APRIL 9/Solid day for gold: up $$4.05 to $1336.75/silver up 12 cents to $16.53/new silver open interest record at 243,411 contracts//Russian sanctions by the USA causes the Rouble to tank and the Russian stock market/Swiss shares that are affiliated with Russian oligarchs crash as well/Israel attacks Syria late Sunday night as well as destroy military facilities in GAZA/Criminal trials to commence against 6 traders

 

 

GOLD: $1336.75  UP $4.05  (COMEX TO COMEX CLOSINGS)

Silver: $16.53 UP 12 CENTS (COMEX TO COMEX CLOSINGS)

Closing access prices:

Gold $1336.50

silver: $16.50

For comex gold:

APRIL/

NUMBER OF NOTICES FILED TODAY FOR APRIL CONTRACT:2 NOTICE(S) FOR 200 OZ.

TOTAL NOTICES SO FAR 657 FOR 65700 OZ (2.043 tonnes)

THE COMEX IS OUT OF GOLD

For silver:

APRIL

0 NOTICE(S) FILED TODAY FOR

nil OZ/

Total number of notices filed so far this month: 19 for 90,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Bitcoin: BID $6684/OFFER $6784: UP $135(morning)

Bitcoin: BID/ $6616/offer $6716: up $67  (CLOSING/5 PM)

 

end

Let us have a look at the data for today

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In silver, the total open interest SURPRISINGLY ROSE AGAIN BUT BY A SMALLER THAN EXPECTED 516 contracts from 242,895  RISING TO 243,411  WITH FRIDAY’S TINY  4 CENT RISE IN SILVER PRICING. TODAY WE SET ANOTHER NEW ALL TIME RECORD FOR SILVER OPEN INTEREST . OBVIOUSLY, WE AGAIN HAD ZERO COMEX LIQUIDATION.  BUT WE MUST HAVE WITNESSED SOME COMEX SHORT COVERING AS THE BANKERS ARE QUITE CONCERNED WITH SILVER’S DIZZYING OPEN INTEREST HEIGHT. WE WERE AGAIN NOTIFIED THAT WE HAD ANOTHER GOOD SIZED NUMBER OF COMEX LONGS TRANSFERRING THEIR CONTRACTS TO LONDON THROUGH THE EFP :  1470 EFP’S FOR MAY AND ZERO FOR ALL  OTHER MONTHS  AND THUS TOTAL ISSUANCE OF 1470 CONTRACTS.  WITH THE TRANSFER OF 1470 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 24-48 HRS IN THE ISSUING OF EFP’S. THE 1470 CONTRACTS TRANSLATES INTO 7.35 MILLION OZ  ON TOP OF THE RISE IN OPEN INTEREST IN SILVER AT THE COMEX AND THE STRONG AMOUNT OF SILVER OUNCES STANDING FOR APRIL COMEX DELIVERY.

ACCUMULATION FOR EFP’S/SILVER/J.P.MORGAN’S HOUSE OF BRIBES, / STARTING FROM FIRST DAY NOTICE/FOR MONTH OF APRIL:

12,725 CONTRACTS (FOR 6 TRADING DAYS TOTAL 12,725 CONTRACTS) OR 63.625 MILLION OZ: AVERAGE PER DAY: 2120 CONTRACTS OR 10.604 MILLION OZ/DAY

TO GIVE YOU AN IDEA AS TO THE HUGE SUPPLY THIS MONTH IN SILVER:  SO FAR THIS MONTH:  63.625 MILLION PAPER OZ HAVE MORPHED OVER TO LONDON. THIS REPRESENTS AROUND 9.08% OF ANNUAL GLOBAL PRODUCTION

ACCUMULATION IN YEAR 2018 TO DATE SILVER EFP’S782.12 MILLION OZ.

ACCUMULATION FOR JAN 2018:                        236.879 MILLION OZ

ACCUMULATION FOR FEB 2018:                        244.95 MILLION OZ

ACCUMULATION FOR MARCH 2018:                236.67 MILLION OZ

RESULT: WE HAD A SMALL SIZED GAIN IN COMEX OI SILVER COMEX OF 516  WITH THE TINY 4 CENT RISE IN SILVER PRICE.   WE ALSO HAD ANOTHER STRONG SIZED EFP ISSUANCE OF 516 CONTRACTS WHICH EXITED OUT OF THE SILVER COMEX AND TRANSFERRED THEIR OI TO LONDON AS FORWARDS. SPECULATORS CONTINUED THEIR INTEREST IN ATTACKING THE SILVER COMEX FOR PHYSICAL SILVER . FROM THE CME DATA 516  EFP’S  FOR THE  MONTH OF MAY WERE ISSUED FOR  A DELIVERABLE FORWARD CONTRACT OVER IN LONDON WITH A FIAT BONUS.   WE GAINED A STRONG  1986 OI CONTRACTS ON THE TWO EXCHANGES: i.e. 1470 open interest contracts headed for London (EFP’s) TOGETHER WITH AN INCREASE OF 516  OI COMEX CONTRACTS. AND ALL OF THIS HAPPENED WITH THE TINY RISE IN PRICE OF SILVER OF 4 CENTS AND A CLOSING PRICE OF $16.40 WITH RESPECT TO FRIDAY’S TRADING. YET WE STILL HAVE A GOOD AMOUNT OF SILVER STANDING AT THE COMEX FOR DELIVERY IN THIS NON ACTIVE APRIL DELIVERY  MONTH.

In ounces AT THE COMEX, the OI is still represented by just OVER 1 BILLION oz i.e. 1.217 BILLION TO BE EXACT or 174% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT APRIL MONTH/ THEY FILED: 0 NOTICE(S) FOR NIL OZ OF SILVER

IN SILVER, WE HAVE NOW SET THE NEW RECORD OF OPEN INTEREST AT 243,411 AND AGAIN THIS HAS BEEN SET WITH A LOWE PRICE.  THE PREVIOUS RECORD WAS YESTERDAY AT 242,895 CONTRACTS WITH A SILVER PRICE CLOSING OF $16.40.

ON THE DEMAND SIDE WE HAVE THE FOLLOWING:

  1. HUGE AMOUNTS OF SILVER STANDING FOR DELIVERY  (MARCH 27 MILLION OZ AND APRIL 1.8 MILLION OZ)
  2. HUGE OPEN INTEREST IN SILVER  243,411 CONTRACTS (OR 1.217 BILLION OZ/
  3. HUGE ANNUAL EFP’S ISSUANCE EQUAL TO 2.9 BILLION OZ OR 400% OF SILVER ANNUAL PRODUCTION

AND YET WE HAVE A CONTINUAL LOWE PRICE OF SILVER DESPITE THE ABOVE HUGE DEMAND.  TO ME THE ONLY ANSWER IS THAT WE HAVE SOVEREIGN  (CHINA) WHO IS ENDEAVOURING TO GOBBLE UP ALL AVAILABLE PHYSICAL SILVER NO MATTER WHERE, EXACTLY WHAT J.P.MORGAN IS DOING. AND IT IS MY BELIEF THAT J.P.MORGAN IS HOLDING ITS SILVER FOR ITS BENEFICIAL OWNER..THE USA GOVERNMENT WHO IN TURN IS HOLDING THAT SILVER FOR CHINA.(FOR A SILVER LOAN REPAYMENT)

In gold, the open interest  ROSE BY A SMALL SIZED 1765 CONTRACTS UP TO 495,082 ACCOMPANYING THE GOOD SIZED GAIN IN PRICE/FRIDAY’S TRADING ( GAIN OF $7.50).  WE ARE NOW IN THE ACTIVE DELIVERY MONTH OF APRIL. THE CME RELEASED THE DATA FOR EFP ISSUANCE AND IT TOTALED A RATHER LARGE SIZED 9917 CONTRACTS :   JUNE SAW THE ISSUANCE OF 9917 CONTRACTS  AND ALL OTHER MONTHS ZERO.  The new OI for the gold complex rests at 495,082. ALSO REMEMBER THAT THERE WILL BE A DELAY IN THE ISSUANCE OF EFP’S.  THE BANKERS REMOVE LONG POSITIONS OF COMEX GOLD IMMEDIATELY.  THEN THEY ORCHESTRATE THEIR PRIVATE EFP DEAL WITH THE LONGS AND THAT COULD TAKE AN ADDITIONAL 48 HRS SO WE GENERALLY DO NOT GET A MATCH WITH RESPECT TO DEPARTING COMEX LONGS AND NEW EFP LONG TRANSFERS. 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 FEBRUARY 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  AND WE ARE WITNESSING DELAYS IN ACTUAL DELIVERIES. IN ESSENCE WE HAVE A GOOD  OI GAIN IN CONTRACTS ON THE TWO EXCHANGES: 1765 OI CONTRACTS INCREASED AT THE COMEX AND A STRONG  SIZED 9917 EFP OI CONTRACTS WHICH NAVIGATED OVER TO LONDON.THUS  TOTAL OI GAIN: 11,682 CONTRACTS OR 1,168,200 OZ =36.33 TONNES

FRIDAY, WE HAD 11895  EFP’S ISSUED.

ACCUMULATION OF EFP’S GOLD AT J.P. MORGAN’S HOUSE OF BRIBES: (EXCHANGE FOR PHYSICAL) FOR THE MONTH OF APRIL : 61,542 CONTRACTS OR 6,154,200  OZ OR 191.42 TONNES (6 TRADING DAYS AND THUS AVERAGING: 10,257 EFP CONTRACTS PER TRADING DAY OR 1,025,700 OZ/ TRADING DAY)

TO GIVE YOU AN IDEA AS TO THE HUGE SIZE OF THESE EFP TRANSFERS :   SO FAR THIS MONTH IN 6 TRADING DAYS IN  TONNES: 191.42 TONNES

TOTAL ANNUAL GOLD PRODUCTION, 2017, THROUGHOUT THE WORLD EX CHINA EX RUSSIA: 2555 TONNES

THUS EFP TRANSFERS REPRESENTS 191.42/2550 x 100% TONNES =  7.50% OF GLOBAL ANNUAL PRODUCTION SO FAR IN MARCH ALONE.*** THE ACCUMULATION OF EFP CONTRACTS IS RISING PER MONTH.

ACCUMULATION OF GOLD EFP’S YEAR 2018 TO DATE 2235.90 TONNES

ACCUMULATION OF GOLD EFP’S FOR JANUARY 2018:           653.22  TONNES

ACCUMULATION OF GOLD EFP’S FOR FEBRUARY 2018:         649.45 TONNES

ACCUMULATION OF GOLD EFP’S FOR MARCH 2018:                741.89 TONNES

WHAT IS ALARMING TO ME, ACCORDING TO OUR LONDON EXPERT ANDREW MAGUIRE IS THAT THESE EFP’S ARE BEING TRANSFERRED TO WHAT ARE CALLED SERIAL FORWARD CONTRACT OBLIGATIONS AND THESE CONTRACTS ARE LESS THAN 14 DAYS.  ANYTHING GREATER THAN 14 DAYS, THESE MUST BE RECORDED AND SENT TO THE COMPTROLLER, GREAT BRITAIN TO MONITOR RISK TO THE BANKING SYSTEM.  IF THIS IS INDEED TRUE, THEN THIS IS A MASSIVE CONSPIRACY TO DEFRAUD AS WE NOW WITNESS A MONSTROUS TOTAL EFP’S ISSUANCE AS IT HEADS INTO THE STRATOSPHERE

Result: A LARGE SIZED INCREASE IN OI AT THE COMEX WITH THE SMALL SIZED GAIN IN PRICE IN GOLD TRADING FRIDAY ($7.50 GAIN). WE HAD A VERY LARGE SIZED NUMBER OF COMEX LONG TRANSFERRING TO LONDON THROUGH THE EFP ROUTE: 9917 CONTRACTS AS THESE HAVE ALREADY BEEN NEGOTIATED AND CONFIRMED.   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 9917 EFP CONTRACTS ISSUED, WE HAD A GOOD NET GAIN IN OPEN INTEREST OF 11,682 contracts ON THE TWO EXCHANGES:

9917 CONTRACTS MOVE TO LONDON AND 1765 CONTRACTS INCREASED AT THE COMEX. (in tonnes, the GAIN in total oi equates to 36.33 TONNES).

we had: 2 notice(s) filed upon for 200 oz of gold.

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

GLD

WITH GOLD UP  $4.50 :  WE HAD NO  CHANGES IN GOLD INVENTORY AT THE GLD/

Inventory rests tonight: 859.99 tonnes.

SLV/

WITH SILVER UP 12 CENTS TODAY: NO  CHANGES/ 

/INVENTORY RESTS AT 320.196 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 SMALLER THAN EXPECTED 516 CONTRACTS from 242,895 UP TO 243,411 (AND A  NEW COMEX RECORD SET TODAY/APRIL 9/2017. THE PREVIOUS RECORD OTHER THAN WAS ESTABLISHED FRIDAY.  THE PREVIOUS RECORD WAS: 234,787 SET ON APRIL 21.2017 ALMOST ONE YEAR AGO.  THE PRICE OF SILVER ON THAT DAY: $17.89).

FRIDAY’S TRADING  OCCURRED SURPRISINGLY WITH THE TINY RISE IN PRICE OF SILVER (4 CENTS//).   OUR BANKERS USED THEIR EMERGENCY PROCEDURE TO ISSUE ANOTHER 1470 EFP CONTRACTS FOR MAY  (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 AGAIN ZERO COMEX SILVER COMEX LIQUIDATION. IF WE TAKE THE  OI GAIN AT THE COMEX OF 516 CONTRACTS TO THE 1470 OI TRANSFERRED TO LONDON THROUGH EFP’S, WE OBTAIN A GOOD  GAIN OF 1986  OPEN INTEREST CONTRACTS.  WE STILL HAVE A GOOD AMOUNT OF SILVER OUNCES THAT ARE STANDING FOR METAL IN APRIL (SEE BELOW). THE NET GAIN TODAY IN OZ ON THE TWO EXCHANGES:  9.93 MILLION OZ!!!

RESULT: A SMALL SIZED INCREASE IN SILVER OI AT THE COMEX WITH THE TINY RISE IN SILVER PRICING / FRIDAY (4 CENTS) . BUT WE ALSO HAD ANOTHER VERY GOOD SIZED 1470 EFP’S ISSUED TRANSFERRING COMEX LONGS OVER TO LONDON. TOGETHER WITH THE STRONG  SIZED AMOUNT OF SILVER OUNCES STANDING FOR MARCH, DEMAND FOR PHYSICAL SILVER INTENSIFIES AS WE WITNESS SEVERE BACKWARDATION IN SILVER IN LONDON.

(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)MONDAY MORNING/SUNDAY NIGHT: Shanghai closed UP 7.18 POINTS OR .23%  /Hang Sang CLOSED UP 384.64 POINTS OR 1.29%   / The Nikkei closed UP 110.74 POINTS OR 0.51%/Australia’s all ordinaires CLOSED UP .30% /Chinese yuan (ONSHORE) closed DOWN at 6.3153/Oil DOWN to 62.25 dollars per barrel for WTI and 67.59 for Brent. Stocks in Europe OPENED IN THE GREEN EXCEPT LONDON   .   ONSHORE YUAN CLOSED UP AT 6.3153 AGAINST THE DOLLAR. OFFSHORE YUAN CLOSED DOWN ON THE DOLLAR AT 6.3161 /ONSHORE YUAN TRADING STRONGER AGAINST OFFSHORE YUAN/ONSHORE YUAN TRADING WEAKER AGAINST USA DOLLAR/OFFSHORE YUAN TRADING  MUCH WEAKER AGAINST THE DOLLAR /CHINA RETALIATES WITH TARIFFS/ TRUMP RESPONDS TO NEW TARIFFS AND IT NOW LOOKS LIKE A FULL TRADE WAR IS BEGINNING/

SOUTH KOREA/NORTH KOREA

 

i)North Korea/South Korea

b) REPORT ON JAPAN

3 c CHINA

i))China/ SOUTH CHINA SEAS

China wishes to show her muscle as they deploy 3 carrier battle groups in the South China Sea

( zerohedge)

ii)It seems that instead of dumping its USA treasuries, China is thinking about the devaluation of the yuan and that would put tremendous pressure around the world

( zerohedge)

iii)This seems like a logical step for the Chinese.  They do not want to send the nuclear button to the USA.  A good alternative is for them to just stop buying USA treasuries.  It will hurt the USA as their deficit is already at 1.2 trillion dollars and then on top of that the Fed will roll off 600 billion.  If the Chinese stop buying the Fed will be called upon to purchase Bonds and QT will end.

(courtesy zerohedge)

4. EUROPEAN AFFAIRS

i)GREAT BRITAIN

Tom Luongo discusses what happens next with the Theresa May Government post Skripal

( Tom Luongo)

ii)DEUTSCHE BANK/GERMANYWe reported on this two weeks ago that the world’s largest derivative bank is preparing to replace John Cryan. It seems that the rumours are true and he will be replaced with retail banking head Sewing

( zerohedge)

iii)ITALY

Tom Luongo discusses the foolishness of the League party

( Tom Luongo)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)RUSSIA/USA/SYRIA

Oh no!! not again…Trump threatens Putin again over Saturday night’s purported “chemical attack”. Russia warns of a grave response if the USA launches a strike in retaliation to this “event”

( zerohedge)

ii)Last night explosions heard above Syria/Pentagon denies it was responsible

( zerohedge)

iii)ISRAEL/RUSSIA/SYRIA

Russia blames Israel for the above attack last night

(courtesy zerohedge)

iv)Israel told USA officials of last night’s raid in Syria and now the big question: what will be the Russian response?

( zerohedge)

v)Israel also strikes Hamas in the Gaza Strip knocking out military compounds

(courtesy zerohedge)

vi)The USA has no evidence that Assad was behind the chemical attack on Friday night but says that they will retaliate regardless of the UN decision

( zerohedge)

 
vii)TURKEY

The Turkish Lira falls badly to 4.07 to the dollar and over 5 Turkish Lira/Euro

(courtesy zerohedge)

viii)TRUMP TO MAKE A MAJOR DECISION BY THE END OF TODAY ON SYRIA. HE IS EXTREMELY ANGRY AT THE CHEMICAL ATTACK ON FRIDAY BUT HE DOES NOT HAVE PROOF IT WAS ASSAD

( zerohedge)

6 .GLOBAL ISSUES

7. OIL ISSUES

8. EMERGING MARKET

9. PHYSICAL MARKETS

i)This is just a small part in the criminal actions by the banks in manipulating gold and silver. As we get more canaries talking, it will get more intense

( Alan Flynn/Comex We have a Problem blog)

ii)Chris Powell comments on the above story

 ( Chris Powell/GATA)

iii)A commentary on why silver should explode in price

(courtesy Gijsbert G)

iv)Ambrose Evans Pritchard explains why China will not benefit at all with they dump with USA treasuries as the USA Fed can easily soak up all of this debt.

( Ambrose Evans Pritchard/UKTelegraph)

 v)Chinese foreign exchange reserves rise slightly as the USA dollar weakens

( GATA/Reuters)

vi)Cryptos crash on the weekend due to the Russian sanctions

( zerohedge)

vii)The sanctions against Russian aluminum company RUSAL is causing fears that they may collapse

( zerohedge)

10. USA stories which will influence the price of gold/silver

i)Sunday: 
Kudlow claims that the White House is planning to trim its huge 1.3 trillion omnibus spending bill
(courtesy zerohedge)
ii)Wall Street will be watching closely what Xi will say in his speech tonight

(courtesy zerohedge)

iii)We have been highlighting the subprime auto sector to you for quite some time and it was inevitable that the bubble would burst.  It has now started as lenders are dropping like flies

( zerohedge)

iv) Wolf Richter comments that the unwind is proceeding exactly as planned and despite stock market sell offs
( Wolf Richter/WolfStreet)

v)David Stockman gives us a thorough analysis of China and how their huge number of bad money projects will eventually cause their destruction( David Stockman/ContraCorner)

vi)SWAMP STORIES

FRIDAY NIGHT

a)Kelly goes nuclear and threatens to quit

( zerohedge)

b)The “Stormy Daniels” case against Trump just received a gale force head wind:  The FBI just raided the office of Trump lawyer Michael Cohen

( zerohedge)

Let us head over to the comex:

The total gold comex open interest ROSE BY SMALL SIZED 1765 CONTRACTS UP to an OI level 495,082  ACCOMPANYING THE GOOD SIZED RISE IN THE PRICE OF GOLD ($7.50 GAIN/ FRIDAY’S TRADING)  FOR TWO YEARS STRAIGHT WE HAVE NOTICED THAT ONE WEEK PRIOR TO FIRST DAY NOTICE OF AN ACTIVE DELIVERY MONTH THE COMEX OPEN INTEREST CONTRACTS AND EFP’S NOTICES EXPONENTIALLY INCREASE.   THE CME REPORTS THAT  THE BANKERS ISSUED A HUGE SIZED  COMEX TRANSFER THROUGH THE EFP ROUTE AS THESE LONGS RECEIVED A DELIVERABLE LONDON FORWARD TOGETHER WITH A FIAT BONUS. WE HAD 9917 FOR  JUNE, AND ZERO FOR ALL OTHER MONTHS:  TOTAL  9917 CONTRACTS.  THE OBLIGATION STILL RESTS WITH THE BANKERS ON THESE TRANSFERS. ALSO REMEMBER THAT THERE IS NO DOUBT A HUGE DELAY IN THE ISSUANCE OF EFP’S AND IT PROBABLY TAKES AT LEAST  48 HRS AFTER LONGS GIVE UP THEIR COMEX CONTRACTS FOR THEM TO RECEIVE THEIR EFP’S AS THEY ARE NEGOTIATING THIS CONTRACT WITH THE BANKS FOR A FIAT BONUS PLUS THEIR TRANSFER TO A LONDON FORWARD… THE COMEX IS NOW AN ABSOLUTE FRAUD!!

ON A NET BASIS IN OPEN INTEREST WE GAINED THE FOLLOWING TODAY ON OUR TWO EXCHANGES: 11,682 OI CONTRACTS IN THAT 9917 LONGS WERE TRANSFERRED AS FORWARDS TO LONDON AND WE GAINED 1765 COMEX CONTRACTS.

NET GAIN ON THE TWO EXCHANGES: 11,682 contracts OR 1,168,200  OZ OR 36.33 TONNES.

