GOLD: $1269.00 down $8.80
Silver: $16.80 DOWN 15 cents
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: $1291.03 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1280.50
PREMIUM FIRST FIX: $10.53(premiums getting larger)
SECOND SHANGHAI GOLD FIX: $1291.03
NY GOLD PRICE AT THE EXACT SAME TIME: $1281.00
Premium of Shanghai 2nd fix/NY:$10.03 PREMIUMS GETTING LARGER)
LONDON FIRST GOLD FIX: 5:30 am est $1278.20
NY PRICING AT THE EXACT SAME TIME: $1277.75
LONDON SECOND GOLD FIX 10 AM: $1273.75
NY PRICING AT THE EXACT SAME TIME. 1274.70 ??
For comex gold:
NOTICES FILINGS TODAY FOR OCT CONTRACT MONTH: 85 NOTICE(S) FOR 8500 OZ.
TOTAL NOTICES SO FAR: 3173 FOR 317,300 OZ (9.869TONNES)
28 NOTICES FILED TODAY FOR
Total number of notices filed so far this month: 1057 for 5,285,000 oz
Bitcoin: $5834 bid /$58544 offer UP $155.00 (MORNING)
BITCOIN CLOSING;$5833 BID:5853. OFFER up $155.00
Let us have a look at the data for today
In silver, the total open interest FELL BY A TINY 37 contracts from 193 ,899 DOWN TO 193,862 WITH YESTERDAY’S TRADING IN WHICH SILVER HAD NO GAIN. THE CROOKS ARE STILL HAVING AN AWFUL TIME TRYING TO COVER THEIR MASSIVE SILVER SHORTS SO THEY CONTINUE TO TORMENT. THIS IS OPTIONS EXPIRY WEEK FOR BOTH GOLD AND SILVER SO WE MUST EXPECT SOFTNESS IN OUR METAL PRICES UNTIL THE 31ST OF OCTOBER. THEY ARE ALSO TARGETING THE 200 DAY AVERAGE FOR GOLD AT $1266.00
RESULT: A TINY SIZED FALL IN OI COMEX WITH THE 0 CENT PRICE GAIN. OUR BANKERS COULD NOT COVER ANY OF THEIR HUGE SHORTFALL.
In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e. 0.970 BILLION TO BE EXACT or 139% of annual global silver production (ex Russia & ex China).
FOR THE NEW FRONT OCT MONTH/ THEY FILED: 64 NOTICE(S) FOR 320,000 OZ OF SILVER.
In gold, the open interest FELL BY 453 CONTRACTS DESPITE THE RISE IN PRICE OF GOLD ($0.70) . The new OI for the gold complex rests at 526,221. OUR BANKER FRIENDS COULD NOT COVER ANY OF THEIR SHORTFALL DESPITE THE CONSTANT WHACKING . THIS IS OPTIONS EXPIRY WEEK SO IT IS FITTING THAT THE BANKERS WILL TRY TO SHAKE AS MANY GOLD/SILVER LEAVES AS POSSIBLE. THE TORMENT WILL NO DOUBT END ON OCT 31.2017
Result: A SMALL SIZED DECREASE IN OI DESPITE RISE IN PRICE IN GOLD ($0.70). WE HAD MINIMAL BANKER GOLD SHORT COVERING AS THE BANKERS FAILED MISERABLY TO LOOSEN ANY GOLD LEAVES FROM THE GOLD TREE YESTERDAY. THIS IS OPTIONS EXPIRY WEEK SO EXCEPT SOFTNESS IN OUR PRECIOUS METALS UNTIL OCT 31.
we had: 85 notice(s) filed upon for 8500 oz of gold.
With respect to our two criminal funds, the GLD and the SLV:
Tonight , A HUGE CHANGE in gold inventory at the GLD/ A WITHDRAWAL OF 1.18 TONNES FROM THE GLD
Inventory rests tonight: 851.95 tonnes.
Today: NO CHANGE IN SILVER INVENTORY AT THE SLV
INVENTORY RESTS AT 320.288 MILLION OZ
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver FELL BY 37 contracts from 193,899 UP TO 193,862(AND now A LITTLE FURTHER FROM THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) . OUR BANKERS WERE AGAIN UNSUCCESSFUL IN THEIR ATTEMPT TO COVER ANY OF THEIR SILVER SHORTS.
RESULT: A TINY SIZED DECREASE IN SILVER OI AT THE COMEX DESPITE THE ZERO GAIN IN PRICE (WITH RESPECT TO YESTERDAY’S TRADING). OUR BANKER FRIENDS WERE UNSUCCESSFUL IN THEIR ATTEMPT TO COVER ANY OF OUR SILVER SHORTS . EXPECT SOFTNESS FOR THE REST OF THE WEEK AS WE ARE NOW IN OPTIONS EXPIRY WEEK.
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
3. ASIAN AFFAIRS
)Late WEDNESDAY night/THURSDAY morning: Shanghai closed UP 10.67 points or .31% /Hang Sang CLOSED DOWN 100.51 pts or 0.36% / The Nikkei closed UP 32.16 POINTS OR .15/Australia’s all ordinaires CLOSED UP 0.17%/Chinese yuan (ONSHORE) closed UP at 6.634/Oil DOWN to 52.17 dollars per barrel for WTI and 58.22 for Brent. Stocks in Europe OPENED IN THE GREEN EXCEPT LONDON . ONSHORE YUAN CLOSED UP AGAINST THE DOLLAR AT 6.634. OFFSHORE YUAN CLOSED AT VALUE OF THE ONSHORE YUAN AT 6.634 AND //ONSHORE YUAN STRONGER AGAINST THE DOLLAR/OFF SHORE STRONGER TO THE DOLLAR/. THE DOLLAR (INDEX) IS STRONGER AGAINST ALL MAJOR CURRENCIES. CHINA IS HAPPY TODAY.
3a)THAILAND/SOUTH KOREA/NORTH KOREA
b) REPORT ON JAPAN
c) REPORT ON CHINA
4. EUROPEAN AFFAIRS
ii)Graham Summers is perfectly correct with respect to the ECB. They are cornered with respect to the bond market. Once they taper, bond yields will rise and their financial system blows up:
( Graham Summers)
It looks like the Catalan Government is said to back off its independence move as they will seek elections
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
6 .GLOBAL ISSUES
7. OIL ISSUES
8. EMERGING MARKET
it looks like Venezuela will default in the next 48hrs
9. PHYSICAL MARKETS
The Chairman of the Bank of India is having trouble with the strength of the Rupee and the huge amount of dollars purchased by citizens as continue to buy gold.
10. USA Stories
ii)What a riot: Democrats are now abandoning Hillary as they now state that they are the NEW DNC and they have no knowledge of Trump dossier funding( zero hedge)
iii)There is now an FEC complaint which alleges that Hillary and the DNC broke election laws by not disclosing the Trump Russia dossier funding
iv)Wow!! this is exciting: the Dept. of Justice has now cleared our FBI informant (Confidential One) to testify in the Clinton Foundation/Uranium bribery scandal.
iv b)After a long delay, the FBI will turn over the Trump Dossier documents( zerohedge)
v)Yellen and Warsh are out and thus the last two remaining Fed candidates are Powell and Taylor. One will be the Fed Chairman and the other will be Vice Chair( zerohedge)
vi)Q3 GDP may drop as retail inventories drop 1% month/month while wholesale inventories rose only .3%
Let us head over to the comex:
The total gold comex open interest FELL BY 453 CONTRACTS DOWN to an OI level of 526,221 WITH THE RISE IN THE PRICE OF GOLD ($0.70 FALL IN YESTERDAY’S TRADING). OUR BANKER FRIENDS HAD ZERO SUCCESS IN THEIR ATTEMPT TO COVER THEIR HUGE GOLD SHORTFALL. WE HAVE NOW ENTERED OPTIONS EXPIRY WEEK SO THE CROOKS WILL TORMENT SUCH THAT MORE GOLD/SILVER LEAVES WILL FALL. THEY ALSO SEEM TO BE TARGETING THE 200 DAY MOVING AVERAGE PRICE ($1266).
OCTOBER IS AN ACTIVE DELIVERY MONTH ALTHOUGH IT IS THE WEAKEST IN TERMS OF ACTUAL DELIVERIES AND OPEN INTEREST. WE VISUALIZED 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 WHEREBY ANOTHER 7200 LONG COMEX CONTRACTS WERE GIVEN 7200 EFP’S.
Result: a SMALL SIZED open interest DECREASE WITH THE RISE IN THE PRICE OF GOLD ($0.70.) .THERE WAS ZERO SHORT COVERING YESTERDAY .
We have now entered the active contract month of Oct and here we saw a LOSS of 64 contracts DOWN TO 170 contracts. We had 83 notices filed yesterday so we GAINED 19 contracts or an additional 1900 oz will stand for delivery at the comex in this active delivery month of October and 0 EFP notices were given. The low number of notices early in the delivery cycle is evidence of a lack of physical gold. We have just witnessed yet another queue jumping in the gold comex which is another indicator of physical shortage. TO SEE THIS IN BOTH GOLD AND SILVER MUST BE HEARTENING TO US!!
The November contract saw A loss OF 36 contracts down to 833.
The very big active December contract month saw it’s OI loss OF 3526 contracts DOWN to 389,301
We had 85 notice(s) filed upon today for 8500 oz
VOLUME FOR TODAY (PRELIMINARY) 371,583
CONFIRMED VOLUME YESTERDAY: 390,175
We had 28 notice(s) filed for 140,000 oz for the OCT. 2017 contract
|Withdrawals from Dealers Inventory in oz||nil oz|
|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||xxx oz|
Today, 0 notice(s) were issued from JPMorgan dealer account and 1 notices were issued from their client or customer account. The total of all issuance by all participants equates to 85 contract(s) of which 0 notices were stopped (received) by j.P. Morgan dealer and 1 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)||1057contracts
|Total accumulative withdrawal of silver from the Dealers inventory this month||NIL oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||xx oz|
NPV for Sprott and Central Fund of Canada
will update later tonight
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 26./A WITHDRAWAL OF 1.18 TONNES OF GOLD FROM THE GLD/INVENTORY RESTS AT 851.95 TONNES
Oct 25/NO CHANGE (SO FAR) IN GOLD INVENTORY/INVENTORY RESTS AT 853.13 TONNES
Oct 24./no change in gold inventory at the GLD/inventory rests at 853.13 tonnes
OCT 23./NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY REMAINS AT 853.13 TONNES
OCT 20/NO CHANGE IN GOLD INVENTORY AT THE GLD/ INVENTORY REMAINS AT 853.13 TONNES
oCT 19/NO CHANGE/853.13 TONNES
Oct 18 /no change in gold inventory at the GLD/ inventory rests at 853.13 tonnes
Oct 17./no change in gold inventory at the GLD/inventory rests at 853.13 tonnes
Oct 16/A HUGE WITHDRAWAL OF 5.32 TONNES FROM THE GLD/INVENTORY RESTS AT 853.13 TONNES
0CT 13/ NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 858.45 TONNES
Oct 12/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 858.45 TONNES
Oct 10/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 858.45 TONNES
Oct 9/ANOTHER DEPOSIT OF 4.43 TONNES INTO GLD/INVENTORY RESTS AT 858.45 TONNES
Oct 6/A DEPOSIT OF 2.96 TONNES OF GOLD INVENTORY INTO THE GLD/TONIGHT IT RESTS AT 854.02 TONNES
Oct 5/A LOSS OF 3.24 TONNES OF GOLD INVENTORY FROM THE GLD/INVENTORY RESTS AT 851.06 TONNES
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
Now the SLV Inventory
Oct 26/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 320.288 MILLION OZ/
Oct 25/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 320.288 MILLION OZ
Oct 24/no change in inventory at the SLV/inventory rests at 320.288 million oz/
oCT 23./STRANGE!!WITH SILVER RISING TODAY WE HAD A HUGE WITHDRAWAL OF 1.039 MILLION OZ/inventory rests at 320.288 million oz/
OCT 20NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 321.327 MILLION OZ
oCT 19/INVENTORY LOWERS TO 321.327 MILLION OZ
Oct 18 no change in silver inventory at the SLV/inventory rest at 322.271 million oz
Oct 17/ A MONSTROUS WITHDRAWAL OF 3.494 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 322.271 MILLION OZ
Oct 16/ NO CHANGES IN SILVER INVENTORY AT THE SLV.INVENTORY RESTS AT 325.765 MILLION OZ
oCT 13/ NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 325.765 MILLION OZ
Oct 12/THE LAST TWO DAYS WE LOST 1.113 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 325.765 MILLION OZ
Oct 10/NO CHANGE IN INVENTORY AT THE SLV/INVENTORY RESTS AT 326.898 MILLION OZ/
Oct 9/A HUGE DEPOSIT OF 1.227 MILLION OZ INTO THE INVENTORY OF THE SLV/INVENTORY RESTS AT 326.898 MILLION OZ
Oct 6/NO CHANGE IN SILVER INVENTORY/ INVENTORY RESTS AT 325.671 MILLON OZ
Oct 5/ANOTHER WITHDRAWAL OF 944,000 OZ FROM THE SLV/INVENTORY RESTS AT 325.671 MILLION OZ
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/
Indicative gold forward offer rate for a 6 month duration+ 1.37%
Major gold/silver trading/commentaries for THURSDAY
Gold Will Be Safe Haven Again In Looming EU Crisis
– Gold will be safe haven again in looming EU crisis
– EU crisis is no longer just about debt but about political discontent
– EU officials refuse to acknowledge changing face of politics across the union
– Catalonia shows measures governments will use to maintain control
– EU currently holds control over banks accounts and ability to use cash
– Protect your savings with gold in the face of increased financial threat from EU
Editor: Mark O’Byrne
When we talk about the Eurozone crisis we are usually referring to the Eurozone debt crisis. According to the OECD the debt crisis of 2011 was the world’s greatest threat.
