JAN 7/PLUNGE PROTECTION TEAM OUT IN FULL FORCE TODAY: DOW UP ONLY 98 POINTS WITH NASDAQ UP 84 POINTS.//GOLD UP $4.35 TO $1288.70/SILVER IS DOWN ONE CENT TO $15.70//HUGE AMOUNT OF SILVER (5.02 MILLION OZ STANDING AT THE COMEX/MAINLAND CHINA DEMANDS THE PEACEFUL REUNIFICATION WITH TAIWAN/FRANCE ON FIRE OVER THE WEEKEND WITH HUGE PROTESTS/CHINA ADDS ALMOST 10 TONNES TO ITS OFFICIAL TOTALS TODAY/TWO REPORTS SHOWING THE USA ECONOMY FALTERING: 1/ POOR HEAVY DUTY TRUCK SALES AND 2. POOR USA SERVICE ISM DATA//SEARS IN LIQUIDATION/ P.G AND E MAY SEEK BANKRUPTCY PROTECTION BECAUSE OF THE THEIR LIABILITY TO THE FIRES THEY HELPED TO CREATE/

 

 

 

GOLD: $1288.70 UP $4.35 (COMEX TO COMEX CLOSINGS)

Silver:   $15.70 DOWN 1 CENTS (COMEX TO COMEX CLOSING)

Closing access prices:

Gold :  1289.20

 

silver: $15.66

 

 

 

 

 

 

 

 

For comex gold and silver:

JANUARY

 

 

 

NUMBER OF NOTICES FILED TODAY FOR  JAN CONTRACT: 4 NOTICE(S) FOR 400 OZ (0.0124 tonnes)

TOTAL NUMBER OF NOTICES FILED SO FAR:  98 NOTICES FOR 9800 OZ  (.3048 TONNES)

 

 

SILVER

 

FOR JANUARY

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

 

106 NOTICE(S) FILED TODAY FOR  530,000  OZ/

 

total number of notices filed so far this month: 286 for 1,430,000

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Bitcoin: OPENING MORNING TRADE  $3972:  DOWN 14

 

Bitcoin: FINAL EVENING TRADE: $3767  down 19 

 

end

 

XXXX

JPMorgan or Goldman Sachs are taking a huge issuance (stopping) of gold at the comex.

today 2/98

EXCHANGE: COMEX
CONTRACT: JANUARY 2019 COMEX 100 GOLD FUTURES
SETTLEMENT: 1,282.700000000 USD
INTENT DATE: 01/04/2019 DELIVERY DATE: 01/08/2019
FIRM ORG FIRM NAME ISSUED STOPPED
____________________________________________________________________________________________
624 C MERRILL 1
657 H MORGAN STANLEY 1
661 C JP MORGAN 2
737 C ADVANTAGE 3
800 C RCG 1
____________________________________________________________________________________________

TOTAL: 4 4
MONTH TO DATE: 98

 

Let us have a look at the data for today

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In silver, the total OPEN INTEREST ROSE BY AN CONSIDERABLE SIZED  1153 CONTRACTS FROM 178,003 UP TO 179,156 DESPITE FRIDAY’S SMALL 3 CENT LOSS IN SILVER PRICING AT THE COMEX. TODAY WE ARRIVED SLIGHTLY CLOSER TO  AUGUST’S  RECORD SETTING OPEN INTEREST OF 244,196 CONTRACTS.

WE HAVE ALSO WITNESSED A LARGE AMOUNT OF PHYSICAL METAL STAND FOR COMEX DELIVERY AS WE NOW HAVE JUST LESS THAN 22 MILLION OZ STANDING IN DECEMBER. AS WELL WE ARE WITNESSING CONSIDERABLE LONGS PACKING THEIR BAGS AND MIGRATING OVER TO LONDON IN GREATER NUMBERS IN THE FORM OF EFP’S.  WE WERE  NOTIFIED  THAT WE HAD A HUGELY STRONG SIZED NUMBER OF COMEX LONGS TRANSFERRING THEIR CONTRACTS TO LONDON THROUGH THE EFP:

5044 EFP’S FOR MARCH,  0 FOR APRIL AND ZERO FOR ALL  OTHER MONTHS  AND THEREFORE TOTAL ISSUANCE: OF 5044 CONTRACTS. WITH THE TRANSFER OF 5044 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 5044 EFP CONTRACTS TRANSLATES INTO 25.22 MILLION OZ  ACCOMPANYING:

1.THE 3 CENT LOSS IN SILVER PRICE AT THE COMEX AND

2. THE STRONG AMOUNT OF SILVER OUNCES WHICH STOOD FOR DELIVERY IN THE LAST SIX MONTHS:

JUNE/2018. (5.420 MILLION OZ);

FOR JULY: 30.370 MILLION OZ

FOR AUG., 6.065 MILLION OZ

FOR SEPT. 39.505 MILLION  OZ S

FOR OCT.2.525 MILLION OZ.

FOR NOV:  A HUGE 7.440 MILLION OZ STANDING FOR NOVEMBER AND

 21.925 MILLION OZ FINALLY STAND FOR DECEMBER.

AND NOW: INITIALLY 5.020 MILLION OZ STAND IN JANUARY.

 

 

ACCUMULATION FOR EFP’S/SILVER/J.P.MORGAN’S HOUSE OF BRIBES, / STARTING FROM FIRST DAY NOTICE/FOR MONTH OF JANUARY: 13,819 CONTRACTS (FOR 4 TRADING DAYS TOTAL 13,819 CONTRACTS) OR 69.095 MILLION OZ: (AVERAGE PER DAY: 3454 CONTRACTS OR 17.273 MILLION OZ/DAY)

TO GIVE YOU AN IDEA AS TO THE HUGE SUPPLY THIS MONTH IN SILVER:  SO FAR THIS MONTH OF JAN:  69.095 MILLION PAPER OZ HAVE MORPHED OVER TO LONDON. THIS REPRESENTS AROUND 9.85% OF ANNUAL GLOBAL PRODUCTION (EX CHINA EX RUSSIA)*  JUNE’S 345.43 MILLION OZ IS THE SECOND HIGHEST RECORDED ISSUANCE OF EFP’S AND IT FOLLOWED THE RECORD SET IN APRIL 2018 OF 385.75 MILLION OZ.

ACCUMULATION IN YEAR 2019 TO DATE SILVER EFP’S:           69.095    MILLION OZ.

 

 

 

RESULT: WE HAD A CONSIDERABLE SIZED INCREASE IN COMEX OI SILVER COMEX CONTRACTS OF 1153 DESPITE THE 3 CENT LOSS IN SILVER PRICING AT THE COMEX //FRIDAY..THE CME NOTIFIED US THAT WE HAD A HUGE SIZED EFP ISSUANCE OF 5044 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 (SEE COMEX DATA) .

TODAY WE GAINED A STRONG SIZED: 6197 TOTAL OI CONTRACTS ON THE TWO EXCHANGES:

i.e 5044 OPEN INTEREST CONTRACTS HEADED FOR LONDON  (EFP’s) TOGETHER WITH INCREASE OF 1153 OI COMEX CONTRACTS. AND ALL OF THIS  DEMAND HAPPENED WITH A 3 CENT LOSS IN PRICE OF SILVER  AND A CLOSING PRICE OF $15.71 WITH RESPECT TO YESTERDAY’S TRADING. YET WE HAD A GIGANTIC AMOUNT OF SILVER STANDING AT THE COMEX FOR DELIVERY 

 

 

In ounces AT THE COMEX, the OI is still represented by JUST UNDER 1 BILLION oz i.e. .896 BILLION OZ TO BE EXACT or 128% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT JANUARY MONTH/ THEY FILED AT THE COMEX: 106 NOTICE(S) FOR 530,000 OZ OF SILVER

IN SILVER,PRIOR TO TODAY, WE  SET THE NEW COMEX RECORD OF OPEN INTEREST AT 243,411 CONTRACTS ON APRIL 9.2018 AND AGAIN THIS HAS BEEN SET WITH A LOW PRICE OF $16.51.  

AND NOW WE RECORD FOR POSTERITY ANOTHER ALL TIME RECORD OPEN INTEREST AT THE COMEX OF 244,196 CONTRACTS ON AUGUST 22/2018 AND AGAIN WHEN THIS RECORD WAS SET, THE PRICE OF SILVER WAS $14.78 AND LOWER IN PRICE THAN PREVIOUS RECORDS.

ON THE DEMAND SIDE WE HAVE THE FOLLOWING:

  1. HUGE AMOUNTS OF SILVER STANDING FOR DELIVERY  (MARCH/2018: 27 MILLION OZ , APRIL/2018 : 2.485 MILLION OZ  MAY: 36.285 MILLION OZ ; JUNE/2018  (5.420 MILLION OZ) , JULY 2018 FINAL AMOUNT STANDING: 30.370 MILLION OZ   )  FOR AUGUST 6.065 MILLION OZ. , SEPT:  A HUGE 39.505 MILLION OZ./ OCTOBER: 2,520,000 oz  NOV AT 7.440 MILLION OZ./ DEC. AT 21.925 MILLION OZ  AND NOW JANUARY AT  5.020 MILLION OZ.
  2. HUGE RECORD OPEN INTEREST IN SILVER 243,411 CONTRACTS (OR 1.217 BILLION OZ/ SET APRIL 9/2018) AND NOW AUGUST 22/2018:  244,196 CONTRACTS,  WITH A SILVER PRICE OF $14.78.
  3. HUGE ANNUAL EFP’S ISSUANCE EQUAL TO 2.9 BILLION OZ OR 400% OF SILVER ANNUAL PRODUCTION/2017
  4. RECORD SETTING EFP ISSUANCE FOR ANY MONTH IN SILVER; APRIL/2018/ 385.75 MILLION OZ/  AND THE SECOND HIGHEST RECORDED EFP ISSUANCE JUNE 2018 345.43 MILLION OZ

AND YET, WITH THE EXTREMELY HIGH EFP ISSUANCE, WE HAVE A CONTINUAL LOW 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 FELL BY A SMALL 844 CONTRACTS DOWN TO 456,364 WITH THE LOSS IN THE COMEX GOLD PRICE/(A FALL IN PRICE OF $8.45//FRIDAY’S TRADING)

 

THE CME RELEASED THE DATA FOR EFP ISSUANCAND IT TOTALED A HUGE  SIZED 14,688 CONTRACTS:

 

FEBRUARY HAD AN ISSUANCE OF 14,688 CONTACTS  AND ALL OTHER MONTHS ZERO.  The NEW COMEX OI for the gold complex rests at 456,364. 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. . 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 AN HUGE SIZED GAIN IN TOTAL CONTRACTS ON THE TWO EXCHANGES OF 13,844 CONTRACTS: 844 OI CONTRACTS DECREASED AT THE COMEX AND 14,688 EFP OI CONTRACTS WHICH NAVIGATED OVER TO LONDON. THUS  TOTAL OI GAIN: 13,844 CONTRACTS OR 1,384,400 OZ = 43.06 TONNES. AND ALL OF THIS VERY HUGE DEMAND OCCURRED WITH A STRONG LOSS IN THE PRICE OF GOLD/ YESTERDAY TO THE TUNE OF  $8.45

 

 

 

 

YESTERDAY, WE HAD 12530 EFP’S ISSUED.

ACCUMULATION OF EFP’S GOLD AT J.P. MORGAN’S HOUSE OF BRIBES: (EXCHANGE FOR PHYSICAL) FOR THE MONTH OF JANUARY : 40,014 CONTRACTS OR 4,001,300 OZ  OR 124.46 TONNES (4 TRADING DAYS AND THUS AVERAGING: 10,004 EFP CONTRACTS PER TRADING DAY

TO GIVE YOU AN IDEA AS TO THE HUGE SIZE OF THESE EFP TRANSFERS :  THIS MONTH IN 4 TRADING DAYS IN  TONNES: 124.46 TONNES

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

THUS EFP TRANSFERS REPRESENTS 124.46/2550 x 100% TONNES = 3.09% OF GLOBAL ANNUAL PRODUCTION SO FAR IN DECEMBER ALONE.***

ACCUMULATION OF GOLD EFP’S YEAR 2019 TO DATE:     124.46  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 SMALL SIZED INCREASE IN OI AT THE COMEX OF 638 WITH THE LOSS IN PRICING ($8.45) THAT GOLD UNDERTOOK YESTERDAY) //.WE ALSO HAD A VERY HUGE SIZED NUMBER OF COMEX LONG TRANSFERRING TO LONDON THROUGH THE EFP ROUTE: 14,688 CONTRACTS AS THESE HAVE ALREADY BEEN NEGOTIATED AND CONFIRMED.   THERE OBVIOUSLY DOES NOT SEEM TO BE MUCH PHYSICAL GOLD AT THE COMEX.  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 14,688 EFP CONTRACTS ISSUED, WE HAD A HUMONGOUS GAIN OF 13,844 CONTRACTS IN TOTAL OPEN INTEREST  ON THE TWO EXCHANGES:

14,688 CONTRACTS MOVE TO LONDON AND 844 CONTRACTS DECREASED AT THE COMEX. (in tonnes, the GAIN in total oi equates to 43.06 TONNES). ..AND ALL OF THIS HUGE  DEMAND OCCURRED WITH THE LOSS OF $8.45 IN FRIDAY’S TRADING AT THE COMEX

 

 

we had: notice(s) filed upon for 400 oz of gold at the comex.

 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD...

 

WITH GOLD UP $4.35 TODAY 

 

A HUGE CHANGE IN GOLD INVENTORY AT THE GLD; ANOTHER DEPOSIT OF 2.94 TONNES

 

 

 

 

 

 

 

 

 

 

 

/GLD INVENTORY   798.25 TONNES

Inventory rests tonight: 798.25 tonnes.

TO ALL INVESTORS THINKING OF BUYING GOLD THROUGH THE GLD ROUTE: YOU ARE MAKING A TERRIBLE MISTAKE AS THE CROOKS ARE USING WHATEVER GOLD COMES IN TO ATTACK BY SELLING THAT GOLD.  IT SURE SEEMS TO ME THAT THE GOLD OBLIGATIONS AT THE GLD EXCEED THEIR INVENTORY

SLV/

WITH SILVER DOWN 1 CENT  TODAY:

 

 

ANOTHER HUGE CHANGE IN SILVER INVENTORY/

THIS TIME A MASSIVE WITHDRAWAL OF 2.347 MILLION OZ WITH SILVER TRADING BASICALLY AT PAR????

 

 

/INVENTORY RESTS AT 314.758 MILLION OZ.

 

 

end

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in SILVER ROSE BY A CONSIDERABLE SIZED 1153 CONTRACTS from 178,003 UP TO 179,156  AND MOVING CLOSER TO THE NEW COMEX RECORD SET LAST IN AUG.2018 AT 244,196 WITH A SILVER PRICE OF $14.78/(AUGUST 22/2018)..THE PREVIOUS RECORD WAS SET ON APRIL 9/2018 AT 243,411 OPEN INTEREST CONTRACTS WITH THE SILVER PRICE AT THAT DAY: $16.53). AND PREVIOUS TO THAT, THE RECORD  WAS ESTABLISHED AT: 234,787 CONTRACTS, SET ON APRIL 21.2017 OVER  1 1/3 YEARS AGO.  THE PRICE OF SILVER ON THAT DAY: $17.89.  AS YOU CAN SEE, WE HAVE RECORD HIGH OPEN INTERESTS IN SILVER  ACCOMPANIED BY A CONTINUAL LOWER PRICE WHEN THAT RECORD WAS SET…..

 

.

OUR CUSTOMARY MIGRATION OF COMEX LONGS CONTINUE TO MORPH INTO LONDON FORWARDS  AS OUR BANKERS USED THEIR EMERGENCY PROCEDURE TO ISSUE:

 

5044 CONTRACTS FOR MARCH. 0 CONTRACTS FOR APRIL AND  AND ALL OTHER MONTHS: ZERO. TOTAL EFP ISSUANCE: 5044 CONTRACTS. EFP’S GIVE OUR COMEX LONGS A FIAT BONUS PLUS A DELIVERABLE PRODUCT OVER IN LONDON.  IF WE TAKE THE  OI GAIN AT THE COMEX OF 1153 CONTRACTS TO THE 5044 OI TRANSFERRED TO LONDON THROUGH EFP’S,  WE OBTAIN A HUGE GAIN  OF 6197  OPEN INTEREST CONTRACTS.  THUS IN OUNCES, THE GAIN ON THE TWO EXCHANGES: 30.98 MILLION OZ!!! AND YET WE ALSO HAVE A STRONG DEMAND FOR PHYSICAL AS WE WITNESSED A FINAL STANDING OF GREATER THAN 30 MILLION OZ FOR JULY, A STRONG 6.065 MILLION OZ FOR AUGUST..  A HUGE 39.505  MILLION OZ  STANDING FOR SILVER IN SEPTEMBER… OVER 2 million  OZ STANDING FOR THE NON ACTIVE MONTH OF OCTOBER.,  7.440 MILLION OZ FINALLY STANDING IN NOVEMBER.  21.925 MILLION OZ  STANDING IN DECEMBER AND 5.020 MILLION OZ STANDING IN JANUARY..

 

 

RESULT: A CONSIDERABLE SIZED INCREASE IN SILVER OI AT THE COMEX WITH THE 3 CENT PRICING LOSS THAT SILVER UNDERTOOK IN PRICING// YESTERDAY.BUT WE ALSO HAD ANOTHER STRONG SIZE 5044 EFP’S ISSUED TRANSFERRING COMEX LONGS OVER TO LONDON. TOGETHER WITH THE STRONG  SIZED AMOUNT OF SILVER OUNCES STANDING FOR SEPTEMBER, DEMAND FOR PHYSICAL SILVER CONTINUES TO INTENSIFY 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 18.22 PTS OR 0.72% //Hang Sang CLOSED UP 209.67 POINTS OR 0.82% /The Nikkei closed UP 477/91 POINTS OR 2.44% / Australia’s all ordinaires CLOSED UP 1.19%

/Chinese yuan (ONSHORE) closed UP  at 6.8523 AS TRUCE DECLARED FOR 3 MONTHS /Oil UP to 49.20 dollars per barrel for WTI and 58.34 for Brent. Stocks in Europe OPENED RED 

//ONSHORE YUAN CLOSED UP AT 6.8523 AGAINST THE DOLLAR. OFFSHORE YUAN CLOSED UP ON THE DOLLAR AT 6.8525: HUGE DEVALUATION/PAST SEVERAL DAYS RESUMES// TRADE TALKS NOW ON/MAJOR PROBLEMS AT HUAWEI /CFO ARRESTED   : /ONSHORE YUAN TRADING ABOVE LEVEL OF OFFSHORE YUAN/ONSHORE YUAN TRADING STRONGER AGAINST USA DOLLAR/OFFSHORE YUAN TRADING STRONGER AGAINST THE DOLLAR /CHINA RETALIATES WITH TARIFFS/ TRUMP RESPONDS TO NEW TARIFFS AND IT NOW A FULL TRADE WAR COMMENCED

 

 

 

 

 

 

 

 

 

 

3A/NORTH KOREA/SOUTH KOREA

i)North Korea/South Korea/USA/

 

 

 

b) REPORT ON JAPAN

Japan/USA/China

China is not very happy with this:  The USA has its first missile drill on Japan’s Okinawa Island

( zerohedge)

 

 

3 C/  CHINA

 

 

 

i)CHINA/

Gordon Chang is perhaps the world’s greatest authority on China. The writes that China does not want in live within the current Westphalian system of nation states but want to dominate..Xi is even thinking of overthrowing it altogether.

This is a must read..

( Gordon Chang/Gatestone)

ii)Once again Mainland China wants the peaceful reunification of Taiwan and it reserves the right to use force.  Taiwan would be the China’s first aspiration and it resrvs the option of taking all necessary measures in achieving that goal.

(courtesy zerohedge)

iii)I am surprised that real GDP for China is this high.  A Chinese professor in a paper presented to investors claims that the real Chinese GDP growth is below 2%( zerohedge)

iv)And now really scary stuff: Xi orders the Chinese army to “prepare for war”

( zerohedge)

v)The USA continues to carry out its latest “freedom of Navigation’ in the South China seas much to the anger of China. Obviously this will not help in the trade negotiations.

( zerohedge)

 

vi)China is hurting more from the tariffs than the uSA.  He is probably right

( zerohedge)

4/EUROPEAN AFFAIRS

i)FRANCE

Macron arrests the organizer of the “Yellow Vest” movement: Eric Drouet and that will surely not calm things down

(courtesy zerohedge)

ii)Well that did not take long:  France is ablaze after the arrest of the founder of the Yellow Vest movement
( zero hedge)

iii)We highlighted this important commentary to you last week.  I have decided to repeat it in light of what is going on the world today.( Alasdair Macleod/Mises)

 

 

 

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

 

 

 

IRAN/USA

 

6. GLOBAL ISSUES

We highlighted this important commentary to you last week.  I have decided to repeat it in light of what is going on the world today.

( Alasdair Macleod/Mises)

 

 

7. OIL ISSUES

We highlighted this to you on several occasions:  fracking wells are producing far less than forecast

(courtesy zerohedge)

 

 

 

8 EMERGING MARKET ISSUES

i)Venezuela

 

 

 

9. PHYSICAL MARKETS

i)It sure looks like we are getting a mass migration away from Canadian roots for Canadian mining. Barrick has very few people left in Canada/  Canada has seen the loss of Inco, Falconbridge and now Barrick.

( zerohedge)

ii)TRADING UNOFFICIALLY AT 110,000 RIYALS/DOLLAR…Iran’s central bank proposes the slashing off of 4 zeros from its falling currency

(Reuters/GATA)

iii)GATA’s work in exposing the criminality is very important and thus a worthy cause

(courtesy GATA/Chris Powell)

 

iv)Essential reading for you tonight.  Ambrose Evans Pritchard is of the belief that the Fed will stop its QT as “Jerome Powell has listened”.  It is probably the right thing to do but I do not think that Powell will stop his QT. I am in the camp of Brandon Smith, i.e. Powell is there to blow up the system.

