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Updated: 4 hours 33 min ago

MAY 24/GLD loses 3.86 tonnes of gold from its inventory/At the comex, the front May delivery month once again increases the amount of gold standing to 6.8874 tonnes/Last night Moody’s downgrades Deutsche bank to 2 notches above junk/Richmond Mfg Fed...

Tue, 05/24/2016 - 18:51

Good evening Ladies and Gentlemen:

Gold:  $1,228.10 DOWN $22.90    (comex closing time)

Silver 16.24  DOWN 17 cents

In the access market 5:15 pm

Gold $1227.20

silver:  16.22

 

i) the May gold contract is a non active contract.  Yet we started the month with 5.67 tonnes of gold standing and it has increased every single day and today sits at 6.68 tonnes of gold standing:

The amount standing for gold at the comex in May is simply outstanding at 6.8740 tonnes. The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

Let us have a look at the data for today

.

At the gold comex today we had a GOOD delivery day, registering 44 notices for 4400 ounces for gold,and for silver we had 0 notices for nil oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 240.41 tonnes for a loss of 63 tonnes over that period

.

In silver, the open interest ROSE by 1,339 contracts UP to 203,581 as the price was silver was DOWN by  7 cents with respect to YESTERDAY’S trading..In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.018 BILLION TO BE EXACT or 145% of annual global silver production (ex Russia &ex China)

In silver we had 12 notices served upon for 60,000 oz.

In gold, the total comex gold OI fell by a CONSIDERABLE 5,076 contracts down to 551,561 as the price of gold was DOWN $1.30 with yesterday’s trading(at comex closing). They certainly got the liquidation in gold but not silver.

 

We had  a huge withdrawal (and no doubt this is paper gold)  in gold inventory at the GLD to the tune of 3.86 tonnes. The inventory rests at 868.66 tonnes. .We had a good sized deposit  in silver inventory at the SLV to the tune of 951,000 oz . Inventory rests at 336.024 million oz.

.

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

1. Today, we had the open interest in silver RISE by 1339 contracts UP to 203,581 as the price of silver was DOWN by 7 cents with YESTERDAY’S trading. The gold open interest FELL by 5,076 contracts as  gold was down $1.30 yesterday. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Mark O’byrne)

3. ASIAN AFFAIRS

i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP  BY 18.14 PTS OR 0.64%  /  Hang Sang closed DOWN 43.17 OR 0.22%. The Nikkei closed DOWN 81,85 POINTS OR 0.49% . Australia’s all ordinaires  CLOSED DOWN 0.60% Chinese yuan (ONSHORE) closed DOWN at 6.5542 .  Oil FELL to 47.81 dollars per barrel for WTI and 48.14 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5627 yuan to the dollar vs 6.5542 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.

REPORT ON JAPAN  SOUTH KOREA AND CHINA a) REPORT ON JAPAN

none today

b) REPORT ON CHINA

none today

4.EUROPEAN AFFAIRS

i)The following is big news:  Moody’s downgrades Deutsche bank’s debt to two notches above junk.  I guess all of those derivative players who play with DB are getting quite nervous.

( zero hedge)

 

ii)The CEO of DB is very disappointed by the decision of Moody’s to downgrade.The two big problems are the lowering of interest rates in Europe which is killing the banks over there and the ongoing litigation of rigging just about every market there is!

(courtesy zero hedge)

iii)The French government is getting quite tough on the powerful French unions. Last week all 8 huge French refiners have been on strike due to the government’s seeking move of bypassing parliament to enact tougher union laws.

Shortages intensify!

( zero hedge)

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

 

I am not sure who is more a buffoon: Obama or Dennis Gartman

 

Iran’s Ayatollah: “The US Can’t Do A Damn Thing About Our Missile Program” (courtesy zero hedge) 6.GLOBAL ISSUES none today 7.OIL ISSUES

Crude spikes to over 49.00 per barrel on biggest inventory draw:

( zero hedge)

8.EMERGING MARKETS

none today

9. PHYSICAL MARKETS

i)The CME admits that under their old system, future trading was rigged by the  HFT boys:

( zero hedge)

ii)Gold is moving up in a rising channel.  When gold is whacked, new buyers are waiting in the wings to purchase, not wishing to be left out.

 (James Turk/Kingworldnews)/

iii)The Banks now must defend Libor lawsuits after the judges warn of impact of treble damages.  And it is this very fact that has our banks worried about their manipulation in gold/silver.( Bloomberg)

 

USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD AND SILVER

i)It looks like Google is going to have a visit from tax authorities all over Europe as early this morning there was a raid on their Paris office, probing tax evasion:

( zero hedge)

 

ii)Richmond Fed crashes by the biggest margin ever and lands into contraction mode:

( zero hedge)

iii) “Guccifer” to plead guilty for hacking into prominent USA authorities and then will fully cooperate with the ongoing email investigation.

Lot so fun for Hillary ( zero hedge)

iv)Now it is New York’s turn to raise the premiums for Health Insurance next year:

Individuals: 17.3% and small groups 12.0% ( zero hedge) v)Interesting!! only 4 regional Feds support a discount rate increase: (courtesy zero hedge) Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 551,561 for a CONSIDERABLE LOSS of 5,076 contracts AS  THE PRICE OF GOLD WAS DOWN $1.30 with respect to YESTERDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED. ACTUALLY WE HAVE WITNESSING A GRADUAL RISE IN AMOUNT STANDING THROUGH THE MONTH.  THE MONTH OF May saw its OI fall by only 17 contracts DOWN to 120. We had 44 notices filed YESTERDAY so we GAINED ANOTHER 27 gold contract or an additional 2700 oz will stand for delivery.We have started the month with 5.6 tones and gained in ounces standing everyday but one which remained neutral. The next big active gold contract is June and here the OI FELL by 46,496 contracts DOWN to 185,746 as those paper players that wished to stay in the game rolled to August AND THE REST EITHER STAYED PUT FOR NOW OR LEFT PERMANENTLY. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at 4541,907. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was EXCELLENT at 315,156 contracts. The comex is not in backwardation. We are ONE week away from first day notice for the huge June contract/May 31.2016.

(NEXT MONDAY IS MEMORIAL DAY AND THERE WILL BE NO USA TRADING.  THUS ONLY 5 TRADING DAYS REMAIN.

Today we had 50 notices filed for 5,000 oz in gold.

 

And now for the wild silver comex results. Silver OI ROSE by A CONSIDERABLE 1,339 contracts from 202,242 UP to 203,581 as the price of silver was DOWN BY only 7 cents with YESTERDAY’S TRADING. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 1 contract DOWN to 600. We had 0 notices filed yesterday so we LOST 1 contract or an additional 5,000 oz of silver will NOT  stand in this non-active delivery month of May. The next non active month of June saw its OI ROSE by 6 contracts UP to 657 OI. The next big delivery month is July and here the OI ROSE by 253 contracts UP to 134,175. The volume on the comex today (just comex) came in at 34,890 which is  GOOD. The confirmed volume YESTERDAY (comex + globex) was VERY GOOD at 42,248. Silver is  in backwardation up to June. London is in backwardation for several months.   We had 12 notices filed for 60,000 oz.  

MAY contract month:

INITIAL standings for MAY

May 24. Gold Ounces Withdrawals from Dealers Inventory in oz   nil Withdrawals from Customer Inventory in oz  nil  70,412.998 OZ

BRINKS, HSBC

1  KILOBAR Deposits to the Dealer Inventory in oz NIL Deposits to the Customer Inventory, in oz    163,166.25 oz

5,075 kilobars

Brinks, hsbc?? No of oz served (contracts) today 50 contracts
(5,000 oz) No of oz to be served (notices) 70 CONTRACTS

70000 OZ Total monthly oz gold served (contracts) so far this month 2140 contracts (214,000 oz) Total accumulative withdrawals  of gold from the Dealers inventory this month   nil Total accumulative withdrawal of gold from the Customer inventory this month  352,910.0 OZ

Today we had 0 dealer deposits

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 2 customer deposit:

i) Into BRINKS:  2411.25 oz or 75 kilobars

ii) Into HSBC: 160,755.000 oz ?? a touch over  5,000 kilobars???

Total customer deposits;   163,166.25 OZ  5075 kilobars

Today we had 2 customer withdrawals:

i) Out of Brinks:  32.15 oz  1 KILOBAR
ii) Out of HSBC: a real withdrawal:  70,412.998 oz

total customer withdrawals: 70,412.998 OZ

Today we had 0 adjustment:

Today, 0 notices was 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 44 contracts of which 3 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account.  To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (2140) x 100 oz  or 214,000 oz , to which we  add the difference between the open interest for the front month of MAY (120 CONTRACTS) minus the number of notices served upon today (50) x 100 oz   x 100 oz per contract equals 221,000 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE    Thus the initial standings for gold for the MAY. contract month: No of notices served so far (2140) x 100 oz  or ounces + {OI for the front month (120) minus the number of  notices served upon today (50) x 100 oz which equals 221,000 oz standing in this non  active delivery month of MAY(6.8740 tonnes). WE  gained 27 contracts or an additional 2700 oz will stand for delivery in this non non active month of May.  It is this continual increase in gold ounces standing that is driving our bankers crazy and the reason today for another raid on gold/silver TODAY. Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you.    We thus have 6.8740 tonnes of gold standing for MAY and 20.477 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing. We now have partial evidence of gold settling for last months deliveries We now have 6.8740 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes  = 17.222 tonnes still standing against 20.477 tonnes available.   Total dealer inventor 658,361.132 tonnes or 20.477 tonnes Total gold inventory (dealer and customer) =7,854,091.190 or 244.29 tonnes    Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 244.29 tonnes for a loss of 59 tonnes over that period.    JPMorgan has only 22.79 tonnes of gold total (both dealer and customer) JPMorgan now has only .900 tonnes left in its dealer account. May is not a very good delivery month and yet 6.8740 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.    end And now for silver  

MAY INITIAL standings

 May 24.2016

Silver Ounces Withdrawals from Dealers Inventory nl oz Withdrawals from Customer Inventory  1,217,214.135 oz

CNT,JPM

  Deposits to the Dealer Inventory nil oz Deposits to the Customer Inventory  583,783.140 oz

scotia No of oz served today (contracts) 12 CONTRACTS 

60,000 OZ No of oz to be served (notices) 588 contracts

2,940,000 oz Total monthly oz silver served (contracts) 2140 contracts (10,700,000 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  9,758,734.8 oz

today we had 0 deposit into the dealer account

total dealer deposit:nil oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

 

we had 1 customer deposits:

i) Into Scotia: 583,783.140  oz

Total customer deposits: 583,783.140 oz.

We had 2 customer withdrawals

i) out of CNT: 617,214.035 oz

ii) Out of JPM:  600,000,100

:

total customer withdrawals:  1,217,214.135  oz

   

 

 we had 1 adjustment

i) Out of CNT:

55,278.400 oz was adjusted out of the customer and this landed into the dealer account of CNT

The total number of notices filed today for the MAY contract month is represented by 0 contracts for NIL oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (2140) x 5,000 oz  = 10,700000 oz to which we add the difference between the open interest for the front month of MAY (600) and the number of notices served upon today (12) x 5000 oz equals the number of ounces standing    Thus the initial standings for silver for the MAY contract month:  2140 (notices served so far)x 5000 oz +{600 OI for front month of MAY ) -number of notices served upon today (12)x 5000 oz  equals 13,640,000 oz of silver standing for the MAY contract month. WE LOST 1  SILVER CONTRACTS TODAY OR AN ADDITIONAL  5,000 OZ WILL NOT STAND FOR DELIVERY IN THIS ACTIVE MONTH OF MAY.   Total dealer silver:  30.089 million Total number of dealer and customer silver:   153.665 million oz The open interest on silver is NOW AT CLOSE an all time high with the record of 207,394 being set May 18.2016. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver. The reason for the raid today in both gold and silver is probably for the following 4 reasons: 1. The beginning of options expiry week 2. the stranglehold on the May front gold contract month 2. the continued drama in high silver OI 4. potential problem for the bankers in June gold. end And now the Gold inventory at the GLD MAY 24/ a good sized withdrawal of 3.86 tonnes of paper gold from the GLD/Inventory rests at 868.66 tonnes May 23./this is rather impossible: another huge deposit of 3.26 tonnes into the GLD with the price of gold down again today?/inventory rests at 872.52 tonnes May 20/what!!!A MONSTER DEPOSIT OF :8.92 TONNES OF GOLD INTO THE GLD INVENTORY/AND WITH GOLD DOWN $2.80??/INVENTORY RESTS AT 869.26 May 19/ANOTHER HUGE DEPOSIT OF 4.46 TONNES OF GOLD INTO THE GLD/iNVENTORY RESTS AT 860.34 TONNES May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes. May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition.. May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN??? May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes April 28/we gained 1.49 tonnes of gold at the GLD/Inventory rests at 804.14 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 24.:  inventory rests tonight at 868.52 tonnes

end

 

Now the SLV Inventory MAY 24/no change in inventory at the SLV/Inventory rests at 335.739 million oz May 23./we had a small withdrawal of 285,000 oz and that generally means payment of fees.Inventory rests at 335.739 million oz May 20/WE HAD A GOOD SIZED DEPOSIT OF 951,000 OZ INTO THE SLV/INVENTORY RESTS AT 336.024 MILLION OZ May 19/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz May 12/no change in silver inventory/rests tonight at 335.073 million oz/  May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/ May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz. May 9. no change in silver inventory/rests at 336.119 million oz. May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV INVENTORY RESTS AT 336.119 MILLION OZ MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580 April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz . May 24.2016: Inventory 335.739 million oz end NPV for Sprott and Central Fund of Canada

will update on this site later tonight/

1. Central Fund of Canada: traded at Negative 5.0 percent to NAV usa funds and Negative 4.7% to NAV for Cdn funds!!!! Percentage of fund in gold 61.8% Percentage of fund in silver:36.8% cash .+1.4%( May 24/2016). Cdn holiday /no data 2. Sprott silver fund (PSLV): Premium falls  to -0.64%!!!! NAV (MAY 24.2016)  3. Sprott gold fund (PHYS): premium to NAV  FALLS TO -0.04% to NAV  ( MAY 24.2016) Note: Sprott silver trust back  into NEGATIVE territory at -0.64% /Sprott physical gold trust is back into negative territory at -0.04%/Central fund of Canada’s is still in jail. It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to -0.64%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.      

END

And now your overnight trading in gold,TUESDAY MORNING and also physical stories that may interest you: Trading in gold and silver overnight in Asia and Europe Mark O’Byrne (goldcore) World’s Largest Asset Manager Blackrock: “Perfect Time and Place” For Gold

By Mark O’ByrneMay 24, 20160 Comments

The world’s largest asset manager, Blackrock Inc., has written a note about gold in which it suggests that this is the “perfect time and place” for gold due to “low and even negative yields, slow growth and potential signs of rising inflation.”

BlackRock has over $4.6 trillion in assets under management and provides guidance to individuals, financial professionals and institutions and the note was written by Russ Koesterich, the Head of Asset Allocation for a leading Blackrock fund.

The blog, ‘Are these the golden days for gold?’ published by Blackrock last week, points out that “gold may continue to shine”:

“Given slow growth, a cautious Federal Reserve and the proliferation of negative sovereign yields in Japan and Europe, U.S. real rates are likely to remain low for the foreseeable future. At the same time, both core inflation and wages have been firming while the inflation drag from last year’s strong dollar and collapse in oil is beginning to fade. This is exactly the type of environment that has historically been most favorable to gold.”

Blackrock believe that the “unusually low level of  real interest rates (i.e. after inflation)” now make the asset class of gold a potential remedy:

“All told, this is a serious problem for yield starved investors. Ironically, one potential remedy is to take a second look at an asset class that provides no income: gold.”

In March, BlackRock joined Pacific Investment Management Co. (PIMCO) in recommending inflation linked bonds and gold, warning costs are poised to pick up and there is a growing risk of inflation. “We like inflation-linked bonds and gold as diversifiers” said New York-based BlackRock.

“The strategy tactically invests in multiple inflation-sensitive asset classes, allocating across a broad opportunity set of real assets, including global inflation-linked bonds, commodities, real estate, currencies and gold …

Gold has characteristics of both a commodity that is easily stored for a long period of time and a currency whose supply is limited.”

 

Recent Market Updates
Buy Gold As “Extremely Low-Risk Asset” – Rogoff Advises Creditor Nations
Silver – “Best Precious Metals Trade”
Bank Bail-Ins Pose Risks To Depositors, Investors & Economies
Take Delivery of Gold and Silver Coins, Store Gold Bars – Hobbs
George Soros Buying Gold ETF And Gold Shares In Q1
Hedge Funds Take Record Long Silver Position As Silver Bullion Deficit Surges

Gold and Silver News
Gold holds near 3-1/2 week low on Fed rate hike prospects – Reuters
Gold Holds Four-Day Drop as Fed ‘Procession’ Signals Rate Rise – Bloomberg
European Shares Rise as Investors Weigh Implications of Fed Talk – Bloomberg
Lacking new ideas, G7 to agree on ‘go-your-own-way’ approach – Reuters
Banks Must Defend Libor Lawsuits After Judges Warn of Impact – Bloomberg

Gold Rally is Here to Stay says Lombard Odier (Video) – Morning Star
Silver Shortage Or No Shortage? Renowned Silver Expert David Morgan – Youtube
First Soros… Now Jim Rogers Predicts Trillion-Dollar ‘Biblical’ Crash – Dollar Vigilante
High priest of helicopter money speaks (Daily Reckoning)
A Debt Agenda for the G7 (Project Syndicate)
Read More Here

Gold Prices (LBMA AM)
24 May: USD 1,242.65, EUR 1,111.18 and GBP 852.71 per ounce
23 May: USD 1,250.40, EUR 1,115.84 and GBP 860.89 per ounce
20 May: USD 1,256.50, EUR 1,120.18 and GBP 862.75 per ounce
19 May: USD 1,253.75, EUR 1,117.74 and GBP 857.37 per ounce
18 May: USD 1,270.90, EUR 1,127.21 and GBP 882.05 per ounce

Silver Prices (LBMA)
24 May: USD 16.27, EUR 14.55 and GBP 11.14 per ounce
23 May: USD 16.31, EUR 14.55 and GBP 11.27 per ounce
20 May: USD 16.56, EUR 14.76 and GBP 11.35 per ounce
19 May: USD 16.60, EUR 14.81 and GBP 11.35 per ounce
18 May: USD 17.05, EUR 15.13 and GBP 11.77 per ounce

 

 


Read Our Most Popular Guides in Recent Months

Mark O’Byrne Executive Director

END

 

European Close Triggers Precious Metals Plunge

Because nothing says ‘fiduciary’ duty like waiting until Europe closes to dump $850 million notional of gold…

To the tick 1130ET – when European stocks close – gold started to be dumped…

 

And Silver…

 

As The USD was suddenly bid…

 

Charts: Bloomberg

 

end

 

The CME admits that under their old system, future trading was rigged by the  HFT boys:

(courtesy zero hedge)

 

The CME Admits Futures Trading Was Rigged Under Old System

Ask any trader what they believe to be the hallmark feature of any “rigged market” and the most frequent response(in addition to flagrant crime of the type supposedly demonstrated every day by Deutsche Bank and which should not exist in a regulated market) will be an institutionally bifurcated and legitimized playing field, one in which those who can afford faster, bigger, more effective data pipes, collocated servers and response times – and thus riskless trades – outperform everyone else who may or may not know that the market is legallyrigged against them.

Think of it as baseball game for those who take steroids vs a ‘roid free game, only here the steroids are perfectly legal for those who can afford them. Or like a casino where the house, or in this case the HFTs, always win.

However, as it turned out, the vast majority of the public had no idea that a small subset of the market was juicing, despite our constant reports on the topic since 2009, until the arrival of Michael Lewis’ book Flash Boys, which explained the secret sauce that made all those HFT prop shops into unbeatable “trading titans“: frontrunning.

That’s really all one had to know about the mystical inner working of the modern market. All Reg NMS did was legitimize and legalize frontrunning at a massive scale for those who could afford (and hide) it, all the while the technology race ran in the background making it increasingly more expensive to stay at the top: fiber optics, microwaves, lasers, FPGAs, PCI-Express and so on.

And, as we have also discovered in recent years especially since the advent of IEX, for many exchanges providing a two-tiered marketplace was the lifeblood of the business model: the bulk of the revenues for “exchanges” such as BATS and Nasdaq would come from selling non-HFT retail and institutional orderflow to HFT clients. Since the HFTs made far more than the invested cost in permitting such perfectly legal frontrunning, they were happy, the exchanges were happy too as they betrayed only those clients who didn’t pay up the “extra fee”, and only the true outsiders lost. And any time they complained how rigged the system was against them, the HFTs would scream that “they provide liquidity” as they are the real modern-day market makers.

Except that’s not true: the only time HFTs provide liquidity it when it is not needed. When liquidity is truly scarce and required in the market, such as on days like the May 2010 flash crash, or August 2015…  they disappear.

Meanwhile, nothing changes, because the regulators are just as corrupt as the exchanges and the HFTs, and their role is not to bring transparency to a broken, manipulated market, but to keep retail investors in the dark about just how rigged everything is.

It appears that the CME was doing just that as well.

According to Bloomberg, the CME Group – the world’s largest exchange operator – just completed an “upgrade” traders said would eliminate a shortcoming that gave some participants an advantage.

Under the old system, data connections that linked customers to CME – where key products like Treasury futures and contracts tied to the Standard & Poor’s 500 Index trade – had noticeably different speeds, opening up the potential for gaming, according to traders and other experts. Those who knew how to gain faster access could increase their odds of being first in line to trade.

The new design supposedly stamps that out.

Oh, so it was a design glitch that allowed those who “knew” how to frontrun everyone else to do so. That’s the first time we have heard of the particular excuse. Usually the scapegoat is a “glitch”, only in this case the CME didn’t even bother.

“It’s an excellent step forward,” said Matthew Andresen, co-owner of Headlands Technologies LLC, a quantitative trading firm. “The new architecture is flat and fair, a great improvement,” said Andresen, whose knowledge of market infrastructure goes back to the 1990s, when he worked for electronic trading pioneer Island ECN.

But, wait… if it is an “excellent step” that some traders can no longer frontrun other traders on the CME, why is it not a “poor step” that virtually every other exchange still enables precisely this kind of tiered marketplace, which is neither flat nor fair?

Actually, scratch that: that’s precisely what IEX is trying to resolve. The reaction? An exchange which explicitly profits from providing a two-tiered market and charging an arm and a leg for those who can afford it (and thus frontrun everyone else) namely the Nasdaq, has threatened to sue the SEC if it permits IEX to become a full-fledged stock exchange.

As Bloomberg adds, the situation involving CME’s data connections highlights a fresh set of difficulties ensuring a level playing field in the era of light-speed markets, in which even the smallest bits of a second matter. The race to shave off milliseconds has spurred efforts to carve through mountains, span continents with microwave networks and prompted a backlash championed by the likes of IEX Group Inc., the upstart stock market that delays trading to impose fairness.

Unlike some of today’s state of the art means of being faster than everyone else, frontrunning orderflow on the CME was more of a “brute force” mechanism: CME customers are allotted data connections to the exchange. Some have more, some have less. Given that their speeds varied noticeably under the old architecture, the more lines a trading firm had, the better odds it could find a faster one. Trading firms with a lot of links had the chance to fish around for the fastest way to get trades done. Other firms that didn’t have as many connections or the computer programming resources to test around and find the quickest, most efficient way in were at the mercy of the connections they had.

“The performance could vary widely” with data connections under the former CME architecture, Andresen said. By which he meant that those who could afford to pay much more than everyone else, would also be able to frontrun almost everyone else.

But no more. The new system “is an important innovation that will set a new standard for fair and efficient access to the futures markets,” said Benjamin Blander, managing member of Radix Trading, a Chicago-based trading firm.

CME declined to comment on claims the old system was unfair, Bloomberg adds. “We are continuously enhancing our infrastructure in order to provide the latest and best technology architecture for our clients,” said Michael Shore, a spokesman for CME.

CME has been installing the new architecture since February. The last group of futures and options became available on the new system last week, according to CME. Traders aren’t required to switch over to the new system and can keep trading the old way if they want.

This isn’t the first time CME revamped its systems to stamp out an imperfection. Before an upgrade more than two years ago, traders were notified that their own orders were completed before everyone else found out, potentially giving initiators of transactions time to buy or sell on other exchanges with knowledge of their executions.

We expect more violations of “accidentally” rigged markets to be uncovered in time, both on the CME and elsewhere, although we wonder at this time does it even matter: besides central banks trading with other central banks (especially courtesy of the CME’s own Central Bank Incentive Program), does anyone else even bother? If judging by the total collapse in trading volumes over the past decade in virtually every product class, the answer is clear.

end Gold is moving up in a rising channel.  When gold is whacked, new buyers are waiting in the wings to purchase, not wishing to be left out. (courtesy James Turk/Kingworldnews)/ Gold is having an unusual rising correction, Turk tells KWN

Submitted by cpowell on Mon, 2016-05-23 22:50. Section:

6:49p ET Monday, May 23, 2016

Dear Friend of GATA and Gold:

GoldMoney founder and GATA consultant James Turk tells King World News today that gold is going through an unusual rising correction. Either many buyers are awfully eager to buy the dips, Turk says, or investors fear that something nasty is imminent for the world financial system and figure that gold is necessary insurance. An excerpt from Turk’s interview is posted at KWN here:

http://kingworldnews.com/james-turk-this-is-why-gold-is-headed-much-high…

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

 

END

 

The Banks now must defend Libor lawsuits after the judges warn of impact of treble damages.  And it is this very fact that has our banks worried about their manipulation in gold/silver.

(courtesy Bloomberg)

 

Banks must defend Libor lawsuits after judges warn of impact

Submitted by cpowell on Tue, 2016-05-24 00:49. Section:

By Bob Van Voris
Bloomberg News
Monday, May 23, 2016

Sixteen of the world’s largest banks, including JPMorgan Chase & Co. and Citigroup Inc., must face antitrust lawsuits accusing them of hurting investors who bought securities tied to Libor by rigging an interest-rate benchmark, a ruling that an appeals court warned could devastate them.

The appellate judges reversed a lower-court ruling on one issue — whether the investors had adequately claimed in their complaints to have been harmed — while sending the cases back for the judge to consider another issue: whether the plaintiffs are the proper parties to sue, in part because their claims, if successful, provide for triple damages that could overwhelm the banks.

“Requiring the banks to pay treble damages to every plaintiff who ended up on the wrong side of an independent Libor‐denominated derivative swap would, if appellants’ allegations were proved at trial, not only bankrupt 16 of the world’s most important financial institutions, but also vastly extend the potential scope of antitrust liability in myriad markets where derivative instruments have proliferated,” the U.S. Court of Appeals in New York said in the ruling.

Bank of America Corp., HSBC Holdings Plc, Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, Royal Bank of Canada, and Royal Bank of Scotland Group Plc are also among the banks sued in Manhattan. …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2016-05-23/banks-are-ordered-by-c…

 

 

END

 

Bill Holter’s interview with SGT:

 

 

How Will America Trade With WORTHLESS DOLLARS & NO GOLD? — Bill Holter How Will America Trade With WORTHLESS DOLLARS & NO GOLD? — Bill Holter Bill Holter from JS Mineset is back to help us document the collapse for the fourth week of end

 

Your early TUESDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight    

:

1 Chinese yuan vs USA dollar/yuan  DOWN to 6.5554 ( DEVALUATION AGAIN BUT TINY/CHINA STILL FIRES SHOT ACROSS THE USA BOW ) / Shanghai bourse  CLOSED DOWN 21.98 OR 0.77%  / HANG SANG CLOSED UP 21.40 OR 0.11%

2 Nikkei closed DOWN 155.84 OR 0.94% /USA: YEN FALLS TO 109.62

3. Europe stocks opened ALL IN THE GREEN  /USA dollar index UP to 95.40/Euro DOWN to 1.1181

3b Japan 10 year bond yield: FALLS   TO -.102%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.35

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  47.88  and Brent: 48.12

3f Gold DOWN  /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to 0.167%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate FALL to 8.24%/: 

3j Greek 10 year bond yield FALL to  : 7.25%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1241.80/silver $16.29(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 21 in  roubles/dollar) 66.91-

3m oil into the 47 dollar handle for WTI and 48 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9921 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1087 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year RISES to  + .167%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

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 1.839% early this morning. Thirty year rate  at 2.632% /POLICY ERROR)

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

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

end Stronger Dollar Sends Futures Higher, Oil Lower, Asian Stocks To Two Month Lows

Yesterday’s weak dollar headfake has ended and overnight the USD rallied, while Asian stocks dropped to the lowest level in 7 weeks and crude oil fell as speculation returned that the Federal Reserve will raise interest rates as early as next month. The pound jumped and European stocks gained thanks to a weaker EUR.

Philadelphia Fed President Patrick Harker said on Monday that a hike in June is appropriate unless data weakens, while St. Louis Fed President James Bullard said holding rates too low for too long could cause financial instability. “The market seems to be taking a cautious stance ahead of the Fed Chair Janet Yellen’s speech later this week,” said Jung Sung-yoon, a foreign exchange analyst at Hyundai Futures.

“A rise in the dollar would be a big help for European stocks” Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank told Bloomberg. “People are testing whether the market has found a bottom, and there’s plenty of money sitting on the sidelines. We’ve had pretty calm, sideways trading this month even with another Fed rate hike looking more likely.” What Sonnenschein probably did not have in mind is such a drastic rise in the dollar that every other currency has to plunge, leading to the January EM puke which in turn sent all stocks, including European, reeling.

Others were less optimistic: Yang Hai, analyst at Kaiyuan Securities, said trading will likely remain dull for a while as economic sluggishness discourages investor participation. “The current economic environment doesn’t justify a sustainable rebound. In addition, regulators are reducing leverage in the asset management industry so money is not flowing in.”

In any event, the USD touched its strongest level in eight weeks against the euro, sending all 19 Stoxx 600 sectors higher with basic resources, banks outperforming and tech, financial services underperforming. Australia’s dollar and the Malaysia’s ringgit were among the biggest losers, as the prospect of higher interest rates boosted demand for the greenback. The stronger dollar also weighed on commodities, as gold headed for its longest losing streak since November and Brent crude oil declined for a fifth day. Sterling was boosted by a poll showing support for staying in the European Union is solidifying, while the Turkish lira gained after a cabinet reshuffle.

According to Bloomberg, Fed Funds futures are indicating for the first time since March a better-than-even chance that the U.S. central bank will raise interest rates by its July meeting. The speculation is driving a dollar rally that’s reminiscent of early January, when a global equities selloff wiped out about $7 trillion of market value following a December rate hike by the Fed. Unlike back then, oil and China’s yuan are showing signs of stability. Federal Reserve Bank of Philadelphia President Patrick Harker said he could see two to three rate hikes in 2016.

“Markets remain fragile as talks of a U.S. interest- rate hike in June puts some fear on whether global growth will remain resilient,” said Niv Dagan, Melbourne-based executive director at Peak Asset Management LLC. Williams and Bullard “both struck hawkish tones. The timing of future Fed rate hikes in the face of a sluggish economy is a major focus among stock investors who have benefited from historically low borrowing costs since the 2008 financial crisis.”

The Stoxx Europe 600 Index added 0.9 percent, led by miners and banks. S&P 500 futures gained 0.2 percent, signaling that the main index will recover after falling 0.2 percent Monday. The MSCI Emerging Markets Index of stocks dropped 0.6 percent. The measure is down 1.2 percent this year and trades at 11.2 times its projected 12-month earnings, data compiled by Bloomberg show. The Borsa Istanbul 100 Index jumped 1.9 percent.

Market Wrap

  • S&P 500 futures up 0.3% to 2052
  • Stoxx 600 up 0.9% to 341
  • FTSE 100 up 0.5% to 6168
  • DAX up 0.6% to 9899
  • S&P GSCI Index down 0.4% to 363.5
  • MSCI Asia Pacific down 0.9% to 125
  • Nikkei 225 down 0.9% to 16499
  • Hang Seng up 0.1% to 19830
  • Shanghai Composite down 0.8% to 2822
  • S&P/ASX 200 down 0.4% to 5296
  • US 10-yr yield unchanged at 1.84%
  • German 10Yr yield down 1bp to 0.17%
  • Italian 10Yr yield down 3bps to 1.45%
  • Spanish 10Yr yield down 2bps to 1.56%
  • Dollar Index up 0.19% to 95.41
  • WTI Crude futures down 0.5% to $47.86
  • Brent Futures down 0.7% to $48.03
  • Gold spot down 0.4% to $1,244
  • Silver spot down 0.6% to $16.29

Top Global News

  • Snapchat Said to Raise Funds at ~$20b Valuation: TechCrunch: Snapchat’s new fundraising round is about $200m; follow-on to $175m Series F round led by Fidelity
  • Cryan Says Deutsche Bank ‘Disappointed’ as Moody’s Cuts Rating: Unsecured debt rating lowered to Baa2, two levels above junk. ‘They face some pretty challenging headwinds,’ analyst says
  • Viacom CEO Dauman Sues to Block Removal From Redstone Trust: Complaint says Redstone’s daughter Shari is manipulating him. Move to replace them upends decades of planning, suit says
  • Worst-Performing U.S. Notes Go On Sale Under Threat of Fed Hike: Two-year notes stagnate in 2016 as 30-year bonds surge 8.9%. Odds of Fed rate increase this year rise to 76%, futures show
  • Facebook Changing Guidelines for Trending Topics After Probe: Will no longer require stories to appear on sites considered news leaders, including the New York Times and Buzzfeed, as that requirement could lead to bias
  • Tudor Cuts Fees on Biggest Fund to Keep Investors on Board: Firm’s charges are among the hedge fund industry’s highest. Macro hedge fund declined 2.6% this year as of May 13
  • Brexit Drama Scares Off Biggest Nordic Private Equity Fund EQT: EQT’s von Koch says Europe’s potential is underestimated
  • Morgan Stanley’s Gorman Says ‘Stay Tuned’ for Better Returns: Markets becoming more normal after tough quarter

Looking at Regional Markets, Asia traded lower across the board following the poor close on Wall Street in which Fed rate hike concerns and light trade dampened risk-appetite. Nikkei 225 (-0.9%) and ASX 200 (-0.4%) were pressured from the open with energy and basic materials weighed after oil fell below USD 48/bbl and iron ore prices continued to slump. Chinese bourses have conformed to the negative picture with the Hang Seng (+0.1%) and Shanghai Comp (-0.8%) impacted by the commodity weakness in which Dalian iron ore futures fell around 4% in early trade. Finally, 10yr JGBs traded higher amid risk-averse sentiment, while today’s enhanced liquidity auction for 10yr, 20yr, and 30yr JGBs was better received with b/c increasing to 4.03 from 3.67.

Top Asian News

  • Singapore Orders BSI Bank to Shut Down Amid 1MDB Probe: BSI’s Group CEO Stefano Coduri resigns
  • Google, Temasek See S.E. Asia Web Economy Reaching $200 Billion: Region attracts a fraction of VC funding received by India
  • Yuan Watchers See Decline Without Disorder as PBOC Learns Lesson: Top forecaster sees use of intervention, fixing to steady rate
  • Xiaomi Said to Plan First Drone at $610 in Challenge to DJI: Drone with 4K video said to be priced at ~4,000 yuan
  • Sony’s Profit Forecast Misses Estimates on Earthquake Damage: Sees net income down 46% to 80b yen for current fiscal year vs 196.4b yen analyst est.
  • Billionaire Jindal Family’s JSW Seeks More Distressed Assets: Group targets power, steel, iron ore and coal mine deals

In Europe, choppy price action has once again been at the fore of early European trade, with equities paring early losses to trade back in positive territory (Euro Stoxx 50: +0.8%). Italian banks are among the best performers on the continent today as they continue their recent volatile trend, in what has otherwise been a relatively quiet morning thus far in terms of stock specific newsflow. In terms of fixed income, Bunds have spent the morning in a particularly tight range (28 ticks), having opened higher after risk-off sentiment during Asian hours. Ultimately prices have failed to react to the upside in equities with any move to the downside potentially capped by the notable lack of supply from the Eurozone this week.

Top European News

  • Greek Debt Relief 2.0 Is Coming as IMF Rips Euro-Area Proposal
  • Plummeting Lira Threatens Plan to Spur Growth With Rate Cuts
  • Italy Top Female CEO Targets Growth of De Benedetti Empire
  • Monsanto Trading Below Bayer Offer Shows Regulatory Anxiety

In FX, the Bloomberg Dollar Spot Index, a gauge of dollar strength against 10 major peers, rose 0.2% in early trade. It advanced 0.4% to $1.1181 per euro, after being as strong as $1.1169. The Aussie dropped 0.8% after Reserve Bank of Australia Governor Glenn Stevens said inflation is too low. The ringgit slid 0.9 percent as the drop in oil prices dimmed prospects for Malaysia, Asia’s only major net exporter of crude. The MSCI Emerging Markets Currency Index dropped 0.2 percent. Sterling jumped 0.9 percent versus the euro and was 0.7 percent stronger at $1.4580, its first advance versus the greenback in three days. An ORB survey for the Daily Telegraph newspaper found older voters, previously found to back leaving the EU, are switching sides. The yuan was the most resilient of 31 major currencies, gaining 0.02 percent versus the dollar and trimming this year’s loss to 0.9 percent. China’s central bank scrapped a market-based mechanism for managing the currency on Jan. 4, returning to a system whereby the exchange rate is based on what suits authorities the best, the Wall Street Journal reported, citing unidentified people close to the People’s Bank of China.

Perhaps most notably, Turkey’s lira rebounded, climbing 0.6% after Mehmet Simsek, seen by many as the last pillar of stability in the Turkish government, was named deputy prime minister in a cabinet announced by prime-minister designate Binali Yildirim. The former Merrill Lynch strategist is credited by investors for maintaining fiscal discipline and acting as a buffer to President Recep Tayyip Erdogan’s push against orthodox monetary policy.

In commodities, Crude declined as Canadian oil-sands producers prepared to restart operations and cooler weather helped contain wildfires. Brent crude futures decreased 0.6 percent, after declining 1.9 percent over the previous four sessions. Inventories slid by 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday. Supplies are near the highest in eight decades. West Texas Intermediate slid 0.4 percent to $47.89 a barrel Zinc in London dropped 1.4 percent to $1,815 a metric ton, the lowest in six weeks, while nickel rose 0.2 percent as Chinese import data signaled a diverging demand picture for the two metals. Copper rose 0.9 percent. Gold fell for a fifth day, with bullion for immediate delivery slipping 0.4 percent to $1,244.01 an ounce.

Bulletin Headline Summary From Bloomberg and RanSquawk

  • European equities have once again pared opening losses amid no direct fundamental catalysts to instigate price action and alongside a steady energy market
  • GBP continues to remain at the forefront of investor sentiment with the latest ORB/Telegraph poll further emphasising the lead of the ‘remain’ campaign
  • Looking ahead, highlights include US New Home Sales and API Inventories
  • Treasuries little changed in overnight trading; GBP/USD rallies as BOE’s Carney speaks before Parliament, says BOE has an obligation to assess risks related to Brexit; Treasury to sell $26b 2Y notes, WI 0.92%; last sold at 0.842% vs 0.840% WI yield at bidding deadline, first 2Y auction to tail since May 2014.
  • “My personal view is that the next rate move is more likely to be up than down in a Remain vote,” BOE Governor Mark Carney said at a hearing before U.K. lawmakers in London
  • Charlene Chu, a banking analyst who made her name warning of the risks from China’s credit binge, said a bailout in the trillions of dollars is needed to tackle the bad-debt burden dragging down the nation’s economy
  • Responding to a credit-rating cut by Moody’s Investors Service, Deutsche Bank AG Chief Executive Officer John Cryan said his bank has never had more capital and could easily repay its debt many times over
  • HSBC Holdings Plc, the U.K.’s biggest lender, is selling the riskiest type of bank debt about a month before a referendum that could lead to the country leaving the European Union
  • The world’s biggest banks have shed about one in three bond traders since 2011 as rules that make some businesses less profitable dovetail with volatile markets that are spooking investors
  • A surge in investment propelled German economic growth to its fastest pace in two years in the first quarter as mild winter weather encouraged construction

DB’s Jim Reid concludes the overnight wrap

Over in markets, a new week seemed to bring with it a bit of a pause for breath for investors for the most part yesterday. Indeed low volumes and choppy moves characterised much of the afternoon session in the US where the S&P 500 (-0.21%) eventually ended with a small loss. That said volumes were 16% below the average while the high to low range (of 0.41%) was the second smallest daily range of the year. Bourses in Europe were down a little more (Stoxx 600 -0.39%) not helped by a near 6% slide for Bayer after the terms of it $62bn mega offer for Monsanto was disclosed.

The economic data and specifically the release of the PMI’s yesterday didn’t lend much of a supporting hand to improving sentiment. In the US the flash manufacturing PMI for May was down a disappointing 0.3pts to 50.5 (vs. 51.0 expected) which is the lowest reading since September 2009 and backs up those soft regional readings of late. The details weren’t much better with output (49.1 from 50.3) falling below 50 to the lowest since August 2009, while new orders is at the lowest this year.

Meanwhile in Europe we saw the Euro area composite nudge down from 53.0 in April to 52.9 in the flash May reading which went against the consensus estimate for a rise to 53.2. The weakness came from the manufacturing sector where the PMI edged down to 51.5 (vs. 51.9 expected) from 51.7, while the services reading was unchanged at 53.1 (vs. 53.2 expected). Regionally however, the data pointed at some potential warning signs for the periphery. The composite readings for Germany (+1.1pts to 54.7; 53.9 expected) and France (+0.9pts to 51.1; 50.4 expected) actually rose more than expected and as a result, our European economists noted yesterday that this implies a contraction of 1.7pts on average in the composite PMI of Italy, Spain and Ireland. Overall yesterday’s data was in line with our colleague’s projected temporary slowdown in Euro area GDP growth to +0.3% qoq in Q2.

Switching our focus over to the latest in Asia where a weak last 24 hours for commodity markets, as well as the relatively soft price action in the US last night has seen most markets in Asia dip lower this morning. Losses are being led out of China where the Shanghai Comp is currently -0.90%, while elsewhere the Nikkei (-0.67%), Hang Seng (-0.14%), Kospi (-0.63%) and ASX (-0.16%) are all in the red. WTI has fallen below $48/bbl this morning ahead of the US inventory data today, while a near 7% fall for iron ore yesterday followed by further declines in the futures market this morning to the lowest level since early March appears to be weighing on miners.

Moving on. There was a bit more Fedspeak for us to note yesterday, although none of which particularly moved the dial giving it largely replicated much of what we’ve heard in the last week or so. Speaking after the US close, the Philadelphia Fed President Harker, usually of a hawkish leaning (and a non-voter this year), said that while he would not commit to a definitive path of how the Fed’s policy should evolve, did highlight that ‘I can easily see the possibility of two or three rate hikes over the remainder of the year’ while also suggesting that should the data come in as expected, then he would also see a June increase as appropriate. Prior to this we’d heard similar comments from San Francisco Fed President Williams, also a slightly more hawkish non-voter this year, who said that two to three rate increases this year are still about right. This echoes comments Williams made last month so was nothing new. The other comments yesterday came from St Louis Fed President Bullard who tends to be slightly more hawkish than that of his aforementioned colleagues (and is a voter this year), who said that he does not see the upcoming risk of Brexit as affecting the Fed’s decision making progress. The USD was actually a touch weaker yesterday (Dollar index -0.11%) although 2y Treasury yields have crept up above 0.900% again (from 0.878% on Friday) and the probability of a hike in June is now back at 32% from 28%, while July is up at 54% from 48%.

Away from this, with a month to go to June 23rd, The House View team have published a special report on the Brexit referendum. They look at the latest polls and bookmaker odds and explore the implications for either scenario. The negotiation period under an out vote is likely to take longer than the two years envisaged in the EU Treaty: it took three years for Greenland in the 1980s. During the negotiations the EU would have to strike a balance between preserving links with the UK and avoiding dissolution, a process that will be made more difficult given the different agendas, exposures and sensitivities to the UK of the other 27 EU countries. The report also looks at the potential macro and markets impacts of the different outcomes.

Staying with the political theme, over in Austria a super tight Presidential vote eventually concluded with the announcement that Van der Bellen will be the next President after taking 50.3% of the vote. Of significance was that he defeated Freedom Party candidate Norben Hofer who took 49.7% of the vote, meaning the first election of a far right-wing populist head of state since WWII was avoided. The close result laid out the huge division in the nation over issues such as the migration crisis as well as the domestic issues facing the Austrian economy presently.

Looking at today’s calendar, this morning the early focus is on Germany where shortly after we go to print the final revisions to Q1 GDP will be due out (no change from the +0.7% qoq reading expected) along with the associated growth components. Shortly after that we’ll get various confidence indicators out of France followed then by the April public sector net borrowing data for the UK. Later this morning we’ll also get the May ZEW survey report for Germany where some modest improvement in both the current situation (+1.3pts to 49.0 expected) and expectations (+0.8pts to 12.0 expected) components are expected. This afternoon we’ll get some data out of China with the Conference Board’s leading index, while across the pond this afternoon the Richmond Fed manufacturing index is due out (expected to deteriorate) as well as April new home sales data. Away from the data there’s no Fedspeak due although it’ll be worth keeping an eye on comments from the BoE’s Carney this afternoon when he is due to appear before the Treasury Committee (along with Broadbent, Weale and Vlieghe) to answer questions on the 2016 May Inflation Report. The ECB’s Praet is also due to speak today while Euro area finance ministers will be meeting in Brussels today with all things Greece on the agenda.

END ASIAN AFFAIRS

i)Late  MONDAY night/ TUESDAY morning: Shanghai closed DOWN  BY 21.98 PTS OR 0.77%  /  Hang Sang closed UP 21.40 OR 0.94%. The Nikkei closed DOWN 155.84 POINTS OR 0.94% . Australia’s all ordinaires  CLOSED DOWN 0.44% Chinese yuan (ONSHORE) closed DOWN at 6.5554 .  Oil FELL to 47.88 dollars per barrel for WTI and 48.12 for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades  6.5653 yuan to the dollar vs 6.5554 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA a) JAPAN ISSUES

none today/also no China stories

EUROPEAN AFFAIRS

The following is big news:  Moody’s downgrades Deutsche bank’s debt to two notches above junk.  I guess all of those derivative players who play with DB are getting quite nervous.

(courtesy zero hedge)

 

Moody’s Downgrades Deutsche Bank’s Debt Two Notches Above Junk

While not quite on the level of last week’s Berenberg downgrade (to Sell) which warned that DB’s problems are now “insurmountable“, shortly after the close Moody’s surprised the market with a downgrade that may have substantial repercussions on the funding costs (and perhaps viability) of the largest German, and European, lender.

Shortly after the market close, the rating agency decided to pile some more pain on the misery that has befallen Germany’s largest lender (who just today admitted it had rigged stocks in addition to seeing yet another MBS probe unveiled against it), when it downgraded the bank’s credit ratings across the board as follows: Senior debt to Baa2, or just two notches above junk, Long term deposits to A3 and counterparty risk assessment to A3.

Moody’s also downgraded Deutsche Bank’s short-term ratings and short-term counterparty risk assessments were also downgraded to Prime-2 from Prime-1 and to Prime-2(cr) and Prime-1(cr).

Moody’s downgrades Deutsche Bank’s ratings (senior debt to Baa2, long term deposits to A3 and counterparty risk assessment to A3(cr)); outlook stable

The full release:

Moody’s Investors Service has today downgraded the ratings of Deutsche Bank AG and affiliates, including the bank’s long-term deposit rating, to A3 from A2, its senior unsecured debt rating to Baa2 from Baa1, its standalone baseline credit assessment (BCA) to ba1 from baa3, and its counterparty risk assessment to A3(cr) from A2(cr). Deutsche Bank’s short-term ratings and short-term counterparty risk assessments were also downgraded to Prime-2 from Prime-1 and to Prime-2(cr) and Prime-1(cr), respectively. Today’s rating action reflects the increased execution challenges Deutsche Bank faces in achieving its strategic plan.

Moody’s also downgraded the ratings of US–based Deutsche Bank Trust Corporation and its trust company affiliates. These trust companies’
long-term deposit ratings were downgraded to A2 from A1, their long-term issuer ratings were downgraded to Baa2 from Baa1, their standalone baseline credit assessment was downgraded to baa1 from a3; their long-term and short-term counterparty risk assessments were downgraded to A3(cr) from A2(cr) and to Prime-2(cr) and Prime-1(cr) respectively. The Prime-1 short-term deposit ratings of these trust companies were affirmed.

The outlook on the ratings is now stable, reflecting the potential long-term benefits to creditors of Deutsche Bank’s five-year strategy plan through 2020 once achieved. It also reflects actions taken by the management team to preserve capital and liquidity during the restructuring process. This rating action concludes Moody’s review for downgrade of Deutsche Bank and its subsidiaries which began on 21 March 2016.

RATIONALE FOR RATINGS DOWNGRADE

Deutsche Bank is engaged in a multi-year undertaking to simplify its businesses, fortify its controls, strengthen its balance sheet and stabilize its earnings. Once substantial progress has been made, Deutsche Bank will have a reduced risk profile, more balanced earnings and operate with more conservative levels of leverage. Accomplishing these objectives will be positive for Deutsche Bank’s creditors, and the newly appointed management team is diligently attempting to execute this plan.

However, the rating downgrade reflects increased risks to Deutsche Bank’s ability to successfully execute this ambitious, creditor-friendly plan.Deutsche Bank’s performance over the last several quarters has been weak, and substantial operating headwinds, including continuing low interest rates and macroeconomic uncertainty, will challenge the firm. These forces will likely result in periods of subdued customer volumes and revenues within Deutsche Bank’s retail, asset management and institutional franchises, in Moody’s view. Moody’s expects that such revenue weakness could hinder or delay Deutsche Bank’s ability to make progress on its plan, as this would be contingent on the firm’s ability to balance the impact of plan-related expenses on its internal capital generation against the firm’s growing regulatory capital requirements.

“Deutsche Bank’s new management team is executing in a disciplined way, but the headwinds have stiffened, reducing the firm’s operating flexibility”, said Peter Nerby, a Moody’s Senior Vice President.

These challenges have been evident in revenue pressures facing Deutsche Bank over the past two quarters. Looking ahead, continuing headwinds could limit management’s ability to address one of the bank’s key credit challenges – to improve its structurally weak profitability and internal capital generation by 2018. Moody’s estimates that the firm is unlikely to achieve its targeted profitability improvements unless there is a material and sustained improvement in the operating environment.

RATIONALE FOR STABLE OUTLOOK

At the same time, the outlooks on Deutsche Bank’s ratings are stable, reflecting the potential long-term benefits to creditors of the five-year plan through 2020. Deutsche Bank maintains a sound liquidity position which is supportive of the bank’s credit fundamentals while management is deploying many operating and financial tools to execute this multi-faceted re-engineering. Recent actions include the implementation of a more comprehensive account opening process, the decommissioning of many legacy systems and the closure of onshore
operations in Russia.

The stable outlooks also reflect actions taken by the management team to preserve capital and liquidity during the restructuring process, such as suspending the dividend on its common stock and accelerating asset sales. These are important actions to maintain prudent cushions above regulatory minimums, if profit generation is limited in 2016 and 2017.

The downgrades to Deutsche Bank Trust Corporation and its trust company affiliates reflect the close linkages of the franchise value and client base of these operations to those of the parent Deutsche Bank. At the same time, the baa1 baseline credit assessments of the trust companies remain three notches above those of Deutsche Bank, reflecting strong regulatory ring-fencing, which preserves the capital and liquidity position of these entities as well as a lower risk profile focused on operational and wealth management services within these entities.

What Could Change the Rating – Up?

Steady progress toward improving profitability and reducing tail risks in the form of outstanding litigation and the run-off of legacy
positions as well as material progress in rebuilding the information technology environment of the bank, could lead to a rating upgrade.

What Could Change the Rating – Down?

The current ratings incorporate the possibility for a modest loss and substantial litigation costs in 2016 and the potential for limited profitability in 2017. Further downward pressure could occur if capital ratios weaken substantially or if liquidity declines sharply.

* * *

Remember that Deutsche Bank – Lehman analog?

With every additional downgrade by the likes of Berenberg or Moody’s, the two lines will converge ever closer.

 END The CEO is very disappointed by the decision of Moody’s to downgrade DB. The two big problems are the lowering of interest rates in Europe which is killing the banks over there and the ongoing litigation of rigging just about every market there is! (courtesy zero hedge) Deutsche Bank CEO “Very Disappointed” By Moody’s Downgrade

As reported yesterday, adding insult to injury to a bank that just hours earlier admitted that in addition to rigging everything else it has also been caught engaging in “stock fraud” at the same time as a new mortgage probe was launched against it, Deutsche Bank’s senior debt rating was downgraded by Moody’s to Baa2, just two notches above junk. For the bank with the tens of trillions in derivatives, being seen as an increasingly more distressed counterparty was not good news and explains why the CEO took the unexpected step of having to defend his firm following the downgrade.

As Bloomberg reports, DB’s CEO John Cryan said he was not happy with the Moody’s decision, his bank has never had more capital and could easily repay its debt many times over.:

We are very disappointed,” Cryan said in an interview on the sidelines of the Institute of International Finance’s conference in Madrid. “We have enough capital to repay all of our debt four-times over.”

It is unclear if under debt he also included the bank’s gross notional derivative liabilities which are several tens of trillions worth.

As we reported last night, Moody’s said that Deutsche faces mounting challenges in carrying out its turnaround, and cut the bank’s senior unsecured debt metric one level to Baa2, two grades above junk. The firm’s long-term deposit rating fell to A3 from A2.

The reason why DB has been singled out is because Cryan’s planned overhaul of the bank, laid out in October, has run into an industrywide slump in trading and investment banking, as well as a continued decline in interest rates in Europe and Asia, which is squeezing margins, but most troubling is the bank’s ongoing disclosures of legal non-compliance and outright fraud, leading to billions in settlements, legal fees and other increasingly more recurring charges. Net income fell 61% in the first quarter, leaving the company at risk of a second straight annual loss this year as it tries to resolve legal cases.

Moody’s tried to be diplomatic about its unexpected puke on what may be the world’s most important – and troubled – bank: “The plan they’re trying to execute is a good plan for the bondholder in the long run, but they face some pretty challenging headwinds when you look at the current operating environment,” Peter Nerby, a senior vice president at Moody’s, said in a phone interview. “They’re working on it, but it’s tougher than it was.”

However, one could read between the lines. Meanwhile, Deustche doth protested some more: “All key ratings remain investment grade,” Deutsche Bank Chief Financial Officer Marcus Schenck said in a separate statement on Monday. “And they remain in ‘A’ territory in our counterparty risk assessment and long-term deposit rating, which are most important for our clients.”

For now the market is buying it, literally, and the stock was up 1% in early Frankfurt trading

 

end

 

The French government is getting quite tough on the powerful French unions. Last week all 8 huge French refiners have been on strike due to the government’s seeking move of bypassing parliament to enact tougher union laws.

Shortages intensify!

(courtesy zero hedge)

French Government Promises To Deal With Unions “Extremely Firmly” As Fuel Shortages Intensify

French police used water cannons and tear gas to break up a picket that was blocking access to a large oil refinery in the southern port area of Marseille, as Prime Minister Manuel Valls told the unions that“enough is enough.” Valls went on to say that if labor unions continue to picket and disrupt fuel supplies, that they would be dealt with “extremely firmly.”

 

Valls has changed his tone on the matter, as the unions have exhibited that they can in fact disrupt fuel supplies around the country. Unions have been striking and blocking fuel supplies from being delivered ever since the government bypassed parliament and enacted unpopular labor reforms earlier this month. Rationing at many of the roughly 12,000 gas stations nationwide has already begun as the pickets have started to create significant fuel shortages in the country.

 

The government has said that there are enough emergency fuel reserves if necessary, but has taken a firm approach to breaking up the pickets as now all 8 French refineries have gone on strike, and Exxon’s Gravenchon refinery reports being down 50%, as it states that the plant isn’t halted but no petroleum is being delivered.

CGT union boss Philippe Martinez said that the strikes will continue until the labor law is withdrawn, and that the government was “playing a dangerous game” by refusing to back down on the reforms.

“We’ll see this through to the finish, to withdrawl of the labor law. This government which has turned its back on its promises and we are now seeing the consequences.

40 busloads of riot police took part in breaking up the strike outside of the Fos-sur-Mer refineries, which CGT union member Emmanuel Lepine called “unprecedented violence.”, also noting that the plan to disrupt fuel supplies is working “output is going to fall by at least 50 percent.”

As if the disruption in fuel supplies wasn’t enough, the CGT has also called weekly strikes on the SNCF state railways and an open-ended strike on the Paris underground and suburban commuter train networks from June 2, a week befor ethe Euro 2016 soccer tournament opens.

Bloomberg has more:

  • *Prime Minister pledges further state intervention after Fos, near Marseille, unblocked by force
  • *CGT: ALL 8 FRENCH REFINERIES ARE ON STRIKE
  • *Exxon’s Gravenchon in Normandy down by >50%
  • *Plant’s units not halted but it’s not delivering petroleum

Alas, contrary to what Prime Minister Valls would like everyone to believe, it appears that he does not have the situation “fully under control.

end RUSSIAN AND MIDDLE EASTERN AFFAIRS

I am not sure who is more a buffoon: Obama or Dennis Gartman

(courtesy zero hedge)

 

Iran’s Ayatollah: “The US Can’t Do A Damn Thing About Our Missile Program”

Over the weekend we reported that in the latest unspoken mockery of the Obama administration, the Iranian military had successfully carried out another two launches of short-range ballistic missiles – the Nazeat and the Fajr-5 – during ground forces exercises. As a reminder, Iran is technically not permitted (even if the prohibition is not enforced) to engage in such drills, because following the adoption of the JCPOA, the UN Security Council passed Resolution 2231, which prohibits Iran from engaging in activities related to ballistic missiles capable of delivering nuclear weapons.

Which, as we wrote, is precisely why Iran keeps doing just that in its ongoing attempts to mock the Obama administration as one which no longer has any leverage over what Iran does, something Trump, who has repeatedly said he would immediately cancel the deal if he is elected president, will use to his full advantage in the coming months.

Well, what until now was an “unspoken mockery” of the US just became very spoken, because as Iran’s semi-official Fars News Agency reported, cited by TOI, Iran’s supreme leader Ali Khamenei on Monday said the United States cannot “do a damn thing” about the Islamic Republic’s ballistic missile program, making it explicit that every preceding and future ballistic missile test is about one thing only: to humiliate the Obama administration.

Referring to the US, Khamenei said that “they have engaged in a lot of hue and cry over Iran’s missile capabilities, but they should know that this ballyhoo does not have any influence and they cannot do a damn thing.”

The US and other powers are extremely sad at this issue and they have no other option; that is why they made huge efforts in order to bring the country’s decision-making and decision-taking centers under their control, but they failed and God willing, they will continue to fail,” Khamanei added.

The supreme leader, who has final say on state matters, slammed “arrogant” Western powers, arguing that efforts to shut down its nuclear program and missile tests were a pretext to meddle in Iran’s affairs. “The nuclear issue and missiles are excuses and of course excuses are useless and they can do no damn thing,” Khamenei said. “The point is Iran doesn’t follow arrogant powers.”

In this war, willpowers are fighting. The stronger willpower will win,” Khamenei added.

Unless willpower is measured by the size of one’s gold handicap, we doubt Obama would disagree.

Elsewhere, the leader of the Iranian Revolutionary Guards, general Qassem Soleimani, maintained that without the Islamic Republic, the Islamic State would now control all of Syria. The United States has been forced to back down in the region, he said, according to Iranian reports.

Iran also pivoted to its historic nemesis Israel. Last week, a senior Iranian military commander boasted that the Islamic Republic could “raze the Zionist regime in less than eight minutes.” Ahmad Karimpour, a senior adviser to the Iranian Revolutionary Guards’ elite unit al-Quds Force, said if Khamenei gave the order to destroy Israel, the Iranian military had the capacity to do so quickly.

“If the Supreme Leader’s orders [are] to be executed, with the abilities and the equipment at our disposal, we will raze the Zionist regime in less than eight minutes,” Karimpour said Thursday, according to the semi-official Fars News Agency.

A senior Iranian general on May 9 announced that the country’s armed forces successfully tested a precision-guided, medium-range ballistic missile two weeks earlier that could reach Israel, the state-run Tasnim agency reported.

“We test-fired a missile with a range of 2,000 kilometers and a margin of error of eight meters,” Brigadier General Ali Abdollahi was quoted as saying at a Tehran science conference. The eight-meter margin means the “missile enjoys zero error,” he told conference participants.

He was referring to a potential Israeli strike, something which has not escaped the Israelis, who also realize that Khamenei is absolutely right that the US “can’t do a damn thing” about the Iranian program, which may in turn lead to a return of the same concerns which emerged for the first time in 2010 and 2011 that Israel would launch a preemptive strike against Iran just to make sure Iran does not do the same.

For now, however, ISIS is providing a sufficient distraction to the much deeper and ongoing tensions in the middle east.

 

END

 

Crude spikes to over 49.00 per barrel on biggest inventory draw:

(courtesy zero hedge)

 

Crude Spikes Above $49 After Biggest Inventory Draw Since 2015

Following last week’s surprise draw (from the DOE data), API reported a huge 5.14mm draw (against expectations of a 2mm barrel draw) – the biggest since Dec 2015. Bear in mind that last week API reported a large build only to se a major draw in DOE data so perhaps this is catch down from the Canada interruption. Cushing saw its first draw in 4 weeks but Gasoline inventories rose dramatically (+3.06mm vs -1.5mm exp). Crude prices are exuberantly looking to run last week’s high stops on the news, breaking above $49 again.

 

API

  • Crude -5.137mm (-2mm exp)
  • Cushing -189k (-400k exp)
  • Gasoline +3.06mm (-1.5mm)
  • Distillates -2.92mm (-750k exp)

This is the biggest inventory draw since Dec 18th…

Bear in mind, seasonally, the trend is for a draw in May. In fact May of 2015 saw one of the biggest draws of all time at -16.4 million. How did 2015 end?

 

The reaction, understandably, a surge in oil prices – breaking above $49…

 

Charts: Bloomberg

 

end

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

Euro/USA   1.1181 DOWN .0032 ( STILL REACTING TO USA FAILED POLICY

USA/JAPAN YEN 109.62  UP.247 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4611 UP.0133 (LESS OF A THREAT OF BREXIT)

USA/CAN 1.3159 UP .0013

Early THIS TUESDAY morning in Europe, the Euro FELL by 32 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED DOWN BY 21.98 PTS OR 0.77% / Hang Sang CLOSED UP 21.40 OR  0.11%   / AUSTRALIA IS LOWER BY 0.44%(RESOURCE STOCKS DOING POORLY / ALL EUROPEAN BOURSES ARE ALL IN THE GREEN   as they start their morning/

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this TUESDAY morning: closed DOWN 155.84 OR 0.94% 

Trading from Europe and Asia:
1. Europe stocks ALL THE GREEN AS  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 21.40 PTS OR 0.11% . ,Shanghai CLOSED  DOWN 21.98 OR 0.77%/ Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED IN THE RED /India’s Sensex IN THE GREEN

Gold very early morning trading: $1242.00

silver:$16.29

Early TUESDAY morning USA 10 year bond yield: 1.839% !!! UP 1 in basis points from MONDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.632 UP 1 in basis points from MONDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early TUESDAY morning: 95.40 UP 15 CENTS from MONDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers TUESDAY MORNING

END

 

And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield:  3.02% DOWN 5 in basis points from MONDAY

JAPANESE BOND YIELD: -.104% DOWN 2 in   basis points from MONDAY

SPANISH 10 YR BOND YIELD:1.54%  DOWN 3 IN basis points from MONDAY

ITALIAN 10 YR BOND YIELD: 1.42  DOWN 6 IN basis points from MONDAY

the Italian 10 yr bond yield is trading 12 points lower than Spain.

GERMAN 10 YR BOND YIELD: .176% UP 1  IN BASIS POINTS ON THE DAY

 

END

 

IMPORTANT CURRENCY CLOSES FOR TUESDAY

Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

 

Euro/USA 1.1141 down .0072 (Euro =DOWN 72 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.98 UP 0.604 (Yen DOWN 64 basis points )

Great Britain/USA 1.4629 UP.0151 Pound UP 151 basis points/

USA/Canada 1.3141 UP 0.0006 (Canadian dollar DOWN 6 basis points with OIL RISING a BIT(WTI AT $48.69).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 72 basis points to trade at 1.1141

The Yen FELL to 109.98 for a LOSS of 61 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 151 basis points, trading at 1.4629 (LESS BREXIT FEARS)

The Canadian dollar FELL by 6 basis points to 1.3141, WITH WTI OIL AT:  $48.68

The USA/Yuan closed at 6.5460

the 10 yr Japanese bond yield closed at -.104% UP 2 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: UP 3  IN basis points from MONDAY at 1.859% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.645 UP 3 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 95.58 UP 36 IN CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for TUESDAY

London:  CLOSED UP 82.83 OR 1.35%
German Dax :CLOSED UP 215.02 OR 2.18%
Paris Cac  CLOSED UP 106.42  OR 2.46%
Spain IBEX CLOSED UP 204.10 OR 2.34%
Italian MIB: CLOSED UP 578.89.27 OR 3.34%

The Dow was UP 213.12  points or 1.22%

NASDAQ UP 95.27 points or 2.00%
WTI Oil price; 48.70 at 4:30 pm;

Brent Oil: 48.70

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.55 (ROUBLE UP 57/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT ROSE AND WTI ROSE

TODAY THE GERMAN YIELD ROSE TO .177  FOR THE 10 YR BOND

.

END

 

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:49.20

BRENT: 49.12

USA 10 YR BOND YIELD: 1.863%

USA DOLLAR INDEX: 95.60 up 35 cents

END

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

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Gold Drops, Oil Pops As Another Volumeless Buying-Frenzy Strikes Stocks

We begin today’s end of day catch up with a report from The Onion that seemed highly appropriate:

NEW YORK – According to a brief but conclusive report released Monday, nobody fucking cares.

 

“Doesn’t fucking matter,” read the report in part, which went on to inform readers that no one gives two shits, so fuck it. “Seriously. Stop wasting everyone’s goddamn time.”

 

The report further urged those who still hadn’t shut up about it to quit acting like fucking idiots and just give it a rest, for Christ’s sake.

 

As following the overnight strength – on a Brexit poll of 1000 people that suggested Brexit fears overblown – the ridiculous beat in new home sales (at a record high price)…

 

…sparked sheer panic bids in homebuilder stocks.. and pretty much everything else. Dow Futures soared 300 points off the overnight lows… (we saw this manic pattern last week)

 

Trannies were the laggard on the day but bounced off unch for the week, Small Caps are leading…

 

Futures show the overnight exuberance…

 

For context today’s spikes in stocks – the biggest since March – were very technical – all breaking their 50-day moving-averages…

 

As the short squeeze comes on again…US Open and EU Close sparked big squeezes in “most shorted” stocks – doubling the performance of the market…biggest 3-day short-squeeze in 6 weeks.

 

Homebuilders were best (with Utes lagging)…

 

Today’s exuberance lifted The S&P and Small Caps into the green for May…

 

VIX was jammed down to a 14 handle again…

 

Treasury yields were far less exuberant than stocks…

 

But USDJPY 110 was in charge of the day…

 

Treasury yields all rose on the day but the long-end underperformed (10Y +3bps, 2Y unch) – once again the EU close pivoted the trend from selling bonds to buying them…

 

The USD Index rose once again (9th day in a row) today (as JPY weakness offset GBP strength – more positive polls) and EUR sunk…

 

Commodities were very mixed today with copper and crude soaring and PMs dumping…Crude’s 2016 highs…

 

Charts: Bloomberg

 

END

 

 

It looks like Google is going to have a visit from tax authorities all over Europe as early this morning there was a raid on their Paris office, probing tax evasion:

(courtesy zero hedge)

Google’s Paris Office Raided In Tax Evasion Probe

Europe’s crackdown on both individual and corporate tax evaders hit a new high this morning when according to French daily Le Parisien, French tax officials raided the Paris offices of Google early Tuesday in a probe into possible tax evasion.

The raids follows a complaint by the French finance ministry, paper says. Acccording to Bloomberg, prosecutors and Al Verney, a spokesman for Google in Brussels, didn’t immediately respond to requests for comment.

Reuters adds that investigators have been probing Google’s offices in central Paris since 0500 am (0300 GMT). It notes that France is seeking €1.6 billion ($1.79 billion) in back taxes from the U.S. Internet giant Google, criticized for its use of aggressive tax optimization techniques, another source at the finance ministry had said in February.

Here is the original report, Google translated:

According to our information, a search is underway on Tuesday at Google headquarters in Paris in the ninth district. From five in the morning, following a complaint Bercy suspect that the US giant digital tax evasion, hundreds of tax officials and law enforcement brigade of the great financial crime (BRGDF) are on the premises, with the reinforcement of five judges of the national financial parquet.

“The operation was top secret, says a source. It was conducted without using the financial parquet courier to avoid leaks.”

Since European tax crackdowns are rarely state-specific, we expect imminent such crackdowns in other Google offices across Europe.

More as we get it.

END Richmond Fed crashes by the biggest margin ever and lands into contraction mode: (courtesy zero hedge) Richmond Fed Crashes Into Contraction From 6 Year Highs, Biggest Drop In History

Having spiked mysteriously to 6 year highs in March (from 4 year lows in Feb), Richmond Fed’s manufacturing survey crashed back into contraction in May (printing -1 against =14 prior and +8 expectations).

 

Weakness was broad-based across the entire set of subcomponents with New Orders plunging, shipments crashing, employees and workweek tumbling, and worse still future employment and capex expectations dropped precipitously.  

The drop in the last 2 months is the largest in the 23 year history of the survey.

 

So WTF was that spike in March?

 

Charts: Bloomberg

end Guccifer to plead guilty for hacking into prominent USA authorities and then will fully cooperate with the ongoing email investigation. Lot so fun for Hillary! (courtesy zero hedge) Hacker Who Got Inside Hillary Clinton’s Server Said To Cooperate Fully With Ongoing Email Investigation

As we reported three weeks ago, the notorious Romanian hacker Marcel Lazar known also as Guccifer who first exposed Hillary Clinton’s private email address made a bombshell claim when he claimed that he also gained access to the former Secretary of State’s “completely unsecured” server. “It was like an open orchid on the Internet,” Lazar told NBC News. “There were hundreds of folders.”

This took place shortly after Lazar was extradited from Romania to the US to face hacking charges.

In the latest twist, Politico reports, Lazar is now expected to plead guilty this week, clearing the way for his unfettered cooperation with federal prosecutors, suggesting that all of his heretofore unverified claims about hacking into Hillary’s server will be duly investigated. If confirmed, this could open a new chapter in the FBI’s criminal probe into Hillary’s email use and/or abuse.

As Politico adds, Lazar is scheduled to appear in federal court in Alexandria, Va. Wednesday morning for a change of plea hearing, according to court records. A prosecution spokesman did not immediately respond to a message seeking confirmation that the guilty plea is part of a plea bargain with prosecutors. A defense attorney declined to comment. Such plea deals usually oblige a defendant to assist authorities in all ongoing investigations.

Lazar was indicted in 2014 on nine felony charges stemming from his alleged hack into the emails of several prominent Americans, including former Secretary of State Colin Powell, a relative of former President George W. Bush and George H.W. Bush, and former Clinton adviser Sidney Blumenthal. A set of Blumenthal’s emails were published online in 2013, disclosing a private email address Clinton used. She later changed the address.

Allegedly, Hillary’s personal email server was also among those hacked.

Clinton’s email arrangement is the subject of an ongoing FBI investigation, believed to be focused on how email messages deemed classified wound up on her server. Some reports have speculated that Lazar could demonstrate how vulnerable Clinton’s unusual email set-up was to foreign hackers, but it’s unclear how significant that fact would be to a decision about whether to seek criminal charges against Clinton or others involved in creating or using the unofficial email system.

If the DOJ’s ongoing “effort” to squash the probe – often in direct confronation with the FBI – is any indication, even full data dump by the Romanian may not spur any action, unless of course it is Obama’s intention to thaw the DOJ out of its deep freeze slumber right before the Democratic convention and somehow insert Joe Biden as the presumptive presidentical candidate.

end Now it is New York’s turn to raise the premiums for Health Insurance next year: Individuals: 17.3% and small groups 12.0% (courtesy zero hedge) Next Up For Exploding Health Insurance Premiums: New York

When we warned recently that thanks to Obamacare, insurance companies would be unveiling significant price shocks one week before the presidential elections, we knew it was only a matter of time before the 2017 proposals would start to be released and double digit increases would be unveiled to the public.

 

Sure enough, we were proven right when the first two states to release proposals, Oregon and Virginia, showed that insurers were indeed asking for significant double digit increases.

Now, another state has made the 2017 proposals public, and the results aren’t any better. InNew York, health insurers have proposed an average 17.3 percent increase for individuals, and an average 12 percent increase for small groups. In the individual market there is a wide range of increases, from MVP Health asking for a 6.1 percent increase, to Crystal Run Health Plan asking for a whopping 89.1 percent increase. For small groups, Healthfirst Health Plan has proposed a 5 percent increase on the low end, while Crystal Run has proposed a 61.9 percent increase on the high end.

The 2017 rate submissions reflect increases that are the direct result of the underlying cost of care and marketplace changes that continue to impact health plans’ operations,” said Paul Macielak, president of the New York Health Plan Association.

Other proposed rate increases for individuals include 45.6 percent increase by United Healthcare of New York, 29.2 percent increase by North Shore-LiJ CareConnect, and 15.9 percent by Excellus.

While on average a 17.3 percent increase has been proposed for individuals, it’s important to note that in 2015 the Department of Financial Services only approved an increase of 5.7 percent even as the companies proposed a 12.5 percent increase.

Obamacare now finds itself at an interesting crossroads. On one hand, as evident in the proposed increases, very few companies can make a profit while participating in Obamacare with rates at current levels. Companies set up specifically under the Affordable Care Act have started to shut their doors (losing taxpayers billions) because there is simply no profit to be made, and now the government is even walking back promises to compensate firms that agreed to participate for their losses. Indeed, if the higher rates are not approved, firms will continue to exit the healthcare exchanges. However, if rate increases are approved, another problem is presented. Increased costs would put further pressure on already financially strained individuals and small business owners who would have to come up with ways to absorb the additional costs.

Ironically, the guy primarily responsible for creating such a mess won’t have to deal with any of this come January 20, 2017.

 end Interesting!! only 4 regional Feds support a discount rate increase: (courtesy zerohedge) What Rate Hike: Only 4 Regional Feds Support Discount Rate Increase Compared To 9 Back In November

Moments ago, the Fed’s discount rate minutes for the months of March/April suggested that a rate hike may be indeed closer than some expect, because after just two regional Feds – those of Richmond Fed and Kansas City – requested an increase in the rate charged on direct loans from the central bank to 1.25% from 1% in the Feb/March meeting, this number doubled to four, with the inclusion of the San Fran and Cleveland Feds joining the group of regional Feds pushing for a 25 bps rate hike to the discount rate.

The four regional Feds, however, were overriden by the balance of the 12 regional Feds, including the Boston, New York, Chicago, Minneapolis, Dallas, Philadelphia, Atlanta, St. Louis Feds, all of whom recommended keeping the discount rate unchanged.

From the minutes:

Subject to review and determination by the Board of Governors, the directors of the Federal Reserve Banks of Chicago, Minneapolis, and Dallas had voted on April 14, 2016, and the directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Atlanta, and St. Louis had voted on April 21, to reestablish the existing rate for discounts and advances (1 percent) under the primary credit program (primary credit rate). The directors of the Federal Reserve Banks of Cleveland, Richmond, Kansas City, and San Francisco had voted on April 14 to establish a rate of 1-1/4 percent (an increase from 1 percent). At its meeting on April 11, the Board had taken no action on requests by the Richmond and Kansas City Reserve Banks to increase the primary credit rate.

 

Federal Reserve Bank directors cited continued improvement in labor markets, including significant payroll gains and increases in labor force participation.Although many directors noted a recent slowdown in economic growth, they were generally positive about the prospects for moderate increases in economic activity going forward. Directors provided mixed reports on consumer spending, including some easing in the growth of auto sales. Several directors noted steady-to-increasing housing-sector activity, but others cited ongoing weakness in the agriculture and energy sectors. Some directors noted the potential implications of global economic and financial developments for export-related activity. Some directors reported moderate wage pressures for certain jobs, as well as difficulty hiring  and retaining some types of skilled and unskilled workers. Inflation remained below the Federal Reserve’s 2 percent objective.

 

Against this backdrop, most Federal Reserve Bank directors recommended that the current primary credit rate be maintained. Other Federal Reserve Bank directors recommended increasing the primary credit rate to 1-1/4 percent, in light of current and anticipated economic conditions, improvements in the labor market, and expectations that inflation would rise toward the Federal Reserve’s 2 percent objective over the medium term.

 

Today, Board members considered the primary credit rate and discussed, on a preliminary basis, their individual assessments of the appropriate rate and its communication, which would be discussed at the meeting of the Federal Open Market Committee this week. No sentiment was expressed for changing the primary credit rate before the Committee’s meeting, and the existing rate was maintained. Thereafter, a discussion of economic and financial developments and issues related to possible policy actions took place.

Is this enough? Recall that on November 24, one month before the Fed did hike rates by 25 bps, a whopping 9 regional Fed requested a Discount Rate hike With only four regional Feds on the same page as of this moment, it is very unlikely that June is when the Fed’s rate hike will take place, and with July missing a press conference, it remains to be seen just how the Fed can proceed with the much touted rate hike in the coming 2 months, without some major surprises.

 

end

Well that is all for today

I will see you tomorrow night

H


mAY 23/Again the number of tonnes of gAnother whoppping 3.29 tonnes of gold added to the GLD and again the price dropped!/G7 meeting in Sendai Japa, will not allow Japan to devalue its yuan..this will be harmful to the markets/China devalues a small...

Mon, 05/23/2016 - 18:26

Good evening Ladies and Gentlemen:

Gold:  $1,251.10 DOWN $1.30    (comex closing time)

Silver 16.41  DOWN 7 cents

 

In the access market 5:15 pm

Gold $1249.10

silver:  16.35

 

 

i) the May gold contract is a non active contract.  Yet we started the month with 5.67 tonnes of gold standing and it has increased every single day and today sits at 6.68 tonnes of gold standing:

The amount standing for gold at the comex in May is simply outstanding at 6.79941 tonnes. The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

Let us have a look at the data for today

.

At the gold comex today we had a GOOD delivery day, registering 44 notices for 4400 ounces for gold,and for silver we had 0 notices for nil oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 240.41 tonnes for a loss of 63 tonnes over that period

.

In silver, the open interest FELL by only 385 contracts DOWN to 202,242 as the price was silver was UP by a tiny 4 cents with respect to Friday’s trading..In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.013 BILLION TO BE EXACT or 144% of annual global silver production (ex Russia &ex China)

In silver we had 0 notices served upon for nil oz.

In gold, the total comex gold OI fell by a CONSIDERABLE 16,559 contracts down to 556,637 as the price of gold was DOWN $1.80 with yesterday’s trading(at comex closing). They certainly got the liquidation in gold but not silver.

 

We had  a monster deposit  in gold inventory at the GLD to the tune of 3.96 tonnes. The inventory rests at 872.52 tonnes. I have no doubt whatsoever that this was a paper addition as they could not possibly find the 3 tonnes in one day.We had a good sized deposit  in silver inventory at the SLV to the tune of 951,000 oz . Inventory rests at 336.024 million oz.

.

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

 

1. Today, we had the open interest in silver fall by 385 contracts down to 202,242 as the price of silver was UP by 4 cents with Friday’s trading. The gold open interest FELL by 16,559 contracts as  gold was down $1.80 yesterday. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Mark O’byrne)

 

3. ASIAN AFFAIRS

i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP  BY 18.14 PTS OR 0.64%  /  Hang Sang closed DOWN 43.17 OR 0.22%. The Nikkei closed DOWN 81,85 POINTS OR 0.49% . Australia’s all ordinaires  CLOSED DOWN 0.60% Chinese yuan (ONSHORE) closed DOWN at 6.5542 .  Oil FELL to 47.81 dollars per barrel for WTI and 48.14 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5627 yuan to the dollar vs 6.5542 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.

 

REPORT ON JAPAN  SOUTH KOREA AND CHINA a) REPORT ON JAPAN

i)The G7 meeting at Sendai Japan, have basically told Japan that it cannot intervene in the FX markets to lower the yen unless the USA gives its pre-approved endorsement.Japan has not been humiliated on its own turf.