Result: A SMALL SIZED INCREASE IN COMEX OPEN INTEREST WITH THE  RISE IN PRICE FRIDAY  (ENDING UP WITH A GAIN OF $7.50)THE  TOTAL OPEN INTEREST GAIN ON THE TWO EXCHANGES: 11,682 OI CONTRACTS..

We have now entered the  active contract month of APRIL where we LOST 136 contracts LOWERING TO  1499 contracts.  We had 60 notices served on Friday, so we lost 76  contracts or an additional 7600 oz will not stand for delivery in this active delivery month of April and these lost contracts will morph into EXCHANGE FOR PHYSICAL (EFP’S) ONCE THEY HAVE BEEN NEGOTIATED, WRITTEN UP AND SEALED. (i.e. London based forwards)

May saw A LOSS of 48 contracts to stand at 1095. The really big June contract month saw a LOSS of 209 contracts DOWN to 369,416 contracts..  The next big delivery month after June is August and here the OI ROSE BY 433 contracts UP to 53,107.

We had 2 notice(s) filed upon today for  200 oz

THERE IS NO QUESTION THAT THE COMEX DOES NOT HAVE ANY APPRECIABLE GOLD TO SATISFY UPON OUR LONGS.

Trading Volumes on the COMEX

PRELIMINARY COMEX VOLUME FOR TODAY:219,194  contracts

CONFIRMED COMEX VOL. FOR YESTERDAY: 383,966 contracts

comex gold volumes are RISING AGAIN

Here is a summary of the latest gold trading volumes at the Comex per year

certainly the introduction of EFP’s has certainly had an effect:

Meanwhile, gold-trading volumes on the COMEX have never been higher:

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And now for the wild silver comex results.

Total silver OI ROSE BY A SMALLER THAN EXPECTED 516 CONTRACTS FROM 242,895 UP TO 243,411 AND A NEW RECORD OI FOR SILVER,  WITH OUR 4 CENT RISE IN SILVER PRICING/ FRIDAY).   ALSO,WE WERE ALSO INFORMED THAT WE HAD A STRONG  1470 EMERGENCY EFP’S FOR MAY 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: 1470.   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 AS WE HAVE JUST SEEN IN GOLD TODAY. THIS PROCESS HAS JUST BEGUN IN EARNEST IN SILVER STARTING IN SEPTEMBER 2017. HOWEVER, IN GOLD, WE HAVE BEEN WITNESSING THIS FOR THE PAST 2 YEARS. NICK LAIRD WAS KIND ENOUGH TO SUPPLY US THE TOTAL FOR 2017 GOLD EFP’S AND IT WAS 6600 TONNES FOR THE ENTIRE YEAR.  WE AGAIN  SURPRISINGLY AND SHOCKINGLY HAD ZERO LONG COMEX SILVER LIQUIDATION WITH OUR RECORD SILVER OPEN INTEREST.  WE ALSO HAVE A GOOD SIZED GAIN IN TOTAL SILVER OI FROM OUR TWO EXCHANGES. WE ARE ALSO WITNESSING A STRONG AMOUNT OF SILVER OUNCES STANDING FOR COMEX METAL IN THIS  NON ACTIVE OF APRIL AS WELL AS THE 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 1986 SILVER OPEN INTEREST CONTRACTS AS WE OBTAINED A  516 CONTRACT GAIN AT THE COMEX COMBINING WITH THE ADDITION OF 1470 OI CONTRACTS NAVIGATING OVER TO LONDON.

NET GAIN ON THE TWO EXCHANGES:1986 CONTRACTS 

AMOUNT STANDING FOR SILVER AT THE COMEX

We are now in the non active delivery month of April and here the front month GAINED 1 contract RISING TO 337 contracts.  We had 0 notices filed upon  so in essence we GAINED 1 contract or 5,000 additional ounces of silver will  stand for delivery in this non active delivery month of April.(AND THESE GUYS MORPHED INTO LONDON BASED FORWARDS)

The next big active delivery month for silver will be May and here the OI LOST 3385 contracts DOWN to 147,662. June saw a loss of 4 contracts to stand at 38.  The next big delivery month for silver is July and here the OI rose by 3532 contracts up to 57,739.

We had 0 notice(s) filed for NIL OZ for the APRIL 2018 contract for silver

INITIAL standings for APRIL/GOLD

APRIL 9/2018.

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
2 notice(s)
 200 OZ
No of oz to be served (notices)
1497 contracts
(149,700 oz)
Total monthly oz gold served (contracts) so far this month
657 notices
65,700 OZ
2.043 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
***
we had 0 kilobar transaction/
We had 0 inventory movement at the dealer accounts
total inventory deposit into the dealer accounts:  NIL  oz
total inventory withdrawals out of dealer accounts; nil oz
we had 0 withdrawals out of the customer account:
total withdrawal:  nil   oz
we had 0 customer deposit
total customer deposits: nil oz
we had 0 adjustment(s)

For APRIL:
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 2 contract(s) of which 2 notices were stopped (received) by j.P. Morgan dealer and 0 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account.

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To calculate the INITIAL total number of gold ounces standing for the APRIL. contract month, we take the total number of notices filed so far for the month (657) x 100 oz or 65,700 oz, to which we add the difference between the open interest for the front month of APRIL. (1499 contracts) minus the number of notices served upon today (2 x 100 oz per contract) equals 223,000 oz, the number of ounces standing in this active month of APRIL (6.699 tonnes)

Thus the INITIAL standings for gold for the APRIL contract month:

No of notices served (657 x 100 oz or ounces + {(1499)OI for the front month minus the number of notices served upon today (2 x 100 oz )which equals 223,000 oz standing in this  active delivery month of APRIL . THERE IS 12.003 TONNES OF REGISTERED GOLD AVAILABLE FOR DELIVERY SO FAR.

WE LOST 76 COMEX OI CONTRACTS OR 7600 OZ OF GOLD WILL NOT STAND BUT  THESE GUYS  MORPHED INTO LONDON BASED FORWARDS.

total registered or dealer gold:  385,923.014 oz or 12.003 tonnes
total registered and eligible (customer) gold;   9,062,198.720 oz 281.87 tones
THE COMEX IS AGAIN IN STRESS AS ONLY 12.003 TONNES OF GOLD ARE LEFT TO SERVICE DELIVERIES. THERE IS HARDLY ANY GOLD AT THE COMEX TO SERVE UPON LONGS AND THUS THE REASON FOR THE EFP TRANSFER OVER TO LONDON.

IN THE LAST 18 MONTHS 72 NET TONNES HAS LEFT THE COMEX.

end

And now for silver

AND NOW THE APRIL DELIVERY MONTH

APRIL INITIAL standings/SILVER

APRIL 9/ 2018
Silver Ounces
Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory
 679,863.510
  oz
Scotia
Deposits to the Dealer Inventory
601,255.440
oz
Brinks
Deposits to the Customer Inventory
nil oz
No of oz served today (contracts)
0
CONTRACT(S
NIL OZ)
No of oz to be served (notices)
337 contracts
(1,685,000 oz)
Total monthly oz silver served (contracts) 19 contracts

(95,000 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 1 inventory movement at the dealer side of things

i) Into Brinks: 601,255.440 oz

total dealer deposits:  601,255.440 oz

we had 0 deposits into the customer account

i) Into JPMorgan: zero oz

*** JPMorgan for most of 2017 and in 2018 has adding to its inventory almost every single day.

JPMorgan now has 140 million oz of  total silver inventory or 53.4% of all official comex silver. (140 million/263 million)

JPMorgan did not  deposit  into its warehouses (official) today.

total deposits today: nil  oz

we had 1 withdrawals from the customer account;

i) Out of Scotia: 679,863.510 oz

total withdrawals;  679,863.510   oz

we had 0 adjustment

total dealer silver:  59.452 million

total dealer + customer silver:  263.290 million oz

The total number of notices filed today for the APRIL. contract month is represented by 0 contract(s) FOR NIL oz. To calculate the number of silver ounces that will stand for delivery in APRIL., we take the total number of notices filed for the month so far at 19 x 5,000 oz = 95,000 oz to which we add the difference between the open interest for the front month of April. (336) and the number of notices served upon today (0 x 5000 oz) equals the number of ounces standing.

.

Thus the INITIAL standings for silver for the APRIL contract month: 19(notices served so far)x 5000 oz + OI for front month of April(337) -number of notices served upon today (0)x 5000 oz equals 1,780,000 oz of silver standing for the April contract month

WE GAINED 1  SILVER CONTRACTS OR 5,000 ADDITIONAL OUNCES WILL  STAND IN THIS NON ACTIVE DELIVERY MONTH OF APRIL AND THESE GUYS MORPHED INTO LONDON BASED FORWARDS. 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

ESTIMATED VOLUME FOR TODAY: 84,135 CONTRACTS

CONFIRMED VOLUME FOR YESTERDAY: 96,963 CONTRACTS

YESTERDAY’S CONFIRMED VOLUME OF 96,963 CONTRACTS EQUATES TO  484 MILLION OZ OR 69.22% 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 

1. Sprott silver fund (PSLV): NAV RISES TO -2.14% (APRIL 9/2018)
2. Sprott gold fund (PHYS): premium to NAV RISES TO -0.52% to NAV (APRIL 9/2018 )
Note: Sprott silver trust back into NEGATIVE territory at -2.14%-/Sprott physical gold trust is back into NEGATIVE/ territory at -0.52%/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)

3.SPROTT CEF.A FUND (FORMERLY CENTRAL FUND OF CANADA): NAV FALLS TO -2.14%: NAV 13.75/TRADING 13.41//DISCOUNT 2.14.

END

And now the Gold inventory at the GLD/

APRIL 9/WITH GOLD UP$4.50/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 859.99 TONNES

APRIL 6/WITH GOLD UP $7.50 ,A HUGE CHANGE IN INVENTORY AT THE GLD/ A DEPOSIT OF 5.90 TONNES/INVENTORY RESTS AT 859.99 TONNES

APRIL 5/WITH GOLD DOWN $8.20 WE HAD TWO ENTRIES: 1) TINY WITHDRAWAL OF .28 TONNES TO PAY FOR FEES AND 2) A DEPOSIT OF 2.06 TONNES//INVENTORY RESTS AT 854.09 TONNES

April 4/WITH GOLD UP $2.90 WE HAD NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 852.31 TONNES

APRIL 3./WITH GOLD DOWN $9.30 WE HAD NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 852.31 TONNES

APRIL 2/WITH GOLD UP $19.50, WE HAD A BIG  CHANGES IN GOLD INVENTORY AT THE GLD A DEPOSIT OF 6.19 TONNES/INVENTORY RESTS AT 852.31 TONNES

MARCH 29/WITH GOLD DOWN $3.20 AND OPTIONS EXPIRY FINISHED, WE HAD NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS A 846.12 TONNES

March 28/WITH GOLD DOWN $16.70, ANOTHER RAID ORCHESTRATED, AGAIN NO SURPRISES AS WE WITNESS ANOTHER 1.18 TONNES OF GOLD REMOVED/INVENTORY RESTS AT 846.12 TONNES

MARCH 27/WITH GOLD DOWN $11.70 AND A RAID INITIATED, IT WAS NO SURPRISE TO SEE THAT A MASSIVE WITHDRAWAL OF 3.24 TONNES WAS USED IN THE ABOVE RAID/INVENTORY RESTS AT 847.30 TONNES

MARCH 26./WITH GOLD UP $4.60/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 850.54 TONNES

MARCH 23/WITH GOLD UP $23.30/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 850.54 TONNES

MARCH 22.WITH GOLD UP $5.90, NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 850.54 TONNES/

MARCH 21/WITH GOLD UP $9.65 NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 850.54 TONNES

March 20/WITH GOLD DOWN $5.75, A SURPRISING HUMONGOUS DEPOSIT OF 10.32 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT 850.64 TONNES/

SO FAR, FOR THE MONTH OF MARCH, THE GLD HAS ADDED 19.61 TONNES WITH A NET LOSS OF $17.45

March 19/WITH GOLD UP $5.25: ANOTHER HUGE DEPOSIT OF GOLD TO THE TUNE OF 2.07 TONNES/GOLD INVENTORY RESTS TONIGHT AT 840.22 TONNES

MARCH 16/WITH GOLD DOWN $5.65/OUR CROOKS DEPOSITED ANOTHER 4.42 TONNES INTO GLD INVENTORY/INVENTORY RESTS AT 838.15 TONNES

FOR THE WEEK: GOLD LOST  $11.80, BUT GOLD INVENTORY ADVANCED:4.42 TONNES

MARCH 15/WITH GOLD DOWN $7.85, NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.73 TONNES

MARCH 14/WITH GOLD DOWN $1.55/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.73 TONNES

MARCH 13/WITH GOLD UP $6.25/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.73 TONNES

MARCH 12/WITH GOLD DOWN $3.00/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.73 TONNES

MARCH 9/WITH GOLD UP $2.25/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.73 TONNES

March 8/NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.73 TONNES

GOLD DOWN 5.45 TODAY.

MARCH 7/WITH GOLD DOWN 8.00/A SLIGHT CHANGE IN GOLD INVENTORY AT THE GLD/A WITHDRAWAL OF .25 TONNES TO PAY FOR FEES//INVENTORY RESTS AT 833.73 TONNES

MARCH 6/WITH GOLD UP $15.60/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.98 TONNES

March 5/WITH GOLD DOWN $4.10/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.98 TONNES

MARCH 2/WITH GOLD UP $18.70/NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 833.98 TONNES

March 1/WITH GOLD DOWN ANOTHER $12.30/A HUGE CHANGE IN GOLD INVENTORY/ A DEPOSIT OF 2.96 TONNES/INVENTORY RESTS AT 833.98 TONNES

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

APRIL 9/2018/ Inventory rests tonight at 859.99 tonnes

*IN LAST 358 TRADING DAYS: 81.05 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 308 TRADING DAYS: A NET 75.25 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.

end

Now the SLV Inventory/

APRIL 9/WITH SILVER UP 12 CENTS/WE HAD NO CHANGES IN SILVER INVENTORY/INVENTORY RESTS AT 320.196 MILLION OZ/

APRIL 6/WITH SILVER UP 4 CENTS, WE HAD A HUGE DEPOSIT OF 1.319 MILLION OZ INTO THE SLV INVENTORY/INVENTORY RESTS AT 320.196 MILLION OZ

APRIL 5/WITH SILVER UP 6 CENTS/NO CHANGES IN INVENTORY AT THE SLV/INVENTORY RESTS AT 318.877 MILLION OZ/

April 4/WITH SILVER DOWN 11 CENTS/A SMALL CHANGE IN SILVER INVENTORY AT THE SLV/ A WITHRAWAL OF 135,000 OZ AND THIS IS PROBABLY TO PAY FOR FEES/INVENTORY RESTS AT 318.877 MILLION OZ/

APRIL 3./WITH SILVER DOWN 16 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 319.012 MILLION OZ/

APRIL 2/WITH SILVER UP 34 CENTS/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 319.012 MILLION OZ/

MARCH 29/WITH SILVER UP 6 CENTS, THE CROOKS DECIDED THAT THEY HAD BETTER ADD SOME 943,000 PAPER OZ TO THEIR INVENTORY/INVENTORY RESTS AT 319.012 MILLION OZ

March 28/WITH SILVER DOWN 27 CENTS/AGAIN NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.069 MILLION OZ

MARCH 27/WITH SILVER DOWN 14 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.069 MILLION OZ/

WITH SILVER UP 11 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.069 MILLION OZ/

MARCH 23/WITH SILVER UP 19 CENTS, A HAD A BIG WITHDRAWAL OF 1.602 MILLION OZ.INVENTORY RESTS AT 318.069 MILLION OZ/

MARCH 22/WITH SILVER DOWN ONE CENT, NO CHANGE IN SLV INVENTORY/INVENTORY RESTS AT 319.671 MILLION OZ/

March 21/WITH SILVER UP 21 CENTS/NO CHANGE IN SLV INVENTORY/INVENTORY RESTS AT 319.671 MILLION OZ/

March 20/WITH SILVER DOWN 13 CENTS/NO CHANGE IN SLV INVENTORY/INVENTORY RESTS AT 319.671 MILLION OZ/

March 19/WITH SILVER UP 5 CENTS, THE SLV ADDS A SMALL 659,000 OZ TO ITS INVENTORY/INVENTORY RESTS AT 319.671 MILLION OZ/

MARCH 16/WITH SILVER DOWN 15 CENTS/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 319.012 MILLION OZ.

FOR THE WEEK;  SILVER IS DOWN 42 CENTS YET ADDS 943,000 OZ OF SILVER INTO THE SLV/

MARCH 15/WITH SILVER DOWN 11 CENTS/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 319.012 MILLION OZ/

MARCH 14/WITH SILVER DOWN 8 CENTS/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 319.012 MILLION OZ/

MARCH 13/WITH SILVER UP 10 CENTS/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 319.012 MILLION OZ/

MARCH 12/WITH SILVER DOWN 8 CENTS/A BIG CHANGES IN SILVER INVENTORY AT THE SLV/ A DEPOSIT OF 943,000 OZ/INVENTORY RESTS AT 319.012 MILLION OZ/

MARCH 9/WITH SILVER UP 21 CENTS, NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.069 MILLION OZ/

March 8/WITH SILVER DOWN 1 CENT TODAY: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.069 MILLION OZ/

MARCH 7/WITH SILVER DOWN 27 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.069 MILLION OZ/

MARCH 6/WITH SILVER UP 38 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.069 MILLION OZ/

March 5/WITH SILVER DOWN 11 CENTS/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.069 MILLION OZ/

MARCH 2/WITH SILVER UP 23 CENTS: A HUGE 1.479 MILLION OZ WAS ADDED TO SILVER’S INVENTORY/INVENTORY RESTS AT 318.069 MILLION OZ/

March 1/WITH SILVER DOWN 11 CENTS TODAY/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 316.590 MILLION OZ./

HAD ANOTHER HUGE ADDITION OF 1.315 MILLION OZ/INVENTORY RESTS AT 316.590 MILLION OZ/

APRIL 9/2018:  A NO CHANGES IN SILVER INVENTORY:  

Inventory 320.196 million oz

end

6 Month MM GOFO 1.90/ and libor 6 month duration 2.47

Indicative gold forward offer rate for a 6 month duration/calculation:

G0FO+ 1.90%

libor 2.47 FOR 6 MONTHS/

GOLD LENDING RATE: .57%

XXXXXXXX

12 Month MM GOFO
+ 2.71%

LIBOR FOR 12 MONTH DURATION: 2.47

GOFO = LIBOR – GOLD LENDING RATE

GOLD LENDING RATE  = +.24

end

Major gold/silver trading /commentaries for MONDAY

GOLDCORE/BLOG/MARK O’BYRNE.

GOLD/SILVER

Gold Out Performs Stocks In 2018 and This Century By Ratio Of Two To One

– Gold outperforming stocks in 2018 and this century (see chart)
– Gold up close to 2% in 2018 while S&P 500 is down 2%
– Trump trade wars and Kudlow as Trump chief economic advisor is gold bullish
– Given gold’s performance, Kudlow’s dismissal of gold as “end of the world insurance” is “irrational”
– Market volatility could drive gold to $1,500/oz in 2018 – Holmes

Editor: Mark O’Byrne

Authored by Frank Holmes of US Funds

In a January post, I showed how the price of gold rallied in the months following the 2015 and 2016 December interest rate hikes—as much as 29 percent in the former cycle, 17.8 percent in the latter. Gold ended 2017 up double digits, despite pressure from skyrocketing stocks and massive cryptocurrency speculation.

I forecast then that we could see another “Fed rally” this year following the rate hike in December 2017. Hypothetically, if gold took a similar trajectory as the past two cycles, its price could climb as high as $1,500 this year.

As I told Kitco News’ Daniela Cambone last week, I stand by the $1,500 forecast. Before last week, investors might have been slightly disappointed by gold’s mostly sideways performance so far this year. But now, in response to a number of factors, it’s up close to 3 percent in 2018, compared to the S&P 500 Index, down 2.4 percent.

Living with Volatility

While I’m on the topic of equities, the S&P 500 dividend yield, for the first time in nearly a decade, is now below the yield on the two-year Treasury. Historically, the economy has slowed around six months after dividends stopped paying as much as short-dated government paper.

This could spur some stock investors to trim their exposure and rotate into other asset classes, including not just bonds but also precious metals, which I believe might help gold revisit resistance from its 2016 high of $1,374 an ounce.

Volatility has also crept back into markets. It began with the positive wage growth report in February, implying the possibility of faster inflation. More recently, the CBOE Volatility Index (VIX), or “fear gauge,” has surged on the departures of Gary Cohn as chief economic advisor and Rex Tillerson as secretary of state, as well as the application of tariffs on steel and aluminum imports.

Last week, President Donald Trump ordered tariffs on at least $50 billion of Chinese goods, stoking new fears of a U.S.-China trade war. In response, the Asian giant proposed fresh duties on as much as $3 billion of U.S. products, including wine, fruits, nuts, ethanol and steel pipes.

As I see it, there could be other contributing factors pushing up the price of gold. A good place to start is with Trump’s recent appointment of former CNBC star Larry Kudlow as White House chief economic advisor.

Kudlow’s Kerfuffle Over Gold

Between 2001 and 2007, I appeared on Kudlow’s various CNBC shows a number of times, and though he always struck me as highly intelligent, informed and accomplished—he served as Bear Stearns’ chief economist and even advised President Ronald Reagan—it was clear he had a strong bias against gold. This was the case even as the price of the yellow metal was on a tear, rising from $270 in 2001 to more than $830 an ounce by the end of 2007.

Kudlow showed his true colors toward gold as recently as this month, telling viewers: I would buy King Dollar and I would sell gold. As you can see below, this has’t been a prudent trade for more than a year now.

Earlier this month, Kudlow wrote that falling gold is good, as it “bodes well for the future economy.” He said he agreed with a friend, who called the metal an “end-of-the-world insurance contract.”

While there are those who would agree with him, it’s important to remember that gold is used for much more than as a portfolio diversifier, and its price is driven by a number of factors. These include Fear Trade factors, from inflation to negative real interest rates, and Love Trade factors such as gift-giving during cultural and religious festivals. The precious metal has important industrial applications as well.

And since I first went on Kudlow’s program, gold has outperformed the S&P 500’s price action nearly two-to-one, as I showed you back in December. Even with dividends reinvested, the market is still trailing the yellow metal.

