GOLD: $1275.40 DOWN $4.75
Silver: $16.95 DOWN 27 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: $1293.86 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1279.85
PREMIUM FIRST FIX: $14.01(premiums getting smaller)
SECOND SHANGHAI GOLD FIX: $1285.00
NY GOLD PRICE AT THE EXACT SAME TIME: $1279.00
Premium of Shanghai 2nd fix/NY:$6.00 PREMIUMS GETTING smaller)
LONDON FIRST GOLD FIX: 5:30 am est $1276.35
NY PRICING AT THE EXACT SAME TIME: $1276.30
LONDON SECOND GOLD FIX 10 AM: $1275.60
NY PRICING AT THE EXACT SAME TIME. 1276.95 ??
For comex gold:
NOTICES FILINGS TODAY FOR OCT CONTRACT MONTH: 110 NOTICE(S) FOR 11000 OZ.
TOTAL NOTICES SO FAR: 966 FOR 96,600 OZ (3.004TONNES)
7 NOTICE(S) FILED TODAY FOR
Total number of notices filed so far this month: 863 for 4,315,000 oz
Bitcoin: $7174 bid /$7199 offer up $244.00 (MORNING)
BITCOIN CLOSING;$7099 BID:7124. OFFER down $124.00
Let us have a look at the data for today
In silver, the total open interest ROSE BY A HUGE 3562 contracts from 204 ,938 DOWN TO 208,500 WITH YESTERDAY’S TRADING IN WHICH SILVER ROSE BY A CONSIDERABLE 37 CENTS. THE CROOKS NO DOUBT ARE PULLING THEIR HAIR AS THEY ARE STILL HAVING AN AWFUL TIME TRYING TO COVER THEIR MASSIVE SILVER SHORTS. THEY TRY TO CONTINUE WITH THEIR TORMENT WITH NO APPRECIABLE FALL IN SILVER OI.YESTERDAY HUGE NUMBERS OF NEWBIE SPEC LONGS ENTERED THE SILVER ARENA TO WHICH OUR BANKERS DUTIFULLY SUPPLIED.
RESULT: A HUGE SIZED RISE IN OI COMEX WITH THE CONSIDERABLE 37 CENT PRICE GAIN. NEWBIE SPEC LONGS ENTERED THE ARENA AND THESE GUYS WERE DUTIFULLY SUPPLIED BY OUR CROOKED BANKERS. THERE WAS NO SHORTCOVERING YESTERDAY.
In ounces, the OI is still represented by just OVER 1 BILLION oz i.e. 1.042 BILLION TO BE EXACT or 149% of annual global silver production (ex Russia & ex China).
FOR THE NEW FRONT OCT MONTH/ THEY FILED: 7 NOTICE(S) FOR 35,000 OZ OF SILVER
In gold, the open interest ROSE BY A LARGER THAN EXPECTED 8303 CONTRACTS WITH THE GOOD SIZED RISE IN PRICE OF GOLD ($11.25) WITH YESTERDAY’S TRADING . The new OI for the gold complex rests at 537,727. NEWBIE LONGS RE-ENTERED THE ARENA TO WHICH THE BANKERS DUTIFULLY SUPPLIED THE NECESSARY SHORT PAPER..
NO EFP’S WERE ISSUED FOR THE NOVEMBER CONTRACT MONTH.
Result: A GOOD SIZED INCREASE IN OI WITH THE RISE IN PRICE IN GOLD ($11.25). WE HAD ZERO BANK SHORT COVERING AS ANY OF OUR NEWBIE LONGS RE-ENTERED THE GOLD COMEX AREA TO WHICH OUR BANKERS DUTIFULLY SUPPLIED THE NECESSARY SHORT PAPER.
we had: 110 notice(s) filed upon for 11,000 oz of gold.
With respect to our two criminal funds, the GLD and the SLV:
A huge change in gold inventory at the GLD/ a withdrawal of 1.48 tonnes
Inventory rests tonight: 844.27 tonnes.
TODAY WE HAD NO CHANGE IN SILVER INVENTORY AT THE SLV
INVENTORY RESTS AT 319.018 MILLION OZ
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver ROSE BY A HUGE 3562 contracts from 204,938 UP TO 208,500 (AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) WITH THE CONSIDERABLE RISE IN SILVER PRICE (RISE OF 37 CENTS). OUR BANKERS WERE AGAIN UNSUCCESSFUL IN THEIR ATTEMPT TO COVER MUCH OF THEIR SILVER SHORTS. NEWBIE LONGS IN SILVER RE-ENTERED THE ARENA TO WHICH THE BANKERS DUTIFULLY SUPPLIED THE NECESSARY SHORT PAPER.
RESULT: A GOOD SIZED INCREASE IN SILVER OI AT THE COMEX WITH THE 37 CENT RISE IN PRICE (WITH RESPECT TO YESTERDAY’S TRADING). OUR BANKER FRIENDS WERE UNSUCCESSFUL IN THEIR ATTEMPT TO COVER ANY OF THEIR HUGE BURGEONING SILVER SHORTS . .NO EFP’S WERE ISSUED FOR THE UPCOMING NOVEMBER CONTRACT. NEWBIE LONGS RE=ENTERED THE SILVER ARENA TO WHICH OUR BANKERS DUTIFULLY SUPPLIED THE NECESSARY SHORT PAPER.
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
3. ASIAN AFFAIRS
i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 25.40 points or .75% /Hang Sang CLOSED UP 397.54 pts or 1.39% / The Nikkei closed UP 389.25 POINTS OR 1.73%/Australia’s all ordinaires CLOSED UP 1.00%/Chinese yuan (ONSHORE) closed DOWN at 6.635/Oil UP to 57.26 dollars per barrel for WTI and 63.99 for Brent. Stocks in Europe OPENED RED . ONSHORE YUAN CLOSED DOWN AGAINST THE DOLLAR AT 6.638. OFFSHORE YUAN CLOSED STRONGER TO THE ONSHORE YUAN AT 6.635 //ONSHORE YUAN WEAKER AGAINST THE DOLLAR/OFF SHORE WEAKER TO THE DOLLAR/. THE DOLLAR (INDEX) IS STRONGER AGAINST ALL MAJOR CURRENCIES. CHINA IS NOT VERY HAPPY TODAY.
3a)THAILAND/SOUTH KOREA/NORTH KOREA
i)North Korea//South Korea
b) REPORT ON JAPAN
c) REPORT ON CHINA
4. EUROPEAN AFFAIRS
( Mish Shedlock/Mishtalk)
ii)Giulio Meotti of the Gatestone Institute discusses that the European migrant crisis is the equivalent to the USA 9/11
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
ii)Obviously Lebanon did not declare war on Saudi Arabia. However deep seated animosity for the Shiites may bring about war as the Sunnis are extremely worried about Iran’s growing strength
The Shiites from Yemen now are threatening Saudi ports and airports..
A leaked document confirms the co ordination between Saudi Arabia and Israel as both have a sworn enemy in Lebanon’s Hezbolloh
6 .GLOBAL ISSUES
7. OIL ISSUES
Nick Cunningham believes that the oil market has overreacted to the Saudi purge. It was far more important to see a drop in rigs than the purge in Saudi Arabia which will not change the policy directive
( Nick Cunningham,/Oil Price.com)
8. EMERGING MARKET
Goldman Sachs takes a big hit on bonds that it purchased in May of 2017
9. PHYSICAL MARKETS
i)The following is a superb article explaining how the Deep State has controlled the price of gold for over 40 years
a must read..
Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom
ii)Funny story: Bitcoin rebounds sharply after Dennis Gartman predicts a wicked fall from Bitcoin.
10. USA stories which will influence the price of gold/silver
i)David Stockman discusses two important points:
- the bet of the USA is out of control
- the tax reform bill will solve nothing
( David Stockman)
ii)Our resident expert on bricks and mortar operations in the USA reports on sinking property prices
Let us head over to the comex:
The total gold comex open interest ROSE BY A GREATER THAN EXPECTED 8,303 CONTRACTS UP to an OI level of 537,427 WITH THE GOOD SIZED RISE IN THE PRICE OF GOLD ($11.25 GAIN IN YESTERDAY’S TRADING). SOME NEWBIE LONGS RE ENTERED THE GOLD ARENA WITH THE BANKERS VERY SO EAGER TO SUPPLY THE NECESSARY PAPER.
NO EFP’S WERE ISSUED FOR NOVEMBER YESTERDAY.
Result: a GREATER THAN EXPECTED open interest INCREASE WITH THE CONSIDERABLE RISE IN THE PRICE OF GOLD ($11.25.) WE HAD ZERO BANKER SHORT COVERING. NEWBIE LONGS RE ENTERED THE ARENA TO WHICH OUR BANKER FRIENDS WERE MORE THAN WILLING TO SUPPLY THE NECESSARY SHORT PAPER.
We have now entered the NON active contract month of NOVEMBER.HERE WE HAD A GAIN OF 48 CONTRACT(S) UP TO 188. We had 27 notices filed YESTERDAY so surprisingly we again gained 75 contracts or 7500 additional oz will stand for delivery in this non active month of November. TO SEE BOTH GOLD AND SILVER RISE IN AMOUNT STANDING (QUEUE JUMPING) IS A GOOD INDICATOR OF PHYSICAL SHORTNESS FOR BOTH OF OUR PRECIOUS METALS.
The very big active December contract month saw it’s OI LOSS 219 contracts DOWN to 359,661. January saw its open interest rise by 329 contracts up to 442. FEBRUARY saw a gain of 7423 contacts up to 114,580.
We had 110 notice(s) filed upon today for 11000 oz
VOLUME FOR TODAY (PRELIMINARY) NOT AVAILABLE
CONFIRMED VOLUME YESTERDAY: 377,874
We had 7 notice(s) filed for 35,000 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 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 110 contract(s) of which 0 notices were stopped (received) by j.P. Morgan dealer and 53 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)||863 contracts
|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
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
Nov 7/a huge withdrawal of 1.48 tonnes of gold from the GLD/Inventory rests at 844.27 tonnes
NOV 6/ a tiny withdrawal of .29 tonnes to pay for fees etc/inventory rests at 845.75 tonnes
Nov 3/no change in gold inventory at the GLD/Inventory rests at 846.04 tonnes
NOV 2/STRANGE!!! WE HAD ANOTHER WITHDRAWAL OF 3.55 TONNES FROM THE GLD DESPITE GOLD’S RISE OF $6.60 YESTERDAY AND $1.55 TODAY/INVENTORY RESTS AT 846.04 TONNES
Nov 1/a withdrawal of 1.18 tonnes of gold from the GLD/Inventory rests at 849.59 tonnes
OCT 31/no change in gold inventory at the GLD/Inventory rests at 850.77 tonnes
Oct 30/STRANGE WITH GOLD UP THESE PAST TWO TRADING DAYS, THE GLD HAS A WITHDRAWAL OF 1.18 TONNES FROM ITS INVENTORY/INVENTORY RESTS AT 850.77 TONES
Oct 27/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 851.95 TONNES
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
Now the SLV Inventory
Nov 7/a huge withdrawal of 9440,000 oz from the SLV/inventory rests at 318.074 million oz/
NOV 6/no change in silver inventory at the SLV/Inventory rests at 319.018 million oz/
Nov 3/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS TONIGHT AT 319.018 MILLION OZ.
NOV 2/A TINY LOSS OF 137,000 OZ BUT THAT WAS TO PAY FOR FEES LIKE INSURANCE AND STORAGE/INVENTORY RESTS AT 319.018 MILLION OZ/
Nov 1/STRANGE! WITH SILVER’S HUGE 48 CENT GAIN WE HAD NO GAIN IN INVENTORY AT THE SLV/INVENTORY RESTS AT 319.155 MILLION OZ/
Oct 31/no change in silver inventory at the SLV/Inventory rests at 319.155 million oz
Oct 30/STRANGE!WITH SILVER UP THESE PAST TWO TRADING DAYS, WE HAD A HUGE WITHDRAWAL OF 1.133 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 319.155 MILLION OZ/
Oct 27/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 320.288 MILLION OZ
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
Indicative gold forward offer rate for a 6 month duration+ 1.41%
Major gold/silver trading/commentaries for TUESDAY
Peak Gold – Another Sign As Chinese Gold Production Falls 10%
– Gold mining production in China fell by 9.8% in H1 2017
– Decreasing mine supply in world’s largest gold producer and across the globe
– GFMS World Gold Survey predicts mine production to contract year-on-year
– Peak gold production being seen in Australia, world’s no 2 producer
– Peak gold production globally while global gold demand remains robust
Editor Mark O’Byrne
Gold production in the world’s largest gold producer and buyer fell by nearly 10% in the first half of 2017 in what may be another indication of peak gold.
Chinese mine production registered the largest drop globally to total 207 tonnes in the first half of 2017, down 23 tonnes, or 9.8% year-on-year. In the same period last year the country produced 230 metric tons.China mined production of gold (Wikipedia)
The issue of declining gold supply in China is not expected to improve. The GFMS World Gold Survey expects Chinese gold supply to fall by 14% this year from the 2014 peak. Their latest update explains:
Based on limited updated quarterly production reports and annual production guidance, we expect mine production to contract year-on-year in Q3 2017. We expect losses in China to accelerate as capacity is curtailed further. Industry consensus points to a considerable drop in Chinese mine production for the year as a whole.
This fall in supply could have significant implications for global gold supply given the country’s leading role in the gold market. In 2016 the country produced 453t, 160t or 56% more than the second highest gold producing nation of Australia. It also leads global gold demand, beating India in the last five years.
These numbers could be an indication that we are reaching peak gold, if we haven’t already. Given the country relies heavily on domestic gold supply – a shortage of gold supply at home will force the country to import more from abroad, putting pressure on global supply with a likely rise in prices. A situation made worse by the fact that many other gold producing nations are also suffering from falling production levels – including world’s no 2 gold producer Australia.
Not just a crack in the China
In the first quarter of the year the ten largest Chinese gold mining companies accounted for 41.4% of the country’s total production. China is very reliant on their domestic gold supply and points to problems further down the line of meeting its high levels of gold demand.
At the beginning of the year China was the only major gold mining nation to have increased production in recent years, now it has joined its contemporaries in seeing falling production. The main reason for the fall in China’s gold supply isn’t on account of falling demand or prices:
The government’s escalating efforts to fight pollution and increase attention to environmental protection. As a result, output from the country’s nonferrous smelters fell by 30% or 14 tonnes in tandem with a 2% drop in ‘mine-produced gold’ to total 65 tonnes.
Declining supply is not a problem unique to China. It is a common problem in gold producing nations. At the beginning of the year GFMS noted that global mine supply in the first quarter of the year reached a total of 756 tonnes, one tonne below the same period in 2016.
The largest drop was in South America and Asia, which slipped by a combined 4% with China, Mongolia, and Peru suffering the top three country-level decreases. Oceania posted a fractional drop following severe weather conditions in Australia.
This is not a new problem. Just a quick glance at South Africa’s mining figures and one can see why it has has been a key point of concern for those monitoring global gold supply. It was once the leading producer, accounting for more than 40% of the total mined gold on earth.
We have been warning that it is the ‘canary in the gold mine’ as its 80% plunge in production point to a future of gold shortages and peak gold.
Earlier this quarter the Chairman of the World Gold Council Randall Oliphant expressed concern that the world might have already produced the most gold in a year that it ever will, on account of increasing gold demand and declining supply.
