GOLD: $1336.75 UP $2.30
Silver: $17.20 UP 5 cents
Closing access prices:
Gold $1338.50
silver: $17.20
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: $1348.63 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1341.00
PREMIUM FIRST FIX: $7.63
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SECOND SHANGHAI GOLD FIX: $1346.42
NY GOLD PRICE AT THE EXACT SAME TIME: $1339.32
Premium of Shanghai 2nd fix/NY:$7.16
SHANGHAI REJECTS NY /LONDON PRICING OF GOLD
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LONDON FIRST GOLD FIX: 5:30 am est $1334.95
NY PRICING AT THE EXACT SAME TIME: $1334.65
LONDON SECOND GOLD FIX 10 AM: $1333.85
NY PRICING AT THE EXACT SAME TIME. $1333.10
For comex gold:
JANUARY/
NUMBER OF NOTICES FILED TODAY FOR JANUARY CONTRACT: 12 NOTICE(S) FOR 1200 OZ.
TOTAL NOTICES SO FAR: 449 FOR 44900 OZ (1.3965 TONNES),
For silver:
jANUARY
31 NOTICE(S) FILED TODAY FOR
155,000 OZ/
Total number of notices filed so far this month: 573 for 2,865,000 oz
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Bitcoin: BID $12,319/OFFER $12,429 DOWN $1225 (morning)
Bitcoin: BID 10,480/OFFER $10,586 DOWN $3086(CLOSING)
end
Let us have a look at the data for today
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In silver, the total open interest ROSE BY A HUGE 3979 contracts from 196,444 RISING TO 200,423 WITH FRIDAY’S 20 CENT RISE IN SILVER PRICING. WE HAD NO COMEX LIQUIDATION BUT WITHOUT A DOUBT WE WITNESSED ANOTHER FAILED MAJOR BANK SHORT- COVERING OPERATION ON FRIDAY. NOT ONLY THAT , WE WERE AGAIN NOTIFIED THAT WE HAD ANOTHER SMALL SIZED NUMBER OF COMEX LONGS TRANSFERRING THEIR CONTRACTS TO LONDON THROUGH THE EFP ROUTE: 483 EFP’S FOR MARCH AND ZERO FOR OTHER MONTHS AND THUS TOTAL ISSUANCE OF 483 CONTRACTS. HOWEVER THE MOVEMENT ACROSS TO LONDON IS NOT AS SEVERE AS IN GOLD AS THERE SEEMS TO BE MAJOR PLAYERS WILLING TO TAKE ON THE BANKS AT THE COMEX. STILL, WITH THE TRANSFER OF 483 CONTRACTS, WHAT THE CME IS STATING IS THAT THERE IS NO SILVER (OR GOLD) TO BE DELIVERED UPON AT THE COMEX AS THEY MUST EXPORT THEIR OBLIGATION TO LONDON. ALSO KEEP IN MIND THAT THERE CAN BE A DELAY OF 24 HRS IN THE ISSUING OF EFP’S.
ACCUMULATION FOR EFP’S/SILVER/ STARTING FROM FIRST DAY NOTICE/FOR MONTH OF JANUARY:
24,244 CONTRACTS (FOR 11 TRADING DAYS TOTAL 24,244 CONTRACTS OR 121.220 MILLION OZ: AVERAGE PER DAY: 2204 CONTRACTS OR 11.020 MILLION OZ/DAY)
TO GIVE YOU AN IDEA AS TO THE HUGE SUPPLY THIS MONTH IN SILVER: SO FAR THIS MONTH: 121.220 MILLION PAPER OZ HAVE MORPHED OVER TO LONDON. THIS REPRESENTS AROUND 19.04% OF ANNUAL GLOBAL PRODUCTION
RESULT: A HUGE SIZED GAIN IN OI COMEX WITH THE GOOD 20 CENT RISE IN SILVER PRICE WHICH USUALLY INDICATES ANOTHER FAILED BANKER SHORT-COVERING. WE ALSO HAD A SMALL SIZED EFP ISSUANCE OF 483 CONTRACTS WHICH EXITED OUT OF THE SILVER COMEX AND TRANSFERRED THEIR OI TO LONDON AS FORWARDS. SPECULATORS WERE MORE INTERESTED IN ATTACKING THE SILVER COMEX INSTEAD OF MOVING THEIR LONGS TO LONDON. FROM THE CME DATA 484 EFP’S WERE ISSUED FOR TODAY FOR A DELIVERABLE FORWARD CONTRACT OVER IN LONDON WITH A FIAT BONUS. WE REALLY GAINED 4462 OI CONTRACTS i.e. 483 open interest contracts headed for London (EFP’s) TOGETHER WITH A INCREASE OF 3979 OI COMEX CONTRACTS. AND ALL OF THIS HAPPENED WITH THE RISE IN PRICE OF SILVER OF 20 CENTS AND A CLOSING PRICE OF $17.15 WITH RESPECT TO FRIDAY’S TRADING. YET WE STILL HAVE A GOOD AMOUNT OF SILVER STANDING AT THE COMEX.
In ounces AT THE COMEX, the OI is still represented by just OVER 1 BILLION oz i.e. 1.0020 BILLION TO BE EXACT or 140% of annual global silver production (ex Russia & ex China).
FOR THE NEW FRONT JANUARY MONTH/ THEY FILED: 31 NOTICE(S) FOR 155000 OZ OF SILVER
In gold, the open interest ROSE BY A CONSIDERABLE 10,992 CONTRACTS UP TO 574,992 WITH THE SOLID RISE IN PRICE OF GOLD WITH FRIDAY’S TRADING ($11.65). IT LOOKS LIKE OUR BANKERS STARTED TO COVER THEIR GOLD SHORTS IN A SIMILAR FASHION TO WHAT WE ARE WITNESSING IN SILVER. IN ANOTHER HUGE DEVELOPMENT, WE RECEIVED THE TOTAL NUMBER OF GOLD EFP’S ISSUED FRIDAY FOR MONDAY AND IT TOTALED A GOOD SIZED 7163 CONTRACTS OF WHICH THE MONTH OF FEBRUARY SAW 7163 CONTRACTS AND APRIL SAW THE ISSUANCE OF 0 CONTRACTS The new OI for the gold complex rests at 574,992. DEMAND FOR GOLD INTENSIFIES GREATLY AS WE CONTINUE TO WITNESS A HUGE NUMBER OF EFP TRANSFERS TOGETHER WITH THE MASSIVE INCREASE IN GOLD COMEX OI TOGETHER WITH THE TOTAL AMOUNT OF GOLD OUNCES STANDING FOR JANUARY COMEX. EVEN THOUGH THE BANKERS ISSUED THESE MONSTROUS EFPS, THE OBLIGATION STILL RESTS WITH THE BANKERS TO SUPPLY METAL BUT IT TRANSFERS THE RISK TO A LONDON BANKER OBLIGATION AND NOT A NEW YORK COMEX OBLIGATION. LONGS RECEIVE A FIAT BONUS TOGETHER WITH A LONG LONDON FORWARD. THUS, BY THESE ACTIONS, THE BANKERS AT THE COMEX HAVE JUST STATED THAT THEY HAVE NO APPRECIABLE METAL!! THIS IS A MASSIVE FRAUD: THEY CANNOT SUPPLY ANY METAL TO OUR COMEX LONGS BUT THEY ARE QUITE WILLING TO SUPPLY MASSIVE NON BACKED GOLD (AND SILVER) PAPER KNOWING THAT THEY HAVE NO METAL TO SATISFY OUR LONGS. LONDON IS NOW SEVERELY BACKWARD IN BOTH GOLD AND SILVER (BIG RISE IN BOTH GOFO AND SIFO) AND WE ARE WITNESSING DELAYS IN ACTUAL DELIVERIES. IN ESSENCE WE HAVE ANOTHER GOOD GAIN OF 18,155 OI CONTRACTS: 10,992 OI CONTRACTS INCREASED AT THE COMEX AND A GOOD SIZED 7163 OI CONTRACTS WHICH NAVIGATED OVER TO LONDON.
FRIDAY, WE HAD 11170 EFP’S ISSUED.
ACCUMULATION OF EFP’S/ GOLD(EXCHANGE FOR PHYSICAL) FOR THE MONTH OF JANUARY STARTING WITH FIRST DAY NOTICE: 98,765 CONTRACTS OR 9.8765 MILLION OZ OR 307.20 TONNES (11 TRADING DAYS AND THUS AVERAGING: 8,978 EFP CONTRACTS PER TRADING DAY OR 8,978 OZ/DAY)
TO GIVE YOU AN IDEA AS TO THE HUGE SIZE OF THESE EFP TRANSFERS : SO FAR THIS MONTH IN 11 TRADING DAYS: IN TONNES: 307 TONNES
TOTAL ANNUAL GOLD PRODUCTION, 2017, THROUGHOUT THE WORLD EX CHINA EX RUSSIA: 2200 TONNES
THUS EFP TRANSFERS REPRESENTS 307/2200 TONNES = 13.95% OF GLOBAL ANNUAL PRODUCTION SO FAR IN JANUARY ALONE.
Result: A CONSIDERABLE SIZED INCREASE IN OI AT THE COMEX DESPITE THE SOLID RISE IN PRICE IN GOLD TRADING ON YESTERDAY ($11.65). WE HAD ANOTHER FAIR SIZED NUMBER OF COMEX LONG TRANSFERRING TO LONDON THROUGH THE EFP ROUTE: 7163. THERE OBVIOUSLY DOES NOT SEEM TO BE MUCH PHYSICAL GOLD AT THE COMEX AND YET WE ALSO OBSERVED A HUGE DELIVERY MONTH FOR THE MONTH OF DECEMBER. I GUESS IT EXPLAINS THE HUGE ISSUANCE OF EFP’S…THERE IS HARDLY ANY GOLD PRESENT AT THE GOLD COMEX FOR DELIVERY PURPOSES. IF YOU TAKE INTO ACCOUNT THE 7163 EFP CONTRACTS ISSUED, WE HAD A NET GAIN IN OPEN INTEREST OF 18,155 contracts ON THE TWO EXCHANGES:
7163 CONTRACTS MOVE TO LONDON AND 10,992 CONTRACTS INCREASED AT THE COMEX. (in tonnes, the gain in total oi equates to 56.47 TONNES)
we had: 12 notice(s) filed upon for 1200 oz of gold.
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With respect to our two criminal funds, the GLD and the SLV:
GLD
With gold up again today, we had no changes in inventory from the GLD:
Inventory rests tonight: 828.96 tonnes.
SLV/
NO CHANGES IN SILVER INVENTORY AT THE SLV/
INVENTORY RESTS AT 316.348 MILLION OZ/
end
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver ROSE BY A CONSIDERABLE 3979 contracts from 196,444 UP TO 200,423 (AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) WITH THE GOOD RISE IN PRICE OF SILVER TO THE TUNE OF 20 CENTS WITH RESPECT TO FRIDAY’S TRADING. WE HAD WITHOUT A DOUBT ANOTHER FAILED SHORT COVERING FROM OUR BANKERS AS THEY HAVE CAPITULATED.HOWEVER THIS TIME THEY WERE JOINED BY GOLD. NOT ONLY THAT BUT OUR BANKERS USED THEIR EMERGENCY PROCEDURE TO ISSUE ANOTHER SMALL 483 PRIVATE EFP’S FOR MARCH (WE DO NOT GET A LOOK AT THESE CONTRACTS AS IT IS PRIVATE BUT THE CFTC DOES AUDIT THEM) AND 0 EFP’S FOR ALL OTHER MONTHS . EFP’S GIVE OUR COMEX LONGS A FIAT BONUS PLUS A DELIVERABLE PRODUCT OVER IN LONDON. WE HAD NO COMEX SILVER COMEX LIQUIDATION. IF WE TAKE THE OI GAIN AT THE COMEX OF 43979 CONTRACTS TO THE 483 OI TRANSFERRED TO LONDON THROUGH EFP’S WE OBTAIN A GAIN OF 4462 OPEN INTEREST CONTRACTS IN CONJUNCTION WITH ANOTHER FAILED BANKER SHORT COVERING. WE STILL HAVE A GOOD AMOUNT OF SILVER OUNCES THAT ARE STANDING FOR METAL IN JANUARY (SEE BELOW). THE NET GAIN TODAY IN OZ ON THE TWO EXCHANGES: 22.31 MILLION OZ!!!
RESULT: A STRONG SIZED INCREASE IN SILVER OI AT THE COMEX WITH THE SOLID RISE OF 20 CENTS IN PRICE (WITH RESPECT TO FRIDAY’S TRADING). BUT WE ALSO HAD ANOTHER 483 EFP’S ISSUED TRANSFERRING COMEX LONGS OVER TO LONDON. TOGETHER WITH THE GOOD SIZED AMOUNT OF SILVER OUNCES STANDING FOR JANUARY, DEMAND FOR PHYSICAL SILVER INTENSIFIES AS WE WITNESS MAJOR BANK SHORT COVERING ACCOMPANIED BY INCREASES IN GOFO AND SIFO RATES INDICATING SCARCITY.
(report Harvey)
.
2.a) The Shanghai and London gold fix report
(Harvey)
2 b) Gold/silver trading overnight Europe, Goldcore
(Mark O’Byrne/zerohedge
and in NY: Bloomberg
3. ASIAN AFFAIRS
i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 26.11 points or 0.77% /Hang Sang CLOSED UP 565.88 pts or 1.87% / The Nikkei closed UP 236.93 POINTS OR 1.00%/Australia’s all ordinaires CLOSED DOWN 0.35%/Chinese yuan (ONSHORE) closed WELL UP at 6.4422/Oil UP to 63.95 dollars per barrel for WTI and 69.38 for Brent. Stocks in Europe OPENED GREEN EXCEPT LONDON. ONSHORE YUAN CLOSED UP AGAINST THE DOLLAR AT 6.4422. OFFSHORE YUAN CLOSED UP AGAINST THE ONSHORE YUAN AT 6.4388 //ONSHORE YUAN MUCH STRONGER AGAINST THE DOLLAR/OFF SHORE STRONGER TO THE DOLLAR/. THE DOLLAR (INDEX) IS MUCH WEAKER AGAINST ALL MAJOR CURRENCIES. CHINA IS STILL HAPPY TODAY.(GOOD MARKETS )
3a)THAILAND/SOUTH KOREA/NORTH KOREA
i)/South Korea/North Korea
Tillerson breaks with Trump as he rejects a freeze of military exercises near North Korea for a freeze of their nuclear activities
( zerohedge)
b) REPORT ON JAPAN
i)Foreign exchange hedge costs have skyrocketed for Japanese investors and that is the reason for their purchase of USA treasuries to tumble.
( zerohedge)
ii)This is a must read…Albert Edwards speculates that it will be Japan that will trigger the global unwind. Why? because he believes Japan is finally heating up economically and that the central bank of Japan will have to cool their jets. This will force the shorts to cover their massive USA/Yen short and thus end the huge yen carry trade
3 c CHINA
i)Chinese rating agency, Dagong downgrades USA sovereign credit rating from A minus to BBB plus and they warn that a USA insolvency would detonate the next crisis
( zerohedge)
ii)Trump warns China that the USA trade deficits are getting worse and are “not sustainable”
4. EUROPEAN AFFAIRS
ii)England
( zerohedge)
(courtesy zerohedge)
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
( zerohedge)
ii)NATO ally Turkey is threatening a massive invasion in northwest Syria trying to dislodge the kurds from AFRIN. Syria.
6 .GLOBAL ISSUES
1/3 of Canadians cannot pay their monthly bills as interest rates set to rise
( Globe and Mail)
7. OIL ISSUES
Russia, upon seeing a high value for oil, may decide to exit from the OPEC deal.
( Z. Calcuttawala/OilPrice.com)
8. EMERGING MARKET
9. PHYSICAL MARKETS
( Ted Butler)
ii)Saturday
( zero hedge)
iii)Sunday night: Cryptos originally slide and then rebound:
( zerohedge)
iv)Monday night/Tuesday morning:
Cryptos slide after another South Korean shutdown by the Finance Ministry.
( zerohedge)
v)Bitcoin just crashed below 12,000 dollars (down over 20%) amid growing fears of a crackdown
( zerohedge)
vi)Another crypto exchange, Kraken went offline last night at 9 pm est and that is getting users very nervous
( Bloomberg/GATA)
vii)A terrific interview of Eric Sprott as he talks about the huge numbers of EFP’s issued. I have been commenting that for gold this phenomenon has been going on for two years.
Nick Laird has graphed the totals issued for gold and for 2017: 6600 tonnes have transferred to London. Sprott agrees with me that the comex is a fraud vs the real market for gold.
( Hemke/Sprott/Gata)
viii)Only Libor? Nine banks have been accused of rigging the key Libor lending rates
( McLannahan/London Financial Times)
10. USA stories which will influence the price of gold/silver
ii)Soft data, Empire manufacturing falters to 6 month lows as orders and work hours plunge( zerohedge)
iii)This does not look good: Bellwether GE tumbles badly after a massive finance arm charge
(courtesy zerohedge)
iv)SWAMP STORIES
On Friday, we had a 11 count indictment against Mark Lambert who was the transportation specialist for moving the Uranium out of the USA and onto Russian shores. Lambert engaged in multiple bribes and money laundering with Russian officials. This is not the first indictment against individuals in the Uranium one deal. Back in 2009 or so there were 4 convictions but they were very light. The prosecutors: Rod Rosenstein and Mueller with McCabe fully aware as to what was going on
( zerohedge)
v)More fun in the swamp: Mueller subpoenas Bannon in the Russian probe
( zerohedge)
vi)Pam and Russ talk about Nomi Prins latest book: Collusion: How Central banks rigged the world.
Let us head over to the comex:
The total gold comex open interest ROSE BY A CONSIDERABLE 10,992 CONTRACTS UP to an OI level of 574,992 WITH THE SOLID RISE IN THE PRICE OF GOLD ($11.65 GAIN WITH RESPECT TO FRIDAY’S TRADING). WE HAD ZERO COMEX GOLD LIQUIDATION AND NO DOUBT WE WITNESSED SOME GOLD SHORT COVERING AT THE COMEX. WE ALSO WITNESSED ANOTHER STRONG COMEX TRANSFER THROUGH THE EFP ROUTE. THESE LONGS RECEIVED A DELIVERABLE LONDON FORWARD TOGETHER WITH A FIAT BONUS. THE CME REPORTS THAT 7163 EFP’S WERE ISSUED FOR FEBRUARY , 0 EFP’s FOR APRIL, AND 0 FOR DECEMBER: TOTAL 7163 CONTRACTS. THE OBLIGATION STILL RESTS WITH THE BANKERS ON THESE TRANSFERS.
ON A NET BASIS IN OPEN INTEREST WE GAINED TODAY: 18155 OI CONTRACTS IN THAT 7163 LONGS WERE TRANSFERRED AS FORWARDS TO LONDON AND WE GAINED 10,992 COMEX CONTRACTS. NET GAIN ON THE TWO EXCHANGES: 18,155 contracts OR 1.8155 MILLION OZ OR 56.46 TONNES
Result: A CONSIDERABLE INCREASE IN COMEX OPEN INTEREST WITH THE RISE IN THE PRICE YESTERDAY’S GOLD TRADING ($11.65.) WE HAD NO GOLD LIQUIDATION AT THE COMEX. HOWEVER WE, NO DOUBT WE HAD ANOTHER FAILED BANKER SHORT COVERING AS THE BANKERS WERE CAUGHT OFF GUARD ON FRIDAY’S BIG PRICE RISE.. TOTAL OPEN INTEREST GAIN ON THE TWO EXCHANGES: 18,155 OI CONTRACTS…
We have now entered the active contract month of JANUARY. The open interest for the front month of JANUARY saw it’s open interest FALL by 180 contracts DOWN to 40. We had 181 notices served upon yesterday so we gained 1 contract or an additional 100 oz of gold will stand AT THE COMEX in this non active month of January.
FEBRUARY saw a LOSS of 6704 contacts DOWN to 324,958. March saw a loss of 209 contracts down to 492. April saw a GAIN of 12.223 contracts UP to 140,073.
We had 12 notice(s) filed upon today for 1200 oz
PRELIMINARY VOLUME TODAY ESTIMATED; 508,049
FINAL NUMBERS CONFIRMED FOR YESTERDAY: 429,668
comex gold volumes are RISING AGAIN
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And now for the wild silver comex results.
Total silver OI rose BY A huge 3,979 CONTRACTS FROM 196,660 UP TO 200,423 WITH FRIDAY’S STRONG 20 CENT GAIN. AGAIN WE HAD CONTINUED FAILED BANKER SHORT COVERING. NOT ONLY THAT, WE HAD ANOTHER SMALL SIZED 483 EMERGENCY EFP’S FOR MARCH ISSUED BY OUR BANKERS (AND ZERO FOR ALL OTHER MONTHS) TO COMEX LONGS WHO RECEIVED A FIAT BONUS PLUS A DELIVERABLE PRODUCT OVER IN LONDON: THE TOTAL EFP’S ISSUED: 484. IT SURE LOOKS LIKE THE SILVER BOYS HAVE STARTED TO MIGRATE TO LONDON FROM THE START OF DELIVERY MONTH AND CONTINUING RIGHT THROUGH UNTIL FIRST DAY NOTICE JUST LIKE WE ARE WITNESSING TODAY. USUALLY WE NOTED THAT CONTRACTION IN OI OCCURRED ONLY DURING THE LAST WEEK OF AN UPCOMING ACTIVE DELIVERY MONTH. THIS PROCESS HAS JUST BEGUN IN EARNEST IN SILVER STARTING IN SEPTEMBER. HOWEVER, IN GOLD, WE HAVE BEEN WITNESSING THIS FOR THE PAST 2 YEARS. WE HAD ZERO LONG COMEX SILVER LIQUIDATION BUT A RISE IN TOTAL SILVER OI. WE ARE ALSO WITNESSING A FAIR AMOUNT OF SILVER OUNCES STANDING FOR COMEX METAL IN THIS NON ACTIVE JANUARY AS WELL AS THAT CONTINUAL MIGRATION OF EFPS OVER TO LONDON. ON A PERCENTAGE BASIS THERE ARE MORE EFP’S ISSUED FOR GOLD THAN SILVER. ON A NET BASIS WE GAINED 4462 OPEN INTEREST CONTRACTS:
3797 CONTRACT GAIN AT THE COMEX COMBINING WITH THE ADDITION OF 483 OI CONTRACTS NAVIGATING OVER TO LONDON.
NET GAIN TWO EXCHANGES: 4462 CONTRACTS
We are now in the poor non active delivery month of January and here the OI GAINED 39 contracts RISING TO 110. We had 0 notices served on Friday, so we GAINED 39 contracts or an additional 195,000 oz will stand for delivery AT THE COMEX AS QUEUE JUMPING INTENSIFIES
February saw a LOSS OF 2 OI contracts FALLING TO 379. The March contract LOST 793 contracts DOWN to 144,571.