So it’s fine if gold isn’t your favorite asset, but to dismiss it wholesale as Kudlow has again and again is, with all due respect, irrational.

It’s Not About Steel, It’s About Stealing

Kudlow isn’t just anti-gold, however.

He’s also anti-China, and even though he’s traditionally opposed tariffs in general, he supports Trump’s efforts to levy taxes on Chinese imports. Specifically, the duties are designed to offset the cost of intellectual property allegedly stolen by the Chinese over the past several years.

China’s J-31 fighter jet, for example, is believed to be a knockoff of Lockheed Martin’s F-35, the most expensive piece of U.S. military equipment. It’s for this reason that Lockheed’s CEO, Marillyn Hewson, was present when Trump signed the authorization to impose new tariffs.

Our intellectual property is hugely important to the U.S. economy. As important as steel and aluminum are, they account for only 2 percent of world trade, and in the U.S., it’s even less than a percent of gross domestic product (GDP). Technology exports, on the other hand, represent about 17 percent of U.S. GDP.

That said, the implications of a trade war with the world’s second-largest economy certainly have many investors concerned—all the more reason to consider adding to your gold allocation at this time. As always, I recommend a 10 percent weighting, with 5 percent in gold bullion, 5 percent in high-quality gold mining stocks and ETFs.

Is Trump Betting on the Wrong Guy?

On a final note, we were pleased to have an old friend visit our office last week. Michael Ding, a veteran of the U.S. Global investments team, joined us to share some laughs and his thoughts on what’s happening in Asian markets right now.

Specifically, Michael said that Ray Dalio, founder of mammoth investment firm Bridgewater Associates, which manages around $160 billion, has become something of an economic guru for members of the Chinese ruling party’s highest-ranking members, including Premier Li Keqiang.

Dalio—whose most recent book, Principles, nowtops China’s bestseller list—is reportedly advising the country’s top bankers and economists on how to deleverage safely without triggering a so-called “hard landing.”

A trade war between the U.S. and China, Ray Dalio said recently, would be a “tragedy.”

So to put it in perspective: Whereas Trump has just now brought on Kudlow, the Chinese are leaning on a fellow American, Dalio, one of the smartest, most gifted money managers in the world—not just of our time but of all time.

Did Trump make the right call? Which player would you want on your team: Kudlow or Dalio? For my money, I would pick Dalio.

This post was originally posted here

Recommended reading

Gold Outperforms Stocks In Q1, 2018

“Stars Are Slowly Aligning For Gold” – Frisby

Uncle Sam Issuing $300 Billion In New Debt This Week Alone

Gold and Silver Bullion – News and Commentary

Gold slips as dollar firms, but trade war fears persist (Reuters.com)

Soft NFP and trade tensions underpin gold ahead of CPI next week (FXStreet.com)

As U.S. and China trade tariff barbs, others scoop up U.S. soybeans (Reuters.com)

China’s Foreign Reserves Rise on Yuan Gains, Capital Curbs (Bloomberg.com)

Kashkari Says Fed Watching U.S.-China Spat as Markets Shudder (Bloomberg.com)


Source: US Global Investors

Another Superb COT Report For Silver (GoldSeek.com)

The Stars Be Aligned for $1,500 Gold (IRIS.xyz)

China has the ‘financial arsenic’ to ruin the US – but will it use it? (SMH.com)

India, Pakistan central banks clamp down on crypto-currencies (Reuters.com)

Chinese Investors Rush to Gold ETF as Trade Angst Adds to Risk (Bloomberg.com)

Listen on SoundCloud , Blubrry & iTunesWatch on YouTube below

Gold Prices

09 Apr: USD 1,328.69, GBP 941.61 & EUR 1,082.29 per ounce
06 Apr: USD 1,325.60, GBP 946.08 & EUR 1,082.75 per ounce
05 Apr: USD 1,327.05, GBP 943.67 & EUR 1,080.75 per ounce
04 Apr: USD 1,343.15, GBP 955.52 & EUR 1,092.79 per ounce
03 Apr: USD 1,336.60, GBP 949.65 & EUR 1,085.99 per ounce
29 Mar: USD 1,323.90, GBP 941.69 & EUR 1,075.80 per ounce

Silver Prices

09 Apr: USD 16.37, GBP 11.60 & EUR 13.33 per ounce
06 Apr: USD 16.28, GBP 11.61 & EUR 13.30 per ounce
05 Apr: USD 16.31, GBP 11.59 & EUR 13.28 per ounce
04 Apr: USD 16.46, GBP 11.72 & EUR 13.40 per ounce
03 Apr: USD 16.52, GBP 11.78 & EUR 13.44 per ounce
29 Mar: USD 16.28, GBP 11.58 & EUR 13.21 per ounce


Recent Market Updates

– Jamie Dimon Warns Of Potential ‘Market Panic’
– Silver Bullion: Should We Be Worried About Silver?
– Martin Luther King Jr. Anniversary: Reminds Us Of Costs Of War To Society and Financial System
– Gold Outperforms Stocks In Q1, 2018
– Brexit, Stagflation Pressures UK High Street
– Gold Is Money While Currencies Today Are “IOU Nothings”
– “Stars Are Slowly Aligning For Gold” – Frisby
– Uncle Sam Issuing $300 Billion In New Debt This Week Alone
– Eurozone Faces Many Threats Including Trade Wars and “Eurozone Time-Bomb” In Italy
– Silver Futures Report and JP Morgan Record Silver Bullion Holding Is Extremely Bullish
– London House Prices Falling Sharply – UK’s Much Needed Wake-Up Call
– Global Trade War Fears See Precious Metals Gain And Stocks Fall
– Gold +1.8%, Silver +2.5% As Fed Increases Rates And Trade War Looms

Mark O’Byrne
Executive Director

Andrew Maguire’s Kinesis money which is a “bitcoin” but backed 100% by allocated gold and silver is set to go.

it think it would be a great idea to look at this!

please read at:  https://kinesis.money/#/

(Andrew Maguire)

Andrew Maguire

2:57 PM (1 hour ago)
to me

Harvey

Here It is my friend!  https://kinesis.money/#/ Please let everyone know.

Let catch up on Monday if you have time. We have billions in the hopper ready to be allocated on the 1st day of trading. The paper market days are over.

Warm regards

Andy

END

This is just a small part in the criminal actions by the banks in manipulating gold and silver. As we get more canaries talking, it will get more intense

(courtesy Alan Flynn/Comex We have a Problem blog)

“I F**k The [Precious Metals] Market Around A Lot” – Spoofer Admits “I Was A Tyrant”

Authored by Alan Flynn via COMEX We Have A Problem blog,

Following news coverage of the charging of five precious metals traders and three banks in January, Commodities Futures Trading Commission and Department of Justice documents reveal a global criminal cabal of 16 traders operating in at least four major financial institutions between 2008 and 2015 to defraud COMEX gold and silver futures markets.

Of the many examples published, one reveals a UBS AG precious metals trader known as “The Legend,” spoofed sell orders to push down the price of gold futures on September 6, 2011, the day the gold market attained, and commenced a lengthy retreat, from its historic peak of US $1,923.70.

Jury trials are sought for Cedric Chanu and James Vorley of Deutsche Bank, Edward Bases and John Pacilio of Merrill Lynch Pierce Fenner & Smith, and Andre Flotron of UBS AG. The traders are indicted with multiple offences including spoofing, manipulation and attempted manipulation of the precious metals futures market. FBI investigations found many of the traders had placed “thousands” of fake orders over “hundreds” of occasions during the relevant period. Some even more.

Enforcement orders totaling $46.6 million were issued to Deutsche Bank, UBS AG and HSBC. Bank of America Merrill Lynch, parent company of  Merrill Lynch Pierce Fenner & Smith, although implicated by the alleged actions of its subsidiaries traders, has not been sanctioned.

The agencies said traders placing genuine orders to buy or sell and concurrently huge opposite spoof orders to present a false picture of supply or demand. Other traders were thus tricked into accepting the genuine orders at prices favourable to the manipulators. The spoof orders being placed far enough away from the current price to safeguard against their actual execution were then swiftly cancelled. The traders had the ability using spoofing to move prices up or down.

By correlating details among multiple court documents and public sources it has been possible, with a high degree of certainty, to match the sample chats provided with the indicted traders, and banks they worked for.

“THE LEGEND”

Deutche Bank trader and Informant David Liew thought so highly of senior cabal member and co-conspirator, Trader F, according to Bloomberg’s disclosure of a sealed indictment, that he called him “The Legend.”

Trader F, as CFTC UBS Orders name, dominated the world of precious metals spoofing at UBS, appearing in nine of 12 manipulation samples listed in the CFTC UBS AG Orders, seven of which involve David Liew, Deutsche Bank informant. While the regulators describe four UBS traders as involved in the scandal, they currently seek a jury trial for only one.

Andre Flotron – LinkedIn image

Veteran UBS precious metals specialist Andre Flotron’s term at the trading desk predates the bank itself.

His LinkedIn timeline says he began trading gold and silver in 1982 with the Swiss Banking Corporation, Zurich. While still at the SBC precious metals desk, the corporation amalgamated with the Union Bank of Switzerland becoming UBS AG in 1999.

In over 15 years at UBS, the 55 year old worked two stints each in Zurich and Stamford. In addition to trading, he held also managerial and training responsibilities until January, 2014, when placed on leave from Zurich following an internal investigation.

An FBI affidavit describes how from July, 2008, Flotron mentored a new UBS employee in the art of spoofing. Trader#1 sat with Flotron for 2 months at his trading desk in Stamford, Connecticut “shadowing and observing” him with the aim of then transferring to the UBS precious metals desk in Singapore. The unnamed Trader#1 is now assisting the FBI investigation in return for immunity from prosecution.

In a teaching moment with a colleague about best practice for spoofing, on April 30, 2010, The Legend instructed:

“u gotta be quick with spoofs cause everyone else knows the trick too … except for smaller shops … and algos of course.”

Then contrasting the ease at which spoofing could be pulled off in years past:

“u know i use[d] to do that is Stamford so i can get filled … i’d be short 10k, show a bid for 35 lots … mkt chases it … i shift it lower … and lower.”

As the FBI investigators found, a hallmark of Flotron’s operation became placing spoof orders in quantities such as 22, 33, 44, 55, or 99 contracts by “automated trading software which had the ability to … place, modify, and cancel multiple orders nearly simultaneously.”

In one example allegedly aiming to manipulate the market down to his favourable purchase orders on October 17, 2013, Flotron placed and then withdrew three large fake sell orders for futures worth $30.5 million in gold over a 2.5 minute period.

The largest of his fake orders was placed, a parcel of 99 lots worth $13 million in gold, immediately doubled the volume of sell orders compared to buy orders, while “never intending” it to be executed, the indictment says. The multi-million dollar spoof order was sufficient to immediately bring sellers down from $1319.30 to $1,319.20 filling several of the trader’s partially concealed 1-contract bids totalling $1.5 million gold value.

Sometimes the traders could move COMEX much more.

On January 28, 2009, Deutsche Bank’s Edward Bases allegedly shifted the gold futures price two dollars in one attack alone by placing and quickly cancelling a number of large bids in order to “help” his then colleague Cedric Chanu’s resting orders fill.

As a post-spoof chat shows, the technique and camaraderie bore a strong semblance to computer gaming.

Bases:                   “so glad i could help…got that up 2 bucks…hahahahah.”

“that does show u how easy it is to manipulate so[me]times.”

Chanu:                  “yeah yeah of course.”

Bases:                   “that was alot of clicking”

Chanu:                  “basically you tricked alkll [sic] the algorythm”

Bases:                   “good man. Correct.i know how to “game” this stuff…”

Chanu:                  “THAT IS BRILLIANT.”

Bases:                   “I just dotn have the time to do it.. but i do it a lot in the aftermakete.
                               i f..k the m[ar]k[e]t around a lot…not alot of people…had it figgied
                               out…thats [sic] why i love electronic trading.”

Bases:                   “im just glad we got you out…”

Besides helping each other achieve better than market prices, the Deutsche Bank traders helped UBS traders and traders from another global financial institution, Bank of America Merrill Lynch. One of the traders worked directly for two of the banks.

THE “TYRANT”

Edward Bases – Facebook image

Edward Bases was a metals tough guy. A 25-year career trading gold and silver in New York for the world’s largest banks, including a couple of years at Bear Sterns, gave him some trading bristle.

The era of floor trading in commodities and stocks was coming to an end when Bases departed Deutsche Bank for Bank of America Merrill Lynch in June, 2010. There, as he reminisced with a UBS trader in 2015, he was already a formidable spoofer in the pits long before he clicked his way to wealth at Deutsche Bank.

UBS Trader #2: “when you were a younger man where you also this angry?”

Bases:     “In a different way”

“I was a tyrant”
“Different world”
“U called out dealersla”
“Sppoofed the mkt”
“Lined people up”
“It was very physcial and emotional”
“I was very good”
“At it”

At the trading desk as on the floor, when extra muscle was required to move prices Bases strong-armed it.

Paraphrasing the indictment: on January 28, 2009, his then colleague Cedric Chanu placed an iceberg order to sell 170 contracts with only one visible lot at $892.50. Five minutes later to help him out, Bases placed a spoof order to buy 250 contracts at $890.80, worth $22 million in gold, which he cancelled two seconds later. Straight away Bases placed a 240 lot spoof order to buy at various prices between $890.80 and $892.40, and all 170 of Chanu’s primary orders became filled.

The spoofing methods and amounts could be tweaked depending which market participants were being targeted.

THE TACTICIAN

John Pacilio – Facebook image

Hailing from the neighbouring affluent townships of New Caanan and Southport, Connecticut, 50 miles from New York, Bases, 56, and John Pacilio, 54, share an indictment of five charges in connection with Title 7 and 18 spoofing, manipulation, conspiring and fraud involving a commodity for future delivery.

While trading precious metals at Bank of America Merrill Lynch, New York, John Pacilio is alleged to have spoofed solo and in tandem with his colleagues including Bases, and other banks between January, 2010, and April, 2011. Pacilio’s published trades include the largest of spoofing examples by the six traders.

On February 4, 2011, Pacilio placed and cancelled within the space of less than a minute, spoof orders to sell the equivalent of $74.1 million worth of gold in futures contracts.

His spoofing victims weren’t always human and rational as the trader advised seven others at BOAML including Bases on November 16, 2010.

“guys the algos are really geared up in here. if you spoof this it really moves. thats where alot of this noise is coming from.”

According to court filings, 20 seconds later Pacilio placed an iceberg Primary Order to sell 10 silver futures contracts at $25.48. After 29 seconds he then placed a succession of Opposite Orders totalling 250 lots to buy silver futures at between $25.455 and 25.47, which were cancelled as soon as his Primary Orders were filled.

THE SPOKESMAN 

Cedric Chanu – Twitter image

Three years after commencing with Deutsche Bank precious metals desk London, Chanu was promoted to Director, Precious Metals Trading Singapore, in 2011, where called on, in between weekend recreations, to promote and represent the German bank in its Asian precious metals  business.

When interviewed by the Wall St Journal in September, 2012, Chanu, perhaps alluding to a growing disdain for spoofable forms of gold, noted “a dramatic increase in customers wanting to move out of paper, that is over-the-counter gold, and into physical.”

The trader had a brief stint trading for the Swiss company Gunvor after leaving Deutsche Bank at the end of 2013. The conglomerate got out of precious metals trading however, according to Bloomberg in December 2014, when “executives decided to abandon the precious metals trading business partly because of difficulties in finding steady supplies of gold where the origin could be well documented.” Gunvor, it appears, couldn’t locate unspoofable gold bullion at the same price and volume at which gold futures and unallocated gold investments were trading.

Part owned by Russian billionaire Gennady Timchenko until March, 2014, Gunvor ceased precious metals operations only one month after Deutsche Bank announced it was pulling out of precious metals trading in November, 2014.

Cedric Chanu’s indictment details nine examples out of “hundreds” of precious metals manipulations while at Deutsche Bank between December, 2008, and June, 2013.

A shared indictment for Chanu, 37, and his Deutsche Bank colleague James Vorley, 38, residents of the UAE and the UK respectively, was filed in an Illinois Court on January, 19. A Status Conference for the related civil case titled: CFTC vs Vorley and Chanu is scheduled for May, 7.

“THE MASTER” 

London precious metals desk Deutsche Bank trader James Vorley cast himself in the theatre of chat as the quintessential English gent with a strong sense of fair play.

He even told a trader at another firm in October, 2007, of his repulsion at a third firms manipulation of either futures or another precious metals instrument:

“this spofi.ng [sic] is annoying / its illegal for a start…”its just not cricket.”

It was all a bad joke as FBI Special Agent Nevens found, seven months later from at least May, 2008, Vorley was running a “self enrichment scheme” to defraud the COMEX precious metals futures market and spoof training a new employee. His collaborators: Chanu and other Deutsche Bank traders, and those at another bank.

According to the indictment, the FBI uncovered over “a thousand” instances of Vorley trading in a pattern consistent with spoofing, “placing over ten thousand Opposite Orders,” presumably withdrawn, and coordinating in spoofing with his Deutsche Bank colleague Cedric Chanu “over one hundred times” up to March, 2015.

Included, an episode on March 16, 2011, when Vorley is recorded chatting to his colleague about “spoofing it up / ahem ahem” in relation to simultaneous platinum and gold futures trades.

Deutsche Bank co-conspirator turned informant David Liew whom Vorley trained in spoofing, testifies that Vorley preferred the term “jam it” when referring to the illegal act.

After one operation assisting Liew getting an order filled on November 3, 2010, Vorley “submitted and cancelled 29 buy orders at 10 contracts each”, and celebrated after:

“was cladssic [sic] / jam it / woooooooooooo…bif [sic] it up.”

As a sign of gratitude, his understudy Liew responded glowingly:

“tricks from the…master.” (Emphasis supplied.)

Not one to readily admit to wrongdoing, when queried in March, 2015, by Deutsche Bank compliance and employee relations, Vorley told them the term spoofing had been used “to describe more innocent and everyday occurrences.” He went on to defend the reason for his “inopportune use of the word spoof ” as “a bad example of market banter masquerading as sarcasm.”

A study by West Australian University Prof. Andrew Caminschi published September, 2013, observed gold and silver futures, and the GLD ETF, were significantly impacted” by downward pricing anomalies from the London Gold and Silver PM Fixings leaking, prior to the publishing of the Fixing auction results.

A previously unreported crack through which the Fix prices may have bled from London to Chicago and elsewhere can be found in one of the six futures trader’s connection to the London Gold and Silver Fixings.

At the same time Deutsche Bank’s James Vorley is alleged by the CFTC and FBI to have manipulated COMEX precious metals futures, at least from May, 2008, to March, 2015, he was also a director of London Silver Market Fixing Limited and the London Gold Market Fixing Limited auctions.

The London Gold and Silver Fixings set the world benchmark prices for the precious metals twice daily. Vorley’s tenure on the Fix lasted between September 2009 and May, 2014, for the Gold Fixing, and October, 2015, for the Silver Fixing.

Three short weeks after Caminschci’s paper was published, UBS AG self-reported to global authorities that an internal investigation had uncovered “possible signs of manipulation, collusion and other market abusive conduct in foreign exchange trading” between the bank and other financial institutions. The Precious Metals Desk at UBS was a sub-unit of their Foreign Exchange Desk.

As precious metals class action lawsuits flooded US courts in the following three years, Vorley’s employer Deutsche Bank, failing to find a buyer for its seat, dropped out of the London Gold and Silver Fixings, disbanded their precious metals trading unit, payed $98 million to settle class action lawsuits alleging collusion in the London Gold and Silver Fixings, and supplied antitrust plaintiffs with significant evidence against co-defendants.

Short of an innocent sounding explanation as to how the precious metals pricing got so quickly from Fix-to-Futures, “ahem ahem,” it remains to be explored what Fixing information Vorley had prior to its publishing and what use, if any, he made of it in futures trading.

THE INFORMANT

After joining Deutsche Bank as a fresh graduate in 2009, David Liew was assigned, at completion of a short orientation and training period, to the Singapore Deutsche Bank precious metals desk. He was supervised and trained in manual spoofing by Vorley and Chanu, among others in Singapore and the UK, with whom he shared a “common electronic trading platform screen.” Here his trading could be monitored and he in turn could observe his mentor’s spoofing activities on his monitor.

David Liew – Google Plus image

CFTC findings stressed that by allowing the traders to observe each other’s orders, Deutsche Bank facilitated their spoofing activities. The bank’s traders also communicated across the globe via electronic chat rooms and video teleconferencing.

The 31 year old who participated in, solo and coordinated spoofing with other traders “hundreds of times,” and stop loss manipulation coordinated with Trader F at UBS, apparently Andre Flotron, pleaded guilty in a Chicago court on June 1, 2017. Stop loss manipulations were also undertaken with others at Deutsche Bank in relation to information about a large metals trade for a bank customer.

The penalty handed down by the CFTC for Liew included a lifetime ban from commodity trading, while a monetary fine was not imposed “based upon his cooperation in a Commission investigation and related proceedings.” The DOJ prosecutes his criminal trial where he is expected to receive reduced sentencing in return for cooperation as a witness.

According to the sealed FBI affidavit cited by Bloomberg, after Liew was taught to spoof by Vorley and Chanu at Deutsche Bank he went on to train others in the “tricks.”

Since leaving the bank, Liew has continued to use his business and training skills, as he told the Court in June last year.

“I’ve set up my own businesses. So, I — a co-owner of a restaurant. I own a online toy store for children. And most recently I’ve also started teaching programming to kids.”

Presently up to four Deutsche Bank, two Merrill Lynch and UBS AG traders associated with the alleged manipulations are absent from indictments. Similarly an HSBC trader who allegedly spoofed alone remains at large.

The only US financial organisation implicated, Bank of America Merrill Lynch and its indicted traders, Edward Bases and John Pacilio are absent from CFTC Orders and Complaints.

The first public proceedings for the six traders is to begin in couple of weeks with Flotron’s jury selection scheduled for April, 6. His trial under Judge Jeffrey A. Meyer in Newhaven, Connecticut, is set to commence on April, 9.

“BEYOND SPOOFING”

Even with the first trial about to start, four years since the last of the allegations, the precious metals probes continue.

