Ladies & Gentlemen, Harvey Organ’s 10-21-14 update

Oct 21.2014:

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: 1251.00 up $7.00
Silver: 17.50 up 20 cents

In the access market 5:15 pm:

Gold $1249.00
silver $17.52

The gold comex again today had 220 notices served.
Again we had large withdrawals of gold from the comex vaults. A few months ago we had 303 tonnes of total gold at the comex. Today the total inventory rests at 276 for a loss of 27 tonnes.

In silver, the open interest continues to remain high at 170,155 contracts.
To boot, the December silver OI remains extremely high at 119,103.

As I reported to you the big news on the weekend, came from China where weekly demand (gold withdrawals) came in at 68.4 tonnes. On a 7 day week this works out to 9.77 tonnes per day The world ex China and ex Russia (they keep all gold produced) produces 6.02 tonnes per day (2200 tonnes per year). This news came on hot on the heels of a huge importation of gold into India last month of approximately 100 tonnes. Yesterday, it was Russia’s turn. Despite the fact that Russia’s rouble is faltering terribly and in fact is at multi year lows and also its bonds are faltering with the 10 year Russian bond yield at over 4%, Russia found it necessary to purchase 37 tonnes of gold last month.

We have two important discussions on the above demand for gold from Peter Cooper of Arabian gold and Lawrence Williams of Mineweb.

Dave Kranzler weighs in on whether GLD is fraudulent.
You all know my opinion on that matter.

Today, we had no changes in inventory at the GLD. Tonnage remains at 751.97 tonnes.

SLV’s inventory remains unchanged and rests at 343.415 million oz.

Finally, Bill Holter’s commentary tonight talks about the insolvent Fed and it is a must read

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 21 2014

1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate

+.0775% +.095% +.11% +.1275% + .1775%

Oct 20 .2014:

1 Month Rate 2 Month Rate 3 Month Rate 6 month Rate 1 yr rate

+.072% +.0825% +.09% +.115 +.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 3,683 contracts from 403,776 contracts up to 407,459 with gold up $5.70 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 230 contracts down to 607. We had 230 notices filed on yesterday we neither lost nor gained any gold contracts standing for the October contract month. The November contract month saw its OI fall by 2 contracts down to 355. The December contract rose by 2,756 contracts down to 291,069. The estimated volume today was fair at 163,018 contracts. The confirmed volume yesterday was poor at 100,998.

The total silver Comex OI fell by a tiny 93 contracts as silver was down yesterday to the tune of 2 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 170,155 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 69 contracts down to 105 contracts. We had 72 notices served upon yesterday so we gained 3 silver contracts or an additional 15,000 oz of silver will be standing for the October contract month. November is also a non active delivery month and here the OI lowered by 1 to 124 contracts.

The December silver contract is a biggy contract month and tonight it fell slightly to 119,103 contracts for a loss of 291 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 595.5 million oz or 85.07% of annual global production (ex China). The estimated volume today was fair at 33,245. The confirmed volume yesterday was poor at 25,219 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 21.2014

Gold
Ounces
Withdrawals from Dealers Inventory in oz 24,218.688 (Scotia)
Withdrawals from Customer Inventory in oz 64.30 oz (2 Kilobars) (Manfra)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 220 contracts( 22,000 oz)
No of oz to be served (notices) 387 contracts (38,700 oz)
Total monthly oz gold served (contracts) so far this month 934 contracts (93,400 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 one dealer transactions today and it was a withdrawal:

i) Out of Scotia: 24,218.688 oz

total dealer withdrawal: 24,218.688 oz

total dealer deposit: nil oz

we had 1 customer withdrawal:

i) out of Manfra: 64.30 or 2 kilobars

total customer withdrawals: 64.30 oz (2 kilobars)

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 220 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices stopped by JPMorgan customer account.

We had 220 notices served upon our longs for 22,000 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 934 x 100 oz = 93,400 oz,to which I add the difference between the open interest for the front month of October(607) minus the number of notices served upon today (220) x 100 oz = 132,100 oz or 4.108 tonnes.

