GOLD: $1272.10 UP $0.10
Silver: $16.60 DOWN 1 CENT(S)
Closing access prices:
SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
SHANGHAI FIRST GOLD FIX: $n/a DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $n/a
PREMIUM FIRST FIX: $8.24 (premiums getting larger)
SECOND SHANGHAI GOLD FIX: $n/a
NY GOLD PRICE AT THE EXACT SAME TIME: $/na
Premium of Shanghai 2nd fix/NY:$13.00 (PREMIUMS GETTING LARGER)
LONDON FIRST GOLD FIX: 5:30 am est $not important
NY PRICING AT THE EXACT SAME TIME: $not important
LONDON SECOND GOLD FIX 10 AM: $1283.10
NY PRICING AT THE EXACT SAME TIME. 1283.10
For comex gold:
NOTICES FILINGS TODAY FOR SEPT CONTRACT MONTH: 75 NOTICE(S) FOR 7500 OZ.
TOTAL NOTICES SO FAR: 2115 FOR 211,500 OZ (6.5785 TONNES)
23 NOTICES FILED TODAY FOR
Total number of notices filed so far this month: 316 for 1,695,000 oz
Let us have a look at the data for today
In silver, the total open interest SURPRISINGLY ROSE BY 285 contracts from 183,209 UP TO 183,494 WITH RESPECT TO YESTERDAY’S TRADING (UP 1 CENT ). THE CROOKS TRIED TO COVER AS MUCH OF THEIR SILVER SHORTS AS POSSIBLE BUT IT LOOKS LIKE THEY FAILED AGAIN
RESULT: A SMALL SIZED RISE IN OI COMEX WITH THE 1 CENT PRICE RISE AND CONSTANT TORMENT. IT SURE LOOKS LIKE OUR BANKERS FAILED AGAIN IN THEIR ATTEMPT TO COVER THEIR MASSIVE SILVER SHORTFALL
In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e. 0.915 BILLION TO BE EXACT or 131% of annual global silver production (ex Russia & ex China).
FOR THE NEW FRONT OCT MONTH/ THEY FILED: 19 NOTICE(S) FOR 95,000 OZ OF SILVER.
In gold, the open interest FELL BY A MUCH LARGER THAN EXPECTED 5604 CONTRACTS WITH THE FALL in price of gold ($2.75 ) . The new OI for the gold complex rests at 525,127. WE HAVE NOW ENTERED GOLDEN WEEK (ONE WEEK OF CHINESE HOLIDAY)..SO EXPECT TORMENT FOR THE REST OF THE WEEK AS THE CROOKS DO NOT HAVE TO WORRY ABOUT PHYSICAL DELIVERIES FOR A WEEK. OUR BANKER FRIENDS WERE QUITE SUCCESSFUL IN COVERING MORE OF THEIR GOLD SHORTS.
Result: A GOOD SIZED DECREASE IN OI WITH THE FALL IN PRICE IN GOLD ($2.75)
we had: 75 notice(s) filed upon for 7,500 oz of gold.
With respect to our two criminal funds, the GLD and the SLV:
Tonight , NO CHANGES in gold inventory at the GLD
Inventory rests tonight: 854.30 tonnes.
Today: NO changes in inventory:
INVENTORY RESTS AT 326.615 MILLION OZ
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver SURPRISINGLY ROSE BY 285 contracts from 183,209 UP TO 183,2494(AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) . IT SEEMS THAT OUR BANKERS WERE AGAIN UNSUCCESSFUL IN COVERING THEIR SILVER SHORTS. WITH GOLDEN WEEK IN CHINA, EXPECT THE BANKERS TO HAVE CONSTANT TORMENT THROUGH THIS COMING WEEK AS THEY TRY AND COVER AS MANY AS POSSIBLE OF THEIR SILVER/GOLD SHORTS.
RESULT: A SMALL SIZED INCREASE IN SILVER OI AT THE COMEX WITH THE RISE IN PRICE OF 1 CENT IN YESTERDAY’S TRADING. EXPECT CONSTANT TORMENT FOR THE REST OF THE WEEK. OUR BANKER FRIENDS WERE UNSUCCESSFUL IN THEIR ATTEMPT TO COVER ANY OF OUR SILVER SHORTS
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
3. ASIAN AFFAIRS
i)Late TUESDAY night/WEDNESDAY morning: Shanghai closed /Hang Sang CLOSED / The Nikkei closed UP 12.59 POINTS OR 0.03%/Australia’s all ordinaires CLOSED DOWN 0.77%/Chinese yuan (ONSHORE) closed/Oil DOWN to 50.26 dollars per barrel for WTI and 55.86 for Brent. Stocks in Europe OPENED RED EXCEPT GERMANY . ALL YUAN FIXINGS CLOSED
3a)THAILAND/SOUTH KOREA/NORTH KOREA
b) REPORT ON JAPAN
c) REPORT ON CHINA
4. EUROPEAN AFFAIRS
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
6 .GLOBAL ISSUES
7. OIL ISSUES
8. EMERGING MARKET
9. PHYSICAL MARKETS
10. USA Stories
Let us head over to the comex:
The total gold comex open interest FELL BY MUCH LARGER THAN EXPECTED 5604 CONTRACTS DOWN to an OI level of 525,127 WITH THE FALL IN THE PRICE OF GOLD ($2.75 LOSS IN YESTERDAY’S TRADING). OUR BANKER FRIENDS WERE QUITE SUCCESSFUL IN THEIR ATTEMPT TO COVER SOME OF THEIR HUGE GOLD SHORTFALL. OCTOBER IS AN ACTIVE DELIVERY MONTH ALTHOUGH IT IS THE WEAKEST IN TERMS OF ACTUAL DELIVERIES AND OPEN INTEREST. WE CAN VISUALIZE THAT THROUGHOUT THE MONTH OF SEPTEMBER, THE CROOKS UTILIZED THE EMERGENCY EFP SCHEME TO TRANSFER OBLIGATIONS OVER TO LONDON. IT THEN STANDS TO REASON THAT IF THE EMERGENCY WAS IN FORCE THROUGHOUT THE MONTH OF SEPTEMBER IT WOULD CONTINUE ON FIRST DAY NOTICE. IT LOOKS LIKE ANOTHER 7200 LONG COMEX CONTRACTS WERE GIVEN 7200 EFP’S. WE HAVE NOW ENTERED GOLDEN WEEK WHERE ALL OF CHINA IS OFF AND AS SUCH EXPECT CONSTANT TORMENT FOR THE REST OF THE WEEK.
Result: a LARGER SIZED open interest DECREASE WITH THE SMALL SIZED FALL IN THE PRICE OF GOLD ($2.75) . BANKERS SUCCESSFUL IN THEIR ATTEMPT TO COVER THEIR GOLD SHORTFALL
CHINA THREW OUT A TRIAL BALLOON LAST MONTH THAT THEY WERE CONSIDERING A YUAN BASED OIL CONTRACT ON THE SHANGHAI EXCHANGE AND THEN THE RECIPIENT OF YUAN WILL ALSO HAVE THE OPTION OF CONVERTING TO GOLD. I NOW STRONGLY BELIEVE THAT THAT IS THE REASON FOR THE CONSTANT TORMENT. THE BANKERS KNOW THAT THEIR GAME WILL BE UP ONCE WE GET A YUAN-PETRO SCHEME WITH A CONVERSION OF YUAN INTO GOLD.
I BELIEVE THE CHINESE WILL INTRODUCE THIS SCHEME AT THEIR BIG 5 YR FORUM BEGINNING ON OCT 18.
I WOULD IMAGINE THAT THE CHINESE WOULD TAKE IN ALL GOLD INITIALLY AT SAY $2,000…AND THE NEW GOLD RECEIVED WOULD BE USED TO SETTLE ON YUAN CASHED. IF 2,000 DOLLARS IS INSUFFICIENT TO RAISE ENOUGH GOLD, THEN FURTHER INCREASES WILL BE THE ORDER OF THE DAY UNTIL EQUILIBRIUM.
THE BANKERS FEARING THIS, HAS ORCHESTRATED HUGE RAIDS THESE PAST 2 WEEKS HOPING TO COVER AS MANY GOLD/SILVER SHORTS AS POSSIBLE.
We have now entered the active contract month of Oct and here we saw a LOSS of 1733 contracts DOWN to 489 contracts. We had 1601 notices filed yesterday so we lost 132 contracts or 13,200 oz will not stand for delivery at the comex. However 132 EFP notices were given to those longs which gives them a fiat bonus plus a future delivery product on another bourse and most likely that would be London. These departing longs would thus receive a London based forward contract for delivery at another date. These EFP’s are supposed to be for emergency purposes only but the crooks are continually using this escape hatch.
The November contract saw A GAIN OF 219 contracts UP to 1939.
The very big active December contract month saw it’s OI LOSS OF 4298 contracts DOWN to 416,075.
We had 75 notice(s) filed upon today for 7,500 oz
VOLUME FOR TODAY (PRELIMINARY) 270,845
CONFIRMED VOLUME YESTERDAY: 212,908
We had 23 notice(s) filed for 115,000 oz for the OCT. 2017 contract
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz||
|Deposits to the Dealer Inventory in oz||nil oz|
|Deposits to the Customer Inventory, in oz||
|No of oz served (contracts) today||
|No of oz to be served (notices)||
|Total monthly oz gold served (contracts) so far this month||
|Total accumulative withdrawals of gold from the Dealers inventory this month||NIL oz|
|Total accumulative withdrawal of gold from the Customer inventory this month||23,630.25 oz|
Today, 0 notice(s) were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 75 contract(s) of which 0 notices were stopped (received) by j.P. Morgan dealer and 0 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account.
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||
|Deposits to the Dealer Inventory||
|Deposits to the Customer Inventory||
|No of oz served today (contracts)||
|No of oz to be served (notices)||
|Total monthly oz silver served (contracts)||339 contracts (1,695,000 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||2912.95 oz|
NPV for Sprott and Central Fund of Canada
Sprott WINS hostile 3.1 billion bid to take over Central Fund of Canada
Sprott Inc. to take control of rival gold holder Central Fund of Canada
Posted Oct 2, 2017 8:43 am PDT
Last Updated Oct 2, 2017 at 9:20 am PDT
TORONTO – Sprott Inc. (TSX:SII) says it has struck a deal to take control of rival gold-holding firm Central Fund of Canada Ltd. (TSX:CEF.A) after a protracted takeover effort.