The Department of Justice Fraud and Antitrust Divisions opened their precious metals investigations into financial institutions in 2015, but the criminal antitrust probe was closed in January, 2016. The US Government agencies were not the only parties investigating banks precious metals trading though.

The banks, defending also civil antitrust precious metals class action lawsuits, received an extraordinary boost in the form of letter/s from the DOJ announcing closure of the investigations. Predictably the letter was used by defendants straight away in an attempt to convince the Courts to dismiss the lawsuits.

The Court: “You all love this letter, don’t you?”

Defense Attorney: “They are not that easy to get, your Honor.”

The Court: “That’s true. You should have gold bars around it.”

Raising the spectre that the DOJ had botched the antitrust probe, in October the Court denied Motions to Dismiss against all the banks except UBS, the only non-Fixing bank defendant.

Challenging the Courts decision to dismiss civil complaints against UBS, only a short month later in November, the antitrust plaintiffs submitted damning new evidence.

Frank chat messages between traders in different banks, including UBS, about manipulating the Gold and Silver Fixes had been provided to plaintiffs by Deutsche Bank in their settlement cooperation materials. Surprisingly the DOJ had for 13 months sifted the same evidence without finding criminal evidence of antitrust conspiracy.

At the request of the DOJ the Court then placed the civil antitrust lawsuits on a partial stay of discovery for 12 months until December, 2017, doubtless to protect their ongoing precious metals fraud investigation.

To be fair to the DOJ, as Judge Valerie Caproni, former FBI General Counsel, had warned at the April, 2016, arguments, mistakes are not uncommon in government investigations. 

“Just because a government investigation is closed…doesn’t mean everybody is innocent.”

Another reason for delays in criminal prosecution of the cartel, concerns international treaties. Andre Flotron’s indictment and arrest on US soil in September last year was a stroke of luck for investigators and prosecutors who understand that extradition between countries with different laws can be problematic.

For example in May, 2015, the CFTC brought spoofing charges in gold and silver futures against UAE traders Heet Khara and Nasim Salim for manipulation between February and April, 2015. In 2016 a Federal New York court ordered the duo to pay $1.38 and $1.31 million in civil monetary penalties, but the pair are yet to be indicted in the US.

The FBI is yet to declare if the futures traders were also manipulating the underlying commodity such as the Gold and Silver Fix and spot markets, not to mention other products such as ETF’s.

At Andre Flotron’s pre-trial Status Conference December 4, 2017, DOJ Fraud Section Attorney Micheal Rinaldi hinted at a bigger picture:

“The larger conspiracy includes this much larger universe where Mr. Flotron is spoofing on a regular basis.”

The Swiss trader, was all but named by a Swiss regulator in 2014 who said they had, “seen clear attempts to manipulate fixes in the precious metals markets,” at the UBS precious metals desk in Zurich. FINMA went on to ban two UBS precious metals traders for one year, evidently Flotron, principal trader at the desk since 2010, and another uncharged.

Answering the judge’s question at the October 5, 2017, Status Conference about Flotron’s witness statement and the possibility of new evidence emerging, Assistant U.S. Attorney Jonathon Francis said:

“if we have communications, his chats, his e-mails, something like that, here’s no reason not to give them to them now. It’s when we get into the sort of the everything else. And I’ll tell you, the everything else goes beyond spoofing. Because this investigation dealt with trading more broadly and many banks.”

 end
Chris Powell comments on the above story
(courtesy Chris Powell/GATA)

Allan Flynn: Gold and silver futures were easy targets for spoofers

 Section: 

11:55a HKT Friday, April 6, 2018

Dear Friend of GATA and Gold:

Allan Flynn, who runs the “Comex, We Have a Problem” blog, this week posted a fascinating review of the traders who are the major targets of the recent investigation by the U.S. Justice Department and Commodity Futures Trading Commission of “spoofing” in the monetary metals futures markets.

Two details that may be of special interest:

1) The traders seemed to find “spoofing” exceedingly easy. So one may wonder how much easier market manipulation may be for governments with access to infinite money and more advanced technology and programming — especially since U.S. law fully authorizes the U.S. government to rig surreptitiously any market in the world.

2) The government’s first investigation of manipulation of the monetary metals markets failed to identify the evidence developed by the class-action anti-trust lawsuits brought against bullion banks in federal court in New York. The government’s second investigation has caused a long delay in those lawsuits.

Flynn’s report is headlined “U.S. Gold and Silver Futures Markets: ‘Easy’ Targets” and it’s posted at “Comex, We Have a Problem” here:

http://comexwehaveaproblem.blogspot.hk/2018/04/us-gold-silver-futures-ma…

Flynn, an Australian, is hoping to attend and report about the upcoming trial of one of the traders charged, which will be held in Connecticut soon, and is seeking to raise money for his expedition at GoFundMe here:

https://www.gofundme.com/Gold-Spoofing-Trial

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

end

A commentary on why silver should explode in price

(courtesy Gijsbert G)

Explaining why the silver price should be at new highs! — My latest article on silver. All the facts show a huge breakout is nigh. Best Gijsbert

Explaining why the silver price should be at new highs:

(courtesy Gijsbert Groenewegen

end

Ambrose Evans Pritchard explains why China will not benefit at all with they dump with USA treasuries as the USA Fed can easily soak up all of this debt.

(courtesy Ambrose Evans Pritchard/UKTelegraph)

Ambrose Evans-Pritchard: China’s dumping Treasuries won’t win the trade war

 Section: 

By Ambrose Evans-Pritchard
The Telegraph, London
via The Sydney Morning Herald
Saturday, April 7, 2018

https://www.smh.com.au/business/investments/china-has-the-financial-arse…

China’s leaders must be sorely tempted to activate the “nuclear option” and punish the capitalist running dog, the tango dancer in the White House.

They could at any time start to liquidate their $US1.2 trillion ($1.5 trillion) holdings of US Treasury debt, switching the proceeds into euro, sterling, krona, Aussie, or peso debt to stop the yuan exchange rate soaring.

Even a small dose of this financial arsenic would — in the minds of Beijing’s ultra-nationalist faction — set off a salutary panic. It would crater the US bond market at the very moment when Donald Trump’s fiscal depravity is driving the US budget deficit to a stratospheric $US1 trillion.

The contagion would spread instantly through US mortgages and consumer credit, and would detonate a Wall Street equity crash — the “Trump crash” in blood and gore.

Timed astutely, it might decide the midterm elections and deliver a Democratic Congress, one with control over the impeachment machinery. The demise of Trumpism would then be in sight, either because the Mueller inquiry establishes collusion with the Kremlin or because the president commits perjury in one of sundry lawsuits ensnaring him.

China need say nothing. Action would speak loud enough. If pressed to explain, it could state, with some justification, that US fiscal policy is out of control and that the Trump administration is not a fit custodian of any country’s wealth.

This drastic possibility is on the radar screen after China’s commerce ministry upped the ante with talk of “comprehensive measures,” which appear to go beyond trade. President Xi Jinping cannot retaliate symmetrically to Mr Trump’s new threat to impose tariffs on another $US100 billion of Chinese exports. China does not buy enough imports from the US to match it.

The Communist Party leadership will not kowtow to Mr Trump. The “opium century of humiliation” at Western hands is too fresh in the collective Chinese psyche to yield to such crude intimidation. Beijing said that the nation is “willing to make any sacrifice” to uphold its dignity.

The hardline tabloid Global Times has been writing daily editorials proclaiming that China is a coequal superpower with an arsenal of reserves and limitless tolerance for pain, so make our day. “To take China down would mean an unimaginably cruel battle for the US,” it said.

Yet the nuclear option is in reality almost useless. “The US Federal Reserve could counter it easily with emergency open market operations,” said Geoffrey Yu from UBS.

If the Fed can buy more than $US3 trillion of US Treasuries and mortgage bonds under its quantitative easing programme, it can equally soak up China’s entire holdings if necessary. A stroke of the electronic pen would do the job. Jeffrey Gundlach from DoubleLine Capital said China cannot fruitfully deploy its weapon. “It is more effective as a threat. If they sell, it would only eliminate their leverage,” he said.

Let us suppose as a Gedanken experiment that Xi Jinping did succeed in triggering a US financial crisis by this method. The consequences would be deeply destructive for China itself. The ensuing rout would engulf “risk assets” across the world, as the Chinese central bank has patiently explained to fire-breathers on the State Council. “It is just not worth the risk,” said Mr Wu.

The global mayhem would violate China’s solemn pledge to “protect the multilateral framework” and would drive away the very allies that it is so systematically cultivating. It would undermine the grand plan to steal the mantle of world leadership from the US, a fallen Trumpian dystopia that is abandoning the international system that Americans built and ran with such high statecraft for 70 years.

The Chinese equity and bond markets would crash, triggering a rerun of the capital flight crisis in early 2016, but this time with greater intensity. Mark Ostwald from ADM said it would lead to a worldwide scramble for US dollars, the reflex default in times of trouble for an international financial system that is leveraged to the hilt on dollar credit. The dollar would go through the roof. Never forget that it spiked 53 per cent against the euro as the Lehman crisis unfolded.

The Bank for International Settlements says offshore dollar debt has ballooned to $US25 trillion in direct loans and equivalent derivatives. At least $US1.7 trillion is debt owed by Chinese companies, often circumventing credit curbs at home. Any serious stress in the world financial system quickly turns into a vast dollar “margin call.” Woe betide any debtor who had to roll over three-month funding.

The financial “carry trade” would seize up across Asia, now the epicentre of global financial risk. Nomura said the region is a flashing map of red alerts under the bank’s predictive model of future financial blow-ups. East Asia is vulnerable to any external upset. The world’s biggest “credit gap” is in Hong Kong, where the overshoot above trend is 45 per cent of GDP. It is an accident waiting to happen.

China is of course a command economy with a state-controlled banking system. It can bathe the economy with stimulus and order lenders to refinance bad debts. It has adequate foreign reserve cover to bail out its foreign currency debtors. But it is also dangerously stretched, with an “augmented fiscal deficit” above 12 per cent of GDP.

It is grappling with the aftermath of an immense credit bubble that has pushed its debt-to-GDP ratio from 130 per cent to 270 per cent in 11 years, and it has reached credit saturation. Each yuan of new debt creates barely 0.3 yuan of extra GDP. The model is exhausted.

China has little to gain and much to lose from irate and impulsive gestures. Its deep interests are better served by seeking out the high ground — hoping the world will quietly forgive two decades of technology piracy — and biding its time as Mr Trump destroys American credibility in Asia.

The US president is a strategic gift if handled carefully. He is so ignorant and fundamentally shallow that he might even be induced to hand over Taiwan in exchange for a face-saving frippery on trade.

That truly would be the “art of the deal” — for China.

end

Chinese foreign exchange reserves rise slightly as the USA dollar weakens

(courtesy GATA/Reuters)

China’s forex reserves rise slightly as U.S. dollar weakness continues

 Section: 

From Reuters
Saturday, April 7, 2018

BEIJING — China’s foreign exchange reserves rose slightly in March as broad U.S. dollar weakness continued and escalating trade tensions between the world’s two largest economies bolstered expectations of a firmer Chinese currency.

Reserves rose $9 billion in March to $3.143 trillion, compared with a drop of $27 billion in February, central bank data showed on Sunday.

Economists polled by Reuters had expected reserves to increase by around $6 billion in March to $3.14 trillion. …

… For the remainder of the report:

https://www.reuters.com/article/us-china-economy-forex-reserves/china-fo…

end

Cryptos crash on the weekend due to the Russian sanctions

(courtesy zerohedge)

Cryptos Crash As Russian Sanctions Ripple Through Markets

Despite news that more ultra-elite family wealth (Rockefellers) is being aimed at cryptocurrencies, it seems the US sanctions against Russian oligarchs has created some anxiety in the space with Ethereum and Bitcoin plunging.

For now the broad crypto space remains higher from Friday’s close…

But Bitcoin is back below $7,000 on heavy volume…

Catalysts for the move are unclear but some have suggested Oligarch’s pulling virtual currency to source dollars while others have suggested this is pre-emptive selling ahead of possible crackdowns to further pressure the oligarchs.

END

The sanctions against Russian aluminum company RUSAL is causing fears that they may collapse

(courtesy zerohedge)

Aluminum Soars On “Panic Buying” Amid Fears Of Imminent Rusal Collapse

While Russia’s currency and capital markets are tumbling in a delayed response to Friday’s US sanctions against a handful of Kremlin-friendly billionaires, one vital metal used across the globe in aircraft manufacturing and the auto industries is soaring today as a consequence to sanctions against Russia.

Aluminum prices have soared, first on Friday and then again on Monday, amid growing fears that sanctions on a Russian metal producer will prevent it from supplying the global commodity market, and could threaten a significant part of the global supply chain.

On Friday, the Treasury sanctioned Russian individuals, officials, state-owned firms and companies, including Rusal, the world’s second largest marker of aluminum, under provisions of a law Congress passed last year to retaliate against Moscow for meddling in the 2016 U.S. presidential election. The action actions target Russian oligarchs whose companies have wide-ranging involvement in international capital markets.

Of these, Rusal may be the most important one as it accounts for about 17% of supply outside of China, according to Harbor Intelligence, whose managing director, Jorge Vazquez said that sanctions are “going to create chaos in the short term.”

This does warrant a little bit of panic buying by traders – the risk is large enough and real enough to buy on the back of insecurity of supply,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd.

And panic buying there is: aluminum for delivery in three months soared as much as 4% to $2,124 a metric ton on the London Metal Exchange, extending a 1.6% gain in the previous session, heading for the biggest jump in more than 2 years.

At the same time, the stock of Rusal tumbled a whopping 50% today alone amid fears that US sanctions – which have been designed to make it impossible for Deripaska’s commodity giant to do business in U.S. dollars – would terminally cripple the company, forcing an imminent bankruptcy and collapse for the company that is owned by one of President Vladimir Putin’s closest allies.

Adding fuel to the fire, the company warned that the sanctions may result in technical defaults on some credit obligations and be “materially adverse to the business and prospects of the group,” Rusal said in a statement Monday, adding its annual report may also be delayed. “The company’s primary focus remains its business and, most importantly, all of its global customers, investors and partners.”

If Rusal has sales issues, that will definitely affect the price,” Kirill Chuyko, BCS Global Markets’ chief of research, said by telephone. “So far they will stop sales to the U.S., which were anyway hurt by Trump’s tariffs. But if the issue is wider, it will be more difficult for Rusal to re-route volumes.”

Completing the trifecta of pain, Bloomberg notes that – as expected – international trading houses have stopped buying aluminum from Rusal which is suddenly “toxic” as a result of the US sanctions, sending shock waves through the market for the metal used in everything from airplanes to beer cans.

Trading houses have been advised by their banks and lawyers that they can’t continue trading with the Russian company, according to executives at five companies that regularly buy from Rusal, who spoke under condition of anonymity due to the sensitivity of the discussions.

Rusal, the biggest aluminum supplier outside China, has also asked them to “immediately withhold all payments” to the company, according a copy of a letter sent by its head of marketing.

John Whittaker, a partner at law firm Clyde & Co LLP who advises commodity traders, compared the restrictions on Rusal with the U.S. sanctions against Iran that restricted oil exports from the country and helped lift global prices.

“It would be an inhibiting factor for international traders,” Whittaker said. “I can’t think of anything as significant since the banking sanctions in 2013 against Iran.”

Needless to say, Deripaska – who has been accused of being part of Trump’s “collusion” inner circle, called the reasons “groundless, ridiculous and absurd.”

Meanwhile, the Russian Foreign Ministry said it was working on a response: “We have a whole list of possible measures that are being studied.”

Until then, however, questions have risen how Europe will procure its much needed aluminum used in virtually all high-tech industries, now that Rusal’s products are “toxic” for all US allies : note that Europe is Rusal’s biggest buyer by a wide margin, followed by Asian customers.

US sanctions could lead to other, unexpected downstream effects. As Bloomberg points out, the move also raises questions for Glencore and its billionaire chief Ivan Glasenberg: the commodity giant is one of Rusal’s top shareholders and the biggest buyer of its metal, while Glasenberg sits on the board.

And now we wait to find out whether other producers can step in to fill the void left by Rusal, and if not, how big the inflationary impact of the sudden aluminum supply chain shortage will be. One thing is certain: the potential collapse of Rusal will have a far greater impact on final costs – and inflation – than the US tariffs on steel and aluminum imports.

____________________________________________________________________________________

Your early MONDAY 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 DOWN 6.3153  /shanghai bourse CLOSED UP 7.18 POINTS OR .23%   / HANG SANG CLOSED UP 384.64 POINTS OR 1.29%
2. Nikkei closed UP 110,74 POINTS OR 0.51%/  /USA: YEN RISES TO 107.13/  

3. Europe stocks OPENED IN THE GREEN EXCEPT LONDON     /USA dollar index RISES TO 90.21/Euro FALLS TO 1.2269

3b Japan 10 year bond yield: FALLS TO . +.040/ !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 107.13/ 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:: 62.25  and Brent: 67.59

3f Gold DOWN/Yen DOWN

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

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

3h Oil DOWN for WTI and DOWN FOR Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund FALLS TO +.501%/Italian 10 yr bond yield DOWN to 1.772% /SPAIN 10 YR BOND YIELD DOWN TO 1.236%

3j Greek 10 year bond yield RISES TO : 4.0012?????????????????

3k Gold at $1328.75 silver at:16.38     7 am est) SILVER NEXT RESISTANCE LEVEL AT $18.50

3l USA vs Russian rouble; (Russian rouble DOWN 172/100 in roubles/dollar) 59.83

3m oil into the 62 dollar handle for WTI and 68 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/

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 107.13 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 0.9603 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1787 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 +0.501%

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 2.7902% early this morning (THIS IS DEADLY TO ALL MARKETS). Thirty year rate at 3.0369% /

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

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

Global Markets Jump On Hope Trade Tensions Fading, Despite Trump Slamming “STUPID TRADE”

It’s another “glass is half full” moment for global markets as Asian and European markets as well as S&P futures, are heading into the new week well in the green, at least for now, on renewed hopes a deal can be reached between the U.S. and China to avoid a full-blown trade war, following Trump statements over the weekend which have been described as conciliatory, although that may change quickly.

As a result, the Euro Stoxx 600 is up 0.6%, tracking a rise of 0.7% on S&P 500 futures, which is now back above the 200DMA and also the secondary support level of 2610…

… while the MSCI Asia Pac and Nikkei both closed 0.5% higher, leading to a general sea of green in this morning’s market snapshot.

The reason for the bout of optimism is that on Sunday, President Trump said that he will always be friends with Chinese President Xi Jinping no matter what happens regarding the dispute on trade, while also predicting that the US would prevail and reach agreements with China on trade issues while on the Sunday morning TV circuit,  White House economic adviser Kudlow explicitly stated that this is not a trade war, although his role as Trump’s “good cop” is well known by now.

A conciliatory tone, however, was clearly missing this morning when Trump once again tweeted on the topic of Chinese protectionism, and went so far as slamming the “STUPID TRADE” when it comes to cars between the US and China:

When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade.  No, it sounds like STUPID TRADE –  going on for years!

Donald J. Trump

@realDonaldTrump

When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE – going on for years!

Also not helping the “conciliation narrative” was a Bloomberg report at 3am ET that China is looking at CNY devaluation as a tool in their trade spat with the US, according to sources, while China’s Foreign Ministry said that there have been no negotiations with the US, and that the US is to blame for the trade friction.

Meanwhile, a hint that the trade war will only escalate from now, a PBoC policy adviser said that China should invest more in real assets rather than invest in US debt and that US is seeking to restrict China’s rise via trade war. However, there were also contradictory comments from China think-tank CASS that the nation is unlikely to use USTs as a trade war weapon. That said, this appears to be at odds with research from SGH Macro which suggests that their understanding is that China has halted purchases of USTs.

Also not helping global trade tensions were Sunday reports that no deal in principle regarding NAFTA is expected to be announced in the upcoming Summit of Americas in Lima, Peru, contrary to prior expectations.

Finally, moments ago China made it clear it would retaliate any moment to Trump’s latest proposed re-escalation:

  • CHINA HAS DRAFTED DETAILED COUNTERMEASURES ON U.S. TRADE MOVES
  • CHINA FOREIGN MINISTRY COMMENTS ON U.S. PLANNED TARIFFS

Yet despite all this, somehow optimism has prevailed so far, and banks and industrial companies led European stocks to a three-week high, mirroring gains in Asia; just beware of sharp air pockets lower as headlines and Trump tweets start coming out, crushing any fragile optimism that may have emerged.

For now, all ten sectors in Europe trade in positive territory with financial names outperforming as Deutsche Bank (+4.0%) leads the sector after news they have appointed Christian Sewing as CEO; Commerzbank (+1.5%) are also seen higher in sympathy. Elsewhere, energy names modestly lag their peers given price action in the energy sector. Deutsche Bank will be watched after the lender named Christian Sewing to succeed Cryan following weeks of drama. The stock has plummeted nearly 30% since the start of the year, but seems to have found a bottom around 11 euros over the last two weeks.

Asia was likewise buoyant, with the ASX 200 (+0.4%) shrugging off early indecision and trading positive, although weakness in mining and energy names capped upside, while Nikkei 225 (+0.5%) was lifted by JPY weakness. Elsewhere, Shanghai Comp. (+0.2%) recovered from the initial selling seen on the mainland’s re-open from a 4-day closure and first opportunity to react to the additional USD 100bln tariff consideration against China, while Hang Seng (+1.3%) outperformed on declining money market rates after the PBoC resumed liquidity operations after halting for over 2 weeks.

The dollar rebounded after sliding on Friday after a disappointing jobs report, while the Chinese yuan and other emerging market currencies slid amid news that China ia said to be evaluating the potential impact of a gradual yuan depreciation as one of its options in the trade spat with the U.S. The news raised interest around a speech by Chinese President Xi Jinping due Tuesday (more in a subsequent post).

Elsewhere in FX, most Group-of-10 currencies traded in tight ranges, with the yen edging lower as risk sentiment improved, while New Zealand’s dollar outperformed all peers on cross-flow activity against the Aussie. In Russia the currency plunged and the Moex Russia Index of stocks plunged the most in four years after the U.S. sanctioned some prominent Kremlin-connected billionaires and their companies.