We neither lost nor gained any gold ounces standing for the October contract month.
Thus: October standings:

934 contracts x 100 oz = 93,400 oz + (607 ) – (220)x 100 = 132,100 oz or 4.108 tonnes

end

Oct 21/2014:

October silver: Initial standings

Silver Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 425,900.21 oz
(Scotia/CNT,Delaware)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 607,638.37 oz (Brinks, CNT)
No of oz served (contracts) 5 contracts (25,000 oz)
No of oz to be served (notices) 100 contracts (500,000 oz)
Total monthly oz silver served (contracts) 654 contracts (3,270,000 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 6,474,742.9 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil oz

we had 0 dealer withdrawal:

total dealer withdrawal: nil oz

We had 3 customer withdrawals:

i) Out of Scotia: 90,709.94 oz
ii) Out of Delaware: 300,136.26 oz
iii) Out of CNT: 35,054.01 oz

total customer withdrawal 425,900.21 oz

We had 2 customer deposit:

i) Into Brinks: 7,646.600 oz
ii) Into CNT: 599,991.770 oz

total customer deposits: 607,638.37 oz

we had 0 adjustments:

Total dealer inventory: 66.849 million oz
Total of all silver inventory (dealer and customer) 179.447 million oz.

The CME reported that we had 5 notices filed for 25,000 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 654 x 5,000 oz per contract or 3,270,000 ounces upon which I add the difference between the open interest for the front month of October (105) – the number of notices served upon today (5) x 5000 oz per contract

Thus Oct. standings for silver: 654 notices x 5,000 oz per notice or 3,270,000 oz + (105) – (5) x 5,000 oz = 3,770,000 oz,

we thus gained 15,000 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 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 no change in gold inventory at the GLD

inventory: 751.97 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: 751.97 tonnes.

end

And now for silver:

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 21.2014

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 7.2% percent to NAV in usa funds and Negative 7.2% to NAV for Cdn funds
Percentage of fund in gold 60.90%
Percentage of fund in silver:38.40%
cash .7%

.( Oct 21/2014)
2. Sprott silver fund (PSLV): Premium to NAV falls to positive 4.39% NAV (Oct 21/2014)
3. Sprott gold fund (PHYS): premium to NAV rises to negative -0.57% to NAV(Oct 21/2014)
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….on the problems facing Italy, Greece and Ireland

(courtesy Mark O’Byrne)

First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45%

Published in Market Update Precious Metals Upate on 21 October 2014
By Mark O’Byrne
3

The first poll of how the Swiss people will vote in the “Save Our Swiss Gold” initiative on November 30th shows that the Swiss are leaning towards voting for the pro-gold initiative.

Gold Initiative Poll Results – 20 Minuten
The poll had quite a large sample of 13,397 people from all over Switzerland who participated in the first phase of the 20 Minuten online survey on October 15.
The poll shows that 45% approve the Swiss gold initiative and 39% are against. There are 29% firm yes voters and 28% firm no voters (see graph). The poll shows 16% are leaning towards a yes or are “more yes” and 11% are leaning towards a no or are “more no.”
20 Minuten or 20 Minutes in English, is a very popular German language free daily newspaper and online paper in Switzerland, published in a tabloid format and online.

Swiss Gold Flag
The political scientist Lucas Leeman and Fabio Wasserfallen organised the survey according to demographic, geographic and political variables and it is weighted so that the sample corresponds as closely as possible the structure of the voting population according to 20 Minuten.
There are a lot of swing voters with 16% undecided and not wanting to commit themselves.
The poll suggests that the Swiss gold initiative remains tightly in the balance and may be much closer than is commonly expected.