Toronto-based Sprott said Monday it will pay $120 million in cash and stock for Central Fund of Canada Ltd.’s common shares and for the right to administer and manage the fund’s assets.
The deal, which requires approval from Central Fund shareholders, would see its class A shareholders transferred to a new Sprott Physical Gold and Silver Trust.
Sprott says the deal would add $4.3 billion to its assets under management, which are focused largely on holding physical precious metals on behalf of clients, and 90,000 investors to its client base.
In March, Sprott tried to go through the Court of Queen’s Bench of Alberta to allow Central Fund’s class A shareholders to swap their shares to Sprott after the family that controls Central Fund rebuffed their attempt to make a deal.
Last year Sprott took over Central GoldTrust, a similar fund controlled by the same family, after securing support from more than 96 per cent of shareholder votes cast.
And now the Gold inventory at the GLD
Oct 4/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 854.30 TONNES
oCT 3/ A HUGE WITHDRAWAL OF 10.35 TONNES FROM THE GLD/INVENTORY RESTS AT 854.30 TONNES
Oct 2/STRANGE/WITH GOLD’S CONTINUAL WHACKING WE GOT A BIG FAT ZERO OZ LEAVING THE GLD/INVENTORY RESTS AT 864.65 TONNES
SEPTEMBER 29/no changes in gold inventory at the GLD/Inventor rests at 864.65 tonnes
Sept 28/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 864.65 TONNES
Sept 27/WOW!! WITH GOLD DOWN $13.25, WE HAD A HUGE 8.57 TONNES OF GOLD ADDED TO THE GLD/
Sept 26/no changes in gold inventory at the GLD/Inventory rests at 856.08 tonnes
Sept 25./Another big deposit of 3.84 tonnes into GLD/Inventory rests tonight at 856.08 tonnes
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.
Now the SLV Inventory
OCT 4/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 326.615 MILLION Z
Oct 3/A TINY WITHDRAWAL OF 143,000 FROM THE SLV FOR FEES/INVENTORY RESTS AT 326.615 MILLION OZ
Oct 2/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 326,757 MILLION OZ
SEPTEMBER 29/no changes in silver inventory at the SLV/inventory rests at 326.757 million oz/
Sept 28/NO CHANGES IN SILVER INVENTORY/INVENTORY RESTS AT 326.757 MILLION OZ/
Sept 27/STRANGE!! SILVER IS HIT FOR 24 CENTS YESTERDAY AND. 9 CENTS TODAY AND YET NO CHANGE IN SILVER INVENTORY/INVENTORY RESTS AT 326.757 MILLION OZ
Sept 26./no change in silver inventory at the SLV/.inventory rests at 326.757 million oz
Sept 25./ a big deposit of 1.842 million oz into the SLV/inventory rests at 326.757 million oz/
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
Indicative gold forward offer rate for a 6 month duration+ 1.34%
Major gold/silver trading/commentaries for WEDNESDAY
Safe Haven Silver To Outperform Gold In Q4 And In 2018
Editor Mark O’Byrne
– Safe haven silver to outperform gold in Q4 and 2018
– “Expect silver to eventually outperform gold” say Metals Focus
– 2017 YTD, silver has underperformed gold, climbing by 5% versus 11%
– Silver undervalued versus gold and especially stocks, bonds and many property markets
– Will follow gold’s reactions to macroeconomic & geopolitical factors and should outperform gold
– Special report on India shows it accounts for just 16% of global silver demand
– Silver a “safe haven at times during which gold failed to be” according to academic research
Since the beginning of 2017 the silver price has disappointed many investors. With a 5% gain so far in 2017, it has failed to match gold’s 11% gains this year. Both precious metals have ultimately performed below expectations given the positive macroeconomic and geopolitical backdrop.
However, things are starting to look up for the industrial precious metal as industry observers believe it will outperform gold this quarter and into 2018.
In a recent Metals Focus report, the precious metals consultancy concluded that ‘we do expect silver to eventually outperform gold.’
Whilst demand for silver coins in the US has been weak, there are some indicators that suggest this physical demand is beginning to pick up, alongside industrial demand. For example, there has been robust silver ETF demand and in September there was significant uptick in those taking immediate delivery on COMEX.
This year has also taken many market participants by surprise as silver demand has fallen in a number of areas. One of which is India.
The Metals Focus report for the Silver Institute believes that Indian demand in 2017 has not matched the decades’ unprecedented silver demand due to higher prices and a clampdown by Indian government on unbanked money in the drive to the cashless society.
However, incomes and the economy and both growing which leads the report to conclude that demand will come back to the country with a bang.
Gold-Silver ratio shows silver undervalued
In June, silver hit a low of $15.60/oz, since then it has recovered somewhat. The gold-silver ratio is also higher than expected, given gold’s performance of late. Earlier this year it fell to as low as 68, but has recently been stuck between 74 and 80.
The modern historical average is around 40 to 1. The long term historical average is 15 to 1.
Not only is silver undervalued relative to gold but also to increasingly over valued stocks, bonds and property markets.
Given silver’s industrial role and the fact that geologically there are just 15 particles of silver to every one particle of gold, it is likely that the gold/silver ratio will gradually return to below the 100 year average of 40 to 1.
At the current depressed gold price this would put silver at nearly $32/oz.
India’s love for silver
Love for gold in the world’s seventh largest economy is well-documented but few are aware of its feelings towards silver.
In 2016 India’s demand for silver accounted for just 16% of global demand. The report summarises the all important context for this:
India is one of the world’s largest silver markets, with a very traditional core in a diverse market. To put this into perspective, India consumed 160.6Moz (4,996t) last year, which accounted for a noteworthy 16% of global silver demand. It is not only the scale of Indian demand that matters; the country’s dependence on imported metal means that changes in Indian offtake can impact those countries that supply bullion to India.
The sheer scale of the Indian silver market resonates across much of the country, from physical investment, through to day-to-day activities.
It is also integral to India’s cultural and belief systems. It is therefore not surprising that silver is an important part of Indian festivities and weddings.
For example, it is considered auspicious to gift silver during weddings or for the birth of a child. All this means that silver’s appeal extends across most income groups. Even so, the silver market in recent years has evolved considerably in line with the growth in the Indian economy and the rise in
Regarding demand, jewellery, silverware and physical investment account for around 75% of total Indian silver demand. With jewellery and silverware accounting for more than 50% of total silver demand.
Investment demand is increasing from a very low base.
In 2010 the two markets combined accounted for 1,200t. By the end of the decade the Silver Institute believes ‘the market will expand further to around 109Moz (3,400t), driven largely by healthy economic growth.’
Industrial demand accounts for just 22% of Indian demand and, like investment silver, it has struggled in recent years. The report explains, that this was due to an economic slowdown:
‘This saw Indian demand fall from 45.7Moz (1,421t) in 2010 to 35.9Moz (1,115t) in 2015. However, with the economy improving over the last two years (GDP growth is back over 7%), we expect industrial demand to continue to rise in the coming years.’
Outlook has a silver lining
World Gold Council data-provider Metals Focus’ conclusion will bring some hope to silver investors:
“the case for further price gains, for both silver and gold still appears strong. Together with negative interest rates (in real or nominal terms) in several key currencies, expectations for Fed rate increases have also been pushed further out. This should make the case for a weaker dollar going forward. Along with heightened geopolitical concerns, investment demand should strengthen. While gold will be the main beneficiary, silver prices should also improve.”
Overall, silver will not only step back up to the plate but it will excel the lacklustre performance of this year.
“Given silver’s much smaller market (compared with gold) it should experience greater price volatility. This in turn should see silver prices eventually outperform gold, both later this year and into 2018”
A buying opportunity
We can sit and ponder where we think the price may or may not go in the last three months of the year. We can also sit and hypothesise as to why both gold and silver haven’t performed better this year. Neither of these scenarios help our portfolios.
Instead we have to focus on what we do know – silver is currently relatively cheap when considered against a backdrop of heightened geopolitical concerns, rising inflation and ever-prominent and increasing debt risks.
History tells us that very little currently at the forefront of both economic and political concerns are going to be dealt with without negative consequences. History also tells us that silver has a key role to play as a safe haven in your portfolio.
Academic research echoes this sentiment.
Should you believe the politicians both here and across the pond that the economy is improving, this is a further reason to hold silver as part of your portfolio. In 2012 Belousova and Dorfleitner concluded that
‘Adding silver or platinum to a portfolio [of stocks, sovereign bond and the money market instruments] during bull markets reduces volatility and enhances return.’
When looking at all four precious metals’ role as a safe haven between 1989 and 2013, against the S&P 500 and US 10 year bonds, Lucey and Li (2015) found that ‘silver was a safe haven at times during which gold failed to be’, but also during far more quarters than both platinum and palladium.’
News and Commentary
Gold Prices (LBMA AM)
03 Oct: USD 1,270.70, GBP 959.00 & EUR 1,081.87 per ounce
02 Oct: USD 1,273.10, GBP 956.48 & EUR 1,084.55 per ounce
29 Sep: USD 1,286.95, GBP 963.15 & EUR 1,090.82 per ounce
28 Sep: USD 1,284.30, GBP 961.04 & EUR 1,091.40 per ounce
27 Sep: USD 1,291.30, GBP 963.83 & EUR 1,099.54 per ounce
26 Sep: USD 1,306.90, GBP 969.59 & EUR 1,105.38 per ounce
25 Sep: USD 1,295.50, GBP 957.89 & EUR 1,089.26 per ounce
Silver Prices (LBMA)
03 Oct: USD 16.61, GBP 12.53 & EUR 14.13 per ounce
02 Oct: USD 16.58, GBP 12.46 & EUR 14.12 per ounce
29 Sep: USD 16.86, GBP 12.60 & EUR 14.27 per ounce
28 Sep: USD 16.82, GBP 12.53 & EUR 14.28 per ounce
27 Sep: USD 16.89, GBP 12.58 & EUR 14.38 per ounce
26 Sep: USD 17.01, GBP 12.67 & EUR 14.43 per ounce
25 Sep: USD 16.95, GBP 12.57 & EUR 14.27 per ounce
Recent Market Updates
– Plan For Run On The Pound
– Russia Gold Rush Sees Record Reserves For Putin Era
– China Catalyst To Send Gold Over $10,000 Per Ounce?