If the USA does raise its interest rate in June or July, this will send turmoil throughout the globe, as Chinese FX leaves China, emerging markets tumble as does commodity prices. Europe and Japan will have a temporary reprieve as the EURO AND YEN  fall as the dollar rises, but this will be short-lived until another SHANGHAI ACCORD  comes into being

zero hedge)

 

ii)Trade with Japan collapses as exports decline for the 7th straight month and imports decline for 16 months in a row. The decline in imports is greater than the decline in exports so Japan shows an unexpected rise in Japanese trade surplus. Japanese output shrinks at the fastest pace since 2012 and signals a complete failure in Abenomics.

Japanese PMI , or total mfg output  falters badly! NO WONDER THE FEUD WITH THE USA. JAPANESE TRADE (EXSPORTS) EVAPORATES ( Mish Shedlock) b) REPORT ON CHINA

 

i)The number of strikes inside China has risen appreciably.  As such we are witnessing the hiring of individuals on a part time basis in order to avoid social unrest:

( zero hedge)

 

ii)Two months ago China threw a trial balloon upon which we reported.  They had a huge 31 trillion USA debt of which probably 20% was non performing/ The trial balloon was theat the POBC was going to force the banks to turn the bad debt into equity.  We thought that it would not get out of the starting game.  We were wrong:  China has quietly bailed out 220 billion in bad debt.

An accident waiting to happen as these guys will load up with more debt ( zero hedge)

iii)Soc Gen writes about the woes inside China and confirms Kyle Bass’s assessment that they will need at least a 30% devaluation.  Soc Gen puts their non performing loans at 1.2 trillion USA or 12% of GDP. They have already a DEPT to GDP of 350% and have no place to put additional debt.If China goes the rout of the 15% devaluation, the yuan to usa cross would be around 7.46 to one. A 30% devaluation would put the cross at 8.44 to one. Regardless this would send a massive deflation throughout the globe and totally bury the likes of commodities, Japan, South Korea and the emerging markets.

a must read..

(courtesy Soc Gen/zero hedge)

C) SOUTH KOREA

Devastation inside South Korea as the global economy contracts.  The huge problem here can be seen in the shipbuilding area where the yards have seen orders fall by a huge 94%

( Bloomberg)

   4.EUROPEAN AFFAIRS

i)Not only Japan’s PMI printed badly but also the Eurozone which saw its PMI print 529 down from 53.0 last month and well below the 53.2 expected.  It is hte hlowest in 16 months.

( ZERO HEDGE)

 

ii)Despite Greece’s depression, the crooks at the EU have forced hikes in VAT to 24% as well as added new taxes including lesser pensions.

Greece will go  further down the rabbit’s hole ( Mish Shedlock/Mishtalk)

iii) France hit by gas shortages as refinery workers go on strike and block all outgoing routes. There is no gas in the North West, North which includes Paris

( zero hedge)

iv)Again Deutsche bank admits that it now rigged stocks.  It stock slides again

( zero hedge) 5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

 

i)Erdogan now has absolute power as he  appoints a puppet for Premier: ( zero hedge) ii) Europe negates on visa free travel for Turkey /Erodgan is furious! (zero hedge)

 

6.GLOBAL ISSUES none today 7.OIL ISSUES

The algo traders lift WTI back above 48 dollars:

( zero hedge)

8.EMERGING MARKETS

 

Well that did not take long.  New President Temer has just suffered his first corruption scandal implicating  the party;s planning Minister Juca and an executive with Petrobras. The theory here is that this will lead to many more in the car wash scandal including Temer:

(courtesy zero hedge)

9 PHYSICAL MARKETS

i)A good look at the trimmed down Kinross:

(courtesy James Wilson/London’s Financial Times/GATA)_

ii) Lawrie on gold/huge Russian purchase of 15.6 tonnes of gold and they are increase ing their reserves on average by this amount

(Lawrie on Gold)

 

10.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD/SILVER/

i)USA manufacturing collapses to 2009 level and these bozos are going to raise rates?

( PMI/zero hedge)

 

ii)The clowns at the FED have no idea what they are doing!!

( zero hedge) iii) tonight’s wrap up courtesy of Greg hunter/Bix Weir (USAWatchdog)

 

Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 556,637 for a CONSIDERABLE LOSS of 16,559 contracts AS  THE PRICE OF GOLD WAS DOWN $1.80 with respect to FRIDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED. ACTUALLY WE HAVE WITNESSING A GRADUAL RISE IN AMOUNT STANDING THROUGH THE MONTH.  THE MONTH OF May saw its OI fall by only 27 contracts DOWN to 137. We had 69 notices filed ON FRIDAY so we GAINED ANOTHER 42 gold contract or an additional 4200 oz will stand for delivery.We have started the month with 5.6 tones and gained in ounces standing everyday but one which remained neutral. The next big active gold contract is June and here the OI FELL by 34,043 contracts DOWN to 232,241 as those paper players that wished to stay in the game rolled to August AND THE REST EITHER STAYED PUT FOR NOW OR LEFT PERMANENTLY. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at 322,998. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was EXCELLENT at 289,096 contracts. The comex is not in backwardation. We are ONE week away from first day notice for the huge June contract/May 31.2016.(6 trading sessions)

Today we had 44 notices filed for 4400 oz in gold.

 

And now for the wild silver comex results. Silver OI FELL by A SMALL 385 contracts from 202627 DOWN to 202242 as the price of silver was UP BY only 4 cents with FRIDAY’S TRADING. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 71 contracts DOWN to 601. We had 72 notices filed yesterday so we GAINED 1 contract or an additional 5,000 oz of silver will  stand in this non-active delivery month of May. The next non active month of June saw its OI FALL by 9 contracts DOWN to 651 OI. The next big delivery month is July and here the OI FELL by 1214 contracts down to 133,922. The volume on the comex today (just comex) came in at 39,935 which is  VERY GOOD. The confirmed volume YESTERDAY (comex + globex) was VERY GOOD at 42,286. Silver is  in backwardation up to June. London is in backwardation for several months.   We had 0 notices filed for NIL oz.  

MAY contract month:

INITIAL standings for MAY

May 23. Gold Ounces Withdrawals from Dealers Inventory in oz   nil Withdrawals from Customer Inventory in oz  nil  32,15 OZ

MANFRA,

1  KILOBAR Deposits to the Dealer Inventory in oz 803.75 oz

25 kilobars

Manfra Deposits to the Customer Inventory, in oz    3793.700 oz

118 kilobars

Brinks No of oz served (contracts) today 44 contracts
(4400 oz) No of oz to be served (notices) 93 CONTRACTS

9300 OZ Total monthly oz gold served (contracts) so far this month 2093 contracts (209,300 oz) Total accumulative withdrawals  of gold from the Dealers inventory this month   nil Total accumulative withdrawal of gold from the Customer inventory this month  282,497.5 OZ

Today we had 0 dealer deposits

 

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

 

Today we had 1 customer deposit:

i) Into Manfra:  803.75 oz or 25 kilobars

Total customer deposits;   803.75 OZ

 

Today we had 1 customer withdrawals:

i) Out of Manfra:  32.15 oz  1 KILOBAR

total customer withdrawals: 32.15 OZ  (1 kilobars)

Today we had 0 adjustment:

Today, 0 notices was 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 44 contracts of which 3 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account.  To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (2093) x 100 oz  or 209,300 oz , to which we  add the difference between the open interest for the front month of MAY (137 CONTRACTS) minus the number of notices served upon today (44) x 100 oz   x 100 oz per contract equals 218,600 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE    Thus the initial standings for gold for the MAY. contract month: No of notices served so far (2093) x 100 oz  or ounces + {OI for the front month (137) minus the number of  notices served upon today (44) x 100 oz which equals 218,600 oz standing in this non  active delivery month of MAY(6.7994 tonnes). WE  gained 42 contracts or an additional 4200 oz will stand for delivery in this non non active month of May.  It is this continual increase in gold ounces standing that is driving our bankers crazy and the reason today for another raid on gold/silver TODAY. Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you.    We thus have 6.7994 tonnes of gold standing for MAY and 20.477 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing. We now have partial evidence of gold settling for last months deliveries We now have 6.7994 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes  = 17.147 tonnes still standing against 20.477 tonnes available.   Total dealer inventor 658,361.132 tonnes or 20.477 tonnes Total gold inventory (dealer and customer) =7,761,370.088 or 241.41 tonnes    Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 241.41 tonnes for a loss of 62 tonnes over that period.    JPMorgan has only 22.79 tonnes of gold total (both dealer and customer) JPMorgan now has only .900 tonnes left in its dealer account. May is not a very good delivery month and yet 6.7994 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.    end And now for silver  

MAY INITIAL standings

 May 23.2016

Silver Ounces Withdrawals from Dealers Inventory nl oz Withdrawals from Customer Inventory  673,922.056 oz

CNT,HSBC

Scotia Deposits to the Dealer Inventory nil oz

  Deposits to the Customer Inventory  405,487.300 oz

jpm No of oz served today (contracts) 0 CONTRACTS 

NIL OZ No of oz to be served (notices) 601 contracts

3,005,000 oz Total monthly oz silver served (contracts) 2128 contracts (10,640,000 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  8,541,520.7 oz

today we had 0 deposit into the dealer account

 

total dealer deposit:nil oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposits:

 

i) Into JPM: 405,487.300  oz

Total customer deposits: 405,487.300 oz.

We had 3 customer withdrawals

i) out of CNT: 29,969.550 oz

ii) Out of HSBC: 583,783.196 oz

iii) Out of Scotia; 60,169.310 oz

:

total customer withdrawals:  673,922.056  oz

   

 

 we had 0 adjustment

The total number of notices filed today for the MAY contract month is represented by 0 contracts for NIL oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (2128) x 5,000 oz  = 10,640000 oz to which we add the difference between the open interest for the front month of MAY (601) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing    Thus the initial standings for silver for the MAY contract month:  2128 (notices served so far)x 5000 oz +{601 OI for front month of MAY ) -number of notices served upon today (0)x 5000 oz  equals 13,645,000 oz of silver standing for the MAY contract month. WE GAINED 1  SILVER CONTRACTS TODAY OR AN ADDITIONAL  5,000 OZ WILL NOT STAND FOR DELIVERY IN THIS ACTIVE MONTH OF MAY.   Total dealer silver:  30.034 million Total number of dealer and customer silver:   154.297 million oz The open interest on silver is NOW AT CLOSE an all time high with the record of 207,394 being set May 18.2016. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver. The reason for the raid today in both gold and silver is probably for the following 4 reasons: 1. The beginning of options expiry week 2. the stranglehold on the May front gold contract month 2. the continued drama in high silver OI 4. potential problem for the bankers in June gold. end And now the Gold inventory at the GLD May 23./this is rather impossible: another huge deposit of 3.26 tonnes into the GLD with the price of gold down again today?/inventory rests at 872.52 tonnes May 20/what!!!A MONSTER DEPOSIT OF :8.92 TONNES OF GOLD INTO THE GLD INVENTORY/AND WITH GOLD DOWN $2.80??/INVENTORY RESTS AT 869.26 May 19/ANOTHER HUGE DEPOSIT OF 4.46 TONNES OF GOLD INTO THE GLD/iNVENTORY RESTS AT 860.34 TONNES May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes. May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition.. May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN??? May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes April 28/we gained 1.49 tonnes of gold at the GLD/Inventory rests at 804.14 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 23.:  inventory rests tonight at 872.52 tonnes

end

Now the SLV Inventory May 23./we had a small withdrawal of 285,000 oz and that generally means payment of fees. May 20/WE HAD A GOOD SIZED DEPOSIT OF 951,000 OZ INTO THE SLV/INVENTORY RESTS AT 336.024 MILLION OZ May 19/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz May 12/no change in silver inventory/rests tonight at 335.073 million oz/  May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/ May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz. May 9. no change in silver inventory/rests at 336.119 million oz. May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV INVENTORY RESTS AT 336.119 MILLION OZ MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580 April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz . May 23.2016: Inventory 335.739 million oz end NPV for Sprott and Central Fund of Canada

will update on this site later tonight/

1. Central Fund of Canada: traded at Negative 4.1 percent to NAV usa funds and Negative 4.0% to NAV for Cdn funds!!!! Percentage of fund in gold 61.7% Percentage of fund in silver:36.9% cash .+1.4%( May 20/2016). Cdn holiday /no data 2. Sprott silver fund (PSLV): Premium falls  to -.50%!!!! NAV (MAY 23.2016)  3. Sprott gold fund (PHYS): premium to NAV  FALLS TO 0.73% to NAV  ( MAY 23.2016) Note: Sprott silver trust back  into NEGATIVE territory at 0.50% /Sprott physical gold trust is back into positive territory at +0.73%/Central fund of Canada’s is still in jail. It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to -.50%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.      

END

And now your overnight trading in gold,MONDAY MORNING and also physical stories that may interest you: Trading in gold and silver overnight in Asia and Europe Mark O’Byrne (goldcore) Russia buys another 15.55 tones of gold!! Buy Gold As “Extremely Low-Risk Asset” – Rogoff Advises Creditor Nations By Mark O’ByrneMay 23, 20160 Comments

Buy gold as it is an “extremely low-risk asset” is the advice of Professor Kenneth Rogoff to emerging market, creditor nation central banks including the People’s Bank of China (PBOC).

Rogoff believes that there is a good case to be made that emerging market central banks, such as the People’s Bank of China who have over $3.3 trillion in foreign exchange reserves, accumulate gold as this would “help the international financial system function more smoothly and benefit everyone”.

Russian central bank bought another  500,000 troy ounces of gold in April (ShareLynx)

Writing in Project Syndicate Rogoff notes that:

“Moreover, there is a case to be made that gold is an extremely low-risk asset with average real returns comparable to very short-term debt. And, because gold is a highly liquid asset – a key criterion for a reserve asset – central banks can afford to look past its short-term volatility to longer-run average returns.”

Rogoff notes that creditor nation central banks have been accumulating gold already but at a snail’s pace:

“Emerging markets have remained buyers of gold, but at a snail’s pace compared to their voracious appetite for US Treasury bonds and other rich-country debt. As of March 2016, China held just over 2% of its reserves in gold, and the share for India was 5%. Russia is really the only major emerging market to increase its gold purchases significantly, in no small part due to Western sanctions, with holdings now amounting to almost 15% of reserves.”

The latest data from Russia over the weekend shows that the Russian central bank bought another 500,000 troy ounces of gold in April.

Russia and China continue to be the largest sovereign buyers of gold today and central bank demand remained robust in the first quarter of the year – central banks purchased 109 metric tonnes. This represents the 21st consecutive quarter that central banks have been net purchasers of gold as they continue to diversify their huge exchange reserves and significant US dollar exposures.

Despite the steady buying, most creditor nations still hold less than 10% of their reserves in gold compared to 60% to 100% in large debtor nations such as the US, Greece, Italy, France and others.

Source Wikipedia 

Other emerging market creditor nation central banks with large foreign exchange reserves include Saudi Arabia, India, Brazil, Mexico, Thailand, Algeria, Iran, Turkey, Indonesia, Malaysia and United Arab Emirates (UAE).

The article by Rogoff is an important one and yet, like many recent significant developments in the gold market, it got surprisingly little mainstream media coverage.

It is another sign that gold is being re-monetised in the global financial and monetary system.

It also bodes well for gold’s outlook as the massive scale of international foreign exchange reserves means that even a small allocation into the small physical gold market by creditor nation central banks should see gold reset to much higher levels in all currencies. This may be why Professor Rogoff says  regarding gold that “there is no limit to its price.”

Rogoff is a thought leader and a leading voice of western central banks. He was the chief economist of the International Monetary Fund from 2001 to 2003 and is the Professor of Economics and Public Policy at Harvard University. See full article onProject Syndicate here


Recent Market Updates
Buy Silver – “Best Precious Metals Trade”
Bank Bail-Ins Pose Risks To Depositors, Investors & Economies
Take Delivery of Gold and Silver Coins, Store Gold Bars – Hobbs
George Soros Buying Gold ETF And Gold Shares In Q1
Hedge Funds Take Record Long Silver Position As Silver Bullion Deficit Surges


Gold and Silver Prices and News
Gold holds earlier losses on firmer Asian shares – Reuters
Gold Options Traders Remain Bullish Even After Price Dip – Bloomberg
Dubai Investor Set to Open Monaco’s First Gold Refinery in 2017 – Bloomberg
Buy Gold on Dips as Fed May Have to Backtrack, Mideast Bank Says – Bloomberg

One of the World’s Most Expensive Countries Is Debating Giving Away Money – Bloomberg
Silver Lower Today Than Was In December 1979 – Smaul Gold
Counterfeit gold and silver coins burning buyers – WCPO
Middle East, OPEC nations may be first to return to gold standard – Examiner
Doug Casey’s Four-Part Plan to Fix a Broken Economy – Casey Research


Gold Prices (LBMA AM)

23 May: USD 1,250.40, EUR 1,115.84 and GBP 860.89 per ounce
20 May: USD 1,256.50, EUR 1,120.18 and GBP 862.75 per ounce
19 May: USD 1,253.75, EUR 1,117.74 and GBP 857.37 per ounce
18 May: USD 1,270.90, EUR 1,127.21 and GBP 882.05 per ounce
17 May: USD 1,270.10, EUR 1,121.43 and GBP 877.50 per ounce

Silver Prices (LBMA)
23 May: USD 16.31, EUR 14.55 and GBP 11.27 per ounce
20 May: USD 16.56, EUR 14.76 and GBP 11.35 per ounce
19 May: USD 16.60, EUR 14.81 and GBP 11.35 per ounce
18 May: USD 17.05, EUR 15.13 and GBP 11.77 per ounce
17 May: USD 17.08, EUR 15.09 and GBP 11.80 per ounce


Read Our Most Popular Guides in Recent Months

Mark O’Byrne Executive Director Published in Daily Market Update

end

 

Russia has decided to increase its monthly purchase of gold from around 10 tonnes per month to 15.6 tonnes.

they must know something..

(courtesy Lawrie on gold)

 

 

 

Russia ups gold reserves by 500,000 ounces in April May 22, 2016lawrieongoldLeave a comment

Latest figures out of Russia’s central bank state that it has increased its gold reserves in April by 500,000 ounces (15.6 tonnes), which is exactly the same amount the bank reported as its reserve increase in March as well.  While February’s reserve increase was reported at 300,000 ounces, January’s was 700,000 ounces.  This means that the average month on month increase this year has been 500,000 ounces suggesting that the bank may be planning to increase reserves by this amount on a regular monthly basis throughout the year.  This would put a projected annual reserve increase of 6 million ounces – or around 187 tonnes.

Some see this increase in gold as reserves – as they do for China which has also increased reserves by around 46 tonnes so far this year – as an ongoing move to diversify reserves away from the U.S. dollar related bonds.  This could be because they see the dollar as likely to depreciate over time, or it could be a political move in Russia’s case in particular given that relations between it and the U.S. are somewhat strained.

Lawrie’s original articles,

A good look at the trimmed down Kinross:

(courtesy James Wilson/London’s Financial Times/GATA)_

 

 

Kinross’ Paul Rollinson and after the gold rush

Submitted by cpowell on Sun, 2016-05-22 16:35. Section:

By James Wilson
Financial Times, London
Monday, May 23, 2016

http://www.ft.com/intl/cms/s/0/65aac95c-0c6c-11e6-b0f1-61f222853ff3.html

When Paul Rollinson took over as chief executive of Kinross Gold four years ago the end was in sight for the biggest gold boom in history — and for some of the people who were part of it.

After rising 500 per cent in a decade, the market price of the precious metal had peaked. In the rush to exploit the boom, mining investments and costs had spun out of control.

Investors in gold miners such as Kinross, which had lavished $11bn on acquisitions in six years and was already writing off part of that spending, were in revolt. Tye Burt, Mr Rollinson’s predecessor, was among a score of mining chief executives to lose their jobs.

 

It was “the end of a champagne era”, recalls Mr Rollinson. “Everything was going up, up, up, forever and ever — and then I got the back half of the mountain, where it has been down, down, down.

“This has been the challenge — running a business as you transition from one phase of the market into another,” he says on a visit to London. After a long trip to see investors in Asia, he is on his way to a gold mining conference in Switzerland. It is a gruelling schedule but he is looking forward to dinner that evening with one of his daughters, who works in the UK capital.

Negotiating the descent has not been easy for Mr Rollinson. In his first week in the job he halted plans for the expansion of its Tasiast mine in Mauritania, the flagship development for Kinross. The project was the centrepiece of a $7.1bn acquisition of Red Back Mining in 2010, Kinross’s largest deal.

After ensuing writedowns on Tasiast, the Canadian company was the first large gold miner to scrap its dividend: “That is one where you send the release out and want to crawl under your desk,” recalls Mr Rollinson in his laconic drawl.

Another project in Ecuador, Fruta del Norte, was sold for much less than it had cost during the boom years; and when tension flared between Russia and the west over Ukraine, Kinross, the largest foreign investor in Russian mining, faced criticism over its strategy.

Mr Rollinson also had to fight to prove that his appointment was the change that Kinross needed.

As the miner’s previous head of corporate development, and before that as an investment banker who advised the company on some deals, Mr Rollinson admits he might have seemed to investors like more of the same as they had had before. He had been involved in some of the decisions investors had criticised. Mr Burt was also previously a banker.

“On paper you might go, ‘Here’s another banker … here we go again’,” he says. “We just got our heads down.”

Four years on, his transition from banker to miner seems to suit both Mr Rollinson and Kinross. The miner’s shares have doubled in the past 12 months. In March, Mr Rollinson was at last able to unveil a definitive plan to develop Tasiast at a much lower cost.

And his stewarding of spending meant Kinross had the cash to snap up assets in the US from Barrick Gold, its larger rival, which helpfully reduced Kinross’s overall exposure to higher-risk countries.

Not least, Mr Rollinson, who looks the image of a tough miner but is softly spoken, is at last having some luck with the gold price, which has risen since the start of 2016. “It is hard to believe we would all be high-fiving when gold got back to $1,200 an ounce but we certainly are, and it seems to be holding in there pretty firmly,” he says.

Mr Rollinson has dual nationality: He was born in the UK but grew up in Canada, where his father worked in mining. He studied geology, and started his working life in Canada’s wide open spaces. “I was living in the wilderness all year round in a tent and I had some amazing experiences. It was my love of the outdoors that got me into this in the first place.”

But a key to his career may have been the finance classes he took while completing a postgraduate degree in mining engineering. On graduating he went into mining banking and a career in a succession of investment banks. He advised Kinross before Mr Burt asked him to join the miner in 2008.

“My intention was always to get back into mining … that is ultimately where my passion is,” Mr Rollinson says.

What has helped his time at Kinross, he says, is that while he came from banking he also had plenty of technical mining knowledge. As he puts it: “I can speak a few languages — geology, mining, corporate finance.” Many miners lost sight of some mining basics, such as the importance of asset quality, during the go-go years: Mr Rollinson says he has brought 70 technical staff into Kinross, adding that much of their job is to argue why projects should not be done, rather than rush them through as fast as possible.

“I call them The Terminators,” he says. “Every time you look at an opportunity — it is like an ice cube. The minute those guys get hold of it, it starts melting. It is ‘Forget it — take that out — that’s aggressive’ … those are the guys that matter.”

Stopping things has been a big feature of Kinross under Mr Rollinson. He describes the original project to expand Tasiast as like a plan for a house that was increasingly difficult to afford to build: today’s is a smaller and cheaper project. “Instead of building new, we are renovating,” Mr Rollinson says.

The original project could have hurt the company, he says. “What scared me was [that] we would get it half built in that overheated environment, over budget, and we might put ourselves in some jeopardy.” Not to put so much at risk was, he says, “a pretty important lesson for me”.

Another lesson has been experience of Kinross in Russia, bringing Mr Rollinson reluctantly into the political arena. At the height of tension with Moscow over Ukraine in 2014, Canada’s government tried to persuade business leaders, including Mr Rollinson, not to attend an economic forum in St Petersburg.

“That was tough but we had to say — we have employees, we have stakeholders, we have shareholders, we don’t want to get involved in politics, and with respect we intend to participate. And we did,” says Mr Rollinson.

Kinross has a seat on Russia’s Foreign Investment Advisory Council, alongside the likes of BP and Siemens. “We have been in Russia for more than 20 years … we are 98 per cent Russian. We are employing and training Russians,” says Mr Rollinson, while noting that Kinross’s mines, in Russia’s far east, are geographically closer to Toronto than they are to Moscow.

Reluctantly drawn into talking about Kinross’s past deals, and his role in them, Mr Rollinson says many have worked out well and points out that the most criticised, the Red Back Mining acquisition, was voted through by shareholders.

Now he prefers to look forward. Kinross last year acquired a US mine in Nevada from Barrick, the world’s largest gold producer by volume, and the gleam in Mr Rollinson’s eye suggests he believes he has got a good deal.

Together with the resolution of the saga over Tasiast’s expansion, he says Kinross now has “good momentum.”

“People are feeling good about the business. It’s been a slog, I can’t tell you it hasn’t — it’s been hard work. But people are seeing the fruits of their labour … what we have to do is keep our focus and keep working hard.”

 

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    

:

1 Chinese yuan vs USA dollar/yuan  DOWN to 6.5542 ( DEVALUATION AGAIN BUT TINY/CHINA STILL FIRES SHOT ACROSS THE USA BOW ) / Shanghai bourse  CLOSED UP 18.14 OR 0.64%  / HANG SANG CLOSED DOWN 43/17 OR 0.22%

2 Nikkei closed DOWN 81.75 OR 0.49% /USA: YEN FALLS TO 109.45

3. Europe stocks opened ALL IN THE RED  /USA dollar index UP to 95.36/Euro DOWN to 1.1206

3b Japan 10 year bond yield: FALLS   TO -.099%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.35

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  47.81  and Brent: 48.14

3f Gold DOWN  /Yen 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.

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to 0.153%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate FALL to 9.33%/: 

3j Greek 10 year bond yield FALL to  : 7.40%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1248.60/silver $16.35(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble DOWN 23 in  roubles/dollar) 67.07-

3m oil into the 47 dollar handle for WTI and 48 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9907 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1097 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .153%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

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 1.821% early this morning. Thirty year rate  at 2.609% /POLICY ERROR)

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

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

end Futures Fade Early Bounce, Slide In Illiquid Tape As Yen Rises, Oil Drops

following the latest month abysmal trade and PMI data out of Japan overnight (April exports crashed -10.1 %, worse than the exp. -9.8 and worse than last month’s -6.8% while imports plunged -23.3% also far worse than exp. -18.8 and March -14.9%; PMI 47.6, Exp. 48.3, last 48.2), it was supposed to be a straight up for the USDJPY, and its carry linked E-mini. However, that this did not happen, and instead the Yen jumped, sinking the USDJPY as low as 109.3 was troubling and suggests that the G7 “Sendai discord”, profiled here on Saturday, was worse than even we expected, and Japan indeed no longer has a right to devalue its currency which in turn has pressured the Yen higher.  (HARVEY:  SEE SENDI MEETING COMENTARY)

Aside from Japan, and the previously announced latest mega-M&A in the form of Bayer’s unsolicited $62 billion bid for Monsanto, the overnight session saw various European PMI prints, where despite a miss and drop in the EU Composite PMI (at 52.9, below Exp. 53.2, and last 53.0), Germany reported a modest improvement in its mfg and service PMIs which provided some optimism to the session.

That however does not explain the sharp, sudden swings in the Dax and Stoxx 600, which from opening red, then turning green, were back in the red at last check. Energy companies posted the biggest decline of the equity benchmark’s 19 industry groups as commodities tumbled. Bayer AG lost 3.2 percent after disclosing an unsolicited $62 billion all-cash offer to acquire Monsanto Co. amid investor concern that it might overpay for a deal that would create the world’s biggest supplier of farm chemicals and genetically-modified seeds.

Apple Inc. suppliers AMS AG and Dialog Semiconductor Plc rose at least 2.4 percent, leading a gauge of technology stocks, after Taiwan’s Economic Daily News reported that the iPhone maker has asked suppliers to prepare production for a new version of its smartphones. Aixtron SE jumped 16 percent after the German supplier of semiconductor equipment said it has agreed to a 670 million-euro takeover bid from a group of Chinese investors.

One recurring concern is what the Fed will do, and how this will impact the dollar. As a result, government bonds rose as investors weighed the timing of the Federal Reserve’s next increase in interest rates and the outlook for inflation.  As Bloomberg puts it, treasury 30-year yields fell for a third day. The yen rose from near this month’s low, spurred by the biggest trade surplus in six years and a U.S. rebuttal of Japan’s case for intervention to weaken the exchange rate.

Investors are moving to price in the Fed’s first increase in interest rates since December after several policy makers signaled a move is becoming more likely, with Fed Bank of Boston President Eric Rosengren telling the Financial Times at the weekend that he’s ready to back a rate increase. Investors now see a 28 percent chance of a June rate hike, while the chances of a July increase have climbed to 48 percent. Regional Fed chiefs for St. Louis, San Francisco and Philadelphia are due to speak Monday.

“There is a lot of discussion about interest rates in the U.S. and the data we will see this week is important,” Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna, told Bloomberg. “Maybe then we’ll have a better idea of what’s going on in June, July, or September.”

Maybe. Meanwhile, oil fell for a fourth day after Iran said again that it won’t countenance freezing output until its production is back at pre-sanctions levels, while iron ore tumbled on rising Chinese stockpiles and copper declined. The Stoxx Europe 600 Index fell, erasing an advance of 0.4 percent.

Futures on the S&P 500 also declined after initially jumping higher in thinly traded, illiquid tape. Best Buy Co. posts earnings today. Investors are also looking to economic data for indications of the strength of the world’s biggest economy and the trajectory of interest rates. A preliminary report due Monday is forecast to show U.S. manufacturing activity expanded to 51.0 in May, up from 50.8 a month ago.

Market Snapshot

  • S&P 500 futures down 0.2% to 2046
  • Stoxx 600 up 0.5% to 336
  • DAX down 0.8% to 9838
  • S&P GSCI Index down 0.5% to 365.3
  • MSCI Asia Pacific up 0.4% to 126
  • Nikkei 225 down 0.5% to 16655
  • Hang Seng down 0.2% to 19809
  • Shanghai Composite up 0.6% to 2844
  • S&P/ASX 200 down 0.6% to 5319
  • US 10-yr yield down 1bp to 1.83%
  • German 10Yr yield down 1bp to 0.15%
  • Italian 10Yr yield down less than 1bp to 1.47%
  • Spanish 10Yr yield down less than 1bp to 1.56%
  • Dollar Index down 0.05% to 95.29
  • WTI Crude futures down 1.1% to $47.83
  • Brent Futures down 0.9% to $48.19
  • Gold spot down 0.2% to $1,250
  • Silver spot down 1% to $16.37

Looking at regional markets, Asian stocks traded mixed despite initially beginning the week mostly higher following last Friday’s tech led-gains in US. Nikkei 225 (-0.5%) underperformed on weak data in which exports and imports fell more than expected highlighting sluggish demand. Japanese exporter sentiment was also pressured by a firmer JPY and contraction in PMI figures. ASX 200 (-0.3%) trades with losses as weakness in copper and oil weighed on sentiment, while Chinese bourses bucked the trend with the Shanghai Comp (+0.6%) & Hang Seng (-0.4%) initially mildly supported after the PBoC continued liquidity injections, coupled with comments from President Xi and Premier Li calling for several measures to support the economy. 10yr JGBs traded mildly higher as the risk-averse sentiment in Tokyo supported safe-haven demand.

China President Xi Jinping called for local authorities to prioritize supply-side reform and increase confidence in economic restructuring, while Chinese Premier Li Keqiang urged for less red tape, improved regulations and better services to support a sustained and healthy development of the economy.

Top Asian News

  • Yuan Basket at One-Month High as China Seen Curbing Volatility: Gains against peers show aim to prevent disorderly sales, OCBC says
  • Japan’s Exports Post Seventh Monthly Decline on Stronger Yen: April exports fall 10.1% y/y vs est. -9.9%
  • Goldman Manages Japan Minus-Rate Bond as Swaps Lure Global Funds: State-backed Japan co. sells its first negative-rate notes
  • 1MDB Bond Fates Diverge as Abu Dhabi Vow Trumps Najib Support: Malaysian fund talks with creditors Monday after April default
  • S.F. Holding to Backdoor List in Estimated 43.3b Yuan Deal: Co. will list through reverse merger with Maanshan Dingtai Rare Earth

The European week has kicked off in a choppy fashion, with equities initially trading in the red across Europe before pulling off their worst levels by mid-morning (Euro Stoxx 50: -0.3%). German large cap Bayer (-2.1 %) is among the worst performers on the continent, after the Co. announced their USD 62b1n bid for Monsanto, with shares lower by around 14% since reports of their interest initially surfaced. The downside in equities has been met with upside in Bunds, with the German benchmark briefly moving above 164 albeit failing to hold the level , as participants initially focussed on the slip in supply this week, with some desks are also noting a recommendation from Commerzbank to take a tactical long position in Bunds. Of note however, the EFSF have mandated banks for an upcoming dual tranche offering with books now open for their new 10 and 31yr bonds.

European Top News

  • Ryanair Profit Growth to Slow as Terror ‘Drip’ Crimps Fares: earnings growth will slow this year as a spate of terror attacks combines with lower fuel prices to prompt European airlines to cut fares
  • CF Abandons $5.4 Billion OCI Deal in Face of Tax Inversion Rules: Although both companies explored alternative structures to try and get the deal done, they failed to find an option that would work
  • Chinese Group to Buy Europe’s Aixtron for $752 Million: A group of Chinese investors agreed to buy Aixtron SE for about 670 million euros, giving the manufacturer a chance to boost sales by expanding in Asia
  • Sky, Iliad Said Among Suitors Weighing Italian Wireless Assets: Vimpelcom, CK Hutchison seeking to sell towers, spectrum. Fastweb, Tiscali also in talks with owners of Wind, 3 Italia
  • Brexit Spurs Torrent of Options Trading in Last Hedging Rush: investors are piling into contracts protecting against stock swings, paying prices not seen in more than a year for the hedges
  • World’s Biggest Wealth Fund Faces Wider Ban on Coal Investments: A majority of parties in Norway’s parliament want to tighten guidelines that prevent the $850 billion fund from owning companies that base more than 30 percent of their activities or revenues on thermal coal

In FX, as anticipated, a cautious morning of trade, with the USD pushing a little higher, but after some of the recent moves seen, seems to be marginal positioning at best . Much of the focus is on Fed chair Yellen’s speech on Friday, so this will likely keep USD trade 2 way for the most part of the week, with her familiarly measured(/dovish) leaning (since the start of the year) a major risk for USD bulls. The yen appreciated 0.7 percent to 109.38 per dollar, after losing ground in each of the last three weeks as Japanese officials warned they may intervene to weaken the currency. Finance Minister Taro Aso raised the issue in a meeting with U.S. Treasury Secretary Jacob J. Lew, who said yen moves haven’t been overly volatile. The two were attending a meeting of Group of Seven finance chiefs in Japan.

Early action today has seen EUR/USD pushing lower to test bids from 1.1200 again, with moves partially driven by EUR/GBP losses which have seen Cable pushed back into the mid 1.4500’s as a result. German PMI’s were better than expected, but this was not reflected in the EU wide numbers. AUD/USD continues to struggle ahead of .7260 on the topside to keep the prospect of fresh lows alive, while USD/CAD is still consolidating above 1.3100 to see a potential move on 1.3200 on the table.

A measure of implied price swings in the pound over the next one month climbed to its highest since February as the vote that will decide the fate of Britain’s membership in the European Union draws closer. One-month implied volatility, a measure of price swings based on options, climbed 80 basis points to 11.24 percent.

In commodities, WTI and Brent looked to have based out in the session with WTI just under the USD 48.00/bbl level and Brent just above USD 48.00/bbl. West Texas Intermediate crude dropped 1.3 percent to $47.80 a barrel and Brent slid 1 percent to $48.23. The Organization of Petroleum Exporting Countries is unlikely to set a production target when the group meets June 2 as it sticks with Saudi Arabia’s strategy to squeeze out rivals, according to all but one of 27 analysts surveyed by Bloomberg. Iron ore prices fell in Asia as rising port inventories in China spurred concern that global supplies are once again topping demand. Futures on the Dalian Commodity Exchange fell 3.5 percent to 359 yuan a ton ($54.79). Steel rebar futures in Shanghai dropped 3.5 percent on Monday to 1,983 yuan a ton.

Copper fell 0.5 percent to $4,557 a ton, declining with other industrial metals following suggestions the Fed could raise interest rates as early as next month. Zinc lost 1.6 percent and nickel slid 1.7 percent. U.S. natural gas advanced after forecasts showing an increasing probability of above-normal temperatures in the northeast and Midwest, which can increase demand for electricity for cooling. Futures rose 2.6 percent to $2.116 per million British thermal units.

Gold has been trading sideways at USD 1250.83/oz firmly within a USD 15.00 trading range. Silver has just bounced off of its USD 16.33/oz support level but remains in a downtrend. Elsewhere in base metals copper and iron ore prices fell with Dalian iron ore futures slumping by 5% to its lowest since early March at the beginning of trade due to demand concerns from the world’s largest iron ore consumer, China.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European trade has been relatively choppy thus far as initial downside in equities was pared with some citing upbeat German PMI data
  • In FX markets, early action today has seen EUR/USD pushing lower to test bids from 1.1200 again
  • Looking ahead, highlights include US PMI alongside Fed’s Bullard, Williams and Harker
  • Treasuries rise during overnight trading amid drop in Japanese, European equity markets after euro-area Markit PMI showed growth in region’s private sector unexpectedly slowed in May, and Japan’s exports fell for a seventh consecutive month in April as the yen strengthened.
  • Speaking in Beijing, St. Louis Fed President Bullard said growth inconsistent with slow-rising path for policy rate; also said some data support market view, some support FOMC view
  • Belgium, Canada, France, Mexico, Spain, Switzerland and the U.K. have all sold debt maturing in 40 to 100 years since 2014, even if infrequently. Not the U.S., which in the interest of keeping sales regular has stuck to securities of three decades or less
  • Mark Carney is limbering up for another encounter with members of Parliament’s Treasury Committee on Tuesday at 10 a.m. in London after a fiery exchange with pro-Brexit lawmaker Jacob Rees-Mogg in March over the U.K.’s referendum on European Union membership
  • The U.K. government issued its starkest warning yet about the dangers of a vote to leave the EU in next month’s referendum, saying Brexit risks causing a yearlong recession, sparking a decline in the pound and costing hundreds of thousands of jobs
  • With only one month to go before the U.K. votes on whether to remain in the EU, investors are piling into contracts protecting against stock swings, paying prices not seen in more than a year for the hedges
  • Greece’s European creditors are preparing to disburse EU11b ($12.3 billion) once the nation successfully completes a review of its bailout program
  • All but 1 of 27 analysts surveyed by Bloomberg said the OPEC won’t set an output target on June 2, as it sticks with Saudi Arabia’s strategy to squeeze out rivals including U.S. shale drillers by pumping near-record volumes
  • The Swiss are discussing paying people $2,500 a month for doing nothing. The country will vote June 5 on whether the government should introduce an unconditional basic income to replace various welfare benefits
  • Sovereign 10Y yields mostly lower; Asian equities mixed, European equities lower; U.S. equity-index futures lower; WTI crude oil, precious metals fall

 

DB’s Jim Reid concludes the overnight wrap

a new week begins with today’s various flash PMIs from around the world the main highlight. Europe is expected to generally see a modest improvement overall as is the flash manufacturing number in US (51.0 expected vs. 50.8 last month). This number will be interesting as many of the regional numbers have been weak recently (Philly Fed and Empire Manufacturing) and the recovery in manufacturing seen in the US through Q1 seems to be stalling even with a firmer oil price.

Before we get to the data though, there’s been a few interesting snippets of newsflow to highlight over the weekend first. Over at the G7 finance leaders meeting this weekend much of the headlines are focused on what appears to be growing tension between the US and Japan concerning exchange rate policies. Indeed Japan’s Finance Minister Taro Aso hinted at growing frustration in the Japan camp about the stronger Yen and the subsequent impact that this was having on exporters. This point was seemingly made to US Treasury Secretary Jack Lew with Aso saying to reporters that he had told Lew that ‘one-sided, abrupt, and speculative moves were seen in the FX market recently, and abrupt moves in the currency market are undesirable and the stability of currencies is important’. According to Reuters Lew responded by saying that he did not consider recent moves in the Yen to be ‘disorderly’ and that ‘it’s important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don’t surprise each other’.

The Yen is close to half a percent stronger this morning while Japanese equity markets are weaker (Nikkei -1.11%) to begin the week although that in part reflects the latest trade data which was released overnight. Japan’s trade surplus has risen to the highest since March 2010 after imports plummeted in April (-23.3% yoy vs. -19.2% expected, -14.9% previously) – offsetting a steeper than expected fall in exports (-10.1% yoy vs. -9.9% expected, -6.8% previously). Also released a short time ago out of Japan was the Nikkei manufacturing PMI for May which showed further deterioration in the sector after dropping 0.6pts to 47.6 and to the lowest level since December 2012. Elsewhere it’s a bit more mixed in trading this morning. The ASX (-0.24%) is also lower although the Hang Seng (+0.23%), Shanghai Comp (+0.43%) and Kospi (+0.18%) are posting modest gains. Oil markets are slightly weaker (WTI -0.54% to $48.15/bbl) following comments over the weekend out of Iran’s state oil minister suggesting that the nation will refrain from joining any potential production freeze at the June 2nd meeting with OPEC partners.

Also of note from the weekend is the latest from Greece where some important progress has been made towards unlocking the next set of emergency funds. Lawmakers yesterday approved a package of additional austerity measures including tax increases and pension cuts, as well as the formation of a new privatisation fund. The vote passed by a narrow majority of 153 lawmakers in the 300-seat parliament. Unsurprisingly there was big push-back from the rival opposition parties, with the next stage now tomorrow’s Eurogroup meeting where the finer details are set to be discussed around debt relief and the actual disbursement of funds.

Staying in Europe, today marks the one month countdown to the UK EU referendum date. As per Reuters, an opinion poll from Opinium on behalf of the Observer newspaper became the sixth poll out of the last seven to be published which has shown the ‘Remain’ campaign as coming out on top. The results from the online poll showed that 44% would vote to stay in the EU with the leave campaign at 40%. The same pollster had the split at 42% and 41% respectively at the end of last month. Indeed our UK rates strategists (Jack Di-Lizia) now note that implied probabilities from bookmakers’ odds are tilted heavily in favour of a vote to remain, with the probability of a Remain outcome now at 82% which is up 4% from the prior week. That said much of the commentary – as highlighted by Reuters – is still suggesting that there is still a difference between the outcomes of telephone polls and online polls with the former tending to show a larger lead for the ‘Remain’ campaign, while the latter tend to show a much closer race. It’s worth noting that from this Friday (27th) the pre-referendum ‘purdah’ period kicks in which restricts the ability for those connected to government to campaign for either outcome. So it’s possible some of the noise around the campaign dies down as a result.

Moving on. It’s worth noting that this morning our European equity strategists have downgraded their YE 2016 Stoxx 600 forecast from 380 to 325 (current 338). They cite the latest FOMC minutes as a reason for increasing risks with fears that we will re-enter the “doom loop” from a more hawkish Fed to a stronger dollar, lower oil prices, higher HY credit spreads and lower equity markets. On the upside, they think the Fed’s increased sensitivity to the problem of dollar strength means it will quickly abandon its tightening intentions once asset prices are falling, thus capping the downside for markets.

Quickly recapping how we closed out markets on Friday. Despite there being no obvious drivers in what was a pretty quiet day overall, risk sentiment was vastly improved with equity markets bouncing back from their post-minutes retreat. The S&P 500 finished +0.60% and in the process moved back to within less than half of a percent of where it was immediately prior to the FOMC minutes on Wednesday. The move also helped the index snap three consecutive weekly declines after closing the five-days with a +0.28% return. US credit was also stronger (CDX IG -1.5bps) while the rebound for risk assets in Europe was even greater. The Stoxx 600 closed +1.23% while Main and Crossover ended 2bps and 5bps tighter respectively.

Treasury yields continue to stall with the benchmark 10y hovering at 1.839%, while the USD rally also took a pause for breath with the Dollar index little changed on Friday. That in part also reflected a quiet day for data. The only data out across the pond was the April existing home sales numbers with sales reported as increasing at a slightly greater than expected rate last month (+1.7% mom vs. +1.3% expected). The only data of note in Europe had been the UK’s CBI Industrial Trends survey (-8 vs. -13 expected) which was suggestive of some modest improvement this month.

Meanwhile in terms of Fed expectations we ended the week with a close to 50% hike priced in for this summer. The odds of a July hike are sitting at 48% (up from 47% on Thursday) with June sitting at 28% (unchanged versus Thursday). As you’ll see shortly it’s a busy week for Fedspeak this week and it’s set to be capped off by Fed Chair Yellen on Friday evening. There was actually a bit of chatter from the weekend to note with regards to the Fed. The usually dovish Rosengren (voter), in an interview with the FT, said that while he is sensitive to how the data comes in, also noted that he ‘would say that most of the conditions that were laid out in the minutes, as of right now, seem to be on the verge of being met’. Rosengren also added that the Fed had set a ‘relatively low threshold’ for improvement in growth and that the economy was ‘making progress on getting to inflation at 2%’. Meanwhile fellow Fed official Williams (non-voter), who leans slightly hawkish, played down the US President Campaign as having an impact on the Fed’s decision for a possible change in policy.

 

end

ASIAN AFFAIRS

i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP  BY 18.14 PTS OR 0.64%  /  Hang Sang closed DOWN 43.17 OR 0.22%. The Nikkei closed DOWN 81,85 POINTS OR 0.49% . Australia’s all ordinaires  CLOSED DOWN 0.60% Chinese yuan (ONSHORE) closed DOWN at 6.5542 .  Oil FELL to 47.81 dollars per barrel for WTI and 48.14 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5627 yuan to the dollar vs 6.5542 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA a) JAPAN ISSUES

The G7 meeting at Sendai Japan, have basically told Japan that it cannot intervene in the FX markets to lower the yen unless the USA gives its pre-approved endorsement.Japan has not been humiliated on its own turf.

If the USA does raise its interest rate in June or July, this will send turmoil throughout the globe, as Chinese FX leaves China, emerging markets tumble as does commodity prices. Europe and Japan will have a temporary reprieve as the EURO AND YEN  fall as the dollar rises, but this will be short-lived until another SHANGHAI ACCORD  comes into being

(courtesy zero hedge)

“The Sendai Dischord” – Japan Humiliated At G-7 Meeting In Sharp Rift Over Yen Intervention

At the end of February, shortly after Japan’s disastrous attempt to crush the Yen at the expense of a stronger dollar when the BOJ unveiled its first episode of Negative Interest Rates, only for everything to go spectacularly wrong for Kuroda, the world’s financial leaders met in Shanghai where the so-called Shanghai Accord took place when in no uncertain terms central bankers around the globe (and especially the Chinese) came down on Janet Yellen like a ton of bricks demanding that the Fed do a “dovish relent”, and stop the Fed’s monetary tightening talk, ease back on expectations of further rate hikes, and generally talk down the dollar.

This is precisely what happened (if only until this past week when the Fed has once again jawboned rate hike expectations higher).

However, while China was delighted because the weaker dollar meant less FX intervention and less capital outflows from China, Europe and especially Japan were livid: after all the offset of a weaker USD would be a stronger EUR and JPY.

And, heading into this weekend’s closely watched G-7 meeting in Japan’s Sendai, the Bank of Japan had made it quite clear it was not happy with being repeatedly singled out by the US Treasury as happened just a few weeks ago, when Jack Lew singled out Japan by putting it on a new currency watch list with a warning not to devalue its currency unilaterally and without prior approval of the international committee.

To be sure, when the meeting started…

 

everyone was all smiles…

 

… with hopes they could hammer the deflation monster to death…

 

… or failing that, hammer out some agreement…

 

… but it was not meant to be.

Unlike February when all central bankers had one simple intention, to push the value of the dollar lower, this time the key issue was whether or not Japan could intervene to devalue the Yen at the first possible opportunity. And without any support to take on the US, whose position has been to only allow preapproved (and thus greenlit by the US) central bank intervenions, Japan was left out in the cold.

To be sure, the G7 did release a joint statement, according to which the group of seven nations agreed not to target exchange rates, saying “excess volatility and disorderly movements” can have an adverse impact on economic and financial stability, however already here one could sense the tension express by Japan which explicitly said that the “summary statement does not officially represent G-7 consensus”, suggesting that now Japan is the G-7 black horse, desperate to push the Yen lower, however the US refuses.

Also, according to the statement, global uncertainties have increased, and as a result the G-7 reaffirmed existing exchange rate agreements, agreed to avoid competitive FX devaluation, adding that it is important to implement fiscal strategies flexibly. The G-7 also committed to reducing international cash transaction threshold hinting that the phasing out of cash in the Developed countries continues.

On the topic of monetary policy, the G-7 agreed it will continue to support economic activity and ensure price stability, in other words keep asset prices artificially inflated. It also said that terrorism, Brexit, refugees complicate economic environment.

But from a trading perspective, what was most important is what was left unsaid in the joint statement. It is here, where as Reuters reports, the United States issued a fresh warning to Japan against intervening in currency markets on Saturday, as the two countries’ differences over foreign exchange overshadowed a Group of 7 finance leaders’ gathering in the Asian nation.

As noted first above, Reuters also writes that “Japan and the United States are at logger-heads over currency policy with Washington saying Tokyo has no justification to intervene in the market to stem yen gains, given the currency’s moves remain “orderly”. The rift was on full show at the G7 finance leaders’ meeting in Sendai, northeastern Japan, with U.S. Treasury Secretary Jack Lew saying he did not consider current yen moves as “disorderly” after a bilateral meeting with his Japanese counterpart.”

The US Treasury secretary was adamant: in the aftermath of the NIRP fiasco, any BOJ interventions will have to be preapproved by the US: “It’s important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don’t surprise each other,” Lew told reporters on Saturday. “It’s a pretty high bar to have disorderly (currency) conditions.”

Hence, the US – and thus global – position is that only if the USDJPY is plunging by a few thousand pips in any given day does the BOJ have permission to intervene. For all other BOJ manipulation, the Federal Reserve will have to be consulted first. Translation: Kuroda (and by implication Abe) is now treated like a little child among the world’s financial elite, and he has lost the right to act independently. It also means that now the Fed believes China’s FX stability is far more important than that of Japan.

There was some obligatory spin by Japan to save face: after all it would be absolutely humiliating for the BOJ to be schooled on its own soil. Japanese Finance Minister Taro Aso said there was no “heated debate” on the yen with Lew, and that it was natural for countries to have differences in how they see exchange-rate moves. But the meeting with Lew did not stop him from issuing verbal warnings to markets against pushing up the yen too much.

“I told (Lew) that recent currency moves were one-sided and speculative,” Aso said in a news conference on Saturday, adding that the yen’s gains in the past few weeks have been disorderly.

The Japanese finmin was alone.

While Aso has publicly warned of intervention after the yen’s recent rise to 18-month highs, some economic policymakers have signaled that they are not too worried the yen will derail a fragile economic recovery.

Aso also said his G7 counterparts reaffirmed the importance of exchange-rate stability, Japan received no public endorsements from other G7 members for intervention to contain “one-sided” yen rises. “There is a consensus that monetary policy is well-adapted and there are no big discrepancies in currencies, so there is no need to intervene,” French Finance Minister Michel Sapin told reporters after the two-day G7 gathering concluded on Saturday.

Meanwhile, the biggest monetary hawk of all, Germany, made it clear that calls for aggressive, coordinated global fiscal policy just won’t happen.

G7 leaders called for a mix of monetary, fiscal and structural policies to boost demand but left it to each country to decide its own policy priorities – dashing Japan’s calls for more aggressive joint fiscal action.

 

Germany has shown no signs of responding to calls from Japan and the United States to boost fiscal spending.

Enter Germany’s finmin Schauble, who said that “the most important are structural reforms… there are more and more (in the G7) recognizing that structural reforms are crucial.”

The conclusion from this G-7 meeting, in as much as one is possible, is that the financial stress that was prevalent in February when global risk assets and commodities were tumbling and pressured the world’s financial leaders to hammer out an agreement, one which however is now self-defeating as the easing in financial conditions resulting from the Shanghai accord, is precisely what has caused the failure of a follow-up monetary agreement, not to mention Japan’s latest humiliation and demotion to rank below that of China, at the Sendai meeting.

Furthermore, should the Fed proceed with another rate hike in June or July as the market now seems to believe, it would mean more USD strength, more Chinese turmoiling, another sharp tightening of financial conditions, more tumbling asset prices and so on in deja vu fashion. But the good news for Japan is that at least it will have gotten its way and a weaker Yen, if only briefly, before this entire episode is repeated yet again.

 end Trade with Japan collapses as exports decline for the 7th straight month and imports decline for 16 months in a row. The decline in imports is greater than the decline in exports so Japan shows an unexpected rise in Japanese trade surplus. Japanese output shrinks at the fastest pace since 2012 and signals a complete failure in Abenomics. Japanese PMI , or total mfg output  falters badly! NO WONDER THE FEUD WITH THE USA. JAPANESE TRADE (EXSPORTS) EVAPORATES (courtesy Mish Shedlock) Trade With Japan Collapses: Exports Decline 7th Month, Imports Plunge Most Since 2009

Submitted by Mish Shedlock of MishTalk

Trade With Japan Collapses: Exports Decline 7th Month, Imports Decline 16th Month

Abenomics was back in the spotlight tonight. Global trade with Japan has collapsed. Exports are down and imports are down even more. The result is an unexpected rise in Japan’s trade surplus, yet another failure of abenomics.

Japanese Output Shrinks at Fastest Pace Since 2012

The Markit Japanese PMI shows Output falls at fastest rate in over two years, underpinned by a sharp
drop in new orders.

  • Flash Japan Manufacturing PMI™ at 47.6 (48.2 in April). Flash headline PMI signals sharpest decline in operating conditions since December 2012.
  • Flash Japan Manufacturing Output Index at 46.9 (47.8 in April). Production decreases at most marked rate in over two years.

Unexpected Surplus

Bloomberg reports Japan April Trade Surplus 823.5 Billion Yen, Beats Estimates.

Japan’s exports fell for a seventh consecutive month in April as the yen strengthened, underscoring the growing challenges to Prime Minister Shinzo Abe’s efforts to revive economic growth.

Overseas shipments declined 10.1 percent in April from a year earlier, the Ministry of Finance said on Monday. The median estimate of economists surveyed by Bloomberg was for a 9.9 percent drop. Imports fell 23.3 percent, leaving a trade surplus of 823.5 billion yen ($7.5 billion), the highest since March 2010.

Trade With Japan Collapses

Chart courtesy of Jeroen Blokland

Rudolf E. Havenstein ‎@RudyHavenstein

MNI: JAPAN APR IMPORTS -23.3% Y/Y; MEDIAN FORECAST -19.0% JAPAN APR IMPORTS POST 16TH STRAIGHT Y/Y DROP

9:05 PM – 22 May 2016

 

Clearly those stats are not worthy of comment. Thus, there was no comment.

zerohedge ‎@zerohedge

BOJ’S NAKASO DECLINES TO COMMENT ON FX LEVELS. Why would he: Peter Pan said he is not targeting FX

11:05 PM – 22 May 2016

Comments or not, those stats are precisely what is behind the Japan-USA feud on the unwelcome, disorderly strength of the Yen from the perspective of Japan.

Orderly and Not Disorderly in Pictures

For further discussion of the meaning of disorderly, please see US and Japan Feud Over Yen, Devaluations, and Meaning of “Orderly”.

END

SOUTH KOREA

 

Devastation inside South Korea as the global economy contracts.  The huge problem here can be seen in the shipbuilding area where the yards have seen orders fall by a huge 94%

 

(courtesy Bloomberg)

Global Deflation Alert: Massive Layoffs Are Looming In South Korea As Shipyard Orders Fall 94%

By Jiyeun Lee at Bloomberg

The South Korean government’s push to restructure debt-laden companies is set to cost tens of thousands of workers their jobs in an economy where social security is limited and a rigid labor market reduces the likelihood of getting rehired in a full-time position.

Many of the layoffs will be in industrial hubs along the southeast coastline, where shipyards and ports dominate the landscape. These heavy industries, which helped propel South Korea’s growth in previous decades, have seen losses amid a slowdown in global growth, overcapacity and rising competition from China. As a condition of financial support, creditor banks and the government are pushing companies to cut back on staff and sell unprofitable assets.

In Korea, losing a permanent, full-time job often means sliding toward poverty, one reason why labor unions stage strikes that at times lead to violent confrontations with employers and police. A preference for hiring and training young employees, rather than recruiting experienced hands, means that many workers who get laid off drift into day labor or low-wage, temporary contracts that lack insurance and pension benefits, according to Lee Jun Hyup, a research fellow for Hyundai Research Institute.

“The possibility of me getting a new job that offers similar income and benefits is about 1 percent,” said one of about 2,600 employees to be laid off following a previous restructure, of Ssangyong Motor in 2009. The 45-year-old worker, who asked only to be identified by the surname Kim as he tries to get rehired, initially delivered newspapers and worked construction after losing his permanent job. He’s now on a temporary contract at a retailer and taking night shifts as a driver to get by. Despite having these two jobs, his income has been halved. Being fired was “like being pushed into a desert with no water,” Kim said.

President Park Geun Hye last month underscored the need for the painful restructuring during a cabinet meeting, likening procrastination on the issue to a sick person frightened about undergoing life-saving surgery. Korean exports have fallen for more than a year and mounting levels of corporate debt are weighing down companies that need to find new growth engines.

Shipbuilding Industry

The government’s priority is on restructuring the hard-hit shipbuilding and shipping industries. Daewoo Shipbuilding & Marine Engineering Co. plans to cut about 10 percent of its workers, or about 1,300 people, from its payroll by the end of 2018. Hyundai Heavy Industries Co. said it is offering early retirement, after reducing the number of executives by 25 percent.

The number of layoffs is expected to balloon as the downsizing of major companies hits subcontractors. Ha Chang Min, an official at the subcontractors’ labor union for Hyundai Heavy, said the union expects about 10,000 workers to lose jobs this year as projects end.

About 205,000 workers were employed in Korea’s shipbuilding industry as of the end of 2014, according to the Korea Offshore & Shipbuilding Association. Hana Financial Investment Co. analyst Lee Mi Seon wrote in a report this month that 10 percent to 15 percent of workers in the industry are estimated to lose their jobs. With average monthly income in the shipbuilding industry at about 4.5 million won ($3,800) last year — relatively higher than other industries — the layoffs could lead to a downturn in consumption and weigh on the regional economy, Lee wrote.

Similar problems face China, whose companies compete with Korea in the global market. China has continued lending to keep its corporate sector growing but the expansion of credit has reached record levels. China’s efforts to curb overcapacity in some heavy industries will come at the price of jobs and may lead to labor unrest. This is a concern to China’s Communist Party leadership whose legitimacy is underpinned by steady employment, analysts say.

Strain is already seen in job markets at Ulsan, a key industrial city on Korea’s southeast coast. The number of unemployment benefit claims rose 18 percent in the first quarter from a year earlier, compared with a 1.3 percent increase for the whole country, data from the labor ministry show.

The government is currently reviewing designating the shipbuilding industry as a “special employment support industry,” according to Lee Hyun Ok, a director for regional and industrial employment policy at Korea’s Labor Ministry. If designated, the government will offer job training to those who are made unemployed and offer financial support to companies that keep their workers, Lee said.

The worst may be yet to come. The value of new orders at Korea’s shipbuilders fell 94 percent in the first quarter from a year earlier, and is forecast to fall 85 percent in 2016, according to Export-Import Bank of Korea. Plunging new orders suggests companies will no longer have room to hold on to employees once current ship-building projects end.

Korean unemployment benefits are a maximum of 43,416 won a day for a maximum 240 days. The exact amount depends on age, number of years the person has paid employment insurance, and final salary.

The proportion of income that is replaced by unemployment benefits in Korea was lower than the average for Organisation for Economic Co-operation and Development in all scenarios listed by the institution. The OECD analyzed various cases depending on the number of money earners and children in a family.

“It will be difficult for those laid off, as with the economy growing slowly, new jobs aren’t being created,” said Cho Seong Jae, director for industrial relations research at Korea Labor Institute. Also, people aren’t aware of the magnitude of the upcoming joblessness because most workers are contract-based and not well represented by unions, he said. “The government should think beyond traditional job support measures to support them,” he said.

Source: Mass Layoffs Are Looming in South Korea – Bloomberg

b) CHINA ISSUES

The number of strikes inside China has risen appreciably.  As such we are witnessing the hiring of individuals on a part time basis in order to avoid social unrest:

(courtesy zero hedge)

Chinese Part-Time Workers Soar As Economy Deteriorates

Not only is China facing a significant risk of an economic hard landing, but, as we have noted on many occasions, the country is also facing what perhaps may be an even greater risk: social unrest.

 

As the economy continues to weaken, and layoffs continue to mount, China has started to relax its own labor rules in order to try and keep everyone happy… for now; as China is experiencing a surge in part-time workers. In order to control costs, but still meet whatever demand comes, Reuters reports factories are now hiring by the day instead of keeping workers around in a full employment contract. In turn, workers are happy with the arrangement of course, because at least it provides the opportunity to make a day’s wage, knowing that if they are hired for that day it means there is work, and they’ll get paid for their efforts.

Squeezed by high costs and unpredictable demand, some factories in southern China’s manufacturing heartland are turning to a new strategy to survive: hiring workers by the day.

 

It is a far cry from Beijing’s vision of a slick, hi-tech manufacturing future of computers and chip makers: on a warm morning in the southern town of Shiling, dozens of workers gather on a city street to haggle for a day of work making bags for $20 to $30.

 

Factory owners in this leatherworking town, and in those nearby, say just-in-time labor allows them to stay competitive, even if day wages can be higher, individually, than full-time salaries.

 

Workers, operating in a legal grey area, say they tolerate the conditions because many fear factories offering permanent jobs could fail to pay if clients dry up and the manager runs off.

 

“We never used to hire temporary workers, because labor costs were not very high. Our workers were on staff,” said Huang Biliang, who runs a button factory in the southern city of Dongguan. “But recently we’ve started to hire more temporary labor.”

 

In a stainless steel factory in the nearby town of Jiangmen, David Liang, manager of Chiefy, agrees: “Every additional (permanent) worker I hire is an additional risk.”

 

The cost of social unrest is well known to the government, and if allowing slightly different rules of employment means that the masses will be happy, then its something officials are willing to tolerate. Although, at the end of the day, officials may have no choice but to soften their stance. As He Fan, chief economist of Caixin Insight Group points out, the manufacturing sector is shrinking, and casual workers may already be on track to outnumber permanent workers as it is.

Though China has tightened rules, officials have also expressed concerns about them. In March, Finance Minister Lou Jiwei publicly criticized the labor contract law, which requires companies to provide employees a written contract.

 

The same month, Guangdong province – which has raised its minimum wage at regular intervals in recent years – said it would scrap scheduled rises to the local minimum wage in 2016, and keep it at 2015 levels through 2018.

 

“The total employment of the manufacturing sector is shrinking,” said He Fan, chief economist of Caixin Insight Group, but not the informal portion of that. He sees the shift to more casual labor as also partly led by younger workers.

 

“If my assumption is correct, then the casual workers may outgrow the permanent workers.”

 

Needing to maintain employment, local authorities appear to tolerate the arrangement.

For now, workers like 39 year old Wang Binge, are happy with the part-time arrangement while looking for more stable work.

In Shiling, in China’s bag capital, men and women gather in the early morning looking for a day’s work.

 

Factory managers in vans and on scooters each hold a sample of the bag they produce; workers crowd around them, examining the sample and discussing the per-piece wage.

 

Among the workers is 39 year-old Wang Binge, who until three years ago ran her own small handbag workshop nearby. The workshop was once profitable enough to allow her to buy a Toyota and build a house in her hometown in southern Hunan province.

 

But orders dried up, and now Wang looks for jobs that pay at least 180 yuan ($27) for about a 12 hour day.

 

So many factory owners have fled without paying their staff, Wang and other workers said, that they feel safer being paid cash by the day, while hoping for more stable work.

At the end of the day, if workers are even tentatively happy, it improves the chances that the government won’t have to deal with further unrest. For China officials, that’s all that matters at the moment.

 

end Two months ago China threw a trial balloon upon which we reported.  They had a huge 31 trillion USA debt of which probably 20% was non performing/ The trial balloon was theat the POBC was going to force the banks to turn the bad debt into equity.  We thought that it would not get out of the starting game.  We were wrong:  China has quietly bailed out 220 billion in bad debt. an accident waiting to happen as these guys will load up with more debt (courtesy zero hedge) China Has Quietly Bailed Out Over $220 Billion In Bad Debt In The Past 2 Months

Two months ago we were amazed to read that according to the latest “deus ex machina” proposed by the PBOC, China would “sweep away” trillions in bad loans by equitizing them in the form of debt-for-equity exchanges. This is how we tried to explain this unprecedented move on March 10 when Reuters first hinted it was coming:

This proposal entails nothing short of a nationalization on a grand scale, one which gives China’s impaired commercial banks – all of which are implicitly state controlled – the “equity keys” to the companies to which they have given secured loans, loans which are no longer performing because the underlying assets are clearly impaired, and where the cash flow generated can’t even cover the interest payments.

 

In effect, the PBOC is proposing the biggest debt-for-equity swap ever seen. What it also means is that since the secured lender, which is at the top of the capital structure will drop all the way down, it wipes out the existing equity and unsecured debt, and make the banks the new equity owners, and as such China’s commercial banks will no longer be entitled to interest payments or security collateral on their now-equity investment. Finally, while this move does free up loss reserves, it essentially strips banks of their security and asset protection which they enjoyed as secured lenders.

 

So why is China doing this? By equitizing trillions in bad loans, it frees up the corporate balance sheets to layer on fresh trillions in bad debt, the same debt that pushed these zombie companies into insolvency to begin with.

 

What this grand equitization does not do, is make the underlying business any more profitable or viable: after all the loans are bad because the companies no longer can generate even the required cash interest payment – as a result of China’s unprecedented excess capacity and low commodity prices which prevent corporate viability. It has little to do with their current balance sheet.

 

That, however, is irrelevant to the PBOC which is hoping that by taking this step it can magically eliminate trilliions in NPL from commercial bank balance sheets in what is not only the biggest equitization in history, but also the biggest diversion since David Copperfield made the statue of liberty disappear, as instead of keeping the bad loans on the asset side as NPLs, thus assuring at least some recoveries, the banks are crammed down and when the next NPL wave hits, their exposure will be fully wiped out as mere equity stakeholders.

So why are banks agreeing to this? Because they know that as quasi (and not so quasi) state-owned enterprises, China’s commercial banks are wards of the state and when the ultimate impairment wave hits and banks have to write down trillions in “equity investments”, Beijiing will promptly bail them out. Essentially, in one simple move, Beijing is about to “guarantee” trillions in insolvent Chinese debt.

 

In short, what the PBOC has proposed is the biggest “shadow nationalization” in history, one which will convert trillions in bad loans in insolvent enterprises into trillions in equity investments in the same enterprises, however without any new money actually coming in! Which means it will be up to new credit investors to prop up these failing businesses for a few more quarters before the reorganized equity also has to be wiped out.

We concluded as follows: “While this is surely “good” news for the very short run, as it allows the worst of the worst in China’s insolvent corporate sector to issue even more debt, in the longer run it means that China’s total debt to GDP, which is already at 350% is about to surpass Japan’s gargantuan 400% within a year if not sooner.”

It also means much more deflation, because Chinese corporations which were adding to China’s massive excess capacity bubble and which would have otherwise gone out of business, will remains in business as they no longer have to worry about funding interest (after being effectively nationalized by the state), and instead will pump output at historical levels.

* * *

To be sure, we did not think much more of this proposed grand nationalization in the past two months, because virtually everyone had spoken up against it: from pundits to analysts, even the media figured out what a naive plan this was.

And then today we learned that not only was China going through with this epic debt-for-equity swap, but it has already equitized over $220 billion in non-performing loans.

Note: these are not traditional, Chapter 11 prepacks where the debt is converted into equity and the debt holder gets the keys to the company. In this case, it is the Chinese government itself which indirectly via state-owned banks, has become the de facto owner of countless companies.

As the FT reports:

“Beijing has stepped up its battle against bad debt in China’s banking system, with a state-led debt-for-equity scheme surging in value by about $100bn in the past two months alone. The government-led programme, which forces banks to write off bad debt in exchange for equity in ailing companies, soared in value to hit more than $220bn by the end of April, up from about $120bn at the start of March, according to data from Wind Information.”

As we said two months ago, and as the FT now confirms, this is nothing short of a state-led bailout of virtually every troubled, overindebted industry.

The latest figures for the debt-to-equity swap, and a debt-to-bonds swap initiated last year, show a subtle bailout is already under way. “One can argue the government-led recapitalisation is already happening in an atypical way and thus reducing the need for recapitalisation in its written sense,” said Liao Qiang, director of financial institutions at S&P Global Ratings in Beijing.

Sorry Liao, but ever since the Global Financial Crisis, recapitalization in the “written sense” has meant a direct or indirect taxpayer funded bailout of the most insolvent sector. And that is precisely what China is doing.

To be sure, Beijing’s debt-to-equity strategy should be differentiated from the debt-to-bonds plan unveiled last year: under the latter program, up to Rmb4tn ($612bn) had been approved in 2015 for the debt-to-bonds swap, which has seen state-controlled banks trade short-term loans to companies connected to local governments in exchange for bonds with much longer maturities. The program relieved the pressure on local governments were that were forced to take out bank loans to proceed with public works projects in the absence of municipal bond markets.

However, the debt-to-equity project has received far less enthusiasm from analysts, who saythat coercing banks to become stakeholders in companies that could not pay back loans will further weigh down profits this year. Instead of underpinning stability at banks, Mr Liao says the efforts undermine it.

The programmes are just two fronts in Beijing’s battle against bad debt.  A third one was revealed recently when China started repackaging its massive NPLs in the form securitizations. As the FT writes, “the government is also reopening the market for securitising bad debt with two deals worth Rmb534m due this month. The efforts have even gone online, with debt managers hawking off bad loans on China’s biggest online retail site.”

The good news for China is that by swapping one bad asset into another, it may have confused the market long enough to buy a few quarters of time.

The bad news is that, as we first reported last November citing Fitch calculations, China’s bad debt “neutron bomb” is roughly 20% of total bank loans. Last week, CLSA’s Frarncis Cheung came up with his own calculation of China’s NPL program which he see as anywhere between 15% and 19%. Here is his analysis:

As analysts are now competing to come up with estimates of the real level of stressed loans in the China banking system and related shadow finance cycles, a good starting point can be found in the IMF’s latest Global Financial Stability Report published in April. This, based on a  sample of 2,871 listed and unlisted nonfinancial Chinese companies, calculates that 15.5% of total commercial bank loans to the corporate sector are “potentially at risk”. This debt-at-risk ratio is defined as having an interest coverage ratio (EBITDA dividend by interest expenses) of below one. Assuming a 60% loss ratio, the IMF puts potential bank losses at 7% of GDP, a level which it still considers as “manageable” while noting that for this to remain the case “prompt action” to address excess capacity and the like needs to occur.


All this is perfectly reasonable. Still Francis Cheung makes the valid point in his report that the IMF has relaxed its criteria from when a similar exercise was done in 2014.Then the debt-atrisk estimate was done using an interest coverage ratio of less than 2x. Now it is 1x. If the same 2x threshold was employed in 2015 the debt-at-risk estimate would rise to 28% of total corporate loans. Meanwhile, Cheung estimates, using the latest listed A-share company data for 2015, China’s bad-debt ratio or NPL ratio at 15-19% based on companies’ interest coverage and debt sustainability.

In short, whether China’s NPL are 15%, 19% or even 28% of total debt, these are absolutely gargantuan amounts – recall that China will report roughly $35 trillion in bank assets this quarter.

 

To believe that any government, even that of China, will be able to cover up what is indeed the “neutron bomb” (as we first dubbed it) under the entire Chinese financial system with some rhetorical sleight of hand, and shifting non-performing assets from one bucket into another without actually addressing the underlying issue, namely collapsing of cash flow, is the height of stupidity and arrogance. Which probably explains why so many sellside banks see this as a viable plan.

 

END

 

Soc Gen writes about the woes inside China and confirms Kyle Bass’s assessment that they will need at least a 30% devaluation.  Soc Gen puts their non performing loans at 1.2 trillion USA or 12% of GDP. They have already a DEPT to GDP of 350% and have no place to put additional debt.If China goes the rout of the 15% devaluation, the yuan to usa cross would be around 7.46 to one. A 30% devaluation would put the cross at 8.44 to one. Regardless this would send a massive deflation throughout the globe and totally bury the likes of commodities, Japan, South Korea and the emerging markets.

a must read..

(courtesy Soc Gen/zero hedge)

 

Kyle Bass Was Right: SocGen Does The Math On China’s Staggering NPL Problem, Issues Dire Warning

Yesterday, when reporting on the latest development in China’s ongoing under-the-table stealthnationalization-cum-bailout of insolvent enterprises courtesy of a proposed plan to convert bad debt into equity, we noted that while China has already managed to convert over $220 billion of Non-performing loans into equity, concerns – both ours and others’ – remained. As Liao Qiang, director of financial institutions at S&P Global Ratings in Beijing, said coercing banks to become stakeholders in companies that could not pay back loans will further weigh down profits this year. Instead of underpinning stability at banks, the efforts undermine it.

That said, while many have voiced their pessimism about China’s latest attempt to sweep trillions in NPLs under the rug, there had been no comprehensive analysis of just how big the impact on China’s banks, economy or financial system would be as a result of this latest Chinese strategy.

Until now.

In a must read note released by SocGen’s Wei Yao titled “Restructuring China Inc.” the French bank tackles just this topic (and many others). What it finds is disturbing and serves as a confirmation of all recent bearish assessments – most notably that of Kyle Bass – that China’s bad debt problem will end in tears.

Here is Yao’s summary:

China is still leveraging up rapidly, with its nonfinancial debt up to 250% of GDP [ZH: realistically 350%]. The corporate sector and capital market liberalisation that the authorities are pushing for has begun to destabilise the debt dynamics. The beginning of debt  restructuring for SOEs, the biggest borrowers and underperformers, brings closer the prospect of bank restructuring – a scenario we think that has a probability of more than 50% over the medium term.

 

As SOE restructuring progresses, it will also become more apparent that Chinese banks need to be rescued.

 

We estimate that the total losses in the banking sector could reach CNY8 trillion, equivalent to more than 60% of commercial banks’ capital, 50% of fiscal revenues and 12% of GDP. The actual tally may still be years away, but could be more sizeable if problems continue to grow.

 

China may still be able to dodge an economic crisis while restructuring its corporate and banking system, but the margin for error will be uncomfortably slim.

To repeat SocGen’s shocking conclusion, SocGen estimates that the total losses of banks could reach CNY8tn (or over $1.2 trillion), equivalent to more than 60% of their capital. It is also equivalent to 50% of fiscal revenues and 12% of China’s total GDP!

Before we get into the details, SocGen reminds us how China’s conducted its previous debt-for-equity round back in 1999, and what happened then:

The previous round of bank restructuring started in 1999, after the liberalisation of the corporate sector was well on track. The programme was wrapped up after the Agricultural Bank of China was successfully listed in 2010.

 

The explicit cost was close to CNY5.4tn (= total NPLs disposed + capital injection, table below), equivalent to 25% of average annual GDP during that period. The government – or essentially taxpayers – footed about 80% of the bill, while new investors – mostly FDI and IPO proceeds – financed more than 15%, and losses on banks accounted for less than 3%. For the government component, the MoF offered 40%, the PBoC 35% and AMCs (100% owned by the government) the remainder.

 

 

There was also a less obvious – though not any less real – cost inflicted on the private sector. Financial repression, in the form of interest rate controls, forced households to accept low deposit rates, while guaranteed interest rate margins (minimum 300bp throughout the 2000s). Although SOEs, thanks to implicit state guarantees, enjoyed lower borrowing rates from banks than what they should have be charged based on their performance, the interest rate margin made it easy enough for banks to make decent profits. As a result, banks had few incentives to service private corporates, which were pushed to shadow banks for exorbitantly expensive borrowing costs. In addition, banks were also offered tax exemptions and other forms of fiscal subsidies.

 

However, the impressive growth, owing to economic liberalisation and the strength of the global economy, was the biggest debt-shrinking tool. The bold SOE reform in the 1990s dissolved the lion’s share of SOEs, opening a vast space for the private sector to grow. The market liberalisation that commenced in 1978 eventually paved the way for China’s WTO entry in 2002, which gave the economy another big boost.

That was then, what about now?

In one previous section, we noted that 12% of listed SOEs’ debt is at risk. Our equity strategists deemed 10% as a baseline estimate for the NPL ratio at listed banks, based on an analysis of financial data of all the listed companies’ – both SOEs and private. Looking at the bigger picture, we have reasons to believe that the share of non-performing assets in the entire banking system or non-performing debt within the entire corporate sector should be higher – at 15% or more. (Again, note that we previously estimated the nonperforming debt ratio of SOEs at 18%.)

 

Big banks, which account for less than 50% of the banking sector, are better run and more prudent than small banks; and listed companies, which account for 10% of total corporate sector debt, should be more efficient than non-listed ones. Furthermore, since banks have engaged in off-balance-sheet lending for years and in many forms, some of the credit risk there may well remain with them because of reputational risk.

 

Applying a 15% non-performing ratio on banks’ total claims on nonfinancial corporates and total debt of nonfinancial corporates gives us CNY12tn and CNY18.5tn, respectively. In order to capture banks’ contingent risk currently hidden in the shadow banking system, we take the mid-point of CNY15tn – $2.3tn, 22% of 2015 GDP and 7.5% of banks’ total assets – as the basis for the likely aggregate non-performing assets that the banking sector may suffer.

 

According to the Doing Business Survey, the average recovery rate in China is about 35% at present. However, once NPL recognition picks up the pace, this rate could be compressed. Assuming the recovery rate drops to 30%, the potential losses on the CNY15tn nonperforming assets would be CNY10.5tn. Regardless, the first line of defence should be banks’ loan-loss reserves, which stood at CNY2.3tn at end-2015. That leaves about CNY8tn in losses (equivalent to over 60% of commercial banks’ total capital, and close to 50% of annual fiscal revenues and 12% of GDP).

In short, according to SocGen an unprecedented 12% of China’s GDP at risk of loss (and perhaps well more than this based on the bank’s conservative NPL assumptions). So how will China fund these losses? This is where it gets tricky, and why devaluation is looking like an inevitable outcome.

As SocGen writes next, when it says to “beware of devaluation risk”, one possible source of funding is backed by government bonds, which is effectively a form of QE, and which, as a result of China’s impossible trinity would have an impact on capital flows and the yuan that would be “rather negative.

Last time, AMCs issued CNY846bn of bonds to pay for NPL purchases, which was more than three times the amount of CGBs issued by the MoF for that restructuring. We think CGBs should play a much bigger role in the next round. A bank restructuring with explicit sovereign support is the most transparent form, which can help clarify the state’s boundaries going forward and avoid revisiting the question about implicit government guarantees.

 

There is also one technical consideration on the bond market. Last time, the MoF did not issue government bonds for most of the bailout funds it provided, but rather used a much less transparent structure of “MoF receivables” vis-à-vis each bank. At present, CGBs account for only 15% of GDP, which is not deep enough for the long-term development of China’s domestic bond market.

 

In either case (fundraising by the MoF or quasi-government agencies), increased bond supply could overwhelm the market. The PBoC might have to expand its balance sheet to either purchase CGBs directly (i.e. quantitative easing) or provide liquidity for big financial institutions to absorb the bond supply, so as to keep domestic interest rates from rising too much. However, given the impossible trinity – unless the authorities decide to seal off the capital account – the impact on capital flows and the yuan would then be rather negative.

 

This was not an issue last time due to strong economic growth, a rapidly expanding current account surplus and, most important of all, a completely closed capital account. However, none of these could be feasibly repeated to the same degree.

 

Let us go back to the CNY8tn estimate for capital losses. The government would need to raise CNY2-6tn if it wanted to fund 25-75% of the recapitalisation on top of the losses already incurred on its equity holding. If all in the form of CGB issuance, then the new CGB supply would be equivalent to 3-9% of GDP, 12-35% of fiscal revenues and 20-60% of outstanding CGBs. In addition to bank recapitalisation, the government would have to provide fiscal support to address unemployment pain and other social effects. The total fiscal bill would probably be considerably more than 10% of GDP.