We had 31 notice(s) filed for NIL 155,000 for the January 2018 contract for silver
INITIAL standings for JANUARY
Jan 16/2018.
| Gold | Ounces |
| Withdrawals from Dealers Inventory in oz | nil oz |
| Withdrawals from Customer Inventory in oz |
nil oz
|
| Deposits to the Dealer Inventory in oz | nil oz |
| Deposits to the Customer Inventory, in oz |
nil oz
|
| No of oz served (contracts) today |
12 notice(s)
1200 OZ
|
| No of oz to be served (notices) |
28 contracts
(2800 oz)
|
| Total monthly oz gold served (contracts) so far this month |
449 notices
44900 oz
1.3965 tonnes
|
| Total accumulative withdrawals of gold from the Dealers inventory this month | NIL oz |
| Total accumulative withdrawal of gold from the Customer inventory this month | xxx oz |
For JANUARY:
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 12 contract(s) of which 9 notices were stopped (received) by j.P. Morgan dealer and 2 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account.
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To calculate the INITIAL total number of gold ounces standing for the JANUARY. contract month, we take the total number of notices filed so far for the month (449) x 100 oz or 44900 oz, to which we add the difference between the open interest for the front month of JAN. (40 contracts) minus the number of notices served upon today (12 x 100 oz per contract) equals 47,700 oz, the number of ounces standing in this active month of JANUARY
Thus the INITIAL standings for gold for the JANUARY contract month:
No of notices served (449 x 100 oz or ounces + {(40)OI for the front month minus the number of notices served upon today (12 x 100 oz which equals 47,700 oz standing in this active delivery month of JANUARY (1.4836 tonnes). THERE IS 18.245 TONNES OF REGISTERED GOLD AVAILABLE FOR DELIVERY SO FAR.
WE GAINED 1 CONTRACT OR AN ADDITIONAL 100 OZ WILL STAND IN THIS NON ACTIVE DELIVERY MONTH OF JANUARY
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ON FIRST DAY NOTICE FOR JANUARY 2017, THE INITIAL GOLD STANDING: 3.904 TONNES STANDING
BY THE END OF THE MONTH: FINAL: 3.555 TONNES STOOD FOR COMEX DELIVERY AS THE REMAINDER HAD TRANSFERRED OVER TO LONDON FORWARDS.
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I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process and are being used in the raiding of gold!
The gold comex is an absolute fraud. The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction. This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
IN THE LAST 14 MONTHS 68 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE DECEMBER DELIVERY MONTH
DECEMBER FINAL standings
| Silver | Ounces |
| Withdrawals from Dealers Inventory | nil oz |
| Withdrawals from Customer Inventory |
70,391.030 oz
Brinks
Delaware
|
| Deposits to the Dealer Inventory |
nil
oz
|
| Deposits to the Customer Inventory |
nil oz
|
| No of oz served today (contracts) |
31
CONTRACT(S)
(155,000 OZ)
|
| No of oz to be served (notices) |
79 contract
(395,000 oz)
|
| Total monthly oz silver served (contracts) | 573 contracts
(2,865,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | NIL oz |
| Total accumulative withdrawal of silver from the Customer inventory this month |
we had no inventory movement at the dealer side of things
total inventory movement dealer: nil oz
we had 0 inventory deposits into the customer account
i
total inventory deposits: nil oz
we had 2 withdrawals from the customer account;
i) out of Brinks; 66,378.230 oz
ii) Out of Delaware: 3,922.800 oz
total withdrawals; 70,301.030oz
we had 0 adjustments
total dealer silver: 45.456 million
total dealer + customer silver: 246.485 million oz
The total number of notices filed today for the JANUARY. contract month is represented by 31 contract(s) FOR 155,000 oz. To calculate the number of silver ounces that will stand for delivery in JANUARY., we take the total number of notices filed for the month so far at 542 x 5,000 oz = 2,710,000 oz to which we add the difference between the open interest for the front month of JAN. (110) and the number of notices served upon today (31 x 5000 oz) equals the number of ounces standing.
.
Thus the INITIAL standings for silver for the JANUARY contract month: 573(notices served so far)x 5000 oz + OI for front month of JANUARY(110) -number of notices served upon today (31)x 5000 oz equals 3,260,000 oz of silver standing for the JANUARY contract month. This is VERY GOOD for this NONACTIVE delivery month of JANUARY. WE GAINED 28 CONTRACTS OR AN ADDITIONAL 140,000 OZ WILL STAND FOR DELIVERY IN THIS NON ACTIVE DELIVERY MONTH OF JANUARY AND QUEUE JUMPING INTENSIFIES.
ON FIRST DAY NOTICE FOR THE JANUARY 2017 CONTRACT WE HAD 3,790 MILLION OZ STAND.
THE FINAL STANDING: 3,730 MILLION OZ
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ESTIMATED VOLUME FOR TODAY: 172,325
CONFIRMED VOLUME FOR FRIDAY: 129,518 CONTRACTS
YESTERDAY’S CONFIRMED VOLUME OF 129,518 CONTRACTS EQUATES TO 647.5 MILLION OZ OR 92.5% OF ANNUAL GLOBAL PRODUCTION OF SILVER
COMMODITY LAW SUGGESTS THAT OPEN INTEREST SHOULD NOT BE MORE THAN 3% OF ANNUAL GLOBAL PRODUCTION. THE CROOKS ARE SUPPLYING MASSIVE PAPER TRYING TO KEEP SILVER IN CHECK.
The record level of silver open interest is 234,787 contracts set on April 21./2017 with the price at that day at $18.42
The previous record was 224,540 contracts with the price at that time of $20.44
end
NPV for Sprott and Central Fund of Canada
1. Central Fund of Canada: traded at Negative 3.0 percent to NAV usa funds and Negative 3.0% to NAV for Cdn funds!!!!
Percentage of fund in gold 63.0%
Percentage of fund in silver:36.8%
cash .+.2%( Jan 15/2018)
2. Sprott silver fund (PSLV): NAV FALLS TO -2.44% (Jan 15/2018)
3. Sprott gold fund (PHYS): premium to NAV FALLS TO -0.65% to NAV (Jan 15/2018 )
Note: Sprott silver trust back into NEGATIVE territory at -2.44%-/Sprott physical gold trust is back into NEGATIVE/ territory at -0.65%/Central fund of Canada’s is still in jail but being rescued by Sprott.
Sprott WINS hostile 3.1 billion bid to take over Central Fund of Canada
(courtesy Sprott/GATA)
END
And now the Gold inventory at the GLD
Jan 16/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 828.96 TONNES
Jan 12/no changes in inventory at the GLD despite the rise in gold price/inventory rests at 828.96 tonnes
Jan 11/ANOTHER IDENTICAL WITHDRAWAL OF 2.95 TONNES FROM THE GLD INVENTORY/INVENTORY RESTS AT 828.96 TONNES
Jan 10/with gold up today, a strange withdrawal of 2.95 tonnes/inventory rests at 831.91 tonnes
Jan 9/no changes in gold inventory at the GLD/Inventory rests at 834.88 tonnes
Jan 8/with gold falling by a tiny $1.40 and this being after 12 consecutive gains, today they announce another 1.44 tonnes of gold withdrawal from the GLD/
Jan 5/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 836.32 TONNES
Jan 4/2018/no change in gold inventory at the GLD/Inventory rests at 836.32 tonnes
Jan 3/a huge withdrawal of 1.18 tonnes of gold from the GLD/Inventory rests at 836.32 tonnes
Jan 2/2018/no changes in gold inventory at the GLD/inventory rests at 837.50 tonnes
Dec 29/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 837.50 TONNES
Dec 28/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 837.50 TONNES
Dec 27/NO CHANGES IN GOLD INVENTORY AT THE GLD/ INVENTORY RESTS AT 837.50 TONNES
Dec 26/no change in gold inventory at the GLD
Dec 22/ A DEPOSIT OF 1.48 TONNES OF GOLD INTO GLD INVENTORY/INVENTORY RESTS AT 837.50 TONNES
Dec 21′ NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 836.02 TONNES
Dec 20/DESPITE THE GOOD ADVANCE IN PRICE TODAY/THE CROOKS RAIDED THE COOKIE JAR TO THE TUNE OF 1.18 TONNES/INVENTORY RESTS AT 836.02 TONNES
Dec 19/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 837.20 TONNES
Dec 18 SHOCKINGLY AFTER TWO GOOD GOLD TRADING DAYS, THE CROOKS RAID THE COOKIE JAR BY THE SUM OF 7.09 TONNES/INVENTORY RESTS AT 837.20 TONNES
Dec 15/NO CHANGES IN GOLD INVENTORY/RESTS AT 844.29 TONNES.
Dec 14/a good sized gain of 1.48 tonnes of gold into the GLD/inventory rests at 844.29 tones
Dec 13/no changes in gold inventory at the GLD/inventory rests at 842.81 tonnes
Dec 12/SURPRISINGLY NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 842.81 TONNES
Dec 11/SURPRISINGLY NO CHANGES IN GOLD INVENTORY AT THE GLD DESPITE THE CONSTANT RAIDS ON GOLD/INVENTORY RESTS AT 842.81 TONNES
Dec 8/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 842.81 TONNES
Dec 7/A BIG WITHDRAWAL OF 2.66 TONNES FROM THE GLD/INVENTORY RESTS AT 842.81 TONNES
Dec 6/No changes in GOLD inventory at the GLD/Inventory rests at 845.47 tonnes
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Jan 15/2018/ Inventory rests tonight at 828.96 tonnes
*IN LAST 309 TRADING DAYS: 111.99 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 244 TRADING DAYS: A NET 45.32 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
end
Now the SLV Inventory
Jan 16/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 316.348 MILLION OZ
Jan 12/no changes in silver inventory at the SLV/inventory rests at 316.348 million oz/
Jan 11/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 316.348 MILLION OZ/
Jan 10/with silver up again, we had a huge withdrawal of 1.227 million oz from the SLV/inventory rests at 316.348 million oz
Jan 9/a withdrawal of 848,000 oz from the SLV/Inventory rests at 317.575 million oz/
jan 8/no change in silver inventory at the SLV/Inventory rests at 318.423 million oz/
Jan 5/DESPITE NO CHANGE IN SILVER PRICING, WE HAD A HUGE WITHDRAWAL OF 2.026 MILLION OZ/INVENTORY RESTS AT 318.423 MILLION OZ.
Jan 4.2018/a slight withdrawal of 180,000 oz and this would be to pay for fees/inventory rests at 320.449 million oz/
Jan 3/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 320.629 MILLION OZ.
Jan 2/WITH SILVER UP DRAMATICALLY THESE PAST 4 TRADING DAYS, THE FOLLOWING MAKES NO SENSE: WE HAD A WITHDRAWAL OF 2.83 MILLION OZ FROM THE SLV
INVENTORY RESTS AT 320.629 MILLION OZ/
Dec 29/no changes in silver inventory at the SLV/inventory rests at 323.459 million oz/
Dec 28/DESPITE THE RISE IN SILVER AGAIN BY 13 CENTS, WE LOST ANOTHER 1,251,000 OZ OF SILVER FROM THE SILVER.
Dec 27/WITH SILVER UP AGAIN BY 17 CENTS, WE LOST ANOTHER 802,000 OZ OF SILVER INVENTORY/WHAT CROOKS/INVENTORY RESTS AT 324.780 MILLION OZ/
Dec 26/no change in silver inventory at the SLV./Inventory rests at 325.582
Dec 21/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 326.227 MILLION OZ/
Dec 20/INVENTORY REMAINS CONSTANT AT 326.337 MILLION OZ (COMPARE WITH GLD)
Dec 19/SILVER INVENTORY REMAINS CONSTANT AT 326.337 MILLION OZ
Dec 18.2017//SILVER INVENTORY CONTINUES TO REMAIN PAT./INVENTORY REMAINS AT 326.337 MILLION OZ/
INVENTORY RESTS AT 326.337 TONNES
Dec 15/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 326.337 MILLION OZ/
Dec 14/a small withdrawal of 377,000 oz and that usually means to pay for fees./inventory rests at 326.337 million oz/
Dec 13/no change in silver inventory at the SLV/Inventory rests at 326.714 million oz/
Dec 12/WOW!ANOTHER STRANGE ONE: SILVER HAS BEEN DOWN FOR 10 CONSECUTIVE DAYS, YET THE SLV ADDS ANOTHER 1.415 MILLION OZ TO ITS INVENTORY. IN THAT 10 DAY PERIOD, SLV ADDS 9.584 MILLION OZ/
INVENTORY RESTS AT 326.714 MILLION OZ
Dec 11/WOW!! ANOTHER STRANGE ONE: SILVER DESPITE BEING DOWN FOR 9 CONSECUTIVE TRADING DAYS ADDS ANOTHER 944,000 OZ TO ITS INVENTORY. FROM NOV 30 UNTIL TODAY SILVER HAS BEEN DOWN EVERY DAY. HOWEVER THE INVENTORY OF SILVER HAS RISEN 8.169 MILLION OZ.
Dec 8/A HUGE DEPOSIT OF 2.642 MILLION OZ/INVENTORY RESTS AT 324.355 MILLION OZ/
Dec 7/strange!! with the continual whacking of silver, no change in silver inventory at the SLV/Inventory rests at 321.713
Dec 6/no change in silver inventory at the SLV/Inventory remains at 21.713 million oz.
Jan 15/2017:
Inventory 316.348 million oz
end
THIS IS HUGE/A BIG JUMP IN GOFO RATES
6 Month MM GOFO
Indicative gold forward offer rate for a 6 month duration
+ 1.80%
12 Month MM GOFO
+ 2.11%
30 day trend
end
Major gold/silver trading /commentaries for TUESDAY
GOLDCORE/BLOG/MARK O’BYRNE.
GOLD/SILVER
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver”
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver”
– JP Morgan continues to accumulate the biggest stockpile of physical silver in history
– “JPM now holds more than 133m oz -more than was held by the Hunt Bros” – Butler
– Silver hoard owned by JPM has increased from Zero ozs in 2011 to 120m ozs today
– Money managers showing more optimism towards silver through record buying
– “Near impossible to rule out an upside price surprise at any moment”
Editor: Mark O’Byrne
- Source: Sharelynx
Money managers are feeling increasingly optimistic about silver, against a backdrop of cautiousness regarding gold according to the latest Commitment of Traders (COT) report.
There has been some record buying in the last fortnight. The report shows some impressive moves given just under a month ago the silver market was net short. Last week speculative gross long positions in Comex silver futures rose by 11,920 contracts to 66,224. Whilst short positions fell by 10,379 contracts to 28,122. Silver’s net long positions now stand at 38,102 contracts.
For the current week’s reporting, the four largest traders are short 130 days of world silver production-and the ‘5 through 8’ large traders are short an additional 70 or so days of world silver production-for a total of 200 days. This is around seven months of global silver production.
JP Morgan are out Hunting the silver market
Much of this is attributed to JP Morgan, who according to respected silver analyst Ted Butler, is responsible for the ‘third great investment accumulation of physical silver’.
The silver market has been closely monitoring JP Morgan’s activities for some time. Since April 2011 the powerful bank has been accumulating silver at a quite a rate. It has taken its position from zero to nearly 120m ounces this month, less than six years later.
Butler explains:
‘Just about every ounce moved into the JPMorgan COMEX warehouse over the past 7 years has come from futures deliveries stopped (taken) by JPM in its own name. JPMorgan took delivery of 14 million ounces in December and so far, 13 million ounces have remained in the warehouses from which the metal was delivered. So this means that JPMorgan now holds more than 133 million ounces of silver in COMEX warehouses, or more than was held by the Hunt Bros or by Berkshire Hathaway at their peaks. There was a lot more silver in the world in 1980 and 1998 than there is today, meaning that JPMorgan’s accumulation is much more of an accomplishment than previous silver acquisitions.’
Why would JP Morgan be stockpiling silver? As we pointed out a few years ago, it may be the case that they are anticipating geopolitical and financial turmoil?
This would not come as a surprise to JP Morgan shareholders who have previously received such warnings from CEO Jamie Dimon who has stated ‘there will be another crisis’.
Dimon has even admitted that the trigger for the next crisis may not be the same trigger as the last one – but there will be another crisis:
“Triggering events could be geopolitical (the 1973 Middle East crisis), a recession where the Fed rapidly increases interest rates (the 1980-1982 recession), a commodities price collapse (oil in the late 1980s), the commercial real estate crisis (in the early 1990s), the Asian crisis (in 1997),so-called “bubbles” (the 2000 Internet bubble and the 2008 mortgage/housing bubble), etc. While the past crises had different roots (you could spend a lot of time arguing the degree to which geopolitical, economic or purely financial factors caused each crisis), they generally had a strong effect across the financial markets.”
JP Morgan’s silver accumulation in the face of upcoming turmoil may lead some to ask why not go for gold? It’s likely that the depressed price is the deciding factor here.
- Silver USD, Jan 2007 – Jan 2017, Goldcore.com
The bank is often compared to the Hunt brothers when it comes to cornering of the silver market, but in truth the bank has been much savvier and is set to make far more. After all, the Hunt’s accumulated primarily paper silver, JP Morgan are going after the hard stuff. Had the Hunt brothers, bought more physical silver bullion and less paper silver in the form of futures, they would likely have made even more money than they could imagine.
More silver bullion than we know?
Butler believes that ‘JPMorgan holds at least 675 million ounces of actual silver. Simply put, JPMorgan has acquired six times as much metal as bought by the Hunts or Berkshire Hathaway. If this really is the case then it would account for ‘nearly 45% of the 1.5 billion ounces of silver bullion in the form of industry standard 1,000 ounces bars in the world’.
The ability to accumulate so much physical silver whilst at the same time sell short huge quantities of paper derivatives or futures contracts could be the poster child for market manipulation. After all, the selling results in lower prices which then paves they way for more physical buying by the bank.
Butler again:
It couldn’t possibly be legitimate and that makes JPMorgan a market crook and manipulator. It also makes the federal regulator, the CFTC, and the self-regulating CME Group, incompetent, corrupt, or both. This takes a special kind of market manipulator, one most likely operating under some type of agreement with the regulators.
To what end are JP Morgan pursuing this path of silver hoarding?
That intent is to sell at as large a profit as possible. No one buys any investment asset with the intention of losing money, least of all JPMorgan. They didn’t spend the last seven years accumulating physical silver to sell that silver at anything but the highest price possible. I can’t tell you when JPM will let the price of silver fly, but I am certain that that day is coming.
Silver prices looks particularly undervalued right now. Last year it gained just 1.6%, compared to 11.5% for gold and 48% for palladium. Yet we (and big banks such as JP Morgan) remain bullish. We have previously written about our forecast that silver prices will surpass its nominal high of $50 per ounce and its inflation adjusted high of $150 per ounce in the coming years.
The fundamental reasons for our very bullish outlook on silver is very reasonable. There are increasing global macroeconomic, systemic, geopolitical and monetary risks. Silver’s historic role as money and a store of value has already been identified time and time again in the past and history is repeating itself. It is also worth considering the declining and very small supply of silver, not to mention increasing investment demand from one of the world’s most powerful banks and other contrarian investors.
We should see JP Morgan’s accumulation as not just a sign to buy physical silver but also that the next financial crisis is coming and its time to diversify into physical gold and silver bullion coins and bars.
Related Reading
JP Morgan To Corner Silver Market?
Silver Bullion Has Key New Player – China Replaces JP Morgan
Silver’s Positive Fundamentals Due To Strong Demand In Key Growth Industries
News and Commentary
Gold holds near 4-mth peak, buoyed by weaker dollar (Reuters.com)
Gold jumps to fresh 4-month high as dollar slide deepens (MarketWatch.com)
China Escalates Crackdown on Cryptocurrency Trading (Bloomberg.com)
Carillion’s Collapse Could Affect Companies From Madrid to Texas (Bloomberg.com)
Six banks accused of rigging key Canada lending rate (Bloomberg.com)
Bundesbank will add China’s yuan to currency reserves (Bloomberg.com)
Source: Bloomberg
Metals Power Higher as Sickly Dollar Spurs Copper-to-Gold Rally (Bloomberg.com)
What investors can learn from Carillion’s collapse (MoneyWeek.com)
Merkel could join Macron in Davos for epic clash with Trump (Reuters.com)
As Petro-Yuan Looms, Bundesbank Adds Renminbi To Currency Reserves (ZeroHedge.com)
2018 – Year of the Octopus – Mauldin (MauldinEconomics.com)
Gold Prices (LBMA AM)
16 Jan: USD 1,334.95, GBP 970.38 & EUR 1,091.32 per ounce
15 Jan: USD 1,343.00, GBP 971.93 & EUR 1,092.93 per ounce
12 Jan: USD 1,332.90, GBP 978.75 & EUR 1,099.78 per ounce
11 Jan: USD 1,319.85, GBP 978.14 & EUR 1,104.45 per ounce
10 Jan: USD 1,321.65, GBP 976.96 & EUR 1,103.31 per ounce
09 Jan: USD 1,314.95, GBP 972.01 & EUR 1,102.19 per ounce
Silver Prices (LBMA)
16 Jan: USD 17.10, GBP 12.43 & EUR 13.99 per ounce
15 Jan: USD 17.12, GBP 12.58 & EUR 14.14 per ounce
12 Jan: USD 17.12, GBP 12.56 & EUR 14.12 per ounce
11 Jan: USD 17.01, GBP 12.64 & EUR 14.24 per ounce
10 Jan: USD 17.13, GBP 12.64 & EUR 14.27 per ounce
09 Jan: USD 17.05, GBP 12.60 & EUR 14.30 per ounc
END
How JPMorgan acquired a massive 675 million oz of physical silver as they wait to profit from it
(courtesy Ted Butler)
The Last Great Silver Buy
January 12, 2018 – 1:44pm
In the annals of silver in the modern age, there have been two well-known instances of very large investor accumulations of the metal. First came the purchase by the Hunt Brothers and their associates in early 1980, followed by the purchase by Warren Buffett’s Berkshire Hathaway, 17 years later. The Hunts were said to control around 100 million ounces of actual metal (plus another 100 million ounces in long paper futures contracts), while Berkshire held as many as 129 million ounces.
Now there is compelling evidence of a third great investment accumulation of physical silver by none other than JPMorgan, one of the most powerful and connected banks in the world. This accumulation can be dated from the price peak of April 2011, after silver began what is now a near seven-year price decline. From zero in April 2011, the amount of silver in the JPMorgan COMEX warehouse has increased to 120 million ounces. Just about every ounce moved into the JPMorgan COMEX warehouse over the past 7 years has come from futures deliveries stopped (taken) by JPM in its own name. JPMorgan took delivery of 14 million ounces in December and so far, 13 million ounces have remained in the warehouses from which the metal was delivered. So this means that JPMorgan now holds more than 133 million ounces of silver in COMEX warehouses, or more than was held by the Hunt Bros or by Berkshire Hathaway at their peaks. There was a lot more silver in the world in 1980 and 1998 than there is today, meaning that JPMorgan’s accumulation is much more of an accomplishment than previous silver acquisitions.
JPMorgan’s COMEX warehouse silver holdings are only the tip of the iceberg. Beneath the surface, the true extent of JPMorgan’s physical silver accumulation is nothing short of mind-boggling. All told, including the verifiable 133 million ounces held in its own and other COMEX warehouses, JPMorgan holds at least 675 million ounces of actual silver. Simply put, JPMorgan has acquired six times as much metal as bought by the Hunts or Berkshire Hathaway. How is it possible that JPMorgan, could acquire such a massive quantity of physical silver, with no general awareness that it was doing so? More importantly, how did they do it while silver prices steadily declined over the entire time of JPM’s accumulation?
