Lades & Gentlemen, Harvey Organ’s 10-22-14 Update
________________________________________
Oct 22.2014:
I will be creating another website of my own. JB Slear and Silverdoctors have been gracious enough to allow me to post on their websites.
All material that I use has been from public sources and I never infringe on copyright laws.
Gold: 1244.80 down $6.20
Silver: 17.18 down 18 cents
In the access market 5:15 pm:
Gold $1241.00
silver $17.16
The gold comex again today had another good noticy day registering 154 notices served.
Today we had no withdrawals of gold from the comex vaults. A few months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 276 for a loss of 27 tonnes.
In silver, the open interest continues to remain high at 170,192 contracts.
To boot, the December silver OI remains extremely high at 118,707.
Today, we had a huge withdrawal in inventory at the GLD. of 2.1 tonnes.Tonnage tonight at 749.87 tonnes.
SLV’s inventory remains unchanged and rests at 343.415 million oz.
Today, the big story is the terror attack on Canada’s capital, Ottawa which set the tone for the North American bourses today.
Finally, Bill Holter continues where he left off yesterday talking about the insolvent Fed and the insolvent USA
with its massive 1.4 quadrillion derivatives.
We have many stories to bring to your attention today…
Let’s head immediately to see the major data points for today.
First: GOFO rates/
All months basically moved slightly in the positive directions with the various GOFO months. On the 22nd of September the LBMA stated that they will not publish GOFO rates. However today we still received today’s GOFO rates.
It looks to me like these rates are now fully manipulated.
London good delivery bars are still quite scarce.
Oct 22 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
+.10% +.11% +.135% +.155% + .1925%
Oct 21 .2014:
1 Month Rate 2 Month Rate 3 Month Rate 6 month Rate 1 yr rate
+.0775% +.095% +.11% +.1275 +.1775%
end
Let us now head over to the comex and assess trading over there today,
Here are today’s comex results:
The total gold comex open interest rose by a large margin of 3,598 contracts from 407,459 up to 411,057 with gold up $7.00 yesterday. We are now in the active delivery month of October and generally this is a very poor month for deliveries. The October contract month actually fell by 219 contracts down to 388. We had 220 notices filed on yesterday we gained 1 gold contract or an additional 100 oz will stand for the October contract month. The November contract month saw its OI rise by 6 contracts up to 361. The December contract fell slightly by3,951 contracts down to 287,118. The estimated volume today was poor at 110,030 contracts. The confirmed volume yesterday was fair at 173,618.
The total silver Comex OI rose by a tiny 37 contracts as silver was down yesterday to the tune of 20 cents. It seems that the shorts are reticent to supply for silver contracts and they are starting to cover for fear of major entities taking delivery. Tonight the silver OI complex rests at 170,192 contracts. In ounces, this represents 851 million oz or 121.60% of silver annual production (annual production of 700 million oz ex China). In commodity law generally the OI is represented by 3 to 5% of annual production. These silver contracts are in very strong hands and as I have indicated to you on countless occasions, this will continue to bring nightmares to our bankers. Probably this is as good a reason as ever for the bankers to raid on a continual basis trying to force those longs to puke their interests.
We are in the non active silver contract of October and here the OI fell by 3 contracts down to 102 contracts. We had 5 notices served upon yesterday so we gained 2 silver contracts or an additional 10,000 oz of silver will be standing for the October contract month. November is also a non active delivery month and here the OI remained constant at 124 contracts.
The December silver contract is a biggy contract month and tonight it fell slightly to 118,707 contracts for a loss of 396 contracts. No doubt the December contract month may provide all the fireworks if our major entity tries to take delivery of much of the comex silver. In ounces, the December contract equates to 593.5 million oz or 84.79% of annual global production (ex China). The estimated volume today was fair at 34,366. The confirmed volume yesterday was also fair at 36,629 contracts. Bill Holter and I strongly believe that only one entity could possibly behind the majority of these longs and that entity is the sovereign Chinese government.
Data for the October delivery month.
October standings
Oct 22.2014
Gold
Ounces
Withdrawals from Dealers Inventory in oz nil
Withdrawals from Customer Inventory in oz nil
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 154 contracts( 15,400 oz)
No of oz to be served (notices) 234 contracts (23,400 oz)
Total monthly oz gold served (contracts) so far this month 1088 contracts (108,800 oz)
Total accumulative withdrawals of gold from the Dealers inventory this month
39,218.97 oz
Total accumulative withdrawal of gold from the Customer inventory this month
641,478.0 oz
Today, we had zero dealer transactions
total dealer withdrawal: nil oz
total dealer deposit: nil oz
we had 0 customer withdrawals:
total customer withdrawals:nil oz
we had 0 customer deposits:
total customer deposit: nil oz
We had 0 adjustment:
Total Dealer inventory: 921,376.368 oz or 28.65 tonnes
Total gold inventory (dealer and customer) = 8.898 million oz. (276.71) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 27 tonnes have been transferred out. We will be watching this closely!
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 154 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices stopped by JPMorgan customer account.
We had 154 notices served upon our longs for 15,400 oz of gold. In order to calculate what will be standing for delivery in September, I take the number of contracts served so far this month at 1088 x 100 oz = 108,800 oz,to which I add the difference between the open interest for the front month of October(388) minus the number of notices served upon today (154) x 100 oz = 132,200 oz or 4.11 tonnes.
We gained 100 gold ounces standing for the October contract month.
Thus: October standings:
1088 contracts x 100 oz = 108,800 oz + (388 ) – (154)x 100 = 132,200 oz or 4.11 tonnes
end
Oct 22/2014:
October silver: Initial standings
Silver Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 446,684.42 oz
(Brinks/CNT,Delaware)
Deposits to the Dealer Inventory 98,007.800 (CNT)
Deposits to the Customer Inventory 687,325.30 oz (CNT)
No of oz served (contracts) 100 contracts (500,000 oz)
No of oz to be served (notices) 2 contracts (10,000 oz)
Total monthly oz silver served (contracts) 754 contracts (3,770,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month 1,880,719.0
Total accumulative withdrawal of silver from the Customer inventory this month 6,921,472.3 oz
Today, we had 1 deposits into the dealer account:
i) Into CNT: 487,325.30 oz
total dealer deposit: 487,325.30 oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 3 customer withdrawals:
i) Out of Brinks: 407,554.80 oz
ii) Out of Delaware: 20,821.41 oz
iii) Out of CNT: 18,308.20 oz
total customer withdrawal 446,684.42 oz
We had 1 customer deposit:
i) Into CNT: 487,325.30 oz
total customer deposits: 487,325.30 oz
we had 0 adjustments:
Total dealer inventory: 67.327 million oz
Total of all silver inventory (dealer and customer) 179.586 million oz.
The CME reported that we had 100 notices filed for 500,000 oz today. To calculate what will stand for this active delivery month of October, I take the number of contracts served for the entire month at 754 x 5,000 oz per contract or 3,770,000 ounces upon which I add the difference between the open interest for the front month of October (102) – the number of notices served upon today (100) x 5000 oz per contract
Thus Oct. standings for silver: 754 notices x 5,000 oz per notice or 3,770,000 oz + (102) – (100) x 5,000 oz = 3,780,000 oz,
we thus gained 10,000 additional ounces of silver standing in the October contract month.
this level should continue to rise as the month progresses.
It looks like China is still in a holding pattern ready to pounce when needed.
The open interest on silver is still highly elevated. Gold has a low OI with a low gold price. Silver has a high OI with a low silver price. Something has got to give!!
As far as the silver inventory, it looks compromised as well. Shanghai is in complete silver backwardation and yet comex seems to import huge amounts of silver.
end
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:
i) demand from paper gold shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China
vs no sellers of GLD paper.
And now the Gold inventory at the GLD:
Oct 22.2014: we lost another 2.1 tonnes of gold at the GLD. Inventory rests at 749.87 tonnes. This tonnage no doubt is off to Shanghai.
Oct 21.2014: no change in inventory/GLD inventory rests tonight at 751.96 tonnes.
Oct 20.2014: wow!! a massive 8.97 tonnes of gold leaves the GLD heading to the friendly shores of Shanghai./Inventory 751.96
Oct 17.2014: No change in gold inventory at the GLD/Inventory 760.93 tonnes
Oct 16.2015: GLD gained back 1.79 tonnes of gold/inventory 760.93 tonnes
Oct 15.2014 GLD lost back the gold it gained yesterday to the tune of 2.09 tonnes/Inventory back to 759.14 tonnes
Oct 14. GLD inventory/stays the same at 761.23 tonnes
Oct 13.2014: this is good/it is quite possible that the gold has finally hit empty (due to gold near backwardation)
GLD 761.23 tonnes up 1.79 tonnes today.
Oct 10.2014: we lost 2.64 tonnes of gold from the GLD and this gold will head to Shanghai/inventory 759.44 tonnes
Oct 8.2014: we lost 5.39 tonnes of gold today and this gold will be heading to the friendly confines of Shanghai, China /New inventory 762.08 tonnes
oct 7.2014: as of 6 pm est, no change in gold inventory/767.47 tonnes
oct 6.2014: as of 6 pm est no change in inventory/767.47 tonnes
Oct 3.2014: as of 5 pm est no change in inventory/767.47 tonnes
Oct 2.2014: we lost another 1.19 tonnes of gold inventory heading towards Shanghai. (inventory 767.47 tonnes)
Oct 1.2014: we lost another 1.20 tonnes of gold inventory heading towards Shanghai. (inventory: 768.66 tonnes)
sept 30.2014: we lost another 2.39 tonnes of gold inventory heading towards Shanghai. (inventory 769.86 tonnes)
Today we lost 2.1 tonnes of gold inventory at the GLD
inventory: 749.87 tonnes.
The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).
GLD gold: 749.87 tonnes.
end
And now for silver:
Oct 22.2014: no change in silver inventory at the SLV ( as of 6 pm est)
Inventory: 343.415
Oct 21.2014; no change in silver inventory at the SLV (as of 6 pm est)
Oct 20.2014: we lost 1.15 million oz of silver inventory at the SLV/inventory 343.415 million oz
Oct 17.2014: no change in silver inventory/344.565 million oz
Oct 16.2014: no change in silver inventory/344.565 million oz
Oct 15.2014 no change in silver inventory/344.565 million oz
Oct 14.2014 today we had a loss of 1.201 million oz/SLV inventory rests at 344.565 million oz
Oct 13.2014: no change in silver inventory so far:
345.766 million oz
oct 10.2014: we lost a massive 3.25 million oz of silver leaving the SLV. Inventory 345.766 million oz
Oct.8/2014 no change in silver inventory 349.071 million oz
Oct 7.2014: a reduction of silver inventory to the tune of 863,000 oz/new inventory at SLV 349.071 million oz
Oct 6.2014: no change in inventory/349.934 million oz.