Treasuries slipped, while euro-area bonds held steady as European equities climbed. In the U.S. this week, highlights include minutes of the FOMC’s March meeting and inflation data due Wednesday

Commodities rebounded after their worst weekly drop since mid-March, with oil and industrial metals rallying: WTI and Brent crude futures trade modestly higher but in close proximity to some of the lows seen on Friday amid trade concerns and an uptick in the Baker Hughes rig count. Elsewhere, energy-specific newsflow has been relatively quiet over the weekend but traders will continue to be mindful of geopolitical developments with US President Trump  warning Syrian President Bashar al-Assad and allies that they could pay a big price following a suspected chemical attack that killed dozens over the weekend. Furthermore, Iranian President Rouhani has stated that US President Trump will regret any withdrawal from the Iranian nuclear deal and that Iran’s response to the matter will be stronger than imagined. In metals markets, spot gold has fallen victim to the apparent return of risk appetite to the market and the modestly firmer USD. Elsewhere, Dalian iron ore slipped to a 10- month low in Asia-Pac trade amid ongoing trade concerns whilst aluminium has been seen higher during London hours amid the potential fallout of sanctions by the US on Russian aluminium producer Rusal.

Bulletin Headline Summary from RanSquawk

  • European equities begin the week on the front foot, supported by US efforts to alleviate trade concerns
  • Reports suggesting China is looking at CNY devaluation briefly lifts USD
  • Looking ahead, highlights include speeches from ECB’s Praet and Constancio

Market Snapshot

  • S&P 500 futures up 0.7% to 2,624.75
  • STOXX Europe 600 up 0.6% to 376.88
  • German 10Y yield rose 0.6 bps to 0.503%
  • Euro down 0.02% to $1.2278
  • Italian 10Y yield fell 0.8 bps to 1.531%
  • Spanish 10Y yield rose 1.1 bps to 1.243%
  • MXAP up 0.5% to 172.58
  • MXAPJ up 0.6% to 564.16
  • Nikkei up 0.5% to 21,678.26
  • Topix up 0.4% to 1,725.88
  • Hang Seng Index up 1.3% to 30,229.58
  • Shanghai Composite up 0.2% to 3,138.29
  • Sensex up 0.6% to 33,814.89
  • Australia S&P/ASX 200 up 0.3% to 5,808.67
  • Kospi up 0.6% to 2,444.08
  • Brent futures up 0.6% to $67.51/bbl
  • Gold spot down 0.2% to $1,329.84
  • U.S. Dollar Index little changed to 90.14

Top Overnight News from Bloomberg

  • A Syrian airbase was hit with a missile attack early on Monday, the country’s official news agency reported, a day after U.S. President Donald Trump warned of a “big price to pay” in response to reports of a chemical attack outside the nation’s capital. The Pentagon said it wasn’t conducting airstrikes
  • Deutsche Bank AG named Christian Sewing chief executive officer, ending John Cryan’s reign after less than three years as questions mount about the future direction of Europe’s largest investment bank
  • Xi Jinping’s first chance to hit back in person against Donald Trump’s barrage of tariff threats comes in a speech Tuesday at the Boao Forum for Asia — China’s answer to Davos — on the tropical island of Hainan
  • The U.S. has confirmed that Kim Jong Un is willing to talk to President Donald Trump about getting rid of his nuclear weapons, as South Korea claimed when it passed along the North Korean leader’s offer for a historic meeting, according to an administration official
  • Disapproval rating for Japanese Prime Minister Shinzo Abe’s Cabinet exceeded approval rating for the first time in 6 months in a survey conducted by JNN. Approval rating fell 9.3ppts to 40%, while the disapproval rating rose 9.5ppts to 58.4%. He now faces questions in parliament over a cover-up relating to reports on Japan’s controversial dispatch of troops to Iraq years ago
  • A majority of Britons support holding a vote on the final Brexit deal secured by Prime Minister Theresa May, according to a YouGov poll conducted for the pro-remain group Best for Britain
  • In speeches, interviews and Parliament testimony, eight of the nine BOE MPC members, including Governor Carney, have backed the view that tightening is warranted — and at a faster pace than previously thought. But Deputy Governor Cunliffe has been noticeably quiet, raising questions about the views of one the MPC’s most dovish members
  • Barclays is set to split its euro- rates trading team because of Brexit and proposes to move part of the unit that trades eurozone government bonds and interest rate swaps away from its main trading floor in London, the Financial Times reported
  • Hungarian Prime Minister Viktor Orban scored a crushing election victory to clinch a fourth term in a boost to Europe’s populist forces that are challenging the European Union’s multi-cultural, democratic values

Asian stocks initially began the week rangebound with a non-committal tone seen in the region following the stock rout last Friday on Wall St after President Trump upped the ante on possible trade tariffs against China and US NFP data fell short of estimates. However, sentiment then gradually improved throughout the trading day which was attributed to US efforts over the weekend to alleviate trade concerns in which President Trump predicted that the US would reach an agreement with China on trade and after White House economic adviser Kudlow explicitly stated that this is not a trade war. As such, ASX 200 (+0.4%) shrugged off the early indecision and traded positive, although weakness in mining and energy names capped upside, while Nikkei 225 (+0.5%) was lifted by JPY weakness. Elsewhere, Shanghai Comp. (+0.2%) recovered from the initial cobwebs seen on the mainland’s re-open from a 4-day closure and first opportunity to react to the additional USD 100bln tariff consideration against China, while Hang Seng (+1.3%) outperformed on declining money market rates after the PBoC resumed liquidity operations after halting for over 2 weeks. Finally, 10-yr JGBs were uneventful with marginal gains seen as they tracked recent price action in T-notes and with the BoJ also in the market to the tune of JPY 710bln in the belly to super-long end.

Top Asian News

  • Hong Kong’s Most Painful Short Keeps on Breaking Record Highs
  • Noble Group’s Bonds Fall After It Moves Head Office to London
  • Alibaba Funding Makes SenseTime World’s Most Valuable AI Startup

European bourses (Eurostoxx 50 +0.7%) have kicked the week off on the front-foot in fitting with the positivity seen during Asia-Pac hours. Asian bourses were supported by US efforts over the weekend to alleviate trade concerns in which President Trump predicted that the US would reach an agreement with China on trade and after White House economic adviser Kudlow explicitly stated that this is not a trade war. As such, all ten sectors in Europe trade in positive territory with financial names outperforming as Deutsche Bank (+4.0%) leads the sector after news they have appointed Christian Sewing as CEO; Commerzbank (+1.5%) are also seen higher in sympathy. Elsewhere, energy names modestly lag their peers given price action in the energy sector. In terms of other individual movers in what’s been a busy morning of equity newsflow, EDP (+3.8%) have been supported by reports of a potential bid by Engie (-0.5%), Rolls Royce (+1.9%) are seen higher after offloading L’Orange to Woodward for EUR 700mln and shares in Casino (+1.8%) have been lifted by a positive broker move at Deutsche Bank.

Top European News

  • Russian Stocks Sink Most in 2 Years on Sanctions, Syria Tensions
  • Deripaska’s Rusal Roiled by Sanctions as Aluminum Prices Jump
  • Russia Government Said to Seek Ways to Help Sanctioned Oligarchs
  • Any Russian Company Can Now Be Hit by Sanctions, Citigroup Warns
  • U.S. Sanctions Could Impact Oerlikon, Schmolz, Sulzer: ZKB

In FX, the DXY has seen a decent comeback from Friday’s post-NFP data lows and some short-lived gains on the back of source reports about China contemplating Yuan devaluation as an option in its ongoing war of words vs the US on trade and import tariffs. The Index briefly probed above 90.200 compared to lows just above 90.000 as USD/CNY spiked to just over 6.3250 after the PBoC’s official 6.3114 mid-point fix. The Kiwi is back on top of the G10 rankings, but again not really on anything fundamental for the currency or NZ-wise and more on cross flows as the AUD continues to underperform and bear the brunt of any negative repercussions from a full-blown US-China-global trade war. NZD/USD is back near 0.7300 and AUD/NZD is re-testing support just ahead of 1.0500 as AUD/USD continues to reject advances towards 0.7700. Another gainer vs the USD and other majors amidst ongoing bullish Sterling seasonal factors, as Cable pivots 1.4100, EUR/GBP straddles 0.8700 (market contacts noting offers at the figure earlier) and GBP/JPY reclaims 151.00, albeit just. Note, significantly firmer than Halifax house prices also  underpinned the Pound, fleetingly. CAD/EUR/JPY/CHF are all narrowly mixed vs the Greenback in typically quiet early  Monday trade, with USD/CAD still capped ahead of 1.2800 amidst more reports of positive NAFTA talks, though a  deal may not be reached in principle in time for the upcoming Summit of Americas as had been touted. EUR/USD is extremely contained between 1.2660-90, USD/JPY has recoiled around the 107.00 axis and USD/CHF is trapped within 0.9590-0.96

In commodities, WTI and Brent crude futures trade modestly higher but in close proximity to some of the lows seen on Friday amid trade concerns and an uptick in the Baker Hughes rig count. Elsewhere, energy-specific newsflow has been relatively quiet over the weekend but traders will continue to be mindful of geopolitical developments with US President Trump warning Syrian President Bashar al-Assad and allies that they could pay a big price following a suspected chemical attack that killed dozens over the weekend. Furthermore, Iranian President Rouhani has stated that US President Trump will regret any withdrawal from the Iranian nuclear deal and that Iran’s response to the matter will be stronger than imagined. In metals markets, spot gold has fallen victim to the apparent return of risk appetite to the market and the modestly firmer USD. Elsewhere, Dalian iron ore slipped to a 10- month low in Asia-Pac trade amid ongoing trade concerns whilst aluminium has been seen higher during London hours amid the potential fallout of sanctions by the US on Russian aluminium producer Rusal.

It is a quiet start to the week with February trade data in Germany, March house prices data in the UK and the April Sentix investor confidence reading for the Euro area. There is no data due in the US today. The ECB’s Praet is due to participate in a meeting of the European Finance Forum in Frankfurt and ECB’s Constancio in Brussels.

US Event Calendar

  • Nothing major scheduled

DB’s Jim Reid concludes the overnight wrap

Normally the week after payrolls is a little quiet but because the first Friday of the month (ie: payrolls day) was relatively late it means we move into US CPI week very quickly rather than having a week in between payroll and the inflation report. There’s not much point dissecting the consensus for core US CPI this month as the forecast has been 0.2% mom for 29 months now and this month is no different. Over this period 16 months have indeed been at this level but since the start of 2017 only 5 out of 14 have been in line with this forecast. Of the 9 misses, 7 have been below expectations. Outside of US inflation on Wednesday we also have the latest FOMC minutes on the same day, US earnings season starting (with three big banks on Friday the highlight), and of some intrigue we have Facebook’s Zuckerberg’s testimony to a Senate panel on Wednesday. This could impact tech and with it the rest of the market. Elsewhere in the US, the Congressional Budget Office will release the latest US budget deficit  projections this week which would likely determine the potential supply of treasuries over the coming months.

In Europe this week the key will be the final inflation prints due with March CPI reports out in France (Thursday), Germany (Friday) and Spain (Friday). Meanwhile in Asia, China’s CPI and PPI prints for March due on Wednesday and March trade data due on Friday are the highlights. The full day-by-day week ahead is at the end today.

Back to markets on Friday, the Stoxx 600 fell -0.35% while the S&P dropped -2.19% following a further rise in trade tensions and a weaker than expected payrolls report (more below). Over the weekend things haven’t escalated  much but President Trump tweeted “China will take down its trade barriers because it’s the right thing to do…taxes will become reciprocal & a deal will be made on intellectual property”. His officials have tried to calm the markets  somewhat though. Treasury secretary Mnuchin noted the US objective “is to continue to have discussions with China” while his economic adviser Mr Kudlow reiterated “we’re not going to end up in a trade war”. Conversely, White House adviser Navarro noted the threat of tariffs is not merely a bargaining chip, but also conceded that talks with China will take place before any tariffs will take effect. Elsewhere, China’s President Xi will be speaking at the Boao Forum on Tuesday, potentially providing more clues on the evolving situation.

This morning in Asia, markets are trading modestly higher with the Nikkei (+0.59%), Kospi (+0.59%) and Hang Seng  (+1.76%) all up while Chinese bourses are up c0.3% as trading resumed post the holidays. Futures on the S&P are up c0.5% while yields on UST 10y are up c2bp.

Continuing with the weekend developments, CNN has reported that the US and North Korea have been holding secret and direct talks to prepare for the Summit between President Trump and Kim Jong Un, while White House officials have confirmed that Kim is ready to discuss the topic of denuclearization. Elsewhere, Reuters has reported that an in principle NAFTA deal is unlikely at this week’s Lima Summit as negotiations between the three sides are not advanced enough yet.

Now recapping other markets performance from Friday. US bourses were all lower (Dow -2.34%, Nasdaq -2.28%) and all sectors within the S&P were in the red. Equities were initially weighed down by President Trump’s new instructions to the USTR to consider whether higher tariffs on an additional $100bn of goods would be appropriate Then losses accelerated during the day as the Chinese Commerce Ministry quickly responded by indicating that “we will follow suit to the end and at any cost…using new comprehensive countermeasures…” The VIX jumped 13.5% to 21.49 while European equities were relatively calm with modest losses across the board (DAX -0.52%; FTSE -0.22%).

Government bonds were broadly firmer with core 10y bond yields down 2-6bp, partly helped by the risk off tone in equities and the softer payrolls reports (UST 10y -5.9bp to 2.773%; Bunds -2.7bp). In FX, the US dollar index weakened -0.39% while the Euro and Sterling gained 0.33% and 0.64% respectively. Elsewhere, WTI oil retreated -2.33% to $62.06/bbl while Gold gained 0.49%.

Moving onto the various Fed speakers. On Friday, the Fed Chairman Powell has reiterated “further gradual increases in rates” as long as “the economy continues broadly on its current path” while the Fed’s Williams also noted “I’m  confident that we can carry on the process of gradually moving rates up over the next two years while seeing solid (economic) growth”. Over the weekend, the usually dovish Fed’s Evans noted that he is “optimistic that we’re going to get to 2% (CPI), it would be surprising if we didn’t” and that “…gradual (rate) increases is appropriate”. On trade, the Fed’s Powell said its “really too early” to estimate how tariffs will impact the US economy while the Fed’s Kashkari also said “it’s too soon for any of us to judge…none of us know how to weigh the probability of these different outcomes”. He added that the end result of the trade rhetoric “may be something in the middle (of a trade war and lots of chest pounding), where it’s a lot of blusters but it scares businesses and investors”.

Over in Italy, the League party leader Salvini sees “real chance” that the center-right coalition will be able to form the next government with the Five Star Movement as “policy differences are less pronounced that people think”. Looking ahead, the second round of talks with the various party leaders will resume this week in order to break the political gridlock since the March 4 election.

Back in credit, Michal in our team published a report “IG Strategy: Record Primary CSPP Purchases Helped Absorb Heavy March Supply” on Friday night. Apart from the usual analysis of the ECB QE, with a focus on credit, it notes that last month’s corporate supply included a record amount of CSPP-eligible paper, providing the ECB with the opportunity to load up in the primary. Indeed, it did so and in fact more than proportionately, receiving a record primary allocation estimated to be 50% greater than the average since the CSPP began. That has also pushed the share of the CSPP in the overall QE to an all-time high. While this time the ECB could help private investors pick up some of the excess supply in weak markets, it has been a timely reminder of the added pressure credit is going to be under when QE has been tapered off. You can download the full report here.

Before we take a look at today’s calendar, we wrap up with other data releases from Friday. In the US, the March change in non-farm payrolls was below market at 103k (vs. 185k expected) despite a +13k upward revision to    February.

Notably, the March reading followed a strong prior month print of 326k and the three-month average gain of 202k is still well above the 12-month average of 188k. Elsewhere, the average hourly earnings growth was in line at 0.3% mom and 2.7% yoy, while the unemployment rate was steady at 4.1% for the sixth consecutive month.

In Europe, Germany’s February IP was weaker than expected at -1.6% mom (vs. 0.2%) and 2.6% yoy (vs. 4.4%) while France’s February trade deficit was broadly in line (-€5.2 vs. -€5.3bln expected) with exports up 4.2% yoy and imports up 1.3% yoy.

It is a quiet start to the week with February trade data in Germany, March house prices data in the UK and the April Sentix investor confidence reading for the Euro area. There is no data due in the US today. The ECB’s Praet is due to participate in a meeting of the European Finance Forum in Frankfurt and ECB’s Constancio in Brussels.

3. ASIAN AFFAIRS

i)MONDAY MORNING/SUNDAY NIGHT: Shanghai closed UP 7.18 POINTS OR .23%  /Hang Sang CLOSED UP 384.64 POINTS OR 1.29%   / The Nikkei closed UP 110.74 POINTS OR 0.51%/Australia’s all ordinaires CLOSED UP .30% /Chinese yuan (ONSHORE) closed DOWN at 6.3153/Oil DOWN to 62.25 dollars per barrel for WTI and 67.59 for Brent. Stocks in Europe OPENED IN THE GREEN EXCEPT LONDON   .   ONSHORE YUAN CLOSED UP AT 6.3153 AGAINST THE DOLLAR. OFFSHORE YUAN CLOSED DOWN ON THE DOLLAR AT 6.3161 /ONSHORE YUAN TRADING STRONGER AGAINST OFFSHORE YUAN/ONSHORE YUAN TRADING WEAKER AGAINST USA DOLLAR/OFFSHORE YUAN TRADING  MUCH WEAKER AGAINST THE DOLLAR /CHINA RETALIATES WITH TARIFFS/ TRUMP RESPONDS TO NEW TARIFFS AND IT NOW LOOKS LIKE A FULL TRADE WAR IS BEGINNING/

3 a NORTH KOREA/USA

North Korea/South Korea

 

3 b JAPAN AFFAIRS

end

c) REPORT ON CHINA

China

China wishes to show her muscle as they deploy 3 carrier battle groups in the South China Sea

(courtesy zerohedge)

US Deploys Three Carrier Battle Groups To Face-Off Against Chinese Aircraft Carrier In South China Sea

Last week, we reported that satellite images had captured China’s only aircraft carrier in deployment, the Liaoning, flanked by 40 other warships and submarines, conducting unprecedented live-fire drills in the South China Sea. This massive Chinese naval exercise was observed for the first time, with China watchers pointing out that such a forceful display of deterrence was highly unusual for the People’s Liberation Army Navy. Perhaps in light of recent events, it was merely a warning.

Li Jie, a Beijing-based naval specialist, said, “it was the first time the Liaoning had taken part in live-fire drills. This will test the Liaoning’s real combat strength as well as joint-operations skills between the aircraft carrier and warships from other fleets.”

“China wants to show the outside world its determination to defend the fruits of its economic reforms over the past 40 years,” Beijing-based military analyst Zhou Chenming said.“Like the US, China’s military might is one of the government’s political tools to protect the country’s national interests.”

Now, according to the South China Morning Post, as Beijing flexes its naval war muscle, the US is preparing for its own “show of force” naval drill in the Asia-Pacific region, and in close proximity to the Liaoning. The Pentagon is reportedly sending an unprecedented three aircraft carrier battle groups to the region, with the USS Theodore Roosevelt flotilla arriving in Singapore sometime early next week. 

Separately, the USS Carl Vinson and its fleet have just paid a first visit to the Vietnamese coastal city of Da Nang since the end of the Vietnam war, a move Chinese military experts said was aimed at countering Beijing’s influence in the region.

Meanwhile “China is believed to have deployed the DF-21D, dubbed the “carrier killer”, in the East and South China seas to fend off any possible US aircraft carrier battle group attacks on coastal cities, the country’s economic heartland,” according to the SCMP.

Overlapping naval war drills could be a symptom of diplomatic and economic relations between the United States and China rapidly deteriorating with the onset of a rapidly expanding trade war. Both countries announced tit-for-tat tariffs this week, which sent shockwaves through global markets.

President Trump maintained his aggressive approach to trade policy on Friday and Treasury Secretary Steven Mnuchin warned there is the possibility of a trade war with China. For anyone who missed it, in just the span of 72 hours, on Wednesday China reacted to Trump’s $50 billion tariff threat by declaring matching tariffs of its own on 106 U.S. exports including aerospace, autos, defense, and even soybeans. Then in a tit-for-tat retaliation on Thursday, Trump slapped China with an additional $100 billion in tariffs.

Here is what Mnuchin said Friday on CNBC’s “Power Lunch” about the Trump administration’s trade dispute with China:

“Our objective is still not to be in a trade war with [China],” Mnuchin said on CNBC’s “Power Lunch.” “I’m cautiously optimistic that we will be able to work this out.”

But, he added, “there is the potential of a trade war.”

Mnuchin said the U.S. is in “communications” with China, but he didn’t want to comment on the progress of the talks.

“Right now we have initiated a plan. The tariffs will take some period of time to go into effect. There will be public comment, while we’re in the period before the tariffs go on. We’ll continue to have discussions,” he said. “The president wants reciprocal trade.”

America’s last full-blown global trade war was ignited by the notorious Smoot-Hawley tariff of 1930, as the U.S slid into a Great Depression — all in attempt to protect struggling American farmers by increasing tariffs on agricultural imports. The global reaction was short and quick, after that, a trade war ensued. These protectionist and nationalist economic policies severely disrupted global trade, facilitated the rise of fascist leaders, and ultimately some years later contributed to the outbreak of World War II.

The lesson from history is clear: trade wars have no winners and generally damage the economies of the world, raising tensions and increasing the risk of an international shooting war. If anything, trade wars serve to accelerate some pre-designed systemic “reset.”

In the context of recent events, and a world which both Goldman and Bank of America recently admitted has too much debt to be sustainable, it is starting to emerge that a reset is precisely what the endgame here is, especially the final “hot war” outcome.

Is the catalyst for this grand  escalation currently preparing for a face-off, somewhere in the South China Sea?

end
It seems that instead of dumping its USA treasuries, China is thinking about the devaluation of the yuan and that would put tremendous pressure around the world
(courtesy zerohedge)

China Studying Yuan Devaluation As Retaliation To Trade War; CNH Slides

Last week, with the tit-for-tat Chinese trade war escalating following Trump’s threat to raise Chinese imports tariffs by another $100BN, we said that it is time to buy some Yuan puts, ahead of a potential Chinese devaluation.

zerohedge@zerohedge

CNY puts looking real cheap right about now

Overnight we got a clear lesson why this highly convex trade would be prudent in the current trade war environment, when Bloomberg reported at 3am EDT that China is “evaluating the potential impact of a gradual yuan depreciation” citing people familiar with the matter said, as the country’s leaders are weighing their possible responses in the escalating trade war with President Trump.