In the years that followed, Germany, France and the UK led EU members in their efforts to stave off debt defaults from the likes of Ireland, Portugal, Italy, Spain and, of course, Greece. This was partly in order to protect the German, French and UK banks who had lent irresponsibly into the periphery EU nations and were very exposed.
In recent months one could argue that things were starting to look up for the single-currency area. Recent headlines report that the Eurozone’s recovery is firmly under way. Manufacturing workloads are rising and companies are hiring at their fastest pace in over a decade.
Of course much of the recovery is attributed to the ECB and their bond purchasing ‘stimulus’ of €60 billion euros every single month … courtesy of Super Mario’s Bazooka. This is unlikely to come to a halt later today in what is being touted as the central bank’s most important policy meeting recently.
There are a few different potential outcomes to the meeting, but none will address the new and very real and very pressing Eurozone crisis: the growing political crisis.
Political change: the real Eurozone crisis
Ever since the debt crisis exposed the cracks in the ‘single currency’ union, the increasingly two-tier economy has caused more and more problems, both economic and political.
Germany has surged ahead in terms of productivity and GDP growth. Meanwhile the southern states have experienced economic pain.
Throw into the mix various EU requirements on countries such as free movement of labour and refugee quotas and it isn’t just the poorer countries that are feeling the heavyweight of eurozone politicians.
This has inevitably given way to a populist surge in politics as voters become increasingly disenfranchised with the EU first, country second approach of their own elected governments and the unelected bureaucrats in Brussels.
This is now a real political risk and reality which the bureaucrats of the EU seem to treat like an embarrassing smell: something they hope will just disappear and require no acknowledgement.
In truth this will continue to snowball as the EU will inevitably remain economically and socially unbalanced. This is a eurozone crisis that is no longer about poor countries unable to cover their debts, this is a eurozone crisis that threatens the very nature of the European Union.
A populist surge has already arrived
Political risk has long been present in the Eurozone. Since the creation of the single-currency union and its various requirements of participating countries, there has arguably been an underlying nationalist movement protesting against the imbalance across the market, the bureaucrats and the control of Brussels.
Only in the last couple of years however, has this political issue gained an international and influential stage. Brexit was of course one of the catalysts that sparked the reaction (followed by Trump’s election) prompting worries that a populist surge was about to sweep through Europe.
The concerns are not completely unfounded. We can now briefly look across Europe to the likes of Spain and the Czech Republic and see that this is exactly what has been (and is) going on.
The most current and serious of these political issues is in Catalonia. On October 1st, 90% of the 43% of voters who participated in the unofficial referendum voted for independence from Spain.
Has the EU appreciated the damage that could be done as a result of not only a legal (and successful) Catalonian referendum and the current fallout alone?
Holger Schmieding, chief economist at Berenberg in London said earlier this month “for the euro zone as a whole, the possible Catalan impact will probably be too small to make a noticeable difference.” This is a common EU response.
But they seem to be forgetting that events in Catalan are not just seen as isolated to the region. The rest of world sees this as a reflection on Spain and therefore, the Eurozone.
The Eurozone has no easy answers to questions such as will the region be allowed to use the euro or what will happen to Spanish banks? The country is the Eurozone’s fourth-largest. Given Spain’s national net debt is more than one trillion euros anything that rocks the stability of the country will have a ripple effect across the EU and beyond.
Czech Trump secures major victory at home and across EU
Last weekend saw a dominant win in the Czech Republic for the euroskeptic ANO party. It is the first time an outwardly anti-euro leader has been elected within the EU-region. The result was not surprising given the general consensus in the country. Parties opposed to deeper integration won more than half of the vote.
ANO leader and multi-billionaire, Sebastian Kurz, is likely to form a coalition with the far-right Freedom Party. Both oppose the euro and have blamed increased terrorism attacks on Germany’s immigration policy. Meanwhile parties such as the anti-Muslim Freedom and Direct Democracy, the SPD, gained a significant number of votes.
Angela Merkel is likely looking at the Czech election with some apprehension. She was closely contested in her own recent election. Whilst she remains Chancellor, right-wing parties gained significant ground and she is yet to form a coalition.
As with the Catalan referendum or Brexit vote, this is not about increasing levels of racism or an ‘anti-Europe’ stance. Despite what the headlines say no-one has declared their country should leave the continent. Brits remain a part of Europe as do the Czechs, they just no longer wish to be under the rule of a government that operates outside of their own (perceived) interests. The benefits of which are increasingly unclear to them.
This change in the political landscape is evidence of the widening gap between the winners and losers of globalisation. This has inevitably generated negative sentiment toward the EU, the embodiment of globalisation and corporate and banking dominance of the continent.
EU’s approach to national and individual sovereignty
As we saw in the UK, much of Europe is split over its feelings towards the EU and the eurozone. However as long as the EU continues to resist and ignore the concerns of voters they are likely to cause more moderates to turn against them.
Anecdotal, I know, but I see evidence of this happening here in the UK. On a recent visit back to London it was clear that many friends and acquaintances (all Remainers in the 2016 referendum) were appalled at the ‘bullying’ tactics and financial demands of the EU Brexit negotiators.
This has prompted many of them to question if a renegotiation of the UK’s place in the EU wasn’t such a bad idea after all.
We also see evidence of this in Spain where Madrid has taken measures that only serve to inflame tensions and irritate Catalonians: from low flying helicopters around the Catalan region to consideration of suspending the constitution and imposing direct rule. Residents are reportedly growing increasingly frustrated with the capital and even more so with the European Commission’s apparent indifference to the situation.
On an individual level, we must hope that this will lead to many savers and investors considering their own financial sovereignty or freedom against the backdrop of EU-focused nationalism. As more disgruntled EU citizens express themselves in the way the Brits, Czech and Catalonians have done, the greater pressure there is on the euro and the EU’s financial markets.
As we have seen with Catalonia, the response from governments when things aren’t going to plan is to exert more force and control. Whether it is threats of preventing free movement for Brits, to removing local power in Catalonia, there are a number of ways individual freedoms can disappear over night.
Protect your sovereignty with your wealth
The same can be said for our wealth, with or without a rise in populism. Currently the EU wields significant power over not only how we spend our money but how we hold it and its security.
As explained earlier this year there is a major clamp down across the EU on cash payments. This is one area of control. The more covert measures are negative interest rates and bail-ins.
Bail-in rules have been in operation since the beginning of 2016. The rules basically mean that desperate governments are able to confiscate some of your savings in times of financial crisis and bank insolvency.
One wonders what other excuses they could find in order to gain access to your funds. Political protests, increased fracturing across the EU and concerns over maintaining control are just a few that spring to mind.
With the same disregard EU officials have shown for the growing discontent across the union, they have dismissed the concerns individuals have for the value and safety of their savings.
Investors should protect themselves from these risks by diversifying their savings and owning physical gold -not paper or digital gold. This reduces the level of counterparty risk your savings are exposed to and ensures some level of sovereignty and financial safety and freedom when it comes to your wealth.
These financial risks including Bail-ins are a threat to all savers in the western world.
Fail to prepare, prepare to fail.
News and Commentary
Gold Prices (LBMA AM)
26 Oct: USD 1,278.00, GBP 968.34 & EUR 1,082.34 per ounce
25 Oct: USD 1,273.00, GBP 964.81 & EUR 1,081.67 per ounce
24 Oct: USD 1,278.30, GBP 970.36 & EUR 1,087.32 per ounce
23 Oct: USD 1,275.25, GBP 967.79 & EUR 1,085.62 per ounce
20 Oct: USD 1,280.25, GBP 974.27 & EUR 1,084.76 per ounce
20 Oct: USD 1,280.25, GBP 974.27 & EUR 1,084.76 per ounce
Silver Prices (LBMA)
26 Oct: USD 16.97, GBP 12.84 & EUR 14.37 per ounce
25 Oct: USD 16.89, GBP 12.75 & EUR 14.34 per ounce
24 Oct: USD 17.04, GBP 12.92 & EUR 14.49 per ounce
23 Oct: USD 17.00, GBP 12.90 & EUR 14.47 per ounce
20 Oct: USD 17.08, GBP 12.96 & EUR 14.46 per ounce
20 Oct: USD 17.08, GBP 12.96 & EUR 14.46 per ounce
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– Young Guns of Gold Podcast – ‘The Everything Bubble’
– London House Prices Are Falling – Time to Buckle Up
The Chairman of the Bank of India is having trouble with the strength of the Rupee and the huge amount of dollars purchased by citizens as continue to buy gold.
India’s efforts to curb the rupee are getting harder
Submitted by cpowell on Wed, 2017-10-25 13:55. Section: Daily Dispatches
By Subhadip Sircar and Anirban Nag
Tuesday, October 24, 2017
India’s currency management just got harder.
The U.S. Treasury said last week it will “closely monitor” the Reserve Bank of India’s policies after a “notable increase in the scale and persistence” of dollar purchases. While Treasury refrained from adding India to its watch list for potential currency manipulators, it noted that foreign-exchange buying had risen to 1.8 percent of gross domestic product in the year through June, just below the Treasury’s 2 percent red line.
The glare of this spotlight may hamper Governor Urjit Patel’s freedom to curb sharp gains in the rupee. Losing the ability to intervene could prove costly though: an overvalued currency has been cited as keeping exports expensive, hurting competitiveness at a time when global demand is recovering. …
… For the remainder of the report:
A must read..
Chris Powell: The essentially prohibited questions about the price of gold
Submitted by cpowell on Thu, 2017-10-26 15:33. Section: Daily Dispatches
Gold Market Manipulation Update
Remarks by Chris Powell
Secretary/Treasurer, Gold Anti-Trust Action Committee Inc.
New Orleans Investment Conference
Hilton New Orleans Riverside Hotel
Wednesday, October 25, 2017
All you really need to know about gold could have been surmised from a story on the front page of The Wall Street Journal on August 10:
In that story the newspaper quoted four experts on the gold market, all of them associates of the Gold Anti-Trust Action Committee and all of them introduced to the newspaper’s reporter by me.
Those four experts — gold researcher Ronan Manly, Sprott Asset Management’s John Embry, GoldMoney founder James Turk, and futures market analyst James McShirley – accused the Federal Reserve of being involved with the suppression of the gold price through the surreptitious lending and swapping of central bank gold reserves.
The Wall Street Journal story was a triumph for GATA, even though the Journal declined to mention GATA by name. (The reporter told GATA Chairman Bill Murphy that the newspaper just ran out of space.)