Common sense would dictate that such a large acquisition as JPM’s 675 million ounces (nearly 45% of the 1.5 billion ounces of silver bullion in the form of industry standard 1,000 ounces bars in the world), could not be bought by any entity without driving prices sharply higher. So how could JPMorgan do so without it being noticed and without driving prices sharply higher? The answer is that in addition to being the biggest physical silver accumulator in history, JPMorgan has simultaneously been the largest short seller in COMEX silver futures for the entire time since it acquired Bear Stearns in early 2008. JPMorgan has pulled off something that couldn’t possibly be replicated not just in silver but in any other world commodity. Never again will any one entity be able to accumulate 45% of the world’s supply of a commodity. JPMorgan’s accumulation is more bullish for silver than any other single consideration by a factor of 1,000.
How legitimate is it that a large financial entity could sell short massive quantities of paper derivatives contracts which result in lower prices, and then use those lower prices to accumulate silver on the cheap? It couldn’t possibly be legitimate and that makes JPMorgan a market crook and manipulator. It also makes the federal regulator, the CFTC, and the self-regulating CME Group, incompetent, corrupt, or both. This takes a special kind of market manipulator, one most likely operating under some type of agreement with the regulators.
As I have explained in past articles, 150 million ounces of silver was acquired by JPMorgan through buying 100 million Silver Eagles from the U.S. Mint, plus another 50 million Silver Maple Leafs from the Royal Canadian Mint. All these coins were melted into industry standard 1,000 ounce bars since as there’s no way anyone to unload 150 million Silver Eagles and Maple Leafs. In 2013 record sales of these silver coins conflicted strongly with reports from retail dealers of weak demand. By process of elimination, if it wasn’t the guy on the street buying all these coins, it had to be someone big. Based upon a variety of other supporting evidence that JPMorgan was the absolute king of the silver market, the most plausible explanation was that JPMorgan was Mr. Big when it came to buying Eagles and Maple Leafs. JPMorgan’s cessation in buying these coins a year or so ago is the only explanation for why sales then fell off a cliff. JPM controlled the price at which the mints sold and JPMorgan bought. It was a particularly clever and deceitful means by which JPM acquired 150 million ounces of silver at give-away prices.
At the exact time that silver topped out in April of 2011, JPMorgan opened its COMEX silver warehouse and began its epic accumulation of silver. Another almost impossible to explain phenomenon started then and continues to this day – an unusually large and persistent physical movement of silver brought into and taken out from the COMEX silver warehouses. Over the past near 7 years, there has been an average weekly movement of around 4.5 million ounces of physical silver turning over in the COMEX silver warehouses, far higher than ever before. In total, some 1.4 billion ounces of physical silver were moved in and out of the COMEX warehouses. This physical movement of silver in the COMEX warehouses is highly unique to silver, as no other commodity has seen any unusual turnover in exchange-approved warehouse inventories – just COMEX silver. I believe this unusual turnover was created by JPMorgan gobbling up all available silver in industry standard 1,000 ounce bars. JPM has been able to “skim off” 150 to 200 million ounces, which when combined with the 150 million ounces that JPM accumulated in mint-issued coins, brings to 300 to 350 million ounces of the 550 million ounces JPMorgan holds outside its COMEX warehouse holdings.
However, the main means by which JPMorgan has accumulated its massive hoard of physical silver is by continuously converting shares of the big silver ETF, SLV, into metal. All told, JPMorgan has acquired 250 to 300 million ounces of physical silver by this means. By converting shares of SLV into physical silver bullion, a large buyer can convert shares of SLV, (ownership of shares must be publicly-reported at certain SEC-mandated thresholds), into physical metal with no disclosure reporting requirements. It is the perfect means for someone big to acquire significant quantities of physical silver on the sly and no entity in the world is more qualified to do this than JPMorgan. That’s because JPMorgan is not only the largest Authorized Participant (market maker) in SLV, it is also the sole official custodian, which means it is in charge of all physical metal that moves in and out of the trust. Any time you see what looks like a highly counterintuitive redemption of metal from the SLV on rising prices, which has happened quite frequently over the past 7 years, dollars to donuts it is the handiwork of JPMorgan converting shares to metal.
With the publically disclosed 133 million ounces JPM holds in the COMEX warehouses, JPM’s total holdings are 675 million ounces at a minimum. For those who would contend that JPMorgan would have to report such holdings publicly, I say poppycock – JPMorgan reports what it wants to report and its vast army of accountants, lawyers and lobbyists are the main parties which determine what has to be reported publicly. Truth be told, JPMorgan could own a fleet of aircraft carriers and keep them off its public reporting books, if it so desired. Who would stop them? The CFTC? That JPMorgan has accumulated at least 675 million ounces of silver appears clear to me. More to the point is what JPMorgan intends to do with its epic physical silver holdings. The bank has maintained its death-grip on lower silver prices for so long it feels like it will do so forever.
However, I remain convinced that JPMorgan has the same intent as did the two previous great physical accumulators of investment silver, the Hunt Bros. and Warren Buffet. That intent is to sell at as large a profit as possible. No one buys any investment asset with the intention of losing money, least of all JPMorgan. They didn’t spend the last seven years accumulating physical silver to sell that silver at anything but the highest price possible. I can’t tell you when JPM will let the price of silver fly, but I am certain that that day is coming. And considering the means and deception with which it has accumulated the physical silver it holds, watching JPMorgan distribute its holdings at the highest prices it can attain will be one for the history books. That’s what these guys do for a living.
Given the clear evidence of the historic and epic accumulation by JPMorgan of physical silver in amounts so massive it’s near impossible to rule out an upside price surprise at any moment. That certainly includes a possible double cross by JPMorgan of its fellow big silver shorts. An email exchange with a subscriber this week prompted me to think back to the time when JPMorgan acquired Bear Stearns nearly ten years ago. Looking back over what has transpired since then, it’s now very easy for me to imagine JPMorgan playing a previously undisclosed role in Bear’s demise at the time. Who would put it past JPM to have exploited Bear Stearns’ vulnerability as the largest COMEX silver and gold short, at the time by helping to goose prices higher so that it could acquire Bear on the cheap and usurp the role of Mr. Big in matters silver and gold? Not me.
Ted Butler
January 12, 2018
end
Saturday
(courtesy zero hedge)
Cryptocurrencies Surge As South Korea Backs Off Crypto Ban
On Wednesday night, bitcoin and the entire crypto sector tumbled more than 10%, following reports that the Ministry of Justice in South Korea – one of the world’s most active cryptocurrency markets – said it was preparing legislation to close the country’s online exchanges amid a speculative boom in cryptocurrencies. That shot across the bow was paired with the news that tax authorities were investigating at least some of the exchanges in Korea.
In a statement, South Korea Attorney General Park Sang-ki said: “The South Korean Ministry of Justice is considering the closure of cryptocurrency trading to bring cryptocurrency mania and speculation under control for investor protection.”
However, confusion quickly erupted just hours later when following the surprise announcement, South Korea’s Ministry of Strategy and Finance, a key member of the country’s cryptocurrency task force, said that it does not agree with the “premature statement of the Ministry of Justice about a potential cryptocurrency trading ban.”
In a press conference, the South Korean Ministry of Strategy and Finance told local reporters that it had first heard of the Ministry of Justice’s cryptocurrency trading ban through media reports. The cryptocurrency task force participated by the central bank, MInistry of Finance, Ministry of Justice, and other agencies have not agreed upon the proposal.
“We do not share the same views as the Ministry of Justice on a potential cryptocurrency exchange ban,” MSF said according to the local Naver website.
Kim Dong-yeon, S.Korea Minister of Finance and Economy.
Adding to the confusion is that in addition to the ouctry from the Finance Ministry, the proposed ban drew swift pushback from within the South Korean government – the president’s office, in particular, said no move is “finalized” as of yet – as well as cryptocurrency supporters and traders in the country who cried foul as the statements sparked a fall in cryptocurrency prices.
Heading into the weekend, the public backlash against the proposed move was accelerating. On the Korean president’s Blue House website, more than 4,000 petitions have been filed related to “virtual currencies” since Jan. 10, CoinDesk reported.
As Coindesk further notes, one petition asking the Minister of Justice to step down in the aftermath of his proposed ban received more than 30,000 signatures on its own. Reuters reports that one petition alone has attracted more than 100,000 signatures and the website became inaccessible due to excess traffic. At last check the petition had over 153,000 signatures and rising fast.
Comments on the government’s website included a petition from a user who claimed to have lost money due to the Justice Ministry’s saber-rattling. Another petition compared cryptocurrency trading with the stock market, but claimed the latter is much more speculative. Yet another petition struck a supportive note on the development of new rules but called for the government to consult with the wider cryptocurrency community before implementing any such rules.
Angry South Koreans took to the streets to protest the uncoordinated ban announcement:
Jan 13 Myeongdong Seoul, busiest part of Korea.
This is the mess former (impeached) president left Korea with.
Current gov’t infuriated over a million people with #bitcoin trading ban fiasco.#Cryptocurrency market is fine. Fix the country first. Leave #bitcoin alone.
The bizarre unilateral decision by the country’s Justice Ministry sparked even more outrage: in addition to the government, and the broader public, Korea’s daily newspaper The Hankyoreh wrote that leaders of several opposition parties are moving to criticize what they deem a unilateral crackdown without any discussion or debate. One opposition lawmaker said the ban was not a government position, but rather one that the Ministry of Justice and, possibly the president, hold themselves.
“The government announcement should be based on detailed reviews and coordination. If there is a problem, we should warn and prepare in advance.”
Others politicians quickly piled on:
Jang Je Won, spokesperson for an opposition party (Jayoo Party), stated:
“South Korean government made the public to see its people as uninformed gamblers with a premature statement on #cryptocurrency trading ban. It’s not able to read the global trend in finance market.”
Yoo Eu Dong, spokesperson for an opposition party (Bareun Party) stated:
“The Justice Ministry’s premature statement on #cryptocurrency trading ban was a mockery of the Korean people. President should apologize to the people and have Justice Minister take responsibility of it.
In other words, from merely a daytrading infatuation, the fate of cryptocurrency trading has rapidly emerged as one of the most politically sensitive and socially polarizing issues within South Korean society, where as we previously reported, nothing short of crypto-mania is raging as “bitcoin zombies”, millions of mostly young people, spend their every hour daytrading cryptocurrencies.
Back in November, Prime Minister Lee Nak-yeon warned that “there are cases in which young Koreans including students are jumping in to make quick money and virtual currencies are used in illegal activities like drug dealing or multi-level marketing for frauds.” And in an attempt to limit what the South Korean government has called a dangerous obsession, the government has made efforts to crackdown on what it refers to as speculation surrounding cryptocurrencies.
Efforts included new regulations for banks conducting transactions with cryptocurrency exchanges. On Jan. 8, regulators inspected six banks to ensure compliance with the new regulations, which included strict know-your-customer identification rules, among other measures.
However, as confusion over the fate of crypto trading has grown, rather than comply with the new rules, some banks said they would simply cease trading with cryptocurrency exchanges altogether, according to the Korea Times, only to reverse shortly after.
On Friday, South Korea’s largest bank, Shinhan Bank, said that it would be closing down the virtual currency accounts it offers in order to comply with new regulations surrounding their use. The bank said it would ban customers from putting money into their virtual accounts that have been used for trading cryptocurrencies starting Jan. 15, according to Bloomberg. The bank would also delay issuing new virtual accounts for trading cryptocurrencies until the system for preventing money laundering is normalized.
Other banks jumped on board with the Industrial Bank of Korea said it would gradually close down accounts that were issued previously for trading cryptocurrencies, according to Yonhap. IBK also made a decision to not operate a real-name account system for trading cryptocurrencies, as did KEB Hana Bank.
* * *
However, overnight, in an indication that the South Korean purge launched by the Justice Ministry may be ending, and that a cryptocurrency ban will likely not happen following the public outcry, South Korea’s Chosun Ilbo reported that “the country will have no issues setting up a real-name cryptocurrency account system by end-January”, according to an unidentified official at Financial Services Commission.
Why “real name” accounts? Well, South Korea’s financial authorities asked banks to adopt real-name cryptocurrency account system earlier this month, with Yonhapn noting that the system will reflect the anti-money laundering guideline which is currently being worked on by financial authorities.
In other words, there will be no need to ban cryptocurrency trading as the danger of money laundering will be eliminated, as all accounts trading cryptos will henceforth be under real names, no longer “virtual.”
According to Chosun, the commission held a meeting with banks, including Kookmin, Shinhan, KEB Hana, NH and IBK, on Friday to conduct joint inspection over establishing a real-name account system. The article adds that while South Korea is technically prepared to create the system, but banks said the govt needs to give clear stance on its regulations over cryptocurrency trading.
Finally, in the most notable U-turn, while Shinhan Bank earlier said it will delay issuing new real-name accounts for trading cryptocurrencies, an unidentified official at Shinhan told the S.Korean daily that the bank still plans to launch the system after setting up anti- money laundering guidelines.
The news that South Korea appears to be rapidly shifting away from a bitcoin ban posture and toward one of regulation, sent the crypto space much higher overnight…
… as it suggests that instead of banning crypto trading outright, the government will instead allow the local trading frenzy to grow, however while extracting its pound of flesh in the form of transaction fees and capital gain taxes.
Incidentally, if the emerging South Korean model of quasi-approval spreads to other nations, it would be another implicit stamp of approval and regulatory validation of cryptocurrencies, for which the biggest, existential threat, is an outright government ban. However, that is unlikely if instead of shutting it down, governments decide to share the upside through taxation. It would also be the catalyst for the next, and even sharper move higher in cryptocurrency prices.
END
Sunday night: Cryptos originally slide and then rebound:
(courtesy zerohedge)
Cryptocurrencies Are Sliding Again
Crypto bulls rejoiced on Saturday when a report in South Korea’s Chosun Ilbo repudiated the Justice Ministry’s warning that it would seek to stifle digital-currency trading in South Korea, and instead, the country is planning to implement a real-name accounting system. The news effectively put an end to the confusion surrounding the future of cryptocurrency policy in one of bitcoin’s most active markets.
Alas, the relief rally was short-lived.
Cryptocurrencies are sliding again on Sunday, with only 2 of the top 20 currencies trading in the green, according to CryptoCompare.
Of course, South Korea isn’t the only country rushing to create a regulatory framework that would presumably help bring digital currencies into the mainstream: Treasury Secretary Steven Mnuchin said this week that US regulators are forming a cryptocurrency working group.
The selloff appears to have coincided with the Central Bank of Indonesia issuing a press release warning its citizens against the use of selling, buying or trading cryptocurrency and reiterating that virtual currencies are vulnerable to bubbles and manipulation, which is why they’re not legally recognized within Indonesia.
“Virtual currencies are vulnerable to bubble risks and susceptible to be used for money laundering and terrorism financing, therefore can potentially impact financial system stability and cause financial harm to society.”
Ripple Labs shot higher earlier this week after payments service MoneyGram said it would use Ripple Labs’ technology in its product.
But it unwound some of those gains this weekend after MoneyGram clarified that it is only using Ripple’s tech in a pilot program.
To be sure, the market wasn’t totally lacking in good news. As CoinTelegraph reports, the Russian Ministry of Finance has drafted a bill to legalize the trading of cryptocurrencies on approved exchanges, removing the threat of a crackdown that had once been raised by Deputy Finance Minister Alexei Moiseev.
* * *
Meanwhile, some believe that bitcoin’s comparatively lackluster start to 2018 is a sign that the pioneering currency is headed lower – potentially much lower – according to Academy Securities’ Peter Tchir. Tchir elaborated in a piece for Forbes “Bitcoin Is Headed Lower – For Now.”
Bitcoin, which hit a high of almost $19,000 on December 18, 2017 is headed lower – possibly much lower, for now.
This isn’t the end of Bitcoin, just a view that in the near term, the price of Bitcoin will continue lower (it may bounce, but the highs are in, for now). It is not the end of cryptocurrencies either, in fact the rise of other cryptocurrencies is part of the reason Bitcoin is due to continue its recent pullback.
While not a ‘perfect storm’ for Bitcoin – many factors have aligned against it in recent weeks
The ‘adoption’ story is fading. This was my view that futures and ETFs and ETNs would allow an increasing number of ‘mainstream’ buyers to enter the market. There are three reasons that story is over, for now.
- ‘Owning’ Bitcoin directly has been made easier as services like http://www.coinbase.com and have improved. Friends and colleagues on forbes.com and @reformedbroker have helped explain it to more people (link). The ‘problem’ with this is it has made the adoption trade less necessary as more people already own Bitcoin.
- Futures have been a failure in terms of generating real interest and demand and may have created a way for ‘pros’ to short Bitcoin at the expense of some retail investors.
- After futures were ‘rushed’ to the market, it seems as though ETFs and ETNs will have more difficulty arriving – delaying the single best source of new mainstream investor adoption (link).
The ‘competition’ story is heating up.
- There is rapidly growing interest in other forms of cryptocurrency which are now competing for investor attention and resources.
- Whether it is Litecoin, Ethereum, Ripple, or some other cryptocurrency you have barely announced, or some public company announced the launch of, there is growing competition for crypto investments.
- Some of this money, I think is merely chasing ‘lower priced’ offerings so they can own more coins (bubble behavior) but some is also looking for rational reasons to pick a ‘technology’ that overcomes some of Bitcoin’s shortcomings.
- Sites like http://www.coindesk.com have shifted their attention from what struck me as overly bitcoin focused a year ago – to much more broadbased coverage of crytpocurrencies and the businesses around them.
The ‘scalability’ issue is finally attracting attention. Real issues about potential growth rather than silly tulip analogies.
- Growing concern about the electricity costs required to mine bitcoin are becoming a real concern for many. The speed at which Bitcoin transactions can be processed is another. Many people found the fact that a Miami Bitcoin Conference Stopped Accepting Bitcoin due to fees and congestion as amusing, if not symbolic of some real issues facing Bitcoin’s ability to grow.
The ‘government’ or ‘crackdown’ risk is increasing.
- Korea seems to be announcing some new form of crackdown on an almost daily basis.
- Regulators seem to be commenting more and more about the risks posed by cryptocurrencies and the need to regulate them.
- FedCoin is a topic discussed more and more in circles plugged into D.C. which would be competition in a different form (to some hardcore cryptocurrency users – government backed crypto is an abomination of what crypto is meant to be – but for a lot of mainstream users – it has a certain appeal).
Some of these issues impact all cryptocurrencies as they have all benefited from the adoption phase and all will be hurt by increased government intervention. Other issues are Bitcoin specific.
For those of you about to enter the fifth stage of Not Owning Bitcoin Grief you may have time to take a deep breath and be patient.
end
Monday night/Tuesday morning: Cryptos slide after another South Korean shutdown by the Finance Ministry.
(courtesy zerohedge)
Cryptos Slide After Yet Another South Korean Shutdown Headline
Cryptocurrencies are sliding once again as Asia opens following headlines from South Korea’s finance ministry that a cryptocurrency exchange shutdown is still an option (but admittedly it needs “serious” discussion among ministries first).
While all of the main South Korean ministries agree that there is irrational speculation in cryptocurrency and rational regulation are needed to curb the speculation, only the Justice Ministry has said the shut down of cryptocurrency exchanges is needed as other ministries are concerned about side effects.
As Yonhap reports again, The Office for Government Policy Coordination made the announcement, downplaying the justice minister’s remark last week that the government is working on legislation to close all virtual currency exchanges to tackle speculation.
“The proposed shutdown of exchanges that the justice minister recently mentioned is one of the measures suggested by the justice ministry to curb speculation. A government-wide decision will be made in the future after sufficient consultation and coordination of opinions,” the office said in a statement.
Ripple is leading the overnight slam (down around 10%)…
Which leaves Ripple down 25% year-to-date (while Ethereum remains up around 65%)…
Bitcoin just broke back below $13,000 having tested above $14,000 during the day…
The irony is that all of this ‘news’ hit last night (and has done numerous times) but keeps getting regurgitated as new headlines that take the cryptos down briefly.
end
Bitcoin just crashed below 12,000 dollars (down over 20%) amid growing fears of a crackdown
(courtesy zerohedge)
Bitcoin Crashes 20% Amid Growing Fears Of Crypto Crackdown
As first discussed last night, the selling in bitcoin and across cryptocurrencies – which began as Asia opened, and appeared to be catalyzed by headlines from South Korea’s finance ministry that a cryptocurrency exchange shutdown is still an option…
… accelerated overnight with bitcoin plunging as much as 20% as the prospect of regulatory crackdowns appeared to spread across Asia. Having traded just above $11,000 this morning, the lowest level since late December, and down more than 40% from its all-time high of $20,000 set just a month ago, bitcoin fell 12.3% to $12,130 as at 7:30am ET.
As bitcoin halted a two-day rally, rival cryptocurrencies also plunged, and the losses in bitcoin are largely in line with those seen across the cryptocurrency space. As of writing, Ripple (XRP), stellar lumens (STR) and cardano (ADA) are down at least 25 percent on the day each. Ethereum’s ether (ETH) token has shed 18 percent in value in the last 24 hours.
As discussed last night, traders continue to focus largely on South Korea, one of the busiest markets around the globe for cryptocurrencies, where finance minister Kim Dong-yeon said overnight that shutting down cryptocurrency exchanges is still an option, but in what appeared a backtracking from last week’s vow to crack down on bitcoin by the Justice Ministry, Kim said that measures first need “serious” discussion among ministries, holding out hope for traders that a crackdown won’t go that far. Kim said there’s irrational speculation and that rational regulation was needed.
“The finance minister made it clear they’re definitely considering banning crypto trading – and it’s probably the third-largest market,” said Neil Wilson, senior market analyst in London for online trading platform ETX Capital. “The news is hitting prices and broader sentiment, and it follows China’s move to shutter mines.”
Meanwhile, according to Bloomberg, China – which first began targeting the industry last year – is escalating its clampdown on cryptocurrency trading, particularly online platforms and mobile apps that offer exchange-like services, although with China no longer a notable player in the crypto space, it is unclear what if any impact further halts of China’s already halted exchanges will have, besides just making cryptos that much more attractive of course.
As Reuters adds, a report today says that a PBoC official has said that centralized trading of virtual currencies should be banned, as well as individuals and businesses that provide related services. This is according to an internal memo that refers to PBoC Vice Governor Pan Gongsheng who reportedly said the government would continue to apply pressure to the virtual currency trade and prevent the build up of risks in that market.
“We’ve heard reports that South Korea, China and Japan have considered a shared approach, a path, to regulation,” ETX’s Wilson said, also citing a challenge to digital coins from a bill in the U.S Senate. “It looks like the light touch that has allowed the crypto-boom to explode may be coming to an end,” he wrote in a note to investors.
Also on Monday night, Steven Maijoor, chairman of the European Securities and Markets Authority, said investors “should be prepared to lose all their money” in bitcoin, in a Bloomberg TV interview in Hong Kong. “It has an extremely volatile value, which undermines its use as a currency,” he said. “It’s also not broadly accepted.”