– Gold Matches S&P 500 Performance In First 3 Quarters; Up 12% 2017 YTD
– Gold Standard Resulted In “Fewer Catastrophes” – FT
– Financial Advice From Man Who Made $1+ Billion in 1929 – Importance Of Being Patient and “Sitting”
– “Gold prices to reach $1,400 before the end of the year” – GoldCore
– Commodities King Gartman Says Gold Soon Reach $1,400 As Drums of War Grow Louder
– Bitcoin “Is A Bubble” but Gold Is Money Says World’s Biggest Hedge Fund Manager
– Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms
– 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
Gold trading last night/early this morning
Gold Gains As Dollar Dives On Asian Open
With China still enjoying their National Golden Week holiday, it appears the algos are unable to maintain their normal patterns of behavior…
Instead of the ubiquitous rise in USDJPY, sparking risk-on sentiment for all to follow, tonight USDJPY is falling at the open and that means gold is up (albeit marginally)…
But it’s not just JPY, all the majors are bid versus the greenback sparking a notable downdraft to the Dollar Index…
For now US and Asian equity futures are unaffected, but bonds are extending gains from the day session.
As Bloomberg’s Mark Cranfield notes, the sudden wave of USD bearishness running through Asia markets on Wednesday appears to be investors in the region reacting to the Fed short list. Betting markets show a surge in interest for Jerome Powell, who would be expected to take a dovish tack.
This is exactly what I have been reporting to you: huge comex silver deliveries over the past 6 months
(courtesy TFMetalsCraig Hemke)
TF Metals Report: Comex silver ‘deliveries’ surge in September
Submitted by cpowell on Tue, 2017-10-03 15:41. Section: Daily Dispatches
11:41a ET Tuesday, October 3, 2017
Dear Friend of GATA and Gold:
Reported deliveries against Comex silver futures contracts have risen dramatically in recent months, the TF Metals Report writes today.
The TF Metals Report asks: “Is it actual metal or just an exchange of warehouse receipts between banks, made to create the illusion of physical delivery for their paper derivative market? And does this increase in ‘deliveries’ translate to physical demand and Comex stress or is it just emblematic of the general increase in total Comex silver open interest?”
The report is headlined “Comex Silver ‘Deliveries’ Surge in September” and it’s posted here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
HSBC and Deutsche bank pay penalties for foreign exchange rate manipulation
(courtesy Zack’s Equity Research/GATA)
HSBC, Deutsche Bank pay penalties for FX rate manipulation
Submitted by cpowell on Tue, 2017-10-03 13:14. Section: Daily Dispatches
From Zacks Equity Research
Monday, October 2, 2017
Two major foreign banks, HSBC Holdings plc HSBC and Deutsche Bank AG DB , resolved legacy business misconduct matters in the United States. The banks were accused of rigging foreign exchange (FX) rates.
HSBC was fined $175 million for its “unsafe and unsound practices in its foreign exchange trading business” by the Federal Reserve. The bank was accused of failure of oversight and internal control of its FX traders who buy/sell currencies “for the firm’s own accounts and for customers.”
The banking regulator alleged that the bank’s dealers shared confidential information about client orders and matched up trades to benefit them. The bank was also accused of attempting to manipulate FX rates.
HSBC is now required to improve control and fix shortfalls in “governance, risk management, compliance, and audit policies” pertaining to its FX trading operations. Company spokesman Rob Sherman said, “We are pleased to have resolved this matter related to practices in the FX market from 2008-2013.”
In a separate litigation, Deutsche Bank agreed to resolve a class-action lawsuit by customers that alleged it of rigging FX rates. The bank will be paying $190 million as penalty. …
… For the remainder of the report:
China is busy: they announce that their in ground gold reserves stand at a very large 12,000 tonnes.
Submitted by cpowell on Mon, 2017-10-02 15:09. Section: Daily Dispatches
Monday, October 2, 2017
SHANGHAI — China’s proven gold reserves reached 12,100 tonnes at the end of 2016, the state news agency Xinhua reported today, quoting an official with the national gold association.
Ted Butler: why won’t anyone dispute the silver manipulation
(courtesy Ted Butler/GATA)
Ted Butler: Why won’t anyone dispute silver market manipulation?
Submitted by cpowell on Mon, 2017-10-02 14:49. Section: Daily Dispatches
10:49a ET Monday, October 2, 2017
Dear Friend of GATA and Gold:
Silver market analyst Ted Butler laments today that he can’t get anyone to argue with his assertions that the silver market is manipulated largely by JPMorganChase and the CME Group, operator of the major U.S. futures exchanges.
GATA often laments that it gets no argument about its complaints of manipulation of the gold market by central banks, governments, and the investment banks that act as their agents.
Of course there’s an explanation for this lack of argument: that the evidence of silver and gold market rigging cannot be disputed specifically because it is actually proof, and the best the market riggers can do is avoid drawing more attention to it.
Butler’s commentary is headlined “Thoughtful Disagreement” and it’s posted at GoldSeek’s companion site, SilverSeek, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
October 2, 2017 – 9:16am
I caught a good interview by Charlie Rose on Bloomberg TV the other night of Ray Dalio, founder and head of Bridgewater Associates, the world’s largest hedge fund with some $150 billion in assets under management. Dalio has been making the rounds recently in promoting his new book, “Principles”, in which he lays out his beliefs for the investment business and the business of life. Now in book form, Dalio previously offered his work for free and which was downloaded more than three million times. For very good reason, when Dalio speaks, he is listened to even more than EF Hutton.
One of the best things about Dalio (and if you’re unfamiliar with him, please do a search on Google) is his rags-to-riches real life experience and his strong belief that we learn through our mistakes. In his case, his biggest failure and the cause of his near financial ruin was a mistaken bet on a stock market collapse in the summer of 1982. Instead of the market tanking for all the reasons Dalio had (correctly) anticipated, it exploded with a vengeance, creating losses and forcing him to lay off his employees (with whom he held close personal relationships) and resort to borrowing $4000 from his father to survive. For a more detailed version of the affair, here’s a good link.
Staring into his own personal abyss, Dalio vowed to learn from it and set about to do just that, succeeding far beyond what anyone could have ever imagined. What resulted was an organized and disciplined approach to dealing with decisions and mistakes. Please recognize that I am paraphrasing in very simple terms what is a detailed plan for action on his part. In essence, Dalio’s design was to come up with investment ideas not currently widely-embraced (allowing for big rewards if correct), but then to subject those ideas to intense and deliberate critique. In Dalio’s words, the critique should take the form of “thoughtful disagreement”. Spend time and energy uncovering and developing new ideas, but then spend just as much effort in trying to uncover what’s wrong with the new ideas (before the market tells you that the idea was flawed). All in all, pretty good stuff.
The reason I bring all this up is because I feel it directly relates to silver as an investment idea and, all along and quite unknowingly, I may have been applying Dalio’s principles in my analysis of silver. Certainly, silver meets Dalio’s prerequisite for a profitable investment idea since it is far from widely embraced by the investment community, but there is a lot more to it than that. In fact, Dalio has been a long-time and strong proponent for gold and in the interest of full disclosure, some six or seven years ago, I wrote to him and his chief investment officer, Greg Jensen, about the merits of investing in silver. I remember having to print out and snail mail my thoughts to Dalio and Jensen because no email contact was available on the Bridgewater website.
Just like the vast majority of my attempts to contact those of great influence in the investment world on silver, I received no reply from Dalio, not that I was really expecting one. That mattered little, since I promised myself long ago that I would do whatever I could imagine to get others to see what I saw in silver and no response wasn’t a crushing blow or deterrent. So why am I bringing up Dalio’s principles?
Unbeknownst to me, it seems that I have been following Dalio’s advice about seeking serious critique for my ideas on silver, particularly of the thoughtful disagreement variety. How else would you characterize what I do? By writing on a public and semi-public basis, including to those at the very top of regulation and the organizations I claim are manipulating the price of silver (JPMorgan and the CME Group), I would contend that what I am doing is nothing but looking for thoughtful disagreement (including perhaps from Dalio himself). Sure, I get plenty of personal insults from some, mostly anonymous, but serious critique about the body of what I write? Never.
Here are the issues. Silver (and gold) prices are set by paper dealings on the COMEX by a few large speculators (banks and managed money traders), to the exclusion of input from real producers and consumers, making the price discovery process and the resultant price artificial. For the past nearly ten years, CFTC data have indicated that JPMorgan has been the dominant paper silver short seller, along with a few other large banks and as a result of that dominance and control none have ever taken a loss when adding short positions. In addition, for the past six and a half years, JPMorgan has accumulated a massive amount of actual silver (650 million oz) at rock-bottom and self-created depressed prices, all while never taking a loss while shorting silver on the COMEX.
I have carefully thought out the silver price manipulation for more than 30 years, yet I see no thoughtful disagreement to my presentation of it. What’s a guy got to do to get some thoughtful disagreement? Take a knee during the national anthem? I thought I was already doing the equivalent of that in openly calling out JPMorgan and the CME as the market crooks and manipulators they surely are. Yes, there were a few long public responses to my allegations from the CFTC, but the last was more than 9 years ago. Since then, as I have chronicled on these pages, JPMorgan has burst onto the scene as the big paper silver manipulator and physical accumulator (as a result of its takeover of Bear Stearns).