 

After such expansion, CGBs would still account for only 18-25% of GDP, while the total government debt would rise anywhere between 50% and 75%, depending on how much more LGFV debt would be converted into LGBs. Our rate strategist thinks that it would be rather difficult for the bond market to cope with the high end of the estimates of additional CGB supply without help from the PBoC.

Another option is for the PBOC to use its vast (if declining) reserve holdings to directly inject funds into the banking system. This approach is less likely.

The CNY8tn in losses is equivalent to $1.2tn at today’s exchange rate. The same ratio as last time means $480bn FXRs of the $3.2tn stock for recapitalising banks – not implausible technically. If another FXR injection were to take place, banks might be under greater pressure to convert and put at least part of the new capital to use as soon as possible. Any conversion would exert appreciation pressure on the Chinese currency versus the dollar (i.e. deflationary).Even if banks were to use derivatives to raise local currency without conversion (for example, repo contracts), these activities would still impact the currency market.

 

Then, the PBoC would need to make another difficult decision – whether or not to buy these dollars back for a second time. Technically, the PBoC could choose to do so, and that would mean heavy intervention in the FX market, reversing all the reforms aimed at currency flexibility and – possibly – capital account liberalisation.

In summary China has two options how to address its upcoming CNY8(+) trillion in bank losses:

  • Using government bonds to recapitalise banks would lead to either higher domestic interest rates or higher currency devaluation risk, if the PBoC helps absorb the bond supply.
  • Using FX reserves would result in high appreciation pressure on the currency after the injection in the short term, but the PBoC’s ability to prevent renminbi depreciation in the future would be weakened.

And here is why, as per SocGen’s conclusion, Kyle Bass will be ultimately right and why China will almost certainly be forced to devalue its currency:

The solution to the currency issue might be a mix of two: basically, banks selling the PBoC’s dollars (obtained from FXR injection) to dampen the depreciation pressure on the renminbi caused by the expansion of the PBoC’s balance sheet, which is a result of the PBoC’s acquisition of CGBs issued for bank recapitalisation.However, it is impossible to make the mix just right so that there is no or little impact on the currency – this would require an unrealistically high degree of PBoC control over banks and/or an incredible amount of foresight.

 

The bottom line is that the government bail-out programme could be designed in a way to greatly limit its impacts on currency and capital account stability. Such designs seem to exist in theory, but would be very difficult to realise in the real world. We think that greater currency flexibility would probably be another major consequence that the authorities need to accept alongside bank restructuring.

At this point, since the math does not lie only Chinese statistics do, the only question is how will China engage the wholesale restructuring of its banking system: fast or slow.

A fast restructuring of corporates and banks risks an economic hard landing, since that could entail massive corporate defaults and big losses in terms of economic output, even in the case of a quick recapitalisation. A hard landing threatens social stability, and for this obvious reason, Chinese policymakers have opted for a slow and gradual process.

As a result, a fast restructuring, while ultimately preferable as it will allow China to peel the bandaid off, suffer acute pain for short period of time, then resume growth, is unlikely. This only leaves a slow restructuring as the option:

Being slow and gradual means that policymakers will most likely continue to adjust the pace of defaults and restructuring by offering (targeted) credit stimulus from time to time and, if needed, topping up financial support for failing SOEs and/or banks. This approach would also force relatively stronger banks to pay for incremental NPL disposals with their profits, which is essentially asking banks’ existing shareholders to bear some of the further cost of debt restructuring.

This is precisely what China’s recently introduced debt-for-equity restructuring program is facilitating.

The government seems to think that it can restructure the worst part of the corporate sector – zombie SOEs – bit by bit and use the freed-up resources to support good corporates and the new economy. The strength seen there, alongside help from modest fiscal expansion, could offset most of the negative impacts of the debt restructuring – including unemployment pains.

 

However, this is an overly optimistic view. There are two major risks with this gradual approach, in our view: a lost decade and policy uncertainty.

 

The restructuring might be too slow – even slower than the formation of new NPLs. In this case, we would never see deleveraging, and the restructuring bill would only grow – which has been the case in previous years.

This is bad as it implies China builds up bad debt faster than it eliminates it, which with $35 trillion in bank “assets” is to be expected: recall that Chinese banks are now adding roughly $3 trillion in assets every year, a staggering pace.

Here, SocGen once again channels Kyle Bass:

It is difficult, if not impossible, for us to picture a debt restructuring scenario that does not impact industrial output. The service sector might make such an outcome possible for the whole economy, but a high degree of policy precision and coordination is required nonetheless.

But the biggest problem for China is not whether it picks the fast or slow restructuring pathway, but how it decides to pick anything in the first place.

The government appears to still be in the process of working out how to restructure. This is the root of the uneasiness – the excruciating time spent waiting before the government takes action. In the face of negative market events, the state’s gradualism may be interpreted by everyone else as policy uncertainty.

 

A case in point – although most people (if asked on a good day) still believe that the Chinese government will eventually come to the rescue, this view was widely questioned and did not help avoid bond market jitters when SOE defaults occurred during the past month. Not to mention the fact that this view has not been very helpful in dispelling the doubts of investors about the asset qualities of listed banks.

SocGen’s conclusion is virtually identical to that of Kyle Bass, if not even more dire, although for the sake of the bank’s access to China, it clearly needs to tone down its assessment, to wit:

Given the immense challenges and risks inherent in the debt restructuring, it is unrealistic to expect a perfectly smooth process. Even if Chinese policymakers can come up with a sensible strategy and start implementing it tomorrow, the chance of policy errors – small or large – during the process would still be quite high. This is why we assign a 30% probability to a hard landing scenario over the medium term.

And, as Kyle Bass would note, even a 30% hard landing probability is enough to lead to a 15% or greater devaluation in the Yuan. The question is not if – the math confirms it – the question is when.

Finally, we would add that with China currently nursing a realistic 350% in debt/GDP according to Rabobank, the probability of a hard landing with no incremental debt capacity left unlike the last time China restructured its banks, is just shy of 100%.

Much more in the full “must read” SocGen note.

 

end

EUROPEAN ISSUES

 

Not only Japan’s PMI printed badly but also the Eurozone which saw its PMI print 529 down from 53.0 last month and well below the 53.2 expected.  It is hte hlowest in 16 months.

(COURTESY ZERO HEDGE)

Eurozone Business Growth “Unexpectedly” Slows Down To 16 Month Low

It wasn’t just Japan’s PMI which overnight printed at a disappointing 47.6, missing expectations and signaling the sharpest decline in operating conditions since December 2012. Overnight Markit showed that the Chinese credit-induced global slowdown is coming far faster than most (if not Morgan Stanley) expected, when the Eurozone flash PMI printed at 52.9, down from 53.0 in April, below the 53.2 expected, and the lowest in 16 months. As Reuters put it, this offers “the latest evidence that a strong acceleration in growth in the first three months of the year was only temporary” and likely

Curiously this happened on the back of stronger than expected PMIs from France and Germany which as Goldman notes, suggests weaker prints in Italy and Spain which are yet to be published.

Goldman’s full breakdown of the Markit report:

  1. The breakdown revealed a 0.2pt fall in the manufacturing output component drove the decline in the composite figure. The services PMI component was unchanged at 53.1.
  2. The Euro area manufacturing PMI fell by 0.2pt in May. The manufacturing breakdown showed a 0.2pt fall in manufacturing output, a 0.2pt fall in employment, and a 0.1pt fall in new orders. Within the services PMI, the forward-looking subcomponents (which are not part of the headline services PMI figure) were particularly weak, with ‘incoming new business’ falling 1.0pt, and business expectations decreasing by 2.8pt.
  3. On a country basis, the German composite PMI was strong, rising 1.1pt, while the French composite figure rose by 0.9pt. The strength in Germany and France combined with a relatively unchanged area-wide figure suggests weaker prints in Italy and Spain, which are due to be released next week.
  4. Based on historical correlations, a composite PMI of 52.9 is consistent with growth of in the Euro area of +0.3%qoq, just below our judgemental forecast of +0.4%qoq for Q2. That said, the PMIs throughout Q1 were consistent with GDP growth of around +0.3%qoq, yet growth accelerated to +0.5%qoq (initially estimated at +0.6%qoq) on Eurostat’s estimates, and as such we remain wary of drawing conclusions too early in Q2 based on the PMI data alone.

Visually:

 

As Reuters adds, while essentially stable – and still indicating growth – the reading was the lowest since the start of 2015. It ran against expectations in a Reuters poll, which had predicted a tick up to 53.2 in one of the earliest reported broad indicators of growth during the month.

Markit said the PMI pointed to quarterly GDP growth of 0.3 percent, in line with forecasts in a Reuters survey published earlier this month, but short of 0.5 percent in the first quarter, which was initially reported as 0.6 percent.

The silver lining: individual surveys showed growth in Germany’s private sector accelerated to hit the fastest rate so far this year. French business activity also grew faster than expected, returning to a rate not recorded since before the Nov. 13 attacks in Paris. “That suggests that the PMIs for the other major euro zone economies such as Italy and Spain will be soft when released next week,” said Stephen Brown at Capital Economics.

Looking at the aggregated level, while the headline composite PMI was above the 50 mark that separates growth from contraction, the index measuring prices businesses charge remained below it at 49.0, although that was an increase from last month’s 48.3. This, according to Reuters, may concern policymakers at the European Central Bank who have been battling to get inflation up to their 2 percent target ceiling. Consumer prices fell 0.2 percent in April, despite the Bank’s ultra-loose monetary policy.

Even with price discounting, new order growth slowed and there was no acceleration in activity in the bloc’s dominant service industry. A Reuters poll had predicted an increase to 53.3 but the PMI held steady at April’s 53.1. The manufacturing PMI fell to 51.5 from 51.7, missing the median Reuters poll forecast for 51.9, while an index measuring output dropped to 52.4 from 52.6.

Details in the data hint that there may be little or no improvement in June. Optimism among service firms fell to a 10-month low, with the sub-index plummeting to 61.7 from 64.5, and factory recruitment slowed.

“The flash PMIs provided slight disappointments to the markets,” said Tuuli Koivu at Nordea, who expects 0.3 percent growth in Q2. “However, the negative surprises were only minor ones and do not cause any changes to our GDP growth forecast.”

In other words, it will once again be all up to China once more; although considering it took a $1 trillion credit injection by China to buy the most modest of first quarter economic rebounds, it is questionable if Beijing can repeat this dramatic credit spree, especially after an April new loan report which as we commented just over a week ago, was very disappointing and as we warned, presaged a period of weakness for the global economy, as is now materializing.

 

end: Despite Greece’s depression, the crooks at the EU have forced hikes in VAT to 24% as well as added new taxes including lesser pensions. Greece will go  further down the rabbit’s hole (courtesy Mish Shedlock/Mishtalk) Despite Depression, Greece Forced To Hike VAT, Add New Taxes

Submitted by Michael Shedlock via MishTalk.com,

Greece remains in an economic depression interrupted by a few quarters of anemic growth.

Hiking taxes in a depression is one of the stupidest thing one can do, but Greece is set for another vote to do just that.

Prime minister Alexis Tsipras is once again prepared to kiss German Chancellor Angela Merkel’s behind, and his party will likely go along for the ride.

The wildcard IMF has yet to chime in on the economic stupidity of this hike.

Please consider Greece Set for Austerity Vote to Secure Bailout Cash.

Greece’s parliament is expected to vote late Sunday on a raft of fresh taxes and austerity reforms that the country must legislate to unlock further rescue loans, ahead of a crucial eurozone finance ministers meeting on Tuesday.

 

The bill includes the last portion of an austerity package worth €5.4 billion ($6.06 billion), or 3% of the country’s gross domestic product, which Greece has agreed on with its international creditors to implement by 2018 in exchange for fresh bailout funds under the terms of its third bailout deal.

 

The IMF has said it would only sign up to the Greek bailout if Germany agrees to debt relief. But German officials are seeking to delay any debt restructuring until the end of the current Greek bailout program in 2018, so that Germany’s parliament, the Bundestag, would pass such measures only after Germany’s 2017 elections.

 

To meet its targets, Athens was asked to set up a “contingency mechanism” of additional austerity measures worth some 2% of GDP.

 

The measures being voted on Sunday include new taxes on fuel, tobacco, alcohol, Internet, pay TV, hotel stays, cars, changes in property tax, as well as a rise in the basic value-added tax rate, applied to most goods and services, from 23% to 24%.

 

The Greek parliament is also expected to vote on the fiscal brake mechanism that would automatically cut state spending if Greece misses its budget targets.

 

How much the next bailout tranche would be is still to be determined, butEuropean Union officials indicate it could be €10 billion.

 

Another Humiliating Greece Cave-In

On May 14, I reported Greece “Demands” Debt Relief, Owes Troika €11+ Billion by July.

My comment: “Greece has caved in every time, and in the most humiliating ways. Greece even caved in on pension cuts last week. Why should anyone believe Greek demands now?

€10 billion would be a lot of money, if the money went to Greece. But virtually none of it will go to Greece.

 

Greece Short-Term Debt Timeline

Somehow I expect the next tranche to be a “greater than expected” €11 billion. Perhaps €10 billion will suffice if Greece has €1 billion of its own to pony up.

 

Greece Long-Term Debt Timeline

Payments to the Troika stretch all the way to 2059, while assuming Greece can maintain a primary account surplus of 3.5% the entire way.

The IMF says this is impossible, while proposing a surplus of 1.5%, also impossible.

 

Politics of Debt Relief

The IMF wants debt relief now, but Germany wants the IMF to hold off until Merkel wins reelection.

Meanwhile, the Greek depression resumes.

These tax hikes are insane. The key question remains: Is the IMF bluffing about debt relief or not?

END

France hit by gas shortages as refinery workers go on strike and block all outgoing routes. There is no gas in the North West, North which includes Paris

(courtesy zero hedge)

 

France Hit By Gas Shortages, Rationing After Refinery Workers Go On Strike

In the wake of French president Francois Hollande using an obscure article of the constitution in order to bypass parliament and force through labor reforms that are viewed as unfavorable to workers, protests have been ongoing in the country.

Now, French refinery workers have launched a strike to hit the government where it hurts the most. Protesters have blocked deliveries to gas stations from at least half of France’s eight refineries, and workers at three Total refineries have voted to halt all output by Tuesday according to France 24.

The news sent drivers rushing to gas stations in order to fill up their tanks while they could.About 820 stations out of 11,500 in France were out of fuel on Sunday, and another 800 were lacking at least one type of fuel.

Prime Minister Manuel Valls said that the situation is fully under control, and that there are enough fuel reserves to deal with the blockade.

We have the situation fully under control. I think that some of the refineries and depots that were blocked are unblocked or will be in the coming hours and days. In any case, we have the reserves to deal with these blockades.”

Kristine Petrosyan, an oil market analyst for refining at the International Energy Agency adds “there is a noticeable fuel shortage in the North West and North of the country, including parts of the greater Paris region.”

Strikers aim to block access to fuel infrastructure, including refineries, fuel depots, and ports, so imports won’t reach consumers if fuel depots continue to be blocked. France is net gasoline exporter, “but world’s biggest diesel importer” – It imports ~420k b/d of diesel, and exports ~100k b/d gasoline.

Moments ago, Total chimed in as well, saying 612 of its French gas stations have a partial or full fuel shortage, as a result of 2 of 9 fuel depots being blocked by striking workers.

View image on Twitter

Total Press Office ‎@TotalPress

.@Total mobilisé – dispositif exceptionnel – doublement des ravitaillements . Point de situation à 13h30.

7:49 AM – 23 May 2016

For now, it doesn’t appear the situation is “fully under control” in fact quite the opposite. And if the striking workers are indeed serious in their demands, the already unpopular French government may have just two options: walk back its labor reform law, or suffer a crippling economic slowdown, something which GDP “powerhouse” France can hardly afford.

end Again Deutsche bank admits that it now rigged stocks.  It stock slides again (courtesy zero hedge) Deutsche Bank Slides After Mortgage Probe Unveiled; Admission It Rigged Stocks

A month after admitting to rigging precious metals markets, Deutsche Bank has been hit with a double-whammy of more alleged fraudulent behavior today and the stock is sliding. First, Reuters reports that the bank took a charge of 450 million euros for “equity trading fraud,” and then Bloomberg reports that The SEC is looking into Deutsche’s post-crisis mortgage positions.

First, as Reuters reports,

Germany’s Deutsche Bank said it took a charge of around 450 million euros (348 million pounds) last year in relation to share trading fraud, but declined to give any details on Monday.

 

The bank increased its provisions for “external fraud” to 475 million euros in 2015 from 20 million euros in 2014, according to its annual report.

 

“The increase in the event type ‘External Fraud’ is caused by a provision for equity trading fraud,” the bank said in the report, which was published in March.

And then, as Bloomberg reports,

SEC investigating whether Deutsche Bank inflated the value of securities in its mortgage-bond trading business, masked losses around 2013,according to people with knowledge of the matter.

 

Investigators looking at positions overseen by Troy Dixon, who at the time ran the bank’s trading for U.S. government- backed mortgage bonds known as agency pass-throughs.

 

SEC asking whether DB delayed recording losses on those securities over an extended period of time

And the result…

 

What happens next?

END RUSSIAN AND MIDDLE EASTERN AFFAIRS Erdogan now has absolute power as he  appoints a puppet for Premier: (courtesy zero hedge) Erdogan Nears Absolute Power With Appointment Of Puppet Premier, Stripping MPs Of Immunity

When the news hit on May 5 that Turkey’s Prime Minister Ahmet Davutoglu would unexpectedly stand down from his post as a result of sharply escalating fighting behind the scenes over president Tayyip Erdogan’s relentless attempt to rule Turkey with virtually no checks and balances, the market was not happy, and the volatility of the Turkish Lira soared the most in the past decade.

 

Since then the Turkish market has modestly tamed, even if the Erdogan’s push for supreme control has done anything but, and during today’s congress of Turkey’s AKP, Erdogan confirmed an impotent lapdog, Binali Yildirim – a close ally for two decades and a co-founder of the ruling AK Party – as his new prime minister on Sunday, which as Reuters explained was “a big step towards the stronger presidential powers [Erdogan] has long sought.” In plain English, Turkey is unofficially a dictatorship, in which Erdogan is president only in title and in reality a supreme despot as there is no longer anyone who can politically challenge the president.

Concurrently, Erdogan also accepted the resignation of outgoing Prime Minister Ahmet Davutoglu on Sunday, hours after AKP elected Yildirim as his replacement.

In a speech to AKP delegates who earlier elected him party leader at a special congress, Yildirim, transport minister for most of the past decade and a half, left no doubt that he would prioritise the policies closest to Erdogan’s heart. His main aim, he said, was to deliver a new constitution and create an executive presidency, a change Erdogan says will bring stability to the NATO member state of 78 million, but which opponents fear will herald greater authoritarianism.

Yildirim, 60, said constitutional change was a necessity to legitimize the existing situation, tacit acknowledgment that Erdogan has extended the traditionally ceremonial role of the Turkish presidency. “The most important mission we have today is to legalize the de facto situation, to bring to an end this confusion by changing the constitution,” he said. “The new constitution will be on an executive presidential system.”


Erdogan meets with incoming Prime Minister Binali Yildirim.

The constitutional change would give Erdogan unlimited power over virtually every aspect of governance.

As if proof were needed of where power in the party lies, delegates remained standing through a message from Erdogan read out at the start of the congress. Yildirim vowed that, under his leadership, the AKP’s way would be “Erdogan’s way“. Justice Minister Bekir Bozdag said Erdogan was the party’s one leader.

He has made clear he will pursue two of Erdogan’s biggest priorities – the executive presidency and the fight against militants of the outlawed Kurdistan Workers Party (PKK) in the largely Kurdish southeast. “They are asking us when the anti-terror operations will end. I am announcing hereby that operations will end when all our citizens are safe,” Yildirim said in an emotional speech.

“Operations will continue without pause until the bloody-handed terrorist organization PKK ends its armed actions.”

Despite Erdogan’s attempts to silence any journalistic criticism by sending his biggest public detractors to prison, some dares to voice their displeasure with what is happening inside the NATO member and Europe’s close Asian ally:

“If they can succeed, this will be a transition period for the executive presidency,” journalist Abdulkadir Selvi, who is seen as close to AKP, told Reuters.

And now that the Turkish premier figurehead is known, investors’ eyes shift to the future of Deputy Prime Minister Mehmet Simsek, who according to Reuters is seen as one of the remaining anchors of market confidence. Erdogan, who favors consumption-led growth, has repeatedly railed against high interest rates in Turkey, saying they cause inflation, a stance at odds with mainstream economics. Without Simsek, investors fear, it will be less likely that the government will deliver on promises to liberalize the labor market, encourage savings and bring in more private investment.

Installing a puppet PM was not all Erdogan did in this busy week: just to make sure Erdogan can use the law to crack down on any of his political opponents, last Friday Erdogan’s puppet parliament agreed to strip its members of immunity, a move which will be used by Erdogan to prosecute members of the pro-Kurdish HDP, parliament’s third-biggest party, as well as anyone else he choose to take down.

He accuses the HDP of being the political wing of the Kurdish Workers’ Party (PKK) which has waged a three-decade insurgency against the state. The HDP denies such links and says its parliamentary presence could be all but wiped out if prosecutions go ahead.

In other words, if any MP says or does something that the president disagrees with, said member of parliament will promptly find themselves under arrest and behind bars: a strong deterrent never to say or do anything that would displease the ascendant tyrant.

It is this stripping of immunity that Germany’s Chancellor Angela Merkel said she would discuss with Erdogan on Monday when the two meet tomorrow in Istanbul, voicing disquiet at a measure meant to sideline the pro-Kurdish opposition.


Erdogan meets with Merkel in Ankara, Turkey February 8, 2016

“Naturally some developments in Turkey are causing us grave concerns,” Merkel told the Frankfurter Allgemeine Zeitung on Sunday, one day before she meets Erdogan on the sidelines of a U.N.-sponsored humanitarian summit in Istanbul.

However, it’s not as if Merkel has any leverage or strings to pull. Quite the opposite: Merkel is facing accusations at home that she has become too accommodating of Erdogan as she tries to secure a European Union deal with Ankara to stem the flow of refugees from Turkey into Europe, the bulk of whom have gone to Germany.

Worse, the accusations are 100% accurate, because as of this moment the person who dictates the future of Europe is neither in Greece, nor in Great Britain, but is not even located in Europe in the first place (although that may change soon). This guy.

end Then Erdogan’s house of cards just fell: the EU suspends plans to extend visa free travel for Turks: Erdogan Furious After EU Suspends Plans To Extend Visa-Free Travel To Turkey

Two weeks ago a high-ranking deputy for Turkey’s ruling AKP party, Burhan Kuzu (also a former adviser to President Erdogan) issued an explicit threat to Europe which was at that time discussing whether or not to grant Turkey visa-free travel within the continent. Specifically, he tweeted that “The European Parliament will discuss the report that will open Europe visa-free for Turkish citizens. If the wrong decision is taken, we will unleash  the refugees!.” 

What followed were ever louder accusations lobbed German Chancellor Angela Merkel by her own government that the woman dubbed by many as the most powerful person in Europe had engaged in a series of appeasing actions to placate the increasingly more despostic Turkish president, just to keep the millions of refugees currently held behind Turkey’s borders in their place, and avoid a repeat of the social crisis that followed when tens of thousands of mid-east refugees would enter Germany every single day leading to a surge in the anti-immigrant, anti-Muslim and anti-EU AfD party. Indeed, as we among others speculated, it appeared as if Turkey has unlimited leverage over both Merkel and Europe, and could demand virtually anything.

That may have changed today because as Deutsche Welle reports, an EU plan that would extend visa-free travel privileges to Turkey as of July 1 will be delayed over worries Ankara won’t meet the key conditions on time. The German publication adds that “Chancellor Angela Merkel is in no mood to budge” in what is the first actual indication of resistance by the German to the increasingly more whimsical demands by the Turkish president.

As DW reminds us, Turkey has already agreed to take back refugees who have already used it as a transit country to enter Europe, in exchange for the visa-free deal, but the EU believes Ankara will not be able to implement reforms on freedom of the press and the judiciary by June 30.

Turkey’s 75 million citizens would have the right to enter the Schengen zone for up to 90 days at a time with biometric passports from the end of June. However, this deal has now been delayed indefinitely, and will certainly force an increasingly more irrational, and now infuriated, Turkish president to retaliate or else it will be his turn to be perceived as weak.

The EU has a list of 72 requirements that Ankara needs to meet to obtain visa-free travel, with reform of anti-terror legislation another of the five remaining key steps, along with the protection of personal data. “The questions I had in this connection have not been fully cleared up,” Merkel said.

Terrorists would be more likely to attack EU countries as a result of the deal to allow Turkish citizens to travel across the continent without visas, EU leaders said last week. “Foreign terrorists and organized criminals are ‘expected’ to seek Turkish passports to reach continental Europe ‘as soon as’ the visa waiver program comes into force,” a European Commission report said.

That was not the only grievance voiced by Merkel. As we previewed last night when we reported that in his latest attempt to seize absolute power Turkey had stripped PMs of diplomatic immunity in a step that would certainly lead to the incarceration of Erdogan’s political enemics, today Merkel met with Erdogan in Istanbul and said she had “made it very clear” that the move to strip about 25% of Turkish members of parliament (MPs) – many of whom are from the Kurdish minority – of their legal immunity as “a reason for deep concern.”

World leaders and aid groups met at an unprecedented aid summit in Istanbul, headed by UN Secretary General Ban Ki-moon. At the event Erdogan stressed Turkey’s contributions in hosting three million refugees from the Syria and Iraq conflicts.

“The current system falls short… the burden is shouldered only by certain countries, everyone should assume responsibility from now on,” he said. “Needs increase every day but resources do not increase at the same pace. There are tendencies to avoid responsibility among the international community.” He added that Turkey had spent $10 billion on hosting Syrian refugees, compared to $450 million from the rest of the international community.

The implication: send even more money over and above the $3 billion promised previously. And now that Erdogan’s failure to pass visa-free travel will be critized domestically with questions over his ability to govern without his former PM Ahmet Davutoglu, who was instrumental in getting the visa-waiver deal, the question is whether the infuriated Turkish leader will resort to making good on his threat, and once again send out countless refugees along the Balkan route whose end destination is well-known: the wealthy countries of Central Europe.

end EMERGING MARKETS

 

Well that did not take long.  New President Temer has just suffered his first corruption scandal implicating  the party;s planning Minister Juca and an executive with Petrobras. The theory here is that this will lead to many more in the car wash scandal including Temer:

 

(courtesy zero hedge)

Brazilian Risk Assets Slammed After New President Suffers First Corruption Scandal Crisis

Back on May 12, when Brazil’s disgraced president Dilma Rousseff was impeached in a move that according to her was a “coup” and a “farce”, we said that “Brazil’s problems are only just startingbecause “if Brazil is indeed seeking to cleanse its corrupt political class, Temer is hardly the right guy to do it. In fact, if markets believe that the Brazilian political situation will stabilize following the Rousseff “coup” as she calls it, we would be sellers for one simple reason: the man who may become Brazil’s next president is almost as unpopular as the leader facing impeachment now, and stained by scandals of his own.”

To be sure, the Brazil EWZ ETF peaked on May 12 and the price has been downhill ever since.

But the bigger problem is that the selling may have only just started, because what until recently was seen a salvation cabinet for Brazilian risk assets, is quickly turning into a just as substantial liability: as AP framed the “big question” two days ago, can acting Brazilian president Michel Temer “avoid ouster himself.

Some more of our observations:

Whether the Rio Olympics in just over two months are a disaster or not, however, one thing is certain – for months, the business community has been hoping that Temer would take over from the leftist Rousseff. But whether he’ll have the ability or appetite to take on major reforms, such as overhauling a costly pension system, is unclear. “I think that Temer is not going to be able to govern if he assumes the presidency,” said Jandira Feghali.

Today we got the first indication of just how much of an uphill climb the Temer administration will have when Brazil’s Folha de S. Paulo newspaper reported that it has had access to recordings of conversations that took place in March between then-senator Romero Juca, who is currently Brazil’s critical Planning Minister under Temer, and a former executive linked to state-run oil company Petrobras. In the conversations, the minister allegedly says a change in federal government leadership would lead to an agreement to prevent the wide corruption probe dubbed Carwash from proceeding.


Romero Juca

The immediate suggestion is that Juca himself, and likely Temer too, were implicated in Brazil’s vast “carwash” scandal, and as a result the Rousseff impeachment was nothing but a smokescreen to deflect attention from their own involvement.

According to Bloomberg, Juca’s lawyer, Antonio Carlos de Almeida Castro, didn’t deny the conversations between the minister and the former company executive, but added he saw no criminal implications in the exchange. “At no time was Juca speaking against Carwash or seeking to interfere with the operation,” Almeida Castro said in an interview.

In an interview with a local radio station on Monday, Juca said he didn’t “feel embarrassed” by the recordings and that he was still fit for his job. “I’m going to keep working to approve the fiscal deficit target.”

Juca and his lawyer may not be concerned but others are. As Bloomberg puts it, “the allegations against Juca raised questions about whether Temer will be able to avoid the fallout from investigations into the massive kickback scheme at Petrobras that has rocked the political establishment in the past year, resulting in the detainment of lawmakers and businessmen.”

Or precsely what we warned about less than 2 weeks ago. And if it took just 11 days for the first potential scandal to emerge, what will happen in aother 2 weeks, or a month? Temer will be president until Rousseff is ultimately booted from office six months from the date of her impeachment, a period that includes the critical Rio olympics: if his government is already mired in scandal, he will find himself just as impotent as his predecessor.

Although not politically fatal, the content of the recording entangles Romero Juca in Carwash even further,” analysts at MCM Consultores Associados said in a note to clients. “The pressure for Juca, an important name in political articulation and on the economic side, to leave the ministry will increase. The chances he leaves are higher, even because there could be more recordings.

MCM’s Ricard Ribeiro added that “while fiscal target is likely to still be approved this week, eventual new accusations targeting Temer government members could be a risk for approval of reforms that demand largest vote in Congress, such as the pension regime overhaul.”

Italo Abucater, the head of currency trading at ICAP Brasil, also chimed in saying that “I think this is too serious. This is the first crisis of many that may come through.”

But as Arko’s Lucas de Aragao perhaps summarized it best when he told Bloomberg, “Temer is having his first big political crisis with Juca.”

It won’t be the last.

The revelation of Juca’s recorded conversations could not come at a worse time for the new president: it follows a decision last week by the Supreme Court to authorize the release of Juca’s bank records and comes as Temer this week seeks the approval in Congress of measures aimed at shoring up government’s accounts.

The market reaction is hardly enthusiastic: as shown below, while the EWZ has tumbled to the lowest since early April, yields on local swap rates jumped, with the contract due Jan. 2019 rising 17 basis points to 12.63%. The move reflected the threat to both the government’s fiscal adjustment and governability in general, according to Luiz Eduardo Portella, partner at Modal Asset Management. The Brazilian real lost 1.3% while the cost to insure dollar-denominated government debt for five years rose 10 basis points to its highest level in nearly a month.

In retrospect, it would appear that rumors of Brazil’s political and economic resurrection have been greatly exaggerated.

end OIL ISSUES

The algo traders lift WTI back above 48 dollars:

(courtesy zero hedge)

Panic-Buyers Lift WTI Crude Back Over $48

Because… fundamentals…

Nothing says “Buy Oil” like the weakest US manufacturing PMI since 2009, dismal Japanese trade data, and the European economy collapsing.

Chatter is that the catalyst for the move is a Genscape report showing an inventory draw at Cushing

 

WTI had been sliding amid growing optimism for returning Canada production after weather relief over weekend helped firefighters battling wildfires that shut-in more than 1m b/d of production.

Brent extends drop into 4th day, falls below $48, as French refinery strikes add to bearish sentiment.

“Canada is coming back and refinery strikes in France are bearish for crude oil, although bullish for products,” says Petromatrix oil analyst Olivier Jakob. “The combination of these two is putting some pressure on oil”

As supply disruptions fade, prices drifted lower overnight amid tumbling growth guesses from dismal PMIs… and then US equities opened and the buying panic ensued.

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

Euro/USA   1.1206 DOWN .0016 ( STILL REACTING TO USA FAILED POLICY

USA/JAPAN YEN 109.45  DOWN.442 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4569 DOWN.0028 (LESS OF A THREAT OF BREXIT)

USA/CAN 1.3156 UP .0050

Early THIS MONDAY morning in Europe, the Euro FELL by 16 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED UP BY 18.16 PTS OR 0.64% / Hang Sang CLOSED DOWN 43.17 OR  0.22%   / AUSTRALIA IS LOWER BY 0.60%(RESOURCE STOCKS DOING POORLY / ALL EUROPEAN BOURSES ARE ALL IN THE RED   as they start their morning/

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this MONDAY morning: closed DOWN 81.75 OR 0.49% 

Trading from Europe and Asia:
1. Europe stocks ALL THE RED AS  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 43.17 PTS OR 0.22% . ,Shanghai CLOSED  UP 18.16 OR 0.64%/ Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED IN THE RED /India’s Sensex IN THE RED

Gold very early morning trading: $1248.90

silver:$16.34

Early MONDAY morning USA 10 year bond yield: 1.821% !!! DOWN 3 in basis points from FRIDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.609 DOWN 4 in basis points from FRIDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early MONDAY morning: 95.36 UP 1 CENT from FRIDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers MONDAY MORNING

END

 

And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield:  3.08% DOWN 1 in basis points from FRIDAY

JAPANESE BOND YIELD: -.094% DOWN 2 in   basis points from FRIDAY

SPANISH 10 YR BOND YIELD:1.57%  DOWN 2 IN basis points from FRIDAY

ITALIAN 10 YR BOND YIELD: 1.48  UP 1 IN basis points from FRIDAY

the Italian 10 yr bond yield is trading 9 points lower than Spain.

GERMAN 10 YR BOND YIELD: .176% UP 1  IN BASIS POINTS ON THE DAY

END

IMPORTANT CURRENCY CLOSES FOR MONDAY

Closing currency crosses for MONDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

 

Euro/USA 1.1227 up .0005 (Euro =UP 5 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.17 DOWN 0.725 (Yen UP 725 basis points )

Great Britain/USA 1.4487 DOWN.0011 Pound DOWN 11 basis points/

USA/Canada 1.3128 UP 0.0021 (Canadian dollar DOWN 21 basis points with OIL FALLING a BIT(WTI AT $48.04).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 5 basis points to trade at 1.1227

The Yen ROSE to 109.17 for a GAIN of 73 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was DOWN 11 basis points, trading at 1.4487

The Canadian dollar FELL by 21 basis points to 1.3128, WITH WTI OIL AT:  $48.04

The USA/Yuan closed at 6.5533

the 10 yr Japanese bond yield closed at -.094% UP 2 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 2  IN basis points from FRIDAY at 1.831% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.618 DOWN 3 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 95.18 PAR IN CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY

London:  CLOSED DOWN 19.89 OR 0.32%
German Dax :CLOSED DOWN 73.73 OR 0.74%
Paris Cac  CLOSED DOWN 28,80  OR 0.66%
Spain IBEX CLOSED DOWN 57.20 OR 0.65%
Italian MIB: CLOSED DOWN 487.27 OR 2.74% (BANKING CRISIS)

The Dow was DOWN 8.01  points or 0.05%

NASDAQ UP 3.78 points or 0.08%
WTI Oil price; 48.02 at 4:30 pm;

Brent Oil: 48.16

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.84 (ROUBLE DOWN 0/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD ROSE TO .176  FOR THE 10 YR BOND

.

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:48.10

BRENT: 48.36

USA 10 YR BOND YIELD: 1.833%

USA DOLLAR INDEX: 95.25 DOWN 10 cents

END

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

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Equities Coil Despite USDJPY Turmoil As Bullish Stock Speculators Hit 16-Month Highs

Today’s ultra-low volume, ultra-low-range equity market can be summed up thusly…

 

Before we get started, just two quick charts to shut the mouths of all those proclaiming this is a hated rally and that sentiment is shitty… it’s not!

Net speculative positioning for S&P 500 futures is at its highest since Feb 2015 as the major short position of the last few months has been unwound off the February lows…

 

And speculative shorts in VIX (bullish stocks) are at 3 year highs…

 

Which is ironic as VXX (VIX ETF) shares outstanding continue to explode…

 

US equity markets traded in a very unusually narrow range hugging VWAP all day…

 

With volume abysmal…

 

Trannies underperformed on the day… Notice once again that buying presure occurred as EU closed and selling resumed when NYMEX closed…

 

And Trannies are sending another unhealthy signal for the Dow Industrials…

 

Stocks held up despite The G7-hangover in USDJPY…

 

But the Long Bond remains best since The FOMC Minutes…

 

Notably equity risk has been rising the most off the April VIX lows with other asset classes seeing vol drop during the same time…

 

Treasury yields were mixed today but continued the curve flattening with 2s and 5s higher in yield and the rest of the curve lower…

 

The USD Index fell for the first time in 8 days, led by JPY strength and reversing earlie rgains once Europe closed…

 

JPY strengthening again after hopeful decline into this weekend’s G7…

 

Commodities were relatively quiet with gold and copper flat (as crude pumped and dumped)…

 

Despite some panic buying at the US equity open, WTI crude fall for the 4th day in a row asCanadian producers prepare to resume more production at oil-sands sites after wildfires in Alberta caused loss of output. Crude traders watching “for news of a recovery in Canadian oil sands production as favorable weekend weather may have allowed further progress in containing wildfires,” Tim Evans, energy analyst at Citi Futures Perspective in New York, says in note. “Reports of the return of Libyan exports” also weighing on mkt, according to Phil Flynn, sr mkt analyst at Price Futures Group in Chicago

 

END

 

USA manufacturing collapses to 2009 level and these bozos are going to raise rates?

(courtesy PMI/zero hedge)

 

US Manufacturing PMI Collapses To 2009 Lows (As Fed Readies Rate Hike?)

So much for the huge China credit impulse spreading around the world. After this morning’s extremely disappointing European data, US Manufacturing’s flash PMI for May printed a disappointing 50.5 – its lowest since 2009.Under the surface the state of American manufacturing is even more disastrous as Markit notes, output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports.

It’s rate-hiking time…A general lack of pressure on operating capacity was signalled by the latest survey data, with outstanding work at U.S. manufacturers falling for the fourth successive month in May.

U.S. manufacturers signalled the first reduction in output since September 2009 in May, although the rate of decline was only marginal. A number of monitored firms mentioned that uncertainty around the general economic outlook had caused clients to delay spending decisions, which in turn prompted firms to trim their production schedules.

 

As Markit’s Chris Williamson warns, the weak manufacturing PMI data cast doubt on the ability of the US economy to rebound from its disappointing start to the year in the second quarter.

“The survey is signalling that manufacturing will act as a drag on economic growth in the second quarter, leaving the economy once again dependent on the service sector, and consumers in particular, to sustain growth.

“Output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports.

“Backlogs of work are also dropping at the fastest rate since the recession, meaning firms will be poised to cut capacity unless inflows of new work start to pick up again.

“The survey’s employment gauge is in fact already running at a level consistent with a further reduction in the official measure of factory payroll numbers.

“Any uplift in prices was largely due to higher commodity prices, notably oil. Core price pressures look to have been once again subdued by weak demand.”

Seems like a great time to be hiking rates?

 end The clowns have no idea what they are doing!! (courtesy zero hedge) Fed’s Williams Says “I Don’t Know What We’ll Do In June”

Some were concerned earlier today, when SF Fed’s John Williams said that he sees about 2-3 rate hikes in 2016, followed by another 3-4 in 2017, suggesting a grand total between 5 and 7 more rate hikes over the next 18 months. However, those fears were promptly dissiptated when as Williams himself admitted during the reporter Q&A, he – like virtually everyone else at the Fed – has no idea what he is talking about. To wit:

  • FED’S WILLIAMS SAYS `I DON’T KNOW WHAT WE’LL DO IN JUNE’

Clearly unwavering from having zero credibility, her also added the following:

  • WILLIAMS SAYS UPCOMING FOMC MEETINGS ARE `LIVE’ FOR RATE MOVE
  • WILLIAMS SAYS FED FACING LOT OF UNCERTAINTIES SUCH AS BREXIT
  • WILLIAMS SAYS BACK-TO-BACK RATE HIKES ARE POSSIBLE BUT UNLIKELY
  • WILLIAMS: BACK-TO-BACK HIKES INCONSISTENT WITH GRADUAL FED PLAN

Some more Fed “observations” on the economy:

  • WILLIAMS: WANT TO SEE DATA CONSISTENT W/BETTER 2Q GDP TRACKING
    WILLIAMS: Q1 GDP PRETTY ANEMIC, Q2 TRACKERS SHOWING ABOVE 2%
    WILLIAMS: EXPECTS TO MOVE VERY GRADUALLY THIS YEAR, NEXT
  •  WILLIAMS: STILL SEE UNCERTAINTY ON BREXIT, CLD IMPACT JUNE

And the punchline:

  • WILLIAMS: ‘GOOD THING’ MKTS RATE HIKE PRICING CLOSER TO FOMC’S

What he meant is “good thing” the Fed’s “dot plot” and rate hike forecast is closer to the market’s.

 

END

 

The top 10 big firms that have cut the most jobs: Great  reason to raise rates.

In order of job cutting:

(courtesy zero hedge)

 

 

These Are The Ten Companies That Have Cut The Most Jobs In 2016

After the US Manufacturing PMI plunged to 7 year lows today, we thought it relevant to remind everyone just how robust the economy is by showing the 10 companies that have cut jobs so far in 2016.

The Fiscal Times has compiled a list of 20 companies – here are the top ten “fiction peddlers” ignoring President Obama’s rhetoric…

1) National Oilwell Varco: 17,850

2) Wal-Mart: 16,000

3) Schlumberger: 12,500

4) Intel: 12,000

5) Halliburton: 10,200

6) Dell: 10,000

7) Chevron: 7,500

8) Buffets: 6,000

9) DuPont: 6,000

10) Weatherford International: 6,000

Not surprisingly the list is dominated by the tech and energy sectors, but those will bounce back in the second half of the year as growth pics up… right?

end

 

The following is continuation of a story we brought to your attention two weeks ago.  It now seems that the Central States Pension Fund which applied to cut current benefits to retirees by 60% is not enough.  Treasury states that they need to new plan to stave off bankruptcy, which is inevitable in 10 yr when they run out of money.

(courtesy Mish Shedlock)

407,000 Workers Stunned As Pension Fund Proposes 60% Cuts, Treasury Says “Not Enough”

Submitted by Michael Shedlock via MishTalk.com,

407,000 private sector workers are about to lose most of their pensions.

I first wrote about this on April 21, in One of Nation’s Largest Pension Funds (Truckers) Will Reduce Benefits or Go Broke by 2025.

The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union truck drivers across various states applied for reductions under that law.

Currently the plan pays out $3.46 in pension benefits for every $1 it receives from employers. That’s a drain of $2 billion annually.

The plan filed for 60% cuts in pensions. The Treasury Department has the final say. The verdict came in today: “cuts not deep enough”.

Please consider Pensions May be Cut to ‘Virtually Nothing’ for 407,000 People.

The Central States Pension Fund has no new plan to avoid insolvency, fund director Thomas Nyhan said this week. Without government funding, the fund will run out of money in 10 years, he said.

 

At that time, pension benefits for about 407,000 people could be reduced to “virtually nothing,” he told workers and retirees in a letter sent Friday.

 

In a last-ditch effort, the Central States Pension Plan sought government approval to partially reduce the pensions of 115,000 retirees and the future benefits for 155,000 current workers. The proposed cuts were steep, as much as 60% for some, but it wasn’t enough. Earlier this month, the Treasury Department rejected the plan because it found that it would not actually head off insolvency.

 

The fund could submit a new plan, but decided this week that there’s no other way to successfully save the fund and comply with the law. The cuts needed would be too severe.

 

Normally, when a multi-employer fund like Central States runs out of money, a government insurance fund called the Pension Benefit Guaranty Corporation (PBGC) kicks in so that retirees still receive some kind of benefit.

 

But that’s not a great solution in this case. For one thing, the amount is smaller than what pensioners would have received under the Central States reduction plan, and is based on the number of years a retiree worked. A retiree would receive a maximum $35.75 a month for each year worked, according to the fund’s website. (That amounts to $1,072.50 a month for retiree who worked 30 years.)

 

But there’s yet another problem. The PBGC itself is underfunded and isn’t expected to be able to cover all the retirees in the Central States Pension Fund.

Dear Beneficiary

Click here for the entire “Dear Beneficiary” letter.

This is a sad saga for which there is no happy ending.

 

Public Union Whiners

An Illinois state worker was whining earlier today about my post Chicago Pension Liabilities Jump 168%, Understated by $11.5 Billion.

When private pension plans go broke, they go broke. Public pension expect a bailout.

I replied to the person whining … “Corrupt politicians got in bed with corrupt union leaders making promises both knew could not be met.”

Public workers have no idea how well off they are vs. the private sector, yet they demand, more, and more and more, from a state that is broke.

Taxpayers owe the Chicago pension fund absolutely nothing. Bankruptcy is the solution.

END The IRS is now cracking down on tax evaders:  first on the list Morris Zukerman, former head of Morgan Stanley energy group who evaded 45 million in taxes plus fraud in the creation of phony invoices hiding the taxes owed (courtesy zero hedge)

 

Former Head Of Morgan Stanley Energy Group Indicted for Evading $45 Million In Taxes

In the aftermath of the Panama Papers revelations, US authorities including the IRS appear to have begun a crackdown on tax evaders (if staying away from Washington D.C. for the time being for obvious reason), and according to Bloomberg they just landed a juicy target in the face of Morris Zukerman, a former head of Morgan Stanley’s energy group who now runs a private investment firm, who was indicted in Manhattan on charges of evading more than $45 million of federal and New York state taxes.

Bloomberg reports that  Zukerman failed to report profits from the sale of an equity stake, lied to his accountants, created phony and backdated documents and shipped paintings to addresses in Delaware and New Jersey to avoid New York state sales tax on artwork that hangs in his Park Avenue duplex, according to the indictment. He also took improper tax deductions, according to the indictment.

Zukerman, 71, runs M.E. Zukerman & Co Inc., which invests in “stable assets used to produce, gather, process, transport, store, refine or distribute crude oil, natural gas and related products,” according to the company’s website.

He is a graduate of Harvard College and Harvard Business School and studied economics at Cambridge University, according to a biography on his firm’s the site. He worked at Morgan Stanley from 1972 to 1988 and helped manage the firm’s global merchant banking operations.

end Bix Weir, is a very colourful guy with some strange theories as to how this gold =/banking fraud will end. However today’s commentary with Greg Hunter is pretty good and very close to what we feel is happening to Deutsche bank right now We conclude tonight with this wrap up courtesy of Greg Hunter and Bix Weir (courtesy Greg Hunter/Bix Weir/USAWatchdog) All Electronic Assets Wiped Out in Fall Crash By Greg Hunter On May 22, 2016 In Political Analysis 174 Comments

By Greg Hunter’s USAWatchdog.com  (Early Sunday Release)

Financial analyst Bix Weir has laid out a timeline for the next financial collapse that he says is underway. Bix explains, “It’s happening now, and it has been happening since the beginning of the year.  Some of the big things on the time line and one of the bigger things to watch is the Deutsche Bank (DB) implosion.  That’s going to be gigantic because Deutsche Bank is the largest derivative holder in the world.  Their stock is plummeting, and they are begging for tier 1 capital.  It’s all happening right now.  The question is what is the day that Deutsche Bank throws up its arms and says we’re insolvent?  We are many times insolvent, and that would just destroy the European markets.  It will also destroy the U.S. markets because our biggest banks are invested in the sovereign debt of European countries.  That’s how it is going to start, and I believe the end of the end will be the Deutsche Bank implosion. . . .This is why Deutsche Bank is paying huge interest rates now because they need to raise their tier 1 capital.  They have to raise tier 1 capital before they report for the second quarter.  They are in massive trouble.  Their tier 1 capital is being destroyed by all these losses and lawsuits.  Didn’t they lose $7 billion euros last year? . . . They need massive amounts of capital . . . and they are willing to pay 5% interest just to get past the second quarter.  That’s the amazing thing. . . . Deutsche Bank is going to be gone by the end of the third quarter.”

Weir wrote a recent article that said a “Trump/Sanders ticket would galvanize the nation.” A Trump/Sanders ticket this fall for the White House?  Sound crazy?  Weir predicts that things will get so bad “the USA must Unite or Die.” Weir contends, “If Trump wins it alone, you are going to see a revolution overnight.  You are going to see mass rioting in the streets because there are so many people disenfranchised and angry.  Where is the anger going to be placed when people lose their 401-Ks, checking accounts and savings accounts?  The banks and the rich.  You cannot have Trump leading us forward after that moment.  You need both.  You need the left and you need the right.  I think Sanders and Trump have some kind of back deal going on with the people who are leading their campaigns.  They are going to come together when this chaos happens. . . . Any other scenario and you can kiss the United States goodbye in a blink of an eye.  The key is, with these guys (Trump and Sanders), they both love their country.  They approach it in different ways, but they both love their country.”

Weir expects his timeline to hit a financial crescendo in the September/October time frame. Weir says, “The Fed and the Treasury are controlling all markets with computer programs.  I have proved this a zillion times.  They are doing it with the programs that Alan Greenspan wrote in the 1960’s and 1970’s.  It has always been the plan to destroy the dollar and go back to a gold standard.  Everything is on lockdown.  You are not going to see wild swings and crashes until it’s time to pull the plug.  Right now, they are getting everything in line. . . . There are all kinds of things being put into place before they click that mouse and crash the system. . . . It’s so easy to do.  Computers are unbelievably powerful.  They are more powerful than we know. . . . Silicon Valley doesn’t have the most powerful computers.  It’s the Fed, the Treasury and the military that have the most powerful computers. . . .They can end it in a blink of an eye.”

Weir ends by saying, “Right now, the idea is to control it and keep the system going until we get into mid to late summer. Then, the plug is going to be pulled.  Then, the bad guys will be exposed, and then we have a bigger problem.  They are going to force Trump and Sanders to come together for the good of the country because we have to be united going into this. . . .The crash will be electronic.  All electronic assets will be frozen and be wiped away.  Exchanges will not be open. . . . Nothing will be open and nothing will reopen.  We will get rid of the nanny state. . . . There is no way we are ever going to pay off this debt.  If there is a crash in the markets, and all the debts and electronic assets were wiped clean, we would win.  The U.S. is the largest debtor nation in the world.  That was always the plan.”

Join Greg Hunter as he goes One-on-One with Bix Weir founder of RoadtoRoota.com.

(There is much more in the video interview.)

After the Interview:

END

see you tomorrow night

h.

May 20 b/Huge increase in inventory of 8.92 tonnes at the GLD/ A good sized deposit of 951,000 oz in silver enters the SLV/Comex gold standing for delivery in May increases to 6.68 tonnes/It has been increasing all month!/The Central Bank of Japan...

Fri, 05/20/2016 - 18:53

Good evening Ladies and Gentlemen:

Gold:  $1,252.40 DOWN $1.80    (comex closing time)

Silver 16.52  UP 4 cents

 

In the access market 5:15 pm

Gold $1252.30

silver:  16.52

Today after a great start for gold and silver, the bankers thought in necessary to raid again. The gold/silver equity shares paid no attention to these antics and rose again today.

There is something really bothering them.

i)There was no question that the high open interest in gold for the entire complex, plus the high OI for June was one factor

ii) the continued high OI for silver and its refusal to melt with constant whacking

iii) the May gold contract is a non active contract.  Yet we started the month with 5.67 tonnes of gold standing and it has increased every single day and today sits at 6.68 tonnes of gold standing:

 

The amount standing for gold at the comex in May is simply outstanding at 6.6811 tonnes. The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

Let us have a look at the data for today

.

At the gold comex today we had a GOOD delivery day, registering 69 notices for 6900 ounces for gold,and for silver we had 72 notices for 360,000 oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 240.39 tonnes for a loss of 63 tonnes over that period

.

In silver, the open interest FELL by 2,302 contracts DOWN to 202,627 as the price was silver was DOWN  by 64 cents with respect to yesterday’s trading. AGAIN TODAY, NOT NEARLY THE LIQUIDATION THAT THEY HAVE BEN LOOKING FOR. In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.013 BILLION TO BE EXACT or 144% of annual global silver production (ex Russia &ex China)

In silver we had 72 noticeS served upon for 360,000 oz.

In gold, the total comex gold OI fell by a CONSIDERABLE 17,504 contracts down to 573,196 as the price of gold was DOWN $19.50 with yesterday’s trading(at comex closing). They certainly got the liquidation in gold but not silver.  However our banker boys have another problem in gold which I will highlight below.

 

 

We had  a monster deposit  in gold inventory at the GLD to the tune of 8.92 tonnes. The inventory rests at 869.26 tonnes. I have no doubt whatsoever that this was a paper addition as they could not possibly find 10 tonnes in one day.We had a good sized deposit  in silver inventory at the SLV to the tune of 951,000 oz . Inventory rests at 336.024 million oz.

.

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

1. Today, we had the open interest in silver fall by 2,302 contracts down to 202,627 as the price of silver was DOWN by 64 cents with yesterday’s trading. The gold open interest FELL by 17,504 contracts as  gold was down $19.50 yesterday. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Mark O’byrne)

2c) COT report

Harvey

3. ASIAN AFFAIRS

i)Late  THURSDAY night/ FRIDAY morning: Shanghai closed UP  BY 18.56 PTS OR 0.66%  /  Hang Sang closed UP 157.87 OR 0.80%. The Nikkei closed UP 89.69 POINTS OR 0.54% . Australia’s all ordinaires  CLOSED UP 0.53% Chinese yuan (ONSHORE) closed DOWN at 6.5471 .  Oil FELL to 48.24 dollars per barrel for WTI and 48.81 for Brent. Stocks in Europe  ALL IN THE GREEN . Offshore yuan trades  6.5649 yuan to the dollar vs 6.5471 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.

 

REPORT ON JAPAN  SOUTH KOREA AND CHINA

 

a) REPORT ON JAPAN

wow!! late this afternoon, the central bank of Japan threw a huge trial balloon for the markets over here.  This was released after midnight i.e. early Saturday morning for them.

Basically they are starting to prepare for losses on its huge debt holdings once QE ends.

They will have two problems:

i)as rates rise, bonds sink and thus huge losses

ii) a soaring yen, being unwound by everybody will kill the country’s exports

(courtesy zero hedge)

  b) REPORT ON CHINA

 

China sends a strong message to the USA to cease immediately spy plane missions near its borders.  If the USA does not respond, then China would devalue the yuan greatly!!

( zero hedge)

 

 

   4.EUROPEAN AFFAIRS

We now have an investigation of the Greek banks being investigated for funding politicians in Greece

 

( zero hedge)

 

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

 

Protesters have stormed Baghdad’s Green zone and now have entered the Prime Minister’s office..looks precarious to me

(courtesy zerohedge)

6.GLOBAL ISSUES

none

7. OIL ISSUES

 

i)The huge disruptions that we have had with respect to oil has now faded away as Canada, Libya and Nigera resume their production

 

( zero hedge)

 

ii)Just take a look at the idle tankers off the coast of Singapore:

( zero hedge)

iii)Oil falls a bit after the rig count declines have finally stalled:

( zero hedge)

 

8.PHYSICAL MARKETS

i)An extremely important read.

Commodity prices are rising, not because of increased activity but because the dollar is losing purchasing power.  This will in turn cause bond yields to rise.

And where is trouble going to manifest itself?  Alasdair explains that the Eurozone will be in deep trouble and no doubt Italy will be in the forefront.

Italy has a Debt to GDP of 130%  (and probably higher) .  It also has non performing loans of 360 billion euros which represents 40% of all private loans. The author correctly believes that Italian sovereign bonds yields must rise from the ridiculous 1.5% level to more realistic 7%.  That is when everything blows up

 

(Alasdair Macleod)

 

USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD AND SILVER

i) a  Insolvent Illinois has it’s state workers demanding wage increases of up to 29%. These guys also have gravy train health benefits that would make the envy of anybody in the USA

( Mish Shedlock)

 

ib)Chicago’s pension liabilities jump by 168% and understated by a huge 11.5 billion.

It sure looks like Chicago is the next Detroit: ( Mish Shedlock)

 

ii)Consumer loan delinquencies have been hanging in there but it is business loan soaring that is causing much grief for the Fed:

( Wolf Richter/WolfStreet) iii)Existing homes sales tumble in the south and the west regions of the USA.  However what saved the day is condo sales (zero hedge) Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 573,196 for a CONSIDERABLE LOSS of 17,504 contracts AS  THE PRICE OF GOLD WAS DOWN $19.50 with respect to YESTERDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED. ACTUALLY WE HAVE WITNESSING A GRADUAL RISE IN AMOUNT STANDING THROUGH THE MONTH.  THE MONTH OF May saw its OI RISE 53 contracts UP to 164. We had 0 notices filed YESTERDAY so we GAINED 53 gold contract or an additional 5300 oz will stand for delivery. The next big active gold contract is June and here the OI FELL by 38,399 contracts DOWN to 266,284 as those paper players that wished to stay in the game rolled to August AND THE REST EITHER STAYED PUT FOR NOW OR LEFT PERMANENTLY. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at297,222. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was EXCELLENT at 336,279 contracts. The comex is not in backwardation. We are LESS THAN 2 weeks away from first day notice for the huge June contract.(8 trading sessions)

Today we had 69 notices filed for 6900 oz in gold.

 

And now for the wild silver comex results. Silver OI FELL by A SMALL 2,302 contracts from204,929 DOWN to 202,627 as the price of silver was DOWN BY 64 cents with YESTERDAY’S TRADING. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 55 contracts DOWN to 627. We had 3 notices filed yesterday so we LOST 52 contract or an additional 260,000 oz of silver will NOT stand in this non-active delivery month of May. The next non active month of June saw its OI FALL by 189 contracts DOWN to 660 OI. The next big delivery month is July and here the OI FELL by 2654 contracts down to 135,136. The volume on the comex today (just comex) came in at 36,522 which is good. The confirmed volume YESTERDAY (comex + globex) was huge at 81,426. Silver is  in backwardation up to June. London is in backwardation for several months.   We had 72 notices filed for 360,000 oz.  

MAY contract month:

INITIAL standings for MAY

May 20. Gold Ounces Withdrawals from Dealers Inventory in oz   nil Withdrawals from Customer Inventory in oz  nil  192.900 OZ

MANFRA,

6  KILOBARS Deposits to the Dealer Inventory in oz 28,356.300 oz

882 kilobars

Brinks Deposits to the Customer Inventory, in oz    3793.700 oz

118 kilobars

Brinks No of oz served (contracts) today 69 contracts
(6900 oz) No of oz to be served (notices) 99 CONTRACTS

9900 OZ Total monthly oz gold served (contracts) so far this month 2049 contracts (204,900 oz) Total accumulative withdrawals  of gold from the Dealers inventory this month   nil Total accumulative withdrawal of gold from the Customer inventory this month  282,465.5 OZ

Today we had 1 dealer deposits

i) Into Brinks:  28,356.300 oz  (882 kilobars)

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 1 customer deposit:

i) Into brinks:  3793.700 oz or 118 kilobars

Total customer deposits;3793.700 OZ

Thus Brinks through dealer and customer brought in 31,150.000 oz or 1,000 kilobars

Ladies and Gentlemen:  the comex is one big fraud.

Today we had 1 customer withdrawals:

i) Out of Manfra:  192.900 oz  6 KILOBARS

total customer withdrawals: 192.900 OZ  (6 kilobars)

Today we had 0 adjustment:

Today, 0 notices was 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 69 contracts of which 7 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account.  To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (2049) x 100 oz  or 204,900 oz , to which we  add the difference between the open interest for the front month of MAY (164 CONTRACTS) minus the number of notices served upon today (69) x 100 oz   x 100 oz per contract equals 214,800 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE    Thus the initial standings for gold for the MAY. contract month: No of notices served so far (2049) x 100 oz  or ounces + {OI for the front month (164) minus the number of  notices served upon today (69) x 100 oz which equals 214,800 oz standing in this non  active delivery month of MAY(6.6811 tonnes). WE  gained 53 contracts or an additional 5300 oz will stand for delivery in this non non active month of May.  It is this continual increase in gold ounces standing that is driving our bankers crazy and the reason today for another raid on gold/silver. Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you.    We thus have 6.6811 tonnes of gold standing for MAY and 19.595 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing. We now have partial evidence of gold settling for last months deliveries We now have 6.6811 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes  = 17.029 tonnes still standing against 19.595 tonnes available.   Total dealer inventor 658,361.132 tonnes or 20.477 tonnes Total gold inventory (dealer and customer) =7,760,598.488 or 241.387 tonnes    Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 241.39 tonnes for a loss of 62 tonnes over that period.    JPMorgan has only 22.79 tonnes of gold total (both dealer and customer) JPMorgan now has only .900 tonnes left in its dealer account. May is not a very good delivery month and yet 6.6811 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.    end And now for silver  

MAY INITIAL standings

 May 20.2016

Silver Ounces Withdrawals from Dealers Inventory nl oz Withdrawals from Customer Inventory  172,888.530 oz

Delaware,HSBC

Scotia Deposits to the Dealer Inventory 363,692.650 oz

Brinks Deposits to the Customer Inventory  837,485.783 oz

Brinks, CNT No of oz served today (contracts) 72 CONTRACTS 

360,000 OZ No of oz to be served (notices) 600 contracts

3,000,000 oz Total monthly oz silver served (contracts) 2128 contracts (10,640,000 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  7,867,598.6 oz

today we had 1 deposit into the dealer account

i) Into Brinks: 363,692.650 oz

total dealer deposit:363,692.650 oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

 

we had 2 customer deposits:

i) Into Brinks: 600,732.310 oz

ii) Into CNT: 236,753.473

Total customer deposits: 837,485.783 oz.

We had 3 customer withdrawals

i) out of Delaware: 4931.100 oz

ii) Out of HSBC: 107,615.740

iii) Out of Scotia; 60,340.690 oz

:

total customer withdrawals:  172,888.530  oz

   

 

 we had 0 adjustment

The total number of notices filed today for the MAY contract month is represented by 72 contracts for 360,000 oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (2128) x 5,000 oz  = 10,640000 oz to which we add the difference between the open interest for the front month of MAY (672) and the number of notices served upon today (72) x 5000 oz equals the number of ounces standing    Thus the initial standings for silver for the MAY contract month:  2128 (notices served so far)x 5000 oz +(672{ OI for front month of MAY ) -number of notices served upon today (72)x 5000 oz  equals 13,640,000 oz of silver standing for the MAY contract month. WE LOST 52  SILVER CONTRACTS TODAY OR AN ADDITIONAL 260,000 OZ WILL NOT STAND FOR DELIVERY IN THIS ACTIVE MONTH OF MAY.   Total dealer silver:  30.034 million Total number of dealer and customer silver:   154/565 million oz The open interest on silver is NOW AT CLOSE an all time high with the record of 207,394 being set May 18.2016. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver. end And now the Gold inventory at the GLD May 20/what!!!A MONSTER DEPOSIT OF :8.92 TONNES OF GOLD INTO THE GLD INVENTORY/AND WITH GOLD DOWN $2.80??/INVENTORY RESTS AT 869.26 May 19/ANOTHER HUGE DEPOSIT OF 4.46 TONNES OF GOLD INTO THE GLD/iNVENTORY RESTS AT 860.34 TONNES May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes. May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition.. May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN??? May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes April 28/we gained 1.49 tonnes of gold at the GLD/Inventory rests at 804.14 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 20.:  inventory rests tonight at 869.26 tonnes

end

Now the SLV Inventory May 20/WE HAD A GOOD SIZED DEPOSIT OF 951,000 OZ INTO THE SLV/INVENTORY RESTS AT 336.024 MILLION OZ May 19/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz May 12/no change in silver inventory/rests tonight at 335.073 million oz/  May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/ May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz. May 9. no change in silver inventory/rests at 336.119 million oz. May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV INVENTORY RESTS AT 336.119 MILLION OZ MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580 April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz . May 20.2016: Inventory 336.024 million oz end COT report At 3:30 pm we receive the COT report.  Let us see what damage the bankers did this week:

First Gold COT:

Gold COT Report – Futures Large Speculators Commercial Total Long Short Spreading Long Short Long Short 340,748 74,460 79,137 122,477 412,720 542,362 566,317 Change from Prior Reporting Period 3,497 2,107 11,532 -734 4,513 14,295 18,152 Traders 194 102 102 49 62 296 221   Small Speculators   Long Short Open Interest   52,715 28,760 595,077   1,005 -2,852 15,300   non reportable positions Change from the previous reporting period COT Gold Report – Positions as of Tuesday, May 17, 2016

Our large specs:

Those large specs that have been long in gold added 3497 contracts to their long side’ Those large specs that have been short in gold added 2107 contracts to their short side. Our commercials: Those commercials that have been long in gold pitched 734 contracts from their long side Those commercials that have been short from the beginning of time added another 4513 contracts to their short side.

Our small specs

Those small specs that have been long in gold added 1005 contracts to their long side Those small specs that have been short in gold covered 2852 contracts from their short side Conclusions: Commercials go net short by : 4679 and thus bearish. However i strongly believe that the data is compromised. And now for our silver COT: Silver COT Report: Futures Large Speculators Commercial Long Short Spreading Long Short 105,988 28,786 18,897 54,759 144,654 -1,856 1,213 2,233 889 -948 Traders 112 62 41 35 41 Small Speculators Open Interest Total Long Short 207,394 Long Short 27,750 15,057 179,644 192,337 737 -495 2,003 1,266 2,498 non reportable positions Positions as of: 169 126 Tuesday, May 17, 2016   © SilverS Our large specs: Those large specs that have been long in silver pitched 2030 contracts from their long side?? Those large specs that have been short in silver added another 1131 contracts to their short side. Our commercials: Those commercials that have been long in silver added 1370 contracts to their long side?? Those commercials that have been short in silver covered 548 contracts from their short side?? Our small specs; Those small specs that have been long in silver added 721 contracts to their long side Those small specs that have been short in silver covered 522 contracts from their short side. Conclusions;  commercials go net long by 1918 contracts. however I believe that the data is compromised.  NPV for Sprott and Central Fund of Canada 1. Central Fund of Canada: traded at Negative 4.1 percent to NAV usa funds and Negative 4.0% to NAV for Cdn funds!!!! Percentage of fund in gold 61.7% Percentage of fund in silver:36.9% cash .+1.4%( May 20/2016). 2. Sprott silver fund (PSLV): Premium rises   to +.04%!!!! NAV (MAY 20.2016)  3. Sprott gold fund (PHYS): premium to NAV  FALLS TO 1.07% to NAV  ( MAY 20.2016) Note: Sprott silver trust back  into POSITIVE territory at +04% /Sprott physical gold trust is back into positive territory at +1.07%/Central fund of Canada’s is still in jail. It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to +.04%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.      

END

 

And now your overnight trading in gold,FRIDAY MORNING and also physical stories that may interest you: Trading in gold and silver overnight in Asia and Europe Mark O’Byrne (goldcore) Buy Silver – “Best Precious Metals Trade” By Mark O’ByrneMay 20, 2016No Comments

“Buy silver, sell gold” is the bold call of currency and money analyst Dominic Frisbyin the latest edition of best selling Money Week.

Frisby looks at the relative value of silver to gold and comes to the conclusion that silver is a better buy right now. We share his bullish view on silver and hence our current campaign regarding VAT free silver coins.

From the article:

“Today we consider gold and silver.

We suggest that you should buy one and sell the other.

We then advise walking away for a couple of years…

Silver and Mother Nature’s ratio

There is, say the wise old men of geological lore, something like 15 times as much silver in the Earth’s crust as there is gold. Received wisdom is that in days gone by, the value of silver relative to gold reflected the amount of metal Mother Nature has given us: gold was, for hundreds of years, about 15 times the price of silver.

Last year 27,579 tonnes of silver were produced (according to my most reliable of precious metal data sources, Nick Laird of Sharelynx) and about 3,000 tonnes of gold. In other words, just over nine times as much as silver as gold was produced.

However, the gold price – about $1,270 an ounce – is about 75 times silver’s price of $17 an ounce. What gives?”

Dominic kindly mentions us as a bullion dealer who will buy gold bullion from you and sell silver coins and bars to you:

“If you want to buy physical silver, our friends in Dublin, the precious metals dealers GoldCore, have a new scheme whereby you can buy silver coins VAT-free. They’ll also, as most dealers will, buy your gold”.

We make a market in all popular bullion formats from small gold sovereigns to large 400 ounce gold bars and at the risk of doing ourselves out of business, we would caution against selling gold bullion right now.

Sell paper and digital gold, like Bullion Vault, maybe but not physical gold coins and bars. Rather both physical gold and silver bullion should be owned as financial insurance and hedges against currency debasement, bail ins, systemic and counter party risks and the myriad other risks today.

There is the possibility that gold continues to outperform silver in the short term. This is quite likely if we get another bout of severe deflation and the next stage of the global financial crisis. There is also the real chance of the currency reset where gold prices are revalued by the global monetary authorities to $5,000 to $10,000 per ounce. This could see silver underperform in the short term.

Silver remains severely undervalued versus gold but more particularly versus stocks, bonds and other financial – digital and paper – assets and we believe will outperform most assets in the coming years. Allocations to both depend on risk appetite and motivations for buying.

Read the full article by Dominic Frisby on MoneyWeek here.

Gold and Silver Prices and News
Gold down 1.4% for week on Fed rate views – Reuters
Asian shares set for weekly loss, Fed talk lifts dollar – Reuters
Gold Takes ‘Brunt of the Selling’ as Fed Primes Markets for Hike – Bloomberg
Philly Fed index dips to negative 1.8 in May – Morning Star
Gold jewelry is getting pricier – CNN Money

Warning signs everywhere that the British housing bubble is about to go POP! – This Is Money
English Farm Prices Fall Most Since 2008 on Brexit Fears – Bloomberg
Rating agencies highlight the gloomy Brexit scenarios – Irish Times
Market Impact of Brexit Is Key Concern for G-7 Finance Chiefs – Bloomberg
George Soros Takes Massive Gold Position, Fears of a Crisis Grow – Value Walk

Gold Prices (LBMA AM)
20 May: USD 1,256.50, EUR 1,120.18 and GBP 862.75 per ounce
19 May: USD 1,253.75, EUR 1,117.74 and GBP 857.37 per ounce
18 May: USD 1,270.90, EUR 1,127.21 and GBP 882.05 per ounce
17 May: USD 1,270.10, EUR 1,121.43 and GBP 877.50 per ounce
16 May: USD 1,281.00, EUR 1,132.04 and GBP 892.87 per ounce

Silver Prices (LBMA)
20 May: USD 16.60, EUR 14.81 and GBP 11.35 per ounce
19 May: USD 16.60, EUR 14.81 and GBP 11.35 per ounce
18 May: USD 17.05, EUR 15.13 and GBP 11.77 per ounce
17 May: USD 17.08, EUR 15.09 and GBP 11.80 per ounce
16 May: USD 17.32, EUR 15.30 and GBP 12.07 per ounce


Read Our Most Popular Guides in Recent Months

Mark O’Byrne Executive Director

END

 

Alasdair Macleod’s weekly commentary: This one is a dandy!!

I have outlined the key passages in red

(courtesy Alasdair Macleod)

 

Alasdair Macleod: The eurozone is the greatest danger

Submitted by cpowell on Fri, 2016-05-20 01:00. Section: 

By Alasdair Macleod
GoldMoney.com, St. Helier, Jersey, Channel Islands
Thursday, May 19, 2016

Worldwide, markets are horribly distorted, which spells danger not only to investors, but to businesses and their employees as well, because it is impossible to allocate capital efficiently in this financial environment.

With markets everywhere disrupted by interventions from central banks, governments, and their sovereign wealth funds, economic progress is being badly hampered, and therefore so is the ability of anyone to earn the profits required to pay down the highs levels of debt we see today. Money that is invested in bonds and deposited in banks may already be on the way to money heaven, without complacent investors and depositors realizing it.

It should become clear in the coming weeks that price inflation in the dollar, and therefore the currencies that align with it, will exceed the Fed’s 2 percent target by a significant amount by the end of this year. This is because falling commodity prices last year, which subdued price inflation to under 1 percent, will be replaced by rising commodity prices this year. That being the case, CPI inflation should pick up significantly in the coming months, already reflected in the most recent estimate of core price inflation in the US, which exceeded 2 percent. Therefore, interest rates should rise far more than the small amount the market has already factored into current price levels. …

… For the remainder of the analysis:

https://www.goldmoney.com/the-eurozone-is-the-greatest-danger?gmrefcode=…

 

An extremely important read.

Commodity prices are rising, not because of increased activity but because the dollar is losing purchasing power.  This will in turn cause bond yields to rise.

 

And where is trouble going to manifest itself?  Alasdair explains that the Eurozone will be in deep trouble and no doubt Italy will be in the forefront.

Italy has a Debt to GDP of 130%  (and probably higher) .  It also has non performing loans of 360 billion euros which represents 40% of all private loans. The author correctly believes that Italian sovereign bonds yields must rise from the ridiculous 1.5% level to more realistic 7%.  That is when everything blows up

(courtesy Alasdair Macleod)

 

 

The Eurozone is the greatest danger BY ALASDAIR MACLEOD

GOLDMONEY INSIGHTS MAY 19, 2016

World-wide, markets are horribly distorted, which spells danger not only to investors, but to businesses and their employees as well, because it is impossible to allocate capital efficiently in this financial environment.

With markets everywhere disrupted by interventions from central banks, governments, and their sovereign wealth funds, economic progress is being badly hampered, and therefore so is the ability of anyone to earn the profits required to pay down the highs levels of debt we see today. Money that is invested in bonds and deposited in banks may already be on the way to money-heaven, without complacent investors and depositors realising it.

It should become clear in the coming weeks that price inflation in the dollar, and therefore the currencies that align with it, will exceed the Fed’s 2% target by a significant amount by the end of this year. This is because falling commodity prices last year, which subdued price inflation to under one per cent, will be replaced by rising commodity prices this year. That being the case, CPI inflation should pick up significantly in the coming months, already reflected in the most recent estimate of core price inflation in the US, which exceeded two per cent. Therefore, interest rates should rise far more than the small amount the market has already factored into current price levels.

Most analysts ignore the danger, because they are not convinced that there is the underlying demand to sustain higher commodity prices. But in their analysis, they miss the point. It is not commodity prices rising, so much as the purchasing power of the dollar falling. The likelihood of stagflationary conditions is becoming more obvious by the day, resulting in higher interest rates at a time of subdued economic activity.

A trend of rising interest rates, which will have to be considerably more aggressive than anything currently discounted in the markets, is bound to undermine asset values, starting with government bonds. Rising bond yields lead to falling equity markets as well, which together will reduce the banks’ willingness to lend. In this new stagnant environment, the most overvalued markets today will be the ones to suffer the greatest falls.

Therefore, prices of financial assets everywhere can be expected to weaken in the coming months to reflect this new reality. However, the Eurozone is likely to be the greatest victim of a change in interest rate direction. The litany of potential problems for the Eurozone makes Chidiock Titchborne’s Elegy, written on the eve of his execution, sound comparatively upbeat. Negative yields on government debt will have to be quickly reversed if the euro itself is to be prevented from sliding sharply lower against the dollar. Bankrupt Eurozone governments are surviving only because of the ECB’s money-printing, which will have to restricted, and government borrowing exposed to the mercy of global markets. Key Eurozone banks are undercapitalised compared with the risks they face from higher interest rates, so they will do well to survive without failing. There is also a growing undercurrent of political unrest throughout Europe, fuelled by persistent austerity and not helped by the refugee problem. Lastly, if the British electorate votes for Brexit, it will almost certainly be Chidiock’s grisly end for the European project.

We know the powers-that-be are very worried, because the IMF warned Germany to back off from forcing yet more austerity on Greece, which is due to make some €11bn in debt repayments in the coming months. The only way Greece can pay is for Greece’s creditors to extend the money as part of a “restructuring”, which then goes directly to the Troika, for back-distribution. It will be extend-and-pretend, yet again, with Greece seeing none of the money. Greece will be forced to promise some more spending cuts, and pay some more interest, so the fiction of Greek solvency can be kept alive for just a little longer.

One cannot be sure, but the IMF’s overriding concern may be the negative effect Germany’s tough line might have on the British electorate, ahead of the referendum on 23rd of June. That is the one outlier everyone seems to be frightened about, with President Obama, NATO chiefs, the IMF itself, and even the supposedly neutral Bank of England, promising dire consequences if the Brits are uncooperative enough to vote Leave.

All this places Germany under considerable pressure. After all, her banks, acting on behalf of the government and Germany’s populace, have parted with the money and cannot afford to write it off. Greece is bad enough, but Germany must be even more worried about the effect that a Greek compromise will set for Italy, which is a far larger problem.

Officially, the Italian government’s debt-to-GDP ratio stands at 130%, and since the public sector is 50% of GDP, government debt is 260% of the Italian tax base. It is also the nature of these things that these official numbers probably understate the true position.

If the Eurozone is the greatest risk to global financial and systemic stability, Italy looks like being the trigger at its core. The virtuous circle of Italian banks, pension funds and insurance companies, funding ever-increasing quantities of debt for the government, is failing. Pension funds and insurers cannot match their liabilities at current interest rates, and importantly, the banks are under water with non-performing loans to the tune of €360bn, about 18% of all their lending. It also represents 19.4% of GDP, or because the NPLs are all in the private sector, it is 39% of private sector GDP.

Within the private sector, NPLs are more prevalent in firms than in households. And that is the underlying problem: not only are the banks undercapitalised, but Italian industry is in dire straits as well. The Banca D’Italia’s Financial Stability Report puts a brave gloss on these figures, telling us that the firms’ financial situation is improving, when an objective independent analysis would probably be much more cautious.1

All financial prices in the Eurozone are badly skewed, most obviously by the ECB, which will be increasing its monthly bond purchases from next month to as much as €80bn. So far, the price inflation environment has been benign, doubtless encouraging the ECB to think the inflationary consequences of monetary policy are nothing to worry about. But from the beginning of this year, things have been changing.

Because the recent pick-up in commodity prices will begin to show in the dollar’s inflation statistics, markets will begin to smell the end of negative euro rates, in which case Eurozone bond yields seem sure to rise steeply. Given their extreme overvaluations, price volatility should be considerably greater than that of the US Treasury market. Imagine, if instead of yielding 1.5%, Italian ten-year bond yields more accurately reflected Italy’s finances, by moving to the 7-10% band.

This would result in write-downs of between 40% and 50% on these bonds. The effect on Eurozone bank balance sheets would be obvious, with many banks in the PIGS2 needing to be rescued. Less obvious perhaps would be the effect on the ECB’s own balance sheet, requiring it to be recapitalised by its shareholders. This can be easily engineered, but the political ramifications would be a complication at the worst possible moment, bearing in mind all EU non-Eurozone central banks, such as the Bank of England, are also shareholders and would be part of the whip-round.

Assuming it survives the embarrassment of its own rescue, the ECB will eventually face a policy choice. It can continue to buy up all loose sovereign and corporate debt to stop yields rising, in which case the ECB will be signalling it has chosen to save the banks and member governments’ finances in preference to the currency. Alternatively, it can try to save the currency by raising interest rates, giving a new and darker meaning to Mario Draghi’s “whatever it takes”. In this case insolvent banks, businesses and the PIGS governments could go to the wall. The choice is somewhat black or white, because any compromise risks both a systemic failure and a collapse in the euro. And there is no guarantee that if the banks fail, the euro will survive anyway.

The ECB is likely to opt for supporting the banks and over-indebted governments, partly because that is the mandate it has set for itself, and partly because experience after the Lehman crisis showed it could expand money supply without destabilising price inflation. The danger, once it dawns on growing numbers of investors and bank depositors, is stagflation. In other words, rising goods prices, falling asset prices, and interest rates not being allowed to rise enough to break the cycle, all combining to further undermine the euro’s purchasing power.

Financial and economic prospects for the Eurozone have many similarities to the 1972-75 period in the UK, which this writer remembers vividly. Equity markets lost 70% between May 1972 and December 1974, cost of funding was reflected in a 15-year maturity UK Treasury bond with a 15.25% coupon, and monthly price inflation peaked at 27%. There was a banking crisis, with a number of property-lending banks failing, and sterling went through a bad time. The atmosphere became so gloomy, that there was even talk of insurrection.3

This time, the prospects facing the Eurozone potentially could be worse. The obvious difference is the far higher levels of debt, which will never allow the ECB to run interest rates up sufficiently to kill price inflation. More likely, positive rates of only one or two per cent would be enough to destabilise the Eurozone’s financial system.

Let us hope that these dangers are exaggerated, and the final outcome will not be systemically destabilising, not just for Europe, but globally as well. A wise man, faced with the unknown, believes nothing, expects the worst, and takes precautions.