“We’re not going to fall off a cliff in the near term, but in the same time it’s really hard to see how we’re going to produce enough gold to meet all this demand.”
Peak gold here as uncertainties reach peak levels
China does not export any of its domestically produced gold, but even this is not enough to satisfy demand from both investors and the official sector. Last year the country imported 1,281 tonnes of gold, from four key countries.
In the short term, China may well be able to increase imports in order to satisfy domestic demand. It may struggle to increase its own production. However, in the long-term this is not a sustainable solution. Gold mines are finite and supply relies on an ever-growing number of new mines being discovered. Something which we can no longer rely on, as Pierre Lassonde recently explained:
If you look back to the 70s, 80s and 90s, in every one of those decades, the industry found at least one 50+ million ounce gold deposit, at least ten 30+ million ounce deposits and countless 5 to 10 million ounce deposits. But if you look at the last 15 years, we found no 50 million ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits.
Gold demand shows no sign of abating. As uncertainties increase across the world demand for physical gold increases. It is because of uncertainties that Oliphant believes that there will not be enough gold to satisfy demand. He sees risks in the political and economic system, combined with robust demand from India and China as the key drivers for increased gold demand and higher prices.
“All this uncertainty seems very fertile ground for people to get into gold.”
Diversify into actual physical gold before peak gold sees gold surge like bitcoin
We are at a key inflection point in gold history. There is an unstoppable force of global gold demand hurtling towards the inevitable and immovable object that is finite and diminishing gold supply.
Who wins? Gold investors. Gold will always be in demand for as long as governments cause uncertainties both politically and economically. Short of alchemy there is nothing anyone can do to discover more gold as quickly as governments can destroy our confidence in the system and the value of our savings.
Important developments such as these highlight the importance of not investing in paper, ETF or digital gold but buying actual gold bullion and ensuring that you own allocated and segregated physical gold bars and coins. If we have reached or are close to peak gold, investors do not want to find themselves on the wrong side of an ETF or digital gold redemption gone wrong.
News and Commentary
Gold Prices (LBMA AM)
07 Nov: USD 1,276.35, GBP 970.92 & EUR 1,103.28 per ounce
06 Nov: USD 1,271.60, GBP 969.72 & EUR 1,095.61 per ounce
03 Nov: USD 1,275.30, GBP 976.24 & EUR 1,094.59 per ounce
02 Nov: USD 1,276.40, GBP 965.09 & EUR 1,095.92 per ounce
01 Nov: USD 1,279.25, GBP 961.48 & EUR 1,099.52 per ounce
31 Oct: USD 1,274.40, GBP 964.21 & EUR 1,095.60 per ounce
30 Oct: USD 1,272.75, GBP 966.91 & EUR 1,093.80 per ounce
Silver Prices (LBMA)
07 Nov: USD 17.01, GBP 12.95 & EUR 14.70 per ounce
06 Nov: USD 16.92, GBP 12.90 & EUR 14.59 per ounce
03 Nov: USD 17.09, GBP 13.05 & EUR 14.67 per ounce
02 Nov: USD 17.08, GBP 12.98 & EUR 14.66 per ounce
01 Nov: USD 16.94, GBP 12.74 & EUR 14.55 per ounce
31 Oct: USD 16.82, GBP 12.72 & EUR 14.45 per ounce
30 Oct: USD 16.74, GBP 12.69 & EUR 14.39 per ounce
Recent Market Updates
– German Investors Now World’s Largest Gold Buyers
– Gold Price Reacts as Central Banks Start Major Change
– Why Switzerland Could Save the World and Protect Your Gold
– Invest In Gold To Defend Against Bail-ins
– Stumbling UK Economy Shows Importance of Gold
– Wozniak and Thiel Fuel Bitcoin-Gold Debate: Gold Comes Out On Top
– Russia Buys 34 Tonnes Of Gold In September
– Gold Will Be Safe Haven Again In Looming EU Crisis
– Gold Is Valuable Due to “Extreme Rarity” – Must See CNN Video
– Gold Is Better Store of Value Than Bitcoin – Goldman Sachs
– Next Wall Street Crash Looms? Lessons On Anniversary Of 1987 Crash
– Key Charts: Gold is Cheap and US Recession May Be Closer Than Think
– Gold Up 74% Since Last Market Peak 10 Years Ago
The following is a superb article explaining how the Deep State has controlled the price of gold for over 40 years
a must read..
Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom
by Stewart Dougherty
here is the article in the clear:
“There are crooks everywhere you look now. The situation is desperate.” Final blog entry by Daphne Caruana Galizia, 53, renowned Maltese investigative reporter who specialized in exposing state corruption; posted on 16 October 2017, one day before she and her vehicle were blown to bits by a car bomb in Bidnija, Malta
In 2011, gold pulled a “Bitcoin” before anyone even knew what Bitcoin was: its price went vertical to $1,900 per ounce. Inflation-adjusted, the price was still far below its 1980 all-time high, and from all indications, it was going to keep heading north toward its free market print.
In surging, gold blurted out the Deep State Central Planners’ strategy for dealing with the Great Financial Crisis: the hyperinflation of bond, equities and real estate prices via the hyperinflation of both official and totally clandestine, off-the-books money supply, in order to create the hyperinflation of tax revenues desperately required by the government to forestall its fiscal collapse. Gold’s exposure of the Deep State Central Planners’ secret strategy was absolutely unacceptable to them, and had to be stopped.
Worse, gold’s price breakout interfered with the continuation of the largest and most profitable financial crime in history: gold price manipulation. As we have outlined in previous articles, including “Gold and Silver Price Manipulation: The Biggest Financial Crime in History,” from its commencement in 1980, this crime has netted its perpetrators more than $1 trillion in criminal, Mafia-style profits. The epic scale of this crime is exactly why it continues unabated to this day. (While the gold price rigging crime is virtually identical to the manipulation of silver prices, in the interests of brevity, we will solely focus on gold in this article.)
The weapon used in the gold price manipulation crime is paper, or, better stated, electronic gold in five distinct forms: gold futures; gold options on futures; bullion-bank controlled, deliberately audit-proof gold ETFs; gold EFPs (Exchanges for Physical); and the equities of bullion bank-controlled major mining companies. (The major miners serve the bullion banks, not their shareholders, and have actively participated in gold’s price destruction for years, starting with the “hedging” campaign that handed guaranteed profits to the banks and pitiful share prices to the stakeholders.)
These electronic (in other words, non-physical and unreal) gold products are used by Deep State financial insiders to misdirect funds intended by investors to flow into gold, away from gold. Those who “invest” in electronic gold are, in fact, aiding and abetting the exact financial criminals who are stealing from them. The Deep State financial elite is laughing itself sick that suckers still fall for the electronic gold scam nearly four decades after they first hatched it and after already having stolen $1 trillion from their marks. Proof that many people in our world never learn.
Simplified, the gold price rigging scam works by the orchestrators allowing natural market forces to increase the price in roughly $50 – 100 increments, whereupon they unleash massive, synchronized, simultaneous, shock-and-awe-style naked short sales, unbacked by any physical gold they actually own, that take the price right back down by $50 to $100 in a matter of minutes to a few days. This forces the price-attacked longs to dump their losing positions, enabling the shorts to cover at an illegal profit. Each such large-scale price raid produces hundreds of millions of dollars in profits for the criminal orchestrators, not just from the futures market, but from the companion options, swaps and equities markets, all of which act in unison, and in a price-predictable up or down manner. This identical wash, rinse, repeat cycle has occurred literally hundreds of times over the past 38 years, with no serious investigations or prosecutions whatsoever in that this is official,
state-sponsored, for-profit corruption.
For any one of hundreds of reasons, gold should be in a raging bull market at this time. Given that its price remains lackluster and greatly disappointing, rich gallows humor has emerged as a form of therapy for those attempting to deal with the irrationality of it all.
One gallows joke that made the rounds was that if nuclear war were declared, gold’s price would go down and the DJIA would go up. While this was a funny take on the absurdity of the situation, it seemed a bit far-fetched.
In an October 20, 2017 podcast interview, Mr. James Rickards, a leading public commentator on gold, stated that he had spent the previous day in an extremely exclusive national intelligence planning session overseen by CIA Director Mike Pompeo and National Security Advisor H.R. McMaster. Rickards reported that Pompeo told him, categorically, that military action will be taken against North Korea within 5 months, or by March 20, 2018. Rickards also reported that the group was informed that the assassination of Kim Jong Un is one U.S. military option officially on the table.
In the trading days after Mr. Rickards made that public announcement, the price of gold declined and the DJIA hit record highs.
In the practice of Inferential Analytics, the forecasting method we developed and use, we pay rapt attention when gallows humor becomes gallows fact, because it invariably signals that something is seriously wrong.
As practitioners and students of professional, CIA-style human manipulation, mind control and propaganda campaigns know, they are driven by misdirection, reverse psychology, twisted narratives, head fakes, false flags, imposters, blind alleys, Judas goats, projections, and the invention and dissemination of elaborate lies, told by professional liars, that are the exact opposite of reality. Such techniques are now being used to keep the gold price manipulation and electronic gold frauds alive, well and gushing profits for the insider looters.
The challenge faced by those who conduct professional swindles and stings is that such schemes burn through victims. The defrauded either go bankrupt, or wake up and get out. Therefore, con artists must constantly trawl for new suckers to screw.
In the case of the gold price manipulation swindle, the insider con men must find ways to lure new, naïve, outsider money onto the insider-controlled Gold Looting Field, in order for there to be fresh market liquidity for the insiders to sell into and plunder. This is becoming increasingly difficult, given that the insider criminals have been systematically screwing investors for nearly 40 years, have destroyed the gold market’s reputation, and have ravaged the prospect base of patsies.
Therefore, the gold market price wreckers are now in the paradoxical situation of needing to make, via controlled spokespersons and/or by riding on the coattails of independent, non-aligned commentators, a high-profile, bullish case for gold.
The rigging of gold persists without regulatory or legal interference because it is based on a straightforward deal between the profiteering Deep State financial elite, and the western governments they control: the criminals are allowed to manipulate the gold market however brazenly they wish and keep whatever sums they steal, as long as they keep the gold price under control. Gold price control is critical to states’ official monetary, fiscal and economic narratives, all of which are false. If the gold price were to get out of control, as it started to do in earnest in 2011, this would fatally contradict the states’ false narratives. Freed at this juncture, gold could easily ascend to $10,000 per ounce, which would announce to the people that reality is not what they are being told.
Mr. Rickards has been an unrelenting gold bull for several years. His first book was published in 2011, not long after the gold price had taken on momentum, and he has been a highly-visible pundit ever since. He expresses his views on all of the major business networks, in hundreds of radio and podcast interviews, and in articles and newsletters distributed all over the world.
Mr. Rickards positions himself as an “Insider’s Insider,” repeatedly referencing his connections to and interactions with the intelligence community and financial elite. Additionally, he has publicly stated that he has coordinated and participated in simulated financial war games developed for high level government, intelligence community, academician and private commercial sector participants. The purpose of these financial war games is to simulate the means by which nations might attack one another financially, as opposed to militarily, as the so-called art of war evolves.
Mr. Rickards states his views clearly and with conviction, and he can be quite convincing. Despite his compelling forecasts between 2011 and now for a surging gold price (he has stated that $10,000 per ounce gold is likely), the price has, in fact, plunged from $1,900 to $1,280 today, while virtually every other asset class, including stocks, bonds, real estate and even ethereal cryptocurrencies has surged.
Some of Rickards’s recent and current predictions include these:
1) Kevin Warsh would be named Chairman of the
Federal Reserve. Such a development would have been bullish for gold, because Warsh is said to oppose the exact kind of market manipulation that has been practiced by the Fed and that has criminalized the gold market for years. As we now know, this prediction was wrong, and subsequent to Powell’s nomination, the price of gold went down.
2) He categorically asserts that there will be no Federal Reserve rate hike in December, 2017. Obviously, this would be extremely bullish for gold, and anyone who believes the prediction should aggressively buy it at this time. The problem is that, barring some kind of extraordinary exogenous event, it is highly likely to be wrong. Interest rates will almost certainly be raised in December, regardless of economic conditions. If they are not, the Fed’s economic narrative will unravel and its credibility will be shredded, something that no central bank can allow to happen.
3) A new prediction is that there will be a government shut down this December, due to federal debt limit increase disputes among politicians. This would be bullish for gold and bearish for financial markets. In our view, this prediction is also destined to be wrong. With Republicans in control of the House, Senate and White House, they would totally “own” such a shutdown, which citizens detest, and this could only hurt them in the November, 2018 elections. We doubt they will allow this to happen.
4) The prediction that war with North Korea and/or the possible assassination of Kim Jong Un will occur by March 20, 2018 remains on the table. It is hard to imagine a story line more bullish for gold, given that such a war will almost certainly be nuclear and could swiftly morph into World War III. The global “rush to safety” in such a situation would be historic.
Over the past several years, Rickards has made literally dozens of similar, gold-bullish predictions, and yet the gold price has gone down to nowhere during the same period. As we can see, even excellent rationales for a rising price of gold, along with basic common sense, do nothing to create that outcome. The reason for this is simple: the gold market has been completely corrupted.
By publicly revealing specific content from the Pompeo / McMaster planning session, Rickards indicated that he is an official spokesperson for the Central Intelligence Agency and the national security complex. Because if the meeting Mr. Rickards reported upon actually occurred and if he actually attended it (and Mr. Rickards is a credible figure whose veracity we have no reason whatsoever to doubt), we simply cannot believe that he could have publicly revealed what transpired at it without the direct, formal authorization of Messrs. Pompeo and McMaster, its hosts. Further, we would think that Pompeo and McMaster would have required President Trump’s authorization to facilitate the public release, via Rickards or anyone else, of the timeline for war with North Korea and the nation’s active assassination options. If correct, this would mean that Rickards is a direct spokesperson for the CIA, the National Security Advisor, and by extension, President Trump.
Therefore, we are faced with an extremely curious situation where a direct consultant to and spokesperson for the Director of the Central Intelligence Agency, the National Security Advisor and the President of the United States is also one of the most high profile cheerleaders in the world for gold.
This is an extraordinary paradox, because we know that the Federal Reserve, U.S. Treasury, banks, brokerage houses, insurance companies, mutual fund corporations, pension fund managers and virtually every other participant in the United States financial services juggernaut have absolutely no interest in or anything whatsoever to gain from the people finally waking up to and acting upon the astoundingly bullish case for gold.
So we ask ourselves: Why would the government wish to align with someone who popularizes a point of view (“buy gold because it is going to $10,000 per ounce”) that is a direct threat to it and to the Deep State financial elite it serves? This would be like the Fed hiring Ron Paul, who wrote a book entitled “End the Fed,” to become one of its official champions and spokespersons. Can anyone imagine that happening? As we can see, this is a very complex and confusing situation.
While the bullish case for gold is directly contrary to the interests of the financial establishment generally, it is of extreme interest and benefit to the subset of the establishment that has made more than $1,000,000,000,000.00 in illegal profits over the past forty years by rigging the gold market, and that wishes to steal as much additional money as they can get away with.
No matter who writes them, gold-bullish commentaries are extremely helpful to the gold price rigging cartel, which needs constant capital injections into the electronic gold market in order to keep its looting spree going. By making his particularly cogent and compelling bullish arguments for gold, and given his stature, credibility and connections, Rickards is a God send to the price riggers. Over the years his work must certainly have heightened investor interest in gold and resulted in sizable fresh flows of investment capital pouring onto the electronic gold Looting Field.