Oct 3.2014/ we had a minor loss of 152,000 oz and this is usually to pay for fees./Inventory 349.934
oct 2.2014: no change in silver inventory/350.086 million oz.
Oct 1 late last night at 11 pm I was notified by Fred that they added a remarkably high 4.075 million oz of silver inventory at the SLV.
new inventory: 350.086 million oz.
sept 30.2104: no change in inventory/inventory 346.011 million oz
Today, Oct 22.2014
Inventory tonight no change in silver inventory /silver inventory rests tonight at 343.415 million oz
end
And now for our premiums to NAV for the funds I follow:
Note: Sprott silver fund now deeply into the positive to NAV
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 8.1% percent to NAV in usa funds and Negativee 7% 7.9% to NAV for Cdn funds
Percentage of fund in gold 60.80%
Percentage of fund in silver:38.60%
cash .6%
.( Oct 22/2014)
2. Sprott silver fund (PSLV): Premium to NAV rises to positive 4.42% NAV (Oct 22/2014)
3. Sprott gold fund (PHYS): premium to NAV falls to negative -0.66% to NAV(Oct 22/2014)
Note: Sprott silver trust back hugely into positive territory at 4.39%.
Sprott physical gold trust is back in negative territory at -0.57%
Central fund of Canada’s is still in jail.
end
Oct 21.2014
Now your more important physical stories today:
Important read…
(courtesy Mark O’Byrne)
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High
Published in Market Update Precious Metals on 22 October 2014
By Mark O’Byrne
Demand for gold continues to be robust and has indeed increased significantly in recent weeks despite gold’s most recent paper driven gold weakness.
Demand in China and India surged again and gold reserve diversification by the central bank of Russia hit a new record high in September as geopolitical tensions rose.
The seemingly insatiable appetite of the growing Indian middle class for gold is causing the government in India to again consider imposing sanctions on the importing of gold.
Gold imports into India in September were worth $3.8 billion. This figure is almost double the $2 billion spent by Indians in August as, once again, the Indian middle class, like their Chinese counterparts, used the opportunity of a weakened gold price to increase their holdings. This was particularly the case in recent weeks and in the run up to the Diwali festival which began yesterday with Dhanteras.
To put this figure in context it is worth noting that in August 2013 gold imports were valued at just $739 million.
Indian gold imports were up 449.7% y/y in September, which is approximately 94 tonnes, using the average gold price for September.
From the point of view of the government in India, this level of demand for the precious metal, which must be imported, is an unwelcome development. “The trade deficit worsened to an 18-month high of $14 billion in September following a 450% rise in gold imports as importers rushed to take advantage of lower prices” reports India’s Economic Times.
The government in India claims that this staggering level of demand is causing a weakening of the rupee which undermines India’s ability to import the other commodities upon which it depends.
Exactly how the Indian government intend to deal with the problem is unclear. The previous attempt to control gold imports in 2013 was aborted due to it’s deep unpopularity and to the fact that vast quantities continued to be smuggled into India regardless, resulting in loss of revenue to the state.
In China, gold imports have surged again.
In the world’s largest gold buyer China, premiums recovered to $2-$3 an ounce from $1-$2 overnight, showing higher demand and lending support to global prices. Shanghai Gold Exchange (SGE) gold withdrawals were very high this week and saw a huge rise for the week to 68.4 tonnes with most of the buying after their Golden Week holiday.
Last year alone, China imported almost 2,000 tonnes of gold as seen in the important metric that is withdrawals from the SGE. To put that figure in context, global mining supply will be around 2,700 tonnes this year.
What we in the West need to appreciate is that – in the case of both India and China, where around one third of the population of the Earth reside, – it is masses of individuals, families and local businesses who are driving this demand.
It is being driven particularly by the burgeoning middle classes who are accumulating whatever gold they can with their disposable income. The desire to own gold as savings and financial security is culturally embedded in these ancient cultures.
Asians experience of fiat, paper currencies has not been a good one.
As such, the demand is not speculative and a cyclical, short term blip. Rather, it would appear to be a long term, structural shift to higher demand. While the trend may dissipate it is very unlikely to reverse into a trend of mass selling and it is unlikely to reverse trend anytime soon given the fiscal and monetary challenges facing the Western and indeed the Eastern world.
Apart from massive store of wealth demand in the East, the gold reserve demand by many large, creditor nation central banks continues unabated.
In Russia, the central bank added a very large 37.3 tonnes of the metal to it’s reserves in September – it’s largest purchase in fifteen years.
It is an indication of the strategic importance that Vladimir Putin and his government place on gold that such a large amount was purchased at this time of international tensions.
The rouble has been under tremendous pressure due to Western imposed sanctions and the slump in oil prices – Russia’s largest revenue source. According to the Russian Central Bank: “In the past ten days we have sold about $6 billion” to support the rouble rate, Reuters reported yesterday. And yet $1.5 billion was made available to acquire gold reserves.
Asian people are acting like their own central bank and diversifying their wealth.
It is safe to say that – in the event of a global monetary crisis brought on by a tsunami of insurmountable QE compounded debt – the average Indian or Chinese family will be reasonably well equipped to weather the financial and monetary storm.
The same cannot be said, unfortunately, for their Western counterparts where ownership of tangible assets is abysmally low and only a tiny fraction of the population own gold and silver bullion.
Get Breaking News and Updates on the Gold Market Here
GOLDCORE MARKET UPDATE
Today’s AM fix was USD 1,246.75, EUR 982.08 and GBP 777.66 per ounce.
Yesterday’s AM fix was USD 1,251.75, EUR 978.85 and GBP 774.17 per ounce.
Gold climbed $2.20 or 0.18% to $1,248.30 per ounce and silver rose $0.07 or 0.4% to $17.51 per ounce yesterday.
Silver in U.S. Dollars – 10 Years (Thomson Reuters)
Gold in Swiss storage or for immediate delivery lost 0.2% to $1,246.08 an ounce by 1200 in Zurich.
Silver for immediate delivery lost 0.7% to $17.43 an ounce. Platinum fell 0.5% to $1,276 an ounce. Palladium was 0.4% lower at $776 an ounce.
Gold retreated from the highest in almost six weeks in dollar terms due to profit taking and renewed risk appetite which saw stocks globally bounce from their recent lows although european shares are showing weakness again this morning. Although gold continues to eke out small gains in euro, pound and other fiat currency terms.
Gold reached $1,255.34 an ounce yesterday, the highest since September 10. Demand in India, the second biggest gold buyer, surged before the Diwali festival, Indian’s Christmas.
Diwali, the festival of lights is celebrated tomorrow and Dhanteras, the biggest gold buying festival, was celebrated yesterday. Dhanteras is considered an auspicious time to buy gold coins, bars and jewellery. Researcher CPM Group estimates the holiday generates about 20% of India’s annual purchases.
Platinum in U.S. Dollars – 10 Years (Thomson Reuters)
Gold has risen 3.2% so far in October as stocks fell sharply and traders pushed back estimates for when the Federal Reserve might raise U.S. interest rates from near 0%. The IMF has cut its economic growth outlook this month and Fed policy makers said slowing foreign economies were a risk to U.S. expansion. Indeed, the U.S. economy itself looks very vulnerable to a recession.
The Shanghai Gold Exchange is working to implement China’s first forwards and options in gold, in a race to put China as the main Asian pricing benchmark that could rival the London gold fix.
The European Central Bank is planning to buy corporate bonds on the secondary market and may decide as soon as December with a view to begin purchases in early 2015. This is another sign of desperation on the part of central bankers who are attempting to kick start the structurally broken Eurozone economy.
A diversified portfolio of precious metal coins and bars, owned in a segregated and allocated manner in the safest jurisdictions in the world remains very prudent.
See Essential Guide to Storing Gold In Switzerland here
end
It is now official: gold demand for China last year was 2200 tonnes which is exactly equal to all of the mining output ex China ex Russia. I would also like to point out to you that this is consumer demand. Sovereign demand is separate as the sovereign China purchases gold with unwanted USA dollars and the sovereign purchases are quite separate from the consumer demand purchases.
a very important commentary from Koos Jansen
(courtesy Koos Jansen)
Koos Jansen: It’s official — China’s gold demand in 2013 was 2,199 tonnes
Submitted by cpowell on Wed, 2014-10-22 14:56. Section: Daily Dispatches
10:54a CT Wednesday, October 22, 2014
Dear Friend of GATA and Gold:
The China Gold Association has confirmed that China’s gold offtake in 2013 reached 2,200, Bullion Star market analyst and GATA consultant Koos Jansen reports today. That would constitute most of world gold mine production and the figure apparently does not include purchases by the People’s Bank of China, which remain the most sensitive state secret.
“Why the Western media don’t report on these numbers is a mystery,” Jansen writes. “This data is not a secret. Yet the Chinese have been trying to hide it as much as possible and it looks like either they’re being helped by Western institutions or these institutions are ignorant.”
Of course there is still another explanation: that Western financial news organizations and the World Gold Council very much intend not to deal with this issue honestly, since doing so would impugn the whole Western financial system, built as it is on currency and commodity market rigging.
Jansen’s report is headlined “China Gold Association: 2013 Gold Demand 2199 Tonnes” and it’s posted at Bullion Star here:
https://www.bullionstar.com/blog/koos-jansen/china-gold-association-2013…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
It now seems that China wants to take over the west’s responsibility in the price discovery mechanism for gold. They want to enter the Forwards arena (take on the LBMA) as well as derivatives (Comex).
This will be a heart in the dagger of the West’s price suppression scheme
(courtesy Reuters/GATA)
Top bullion consumer China works on first gold forwards, options
Submitted by cpowell on Wed, 2014-10-22 15:02. Section: Daily Dispatches
By A. Ananthalakshmi and Fayen Wong
Reuters
Tuesday, October 21, 2014
The Shanghai Gold Exchange is working on plans for China’s first forwards and options in gold, sources say, potentially putting China ahead in the race to set an Asian pricing benchmark that might eventually rival the London gold fix.
China, which overtook India last year to become the world’s biggest consumer of gold, bans trading in commodity options and forwards at present to limit speculation.