 

end

Your early FRIDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight    

:

1 Chinese yuan vs USA dollar/yuan  DOWN to 6.5471 ( DEVALUATION AGAIN BUT TINY/CHINA STILL FIRES SHOT ACROSS THE USA BOW ) / Shanghai bourse  CLOSED UP 18.56 OR 0.66%  / HANG SANG CLOSED UP 157.87 OR 0.80%

2 Nikkei closed UP 89.69 OR 0.54% /USA: YEN FALLS TO 110.35

3. Europe stocks opened ALL IN THE GREEN  /USA dollar index DOWN to 95.30/Euro UP to 1.1214

3b Japan 10 year bond yield: FALLS   TO -.099%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.35

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  48.18  and Brent: 48.64

3f Gold UP  /Yen 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.

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 10 yr bund FALLS to 0.182%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 9.53%/: 

3j Greek 10 year bond yield RISE to  : 7.43%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1255.25/silver $16.54(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble DOWN 9 in  roubles/dollar) 66.86-

3m oil into the 47 dollar handle for WTI and 47 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9913 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1117 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .182%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

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 1.859% early this morning. Thirty year rate  at 2.651% /POLICY ERROR)

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

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

end Futures Rise As Fed Fears Subside; Global Stocks Rebound From Six Week Lows

It will be fitting, not to mention symmetric, if stocks which yesterday closed at 7 weeks lows and red for the year, end the week the same way they started it: with a rally on no news, just more hopes that oil (which as recently as two years ago none other than Chair Yellen said said would be be “unambiguously good” if lower) will continue rising. While US markets ended yesterday’s trading on a sour note, that weakness has failed to spread to the rest of the world, and global shares rebounded from a six-week low as crude and commodity prices recovered, while the yen weakened on reduced demand for haven assets.

And just like on Monday, the rebound was once led by the commodity sector, where raw-materials producers and energy companies outperformed on the Stoxx Europe 600 Index as shares in the region rebounded from their biggest decline in two weeks. Crude rose toward a seven-month high and copper rebounded from levels last seen in February.

Concerns remained about the Fed’s June/July hike although the goalseeked narrative has bifurcated.

According to some, such as Thorsten Engelmann, a Frankfurt-based trader at Equinet Bank, the market has now priced in a summer hike: “After the losses of the last few days, bargain hunters are re-entering the market. The market seems to be able to deal with the Fed raising rates, and next week should be quieter now that the earnings season is over.”

Others, like David Gaud, a fund manager at Edmond de Rothschild Asset Management, told Bloomberg TV in Hong Kong, that there simply won’t be a rate hike in the first place: “There will be no rate hike in June, it’s probably a bit too early. The Fed will further prepare the markets for a hike probably in September and maybe a second one in December. That’s going to create more volatility, but more than anything that’s going to be a positive in the end for the markets.”

Meanwhile, the levitation in oil continues, even if WTI trades little changed as of this moment after paring earlier gain with focus moving to supply disruption. June contract expires today. “Supply disruptions” are back in focus, “the market has fairly quickly shrugged off the dollar strength that caused a bit of a stir yesterday and triggered some profit- taking,” says Saxo Bank head of commodity strategy Ole Hansen. “If we had supply disruptions from places like Canada, Nigeria, Venezuela and Libya like this 5 years ago we wouldn’t be up $5, we’d be up $25 – that is probably a testament to the oversupply still in the market.”

The MSCI All-Country World Index of shares rose 0.4 percent as of 10:57 a.m. London time, climbing for the first time in four days. In Europe, the Stoxx 600 climbed 1 percent and futures on the S&P 500 added 0.2 percent. The MSCI Emerging Markets Index rose 0.4 percent, paring its weekly decline to 1.4 percent. The gauge is headed for its fifth weekly drop in the longest run of losses since August. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 0.7 percent.

Market Snapshot

  • S&P 500 futures up 0.3% to 2044
  • Stoxx 600 up 0.8% to 337
  • FTSE 100 up 1.3% to 6132
  • DAX up 0.7% to 9864
  • German 10Yr yield down less than 1bp to 0.17%
  • Italian 10Yr yield down 2bps to 1.48%
  • Spanish 10Yr yield down 2bps to 1.57%
  • S&P GSCI Index up 0.3% to 368
  • MSCI Asia Pacific up 0.3% to 126
  • Nikkei 225 up 0.5% to 16736
  • Hang Seng up 0.8% to 19852
  • Shanghai Composite up 0.7% to 2825
  • S&P/ASX 200 up 0.5% to 5351
  • US 10-yr yield down less than 1bp to 1.85%
  • Dollar Index down less than 0.01% to 95.28
  • WTI Crude futures up 0.3% to $48.29
  • Brent Futures up 0.1% to $48.86
  • Gold spot up 0.3% to $1,258
  • Silver spot up 0.5% to $16.58

Top Global News

  • Yahoo Bids May Fall Short of $4b-$8b Expected Range: WSJ
  • Gameloft Rises as Vivendi Ups Hostile Bid Through Stake Purchase
  • Total, Oil Search Divvy InterOil Assets in $2.2 Billion Deal
  • Vale Blending Optimism With Caution on Iron’s Biggest Tie-Up

Looking at regional markets, we start in Asia which managed to put the US concerns about a Fed rate behind it with risk-appetite improving alongside the gains in the energy complex. ASX 200 (+0.5%) traded higher as the index coat-tailed on oil after WTI crude futures rose above USD 49/bbl, while Nikkei 225 (+0.5%) was underpinned following a rebound in USD/JPY which edged above 110.00. Hang Seng (+0.8%) and the Shanghai Comp (+0.7%) conformed to the improving sentiment in the region after the PBoC returned to a net weekly injection of CNY 50bIn from the recent consecutive weekly net drains, with retailer earnings also boosting optimism. 10yr JGBs traded higher despite the risk-on sentiment seen in Japanese equities with the BoJ in the market to acquire around JPY1.2trl in government debt.

Top Asian News:

  • Japan Lawmakers Discuss Big Stimulus to Accompany 2017 Tax Hike: Debate may now shift to size, shape of fiscal packages
  • Hong Kong’s SFC Said to Survey Participants on Investor Codes: Brokers seek clarity on how identity codes would be assigned
  • Morgan Stanley Said to Move 75 Shanghai Jobs to Hong Kong, India: Co. seeks to improve back-office efficiency
  • Hotel Lotte’s $4.8 Billion IPO Is Big But Comes With Baggage: Sale comes in wake of power struggle atop Lotte Group
  • Total, Oil Search Divvy InterOil Assets in $2.2 Billion Deal: Total to buy ~60% of InterOil’s assets from Oil Search
  • Taiwan’s New President Resists China ’One-Country’ Pressure: Tsai focused on domestic agenda in first presidential address

Like in Asia, risk-on sentiment has dominated the state of play in Europe with the Eurostoxx (+1.3%) firmly in the green underpinned by upside in commodity prices. As such, energy names outperform this morning as both WTI and Brent break back above USD 49/bbl. In stock specific news, Richemont underperforms following their earnings update in which FY operating profit missed expectations subsequently dragging related consumer discretionary names lower. However, some selling pressure has crept in to price action in recent trade ahead of the North American crossover.

Top European News:

  • Deutsche Bank May Punish Employees for Personal Trade With Firm: halted bonus payments to a group of employees while examining whether they improperly traded with the firm
  • Richemont Sees Challenging Market After April Sales Plunge: Full-year operating profit falls more than analysts expected. Cartier owner forecast difficult comparisons in first half
  • Monsanto’s #Monsatan Factor and What Bayer Needs to Do About It: if the takeover succeeds, Bayer will likely find itself in the crosshairs of Monsanto’s army of critics

In FX, a mostly consolidative trading session in FX this morning, though GBP has come back a little, with Cable testing the mid 1.4500’s , but the fall-back initially led by a ramp up in EUR/GBP. Despite taking out some support levels yesterday, alongside EUR/USD, the cross rate found buyers at .7650, and from there, we have seen a spike up to .7700+, but the move since running out of steam. M&A flow may have contributed to the random hit on GBP, with reports in the papers suggesting a Reckitt Benckiser takeover bid for Church and Dwight. Similarly EUR/USD falters ahead of 1.1230, where USD bulls continue to press for a deeper decline through yesterday’s 1.1180 level.

The overnight session was once again all about commodities, where WTI and Brent have just started to fall off after trying to attack the USD 50.00/bbl level and falling short. Of note we are still seeing some refinery closures in Nigeria. Crude oil rose 0.3 percent to $48.30 a barrel in New York, headed for a weekly advance of about 4.5 percent. Prices were boosted this week as data showed U.S. output slid to the lowest since September 2014 and wildfires in Canada expanded. “We’ve got U.S. demand picking up and combining with bullish supply news filtering through the market,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. “Unless there is a clear new fundamental reason to buy oil, I think $50 is a hard psychological level to break through.”

Gold and Silver have been bullish in European trade after selling off in in the Asian session and spot Gold currently resides around the USD 1258.00/oz level. Elsewhere copper and iron ore traded higher reflecting the improved risk appetite in China.  Copper rose 1.3 percent in London, while nickel rebounded from a six-week low. Gold was headed for a third weekly decline, its longest losing streak of the year. Soybeans in Chicago were set for a sixth weekly advance, the longest run of gains since 2013. The U.S. Department of Agriculture estimated last week that global inventories will fall 8.1 percent by the end of September next year.

Bulletin Headline Summary From RanSquawk and Bloomberg

  • European equities enter the North American crossover in positive territory as energy prices help guide price action
  • A predominantly consolidative trading session in FX this morning, though GBP has come back a little, with Cable testing the mid 1.4500’s
  • Looking ahead, highlights include Canadian Retail Sales, CPI, US Existing Home Sales, ECB’s Draghi and Coeure

DB’s Jim reid completes the overnight wrap

A more hawkish tone from the Fed and subsequent repricing of interest rate risk as a result is dictating much of what’s going on at the moment. That’s putting pressure on risk assets and equities suffered again yesterday with the S&P 500 closing -0.37% and in the process falling to the lowest level in seven weeks, as well as slipping back into negative territory year-to-date. Treasuries were actually little changed yesterday with the 10y benchmark stalling around 1.850% seemingly with the latest soft manufacturing data giving some food for thought. More on that shortly. It was comments from the NY Fed President Dudley which was arguably the biggest event yesterday though. Seen as having views closely aligned to those of Fed Chair Yellen and usually leaning towards slightly dovish of centre in nature, Dudley opined in the Q&A session that ‘if I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation’. He did cite risks from the timing of the UK EU referendum in the context of the meeting next month but the overall takeaway was one of a feeling of continuing the recent party line of talking up market expectations closer to that of the Fed.

On that, the June probability did actually slip slightly yesterday to 28% from 32% post minutes although that is still a marked re-pricing compared to the 4% earlier this week. The July probability is unchanged at 47% while December is hovering around 74% and also little changed from the post minutes level. While a move in June still feels like a stretch there’s no doubt that the meeting is still going to be hugely important in terms of table setting expectations for July and beyond.

One sector that will see a possible rate rising environment with a bit more hope is banks. Although you often hear that equity multiples in general can go up when 10y yields go down, the opposite seems to be true for banks at the moment with European banks perhaps the most sensitive. In the PDF today we show a graph of 10y Treasuries and Euro Bank stocks YTD. The correlation has been very strong in 2016. When yields go down stocks fall and visa-versa as yields seem to be a proxy for net interest margins. It is a double edged sword though as if higher yields destabilise global markets that can’t be good for bank equities. Obviously if higher yields represent a move closer towards normality in the rates market and the global economy then that would be very supportive for banks. Unfortunately we suspect that this is not a big move towards normalisation. Abnormal remains the new normal.

Changing tack now and refreshing our screens quickly, bourses in Asia did initially open in the red after reflecting those losses on Wall Street last night, but sentiment has quickly swung back the other way with the majority of markets looking like they’re closing the week on a positive footing. Indeed it’s the Hang Seng (+1.14%) which is leading the way, followed by the ASX (+0.64%), Shanghai Comp (+0.25%) and the Nikkei (+0.19%). A bounce back in Oil since the Europe close yesterday has continued this morning with WTI currently up just over 1% and that appears to be helping sentiment generally.  One thing worth noting is that despite markets in China being up, the Shanghai Comp is still on course for its fifth consecutive weekly decline which is the most since 2012.

Moving on, yesterday’s economic data flow in the US was mainly focused on the labour market and manufacturing sector. Initial jobless rebounded last week, declining 16k to 278k after that sharp spike higher that we’d seen in the week prior. The four-week average did however rise 8k to 276k. Meanwhile the Philly Fed manufacturing survey largely backed up that soft NY Fed survey from earlier in the week. The print declined another 0.2pts to -1.8 after expectations had been for a rebound to +3.0. The details of the report were also soft with new orders, shipments, employment and inventories all remaining in contractionary territory. Our US economists noted that their ISMadjusted manufacturing survey is currently suggesting a slip back below 50 for the manufacturing ISM for this month when we get the data on June 1st. Meanwhile the other data of note across the pond later in the session was the Conference Board’s leading index which was a touch above expectations at +0.6% mom (vs. +0.4% expected).

Meanwhile there was also some Fedspeak from Richmond Fed President Lacker to mention yesterday too. A non-voter this year and seen as someone who sits right at the hawkish end of the scale, Lacker said that ‘I certainly supported a rate increase at the April meeting’ and that ‘I think the case would be very strong for raising rates in June’. Lacker also said that ‘I see risks from global and financial developments having virtually entirely dissipated’ and that ‘markets took the wrong signal from us pausing in March and April’ and so ‘overestimated how likely we were to pause for the rest of the year’. Given his hawkish reputation there wasn’t a great deal of surprise in his comments yesterday.

Prior to this in Europe the main data release was out of the UK where after some earlier disappointment this week in the inflation and weekly earnings data, retail sales proved to be a positive surprise last month. Excluding fuel sales we saw a +1.5% rise mom last month, far exceeding the +0.6% expectation and resulting in the YoY rate moving up to +4.2% from +2.6%. Including fuel last month the +1.3% mom reading was also far better than expected (+0.6% expected) with the YoY rate at a similar +4.3%. Away from that we also got the latest ECB minutes although in truth they didn’t offer a whole lot of new information. The text revealed that there was a ‘broad agreement’ that ‘patience was needed for the measures to fully unfold over time in terms of output and inflation’.

Wrapping up the price action yesterday, markets in Europe were playing catch up somewhat from the post-Fed minutes moves with the end result being a broad sell off across risk assets in the region. The Stoxx 600 closed -1.09% with energy stocks being hardest hit while in credit markets we saw Main and Crossover end 2bps and 9bps wider respectively. Oil had actually been particularly weak for much of the day with WTI at one stage dipping as low as $46.73/bbl (down 3% on the day) with the strengthening US Dollar a big  factor, before rallying late into the close to actually finish little changed around $48/bbl after more news filtered through about supply disruptions in Nigeria.

 

end

ASIAN AFFAIRS

i)Late  THURSDAY night/ FRIDAY morning: Shanghai closed UP  BY 18.56 PTS OR 0.66%  /  Hang Sang closed UP 157.87 OR 0.80%. The Nikkei closed UP 89.69 POINTS OR 0.54% . Australia’s all ordinaires  CLOSED UP 0.53% Chinese yuan (ONSHORE) closed DOWN at 6.5471 .  Oil FELL to 48.24 dollars per barrel for WTI and 48.81 for Brent. Stocks in Europe  ALL IN THE GREEN . Offshore yuan trades  6.5649 yuan to the dollar vs 6.5471 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA a) JAPAN ISSUES

wow!! late this afternoon, the central bank of Japan threw a huge trial balloon for the markets over here.  This was released after midnight i.e. early Saturday morning for them.

Basically they are starting to prepare for losses on its huge debt holdings once QE ends.

They will have two problems:

a)as rates rise, bonds sink and thus huge losses

b) a soaring yen, being unwound by everybody will kill the country’s exports

(courtesy zero hedge)

 

Bank Of Japan Said To Start Preparing For Losses On Its “Huge” Debt Holdings Once QE Ends

While it most likely is just the usual Friday (past) midnight trial balloon by the Nikkei, a media outlet that has promptly become the BOJ’s mouthpiece (recall a week ago the new owner of the FT reported that Abe would delay his 2017 sales tax increase, only to see the premier backpedal when the reaction in the USDJPY was not quite as desired), moments ago the Japanese publication reported that the Bank of Japan will “likely set aside funds for the first time to prepare for losses on its huge holdings of Japanese government bonds should the central bank end its monetary easing policy in the future.”

Nikkei reports that the BOJ has reserved 450 billion yen ($4.07 billion) for the year ended in March. The amount will become known when the BOJ releases financial statements as early as next week. The way the BOJ is preparing for losses is amusing: it is accruing the interest income from the bonds it owns so it can reserve for capital losses on those same bonds once rates spike, to wit:

The BOJ created a framework last fiscal year that permits it to set aside part of the interest income from its JGB holdings, which have ballooned through the bank’s massive monetary easing program. Interest income likely grew about 30% from the prior year to around 1.3 trillion yen in fiscal 2015.

 

Though BOJ Gov. Haruhiko Kuroda has indicated that the bank could expand easing if it faces difficulty achieving its inflation target, the creation of the reserves is a move to prepare for an exit from monetary easing.

 

The central bank’s JGB holdings totaled 349 trillion yen as of March 31, up about 180% in three years. Long-term interest rates, currently in negative territory, will rise and bond prices will fall should the BOJ end its monetary easing once it is sure that Japan is finally breaking free of deflation.

According to Nikkei, the bank estimates that a 1 percentage-point rise in long-term rates lowers the value of its JGB holdings by 21 trillion yen, or about $200 billion, which incidentally is about 50x more than the BOJ is said to be reserving, which implies that the BOJ is expecting only a tiny increase in rates.

There will be a problem however if interest rates spike far more than just 1%.. or even 10%. After all, with the BOJ out of the picture, there will be no backstopped buyer of marginal issuance (and deficit funding), which means that the BOJ will almost certainly never be able to get out of the market at all.

Which however explains the trial balloon: the BOJ is merely curious to see how the market will react to the hint that BOJ buying may eventually end (even if it never will).

Meanwhile, just like in the case of the US, the BOJ pays most of its net income to the government, and this payment will decline if the bank sets aside reserves. Furthermore, the central bank’s profits have suffered from the lower value of foreign-currency assets due to a stronger yen. As a result, payments to the government are estimated at 400 billion yen for fiscal 2015, down sharply from 756.7 billion yen in the prior year.

Fiscal 2010 was the last time the BOJ paid less than 500 billion yen to the government. “The reserves are meant to even out swings in profit so payments to the government will not change over the long term,” a BOJ official said.

 

But from a short-term perspective, the lower payment to the government means that taxpayers will shoulder a heavier burden. So while the BOJ’s monetary easing may be propping up the economy and consumer prices, taxpayers essentially are picking up the tab.

If and when the BOJ does withdraw from the market, it will therefore face a double whammy of risks: the threat of soaring bond yields and a just as soaring Yen, in a global risk off move. At least initially: once the BOJ loses all credibility, the Yen will disintegrate as has been the long-running thesis of Kyle Bass and Dylan Grice, as Japan finally unleashes hyperinflation to deal with its massive debt overhang.

It’s a different matter entirely if the BOJ will ever actually follow up with “ending monetary easing policy.” If the past 8 years have demonstrated something very vividly, it is that central banks simply can not escape the vortex of QE, ZIRP and now NIRP. If anything, more easing will have to be added in the coming years as global rates turn ever more negative.

In fact, according to many observers, far from reducing QE, Japan’s next move will be one of terminal easing in the form of helicopter money.

For now, however, let the latest Nikkei trial balloon play out.

end b) CHINA ISSUES

China sends a strong message to the USA to cease immediately spy plane missions near its borders.  If the USA does not respond, then China would devalue the yuan greatly!!

(courtesy zero hedge)

 

China Demands US “Cease Immediately” Provocative Spy Plane Missions Near Its Borders

Just days after a report that two Chinese J-11 fighter jets buzzed a US spy plane above the South China Sea, Beijing has officially escalated its displeasure at US surveillance up the chain of command and asReuters reports, Beijing has demanded an end to all U.S. surveillance near China. 

As a reminder, a U.S. Defense official said two Chinese J-11 fighter jets flew within 50 feet (15 meters) of the U.S. EP-3 aircraft in what the Pentagon deemed an “unsafe” intercept. And, just like Russia, China has had enough and demands US provocations end.

Stock footage of a Chinese J-11 fighter

“It must be pointed out that U.S. military planes frequently carry out reconnaissance in Chinese coastal waters, seriously endangering Chinese maritime security,” China’s Foreign Ministry spokesman Hong Lei Hong told reporters, adding that  “we demand that the United States immediately cease this type of close reconnaissance activity to avoid having this sort of incident happening again.”

Speaking at a regular press briefing, he described the Pentagon statement as “not true” and said the actions of the Chinese aircraft were “completely in keeping with safety and professional standards.” “They maintained safe behavior and did not engage in any dangerous action,” Hong said.

The encounter comes a week after China scrambled fighter jets as a U.S. Navy ship sailed close to a disputed reef in the South China Sea. Another Chinese intercept took place in 2014 when a Chinese fighter pilot flew acrobatic maneuvers around a U.S. spy plane.

We are confident Russia will echo China’s concerns. As we summarized earlier this week, in just the past month there have been at least four close fly-bys involved Russian fighter jets following close US incursions:

First a Russian Su-24 “buzzed” the US missile destroyer USS Donald Cook in the Baltic Sea allegedly over Russian territorial waters; then just days later another Russian fighter jet flew within 50 feet of a US recon plane also flying over the Baltic Sea; this was followed by a third close encounter when a little over a week later a Russian Mig-31s flew within 50 feet of a US spy plane flying over a Russian naval base in the Kamchatka peninsula; the fourth provocation took place just days later when as a Russian SU-27 conducted a barrel roll over a U.S. Air Force RC-135 reconnaissance plane flying over the Baltic sea.

The Chinese intercept occurred days before President Barack Obama travels to parts of Asia from May 21-28, including a Group of Seven summit in Japan and his first trip to Vietnam.

Washington has accused Beijing of militarizing the South China Sea after creating artificial islands, while Beijing, in turn, has criticized increased U.S. naval patrols and exercises in Asia. In 2015, the United States and China announced agreements on a military hotline and rules of behavior to govern air-to-air encounters called the Code for Unplanned Encounters at Sea (CUES).

“This is exactly the type of irresponsible and dangerous intercepts that the air-to-air annex to CUES is supposed to prevent,” said Greg Poling, director of the Asia Maritime Transparency Initiative at Washington’s Center for Strategic and International Studies think-tank.

China has fired back that there would be no need for the “irresponsible” intercepts if the US did not launch recon missions in the first place.

However Poling pressed on and said that either some part of China’s air force “hadn’t gotten the message,” or it was meant as a signal of displeasure with recent U.S. freedom of navigation actions in the South China Sea. “If the latter, it would be very disappointing to find China sacrificing the CUES annex for political gamesmanship.”

Zhang Baohui, a security expert at Hong Kong’s Lingnan University, said he believed the encounter highlighted the limitation of CUES, and shows that Chinese pilots would still fly close to U.S. surveillance planes if needed. “Frankly, we’re always going to see these kinds of incidents as China will always put the priority on national security over something like CUES whenever it feels its interests are directly threatened,” he said.

The latest encounter took place in international airspace about 100 nautical miles south of mainland China and about 50 nautical miles east of Hainan island, a Pentagon spokesman said in a statement issued later on Thursday.

Why is the US spying on Hainan? Because China’s submarine bases on Hainan are home to an expanding fleet of nuclear-armed submarines and a big target for on-going Western surveillance operations. The Guangdong coast is also believed to be home to some of China’s most advanced missiles, including the DF-21D anti-ship weapon.

And that is why US espionage in the region will continue, even as the Pentagon tries to put the blame on Beijing for any and all such future “close encounters” until eventually there is an “unexpected” incident.end

EUROPEAN ISSUES

We now have an investigation of the Greek banks being investigated for funding politicians in Greece

 

(courtesy zero hedge)

 

First Italy, Now Greek Banks Being Investigated For ‘Funding’ Politicians, Media

With Trump going after billionaire-funded media in America, and Italy facing probes over its banking-system-controlled media, it is perhaps no surprise that yet another generally corrupt nation – Greece – is facing a parliamentary committee investigation into spuriously large ‘bank loans’ and highly-concentrated advertising spend made to various political parties and media groups in 2015.

The Parliamentary Inquiry Commission decided on Wednesday to investigate the advertising expenditure of Greek banks to the media over a period of the last 10 years. As KeepTalking Greece reports,the Commission investigates in general the legality of  bank loans to political parties as well as loans to mass media groups. The extension of mandate to investigate also the bank advertisement to media was submitted by SYRIZA MP Annetta Kavvadia, a former journalist.

According to Kavvadia, “70% of the bank advertising expenditure was distributed among five media and media groups in 2015″ and that the citizens had a right to know that while the banks were stopping loans to Small & Medium Enterprises they were profusely posting ads in the same media that had taken loans from them.”

“It is interesting to see what amounts of money were given by the banks to particular media companies that allegedly had taken loans form the same banks and were unable to service these loans, ” Kavvadia said.

New Democracy representative at the Committee rejected Kavvadias’ proposal claiming that it went beyond the Committee’s mandate and did not support the proposal.

The representatives of SYRIZA, Independent Greeks, Golden Dawn, KKE, Centrists’ Union, voted in favor, GD asked an investigation ever since 2002. PASOK and To Potami voted “present”.

The Committee decided unanimously to give a deadline to banks until the end of May in order to provide data for the repayment of loans in euros by the media as well as data about loans to regional press.

The Committee Chairman said that “we will investigate whether the requirements of advertising rules were met the bank had also another relation (loan) with the media.”

Last month, four Greek systemic banks had published their expenditure on advertisement for 2015. Yes, it was striking to see that certain media groups had received large amount of money, something like half a million euro by one bank over the period of one year.

Will the Parliamentary Committee be able to shed a light into dark corridors of the famous Greek political and media scene?

The general rule was that political parties would give as guarantee for the loans the funding they would receive from the state. Too bad, the economic crash since 2010 brought the political system upside down. As for the big “systemic” media groups, well… they often got new loans in order to help them pay back their old loans and they sank in debts as Greece with the bailouts.

Excerpt from Giorgos Pleios Interview about “The Greek media, the oligarchs and the new Media Law.”

Greece is one of those countries in southern Europe where there is a close relationship and interdependence between media and political power – economic as well as political- both on an institutional and an ideological level.  The model describing the relationship between mass media, the state and political elites is that of vested interests as often described in the political discourse and scientific research. This practically means that mass media owners in Greece – also owners of other businesses (eg construction and shipping companies, new technologies and health services firms, etc.) tend to provide political support to political parties, especially those at power or likely to form  a new government.

On the other hand, the political parties in Greece tend to provide financial and administrative support to media owners and the companies owned by the so called “oligarchs”, in exchange for their political support. This is done through the assignment of public works (i.e roads and government buildings construction etc.) as well as government advertising, public property management, etc at scandalously profitable terms and in return for political support.”

George Pleios is Head of the Department of Communication and Media Studies at the National and Kapodestrian University of Athens.

full interview in English here.

Odd that all the media that received the large amounts of advertisement were also pro Bailout- and Austerity-supporters ever since 2010. Odd? Hardly…

END RUSSIAN AND MIDDLE EASTERN AFFAIRS

Protesters have stormed Baghdad’s Green zone and now have entered the Prime Minister’s office..looks precarious to me

 

(courtesy zerohedge)

Tear Gas, Bullets Fired As Anti-Government Protesters Storm Baghdad Green Zone, Enter PM’s Office

Update: curek imposed in Baghdad

Jon Williams

‎@WilliamsJon

Curfew imposed in Baghdad.

11:57 AM – 20 May 2016

 

The situation in Iraq had already become very dangerous, as we reported in earlier in the month, after the Iraq PM ordered arrests in order to disband Green Zone protests.

As Reuters reports, Anti-government protesters are back at it, and have stormed into Baghdad’s Green Zone, allegedly reaching the Council of Ministers building.

AFP news agency ‎@AFP

Protesters enter Iraqi PM’s office: AFP photographer

11:43 AM – 20 May 2016 Reuters Top News ‎@Reuters

BREAKING: Anti-government protesters storm into Baghdad’s green zone as security forces shoot tear gas, live bullets: witness

11:15 AM – 20 May 2016

 

 

View image on Twitter

Donatella Rovera ‎@DRovera

‘s helpless to halt political crisis as clamour 4 radical change continues http://www.al-monitor.com/pulse/originals/2016/05/politicians-suggestions-on-a-way-out-of-iraqi-crisis.html …

9:40 AM – 20 May 2016 · New Brunswick, NJ, United States

 

 

end OIL ISSUES

The huge disruptions that we have had with respect to oil has now faded away as Canada, Libya and Nigera resume their production

 

(courtesy zero hedge)

Oil Supply Disruptions Quickly Fading As Canada, Libya, And Nigeria Resume Production

Earlier this week, Goldman unleashed the latest oil rally when it admitted that while the oil market will take far longer to rebalance due to rising low-cost oil production, it said that material supply disruptions are providing a boost to near-term prices. Goldman provided the following visualization of unplanned ongoing outages …

 

… where it highlighted the recent stoppages in Canada, Nigeria and Libya as the most prominent.

In a surprising twist, it appears that virtually all three of the main disruptions choke points are being resolved far quicker than expected.

First on Canada and its ongoing wildfire, the WSJ reported that the threat from forest fires in northern Alberta receded further on Thursday with the blazes moving away from oil-sands production facilities and a nearby evacuated town as cooler, wetter weather aided firefighting efforts, provincial officials said. The out-of-control wildfire spread to more than 1.25 million acres, up from just over one million acres on Wednesday, but the front line moved away from critical infrastructure to a remote area on the border of neighboring Saskatchewan province, the officials said.

Firefighters kept blazes away from two major oil-sands production complexes threatened earlier in the week, helped by lower temperatures and trace amounts of rain, said Chad Morrison, the Alberta forest ministry’s chief wildfire official.

 

The threat definitely has diminished around the communities and the oil-sands facilities,” Mr. Morrison said at a news conference in Edmonton. “We held the fire yesterday in all critical areas.”

This means that oilsands production is gradually coming back online and full capacity will likely be fully restored in the coming days:

No production facilities have been damaged by wildfires, but the threat has forced several large oil sands producers to shut down mining and well sites for more than two weeks, reducing Canadian oil production by at least one million barrels a day, or about 40% of the country’s total oil-sands output. The spread of fires forced some operators to abandon plans laid last week to restart. Late Thursday, Exxon Mobil Corp.’s Canadian unit Imperial Oil Ltd. said it had partially restarted operations at its Kearl oil sands mine about 47 miles northeast of Fort McMurray.

Just as important is that the long-running export crisis in Libya also appears to be on the verge of a solution. According to Bloomberg, oil exports are set to resume Thursday from the port of Hariga in eastern Libya, easing a bottleneck and allowing for crude production to increase after competing administrations of the state-run National Oil Corp. reached an agreement in the divided country.

The tanker Seachance is loading 650,000 barrels of crude at Hariga for the U.K., Omran al-Zwai, a spokesman for NOC unit Arabian Gulf Oil Co. known as Agoco, said by phone on Thursday. The cargo would be the first international shipment from Hariga since the United Nations blacklisted a tanker last month following complaints from authorities in the west of the country. NOC’s competing leaderships reached an agreement to resume exports from Hariga earlier this week. Agoco will be able to boost crude output to 120,000 barrels a day from 90,000 before the shipment, Al-Zwai said, as the company’s production has been limited by a lack of storage at the port. Libya produced a total of 310,000 barrels a day in April, data compiled by Bloomberg show.

The competing NOC administrations agreed to restart shipments from Hariga after holding talks in Vienna earlier this week, Elmagrabi said Monday. Officials at the western NOC administration in Tripoli couldn’t immediately be reached for comment. The shipment from Hariga comes after Agoco reached an agreement on Wednesday with the NOC’s eastern administration to restart international exports from the port, said Nagi Elmagrabi, chairman of the eastern NOC.

 

Libya pumped about 1.6 million barrels a day of crude before the 2011 rebellion that ended Moammar Al Qaddafi’s 42-year rule. It’s now the smallest producer in the Organization of Petroleum Exporting Countries. Since Qaddafi’s ouster and death, armed militias have also competed for control of the nation’s oil facilities.

Finally, and perhaps most importantly, is Nigeria, whose offline high quality bonny light crude has been seen as a major catalyst for the recent spike in prices due to the actions of such groups as the Niger Delta Avengers, and where Bloomberg notes that an oil tanker was said to have finally loaded up Nigeria’s Qua Iboe crude today, when a shipment was made on the SCF Khibiny, a 1 million bbl carrying Suezmax. It adds that the ship signals today that its status is “under way” having previously been anchored.

The reason: “people who had blocked bridge access to Qua Iboe terminal no longer there” according to Bloomberg.

In summary, after oil disruptions were represented by Goldman as a catalyst for higher oil prices, it now appears that the three major bottlenecks are being eliminated, and from a supply shortage, the oil market will now re-enter near-term glut as all of these mothballed operations scramble to restore recent production capacity. Meanwhile, the organization formerly known as OPEC continues to produce oil at an unprecedented pace as previously documented.

We are curious how long it will take the upward momentum-chasing oil algos to realize that the near-term supply picture has just changed dramatically.

end Just take a look at the idle tankers off the coast of Singapore: (courtesy zero hedge) Something Stunning Is Taking Place Off The Coast Of Singapore

on: “And the paper market seems blissfully unaware of it.”

He is right… for now. Because all that will take for even the algos to give up their relentless upward momentum, is for some of these tens of millions of barrels to finally come onshore, which now that contango is no longer profitable, is just a matter of time.

In the meantime, just keep track of the unprecedented parking lot of ships off the coast of Singapore: the larger it gets, the more violent the price drop will be once banks say “no more” to funding money losing charters.

end Oil falls a bit after the rig count declines have finally stalled: (courtesy zero hedge) Oil Price Slips After Rig Count Decline Stalls

For 20 of the last 21 weeks, US oil rig count has declined as it tracked the lagged oil price lower. That changed today as oil rigs were unchanged week-over-week perfectly syncing with the lagged lows in oil. Total rigs dropped 2 (thanks to gas rigs) to a new record low but even that pace has slowed dramatically. Oil prices are fading modestly on the news…

 

 

And oil prices are giving up earlier gains…

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

Euro/USA   1.1214 up .0014 ( STILL REACTING TO USA FAILED POLICY

USA/JAPAN YEN 110.35 UP .440 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4579 DOWN.0019 (LESS OF A THREAT OF BREXIT)

USA/CAN 1.3116 UP .0028

Early THIS FRIDAY morning in Europe, the Euro ROSE by 12 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED UP BY 18.56 PTS OR 0.66% / Hang Sang CLOSED UP 157.87 OR  0.80%   / AUSTRALIA IS HIGHER BY 0.53%(RESOURCE STOCKS DOING POORLY / ALL EUROPEAN BOURSES ARE ALL IN THE GREEN   as they start their morning/

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this FRIDAY morning: closed UP 89.69 OR 0.54% 

Trading from Europe and Asia:
1. Europe stocks ALL THE GREEN AS  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 157.87 PTS OR 0.80% . ,Shanghai CLOSED  UP 18.56 OR 0.66%/ Australia BOURSE IN THE GREEN: /Nikkei (Japan) CLOSED IN THE GREEN /India’s Sensex IN THE GREEN

Gold very early morning trading: $1256.20

silver:$16.55

Early FRIDAY morning USA 10 year bond yield: 1.859% !!! UP 1 in basis points from THURSDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.65 UP 1 in basis points from THURSDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early FRIDAY morning: 95.30 UP 1/3 CENT from THURSDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers FRIDAY MORNING

END

 

And now your closing FRIDAY NUMBERS

Portuguese 10 year bond yield:  3.09% PAR in basis points from THURSDAY

JAPANESE BOND YIELD: -.065% UP 2 in   basis points from THURSDAY

SPANISH 10 YR BOND YIELD:1.59%  DOWN 1 IN basis points from THURSDAY

ITALIAN 10 YR BOND YIELD: 1.49  PAR IN basis points from THURSDAY

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

GERMAN 10 YR BOND YIELD: .168% UP 2  IN BASIS POINTS ON THE DAY

END

IMPORTANT CURRENCY CLOSES FOR FRIDAY

Closing currency crosses for FRIDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

Euro/USA 1.1198 down .0021 (Euro =DOWN 21 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.93 DOWN 0.238 (Yen UP 24 basis points )

Great Britain/USA 1.4621 UP .0028 Pound UP 28 basis points/

USA/Canada 1.3083 UP 0.0055 (Canadian dollar DOWN 55 basis points with OIL RISING a BIT(WTI AT $48.17).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 21 basis points to trade at 1.1198

The Yen FELL to 109.93 for a GAIN of 24 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 28 basis points, trading at 1.4621

The Canadian dollar FELL by 55 basis points to 1.3083, WITH WTI OIL AT:  $48.17

The USA/Yuan closed at 6.5450

the 10 yr Japanese bond yield closed at -.065% UP 2 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 2  IN basis points from THURSDAY at 1.847% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.64 DOWN 4 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 95.27 UP 8 IN CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY

London:  CLOSED DOWN 112.45 OR 1.82%
German Dax :CLOSED DOWN 147.34 OR 1.48%
Paris Cac  CLOSED DOWN 36.76  OR 0.86%
Spain IBEX CLOSED DOWN 100.40 OR 1.14%
Italian MIB: CLOSED DOWN 168.06 OR 0.95%

The Dow was UP 65.54  points or 0.38%

NASDAQ UP 57.03 points or 1.21%
WTI Oil price; 48.19 at 4:30 pm;

Brent Oil: 48.80

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.71 (ROUBLE DOWN 52/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD ROSE TO .170  FOR THE 10 YR BOND

.

END

 

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:47.67

BRENT: 48.80

USA 10 YR BOND YIELD: 1.838%

USA DOLLAR INDEX: 95.27 down 4 cents

END

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

 

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Hawkish Fed Slams Stocks To Longest Losing Streak In 20 Months

With the stock markets vertical drops and pops this week, the following just seemed appropriate…

 

Since The FOMC Minutes, the long bond is leading the way with stocks, gold, and oil lower…

 

Post FOMC – Nasdaq and Small Caps led the gains with Dow the biggest loser…

 

Despite the best efforts to keep the S&P green for the week (with VIX slammed)…

 

The Dow closed red for the 4th week in a row – the longest losing streak since Oct 2014’s Bullard Bounce lows…

 

The Dow was the week’s underperformer as Trannies surged over 2%… Nasdaq broke its 5 week losing streak with AAPL up 5%!!

 

But Futures shows the chaos of the week…

 

Massive redemptions hit high yield credit markets again (yesterday was the largest daily HYG outflow ever!)

 

Treasury yields rose across the complex this week but 30Y notably outperformed…

 

With 30Y outperforming post-FOMC…

 

With 2s30s flattening a dramatic 5bps…

 

The USD Index flatlined today but ended the week up 0.7%…

 

 

The strong dollar weighed on commodities but crude rallied on the week.

 

Don’t forget – it’s OPEX!

 

Charts: Bloomberg

END

 

Insolvent Illinois has it’s state workers demanding wage increases of up to 29%. These guys also have gravy train health benefits that would make the envy of anybody in the USA

 

(courtesy Mish Shedlock)

Illinois State Workers, Highest Paid In Nation, Demand Up To 29% Wage Hikes

Submitted by Michael Shedlock via MishTalk.com,

Illinois state workers, are the highest paid in the nation.

Yet, despite the fact that Illinois is for all practical purposes insolvent, the AFSCME union demands four-year raises ranging from 11.5 to 29 percent, overtime after 37.5 hours of work per week, five weeks of vacation and enhanced health care coverage.

AFSCME workers already get platinum healthcare benefits that would make nearly everyone in the country green with envy.

This is a guest post from Ted Dabrowski at the Illinois Policy Institute, of which I am a senior fellow.

For years, Illinois taxpayers haven’t been represented at the bargaining table between Illinois’ largest government union and the state. Illinois’ former governors cared more about appeasing the American Federation of State, County and Municipal Employees than protecting the taxpayers the governors were supposed to represent. That’s how AFSCME workers have become some the highest-compensated state workers in the nation.

Now the union is working overtime to remove Gov. Bruce Rauner – who actually represents taxpayers’ interests – from labor contract negotiations. The union supports House Bill 580, which would strip the governor of his ability to negotiate. AFSCME wants the current contract dealings turned over to unelected arbitrators who are likelier to decide in the union’s favor.

AFSCME wants to remove the governor from contract negotiations because union officials know Rauner will not agree to outrageous demands. Union leaders are demanding $3 billion in additional salary and benefits for union members in a new contract. They’re seeking four-year raises ranging from 11.5 to 29 percent, overtime after 37.5 hours of work per week, five weeks of vacation and enhanced health care coverage. Those additional demands would come on top of the costly benefits that AFSCME workers already receive.

Here are four facts about state-worker compensation the union doesn’t want taxpayers to know:

1. Illinois state workers are the highest-paid state workers in the country

Illinois state workers are the highest-paid state workers in the country when adjusted for cost of living. Illinois pays its state workers more than $59,000 a year, far more than its neighbors and nearly $10,000 more than the national average.

Moreover, state AFSCME workers have received salary increases not matched in Illinois’ private sector.

Median AFSCME worker salaries increased more than 40 percent from 2005 to 2014, reaching more than $62,800. During that same period, median private-sector earnings in Illinois remained virtually flat.

2. AFSCME workers receive Cadillac health care benefits

In addition to paying state workers the highest salaries in the nation, Illinois taxpayers also subsidize a majority of AFSCME workers’ Cadillac health care benefits.

The average AFSCME worker receives the ObamaCare equivalent of platinum-level benefits, but only pays the equivalent of bronze-level insurance premiums. That forces a vast share of AFSCME workers’ health care costs onto state taxpayers.

AFSCME workers pay for just 23 percent of their health care costs, or $4,452 a year. State taxpayers pay the remaining 77 percent, or an average of $14,880 per worker.

3. Most state workers receive free retiree health insurance

The state also subsidizes 100 percent of the health insurance costs for state retirees who spent 20 or more years working for the state. Such a benefit is almost unheard of in the private sector.

This benefit costs taxpayers $200,000 to $500,000 per state retiree. An ordinary worker in the private sector thus would need to have $200,000 to $500,000 in the bank before retirement to purchase the insurance most retired state workers get for free.

4. Career state retirees on average receive $1.6 million in pension benefits

Thanks to unrealistic pension rules, career state workers – meaning those who work 30 or more years – will average $1.6 million in benefits over the course of their retirements.

That’s on top of Social Security benefits, which nearly all state workers receive. In addition, over half of state workers end up retiring in their 50s.

It’s not fair that Illinois residents, struggling with stagnant incomes in one of the nation’s weakest economies, continue to subsidize AFSCME benefits to such an extent.

Many other unions that contract with the state have recognized that taxpayers can’t afford higher taxes to fund even greater pay and benefits for state workers. Officials from more than 17 unions, including the Teamsters, understood the depth of Illinois’ fiscal crisis and agreed to affordable contracts with the state.

AFSCME, which represents a mere 0.5 percent of Illinois’ total labor force (35,000 state workers out of a total 6.5 million workers), is putting undue pressure on the state and its finances.

The General Assembly needs to allow the governor’s veto of HB 580 to stand.

Instead of increasing benefits as AFSCME has demanded, the state should work to bring its employees’ total compensation more in line with what the private sector can afford.

Ted Dabrowski
Vice President of Policy

Question of Fairness

The AFSCME seeks “fairness”. I wholeheartedly agree. Here is my eight-point proposal.

  1. Cut AFSCME salaries an average of 40%
  2. Make AFSCME employees contribute 50% to health care plans.
  3. Drop AFSCME retiree health benefits entirely. Put them on Medicare.
  4. Put caps on pension pay.
  5. Kill defined benefit pension plans entirely for new hires.
  6. Pass right-to-work legislation.
  7. Allow municipalities to go bankrupt.
  8. Kill all prevailing wage laws,
end Chicago’s pension liabilities jump by 168% and understated by a huge 11.5 billion. It sure looks like Chicago is the next Detroit: (courtesy Mish Shedlock) Chicago Pension Liabilities Jump 168%, Understated By $11.5 Billion

Submitted by Michael Shedlock via MishTalk.com,

New accounting rules show Chicago has understated its pension liabilities by $11.5 billion.

At the end of 2015 the stated liability was $7.1 billion. Today it’s $18.6 billion. That’s a jump in net liabilities of 168%.

Mayor Rahm Emanuel has hopes pinned on union concessions and help from the state legislature. Neither is likely.

Out of Money in 10 Years

Bloomberg reports Chicago’s Pension-Fund Troubles Just Became $11.5 Billion Bigger.

Thanks to the defeat of the city’s retirement-fund overhaul by the Illinois Supreme Court and new accounting rules, Chicago’s so-called net pension liability to its Municipal Employees’ Annuity and Benefit Fund soared to $18.6 billion by the end of 2015 from $7.1 billion a year earlier, according to an annual report presented to the fund’s board on Thursday. The fund serves some 70,000 workers and retirees.

 

Decisions that are now adding hundreds of millions of dollars to its annual bills have left Chicago with a lower credit rating than any big U.S. city but once-bankrupt Detroit.

 

The latest estimate for the municipal fund, one of Chicago’s four pensions, will add to what had been an unfunded liability estimated at $20 billion.

 

A key driver was the court ruling striking down Mayor Rahm Emanuel’s plan that cut benefits and boosted city and employee contributions. Without it in place, the fund is now set to run out of money within 10 years.

 

That triggered another change. New accounting rules, adopted to keep governments from using overly optimistic investment-return forecasts to mask the scale of their liabilities, require them to use more modest assumptions once pension plans go broke. As a result, the reported liabilities jump.

 

Under the traditional way of estimating the municipal fund’s obligations, which is how annual contributions are set, the shortfall rose to $9.9 billion as of Dec. 31, based on market value of its assets, according to the actuaries report. That’s up from $7.1 billion a year earlier. The pension is only 32 percent funded — meaning it has 32 cents for every dollar it owes — compared to 42 percent last year, according to the actuaries.

“Very Good Discussions”

Emanuel claims to have “very good discussions” with the unions. That means one of two things.

  1. Emanuel’s mind has gone to mush.
  2. Emanuel is telling the unions he will hike taxes again, and again, and again.

In retrospect, those are the same thing.

Fluidity

Meanwhile, Jim Mohler, executive director of the fund, told board members on Thursday that it’s a “fluid situation.”

Mohler cited pending legislation in the Illinois legislature to bail out Chicago.

The only thing fluid is the exact timing of the bill followed by Governor Bruce Rauner’s immediate veto.

Super-Majority Theory and Practice

The Democrat controlled legislature has a super-majority that could in theory override Rauner’s veto. However, the legislature could have passed anything they wanted all year long. Yet, Illinois still does not have a budget.

In practice, there are a few “blue dog Democrats” that have a bit of fiscal sense.

And in this case, add in a bunch of downstate legislators who won’t relish hiking taxes to bail out bankrupt Chicago pensions.

Pension Shortages

Will downstate legislators and “blue dog” Democrats vote to bail out that mess?

It’s possible, but color me skeptical. Is Emanuel going to get union concession?

That idea sounds even sillier.

Stock Market Valuations and Assumptions

The Chicago pensions are 32% funded despite the biggest bull market in history. What happens if the market has negative returns for even a few years?

The answer is the pension plans will go bust before 10 years pass.

The sorry state of affairs is stock and bonds have such lofty valuations that negative returns are likely not for a few years, bit seven to ten years.

“One Big Worldwide Bubble”: Cusp of 30-Year Bear Market in Stocks and Bonds

I side with Milton Berg, founder and CEO of MB advisors says “One Big Worldwide Bubble”: Cusp of 30-Year Bear Market in Stocks and Bonds.

 

Please click on the above link for a fantastic interview with Berg.

Tax Hikes Not the Solution

The pension mess and the Chicago public school mess cannot be placed on the backs of Illinois taxpayer.

Mayor Emanuel already passed the biggest tax hike in history. Here are some links for discussion:

Solution is Bankruptcy

If Mayor Emanuel really wanted to do something for the city and city taxpayers, he would be begging House Speaker Michael Madigan for the one and only thing that can help the city: legislation that would allow Illinois municipal bankruptcies.

Let’s stop pretending there is another solution, because there isn’t.

end Consumer loan delinquencies have been hanging in there but it is business loan soaring that is causing much grief for the Fed: (courtesy Wolf Richter/WolfStreet) Business Loan Delinquencies Spike To Lehman Moment Level

Submitted by Wolf Richter via WolfStreet.com,

A leading indicator of big trouble.

This could not have come at a more perfect time, with the Fed once again flip-flopping about raising rates. After appearing to wipe rate hikes off the table earlier this year, the Fed put them back on the table, perhaps as soon as June, according to the Fed minutes. A coterie of Fed heads was paraded in front of the media today and yesterday to make sure everyone got that point, pending further flip-flopping.

Drowned out by this hullabaloo, the Board of Governors of the Federal Reserve released itsdelinquency and charge-off data for all commercial banks in the first quarter – very sobering data.

So here a few nuggets.

Consumer loans and credit card loans have been hanging in there so far. Credit card delinquencies rose in the second half of 2015, but in Q1 2016, they ticked down a little. And mortgage delinquencies are low and falling. When home prices are soaring, no one defaults for long; you can sell the home and pay off your mortgage. Mortgage delinquencies rise after home prices have been falling for a while. They’re a lagging indicator.

But on the business side, delinquencies are spiking!

Deli

nquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail.

Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion. They’re halfway toward to the all-time peak during the Financial Crisis in Q3 2009 of $53.7 billion. And they’re higher than they’d been in Q3 2008, just as Lehman Brothers had its moment.

Note how, in this chart by the Board of Governors of the Fed, delinquencies of C&I loans start rising before recessions (shaded areas). I added the red marks to point out where we stand in relationship to the Lehman moment:

Business loan delinquencies are a leading indicator of big economic trouble. They begin to rise at the end of the credit cycle, on loans that were made in good times by over-eager loan officers with the encouragement of the Fed. But suddenly, the weight of this debt poses a major problem for borrowers whose sales, instead of soaring as projected during good times, may be shrinking, and whose expenses may be rising, and there’s no money left to service the loan.

The loan officer, feeling the hot breath of regulators on his neck, and seeing the Fed fiddle with the rate button, refuses to “extend and pretend,” as the time-honored banking practice is called of kicking the can down the road in good times.

If delinquencies are not cured within a specified time, they’re removed from the delinquency basket and dropped into the default basket. When defaults are not cured within a specified time, the bank deems a portion or all of the loan balance uncollectible and writes it off, therefore moving it out of the default basket into the write-off basket. That’s why the delinquency basket doesn’t get very large – loans don’t stay in it very long.

And farmers are having trouble.

Slumping prices of agricultural commodities have done a job on farmers, many of whom are good-sized enterprises. Farmland is also owned by investors, including hedge funds, who’ve piled into it during the boom, powered by the meme that land prices would soar for all times because humans will always need food. Then they leased the land to growers.

Now there are reports that farmland, in Illinois for example, goes through auctions at prices that are 20% or even 30% below where they’d been a year ago. Land prices are adjusting to lower farm incomes, which are lower because commodity prices have plunged. (However, top farmland still fetches a good price.)

Now delinquencies of farmland loans and agricultural loans are sending serious warning signals. These delinquencies don’t hit the megabanks. They hit smaller specialized farm lenders.

Delinquencies of farmland loans jumped 37% from $1.19 billion in Q3 2015 to $1.64 billion in Q1 this year, the vast majority of it in the last quarter (chart by the Board of Governors of the Fed):

Delinquencies of agricultural loans spiked 108% in just two quarters to $1.05 billion in Q1. On the way up during the financial crisis, they’d shot past that level during Q1 2009:

Bad loans are made in good times — the oldest banking rule. “Good times” may not be a good economy, but one when rates are low and commercial loan officers are desperate to bring in some interest income. With a wink and a nod, they extend loans to businesses that look good for the moment. That has been the case ever since the Fed repressed interest rates during the Financial Crisis. A lot of bad loans were made during those “good times,” precisely as the Fed had encouraged them to do. And these loans are now coming home to roost.

One of the big indicators of the end of the “credit cycle” is the number of bankruptcies. During good times, so earlier in the credit cycle, companies borrow money. Lured by low interest rates and rosy-scenario rhetoric, they borrow even more. Then reality sets in.

Read… US Commercial Bankruptcies Skyrocket

end

 

Existing homes sales tumble in the south and the west regions of the USA.  However what saved the day is condo sales.

Existing Home Sales Tumble In South, West Regions; Condo Sales Soar

Single-family existing home sales rose just 0.6% MoM in April with The South and The West regions seeing notable declines in sales (down 2.7% and down 1.7% respectively). What saved the headline print was a 10.3% surge in Condo sales – among the best monthly spikes since the crisis helped by a spike in sales in The Midwest – where prices are most affordable.

Condos saved the day:

 

While supply of single-family homes is rising, the demand was again all on condos:

The median price of existing homes:

Single-family home sales inched forward 0.6 percent to a seasonally adjusted annual rate of 4.81 million in April from 4.78 million in March, and are now 6.2 percent higher than the 4.53 million pace a year ago. The median existing single-family home price was $233,700 in April, up 6.2 percent from April 2015.

 

Existing condominium and co-op sales jumped 10.3 percent to a seasonally adjusted annual rate of 640,000 units in April from 580,000 in March, and are now 4.9 percent above April 2015 (610,000 units). The median existing condo price was $223,300 in April, which is 6.8 percent above a year ago.

Lawrence Yun, NAR chief economist, says April’s sales increase signals slowly building momentum for the housing market this spring.

“Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home,” he said.

 

“Except for in the West — where supply shortages and stark price growth are hampering buyers the most — sales are meaningfully higher than a year ago in much of the country.”

Regionally, the story is very mixed…

  • April existing-home sales in the Northeast climbed 2.8 percent to an annual rate of 740,000, and are now 17.5 percent above a year ago. The median price in the Northeast was $263,600, which is 4.1 percent above April 2015.
  • In the Midwest, existing-home sales soared 12.1 percent to an annual rate of 1.39 million in April, and are now 12.1 percent above April 2015. The median price in the Midwest was $184,200, up 7.7 percent from a year ago.
  • Existing-home sales in the South declined 2.7 percent to an annual rate of 2.19 million in April, but are still 4.3 percent above April 2015. The median price in the South was $202,800, up 6.5 percent from a year ago.
  • Existing-home sales in the West decreased 1.7 percent to an annual rate of 1.13 million in April, and are 3.4 percent lower than a year ago. The median price in the West was $335,000, which is 6.5 percent above April 2015.

The West is exhibiting a notable trend with low-end sales plunging and higher-end rising…

 

Which price buckets saw the most transactions:

And Y/Y transactions by bucket:

The NAR’s chief economy Larry Yun warns again:

“The temporary relief from mortgage rates currently near three-year lows has helped preserve housing affordability this spring, but there’s growing concern a number of buyers will be unable to find homes at affordable prices if wages don’t rise and price growth doesn’t slow.”

Finally, it is worth noting that since the data was better than expected, there was no scapegoating of “weather” this time.

end

 

This is a huge problem:  Lake Mead water levels at 1080 feet and coming very close to the danger level of 1075.00 feet.  Lake Mead provides drinking water to Las Vegas, most of Nevada and parts of Arizona and parts of California.

Leaking Las Vegas: Lake Mead Plunges To Lowest Level Ever As “The Problem Is Not Going Away”

The hopes of an El Nino-driven refill from last summer’s plunging levels of the nation’s largest reservoir have been dashed as AP reportsLake Mead water levels drop to new record lows (since it was filled in the 1930s) leaving Las Vegas facing existential threats unless something is done. Las Vegas and its 2 million residents and 40 million tourists a year get almost all their drinking water from the Lake and at levels below 1075ft, the Interior Department will be forced to declare a “shortage,” which will lead to significant cutbacks for Arizona and Nevada. As one water research scientist warned, “this problem is not going away and it is likely to get worse, perhaps far worse, as climate change unfolds.”

As USA Today reports,the nation’s largest reservoir has broken a record, declining to the lowest level since it was filled in the 1930s.

Lake Mead reached the new all-time low on Wednesday night, slipping below a previous record set in June 2015.

 

The downward march of the reservoir near Las Vegas reflects enormous strains on the over-allocated Colorado River. Its flows have decreased during 16 years of drought, and climate change is adding to the stresses on the river.

 

As the levels of Lake Mead continue to fall, the odds are increasing for the federal government to declare a shortage in 2018, a step that would trigger cutbacks in the amounts flowing from the reservoir to Arizona and Nevada. With that threshold looming, political pressures are building for California, Arizona and Nevada to reach an agreement to share in the cutbacks in order to avert an even more severe shortage.

 

“This problem is not going away and it is likely to get worse, perhaps far worse, as climate change unfolds,” said Brad Udall, a senior water and climate research scientist at Colorado State University. “Unprecedented high temperatures in the basin are causing the flow of the river to decline. The good news is that we have time and the smarts to manage this, if all the states work together.”

 

He said that will require “making intelligent but difficult changes to how we have managed the river in the past.”

 

As of Thursday afternoon, the lake’s level stood at an elevation of about 1,074.6 feet.

Lake Mead water levels sink to a new record low – notably ahead of the seasonally-normal lows…

Under the federal guidelines that govern reservoir operations, the Interior Department would declare a shortage if Lake Mead’s level is projected to be below 1,075 feet as of the start of the following year. In its most recent projections, the Bureau of Reclamation calculated the odds of a shortage at 10 percent in 2017, while a higher likelihood – 59 percent – at the start of 2018.

But those estimates will likely change when the bureau releases a new study in August. Rose Davis, a public affairs officer for the Bureau of Reclamation, said if that study indicates the lake’s level is going to be below the threshold as of Dec. 31, a shortage would be declared for 2017.

That would lead to significant cutbacks for Arizona and Nevada. California, which holds the most privileged rights to water from the Colorado River, would not face reductions until the reservoir hits a lower trigger point.

http://c.brightcove.com/services/viewer/federated_f9?isSlim=1

 

As AP concludes,

Officials in Nevada, Arizona and California are working on a deal to keep water in the lake by giving up some of their Colorado River water.

 

The river serves about 40 million residents in seven Southwest states. Two key points are lakes Powell and Mead, the largest reservoir in the system.

 

Lake Mead’s high-water capacity is 1,225 feet above sea level. It reaches so-called “dead pool” at just under 900 feet, meaning nothing would flow downstream from Hoover Dam.

As population growth and heavy demand for water collide with hotter temperatures and reduced snowpack in the future, there will be an even greater mismatch between supply and demand, said Kelly Sanders, an assistant professor at the University of Southern California who specializes in water and energy issues.

“The question becomes how to resolve this mismatch across states that all depend on the river to support their economic growth,” Sanders said. She expects incentives and markets to help ease some of the strains on water supplies, “but it is going to be tricky to make the math work in the long term.”

 end

Let us wrap up the week with this commentary from Greg Hunter of USAWatchdog

(courtesy Greg Hunter/USAWatchdog) Saudi Financial Trouble Means US Financial Trouble, Fed Rate Hike Fake-Out, Bernie Beats Clinton-Again

 

Saudi Arabia is in deep financial trouble, and that spells financial trouble for the U.S. Let’s connect the dots. Shall we?  The Senate just passed a bill that releases 28 secret pages from the 9/11 Report, and it also allows the families sue the Kingdom if it was involved in the attack.  Saudi has threatened to dump U.S. assets if this becomes law.  Some people say they would never do that because it would hurt them.  I say, they may be forced to sell U.S. Treasuries and other assets because they need the money.  This is against the backdrop of reports of Saudi Arabia paying workers and contractors with IOUs and mass layoffs in the Kingdom.  No wonder why Moody’s just downgraded Saudi debt.  This week, we also find out how much U.S. debt Saudi owns.  It’s $117 billion.  I would say this is on the top of the list to raise cash fast, and Saudi is not alone in the need for cash.  This headline from CNN says it all:“U.S. Debt Dump Deepens in 2016.”   China, Russia and Brazil are a few more of the many sellers of U.S. debt.  How long can this go on for without something breaking?  What if everybody holding U.S. debt sells?  Not for some punishing reason but just because they need the cash.

The Fed is faking us all out again or are they? Fed Presidents Lacker and Dudley are pitching the possibility of a Fed rate hike–again.  They are saying things such as “June is a live meeting.”  I say no way they hike rates unless they want to intentionally crash the economy.  Can’t see Fed Head Janet Yellen signing on to that less than 6 months before a Presidential election.  This is much like the story of the little boy who cried wolf.  The economy is terrible and no way is it getting better.

Is the global economy so bad that it is raising the specter of war? The U.S. just hit China with a more than 500% tariff on its steel exports.  Of course, China is pissed, but it is flooding the world with cheap steel, and it is basically causing damage to its global competitors.  Add that to the fact that thing are continuing to heat up in the South China Sea, and China continues to make military threats if the U.S. doesn’t back off.  Meanwhile, in Europe, the Guardian UK is reporting “West and Russia on course for war, says ex-Nato deputy commander.” This war scenario is laid out in a new book by Former British General Alexander Richard Shirreff.

Hillary Clinton just cannot put away Bernie Sanders in the race for the Democratic nomination. Best she could do was a virtual tie in Kentucky and got whipped again in Oregon.  Some of Bernie’s supporters call Hillary “Slillary.”  It is amazing how weak the Clinton campaign looks, especially when you consider that Bernie is competing not only with Clinton but the entire DNC, which gives out super delegates to rig the system in Clinton’s favor.  I think Sanders is going to win California, but that only adds to her problems.  Remember, there is still that ongoing FBI criminal investigation on Clinton and her private unprotected server.

 

Join Greg Hunter as he looks at these stories and more in the Weekly News Wrap-Up.

After the WNW:

 

 

 

end

 

Well that is all for today

I wish all my fellow Canadians a very happy Victoria  holiday weekend

I will see you all Monday evening

Harvey


MAY 19/Gld adds 4.45 tonnes of gold with the price of gold down $19.50?/China fires another shot across the bow by devaluing the yuan by the most since last August/Vicious raid against gold and silver today but gold/silver equity shares rise/Egyptian...

Thu, 05/19/2016 - 18:40

Good evening Ladies and Gentlemen:

Gold:  $1,254.20 DOWN $19.50    (comex closing time)

Silver 16.48  DOWN 64 cents

In the access market 5:15 pm

Gold $1254.70

silver:  16.51

Yesterday I wrote the following:

“No doubt that the entire trading of gold and silver today was orchestrated by our crooked banks. They were massively selling paper gold throughout the night and early morning. Even the one billion dollar bid for gold early this morning did not spook the crooks.  At 2 pm they released the beige book report and the Fed stated that it is likely that they will raise rates in June. The USA should raise rates but the problem will be China who has threatened to lower dramatically the yuan and in so doing would absolutely kill Japan, South Korea and the emerging markets. Besides no Fed would be stupid enough to raise rates three months before a USA election.”

 

China wasted no time firing another shot across the bow by  devaluing the yuan further today,and this put tremendous pressure on global markets.

 

The amount standing for gold in May is simply outstanding at 6.504 tonnes, remaining constant by from yesterday.  The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

Let us have a look at the data for today

.

At the gold comex today we had a POOR delivery day, registering 0 notices for NIL ounces for gold,and for silver we had 3 notices for 15,000 oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 240.39 tonnes for a loss of 63 tonnes over that period

.

In silver, the open interest FELL by 2,465 contracts DOWN to 204,929 as the price was silver was DOWN  by 11 cents with respect to yesterday’s trading. NOT NEARLY THE LIQUIDATION THAT THEY HAVE BEN LOOKING FOR. In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.024 BILLION TO BE EXACT or 146% of annual global silver production (ex Russia &ex China)

In silver we had 1 notice served upon for 5,000 oz.

In gold, the total comex gold OI fell by a CONSIDERABLE 4,377 contracts down to 590,700 as the price of gold was DOWN $2.50 with yesterday’s trading(at comex closing).

 

 

 

As far as the GLD, THE FOLLOWING MAKES NO SENSE AT ALL: WE HAD A HUGE DEPOSIT OF 4.42 TONNES in inventory at the GLD WITH GOLD DOWN $19.50. The inventory rests at 860.34 tonnes. We had no changes in silver inventory at the SLV. Inventory rests at 335.073 million oz.

.

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

1. Today, we had the open interest in silver rise by 1,180 contracts UP to 207,394 as the price of silver was DOWN by 11 cents with yesterday’s trading. The gold open interest FELL by 1,436 contracts as  gold was up $2.50 yesterday. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Harvey/zero hedge)

3. ASIAN AFFAIRS

i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN  BY 36.10 PTS OR 1.27%  /  Hang Sang closed DOWN 292.39 OR 1.45%. The Nikkei closed DOWN 8.11 POINTS OR 0.06% . Australia’s all ordinaires  CLOSED DOWN 0.74% Chinese yuan (ONSHORE) closed DOWN at 6.5362 as China fired another shot across the bow telling the USA not to raise rates.  Oil ROSE to 47.76 dollars per barrel for WTI and 48.80 for Brent. Stocks in Europe  MOSTLY IN THE GREEN . Offshore yuan trades  6.5581 yuan to the dollar vs 6.5362 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS.

REPORT ON JAPAN  SOUTH KOREA AND CHINA a) REPORT ON JAPAN

none today

b) REPORT ON CHINA

i)As promised, the POBC has sent a message to the Fed tonight concerning their “likely” raising their interest rate in June:  the second largest devaluation since August:6.56557

Time:  10 pm est:

USDCNY:CUR  onshore 6.5420 CNY 0.0034 0.05% As of 10:07 PM EDT 5/18/2016 USA/CNH U.S. Dollar/Chinese Yuan 6.56776  offshore -0.00683 (-0.10%) yesterday’s closing prior to China’s opening: Offshore yuan trades  6.5581 yuan to the dollar vs 6.5362 on shore CHINA’S MESSAGE TO THE USA IS SIMPLE:  EITHER ABANDON THOUGHTS OF A RATE INCREASE AND LET CHINA REFLATE OUR ELSE CHINA WILL DEVALUE HUGELY BRINGING MASSIVE TURMOIL TO ALL MARKETS;  CHECK TO JANET YELLEN!! ( zero hedge)

ii)After annoying the Russians by flying very close to their territory, the USA decided it was high time to annoy the Chinese:

 

( zero hedge) iii)China is furious with the USA over the 522% duty on steel.  It is probably China’s falt for increasing its capacity so much to produce that steel.  It now has huge excesses and as countries seek protectionism, that inventory will stay stationary inside China:

( zero hedge)   4.EUROPEAN AFFAIRS

i)Looks like the EU-Turkey migrant deal is falling apart as EU has second thoughts on granted 80,000 visa entry to Turkish citizens.  The threat of unwanted people entering Europe is weighing in on the issue

 

( Soeren Kern/Gatestone Institute)

 

ii)Why Tim Price is voting to leave the EU:

I also urge you to watch the BREXIT movie ( Tim Price/SovereignMan.com) 5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)Egyptian aircraft carrying 66 on board crashes into the Med. Sea.  It seems it blew up in mid air and thus it sure looks like another terrorist attack:

( zero hedge)

 

ii)Then at 1 pm CNN reports that it was a bomb that blew up the Egyptian Airliner:

( zero hedge)

6.GLOBAL ISSUES

FIVE BANKS INCLUDING BANK OF AMERICA AND DEUTSCHE BANK HAVE BEEN SUED OVER MANIPULATION IN AGENCY BONDS:

(COURTESY BLOOMBERG)

 

7.PHYSICAL MARKETS

i)Doug Pollitt comments on gold’s continuing respect

(courtesy Doug Pollitt/GATA

 

ii)GoldMoney launches a gold payroll and gold payout application for the BitGold business platform

( Business Wire/SF California/GATA))

 

8.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD AND SILVER

i)Late last night, Elizabeth Holmes admits that billion dollar company Theranos is a fraud: the technology is a fraud:

( zero hedge)

ii)Bellwether Caterpillar has retail sales falling for a record 41 consecutive months.The global growth is stagnant!

( zero hedge)

 

iii)Dudley disappoints and this causes stocks to fall some more.  He is totally unhappy that even a hint that the Fed will hike causes markets to falter:

( zero hedge) iv)Basically Gundlach feels that something has changed at the Fed. I don’t think anything changed:  The Fed cannot raise rates because the economy is in poor shape, it would be foolish to raise rates with an election in November and most importantly, China will certainly react to a higher dollar by devaluing its yuan:

(courtesy zero hedge/Jeff Gundlach) v)Highmark insurer is now asking for money owed by the Fedeal government for some of its losses:

( zero hedge) vi)Puerto Rico is to be bailed out.  The bondholders are not happy with the result:

( zero hedge) vii)USA jobless claims continue to rise:  278,000 vs est. 275,000

( Reuters) Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 590,700 for a CONSIDERABLE LOSS of 4,377 contracts AS  THE PRICE OF GOLD WAS DOWN  $2.50 with respect to YESTERDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED.   The month of May saw its OI FALL 8 contracts DOWN to 111. We had 8 notices filed  YESTERDAY so we NEITHER GAINED NOR LOST ANY gold contracts THAT will stand for delivery. The next big active gold contract is June and here the OI FELL by 16,523 contracts DOWN to 304,683 as those paper players that wished to stay in the game rolled to August AND THE REST STAYED PUT FOR NOW AND THE REMAINDER LEFT PERMANENTLY. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at 359,767. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was EXCELLENT at 275,430 contracts. The comex is not in backwardation. We are LESS THAN 2 weeks away from first day notice for the huge June contract.(8 trading sessions)

Today we had 0 notices filed for NIL oz in gold.

 

And now for the wild silver comex results. Silver OI FELL by A SMALL 2467 contracts from 207,394 DOWN to 204,929 as the price of silver was DOWN BY 11 cents with YESTERDAY’S TRADING.We HAVE NOW SURPASSED the all time high OI in silver of 206,748. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 2 contracts DOWN to 727. We had 3 notices filed yesterday so we  gained 1 contract or an additional 5,000 oz of silver will stand in this non-active delivery month of May. The next non active month of June saw its OI RISE by 10 contracts UP to 849 OI. The next big delivery month is July and here the OI FELL by 2,957 contracts down to 137,790. The volume on the comex today (just comex) came in at 79,964 which is HUGE. The confirmed volume YESTERDAY (comex + globex) was EXCELLENT at 64,937. Silver is  in backwardation up to June. London is in backwardation for several months.   We had 3 notices filed for 15,000 oz.  

MAY contract month:

INITIAL standings for MAY

May 19. Gold Ounces Withdrawals from Dealers Inventory in oz   nil Withdrawals from Customer Inventory in oz  nil  11,284.25 OZ

MANFRA, SCOTIA

351 KILOBARS Deposits to the Dealer Inventory in oz  

 

 

NIL Deposits to the Customer Inventory, in oz    NIL No of oz served (contracts) today 8 contracts
(800 oz) No of oz to be served (notices) 111 CONTRACTS

11,100 OZ Total monthly oz gold served (contracts) so far this month 1980 contracts (198,000 oz) Total accumulative withdrawals  of gold from the Dealers inventory this month   nil Total accumulative withdrawal of gold from the Customer inventory this month  282,272.4 OZ

Today we had 0 dealer deposits

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

 

Today we had 0 customer deposit:

Total customer deposits;NIL OZ

Today we had 2 customer withdrawals:

i) Out of Manfra:  32.15 oz  I KILOBARS

ii) Out of Scotia:  11,252.500 oz  (350 kilobars)

total customer withdrawals: 11,284.65 OZ  351 kilobars)

Today we had 1 adjustment:

i) Out of jpm:

11,115.419 oz was removed from the dealer jpm and into the customer jpm and that will be deemed a settlement:  1.5635 tonnes

ii) out of HSBC: 70,412.998 oz was removed from the dealer HSBC and this lands into the customer account of HSBC

total  81,525.417 oz or 2.53 tonnes

 

Today, 0 notices was 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 0 contracts of which 0 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account.  To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (1980) x 100 oz  or 198,000 oz , to which we  add the difference between the open interest for the front month of MAY (111 CONTRACTS) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals 209,000 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE    Thus the initial standings for gold for the MAY. contract month: No of notices served so far (1980) x 100 oz  or ounces + {OI for the front month (119) minus the number of  notices served upon today (0) x 100 oz which equals xxxx oz standing in this non  active delivery month of MAY(6.5038 tonnes). WE NEITHER GAINED NOR LOST ANY GOLD OUNCES STANDING IN THIS NON ACTIVE DELIVERY MONTH OF MAY. Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you.    We thus have 6.5038 tonnes of gold standing for MAY and 19.595 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing. We now have partial evidence of gold settling for last months deliveries We now have 6.5038 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes  = 16.8525 tonnes still standing against 19.595 tonnes available.   Total dealer inventor 630,004.832 tonnes or 19.595 tonnes Total gold inventory (dealer and customer) =7,728,641.388 or 240.39 tonnes    Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 240.39 tonnes for a loss of 63 tonnes over that period.    JPMorgan has only 22.79 tonnes of gold total (both dealer and customer) JPMorgan now has only .900 tonnes left in its dealer account. May is not a very good delivery month and yet 6.5079 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.  end And now for silver  

MAY INITIAL standings

 May 19.2016

Silver Ounces Withdrawals from Dealers Inventory nl oz Withdrawals from Customer Inventory  406,486.34 oz

CNT, BRINKS Deposits to the Dealer Inventory  NIL Deposits to the Customer Inventory  604,095.600 OZ

,JPM, No of oz served today (contracts) 3 CONTRACTS 

15,000 OZ No of oz to be served (notices) 724 contracts

3,620,000 oz Total monthly oz silver served (contracts) 2056 contracts (10,280,000 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  7,694,710.1 oz

today we had 0 deposit into the dealer account

total dealer deposit:NIL oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposits:

i) Into JPM: 604,095.600 oz

Total customer deposits: 604,095.600 oz.

We had 2 customer withdrawals

i) out of CNT: 405,486.34 oz

ii) Out of BRINKS: 1,000.000 oz ??

:

total customer withdrawals:  406,486.34 oz

   

 

 we had 0 adjustment

 

The total number of notices filed today for the MAY contract month is represented by 3 contracts for 15,000 oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (2056) x 5,000 oz  = 10,280000 oz to which we add the difference between the open interest for the front month of MAY (727) and the number of notices served upon today (3) x 5000 oz equals the number of ounces standing    Thus the initial standings for silver for the MAY contract month:  2056 (notices served so far)x 5000 oz +(727{ OI for front month of MAY ) -number of notices served upon today (3)x 5000 oz  equals 13,900,000 oz of silver standing for the MAY contract month. WE GAINED ONE SILVER CONTRACTS TODAY OR AN ADDITIONAL 5,000 OZ WILL STAND.   Total dealer silver:  29.67 million Total number of dealer and customer silver:   153.537 million oz The open interest on silver is NOW AT CLOSE an all time high with the record of 207,394 being set May 18.2016. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver. end And now the Gold inventory at the GLD May 19/ANOTHER HUGE DEPOSIT OF 4.46 TONNES OF GOLD INTO THE GLD/iNVENTORY RESTS AT 860.34 TONNES May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes. May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition.. May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN??? May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes April 28/we gained 1.49 tonnes of gold at the GLD/Inventory rests at 804.14 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 19.:  inventory rests tonight at 860.34 tonnes

end

Now the SLV Inventory May 19/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz May 12/no change in silver inventory/rests tonight at 335.073 million oz/  May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/ May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz. May 9. no change in silver inventory/rests at 336.119 million oz. May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV INVENTORY RESTS AT 336.119 MILLION OZ MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580 April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz . May 19.2016: Inventory 335.073 million oz end   1. Central Fund of Canada: traded at Negative 3.9 percent to NAV usa funds and Negative 3,9% to NAV for Cdn funds!!!! Percentage of fund in gold 61.5% Percentage of fund in silver:37.1% cash .+1.4%( May 19/2016). 2. Sprott silver fund (PSLV): Premium rises   to -.01%!!!! NAV (MAY 19.2016)  3. Sprott gold fund (PHYS): premium to NAV  RISES 1.25% to NAV  ( MAY 19.2016) Note: Sprott silver trust back  into NEGATIVE territory at -01% /Sprott physical gold trust is back into positive territory at +1.22%/Central fund of Canada’s is still in jail. It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to -.01%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.      

END

And now your overnight trading in gold,THURSDAY MORNING and also physical stories that may interest you: Trading in gold and silver overnight in Asia and Europe Mark O’Byrne (goldcore) Buy Gold and Silver Coins and Bars – Leading Irish Financial Adviser By Mark O’ByrneMay 18, 20160 Comments

Buy gold and silver coins and bars for delivery and storage has advocated a leading Irish financial adviser. Eddie Hobbs has given advice to his clients and says that they should buy silver and gold bullion in order to protect from the coming global financial crisis.


In his most recent research report, ‘Outlook, May 2016’ he said that

“Not holding gold is now, in my opinion, high risk. Gold is the single asset class that protects both against deflation and especially against inflation. The case for gold against this backdrop has strengthened and not weakened.”

Below are the key excerpts from the excellent report regarding gold and silver:

OWN SOME GOLD

As a financial practice we have been recommending gold to our clients since 2005. Gold prices peaked to $1,900 an ounce before declining to the current trading range of between $1,000 and $1,300, i.e. approximately €1,100 at current prices.

The nominal value for gold, if there was a gold standard implemented, would be between $7,000 and $9,000 an ounce, it has been calculated.

This does not mean that gold could go to these prices, but what it does tell us is that it has the potential to go to these values in the event of a loss of confidence in global currencies, especially the US Dollar.

Gold is not an investment, but rather a hedge, and insurance against the potential for substantial falls in other parts of your balance sheet. As a general rule we recommend that between 5% and 10% of liquid assets are held in gold.

We had discontinued recommending clients holding gold from 2012 to 2016 and, once again, it forms the mainstay on all client recommendations for good reason: Gold should be considered a form of money, a The value of gold as against the Euro is outlined in the tables below: 2005 + 36.7% 2011 +14.2% 2006 + 10.6% 2012 + 4.9% 2007 + 18.4% 2013 – 31.2% 2008 + 10.5% 2014 +12.1% 2009 + 20.7% 2015 – 0.3% 2010 + 37.1%

We first started adding gold to client portfolio recommendations in 2005, when gold was about €300 per ounce, and stopped about three years ago. Gold, having spiked up to €1,370, is now hovering around €1,100 per ounce and once again looks like reasonable value set against the above backdrop risk.

HOLD SOME SILVER COINS

Holding a small amount of cash or gold and silver coins at home makes sense provided you’ve allowed for the security risks. This is on the basis that the existing banking system may be closed and that access to cash may be limited as it has been for periods in Greece and in Cyprus after their financial crisis. Although this was not a feature of the financial crisis in Ireland, it did come close to it.

In the event of a general loss of confidence in major currencies, especially the Dollar and secondarily the Euro, holding physical silver coins makes a lot of sense. Silver does not move in step with gold in the short term but in a severe deflationary event and a loss of confidence in paper currencies, having silver, which comes sat lower unit values to gold is attractive.