It is likely that people at the highest levels of the Deep State financial elite fully realize that a large migration of the people’s money into precious metals is virtually inevitable, given the government’s urgent need to hyper-inflate money supply and massively stimulate the economy in order to hyper-inflate tax receipts, the only way it can avoid collapse. Ultimately, this is guaranteed to create severe, generalized consumer price inflation. Historically, hyperinflation has always resulted in a significantly higher gold price.
With massive and increasing structural deficits; exploding debt in all sectors; hostile demographics; social and political fracturing and disintegration; grotesque wealth inequality; extraordinary global trade competition; a complete collapse of respect for vital government organizations such as the Justice Department and FBI, which the people now realize have gone rogue; an extremely complex and corrosive global geopolitical environment; the real prospect of war, potentially nuclear and worldwide; not to mention numerous additional factors, we can only point to few other times in history more dangerous to the people’s financial welfare, and therefore more overall bullish for gold, one of the only financial sanctuaries proven to work in times of dislocation.
If a large move into precious metals is going to happen whether the Deep State financial elite likes it or not, they realize they must at least do everything possible to control where those funds go, while they still can. This means they must ensure that as much money as possible flows into electronic gold products controlled by them, and not into physical gold privately owned and controlled by citizens.
In our consumer research, we have found that the average U.S. citizen is literally clueless when it comes to gold. They are almost completely unaware of the gold products available to them, the prices of those products, or even where to buy them. After two generations of being deliberately educated in total ignorance about gold, none of this should come as a surprise. Knowing next to nothing about physical gold or the mechanics of buying it, they feel intimidated by the subject. Therefore, the simple fact is that if they do decide to buy gold, the path of least resistance leads them to electronic gold.
Financial services industry employees are trained to talk customers out of buying gold. They do this by pointing out its price volatility and riskiness. (The public has no idea that the gold price is manipulated, and fake.) If the customer still wants to buy it, then the broker steers them into electronic gold, such as bullion bank-controlled ETFs and major mining company equities.
This sterilizes the investor’s funds, and prevents them from being used to buy physical precious metals, which would interfere with the price rigging crime by increasing physical demand for and the price of gold, given its consistently tight supplies. It would also lessen capital flows onto the Gold Looting Field, the exact opposite of the Deep State manipulators’ agenda.
Over the past several years, there have been many, highly sensationalized mainstream media reports about counterfeit gold, such as the report last year about a few ten ounce PAMP gold bars with tungsten cores. To listen to the MSM, one would think that all of the physical investment gold in the world is fake. The fact is that the overwhelming majority of physical investment gold is genuine. Counterfeit gold hysteria is yet another spoke of the anti-physical gold propaganda wheel whose function is to scare people away from real physical gold personally owned and controlled by them, and into fake electronic gold controlled by the Deep State financial elite.
The Deep State financial elite fully understands that it cannot prevent all investment funds from reaching physical gold. But they do not need to in order to maintain their price rigging scheme, or to continue making significant profits from the electronic gold products they distribute and manage.
In fact, just as they benefit from the bullish case for gold that results in funds continuing to flow onto the Gold Looting Field, they also benefit when commentators speak about the virtues of personally owned physical gold. They fully realize that any commentator who recommends gold but also says that people should not personally own any of it would lose credibility. So it is completely fine with them when a gold booster such as Mr. Rickards makes positive comments about, for example, gold Maple Leafs, which he has done. They realize that as a practical matter, the average person is going to find the purchase of physical investment gold too difficult and intimidating to pursue, and will gravitate to electronic gold, even though some of them might buy some Maple Leafs. Apple does not need 100% smart phone market share to be enormously profitable, and neither does the Deep State financial elite need 100% gold market share to make massive gold profits, which they do.
The larger purpose behind the Deep State’s electronic gold products, beyond current profits, is to concentrate investment gold in a select number of locations that will be easy to control and raid when the time comes. When the gold price is reset, most likely by China and an outcome we view as inevitable, western governments will move fast to prohibit its private ownership. The Deep State elite, which for decades has exhibited an endless lust for other people’s money and greed that is beyond biblical, is simply not going to allow every day citizens to benefit from gold holdings that have surged in value. Therefore, when the Deep State elite realize that they have lost control and the price is about to be reset, they will pre-emptively cash-settle their electronic gold products in fiat currencies that will subsequently plunge in value, and abscond with the physical gold that backs such products. For investors, electronic gold is nothing but modern day Fools’ gold. For the Deep State, it is a free ride, on investors’ backs, to the most massive physical gold theft of all times.
Taken together, we believe these factors present a compelling argument why investors should exit all of the electronic gold products specified at the beginning of this article, and convert the proceeds into physical gold and/or non-Deep State-controlled equities of companies in which they have full confidence that managements are working for them, not the bullion banks. The fact is that the Deep State manipulation of the gold price is never going to end until people stop buying electronic gold and providing the liquidity the Deep State needs to continue perpetrating the gold price rigging crime.
More than 100 years ago, Dostoyevsky wrote: “Money is coined liberty, and so it is ten times dearer to the man who is deprived of freedom. If money is jingling in his pocket, he is half consoled, even if he cannot spend it. But money can always and everywhere be spent, and, moreover, forbidden fruit is sweetest of all.” When honest money is attacked, so is human freedom. Because it is impossible for human beings to be free if their currency is a fraud and they are at the same time prohibited from owning honest money. The gold price is, in fact, a barometer of human liberty. When it is fake, there is slavery; when it is honest, there is freedom.
Thanks to the Deep State financial elitists, for whom fraud and plunder are a way of life, the gold market has been a cesspool of corruption for nearly forty years. And as we can see, corruption has metastasized throughout the world. “There are crooks everywhere you look now. The situation is desperate,” said Daphne Caruana Galizia, prior to being assassinated for her work and courage. May she rest in peace. In the coming hurricane, the rest of us are going to need to exhibit her same bravery to fight the crooks who have corrupted our world and our futures with their nauseating arrogance, greed, and immorality.
Funny story: Bitcoin rebounds sharply after Dennis Gartman predicts a wicked fall from Bitcoin.
Bitcoin Rebounds Sharply After Gartman Predicts Drop
Having tumbled from record highs near $7600 to $6900 in the last two days, Bitcoin is rebounding this morning, back to $7250 following condemnation from Dennis Gartman and blessing from ‘father of financial futures’ Leo Melamed.
Gartman issued the following statement overnight…
BITCOIN: A Bubble Bursting… Maybe?: Our antipathy toward Bitcoin specifically and toward the crypto-currencies generically is widely known but yesterday’s action does look like a “reversal” to the downside… finally.
And Bitcoin surged…
But on the positive side, Reuters reports that Leo Melamed, 85, said while he was initially skeptical about bitcoin he sees similarities between it and International Monetary Market currency futures trading, which he launched as chairman of the Chicago exchange in 1972.
“The world in the 1970s didn’t look at currency trading as a valid instrument of finance. I too went from not believing (in bitcoin) to wanting to know more,” he said.
He says bitcoin could go beyond being a crypto-currency and represent a new asset class based on blockchain technology.
“My whole life is built abound new technology. I never said no to technology. People who say no to technology are soon dead. I’m still that same guy who believes in, at least examining change. That’s what bitcoin represents,” he also said.
Melamed said he expects major investors to take part in bitcoin futures, which the exchange plans to start by the end of year.
“That’s a very important step for bitcoin’s history… We will regulate, make bitcoin not wild, nor wilder. We’ll tame it into a regular type instrument of trade with rules.”
Finally, we note that as the cryptocurrency has surged in recent months, searches for “buy bitcoin” have overtaken “buy gold” dramatically
“With the U.S. stock market setting fresh all-time highs day after day, it’s no surprise gold prices have retreated,”Adrian Ash, research director at London-based BullionVault, said in a report.
“Some investors are also being distracted by the noise around Bitcoin and other cryptocurrencies. Altogether, that’s madeinterest from new gold investors the weakest since the metal’s half-decade price lows of end-2015.”
Your early TUESDAY morning currency, Asian stock market results, important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight/9 AM EST
2. Nikkei closed UP 389.25 POINTS OR 1.73% /USA: YEN RISES TO 114.12
3. Europe stocks OPENED RED /USA dollar index RISES TO 95.09/Euro DOWN TO 1.1565
3b Japan 10 year bond yield: RISES TO . +.032/ GOVERNMENT INTERVENTION !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 114.07/ 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:: 57.26 and Brent: 63.99
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 UP for WTI and UP FOR Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO +.344%/Italian 10 yr bond yield DOWN to 1.735% /SPAIN 10 YR BOND YIELD DOWN TO 1.441%
3j Greek 10 year bond yield FALLS TO : 5.126???
3k Gold at $1276.90 silver at:17.05: 6 am est) SILVER NEXT RESISTANCE LEVEL AT $18.50
3l USA vs Russian rouble; (Russian rouble DOWN 64/100 in roubles/dollar) 58.91
3m oil into the 57 dollar handle for WTI and 63 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT A GOOD SIZED DEVALUATION SOUTHBOUND
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 114.12 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 0.9996 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1554 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017
3r the 10 Year German bund now POSITIVE territory with the 10 year RISING to +0.342%
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 2.325% early this morning. Thirty year rate at 2.799% /
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Global Stock Meltup Sends Nikkei To 25 Year High
The global risk levitation continues, sending Asian stocks just shy of records, to the highest since November 2007 and Japan’s Nikkei topped 22,750 – a level last seen in 1992 – while European shares and US equity futures were mixed, and the dollar rose across the board, gains accelerating through the European session with EURUSD dumping below 1.16 shortly German industrial output shrank more than forecast, eventually dropping to the lowest point since last month’s ECB meeting. Meanwhile soaring iron-ore prices couldn’t provide relief to the Aussie as the RBA held rates unchanged as expected; Oil traded unchanged at 2.5 year highs, while TSY 10-year yields rose while the German curve bear steepened, both driven by selling from global investors.
The Stoxx Europe 600 Index edged lower, erasing an early advance, despite earlier euphoria in stocks from Japan to Sydney, which reached fresh milestones. Disappointing reports from BMW AG and Associated British Foods Plc weighed on the European index as third-quarter earnings season continued. Earlier, the Stoxx Europe 600 Index rose as much as 0.3%, just shy of a 2-year high it reached last week. Maersk was among the worst performers after posting a quarterly loss, saying a cyberattack in the summer cost more than previously predicted. Spain’s IBEX 35 gains crossed back above its 200 day moving average. European bank stocks trimmed gains after European Central Bank President Mario Draghi said that the problem of non-performing loans isn’t solved yet, though supervision has improved the resilience of the banking sector in the euro region. Draghi was speaking at a conference in Frankfurt.
Over in Asia, equities rose to a decade high, with energy and commodities stocks leading gains as oil and metals prices rallied. The MSCI Asia Pacific Index gained 0.8 percent to 171.40, advancing for a second consecutive session. Oil-related shares advanced the most among sub-indexes as Inpex Corp. rose 3.7 percent and China Oilfield Services Ltd. added 4.6 percent. The MSCI EM Asia Index climbed to a fresh record. The Asia-wide gauge has risen 27 percent this year, outperforming a measure of global markets. The regional index is trading at the highest level since November 2007. Hong Kong’s equity benchmark was at its highest since December 2007 as Tencent Holdings Ltd. advanced for an eighth session. Australia’s S&P/ASX 200 index closed at its highest level since the financial crisis.
Japanese stocks climbed, bolstered by strong corporate earnings, with the Nikkei 225 Stock Average closing 1.7% higher at 22,937.60 at 3pm in Tokyo, climbing for 23 out of the past 25 trading sessions. Japan’s main stock index has gained 20% this year with Tokyo Electron, Fanuc, SoftBank and Kyocera providing the biggest boosts, as the Topix index rises 1.2% to 1,813.29 from Monday, pushing it up +19% YTD.
“Oil and other commodities’ fundamentals are improving amid OPEC’s efforts, stagnating U.S. production and stable growth in China are positive for most Asian markets,” said Hans Goetti, founder of HG Research, referring to output caps put in place by the Organization of Petroleum Exporting Countries. “Economic growth differentials also are in favor of Asian markets, so the rally should continue.”
The euro declined to a four-month low and bund yields nudged higher after German industrial production fell more than expected in September. WTI crude hovered near the highest since January as political upheaval in Saudi Arabia reverberated through the market. Yen traded at 113.99 per dollar from 113.71 on Monday; currency +2.6% YTD.
In rates, the yield on 10Y TSYs rose two basis points to 2.33%; Germany’s 10-year gained 1 bp to 0.34%; Britain’s 10-year yield rose 1 basis point to 1.263% while Japan’s 10-year yield advanced one basis point to 0.032%.
Investors’ focus returned to geopolitics as Trump continued his tour of Asia, while Saudi Arabia launched a crackdown on corruption. Speaking next to South Korean President Moon Jae-in in Seoul, Trump said he saw some progress on North Korea, said that now is the time to act with urgency and determination with North Korea, and called on the rogue state to “come to the table”. He added that the U.S. and South Korea will act together to confront North Korea’s actions, and the U.S. stands ready to use its full range of military capabilities “if need be.” Meanwhile, the South Korean President Moon says that he and Trump reaffirmed resolve to peacefully end N. Korean nuclear standoff.
Bulletin Headline Summary from RanSquawK
- European equities have struggled to maintain the Asian and American impetus
- RBA stood pat on rates as expected. RBNZ act looks to maximise employment as a goal
- Looking ahead, highlights include US APIs and comments from Fed’s Yellen and BoC’s Poloz
- S&P 500 futures little changed at 2,589
- STOXX Europe 600 up 0.04% to 396.73
- MSCI Asia up 0.8% to 171.40
- MSCI Asia ex Japan up 0.6% to 560.95
- Nikkei up 1.7% to 22,937.60
- Topix up 1.2% to 1,813.29
- Hang Seng Index up 1.4% to 28,994.34
- Shanghai Composite up 0.8% to 3,413.58
- Sensex down 0.9% to 33,424.09
- Australia S&P/ASX 200 up 1% to 6,014.34
- Kospi down 0.2% to 2,545.44
- German 10Y yield rose 1.3 bps to 0.349%
- Euro down 0.3% to $1.1574
- Italian 10Y yield fell 0.7 bps to 1.52%
- Spanish 10Y yield fell 0.9 bps to 1.459%
- Brent futures down 0.3% at $64.11/bbl
- Gold spot down 0.4% at $1,276.47
- U.S. Dollar Index up 0.3% at 95.04
Top Overnight News
- President Donald Trump again showed how quickly his tweets can outrun U.S. foreign-policy planning, after he backed Saudi Arabia’s king and crown prince over the arrests of dozens of officials before the State Department had completed its review of the moves
- U.S. President Donald Trump said that North Korea should “come to the table” and make a deal on its missile and nuclear programs
- ECB Executive Board member Sabine Lautenschlaeger would have “liked to see a clear exit” from the ECB’s asset- purchase program, she tells Bloomberg TV
- A ninth straight annual advance for emerging-market macro hedge funds doesn’t mean investors are expecting an exodus as the world’s central bankers start turning off the taps; demand remains so brisk that some are turning new money away
- German industrial production dropped 1.6% in September from August, when it surged 2.6 percent, the fastest pace in six years
- There are continued signs that French bonds could be one of the big winners from the ECB’s extension of stimulus; the bank set a new record in buying the country’s securities, purchasing 1.70 billion euros ($2 billion) relative to its capital key for October, compared with 1.57 billion a month earlier
- Saudi Arabia’s anti-corruption crackdown is expanding beyond the list of princes, billionaires and officials already arrested
- Multinational companies including Apple Inc., Pfizer Inc. and Ford Motor Co. would face a new tax on payments they make to offshore affiliates under the House Republicans’ tax bill — a surprise provision that has stunned tax experts
- Broadcom Ltd. is using a tactic popularized by corporate raiders in the 1980s to convince Qualcomm Inc. and its shareholders that it has the means to complete the biggest tech deal ever
- Biggest Danish Mortgage Bank Cancels IPO After Private Offer
Asian bourses higher across the board, having drawn encouragement from the close on Wall Street, where all three major indices touched yet more record highs over the surge in energy names amid rising oil prices. ASX 200 (+1.0%) briefly pushed through the key 6000 level for the first time since 2008 as miners lifted shares in Australia with iron prices continuing to rise. Similarly, the Nikkei 225 (+1.6%) traded at better levels, making fresh 25yr highs after topping 22,750. While, Chinese markets also eked out gains this morning with Evergrande the notable outperformer in China after the company stated that they were to sell CNY 60bln of property assets. In credit markets, across the Japanese curve, the short end outperformed with the curve somewhat steeper. JGBs had been tracking lower, in tandem with USTs as equities continue to reach new highs.