As a reminder, a devaluation was one of the “nuclear” retaliation options listed here on Friday, and is certain to provoke an even harsher response by the US. Still, this appears not to have spooked senior Chinese officials who are reportedly studying a “two-pronged analysis of the yuan that was prepared by the government”: one part looks at the effect of using the currency as a tool in trade negotiations with the U.S., while a second part examines what would happen if China depreciates the yuan to offset the impact of any trade deal that curbs exports.

Still, the analysis doesn’t mean officials will carry out a devaluation, which would require approval from top leaders.

In kneejerk response, both the onshore and offshore yuan weakened as much as 0.2% to 6.3186 per dollar in onshore trading and 6.3211 for the offshore pair.

At the same time, the dollar climbed against the yen and other EM currencies in response: “USD seems to be regaining some ground on the back of the headline” said Valentin Marinov, head of G-10 FX research at Credit Agricole. “The story seems to suggest that the Chinese are discussing the idea of FX depreciation rather than work on an imminent change in FX policy.”

Ironically, while Trump has bashed China on the campaign trail and more recently on Twitter, for keeping its currency artificially weak, the yuan has gained about 9% against the greenback since he took office and has been steady in recent weeks despite the escalation of trade tensions between the world’s two largest economies, prompted by a weaker dollar. The Chinese currency touched the strongest level since August 2015 last month.

That said, w\hile a weaker yuan could help President Xi Jinping shore up China’s export industries in the event of widespread tariffs in the U.S., a devaluation comes with plenty of risks, according to Bloomberg:

  • It would encourage Trump to follow through on his threat to brand China a currency manipulator,
  • it would make it more difficult for Chinese companies to service their mountain of offshore debt,
  • It would undermine recent efforts by the government to move toward a more market-oriented exchange rate system.
  • It would expose China to the risk of local financial-market volatility, something authorities have worked hard to subdue in recent years. When China unexpectedly devalued the yuan by about 2 percent in August 2015, the move sent shock-waves through global markets.

“Is it in their interest to devalue yuan? It’s probably unwise,” said Kevin Lai, chief economist for Asia ex-Japan at Daiwa Capital Markets Hong Kong Ltd. “Because if they use devaluation as a weapon, it could hurt China more than the U.S. The currency stability has helped to create a macro stability. If that’s gone, it could destabilize markets, and things would look like 2015 again.”

Which is why many are unconvinced China will actually follow through.

China is unlikely to resort to a devaluation unless it exhausts its other trade-negotiation tools, said Frances Cheung, head of Asia macro strategy at Westpac Banking Corp. in Singapore. The more likely scenario is that the two countries will reach a compromise and China will continue to liberalize its capital account, added Zhou Hao, senior Asia emerging markets economist at Commerzbank AG.

“There are many measures they can take before resorting to this tool,” said Ken Peng, an investment strategist at Citi Private Bank in Hong Kong. “Using yuan depreciation is like sacrificing 800 soldiers of your own to kill just 1,000 enemies.”

Perhaps, although as we noted yesterday, one of the measures suggested by China’s Global Times is to attack the US stock market. It is not clear if that is necessarily a “better option.” It also doesn’t mean market-driven yuan weakness is off the table. The average forecast among analysts tracked by Bloomberg calls for the currency to drop slightly by year-end to 6.38 per dollar.

“There is room for a near-term yuan correction given how much the currency has gained since last year,” said Ken Cheung, a currency strategist at Mizuho Bank Ltd. in Hong Kong. “China would allow market-driven yuan weakness if sentiment fluctuates on trade war concerns. But it’s unlikely for the authorities to engineer another round of significant one-off devaluation.”

Speculation aside, a key event will take place in under 24 hours when traders looking for clues on President Xi’s thinking will get an opportunity to hear him speak personally. On Tuesday he’s scheduled to address the Boao Forum for Asia – China’s answer to Davos – on the tropical island of Hainan.

Meanwhile, courtesy of Bloomberg, here are several research analyst responses to the story that China may devalue its currency:

Citi Private Bank (Ken Peng, investment strategist)

  • China likely won’t devalue the yuan, as further weakness would lead to significant capital outflows, which the government tried to rein in over the past few years
  • Cost of such a measure outweighs benefits; using yuan depreciation is like sacrificing 800 soldiers of your own to kill just 1,000 enemies
  • There are many tools the government can take before resorting to yuan depreciation, such as more tariffs, canceling orders from American companies and even selling U.S. Treasuries
  • The yuan may weaken due to market forces, as it’s rallied too quickly recently and the U.S.-China interest-rate gap has narrowed

Westpac Banking Corp. (Frances Cheung, head of Asia macro strategy)

  • China is unlikely to target a certain level for the yuan in response to the trade conflict when other options aren’t exhausted
  • A stable yuan is in China’s interest, it helps promote foreign interest in yuan assets
  • Response pretty much focuses on trade, though this may be extended to other bilateral flows as China doesn’t import that much from the U.S.
  • Prudent for policymakers to carry out studies such as this from time to time

Daiwa Capital Markets (Kevin Lai, chief economist for Asia ex-Japan)

  • Would be unwise for China to devalue the yuan, as that could hurt China more than the U.S.
  • Currency stability has helped create macro stability; if that’s gone, it could destabilize markets, and things would look like 2015 again

Mizuho Bank (Ken Cheung, strategist)

  • There’s room for near-term yuan correction given how much the currency has gained since last year
  • It’s unlikely China will engineer another significant one-off devaluation — the cost would be too big as it would spark depreciation concerns and go against China’s target to open its market and globalize the yuan

Commerzbank AG (Zhou Hao, economist)

  • Yuan depreciation is a measure China would have to prepare, and there’s nothing unusual for it to be considered in a trade war
  • If China and the U.S. fail to strike a deal, China would definitely weaken the yuan
  • More likely scenario is for the two countries to compromise and China to liberalize capital account

end

This seems like a logical step for the Chinese.  They do not want to send the nuclear button to the USA.  A good alternative is for them to just stop buying USA treasuries.  It will hurt the USA as their deficit is already at 1.2 trillion dollars and then on top of that the Fed will roll off 600 billion.  If the Chinese stop buying the Fed will be called upon to purchase Bonds and QT will end.

(courtesy zerohedge)

“We Understand The Chinese Government Has Halted Purchases Of US Treasuries”: SGH

On Friday, we reported that among the five “nuclear” options available to Beijing to retaliate against Trump’s latest $100BN in proposed import tariffs, was the choice whether to sell US Treasuries. But what if Beijing did not want to unleash a full-blown market nuke, and instead was hoping for a targeted, EMP hit?

Then it would simply stop buying US paper, instead of dumping it outright; in the process it wouldn’t hurt the US too much – avoiding a furious tit-for-tat response – but would still send a clear signal to the White House, whose fiscal spending plan will more than double net Treasury issuance this year from under $500BN to over $1 trillion, and which needs every possible marginal buyer of US paper, both domestic and foreign.

Which is precisely what a new report by SGH Macro Advisors claims.

According to the consultancy, a long-time favorite of macro hedge funds, Beijing has twice threatened deliberately targeted tit-for-tat punitive measures against the US to date: “first, in response to the Trump Administration’s threat of steel and aluminum tariffs, and second, in response to broader measures aimed at $50 billion of products that lie directly at the heart of Chinese technology transfers, intellectual property violations, and strategic, “Made in China 2025” plan.

But even as US cabinet officials lined up yesterday to calm jittery equity markets, SGH says in a note released over the weekend that “China had already signaled an aggressive and potentially more ominous escalation in the developing trade wars to the White House“:

From what we understand, the Chinese government has halted its purchases of US Treasuries. Despite the direct encouragement, according to Chinese sources, by US Treasury Secretary Steve Mnuchin for China to “stay put,” Beijing has apparently discontinued purchases of US Treasuries “for the past few weeks.”

Some more details from the note:

Chinese officials hold out hope that “equal-footing consultations and negotiations” could be held on specific trade issues, with results potentially by mid-June. But that timing was envisioned before President Trump’s formal statement calling for US Trade Representative Robert Lighthizer to consider an additional $100 billion worth of Chinese goods that could fall under a US tariff regime.

Furthermore, there have been no discussions to date yet of substance, at a high level, on what an agreement might hold. Within Beijing, concessions under consideration remain focused on opening some “newly emerging industries,” as well as financial industries, to the US, and broad assurances that China might keep the growth rate of US imports to at least 15% this year. And on the currency front, Chinese officials consider the Renminbi, which has remained relatively strong, to be at a “broadly reasonable” level, and hold out that if bilateral trade disputes are finally settled through negotiations, it could continue to rise steadily this year.

But those are all small, and insufficient, steps, and more significant tensions loom.

Beijing, and President Xi Jinping, remain focused on extracting concessions from the US on high-tech export restrictions to China. But Beijing remains on its back heels in continuously underestimating the imperative for the Trump Administration to “deliver” – in a material fashion – on the President’s campaign promises to bring an “unchecked China” to heel.

That includes, in the background, discrete by significant proposals that are under active consideration by the White House and Congress to add teeth to the CFIUS (Committee on Foreign Investment in the United States) approval process of vetting mergers and the acquisition of sensitive technologies by foreign firms.

A hard line on China remains, along with immigration, on the top of the Trump political agenda before the critical November mid-term elections that loom, ominously, ahead.

A (Very Precise) Tit-for-Tat

The measures announced on Wednesday by China in response to the formal release by the White House of US Trade Representative Robert Lighthizer’s list of potential targets subject to an additional tariff was a direct tit for tat in magnitude, as well as in timing, of the threat of 25% tariffs covering $50 billion worth of exports from China.

It was, furthermore, intended as a “precision blow,” targeted at the heart of President Trump’s political base.

In an executive meeting chaired by Premier Li Keqiang on Wednesday morning, Beijing time, China’s State Council decided to threaten actions with China’s own list of 106 products in 14 categories of American products worth $50 billion, including automobiles, aircraft, chemical products, soybean, corn, sorghum, and cotton.

At the meeting, and in subsequent statements to the public, participants stressed that the aim of the trade retaliation was to make Trump feel real political pain, and to warn him against launching a head-on “trade war” with China. And, as we had expected, the main targets of trade retaliation were, by design, geographically aimed at the Rust Belt and agricultural states that strongly supported Trump in the 2016 elections.

Premier Li, from what we understand, is said to have characterized these measures as “a precision blow” to punish Trump, but he furthermore went on to add that the objective is not to engage in a trade war with the US, but rather to force the Trump Administration to conduct “equal-footing consultations and negotiations” with China on bilateral trade disputes.

Beijing’s Eye on November, and 2020

Beijing has studied closely the US political landscape and aimed its latest measures directly at American farmers and workers who they believe, correctly or not, are Trump’s main source of support. It has not gone unnoticed in Beijing that the American farm and agricultural sector and workers are already feeling the heat, and running advertisements on TV in opposition of a “trade war.”

The Rust Belt vote could swing either way, but without the support of the farm and agricultural demographic, Chinese sources believe, Trump would struggle to win the 2020 presidential elections. At least that is the desired effect – if all goes wrong for China.

But, at least as of last night, Chinese officials were also heartened to hear what they thought was a softening in tone from senior Administration economic officials, including NEC Director Larry Kudlow, Secretary of Commerce Wilbur Ross, and the architect of the harshest of administration trade policies, the White House trade adviser, Peter Navarro.

That conciliatory response was welcomed by Beijing, but not without some chest thumping in public, including a crowing, victorious editorial in the China Daily.

That tone may have been premature, and seen by the White House as ill-advised, as well as the continued insistence by Beijing on some semblance of “equivalence” in these escalating trade tensions with the US.

While the report has not made it into the public arena, it is worth noting that 10Y nominal yields have barely moved on the news, rising from a session low of 2.78% to 2.80%, and are currently trading back with a 2.79% handle. Of course, should China proceed to announce that it is now a matter of official policy not to buy US paper, the adverse reaction will be far more aggressive.

As for FX impacts, the rolloff of TSY purchases would be superficially positive for the Yuan, hardly what exporters China wants, although Beijing has an effective way of fixing that: just devalue the currency, something which Bloomberg reported overnight China is now actively contemplating.

4. EUROPEAN AFFAIRS

GREAT BRITAIN

Tom Luongo discusses what happens next with the Theresa May Government post Skripal

(courtesy Tom Luongo)

8. EMERGING MARKET

end

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

Euro/USA 1.2269 DOWN .0010/ 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 ALL IN THE GREEN EXCEPT LONDON   

USA/JAPAN YEN 107.13 UP  0.224 (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/DEADLY UNWINDING OF YEN CARRY TRADE

GBP/USA 1.4101 UP .0022  (Brexit March 29/ 2017/ARTICLE 50 SIGNED/BREXIT FEES WILL BE CAPPED

USA/CAN 1.2787 UP .0009 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU/(TRUMP INITIATES LUMBER TARIFFS ON CANADA/CANADA HAS A HUGE HOUSEHOLD DEBT/GDP PROBLEM)

Early THIS MONDAY morning in Europe, the Euro FELL by 10 basis points, trading now ABOVE the important 1.08 level RISING to 1.2280; / Last night Shanghai composite CLOSED UP 7.18 POINTS OR .23% /   Hang Sang CLOSED UP 384.64 POINTS OR 1.29% /AUSTRALIA CLOSED UP .30% / EUROPEAN BOURSES  OPENED IN THE GREEN EXCEPT LONDON

The NIKKEI: this MONDAY morning CLOSED UP 110.74 POINTS OR 0.51%

Trading from Europe and Asia

1/EUROPE OPENED  IN THE GREEN

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 384.64 POINTS OR 1.29%  / SHANGHAI CLOSED UP 7.18 POINTS OR .23%   /

Australia BOURSE CLOSED UP .30% 

Nikkei (Japan) CLOSED UP 110,74 POINTS OR 0.51%

INDIA’S SENSEX  IN THE GREEN 

Gold very early morning trading: 1328,50

silver:$16.35

Early MONDAY morning USA 10 year bond yield: 2.7972% !!! UP 2  IN POINTS from FRIDAY night in basis points and it is trading WELL ABOVE resistance at 2.27-2.32%. (POLICY FED ERROR)/ 

The 30 yr bond yield 3.0369 UP 2  IN BASIS POINTS from FRIDAY night. (POLICY FED ERROR)/

USA dollar index early  MONDAY morning: 90.21 UP 10  CENT(S) from FRIDAY’s close.

This ends early morning numbers MONDAY MORNING

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And now your closing MONDAY NUMBERS \1: 00 PM

Portuguese 10 year bond yield: 1.697% UP  1  in basis point(s) yield from FRIDAY/

JAPANESE BOND YIELD: +.0.040% DOWN 3/5    in basis points yield from FRIDAY/JAPAN losing control of its yield curve/

SPANISH 10 YR BOND YIELD: 1.238% UP 0  IN basis point yield from FRIDAY/

ITALIAN 10 YR BOND YIELD: 1.772  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:RISES TO +.504%   IN BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR MONDAY

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

Euro/USA 1.2319 UP .0041 (Euro UP 41 Basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 107.07 UP 0.170 Yen DOWN 17 basis points/

Great Britain/USA 1.4134 UP .0052( POUND UP 52 BASIS POINTS)

USA/Canada 1.2695 DOWN  .0120 Canadian dollar UP 120 Basis points AS OIL ROSE TO $63.33

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This afternoon, the Euro was UP 41 to trade at 1.2319

The Yen FELL to 107.07 for a LOSS of 17 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE

The POUND ROSE BY 52 basis points, trading at 1.4134/

The Canadian dollar ROSE by 120 basis points to 1.2695/ WITH WTI OIL RISING TO : $63.33

The USA/Yuan closed AT 6.3070
the 10 yr Japanese bond yield closed at +.040%  DOWN 3/5   IN BASIS POINTS / yield/
Your closing 10 yr USA bond yield UP 2 IN basis points from FRIDAY at 2.800% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 3.0423  UP 1    in basis points on the day /

THE RISE IN BOTH THE 10 YR AND THE 30 YR ARE VERY PROBLEMATIC FOR VALUATIONS

Your closing USA dollar index,89.89  DOWN 22 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 MONDAY: 1:00 PM EST

London: CLOSED UP 11.11 POINTS OR 0.15%
German Dax :CLOSED UP 20.48 POINTS OR 0.17%
Paris Cac CLOSED UP 5.15   POINTS OR 0.10%
Spain IBEX CLOSED UP 60.00 POINTS OR 0.62%

Italian MIB: CLOSED UP 124.12 POINTS OR 0.54%

The Dow closed UP 46.34 POINTS OR 0.19%

NASDAQ WAS UP 35.23 Points OR 0.51% 4.00 PM EST

WTI Oil price; 63.33 1:00 pm;

Brent Oil: 68.39 1:00 EST

USA /RUSSIAN ROUBLE CROSS: 60.04 UP 194/100 ROUBLES/DOLLAR (ROUBLE LOWER BY 194 BASIS PTS)

TODAY THE GERMAN YIELD FALLS TO +.504% 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:$63.30

BRENT: $68.53

USA 10 YR BOND YIELD: 2.779%   THIS RAPID DECENT IN YIELD IS ALSO VERY DANGEROUS/RECESSION COMING

USA 30 YR BOND YIELD: 3.0185%/

EURO/USA DOLLAR CROSS: 1.2319 UP .0040  (UP 40 BASIS POINTS)

USA/JAPANESE YEN:106.76 DOWN 0.145/ YEN UP 15 BASIS POINTS/ very dangerous as yen carry traders are getting killed/yen continues to rise despite the NYSE rising. however gold is now breaking away from yen influence.

USA DOLLAR INDEX: 89.86 down 25 cent(s)/dangerous as the lower the dollar the higher the inflation.

The British pound at 5 pm: Great Britain Pound/USA: 1.4126: UP 0.0045  (FROM LAST NIGHT UP 45 POINTS)

Canadian dollar: 1.2699 UP 77 BASIS pts

German 10 yr bond yield at 5 pm: +0.504%


VOLATILITY INDEX:  21.77  CLOSED  UP 0.28

LIBOR 3 MONTH DURATION: 2.337%  ..LIBOR HAS INCREASED FOR 42 CONSECUTIVE DAYS. 

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

TRADING IN GRAPH FORM FOR THE DAY

Dow Roundtrips 800 Points As Trump Turmoil Returns

It was all looking so awesome early on…

Stocks were higher in the pre-market, but went panic-bid as soon as the cash market opened, with Nasdaq soaring to Thursday’s close – erasing Friday’s China retaliation chaos – before legging back lower after running those stops (and CBO headlines)… then things really accelerated lower after The New York Times reported that the FBI has raided the offices of the president’s lawyer, Michael Cohen.

Futures show the move best…

But Cash indices ended the day marginally higher (aside from Trannies)

GreekFire23@GreekFire23

Market gives back all of the gains after not knowing why it had such gains

As The Dow roundtripped over 800 points…

VIX popped back above 22…

Bank stocks gapped open and ran into the green from Thursday’s close before rolling over…

FANGMAN stocks all soared out of the gate but TSLA was the first to crack and then the rest saw derisking…

It appears TSLA’s squeeze is over…

Bonds and Stocks completely decoupled at around 11amET

Bonds were mixed but as they rallied in the afternoon, 30Y yields went lower on the day, notably flattening the curve…

2s30s tumbled back off pre-rate-hike levels…

But Breakevens tumbled in the afternoon – around when CBO’s report hit – along with real yields, dragging down stocks…

The Dollar dropped for the second day in a row, back at one-week lows…

The Peso and Loonie both jumped after Kudlow’s comments on a coordinated currency across North America…

But the big headline was the plunge in the Ruble and Russian stocks…

The spread widening on Russian bonds is now more than 70bps on the day, which means this will be the worst day for the Russian index since 2000.

Cryptos tumbled earlier today as the Russian sanctions headlines hit, but stabilized, still up from Friday’s close…

Dollar weakness sent commodities higher on the day with Crude best, seemingly gaining after Russian sanctions…

WTI pushed back above $63 and gold topped $1340..

As Gluskin-Sheff’s David Rosenberg notes, we are on track for 100 sessions this year with at least a 1% move in the S&P 500. In the past 7 decades, this happened in 1974, 2001, 2002, 2008 and 2009. Hmm…

 end
TRADING TODAY/EUROPE
(courtesy zerohedge)

European Stocks Stumble As EUR Jumps To 1-Week Highs

EURUSD spiked above 1.23 to one-week highs as modest derisking ripples through markets after the Russian jolt.

European stocks legged down on the shift with UK’s FTSE worst on the day but Germany’s DAX hardest hit in the leg down…

END

Gold and silver love this CBO report:  The USA deficit will exceed $1 Trillion by 2020 and 804 billion in the upcoming 2019 fiscal year.

US Deficit To Soar Over 40% In 2019, Exceed $1 Trillion By 2020: CBO

The Congressional Budget Office has hit President Trump with a double whammy in its latest report, calculating that the U.S. budget deficit will surpass $1 trillion by 2020, two years sooner than previously estimated, as tax cuts and spending increases will do little to boost long-term economic growth.

Spending will exceed revenue by $804 billion in the fiscal year ending Sept. 30, jumping from a projected $563 billion shortfall forecast in June, the non-partisan arm of Congress said in a report Monday. In fiscal 2019, the deficit will reach $981 billion, compared with an earlier projection of $689 billion.

Deficits were only set to surpass the trillion-dollar level in fiscal 2022 under CBO’s report last June.

The U.S. cumulative deficit — taking into account the new tax and spending legislation — will be $11.7 trillion from 2018 to 2027, about $1.6 trillion larger than the CBO projection in June. The CBO forecast 2 percent less revenue and 1 percent more spending over the period, it said.

Over the 2021–2028 period, projected deficits average 4.9 percent of GDP; the only time since World War II when the average deficit has been so large over so many years was after the 2007–2009 recession.

As deficits accumulate in CBO’s projections, debt held by the public rises from 78 percent of GDP (or $16 trillion) at the end of 2018 to 96 percent of GDP (or $29 trillion) by 2028That percentage would be the largest since 1946 and well more than twice the average over the past five decades

The tax-cut and spending legislation “provide fiscal stimulus, raising real GDP more than potential GDP in the near term,” the CBO said.