(courtesy Ambrose Evans Pritchard))

v)Nicholas is in my camp on this. Both EFP’s and the LBMA are frauds.
(courtesy Nicholas B)

 

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

 

 

MARKET TRADING

ii)Market data/

a)Another great indicator as to the strength of the USA economy: the sale of heavy duty trucks.  Their orders tumbled 43% last month

( zerohedge)

b)The USA  ISM service sector report confirms the USA slowdown.  Usually the service sector is the stronger of the two. Not today.
( ISM service/zerohedge)

iii)USA ECONOMIC/GENERAL STORIES

a)the fires have had a devastating effect on the share price of PG and E.  For the second time in 7 years, these guys are set to file for bankruptcy protection

(courtesy zerohedge)

b)Brandon Smith continues with his theory of the Deep State/Neo-cons running the USA. The key to his thinking is that the deep state eventually wants a one currency, one government operation controlling the world and the Fed would even sacrifice itself in order for this to occur.  Trump is either a patsy or maybe a pied piper for the new world order agenda. The Fed my raising rates in a lousy economy is deliberately trying to implode the economy.
 Brandon Smith//Alt Market.com

c)The Deep State going against Trump with an implicit rebuke of the Syrian draw down.

( zerohedge)

d)Lampert’s 11th hr bid fails and now Sears is preparing for liquidation( zerohedge)

e)A good one today from Tom Luongo has he agrees wholeheartedly with Tucker Carlson that the middle class and family formation has been devastated

( Tom Luongo/Tucker Carlson)

f)we warned out last week that this will come but we did not expect it  so early in January.  An Indiana grocery store could not process food stamp payments because of the Government shutdown

( zerohedge)
g)The iRS announces that it will issue tax refunds and thus easing pressure to reach a deal.  It looks like the only stumbling block will be the adjudication of food stamp money
(zerohedge)

iv)SWAMP STORIES

a)A key democrat states that Trump can use the :National Emergency” to build the wall

(courtesy zerohedge)

Trump to speak tomorrow night at 9 pm on this.

E)SWAMP STORIES/MAJOR STORIES//THE KING REPORT

Let us head over to the comex:

 

THE TOTAL COMEX GOLD OPEN  FELL BY A TINY SIZED 844 CONTRACTS DOWN TO A LEVEL OF 456,364 DESPITE THE STRONG LOSS IN THE PRICE OF GOLD ($8.45) IN YESTERDAY’S COMEX 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 AS WELL AS WE WITNESS THE COMEX OPEN INTEREST COLLAPSE. ONCE WE GET TO FIRST DAY NOTICE, THEN THE OPEN INTEREST RISES AND AGAIN THEY DID NOT DISAPPOINT US.

 

 

WE ARE NOW IN THE  NON ACTIVE DELIVERY MONTH OF JANUARY..  THE CME REPORTS THAT THE BANKERS ISSUED A HUMONGOUS SIZED COMEX TRANSFER THROUGH THE EFP ROUTE AS THESE LONGS RECEIVED A DELIVERABLE LONDON FORWARD TOGETHER WITH A FIAT BONUS., THAT IS 14,688 EFP CONTRACTS WERE ISSUED:

FOR FEBRUARY:  14,688 AND  ZERO FOR ALL OTHER MONTHS:

TOTAL EFP ISSUANCE:  14,688 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 BASED FORWARD.

ON A NET BASIS IN OPEN INTEREST WE GAINED THE FOLLOWING TODAY ON OUR TWO EXCHANGES:  13,844 TOTAL CONTRACTS IN THAT 14,688 LONGS WERE TRANSFERRED AS FORWARDS TO LONDON AND WE LOST A TINY SIZED 844 COMEX CONTRACTS.

NET GAIN ON THE TWO EXCHANGES: 13,844 contracts OR 1,384,400  OZ OR 43.06 TONNES.

 

We are now in the NON active contract month of JANUARY and here the open interest stands at 353 contracts as we LOST 12 contracts. We had 29 notice filed on yesterday so we gained 17 contracts or 1700 oz will stand for delivery as these guys refused to morph into London based forwards as well as negate a fiat bonus. QUEUE JUMPING RETURNS IN EARNEST TO THE COMEX GOLD COMPLEX.

 

 

The next active delivery month is February and here the OI FELL by 9143 contracts DOWN to 302,111 contracts.  After February, March received another 63 contracts to stand at 432.  After March, the next big delivery month is April and here the OI rose by 6952 contracts up to 80,714 contracts.

 

 

 

FOR COMPARISON TO THE  January 2018 contract month

 

 

ON JANUARY 1/2018: 1.297 TONNES STOOD FOR DELIVERY  (Jan 1 2019 initial standing 1.306 tonnes)

EVENTUALLY ON JAN 31.2018: 2.17 TONNES STOOD FOR DELIVERY AS QUEUE JUMPING STARTED IN EARNEST AT THE GOLD COMEX

 

 

WE HAD 4 NOTICES FILED AT THE COMEX FOR 400 OZ. (0.0124 tonnes)

 

 

 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And now for the wild silver comex results.

Total silver OI ROSE BY A CONSIDERABLE 1153 CONTRACTS FROM 178003 UP TO 179,156 (AND CLOSER TO THE NEW RECORD OI FOR SILVER SET ON AUGUST 22.2018.  (THE PREVIOUS RECORD WAS SET APRIL 9.2018/ 243,411 CONTRACTS) AND TODAY’S OI COMEX GAIN  OCCURRED WITH A 3 CENT LOSS IN PRICING.

 

WE ARE NOW INTO THE NON ACTIVE DELIVERY MONTH OF JANUARY AND THE  AMOUNT OF OPEN INTEREST READY TO STAND IS 820 CONTRACTS HAVING LOST ONLY 17 CONTRACTS FROM FRIDAY.  WE HAD 24 NOTICES FILED ON YESTERDAY, SO WE GAINED 7 CONTRACTS OR  35,000 ADDITIONAL OZ OF SILVER WILL STAND FOR SILVER AS THESE GUYS REFUSED TO MORPH INTO LONDON BASED FORWARDS AS WELL AS NEGATING A FIAT BONUS

 

 

 

THE NEXT NON ACTIVE DELIVERY MONTH IS FEBRUARY AND HERE THE OI FELL BY 56 CONTRACTS UP TO 430. AFTER FEBRUARY IS THE VERY BIG AND ACTIVE DELIVERY MONTH OF MARCH AND HERE THE OI FELL BY 539 CONTRACTS DOWN TO 142,916 CONTRACTS.

 

 

ON A NET BASIS WE GAINED 6197 SILVER OPEN INTEREST CONTRACTS AS WE OBTAINED A  1153 CONTRACT GAIN AT THE COMEX COMBINING WITH THE ADDITION OF 5044 OI CONTRACTS NAVIGATING OVER TO LONDON.

NET GAIN ON THE TWO EXCHANGES:  6197 CONTRACTS...AND ALL OF THIS DEMAND OCCURRED WITH A 3 CENT LOSS IN PRICING// YESTERDAY

 

 

 

 

 

FOR COMPARISON TO THE COMEX 2017 CONTRACT MONTH AND JANUARY 2018 CONTRACT MONTH

 

 

 

ON FIRST DAY NOTICE JAN 1/2018 CONTRACT MONTH WE HAD A GOOD 2.695 MILLION OZ STAND FOR DELIVERY’

AT THE CONCLUSION OF JAN/2018 WE HAD 3.650 MILLION OZ STAND AS QUEUE JUMPING WAS THE NORM FOR SILVER

.

 

 

 

 

 

 

 

 

We had 106 notice(s) filed for 530,000 OZ for the FEB, 2018 COMEX contract for silver

 

 

Trading Volumes on the COMEX

 

 

CONFIRMED COMEX VOL. FOR YESTERDAY:  254,553  contracts

volumes at the comex for both gold and silver are much less than usual.

 

 

 

 

 

 

 

 

 

 

 

INITIAL standings for  JAN/GOLD

JAN 7-/2019.

Gold Ounces
Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz
nil oz
scotia
Deposits to the Dealer Inventory in oz NIL oz

 

 

 

 

 

Deposits to the Customer Inventory, in oz  

 

NIL

 

OZ

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No of oz served (contracts) today
4 notice(s)
 400 OZ
No of oz to be served (notices)
349 contracts
(34900 oz)
Total monthly oz gold served (contracts) so far this month
98 notices
9800 OZ
0.3048 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 dealer entries:

 

 

total dealer deposits: NIL oz

total dealer withdrawals: 0 oz

We had 0 kilobar entries

 

we had 0 deposits into the customer account

 

total gold customer deposits;  NIL oz

 

we had 0 gold withdrawals from the customer account:

 

 

total gold withdrawing from the customer;  nil oz

 

we had 0  adjustments….

FOR THE DEC 2018 CONTRACT MONTH)

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 4 contract(s) of which 0 notices were stopped (received) by j.P. Morgan dealer and 2 notice(s) was (were) stopped/ Received) by j.P.Morgan customer account and 0 notices by the squid  (Goldman Sachs)

 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
To calculate the INITIAL total number of gold ounces standing for the JANUARY/2018. contract month, we take the total number of notices filed so far for the month (98) x 100 oz , to which we add the difference between the open interest for the front month of JAN. (353 contract) minus the number of notices served upon today (4 x 100 oz per contract) equals 44,700 OZ OR 1.3903 TONNES) the number of ounces standing in this NON  active month of JANUARY

 

Thus the INITIAL standings for gold for the JAN/2018 contract month:

No of notices served (98 x 100 oz)  + {353)OI for the front month minus the number of notices served upon today (4 x 100 oz )which equals 44,700 oz standing OR 1.3903 TONNES in this NON  active delivery month of JANUARY.

We gained 17 contracts or an additional 1700 oz will stand in this non active month of January as queue jumping resumes at the gold comex.

 

 

 

 

 

THERE ARE ONLY 23.372 TONNES OF REGISTERED COMEX GOLD AVAILABLE FOR DELIVERY AGAINST 1.3903 TONNES STANDING FOR JANUARY

 

 

total registered or dealer gold:  751,413.930 oz or   23.372 tonnes*
total registered and eligible (customer) gold;   8,432,261.563 oz 262.27 tonnes
In December  we had 23.374 tonnes of gold  SERVED UPON against dealer inventory of 23.373 tonnes and  no evidence of settlements.  We generally get a settlement when we see an adjustment from the dealer side to the customer side.. We have now gone through the entire month of December with only one tiny adjustment from a dealer to a customer account.  THERE WERE NO OTHER TRANSFERS TO INDICATE A SETTLEMENT.
Thus by the end of December we had:  23.374 tonnes of gold standing for metal against only 23.186 tonnes of dealer gold and .182 tonnes has been settled…(Dec 17)
We now add 1.3903 tonnes of gold standing in January against this same 23.372 tonnes available for delivery.
If you want to keep score:
December: 23.374 tonnes
January 1.3903 tonnes
total: 24.764 tonnes against inventory of 23.372 tonnes (registered)

IN THE LAST 27 MONTHS 92 NET TONNES HAS LEFT THE COMEX.

 

end

And now for silver

AND NOW THE NOV DELIVERY MONTH

JAN INITIAL standings/SILVER

JAN 7, 2019
Silver Ounces
Withdrawals from Dealers Inventory NIL oz
Withdrawals from Customer Inventory
1,063,684.418oz
CNT
Delaware
Int. Delaware
Scotia

 

 

Deposits to the Dealer Inventory
nil  oz
Deposits to the Customer Inventory
600,833.390
oz
HSBC
No of oz served today (contracts)
102
CONTRACT(S)
530,000 OZ)
No of oz to be served (notices)
718 contracts
3,590,000 oz)
Total monthly oz silver served (contracts) 286 contracts

(1,430,000 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 0 inventory movement at the dealer side of things

 

total dealer deposits: niloz

total dealer withdrawals: 0 oz

we had 1 deposits into the customer account

 

i) Into JPMorgan: nil oz

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

JPMorgan now has 150.55 million oz of  total silver inventory or 51.03% of all official comex silver. (152.0 million/292 million)

 

ii) Into  HSBC:  600,833.390 oz

 

 

 

 

 

 

 

 

 

 

 

 

 

 

total customer deposits today: 600,833.390  oz

we had 4 withdrawals out of the customer account:
i) Out of CNT: 705,363.099 oz
ii) Out of Delaware: 2022.153 oz
iii) Out of Int Delaware: 57,974.916 oz
iv) out of Scotia:  298,324.250 oz

 

 

 

 

 

total withdrawals: 1,063,684.418   oz

 

we had 1 adjustment

i) out of CNT:  504,285.390 oz was adjusted out of the customer and this landed into the dealer account of CNT

 

 

total dealer silver:  82.794 million

total dealer + customer silver:  293.239 million oz

 

 

 

 

The total number of notices filed today for the JANUARY 2018. contract month is represented by 106 contract(s) FOR 530,000  oz

To calculate the number of silver ounces that will stand for delivery in JAN., we take the total number of notices filed for the month so far at 286 x 5,000 oz = 1,430,000 oz to which we add the difference between the open interest for the front month of JAN. (820) and the number of notices served upon today (106x 5000 oz) equals the number of ounces standing.

.

Thus the INITIAL standings for silver for the JANUARY/2018 contract month: 286(notices served so far)x 5000 oz + OI for front month of JAN( 820) -number of notices served upon today (106)x 5000 oz equals 5,020,000 oz of silver standing for the JANUARY contract month.  This is a strong number of oz standing for an off delivery month. We gained 7 contracts or an additional 35,000 oz (totals corrected from Friday) will  stand for delivery and these guys refused to morph into London based forwards as well as negating a fiat bonus.

 

 

 

 

 

 

 

 

 

 

 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 

TODAY’S SILVER VOLUME:  51,878 CONTRACTS

 

 

CONFIRMED VOLUME FOR YESTERDAY: 107,659 CONTRACTS… 

volumes at the comex now increasing for silver

 

 

 

 

 

YESTERDAY’S CONFIRMED VOLUME OF 107,659 CONTRACTS EQUATES to 538 million OZ  76.8 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 FALLS TO -4.10-% (JAN 7/2019)
2. Sprott gold fund (PHYS): premium to NAV FALLS TO -0.85% to NAV (JAN 7 /2019 )
Note: Sprott silver trust back into NEGATIVE territory at -4.10%-/Sprott physical gold trust is back into NEGATIVE/

(courtesy Sprott/GATA)

3.SPROTT CEF.A FUND (FORMERLY CENTRAL FUND OF CANADA):

NAV 13.14/TRADING 12.65/DISCOUNT 3.66

END

And now the Gold inventory at the GLD/

JAN 7/WITH GOLD UP $4.45 TODAY: A HUGE DEPOSIT OF 2.94 TONNES OF GOLD ENTERED THE GLD/INVENTORY RESTS AT 798.25 TONNES

JAN 4/WITH GOLD DOWN $8.65 TODAY; NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 795.31 TONNES

JAN 3/2019/WITH GOLD UP $10.65 TODAY: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY REMAINS AT 795.31 TONNES

JAN 2.2019/WITH GOLD UP $3.35 TODAY: A HUGE CHANGE IN GOLD INVENTORY AT THE GLD: A DEPOSIT OF 7.64 TONNES/INVENTORY RESTS AT 795.31 TONNES

DEC 31/WITH GOLD DOWN $2.20 TODAY: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 787.67 TONNES

DEC 28/WITH GOLD UP $2.20 STRANGELY A WITHDRAWAL OF 2.35 TONNES FROM THE GLD/INVENTORY RESTS AT 787.67 TONNES

DEC 27/WITH GOLD UP $8.65: A MASSIVE 15.88 TONNES WAS ADDED INTO THE GLD/INVENTORY RESTS AT 790.02 TONNES

DEC 26/WITH GOLD UP $0.15: NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 774.14 TONNES

DEC 24/WITH GOLD UP $15.15: A HUGE DEPOSIT OF 5.00 TONNES INTO THE GLD/INVENTORY RESTS AT 774.14 TONNES

DEC 21/WITH GOLD DOWN $10.15 TODAY: A HUGE WITHDRAWAL OF 2.65 TONNES/INVENTORY RESTS AT 769.14 TONNES

DEC 20/WITH GOLD UP $11.50 TODAY: NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY AT 771.79 TONNES

DEC 19/WITH GOLD UP $3.15 TODAY: A HUGE DEPOSIT OF 8.23 TONNES OF GOLD ENTERED THE GLD/INVENTORY RESTS AT 771.79 TONNES

DEC 18/WITH GOLD UP $1.50 TODAY: NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 763.56 TONNES

DEC  17 WITH GOLD UP $10.60 TODAY: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 763.56 TONNES

DEC 14/WITH GOLD DOWN $5.60: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 763.56 TONNES

DEC 13/WITH GOLD DOWN $2.00: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 763.56 TONNES

DEC 12/WITH GOLD UP $3.05 A HUGE DEPOSIT OF 3.24 TONNES OF GOLD INTO THE GLD/SOMETHING IS BURNING…/INVENTORY RESTS AT 763.56 TONNES

DEC 11/WITH GOLD DOWN $4.85 A SMALL DEPOSIT OF .59 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT 760.32 TONNES

DEC 10/WITH GOLD DOWN $3.05 TODAY: NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 759.73 TONNES

DEC 7/WITH GOLD UP $8.35/A BIG CHANGE IN GOLD INVENTORY AT THE GLD: A DEPOSIT OF 1.51 TONNES/INVENTORY RESTS AT 759.73 TONNES

DEC 6/WITH GOLD UP $1.60: NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 758.21 TONNES

DEC 5/WITH GOLD DOWN $4.25: NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 758.21 TONNES

DEC 4/WITH GOLD UP $7.25: A HUGE WITHDRAWAL OF 3.53 TONNES OF GOLD FROM THE GLD/INVENTORY RESTS AT 758.21 TONNES

DEC 3/WITH GOLD UP $13.25: NO CHANGES IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 761.74 TONNES

NOV 30/WITH GOLD DOWN $4.00: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 761.74 TONNES

NOV 29/WITH GOLD UP $1.30: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 761.74 TONNES

NOV 28/WITH GOLD UP $9.45 TODAY: NO CHANGE IN GOLD INVENTORY AT THE GLD/INVENTORY RESTS AT 761.74 TONNES

NOV 27/WITH GOLD DOWN $8.60 A WITHDRAWAL OF 1.18 TONNES OF GOLD FROM THE GLD/INVENTORY RESTS AT 761.74 TONNES

 

 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

JAN 472019/ Inventory rests tonight at 798.25 tonnes

*IN LAST 530 TRADING DAYS: 136.91 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 430 TRADING DAYS: A NET 23.09 TONNES HAVE NOW BEEN ADDED INTO THE GLD INVENTORY.

 

end

 

Now the SLV Inventory/

JAN 7/WITH SILVER DOWN ONE CENT: A HUGE WITHDRAWAL OF 2.347 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 314.758 MILLION OZ/

JAN 4/WITH SILVER DOWN 3 CENTS: NO CHANGE IN SILVER INVENTORY AT THE SLV.INVENTORY RESTS AT 317.105 MILLION OZ

JAN 3/2019/WITH SILVER UP 22 CENTS A SMALL CHANGE TODAY: A WITHDRAWAL OF 118,000 OZ TO PAY FOR FEES:  INVENTORY RESTS AT 317.105 MILLION OZ/

JAN 2/2019/WITH SILVER UP 10 CENTS TODAY/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 317.233 MILLION OZ/

DEC 31/WITH SILVER UP 6 CENTS TODAY: NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 317.233 MILLION OZ/

DEC 28/WITH SILVER UP 10 CENTS TODAY/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 317.233 MILLION OZ/

DEC 27/WITH SILVER UP 22 CENTS TODAY: A SMALL CHANGE IN SILVER INVENTORY AT THE SLV: AN ADDITION OF 94,000 OZ/INVENTORY RESTS AT 317,233

DEC 26/WITH SILVER UP 27 CENTS TODAY: NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 317.139 MILLION OZ

DEC 21/WITH SILVER DOWN 14 CENTS TODAY: NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 317.139 MILLION OZ/

DEC 20/WITH SILVER UP 4 CENTS TODAY: A HUGE CHANGE IN SILVER INVENTORY AT THE SLV: A WITHDRAWAL OF 1.408 MILLION OZ OF SILVER FROM THE SLV/ INV. RESTS AT 317.139 MILLION OZ/

DEC 19/WITH SILVER UP 10 CENTS TODAY: A HUGE CHANGE IN SILVER INVENTORY AT THE SLV: A DEPOSIT OF 751,000 OZ INTO THE SLV./INVENTORY RESTS AT 318.547 MILLION OZ/

DEC 18/WITH SILVER DOWN 4 CENTS TODAY: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 317.796 MILLION OZ/

DEC 17/WITH SILVER UP 13 CENTS TODAY/ A HUGE CHANGE IN SILVER INVENTORY AT THE SLV: A WITHDRAWAL OF 939,000 OZ FROM THE SLV/INVENTORY RESTS AT 317.796 MILLION OZ/.

DEC 14/WITH SILVER DOWN 22 CENTS: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.735 MILLION OZ/

DEC 13/WITH SILVER UP 2 CENTS TODAY: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.735 MILLION OZ/

DEC 12/WITH SILVER UP 22 CENTS TODAY: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.735 MILLION OZ

DEC 11/WITH SILVER UP ONE CENT TODAY: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY ESTS AT 318.735 MILLION OZ/

DEC 10/WITH SILVER DOWN 8 CENTS TODAY: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.735 MILLION OZ/

DEC 7/WITH SILVER UP 16 CENTS: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 318.735 MILLION OZ/

DEC 6/WITH SILVER DOWN 5 CENTS TODAY: A HUGE CHANGE IN SILVER INVENTORY AT THE SLV: A WITHDRAWAL OF 2.817 MILLION OZ//INVENTORY LOWERS TO 318.735 MILLION OZ/

DEC 5/WITH SILVER DOWN 6 CENTS TODAY: NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY REMAINS AT 321.552 MILLION OZ.

DEC 4/WITH SILVER UP 10 CENTS TODAY: A SMALL CHANGE IN SILVER INVENTORY AT THE SLV:A WITHDRAWAL OF 134,000 OZ//INVENTORY RESTS AT 321.552 MILLION OZ/

DEC 3/WITH SILVER UP 29 CENTS: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 321.686 MILLION OZ/

NOV 30/WITH SILVER DOWN 17 CENTS TODAY: A BIG CHANGE IN SILVER INVENTORY AT THE SLV: A WITHDRAWAL OF 1.22 MILLION OZ FROM THE SLV /INVENTORY RESTS AT 321.686 MILLION OZ/

NOV 29/WITH SILVER DOWN 2 CENTS TODAY: NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 322.906 MILLION OZ.