Top Asian News
- Razer Is Said to Raise $529 Million in IPO Priced Near Top End
- China Firms Have Found a Way to Cut Debt, at Least on Paper
- India’s Sensex Falls from Record as Drugmakers, Oil Shares Drop
- Hong Kong Traders Get Vertigo as Stocks Whipsaw to Decade- High
- Tencent’s Honour Loses Top Spot in China After Year-Long Run
- Lupin Gets FDA Warning Letter on Goa, Indore Plants; Shares Fall
- Bank of Korea Board Split on Timing of Rate Hike, Minutes Show
European equities have followed the theme across the globe, with the majority of bourses trading in the green. Sectors see energy leading the charge once again, as oil continues to drive the unit over 1%. The Dax sees another record and is only seeing weight from BMW following their earnings – Earnings do continue to drive with the biggest moves seen in Maersk, Dialog, Siemens Gamesa and Zalando all suffering after disappointing updates. Treasuries trade near session lows, as some selling volume has helped the marginal bearish push. US 2/10s have flattened to a new low around 70bps, with the curve not seeing levels like that since Nov 2007.
Top European News
- Fortum CEO Seeks Talks With Uniper Head as Germany Approves Bid
- Credit Agricole Unit Agrees to buy Italy Wealth Manager Leonardo
- U.K. Retail Sales Weaken as Cash-Strapped Consumers Hold Back
- German Industrial Output Drops as Manufacturing Takes Breather
- SocGen Faces French Criminal Probe Into Suspected Libya Bribery
- Draghi Says Banks’ Non-Performing-Loans Problem Isn’t Solved Yet
- Serbs Mull New IMF Deal as Weak Growth Mars Healthier Budget
- Siemens Is Said to Ready Job Cuts Amid Slump in Power Orders
In FX, USD A second wave of USD buying has been evident in European trade, with a push clear in USD/JPY, as Monday’s 114.73 how is set to behave as the next resistance level. Focus remains political, with eyes on the GOP tax bill, coinciding with President Trump’s visit of South Korea and later comments expected from current Fed Chair Yellen. The Kiwi was one of the movers overnight, finding volatility as the New Zealand PM outlined the review of RBNZ act, which will include maximising employment as a goal, however, further stated that there is no desire to have the exchange rate in the review. The initial spike higher in the NZD retraced through the Asian session and opened Europe back below pre-announcement levels. Australian RBA Cash Rate (Nov) 1.50% vs. Exp. 1.50% (Prev. 1.50%). RBA says forecasts are largely unchanged with the forecast remaining that inflation will pick up. Higher currency would slow the economy, adding that it is restraining price pressures. Labour market has continued to strengthen, although inflation remains low and will likely do so for some time. New Zealand Financial Minister stated that they will retain the 1-3% inflation target for RBNZ. There is no desire to have NZD included in the RBNZ review. The RBNZ review to include maximising employment as their goal.
In commodities, Oil continued to gain through yesterday’s session continuing to print fresh highs, the next clear resistance is likely to be 2015 highs, just through 60.00/bbl. Precious metals have been pushed lower, led by gold, largely in line with the bullish pressure seen in the USD this morning
Looking at the day ahead, datawise we’ll get Germany industrial production for September, Euro area retail sales for September and September JOLTS and October consumer credit in the US. The holds a forum on Banking Supervision which will include a speech from President Draghi. The Fed’s Quarles is also due to speak in the evening at the Clearing House annual conference. The OPEC world oil outlook will also be presented.
US Event Calendar
- 10am: JOLTS Job Openings, est. 6,075, prior 6,082
- 12:35pm: Fed’s Quarles Speaks at Clearing House Conference
- 2:30pm: Yellen to Receive Award for Ethics in Government
- 3pm: Consumer Credit, est. $17.5b, prior $13.1b
DB’s Jim Reid concludes the overnight wrap
Given the fairly light calendar elsewhere it feels like developments in and around Washington will likely hog the spotlight this week. With that in mind it was interesting to hear the latest view of DB’s Washington specialist Frank Kelly yesterday on his conference call. Unsurprisingly Frank thinks that the tax bill has little chance of passing in its current form. He made the point that the bill is likely to face an extraordinary amount of lobbying and noted three very powerful groups in the association of homebuilders, realtors and independent businesses. So the current House version is seen as more of an opening bid but as the days go on the lobbying will ramp up intensely. What is hugely important in Frank’s view though is the parallel developments in the Senate. Indeed early next week, or possibly late this week, the Senate Republicans will unveil a plan of their own which is likely to look very different to the current House bill legalisation, certainly in being a lot less sweeping. This morning, Bloomberg noted that the Senate’s tax plan may keep the mortgage interest deduction limit at $1m instead. Politico also ran an article yesterday saying that reconciling the difference between the two chambers could end up being the biggest hurdle. So keep an eye on that as the next important event in addition to any press snippets in terms of mark ups on the current House version.
In terms of timing Frank thinks that it’s very unlikely that we get the bill passed before Thanksgiving. Instead we might see something around the Holiday Season or possibly as late as early next year depending on how contentious it is. Frank is a bit more upbeat about getting something however given the health reform debacle. So all in all expect this to rumble on for some time.
Unlike politics, markets have had a slightly less complicated start to the week. Having dipped into the red at the open following the Saudi Arabia, China and Trump headlines from the weekend, equity markets largely closed on the front foot last night. In Europe the Stoxx 600 finished +0.13% while across the pond the S&P 500 also eked out a +0.13% gain by the end of play – the 5th day in a row it has closed higher – helped by a decent rally for energy stocks after WTI rose +3.07% and to the highest in two years on the back of those Saudi developments. The broader move higher was also despite the telecom sector doing its best to drag the index down after the news that Sprint and T-Mobile were officially ending merger talks. In fact M&A has been a bit of a theme over the last 24 hours particularly in the tech sector.
Bond markets were slightly firmer yesterday too. Bunds ended the session 2.8bps lower at 0.332% while Treasuries were 1.4bp lower to 2.316%. The Treasury curve was actually a bit flatter yesterday with the 2s10s curve dipping below 70bps intraday and to the lowest since early November 2007. It’s hard to know if the latest leg had anything to do with the weekend news of the NY Fed’s Dudley announcing his plan to retire by the middle of next year and before the end of his term in 2019. The board of the NY Fed will now choose the next President. The announcement means that the last member of the Yellen-Fischer- Dudley triumvirate will now step down and at face value one would think that this makes ‘continuity’ under Powell certainly more of a challenge given that Yellen was seen as having significant support from both Fischer and Dudley. So the decks have certainly been cleared for a Fed leadership change which is something to keep in mind as we approach 2018.
Back to bond markets briefly, it’s worth pointing out that the latest ECB PSPP and CSPP data was released yesterday. Significantly, with regards to the former, the ECB announced that there will be €124bn of reinvestments from January to October 2018 (so an average of €12bn a month). The pace will however be slower for the first three months of next year at just €23bn total for those months before ramping up from April. So that means that the pace of QE plus reinvestments following the taper announcement nearly two weeks ago will be around €38bn for January to March and closer to €45bn from April to October. In terms of CSPP, what was most interesting from the latest data was confirmation that next year’s CSPP redemptions are a lot smaller than would be implied by the eligible universe because purchases have been concentrated in liquid new-ish issues.
The data suggest that the average monthly CSPP redemptions over the next 12 months will only be €273m (2.7% pa of the current holdings versus close to 8% in the eligible universe). The data backs up the view of DB’s Michal Jezek as per his note here from mid-October.
Turning now to markets in Asia this morning where the rally for Oil is helping equity bourses to post decent gains. The Nikkei (+1.57%) in particular is at a new 25-year high while the Hang Seng (+1.22%), ASX 200 (+1.02%) and Shanghai Comp (+0.63%) are also up. There hasn’t been any notable updates from Trump’s Asia tour while this morning we also had the RBA meeting where policy was left unchanged, as expected.
Moving on. There were a few central bank speakers yesterday but in truth there wasn’t much in it to move the dial. The Fed’s Dudley spoke post his resignation announcement and said that “…there’s not a lot of discord going into this (Fed) transition…so I think it’s going to be a very, very smooth transition” and that the Fed vacancies “has no implication whatsoever for policy right now”. Further, he added that Governor Powell and Chair Yellen “are very well aligned, so I think this is going to be very evolutionary”.
Meanwhile the ECB’s Praet sounded a bit dovish, noting that “a substantial amount of monetary accommodation continues to be necessary…” and that “overall, inflation developments, despite the solid growth, have remained subdued”. In the details, he noted 3 factors were considered when ECB recalibrated its policy on QE back in October, including: i) pace – was reduced because “the brighter economic prospects have increased our confidence” on a gradual rise in inflation, ii) horizon – was extended because ECB “has always emphasized monetary policy needs to be persistent and patient for underlying inflation pressure to gradually build up” and iii) optionality – as retaining the option to recalibrate the APP if warranted is consistent with the forward guidance on the APP.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the Fed’s latest senior loan officer opinion survey was released. In the details, respondents indicated that bank’s lending
standards was i) eased for commercial and industrial loans (C&I), ii) broadly unchanged for most commercial (CRE) and residential real estate (RRE) loans, but iii) tightened for credit cards and auto loans. Conversely, in terms of demand, a) RRE and credit card lending was broadly unchanged, but b) demand for C&I and CRE loans was weaker.
In the Eurozone, the final reading for the October PMI was revised 0.1pts higher, with the services PMI now at 55.0 and composite PMI at 56.0. Overall, our economists believe that if this level is sustained, 4Q GDP growth could be closer to 0.7% qoq rather than the 0.5% qoq that they currently expect. Across the bloc in terms of composite PMI, France’s PMI was revised 0.1pt lower to 57.4, Germany’s PMI was revised 0.3pts lower to 56.6 and Spain’s PMI fell 1.3pts to a still solid 55.1 this month, albeit the lowest reading since February. Elsewhere, Italy’s flash PMI was lower than expectations at 52.1 (vs. 52.9 expected) and composite PMI was 53.9 (vs. 54.3 expected).
Elsewhere Germany’s September factory orders were above expectations at +1.0% mom (vs. -1.1% expected) and +9.5% yoy (vs. +7.1% expected). Excluding the volatile ‘other transport’ sector, manufacturing orders were still up +8.9% yoy. Elsewhere, the Eurozone’s September PPI was above consensus at +0.6% mom (vs. +0.4% expected) and +2.9% yoy (vs. +2.7% expected), while the November Sentix investor confidence also beat at 34 (vs. 31 expected) – now slightly lower than the pre-GFC high.
Looking at the day ahead, datawise we’ll get Germany industrial production for September, Euro area retail sales for September and September JOLTS and October consumer credit in the US. The ECB is due to hold a forum on Banking Supervision which will include a speech from President Draghi. The Fed’s Quarles is also due to speak in the evening at the Clearing House annual conference. The OPEC world oil outlook will also be presented.
3. ASIAN AFFAIRS
i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 25.40 points or .75% /Hang Sang CLOSED UP 397.54 pts or 1.39% / The Nikkei closed UP 389.25 POINTS OR 1.73%/Australia’s all ordinaires CLOSED UP 1.00%/Chinese yuan (ONSHORE) closed DOWN at 6.635/Oil UP to 57.26 dollars per barrel for WTI and 63.99 for Brent. Stocks in Europe OPENED RED . ONSHORE YUAN CLOSED DOWN AGAINST THE DOLLAR AT 6.638. OFFSHORE YUAN CLOSED STRONGER TO THE ONSHORE YUAN AT 6.635 //ONSHORE YUAN WEAKER AGAINST THE DOLLAR/OFF SHORE WEAKER TO THE DOLLAR/. THE DOLLAR (INDEX) IS STRONGER AGAINST ALL MAJOR CURRENCIES. CHINA IS NOT VERY HAPPY TODAY.
3a)THAILAND/SOUTH KOREA/NORTH KOREA
NORTH KOREA//SOUTH KOREA
3b) REPORT ON JAPAN
3C CHINA REPORT.
Target 2 imbalances rise again for Italy as it hits a record 433 billion euros to Northern European nations. Germany has a net credit of 879 billion euros. It means that Italian and other southern European citizens are moving their euros to Northern block countries. This debt which is guaranteed by central banks can never be paid.
(courtesy Mish Shedlock/Mishtalk
Italy Target2 Imbalance Hits Record €432.5 Billion As Dwindling Trust In Banks Plunges
Contrary to ECB propaganda, Target2 imbalances are a direct result an unsustainable balance of payment system. The imbalances represent both capital flight and debts that can never be paid back. If you think Italy can pay German and other creditors a record €432.5 Billion, you are in Fantasyland.
Just 16 percent of Italians have confidence in the country’s lenders, down from an already meager 17 percent in June, according to a poll by the SWG research group of Trieste on Friday. Only 24 percent trust the Bank of Italy, plunging from 36 percent in June.
One likely reason: a tortuous bank crisis that caused losses for savers and led the government to rescue three lenders with taxpayers’ money this year. The vanishing confidence is likely to show in campaigns for national elections expected by next spring.
Supporters of the populist Five Star Movement and anti-migrant Northern League have the least confidence in lenders and the Bank of Italy among those with a definite opinion, according to the survey of 1,000 adults conducted Oct. 23-25.
Confidence in Banks Plunges
The eurosceptic Five Star Movement just happens to have the largest share of the vote in recent polls.
Target2 stands for Trans-European Automated Real-time Gross Settlement System. It is a reflection of capital flight from the “Club-Med” countries in Southern Europe (Greece, Spain, and Italy) to banks in Northern Europe.
Pater Tenebrarum at the Acting Man blog provides this easy to understand example: “Spain imports German goods, but no Spanish goods or capital have been acquired by any private party in Germany in return. The only thing that has been ‘acquired’ is an IOU issued by the Spanish commercial bank to the Bank of Spain in return for funding the payment.”