Over the longer term, all of those effects, as well as the larger federal budget deficits resulting from the new laws, exert upward pressure on interest rates and prices.

As Bloomberg reports, the Trump administration has said tax cuts will lead to faster economic growth that would offset deficit expansion. But, while CBO estimated that real gross domestic product will expand by 3.3 percent in the 2018 calendar year, they estimate that the economy will then slow to 2.4 percent in 2019 and 1.8 percent in 2020, based on the fourth quarter year-over-year figure. In June, CBO forecast 2 percent growth this year.

During the 2020-2026 period, a number of factors dampen economic growth: higher interest rates and prices, slower growth in federal outlays, and the expiration of reductions in personal income tax rates,” CBO said.

Finally, here is CBO’s summary of its forecasts – note item 3 where inflation is set to remain stuck at 2% for the next 10 years… and unemployment will barely budge.

Bear in mind that the CBO is now estimating that their will be no recession within the next ten years – making this the longest economic cycle without contraction in US history…234 months from June 30 2009 through Dec 31, 2028

As Bloomberg notes ominously, the CBO baseline represents what it projects will happen if current law is allowed to remain in effect. CBO assumes that budget caps on annual appropriations, which Congress has raised regularly, remain in effect. Because of that, deficits are likely to be even larger than CBO is projecting.

…and cue the hysteria!

Full CBO Outlook

see zerohedge

Sunday: 
Kudlow claims that the White House is planning to trim its huge 1.3 trillion omnibus spending bill
(courtesy zerohedge)

Kudlow: White House Planning Cuts To $1.3 Trillion Omnibus Spending Bill

Larry Kudlow has been making the media rounds this week, appearing on Fox and Bloomberg (though, tellingly, not his former employer, CNBC) to help soften President Trump’s aggressive trade rhetoric to make it more palatable to investors.

But in what can only be interpreted as a show of defiance considering the Dow’s nearly 600 point drop on Friday, Kudlow took to Fox News Sunday to offer a stern warning to China: Stop stonewalling and instead make a good-faith effort to come to the table.

WALLACE: And that’s what they’re doing is stonewalling?

KUDLOW: Basically. I mean, lots of rhetoric out there, like, you know, old communist party type stuff. The whole world, please, the whole world knows China has been violating trade laws for many years and President Trump is the guy calling them on it and he’s right to do so.

WALLACE: Is the president — you say he’s calling them on it. Is he bluffing or will he impose tariffs if China doesn’t change its trade practice?

KUDLOW: Look, I — he’s not bluffing. I mean, there are a number of tools at his disposal.

Just one thing there — people are saying Trump, Trump, Trump. This is a problem caused by China, not a problem caused by President Trump, and I would go so far as to say, Trump is there to fix the problem.

If you talk to the president as I have, he regards himself as a free trader, all right? As do I. But his argument, and it’s a good one, you can’t have free trade, which is pro-growth around the world unless China brings down its barriers, opens up its markets —

And while Kudlow neglected to announce his “trade coalition of the willing” like he had promised on Friday, he did try his hardest to burnish both the president’s and his own free-trade bona fides while trying to frame the US’s tariff tit-for-tat with China as an isolated issue within the framework of global trade – not a runup to the US implementing blanket tariffs, a policy Kudlow says he vehemently opposes.

KUDLOW: Well, hang on. So, I oppose the blanket tariffs, I always do.

Now, with respect to China, I’ve always been a hard-liner on China, and while I don’t like tariffs, sometimes there is no substitution for putting tariffs into the discussion, into the process. That is part of the quiver of arrows that the president has.

Look, he’s a great negotiator. He has a whole history of that. But in this process, tariffs have to be part of it. There’s no two ways about it. Then, hopefully, there will be discussions and hopefully, in just the next two months, the Chinese will come seriously back to the table.

President Trump has told me, we were together a long time on Thursday and Friday. He likes President Xi. They get along. He respects President Xi as a negotiator, but they have not played by the rules, Chris. This has been going on.

Technology is everything to this country, everything — our entrepreneurship, our innovation, our future growth, our productivity. We cut corporate tax rates precisely to unlock the animal spirits around technology.

We cannot let China willy-nilly steal our technology.

Of course, we’ve heard most of this trade rhetoric before, Kudlow took viewers by surprise after Wallace moved on to his next topic, the $1.3 trillion omnibus spending bill. Is it true, Wallace asked, that the White House is pushing a bill to undo some of the spending increases included in the omnibus bill?

Kudlow confirmed that he and OMB Chief Mick Mulvaney are working on an “enhanced rescission package” that would “trim some spending”, now that Republicans on the Hill have finally come around to the idea that blowing a massive hole in the federal budget could be bad for America in the long term.

WALLACE: OK, I’ve got a minute left. There is talk this morning that the president may ask Congress to undo part of the $1.3 trillion spending bill to cut back some of the expenditures that were made. Is that true and how far along are you on that?

KUDLOW: It’s playing in the White House. My friend, OMB Director Mick Mulvaney, he and I are on — I’m an ex-OMB guy. I feel his pain.

We are looking at an enhanced rescission package. I’m not going to use numbers. This is all around town.

I think the Republican Party on the Hill has finally figured out. It’s really not a bad idea to trim some spending because, after all, spending can lead to deficits and spending interferes with the economy. And President Trump is a deregulator and a tax cutter. So, we want and much more modest government role.

While this is certainly an encouraging sign for Treasury bulls, there’s much that needs to be determined. Depending on the final number, whatever rescission package Kudlow is planning could amount to a drop in the bucket: Goldman warned in January that US Treasury issuance was set to double in 2019 – and that was before the omnibus bill was signed into law. Trump warned when he signed the $1.3 trillion bill that he was only affixing his signature because of national security concerns, and that he would never sign another bill like it.

Will markets take Kudlow’s hint seriously? We’ll need to wait until Treasury futures open later this afternoon to find out.

Of course, Kudlow wasn’t the only senior administration official to talk trade on the Sunday shows this week. After he admitted on Friday that a trade war with China remained a possibility, Treasury Secretary Steven Mnuchin clarified that, while a trade war remains a possibility, he doesn’t see one as likely.

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Wall Street will be watching closely what Xi will say in his speech tonight

(courtesy zerohedge)

Wall Street Obsessing Over Xi Jinping’s Speech Tonight For Clues On What Happens Next

Following Trump’s Sunday morning tweet, in which the US president said that he will always be friends with Chinese president Xi Jinping no matter what happens yet at the same time predicted that China will be first to blink in a trade war, tweeting that “China will take down its Trade Barriers because it is the right thing to do”, traders were spooked by an overnight report that China is studying yuan devaluation as a tool in the trade spat.

As such, the speech by China’s president Xi Jinping tomorrow (technically tonight in the US) at the Boao Forum for Asia, China’s answer to Davos, is taking on added importance.

As trade tensions between US and China escalate with few if any silver linings, the speech by China Premier Xi Jinping at the Boao Forum – China’s answer to Davos – will be keenly watched. The full agenda of the meeting can be seen hereHe will speak between 9:30-11:30am local time (21:30-23:30 EST)

While it remains to be seen if protectionism will be on the agenda, China’s President will deliver the keynote speech and analysts suggest that China will use the speech to announce market access reforms, as well as embrace globalism, while potentially downplaying the growing trade war with the US.

“If Chinese President Xi Jinping announces market reforms at a scheduled speech on Tuesday, that could help heal U.S.-China trade frictions, said Myron Brilliant from the US Chamber of Commerce. The question on the table is how big the reform package will be and how specific it will be.” – CNBC

Chinese Foreign Minister Wang Yi said last week that the speech would be “the most authoritative interpretation” of the new measures planned to mark the 40th anniversary of reforms that launched China’s economic boom.

According to the SCMP, China’s plan to create free trade ports as part of its ongoing reform and opening up could be one of Xi’s major announcements at the forum, that started yesterday. The SCMP writes, “Amid a growing trade dispute with the US, Xi will be keen to use the Boao Forum for Asia to reassure the world that China remains open for business” and adds that “on Sunday morning, Chi Fulin, the head of the China Institute for Reform and Development, a think tank in Hainan, said on state television that the island would be at the forefront of the opening up of China’s services market, covering everything from tourism to health care, and easier access for foreign companies.”

However, as Bloomberg notes, any reconciliatory tone from Xi “obviously won’t resolve the trade skirmish. Trump has asked China to take down trade barriers, accept reciprocal taxes and protect intellectual property. These are the areas that China is willing to work with. The negotiations are about how much of a concession China is willing to give.”

It’s reasonable to suggest that noise about the “trade war” is peaking. But it’s also worth keeping in mind that there seems to be a perception among Chinese leaders that the Plaza Accord was the root cause of Japan’s Lost Decade. China shouldn’t repeat the same mistake by being bullied into a trade deal that will be detrimental to its long-term growth, so goes the thinking.

This means that while the verbal “foreplay” in the coming trade war may be ending, it will be up to Xi – and China’s official response to the latest proposed $100BN tariffs – to determine what the US will do in the coming months.

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We have been highlighting the subprime auto sector to you for quite some time and it was inevitable that the bubble would burst.  It has now started as lenders are dropping like flies

(courtesy zerohedge)

Subprime Auto Implosion In Full Effect As Lenders Start Dropping Like Flies

We are in the midst of watching the subprime auto lending bubble burst in its entirety. Smaller subprime auto lenders are starting to implode, and we all know what comes next: the larger companies go bust, inciting real capitulation.

In addition to our coverage out just days ago  talking about how the subprime bubble has burst and, since then since has been crunched even further, additional reports today are showing that smaller subprime lenders are starting to simply implode after being faced with losses and defaults. In addition to losses and defaults, Bloomberg reported this morning that there have been allegations of fraud and under reporting losses, tactics that are clearly reminiscent of

:

Growing numbers of small subprime auto lenders are closing or shutting down after loan losses and slim margins spur banks and private equity owners to cut off funding.

Summit Financial Corp., a Plantation, Florida-based subprime car finance company, filed for bankruptcy late last month after lenders including Bank of America Corp. said it had misreported losses from soured loans. And a creditor to Spring Tree Lending, an Atlanta-based subprime auto lender, filed to force the company into bankruptcy last week, after a separate group of investors accused the company of fraud. Private equity-backed Pelican Auto Finance, which specialized in “deep subprime” borrowers, finished winding down last month after seeing its profit margins shrink.

The article continues:

The pain among smaller lenders has parallels with the subprime mortgage crisis last decade, when the demise of finance companies like Ownit Mortgage and Sebring Capital Partners were a harbinger that bigger losses for the financial system were coming. In both cases, rising interest rates helped trigger more loan losses.

“There’s been a lot of generosity and not a lot of discretion on the part of lenders and investors,” said Chris Gillock, a banker at Colonnade Advisors, which advises companies on subprime auto investments. “There’s going to be more capitulation.”

Representatives for Spring Tree didn’t respond to requests for comment. A lawyer for Summit said “restructuring in a Chapter 11 bankruptcy proceeding is the best strategy to ensure its long term success” and the company is working with its vendors and lenders to meet its obligations.

Astonishingly and ridiculously, the article goes on to talk about this implosion as if it was expected to happen and as if it’s what would have happened during the normal course of business if ridiculous debt and engineered interest rates weren’t a mainstay of current economic policy:

This time around, the financial system’s losses are expected to be much more manageable, because auto lending is a smaller business relative to mortgages, and Wall Street hasn’t packaged as many of the loans into complicated securities and derivatives. As of the end of September, there were about $280 billion of subprime auto loans outstanding, according to the Federal Reserve Bank of New York, compared with around $1.3 trillion in subprime mortgage debt at the start of 2007. There isn’t a standardized definition of subprime borrowers, though it generally encompasses borrowers with FICO credit scores below 600 to 640 on an 850 point scale.

Take, for example, this gem of cognitive dissonance:

“When you think about the effects of housing versus autos, they’re a lot different,” said Kevin Barker, a stock analyst covering specialty finance companies at Piper Jaffray & Co. Losses tend to be less severe for car loans because they are smaller than mortgages and borrowers pay them down faster, he said, and the collateral is easier to repossess. With home loans, in many states foreclosures require a lengthy court process.

As we all saw from the housing crisis, the smaller shops are usually the first ones to go. The law of large numbers plays to the advantage of bigger corporations and usually buys them more time. The bigger the company, the more the government and institutions care if it goes bust. Smaller companies come and go like it’s nothing, because they have no tangible effect on major financial institutions or the US economy. However, this generally only exacerbates the size of the ticking time bomb to come.

In early March of this year, we posted our “Signs of the Peak: 10 Charts Reveal an Auto Bubble on the Brink“. Our timing couldn’t have been better. In that article we pointed out that the key data which seems to suggest that the auto bubble may have run its course comes from the following charts which reveal that traditional banks and finance companies are starting to aggressively slash their share of new auto originations while OEM captives are being forced to pick up the slack in an effort to keep their ponzi schemes going just a little longer.

And while some can claim that this is just a natural result of healthy competition between lenders, what is likely causing sleepless nights at banks who have tens of billions in outstanding loans, is the coming tsunami of lease returns which will lead to a shock repricing for both car prices and existing LTVs once the millions in new cars come back to dealer lots…

We have seen this bubble coming from a mile away. 

Also, just as we expected, between record prices (courtesy of what until recently was easy, cheap debt), record loan terms, and rising rates, shoppers with shaky credit and tight budgets have suddenly been squeezed out of the market. In fact in the first two months of this year, sales were flat among the highest-rated borrowers, while deliveries to those with subprime scores slumped 9 percent, according to J.D. Power.

Confirming our observations, Bloomberg notes that while lenders took chances on consumers with lower FICO scores after the recession, partially on the notion that borrowers prioritize car payments ahead of other expenses, several financial companies started to tighten their standards more than a year ago. The result is a surge in the amount of captive financing shown in the chart above, which as we warned is the clearest indication yet of the popping car bubble.

We also predicted back in December of last year that certain PE firms would start to feel the pain of their subprime auto bets.

However, no one wants to make the point that subprime auto also followed in the footsteps of the financial crisis because it was a bubble that was engineered due to the Fed making it easy to take on cheap debt in order to fuel our nonsense “recovery”.

The continued focus on borrowing and spending, instead of saving and underconsumption, will ensure not only that these bubbles continue to happen going forward, but they will get larger in size as time progresses.

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 Wolf Richter comments that the unwind is proceeding exactly as planned and despite stock market sell offs
(courtesy Wolf Richter/WolfStreet)

Fed’s QE-Unwind Proceeds Despite Stock Market Sell-Offs

Authored by Wolf Richter via WolfStreet.com,

Didn’t miss a beat.

The sixth month of the QE-Unwind ended on March 31, which is reflected in the Fed’s balance sheet, released this week, for the week ending April 4. The QE-Unwind appears to be on automatic pilot, clicking along at the pace that accelerated in January, despite the sporadic stock market sell-offs since early February.

During the years of QE, the Fed acquired a total of $3.4 trillion in Treasury securities and mortgage-backed securities. The MBS are backed by mortgages that are guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Now the Fed is shedding those securities at a rate that accelerates every quarter until it reaches its maximum pace of up to $50 billion a month in Q4 2018.

By the end of the year, this plan would shrink the balances of Treasuries and MBS by up to $420 billion. In 2019, and going forward, up to $600 billion would come off the balance sheet per year, until the Fed deems the balance sheet to be sufficiently “normalized” — or until something big falls apart, whichever comes first.

For Q1, the scheduled pace was up to $20 billion a month. So for March, we’re looking for a reduction of $12 billion in Treasuries and $8 billion in MBS.

“Rolling off” Treasury securities

On today’s balance sheet, there are $2,413 billion in Treasuries, down $11 billion from February 28 ($2,424 billion). In total, since the beginning of the QE-Unwind, the balance of Treasuries has dropped by $53 billion, to hit the lowest level since July 16, 2014:

The stair-step movement in the chart above is a result of how the Fed sheds securities. It does not sell them but allows them to “roll off” when they mature, which is mid-month and at the end of the month. In March, no Treasuries on the Fed’s balance sheet matured mid-month. But at the end of March, $31 billion matured.

So the Fed replaced $19 billion of the maturing Treasuries with new ones directly via its special arrangement with the Treasury Department that cuts out Wall Street. Those $19 billion were “rolled over.” But it did not replace $11 billion of maturing Treasuries. Hence, they “rolled off.” The blue arrow in the chart above shows the March 31 roll-off.

Allowing MBS to “roll off”

For March, the plan calls for $8 billion in MBS to roll off.

But residential MBS are different. Holders receive principal payments continuously as the underlying mortgages are paid down or are paid off. Thus, the principal shrinks. At maturity, what’s left over is paid off. To keep the MBS balance steady, the New York Fed’s Open Market Operations (OMO) continually buys MBS.

Settlement of those trades occurs two to three months later, which is when the Fed books the trades. This time lag causes weekly fluctuations on the Fed’s balance sheet in the range of $10 billion to $20 billion. It also delays when MBS that have been allowed to “roll off” disappear from the balance sheet [my detailed explanation is here].

Given the jagged line on the chart, we’re looking for lower highs and lower lows. Today’s balance sheet reflects MBS that matured somewhere around December and January. In December, $4 billion in MBS were supposed to roll off per month; in January, the rate was scheduled to accelerate to $8 billion.

The chart below shows the lower highs and lower lows over the past few months. At the low in late October and early November, the Fed held $1,770.5 billion in MBS. This marked the starting point. The low in early March was $1,760. Today’s balance sheet shows $1,754.4 billion. From low to low over the past month, the balance dropped by $5.6 billion, reflecting trades somewhere around December and January. In total, the balance of MBS shrank by about $16 billion:

The overall balance sheet too

The QE-Unwind only relates to Treasuries and MBS, which dropped $53 billion and $16 billion respectively since the beginning of the QE-Unwind, for a combined decline of $69 billion.

Total assets on the Fed’s balance sheet dropped by $74 billion from $4,460 billion at the outset of the QE-Unwind to $4,386 billion on today’s balance sheet. This is the lowest since July 9, 2014:

The balance sheet also reflects the Fed’s other roles that may impact its assets and liabilities. It acts as the bank of the US government, and the Treasury Department keeps its cash balances on deposit at the Fed. It also holds “Foreign Official Deposits” by other central banks and government entities. But these and other activities have nothing to do with QE or the QE-Unwind.

It will let them rip.

Despite the sporadic sell-offs in the stock market, the QE-Unwind proceeded on plan, and I expect this to continue. It looks very unlikely that the Fed will try to stop a sell-off by altering its QE-Unwind routine. The Fed is targeting “elevated” asset prices. Sell-offs are part of the process, and the Fed will let them rip.

However, if credit freezes up as it did during the Financial Crisis – when fears arose that even big companies might have a hard time making payroll – all bets will be off, and the Fed will step in as lender of last resort. But that scenario is not yet on the horizon. So the QE-Unwind will be allowed to do its magic, which is to undo part of what years of QE have wrought.

Interest rates “may go higher and faster than people expect,” explained Jamie Dimon. The Fed may have to “sell more securities,” and “as all asset prices adjust to a new and maybe not-so-positive environment,” there’s “a risk that volatile and declining markets can lead to market panic.”Read…  “When the Next Crisis Begins…” JPMorgan CEO Jamie Dimon

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David Stockman gives us a thorough analysis of China and how their huge number of bad money projects will eventually cause their destruction

(courtesy David Stockman/ContraCornner)

Not Your Grandfather’s Trade War: The Revenge Of Bad Money, Part 1

Authored by David Stockman via Contra Corner blog,

With his China Trade Wars tweet yesterday, the Donald has proved once again that he has an uncanny ability to get to the heart of matters….even if by sheer accident!

Yet he’s right. The trade war was “lost many years ago” and it’s the reason Flyover America has rallied to his bluster and bombast on imports and the nefarious practices of furin guberments:

We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!

But, alas, the “foolish or incompetent people” skewered in the Donald’s 7:22 AM tweet are not some defunct Commerce Department or USTR officials from bygone times.

Nope, it’s not pointy-head trade bureaucrats at all. The actual culprits are the “low interest” men and women resident in the Eccles Building, who over the past three decades have transformed the Fed into a Bubble Finance machine and the main street economy into a hollowed out tower of debt.

In a manner of speaking, free money has trumped free trade. And that means what is aborning is not your grandfather’s garden variety trade war; it’s the abiding revenge of bad money – a debilitating affliction that cannot be bargained away by cooler heads among professional trade negotiators as the dip buyers are so foolishly betting again today.

The truth is, the Red Ponzi is an absolute freak of economic nature that has laid waste to much of the US industrial economy. But the dark secret unbeknownst to the Donald, and the Wall Street/Washington establishment alike, is that the China monster was enabled, fostered and feed by the US central bank’s pursuit of an upside-down monetary policy after 1987.

The turning point came when Mr. Deng concluded that Mao had been wrong about the source of state power: Rather than emanating from the barrel of a gun, as the Great Helmsman had insisted, Deng Xiaoping ordered a 60% depreciation of the yuan, thereby recognizing the far greater efficacy of the credit power that issued from the end of the central bank’s printing press.

Then and there the die was cast. Faced with world history’s greatest mercantilist export campaign and the draining of China’s vast rice paddies of tens of millions of cheap workers to fill Mr. Deng shiny new export factories, the US economy required one thing above all: Namely, a systematic deflation of its bloated price, wage and cost structure; high interest rates to dampen consumption and encourage savings; and sustained supra-historical levels of investment in plant, equipment and technology to equip American workers with an insuperable edge in tools and labor productivity.

Needless to say, Greenspanian money-pumping, soaring debt and wealth effects driven financialization were not merely the opposite of what a regime of sound money would have generated; they were the kiss of death for jobs, prosperity and hope in Flyover America, as the chart below so dramatically illustrates.

Folks, this chart is not the fruit of Adam Smith’s unseen hand of free trade going about the work of the economic gods. China’s monthly exports to the US of just $490 million in November 1987 did not explode by98X over the next 30 years to $48.2 billion in November 2017 owing to comparative advantage!

Indeed, the chart below would not have happened in 10,000 years under a regime of sound money and honest price discovery in the capital markets. To the contrary, China’s initial advantage in cheap labor would have led to a large inflow of reserve assets (e.g. gold) to China and a large outflow from the US, causing wage and cost inflation in China and deflation in the US.

