold in their Individual Retirement Accounts (IRAs).

Adding gold to your pension is a time-proven way to protect your retirement from the pensions time bomb. There is little we can do to stop it, investors should act now and take responsibility for their retirement nest egg by investing in the ultimate form of financial insurance – gold bullion.

The ‘pensions timebomb’ looms. UK pension funds’ lack of diversification and overexposure to traditional paper assets may cost pension holders dearly.

Pensions allocations to gold are very low in the UK and yet gold has an important role to play over the long term in preserving and growing pension wealth. You can read our guide about how to invest in gold in a pension in the UK here.

News and Commentary

Metals Morning View: Gold’s Correction Runs Into Haven Buyin (BullionDesk.com)

Gold prices inch up amid North Korea concerns (Reuters.com)

Stocks Drop, Yen Rises on Renewed N. Korea Tension (Bloomberg.com)

Asia stocks fall, yen and franc gain as North Korea moots H-bomb test (Reuters.com)

Kim Jong Un will tame ‘mentally deranged U.S. dotard’ Trump with fire (MarketWatch.com)

 Robert Shiller warns US stocks overvalued. Source: Marketwatch

U.S. stock market looks like it did before most of the previous 13 bear markets (MarketWatch.com)

UK property transactions fell again last month (CityAM.com)

Bitcoin is not a fraud – it’s dotcom 3.0 (MoneyWeek.com)

Bitcoin Under Fire – Profit for Gold? (CoinTelegraph.com)

Fed’s long walk to normalisation might have to turn into a jog (MoneyWeek.com)

Gold Prices (LBMA AM)

22 Sep: USD 1,297.00, GBP 956.15 & EUR 1,082.09 per ounce
21 Sep: USD 1,297.35, GBP 960.56 & EUR 1,089.00 per ounce
20 Sep: USD 1,314.90, GBP 970.53 & EUR 1,094.79 per ounce
19 Sep: USD 1,308.45, GBP 969.30 & EUR 1,091.25 per ounce
18 Sep: USD 1,314.40, GBP 970.16 & EUR 1,100.68 per ounce
15 Sep: USD 1,325.00, GBP 977.32 & EUR 1,109.16 per ounce
14 Sep: USD 1,323.00, GBP 1,002.44 & EUR 1,111.58 per ounce

Silver Prices (LBMA)

22 Sep: USD 16.97, GBP 12.52 & EUR 14.18 per ounce
21 Sep: USD 16.95, GBP 12.58 & EUR 14.24 per ounce
20 Sep: USD 17.38, GBP 12.84 & EUR 14.48 per ounce
19 Sep: USD 17.15, GBP 12.70 & EUR 14.31 per ounce
18 Sep: USD 17.53, GBP 12.94 & EUR 14.66 per ounce
15 Sep: USD 17.70, GBP 13.03 & EUR 14.81 per ounce
14 Sep: USD 17.75, GBP 13.40 & EUR 14.91 per ounce


Recent Market Updates

– Gold Investment “Compelling” As Fed May “Kill The Business Cycle”
– “This Is Where The Next Financial Crisis Will Come From” – Deutsche Bank
– Global Debt Bubble Understated By $13 Trillion Warn BIS
– Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials
– Gold Up, Markets Fatigued As War Talk Boils Over
– Oil Rich Venezuela Stops Accepting Dollars
– Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today
– British People Suddenly Stopped Buying Cars
– Buy Gold for Long Term as “Fiat Money Is Doomed”
– Conor McGregor – Worth His Weight In Gold?
– Gold Has 2% Weekly Gain,18% Higher YTD – Trump’s Debt Ceiling Deal Hurts Dollar
– ‘Things Have Been Going Up For Too Long’ – Goldman CEO
– Physical Gold In Vault Is “True Hedge of Last Resort” – Goldman Sachs

end

Two articles for you to read

the first one by Macleod is a must read.  He states that we are now entering the expansionary phase of the credit cycle and the area that will be most effected will by Europe and rising rates will bring down the entire European banking sector

(courtesy Macleod/Goldmoney)

and Hugo Salinas Price on the new Yuan petro dollar which will cause gold to rise

(Hugo Salinas Price)

Macleod on the next crisis, Salinas Price on gold’s prospects

 Section: 

4:27p ET Thursday, September 21, 2017

Dear Friend of GATA and Gold:

GoldMoney research director Alasdair Macleod today writes that increased borrowing by smaller businesses soon will lead to the crisis phase of the credit cycle. His commentary is headlined “The Forthcoming Global Crisis” and it’s posted at GoldMoney here:

https://www.goldmoney.com/research/goldmoney-insights/the-forthcoming-gl…

Meanwhile Hugo Salinas Price, president of the Mexican Civic Association for Silver, offers an idea of how China’s facilitating the trade of oil for yuan and gold might break the gold-price-suppressing bullion banks in London. Salinas Price’s commentary is headlined “My Views Regarding Prospects for Gold” and it’s posted at the association’s internet site here:

http://www.plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=3…

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

AND IN FULL: ANGUS MACLEOD….

The global economy is now in an expansionary phase, with bank credit being increasingly available for non-financial borrowers. This is always the prelude to the crisis phase of the credit cycle.

Most national economies are directly boosted by China, the important exception being America. This is confirmed by dollar weakness, which is expected to continue. The likely trigger for the crisis will be from the Eurozone, where the shift in monetary policy and the collapse in bond prices will be greatest. Importantly, we can put a tentative date on the crisis phase in the middle to second half of 2018, or early 2019 at the latest.


Introduction

Ever since the last credit crisis in 2007/8, the next crisis has been anticipated by investors. First, it was the inflationary consequences of zero interest rates and quantitative easing, morphing into negative rates in the Eurozone and Japan. Extreme monetary policies surely indicated an economic and financial crisis was just waiting to happen. Then the Eurozone started a series of crises, the first of several Greek ones, the Cyprus bail-in, then Spain, Portugal and Italy. Any of these could have collapsed the world’s financial order.

But Mario Draghi steadied the sinking Eurozone banking system by promising to do whatever it takes. We derided him, but he has succeeded. The intention of zero interest rates and QE was to prevent a slide into deflation, a spiral of collapsing bank credit and asset values. Markets steadied. It was intended to restore private sector wealth by inflating asset prices. It enriched the hard-pressed financial sector, with bond and stock markets not only recovering, but going on to record levels. A sense of wealth has returned to the portfolio-owning classes. The DAX has risen over 225% and the S&P 500 nearly 250%. Inflation, by which commentators mean the rate of increase in consumer prices, has not yet reflected the massive injection of monetary inflation from the time of the crisis. At least, not on official CPI figures.

If there is a lesson for us all since the great financial crisis, it is that central banks, even though dealt an appalling hand, are very good at managing local systemic problems, real or imagined. Bearish hedge fund managers, those masters of the universe, are throwing in the towel. Valuations, according to their models, cannot be explained, let alone justified.

In truth, these investors have made the same mistake every cycle. They see the bubbles, but fail to fully understand their source. They think bubbles are solely the result of the madness of crowds, irrational bullishness ignoring fundamentals. They fail to dig a little deeper and understand the source is a repeating credit cycle. Only when you understand that financial bubbles are merely visible symptoms, can you begin to understand the underlying disease.

The global credit cycle is in a new expansionary phase, which can be expected to change market characteristics. Only now are we sufficiently advanced in the global credit cycle to speculate about its evolution into crisis. This article takes the reader through the likely manifestations of it, providing a road map for reference of its progress, and where and when it is likely to hit first.


Credit cycle recap

During a credit crisis, the expansion of the money quantity at the behest of the central bank is aimed at saving the banks. Otherwise, banks, which are highly-leveraged financially, would simply collapse under a combination of their customers’ bad debts and falling collateral values.

Assuming monetary policy rescues the banks from the crisis, the financial system becomes stabilised, the crisis is over, and we move into a second phase of recovery. Unemployment starts being cyclically high, and price inflation remains subdued. The banks are still traumatised, expanding credit only to the government and their largest low-risk customers. On the back of improving bond prices, they begin to expand credit towards their own and associated financial activities, remaining cautious over lending to the medium and smaller business sectors (SMEs), which between them form the bulk of non-financial economic activity. This recovery from the crisis is prolonged by government intervention, which generally seeks to prevent malinvestments being liquidated, freeing up capital to be used more productively.

As time goes on, the banks begin to grow confident that the crisis has passed, and memories of it fade. They gradually extend their lending to SMEs, which represents the silent majority of the non-financial economy. We have now entered the expansionary third phase, where banks increasingly compete for what they have now decided is low-risk business. The second half of the expansionary phase is characterised by low unemployment, growing skill shortages, and rising price inflation. Rising prices cheapen the real interest rate to a lower level than in the recovery phase, upsetting the balance between the expansion of credit and availability of capital and consumption goods even more. It is this that eventually forces the central bank to raise interest rates to the point where the next crisis phase is upon us. Central banks have no option but to address the falling purchasing power of the currency by raising interest rates sufficiently to stabilise it.

A debt crisis is triggered, because business models are undermined by rising financing costs. Companies collapse. In addition, the legacy of accumulated debt means high interest rates undermine the credit status of long-term debts and the asset values dependant on them, particularly of property. Government welfare costs rise and state finances deteriorate rapidly. As financial intermediaries, the banks are caught in the middle of the crisis, and being operationally geared, face bankruptcy. There comes that moment when even ordinary people wonder if they have lost everything.

That is why having triggered the crisis, central banks then rapidly change course and do everything, however financially unsound, to ensure the financial system survives and governments can continue to be financed.

Every credit cycle evolves on this approximate framework, but each has its specific characteristics. Progression from one phase to the other is often difficult to detect, and sometimes only obvious long after the event. But the repetition of crisis, recovery, expansion and crisis again is the structure of every credit cycle.

Over recent credit cycles, the magnitude of the crisis phase has increased, reflecting the enormous debt burden accumulating in the overall global economy. Since the financial reforms of the 1980s, there has been a new and growing element in the advanced economies: the expansion of credit aimed at financing consumption, which has now overtaken the application of credit aimed at production. This does not change the cycle framework, but it does alter its characteristics and visibility.


Global expansion is already here

The G20’s efforts to coordinate monetary policy globally have been undoubtedly successful. Unfortunately, they make credit expansion a truly international phenomenon, eventually feeding into a synchronised global credit cycle. International coordination of monetary policy increases the economic and price distortions for everyone, rolling up several smaller waves into one big tsunami. Furthermore, when the crisis hits one jurisdiction, the chances today are higher than before it will be transmitted to the others. So, we must consider this as a global experience, likely to be triggered from anywhere.

Investors based in Western capital markets often point the finger at China. We know that China’s massive credit expansion of recent years has already taken her into an expansionary phase. All the signs are there in plain sight, because the government is working to a predetermined published plan. The current five-year plan is intended to make China, in partnership with Russia, the dominant economic force on the Eurasian continent.

China is the most significant contributor to the current global credit expansion phase, benefiting all those that trade with her. Britain, a trading partner, has also been at full employment for some time. She has an open service-based economy, which permits it to expand in the direction of maximum opportunity. She is in the vanguard of providing services, technology and manufactured goods to China, and for all the other countries in Asia that are expanding with her. Germany is also expanding on the back of the Chinese story, but in her case principally as a supplier of capital goods. Japan, whose mighty corporations have factories throughout East Asia, is also doing well.

Commodity exporters round the world are similarly benefiting from Chinese demand for raw materials. Sub-Saharan Africa is now in China’s thrall, as is Australia and important South American countries. Canada and Mexico benefit. It is easier to list the countries not affected by China, so small is the number.

The expansionary phase of the credit cycle is all about how money is deployed. To make room for an increase in bank lending to non-financials, banks sell their low risk assets, predominantly short-term government bonds. Today, the consequential rise in government bond yields, an important indicator, remains suppressed by extreme monetary policy, and by the fact that large government deficits need to be financed at the lowest possible rates. Furthermore, different countries are expanding at vastly different rates, but they are all expanding on the back of bank credit becoming more widely available to the non-financial sector.


The sequence to look for ahead of the crisis

There is little doubt that the world is in the expansion phase of the credit cycle, with some economies responding better than others. China is driving the application of credit worldwide through her policies of infrastructure spending and economic progression. Her demand for capital goods and raw materials affects different countries in different ways, but China is the major global stimulant for credit demand in all her trading partners.

America is left out of this party, sitting it out in a grumpy mood. She frets about her trade deficit with China, threatening tariff retribution. However, even America’s economy is running towards capacity constraints, with unemployment, at least for the employable, at or close to cyclical lows. Credit is still fuelling financial asset values, as well as consumption and financing the government deficit. Investment in production, our marker for the application of credit, is taking a back seat, telling us that economic progress, as opposed to increases in GDP, is stagnating. But the expansion, even though weak, is nevertheless there.

All that’s needed to upset the Fed’s monetary planning is for consumer prices to rise significantly above the target rate of 2%. Even though the great American economy is mainly an internal affair, at some stage if the dollar continues to weaken there will be higher price inflation, despite domestic stagnation

Markets should give us a more predictable guide. The first market to turn is always bonds. Falling bond prices can be tolerated by equity markets to a degree, before the net flow of funds out of financial assets gathers pace. This is the current situation in most financial markets. One would expect to see improved trading prospects in the non-financial economy, encouraging inexperienced investors to continue to buy equities, before they too lose bullish momentum.

First bonds, then equities. Property prices should continue to rise, buoyed up by a combination of credit-fuelled economic expansion, wage rises improving affordability, and suppressed real interest rates. In this cycle, demand for retail space has been subdued by online shopping, but demand for office space, particularly outside the US, continues apace. The explosive growth in construction in Asian cities is our evidence. China’s property development programmes are massive, but state-directed with a purpose, so not the best indicator of credit-fuelled capital spending.

It is at this point that banks compete to lend, looking for market share rather than profit. Property is usually a major recipient of bank credit and the boom can be substantial. According to Colliers International, €12.2bn were invested in German commercial real estate in Q1 2017. This is the second time that quarterly transaction volume has exceeded €10bn since the 2007 record year. Japan’s commercial property price index has risen 17% since 2012, not a bad return in Japanese terms. In Dubai, a further 9.9 million square feet of office space is under construction. Similar stories abound elsewhere.

So, the theoretical sequence is bonds top out, followed by equities, followed by property. Bond yields started rising in 2012, and it’s likely the next rise will be enough to call the top on equities. Property prices should continue to rise after that, buoyed up by improved economic conditions, until central banks are eventually forced to raise interest rates to control price inflation. The time-lapse between these events can vary considerably, but as history has repeatedly showed, all three events must take place: one or two are not enough. The final collapse should be in property. In that sense, the great financial crisis of nine years ago was a classic example.


The source of the next crisis

Given the G20 now ensures that when the crisis hits, we all sink together, we must now speculate where the next crisis will arise. We shall assume that the world does not descend into a geopolitical and financial war, though that risk is significant. We must look for extremes between current monetary policy and economic reality, a task made easy for us by central banks, who are always too late in understanding the dynamics of credit and its effect on prices. It is a process of elimination.

We can eliminate the hedge funds’ favourite, China, because the expansion of bank credit is associated with financing genuine economic progress more so than anywhere else. Furthermore, the state tightly controls bank lending and capital flows, and she pays no more than lip service to the credit-cycle coordinating activities of the G20. We can also rule out the US, because her expansion phase has been subdued by her policies of economic isolationism, unless, that is, the dollar collapses against other currencies to the extent the reserve currency becomes the crisis.

Japan’s monetary policy has become less relevant to her economy, unless for some reason ordinary savers suddenly become scared by price inflation. Much Japanese manufacturing is now conducted overseas, and domestically the expansionary phase of the credit cycle is directed at financing the government’s deficit. The British economy is a potential source of systemic danger, given its strong performance and inappropriate monetary policies, but at last the Bank of England is beginning to reconsider its monetary stance.

By far the most likely and dangerous source of the next crisis appears to be the Eurozone. The ECB, distracted by the difficulties in Greece, Italy, Spain and Portugal, maintains a bizarre monetary policy of negative interest rates for bank deposits and a monthly injection of €60bn, aimed at keeping government funding costs as low as possible and the weaker banks solvent. The market distortions are extreme, with the “riskless” 2-year German Schatz bond yielding a negative 0.68%.

Trouble is brewing, with the euro rising 15% against the dollar this year so far. The reflationists at the ECB see this as deflationary, putting pressure on EU exporters, who always lobby for a low exchange rate. Therefore, the temptation to ride out currency strength with no change in monetary policy is strong.

Dollar and sterling interest rates are already rising. The underlying problem for the ECB is they have financed government spending by buying up Eurozone sovereign debt, underwriting inflated bond prices. Governments have got used to artificially suppressed funding costs and will not take kindly to seeing them rise. But even worse, Basel committee rules give sovereign debt a zero-risk weighting for banks, and so the Eurozone’s banks are up to their necks in overpriced government bonds.