This is not the same as an auto loan from a dealer or a bank. In the case of Target2, central banks are guaranteeing the IOU.
Target2 also encompasses people yanking deposits from a bank in their country and parking them in a bank in another country. Greece is a nice example, and the result was capital controls.
If Italy or Greece (any country) were to leave the Eurozone and default on the target2 balance, the rest of the countries would have to make up the default according to their percentage weight in the Eurozone.
Another Look at Capital Flight
It is no coincidence that Target2 imbalances are on the rise as faith in banks collapses. Target2 is a measure of capital flight despite the ECB’s assurances to the contrary.
For further discussion, please see Another Look at Capital Flight in Italy and Spain: ECB’s Target2 Explanation is False.
Giulio Meotti of the Gatestone Institute discusses that the European migrant crisis is the equivalent to the USA 9/11
Meotti: The Migrant Crisis Upended Europe
- “The migrant crisis is the 9/11 of the European Union… That day in 2001, everything changed in the US. In a minute, America discovered its vulnerability. Migrants had the same effect in Europe… The migration crisis profoundly undermines the ideas of democracy, tolerance and… the liberal principles that constitute our ideological landscape.” — Ivan Kratsev,Chairman of the Center for Liberal Strategies in Sofia and a member of the Institute of Humanities in Vienna, Le Figaro.
- The European public now looks at EU institutions with contempt. They perceive them — under multiculturalism and immigration — not only as indifferent to their own problems, but as adding to them.
- “We are a cultural community, which doesn’t mean that we are better or worse — we are simply different from the outside world… our openness and tolerance cannot mean walking away from protecting our heritage”. — Donald Tusk, President of the European Council.
A few weeks after Germany opened its borders to over a million refugees from the Middle East, Africa and Asia, Hungarian Prime Minister Viktor Orbán said that the migration crisis would “destabilize democracies“. He was labelled a demagogue and a xenophobe.
Two years later, Orbán has been vindicated. As Politico now explains, “[M]ost EU leaders echo the Hungarian prime minister” and the Hungarian PM can now claim that “our position is slowly becoming the majority position”.
Many in Europe seem to have understood what Ivan Krastev, the Chairman of the Center for Liberal Strategies in Sofia and a member of the Institute of Humanities in Vienna, recently explained to Le Figaro:
“The migrant crisis is the 9/11 of the European Union…That day in 2001, everything changed in the US. In a minute, America discovered its vulnerability. Migrants had the same effect in Europe. It is not their number that destabilizes the continent… The migration crisis profoundly undermines the ideas of democracy, tolerance and progress as well as the liberal principles that constitute our ideological landscape. It is a turning point in the political dynamics of the European project“.
Thousands of migrants arrive on foot at a railway station in Tovarnik, Croatia, September 17, 2015. (Photo by Jeff J Mitchell/Getty Images)
Migration is having a significant impact, for instance, on Europe’s public finances. Take the two countries most affected by it. Germany’s federal government spent 21.7 billion euros in 2016 to deal with it. Also reported was that Germany’s budget for security this year will grow by at least a third, from 6.1 billion to 8.3 billion euros.
In Italy, the Minister of Economy and Finance recently announced that the country will spend 4.2 billion in 2017 on migrants (one-seventh of Italy’s entire budget for 2016). Spain recently announced that in North Africa, the fence around its enclaves of Ceuta and Melilla, which keeps migrants out of the Spanish territory, will be funded through a further infusion of 12 million euros. Everywhere in Europe, states are allocating extra resources to deal with the migrant crisis, which has also changed Europe’s political landscape.
The recent election victories of Sebastian Kurz in Austria and Andrej Babis in the Czech Republic have potentially enlarged the group of Central and Eastern European countries that oppose Brussels — countries that do not want to accept the number of migrants that the EU is demanding. The topic of immigration is fracturing Europe along ideological lines. Not only fences, but rivalry, mistrust and hate now divide the European project more deeply than ever before. The European public now looks at EU institutions with contempt. They perceive them — under multiculturalism and immigration — not only as indifferent to their own problems, but as adding to them.
Another political earthquake linked with the migration crisis is “the decline of social democracy in the West”, as Josef Joffe, Editor and Publisher of Die Zeit, recently called it. Everywhere in Europe, the migration crisis has all but killed the social-democratic parties, long perceived as unable to cope with it. Twenty years ago, these left-liberal parties governed everywhere — Spain, Britain, Germany, for instance — but now they are in the opposition everywhere except Italy. From Norway to Austria, Europe is now led by conservative governments.
More than half the terror plots in Germany since the onset of the migrant crisis in 2014 have involved migrants, according to headlines as well as a study by the Heritage Foundation. In addition, ever since the Islamic State — now defeated in Raqqa — took advantage of the destabilization caused by Syria’s civil war to become a major driver of the migrant crisis, migration has been a major concern for Europe’s security. From the territory it conquered, ISIS launched major terror attacks on Europe.
The migration crisis has also led to the strategic strengthening in Europe of Turkish President Recep Tayyip Erdogan. He has been blackmailing European countries by threatening that if billions of euros and certain political concessions are not given to him, he will openTurkey’s borders to let millions more migrants flood into Europe. Erdogan has not only demanded that Europe jail writers and journalists; he has also tried to influence elections in the Netherlands and Germanyby appealing to his Turkish constituencies there.
A Pew Research report shows how migration is reshaping European countries. In 2016 alone, Sweden’s population grew by more than 1%. The increase is ascribed to mass migration, the second-highest in the EU. The number of immigrants rose from 16.8% to 18.3% of Sweden’s population between 2015 and 2016.
Austria and Norway, two other countries with large immigrant populations (at least 15% percent in 2016), saw a 1% rise from 2015. The newspaper Die Welt recently reported that 18.6 million German residents — one-fifth of Germany’s total population — now come from migrant backgrounds.
The Machiavelli Center in Italy reported in a study, “How immigration is changing Italian demographics”, that an “unprecedented” shift in Italy’s demography has been taking place due to the migration crisis.
The Pandora’s box of a demographic revolution has been opened.
Two years ago, Hungarian Prime Minister Viktor Orbán was the only voice in Europe speaking of the need to keep Europe “Christian”. Now one of his most vocal opponents, Donald Tusk, President of the European Council, has said:
“We are a cultural community, which doesn’t mean that we are better or worse — we are simply different from the outside world… our openness and tolerance cannot mean walking away from protecting our heritage”.
In 2015, any talk about “culture” was condemned as “racism”. Now it is becoming part of the mainstream.
In trying to cope with the Islamists’ war on Western politics, culture and religion, and the cultural clash they created, Europe has been upended.
5. RUSSIA AND MIDDLE EASTERN AFFAIRS
Saudi Arabia Is About To Confiscate $33 Billion From Four Of Its Richest People
Earlier today, when discussing the Saudi bank account and asset freeze (and confiscation) of dozens of princes and ministers, we said that just the haul of billionaire prince Alwaleed’s $19 billion in various holdings, including nearly a billion dollars in jewelry, plans, yachts, furniture and cash…
… would be an efficient way of refilling Saudi’s rapidly declining foreign reserves. And refilling they need: as shown in the chart below, Saudi reserves have declined from their peak in 2014 by over a quarter trillion dollars as a result of the roughly 50% drop in gas prices in the past 3 years.
Of course, it’s not just Alwaleed whose net worth is at risk of becoming nationalized. As Bloomberg writes, “the stunning series of arrests has implicated three of the country’s richest people, including Prince Alwaleed bin Talal, who’s No. 50 on the Bloomberg Billionaires Index ranking of the world’s 500 richest people, with $19 billion. Also being held are the kingdom’s second- and fifth-wealthiest people, as well as a travel-agency mogul and Bakr Binladin, a scion of a one of the country’s biggest construction empires.” He is also, of course, Osama bin Laden’s brother as discussed yesterday.
All told, up to $33 billion in (arrested) royalty wealth is at risk of confiscation.
Here is Bloomberg’s breakdown of the 4 Saudi individuals who stand to lose the most from the latest purge:
Alwaleed bin Talal, $19 billion
- Owns stakes in Twitter Inc., News Corp. and Citigroup Inc.
- Nephew of the late Saudi ruler, King Abdullah. Son of Prince Talal and Princess Mona El-Solh, daughter of Lebanon’s first prime minister, Riad El-Solh.
- Made his first billion dollars trading land and acting as a point man for multinational companies seeking local contracts.
Alwaleed’s publicly traded Kingdom Holding Group released a statement saying it “enjoys a solid financial position” and the government has “full confidence” in the company.
* * *
Mohammed Al Amoudi, $10.1 billion
- Controls an empire that has investments across Africa, Europe and Saudi Arabia.
- Born in Ethiopia to a Saudi father and Ethiopian mother.
- Moved to Saudi Arabia as a young man and made his first billion in the late 1980s through construction, aided by an early government contract to help build the country’s underground oil storage facility.
- Assets include Sweden’s largest oil refiner, Preem AB, real estate and numerous contracting businesses. In Ethiopia, where he’s said to be the biggest private investor, he owns hotels and a gold mine, and has invested hundreds of millions of dollars in large-scale farms growing coffee and rice.
Tim Pendry, Al Amoudi’s London-based spokesman said in a statement Monday that the arrest “is an internal matter for the kingdom and we have no further comment to make other than to say that the overseas businesses owned by the Sheikh remain unaffected by this development.”
* * *
Saleh Kamel, $3.7 billion
- Self-made finance and healthcare entrepreneur started running bus services for Hajj pilgrims and later founded the kingdom’s first driving school.
- Regarded as one of the pioneers of Islamic finance, a method of banking that complies with Islamic law and is today a $2.2 trillion industry.
- Kamel founded Manama, Bahrain-based Albaraka Banking Group, an Islamic bank with $23.4 billion in assets at the end of 2016.
- Carved out an early niche for himself by becoming the first non-government company to sell services to consumers.
- Jeddah-based holding group, Dallah Albaraka, owns more than a dozen businesses, spanning hospital operator Dallah Healthcare Company, real estate developments and snack-food factories.
Albaraka Banking Group said in a statement that the arrest didn’t have a direct impact on the company and that Kamel didn’t serve on the bank’s board.
* * *
Nasser Al Tayyar, $600 million
- The 60-year-old amassed a fortune that’s tied to publicly traded Al Tayyar Travel Group Holding Co., one of Saudi Arabia’s largest travel agencies.
- Founded the business in 1980 with four employees and about $300,000 after a stint in the reservations department of Saudi Arabian Airlines.
- The company books airfare and hotel rooms, and also organizes specialized travel, like foreign medical trips, and Hajj and Umrah pilgrimages to Islam’s holy cities.
- Al Tayyar’s shares slumped 10 percent at the close in Riyadh reaching their lowest since June 2012.
The company said in a statement to the Saudi Stock Exchange that its operations are continuing, and that it’s safeguarding the interests of its customers and shareholders.
* * *
- The brother of Osama Bin Laden heads one of the kingdom’s largest construction companies, Saudi Binladin Group.
- The closely-held firm was started by Bakr’s father, Mohammed, in 1931, and has built some of the kingdom’s biggest and most notable projects, from the expansion of the Grand Mosque in Mecca, to airports and King Abdullah Economic City.
- The company had revenue of $3 billion in 2016, and ownership is split among more than 20 descendants, according to Orbis, a database of company information published by Bureau van Dijk.
And while the people listed above may soon find themselves up to $33 billion poorer, at least they will do so in style: they remain confined at the Riyadh Ritz-Carlton…
… where the atmospehere, however, is less than enjoyable.
Still, more arrests may be imminent: according to Bloomberg, two of the four Saudis on the Bloomberg index haven’t been detained in the sweep: hotel magnate Mohamed bin Issa Al Jaber, who has an $8.3 billion fortune and splits his time between Paris, London, Vienna and Jeddah, and Prince Sultan Bin Mohammed Al Kabeer, the biggest individual shareholder in food processor Almarai Company, who has $4.7 billion. If the Saudi budget needs an additional $13 billion in urgent funding needs, they will likely be next.
* * *
The moral of the story: the Saudi royal family – whether in conjunction with Jared Kushner or independently – certainly knows how to kill two birds with one stone: not only has Mohammad Bin Salmaneliminated the bulk of his potential political opponents in one day, he also boosted the Saudi reserves by 7% in one day.
There is just one trade-off: if Riyadh thinks it is sending a soothing message of stability to potential Aramco investors that the rule of law in Saudi Arabia is sacrosanct, and that contractual agreement in Saudi Arabia are inviolable, well… good luck
Obviously Lebanon did not declare war on Saudi Arabia. However deep seated animosity for the Shiites may bring about war as the Sunnis are extremely worried about Iran’s growing strength
On The Verge Of Catastrophe: Saudi Arabia Says Lebanon Declared War
As expected, Saudi Arabia has cast itself as the victim of external Shia plotting after its internal weekend of chaos which included a missile attack from Yemen, the deaths of two princes and other high officials within a mere 24 hours, and an aggressive crackdown against dissent in the royal family which saw close to a dozen princes placed under house arrest. And as Al Jazeera noted,in this Saudi version of ‘Game of Thrones’, the 32-year-old Mohammed Bin Salman (MBS) shows that he is willing to throw the entire region into jeopardy to wear the royal gown.
While Saudi Arabia has long blamed Iran for sowing unrest in the region, this evening’s declaration by Saudi Gulf affairs minister Thamer al-Sabhan that Lebanon has “declared war” against the kingdom is truly an historic first. But perhaps the biggest problem is that international media is currently uncritically spreading the statement, whereas what such a bizarre claim actually warrants is laughter. Thankfully, Nassim Nicholas Taleb sums it up nicely with a basic geography lesson: “Either the media is stupid, or Saudi rulers are stupid, or both. Lebanon did not formally declare war and there is no common border.”
Still image taken from a video distributed by Yemen’s pro-Houthi Al Masirah television station, which purports to show the ballistic missile previously launched at Saudi Arabia.
With that in mind, here is the statement currently making headlines as reported by Reuters:
Saudi Arabia said on Monday that Lebanon had declared war against it because of attacks against the Kingdom by the Lebanese Shi‘ite group Hezbollah.
Saudi Gulf affairs minister Thamer al-Sabhan told Al-Arabiya TV that Saad al-Hariri, who announced his resignation as Lebanon’s prime minister on Saturday, had been told that acts of “aggression” by Hezbollah “were considered acts of a declaration of war against Saudi Arabia by Lebanon and by the Lebanese Party of the Devil”.
Though clearly absurd (that Lebanon has declared war on KSA), the statement is driven by legitimate and deep-rooted fear, for not only has Hezbollah transformed itself into a Middle East powerhouse whose influence has grown vastly in the midst of the Syrian war, but it has transitioned into a quasi-state which has gained the respect of Lebanese and Arabs across the region. As we’ve noted many times before, it is fear of Hezbollah and its increasingly broad acceptance and legitimacy within Lebanese state institutions that also drives heightened Israeli rhetoric and bellicosity of late, which has once again “surprisingly” found itself on the same side as Saudi Arabia.