But the story would have been a much greater triumph for us — indeed, it would have been a triumph for free markets — if the newspaper had not decided, in reporting these complaints about surreptitious government intervention in the gold market, to violate the first rule of journalism. That’s the rule about getting both sides of a story.
The Journal reported: “Some gold bugs — investors bullish on the yellow metal — think the Fed secretly lends it out to suppress prices, partly to protect the dollar’s value. In theory, the Fed can feed gold into the market through swaps with other countries.”
So where were the Journal’s questions about this for the Fed and the Treasury Department? Are the Fed and the Treasury Department involved in keeping the gold price down through surreptitious interventions, or are they not involved?
But the Journal never asked such questions, even though for a year and a half, as I provided the Journal’s reporter with the documents of these interventions, I repeatedly pressed her to put the questions to the Fed and Treasury Department. I even provided the Journal’s reporter with a video showing New York Federal Reserve Bank President William Dudley refusing to answer a question about gold swaps during his appearance at the Virginia Military Institute on March 31, 2016:
Ordinarily news organizations are most interested in questions that high government officials refuse to answer. But mainstream financial news reporters are not interested in questions about secret government intervention in the gold market and secret interventions in markets generally. No, such questions are too sensitive, considered matters of national security.
The best that mainstream financial news organizations can do is just to acknowledge the questions sometimes. Mainstream financial news organizations can never pursue the answers, no matter how easy it would be to do so.
Unfortunately most gold market analysts themselves will not pursue these questions either — at least not yet. GATA will continue working on them.
But market manipulation issues have kept coming close to the surface since we met here last year.
Last month it was reported that former Federal Reserve Board member Kevin M. Warsh was under consideration by President Trump to become Fed chairman.
Warsh is well known to GATA. He was the Fed board member who, adjudicating our freedom-of-information request to the Fed in September 2009, admitted in a letter to our lawyer that the Fed has secret gold swap arrangements with foreign banks and that the Fed insists on keeping them secret:
Also last month, GATA consultant Robert Lambourne, an expert on the Bank for International Settlements, reported that in the last year gold swaps undertaken by the BIS have exploded from zero to close to 500 tonnes:
This is revealed in the footnotes of the BIS’ latest annual report:
The relevant page is isolated in PDF format here:
Lambourne says there is reason to believe that these swaps were undertaken by the BIS just as the gold price showed signs of breaking upward.
The BIS is the primary gold broker for its central bank members and does all sorts of gold business for them. This business is acknowledged in the bowels of the BIS’ internet site:
The relevant section is isolated in PDF format here:
Contrary to what some people would have you believe, central bank gold reserves don’t just sit quietly in their vaults all day. They are mobilized every day, often with the help of the BIS, not just through sales and leases but also through issuance of the various kinds of derivatives listed on the screen.
Indeed, when the BIS thinks that only its central bank members and potential members are listening, it even advertises that its services include secret interventions in the gold market.
This advertisement was part of the BIS presentation that was made to potential central bank members during a conference at BIS headquarters in Basel, Switzerland, in June 2008:
The BIS is a powerful organization but most of its power comes from the refusal of mainstream financial news organizations and gold market analysts to ask the bank to explain what it does in the gold market and then to report the bank’s refusal to explain.
Confirmations of gold and silver market rigging below the central bank level have poured in during the last year.
In December last year Deutsche Bank agreed to pay $60 million to settle a class-action anti-trust lawsuit’s complaints that it had manipulated the gold market. In October last year Deutsche Bank agreed to pay another $38 million to settle a similar complaint that it had manipulated the silver market. Perhaps more importantly, Deutsche Bank agreed to provide the plaintiffs with evidence against the banks it admitted conspiring with:
Unfortunately the discovery and deposition procedures in the class-action anti-trust lawsuits against Deutsche Bank have been put on hold at the request of the U.S. Justice Department, which purports to be undertaking its own investigation of the bank. More likely the Justice Department is just trying to delay exposure of the U.S. government’s own involvement with the market rigging.
In June a former metals trader for Deutsche Bank pleaded guilty in federal court in Chicago to using “spoofing” techniques to manipulate the futures markets for gold, silver, platinum, and palladium. The former trader for Deutsche Bank also admitted front-running customer orders:
In May gold researcher Ronan Manly, reviewing records at the Bank of England discovered minutes showing that Western central bankers conspired in the early 1980s to suppress the gold price in exchange for continued cheap oil exports from the Middle East. These Bank of England minutes are confirmation of the long-held belief in gold circles that gold price suppression originates in part from the desire of Middle Eastern oil exporters to be able to exchange their oil for better money than U.S. dollars, money that can’t be devalued so easily:
Reviewing those Bank of England records, Manly also discovered that Western central banks conspired in 1979 to create a second London gold pool to control the metal’s price:
Last May GoldMoney Vice President John Butler discovered another U.S. State Department memorandum detailing U.S. government policy to drive gold out of the world financial system in favor of the U.S. dollar and the Special Drawing Rights issued by the International Monetary Fund, which then was under U.S. government control.
The memo was written in 1974 by Deputy Assistant Secretary of State Sidney Weintraub for Secretary of State Henry Kissinger and the Treasury Department’s undersecretary for monetary affairs, Paul Volcker, who of course went on to become chairman of the Federal Reserve.
Weintraub wrote: “To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price, and encourage the gradual disposition of monetary gold through sales in the private market.”
In April the British Broadcasting Co.’s “Panorama” program obtained and broadcast a recording of a conversation between two officials of Barclays bank that implicated the Bank of England in the infamous rigging of the London Interbank Offered Rate, the LIBOR interest rate:
In the recording a senior Barclays manager, Mark Dearlove, instructs the bank’s LIBOR rate submitter, Peter Johnson, to lower the rates Barclays is submitting.
Dearlove tells Johnson: “We’ve had some very serious pressure from the UK government and the Bank of England about pushing our LIBORs lower.”
Johnson objects, saying that this would mean breaking the rules for setting LIBOR, which required Barclays to submit rates based only on the cost of borrowing cash. Johnson asks: “So I’ll push them below a realistic level of where I think I can get money?”
His boss Dearlove replies: “We’ve got the Bank of England, all sorts of people involved in the whole thing. … I am as reluctant as you are. … These guys have just turned around and said just do it.”
In January the TF Metals Report discovered in the Wikileaks archive of State Department diplomatic cables a cable sent in December 1974 from the U.S. embassy in London to the State Department in Washington. The cable shows that the U.S. government had just gotten assurances from London bullion banks that the imminent creation of a gold futures market in the United States would cause so much volatility in the gold price that ordinary investors would be driven out of gold:
The gold price has always been of great interest here at the New Orleans Investment Conference. In GATA’s view there are four crucial questions about the gold price, questions that are essentially prohibited elsewhere. I encourage you to put these questions to those who speak about gold here.
1) Are governments and central banks active in the monetary metals markets or not?
2) Are the documents compiled by GATA from government archives and other official sources asserting such activity genuine or forgeries?
3) If governments and central banks are active in the monetary metals markets, is it just for fun or is it for policy purposes?
4) If such activity by governments and central banks is for policy purposes, do those purposes involve the traditional objectives of defeating an independent world currency that competes with government currencies and interferes with government control of interest rates and, indeed, interferes with control of the entire economy and society itself?
In GATA’s view there are good arguments for investing in the monetary metals and the companies that mine them. But investors need to know what they’re getting into, what they’re up against, and what they can do to improve the prospects for their investments and for the restoration of free markets.
Remember, as author and fund manager Jim Rickards said on CNBC a few years ago: “When you own gold you’re fighting every central bank in the world.”
So we just have to beat the bastards.
You can find GATA on the internet at GATA.org, where you can sign up for our daily e-mail dispatches and, if you’re inclined to help us, make contributions that are tax-deductible. We really could use your help. Of course I’ll be glad to hear from you by e-mail at CPowell@GATA.org.
Thanks for your kind attention.
The accumulation of monetary policy errors by the Fed is increasingly certain to culminate in the credit crisis that always marks the end of the credit cycle. Credit crises are the result of globally coordinated monetary policies nowadays, so the timing of the forthcoming crunch is not only dependant on the Fed’s actions, but is equally likely to be triggered from elsewhere. Candidates for triggering a global credit crisis include economic and financial developments in Europe, Japan and China.
The next crisis is set to be more serious than the global crisis of 2008/09, given the greater level of debt involved, and the exceptionally high rate of monetary inflation since. It is a story I have covered elsewhere.i This article will concentrate on the prospects for the US economy ahead of the next credit crisis, and the implications for the dollar and its associated financial markets.
Other jurisdictions face a similar problem, with domestic consumers being maxed out on their credit cards, auto loans and expensive overdrafts. Rising interest rates after a prolonged period of zero and negative interest rates will increase the cost of mortgages, an acute problem for home-owners, particularly in North America and Britain. In the coming years, economic expansion for all highly-indebted nations will be driven by China’s Asia-wide expansion, in some cases more than by domestic factors. China will even suck in outside capital for the infrastructure development planned in both Asia and China. Demand for non-financial bank credit from all sources will be increasingly allocated to this task, leading to the selling down of the banks’ investments in both dollars and short-term sovereign debt.
It is the single greatest challenge faced by the major central banks in the coming months, and we cannot be certain they are fully aware of the forthcoming dangers. The Chinese currency is already rising, reflecting the start of these capital flows. It is likely to radically change international portfolio managers’ attitudes to their dollar exposure and bond allocations.
We can only conclude that the rise in short-term government bond yields that follows from the reallocation of capital to non-financial activities means the central banks have probably lost control of interest rates already.
Our starting point for describing the outlook for the US economy is to concede that under President Trump, America is isolating her domestic economy from the China-led economic expansion that is revolutionising not only her own economy, but that of the whole Eurasian continent. The US economy now depends for its growth prospects on domestic manufacturing and consumption, financed by yet more bank credit.
The conventional measurement of economic growth, the yardstick used by neo-Keynesians, is changes in real GDP. The statistics that make up this gauge of the state of the economy, nominal GDP and its deflator, are unfit for the purpose. GDP, being a money-total, tells you nothing about economic progress, and how technology and time are improving the average person’s standard of living.
As for the deflator, I challenge anyone to say by how much the general price level is changing, with John Williams’s ShadowStats inflation figures indicating it is rising at between six and ten per cent, depending which of his indicators you use. The Chapwood index confirms the latter ShadowStats figure, finding prices of commonly bought items have risen by an average of about ten per cent annually over the last five years. The Fed targets two per cent for core personal consumption expenditures (PCE), which was up only 1.275% year-on-year to August.
It is clear the Fed’s inflation targeting is being set against the most favourable statistic, from the point of view of those who believe in suppressing interest rates. But while the Fed apes the three wise monkeys over price inflation, the rise in prices is creating significant damage to consumption prospects. It is a process that has continued broadly uninterrupted since the 1990s, financed by increasing consumer debt and hardly at all by higher wages. Consequently, the average American consumer is burdened with unsustainable levels of debt, and is running out of an ability to finance continued spending beyond his income. And those who depend on inflation-linked wage increases and subsidies have been progressively screwed down by the CPI’s under-recording of the true cost of living.
Instead of taking the CPI, let us assume Chapwood’s estimate of price inflation as closer to the truth. On this basis, over the last five years, price inflation has been running at an annual average of 10%.ii This means the consumer’s dollar has lost 41% of its purchasing power since 2012. Meanwhile, wage increases tied to the CPI have only increased by 7% over the same period, while total consumer credit has increased by 32%.iii
These numbers confirm our thesis, that it is mainly debt that is financing higher prices. It cannot continue indefinitely. Meanwhile, business is cutting costs where it can, and that requires capital investment. Banks are increasingly prepared to lend to businesses, partly because they perceive lending risk has diminished, and partly because the main alternative use of bank credit, which is investing in short-term government bonds and related financial instruments, is losing them money. And now that the yield on US Government five-year bonds is back above 2%, the momentum of bank sales of government debt is set to increase, as will the pace of bank credit expansion in favour of non-financial businesses.
Capital investment at this stage of the credit cycle tends not to lead to higher wages. Rather, it is about producing more through investment in manufacturing technology, as a means of remaining competitive. An article in the current Bloomberg Businessweek on Fanuc, the Japanese robotics manufacturer, revealed that North American manufacturers increased their spending on robotics by 32% to the first quarter of this year, compared with Q1 in 2016.