An ounce of gold by May 2016 is worth just over €1,100 ($1,270) while an equivalent weight in silver is €15 ($17). <See prices below>
Ends


Gold and Silver Prices and News
Gold holds gains; caution prevails after Fed rate talk (Reuters)
As Brexit, Trump Multiply Global Risks, Gold May Rally to $1,400 (Bloomberg)
Gold Gains on China Debt Concerns as Soros Stake Boosts Miners (Bloomberg)
Gold prices rise as dollar, U.S. stocks ease (Reuters)
China ICBC buys secret gold vault London (Business Insider)

Why Gold Is A Better Investment Than Apple (Forbes)
George Soros Is Making a Big New Bet on Gold (Fortune)
“They Are Scared To Death” – CEO On “Biggest Reason” Why People Buying Precious Metals (Zere Hedge)
‘Audit the Fed’ movement taking big step forward in Congress this week (CNBC)
Gold Demand Just Had Its Strongest-Ever First Quarter (Gold Seek)

Gold Prices (LBMA AM)
18 May: USD 1,270.90, EUR 1,127.21 and GBP 882.05 per ounce
17 May: USD 1,270.10, EUR 1,121.43 and GBP 877.50 per ounce
16 May: USD 1,281.00, EUR 1,132.04 and GBP 892.87 per ounce
13 May: USD 1,275.15, EUR 1,123.51 and GBP 885.16 per ounce
12 May: USD 1,268.30, EUR 1,111.30 and GBP 878.28 per ounce

Silver Prices (LBMA)
18 May: USD 17.05, EUR 15.13 and GBP 11.77 per ounce
17 May: USD 17.08, EUR 15.09 and GBP 11.80 per ounce
16 May: USD 17.32, EUR 15.30 and GBP 12.07 per ounce
13 May: USD 17.09, EUR 15.06 and GBP 11.85 per ounce
12 May: USD 17.23, EUR 15.12 and GBP 11.91 per ounce

 


Read Our Most Popular Guides in Recent Months

Mark O’Byrne Executive Diretor

END-

 

Doug Pollitt comments on gold’s continuing respect

(courtesy Doug Pollitt/GATA)

Doug Pollitt: Devaluing dollar and debt by revaluing gold is getting respectable Submitted by cpowell on Wed, 2016-05-18 13:40. Section:

9:40a ET Wednesday, May 18, 2016

Dear Friend of GATA and Gold:

May’s market letter by Doug Pollitt of Pollitt & Co. in Toronto reflects on the growing respectability of devaluing the U.S. dollar and debt by the upward revaluation of gold. Devaluation of the dollar against gold in 1934 was, Pollitt writes, the most successful provision of President Franklin D. Roosevelt’s New Deal. Pollitt’s letter is headlined “Pimco Goes Full Goldbug” and he has kindly given GATA permission to share it with you in PDF format here:

http://www.gata.org/files/PollittMarketLetter-05-2016.pdf

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

 

end

 

GoldMoney launches a gold payroll and gold payout application for the BitGold business platform

(courtesy Business Wire/SF California/GATA))

 

 

GoldMoney launches gold payroll and gold payout applications for BitGold business platform Submitted by cpowell on Thu, 2016-05-19 00:13. Section:

Company Announcement
via Business Wire, San Francisco, California
Wednesday, May 18, 2016

TORONTO — GoldMoney Inc., a financial technology company that operates a global, full-reserve, and gold-based financial services platform, is pleased to announce the launch of gold payroll and gold payout applications for the BitGold Business platform. The engineering and launch of the gold payout application completes another milestone in the build out of the BitGold B2B and B2C ecosystem.

The gold payout application is a free-enterprise software tool for BitGold Business accounts that allows clients to set up and automate recurring payments to anyone with an email address or mobile phone number. The payout application is designed to streamline international payroll, dividends, rebates, reward payments, partner and affiliate payouts, micro-payments, and more. Built on top of a global, closed-loop, and full-reserve account structure, the payout application allows for instant settlement of cross-border value transfers, which can also be automated to settle into any currency given the global nature of gold. …

… For the remainder of the announcement:

http://www.businesswire.com/news/home/20160518005674/en/GoldMoney-Launch…

 

end

 

Gold trading today:

Early this morning;

(courtesy zero hedge)

 

Gold Slammed To 3-Week Lows Under $1250 After Lacker Ramps Up Hawkish Tone

The weakness in precious metals – as the dollar soared – after yesterday’s Fed minutes has extended this morning as Fed’s Lacker unleashes even greater hawkish-ness. Gold is back at 3-week lows, back below $1250 with its biggest drop in 3 months…

 

Double-whammy…Gold’s biggest one-day drop in 3 months on very heavy volume

 

Now back at 3-week lows…

 

And higher-beta Silver is sliding fast…

 

Pushing Gold/Silver back to one-month highs…

 end With we take the amount of gold held by Chinese banks  (at the end of 2015 equate to 2690 tonnes)  together with its official reserves of 1808 tonnes, the Chinese have really official reserves of:  4498 tonnes.  Presumably the banks have added considerably more gold in 2016 so real official reserves is 4500 tonnes+.  And this is not gold that they have hidden in other places: (courtesy Lawrie Williams/Sharp’s Pixley/Lawrie on Gold) LAWRIE WILLIAMS: China’s Govt controlled gold reserves already 4,500 tonnes plusMAY
18

I speculated her back in February in an article entitled China still building gold reserves, running down forex that holdings of gold by Chinese commercial banks perhaps could be considered as part of the nation’s total gold reserve. The banks are effectively state-owned and would thus likely be subject to their assets being utilised on behalf of the government if required. I hadn’t seen anyone else bring this particular theory up and assumed the idea had been ignored by analysts and other media, but earlier today at Bloomberg’s Precious Metals Forum in London, not only was there an estimate given of the total amount of gold held by the Chinese commercial banks (a very big number indeed), but also the agreement in a panel discussion between two top China gold experts that, in extremis, the Chinese government could take the banks’ gold reserves into its own gold hoard. This would put a different complexion on China’s known gold holdings available to the government, and also helps account for some of the huge anomalies between China’s assumed gold ‘consumption’ (by the jewelry, investment and industrial sectors) and the sum total of known mainland Chinese gold imports and its domestic production which is hugely higher.

To go back to the original article linked above I raised this particular anomaly thus: ‘…gold consultancy GFMS’s latest Quarterly update suggests that Chinese commercial banks, which are state-owned, had built up internal gold holdings of some 1,900 tonnes by the first half of 2015 (and this may well have expanded to around 2,000 tonnes by the year end given the strength of Shanghai Gold Exchange withdrawals which totalled 2,596 tonnes in 2015. This SGE withdrawals figure is hugely higher than the less than 1,000 tonnes GFMS rates as Chinese gold ‘consumption’, yet this gold has to be going somewhere and commercial bank vaults could well account for much of the difference. Could this be being held on behalf of the government?’ At the time known Chinese gold imports alone were running at around 1,400 tonnes or more and domestic gold production around 450 tonnes so the two figures combined left a huge gap between GFMS’s estimated consumption figure and known gold flows into China.

Back in February it appears that the figure quioted then may have significantly underestimated the amount of gold held by the Chinese commercial banks. At today’s Bloomberg event, Roland Wang, the World Gold Council’s Managing Director for China, put the gold holdings of the Chinese commercial banks at the end of 2015 at 2,690 tonnes – which will presumably have risen further during the first four months of the current year. China’s ‘official’ gold holdings as reported to the IMF, plus its own reported 9 tonne gold purchase in April stand currently at around 1,808 tonnes. If we add in the commercial bank numbers we come up with a combined total of just short of 4,500 tonnes, plus any accumulations by the commercial banks since the start of the year, which would put it comfortably in second place behind the USA with its 8,133.5 tonnes.

That the Chinese commercial bank gold holdings could be utilised in extremis by the Chinese government was alluded to in a discussion between Ken Hoffman and Hong Kong-based Philip Klapwijk. Ken is Bloomberg Intelligence’s Senior Metals and Mining Analyst who put forward this theory to Philip Klapwijk, Former Executive Chairman of GFMS before its takeover by Thomson Reuters, now Managing Director of Precious Metals Insights, who agreed that this was indeed a logical position. Both are experienced China watchers and will have a better perspective on this than most other analysts.

But China has also been ‘economic with the truth’ in the past in reporting the true levels of its reserves through holding some of its gold in non-reported separate accounts. It appears to be more transparent in its reporting nowadays but no-one, presumably apart from within the Chinese government, knows whether there are still unreported gold reserves. One suspects there are but putting a figure on them would be pure speculation.

So by using the commercial banks’ holdings – even without taking into accpount any surreptitious hidded reserves, it would seem that the Chinese government can already get its hands on close to 5,000 tonnes of physical gold assuming some additional intake by the commercial banks in the first four months of the current year.

As was also pointed out at the AMA/Sharps Pixley bulls and bears gold debate, also in London, two days earlier, China has been in the position of not only being the world’s biggest producer of gold, but at the same time is also by far the world’s biggest importer, which is almost certainly unique in the history of the global gold market when the world’s top producers have always exported most of their gold. This emphasises perhaps how important gold is in the Chinese psyche and in the firm belief by the government that building its gold reserves is diversification insurance against any potential deterioration over time in the value of the U.S. dollar and the feeling that a bigger gold reserve would enhance its positioning in the country’s aspirations for the yuan as a global reserve currency. This year sees the yuan becoming part of the IMF’s Special Drawing Right in October, and it is possible that China may now see its job as already partly done, which could account for what may be a cutback in its monthly gold reserve increases which it has been reporting since July 2015.

 

end Your early THURSDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight    

:

1 Chinese yuan vs USA dollar/yuan WELL DOWN to 6.5465 ( DEVALUATION DEEPENS/CHINA FIRES SHOT ACROSS THE USA BOW ) / Shanghai bourse  CLOSED DOWN 0.608 OR 0.02%  / HANG SANG CLOSED DOWN 132.08 OR 0.67%

2 Nikkei closed UP 1.97 OR 0.02% /USA: YEN FALLS TO 109.95

3. Europe stocks opened ALL IN THE RED  /USA dollar index UP to 95.26/Euro DOWN to 1.1204

3b Japan 10 year bond yield: FALLS   TO -.071%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.95

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  47.27  and Brent: 47.82

3f Gold DOWN  /Yen 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.

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to 0.197%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 9.41%/: 

3j Greek 10 year bond yield RISE to  : 7.43%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1253.60/silver $16.63(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble DOWN 32 in  roubles/dollar) 66.51-

3m oil into the 47 dollar handle for WTI and 47 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9893 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1084 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year RISES to  + .197%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

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 1.873% early this morning. Thirty year rate  at 2.67% /POLICY ERROR)

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

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

end Global Stocks Slide, S&P Set To Open Red For The Year As Hawkish Fed Ignites “Risk Off”

After yesterday’s algo-driven mad dash to close the S&P green both for the day and for the year following Fed minutes that came in shocking hawkish, the selling has continued overnight, led by the commodity complex as rate hike fears have pushed oil back down some 2% from yesterday’s 7 month highs, which in turn has dragged global stocks lower to a six-week low, while pushing bond yields higher across developed nations as the market suddenly reprices the probability of a June/July rate hike.

For now the critical S&P500 support level at 2030 continues to hold, however that may be put in test today, leading to the next leg lower in the S&P. Should stocks open here, the S&P will be red for the year.

The dollar continued to rise overnight after its biggest jump in 6 months, which led to a substantial devaluation of the Chinese Yuen as a result, which in turn may have spooked the global markets who still remember that China was the primary catalyst that unleashed the wave of selling in December and January.

The hawkish Fed minutes pressed the MSCI All Country World Index which declined for a third day, and dropped to the lowest level since April 8. U.K. gilts and German bunds fell, after Treasuries posted their biggest losses of the year. Currencies in Australia, China and South Korea sank to two-month lows against the dollar, while crude oil retreated and copper fell toward levels last seen in February. Gold and silver slipped to this month’s lows.

Many were shocked by the Fed’s minutes which come from a meeting where Yellen was said to be fully dovish. “There is this enormous policy uncertainty,” said Randal Jenneke, Sydney-based fund manager at T. Rowe Price. “The Fed has changed the goal posts so many times, everyone is confused. No one knows when they’re going to raise rates and no one knows what’s going to be the key thing to trigger the decision.”

This is what the Fed calls successful communication. There will be more of it today.

Comments from Fed Vice-Chair Fischer and President Yellen will likely be crucial in terms of really hammering home expectations and we’ll hear from the former this afternoon. Fischer’s event is closed to media so it remains to be seen how much he’ll delve into policy outlook but we will also hear from Dudley this afternoon who’s views are closely aligned to those of Yellen so that could be worth watching out for. As a reminder Dudley last said about two weeks ago that two rate hikes this year was a ‘reasonable’ expectation.

According to Bloomberg calculations, Fed Funds futures show the odds of a move surged to 32 percent on Wednesday, after tripling to 12% from 4% in the prior session as data on inflation, housing starts and industrial production beat forecasts. Following months of expectation and fluctuations last year, including a selloff caused by China’s unexpected devaluation of the yuan, markets reacted calmly when the Fed finally raised rates in December for the first time since 2006, reflecting investor conviction in the U.S. recovery’s ability to withstand tighter monetary policy.

“The markets were getting a little too complacent for the scope for rate hikes this year and next year but the fed minutes were on the hawkish side yesterday so that made investors nervous,” said Allan von Mehren, chief analyst at Danske Bank told Bloomberg. “We see some repricing on bond yields and it’s also having a negative spill-over on equity markets.”

In other, otherwise very bullish news, Moody’s lowers US growth outlook to 2.0% from 2.3% and cuts G20 EM growth to 4.2% vs. Prey. 4.4%, sees China growth slowing gradually to around 6.3% this year. However this time not even a major growth forecast cut was enough to send stocks soaring.

The Stoxx Europe 600 Index dropped 0.8 percent, with BHP Billiton Ltd. and Rio Tinto Group leading miners lower as commodities retreated. The European equity gauge has gone a month without posting a daily gain of at least 1 percent, and is down 4.5 percent from its April 20 peak. Futures on the S&P 500 lost 0.3 percent, indicating equities will decline after Wednesday closing little changed. Investors will look Thursday to an index of leading indicators in the U.S. for signs of the economy’s strength. Fed Vice Chairman Stanley Fischer and New York Fed chief William Dudley are scheduled to speak, while Wal-Mart Stores Inc. is among American companies reporting earnings.

Oil fell below $48 a barrel on Thursday, pressured by a stronger dollar and as a surprise increase in U.S. crude inventories served as a reminder that supply remains ample despite output problems. As Reuters recaps, supply losses in Canada and Nigeria have lent support, but cooler weather was expected to help firefighters battling Canadian wildfires. Traders said Exxon Mobil is boosting output at Nigeria’s largest crude stream.

“The main factor weighing on prices is the much appreciated U.S. dollar,” said Carsten Fritsch, analyst at Commerzbank. “What is more, rain forecast in the Canadian oil province of Alberta is giving rise to hopes that the devastating wildfires there could be brought under control.”

Elsehwere, Egyptian stocks slipped for the first time in four days, falling 2 percent. The government has deployed naval ships to search for an EgyptAir Airbus A320 en route to Cairo from Paris that went missing off the coast overnight.

Market Wrap

  • S&P 500 futures down 0.3% to 2035
  • Stoxx 600 down 0.8% to 335
  • FTSE 100 down 1.5% to 6075
  • DAX down 1.5% to 9797
  • S&P GSCI Index down 1.6% to 364
  • MSCI Asia Pacific down 0.9% to 125
  • Nikkei 225 up less than 0.1% to 16647
  • Hang Seng down 0.7% to 19694
  • Shanghai Composite down less than 0.1% to 2807
  • S&P/ASX 200 down 0.6% to 5323
  • US 10-yr yield up 1bp to 1.86%
  • German 10Yr yield up 2bps to 0.19%
  • Italian 10Yr yield up less than 1bp to 1.5%
  • Spanish 10Yr yield up 1bp to 1.61%
  • Dollar Index up 0.1% to 95.17
  • WTI Crude futures down 2% to $47.22
  • Brent Futures down 2.3% to $47.82
  • Gold spot down 0.3% to $1,254
  • Silver spot down 1.5% to $16.65

Top Global News

  • Stocks, Bonds, Commodities Slide as Fed Weighs June Rate Hike
  • Bayer Bids for $42 Billion Monsanto to Form Life Sciences Giant
  • Moody’s Cuts 2016 U.S. Growth Forecast, Cites Weak Global Demand
  • Technip to Combine With FMC Technologies in All-Share Deal
  • Theranos Corrects Tens of Thousands of Blood-Testing Results
  • Dollar Climbs to Seven-Week High as Templeton Backs Divergence
  • Trump Invested in Outsourcing Companies He Denounced in Campaign
  • Zuckerberg Acknowledges Trust Gap After Meeting on Bias
  • Apple, Not China, Is JPMorgan’s Biggest Risk for Taiwan Stocks

Looking at regional markets, Asia stocks traded mostly lower following a subdued lead from Wall Street where US equities pared gains following a hawkish FOMC minutes in which most Fed officials saw a June hike likely if the economy warranted. This initially set the tone across the region with the ASX 200 (-0.6%) dragged by basic materials and energy as a firmer USD post-FOMC minutes weighed on commodities. Nikkei 225 (flat) fluctuated between gains and losses as JPY weakness and strong machine orders provided some optimism in Japan, while Shanghai Comp (flat) outperformed for a bulk of the session after the PBoC continued to up liquidity injections and China continued its supportive sector adjustments. 10yr JGBs saw some spill-over selling, with demand subdued as BoJ refrained from conducting its bond purchase program, while further pressure was seen after the 20yr auction in which the b/c ratio declined from prior.

Top Asian News

  • Suzuki Says Improper Mileage Tests Used on 2.1 Million Cars: Testing didn’t follow protocol due to concerns about weather
  • Australia Adds More Jobs as Unemployment Rate Holds at 5.7%: Employment data comes in slightly under economist forecasts
  • Apple, Not China, Is JPMorgan’s Biggest Risk for Taiwan Stocks: Foreign investors pull $2.2 billion as Apple suppliers fall
  • BEA Union Cuts China Property Bond Exposure on Valuation Concern: Holdings in key fund 33 percent versus 55 percent last year
  • Two Chinese Fighters Intercept U.S. Plane Over South China Sea: Encounter in international airspace could further strain ties
  • Modi Set for Lone India State Win as Regional Parties Dominate: Modi’s BJP is ahead in Assam in 126-member state assembly
  • Vale Delivers Warning on Iron Ore After China Frenzy Fades Away: Watch out for bumpy road ahead as low-cost supply is set to pick up

European equities have slipped this morning following the fallout of the more hawkish than expected FOMC meeting minutes, having kept June as a live possibility to tighten monetary policy. Subsequently, FFR futures are now pricing in a 32% chance of a hike next month, as such financials outperform amid the prospect of higher borrowing costs for consumers. However, failed to offset the weakness across material names as they are hampered by the fall in commodity prices in reaction to the upside in the greenback. Additionally, notable weakness has been seen across airliners in the wake of reports of a missing EgyptAir flight, while Thomas Cooks underperforms in relation to other airliners after their CEO stated that FY underlying earnings is at the lower end of guidance. Despite the downside in equities European bonds have been pressured this morning amid the rise in yields, with Bunds yields bear steepening across the curve, which comes after the aforementioned hawkish FOMC minutes. Furthermore, desks are also attributing some of the price action to technical factors with downside limited by support holding around 163.00.

Top European News

  • European Stocks Slide as Fed Minutes Signal June Hike Possible: Stoxx Europe 600 Index lost 0.5 percent at 9:23 a.m. in London, with commodity producers declining the most
  • Bayer Eyes $42 Billion Monsanto in Quest for Seeds Dominance: bold attempt by Bayer to snatch the last independent global seeds producer and become the world’s biggest supplier of farm chemicals
  • Investec’s Full-Year Profit Rises 3% as Bank Lending Increases: Net income for the 12 months ended March 31 rose to 423 million pounds ($616 million) from 410 million pounds a year earlier

In FX, the Japanese yen has been modestly stronger overnight, with the USDJPY trading closely around 110, following a 1 percent slide in the last session when it hit 110.40 following the Fed minutes.  Australia’s dollar weakened as much as 0.5 percent, and the MSCI Emerging Markets Currency Index fell 0.5 percent, taking its retreat in May to 3 percent. Indonesia’s rupiah and South Korea’s won led declines on Thursday, weakening at least 0.8 percent.

But the overnight highlight as previosly reported was China’s yuan which declined as much as 0.1 percent in Shanghai’s onshore market. It was more volatile in offshore trading, rebounding 0.3 percent after a 0.5 percent loss on Wednesday that marked its biggest decline since January. South Africa’s rand climbed 0.4 percent, paring this month’s slide to 10 percent, the worst performer among 31 major currencies worldwide. While the central bank will probably keep interest rates unchanged on Thursday, six of the 25 estimates from economist in a Bloomberg survey predict a quarter-point increase. The rest see the benchmark remaining at 7 percent.

In commodities, WTI dropped 2.2% to $47.15 a barrel, extending Wednesday’s retreat from a seven-month high. The dollar’s increase coupled with renewed concern over the global oil glut unsettled markets, with U.S. crude inventories unexpectedly rising by 1.3 million barrels last week, according to data issued on Wednesday. Rain in Canada may have also slowed fires that have shifted back toward the province of Alberta’s oil-sands operations. Copper, nickel and zinc fell by at least 0.8 percent in London. Gold slid to a three-week low on concern the Fed is moving closer to raising interest rates. Metal for immediate delivery fell as much as 0.5 percent to $1,252.42 an ounce.

 

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities follow suit from the fallout of the hawkish FOMC minutes release, with Bunds also softer despite capping losses after finding support at 163.00
  • GBP has been another source of focus for FX markets in the wake of upbeat UK retail sales while USD remains firmer against its major counterparts
  • Looking ahead, highlights include ECB Minutes, Initial Jobless Claims, Fed’s Fischer (Voter, Neutral), Dudley (Voter, Soft Dove) and BoE’s Vlieghe (Dove)
  • Treasuries fall during overnight trading, with global equities dropping to six-week low and commodities lower against a stronger U.S. dollar as the world braces for the possibility that the Fed may raise rates in June.
  • An EgyptAir Airbus A320 en route from Paris to Cairo with 66 people on board went missing over the Mediterranean Sea in cloudless stable weather, raising concerns of a crash caused by a deliberate act or mechanical failure
  • Federal Reserve officials want to raise interest rates in June. Now, it is up to the U.S. economy to confirm their view that slow growth in the first quarter was temporary;
  • Moody’s Investors Service lowered its growth forecast for the U.S. economy this year to 2 percent from 2.3 percent to account for a weak first quarter, while anticipating underlying resilience through 2017
  • Is the link between monetary policy and inflation broken? The central bank governor of Denmark, where nominal rates have been negative longer than anywhere else in the world, says there may be signs that the link has grown weaker
  • The BOJ must drastically lower its presence in the nation’s stock market if it wants to preserve the ability to one day unwind its massive position, according to the Democratic Party’s Tsutomu Okubo, a former vice finance minister
  • Given the uncertainty of Brexit’s potential impact, a vote to leave is a risk. The question is: Is the risk worth taking?
  • Euro-area officials are weighing a proposal to purchase loans that member states made to Greece in a move that would ease the nation’s debt burden, a precondition for the International Monetary Fund’s involvement in a bailout program
  • Quiet trading floors are set to depress global investment banks’ second-quarter revenue 24 percent, with the underwriting and equities businesses facing the biggest drops, according to analysts at JPMorgan Chase & Co
  • Sovereign 10Y yields lower; Asian, European equities mostly lower; U.S. equity-index futures lower; WTI crude oil, precious metals fall

 

DB’s Jim Reid concludes the overnight wrap

Before we move onto a hawkish Fed and a continuation of the sudden and sharp re-pricing of interest rate risk, this morning we have published the fifth edition of DB’s annual survey of global prices of goods and services which my team has now taken over. This year we have added a number of extra European cities. In adding these it confirms that Europe is an expensive place to buy things. Indeed Swiss and Nordic/Scandinavian cities are generally the most expensive in the world. Sydney and London also require a bulging wallet. EM countries remain the cheapest places overall though and the gap between DM and EM prices has mostly widened over the past 4 years helped by the latter’s currency and economic weakness.

Our weekend getaway index neatly reflects the general cost of living around the world. Zurich leads the way, followed by Sydney, London, Milan, Stockholm, Copenhagen, NYC, San Francisco, Amsterdam and Madrid. Our cheap date index sees Zurich, Copenhagen, Tokyo, Stockholm and Amsterdam as the most expensive cities to woo a partner. At the other end of the scale, cities in Malaysia, India and South Africa are the cheapest for a weekend away and around a third of the cost of the most expensive places. For those wanting a real cheap ‘cheap date’, India, Indonesia, the Philippines and South Africa are the places to go. Indeed in all of these places you can have at least 4 dates for the price of one in Zurich but please don’t tell the other 3 people! Indeed if someone asks you out on a date in Zurich please clarify who is paying before accepting.

Elsewhere we look at the price of numerous goods and services across the world including iPhones, jeans, trainers, cars, Coke, meals out, cinema tickets, taxis, public transport, beers, cigs, gym membership, a haircut, the economist and the price of attending business school. Is your country cheap or expensive in these areas? See the report published in the last hour to find out.

So the merry dance starts. The Fed minutes last night highlight a committee that continues to want to raise rates whenever they can push it through. However what normally happens after such hawkishness in the current environment is either the data doesn’t ever quite get there for them to pull the trigger or the global market takes fright by enough for them to have to postpone their plan. I’m not sure this time is any different but clearly you can try to trade the volatility between the two points. Indeed the probability of a June hike has moved from 4% on Monday to 32% after last night’s minutes. Contracts further out in the year have also seen a reasonable re-pricing. The probability of a July move is now up to 47% from 28% just prior to the minutes and 19% on Monday, while a move by December has gone from 56% at the start of the week to 65% on Tuesday and to 75% post minutes.

Fixed income markets were the big mover yesterday. Looking at Treasuries the 2y yield was up another 6bps yesterday to 0.894% which is the highest yield since mid-March. In fact yields at the short-end of the curve are up an impressive 15bps since the close last Friday. The 10y yield yesterday was actually up 8bps by the end of play at 1.855% and approaching the top end of the recent range. FX markets were also particularly active and unsurprisingly it was a relatively strong day for the US Dollar with the Dollar index up +0.56% with EM currencies hit hardest across the board.

In terms of the important stuff, much of the focus was on the line concerning that ‘most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labour market conditions continuing to strengthen, and inflation making progress towards the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June’. That said there was a bit of balance in that comment with the sentence that ‘participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting’ with some officials expressing confidence that the incoming data would be sufficient enough to make a June increase appropriate, but offset by ‘several participants’ who seemed more concerned that the data would not provide ‘sufficiently clear signals’ to determine if a move next month is warranted. Some also cited concern about the low implied pricing in futures markets, while it was noted that participants viewed downside risks from abroad as having reduced, but that close monitoring is still warranted’.

So it’s over to the data now and the continued flow of Fedspeak. As we highlighted yesterday comments from Fed Vice-Chair Fischer and President Yellen will likely be crucial in terms of really hammering home expectations and we’ll hear from the former this afternoon. Fischer’s event is closed to media so it remains to be seen how much he’ll delve into policy outlook but we will also hear from Dudley this afternoon who’s views are closely aligned to those of Yellen so that could be worth watching out for. As a reminder Dudley last said about two weeks ago that two rate hikes this year was a ‘reasonable’ expectation.

Refreshing our screens this morning, aside from China the vast majority of bourses in Asia are in the red this morning. There are modest losses for the Nikkei (-0.05%) and Hang Seng (-0.24%), although the Kospi (-0.54%) and ASX (-0.70%) are down a bit more. China is the outlier again with the Shanghai Comp currently +0.58% with Bloomberg reporting that steelmakers in particular have surged following the news that President Xi is to push ahead with plans to reduce overcapacity at SOE’s and so support commodity prices. US equity index futures are modestly lower this morning, while the US Dollar has continued to gain.
Recapping the rest of the moves in markets yesterday. US equities were initially putting in a relatively strong performance leading into the minutes with the S&P 500 up as much as +0.6%. That quickly changed once the text was released however with the index actually plummeting to a -0.6% loss before paring that move to finish pretty much unchanged (+0.02%) by the end of play as a strong session for banks helped to offset weakness for utility and telecom names. The commodity complex was also hit hard with WTI creeping back below $48/bbl this morning (down about 2.5% from just prior to the minutes) after being weighed down by those US Dollar gains, while in the metals space it was precious metals which declined the sharpest. Gold, Silver and Platinum ended -1.60%, -1.99% and -2.45% respectively.

Moves for European equities look a bit outdated now although we did see bourses finally break out with the Stoxx 600 closing +0.85% with Banks gaining on the prior day’s Fedspeak. Meanwhile there was some data released in Europe yesterday to mention. There were no changes in the final revisions to Euro area CPI in April with the monthly headline reading of 0.0% mom meaning the YoY rate was confirmed at -0.2% and down two-tenths from March. The core print was also confirmed +0.7% yoy which is down three tenths and is the lowest print in 12 months. The other data was out of the UK yesterday with the release of the latest employment report. The ILO unemployment rate was unchanged in March as expected at 5.1%. Employment was reported as rising 44k in the first quarter compared with the three months to December which was better than expected, although surprisingly average weekly earnings ex bonuses did slow to 2.1% yoy from 2.2% after consensus had been for modest growth.

Looking over today’s calendar, this morning we’re kicking off in Europe where shortly after this goes to print the Q1 employment figures from France are released. Following that later this morning will be April retail sales data out of the UK which is expected to rebound. That comes before the ECB minutes which are due to be released around lunchtime. Over in the US this afternoon the Philly Fed’s manufacturing survey will be closely watched especially considering the weakness in the NY Fed survey earlier this week. We’ll also get the latest initial jobless claims numbers which are expected to come back down again following the big spike higher in the last reading, while the Conference Board’s leading index for April rounds off the data. As mentioned earlier, Fedspeak wise we will hear from Vice-President Fischer who is due to speak at 2.15pm BST, while Dudley (at 3.30pm BST) is also scheduled for comments today.

 

end

ASIAN AFFAIRS

i)Late  WEDNESDAY night/ THURSDAY morning: Shanghai closed DOWN  BY 0.608 PTS OR 0.02%  /  Hang Sang closed DOWN 132.08 OR 0.67%. The Nikkei closed UP 1.97 POINTS OR 0.01% . Australia’s all ordinaires  CLOSED DOWN 0.61% Chinese yuan (ONSHORE) closed DOWN at 6.5465 as China fired another HUGE shot across the bow telling the USA not to raise rates (SEE STORY BELOW).  Oil FELL to 47.32 dollars per barrel for WTI and 47.82 for Brent. Stocks in Europe  ALL IN THE RED . Offshore yuan trades  6.5663 yuan to the dollar vs 6.5465 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA a) JAPAN ISSUES NONE TODAY b) CHINA ISSUES

As promised, the POBC has sent a message to the Fed tonight concerning their “likely” raising their interest rate in June:  the second largest devaluation since August:6.56557

 

Time:  10 pm est:

 

USDCNY Spot Exchange Rate USDCNY:CUR  onshore 6.5420 CNY 0.0034 0.05% As of 10:07 PM EDT 5/18/2016 USA/CNH USD/CNH SPOT EXCHANGE RATE U.S. Dollar/Chinese Yuan 6.56776 -0.00683 (-0.10%) CHINA’S MESSAGE TO THE USA IS SIMPLE:  EITHER ABANDON THOUGHTS OF A RATE INCREASE AND LET CHINA REFLATE OUR ELSE CHINA WILL DEVALUE HUGELY BRINGING MASSIVE TURMOIL TO ALL MARKETS;  CHECK TO JANET YELLEN!!1 (courtesy zero hedge) China Sends Hawkish Fed A Message – Devalues Yuan Near 2016 Lows

Just as we warned was probable, The PBOC sent a message loud and clear to the newly hawkish Fed following today’s surge in the dollar after the minutes were released. With the 2nd biggest daily devaluation since the August collapse, China pushed the Yuan fix against the USD down to its lowest since early February – barely above the January lows. As we warned earlier, the China-Panic trade looms loud now as turmoil appears all that is left to stop The Fed unleashing another round of liquidity-sucking rate hikes sooner than the market wants.

All eyes have been firmly focus on the Yuan’s move against the USD but in fact the Yuan has been falling non-stop against the world’s major currencies…

The critical issue now is that the U.S. dollar is appreciating again. The
Bloomberg Dollar index is up 2.8% in the last two weeks and another 2%
wouldn’t be an unreasonable consolidation in the context of it dropping
more than 7% in the previous three months.

 

That previous dollar slide distracted from the fact that yuan depreciation never abated. Against the basket, it’s been weakening at an average rate of almost 1.2% per month for the last five months.

 

 

The market’s single-minded focus on USD/CNY is crucial and it’s also why disaster can still be averted. It will require the PBOC to temporarily suspend their yuan-weakening policy for as long as the dollar is climbing.

 

Otherwise, prepare to batten down the hatches for the coming storm.

It appears that it is the USD’s turn to face The PBOC once again… The 2nd biggest daily devaluation of the Yuan fix against the USD since August’s collapse.

 

Simply put, China does not want The Fed sucking the liquidity lifeline out of world markets right as it embarks on another round of desperate credit reflation.

Given The Fed’s comments today, the only excuse left for Yellen and her friends (unless they are willing to lose all credibility due to short-term fluctuations in macro-economic data from now to June meeting – as opposed to their mandated long-term view) is if markets turmoil enough to warrant some level of conservatism. As we have warned before – bullish stock market investors should be careful what they wish for – the higher stocks go, the higher the chances of rate hike, and the more likely China pre-taliates with some turmoil-inducing events to stall the unwind… the last time traders panicced about China, bad things happened to stocks…

END

 

After annoying the Russians by flying very close to their territory, the USA decided it was high time to annoy the Chinese:

 

 

(courtesy zero hedge)

 

Chinese Fighter Jets Fly Within 50 Feet Of US Spy Plane Near China

Having relentless provoked Russia over the past month, when week after week the Pentagon expressed its shock and dismay that Russians dare to scramble fighter jets when US missile cruisers or reconnaissance planes fly next to, or above, Russian territory the US has decided to pick on another target: China.

It started one month ago when first a Russian Su-24 “buzzed” the US missile destroyer USS Donald Cook in the Baltic Sea allegedly over Russian territorial waters; then just days later another Russian fighter jet flew within 50 feet of a US recon plane also flying over the Baltic Sea; this was followed by a third close encounter when a little over a week later a Russian Mig-31s flew within 50 feet of a US spy plane flying over a Russian naval base in the Kamchatka peninsula; the fourth provocation took place just days later when as a Russian SU-27 conducted a barrel roll over a U.S. Air Force RC-135 reconnaissance plane flying over the Baltic sea.

This series of Top Gun-like, if very dangerous (on purpose) stunts culminated this past Mondaywhen yet another US spy plane once again brushed against the Russian border, promptly leading to another, understandably, angry Russian response.

So after five such encounters between US and Russian armed forces, all of which ‘oddly’ took place in the immediate vicinity of Russia and not, say, above the Gulf of Mexico or next to California, the US has moved on to provoking another even bigger and more dangerous cold war foe, China.

According to NBC two Chinese military aircraft intercepted a U.S. military reconnaissance plane over the South China Sea Tuesday.

This test of China’s response did not come out of nowhere.

Recall that one week ago the US sailed the USS William P Lawrence within 12 miles of the contested and China-occupied manmade island of Fiery Cross Reef in the South China Sea in what the US Navy dubbed a “freedom of navigation” operation. China was not impressed and promptly scrambled two fighter jets to the U.S. navy ship, a patrol China denounced as an illegal threat to peace. China’s Defense Ministry said that in addition to the two fighters, an additional three warships shadowed the U.S. ship, telling it to leave.

China’s foreign ministry immediately expressed anger, and spokesman Lu Kang told a daily news briefing the ship illegally entered the waters without China’s permission and that the move threatened peace and stability. “This action by the U.S. side threatened China’s sovereignty and security interests, endangered the staff and facilities on the reef, and damaged regional peace and stability,” he told a news briefing.

But if Lu was angry then, he will be livid now after what Defense Department spokesperson Lt. Col. Michelle Baldanza said was a U.S. maritime patrol reconnaissance aircraft was flying in a “routine patrol” in international airspace on May 17 when “two tactical aircraft from the People’s Republic of China” intercepted the U.S. plane. The two Chinese fighter jets were J-11s and flew approximately 50 feet from the U.S. aircraft.


Stock footage of a Chinese J-11 fighter.

It’s odd how US aircraft supposedly flying in “international airspace” and clearly minding their business, if just as obviously spying either on Russia or China, always end up getting intercepted… almost as if the flight path is not quite what the official narrative says it is in the post-encounter briefing.

Naturally, the Pentagon immediately spun this latest situation in the way it has constantly done in its recent close encounters with Russia – that it was China’s fault the US was flying its spy planes near China’s border and that China dared to retaliate.

“Over the past year, DoD has seen improvements in PRC actions, flying in a safe and professional manner” Baldanza said in a written statement, adding that iInitial reports characterized the incident as unsafe.”

We wonder whose fault that is.

The incident is under investigation by U.S. Pacific Command. The U.S. said it has photos but they are classified.

We hope that once the US is done with its “investigation” it will notice the peculiar pattern where US spy planes and ships located by or above the territories of either Russia or China end up resulting in dangerously close encounters, usually involving either barrel rolls or “50 foot” fly-bys. At that point we can only hope that the US will also figure out who the recurring culprit in all these situations is.

end China is furious with the USA over the 522% duty on steel.  It is probably China’s falt for increasing its capacity so much to produce that steel.  It now has huge excesses and as countries seek protectionism, that inventory will stay stationary inside China: (courtesy zero hedge) China Furious After US Launches Trade War “Nuke” With 522% Duty

Now that China’s brief infatuation with “rationalizing” excess capacity in its massively glutted (and insolvent) steel sector is over after lasting all of 2-3 months, China is back to doing what it did in late 2015 (and what it has always done) when as we reported, a surge in Chinese exports led to the first salvos in the trade war between China – the world’s biggest exporter of various steel products and is responsible for half the entire world’s steel output – and countries who are importing dumped Chinese products at the expense of their own steel and mining industries.

Nowhere has this trade tension been more obvious than in the UK, where in recent months angry, protesting steel workers have been demanding rising protectionist steps against a country they, rightfully, see as unleashing a global commodity deflation driven by out of control, and unprofitable by highly subsidized, production by Chinese steel mills.

The US was not left unscathed: we reported in December that “The Trade Wars Begin: U.S. Imposes 256% Tariff On Chinese Steel Imports” and since then things have progressively turned worse, finally culminating overnight with an outburst of anger from Chinese officials who, after attempting to flood not just the US but also the entire world with their commodity in general and steel in particular, exports…

 

… Pushing prices even lower…

 

….  have criticized U.S. anti-dumping penalties imposed on Chinese steel amid mounting complaints Beijing is exporting at improperly low prices to clear a backlog at home.

The numbers, however, do not lie and confirm that China is engaging in massive global commodity dumping.

Chinese exports hit a record 112 million tonnes last year, with rivals claiming that Chinese steelmakers have been undercutting them in their home markets. According to Reuters, in the four months to April, China’s steel exports have risen nearly 7.6% to 36.9 million tonnes.

In some regard, China has reason to be angry: the US unleashed what is nothing short of a nuclear bomb in its rapidly escalating trade war with China, and recently imposed duties of 522% on cold-rolled steel used in automobiles and other manufacturing,  In doing so it has rendered Chinese exports to the US unsustainable and will force even more excess Chinese production to remain landlocked within China’s borders, making the domestic glut, and price collapse, that much worse.


An employee talks on his mobile phone near stacks of rebar at

Shanxi Zhongsheng Iron and Steel in Fenyang, Shanxi Province

On the other hand, the only reason the US is forced to unveil such unprecedented protectionist measures (we wonder how the “impartial” WTO will argue that US trade practices are fair) is because of China’s own capital misallocation which, however, unlike in the US where the capital markets are a perpetual store of newly printed money, in China those $30 trillion in deposits ultimately end up allocated toward fixed investment. The result is the current historic plunge in Chinese commodity prices (now that the recent bubble has burst) and the unleashing of even more exported, quite literally, deflation.

Sure enough, as AP reports, Beijing faces mounting criticism from the United States and Europe over a flood of low-cost steel that Western governments complain hurts their producers and threatens thousands of jobs.

The Chinese government is trying to shrink bloated industries including steel, coal, cement, aluminum and solar panel manufacturing in which supplies exceed demand. That has led to price-cutting wars that are driving producers into bankruptcy. It is also leading to mass layoffs, and is why in recent months the government decided to, far less publicly, stop shrinking its bloated industries and revert to the old and broken model, one which lead to the export surge in the first place.

The result has been immediate: the latest U.S. duties include 266% for anti-dumping and 256% to offset what investigators concluded were improper subsidies, for a grand total of over 500%!

As noted previously, China is furious. The Commerce Ministry complained regulators engaged in “unfair practices” and improperly hampered the ability of Chinese companies to defend themselves but gave no details.

“There’s too much trade friction and it’s not good for the market,” Liu Zhenjiang, secretary general of the China Iron and Steel Association told Reuters when asked if China will appeal U.S. anti-dumping duties at the World Trade Organization. While a flood of cheap Chinese steel has been blamed for putting some overseas producers out of business, China has denied its mills have been dumping their products  on foreign markets, stressing that local steelmakers are more efficient and enjoy far lower costs than their international counterparts.

“High taxes are unfair …. China doesn’t have a large market share in the United States,” Zhang Dianbo, deputy general manager at Baosteel Group, said recently during a Singapore conference. Mr. Dianbo may be interested to know that creating $1 trillion in new loans in the first quarter as China did, is also to some, “unfair” as all that money goes to subsidize insolvent industries, and results in the export glut that is the heart of the problem.

To be sure, China at least tangentially acknowledged that it was the cause of the problem: a surge in Chinese steel prices helped restart once-shut mills, and might slow Beijing’s bid to address excess capacity, said Baosteel’s Zhang. “The price rebound is not beneficial to the overcapacity situation…. It will delay the shutdown of (inefficient) capacity,” he said.

Steel prices have come off around a quarter since their April peaks and could weaken further in the second half of the year, but Zhang said they were unlikely to return to recent lows.

We disagree, and so do US steel producers who are relying on Washington to do everything in its power to prevent a price collapse.

Washington was responding to a 2015 complaint by five steel producers that said they have been forced to lay off thousands of employees due to unfair foreign competition. One of the producers, United States Steel Corp., filed a separate complaint last month accusing the biggest Chinese steel producers of conspiring to fix prices, stealing trade secrets and skirting duties on imports in the U.S. with false labeling.

Life for China’s exporters is only going to get more difficult: the European Union launched its own investigation of Chinese steel exports last week following protests by steelworkers. In Britain, Tata Steel cited low-cost Chinese competition when it announced plans last month to sell money-losing operations that employ 20,000 people.

And just to assure that this is nowhere near the end of the ongoing trade wars, China pushed back against its trading partners in April, announcing anti-dumping duties on steel from the European Union, Japan and South Korea.

Average:

5 Your rating: None Average: 5 (3 votes) EUROPEAN ISSUES

Looks like the EU-Turkey migrant deal is falling apart as EU has second thoughts on granted 80,000 visa entry to Turkish citizens.  The threat of unwanted people entering Europe is weighing in on the issue

(courtesy Soeren Kern/Gatestone Institute)

 

EU-Turkey Migrant Deal Unravels Turning Greece Into Massive Refugee Camp

Submitted by Soeren Kern via The Gatestone Institute,

  • “It can be expected that, as soon as Turkish citizens will obtain visa-free entry to the EU, foreign nationals will start trying to obtain Turkish passports … or use the identities of Turkish citizens, or to obtain by fraud the Turkish citizenship. This possibility may attract not only irregular migrants, but also criminals or terrorists.” — Leaked European Commission report, quoted in the Telegraph, May 17, 2016.
  • According to the Telegraph, the EU report adds that as a result of the deal, the Turkish mafia, which traffics vast volumes of drugs, sex slaves, illegal firearms and refugees into Europe, may undergo “direct territorial expansion towards the EU.”
  • “If they make the wrong decision, we will send the refugees.” — Burhan Kuzu, senior adviser to Turkish President Recep Tayyip Erdogan.
  • Erdogan is now demanding that the EU immediately hand over three billion euros ($3.4 billion) so that Turkish authorities can spend it as they see fit. The EU insists that the funds be transferred through international aid agencies in accordance with strict rules on how the aid can be spent. This prompted Erdogan to accuse the EU of “mocking the dignity” of the Turkish nation.

The EU-Turkey migrant deal, designed to halt the flow of migrants from Turkey to Greece, is falling apart just two months after it was reached. European officials are now looking for a back-up plan.

The March 18 deal was negotiated in great haste by European leaders desperate to gain control over a migration crisis in which more than one million migrants from Africa, Asia and the Middle East poured into Europe in 2015.

European officials, who appear to have promised Turkey more than they can deliver, are increasingly divided over a crucial part of their end of the bargain: granting visa-free travel to Europe for Turkey’s 78 million citizens by the end of June.

At the same time, Turkey is digging in its heels, refusing to implement a key part of its end of the deal: bringing its anti-terrorism laws into line with EU standards so that they cannot be used to detain journalists and academics critical of the government.

A central turning point in the EU-Turkey deal was the May 5 resignation of Turkish Prime Minister Ahmet Davutoglu, who lost a long-running power struggle with Turkish President Recep Tayyip Erdogan. Davutoglu was a key architect of the EU-Turkey deal and was also considered its guarantor.

On May 6, just one day after Davutoglu’s resignation, Erdogan warned European leaders that Turkey would not be narrowing its definition of terrorism: “When Turkey is under attack from terrorist organizations and the powers that support them directly, or indirectly, the EU is telling us to change the law on terrorism,” Erdogan said in Istanbul. “They say ‘I am going to abolish visas and this is the condition.’ I am sorry, we are going our way and you go yours.”

Erdogan insists that Turkey’s anti-terrorism laws are needed to fight Kurdish militants at home and Islamic State jihadists in neighboring Syria and Iraq. Human rights groups counter that Erdogan is becoming increasingly authoritarian and is using the legislation indiscriminately to silence dissent of him and his government.

European officials say that, according to the original deal, visa liberalization for Turkish citizens is conditioned on Turkey amending its anti-terror laws. Erdogan warns that if there is no visa-free travel by the end of June, he will reopen the migration floodgates on July 1. Such a move would allow potentially millions more migrants to pour into Greece.

European officials are now discussing a Plan B. On May 8, the German newspaper Bildreported on a confidential plan to house all migrants arriving from Turkey on Greek islands in the Aegean Sea. Public transportation to and from those islands to the Greek mainland would be cut off in order to prevent migrants from moving into other parts of the European Union.

Migrants would remain on the islands permanently while their asylum applications are being processed. Those whose asylum requests are denied would be deported back to their countries of origin or third countries deemed as “safe.”

The plan, which Bild reports is being discussed at the highest echelons of European power, would effectively turn parts of Greece into massive refugee camps for many years to come. It remains unclear whether Greek leaders will have any say in the matter. It is also unclear how Plan B would reduce the number of migrants flowing into Europe.


Thousands of newly arrived migrants, the vast majority of whom are men, crowd the platforms at Vienna West Railway Station on August 15, 2015 — a common scene in the summer and fall of 2015. (Image source: Bwag/Wikimedia Commons)

Speaking to the BBC News program, “World on the Move,” on May 16, Sir Richard Dearlove, the former head of the British intelligence service MI6, warned that the number of migrants coming to Europe during the next five years could run into millions. This, he said, would reshape the continent’s geopolitical landscape: “If Europe cannot act together to persuade a significant majority of its citizens that it can gain control of its migratory crisis then the EU will find itself at the mercy of a populist uprising, which is already stirring.”

Dearlove also warned against allowing millions of Turks visa-free access to the EU, describing the EU plan as “perverse, like storing gasoline next to the fire we’re trying to extinguish.”

On May 17, the Telegraphpublished the details of a leaked report from the European Commission, the powerful administrative arm of the European Union. The report warns that opening Europe’s borders to 78 million Turks would increase the risk of terrorist attacks in the European Union. The report states:

“It can be expected that, as soon as Turkish citizens will obtain visa-free entry to the EU, foreign nationals will start trying to obtain Turkish passports in order to pretend to be Turkish citizens and enter the EU visa free, or use the identities of Turkish citizens, or to obtain by fraud the Turkish citizenship. This possibility may attract not only irregular migrants, but also criminals or terrorists.”

According to the Telegraph, the report adds that as a result of the deal, the Turkish mafia, which traffics vast volumes of drugs, sex slaves, illegal firearms and refugees into Europe, may undergo “direct territorial expansion towards the EU.” The report warns: “Suspect individuals being allowed to travel to the Schengen territory without the need to go through a visa request procedure would have a greater ability to enter the EU without being noticed.”

While the EU privately admits that the visa waiver would increase the risk to European security, in public the EU has recommended that the deal be approved.

On May 4, the European Commission announced that Turkey has met most of the 72 “benchmarks of the roadmap” needed to qualify for the visa waiver. The remaining five conditions concern the fight against corruption, judicial cooperation with EU member states, deeper ties with the European law-enforcement agency Europol, data protection and anti-terrorism legislation.

European Commission Vice President Frans Timmermans said:

“Turkey has made impressive progress, particularly in recent weeks, on meeting the benchmarks of its visa liberalization roadmap…. This is why we are putting a proposal on the table which opens the way for the European Parliament and the Member States to decide to lift visa requirements, once the benchmarks have been met.”

In order for the visa waiver to take effect, it must be approved by the national parliaments of the EU member states, as well as the European Parliament.

Ahead of a May 18 debate at the European Parliament in Strasbourg over Turkey’s progress in fulfilling requirements for visa liberalization, Burhan Kuzu, a senior adviser to Erdogan, warned the European Parliament that it had an “important choice” to make.

In a Twitter message, Kuzu wrote: “If they make the wrong decision, we will send the refugees.” In a subsequent telephone interview with Bloomberg, he added: “If Turkey’s doors are opened, Europe would be miserable.”

Meanwhile, Erdogan has placed yet another obstacle in the way of EU-Turkey deal. He is now demanding that the EU immediately hand over three billion euros ($3.4 billion) promised under the deal so that Turkish authorities can spend it as they see fit.

The EU insists that the funds be transferred through the United Nations and other international aid agencies in accordance with strict rules on how the aid can be spent. That stance has prompted Erdogan to accuse the EU of “mocking the dignity” of the Turkish nation.

On May 10, Erdogan expressed anger at the glacial pace of the EU bureaucracy:

“This country [Turkey] is looking after three million refugees. What did they [the EU] say? We’ll give you €3 billion. Well, have they given us any of that money until now? No. They’re still stroking the ball around midfield. If you’re going to give it, just give it.

 

“These [EU] administrators come here, tour our [refugee] camps, then ask at the same time for more projects. Are you kidding us? What projects? We have 25 camps running. You’ve seen them. There is no such thing as a project. We’ve implemented them.”

In an interview with the Financial Times, Fuat Oktay, head of Turkey’s Disaster and Emergency Management Authority (AFAD), the agency responsible for coordinating the country’s refugee response, accused European officials of being fixated on “bureaucracies, rules and procedures” and urged the European Commission to find a way around them.

The European Commission insists that it was made clear from the outset that most of the money must go to aid organizations: “Funding under the Facility for Refugees in Turkey supports refugees in the country. It is funding for refugees and not funding for Turkey.”

The migration crisis appears to be having political repercussions for German Chancellor Angela Merkel, a leading proponent of the EU-Turkey deal. According to a new poll published by the German newsmagazine Cicero on May 10, two-thirds (64%) of Germans oppose a fourth term for Merkel, whose term ends in the fall of 2017.

In an interview with Welt am Sonntag, Horst Seehofer, the leader of the Christian Social Union (CSU), the Bavarian sister-party to Merkel’s Christian Democrats (CDU), blamed Merkel for enabling Erdogan’s blackmail: “I am not against talks with Turkey. But I think it is dangerous to be dependent upon Ankara.”

Sahra Wagenknecht of the Left Party accused Merkel of negotiating the EU-Turkey deal without involving her European partners: “The chancellor is responsible for Europe having become vulnerable to blackmail by the authoritarian Turkish regime.”

Cem Özdemir, leader of the Greens Party and the son of Turkish immigrants said: “The EU-Turkey deal has made Europe subject to Turkish blackmail. The chancellor bears significant responsibility for this state of affairs.”

end Why Tim Price is voting to leave the EU: I also urge you to watch the BREXIT movie (courtesy Tim Price/SovereignMan.com) Tim Price: Why I’m Voting To Leave The European Union

Submitted by Tim Price via SovereignMan.com,

On 23 June 2016, this British citizen will be voting to leave the European Union.

To me it’s clear: the EU has not only become too big for its own good, it’s too big to do hardly anything good.

Back in 1975 when the UK first confirmed membership in the EU (when it was called the European Economic Community), it made sense.

Britain has always thrived on international trade, and the EU promised more trade.

But that’s not what happened. The EU didn’t turn into a peaceful, efficient, multi-national trading bloc that enables commerce and prosperity.

Rather it has become an ever-expanding, unaccountable bureaucracy ruling over vastly disparate nations who are increasingly at odds with one another.

And it is precisely the size of this Leviathan that’s the problem… something that was first identified several decades ago by economist Leopold Kohr.

Kohr was an Austrian Jew who only narrowly escaped Hitler’s Germany just before the outbreak of the Second World War.

He had been born in Oberndorf in central Austria, a village of just 2,000 or so.

And Oberndorf’s tiny size came to play a crucial role in Kohr’s thinking about the wealth of nations.

Kohr’s premise was simple: when you get too big, you start having serious problems.

This applies to political unions, from the Roman Empire to the EU, as well as to companies.

Even Warren Buffett has warned that large companies will eventually find it difficult to grow.

Kohr graduated in 1928 and went off to study at the London School of Economics with the likes of fellow Austrian Friedrich von Hayek.

In September 1941, Kohr began writing what would become his masterwork, ‘The Breakdown of Nations’.

He wrote that instead of expanding, Europe should be shrinking back into small political regions (like Switzerland) with a commitment to private property rights and local democracy.

“We have ridiculed the many little states,” wrote Kohr sadly, “now we are terrorised by their few successors.”

Simply put, size creates unavoidable limits… and problems.

And as the European Union has grown ever larger, it smashes horribly into Kohr’s thesis.

We can see this with the spate of problems in Europe ranging from horrific youth unemployment to major border crises to negative interest rates across the continent.

Of all the world’s population centers, Europe is the slowest growing (i.e. most rapidly shrinking) in the world.

The promises of growth and prosperity proved hollow. Yet the Eurocrats want to give Europeans even more: more regulation, more negative interest rates, more size.

Perhaps ECB Governing Council member Vitas Vasiliauskas sums this up the best from his comments last week:

“Markets say the ECB is done, their box is empty. But we are magic people. Each time we take something and give to the markets – a rabbit out of the hat.”

Vasiliauskas is the perfect embodiment of the EU bureaucracy: they believe they are special people capable of performing miracles.

The arrogance and hubris in this statement are overwhelming and tell you everything you need to know about the unelected, unaccountable people who control our lives.

*  *  *

If you want to understand this issue even more, I highly recommend the documentary Brexit: The Movie.

It’s a well-presented masterpiece of government overreach that would likely win an award for Best Comedy if it weren’t sadly true.

If you’re pressed for time, here’s a 60-second snippet detailing the tens of thousand of regulations that crowd our daily lives:

end

 

RUSSIAN AND MIDDLE EASTERN AFFAIRS

Egyptian aircraft carrying 66 on board crashes into the Med. Sea.  It seems it blew up in mid air and thus it sure looks like another terrorist attack:

(courtesy zero hedge)

EgyptAir Flight From Paris To Cairo Crashes With 66 On Board

Six months after an Airbis A321 operated by Russia’s Metrojet exploded shortly after takeoff from Egypt’s Sinai peninsula en route to St. Petersburg, killing all 224 people on board in what was an ISIS-inspired terrorist attack, overnight there has been another aircraft-related tragedy when an EgyptAir flight carrying 66 passengers and crew on a flight from Paris to Cairo disappeared from radar over the Mediterranean shortly before landing, at 2:30am local time. Officials said they believed the jet has come down in the Mediterranean sea. A search and rescue operation is currently underway and authorities have said that no scenario can be ruled out, including terrorism.

Flight MS804 left Charles de Gaulle Airport at 11:09pm local time (21:09 GMT) on Wednesday Paris time and was expected to arrive in Cairo by 3am on Thursday. A direct flight usually takes just over four hours.

EgyptAir said on its Twitter account that Flight MS804 had departed Paris at 23:09 (CEST). It disappeared at 02:30 a.m. at an altitude of 37,000 feet (11,280 meters) in Egyptian air space, about 280 km (165 miles) from the Egyptian coast before it was due to land at 03:15 a.m..

is-deciderHtmlWhitespace" cite="https://twitter.com/EGYPTAIR/status/733129477941788672">

EGYPTAIR ‎@EGYPTAIR

An informed source at EGYPTAIR stated that Flight no MS804,which departed Paris at 23:09 (CEST),heading to Cairo has disappeared from radar.

10:57 PM – 18 May 2016

View image on Twitter

is-deciderHtmlWhitespace" cite="https://twitter.com/flightradar24/status/733132496167153664">

Flightradar24 ‎@flightradar24

operated by an Airbus A320-232 (SU-GCC), delivered in 2003. http://www.jetphotos.net/aircraft/A32X-2088 …

11:09 PM – 18 May 2016

 

The weather was clear at the time the plane disappeared, according to Eurocontrol, the European air traffic network. “Our daily weather assessment does not indicate any issues in that area at that time,” it said.  Speed and altitude data from aviation website FlightRadar24.com indicated the plane was cruising at the time it disappeared.

Egyptian Prime Minister Sherif Ismail said the search was underway to find the missing Airbus A320 and it was too early to rule out any explanation, including terrorism. Cited by Reuters, officials with the airline and the Egyptian civil aviation department told Reuters they believed the jet had crashed into the Mediterranean between Greece and Egypt.

View image on Twitter

is-deciderHtmlWhitespace" cite="https://twitter.com/flightradar24/status/733131604894318592">

Flightradar24 ‎@flightradar24

.@EGYPTAIR stating has “disappeared from radar”. FR24 flight track: https://www.flightradar24.com/data/flights/ms804/#9c0b766 …

11:06 PM – 18 May 2016

It is as of this moment unclear whether the disappearance was due to technical failure or any other reason such as sabotage by ultra-hardline Islamists, who have targeted airports, airliners and tourist sites in Europe, Egypt, Tunisia and other Middle Eastern countries over the past few years.

“There was nothing unusual,” EgyptAir vice chairman Ahmed Adel told Reuters. “The search and rescue aircraft from the Egyptian air force are at the position where we lost contact. They are still looking and so far there is nothing found.”

According to Reuters, the aircraft was carrying 56 passengers – with one child and two infants among them – and 10 crew, EgyptAir said. They included 30 Egyptian and 15 French nationals, along with citizens of 10 other countries. “The theory that the plane crashed and fell is now confirmed after the preliminary search and after it did not arrive at any of the nearby airports,” said a senior aviation source, who declined to be identified. The airplane pilot had clocked up 6,275 hours of flying experience, including 2,101 hours on the A320, while the first officer had 2,766 hours, the airline said.

Airbus said the missing A320 had been delivered to EgyptAir in November 2003 and had operated about 48,000 flight hours.

Egypt Air said the plane sent an emergency signal – possibly from an emergency beacon attached to the plane – at 04:26 a.m., two hours after it disappeared from radar screens.  In water crashes, an underwater beacon attached to the aircraft’s flight recorders starts to emit a signal or ping. This helps search and rescue teams to locate the crash and find the boxes.

Asked if he could rule out that terrorists were behind the incident, Prime Minister Ismail said: “We cannot exclude anything at this time or confirm anything. All the search operations must be concluded so we can know the cause. Search operations are ongoing at this time for the airplane in the area where it is believed to have lost contact,” he told reporters at Cairo airport.

Reuters adds that Greek air traffic controllers spoke to the pilot as the jet flew over the island of Kea, in what was thought to be the last broadcast from the aircraft, and no problems were reported. But just ahead of the handover to Cairo airspace, calls to the plane went unanswered, before it dropped off radars shortly after exiting Greek airspace, Kostas Litzerakis, the head of Greece’s civil aviation department, told Reuters.

is-deciderHtmlWhitespace" cite="https://twitter.com/AFP/status/733237272108224512">

AFP news agency ‎@AFP

‘No problem’ cited by EgyptAir pilot in final contact: Greek official

6:06 AM – 19 May 2016

“During the transfer procedure to Cairo airspace, about seven miles before the aircraft entered the Cairo airspace, Greek controllers tried to contact the pilot but he was not responding,” he said. Egyptian President Abdel Fattah al-Sisi will chair a national security council meeting on Thursday morning, a statement from his office said. It did not say if the meeting would discuss the plane.

At Cairo airport, authorities ushered families of the passengers and crew into a closed-off waiting area. However, two women and a man, who said they were related to a crew member, were seen leaving the VIP hall where families were being kept. Asked for details, the man said: “We don’t know anything, they don’t know anything. No one knows anything.”

In Paris, a police source said investigators were now interviewing officers who were on duty at Roissy airport on Wednesday evening to find out whether they heard or saw anything suspicious. “We are in the early stage here,” the source said.

Greece said it had deployed aircraft and a frigate to the area to help with the search. A Greek defense ministry source said authorities were also investigating an account from the captain of a merchant ship who reported a ‘flame in the sky’ about 130 nautical miles south of the island of Karpathos.

A terrorist link

An Airbus A321 operated by Russia’s Metrojet crashed in the Sinai on Oct. 31, 2015, killing all 224 people on board. Russia and Western governments have said the plane was probably brought down by a bomb, and the Islamic State militant group said it had smuggled an explosive device on board.

The crash called into question Egypt’s campaign to eradicate Islamist militancy and has damaged its tourism industry, a cornerstone of the economy.

Islamist militants have stepped up attacks on Egyptian soldiers and police since Sisi, as army chief, toppled freely elected Islamist President Mohamed Mursi in 2013 after mass protests against his rule.

In March, an EgyptAir plane flying from Alexandria to Cairo was hijacked and forced to land in Cyprus by a man with what authorities said was a fake suicide belt. He was arrested after giving himself up.

In the same month, Islamic State suicide bombers hit Brussels airport and a metro train in the worst such attacks in Belgian history, killing 32 people. Investigators believed they were carried out by the same cell that was behind November’s gun and bomb attacks in Paris which claimed the lives of 130 people.

If indeed this is another terrorist attack, we expect that shortly one of the extremeist Muslim organizations will step up to claim credit for this latest tragedy.

end

 

Then at 1 pm CNN reports that it was a bomb that blew up the Egyptian Airliner:

(courtesy zero hedge)

 

Trump Right Again? US Government Operating On Theory EgyptAir Plane “Taken Down By A Bomb”

Early this morning, following news of the tragic crash of yet another airplane, Donald Trump was the first to suggest that the catastrophe was the result of “yet another terrorist attack”…

is-deciderHtmlWhitespace" cite="https://twitter.com/realDonaldTrump/status/733242745385537536">

Donald J. Trump ‎@realDonaldTrump

Looks like yet another terrorist attack. Airplane departed from Paris. When will we get tough, smart and vigilant? Great hate and sickness!

6:27 AM – 19 May 2016

 

… a statement which was promptly vilified in the media, most promintnly from the New York Times, but many others as well:

His post on Twitter drew criticism from Robert M. Gates, a former secretary of defense and director of the C.I.A., who was asked about it during an interview on MSNBC’s “Morning Joe.”

 

“Well, I think it prejudges the outcome,” Mr. Gates said. “Let’s just suppose that it turns out not to be a terrorist event. Then what’s the — then what do you say, having made these allegations.”

 

He continued, “It’s always better to wait until you actually know what the facts are before you open up.

And, as usual, Trump is about to have the final laugh, because as CNN reported moments ago:

U.S. government officials are operating on an initial theory that EgyptAir Flight 804 was taken down by a bomb, two U.S. officials told CNN on Thursday. Officials said the theory could change, with one senior administration official cautioning it is not yet supported by a “smoking gun.”

Or bomb as the case may be. For the official confirmation we will probably have to wait for ISIS to claim the attack and perhaps release a video clip as it did in November when it was ISIS again that blew up a Russian passenger airplane deparing the Sinai penninsula.

However, a bigger question will emerge then: while the November terrorist attack was orchestrated by an ISIS supporter at the Egyptian airport, in this case there would have to be even more ISIS participation, only on the side of the departing city, in this case Paris. It would also mean that more terrorist attacks in Europe are likely to come as this would confirm there is at least one more active cell in the French capital.

end GLOBAL ISSUES

 

FIVE BANKS INCLUDING BANK OF AMERICA AND DEUTSCHE BANK HAVE BEEN SUED OVER MANIPULATION IN AGENCY BONDS:

(COURTESY BLOOMBERG)

Banks Sued Over Manipulation on $9 Trillion Agency-Bond Market

Bank of America Corp. and Deutsche Bank AG were among five banks sued over claims that traders conspired to manipulate the market in agency bonds, which is made up of an estimated $9 trillion of debt issued by government entities and institutions like the World Bank.

The suit, filed by the Boston Retirement System, a pension fund representing city workers, follows inquiries by the U.S. and U.K. into the market for the securities, known as supranational, sub-sovereign and agency bonds, or SSAs. The probes target alleged illegal collusion in international bank trading, after regulators reached billions of dollars in settlements over manipulation claims involving interest-rate benchmarks and currency markets.

The suit, filed Wednesday in Manhattan federal court, adds the threat of possible triple damages available under U.S. antitrust law for investors harmed by any illegal price-fixing. Also sued were Credit Agricole SA, Credit Suisse Group AG and Nomura Holdings Inc. or their units.

The SSA market is generally defined to include international development organizations, government- sponsored entities and some sovereign debt. Depending on the securities which are included, the market could range from $9 trillion to $15 trillion, according to data compiled by Bloomberg. The bonds generally have high credit ratings because many are backed by explicit or implicit guarantees.

U.S. Probe

http://www.bloomberg.com/news/articles/2016-05- 18/banks-sued-over-m
anipulation-on-9-trillion-agency- bond- market

-END-

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

Euro/USA   1.1204 DOWN .0015 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 109.95 DOWN .273 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4636 UP .0043 (LESS OF A THREAT OF BREXIT)

USA/CAN 1.3093 UP .0068

Early THIS THURSDAY morning in Europe, the Euro FELL by 15 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED DOWN BY 0.608 PTS OR 0.02% / Hang Sang CLOSED DOWN 132.08 OR  0.67%   / AUSTRALIA IS LOWER BY 0.61%(RESOURCE STOCKS DOING POORLY / ALL EUROPEAN BOURSES ARE ALL IN THE RED   as they start their morning/

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this THURSDAY morning: closed UP 1.97 OR 0.01% 

Trading from Europe and Asia:
1. Europe stocks ALL THE RED AS  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 132.08 PTS OR 0.67% . ,Shanghai CLOSED  DOWN 0.608 OR 0.02%/ Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED IN THE GREEN BARELY/India’s Sensex IN THE RED

Gold very early morning trading: $1253.15

silver:$16.62

Early THURSDAY morning USA 10 year bond yield: 1.872% !!! UP 1 in basis points from WEDNESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.67 DOWN 1 in basis points from WEDNESDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early THURSDAY morning: 95.26 UP 8 from WEDNESDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers THURSDAY MORNING

END

And now your closing THURSDAY NUMBERS

Portuguese 10 year bond yield:  3.09% PAR in basis points from WEDNESDAY

JAPANESE BOND YIELD: -.065% UP 2 in   basis points from WEDNESDAY

SPANISH 10 YR BOND YIELD:1.59%  DOWN 1 IN basis points from WEDNESDAY

ITALIAN 10 YR BOND YIELD: 1.49  PAR IN basis points from WEDNESDAY

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

GERMAN 10 YR BOND YIELD: .168% UP 2  IN BASIS POINTS ON THE DAY

END

IMPORTANT CURRENCY CLOSES FOR THURSDAY

Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

Euro/USA 1.1198 down .0021 (Euro =DOWN 21 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.93 DOWN 0.238 (Yen UP 24 basis points )

Great Britain/USA 1.4621 UP .0028 Pound UP 28 basis points/

USA/Canada 1.3083 UP 0.0055 (Canadian dollar DOWN 55 basis points with OIL RISING a BIT(WTI AT $48.17).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 21 basis points to trade at 1.1198

The Yen FELL to 109.93 for a GAIN of 24 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 28 basis points, trading at 1.4621

The Canadian dollar FELL by 55 basis points to 1.3083, WITH WTI OIL AT:  $48.17

The USA/Yuan closed at 6.5450

the 10 yr Japanese bond yield closed at -.065% UP 2 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 2  IN basis points from WEDNESDAY at 1.847% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.64 DOWN 4 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 95.27 UP 8 IN CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY

London:  CLOSED DOWN 112.45 OR 1.82%
German Dax :CLOSED DOWN 147.34 OR 1.48%
Paris Cac  CLOSED DOWN 36.76  OR 0.86%
Spain IBEX CLOSED DOWN 100.40 OR 1.14%
Italian MIB: CLOSED DOWN 168.06 OR 0.95%

The Dow was DOWN 91.22  points or 0.52%

NASDAQ DOWN 26.59 points or 0.56%
WTI Oil price; 48.19 at 4:30 pm;

Brent Oil: 48.80

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.71 (ROUBLE DOWN 52/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD ROSE TO .170  FOR THE 10 YR BOND

.

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:48.18

BRENT: 48.86

USA 10 YR BOND YIELD: 1.848%

USA DOLLAR INDEX: 95.30 UP 22 cents

 

END

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

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Hawk & Hawker Send Stocks Negative For 2016, Yield Curve Crush Continues

From uber-doves to ultra-hawks in 3 weeks (and a few hundred Dow points), today’s FedSpeak did not rescue stocks as everyone assumed it did as Dudley’s Dud dropped risk…

 

“Sell In May” is working once again…

 

And while The Dow craped back into green, S&P 500 closed red for 2016…

 

This week’s chaos is more clearly seen in futures with every rip sold and every dip bought…

 

While the big dump occurred early, it wouldn’t be ‘Murica if we didn’t ramp back maniacally trying to save the S&P from negative territory year-to-date… VIX topped 17.5 at the highs today (2-month highs)

 

Post-FOMC Minutes, Trannies and Small Caps are the worst performers…

 

Long Bonds are best since the hawkish minutes struck…

 

Treasuries were mixed with further weakness in the short-end but modest bid in the 30Y…

 

Pushing 2s30s even flatter…lowest since Dec 2008 which is not good news for financials..

 

The USD Index extended post-FOMC Minutes gains but only modestly as Cable remains the week’s big winner amid falling Brexit polls…

 

The modest strength in the dollar pressured most commodities lower but once Europe closed, crude oil was panic bid…

 

Gold & Silver have tumbled since The FOMC Minutes (but bounced back this afternoon)…

 

Charts: Bloomberg

Bonus Chart: This won’t end well…

Average:

4.4

END

Late last night, Elizabeth Holmes admits that billion dollar company Theranos is a fraud: the technology is a fraud:

 

(courtesy zero hedge)

 

Elizabeth Holmes Admits Theranos’ “Technology” Is A Fraud: Restates, Voids Years Of Test Results

The billion dollar baby has now, officially, gone bye bye.

 

Just when you thought that the biggest ever “multi-billion” private company that also happens to be an utter fraud, would quietly disappear before it risked attracting even more unwarranted attention from regulators, enforcers, and criminal investigators which could potentially lead to prison time for “billionaire” Elizabeth Holmes, here she comes again reminding everyone of her fallen from grace presence, in this case with what should be the terminal news for this company, namely that as the WSJ reports (and as the company confirms) Theranos has told federal health regulators that the company voided and revised two years of results from its Edison blood-testing devices and has issued tens of thousands of corrected reports to doctors and patients.

As a reminder, the basis for Theranos ludicrous $9 billion valuation which it appears was achieved without anyone doing any actual due diligence, were the “Edison” machines which were touted as revolutionary – not just by Holmes but by the fawning media and even the Clintons. Theranos has now told regulators that it threw out all Edison test results from 2014 and 2015, effectively confirming it has no proprietary technology, and also validating that its valuation should be zero.

Worse, Theranos has told regulators that it used the Edison for 12 types of tests out of more than 200 offered to consumers and stopped using the devices altogether in late June 2015. In other words, Theranos’ insane “valuation” was achieved on the basis of doing only 6% of blood tests in house (all of them erroneously we now learn), and outsourcing 94% to companies whose products actually worked and many of whom likely had a far lower valuation than the one at which a bunch of idiot billionaires “valued” Holmes’ worthless company.

In the process of commiting fraud and building up her valuation, Holmes repeatedly gambled with people’s lives, sending them clearly wrong results. As a result some patients have received erroneous results that might have thrown off health decisions made with their doctors, the WSJ reports. All this is needed is one death and there is a criminal case.

So why come clean now?

The move is part of Theranos’s attempt to persuade the agency not to impose stiff sanctions it threatened in the aftermath of its inspection of the company’s Newark, Calif., laboratory. The voided and revised test results are one of the most dramatic steps yet taken by Theranos.

 

Company records reviewed during the inspection showed that the California lab ran about 890,000 tests a year. The inspection found that Edison machines in the lab often failed to meet the company’s own accuracy requirements.

In other words, Theranos may have put as many as 890,000 lives per year in jeopardy with its fake technology.

The good news, this is now officially game over for if not Elizabeth Holmes, then certainly her company:

“There have been massive recalls of single tests in the past, but I’m not aware of one where a company recalled the entirety of the results from its testing platform,” said Geoffrey Baird, associate professor in the department of laboratory medicine at the University of Washington in Seattle. “I believe that’s unprecedented.”

The company also commented:

In response to questions from The Wall Street Journal about the blood-test corrections, Theranos spokeswoman Brooke Buchanan said: “Excellence in quality and patient safety is our top priority and we’ve taken comprehensive corrective measures to address the issues CMS raised in their observations. As these matters are currently under review, we have no further comment at this time.”

That’s rich, pardon the pun. Less rich, if only on paper, will be Holmes who will have ample opportunity to make numerous comments during trial.

* * *

Finally, the question everyone should be asking is who enabled this fraud for so many years? The simple answer: everyone, and especially those who have an agenda to conduct one endless infomercial for a product that ended up being an epic fraud

 

 

end

 

Bellwether Caterpillar has retail sales falling for a record 41 consecutive months.The global growth is stagnant!

(courtesy zero hedge0

 

 

Caterpillar Retail Sales Fall For Record 41 Consecutive Months

For Caterpillar, the great recession was bad, for about 19 months. In May 2010, after declining sharply for just under two years, CAT posted it first positive global retail sales comps and never looked back… until December 2012 when comp sales once again turned negative and have been negative ever since. For the past 41 months!

 

The breakdown showed that contrary to popular opinion, there has been no pick up in demand for heavy industrial machinery anywhere around the globe.

  • Caterpillar global 3-mo. retail machine sales down 12% vs March 13% fall, Feb. down 21%
  • North America machine sales down 11% after falling 8% in March
  • Asia/Pacific sales April down 10% after falling 14% in March
  • Latam sales April down 37% after falling 34%
  • EAME (Europe, Africa, Middle East) sales April down 6% after falling 8%
  • Power systems sales: April down 34% after falling 41%

And a quick comment from Axiom’s Gordon Johnson who reminds us that CAT’s sales guidance implies a rebound in the second half, yet North America sales are worsening.

While some modest improvements were observed (i.e., the declines in Asia/Pac slights moderated in Resource Industries & were up for a second straight month in Construction), declines in North America look to be deepening in both Construction & Resources.

 

This seems to be a bad start for a company guiding to a back-end loaded rebound in 2016 sales.

Don’t worry Gordon: there are always millions in buybacks to fix anything “bad”

end Dudley disappoints and this causes stocks to fall some more.  He is totally unhappy that even a hint that the Fed will hike causes markets to falter: (courtesy zero hedge) Dudley A Dud: Stocks Hit Lows After NY Fed President Warns June “Definitely Live Meeting”

Following yesterday’s surprisingly hawkish minutes, the market held on to hope that either vice Chair Fischer, or former Goldmanite Bill “edible ipads” Dudley would provide at least some dovish counter to a Fed that suddenly has taken out all the wind from the market’s sails. That did not happen earlier when Fischer refused to comment on monetary policy, while moments ago Bill Dudley deliver “Opening Remarks at the Economic Press Briefing on the U.S. Economy in a Snapshot” in which he repeated the broken record  that the Fed remains data-dependent, adding that it is “important” for market participants and public to follow data along with FOMC and “to understand how we are likely to interpret and react” to it.

In other words, Dudley was looking at the reflexive relationship between the Fed and the market we showed several days ago…

… and is begging the market to stop selling off any time the Fed hints at tightening.

Of course, that will never happen, because not only does the market no longer discount any Fed-independent future, but is increasingly aware the Fed itself has no idea what is going on, and the moment the mere hint of more tightening emerges, everything is sold.

As Bloomberg adds, Dudley is the only Fed president with permanent vote on policy, has never dissented on FOMC decision.

“When asked about the trajectory for the monetary policy stance, I always point out that it is data dependent,” Dudley says in text of remarks Thursday at press briefing in New York. Data close to Fed’s expectations “have little additional impact” on central bank’s forecast; data that deviates significantly “can lead to more significant revisions” of forecast.

He added that the FOMC “calibrates” its monetary policy stance to achieve price stability and maximum sustainable employment, while taking into account forecast.

Transmission of monetary policy to economy through many channels “works best” when central bank is transparent about its strategy; in this case, market participants/public “understand and can anticipate actions by the central bank.”

Translation, the Fed has finally figured out the “Nightmarish merry-go-round” we profiled first earlier this week.

Finally, and confirming that the market clearly ignored everything Dudley said, the S&P just hit intraday lows following this headline:

  • DUDLEY: JUNE IS DEFINITELY A LIVE MEETING
  • DUDLEY: QUITE PLEASED WITH MARKET’S JUNE-JULY VIEWS
  • DUDLEY SAYS BIGGER UNCERTAINTY IS WHAT’S GROWTH GOING TO BE
  • DUDLEY: I’M PRETTY CONFIDENT WE’LL GET BACK TO 2% INFLATION
  • DUDLEY: MKT PRICING OF FED HIKE ODDS WAY TOO LOW PRIOR MINUTES

Definitely live…. until the “economy” slides back under 2,000 of course, something the “economy” knows very well.

end Basically Gundlach feels that something has changed at the Fed. I don’t think anything changed:  The Fed cannot raise rates because the economy is in poor shape, it would be foolish to raise rates with an election in November and most importantly, China will certainly react to a higher dollar by devaluing its yuan: (courtesy zero hedge) Jeff Gundlach Warns That “Something Changed” At The Fed

Something has changed according to Jeff Gundlach.  After claiming that a rate hike is “inconceivable” as recently as a month ago, a stance which he softened somewhat in recent days, Gundlach said that the Fed has changed the conditions required for a potential interest-rate hike this year.

Cited by Bloomberg, Gundlach believes that the Fed’s thinking has shifted from, ‘if the data pattern improves we will have the green light to hike,’ to ‘unless the data pattern weakens we have the green light to hike.'”

Perhaps, but surely only as long as the S&P, pardon the “economy” remains above 2,000. The second the S&P, pardon the “economy” slides back under that critical for the Fed level, one can forget all about any rate hike for the foreseeable future as the Fed will never risk crushing the wealth effect it has built up over 8 years of careful micromanagement and market manipulation.

And that is precisely what the market, which understand the reflexive relationship with the Fed much better than the group of career academics locked up in the Marriner Eccles building ever could, is going for: pushing the S&P, pardon the “economy” back under 2,000 so that any hiking ambitions Yellen may have are promptly pushed back by another three months.

In minutes of an April Federal Open Market Committee meeting released Wednesday, officials used the word June six times, signaling the possibility of a rate hike next month. Odds of a move in June, which would be the second in a decade following December’s quarter-percentage-point increase, climbed to 28 percent, according to Bloomberg data.

Gundlach, whose $60 billion DoubleLine Total Return Bond Fund has outperformed 98 percent of its Bloomberg peers over the past five years, said May 12 that the odds were about 50-50 for an increase this year.

Bloomberg also reminds us that Gundlach previously criticized Fed board members who signaled intentions to increase rates as many as four times this year as “a suicide mission,” given signs of weakness, such as slowing U.S. corporate earnings and negative interest rate policies pursued by central bankers in Japan and Europe.

But the biggest threat is how China will respond not so much to another rate hike but to the surge in the USD that will precede it. Ovenright Beijing already launched the warning salvo,when the PBOC not only devalued the Yuan by the most since the infamous August devaluation, but also pushed the Yuan to 2016 lows against the USD – a precursor to the market swoon observed at the start of the year.

 

And as even the Fed has admitted by now, once the emerging market starts turmoiling, then all bets, and certainly of a rate hike, are off.

end Highmark insurer is now asking for money owed by the Fedeal government for some of its losses: (courtesy zero hedge) Insurer Sues US Government For $223 Million In Obamacare Related Back Payments

In yet another development in the train wreck that is Obamacare, while we know that the legislation is failing individuals and businesses, the government is now failing to live up to its obligations made to the insurers who chose to participate in the healthcare exchanges.

The Affordable Care Act set up what is called a risk-corridor program to entice insurers to participate. Essentially the program limits the risk of loss an insurer can take due to its participation in the healthcare exchange by being reimbursed for part of the loss. The program works the other way as well, meaning that if an insurer profits above a certain threshold, those profits get paid into the program.