And at a moment that Israel has begun massive war games, and as MBS continues his purge toward total consolidation of power over the kingdom, both unlikely bedfellows continue their war of words against Hezbollah. It’s no secret that common cause in Syria of late has led the historic bitter enemies down a pragmatic path of unspoken cooperation as both seem to have placed the break up of the so-called “Shia crescent” as their primary policy goal in the region. But that’s perhaps why few pundits seemed overly shocked when Israeli media reported in early September that bin Salman may have made a secret visit to Israel, in spite of the fact that the kingdom does not recognize the Jewish state, and the two sides do not have diplomatic relations.
Will the current chaotic trajectory of things and unholy alliance between the Saudis and Israelis place Lebanon in the cross hairs of yet another Israeli-Hezbollah war? While we’ve recently addressed this question, this new and erratic Saudi declaration certainly puts the region a big step closer to such a war becoming a reality.
Though this question of the looming specter of an Israeli-Lebanese War (which would surely involve the Saudis aiding Israel politically inside Lebanon) has been addressed many times over of late, the real question, which isn’t often analyzed, is the true military capabilities of Hezbollah. What has both Israel and the Saudis worried is the fact that the Syrian war has possibly strengthened Hezbollah, not weakened it.
In a follow up article we will dissect Hezbollah’s military capabilities, and its role in Lebanese society.
The Shiites from Yemen now are threatening Saudi ports and airports..
After “Declaration Of War”, Yemen Rebels Threaten Attacks On Saudi Arabia
Pre-war tensions in the middle-east are surging almost as fast as the price of crude… and that is just fine with the Saudi Royal Family, which is willing to risk world war if it means pushing the price of oil back to triple digits.
One day after Saudi Arabia warned on Monday that Lebanon had declared war against it because of attacks against the Kingdom by the Lebanese Shi‘ite group Hezbollah – and shortly after the Saudis intercepted what they claimed was an Iranian-made ballistic missile near Riyadh launched by Yemen rebels, on Tuesday Yemen’s Iran-backed Houthi rebels threatened retaliation against the ports and airports of the United Arab Emirates and Saudi Arabia, which this week closed the Yemeni land, sea and air borders.
Still image taken from a video distributed by Yemen’s pro-Houthi Al Masirah
TV station, showing the ballistic missile allegedly launched at Saudi Arabia.
“All airports, ports, border crossings and areas of any importance to Saudi Arabia and the UAE will be a direct target of our weapons, which is a legitimate right,” read a statement released by the rebels’ political office, carried by AFP.
The Houthi’s statement comes the day after the Saudi coalition announced it had closed all of Yemen’s borders, in retaliation for the shot down ballistic missile that had targeted the kingdom’s international airport in Riyadh.
As we reported last night, commenting on Saturday’s Houthi attack, the Saudi-led coalition that has been conducting an operation in Yemen since 2015, stated that it “considered the missile launch an act of war against the kingdom” and reserved the right to respond against Iran, who it holds accountable for the attack, in a claim strongly denied by Tehran.
More recently Saudi Arabia’s Crown Prince Mohammed bin Salman also accused Tehran over alleged arms supplies to the Houthis, with Tehran lashing out at Riyadh’s claim it has described as being “contrary to reality.” The statement echoed a remark made by US President Donald Trump, who had blamed Iran for the missile launch by Yemeni rebels.
Yemen has been engulfed in a violent war between the government and Houthi rebels backed by army units loyal to former President Ali Abdullah Saleh since 2015, with a coalition backed by Saudi Arabia launching an aerial operation in the country at the request of President Abd Rabbuh Mansur Hadi.
The United Nations on Monday reported the Saudi-led coalition had prevented two humanitarian aid flights from flying to the war-torn country.
A leaked document confirms the co ordination between Saudi Arabia and Israel as both have a sworn enemy in Lebanon’s Hezbolloh
Explosive” Leaked Secret Israeli Cable Confirms Israeli-Saudi Coordination To Provoke War
Early this morning, Israeli Channel 10 news published a leaked diplomatic cable which had been sent to all Israeli ambassadors throughout the world concerning the chaotic events that unfolded over the weekend in Lebanon and Saudi Arabia, which began with Lebanese Prime Minister Saad Hariri’s unexpected resignation after he was summoned to Riyadh by his Saudi-backers, and led to the Saudis announcing that Lebanon had “declared war” against the kingdom.
The classified embassy cable, written in Hebrew, constitutes the first formal evidence proving that the Saudis and Israelis are deliberately coordinating to escalate the situation in the Middle East.
The explosive classified Israeli cable reveals the following:
- On Sunday, just after Lebanese PM Hariri’s shocking resignation, Israel sent a cable to all of its embassies with the request that its diplomats do everything possible to ramp up diplomatic pressure against Hezbollah and Iran.
- The cable urged support for Saudi Arabia’s war against Iran-backed Houthis in Yemen.
- The cable stressed that Iran was engaged in “regional subversion”.
- Israeli diplomats were urged to appeal to the “highest officials” within their host countries to attempt to expel Hezbollah from Lebanese government and politics.
Left: Israeli PM Netanyahu, Right: Saudi Prince Mohammed bin Salman
As is already well-known, the Saudi and Israeli common cause against perceived Iranian influence and expansion in places like Syria, Lebanon and Iraq of late has led the historic bitter enemies down a pragmatic path of unspoken cooperation as both seem to have placed the break up of the so-called “Shia crescent” as their primary policy goal in the region. For Israel, Hezbollah has long been its greatest foe, which Israeli leaders see as an extension of Iran’s territorial presence right up against the Jewish state’s northern border.
This is a EXPLOSIVE thread that proves how Saudi and Israel are deliberately coordinating to escalate the situation in the MidEast. https://twitter.com/BarakRavid/status/927629611713941505 …
- I published on channel 10 a cable sent to Israeli diplomats asking to lobby for Saudis/Harir and against Hezbollah. The cable sent from the MFA in Jerusalem [Israeli Ministry of Foreign Affairs] to all Israeli embassies toes the Saudi line regarding the Hariri resignation.
- The Israeli diplomats were instructed to demarch their host governments over the domestic political situation in Lebanon – a very rare move.
- The cable said: “You need to stress that the Hariri resignation shows how dangerous Iran and Hezbollah are for Lebanon’s security.”
- “Hariri’s resignation proves wrong the argument that Hezbollah participation in the government stabilizes Lebanon,” the cable added.
- The cable instructed Israeli diplomats to support Saudi Arabia over its war with the Houthis in Yemen. The cable also stressed: “The missile launch by the Houthis towards Riyadh calls for applying more pressure on Iran & Hezbollah.”
1 \ I published on channel 10 a cable sent to Israeli diplomats asking to lobby for Saudis\Hariri &against Hezbollah http://news.nana10.co.il/Article/?ArticleID=1272790&sid=126 …
האיום האיראני: ישראל מיישרת קו עם סעודיה נגד מעורבות טהראן וחיזבאללה בלבנון
משרד החוץ שיגר מברק הנחיות לכל שגרירויות ישראל בו התבקשו לפעול נגד המעורבות של חיזבאללה ואיראן במערכת הפוליטית בלבנון
Watch today’s Hebrew broadcast Channel 10 News report which features the Israeli diplomatic cable – the text of which is featured in Channel 10’s screenshot (below) – here.
Below is a rought translation of the classified Israeli embassy cable using Google Translate as released by Israel’s Channel 10 News:
“To the Director-General: you are requested to urgently contact the Foreign Ministry and other relevant government officials [of your host country] and emphasize that the resignation of Al-Hariri and his comments on the reasons that led him to resign illustrate once again the destructive nature of Iran and Hezbollah and their danger to the stability of Lebanon and the countries of the region.
Al-Hariri’s resignation proves that the international argument that Hezbollah’s inclusion in the government is a recipe for stability is basically wrong. This artificial unity creates paralysis and the inability of local sovereign powers to make decisions that serve their national interest. It effectively turns them into hostages under physical threat and are forced to promote the interests of a foreign power – Iran – even if this may endanger the security of their country.
The events in Lebanon and the launching of a ballistic missile by the signatories to the Riyadh agreement require increased pressure on Iran and Hezbollah on a range of issues from the production of ballistic missiles to regional subversion.”
Thus, as things increasingly heat up in the Middle East, it appears the anti-Iran and anti-Shia alliance of convenience between the Saudis and Israelis appears to have placed Lebanon in the cross hairs of yet another looming Israeli-Hezbollah war. And the war in Yemen will also continue to escalate – perhaps now with increasingly overt Israeli political support. According to Channel 10’s commentary (translation), “In the cable, Israeli ambassadors were also asked to convey an unusual message of support for Saudi Arabia in light of the war in which it is involved in Yemen against the Iranian-backed rebels.”
All of this this comes, perhaps not coincidentally, at the very moment ISIS is on the verge of complete annihilation (partly at the hands of Hezbollah), and as both Israel and Saudi Arabia have of late increasingly declared “red lines” concerning perceived Iranian influence across the region as well as broad Hezbollah acceptance and popularity within Lebanon.
What has both Israel and the Saudis worried is the fact that the Syrian war has strengthened Hezbollah, not weakened it. And now we have smoking gun internal evidence that Israel is quietly formalizing its unusual alliance with Saudi Arabia and its power-hungry and hawkish crown prince Mohammed bin Salman.
Saudi Purge Goes Nuclear: Over 1,200 Bank Accounts Frozen
One day after we reported that Saudi Arabia has started to freeze the accounts of the dozens of arrested royals, ministers and businessmen, in the process allowing Mohammed bin Salman to further cement control over the Kingdom, the Kingdom has taken its “money laundering” crackdown to the next level and on Tuesday, Saudi banks have frozen more than 1,200 accounts belonging to individuals and companies in the kingdom as part of the government’s anti-corruption purge, bankers and lawyers told Reuters, adding that “the number is continuing to rise.”
Since the “countercoup” on Sunday, the Saudi central bank has been expanding the list of accounts it is requiring lenders to freeze on an almost hourly basis, a regional banker told Reuters, and while he did not name the companies affected , he said they included listed and unlisted firms across many sectors.
The banker also said that if the freezes stayed in place for long, they could start to hurt day-to-day business activities such as paying staff and creditors or making other transactions. A second banker said, however, that most of the frozen accounts belonged to individuals rather than companies, and that banks were being allowed by the regulator to continue to fund existing commitments.
In an e-mailed statement, the Saudi Arabian Monetary Authority, or SAMA, said suspension of bank accounts of “persons of interest” is in response to Attorney General’s request pending the legal cases against them, according to Governor Ahmed Abdulkarim Alkholifey says in emailed statement. SAMA clarified that individual accounts, rather than corporate businesses, have been put in suspension until final court rulings, and explained that – for now – corporate businesses remain unaffected, which means that are no restrictions on money transfers through proper banking channels. Assuming, of course, one isn’t an “individual” on MbS’s black list, and the money in the bank has effectively been nationalized.
For now, it remains unclear what the total potential haul from the bank account crackdown would be. Yesterday we reported that just the 4 billionaires named previously, and who were arrested over the weekend including Pricne Alwaleed, have no less than $33 billion in net worth at risk.
Among top business executives detained in the probe are billionaire Prince Alwaleed bin Talal, chairman of investment firm Kingdom Holding; Nasser al Tayyar, founder of Al Tayyar Travel; and Amr al-Dabbagh, chairman of builder Red Sea International. The stocks of all three companies, which have issued statements saying they continue to operate as normal, plunged another 9-10% on Tuesday.
So when could the confiscatory process end? As we jokingly suggested yesterday, the ruling Saudi royal family has realized that not only can it crush any potential dissent by arresting dozens of potential coup-plotters, it can also replenish the country’s foreign reserves, which in the past 3 years have declined by over $250 billion, by confiscating some or all of their generous wealth, which is in the tens if not hundreds of billions. If MbS continues going down the list, he just may recoup a substantial enough amount to what it makes a difference on the sovereign account.
He will naturally also provoke enough anger to start civil unrest, if not a domestic war, but let’s cross that bridge when we get to it.
6 .GLOBAL ISSUES
Nick Cunningham believes that the oil market has overreacted to the Saudi purge. It was far more important to see a drop in rigs than the purge in Saudi Arabia which will not change the policy directive
(courtesy Nick Cunningham,/Oil Price.com)
Did Oil Markets Overreact To The Saudi Purge?
Saudi Arabia’s powerful crown prince led a massive purge over the weekend, ousting around a dozen royal cousins in a bid to consolidate power.
The removal and detentions of so many members of the royal family were ostensibly the outgrowth of an anti-corruption campaign, but the actions put the top security institutions under the control of the king and the crown prince after having been distributed among different family factions for decades. In essence, Crown Prince Mohammed bin Salman (aka, MBS) has ended decades of tradition and has consolidated power in his own hands, making him the most powerful figure the country has seen in generations.
MBS also removed one of his rivals for the throne, Prince Miteb bin Abdullah, son of the late King Abdullah. Many analysts expect the octogenarian King Salman to abdicate the throne in the coming months, and the ouster of Miteb paves the way for MBS to take over.
The purge also took down the richest Saudi investor, Prince Alwaleed bin Talal, a move that “would be like arresting Warren Buffet or Bill Gates in the United States,” Robert Jordan, former U.S. ambassador to the kingdom, told CNBC.
Favorable interpretations of what is playing out in Riyadh view the actions as a way to push forward with economic reforms. “The new leadership is committed to modernizing the economy and diversifying the economy and addressing the issue of over-reliance on oil,” Khatija Haque, head of Middle East research at Emirates NBD PJSC, told Bloomberg. “What this signals is that the crown prince is strengthening his position to continue with pushing forward with the reforms that are needed.”
But analysts say the actions by MBS could undercut one his own top priorities: Attracting international investment, specifically for the IPO of Saudi Aramco. The arrests without due process “sends a chill down the spine of foreign investors,” Bernard Haykel, a professor at Princeton University, told the New York Times in an interview. Moreover, a Saudi Aramco board member and former finance minister was actually included in the series of detentions.
Meanwhile, Saudi Foreign Minister Adel al-Jubeir said on Monday that the Saudi government has the right to respond to Iran’s “hostile actions,” after a missile was reportedly fired by Houthi rebels from Yemen. The missile was intercepted, but Saudi state press said the government “considers this a blatant act of military aggression by the Iranian regime, and could rise to be considered as an act of war against the Kingdom of Saudi Arabia.”
And to make matters even more bizarre, a Saudi prince was killed in a helicopter crash near the border with Yemen on Sunday, a seemingly unrelated event with an unknown cause.
The sudden turmoil in Saudi Arabia likely helped push oil prices to their highest level in two and a half years on Monday, with Brent breaking $64 per barrel and WTI moving past $57 per barrel during intraday trading.
However, the Saudi purge does not necessarily mean a change in oil policy. Saudi officials have been pushing for an extension of the OPEC cuts through the end of 2018, particularly as they prepare the IPO of Aramco.
“We believe the kingdom will stick to the OPEC+ deal and continue to focus on reducing global oil inventories,” UBS oil analyst Giovanni Staunovo told Reuters.
At the same time, the political intrigue has introduced an element of geopolitical risk, which could be helping to add a bit of bullish momentum to oil prices.
“Uncertainty about core regime stability has gone up a bit, so a higher risk premium is justified,” Samuel Ciszuk, a senior adviser to the Swedish Energy Agency, said at the Reuters Global Oil Forum.
With all of that said, there are more important factors governing the price of oil. The fate of the OPEC extension is first and foremost. After that, oil investors are keeping an eye on the response from U.S. shale to rising oil prices. The sharp decline in the rig count last week is probably more important in the eyes of some oil traders than the purge in Saudi Arabia.