There can be little doubt that without increasing automation, price inflation pressures would be even greater. However, with independent forecasters telling us prices have been rising faster than officially admitted, the combination of capital investment and runaway price inflation can only result in economic stagnation.
The alternative of relying upon stimulative fiscal policies by the government is already restricted by the presence of an intractable and growing budget deficit. President Trump’s tax plans, which are intended to stimulate the economy by cutting taxes, are not going to be matched by cuts in government spending, and will gain no lasting benefit from the more efficient redeployment of economic resources from government consumption to the private sector.
The dollar will weaken
With the American consumer maxed out, there is little apparent reason for the Fed to raise interest rates by much. Inflation is tamed by the statistics, and unemployment likewise. It will be outside influences that upset this uneasy balance, reflected through the exchange rate. Foreign use of the dollar is being challenged by China, which is now driving global demand for commodities, and is increasingly demanding her trade payments be settled in yuan. Redundant dollars in foreign hands will simply be sold.
Therefore, the outlook for the dollar is for it to weaken, the speed of which looks like being partly determined by China’s purchasing of energy and industrial materials for yuan, and partly by the development of international yuan markets to provide currency hedges. There is also a separate problem brewing in the bond markets, and that is over foreign residents’ portfolio holdings of US securities. At June 2016 (the last published date for comprehensive figures) they totalled $17.139 trillion, barely changed from a year earlier. This follows a period of rapid expansion after the great financial crisis, which saw it increase from $9.641 trillion in 2009 to $16.417 trillion in 2014.iv Undoubtedly, the increase in portfolio weightings was encouraged by dollar strength in the currency markets.
The figures for mid-2017 will be released in April or May next year, and are likely to show a decline, given the level of portfolio saturation and the downturn in the dollar from last January. The magic circle whereby the sheer scale of foreign demand for dollars pushed up the dollar, and therefore justified the investment, is ready to be reversed as dollars become increasingly redundant.
At the same time as dollar investments are being reduced in foreign portfolios, the US Government will be increasing its funding requirements to pay for tax cuts, while the Fed is trying to reduce its balance sheet by running off maturing assets. This triple whammy is certain to raise US bond yields for all maturities while the dollar weakens, reflecting the reversal of foreign portfolio flows. So, what does an American bank do?
At this stage of the credit cycle, it accelerates its sales of short-term bonds to make way for lending to non-financial businesses. Banks advertising for business customers will become increasingly common.v The injection of extra credit into non-financial businesses will give the appearance of a temporary economic boom. Previous credit cycles have shown that the banks even begin to compete to lend to medium-sized and small businesses in this expansionary stage of the credit cycle, by reducing loan rates and fees to gain market share.
Loan competition and rising price inflation, the consequence of domestic credit expansion, leads to inflation-adjusted interest rates becoming their most negative at any time in the credit cycle, accelerating the loss of the currency’s purchasing power even further.
In short, the Fed has lost control over interest rates already, and seems hardly aware of it. The Fed thinks price inflation is less than 2%, when in truth it is closer to 10%. Combine wishful thinking with groupthink, and you have an explanation for current monetary policy. The Fed’s interest rate increases are even now ex post facto, leading us towards the crisis stage of the credit cycle, when the debt trap snaps firmly, finally and forever shut.
From the analysis above, we can expect bond yields to rise significantly, irrespective of the Fed’s interest rate policy. The effect on other financial assets will be twofold. Firstly, rising bond yields will undermine the values of all financial assets priced on a yield or comparison basis, and secondly, as banks refocus their balance sheets from financial activities, or shadow banking, towards the real economy, they are bound to introduce selling pressure into a wide range of financial assets.
The most recent assessment of the size of global shadow banking is for end-2015, which estimated it to have been $34 trillion on a narrow basis globally, and $92 trillion including “other financial intermediaries” (excluding those in China). Given the scale of credit expansion in China, this probably places the real figure well above $100 trillion. Shadow banking has increased by one third over the course of the global equity bull market.vi As banks reduce their shadow banking exposure to lend to non-financials, so must the OFIs reduce their activities, and both equity and bond markets are bound to suffer. Timing-wise, it would appear this event is now imminent, given the rise in bond yields to date and increasing signs of economic growth around the world.
Market tops in equities are characterised by selling by insiders, who observe these financial flows, to the public, who are encouraged to buy by the apparent improvement in business conditions. How long public buying remains sufficiently strong to overcome insider selling depends on the speed with which events occur. Obviously, a sharp rise in bond yields has a swifter destructive effect than a gradual increase.
The Fed has reasonably prepared US markets for this event with its determination to normalise interest rates and monetary policy. This is untrue of the European Central Bank and the Bank of Japan, where a reversal of negative interest rates and suspension of bond purchase programmes have yet to occur. The financial shock to bonds and equities in Japan and the Eurozone from normalisation of monetary policies should be greatest, and could exacerbate falls in the dollar and US equities in turn.
The commencement of an equity bear market is not to be confused with the credit crisis itself. That follows in due course, when increasing numbers of people reduce their preference for money in favour of goods. Unstopped, it becomes the path to hyperinflation of prices, and before long, central banks must choose between sacrificing the economy or the currency. That decision is still ahead of us, and in 2018 the dilemma faced by central banks will become increasingly apparent to market participants.
A feature of this credit cycle is the securitisation of investment assets in the form of exchange traded funds (ETFs). They have supplemented and replaced the more expensive cost structures of mutual funds as public investment vehicles. ETFs are marketed as a means of eliminating specific investment risks, and are especially popular with investment advisors who think they minimise investment risk generally, but fail to understand that market risk remains.
To this extent, ETFs have been miss-sold to the public. When it becomes clear to the investing public that markets are no longer rising (usually signalled by a fall in stock prices large enough to violate long-term uptrends), the public is likely to sell ETFs indiscriminately and underlying positions will be liquidated in direct proportion to their index weightings. For the same reasons that ETF investment has helped drive equity indices up, they will drive prices down, probably more rapidly, given the likely absence of buyers.
Many of these ETFs are synthetic, investing in equity index derivatives while the core investment is in bonds. In these cases, there are extra risks involved concerning the quality of the underlying bonds, as well as exposure to derivatives. Therefore, we should note a caveat, that the normal behaviour of equity markets at this stage of the credit cycle could be adversely affected by these additional factors.
A distinction must be made between financial assets and property, which are assets with a utility. Even a home is a non-financial asset, its utility being shelter. Non-financials assets take their value from their utility. A machine tool, for instance, is an integral part of the production of consumer goods. If the price of the consumer goods produced rises due to the loss of a currency’s purchasing power, then other things being equal, the value of the machine tool increases as well. It is the same for commercial and residential property.
In the case of commercial property, values tend to rise due to the increasing value of its utility in the final stages of the credit cycle. This is the expected response to the credit boom, fuelled by negative real interest rates. There are nuances. For example, capacity in shopping malls in America is greater than the market requires, due to the shift towards online shopping, suppressing their capital values.
Another reason for rising commercial property prices is the anticipation of the higher utility values from future price inflation. Real estate investment trusts and similar property vehicles become popular with investors, because they represent “real assets”, expected to retain their value in a declining currency. And given the selling of equities generally, property investments come to be regarded as a sound investment.
The same theoretically applies to residential property, because the expansionary phase of the credit cycle normally leads to increased wages, reflecting demand for labour. There are two reasons this characteristic is likely to be swamped by negative factors. Automation continues apace, which continues to restrict the rise in the general level of wages. But more importantly, residential property values are highly geared to changes in interest rates through mortgages. With two-thirds of consumer debt being mortgage finance, a rise in interest rates of as little as one or two per cent becomes a systemic risk, shortening the life of the expansion phase. The Fed is sensitive to this issue, because it was this problem that triggered the great financial crisis. At the time of the great financial crisis, US mortgage debt peaked at $14,795bn in Q2 2008. Following the crisis, it dipped to $13,275bn in Q2 2013, before rising back to $14,590bn last June.vii In other words, despite the awful consequences of easy money and “liar loans”, residential property debt is back in dangerous territory.
Essentially, homeowners are treating their homes as a financial asset, divorcing its value from its utility. As was the case ten years ago, there is a significant risk that residential property will short-circuit the credit boom that is the final, pre-crisis phase of the credit cycle. The same risk is true for Britain’s homeowners.
In recent years, the gold price has had an inverse relationship with nominal US interest rates, weakening ahead of expected increases, and strengthening afterwards. At the same time, the dollar has strengthened against other currencies when the Fed signalled an intention to raise rates.
The relationship between gold, interest rates and the dollar saw a change this year, when the dollar entered a bear market. However, traders in gold derivatives, who dominate short-term pricing, still act as if the previous relationship is intact. Therefore, the increasing inevitability of rising bond yields and interest rates can be expected to temporarily depress the gold price on the futures markets.
This is not the sole driver of the gold price. Portfolio flows fleeing the dollar and thereby depressing it are likely to lend support to precious metals. Furthermore, China’s intended introduction of yuan futures contracts, expected later this year, will undermine prospects for the dollar. In the short-term, there’s no knowing how these factors will balance out.
Beyond the short term, the outlook for the gold price fits into the turning-point of bond yields rising, equity markets weakening, and the dollar embarking on its next downward phase. The bullish relationship between gold and increasingly negative real interest rates should emerge into the open, when it is more generally realised the central banks are powerless to control interest rates and the pricing power of their currencies.
Markets always assert themselves in the end. This will become increasingly obvious as we hurtle towards the crisis stage of the credit cycle, from which there is no escape. The moving parts may be different, but all the characteristics of one last hurrah for the global economy are there. The time left to us before an even greater credit crisis than the last one may not be that long, given the massive debt loads inherited, unresolved and added to from last time by both consumers and governments. And the monetary ring-masters, the central banks, delude themselves with self-serving statistics that they remain in control.
Your early THURSDAY morning currency, Asian stock market results, important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight/9 AM EST
2. Nikkei closed UP 32.16 POINTS OR 0.15% /USA: YEN RISES TO 113.67
3. Europe stocks OPENED IN THE GREEN /USA dollar index RISES TO 93.72/Euro UP to 1.1807
3b Japan 10 year bond yield: RISES TO +.07/ GOVERNMENT INTERVENTION !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 113.72/ 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:: 52.17 and Brent: 58.22
3f Gold DOWN/Yen DOWN
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS AND SELLING THE SHORT END
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil DOWN for WTI and DOWN or Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO +.467%/Italian 10 yr bond yield UP to 2.022% /SPAIN 10 YR BOND YIELD DOWN TO 1.599%
3j Greek 10 year bond yield FALLS TO : 5.57???
3k Gold at $1278.25 silver at:16.99: 6 am est) SILVER NEXT RESISTANCE LEVEL AT $18.50
3l USA vs Russian rouble; (Russian rouble UP 3/100 in roubles/dollar) 57.73
3m oil into the 52 dollar handle for WTI and 58 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT A SMALL SIZED REVALUATION NORTHBOUND
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 113.67 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 0.9914 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1705 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 +0.467%
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 2.417% early this morning. Thirty year rate at 2.928% /
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Traders Paralyzed, Markets Flat Ahead Of Today’s Main Event: The ECB’s Taper Announcement
US equity futures and Asian shares are flat this morning with European shares treading water ahead of the ECB’s policy meeting in which it’s expected to announce a tapering to its €60bn in monthly QE. On this busiest day of Q3 earnings season, companies set to report earnings include Alphabet, Microsoft, Amazon and Intel, while we also get data on jobless claims and wholesale inventories.
In a pre-ECB appetizer, Sweden and Norway’s central banks both kept their interest rates on hold as they too look forward to see what the ECB does first. Their currencies barely budged though as attention remained firmly on a euro rose to a 1-week high of $1.1820, up 12.5% for the year, before hitting an air pocket ahead of the European open.
Ahead of today’s main event, traders waited for formal confirmation from the ECB that will take its biggest step yet in unwinding years of loose monetary policy before committing capital and volumes were abysmal and price action has been tentative. In terms of sector specific moves, performance is relatively mixed with a bulk of the outliers coming in the form of individual companies given we are in the thick of earnings season.