In 2014, insurers paid $362 million into the program, however they requested a whopping $2.87 billion in payments to help cover losses. Due to this, the federal Department of Health and Human Services promptly backed out of the agreement it had made with insurers, and decided to announce that insurers would only receive 12.6% of the money they claimed under the risk-corridor program in 2014. Perhaps the bill came due for that $4.4 billion destroyer the Navy decided it needed and the money went to pay for that instead.

It turns out that at least one insurer isn’t going accept that the the government isn’t going to fulfill its end of the bargain. Highmark, the insurance arm of Pittsburgh based nonprofit Highmark Health, is suing the US government for $223 million in back payments owed to it under the risk-corridor program.

All we’re asking is for the federal government to do what they promised” said Highmark Health CEO David Holmberg.

Highmark Health had a loss of around $85 million last year, on revenue of about $17.7 billion. The losses are largely due in part to its ACA-plan business, and one can see why the company would expect the government to live up to its promises.

This is a textbook example of how Obamacare will not only drive up insurance premiums, drive out small businesses, and leave patients scrambling for medical attention, but it will alsocontinue to drive health insurance companies out of business. That change we could all believe in? That’s the pennies on the dollar that the government is paying out on its own promises,

 end USA jobless claims continue to rise:  278,000 vs est. 275,000 (courtesy Reuters) US weekly jobless claims total 278,000 vs 275,000 estimateReuters

The number of Americans filing for unemployment aid fell from a 14-month high last week, the latest sign that the economy was regaining speed after stumbling in the first quarter.

Initial claims for state unemployment benefits declined 16,000 to a seasonally adjusted 278,000 for the week ended May 14, the Labor Department said on Thursday. That was the biggest drop since February and snapped three consecutive weeks of increases. Claims for the prior week were unrevised.

Economists polled by Reuters had forecast initial claims falling to 275,000 in the latest week. Claims have now been below 300,000, a threshold associated with a strong job market, for 63 straight weeks, the longest stretch since 1973.

The claims report added to data on retail sales, housing starts and industrial production in painting an upbeat picture of the economy at the start of the second quarter. Gross domestic product growth braked sharply to a 0.5 percent annualized rate in the January-March period.

Claims had risen since mid-April, with economists blaming a variety of factors, including the different timing of school spring breaks, which often makes it difficult to adjust the data around this time of the year.

An ongoing strike by Verizon workers as well as possible disruptions to manufacturing activity in the wake of recent earthquakes in Japan have also been cited.

A Labor Department analyst said there were no special factors influencing last week’s claims data and no states had been estimated. There were large declines in unadjusted claims for New York, Pennsylvania and Michigan, which had seen hefty gains in recent weeks.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week- to-week volatility, rose 7,500 to 275,750 last week. The claims data covered the survey week for May’s nonfarm payrolls.

The four-week average of claims increased 15,000 between the April and May survey periods, suggesting little change in employment gains after the economy added 160,000 jobs last month.

Thursday’s claims report showed the number of people still receiving benefits after an initial week of aid fell 13,000 to 2.15 million in the week ended May 7. The four- week average of the so-called continuing claims rose 4,250 to 2.14 million.

-END-

Puerto Rico is to be bailed out.  The bondholders are not happy with the result: (courtesy zero hedge) Republicans, Democrats Agree On A Bill To Bailout Puerto Rico

It turns out that Puerto Rico’s plan to default on its debt and beg congress for help is working out as planned.

After a slight delay, House Republicans have reached an agreement with the Obama administration to provide a path to restructure Puerto Rico’s $70 billion debt load. The bill would offer the island a legal out similar to bankruptcy and wouldn’t commit any federal money according to the WSJ.

All of the political talking heads are supportive of the bill, with House Speaker Paul Ryan saying that “the stability of the territory is in danger. Today, Republicans and Democrats came together to fulfill Congress’s constitutional and fiscal responsibility to address the crisis”, and Treasury Secretary Jacob Lew called the proposal “a fair, but tough bipartisan compromise.”

While the goal of the bill is to reduce Puerto Rico’s debt burden, which currently absorbs about a third of the island’s revenues, the bondholders are vehemently opposing it, knowing that a haircut would be all but guaranteed. In addition to Puerto Rico’s $70 billion in debt, it also has $40 billion in unfunded pension liabilities, and bondholders have been arguing that any legislation should require pensions to be reduced before any bonds get restructured.

As a reminder, Puerto Rico’s economic crisis has led to a 10% drop in population over the past decade, which has resulted in an eroding tax base, and exacerbated further with businesses having to shut down.

In order to avoid default last year, the government withheld tax refunds and payments to suppliers. “There is an extremely high level of uncertainty, which makes it impossible to attract new investment” said Jose Vazquez, an owner of multiple Subway restaurants on the island.

Jack Lew chimed in with some more value added commentary, telling bondholders that “the reality is if the economy of Puerto Rico doesn’t come back, the bondholders are not going to do well.”

Interestingly, the legislation also exempts Puerto Rico from the new overtime regulation, which extended overtime pay to millions of lower income workers.

As we have repeated, the entire tone of the process is reminiscent of the 2008 financial crisis when Hank Paulson threatened Armageddon if nothing was done to bail the banks out. This time, Treasury Secretary Jack Lew was sending out letters out warning that if no restructuring framework were to be set forth, a series of “cascading defaults” would be touched off. So, once again a path forward has been created that will simply wipe the slate clean for the US territory, and just as in 2008, a message has been sent that it’s ok to take on unsustainable debt loads, as they can now simply be discharged either through bankruptcy or a congressional tweak to existing laws.

end Philly Fed manufacturing index very weak:-1.8 instead of expected 3.5 (courtesy Jill Mislinski/APViewPoint) Philly Fed Manufacturing Index: Weak Growth in May May 19, 2016 by Jill Mislinski

The Philly Fed’s Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to direction of the broader Chicago Fed’s National Activity Index.

The latest Manufacturing Index came in at -1.8, down from last month’s -1.6. The 3-month moving average came in at 3.0, up from 2.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was down at 36.1, versus the previous month’s 42.2.

Today’s -1.8 came in below the 3.5 forecast at Investing.com.

Here is the introduction from the survey released today:

Firms responding to the Manufacturing Business Outlook Survey continued to report tenuous growth this month. The indicator for general activity was essentially unchanged in May and remained slightly negative. Other broad indicators also reflected general weakness in business conditions. The indicator for employment improved but remained negative. Manufacturers’ forecasts of future activity tempered slightly from last month, overall, but continue to suggest confidence in future growth. (Full Report)

The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012, and a shallower contraction in 2013. Last year saw a contraction with an improvement in 2016.

In the next chart we see the complete series, which dates from May 1960. For proof of the high volatility of the headline indicator, note that the average absolute monthly change across this data series is 7.7.

The next chart is an overlay of the General Activity Index and the Future General Activity Index — the outlook six months ahead.

For comparison, here is the latest ISM Manufacturing survey.

Let’s compare all five Regional Manufacturing indicators.Here is a three-month moving average overlay of each since 2001 (for those with data).

Here is the same chart including the average of the five. Readers will notice the range in expansion and contraction between all regions.

end

Well that is all for today I will see you tomorrow night h

May 18/Beige book report suggests a “likely” rate hike/If so China will massively devalue/Saudi Arabia has a full blown liquidity crisis as they are paying their contract workers in notes rather than cash/Inthe USA Target misses top line, bottom line...

Wed, 05/18/2016 - 19:27

Good evening Ladies and Gentlemen:

Gold:  $1,273.70 DOWN $2.50    (comex closing time)

Silver 17.12  DOWN 11 cents

In the access market 5:15 pm

Gold $1258.25

silver:  16.87

No doubt that the entire trading of gold and silver today was orchestrated by our crooked banks. They were massively selling paper gold throughout the night and early morning. Even the one billion dollar bid for gold early this morning did not spook the crooks.  At 2 pm they released the beige book report and the Fed stated that it is likely that they will raise rates in June. The USA should raise rates but the problem will be China who has threatened to lower dramatically the yuan and in so doing would absolutely kill Japan, South Korea and the emerging markets. Besides no Fed would be stupid enough to raise rates three months before a USA election.

 

 

The amount standing for gold in May is simply outstanding at 6.504 tonnes, rising again by 100 oz.  The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

Let us have a look at the data for today

.

At the gold comex today we had a SMALL delivery day, registering 8 notices for 800 ounces for gold,and for silver we had 3 notices for 15,000 oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 236.257 tonnes for a loss of 67 tonnes over that period

.

In silver, the open interest rose by 1,180 contracts up to 207,394 as the price was silver was UP  by 9 cents with respect to yesterday’s trading.  In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.037 BILLION TO BE EXACT or 148% of annual global silver production (ex Russia &ex China)

In silver we had 1 notice served upon for 5,000 oz.

In gold, the total comex gold OI fell by a tiny 1,436 contracts down to 595,077 as the price of gold was up $2.80 with yesterday’s trading(at comex closing).

 

As far as the GLD, no changes in inventory at the GLD. The inventory rests at 855.89 tonnes. We had no changes in silver inventory at the SLV. Inventory rests at 335.073 million oz.

.

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

1. Today, we had the open interest in silver rise by 1,180 contracts UP to 207,394 as the price of silver was UP ONLY by 9 cents with yesterday’s trading. The gold open interest FELL by 1,436 contracts as  gold was up $2.80 yesterday. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Harvey/zero hedge)

3. ASIAN AFFAIRS

i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN  BY 36.10 PTS OR 1.27%  /  Hang Sang closed DOWN 292.39 OR 1.45%. The Nikkei closed DOWN 8.11 POINTS OR 0.06% . Australia’s all ordinaires  CLOSED DOWN 0.74% Chinese yuan (ONSHORE) closed DOWN at 6.5362 as China fired another shot across the bow telling the USA not to raise rates.  Oil ROSE to 47.76 dollars per barrel for WTI and 48.80 for Brent. Stocks in Europe  MOSTLY IN THE GREEN . Offshore yuan trades  6.5581 yuan to the dollar vs 6.5362 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS.

REPORT ON JAPAN  SOUTH KOREA AND CHINA a) REPORT ON JAPAN

none today

b) REPORT ON CHINA

i)Just take a look at Tier 1 house prices in China, up a staggering 26-28% year over year.

This is a huge bubble and it will burst as there is not enough money earned to sustain the prices.

( zero hedge)

 

ii)A good illustration of the huge debt problem inside China.  Kyle Bass has done huge research on China and he comes up with a total debt of 31 trillion USA with non performing loans of 20%.

This is an atomic bomb waiting for ignition: ( zero hedge)   4.EUROPEAN AFFAIRS

The Pound/USA dollar rises due to the latest Evening Standard newspaper poll indicating the stay crowd ahead of the leave sector!

( zero hedge)

 

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

Saudi Arabia has a full blown liquidity crisis and they can only pay government contractors with IOU’s!

( zero hedge)

 

6.EMERGING MARKETS

Rubber bullets are fired into the crowd as police clash with protesters. Conditions inside Venezuela worsens:

(courtesy zero hedge)

7.OIL ISSUES

DOE shows a huge 3.5 million build against expectations of a 3.5 million draw. Crude production fell again to the lowest level since 2014. Cushing inventories rose again but less than expected.  Oil initially dumped and then rose

( zero hedge)

 

8.PHYSICAL STORIES

i)Texas begins the construction of its own gold depository

( Ryan McMaken/Mises Institute)

 

ii)U. of Michigan is setting up a fund to invest in gold and copper mining companies

( Lorin/Bloomberg news/GATA)

iii)John Paulson has lost big on many of his bets as he was forced to liquidate some of his investment in GLD.  However Soros and others have rushed back into GLD.  When this is over they will probably be shocked that the GLD has no physical behind it only paper obligations of others:( Kumar/Bloomberg news/GATA)

 

iv)For your enjoyment:  After Maduro nationalized just about all the mines in Venezuela he needs good mining companies to go back into business and mine the precious metals.  He has one problem:  armed gangs are illegally mining and they enjhoy a cozy relationship with local military commanders

( Wall Street Journal/Kurmanev /GATA)

 

v)There is now an increased movement at Congress to Audit the Fed

( CNBC/GATA)

 

vi)The TF Metals report is a must read.  Craig Hemke discusses the fraudulent exercise orchestrated by the bankers by supplying non backed paper gold as they try and contain the gold price.  Note the huge increase in OI in the comex gold complex and the great difficulty that the banks are now experiencing trying to cover their shortfall.

a must read. ( TFMetals/Craig Hemke/GATA) vii) A thorough look at the huge change in trends with respect to gold throughout these past 15 years or so:( SRSRocco/SRSReport)

 

9.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD AND SILVER

i)Fun and games! After the government stated that retail sales jumped the most in years, Target, misses on top line and worst of all , they slash guidance!

( zero hedge)

ii BEIGE BOOK RELEASE SENDS MARKETS SOUTHBOUND!

First: FOMC states that the cornered Fed will “likely” hike rates in JUne and the masrket is underpricing risk of that hike: (courtesy zero hedge) iii)And the initial reaction:( zero hedge)

 

iv)With the rise in the USA dollar, we are now again seeing the China panic trade once again rear its ugly head.  China has continued to warn the USA that if they raise rates,  the POBC will devalue the yuan which will set off a massive deflation throughout the globe and totally kill Japan and South Korea as well as the emerging markets.

 

v) A must see interview of Rob Kirby/USAWatchdog

 

Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 595,077 for a SMALL LOSS of 1,436 contracts AS  THE PRICE OF GOLD WAS UP  $2.80 with respect to YESTERDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED.   The month of May saw its OI FALL 1011 contracts DOWN to 119. We had 1012 notices filed  YESTERDAY so we gained 1 gold contracts or an additional 100 gold ounces will stand for delivery. The next big active gold contract is June and here the OI FELL by 11,702 contracts DOWN to 321,206 as those paper players that wished to stay in the game rolled to August AND THE REST STAYED PUT FOR NOW. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was VERY GOOD at 199,728. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was VERY GOOD at 248,645 contracts. The comex is not in backwardation. We are LESS THAN 2 weeks away from first day notice for the huge June contract.(9 trading sessions)

Today we had 8 notices filed for 800 oz in gold.

 

And now for the wild silver comex results. Silver OI ROSE by 1180 contracts from 206,214 UP to 207,394 as the price of silver was UP BY ONLY 9 cents with YESTERDAY’S TRADING.We HAVE NOW SURPASSED the all time high OI in silver of 206,748. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 1 contract DOWN to 729. We had 1 notice filed yesterday so we neither gained nor lost any silver ounces standing in this non-active delivery month of May. The next non active month of June saw its OI RISE by 124 contracts UP to 839 OI. The next big delivery month is July and here the OI ROSE by 553 contracts UP to 140,749. The volume on the comex today (just comex) came in at 54,909 which is VERY GOOD. The confirmed volume YESTERDAY (comex + globex) was  very good at 43,345. Silver is  in backwardation up to June. London is in backwardation for several months. THE HIGH OPEN INTEREST FOR THE ENTIRE COMPLEX PLUS THE HIGH OI FOR THE FRONT MAY GOLD AND SILVER CONTRACTS MUST BE SCARING OUR BANKERS TO NO END.   We had 3 notices filed for 15,000 oz.  

MAY contract month:

INITIAL standings for MAY

May 18. Gold Ounces Withdrawals from Dealers Inventory in oz   nil Withdrawals from Customer Inventory in oz  nil  96.45 OZ

MANFRA

 

3 KILOBARS Deposits to the Dealer Inventory in oz 64,235.700 OZ

BRINKS

1998 KILOBARS Deposits to the Customer Inventory, in oz    80,294.53 OZ

HSBC

BRINKS

INCL 2 KILOBARS

  No of oz served (contracts) today 8 contracts
(800 oz) No of oz to be served (notices) 111 CONTRACTS

11,100 OZ Total monthly oz gold served (contracts) so far this month 1980 contracts (198,000 oz) Total accumulative withdrawals  of gold from the Dealers inventory this month   nil Total accumulative withdrawal of gold from the Customer inventory this month  270,987.65 OZ

Today we had 1 dealer deposit

I) iNTO BRINKS: 64,235.700 (1998 KILOBARS)

total dealer deposit: 64,235.700 oz

 

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

 

Today we had 2 customer deposit:

i)INTO HSBC:  80,230.23 OZ

ii) INTO BRINKS: 64.30  (2 KILOBARS)

Total customer deposits;80,294.53 OZ

Today we had 1 customer withdrawals:

i) Out of Manfra:  96.45 oz

 

total customer withdrawals: 96.45 OZ  3 kilobars)

Today we had 1 adjustment:

i) Out of Brinks:

50,268.100 oz was removed from the dealer Brinks and into the customer Brinks and that will be deemed a settlement:  1.5635 tonnes

Today, 0 notices was 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 8 contracts of which 2 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account.  To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (1980) x 100 oz  or 198,000 oz , to which we  add the difference between the open interest for the front month of MAY (119 CONTRACTS) minus the number of notices served upon today (8) x 100 oz   x 100 oz per contract equals 209,000 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE    Thus the initial standings for gold for the MAY. contract month: No of notices served so far (1980) x 100 oz  or ounces + {OI for the front month (119) minus the number of  notices served upon today (8) x 100 oz which equals xxxx oz standing in this non  active delivery month of MAY(6.5038 tonnes). WE GAINED 1 CONTRACT OR AN ADDITIONAL 100 OZ WILL STAND FOR DELIVERY IN THIS NON ACTIVE DELIVERY MONTH OF MAY. Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you.    We thus have 6.5038 tonnes of gold standing for MAY and 21.697 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing. We now have partial evidence of gold settling for last months deliveries We now have 6.5038 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes  = 19.3875 tonnes still standing against 21.697 tonnes available.   Total dealer inventor 697,565.649 tonnes or 21.697 tonnes Total gold inventory (dealer and customer) =7,595,492.258 or 236.25 tonnes    Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 236.25 tonnes for a loss of 67 tonnes over that period.    JPMorgan has only 22.79 tonnes of gold total (both dealer and customer) May is not a very good delivery month and yet 6.5079 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.  end And now for silver  

MAY INITIAL standings

 May 18.2016

Silver Ounces Withdrawals from Dealers Inventory nl oz Withdrawals from Customer Inventory  727,003.291 oz

CNT, SCOTIA Deposits to the Dealer Inventory  NIL Deposits to the Customer Inventory  603,348.900 OZ

,JPM, No of oz served today (contracts) 3 CONTRACTS 

15,000 OZ No of oz to be served (notices) 726 contracts

3,630,000 oz Total monthly oz silver served (contracts) 2053 contracts (10,265,000 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  7,288,223.8 oz

today we had 0 deposit into the dealer account

total dealer deposit:NIL oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposits:

i) Into JPM: 603,348.900 oz

Total customer deposits: 603,348.900 oz.

We had 2 customer withdrawals

i) out of CNT: 606,181.371 oz

ii) Out of SCOTIA: 120,821.92 oz

:

total customer withdrawals:  727,003.291 oz

   

 

 we had 1 adjustment

i) OUT OF BRINKS:  612,179.045 OZ WAS ADJUSTED OUT OF THE DEALER AND THIS LANDED INTO THE CUSTOMER ACCOUNT OF BRINKS

The total number of notices filed today for the MAY contract month is represented by 3 contracts for 15,000 oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (2053) x 5,000 oz  = 10,265,000 oz to which we add the difference between the open interest for the front month of MAY (729) and the number of notices served upon today (3) x 5000 oz equals the number of ounces standing    Thus the initial standings for silver for the MAY contract month:  2053 (notices served so far)x 5000 oz +(729{ OI for front month of MAY ) -number of notices served upon today (3)x 5000 oz  equals 13,895,000 oz of silver standing for the MAY contract month. WE NEITHER GAINED NOR LOST ANY SILVER CONTRACTS TODAY   Total dealer silver:  29.67 million Total number of dealer and customer silver:   153.339 million oz The open interest on silver is NOW AT an all time high with the record of 207,394 being set in the last week of April. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver. end And now the Gold inventory at the GLD May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes. May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition.. May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN??? May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes April 28/we gained 1.49 tonnes of gold at the GLD/Inventory rests at 804.14 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 18.:  inventory rests tonight at 855.89 tonnes

end

Now the SLV Inventory May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz May 12/no change in silver inventory/rests tonight at 335.073 million oz/  May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/ May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz. May 9. no change in silver inventory/rests at 336.119 million oz. May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV INVENTORY RESTS AT 336.119 MILLION OZ MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580 April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz . May 18.2016: Inventory 335.073 million oz end   1. Central Fund of Canada: traded at Negative 2.8 percent to NAV usa funds and Negative 2,9% to NAV for Cdn funds!!!! Percentage of fund in gold 61.5% Percentage of fund in silver:37.2% cash .+1.3%( May 17/2016). 2. Sprott silver fund (PSLV): Premium FALLS   to -.48%!!!! NAV (MAY 18.2016)  3. Sprott gold fund (PHYS): premium to NAV  FALLS 1.22% to NAV  ( MAY 18.2016) Note: Sprott silver trust back  into NEGATIVE territory at -48% /Sprott physical gold trust is back into positive territory at +1.22%/Central fund of Canada’s is still in jail. It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to -.48%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.      

END

And now your overnight trading in gold,WEDNESDAY MORNING and also physical stories that may interest you: Trading in gold and silver overnight in Asia and Europe Mark O’Byrne (goldcore)/ off today

end

 

Gold trading today:  8,500 contracts bought in 5 minutes!!??

(courtesy zero hedge)

 

Gold Spikes Above $1275 On Sudden Billion Dollar Bid

As an equal opportunity information-provider, we thought it worth noting that following yesterday’s panic-selling puke in precious metals, this morning we are greeted with panic-buying as Gold and Silver spike higher on heavy volume as US stocks open…

8,500 contracts in 4 minutes – or just over a billion dollars notional paper gold bid…

end

Texas begins the construction of its own gold despository

(courtesy Ryan McMaken/Mises Institute)

Texas Begins Construction Of Gold Depository

Submitted by Ryan McMaken via The Mises Institute,

Last year, we covered a story coming out of Texas in which the state government was planning to institute a state-controlled “gold depository” that would allow individuals to store their gold in a presumably safe place outside the United States banking system.

This proposition was met with emotionally-charged denunciations from Americans in far away northeastern American states where it was claimed this measure was contrary to the “supremacy clause” and just a terrible idea in general because it undermined faith in the US’s central government and the Federal Reserve System.

Well, in spite of the disapproval of New Yorkers, the Texas legislature passed the bill, and the governor signed it into law last June

“With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state,” Abbott said when he signed the bill.

The depository won’t just store state gold and other precious metals. The law requires that individual customers, and even school districts, be allowed to open accounts. Capriglione has described it as a bank that doesn’t do any lending. 

Originally, the bill appears to have envisioned Texas tax dollars being used to create the facility, but the bill only passed when it was modified to create what is seemingly a state-chartered gold depository that will be privately owned and paid for via fees for gold storage. 

Thus, not surprisingly, several private firms are now trying to become the creators of one of these depositories. The Ft. Worth Star-Telegramyesterday reported:

Saab’s company, one of many interested in being involved with the state’s plan to create a depository, proposes building a potentially $20 million facility — with no Texas tax dollars — on 40 acres of land it has in Shiner, about 250 miles south of Fort Worth.

The original sponsor of the bill, State Representative Giovanni Capriglione appears pleased with the progress being made:

“I am optimistic that the depository will be up and running at the end of this year or the beginning of next year,” Capriglione said. “The most important factor is making sure that the process is completed with considerable thought and care.”

At the depository, Texans will be able to open accounts similar to checking or savings accounts at traditional banks — and monitor them online.

The physical construction of the facility is very humdrum compared to the implications of the creation of a depository of this sort.

Laying the Ground Work for Electronic Gold-Based “Money”

For one, many state politicians hope that the State of Texas will be able to relocate its own gold holdings into Texas from New York where it currently sits. The state spends a million dollars per year on its storage.

Moreover, existence of the depository opens up the possibilities for users creating a new type of currency in which purchases are made electronically with the backing of the gold in the depository. In other words, one could potentially use the depository’s infrastructure to make purchases using gold, and to have gold either directly deposited into another’s account, or converted to US dollars and deposited in a conventional bank. Arguably, this is just an electronic version of gold-backed money.

Ironically, Zero Interest Rate Policy Has Made Gold Depositories More Practical

And now more than ever, the idea of paying fees on gold deposits has become relatively economical thanks to near-zero interest rates on ordinary bank accounts. In ages past when banks actually paid meaningful interest on deposits, one might wonder why anyone would pay a fee to store gold when one could collect interest on cash at a bank.

Thanks to the central banks’ commitment to near-zero or even negative interest rates, though, holding cash in a bank no longer brings any benefit in terms of investment earnings. That is, the opportunity cost of storing gold in a depository is getting lower and lower thanks to central bank policy.

 end U. of Michigan is setting up a fund to invest in gold and copper mining companies (courtesy Lorin/Bloomberg news/GATA) University of Michigan to invest in gold, copper mining fund

Submitted by cpowell on Tue, 2016-05-17 12:31. Section:

By Janet Lorin
Bloomberg News
Monday, May 16, 2016

The University of Michigan plans to invest $30 million in a fund that will buy North American gold and copper mines from distressed companies.

The school, with a $10 billion endowment as of June 30, plans to make the investment with Waterton Mining Parallel Fund, which is managed by Waterton Global Resources Management in Toronto, according to an agenda for the Board of Regents meeting on May 19.

Gold is the best-performing major metal this year after silver amid rising concern over negative rates in Europe and Japan and whether the Federal Reserve will be able to tighten further.

“These opportunities arise from the financial distress of mining companies who took on significant amounts of debt for M&A activity prior to the collapse in commodity prices since 2011,” Kevin Hegarty, chief financial officer at University of Michigan, wrote in the request for approval. “Now looking to strengthen their balance sheets, these financially distressed companies are selling assets to raise cash and reduce debt levels.” …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2016-05-16/university-of-michigan…

 

END

 

John Paulson has lost big on many of his bets as he was forced to liquidate some of his investment in GLD.  However Soros and others have rushed back into GLD.  When this is over they will probably be shocked that the GLD has no physical behind it only paper obligations of others:

(courtesy Kumar/Bloomberg news/GATA)

Paulson cut gold bets again as Soros, others rushed back

Submitted by cpowell on Tue, 2016-05-17 12:38. Section:

By Devika Krishna Kumar
Bloomberg News
Tuesday, May 17, 2016

Gold bull John Paulson slashed his bets on bullion while billionaire investor George Soros and other big funds returned to the metal for the first time in years, filings showed on Monday, as prices staged their biggest rally in nearly 30 years.

New York-based hedge fund Paulson & Co, led by John Paulson, one of the world’s most influential gold investors, slashed its investment in SPDR Gold Trust, the world’s biggest gold exchanged-traded fund, by 17 percent to 4.8 million shares, U.S. Securities and Exchange Commission filings showed on Monday.

It was Paulson’s third cut to his SPDR stake in a year and saw him drop to the third largest investor in the fund from second, behind BlackRock and First Eagle Investment Management.

“If you were already long, which clearly Paulson was, maybe he’s just taking some profits off the table,” Mike Dragosits, senior commodities strategist at TD Securities said. …

… For the remainder of the report:

http://www.reuters.com/article/us-investments-funds-gold-idUSKCN0Y72C4

 

END

 

For your enjoyment:  After Maduro nationalized just about all the mines in Venezuela he needs good mining companies to go back into business and mine the precious metals.  He has one problem:  armed gangs are illegally mining and they enjhoy a cozy relationship with local military commanders

(courtesy Wall Street Journal/Kurmanev /GATA)

Armed gangs confound Venezuela’s bid to exploit gold mines

Submitted by cpowell on Tue, 2016-05-17 12:45. Section:

By Anatoly Kurmanaev
The Wall Street Journal
Tuesday, May 17, 2016

LA PARAGUA, Venezuela — Five years after Venezuela nationalized much of its mining industry, President Nicolas Maduro is inviting multinational firms back in to try to revive the country’s dying economy. But standing between the companies and the minerals are up to 100,000 illegal miners and armed gangs, some of which evidently enjoy cozy relations with local military commanders.

In February, Mr. Maduro unveiled a plan to auction 27 million acres of new concessions in an area he designated as the Orinoco Mining Arc. The government estimates the area holds 7,000 tons of gold, which if certified would make Venezuela’s gold deposits second only to Australia’s.

Mr. Maduro signed deals that month with China’s fourth-largest coal miner Yankuang Group, construction giant China CAMC Engineering Co. and Spokane, Washington-based independent miner Gold Reserve Ltd. He said more contracts worth billions of dollars are coming.

“This is a magnificent source of wealth that will begin substituting petroleum as our only source of foreign earnings,” he said.

But at the illegal Arenosa gold mine in the heart of the Orinoco Mining Arc, gang leader Ramon said he had other plans. On a recent day, dozens of his henchmen armed with pistols, shotguns, and machine guns stood guard surrounding the mines. Around them, hundreds of wildcatters dug pits with shovels amid blaring salsa music. …

… For the remainder of the report:

http://www.wsj.com/articles/armed-gangs-confound-venezuelas-bid-to-explo…

 

END

 

There is now an increased movement at Congress to Audit the Fed

(courtesy CNBC/GATA)

‘Audit the Fed’ movement is taking a big step forward in Congress this week

Submitted by cpowell on Tue, 2016-05-17 13:27. Section:

By Jeff Cox
CNBC, New York
Monday, May 16, 2016

An effort to conduct an unconventional audit of the Federal Reserve is gaining traction in Washington and on its way to a potentially important milestone this week.

The Federal Reserve Transparency Act will undergo the markup process this week in the House Oversight and Government Reform Committee. A product of the “Audit the Fed” movement, the bill seeks not a financial exam of the U.S. central bank but rather a peek behind the curtain of how monetary decision-making happens. The markup comes after several failed efforts to move the legislation ahead, and supporters believe there now is enough backing in Congress to go forward.

The Fed’s policymaking arm, the Federal Open Market Committee, does not meet in public and only communicates its decisions through carefully worded statements at the end of its meetings and through officials’ remarks at speaking engagements and through the press. …

… For the remainder of the report:

http://www.cnbc.com/2016/05/16/the-audit-the-fed-movement-is-taking-a-bi…

END The TF Metals report is a must read.  Craig Hemke discusses the fraudulent exercise orchestrated by the bankers by supplying non backed paper gold as they try and contain the gold price.  Note the huge increase in OI in the comex gold complex and the great difficulty that the banks are now experiencing trying to cover their shortfall. a must read.. (courtesy TFMetals/Craig Hemke/GATA) TF Metals Report: The epic battle continues

Submitted by cpowell on Tue, 2016-05-17 23:30. Section:

7:29p ET Tuesday, May 17, 2016

Dear Friend of GATA and Gold:

The TF Metals Report’s Turd Ferguson shows today how yesterday’s seemingly unprovoked smash of gold futures prices was another attack by the bullion banks that have — or have been lent by central banks — the power to create infinite amounts of imaginary metal for price suppression.

Ferguson writes: “Having the ability to create an endless supply of anything gives you direct control over whatever market you ‘make.’ And for three years this has provided a stream of easy profits for these bank trading desks. They would simply issue as many new contracts as necessary to wait out the specs. Eventually price would top out and momentum would stall. All it would take was usually one good shove from the banks and down would go price. The specs would all rush for the exits and the banks would use the ensuing selling to buy back and cover nearly all their recently issued shorts.”

Ferguson’s analysis is headlined “The Epic Battle Continues” and it’s posted at the TF Metals Report here:

http://www.tfmetalsreport.com/blog/7631/epic-battle-continues

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

And now the report by Craig Hemke:

(courtesy Craig Hemke)

The Epic Battle Continues By Turd Ferguson | Tuesday, May 17, 2016 at 11:05 am

On one side, we have The Specs. These” investors” seek an exposure to gold through ownership of the paper derivative offered by The Comex. On the other side, we have The Banks. These “criminals” fraudulently create unlimited amounts of unbacked paper gold and sell them to The Specs in an attempt to cap price and, ultimately, profit by covering at lower prices. Which side will win? With open interest near record levels in both gold and silver, we’re likely not going to have to wait much longer to find out.

If you somehow managed to sleep through yesterday, here’s a recap. It was typical of the new, post-April 19 norm. Prices rose on the Sunday evening Globex. They rose further in Asia and they even extended through the London session. However, after hitting highs above $1290 in early Comex trading, prices were slammed for $15 in 15 minutes in a move that left many “analysts” searching for explanations: http://www.cityam.com/241192/analysts-puzzled-as-gold-and-silver-prices-suddenly-drop-during-us-morning-trading-

Perhaps your sweet, loving and harmless local analyst can help these “puzzled” folks out a bit?

The action on The Comex yesterday was simply another act of desperation on the part of The Banks. The issued and dumped an inordinate amount of paper gold, calculated by ZeroHedge to be in excess of $2.3B notional: http://www.zerohedge.com/news/2016-05-16/gold-silver-are-being-dumped

Were these Banks suddenly in a rush to sell an accumulated long position? Was immediate liquidation so important that an entire position needed to be blown out in minutes? Or we’re The Banks simply dumping a whole bundle of new paper contract supply onto the “market”? In doing so, The Banks would clearly be attempting to manipulate prices lower, either to simply cap the days gains or to protect against the incredible losses that would be incurred if/when price surges through $1300. Recall that as of the most recent Bank Participation Report, The Banks were NET short nearly 200,000 Comex contracts. This means that every $10 move in price equates to a $200M paper loss. Accordingly, a gold price that surges from $1300 to $1400 would force another $2B+ in losses upon The Banks. Do you think they’d like to avoid this fate?

Thus we have days like yesterday. And how do we know this to be true? The answers can be found in the CME’s own open interest numbers which are updated daily. If yesterday’s massive contract dump had emanated from a Spec long, Comex history and paper market dynamics would have suggested a significant decrease in total open interest. The Specs would have sold longs. The Banks would have taken the other side of the trade and bought to cover shorts. Open interest would have been retired and the total number of contracts outstanding would have declined. On the flip side, if the massive dump emanated from a Bank issuing a whole bundle of new paper shorts, we would expect to see a significant increase in total open interest.

Well, the open interest numbers for yesterday are out and what do we have??? An increase of 16,767 contracts to a new, multi-year high of 596,513 paper contracts.

So now that we know just which parties were responsible for the raid and selling yesterday, it’s time to once again discuss WHY The Banks operate this way. Aside from their BIS and Central Bank mandate to manage price, The Banks manage and manipulate the precious metals because they profit from it! Having the unlimited ability to create an endless supply of anything gives you direct control over whatever market you “make”. And, for the past three years, this has provided a stream of easy profits for these Bank trading desks. They would simply issue as many new contracts as necessary to wait out The Specs. Eventually, price would top out and momentum would stall. All it would take was usually one good shove from The Banks and down would go price. The Specs would all rush for the exits and The Banks would use the ensuing selling to buy back and cover nearly all of their recently issued shorts.

The most recent and egregious example of this was last October and we documented the entire process as it unfolded, hopefully saving all of you some fiat and undue anxiety in the process. Here are two charts from the archives that effectively describe the process. These are dated 11/18/15 and labeled in such a way as to make it all quite clear:

The Banks are attempting the same maneuver now, writ large. Writ very, very large! Check the chart below and notice the same style of open interest flooding and price capping, only on a much larger scale and with much higher stakes:

Let’s have some fun with math. Shall we?

As noted above, on January 28 of this year, total Comex gold open interest was 373,252 contracts representing 37,325,200 ounces of paper gold. That night price was $1116 and the CME Gold Stocks report showed a total vaulting of 6,427,038 ounces.

By March 11, price had risen to $1261 and total open interest was 506,363 contracts representing 50,636,300 ounces of paper gold with the CME Gold Stocks showing a total Comex vault of 6,815,280 ounces.

As of last night, price was $1274 and total open interest was 596,513 contracts representing 59,651,300 ounces of paper gold with the CME Gold Stocks showing a total Comex vault of 7,595,687 ounces.

So, over the period January 28 to May 16:

  • Paper price has risen by $158 or 14.16%
  • Total Comex open interest has risen by 223,261 contracts representing 22,326,100 ounces of paper gold or an increase of 59.82%.
  • Total Comex vault stocks have risen by 1,168,649 ounces of gold or an increase of 17.15%
  • Leverage of paper ounces to total Comex stocks has increased from 5.81:1 to 7.84:1 or an increase of 34.94%.

If The Comex Banks had just been forced to maintain the already-fraudulent 5.81:1 ratio of paper to vault stocks from January 28, then total open interest allowed as of yesterday would only have been 441,309 contracts. And if total open interest was 155,000 contracts LESS than what it currently is, do you suppose that price would be a bit higher than $1272?

So, what’s the point of all this? Once again, we’re simply attempting to draw attention to the hopelessly corrupt and fraudulent, paper derivative pricing scheme. In the absence of any meaningful physical delivery, the “price” discovered on the Comex is not a price for gold (or silver) at all. Instead, the only price being discovered is the price of the derivative, itself. Nothing more.

However, there is a secondary point worth noting. Go back up and check that chart from November 18. Note the size of the “Commercial” NET short positions. Back then, the Gold Commercials saw their NET position reach 166,000 contracts and the 24 Banks included in the Bank Participation Report saw their NET position reach to 99,119 contracts short. As of last week, the Gold Commercial NET short position hit 285,000 contracts and this month’s BPR revealed a 24 Bank NET short position of 195,262 contracts. Are The Banks beginning to get squeezed? Is there a limit to the amount of unbacked, naked short positions that they are willing to create and maintain. Is it possible that they are blindly putting good money after bad in a desperate attempt to save their accumulated positions? Could The Banks actually lose and be forced to cover, all the while sustaining massive losses? These are good questions. Perhaps we should consult “The London Whale” for answers: http://www.wsj.com/articles/london-whale-breaks-silence-1456189964

At the end of the day, be patient yet remain firm. Recognize the forces aligned against you, however, and know that they are conspiring against you. Will they lose control? Only time will tell. In the meantime, simply remain alert and prepare accordingly for all possible outcomes.

TF

END

 

A thorough look at the huge change in trends with respect to gold throughout these past 15 years or so:

 

(courtesy SRSRocco/SRSReport)

 

Huge Trend Changes Point To Something Big In The Gold Market

by SRSrocco on May 18, 2016

Very few precious metals investors realize how recent trend changes will greatly impact the gold market going forward. The reason many investors fail to grasp the huge change in the gold market is that they look at data or information on an individual basis. To really understand what is going on, we must look at how all segments of the market compare to each other… a BIRD’S EYE VIEW.

Let’s start off with one segment of the gold market that has changed significantly in the past 15 years. The Global Gold Hedge Book hit a peak of nearly 3,100 metric tons (mt) in 1999:

(chart courtesy of the World Gold Council)

Here we can see that after the Global Gold Hedge Book peaked in 1999, it fell to a low at a little more than 100 mt in 2013. Not only was this a significant change in the hedging strategy of the gold mining industry, it also was impacted by the price change from an average price of $279 in 1999 to $1,411 in 2013.

So, as the price of gold jumped five times from 1999 to 2013, the Global Gold Hedge Book fell 96%. Even though it increased a bit in the first quarter of 2016 to the present 253 metric tons, it’s still a fraction of the massive hedge book the gold industry held in 1999.

Now, if we add another segment of the gold market, we will see another large trend change. Global Gold Bar & Coin demand increased significantly since 2000. In 2000, total Global Gold Bar & Coin demand was 166 mt. However, this hit a record high of 1,705 mt in 2013:

If we were to super-impose the Global Gold Hedge Book chart with the Gold Bar & Coin chart, we would see an interesting trend. As the gold industry’s hedge book fell to a low in 2013, Global Bar & Coin demand hit a peak. Furthermore, if we consider the net change in Central Bank Gold purchases, it’s even more interesting:

When the gold industry held a very large gold hedge book, Western Central Banks were dumping gold on the market HAND-over-FIST. I imagine this was a two-tiered approach in controlling the gold price. We can see that in 2003, Central Banks dumped 620 mt of gold into the market and another whopping 663 mt in 2005. However, this all turned around in 2010, when (Eastern) Central Banks became net buyers of gold at 79 mt.

Moreover, Central Bank gold purchases also hit a record 625 mt in 2013 along with Gold Bar & Coin Demand of 1,705 mt. These two record gold demand figures took place the very year the Global Gold Hedge Book fell to a record low.

While these three different segments of the gold market provide the investor with a different understanding when we look at them all together, there is another factor that is even more compelling.

Global Gold ETF Demand Is The Major Trend Changer

Even though investors don’t trust a lot of the figures coming out of the Gold ETF market, it is by far the most critical factor in the gold market going forward. Why? Because this is where the Main Stream Investors enter in BIG NUMBERS.

This chart shows the change of Gold Bar & Coin demand versus Gold ETF demand in the past two quarters:

Even though gold went up $200 in the first quarter of 2016, Gold Bar & Coin demand actually declined from 272 mt (Q4 2015) to 254 mt (Q1 2016). However, Global Gold ETF’s saw a huge spike in demand from a negative 68 mt in Q4 2015 to 364 mt in Q1 2016. While Gold Bar & Coin demand fell 7% in Q1 2016 compared to the previous quarter, Global Gold ETF’s experienced a huge 300+% increase.

Okay, I realize many investors don’t trust the data put out by the World Gold Council, but its the best we can go by. Even if the data is manipulated or under-reported, the trend changes discussed here are important to understand. Furthermore, if the figures are manipulated, then the trend changes are even more severe and bullish for the gold investor going forward.

Regardless, the big change of Global Gold ETF demand will be the major factor to focus on in the future. It won’t matter if the GLD ETF has all the gold it states, spiking demand in this sector will be the factor that overwhelms the entire market. Again, if we look at the chart above we can see that Gold Bar & Coin demand did not really increase during the $200 gold price increase. Which means, the 1% of investors who have been acquiring physical gold for years didn’t feel motivated to buy much more.

On the other hand, FEAR entered into the Main Stream Investor as the broader stock markets were crashing during the first quarter of 2016. This was the motivation of the main stream investor to get into the safety trade of gold. I see this segment of the gold market surging as the Dow Jones finally falls off a cliff.

Lastly, the gold market was in serious trouble at the end of 2012 when the price of gold hit an average high of $1.669. This is why the gold price was knocked lower in 2013 and lower still over the next two years. This forced gold out of the Global Gold ETF’s. This last chart represents Net Global Gold Investment since 2013:

Even though total Gold Bar & Coin demand for 2013 was 1,705 mt, when we subtract out the outflows from Global Gold ETF’s, total net gold investment was only 885 mt. This figure does not include Central Bank purchases. By pushing the price of gold down for the past three years, gold was taken out of Global Gold ETF’s to supplement the market.

However, this all changed during the first quarter of 2016 as Global Gold ETF demand surged to 354 mt versus a negative 68 mt in Q4 2015. Thus, total gold investment for Q1 2016 is already 618 mt. What happens for the next three-quarters?

Take a look at Global Gold Holdings over the past 10 days:

What is interesting here is as the price of gold declined from $1,289 on May 6th to $1,277 on May 17th, total Global Gold Holdings increased 1.8 million oz (shown on the dark blue line). Basically, Gold ETF’s, similar products and exchanges total inventories increased from 75 million oz to 76.8 million oz as the price of gold declined.

This means investors are still highly concerned about the economic and financial markets to move into gold investments as the price declines.

Keep an eye on Global Gold ETF demand going forward. This will be the key that totally overwhelms the gold market in the future.

-END-

Your early WEDNESDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight    

:

1 Chinese yuan vs USA dollar/yuan DOWN to 6.5362 ( DEVALUATION DEEPENS ) / Shanghai bourse  CLOSED DOWN 36.10 OR 1.27%  / HANG SANG CLOSED DOWN 292.39 OR 1.45%

2 Nikkei closed DOWN 8.11 OR 0.06% /USA: YEN RISES TO 109.42

3. Europe stocks opened ALL IN THE RED  /USA dollar index UP to 94.83/Euro DOWN to 1.1273

3b Japan 10 year bond yield: FALLS   TO -.100%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.42

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  48.46  and Brent: 49.28

3f Gold DOWN  /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

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 10 yr bund FALLS to 0.146%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 9.06%/: 

3j Greek 10 year bond yield RISE to  : 7.38%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1274.40/silver $17.07(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble DOWN 42 in  roubles/dollar) 65.21-

3m oil into the 48 dollar handle for WTI and 49 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9841 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1093 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .146%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

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 1.784% early this morning. Thirty year rate  at 2.605% /POLICY ERROR)

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

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

end

 

Copper Slides To Three Month Low Despite Flat Futures, Oil; Dollar Rise Continues

After two violently volatile days in which the market soared (Monday) then promptly retraced all gains (Tuesday), the overnight session has been relatively calm with futures and oil both unchanged even as the BBG dollar index rose to the highest level since April 4. This took place despite a substantial amount of macro data from both Japan, where the GDP came well above the expected 0.3%, instead printing 1.7% annualized, which pushed stocks lower as it meant the probability of more BOJ interventions or a delay of the sales tax hike both dropped. Meanwhile, in China we got proof of the ongoing housing bubble when new property prices were reported to have soared 12.4% Y/Y in April, which in turn pushed the local stock market to two month lows amid concerns the rampant housing bubble sector could divert funds from stocks. Yes, China is trading on the “risk” one bubble will burst another bubble.

At the end of the day, however, it was all about two Fed speakers yesterday and, as Bloomberg put it, financial markets reawakening to the risk that the U.S. expedites interest-rate increases, and that’s buoying the dollar while denting emerging markets and commodities. Additionally, the US 2s10s curve hit its flattest level since 2007. As noted above, the USD has risen rapidly in the past few weeks and as of this morning climbed to a seven-week high and Treasuries fell, pushing two-year yields to highest since April, after Atlanta Federal Reserve President Dennis Lockhart and San Francisco’s John Williams said Tuesday two rate hikes may be warranted this year. Chinese stocks tumbled to a two-month low, while the rand led the selloff versus the greenback amid mounting political tension in South Africa. Copper and gold fell for the first time in four days.

Looking at markets, DB’s Jim Reid summarized the situation relatively well as follows:

The mood of markets is pretty temperamental at the moment with sudden reversals in sentiment seemingly occurring every few days. The S&P 500 closed -0.94% last night, wiping out Monday’s gains. Fedspeak seemed to be a driver and it was interesting to see the US 2s10s curve hit its flattest level since 2007. Specifically it was the joint comments from Atlanta Fed President Lockhart and also San Francisco Fed President Williams that sparked interest after both suggested that they continue to see two to three rate hikes this year. Lockhart also added that markets are currently more pessimistic than he is, while Williams made mention of June being a live meeting and even went as far as to say that his view of gradual hikes also means 3-4 hikes in 2017. Balancing all this were comments from Dallas Fed President Kaplan shortly after who said that a hike may well be warranted in the ‘not-too-distant future’ but warned of the need to consider uncertainty including Brexit risk.

In any case it was the initial hawkish comments which helped to fuel a decent flattening across the Treasury curve. 2y yields ended 4.5bps higher at 0.833% with 10y yields ‘just’ 1.9bps higher at 1.773%. That means the current 2s10s spread of 94bps has marked a new tight for the year and you have to go back to December 2007 to find the last time the spread was this narrow. All of this has also resulted in a decent repricing in Fed Funds futures. The probability of a hike next month has now risen to 12% from 4% on Monday while a July hike has increased to 28% from 19%. The December meeting odds are now sitting at 65% from 56%.

And while oil is largely unchanged as of this moment with WTI trading in the mid-$48 range, buoyed by renewed fears from the Canadian wildfires which appear set to keep millions of barrels of production offline for several more days, keep a close eye on copper, which this morning is down 1.6% to $2.06/lb, hitting its lowest price in three months.

But going back to the story of the day, especially ahead of today’s only notable news release the FOMC April minutes, all eyes remain on the dollar and the suddenly renewed probability of a rate hike. The dollar has rebounded in May after declining in the previous three months as the Fed pushed back expectations for rate increases this year. A strengthening U.S. economy and the biggest jump in consumer prices in three years have led traders to boost the odds of a move in June threefold to 12 percent. The Fed will release the minutes of its April policy meeting on Wednesday.

“Expectations appear to be that minutes will signal that a summer hike is on the cards,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. The “solidly hawkish” rhetoric from Fed non-voting members of late is proving to be dollar positive, as the possibility of a hike is not priced in by markets, he said.

Futures on the S&P 500 were little changed after equities tumbled on Tuesday. Investors will look Wednesday to earnings from retailers including Target Corp., Staples Inc., Lowe’s Cos. and Urban Outfitters Inc. for further indications on the health of U.S. consumers after a slew of disappointing results cast doubt on their willingness to spend. The Stoxx Europe 600 Index slipped 0.1 percent. Burberry Group Plc dropped 3.7 percent after the luxury-goods retailer added to the industry’s gloom by posting a second straight drop in annual earnings. Sonova Holding AG tumbled 7.1 percent after the Swiss hearing-aid maker’s second-half earnings missed estimates.

Minutes from the Fed’s April meeting will also be in focus for clues on the trajectory of interest rates after hawkish comments from regional presidents. The first month with even odds of higher borrowing costs also moved up to November from December.

Market Snapshot Summary

  • S&P 500 futures down less than 0.1% to 2043
  • Stoxx 600 down 0.1% to 335
  • FTSE 100 down 0.4% to 6141
  • DAX down 0.3% to 9864
  • MSCI Asia Pacific down 0.7% to 127
  • Nikkei 225 down less than 0.1% to 16645
  • Hang Seng down 1.5% to 19826
  • Shanghai Composite down 1.3% to 2808
  • S&P/ASX 200 down 0.7% to 5356
  • US 10-yr yield up 1bp to 1.78%
  • German 10Yr yield up 1bp to 0.14%
  • Italian 10Yr yield down less than 1bp to 1.45%
  • Spanish 10Yr yield up less than 1bp to 1.57%
  • Dollar Index up 0.37% to 94.9
  • WTI Crude futures down 0.3% to $48.16
  • Brent Futures down 0.5% to $49.05
  • Gold spot down 0.5% to $1,272
  • Silver spot down 1.2% to $17.04

Top Global News

  • Mitsubishi Motors President Resign as Mileage Scandal Widens
  • Eletrobras Sees U.S. Delisting on Deadline Miss Amid Graft Probe
  • Nasdaq Bears at 5-Year High Just as Berkshire Sees Apple Bargain
  • Goldman’s Hatzius Says Flattest Yields Since 2007 Misprice Fed
  • Goldman’s India Blue-Chip Bond Picks Gain After 2015 Junk Flop
  • BlackRock Hires Ex-Hedge Fund Founder Ferrier for Private Credit
  • Goldman Sachs Asset Said to Consider Aussie Equities Unit Sale
  • Fed Alarm Has $8.5b Swedish Fund Manager Dumping Risk

Looking at regional markets, Asia stocks traded mostly lower following losses on Wall St. where several Fed speakers suggested prospects for a June hike were still alive. This pressured ASX 200 (-0.7%) & Nikkei 225 (-0.1%) at the open, however Japanese stocks briefly staged a recovery as participants digested better than expected GDP with the annualised figure printing at a 1 year high at 1.7% vs. Exp. 0.3%, although selling later resumed. Shanghai Comp (-1.8%) was negative despite continued gains in Chinese property prices amid concerns the rampant sector could divert funds from stocks, while tech names underperformed after reports overseas users of Alipay may be restricted from the service from Friday. In addition, some analysts also noticed disappointment as NPC Head Zhang was did not mention the HK-Shenzhen stock connect at a speech in Hong Kong. 10yr JGBs were mildly lower with the increased risk appetite for Japanese equities dampening demand for the paper, despite the BoJ also entering the market to purchase over JPY 1.2tr of JGBs.

Japanese GDP SA (Q1 P) Q/Q 0.4% vs. Exp. 0.1% (Prey. -0.3%, Rev. -0.4%)

  • GDP Annualised SA (Q1 P) Q/Q 1.7% vs. Exp. 0.3% (Prey. -1.1%, Rev. -1.7%)
  • GDP Nominal SA (Q1 P) Q/Q 0.5% vs. Exp. 0.5% (Prey. -0.2%). (BBG)

China April New Home prices rose 6.2% Y/Y vs. Prey. 4.9% in March. (BBG)

Top Asian News

  • Japan Dodges Recession on Modest Increase in Consumer Spending: Expansion of GDP exceeds forecasts by all surveyed economists
  • Suzuki Plunges After Finding Flaw in Mileage Testing Method: co. used improper method to test fuel efficiency of its vehicles
  • Goldman Sachs Asset Said to Consider Aussie Equities Unit Sale: Sale or management buyout of unit said to be among options
  • China Leader Asks Hong Kong for ‘Broader Mind’ Amid Protests: Communists’ No. 3 urges integration with Beijing’s development
  • Malaysia May Bar Overseas Travel for Those Who Insult Government: Human rights activist prevented from going to South Korea
  • Midea Makes Offer to Become Biggest Shareholder in Kuka: German robot maker already helping Midea to automate factories
  • Forget About Shenzhen Link Date, Just Buy In, Legg Mason Says: Investors should seize opportunity to position for it instead of guessing a start date

European equities have followed on from yesterday’s trend to trade lower this morning (Euro Stoxx: -0.4%), with energy and material sectors weighing on the index. As such, the FTSE 100 is the worst performing of the major indices, with the likes of Glencore, Anglo America and Rio Tinto among the worst performers in Europe. Bunds have continued to trade within a relatively tight range around the 164.00 level , with the German benchmark initially seeing downside given the supply due out today, combined with the recent downside in T-notes given the rise in expectations of a potential rate hike from the Fed in June. However, heading back into mid-morning , Bunds have pared some of their losses and are moving back towards the aforementioned 164.00 level.

Top European News

  • Stoxx 600 down 0.2% to 334
  • FTSE 100 down 0.4% to 6141
  • DAX down 0.3% to 9864
  • German 10Yr yield up 1bp to 0.14%
  • Italian 10Yr yield down less than 1bp to 1.45%
  • Spanish 10Yr yield up less than 1bp to 1.57%
  • S&P GSCI Index down 0.6% to 368.7

In FX, the Bloomberg Dollar Spot Index advanced 0.4 percent at 6:04 a.m in New York, hitting the highest since April 6 in early trade. Australia’s dollar lost 0.8%. The yen slipped 0.3 percent to 109.43 per dollar, after earlier strengthening as much as 0.4 percent. The euro weakened 0.4 percent to $1.1268. The MSCI Emerging Markets Currency Index fell 0.5 percent, the most in two weeks. South Korea’s won, Russia’s ruble, the Mexican peso and Malaysian ringgit dropped at least 0.8 percent.

The UK jobs report was a risk for GBP this morning, and duly continued the healthy data series to show the employment change rising a more than expected +44k, while jobless claims also fell. Earnings were healthy, but a little more mixed when looking at ex-bonus. Nevertheless, the initial Cable response was positive, but extremely short lived, with the look above 1.4450 brief and sellers keen to get long USD’s against the Pound. Elsewhere, EUR/USD made fresh cycle lows just ahead of 1.1255, but USD/JPY gains — so far – have stopped just short of the 109.65 highs seen yesterday . AUD, NZD and CAD have all pushed lower again, but held off their respective (recent) lows. AUD/USD is finding buyers ahead of .7250, as is NZD/USD ahead of .6750. USD/CAD continues to eye 1.3000+ again but Oil prices keep ratcheting higher to deter a full on attack. FOMC minutes ahead are also adding to hesitation, and we expect ranges to tighten up after midday.

In commodities, WTI and Brent had been advancing overnight after draw in API’s last night, but in the EU session prices have fallen from overbought levels with Brent at USD 49.00/bbl and WTI at USD 48.79/bbl respectively. Gold and Silver have also been falling in the European session alongside a broad based sell off in commodities, with Silver testing the USD 17.00/oz level and starting to consolidate at around USD 17.050/oz. Copper fell along with other metals amid rising supplies and an uncertain demand outlook in China, the world’s top consumer. Antofagasta Plc, a Chilean copper producer, said it isn’t counting on an improving global economy and expects low copper prices for another year or two, according to a statement from Chairman Jean-Paul Luksic.

There’s no data due out in the US this afternoon so the focus will be on the FOMC minutes at 7.00pm (BST) a nice warm up for the kick off in Basel 45 minutes later. Away from the data we’ll also hear from the BoE’s Haldane this evening.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities have followed suit from US and Asian equity performance with material and energy names also lagging in the region
  • GBP failed to benefit from a largely upbeat employment report with the USD remaining firmer against its major counterparts following relatively hawkish Fed speak
  • Looking ahead, highlight include US Fed Releases Minutes, DOE Inventories & BoE’s Haldan
  • Treasuries fall during overnight trading with global equities, while USD strengthened after Fed’s Williams and Lockhart said Tuesday two rate hikes may be warranted this year; April 26-27 FOMC minutes will be released at 2pm ET.
  • Fed fund futures fully pricing next rate hike around Jan. 2017, implied rate 63bps, near midpoint of 50-75bp target range
  • A decision by the British electorate to withdraw from the European Union in a June 23 referendum could delay the next tightening move from U.S. policy makers by about three months, according to an economic model designed by analysts Jamie Murray, Carl Riccadonna and Dan Hanson
  • Jan Hatzius, the chief economist at Goldman Sachs Group Inc., warned bond investors aren’t prepared for the Federal Reserve to raise interest rates
  • The U.K. jobs market showed signs of cooling in the first quarter as Britain prepares for an increasingly bitter referendum on its European Union membership
  • A thicket of risks from the U.K.’s Brexit vote next month to the U.S. presidential election may lift gold prices even further by year-end, according to Denmark’s Saxo Bank A/S
  • With $2.7 trillion of European bonds yielding less than zero, some of the biggest fixed-income investors are looking 50 years ahead to buy government debt they consider decent value
  • Haruhiko Kuroda’s pain is China’s gain. The BOJ’s efforts to bolster economic growth have been undermined by the yen’s surge, which is a tailwind for China after the yuan dropped this month to the lowest level versus the yen since 2014
  • $28.2b IG Credit priced yesterday, brings weekly volume to $35.475b as May tops $100b mark at $120.26b; YTD $713.715b

DB’s Jim Reid concludes the overnight wrap

The mood of markets is pretty temperamental at the moment with sudden reversals in sentiment seemingly occurring every few days. The S&P 500 closed -0.94% last night, wiping out Monday’s gains. Fedspeak seemed to be a driver and it was interesting to see the US 2s10s curve hit its flattest level since 2007. Specifically it was the joint comments from Atlanta Fed President Lockhart and also San Francisco Fed President Williams that sparked interest after both suggested that they continue to see two to three rate hikes this year. Lockhart also added that markets are currently more pessimistic than he is, while Williams made mention of June being a live meeting and even went as far as to say that his view of gradual hikes also means 3-4 hikes in 2017. Balancing all this were comments from Dallas Fed President Kaplan shortly after who said that a hike may well be warranted in the ‘not-too-distant future’ but warned of the need to consider uncertainty including Brexit risk.

In any case it was the initial hawkish comments which helped to fuel a decent flattening across the Treasury curve. 2y yields ended 4.5bps higher at 0.833% with 10y yields ‘just’ 1.9bps higher at 1.773%. That means the current 2s10s spread of 94bps has marked a new tight for the year and you have to go back to December 2007 to find the last time the spread was this narrow. All of this has also resulted in a decent repricing in Fed Funds futures. The probability of a hike next month has now risen to 12% from 4% on Monday while a July hike has increased to 28% from 19%. The December meeting odds are now sitting at 65% from 56%.

Notwithstanding those moves, there’s still a clearly large gap between where the market is and the recent rhetoric from the Fed. In our view though this is just in keeping with the Fed holding on to full optionality. Importantly we’re still yet to hear from either the Fed President Yellen or Vice-Chair Fischer recently. That will change tomorrow though when the latter is scheduled to speak, while Yellen is pencilled in for a talk at Harvard University on the 27th of this month and then again on June 6th. As we’ve highlighted previously there are a number of big events in June so it looks set to be an interesting six weeks or so ahead.

Meanwhile all this chatter also comes before this evening’s FOMC minutes from the April meeting. They are likely to be a bit outdated now given what we’ve heard from Fed officials and it wouldn’t be a great surprise to see the text as relatively balanced versus the more dovish tone in prior statements.

Changing tact now and switching over to Asia this morning where the bulk of bourses are following the weak lead from the US last night. Indeed the Hang Seng (-1.27%), Shanghai Comp (-1.45%), Kospi (-0.59%) and ASX (-0.19%) are in the red, while Japanese equities initially advanced with the better than expected GDP print, but have now followed the moves elsewhere and are down as we type with the Nikkei and Topix currently -0.46% and -0.14% respectively. Japan’s Q1 GDP printed at +0.4% qoq after expectations were for just +0.1% growth and it means the annualized pace has been lifted to +1.7% qoq from -1.7% previously. That data should provide some relief to an under pressure BoJ although the Yen is starting to strengthen as we type and is perhaps contributing to some of the volatile moves.

There’s also been data out of China this morning too in the form of the latest house price data. April new house prices were reported as climbing in 65 of the 70 cities tracked, compared with 62 in March. It’s the most since December 2013.

Moving on. The latest “Credit Bites” was just out around an hour ago. In it we take a brief look at the basis between CDS and cash in HY by looking at the spread level of the iTraxx Crossover index vs. the asset swap spread of the iBoxx EUR HY Non-Fin index. We specifically highlight that while the two series have followed very similar paths, the CDS-cash basis has turned consistently negative since September 2013 and has generally been lower than -100bps over the past 8-9 months. Given slightly higher ratings for the cash index the stretched relationship poses the question as to whether this highlights relative value for the cash market over CDS or simply a reflection of deteriorating liquidity. All thoughts welcome.

Staying with credit, while price action yesterday in the market largely reflected what was a weaker session for risk assets in the US (CDX IG ending 1bp wider) and a benign session in Europe (Main unchanged), the big news was the pricing of the hotly anticipated bumper deal from Dell. With a reported $85bn of orders according to the FT, the all senior secured deal was eventually upsized to $20bn from $16bn and priced across 6 tranches. Bonds eventually priced at the tight end of guidance with secondary trading said to be supportive. The same FT article suggests that this was the fourth biggest corporate bond sale on record.

Meanwhile, it wasn’t just the Fedspeak that markets had to contend with yesterday, with it also being a relatively busy day for data. Specifically it was the inflation data in the US which the market was most focused on. Headline CPI printed at +0.4% mom in April and slightly ahead of expectations (+0.3% expected) after being boosted by rising fuel prices. That had the effect of lifting the YoY rate by two-tenths to +1.1%. Meanwhile the core print of +0.2% was bang on estimates, although it did cause the YoY rate to edge down one-tenth to +2.1%. Our US economists noted that the details of the latest CPI report provide preliminary evidence that core inflation may level out as rents and medical prices, which together make up 50% of the core CPI, are possibly in the midst of stabilising.

As well as the inflation data, industrial production was reported as increasing more than expected in April (+0.7% mom vs. +0.3% expected) with capacity utilization also edging up five-tenths to 75.4% (vs. 75.0% expected). The April housing starts data showed a +6.6% mom rebound in sales (vs. +3.3% expected) to an annualized rate of 1172k. Building permits rebounded a slightly less than expected +3.6% mom (vs. +5.5% expected).

Elsewhere in Europe it was another fairly uninspiring day of price action with the Stoxx 600 (0.00%) unchanged again (it was +0.01% on Monday) after giving up gains of as much as +1.2% early in the session. While there’s been some reasonable intraday volatility the index is still effectively unchanged since May 3rd now. In the commodity space the day was characterised by yet another advance for Oil. WTI rose another +1.24% to take it past $48/bbl, while Brent closed +0.63% and is creeping closer to testing that $50/bbl level (currently $49.39/bbl). The data in Europe yesterday was focused in the UK and specifically the April inflation data docket. CPI rose less than expected last month (+0.1% mom vs. +0.3% expected) meaning the YoY rate has edged down two-tenths to +0.3%. Meanwhile the core print of +1.2% yoy also missed (+1.4% expected) and is a decline of three-tenths from March.

ASIAN AFFAIRS

i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN  BY 36.10 PTS OR 1.27%  /  Hang Sang closed DOWN 292.39 OR 1.45%. The Nikkei closed DOWN 8.11 POINTS OR 0.06% . Australia’s all ordinaires  CLOSED DOWN 0.74% Chinese yuan (ONSHORE) closed DOWN at 6.5362 as China fired another shot across the bow telling the USA not to raise rates.  Oil ROSE to 47.76 dollars per barrel for WTI and 48.80 for Brent. Stocks in Europe  MOSTLY IN THE GREEN . Offshore yuan trades  6.5581 yuan to the dollar vs 6.5362 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA a) JAPAN ISSUES end b) CHINA ISSUES

Just take a look at Tier 1 house prices in China, up a staggering 26-28% year over year.

This is a huge bubble and it will burst as there is not enough money earned to sustain the prices.

(courtesy zero hedge)

 

 

China’s Housing Bubble Is So Big, Goldman Will “Need A Bigger Chart”

One of the stated reasons for the Shanghai Composite’s 1.3% drop (and it would have been worse had the PPT not launched its infamous last minute buying blitz) was also the most amusing one: the stock market bubble is in danger of popping even more as a result of a housing bubble that is now raging at a pace not seen since the last Chinese housing bubble, and thus threatens to soak up even more cash from China’s chronic gamblers-cum-speculators.

So just how high of a housing number did the NBS report that spooked stocks so much? Well, as Goldman summarizes, housing prices in the primary market increased 1.1% month-over-month after seasonal adjustment in April, higher than the growth rate in March. Out of 70 cities monitored by China’s National Bureau of Statistics (NBS), 63 saw housing prices increase from the previous month. On a year-over-year, population-weighted basis, housing prices in the 70 cities were up 6.9% (vs. 5.5% yoy in March).  According to an alterantive set of calculations by MarketNews, aggregate home prices rose 12.4% Y/Y in April after rising 10.4% in March. Since both numbers are ridiculously high, we’ll just leave them at that.

However, it was not the overall market bubble that is troubling, but that focused on the most desired, top – or Tier 1 – cities. Here, April price growth was 2.6% month-over-month after seasonal adjustment, vs. 3.0% in March.

But the real shocker was that on a year-over-year price growth in tier-1 cities continue to rise however, reaching 28.3% vs. 26.0% yoy in March. In fact it is so bad that Goldman, which tried to show the surge in the second chart below, clearly needs a bigger chart. Incidentally, total property sales in tier-1 cities accounted for around 5% of nationwide property sales in volume terms, and around 15% in value terms (2015 data).

It wasn’t just the top: average property prices also increased in lower tier cities: In tier-2 cities (our own definition; 11 cities), property price growth was 1.3% month-over-month after seasonal adjustment, up from 1.0% in March. Price growth in tier-3 cities was 0.7% month-over-month after seasonal adjustment in April, higher than 0.5% in March, and month-over-month price growth in tier-4 cities was +0.4% month-over-month after seasonal adjustment, vs. +0.3% in March.

Today’s data is consistent with the Soufun property price data for April released earlier. The continued acceleration in prices contributed to the strong growth in  investment and construction activities in the property sector.

This repeat housing bubble also explains why China is citing “authoritative figures” in People’s Daily front page stories to warn the population that China is about to crack down on said bubble… just not quite yet.

And the stunning charts:

Home price inflation month over month

And year over year: to show the Tier 1 housing bubble, Goldman will need a bigger chart.

end A good illustration of the huge debt problem inside China.  Kyle Bass has done huge research on China and he comes up with a total debt of 31 trillion USA with non performing loans of 20%. This is an atomic bomb waiting for ignition: (courtesy zero hedge) China’s Debt Bomb: No One Really Knows The Payload No one knows if it’s a hand grenade or a nuclear warhead…

The ramp up in Chinese debt accumulation has been a leading concern of investors for years. The average total debt of emerging market economies is 175% of GDP, and skyrocketing corporate non-financial debt has launched China far beyond that number.

The real question is: by how far?

The answer is disconcerting, as VisualCapitalist’s Jeff Desjardins warns, because nobody really knows.

If the Chinese debt bomb is detonated, the impact on markets is anybody’s guess. Kyle Bass says the losses would be 5x that of the subprime mortgage crisis, while Moody’s says the bomb will be safely disarmed by authorities far before it goes off.

In today’s chart, we look at various estimates to the size of China’s debt bomb, its payload, and what might spark the fuse…

Courtesy of: Visual Capitalist CHINA’S DEBT BOMB: THE PAYLOAD

Mckinsey came out with a widely-publicized estimate of China’s debt at the beginning of 2015. Using figures up to Q2 2014, they estimated that total Chinese debt was 282% of GDP, an increase from 158% in 2007.

Since then, various trusted organizations have come up with follow-up estimates.

On the low end, Goldman Sachs came out with an estimate in January 2016 of 216% total debt-to-GDP for 2015. (A few months later, they put out a separate report saying that total debt-to-GDP was estimated to be closer to 270% for 2016.)

On the high end, Macquarie analyst Viktor Shvets said that China’s debt was $35 trillion, or “nearly 350%” of GDP.

The truth is that it’s anybody’s guess. China’s official estimates are fairly useless, and the country has a massive and quickly evolving shadow banking sector that complicates these projections significantly.

EXPLOSIVE MATERIALS

Total debt is made up of various components, including government, corporate, banking, and household debts.

In the case of China, it is corporate debt that is particularly explosive. According to Mckinsey, the country’s corporate sector already has a higher debt-to-GDP than the United States, Canada, South Korea, or Germany, even while still being considered an “emerging market”.

S&P Global Ratings now figures that Chinese corporate debt is in the 160% range, up from 98% in 2008. The current number in the United States is a less ominous 70%.

China’s central bank is just as concerned as anyone else. Here’s what the Governor of the People’s Bank of China, Zhou Xiaochuan, had to say about a month ago:

Lending as a share of GDP, especially corporate lending as a share of GDP, is too high.

Xiaochuan also noted that a high leverage ratio is more prone to macroeconomic risk.

DEFUSING THE BOMB

If there’s something that can ignite the fuse of China’s debt bomb, it’s non-performing loans (NPLs).

An NPL is a sum of money borrowed upon which the debtor has not made scheduled payments. They are essentially loans that are either close to defaulting, or already in default territory.

China has an official estimate for this number, and it is a benign 1.7% of debt. Unfortunately, independent researchers peg it much higher.

Bullish analysts have the number pegged in the high single-digits, while bearish analysts put the range anywhere between 15% and 21%. Even the IMF says that loans “potentially at risk” would be equal to 15.5% of total commercial lending.

If there’s a place to start defusing the bomb, this is it.

end EUROPEAN ISSUES

 

The Pound/USA dollar rises due to the latest Evening Standard newspaper poll indicating the stay crowd ahead of the leave sector!

(courtesy zero hedge)

Cable Spikes To 3-Week Highs On Latest BREXIT Poll

With still more than a month to go until the June 23 referendum on whether to keep Britain inside the European Union, the pound is strengthening amid evidence the “leave” campaign is losing ground in the Brexit debate. Cable has spiked this morning to near 3-week highs after an opinion poll by the Evening Standard newspaper and Ipsos Mori put the “remain” camp’s lead at 18 percentage points. What is most fascinating is that while phone polls show BREMAIN now in the lead, online polls signal BREXIT still leads – perhaps indicating age-related biases.

As AP reporets, Britain is set to vote overwhelmingly to remain in the European Union, according to a poll.

The Ipsos Mori survey for the Evening Standard put Remain on 55% against 37% for Leave.

 

The 18-point advantage for Remain is the largest since the referendum was called for June 23.

 

The pollsters said there were signs of moderately Eurosceptic Conservative voters swinging towards Remain, with 60% of Tories now saying they will opt to stay in the EU.

 

However, these voters were also the group most likely to say they could change their minds.

And the reaction – a buying panic in cable… Is vol about to explode as every poll is now a trading signal?

 

However, online polls still show BREXIT leading…

 

But phone polls still have BREMAIN leading…

 

Charts: Bloomberg

 

end

 

RUSSIAN AND MIDDLE EASTERN AFFAIRS

Saudi Arabia has a full blown liquidity crisis and they can only pay government contractors with IOU’s!

(courtesy zero hedge)

Saudi Arabia Admits To A Full-Blown Liquidity Crisis; Will Pay Government Contractors With IOUs, Debt

Previously we documented that as a result of the still low oil prices, largely a result of Saudi Arabian strategy to put high cost producers out of business and to remove excess supply, none other than Saudi Arabia has been substantially impacted, with the result being dramatic state budget cuts and mass layoffs. Just three weeks ago we reported that the biggest construction conglomerate in the middle east, the Saudi Binladin Group had announced it would layoff 50,000 workers ot a quarter of its workforce, slammed by the weak economy.

Now, Saudi economic (and liquidity) problems just spilled out into the open, because Bloomberg reported moments ago, Saudi Arabia has told banks it is considering paying some outstanding bills to contractors with government-issued bonds, citing people with knowledge of matter say.

Contractors would be able to hold bond-like instruments until maturity.

Bloomberg adds that issuing bonds is one of several options being considered.

Contractors so far received some payments of outstanding bills from government in cash.

Saudi Arabia’s finance ministry declines to comment, while central bank didn’t immediately return calls seeking comment

What this means is simple: as a result of the budget imbalance driven by low oil prices, largely a Saudi doing, the kingdom is forced to give workers an implicit pay cut. It also means that since the government has to “pay” through the issuance of debt, that the liquidity crisis in the kingdom is far worse than many had anticipated.

Which brings up the question of devaluation: how long until the SAR has to follow the Yuan and see a substantial haircut. According to the market, 12 month SAR forward are now trading at a price which implies a 12% devaluation in the coming months.

When that happens is, of course, up to the King Salman.

END EMERGING MARKETS

Rubber bullets are fired into the crowd as police clash with protesters. Conditions inside Venezuela worsens:

 

(courtesy zero hedge)

 

Venezuelan Police Unleash Tear-Gas, Rubber Bullets Amid Violent Anti-Government Protests

The conflagration that is the collapse of a socilaist utopia continues to escalate in Venezuela today. With morgues overflowing, medicines running out, and apocalyptic scenes playing out across the nation, Venezuelans took to the streets of Caracas today – at the behest of the opposition – demanding a recall referendum to end Venezuelan President Nicolas Maduro’s socialist rule. The troubled nations leader was not happy and security forces fired tear gas and shut subway stations to block the thousands of protesters.

Over the last two weeks, several provinces have hosted scenes of looting in pharmacies, shopping malls, supermarkets, and food delivery trucks. In several markets, shouts of “we are hungry!” echoed. On April 27, the Venezuelan Chamber of Food (Cavidea) reported that the country’s food producers only had 15 days left of inventory.

PanamPost adds that lootings are becoming an increasingly common occurrence in Venezuela, as the country’s food shortage resulted in yet another reported incident of violence in a supermarket — this time in the Luvebras Automarket located in the La Florida Province of Caracas.

Venezuelans lost control this week when offered small portions

Videos posted to social media showed desperate people falling over each other trying to get bags of rice. One user claimed the looting occurred because it is difficult to get cereal, and so people “broke down the doors and damaged infrastructure.”

And now, as Reuters reports, in the third opposition rally in a week, several thousand protesters descended on downtown Caracas, witnesses said, planning to march to the national election board’s headquarters

But National Guard soldiers and police cordoned off the square where they planned to meet, so protesters milled instead in nearby streets waving flags and chanting anti-Maduro slogans.

is-deciderHtmlWhitespace" cite="https://twitter.com/RCTVenlinea/status/732976012598882304">

RCTV.net ‎@RCTVenlinea

Adultos mayores rompieron cordón policial en la Av.Libertador.

12:47 PM – 18 May 2016

 

 

Security forces used tear gas to control about 100 protesters in one street, witnesses said.

 

 

“They’re scared. Venezuelans are tired, hungry,” said demonstrator Alfredo Gonzalez, 76, who wore a scarf over his mouth and said he had been sprayed with pepper gas.

 

An anti-Maduro demonstration Wednesday also turned violent, with troops using tear gas to quell stone-throwing protesters and an officer pepper-spraying opposition leader Henrique Capriles.

 

 

 

Beyond the opposition’s formal protest campaign, spontaneous street protests and looting are becoming more common around Venezuela amid worsening food shortages, frequent power and water cuts, and inflation that is the highest in the world.

 

 

During the weekend, Maduro declared a 60-day state of emergency, widening his powers to sidestep the legislature, intervene in the economy and control the streets, because of what he called U.S. and domestic plots against him.

 

Protester Jose Alirio, 48, said he had been a supporter of Chavez but was angry at Maduro. “The bread shops are empty,” said Alirio, a bus conductor. “I’m close to robbing. This man has to fix things or he should go.”

 

Haydee Teran, a 48-year-old housewife who had been lining up for hours at the supermarket hoping to buy some scarce essentials, said Guarenas officials ordered that half of the food deliveries heading to shops and markets be instead diverted for local distribution.

 

“This decree isn’t solving anything,” Teran told AFP, showing a video of the incident she posted on Twitter.

 

“What the people want is food. There hasn’t been looting, but we are closing the streets to protest,” she said.

 

Authorities also closed subway stations in Caracas on Wednesday in another measure to impede the protesters.

As AFP adds, the head of the Venezuelan Observatory for Social Conflict, Marco Ponce, told AFP that his non-governmental organization had counted 107 instances of looting and attempted looting in the first three months of the year. There have been hundreds of small street protests, he said.

Seventy percent of Venezuelans want a change of government, according to a poll by the firm Datanalisis.

 

Lopez is among them, but she doesn’t want to see current opposition figures take over, remembering some of them as greedy and arrogant when they held the reins before Chavez’s rule.

 

“It’s best that others step in to govern — but not those squalid bastards, not them either,” she said.

 

A man in line yells out sardonically that “the socialist bread is coming,”provoking a ripple of comments and grumbles from others in the long bread line.

 

“They are going to fall! They are going to fall!” residents chant from windows above the bakery.

The crowd is growing despite police action…

View image on Twitter

is-deciderHtmlWhitespace" cite="https://twitter.com/NoticiasSB1/status/732988827699150848">

NoticiasSimonBolivar ‎@NoticiasSB1

imágenes de la maecha esta si es una marcha Maduro el pueblo te dice FUERAAAAAAAAAAAAAAAAAAAAAAA AAAAAAAAAA#Caracas

1:38 PM – 18 May 2016

View image on Twitter

is-deciderHtmlWhitespace" cite="https://twitter.com/albaciudad/status/732988576317775874">

Alba Ciudad 96.3 FM ‎@albaciudad

“Hay planes para convertir las marchas en Caracas en eventos violentos” http://albaciudad.org/2016/05/hay-planes-para-convertir-las-marchas-en-caracas-en-eventos-violentos/ …

1:37 PM – 18 May 2016

View image on Twitter

is-deciderHtmlWhitespace" cite="https://twitter.com/ernestojt/status/732971916269629440">

Ernesto J. Tovar ‎@ernestojt

Av Libertador Caracas 12:30 pm gases lacrimógenos contra manifestantes q arrojan piedras y botellas a PNB

12:31 PM – 18 May 2016

 

As we concluded, previously, Social Collapse Is Inevitable

With the economy dead, the only thing remaining is to watch as society implodes. To that end, Oscar Meza, Director of the Documentation Center for Social Analysis (Cendas-FVM), said that measurements of scarcity and inflation in May are going to be the worst to date. “We are officially declaring May as the month that [widespread] hunger began in Venezuela,” he told Web Noticias Venezuela. … “As for March, there was an increase in yearly prices due to inflation — a 582.9 percent increase for food, while the level of scarcity of basic products remains at 41.37 percent.”


“We are officially declaring May as the month that hunger began
in Venezuela,” says an NGO that measures inflation and scarcity

Meza said the trigger for the crisis is the shortage of bread and other foods derived from wheat.

“Prices are so high that you can’t buy anything, so people don’t buy bread, they don’t buy flour. You get porridge, you see the price of chicken go up and families struggle … lunch is around 1,500 bolivars… People used to take food from home to work, but now you can’t anymore because you don’t have food at home.”

The is why, Español Ramón Muchacho, Mayor of Chacao in Caracas, said the streets of the capital of Venezuela are filled with people killing animals for food. “Muchacho reported that in Venezuela, it is a “painful reality” that people “hunt cats, dogs and pigeons” to ease their hunger.”

Subsquently, Muchacho warned that Caribbean islands and Colombia may suffer an influx of refugees from Venezuela if food shortages continue in the country.

“As hunger deepens, we could see more Venezuelans fleeing by land or sea to an island,” Muchacho said.

And that is how all socialist utopias always end.