Unlike American banking regulators, which since the last credit crisis have forced the US banks to increase their core capital, the ECB has done very little to improve the soundness of Eurozone banks. Therefore, they cannot afford to see government bond yields rise significantly, because the valuation losses will wipe out many banks’ capital. Yet, with the 2-year yield marker still deep in negative yield territory, and the Eurozone economy now demonstrably in the expansionary phase of the credit cycle, here lies the crisis in the making.

Rarely have the financial dynamics appeared more alarming. And as trade with China increases in the coming months, with container-loads of product being shipped overland both ways, the dilemma facing the ECB will worsen. Furthermore, with the dollar set to weaken on a combination of US economic underperformance and growing international antipathy against it as a trade currency, it is hard to see how the euro will not continue to strengthen further.

Notwithstanding these problems, we must expect an initial reversal of current monetary policy. Reluctantly perhaps, the ECB will stop buying financial assets and remove negative deposit rates. However, even this move will hurt the Eurozone banks as short-term bond prices fall, and the prevention of a new banking crisis will dominate monetary policy.

Assuming the systemic fall-out from this initial rise in interest rates and bond yields is contained by nursing the weaker banks, private sector non-financial business should continue to expand. Eurozone CPI inflation is already at 1.5%, with Germany’s at 1.8%. The 2% target rate could be breached early next year, and speculation is likely to mount about further interest rate rises from then on. Government bond yields in the Eurozone are bound to soar, guaranteeing widespread insolvency among the Eurozone’s banks.

For now, the end of negative interest rates and the asset purchase programme should buy some time, perhaps until the middle of next year, by when property prices should be rising strongly. Eurozone companies will be reporting improved trading and rising profits, and the sounder banks competing to lend by cutting their loan rates. Furthermore, with inflation rising, borrowing costs in real terms could be even more negative than they are today. Despite the relative strength of the euro, price inflation, always the balance between excess credit and limited supplies of goods, will become the dominant issue.

All major jurisdictions have this problem to a greater or lesser extent. The specifics differ, but rising rates of price inflation will become common. Thanks to the G20 ensuring everyone is in the same boat, thanks to China’s stimulus to most of the world economy, and thanks to the long-term accumulation of excessive debt, the dynamics behind the next crisis promise to be greater than anything seen heretofore.

Therefore, it looks like the timing will be set by the violent transformation of the ECB’s monetary policy from saving the system from the last crisis, to a realisation that if they don’t act quickly, we will be into the next one, and then the eventual realisation that they must raise interest rates even more sharply. We can tentatively pencil in a date sometime between the middle and the end of next year for this final act, and probably put a time limit on it of early 2019.

How it plays out is another story for another article, but at least we can begin to expect where and roughly when the next credit-fuelled crisis is due to happen.

END

Quite a story:  Fact or fiction:  Marcos’ gold bars:  real or fiction

(courtesy  Gerry Liro/ABS-CBN NEWS)

Philippine dictator Marcos’ gold bars: Fact or fiction?

 Section: 

Some very interesting photos at the internet link below.

* * *

By Gerry Lirio
ABS-CBN News, Quezon City, Philippines
Thursday, September 21, 2017

http://news.abs-cbn.com/focus/09/21/17/marcos-gold-bars-fact-or-fiction

MANILA — By the late industrialist Enrique Zobel’s recollections, former strongman Ferdinand Marcos left behind his widow, Imelda, and three children with a cache of gold bars that in 1989 was worth at least $35 billion.

Zobel disclosed the value of Marcos’ gold bars in a 14-page sworn statement issued before the Senate Blue Ribbon Committee at the Philippine Consulate in Honolulu between October 27 and 29, 1999. Sen. Aquilino “Nene” Pimentel Jr., then Blue Ribbon Committee chair, and Sen. Juan Flavier flew to Hawaii in response to two resolutions filed separately by Sens. Serge Osmeña III and Franklin Drilon seeking to inquire about the gold bars

Based on his deposition, Zobel said Marcos had $100 billion in his name and part of it was the $35 billion in gold bars.

Now that the Duterte administration and the Marcoses are said to be in talks over the Marcos wealth, Pimentel told ABS-CBN News in an interview last week that it is about time the government ascertained the true value of the family’s gold hoard.

Zobel’s disclosure reinforced a long-held view that the Marcoses had kept to themselves a huge treasure on top of the P170-billion Marcos wealth recovered as of 2015 by the government since the four-day peaceful revolt forcibly sent them to Hawaii in February 1986.

Zobel was a Marcos confidante and supporter who stood by him until the strongman died at 72 in exile in Hawaii on September 28, 1989. The tycoon died 15 years later at the Asian Hospital in Muntinlupa. He was 77.

Zobel said Marcos, then weak and ailing, showed him original certificates of the gold bars worth $35 billion, then based on the prevailing price of $400 per ounce, after Marcos asked to borrow some $250 million several months after the Marcos family landed in Hawaii. Marcos signed a promissory note for the loan, with the certificates meant to prove he could pay him back. The promissory note was dated October 17, 1988, one day before was indicted in the United States.

Apart from the gold certificates, which came mostly from Germany, Zobel said Marcos had in possession two more tranches of gold from Suriname, a sovereign state in the northeastern Atlantic coast of South America.

In all he estimated that Marcos had total wealth of some $100 billion. When Flavier asked him if he heard it right, Zobel replied: “Yes, $100 billion.” That was in 1989.

An investment adviser who once worked at UBS-Philippines where Marcos had maintained an account told ABS-CBN News that Marcos affixed not his signature, but his palm print to make a transaction while in Hawaii. At least two UBS officials — Gertrude Erismann-Peyer, spokesperson of the UBS in Switzerland, and its international watchdog Hans Peter Bauer — admitted Marcos had accounts in the bank.

… Worth pursuing

Zobel, one of the country’s richest at that time, said he believed Marcos. He said the certificates looked real.

Pimentel, jailed by Marcos’ military four times for opposing the dictatorship, said Zobel’s disclosure was worth pursuing.

“My view is that no matter how tall the tale sounds, within reason, it should be heard and placed on record where it may later on be analyzed more critically. It should not be dismissed outright,” he said in a speech titled “Still a Long Way to Go” on November 16, 1999, before the Manila Overseas Press Club.

… Historical value

“By receiving such testimonies under oath, the committee helps to document, hopefully, more systematically, people’s stories on the Marcos wealth,” he said.

Pimentel told ABS-CBN News last week that Zobel’s testimony deserved a closer look then and now. “Such testimonies should have some value in law, if not in history,” he said.

Zobel knew wealth like no other, he said. Similarly, Zobel knew gold certificates like no other.

“It was a good thing that the president [Duterte] disclose to the public the Marcos family’s offer,” Pimentel said.

“Now the negotiations should have complete transparency. How much are we really talking about here? And what do they want?”

… Conservative estimate

The 1989 value of the gold bars was 10 times more than the $10-billion estimate the Cory Aquino government made of the entire Marcos loot throughout his 20-year rule. First made by former Sen. Jovito Salonga, founding chair of the Presidential Commission on Good Government, that estimate has not changed since March 1986. Salonga knew then it was a conservative estimate, but cited the difficulty of penetrating the international banking system to get more details.

Gold is power and throughout the centuries people have continued to hold and hoard gold if only because it has maintained its value and stature. People see gold as a way to pass on and preserve their wealth from one generation to the next, especially now that supply has become scarce.

Between 1998 and 2008, the price of gold nearly tripled, reaching the $1,000-an-ounce milestone in early 2008 and nearly doubling between 2008 and 2012, hitting around the $1,800-$1,900 mark, according to various records.

According to the UBS investment adviser, the prices of gold fluctuated once upon a time in the early 1990s, when Marcos’ son, Ferdinand Jr., was reportedly either unloading or transferring some of the family’s gold deposits from one account to another.

… Duterte’s disclosure

President Duterte announced last August 29 on national TV that the Marcos family was willing to return a few hidden gold bars.

If indeed anyone of the Marcos heirs made an offer to the president, it would be the first time for them to officially acknowledge that they indeed had a cache of gold bars, and that these have been in their possession for many years, giving credence to Zobel’s testimony.

In an interview on August 31, Rep. Lito Atienza of the Buhay Party-list group quoted Marcos’s widow, Imelda, as telling him that she wanted to return part of her family’s supposed 7,000-ton gold cache worth roughly P15 trillion.

It wasn’t Imelda’s first time to say so. According to former PCGG commissioner Ricardo Abcede, in various media interviews in 2010, Imelda had told him she had $1 trillion in an account in a New York bank.

… Great gold rush

Where the gold bars came from is another story.

Reports on Marcos’ gold bars have all been conflicting and confusing and, when ranged against each other, they all made up a tall tale.

One report said that Marcos found the Yamashita treasure, including a golden Buddha, when he was still a guerilla commander during the Japanese occupation, and that he got them shipped to Hong Kong, Switzerland, among other places, under his account.

Japanese Gen. Tomoyuki Yamashita had reportedly brought in the treasure, stolen by Japanese forces from various sources in Southeast Asia, and hid it in caves, tunnels, underground complexes or just underground in the Philippines before the arrival of American troops.

… Man who found gold

Another report said that a treasure hunter named Roger Roxas found it somewhere in an underground chamber in Baguio City in 1971, with a permit given by Judge Pio Marcos, a Marcos relative.

Roxas said he and his team found a 3-foot-high golden Buddha from an enclosed chamber on state lands near Baguio, along with bayonets, samurai swords and crates packed with gold bullion, among other items.

A few days after, the story said, two individuals came to him, introducing themselves as gold buyers. To his horror and sorrow, the two men, he learned later, were allegedly spies President Marcos sent to check on him. In no time, military men stormed the area, seized Roxas’ gold find, grabbed him by the throat, beat him black and blue, and held him captive in a godforsaken land for weeks.

Then and now, nobody knows how much the treasure was worth.

… Osmeña’s role

Roxas escaped with the help of Osmeña’s father, former Sen. Sergio Osmena Jr. In an interview with ABS-CBN News, Osmeña III confirmed Roxas’ gold find and escape story, one of the many reasons Marcos reportedly hated the Osmeñas. “That story is true and Roxas went to the US to sue Marcos,” he said in an interview last week.

Freed, Roxas reportedly went to town spreading word of how he discovered the gold and how Marcos stole it from him. In March 1988, he sued Marcos and his family in a Hawaii court to recover the treasure and seek damages. He died on the eve of the trial.

… Hawaii suit

In 1996 the court ruled in Roxas’ favor, but the decision was unclear on the damages as it was uncertain as to the value of the treasure. It said Roxas found a treasure, but could not conclude if it was the one by Yamashita.

In his testimony, Zobel said Marcos recovered part of the Yamashita treasure before the liberation and another part when he was president.

The Yamashita treasure is not fiction, judging from well-researched accounts of book authors and publishers — “The Yamato Dynasty: The Secret History and of Japan’s Imperial Family” (2000) by Sterling Seragrave and Peggy Seagrave; “Gold Warriors: America’s Secret Recovery of Yamashita’s Gold” (2003) by Sterling Seragrave and Peggy Seagrave; and “The Great Gold Swindle: Yamashita Gold, 75 Years of Philippine Corruption” by Phoenix J. Powers. All these books detailed how General Yamashita discovered and hid the treasures in the Philippines.

… Enter McDougald

Whether or not it was the Yamashita treasure that Roxas found, the treasure story so convinced President Corazon Aquino that her government gave full sanction and protection in February 1988 to American treasure hunter Charles McDougald to dig more than 20 feet under Manila’s oldest structure, the 16th-century-built Fort Santiago. (Her maternal family was once the subject of another tall treasure tale before the turn of the 19th century.)

… Central bank vault

One professor from the University of the Philippines cast doubt about the existence of the Yamashita treasure.

One other treasure story is not about the seizure of the Yamashita treasure. It was about the raid of the central bank vault.

After Zobel’s deposition, the Senate committee received information from three potential witnesses — one in Honolulu and two in the Philippines — of the Central Bank raid, according to Pimentel.

It was widely believed that Marcos was running out of cash at the rate Imelda was shopping left and right abroad, and Marcos had to dip his fingers into the central bank.

… Imelda’s treasures

n his book “Incredible Destiny,” author Nigel Blundell, famous for his investigative pieces put together in the book titled “The World’s Most Infamous Murders,” said Imelda continued with her shopping despite economic crisis in the Philippines. She bought designer shoes, dresses, art collections and properties — the Herald Center Shopping Complex, the Crown building, office complexes on Wall Street and Madison Avenue, and houses in New Jersey and New York.

But during a trial in New York, Imelda declared that the Yamashita gold accounted for the bulk of her husband’s wealth.

All that, Pimentel argued, only meant to reinforce the view that the Marcoses stole nothing.

… Willing to share

In a letter to Aquino in February 1989, then vice-president Salvador Laurel said he met with Marcos on his deathbed in October 1997 and that Marcos told him he wanted to return 90 percent of his wealth to Filipinos through a foundation provided he was allowed to come home, die, and be buried in Batac beside his mother, Ilocos Norte.

Aquino showed no interest, Laurel later wrote in his book “Neither Trumpets nor Drums,” published in 1992.

Could the government have settled the issues surrounding Marcos’ stolen wealth had Aquino taken Marcos’ offer?

But neither Zobel nor Laurel carried a message that Marcos was sorry for the plunder of the economy and the deaths of those who opposed his dictatorial regime. That was probably what Aquino was looking for: Should she have allowed Marcos to get away with it in exchange for a fraction of his gold hoard?

History is full of loose ends left untied.

END

Bitcoin slides again as Jamie Dimon doubles down again on cryptocurrency concerns.

(courtesy zerohedge)

Bitcoin Slides After Dimon Doubles Down On Cryptocurrency Concerns: “It Will End Badly”

Just a week after Jamie Dimon first attacked Bitcoin for being a “fraud,” the self-interested JPMorgan CEO has doubled down on his anti-crypto-currency tirade, somewhat exposing just how concerned he is at the potential for disruption within his industry.

To paraphrase, here’s what Dimon said last week…

“It’s a fraud. It’s making stupid people, such as my daughter, feel like they’re geniuses. It’s going to get somebody killed. I’ll fire anyone who touches it.”

And now, as CNBC reports, JPMorgan Chief Executive Jamie Dimon has laid into bitcoin and digital currencies once again, labeling it a “novelty” that is likely to end badly.

https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=3000656758&size=530_298

Eventually governments will close down cryptocurrencies: JPMorgan CEO from CNBC.

“Right now these crypto things are kind of a novelty. People think they’re kind of neat. But the bigger they get, the more governments are going to close them down,” Dimon said during an interview with CNBC-TV18 in New Delhi, India, on Friday.

Dimon was concerned that with bitcoin, ethereum and various Initial Coin Offerings (ICOs), there are now cryptocurrencies everywhere.

“It’s creating something out of nothing that to me is worth nothing,” he said. “It will end badly.”

Dimon warned that governments will eventually crack down on cryptocurrencies and will attempt to control it by threatening anyone who buys or sells bitcoin with imprisonment, which would force digital currencies into becoming a black market.

And this has pushed Bitcoin lower (extending losses from BTC China liquidations ahead of its closure)…

Dimon’s comments came under criticism from several bitcoin investors and experts.

“Comments like Jamie’s show a failure to grasp the significance of the blockchain and the power of brand in a fundamental sea of change,”said Scott Nelson, CEO and chairman of blockchain firm Sweetbridge, in an email to CNBC last week.

And as we reported previously, a company called Blockswater has filed a market abuse complaint in Sweden against Dimon and JPMorgan.

Blockswater claims Dimon deliberately spread false and misleading information, according to a report by City A.M.

And perhaps even more interesting, as we detailed before, JPMorgan Securities continues to allow clients to trade this ‘fraudulent’ security through its platform…

Source

In fact JPMorgan has transacted 87 million Swedish Kroner’s worth of Bitcoin ETF transcations in the past year for clients…

Source

As we asked rhetorically previouslydoes the bank not have a fiduciary duty not to transact on clients’ behalf in a security it defines as fraud? (like Subprime CDOs?)

end

Fame author Martin Katusa sees a rush into physical gold as de-dollarization intensifies:  a must read and view

(courtesy Martin Katusa/Mac Slavo/SHFTPlan)

“You’re Going To See A Rush For Gold” – Katusa Warns De-Dollarization Is Accelerating

Authored by Mac Slavo via SHTFplan.com,

Global strategist Marin Katusa is the New York Times best selling author of The Colder War, which details the geo-political power shift that threatens the global dominance of the United States. He’s also a well known resource hedge fund manager who legendary investor Doug Casey has called one of the best market analysts he’s ever worked with.

His prior forecasts noted that countries around the world would soon stop trading commodities like oil in the U.S. dollar, something we’re already seeing with China, Russia, Iran, and Venezuela, all of which are preparing non-dollar, gold-backed mechanisms of exchange.