But Beijing is setting the stage for the launch of such derivatives as it opens up its markets, and gold could be among the first commodities on the list, although it remains unclear when trading might start. …
… For the remainder of the report:
http://www.reuters.com/article/2014/10/22/us-china-gold-idUSKCN0IB034201…
end
Keith Barron interviewed by Lars Schall
a must view…
(courtesy Keith Barron/Lars Schall)
Barron interviewed on ‘peak gold,’ mining costs, and Swiss referendum
Submitted by cpowell on Wed, 2014-10-22 15:27. Section: Daily Dispatches
10:24a CT Wednesday, October 22, 2014
Dear Friend of GATA and Gold:
Geologist and mining entrepreneur Keith Barron, interviewed by financial journalist Lars Schall for Matterhorn Asset Management’s Gold Switzerland Internet site, discusses the mining industry’s understatement of its exploration costs, the overstatement of the world’s gold supply, the likelihood that the world has seen “peak gold” production, and the importance of the Swiss gold repatriation referendum, among other topics. The interview is 47 minutes long and can be heard at Gold Switzerland here:
https://goldswitzerland.com/i-believe-we-have-seen-peak-gold-keith-barro…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
you can also pick up the interview here:
Lars Schall
to Lars, bcc: me
friends, romans, countrymen!
it’s a pleasure to be in touch with keith:
THE MATTERHORN INTERVIEW – October 2014: Keith Barron PhD
“I believe we’ve seen Peak Gold”
Podcast interview:
On behalf of Matterhorn Asset Management, financial journalist Lars Schall talked with exploration geologist and mining entrepreneur Dr. Keith Barron.
Keith is a scientist and he explains in no uncertain terms what is going on in the mining industry, the false accounting relative to the cost of exploration, what happened when gold went up to 1,900, why gold versus USD simply must go to at least 5,000, why ‘gold above ground’, if anything, is overstated and why the Swiss GoldInitiative is indeed very important and not just for the Swiss People, as well as Keith Barron’s view on Silver.
This is clearly one of the best interviews on the subject of gold mining and a must listen for all Gold investors or anyone interested in gold, silver and mining
https://goldswitzerland.com/i-believe-we-have-seen-peak-gold-keith-barron/
all the best,
lars schall.
end
The Libor rigging could reach a massive 41 billion USA in fines states Citi report
(courtesy Bloomberg)
Forex-rigging fines against banks could reach $41 billion worldwide, Citi report says
Submitted by cpowell on Tue, 2014-10-21 20:37. Section: Daily Dispatches
By Richard Partington
Bloomberg News
Tuesday, October 21, 2014
http://www.bloomberg.com/news/2014-10-20/forex-rigging-fines-could-hit-4…
LONDON — Probes into allegations that traders rigged foreign-exchange benchmarks could cost banks as much as $41 billion to settle, Citigroup Inc. analysts said.
Deutsche Bank is seen as probably the “most impacted” with a fine of as much as 5.1 billion euros ($6.5 billion), Citigroup analysts led by Kinner Lakhani said yesterday, estimating that the Frankfurt-based bank’s settlements could reach 10 percent of its tangible book value, or its assets’ worth.
Using similar calculations, Barclays could face as much as 3 billion pounds ($4.8 billion) in fines and UBS penalties of 4.3 billion Swiss francs ($4.6 billion), they wrote in a note first sent to clients on Oct. 3.
Extrapolating European and, more importantly, U.S. penalties from a previous global settlement suggests to us a total potential global settlement on this key issue,” they said in the note.
Authorities around the world are scrutinizing allegations that dealers traded ahead of their clients and colluded to rig currency benchmarks. Regulators in the U.K. and U.S. could reach settlements with some banks as soon as next month, and prosecutors at the U.S. Justice Department plan to charge one by the end of the year, people with knowledge of the matter have said.
Spokesmen for Deutsche Bank, Barclays and UBS declined to comment on the Citigroup estimates.
The Citigroup analysts made their calculations using a Sept. 26 Reuters report that the U.K. Financial Conduct Authority settlements could include fines totaling about 1.8 billion pounds. They derived their estimates for how high fines could go in other investigations from that baseline, using banks’ settlements in the London interbank offered rate manipulation cases as a guide.
“The discussion around a potential U.K. settlement as well as certain U.S. banks taking related provisions in their recent results suggests a kick-start toward overall FX litigation settlement,” Lakhani said by e-mail.
Citigroup is the biggest player in the $5.3 trillion-a-day foreign-exchange market, according to a Euromoney Institutional Investor Plc survey published May 9. The New York-based bank’s 16.04 percent market share topped Deutsche Bank’s 15.67 percent and Barclays’s 10.91 percent. UBS controlled 10.88 percent.
Citigroup’s potential fine in the currency manipulation investigations wasn’t mentioned in the analysts’ report, in line with bank policy. The firm is among those in talks with regulators in the U.S. and U.K. to settle probes, people with knowledge of the matter have said.
Cooperation Benefits
The Euromoney rankings are drawn from a survey of traders in the foreign-exchange markets. The 2013 results were based on 14,050 responses, representing $225 trillion of turnover, London-based Euromoney said.
U.K. authorities will probably account for about $6.7 billion of fines across all banks, according to the Citigroup analysts. Other European investigations will account for $6.5 billion. Penalties in the U.S. cases could be about four times greater, hitting $28.2 billion.
The Citigroup analysts didn’t take into account the possible effect of banks’ collaboration with investigators. That can have a big impact on the size of the fines, lowering and even wiping out a penalty in some cases.
UBS and Barclays saw $4.3 billion worth of antitrust fines waived by European Union authorities in December in exchange for their early and full cooperation. Six others were fined 1.7 billion euros in that case, which involved rigging euro and yen interest rate derivatives.
UBS has sought leniency in exchange for handing over evidence of misconduct to U.S. antitrust investigators in the foreign-exchange probes, and was the first to step forward to cooperate with the EU, people with knowledge of the matter have said.
end
The problems with producing gold in foreign countries;
(courtesy Reuters/GATA)
Kinross to sell halted Ecuador gold project to Lundin company
Submitted by cpowell on Tue, 2014-10-21 23:51. Section: Daily Dispatches
By Nicole Mordant
Reuters
Tuesday, October 21, 2014
Kinross Gold Corp has agreed to sell its halted Fruta del Norte gold project in Ecuador to a company belonging to the Swedish-Canadian Lundin family for $240 million, Kinross and the company, Fortress Minerals Corp., said today.
Toronto-based Kinross acquired the project in 2008 with its $1.2 billion friendly takeover of Aurelian Resources, and once called it “one of the most exciting gold discoveries of the past 15 years.”
But last year it suspended work on the gold project, Ecuador’s largest, saying the government had refused to compromise over a 70 percent windfall tax. Last June Kinross took a $720 million charge on the project and has been looking to sell it.
The government of Ecuador has indicated its support for the transaction, Kinross said. …
… For the remainder of the report:
http://www.reuters.com/article/2014/10/21/kinross-fortress-ecuador-idUSL…
end
Von Greyerz and the Swiss referendum:
(Von Greyetrz/Kingworldnews)
Von Greyerz: Swiss gold referendum aims squarely at market manipulation
Submitted by cpowell on Tue, 2014-10-21 23:26. Section: Daily Dispatches
6:24p CT Tuesday, October 21, 2014
Dear Friend of GATA and Gold:
Swiss gold fund manager Egon von Greyerz today comments to King World News about the opinion poll showing strong support for the Swiss gold repatriation referendum proposal.
Von Greyerz says: “The yes campaign starts this Thursday with a press conference. This is when it will put forward its arguments for this initiative. The Swiss government is against this initiative, as all governments are, because it takes away the government’s ability to manipulate the currency and gold markets. Switzerland sold 50 percent of its gold at the bottom of the market between 2000 and 2005. This has already cost the Swiss government 29 billion Swiss francs.”
Von Greyerz’s interview is excerpted at the KWN blog here:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/10/21_T…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
The following is wild.
I do not think this will happen but Rickards is one smart cookie:
(courtesy James Rickards)_
James G. Rickards: In the year 2024
Submitted by cpowell on Wed, 2014-10-22 00:08. Section: Daily Dispatches
7:06p CT Tuesday, October 21, 2014
Dear Friend of GATA and Gold:
Writing for The Daily Reckoning, fund manager, author, and geopolitical strategist James G. Rickards imagines life in the year 2024 as being under the totalitarian control of a world central bank that has outlawed not only gold but also markets and money itself. While Rickards’ nightmare scenario is the perfectly logical consequence of the trend of central banking, we still have a few years to push the world toward a different future. Rickards’ essay is headlined “In the Year 2024″ and it’s posted at The Daily Reckoning here:
http://dailyreckoning.com/a-glimpse-into-the-year-2024/
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
Bill Holter continues where he left off yesterday talking about the solvency of the USA
Bill is in New Orleans, ready to ask important questions to Alan Greenspan el al.
(courtesy Bill Holter/Miles Franklin)
Benefit of the doubt.
The argument of “stock versus flow” has been debated from many angles and across many asset classes. The most heated may be in the gold and silver bullion categories. I’ve written on this topic before and I’m sure I will again but for this exercise I want to talk about U.S. stocks.
Zero Hedge put out a piece yesterday reporting that JP Morgan E-Mini Liquidity Has Crashed 40% In The Past Quarter, JPMorgan Finds | Zero Hedge says liquidity has dropped 40% in the S+P E mini contract. The study looks at “depth” of both bids and offers, this is now drying up, in fact, the ramp upwards was performed on continually lower volume. Not exactly a confidence builder as volumes dried up out of, well, lack of confidence. Without spending a whole lot of time on this, suffice it to say “liquidity is the blood of life” as far as the markets are concerned. Without it or when liquidity decreases, accidents tend to happen. “Accidents” in this case are when the markets move violently which affects a good part of the $1.4 quadrillion in derivatives. Big moves in either direction can affect the standing of these derivatives as for every winner there is a loser. The problem arises when a loser is so crippled, they cannot perform (pay) on their losses.
The above is a very basic synopsis of the “what”, the important thing right now is the “why”. Why is volatility increasing? Why has volume and liquidity decreased so much? There are two basic reasons, first the global economy is slowing at a time when debt is a bigger percentage of financing than ever. Debt service must be paid whether good times or bad. It just happens that right now we are seeing a global slowdown which leaves less free cash flow available whether it be a sovereign, corporation or individual …money is tight so to speak. Secondly, the Fed has reduced their “free money spigot” called QE by $75 billion per month down to only $10 billion per month. This is slated to drop to zero next month.
I guess the best way to explain this is the financial system got “used to” an extra $85 billion per month sloshing around. By no longer providing this, the Fed, even though not actually tightening credit conditions …are tightening credit availability. What we now see happening is the economy must stand on its own without any help from the Fed, it’s not working very well and this is what the markets are telling us.