NOV 28/WITH SILVER UP 23 CENTS TODAY: A DEPOSIT OF 188,000 OZ/INVENTORY RESTS AT 322.906 MILLION OZ/

NOV 27/WITH SILVER DOWN 14 CENTS TODAY: A HUGE WITHDRAWAL OF 2.301 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 322.718 MILLION OZ/

 

 

JAN 7/2019:

 

Inventory 314.758 MILLION OZ

LIBOR SCHEDULE AND GOFO RATES:

 

 

THE RISE IN LIBOR IS CREATING A SCARCITY OF DOLLARS BECAUSE FOREIGN EXCHANGE SWAPS (COSTS) ARE SIMPLY PROHIBITIVE

YOUR DATA…..

6 Month MM GOFO 2.38/ and libor 6 month duration 2.86

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

G0LD LENDING RATE: + .48

 

 

XXXXXXXX

12 Month MM GOFO
+ 2.62%

LIBOR FOR 12 MONTH DURATION: 2.96

GOFO = LIBOR – GOLD LENDING RATE

GOLD LENDING RATE  = +.34

end

 

PHYSICAL GOLD/SILVER STORIES

end
i) GOLDCORE BLOG/Mark O’Byrne

China Adds 320,000 Ounces To Gold Reserves – First Central Bank Purchase Since October 20167, January

– China increases gold holdings by large 320,000 ounces

– Gold bullion remains a tiny component of the People’s Bank of China massive foreign exchange (FX) reserves which rose to $3.073 trillion

– China’s gold reserves rose for first time since October 2016 to 59.56 million ounces by the end of December (1,853 metric tons) from 59.24 million ounces

– Gold climbed 5% in December on equity rout, growth concerns

by Bloomberg:

After a hiatus of more than two years, China is adding to its gold reserves again.

The People’s Bank of China increased holdings to 59.56 million ounces by the end of December, or about 1,853 metric tons, from 59.24 million ounces previously, according to data on the central bank’s website. They had been unchanged since about 130,000 ounces were added in October 2016.

The world’s biggest producer and consumer boosted holdings of bullion in a month marked by mounting concerns that China’s trade dispute with the U.S. is threatening economic growth. Spot gold had its strongest month in almost two years as those fears spurred gyrations in equities and the dollar and boosted demand for the precious metal as a haven.

Speculation that the Federal Reserve may pause its interest rate hikes has given further strength to gold’s rally into the new year and assets in bullion-backed exchange-traded funds are at a seven-month high. Spot gold was trading 0.5 percent higher at $1,291.83 an ounce.

“It’s a bullish sign for gold,” Matthew Turner, a commodities strategist at Macquarie Group Ltd. in London, said by phone. “The reasons could be diversification, a wish to get away from the dollar, but it’s hard to be certain because we just don’t know enough about what their motivations are.”

The Asian nation has previously spent long periods without revealing increases in gold holdings. When the central bank announced a 57 percent jump in reserves to 53.3 million ounces in July 2015, it was the first update in six years.

“I’m always wary of year-end moves, but if they buy again, then it’ll look like they’re on another run of additions, like they did in 2015-2016.” Turner said.

It’s not just China buying. Poland and Hungary surprised the market in 2018 by adding to their gold holdings for the first time in many years.

Central banks were expected to increase their purchases of gold in 2018 for the first time in five years as eastern European and Asian countries seek to diversify their reserves, according to an October projection by consultancy Metals Focus Ltd.

-END-

Bloomberg

Gold At 6 M

* * *

GATA STORIES AS IT RELATES TO PHYSICAL GOLD/SILVER

It sure looks like we are getting a mass migration away from Canadian roots for Canadian mining. Barrick has very few people left in Canada/  Canada has seen the loss of Inco, Falconbridge and now Barrick.

(courtesy zerohedge)

 

Barrick Gold veers away from Canadian roots after Randgold acquisition

 Section: 

By Niall McGee and Rachelle Younglai
The Globe and Mail, Toronto
Thursday, January 3, 2019

https://www.theglobeandmail.com/business/article-barrick-gold-veering-aw…

The slow shift of power away from Barrick Gold Corp.’s Canadian head office has moved into high gear, just days after the company closed its deal with African operator Randgold Resources Ltd.

The US$6-billion acquisition, which was announced in September and completed Tuesday, has left Barrick with a hollowed-out head office, almost no Canadian representation on the board, and few Canadians in top management positions.

… 

 

Barrick’s retreat in Canada reflects a broader downsizing of Toronto as a world mining capital, with fewer global players headquartered in the city and dramatically less mining capital being raised on the Toronto Stock Exchange. Barrick, the world’s largest gold producer, had been one of the last great Canadian corporate mining champions left standing after a wave of foreign takeovers of metals giants such as Inco and Falconbridge. With a head office of about 500 employees, it played a major role in Toronto’s financial scene.

But that Toronto office has been shrinking for years as Barrick went through a series of restructuring moves led by John Thornton, its U.S.-based executive chairman.

Pierre Lassonde, whose Franco Nevada Corp. has owned a royalty on Barrick’s Goldstrike mine in Nevada since 1985, believes that Peter Munk, Barrick’s late founder, would be aghast at seeing the company’s fast-shrinking presence in Canada.

“I think Mr. Munk is going to roll over in his grave 10 times,” Mr. Lassonde said. “Peter was Mr. Canada. He wore Canada on his sleeve. He was so proud to be a Canadian.”

Not long after Barrick announced its purchase of Randgold, the company’s new executive team dramatically scaled down its domestic footprint.

Only around 65 people work in Barrick’s head office now, compared with 150 as recently as September. A board overhaul announced Wednesday has left only one Canadian director, Michael Evans, and he lives in New York. Many of the company’s new executives came from Randgold and just two of 14 upper management roles are held by Canadians.

Mr. Thornton, the executive chair, is American, South African Mark Bristow is chief executive officer, and another South African, Graham Shuttleworth, is chief financial officer. The highest-ranking Canadian left is Kevin Thomson, who serves as senior executive vice-president of strategic matters.

Soon Barrick will likely not have any mines left in Canada either. The company is planning to sell the Hemlo mine in Ontario, the only Canadian operation in its portfolio.

“Don’t tell me in the Canadian mining industry there’s not great people to run a company like Barrick,” Mr. Lassonde said, whose Franco-Nevada is run entirely by Canadians.

A Hungarian immigrant, Mr. Munk founded Barrick in 1983 and grew it into the biggest gold company in the world. Around the time Canadian base-metal companies such as Inco and Falconbridge were being sold to foreign buyers, he marched into the offices of The Globe and Mail and demanded the newspaper draw attention to what he saw as the gutting of Canada.

When Mr. Munk tried to merge Barrick with U.S. competitor Newmont Mining in 2014, the deal was called off at the 11th hour amid a clash among chairmen and Newmont’s plan to move Barrick’s head office to the United States. That was a deal-breaker for Mr. Munk, who demanded it stay in Toronto.

In November, when asked if he thought the lack of Canadian influence at the top and its shrinking footprint in Canada was an issue people should care about, Mr. Thornton said, “The single most important thing that anyone should be focused on about any company is: Is it healthy and successful?

“The issue shouldn’t be what’s the nationality of the people running anything in any world-leading company,” the Barrick executive chairman said. “The issue should be: Are they doing a good job or are they not doing a good job? That’s all.”

Mr. Thornton, who spent much of his career as an investment banker with Goldman Sachs, lives in Palm Beach, Fla., only occasionally visiting Toronto.

Mr. Bristow, the CEO, plans to spend much of his time abroad, visiting the company’s international mines. He doesn’t even like the term “head office” and doesn’t really believe in them, he said. At Randgold, Mr. Bristow, who was both the CEO and founder, was known for running a highly efficient gold miner with little or no ties to any specific country. Randgold’s head office in Jersey in the Channel Islands housed only a handful of people.

But Mr. Lassonde says while he’s broadly in favor of Barrick’s new decentralized management structure, there’s still a need for a vibrant head office at any mining company, with the main decision makers working on site.

“The head office should be where the CEO is, where the chairman is, and where the CFO resides,” Mr. Lassonde said. “This is going to be a phantom head office until the company is either sold or dismantled and then it’s going to disappear. It cannot stay like this.”

The cuts at Barrick’s head office will likely have broad knock-on effects for Toronto’s financial ecosystem that will mean less work for bankers, consultants, and legal professionals. Under Mr. Munk, Barrick regularly used RBC as one of its investment bankers. Although Barrick tapped Canadian banks for some of its smaller asset sales in recent years, the miner did not hire a domestic bank for the Randgold purchase.

Mark Selby, a former Inco executive and now president of junior nickel miner RNC Minerals, said what’s happening at Barrick is part of a retreat from mining in Canada. The retreat kicked off with the gutting of the large base-metal companies in the mid-2000s and a shift of large mining headquarters away from Toronto toward London, such as Rio Tinto’s acquisition of Alcan.

“Before, Toronto made sense to be there because you had this cluster of large companies, a cluster of capital providers and fund managers and investment analysts who helped allocate that capital. Those have all shrunk dramatically,” Mr. Selby said. “There is less of a need to be in Toronto today.”

Derek White, former executive with Billiton and now CEO of junior miner Ascot Resources Ltd., called it “a bit of a setback to our ability to remain as the center for global gold companies.”

“It means that newer, smaller companies will have to come together to build up critical mass inside of Canada,” he said. “If we want to be the bigger players, some of our players are going to have to come together to step up to the plate to make that happen.”

END

TRADING UNOFFICIALLY AT 110,000 RIYALS/DOLLAR…Iran’s central bank proposes the slashing off of 4 zeros from its falling currency

(Reuters/GATA)

Iran’s central bank proposes slashing four zeros from falling currency

 Section: 

From Reuters
Sunday, January 6, 2019

DUBAI — Iran’s central bank has proposed slashing four zeros from the rial, state news agency IRNA reported today, after the currency plunged in a year marked by an economic crisis fueled by U.S. sanctions.

“A bill to remove four zeros from the national currency was presented to the government by the central bank yesterday and I hope this matter can be concluded as soon as possible,” IRNA quoted central bank governor Abdolnaser Hemmati as saying.

… Dispatch continues below 

Proposals to remove four zeros from the currency have been floated since 2008, but the idea has gained strength as the rial lost more than 60 percent of its value in 2018 despite a recent recovery engineered by the central bank in defiance of U.S. sanctions. …

… For the remainder of the report:

https://www.reuters.com/article/us-iran-currency/irans-central-bank-prop…

end

GATA’s work in exposing the criminality is very important and thus a worthy cause

(courtesy GATA/Chris Powell)

Is GATA’s challenge to market rigging worth even $5 to you?

 Section: 

12:58p ET Sunday, January 6, 2019

Dear Friend of GATA and Gold:

GATA knows there’s a secret to fundraising: You have to ask.

But a friend scolds us that there’s another secret: Get to the point faster than we did with our appeal on New Year’s Day, which may have provided a little too much history about GATA’s efforts to expose the longstanding Western government policy of gold price suppression:

http://www.gata.org/node/18731

Right or wrong, that was an attempt to justify GATA’s work and make a case for support.

Because of the depression and demoralization in the monetary metals sector, GATA hasn’t done any general fundraising in a long time. But there are signs that the markets are reversing now even as our direct questions to U.S. government agencies are plainly making them uncomfortable, and we can’t wait any longer.

… …

Nearly 7,800 people receive GATA’s dispatches, are interested in the monetary metals if not also invested in them, and presumably are sympathetic to GATA’s work.

We don’t charge subscription fees, since we’re in the business of exposing wrongdoing by government and we’re a nonprofit educational and civil rights organization. We have proven our case to anyone who wants to examine our documentation —

http://www.gata.org/taxonomy/term/21

— and we’re always building on it in the belief that at some point the truth will make the world free, leading it to free and transparent markets and limited and accountable government.

A donation of just $5 from everyone on our dispatch list who has not already supported us would sustain us for a year, during which time victory might be gained. Really, if GATA’s work is not worth even $5 to you, why would you subscribe to our dispatches?

Your support will produce results. No other organization challenges market rigging by central banks and governments.

So please consider helping us by visiting our donation page here:

http://www.gata.org/node/16

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

end

Essential reading for you tonight.  Ambrose Evans Pritchard is of the belief that the Fed will stop its QT as “Jerome Powell has listened”.  It is probably the right thing to do but I do not think that Powell will stop his QT. I am in the camp of Brandon Smith, i.e. Powell is there to blow up the system.

(courtesy Ambrose Evans Pritchard))

Ambrose Evans-Pritchard: Bears beware — The Fed has listened to the primordial scream of world markets

 Section: 

By Ambrose Evans-Pritchard
The Telegraph, London
Sunday, January 6, 2019

https://www.telegraph.co.uk/business/2019/01/06/bears-beware-fed-has-lis…

The US Federal Reserve has called off the hounds. China has abandoned efforts to purge financial excess, reverting to stimulus on multiple fronts.

Policy pirouettes by the world’s twin superpowers mark a critical moment in the tightening cycle, with sweeping implications for global asset markets and for the health of the international economy over the next year.

The shift in Washington — assuming it is more than a rhetorical feint — is the more potent of the two.

… 

 

It has echoes of the Fed retreat in early 2016 when China’s currency scare threatened to spin out of control. On that occasion the Yellen Fed came to the rescue and shelved plans for higher interest rates, launching a 25 percent surge in the MSCI index of world equities over the following twelve months.

A turbo-charged variant of this happened in late 1998 following the East Asia crisis and Russia’s default. The Greenspan Fed rushed through emergency rate cuts, igniting the final leg of the explosive dotcom boom.

It is too early to judge whether this is a comparable turning point but there is no doubt that current Fed chairman Jay Powell went out of his way to soothe markets on Friday, pointedly invoking the 2016 episode. The message could hardly have been clearer.

He vowed to shift gears “quickly” if need be. The Fed “wouldn’t hesitate” to suspend quantitative tightening (QT) if circumstances deteriorate.

This was a far cry from his comment before Christmas that the Fed’s pre-set plan to shrink the balance sheet by $50 billion a month was on “autopilot” — even though half the world was by then in flames. In the US itself the Goldman Sachs Financial Conditions Index had jumped 100 basis points since early October.

The new line is clearly a concerted Fed message. A day earlier Robert Kaplan from the Dallas branch said he was watching “very, very carefully” lest QT causes liquidity to evaporate and leads to a crunch.

It is the reassurance that skittish investors have been waiting for after a $20 trillion slide in global equities and signs of seizure in the credit markets. The S&P 500 index of equities roared 3.4 percent within hours. January suddenly feels different.

Bank of America’s Michael Hartnett issued a tactical buy alert for the first time since the Brexit referendum in June 2016. His ‘Bull & Bear Indicator’ had earlier dropped to an “extreme” pessimism reading, a level that typically leads to a snap-back rally in risk assets over the following three months. It did not work in 2008 however. Markets continued crashing.

Mr Hartnett said Wall Street and global markets have not yet seen the “big low” of 2019. Panic capitulation still lies ahead as the profit cycle turns. But for the brave and nimble he recommends a short-term foray into Chinese and German equities, energy stocks, US small cap stocks, and emerging market currencies, all deemed “very oversold.”

In supporting chorus, the Chinese have cut the required reserve ratio for banks a fifth time. Local governments have been ordered to pull forward new bond issuance. Beijing’s Central Economic Work Conference before Christmas was a paean to stimulus. Deleveraging be damned.

This comes too late to stop a “recession with Chinese characteristics” in early 2019. Berenberg Bank thinks the true growth rate has fallen to 3 percent. A Renmin University professor cited closed-door research suggesting that it may even be negative. His lecture went viral on the web before censors shut it down.

Capital Economics says it will take several months for the new stimulus to reach China’s real economy. This time recovery will be weaker than in past episodes. Debt saturation — and stalled reform — has choked the economy. It expects growth to bottom out at 4 percent in the second quarter based on proxy measures.

China is no longer the global Wunderkind of the early 2000s but at least investors can glimpse light at the end of the latest tunnel.

It is the Fed that matters most. For the last year it has been draining dollar liquidity mercilessly, both by shrinking the balance sheet and by raising rates. The “broad” dollar index has soared to an 18-year high.

The squeeze has been slow torture for a world financial system that has never been more dollarized or more sensitive to US borrowing costs, especially in those emerging markets that were flooded — nolens volens — with cheap dollar debt during the QE years.

Turkey and Argentina were the prime casualties of 2018, but South Africa, The Philippines, Indonesia, India, Mexico, and in its way China have all suffered.

Offshore dollar debts worldwide have ballooned to $12.8 trillion (BIS data). Roughly $4 trillion of contracts outside the US are priced off three-month Libor rates alone, which have doubled over the last year.

The strains reached breaking point in the fourth quarter. Dollar funding markets in Asia and Europe began to dry up. High-yield credit spreads have surged by over 260 basis points in Europe, where bank stocks have been in free-fall.

The dangerous anomaly at the heart of global finance is that the Fed’s actions have an extremely powerful effect on everybody, yet it sets policy for internal conditions of America’s closed and now relatively diminished economy. The World Bank says emerging markets have grown to 59 percent of GDP (PPP basis).

The extra twist this time is that Fed has had to cope with Donald Trump’s late–cycle blitz of fiscal stimulus and the risks — abating — of overheating. America has been drastically misaligned with the world.

Sooner or later the “blowback” was going to reach the US itself. Wall Street’s rout last month was the worst December since the depths of the Great Depression in 1931.

The Fed was in danger of losing credibility at its pre-Christmas meeting. Its “dot plots” were signalling two rate rises in 2019 while the futures markets were pricing in a rate cut and mounting recession risk.

The US yield curve — the Fed’s own warning indicator — was as flat as a pancake and had inverted by ten basis points along the two to five year maturity range.

Jobs growth was holding up but employment turns late in the cycle. It is rarely gives much prior warning. More ominous was a collapse in the growth rate of real M1 money for businesses. It had turned negative for the first time since the onset of the Lehman crisis.

The refusal to shift ground on the reversal of QE had become a neuralgic issue for markets. The tones of Olympian certainty from Fed staff that it was “like watching paint dry” were simply not believable.

No central bank has ever tried to exit QE on such a scale before. There is deep confusion over how QE works and how it interacts with the financial system.

Monetarists accuse Fed officials of ignoring the “quantity theory of money” anchored even in the works of John Maynard Keynes, relying instead on incoherent “creditist” assumptions.

Tim Duy from Fed Watch said the institution has been “slave to its models” and made a serious error in December but at least that error was “retrievable.” Jay Powell may have pulled back just in time.

The central question now facing markets is whether the Fed is merely tweaking its message or is preparing to halt the tightening cycle altogether, a move that would send the dollar tumbling and act as powerful global stimulus. If that happens the ‘tourniquet effect’ of the last year will go into reverse and emerging markets can breath again.

Hans Redeker, currency chief at Morgan Stanley, said the great dollar rally is over. It has become clear over the Autumn that America itself cannot handle rising real yields since US corporate debt ratios are at a record high.

Japanese investors are starting to unwind some of their $2 trillion of US dollar assets as the cost of currency hedges renders the ‘carry trade’ into US money markets unprofitable. “They are sitting on loss-making assets so they have to liquidate,” he said.

Wild moves in the yen last week were a sign of the shifting flows. When this process gathers pace the dollar typically goes into a fast and accelerating downward slide. This in turn sets off a recovery in gold, oil, commodities, and battered markets in Asia, Latin America, and Africa.

“When the US dollar starts to weaken, the world is happy again,” said Mr Redeker.

A US-China trade deal would clinch the argument and set off a roaring spring rally. Bears beware.





iii) Other Physical stories
Due to the criminal conviction of trader Edmonds, the USA prosecution is seeking to halt the civil lawsuit. I was misinformed: all discoveries in a civil suit are public and because of that, the prosecution gives the defendants the right to plead the 5th if their testimony incriminates them
(courtesy zerohedge/Chris Powell)

US seeks halt in civil lawsuit accusing JP Morgan of manipulating metals market, citing criminal case

  • The U.S. wants a federal judge to halt a civil lawsuit accusing J. P. Morgan of manipulating precious metals markets. The Justice Department cited an ongoing criminal case as its reason for the request.
  • A former J. P. Morgan trader pleaded guilty in Connecticut last month to manipulation charges.
  • In the guilty plea, the trader said he had learned to make bogus trade orders from senior traders at the bank and that he used the strategy hundreds of times with the knowledge and consent of his immediate supervisors.

A sign of JP Morgan Chase Bank is seen in front of their headquarters tower in New York.

Amr Alfiky | Reuters
A sign of JP Morgan Chase Bank is seen in front of their headquarters tower in New York.

The Justice Department is asking a judge to put the brakes on a civil lawsuit against J. P. Morgan Chase, citing an ongoing probe into a “related criminal case” that involves alleged manipulation of precious metals markets.

The department wants a six-month postponement in the proceedings of the civil lawsuit, which was filed in 2015 by hedge fund manager Daniel Shak and two commodity traders. The government also says it could ask for a longer delay in the case, according to a court filing on Monday.

The move comes days after Shak’s lawyer, David Kovel, sought permission to reopen questioning of two former J. P. Morgan traders and the bank’s current global head of base and precious metals trading.

Kovel, in making the request with the Manhattan federal judge in the civil case, cited last month’s guilty plea by one of those former traders, John Edmonds, in federal court in Connecticut.

Edmonds admitted making bogus bids on precious metals contracts while working at the bank from 2009 to 2015.

Neither J. P. Morgan Chase nor Kovel’s clients have opposed the Justice Department’s request.

In arguing for a delay, the Justice Department said Shak’s lawsuit is “related” to Edmonds’ criminal case and that Edmonds has “pleaded guilty and acknowledged his own participation in such conduct, as well as that of other traders.”

“Edmonds awaits sentencing, but the broader investigation is ongoing,” the Justice Department said. The U.S. wants to delay the civil case “to protect the integrity of its ongoing criminal investigation,” it said.

J. P. Morgan did not respond to a request for comment by CNBC. Kovel declined to comment.

Tuesday night, after this story first was published, Judge Paul Engelmayer ordered the federal prosecutors to explain in detail by Monday why postponing proceedings in the civil lawsuit would not harm those involved, and why reopening questioning “would be detrimental to the Government’s ongoing criminal investigation.”

Englemayer also wrote that he regards Edmonds’ guilty plea “as potentially highly consequential” to the civil case.

In his guilty plea, the 36-year-old Edmonds said he had learned to make bogus trade orders from senior traders at the bank and that he used the strategy hundreds of times with the knowledge and consent of his immediate supervisors. He admitted to working with “unnamed co-conspirators” at J. P. Morgan, according to the Justice Department.