This trend, according to Katusa in a must see interview with Future Money Trendswill only continue to weaken the U.S. dollar going forward and the result will be a massive capital flight to gold in coming years:

I think we’ll have a near term bounce on the U.S. dollar… then it’s going to be very weak… and then it’s going to go much, much lower… With China and Russia working together to de-dollarize the U.S. dollar starting with oil, which is the biggest market… and then all the other commodities.

You’re going to start seeing a massive unwind of these U.S. dollars in the emerging markets.

When that money comes back… which it will… and the world starts cluing in that the emerging markets need gold to convert the Yuan and the Ruble and all these different factors, you’re going to see a massive rush for gold.

Watch the full interview:

Katusa notes that he is preparing to “load up” on gold-based assets as the dollar strengthens and puts additional pressure on gold prices, but says that by next year major fund managers will start moving capital back into precious metals in response to dollar weakness, global de-dollarization and economic crisis:

Everybody wants to rush in when something’s exciting… but you take your position before the massive flow of money…

I think we have a near term dead cat bounce for the U.S. dollar… which will mean we’re going to have a little bit of weakness here in gold in the near term… the next six months is my time to load up.

…And when the funds flow come in… it’s going to be the equivalent of Niagra Falls coming through your garden hose.

The geo-political realignment taking place now stands to upend the financial and economic systems as we know them. This shift will not come without crisis and panic. The time to position yourself in gold-based assets is now.

end



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

 
 i) Chinese yuan vs USA dollar/yuan SLIGHTLY WEAKER AT 6.5920 (DEVALUATION SOUTHBOUND   /OFFSHORE YUAN MOVES HUGELY STRONGER TO ONSHORE AT   6.5741/ Shanghai bourse CLOSED DOWN 5.28 POINTS OR 0.16%  / HANG SANG CLOSED DOWN 229.80 POINTS OR 0.82% 

2. Nikkei closed DOWN 51.03 POINTS OR 0.25%    /USA: YEN FALLS TO 112.03

3. Europe stocks OPENED ALL GREEN     ( /USA dollar index FALLS TO  91.99 /Euro UP to 1.1968

3b Japan 10 year bond yield: FALLS  TO  -+.034%/ GOVERNMENT INTERVENTION    !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 112.53/ 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::  50,46 and Brent: 56.45

3f Gold UP/Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLSS TO  +.462%/Italian 10 yr bond yield DOWN  to 2.108%    

3j Greek 10 year bond yield RISES TO  : 5.577???  

3k Gold at $1295.55  silver at:17.00 (8:15 am est)   SILVER NEXT RESISTANCE LEVEL AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 38/100 in  roubles/dollar) 57.53-

3m oil into the 50 dollar handle for WTI and 56 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 TINY SIZED DEVALUATION SOUTHBOUND 

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 112.03 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  0.9693 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1601 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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

3r the 10 Year German bund now POSITIVE territory with the 10 year FALLING to  +0.462%

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 2.255% early this morning. Thirty year rate  at 2.789% /POLICY ERROR/FLATTENING OF THE CURVE)

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

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

Global Markets Spooked By North Korea H-Bomb Threat; Focus Turns To Brexit Speech

S&P futures retreated along with European and Asian shares with tech, and Apple supplier shares leading the drop while safe havens such as gold and the yen rose, as the war of words between U.S. President Donald Trump and Kim Jong Un escalated and North Korea threatened to launch a hydrogen bomb, leading to a prompt return of geopolitical concerns. Trade focus now turns to a planned speech by Theresa May on Brexit (full preview here).

As reported last night, the key overnight event was the latest threat by North Korea that its counter-measure may mean testing a hydrogen bomb in the Pacific, according to reports in Yonhap citing North Korea’s Foreign Minister. North Korea’s leader Kim said North Korea will consider “corresponding, highest level of hard-line measure in history” against US, while he also stated that President Trump’s UN speech was rude nonsense and demonstrated insanity and inhumanity which confirmed North Korea’s nuclear and missile advances are on right path and will continue to the end. There was more on the geopolitical front with the Iranian President
informing armed forces that the nation will bolster its missile
capabilities, according to local TV.

As a result, treasury yields pulled back and the dollar slid the most in two weeks following North Korea’s threat it could test a hydrogen bomb in the Pacific Ocean. Europe’s Stoxx 600 Index edged lower as a rout in base metals deepened, weighing on mining shares. WTI crude halted its rally above $50 a barrel as OPEC members gathered in Vienna.

US stock futures pulled back 0.1% though markets were showing growing signs of fatigue over the belligerent U.S.-North Korea rhetoric. “North Korea poses such a binary risk that it’s very hard to price, and at the moment investors just have to look through it,” said Mike Bell, global market strategist at JP Morgan Asset Management. Despite the latest jitters, MSCI’s world equity index remained on track for another weekly gain, holding near its latest record high hit on Wednesday as investors’ enthusiasm for stocks showed few signs of waning.

The dollar weakened versus the yen and the euro as escalating tensions between North Korea and the U.S. spurred demand for haven assets. The U.S. currency paring its gains made versus the euro since the Federal Reserve’s hawkish rhetoric on Sept. 20. The euro approached $1.20, boosted by data which showed Europe’s economy was on track for the best quarterly growth since 2015, while a gauge of private-sector output in Germany hit the highest level in more than six years. Three-month implied volatility in euro- dollar reached its highest since April. Comments by policy makers and politicians may be the main drivers for currency markets on Friday.

Germany’s benchmark index advanced and the euro headed back toward $1.20 after manufacturing and services surveys data indicated the Eurozone is on track for its best quarterly growth since 2015, buoying sentiment ahead of German elections on Sunday. Manufacturing PMIs from Germany and France and a composite euro-zone private-sector activity index provided support for European policy makers as they consider scaling back stimulus. Both France and Germany reported stronger Flash PMIs, leading to a better than expected composite Eurozone PMI print of 56.7, vs Exp. 55.5 and 55.7 last (Mfg 58.2 vs exp. 57.1, Services 55.6, vs exp. 54.7).

The PMI summary showed continuing strong growth on virtually all components:

“This encouraging economic backdrop is strengthening the EU governments’ optimism about the future, helping to reinforce their firm stance vis a vis the UK in the Brexit negotiations,” said Societe Generale cross-asset strategists.

European equity markets pushed higher after the stronger PMIs, while L’Oreal rose 4.0% after the death of the founding family’s matriarch leads to M&A speculation, CAC 40 outperforms. Mining sector lags for a second day after base metals sell off in Asian trade again. The Stoxx Europe 600 Index was up 0.1 percent as of publication. The U.K.’s FTSE 100 Index declined less than 0.05 percent. Germany’s DAX Index increased 0.1 percent, hitting the highest in 10 weeks with its fifth consecutive advance.  The UST/bund spread widens 3bps as bunds react to positive data.

Brexit bellwether sterling hovered at a two-month high against the euro having firmed against both euro and dollar this week as traders anticipated May would strike a softer tone on negotiations for Britain’s exit from the EU. Options markets were pricing a large GBP/USD reaction to the speech, as investors bought protection against sharp fluctuations.

“Sterling’s rally in the past couple of weeks is partly in reaction to the Bank of England but also reflects an assumption that it’s more likely we do get a transitional deal,” said Mike Bell, global market strategist at JP Morgan Asset Management. “If that’s what May is laying out today that would be supportive, but I think you have seen a lot of that move priced in already,” he added.

Asia equity markets traded mostly negative following US losses where the DJIA snapped a 9-day win streak, with the MSCI Asia Pacific Index dropping 0.2%, with sentiment dampened after North Korean verbal provocation in which its Foreign Minister suggested its counter-measures could mean testing a hydrogen bomb in the Pacific. This followed defiant comments from North Korean leader Kim who labelled Trump a dotard and pressured Nikkei 225 (-0.3%) as well as most indices in the region, although ASX 200 (+0.3%) was kept afloat by strength in its largest weighted financials sector. Hang Seng (-0.9%) and Shanghai Comp. (-0.5%)  conformed to the subdued tone in the region with sentiment reeling from a downgrade to China and Hong Kong’s sovereign ratings by S&P. Taiwan’s Taiex index fell 1.2 percent, the biggest slide in Asia. Hon Hai Precision Industry Co. is heading for its biggest weekly loss since October 2014, with some analysts saying early sales of Apple’s new iPhone 8 are slower than for previous models. Finally, 10yr JGBs and T-notes gained on the safe-haven flows, although upside was capped following an enhanced liquidity auction for longer dated Japanese bonds which showed a weaker b/c than prior.

“Although we continue to believe that global stocks can grind higher, underpinned by robust economic growth and increasing earnings, rising valuations are reducing the possibility of significant further upside,” UBS global chief investment officer Mark Hafele says in note. UBS reduced overweight to global equities, maintaining a moderate risk-on stance.

In currencies, the Bloomberg Dollar Spot Index decreased 0.4 percent, the biggest dip in more than two weeks.  The euro increased 0.4 percent to $1.1994, the strongest in two weeks.  The British pound declined 0.2 percent to $1.3557.  The Japanese yen increased 0.5 percent to 111.93 per dollar, the first advance in more than a week.

In rates, German bond yields hardly budged ahead of elections on Sunday which market participants said would yield no big surprises with Chancellor Merkel likely to win a fourth term. The 10-year Treasury yield declined about 2 basis points to 2.255 percent as risk aversion favored government bonds. It had risen for nine consecutive sessions prior, brushing a six-week high of 2.289 percent. Britain’s 10-year yield declined less than one basis point to 1.375 percent.

Elsewhere, U.K. Prime Minister Theresa May is set to give a key speech on her Brexit strategy on Friday in Florence. And Germany goes to the polls on Sunday, with Chancellor Angela Merkel expected to secure a fourth term, although she may not win an outright majority leading to coalition talks to form a new government.

Bulletin Headline Summary from RanSquawk

  • Asian equities faced selling pressure overnight amid threats of further hydrogen bomb tests from North Korea. Europe supported amid upbeat data
  • The risk-off sentiment spurred flows into JPY. Focus for GBP remains on today’s speech by UK PM May
  • Looking ahead, highlights include Canadian retail sales & CPI, UK PM May and a slew of central bank speak

Market Snapshot

  • Dow futures fall 0.1%
  • S&P 500 futures down 0.2%
  • Nasdaq 100 futures down 0.3%
  • S&P 500 down 0.3% to 2,500.60 on Thursday
  • VIX up 2.2% to 9.88%
  • STOXX Europe 600 down 0.2% to 382.20
  • MSCI Asia down 0.2% to 162.97
  • MSCI Asia ex Japan down 0.4% to 538.52
  • Nikkei down 0.3% to 20,296.45
  • Topix down 0.3% to 1,664.61
  • Hang Seng Index down 0.8% to 27,880.53
  • Shanghai Composite down 0.2% to 3,352.53
  • Sensex down 1.1% to 32,005.00
  • Australia S&P/ASX 200 up 0.5% to 5,682.14
  • Kospi down 0.7% to 2,388.71
  • German 10Y yield rose 0.7 bps to 0.462%
  • Euro up 0.4% to $1.1994
  • Italian 10Y yield rose 3.7 bps to 1.816%
  • Spanish 10Y yield fell 0.3 bps to 1.619%
  • WTI Futures little-changed at $50.6/bbl;
  • Brent crude down 0.1% to $56.02
  • Gold spot up 0.4% to $1,296.51
  • U.S. Dollar Index down 0.4% to 91.91

Top Overnight News

  • Kim says he’ll tame ‘mentally deranged’ Trump ‘with fire’: KCNA
  • North Korea Says Actions May Include Pacific H-Bomb Test
  • CDU/CSU unchanged at 36%, SPD 21.5% in ZDF Politbarometer poll ahead of German election Sunday
  • New Zealand election still too close to call, Newshub poll shows
  • In the space of just seven weeks, Jacinda Ardern has led her opposition Labour Party out of the wilderness and given it the chance of a stunning upset in Saturday’s New Zealand election; what had looked like a cakewalk for the ruling National Party has become a riveting contest of ideas and left the ballot too close to call
  • Ministers from OPEC nations and its allies broadly signaled that their meeting on Friday wouldn’t take concrete steps to address concerns that their agreement may end too early
  • In her speech, U.K. PM May will seek a transition period of up to two years after Brexit, and will also pledge to strengthen legal protections for the 3 million EU citizens living in the U.K., according to media reports
  • ECB President Draghi doesn’t make any reference to euro in his speech earlier Friday; says strengthening recovery will reduce youth joblessness
  • China’s Credit Rating Cut as S&P Cites Risk From Debt Growth
  • Europe’s Economy on Track for Best Quarterly Growth Since 2015
  • L’Oreal Advances on Prospect of Sale of Nestle’s Holding
  • OPEC, Allies Wait and See If Oil Cuts Need to Be Extended
  • Trump’s Travel Ban Decision Could Set Off New Wave of Turmoil

Asia equity markets traded mostly negative following US losses where the DJIA snapped a 9-day win streak, and with sentiment dampened after North Korean verbal provocation in which its Foreign Minister suggested its counter-measures could mean testing a hydrogen bomb in the Pacific. This followed defiant comments from North Korean leader Kim who labelled Trump a dotard and pressured Nikkei 225 (-0.3%) as well as most indices in the region, although ASX 200 (+0.3%) was kept afloat by strength in its largest weighted financials sector. Hang Seng (-0.9%) and Shanghai Comp. (-0.5%)  conformed to the subdued tone in the region with sentiment reeling from a downgrade to China and Hong Kong’s sovereign ratings by S&P. Finally, 10yr JGBs and T-notes gained on the safe-haven flows, although upside was capped following an enhanced liquidity auction for longer dated Japanese bonds which showed a weaker b/c than prior. S&P downgraded Hong Kong’s sovereign rating to AA+; outlook stable from AAA; outlook negative. PBoC injected CNY 100bln via 7-day reverse repos and CNY 20bln via 28-day reverse repos, for a net weekly injection of CNY 450bln vs. last week’s CNY 260bln net injection.

Top Asian News

  • S&P Strips Hong Kong of AAA Rating After China Downgrade
  • S&P’s First China Downgrade Since ’99 Is Good News for Bulls
  • ZhongAn Is Said to Raise $1.5 Billion in IPO Priced at Top End
  • Day Traders Reap Profits in Japan When North Korea Tensions Jump
  • Iron Ore Routed in Woeful Week as Questions Stack Up on China

European equities shrugged off some of the downbeat sentiment seen during Asia-Pac trade which stemmed from fresh North Korean provocations. More specifically, the NK Foreign Minister suggested its counter-measures could mean testing a hydrogen bomb in the Pacific. Nonetheless, European bourses have chosen to look through these threats and have taken a more in-looking view amid this morning’s slew of PMI readings which showed beats for Germany, France and the Eurozone as a whole. In terms of sector specifics, material names underperform while consumer staples have lead markets higher, with the notable stock specific mover being L’Oreal (OR FP) amid speculation over Nestle’s stake in the Co. in the wake of heiress Battencourt’s death. Bund futures have seen a bit of a retracement towards 161.00 as risk-off sentiment eased and upbeat Eurozone PMI’s, with the region having already digested this week’s sovereign supply. Elsewhere, peripheral yields have seen some modest tightening with little activity seen in core paper.

  • Top European News
  • May to Reboot Brexit Plan by Requesting Transition Period
  • Steer Clear of Spanish Debt on Catalan Concern, Allianz GI Says
  • Russia Sees ‘Full-Scale Cyberwar’ as Bomb-Threat Wave Continues
  • French Economic Good News Continues as Macron Pushes Reforms
  • Vestas Shares Fall; HSBC Sees Pressure at Onshore Wind Auctions
  • Macron’s Man in Senate Warns French President Can’t Win This One

In FX markets, in-fitting with the sentiment seen across the continent, the EUR has been given a helping hand with the EUR/USD pair eyeing 1.2000 to the upside once again which also comes amid a broader USD retracement. Elsewhere, GBP/USD has seen a pullback from yesterday’s gains as markets now await further clarity on the UK’s Brexit path from PM May today via her speech from Florence later today. NZD will most likely also be one to watch heading into the weekend ahead of the election on Saturday; albeit polls have recently suggested that the incumbent National Party should secure victory. North Korean rhetoric spurred some safe-haven flows, as USD/JPY took some extra impetus from some week end unwinds. The touted resistance around the 112.70 area has been evident of profit taking, as many investors seem concerned to hold weekend positions following further threats of hydrogen bomb tests from the rebel state.