The Stoxx Europe 600 Index was little changed with bank shares underperforming after earnings reports from Deutsche Bank AG and Barclays Plc. Spanish shares rebounded sharply following a Bloomberg report that instead of Independence, Catalonia may seek election instead. In any case, Catalonia’s President Carles Puigdemont will address the regional parliament on Thursday afternoon.
Notable movers include Barclays (-5.9%), Bayer (-3.4%), AB Inbev (-2.6%), Deutsche Bank (-2.03%, STMicroelectronics (+6.4%). Typically tight and light trade in Bunds ahead of an ECB meeting, and especially one that is widely expected to herald a change in policy. The 10 year German bond briefly attempted to trade higher off the Eurex open, but swiftly reversed course and revisited sub-161.00 territory (ie yield staying close, albeit just below 0.5%). Volume so far only a little more than 100k lots, with many market participants sitting tight until the ECB reveals its QE hand amidst a range of potential tapering options and opinions. Gilts largely side-lined, but firmer for choice having underperformed yesterday on UK data that supports near term tightening (November BoE hike prospects up to between 80-90% as a result). Some respite for US Treasuries also, after recent bear steepening, on a Wall Street downturn and reports that dove Yellen may yet be reappointed by President Trump for a further term.
Eurozone bonds trade in tight ranges: the German curve has flattened as the long-end outperforms. In the US, Treasuries rebound, with 10Y yields pulling back from yesterday’s seven-month high, declining to 2.42%, the level that sparked yesterday’s stop loss driven selloff. SEK and NOK were slightly weaker versus EUR after both Riksbank and Norges Bank left policy unchanged as expected while the Turkish Lira is among the biggest losers in EM ahead of Turkey’s central bank decision. European stocks slightly stronger, with Italian equities leading regional gains. WTI extends gain above $52/bbl as Saudi Arabia’s crown prince backs extending OPEC production cuts beyond March 2018. The pound fell and South Africa’s rand extended its decline amid worries
of a rating downgrade after the country’s finance minister on Wednesday
signaled more borrowing. West Texas crude slipped a second day.
As a reminder, the ECB is expected to announce a reduction in the size of its monthly bond buying at its policy meeting. Any deviation from the expected nine-month extension of quantitative easing at around 30 billion euros a month, could impact markets, in particular the euro and German bunds.
In Asia, despite an overall muted tone to trading, the Nikkei 225 resumed its winning ways (+0.2%) after ending the longest stretch of gains on record, dismissing a strong yen, and traded positive with Daiwa Securities and Fanuc among the biggest gainers after encouraging earnings. Hang Seng (-0.2%) and Shanghai Comp. (+0.5%) were mixed ahead of updates from the blue-chip financials with the mainland lifted after another respectable liquidity operation by the PBoC. The Kospi underperformed even as data showed South Korea’s economic growth picked up more than expected in the third quarter. China began marketing its first sovereign dollar bonds since 2004 on the heels of the twice-a-decade Communist Party congress. 10yr JGBs were relatively flat with early mild upside seen alongside a rebound in USTs, while today’s 2yr JGB auction failed to inspire demand despite stronger than prior results as price action conformed to the mundane tone seen across overnight asset classes.
While the bond rout eased in Europe and the US, China’s 10Y sov bond briefly rose to the highest in three years amid concerns over the nation’s deleveraging campaign, although it pared the advance to stay little changed at 3.79% as of close in Shanghai after surging 6bps on Wednesday in the biggest jump since May. Bond strategists point to 4% as next level to watch for 10-year yield, as sentiment is fragile and market tends to be moved by negative news.
In rates, the yield on 10Y Treasuries fell 1bp to 2.42%; Germany’s 10Y yield decreased 2 bps to 0.47%.
In commodities, West Texas Intermediate crude dipped less than 0.05 percent to $52.17 a barrel. Gold advanced less than 0.05 percent to $1,277.56 an ounce. Copper fell 0.4 percent to $6,984.50 per metric ton, the biggest fall in more than a week.
Bulletin Headline Summaary from RanSquawk
- European equity markets subdued, as eyes on Draghi
- The range bound theme has been evident across markets, with FX also seeing light trade
- Looking ahead, the highlight will be the ECB and Draghi press conference, followed by US trade data and weekly jobs
- S&P 500 futures down 0.03% to 2,557.75
- STOXX Europe 600 up 0.04% to 387.27
- MSCI Asia down 0.1% to 166.77
- MSCI Asia ex Japan down 0.2% to 546.50
- Nikkei up 0.2% to 21,739.78
- Topix up 0.1% to 1,753.90
- Hang Seng Index down 0.4% to 28,202.38
- Shanghai Composite up 0.3% to 3,407.57
- Sensex up 0.3% to 33,132.34
- Australia S&P/ASX 200 up 0.2% to 5,916.30
- Kospi down 0.5% to 2,480.63
- German 10Y yield fell 0.6 bps to 0.476%
- Euro up 0.03% to $1.1817
- Brent Futures down 0.2% to $58.33/bbl
- Italian 10Y yield fell 2.2 bps to 1.77%
- Spanish 10Y yield unchanged at 1.647%
- Brent Futures down 0.2% to $58.33/bbl
- Gold spot up 0.03% to $1,277.96
- U.S. Dollar Index down 0.04% to 93.67
Top Overnight News
- President Donald Trump said he’s thinking about giving Janet Yellen another term as U.S. Federal Reserve chair as he balances the desire to put his stamp on the central bank with the risk of changing leadership amid a stock market rally.
- A federal judge rejected a bid by Democratic state officials to temporarily block the White House from ending so-called cost-sharing reduction payments to health insurers under the Affordable Care Act.
- To make a fair deal with Nafta you have to ’terminate’ it, Trump says
- Sweden’s Riksbank keeps key rate at -0.50%, says still sees first rate hike in mid-2018
- Norges Bank keeps deposit rate at 0.50%, says balance of economic risks unchanged since September
- Catalonia may call regional elections this week, rather than declaring independence from Spain
- Italy passes new law that sets stage for general elections in 1H 2018
- Saudi’s crown prince says “of course” he wanted to extend the cuts into 2018; there’s a need to “continue stabilizing the market,” he adds
- RBA’s Debelle says Australia inflation could be weaker than recent data showed
Asia stocks were indecisive for most of the session following the worst performance in their US counterparts since early September, where losses were led by telecoms and industrials amid a slump in AT&T and Boeing shares post-earnings. Corporate updates were in focus in Asia with ASX 200 (+0.1%) initially pressured by weakness in its largest weighted financials sector after ‘Big 4’ ANZ Bank missed on FY results. However, a late rebound in other banking names in Australia lifted the index into the green heading into the close. Nikkei 225 (+0.2%) dismissed a firmer JPY and traded positive with Daiwa Securities and Fanuc among the biggest gainers after encouraging earnings. Hang Seng (-0.2%) and Shanghai Comp. (+0.5%) were mixed ahead of updates from the blue-chip financials with the mainland lifted after another respectable liquidity operation by the PBoC. Finally, 10yr JGBs were relatively flat with early mild upside seen alongside a rebound in USTs, while today’s 2yr JGB auction failed to inspire demand despite stronger than prior results as price action conformed to the mundane tone seen across overnight asset classes. PBoC injected CNY 80bln via 7-day reverse repos and CNY 40bln via 14-day reverse repos. PBoC set CNY mid-point at 6.6288 (Prev. 6.6322)
- Top Asian News
- Japan Post Insurance Preparing to Invest in Foreign Real Estate
- Vietnam’s Biggest-Ever Initial Public Offering Prices at Top End
- No Good News for India’s Bonds Means Yields Set to Grind Higher
- Sri Lanka Large Lenders Rise as Rule Changed for Minimum Capital
- Kobe Steel Finds Four Additional Cases of Suspected Fake Data
- RBA’s Debelle Says Inflation May Be Even Weaker Than Data Show
In Europe, price action has also been tentative with traders looking to take the lead from events in Frankfurt today. In terms of sector specific moves, performance is relatively mixed with a bulk of the outliers coming in the form of individual companies given we are in the thick of earnings season. Notable movers include Barclays (-5.9%), Bayer (-3.4%), AB Inbev (-2.6%), Deutsche Bank (-2.03%, STMicroelectronics (+6.4%). Typically tight and light trade in Bunds ahead of an ECB meeting, and especially one that is widely expected to herald a change in policy. The 10 year German bond briefly attempted to trade higher off the Eurex open, but swiftly reversed course and revisited sub-161.00 territory (ie yield staying close, albeit just below 0.5%). Volume so far only a little more than 100k lots, with many market participants sitting tight until the ECB reveals its QE hand amidst a range of potential tapering options and opinions. Gilts largely side-lined, but firmer for choice having underperformed yesterday on UK data that supports near term tightening (November BoE hike prospects up to between 80-90% as a result). Some respite for US Treasuries also, after recent bear steepening, on a Wall Street downturn and reports that dove Yellen may yet be reappointed by President Trump for a further term.
Top European News
- Santander Underlying Profit Gains as Charges Hurt Net Income
- Liberty Global-Ziggo Deal Approval Annulled by EU Court
- Hungarian Central Bankers Reiterate Extra Euro Entry Conditions
- IMF Tells Central Banks to Keep Policy Accomodative If Possible
- Norway Keeps Rates at Record Low to Back Recovery From Oil Slump
In FX, RBA Deputy Governor Debelle says they are alert to risk that wages will remain subdued even as spare capacity is reduced. US President Trump says his people negotiating NAFTA will have to get tougher and that to make a fair deal with NAFTA, it has to be terminated n a session set to be dominated by central bank action, notable announcements thus far have included rate decisions from the Riksbank and Norges bank. Kicking off with the Swedes, as expected the governing council stood pat on rates at -0.5% whilst maintaining their current size of asset purchases and repo rate path. The bulk of the reaction emanated from the Bank not paying too much credence to recent disappointing inflation data which led to appreciation of the SEK. However, this move was short-lived after the Bank extended their mandate for FX interventions. Elsewhere in the Scandi’s NOK saw little in the way of a reaction after the Norges bank kept rates on hold as expected and maintained existing rhetoric. AUD slipped below 0.7700 after RBA Debelle highlighted risks that wages could remain subdued. Finally, most other majors have traded in a relatively tight-range ahead of the ECB.
In commodities, in the commodity complex, price action has also been particularly tight with WTI reclaiming USD 52/bbl with little in the way of newsflow other than comments from the Saudi Crown Prince backing extending OPEC output cuts into 2018. In metals markets, copper has traded relatively flat while Gold has largely been tracking movements in the USD which has been kept in a range ahead of key risk events.
Looking at the day ahead, the ECB meeting at 12.45pm BST and Draghi press conference shortly after are likely to be front and center today. Data wise this morning we’ll receive German consumer confidence for November, Euro area M3 money supply for September and UK CBI retailing reporting sales for October. In the afternoon across the pond wholesale inventories for September, initial jobless claims, September advance goods trade balance, September pending home sales and October Kansas City Fed manufacturing activity data are all due. Barclays, Twitter, Amazon and Alphabet are amongst those due to report results.
US Event Calendar
- 8:30am: Initial Jobless Claims, est. 235,000, prior 222,000; Continuing Claims, est. 1.89m, prior 1.89m
- 8:30am: Advance Goods Trade Balance, est. $64.0b deficit, prior $62.9b deficit, revised $63.3b deficit
- 8:30am: Wholesale Inventories MoM, est. 0.4%, prior 0.9%; Retail Inventories MoM, prior 0.7%, revised 0.7%
- 9:45am: Bloomberg Consumer Comfort, prior 51.1
- 10am: Pending Home Sales MoM, est. 0.4%, prior -2.6%
- 10am: Pending Home Sales NSA YoY, est. -4.2%, prior -3.1%
- 11am: Kansas City Fed Manf. Activity, est. 17, prior 17
DB’s Jim Reid concludes the overnight wrap
So today is the day we’ve all been waiting for. It’s not an exaggeration to say some people have waited all their life for this moment. What will the announcement bring? Will the conspiracy theorists be working overtime? And will we get closure on a number of issues? Yes today sees the release of the final classified files on the JFK assassination nearly 54 years after the event. As someone who knows most of what he knows about the event from the film JFK I’m looking forward to being educated.