* * *

Meanwhile, as civil war appears inevitable, as previously reported there are factions vying to oust Maduro, although we are confident the dictator will hang on for dear life (literally) and force his population to endure more of this socialist nightmare. One can only hope that these shocking scenes remain relegated to the streets of offshore socialist paradises, although Americans should always prepare for the worst in case they eventually manage to make their way into the country.

end

 

OIL ISSUES

DOE shows a huge 3.5 million build against expectations of a 3.5 million draw. Crude production fell again to the lowest level since 2014. Cushing inventories rose again but less than expected.  Oil initially dumped and then rose

(courtesy zero hedge)

Crude Dumps’n’Pumps After Unexpected Inventory Build Offset By Production Cut

Following API’s smaller than expected draw overnight, DOE data showed an unexpedted 1.31m barrel build (3.5m draw expectations). This was offset by considerably bigger than expected draws in Gasoline and Distillates and Cushing inventories rose less than expected. Crude production also fell once again, to its lowest since Sept 2014. The initial kneejerk was a mini-flash-crash in crude prices.. but that was rapidly bid back to unch…

 

API:

  • Crude -1.1m (-3.5mm exp, last week -3.4mm)
  • Cushing +508k (+1.1m exp)
  • Gasoline -1.9mm (-1m exp)
  • Distillates -2m (-1m exp)

DOE

  • Crude +1.31m (-3.5mm exp, last week -3.4mm)
  • Cushing +460k (+1.1m exp)
  • Gasoline -2.5mm (-1m exp)
  • Distillates -3.17m (-1m exp)

Production dropped for the 17th week in a row to its lowest since Sept 2014…

 

And the reaction was an immediate flash crash in crude…but BTFD’ers could not resist…

 

Charts: Bloomberg

 

end

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

Euro/USA   1.1273 DOWN .0041 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 109.42 UP .404 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4484 UP .0030 (STILL THREAT OF BREXIT)

USA/CAN 1.2960 UP .0052

Early THIS WEDNESDAY morning in Europe, the Euro FELL by 41 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED DOWN BY 36.10 PTS OR 1.27% / Hang Sang CLOSED DOWN 292.39 OR  1.45%   / AUSTRALIA IS LOWER BY 0.74% / ALL EUROPEAN BOURSES ARE ALL IN THE RED   as they start their morning/

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this WEDNESDAY morning: closed DOWN 8.11 OR 0.06% 

Trading from Europe and Asia:
1. Europe stocks ALL THE RED AS  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 2392.39 PTS OR 1.45% . ,Shanghai CLOSED  DOWN 36.10 OR 1.27%/ Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED IN THE RED/India’s Sensex IN THE RED

Gold very early morning trading: $1273.00

silver:$17.04

Early WEDNESDAY morning USA 10 year bond yield: 1.784% !!! UP 3 in basis points from TUESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.605 UP 1 in basis points from TUESDAY night.

USA dollar index early WEDNESDAY morning: 94.83 UP 25 from TUESDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers WEDNESDAY MORNING

END

 

And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield:  3.09% UP 2 in basis points from TUESDAY

JAPANESE BOND YIELD: -.093% UP 2 in   basis points from TUESDAY

SPANISH 10 YR BOND YIELD:1.60%  UP 3 IN basis points from TUESDAY

ITALIAN 10 YR BOND YIELD: 1.49  UP 4 IN basis points from TUESDAY

the Italian 10 yr bond yield is trading 11 points lower than Spain.

GERMAN 10 YR BOND YIELD: .168% UP 2  IN BASIS POINTS ON THE DAY

 

END

IMPORTANT CURRENCY CLOSES FOR WEDNESDAY

Closing currency crosses for WEDNESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

 

Euro/USA 1.1229 down .0085 (Euro =DOWN 85 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 110.00 UP 1.004 (Yen DOWN 100 basis points )

Great Britain/USA 1.4596 UP .0143 Pound UP143 basis points/

USA/Canada 1.2983 UP 0.0075 (Canadian dollar DOWN 75 basis points with OIL FALLING a LOT(WTI AT $48.09).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 85 basis points to trade at 1.1229

The Yen FELL to 110.00 for a LOSS of 100 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 143 basis points, trading at 1.4596

The Canadian dollar FELL by 75 basis points to 1.2983, WITH WTI OIL AT:  $48.11

The USA/Yuan closed at 6.5386

the 10 yr Japanese bond yield closed at -.093% UP 2 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: UP 11  IN basis points from TUESDAY at 1.866% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.6840 UP 8 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 95.06 UP 46 IN CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for WEDNESDAY

London:  CLOSED DOWN 1.977 OR 0.03%
German Dax :CLOSED UP 53.04 OR .54%
Paris Cac  CLOSED UP 21.73  OR 0.51%
Spain IBEX CLOSED UP 76.40 OR 0.88%
Italian MIB: CLOSED UP 214.74 OR 1.23%

The Dow was DOWN 3.36  points or 0.02%

NASDAQ UP 23.39 points or 0.50%
WTI Oil price; 48.12 at 4:30 pm;

Brent Oil: 48.74

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  65.85 (ROUBLE DOWN 1 AMD 6/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD ROSE TO .168  FOR THE 10 YR BOND

.

END

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:47.92

BRENT: 48.51

USA 10 YR BOND YIELD: 1.853%

USA DOLLAR INDEX: 95.22 UP 68 cents

END

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

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Late-Day Buying Panic Keeps Stocks Green For 2016 After Fed Shock

Another roller-coaster day… “you’re a crook, and a cheat, and a swindler…”

 

Today’s melt-ups (pre-FOMC Minutes) were all thanks to broken markets

 

But after FOMC, things went south in everything (except the Dollar)…

 

Post-fed, bonds win (but they all lose)…

 

Obviously we were panic bid into the FOMC minutes but that all changed when The Fed hawks appeared…

 

The machines were in full rescue mode eying VWAP twice after the minutes smashed stocks lower...perfect VWAP close!

 

Chaos reigned in VIX… With desperation to keep the S&P green for 2016…

 

With some huge Open Interests in 205 and 210 SPYs…

h/t @DamonSharkey

 

Treasury yields all spiked on the Fed minutes (but note the short-end notably underperforming)…

 

with 2s30s collapsing to fresh lows since Dec 2008…

 

The USD Index spiked to its highest since March…

 

But Cable bucked the day’s trend, rallying after positive BREXIT (remain 55%) polls…

 

We suspect tonight will see a major China devaluation…to send a message, and increase turmoil – in order to scare The Fed off again…

 

The strong USD weighed heavy on commodities…

 

Charts: Bloomberg

end

 

Fun and games! After the government stated that retail sales jumped the most in years, Target, misses on top line and worst of all , they slash guidance!

(courtesy zero hedge)

Target Crashes To 2016 Lows After Missing Top Line, Slashing Guidance

How is this possible? The government just told us that retail sales jumped the most in years?

Target is out with its earnings despite beating bottom line, it missed top-line and took an ax to Q2 guidance…

  • *TARGET 1Q ADJ. EPS $1.29, EST. $1.19 (Good)
  • *TARGET 1Q REV. $16.2B, EST. $16.3B (Bad)
  • *TARGET SEES 2Q ADJ. EPS $1.00-$1.20, EST. $1.36 (Ugly)

 

In second quarter 2016, Target expects comparable sales of flat to down two percent, and Adjusted EPS of $1.00 to $1.20. Second quarter GAAP EPS from continuing operations will include approximately $0.17 of expense related to early debt retirement losses, and also may include the impact of certain additional discrete items which will be excluded in calculating Adjusted EPS. In the past, these items have included data breach expenses, restructuring costs and certain other items that are discretely managed. Beyond losses related to the early debt retirement, Target is not currently aware of any other material discrete items.

And the result – Target is down almost 10% in the pre-market…

 

Makes you wonder just what fiction the government is peddling?

The government data was so “good” in fact that even establishment economists such as Stephanie Pomboy of Macromavens did what we have repeatedly done in the past few months when she accused the government of fabricating the reported number by using a major seasonal adjustment gimmick

end

First: FOMC states that the cornered Fed will “likely” hike rates in JUne and the masrket is underpricing risk of that hike: (courtesy zero hedge) FOMC Minutes Show Cornered Fed “Likely” To Hike Rates In June, Concerned Market Underpricing Risk Of Hike

The supposedly dovish April FOMC statement – as global fears fell and turned domestically – has left bonds and bullion the winners and stocks the losers as investors lose faith in The Fed’s forecast and economic promises. Today’s FOMC meeting minutes suggest an increasingly cornered Fed will pull the trigger in June with member disagreements brewing…

  • *MOST FED OFFICIALS SAW JUNE HIKE `LIKELY’ IF ECONOMY WARRANTED
  • *FED: RANGE OF VIEWS ON WHETHER DATA WOULD SUPPORT JUNE HIKE

Of course, no matter what narrative the market perceives from these minutes, tomorrow’s speeches by Dudley and Fischer (who has been conspicuously quiet recently) will likely give the biggest hint as to what happens next.

Further headlines:

  • *FED: MANY OFFICIALS NOTED GLOBAL RISKS NEED `CLOSE MONITORING’
  • *FED: OFFICIALS WANTED TO KEEP `OPTIONS OPEN’ FOR JUNE

Since The April FOMC Statement, stocks are the laggard, gold and bonds outperforming while Oil has spiked 9%!!??

 

And ED Futures have rallied (dovish) and sold off (hawkish) back to unchanged…

 

If The Fed doesn’t go after this statement, then all credibility will be lost.

Here are the key statement excerpts:

June rate hike may be warranted:

Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June.

The Fed remains worried about foreign developments:

Many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring. For these reasons, participants generally saw maintaining the target range for the federal funds rate at ¼ to ½ percent at this meeting and continuing to assess developments carefully as consistent with setting policy in a data-dependent manner and as leaving open the possibility of an increase in the federal funds rate at the June FOMC meeting

* * *

Many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring

So much so that “global” was used 15 times in the April minutes.

The Fed is also worried that the market is underestimating the Fed. In fact, the following statement may be the most important one.

Some members expressed concern that the likelihood implied by market pricing that the Committee would increase the target range for the federal funds rate at the June meeting might be unduly low

However, the market may be right again:

Regarding the possibility of adjustments in the stance of policy at the next meeting, members generally judged it appropriate to leave their policy options open and maintain the flexibility to make this decision based on how the incoming data and developments shaped their outlook for the labor market and inflation as well as their evolving assessments of the balance of risks around that outlook.

Worries about brexit just after the June meeting:

Some participants noted that global financial markets could be sensitive to the upcoming British referendum on membership in the European Union or to unanticipated developments associated with China’s management of its exchange rate

And the usual worries about an asset bubble.

Several noted the ongoing need to remain alert to vulnerabilities in the financial system. In that regard, a few cited concerns about rapidly rising prices of CRE, including multifamily properties, or about illiquidity of the assets of some mutual funds. It was also noted that the debt situation in Puerto Rico had deteriorated further over the intermeeting period and remained unresolved. To date, the situation had not led to strains in broader financial markets and was not expected to do so

But before everyone assumes the statement is unduly hawkish, note the following statement:

participants generally agreed that the Committee should not completely rule out the possibility of using monetary policy to address financial stability risks, particularly in circumstances in which such risks significantly threatened the achievement of its dual mandate and when macroprudential tools had been or were likely to be ineffective at mitigating those risks

And then this shocker:

participants stressed the need for further research and analysis to advance understanding of the relationship between monetary policy and financial stability and to help identify situations in which it might be desirable to incorporate financial stability considerations in the design of monetary policy.

Yes, that would be useful.

Of course, at the end of the day, it’s all about this:

Full FOMC Meeting Minutes…

 

end

 

And the initial reaction:

(courtesy zero hedge)

 

Dollar Jumps, Stocks Slump As June Rate Hike Odds Soar After Fed Minutes

Surprise! June rate hike odds have tripled – but remain at just 24% for now…

 

Pre-Election rate hike odds now at record highs…

 

With the USD Index surging, Gold, stocks, and the short-end of the bond curve are fading fast…

 

But the 30Y is outperforming dramatically (policy error?)

 

Financials are rallying hopefully but traders are missing the fact that it’s the spread not the level that matters and the curve is flattening…

 

S&P is back in negative territory for 2016 to March lows…

 

And The USD Index is at its highest since March…

 

Oil is the biggest loser for now…

end With the rise in the USA dollar, we are now again seeing the China panic trade once again rear its ugly head.  China has continued to warn the USA that if they raise rates,  the POBC will devalue the yuan which will set off a massive deflation throughout the globe and totally kill Japan and South Korea as well as the emerging markets. The China-Panic Trade Is Back

Once again the fears over China’s slowdown, global growth faltering, and the fallacy of US analyst hockey sticks are biting at the ankles of fiction-peddling talking heads. With copper plunging and the USD Index resurgent, as Bloomberg’s Mark Cudmore warns, the risk-aversion sparked by China in January is on course for an imminent replay

Deja vu all over again…

 

With the last few weeks really diverging…

 

As Bloomberg’s Mark Cudmore warns, we are on the verge of the ‘China Panic’ trade once again…

The risk-aversion sparked by China in January is on course for an imminent replay unless the trend of the weakening yuan amid a strengthening dollar is checked.

 

Chinese data this weekend missed expectations across the board. But that isn’t the real concern — retail sales expanding at 10.1% year-on-year is still an exceptional pace of growth even if it’s a slowdown relative to the rate of the last decade. The real problem is the creep higher in USD/CNY.

 

It’s an expectations game. The more the currency pair climbs, the more traders fear that unsustainable capital outflows will force a more sudden yuan devaluation and result in global turmoil. Panic started in January when the rate climbed above 6.56 yuan. Today’s fix was within 0.4% of that level.

 

On Friday, the offshore yuan traded at the weakest level relative to the onshore yuan in more than three months. That’s a good barometer of building speculation.

 

The critical issue now is that the U.S. dollar is appreciating again. The Bloomberg Dollar index is up 2.8% in the last two weeks and another 2% wouldn’t be an unreasonable consolidation in the context of it dropping more than 7% in the previous three months.

 

That previous dollar slide distracted from the fact that yuan depreciation never abated. Against the basket, it’s been weakening at an average rate of almost 1.2% per month for the last five months.

 

 

The market’s single-minded focus on USD/CNY is crucial and it’s also why disaster can still be averted. It will require the PBOC to temporarily suspend their yuan-weakening policy for as long as the dollar is climbing.

 

Otherwise, prepare to batten down the hatches for the coming storm.

Of course, the last time traders panicced about China, bad things happened to stocks…

 end Let us close with this must see interview with Rob Kirby and Greg Hunter of USAWatchdog (courtesy Greg Hunter/Rob Kirby) Global Elite Making Preparations for Post-Dollar World-Rob Kirby

 

 

 

Macroeconomic analyst Rob Kirby says his rich clients around the planet are bracing for an inevitable economic calamity. Kirby explains, “The people I know, that I would say are at the higher level of the food chain in the global world of finance, are hunkered down and making very serious preparations.  What I see on a macro level is people acting like squirrels preparing for winter.  They are burying nuts and gathering as much physical precious metals as they can. They are making preparations for a post-dollar world in terms of world reserve currency.”

On news that there are more than 540 paper claims for every ounce of Gold at COMEX, Kirby contends, “There are 540 claims for every ounce of gold at the COMEX vault. My question to you is what happens if that gold is in fact leased metal?  Then, the 540 becomes 1,080, and what if it has been leased two times?  Then, it becomes 2,160.  So, the number of claims for every ounce of gold may be many factors higher than even 540.”

Kirby goes on to say, “I have been writing consistently for the past 12 years that if you are going to own gold, you need to own it physically. If you own precious metals, and you can’t physically go and touch it, then it’s highly dubious whether you have clear title on any physical metal at all.  This is the reason why I am such a strong advocate of owning your own stash.  My gut tells me, in the very near term, people are going to find out what they really hold.  The tide is going out, and we’re going to find out who is wearing bathing suits pretty darn soon. . . . This is building to some sort of climactic event that will blow.  It’s sort of like putting baking soda and vinegar together.  You know what’s going to happen, and if it take a few extra seconds to pop, then so be it.  In economic terms . . . the big question is not whether they can keep making things appear pseudonormal for next few days, weeks or months . . .  the outcome is absolutely cemented in stone.”  The real question you should be asking is . . . do you want to own fire insurance?  It’s a mathematical certainty your house is going to burn to the ground.”

Kirby also arranges gold sales between buyers and sellers by the ton. Kirby says the biggest concern for his customers is the U.S. dollar.  Kirby says, “The dollar is going to be kicked off its perch.  That is a guarantee.  It’s only a matter of time.

So, what are Kirby’s clients doing now? Kirby says, “The universal message is people are trying to get, for the most part, as much of their assets into physical precious metals as they can.  Precious metal is getting increasingly hard to buy.”

Has Kirby seen demand for precious metals higher than right now? Kirby says, “No, I haven’t.  I also have never seen this much interest to procure or own physical precious metal.  Up until 2010, central banks were net sellers of gold, and since 2010, they have been net buyers of physical precious metal, and they never bought more than last year, except this year will be bigger than last year.

Join Greg Hunter as he goes One-on-One with Rob Kirby of KirbyAnalytics.com.

(There is much more in the video interview.)

 

end Well that is all for today I will see you tomorrow night h,.

May 17/Comex May has 6.5 tonnes of gold standing which is extremely high and bodes well for June gold deliveries/GLD again has a huge deposit of 4.76 tonnes into inventory/SLV remains constant/Today we had a monstrous notice of 1021 contracts or 102...

Tue, 05/17/2016 - 18:56

Good evening Ladies and Gentlemen:

Gold:  $1,276.20 UP $2.80    (comex closing time)

Silver 17.23  UP 9 cents

 

In the access market 5:15 pm

Gold $1279.40

silver:  17.24

 

You will probably note that gold is always much stronger in the physical time zones as opposed to the paper time zone.  The Chinese fix at around 12 midnight EST provides strength for gold and silver as actual metal is fixed in price instead of the complex and dubious London fix.  However the Chinese fix is certainly mustering strength for gold in the wee hours of the morning.  Then at 10 -12 noon we have the London afternoon fix and again we see gold/silver higher.  Once London is put to bed, the crooks whack OUR PRECIOUS METALS lowering the price until we start the cycle all over again.

 

The amount standing for gold in May is simply outstanding at 6.50 tonnes.  The previous May 2015, we had only .08 tonnes so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace.  This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

 

Let us have a look at the data for today

.

At the gold comex today we had a HUGE delivery day, registering 1012 notices for 101,200 ounces for gold,and for silver we had 1 notice for 5,000 oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 236.257 tonnes for a loss of 67 tonnes over that period

.

In silver, the open interest rose by 1472 contracts down to 206,214 as the price was silver was UP  by 2 cents with respect to yesterday’s trading.  In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.031 BILLION TO BE EXACT or 147% of annual global silver production (ex Russia &ex China)

In silver we had 1 notice served upon for 5,000 oz.

In gold, the total comex gold OI rose by a considerable 16,767 contracts up to 596,513 as the price of gold was up $1.60 with yesterday’s trading(at comex closing).

 

As far as the GLD, we had a huge change, another 4.76 deposit into the GLD. The new inventory rests at 855.89 tonnes. We had no changes in silver inventory at the SLV. Inventory rests at 335.073 million oz.

.

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

1. Today, we had the open interest in silver rise by 1,472 contracts UP to 206,214 as the price of silver was UP ONLY by 2 cents with yesterday’s trading. The gold open interest ROSE by 16,767 contracts as  gold was up $1.50 yesterday. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Harvey)

3. ASIAN AFFAIRS

.i)Late  MONDAY night/ TUESDAY morning: Shanghai closed DOWN  BY 7.17 PTS OR 0.25%  /  Hang Sang closed UP 234.85 OR 1.18%. The Nikkei closed UP 186.40 POINTS OR 1.13% . Australia’s all ordinaires  CLOSED UP 0.69% Chinese yuan (ONSHORE) closed DOWN at 6.5261.  Oil ROSE to 47.76 dollars per barrel for WTI and 48.80 for Brent. Stocks in Europe  MOSTLY IN THE GREEN . Offshore yuan trades  6.54620 yuan to the dollar vs 6.5261 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE REMAINS CONSTANT.

REPORT ON JAPAN  SOUTH KOREA AND CHINA a) REPORT ON JAPAN

none today

b) REPORT ON CHINA none today   4.EUROPEAN AFFAIRS

Amazing another German Bank’s analyst, Berenberg’s James Chappell states that Deutsche bank’s problems are basically insurmountable and he downgrades the stock to sell. Boy does he have guts:

(Berenberg Bank/Chappell/zero hedge)

 

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)It is now time to annoy Russia so more:  War games are initiated right in Russia’s back yard:

( zero hedge)

 

ii)The USA Senate passed the bill that would expose the Saudi’s role in the 9/11 terror attacks.  Obama states that he would veto the bill and as such he is putting the Saudis ahead of USA victims of the tragedy!

( zero hedge)

 

6.EMERGING MARKETS

The Opposition leader has urged Venezuelans to defy the state of emergency. The country is in complete anarchy and now the government has the authority to confiscate businesses who are not producing goods because they cannot get their hands on uSA dollars to buy the raw materials they need:

(courtesy zero hedge)

7.OIL ISSUES

i)Nigeria has always had problems with militants.  Now meet the newest member of militant to cause huge problems for this oil nation:  the Niger Delta Avengers:

They are certainly causing oil to rise in price as they keep millions of barrels of oil off market:

( zero hedge)

 

ii)Crude slides after API reports a lower than expected draw:

( zero hedge)

8.PHYSICAL MARKETS

i)An excellent presentation showing where physical gold is stored in the USA:

( Ronan Manly/GATA)

 

ii)Geo. Soros buys $264 million dollars worth of Barrick gold and he also buys calls on the GLD.  He could do better on both fronts:  there are better miners and GLD is a fraud in that there is no gold behind it.

( Bloomberg/GATA)

 

iii)It now seems that everyone knows that the gold/silver futures market is toally rigged. Anybody playing this market is foolish!

(Clint Siegner/MoneyMetalsExchange)

 

iv)Although I generally cover silver and gold, the other two precious metals also deserve some attention.  Here is Lawrie Williams discussing Platinum and Palladium:

( Lawrie on Gold/Lawrence Williams)

 

v)Gold would certainly be a big winner on a BREXIT

( LawrieonGold)

 

9.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD AND SILVER

i)Headline CPI rises .4% month/month and the biggest jump since Feb 2013.  Also hourly wages slid .1%.  Not a good report

( zero hedge)

 

ii)OBAMACARE losses mount but what is very troubling is many are refusing to take Obamacare:

( Mish Shedlock/Mishtalk)

iii)The clowns are at it again:  Lockhart and Williams say a rate hike in June is on the table

(courtesy zero hedge) iv)For those of you who are playing the market (other than gold) this is the only chart that you should pay attention to:

(Bank of America/ zero hedge)

 

Let us head over to the comex:

The total gold comex open interest ROSE to an OI level of 596,513 for a HUGE GAIN of 16,767 contracts AS  THE PRICE OF GOLD WAS UP ONLY $1.50 with respect to YESTERDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED.   The month of May saw its OI FALL 11 contracts DOWN to 1130. We had 28 notices filed  YESTERDAY so we gained 17 gold contracts or an additional 1700 gold ounces will stand for delivery. The next big active gold contract is June and here the OI rose by 8,783 contracts UP to 338,908 as those paper players that wished to stay in the game rolled to August AND THE REST STAYED PUT FOR NOW. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was VERY GOOD at 199,934. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was VERY GOOD at 226,757 contracts. The comex is not in backwardation. We are LESS THAN 2 weeks away from first day notice for the huge June contract.

Today we had 1012 notices filed for 101,200 oz in gold.

 

And now for the wild silver comex results. Silver OI ROSE by 1,472 contracts from 204,742 UP to 206,214 as the price of silver was UP BY ONLY 2 cents with YESTERDAY’S TRADING.We are within spitting distance of the all time high OI in silver of 206,748 For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 28 contracts DOWN to 730. We had 8 notices filed ON FRIDAY so we LOST 20 contracts or AN ADDITIONAL  100,000 oz of silver will NOT stand for delivery in this active month of May. The next non active month of June saw its OI FALL by 4 contracts DOWN to 715 OI.The next big delivery month is July and here the OI ROSE by 1449 contracts UP to 40,196. The volume on the comex today (just comex) came in at 37,849 which is VERY GOOD. The confirmed volume YESTERDAY (comex + globex) was AGAIN EXCELLENT AT 52,960. Silver is not in backwardation. London is in backwardation for several months. THE HIGH OPEN INTEREST FOR THE ENTIRE COMPLEX PLUS THE HIGH OI FOR THE FRONT MAY GOLD AND SILVER CONTRACTS MUST BE SCARING OUR BANKERS TO NO END.   We had 1 notice filed for 5,000 oz.  

MAY contract month:

INITIAL standings for MAY

May 17. Gold Ounces Withdrawals from Dealers Inventory in oz   nil Withdrawals from Customer Inventory in oz  nil  58,643.338 OZ

MANFRA

BRINKS

HSBC

INCLUDES

4 KILOBARS Deposits to the Dealer Inventory in oz NIL Deposits to the Customer Inventory, in oz    58,448.700 OZ

JPMORGAN

EXACTLY 1818 KILOBARS

  No of oz served (contracts) today 1012 contracts
(101,200 oz) No of oz to be served (notices) 118 CONTRACTS

11,800 OZ Total monthly oz gold served (contracts) so far this month 1972 contracts (197,200 oz) Total accumulative withdrawals  of gold from the Dealers inventory this month   nil Total accumulative withdrawal of gold from the Customer inventory this month  270,891.2 OZ

Today we had 0 dealer deposit

total dealer deposit: NIL oz

 

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

 

Today we had 1 customer deposit:

i)INTO JPMORGAN:  58,448.700 OZ OR 1818 KILOBARS

Total customer deposits;  58,448.7000z

Today we had 3 customer withdrawals:

i) Out of Manfra:  64.22 oz

ii) Out of Manfra: 128.60:   oz  4 kilobars

iii) Out of HSBC: 58,450.518 oz  (compare above deposit JPMorgan/the first is kilobars and the second is non kilobars???)

 

total customer withdrawals: 58,643.338 OZ

 

Today we had 0 adjustment:

 

Today, 0 notices was 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 1012 contracts of which 155 notices was stopped (received) by JPMorgan dealer and 22 notices were stopped (received)  by JPMorgan customer account.  To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (1972) x 100 oz  or 197,200 oz , to which we  add the difference between the open interest for the front month of MAY (1130 CONTRACTS) minus the number of notices served upon today (1012) x 100 oz   x 100 oz per contract equals 209,000 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE    Thus the initial standings for gold for the MAY. contract month: No of notices served so far (1972) x 100 oz  or ounces + {OI for the front month (1130) minus the number of  notices served upon today (1012) x 100 oz which equals 209,000 oz standing in this non  active delivery month of MAY(6.5007 tonnes). WE GAINED 17 CONTRACTS OR AN ADDITIONAL 1700 OZ WILL STAND FOR DELIVERY IN THIS NON ACTIVE DELIVERY MONTH OF MAY. Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you.    We thus have 6.5007 tonnes of gold standing for MAY and 21.697 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing. We now have partial evidence of gold settling for last months deliveries We now have 6.5007 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003  = 20.9479 tonnes still standing against 21.697 tonnes available.   Total dealer inventor 697,565.649 tonnes or 21.697 tonnes Total gold inventory (dealer and customer) =7,595,492.258 or 236.25 tonnes    Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 236.25 tonnes for a loss of 67 tonnes over that period.    JPMorgan has only 22.79 tonnes of gold total (both dealer and customer) May is not a very good delivery month and yet 6.5079 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.  end And now for silver  

MAY INITIAL standings

 May 17.2016

Silver Ounces Withdrawals from Dealers Inventory nl oz Withdrawals from Customer Inventory  1,088,672.080 oz

CNT, HSBC

  Deposits to the Dealer Inventory  NIL Deposits to the Customer Inventory  1,090,541.200 OZ

,JPM, No of oz served today (contracts) 1 CONTRACT 

5,000 OZ No of oz to be served (notices) 719 contracts

3,595,000 oz Total monthly oz silver served (contracts) 2050 contracts (10,250,000 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  6,561,220.5 oz

today we had 0 deposit into the dealer account

total dealer deposit:NIL oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposits:

i) Into JPM: 1,090,541.200 oz

 

Total customer deposits: 1,090,541.200 oz.

We had 2 customer withdrawals

i) out of CNT: 603,346.610 oz

ii) Out of HSBC: 485,325.470 oz

:

total customer withdrawals:  1,088,672.08 oz

   

 

 we had 0 adjustment

The total number of notices filed today for the MAY contract month is represented by 1 contract for 5,000 oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (2050) x 5,000 oz  = 10,250,000 oz to which we add the difference between the open interest for the front month of MAY (730) and the number of notices served upon today (1) x 5000 oz equals the number of ounces standing    Thus the initial standings for silver for the MAY contract month:  2050 (notices served so far)x 5000 oz +(730{ OI for front month of MAY ) -number of notices served upon today (1)x 5000 oz  equals 13,845,000 oz of silver standing for the MAY contract month. WE LOST 20 CONTRACTS OR AN ADDITIONAL 100,000 OZ WILL NOT STAND FOR DELIVERY.   Total dealer silver:  30.282 million Total number of dealer and customer silver:   153.463 million oz The open interest on silver is still close an all time high with the record of 206,748 being set in the last week of April. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver. end And now the Gold inventory at the GLD May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition.. May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN??? May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes April 28/we gained 1.49 tonnes of gold at the GLD/Inventory rests at 804.14 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 17.:  inventory rests tonight at 855.89 tonnes

end

 

Now the SLV Inventory May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/ May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz May 12/no change in silver inventory/rests tonight at 335.073 million oz/  May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/ May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz. May 9. no change in silver inventory/rests at 336.119 million oz. May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV INVENTORY RESTS AT 336.119 MILLION OZ MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580 April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz . May 17.2016: Inventory 335.073 million oz end   1. Central Fund of Canada: traded at Negative 2.8 percent to NAV usa funds and Negative 2,9% to NAV for Cdn funds!!!! Percentage of fund in gold 61.5% Percentage of fund in silver:37.2% cash .+1.3%( May 16/2016). 2. Sprott silver fund (PSLV): Premium RISES   to +.44%!!!! NAV (MAY 17.2016)  3. Sprott gold fund (PHYS): premium to NAV  FALLS 1.60% to NAV  ( MAY 17.2016) Note: Sprott silver trust back  into POSITIVE territory at +44% /Sprott physical gold trust is back into positive territory at +1.60%/Central fund of Canada’s is still in jail. It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to +.44%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.      

END

 

And now your overnight trading in gold,TUESDAY MORNING and also physical stories that may interest you: Trading in gold and silver overnight in Asia and Europe Mark O’Byrne (goldcore)/ Hedge Funds Buy Silver As Silver Bullion Deficit Surges By Mark O’ByrneMay 16, 20161 Comment

– Hedge funds have taken a record net-long silver position – CFTC data shows

– Precious metal surges 26% in 2016 on Fed, industrial & investment demand

– Cumulative global silver bullion deficit surges on revised data


Hedge Funds Keep Betting On Silver (Bloomberg)
Gold up for 2nd day on China data, weaker stock markets (Reuters)
North American appetite for platinum jewelry flourishes (Reuters)
China goes cold on platinum jewelry, crimping world demand (Reuters)
Gold Caps Weekly Loss as U.S. Sales Gain Curbs Haven Demand (Bloomberg)

Global Silver Supply Deficit Surges On Revised Data (Silver Seek)
Financial Repression and “The Age of Stagnation” – Satyajit Das (FRA)
There is a global war against gold: Prof. Antal Fekete (Barba)
Middle class takes financial hit in most US cities this century (Fintech News)
Zimbabwe’s trillion-dollar note: from worthless paper to hot investment (Guardian)
Read More Here


Gold Prices (LBMA)

16 May: USD 1,281.00, EUR 1,132.04 and GBP 892.87 per ounce
13 May: USD 1,275.15, EUR 1,123.51 and GBP 885.16 per ounce
12 May: USD 1,268.30, EUR 1,111.30 and GBP 878.28 per ounce
11 May: USD 1,271.80, EUR 1,116.19 and GBP 882.45 per ounce
10 May: USD 1,264.85, EUR 1,111.04 and GBP 875.90 per ounce

Silver Prices (LBMA)
16 May: USD 17.32, EUR 15.30 and GBP 12.07 per ounce
13 May: USD 17.09, EUR 15.06 and GBP 11.85 per ounce
12 May: USD 17.23, EUR 15.12 and GBP 11.91 per ounce
11 May: USD 17.51, EUR 15.36 and GBP 12.14 per ounce
10 May: USD 17.04, EUR 15.00 and GBP 11.82 per ounce


Read Our Most Popular Guides in Recent Months

Mark O’Byrne Executive Director Published in Daily Market Update END A humour story:  Libya’s central bank has gold stashed in Eastern Libya but the combination is known only by folks in Western Libya.  And they cannot blow up the safe? (courtesy Wall Street Journal/GATA) Libya’s central bank needs gold stashed in safe but code is in dispute

Submitted by cpowell on Mon, 2016-05-16 17:46. Section:

By Hassan Morajea and Tamer El-Ghobashy
The Wall Street Journal
Friday, May 13, 2016

BEYDA, Libya — Underneath a bank in this eastern coastal city, a vault holds a trove of gold and silver coins worth $184 million. It belongs to the central bank, which could use the money to alleviate a crippling cash shortage.

The pile, however, presents some problems. The coins are locked away with a five-number code that central bankers in this part of the country don’t have. A rival government in Tripoli, which has effective control over the bank system, won’t hand over the digits and has expressed concern the money could fund armed militias opposed to its rule.

To make things worse, the metal pieces bear the face of Moammar Gadhafi, the reviled leader who was overthrown, captured, and killed in 2011. …

… For the remainder of the report:

http://www.wsj.com/articles/libyas-central-bank-needs-money-stashed-in-a…

 

 

END

 

 

An excellent presentation showing where physical gold is stored in the USA:

(courtesy Ronan Manly/GATA)

 

Bullion Star makes a graphic of the Comex gold market

Submitted by cpowell on Tue, 2016-05-17 00:15. Section:

8:15p ET Monday, May 16, 2016

Dear Friend of GATA and Gold:

Bullion Star has created a graphic illustration of the Comex gold market, showing that, like the London gold market, the Comex is a fractional-reserve-based and largely unallocated market with little real metal ever being delivered. The graphic is posted at Bullion Star here:

https://www.bullionstar.com/blogs/bullionstar/infographic-comex-gold-fut…

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

 

END

 

Geo. Soros buys $264 million dollars worth of Barrick gold and he also buys calls on the GLD.  He could do better on both fronts:  there are better miners and GLD is a fraud in that there is no gold behind it.

 

(courtesy Bloomberg/GATA)

Soros puts $264 million in Barrick Gold, buys calls on gold ETF

Submitted by cpowell on Tue, 2016-05-17 00:44. Section:

Billionaire Soros Cuts U.S. Stocks by 37%, Buys Gold Miner

By Jesse Riseborough and Saijel Kishan
Bloomberg News
Monday, May 16, 2016

Billionaire George Soros cut his firm’s investments in U.S. stocks by more than a third in the first quarter and bought a $264 million stake in the world’s biggest bullion producer, Barrick Gold Corp.

The value of Soros Fund Management’s publicly disclosed holdings dropped by 37 percent to $3.5 billion as of the end of the last quarter, according to a government filing today. Soros acquired 1.7 percent of Barrick, making it the firm’s biggest U.S.-listed holding. Soros also disclosed owning call options on 1.05 million shares in the SPDR Gold Trust, an exchange-traded fund that tracks the price of gold. …

… For

 

the remainder of the report:

http://www.bloomberg.com/news/articles/2016-05-16/billionaire-soros-cuts…

 

END

 

It now seems that everyone knows that the gold/silver futures market is toally rigged. Anybody playing this market is foolish!

(courtesy Clint Siegner/MoneyMetalsExchange)

 

Why The Gold And Silver Futures Market Is Like A Rigged Casino

Submitted by Clint Siegner via Money Metals Exchange,

A respectable number of Americans hold investments in gold and silver in one form or another. Some hold physical bullion, while others opt for indirect ownership via ETFs or other instruments. A very small minority speculate via the futures markets. But we frequently report on the futures markets – why exactly is that?

Because that is where prices are set. The mint certificates, the ETFs, and the coins in an investor’s safe – all of them – are valued, at least in large part, based on the most recent trade in the nearest delivery month on a futures exchange such as the COMEX. These “spot” prices are the ones scrolling across the bottom of your CNBC screen.

That makes the futures markets a tiny tail wagging a much larger dog.

Too bad. A more corruptible and lopsided mechanism for price discovery has never been devised. The price reported on TV has less to do with physical supply and demand fundamentals and more to do with lining the pockets of the bullion banks, including JPMorgan Chase.

Craig Hemke of TFMetalsReport.com explained in a recent post how the bullion banks fleece futures traders. He contrasted buying a futures contract with something more investors will be more familiar with – buying a stock. The number of shares is limited. When an investor buys shares in Coca-Cola company, they must be paired with another investor who owns actual shares and wants to sell at the prevailing price. That’s straight forward price discovery.

Not so in a futures market such as the COMEX. If an investor buys contracts for gold, they won’t be paired with anyone delivering the actual gold. They are paired with someone who wants to sell contracts, regardless of whether he has any physical gold. These paper contracts are tethered to physical gold in a bullion bank’s vault by the thinnest of threads. Recently the coverage ratio – the number of ounces represented on paper contracts relative to the actual stock of registered gold bars – rose above 500 to 1.

The party selling that paper might be another trader with an existing contract. Or, as has been happening more of late, it might be the bullion bank itself. They might just print up a brand new contract for you. Yes, they can actually do that! And as many as they like. All without putting a single additional ounce of actual metal aside to deliver.

Gold and silver are considered precious metals because they are scarce and beautiful. But those features are barely a factor in setting the COMEX “spot” price. In that market, and other futures exchanges, derivatives are traded instead. They neither glisten nor shine and their supply is virtually unlimited. Quite simply, that’s a problem.

But it gets worse. As said above, if you bet on the price of gold by either buying or selling a futures contract, the bookie might just be a bullion banker. He’s now betting against you with an institutional advantage; he completely controls the supply of your contract.

It’s remarkable so many traders are still willing to gamble despite all of the recent evidence that the fix is in. Open interest in silver futures just hit a new all-time record, and gold is not far behind. This despite a barrage of news about bankers rigging markets and cheating clients.

Someday we’ll have more honest price discovery in metals. It will happen when people figure out the game and either abandon the rigged casino altogether or insist on limited and reasonable coverage ratios. The new Shanghai Gold Exchange which deals in the physical metal itself may be a step in that direction. In the meantime, stick with physical bullion and understand “spot” prices for what they are.

end Gold would certainly be a big winner on a BREXIT (courtesy LawrieonGold) Britain Facing Brexit Bombshell. What Would Happen to Gold?

May 17, 2016 lawrieongold

According to the opinion polls whether Britain will vote to leave the European Union on June 23rd, or to stay in, it is too close to call. And given there is a large section of the population still undecided, and that this may end up voting with hearts rather than minds there has to be a serious chance that the ‘leave’ vote will end triumphant, despite the vast array of key figures from within and without the UK establishment pushing the ‘remain’ agenda unmercifully.

The thing is, the general public no longer trusts mainstream politicians – and those key figures from outside the UK – like US President Obama, IMF Head Christine Lagarde are seen as just supporting the status quo – and their statements may even end up being counter-productive for the cause they are trying to help promote. Brits don’t like being told what they should do by foreigners – which is perhaps the whole basis of the Brexit argument in the first place. Even Labour leader, Jeremy Corbyn – officially on the ‘remain’ side – seems lukewarm in his views more intent on castigating the Conservative government than for calling for the country to stay in.

Charisma may well win the day and Brexit does have two of the more charismatic proponents on its side in Boris Johnson and Nigel Farage. Even though the Brexit camp tries to sideline Farage, presumably because of the roots of the UKIP political party which he has largely single-handedly brought into the political mainstream, he does have a charisma lacking in most of the mainstream politicos and will certainly have an impact on the vote.

The latest poll of polls conducted by the Financial Times, published two days ago, puts the balance at 46% to remain and 44% to leave BUT of the last ten polls taken into account Brexit was either in the majority, or even, for six of them. However there was huge volatility in the results in terms of percentage gaps. Does this suggest that the Brexit vote is gaining the momentum necessary to see it first past the post on the day? The final poll is still just over a month away and a lot can happen in that time. It might only take one significant event in the meantime seen as either positive or negative to the Brexit case to sway the final outcome – as may who is most successful in getting their supporters out to vote on the day.

Two polls out today, one by telephone and one online both conducted by The Guardian in conjunction with polling company ICM, show hugely different results. As Reuters reports, the contrast in the two surveys is particularly stark, because they were conducted concurrently and deployed as similar vote adjustment methodologies as possible. In ICM’s telephone poll, the remain camp was eight points clear of leave, at 47% compared with 39%, with 14% undecided. Once the “don’t knows” are excluded, remain looked set for a clear 10-point lead, by 55% to 45%.

But the results of the online survey were very different showing those in favour of Brexit having a definite edge – standing on 47% to remain’s 43%, with only 10% of respondents undecided. Once they are excluded, leave’s four- point advantage is maintained, in a projected final pro- Brexit result of 52% to 48%.

Telephone polls in general have tended to show principal support for the remain option while internet ones for a dead heat or Brexit so the results shouldn’t be seen as too surprising.

Also, because Brexit is largely presented by the media as being potentially disastrous, among the economic cognoscenti, many are loath to nail their colours to the Brexit cause – at least openly – but there is a distinct feeling from this commentator that many of these are more open to the idea of Britain leaving the EU than they are prepared to admit in public.

The presumed economic arguments against Brexit are legion and heavily promoted by the remain camp, with government backing – but the truth is nobody really knows what would happen in the case of a leave vote in terms of subsequent renegotiations of key trade deals and political alliances. Initial uncertainty would almost certainly cause some severe hiccups for sterling, the equities markets and the UK economy, but the leave proponents are of the opinion that this would be shortlived. As a nation which despite its small geographical footprint still has the world’s fifth largest GDP (after the US, China, Japan and Germany), and has historic trading links which far transcend the EU, the argument from the leave supporters is that it can easily stand on its own feet outside any artificial union.

The whole result may come down to sovereignty. There is a perception – only partially correct – that EU laws override long term UK ones and that a mostly unelected European Commission can impose all kinds of restrictions on what UK citizens can or can’t do or consume.

Freedom of movement between EU states is another area where one suspects UK citizenry, rightly or wrongly, is nervous about continuing membership. When the EU comprised just the major European economies this would not have been a problem, but now that there are 28 member nations, and the prospect of others being added to the list, mostly seen as being nations with poorer economies and less munificent social systems, prospective unchecked EU migration flows are viewed as being unmanageable if Britain remains in the EU and counter to the best interests of the British workforce.

These are emotive arguments. The general populace probably just doesn’t believe the plethora of adverse economic projections spun out by the government-backed remain camp in a campaign which seems wholly have been designed to project fear of consequences of a Brexit, rather than any advantages of staying in. This may well prove to have been counterproductive come the day. There’s little doubt that economic data will be manufactured in the days leading up to the referendum to support the government’s case for staying in the EU. Will this swing the result?

But don’t write off the possibility of a Brexit yet, whatever the polls may tell you. And if it happens it will certainly result in economic uncertainty, perhaps even for a few years. But this uncertainty won’t just apply to the UK – it could launch the whole of the EU into introspective turmoil. There are ‘leave’ movements in many countries and these will gain heart, and numbers, from a UK Brexit decision were it to happen.

This website is largely about gold and precious metals. What would be the effects of a Brexit on the yellow metal? We think the impact could be strongly positive for gold. The yellow metal tends to thrive on economic and political uncertainty and there are potentially far reaching consequences of a Brexit decision, particularly within the EU itself. For UK holders a mini collapse of sterling as a result of a Brexit decision should it happen, would probably make moving some of one’s wealth into gold a very wise decision indeed. Gold is in effect financial insurance and if the economists and politicians predicting disaster for the UK economy if Brexit happens are correct and sterling plunges – it probably would in a knee-jerk reaction anyway – then a global gold price rise coupled with a fall in the domestic currency looks to make holding some gold a no- brainer for the UK investor in particular.

https://lawrieongold.com/2016/05/17/britain-facing- brexit-bombshell-what-would-happen-to-gold/

-END-

 

Although I generally cover silver and gold, the other two precious metals also deserve some attention.  Here is Lawrie Williams discussing Platinum and Palladium:

(courtesy Lawrie on Gold/Lawrence Williams)

 

Platinum and palladium outlook – Big deficits ahead but will they make any difference to prices? May 17, 2016lawrieongold

We have seen three major reports out for London’s Platinum Week from Metals Focus, GFMS and the WPIC.  They all offer comprehensive analyses in text, tabular form and graphical content of various aspects of the markets and they are a hugely valuable resource for followers of the pgms sector.   There are definite differences of opinion on the relative supply and demand scenarios for platinum in particular in 2015, but all three analyses are predicting supply deficits ahead for the two major pgms, but on past performance such seemingly strong fundamentals may have little impact on prices.

The latest to report was Metals Focus with its inaugural Platinum & Palladium Focus 2016, a comprehensive 78 page long analysis of the platinum and palladium markets.  In many respects it appears to this observer to offer the most realistic appraisal of the markets and likely price performance for the two major platinum group metals (pgms).

A couple of articles I’ve published on Sharpspixley.com on platinum group metals resulting from the release of these three very comprehensive reports on the sector  are linked here:

Platinum and palladium supply deficits ahead, but will this impact prices?

Is platinum in surplus or deficit? Reports contradict.

end

 

 

Your early TUESDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight    

:

1 Chinese yuan vs USA dollar/yuan DOWN to 6.5261 ( DEVALUATION ) / Shanghai bourse  CLOSED DOWN 7.71 OR 0.25%  / HANG SANG CLOSED UP 234.85 OR 1.18%

2 Nikkei closed UP 186.40 OR 1.13% /USA: YEN RISES TO 109.51

3. Europe stocks opened ALL IN THE GREEN  /USA dollar index DOWN to 94.55/Euro UP to 1.1318

3b Japan 10 year bond yield: FALLS   TO -.107%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.51

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  47.76  and Brent: 48.80

3f Gold DOWN  /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

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 10 yr bund RISES to 0.159%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate FALL to 8.95%/: 

3j Greek 10 year bond yield FALL to  : 7.36%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1272.60/silver $17.07(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 11 in  roubles/dollar) 64.83-

3m oil into the 47 dollar handle for WTI and 48 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9785 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1077 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year RISES to  + .159%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

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 1.757% early this morning. Thirty year rate  at 2.59% /POLICY ERROR)

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

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

Futures Fizzle After Oil Fades Bounce Above $48

It has been more of the same overnight, as global stocks piggybacked on the strong US close and rose despite the lack of good (or bad) macro news, propelled higher by the two usual suspects: a higher USDJPY and a even higher oil, if mostly early on in the trading session.

Yes, the oil squeeze higher continues, and as the charts below courtesy of Andy Critchlow show, Brent is now 82% higher in the past 82 days

… while crude has had its strongest rally since 2010.

However, after rising above $48 for the first time since October, crude finally pulled back modestly and was unchanged at last check while Brent was modestly in the red. This led to equities paring much of their overnight advance. In FX, in addition to the abovementioned spike in the USDJPY now well in the mid-109.50s, the other prominent mover was Australia’s dollar which advanced after central bank officials suggested authorities will hold off on cutting interest rates.

The Stoxx Europe 600 Index was still set for its third day of gains also following the crude jump above $48 a barrel. The British pound climbed by the most in four weeks as a poll indicated support is growing in the U.K. for the country to remain in the European Union. Investors got a reminder of the challenges facing central banks as a report showed U.K. consumer-price growth unexpectedly slowed in April. U.S. data on Tuesday are forecast to show inflation quickened last month. West Texas Intermediate crude was unchanged at $47.74. The pound was 0.6 percent stronger at $1.4486 and the Aussie gained 0.5 percent to 73.25 U.S. cents. US equity futures were unchanged after rising 0.3% around the European open.

“Markets seem to be in a relatively sweet spot with a steadily stronger U.S. dollar and resilient commodities prices,” Angus Nicholson, a Melbourne-based market analyst at IG Ltd., told Bloomberg “Many investors have been predicting a pullback in markets, but despite all the negativity, markets have continued to grind higher.”

Spot on: which is why to all those who are itching to short the market here, our advise is to wait for Gartman to go long first.

This is where markets were at this moment

  • S&P 500 futures up less than 0.1% at 2063.5
  • Stoxx 600 up 0.5% to 337
  • FTSE 100 up 0.6% to 6191
  • DAX up 0.1% to 9963
  • German 10Yr yield up 1bp to 0.16%
  • Italian 10Yr yield down less than 1bp to 1.48%
  • Spanish 10Yr yield down less than 1bp to 1.6%
  • S&P GSCI Index down 0.1% to 367.2
  • MSCI Asia Pacific up 0.7% to 127
  • Nikkei 225 up 1.1% to 16653
  • Hang Seng up 1.2% to 20119
  • Shanghai Composite down 0.3% to 2844
  • S&P/ASX 200 up 0.7% to 5396
  • US 10-yr yield up less than 1bp to 1.76%
  • Dollar Index down 0.04% to 94.53
  • WTI Crude futures up less than 0.1% to $47.74
  • Brent Futures down 0.6% to $48.68
  • Gold spot down 0.2% to $1,271
  • Silver spot up less than 0.1% to $17.16

Top Global News

  • Oil Advances to Seven-Month High as U.S. Stockpiles Seen Falling
  • Saudi Arabia’s Treasuries Holdings Are Unveiled After 41 Years
  • Soros Cuts U.S. Stock Investments 37%, Buys Barrick Gold Stake
  • Hedge Funds Abandon Ex-Darling Valeant and Other 13F Highlights
  • LendingClub Subpoenaed by Justice Department After CEO Exit

Looking at regional m,arkets, Asian stocks traded mostly higher following a firm Wall Street close where tech and energy surged after Berkshire Hathaway took a USD 1bIn stake in Apple and WTI rose to fresh 6-month highs. This saw the energy sector underpin ASX 200 (+0.7%) and Nikkei 225 (+1.1%) as WTI extended its advances during Asia hours to above USD 48/bbl, while JPY weakness further bolstered Japanese stocks. Shanghai Comp (-0.3%) underperformed despite the PBoC injecting funds through its Medium-term Lending Facility, as debt concerns continued to linger after Evergreen Holding defaulted on bond repayments to become at least the 10th defaulter in China YTD. 10yr JGBs traded flat with a lack of demand seen amid a positive risk tone in Japan, while today’s 5yr auction saw mixed results with the b/c slightly declining from prior although the lowest accepted price was higher than expected. Japanese PM Abe said the sales tax will be increased as planned unless a serious event occurs. PM Abe also commented he will make a decision at an appropriate time which will be based on expert opinions.

Top Asian News

  • BlackRock’s Fink Says ‘All Have to’ Worry About China Debt
  • China to Restrict Trading Halts, Report Says, Boosting MSCI Odds
  • ANZ to Cut About 200 Jobs in Australia as Loan Growth Slows
  • As China Revamps Regulation, PBOC Gears Up for Central Role
  • Aircastle’s Japan Venture to Buy Up to 10 Boeing, Airbus Planes
  • Japan to Seek Cheaper Plans From Operators, Official Says

European equities have been climbing higher this morning with Germany and Switzerland returning from their elongated break. Risk on sentiment has been supported by the continuation of the upside in oil prices in which Brent crude futures had sustained a move above USD 49/bbl for a large part of the morning. However, in recent trade prices have tailed off with WTI crude retesting USD 48/bbl to the downside.
Additionally, the upbeat tone has also been supported by the gains in Apple yesterday following Berkshire Hathaway announcing a USD 1bIn stake in the Co. As such, gains in equities has seen Bunds on the back foot. Alongside this, a slew of EUR-denominated bond sales is set to continue this week after near record amount of sales last week. Furthermore, as energy markets continue to climb this could continue to hamper fixed income products as markets inflation expectations adjust to the uptick in prices.

Top European News

  • U.K. Inflation Rate Unexpectedly Declines to 0.3% on Air Fares: Economists had forecast a rate of 0.5 percent, based on the median estimate in a Bloomberg survey
  • Vodafone Beats Estimate With 2.5% Quarterly Network Revenue Gain: Analysts surveyed by Bloomberg expected 1.5 percent growth, on average
  • Iliad First-Quarter Sales Increase 6.6% on Wireless Promotions: Revenue rose to 1.15 billion euros ($1.3 billion)
  • Barclays’ Ramos Emerges as Best-Value South African Bank CEO: Barclays Africa earned 508 rand ($33) in net income for every rand the Johannesburg-based company paid Ramos in base salary, long-term incentives and bonuses in 2015, according to data compiled by Bloomberg
  • Deutsche Bank Names Ex-EDF CFO Thomas Piquemal to Lead M&A: Piquemal, 47, who quit as chief financial officer of French utility Electricite de France SA in March, will be based in Paris and report to corporate and investment banking chief Jeff Urwin

In FX, Asia and early London have been pretty active today, with the ongoing levitation in USDJPY one of the most prominent trades, where a 109 stop hunt unleashed short covering above 109 and pushed the pair as high as 109.60.  Cable has also been active with inflation data in both the UK and US today. The UK numbers saw some softness in the more focused-upon core read, with the y-o-y rate registering 1.2% vs median 1.4% expected. Ahead of this, the ORB/Telegraph poll saw the remains showing a significant lead to send the spot rate tearing through the 1.4400’s, trading through 1.4500 but holding resistance levels ahead of 1.4550 before the data response saw us lower again. EUR/GBP was testing .7800 early on, but has survived a potential breach of the figure level. Elsewhere, the post RBA (minutes) recovery in AUD looks to have been short-lived as the spot rate sinks back into the low .7300’s. US inflation now set to determine whether we test through the figure, with EUR/USD also mid-range ahead of the release. USD/JPY is higher on the positive risk tone, with the quest for 110.00 back on. USD/CAD has duly found anticipated support in the mid 1.2800’s to return through 1.2900, coinciding with a turn-back in WTI through $48.0 and Brent below $49.0.

In commodities, WTI and Brent have fallen off session highs after eyeing the USD 50.00/bbl level. Gold and silver have also been falling alongside the rest of the commodities complex as the USD has been strengthening in the EU session. Elsewhere, copper and iron prices were underpinned and were in minor positive territory amid the global risk sentiment.

On today’s US calendar, the big focus will be on the April inflation data. Market expectations are for a +0.3% mom headline print which should be boosted by higher oil prices and a +0.2% mom print at the core.  Elsewhere this afternoon we’ll also get April housing starts and building permits data – both of which are expected to rebound. Finally we’ll cap the day off with more important data in the form of industrial production (+0.3% mom expected), capacity utilization and manufacturing production. Fedspeak wise we’ll also hear from Williams and Lockhart at noon in a joint interview, as well as Kaplan (at 1.15pm EDT) later on while the ECB’s Praet and Nouy are scheduled to speak this morning.

Bulletin Headline Summary From RanSquawk and Bloomberg

  • European equities trade higher as European equities take the lead from their US and Asian counterparts with elevated energy prices also underpinning sentiment
  • GBP has been a key focus for FX markets as UK CPI fell short of expectations, while the latest polls develop a further bias for remaining in the EU
  • Looking ahead, highlights include US CPI, Housing Starts, Building Permits and API Inventories, ECB’s Praet, Fed’s Williams, Lockhart and Kaplan
  • Treasuries trade slightly lower overnight, led by belly, amid rise in global equities while crude oil is off session-highs; U.S. data includes CPI and housing starts.
  • Even as the VIX sits 25 percent below its bull market average, investors are using futures on the index to hedge against trouble in equities six months from now
  • After spending years fighting the European Union, Ryanair Holdings Plc CEO Michael O’Leary has turned into one of its biggest defenders, and he’s even decorating his airplanes to prove it
  • The pound rallied the most in two weeks after the ORB/Telegraph poll showed 55 percent of respondents were in favor of remaining in the European Union, while 40 percent wanted to leave
  • U.K. inflation unexpectedly slowed in April, highlighting the struggle Bank of England policy makers face to revive price growth
  • Chinese stocks traded in Hong Kong rose the most in a month, with commodity producers gaining as oil prices climbed and President Xi Jinping vowed to press ahead with plans to cut capacity at state-owned enterprises
  • As China’s leaders consider ways to improve market oversight and avoid the kind of boom and bust in equities that shook investors around the world last year, the PBOC is already extending its oversight to areas beyond its traditional focus
  • BlackRock Inc.’s Laurence D. Fink, who oversees the world’s largest money manager with $4.7 trillion of client assets, said “we all have to be worried” about China’s mounting debt amid slowing growth, even as he remains bullish on the economy in the long run
  • Ray Dalio’s $154 billion Bridgewater Associates became the first foreign hedge fund manager to win approval to set up a wholly owned investment-management business in China, according to Shanghai-based consulting firm Z-Ben Advisors
  • Sovereign 10Y yields mostly lower; Asian, European equities higher; U.S. equity-index futures higher; WTI crude oil rises while precious metals fall

DB’s Jim Reid concludes the overnight wrap

Yesterday was all about Apple and oil. Starting with the former, Apple’s share price gained close to 4% yesterday and the most in over two months following the news that Warren Buffet’s Berkshire Hathaway has bought a $1bn slice of the company. That comes as other high-profile money managers have recently cut or exited their positions in the tech giant (including Carl Icahn). That said, after trading just above $130 in the summer of 2015, shares have since collapsed into the low $90’s and while Buffet has for a while typically avoided investment in the tech sector, the move will been as a something of a vote of confidence that Apple can halt the recent slide in sales.

Meanwhile, the other big headline grabber yesterday was Oil. An upbeat broker report suggesting that the market has moved into a deficit quicker than expected following some of the recent supply disruptions (including Nigeria, Canada and Venezuela) helped fuel a +3.27% for WTI and so taking it to close to $48/bbl and the highest close since November 3rd. Brent was up a similar amount and is edging closer to the $50/bbl mark (hovering around $49.26/bbl this morning). With the moves this morning it means that the unrelenting rally for WTI since the February intraday lows has seen it surge an impressive 84% in that time.

Unsurprisingly then it was energy and tech names which led the S&P 500 to a +0.98% gain yesterday, while the Nasdaq finished up a slightly higher +1.22%. While Oil has been on a one-way track since February, it does appear that US equities have however hit a bit of a stumbling block this month even after considering yesterday’s strong performance. In fact in the nine sessions prior to yesterday, the S&P 500 had followed three days of consecutive losses, with three days of gains and then three more days of losses again with the index back to flat for the month of May (which compares to a 4% return for Oil). So while the old adage ‘sell in May and go away’ hasn’t quite been completely true, it’s proving to be a much more directionless month for US equities compared to the positive performance of March and April.

With the rebound in oil we thought we’d update our long-term chart of the average real price of oil back to 1861. When we last published back in January we remarked that for the first time in a decade oil was actually cheap relative to its long term value. 4 months on and with the large rally its back just above its 155 year long term real adjusted average (around $47). The chart is in the PDF today for those interested.

Switching our focus now to the latest in Asia this morning, bourses are largely following the US lead with the majority advancing. The Nikkei (+0.77%), Topix (+0.76%), Hang Seng (+0.31%), and ASX (+0.56%) are all up, while it’s China which is the standout underperformer with the Shanghai Comp currently – 0.37% although it’s not obvious what has triggered that. The poor weekend data was largely ignored yesterday but perhaps it’s causing a drag today. Credit markets are benefiting from the general better sentiment with indices in Asia and Australia a couple of basis points tighter. In FX markets the Aussie Dollar (+0.80%) is the big mover following the RBA minutes from the meeting earlier this month which indicated that the decision to cut rates was actually more balanced than maybe first thought.

Moving on. Aside from the Apple and oil focus there wasn’t a great deal else to drive markets yesterday although the US data did turn a few  heads. Specifically it was the May Empire manufacturing print which attracted attention after the data was reported as tumbling from its recent April high by nearly 19pts to -9.0 (vs. +6.5 expected). That monthly change was actually the most since October 2014 and of further concern was the weakness in the components with new orders, shipments and inventories all negative. Our US economists highlighted that this has resulted in their ISM-adjusted manufacturing survey index now falling below 50 after two successive monthly >50 readings. The ISM manufacturing print is due to be released on June 1st but for now yesterday’s reading will see much attention placed on Thursday’s Philly Fed manufacturing survey. Meanwhile the other data yesterday was the NAHB housing market index which also came in lower than expected at 58 for May, albeit unchanged relative to the prior month.

There was also some Fedspeak to mention yesterday and it came from Richmond Fed President Lacker. The Fed official said that while he would never completely make up his mind prior to a meeting, he noted that ‘at this point it looks to me as if the case for raising rates looks to be  pretty strong in June’. Lacker made mention of inflation moving ‘decidedly toward 2%’ as well as there being further evidence of tightening in  labour markets. He also said that the downside risks which dominated at the beginning of the year ‘have dissipated’. The US Dollar was little changed by the end of play yesterday although there was a reasonable move in the Treasury market with the benchmark 10y finishing up over 5bps higher in yield at 1.754% and wiping out Friday’s move lower.

Wrapping up the rest of the price action yesterday, with a number of public holidays it was an unsurprisingly quiet and low volume session in Europe reflected by just the +0.01% return for the Stoxx 600. Credit markets in the region were a touch wider (Crossover +4bps) although the stronger day for risk in the US saw CDX IG finish nearly 2bps tighter. It’s the new issue market which is still taking up much of the attention – particularly the mega deal from Dell. Bloomberg is reporting that the $16bn deal will be split across 8 tranches and is set to possibly price today but notably the same article suggests that the order book has already run past the $60bn mark, with the company suggesting that it is weighing up whether or not to upsize the deal.

Before we move on to the day ahead, the latest The House View titled “A challenging road” came out overnight. Despite rising concerns about global growth, the team expects only a modest deceleration into year-end from the US, China and the eurozone in aggregate. This, coupled with central banks taking a backseat in the coming months and geopolitical risk events approaching, leaves them holding a short-term neutral view on most markets.

 

end ASIAN AFFAIRS

i)Late  MONDAY night/ TUESDAY morning: Shanghai closed DOWN  BY 7.17 PTS OR 0.25%  /  Hang Sang closed UP 234.85 OR 1.18%. The Nikkei closed UP 186.40 POINTS OR 1.13% . Australia’s all ordinaires  CLOSED UP 0.69% Chinese yuan (ONSHORE) closed DOWN at 6.5261.  Oil ROSE to 47.76 dollars per barrel for WTI and 48.80 for Brent. Stocks in Europe  MOSTLY IN THE GREEN . Offshore yuan trades  6.54620 yuan to the dollar vs 6.5261 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE REMAINS CONSTANT.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA a) JAPAN ISSUES end b) CHINA ISSUES

none today

EUROPEAN ISSUES

Amazing another German Bank’s analyst, Berenberg’s James Chappell states that Deutsche bank’s problems are basically insurmountable and he downgrades the stock to sell. Boy does he have guts:

 

(courtesy Berenberg Bank/Chappell/zero hedge)

 

Analyst Warns Deutsche Bank’s Problems May Now Be “Insurmountable”

Call it some no holds barred German bank on German bank action.

After a tumultous start to a year that Germany’s largest, and judging by the tens of billions in legal settlements and charges also its most criminal bank, Deutsche Bank, would love to forget, things got worse over the weekend when a note issued by another German bank said that either Deutsche will have to massively dilute its shareholders as a result of “insurmountable” debt, or a fate far worse could await the Frankfurt-based lender.

Berenberg analyst James Chappell pulled no punches and spoke in uncharacteristically frank terms, traditionally reserves for the fringe media, when he said that “facing an illiquid credit market limiting Deutsche Bank’s (DBK) ability to delever and with core profitability impaired, it is hard to see how DBK can escape this vicious circle without raising more capital. The CEO has eschewed this route for now, in the hope that self-help can break this loop, but with risk being re-priced again it is hard to see DBK succeeding.” Chappell then broke the cardinal rule of sellside analysts: never issue a Sell rating on a fellow bank. “We downgrade to Sell and cut our price target to EUR9.00.

According to Chappell, the biggest problem, of which DB has many, is that it simply has too much leverage, some 40x to be precise, something we have warned about since 2013. To wit:

Too many problems still: The biggest problem is that DBK has too much leverage. On our measures, we believe DBK is still over 40x levered. DBK can either reduce assets or increase capital to rectify this. On the first path, the markets do not exist in the size nor pricing to enable it to follow this route. Going down the second path also seems impossible at the moment, as the profitability of the core business is under pressure. Seeking outside capital is also likely to be difficult as management would likely find it hard to offer any type of return on new capital invested.

In other words, DB may be frash out of options. But wait, there’s more bad news because as Berenberg adds, the entire “industry is in structural decline

The difficulty in analysing investment banks from the outside is that it is hard to establish core profitability. In an industry in structural decline, investment bank management teams are also likely to face similar challenges. Each weak quarter is seemingly greeted with an excuse that it could have been better if not for the wrong type of volatility, client uncertainty or central bank intervention. Q1  2016 saw the absence of one-off profitable events that have protected revenues in the past. We have perhaps had the first glimpse of what core profitability in the investment banking industry really is (ROEs in the midsingle digits at best) and it could be even worse if the traditional seasonality occurs.

Which brings us to his price target and Sell rating:

Price target cut to EUR9.00: We look at DBK’s valuation in two ways. One is a sum-of-the-parts analysis on the basis of normal conditions returning. This would imply a price target of EUR15.00. The second is a leverage adjusted P/E using the sector average multiple of 10x. This implies a price target of EUR9.00, using tangible book value. Considering “normal” conditions are unlikely to return and risk is re-pricing, we use the latter.

We applaud Chappell and only wish more of his peers had the guts to tell the truth and call it like it is.

END RUSSIAN AND MIDDLE EASTERN AFFAIRS

It is now time to annoy Russia so more:  War games are initiated right in Russia’s back yard:

(courtesy zero hedge)

 

Washington “Promotes Regional Stability” With War Games In Russia’s Back Yard

Around 350 troops from six countries (US, UK, Bulgaria, Moldova, Romania, and Serbia) are taking part in a military drill entitled ‘Platinum Eagle 16.1’, which is scheduled to conclude today according to RT.

The exercise comes less than a week after the US launched its European missile defense system in Romania, much to the ire of Russia.

“The 1st Battalion Marines is spread out over Eastern Europe, and the fact that we are able to come here, in Romania, and train with five other nations, that really promotes regional stability. Training together in peace time, those who train together will fight well together,” Lieutenant-Colonel Justin Ansel of the US Marine Corps told RT’s Ruptly video agency

Ah yes, nothing says regional stability like holding military exercises in Russia’s back yard just days after pushing Russia back to a cold war type of mentality.

We’re not going to be dragged into this race. We’ll go our own way. We’ll work very accurately without exceeding the plans to finance the re-equipment of our Army and Navy, which have already been laid out for the next several years,” Putin said on Friday

Recent developments indicate that the situation isn’t getting better. Unfortunately, it’s deteriorating. I’m talking about the launch of the radar station in Romania as one of the elements of the up-and-coming US anti-missile defense program,” the Russian president added.

* * *

It appears as though the US isn’t the slightest bit concerned about pushing Russia even further than it already has. As we said earlier, given how the market processes newsflow lately, perhaps Russia being forced to move more ICBMs to its border, increasing the likelihood of a catalyst for actual war, will be viewed as bullish for stocks.

END The USA Senate passed the bill that would expose the Saudi’s role in the 9/11 terror attacks.  Obama states that he would veto the bill and as such he is putting the Saudis ahead of USA victims of the tragedy! (courtesy zero hedge) Senate Passes Bill That Would Expose Saudi Arabia’s Role In Sept. 11: Obama Veto Imminent

After a month-long scare campaign waged by Saudi Arabia, and in no small part the Obama administration, which went so far as to threaten it would dump its US Treasurys (which the NYT previously had quantified as $750 billion however which the Treasury just yesterday disclosed for the first time in 41 years as only $117 billion, suggesting the Saudis would likely also have to sell US stocks and various other US-denominated assets), if the US were to pass a bill that would hold it legally liable for the Sept 11 attacks, it will be up to Obama to veto the bill because moments ago the Senate unanimously passed said bill, bringing Congress closer to a showdown with the White House.

The Senate’s passage of the bill, which will now be taken up in the House, is another sign of escalating tensions in a relationship between the United States and Saudi Arabia that once received little scrutiny from lawmakers.

As reported a month ago, the Obama administration has urgently lobbied against the bill, and the Saudi government has warned that if the legislation passes it might begin liquidating its USD reserves. Adel al-Jubeir, the Saudi foreign minister, delivered the warning to lawmakers and administration officials while in Washington in March.

Many economists are skeptical that the Saudis would deliver on such a warning, saying that the sell-off would be hard to execute and would do more harm to the kingdom’s economy than to America’s.

As the NYT reports, questions about the role Saudi officials might have played in the terror plot have lingered for more than a decade, and families of the Sept. 11 victims have used various lawsuits to try to hold members of the Saudi royal family and charities liable for what they allege is financial support for terrorism. But these moves have been mostly blocked, in part because of a 1976 law that gives foreign nations some immunity from suits in American courts.

But the Senate bill carves out an exception to the law if foreign countries are found culpable for terrorist attacks that kill American citizens inside the United States. If the bill were to pass both houses of Congress and be signed by the president, it could clear a path for the role of the Saudi government to be examined in the Sept. 11 lawsuits.

The administration has warned that any weakening of the sovereign immunity law could put American troops, civilians and corporations at legal risk if other nations decide to retaliate with their own legislation. Josh Earnest, a White House spokesman, said last month that President Obama would veto the bill if it reached his desk in its current form.

Earnest repeated the same warning moments ago, which means that if the House endorses the Senate bill, Obama will be put in the unpleasant spot of having to veto a bill which to many Americans is a critical milestone in figuring out if Saudi Arabia was indeed behind the September 11 bombings, and further lead to questions why Obama is defending a Wahhabist regime which has been repeatedly implicated in the biggest terrorist attack on US soil, and flagrantly rejecting to follow the will of the US electorate.

 END EMERGING MARKETS

The Opposition leader has urged Venezuelans to defy the state of emergency. The country is in complete anarchy and now the government has the authority to confiscate businesses who are not producing goods because they cannot get their hands on uSA dollars to buy the raw materials they need:

(courtesy zero hedge)

 

Caracas Showdown: Opposition Leader Urges Venezuelans To Defy State Of Emergency

As reported over the weekend, in what may well be one of Maduro’s last desperation steps, the Venezuela president announced the would implement a state of emergency, and also threatened to seize closed factories as well as arrest their owners.

During an impassioned rally, the embattled Venezuela ruler boomed: “Comrades, I am ready to hand over to communal power the factories that some conservative big wigs in this country have stopped. An idled factory is a factory handed over to the people. We are going to do it, fuck it!”

As expected, on Saturday the opposition decried the emergency measure.  “If you obstruct the democratic way, we do not know what could happen in this country. Venezuela is a bomb that could explode at any moment.” Said opposition leader Henrique Capriles.

Earlier today Venezuela may have neared its tipping point, when Capriles urged the country on Tuesday to defy a state of emergency decreed by the government as it grapples with an acute political and economic crisis. Henrique Capriles spoke as the opposition-controlled congress prepared to debate the sweeping measures ordered by President Nicolas Maduro.

He said lawmakers will probably reject it, and that if the government insists the decree remains in force “it is up to us … to ignore this decree.”

That stance is likely to pit the congress not only against the presidency, but also the Supreme Court, which has final say over the legality of the decree. It will also likely push the country to a full-blown confrontation between forces supporting the president, including the national guard, and the general population which has been crushed in recent months by Venezuela’s economic devstation.

Many of the Supreme Court judges were appointed during the reign of Maduro’s late predecessor, Hugo Chavez, and are seen as loyal to the government.

The decree establishing the state of emergency came into force for 60 days on Monday, after Maduro announced it last week. As AFP reports, Its first big test will come on Wednesday when opposition-led marches are to take place nationwide demanding electoral officials validate a referendum to oust Maduro. Similar marches last week were met by riot police and tear gas.

As regular readers know all too well, Venezuela is facing hyperinflation, food and electricity shortages that are sharpening public anger against the unpopular Maduro – seven in 10 Venezuelans want a change of government. But the president controls the levers of power.

And the measures in his decree give his government and security forces broad authorization to ignore most constitutional safeguards in a bid to keep order. Venezuela’s army is notably to be backed by civilians grouped into security units to tackle public unrest rising amid food shortages. As we reported over the weekend, Maduro warned that the military would hold “exercises” as soon as the coming weekend, seemingly to send a clear message to his critics that any popular move would be met with force.

The text also authorizes the state to do what is necessary to ensure supply of basic foods and services and to counter a crippling energy shortage that has resulted in electricity rationing.

The latest developments threaten to deepen the crisis in the oil-rich South American country, whose economy is tottering dangerously. Venezuela is in its third year of recession, brought low by global oil prices that are a third of where they were when Chavez was in charge and spending freely on welfare programs. Recently the country was rumored to have sold some (or all) of its gold reserves to procure much needed liquidity.

The climbing social and political tensions are ringing alarm bells beyond the nation’s frontiers. The United States has described reports of Venezuela’s spiral downwards as “breathtaking.” “The conditions for the Venezuelan population are terrible,” said a spokesman for the White House in Washington, Josh Earnest.

But with Maduro alleging the US is behind much of the volatility, in cahoots with rightwing Venezuelan tycoons, Washington is choosing its words carefully so as not to be seen as meddling. Maduro has ordered military exercises for Saturday to show Venezuela’s ability to see off foreign “armed intervention.”

As AFP adds, in his decree, Maduro said the security measures will counter “destabilizing actions that mean to disrupt life inside the country or its international relations.” Individuals, companies and non-governmental organizations in Venezuela with links to foreign groups are also to be put under scrutiny and risk having their finances frozen. The decree opens the way to businesses being expropriated if they are not seen to be doing enough to supply staple foodstuffs.

 Company seizures could notably affect the Polar group, Venezuela’s biggest food and beverage company, which halted beer production on April 30, saying it had run out of barley. Venezuelan businesses say they are currently operating at less than 45 percent capacity because the government will not allow them to buy increasingly scarce dollars to pay foreign suppliers.

The opposition says it has collected 1.8 million signatures to launch a recall referendum against Maduro. But the vote must be held before January 10, 2017 in order to trigger new elections, and the opposition accuses the electoral authorities of stalling. If held any later, a successful recall vote would simply transfer power to his hand-picked vice president, Aristobulo Isturiz.

Of course, Maduro will never allow a referendum and instead will cling to power at all costs, which likely means that a violent uprising against the regime now looks like a virtual certainty. The only question is when.

 END OIL ISSUES

Nigeria has always had problems with militants.  Now meet the newest member of militant to cause huge problems for this oil nation:  the Niger Delta Avengers:

They are certainly causing oil to rise in price as they keep millions of barrels of oil off market:

(courtesy zero hedge)

Meet The “Niger Delta Avengers” – The Group Which Holds The Price Of Oil In Its Hands

As Goldman famously declared on Sunday night when it boosted its near-term oil prices targets (while cutting its 2017 estimates as a result of what it admits will be a delayed rebalancing of the oil market), the biggest upside risk to oil over the next months remains the threat from unexpected supply disruptions…

… such as the Canada wildfire which has mothballed up to 1.5 million barrels in daily production (and which took a turn for the worse earlier today, when new evacuations threatened the restart of oilsands facilities), but mostly the ongoing attacks shaking up, or rather down, Nigerian production, specifically affecting the region of the Niger River delta.

It is here where we meet a recently unknown group of militants, better known as the “Niger Delta Avengers” who are thought to be behind recent attacks on oil pipelines in the south.

As Bloomberg notes, “the Niger Delta Avengers have certainly been busy, forcing Shell’s Forcados terminal to shut in about 250,000 barrels of daily exports; and breaching an offshore Chevron facility in the 160,000 barrels per day Escravos system. In April, ENI had to declare force majeure, letting it stop shipments without breaching contracts — on exports of its Brass River grade after a pipeline fire.The country’s oil production has been severely disrupted by the attacks.”

To be sure, Nigeria has had a long history of dealing with militants who use attacks on oil to gain leverage. The previous wave of discontent, which hit a peak in 2009, only came to an end when President Yar’Adua offered amnesty, training programs and monthly cash payments to nearly 30,000 militants, at a yearly cost of about $500 million. Some leaders of the Movement for the Emancipation of the Niger Delta (MEND), the militant group, got lucrative security contracts. In other words, the “solution” was appeasement, and as Europe knows very well, appeasement never works, and instead invites increasingly greater problems.

As BBC adds, the amnesty program, which provides tens of thousands of former oil militants with a monthly stipend from the government, stemmed the level of violence in the region after its introduction in 2009. But in the latest budget, Nigerian President Muhammadu Buharireduced funding for the program by 70%, and has spoken of phasing it out entirely by 2018.

Yes, in Nigeria paying blackmail is part of the state budget.

It gets better: critics accuse Mr Buhari, a Muslim northerner, of unfairly targeting communities in the southern, mainly Christian oil-producing regions, as part of his anti-corruption drive. Mr Buhari’s predecessor Goodluck Jonathan, a Christian, comes from the Niger Delta region.

In other words, the indirect accusation is that the current president of a country whose primary source of revenue is oil exports, has unleashed the current Nigerian oil supply crisis on his own due to his reduced support for the same militant groups which he knew would promptly step in an hold the country’s oil production for ransom until they too got paid off.

And this is where the Niger Delta Avengers come into play: the group who, by keeping half a million barrels in oil from the market, have catalyzed not only the latest rally in oil, but now effectively hold the fate of the price of oil in their hands.

 

But who are the Niger Delta Avengers?

Luckily, the group has its own website called, not surprisingly, Niger Delta Avengers, which while somewhat unoptimized is very social-media friendly and even has a convenient section allowing outside parties to contact the millitants.

 

Some other notable oddities: the website was created on February 3, 2016 usinggodaddy as registrar.

The website has its own news blog, where it has posted such stories as “Niger Delta Avengers Zero Chevron Operations“, “STOP KILLING NIGER DELTANS IN THE GUISE OF ESCORTING OIL TANKERS“, and “KEEP YOUR THREAT TO YOURSELF MR. PRESIDENT; WE SHALL CONTINUE TO DO WHATEVER IS NECESSARY TO PROTECT THE NIGER DELTA INTEREST“, all authored by the same person, one Col. Madoch Agbinibo, NDA spokesman.

One interesting post which caught our attention explains Operation Red Economy from February 13, and which lays out the group’s genesis, agenda and demands.

OPERATION RED ECONOMY

 

We are a group of young Niger Deltans who have support from other parts of Nigeria, namely Northern, Western and Eastern part of the Country.

 

We have watched with keen interest, the way and manner in which the president Muhammadu Buhari Led APC government runs the affairs of this country, and we not pleased with the way things are going. For instance, the so-called anti-corruption fight is directed towards perceived enemies of the government, and those that are sympathetic to former President Goodluck Jonathan. We wonder why this persecution, despite the peaceful manner Jonathan hand over government to All Progressive Congress APC. When they did not even the win the 2015 election because he was after lives of Nigerians as he saw that the APC is blood tasty.

 

So far the only two governorship elections that were conducted under this government were and still remain the most controversial elections in the history of this nation.

 

The 2016 budget that was presented to the national assembly is full of fraud, yet nobody has owned up to the frauds spotted in the budget by Nigerians and the national assembly.

 

The president has not deem it fit to expose and prosecute those that are behind these frauds and punish them accordingly, because, because he is neck dip in these frauds. What kind of anti-corrupt fight is this?

 

This is the time Nigerians need to say the truth and stand by it. There must be a revolution to deliver this country from the hands of this wicked administration now. Imagine all the appointees to the president are all his relations eg DSS, Customs, INEC, and so on. We can no longer continue like this. There is a serious and biting hunger in the land. So many persons have lost their jobs under this Buhari led administration, while his wife and children are doing party everyday in Aso Rock Villa.

 

We cannot continue like this. Most APC leaders and other big men are pretending as if all is well but all is not well with them. Infact, they are dying in silent. Nigerians must speak up against this Military in Democracy government. Things must be done in the right way.

 

Therefore, we have chosen to start this revolution to free country from these vampires called APC government. We are hereby giving president Buhari two weeks ultimatum to do the following things urgently.