In commodities, Chinese metal prices were lower with Dalian Iron Ore prices slipping around 4%, plumbing multi week lows, given expectations of slower winter demand and steel output curbs, while S&P downgrading China’s credit rating also added to the recent headwinds. Elsewhere, gold prices rose over 0.5% on flight-to-quality flow after reports that North Korea is willing to conduct a H-Bomb test in the Pacific. Energy markets will be focusing on the fallout from today’s OPEC/non-OPEC meeting, with two delegates suggesting that today’s sit down will be “brief.” Furthermore, the Russian energy minister has briefed media saying that discussions will focus on export monitoring and US shale production. OPEC and non-OPEC producers are looking at all parameters for export monitoring, according to the Venezuelan oil minister. Libya’s national oil production is at about 900,000 BPD, according to a Libyan oil source.

Looking at the day ahead, the Markit PMIs on services, manufacturing and the Composite will be available for the US, Eurozone, Germany and France. Onto other events, there will be three Fed speakers today, including John Williams, Esther George and Robert Kaplan. Over in Europe, the ECB’s Vice President Constancio will also speak and the EU foreign ministers will also hold an informal meeting. In Italy, UK’s PM Theresa May will give her big speech  updating her government’s position on Brexit.

US Event Calendar:

  • 9:45am: Markit US Manufacturing PMI, est. 53, prior 52.8; Services PMI, est. 55.7, prior 56; Composite PMI, prior 55.3
  • 6am: Fed’s Williams Speaks to Media at Swiss National Bank Event
  • 9:30am: Fed’s George Speaks at Dallas/Kansas City Fed Oil Conference
  • 1:30pm: Fed’s Kaplan Speaks at Dallas/Kansas City Fed Oil Conference

DB’s Jim Reid concludes the overnight wrap

It doesn’t feel like this week has reached its peak yet. This week has been, and still is, all about (arguably) the three most powerful women in the world. Yellen was certainly on the hawkish side on Wednesday and now we have a big Mrs May speech on Brexit today ahead of Mrs Merkel’s re-election vote on Sunday. Before we preview both these events we’ll first highlight that there has been further verbal escalations in the North Korean situation. Yesterday President Trump ordered new sanctions on individuals, companies and banks doing business with North Korea. He said ‘foreign banks will face a clear choice, do business with the US or facilitate trade with…NK”. He added that China has also asked its banks to stop dealing with the regime. In response, Kim Jong Un has threatened the “highest level of hard-line countermeasure in history” with his foreign minister suggesting that this could include testing a hydrogen bomb in the Pacific Ocean. Asian markets all trading lower on the back of these comments with the Nikkei (-0.35%), Kospi (-0.82%) and Hang Seng (-0.84%) down as we type. Note that we have the flash services PMIs today in Europe and the US which will give us the latest live barometer of economic activity.

Back to Brexit. There has been lots of headlines in the UK speculating about Mrs May’s Florence speech today which starts at 2.15pm BST. However none of Thursday’s headlines told us much that hadn’t been speculated beforehand. Perhaps the speech is still being finalised although there was a 2 and a half hour cabinet meeting yesterday where she briefed her team about the contents. Hopes of Mrs May announcing a figure the UK would be prepared to pay as a divorce settlement or interim annual payment seems a bit optimistic to us as it would end up being the focal point of the speech and all that the press would care about. We’re not sure she’ll want it remembered for that. Having said that the BBC reported in the afternoon that Mrs May is willing to pay 20bn euros during a transition period of two years. However the headline is slightly misleading as the story says the package might be worth up to 20bn without necessarily having that figure explicitly mentioned in the speech. So lots to look forward to on this.

Politics should remain the focus for markets heading into this weekend with Germany’s federal election due on Sunday. Our economists in Germany published a report earlier this week laying out their expectations. In summary they note that according to the ARD Deutschland-tre nd, only a renewed Grand Coalition or a coalition between Merkel’s CDU/CSU, the liberals (FDP) and the Greens (“Jamaica”) would be arithmetically possible. However they highlight that given the tight polls of late and accounting for the usual typical margins of error, other alternative coalitions for the CDU/CSU are still possible. In fact they note that in some polls up to half of the voters still remain undecided. For a CDU/ CSU and FDP/Greens coalition, they highlight that there are question marks about the Greens agreeing to join, as well as the FDP willing to give up its renewed “trade mark” for the sake of government jobs. A Grand Coalition on the other hand they highlight as being a “coalition of last resort” should all else fail. It might also require massive concessions to the SPD. There may be a lot of negotiations ahead.

Before we move back to markets a word of note that the next couple of weeks are likely to see lots of noise on tax reform (and possibly on healthcare again). I listened to DB’s Frank Kelly speak yesterday on this topic and he thinks it’s going to be a very hard road ahead to get a workable agreement through. Next week, the so called “group of six” will come up with a tax plan but it’s likely to be vague and designed to whip Congress into action rather than put firm proposals through. This may initially disappoint markets although I’m not sure there is much reform priced into markets at the moment. The hope would be that something more substantial will be forthcoming the following week. So plenty of headlines likely.

Back onto yesterday’s markets performance. US bourses all softened with the S&P (-0.30%) down for the first time in five days, while the Dow (-0.24%) and Nasdaq (-0.52%) also fell slightly. Within the S&P, most sectors were in the red, with only the Industrials and Financials sector (+0.20%) up slightly. Conversely, European markets were marginally higher, with the Stoxx 600 and DAX both up c0.2%, supported by banks on the prospect of higher yields, but the FTSE 100 dipped 0.11%. Notably, low volatility has returned with the VIX closing a bit lower at 9.67 while the VSTOXX touched the lowest level on record intraday, but ended the day at 11.19 (-0.60 from previous day).

Over in government bonds, core yields were little changed while peripherals underperformed. For 10y yields, UST, Bunds and French OATs all rose c1bp while Gilts were 2.5bp higher. Elsewhere, peripherals underperformed, with Italy, Spain and Portugal 10y yields all c4bp higher. At the two year part of the curve, USTs was flat while Bunds and Gilts rose c0.8bp.

Turning to currencies, the US dollar index weakened 0.27%, enabling the Euro and Sterling to gain 0.41% and 0.63% respectively. The AUD dropped 1.27%, partly as its central bank governor said “a rise in global rates has no automatic implications for Australia”. In commodities, WTI oil was little changed (-0.28%) but Iron Ore fell 5.11% on growing concerns that Chinese iron ore stockpiles are rising just as winter steel production cuts are about to reduce demand. Elsewhere, precious metals traded slightly lower (Gold -0.76%; Silver -1.28%) yesterday, while industrial metals are trending lower this morning, with Copper (-1.43%), Zinc (-2.42%) and Aluminium (-2.83%) all down modestly.

Away from markets, S&P has downgraded China’s sovereign credit rating for the first time since 1999, now one notch lower, from AA-/Negative to A+/Stable, citing that a prolonged period of strong credit growth has increased China’s economic and financial risks. The change should not be a big surprise as it follows that of Moody’s downgrade back in May and now both agencies effectively have the same rating on China. The markets’ reaction seemed somewhat muted with China’s sovereign 5y USD CDS widening by 0.5bp to 58.5bp.

Turning to Europe, Draghi’s keynote address as Chair of the European Systemic Risk board contained little material developments, although he noted that “the use of monetary policy is not the right instrument to address financial imbalances” when financial and business cycles diverge. Over at Italy yesterday, the EU’s Chief negotiator Barnier seemed a bit more optimistic ahead of PM May’s big speech. He noted “I’m convinced a rapid agreement on the conditions of the UK’s orderly withdrawal and a transition period is possible…for that to happen, we would like the UK to put on the table, as soon as next week, proposals to overcome the barriers”. Finally, circling back to Spain, we watch and wait to see if Catalonia’s independence referendum vote scheduled for 1 October will go ahead or not, in part as BBC has reported Spain’s constitutional court has imposed daily fines of €12k on top Catalan officials with police raids on key Catalan government buildings with some officials arrested.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the macro data was solid and above market expectations. The Philly Fed manufacturing index rose 4.9pts to 23.8 in September (vs. 17.1 expected ). Within the details, the readings were also strong with the shipments index up 8.4pts to 37.8 and the new orders index up 9.1pts to 29.5. The Conference board leading index also slightly beat, up 0.4% mom (vs. 0.3% expected). Elsewhere, the initial jobless claims print was much stronger than expected at 259k (vs. 302k expected), suggesting limited impact from the storms for now, while continuing claims were broadly in line at 1,980k (vs. 1,975k expected). The slight disappointment was the FHFA house price index which rose 0.2% mom (vs. 0.4% expected).

Moving along, the Eurozone’s confidence index edged up 0.3pts to -1.2 (vs. -1.5 expected) to a fresh 16-year high. Over in the UK, the August credit data for the private and public sector were both modestly lower than expected, with PSNB ex banking net borrowing at £5.7bln (vs. £7.1bln expected) and public sector net borrowing at £5.1bln (vs. £6.4bln expected).

Looking at the day ahead, In France, the final reading of 2Q GDP (0.5% qoq, 1.7% yoy expected) and wages will be out. Over in Canada, there is August inflation and retail sales. Elsewhere, the Markit PMIs on services, manufacturing and the Composite will be available for the US, Eurozone, Germany and France. Onto other events, there will be three Fed speakers today, including John Williams, Esther George and Robert Kaplan. Over in Europe, the ECB’s Vice President Constancio will also speak and the EU foreign ministers will also hold an informal meeting. In Italy, UK’s PM Theresa May will give her big speech  updating her government’s position on Brexit.

3. ASIAN AFFAIRS

i)Late WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 5.28 POINTS OR 0.16%   / /Hang Sang CLOSED DOWN 229.80 POINTS OR 0.82%/ The Nikkei closed DOWN 51.03 POINTS OR 0.25%/Australia’s all ordinaires CLOSED UP 0.42%/Chinese yuan (ONSHORE) closed  DOWN at 6.5920/Oil UP to 50.46 dollars per barrel for WTI and 56.45 for Brent. Stocks in Europe OPENED ALL GREEN . Offshore yuan trades  6.5741 yuan to the dollar vs 6.5920 for onshore yuan. NOW THE OFFSHORE MOVED MUCH STRONGER  TO THE ONSHORE YUAN/ ONSHORE YUAN SLIGHTLY WEAKER (TO THE DOLLAR)  AND THE OFFSHORE YUAN IS STRONGER TO THE DOLLAR AND THIS IS COUPLED WITH THE WEAKER  DOLLAR. CHINA IS HAPPY TODAY 

3a)THAILAND/SOUTH KOREA/NORTH KOREA

NORTH KOREA/USA

Kim threatens the USA with a Hydrogen bomb test:

(courtesy zerohedge)

.

Kim Jong Un Vows To Tame “Mentally Deranged Dotard” Trump “With Fire”

The verbal soap opera continues.

Just hours after North Korea’s foreign minister Ri Yong-ho called Donald Trump a “barking dog”, the rogue state’s president, Kim Jong-Un called President Donald Trump “a frightened dog” and a “gangster fond of playing with fire” in an official yet fiery statement on Thursday.

Reacting to Trump’s United Nation’s speech in which the US president called Kim Jong Un “Rocket Man,” and threatened to “totally destroy” North Korea, Kim’s response was nothing short of a macabre magnum opus of comic-hyperbolic fusion.

“Far from making remarks of any persuasive power that can be viewed to be helpful to defusing tension, he made unprecedented rude nonsense one has never heard from any of his predecessors,” Kim said adding that “A frightened dog barks louder.”

Kim went on:

“[Trump’s] remarks remind me of such words as “political layman” and “political heretic” which were in vogue in reference to Trump during his presidential election campaign.”

The mentally deranged behavior of the U.S. president openly expressing on the UN arena the unethical will to “totally destroy” a sovereign state, beyond the boundary of threats of regime change or overturn of social system, makes even those with normal thinking faculty think about discretion and composure.

“After taking office Trump has rendered the world restless through threats and blackmail against all countries in the world. He is unfit to hold the prerogative of supreme command of a country, and he is surely a rogue and a gangster fond of playing with fire, rather than a politician.”

The North Korean then responded to Trump’s hollow threat with one of his own:

“I am now thinking hard about what response he could have expected when he allowed such eccentric words to trip off his tongue. Whatever Trump might have expected, he will face results beyond his expectation. I will surely and definitely tame the mentally deranged U. S. dotard with fire.”

On Thursday, Trump signed an executive order that would slap sanctions on individuals, companies and financial institutions that do business with North Korea, or as Trump called the nation  “this criminal rogue regime.” He said his mission was North Korea’s “complete denuclearization.”

Also earlier this month, the U.N. Security Council passed harsh sanctions on Kim’s small nation, as it continued to fire threatening missile tests and claim the expansion of its nuclear arsenal. The sanctions ban 90 percent of North Korean exports and were approved by Russia and China, who had previously maintained closer ties to North Korea.

While Kim did not mention the sanctions, in his speech, which was officially translated by the DPRK, he refers to Trump multiple times as a “dotard”, a rather arcane word for an elderly person who is weak minded or senile, which will be entirely lost on Trump.

* * *

Kim’s full speech – via KCNA – is below:

END

Initial trading…gold jumps a bit on news of a Hydrogen Bomb test

(courtesy zerohedge)

STOCKS, USDJPY STUMBLE AFTER NORTH KOREAN “H BOMB TEST” THREAT REPORTS

After an initial slide on Kim’s “deranged dotard” reaction to President Trump, both USDJPY and US equity futures are falling further afterYonhap reports, North Korea’s Foreign Minister Ri Yong Ho says the highest level of hard-line” countermeasure could refer to hydrogen-bomb detonation in the Pacific.

Of course, if recent threats and tests are anything to gop by tyhis is the perfect time to BTFN(uclear)A(rmageddon)Dip!

END

Trump responds to Kim Jong un’s threat.  He also threatens the 4 Republicans to vote for the Graham-Cassidy repeal and replace of Obamacare health bill

(courtesy zerohedge)

Trump: Madman Kim “Will Be Tested Like Never Before”

Following Kim Jong-Un’s televized response to Trump’s UN speech, in which he called the US president a “mentally deranged dotard” and vowed to “tame the U. S. dotard with fire”, Donald Trump took to twitter this morning, responding in kind that Kim Jong Un of North Korea, who is obviously a madman who doesn’t mind starving or killing his people, will be tested like never before!”

Kim Jong Un of North Korea, who is obviously a madman who doesn’t mind starving or killing his people, will be tested like never before!

As a reminder, Kim’s last jawboning effort deserved a solid A+ for vivid tragicomic imagery and hollow threats:

“[Trump’s] remarks remind me of such words as “political layman” and “political heretic” which were in vogue in reference to Trump during his presidential election campaign.”

The mentally deranged behavior of the U.S. president openly expressing on the UN arena the unethical will to “totally destroy” a sovereign state, beyond the boundary of threats of regime change or overturn of social system, makes even those with normal thinking faculty think about discretion and composure.

“After taking office Trump has rendered the world restless through threats and blackmail against all countries in the world. He is unfit to hold the prerogative of supreme command of a country, and he is surely a rogue and a gangster fond of playing with fire, rather than a politician.”

“I am now thinking hard about what response he could have expected when he allowed such eccentric words to trip off his tongue. Whatever Trump might have expected, he will face results beyond his expectation. I will surely and definitely tame the mentally deranged U. S. dotard with fire.”

The latest war of words, which also prompted North Korea to threaten another hydrogen bomb test overnight, erupted after Trump signed an executive order on Thursday that would slap sanctions on individuals, companies and financial institutions that do business with North Korea, or as Trump called the nation  “this criminal rogue regime.” He said his mission was North Korea’s “complete denuclearization.” Also earlier this month, the U.N. Security Council passed harsh sanctions on Kim’s small nation, as it continued to fire threatening missile tests and claim the expansion of its nuclear arsenal. The sanctions ban 90 percent of North Korean exports and were approved by Russia and China, who had previously maintained closer ties to North Korea.

In a separate tweet, Trump also warned that any Republican lawmaker who votes against the new Senate GOP ObamaCare repeal bill will be known in “future political campaigns” as “the Republican who saved ObamaCare.”

“Rand Paul, or whoever votes against Hcare Bill, will forever (future political campaigns) be known as “the Republican who saved ObamaCare.”

Rand Paul, or whoever votes against Hcare Bill, will forever (future political campaigns) be known as “the Republican who saved ObamaCare.”

Paul has firmly opposed the new ObamaCare repeal measure put forward by Sens. Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.).  Paul on Tuesday criticized the new Senate GOP ObamaCare repeal bill as a “government boondoggle of a trillion dollars.” The measure would repeal much of ObamaCare by converting funds for certain provisions into block grants to states. Eyes are also on Sens. John McCain (Ariz.), Susan Collins (Maine) and Lisa Murkowski (Alaska) who voted against the last ObamaCare repeal measure and who have yet to say whether they would vote in favor of the Graham-Cassidy bill.

Trump has railed against Republican lawmakers for failing to repeal ObamaCare, a longstanding GOP promise, despite having a majority in both chambers of Congress. The president set his sights on Paul earlier this week, calling him a “negative force” in similar tweets early Thursday. “Rand Paul is a friend of mine but he is such a negative force when it comes to fixing healthcare. Graham-Cassidy Bill is GREAT! Ends Ocare!” he tweeted.