What he really meant is that unlike stocks, traders should not expect a central bank bailout on their crypto investment when things turn rough. Which, of course, is the biggest part of the attraction.
So to summarize the speculated catalysts behind the selloff from CoinDesk:
- Firstly, comments on social media indicate there is unease in the investor community over talk of a cryptocurrency trading ban in South Korea and further possible crackdowns on trading and mining in China.
- And secondly, BTC futures contracts are trading at a discount to bitcoin’s global average calculated by CoinMarketCap. The January expiry futures contract on the CBOE is trading at $11,510 and CME’s is changing hands at $11,530. Meanwhile, BTC spot is trading at $11,816. The discount (futures price lower than spot price) indicates that the market participants are bearish on the underlying asset (BTC).
For the technicians, the chart analysis indicates scope for a drop to below $10,000 levels if the bulls can’t muster a response today.
The above chart (prices as per Coinbase) shows:
- The rising trendline (blue line) has been breached.
- A downside break of the triangle pattern, indicating the sell-off from the record high of $19,891.99 9 (Dec. 17 high) has resumed.
- The relative strength index (RSI) has turned bearish (below 50.00), indicating scope for further losses.
- The 50-day moving average (MA) has shed bullish bias (flattened).
- The 5-day and 10-day MAs carry a strong bearish bias (downward sloping).
* * *
Finally, the selling wasn’t confined to tokens: U.S. stocks with exposure to cryptocurrencies also plunged in pre-market trading:
- Riot Blockchain, a diagnostic machinery maker that rebranded as a blockchain company in October, falls 8.1% pre- market
- Overstock.com, which has a blockchain subsidiary called Medici Ventures, falls 7.5%
- Kodak, which said this month it’s working with WENN Digital to offer a blockchain-based service for paying photographers, drops 8.7%
- Metropolitan Bank, the issuing bank for a bitcoin debit card called Shift Card, is down 4.5%. On Jan. 14, Fortune reported that the bank halted all cryptocurrency-related international wires, citing an unidentified Metropolitan customer
- Seven Stars Cloud Group, which operated as an on-demand video service in China before buying a 51% stake in a blockchain company in June, drops 3.4%
- Square, which has a bitcoin service on its Square Cash app, falls 2.6%
Other cryptocurrency-exposed stocks to watch, according to Bloomberg, include: OTIV, SRAX, XNET, CRCW, RCGR, AMD, NVDA, MARA, MGTI.
end
Another crypto exchange, Kraken went offline last night at 9 pm est and that is getting users very nervous
(courtesy Bloomberg/GATA)
Big crypto exchange goes dark and users are getting nervous
Submitted by cpowell on Sat, 2018-01-13 00:09. Section: Daily Dispatches
By Camila Russo
Bloomberg News
Friday, January 12, 2018
One of the biggest cryptocurrency exchanges has been down for hours and its clients are starting to freak out.
Kraken went offline at 9 p.m. Pacific Time Wednesday for maintenance that was initially scheduled to last two hours, plus an additional two to three hours for withdrawals, according to an announcement on the San Francisco-based company’s website.
“We are still working to resolve the issues that we have identified and our team is working around the clock to ensure a smooth upgrade,” according to a status update on Kraken’s website posted seven hours ago. “This means it may still take several hours before we can relaunch the site.” …
… For the remainder of the report:
https://www.bloomberg.com/news/articles/2018-01-12/crypto-exchange-krake…
END
then another barrage of negative news on cryptos with one central banker stating what I have been telling you: be prepared for your crypto to go to zero
Crypto Carnage Continues – Ripple Now Down 40% Year-To-Date
Overnight reports from South Korea started it; European regulator comments extended it this morning; and Shanghai “scrutiny” headlines just sparked another slam as cryptocurrencies are getting hammered today…
We detailed the anxiety over a more widespread crackdown on crypto-trading overnight, and since the US came back from its MLK-Day vacation, things have got worse.
It started with a repeat of South Korean finance ministry shutdown headlines.
Then Steven Maijoor, chairman of the European Securities and Markets Authority, said investors “should be prepared to lose all their money” in bitcoin, in a Bloomberg TV interview in Hong Kong. “It has an extremely volatile value, which undermines its use as a currency,” he said. “It’s also not broadly accepted.”
That was followed by warnings from Germany’s Central Bank – Joachim Wuermeling, a member of the board of Germany’s Bundesbank, has suggested that any attempt to regulate cryptocurrencies would require international cooperation. Speaking at an event in Frankfurt on Jan. 15, the director told listeners: “Effective regulation of virtual currencies would therefore only be achievable through the greatest possible international cooperation, because the regulatory power of nation states is obviously limited.”
Then China headlines hit: Shanghai Stock Exchange has taken actions including suspending shares, requiring company clarification and asking for risk disclosure against some stocks amid speculation of blockchain concept, Shanghai Securities News reports, citing the bourse.
Shanghai-listed Easysight Supply Chain Management said in filingsthat co. will halt trading pending checks related to blockchain concept and warned investors again that blockchain business wouldn’t have significant impact on current earnings.
The reaction is not pretty as Ripple leads the collapse…
This leaves Ripple down 40% in 2018 and Bitcoin down almost 20% YTD…
There was one glimpse of silver-lining as CoinTelegraph reports that Mark Cuban, billionaire tech investor and owner of the NBA team The Dallas Mavericks tweeted on Tuesday, Jan. 16 that starting next season, it will be possible to buy tickets to the team’s games with Bitcoin.
end
A terrific interview of Eric Sprott as he talks about the huge numbers of EFP’s issued. I have been commenting that for gold this phenomenon has been going on for two years.
Nick Laird has graphed the totals issued for gold and for 2017: 6600 tonnes have transferred to London. Sprott agrees with me that the comex is a fraud vs the real market for gold.
(Courtesy Hemke/Sprott/Gata)
Comex’s ‘exchange for physicals’ mystify gold market, Sprott says
Submitted by cpowell on Mon, 2018-01-15 17:27. Section: Daily Dispatches
12:28p ET Monday, January 15, 2018
Dear Friend of GATA and Gold:
Interviewed by Craig Hemke of the TF Metals Report for Sprott Money News, mining entrepreneur Eric Sprott discusses the “exchange for physicals” mechanism that is moving gold futures delivery off the New York Commodities Exchange to secretive resolution in London.
“It makes you think that the comex is a fraud vis-a-vis the real market for gold,” Sprott says. “So I think the exchange for physical is just part of the whole thing. Move it off, get rid of it, put it under some carpet somewhere, so nobody sees what’s going on.”
The interview is 10 minutes long and can be heard and read at the Sprott Money internet site here:
https://www.sprottmoney.com/Blog/everything-is-so-vulnerable-eric-sprott…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
END
Only Libor? Nine banks have been accused of rigging the key Libor lending rates
(courtesy McLannahan/London Financial Times)
Nine banks accused of rigging key Canada lending rate
Submitted by cpowell on Mon, 2018-01-15 22:30. Section: Daily Dispatches
By Ben McLannahan
Financial Times, London
Monday, January 15, 2018
A cluster of big banks has been named in a new lawsuit alleging manipulation of a key benchmark lending rate in Canada, opening up a new front in a global scandal that has led to billions of dollars in fines and penalties.
The plaintiff, the Fire and Police Pension Association of Colorado, is accusing nine banks of colluding over a period of about seven years in the manipulation of the Canadian Dealer Offered Rate (CDOR), in order to boost profits for their derivatives trading businesses.
CDOR, a benchmark created by the Canadian Bankers’ Association, is supposed to reflect the cost of borrowing Canadian dollars in North America, according to the lawsuit, which was filed last Friday in the southern district of New York.
Instead, the suit claims, the banks conspired to “suppress” CDOR by making artificially low submissions that did not reflect the actual rates at which they were lending.
On “hundreds” of days during the period in question, the suit adds, the banks’ submissions were identical, suggesting a pattern of collusion through electronic message platforms, phones, and emails.
By lowballing submissions, the banks stood to make more money from their derivatives businesses, from which they “aggressively” marketed and sold interest-rate swaps, forward-rate agreements, and other CDOR-based products to pension funds, hedge funds, and companies in North America. The lower the CDOR rate, the less interest the banks would owe on such positions. At their peak, the derivatives books were about 50 times bigger than the banks’ aggregate CDOR-based loan portfolios. …
The class-action lawsuit names nine big banks — Bank of Montreal, Bank of America Merrill Lynch, Deutsche Bank, Scotiabank, CIBC, HSBC, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank — along with various subsidiaries, which were the most active dealers in CDOR between August 2007 and June 2014. …
… For the remainder of the report:
https://www.ft.com/content/2c2df13e-fa1a-11e7-9b32-d7d59aace167
end
(courtesy Bill Holter/Holter Sinclair collaboration/Miles Franklin)
I believe I have written a couple of times in the past regarding Harry Dent’s “dented logic”. I did so after reading fearful e-mails from holders of gold and silver. Well, Harry Dent is at it again. He has advertisements everywhere, the latest posing as an “article” on Zerohedge where he says gold will be crushed to $700 in a market panic.
He claims a financial and market meltdown is coming to which I wholeheartedly agree because the math not only supports this, it guarantees it at some point. The problem is this, he is trying to scare anyone and everyone he can AWAY from gold by claiming gold will trade to down to $700 and maybe even $250!
First, if gold were to “trade” down to $700, it would solely be traded at that price on paper exchanges and virtually no physical gold would ever change hands at the “exchange prices”. We saw this in 2008 when gold and silver prices were crashed on the COMEX and LBMA. For example, silver was quoted at around $9 an ounce …but the problem for buyers was they could not find much of any real physical silver available for under $15! Before going further, I should mention it is a distinct possibility that paper prices do actually collapse for the simple reason they are only “contracts” and not actually metal. As Jim has long asked, “what is the value of a contract that cannot perform”? The answer of course is zero, and this is exactly where contracts that cannot deliver real metal should approach.
The core flaw to Dent’s logic is that “deflation” will take hold and he claims gold will go down in a deflationary scenario. History does not support this. In fact, “cash” has always been THE best place to be during credit liquidations (deflation). Since the advent of paper currencies, until today’s fiat experiment, most all paper currencies were “backed” by gold. Looking back to the 1930’s deflation, gold not only did not “go down”, it skyrocketed versus almost all everyday goods, wages, and assets …AND was revalued over 70% higher versus dollars! Both Dent and Martin Armstrong claim the dollar was THE best performing asset in the 1930’s, this is simply not true. Yes it was a good thing to have “dollars” (liquidity), but it was far better (70% better) to have gold.
As I have said in the past many times, today’s dollar is not your grandfather’s dollar. In fact, it is actually the opposite! To explain, back in the day, gold and dollars were interchangeable at a rate of $20.6. In other words, you could walk into a bank with $20.67 and walk out with a one ounce Liberty or vice versa. In short, dollars were “backed by gold” because they were interchangeable. Today, the dollar is not backed by anything. Yes it can be said it is backed by the full faith and credit of the U.S. …or even “mandated” by the U.S. military.
The fatal flaw in the thought the U.S. dollar will be the “safe haven” is believing the “value” to gold was a backing BY the dollar when in fact it was the reverse. What Harry Dent, Armstrong and others would have you believe is scrip, issued by a mathematically bankrupt issuer is “real and safe money”. Nothing could be further from the truth. Gold has been the backing to paper monies going back hundred’s of years. Each time it was discovered there was not enough gold to back the quantity of paper outstanding …the paper failed! This phenomenon has taken longer in today’s world via the use of financial engineering and “credit” to hide the reality, but the reality still lurks and will burst forth on a global basis rather than just regional as in the past. Without going into a full article, the world today is engulfed in the greatest credit bubble in history …fueled by the greatest money printing in history …U.S. DOLLARS!
The question of “where is the safe haven?” has never been more relevant nor important in human history. If you get this one wrong …180 degrees wrong, your financial life will be ruined! Choosing between the dollar and gold as your financial protector is like choosing between a 20 lb. stone and a flotation device on the Titanic! It is THE most important financial choice you will ever make. Use real rather than made up history …and common sense as your guide and do not be scared away from what has been THE ultimate financial life preserver for over 5,000 years, gold!
Standing watch and refuting broken logic,
Bill Holter
Holter-Sinclair collaboration
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
i) Chinese yuan vs USA dollar/CLOSED UP AT 6.4422 /shanghai bourse CLOSED UP AT 26.11 POINTS 0.77% / HANG SANG CLOSED UP 565.88 POINTS OR 1.87%
2. Nikkei closed UP 236.93 POINTS OR 1.00% /USA: YEN RISES TO 110.64
3. Europe stocks OPENED GREEN EXCEPT LONDON /USA dollar index RISES TO 90.71/Euro FALLS TO 1.2216
3b Japan 10 year bond yield: RISES TO . +.083/ GOVERNMENT INTERVENTION !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.64/ 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:: 63.89 and Brent: 69.035
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 FALLS TO +.563%/Italian 10 yr bond yield UP to 1.945% /SPAIN 10 YR BOND YIELD DOWN TO 1.488%
3j Greek 10 year bond yield FALLS TO : 3.810?????????????????
3k Gold at $1336.150 silver at:17.12: 6 am est) SILVER NEXT RESISTANCE LEVEL AT $18.50
3l USA vs Russian rouble; (Russian rouble UP 13/100 in roubles/dollar) 56.50
3m oil into the 63 dollar handle for WTI and 69 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation. 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/
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 110.64 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 0.9644 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1792 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017
3r the 10 Year German bund now POSITIVE territory with the 10 year FALLING to +0.563%
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 2.528% early this morning. Thirty year rate at 2.8310% /
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Dow To Open Above 26,000 As Global Stock Meltup Turns Parabolic, Dollar Rebounds
When markets open for trading today, the S&P will rise above 2,800 and the Dow Jones will not only make a new record high (those have become a bit of a boring daily occurrence lately) it will do so in historic fashion with just 12 days needed to move from 25,000 to 26,000, the fastest 1,000 point move in history, nearly twice as fast as the previous record when it took just 23 days for the DJIA to move from 24,000 to 25,000. And yes, get ready for the imminent (self-)congratulatory tweet from Donald Trump…
And as the DJIA makes history, and breaks every possible record, Asia and Europe’s bourses similarly kept world shares on their record-breaking run on Tuesday, though a steadier dollar halted the sizzling start to the year for the euro, yen and yuan and sent metals markets sprawling.
MSCI’s all-country world index notched its third consecutive all-time high as Japan’s heavyweight Nikkei rose to its best level since 1991 during a lively Asian session. In Europe, the STOXX 600 index crawled 0.3% higher as technology and insurance stocks offset a 0.5% drop in miners caused by the buckling metals prices.
After ending its record streak of upward days at 15 yesterday, the Hang Seng nonetheless closed at a post-2007 record high, soaring 1.8% to a new record high of 31,904.
S&P futures move through 2800 and European equity markets are lifted by technology sector. Core fixed income markets also rally, UST and bund curves flatten and ASW widens due to limited long-end supply outlook. Metals continue overnight selloff after bearish Barclays note on iron ore.
Overnight, the dollar rebounded following its widest two-day drop in ten months and the yen snapped a five-day rally after Japan’s Finance Minister Aso said sudden moves are a concern. The euro was headed for its first drop in five days amid profit-taking, and a report that German coalition talks are still facing hurdles and speculation that the ECB will not change its forward guidance any time soon. Speculation over a Chinese intervention to slow the yuan’s gains also prompted short-covering of the dollar. In addition to equities, Euro-area bonds and Treasuries also advanced.
Looking at the macro picture, Bloomberg notes that it’s a peculiar European session, “with asset classes moving independently from each other.” Of note, the USD is finally stronger against G-10 overall as the DXY index attempts to bounce from close to important 90.00 level. The EUR spikes lower in early trade after reports of potential German coalition jitters, however regional impact is later downplayed. A later dovish report that ECB is unlikely to drop its bond-buying pledge next week pushes EUR/USD toward 1.22. GBP softer after core CPI is lower than expected, USD/ZAR runs downside stops through yesterday’s low to hit lowest since June 2015 amid little news.
“The yen’s appreciation against the dollar has stopped and this brightened sentiment, along with expectations for robust company quarterly results,” said Sumitomo Mitsui Asset Management’s Masahiro Ichikawa about Tokyo’s gains.
Japanese Finance Minister Taro Aso said on Tuesday that he did not see problems with the dollar weakening to around 110.80 yen, but that big swings in currencies would be problematic.
Also notable: Bitcoin led a slump in cryptocurrencies, tumbling as much as 20 percent. Emerging-market stocks jumped, consolidating at the highest level in almost a decade.
Copper slumped 1.8 percent, while nickel plunged almost 4 percent. For both it was their biggest drop since early December, after which they went on to surge 10 and 20 percent respectively. Analysts put the wobble partly down to supply issues after stockpiles of iron ore at China’s ports leapt to the highest since at least 2004, but also the dollar – used to price commodities – pulling out of a four-day dive.
“Everything this year (in commodity markets) has been largely about the dollar,” said Crédit Agricole FX Strategist Manuel Oliveri. “It has been selling off regardless of rate expectations, regardless of the growth outlook,” he added, saying he expected it to start to stabilize.
The steadier dollar also brought an end to the euro’s four-day hot-streak. The single currency was also being buffeted by reports that parts of Germany’s main opposition party are resistant to reforming a ‘Grand Coalition’ with Angela Merkel’s conservatives.
The euro slipped back to $1.2235 but was still up 2 percent since the start of the year, helped by talk of a quicker end to European Central Bank stimulus. The yen was 0.15 percent lower at 110.6 per dollar.
Euro zone government bond yields switched direction too, with German Bunds coming off recent highs and low-rated Italian and Portuguese debt outperforming as investors returned to some of 2017’s most profitable trades
Market Snapshot
- S&P 500 futures up 0.4% to 2,800.50
- STOXX Europe 600 up 0.3% to 398.98
- MSCI Asia Pacific up 0.4% to 182.83
- MSCI Asia Pacific ex Japan up 0.4% to 594.38
- Nikkei up 1% to 23,951.81
- Topix up 0.6% to 1,894.25
- Hang Seng Index up 1.8% to 31,904.75
- Shanghai Composite up 0.8% to 3,436.59
- Sensex down 0.2% to 34,781.66
- Australia S&P/ASX 200 down 0.5% to 6,048.64
- Kospi up 0.7% to 2,521.74
- German 10Y yield fell 1.4 bps to 0.573%
- Euro down 0.3% to $1.2224
- Italian 10Y yield rose 1.9 bps to 1.734%
- Spanish 10Y yield fell 2.5 bps to 1.506%
- Brent Futures down 0.6% to $69.85/bbl
- Gold spot down 0.4% to $1,334.59
- U.S. Dollar Index down 0.3% to 90.68
Top News
- Republican leaders are weighing a stopgap spending bill until Feb. 16, as they don’t believe they have the time to complete a fiscal year spending deal by Friday, according to a person familiar with the talks
- Crypto: PBOC official says China’s centralized virtual currency trade needs to end, according to people familiar: Reuters
- The European Central Bank is unlikely to drop a pledge to keep buying bonds at next week’s meeting as rate setters need more time to assess the outlook for the economy and the euro, Reuters reports, citing unidentified people
- The EU has stepped up the demands it will make of the U.K. for the transitional period that follows Brexit, calling for more rights for EU citizens, according to revised draft guidelines seen by Bloomberg
- Russia’s government is said to be discussing a proposal to turn on the fiscal taps in the biggest domestic spending spree since Putin last ran for re-election in 2012
- Bitcoin slumped as much as 20 percent, giving more impetus to a January selloff in cryptocurrencies, after South Korea’s finance minister repeated that the country may ban trading in one of the world’s most active markets
- The Fire & Police Pension Association of Colorado alleged in a New York court filing that Canada’s six biggest banks and three foreign lenders of conspiring to manipulate the Canadian Dealer Offered Rate to boost “illegitimate profits” on derivatives trades for several years until 2014
- Government Shutdown: GOP leaders don’t believe they have time to complete a fiscal year spending deal by Friday, considering a short-term extension until Feb. 16, according to people familiar
- ECB is unlikely to change forward guidance at Jan. meeting; March meeting a more likely option due to updated forecasts, according to people familiar: Reuters
- German Coalition: Berlin regional SPD reject coalition deal with Merkel bloc; Berlin SPD hold 23 out of 600 delegates at SPD congress for Jan. 21: Spiegel
- UK Dec. CPI y/y: 3.0% vs 3.0% est; Core CPI 2.5% vs 2.6% est; ONS notes decline largely driven by a technical reweighting of airfares in the inflation basket
- Japan Finance Minister Aso: current USD/JPY rate isn’t a major issue, referring to a level of 110.80
Asia equity markets were overwhelmingly positive as region digested corporate updates and picked up the pace from the holiday-quietened lead due to the US market closure for Martin Luther King Jr Day. Nikkei 225 (+0.9%) and ASX 200 (-0.5%) traded mixed as Japan coat-tailed on a rebound in USD/JPY, while sentiment in Australia was dampened by weakness across commodity names including Rio Tinto which was pressured despite a beat on Q4 iron ore shipments, as the Co. also maintained full year guidance against expectations for an upgrade. Elsewhere. Hang Seng (+1.1%) outperformed and is on course for a record close, while Shanghai Comp. (+0.2%) was also in the green amid several positive profit alerts and after a firm liquidity operation by the PBoC, which resulted to a net daily injection of CNY 270bln. Finally, 10yr JGBs were flat with prices range-bound throughout the day amid a lack of catalysts and after mixed results from a 5yr JGB auction. PBoC injected CNY 160bln via 7-day reverse repos, CNY 150bln via 14-day reverse repos and CNY 10bln via 63-day reverse repos. PBoC set CNY mid-point at 6.4372 (Prev. 6.4574)
Top Asian News
- Thousands of Palm Oil Farmers March Against EU Restrictions
- Race for Lithium Sees Quarter Billion Investment From Toyota
Most of the major bourses traded in positive territory with the FTSE 100 benefitting from a decline in the GBP after the inflation data. Continental and Michelin topped their respective bourses after reports that the former has hired JPMorgan to look at a break up of the business. There was more to cheer for the UK high street as Greggs and JD Sports both reported strong sales over the Christmas period. In European fixed income, following the UK inflation data, the 10 year gilt inched closer to 124.00 at 123.98 and Short Sterling futures climb another tick or so to stand 0.5-3 ticks above yesterday’s settlement levels. Bunds also revisiting their Eurex session peaks (160.70), but just shy on Monday’s intraday high despite upside hedging for latest sovereign and corp supply via swaps, while USTs have edged a few ticks higher with the curve still flatter ahead of the return of US participants after the long holiday weekend. Only Empire State manufacturing scheduled, but another White House funding bridge to be crossed this week after IP data on Wednesday.