Kovel wants to question Edmonds again as well as Michael Nowak, the bank’s global head of base and precious metal trading, and former J. P. Morgan Chase Managing Director Robert Gottlieb. The three had previously answered questions under oath in the civil case.

Kovel said in court filings that Nowak was the immediate supervisor of Edmonds, while Gottlieb was Edmonds’ mentor.

In his prior deposition, Edmonds said that Gottlieb sat only a “couple feet” away from him for about five years, and that he was “somebody [he] looked up to in the business,” who helped guide and train him.

Nowak is described by Edmonds as his direct supervisor, with whom he would sometimes discuss trading strategies. Nowak was also the person responsible for overseeing the performance and risk of Edmonds’ portfolio, according to the deposition.

Edmonds also stated in his prior deposition that he would enter precious metals trades for both Nowak and Gottlieb, among others.

The civil lawsuit claims Shak and his fellow plaintiffs lost tens of millions of dollars as a result of actions by J. P. Morgan’s traders.

 

 

 

-END-

Nicholas is in my camp on this. Both EFP’s and the LBMA are frauds.
(courtesy Nicholas B)

 

Good Morning Bill, Harvey

When EFP contracts first came to the attention of analysts in 2016 because of the material and serial daily volumes, an assumption was made that somehow the LBMA must be involved because from where else could physical precious metal in such volume possibly be sourced. Now that these EFP volumes have established a track record of being multiples of annual production (both in silver and gold), it is obvious that the transfer of any physical metal is most certainly not involved although any precise and better particulars are not provided by the plethora of regulators. These days most, if not all, regulators fall into that tragic category of pathetic corrupted and ,conflicted persons who will do anything necessary (including indulging in complete inaction) in order to preserve a monthly pay cheque and a pension promise. If the transfer of physical metal is not involved, then there is no longer a need to postulate that the LBMA is, in any way, involved in EFP contracts. EFPs are merely an extension of all the fiat based manipulative techniques devised by the central planners,

Obviously the LBMA could not break ranks and make any public comments that even begin to lift the veneer on the hopelessly corrupt and opaque world of gold and silver trading in Western precious metal markets. The LBMA decided recently to embark on some damage limitation by disseminating a propaganda blitz in respect of the physical precious metal volumes that are conducted by its members. Here is an analysis of the LBMA’s own data.


It can be seen that all these month end volumes are metronomically constant. Therefore the only net movement of real physical precious metal on the LBMA (as opposed to the perpetual churning of paper contracts) relates to the net monthly physical metal inflows, which presumably can be discerned from import/export data that is disseminated by various agencies. Whilst the LBMA clearly seeks to discourage this kind of analysis by only releasing its data three months in arrears, nevertheless, the fraudulent and false claims of the LBMA are manifest.

Regards,
Nicholas…

end
Strange!! China officially adds a tiny 9.9 tonnes of gold to its official reserves. Are they signalling something here?  Will they raise their official levels each and every month.  I am pretty sure that China has approx 20,000 tonnes of gold to ts credit with only 1852 tonnes of it being official.
(courtesy zerohedge)

Is This Why Gold Just Had Its Best Month In 2 Years?

Spot Gold prices rallied for three straight months to end 2018, with December seeing the biggest monthly gold gains in around two years (since Jan 2017)…

At the same time, China’s official gold reserves rose for the first time in around two years (since Oct 2016)…

China’s gold reserves had been steady at 59.240 million fine troy ounces from October 2016 to November 2018, according to data from the People’s Bank of China, and suddenly jumped to 59.560 million fine troy ounces at end-December.

The PBOC’s overall FX reserves rose by US$11bn in December to $3.07tn. However, The increase likely reflects the currency valuation effect, which Goldman estimates to be +$14bn in December.

It’s not just China buying. As Bloomberg reports, Poland and Hungary surprised the market in 2018 by adding to their gold holdings for the first time in many years.

“It’s a bullish sign for gold,” Matthew Turner, a commodities strategist at Macquarie Group Ltd. in London, said by phone.

“The reasons could be diversification, a wish to get away from the dollar, but it’s hard to be certain because we just don’t know enough about what their motivations are.”

As is very clear from the chart above, China has previously spent long periods without revealing increases in gold holdings. When the central bank announced a 57 percent jump in reserves to 53.3 million ounces in July 2015, it was the first update in six years.

“I’m always wary of year-end moves, but if they buy again, then it’ll look like they’re on another run of additions, like they did in 2015-2016.” Turner said.

Crucially, the size of the gold addition are far less important than the signaling effect – why did China decide now was the right time to publicly admit its gold reserves are rising?

After months of seeming stability in the yuan relative to gold, Q4 2018 saw China seemingly allow gold to appreciate relative to the yuan

One wonders if Alasdair Macleod is on to something when he notes that if the yuan is to replace the dollar for China’s trade, officials will have to back it with gold

It is hard to see how the US can match a sound-money plan from China. Furthermore, the US Government’s finances are already in very poor shape and a return to sound money would require a reduction in government spending that all observers can agree is politically impossible. This is not a problem the Chinese government faces, and the purpose of a gold-linked jumbo bond is not so much to raise funds; rather it is to seal a price relationship between the yuan and gold.

Whether China implements the plan suggested herein or not, one thing is for sure: the next credit crisis will happen, and it will have a major impact on all nations operating with fiat money systems. The interest rate question, because of the mountains of debt owed by governments and consumers, will have to be addressed, with nearly all Western economies irretrievably ensnared in a debt trap. The hurdles faced in moving to a sound monetary policy appear to be simply too daunting to be addressed.

Ultimately, a return to sound money is a solution that will do less damage than fiat currencies losing their purchasing power at an accelerating pace. Think Venezuela, and how sound money would solve her problems. But that path is blocked by a sink-hole that threatens to swallow up whole governments. Trying to buy time by throwing yet more money at an economy suffering a credit crisis will only destroy the currency. The tactic worked during the Lehman crisis, but it was a close-run thing. It is unlikely to work again.

Because China’s economy has had its debt expansion of the last ten years mostly aimed at production, if she fails to act soon she faces an old-fashioned slump with industries going bust and unemployment rocketing. China offers very limited welfare, and without Maoist-style suppression, faces the prospect of not only the state’s plans going awry, but discontent and rebellion developing among the masses.

For China, a gold-exchange yuan standard is now the only way out. She will also need to firmly deny what Western universities have been teaching her brightest students. But if she acts early and decisively, China will be the one left standing when the dust settles, and the rest of us in our fiat-financed welfare states will left chewing the dirt of our unsound currencies.

 

Is China’s “signal” an explicit warning of the end to the dollar era that has existed since August 1971, when gold as the ultimate money was driven out of the monetary system.

end

 

 

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 UP TO 6.8523/HUGE DEVALUATION FOR THE PAST FOUR WEEKS STOPS ON TRUCE/

//OFFSHORE YUAN:  6.8525   /shanghai bourse CLOSED UP 18.22 PTS OR 0.72%

 

HANG SANG CLOSED UP 209.67 POINTS OR 0.82%

 

 

2. Nikkei closed UP 477.91 POINTS OR 2.44%

 

 

 

 

3. Europe stocks OPENED ALL RED

 

 

 

 

 

 

/USA dollar index FALLS TO 95.87/Euro RISES TO 1.1453

3b Japan 10 year bond yield: RISES TO. .01/ !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 108.30/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD IS NOW TARGETED AT .11%/JAPAN LOSING CONTROL OF THEIR BOND MARKET

 

3c Nikkei now JUST BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI:: 47.92 and Brent: 57.03

3f Gold UP/JAPANESE Yen UP CHINESE YUAN:   ON -SHORE UP/OFF- SHORE: UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO +.20%/Italian 10 yr bond yield UP to 2.91% /SPAIN 10 YR BOND YIELD UP TO 1.48%…ITALIAN 10 YR BOND YIELD/GERMAN BUND: 2.71: DANGEROUS FOR THE ITALIAN BANKING SYSTEM

3j Greek 10 year bond yield FALLS TO : 4.40

3k Gold at $1292.00 silver at:15.76   7 am est) SILVER NEXT RESISTANCE LEVEL AT $18.50

3l USA vs Russian rouble; (Russian rouble UP 60/100 in roubles/dollar) 66.94

3m oil into the 49 dollar handle for WTI and 58 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation. 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 108.30 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 0.9814 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1233 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT/ARTICLE 50 COMMENCES MARCH 29/2017

3r the 10 Year German bund now POSITIVE territory with the 10 year RISING to +0.20%

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 2.64% early this morning. Thirty year rate at 2.94%

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

6.  TURKISH LIRA:  UP  TO 5.3582

 

 

Futures Slide, Global Rally Fizzles As Trade Talks Begin

U.S. stock futures slumped more than 25 points from overnight highs and European equities dropped and Friday’s “jumbo” 747 point surge in the Dow lost momentum as trade talks began in Beijing between the U.S. and China, with both sides pressured by concerns over the economy and market jitters. Chinese Vice Premier Liu He unexpectedly attended the first day of talks, Bloomberg reported, to discuss topics including IP, agriculture and industrial purchases in the first formal meeting between the two sides since Donald Trump and Xi Jinping agreed to a 90-day truce on Dec. 1. The dollar fell to the lowest in more than two months against peers.

S&P futures slumped back to red, after gaining as much as 0.8% shortly after the session open, as European equities drop shortly after the open, its third drop in four sessions, and reversing a broad rally in Asia, led by Japanese shares.

European shares slumped right off the start after a stellar opening for Asian bourses helped by the weaker dollar, pushing MSCI’s world equity index, which tracks shares in 47 countries, to its highest level in 2-1/2 weeks, and 6% higher than its December trough. The Stoxx 600 drops 0.4%, dragged by food and beverage sector after beer producers downgrades by Goldman Sachs. Additionally, German factory orders fell more than expected in November. Orders slid 1% from October, and posted a year-on-year decline of 4.3%, the biggest in more than six years

After gains of more than 2% in Shanghai and HK on Friday before the U.S. jobs data and Powell’s comments, both markets added to gains on Monday, with the Shanghai Comp. (+0.7%) and Hang Seng (+0.8%) confirming to the positive tone following the RRR cut announcement and with mid-level trade discussions set to resume between US and China today, although the mainland lagged its regional peers following a CNY 170bln liquidity drain by the PBoC. Japan’s Nikkei reversed Friday’s plunge to gain 2.4%.

“It is a reminder that central banks still have some firepower to deal with lower growth prospects, and perhaps what we are also getting some return of liquidity as investors return from the holidays and the ability to think things through,” said Investec economist Philip Shaw. He warned, however, that there is continued uncertainty about global growth, trade talks between the United States and China and U.S. monetary policy. “There are a number of questions that remain unanswered,” Shaw said.

Elsewhere, emerging-market shares jumped, and the Korean won, Malaysian ringgit and the Indonesian rupiah led gains in major currencies.

Treasury yields fell following Friday’s biggest one-day percentage surge in two years amid a broad-based rotation out of bonds and into stocks.

The Bloomberg Dollar Spot Index stayed on the back foot on soft Fed rate-outlook pricing and slid to its lowest level since Oct. 18 as Treasuries gained.Tthe pound slipped against the euro as U.K. lawmakers sought to avoid a no-deal Brexit. The euro currency remained solidly up even as data showed German factory orders fell more than expected in November.

West Texas Intermediate crude extended a recent rebound to trade above $49 a barrel. Gold climbed after China reported increased holdings.

US President Trump and Chinese President Xi Jinping are reportedly mulling a potential summit in H1 2019 if progress is made in trade talks which begin today in Beijing according to sources. Elsewhere, US President Trump renewed his threat to invoke a national emergency as a way to circumvent Congress and build a wall on the southern US border in which he warned he may declare a national emergency dependent on what happens over the next few days.

In the latest Brexit developments, UK PM May warned that Britain would be in unchartered territory if her Brexit deal is rejected by parliament and said the vote would be held around 15th January as expected. May also left open the possibility of a 2nd referendum but stated that this is not a course of action she wanted to follow. More than 200 UK lawmakers from the Conservative and opposition parties have signed a letter to UK PM May asking her to rule out the option of a No deal Brexit. (Newswires) This also comes in the context of reports stating that Parliament will vote on two amendments to the finance bill on Tuesday that would result in a government shutdown unless UK PM May is able to secure support for her Brexit deal.

In geopolitical news, a US destroyer has sailed near the Parcel Island chain to challenge China’s excessive maritime claims. Subsequently, China’s Foreign Ministry say they have sent a vessel to verify this, and warn it off. Adding that US action in the sea has violated law, and China has urged the US to stop these actions.

Expected data include ISM Non-Manufacturing Index, while the publication of factory orders is delayed because of the government shutdown. Commercial Metals is reporting earnings

Market Snapshot

  • S&P 500 futures down 0.1% to 2,528.50
  • STOXX Europe 600 down 0.4% to 342.15
  • MXAP up 1.9% to 148.38
  • MXAPJ up 1.3% to 478.07
  • Nikkei up 2.4% to 20,038.97
  • Topix up 2.8% to 1,512.53
  • Hang Seng Index up 0.8% to 25,835.70
  • Shanghai Composite up 0.7% to 2,533.09
  • Sensex up 0.5% to 35,855.89
  • Australia S&P/ASX 200 up 1.1% to 5,683.19
  • Kospi up 1.3% to 2,037.10
  • German 10Y yield fell 1.3 bps to 0.195%
  • Euro up 0.4% to $1.1443
  • Italian 10Y yield rose 3.8 bps to 2.538%
  • Spanish 10Y yield fell 1.0 bps to 1.464%
  • Brent futures up 3.1% to $58.81/bbl
  • Gold spot up 0.4% to $1,290.84
  • U.S. Dollar Index down 0.3% to 95.88

Top Overnight news from BBG

  • U.S. and Chinese officials are set to begin trade negotiations on Monday in the hope of reaching a deal during a 90-day truce between President Donald Trump and his counterpart Xi Jinping.
  • Chinese Vice Premier Liu He — top economic adviser to President Xi Jinping — unexpectedly attended the first day of talks aimed at resolving the trade dispute between the world’s two biggest economies, according to people familiar with the matter and a photo seen by Bloomberg
  • Detailed figures showing how the U.S.-China trade war is affecting imports and exports are among economic releases to be delayed this week as the partial government shutdown drags on
  • Theresa May stepped up her battle to persuade her opponents in Parliament to back her Brexit deal, warning the U.K. will be in “uncharted territory” if they reject her plan in a key vote this month
  • French Finance Minister Bruno Le Maire said the government is sticking to its growth forecast of 1.7% in 2019, even as he warned of risks from the international environment and the Yellow Vests protests in France
  • President Donald Trump said his administration is now planning a steel barrier on the U.S. border with Mexico rather than a concrete wall, even as he renewed a threat to invoke a national emergency as a way to circumvent Congress on border funding
  • German factory orders fell more than expected in November, though the numbers were distorted by airplane orders that masked signs of underlying momentum. Orders slid 1 percent from October, and posted a year-on-year decline of 4.3 percent, the biggest in more than six years

Asian stocks began the week higher across the board as the region took its first opportunity to react to the trifecta of bullish developments from last Friday including the blockbuster NFP jobs data, dovish comments from Fed Chair Powell and the PBoC’s 100bps RRR cut. ASX 200 (+1.1%) and Nikkei 225 (+2.4%) gained from the open with Australia led by strength in tech and miners, while the Japanese benchmark outperformed and initially rose by over 3% as it tracked the rally in its Wall St. counterparts. Elsewhere, Shanghai Comp. (+0.7%) and Hang Seng (+0.8%) conformed to the positive tone following the RRR cut announcement and with mid-level trade discussions set to resume between US and China today, although the mainland lagged its regional peers following a CNY 170bln liquidity drain by the PBoC. Finally, 10yr JGBs were softer with safe-haven demand dampened amid the rally across stocks, but with downside also stemmed by the BoJ’s presence in the market for JPY 1tln in JGBs with maturities spread across the curve.

Top Asian News

  • Taiwan Arrests Six Accused of Leaking BASF Tech to China
  • Temasek Said to Weigh Options for Stake in Retailer A.S. Watson
  • Indonesia’s Foreign Reserves Said to Jump to Seven-Month High
  • Musk Breaks Ground on Tesla China Plant, First Outside U.S.
  • Macau Gaming Cut to In-Line as MS Sees Revenue Declining in 2019

Major European indices are broadly in the red [Euro Stoxx 50 -0.5%] with underperformance seen in the FTSE 100 (-0.6%) after multiple downgrades within the index such as; Centrica (-4.6%), InterContinental Hotels (-2.1%) and Hargreaves Lansdown (-0.6%). Sectors are firmly in the red with the exception of IT which is the outperforming sector. Other notable stories include Tullow Oil (+1.7%) in the green after being upgraded at RBC. Ryanair (-1.0%) share prices are down as the Co are named the UK’s worst short-haul airline for the 6th consecutive year. In terms of pre-market news flow for the US, General Electric shares are up around 2.8% pre-market following reports that Apollo are considering a bid for the Co’s jet-leasing business. Elsewhere, Apple’s iPhone XR volume outlook for the initial 6-months of production has been approximately halved to 30-40mln units (WSJ). In recent news, Eli Lilly are to purchase Loxo Oncology for USD 8bln.

Top European News

  • German Factory Orders Slip as Euro-Area Demand Deteriorates
  • UBS Is at Early Stage of CEO Succession Planning, Weber Says
  • Danske Starts Investor Talks Amid $12b Debt Issuance Plan
  • BP Is Said to Plan Selling North Sea Shearwater Project Stake

In FX, the USD kicked the week off on the back-foot in a continuation of the sentiment seen on Friday after Fed Chair Powell opted to strike a more flexible approach to monetary policy than the one he was perceived to have had at last month’s press conference. As such, the DXY resides on a 95 handle after breaching 96.00 to the downside during Asia-Pac trade to a session low of 95.85. Subsequently, the greenback’s major counterparts have captured on the relative weakness of the USD to eke out mild gains with USD/JPY a key source of market focus. USD/JPY has drifted lower throughout the Asia-Pac and EU session’s with a low print of 108.04 as the move ran out of steam ahead of the psychological 108.00 level where there were said to be bids, with larger bids noted at 107.50. Of note, from a risk perspective, opening gains in European bourses proved to be relatively short-lived with EU cash bourses mostly residing in modest negative territory.

  • Elsewhere, gains for GBP vs. the USD have been relatively modest as political risk keeps prices anchored. Lawmakers return to Westminster this week and as such, Brexit-related commentary has ramped up significantly over the weekend. In terms of the latest state-of-play, May’s meaningful vote appears to be going ahead on the 15th despite reports last week acknowledging that it is unlikely to pass. As such, the likelihood of alternative scenarios such as a second referendum, no deal Brexit and a confidence vote continue to heighten but with a distinct lack of clarity on what the most like course of action will be. In terms of price action, GBP/USD is currently trading around the mid-point of the session’s 1.2719-55 range with Jan 2nd high of 1.2773 the next source of resistance should the USD concede further ground.
  • EUR has extended its recovery above 1.1400 vs. the USD with the move pausing for breath just under the 1.1450 level. Macro newsflow for the EZ remains light ahead of this week’s ECB minutes release with mixed retail sales and factory orders from Germany unable to sway investor sentiment.  From a technical perspective, Lloyds suggest a clear break above 1.1500 could inspire a gradual recovery towards 1.1600 before an eventual move towards range highs of 1.1750-1.1850.

In commodities, Brent (+2.3%) and WTI (+2.3%) prices are higher with WTI just over the USD 49/bbl level; fuelled by speculation that negotiations which are staring today between China and the US may lead to an easing in tensions between the two economies. Friday’s Baker Hughes showed a decrease in oil rigs by 8 to 877, indicating that production may begin to slowdown although EIA data, also from last Friday, presented an unexpected build in crude inventories. Elsewhere, both Goldman Sachs and Societe Generale have lowered their 2019 average price expectation for Brent from USD 70bbl to USD 62.50 and USD 73/bbl to USD 64/bbl. With their WTI forecasts also lowered from USD 64.5/bbl to USD 55.5/bbl and USD 66/bbl to USD 57/bbl respectively. Gold (+0.5%) is in the green on dollar weakness following Fed Chair Powell’s Dovish comments regarding the future of rate hikes. Elsewhere, Chinese steel and iron ore are benefiting from the aforementioned commencement of US-China trade talks. Goldman Sachs cut 3-month copper price target to USD 6100/ton from USD 6500/ton but maintained 12-month copper forecast at USD 7000/ton, while it reduced base metals targets amid notable China deceleration.

Looking at the day ahead, trade is likely to dominate the early focus next week with a US delegation visiting China for two days of trade talks with officials. Meanwhile, it’s a busy start to the week for data on Monday with Japan’s December composite and services PMIs out overnight, followed by. Germany’s November factory orders, UK December new car registrations and the Euro Area’s January Sentix investor confidence and November retail sales data. In the US we’ll get final November factory orders, durable and capital goods orders along with the December ISM non-manufacturing index. We will also get China’s December foreign reserves data at some point during the day. Away from that, the Fed’s Bostic is due to speak in the afternoon, while the ECB’s Guindos is also slated to speak.

US Event Calendar

  • 10am: Factory orders/durables data postponed by government shutdown
  • 10am: ISM Non-Manufacturing Index, est. 59, prior 60.7

DB’s Jim Reid concludes the overnight wrap

If you’re just getting back into the office this week then you might want to reconsider taking a few more days off as it feels like it’s been a lifetime in markets so far in 2019. We saw soft China data, an unprecedented cut to revenue guidance from the previously biggest company in the world in Apple, and a big drop in the latest ISM manufacturing reading initially lead markets much lower into Thursday night. However, we then did a complete U-turn on Friday when risk assets roared back thanks to a China RRR cut, a blockbuster US employment report which included the second biggest payrolls reading (312k) since August 2016 and joint-second biggest average hourly earnings reading (+0.40% mom) since February 2015, and comments from Fed Chair Powell which signalled a change in the policy reaction function of the Fed to being more nimble and flexible.

When all that was said and done the S&P 500 actually notched up a positive week (+1.86%) for the second week in a row. The VIX also dropped 6.96pts and the most since February last year. Meanwhile the STOXX 600 (+2.13%) had its best week since early November while in credit HY spreads in the US also finished 25bps tighter – thanks to an eye watering 40bps rally on Friday – for the strongest week since the first week of 2018. Brent oil (+9.31%) rose by the most in over two years and EM FX (+1.39%) by the most since February last year. The point-to-point moves for bond markets are a lot less eye catching with 10y Treasury yields for example just 5.1bps lower in yield however that does mask an intraday range during the week of just over 20bps and a low of 2.541% at one stage on Friday morning. Yields on 2y Treasuries were actually up +11.5bps on Friday alone and the most since 2015. No shortage of talking points then.