The latest events come as oil prices had already been gaining strength. A recent Wall Street Journal poll of 14 investment banks finds an averaged predicted Brent price in 2018 at $54 per barrel, an increase of $1 per barrel since September and the first increase in six months for the poll.
8. EMERGING MARKET
Goldman Sachs takes a big hit on bonds that it purchased in May of 2017
Goldman’s Asset Arm Takes Big Hit On Venezuelan Bond Bloodbath
The fallout from the Venezuelan bond restructuring has claimed a major victim in Goldman Sachs Asset Management, or rather some of the “muppets” who trusted Goldman to invest their money. However, the route which led Goldman to losing a chunk of client money wasn’t just a case of bad judgement, being riddled with the usual mixture of greed, questionable ethics and government intervention. As we detailed in “Goldman Accused Of Funding Maduro’s Dictatorship”.
Goldman controversially purchased $2.8 billion of 2022 bonds in May 2017 in the state-owned oil producer PDVSA, for about $865 million – or about 31 cents on the dollar. This prompted Julio Borges, President of the National Assembly and head of Venezuela’s opposition, to accuse Goldman of “aiding and abetting the country’s dictatorial regime.” Borges threatened that any future democratic government would not recognise or pay on the bonds. In true Goldman fashion, however, the deal was just too lucrative to pass up, or so it seemed at the time, as Goldman paid a then 30% discount to other Venezuelan bonds with a similar maturity.
Goldman’s ”defence” was that it did not buy the bonds directly from PDVSA, consequently it did not transfer funds directly to the Venezuelan regime.
To make matters worse, when the Trump White House extended sanctions against Venezuela over the Summer, including a ban on trading Venezuelan debt, Goldman’s bonds were mysteriously exempt. As we argued here.
“the logic is that if Goldman was forced to liquidate the bonds, or worse was stuck holding them as Venezuela went bankrupt, it would take a huge hit on the nearly $3 billion notional position. As such, Goldman’s advisors to Trump made it quite clear that any sanctions against Venezuela would have to be Goldman Sachs revenue neutral first and foremost. That’s precisely what happened.”
We have to acknowledge, however, that the next comment of ours was only half correct.
“Of course, Venezuela’s default is just a matter of time, but it won’t take place before Goldman dumps its bond holdings to some unwitting retail investor or some German widows and orphans.”
It turns out that Goldman had only dumped part of its holdings prior to the expected default, and is sitting on a sizeable loss, as the FT explains.
Ricardo Penfold, a senior portfolio manager at Goldman Sachs Asset Management, earlier this year swooped on a big slice of a bond issued by PDVSA, Venezuela’s state oil company, people familiar with the matter say. Mr Penfold paid $865m for bonds with a face value of $2.8bn — a price of just under 31 cents on the dollar — reflecting the elevated risks of a default even at the time. While GSAM has since sold off chunks of the bond, it was still listed as the single biggest overall owner of the PDVSA bond maturing in 2022, with a face value holding of $1.3bn at the end of the third quarter. But with Thursday’s announcement that Venezuela would seek to restructure all its foreign bonds, the bond is now trading at 25 cents on the dollar, down from 29 cents at the start of last week. That would translate into a paper loss of $54m in just five days if GSAM has not reduced its stake since the end of the third quarter…
GSAM is listed as the single biggest overall owner of PDVSA debts, according to Bloomberg data based on fund filings, with $1.8bn of face value holdings.
A Goldman spokesman said: “We are monitoring this situation closely.” The summer deal was particularly controversial, attracting condemnation from the Venezuelan opposition and US senator Marco Rubio, because it in effect constituted a cash infusion for the increasingly autocratic government led by Nicolás Maduro. GSAM bought the bond via an intermediary, but it was sold by the central bank.
As we said, and other analysts agree, Goldman should have seen it coming. From the FT article.
Many investors who had been betting that Venezuela would manage to avoid defaulting are nursing losses. Venezuelan bonds suffered a drubbing in the wake of Mr Maduro announcing plans to restructure the country’s $89bn debt pile. “This has been a well-telegraphed train wreck,” said Robert Koenigsberger, head of Gramercy, an emerging markets-focused asset manager.
“There are reasons to expect that prices will go even lower from here.” GSAM and other big Venezuelan bond investors — such as Fidelity, T Rowe Price and Ashmore — could still end up making money from their Venezuelan bond purchases, as analysts expect the ultimate “recovery value” on Venezuelan debt to be higher than where the bonds are trading at now.
While the article suggests the possibility of a more favourable exit for Goldman in due course, the restructuring of Venezuelan debt is not going to be a “plain vanilla” variety. Indeed, it might be more complicated than any previous sovereign debt restructuring. The irony for Goldman, as the FT explains, is that the extension of sanctions by the US Government will make it much harder for the bank to recover its losses.
Venezuela’s plans to restructure its debts are riddled with complications. The mess of bonds issued by the country and PDVSA are hard to disentangle, and oil exports — the country’s sole financial lifeline — are vulnerable to seizures from litigious creditors. However, the biggest wrinkle is the US government’s sanctions on Venezuela, unveiled in August after the GSAM deal. In practice, they prohibit any US institutions from involvement in any Venezuelan debt restructuring.
“Sanctions will prevent a conventional exchange offer,” said Lee Buchheit, a senior partner at Cleary Gottlieb, who has represented a series of countries when they restructure their debts. “It’s really not clear what Maduro has in mind, or whether he even has anything in mind.”
Venezuela owes about $750m in bond arrears and is facing a further $965m of interest payments over November and December, calculates Patrick Esteruelas, global head of research at Emso Asset Management. If Caracas has run out of money — and Russia or China decline to extend more loans to Venezuela — it will have to default. But as long as US sanctions remain in place, this will push Venezuela into financial purgatory of a protracted, unresolvable debt default. “In a world where you can’t pay and you can’t restructure, all you can do is default,” Mr Koenigsberger said. “Even without the sanction, this would have been an exceptionally tough debt restructuring. It will now be exponentially harder than anything we have seen before. And I don’t think that is priced in yet.”
It will be tragically amusing to watch what extraordinary measures the heavily Goldman-influenced White House takes to bail the bank out of its latest predicament.
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings TUESDAY morning 7:00 am
Euro/USA 1.1565 DOWN .0046/ 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 RED
USA/JAPAN YEN 114.12 UP 0.348(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 1.3131 DOWN .0041 (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 1.2758 UP .0045(CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA)
Early THIS TUESDAY morning in Europe, the Euro FELL by 46 basis points, trading now ABOVE the important 1.08 level FALLING to 1.1565; / Last night the Shanghai composite CLOSED UP 25.40 POINTS OR .75% / Hang Sang CLOSED UP 297.54 PTS OR 1.39% /AUSTRALIA CLOSED UP 1.00% / EUROPEAN BOURSES OPENED RED
The NIKKEI: this TUESDAY morning CLOSED UP 9.23 POINTS OR .04%
Trading from Europe and Asia:
1. Europe stocks OPENED RED
2/ CHINESE BOURSES / : Hang Sang CLOSED UP 397.54 POINTS OR 1.39% / SHANGHAI CLOSED UP 25.40 POINTS OR .75% /Australia BOURSE CLOSED UP 1.00% /Nikkei (Japan)CLOSED UP 389.24 POINTS OR 1.73%
INDIA’S SENSEX IN THE RED
Gold very early morning trading: 1277.20
Early TUESDAY morning USA 10 year bond yield: 2.325% !!! DOWN 4 IN POINTS from MONDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. (POLICY FED ERROR)
The 30 yr bond yield 2.799 DOWN 5 IN BASIS POINTS from MONDAY night. (POLICY FED ERROR)
USA dollar index early TUESDAY morning: 95.09 UP 34 CENT(S) from YESTERDAY’s close.
This ends early morning numbers TUESDAY MORNING
And now your closing TUESDAY NUMBERS \1 PM
Portuguese 10 year bond yield: 1.93% DOWN 10 in basis point(s) yield from MONDAY
JAPANESE BOND YIELD: +.032% UP 1 in basis point yield from MONDAY/JAPAN losing control of its yield curve/
SPANISH 10 YR BOND YIELD: 1.408% DOWN 6 IN basis point yield from MONDAY
ITALIAN 10 YR BOND YIELD: 1.702 DOWN 8 POINTS in basis point yield from MONDAY
the Italian 10 yr bond yield is trading 30 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.327% DOWN 2 IN BASIS POINTS ON THE DAY
IMPORTANT CURRENCY CLOSES FOR TUESDAY
Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM
Euro/USA 1.1587 DOWN ,0023 (Euro DOWN 23 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 113.84 UP 0.074(Yen DOWN 7 basis points/
Great Britain/USA 1.3158 DOWN 0.0015( POUND DOWN 15 BASIS POINTS)
USA/Canada 1.2789 UP.0076 Canadian dollar DOWN 76 Basis points AS OIL ROSE TO $57.15
This afternoon, the Euro was DOWN 23 to trade at 1.1587
The Yen FELL to 113.84 for a LOSS of 7 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 15 basis points, trading at 1.3159/
The Canadian dollar FELL by 74 basis points to 1.2789 WITH WTI OIL RISING TO : $57.15
Your closing 10 yr USA bond yield DOWN 2 IN basis points from MONDAY at 2.303% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 2.769 DOWN 3 in basis points on the day /
Your closing USA dollar index, 94.93 UP 17 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 TUESDAY: 1:00 PM EST
London: CLOSED DOWN 49.17 POINTS OR 0.65%
German Dax :CLOSED DOWN 89.52 POINTS OR 0.86%
Paris Cac CLOSED DOWN 26.61 POINTS OR 0.48%
Spain IBEX CLOSED DOWN 85.80 POINTS OR 0.83%
Italian MIB: CLOSED DOWN 40.26 POINTS OR 0.18%
The Dow closed up 8,81 POINTS OR .04%
NASDAQ WAS closed DOWN 16.65 PTS OR 0.27% 4.00 PM EST
WTI Oil price; 57.15 1:00 pm;
Brent Oil: 63.73 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 59.34 UP 106/100 ROUBLES/DOLLAR (ROUBLE LOWER BY 106 BASIS PTS)
TODAY THE GERMAN YIELD FALLS TO +.327% 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:$57.23
USA 10 YR BOND YIELD: 2.314% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 2.777%
EURO/USA DOLLAR CROSS: 1.1587 DOWN .0024
USA/JAPANESE YEN:113.97 up 0.200
USA DOLLAR INDEX: 94.92 up 16 cent(s)/
The British pound at 5 pm: Great Britain Pound/USA: 1.3164 : down 9 POINTS FROM LAST NIGHT
Canadian dollar: 1.2779 DOWN 65 BASIS pts
German 10 yr bond yield at 5 pm: +0.327%
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM FOR THE DAY
Yield Curve & Credit Markets Are Flashing Red As Small Caps Slump On Tax Turmoil
Overheard in Washington today…
Equities slipped, the dollar gained and the Treasury yield curve flattened further as markets reacted to the suggestion that Senate tax writers will release a bill Thursday, according to Senate Finance Chairman Orrin Hatch.
Stock indexes across the Gulf were among the world’s worst performers, with Saudi Arabia’s Tadawul All Share Index falling the most in a year before paring losses.
Since the Saudi shenanigans, bonds and bullion are outperforming…
Trannies and Small Caps are notably weak as Dow, S&P, and Nasdaq cling to unch on the week… (Small Caps worst day in 3 months)
The Dow was desperately pumped back to green by the close… another new record high…
It was also a very weak breadth day…
Blue Apron was very red…
And Red Robin shareholders were blue…
Tax reform hopes faded notably today…
We also wanted to noted this chart – have you ever seen a chart so placidly plodding higher without a heart beat?
High yield credit markets continue to signal trouble…
And as the cost of protecting credit has recently surged, so the cost of protecting stocks has decoupled from the underlying…
Equity vol has ben languishing for months but the last wek or so has seen FX and Rates volatility collapse… (FX Vol now at 3 year lows and Rate vol at record lows)
High yield bond prices (HYG) are the furthest below the 200DMA since the election…
Treasury yields were mixed with the long-end lower in yield and short-end unch…
With the yield curve crashing through 80bps – flattest since Nov 2007… This is the 8th day in a row of flattening – the longest streak in two years! Who’s to blame?
Elsewhere in the world, Venezuela is bloodbathing…
The Dollar Index rebounding from yesterday’s tumble but rolled over into the end of the US session back into red on the week…
Bitcoin slid again today, but held above $7000…
WTI fell vey modestly clinging to post-Saudi gains…
Gold was slightly lower today but continues the chaotic trading patterns around the US equity open…
But crude remains the week’s commodity winner while copper is lagging…
And finally, there’s this… worst day for small caps in 3 months today…
Brick-and-Mortar Meltdown Sinks Property Prices
By Wolf Richter, WOLFSTREET.com:
Commercial real estate prices soared relentlessly for years after the Financial Crisis, to such a degree that the Fed has been publicly fretting about them. Why? Because US financial institutions hold nearly $4 trillion of commercial real estate loans. But the boom in most CRE sectors is over.
The Green Street Property Price Index – which measures values across five major property sectors – had soared 107% from May 2009 to the plateau that began late last year, and 27% from the peak of the totally crazy prior bubble that ended with such spectacular fireworks. But it has now turned around, dragged down by a plunge in prices for retail space.
The CPPI by Green Street Advisors dropped 1.1% in October from September. In terms of points, the 1.4-point decline was the largest monthly decline since March 2009. The index is now below where it had been in June 2016:
This phenomenal bubble, as depicted by the chart above, has even worried the Fed because US financial institutions hold nearly $4 trillion of CRE loans, according to Boston Fed governor Eric Rosengren earlier this year. Of them, $1.2 trillion are held by smaller banks (less than $50 billion in assets). These smaller banks tends to have a loan book that is heavily concentrated on CRE loans, and these banks are less able to withstand shocks to collateral values.
Rosengren found that among the root causes of the Financial Crisis “was a significant decline in collateral values of residential and commercial real estate.”
But the CRE bubble isn’t unraveling as gently as the chart suggests. Some sectors are still surging, while others are plunging. According to the report, the index, which captures the prices at which CRE transactions are currently being negotiated and contracted, “was pushed down by falling mall valuations.”
Which sector is plunging, and which is soaring?
Brick-and-mortar retail space is getting crushed. The index for strip retail fell 5% year-over-year. And the index for mall prices plunged 6% in just the month of October from September – a huge move in one month – and are down 11% from a year ago.
The self-storage sector, formerly the hottest sector of them all, having surged 180% since the trough of the Financial Crisis, has turned cold, and prices are down 3% year-over year.
Lodging took a 12% plunge that started in 2015, and it never recovered. It has remained essentially flat since, currently with a 1% gain over the beaten-down levels last year. Lodging has been under attack from a structural shift to home-sharing rentals, such as Airbnb, and even at its peak in 2015, the index barely hit its peak before the Financial Crisis, before dropping again. It is now down about 10% from its 2007 peak.
The industrial sector is hot. The index jumped 10% year-over-year in October. Industrial includes warehouse space for “fulfillment centers,” as Amazon calls them. They are in hot demand, not only from Amazon, which has been leasing them around the country, but also from other logistics and retail companies involved in the online retail boom.
The apartment sector is still hanging on by its fingernails, with prices up a measly 1% from a year ago, but down from their peak.