Top European News
- ECB Could End QE After September, Hansson Tells Boersen- Zeitung
- Bundesbank Says China’s Yuan to Be Included in Currency Reserves
- Rep. of Macedonia Plans to Cut Budget Deficit to 2%/GDP by 2020
- EU’s Tusk Says the U.K. Can Have ‘Change of Heart’ on Brexit
- Dubai Oil Refiner Said to Have Held Talks on Retail Unit IPO
- Brexit to Drive Dublin Office Real Estate in 2018, CBRE Says
- Israel’s Discount Investment May Propose Eurocom Creditor Deal
In FX, there has been broad, albeit modest recovery gains for the USD which have helped the Index rebound above 90.500, but it seems to be a fragile move awaiting confirmation and the return of US traders following Monday’s MLK market holiday. In the meantime, some short covering/long liquidation or position paring and profit taking, with the EUR seeing a bit of negativity on reports the Berlin branch of the SPD vote against a grand coalition – EUR/USD now around 1.2250 vs 1.2217 low and near 1.2300 peak yesterday. 1.2302 remains the nearest upside chart objective (another December 2014 high) before strong tech resistance at 1.2350, while support comes in around 1.2188-70. Cable retreated after (and before) the UK inflation data although the moves were relatively as the headline was in line with forecasts.
In commodities, WTI and Brent crude futures are trading mixed with a number of big banks commenting on prices this morning. Goldman Sachs said they see increasing upside risks to their calls for the two major benchmarks, although this isn’t too surprising considering both trade above Goldman’s average forecast this year. Morgan Stanley, Soc Gen and Bank of America have all lifted their forecasts. Precious metals have slipped back as the USD has regained some ground, with palladium pulling back from the record high hit on Monday. Base metals have seen similar price action with copper down just shy of 1% on the LME.
Brexit update (via RanSquawk): EU is said to toughen conditions for a post Brexit agreement, as draft documents showed revised directives for EU chief negotiator Barnier with stricter conditions for a transition deal. (FT) BOE’s external member Tenreyro said that at December meeting, she saw ‘ample time’ before the BOE would need to raise rates and expects a couple more hikes over next three years if economy performs as expected. (Newswires) UK PM May is planning a speech to outline Brexit policy next month, while reports also stated that the EU withdrawal bill is expected to move to the House of Lords this week and pass. (Newswires) ECB’s Lane said he sees an abrupt Brexit to be a genuine shock that would risk the stability of the European financial system. (FT)
Norwegian officials tell Brussels they may seek radical rethink of their terms if UK has access to single market for key sectors. (The Guardian)
Looking at the day ahead, final December CPI reports are due in Germany and Italy. In the UK, there is the December CPI, PPI and RPI along with the November house price index, while in the US the January empire manufacturing print is due. Away from the data, Canada’s Foreign Affairs Minister Chrystia Freeland and US Secretary of State Rex Tillerson are due to meet to discuss stability on the Korean Peninsula. Citigroup are due to report Q4 earnings.
US Event Calendar
- 8:30am: Empire Manufacturing, est. 19, prior 18
DB’s Jim Reid concludes the overnight wrap
I hope you all got over Blue Monday – supposedly the most depressing day of the year. This is calculated on a model that includes the weather, debt levels, the amount of time post Xmas, time since failing New Year’s resolutions, low motivational levels and the feeling of needing to take charge of your life. Feel familiar? I spent this uplifting day in Paris and during a communication with a taxi driver I realised the most odd thing that a lot of us do. I was trying to tell my taxi driver where I wanted to go in what can only be described as hideously bad French. However as I was talking I heard myself trying to pronounce everything in an absurdly strong French accent. It made me stop and think as to why when speaking certain foreign languages we feel the need to try to do an impression of a person from that country? If you think about it, if you went to Birmingham, New York or Sydney you wouldn’t tell a taxi driver where you were going in a strong regional accent so why should you in France? Indeed imagine you were in the Caribbean and spoke in a strong West Indian accent when ordering something or an Indian accent in Mumbai. You may get locked up and rightly so. So if anyone can tell me why we try to speak in accents in certain languages and not others then I’d be interested to know. Or maybe it’s only me in France. Yikes!!
In reality it was a good day to be out of the office given the US holiday and fairly dull markets. However the highlight was the continued weakness in the dollar, with the US dollar index down for the fourth consecutive day (-0.58%) and extending on its three year low. Conversely, Sterling rose 0.47% and the Euro was up 0.51% to 1.227. As a reminder, our FX team believes that flows out of USD will matter more in 2018 than rate differentials and they have a target of 1.30 (EURUSD) on the currency.
Staying in FX, China’s RMBUSD rose to a two year high (+0.49%) after the central bank strengthened the Yuan fixing by 0.55% (the biggest increase in fixing in three months). Notably, the Bundesank has decided to add the Yuan to its currency reserve, albeit starting with a small amount.
Over in government bonds, 10y Bunds and French OATs yields rose c1bp, partly weighed down by the hawkish tone from the ECB’s Hansson. He noted that if growth and inflation continue to evolve broadly in line with the ECB’s projections, it would “certainly be conceivable and appropriate to end the (QE) purchases after September”. Further, in terms of how to end QE, he added that “the last step to zero is not a big deal anymore” and “I think we can go to zero in one step without any problems”. On the higher Euro, he noted it “is not a threat to the inflation outlook” up to now and one “should not overdramatize it”. Finally, on policy guidance, he added “there are certainly good reasons to reduce the importance of the net purchases in our communication soon”. Elsewhere, 10y Gilts yields fell for the first time in five days (-1.6bp) while peripherals rose 1-3bp.
In the UK, the BOE’s Tenreyro has echoed other MPC member’s view that if the central bank’s forecasts are accurate, then the UK economy will potentially have two more rate hikes over the next three years. Notably, she noted that “a different outturn for productivity growth would affect that rate path” and that based on her analysis, it leads her to think that “in the medium term, the risks to productivity may be skewed to the upside”. Looking ahead, she noted that as of December, she saw “ample” time to assess current policy before potentially hiking rates again.
This morning in Asia, equities are trading higher. The Hang Seng has rebounded (+1.22%) with all sectors in the green, while the Nikkei (+0.98%), Kospi (+0.77%) and China’s CSI300 (+0.71%) are all higher. Elsewhere, China’s RMBUSD is up 0.05% as we type. The Japanese Finance minister Aso noted the Yen’s current exchange rate is not a major issue but sudden movements are a big problem for the currency.
Now recapping other markets performance from yesterday. European equities were broadly lower with the Stoxx 600 down 0.17%, partly weighed down by the stronger Euro and weakness in healthcare stocks. Across the region, key bourses were all modestly lower (FTSE -0.12%; CAC -0.13%; DAX -0.34%) while Italy’s FTSE MIB bucked the trend to be up 0.49%.
In commodities, Brent crude oil rose 0.47% to above $70/bbl and is up c40% from its recent lows in August. Yesterday’s strength was partly supported by Iraqi oil minister al-Luaibi comments over the weekend, where he noted that OPEC production curbs should remain until the end of 2018. Gold has edged higher (+0.18%) to a four month high and is up c8% since mid-December. Elsewhere, other base metals were mixed with softness in aluminium prices (Copper +0.16%; Zinc flat; Aluminium -0.79%).
Away from the markets and onto Germany’s efforts to form the next coalition government. The SPD’s caucus whip Mr Schneider said he is “firmly convinced” that this Sunday’s party convention will support the coalition talks with Ms Merkel’s bloc. Elsewhere, according to a Forsa poll conducted last Friday, 56% of SPD voters and 70% of CDU/CSU voters would back a renewed grand coalition between Ms Merkel’s bloc and the SPD.
Turning to Brexit, the FT has reported that EU member states have drawn up revised directives that will toughened its conditions on the UK’s post Brexit transition deal. Based on a draft seen by the FT, the conditions include: i) restricting the UK’s ability to apply a new immigration system to EU national arriving in the transition period, which implies that individuals arriving in the UK after Brexit but before 2021 are eligible to stay indefinitely, ii) British ministers will not be able to enter into agreements with non-EU countries to replace the benefits of those lost trade deals unless authorised to do so by the EU and iii) no change to fishing rights in UK waters.
Finally, the latest ECB holdings were released yesterday. Net CSPP purchases last week were €1.4bn and Net PSPP purchases €7.1bn. This left the CSPP/PSPP ratio at 19.4% last week (vs. 11.5% before QE was trimmed in April 2017), which is in line with our expectations of “around 20%” post the latest taper. That said, this is the first week of relevant data after the QE was halved and the data can be lumpy, so we believe it’s too early to make material conclusions until additional readings. However one of the reasons we thought Q1 would be strong for credit was that the CSPP technicals will improve initially. After Q1 macro issues will start to offset this though and the overall end of QE will come into view.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In Europe, the Eurozone’s November trade surplus was higher than expected at €22.5bln (vs. €22.3bln) with exports up 7.7% yoy and imports up 7.3% yoy. In the UK, the January Rightmove index reported that asking prices for homes rose 1.1% yoy, slightly higher than the prior month’s reading of 1%.
In Japan, the BOJ’s regional economic report noted that six of nine regions had been expanding or expanding moderately, with the remainder continuing to recover moderately. Elsewhere, three of the nine regions revised up their economic assessment from that made in October.
Looking at the day ahead, final December CPI reports are due in Germany and Italy. In the UK, there is the December CPI, PPI and RPI along with the November house price index, while in the US the January empire manufacturing print is due. Away from the data, Canada’s Foreign Affairs Minister Chrystia Freeland and US Secretary of State Rex Tillerson are due to meet to discuss stability on the Korean Peninsula. Citigroup are due to report Q4 earnings.
3. ASIAN AFFAIRS
i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 26.11 points or 0.77% /Hang Sang CLOSED UP 565.88 pts or 1.87% / The Nikkei closed UP 236.93 POINTS OR 1.00%/Australia’s all ordinaires CLOSED DOWN 0.35%/Chinese yuan (ONSHORE) closed WELL UP at 6.4422/Oil UP to 63.95 dollars per barrel for WTI and 69.38 for Brent. Stocks in Europe OPENED GREEN EXCEPT LONDON. ONSHORE YUAN CLOSED UP AGAINST THE DOLLAR AT 6.4422. OFFSHORE YUAN CLOSED UP AGAINST THE ONSHORE YUAN AT 6.4388 //ONSHORE YUAN MUCH STRONGER AGAINST THE DOLLAR/OFF SHORE STRONGER TO THE DOLLAR/. THE DOLLAR (INDEX) IS MUCH WEAKER AGAINST ALL MAJOR CURRENCIES. CHINA IS STILL HAPPY TODAY.(GOOD MARKETS )
3 a NORTH KOREA/USA
NORTH KOREA/SOUTH KOREA
Tillerson breaks with Trump as he rejects a freeze of military exercises near North Korea for a freeze of their nuclear activities
(courtesy zerohedge)
Tillerson Breaks With White House, Rejects Freeze Of Military Exercises Near North Korea
In a direct reversal with the recently disclosed official White House policy, Secretary of State Rex Tillerson said the U.S. rejects a ‘freeze for freeze’ approach that would pause joint U.S./South Korean military drills in exchange for a pause to North Korea’s nuclear program.
Speaking in Vancouver at a meeting with foreign ministers, Tillerson said that “we reject a ‘freeze for freeze’ approach, in which legitimate defensive military exercises are placed on the same level as the DPRK’s unlawful actions. The pressure campaign will continue until North Korea takes decisive steps to de-nuclearize.”
Tillerson also said that “we especially urge Russia and China” to enforce NK sanctions” and added that “if all countries cut off or significantly limit their economic and diplomatic engagements with North Korea, the sum total of our individual, national efforts will increase the chances of a negotiated resolution.”
The Secretary of State also warned that North Korea could affect airline travel.
As a reminder, two weeks ago, in what seemed like a diplomatic victory for North Korea, President Trump and South Korean President Moon Jae-in agreed not to hold springtime military exercises during the Olympics, the South Korean president’s office said, a move that was meant to cool tensions with North Korea, even if meant sidelining the US diplomatic pressure on North Korea as it suggested the Kim regime could be gaining the upper hand in negotiations.
As some pundits noted, by agreeing to suspend military exercises to ensure a smooth Olympics, the Trump administration got maneuvered into a freeze for freeze. But now Tillerson rejects that, which is grandstanding, or Tillerson is not even aware of what the White House’s official policy vis-a-vis North Korea is at this moment.
As usual, look to Trump’s twitter feed for some clarification on whether Trump has quietly reversed positions in the past 2 weeks, or whether Tillerson was simply confused.
end
3 b JAPAN AFFAIRS
Foreign exchange hedge costs have skyrocketed for Japanese investors and that is the reason for their purchase of USA treasuries to tumble.
(courtesy zerohedge)
Japanese Purchases Of US Treasurys Tumble
In the last days of 2017, we showed something surprising: as a result of suddenly exploding USDJPY funding costs, there had never been a worse time for Japanese investors, traditionally some of the most ravenous purchasers of US paper, to buy US Treasurys.
As we explained on December 27, USD funding costs for Japanese insurers and banks to invest in US Treasuries – which had surged reaching a post-financial-crisis high of 2.35% on 15 Dec – are determined by three things, namely (1) the difference in US and Japanese risk-free rates (OIS), (2) the difference in US and Japanese interbank risk premiums (Libor-OIS), and (3) basis swaps, which illustrate the imbalance in currency-hedged US and Japanese investments.
In this particular case, widening of (1) as a result of Fed rate hikes and tightening of dollar funding conditions inside the US (2) and outside the US (3) have occurred simultaneously. This is shown in the chart below.
Whatever the cause behind these sharp funding shortages, one thing was clear – dollar funding costs (FX hedging costs) for both Japanese insurers, banks and other investors to buy US Treasuries were surging (with Japanese buyers and reached a post-financial-crisis high of 2.35% on 15 Dec. And in terms of practical implications for the treasury market this means that, all else equal, marginal demand for US paper is about to plunge for one simple reason: the FX-hedged yields on US Treasurys have plunged to (negative) levels never seen before (unless of course foreign investors buy US Treasurys unhedged).
To demonstrate this point, the chart below from Deutsche Bank shows the yields on currency-hedged US Treasuries from the perspective of Japanese investors. Annualized hedge costs had risen to 2.33% at the end of December, which means that investments in 10y US Treasuries would result in virtually no yield. Furthermore, yields from investment in shorter than 10y US Treasuries would be less than JGBs and result in negative spreads.
And while TSY funding costs, and various X-CCY basis swaps in the past two weeks has dropped, Japan’s lack of appetite for US Treasurys will only continue to rise.
The reason is that as the Nikkei reports, Japanese investors – traditionally the most enthusiastic foreign buyers of US Treasurys – have become far less enthusiastic about buying US debt last year on growing concern about rising U.S. Treasury yields. According to Ministry of Finance data released on Friday, Japanese investors’ net purchases of mid- to long-term foreign bonds tumbled 94.6% on the year to 1.1 trillion yen ($9.9 billion) in 2017, the first annual decline in four years.
In prior years, Japanese institutional investors such as banks and life insurance companies had actively pursued foreign bonds in search of higher returns, finding few alternatives in Japan, where interest rates remained extremely low, and Europe providing few options as a result of the ECB’s NIRP policies. As a result, the only option for many was US paper.
But the November 2016 election of Donald Trump as U.S. president sent the 10-year Treasury yield shooting up from around 1.8% to almost 2.6% in just over a month, and the yield stayed above 2% throughout 2017. Any investors holding onto Treasurys during the yield surge would have incurred significant losses as prices tumbled.
Life insurers’ net purchases declined 8.4 trillion yen last year, and banks collectively turned into net sellers, with their net sales reaching a record 7.6 trillion yen. Over 2015 and 2016, in contrast, they bought 20.6 trillion yen more than they sold.
In March 2017, Japan’s Financial Services Agency announced stricter oversight on foreign bond investment by regional banks. The following month, net sales of mid- to long-term bonds by Japanese investors hit a monthly record of 4.2 trillion yen.
And, of course, as discussed at the top, the higher cost of buying the U.S. dollar is also at play. Life insurers often hedge against a strengthening yen via foreign exchange swaps when investing in foreign bonds. But hedges have become more expensive due to higher U.S. interest rates and other reasons. So the appeal of investing in U.S. bonds has faded overall, unless of course, Japanese investors bid up US paper unhedge, which however could backfire dangerously should FX volatility pick up, or if the dollar continues to devalue against most G-10 peers.
The bottom line: foreign, and certainly Japanese demand for US Treasurys appears to be sliding, whether due to rising yields and P&L losses, or blowing out funding costs, at the worst possible time: just as net supply of US Treasurys is set to double from $488BN in 2017…
… to $1,030BN in 2018, as Goldman calculated last Friday.
Which means that just one hiccup, and yields will soar. It also means that we are one not so major bond tantrum away from the Fed begging preparations for the next massive bond monetization episode, also known as QE4.
According To Albert Edwards, This Country Will Trigger The “Great Unwind”
For years, SocGen’s permabear Albert Edwards was best known for preaching the gospel of terminal deflation, having introduced the “Ice Age” concept some three decades ago to describe a world trending toward monetary paralysis and the failure of conventional economic policies as central banks fail to stimulate “just the right amount” of inflation to kickstart growth, instead losing the war to deflation as attempts to boost wage growth fail time and again.
Which is surprising, because in his latest letter to clients from last week, the prominent SocGen strategist proposes that not deflation, but rather a unexpected episode of monetary tightening will be the catalyst that will trigger the next “Great Unwind”, bringing the record-setting global stock market to a screeching halt.
What is even more interesting is the country that according to Edwards, will launch this great monetary shock: Japan, also known as ground zero for every failed reflation experiment conducted in the past 30 years.
This time may be different and, far now, most investors fail to see it, according to Edwards.
As he explains, “with so much investor attention focused on the improving US economic outlook and the Trump corporate tax cuts, and with the eurozone having seen a rapid improvement in growth prospects over the past year, the other big developed economy/market has been somewhat overlooked”, that of Japan.
“Japan’s economic situation has been improving too although likely in a more durable fashion. Indeed the front-page chart shows a consistent improvement in consumer expectations that the great deflation in Japan has finally ended – despite headline inflation remaining close to zero. A change in the deflationary mindset may yet be at hand, and that in itself would stimulate the economy by reducing the incentive to delay purchases.”
To emphasize his point that Japan’s economy may indeed be on the cusp of secular change – for the better – and inflation is finally stirring, Edwards first points out just how tight the Japanese labor market is: “It is widely accepted that despite a reasonably subdued economic recovery, the demographic situation means that Japan’s labour market is one of the tightest of all the developed economies. Measures of tightness are close to or surpass those at the height of the late-1980s economic bubble (see chart below).”
And yet, just like in the US, despite the tightness in the Japanese labour market, wages have failed to accelerate despite much official encouragement, including tax breaks for companies that raise them. In fact, underlying wage inflation seems to have been stuck at about ½% for the past 2½ years, which although much stronger than before, is still disappointing.
That said, hourly earnings is just one part of the equation that feeds into personal income and employee compensation, the other being hours worked, which is important because despite the subdued pace of wage inflation, rising hours worked means income growth is growing by 2% yoy in nominal terms. Furthermore, unlike the US and UK where personal savings have plumbed decade lows and are fast approaching record lows, income growth in Japan is outstripping consumer spending by a wide margin and the savings ratio has risen (see chart below). Hence if consumer confidence in Japan remains buoyant, consumer spending should contribute to even stronger GDP growth than the above trend 2% yoy rate recorded in 3Q last year, the SocGen analyst concludes.
And yet, notwithstanding the unexpected recent strength of the Japanese economy (much of which appears to be largely thanks to intellectual property exports), the one consistent disappointment has been the inability to hit the 2% core inflation target. As Edwards notes, “The BoJ has failed despite hitting the monetary hyperspace button again and again.”
In his note, Edwards concludes that his own personal view is that the BoJ had made a major policy error in not forcing the yen below the 30-year support of ¥123 (chart below), which in itself would have led to a further slide and imported even more inflation.
But that was then. What about now?
Edwards concedes that it is now “entirely conceivable” that the improved economic and inflation picture noted above prompts a surprise BoJ tightening, leaving the market badly wrong-footed and prompting a massive 2008-like unwind of carry trades (CFTC data shows extreme short yen positioning). And, in an indication that Edwards may well be right, it was one week ago when the BOJ unexpectedly announced a material reduction in its monthly asset purchases, sending both yields and the USDJPY tumbling.
Edwards concluded in his usual, cryptic style:
“If investors are looking for the major surprise that could end this equity bull market, could this be it?”
Speaking at SocGen’s annual strategy conference in London last Tuesday, Edwards reiterated the key points from his what: “We’ve been looking for surprises and one thing that can catch us out is if the Bank of Japan starts tightening. If it actually follows the Fed and the ECB and announces some sort of tapering.”
He then again warned that not enough people are paying attention to Japan: “This could be far more important than the Fed. A lot of major trends start with Japan. People don’t focus on Japan enough in my view.”
Going back to the threat of surprise inflation, Edwards also warned that core inflation in Japan may have bottomed, as the following chart illustrates, while more than 60% of households now expect inflation rather than deflation, he pointed out.
And just in case his revised thesis was lost on some, Edwards concluded by asking rhetorically “what happens if the BOJ tightens instead of weakens as everyone is positioned for? What if the yen strengthens and [the dollar] breaks through ¥107? That would be a major surprise.”
Putting it all together, “If you are looking for something as a trigger for the great unwind, [tightening by the Bank of Japan] could be it.”
To be fair, never one to avoid mocking his own bearish forecasts, Edwards inserted the following self-deprecating snippet:
I have called the top of this equity rally several times and I have been wrong time and time again, so I am not going to waste your time calling another top for this week at least! The FTs chief leader writer, Robert Armstrong, participating in a round table outlook for 2018, described me as having “correctly predicted 10 of the last one market crash”. Ouch!
Who knows, maybe this time Albert will be right.
c) REPORT ON CHINA
Chinese rating agency, Dagong downgrades USA sovereign credit rating from A minus to BBB plus and they warn that a USA insolvency would detonate the next crisis
(courtesy zerohedge)
China Downgrades US Credit Rating From A- To BBB+, Warns US Insolvency Would “Detonate Next Crisis”
In its latest reminder that China is a (for now) happy holder of some $1.2 trillion in US Treasurys, Chinese credit rating agency Dagong downgraded US sovereign ratings from A- to BBB+ overnight, citing “deficiencies in US political ecology” and tax cuts that “directly reduce the federal government’s sources of debt repayment” weakening the base of the government’s debt repayment.
Oh, and just to make sure the message is heard loud and clear, the ratings, which are now level with those of Peru, Colombia and Turkmenistan on the Beijing-based agency’s scale of creditworthiness, have also been put on a negative outlook.
In a statement on Tuesday, Dagong warned that the United States’ increasing reliance on debt to drive development would erode its solvency. Quoted by Reuters, Dagong made specific reference to President Donald Trump’s tax package, which is estimated to add $1.4 trillion over a decade to the $20 trillion national debt burden.
“Deficiencies in the current U.S. political ecology make it difficult for the efficient administration of the federal government, so the national economic development derails from the right track,” Dagong said adding that “Massive tax cuts directly reduce the federal government’s sources of debt repayment, therefore further weaken the base of government’s debt repayment.”
Projecting US funding needs in the coming years, Dagong said a deterioration in the government’s fiscal revenue-to-debt ratio to 12.1% in 2022 from 14.9% and 14.2% in 2018 and 2019, respectively, would demand frequent increases in the government’s debt ceiling.
“The virtual solvency of the federal government would be likely to become the detonator of the next financial crisis,” the Chinese ratings firm said.