The whole thing is quite surreal – a major market voice (Dalio) preaching the need for thoughtful disagreement and the lack thereof on an issue that couldn’t possibly be more serious; the price manipulation of an important world commodity. It seems to me that this is not a situation that can remain unresolved indefinitely; sooner or later, someone will come up with the thoughtful disagreement that makes the body of my premise invalid or the price of silver will validate the premise by exploding. Obviously, I would prefer a silver price explosion, but truth be told, in the interim, I’d settle for some thoughtful disagreement.
October 2, 2017
Your early WEDNESDAY morning currency, Asian stock market results, important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight
2. Nikkei closed UP 12.59 POINTS OR 0.03% /USA: YEN FALLS TO 112.61
3. Europe stocks OPENED RED EXCEPT GERMANY ( /USA dollar index FALL TO 93.45/Euro UP to 1.1767
3b Japan 10 year bond yield: FALLS TO -+.055%/ GOVERNMENT INTERVENTION !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 112.44/ 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:: 50.26 and Brent: 55.86
3f Gold UP/Yen UP
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS AND SELLING THE SHORT END
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil DOWN for WTI and DOWNf or Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO +.439%/Italian 10 yr bond yield UP to 2.172% /SPAIN 10 YR BOND YIELD UP TO 1.755%
3j Greek 10 year bond yield FALLS TO : 5.589???
3k Gold at $1275.55 silver at:16.64(8:15 am est) SILVER NEXT RESISTANCE LEVEL AT $18.50
3l USA vs Russian rouble; (Russian rouble UP 30/100 in roubles/dollar) 57.64-
3m oil into the 50 dollar handle for WTI and 55 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT A GOOD SIZED REVALUATION NORTHBOUND
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 112.61 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 0.9728 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1447 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 +0.439%
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 2.322% early this morning. Thirty year rate at 2.869% /
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Spanish Stocks Tumble On Growing Catalan Crisis; Dollar Weakens As China Jumps
While U.S. equity futures were little changed in a rerun of every other morning this month ahead of a diagonal ramp that closes the S&P at daily all time highs, things were more volatile elsewhere with the dollar sliding as investors weighed the possibility that current Fed Governor Jerome Powell, seen widely as far more dovish than Kevin Warsh, might take the reins from Janet Yellen, who Bloomberg reported was said to be getting the cold shoulder.
Both the Bloomberg Dollar Spot Index and 10-year Treasury yields retreated from recent highs following the a Bloomberg report that Trump had been presented with a shortlist of Fed chair candidates, among them, ex-board member Kevin Warsh has criticized the central bank for trying to do too much with monetary policy while current Governor Jerome Powell has voted in sync with Chair Janet Yellen, who’s term is up in February and who was said to have gotten little support from Trump’s group of close advisors.
Following the report, Jerome Powell’s odds of replacing Yellen soared to second behind Kevin Warsh, and were at 35% most recently, ahead of John Taylor and Gary Cohn, with Janet Yellen in 5th spot.
While the latest September econ data out of Europe was solid, pushing the euro higher, Spanish assets tumbled as a Catalan spokesperson reiterates commitment to becoming a republic and the regional leader scheduled a press conference; the bund/bono spread was wider by 7bps and Spanish IBEX heavily underperforms as domestic banks decline. Spanish notes slumped on news that Catalonia’s leader Carles Puigdemont would release a statement at 9 p.m. CET after promising a formal announcement to regional lawmakers of the referendum results, triggering a 48-hour countdown to a unilateral declaration of independence. This prompted a sharp drop in Spanish assets, with the IBEX sliding as much as 2.5% on surging volumes more than twice 30DMA, led lower by Catalan exposed banks such as Banco de Sabadell (4.7%), CaixaBank (4.5%), Banco Santander (2.7%) and BBVA (2.7%); the drop sent the IBEX into correction territory now down 10% from intraday peak on May 8.
“As far as market reaction is concerned the short-term effect is that investors would be reluctant to hold Spanish exposure ahead of this event risk,” said Antoine Bouvet, an interest-rate strategist at Mizuho. Others chimed in with a bearish take: “A pause in the global stock market rally is necessary and the political stress coming from Spain could become one of the triggers”, said Jerome Troin-Lajous, cross-asset sales trader at Louis Capital Markets. “This could revive the grim view of some U.S. investors that Europe is a political can of worms.” The deteriorating Spanish politics acted as a drag on positive read-across from the record highs on Wall Street, says Jasper Lawler, head of research at London Capital Group
The EUR/USD continued to find bullish pressure, following the support seen yesterday around the 1.17 handle, triggered by option expiries in the pair, with around 4.6bln between 1.17 and 1.18. EUR has seen subdued price action through early European trade, as much anticipation lies on pending European Markit PMI data, alongside later commentary from ECB’s Draghi.
Meanwhile, as Spain tumbled, Chinese (offshore) stocks soared and Hong Kong equities added to yesterday’s surge on optimism about monetary loosening. With the mainland closed this week for holiday, offshore Chinese shares extended gains to the highest in almost a decade, as most lenders continued to climb following the central bank’s decision to reduce their RRR in 2018, while real-estate developers rallied. MSCI China Index rises 0.5%, at highest since December 2007; Hang Seng China Enterprises Index advances 0.8% in Hong Kong, taking 3-day gain to 4.8%; Hang Seng Index adds 0.7% for 3-day advance of 3.5%, most since July 2016. Property developers were among main gainers in Hong Kong, with Country Garden Holdings Co. rising 7.2% for 3-day gain of 9.1%. Sunac China Holdings Ltd, Shimao Property Holdings Ltd, China Vanke Co., Guangzhou R&F Properties Co. among top 10 performers on MSCI China, all rising at least 3.8%.
Elsewhere in Asia, Japanese stocks were little changed, while Australia stocks declined -0.8%.
In rates, the yield on 10-year Treasuries decreased one basis point to 2.32 percent. Germany’s 10-year yield dipped two basis points to 0.45 percent, the lowest in more than a week. Britain’s 10-year yield advanced less than one basis point to 1.355 percent. Spain’s 10-year yield climbed five basis points to 1.77 percent.
In currencies, the Bloomberg Dollar Spot Index dipped 0.2 percent. The euro advanced 0.1 percent to $1.1756. The British pound gained 0.3 percent to $1.3272. The Japanese yen increased 0.3 percent to 112.56 per dollar. The DXY suffered overnight, as reports of President Trump’s shortlist for the forthcoming available Fed Chair seat began to price into markets. The likelihood of a banker with a dovish skew in their views is growing, with the candidates being spoken about: Current Fed Chair Yellen, Warsh, Powell, Cohn, and outside calls of notable dove Kashkari, alongside University of Stanford’s Taylor. Despite no official announcement, a Presidential aide declared that Trump is set to deliver a shortlist in the near future. DXY broke through its hourly ‘head and shoulders’ formation, trading below the neckline and consolidating just above 93.30.
WTI and Brent crude futures remain pressured after yesterday’s API report which showed large builds in gasoline and cushing, despite the large than expected draw in the headline figure. Libya’s Sharara oilfield (280k bpd) restarted this morning, according to a Libyan oil source. Libya National Oil Corp lifts force majeure on loadings of Sharara crude oil from Zawiya, according to sources. Gold advanced 0.3 percent to $1,275.86 an ounce. Copper decreased 0.4 percent to $2.95 a pound, the lowest in a week.
- S&P 500 futures down 0.05% to 2,531.50
- STOXX Europe 600 down 0.2% to 390.06
- MSCI Asia up 0.2% to 162.97
- MSCI Asia ex Japan up 0.3% to 537.25
- Nikkei up 0.06% to 20,626.66
- Topix up 0.01% to 1,684.56
- Hang Seng Index up 0.7% to 28,379.18
- Shanghai Composite up 0.3% to 3,348.94
- Sensex up 0.5% to 31,657.11
- Australia S&P/ASX 200 down 0.9% to 5,652.06
- Kospi up 0.9% to 2,394.47
- German 10Y yield fell 1.0 bps to 0.453%
- Euro up 0.2% to $1.1763
- Italian 10Y yield rose 0.9 bps to 1.872%
- Spanish 10Y yield rose 4.1 bps to 1.764%
- Brent Futures down 0.9% to $55.52/bbl
- Gold spot up 0.3% to $1,275.61
- U.S. Dollar Index down 0.2% to 93.42
Bulletin Headline Summary
- Spanish assets slump amid the rift between Spain and Catalonia
- GBP supported by firm Services PMI
- Looking ahead, highlights include, US ADP as well as comments from Fed’s Yellen and ECB’s Draghi
Top Overnight News
- Trump is heading to Las Vegas in the wake of a massacre, where he will confront recurring questions of whether restrictions on firearms can prevent another tragedy
- As part of an investigation into how Russian-linked operatives harnessed social media during the 2016 U.S. election, lawmakers are focusing on Google services including YouTube and Gmail
- Crisis in Spain: While King Felipe VI criticized Catalan separatists for “unacceptable disloyalty,” Catalan President Carles Puigdemont has promised a formal announcement of the referendum results, triggering a 48- hour countdown to a unilateral declaration of independence
- Punters see ex-Fed board member Kevin Warsh as the most likely nominee to take over from Janet Yellen, who is also running for another term: PredictIt.org
- Euro-zone composite PMI climbed to a four-month high 56.7 in September as new orders rose to a six- year high, a final reading showed; services PMI increased to 55.8, beating the flash number of 55.6
- Spain’s King Felipe VI came to PM Rajoy’s support by telling Catalan separatists trying to break up his country that their “unacceptable disloyalty” has no place in any democratic state, as he vowed to keep Spain together
- Iron ore shipments from Australia are rising as miners boost cargoes, with vessel-tracking data signaling that nationwide flows expanded again last month to near an all-time high of 74.36 million metric tons
- Trading of European stocks on dark markets will probably triple as a result of MiFID II overhaul, the opposite of what architects of the law intended, as the new rules give some venues flexibility in how they price shares
Trump Aides Are Said to Deliver Shortlist of Fed Candidates; Fed Chair Hopeful Warsh Draws Opposition From Left and Right
- Trump Suggests Puerto Rico’s Debt Will Need to Be Wiped Out
- MiFID Is Seen Tripling Dark Trading in Europe as New Venues Soar
Asia stocks traded mostly higher after another record setting session in the US where all major indices printed fresh all-time highs for a consecutive day and automakers advanced on strong September car sales data. The positive momentum supported the Nikkei 225 (+0.1%) but with gains capped on a firmer JPY. Hang Seng (+0.8%) continued to lead the upside in the region as financials remained underpinned by lower reserve requirements for next year and ASX 200 (-0.8%) lagged with energy names reeling after oil briefly slipped below USD 50/bbl to a 2-week low. 10yr JGBs traded higher from the open as yields declined across the curve and with prices also supported by the BoJ’s presence for JPY 990bln in JGBs ranging from 1yr-10yr maturities. World Bank raised 2017 China GDP growth forecast to 6.7% from 6.5% and raised 2018 forecast to 6.4% from 6.3%.