Swiss Gold Reserves
Some have suggested that as this was an online poll, caution may be needed as the 13,397 people polled are likely to be more digital savvy and younger. However, it is still believed to give a good barometer of sentiment just five weeks before the poll and before there has been concerted campaigning by either side.
20 Minuten is distributed to commuters at over 150 train stations across the country. Since September 2004, the German language edition has been the most widely read daily newspaper in Switzerland, surpassing Blick. The audited distribution in 2004 was 329,242 (WEMF AG) and it had a readership of an estimated 782,000 according to Wikipedia.
The three key measures of the “Save Our Swiss Gold” initiative are the following:
* an increase in gold holdings of the SNB to reflect an allocation of 20% of total reserves (today gold accounts for 7.7% of total reserves)
* and a moratorium on the sale of Swiss gold reserves
* the repatriation of Swiss gold reserves – some of which are believed to be in the UK and Canada
See Essential Guide To Gold Bullion Storage In Switzerland

GOLDCORE MARKET UPDATE
Today’s AM fix was USD 1,251.75, EUR 978.85 and GBP 774.17 per ounce.
Yesterday’s AM fix was USD 1,241.00, EUR 972.65 and GBP 769.71 per ounce.

Gold climbed $8.30 or 0.67% to $1,246.10 per ounce. Silver rose $0.16 or 0.93% to $17.44 per ounce yesterday.

Gold in U.S. Dollars – YTD, 2014 (Thomson Reuters)
Gold in Singapore rose above $1,250/oz, after rising 0.7% in the previous session, prior to capping once London opened. At the open in London, gold soared to the highest in over five weeks as the greenback pulled back.
Gold for immediate delivery rose 0.4% t to $1,251.63 an ounce by 9:46 a.m. in London, according to Bloomberg generic pricing. It hit $1,253.85, the highest since September 10. Gold for December delivery gained 0.6% to $1,251.60 on the Comex in New York.
The dollar dropped for a second day, reaching the lowest level in nearly a week.
Markets are adjusting estimates back for when the U.S. Federal Reserve may raise interest rates.
Futures traders put the odds of a U.S. rate increase at 46% by October 2015, down from 50% at the end of last week.
Despite very robust global demand, particularly from China and India, gold ETF holdings fell to a five-year low yesterday.
There are a number of gold friendly factors supporting prices including geopolitical and economic uncertainty and still dovish Fed and other central bank policies.

Get Breaking News and Updates on the Gold Market Here

end

Dave Kranzler asks if GLD is a fraud.

You decide…

(courtesy Dave Kranzler/IRD)

The GLD Trust Is Being Drained
October 21, 2014Financial Markets, Gold, Market Manipulation, Precious MetalsGLD, gold bars

It’s a matter of “trust.” How much do you trust GLD’s vault custodian, HSBC? Has HSBC given us any reason to place trust in both its financial reporting and the way it operates? HSBC has been already been nailed for rigging LIBOR and the LBMA gold fix.

I wonder how many of those bars shown in the picture do not belong in the GLD segregated area but were moved there to give the illusion that the GLD account was filled with gold bars?
Another 9 tonnes of gold was removed from the GLD trust yesterday. This takes the “reported” amount down to 751 tonnes. The last time the reported amount of gold in the trust was at this level was November 18, 2008. The price of gold was $738.
Individual share selling of “odd lots” of GLD – where and “odd lot” is defined at as anything less than the 100,000 shares required to redeem gold from the Trust – does not trigger the removal of gold from GLD. Poor investor sentiment does not trigger the removal. The only way gold is removed is if one of the Approved Participant bullion banks collects 100,000 share baskets and turns them in exchange for the delivery of gold bars. Once that gold is removed, it disappears.
On March 24 this year, GLD was reporting 821 tonnes. Since then, 70 tonnes have been removed. Most of it has been removed since late August. It’ s no coincidence that the drain in gold from GLD happens to coincide with the strongest seasonal period of the year for Chinese and Indian gold buying. Recent reports suggest that India imported 131 tonnes of gold in September. This number would not include the large amount of gold being smuggled into India. The Russian Central Bank released its gold holdings thru September, which showed it added 1.2 million ounces – or roughly 34 tonnes. This was the largest monthly addition to its gold holdings ever reported. And the most recent data from China show that, since returning from the observance of a national holiday, the Chinese demand for gold in the 2 days prior to the holiday shutdown and the 3 days after re-opening was over 66 tonnes.
With numbers like this being reported from the largest gold buying areas in the world, it’s hard to believe that the gold being removed from GLD is being used for any purpose other than to meet western bullion bank delivery requirements into these countries.
While it is clear that GLD is being drained in order for the bullion banks to avoid delivery default, it would be infinitely more interesting to know how much of the gold still sitting in JPM’s vault has paper claims attached to them. That is, to what extent has this gold been hypothecated. But because of the protections afforded the GLD Custodian by the investment prospectus, not even the GLD auditor can make unannounced visits to inspect HSBC’s files on this matter.
So, do you really trust HSBC and its custodianship of GLD gold?
end