“I hope Republican Senators will vote for Graham-Cassidy and fulfill their promise to Repeal & Replace ObamaCare. Money direct to States!”

b) REPORT ON JAPAN

end

China fears sanctions brings out more nuclear tests by North Korea which in turn brings on more sanctions as the vicious circle continues:

(courtesy zerohedge)

UK/UBER

It is believed that the private Uber’s company shares are worth around 70 billion dollars.  Today they got a shock with the revoking of Uber’s operating license:  the company states it will challenge them in court:

(courtesy zero hedge)

London Unexpectedly Revokes Uber’s Operating License; Company Vows Court Challenge

In a stunning blow to the world’s most valuable private company (purportedly worth some $70 billion), London’s taxi and delivery car regulator has said it won’t renew Uber’s operating license once it expires at the end of the month. The regulator said Uber “is not fit and proper to hold a private hire operator license.”

“TfL considers that Uber’s approach and conduct demonstrates a lack of corporate responsibilit in relation to a number of issues which have potential public safety and security implications. These include:

  • It’s approach to reporting seriouis criminal offences.
  • It’s approach to how medical certificates are obtained.
  • It’s approach to how Enhanced Disclosure and Barring Service (DBS) checks are obtained.
  • It’s approach to explaining the use of Greyball in London, software that could be used to block regulatory bodies from gaining full access to the app and  prevent officials from undertaking regulatory or law enforcement duties.”

TfL has today informed Uber that it will not be issued with a private hire operator licence.

Uber now has 21 days to appeal the decision.  “We intend to immediately challenge this in the courts,” said Tom Elvidge, general manager of Uber in London, in a statement to Bloomberg. If the decision holds and Uber is forced to shutter its London operations, the estimated 40,000 Uber drivers working in London will need to seek employment elsewhere.

“By wanting to ban our app from the capital Transport for London and the Mayor have caved in to a small number of people who want to restrict consumer choice,” said Elvidge. “If this decision stands, it will put more than 40,000 licensed drivers out of work and deprive Londoners of a convenient and affordable form of transport.”

In a statement to the Financial Times, London Mayor Sadiq Khan said: London mayor Sadiq Khan said: “All companies in London must play by the rules and adhere to the high standards we expect – particularly when it comes to the safety of customers. Providing an innovative service must not be at the expense of customer safety and security. I fully support TfL’s decision.”

The decision is a shot across the bow for Uber, which now has added prominent service disruption to its countless scandals. In particular, the London regulator cited the company’s use of a clandestine software called Greyball as one reason for revoking its operating license. In March, the New York Times revealed that Uber has for years engaged in a program to deceive authorities in cities where its app was being resisted or banned by law enforcement. Uber reportedly used a tool, called Greyball, which uses data collected from Uber’s app and other techniques to identify and circumvent officials. The car-hailing company used these to evade authorities in cities such as Paris, Boston and Las Vegas, and in countries including Australia, China, South Korea and Italy. The blow from the regulator comes at a time when the company is trying to burnish its image. It recently hired Expedia’s Dara Khosrowshahi as its new chief executive in August after co-founder Travis Kalanick was forced to step aside after a series of scandals. Uber was also faulted for not properly reporting crimes and obtaining medical certifiications.

As Bloomberg points out, the decision is a victory for the city’s traditional black cab industry, which has been hurt by the proliferation of Uber drivers and has pushed for tighter regulation of the San Francisco-based ride-hailing service. Taxi drivers must go through extensive testing before receiving a license, while Uber drivers have fewer requirements.

The decision adds to the problems facing Khosrowshahi, who is already dealing with a host of lawsuits and US criminal probe into its Asia operations after several Uber executives bribed foreign officials to help obtain access to lucrative markets. Oh, it’s also facing a federal investigation for allegedly spying on Lyft drivers.

end

No real news on the BREXIT scene except that it will take 2 years and that there is considerable headwinds for the pound.  It fail on the news

(courtesy zero hedge)

“No News Is Bad News”: May Calls For 2 Year brexit “Transition Period”, No Mention Of Early Departure

Theresa May’s speech has concluded, and while she did not confirm prior rumors that she may call for early EU departure prior to 2019, cable is lower on what has been called a “no news is bad news” speech, because as Danske Bank said, May’s remarks in which she confirmed that the UK will be leaving the EU, highlight the Brexit remains a headwind for the pound.

Among the key highlights of her speech, May said that there should be a transition phase to allow businesses, people, and public services to “adjust to new arrangements in a smooth and orderly way.”
The UK PM said that “access to one another’s markets should continue” on existing terms during transition and that the framework for this transition should be “the existing structure of EU rules” and regulations.

She also said that there will be a registration system for EU workers coming to U.K. during transition adding that the transition or “implementation” period will last “around two years” and should be agreed on “as early as possible.” 

Finally, May calls for a clear “double lock” guaranteeing transition but also guaranteeing that period will be “time-limited” so public knows “that this will not go on forever”

Cable has slumped 80 pips, having started its decline ahead of the speech, and bottoming around 1.35

As Bloomberg adds, May’s acknowledgment of the Brexit bill is perhaps helping the pound’s resilience, yet the lack of details is proving problematic for investors. While May said “the U.K. will honor commitments we have made,” Brits “want to continue working together,” and “would want to make an ongoing contribution to cover our fair share,” she sidestepped mentioning any amount and didn’t really say how that amount would be determined. All she did say was that she “would not want our partners to fear they need to pay more or receive less over the remainder of the current budget plan.”

Also, with cable slumping, both the FTSE100 and 10Y yields have rebounded on May’s speech.

In a totally surprised move after 5 pm, Moody’s downgrades UK from Aa1 down to Aa2 to which our Pound flash crashed.

(courtesy zerohedge)

Pound Flash Crashes After Moody’s Downgrades UK To Aa2

In an otherwise boring day, when Theresa May failed to cause any major ripples with her much anticipated Brexit speech, moments ago it was Moody’s turn to stop out countless cable longs, when shortly after the US close, it downgraded the UK from Aa1 to Aa2, outlook stable, causing yet another flash crash in the pound.

As reason for the unexpected downgrade, Moodys cited “the outlook for the UK’s public finances has weakened significantly since the negative outlook on the Aa1 rating was assigned, with the government’s fiscal consolidation plans increasingly in question and the debt burden expected to continue to rise.

It also said that fiscal pressures will be exacerbated by the erosion of the UK’s medium-term economic strength that is likely to result from the manner of its departure from the European Union (EU), and by the increasingly apparent challenges to policy-making given the complexity of Brexit negotiations and associated domestic political dynamics.

Moody’s now expects growth of just 1% in 2018 following 1.5% this yeardoesn’t expect growth to recover to its historic trend rate over coming years. Expects public debt ratio to increase to close to 90% of GDP this year and to reach its peak at close to 93% of GDP only in 2019.

And so, once again, it was poor sterling longs who having gotten through today largely unscathed, were unceremoniously stopped out following yet another flash crash in all GBP pairs.

Full release below:

Moody’s Investors Service, (“Moody’s”) has today downgraded the United Kingdom’s long-term issuer rating to Aa2 from Aa1 and changed the outlook to stable from negative. The UK’s senior unsecured bond rating was also downgraded to Aa2 from Aa1.

The key drivers for the decision to downgrade the UK’s ratings to Aa2 are as follows:

  1. 1. The outlook for the UK’s public finances has weakened significantly since the negative outlook on the Aa1 rating was assigned, with the government’s fiscal consolidation plans increasingly in question and the debt burden expected to continue to rise;
  2. 2. Fiscal pressures will be exacerbated by the erosion of the UK’s medium-term economic strength that is likely to result from the manner of its departure from the European Union (EU), and by the increasingly apparent challenges to policy-making given the complexity of Brexit negotiations and associated domestic political dynamics.

Concurrently, Moody’s has also downgraded to Aa2 the Bank of England’s issuer and senior unsecured bond ratings from Aa1. The rating on its senior unsecured medium-term note (MTN) program was downgraded to (P)Aa2 from (P)Aa1. The short-term issuer ratings were affirmed at Prime-1. The ratings outlook was also changed to stable from negative.

The foreign and local currency bond ceilings and the local-currency deposit ceiling remain unchanged at Aaa/P-1. The foreign-currency long-term deposit ceiling was lowered to Aa2 from Aaa, and the short-term deposit ceilings remain P-1.

RATIONALE FOR THE DOWNGRADE TO Aa2

FIRST DRIVER: WEAKENING PUBLIC FINANCES WITH HIGHER BUDGET DEFICITS IN THE COMING YEARS AMID PRESSURE TO RAISE SPENDING

Moody’s expects weaker public finances going forward, partly linked to the economic slowdown under way but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts. Since 2015, the government has been finding it increasingly difficult to implement the spending cuts that it has been targeting, in particular on welfare spending. More recently, the government has yielded to pressure and raised spending in several areas, including for health and adult social care. It also agreed to above-budget pay increases for some public sector workers. While these additional expenditures will be funded out of current budgets, the pressure to continue to increase spending in the coming years is likely to remain high, in particular on health care and the public sector wage bill.

In addition, in order to secure a working parliamentary majority, the new government agreed a ‘confidence and supply’ arrangement that increases public spending by GBP1 billion for Northern Ireland. It also abandoned a pre-election promise to review the costly so-called “triple lock” on state pensions after 2020. Overall, Moody’s expects spending to be significantly higher than under the government’s current budgetary plans and higher than the rating agency expected when the negative outlook was assigned in June 2016.

At the same time, revenues are unlikely to compensate for higher spending. Earlier this year, the government abandoned a planned increase in national insurance contributions for the self-employed. Instead, the government has become reliant on highly uncertain revenue gains from tackling tax avoidance to fund tax cuts, as the Office for Budget Responsibility recently pointed out. Hence, while last year’s general government budget deficit turned out somewhat lower than expected (3.0% of GDP on a calendar year basis), Moody’s expects the (general government) budget deficit to remain at levels of 3-3.5% of GDP in the coming years, against the government’s plan of a gradual reduction to below 1% of GDP by 2021/22.

The UK’s broader fiscal framework — previously one of the strengths of the sovereign’s credit profile — has also weakened in recent years as illustrated by repeated revisions to medium-term fiscal targets and delays in reversing the rising debt trend. In contrast to the government’s earlier plans to have public sector net borrowing in surplus by 2019-20, the current objective is for the structural deficit to be below 2% by 2020-21; and the supplementary objective of having net debt as a percentage of GDP decline every year has been delayed to 2020-21 (from 2015-16 before). While these targets may be more realistic, the changes signal weaker predictability.

Weaker public finances will imply a further delay in reversing the rising public debt ratio. This places the UK among the few highly-rated European sovereigns where the public debt ratio continues to rise. Moody’s expects the ratio to increase to close to 90% of GDP this year and to reach its peak at close to 93% of GDP only in 2019, two years later than the latest government plans. Moreover, while the UK government benefits from one of the longest average maturities of its debt stock among advanced economies, the cost of the debt is comparatively high with Moody’s preferred metric — interest payments as a share of government revenues — at 6.3% compared to a ratio of around 3.6% for most other Aa2-rated peers.

SECOND DRIVER: EROSION OF ECONOMIC STRENGTH AS A RESULT OF EU EXIT DECISION AND INCREASING CHALLENGES TO POLICYMAKING

Moody’s believes that the UK government’s decision to leave the EU Single Market and customs union as of 29 March 2019 will be negative for the country’s medium-term economic growth prospects. Aside from the direct impact on the UK’s credit profile, the loss of economic strength will further exacerbate pressures on fiscal consolidation.

Growth has slowed in recent months, with average quarterly growth of just 0.26% in the first two quarters, versus an average of 0.6% over the 2014-2016 period. Private consumption has slowed sharply and business investment has been weak since 2016, most likely linked to the Brexit-related uncertainty. While future years may see some recovery, Moody’s expects growth of just 1% in 2018 following 1.5% this year and 2.25% on average in recent years.

More importantly for the UK’s credit profile, Moody’s does not expect growth to recover to its historic trend rate over the coming years. The UK is a relatively open economy, and the EU is by far its largest trading partner. Research by the National Institute of Economic and Social Research (NIESR) suggests that leaving the Single Market will result in substantially lower trade in goods and services with the EU. In a similar vein, both the NIESR and the Bank of England estimate that private investment will be materially lower in the coming years than in a non-Brexit scenario.

Moody’s is no longer confident that the UK government will be able to secure a replacement free trade agreement with the EU which substantially mitigates the negative economic impact of Brexit. While the government seeks a “deep and comprehensive free trade agreement” with the EU, even such a best-case scenario would not award the same access to the EU Single Market that the UK currently enjoys. It would likely impose additional costs, raise the regulatory and administrative burden on UK businesses and put at risk the close-knit supply chains that link the UK and the EU. Also, free trade arrangements do not as a standard cover trade in services — which account for close to 40% of the UK’s exports to the EU and 80% of Gross Value Added in the economy — given the prevalence of non-tariff trade restrictions and the need to align regulations and standards. In Moody’s view, the differences of outlook between the UK and the EU suggest that the most likely outcome is now a rather more limited free trade agreement which may exclude services: the UK’s desire to pursue its own regulatory policies and to avoid the jurisdiction of the European Court of Justice will make finding an agreement on services challenging. Moreover, any free trade agreement will likely take years to negotiate, prolonging the current uncertainty for businesses.

Aside from the direct impact on the UK’s credit profile, weakening growth prospects are likely to exacerbate the government’s evident fiscal challenges. And this is likely to be happening during a period in which policymakers will be increasingly distracted by the twin challenges of sustaining a domestic political consensus on how to operationalise Brexit and reaching agreement with EU counterparts.

Brexit carries with it a heavy policy and legislative agenda which will dominate policymaking in the years to come. In addition to ensuring a smooth exit from the EU, the UK authorities aim for significant changes to the UK’s immigration policy, its broader trade policies as well as regulatory policies. With Brexit dominating the government’s legislative priorities for the coming years, there is likely to be limited political capital and civil service capacity to address other challenges relating to the UK’s growth potential and weak productivity growth. While Moody’s continues to assess the UK’s institutional strength to be very high, the challenges for policymakers and officials are substantial and rising. The recent loss of the UK government’s parliamentary majority further obscures the future direction of economic policy.

RATIONALE FOR STABLE OUTLOOK

The fiscal deterioration that Moody’s expects is balanced by the UK’s continued economic and institutional strengths, that compare well to peers at the Aa2 rating level. While the ongoing Brexit negotiations introduce a high level of uncertainty over the economic outlook for the UK, Moody’s base case remains that some form of a free trade agreement is in the interest of both sides and will ultimately be agreed. Such a scenario would mitigate the negative economic implications of the UK’s departure from the EU to some extent.

In that context, Moody’s notes that the UK government may be softening its negotiating stance in a number of areas, including on the European Court of Justice, on continuing budget contributions in the transition phase and most importantly on the need for a transitional agreement beyond March 2019 to limit the disruption to trade following the UK’s exit.

WHAT COULD CHANGE THE RATING UP/DOWN

The combination of eroding fiscal and economic strength which drove today’s action implies limited upside to the rating following the downgrade. Over the longer term, a more rapid and sustained recovery in fiscal strength, together with evidence that the economic impact of Brexit is less material than Moody’s currently estimates would be positive for the rating.

The rating would come under further downward pressure if Moody’s concluded that public finances were likely to weaken further than Moody’s currently expects. It would also be under pressure if Moody’s concluded that the economic impact of the decision to exit the EU would be more severe than Moody’s currently expects, perhaps because the negotiations with the EU failed to secure an effective transition agreement that would allow for an orderly transition to new trade arrangements.

SPAIN/CATALONIA

Rajoy is sending in the police trying to prevent the referendum from taking place.  It is having unintended consequences.  Those who were originally voting no, upon seeing signs that they were going back to Francoism, have now decided to vote in the positive.

(courtesy zerohedge)

Unintended Consequences & Ugly Repercussions: It’s Getting Worse In Catalonia

As NakedCapitalism’s Jerri-Lynn writesthe Catalonia crisis is accelerating, with Madrid’s crackdown increasing support for independence even among those previously not so disposed. This does not look like it will end well.

Spain will deploy police reinforcements to the northeastern region of Catalonia to maintain order and take action if a referendum on independence pledged by the Catalan government but deemed illegal by Spain should take place, officials said Friday.

AP reports that an Interior Ministry statement said the extra agents would provide backing for the Catalan regional police who are also under orders to prevent the staging of the referendum.

But protests continue to grow and Rajoy’s actions only seem to solidify opposition

“I feel the way people used to feel during Franco regime. Nothing less. Because Francoism is still alive,” said protester Josep Selva, referring to Gen. Francisco Franco’s military regime that ruled Spain between 1939 and 1978, three years after his death.