Risk assets really had Fed Chair Powell to thank for much of the above and the big question now is will this be the start of a positive momentum builder or will we see markets fade the rally once more. The hope that markets took from Powell was his signal of a likely pause in the Fed’s rate hiking cycle, something that wasn’t so apparent at the December FOMC meeting which left the market in a tantrum. He said that the Fed “will be prepared to adjust policy quickly and flexibly” and “will be patient as we watch to see how the economy develops.” Significantly, he also specifically mentioned the fall in equity prices and associated tightening in financial conditions, saying “we’re listening with sensitivity to the message that markets are sending.” Net-net, this suggests the price action over the last month has been enough to convince the Fed to stop and wait for further data before tightening policy further. Fed Funds contracts are still pricing in 8bps of cuts this year, although at one stage last week they were pricing in 18bps of cuts. The 2s10s curve is also still hovering at 17bps and the 2s5s flat however both are off their lows.

Looking ahead there’s unlikely to be much of a breather for markets this week with US and China trade delegates meeting today and tomorrow in Beijing, the UK Parliament resuming debate on the Brexit Withdrawal Bill from Wednesday, FOMC minutes on Wednesday, a US CPI report on Friday and plenty of Fedspeak including Powell once again (on Thursday) to keep us all busy.

Just on the US-China trade meeting, the US delegation will be led by Deputy US Trade Representative Jeffrey Gellish and is likely to involve mid-level officials on both sides. The talks will focus on technical matters, so it remains to be seen how pivotal this meeting will be. However, markets have become super sensitive to trade matters in recent weeks again, so expect there to still be plenty of attention on any news that trickles out. The South China Morning Post is also reporting that President Trump may hold talks with Chinese Vice President Wang Qishan in Davos later this month so there’s likely to be reasonable focus on how talks this week go in anticipation of that.

As for the FOMC minutes this week, our US economists expect the text to provide more colour on the Committee’s thinking about several key issues for market participants – namely their views about headwinds from slowing global growth, progress on the Fed’s balance sheet strategy, and the debate around the neutral rate. As for Powell, it would be a surprise if we got anything new versus what was said on Friday however we are also due to hear from Vice-Chair Clarida on the same day so it’ll be worth seeing if a similar message is repeated. As for US CPI, the consensus is for a +0.2% mom core reading which should be enough to hold the year-over-year rate at +2.2%. Encouragingly for the Fed our US economists also note that shorter term measures, namely 3m and 6m annualized readings, should rise to +2.43% and +2.11% respectively.

All that to look forward to then. In terms of the weekend just gone it’s actually been a (much welcomed) quiet one for headlines. President Trump has again renewed a threat to declare a national emergency on the border wall issue over the next few days however that doesn’t appear to be bothering markets in Asia this morning with the Nikkei (+2.77%), Hang Seng (+0.67%), Shanghai Comp (+0.44%) and Kospi (+1.54%) all benefiting from Friday’s rally on Wall Street and China’s RRR cut. S&P 500 futures are also up +0.32% in early trade this morning while there’s across the board gains for the majority of currencies across Asia. Treasuries have held onto Friday’s move however WTI oil is up another +1.46% in the early going this morning.

3. ASIAN AFFAIRS

i)MONDAY MORNING/ SUNDAY NIGHT: 

SHANGHAI CLOSED UP 18.22 PTS OR 0.72% //Hang Sang CLOSED UP 209.67 POINTS OR 0.82% /The Nikkei closed UP 477/91 POINTS OR 2.44% / Australia’s all ordinaires CLOSED UP 1.19%

/Chinese yuan (ONSHORE) closed UP  at 6.8523 AS TRUCE DECLARED FOR 3 MONTHS /Oil UP to 49.20 dollars per barrel for WTI and 58.34 for Brent. Stocks in Europe OPENED RED 

//ONSHORE YUAN CLOSED UP AT 6.8523 AGAINST THE DOLLAR. OFFSHORE YUAN CLOSED UP ON THE DOLLAR AT 6.8525: HUGE DEVALUATION/PAST SEVERAL DAYS RESUMES// TRADE TALKS NOW ON/MAJOR PROBLEMS AT HUAWEI /CFO ARRESTED   : /ONSHORE YUAN TRADING ABOVE LEVEL OF OFFSHORE YUAN/ONSHORE YUAN TRADING STRONGER AGAINST USA DOLLAR/OFFSHORE YUAN TRADING STRONGER AGAINST THE DOLLAR /CHINA RETALIATES WITH TARIFFS/ TRUMP RESPONDS TO NEW TARIFFS AND IT NOW A FULL TRADE WAR COMMENCED

 

3 a NORTH KOREA/USA

 

 

i)North Korea/South Korea/USA/

3 b JAPAN AFFAIRS

Japan/USA/China

China is not very happy with this:  The USA has its first missile drill on Japan’s Okinawa Island

(courtesy zerohedge)

US To Hold “First-Ever” Missile Drill On Japan’s Okinawa

The US Military will conduct its first-ever missile drill on the Japanese Island of Okinawa, located in the East China Sea, as Washington attempts to counter an increasingly aggressive China. Japan Times reported on Thursday that the US military had notified Japan’s government that it would deploy anti-ship missile systems around the strategically important island this year, the original story was released by Sankei Shimbun.

The war exercise would fortify the island with possible truck-mounted anti-ship cruise missile systems seen as a countermeasure to potential attacks from Chinese surface-to-sea ballistic rockets, the paper said.

China has repeatedly railed against US military expansion in Asia and the Pacific, describing the presence as a source of regional instability. In the last several years, Chinese warships have navigated near Okinawa, where roughly half of the 54,000 American troops are stationed, in an attempt to curb US military dominance in the East China Sea.

To counter the treat, Japan, has, in turn, postured its military along the Japanese archipelago, a group of 6,852 islands that extends over 1,850 miles from the Sea of Okhotsk northeast to the Philippine Sea south along the northeastern coast of the Eurasia continent.

Some military strategists believe Beijing seeks to end US military dominance in the western Pacific by exerting control of the second island chain that links Japan’s southern Ogasawara islands, the US territory of Guam, and Indonesia, said The Japan Times.

China’s rapid military build-up in the South China Sea has frightened its Asian neighbors, with Japan’s defense chief last year indicating China had been “unilaterally escalating” its military war drills in the previous year.

Okinawa’s strategic location between the Philippine, East China and South China Seas makes it a critical military outpost to preserve freedom of navigation of US warships and defend American security interests in the region. Okinawa’s proximity to China, Taiwan, the Korean Peninsula, and Japan supports rapid deployment of US marines to anywhere in the Eastern Hemisphere.

America’s presence on the island is also a critical component of its strategy to preserve peace on the Korean Peninsula.

Washington remains massively invested in Okinawa as a means of policing Asia and supporting Japan in its national defense, an obligation that started when the US signed the Security Treaty with Japan in 1960.

While America has hundreds of military bases around the world, the Okinawa base with future missile drills this year could be an indication that conflict with China is nearing in the East China Sea.

end

3 C CHINA

i)CHINA/

Gordon Chang is perhaps the world’s greatest authority on China. The writes that China does not want in live within the current Westphalian system of nation states but want to dominate..Xi is even thinking of overthrowing it altogether.

This is a must read..

(courtesy Gordon Chang/Gatestone)

Xi Jinping Thinks China Is World’s Only Sovereign State

Authored by Gordon Chang via The Gatestone Institute,

  • The trend of Chinese ruler Xi Jinping’s recent comments warns us that his China does not want to live within the current Westphalian system of nation states or even to adjust it. From every indication, Xi is thinking of overthrowing it altogether.
  • Beijing now thinks it can, with impunity, injure Americans. In the first week of May, the Pentagon said that China, from its base in Djibouti, lasered a C-130 military cargo plane, causing eye injuries to two American pilots.
  • The laser attack in the Horn of Africa, far from any Chinese boundaries, highlights Beijing’s unstated position that the U.S. military has no right to operate anywhere and that China is free to do whatever it wants anyplace it chooses. And let us understand the severity of the Chinese act: an attempt to blind pilots is akin to an attempt to bring down their planes, and an attempt to bring down planes is an assertion China has the right to kill.

The trend of Chinese ruler Xi Jinping’s recent comments warns us that his China does not want to live within the current Westphalian system or even to adjust it. From every indication, Xi is thinking of overthrowing it altogether. Pictured: Xi Jinping (center) at a Chinese Communist Party event on January 2, 2019 in Beijing. (Photo by Mark Schiefelbein-Pool/Getty Images)

“I hear prominent Americans, disappointed that China has not become a democracy, claiming that China poses a threat to the American way of life,” Jimmy Carter wrote on the last day of 2018 in a Washington Post op-ed.

That claim, Carter tells us, is a “dangerous notion.”

There is nothing more dangerous than a notion from the 39th president, even on China. China, despite what he said, threatens not only America’s way of life but also the existence of the American republic. Chinese ruler Xi Jinping has, in recent years, been making the extraordinary case that the U.S. is not a sovereign state.

The breathtaking position puts China’s aggressive actions into a far more ominous context.

Carter, and almost all others who comment on Chinese foreign policy, see Beijing competing for influence in the current international order. That existing order, accepted virtually everywhere, is based on the Treaty of Westphalia of 1648, which recognizes the sovereignty of individual states that are supposed to refrain from interfering in each other’s internal affairs. Those states now compete and cooperate in a framework, largely developed after World War II, of treaties, conventions, covenants, and norms.

Many Chinese policymakers believe they are entitled to dominate others, especially peoples on their periphery. That concept underpinned the imperial tributary system in which states near and far were supposed to acknowledge Chinese rule. Although there is no “cultural DNA” that forces today’s communist leaders to view the world as emperors did long ago, the tributary system nonetheless presents, as Stephen Platt of the University of Massachusetts points out, “a tempting model” of “a nostalgic ‘half-idealized, half-mythologized past.’ ”

In that past, there were no fixed national boundaries. There was even no concept of “China.” There was, as Yi-Zheng Lian wrote in the New York Times, “a sovereignty system with the emperor’s compound in the middle.” Around that were concentric rings. “The further from the center, the less the center’s control and one’s obligations to it,” Lian noted. The Chinese, in fact, were perhaps the first to develop the idea of a borderless world.

In short, Chinese emperors claimed they had the Mandate of Heaven over tianxia, or “All Under Heaven,” as they believed they were, in the words of Fei-Ling Wang of Georgia Tech, “predestined and compelled to order and rule the entire world that is known and reachable, in reality or in pretension.” As acclaimed journalist Howard French writes in Everything Under the Heavens, “One can argue that there has never been a more universal conception of rule.”

Unfortunately, the current Chinese leader harbors ambitions of imposing the tianxia model on others. As Charles Horner of the Hudson Institute told me, “The Communist Party of China remains committed to ordering the People’s Republic of China as a one-party dictatorship, and that is perforce its starting point for thinking about ordering the world.” In other words, a dictatorial state naturally thinks about the world in dictatorial terms. Tianxia is by its nature a top-down, dictatorial system.

Xi Jinping has employed tianxia language for more than a decade, but recently his references have become unmistakable. “The Chinese have always held that the world is united and all under heaven are one family,” he declared in his 2017 New Year’s Message. He recycled tianxia themes in his 2018 New Year’s message and hinted at them in his most recent one as well.

Xi has also used Chinese officials to explain the breathtaking scope of his revolutionary message. Foreign Minister Wang Yi, in Study Times, the Central Party School newspaper, in September 2017 wrote that Xi Jinping’s “thought on diplomacy”—a “thought” in Communist Party lingo is an important body of ideological work—”has made innovations on and transcended the traditional Western theories of international relations for the past 300 years.” Wang with his time reference is almost certainly pointing to the Westphalian system of sovereign states. His use of “transcended,” consequently, hints that Xi wants a world without sovereign states—or at least no more of them than China.

The trend of Xi’s recent comments warns us that his China does not want to live within the current Westphalian system or even to adjust it. From every indication, Xi is thinking of overthrowing it altogether, trying to replace Westphalia’s cacophony with tianxia‘s orderliness.

Xi not only spouts tianxia-like statements, his regime also employs scholars to study the application of tianxia to the world.

He also acts tianxia. His China in December 2016 seized a U.S. Navy drone in international water in the South China Sea. Chinese spokesman Yang Yujun said, according to the official Xinhua News Agency, that one of its navy’s lifeboats “located an unidentified device” and retrieved it “to prevent the device from causing harm to the safety of navigation and personnel of passing vessels.”

In fact, China’s ships had over a long period tailed the USNS Bowditch, an unarmed U.S. Navy reconnaissance vessel. The American crew, who at the time were trying to retrieve the drone, repeatedly radioed the Chinese sailors, who ignored their calls and, within 500 yards of the U.S. craft, went into the water in a small boat to seize it. The Chinese by radio told the Bowditch they were keeping the drone.

The site of the seizure, about 50 nautical miles northwest of Subic Bay, was so close to the shoreline of the Philippines that it was beyond China’s expansive “nine-dash line” claim. There was absolutely no justification for the Chinese navy to grab the drone. The intentional taking of what the Defense Department termed a “sovereign immune vessel” of the United States showed that Beijing thought it was not bound by any rules of conduct.

Beijing now thinks it can, with impunity, injure Americans. In the first week of May, the Pentagon said that China, from its base in Djibouti, lasered a C-130 military cargo plane, causing eye injuries to two American pilots.

The laser attack in the Horn of Africa, far from any Chinese boundaries, highlights Beijing’s unstated position that the U.S. military has no right to operate anywhere and that China is free to do whatever it wants anyplace it chooses. And let us understand the severity of the Chinese act: an attempt to blind pilots is akin to an attempt to bring down their planes and an attempt to bring down planes is an assertion China has the right to kill.

China has been called a “trivial state,” one which seeks nothing more than “perpetuation of the regime itself and the protection of the county’s territorial integrity.” This view fundamentally underestimates the nature of the Chinese challenge. China, under Xi Jinping, has become a revolutionary regime that seeks not only to dominate others but also take away their sovereignty.

Xi at this moment cannot compel others to accept his audacious vision of a China-centric world, but he has put the world on notice.

These events together mean, once again, that Carter has failed to understand a hardline regime. In his op-ed, he warns America against starting “a modern Cold War” with China. Washington, in reality, cannot start anything. There already is a struggle that Xi Jinping has made existential.

end
Once again Mainland China wants the peaceful reunification of Taiwan and it reserves the right to use force.  Taiwan would be the China’s first aspiration and it reserves the option of taking all necessary measures in achieving that goal.
(courtesy zerohedge)

Visualizing The Military Imbalance In The Taiwan Strait

In a speech marking 40 years since the improvement in ties with Taiwan, Chinese President Xi Jinping has has once again called for peaceful reunification, also warning that China reserves the the right to use force.

Although it is self-governed and de-facto independent, Taiwan has never formally declared independence. Xi also said thatreunification is “an inevitable requirement for the great rejuvenation of the Chinese people” and that his government “reserves the option of taking all necessary measures” against outside interference with peaceful reunification.

As Statista’s Niall McCarthy notes, Xi’s comments are in line with China’s long-standing policy on the issue and it is generally regarded as one of the greatest flashpoints in relations between Beijing and Washington.

Despite the improvement in ties in recent years, China has never ruled out the possibility of invasion and it has continued acquiring the military capability to do so. Regional tensions have also grown due to China’s territorial claims and aspirations in the South China Sea, something which has prompted Japan to cast aside its postwar pacifism.

Even though the possibility of China taking Taiwan by force is low, the military balance in the Taiwan Strait is firmly in China’s favor…

The following infographic provides an overview of that imbalance and it is based on an annual U.S. government report.

Infographic: The Military Imbalance In The Taiwan Strait | Statista

You will find more infographics at Statis

end

The USA continues to carry out its latest “freedom of Navigation’ in the South China seas much to the anger of China. Obviously this will not help in the trade negotiations.

(courtesy zerohedge)

As Trade Talks Begin, US Infuriates Beijing With Latest Navy Operation In South China Sea

As a US delegation led by senior trade officials arrived in Beijing on Monday to begin the first round of in-person talks to resolve the burgeoning US-China trade war, the US has reportedly carried out its latest ‘Freedom of Navigation’ operation in the South China Sea – though at least this time there wasn’t a near-collision with a Chinese ship.

Since President Trump’s inauguration, the US has stepped up its ‘Freeops’ as the US Navy seeks to contain China’s growing military ambitions in the Pacific. But since the trade war began, the US has demonstrated a keen sense of timing, contributing to China’s decisions to cancel security conferences and reconsider coming to the table to talk on trade.

Nine Dash

But this time, the controversial maneuver seemingly doesn’t bode well for the fate of a lasting US-China trade compromise. According to the Wall Street Journal, the US-guided-missile destroyer the USS McCampbell patrolled within 12 miles of the Paracel Islands in the South China Sea on Monday. In particular, it came within a few miles of three islands: Tree, Lincoln and Woody.

China sent its own ship to try and deter the McCampbell, but ultimately decided to file an official complaint. According to Bloomberg, China urged the US to halt “provocative actions” in the South China Sea. “The actions by the U.S. fleet have violated Chinese law and related international laws, and undermined the peace, security and good order in the relevant waters,” Chinese Foreign Ministry spokesman Lu Kang told a briefing Monday in Beijing. “China strongly opposes the actions.”

USS

The Paracels are claimed by Vietnam and Taiwan but have been controlled by China since the Communist Nation seized them from Vietnamese forces in 1974. Further alarming the US, Beijing has upgraded several military outposts in the Paracels and deployed jet fighters to at least one, according to satellite images and US officials.

The ship patrol was meant to challenge excessive maritime claims by Beijing and to “preserve access to the waterways as governed by international law,” according to a statement from Lt. j.g. Rachel McMarr, a spokeswoman for U.S. Pacific Fleet.

China sent a vessel to warn off the American ship and has lodged a complaint with the U.S., Chinese Foreign Ministry spokesman Lu Kang said Monday at a regular press briefing in Beijing. Mr. Lu urged the U.S. to stop taking provocative action in the region and avoid disrupting trade talks under way in Beijing.

“It is imperative for the two sides and I believe we have a responsibility to create an enabling atmosphere for these talks at this time,” he said.

In a response delivered by a spokeswoman for the US Pacific Fleet, the operation was intended to “preserve access to the waterways as governed by international law.” The South China Sea is a key artery for international trade and commerce – another reason why the US and its allies have so vehemently opposed China’s militarization of the region.

China claims it has “indisputable” sovereignty over all South China Sea islands and their adjacent waters, and has often accused the US of destabilizing the region with its naval patrols.

The issue of US military challenges to China’s claims over the SCS and Taiwan could become flash points in the relations between the two superpowers this year, as President Xi has already delivered two saber-rattling speeches, including a speech to the Central Military Committee on Friday where he ordered China’s military to “prepare for war.”

Circling back to trade negotiations, in what could be construed as a positive development, Chinese Vice Premier Liu He, China’s top economic official who has been tasked with leading the trade talks, attended the first day of US-China trade talks in Beijing on Monday, which could offer some hope to investors

end

And now really scary stuff: Xi orders the Chinese army to “prepare for war”

(courtesy zerohedge)

President Xi Orders Chinese Army To “Prepare For War”

In just a few short days, China has proved that investors who have been underestimating the geopolitical risks stemming from the simmering tensions between the US and China over the latter’s territorial claims in the South China Sea and paranoia over the fate of Taiwan – a de facto independent state that President Xi Jinping is aggressively seeking to bring under the heel of Beijing – have done so at their own peril.

Earlier this week Xi Jinping, the Chinese emperor for life president provoked an angry rebuke from Taiwan’s pro-independence president when he demanded during a landmark speech earlier this week that Taiwan submit to “reunification” with Beijing.

Xi

And as if tensions between China and the international community weren’t already high enough amid a worsening economic slowdown that’s hurting global economic growth and a tenuous trade “truce” with the US,  in another speech delivered on Friday during a meeting of top officials from China’s Central Military Commission which he leads, Xi took his belligerent rhetoric one step further by issuing his first military command of 2019: that “all military units must correctly understand major national security and development trends, and strengthen their sense of unexpected hardship, crisis and battle.”

“The world is facing a period of major changes never seen in a century, and China is still in an important period of strategic opportunity for development,” Xi said and added that China’s armed forces must “prepare for a comprehensive military struggle from a new starting point,” Xi saidadding that “preparation for war and combat must be deepened to ensure an efficient response in times of emergency.”

Xi’s order prioritizes training with a focus on combat readiness, drills, troop inspections and resistance exercises.

It applies to all units of the PLA, including troops, academies and armed police, and is designed to “ensure new challenges are met and battles are won,” according to a copy of the guidelines seen during the television report.

In other words, Xi just ordered the Chinese military to prepare for war.

According to the South China Morning Post, the order “will kick-start a year of enhanced military training and exercises.” Which, of course, will build on the expansive military exercises carried out in 2018, where China flexed its military muscle in the South China Sea and Strait of Taiwan to show foreign powers that might support Taiwanese independence (i.e. the US) that China still takes the “One China” policy very, very seriously.

Xi

In addition to prioritizing training for military readiness, the CMC issued a separate set of guidelines intended to boost morale, affirming that military personnel would be promoted on the basis of merit while promising greater leniency and understanding for mistakes made during training.

As one Chinese “military expert” quoted by the SCMP pointed out, the order was probably intended as a warning to foreign powers who might try to interfere in its affairs.

Shanghai-based military expert Ni Lexiong said the recent “high-profile gestures” were probably intended as a warning to those who sought to obstruct the mainland’s plans for the reunification of Taiwan.

“[They] show how seriously Xi is taking China’s military training and its preparations for war, while also flexing its strength,” he said.

A former PLA officer was more explicit: a retired PLA colonel Yue Gang said that as well as the rising tensions between Beijing and Taipei,Xi’s rallying call to the military was a response to the growing uncertainty over the geopolitical struggle between China and the United States.

“China is increasing its military training so that it has the best solutions for the worst outcomes, either related to the US or across the [Taiwan] strait,” he said.

“Over the coming year, the US might use Taiwan and the South China Sea as bargaining chips to get what it wants from China with regards to the trade war,” he said.

“And there is always the possibility of increased independence calls from Taiwan.”