Goldbroker puts French subtitles on GATA secretary’s interview with Larry Parks
Submitted by cpowell on Tue, 2014-10-21 17:23. Section: Daily Dispatches
12:20p CT Tuesday, October 21, 2014
Dear Friend of GATA and Gold:
While your secretary/treasurer took four years of it in high school, when it comes to French he still doesn’t know “merde.” Fortunately GATA’s friends at bullion dealer Goldbroker.com –

https://www.goldbroker.com/

– are fluent in the language and, thinking well of your secretary/treasurer’s recent half-hour interview on “The Larry Parks Show” in New York, have affixed French subtitles to the video. Now you can both hear the interview in English and read it in French at the same time. English speakers who have French-speaking friends might want to send it along to them. It’s posted at YouTube here:

Exposing gold price suppression has never been more romantic.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end

As indicated above from Goldcore, a poll finds huge support for the Swiss gold repatriation referendum:

(courtesy Goldcore/GATA)

Poll finds support for Swiss gold repatriation referendum proposal
Submitted by cpowell on Tue, 2014-10-21 15:53. Section: Daily Dispatches
10:50a CT Tuesday, October 21, 2014
Dear Friend of GATA and Gold:
GoldCore’s Mark O’Byrne reports today that the first opinion poll on Switzerland’s gold repatriation referendum proposal shows 45 percent of respondents in favor and 39 percent opposed:

http://www.goldcore.com/goldcore_blog/First_Swiss_Gold_Poll_Shows_Pro_Go…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end

(courtesy Peter Cooper/Arabian Money)

Gold price touches five-week high of $1,250 as Indian religious buying forecast to almost double this season
Posted on 21 October 2014 with no comments from readers

Gold prices have rebounded to a five-week high of $1,250 as Diwali, the festival of lights celebrated by more than 800 million Hindus is feted on Wednesday in India, a religious holiday said to be a particularly auspicious time for buying gold. India was the largest consumer of gold after China last year and holds more physical gold than any other country in the world, reckoned to be around 20,000 tonnes.
Local traders are especially bullish about the current season and say sales could double this year with gold prices lower than a year ago and the feel good factor of the new Modi government bouying consumers. That could mean a total of 200 tonnes of gold sold in India before the year-end, almost double the amount sold in the same months of 2013.
Pent-up demand
Jewelers have been stocking up. Bullion imports surged by 450 per cent to $3.75 billion last month. In May the new government eased import controls to allow more trading houses to bring in gold. That goes some way to make up for the loss of global demand for gold from exchange traded products where holding have dropped by around $13 billion this year.
Demand in Asia has fallen in 2014 after acclerating last year as global prices dropped 28 per cent in the worst correction since 1976, the one that came before an eight-fold increase in gold prices. Consumption dropped 16 per cent in Q2 to 963.8 tons, according to the World Gold Council, with India back as the biggest consumer of gold.
China was the top buyer in 2013, but its demand in the three months through the end of June fell 52 per cent to 193 tonnes, compared with 204 tonnes bought by India. There is a lot of pent-up demand due to recent import restrictions and the tax on gold, say traders.
Gold bears
However, many commodities’ analysts remain firmly in the Goldman Sachs bear camp and think a higher and higher US dollar – as interest rate rises come closer – will be bad for gold prices as it makes the opportunity cost of holding gold higher, and gold is negatively correlated to the greenback. Who knows really?
The dollar may have just reached a peak and gold a low with its triple bottom. Currency markets are notoriously difficult to call and small-time Forex traders lose as predictably as gamblers in a casino. Investors could also be worried that something is seriously wrong in global financial markets and gold is a safe haven without a counterparty unlike bonds or stocks or paper money.
In that case the Diwali buyers of gold have really seen the light.
Posted on 21 October 2014

end

Here is Lawrence Williams talking about the huge demand for gold coming from China and India
(courtesy Mineweb/Lawrence Williams)