* * *
In a preemptive shot across the bow in the coming trade wars, last week Bloomberg reported that Beijing officials reviewing China’s vast foreign exchange holdings had recommended slowing or halting purchases of U.S. Treasury bonds. That warning spooked investors worried that sharp swings in China’s massive holdings of U.S. Treasuries would trigger a selloff in bond and equity markets globally. The report sent U.S. Treasury yields to 10-month highs and the dollar lower, although China’s foreign exchange regulator has since dismissed the report as “fake news.”
Still, Dagong was quick to point out that not much would be needed to crush the public’s confidence in the value of US Treasurys:
“The market’s reversing recognition of the value of U.S. Treasury bonds and U.S. dollar will be a powerful force in destroying the fragile debt chain of the federal government,” Dagong said.
* * *
To be sure, China’s move is far more political than objectively economic, and is meant to send another shot across the bow as the Trump administration prepares to launch a trade war with Beijing in the coming weeks. Still, while both Fitch and Moody’s give the United States their top AAA ratings (and the S&P is the only agency to infamously downgrade the US to AA+ in 2011), US raters have also expressed concerns similar to Dagong‘s. From Reuters:
S&P Global said last month’s proposed U.S. tax cuts would increase the federal deficit and looser fiscal policy could prompt negative action on U.S. credit ratings if Washington failed to address long-term fiscal issues.
In November, Fitch said the tax cuts would give a short-lived boost to the economy, but add significantly to the federal debt burden. It warned that the United States was the most indebted AAA-rated country and ran the loosest fiscal policies.
Moody’s said in September any missed debt payment as a result of disagreement over lifting the debt ceiling, a perennial point of partisan contention in Washington, would result in the United States losing its top-notch rating.
China is rated A+ by S&P Global and Fitch and A1 by Moody‘s, with the three agencies citing risks mainly related to corporate debt, which is estimated at 1.6 times the size of the economy and mostly attributed to state-owned firms.
Trump Warns Xi That “Disappointing” Surge In China Trade Deficit Is “Not Sustainable”
President Trump and China’s President Xi Jinping, held a call yesterday, according to the White House.
While President Trump “expressed hope” that the resumed inter-Korean dialogue may prompt a change in North Korea’s destructive behavior, perhaps more notable was the fact that President Trump used the call “express disappointment that the United States’ trade deficit with China has continued to grow” and made clear that “the situation is not sustainable.”
Indeed – China’s Trade Surplus with the US grew notably in Trump’s first year…
The full readout is below:
President Donald J. Trump spoke yesterday with President Xi Jinping of the People’s Republic of China to discuss recent developments on the Korean Peninsula.
President Trump and President Xi acknowledged the resumption of inter-Korean dialogue and expressed hope that it might prompt a change in North Korea’s destructive behavior.
President Trump committed to sustain the United States-led global campaign of maximum pressure to compel North Korea to commit to denuclearization.
The two leaders also discussed trade issues, and President Trump expressed disappointment that the United States’ trade deficit with China has continued to grow. President Trump made clear that the situation is not sustainable.
It is unclear just what Trump will do about it but as we noted previously, it seems China is deeply worried about US trade sanctions, and more broadly the US taking more assertive in rectifying perceived issues in the bilateral trade relations. Every Administration goes through an episode of promising to deal with Chinese trade interventions and ends up with a watered down, vague agreement. China’s pre-emptive action (with its Treasury purchase headlines) suggests that this time the level of worry is different.
Of course this week also reportedly sees the launch of the Petro-Yuan futures contract.
4. EUROPEAN AFFAIRS
Dollar Tumbles As Euro Soars To 3-Year High; US Markets Closed
With US markets closed for holiday, it has been a quiet, low-liquidity European session, with Asia similarly subdued, while continued USD weakness, now in its 4th consecutive day, has been the main focus as Bloomberg’s dollar index approached its lowest level in three years, helping push the euro up to its strongest since 2014.
Indeed, in lieu of active equity markets, it’s been all about FX and the tumbling dollar and overnight the EURUSD rose to a new three year high just shy of 1.23 before easing off, while cable briefly rose above 1.38 – its highest level since Brexit – and the Mexican Peso was well supported by an unconfirmed Axios reports that was Trump softening his stance on Nafta, at least until Reuters denies it.
The Euro was boosted by growing expectations of tighter monetary policy from ECB, while the chance of a pro-European Union coalition in Germany also boosted confidence in the continent.
“The latest leg up in the euro has clearly come from optimism that the German government is moving towards an agreement for a coalition government,” said Investec economist Victoria Clarke.
The SPD’s pro-European stance – leader Martin Schulz recently argued for a “United States of Europe” – also strengthens the case for investment in the euro.
“This follows an earlier move triggered by the crucial line in the ECB account which has got people thinking about when the first move on rates will happen,” said Clarke.
Euro zone money markets now price in a 70 percent chance of a 10-basis-point rate increase by the ECB by the end of the year, up from 50 percent a week before.
As Bloomberg notes this morning, “the dollar remains under pressure after capping five straight weeks of declines, even against a backdrop of solid U.S. growth. Traders appear to be more excited by potentially hawkish policy shifts from central banks in Europe and Japan, by the improving political outlook in the euro area, and by the synchronized nature of global expansion that’s also propelling emerging-market economies.”
The strength in the euro pushed European stocks a touch lower, as exporters were hit by the currency strength. Europe’s Stoxx 600 Index was down 0.1%, but still not far from multi-year high hit last week, even after advances in Asian stock markets, as the common currency provided a headwind to the region’s exporter-heavy gauge. The yuan touched a two-year high as the People’s Bank of China raised the currency’s fixing to the strongest since May 2016.
European equity markets have started the week in negative territory, taking a breather after the gains seen since the start of the year with the DAX underperforming due to exposure of currency-sensitive stocks amid a surging EURUSD. The UK construction and management company Carillion was in focus after the company was forced to go into voluntary liquidation as talks to rescue the company failed and trading in their shares was suspended. Serco shares rallied over 3% as markets bet that the company should be able to benefit from the collapse of Carillion, while Carillion supplier Speedy Hire fell over 10%. GKN shares have started the week positively after reports that they are considering spinning off a unit to fend off takeover interest and as Melrose said it’s planning to meet with shareholders following their rejected takeover offer.
Over in Asia, the MSCI Asia Pacific Index increased 0.6% to the highest on record with the largest climb in more than a week, even as Hong Kong’s Hang Seng index posted its first drop after a record 14 days of increases although the benchmark equity index erased a gain of as much as 1% as some of the biggest gainers over the past 12 months tumbled Monday afternoon. The Hang Seng closed down 0.2% after earlier climbing above its record closing high earlier; the index had climbed in the previous 14 sessions, its longest run on record.
Meanwhile, on the mainland, the Shanghai Composite closed 0.5% lower, ending its 11-day gaining streak.
China’s Nasdaq-equivalent Chinext tumbled near 3% to the lowest level in 5 months…
… while big-caps outperformed, and the SSE 50 index tracking 50 biggest stocks in Shanghai, climbed 1%.
Asia’s emerging currencies rose amid fund inflows into the region and a weaker dollar. The yuan led the advance after People’s Bank of China boosted the currency fixing to the highest since May 2016. Government bonds were mixed. Strong U.S. stock market will give a tailwind to Asian equity flows, “which should be positive for the regional currency markets,” said Stephen Innes, head of trading for Asia Pacific at Oanda Corp. A soft U.S. dollar and a stronger Chinese yuan fix bode well for the regional currency sentiment, he said.
So, as noted above, the USD has started the week where it left off: lower. USD/JPY bore the brunt of the weakness, dropping below 111.00 before finding support ahead of 110.50. BoJ Governor Kuroda spoke overnight and although he mentioned that QQE with YCC will continue for as long as necessary; the BoJ Governor also offered a positive view on his nation’s economy and inflation on Monday.
The weaker USD has benefitted precious metals with gold higher and palladium now trading at a record high. Base metals also gained with LME copper up over 2% on the LME and zinc up to a 10-year high. WTI and Brent crude futures are both a touch lower as Brent failed to make a clean break above USD 70/bbl. Volumes are expected to remain light today owing to the Martin Luther King holiday in the US.
In Fixed Income markets, Bunds and Gilts both extended gains before fading to stand some 20 ticks above parity, with the former seeing further strength on a break of Friday’s Eurex session high to reach 160.76 (+38 ticks on the day), but unable to really challenge the next resistance area on some intraday or short term charts between 160.85-90. 0.5% in 10 year cash is now support rather than psychological resistance and the level is holding, while Gilts probably saw some selling ahead of 124.00 as the Liffe high so far is 123.97 (+37 ticks). Turnover remains light and will likely stay subdued without US participants, but this could result in some exaggerated price action/moves. UST futures are trading, but again amidst low volumes and modestly firmer with a slight flattening bias for choice. The cash UST market closed all day; large redemptions across EGB markets potentially underpin.
In commodities, precious and industrial metals are well supported by the USD move, while Brent crude edges lower after failing to hold above $70/bbl again. Brent crude futures fell 19 cents to $69.68 a barrel, while U.S. crude was lower 12 cents at $64.19.
As a reminder, US markets are closed today for Martin Luther King day.
Key Bloomberg Headlines
- German Coalition: SPD’s Schneider and Nahles both hopeful on future coalition agreement
- Carillion Files for Liquidation After Failing to Get Bailout
- German grand coalition deal rejected in state of Saxony by one vote
- Bundesbank has decided to include yuan in currency reserves
- U.K. January Rightmove house prices 0.7% vs -2.3% previous
- Kuroda expects CPI to pick up toward 2% target; BOJ will ’continue easing’
- Oil Trades Near Three-Year High as Iraq Joins Call to Keep Cuts
- China Sovereign Wealth Fund: To gradually increase direct investment in the U.S.
- President Trump is said to soften his attitude toward Nafta: Axios
- Middle East: U.A.E. alleges that Qatar fighter jets intercepted a civilian airliner; Qatar denies incident
- Fed’s Rosengren says inflation could pick up faster than expected; flatter curve a consequence of larger central bank B/S, not sign of recession
DB’s Jim Reid, who does not have the day off today, summarizes the overnight wrap.
It will be a quiet start to the week though with the US out on holiday. However last week felt like the most exciting for some time – especially in bond markets – with a rare US Core CPI beat on Friday being the final twist in the tale. A central theme of our 2018 view is that inflation will come back to be a theme in financial markets so the beat was some encouragement to our thesis. As we’ve discussed many times, over the last 2-3 decades US inflation has lagged GDP growth by around 18 months (15 months for the PMIs) and we think that in 2017 markets were too impatient waiting for strong growth to immediate impact inflation. The reality was perhaps that disappointing inflation was to a large part responding to the disappointing growth in late 2015/early 2016 when the energy/ commodity crisis was in full swing.
This week isn’t a bumper week for events but China’s big monthly data dump on Thursday and the threat of the US shutdown materialising on Friday are the highlights. According to our economists, the consensus remains that Congress will pass another four-week continuing resolution in order to hammer out a comprehensive budget agreement, but the risk of a government shutdown is not negligible. The rest of the week ahead is at the end today. For the full week ahead with a cut out and keep table please see “Next week… this week”.
In government bonds on Friday, 10y treasury yields rose to an intraday high of 2.590% (+c.5bp) following the beat on CPI before stabilising back to 2.548% and closing only 1bp up for the day. The UST 2y rose 2bp to 2.0% – the highest since September 2008. European bonds were mixed with 10y Bunds yields up 3.5bp intraday but closed marginally lower (-0.2bp) after the Bundesbank’s Weidmann played down the chance of an imminent rate hike and noted “as far as central bank rates in the Euro area are concerned…the immediate risk of change is currently low”. Elsewhere, Gilts were weaker (10y +3bp) while peripherals outperformed with yields down 3-7bp, led by Italy. The latest poll by Istituto Ixe showed support for Italy’s Democratic Party rose to 23% while support for Five Star Movement fell 1.2ppt to 27.8%.
Despite the beat on CPI and retail sales in the US, the US dollar index fell 0.96% while the Euro jumped 1.41% to a fresh three year high of 1.220 as Germany’s Merkel and SPD reached a preliminary accord to form the next coalition government. Sterling also rose 1.40% to a post Brexit vote high, partly supported by a Bloomberg report that noted the Finance Ministers of Spain and the Netherlands are considering a Brexit deal that keeps the UK as close to the EU as possible.
As a reminder, our FX team has a target of 1.30 on EUR/USD in 2018. George Saravelos suggests that although the Fed is hiking rates, US rate differentials are widening and the dollar has become a G10 high-yielder, the dollar is not responding. He thinks current dynamics look very similar to the 2004-06 Fed cycle. Back then the dollar weakened even as the dollar became one of the highest-yielding currencies in the world. Weaker flows into the US mattered more than rising rates. Our FX team believe flows will matter more in 2018 too, and these are decidedly EUR/USD positive. Refer to link for more details.
This morning in Asia, the BOJ’s Kuroda reiterated that the central bank will continue its stimulus program for as long as needed to achieve its price target. He also noted a moderate economic expansion is now under way which will help accelerate inflation towards the BOJ’s 2% target. Equities are broadly higher. The Hang Seng led the gains and is up for the 15th consecutive day (+0.94%), while the Nikkei (+0.29%), Kospi (+0.24%) and China’s CSI 300 (+0.75%) are all modestly higher. Elsewhere, Axios reported that President Trump is softening his stance towards exiting NAFTA according to five unnamed sources who have spoken with the President. In China, the RMBUSD is up 0.71% to the highest since December 2015 after the central bank strengthened the yuan fixing by 0.55% (the biggest increase in fixing in three months).
Now recapping other markets performance from Friday. US bourses were all higher with the S&P up 0.67% to a fresh high, marking the 8th up day out of 9 trading days. Within the S&P, gains were led by consumer discretionary and financial stocks, following a solid beat in December retail sales as well as better than expected guidance on tax cuts by JP Morgan. European equities were broadly higher with the Stoxx 600 (+0.31%), DAX (+0.32%) and FTSE (0.20%) all
modestly up. Within the Stoxx, gains were broad based with only the consumer staples sector modestly in the red.
In commodities, Brent crude consolidated further and rose 0.88% to $69.87/ bbl. Elsewhere, precious metals gained c1.2% (Gold +1.15%; Silver +1.30%) while other base metals were mixed but little changed (Copper -0.49%; Zinc flat; Aluminium +0.40%). Palladium jumped 3.62% to a fresh record high.
Away from the markets, the Fed’s Rosengren has reiterated his views of potentially changing the Fed’s policy framework. He said this could be done by setting a target range for inflation instead, potentially 1.5%-3% and then deciding on an optimal level within that range, perhaps on a yoy basis or longer. Elsewhere, he conceded the plan could risk generating uncertainty about inflation in the medium and long term.
Over in Germany, Ms Merkel has reached a preliminary accord with the SPD to form the next coalition government. The initial agreements between the parties include: modest middle class tax cuts, focus on strengthening the EU and to contribute more to the EU budget and a potential increase in clean power share from 38% to 65%. Over the weekend, SPD delegates in the state of Saxony-Anhalt rejected the potential for another grand coalition with Ms Merkel’s party by one vote. Notably, the vote is non-binding on the SPD party, but partly illustrate the potential hurdles before a final deal can be reached. Looking ahead, the SPD will vote on the preliminary accord in their full party convention on 21 January. If successful, the two sides will move onto another round of formal talks.
Turning to Brexit and this week’s Parliamentary vote on PM May’s proposed EU withdrawal bill. Both the Opposition Labour Party leader Corbyn and Scottish First Minister Sturgeon have noted they are against the bill in its current form, with Mr Corbyn noting “if our tests are not met by the government, then we will vote against the bill”. Notably, given PM May’s alliance with Northern Island’s DUP, it is likely she would have sufficient votes to pass the bill. Elsewhere, Mr Corbyn noted Labour is “not supporting or calling for a second referendum” on Brexit.
We wrap up with other data releases from Friday. In the US, the December core CPI was above expectations at 0.3% mom (vs. 0.2%) which lifted annual inflation to 1.8% yoy (vs 1.7% expected). The 3 and 6 month annualized core inflation are higher and now at 2.5% and 2.2% respectively. In the details, car prices rose +0.9% mom, housing +0.3% and lodging away from home +0.8% mom, while price of apparel fell 0.5% mom. Elsewhere, the December retail sales (ex-auto) was also above market at 0.4% mom (vs. 0.3% expected) with a strong 0.3ppt upward revision for the prior month. Finally, the November business inventories was in line at 0.4% mom. Factoring the above, the Atlanta Fed’s GDPNow model now estimate 4Q GDP growth of 3.3% saar versus 2.8% saar previously.
The final reading for France and Spain’s December CPI was revised 0.1ppt lower to 1.2% yoy (vs. 1.3% expected). Elsewhere, Italy’s November IP was lower than expected at 2.2% yoy (vs. 3.3%).
end
England
This is not going to be good for the United Kingdom as their huge construction company Carillion who employs 43,000 construction workers around the world has failed and is seeking compulsory liquidation.
(courtesy zerohedge)
UK Construction Giant With 43,000 Employees Collapses
Tense last-minute rescue negotiations failed to yield a result over the weekend, and on Monday morning a major British construction company announced it was going into liquidation after it was unsuccessful in securing a financial lifeline. Carillion, which employs 43,000 people around the world, said in a statement Monday that rescue talks with stakeholders including the British government had collapsed, sending the company into compulsory liquidation.
Commenting on the collapse, Carillion Chairman Philip Green said in a statement that “This is a very sad day for Carillion…Over recent months huge efforts have been made to restructure Carillion to deliver its sustainable future.”
In recent days however we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.
We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers.
Carillion, which has numerous public sector and employs 19,500 workers in Britain and 10,000 in Canada, has its roots in the construction business: roughly three-quarters of its sales come from the U.K., where it has hundreds of contracts with the government. It also builds infrastructure for high speed rail and power distribution projects, and provides government services such as road maintenance and hospital management.
The company had no choice but to liquidate after holding meetings with government figures over the weekend after its bankers refused to provide £300m in new funding without direct intervention from Whitehall. That said, the government will be providing funding required by the liquidator — known as the official receiver — to maintain the public services carried on by Carillion staff, subcontractors and suppliers. According to the FT, PwC is expected to be appointed by the courts to act on behalf of the official receiver and handle the liquidation of Carillion’s assets.
Carillion’s global sales hit £5.2 billion ($7.2 billion) in 2016; the catalyst for its collapse is that Carillion was saddled with net debts of roughly £900m and a pension deficit of £587m, which hugely outweighed its stock market valuation last week of less than £100m after the company lost around 90% of its market cap during 2017.
The crisis was sparked last year when the Wolverhampton-based company warned it was losing cash on key contracts, debt was rising and that it would have to write off £800m and suspend its dividend, leading to the departure of former chief executive Richard Howson.
As a result, Carillion shares, which had been worth as much as £4.57 ($6.30) in late 2007, slumped to trade as low as £0.12 ($0.17) last week after a series of warnings about its finances.
The collapse of Carillion was presaged last year, when the company alerted investors that it was short of cash and would sell assets to raise money.
David Lidington, the top minister at the U.K. government’s Cabinet Office, said in a written statement that his priority was to keep essential public services running.
“All [Carillion] employees should keep coming to work, you will continue to get paid,” he said. “Staff that are engaged on public sector contracts still have important work to do.”
Lidington told the BBC on Monday that the government has been working on contingency plans since 2017 in preparation for a potential collapse. He added that new government contracts awarded to Carillion were structured as joint ventures to ensure that that other partners would be able to step in to complete the necessary work. But critics are unhappy that the government kept awarding contracts as the company floundered.
“It has been more than surprising, possibly even negligent, that the U.K. government continued to dish out contracts to Carillion even though their future has looked uncertain for some time,” said Fiona Cincotta, a senior market analyst at City Index. “[This] is a costly mistake that the U.K. government can ill afford.”
Angela Rayner, shadow education secretary, said the collapse was another example of the failure of privatisation of public services. “Carillion employees whose jobs and pensions are at stake should be the main concern, they are blameless in this corporate meltdown,” she said.
Speaking of pensions, around 28,000 members of Carillion’s 13 UK pension schemes will now be transferred to the Pension Protection Fund, the industry lifeboat for collapsed companies and the UK equivalent of the US PBGC — one of the largest schemes the PPF has had to take over. Those who are not yet retired will receive 90 per cent of the pension they were expecting, up to a cap, while members who are already receiving their pensions will get the full amount, but may see lower annual increases in future.
end
Is something up? Bundesbank decides to add Chinese yuan to its currency reserves
(courtesy zerohedge)
As Petro-Yuan Looms, Bundesbank Adds Renminbi To Currency Reserves
Just days after China’s (denied) threat to slow/stop buying US Treasuries, and just days before the launch of China’s petro-yuan futures contract, Germany’s central bank confirmed it would include China’s Renminbi in its reserves.
The FT reports that Andreas Dombret, a member of Deutsche Bundesbank’s executive board, said at the Asian Financial Forum in Hong Kong on Monday that the central bank had “decided to include the RMB in our currency reserves”.
He said: “The RMB is used increasingly as part of central banks’ foreign exchange reserves; for example, the European Central Bank included the RMB [as a reserve currency].”
The Bundesbank’s six-member board took the decision to invest in renminbi assets in mid-2017, but it was not publicly announced at the time. No investments have been made yet; preparations for purchases are still ongoing.
The inclusion in the German central bank’s reserves basket underscored China’s increasing prominence in the global financial landscape, and reflected policies aimed at making the currency more freely tradable internationally.
Mr Dombret said:
“The notable development from the European point of view over the past few years has been the growing international role of the RMB in global financial markets.”
The offshore Yuan strengthened on the news overnight – pushing to its strongest in over 2 years…
And as Les Echoes reports, while the Bundesbank wants to integrate the yuan into its foreign exchange reserves, the Banque de France is already using it as a currency of diversification.
The Banque de France has raised a corner of the veil on its strategy of managing foreign exchange reserves.
“The foreign currency holdings remain overwhelmingly invested in US dollars, with diversification to a limited number of international currencies such as the Chinese renminbi.“
Which currency would you rather hold as a stable reserve?
The US Dollar has been quite volatile over the last 18 months against a broad basket of its largest trading partners.
The Chinese Renminbi, however, has been very stable over the last 18 months against a broad basket of its largest trading partners (despite volatility against the dollar).
As a reminder, last week, the People’s Bank of China decided to drop a mechanism it recently created to support the renminbi and safeguard it against capital flight, in a sign of rising confidence in the currency. Mr Dombret said the move was “something which we welcome very much”.
end
With European and the uSA stock markets rising to exponential heights why is the German 10 year bund tumbling/
(courtesy zerohedge)
Despite Stock Strength; US, German Bond Yields Are Tumbling
As stocks surge to record-er-est highs, so bond yields and the yield curve are collapsing further…
Buy all the things…
So much for that ‘tantrum’… 10Y Bund yields are tumbling…
Treasury yields are erasing the tantrum spike too…
Perhaps Gundlach was right – Gross’ bear call was premature?
And the US yield curve continues to collapse…
As Goldman notes, CFTC positioning signals investors also expect higher yields in 2018.