Shifting gears just a little bit, we recently saw as a reaction to the lessening QE, a stronger dollar. Scared capital sought safe haven and did so into the dollar out of “habit” because that’s the way it’s always been. Fear capital has always (during our lifetimes) fled into the dollar because the U.S. had a history of a strong rule of law and stable politics. Do we still have a strong rule of law? Are we politically stable as we once were? I personally don’t think so but this topic is for another day.
What I think we will soon see is this “fear capital” will soon leapfrog the dollar altogether and arrive as a bid into gold and silver. Gold and silver have no “politics” and the rule of law is “whoever possesses it holds value”. Simple right? Yes, but think this through all the way. We are headed through the gates of hell if (when) the Fed must announce another round of QE. QE is pure monetization, deep down everyone knows (and have known all along) that QE will not work and is nothing more than printing money out of thin air. It hasn’t worked, it won’t work and it can never work. All it did was buy “cover” or time in the hopes of something coming along to magically fix the mathematically unfixable problem.
The “problem” as I have said all along is one of solvency rather than liquidity. This I believe will be understood whenever the next QE is announced. The “solvency” I am talking about here is that of the Fed and the U.S. which is why the “safety” of the dollar will be shunned on the next go round. I wrote years ago that “all roads will lead to gold and silver”. This is as true today as when I first wrote it back in 2008 …with the exception the “road” is now much much shorter!. The road is shorter because every “tool” in Ben Bernanke’s (now Yellen’s)toolbox has already been taken out and used …to no avail. People “wanted” to believe they would work because of the alternative if they did not. The Chinese were content to sit back and let us play the paper games while they filled their vaults with our gold, how much do you suppose is left? You will know the answer when one day our markets do not open for “business as usual”. No tools, no White Knights, no flight into dollars …no more “benefit of the doubt”. We have lived in a “benefit of the doubt” world for quite some time, once this runs out, capital will arrive to that last asset standing of no doubt …real money. Regards. Bill Holter
Early Wednesday morning trading from Europe/Asia
1. Stocks mostly up on Asian bourses (except Shanghai) with the higher yen values to 106.89
2 Nikkei up 391 points or 2.64%
3. Europe stocks up/Euro down USA dollar index down at 85.51. Chinese bourse Shanghai down as the yuan slightly strengthens in value to 6.11803 per usa dollar/yuan.
3b Japan 10 year yield at .49%/Japanese yen vs usa cross now at 106.89/
3c Nikkei now below 15,000
3d 11 European banks failed the stress tests from 6 European countries (Erste bank from Austria, plus banks from Portugal, Greece, Cyprus, Belgium, Italy)
3e failed German auction!!!
/
3fOil WTI: 82.72 Brent: 86.80
3g/ Gold down/yen up; yen above 106 to the dollar/
3h ECB: early this morning still not looking to buy covered bonds/second denial
3i) There are only 540 billion euros worth of covered bonds (see Jim Reid). If the ECB went with this route, there would be huge liquidity problems.
3j Gold at $1248.00 dollars/ Silver: $17.40
4. USA 10 yr treasury bond at 2.20% early this morning.
5. Details Ransquawk/Bloomberg/Deutche bank/Jim Reid
(courtesy zero hedge)
Equity Levitation Stumbles After Second ECB Denial Of Corporate Bond Buying, Report Of 11 Stress Test Failures
Submitted by Tyler Durden on 10/22/2014 06:57 -0400
• Australia
• Barclays
• BATS
• Belgium
• BOE
• Boeing
• Bond
• China
• Copper
• Core CPI
• CPI
• Crude
• Erste
• European Central Bank
• Eurozone
• Fail
• France
• General Motors
• Germany
• Greece
• Hong Kong
• Italy
• Japan
• Jim Reid
• Monetary Policy
• Natural Gas
• Nikkei
• Portugal
• RANSquawk
• Reuters
• Stress Test
• Turkey
• Ukraine
inShare1
A day after a Reuters headline blast proclaimed that, in a stunning turn of events, the ECB which has barely started buying covered bond (of countries like Germany today for example, because the record low yielding Bunds clearly need help from the ECB) will also buy corporate bonds, sending the stock market soaring the most in 2014, it has now backtracked for the second time, and following a report from the FT yesterday which denied the report, the second denial came straight from Reuters itself which hours ago said that the ECB “has no concrete plans to buy corporate bonds, but this could be a way to prevent the bank from paying too much for just covered bonds and asset backed securities, ECB governing council member Luc Coene told Belgian media.”
“We still haven’t had a serious discussion about the purchase of corporate bonds,” Coene, who is governor of the Belgian central bank, told business dailies L’Echo and De Tijd. “If we limit ourselves to buying covered bonds and asset backed securities there is a risk that we would pay too high a price. We can prevent that by also buying corporate bonds,” Coene added. “But there is no concrete proposal for that on the table.”
And if and when the ECB ever begins buying corporate bonds (of which there is once again not enough to boost its balance sheet to the required size but more on that later), the ECB can just jawbone that in order to not overpay for bonds, corporate or otherwise, it will just begin buying equities, and so on until the ECB has “no choice” but to monetize the garbage in your trash so as not to overpay for your kitchen sink.
However, if the ultimate goal of yesterday’s leak was to push the EUR lower (and stocks higher of course), then the reason why today’s second rejection did little to rebound the Euro is because once again, just after Europe’s open, Spanish Efe newswire reported that 11 banks from 6 European countries had failed the ECB stress test. Specifically, Efe said Erste, along with banks from Italy, Belgium, Cyprus, Portugal and Greece, had failed the ECB review based on preliminary data, but gave no details of the size of the capital holes at the banks.
The ECB, which likely once again leaked the news, said it could not comment on individual institutions or on speculation. “Any inferences drawn as to the final outcome of the exercise would be highly speculative until the results are final on 26 October,” said a spokesman. What the ECB certainly did enjoy is that once again, with just one media leak, it had managed to bring down the EURUSD by 50 pips lower, pushing it under 1.27 yet again. We wonder how long until Europe discovers, just like Japan, that merely slamming your currency does little to boost exports. But at least there is a rising market to keep everyone happy so why not.
Finally, circling back to those German record low yields, earlier today Germany sold another €1.428 billion in 30 year paper at a record low yield of 1.77%, far below the 2.25% in the last such auction in May, however, this was also the 10th (!) uncovered, as in failed, German auction of the year with the Buba forced to retain a whopping 28% of the paper, compared to 19% at the last primary issuance.
Elsewhere, the BoE’s October minutes which showed a 7-2 split among MPC members with Weale and McCafferty maintaining their hawkish stance, despite speculation that circulated pre-release that McCafferty may have stepped down in his call to hike rates. The initially reaction was volatile as outside bets of a 8-1 split were unwound, however, the details revealed a decidedly more dovish outlook from the majority of members who noted some signs that UK economic was losing momentum and that the economic outlook had worsened. As such the short sterling curve has flattened aggressively. Prelim Barclays month end extension for US treasuries +0.08yrs
In summary, European equities initially opened higher this morning following a 3rd consecutive day of >1% gains in the S&P 500 for the first time in 3yrs, and with the Nikkei up some 2.6% overnight. However the positive sentiment proved short lived as weak corporate earnings out of BAT’s and Heineken weighed on consumer stables, ECB’s Coene said that there is no concrete proposal for bond buying, refuting claims to the contrary yesterday, and Spanish press reported that 11 banks may fail the ECB stress tests which are due to be released this Sunday (ECB has declined to comment).
Looking ahead attention turns to US CPI (Sep), DoE oil inventories, Boeing (BA) earnings, and the release of the Bank of Canada interest rate decision where all surveyed analysts are expecting rates to remain on hold at 1%
Bulletin headline summary from RanSquawk and Bloomberg
• Reports circulate that 11 banks may have failed the ECB’s stress tests which are due to be released on Sunday
• GBP underperforms in the FX market after dovish comments in the October BoE minutes
• Treasuries gain before CPI report amid weakness in European stocks, decline in U.S. equity index futures as market looks to next week’s Fed meeting.
• Fed isn’t likely to postpone end of QE or initiate more asset buying soon despite global risks and weakening inflation momentum, according to some strategists
• ECB’s Luc Coene said while policy makers could embark on further stimulus after purchasing covered bonds for the past two days, there’s no specific plan to buy corporate bonds
• Bank of England officials split for a third month on whether to increase the key interest rate as a majority saw increased risks from a slump in the euro-area economy
• ECB bought Spanish covered bonds in the third day of its purchase program, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it
• Johnson & Johnson plans to have 250,000 doses of an experimental Ebola vaccine ready for use in clinical trials in May, adding to efforts to protect people from the virus that has killed thousands of people in West Africa
• Iraqi Kurdish fighters are set to reinforce the defense of Kobani, the Syrian town besieged by Islamic State, after Turkey agreed to let them transit its territory
• China’s media is ratcheting up the rhetoric against Hong Kong’s pro-democracy movement, saying protesters risk becoming foreign puppets
• Russia and Ukraine will seek a temporary deal next week to resolve a natural gas pricing dispute after failing to agree on future payments in talks brokered by the EU
• Sovereign yields mostly lower, Greek 10Y -46bps to 7.25%. Asian stocks gain, European stocks mixed, U.S. equity-index futures decline. Brent crude and copper gain, gold falls
Central Banks
• 10:00am: Bank of Canada seen maintaining benchmark interest rate of 1%
• 11:15am: Bank of Canada’s Poloz and Wilkins hold news conference in Ottawa
• 5:00pm: Reserve Bank of Australia’s Stevens speaks in Sydney
FX
GBP is the main under performer in the FX market weighed by a dovish interpretation of the October BoE minutes which although showed a consistent 7-2 split, saw the majority of MPC members continue to fret over the fragility of the economic environment. Meanwhile, EUR has also weakened amid reports that 11 banks may well have failed ECB’s stress tests which are due to be unveiled this Sunday. A combination of the above has prompted a slight to quality into the USD, with the DXY seen up 0.17%.
According to government sources, the PBOC are likely to hold its line against an interest rate cut even as growth slows to a quarter-century trough, as the politics of reform influence the conduct of monetary policy. (RTRS)
COMMODITIES
WTI crude futures remain flat into the US session as participants await the release of the DoE oil inventory data later today. The headline crude number is expected to show a build of 3mln compared to last week’s build of 8.923mln. To recap, yesterday’s headline API number showed a lower than previous build (1200k vs. Prev. 10200k).