Fortunately the minutes of today’s blockbuster ECB meeting will be available in only a few weeks so there’ll be no need for a film to be made speculating on how we got to the decision (who would play Mr Draghi?). Ahead of this, in a year of ultra-low volatility, yesterday threatened to leave you with a bit of motion sickness given the comparatively large swings seen and decent pick up in volumes. Given how well flagged today’s much anticipated ECB meeting is, it’s possible that yesterday was the storm before the calm. However there are still ways that Mr Draghi and co could surprise. Overall DB expect a cut in purchase at the start of 2018 from EU60bn per month to EU30bn and for this to be confirmed for 9 months. The consensus (guided by informed articles and commentary from the ECB) seems to have migrated lower towards EU25-30bn over the last month and from a 6 to a 9 month extension. However with reinvestments expected to be EU15bn per month on average next year, this could yet lead to a number at the lower end of expectations if the ECB focus on this. Our rates strategists think an explicit mention of gross purchases from the ECB could be quite hawkish as it would acknowledge the reinvestment issue that would naturally keep policy looser if they recycled all proceeds.
Another hawkish signal could be mention of an explicit end date for purchases but this is not expected at the moment. Nevertheless our strategists think the current market pricing of the first rate hike being pushed back to early 2020 is too far. They think it’s more likely to be between Q2 and Q3 2019. Elsewhere for credit investors it’s unlikely they’ll explicitly mention the specifics of the CSPP/ PSPP split but we think there’s a good chance that when the data comes through in early 2018 it will show no or limited CSPP tapering relatively to PSPP. See the note we did on this last week for more details.
We’ve mentioned a few times recently that bonds were looking like they were getting more volatile with the ranges picking up. Yesterday this trend increased as the intra-day range in 10yr USTs, Bunds and Gilts were 6.2bp, 3.7bp and 10.1bps respectively, before closing +1.3bp, 0.6bp and 4.8bp higher. USTs saw the biggest round trip closing at 2.433% having retraced nearly all of the sell-off up to 2.473% earlier on. Driving the swing seemed to be ECB hawkishness (growing chatter about a cut to EU20bn) and stronger IFO, UK GDP and US durables (more later) on one hand before a response to weaker earnings (again more later) and a delayed reaction to the prior day’s disagreement between Senator Flake and Corker and Mr Trump seemed to swing the pendulum the other way.
Over in the US, the House of Representatives votes today on whether to adopt the 2018 budget that has already passed in the Senate. The House Republicans holds 239 seats and need only 217 votes to pass the budget, but potential defections may rock the boat. If passed, this will clear another hurdle before the finer tax plans are released, (expected to be 1 November) which will then lead to further debates. Elsewhere and adding to the bumper Thursday, Italy’s Senate is expected to hold a final vote on its new electoral bill (11am local time).
Moving onto the search for the next Fed Chair, President Trump told Fox network he has narrowed his search to 2 or 3 people, and when asked if Ms Yellen “might be worth keeping”, he said “I would certainly think about that”.He added a decision will come in “the next very short period of time” and that “it won’t be a big shock”. Elsewhere, Bloomberg reports that Trump has privately told people that he would not appoint Gary Cohn to be the Fed Chair, in part to better allow him to focus on the tax reform efforts.
Back in equities yesterday, both the S&P (-0.47%) and Dow (-0.48%) fell the most since early September, while the Nasdaq also retreated 0.52%. The weakness was impacted by softer corporate results from AMD (share price- 13.47%), Chipotle Mexican Grill (-14.58%) and even Boeing (-2.85%) after beating consensus forecasts. Within the S&P, all sectors were in the red, led by losses from the telco (-2.28%) and industrials sectors. The VIX rose to 11.23, back towards its recent highs in early September.
It’s not clear whether some of the risk off was a response to the recent surge in yields. So far markets have shrugged it off but as we approached 2.5% and 0.5% on Treasuries and Bunds perhaps there was an appreciation that most of the recent move has been an increase in real yields and not inflation expectations moving notably higher. So financial conditions have tightened slightly as a result. It’s not clear whether that was an issue but whatever the cause there’s no doubt activity and vol increased.
This morning in Asia, markets are mixed but little changed. The Hang Seng (-0.17%), Kospi (-0.12%) and ASX 200 (-0.10%) are down slightly, but the Nikkei (+0.16%) and the Shanghai Comp (+0.20%) are up as we type. Now quickly recapping other markets performance for yesterday. European bourses were all lower, with the Stoxx 600 (-0.57%), DAX (-0.46%) and CAC (-0.37%) down c0.5%, while the FTSE (-1.05%) underperformed, partly impacted by higher Sterling and GlaxoSmithKline’s weaker results (shares -5.52%, biggest daily fall in 9 years). Turning to currencies, the US dollar index dipped marginally (-0.07%), while Euro republic, while the region’s foreign affairs chief suggested they would consider dropping their bid for independence if the central government offered them a way out. We should find out soon, with the Catalan President Puidgemont due to address Parliament this afternoon (from 5pm local time).
Over to the UK, Brexit secretary Davis had to back track earlier comments where he suggested the UK Parliament may not be able to vote on the final EU divorce term before Brexit happens, as “it (voting) can’t come before we have the deal”. Later on, his office emailed a statement and noted “we are working to reach an agreement on the final deal in good time before we leave the EU in March 19”. Elsewhere, EU Chief negotiator Barnier noted that talks should be wrapped up by October 2018.
In Canada, the cash rate was left unchanged at 1%, in line with consensus. Looking ahead, comments sounded a bit dovish, with the BOC noting “while less monetary policy stimulus will likely be required over time, the Governing Council will be cautious in making future adjustments to the policy rate. In particular, the Bank will be guided by (the) incoming data…” Further, Governor Poloz noted “given our recent history with inflation running below target, we continue to be more preoccupied with the downside risks to inflation”. The odds of a December rate hike fell c11ppt to 33%.
Turning to China, where the new Politburo Standing Committee (PSC) was unveiled yesterday. Our China Chief economist noted that President Xi has gained more political power in this reshuffle. Stronger political power is a necessary condition for faster structural reforms, but not a sufficient one. It remains to be seen how effective the reforms will be implemented, particularly regarding state owned enterprises, fiscal and property market issues. For more details, refer to link.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the September durable goods orders report beat expectations, even with 0.2ppt upward revisions to the prior month’s reading. Core durable goods orders was 0.7% mom (vs. 0.5% expected) while capital goods orders (core) rose 1.3% mom for a third consecutive month (vs. 0.3% expected) – now up 7.8% yoy. Elsewhere, housing market readings were also higher than expectations. New home sales for September rebounded after two months of decline to 667k (vs. 554k expected). The FHFA house price index for August was up 0.7% mom (vs. 0.4% expected) and the four-week average of the MBA’s new purchase mortgage applications index is now up 7.7% yoy, roughly double that reported a month earlier.
In Germany, the October IFO business climate rose to a new post-unification high at 116.7 (vs. 115.1 expected), while the expectations index also rose to 109.3 (vs. 107.3 expected) – the highest since December 2010. In the UK, 3Q GDP beat expectations at 0.4% qoq (vs. 0.3% expected), which is the highest growth this year, while annual growth was in line at 1.5% yoy.
Looking at the day ahead, the ECB meeting at 12.45pm BST and Draghi press conference shortly after are likely to be front and center today. Data wise this morning we’ll receive German consumer confidence for November, Euro area M3 money supply for September and UK CBI retailing reporting sales for October. In the afternoon across the pond wholesale inventories for September, initial jobless claims, September advance goods trade balance, September pending home sales and October Kansas City Fed manufacturing activity data are all due. Barclays, Twitter, Amazon and Alphabet are amongst those due to report results.
3. ASIAN AFFAIRS
i)Late WEDNESDAY night/THURSDAY morning: Shanghai closed UP 10.67 points or .31% /Hang Sang CLOSED DOWN 100.51 pts or 0.36% / The Nikkei closed UP 32.16 POINTS OR .15/Australia’s all ordinaires CLOSED UP 0.17%/Chinese yuan (ONSHORE) closed UP at 6.634/Oil DOWN to 52.17 dollars per barrel for WTI and 58.22 for Brent. Stocks in Europe OPENED IN THE GREEN EXCEPT LONDON . ONSHORE YUAN CLOSED UP AGAINST THE DOLLAR AT 6.634. OFFSHORE YUAN CLOSED AT VALUE OF THE ONSHORE YUAN AT 6.634 AND //ONSHORE YUAN STRONGER AGAINST THE DOLLAR/OFF SHORE STRONGER TO THE DOLLAR/. THE DOLLAR (INDEX) IS STRONGER AGAINST ALL MAJOR CURRENCIES. CHINA IS HAPPY TODAY.
3a)THAILAND/SOUTH KOREA/NORTH KOREA
3b) REPORT ON JAPAN
3C. CHINA REPORT.
Good reason for gold and silver to fall: ECB announced a dovish taper as they will purchase 30 billion euros until Sept 2018 and maybe beyond. The Euro plummets!!
ECB Announces Dovish €30 Billion QE Taper Through September 2018 “Or Beyond”; Euro Tumbles
While the ECB kept all of its three key rates unchanged as expected, and also kept the pace of QE at €60 billion until the end of the year, confirming the numerous trial balloons overthe past month, the ECB announced that it would cut the rate of QE in half, to €30 billion “from January 2018 until the end of September 2018” adding that this would extend “beyond, if necessary” and “until inflation path has sustainably adjusted.”
While the open-ended nature of the announcement was expected by some, the market has taken it as a dovish development, as well as the announcement that the ECB will reinvest the principal payments from maturing securities purchased under the APP “for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary.”
Incidentally, according to preliminary calculations, at a tapered €30 billion rate of QE, the ECB would have until Q2 2019 before it hits the Bund scarcity bottleneck.
Furthermore, the ECB’s the soothing promise that “this will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance” has led to dovish plunge in both Eurozone yields and the EURUSD, which tumbled on the announcement which the markets clearly perceived as risk-friendly.
Full statement below:
The Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.
At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
(1) The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.
(2) As regards non-standard monetary policy measures, purchases under the asset purchase programme (APP) will continue at the current monthly pace of €60 billion until the end of December 2017. From January 2018 the net asset purchases are intended to continue at a monthly pace of €30 billion until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the APP in terms of size and/or duration.
(3) The Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.
(4) The main refinancing operations and the three-month longer-term refinancing operations will continue to be conducted as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the last reserve maintenance period of 2019.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.
(courtesy Graham Summers)
The Bond Market Calls Draghi’s Bluff. What’s Next?
ECB President Mario Draghi is now walking back QE.
This is not a surprise to our readers. I’ve been forecasting this exact development, (as well as the Euro’s spike to 120) since August 2016 (by the way, the Euro was at 109 back then everyone thought it would soon reach parity with the $USD as it collapsed).
Still, why is Draghi doing this?
Because the bond market was in revolt, with yields beginning to rise. Rising yields= falling bonds prices. Falling bond prices over time= bear market in bonds. Bear market in bonds = SYSTEMIC reset.
We explain all of this in our bestselling book The Everything Bubble: The End Game For Central Bank Policy. If you’ve yet to pick up a copy, grab one now. You’ll immediately know more about how the financial system works (as well as what’s come) than anyone else in your social circle.
The bottomline is as follows…
Draghi, like all Central Bankers, cares about just one thing. Bond yields. And as the below chart shows, bonds particularly German Bunds (don’t forget Germany is who controls the real purse strings in Europe) were in revolt, rising above their long-term trendline.
Put simply, the above chart was a MAJOR warning that the bond bubble was in serious trouble. The ECB, like all Central Banks is now cornered: either it stop printing money and let stocks collapse… or they continue to print money, unleash inflation, and pop the bond bubble.
Either way, we’re heading towards another crisis.
The time to prepare your portfolio for this is NOW before this truly gets out of control!
Imagine if you’d prepared your portfolio for a collapse in Tech Stocks in 2000… or a collapse in banks in 2008? Imagine just how much money you could have made with the right investments.
THAT’s the kind of potential we have today.