After bearish US 2y and bullish 10y positioning for much of 2017, 10y positioning has now become bearish as well. This is consistent with the investor feedback we received in our global strategy conference last week in London, where 60% of participants polled expect US 10y yields above 2.75% by 2018YE.
And while bank stock prices do not care, Citi’s Net Interest Margin slid to an all-time low…
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
Prince Alwaleed moves to a high security Saudi prison after refusing to pay the $6 billion for his freedom
(courtesy zerohedge)
Prince Alwaleed Moved To Highest Security Saudi Prison After Refusing To Pay $6 Billion For Freedom
Goodbye Ritz Carlton. Saudi Arabia’s billionaire prince Alwaleed Bin Talal, has been carted off to Al Ha’ir prison, south of Riyadh, after refusing to pay a reported $6 billion to Crown Prince Mohammed Bin Salman to secure his freedom, following a massive consolidation of power on November 4, 2017 in which over 300 princes, ministers and other elites were rounded up in an “anti-corruption” purge.
Prince Alwaleed Bin Talal
Sources told the Middle East Montior that nearly 60 detainees were transferred to the most high security prison in the Kingdom. The prisoners include Prince Al-Waleed Bin Talal as Prince Turki Bin Abdullah and a number of government officials who refused to make the large financial payments for their release.
Al’hair prison
Among those arrested on allegations of corruption is Prince Alwaleed Bin Talal, the Saudi King’s nephew who is worth more than $17bn according to Forbes, and owns stakes in Twitter, Lyft and Citigroup. According to a Daily Mail source, the crown prince had lulled Alwaleedinto a false sense of security, inviting him to a meeting at his Al Yamamah palace, then sent officers to arrest him the night before the meeting.
‘Suddenly at 2.45am all his guards were disarmed, the royal guards of MBS storm in,’ said the source.
‘He’s dragged from his own bedroom in his pajamas, handcuffed, put in the back of an SUV, and interrogated like a criminal.
‘They hung them upside down, just to send a message.
Purged princes and the like were taken to the Riydah Ritz Carlton Hotel, where they have reportedly been allowed to buy their freedom by giving up their billions in oil wealth for their lives.
Purged Royals inside Riydah Ritz Carlton
As the Daily Mail reported in November, mercenaries purportedly employed by Academi – a successor to infamous US security contractor Blackwater, have been stringing up some of MBS’s “guests” at the Riyadh Ritz Carlton by their feet and savagely beating them during interrogations. The claims have spread rapidly on Arabic-language social media, and even Lebanon’s president Michel Aoun has accused MbS of using mercenaries.
Meanwhile, none of Prince Alwaleed’s powerful friends appear to be coming to his defense. As CNBC points out:
One of the most stunning aspects of bin Talal’s detention is how quiet his long list of influential friends have been about it. This week brought at least some mention of his plight with a statement from two former French presidents who expressed concern over Alwaleed’s status. But let’s face it: a few words from a couple of French ex-presidents is peanuts.
So now we have bin Alwaleed in an actual prison, with a government aggressively taking cash and assets, and still no significant outcry from his foreign friends.
Bin Salman came to power last summer after King Salman changed the order of succession and made Bin Salman crown prince. In addition to his “anti-corruption” puge to consolidate power and wealth, the country has embarked on an ambitious plan called “Vision 2030“- which aimsto modernize Saudi Arabia and break its dependence on oil production, as well as combat human rights violations.
In late September, Saudi Arabia took the unprecedented step of allowing women to drive. “The royal decree will implement the provisions of traffic regulations, including the issuance of driving licenses for men and women alike,” the Saudi Press Agency said, according to Al Aribaya
Meanwhile, A Saudi Government panel has asked that all marriage contracts for girls under the age of 18 be approved by family courts – the latest step in a series of sweeping reforms under the lead of their new Crown Prince, Mohammad bin Salman. While falling short of outlawing child marriage, the request marks the first major legislation involving the long-standing practice primarily overseen by Saudi clerics and local judges – not family courts.
The proposed legislation was part of a series of recommendations by the Committee of Islamic and Judiciary Affairs last Monday, which also called for “competent” family courts to oversee premarital virginity tests for girls under 18.
“The committee acceded to have those under 18 submit their marriage contracts, as well as a pre-marital tests to a competent court to determine their case” –Councilwoman Dr. Eqbal Darandari
“Some Shoura members disagreed with this decision because they believed it meant we condone underage marriage,” said Darandari, adding “Others suggested that only those between the ages of 16-18 can transfer their cases to a judge, and those below 16 cannot get married. Some members demanded this be applied to underage boys, as well.”
Dr. Darandari is among several Saudi legislators who believe in an an age limit for underage girls’ to marry. “Girls’ voices must be heard and their opinions taken into consideration. I don’t believe a pre-marital test is enough. In my opinion, I think we need a female committee — made of a doctor, lawyer, psychologist and social worker — that studies the girl’s state in order to assess whether or not she can get married.”
She also warned of the damage which can occur to children who are forced into marriage.
“Those that are fifteen or younger can undergo severe physical and psychological damage through marriage, and they’re probably unequipped for it. I believe there should be sanctions to those who do not adhere to that, and in the case of a marriage during that delicate age, a girl’s right to demand a divorce if things don’t work out should be guaranteed.” –Dr. Eqbal Darandari
So there you have it – Bin Salman is attempting to modernize his country, while wrestling power from long-standing oil families. And for those who don’t comply, it’s off to prison where the beatings shall continue until morale improves.
h/t iBankCoin.com
Turkey Notifies NATO Of Imminent Massive Invasion Of Syria To Fight Kurds
Turkey is poised for an imminent massive ground invasion of Northern Syria to quash Kurdish militia groups currently holding Afrin near the Turkish border. Multiple regional outlets have reported a build-up of forces that could constitute the largest external intervening force thus far in the entirety of the Syrian war.
According to Middle East based Al-Sura News, Turkey’s military build-up currently underway includes special forces troops, Army units, Turkish-backed Syrian Rebels and Turkey’s air force. The Kurdish YPG/J (People’s Protection Units) has held Afrin since the Syrian government withdrew from the area in 2012, which constitutes the western-most part of the self-declared Rojava autonomous Kurdish zone.
“First Turkish military convoy enters Syria’s Idlib, heads to hilltop overlooking Afrin.” via Turkey’s Daily Sabah
Turkey considers it a “terrorist” enclave as it sees Syrian Kurdish factions as an extension of the PKK, while the US has claimed not to be active in supporting Kurdish operations in Afrin, which lies a mere 40 kilometers from Aleppo where the Syrian Army continues to advance through the Aleppo countryside and into Idlib province.
Over the weekend President Recep Tayyip Erdogan slammed recent US efforts to ramp up support for the Kurdish dominated Syrian Democratic Forces (SDF), saying during a speech in Ankara, “A country we call an ally is insisting on forming a terror army on our borders.” He framed US support to Syrian Kurds as undermining Turkey’s security, adding, “What can that terror army target but Turkey? Our mission is to strangle it before it’s even born.”
Meanwhile a top Turkish general told a meeting of NATO military commanders, “We cannot and will not allow support and arming of the YPG terror group under the name of an operational partner. We hope this mistake will be corrected in the shortest time.”
Regional outlets Al Jazeera and Al Masdar News have confirmed that the large Turkish convoy has entered northwest Syria and that sporadic fighting against Kurdish forces is already underway. Notably the air force is said to be mobilized – a significant factor as Turkish ground forces, including its proxy rebel forces making up its “Euphrates Shield Operation”, have had little success in the past dislodging Kurdish fighters without air support.
Should aerial power be utilized by Turkey it would mark a dramatic escalation, especially given that both Russia and the US operate over Northern Syria, with Russia controlling the airspace over Afrin Canton (as well as over Idlib, which have generally frustrated Turkish plans for greater involvement). Whether the operation against Syrian Kurds moves forward or not into a full scale Turkish assault depends in large part on Russia, which has administered ‘deconfliction’ zones in the Afrin area, and has sponsored trilateral talks with Turkey and Iran which seeks cooperation among the three powers to wind down the war in Syria.
In response to news of the impending Turkish invasion, US Coalition spokesman Col. said Tuesday of the Syrian Kurds in Afrin, “We don’t support them, we have nothing to do with them.” Dillon explained further when pressed by Turkish state media journalists, “We are not operating in Afrin. We are supporting our partners in defeating remaining ISIS [Daesh] pockets along the Middle Euphrates River Valley, specifically in areas north of Abu Kamal, on the eastern side of the Euphrates River.”
The 42 km distance from Afrin to Aleppo is already dominated by Opposition Armed groups based near Aleppo in Anadan, Hraytan and all the way up to Afrin
Turkey’s current build-up and offensive comes after Dillon’s controversial comments on Sunday in which he announced that the US coalition will establish a 30,000-strong new border security force with the SDF in Syria. In claiming to have “nothing to do with” Syrian Kurds operating in Afrin the Pentagon is seeking to distance itself from entering into direct conflict with Turkey in northwest Syria.
Though Turkey has threatened many times before that it will dislodge Afrin from control of the Syrian Kurds, Erdogan might not be bluffing this time. Late on Tuesday he’s reported to have phoned NATO General Secretary Jens Stoltenberg in order to inform NATO that the Afrin operation is being launched.
6. GLOBAL ISSUES
1/3 of Canadians cannot pay their monthly bills as interest rates set to rise
(courtesy Globe and Mail)
and special thanks to Robert H for sending this to us
One-third of Canadians can’t pay monthly bills as interest rates set to rise, survey suggests
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Canadian $100 bills are counted in Toronto, on Feb. 2, 2016. A new survey suggests a third of Canadians can’t pay their monthly bills, including debt repayments, against a backdrop of rising interest rates.
GRAEME ROY/THE CANADIAN PRESS
A new survey suggests a third of Canadians can’t pay their monthly bills, including debt repayments, against a backdrop of rising interest rates.
The quarterly MNP consumer debt index survey finds the number of Canadians who can’t cover their fixed monthly expenses is up eight points since September.
It also finds Canadians who are making ends meet have less disposable income, with an average $631 left after paying bills and contributing to debt repayment. That’s 15 per cent less money left over than in the previous quarter.
The survey says Canadians worried more about their debt as the Bank of Canada raised its benchmark interest rate twice last year and is expected to continue the momentum in 2018.
Four-in-10 respondents say they fear financial trouble if interest rates rise much further and one-in-three agree they’re concerned rising rates could move them toward bankruptcy.
More than 70 per cent of respondents say they’ll be more careful with how they spend money as rates move up, and nearly half say they believe they’ll have to take on more debt over the next year to cover expenses.
Ipsos, which conducts the quarterly survey, interviewed 2,001 Canadians online between Dec. 8 and 13, 2017.
The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.
The survey is conducted on behalf of MNP Ltd., a division of MNP LLP., a personal insolvency practice.
end
7. OIL ISSUES
Russia, upon seeing a high value for oil, may decide to exit from the OPEC deal.
(courtesy Z. Calcuttawala/OilPrice.com)
Russia To Discuss Possible Exit From OPEC Deal
Authored by Zainab Calcuttawala via OilPrice.com,
Russia may be on its way out of the OPEC output reduction deal, according to the country’s Energy Minister, Alexander Novak.
Reuters reports that Novak might discuss the country’s potential exit from the pact in Oman next week. Russia had vowed to cut output by 300,000 barrels per day under the agreement as part of a group of non-OPEC producers who elected to coordinate the bloc’s market stabilization initiative.
“We see that the market is becoming balanced. We see that the market surplus is decreasing, but the market is not completely balanced yet and, of course, we need to continue monitoring the situation,” Novak said. Russian oil majors have been complainingabout the deal and how it is creating stumbling blocks on the road towards the industry’s expansion plans.
Brent barrel prices are currently approaching $70 a barrel, suggesting crude markets are rebalancing as we approach June, when the deal is set for “review” – a process with little description in the full text of the OPEC deal’s renewal, which was agreed upon in November.
As far as OPEC members are concerned, the deal could carry on beyond the end of 2018. Speaking to CNBC, the United Arab Emirates’ energy minister, Suhail al-Mazrouei said: “I am expecting that this group of countries that stood and have become responsible for helping the market to correct, (that) there is a very good chance that they could stick together and put a shape around that alliance.”
His statement comes amid a variety of scenarios on how the deal might come to an end, featuring civil unrest in Venezuela and Iran that may lead to supply disruptions; Russia pulling out of the pact in June; OPEC members and other parties to the deal starting—or continuing—to cheat; and oil prices rising too high.
8. EMERGING MARKET
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings TUESDAY morning 7:00 am
Euro/USA 1.2216 DOWN .0051/ REACTING TO MERKEL’S FAILED COALITION/ 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/JAPAN TAPERING BOND PURCHASES /USA FALLING INTEREST RATES AGAIN/HOUSTON FLOODING/EUROPE BOURSES MOSTLY RED
USA/JAPAN YEN 110.64 UP 0.034 (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 1.3746 DOWN .0047 (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 1.2448 UP .00021 (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 51 basis points, trading now ABOVE the important 1.08 level FALLING to 1.2216; / Last night the Shanghai composite CLOSED UP 26.11 POINTS OR 0.77% / Hang Sang CLOSED UP 565.88 POINTS OR 1.87% /AUSTRALIA CLOSED DOWN 0.35% / EUROPEAN BOURSES ALL GREEN EXCEPT LONDON
The NIKKEI: this TUESDAY morning CLOSED UP 236.93 POINTS OR 1.00%
Trading from Europe and Asia:
1. Europe stocks OPENED GREEN (EXCEPT LONDON)
2/ CHINESE BOURSES / : Hang Sang CLOSED UP 565.88 POINTS OR 1.87% / SHANGHAI CLOSED UP 26.11 POINTS OR 0.77% /Australia BOURSE CLOSED DOWN 0.35`% /
Nikkei (Japan)CLOSED UP 236.93 POINTS OR 1.00%
INDIA’S SENSEX IN THE RED
Gold very early morning trading: 1335.40
silver:$17.09
Early TUESDAY morning USA 10 year bond yield: 2.528% !!! DOWN 2 IN POINTS from FRIDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. (POLICY FED ERROR)
The 30 yr bond yield 2.8317 DOWN 2 IN BASIS POINTS from FRIDAY night. (POLICY FED ERROR)
USA dollar index early TUESDAY morning: 90.707 DOWN 27 CENT(S) from YESTERDAY’s close.
This ends early morning numbers TUESDAY MORNING
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And now your closing TUESDAY NUMBERS \1 PM
Portuguese 10 year bond yield: 1.790% DOWN 1/2 in basis point(s) yield from FRIDAY/
JAPANESE BOND YIELD: +.083% UP 1/2 in basis points yield from FRIDAY/JAPAN losing control of its yield curve/
SPANISH 10 YR BOND YIELD: 1.502% DOWN 0 IN basis point yield from FRIDAY/
ITALIAN 10 YR BOND YIELD: 1.971 DOWN 1 POINTS in basis point yield from FRIDAY/
the Italian 10 yr bond yield is trading 53 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.562% DOWN 2 IN BASIS POINTS ON THE DAY
END
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IMPORTANT CURRENCY CLOSES FOR TUESDAY
Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/4:00 PM
Euro/USA 1.2239 DOWN.0027 (Euro DOWN 27 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 110.79 UP 0.178 Yen DOWN 18 basis points/
Great Britain/USA 1.3771 DOWN .0023( POUND DOWN 23 BASIS POINTS)
USA/Canada 1.2428 UP .0001 Canadian dollar DOWN 1 Basis points AS OIL ROSE TO $63.66
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This afternoon, the Euro was DOWN 27 to trade at 1.2239
The Yen FELL to 110.79 for a LOSS of 18 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 23 basis points, trading at 1.3771/
The Canadian dollar FELL by 1 basis points to 1.2428/ WITH WTI OIL RISING TO : $63.66
The USA/Yuan closed AT 6.4440
the 10 yr Japanese bond yield closed at +.083% UP 1/2 BASIS POINTS / yield/
Your closing 10 yr USA bond yield DOWN 1 IN basis points from FRIDAY at 2.557% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 2.8538 DOWN 2 in basis points on the day /
Your closing USA dollar index, 90.59 DOWN 38 CENT(S) ON THE DAY/1.00 PM/
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 13,21 POINTS OR 0.17%
German Dax :CLOSED UP 45.82 POINTS OR 0.35%
Paris Cac CLOSED UP 4.13 POINTS OR 0.07%
Spain IBEX CLOSED UP 53.20 POINTS OR 0.51%
Italian MIB: CLOSED DOWN 48.27 POINTS OR 0.21%
The Dow closed DOWN 10.23 POINTS OR 0.04%
NASDAQ WAS DOWN 27.37 Points OR 0.51% 4.00 PM EST
WTI Oil price; 63.66 1:00 pm;
Brent Oil: 69.25 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 56.44 UP 7/100 ROUBLES/DOLLAR (ROUBLE LOWER BY 7 BASIS PTS)
TODAY THE GERMAN YIELD RISES TO +.562% FOR THE 10 YR BOND 1.00 PM EST EST
END
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:$63.86
BRENT: $69.29
USA 10 YR BOND YIELD: 2.538% THE RAPID ASSENT IN YIELD IS VERY DANGEROUS/ANYTHING OVER 2.70% AND THE ENTIRE DERIVATIVES BLOW UP
USA 30 YR BOND YIELD: 2.831%
EURO/USA DOLLAR CROSS: 1.2263 DOWN.0040 OR 40 BASIS POINTS
USA/JAPANESE YEN:110.53 down 0.089/ YEN UP 9 BASIS POINTS
USA DOLLAR INDEX: 90.44 DOWN 53 cent(s)/
The British pound at 5 pm: Great Britain Pound/USA: 1.3794 : UP 1 POINTS FROM LAST NIGHT
Canadian dollar: 1.2429 UP 2 BASIS pts
German 10 yr bond yield at 5 pm: +0.562%
END
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM FOR THE DAY
Investors ‘Stunned’ As Stocks Suffer Biggest Reversal In 10 Months; Cryptos Crash
As stocks slumped this afternoon, mainstream media turned into farce…
Emotional Roller-Coaster…
Futures show yesterday’s drift higher and then the opening ramp to record highs… before the plunged to unchanged (and BTFD)…Nasdaq and S&P ended lower from Friday’s close…
No News Was Great News as The Dow topped 26k at the open – rallying that last 1000 points at a record-smashing pace of 0.57% per day (just seven days). This is the most-aggressive rise in The Dow ever… triple the pace of the 24k to 25k advance
Bonds and Stocks traded in sync with one another today – which is out of the norm – with investors buying both together early and selling both together after…Until stocks started to get really hammered…
This was The Dow’s biggest intraday percentage reversal since Dec 1st 2017, biggest absolute point reversal since June 2016…
And biggest high to close reversal since March 2017…
Financials and Tech ended the day lower after a solid start…
VIX hit a 5-week high intraday… (NOTE – VIX was rising with futures into the open)
As we noted earlier, S&P options skew reached a record low (greed) level today…
And risk appetite reached its most greedy ever…
Treasury yields began the day lower (even as stocks soared), started to rise as stocks sank, but then as stock losses accelerated, long-end yields tumbled…
The yield curve continued to flatten to new cycle lows…
The Dollar Index gave up its early gains, down for the 5th day in a row…
Early on the big story was the collapse in cryptos (and the gloating that stocks were soaring)… it was an ugly day though in cryptocurrency land…
Bitcoin Futures dropped to their lowest level since inception (and Cash neared its lowest sicen the start of December)
Gold rallied back above $1340 today, higher than Friday’s close. WTI closed lower…
Gold and Bitcoin have decoupled once again…
David Stockman On The Real “Shithole” – $40 Trillion & Counting…
Authored by David Stockman via Contra Corner blog,
You can call it the bleep-hole moment (per the Fox “family channel”) or the shit-hole moment (per the rest of the MSM), but what you can’t call yesterday’s contretemps in the White House is evidence that sentient adults are in charge of the Imperial City.
And, no, we are not getting down on the Donald for using a swear word—nor are we trying to out race-card Don Lemon as to the obvious implications of the President’s crude phraseology.
Indeed, even prior to yesterday’s outburst it was hard to deny that Trump is a semi-literate bully and that he never got (read) the memo on racial comity and respect. But we actually happen to think that the Donald’s potty-talk eruption resulted not from some dark place in his mind and heart, but from sheer frustration as the intractability of the immigration issue closes in on him.
What we mean is that neither party has its cards face up on the matter—-which goes way beyond the potential deportation of the 800,000 dreamers, chain migration, the diversity lottery and the Wall. Underneath it all there is a brutal, raging political struggle for dominance which is almost existential in import.
To wit, the sundry Dem caucuses want more immigrants, and the browner the better, because it’s their only route to electoral dominance. By contrast, the hard core GOP immigrant-thumpers are desperately attempting to hang-on to Red State rule in the face of the forbidding demographic math of the white population—and the fact that not many Norwegians want to come to America anyway.
It would not be too far-fetched to say that the partisan battle for office is morphing into a racial-ethnic war.
Fox host Laura Ingraham is both exceedingly articulate and thoughtful on many issues, but on immigration she is a screecher. So her diatribe with respect to Thursday’s doings goes right to the heart of the matter:
“Number two, Democrats favor granting citizenship to illegal aliens because they believe it is the absolute key to achieving a super-majority, just like the one they currently have in California. They want that in every key battleground state. So, there’s so much more at stake than just the future of the DREAMers. This deal could decide the fate of the country.
We happen to agree with her, but for a vastly different reason. To wit, the immigration issue threatens to destroy the Republican party—either because it terminally rips it apart or because the nativist immigrant-thumpers completely prevail and thereby marginalize the GOP electorally.
Yes, there is nothing in the constitution or American history that requires a politically healthy GOP or even a Republican party at all. Unfortunately, however, there is nothing in the constitution which requires fiscal rectitude, either. Yet that’s exactly where Laura Ingraham’s “fate of the country” comes in.
Washington is drifting rapidly into a hellacious fiscal calamity and the only thin reed of resistance is the once and former party of fiscal rectitude. If it does not get its act together and screw-up some courage and focus on the matter soon, the nation’s budgetary doomsday machine will become unstoppable—-with the national debt soaring to $40 trillion and 140% of GDP within the next decade.
Moreover, this isn’t just a risk; it’s a near certainty based on the built-in budgetary math and the sheer auto-pilot nature of its driving forces. For instance, the income entitlements including social security, disability, SSI, food stamps, family assistance, the earned income credit, government pensions and veterans benefits cost $1.5 trillion in the year just ended, but in the absence of Congressional action will automatically soar to $2.4 trillion by 2027.
The tab for the giant open-ended medical entitlements—Medicare, Medicaid, CHIP and ObamaCare—is racing upwards even more rapidly: at nearly 7% per year. Consequently, last year’s spending of $1.2 trillion on these programs will become $2.2 trillion by the end of the current 10-year budget window.
These big numbers are bad enough in the telling, but their place in the structure of the Federal budget is what screams out calamity ahead. To wit, last year outlays for the combined income and medical entitlements amounted to just under 14% of GDP, but if Congress were to go AWOL for the next tens years, they would automatically absorb 18% of GDP by 2027.