Asian Market Wrap
Equity benchmarks are feeding off the positive sentiment with the Japanese, Hong Kong and Korean gauges all trading notably stronger – as we type the Nikkei is up +1.7% whilst the Hang Seng is trading +1.3% higher. Chinese equities are trading modestly firmer following the GDP print yesterday whilst elsewhere, in a boost to the Japanese manufacturing sector the nation’s exports rose at a greater than expected 6.9% YoY, providing a much needed vote of confidence to the central bank. Meanwhile in Australia the core CPI print was a touch softer than market expectations at 0.4% QoQ which we deem as unlikely to shift the RBA’s stance on monetary policy in the near term.
Europe Market Wrap
European shares little changed, having risen from earlier lows, with the personal & household and basic resources sectors underperforming and financial services, insurance outperforming. Companies including ABB, Heineken, Husqvarna, BATS, Nordea and Iberdrola released results. The U.K. and Spanish markets are the worst-performing larger bourses, the Swiss the best. The euro is weaker against the dollar. Greek 10yr bond yields fall; Portuguese yields decline. Commodities gain, with silver, corn underperforming and zinc outperforming. U.S. mortgage applications, CPI due later.
• S&P 500 futures down 0.1% to 1933.1
• Stoxx 600 down 0% to 323.6
• US 10Yr yield down 3bps to 2.19%
• German 10Yr yield down 2bps to 0.85%
• MSCI Asia Pacific up 1.5% to 138.1
• Gold spot down 0.2% to $1245.9/oz
* * *
DB’s Jim Reid concludes the overnight events:
So a rally that started with Bullard’s about turn on Thursday, ignited with some style yesterday after a Reuters story broke that the ECB was considering buying corporate bonds. Even though the FT subsequently cited an ECB source downplaying this possibility, the market heard what it wanted to hear and risk had a tremendous day globally.
The original story reported that “The European Central Bank is considering buying corporate bonds on the secondary market and may decide on the matter as soon as December with a view to begin purchases early next year.” Reuters claimed the source of this news as, “several sources familiar with the situation.” However the ECB announced that, “The Governing Council has taken no such decision.,” and there was an FT report later in the day stating that the ECB has not put corporate bond buying on the agenda for its December meeting.
However the market is left thinking that there’s no smoke without fire and in this morning’s EMR we wanted to lay out some numbers behind the universe they could possibly look to buy if they went down this route. According to ECB data there are around €1.4tr of eligible corporate bonds to use for collateral for its repo operations – whose main requirement is that assets be Euro currency. However this number is based on their repo operation guidelines and to put things in a wider and more detailed perspective we’ve run our own numbers and have spliced and diced them a few different ways. Looking at the iBoxx EUR, GBP and USD IG indices (which cover a universe with the type of more liquid corporate bonds the ECB might be in the market for) the current total market value of the bonds in these three indices is around €5.4tr, of which around €1.5tr is Euro currency. If instead we look at those bonds issued by euro area firms across currencies then this number falls to €1.2tr. There remains a lot of uncertainty over whether the ECB would be able to buy financial debt, so if we just look at euro denominated, non-financial debt there is around €840bn available. Finally given that the ECB’s current ABS and covered bond programs only cover euro area, EUR denominated debt, if focus on this we end up with a total eligible non-financial iBoxx market of about €540bn worth of bonds, although we’d stress that these are rough numbers and we’re making a lot of assumptions around what the ECB would or wouldn’t be willing to purchase. The key point here is that if the ECB went down this route and were too restrictive they would quickly limit the universe they could buy into. This could cause serious distortions. Liquidity is not great in credit at the moment and this wouldn’t help. In fact it could create a large squeeze.
Interestingly in the sell-off of the last few months in various global risk assets Euro IG non-financials have been very stable and resilient with As and BBBs only a few bps off their cycle spread tights even with HY trading much wider then their cycle tights (single-Bs well over 200bps wider). So if Euro IG non-financial credit can’t sell off with all that’s gone on in recent weeks then surely the hint of this story is going to continue to keep them well bid. This should eventually help HY credit on a relative value basis and also due to the possibility that some investors might switch out of the performing IG market and look for more yield.
Overall we don’t want to over analyse one Reuters story, especially one that the ECB were quick to down play. However it reminds investors that the ECB likely needs to act somewhere relatively soon and corporate bonds might be an easier political move than Government bonds. Given their desire to increase the balance sheet by close to a Trillion Euros every bit helps but we still can’t help thinking that unless they want to severely distort ABS, Covered and Corporate bond markets, to get to this number within a sensible time frame they will still eventually need to buy government debt.
Markets certainly reacted positively to the mere speculation of the plan. In European equities, the Stoxx 600 ended the day up +2%, whilst in credit iTraxx Main and Crossover tightened by -5bps and -24bps respectively. Over in the US, the S&P also closed the day up +2% (the best day for a year) whilst CDX IG and HY tightened –3bps and -12bps. EURUSD ended the day -0.7% with possible further ECB balance sheet expansion clearly in mind. In bond markets the big winner was peripheral debt as Italian, Spanish, Portuguese and Greek 10Y yields fell –8bps, -6bps, -1bps and -35bps respectively.
While on Europe the FT reports that the EC’s will today tell five Eurozone countries that their budget plans risk breaching EU rules. Italy and France are the headline acts here but Austria, Slovenia and Malta seem to be also being targeted.
In terms of markets overnight, equity benchmarks are feeding off the positive sentiment with the Japanese, Hong Kong and Korean gauges all trading notably stronger – as we type the Nikkei is up +1.7% whilst the Hang Seng is trading +1.3% higher. Chinese equities are trading modestly firmer following the GDP print yesterday whilst elsewhere, in a boost to the Japanese manufacturing sector the nation’s exports rose at a greater than expected 6.9% YoY, providing a much needed vote of confidence to the central bank. Meanwhile in Australia the core CPI print was a touch softer than market expectations at 0.4% QoQ which we deem as unlikely to shift the RBA’s stance on monetary policy in the near term.
Back to yesterday, in other news UK public sector borrowing in September came in slightly above expectation at 11.1bn whilst over in the US, existing home sales for September came in ahead of expectation at +2.4% MoM (vs +1% expected). Also DB’s new China economics team published their latest views on the Chinese economic outlook. The team have cut DB’s GDP forecast for China to 7.3% for 2014 and 7% for 2015 citing, “the dominant driver for a growth slowdown is property investment. Property sales remained subdued in September. In past housing cycles, the turning point of property sales led that of property investment by seven months. Therefore, we expect property investment to slow further, at least into mid-2015.” In terms of potential PBOC action, the team also expect the PBOC to cut interest rates by 50bps in 2015. Whilst they note that this view is not consensus, they think the PBOC will act as they, “see growth dropping to 6.7% by Q2 2015 and we believe hard-landing risks may intensify in H2 2015 if the government does not loosen monetary policy significantly. Moreover, inflation has been subdued, which leaves room for policy easing.”
Looking to the day ahead, in Europe we will get the latest BoE minutes which we expect to show little change in the number of members voting for higher rates. However the big read of the day is likely to be US September CPI which is expected in at +0% MoM. This will maybe help shape the Fed so it’s an important release. The market will likely also keep a keen eye on earnings over the day with notable reporters in the US including Boeing, General Motors.
end
Very sad to report a terrorist attack in our capital of Ottawa this morning.
One of our soldiers succumbed to his injuries.
(courtesy zero hedge)
Canadian Capital On Lock Down As A Result Of Ongoing “Terrorist” Shooting Incident -
RCMP Statement:
The Ottawa Police Service and Royal Canadian Mounted Police (RCMP) responded to reports of shooting incidents this morning in the downtown area. Police can now confirm that incidents occurred at the National War Memorial and on Parliament Hill.
Contrary to earlier reports no incident occurred near the Rideau Centre.
One shooting victim succumbed to injuries. He was a member of the Canadian Forces. Our thoughts and prayers are with him and his loved ones.
Next of kin notification is underway and as such, the victim’s identification will not be released.
One male suspect has also been confirmed deceased. There is no further update on injuries at this time.
This is an ongoing joint police operation and there is no one in custody at this time.
Ottawa residents are asked to stay away from the downtown area while the investigation continues. If you work in one of the downtown buildings, follow the instructions from the building management you are in.
A number of RCMP and Federal government buildings are also closed to the public; as is Ottawa City Hall and all Ottawa Police stations.
UPDATE: Sadly the soldier who was shot at the War Memorial has died.
UPDATE: Ottawa Police Confirm at least 3 Separate Shooting Sites and Multiple Suspects
At least two people are injured, including a soldier, after shots were fired in the Parliamentary precinct in Ottawa on Wednesday morning; one shooter is dead and police suspect as many as two others are on the loose.
A dark-clothed gunman fired the shots just before 10 a.m. at the Canadian War Memorial, where a uniformed soldier was shot. The gunman then fled for Parliament Hill, where he unleashed more gunfire inside Centre Block. A security guard was injured before the sergeant-at-arms shot the suspect dead, according to multiple reports.
Ottawa Police said there was also an incident near the Rideau Centre, a large mall metres from Parliament Hill.
CANADA PARLIAMENT SHOOTING:
- Still active shooter
- 3 separate shooting sites
- Multiple gunmen
- 1 gunmen dead
* * *
UPDATE: *CANADA SHOOTER KILLED IN OTTAWA, 2 LAWMAKERS SAY ON TWITTER but CBS reports multiple suspects at large after more than 30 shots fired at Canadian Parliament
• POLICE SAID TRACKING TWO MORE POSSIBLE SUSPECTS: OTTAWA CITIZEN
• AT LEAST 20 SHOTS FIRED IN CANADA PARLIAMENT: WITNESSES – AFP
end
This is very scary stuff.
(courtesy zero hedge)
ISIS Claims It Hit US Embassy In Baghdad’s Green Zone
Submitted by Tyler Durden on 10/22/2014 09:42 -0400
• Iraq
• President Obama
inShare2
“They know Baghdad. They’ve lived in Baghdad,” said Lt.Col Oliver North, warning over the weekend thatsources in Iraq believed ISIS was planning a “major attack” against the embassy in Baghdad. Yesterday we get some confirmation – via ISIS – that they did in fact reportedly strike the U.S. embassy in Baghdad. As Inquisitr reports, on Tuesday the Islamist militant group took credit for a mortar attack against the embassy in Baghdad. The group bragged about the attack on social media, claiming that there were likely casualties – “Four rockets strike Green Zone in #Baghdad; helicopters hovering over the Green Zone; ambulances heading that way after strikes!!” one ISIS militant noted on Twitter. As North concludes, “They are at the gates of Baghdad. They’re coming for us.”