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Chief Market Strategist
Phoenix Capital Research
Our largest derivative player who is also in trouble with us with respect to manipulating gold and silver saw its trading revenue plunge 30% as it’s stock plunges. If these guys fail, then the entire financial system blows up
Deutsche Bank Trading Revenue Plunges 30% As CEO’s Time Running Out
Deutsche Bank’s Q3 2017 revenues were €6.78 billion, below market expectations of €6.88 billion. The share price fell 2.7% shortly after the European market open. The problem – like the previous quarter – was a bigger-than-expected drop in trading revenues. Trading revenue was down 30% year-on-year to €1.512 billion versus €2.162 billion in Q2 2017.
The challenge for the embattled CEO, John Cryan, is that the trend is still deteriorating. Trading revenues in Q2 2017 fell 18% year-on-year to 1.666 billion euros versus 2.027 billion euros. Earlier this year, Cryan pledged to turnaround the performance of the investment bank as soon as this year. On a more positive note, earnings – which obviously possess a near-term degree of flexibility in the banking sector – beat expectations. This mirrored Q2 2017, as Cryan continued to apply a knife to the cost base (although end Q3 headcount rose “slightly” versus end Q2 – probably compliance).
The countdown to Cryan’s replacement is ticking every louder: “These aren’t the kind of numbers you want to keep seeing,” said Markus Riesselmann, an analyst at Independent Research in Frankfurt (who has a buy reco on the bank). “The longer this goes on, the harder it gets to believe management’s hopes for a recovery. We cannot see another two or three quarters like this.”
As Bloomberg reported, Deutsche Bank AG reported a bigger-than-expected drop in third-quarter trading revenue as Europe’s largest investment bank keeps losing ground to rivals. Trading declined 30 percent from a year earlier, Frankfurt-based Deutsche Bank said Thursday in a statement. That’s worse than the 15 percent average decline at the five biggest U.S. investment banks and the 24 percent drop expected by analysts. Net income more than doubled to 647 million euros ($766 million), beating the 278.6 million-euro average estimate of seven analysts, as the bank cut costs.
Cryan is pleading for patience as he battles to turnaround Europe’s largest investment bank, a pricess which will take years. He only has “the next few quarters” as Bloomberg explains.
“We are convinced that the benefits of our efforts will step by step become more apparent in the coming quarters and years,” Chief Executive Officer John Cryan said in the statement. Revenue was hurt by a “challenging” trading environment, he said. Cryan, 56, has come under pressure from investors as he struggles to deliver on a pledge made in March, when he unveiled the bank’s third strategy in as many years, to return to “controlled” growth. While he settled legacy misconduct cases, reduced risk in the securities unit and raised fresh capital, the bank hasn’t won back all clients who reduced business last year. That’s made an industrywide slump in trading worse for Germany’s largest lender. Deutsche Bank’s shares lost 5.6 percent this year through Wednesday, the sixth-worst performance among the 44 members of the Bloomberg Europe 500 Banks and Financial Services Index. Three of the 10 largest stakeholders in the bank, speaking earlier this month on condition of anonymity, said they want to see a turnaround in the next few quarters, particularly in the trading business, to continue to back Cryan. Revenue has fallen in all but two quarters since he took over in 2015.
Deutsche’s board had this to say about market conditions and key performance drivers in the earnings release.
Revenues were negatively impacted by a market and interest rate environment which remained challenging… Client activity was subdued compared to a strong prior year quarter, while volatility and interest rates remained low. Cost reductions boosted profit growth. Noninterest expenses were EUR 5.7 billion in the quarter, down by 14%, or 11% if adjusted for exchange rate movements. Restructuring and severance expenses were significantly lower, as were litigation charges, despite the bank successfully resolving a number of litigation matters, largely within existing provisions. Adjusted costs were down 6%, or 3% if adjusted for exchange rate movements, largely reflecting the absence of the NonCore Operating Unit that was closed last year, and lower professional services fees. Accruals for current-year variable compensation were higher year-on-year. Total headcount fell approximately 4,000* year-on-year. credit quality remained high. Provision for credit losses was EUR 184 million, down by 44% versus the prior year quarter, reflecting a broad-based improvement in the Corporate & Investment Bank and continued strong credit quality in the Private & Commercial Bank.
And on the Corporate & Investment Bank (CIB).
Revenues were EUR 3.5 billion, down 23%, or 21% adjusted for exchange rate movements, reflecting muted client activity and low volatility versus the prior year quarter which saw high levels of client activity post-Brexit. Fixed Income & Currencies (FIC) revenues were down 36%; if reported on the basis of previous segmental reporting, including the relevant revenues now reported in the Financing segment, the year-on-year decline in FIC would have been 24%. Revenues in Equity Sales & Trading and in Origination and Advisory were lower year-on-year, while revenues in Global Transaction Banking (GTB) were lower year-on-year but stable versus the second quarter. GTB’s year-on-year revenue development partly reflected strategic reductions in the business perimeter. CIB has made substantial progress in the repositioning announced earlier in 2017.
So Deutsche Bank and its CEO are as mired in the dismal performance of the investment bank as they were last quarter, probably more so.
In a Bloomberg TV interview this morning, CFO James von Moltke, defended the company’s performance.
- “We’ve actually been holding share, especially in fixed-income markets”
- “It’s been a difficult market for everyone”
- Highlights advisory and prime finance as areas where there is time lag in investment banking revenue
- Says Deutsche Bank gained market share in EMEA investment banking, rates derivatives
- Expects partial IPO of asset management unit “well within” timeline of within 24 months after announcement in March 2017
- Co. making “significant progress” in preparing unit for IPO
- “Too early to take a view” on potential outcome of Basel negotiations
Below is some of the feedback from analysts speaking to Bloomberg after the results:
“The question of investment banking revenue weakness won’t go away,” said Ingo Frommen, an analyst at Landesbank Baden-Wuerttemberg who has a hold recommendation on the shares. “The trading results were very negative and they won’t silence the discussion about how management can get a handle on this issue.” Deutsche Bank’s “poor” set of figures from revenue to capital ratios in 3Q will drive share price down, Natixis analysts led by Alex Koagne write in a note. Natixis analysts say profit beat mainly comes from lower-than- expected provisions for litigation and restructuring costs. Maintain reduce rating, as no sign of how the group could improve profitability. DB continues to lose market share in CIB, a key profit contributor. Morgan Stanley analysts led by Magdalena Stoklosa write that weak FICC (-36% YoY) likely to drive first stock reaction: Maintain equal weight, PT EU16 On divisional level, CIB the miss, AM weak, PCB stronger.
It looks like the Catalan Government is said to back off its independence move as they will seek elections
Catalan Government Said To Back Off Independence Push, Will Seek Elections; Spanish Stocks Soar, Yields Tumble
Yesterday Catalonia’s government was preparing to declare independence, as we discussed. Just hours after Puigdemont snubbed Madrid, canceling his visit to The Senate to discuss their imposition of Article 155, Catalan Deputy First Minister Oriol Junqueras told AP that the Spanish government had left Catalonia “no other option” but to proclaim a new republic. Mr. Junqueras told the AP he was commenting as leader of his party, Republican Catalan Left, not as a member of the regional government. Additionally, Puigdemont posted a defiant Instagram message: “We will not lose time with those who have already decided to crush Catalan self-government. Onwards!”
However, just a few hours later, the Catalonia leadership seems to have backed down, and instead is opting for elections, reportedly just before Christmas.
According to Bloomberg, Catalan President Carlos Puigdemont may call regional elections this week, rather than declaring independence from Spain, as authorities in Madrid finalize plans to oust his rebel administration, according to two people familiar with his thinking.
After defying the Spanish courts for weeks, Puigdemont decision could either ease tensions or deepen the biggest constitutional crisis in western Europe’s fifth-largest country since an attempted coup in 1981. Spain’s chief prosecutor has warned he faces up to 30 years in jail if he goes ahead with the declaration.
“The scenario of independence is one that we cannot allow and which will not happen,” Economy Minister Luis de Guindos told Spanish radio on Thursday. He said there was already a “significant slowdown” in economic activity in the region. “They’re caught in a mousetrap. It seems their own decisions are producing vertigo.”
Bloomberg’s also reports that this could take place on 20 December 2017.
The Spain Report confirms as much:
Several Catalan media outlets reported the Catalan First Minister, Carles Puigdemont, has just dissolved or is about to dissolve the Catalan regional parliament and call new regional elections in a bid to avoid the central government applying Article 155 of the Spanish Constitution to suspend home rule in Catalonia.
La Vanguardia and El Mon reported the likely date of the ballot would be December 20.
Mr. Puigdemont will make a statement at 1:30 p.m. Spanish time.
The Spanish government had said this week that just calling early elections at this late stage would not be enough to stop the application of the Article 155 measures.
The Spanish Prime Minister’s office, Moncloa, told The Spain Report at 12:30 p.m. that there was so far “no change” in the central government’s plan to press ahead with the implementation of Article 155
If true, the news is positive for Spanish bonds as polls taken in recent days suggest that the Catalan secessionists would lose their majority. In the Spanish bond market, the 10-year yield has dropped by about 5 basis points while the IBEX 35 jumped over 1.3%.
Of course, this could be just another “fake news” trial balloon: Puigdemont will make a formal statement in just minutes, at 13.30 Madrid time today.
Catalan separatists are now rebelling against their leader
(courtesy zero hedge)
5. RUSSIA AND MIDDLE EASTERN AFFAIRS
6 .GLOBAL ISSUES
8. EMERGING MARKET
it looks like Venezuela will default in the next 48hrs
The Time Has Come: Venezuela May Be In Default In Under 48 Hours
This past weekend, Venezuela failed to make $237 million in bond coupon payment, blaming “technical glitches” when in reality it simply did not have the money (or wish to part with it). Adding the $349 million in unpaid bond interest accumulated over the past month as of last Friday, that brings Caracas’ unpaid bills to $586 million this month, just days before the nation must make a critical principal payment. And, as BofA sovereign debt analyst Jane Brauer writes, while the bank’s base case assumption is that Venezuela will make its debt service payments this year, “the probability of a short term default has increased substantially with coupon delays” and it could come as soon as this Friday, when an $842 million PDVSA principal plus interest payment is due, and which unlike typical bond payments does not have a 30 day grace period but instead is followed by a second $1.1 billion PDVSA coupon on Nov 2, also without a 30 day grace period.
As Brauer writes, Venezuela has been in as similar situation of payment uncertainty in the recent past, with bond prices plummeting right before a big payment. For example, just before a big principal payment was due in April 2017 Venezuela received a $1bn loan from Russia just one week before the due date. At that time Ven 27s dropped 16% in a month (from $52 to $45) and recovered completely within a month. Ven 27 has fallen to $35, as Venezuela has demonstrated that it will be a challenge to make all payments on time. The difference between now and April is that coupon payment delays then came after, not before the payment.
Meanwhile, Venezuela has managed to redefine the concept of payment “on time” which now means “by the end of the grace period”
As we keep track of missed payments, the 5 missed payments, so far totaling $350mn all have a 30 day grace period, as did the $237mn payments over the weekend.
The concern is that the principal payments coming up have:
- No grace period in the bond indenture for an event of default
- Three business day grace period before triggering CDS
The concerning principal due dates are coming up, the first of which is this coming Friday, which means in less than 48 hours Venezuela could be in default unless it can find $842 million:
- Friday, Oct 27 PDVSA 2020 $842mn
- Thursday Nov 2 PDVSA 17N $1,121mn
The collateral against the first bond is PDVSA’s Houston-based refining and retail subsidiary, and in just a few hours, the bondholders may be the (un)happy new ownders of said subsidiary.
“This weekend, there’s either going to be a lot of bond holders and traders drinking champagne, or there’s going to be a lot of stressed fund managers,” said Russ Dallen, managing partner at Caracas Capital Markets
And to help everyone involved, here are some key tables, courtesy of BofA:
- Table 1. Ordered by due dates, missed payments and payments due today for Venezuela sovereign and wholly-owned quasi sovereign issuers.