Top Asian News
- China’s Reserve Cut Excites Investors as Analysts Cautious
- HSBC Lowers Hong Kong Stocks to Underweight Amid Tightening
- India Seeks to Rework More LNG Contracts Amid Surplus, GAIL Says
- RBA May Raise Rates Even If Inflation Below Target, Edwards Says
- Russia to Challenge U.S. LNG Wave With Sevenfold Boost in Output
- Unusual Ltd. Shares Rise to Record High; Co. Receives SGX Query
In Europe, the IBEX is the underperformer, slipping 2% with Spanish banks leading the declines. Aside from Spain, European bourses are trading higher marginally, with the FTSE 100 supported by the rise in Tesco shares, following positive earnings and the supermarket restoring their dividend. DAX outperforming as German participants play catch up after the market closure for Unity day. Spanish bonds taking a whack this morning as the stand-off between Spain and Catalonia looks to take a turn for the worse with the Catalonian Leader Puidgemont holding a news conference at 8pm London time. 10yr Bono’s rose as much as 7bps to levels last seen in March, moving within close proximity to 1.8%. Bono’s unsurprisingly underperform against all major counterparts with the GE-SP spread widening by 6.6bps.
Top European News
- Catalans Dismiss Spanish King’s Attacks as Police Chief Probed
- Pirelli Shares Fall After Return to Stock Market Following IPO
- Stoxx 600 Turns Negative as Spanish Stock Selloff Intensifies
In currencies, the US Dollar suffered overnight, as reports of President Trump’s shortlist for the forthcoming available Fed Chair seat began to price into markets. The likelihood of a banker with a dovish skew in their views is growing, with the candidates being spoken about: Current Fed Chair Yellen, Warsh, Powell, Cohn, and outside calls of notable dove Kashkari, alongside University of Stanford’s Taylor.
Despite no official announcement, a Presidential aide declared that Trump is set to deliver a shortlist in the near future. DXY broke through its hourly ‘head and shoulders’ formation, trading below the neckline and consolidating just above 93.30. The EUR/USD continued to find bullish pressure, following the support seen yesterday around the 1.17 handle, triggered by option expiries in the pair, with around 4.6bln between 1.17 and 1.18. EUR has seen subdued price action through early European trade, as much anticipation lies on pending European Markit PMI data, alongside later commentary from ECB’s Draghi. In the UK, political uncertainties have once again flooded into Sterling, with contradicting reports, as yesterday saw David Davis stick to past rhetoric, stating that ‘no deal is better than a bad deal’. However, some positive developments are evident in terms of Brexit negotiations as FT reports circulated that the UK and EU have struck an agreement on dividing up WTO quotas that govern the import of farm products. GBP is marginally higher against its major counterparts, EUR/GBP has held yesterday’s high, with offers likely stacked at the 0.8880 level and trades inside the previous day’s trading range. Cable sees similar action, residing inside of Tuesday’s range, with offers touted between 1.3300-13350. Today’s services PMI reading printed firmer than analyst estimates, subsequently pushing GBP to intraday highs of 1.3281, while focus is now turning to PM May’s closing Tory conference remarks at circa 11:30.
In commodities, WTI and Brent crude futures remain pressured after yesterday’s API report which showed large builds in gasoline and cushing, despite the large than expected draw in the headline figure. Libya’s Sharara oilfield (280k bpd) restarted this morning, according to a Libyan oil source. Libya National Oil Corp lifts force majeure on loadings of Sharara crude oil from Zawiya, according to sources.
US Event Calendar
- 7am: MBA Mortgage Applications, prior -0.5%
- 8:15am: ADP Employment Change, est. 135,000, prior 237,000
- 9:45am: Markit US Services PMI, est. 55.1, prior 55.1
- 9:45am: Markit US Composite PMI, prior 54.6
- 10am: ISM Non-Manf. Composite, est. 55.5, prior 55.3
- 3:15pm: Yellen Gives Welcoming Remarks at Community Banking Event
3. ASIAN AFFAIRS
i)Late TUESDAY night/WEDNESDAY morning: Shanghai closed /Hang Sang CLOSED / The Nikkei closed UP 12.59 POINTS OR 0.03%/Australia’s all ordinaires CLOSED DOWN 0.77%/Chinese yuan (ONSHORE) closed/Oil DOWN to 50.26 dollars per barrel for WTI and 55.86 for Brent. Stocks in Europe OPENED RED EXCEPT GERMANY . ALL YUAN FIXINGS CLOSED
3a)THAILAND/SOUTH KOREA/NORTH KOREA
b) REPORT ON JAPAN
Tuesday night: Catalonia announces that they will declare independence in days. Madrid ready to invoke article 55 and take over Catalonia
Spanish Showdown: Catalonia To Declare Independence “In Days” Puidgemont Says Despite King’s Condemnation
As reported previously, in a sternly worded address to the nation, Spain’s King Felipe VI condemned organizers of Catalonia’s independence referendum for having put themselves “outside the law” and said the situation in Spain was “extremely serious”, calling for unity. In his address, King Felipe VI said Catalan leaders who organized the referendum showed their “disrespect to the powers of the state” adding that “they have broken the democratic principles of the rule of law.
“Today, the Catalan society is fractured,” the king said, warning that the poll could put at risk the economy of the wealthy autonomous north-eastern region and the whole of Spain. He said that Catalonia’s authorities, “have placed themselves outside the law and democracy, they have tried to break the unity of Spain and national sovereignty”. Offering firm backing to the Spanish government of Mariano Rajoy, Felipe said it was the “responsibility of the legitimate powers of the state to ensure the constitutional order.”
Felipe also said the Catalan government had “systematically violated the law, demonstrating a disloyalty that is inadmissible” and “undermined the harmony and coexistence in Catalan society”
But he stressed that Spain “will overcome difficult times”.
The address came on the same day as Barcelona’s roadways were blockaded amid a general strike as hundreds of thousands in Catalonia have been protesting over Spanish police violence during Sunday’s vote, in which nearly 900 people were hurt.
However, despite the King’s warning and hinting that a showdown, potentially violent, is coming, Catalan President Carles Puigdemont told the BBC the region will declare independence in a matter of days. In his first interview since the referendum, Carles Puigdemont said his government would “act at the end of this week or the beginning of next”.
When asked what he would do if the Spanish government were to intervene and take control of Catalonia’s government, Puigdemont said it would be “an error which changes everything”.
As Bloomberg reported earlier, Prime Minister Mariano Rajoy has been fighting to maintain control after 2.3 million Catalans voted in Sunday’s makeshift referendum and the regional police force ignored orders to prevent the ballot. Preparing for launching the “nuclear option”, Bloomberg added that Rajoy is mulling if, and when, to use Article 155 of the Spanish Constitution to take direct control from the administration in Barcelona. This is the “error that would change everything” referred to by Puigdemont.
As a reminder, the Spanish government in Madrid has described the referendum as illegal. During the vote, 33 police officers were also injured, local medical officials said.
Meanwhile, as noted this morning, huge protest rallies have been taking place across Catalonia. In Barcelona alone, 700,000 people took to the streets, city police were quoted as saying by the AFP news agency.
More than 50 roadblocks in the city caused big traffic jams. Barcelona’s metro traffic was cut to a 25% service during rush hour and no trains at all at other times. Barcelona’s port was at a standstill, trade union sources said. Top tourist attractions were also closed, including the city’s famous Sagrada Familia church.
A roadblock on Gran Via in central Barcelona: The banner says “Occupation forces get out!”
Mercabarna – Barcelona’s massive wholesale market – was left deserted as some 770 food businesses closed for the day. Many small businesses have shut for the day. Schools, universities and medical services were also closed or operating at a minimum level.
The strike was called in protest at “the grave violation of rights and freedoms” seen during Sunday’s ballot. Some police officers were seen firing rubber bullets, storming into polling stations and pulling women by their hair.
Earlier on Tuesday, Spanish Interior Minister Juan Ignacio Zoido said: “We see how day after day the government of Catalonia is pushing the population to the abyss and inciting rebellion in the streets.” He also warned that the central government would take “all measures necessary to stop acts of harassment”.
Meanwhile, Deputy Prime Minister Soraya Sáenz de Santamaría condemned the “mafia” behavior of those protesters who had earlier gathered around hotels housing Spanish police officers and demanded that they leave.
It is unclear what Madrid’s response will be if, or when, Catalonia follows through on its threat to declare independence. One option is for Madrid to challenge the declaration at the Constitutional Court, which will immediately rule against it. Next, if the Catalan government ignores the ruling, Madrid is likely to trigger article 155 of the Constitution to strip out Catalonia’s autonomy and to call for regional elections. This would be a risk-negatie scenario, and one which Citi said “could trigger a civil rebellion, with possible wide disruptions and violent confrontations. A move by the regional police force to ally with the pro-independence parties could significantly escalate the situation.
Wednesday morning: Catalonia to declare independence from Spain on Monday setting up a confrontation
Catalonia To Declare Independence From Spain On Monday
Spanish stocks tumbled, with the IBEX index sliding into a 10% correction, following an overnight report that Catalan leader Puigdemont was set to make a statement at 9 p.m. (1900 GMT) on Wednesday, after an all-party committee of the region’s parliament meets to agree a date for a plenary session on independence. That concluded moments ago and CUP, the pro-secession party that is a majority in the Catalan parliament, has announced it will declared independence from Spain in plenary session on Monday, El Pais reports.