Chinese and Indian gold buyers back in market in a big way
The gold price has been falling but physical gold demand appears, counter-intuitively, to have been rising dramatically over the same period.
Author: Lawrence Williams
Posted: Tuesday , 21 Oct 2014
LONDON (MINEWEB) -
What has been particularly strange about the gold market over the past two years is that the stronger the physical demand appearing for gold, the weaker the gold price has tended to get.
In the past few months, the gold price has fallen back from around $1,340 down at one time to $1,190 and now hovering back seemingly trying to breach $1,250 on the upside again, yet by all accounts demand in the two biggest consuming nations has been soaring and they are, between them, taking in virtually everything the world’s gold mines can produce.
The two countries are India and China. A mild relaxation of some of the import controls put on gold in the former saw gold imports rise to around 95 tonnes in September, while the weekly withdrawal statistics from the Shanghai Gold Exchange show that gold demand has latterly also picked up extremely well in China after a good start to the year, but then a marked downturn from March to August.
Indeed the latest weekly figures from the SGE could be seen as particularly strong given that the markets were closed for half the period due to China’s Golden Week holiday. While the total for the two weeks at around 68 tonnes may not seen spectacular, given that these purchases were actually made in only five days (September 29th and 30th and October 8th, 9th and 10th) due the long holiday market closure could suggest that Chinese demand is indeed soaring enormously.
Click here for top China gold stats follower Koos Jansen’s take on these figures.
Of course another interpretation might be that the very high sales on the days markets were open were because jewellers and traders primarily were stocking up ahead of the holiday and restocking after it, but one suspects the reality is something of a combination between the two. Subsequent weekly withdrawal figures will show a better light on these figures, but in general withdrawals from the SGE since the end of August have been running at far stronger levels than in the previous six months.
Overall looking at the more recent SGE withdrawal figures we are looking at Chinese total demand for the year reaching close on 2,000 tonnes and, if one subtracts China’s own gold production and scrap from the total this suggests gold imports near 1,300 tonnes this year – which is yet another nail in the coffin for the belief that Hong Kong net gold exports to the mainland are representative of total Chinese imports. They patently are not and have not been since around February this year as other points of import for gold have begun to dominate.
The other principal global gold consumer is, as noted above, India. Gold imports here have been so great that they have had a decidedly adverse effect on the country’s balance of payments and the previous government too action to mitigate this through imposing some fairly drastic import restrictions including a 10% tax level on gold imports and a regulation that 20% of imported gold would have to be re-exported (the 80:20 rule). It was widely hoped among the very significant Indian gold fabrication sector that the new Modi government, which took office earlier this year, would reverse this decision, but so far has not done so, again in recognition of the country’s current account deficit. There has been a minor relaxation of the 80:20 rule, but even this seems to have led to a massive increase in the country’s gold imports in recent months with September figures particularly high at $3.75 billion- equivalent to around 95 tonnes. August imports were put at around 60 tonnes plus.
See: Gold imports soar 450% in India
Of course these figures do not represent the full picture for Indian gold imports. The 10% tax regime on imported gold in particular has also led to substantial amounts of smuggled gold coming into the country. While recent reports have suggested that increased seizures have led to this becoming less attractive one suspects these are only the tip of the iceberg with thousands of Indian workers coming home daily from contract work in the Middle East, as well as more professional smugglers taking advantage of India’s long land borders and coastline.
So gold hungry China and India continue to accumulate gold, between them at a rate which probably accounts for close to the full total of global mined supply. And there are another group of Asian nations with similar gold hoarding proclivities, not quite at the same scale, but cumulatively significant.
One may ask that, if indeed they are collectively accumulating more than global new mined supply, and with scrap supplies falling with the gold price, where all this gold is coming from. The gold bugs will tell you it is gold leased from the world’s central banks which now can never be returned because it now resides in strong hands – yet remains on their books because it is leased rather than sold. Last year it may have come from gold ETF liquidations which amounted to perhaps more than 700 tonnes, but although there have been some sales out of the gold ETFs this year they have been on nothing like the scale of 2013. So the conundrum remains. Demand has to be exceeding supply, yet the price keeps falling. Surely that has to end soon.
And, of course, there is the other big unknown in the gold market demand. Is China surreptitiously building its gold reserves, but not reporting the increase until it feels it is politically expedient so to do. There is a lot of evidence out there in speeches by top Chinese officials and academics (and in a tightly controlled country like China these would seldom be made without some kind of government approval) that China is looking to build its gold reserves to around 8,500 tonnes, thus topping the US’s 8,133.5 tonne official reserve figure. But no-one knows for sure.
Topics: MINING, INVESTMENTS, GOLD BUYING, INDIA, CHINA, SHANGHAI GOLD EXCHANGE, GOLD ETFS