- Table 2. Sorted by grace period end dates for missed payments and those due today
- Table 3. Debt service due dates for the next 9 months
- Table 4. Bond Attributes and face needed to block CACs
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings THURSDAY morning 7:00 am
Euro/USA 1.1807 DOWN .0012/ REACTING TO 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 ALL GREEN
USA/JAPAN YEN 113.67 UP 0.090(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 1.3218 DOWN .0093 (Brexit March 29/ 2017/ARTICLE 50 SIGNED
THERESA MAY FORMS A NEW GOVERNMENT/STARTS BREXIT TALKS/MAY IN TROUBLE WITH HER OWN PARTY/
USA/CAN 1.2794 DOWN .0002(CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA)
Early THIS THURSDAY morning in Europe, the Euro FELL by 12 basis points, trading now ABOVE the important 1.08 level FALLING to 1.1807; / Last night the Shanghai composite CLOSED UP 10.67 POINTS OR .31% / Hang Sang CLOSED DOWN 100.51 PTS OR 0.15% /AUSTRALIA CLOSED UP 0.17% / EUROPEAN BOURSES OPENED
The NIKKEI: this THURSDAY morning CLOSED UP 32.16 POINTS OR 0.15%
Trading from Europe and Asia:
1. Europe stocks OPENED GREEN
2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 100.51 POINTS OR 0.15% / SHANGHAI CLOSED UP 10.67 POINTS OR .31% /Australia BOURSE CLOSED UP 0.17% /Nikkei (Japan)CLOSED UP 32.16 POINTS OR 0.15% / INDIA’S SENSEX IN THE GREEN
Gold very early morning trading: 1277.50
Early THURSDAY morning USA 10 year bond yield: 2.417% !!! DOWN 1 IN POINTS from WEDNESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. (POLICY FED ERROR)
The 30 yr bond yield 2.928 DOWN 2 IN BASIS POINTS from WEDNESDAY night. (POLICY FED ERROR)
USA dollar index early THURSDAY morning: 93.72 UP 1 CENT(S) from YESTERDAY’s close.
This ends early morning numbers THURSDAY MORNING
And now your closing THURSDAY NUMBERS \1 PM
Portuguese 10 year bond yield: 2.237% DOWN 6 in basis point(s) yield from WEDNESDAY
JAPANESE BOND YIELD: +.070% UP 0 in basis point yield from WEDNESDAY/JAPAN losing control of its yield curve/
SPANISH 10 YR BOND YIELD: 1.537% DOWN 8 IN basis point yield from WEDNESDAY
ITALIAN 10 YR BOND YIELD: 1.95 DOWN 9 POINTS in basis point yield from WEDNESDAY
the Italian 10 yr bond yield is trading 41 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.415% down 7 IN BASIS POINTS ON THE DAY
IMPORTANT CURRENCY CLOSES FOR THURSDAY
Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM
Euro/USA 1.1691 DOWN 128 (Euro DOWN 128 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 113.71 UP 0.174(Yen DOWN 17 basis points/
Great Britain/USA 1.3171 DOWN 0.01002( POUND DOWN 100 BASIS POINTS)
USA/Canada 1.2827 UP.0032 Canadian dollar DOWN 32 basis points AS OIL ROSE TO $52.42
This afternoon, the Euro was DOWN 128 to trade at 1.1691
The Yen FELL to 113.76 for a LOSS of 17 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 FELL BY 100 basis points, trading at 1.3171/
The Canadian dollar FELL by 32 basis points to 1.2827 WITH WTI OIL FALLING TO : $52.42
Your closing 10 yr USA bond yield UP 0 IN basis points from WEDNESDAY at 2.433% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 2.949 UP 0 in basis points on the day /
Your closing USA dollar index, 93.34 UP 63 CENT(S) ON THE DAY/1.00 PM/BREAKS RESISTANCE OF 92.00
Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY: 1:00 PM EST
London: CLOSED UP 39.23 POINTS OR 0.53%
German Dax :CLOSED UP 179.87 POINTS OR 1.39%
Paris Cac CLOSED UP 80.51 POINTS OR 1.50%
Spain IBEX CLOSED UP 194.50 POINTS OR 1.92%
Italian MIB: CLOSED UP 361.03 POINTS OR 1.61%
The Dow closed up 71.40 POINTS OR .31%
NASDAQ WAS closed DOWN 7.12 PTS OR .11% 4.00 PM EST
WTI Oil price; 52.41 1:00 pm;
Brent Oil: 58.58 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 57.68 DOWN 6/100 ROUBLES/DOLLAR (ROUBLE HIGHER BY 6 BASIS PTS)
TODAY THE GERMAN YIELD FALLS TO +.417% FOR THE 10 YR BOND 1.00 PM EST EST
This ends the stock indices, oil price, currency crosses and interest rate closes for today 4:30 PM
Closing Price for Oil, 4:30 pm/and 10 year USA interest rate:
WTI CRUDE OIL PRICE 4:30 PM:$52.77
USA 10 YR BOND YIELD: 2.460% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 2.972%
EURO/USA DOLLAR CROSS: 1.1652 DOWN .0167
USA/JAPANESE YEN:113.99 UP 0.404
USA DOLLAR INDEX: 94.63 UP 92 cent(s)/
The British pound at 5 pm: Great Britain Pound/USA: 1.3160 : DOWN 110 POINTS FROM LAST NIGHT
Canadian dollar: 1.2845 DOWN 50 BASIS pts
German 10 yr bond yield at 5 pm: +0.417%
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM FOR THE DAY
‘All Drugged Up And Nowhere To Go’ – S&P Flatlines As Bond Yields, Dollar Surge
Hmmmm…Wall of worry indeed…
Chaotic flip-flopping headlines hit Spanish stocks today (and continued after the close)…
While Trannies had a big day, S&P and Nasdaq was very quiet…
And even as VIX rallied, S&P Futs flatlined…
The decoupling continues between The Dow and Dow VIX (and is very clear from the chart, the surge in 2Y yields) which all started when China intervened in its FX market…
While the major indices were dead-stick today, there were some significant moves under the hood…
CVS/Walgreens tumbled on AMZN news…
Biotechs tumbled on Celgene, then fell further on Trump’s opioid speech…
FANG Stocks bounced today ahead of tonight’s AMZN and GOOGL earnings…(but remain lower on the week)
Interestingly, ‘High-Tax’ Corporations underperformed the broad market despite the adoption of the budget resolution…
High yield bond prices leaked back lower to crucial technical support once again…
The yield curve flattened very modestly today but banks didn’t care…
Treasury yields rose once again…
Sending 10Y Yields to 7-month highs…
Which sent the UST-Bund spread soaring over 200bps (as Draghi extended QE) to six-month highs…
The Dollar Index sprinted higher – the biggest day for the dollar in 9 months – to 3 month highs…
EUR weakness was the biggest driver of today’s push but commodity currency moves (Loonie Central Bank and Aussie CPI) is helping on the week…
Dollar strength drove PMs lower but crude jumped on Saudi comments regarding production cuts…
Finally, while 10Y Tsy yields are at their ‘cheapest’ to Bunds in 6 months, Treasury yields are now near their highest relative to equity divi yields in 3 years…
Muni Investors Celebrate “Juicy” 3.74% Yield On New Illinois Bonds As State Hurdles Toward Bankruptcy
Muni investors seem to be absolutely elated today by the opportunity to scoop up their fair share of $4.5 billion worth of new Illinois bonds due in 2028 at a “juicy” yield of 3.74%…which makes a ton of sense if you can look beyond the fact that the state looks to be on an inevitable collision course with bankruptcy.
Be that as it may, Wells Fargo Portfolio Manager Garbriel Diederich insists that the new issue “offers a tremendous amount of yield in a pretty yield-starved environment.” Per Bloomberg:
As the state marketed $4.5 billion of bonds Wednesday, securities due November 2028 are being offered at a preliminary yield of 3.74 percent, according to four people with knowledge of the pricing who requested anonymity because the yields aren’t final. That’s lower than the 3.78 percent yield for the November 2029 portion of last week’s $1.5 billion deal, even though bond prices have slid since then.
Investors said the yields are alluring, with benchmark 11-year tax-exempt debt paying about 2.1 percent.
“The issuer still offers a tremendous amount of yield in a pretty yield-starved environment,” said Gabriel Diederich, fixed income portfolio manager at Wells Fargo Asset Management, which holds $41 billion in municipal bonds, including those issued by Illinois. “Outside of this little supply hump here with this deal, there really hasn’t been much muni issuance before this or likely in the weeks ahead.”
Of course, just a few months ago in July, the state of Illinois narrowly avoided a junk bond rating with a last minute budget deal that included a 32% hike in income taxes. Republican Governor Bruce Rauner vetoed the budget and called it a “disaster,” but both houses of the state legislature voted to override his veto. Meanwhile, S&P and Moody’s were apparently both convinced that the budget deal was sufficient for the state to remain an investment grade credit and all lived happily ever after…
The deal comes after Illinois avoided becoming the first junk-rated state because lawmakers overrode Governor Bruce Rauner’s veto of tax hikes to end a two-year budget impasse in July. The proceeds from Wednesday’s deal, as well as the borrowing last week, will pay down $16.6 billion of unpaid bills that piled up during the budget stalemate.
“Clearly the passage of a budget, the performance of the revenue enhancements with the income-tax, paired with the ability to refinance high-cost payables at much lower levels, is positive for the state,” Diederich said. “But the need for expense and pension reform remains and will be a limiter on this name trading substantially tighter.”
…with bondholders expressing their approval via an insatiable demand for 18-year Illinois risk.
Of course, if all of Illinois’ financial problems were solved via one simple tax hike, then someone is going to have to explain to us why the state’s unpaid payables balance continues to balloon higher with each passing day and now stands at a record $16,559,494,396.60according the comptroller’s office…
…which is only a 3-fold increase over the past two years.
Oh, and lets not forget that pesky little $130 billion pension underfunding that will rank pari passu with holders of Illinois’ latest “juicy” bond offering when the state inevitably collapses at some point in the not so distant future…
But sure, 3.74% is a great yield relative to other muni issuers…
Here’s How Much Your Obamacare Rates Are Going Up In 2018 (Hint: It’s A Lot And It’s All Trump’s Fault)
A new study conducted by Avalere and released earlier today found that Obamacare rates will surge an average of 34% across the country in 2018. Of course, this is in addition to the 113% average premium increase from 2013 and 2017, which brings the total 5-year increase to a staggering 185%.
Meanwhile, and to our complete shock no less, Avalere would like for you to know that the rate increases are almost entirely due to the Trump administration’s “failure to pay for cost-sharing reductions”…which is a completely reasonable guess if you’re willing to ignore the fact that 2018 premium increases are roughly in-line with the 29% constantly annualized growth rates experienced over the past 4 years before Trump ever moved into the White House…but that’s just math so who cares?
New analysis from Avalere finds that the 2018 exchange market will see silver premiums rise by an average of 34%. According to Avalere’s analysis of filings from Healthcare.gov states, exchange premiums for the most popular type of exchange plan (silver) will be 34% higher, on average, compared to last year.
“Plans are raising premiums in 2018 to account for market uncertainty and the federal government’s failure to pay for cost-sharing reductions,” said Caroline Pearson, senior vice president at Avalere. “These premium increases may allow insurers to remain in the market and enrollees in all regions to have access to coverage.”
Avalere experts attribute premium increases to a number of factors, including elimination of cost-sharing reduction (CSR) payments, lower than anticipated enrollment in the marketplace, limited insurer participation, insufficient action by the government to reimburse plans that cover higher cost enrollees (e.g., via risk corridors), and general volatility around the policies governing the exchanges. The vast majority of exchange enrollees are subsidized and can avoid premium increases, if they select the lowest or second lowest cost silver plan in their region. However, some unsubsidized consumers who pay the full premium cost may choose not to enroll for 2018 due to premium increases.
Of course, not all residents are treated equally when it comes to premium hikes. So far, Iowa is winning the award for greatest percentage increase at 69%, with Wyoming, Utah and Virginia close behind.
On an absolute basis, Wyoming wins with the average 50 year old expected to drop nearly $1,200 per month (or roughly the cost of a mortgage) on health insurance premiums.
So what say you? Have we finally reached the tipping point where enough full-paying Obamacare customers will simply forego insurance that they can no longer afford and cause the whole system to come crashing down?
Well that about does it for tonight
I will see you FRIDAY night