And that’s where the rubber would meet the road. Owing to the Christmas Eve tax cut special, the revenue base will drop by $280 billion in the year just ahead (FY 2019), bringing Uncle Sam’s take down to just $3.4 trillion or 16.5% of GDP—-the lowest level since the eve of the Korean War.
In other words, what is now in place owing to the folly of the GOP tax cut and 30 years of bipartisan fiscal can-kicking, is a revenue base that is not even large enough to pay for the big entitlements.
And, of course, that omits entirely the roughly $2.7 trillion that current GOP policy would require by 2027 for national security, roads, education, agriculture, space, small business, medical research, rivers and harbors, courts and prisons, the Census Bureau, the Washington monument etc.—and what will be nearly $1.0 trillion per year of interest on the national debt by then.
To be sure, they have this sheer absurdity—-$2.7 trillion of non-entitlement expense and zero revenue to pay for it—papered over with a motely array of budgetary gimmicks. These cause projected revenue to rise back to just over 18% of GDP by 2027, but this is overwhelmingly fake revenue. Even then, it’s still is not enough to pay for the vast reaches of government outside of the entitlements summarized above.
For instance, the individual tax cuts, which will allegedly go to 90% of taxpayers and which are being ballyhooed by the White House as showing up in revised withholding tables by February, will cost $189 billion in the first full year (FY 2019).
But thanks to the disappearing ink in which they were written (i.e. the 2025 “sunset”) that number swings to a $32 billion tax increase by 2027. Of course, that’s never going to happen: The GOP tax-writers have already baldly confessed that the sunset is just a gimmick to avoid the fiscal discipline required by the budget rules. The only thing they haven’t confessed is on the eve of which up-coming election will they vote to cancel the sunset, thereby saving 140 million individual tax filers from what would otherwise be upwards of a quarter-trillion per year tax increase.
And the same goes for the $50 billion per year or so of so-called “tax extenders”. This refers to expiring tax breaks for wind, solar and biofuels–along with affordable housing, community development, Hollywood expensing rules, NASCAR motor sports, rum producers, tuna canneries, short-line railroads and countless more.
The game here has been going on for decades: These measures get continuously reenacted just a few years at a time to make the outyear revenue baseline look healthier. But on the eve of expiration they are invariably given another short-term reprieve. That is, Lucy jerks away the revenue football, leaving Uncle Sam to borrow the difference.
Below we provide new data on the fast collapsing fiscal outlook, but suffice here to say that CBO’s latest 10-year baseline deficit of $10.2 trillion has already been hiked to just under $12 trillion owing to the tax cut. And when you add in the impact of blowing the sequester caps for defense and non-defense by $120 billion per year (as is now clearly intended by both parties) on a permanent basis and also remove the phony sunsets, fake out-year spending cuts and tax extenders from the projections, the projected red ink soars to a cummulative $15 trillion over the decade ahead.
The chart below was developed by the Committee for a Responsible Budget, of which your editor is a charter member, and if anything it errs on the conservative side. The blue section of the deficit bars is the current CBO baseline, the green area adds the impact of the GOP tax cut, and the dotted boxes reflect spending increases already made or promised (defense, disaster aid, border control, veterans, ObamaCare bailout subsidies) and the various budget gimmick which are used to hide the out-year deficits.
The above projection of $15 trillion of cumulative red ink is the very opposite of the Wall Street earnings hockey sticks. The latter are based on a series of economic and financial miracles which never happen. By contrast, the above is an absolute baked-in-the cake price-out of what can’t be stopped—-without an aggressive and determined return by the GOP to its roots in the old-time fiscal religion.
Even absent the fracturing impact and complete distraction of the current right-wing anti-immigration crusade, the task of fiscal stabilization would be herculean, as dramatized by the graph below.
When you factor in the Donald’s massive defense spending increase, the rest of the GOP/bipartisan spending agenda (but not including the promised big infrastructure initiative) and the guaranteed explosion of interest outlays, Federal spending will hit 24.3% of GDP by 2027.
The debt service element needs to be thoroughly understood because without a radical swing toward fiscal austerity, interest expense is virtually guaranteed to rise from $269 billion in the year just completed (FY 2017) to $1 trillion by 2027. That’s mainly because the FY 2017 number was a phony artifact of decades of Fed financial repression and the massive expansion of the Fed’s balance sheet under QE.
As a result, the weighted average cost of interest on the Federal debt was well under 2.0% and the Fed paid $80 billion to the US Treasury as an off-setting “profit” on its money printing scheme. That is, its $4.4 trillion of liabilities cost virtually nothing because they were plucked out of thin air by the Fed’s printing press and were then used to purchase a like amount of income earning UST debt and GSE securities.
But here’s the thing. By virtue of its pivot to QT the Fed will be selling upwards of $2 trillion of its earning asset trove over the next several years—-even as interest rates and bond yields steadily rise. In the puzzle palace of government and central bank book-keeping, however, the implicit mark-to-market losses on the Fed’s shrinking pile of assets will be charged to expense, meaning that its profits will virtually disappear and its payment to the treasury will head toward zero.
That’s especially the case because at the same time, its primary tool to raise the federal funds rate is known as IOER and involves paying interest to banks on excess reserves. That doubled last year to $30 billion and will continue to rise steadily, thereby further eroding the Fed’s so-called “profit”.
Yet at the same time the Fed’s phony profit sharing payment is disappearing, the blended rate on Uncle Sam’s rapidly expanding debt balances will also soar. The CBO, for instance assumes the 1.5% average rate during FY 2017 will reach 3.2% by 2027 in very slow increments. But that surely understates both the speed and level of the coming increase—–once the world’s $100 trillion bond bubblecollapses in the face of global QT.
So the truth of the matter is that interest expense on Washington’s exploding debt—-as shown above where annual deficits hit $1.1 trillion in the year ahead and $2.1 trillion by 2027—could end up far more than $1 trillion annually and also raise the total spending take to 25% of GDP or more.
And that’s what makes the GOP’s asinine tax bill—–a temporary break for the folks and a permanent 21% corporate rate which will generate trillions of stock buybacks, dividends and other financial engineering maneuvers that benefit primarily the top 1% and 10%——such a fiscal horror show. When you strip out the gimmicks, the policy amounts to a permanent revenue take of just 16.8% of GDP.
In a word, these clowns have just completed the drawing-and-quartering of the nation’s fiscal accounts.
In fact, the stunning irresponsibility of it couldn’t be more apparent when you recall that the 18% of GDP cost of the entitlements outlined above is overwhelmingly driven by old people—-including a substantial share of Medicaid costs which go to poor retirees and nursing home beneficiaries. Yet the baby-boom retirement bow wave is just getting started.
As shown below, there are presently about 50 million people 65 and over, but after 2030 that number will go parabolic reaching 105 million eventually. So if the plan is to end the 2020s with $2 trillion plus annual deficits as shown above, it doesn’t take much imagination to see where the fiscal accounts will go when the shaded area in the graph below vectors sharply to the upper right after 2030.
But even that’s not all. The deficit chart above adopts the current CBO economic forecast which assumes recessions have been abolished from the face of the earth and that the already faltering US recovery at 103 months will just keep on trucking to a ripe old age of 207 months in 2027.
The risible fantasy of that assumption is evident in the chart below. In the face of soaring public debts, $67 trillion of total public and private debt and an epochal pivot to QT by the Fed and other central banks, there is not a snowballs chance in the hot place of the green bar (below) ever materializing.
As it is, the CBO forecast embedded in the graph assumes average annual nominal GDP growth—–and that’s what drives revenues and the deficit, not “real” GDP—that is 33% higher than during the last ten years (2006-2016). Accordingly, the cumulative nominal GDP underlying the post-tax bill revenue and deficit projection above is $237 trillion.
A big number, that. But also a vulnerable one. Just factor in an average recession somewhere along the line during the 10-year window and a resulting nominal GDP growth rate equal to the actual rate for the last decade (which benefited from massive Fed QE versus the pending era of QT).
In the world of big numbers that results in about $14 trillion less GDP over the period and about $2.5 trillion less revenue (at the 18% take rate). Throw in additional debt service and interim recession spending for unemployment insurance and other safety nets and you get $20 trillion of cumulative deficits over the period.
Needless to say, that would bring the national debt to $40 trillion and 140% of GDP just in the nick of time. That is, just before the peak baby-boom retirement wave of the 2030s lays total waste to the nation’s fiscal accounts.
At the end of the day, there is only one way out of the impending fiscal catastrophe. Namely, a revival of the old-time fiscal religion within the GOP, and a Paul-on-the-road-to-Damascus conversion among Republicans on the matter of immigration.
That is to say, America does not need Walls; it actually needs tens of millions of younger and working age immigrants who can function as tax mules to carry the burden of 105 million baby-boomer and retirees.
There is virtually no other way out of the giant fiscal trap that is now closing in on the Imperial City—even as going that route is also the only way to save America’s constitutional democracy.
What the GOP immigrant bashers fail to recall is that America was not based on a tribe, a folk, a people or a nation. It was a melting pot of diverse peoples who came here seeking the freedom to go their own way as guaranteed by the constitution and to pursue the opportunity to prosper as offered by free market capitalism. And it worked without any borders at all.
The truth of the matter is that in the present day and age people come here “illegally” (since we now have legal quotas that didn’t exist prior to 1925) to either: (1) sell or distribute illegal drugs; or (2) find jobs and a better standard of living for their families.
On Monday we will eviscerate the immigrants-bashing claims of the GOP right-wing and the Donald and show this proposition to be true: Namely, if you want to get rid of item #1—then end the War on Drugs and turn-over the drug distribution business to Phillip Morris, the teamsters union truck drivers and the rest of the law-abiding machinery we use to distribute everything else.
At the same time, recognize that item #2 is an economic positive and an unavoidable necessity.
Indeed, its the only way to prevent America from becoming the fiscal bleep(shit)-hole described above.
end
SWAMP STORIES
On Friday, we had a 11 count indictment against Mark Lambert who was the transportation specialist for moving the Uranium out of the USA and onto Russian shores. Lambert engaged in multiple bribes and money laundering with Russian officials. This is not the first indictment against individuals in the Uranium one deal. Back in 2009 or so there were 4 convictions but they were very light. The prosecutors: Rod Rosenstein and Mueller with McCabe fully aware as to what was going on
(courtesy zerohedge)
FBI Probe Into Russian Uranium Bribes Concealed By Obama DOJ; Mueller, McCabe, Rosenstein Involved
Friday’s 11-count indictment of former uranium transportation company executive, Mark Lambert, was the latest in a series of DOJ prosecutions involving individuals linked to the Russian nuclear industry and the Uranium One deal.
Mark Lambert
According to the indictment, Lambert and others at Transport Logistics International (TLI) engaged in several counts of bribery, kickbacks and money laundering with Russian nuclear official Vadim Mikerin, in order to secure business advantages with TENEX – a subsidiary of Rosatom, the Kremlin’s state-owned energy company which bought Uranium One.
TLI would have ostensibly transported all of the uranium from the U1 deal, were it not for an FBI undercover mole buried deep within the Russian nuclear industry who gathered extensive evidence of corruption.
What many don’t realize is that Lambert’s Friday indictment is not the first linked to the Uranium One deal.
In fact, Robert Mueller’s FBI had been investigating the scheme since at least 2008 – with retiring Deputy FBI Director Andrew McCabe assigned to the ongoing investigation which was hidden from the Committee on Foreign Investments in the Untid States (CFIUS). Had they known, the committee never would have approved the Uranium One deal with TENEX’s parent company, Rosatom.
Four individuals were eventually prosecuted and given plea agreements after the Uranium One deal was approved. The prosecuting DOJ attorneys? Deputy Attorney General Rod Rosenstein and top Mueller investigator in the Trump-Russia probe, Andrew Weissman – who praised former acting Attorney General Sally Yates for defying Trump.
Unsurprisingly, all four indicted individuals were handed extremely light sentences, none of which made headlines.
The judge? Theodore Chuang – an Obama appointee who went to Harvard Law at the same time as Obama, advised Hillary Clinton as “Counselor on detail to the United States Department of State,” and just so happened to strike down Trump’s “Travel Ban” Executive Order. Chuang’s wife, Jacinta Ma served as a senior policy advisor to Michelle Obama
end
There may be a temporary shutdown of government this Friday as Democrats balk at any deal
(courtesy zerohedge)
‘Shithole-Gate’ Might Lead To Government Shutdown As Democrats Balk At Deal
The Democrats’ critics on the left are demanding that the minority party use all of its leverage to stymie the Trump agenda, even if that means forcing a government shutdown. Fortunately, more mainstream party members can now use Trump’s “Shithole”” comment as a pretext to drop their support for an immigration compromise in the hope of eventually coaxing Republicans into a better deal.
Meanwhile, the GOP had concluded that it would be unable to reach a long-term spending accord by the Friday deadline, which means that chances of a government shutdown have increased this week as yet another “stop-gap” deal is the only option. The government has been operating on short-term spending authorizations since the last two-year budget expired in September. The current short-term spending bill expires Friday at midnight.
Last week, members of a bipartisan senate group that had been negotiating a DACA compromise for four months said they’d reached an agreement in principle. Then the Washington Post published its story about Trump’s response to leaving measures protecting Haitian and El Salvadoran immigrants intact.
There also appears to be some resistance from the White House. This morning, Trump retweeted a tweet he had sent Monday accusing Illinois Senator Dick Durbin, a member of the Democrat’s congressional leadership, of lying about the “shithole” remark, an affront that, Trump suggested, could preclude a DACA deal, the Washington Post reported.
Senator Dicky Durbin totally misrepresented what was said at the DACA meeting. Deals can’t get made when there is no trust! Durbin blew DACA and is hurting our Military.
Should a deal be reached, the most likely outcome would be another short-term spending stopgap that would expire in mid-February. According to WSJ, Freedom Caucus leader Rep. Mark Meadows suggested that his faction would agree to a short-term compromise if there was no other alternative to avert a shutdown. Extending the deadline would require what is known as a continuing resolution.
“There’s a great pushback to another CR, but with that being said, I don’t see that a shutdown’s an option, so obviously a CR is probably the only thing we’ve got in our tool bag before the 19th,”he said.
But some lawmakers, tired of perpetual can-kicking, have said they might not vote for a short-term bill.
“There’s a double chance I might not vote for it,” Rep. Tom Rooney (R., Fla.), a member of the House Appropriations Committee, said about his support for a short-term spending bill. Among other things, he is concerned that disaster-relief money needed by orange growers in his state would be left out.
Of course, there are several other issues in addition to reauthroizing DACA that could disrupt the negotiations. Congress is also figuring out how to pay for a long-term reauthorization of the Children’s Health Insurance Program and lawmakers in areas affected by recent natural disasters are asking for an increase in relief funding, which could complicate negotiations over even a short-term solution.
Aides to key negotiators from both parties planned to meet Tuesday in an effort to rekindle budget talks, setting up a Wednesday meeting of the leaders themselves. If they cannot agree, the government would shut down at midnight Friday for the first time since 2013.
Per Politico, Democrats will try to push Republicans into some sort of promise on DACA in exchange for cooperation with spending, but Republicans and Trump could blame them if a deal isn’t reached. Despite the finger-pointing, Politico reckons that Speaker Ryan may have the most to lose.
“A government shutdown would be nettlesome for him, to say the least. He and his leadership team are seeing projections that they could lose something like 40 seats – which would cost them their majority. A shutdown does not do him any good. Ryan will need to cobble together 218 Republican votes to proceed without any Democratic votes.
Separately, one Forbes writer argued that Trump needs a shutdown to reassure his base that he’s still in control of the Republican Party.
Given the various firestorms that have occured just this past week – the book, the remark about Haiti and African countries and the hush money paid to a porn star – Trump may want to reassure his base that he is still very much in charge by refusing to sign even a simple, clean and short-term extension of the current continuing resolution. Even if it doesn’t include anything about immigration, Trump could still demand funding for his wall and say he is more than willing to shut down the government until he gets it.
Trump would say this shows he is indeed the toughest of negotiators, that he’s still determined to protect the U.S. and that he’s keeping his campaign promises. All of these would be red meat for the Trump base and, in the White House’s mind, would move the narrative away from the book, the remark and the porn star to something politically positive.
But rest assured: If a shutdown occurs, it probably wouldn’t last longer than a couple of days. According to Forbes, Trump would then tell Congress that he will accept a short-term bill because “progress” had been made during weekend negotiations. This, of course, presupposes that Democrats and Republicans agree on a deal first.
But unless Trump decided to do something extraordinary like shutting the air traffic control system, the only real direct impact over the weekend would be on the very few people trying to use the suddenly closed national parks.The positive political impact Trump would be seeking from the shutdown would be immediate, however.
For that reason, if there is a Trump-induced shutdown this week, it wouldn’t be at all surprising if it only lasted until next Monday. Trump would then tell Congress he will sign a short-term CR to reopen the government because (regardless of whether or not it was true) there was progress made over the weekend.
He would also at least hint that he’ll shut the government again in the future if that’s what it will take to get what he wants.
Meanwhile Republicans are already accusing Democrats of hamstringing the military, but Democrats, like Trump, have an optics problem: They need to prove to the #resistance that they’re capable of standing up to Trump and the Republicans. Since the start of his administration, they’ve appeared to be retreating. With the midterm elections coming up later this year, the pressure to change that perception will only intensify.
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More fun in the swamp: Mueller subpoenas Bannon in the Russian probe
(courtesy zerohedge)
Bannon Subpoenaed By Mueller In Russia Probe
The bad news for Steve Bannon just keeps on coming.
Not long after Bannon was bounced from Breitbart following his feud with Trump over his comments in Michael Wolff’s book, moments ago the NYT reports that Trump’s former chief strategist was subpoenaed last week by the special counsel, Robert Mueller to testify before a grand jury as part of the investigation into possible links between Trump’s associates and Russia.
And the reason why stocks dipped modestly and the VIX bounced on the news, is that the subpoena marks the first time Mueller is known to have used a grand jury subpoena to seek information from a member of Mr. Trump’s inner circle.
After excerpts from the book, “Fire and Fury: Inside the Trump White House,” were published this month, Mr. Trump derided Mr. Bannon publicly and threatened to sue him for defamation. Mr. Bannon was soon ousted as the executive chairman of the hard-right website Breitbart News.
Mueller reportedly issued the subpoena after Mr. Bannon was quoted in a new book criticizing Mr. Trump, saying that Donald Trump Jr.’s 2016 meeting with Russians was “treasonous” and predicting that the special counsel investigation would ultimately center on money laundering.
According to the NYT, the subpoena could be a negotiating tactic:
Mr. Mueller is likely to allow Mr. Bannon to forgo the grand jury appearance if he agrees to instead be questioned by investigators in the less formal setting of the special counsel’s offices in Washington, according to the person, who would not be named discussing the case. But it was not clear why Mr. Mueller treated Mr. Bannon differently than the dozen administration officials who were interviewed in the final months of last year and were never served with a subpoena.
Meanwhile, on Tuesday Bannon was testifying behind closed doors before the House Intelligence Committee, which is also investigating Russia’s meddling in the 2016 election and ties between the Trump campaign and Russia.
The NYT quotes legal experts who said the subpoena could be a sign that the investigation was intensifying, while others said it may simply have been a negotiating tactic to persuade Mr. Bannon to cooperate with the investigation. The experts also said it could be a signal to Mr. Bannon, who has tried to publicly patch up his falling-out with the president, that despite Mr. Trump’s legal threats, Mr. Bannon must be completely forthcoming with investigators.
Prosecutors generally prefer to interview witnesses before a grand jury when they believe they have information that the witnesses do not know or when they think they might catch the witnesses in a lie. It is much easier for a witness to stop the questioning or sidestep questions in an interview than during grand jury testimony, which is transcribed, and witnesses are required to answer every question.
The news will hardly come as a surprise to Trump: “the president appeared to ease his anger toward Mr. Bannon at the end of last week. When asked in an interview with The Wall Street Journal whether his break with Mr. Bannon was “permanent,” the president replied, “I don’t know what the word ‘permanent’ means.””
As a result, “people close to Mr. Bannon took the president’s comments as a signal that Mr. Trump was aware that his fired strategist would soon be contacted by investigators.”
Whether or not Bannon actually knows something that can help the Mueller probe, of course, remains to be seen.
Despite a modest blip lower in risk, stocks have promptly BTFD on the news and for now appear unbothered by this latest development involving the Trump probe.
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Soft data, Empire manufacturing falters to 6 month lows as orders and work hours plunge
(courtesy zerohedge)
Empire Fed Survey Stumbles To 6-Month Lows As Orders, Employees, & Work Hours Plunge
Having equaled its highest print since 2009 late last year, the Empire Fed manufacturing survey has tumbled for 3 straight months, dropping to a disappointing 17.7 in January – the lowest since July.
Under the covers it was a disaster with New Orders plunging from 19.0 to 11.9, Number of Employees crashing from 22.9 to 3.8 and Work Hours cratering from 9.3 to just 0.8 – barely growing.
Of course, while reality sank, hope soared, Six-month general business conditions rose to 48.6 from 46.3.
As good as it gets?
This does not look good: Bellwether GE tumbles badly after a massive finance arm charge
(courtesy zerohedge)
GE Tumbles After Massive Finance-Arm Charge
Having enjoyed a phoenix-like renaissance in 2018 so far, GE is tumbling in the pre-market, erasing 2018 gains, following reports that the company will record an after-tax charge of $6.2 billion in its fourth quarter results as part of an ongoing review of its finance arm’s insurance portfolio.
Additionally, as WSJ reports,GE will have to set aside $15 billion over seven years to bolster insurance reserves at its GE Capital unit, surprising investors with deeper than expected problems in a business many thought the company had left behind.
The upshot is that the GE Capital unit, which had been paying dividends in recent years to the parent company, won’t pay dividends to GE for the foreseeable future. GE had suspended the GE Capital dividend last year and slashed its payout to shareholders by half.
Shareholders are not impressed…
GE’s looming charge is one of the biggest yet in a corner of the insurance industry that has reeled from pricing miscalculations made decades ago.
Chief Executive John Flannery expressed frustration at the review’s results while saying the actions will restore GE Capital ratios to appropriate levels.
“At a time when we are moving forward as a company, a charge of this magnitude from a legacy insurance portfolio in runoff for more than a decade is deeply disappointing,” he said.
Probably not as frustrated as the shareholders.
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Pam and Russ talk about Nomi Prins latest book: Collusion: How Central banks rigged the world.
she is certainly correct on that one
In Collusion, Prins walks us through the critically- important events occurring during the 2007-2009 financial crash, many of which would have been relegated to the dust bin of history if not for this book. Prins makes the case that the U.S. is headed toward another epic financial crash as a result of the unchecked powers of the U.S. central bank (the Federal Reserve) and its global counterparts who are creating dangerous new asset bubbles in an effort to paper over the last ones.
Prins convincingly shows that colluding central bankers have effectively become the markets through a never-ending flow of cheap money to the mega banks which have deployed that cheap money to buy back and inflate their own stock – with a green light from their own regulator and money pimp (our term, not hers) – the U.S. Federal Reserve.
Prins correctly points out that what these central banks are doing is providing artificial stimulus to markets – the opposite of what free markets are all about…
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I will see you WEDNESDAY night
HARVEY
harveyorganblog.com 