  1. Immediate implementation of the report of the 2014 National Conference. Otherwise, this country will break-up forcefully.
  2. President Buhari, the DS SSS and Timipre Sylva should apologize to the people of the Niger Delta region and family of Late Chief DSP Alamieyesegha for killing him with intimidation and harassment because of his party affiliation.
  3. The ownership of oil blocks must reflect 60% for the oil producing people and 40% for the non-oil producing people.
  4. The only Nigerian Maritime University sited in the most appropriate and befitting place Okerenkoko must start the 2015/2016 academic session immediately.
  5. The minister of transportation, Mr Rotimi Amechi should apologize to the Ijaws and the entire Niger Delta people for his careless and reckless statement about the siting of the University.
  6. The Ogoniland and indeed ll oil polluted lands in the Niger Delta must be cleaned up and compensation be paid to all oil producing communities.
  7. Mr Nnamdi Kanu, the Leader of IPOB must be released unconditionally as the court said.
  8. The Niger Delta Amnesty programme must be well funded and let it continue to run effectively.
  9. All APC members that are indicted in any corruption related cases should be made to face trial like the PDP members. Otherwise Buhari should shamefully forget about this nonsense anti-corruption fight.
  10. All oil multi-nationals and foreign investors should observe this ultimatum, as their business interest in the country must be first target.
  11. A word is enough for the wise.

In addition to tell the Nigeria government that we mean business at as 10:55pm on Saturday the Forcados terminal crude oil export pipeline was blown up by Niger Delta Avengers.

And then there is another follow up post on the site’s home page titled “CONGRATS TO ALL STRIKE TEAM OF THE NIGER DELTA AVENGERS” which goes on to list the group’s successful accomplishments to date (key excerpts ) and also touches on what the NDA supposedly wants.

From the high command of the Niger Delta Avengers we congratulating all strike teams of the Avengers without taking any innocent life or that of the Nigeria military we were able to shut down 50% of crude production.

 

We have been seeing a lot on the media about us. Some are asking, “Who are you avenging?” some calling us empty heads, ex-agitators have been condemning us on daily basis. Our criticizer from other part of the country, we don’t have any thing to tell you because you clearly don’t know how life is in the region.

 

To our criticizers from the region we want you to know you are all cowards and afraid to stand for your people.

 

Our agitation is more civilize than yours the Niger Delta Avengers is more concern with people of Niger Delta unlike you (ex-agitations) that were into kidnapping, killing of Nigeria soldiers, sea pirates, vessel and tanker hijacking. But we were able to carry out all our operations without killing a fly. We have sophisticated arms far better than what you use to have during your kidnapping days.

 

We are young, educated, well traveled and most of us were educated in east Europe but don’t worry when we achieved our goal (sovereign state of Niger Delta) then you people will be proud of us. In as much as we respect you as our elder brothers (ex-agitators) please don’t dare to stand on our way because if you do we will crash you.

 

To the Nigeria military the Niger Delta avengers is among you. And we know all your plans so we will always ten steps ahead of you. In our meeting comprising all heads of the strike teams, which was held in Bayelsa. The Niger Delta Avengers high Command comes to the conclusion that, if the military harass or invade any community in the region then you (Nigeria military) will get a feel of the Avengers.

 

If you smart or intelligent enough you will look inward not outside. We know when you are vulnerable but not take our calmness for granted.

 

From our analysis above, 90% oil blocs are allocated to individuals from northern Nigeria and some confused elements from the region are calling the Niger Delta Avengers names, some are calling us criminals….  To owners and operators of these oil blocs in our region the Niger Delta Avengers is giving you two weeks ultimatum to shut down your operations and evacuates your staff. If at the end of the ultimatum and you still operating. We will blow up all the locations. It will be bloody. So just shut down your operations and leave.

 

Once again on behalf of all the commanders of the avengers strike teams we congratulate our loyal and gallant soldiers who put human life before their targets. On behalf of the Niger Delta people we said congratulation as we have cripple the Nigeria economy by 50% by the grace of God we will make it 100% if our demands are not met soon.

 

By October 2016 we will display our Currency, Flag, Passport, our ruling Council and our Territory to the world.

 

To the United Nations, we are not asking for much but to free the people of the Niger Delta from environmental pollution, slavery, and oppression.  We want a country that will turn the creeks of the Niger delta to a tourism heaven, a country that will achieve its full potentials, a country that will make health care system accessible by everyone. With Niger delta still under the country Nigeria we can’t make it possible. So we are calling on the Ban Ki-Moon Secretary General United Nations and all Heads of the government of the five Permanent Security Council members to come to the aid of Niger delta people. We are calling on world leaders to come to the Niger delta to see the atrocities committed by the Nigeria government

 

Long Live the Niger delta Avengers.
Long Live the Niger Delta.

 

Col. Mudoch Agbinibo
Spokesperson

So another group of “young, east-Europe educated idealists”, who have a “patriotic agenda” and are intent on achieving an independent state in southeast Nigeria. To do this they will blow up every piece of oil infrastructure in their way.

At least, unlike Hans Gruber, they don’t also demand the release of their ideological “revolutionary brothers and sisters” rotting away in some imperialist prison.

Meanwhile, the price of oil will remain high and keep rising as long as the NDA’s campaign continues oddly unopposed.

What is odd is how unexpectedly this group of African “freedom fighters” emerged, and created a website no less just as oil hit a 13 year low. One almost wonders if there was not certain western financial and military backing behind said group of “freedom fighters”, perhaps backing that has an interest in the price of oil going higher, and thus any sunk costs to fund and arm the NDA would be promptly recovered once oil jumped… as it has in the past week as a result of none other than Goldman highlighting Nigeria’s oil supply problems and making it the basis for their “bullish” (if only in the shorter-term) oil call.

Of course, that would never happen: after all, when in the history of the US has the country, either directly through the government or indirectly through the private sector, armed and funded offshore “rebel” groups to achieve specific national interest goals…

end Crude slides after API reports a lower than expected draw: (courtesy zero hedge) Crude Slides After Oil Inventories Drawdown Less Than Expected

Following last week’s chaotic Genscape build (and warning), API build, but DOE draw, and subsequent face-ripping rally, tonight’s API data signaled a lower than expected draw and sparked further chaos in prices as they jerked higher (“it’s a draw”) only to slide on missed expectations. Having reached 7-month highs during the day session, the 1.1mm barrel drawdown missed expectations of a 3.5mm draw dramatically and sparked selling pressure. However, a smaller than expected build at Cushing stalled the weakness along with notably large drawdowns in Gasoline and Distillates.

API:

  • Crude -1.1m (-3.5mm exp, last week -3.4mm)
  • Cushing +508k (+1.1m exp)
  • Gasoline -1.9mm (-1m exp)
  • Distillates -2m (-1m exp)

A Smaller overall drawdown than expected but smaller than expected build in Cushing and big draws ion Gasoline and Distillates sustained some price strength…

 

Which, after last week’s chaos…

 

Kneejerked crude higher before it dropped on the miss…

 

Charts: Bloomberg

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

Euro/USA   1.1318 UP .0003 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 109.51 UP .426 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4479 UP .0034 (STILL THREAT OF BREXIT)

USA/CAN 1.2918 UP .0019

Early THIS TUESDAY morning in Europe, the Euro ROSE by 3 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED DOWN BY 7.17 PTS OR 0.25% / Hang Sang CLOSED UP 186.40 OR  1.13%   / AUSTRALIA IS HIGHER BY 0.69% / ALL EUROPEAN BOURSES ARE ALL IN THE GREEN   as they start their morning/

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this TUESDAY morning: closed UP 186.40 OR 0.33% 

Trading from Europe and Asia:
1. Europe stocks ALL THE RED AS  THEY START THEIR DAY

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 234.85 PTS OR 1.18% . ,Shanghai CLOSED  UP 23.75 OR 0.84%/ Australia BOURSE IN THE GREEN: /Nikkei (Japan) CLOSED IN THE GREEN/India’s Sensex IN THE GREEN

Gold very early morning trading: $1273.25

silver:$17.09

Early TUESDAY morning USA 10 year bond yield: 1.757% !!! UP 1 in basis points from MONDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.59 PAR in basis points from MONDAY night.

USA dollar index early TUESDAY morning: 94.55 DOWN 2 from MONDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers TUESDAY MORNING

END

And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield:  3.07% DOWN 7 in basis points from MONDAY

JAPANESE BOND YIELD: -.102% DOWN 1/4 in   basis points from MONDAY

SPANISH 10 YR BOND YIELD:1.57%  DOWN 3 IN basis points from MONDAY

ITALIAN 10 YR BOND YIELD: 1.45  DOWN 2 IN basis points from MONDAY

the Italian 10 yr bond yield is trading 12 points lower than Spain.

GERMAN 10 YR BOND YIELD: .132% DOWN 1  IN BASIS POINTS ON THE DAY

 

END

IMPORTANT CURRENCY CLOSES FOR TUESDAY

Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

 

Euro/USA 1.1315 UP .0002 (Euro =UP 2 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.11 UP 0.019 (Yen DOWN 2 basis points )

Great Britain/USA 1.4460 UP .0020 Pound UP 20 basis points/

USA/Canada 1.2909 UP 0.0009 (Canadian dollar DOWN 9 basis points with OIL RISING a bit(WTI AT $48.34).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 2 basis points to trade at 1.1315

The Yen FELL to 109.11 for a LOSS of 2 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 20 basis points, trading at 1.4460

The Canadian dollar FELL by 9 basis points to 1.2909, WITH WTI OIL AT:  $48.31

The USA/Yuan closed at 6.5170

the 10 yr Japanese bond yield closed at -.102% DOWN 1/4 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: UP 1  IN basis points from MONDAY at 1.758% //trading well below the resistance level of 2.27-2.32%) HUGE policy error

USA 30 yr bond yield: 2.590 DOWN 1/3 in basis points on the day ( HUGE POLICY ERROR)

Your closing USA dollar index, 94.56 PAR IN CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for TUESDAY

London:  CLOSED UP 16.37 OR 0.27%
German Dax :CLOSED DOWN -62.71 OR .63%
Paris Cac  CLOSED DOWN 14.71  OR 0.34%
Spain IBEX CLOSED UP 16.60 OR 0.19%
Italian MIB: CLOSED DOWN 238.14 OR 1.34%

The Dow was DOWN 180.73  points or 1.02%

NASDAQ DOWN 59.72 points or 1.25%

 
WTI Oil price; 48.30 at 4:30 pm;

Brent Oil: 49.31

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  64.75 (ROUBLE UP 17/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT ROSE AND WTI ROSE

TODAY THE GERMAN YIELD FELL TO .132  FOR THE 10 YR BOND

.

END

 

This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:

WTI CRUDE OIL PRICE 5 PM:48.59

BRENT: 49.43

USA 10 YR BOND YIELD: 1.774%

USA DOLLAR INDEX: 94.53 DOWN 3 cents

 

END

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

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Stocks Give Up “Volumeless, No Good Reason” Gains On Hawkish FedSpeak

It’s over…Hotflation and Fedspeak – unless the S&P plunged 200 points, June is on like Donkey Kong.

 

Who could have seen that coming…

 

The S&P 500 tumbled back into negative territory for the year once again…

TS YTD

 

What goes up, comes back fast on heavy volume… Weak China data’s dip was a panic buying opportunty for the machines which quickly evaporated…

 

Trannies started off in a hurry on the day…

 

Once again VIX was pressured to keep the S&P 500 above unch year-to-date…

 

There is one odd outlier post payrolls…

 

Financials lagged as they begin to catch down to yield curve reality…

 

Stocks caught down to bonds…

 

Treasury yields extended their losses – despite the equity weakness – as Dell’s yuuge issuance dominated rotation and rate locks – though notably, like last week – thelong-end rallied as the short-end sold off on fed speak…

 

The USD Index trod water today after USDJPY pumped and dumped back to unch…

 

Crude continued its drift higher – no news – as PMs and Copper trod water despite the equity plunge…

 

Oil ETF longs and shorts continue to drift lower but appear balanced for now (lower pane)

 

With API data due after hours, the question is will last week’s exuberant draw stand up…

 

Charts: Bloomberg

 

end

 

 

Headline CPI rises .4% month/month and the biggest jump since Feb 2013.  Also hourly wages slid .1%.  Not a good report

(courtesy zero hedge)

Consumer Prices Jump Most In Over 3 Years Amid Rising Gasoline, Rent Inflation

Headline CPI rose 0.4% MoM (above +0.3% exp) for the biggest jump since Feb 2013 but sadly at the same time, price-adjusted hourly wages slid 0.1% in April.

 

Following a small drop in March, from 8 year highs, Core (ex food and energy) Consumer Prices rose 2.1% YoY (as expected) abesent the effect of Gasoline’s huge 8.1% MoM surge.

 

Of course this is probably transitory but we note that rent inflation remains at 3.7% YoY – its highest since 2008 and definitively not transitory.

 

And as the breakdown shows, energy and gasoline price soared in April – so are higher oil prices good or bad again?

 

The index for all items less food and energy increased 0.2 percent in April after increasing 0.1 percent in March. The shelter index rose 0.3 percent in April following a 0.2 percent rise the prior month. The indexes for rent and for owners’ equivalent rent both increased 0.3 percent, while the index for lodging away from home declined for the second straight month, falling 0.4 percent. The medical care index rose 0.3 percent in April, with the index for prescription drugs rising 0.7 percent and the hospital services index advancing 0.3 percent, but the physicians’ services index declining 0.1 percent. The motor vehicle insurance index rose 1.2 percent in April, and the index for airline fares advanced 1.1 percent after declining in March. The recreation index rose 0.3 percent in April, as did the index for education, and the indexes for alcoholic beverages, tobacco, and personal care all posted slight increases.

Gas prices according to CPI data, are up over 20% in the last 2 months – the biggest spike since June 2009…

 

In contrast, the index for household furnishings and operations declined 0.4 percent in April, its largest decline since April 2010. The indexes for apparel, for new vehicles, and for used cars and trucks also fell in April, each declining 0.3 percent. The index for communication declined as well, falling 0.2 percent.

 

Charts: Bloomberg

END OBAMACARE losses mount but what is very troubling is many are refusing to take Obamacare: (courtesy Mish Shedlock/Mishtalk) As Insurance Losses Mount So Do Refusals: “Sorry, We Don’t Take Obamacare”

Submitted by Michael Shedlock via MishTalk.com,

A McKinsey study shows Obamacare insurers lost money in 2014 and the losses doubled in 2015.

Amazingly, the study concludes there’s nothing to worry about because “30 percent of insurers nationwide were profitable.”

Meanwhile, outright refusals to accept Obamacare mount. “Sorry, We Don’t Take Obamacare” is now a frequent response.

Losses Pile Up

The Hill reports Study Shows ObamaCare Insurers’ Losses Grew in 2015.

The study from McKinsey & Company finds that in 2014, insurers had a margin of minus-4.8 percent, translating to an overall loss of $2.7 billion on the individual health insurance market, which includes ObamaCare’s marketplaces.

 

The study finds those losses roughly doubled in 2015 to between minus-9 and -11 percent margins, based on preliminary data.

 

Still, the study finds that not all insurers lost money. In 45 states, there was at least one profitable insurer in the market in 2014, and 30 percent of insurers nationwide were profitable.

 

“The individual market has little risk of entering a classic insurance ‘death spiral’ as long as the federal government continues to offer subsidies,” the study states, adding that “there will likely continue to be a large, viable individual market.”

Second Class Patients

The New York Times tells the sad tale of an increasing number of “Sorry, We Don’t Take Obamacare” responses to those seeking medical assistance.

AMY MOSES and her circle of self-employed small-business owners were supporters of President Obama and the Affordable Care Act. They bought policies on the newly created New York State exchange. But when they called doctors and hospitals in Manhattan to schedule appointments, they were dismayed to be turned away again and again with a common refrain:“We don’t take Obamacare,” the umbrella epithet for the hundreds of plans offered through the president’s signature health legislation.

 

Though their insurance cards look the same as everyone else’s — with names like Liberty and Freedom from insurers like Anthem or United Health — the plans are often very different from those provided to most Americans by their employers. Many say they feel as if they have become second-class patients.

 

Compared with the insurance that companies offer their employees, plans provide less coverage away from patients’ home states, require higher patient outlays for medicines and include a more limited number of doctors and hospitals, referred to as a narrow network policy. And while employers tend to offer their workers at least one plan that allows them coverage to visit doctors not in their network, patients buying insurance through A.C.A. exchanges in some states do not have that option, even if they’re willing to pay higher premiums.

 

Some of the problems may have been predictable. When designing the new plans, for-profit insurers naturally tended to exclude high-cost, high-end hospitals with whom they had little clout to negotiate discounts. That means, for example, that as of late last year none of the plans available in New York had Memorial Sloan Kettering Cancer Center in their network — an absence that would be unacceptable to many New York-based employers buying policies for their employees. Another issue is out-of-state coverage, which many A.C.A. plans don’t offer aside from emergencies, and which is routinely offered in policies from companies — especially large ones — with workers in more than one state.

 

As a result, many parents who were excited that they would be able to keep their children on their policies until age 26 have discovered that this promise has gone unfulfilled. When Sara Hamilton of New York was shopping on the exchange for a plan to cover her and her two young-adult children — who live in distant states — she discovered that none of the plans covered doctor visits in those places.

 

In 2013, Angie Purtell of Tega Cay, S.C., bought a gold plan offered by Coventry Health Care. When notified that the plan would double its monthly premium the following year, to nearly $1,000, she went shopping again on the state exchange and chose a Blue Cross silver plan for $500. It was branded “Choice.”

 

But when she tried to visit her longtime doctor using the new plan, she found she could not. The doctor’s practice, while in South Carolina, was not covered because it is affiliated with the Carolina Medical Center, a few miles over the border in Charlotte, N.C.

Service Refused

 

Hey! We don’t serve their kind here. They’ve got Obamacards.

end The clowns are at it again:  Lockhart and Williams say a rate hike in June is on the table (courtesy zero hedge) Stocks Slide After Lockhart/Williams Say Rate-Hike In June On The Table

Once again the narrative spewing forth from today’s Fed speakers is that “the market is too pessimistic” presumably meaning the bond market because stocks are near record highs; and crucially, that despite collapsing industrial production, plunging GDP expectations, near-record inventories, and weakness in employment data that the US economy is “doing well” and that “June is a live meeting”for a rate hike… the equity market is not amused…

 

  • *LOCKHART SAYS HE WOULDN’T TAKE MOVE IN JUNE OFF TABLE (if the S&P remains above 2000)
  • *FED’S WILLIAMS SAYS JUNE FOMC A LIVE MEETING IN HIS VIEW (ooh scary!)
  • *LOCKHART: MKTS MAY BE MORE PESSIMISTIC THAN I AM AT THIS STAGE (but stocks are right?)
  • *WILLIAMS: WAGES PICKING UP BY MORE THAN SUGGESTED BY AVERAGES (in some magical dream place?)

Does this look like a market that is “too pessimistic” about the US economy?

 

 

Seems like bonds have been dead right all along?

END For those of you who are playing the market (other than gold) this is the only chart that you should pay attention to: (Bank of America/courtesy zero hedge) “The Nightmarish Merry-Go-Round” – The Only Chart You Need To Trade This Market

Today’s steep selloff was launched by the latest jawboning by Lockhart and Williams who, now that the S&P 500 is back comfortably above 2000, once again hinted that a June rate hike is back on the table. Incidentally, the dynamic of the Fed responding to the market, and the market responding to the Fed, has been the only one worth paying attention to in recent months.

Confused? Don’t be. Here is an explanation from none other than Bank of America.

Not so merry-go-round: By some accounts the Fed is stuck in an adverse feedback loop. They want to raise interest rates so they can “reload” their policy ammunition, but the markets won’t let them. The chart of the day illustrates this nightmarish merry-go-round: the Fed threatens to hike, markets tank, the Fed delays the hike, the market recovers and the cycle repeats. The end result is repeated delays and very little actual policy tightening.

 

 

While we think there are elements of truth in this argument, we think it exaggerates the constraints on the Fed in two ways. First, if we are to believe the story, the timing of this feedback loop shifts from one episode to the next. In particular, in the first three episodes the market responded to the threat of tighter policy, but not to the actual implementation of policy; while in the December case the market was fine with the threat of hiking but only reacted weeks after the fact. So which is it: are markets forward looking or not? Second, the Fed merry-go-round story puts the entire onus on the Fed when a lot else is going on.

Of course, there is a very simple explanation for the above: as George Soros would certainly dub it if he were in a mood to write books, the term would be a “reflexivity trap.

As pertains to Bank of America’s question, regarding the second, the Fed chose to take on the “onus” in 2009 when it decided to centrally-plan the world’s most artificial market rally in history, so they will get no commiseration from us.

As for the first, “are markets forward looking or not”, the answer is simple: the markets can only look as far forward as the next Fed statement… and since the next Fed statement is in turned driven by what the market will do at any given moment, it explains why the only chart traders need is Bank of America’s “nightmarish merry-go-round.”

 

end

 

Well that about does it for tonight

I will see you tomorrow night

Harvey


May 16/Open interests in both gold and silver remain at high levels and that necessitated another raid orchestrated by our criminal bankers/Deutsche bank needs to offer 5% yield for 3 months on deposits/China’s largest bank purchases Barclay’s gold...

Mon, 05/16/2016 - 19:04

Good evening Ladies and Gentlemen:

Gold:  $1,273.40 UP $1.50    (comex closing time)

Silver 17.14  UP 2 cents

In the access market 5:15 pm

Gold $1274.25

silver:  17.16

 

Today we witnessed gold and silver rising throughout last night, and during the early comex hours.  However once London was put to bed, the crooks raided gold and silver/

In gold over 18,000 contracts were supplied at the comex by the criminal bankers over a 10 minute period  (over 2.3 billion dollars worth of gold) and this knocked gold down from $1287.80 down to $1273.00.  The bankers supplied enough paper to knock out all bids driving the price to its low point of the day.We are going to see continual raids like this as our banker friends are quite paranoid with gold’s strength.  We need to see gold rise and pierce the $1308.00 level: (the previous high for gold in January 2015). The gold will be off to the raceway!

 

Let us have a look at the data for today

.

At the gold comex today we had a GOOD delivery day, registering 28 notices for 2800 ounces for gold,and for silver we had 8 notices for 40,000 oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 236.257 tonnes for a loss of 67 tonnes over that period

.

In silver, the open interest fell by 1214 contracts down to 204,742 as the price was silver was UP  by 3 cents with respect to Friday’s trading. A very tiny contraction compared to the raid we had on Friday. In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.023 BILLION TO BE EXACT or 146% of annual global silver production (ex Russia &ex China)

In silver we had 8 notices served upon for 40,000 oz.

In gold, the total comex gold OI rose by 1,375 contracts up to 579,746 as the price of gold was up $1.60 with FRIDAY’S TRADING(at comex closing).

 

As far as the GLD, we had no changes in the GLD. The new inventory rests at 851.13 tonnes. We had no changes in silver inventory at the SLV. Inventory rests at 335.073 million oz.

.

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

1. Today, we had the open interest in silver fell by 1214 contracts DOWN to 204,742 as the price of silver was UP by 3 cents with FRIDAY’S trading. The gold open interest ROSE by 1,375 contracts as  gold was up $1.60 ON FRIDAY. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical. The amount standing for May remains at a very high 6.37 tonnes.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Harvey)

 

3. ASIAN AFFAIRS

.i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP  BY 23.75 PTS OR 0.84%  /  Hang Sang closed UP 164.62 OR 0.84%. The Nikkei closed UP 54.19 POINTS OR 0.33% . Australia’s all ordinaires  CLOSED UP 0.56% Chinese yuan (ONSHORE) closed DOWN at 6.5225.  Oil ROSE to 47.14 dollars per barrel for WTI and 48.84 for Brent. Stocks in Europe  MOSTLY IN THE RED . Offshore yuan trades  6.54640 yuan to the dollar vs 6.5225 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE REMAINS CONSTANT.

REPORT ON JAPAN  SOUTH KOREA AND CHINA

 

a) REPORT ON JAPAN

none today

b) REPORT ON CHINA

For the past 5 years, a massive 110 billion USA has left China to buy USA real estate:

( zero hedge)

  4.EUROPEAN AFFAIRS

i)Something is going on with DB.  They are now offering 5% yields if they lock up their money for 3 months!!  This is going on with the ECB policy of NIRP!!

( zero hedge)

 

ii)A great synopsis of the folly between the Troika and Greece:

( Mish Shedlock)

iii)Over 300 chief executives of British companies are backing a BREXIT stating that the EU are stifling their growth and they are correct!.

( zero hedge) 5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

i) The USA continues to agitate Russia:

( zero hedge)

 

ii)The USA is continually losing control over Russian and other eastern nations.  Despite sanctions the Russian bond yields are now below pres sanction levels:

( zero hedge)

iii)Saudi Arabian is not going to be happy with this release from one of the 9.11 commission members, John Lehman. He states that there were 6 Saudi officials working in the ISA that supported the 9/11 attack and most importantly:

“our report should never have been read as an exoneration of Saudi Arabia,” He is calling for the 28 redacted pages to be declassified and released in full ( Charles Kennedy/ OilPrice.com) EMERGING MARKETS

Venezuela is in complete anarchy:

4 stories from zero hedge:

i) (Story No 1)  Anarchy inside Venezuela

 

ii)Story No 2: Maduro declares a State of Emergency!  (no kidding)  (zero hedge)

iii)Story no 3:  USA officials are concerned at a complete Venezuelan meltdown

 (zero hedge)

iv)Story no 4:  the failed Tinaco -Anaco Railway Line where China extended loans of 37 billion dollars to Venezuela.  There is nothing left of the project as looters stole everything. China may initiate default proceedings

( zero hedge)

v)Today, we have country in country, South Africa, as it seems that the Finance  Minister is to arrested.  He is trying to stop massive corruption in his country and Zuma want to put an end to his rant!

( zero hedge) OIL ISSUES

i)Two more USA energy companies go bust:  Breitburn and Sandridge.

As they enter Chapter 11 they will emerge with lower costs:

( zero hedge)

 

ii)As the price of oil rose, the hedgers decided to hedge their bets.  Hedging activity is at 5 yr highs.  If the price of oil falls, this will probably be quite deleterious to the banks:

( zero hedge)

 

PHYSICAL MARKETS i)An extremely important audio between Craig Hemke and Andrew Maguire explaining the changing landscape in the  gold trading.  The Chinese fix is a physical fix and it is now beginning to dominate the paper game. Most importantly he warns about the $1308 level for gold.  Once it pierces that level gold will proceed immediately to 1400 and beyond as the bankers resistance at that level will be blown up a must listen to… ( Craig Hemke/Andrew Maguire/audio tape)

ii)Dave Kranzler on today’s bombing of gold/silver:(courtesy Dave Kranzler/IRD)

iii) Zero hedge on today’s bombing of gold/silver

(zeor hedge)

iv) Bill Holter’s commentary tonight is entitled:

“It’s a small club …All Roads Will Lead To Gold!”

v)Steve St Angelo describes the official deficit of silver from 2004 onward of 1.3 billion oz.

Since there is no above ground silver anywhere he begs the question:  where did this silver come from? I can only think of one sovereign who could have possibly had this quantity and that would be China

( Steve St Angelo/SRSRocco)

vi)Last yr ICBC , China’s largest bank bought Deutsche bank’s 1500  tonne capacity gold vault in London:  the location of which is secret.  The purchase of London gold vaults did not end there: they just bought Barclay’s 2,000 tonne gold vault and the transaction is to be completed in July.

That leaves only one gold gold vault left in London, the HSBC, besides the Bank of of England’s vault.

Obviously the guilty plea by Deutsche bank is having an effect:

(courtesy zero hedge)

USA MARKETS AND THEIR INFLUENCE ON GOLD/SILVER TRADING)

i)The State of ILLINOIS is in one complete mess.  It still cannot pass a budget bill:

(courtesy zero hedge)

 

ii)The all important NY manufacturing index (Empire index0crashes once again

( NY Manufacturing index/(Empire) Let us head over to the comex:

The total gold comex open interest ROSE to an OI level of 579,746 for a GAIN of 1375 contracts AS  THE PRICE OF GOLD WAS UP $1.60 with respect to FRIDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED.   The month of May saw its OI FALL 53 contracts DOWN to 1141. We had 73 notices filed ON FRIDAY so we gained 20 gold contracts or an additional 2000 gold ounces will stand for delivery. The next big active gold contract is June and here the OI FELL by 3,320 contracts DOWN to 330,125 as those paper players that wished to stay in the game rolled to August. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was VERY GOOD at 215,432. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was GOOD at 196,314 contracts. The comex is not in backwardation. We are LESS THAN 3 weeks away from first day notice for the huge June contract.

Today we had 28 notices filed for 2800 oz in gold.

 

And now for the wild silver comex results. Silver OI fell by 1214 contracts from 205,956 DOWN to 204,742 as  the price of silver was UP BY 3 cents with FRIDAY’S TRADING.We are within spitting distance of the all time high OI in silver of 206,748 For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 150 contracts DOWN to 758. We had 119 notices filed ON FRIDAY so we LOST 31 contracts or AN ADDITIONAL  155,000 oz of silver will NOT stand for delivery in this active month of May. The next non active month of June saw its OI FALL by 12 contracts DOWN to 719 OI.The next big delivery month is July and here the OI FALL by 2201 contracts DOWN to 138,747. The volume on the comex today (just comex) came in at 45,141 which is EXCELLENT. The confirmed volume YESTERDAY (comex + globex) was AGAIN EXCELLENT AT 52,727. Silver is not in backwardation. London is in backwardation for several months. THE HIGH OPEN INTEREST FOR THE ENTIRE COMPLEX PLUS THE HIGH OI FOR THE FRONT MAY CONTRACT MUST BE SCARING OUR BANKERS TO NO END.   We had 8 notices filed for 40,000 oz.  

MAY contract month:

INITIAL standings for MAY

May 16. Gold Ounces Withdrawals from Dealers Inventory in oz   nil Withdrawals from Customer Inventory in oz  nil  386.57 OZ

MANFRA

SCOTIA

9 KILOBARS Deposits to the Dealer Inventory in oz NIL

  Deposits to the Customer Inventory, in oz    33,963.510 OZ

BRINKS

MANFRA

SCOTIA

  No of oz served (contracts) today 28 contracts
(2800 oz) No of oz to be served (notices) 1113 CONTRACTS

111,300 OZ Total monthly oz gold served (contracts) so far this month 960 contracts (96,000 oz) Total accumulative withdrawals  of gold from the Dealers inventory this month   nil Total accumulative withdrawal of gold from the Customer inventory this month  212,247.8 OZ

Today we had 0 dealer deposit

 

total dealer deposit: NIL oz

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 2 customer withdrawals:

i) Out of Manfra:  289.35 oz (9 kilobars)

ii) Out of Scotia:  97.22 oz

total customer withdrawals: 386.57 OZ

 

Today we had 3 customer deposits:

 

i) Into Brinks:  4899.91 oz

ii) Into Manfra:  803.75 oz  25 kilobars

iii) Ino Scotia: 28,259.85 oz  879 kilobars

Total customer withdrawals:  33,963.510 oz

Today we had 0 adjustment:

 

 

Today, 0 notices was 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 28 contracts of which 5 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account.  To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (960) x 100 oz  or 96,000 oz , to which we  add the difference between the open interest for the front month of MAY (1141 CONTRACTS) minus the number of notices served upon today (28) x 100 oz   x 100 oz per contract equals 207,300 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE    Thus the initial standings for gold for the MAY. contract month: No of notices served so far (960) x 100 oz  or ounces + {OI for the front month (1141) minus the number of  notices served upon today (28) x 100 oz which equals XXX oz standing in this non  active delivery month of MAY(6.4479 tonnes). WE GAINED 20 CONTRACTS OR AN ADDITIONAL 2000 OZ WILL STAND FOR DELIVERY IN THIS NON ACTIVE DELIVERY MONTH OF MAY. Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you.    We thus have 6.4479 tonnes of gold standing for MAY and 21.697 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing. We now have partial evidence of gold settling for last months deliveries We now have 6.4479 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003  = 20.8951 tonnes still standing against 21.697 tonnes available.   Total dealer inventor 697,565.649 tonnes or 21.697 tonnes Total gold inventory (dealer and customer) =7,595,686.896 or 236.257 tonnes    Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 236.257 tonnes for a loss of 67 tonnes over that period.    JPMorgan has only 20.97 tonnes of gold total (both dealer and customer) May is not a very good delivery month and yet 6.4479 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.  end And now for silver  

MAY INITIAL standings

 May 16.2016

Silver Ounces Withdrawals from Dealers Inventory nl oz Withdrawals from Customer Inventory  716,415.379 oz

CNT, SCOTIA

DELAWARE Deposits to the Dealer Inventory  NIL

  Deposits to the Customer Inventory  1,070,603.200 OZ

SCOTIA,JPM, No of oz served today (contracts) 8 CONTRACTS 

40,000 OZ No of oz to be served (notices) 750 contracts

3,750,000 oz Total monthly oz silver served (contracts) 2049 contracts (10,245,000 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  5,472,548.4 oz

today we had 0 deposit into the dealer account

 

total dealer deposit:NIL oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 2 customer deposits:

i) Into JPM: 588,484.300 oz

ii) Into SCOTIA:  482,117.900 OZ

Total customer deposits: 1,070,603.200 oz.

We had 3 customer withdrawals

i) out of CNT: 635,592.496 oz

ii) Out of SCOTIA: 60.679.68 oz

:

total customer withdrawals:  716,415.379 oz

   

 

 we had 0 adjustment

 

The total number of notices filed today for the MAY contract month is represented by 8 contracts for 40,000 oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (2049) x 5,000 oz  = 10,245,000 oz to which we add the difference between the open interest for the front month of MAY (758) and the number of notices served upon today (8) x 5000 oz equals the number of ounces standing    Thus the initial standings for silver for the MAY contract month:  2049 (notices served so far)x 5000 oz +(758{ OI for front month of MAY ) -number of notices served upon today (8)x 5000 oz  equals 13,995,000 oz of silver standing for the MAY contract month. WE LOST 31 CONTRACTS OR AN ADDITIONAL 155,000 OZ WILL NOT STAND FOR DELIVERY.   Total dealer silver:  30.282 million Total number of dealer and customer silver:   153.461 million oz The open interest on silver is still close an all time high with the record of 206,748 being set in the last week of April. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver. end And now the Gold inventory at the GLD May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN??? May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes April 28/we gained 1.49 tonnes of gold at the GL/Inventory rests at 804.14 April 27/no change in gold inventory at the GLD/rests at 802.65 tonnes aPRIL 26/ a withdrawal of 2.38 tonnes of gold/inventory rests at 802.65 tonnes April 25.2016: no change in gold inventory/rests tonight at 805.03 tonnes April 22/ no changes in gold inventory/rests tonight at 805.03 tonnes April 21/no change in gold inventory/rests tonight at 805.03 tonnes April 20/no change in gold inventory/rests tonight at 805.03 tonnes April 19./we had a huge withdrawal of 7.43 tonnes from the GLD/Inventory rests tonight at 805.03 tonnes April 18.2016/a huge addition of 6.38 tonnes of gold  in gold inventory at the GLD/Inventory rests at 812.46 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 16.:  inventory rests tonight at 851.13 tonnes

end

 

ETF gold holdings are rising at the fastest pace since 2009.  However in all probability the GLD inventory is paper and not real:

(courtesy zeor hedge)

 

ETF Gold Holdings Rise At The Fastest Pace Since 2009 As Central Banker Credibility Plunges

As Eric Peters explained a few days ago, by pushing prices to overvaluation and reducing yields on every investment asset, central banks have destroyed investors ability to create a portfolio that can withstand even the slightest economic disruption. Peters correctly describes it as “the most obvious disaster in finance.”

By reducing the yield on every investment asset, pushing prices to overvaluation, this policy also destroyed the ability of investors to build diversified portfolios capable of withstanding even the slightest economic disruption. Which ultimately results in reduced private sector risk-taking; the lifeblood of every economy. “This is the most obvious disaster in finance. Central bankers don’t quite understand it.”

As a result of such practices Peters touched upon (ie: negative interest rate environment and concerns over a struggling global economy), two things have occurred. First, gold has become one of the top performing assets YTD through April.

 

Secondly, total gold ETF holdings is seeing its fastest rise since 2009, with total holdings at a level not seen since 2013.

 

ETF holdings have risen along with spot prices…

 

As Bloomberg notes, China, Russia, and Kazakhstan have also been substantial and consistent buyers of gold. The World Gold council estimates that nations are expected to buy 400 to 600 tons this year, compared with 566.3 tons in 2015.

While it must be painful for those who have such disdain for the pet rock, the fact is that central banks are losing credibility with the market, and gold is one way of expressing that. As Elliott Management’s Paul Singer said last month regarding investor confidence in the central planners: “If judgement continues to weaken, the effect on gold could be very powerful.” Perhaps the markets are starting to wake up to the fact that the all-knowing central planners literally have no idea what they’re doing, and if so, we’ll let investors borrow our tinfoil hat.

end Now the SLV Inventory May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz May 12/no change in silver inventory/rests tonight at 335.073 million oz/  May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/ May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz. May 9. no change in silver inventory/rests at 336.119 million oz. May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV INVENTORY RESTS AT 336.119 MILLION OZ MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580 April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz April 27/we had another addition of 856,000 oz into the SLV/Inventory rests at 335.580 aPRIL 26/no change in silver inventory at the SLV/Inventory rests at 334.724 million oz. April 25.2016/ No change in silver inventory/rests tonight at 334.724 million oz. April 22/ no changes in silver inventory/rests tonight at 334.724 million oz April 21/no change in silver inventory/rests at 334.724 million oz/ April 20/no change in inventory/rests at 334.724 million oz April 19./we had a huge inventory deposit of 1.437 million oz/inventory rests at 334.724 . May 16.2016: Inventory 335.073 million oz end   1. Central Fund of Canada: traded at Negative 4.5 percent to NAV usa funds and Negative 4.6% to NAV for Cdn funds!!!! Percentage of fund in gold 61.3% Percentage of fund in silver:37.3% cash .+1.4%( May 16/2016). 2. Sprott silver fund (PSLV): Premium RISES   to +.36%!!!! NAV (MAY 16.2016)  3. Sprott gold fund (PHYS): premium to NAV  RISES 1.69% to NAV  ( MAY 16.2016) Note: Sprott silver trust back  into POSITIVE territory at +36% /Sprott physical gold trust is back into positive territory at +1.69%/Central fund of Canada’s is still in jail. It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to +.36%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.      

END

And now your overnight trading in gold,MONDAY MORNING and also physical stories that may interest you: Trading in gold and silver overnight in Asia and Europe Mark O’Byrne (goldcore)/ off today. END Gold Plunges After “Someone” Suddenly Decides To Dump Over $2.3 Billion Notional In 10 Minutes

A modest blip higher in the USD…

 

And commodities suddenly accelerated to the downside, led by precious metals.

 

While Copper and Crude are giving up gains, gold and silver and being monkey-hammered on heavy volume..

 

Over 18,000 contracts – or over $2.3 billion notional of gold has been dumped in the last 10 minutes…

 

Thank you London Fix.

end

Dave Kranzler on today’s bombing of gold and silver: An extremely important audio between Craig Hemke and Andrew Maguire explaining the changing landscape in the  gold trading.  The Chinese fix is a physical fix and it is now beginning to dominate the paper game. Most importantly he warns about the $1308 level for gold.  Once it pierces that level gold will proceed immediately to 1400 and beyond as the bankers resistance at that level will be blown up (courtesy Craig Hemke/Andrew Maguire/audio tape) a must listen to… By Turd Ferguson | Friday, May 13, 2016 at 11:39 am

As most of you know, each week I assist the good folks at Sprott Money with their “Weekly Wrap-up” segment. With Eric unavailable this week, I was able to line up a special guest appearance from our pal, Andrew Maguire. The resulting audio is an absolute must listen for everyone at TFMR and the greater metals community, at large.

Just a few of the topics addressed by Andy in this podcast:

  • The resilience of paper prices, supported by the steady rise of wholesale prices in London
  • The importance of the $1308 level in gold
  • How physical-only exchanges like the SGE and ABX are changing the global gold market landscape
  • The impact the new Shanghai Fixes are having on the spot market
  • And much, much more.

Again, please take the time to listen and re-listen to this audio. The global gold market is far more vast than the Comex-centric wave-counters would have you believe. To understand it, you need wisdom and experience and we should all be grateful to Andy for sharing some of his with us today.

TF

Sprott Money Link: https://www.sprottmoney.com/blog/may-13-2016.html?mw_aref=f4acdd227eeba8…

 

END

 

Dave Kranzler on today’s bombing of gold/silver:

(courtesy Dave Kranzler/IRD)

 

The Fed Is Desperate To Keep Gold From Exploding Higher May 16, 2016Financial Markets, Gold, Market Manipulation, Precious Metals,U.S. Economy, , ,

The Federal Reserve’s “invisible hand” in the markets is no longer “invisible.”  It’s become obvious to most market participants that the Fed is working hard to keep the stock market from collapsing and the price of gold below $1300.  But why?

The price of gold moved up $15 overnight from the time the Asian markets opened until the Comex gold pit opened.  Shortly after the Comex paper gold market trading was underway, an avalanche of paper contracts was dumped onto the Comex – both the electronic trading system and the floor.  This is what it looked like (click to enlarge):

Gold’s path looks like Niagra Falls in the graph above because shortly after the Comex opened this morning because “someone” decided to dump over 55,000 contracts onto the Comex.  55k contracts translates into 5.5 million ounce of theoretical gold.

“Theoretical” because it’s only in theory that the Comex has 5.5 million ounces of gold to deliver.   Currently the Comex is reporting a little over 697k ounces that are available to be delivered into the paper gold contracts that the banks print up and dump on the market.  The Comex vaults are showing a little over 7 million ounces in total in the vaults.  This is highly theoretical because most of the gold is accounted for the big bullion banks.  I use “accounted for” loosely because there is no mechanism in place to hold the banks accountable for what they are reporting.

In other words, the amount of “physical”  gold reported by the Comex is likely nothing more than a “suggestion.”

In the graph to the left (click to enlarge) there’s been a definitive trading pattern that doesn’t take Einstein’s eyes and brain to see. For the last three trading days, gold has moved higher prior to the opening of the Comex floor in NYC only to be price-smashed with a deluge of paper contracts representing little more that theoretical gold.

But I prefer the real thing. I actually welcome these price hits because it enables me to move theoretical electronic currency from my bank account into a bona fide gold currency in a BITGOLD account. When gold moves higher, my net worth will be the beneficiary of the Fed’s market interventions. I look at it as grabbing my share of the wealth being transferred by the Fed/Government from the besotted middle class to those who know what’s going on.

Of course, the more interesting question begs to know the real reasons the Fed is compelled to make its market intervention activities so blatant.  One look at the economic reports being released from non- Government sources and the condition of the U.S. Government’s balance sheet readily answers that question…

http://investmentresearchdynamics.com/the-fed-is- desperate-to-keep-gold-from-exploding-higher/

 

end

 

Last yr ICBC , China’s largest bank bought Deutsche bank’s 1500  tonne capacity gold vault in London:  the location of which is secret.  The purchase of London gold vaults did not end there: they just bought Barclay’s 2,000 tonne gold vault and the transaction is to be completed in July.

 

That leaves only one gold gold vault left in London, the HSBC, besides the Bank of of England’s vault.

Obviously the guilty plea by Deutsche bank is having an effect:

(courtesy zero hedge)

 

China’s Largest Bank Is Quietly Cornering The Market For London Physical Gold

We have followed the ownership changes of London’s massive vaults with keen interest ever since our December 2014 article when we reported that Deutsche Bank’s gold vaule was for sale in “Massive 1,500 Ton Gold Vault For Sale In The Heart Of London, One Previous Owner, Asking £4,500,000 O.B.O.” The fate of that particular vault was revealed earlier this year when Reuters reported that none other than China’s largest bank, ICBC Standard Bank, was buying the lease on Deutsche Bank’s London gold and silver vault, “enlarging its footprint in the city’s bullion market”

The Chinese and South African lender is aiming to fill the gap left by Western banks, which are retreating from commodities to cut costs and reduce regulatory burden. “They (ICBC Standard Bank) have taken on the lease for the vault,” the first source said.

Deutsche Bank’s vault became operational in June 2014 and has a capacity of 1,500 tonnes. It was built and is managed by British security services company G4S. “The figure that was initially talked about may have been around $4 million, but it’s way lower now,” a second source said, without disclosing the figure paid for the vault.

 

We thought that ICBC would be content with its purchase of one of London’s biggest vaults but that appears to not have been the case. Earlier today, ICBC Standard Bank reported that it was also buying Barclays’ London precious metals vault, giving the Chinese bank the capacity to store gold worth more than US$80bn in the secret location.

The vault, which can store 2,000 tons of gold and other precious metals such as silver, platinum, palladium, was opened by Barclays in 2012 and took more than a year to build. The location of the vault is secret, but the lender has said it’s within the M25 road that orbits London.

“This is an exciting acquisition for the Bank. This enables us to better execute on our strategy to become one of the largest Chinese banks in the precious metals market,” Mark Buncombe, head of commodities at ICBC Standard Bank, said in the statement. “The acquisition of a precious metals vault allows us to expand our services in clearing and processing.”

Barclays’ decision to exit the business comes as U.S. and European Union regulators investigate whether at least 10 banks, including Barclays, JPMorgan Chase & Co. and Deutsche Bank AG — manipulated prices of precious metals such as silver and gold.

Barclays Chief Executive Officer Jes Staley said in January that the bank was assessing “various options” to exit its precious metals business while vowing to speed up disposals from the bank’s non-core unit, which houses 51 billion pounds ($73 billion) of toxic and otherwise unwanted assets.

As Bloomberg reports, China’s (and the world’s) largest bank expects the purchase of the vaulting business and related contracts to be completed in July, it said in an e-mailed statement Monday. No financial details were given.

About $5 trillion of transactions are cleared every year in London’s gold market, which Barclays is exiting as it pulls out of precious metals.

The purchase follows last week’s acceptance of the ICBC Standard into London’s precious-metals clearing system after last month it won classification as a market maker by the London Bullion Market Association.

With this latest takeover by a Chinese bank of a London mega vault, it leave only the HSBC gold vault (profiled here recently) where the inventory of the GLD is also stored not in Chinese hands, as well as, of course, the vault of the Bank of England.

As side from its boilerplate statement according to which the state-backed ICBC seeks to “expand our services in clearing and processing” as of this moment, the real explanation behind China’s increasingly more clear intentions of becoming the dominant provider of London physical gold vaulting services remains undeclared.

end Steve St Angelo describes the official deficit of silver from 2004 onward of 1.3 billion oz. Since there is no above ground silver anywhere he begs the question:  where did this silver come from? I can only think of one sovereign who could have possibly had this quantity and that would be China (courtesy Steve St Angelo/SRSRocco) OFFICIAL SOURCE: Global Silver Supply Deficit Surges On Revised Data

Filed in Precious Metals by SRSrocco on May 15, 2016

If the cumulative global silver deficit since 2004 of one billion ounces wasn’t large enough, a data revision published by the Silver Institute shows the actual figure was much higher. How much higher? A great deal when the additional revised amount would totally wipe out all the silver at the Comex and Shanghai Futures Exchange warehouses.

The Silver Institute receives its figures from the GFMS Team at Thomson Reuters. The GFMS Team also puts out the World Silver Surveys. Some of the data from the World Silver Surveys are published on the Silver Institute website.

Before I get into the details of this deficit revision, I want to discuss the notion put forth by many precious metals investors that “NONE” of the information from the Silver Institute should be trusted. These folks claim that “ALL” the data is manipulated.

While I agree that this data is being researched, quantified and published by Thomson Reuters, one of the largest data-news organizations in the world, there is a lot of good information in these World Silver Surveys. Matter-a-fact, much of the silver mine supply data is taken from government sources such as the USGS in the United States.

Of course, some precious metals investors will say this government mining data shouldn’t be trusted either. Well, if that is true, then the person we are married to or in a relationship with may actually be an alien from some foreign planet. The conspiracy mantra can go to absurd levels. While I believe conspiracies do indeed take place, not everything is manipulated or a conspiracy.

For example, government mining data is pretty accurate because it’s done by bureaucrats who are just doing their job. Furthermore, we can check silver mine supply which is reported by private and public companies and then match it up with the government data. For the most part, this jives nicely.

Of course there are still some precious metals investors who believe all the public and private mining data is manipulated. They may believe that the companies are either under-reporting production or there are a bunch of hidden out-of-the-way mines that are not included in the data. Sure, there could be some mines that are missed or excluded on purpose, but this would be a small amount. We must remember, there are State and Federal taxes that are collected from these mines. Neither the State nor the Federal Govt will forgo receiving taxes just to keep a mine hidden (for the most part).

Lastly, if we look at the trend of all metals production since 1900, they have all gone up exponentially in the same fashion and to the same degree. Regardless, the World Silver Survey is the best information source we can go by, much better than the CPM Group’s Silver Yearbook… in my opinion.

The Cumulative Global Silver Deficit Surges On Revised Data

When the Silver Institute first published their global silver supply and demand table for 2014 in May 2015, it showed a net balance surplus for 2014 (in green):

According to the GFMS Team, the world suffered net annual silver deficits from 2005 to 2013. However, this became a small surplus of 2.6 Moz in 2014. Again, this was published back in May of 2015. When they provided their Nov. 2015 Silver Interim Report, they revised their figures to show a 27.5 Moz net deficit for 2014 and a 21.3 Moz deficit for 2015:

So, now the GFMS Team shows continued annual net silver deficits since 2006. The net deficits did occur in 2004 and 2005, however they were not included in this table. I took the data from this chart as well as the figures for 2004 and 2005 and made my own chart below:

Going by this forecast for 2015, including new data for 2014, the world suffered a cumulative 1,021 Moz net silver supply deficit since 2004. These figures represent changes in Exchanges & ETF’s. The Physical Surplus or Deficit figure shown two lines above the Net Balance figure in the GFMS data tables do not include inventory changes in the Exchanges (Comex & Shanghai Futures Exchange) or the many Electronically Traded Funds (ETF’s). Thus, this net balance figure is the most accurate.

That being said, let’s get to the large global silver supply deficit revision. I mentioned in previous articles, that I had an email exchange with the GFMS Team on the subject of “Private Silver Bars & Rounds” not being included in their figures. They responded by letting me know they were working on including private rounds and bars, but I thought it wouldn’t be for a few years. However, they included private silver rounds and bars in their 2016 World Silver Survey.

Not only did the inclusion of private silver bars and rounds change the figure for 2015, it revised it higher for many years. Which means, physical demand was even higher causing higher deficits. Here is the Silver Institute’s newest 2015 Supply and Demand Table:

Taking this new revised data and updating my chart, the cumulative global silver net deficit increased 263 Moz to 1,284 Moz, or nearly 1.3 billion oz:

According to their Silver Bar & Coin revisions, about half of the total demand increase came from this segment of the silver market. The GFMS Team also revised Jewelry and Industrial demand higher for certain years. So, half of that 263 Moz net silver deficit increase came in the past few years and most of that figure came from adding Private Bars & Rounds to the data.

NOTE: there are 153 Moz of silver stored at the Comex and 63 Moz at the Shanghai Futures Exchange for a total of 216 Moz. Thus, the GFMS data revision of an additional 283 Moz net balance deficit would totally wipe out all inventory at the Comex and Shanghai Futures Exchange.

Okay, the question going through many readers minds right now is… “Where are they getting all that silver?” My simple answer is, “I don’t really know.” However, it’s likely coming from stockpiles gained during surplus years in the 1980’s and 1990’s. Most of this surplus during the past decades came from old official silver coinage that was too valuable to be used in a fiat monetary system.

It is impossible to know how much of this “Unreported Above-Ground” silver stocks have been depleted and how much remain. Regardless, at some point these remaining silver stocks will be totally overrun. I tried to explain this in my last article, The Foundation Of The Financial Markets Took A Big Hit In 2015, but very few people read it. Unfortunately, most of the sites that refer my work, only do so if I stick to writing about the precious metals.

This is very unfortunate as the energy data is even more important than the precious metals information. I was contemplating adding that article to the bottom of this one so more readers would look at it, but I decided instead just to republish one chart:

This chart shows that the world spent a lot of capital in 2015 to find 2.8 billion barrels of new oil. Unfortunately, the world consumed 10 times more than that amount at 29 billion barrels. This is extremely bad news for those who believe business as usual will continue forever.

Furthermore, some readers of my work can’t CONNECT THE DOTS. I see this from reading some of their comments of my work on various websites. They say, “If the price of oil does not rise due to future shortages, then why would the price of silver go to $100+?” They are trying point out inconsistencies in my work.

LET ME REPEAT MYSELF on this issue. While I have written in length and made many charts showing the oil-silver price connection in the past, it will be IRRELEVANT in the future. Why? Because of the collapse in value of most paper assets. Paper assets need a growing energy supply to give them value. Falling oil supply will destroy the value of most paper assets (and physical ones including Real Estate).

Which means…. investors will flood into silver and gold to protect what wealth they can from the collapse of paper assets. So, yes… the price of silver can rise to $100 or more even if the price of oil remains low. The price of silver will be based on its HIGH-QUALITY STORE OF VALUE rather than its current COMMODITY-PRICED mechanism.

If more of my followers would read my energy articles, they would realize this. However, the BLINDFOLDS stay on as they continue to just be interested in one aspect of the precious metals market. This is PURE FOLLY.

Lastly, if you haven’t checked out our new PRECIOUS METALS INVESTING page, I highly recommend you do.

-END-

Dave from Denver…

 

Bill Holter…

 

It’s a small club …All Roads Will Lead To Gold! For many years we have warned of the dangers of derivatives.  We were laughed at leading up to the 2008 financial debacle when Lehman broke and nearly took the entire system down.  That turned out to be no laughing matter and here we are again at exactly the same situation where derivatives threaten to melt the financial system again.  The difference now of course is the “saving ammunition” has already been spent where sovereign treasuries and central banks have destroyed their own balance sheets.   Two weeks ago, the Fed announced a “48 hour stay in place” provision for for collateral of any derivative contracts where the big banks are involved.   http://www.bloomberg.com/news/articles/2016-05-03/fed-expected-to-drag-hedge-funds-into-plan-to-halt-next-lehman  The idea here is to prevent collateral being pulled by the survivor for 48 hours should the bank counterparty become insolvent.  This will give the Fed a window of time to get the fire hose of liquidity out and reliquefy a large bank’s balance sheet before they can break the derivatives chain.  But what does this really do?  Does it make derivatives any more sound or does it really just add more risk to central bank balance sheets and thus the currencies themselves? It is very important to understand just how important derivatives have become.  Derivatives have been used to push, pull, manhandle and outright price many global markets.  They have been used to paint a picture as “proof” the Alice in Wonderland markets are in fact real.  Not even one single market can get out of control because “truth” anywhere will lead to TRUTH everywhere!  Even one single market left alone to Mother Nature will lead to questions that cannot be logically answered. First, these provisions being proposed by the Fed are not set to begin until August 2017.  I cannot imagine markets holding together this long, in fact, I would give less than 50/50 odds the U.S. actually has an election this November, rigged or not.  Next and more importantly, the Fed is actually saying “we will be the backstop” to ALL of the derivatives given the 48 hour window to “fix” the problem at a specific bank.   It does need to be pointed out, if any derivative of any size does fail then someone, somewhere, is “exposed”.  In reality, since few if any of the derivatives can actually perform …the entire world is swimming naked and already completely exposed!  How can I say this?  Forget about CDS on something as unpayable as a U.S. default, can the big banks really pony up $300+ billion if Greece were to fail?  The real number is probably 10 times this amount as “neighbors” are allowed to purchase insurance on their neighbor’s home.  What better incentive to strike a match?  Or what about another 10 times that amount if Italy defaulted?  My point is this, EVERYTHING, EVERYWHERE is “insured” via derivatives.  Many markets and assets have more (or even many times over) “insurance” than the actual market has value, the “coverage” is simply unpayable. The only response to a breakdown of derivatives will be exactly what it always has been, print more and more via QE or other method.  This is obviously destructive to currencies as they will be diluted to zero.  Whether you look at this picture from the micro standpoint of individual currency dilution, or from the macro standpoint of “solvency” …all roads will lead to gold.  Real physical gold cannot be diluted nor can it default.  Gold will be viewed for exactly what it is.    We have said gold will be the “last man standing” in a failure chain of fiat currencies, it will also be viewed as the ONLY protective hedge in a world completely unhedged.  As it stands right now, the belief is that everything is hedged …in reality NOTHING is hedged.  Once it becomes understood that no insurance anywhere has the ability to pay up, the world will collectively “change insurance companies” and move toward the only one with the ability to pay, GOLD!

  Switching gears but I believe very connected to the above, what is to be made of Deutsche Bank offering 3 month accounts paying an annualized FIVE PERCENT interest?!!! 

Liquidity Problems? Deutsche Bank Offers 5% Yields If Depositors Lock Up Their Money For Three Months   To state the obvious, Deutsche Bank needs money (liquidity) badly and they need it now!  Think about this, why would they do such a thing in a world where nearly a third of all debt carries a negative interest rate?  Why didn’t they go to the ECB’s feeding trough and snort up some zero percent funds?  Or, why didn’t they just go to the market place and issue bills for 90 days at 1/4% or less?  WHY WHY WHY?   Unless DB is pulling some sort of late April fools joke, they obviously need money and are “willing” (being forced) to pay 5%.  Is it possible they have been shut out”?  Please remember, DB pleaded criminally guilty to manipulating the gold and silver fixes.  Part of their alleged settlement was turning state’s evidence and aiding regulators in tracking down other perpetrators.  Is it possible the clan of monster derivatives banks is a very small club and Deutsche Bank “ain’t a member anymore” because they turned rat?   Other than not having access to capital anywhere else, I cannot think of any reason they would offer 5%?  If this has become their only source of funding then we just learned something very interesting.  This number of 5% is the REAL and unsubsidized interest rate!  Do you see the ramifications?  The world has “valued” everything with a basic discount rate of “0%”, what does it mean if rates to raise real capital from the markets is 5% rather than free?  Might stock markets be overvalued? …and real estate? …not to mention the foundation to EVERYTHING …BONDS???    This certainly bears watching because if Deutsche Bank has been kicked out of the gentlemen’s club, they have been allowed to carry the red button kill switch called derivatives with them!  I am not really sure what to make of this all.  Surely the powers that be would not kick the largest (or second largest) holder of derivatives off the reservation, would they?  The only possible reason I can imagine is something has already blown up behind the scenes that is too big to be fixed or hidden.  The “blame” for a financial meltdown may very well be hoisted around Deutsche Bank’s neck!   To finish, please do not roll your eyes at this.  If you have a logical explanation as to why DB would offer 500 basis points for three month money if they could get it cheaper elsewhere, I would love to hear it!  Anyone who tells me Deutsche Bank is making this offer because they feel sorry for the elderly savers earning nothing on their life’s savings will go into my spam box forever. This was a public article, if you would like to read all of our work, please follow the link to subscribe:  https://www.jsmineset.com/membership-account/membership-levels/ Standing watch, Bill Holter Holter-Sinclair collaboration Comments welcome  bholter@hotmail.com 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    

:

1 Chinese yuan vs USA dollar/yuan DOWN to 6.5225 ( DEVALUATION ) / Shanghai bourse  CLOSED UP 23.75 OR 0.84%  / HANG SANG CLOSED UP 164.62 OR 0.84%

2 Nikkei closed UP 54.19 OR 0.33% /USA: YEN RISES TO 108.85

3. Europe stocks opened MOSTLY IN THE RED  /USA dollar index FLAT to 94.57/Euro UP to 1.13250

3b Japan 10 year bond yield: FALLS   TO -.106%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 108.85

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  47.14  and Brent: 48.84

3f Gold UP  /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

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 10 yr bund FALLS to 0.123%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 9.04%/: 

3j Greek 10 year bond yield RISE to  : 7.42%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1282.25/silver $17.30(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 43 in  roubles/dollar) 65.02-

3m oil into the 47 dollar handle for WTI and 48 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9761 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1054 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 STARTS ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .123%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

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 1.708% early this morning. Thirty year rate  at 2.556% /POLICY ERROR)

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

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

Futures Flat Despite China Scare As Oil Rebounds Over $47

The main risk over the weekend was that markets, which have now dropped for three consecutive weeks the longest negative streak since January, would focus their attention on the latest batch of negative Chinese economic news released over the weekend, which missed expectations across the board, most prominently in Retail Sales (10.1% vs. Exp. 10.6%, down from 10.5%) and Industrial Production (6.0% vs. Exp. 6.5% down from 6.8%), and following Friday’s disappointing new credit loan data, would sell off as the Chinese slowdown once again becomes a dominant concern. However, after some initial weakness, the risks were all but gone when first the USDJPY jumped on another round of deflationary Japanese economic data (PPI Services -4.2%, Exp. -3.7%) which led to renewed hopes of more BOJ easing and a jump in the USDJPY and thus US futures.

Shortly thereafter a bearish report on oil by Goldman was misreported as bullish on oil prices (Goldman explicitly stated that the global rebalancing is taking longer than expected, but recent supply disruptions have taken off more oil from the market than expected, as a result of which Goldman cut its 2017 forecast prices while pushing up near-term expectations, a move that will also assure that 2017 prices are lower as more near-term production comes online.

With few upside anchors, traders and analysts quickly focused on oil as the driver of risk on strength: “The firmer oil price is helping emerging-market equities today despite the weaker China data over the weekend,” said Michael Wang, a strategist at hedge fund Amiya Capital LLP. “Oil is being driven by what’s happening in Nigeria at the moment – that’s changed sentiment towards Brent and has brought an expected recovery forward,” said John Meyer, an analyst at broker SP Angel Corporate Finance LLP in London. “Rising oil prices tend to support the commodities complex.”

As a result of the confusion, Brent rose to a six-month high, leading a rebound in commodities and boosting the ruble and mining companies, as supply disruptions in Nigeria added to production woes, while WTI was trading above $47 for the first time since November. Precious metals rallied with aluminum and commodity producers climbed, while almost all of the other industry groups in the Stoxx Europe 600 Index fell. Irish bonds advanced, outperforming their euro-area peers, while the Polish zloty strengthened after favorable reports from Moody’s Investors Service. Asian stocks rose from a one-month low.

And so, after last week’s US market losses and renewed recession concerns, the selloff was halted courtesy of the pickup in raw-materials prices which, as Bloomberg wrote, provides support for global equities after about $1.8 trillion was wiped off the value of the securities in the first two weeks of May amid weaker economic data and disappointing earnings reports.

“Concerns over the strength of the global economy are back on investors’ minds,” said Jasper Lawler, a London-based analyst at CMC Markets Plc. “The resources and oil sectors have been outperforming since the February low and both of them are performing OK today. But they need to continue to outperform for us to have a sustained rally.”

Elsewhere, China’s central bank issued a weekend statement saying monetary policy would continue to support growth, after data on new lending, retail sales, industrial production and fixed-asset investment missed economists’ estimates. A Friday report showing a jump in American retail sales bolstered the case for the Federal Reserve to raise interest rates.

Across global stock markets, the Stoxx Europe 600 Index declined 0.4 percent, falling for a third time in four days. German and Swiss markets were among those shut for the Whit Monday holiday, and volume of shares changing hands was about 45 percent lower than the 30-day average. Almost all industry groups in the Stoxx Europe 600 Index dropped after Chinese reports on new lending, retail sales, industrial production and fixed-asset investment missed economists’ estimates. The volume of Stoxx 600 shares changing hands was 44 percent lower than the 30-day average as German and Swiss markets were among those shut for a holiday

The MSCI Emerging Markets Index added 0.2 percent after falling as much as 0.4 percent. Benchmark gauges in Russia, Poland, South Africa and the Philippines climbed at least 0.9 percent. Shenzhen and Hong Kong stocks climbed amid speculation the start date of an exchange trading link between the two cities will be announced this week.

Futures on the S&P 500 Index expiring next month added 0.1% after the gauge completed a third weekly decline, its longest streak since January.  Announced stock buybacks dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show. Is the buyback spree officially coming to an end?

Global Market Snapshot

  • S&P 500 futures up less than 0.1% to 2045
  • Stoxx 600 down 0.4% to 333
  • FTSE 100 down 0.3% to 6121
  • S&P GSCI Index up 0.9% to 364.9
  • MSCI Asia Pacific up 0.4% to 126
  • Nikkei 225 up 0.3% to 16466
  • Hang Seng up 0.8% to 19884
  • Shanghai Composite up 0.8% to 2851
  • S&P/ASX 200 up 0.6% to 5359
  • US 10-yr yield up 1bp to 1.71%
  • German 10Yr yield down less than 1bp to 0.12%
  • Italian 10Yr yield up less than 1bp to 1.48%
  • Spanish 10Yr yieldunchanged at 1.6%
  • Dollar Index up 0.02% to 94.63
  • WTI Crude futures up 2% to $47.13
  • Brent Futures up 1.9% to $48.74
  • Gold spot up 0.7% to $1,282
  • Silver spot up 1.2% to $17.32

Top Overnight News

  • Konecranes Soars After Deal to Buy $1.3 Billion Terex Unit
  • Uber China Rival Didi Said to Consider U.S. IPO in 2017
  • Oil Climbs to Highest Since November as European Shares Retreat
  • Fed May Push Back Rate Hike With Brexit, U.S. Election: Pimco
  • Lawsuits Mount as Energy Transfer’s Williams Takeover Unravels
  • Saudi Arabia, Bahrain Ratings Cut by Moody’s on Lower Oil Prices

Looking at the overnight regional markets, Asia shrugged off the early cautious tone from Friday’s losses on Wall Street and poor Chinese data over the weekend, with Nikkei 225 (+0.3%) initially outperforming on reports that PM Abe will postpone the April 2017 sales tax hike despite Chief Cabinet Secretary Suga later denying these claims. Japanese exporters were also bolstered by JPY weakness amid increased hopes for BoJ action after declining PPI figures, however the Nikkei pared gains as JPY reclaimed some ground against the USD. ASX 200 (+0.6%) was led higher by the health care sector after PM Turnbull announced a resolution to the funding dispute with pathologists. Shanghai Comp (+0.8%) was in positive territory Industrial Production, Retail Sales & lending figures missing expectations as the data increases hopes for future measures. 10yr JGBs saw subdued trade with prices in mildly negative territory amid the risk-on sentiment in Japan with participants side-lined ahead of this week’s key Japanese GDP data and the upcoming 5yr/20yr bond auctions.

Top Asian News

  • China Slowdown Shows Debt Addiction Will Be Tough to Shake: Industrial output, retail, investment all missed estimates
  • Singapore Home Sales Fall as Mortgage Curbs Cool Housing Demand: Developers sold 745 units last month versus 843 in March
  • Bank of Singapore Sees Asia Rich Shift to Paying Fees for Advice: Wealth managers to rely less on transaction-based fees
  • Thailand’s Economy Expands More Than Expected in First Quarter: 1Q GDP Expands 3.2% y/y vs est. +2.8%
  • Emerging Currencies at March Low on Rallying Dollar, Weak China: S. Korean won leads decline followed by Malaysia’s ringgit
  • Bonds Trounce Stocks as Aussie Yield Latest to Drop to a Record: Australian 10-year bond yield drops to record 2.22%
  • Uber China Rival Didi Said to Consider U.S. IPO in 2017: Didi said to raise $3 billion in current round of funding
  • Konecranes Buys Terex Unit for $1.3 Billion After Merger Dropped: Zoomlion interested in buying remaining Terex business

In Europe, the week has kicked off in a subdued fashion in terms of both newsflow and volumes with much of Europe away for Whit Monday. The European equity indices that are open this morning (with the likes of DAX and SMI closed) have spent the morning in the red, weighed on by the downside seen in the US on Friday, combined with the miss on Exp. seen from Chinese data over the weekend Despite the negative trade seen in much of Europe, the energy and materials sectors trade in the green, with the former benefitting from the upside seen in WTI and Brent.  Fixed income markets have also been impacted by low liquidity, with Bunds relatively unchanged on the day. However, today has seen the long end underperforming, with the steepening in the yield curve attributed by some to the upside seen in oil.

Top European News

  • Philips Lighting IPO Could Raise as Much as $1.1 Billion: To sell stock at EU18.50-EU22.50 a share, values business at as much as EU3.38b, expected to start trading May 27
  • Telecom Italia Raises Cost-Cut Target to $1.8 Billion by 2018: Almost tripled its target for reducing expenses to EU1.6b by 2018; cuts will include EU800m in operating costs and EU800m in capital spending
  • Lonmin Turns Cash-Positive as Cost Cuts Meet Higher Platinum: Net cash was $114m at March 31, compared with net debt of $185m at Sept. 30; has cut 5,400 jobs to stay alive
  • ICAP to Become NEX Group to Begin Life After Voice Broking: Will be called NEX once it completes the sale of its voice- broking business to Tullett Prebon, transforming itself into a specialist in electronic markets and post-trade services.
  • Carney Defying Brexit Critics Sees U.K. in Early 1990s Quandary: Defended the Bank of England against critics furious at his warnings about the dangers posed by a European Union exit; British Business Sees Brexit Effect as Growth Forecasts Cut

In FX it is a very quiet start to the week, with plenty of data ahead. The Bloomberg Dollar Spot Index held near its highest close since March as the greenback gained 0.3 percent versus the Japanese yen. U.S. retail sales climbed in April by the most in 13 months and a gauge of consumer confidence surged in early May to an almost one-year high, reports showed Friday. Perhaps due to market holidays in Europe, both Asia and early London have seen some extremely range bound trade in the FX majors, but the fact that we have seen limited follow through from the strong US retail sales number on Friday suggests the USD may be in for some consolidation ahead of the FOMC minutes on Wednesday.

AUD/USD has found a base in the mid .7200’s ahead of the RBA minutes in the overnight session ahead, but USD/CAD has seen limited downside despite WTI piercing $47.0. EUR/USD lows under 1.1300 have held in today’s session so far, as has the Cable zone from 1.4350-20, though we did eat into this a little either side of the weekend. EUR/GBP is threatening to push higher though, but this is more likely to send EUR/USD higher again rather than Cable lower in the current climate. USD/JPY is a trade many are staying away from given the erratic risk sentiment in the market. The mid 108.00’s holding for now, but the quest for 110.00 held off as equities struggle.

In Commodities, Brent rose 1.8 percent to $48.70 a barrel at 10:48 a.m. in London, reaching the highest since November, after Friday’s 0.5 percent loss. China’s refineries processed crude at record rates in April, helping ease a supply glut as the number of active rigs in the U.S. declines. West Texas Intermediate climbed 1.8 percent to $47.06. Goldman Sachs raised its oil-price forecast for the second half to $50, from a March estimate of $45.

Aluminum rose 0.3 percent in London after weekend data showed China’s primary output of the metal slipped 1.2 percent in April from a year earlier. Gold added 0.6 percent after data showed holdings in exchange-traded funds increased to the highest since 2013. Silver gained 1.1 percent. Platinum gained 0.3 percent to $1,054.92 an ounce as the industry gathered in London for the annual Platinum Week meeting. The metal may climb 20 percent by the end of next year, according to a Bloomberg survey of 12 traders and analysts.

It’s a particularly quiet start to the week today with no data of note due out of Europe and just Empire manufacturing and the NAHB housing market index of note in the US session this afternoon.

Overnight Media Digest from Bloomberg and RanSquawk

  • European market closures for Whit Monday have led to subdued trade in the region with equities lower in what has been a relatively quiet session
  • WTI crude futures have reclaimed USD 47.00 while Brent eyes USD 49.00 alongside GS backtracking on some of their bearish oil calls
  • Looking ahead, highlights include US Empire Manufacturing Data and Fed’s Kashkari (Non Voter, No Stance)
  • Treasuries slip during overnight trading, led by 2Y, with rise in Asian equities amid report Japanese Prime Minister Abe will postpone a 2 percentage point increase in the sales tax and Chinese data missed estimates, creating the possibility of more stimulus.
  • China’s run of disappointing April data underscore the bind facing policy makers seeking to cut capacity from the worst- performing sectors and curb credit excesses in recovering ones without stalling the economy
  • A sudden plunge by Chinese stocks in Hong Kong had traders scrambling to find a trigger for the slump that coincided with a surge in futures volumes.
  • Holdings in gold exchange-traded funds have now surged by a quarter, with investors taking advantage of lower prices over the past two weeks to enlarge stakes on rising concern about central bank policy making worldwide
  • Investors are fleeing and volumes are falling due to extreme valuations amid global uncertainties related to monetary policy and political decisions made in wake of the 2007-2009 financial crisis. It’s a flight that’s creating a negative feedback loop
  • Swedish hedge fund Informed Portfolio Management is disregarding risks from a potential Brexit and political turmoil from Brazil to South Africa, instead using an approach of looking at fundamentals and placing narrow bets on how assets perform against each other
  • Mark Carney defended the Bank of England against critics furious at his warnings about the dangers posed by a European Union exit, and described the British economy as facing similar uncertainty to the early 1990s.
  • Sovereign 10Y yields mixed; Asian equities higher while European stocks mostly lower; U.S. equity-index futures higher. WTI crude oil and precious metals rise

DB’s Jim reid concludes the overnight wrap

China will dominate the headlines for different reasons this morning after a soft monthly batch of data released over the weekend. Industrial production grew +6.0% yoy in April (vs. +6.5% expected) and +5.8% ytd (vs. +6.8% yoy in March and +5.8% in Jan-March). Growth of fixed asset investment edged down from +10.7% for Jan-March to +10.5% (vs. +11.0% expected) for Jan-April, with implied monthly growth slowing from +11.2% yoy in March to +10.1%. Nominal growth of retail sales also dropped to +10.1% yoy (vs. +10.6% expected), from +10.5% in March and +10.2% in Jan-Feb.

The property market remained firm though and DB’s Zhiwei Zhang suggests that Q2 growth could still be stronger than Q1 as funds available for investment continued to improve. However net-net (adding in the weak M2 number from Friday), our economists think the risks to their 7% Q2 forecast is to the downside partly because the authorities seems to be shifting from aggressive easing to neutral earlier than expected. Their forecasts for Q3 and Q4 remain at 6.6% and 6.4% respectively.

Markets this morning initially opened a touch weaker in China, but have since bounced back along with other bourses in Asia having been supported by a decent rebound in Oil. Indeed the Shanghai Comp is currently +0.23% after initially falling as much as -0.80%, while elsewhere the Nikkei (+1.33%), Hang Seng (+1.22%), Kospi (+0.10%) and ASX (+0.54%) are also up. Stocks in Japan (Nikkei) are also being helped by a report suggesting that Japan’s government might be considering a delay in the sales tax hike. Meanwhile credit markets are a bit more mixed, while WTI has rallied +1.34% and more than wiped out Friday’s loss to hover just south of $47/bbl. There’s been little in the way of data this morning although it is worth highlighting some rating action from the weekend when Moody’s downgraded a number of Gulf nations including Saudi Arabia (by one notch to A1), in light of lower oil prices.

Moving along. Last week saw markets finish on a somewhat mixed note on Friday. European equities had initially closed with some modest gains (Stoxx +0.47%) which was enough to see the majority of bourses end with a positive return week. That said a bounce for the US Dollar (Dollar index +0.49%) following the much better than expected retail sales data weighed on assets in the US. The S&P 500 eventually closed -0.85% and as a result finished with three consecutive daily declines to take in into negative territory (-0.51%) over the five days.

There was a fair bit of focus going into that retail sales data given some of the soft department store earnings from earlier in the week, so it came as a bit of a surprise to see headline sales print at +1.3% mom for April, a big gap over the +0.8% consensus. All of the other component groups beat as well. Ex autos printed at +0.8% mom (vs. +0.5% expected), ex auto and gas at +0.6% mom (vs. +0.3% expected) and the control group an impressive +0.9% mom (vs. +0.4% expected). The surge in headline sales was actually the most in a single month in 13 months (and included upward prior month revisions) with auto sales a big contributor to the surge, although in fairness the vast majority of categories did report growth.
In terms of how markets responded, that data kick-started the rally for the Dollar while US 2y Treasury yields also marched higher, at one stage touching 0.784% (and 4bps off the lows) before giving up that move into the close to finish close to unchanged on the day at 0.746%. 10y yields, while also temporarily moving higher, actually closed 5.2bps lower at 1.701% meaning the yield curve had interestingly bull flattened by the end of the day. Meanwhile, the odds of a June rate hike ended the day unchanged at 4% based on futures pricing (did get up to 6% at one stage) with a July hike currently at 17% which is also unchanged relative to prior to the data. Those moves also came despite comments from the Fed’s Williams who said that 2-3 rate hikes this year may still make some sense. That said the data did, however, help to lift the Atlanta Fed’s Q2 GDP forecast up to 2.8% from 2.2%, although in contrast the NY Fed’s Q2 GDP forecast is sitting at a much lower 1.2% (from 0.8%).

That wasn’t the only other data out on Friday however. There were also some positive signs to take from the provisional May reading for the University of Michigan consumer sentiment data. The headline index rose an impressive 6.8pts to 95.8 (vs. 89.5 expected) which is the highest level since June last year. The expectations component was actually up 9.9pts at 87.5 (vs. 78.0 expected) while the current conditions component rose 1.9pts to 108.6 (vs. 106.0 expected). That said the data did show a decline in 1y inflation expectations to the tune of three-tenths to 2.5%, although 5-10y inflation expectations nudged up one-tenth to 2.6%. Elsewhere, headline PPI came in a touch lower than expected at +0.2% mom (vs. +0.3% expected) with the core up +0.1% mom as expected. Finally business inventories rose a greater than expected +0.4% mom in March (vs. +0.2% expected).

Prior to this in Europe it was all about the GDP reports. Regionally we saw Germany print a slightly better than expected +0.7% qoq for Q1 (vs. +0.6% expected) with YoY growth now slated at +1.3%. Italy’s Q1 GDP growth came in in-line at +0.3% qoq although the reading for the wider Euro area was revised down a modest one-tenth to +0.5% qoq (in actual fact from 0.55% to 0.52%), with Spain producing the fastest rate of growth (+0.8% qoq) of the core countries.

Last week was a bumper one for new issuance in credit markets. Indeed over the five days last week just over €21bn of corporate issuance was priced in the European market across 30 tranches. Adding in a further €8bn of financials and just over €12bn of SSA issuance meant the €42bn of issuance was the fourth busiest week this year. This week looks set to be a tad lighter in Europe but the forecast range is still €8bn-€12bn. It was much the same in the USD market too where some $50bn was priced. With a bumper deal from Dell already announced and expected to price this week, it’s expected to be another busy week. While we’re with credit, a reminder that we published a Credit Bites at the back end of the week on whether there is now a resistance at zero yields for corporate bonds in Europe.

end ASIAN AFFAIRS

i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP  BY 23.75 PTS OR 0.84%  /  Hang Sang closed UP 164.62 OR 0.84%. The Nikkei closed UP 54.19 POINTS OR 0.33% . Australia’s all ordinaires  CLOSED UP 0.56% Chinese yuan (ONSHORE) closed DOWN at 6.5225.  Oil ROSE to 47.14 dollars per barrel for WTI and 48.84 for Brent. Stocks in Europe  MOSTLY IN THE RED . Offshore yuan trades  6.54640 yuan to the dollar vs 6.5225 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE REMAINS CONSTANT.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA a) JAPAN ISSUES end b) CHINA ISSUES

For the past 5 years, a massive 110 billion USA has left China to buy USA real estate:

(courtesy zero hedge)

 

What Capital Controls? Chinese Buyers Flood US Real Estate Market With $110 Billion

We’ve chronicled extensively the capital flight taking place out of China and into anything that is perceived to hold value as fears that the yuan will devalue persist (here, here, and here). We’ve have also covered the massive debt bubble that has been created during China’s ferocious attempt to prove those who say a hard landing is inevitable wrong. George Sorosand Kyle Bass also agree that China will inevitably have to devalue its currency in order to soften a crash landing, certainly not without its consequences.

We know that Chinese buyers have taken over the Canadian real estate market, and we’ve witnessed the massive amount of corporate M&A being done in the name of preserving shareholder capital. Now we’re able to learn, courtesy of a study done from the Asia Society and Rosen Consulting Group, just how much individual wealth has been poured into the United States real estate market over the past few years.

According to the study (which excludes most purchases by companies and trusts), Chinese buyers have invested a massive $110 billion into the US real estate market between 2010-2015. The $110 billion is broken out into two parts, commercial and residential real estate, absorbing $17 billion and $93 billion respectively. Furthermore, despite the speculation that China will find a way to clamp down even harder on capital controls, the study estimates that for the second half of this decade the number will likely double to $218 billion.

Geographical areas of concentration were New York, Los Angeles, San Francisco, and Seattle, with Chicago, Miami, and Las Vegas also seeing significant investment as well. The impact of course is that real estate prices are being significantly distorted as Chinese buyers are paying huge premiums to ensure deals go through. According to the study,last year Chinese buyers paid on average $832,000 per home in the US, while the overall average for all foreign purchases was just $499,600.

As China continues to flood its economy with new loans, albeit down recently, and the subprime debt bubble gets ready to burst, the race to perceived safety is on for those Chinese buyers fortunate enough to have capital to preserve. As the study suggests,billions more will find its way out of China be