ISIS militant Social media claiming the hits… (via ISIS Tracker)
As Inquisitr reports,
ISIS has reportedly struck the U.S. embassy in Baghdad in what could be the furthers incursion yet into Iraq’s capital.
On Tuesday the Islamist militant group took credit for a mortar attack against the embassy in Baghdad. The group bragged about the attack on social media, claiming that there were likely casualties.
…
ISIS has been increasing its attacks on Baghdad in recent weeks, including a wave of car bomb and mortar attacks on Sunday that left at least 150 people killed. Four car bombs exploded in Shia districts of Baghdad, leaving 36 people dead and 98 wounded in a span of two hours.
ISIS fighters have been encamped in suburbs surrounding Baghdad, and earlier this month sent four mortar shells into the Green Zone, the heavily protected location of the U.S. Embassy and other government buildings.
This is likely no surprise as Lt.Col Oliver North has warned…that sources in Iraq believed ISIS was planning a “major attack” against the embassy in Baghdad.
“They know Baghdad. They’ve lived in Baghdad,” North said of the militants reportedly planning the attack.
They are at the gates of Baghdad. They’re coming for us,” he added.
But North’s predictions were also tinged in political criticism, as he used the prediction as a way to attack President Obama and allege a conspiracy to let ISIS take over Iraq for his own benefit.
“I don’t think he gives a d**n,” North said.“I think he’s hoping that he can hold the lid on this until after this election so it won’t be just another disaster for this administration.”
* * *
end
Your big story of the day. We have been bringing you countless stories of the ECB trying to re inflate its balance sheet with the purchase of covered bonds (mortgaged back securities)
from the private sector. As zero hedge as been telling us, the total amount of these bonds that they can purchase is no more than 50 billion euros.
And Europe and NY jumped dramatically on the news that the ECB may be going ahead with these purchases. It is nothing but a drop in the bucket…
a very important read..
(courtesy zero hedge)
Someone Didn’t Do The Math On The ECB’s Corporate Bond Purchasing “Trial Balloon”
Submitted by Tyler Durden on 10/22/2014 11:45 -0400
• Barclays
• Bond
• BWIC
• Central Banks
• Investment Grade
• Market Conditions
• Monetization
• Primary Market
• Reuters
inShare6
While we understand that following the biggest market rout in years, it was all up to the central bankers to do everything in their power to restore confidence in the market’s upward trajectory in a time when there are only 2 POMOs left under the Fed’s soon ending QE3 program, which explains not only last week’s 2 QE4 hints by FOMC presidents but also yesterday’s ECB “leak” via Reuters that the central bank is contemplating launching corporate bond buying as soon as December. A leak which sent the market soaring to its best day of 2014. And while we give the European central bankers an A for effort, we can’t help but wonder if someone did a major mathematical error when calculating the “bazooka impact” of yesterday’s leak.
The reason: the same one we have cautioned about ever since 2012; the same why as we also explained in August the ECB’s ABS QE will be grossly sufficient: Europesimply does not have enough eligible, unencumbered collateral in the private sector which can be monetized by the central bank (the same issue that the Fed itself was forced to taper QE once its holdings of 10 Year equivalents hit 35% as we showed last year and the TBAC started warning about gross bond market illiquidity). This goes back to a different issue, namely that Europe historically has funded itself on a secured basis, where the loans are kept on bank balance sheets (and serve as deposit collateral) unlike the US, where the primary source of corporate debt is through unsecured borrowing directly from lenders. We have shown all this before:
Our summary from March 2012 was as follows:
What is immediately obvious here, is that unlike in the US, where these are less than 30% for corporates, in Europe, bank loans account for nearly a whopping 90% of total corporate funding! These are secured, LTV loans, made by banks, and not syndicated, which means they are kept on the banks’ balance sheets. As a result the bulk of Europe’s assets held by levered entities, are already encumbered through existing security arrangement in the debt market (recall that bond debt is for the most part unsecured, and is thus a junior piece to secured bank loans). It also explains why European banks have to scramble to find new assets which they can “pledge” to the ECB in exchange for some additional cash to plug this liquidity shortfall hole, or that.
And because we understand that few have actually done any math behind the ECB’s leak, here it is:
According to Barclays, based on the iBoxx Euro Corporate Index, there is €495bn in par value of unsecured,senior non-financial debt outstanding from euro area issuers (Market Value €563bn).
In addition there is €271bn in par value of unsecured,senior financial debt from euro area issuers outstanding (Market Value €300bn). The rating and tenor breakdown of the outstanding universe of bonds is shown below.
According to Barclays the reason why nobody else appears to have done the math, is because the ECB itself screwed up the numbers:
We note that these numbers are significantly different from the numbers reported by the ECB. The central bank reports €1.4trn of marketable corporate bonds and €2.2trn of uncovered bank bonds as eligible collateral at its operations. However, this includes MTNs, CP and guaranteed bonds. Starting from the ECB’s collateral list, instead of a broad-based index, we estimate the stock of corporate bonds at €177bn of non-financials and €321bn of financial debt (excluding Landesbank). This is much smaller than the “headline” figure, but also materially different from our index-based estimate, on the non-financial side.
Barclays’ conclusion on the stock of eligible monetizable corporate debt: “Overall, we estimate the upper-bounds of potential bonds that might be in “scope” for an ECB purchase programme at €560bn of non-financial and €320bn of financial bonds (taking the iBoxx and ECB derived estimates, respectively). This falls to €240bn and €220bn if BBB-rated bonds are excluded.”
It doesn’t get any better when one looks at recent trends in net issuance to determine which way the collateral will move in coming quarters and years:
net issuance from financials has been negative in the senior unsecured €-IG space for the past four years, while net issuance from non-financials has been positive. Ex. Subordinated transactions, the average monthly net flow over the past two years has been: +€5bn from non-financials; and -€10bn from non-financials
In chart format:
Ok, so there is roughly about €750 billion in eligible (non-fin and fin, even though the ECB will almost certainly just do the former) bonds that can be bought? Why is that a problem: can’t the ECB just go out and buy them all in one massive BWIC in its holy quest to boost its balance sheet by €1 trillion (apparently the magic number that will get those record youth unemployed in Spain back in jobs).
Well no. Here is JPM with the missing link which has to do with market liquidity and how much the ECB would actually be able to buy without soaking up all bond market liquidity:
It is unlikely that the ECB would buy subordinated bonds as these are not even eligible as collateral in its refinancing operations. That leaves €750 billion of nonfinancial corporate bonds that the ECB may consider buying, around €500bn of which is issued by European corporates. Market turnover may currently be around 2.5% of outstanding (after correcting for double-counting in the turnover data) and the ECB may be able to purchase 10-20% of this turnover. In addition, the ECB could also go into the primary market, buying 10% of new deals (from a total gross issuance of almost €20 billion per month recently). Such considerations suggest that, as a rough guide,they could purchase around €50 billion over a one year period under current market conditions, and perhaps as high as €100 billion if purchases improve market conditions, raising turnover.
So… the entire mega ramp yesterday was over an ECB monetization leak that boils down to a whopping €50 billion ($60 per year) or a tiny $5 billion per month, which is $15 billion per quarter?
Keep in mind at its peak in 2013 the Fed monetized $85 billion per month, while the BOJ added another $75 billion or so in its QE. So as the Fed is about to completely pull out of the “flow injection” market (even as the BOJ still pushes on with its existing remit which as a result of soaring non-wage inflation will certainly not increase any time soon) it will be replaced by $10 billion or so in ABC/Covered bond purchases and another $5 billion per month in corporate bonds?
And this is the best Hail Mary pass that the central planners could come up with?
All of this is critical because as Citi explained over the weekend, in order to keep the market from crashing,central banks need to inject at least $200 billion per quarter:
For over a year now, central banks have quietly being reducing their support. As Figure 7 shows, much of this is down to the Fed, but the contraction in the ECB’s balance sheet has also been significant. Seen from this perspective, a negative reaction in markets was long overdue: very roughly, the charts suggest that zero stimulus would be consistent with 50bp widening in investment grade, or a little over a ten percent quarterly drop in equities. Put differently, it takes around $200bn per quarter just to keep markets from selling off.
In other words, the “mega-leak” from the ECB will hardly scratch the surface in terms of the required liquidity injections, and certainly will be insufficient if at some point in the coming year, the BOJ finds it too has run out of collateral and is forced to wind down its own QE.
So after actually doing the math we wonder: how long before the market realizes Draghi’s latest bazooka was another water pistol, and how long until Reuters is forced to go with the nuclear leak – that the ECB is now considering monetizing ETFs and, gasp, stocks.
Because that, ladies and gentlemen, is the endgame here.
end
Russia is considering a natural gas pipeline to Japan. There is no doubt, that Russia has asked China for the talks to commence. When this comes to pass, this would be a huge dagger into the heart of the USA dollar/USA petrodollar, and USA dominance
(courtesy Russia insider/and special thanks to Robert H for sending this important commentary to us)
Russia Considers Natural Gas Pipeline to Japan
Construction will depend on the Ukrainian situation and talks over Russia’s Kuril Islands claimed by Japan
This article originally appeared at Business New Europe
Russia is proposing to build a natural gas pipeline to Japan’s northern island of Hokkaido from Russia’s island of Sakhalin, Japan’s Nikkei paper reported on October 14.
Citing unnamed diplomatic sources, Nikkei said that Russia presented the plan in September. “Construction of a pipeline will depend on the Ukrainian situation and talks over the Northern Territories [Russia's Kuril Islands claimed by Japan],” the source said.
As late as May 23 a group of 33 Japanese lawmakers were lobbying the government of Shinzo Abe to push the pipeline in talks with Russian President Vladimir Putin in Tokyo scheduled for this autumn, which were later cancelled, according to Japanese media.
The 1,350km pipeline could transport as much as 20bn cubic meters of natural gas per year, which would increase Russia’s share of Japan’s gas supply from currently nearly 10% to 17%, according to Naokazu Takemoto, the Japanese MP who headed the group lobbying for the pipeline, as earlier quoted in Nikkei.
The big gain for Japan would be price. “The price of natural gas will be two times lower than the export of liquefied natural gas,” Takemoto said, as reported in Nikkei. LNG is significantly pricier than piped gas, requiring expensive liquification and regasification plants, while piped gas comes with volume rebates.
Japan’s imports have soared in the wake of the 2011 Fukushima nuclear accident, which led to Japan taking all of its nuclear power generation capacities offline. As a result, Japan now accounts for one third of world shipments of liquefied natural gas (LNG), the Nikkei said.