“The political reform of 1978 only legalized Francoism and disguised it as democracy,” he said.

But, as WolfStreet.com’s Don Quijones points outMadrid’s crackdown on Catalonia is already having one major consequence, presumably unintended: many Catalans who were until recently staunchly opposed to the idea of national independence are now reconsidering their options.

A case in point: At last night’s demonstration, spread across multiple locations in Barcelona, were two friends of mine, one who is fanatically apolitical and the other who is a strong Catalan nationalist but who believes that independence would be a political and financial disaster for the region. It was their first ever political demonstration. If there is a vote on Oct-1, they will probably vote to secede.

The middle ground they and hundreds of thousands of others once occupied was obliterated yesterday when a judge in Barcelona ordered Spain’s militarized police force, the Civil Guard, to round up over a dozen Catalan officials in dawn raids. Many of them now face crushing daily fines of up to €12,000.

The Civil Guard also staged raids on key administrative buildings in Barcelona. The sight of balaclava-clad officers of the Civil Guard, one of the most potent symbols of the not-yet forgotten Franco dictatorship, crossing the threshold of the seats of Catalonia’s (very limited) power and arresting local officials, was too much for the local population to bear.

Within minutes almost all of the buildings were surrounded by crowds of flag-draped pro-independence protesters. The focal point of the day’s demonstrations was the Economic Council of Catalonia, whose second-in-command and technical coordinator of the referendum, Josep Maria Jové, was among those detained. He has now been charged with sedition and could face between 10-15 years in prison. Before that, he faces fines of €12,000 a day.

The confiscation of ballots and other vital voting paraphernalia and the detention of key members of the referendum’s organizing committee, together with today’s decision by the Spanish Finance Ministry to completely block the regional government’s accounts — a move that would not be possible without full cooperation of both Spanish and Catalan banks — could be a major setback for Catalonia’s dreams of independence.

Without ballots, voter databases and ballot boxes, organizing a referendum is going to be a tough task, especially if Catalonia’s government no longer has access to public funds. But it will still try. It’s already launched a new website informing the public of the location of voting colleges on October 1. The site replaces dozens of other URLs that have been shut down at the behest of Spanish authorities.

Nonetheless, yesterday’s police operation significantly — perhaps even irreversibly — weakens Catalonia’s plans to hold a referendum on October 1, as even the region’s vice-president Oriol Junqueras concedes. But that doesn’t mean Spain has won. As the editor of El Diario, Ignacio Escolar, presciently notes, yesterday’s raids may have been a resounding success for law enforcement, but they were an unmitigated political disaster that has merely intensified the divisions between Spain and Catalonia and between Catalans themselves.

Each time Prime Minister Rajoy or one of his ministers speak of the importance of defending democracy while the Civil Guard seizes posters and banners related to the October 1 vote and judges rule public debates on the Catalan question illegal and then fine their participants, a fresh clutch of Catalan separatists is born.

In the days to come they will be swarming the streets, waving their flags, clutching their red carnations and singing their songs. For the moment, the mood is still one of hopeful, resolute indignation. But the mood of masses is prone to change quickly, and it’s not going to take much to ignite the anger.

Madrid is sending three ships with a total of 6,000 non-Catalan police reinforcements to Barcelona in the coming week. In reaction, the stevedores at Barcelona Port have voted not to provide any services to the ships, which they consider to be “ships of repression.”

If it spirals out of control, the conflict between Barcelona and Madrid could have ugly repercussions far beyond Spanish borders,as we warned in a 2015 article. Yet the European Union steadfastly refuses to mediate in the crisis, arguing that it must respect Spain’s constitution.

Given Brussels’ long-standing habit of meddling in others’ affairs, including toppling the elected leaders of Greece and Italy at the height of Europe’s sovereign debt crisis, it’s a poor excuse. And most of Europe’s governments (with the possible exception of the UK, which is already engaged in a gargantuan struggle with Brussels) refuse to support Catalonia’s separatist movement out of the fear — largely justifiable — that it could fuel separatist tensions closer to home.

But the crisis in Catalonia is not going to go away just by ignoring it.

In the last few weeks alone three major international newspapers — Le Monde, The New York Times and The Times — have called for Madrid to allow a referendum. And with Rajoy and his government seemingly determined to pummel Catalonia into submission, at just about any cost, the chances are that their ranks will grow.

And this is where Madrid is making arguably its biggest mistake.For a new country to be born, it must first be recognized. Thanks to years of sustained, non-violent protest and the often overblown reaction of the Rajoy government, Catalonia has already massively increased the positioning of its brand internationally. Ten years ago, most people in the world didn’t even know what or where Catalonia was. Now, it’s hogging the headlines of the front pages of the biggest newspapers.

“Do not underestimate the power of Spanish democracy.”

Read…  Catalonia’s Defiance of Spanish Authority Turns into Rebellion

*  *  *

Finally, as NakedCapitalism’s Yves discussed earlier this weekCatalonia could exercise the nuclear option of defaulting on its debt– which would have serious consequences for itself and for the government in Madrid. Although this still looks to be a remote possibility, Madrid’s latest aggressive measures have made no headway in defusing that potential bomb

5. RUSSIA AND MIDDLE EASTERN AFFAIRS

IRAN

Iran unveils new ballistic missile with multiple warheads and capable of travelling 1200 miles enough to strike Israel and much of the middle east.  They state that they will not seek permission to produce defensive weapons.

(courtesy zerohedge)

“We Will Not Seek Permission”: Defiant Iran Unveils New Ballistic Missile

Iranian President Hassan Rouhani delivered another snub to the Trump administration on Friday when he said that Iran would continue its missile program in defiance of US sanctions, and to underscore the determination, the Iranian Revolutionary Guard unveiled its newest long-range ballistic missile during a military parade in Tehran.

The new missile that was introduced at the parade is capable of reaching much of the Middle East, including Israel, with a range of 1,200 milesIt’s also capable of carrying several warheads. The parade in Tehran commemorated the 1980s Iraq-Iran war. Though Iran has long boasted of having missiles in the same range in its arsenal, it was the first time that the new Khoramshahr missile was displayed in public,the AP reported adding that in February, Iran test-fired the same medium-range type of missile, prompting Trump to say that the United States is “putting Iran on notice.”

Friday’s parade also showcased various Iranian army units and Revolutionary Guard forces, as well as the police, according to the Associated Press. Similar parades were held in other Iranian cities.

Rouhani addressed the parade in Tehran, saying that Iran would not halt its missile program but continue to boost military capabilities, despite U.S. demands.

“We will increase our military power as a deterrent. We will strengthen our missile capabilities … We will not seek permission from anyone to defend our country.

“All countries in the world supported the nuclear deal in the United Nations General Assembly this year … except the United States and the Zionist regime (Israel),” Rouhani said.

During his address to the general assembly earlier in the week, Rouhani slammed the US and Trump for reneging, and claimed that the Iran deal belongs “to the world” and “cannot be renegotiated.” He criticized Trump’s “ugly, ignorant words” made during Trump’s own address where he urged world powers to come together and pressure the Iranian regime. Rouhani added that the country’s missile program is vital to national security, citing the country’s long-running war with Iraq in the 1980s as justification for the program.

Iran has continued its ballistic missiles program in defiance of sanctions signed into law by US President Donald Trump in August that targeted any person or company that does business with any entity designated by the administration as having a connection to Iran’s missile program. The White House said the sanctions were also levied in response to the country’s purported support of terrorists and alleged human rights violations.

Trump said earlier this week that he has made up his mind about whether to re-certify Iran’s compliance with the deal, but has yet to reveal his decision publicly. The administration has until Oct. 15 to decide whether to label Iran compliant or not. The White House certified in July that Iran was in compliance with the nuclear deal, but would “face consequences” for violating the “spirit” of the deal.

In a press conference Wednesday night, US Secretary of State Rex Tillerson repeated the administration’s line that Iran, while technically in compliance with the deal’s terms, has continued to engage in destabilizing behaviors like funding Hezbollah, and Shia militias fighting on behalf of embattled Syrian President Bashar Al Assad, and by continuing its ballistic weapons program. Tillerson said the agreement must be altered, or the US wouldn’t be able to abide by its terms.

Other signatories to the deal have expressed reluctance to renegotiate. According to Reuters, Chinese Foreign Minister Wang Yi said tensions on the Korean peninsula underlined the importance of the Iranian deal, and that China would continue to support it. Russian Foreign Minister Sergei Lavrov said that the US imposition of unilateral sanctions on Iran was “illegitimate and undermines the collective nature of international efforts.”

ISRAEL/SYRIA
Israel strikes at a Damascus ammunition depot just outside the capital city’s airport.  Israel destroys an Iranian made Syrian drone along the Golan heights.  Both hits were from the Lebanese side of the border as Israel is careful not to cause any problems with the Russians.  Israel wants to eliminate the Hezballoh/Iranian forces inside Syria
(courtesy zerohedge)

Israel Strikes Damascus After Syrian Missile Defense Fires On Aircraft

For the third time in as many weeks Israel has reportedly bombed positions inside Syria. Syrian state media along with multiple regional outlets showed fires burning at a facility near the Damascus international airport in the early hours of Friday. Israeli newspaper Haaretz reports that like with previous attacks, Israel jets fired from over Lebanese airspace. But it appears the latest exchange was part of a tit-for-tat exchange of fire between Syria and Israel in a situation that continues to dangerously escalate. 

Multiple reports are circulating that the Israeli attack was initiated after Syria’s aerial defense missile system engaged and fired on an Israeli aircraft in the area. Video of what purports to show Syrian missiles firing on the aircraft circulated widely in Syrian social media and was picked up by Lebanese and Israeli news outlets. Early reports indicate that an Israeli drone was likely the target.

 air defense downing an  drone over tonight.

It appears that Israel’s attack came in response to Syria’s engaging the unidentified aircraft – though it’s unclear if the target was hit. This latest incident is unique for the fact that Syria quickly publicized that its missile defense system engaged the Israeli target.

The Facebook page of a prominent Syrian pro-government militia reported in the early morning hours that, “an area near the Damascus international airport was attacked by a hostile missile.” Israeli newspapers are claiming the site to be an ammunition storage depot.


Early Friday morning images of the aftermath of the Israeli strike circulated in regional media. Image source: Jerusalem Post via Syrian social media. 

The exchange of fire comes after a Tuesday incident wherein the Israel Defense Forces shot down what it identified as an Iranian-made drone which departed from Damascus and subsequently entered the demilitarized zone along the border on the Golan Heights. Israel’s aerial defense command fired a Patriot missile and destroyed the drone.

Meanwhile, Israeli jets have been illegally operating in Lebanese airspace with increased intensity of late – even to the point of causing temporary moments of panic over southern Lebanon as low flying jets sometimes break the sound barrier. Violation of Syrian airspace was more brazen in previous years of the war, but as we’ve explained previously it appears that Israel is carefully calculating it’s strike positions over “neutral” Lebanese airspace so as not to force a Russian response by directly violating Syrian space.

Weeks ago senior Israeli officials were quoted as threatening to assassinate Syrian President Assad by bombing his palace in Damascus, while further adding that Israel will seek to derail the US-Russia brokered de-escalation deal reached in Astana, Kazakhstan earlier this summer. The Astana deal essentially put Russia in the driver’s seat in Syria, which Israel sees as guaranteeing a permanent Iranian presence – something Prime Minister Netanyahu sees as intolerable.

Though rarely acknowledged in the media, Israel and Syria have been at open war since at least 2013, when Israel launched a massive missile attack against a Syrian defense technology facility in Jamraya outside of Damascus. Israel has also targeted Damascus International Airport on a number of occasions. During the summer, the head of Israel’s air force acknowledged nearly one hundred IDF attacks on convoys inside Syria over the course of the past 5 years. And as a Wall Street Journal investigation confirmed, the Israeli army has been providing military aid to al-Qaeda linked rebels operating in Syria’s south for years.

END

6 .GLOBAL ISSUES

 

7. OIL ISSUES

Oil over 50 dollars as uSA rig count continues to slide which will eventually cause supply to fall

(courtesy zerohedge)

WTI Hovers Above $50 As US Oil Rig Count Slides To 3-Month Lows

With crude production rebounding back to pre-Harvey levels, and refinery demand coming back on-line, WTI has trod water around $50 all week. The US oil rig count dropped for the 6th straight week (down 5 to 744), back at its lowest level since early June.

  • *U.S. OIL RIG COUNT DOWN 5 TO 744 , BAKER HUGHES SAYS :BHGE US
  • *U.S. GAS RIG COUNT UP 4 TO 190 , BAKER HUGHES SAYS :BHGE US

As Bloomberg reports, it looks like shale billionaire Harold Hamm might be right in saying U.S. producers are being more cautious than government output forecasts seem to imply.

At least that’s what the Baker Hughes weekly drilling report suggests, showing producers idled five oil rigs this week, adding to 19 parked over the previous five weeks.

The numbers released every Friday increasingly make it look like the drilling boom might have peaked, and that should impact output down the road.

Shale drillers will be disciplined in how much they produce, Hamm, chief executive officer of Continental Resources Inc. and one of the pioneers of the shale revolution, said on Bloomberg TV Thursday.

The government projection of more than 1 million new barrels a day in U.S. production this year is “flat wrong” and distorting prices, he said.

Production continues to rebound as more of Texas comes back online (despite the stagnation of oil rig counts)…

It’s going to come down to the November meeting and the market will be looking for not so much an extension of the deal, but deeper cuts, says Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors.

“We’ve been in a tight range the last couple of days, not really going anywhere and at the end of the day, winding up at the same prices”

8. EMERGING MARKET

VENEZUELA

end

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

Euro/USA   1.1968 UP .0022/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 GREEN 

USA/JAPAN YEN 112.03 DOWN 0.429(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 1.3568 DOWN .0011 (Brexit  March 29/ 2017/ARTICLE 50 SIGNED

THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS

USA/CAN 1.2271 DOWN .0053 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA)

Early THIS FRIDAY morning in Europe, the Euro ROSE by 22 basis points, trading now ABOVE the important 1.08 level  RISING to 1.1968; / Last night the Shanghai composite CLOSED  DOWN 5.28 POINTS OR 0.16%     / Hang Sang  CLOSED  DOWN 229.80 POINTS OR 0.82% /AUSTRALIA  CLOSED UP 0.42% / EUROPEAN BOURSES OPENED ALL GREEN 

The NIKKEI: this FRIDAY morning CLOSED DOWN 51.03 POINTS OR 0.25%  

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 229.80 POINTS OR 0.82%  / SHANGHAI CLOSED DOWN 5.28 POINTS OR 0.16%   /Australia BOURSE CLOSED UP 0.42% /Nikkei (Japan)CLOSED DOWN 51.03 POINTS OR 0.25%   / INDIA’S SENSEX IN THE RED

Gold very early morning trading: 1295.75

silver:$17.00

Early FRIDAY morning USA 10 year bond yield:  2.255% !!! DOWN 2   IN POINTS from THURSDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. (POLICY FED ERROR)

The 30 yr bond yield  2.789, DOWN 2 IN BASIS POINTS  from THURSDAY night. (POLICY FED ERROR)

USA dollar index early FRIDAY morning: 91.99 DOWN 26  CENT(S) from THURSDAY’s close. 