Meanwhile, China’s People’s Daily, the official publication of the Communist Party, reported Thursday that the PLA has begun an extensive “realistic training exercise” with live fire in Shandong, eastern China. The publication did not specify what the objective of this live-fire exercise was, nor did Chinese agencies report whether Xi mentioned any particular acts to improve combat readiness that the PLA either has already begun to take or will do so in the future.

That same day, the nationalistic Chinese state-run Global Times highlighted comments by acting Pentagon chief Patrick Shanahan, who told reporters that his top priorities were “China, China, China.” The publication warned American officials against anti-Chinese “paranoia” while also threatening to make America “pay an unbearable price if the U.S. infringes on China.”

“When Shanahan shouts ‘China, China, China,’ Beijing must respond by accelerating construction of a deterrent against the U.S. China must make good use of deterrence, learning to make others feel fearful without being furious.”

Despite these explicit warnings and military ambitions, we are confident that in the eyes of the market and general population, the prospects for a prolonged “trade war” with China will remain completely distinct from speculation about the possibility of a hot war – that is, until it’s too late to heed the warnings from US military personnel in the Pacific, who have been outspoken about the threat posed by the Chinese and their growing military ambitions.

end

 

I am surprised that real GDP for China is this high.  A Chinese professor in a paper presented to investors claims that the real Chinese GDP growth is below 2%

(courtesy zerohedge)

Chinese Professor Censored After Admitting Real China GDP Growth Is Below 2%

Stirring up unpleasant echoes of the market chaos that swept the world in the opening days of 2016, Apple’s decision to cut its quarterly revenue guidance for the first time in 16 years – citing slowing iPhone sales in China as the primary culprit – reinforced concerns about slowing growth in the world’s second-largest economy that could have wide-ranging repercussions for global markets.

This wasn’t the only factor prompting fears over slowing Chinese economic growth: a batch of soft economic data including consumption, manufacturing surveys and retail sales indicators has undoubtedly helped contribute to the paranoia. As we argued on Friday, when prognosticating the direction of global markets in 2019,all eyes will be on the USA’s largest trading partner.

For the first time since it overtook Japan as the world’s second-largest economy back in 2011, China has displayed surprisingly weak economic data that have somehow obscured the widely held, if rarely discussed in public belief that these data, which are compiled by the Chinese state, are largely suspect. Contributing to its goal of maintaining order and stability at home, the Communist Party is widely believed to doctor and goalseek its data to present a rosier picture. Apparently, the notion that this is probably happening has become so widely accepted that investors often lose sight of it.

China

But in an well-timed reminder, the Financial Times has published a story citing a presentation by a controversial yet widely recognizable Chinese economist and others who argue that China’s GDP growth could be much weaker than the official data – which showed the Chinese economy grew at an annualized rate of 6.7% through the third quarter – reflect.

To the consternation of Chinese censors, a presentation delivered by an economics professor at Renmin University in Beijing sparked a controversy last month when the professor claimed that a secret government research group had estimated China’s growth in gross domestic product could be as low as 1.67% in 2018, far below the official rate.

Even experts who are skeptical of the official data dismissed the presentation, delivered by a professor Xiang Songzuo, as unrealistic. Yet despite being scrubbed from Chinese social media and the mainland Internet, the presentation has been viewed 1.2 million times on YouTube (clip above), suggesting that Xiang’s warnings are resonating with everyday Chinese consumers, who are struggling with one of the worst-performing stock markets of 2018, a collapsing shadow lending sector, a crackdown on China’s vast online peer-2-peer lending infrastructure, and a currency that has weakened significantly over the past 12 months.

To be sure, (almost) nobody is forecasting a recession in China or even a slowdown to sub-5% growth over the next two years (for the simple reason that Beijing would never allow such an admission due to social instability fears).

But regardless of whether the presentation is accurate, it doesn’t change the fact that China’s economy has slowed…

Three

…and leading indicators suggest that the slowdown will continue.

China

At the end of 2018, the China Beige Book (CBB) fourth-quarter preview, released Dec. 27, reported that sales volumes, output, domestic and export orders, investment, and hiring all fell on a year-over-year and quarter-over-quarter basis. A much-weaker 2019 appears to be in the offing for China, but it’s not solely due to trade tensions with the United States. The domestic economy was already on weak footing and the CBB argues that government support is unlikely.

“China is an aging, leveraged country, with excess industrial capacity. Appearances by inflation should be cheered,” according to the CBB Q4 preview. “They are also rare.”

At least one prominent financier who has an on-the-ground view of Chinese consumer sentiment says the mood is more dour than even the depths of the financial crisis.And since this will likely continue to constrain private spending and investment, the big question on every domestic investors’ mind is will the Chinese government revive its stimulus efforts, like one powerful committee of economic policy makers recently promised to do?

“Domestic sentiment is definitely very bad, perhaps even worse than during the 2008 global financial crisis,” said Fred Hu, founding partner of Primavera Capital, a Hong Kong-based private equity group, and former Greater China chairman for Goldman Sachs.

“In theory, China has wide latitude to boost domestic demand to offset the trade war hit on external demand. But with sagging business and consumer confidence, private spending on both capital expenditure and personal consumption is more likely to trend down.”

Far from being some impossible task, bypassing China’s opaque official statistics is as easy as recognizing that there are other measures that are more difficult to falsify. And these indicators still point to relatively robust growth.

Huang Yiping, vice dean at Peking University’s National School of Development, who stepped down from the People’s Bank of China’s monetary policy committee in June, acknowledges that the official growth rate may be overstated. But he says that the so-called “Li Keqiang Index” – a gauge of tamper-resistant indicators such as electricity production and freight volumes, which premier Li Keqiang privately told a US ambassador in 2007 that he views as more trustworthy than GDP – still points to growth of “6 per cent or slightly below.”

But more importantly, one individual who spoke with the FT pointed out, to a significant extent, the slowdown is largely the government’s own fault (for having the gall to try and force through some macroprudential deleveraging).

Starting in mid-2016, policy shifted from stimulus to austerity, a response to years of warnings about financial risks from a rapid debt build-up. A “regulatory windstorm” targeting shadow bank lending, which had channeled loans to the riskiest borrowers, led to a sharp drop on off-balance sheet credit.

Tighter credit combined with stricter environmental enforcement and a drive to shutter low-end factories — part of Mr Xi’s broader call for a “new era” in which growth quality would take priority over quantitative targets.

“To some extent the slowdown is a result of the government’s own priorities. China is transitioning from relatively low cost to high cost, so a lot of old industries need to be shut down,” says Huang Yiping, vice dean at Peking University’s National School of Development, who stepped down from the People’s Bank of China’s monetary policy committee in June. “The key economic policy battles like cleaning up the environment and containing financial risk all contributed to the slowdown in economic activity,” he says.

More recently, Beijing appears to have gotten second thoughts about its deleveraging campaign, although the government’s light-touch approach to stimulus reflects the reduced policy flexibility today compared with 2008, when debt levels were lower and a simpler growth model based on investment in housing and infrastructure had more room to run.

At the end of the day, China is simply mired in the same problem plaguing the rest of the developed world – it has too much debt. The amount of new capital investment required to generate a given unit of GDP growth has more than doubled since 2007, according to Moody’s. In other words, investment stimulus produces little bang for Beijing’s buck, even as it adds to the debt levels

China

And yet, Beijing’s restrained stimulus has left markets underwhelmed, with China’s stock market tumbling 25% in 2018.

“[Beijing] will soon have no choice but to launch massive stimulus,” says Alicia García Herrero, chief Asia Pacific economist at Natixis in Hong Kong. “They do not want to give away their credibility because they said they wouldn’t do it, but there is no time to be cautious any more. Not having growth is ultimately the worst outcome of all.”

He’s right, although as we discussed last night, a further complication for Beijing arises from the fact that China’s economy is in the middle of a “tectonic transition” as its formerly massive current account surplus is about to turn negative…

Four

… which in turn is creating serious disruptions in capital flows that could portend weakness beyond China’s borders, assuming the trade war continues to impede the foreign investments that China’s increasingly consumption-based economy needs to expand.

end

China is hurting more from the tariffs than the uSA.  He is probably right

(courtesy zerohedge)

Wilbur Ross: Trade War Is Hurting China More Than US

Contrary to claims made Monday by the pro-Communist Global Times, Commerce Secretary Wilbur Ross said Monday during an interview on CNBC that President Trump’s trade war is hurting China more than it is hurting the US – implying that Beijing will relent and strike a trade deal with the US.

Ross claimed that US tariffs are impairing China’s ability to “create jobs” and “stave off social unrest.” Because China exports far more to the US than the US does to China, Beijing is facing a “binary decision”, and it’s finding out just how much it depends on the US.

Ross

He added that the talks are happening at an “appropriate level,” and that the US delegation is large because of the number of issues that must be addressed, including eventual enforcement and compliance.

“What will come out of it is a resolution: Will we go the negotiated rout or will we go in the direction of more tariffs.”

Ross said the sanctions against ZTE – which nearly destroyed the Chinese telecoms giant – helped demonstrate to China just how badly it needs the US.

Already, companies are moving manufacturing out of China, Ross said. Though it’s not all coming to the US, Ross said much of it is moving to other Asian countries.

In a sign that China is taking the negotiations seriously, top Chinese trade official Liu He unexpectedly made an appearanceat the trade talks in Beijing that began on Monday. The “mid-level” talks are intended to lay the groundwork for negotiations: Breakthroughs aren’t expected until at least next week, when a delegation led by Trade Rep. Robert Lighthizer is expected to meet with a delegation led by Liu in the first round of “high-level” talks.

To be sure, by at least one measure, Ross’s claims that China has been hurt worse than the US doesn’t ring true. While China has absolutely suffered a larger deceleration in economic growth, Chinese stocks have actually outperformed US shares since the US imposed the first $50 billion in China-specific tariffs.

Meanwhile, European shares have underperformed both the US and China as collateral damage from the trade war has stretched across the globe.

Stocks

As investors try to gauge the success of Monday’s talks, here are seven things to look out for.

Watch Ross’s comments below:

Secretary Ross: Talks with China are at the appropriate level from CNBC.

 end

4.EUROPEAN AFFAIRS

/ FRANCE

Macron arrests the organizer of the “Yellow Vest” movement: Eric Drouet and that will surely not calm things down

(courtesy zerohedge)

Macron Arrests “Yellow Vest” Organizer In Escalation Which Will Surely Calm Things Down

French authorities have arrested a key organizer of the Gilets Jaunes (Yellow Vest) movement for leading an unauthorized demonstration, signaling a crackdown on the anti-government demonstrators after nearly two months of violence-filled protests.

Eric Drouet, a truck driver from the suburbs of Paris, was arrested in Paris on Wednesday evening near the iconic Champs-Élysées avenue – a prime location for the yellow vests to gather. Drouet was detained while leading a commemoration of yellow vests who have died since the movement’s inception, most of whom were hit by cars during protests at roundabouts throughout the country, according to the Wall Street Journal.

The arrest and detention of Mr. Drouet is completely unjustified and arbitrary,” said Drouet’s attorney in a Thursday statement.

The coming weeks will test whether Mr. Macron’s government can stop the protests, which have slowed the French economy and are undermining his plans for a free-market overhaul of France. Participation waned during the holiday season, but yellow vests are organizing new demonstrations this Saturday in Paris and elsewhere. Protesters continue to camp out at roundabouts across the countryside.

The government has struggled to contain the grass-roots movement, which has no organized leadership and has refused to declare demonstrations to the authorities as required by French law.

Mr. Drouet has emerged as one of its most high-profile members, appearing in the media frequently and calling for protests on Facebook. Mr. Drouet called for Wednesday evening’s commemoration, giving the authorities an opening to detain him. –WSJ

The yellow vest protests began as a demonstration against a climate change fuel tax, and quickly spread throughout France as a widespread rejection of French President Emmanuel Macron and his administration. Rioting yellow vests have clashed with police nearly every weekend since the protests began, with upscale Paris neighborhoods experiencing shattered storefronts and burning cars.

The movement has forced Mr. Macron to reverse course on some key policies, including the suspension of a new fuel tax that prompted the protests. Raising the purchasing power of France’s working class—a key demand of the yellow vests—has vaulted to the top of the political agenda.

Mr. Macron’s concessions have helped drain some public support for the yellow vests, but polls late in December showed they retained the backing of 70% of the French public. –WSJ

Thousands of yellow vests have been arrested, straining the French judicial system.

Many of the yellow vests want the Macron administration to reimpose the wealth tax, which was repealed for all taxes except real estate. Others want yellow vest candidates in the upcoming European elections – a possibility supported by nearly 50% of those polled by Harris Interactive.

Macron’s crappy approval rating has taken a toll on his administration – with one of his closest advisers, Sylvain Fort, resigning on Thursday for personal reasons. Fort worked on Macron’s election campaign, helping sell the French public on the former investment banker in a surprise victory. He transitioned into a role as communications adviser at the Élysée Palace, where he has been unable to mitigate the rapid drop in the French president’s popularity.

Surely arresting a key leader of the yellow vest movement will calm things down.

Très excité…

end
Well that did not take long:  France is ablaze after the arrest of the founder of the Yellow Vest movement
(courtesy zero hedge)

France Ablaze Again; Yellow Vests Rage After Founder Arrested; Cops Punched, Tear Gas Deployed

More violence has erupted across France just days after French authorities arrested a key organizer of the Gilets Jaunes (Yellow Vest) movement.

After the protests began peacefully, Paris police deployed teargas and batons as protesters began to riot during the so-called ‘Act VIII” Day of Rage, while marches were underway in several other cities across France and London. Protesters in Paris hurled objects at riot police manning bridge barricades over the Seine river, while garbage bins were torched along the upscale Boulevard Saint Germain.

Sotiri Dimpinoudis@sotiridi
 · 1h

#Update: The water cannon is being deployed in #Bordeaux as is tear gas. The cops want to despire the peaceful #GiletsJaunes protestors. #ActeVIII looks like the cops do not want to work overtime in #France.

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Sotiri Dimpinoudis@sotiridi

#Update: Lots of tear gas being thrown towards the #GiletsJaunes protestors on the #ChampsElysees in #Paris right now! #ActeVIII pic.twitter.com/0djRrEdhWf

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AFP news agency

@AFP

VIDEO: #YellowVest protesters in Paris gather at the stock exchange where they demand the resignation of French president Emmanuel Macron#GiletsJaunes

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LINE PRESS@LinePress

#GiletsJaune très forte mobilisation à #Paris scènes d’insurrection dans la capitale #Acte8 #ActeVIII #05janvier #05janvier2019

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Paul Joseph Watson

@PrisonPlanet

It’s kicking off in Paris again.

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Bellingdog@Bellingdawg

The #FreeFrench forces drive back Macronist thugs.

🇫🇷 #YellowVest anti-government protesters march during a rally in Nantes#GiletsJaunes
@LoicVenanc for @AFPphoto

View image on TwitterView image on TwitterView image on TwitterView image on Twitter

AFP news agency

@AFP

VIDEO: #YellowVest protesters clash with riot police in Paris#GiletsJaunes pic.twitter.com/ON18p0UY9m

Sotiri Dimpinoudis@sotiridi
 · 2h

#Update: Pictures of Cars Scooters and trash cans are being set on fire in “Saint Germain” in #Paris of the #GiletsJaunes protestors. #ActeVIII

View image on TwitterView image on TwitterView image on TwitterView image on Twitter

Sotiri Dimpinoudis@sotiridi

Twitter user @Bellingdawg, who reported extensively on the Yellow Vest movement, reveals what’s going on in Paris and parts of france receiving less mainstream coverage.

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Bellingdog@Bellingdawg

Heavy fighting and severe casualties reported by the Frech Observatory for Human Rights at the Léopold-Sédar-Senghor footbridge during the 8th Battle of Paris.

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Bellingdog@Bellingdawg

Yellow hordes in the Montpelier afternoon. Far from defeated, the Free French record courageous advances in Paris, Rouen, Bordeaux, Lille, Marseille, Caen, Tours, Épinal and many more key strategic targets around the country.

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Bellingdog@Bellingdawg

#Alsace #FreeFrenchArmy regiment march on #Colmar.

It’s fall seems inevitable.

See Bellingdog’s other Tweets

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Bellingdog@Bellingdawg

The Battle of #Dijon continues on the rue de la Prefecture.

See Bellingdog’s other Tweets

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Bellingdog@Bellingdawg

The quays of #Bordeaux are full of #FreeFrenchArmy. It is the first time since the beginning of the revolution that there has been so many people. #YellowVests #GiletsJaunes #GlobalRevolution

Some demonstrators blocked roads:

Bellingdog@Bellingdawg

“Operation Snail” a complete success on the #A20 between #Paris and #Limoges

See Bellingdog’s other Tweets

There were also skirmishes between police and protesters in the northern port city of Caen. Thousands more rallied in Bordeaux in the southwest, Rouen in the north and Marseille in the southeast, though numbers appeared far below the turnout seen in early weeks of the protests. –Reuters

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LINE PRESS@LinePress

#GiletsJaune très forte mobilisation à #Paris une péniche prend feu aux abords de la manifestation #Acte8 #ActeVIII #05janvier #05janvier2019

33-year-old Eric Drouet, one of the Yellow Vest movement’s most high-profile leaders, was arrested on Wednesday night for leading an unauthorized demonstration, signaling a crackdown on the anti-government demonstrators after nearly two months of violence-filled protests.

Drouet, a truck driver from the suburbs of Paris, was arrested in Paris on Wednesday evening near the iconic Champs-Élysées avenue – a prime location for the yellow vests to gather. Drouet was detained while leading a commemoration of yellow vests who have died since the movement’s inception, most of whom were hit by cars during protests at roundabouts throughout the country, according to the Wall Street Journal.

The movement, which began as a protest against a fuel tax, evolved into a general movement against the Macron administration. France is notably the most taxed country in the world.

“They have no right to leave us in the shit like this,” said protester Francois Cordier, writes Reuters. “We’re fed up with having to pay out the whole time, we’ve had enough of this slavery, we should be able to live on our salaries.”

Macron tries to respond, and fails

The protests which have come just 18 months into Macron’s tenure, have forced the 41-year-old French President to postpone the planned fuel tax as well as grant other concessions.

Last month, Macron promised tax cuts for pensioners, wage rises for the poorest workers and the scrapping of planned fuel tax increases to quell the unrest at a cost to the Treasury of 10 billion euros ($11 billion).

The measures marked the first big U-turn for a president elected 18 months earlier on a platform to break with traditional French politics and liberalize the heavily-regulated euro zone economy.

In a New Year’s Eve address, Macron vowed to press on with his reform agenda, saying: “We can’t work less, earn more, cut taxes and increase spending.” –Reuters

Most recently, the Macron government announced that it would be cracking down on French executives who avoid paying taxes.

That said, the government has resisted demands from Yellow Vest protesters to reinstate the wealth tax – which Macron abolished after becoming president.

end

UK
Theresa May continues to distill fear that if her Brexit deal is not passed, the UK will be in terrible  “uncharted territory”
(courtesy zerohedge)

More “Project Fear”: May Warns ‘No Deal’ Brexit Would Leave UK In “Uncharted Territory”

With roughly 80 days left until Brexit Day, Prime Minister Theresa May is growing increasingly desperate to win support for her supremely unpopular Brexit withdrawal agreement by any means necessary. And with the EU offering no room to reopen negotiations – and dozens of Tories joining with Labour and the DUP to oppose the current deal – May has little choice but to boost her “Project Fear” into hyper-drive.

As May reportedly reaches across the floor to try and win over some Labour MPs to make up for the lack of support among the Tories and DUP, the prime minister took to Britain’s most popular platform for political message – the BBC’s Andy Marr show – to insist that MPs must unite behind her deal or risk unleashing a wave of economic upheaval.

Once again, May warned that a ‘no deal’ Brexit would put Britain in “uncharted territory”. May vowed that the “meaningful vote” on her deal would proceed on Jan. 14 or 15, and that if the deal isn’t ultimately passed, the UK’s plans for exiting the EU could be “in danger.”

“If the deal is not voted on, then we are going to be in uncharted territory,” she said. “I don’t think anyone can say what will happen in terms of the reaction we see in Parliament.

In her latest sop to lawmakers, May promised new safeguards for Northern Ireland and also offered MPs a greater say in shaping the trade deal between the EU and UK that is to be negotiated during the post-Brexit Day transition.

Courtesy of the BBC

In an editorial published Sunday in the Daily Mail, May warned that failing to pass her deal could put Britons’ livelihoods at risk.

With days to go until the Commons showdown on her deal, Mrs May says that MPs thinking of voting it down should consider the effect on ‘the jobs our constituents rely on to put food on the table for their families.’

And in another familiar refrain, May questioned rebellious lawmakers’ commitment to the popular will by claiming – once again – that the only way to honor the results of the Brexit referendum would be to vote for her deal.

She writes: “MPs of every party will face the same question when the division bell rings. It is a question of profound significance for our democracy and for our constituents. The only way to both honour the result of the referendum and protect jobs and security is by backing the deal that is on the table.”

With the holiday truce now a memory, May also renewed her attacks on MPs pushing for a second referendum, arguing that holding another referendum would be impractical from the standpoint of logistics, while also doing little to salve the divisions in British society.

ay slammed MPs asking for a second referendum. “It would divide our country and we wouldn’t be able to organize a referendum before March 29,” she said, pointing out it would therefore require an extension of Article 50 (the treaty article allowing withdrawals from the EU).

Taking a shot at ERG MPs who have questioned her assurances about the Irish Backstop, May warned that Brexiteers risked throwing the baby out with the bathwater.

“Don’t let the search for the prefect [Brexit] become the enemy of the good. Because the danger there is we end up with no Brexit at all,” May said.

As the Daily Mail pointed out, May’s latest round of “Project Fear” warnings have arrived as a pack of lorries prepare to take part in the first ‘No Deal rehearsal’ for potential chaos at Dover, with truckers testing government plans to use the disused Manston Airport as a holding pen for HGVs.

Critics of May’s approach have suggested that TV footage of lorries lined up in rush hour traffic would represent obvious “Project Fear spin.”

Now that pre-holiday rumors that the DUP might relent and reluctantly support May’s deal have been put to rest, it’s becoming increasingly clear that May hasn’t made any progress since deciding to postpone a vote on her deal early last month. With no practical alternatives, Downing Street is effectively pinning its hopes on a ‘white smoke’ moment from Brussels: That is, last-minute concessions over the backstop that would help May avert a no deal scenario. May has said she will be on ‘standby’ to rush over to Brussels if the EU changes its mind about reopening the deal.