As reported last night, Catalan President Carles Puigdemont told the BBC that his government would ask the region’s parliament to declare independence after tallying votes from last weekend’s referendum, which Madrid says was illegal. “This will probably finish once we get all the votes in from abroad at the end of the week and therefore we shall probably act over the weekend or early next week,” he said in remarks published on Wednesday.
Puigdemont’s comments came after Spain’s King Felipe VI accused secessionist leaders on Tuesday of shattering democratic principles and dividing Catalan society, as tens of thousands protested against a violent police crackdown on Sunday’s vote. The Catalan leader is due to make a statement at 9 p.m. (1900 GMT) on Wednesday, during which he is expected to announce that Catalonia will formally announce independence on Monday.
Spain has been rocked by the Catalan vote and the Spanish police response to it, which saw batons and rubber bullets used to prevent people voting. Hundreds were injured, in scenes that brought international condemnation.
And while the constitutional crisis in Spain, the euro zone’s fourth-biggest economy, has hit Spanish stocks and bonds, raising Madrid’s borrowing costs, it has so far failed to have an adverse impact on the broader European market, or the Euro which has remained relatively steady in recent days. As shares in Spain’s big lenders fell on Wednesday, Economy Minister Luis de Guindos tried to reassure investors and customers. “Catalan banks are Spanish banks and European banks are solid and their clients have nothing to fear,” he said on the sidelines of a conference in Madrid.
According to Reuters, Caixabank, Catalonia’s largest lender, said in a memo to employees late on Tuesday that its only objective was to “protect clients’, shareholders’ and employees’ interests”.
Spanish Prime Minister Mariano Rajoy, a conservative who has taken a hard line on the issue, faces a huge challenge to see off Catalan independence without further unrest. Rajoy has been fighting to maintain control after 2.3 million Catalans voted in Sunday’s makeshift referendum and the regional police force ignored orders to prevent the ballot. Preparing for launching the “nuclear option”, Bloomberg added that Rajoy is mulling if, and when, to use Article 155 of the Spanish Constitution to take direct control from the administration in Barcelona.
It is unclear what Madrid’s response will be if, or when, Catalonia follows through on its threat to declare independence. One option is for Madrid to challenge the declaration at the Constitutional Court, which will immediately rule against it. Next, if the Catalan government ignores the ruling, Madrid is likely to trigger article 155 of the Constitution to strip out Catalonia’s autonomy and to call for regional elections. This would be a risk-negatie scenario, and one which Citi said “could trigger a civil rebellion, with possible wide disruptions and violent confrontations. A move by the regional police force to ally with the pro-independence parties could significantly escalate the situation.”
5. RUSSIA AND MIDDLE EASTERN AFFAIRS
6 .GLOBAL ISSUES
7. OIL ISSUES
8. EMERGING MARKET
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings WEDNESDAY morning 7:00 am
Euro/USA 1.1767 UP .0019/ SPAIN VS CATALONIA/REACTING TO +GERMAN ELECTION WHERE ALT RIGHT PARTY ENTERS THE BUNDESTAG/ 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 RED EXCEPT GERMAN DAX
USA/JAPAN YEN 112.61 DOWN 0.237(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 1.3276 UP .0035 (Brexit March 29/ 2017/ARTICLE 50 SIGNED
THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS
USA/CAN 1.2491 UP .0004 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA)
Early THIS WEDNESDAY morning in Europe, the Euro ROSE by 19 basis points, trading now ABOVE the important 1.08 level RISING to 1.1767; / Last night the Shanghai composite CLOSED / Hang Sang CLOSED /AUSTRALIA CLOSED DOWN 0.77% / EUROPEAN BOURSES OPENED ALL RED EXCEPT GERMAN DAX
The NIKKEI: this WEDNESDAY morning CLOSED UP 12.59 POINTS OR 0.03%
Trading from Europe and Asia:
1. Europe stocks OPENED IN THE RED EXCEPT GERMAN DAX
2/ CHINESE BOURSES / : Hang Sang CLOSED / SHANGHAI CLOSED /Australia BOURSE CLOSED DOWN 0.77% /Nikkei (Japan)CLOSED UP 12.59 POINTS OR 0.03% / INDIA’S SENSEX IN THE GREEN
Gold very early morning trading: 1275.55
Early WEDNESDAY morning USA 10 year bond yield: 2.322% !!! DOWN 1 IN POINTS from TUESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. (POLICY FED ERROR)
The 30 yr bond yield 2.869, DOWN 1 IN BASIS POINTS from TUESDAY night. (POLICY FED ERROR)
USA dollar index early WEDNESDAY morning: 93.45 DOWN 11 CENT(S) from TUESDAY’s close.
This ends early morning numbers WEDNESDAY MORNING
And now your closing WEDNESDAY NUMBERS
Portuguese 10 year bond yield: 2.411% DOWN 2 in basis point(s) yield from TUESDAY
JAPANESE BOND YIELD: +.074% DOWN 1/ 10 in basis point yield from TUESDAY/JAPAN losing control of its yield curve/
SPANISH 10 YR BOND YIELD: 1.773% UP 10 IN basis point yield from TUESDAY
ITALIAN 10 YR BOND YIELD: 2.166 UP 1 POINTS in basis point yield from TUESDAY
the Italian 10 yr bond yield is trading 39 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.463% UP 2 IN BASIS POINTS ON THE DAY
IMPORTANT CURRENCY CLOSES FOR WEDNESDAY
Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/400 PM
Euro/USA 1.1761 UP .0013 (Euro UP 13 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 112.74 DOWN 0.107(Yen UP 10 basis points/
Great Britain/USA 1.3243 UP 0.0003( POUND UP 3 BASIS POINTS)
USA/Canada 1.2476 DOWN .0012 Canadian dollar UP 12 basis points AS OIL FELL TO $49.89
This afternoon, the Euro was ROSE 13 basis points to trade at 1.1761
The Yen ROSE to 112.74 for a GAIN of 11 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 3 basis points, trading at 1.3243/
The Canadian dollar ROSE by 12 basis points to 1.2476, WITH WTI OIL FALLING TO : $49.89
Your closing 10 yr USA bond yield DOWN 1 IN basis points from TUESDAY at 2.3230% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 2.866 DOWN 1 in basis points on the day /
Your closing USA dollar index, 93.46 DOWN 11 CENT(S) ON THE DAY/400 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 WEDNESDAY: 1:00 PM EST
London: CLOSED DOWN 0.53 POINTS OR 0.01%
German Dax :CLOSED UP 67.87 POINTS OR .53%
Paris Cac CLOSED UP 4.18 POINTS OR 0.08%
Spain IBEX CLOSED UP 292.60 POINTS OR 2.85%
Italian MIB: CLOSED DOWN 328.44 POINTS OR 0.44%
The Dow closed UP 19.97 OR 0.09%
NASDAQ WAS closed UP 2.92 POINTS OR 0.04% 4.00 PM EST
WTI Oil price; $49.89 1:00 pm;
Brent Oil: 55.74 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 57.68 UP 1/100 ROUBLES/DOLLAR (ROUBLE LOWER BY 1 BASIS PTS)
TODAY THE GERMAN YIELD RISES TO +0.453% FOR THE 10 YR BOND 4.PM EST EST
This ends the stock indices, oil price, currency crosses and interest rate closes for today
Closing Price for Oil, 4 pm/and 10 year USA interest rate:
WTI CRUDE OIL PRICE 5:00 PM:$49.89
USA 10 YR BOND YIELD: 2.323% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 2.866%
EURO/USA DOLLAR CROSS: 1.1761 UP .0013
USA/JAPANESE YEN:112.75 DOWN 0.107
USA DOLLAR INDEX: 93.646 DOWN 11 cent(s)/
The British pound at 5 pm: Great Britain Pound/USA: 1.3243 : UP 3 POINTS FROM LAST NIGHT
Canadian dollar: 1.2476 UP 12 BASIS pts
German 10 yr bond yield at 5 pm: +0.453%
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM FOR THE DAY
Credit Spreads Collapse To Post-Crisis Lows As Stock Market ‘Greed’ Nears 1998 Highs
“I want it all… and I want it now…!!!”
Credit spreads have collapsed in recent weeks – back to post-crisis lows…
As Stone-McCarthy writes, the Investment Grade Markit CDX North American Index was 54.2 basis points yesterday, just down from 54.6 basis points on Monday, and it is trading at 54.8 basis points so far this morning. Yesterday’s reading was the lowest reading for the index, which dates back to September 2011.The High Yield CDX Index was 320.1 basis points yesterday, down from 322.3 basis points on Monday, and it is trading at 321.8 basis points so far this morning. Yesterday’s close was the lowest since August.
Additionally, The BoA/ML Corporate Master Index OAS fell to just 105 basis points from 106 basis points on Monday. That’s the lowest it’s been in more than ten years, since July 19, 2007. We don’t yet have the High Yield Master II Index OAS for yesterday, but it was 355 basis points yesterday, down from 356 basis points on Monday. That matches the low from late July, which is the lowest it’s been since July 9, 2014.
All of which makes zero sense as leverage has never been higher…
But then again, market ‘greed’ has almost never been higher…
CNN’s Fear & Greed index soared to 96 – tied for the 2nd highest reading since 1998…
Ironically, as credit spreads on massively-levered corporate bonds hit post-crisis-lows, Puerto Rico bonds are collapsing…
Behold the bloodbath in Puerto Rico GOs after Trump’s “wipe ’em out” comments…
And before we get to the broader markets, today’s epic 5 sigma beat in ISM Services (which makes all the sense in the world), spiked ‘soft’ data back to 6-month highs (as hard data hovers around 8 year lows). This is the biggest gap between hard and soft data (lower panel) ever…
* * *
In a shocking moment of truth for many investors, Small Cap stocks ended the day lower (unable to ramp like yesterday) but S&P, Dow, and Nasdaq held on to gains… (as Trannies underperformed)
For context, today’s 0.25% drop in Russell 2000 is the worst drop in over a month.