This ends early morning numbers  FRIDAY MORNING

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And now your closing FRIDAY NUMBERS

Portuguese 10 year bond yield: 2.427% UP 7  in basis point(s) yield from THURSDAY 

JAPANESE BOND YIELD: +.04%  UP 1  in   basis point yield from THURSDAY/JAPAN losing control of its yield curve/

SPANISH 10 YR BOND YIELD: 1.6222% UP 4  IN basis point yield from THURSDAY 

ITALIAN 10 YR BOND YIELD: 2.11 UP 4 POINTS  in basis point yield from THURSDAY 

the Italian 10 yr bond yield is trading 49 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.455% DOWN 1  IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR FRIDAY

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

Euro/USA 1.1935 UP .0061 (Euro UP 61 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 1112.53 DOWN 0.013(Yen UP 1  basis points/ 

Great Britain/USA 1.3575 UP  0.0004( POUND UP 4 BASIS POINTS)

USA/Canada 1.2339 DOWN .0004(Canadian dollar UP 4 basis points AS OIL ROSE TO $50.63

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This afternoon, the Euro was UP  by 61 basis points to trade at 1.1935

The Yen ROSE to 112.53 for a GAIN of 1  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  

The POUND ROSE BY 86  basis points, trading at 1.3575/ 

The Canadian dollar ROSE by 4 basis points to 1.2339,  WITH WTI OIL RISING TO :  $50.63

The USA/Yuan closed at 6.590/
the 10 yr Japanese bond yield closed at +.04%  UP 1 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 3  IN basis points from THURSDAY at 2.2710% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 2.801 DOWN 2  in basis points on the day /

Your closing USA dollar index, 92.25  DOWN 25 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 FRIDAY: 1:00 PM EST

London:  CLOSED DOWN  5.05 POINTS OR 0.11%
German Dax :CLOSED UP 30.86 POINTS OR 0.25%
Paris Cac  CLOSED UP 25.63 POINTS OR 0.49% 
Spain IBEX CLOSED UP 4.90 POINTS OR 0.05%

Italian MIB: CLOSED UP 136.15 POINTS OR 0.61% 

The Dow closed down 9.64 OR 0.04%

NASDAQ WAS closed up 4.23  POINTS OR 0.52%  4.00 PM EST

WTI Oil price;  50.63  1:00 pm; 

Brent Oil: 56.63 1:00 EST

USA /RUSSIAN ROUBLE CROSS:  57.82 DOWN 37/100 ROUBLES/DOLLAR (ROUBLE HIGHER BY 37 BASIS PTS)

TODAY THE GERMAN YIELD RISES TO  +0.455%  FOR THE 10 YR BOND  4.PM EST EST

END

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

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

WTI CRUDE OIL PRICE 5:00 PM:$50.63

BRENT: $56.77

USA 10 YR BOND YIELD: 2.249%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 2.7801% (yield curve flattens)

EURO/USA DOLLAR CROSS:  1.1945 UP .0001

USA/JAPANESE YEN:111.94  DOWN  0.514

USA DOLLAR INDEX: 92.17  DOWN 9  cent(s)/

The British pound at 5 pm: Great Britain Pound/USA: 1.3483 : down 95 POINTS FROM LAST NIGHT  

Canadian dollar: 1.2336 DOWN 1 BASIS pts 

German 10 yr bond yield at 5 pm: +0.455%

END

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

TRADING IN GRAPH FORM FOR THE DAY

VIXtermination Sparks Buying-Panic In Stocks As Yield Curve Crashes To 10 Year Lows

A chaotic week in some markets…

But only FX sees through the bullshit…

It was a week of superlatives…

Trump’s best week of the year

The Dollar Index just completed its best 2-week rally since December

The Treasury Curve’s biggest 2-week-flattening since December

10… year… flats…

And as the curve collapse, Financials had their best 2-week rally since December… Harvey ???

This week was Apple’s worst post-product-launch week in over 7 years and worst week since April 2016 (AAPL closed below its 100DMA for the first time since July)

*  *  *

Trannies (up 6 in a row) and Small Caps soared this week as Nasdaq ended the week in the red…S&P was panic-bid into the close…

VIX was hammered lower to get the S&P back above 2500…

As it has all week…

Financials were the biggest gainers on the week…

FANG Stocks ended the week unchanged

McCain’s “No” sparked some exuberance in Managed Care stocks today…

Notably “Most Shorted” stocks fell for the first week in the last 6…

Treasury yields were up across the curve this week but as the folowing chart shows, there was a dramatic flattening at the long end…

2Y Yields rose their highest since Oct 2008…

But no matter the collapse of the curve to its flattest since 2007, bank stocks were bid…

Gold and Silver fell for the second week in a row (as the dollar rallied)…Gold closed right at $1300 and Silver at $17 (higher on the day)

Copper fell for the 3rd week in a row – biggest drop since May 2016…

WTI hovered around $50 all week…

oh and Small Caps hit a new record high… because fun-durr-mentals!!!!

END

END
Shear devastation in Puerto Rico as they have no power and no cell phone towers on top of total destruction of homes and businesses
(courtesy zerohedge)

Puerto Rico: No Power, No Phones, And “Unprecedented” Damage

Hurricane Maria has moved on from Puerto Rico and was passing the Turks and Caicos Islands Friday morning as a Category 3 storm. But the devastation it caused will disrupt life on the island for the next six months, possibly longer, as the cash-strapped US territory struggles to rebuild its power grid and other crucial infrastructure that was completely destroyed by the storm, according to a report in the Wall Street Journal.

More than 95% of Puerto Rico’s wireless cell sites are currently out of service, according to the FCC. That is worse than the aftermath of Hurricane Irma, which knocked out 56% of the island’s wireless network. Federal Emergency Management Agency Administrator Brock Long said restoring electricity to the island “could take weeks or many, many months.”

But the damage goes beyond cell towers. The most powerful hurricane to hit the US territory in almost a century hobbled the island’s telecommunications system, destroyed its power grid and left communities facing widespread devastation. Puerto Rican authorities have warned the island’s 3.4 million residents that the island faces a difficult and expensive path to recovery from Maria. As the territory rushes to provide initial relief to its struggling citizens, Abner Gómez, executive director of the island’s emergency-management agency, said residents should be prepared to sustain themselves without aid for 72 hours, given the severity of the damage, the obstacles to reach people and how thinly stretched government resources are.

FCC Chairman Ajit Pai said the agency is working with telecom providers to help get the communications networks back online. About a week after Irma hit, all but 6% of Puerto Rico’s cell sites were back online.

“Unfortunately, getting Puerto Rico’s communications networks up and running will be a challenging process, particularly given the power outages,” Mr. Pai said.

In an interview aired on the only radio station left that could still broadcast across the island, PR Gov. Ricardo Rosselló described the situation on the island as a crisis. Flooding and mudslides are a “giant problem” especially in rural, mountainous areas, he said, adding that damage to the island’s infrastructure was enormous and the cost to fix it will be “humongous.”

But in a heartening demonstration of resilience, residents of San Juan – the Puerto Rican capital, which experienced flooding throughout most of its downtown area, including its financial district – are banding together to compensate for the loss of essential services. Left to fend for themselves, San Juaneros took to the streets Thursday to “figure it out,” the Miami Herald reports.

“No electricity? A mustachioed man in a white undershirt played traffic cop at a Santurce intersection. No ambulances? A daughter borrowed her brother’s SUV to race her frail mother from the La Perla neighborhood to a hospital. No debris removal? A physician and two neighbors borrowed garden tools to clear main Condado thoroughfares on their own.

With the enormity of Maria’s destruction still unknown even to the overwhelmed Puerto Rican government, the capital’s storm-dazed residents ventured outside Thursday, clogging roadways while trying to bring some semblance of order to their bruised city.”

One doctor chided his neighbors for not pitching in, criticizing them for coping with their problems by “stress eating.”

“Get busy!” implored Dr. Joseph Campos, a 52-year-old internist at the San Juan Veterans Administration hospital, tree-trimmer in hand as he and his neighbors cut down a tree partially blocking access to a highway. “Even if all you can do is pick up a single, little branch. I’m not eating, and I’m healthy, and I’m working. You don’t have to sit home stress-eating.”

Countless roads were impassable, some neighborhoods largely cut off because of debris or flooding. Most areas outside metro San Juan remained unreachable Thursday, both by road and by phone. Campos had no news of his parents in western Puerto Rico and how they’d fared after the Category 4 storm knocked out power to the entire island. Despite the loss of comunication tools, some damage reports from across the island have trickled out. Three sisters were confirmed dead in a building collapse in the mountainous central region of Utuado, according to local press accounts, while authorities declared small communities across the island as essentially destroyed. The official death toll in Puerto Rico has risen to 10. Across the Caribbean, Maria caused the deaths of 30 people.

As of Thursday afternoon, more than 4,000 people had been rescued by helicopter, trucks and boats by the National Guard, police, firefighters and municipal officials, according to the Herald.

Mr. Rosselló ordered an overnight curfew from Wednesday to Saturday and banned liquor sales. The move appears to be an effort to prevent looting and to maintain security. After Hurricane Irma, there were reports of incidents of looting in St. John in the U.S. Virgin Islands, some of the British Virgin Islands, and in St. Martin.

Fortunately for the cash-strapped island, Trump declared a major disaster in Puerto Rico on Wednesday and ordered federal assistance for 54 of the island’s 78 municipalities, including grants for temporary housing and home repairs and low-cost loans to cover uninsured property losses. FEMA has hundreds of staff members in Puerto Rico and the U.S. Virgin Islands conducting initial impact assessments and helping to get seaports and airports open, said Mr. Long, the agency’s administrator, in an interview Thursday.

While the damage to Puerto Rico was unprecedented and severe, it pales in comparison to the total destruction that Maria brought to the tiny Caribbean island of Dominica, which saw its agriculture-based economy totally wiped out, along with towns, roads, forests and its communications and electricty infrastructure.

After the markets closed we got this bad news for Puerto Rico: two dams have failed which will cause massive flooding
(courtesy zerohedge)

NWS Declares “Extremely Dangerous Situation” After Puerto Rico Dam Fails

With electricity and cell phone service still offline across most of hurricane-damaged island, NBC reports that a dam in northwest Puerto Rico has failed, causing even more flash flooding and prompting emergency evacuations.

Guajataca Dam operators said it failed at 2:10 pm ET, prompting the NWS to issue a flash flood emergency warning for Isabela and Quebradillas municipalities.

“This is an EXTREMELY DANGEROUS SITUATION. Busses are currently evacuating people from the area as quickly as they can,” NWS San Juan said.

A warning was also issued for residents living in areas surrounding the Guajataca River who, according to NEW San Juan “should evacuate NOW” as their lives are in danger.

215PM FLASH FLOOD EMERGENCY for A Dam Failure in Isabela Municipality y Quebradillas Municipality in Puerto Rico… 

215PM FLASH FLOOD EMERGENCY for A Dam Failure in Isabela Municipality y Quebradillas Municipality in Puerto Rico…  pic.twitter.com/L3utOjxspR

At 210 PM, dam operators reported the Guajataca Dam is failing causing flash flooding downstream on the Rio Guajataca.

215PM FLASH FLOOD EMERGENCY for A Dam Failure in Isabela Municipality y Quebradillas Municipality in Puerto Rico…  pic.twitter.com/L3utOjxspR

This is an EXTREMELY DANGEROUS SITUATION. Busses are currently evacuating people from the area as quickly as they can 

All Areas surrounding the Guajataca River should evacuate NOW. Their lives are in DANGER! Please SHARE! 

According to federal reservoir data, the lake behind the dam, Lago de Guajataca, rose more than three feet between Tuesday and Wednesday, when the storm was still directly over the island. More recent data were unavailable.

More than 95% of Puerto Rico’s wireless cell sites are currently out of service, according to the FCC. That is worse than the aftermath of Hurricane Irma, which knocked out 56% of the island’s wireless network. Federal Emergency Management Agency Administrator Brock Long said restoring electricity to the island “could take weeks or many, many months.”

end

A 5.7 magnitude earthquake hits off the coast of California  (off of Eureka)
(courtesy zerohedge)

5.7 Magnitude Earthquake Hits Off North California Coast

A major, M5.7 earthquake has struck off the coast of Northern California, just days after a devastating M7.1 quake hit Mexico, resulting in hundreds dead and at least 50 buildings collapsed. The initial quake was quickly followed by a second one coming in at a magnitude of 5.6, which hit closer to shore, the USGS said.

While the quake was luckily too far offshore to cause any damage, the Sacramento Bee writes that after Tuesday’s devastating earthquake in Mexico and the following smaller quakes that shook parts of California, “the West Coast is bracing for the worst.”

Time spoke to experts who pointed out that Southern California, Los Angeles and San Francisco were the most at-risk areas in the country for the next destructive quake. It’s been 160 years since the magnitude 7.9 earthquake near the San Andreas Fault, meaning a lot of pressure has built up over the years.

The Bee writes that multiple smaller earthquakes have been reported throughout the state as Mexico continues to recover and rescue victims from Tuesday’s disaster, and today’s “larger” quake appears to have been a culmination of the Mexico aftermath.  A number of earthquakes were reported in the Bay Area on Wednesday, including one measuring magnitude 2.5 near San Jose, according to NBC Bay Area.

On the central coast, a magnitude 3.2 quake hit San Juan Bautista on Wednesday morning, and a magnitude 2.8 earthquake rumbled between Gilroy and Morgan Hill about 10 a.m. Thursday, television station KSBW-8 reported.

Stronger earthquakes were reported in Northern California, with a magnitude 3.8 earthquake reported in Shasta County and a 3.0 in Humboldt County.

Still, John Bellini, a geophysicist with the U.S. Geological Survey, told SFGate the smaller quakes don’t necessarily mean the “big one” is in the near future. “It looks like normal activity,” Bellini said. “They’re all over the place. It’s not unusual.”

Increased seismic activity doesn’t typically signal an impending larger seismic event, he said.

“We can’t predict or forecast earthquakes,” Bellini said. “Sometimes before a large earthquake you’ll have a foreshock or two. But we don’t know they’re foreshocks until the big one happens.”

Which, of course, is why California residents have been especially on edge in recent days.

Another public pension system in trouble as OPERS face pension cuts as they are deeply underfunded
(courtesy zero hedge)

1 Million Ohio Public Employees Face Pension Cuts As Another Ponzi Teeters On The Brink

We’ve written frequently of late about the pension crisis in Kentucky where pensioners are facing potentially catastrophic benefit cuts as their politicians finally admit that they’ve been sold a fantasy for decades (see: Pension Consultant Offers Dire Outlook For Kentucky: Freeze Pension And Slash Benefits Or Else).

Unfortunately, Kentucky is not unique as there is a never-ending stream of similar pension failures popping up daily all around the country.  The latest such example comes to us from Ohio as the Dayton Daily News notes that the Ohio Public Employees Retirement System (OPERS) has been forced to consider COLA cuts for its 1 million pensioners in order to keep the fund solvent.

Ohio’s biggest public pension system is considering cutting the cost of living allowances for its 1-million members as a way to shore up the long-term finances of the fund.

Ohio Public Employees Retirement System trustees on Wednesday discussed options that could affect all current and future retirees, including tying the cost of living allowance to inflation and capping it and delaying the onset of the COLA for new retirees.

No decision has been made and trustees will discuss the options again in October. So far, some 72,000 members responded to an OPERS survey about possible changes. OPERS spokesman Todd Hutchins said 70 percent of retirees responding to the survey report that they prefer that the COLA be capped, rather than frozen.

So how bad is OPERS?  Per the latest valuation, Ohio taxpayers are on the hook for a roughly $20 billion underfunding.  Ironically, the fund ended 2016 with the highest underfunding in it’s history, after being nearly fully funded in 2007, despite a 275% surge in the S&P off the lows in 2009.  Perhaps someone can explain to us how these pensions stand a chance of ever again being fully funded if they can’t even manage to improve their balance sheet during one of the biggest equity bubbles in history?

Be that as it may, like all pensions the OPERS underfunding is only as good as the garbage assumptions used to calculate it.  As the following table shows, a mere 1% reduction in OPERS’ discount rate would result in a $12 billion increase in the fund’s net liability.

Ironically, even OPERS’ own financial report pegs its “Weighted Average Long-Term Expected Real Rate of Return” at just 5.66%.

Not surprisingly, OPERS is just one of many Ohio public pensions currently facing cuts.

OPERS is the latest of the five public pensions systems in Ohio to consider benefit cuts.

The State Teachers Retirement System of Ohio in April voted to indefinitely suspend the COLA for retired teachers. Trustees said they weren’t certain that the cut would be enough to shore up the finances of the $72-billion fund.

Ohio Police & Fire Pension Fund is expected to hire a consultant to help restructure its health care benefits. OP&F announced in May it would switch in January 2019 to issuing stipends to each retiree, who can then use the money to purchase coverage.

School Employees Retirement System, which covers janitors, bus drivers and cafeteria workers, is taking steps to link its cost of living allowance to inflation, cap it at 2.5 percent, and delay its onset for new retirees.

Meanwhile, by protesting earlier this week Ohio employees demonstrated that they’re still in the “Shock and Denial” phase of dealing with the news that their pensions were always just a clever little fairy tale told to earn their votes.  Luckily, “Anger and Bargaining” is only 2 steps away in the 7-step process…

Trump’s last ditch effort to repeal Obamacare fails as McCain votes no the Graham-Cassidy bill.  After Sept 30, they will need 60 votes which will be impossible. When the news came out that McCain killed the GOP’s last ditch effort to repeal both gold and silver caught bids as it looks like Trump will have considerable trouble passing anything.

(courtesy zerohedge)

John McCain Kills GOP’s Last Ditch Efffort To Repeal Obamacare

Third time turned out to be unlucky after all.

Earlier today, Sen. Susan Collins said that she has serious concerns about the latest GOP bill to repeal and replace ObamaCare as Republicans prepare to vote on the legislation next week, adding that she was “leaning against the bill… I’m just trying to do what I believe is the right thing for the people of Maine.”  And with Collins voicing against the bill, it meant that GOP leadership would be left with no room for error if they want to get their last-ditch ObamaCare repeal bill through the Senate next week.

The math is simple: Republicans have 52 seats and need 50 senators to support the bill, which would require Vice President Pence to break a tie, under the special budget rules being used to avoid a Democratic filibuster.  Sen. Rand Paul has already said he will vote against the legislation.

Which meant that losing just one more vote would mean the end of this latest attempt to repeal Obamacare.