But such a capitulation would be so harmful to the EU’s credibility that it’s difficult to imagine it happening. During her interview with Marr, May refused to rule out calling multiple votes on her deal.

In effect, May is right back where she started: Hoping that an adverse reaction in markets and hysterical warnings about the risks of ‘no deal’ will force hostile MPs to relent at the last minute.

That’s probably bad news for British investors. And good news for Steve Eisman.

end

We highlighted this important commentary to you last week.  I have decided to repeat it in light of what is going on the world today.

(courtesy Alasdair Macleod/Mises)

 

The Eurozone Is In A Danger Zone

Submitted by Alasdair Macleod of The Mises Institute

It is easy to conclude the EU, and the Eurozone in particular, is a financial and systemic time-bomb waiting to happen. Most commentary has focused on problems that are routinely patched over, such as Greece, Italy, or the impending rescue of Deutsche Bank. This is a mistake. The European Central Bank and the EU machine are adept in dealing with issues of this sort, mostly by brazening them out, while buying everything off. As Mario Draghi famously said, “whatever it takes.”

There is a precondition for this legerdemain to work. Money must continue to flow into the financial system faster than the demand for it expands, because the maintenance of asset values is the key. And the ECB has done just that, with negative deposit rates and its €2.5 trillion asset purchase program. But that program ends this month, making it the likely turning point, whereby it all starts to go wrong.

Most of the ECB’s money has been spent on government bonds for a secondary reason, and that is to ensure Eurozone governments remain in the euro system. Profligate politicians in the Mediterranean nations are soon disabused of their desires to return to their old currencies. Just imagine the interest rates the Italians would have to pay in lira on their €2.85 trillion of government debt, given a private sector GDP tax base of only €840 billion, just one third of that government debt.

It never takes newly-elected Italian politicians long to understand why they must remain in the euro system, and that the ECB will guarantee to keep interest rates significantly lower than they would otherwise be. Yet the ECB is now giving up its asset purchases, so won’t be buying Italian debt or any other for that matter. The rigging of the Eurozone’s sovereign debt market is at a turning point. The ending of this source of finance for the PIGS2 is a very serious matter indeed.

A side effect of the ECB’s asset purchase program has been the reduction of Eurozone bank lending to the private sector, which has been crowded out by the focus on government debt. This is illustrated in the following chart.

Following the Lehman crisis, the banks were forced to increase their lending to private sector companies, whose cash flow had taken a bad hit. Early in 2012 this began to reverse, and today total non-financial bank assets are even lower than they were in the aftermath of the Lehman crisis. Regulatory pressure is a large part of the reason for this trend, because under the EU’s version of the Basel Committee rules, government debt in euros does not require a risk weighting, while commercial debt does. So our first danger sign is the Eurozone banking system has ensured that banks load up on government debt at the expense of non-financial commercial borrowers.

The fact that banks are not serving the private sector helps explain why the Eurozone’s nominal GDP has stagnated, declining by 12% in the six largest Eurozone economies over the ten years to 2017. Meanwhile, the Eurozone’s M3 money increased by 39.2%. With both the ECB’s asset purchasing programs and the application of new commercial bank credit bypassing the real economy, it is hardly surprising that interest rates are now out of line with those of the US, whose economy has returned to full employment under strong fiscal stimulus. The result has been banks can borrow in the euro LIBOR market at negative rates, sell euros for dollars and invest in US Government Treasury Bills for a round trip gain of between 25%–30% when geared up on a bank’s base capital.

The ECB’s monetary policy has been to ignore this interest rate arbitrage in order to support an extreme overvaluation in the whole gamut of euro-denominated bonds. It cannot go on for ever. Fortunately for Mario Draghi, the pressure to change tack has lessened slightly as signs of a US economic slowdown appear to be increasing, and with it, further dollar interest rate rises deferred.

TARGET2

Our second danger sign is the massive TARGET2 interbank imbalances, which have not mattered so long as everyone has faith that it does not matter. This faith is the glue that holds a disparate group of national central banks together. Again, it comes down to the maintenance of asset values, because even though assets are not formally designated as collateral, their values underwrite confidence in the TARGET2 system.

Massive imbalances have accumulated between the intra-regional central banks, as shown in our next chart, starting from the time of the Lehman crisis.

Germany’s Bundesbank, at just under €900 billion is due the most, and Italy, at just under €490 billion owes the most. These imbalances reflect accumulating trade imbalances between member states and non-trade movements of capital, reflecting capital flight. Additionally, imbalances arise when the ECB instructs a regional central bank to purchase bonds issued by its government and local corporate entities. This accounts for a TARGET2 deficit of €251 billion at the ECB, and surpluses to balance this deficit are spread round the regional central banks. This offsets other deficits, so the Bank of Italy owes more to the other regional banks than the €490 billion headline suggests.

Trust in the system is crucial for the regional central banks owed money, principally Germany, Luxembourg, Netherlands, and Finland. If there is a general deterioration in Eurozone collateral values, then TARGET2 imbalances will begin to matter to these creditors.

Eurozone Banks

Commercial banks in the Eurozone face a number of problems. The best way of illustrating them is by way of a brief list:

  • Share prices of systemically important banks have performed badly following the Lehman crisis. In Germany, Commerzbank and Deutsche Bank have fallen 85% from their post-Lehman highs, Santander in Spain by 66%, and Unicredit in Italy by 88%.
  • Share prices in the banking sector are usually a reliable barometer of systemic risks.
  • The principal function of a Eurozone bank has always been to ensure its respective national government’s debt requirement is financed. This has become a particularly acute systemic problem in the PIGS.
  • Basel II and upcoming Basel III regulations do not require banks to take a risk haircut on government debt, thereby encouraging them to overweight government debt on their balance sheets, and underweight equivalent corporate debt. Banks no longer serve the private sector, except reluctantly.
  • Eurozone banks tend to have higher balance sheet gearing than those in other jurisdictions. A relatively small fall in government bond prices puts some of them at immediate risk, and if bond prices decline it is the weakest banks that will bring down the whole banking system.
  • Eurozone banks are connected to the global banking system through interbank exposure and derivative markets, so systemic risks in the Eurozone are transmitted to other banking systems.

This list is not exhaustive, but it can be readily seen that an environment of declining asset prices and higher euro bond yields increases systemic threats to the entire banking system. As was the case with Austria’s Credit-Anstalt failure in 1931, one falling domino in the EU can easily topple the rest.

The ECB Itself is a Risk

As stated above, the ECB through its various asset purchase programs has caused the accumulation of some €2.5 trillion of debt, mostly in government bonds. The euro system’s central banks now have a balance sheet total of €4.64 trillion, for which the ECB is the ringmaster. Most of this debt is parked on the NCBs’ balance sheets, reflected in the TARGET2 imbalances.

The ECB’s subscribed equity capital is €7.74 billion and its own balance sheet total is €414 billion.3 This gives an operational gearing on core capital of 53 times. Securities held for monetary purposes (the portion of government debt purchased under various asset purchase programs shown on the balance sheet) is shown at €231 billion (it will have increased further in the current year). This means a fall in the value of these securities of only 3% will wipe out all the ECB’s capital.

If the ECB is to avoid an embarrassing recapitalization when, as now seems certain, bond yields rise, it must continue to rig euro bond markets. Therefore, the reintroduction of its asset purchase programs to stop bond yields rising becomes the last fling of the dice. The debt trap Eurozone governments find themselves in has also become a trap for the ECB.

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

 

 

IRAN/USA

6. GLOBAL ISSUES

On a global scale the mousing markets are in a rout.  It sure looks like we have reached peak unaffordability

(courtesy zerohedge)

 

Global Housing Markets From Hong Kong To Sydney Join Global Rout 

It’s not just stocks: the global housing market is in for a rough patch, which has turned ugly for many homeowners and investors from Vancouver to London, with markets in Singapore, Hong Kong, and Australia already showing increased signs of softening.

Macro factors have triggered a global economic slowdown that is unraveling luxury marketplaces worldwide, according to Bloomberg. As a result, a turning point has been reached, with home prices globally now under pressure, and rising mortgage rates leading to depressed consumer optimism, while also triggering a housing affordability crisis, S&P Global Ratings said in a December report. To make matters worse, a simultaneous drop in house prices globally could lead to “financial and macroeconomic instability,” the IMF warned in a report last April.

While each metropolis globally has its distinct characteristics of what triggered its real estate slowdown, there are a few common denominators at play: rising borrowing costs, quantitative tightening, a crackdown on money laundering and increased government regulation, emerging market capital outflows and volatile financial markets. Bloomberg notes that there is also declining demand from Chinese buyers, who were the most powerful force in many housing markets globally over the course of this cycle.

“As China’s economy is affected by the trade war, capital outflows have become more difficult, thus weakening demand in markets including Sydney and Hong Kong,” said Patrick Wong, a real estate analyst at Bloomberg Intelligence.

One of the first dominos to fall has been in Hong Kong, home values in the city have plummeted for 13 weeks straight since August, the longest losing streak since the 2008 financial crash, data from Centaline Property Agency show. Homeowners and investors have taken great caution due to a jump in borrowing costs, a looming vacancy tax, and the trade war that has derailed economic growth in mainland China.

“The change in attitude can be explained by a slowing mainland economy,” said Henry Mok, JLL’s senior director of capital markets. “Throw in a simmering trade war between China and the U.S., the government has taken actions to restrict capital outflows, which in turn has increased difficulties for developers to invest overseas.”

Home prices in Singapore, which rank among the world’s most expensive places to live, logged the first decline in six quarters in the three months ended December. Bloomberg said luxury experienced the worst declines, with values in prime areas dropping 1.5%.

Most of the slowdown was caused by government policies to cool the overinflated housing market. Cooling measures were implemented in July included higher stamp duties and tougher loan-to-value rules. The policies enacted by the government have halted the home-price recovery that only lasted for five quarters, the shortest since data became available.

“Landed home prices, being bigger ticket items, have taken a greater beating as demand softened,” said Ong Teck Hui, a senior director of research and consultancy at JLL.

The downturn in Sydney’s housing market is expected to continue this year as tighter lending standards and the worst plunge in values since the late 1980s has spooked buyers. Average Sydney home values had dropped 11.1% since their 2017 top, according to a recent CoreLogic Inc. report — surpassing the 9.6% peak to trough decline when Australia was on the cusp of entering its last recession.

Nationwide, home values declined 4.8% last year, marking the weakest housing market conditions since the 2008 financial crash.

“Access to finance is likely to remain the most significant barrier to an improvement in housing market conditions in 2019,” CoreLogic’s head of research Tim Lawless said. Weak consumer sentiment toward the property market is “likely to continue to dampen housing demand.”

Bloomberg notes that home prices in the country are still 60% higher than in 2012, if prices plunge another 10% in 2019, well, it could spark mass panic.

The Reserve Bank of Australia is terrified that an extended downturn will crimp consumption and with the main opposition Labor party pledging to curb tax perks for property investors if it wins an election expected in May, economic optimism would further deteriorate. Treasurer Josh Frydenberg on Thursday told the nation’s top banks not to tighten credit any more as the economic downturn is expected to get much worse.

But all eyes are on what is going on in arguably the most important housing markets in the world – those of Shanghai and Beijing. A government crackdown on leverage and overheating prices have damaged sales and triggered a 5% tumble in home values from their top. Rules on multiple home purchases, or how soon a property can be flipped once it is acquired, are starting to be relaxed, and the giveaways by home builders to lure buyers are starting to get absurd.

One developer in September was giving away new BMWs to new homebuyers at its townhouses in Shanghai. Down-payments have been slashed, with China Evergrande Group asking for 5% rather than the normal 30% deposit required.

“It’s not a surprise to see Beijing and Shanghai residential prices fall given the curbing policies currently on these two markets,” said Henry Chin, head of research at CBRE Group Inc.

As a whole, Bloomberg’s compilation of global housing data showing the unraveling of many housing markets is a sobering reminder that a synchronized global slowdown has started.

 

 

 

7  OIL ISSUES

We highlighted this to you on several occasions:  fracking wells are producing far less than forecast

(courtesy zerohedge)

US Fracking Wells Are Producing Far Less Than Forecast

According to a new report by the Wall Street Journal, thousands of shale oil wells that have been drilled over the last five years are pumping less than what was forecast to investors. The new discovery has raised questions about the strength behind the United States’ newfound supply of shale oil.

The WSJ compares well productivity estimates that were disclosed to investors versus public data of how these wells have performed to date; after analyzing 16,000 wells operated by 29 producers in places like North Dakota and the Permian basin, the Journal  found that about 66% of projections made by companies between 2014 and 2017 are reportedly “overly optimistic”.

In total, these companies are set to pump about 10% less oil and gas than was forecast, an amount which equates to about 1 billion barrels of oil and gas over 30 years, which would be priced at about $30 billion at current market prices. In some regions, companies are reportedly off track by more than 50%.

As previously discussed, the US shale boom has been one of the main reasons that the US has become an oil superpower over the last couple of years, while trimming the US reliance on foreign oil to virtually nothing.

But now shale drillers are under pressure to cut spending, as oil prices have cratered almost 50% in the last three months.

Two companies that operate in the Permian basin, Pioneer Natural Resources Co. and Parsley Energy are among the main culprits lagging behind forecasts (the analysis excluded several oil conglomerates like Exxon, because they didn’t make shale projections).

That said, Pioneer and Parsley disputed the report’s findings, saying that the lifespan of wells was different from forecasts, while other companies like Whiting Petroleum Corp. simply stated that the forecasts can be unreliable and that they were going to move away from providing them. Certainly an easy thing to say now that investments have been made.

Another driller, Oasis Petroleum Inc., tried to hide behind accounting-style excuses, stating about projections: “It’s not a science, it’s more of an art.”

Prior to the shale boom in 2007, oil companies were valued close to their reserves. Now these companies, on average, are valued almost three times higher.

It is no secret that shale companies have taken a significant amount of capital from Wall Street over the last 10 years – mostly in the form of junk bonds – and investors have mostly lost money. Since 2008, an index of United States based oil and gas companies was down 43% while the stock market has doubled in the same time. The article examined 29 companies which collectively spent $112 billion more in cash than they have generated from operations over the last decade.

Meanwhile, the estimates given to investors were sometimes extrapolated from only the best performing wells. Other companies excluded their worst performing wells from the calculations.  Texas A&M University professor John Lee, an expert on calculating oil and gas reserves stated: “There are a number of practices that are almost inevitably going to lead to overestimates.”

When Lee gave a presentation in Houston this past July, highlighting methods that could produce more accurate forecasts, one engineer jokingly stated that their companies weren’t using his methods “because [they] own [their company’s] stock”.

8. EMERGING MARKETS

Venezuela

 

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

Euro/USA 1.1445 UP .0053 REACTING TO MERKEL’S FAILED COALITION/ REACTING TO +GERMAN ELECTION WHERE ALT RIGHT PARTY ENTERS THE BUNDESTAG/ huge Deutsche bank problems + USA election:///ITALIAN CHAOS /AND NOW ECB TAPERING BOND PURCHASES/JAPAN TAPERING BOND PURCHASES /USA RISING INTEREST RATES /FLOODING/EUROPE BOURSES RED

 

 

 

 

USA/JAPAN YEN 108;30  DOWN 0.151 (Abe’s new negative interest rate (NIRP), a total DISASTER/NOW TARGETS INTEREST RATE AT .11% AS IT WILL BUY UNLIMITED BONDS TO GETS TO THAT LEVEL…DEADLY TO OUR YEN SHORTERS

GBP/USA 1.2754     UP    0.0052  (Brexit March 29/ 2017/ARTICLE 50 SIGNED/BREXIT FEES WILL BE CAPPED

USA/CAN 1.3356 DOWN .0044 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 ROSE by 53 basis points, trading now ABOVE the important 1.08 level RISING to 1.1445/ Last night Shanghai composite CLOSED  UP 18.22 POINTS OR 0.72% 

 

 

//Hang Sang CLOSED UP 209.67 POINTS OR 0.82%

 

/AUSTRALIA CLOSED UP 1.19%  /EUROPEAN BOURSES RED

 

 

 

 

 

 

The NIKKEI: this FRIDAY morning CLOSED UP 477.91 POINTS OR 2.44% 

 

 

 

 

 

 

Trading from Europe and Asia

1/EUROPE OPENED RED

 

 

 

 

 

 

 

 

 

 

 

2/ CHINESE BOURSES / :Hang Sang CLOSED UP 209.67 POINTS OR 0.82% 

 

 

 

/SHANGHAI CLOSED UP 18.22 PTS OR 0.72%

 

 

 

 

Australia BOURSE CLOSED UP 1.19%

 

Nikkei (Japan) CLOSED UP 477.91 POINTS OR 2.44% 

 

 

 

 

 

 

INDIA’S SENSEX  IN THE GREEN

Gold very early morning trading: 1291.85

silver:$15.76

Early MONDAY morning USA 10 year bond yield: 2.64% !!! DOWN 2 IN POINTS from FRIDAY’S night in basis points and it is trading WELL ABOVE resistance at 2.27-2.32%. (POLICY FED ERROR)/DEADLY

The 30 yr bond yield 2.94 DOWN 3  IN BASIS POINTS from FRIDAY night. (POLICY FED ERROR)/

USA dollar index early FRIDAY morning: 96.15 DOWN 16 CENT(S) from  FRIDAY’s close.

This ends early morning numbers MONDAY MORNING

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And now your closing MONDAY NUMBERS \12: 00 PM

 

Portuguese 10 year bond yield: 1.82% UP 1    in basis point(s) yield from FRIDAY/

JAPANESE BOND YIELD: -.01%  UP 3   BASIS POINTS from FRIDAY/JAPAN losing control of its yield curve/

 

 

SPANISH 10 YR BOND YIELD: 1.50% UP 3   IN basis point yield from FRIDAY

ITALIAN 10 YR BOND YIELD: 2.90 UP 0     POINTS in basis point yield from FRIDAY/

 

 

the Italian 10 yr bond yield is trading 133 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: RISES UP TO +.22%   IN BASIS POINTS ON THE DAY//

THE IMPORTANT SPREAD BETWEEN ITALIAN 10 YR BOND AND GERMAN 10 YEAR BOND IS 2.68% AND NOW ABOVE THE  THE 3.00% LEVEL WHICH WILL IMPLODE THE ENTIRE ITALIAN BANKING SYSTEM. AT 4% SPREAD THERE WILL BE A MASSIVE BANK RUN…

 

END

IMPORTANT CURRENCY CLOSES FOR MONDAY

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

Euro/USA 1.1467 UP  .0076 or 76 basis points

 

 

USA/Japan: 108.53 UP  0.081 OR 8 basis points/

Great Britain/USA 1.2764 UP .0061( POUND UP 61  BASIS POINTS)

Canadian dollar UP 74 basis points to 1.3404

 

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The USA/Yuan,CNY closed DOWN AT 6.8510-  ON SHORE  (YUAN UP)

THE USA/YUAN OFFSHORE:  6.8488(  YUAN UP)

TURKISH LIRA:  5.4070

the 10 yr Japanese bond yield closed at -.01%

 

 

 

Your closing 10 yr USA bond yield UP 1 IN basis points from FRIDAY at 2.67 % //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 2.97 DOWN 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, 95.75 DOWN 43 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: 12:00 PM 

London: CLOSED DOWN 26.54 OR 0.39%

German Dax : CLOSED DOWN 19.88 POINTS OR 0.18%

Paris Cac CLOSED DOWN 17.95 POINTS OR 0.95%

Spain IBEX CLOSED UP 38.50 POINTS OR 0.44%

Italian MIB: CLOSED UP 121.48 POINTS OR 0.65%

 

 

 

 

WTI Oil price; 49.36 12:00 pm;

Brent Oil: 58.19 12:00 EST

USA /RUSSIAN /   ROUBLE CROSS:    66.69  THE CROSS LOWER BY 0.84 ROUBLES/DOLLAR (ROUBLE HIGHER BY 84 BASIS PTS)

USA DOLLAR VS TURKISH LIRA:  5.4070 PER ONE USA DOLLAR.

TODAY THE GERMAN YIELD RISES +.22 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, 4:00 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 4:30 PM :48.60

 

BRENT :57.55

USA 10 YR BOND YIELD: 2.66%… still .deadly/ the huge volatility is killing the derivative players.

 

 

USA 30 YR BOND YIELD: 2.99%/ still .deadly/ same as above

 

 

 

EURO/USA DOLLAR CROSS: 1.1475 ( UP 83 BASIS POINTS)

USA/JAPANESE YEN:108.71 UP 0.260 (YEN DOWN 26 BASIS POINTS/..deadly to yen shorters

.

 

USA DOLLAR INDEX: 95.69 DOWN  49 cent(s)/

The British pound at 4 pm: Great Britain Pound/USA: 1.268 up 67 POINTS FROM YESTERDAY

the Turkish lira close: 5.3864

the Russian rouble:  66.65 UP .85 Roubles against the uSA dollar.( UP 85 BASIS POINTS)

 

Canadian dollar: 1.3297 UP 75 BASIS pts

USA/CHINESE YUAN (CNY) : 6.8510  (ONSHORE)

USA/CHINESE YUAN(CNH):  6.8451 (OFFSHORE)

German 10 yr bond yield at 5 pm: ,0.22%

 

The Dow closed UP 98.92 POINTS OR 0.42%

 

NASDAQ closed UP 84.62 POINTS OR 1.26%

 


VOLATILITY INDEX:  20.93 CLOSED DOWN 0.45 

 

LIBOR 3 MONTH DURATION: 2.803%  .LIBOR  RATES ARE RISING/

 

FROM 2.795

 

 

 

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

TRADING IN GRAPH FORM FOR THE DAY/WEEKLY SUMMARY/FOLLOWED BY TODAY

 

Dollar Dumps, Stocks Jump As ‘Bad News Is Good’ Storms Back

Dismal data from ISM surveys brushed off because of Powell’s promises, desperate China liquidity injections, and trade talk hope…

 

Despite RRR cuts, China’s bank stocks went nowhere on the day, but CHINEXT (small tech) surged…

European markets were just as mixed with high beta Ital and Spain outperforming while the rest of EU’s majors ended red…

 

From the dismal ISM Services print, stocks surged but bonds, the dollar, and gold limped lower

Bad news is Good news” Again!

US equities soared on the bad news but once President Trump announced his address tomorrow – which could be good news for the shutdown – stocks did not like it…Small Caps massively outperformed today, Dow was least best...