While offering cheaper gas than LNG, such a pipeline deal is the political equivalent of a marriage, energy experts quip. Such a tie-up between Japan and Russia would mark a major step in Russia’s ongoing pivot towards Asia, but would be unimaginable if not flanked by diplomatic initiatives to solve a longstanding territorial dispute between Japan and Russia over Russia’s Kuril Islands – taken by Russia at the end of the second world war, and claimed by Japan ever since. Japan’s claims to the Kuril Islands, which it refers to as the Northern Territories, mean that the two countries have failed to sign a peace treaty ending the Second World War.
But 2015 will mark the 70th anniversary of the end of the war, and analysts believe the anniversary may focus minds in Tokyo and Moscow on finally reaching a settlement. Both Russia and Japan are casting around for new friendships: Russia has fallen out with the EU and US over its aggression in Ukraine, with tit-for-tat sanctions ratcheting up tension.
But Japan for its part is increasingly worried about the rise of China, in the context of tensions over disputed uninhabited islands in the South China Sea. Given that Moscow agreed a massive $400bn gas deal in May 2014 with China, Japan will be keen to avoid Russia being sucked in China’s orbit, heightening readiness to sign a pipeline deal with its giant energy-rich neighbour.
Japan has sided with its traditional allies in the West over Ukraine, and as a result cancelled talks with Moscow scheduled for the autumn. But Putin may meet with Abe on the sidelines of the ongoing Asia-Europe summit in Milan this week, Russian presidential aide Yury Ushakov said on October 15, according to Interfax. If not, Putin and Abe have “a clear agreement that a bilateral meeting will take place as part of the APEC summit in China on November 10-11,” Ushakov said.
end
Get a load of this: Only 13% of Bulgaria’s 4th largest bank had any valid collateral:
This may put Bulgaria under:
(courtesy zero hedge)
Peak Ponzi: Only 13% Of Loans In Bulgaria’s Fourth Largest Bank Had Valid Collateral
Submitted by Tyler Durden on 10/22/2014 10:07 -0400
• Bank Run
• Bulgaria
• Central Banks
• Corruption
• European Union
• Fractional Reserve Banking
• Reality
inShare1
One can debate whether, by virtue of fractional reserve banking, every bank in the world is just a ponzi scheme, and where the stability of the system depends entirely on the level of counterparty faith and general confidence in the system, in other words, a grand con game in which the central bank is tasked with making sure the con works as planned when confidnce gets “a little low.”
One can not debate, however, that a bank had become anything but a pure Ponzi scheme – in this case, a piggybank whose funds were embezzled by its owner as described previously in “Fourth Largest Bulgarian Bank Seized After Bank Run: “Let’s Not Tear Down Our House” Central Banker Begs” – when a token review, only upon its failure, reveals that 87% of its loans were invalid!
From Bloomberg:
• BULGARIA CENTRAL BANK CORPBANK PRE-JUNE REPORTS ‘MISLEADING’
• BULGARIA CENTRAL BANK SAYS CORPBANK ASSETS ARE 6.7B LEV
• BULGARIA CENTRAL BANK SAYS CORPBANK AUDIT SHOWED ONLY 13 PERCENT OF LOANS HAD VALID COLLATERAL
And more:
Audit report of Bulgaria’s Corporate Commercial Bank, under central bank’s supervision since June 22, shows its assets of 6.66b lev as of Sept. 30 need to be written off by 4.22b lev, central bank in Sofia says on website.
The good news: the level of corruption, embezzlement and loan devastation in a country like Cyprus for example, where the entire banking sector had to be bailed out by Europe, was just a little less than what happened in Bulgaria’s fourth largest bank. Actually, it is unclear if that is good news.
The bad news: the Bulgarian central bank “regulator”, just like its peers across the continent, and the world, had no idea what the reality of the balance sheet was until the owner vaporized, as did nearly 90% of the bank’s funds, to borrow a Corzinism.
But it’s ok: remember – all other central banks and regulators have full and unhindered visibility when it comes to the fraud and embezzlement across the other several thousands banks that comprise the European Union. Just like the Fed did when it supervised Goldman and JPM. The only problem is that just like then, so now, nobody dares to do anything, as revealing just how deep the rabbit hole of balance sheet devastation is, goes against the primary directive of every central bank around the globe: preserving faith and confidence in the global fractional reserve banking con game.
As for all those innocent depositors in Bulgaria’s Corpbank who believed the Ponzi and con game would last indefinitely: our condolences: you most likely won’t ever see a dime of your money, even on the deposits that were supposedly “insured.”
end
More updates on the Ebola scare:
(courtesy zero hedge)
Chicago Hospitals Monitoring 2 Sick Passengers From Liberia, CDC Not Testing For Ebola
Submitted by Tyler Durden on 10/21/2014 23:11 -0400
inShare2
Just when you thought it was safe to BTF-Ebola-Is-Fixed-Dip… ABC7 Chicago reports, two unrelated passengers (one child – vomiting, no fever; one adult – nausea, diarrhea, no fever) originating from Liberia became ill en route to O’Hare International Airport. The two patients are being monitored in isolation at The University of Chicago Medical Center and Rush University Medical Center but based on the latest reports and risk exposures (from the Chicago Ebola Resource Network), the CDC has determined not to test them for Ebola… (perhaps they are waiting for Ron Klain to start work tomorrow to give them the go-ahead).
“City and hospital officials are working closely with the CDC to continue monitoring,” officials noted.
Ambulances wait at Rush University Medical Center
end
And now for your major data points today:
Portuguese 10 yr bond yield: 3.40 up 2 in basis points from Tuesday night.
(Portugal imploding)
Your closing Portuguese 10 year bond yield Wednesday night: another fall of 8 in basis points on the day
Portuguese 10 year bond yield: 3.33%
Your closing Japanese yield Wednesday up 1 in basis points from Tuesday night
yield .49% !!!
Japanese 10 year bond yield: .49%
And now for your closing Japanese 10 year bond yield / par in basis points from the morning: ( Japanese markets imploding)
Japanese 10 year bond yield: .49%
end
Your opening currency crosses for Wednesday morning:
EUR/USA: 1.2714 up .0004
USA/JAPAN YEN 106.89 down .100
GBP/USA 1.6068 down .0052
USA/CAN 1.1229 up .0001
This morning the Euro is up , trading now just above the 1.27 level at 1.2714 as Europe reacts to deflation and crumbles on the various European exchanges. The yen is up a little and It closed in Japan rising by 10 basis points at 106.89 yen to the dollar. The pound is down from Tuesday as it now trades just below the 1.61 level to 1.6068. The Canadian dollar is slightly up this morning with its cross at 1.1229 to the USA dollar.
Early Wednesday morning USA 10 year bond yield: 2.20% !!! par in basis points from Tuesday night/ (USA economy not doing so well with this low yield)
USA dollar Index early Wednesday morning: 85.51 up 21 cents from Tuesday’s close
end
The NIKKEI: Wednesday morning up 391 points or 2.64%
Trading from Europe and Asia:
1. Europe all in the green except Spain
2/ Asian bourses all green except Shanghai / Chinese bourses: Hang Sang in the green, Shanghai in the red, Australia in the green: /Nikkei (Japan) green/India’s Sensex in the green
Gold early morning trading: $1248.00
silver:$ 17.40
end
Your closing Spanish 10 year government bond Wednesday/ down 5 in basis points in yield from Tuesday night.
Spanish 10 year bond yield: 2.21% !!!!!!
Your Tuesday closing Italian 10 year bond yield down 9 in basis points and trading 30 in basis points above Spain./
Italian 10 year bond yield; 2.51%!!!!!
end
IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Wednesday night/USA dollar index/USA 10 yr bond: Europe falling apart this afternoon
Euro/USA: 1.2651 down .0059
USA/Japan: 107.16 up .160
Great Britain/USA: 1.6057 down 0.0053
USA/Canada: 1.1224 down .0004
The euro fell quite a bit in value during this afternoon’s session, and it was down a lot by closing time , closing well below the 1.27 level to 1.2651. The yen was down during the afternoon session,and it lost 16 basis points on the day closing well above the 107 cross at 107.16. The British pound lost some ground during the afternoon session and it was down for the day as it closed at 1.6057
. The Canadian dollar was up during the afternoon session, and it was up on the day closing at 1.1224.
Your closing USA dollar index:
85.65 up 34 cents on the day
your 10 year USA bond yield, a rise of 3 basis points: 2.23%
European and Dow Jones stock index closes:
England FTSE up 27.40 or 0.43%
Paris CAC up 23.85 or 0.58%
German Dax up 53.18 or 0.60%
Spain’s Ibex up 97.80 or 0.96%
Italian FTSE-MIB up 208.53 or 1.09%
The Dow: down 153.49. or 0.92%
Nasdaq; down 36.63 or 0.83%
OIL: WTI 80.41
Brent: 84.69
and now oil breaks 81.00 dollars per barrel
this will have a devastating effect on major oil producing nations like
Venezuela, Russia and Iran:
(courtesy zero hedge)
WTI Crude Slides Below $81
Submitted by Tyler Durden on 10/22/2014 14:25 -0400
• Bond
• Crude
inShare
It appears some of the ‘fundamental’ legs of the face-ripping ramp in stocks are fading. Broken Markets – nope; Fed Speakers – nope (blackout period); Crude rising – nope (WTI back under $81)
Why it matters…
But wait – there is a “broken” market – June 2015 Long Bond Futures… fat-fingered, short squeeze, or hedge at any costs?
Paging Jon Hilsenrath…
end
And now for your big USA stories
Today’s NY trading
Stocks Drop On Oil Dump & ECB Reality-Check
Submitted by Tyler Durden on 10/22/2014 16:04 -0400
• Copper
• Crude
• Crude Oil
inShare
While some pointed north to the aweful events in Ottowa, it appears the bigger driver of weakness in stocks today (aside from a sudden absence of broken VIX markets, a lack of Fed Speakers, and the truth about ECB bond-buying being exposed) was the plunge in crude oil. WTI tumbled from over $83 to a low $80 handle after inventories surged more than expected and that appeared the catalyst for equities to catch down to credit weakness. Treasury yields closed the day unchanged but sold off notably in the EU session (like yesterday). The USDollar strengthened for the 2nd day in a row (now up 0.55% on the week) on EUR weakness (CAD volatile around shootings), weighing on commodities. Silver was monkey-hammered early, copper and gold slid, then oil plunged (down 2% on the week) to its lowest close in 18 months. Yesterday’s big winner Trannies tumbled the most today (-2%) as stocks gave up half the week’s gains today.