The office sector index rose 3% year-over-year. While price growth has slowed, there has been no significant decline in recent months.
Healthcare is still rising, up 4% year-over-year, as the industry takes up an ever larger slice of the US economy.
The CPPI is based on estimates of private-market value for REIT portfolios across the five major property sectors with an aggregate asset value of $600 billion, according to Green Street Advisors. Since REITs own high-quality properties, the index measures the value of institutional-quality commercial real estate.
Investors tend to jump on the next hot trend, and years ago, they jumped on retail malls in the hope that the American consumer couldn’t ever be crushed. That is likely true. But that consumer has changed buying habits, and malls are being left out. Maybe these folks should have bought gold coins instead. At least they’d have something that doesn’t have to be razed, which is the fate many malls are facing.
CRE is clearly showing the side effects of the structural switch to online retailing. For retailers with a large brick-and-mortar presence that are trying to restructure their operations and finances to survive in this era, or for their landlords such as REITs, this structural change will drag out for years and will be painful. But for some, this (creative) destruction in the brick-and-mortar meltdown is already painful. Read… Malls and their Hapless Investors Keep Getting Crushed
David Stockman discusses two important points:
- the bet of the USA is out of control
- the tax reform bill will solve nothing
(courtesy David Stockman)
Stockman Exposes “The Black Swan In Plain Sight” – Debt Out The Wazoo
The black swan in plain sight does emit the Donald’s orangish glow, but at the end of the day its true color is actually red.
That is, monumental towers of rapidly rising debt loom everywhere on the planet. For the moment, the artificial cash flow from this unsustainable borrowing spree is keeping a simulacrum of growth and prosperity alive. Yet this whole outbreak of debt madness—-represented by $225 trillion outstanding on a global basis—-is careening toward a financial and economic dead end that will soon crush today’s fiscally profligate politicians and heedless financial punters, alike, in a devastating reset of bond yields.
For our first case in point, the always excellent Wolf Richter published a great chart over the weekend on the exploding US public debt. To say the least, it constitutes a clanging wake-up call amidst the absolute fantasy world that prevails on both ends of the Acela Corridor. That’s because during the mere 8 weeks since the public debt ceiling was suspended by the Donald’s end-run with Nancy and Chuckles in September, the national debt has spiked by $640 billion.
That’s about $16 billion per Federal business day, and they are not done yet. The US Treasury will continue to borrow heavily until the current debt ceiling “suspension” expires on December 8—-at which time it will repair to the old game of divesting trusting funds and employing other gimmicks which circumvent the ceiling, while waiting for Congress to blink and raise the ceiling or authorize a new “temporary” suspension.
As Wolf pointed out, this pattern played out during the debt showdowns of 2013 and 2015, as well, when the resulting “temporary” suspension resulted in borrowing spikes of $464 billion and $650 billion, respectively.
Accordingly, Washington has suspended it way into a $5.7 trillion increase in the public debt in just six years since October 2011. That is, during a period which supposedly constitutes the third longest business expansion in US history.
Indeed, when viewed in cyclical context the latest spike screams out a severe warning. To wit, in the 12 months since the election shock of November 8, 2016, the net public debt— after giving effect to the fluctuations in the cash balance—-has risen by $870 billion to the current total of nearly $20.28 trillion.
That’s right. Way late in the business cycle—–between month #89 and month #101 of the expansion—-the debt is increasing at a rate just under $1 trillion annually. Yet there is virtually no one in the Imperial City or in the Wall Street casino who has even noticed.
Nor have they noticed that revenue collections continue to weaken—-even as a massive surge of spending for the four disasters since August—Texas, Florida, California (fires) and Puerto Rico—– crank up, along with the Donald’s sharply increased temp0 of defense operations.
During the last four months (July through October), in fact, revenue collections came in at $918 billion. That represented just a 2.9% gain over the $892 billion collected in the same prior year period, and barely 1% in real terms after factoring in CPI inflation during the interim.
Needless to say, adding a $1.5 trillion deficit-financed tax cut on top of that over the next decade—–when a public debt of $31 trillion is already guaranteed by the cumulative baseline deficits through 2027— would be the height of folly even under ordinary circumstances. But there are currently two aggravating circumstances that make it even more dubious.
First, as we demonstrated in our post on Friday, the Brady mark is neither a middle class tax cut nor a supply side growth and jobs stimulant; it’s actually a giant windfall to the top 1% and 10%, who own most of the financial assets and especially equities.
That’s because the bill cuts Federal income taxes for the very wealthy by $2.2 trillion over the next decade owing to repeal of the minimum tax, phase-out of the estate tax and the sharp reduction in tax rates on business profits to 20% and 25% for corporate and pass-thru entities, respectively.
Yet the net tax cut for the entire Brady bill over ten years—according to the Joint Committee on Taxation—is just $1.49 trillion. That means, obviously, everyone else is getting a $700 billion increase.
Needless to say, we don’t see much incremental growth from the $2.2 trillion windfall to the top of the economic ladder. We are quite sure, for example, that the 5500 dead people who will benefit from the estate tax repeal each year will not work harder or invest more as a result.
Likewise, we don’t see the 3.2 million minimum tax filers shortening their vacations or cutting back on luxury purchases in order to generate more output and investment from the repeal of that levy.
If anything, it will cause taxable incomes for lawyers, accounts and consultants to fall, thereby reducing Federal revenues. Indeed, like much else in the IRS code, the alternative minimum tax is not so much anti-work, as it is pro-complexity and waste.
Moreover, it is certain beyond much doubt that upwards of 90% of the increased after-tax cash flows from the business rate cuts will go to shareholders in the form of higher dividends and stock buybacks, not increased investments in productive assets or high payments for existing or added workers.
In fact, in a globally mobile and competitive labor market where the US is at the top of the cost curve, wage rates on the margin are set by the India Price for back office services and the China Price for goods. That’s why IBM raised its job count in India from zero in 1993 to 130,000 at present, while cutting its domestic employment count from 150,000 to less than90,000.
What this means is that the great off-shoring of the US economy has occurred owing to economic causes and the technological enablement of the global internet. These include dramatically lower labor rates abroad and proximity to materials, supply chains and end customer markets, not the statutory tax rate. IBM’s effective tax rate, for example, is 11% and that’s not atypical.
Indeed, a recent study of the largest US companies with positive net income over a six year period showed that the average effective tax rate was only 14%. That is, the big cap internationals have already given themselves a big tax cut “selfie” by moving their tax books to the Caribbean, the Channel isles and other tax havens in addition to the impact of economically-driven off-shoring.
In this context, the smiling dufus the Trump White House named as CEA Chairman, Kevin Hassett, needs be thoroughly debunked. He now claims—contrary to all evidence and logic— that the corporate income tax is shifted onto wages and that the 20% rate is therefore worth $4,000 per household in higher earnings!
That’s complete malarkey, of course.Then again, contrary to all evidence and logic, Hassett also predicted the Dow would hit 36,000 in the year 2000.
In short, the Dems have never cared about the deficit and are now just harrumphing about it because the Brady bill does not benefit their constituencies and because it being pursued on a strictly partisan basis. And now that the Donald has left the Congressional GOP crazed and desperate for a “win,” they, too, have thrown fiscal sanity to the winds and, instead, are signing up for a double catastrophe.
That is, they are embracing a giant, politically-stupid “trickle down” tax cut that will not make it to the legislative finish line, but will be a huge loser in the 2018 campaigns.
At the same time, they have punted completely on the spending side of the equation by using the FY 2018 budget resolution as a phony vehicle for parliamentary maneuver (i.e. 51-vote reconciliation in the Senate), thereby guaranteeing that the automatic spending machine for entitlements and debt service—70% of the total—will roll forward unmolested.
And that gets to the other aggravating factor. Namely, for the first time in 30 years, the Fed will be embarking upon a huge, unprecedented demonetization campaign that will dramatically expand the supply of existing treasury debt looking for a home among real money savers—even as the doomsday machines drives annual Federal borrowing above the $1 trillion per year mark.
And there is no respite in sight as far as the eye can see owing to the surging numbers of baby boomers retiring and their impact on social security payments and the medical entitlements.
Indeed, we estimate that in the next four years, the US alone will add $5 trillion to the Treasury float—even as the Fed disgorges upwards of $2 trillion of existing debt securities. At the same time, the other central banks—led by the ECB and the People’s Bank of China—will be forced to exit the bond buying business as well or experience economically devastating declines in their exchange rate against the dollar.
That means, in turn, that the safety valve of the bond supply being sequestered in foreign central banks will also disappear from the global fixed income markets, thereby adding to the yield crunch coming down the pike.
Needless to say, the entire world economy will reel under the impact of rising yields because current asset valuations and the cash management practices of business and households alike are predicated upon ultra- low yields.
In this regard, the 100 months of so-called recovery have been wasted from a deleveraging point of view. In the case of the US household sector, for example, the 20-year surge in debt obligations prior to the 2008 crisis caused total liabilities outstanding to soar by 5.2X, and to rise from 57% of GDP when Greenspan launched the era of bubble finance in Q3 1987 to nearly 100% of GDP on the eve of the crisis.
Nevertheless, after a small net reduction in debt immediately after the crisis, total household liabilities have continued to rise, and now exceed $15.1 trillion. Accordingly, just 250 basis points of interest normalization will cause the carry cost of household debt to rise by upwards of $400 billion per year or nearly triple the amounts of the ballyhooed tax cut.
Needless to say, US households will be far from alone—and also far from the most vulnerable balance sheets—-in the coming global reset of debt costs. At present, the Red Ponzi is staggering under $40 trillion of state and private debt or more than 3.5X its nominal GDP—-as vastly overstated and unsustainable as its official GDP figures actually are.
But during the weeks since the coronation of Mr. Xi occurred at China’s 19th communist party Congress, its bond yields have been rising sharply to three year highs; and its yield curve has plunged into negative territory for the longest continuous period on record.
We can’t even imagine the carnage that will occur among China’s vastly inflated financial and real estate assets when global yields commence their inexorable rise. Nor is it easy to anticipate the crescendo of negative feedbacks that will incessantly pound its debt-driven hot-house economy.
But we are quite sure that Wall Street’s current phony “synchronized global growth” meme will vanish almost instantly when the latest short-lived China credit impulse disappears from the world trading system.
The fundamentals currently don’t matter, as is underscored in the chart below. That is, fundamentals don’t matter until they do—-and then the reset in the stock market will be devastating, as well.
As Lance Roberts succinctly explained in a post last weekend:
“The chart below expands that analysis to include four measures combined: Economic growth, Top-line Sales Growth, Reported Earnings, and Corporate Profits After Tax. While quarterly data is not yet available for the 3rd quarter, officially, what is shown is the market has grown substantially faster than all other measures. Since 2014, the economy has only grown by a little less than 9%, top-line revenues by just 3% along with corporate profits after tax, and reported earnings by just 2%. All of that while asset prices have grown by 29% through Q2.”
At the end of the day, you can’t borrow your way to prosperity. That’s the oldest rule in the book of sound money and sustainable finance.
And it’s about ready to be learned all over again.
“Dead-On-Arrival”-er? Cruz Says He’s A ‘No’ On Tax Reform
Remember when we declared the Trump tax reform effort officially “dead on arrival” yesterday after Senator John McCain affirmed that he would vote against anything that resembles the House bill in its current form? McCain’s opposition, by our count, brought the number of ‘no’ votes to three: Aside from McCain, Maine Senator Susan Collins said she would vote against the bill, as did Tennessee Senator Bob Corker.
Well, as of now, the odds of tax reform’s passage have plunged from low to infinitesimal following a Hill report that Senator Ted Cruz has added his voice to the chorus of nays. The news comes as Senate Republicans have struggled with the timeline for unveiling their version of the tax reform package. The bill was initially expected to be introduced on Thursday, but earlier today, GOP leaders said the bill wouldn’t be ready until next week. Then they walked that back. As of now, it looks like the bill is set to be introduced on Thursday.
Cruz is opposing the bill because he’s against eliminating deductions for state and local taxes that critics say would disproportionally raise taxes on residents of blue states. He explained that raising taxes in these states would be “a mistake.”
“There are some taxpayers who are losing exemptions, particularly in some high-tax states like New York or California that could conceivably be paying higher taxes. I think that is a mistake. I think tax reform needs to cut taxes for everybody,” Cruz told reporters at a press conference Tuesday.
Cruz announced his opposition shortly after the New York Times will raise taxes on one third of middle class families.
Senator Ted Cruz of Texas is pushing to keep alive the idea of including a repeal of Obamacare’s individual mandate in the tax overhaul plan,
At a news conference Tuesday, Cruz said it’s vital to use the tax legislation to end the mandate that all Americans have health insurance or pay a penalty. If nothing else, he said, doing so will in effect be a tax cut for the 6.5 million Americans who now pay a penalty because they don’t have health insurance coverage, according to Bloomberg.
Trump has advocated for including a repeal of the individual mandate in the bill, while House Speaker Paul Ryan said over the weekend that lawmakers were considering it.
“I think it’s critical to make this end,” he said of the mandate.
Fellow conservative Sens. Tom Cotton and Rand Paul have joined Cruz in calling for the individual mandate repeal.
Cruz has said repealing the individual mandate would result in another $400 billion or so in revenue that could be used to offset tax cuts in other areas.
However, a senior Senate GOP source familiar with the tax bill the Senate Finance Committee plans to unveil Thursday said it likely won’t include language to repeal the mandate.
“We’re not going in that direction,” the source said.
As it stands now, even if the House passes their version of the bill, it probably would stall in the senate. And if the Senate passes a version with significant deviations from the House version, the bill might never make it past reconciliation.
Still, stocks barely reacted to the news about Cruz and McCain announcing their opposition to the legislation, as investors cling to the hope that Trump will succeed in passing at least one of his legislative priorities before the midterms. Meanwhile, in what appears to be a desperate attempt to circumvent obstinate Republicans, Axios reported yesterday that Gary Cohn and Marc Short – Trump’s legislative director – will be meeting with senate Democrats to discuss the bill.
US Credit Card Debt Rises Above $1 Trillion As Student, Auto Loans Hit All Time High
Earlier in 2017, using the latest Fed data newspapers and financial media reported that US consumer credit card debt had risen above $1 trillion for the first time since the financial crisis. Ironically, just a few months later the Fed revised its data series sending the revolving credit total back under this “psychological number.” At least until today, when the latest consumer credit update from the Fed disclosed that in September, consumer credit rose by $20.8 billion, more than the $17.5 billion expected, of which $14.4 billion was non-revolving, auto and student loans, and $6.4 billion was credit card debt. Total consumer credit rose by 6.6% Y/Y, rising to $3.788 trillion as of Sept. 30. This was the single biggest monthly increase since November 2016.
And while nonrevolving credit reached a fresh record high of $2.782 trillion, revolving – or credit card debt – is now back over a trillion dollars, or $1.006 trillion to be precise, and fast approaching the all time bubble high of $1.02 trillion hit in the summer of 2008.
And speaking of student and auto loans, the Fed’s latest data showed that in the third quarter, these rose to a new all time high, of $1.112 trillion for auto loans, and a record $1.486 trillion in student loans. The Fed also reported that nonrevolving lending to consumers by the Federal government, which is mainly student loans, rose to $1.137t, on a non-seasonally adjusted basis.
Well that about does it for tonight
I WILL SEE YOU ON WEDNESDAY NIGHT