Small Caps are up 7 of the last 8 days

And all on the back of a massive short-squeeze… This is the biggest 2-day short-squeeze since the days after Brexit

Plunge Protection Team much?

The big banks continue to extend their big gains in 2019… with Citi leading (up over 7%!)

 

AAPL didn’t rally with the market today…

 

Which helped push AMZN to the world’s most valuable company…

 

Tech stocks ramped up to Jan 2nd highs but faded into the close…

 

Credit markets continued their huge squeeze higher with HYG surging back to its 200DMA…

 

IG and HY credit spreads have compressed notably, along with VIX…

 

Treasuries were mixed today but broadly speaking sold as the long-end outperformed and short-end saw yields up 3-4bps…

 

Which flattened the yield curve

 

The Treasury curve now has two inversions…

 

The Dollar continued to get monkeyhammered lower (as The Fed backs away from its rate trajectory plans). The Bloomberg Dollar Index tumbled to its lowest since early October…

 

Ethereum was modestly lower from Friday with Litecoin outperforming…

 

There has been quite a notable divergence between Stocks, Bond Yields (30Y stalled at 3.00%), and The USD in the last few days…

 

Gold and WTI managed gains as silver and copper slid (despite USD weakness)…

 

WTI was unable to breach $50 (in the front-month) and gave back the Saudi production headline-driven gains…

 

Gold held on to gains against the dollar and yuan on the day…

 

Finally, we note that the market shifted more hawkishly today with only 9bps of cuts priced in for 2019 now…

And, we wonder, are we really back in the “bad news is good” environment? After stocks priced in all that endless growthiness and now that The Fed is pulling the rug from the dream of economic growth (why else would they be jawboning the end of the tightening cycle?), investors are buying a dip on dismal data?

Or did Powell’s double-pivot reassure them the Powell Put’s strike is actually higher than they had been calibrated to expect by his pre-Fed context?

 

END

market trading/

S&P Takes Out Overnight Highs, Dow Diverges

The S&P ramped past overnight future highs and extended gains back to mid-December…

but Dow futures remain unable to break out…

10Y Bond yields and stocks are tracking tick for tick (but we note that 30Y yields are actually lower on the day)…

And the USD index continues to slide…

END

 

market data/

Another great indicator as to the strength of the USA economy: the sale of heavy duty trucks.  Their orders tumbled 43% last month

(courtesy zerohedge)

Heavy Duty Truck Orders Tumble 43% To Two Year Low

Orders for heavy duty Class 8 trucks tumbled 43% Y/Y (down 24% M/M) in December to just 21,300 units, representing the second consecutive YoY decline in 2018 and a 25-month low on a seasonally adjusted basis, according to ACT Research.

Class 8 trucks are one of the more common heavy trucks on the road, used for transport, logistics and occasionally (some dump trucks) for industrial purposes and their orderbook is used by Wall Street as a coincident indicator of trade and logistical conditions. Typical 18 wheelers on the road are generally all Class 8 vehicles.

As Buckingham analyst, Neil Frohnapple said, “overall, Class 8 orders were at the lower end of our expected range for the month of December as a further slowdown was anticipated given the extended industry lead-times.” Meanwhile, JPM analyst Ann Duignan forecast that “given current industry fundamentals and supply chain issues, we expect production of ~330,000 in 2019 (up 2% YoY).”

While December is widely considered to be the highest net order month, due to unexpected Q3 strength that normally isn’t associated with the seasonally weak quarter this year and was the result of front-loading orders ahead of a new round of China tariffs, some analysts such as Frohnapple expected a Q4 slowdown: “…we expected the peak-season order period to be relatively weaker,” he said.

Meanwhile, Class 5-7 truck orders – consisting of medium trucks between 16,000 and 33,000 pounds – were down 5% to 21,500 units.

As we pointed out in early December, the exponential surge in transportation prices as a result of an acute scarcity of truck drivers sent trucking prices soaring last year, and led to a historic spike in Class 8 truck orders as supply had scrambled to keep up with demand. That was, until November. ACT Research reported November preliminary North American Class 8 orders of 27.9K units (26.8K, seasonally adjusted), which was well below most forecasts heading into the release.

When the November order numbers came out, we stated that the trucking market was finally starting to cool down:

The total number of orders was down 14.5% from the same month a year ago and off 35.9% from October, when orders reached 43,600. It was the first drop in Class 8 orders this year, falling to the lowest level in 14 months and providing a fresh sign the North American trucking market is cooling down.

According to BMO, one of the most important metrics to monitor will be cancellations. And although gross cancellations have risen relatively precipitously, the cancellation rate as a percentage of trailing 12-month orders remains slightly below 10%. In addition, the cancellation rate as a percent of the backlog reached 3.5% in October 2018, not much higher than the average rate of 2.4%.

Watching the sharp downward reversal analysts have grown increasingly sour on the space, and last month UBS analysts downgraded trucking bellwethers Knight-Swift and Werner Enterprises and truck-rail intermodal provider Hub Group on concern over a softening freight market. “The peak season tightening we had anticipated in late October and November has been more muted than we expected”, UBS said.

The silver linined, according to ACT, is that slowing demand for trucking services and new rigs will enable capacity to stretch to meet demand. “The number of trucks out there in the fleet will start to normalize and return to a balanced state, which is really where things run well.”

Perhaps this optimistic view is warranted, although a far bigger risk is what happens to end demand for heavy duty trucks if trade between the US and China is indeed about to hit a brick wall. As we noted in December, the latest Chinese trade data was downright ugly, with growth tumbling to the lowest level in over a year, and missing expectations widely, while Chinese imports from the US finally collapsed, dropping 25% in November Y/Y.

And while one month ago, we noted that BMO analyst Joel Tiss said that while “there is no doubt that freight and freight-rate growth have slowed, we do not think that it is time to panic just yet” after December’s sharp 43% plunge, we ask “how about now?”

END
The USA  ISM service sector report confirms the USA slowdown.  Usually the service sector is the stronger of the two. Not today.
(courtesy ISM service/zerohedge)

US Services Economy Plummets In December

After reporting that the Manufacturing sector of the US economy collapsed in December, ISM confirmed today that the Services side of the US economy also tumbled in December.

ISM Non-Manufacturing slipped to 57.6 from 60.7, missing expectations of 59.0 to its lowest since July.

This is the 3rd largest monthly decline since the financial crisis.

As ‘soft’ survey data catches down to ‘hard’ reality.

The drop was led by the biggest decline in more than a decade for a measure of supplier-delivery times, as well as a decrease in the gauge of business activity.

The inventories gauge fell by the most since 2016, indicating that stockpiles are still expanding but at a slower pace (not a good sign for Q4 GDP revisions).

On the bright side, new orders rose to a six-month high, but the employment gauge dropped for a third month.

Interestingly, there was little indication in the data of the trade war with China weighing on business: Export orders accelerated, while a measure of imports eased only slightly. Also, a gauge of prices fell to the lowest in more than a year, possibly reflecting a tumble in oil and fuel costs.

USA ECONOMIC STORIES OF INTEREST

the fires have had a devastating effect on the share price of PG and E.  For the second time in 7 years, these guys are set to file for bankruptcy protection

(courtesy zerohedge)

 

Indiana Grocery Store Can’t Process Food Stamp Payments Due To Govt. Shutdown

We warned last week what could happen if the government shutdown continues into February…

If people are getting this restless already, what will things look like when tens of millions of Americans are suddenly cut off from their primary source of food money?

Well, as Daisy Luther reports from her Organic Prepper blo g, it’s starting early. As we discussed previously, we weren’t expecting to see a loss of food stamp benefits until the end of January, but a grocery store in Indiana reported they are unable to process EBT payments.

In Clay City, Indiana, the local IGA discovered the problem last week. Initially, they thought it was a technical glitch.

“Our machines weren’t taking any EBT cards and we didn’t really know what was going on. We didn’t know if it was a technical issue. And then we found out it was due to the government shutting down,” Tristen Malone said. (source)

And although it’s for a slightly different reason, The Red Lion store in York County, Pennsylvania has also had issues. New owners recently purchased the grocery store and sent in their application to accept government benefits before the shutdown occurred.

“Right now we’re officially frozen because the government is shut down and we can’t process our application.”

Tom Lohr is the new owner of D & K.

He says they tried to get pre-approved for the license before the sale went through.

“We tried to be proactive and start this in December, late November, early December , set up the new entities with the businesses it just has not worked out.”

Lohr purchased the business, but doesn’t own the company name, so the license belongs to the original owners.

“We were trying to make it a smooth transition where it would happen the first day we opened, they said if we didn’t hear anything by January 4th to give them a call back. They went dead basically just before Christmas, I think,” said Lohr.

Sixteen percent of their business comes from people who use food stamps.

D & K wants to be able to serve those in need, they’re just waiting for the government to re-open. (source)

And by the end of January, these two stores may only be a drop in the bucket.

More than 42 million Americans rely on food stamps.

A lot of people are very smug when it comes to those who rely on EBT benefits for food, picturing people driving Cadillacs to pick up their government-funded lobster and then go home and watch daytime soaps. But if you consider the state of the economy, it’s no surprise that there are millions who can’t make ends meet. Almost half of all Americans can barely afford both food and rent every month. Prices are just getting higher and wages are not increasing to meet the demands.

Really, the average EBT user isn’t always who you’d expect. Any considering 15 million children are living in homes below the poverty line, the kids will be the ones to suffer.

It’s pretty easy to be judgmental about those who accept food stamps if you have a good job and a full pantry, but remember that not everyone is in their situation by choice. Nobody is immune to hard times. I’ve been there myself.

Imagine the unpleasant surprise

Imagine going to the store to make a purchase, fully believing you have money in your account. But when the cashier tries to ring through your purchase, it’s denied. You ask her to swipe it again, because you know there’s money…but again, it’s declined. “No funds available,” you’re told.

The people who are going to buy groceries with EBT cards that are supposed to be working right now must be feeling desperate. And their frustration will cross into anger very quickly.

A cashier from Clay City, Indiana confirmed this.

“They’re really upset about it, which is understandable. I mean that’s like, you know, really discouraging that they can’t use it. And I mean we’ve had some people even get mad about it but it’s like out of our control, there’s nothing we can do about it,” Malone said. (source)

Now imagine what the situation would be like if suddenly, at the end of January, 42 million people across the country discover they won’t be able to feed their families.

It could be chaos very quickly. You know the saying, “We’re just nine meals away from anarchy.”

It’s all part of the Government Shutdown Theater.

Every single time the government shuts down, an example is made of ordinary Americans. With the Obama shutdown in 2013, all sorts of people suffered, from Native Americans to migrants to victims of domestic violence. In the current shutdown, it’s the poor people or those working government jobs paycheck to paycheck who will pay the price.

Why do they do this? Why do they make those who are suffering, suffer more?

Because the members of Congress and the government wants to impress upon us all how very essential they are to our well-being. They want to provide us with dramatic “evidence” that we can’t get by without them.

No one actually from the government is hurt by the shutdown.

Meanwhile, the “important” people aren’t noticing any hardship from the government shutdown. Speaker of the House Nancy Pelosi took a trip to Hawaii (but she promises it wasn’t a vacation.) And members of Congress get paid, but their staffers do not. (Kudos to this handful who have chosen to donate or forfeit their salaries during the shutdown.) It would be difficult for my opinion of these people to be much lower, but I’m sure they’ll manage to undercut my expectations even further.

The IRS will still take your money and track you down, but they won’t issue any refunds.

The system, as it stands, is anything but “by the people and for the people.”

The system is for the people who are benefitting from it. It’s for the people who are playing Americans like disposable chess pieces on a board. It’s for the people who literally benefit from the suffering of those less fortunate.

But it’s not for the rest of us.

Get prepared for some serious repercussions.

There are no signs of this shutdown ending any time soon. (Although that can change on a dime.) If it runs through the end of the month, be prepared to see some serious fallout when millions of people cannot purchase food for their families anymore. But don’t worry – your members of Congress will be just fine, regardless of how long this charade continues.

If you, personally, are relying on SNAP benefits for food, I strongly advise you to stock up now on low-cost items like beans, rice, oatmeal, peanut butter, pasta, flour, and canned fruits and vegetables. If you have money left on your card for the month, spend it now on things that won’t spoil.

If you are in a position to donate to food banks to help others, the need could soon be at an all-time high. A package of pasta and a can of sauce could at least provide a family with a warm dinner.

And no matter what your situation is, be prepared for the potential of unrest. Because hungry people with hungry children will do desperate things.

end

The iRS announces that it will issue tax refunds and thus easing pressure to reach a deal.  It looks like the only stumbling block will be the adjudication of food stamp money

(courtesy zerohedge)

IRS Will Issue Tax Refunds During Shutdown, Easing Pressure To Reach A Deal

Following panicked reports that the Internal Revenue Service won’t issue refunds during the government shutdown, acting director of the White House Office of Management and Budget, Russell Vought, told reporters “Tax refunds will go out”, effectively easing pressure on Trump to reach a deal.

The tax agency’s previous shutdown contingency plans outlined that the IRS would accept tax returns (and payments of course) during filing season, but refunds would be delayed until government had passed a funding bill, according to Bloomberg.

The decision will naturally come as a relief to many taxpayers who file their taxes as soon as the filing season begins to claim their refund checks, which averaged $2,899 last year. Within the first week of the 2018 filing season, more than 18.3 million people claimed about $12.6 billion in refunds.

The IRS hasn’t yet announced the start date to file tax returns this year, but says it’s on track to begin in late January or early February.

The policy change also removes a major political incentive for lawmakers and the White House to reach a deal in the coming weeks. If refunds won’t be held hostage, the shutdown effects will be felt much less widely, relieving the strain on Congress and Trump to resolve the current impasse about how much money to spend on a border wall with Mexico. –Bloomberg

Former IRS Commissioner Mark Everson noted that if people were unable to get their refunds, there would be “excruciating pressure” on lawmakers to reach an agreement.

And so, without the threat of pitchfork-wielding voters demanding their refunds, it looks like the pressure on Trump to reach a government shutdown deal with the just as stubborn Democrats has just been reduced substantially, and all else equal, the shutdown – which will become the longest on record in just five days, won’t end any time soon.

SWAMP STORIES

A key democrat states that Trump can use the :National Emergency” to build the wall

(courtesy zerohedge)

Trump Confirms He Can Use “National Emergency” To Build Wall After Key Democrat’s Admission

President Trump on Monday reiterated his ability to declare a national emergency and build his border wall, pointing out that top Democrat Adam Smith, Chairman of the House Armed Services Committee admitted on Sunday that Trump can do so.

Donald J. Trump

@realDonaldTrump

Congressman Adam Smith, the new Chairman of the House Armed Services Committee, just stated, “Yes, there is a provision in law that says a president can declare an emergency. It’s been done a number of times.” No doubt, but let’s get our deal done in Congress!

13.4K people are talking about this

***

On SundayABC‘s “This Week” host George Stephanopoulos asked Smith “Does President Trump have the ability, have the authority to declare a national emergency and have the military build his wall?”

“Well, unfortunately, the short answer is yes,” replied Smith. “There is a provision in the law that says the president can declare an emergency. It’s been done a number of times, but primarily it’s been done to build facilities in Afghanistan and Iraq. In this case, I think the president would be wide open to a court challenge saying, where is the emergency? You have to establish that in order to do this. Beyond that, this would be a terrible use of Department of Defense dollars.

“The president spends most of his time talking about how we’re not spending enough on national security, now he wants to take $20 billion out of defense budget to build a wall. Which by the way, is not going to improve our border security. The president seems unaware of this, but we have actually already built a wall across much of the border, and all border security experts that I talk to say, where a wall makes sense, it’s already been built. We should have a conversation about border security, but first, we should we open the government and pay our border patrol agents and the federal agents that are furloughed,” Smith added.

Watch:

Embedded video

Rep. Adam Smith

@RepAdamSmith

I joined @ThisweekABC to discuss the government shutdown and the President’s plan to declare a nat’l emergency to pay for his proposed border wall. He is shutting down the gov’t to break his signature campaign promise – that taxpayers weren’t going to have to pay for the wall.

end

Trump To Deliver Emergency Primetime Address About Border Wall Amid Shutdown

With the federal government shutdown in its 17th day and rapidly approaching the longest shutdown on record (21 days), President Donald Trump said he would address the nation “on the Humanitarian and National Security crisis on our Southern Border” on Tuesday night at 9:00 P.M. Eastern

Donald J. Trump

@realDonaldTrump

I am pleased to inform you that I will Address the Nation on the Humanitarian and National Security crisis on our Southern Border. Tuesday night at 9:00 P.M. Eastern.

Ahead of Trump’s tweet, The New York Times reported that the White House had officially made the request to the networks to interrupt their primetime schedules, however according to Times reporter Michael Grynbaum, at least two of the networks are hesitant, because of “skepticism about handing over airwaves for political statement.”

ABC, CBS, NBC & Fox broadcast have all received White House request for airtime at 9pm Eastern on Tuesday,” Grynbaum reported. “No word yet if any network will agree.”

Michael M. Grynbaum

@grynbaum

ABC, CBS, NBC & Fox broadcast have all received White House request for airtime at 9pm Eastern on Tuesday.

No word yet if any network will agree.

Michael M. Grynbaum

@grynbaum

TRUMP wants primetime slot tomorrow to talk shutdown, @esullivannyt & @maggieNYT scoop

At least TWO major networks still deliberating – skepticism about handing over airwaves for political statement https://nyti.ms/2H1rdkF 

Additionally, White House Press Secretary Sarah Huckabee Sanders said that Trump will be traveling to the Southern border on Thursday.

Sarah Sanders

@PressSec

President @realDonaldTrump will travel to the Southern border on Thursday to meet with those on the frontlines of the national security and humanitarian crisis. More details will be announced soon.

Will Trump finally put an end to the impasse over the Wall funding and announce that he will invoke a “national emergency” loophole in order to get the wall built? Find out tomorrow at 9pm, or most likely well in advance, as the contents of Trump’s address are leaked in the next few hours.

Interestingly, as Trump announced this speech, US equity markets legged down notably.

This morning’s “bad news” ISM print was “good news” for stocks, but “good news” that the shutdown may be nearing an end appears to be “bad news” for stocks?

SWAMP STORIES/MAJOR STORIES//THE KING REPORT
and special thanks to Chris Powell of GATA for sending this down for us:

@realDonaldTrump: V.P. Mike Pence and group had a productive meeting with the Schumer/Pelosi representatives today. Many details of Border Security were discussed. We are now planning a Steel Barrier rather than concrete. It is both stronger & less obtrusive. Good solution, and made in the U.S.A.

 

Today – Trade negotiations between US and China officials begin in Beijing and continue through tomorrow.  The market expects positive news at the conclusion of the talks.  Thus, stocks are likely to be buoyant until details on the deal or no deal appear on Tuesday.

Will the ESH manipulators keep trying to offset real sellers?  Will the various interventions continue?  The stock market is now a game of negative fundamentals inducing real selling vs. manipulators and sovereign interveners.  It is not a game that should be played.  Only those that must play should enter the equity market mix master.

Pelosi: The Constitution considers me equal to Trump [You can’t make this up!]

https://thehill.com/homenews/house/423761-pelosi-the-constitution-considers-me-equal-to-trump

@RealSaavedra: Democrat Rep. Steve Cohen (TN) introduces bill to eliminate the Electoral College

Tlaib Promises Democrats Coming for Trump: We’re Going to ‘Impeach the Mother****er’

https://freebeacon.com/politics/tlaib-promises-democrats-coming-for-trump-were-gonna-impeach-the-motherfer/

WaPo op-ed: What’s so wrong with motherf—er?  [Why would the Washington Post run this?]

https://www.washingtonpost.com/opinions/2019/01/04/whats-so-wrong-with-motherf-er/

Pelosi Defends Rashida Tlaib Vulgar Impeachment Tirade, “I Don’t Think It’s Anything Worse Than what the President Has Said”   https://www.thegatewaypundit.com/2019/01/pelosi-defends-rashida-tlaib-vulgar-impeachment-tirade-i-dont-think-its-anything-worse-than-what-the-president-has-said-video/

Dems livid after Tlaib vows to ‘impeach the motherf—er’ – upended their carefully crafted rhetoric on their plans to take on the president…

https://www.politico.com/story/2019/01/04/dems-livid-tlaib-impeachment-comment-1081370

 

CBS: 70 percent tax rates on ultra-rich would help pay for “Green New Deal,” Ocasio-Cortez says

[Most ultra-rich Americans are Dems; Buffett should be happy; claimed he wants to pay more tax.]

https://www.cbsnews.com/news/alexandria-ocasio-cortez-call-me-a-radical-60-minutes/

Official: Dems ‘Refused’ To Even Listen To Border Security Briefing At White Househttps://dailycaller.com/2019/01/02/democrats-refuse-briefing-nielsen/

 

Norton Introduces D.C. Statehood Bill with Record Number of Original Cosponsors, Announces House Oversight Committee Will Hold Hearing and Markup This Year

https://oversight.house.gov/news/press-releases/norton-introduces-dc-statehood-bill-with-record-number-of-original-cosponsors

Top Senate Finance Dem reintroduces bill that would require Trump to release tax returns

The Presidential Tax Transparency Act, which Wyden first introduced in May of 2016, would require sitting presidents and presidential nominees to release their tax returns publicly… http://hill.cm/AxesBBb

House Democrats Reviving “Gephardt Rule” Protects Rent-Seeking Special Interest, Not Against Default – automatic increases in the debt ceiling triggered after the lower chamber passes a budget

https://www.peoplespunditdaily.com/policy/2019/01/04/house-democrats-reviving-gephardt-rule-protects-rent-seeking-special-interest-not-against-default/

@RealSaavedra: Senator Kyrsten Sinema Refuses To Take Oath on Bible

https://www.azcentral.com/story/news/politics/arizona/2019/01/03/kyrsten-sinema-uses-lawbook-senate-oath-martha-mcsally-uses-bible/2477175002/

Bloomberg @business: The government shutdown is the “tip of the iceberg” for the divided Congress, says Bill Hoagland, senior vice president at Bipartisan Policy Center  https://bloom.bg/2H3FrBM

WaPo: Sen. Pat Roberts announces he won’t seek reelection in 2020 in another departure of a GOP senator known for bipartisanship [Means Roberts often sided with Dems or the Establishment]

    Roberts, 82, barely survived a primary challenge in 2014 and won reelection after Republicans spent more than $10 million on the race… [Roberts knows that he cannot win in 2020.]

END

I WILL SEE YOU ON TUESDAY
H
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