end

Another huge paper from Bill Holter on the insolvent Fed:

(courtesy Bill Holter/Miles Franklin)

The Fed “IS” the problem!

As I wrote yesterday, markets have become schizophrenic and volatility has exploded. It is obvious the uncertainty regarding “QE” (monetization) is at the heart of this renewed volatility. I do want to mention and remind you of past crashes and vicious bear markets, they ALL have seen big volatility (in both directions) prior to the collapse. 1929, 1987, 2000, 2008 …they all experienced big swings in the market prior to the big declines, this is what I believe we are experiencing now.
Before getting to my topic “the Fed IS the problem”, I want to remind you how we have gotten here. Back in 2008, we had both fiscal and monetary stimulus as the policy response to dysfunctional markets and a shrinking economy. You might remember Hank Paulson talking about his “bazooka” TARP plan while the Fed was lowering rates furiously and even lending $16 trillion secretly. They threw the proverbial kitchen sink at the problems. The problems did not go away nor were they fixed, they were only postponed. The postponement date now seems to be upon us as the end of another QE nears …or another round must begin. Can the U.S. Treasury pump more fiscal stimulus without spooking the bond market and exposing insolvency? Who will buy another “1 off” stimulus plan? If the answer is “no one” then it will fall solely on the shoulders of the Fed. Do you see where this goes?
The Fed is literally backed into a corner. They have to reflate the system yet they themselves are stretched more than any monetary entity in history. They are levered at nearly 80 to 1. This means the Fed can only withstand a 1.25% loss on total assets before their capital is wiped out. I have a question for you, do you really believe the Fed has not ALREADY lost 1.25% on total assets? Please remember, they “absorbed” the “crappy” assets after the 2008 debacle. They were buying bonds from banks in order to get the assets off of the books of the banking system …so that the system itself could pretend to still be solvent. Do you remember when some of these assets were offered for sale and the auctions immediately pulled because the bids were coming in UNDER .20 cents on the dollar? Do you suppose on their entire book of business there actually is any equity left?
The answer of course is no, the Fed is most probably already insolvent and has been since their last white knight, “lender of last resort” exercise. What I am trying to point at here is there cannot be another crisis like 2008 because there is no longer anything left big enough to reflate the system. The Treasury doesn’t have the might and neither does the Fed. Herein lies the problem, everyone has looked to the Fed since 2008 to save the system. Everyone has relied on the Fed to create “the bid” so to speak, the saying “the Fed’s got your back” comes to mind. But here they are with a severely crippled balance sheet, a history of 4 rounds of QE (plus the secretive $16 trillion) and …the markets are beginning to test them again.
Understand what I mean by “testing”. The markets are throwing a temper tantrum and want “more” liquidity, can the Fed really do it? Yes, technically yes they can but only by wrecking an already wrecked balance sheet. The next question is what happens if it doesn’t work? What happens if the selling does not abate? What happens if the markets actually realize that QE has done very little to reflate the real economy and all of the accounting tricks have been used up? What happens if speculators go on the attack and call the Fed’s bluff? Who will step up and save the Fed?
No one of course will or is able to rescue the Fed. Possibly the Chinese “could” rescue the Fed, but would they? I believe you already have your answer by Chinese actions over the last 5 years. They have set up currency swaps all over the world and signed trade deals directly with U.S. friends and foes alike, they have been preparing for this for a very long time. There are of course even bigger problems for the Fed than just what happens here in the U.S., they must support all banks far and wide within the “dollar system”. Immediately, 4 German banks currently come to mind. The European stress test out at the end of this week will be an interesting whitewash.
I mentioned above that there cannot be another crisis like 2008 …which is why you have seen markets do things over the last 3 years they have never before done in history. The entire game has been rigged and the charts painted to preach the picture of “control”. This is now changing, “something” is and already has obviously changed. “Control” is definitely beginning to slip away, otherwise you would not see this much volatility. You see, volatility is now a very VERY bad thing because of the amount of derivatives outstanding. Outsized volatility can very easily turn a (so called) solvent bank today …insolvent by tomorrow morning.
The main point I am trying to make here is that the solvency of the Fed itself will be questioned during the next crisis …which looks to already have begun. Either the Fed gets these markets calmed down and “under control” …or, I believe the markets will begin to question the Fed’s “all encompassing power”. The Fed “IS” the problem, my only question is when will speculators take them on? Another announcement of further QE will probably do the trick. Regards Bill Holter