Russell 2000 and its ‘VIX’ remain notably decoupled…
FANG Stocks were panic-bid at the open, but faded for the rest of the day again…
Interestingly, ‘high-tax’ names underperformed today (back below the Trump Tax Plan levels)…
Bank stocks underperformed and recoupled with the post-FOMC flatter yield curve…
Treasury yields ended the day unchanged, continuing the trend of extremely narrow ranges… different regime today overenight but the post ISM move was same as usual – bond buying after Europe closes…
The Dollar Index fell for the 2nd day in a row (with China on Golden Week Holiday). The big flush hit as Asia opened and Fed ‘shortlist’ headlines hit… The dollar rallied since around 8amET (and spiked around the 10amET ISM data
Gold gained modestly on the day, but notably was sold once US woke up. Bitcoin ended lower for the 2nd day in a row, decoupling lower as Asia closed…
While WTI and RBOB levitated off overnight lows (post-API) and snapped higher on DOE data, they closed mixed with oil down back below $50 (despite a big draw) and gasoline up (despite a big build)
Finally, as a reminder, so far this year, the S&P’s maximum continuous sell-off (continuous daily declines) has been less than 2%. If this holds until year-end, then 2018 would be seeing the smallest such loss for the S&P for almost 100yrs (Bloomberg data starts at 1928).
Is it any wonder why so few investors seem to be concerned about traditional macro risks at present – in particular, an equity market correction.
ADP reports that USA employment shows the slowest pace in 11 months this past month
ADP Employment Grows At Slowest Pace In 11 Months As Small Business Slumps
Following August’s huge (4 sigma) beat, ADP reports September’s payrolls rose just 135k (meeting expectations) for the weakest growth since October 2016 (presumably affected by the storms – which did not seem to negatively affect ISM).
“In September, small businesses experienced a dip in hiring,” said Ahu Yildirmaz, vice president and cohead of the ADP Research Institute. “This is in part due to Hurricane’s Harvey and Irma which significantly impacted smaller retailers.
“In addition, the continued slow down we have seen in small business hiring could be due to a lack of competitive compensation to attract skilled talent.”
Mark Zandi, chief economist of Moody’s Analytics, said, “Hurricanes Harvey and Irma hurt the job market in September. Looking through the storms the job market remains sturdy and strong.”
The smallest businesses suffered the most with an 11k drop with service-providing jobs (in this cohort) plunging 18k (the most since 2009) even as goods-producing rose 7.7k
Moody’s is not happy with the Trump tax plan. They will downgrade the uSA if it is passed
“Credit Negative For U.S. Government”: Moody’s Threatens Downgrade If Trump Tax Plan Is Passed
As various institutions continue to publish very detailed estimates of how Trump’s tax plan will impact the federal budget, which is somewhat amazing since income brackets haven’t even been assigned yet, Moody’s published a note today threatening to finally strip the U.S. of its AAA credit rating if the tax plan is ultimately passed as currently contemplated.
President Donald Trump’s tax proposal would probably weigh on the U.S. government’s credit outlook, on concerns that it would cause the federal deficit to swell, according to Moody’s Investors Service.
“The Trump tax framework is likely credit negative for the U.S. government,” Moody’s said in a statement. “Tax cuts would not be offset by equivalent cuts to spending, which would put upward pressure on the federal budget deficit and debt,” while “the tax reform’s effect on economic growth and, in turn, federal government revenue would also affect U.S. credit strength.”
By contrast, banks, insurers and asset managers would benefit from a lower tax rate, Moody’s said.
As we pointed out last Friday, the Tax Policy Center found that Trump’s plan would cost $2.4 trillion over the first decade, assuming no spending cuts, and result in federal deficits soaring by several hundred billion dollars each year.
- The proposal would reduce federal revenues by $2.4 trillion over the first ten years and $3.2 in the second decade. This means that absent a matched deduction in spending, US deficit and debt will increase by a similar amount. This is a problem as a Senate GOP budget resolution unveiled on Friday only allows for adding $1.5 trillion to the debt, implying a revenue shortfall of just under $1 trillion.
- The business income tax provisions—including those affecting corporations and pass-through businesses—would reduce revenues by $2.6 trillion over the first ten years. Elimination of estate and gift taxes would lose another $240 billion. The individual income tax provisions (excluding those related to business income) would increase revenues by about $470 billion over the same period.
So, just to summarize Moody’s position on this issue, a ~$1.5 trillion budget deficit in 2009 was no problem at all but a ~$1 trillion budget deficit today would suddenly merit a downgrade.
Of course, the Trump administration has argued that increased GDP growth will offset lower tax receipts and actually result in lower deficits rather than higher.
To that end, Deutsche Bank’s economists took a shot a estimating what kind of GDP boost could be expected from the Trump tax plan and found that a 0.4% – 0.5% boost might be reasonable…
Given the size and scope of the tax plan presented, it is worthwhile to investigate the potential macroeconomic implications of the bill. We use the Fed’s model of the US economy (FRB/US) to do just that.
The full tax plan provides a meaningful lift to growth in the coming years (Figure 7). Year-over-year growth in Q4 2018 and Q4 2019 is about 0.4pp and 0.5pp higher than the no ?scal stimulus baseline. Higher growth leads to a tighter labor market. The unemployment rate falls to 4% by end-2018 and 3.85% by end-2019 under the full plan, 0.2pp and 0.35pp below the baseline with no tax cuts (Figure 8). The more modest, and in our view more realistic, tax plan intuitively produces more modest results for growth and the unemployment rate. Growth is higher by about 0.2pp and 0.3pp, and the unemployment rate is 0.1pp and 0.2pp lower, by end-2018 and end-2019, respectively.
…that said, they also found that any increase in growth expectations would just be offset by quicker interest rate hikes from the Fed.
Despite assuming a gradual response by the Fed, the implied fed funds rate is significantly higher in response to the tax cuts, as the Fed at least partially o?sets the further decline in the unemployment rate below NAIRU (Figure 9). By end-2018, the fed funds rate would be 13bp higher in response to the full tax plan and 5bp higher under the more modest tax plan scenario. The gap between the no-stimulus scenario and tax cut scenarios is considerably wider further out. By end-2019, the fed funds rate would be 40bp higher in response to the full tax plan and 20bp higher under the more modest tax plan scenario. These differences rise to 60bp and 30bp by end-2020 – more than two hikes more under the full tax cut scenario and more than one additional hike under the modest stimulus compared with the baseline.
Of course, the most comical part of all of this is that, after years of exponential debt growth, Moody’s has finally decided that Trump’s tax cuts will be the final straw that forces them to strip the U.S. of its pristine debt rating…
Puerto Rico Bonds Crash To Record Low After Trump Says Debt May Need To Be “Wiped Out”
Echoing President Obama’s interference in the legal bondholder process of the General Motors bankruptcy, President Trump’s comments that Puerto Rico’s debt “will be wiped out” yesterday has sparked a bloodbath in PR Muni bonds. Puerto Rico’s 8s of 2035 have plunging to a record low 35 cents on the dollar this morning from 44 yesterday, as bondholders fled hitting any bid, worried that Trump would follow through on his warning.
And it’s getting worse.
Based on his comment, Trump appears to have had the intention of punishing Wall Streeters – naming Goldman Sachs – on their Puerto Rico holdings
“We are going to work something out. We have to look at their whole debt structure,” Trump said during an interview on Fox News Tuesday. “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out. That’s gonna have to be – you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave good-bye to that.”
This was not the first time Trump targeted Wall Street bondholders, and last Monday Trump pointed to Puerto Rico’s “massive debt” problems when he tweeted that it owes “billions of dollars” to “Wall Street and the banks, which, sadly, must be dealt with.”
There are a few problems with this: for one, it is unclear how much, if any, commonwealth debt Goldman Sachs Group Inc. still holds in its mutual funds. As of July, significant tranches of its debt were held by companies including Aurelius Capital Management LP, Autonomy Capital LP and Franklin Mutual Advisers LLC, according to Bloomberg data.
The other problem is that much of the island’s debt is owed – mostly indirectly – by retail investors. As a reminder, Puerto Rico owes $74 billion.
… oh which however over $50 billion is owed to everyday investors, through Pension Funds and other intermediaries. Less than 25% of Puerto Rican debt is held by hedge funds, according to estimates by Cate Long, founder of research firm Puerto Rico Clearinghouse. The rest of the debt is owned by individuals and mutual funds that are held by mom-and-pop investors.
“For the most part, Main Street America owns this debt,” Long said.
“It’s not as though these are vultures circling around the island.”
Investors piled into Puerto Rican bonds over the last decade, enabling the island’s unsustainable spending-spree along the way. They kept buying Puerto Rican debt even as the island fell into an 11-year recession that deepened the debt crisis. Puerto Rico’s debt had been a major obstacle for the U.S. territory as it fought for statehood. Bondholders had asked Congress and the Trump administration to hold off on granting statehood until Puerto Rico had paid off its debt.
* * *
In an attempt to temper the market’s shock after Trump’s comment, Office of Management and Budget Director Mick Mulvaney told Bloomberg that “I think what you heard the president say is that Puerto Rico is going to have to figure out a way to solve its debt problem,” adding that “We are not going to bail them out. We are not going to pay off those debts. We are not going to bail out those bond holders.”
In addition to the PR bonds, various bond insurers have also been hit this morning, with MBIA dropping 4.4% pre-market. With some Hurricane Maria economic damage ests. reaching $95b, Puerto Rico will likely prioritize rebuilding expenses over debt obligations, CreditSight’s Josh Esterov writes in note according to Bloomberg. If Puerto Rico were to get federal relief – perhaps via line of credit, as requested by governor – repayment of debt from federal government is likely to take seniority over existing debt obligations.
As Bloomberg notes, it is not clear how Puerto Rico’s debt could just be made to disappear outside of bankruptcy court. Still, to “wipe out” $74 billion in municipal debt, billions of which are guaranteed by the island’s constitution, “would shake investor faith in a market long considered one of the safest of havens. Lower rated municipal borrowers would almost certainly see their borrowing costs rise to account for the added risk.”