Stocks broadly gave back half the week’s gains today…
With Trannies tumbling the most on the day…
and the roundtrip from yesterday…
The S&P failed to hold its 2013 uptrend…
The turn in oil coincided with weakness in Stocks today…
As Oil and stocks decouple…
Oil ended with its lowest close in 18 months…
The drop in stocks caught then down to credit’s early weakness…
The Dollar rallied once again – led by EUR weakness. CAD was very volatile around macro data and the shootings
and USD strength weighed on all commodities…
Close up on today’s action in commodities…
2nd day in a row, Treasuries sold off during the EU session… but closed unchanged on the day.
Charts: Bloomberg
Bonus Chart: What a difference a broken market makes…
end
CPI prints a very small increase in September as the entire world slows down dramatically:
(courtesy zero hedge)
CPI Prints Smallest Possible Increase In September Even As Beef Prices Surge 17% In 2014
Submitted by Tyler Durden on 10/22/2014 08:46 -0400
• CPI
• Natural Gas
inShare5
After last month’s shocking 0.2% drop in CPI, driven almost entirely by plunging gasoline prices, September CPI once again posted a modest rebound, rising 1.7% from a year ago, or 0.1% month over month, just above the 0.0% expectation, with core prices excluding food and energy rising precisely in line with the 0.1% expected.
Broad prices were pushed lower by another month of declining energy prices (Gasoline -1.0%, Fuel Oil -2.1%), however offset by rising food prices which increased by food up 0.3% and Utility bills, rising 1.6% in September – the highest price increase in Utility bills since the 7.5% surge in March.
Then again, one wonders how food inflation is so subdued when the report itself notes that “the index for beef and veal rose 2.0 percent in September and has now risen 16.7 percent since January. The index for dairy and related products increased 0.5 percent, its tenth increase in the last 11 months.” But hey: there is always artificial food in a box which is plunging.
Some other items that saw an increase in price included Medical Care Commodities (+0.5%), Shelter (+0.3%) and Transportation services (+0.1%). After dropping -0.2% in August, hedonically and seasonally-adjusted apparel prices were supposedly unchanged in September.
The components:
The detailed breakdown:
Food
The food index rose 0.3 percent in September after increasing 0.2 percent in August. The index for meats, poultry, fish, and eggs continued to rise, increasing 0.7 percent after a 1.5 percent increase in August. The index for beef and veal rose 2.0 percent in September and has now risen 16.7 percent since January. The index for dairy and related products increased 0.5 percent, its tenth increase in the last 11 months.The index for other food at home also rose 0.5 percent in September, with the index for sugar and sweets increasing 1.6 percent. The index for nonalcoholic beverages, which declined 0.2 percent in August, rose 0.2 percent in September. The fruits and vegetables index also turned up in September, rising 0.1 percent after declining in August. The index for fresh fruits rose 1.3 percent, while the fresh vegetables index fell 1.1 percent. The cereals and bakery products index declined in September, falling 0.4 percent. The food at home index has risen 3.2 percent over the past year. The index for meats, poultry, fish, and eggs has increased 9.4 percent over that span, with the index for beef and veal up 17.8 percent and the pork index up 11.4 percent. The fruits and vegetables index has increased only 0.9 percent over the last 12 months, the index for nonalcoholic beverages has risen 0.2 percent, and the cereals and bakery products index has declined slightly, falling 0.1 percent. The index for food away from home rose 0.3 percent in September and has increased 2.7 percent over the last 12 months.
Energy
The energy index fell 0.7 percent in September, its third consecutive decline. The gasoline index, which declined 4.1 percent in August, fell 1.0 percent in September. (Before seasonal adjustment, gasoline prices fell 2.1 percent in September.) The electricity index also declined in September, falling 0.7 percent after rising slightly in August. The fuel oil index decreased as well, falling 2.1 percent. In contrast to these declines, the index for natural gas turned up in September, rising 1.6 percent after falling in each of the 4 previous months. The energy index has fallen 0.6 percent over the last 12 months, with its components mixed. The natural gas index has risen 5.8 percent over the span and the electricity index has increased 2.8 percent. However, the gasoline index has declined 3.6 percent and the fuel oil index has fallen 3.2 percent.
All items less food and energy
The index for all items less food and energy rose 0.1 percent in September after being unchanged in August. The shelter index accounted for most of the increase, rising 0.3 percent in September. The rent index increased 0.3 percent and the index for owners’ equivalent rent rose 0.2 percent. The medical care index also advanced in September, increasing 0.2 percent. Within the medical care component, the index for medical care commodities rose 0.5 percent, with the nonprescription drugs index increasing 1.5 percent. The index for medical care services rose 0.1 percent, with the index for hospital services advancing 0.3 percent. The indexes for alcoholic beverages and for personal care both rose 0.1 percent in September. Several indexes were unchanged in September, including those for new vehicles, apparel, recreation, and household furnishings and operations. The index for airline fares continued to decline in September, falling 0.5 percent, and the indexes for used cars and trucks and for tobacco both fell 0.1 percent.
And now, we await the several milliseconds it will take the algos to spin this latest data in a favorable light.
end
The lack of mortgage applications means that the housing sector is in disarray:
(courtesy Dave Kranzler/IRD)
The Mortgage Purchase Index Plunges – Again
October 22, 2014Housing Market, U.S. Economyhome builder stocks, Housing bubble, mortgages, New home sales
The lack of movement for the purchase index underscores the lack of traffic and lack of demand in the housing sector. – Bloomberg News
Once again the Mortgage Bankers Association purchase applications index fell 5% week to week and 9% year over year (LINK). Mortgage rates have fallen 30 basis points over the past month and 10 points over the past week. This is stimulating refinancings but not buying.
Cash/investment buyers disappearing – cash buyers were 24% of new home sales in September this year compared to 33% in September 2013. If the number of buyers who require a mortgage are falling and cash buyers are fading, who is going to buy homes? This situation is exacerbated for new homebuilders, as 93% of a newly built homebuyers use a mortgage.
I wrote an analysis of yesterday’s existing home sales report which goes into detail as to why the reality is much different than the headline reports you may have seen: Existing Home Sales Drop Yr/Yr For the Eleventh Month In A Row.
The homebuilder stocks have bounced back up to a level which is ripe for shorting. My three latest homebuilder reports explain why these homebuilders are particularly good short-sell candidates, especially my latest one: Homebuilder Short-Sell Reports.
These homebuilders are riddled with misleading accounting, excessive inventory and debt levels and declining unit deliveries. They are more overvalued in relation to their underlying business fundamentals than they were at the peak of the housing bubble. My reports go into detail on all of those issues. In short, homebuilders are insanely overvalued.
At the very least, any money manger who is long these stocks has a fiduciary duty to look through my work and reassess their investment strategy with regard to this sector. If you happen to be invested in mutual funds with exposure to this sector, get out now.
end
You will love this interview with Michael Snyder of EconomicCollapse blog
(courtesy Michael Snyder/Greg Hunter/USAWatchdog)
Permanent Damage to US Economy-Michael Snyder
By Greg Hunter On October 22, 2014 In Market Analysis 24 Comments
By Greg Hunter’s USAWatchdog.com
Michael Snyder is a self-proclaimed “truth-seeker” and financial writer who says there is no recovery on Main Street, and we are not going to get one—ever. Snyder contends, “We’ve had permanent damage to the U.S. economy. It’s kind of like going to the beach, and you build a sandcastle. The waves start coming in, and the sandcastle is not going to be destroyed by the first wave. Then, more waves will come in, and eventually the whole sandcastle will be wiped out. That’s kind of what’s happening to the U.S. economy. We’ve had waves of economic problems, and we have had permanent damage as a result. Our economy is not totally destroyed yet, but we have permanent damage. Now, new waves are on the way, which will cause more damage because of the long term trends.” Snyder goes on to explain, “None of the long term problems that have been plaguing our economy have been fixed. Instead, the Fed printed a bunch of money and pumped up the stock market. It made people feel good, but the underlying fundamentals are not getting any better.”
On the nearly $18 trillion Federal debt, Snyder says, “This is a massive problem, but the mainstream media says the deficit is going down, and they have it under control. That is actuallynot true. It’s all accounting tricks and smoke and mirrors. Actually, if you look at fiscal year 2014, which just ended, . . . the national debt increased by more than a trillion dollars. What they tell you is the deficit was a little more than $400 billion, but that’s because they take all these things and say that doesn’t count as part of the deficit. . . . By the time President Obama’s eight years are over, we are on pace to approximately double the size of the national debt from $10.6 trillion to more than $20 trillion. What we are doing is absolute insanity. . . . We are going to suffer the consequences for so much of this. As far as the time window, I believe the next 12 to 15 months are going to be the most interesting time economically and as a nation as I have ever seen.”
The deficit problem is much worse than increasing by a cool trillion bucks a year. Snyder points out, “In addition to the $1 trillion a year it has to borrow, the Federal government has to roll over or pay off by borrowing new money–an additional $7 trillion a year. So, the Federal government has to borrow about $8 trillion to fund current spending and, plus, repay old debt with new debt. . . . So far, the rest of the world has played along by lending us trillions and trillions of dollars at super low interest rates. We keep borrowing, and we keep paying it off so we can keep the game going. If that changes, and all it’s going to take is a major financial event such as a stock market crash . . . or black swan event, then we are going to have a massive problem on our hands because we are going to have to borrow $8 trillion, and we will be in a situation where people won’t want to lend us money, especially at super low interest rates.”
What do you look out for as a warning sign of the next calamity? Snyder says, “When there is a financial crisis, all of a sudden, banks don’t want to lend. They don’t want to lend to each other, and they don’t want to lend to anyone else. Credit freezes up, and our financial system is based on debt and the flow of money from the banks lending it to the rest of us. I believe we will have a brief period of deflation before the response by the Federal Reserve and the federal government, where we are going to then have tremendous inflation through the roof.”
How can this be fixed? It can’t be fixed without killing the economy, as Snyder explains, “A lot of people say I hate the banks. Let the banks fail. This is kind of like a patient with a very advanced stage of cancer. That’s what our economy is like. We are so tied into these banks. If you try to kill the advanced cancer, you are probably going to kill the patient as well. If you try to kill the banks, our economy is going to die as well.”
Join Greg Hunter as he goes One-on-One with Michael Snyder, founder ofTheEconomicCollapseblog.com.
(There is much more in the video interview.)
Video Link
http://usawatchdog.com/permanent-damage- to-us-economy-michael-snyder/
-END-
Well that is all for tonight
I will see you tomorrow night
harvey
JB Slear
866-443-0868 Ext 104
817-717-5489
Fax: 817-764-2537
www.FortWealth.com
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Source: http://fortwealth.com/blog/?p=6078
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