They lost it moments ago when John McCain said in a statement that “I cannot in good conscience vote for the Graham-Cassidy proposal

I cannot in good conscience vote for Graham-Cassidy. A bill impacting so many lives deserves a bipartisan approach. http://bit.ly/2xtEuvz 

The senator added that “I would consider supporting legislation similar to that offered by my friends Senators Graham and Cassidy were it the product of extensive hearings, debate and amendment. But that has not been the case. Instead, the specter of September 30th budget reconciliation deadline has hung over this entire process.

ULtimately, McCain demands the Democrats be part of any solution: “A bill of this impact requires a bipartisan approach”

His full statement below:

STATEMENT BY SENATOR JOHN McCAIN ON HEALTH CARE REFORM

Washington, D.C. — U.S. Senator John McCain (R-AZ) released the following statement today on health care reform:

“As I have repeatedly stressed, health care reform legislation ought to be the product of regular order in the Senate. Committees of jurisdiction should mark up legislation with input from all committee members, and send their bill to the floor for debate and amendment. That is the only way we might achieve bipartisan consensus on lasting reform, without which a policy that affects one-fifth of our economy and every single American family will be subject to reversal with every change of administration and congressional majority.

“I would consider supporting legislation similar to that offered by my friends Senators Graham and Cassidy were it the product of extensive hearings, debate and amendment. But that has not been the case. Instead, the specter of September 30th budget reconciliation deadline has hung over this entire process.

“We should not be content to pass health care legislation on a party-line basis, as Democrats did when they rammed Obamacare through Congress in 2009. If we do so, our success could be as short-lived as theirs when the political winds shift, as they regularly do. The issue is too important, and too many lives are at risk, for us to leave the American people guessing from one election to the next whether and how they will acquire health insurance. A bill of this impact requires a bipartisan approach.

“Senators Alexander and Murray have been negotiating in good faith to fix some of the problems with Obamacare. But I fear that the prospect of one last attempt at a strictly Republican bill has left the impression that their efforts cannot succeed. I hope they will resume their work should this last attempt at a partisan solution fail.

“1 cannot in good conscience vote for the Graham-Cassidy proposal. I believe we could do better working together, Republicans and Democrats, and have not yet really tried. Nor could I support it without knowing how much it will cost, how it will effect insurance premiums, and how many people will be helped or hurt by it. Without a full CB0 score, which won’t be available by the end of the month, we won’t have reliable answers to any of those questions.

“I take no pleasure in announcing my opposition. Far from it. The bill’s authors are my dear friends, and I think the world of them. I know they are acting consistently with their beliefs and sense of what is best for the country. So am I.

“I hope that in the months ahead, we can join with colleagues on both sides of the aisle to arrive at a compromise solution that is acceptable to most of us, and serves the interests of Americans as best we can.”

end

Now the main stream media is going after the supposed Russian ads on Facebook.  These ads were supposedly trying to sway the election towards Trump.  The problem is that Russian authorities claim no responsibility for the ads and also claim that they would not even know how to place those ads etc..courtesy zero hedge)

“Russia Hoax Continues”: Trump Blasts Facebook Ad Frenzy; Hits “Fake News” For “Screaming” For Hillary

Continuing his early morning tweetstorm, Donald Trump on Friday questioned the recent media focus on Facebook’s decision to overhaul how it handles political advertisements amid investigations into alleged Russian interference in U.S. elections, and called reports of Kremlin-linked groups buying Facebook ads to sway the 2016 election part of a “Russia hoax.”

“The Russia hoax continues, now it’s ads on Facebook. What about the totally biased and dishonest Media coverage in favor of Crooked Hillary.”

The Russia hoax continues, now it’s ads on Facebook. What about the totally biased and dishonest Media coverage in favor of Crooked Hillary?

In a subsequent tweet, Trump also slammed reports that pro-Russian groups used Facebook ads to influence voters in his favor during the 2016 election, and questioned why no attention was paid to the “fake news media’s” bias in favor of “crooked” Hillary Clinton.

“The greatest influence over our election was the Fake News Media “screaming” for Crooked Hillary Clinton. Next, she was a bad candidate!

The greatest influence over our election was the Fake News Media “screaming” for Crooked Hillary Clinton. Next, she was a bad candidate!

Earlier, Kremlin spokesman Dmitry Peskov said on Friday that Moscow had nothing to do with political advertisements on Facebook that were allegedly aimed at influencing the 2016 US presidential election

“We do not know … how to place an advert on Facebook. We have never done this, and the Russian side has never been involved in it,” Peskov told a conference call with reporters.

The statement was in response to Facebook’s report that a Russian agency had purchased some ads on the social network during the 2016 presidential campaign. Facebook co-founder and Chairman Mark Zuckerberg said on Thursday that the company is “actively working with the US government on its ongoing investigations into Russian interference.”

Facebook previously told investigators it discovered some 3,000 political ads published on its platform over the past two years which were reportedly linked to fake accounts based in Russia. Alex Stamos, Facebook’s chief security officer, made the revelation in a blog post Wednesday. Stamos said that 470 inauthentic accounts spent about $100,000 to buy roughly 3,000 ads. He added that the accounts have since been suspended. On Thursday Facebook announced it would turn over the ads to Congressional investigators.

The company also said that it “will help government authorities complete the vitally important work of assessing what happened in the 2016 election.” “We are looking into foreign actors, including additional Russian groups and other former Soviet states, as well as organizations like the campaigns, to further our understanding of how they used our tools.”

END

It seems that Cuba used a new Sci Fi weapon at USA diplomats which caused hearing loss and memory loss and other debilitating effects.  USA plans a strong response:

(courtesy Mac Slavo.SHFTPlan.com)

Soft data USA manufacturing PMI drops for the first time since March
(courtesy zerohedge)

US Manufacturing “An Increasing Drag On The Economy” As PMI Drops For First Time Since March

Tyler Durden's picture

Following a stronger-than-expected Eurozone PMI print this morning, Markit reports a mixed bag for preliminary September US PMIs with Manufacturing limping higher but Services missing expectations and slipping notably. After 5 straight months of gains, the US Composite PMI dropped back below pre-election levels.

As Markit notes, there were signs of underlying fragility in September, with new orders expanding at one of the slowest rates seen over the past year.

Latest data also indicated that new export sales remain close to stagnation.  

Despite the ongoing collapse of ‘hard’ economic data, ‘soft’ surveys continue to remain hopeful…

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The US economy showed encouraging resilience in a month of hurricane disruption. Although the September surveys indicated a moderation in growth of business activity, the overall rate of expansion remained robust. Historical comparisons of the PMI with GDP indicate that the surveys point to the economy growing at an annualised rate of just over 2% in the third quarter.

“Similarly, the overall rate of job creation remained solid, historically consistent with non-farm payrolls rising by 180,000 in September.

“The biggest impact of Hurricane Harvey was evident in manufacturing supply chains, where resultant supply shortages were a key driver of higher prices. Supply delays were the most widespread in two and a half years, while input price inflation rose to the highest since 2012.

“The manufacturing sector, which was already struggling in August, consequently acted as an increasing drag on the economy, leaving services as the main growth driver. The survey is consistent with a slight deterioration in comparable official manufacturing output data.

“While repair work in the aftermath of Hurricane Harvey may boost short-term business activity in coming months,a drop in business optimism about the year ahead suggests that companies have become less confident in the longer-term outlook.

end

A little difficult to understand  but the upshot of Kaplan’s comments is that the Fed may not have anymore room to raise rates as the economy will buckle over on two or three small rate rises

(courtesy zerohedge)

Fed’s Kaplan Makes A Stark Admission: Equilibrium Rate May Be As Low As 0.25%

As we have hammered away at for years, “the math doesn’t work”, and it appears The Fed just admitted it.

In a stunning admission that i) US economic potential is lower than consensus assumes and ii) that the Fed is finally considering the gargantuan US debt load in its interest rate calculations, moments ago the Fed’s Kaplan said something very surprising:

  • KAPLAN SAYS NEUTRAL RATE MAY BE AS LOW AS 2.25 PCT, LEAVING FED “NOT AS ACCOMMODATIVE AS PEOPLE THINK”

Another way of saying this is that r-star, or the equilibrium real interest rate of the US (calculated as the neutral rate less the Fed’s 2.0% inflation target), is a paltry 0.25%.

What Kaplan effectively said, is that with slow secular economic growth and ‘fast’ debt growth, there’s only so much higher-rate pain America can take before something snaps and as that debt load soars and economic growth slumbers so the long-term real ‘equilibrium’ interest rate is tamped down. It also would explain why the curve has collapsed as rapidly as it did after the Wednesday FOMC meeting, a move which was a clear collective scream of “policy error” from the market.

This should not come as a surprise. As we showed back in December 2015, in “The Blindingly Simple Reason Why The Fed Is About To Engage In Policy Error“, when calculating r-star, for a country with total debt to GDP of 350%…

… The equilbirium real rate is around 0.4-0.6% at most, certainly below 1%, and as low as 0.30%.

Furthermore, as Deutsche Bank’s Dominic Konstam said almost two years ago, “One might argue for low “implied” equilibrium short rates via debt ratios. For example, if nominal growth is 3 percent and the debt GDP ratio is 300 percent, the implied equilibrium nominal rates is around 1 percent. This is because at 1% rates, 100% of GDP growth is necessary to service interest costs.

In this case, real growth would slow in response to rate hikes because productivity would stay weak at full employment and companies would be profit/price constrained around paying higher wages.

Moreover, nominal growth would then slow even more than real growth does because inflation would fall to 1 percent or below.

To be sure, the Fed hinted as much two days ago, when on Wednesday it lowered its longer-run federal funds rate to 2.75% from 3.00%. Another hint came last week from the BOC which, together with Bill Dudley, hinted it was willing to considering changing its mandate, i.e. lowering the inflation target, thereby unlocking some potential upside to the Real Interest Rate.

In the meantime, however, the mere fact that another Fed president is once again hinting that r-star is far lower than consensus, is an indication that the central bank is very limited in how much more tightening it can pull out this cycle. The simple math is that if Kaplan is right, the Fed has at most 3 more hikes left before it prompts yield curve inversion and another recession.

Expect to hear much more on this now that the r-star genie is out of the bottle. Finally the other consideration is that with the Fed once again talking about cutting the neutral rate, is means that not only is tightening approaching its end, but that the Fed may soon be forced to ease, by either cutting rates or QE.

Which also explains the second part of Kaplan’s statement: that the Fed is not as “accomodative as people think.” That is basically the Dallas Fed president jawboning risk assets lower, an implied warning that the market is not appreciating how close to capacity the economy currently is. Of course, the question why stocks aren’t dropping is best left to the ECB and BOJ…

Then again, maybe this time the market will notice, as LT yields are finally starting to move.

David Stockman on the economy:  he gives it 3 months before the crash starts:

(courtesy David Stockman/Daily Reckoning)

Trump’s Now ‘Blowing Kisses to Janet Yellen’

David Stockman joined Fox Business network to discuss his latest analysis on the economy, the political

Stuart Varney started his segment noting that David Stockman is traditionally bearish toward the market and continues to miss out on the Dow rally as it hit an all-time high. Varney began his entry to the former Reagan economic official by stating that if he had listened to Stockman, he would’ve lost out on significant earnings. Stockman began by reverberating, “If you had taken my advice in March 2000, you would’ve dodged a bullet. You could’ve taken my advice in November and dodged another bullet.”

“We have a Federal Reserve, the U.S central bank, that is responsible for creating repeated bubbles that last seven or eight years. This one we’re in has gotten to the point of absurdity. The market is trading at 24 times reported earnings at the 100-month point in the business cycle. Nobody has outlawed a recession. It is going to happen. The market will crash.”

When asked how he can continue to make such remarks when there is a cycle of recession Stockman remained level. He noted, “when the pullbacks come they remain at 20, 30 or 40%.”

Varney, in either negligent or confused tone, then asked what the point of warning of such a threat was if he could not get a specific time period. Stockman remained focused noting, “I cannot predict what the Federal Reserve is going to do. I cannot predict a black swan. I can predict that there’s an orange haired swan heading right the financial system right now. Washington is going to be in chaos within two or three months.”

Stockman went on to warn that Donald Trump was a threat to the market and a destabilizing factor.

The Fox Business host prompted the former Reagan official on what Trump could do to produce such a devastating crash.  Stockman, in clear and sober fashion, leveled, “He’s done nothing right. He’s wasted nine months. The top one, two and even three things wrong and hurting America today falls to the Federal Reserve. He was blowing kisses to Janet Yellen. She’s a menace. She should’ve been asked to resign in January.”

“Second, he should’ve got the budget under control. He is now going to preside over the biggest increase in the national debt in the history of the United States.”

“Third, he should be trying to bring in the expansionist, imperialist foreign policy. He said he would do it during the campaign. Instead of working with Putin and greater relations, he’s running away. Now he is focused on the North Koreans, the Iranians and everyone else. We don’t need another war – we’re bankrupt.”

David Stockman Fox Business Yellen

After being pushed from Varney, who seemed to be in a perplexed mood by the sober speaking, Stockman looked directly into the camera to urge clear and collected thinking. “Sell the bonds. Sell the stocks. Get out of this market. It is a dangerous casino. You have maybe 5% upside and a 40% downside.”

“The risk-reward ratio is terrible. We have a government that is out of control. We have a Federal Reserve that is making dead promises. Put it in cash or anywhere safe – but get it out of Wall Street.”

When asked by the Fox Business host how he could make such claims while others are still making considerable gains in the market, the former Reagan official continued the course. “Good for you on the gains. On the other hand, just because “the world did not end” at this moment today, it does not mean that there is not another drop to fall.”

“I hope you are ready for the crash when it drops because you’re going to have to get out of the way of the thundering crash. Why won’t there be, when you have a market that is so overvalued. Instances of this craziness can be seen in stocks like Netflix that is currently trading at 220 times earnings. It is nothing but a cash burning machine.”

Switching gears the host then went on to ask case specifically for the scenario that Stockman warns of. He began by asking whether Microsoft was in on the craziness. “Microsoft is a little more reasonable. It is trading around the same level it was in 2000 despite the fact that trading is up four times and earnings are up five times. Good companies get massively overvalued during bubbles.”

When asked about his views toward the big tech companies, including Facebook, Apple, Amazon, Netflix and Google (FAANGS), the best-selling author did not turn away from his bearish position. “While I don’t have a big view on Apple, what I do know is that most of the FAANGS, including Facebook, are way overvalued.”

“This market is crazy. This is a classic mania. This is fantasy land. While you smile, you would’ve been doing the same thing at the top of the bubble in March 2009 when everyone was saying ‘this time is different.’ But this time it is worse.”

“The Federal Reserve has nowhere to go. It has already announced that it would be normalizing its books, shrinking the balance rate and raising rates. The European Central Bank (ECB) will follow. The Bank of Japan is now lost. We have a world economy that is in very rough shape. I don’t understand why people don’t see that.”

Find the full interview with David Stockman on Fox Business discussing Janet Yellen’s Federal Reserve, and more here.

Thanks for reading,

David Stockman
for The Daily Reckoning

END

Let us wrap up the week with this offering courtesy of Greg Hunter of USAWatchdog

(courtesy Greg hunter/USAWatchdog)

Bad & Good News on North Korea, Obama Wiretapped Trump, Economic Update

By Greg Hunter On September 22, 2017 In Weekly News Wrap-Ups

There is bad news and good news about the tensions between North Korea and the U.S. First, the bad news. President Trump threatened to “destroy North Korea” if the country continues on its nuclear path and tests more ballistic missiles. North Korea says they will deal with President Trump “with fire.” Now, the good news. China has agreed to enforce stricter sanctions on North Korea (NK) through its banking system. The U.S. has called on China to cut off North Korea from doing business with China’s biggest banks. That doesn’t mean the problem is solved, but it is a huge step by China to curtail NK’s missile testing by cutting down on the flow of cash going into North Korea.

Remember when President Trump said that the Obama Administration “wiretapped” him in Trump Tower? CNN called Trump a “liar” and said his accusations were “baseless.” This week, CNN, among other mainstream media outlets, had to eat their words and admit that Donald Trump and Trump Tower in New York City were, in fact, wiretapped before and after the election. The so-called Russian collusion story falls apart a little more every day, and that is also good news.

The Federal Reserve Head Janet Yellen spoke this week and told the world that low inflation numbers were a “mystery.” Gregory Mannarino of TradersChoice.net says there is no “mystery,” and the Fed knows it. Mannarino contends, “The economy is dead in the water, and the Fed cannot admit it.” That’s why there is low inflation at the moment.

Join Greg Hunter as he talks about these stories and more in the Weekly News Wrap-Up.

(To donate to USAWatchdog.com Click Here)

Video Link

https://usawatchdog.com/bad-good-news-on-north-korea- obama-wiretapped-trump-economic-update/

end

that about does it for tonight

I will see you MONDAY  night

Harvey.

 

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