Maybe there are consequences for ‘reaching for yield’ after all.
is the next to leave the Trump administration Tillerson?
Tillerson Called Trump A “Moron”, Was Close To Resigning
In recent days, foreign policy pundits have been scratching their heads over the apparent lack of directly lines of communication between the White House and the State Department, which led Trump to chide Sec State Rex Tillerson over the weekend, tweeting that there is no need to negotiate with North Korea, as Trump would “handle this” even as it emerged for the first time that the US had engaged in direct contact with Pyongyang. This was merely the latest example of the White House seemingly taking a position opposite to that pushed by Tillerson, prompting many to ask if there is a fallout between the former Exxon CEO and Donald Trump.
Today, NBC gives one possible explanation for the bizarre relationship between the two men, with a report that Rex Tillerson was on the verge of resigning this past summer amid mounting policy disputes and clashes with the White House. The tensions reportedly came to a head around the time President Donald Trump delivered a politicized speech in late July to the Boy Scouts of America, an organization Tillerson once led, NBC reported citing officials familiar.
Tillerson, who was in Texas for his son’s wedding in late July when Trump addressed the Boy Scouts, had threatened not to return to Washington, according to three people with direct knowledge of the threats. His discussions with retired Gen. John Kelly, who would soon be named Trump’s second chief of staff, and Defense Secretary James Mattis, helped initially to reassure him, four people with direct knowledge of the exchanges said.
At that time, however, State Department spokesperson Heather Nauert responded to speculation that Tillerson was thinking about resigning by saying he was “committed to staying” and was “just taking a little time off” in Texas.
Just days earlier, Tillerson had openly disparaged the president, referring to him as a “moron” after a July 20 meeting at the Pentagon with members of Trump’s national security team and Cabinet officials. NBC notes that while it’s unclear if he was aware of the incident, VP Mike Pence “counseled Tillerson”, who is fourth in line to the presidency, on ways to ease tensions with Trump, and other top administration officials urged him to remain in the job at least until the end of the year.
Officials said that the administration, beset then by a series of high-level firings and resignations, would have struggled to manage the fallout from a Cabinet secretary of his stature departing within the first year of Trump’s presidency.
After Tillerson’s return to Washington, Pence arranged a meeting with him, according to three officials. During the meeting, Pence gave Tillerson a “pep talk,” one of these officials said, but also had a message: the secretary needed to figure out how to move forward within Trump’s policy framework. Pence also reportedly asked Tillerson to be “respectful of the president in meetings and in public”, urging that any disagreements be sorted out privately, a White House official said. The official said progress has since been made.
Kelly and Mattis have been Tillerson’s strongest allies in the cabinet. In late July, “they did beg him to stay,” a senior administration official said. “They just wanted stability.”
Tillerson’s top State Department spokesman, R.C. Hammond, said Tillerson did not consider quitting this past summer. He denied that Tillerson called Trump a “moron.” Hammond said he was unaware of the details of Tillerson’s meetings with Pence. And yet, as recent developments showed, the tensions between the two have not abated.
This weekend, tensions spilled out into the open once again when the president seemed to publicly chide Tillerson on his handling of the crisis with North Korea.
It’s unclear if the latest disagreement between the White House and Tillerson on North Korea spells an end to the late-July reset. Nicholas Burns, former undersecretary of state for political affairs under President George W. Bush, said Trump “completely undercut Tillerson” with his tweets.
“This was a direct public, I thought, repudiation of what Tillerson said,” Burns said. “It feeds the perception that Tillerson does not have a trusting relationship with the president, and that’s very harmful
It was also just the latest culmination in the ongoing feud between the two: Tillerson and Trump clashed over a series of key foreign policy issues over the summer, including Iran and Qatar. Trump chafed at Tillerson’s attempts to push him – privately and publicly – toward decisions that were at odds with his policy positions, according to officials. Hammond said Tillerson has had no policy differences with Trump. “The president’s policy is his policy,” Hammond said.
In August, Trump was furious with Tillerson over his response to a question about the president’s handling of the racially charged and deadly violence in Charlottesville, Virginia, administration officials said. Trump had said publicly that white nationalists and neo-Nazi sympathizers shared blame for violence with those who came out to protest them.
“The president speaks for himself,” Tillerson said at the time, when asked on “Fox News Sunday” about Trump’s comments.
Hammond said Trump addressed the issue with Tillerson in a meeting the next day. He said that during the meeting, Trump congratulated another White House official, Homeland Security Adviser Tom Bossert, for his performance on the Sunday news talk shows. Bossert had defended Trump’s controversial pardon of former Arizona sheriff Joe Arpaio.
The president, according to Hammond, told Tillerson he was upset with his comments when he saw them the first time. But, Hammond said Trump told Tillerson, after watching the interview a second and third time, the president understood that Tillerson was trying to say Trump is the best person to convey what his values are. Still, the message was clear that Trump wanted Tillerson to defend him more, Hammond said.
But it was Tillerson’s prior slam of Trump – one which has not been reported previously – that may prove to be the last straw:
Tillerson stunned a handful of senior administration officials when he called the president a “moron” after a tense two-hour long meeting in a secure room at the Pentagon called “The Tank,” NBC reports citing three officials who were present or briefed on the incident. The July 20 meeting came a day after a meeting in the White House Situation Room on Afghanistan policy where Trump rattled his national security advisers by suggesting he might fire the top U.S. commander of the war and comparing the decision-making process on troop levels to the renovation of a high-end New York restaurant, according to participants in the meeting.
Tillerson also has complained about being publicly undermined by the president on the administration’s foreign policy agenda, officials said. Those strains were on display this past weekend when Tillerson said, to the White House’s surprise, that the U.S. is attempting diplomatic talks with North Korea.
Trump quickly took the opposite position, writing on Twitter “I told Rex Tillerson, our wonderful Secretary of State, that he is wasting his time trying to negotiate with Little Rocket Man…,” using his latest epithet for North Korean leader Kim Jong Un.
“…Save your energy Rex, we’ll do what has to be done!” Trump added in a second tweet.
Asked whether the president still has confidence in Tillerson, White House spokeswoman Sarah Sanders said Monday that he does.
While it is unclear whether Trump was told of Tillerson’s outburst after the Pentagon meeting or to what extent the president was briefed on Tillerson’s plan to resign earlier in the year, Trump will be fully aware now. While it is certainly possible that Trump would let Tillerson, the question is whether such a move would elevate US foreign policy risks, which will be exposed to the aggressive nature of Trump’s tweets without Tillerson to act as a potential buffer. According to NBC, administration officials speculate that Tillerson would be succeeded by Haley if Tillerson were to depart.
Tillerson Vows To Stay On, Slams NBC ‘Moron’ Report
Secretary of State Rex Tillerson on Monday denied he has ever considered resigning from his post. Tillerson gave an unscheduled statement after NBC News reported he was on the verge of quitting over the summer, calling Trump a moron and prompting Mike Pence to intervene.
“My commitment to the success of the president and the country is as strong as it was” upon taking office, Tillerson told reporters Wednesday at the State Department in Washington. “I have never considered leaving this post.”
“The vice president has never had to persuade me to remain as secretary of State because I have never considered leaving,” he told reporters at the State Department. Tillerson refused to deny a claim in the report that he called President Trump a “moron” following tense meeting with national security officials over the summer.
Tillerson said of the ‘moron’ report, “I’m not going to deal with petty stuff like that.” He added that he hasn’t spoken to the president on Wednesday morning.
Notably, President Trump appeared to refer to the report in a Twitter post just moments before Tillerson spoke, saying “NBC news is #FakeNews and more dishonest than even CNN. They are a disgrace to good reporting. No wonder their news ratings are way down!”
US Secretary of State Rex Tillerson insists he “never considered” resigning from Donald Trump’s administration pic.twitter.com/XcWdujxF0b
— BBC News (World) (@BBCWorld) October 4, 2017
Headlines from Tillerson’s address:
- *TILLERSON SAYS COMMITMENT TO TRUMP, COUNTRY AS STRONG AS EVER
- *TILLERSON: TRUMP’S FOREIGN POLICY GOALS BREAK TRADITIONAL MOLD
- *TILLERSON: `WE’RE FINDING NEW WAYS TO GOVERN’
- *TILLERSON SAYS TRUMP ADMIN. IS DELIVERING RESULTS FOR U.S.
- *TILLERSON SAYS TRUMP OFFICIALS HAVE WORKED AS A TEAM
- *TILLERSON SAYS HE TALKS WITH MATTIS VIRTUALLY EVERY DAY
- *TILLERSON: MUST BE CLOSE TIES IN DIPLOMATIC, DEFENSE EFFORTS
- *TILLERSON: `WE’RE JUST GETTING STARTED’
- *TILLERSON SAYS HE’S NEVER CONSIDERED LEAVING HIS POST
- *TILLERSON: TRUMP LOVES COUNTRY, PUTS AMERICANS FIRST
- *TILLERSON: WILL SERVE AS SEC. OF STATE AS LONG AS TRUMP WANTS
- *TILLERSON: WON’T DEAL WITH `PETTY STUFF’ AFTER `MORON’ REPORT
- *TILLERSON: WON’T BE PART OF EFFORT TO DIVIDE ADMINISTRATION
Update: according to Politico, Rex Tillerson is not resigning. Furthermore, in an apparent intervention by the president, moments ago Donald Trump tweeted that “NBC news is #FakeNews and more dishonest than even CNN. They are a disgrace to good reporting. No wonder their news ratings are way down!”
NBC news is #FakeNews and more dishonest than even CNN. They are a disgrace to good reporting. No wonder their news ratings are way down!
— Donald J. Trump (@realDonaldTrump) October 4, 2017
Well that about does it for tonight, WE HAVE ONLY TWO MORE DAYS LEFT BEFORE THE END OF CHINA’S GOLDEN WEEK. WHEN CHINA COMES BACK GOLD/SILVER SHOULD BE FIRMER
I will see you THURSDAY night. YOU MAY RECEIVE THE COMMENTARY VERY LATE IN THE EVENING