end

Early Tuesday morning trading from Europe/Asia

1. Stocks mostly up on Asian bourses with the higher yen values to 106.86

2 Nikkei down 307 points or 2.03%
3. Europe stocks up/Euro down USA dollar index down at 85.19. Chinese bourse Shanghai down as the yuan slightly strengthens in value to 6.12175 per usa dollar/yuan.
3b Japan 10 year yield at .47%/Japanese yen vs usa cross now at 106.85/
3c Nikkei now below 15,000
3d Japan now says it will its pension fund will purchase more stocks/Japanese Nikkei rises huge
3e Boston Fed Rosengren: QEIII is ending unless….
3f/ huge IBM miss (see below on USA stories)
3gOil WTI: 82.93 Brent: 85.76
3h/ Gold up/yen up; yen above 106 to the dollar/
3i ECB: early this morning looking to buy covered bonds
3j Chinese fake figures on growth of GDP of &%
3k Gold at $1248.00 dollars/ Silver: $17.44

4. USA 10 yr treasury bond at 2.20% early this morning.

5. Details Ransquawk/Bloomberg/Deutche bank/Jim Reid

(courtesy zero hedge)

Latest Central Bank Sticksave Halts Futures Slide, Sends E-Mini Soaring After ECB Said “Looking To Buy Bonds”