Stated differently, when coupled with sound money, the free market is not suicidal. Instead, current account imbalances get settled via the movement of true reserve assets. That settlement process, in turn, causes domestic interest rates to fall and credit to expand in the case of  inflows, and the opposite to occur in the case of persistent trade deficits and reserve asset outflows.

At length, domestic prices, costs and wages clear at sustainable levels and current accounts remain in reasonable equilibrium among trading partners over the longer run. By contrast, the purple peak in the upper right hand of the chart below represents a 17% compound annual rate of growth for thirty years running; it’s the work of free money, not the free market.

Nevertheless, the so-called “free traders” of the mainstream media are out in force today lamenting the Donald’s purported economic ignorance. When it comes to cardinal intellectual error, however, we are not sure which is worse as between the Donald’s 17th century mercantilism or a bit of undiluted tommyrot we heard this morning from CNBC’s in-house Wall Street shill, Steve Liesman.

Not to worry about giant trade deficits or a 98X growth in imports from China, he opined, because it’s actually a sign of success.

“When we get wealthier we buy everything made here and then add some more from abroad”.

Not so fast, we’d say. Liesman was talking about the kind of transient paper wealth that is measured by multiplying billions of equity shares by their fantastically inflated prices. As we have learned twice already this century, however, that kind of wealth can plunge by 50% or more in a relative heartbeat when the Fed’s serial financial bubbles finally collapse under their own weight.

The truth of the matter, of course, is that the above chart for China is not an aberration; it’s only the poster child for the underlying economic rot that has been induced by bad money. As we will demonstrate in the balance of this series, the chart below for total US trade (including both goods and services) has been enabled by a central bank driven monetary inflation that has nothing to do with sustainable wealth at all.

In a word, the Fed printed—so they printed. We are referring to virtually every other major central bank in the world, and the mercantilist disease that has spread to all four corners of the planet.

Under this baleful regime, statist rulers and politicians everywhere have empowered their central banks to swap the resources of their lands (the petro-states and resource countries) and the sweat of their workers brows (China, India and like EMs) for US dollar liabilities (US treasury debt and GSEs) in a misguided and futile effort to protect their export based prosperity.

In the middle term, of course, this enabled the US to pull off one of the greatest heists in economic history. We issued debt in fantastic abundance and traded it for their goods and services. Since 1980 this heist has accumulated to $12.5 trillion of consecutive current account deficits; and when you inflate those historic dollars to present purchasing power, the total is more like $19 trillion.

That’s right. The US has essentially borrowed the entirety of its current GDP from the rest of the world in order to temporarily live high on the hog.

Needless to say, this doesn’t bother the Liesman’s of the world one bit because today’s Wall Street casino is basically ahistoric and agnostic when it comes to the fundamentals of sound money and finance. In their benighted Keynesian framework, the central bank is always making the future better and stock prices are therefore always going higher—and that’s all that matters. Period.

So, apparently, even 30 years of going to hell in a hand-basket on the current account is of small moment, and if noted at all, it gives rise to entirely asinine rationalizations like the Liesman gem quoted above.

Of course, the latter belongs to the same category of pettifoggery as they perennial sell-side claim that any sharp drop in the stock market is a welcome purge of weak hands; or the astounding statement today by St. Louis Fed president, James Bullard , that no more interest hikes are needed because the Fed is already at the “neutral rate”.

That’s right. At today’s 1.62%, the Fed funds rate is negative after LTM inflation of 2.2%. Then again, if we can have giant, consecutive current account deficits forever, why not negative real interest rates in perpetuity, too?

The point, however, goes far beyond the truth of Herb Stein’s famous observation that unsustainable trends tend to stop. In this case, in fact, it appears that the economics of stopping unsustainable trade deficits are getting some help from America’s most unlikely politician, who saw the resulting hurt in Rust Belt America and proceeded to rub it raw via endless recitation of his long-standing “bad trade deals” trope.

Now that the Donald is attempting to dose the patient with his protectionist patent medicine, however, something more than the unsustainability of $19 trillion in current account deficits is coming to the fore. Namely, the futility of tit-for-tat tariffs in a global context where the underlying economic foundation has been everywhere deformed.

That deformation is obvious enough on the US side of the equation. Real median household income has not increased by one dime since 1999, and at barely 0.25% per year since 1989 shortly after the Greenspan era of Bubble Finance incepted.

In part 2, we will address how the Fed’s destructive pursuit of 2.00% inflation has fostered this lamentable outcome, and how its transformation of the equity and other capital markets into gambling arenas has generated rampant financial engineering in the C-suites of corporate America and the effective de-capitalization of main street.

But the ultimate deformation lies in the Red Ponzi, which is inherently an economic powder keg looking for a match.

In fact, as a freakish product of 30 years of bad money it is the very opposite of the preposterous Wall Street/Washington presumption that it’s just another really big economy that overdid the “growth” thing; and which is now looking to Beijing’s firm hand to effect a smooth transition. That is, an orderly migration from a manufacturing, export and fixed investment boom-land to a pleasant new regime of shopping, motoring, and mass consumption.

Would that it could. But China is not a $12 trillion growth miracle with transition challenges; it is a quasi-totalitarian nation gone mad digging, building, borrowing, spending and speculating in a magnitude that has no historical parallel.

So doing, it has fashioned itself into an incendiary volcano of unpayable debt and wasteful, crazy-ass overinvestment in everything. It cannot be slowed, stabilized or transitioned by edicts and new plans from the comrades in Beijing. It is the greatest economic trainwreck in human history barreling toward a bridgeless chasm.

And that’s what makes Wall Street’s current assumption that the Donald’s trade war is nothing to sweat about so stunningly insensible.

Indeed, the notion that today’s dueling tariffs will be compromised out in some grand global crony capitalist style settlement is not only dead wrong; it’s completely oblivious to the rotting economic foundations that got us here.

Stated differently, the burned out industrial precincts of Pennsylvania, Ohio, Michigan, Wisconsin and Iowa may well have chosen the Donald to huff and puff about trade deficits, but in so doing they have also brought into the line of fire the entire bad money regime that underlies the unsustainable globalist order.

If China goes down hard the global economy cannot avoid a thundering financial and macroeconomic dislocation. And not just because China accounts for 17% of the world’s $80 trillion of GDP or that it has been the planet’s growth engine most of this century.

As we have indicated, China is the rotten epicenter of the world’s three decade long plunge into an immense central bank fostered monetary fraud and credit explosion that has deformed and destabilized the very warp and woof of the global economy.

As further indicated above, China’s financial madness has gone to an unfathomable extreme because in the early 1990s a desperate oligarchy of despots who ruled with machine guns discovered a better means to stay in power. That is, the printing press in the basement of the PBOC—-and just in the nick of time (for them).

Print they did. Buying in dollars, euros and other currencies hand-over-fist in order to peg their own money and lubricate Mr. Deng’s export factories, the PBOC expanded its balance sheet from $40 billion to $4 trillionduring the course of a mere two decades.

That’s 100X and there is nothing like that in the history of central banking—–nor even in economists’ most febrile imagings about its possibilities.

The PBOC’s red hot printing press, in turn, emitted high-powered credit fuel. In the mid-1990s China had about $500 billion of public and private credit outstanding—hardly 1.0X its rickety GDP. Today that number is $40 trillion or even more.

Yet nothing in this economic world (or the next) can grow at 80X in only 20 years and live to tell about it. Most especially, not in a system built on a tissue of top-down edicts, illusions, lies and impossibilities, and which sports not even a semblance of financial discipline, political accountability or free public speech.

To wit, China is a witches brew of Keynes and Lenin. It’s the financial tempest which will slam the world’s great bloated edifice of central bank fostered faux prosperity.

So the right approach to the horrible danger now at hand is not to dissect the dueling tariff lists to guess which tit will be traded for what tat.

Instead, it is time to recognize that the Red Suzerains of Beijing have built a Potemkin Village. But since they actually believe it’s real, they do not have even a passing acquaintanceship with the requisites and routines of a real capitalist economy.

Ever since the aging oligarch(s) who run China were delivered from Mao’s hideous dystopia by Mr. Deng’s chance discovery of printing press prosperity, they have lived in an ever expanding bubble that is so economically unreal that it would make the Truman Show envious. Any rulers with even a modicum of economic literacy would have recognized long ago that the Chinese economy is booby-trapped everywhere with waste, excess and unsustainability.

Here is but one example. Somewhere near Shanghai some credit-crazed developers built a replica of the Pentagon on 100 acres of land. This was not intended as a build-to-lease deal with the  PLA (People’s Liberation Army); its a shopping mall that apparently has no tenants and no customers!

Projects like the above—–and China is crawling with them—–are a screaming marker of an economic doomsday machine. They bespoke an inherently unsustainable and unstable simulacrum of capitalism where the purpose of credit is to fund state mandated GDP quota’s, not finance efficient investments with calculable risks and returns.

Accordingly, the outward forms of capitalism are belied by the substance of statist control and central planning. For example, there is no legitimate banking system in China—just giant state bureaus which are effectively run by party operatives.

Their modus operandi amounts to parceling out quotas for national GDP and credit growth from the top, and then water-falling them down a vast chain of command to the counties, townships and villages below. There have never been any legitimate financial prices in China—all interest rates and FX rates have been pegged and regulated to the decimal point; nor has there ever been any honest financial accounting either—-loans have been perpetual options to extend and pretend.

And, needless to say, there is no system of financial discipline based on contract law. China’s GDP has grown by $11 trillion dollars during this century alone——-that is, there has been a boom across the land that makes the California gold rush appear pastoral by comparison.

Yet in all that frenzied prospecting there have been almost no mistakes, busted camps, empty pans or even personal bankruptcies.  When something has occasionally gone wrong with an “investment” the prospectors have gathered in noisy crowds on the streets and pounded their pans for relief—-a courtesy that the regime has invariably granted.

Indeed, the Red Ponzi makes Wall Street look like an ethical improvement society. Developers there built an entire $50 billion replica of Manhattan Island near the port city of Tianjin—– complete with its own Rockefeller Center and Twin Towers—– but have neglected to tell investors that no one lives there. Not even bankers!

Stated differently, even at the peak of recent financial bubbles in London, NYC, Miami or Houston  they did not build such monuments to sheer economic waste and capital destruction. But just consider the case of China’s mammoth steel industry.

It grew from about 70 million tons of production in the early 1990s to 832 million tons in 2017. Beyond that, the capacity build-out behind the chart below tells the full story.

To wit, Beijing’s tsunami of cheap credit enabled China’s state-owned steel companies to build new capacity at an even more fevered pace than the breakneck growth of annual production. Consequently, annual crude steel capacity now stands at nearly 1.3 billion tons, and nearly all of that capacity—-about 65% of the world total—— was built in the last ten years.

Needless to say, it’s a sheer impossibility to expand efficiently the heaviest of heavy industries by 17X in a quarter century.

This means that China’s aberrationally massive steel industry expansion created a significant increment of demand for its own products.

That is, demand for plate, structural and other steel shapes that go into blast furnaces, BOF works, rolling mills, fabrication plants, iron ore loading and storage facilities, as well as into plate and other steel products for shipyards where new bulk carriers were built and into the massive equipment and infrastructure used at the iron ore mines and ports.

That is to say, the Chinese steel industry has been chasing its own tail, but the merry-go-round has now stopped, and with the completion of the Mr. Xi’s coronation last fall the last burst of Potemkin construction is being ground to a halt. 

The fact is, China will be lucky to have 500 million tons of true sell-through demand—-that is, on-going domestic demand for sheet steel to go into cars and appliances and for rebar and structural steel to be used in replacement construction once the current one-time building binge finally expires. That’s just 40% of its massive capacity investment.

And it is also evident that it will not be in a position to dump its massive surplus on the rest of the world. Indeed, that threat is at the very heart of the Donald’s incipient trade war, which started with the 25% steel tariffs a few weeks ago.

What the trade war really means is that China has upwards of a half-billion tons of excess capacity that will crush prices and profits, but, more importantly, that the one-time steel demand for steel industry CapEx is over and done. And that means shipyards and mining equipment, too.

These are not simply gee whiz comparisons. It took the fastidious Japanese nearly five decades to erect the world’s leading 120 million ton steel industry on the back of tens of thousands of step-by-step engineering and operational improvements. China created the same tonnage each and every year after the financial crisis, but it was all based just on a great field of dreams exercise in pell mell expansion. Efficiency, longevity and steel-making technique were hardly an afterthought.

Nor is its own tail the only loss of market demand. Even more  fantastic than steel has been the growth of China’s auto production capacity. In 1994, China produced about 1.4 million units of what were bare bones communist era cars and trucks. Last year it produced more than 29 million mostly western style vehicles or 21X more.

And, yes, that wasn’t the half of it. China has gone nuts building auto plants and distribution infrastructure. It is currently estimated to have upwards of 35 million units of vehicle production capacity. But  demand has actually rolled over this year and will continue heading lower after temporary government tax gimmicks—– that are simply pulling forward future sales—–expire.

The more important point, however, is that as the China credit Ponzi grinds to a halt, it will not be building new auto capacity for years to come. It is now drowning in excess capacity, and as prices and profits plunge in the years ahead the auto industry CapEx spigot will be slammed shut, too.

Needless to say, this not only means that consumption of structural steel and rebar for new auto plants will plunge. It also will result in a drastic reduction in demand for the sophisticated German machine tools and automation equipment needed to actually build cars.

Stated differently, the CapEx depression which has been underway for several years in China, Australia, Brazil and much of the EM will ricochet across the global economy. Cheap credit and mispriced capital are truly the father of a thousand economic sins.

China’s construction infrastructure, for example, is grotesquely overbuilt—— from cement kilns, to construction equipment manufacturers and distributors, to sand and gravel movers, to construction site vendors of every stripe.

For crying out loud, in three recent years China used more cement than did the United States during the entire 20th century!

That is not indicative of a just a giddy boom; its evidence of a system that has gone mad digging, hauling, staging and constructing because there was unlimited credit available to finance the outpouring of China’s runaway construction machine.

The same is true for its machinery, solar and aluminum industries—to say nothing of 70 million empty luxury apartments and vast stretches of over-built highways, fast rail, airports, shopping mails and new cities.

In short, the flip-side of the China’s giant credit bubble is the most massive malinvesment of real economic resources—-labor, raw materials and capital goods—ever known.

In effect, the country-side pig sties have been piled high with copper inventories and the urban neighborhoods have been covered with glass, cement and rebar erections that can’t possibly earn an economic return. Yet all of these assets have become “collateral” for even more “loans” under the Chinese Ponzi.

China has been on a wild tear heading straight for the economic edge of the planet—-that is, monetary Terra Incognito—based on the circular principle of borrowing, building and borrowing. In essence, it is a giant re-hypothecation scheme where every man’s “debt” become the next man’s “asset”.

Thus, local government’s have meager incomes, but vastly bloated debts based on the collateral of stupendously over-valued inventories of land—-valuations which were established by earlier debt financed sales to developers.

Likewise, coal mine entrepreneurs face not only collapsing prices and revenues, but also soaring double digit interest rates on shadow banking loans collateralized by over-valued coal reserves. Shipyards have empty order books, but vast debts collateralized by soon to be idle construction bays. Speculators have collateralized massive stock piles of copper and iron ore at prices that are on the way to becoming ancient history.

So China is indeed the greatest Ponzi scheme in recorded history. And it is that house of cards that the Donald has now frontally attacked.

More hideous still, it is that house of cards that the robo-machines brought with malice aforethought this afternoon, reversing the Dow’s overnight drop by nearly 750 points.

Bad money has rarely been so insouciant; the revenge never so certain.

end

SWAMP STORIES

Friday night:

Kelly goes nuclear and threatens to quit

(courtesy zerohedge)

Kelly Goes Nuclear In Oval Office, Threatens To Quit: Report

White House Chief of Staff John Kelly threatened to quit in late March after a blow up with Trump in a meeting in the Oval Office, reports Axios.

Kelly was reportedly heard muttering about quitting as he stormed back to his office after the March 28 argument – however sources say it wasn’t related to the firing of former Secretary of Veterans Affairs David Shulkin which happened the same day.

A senior administration official said that calling it a threat was “probably too strong, it was more venting frustration.” Kelly often says he doesn’t have to be there and didn’t seek the job originally. –Axios

Details (via Axios):

  • Kelly packed up some personal belongings, though I’m told that wasn’t necessarily because he was walking out.
  • He was fired up enough that colleagues got allies to call in to calm him down.
  • At one point DHS Secretary Kirstjen Nielsen — perhaps the person in the administration he trusts most — came over to talk him off the ledge.

Meanwhile, President Trump has reportedly been sidestepping Kelly of late – telling one confidant that he’s “tired of being told no” by Kelly, and has instead opted to simply not include his Chief of Staff in various matters, according to CBS News, citing a person who was not authorized to publicly discuss private conversations and spoke on condition of anonymity.

When President Donald Trump made a congratulatory phone call to Russian leader Vladimir Putin, White House chief of staff John Kelly wasn’t on the line. When Mr. Trump tapped John Bolton to be his next national security adviser, Kelly wasn’t in the room.

And when Mr. Trump spent a Mar-a-Lago weekend stewing over immigration and trade, Kelly wasn’t in sight.

Kelly, once empowered to bring order to a turbulent West Wing, has receded from view, his clout diminished, his word less trusted by staff and his guidance less tolerated by an increasingly go-it-alone president. –CBS News

Kelly had made it a practice for months to listen in on many of the president’s calls – particularly with world leaders. He also reportedly advocated against the hiring of John Bolton.

“It’s not tenable for Kelly to remain in this position so weakened,” said Chris Whipple, author of “Gatekeepers,” a history of modern White House chiefs of staff. “More than any of his predecessors, Donald Trump needs an empowered chief of staff to tell him what he does not want to hear. Trump wants to run the White House like the 26th floor of Trump Tower, and it’s simply not going to work.”

In December we reported that President Trump had been calling White House aides to his private residence in the evening where he would give them new assignments – asking them not to tell Kelly.

John has been successful at putting in place a stronger chain of command in the White House, requiring people to go through him to get to the Oval Office,” said Leon Panetta, a White House chief of staff under President Bill Clinton who worked with Mr. Kelly, a four-star Marine general, in the Department of Defense. “The problem has always been whether or not the president is going to accept better discipline in the way he operates. He’s been less successful at that.” –WSJ

This is all just inevitable,” said one person close to Mr. Trump. “It’s not that Mr. Kelly is wrong—we all know he’s terribly competent.

Meanwhile, frustrated friends of the President have also reportedly gotten around Kelly’s “do not call” list by calling Melania Trump in order to pass messages to her husband, according to two people familiar with the matter.

“[S]ince she arrived in the White House from New York in the summer, the first lady has taken on a more central role as a political adviser to the president.”

If I don’t want to wait 24 hours for a call from the president, getting to Melania is much easier,” one person said. –WSJ

Melania Trump’s office issued a harsh rebuke to the Wall St. Journal, stating This is more fake news and these are more anonymous sources peddling things that just aren’t true. The First Lady is focused on her own work in the East Wing.” 

Trump’s Twitter feed is still off limits to Kelly, who’s been rolling his eyes at questions over potential diplomatic quagmires such as the time he called North Korean leader Kim Jong Un “short and fat.” Asked about the incident, Kelly shrugged it off – saying “Believe it or not – I don’t follow the tweets,” adding that he has advised White House staff to do the same. “We develop policy in the normal traditional staff way.”

As one White House official told the WSJ, despite what appears to be an equilibrium between Kelly and Trump, they may never see eye to eye. “Kelly is too much of a general, and Trump is too much Trump,” adding that Trump continues to hold Mr. Kelly in high regard – often praising him during public appearances.

Meanwhile in March, Kelly  was reportedly so furious over the way the press was covering Secretary of State Rex Tillerson’s Tuesday firing that he shouted at the television on Air Force One as the President and his staff took off for California, according to Politico.

Accounts of Kelly’s involvement in Tillerson’s ouster have varied. While some reports describe Kelly only telling Tillerson to watch Trump’s twitter account “over the next few days,” others have said it was a much more direct conversation in which the Secretary of State was given a heads up. In that version, Tillerson implored Kelly to hold off on any decisions until he returned to the U.S. on Monday.

Tillerson, meanwhile, would only say that he received a “lunchtime call” from Trump during the President’s flight to California, and a separate call from Kelly – both after Trump’s tweet.

Kelly’s consternation over the press coverage came on the heels of former Trump staff secretary Rob Porter’s ouster in February after the Daily Mail published accounts from his two ex-wives accusing him of domestic abuse. Kelly took fire for not getting rid of Porter earler, after it emerged that the FBI had alerted the White House several times in 2017 that the allegations were holding up Porter’s security clearance.  When the allegations against Porter began to fly, Kelly put out a statement calling Porter a “man of true integrity and honor,” and “a trusted professional.”

With Trump playing musical chairs in the West Wing seemingly every other week, one has to wonder exactly how much longer Kelly will last.

end

The “Stormy Daniels” case against Trump just received a gale force head wind:  The FBI just raided the office of Trump lawyer Michael Cohen

(courtesy zerohedge)

FBI Raids Office Of Trump Lawyer Michael Cohen

With stocks pulling off yet another stunning intraday reversal as trade tensions and an ominous OMB report sapped investors of what little confidence they gained over the weekend, the New York Times dropped a bombshell that helped drive them to their session lows when it reported that the FBI has raided the offices of Trump lawyer Michael Cohen.

Federal prosecutors in Manhattan obtained a search warrant following a referral from Special Counsel Robert Mueller, Cohen’s lawyer told the times. He also called the search “completely inappropriate and unnecessary.” The search doesn’t appear to be related to the Mueller probe – but rather separate charges being explored by prosecutors in New York.

“Today the U.S. Attorney’s Office for the Southern District of New York executed a series of search warrants and seized the privileged communications between my client, Michael Cohen, and his clients,” said Stephen Ryan, his lawyer. “I have been advised by federal prosecutors that the New York action is, in part, a referral by the Office of Special Counsel, Robert Mueller.”

A person who had reportedly been briefed by the FBI on the matter said questions about Michael Cohen’s $130,000 payment to former adult film actress Stephanie Clifford – better known as Stormy Daniels – were one of several topics being explored by investigators.

end

I will  see you  TUESDAY night

HARVEY

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