Submitted by Tyler Durden on 10/21/2014 06:41 -0400
• 200 DMA

• Apple

• China

• Copper

• Crude

• Equity Markets

• Fisher
• fixed

• Goldman Sachs

• goldman sachs

• headlines

• Jim Reid
• McDonalds

• Nikkei

• RANSquawk

• Recession

• Reuters

• Ukraine
• Verizon

• Volatility

inShare1

Another day, another central bank sticksave.
Moments after Europe’s open, when once again the equity futures complex was threatening to break the upward trendline, after USDJPY took out stops and sliding below 106.3, pushing bonds both in Europe and the US to intraday highs, and the ES to session lows just above 1890, and then… here comes the ECB rumor cavalry, this time in the face of Reuters which blasted the tape with:
• ECB LOOKING TO BUY CORPORATE BONDS ON SECONDARY MARKET: REUTERS
And because in this centrally-planned market no amount of GPIF or ECB doing what everyone knows they are doing headlines can not surprise the algos, ES has soared over 20 points from the overnight lows and is now solidly above the 200 DMA which was the clear intention of this latest sticksave.
Ironically, this happens even as the “pundits” interpret yesterday’s stronger than expected Chinese data as indicative of more China stimulus, not less! As Bloomberg summarized, “stronger-than-estimated economic data failed to convince analysts that China’s authorities will refrain from introducing more targeted measures.”
So first it was China reported better than expected goalseeked GDP “data” (if still the worst since 2009) which was evidence of more stimulus, not less, and then Reuters leaked today’s central bank “all green to buy stocks” headline.
To summarize: the S&P 500 is now almost 100 points higher from last Tuesday as the global central bank plunge protection team of first Williams and Bullard hinting at QE4, then ECB’s Coeure “ECB buying to start in a few days”, then China’s latest $30 billion “targeted stimulus”, then the Japanese GPIF hinting at a 25% stock rebalancing in the pension fund, and finally again the ECB, this time “buying of corporate bonds on secondary markets”, rolls on and manages to send stocks into overdrive. Even asabsolutely nothing has been fixed, as Europe is still tumbling into a triple-drip recession, as Emerging Markets are being slammed by a global growth slowdown and the US corporate earnings picture is as bleak as it gets.
Because “fundamentals.”
In other news, Asian markets are broadly flat-to-down as we write, with the Shanghai Composite and Hang Seng posting moves of -0.7% and 0.1% respectively whilst Japanese equities are notably underperforming, and dropping 2%, following the 4% rise yesterday on news that the GPIF would increase its allocation to domestic equities. The other main event post the US market close last night was the impressive results from Apple with early hints at strong demand for the new iPhone 6 following earnings beats on revenues, profit and phone sales. Shares rose in afterhours trading.
FIXED INCOME
Bund futures opened higher this morning in sympathy with the gains in T-notes overnight as Asia equities declined on the back of concerns over growth in China, and a pullback in yesterday’s sharp gains in the Nikkei 225. However, the release of latest source comments, which indicated that the ECB is considering buying corporate bonds, and that the buying is already well under way, saw bund futures spike lower in the best volumes of the day.
Goldman Sachs and JPMorgan have cut their 10yr Treasury yield forecast to 2.5% (Prev. 3%), and 2.45% (Prev. 2.7%) respectively. (WSJ)
EQUITIES
Asian sentiment was weighed upon by the release of Chinese GDP, which although topped analysts’ forecasts, showed that the economy expand at its slowest pace since Q1 of 2009. In addition, Nikkei 225 (-2%) lost some of yesterday’s GPIF-inspired shine amid a bout of profit taking and JPY strengthening O/N. Furthermore, Japan’s welfare minister Shiozaki, who oversees the pension fund, said he “absolutely has no knowledge” regarding yesterday’s GPIF reports, which was also attributed to the weakness in the index. UK and European markets trade in positive territory boosted by positive earnings reports with the likes of ASOS (+15.5%), Actelion (+7%) and Akzo Nobel (+4.5%) all trading sharply higher. Stocks in general, especially the periphery, got a further lift after the latest source comments suggest that the ECB may target corporate debt in addition to the covered and ABS programmes that have already been announced.
FX
EUR weakness on the back of the latest ECB source comments have dictated the main moves in the FX market this morning. As such the USD has also recovered from its lows seen at the European open which in turn has pressured cable lower. Looking elsewhere the AUD is still holding onto gains seen overnight where the currency welcomed the release of Chinese GDP coming in higher than expected.
COMMODITIES
WTI and Brent crude futures are both trading higher into the North American open finding some solace that Chinese Q3 GDP and Industrial Production exceed expectations overnight. Meanwhile, spot gold traded around 5-week highs overnight but has since come off the highs as the USD has recovered off its lowest assisted by aggressive selling of EUR following the latest source comments.
Iran’s oil minister has reiterated that an emergency meeting is not necessary to discuss the slide in prices. (Shana)
JPMorgan has lowered gold and copper price forecasts, citing more muted global growth which is offset by lower supply growth
Bulletin Headline Summary from RanSquawk and Bloomberg
• EU stocks seen higher after latest source comments suggest the ECB is looking at buying corporate bonds
• Chinese GDP, which although topped analysts’ forecasts, showed that the economy expand at its slowest pace since Q1 of 2009
• Apple (AAPL) traded higher after market, following a beat in expectations on revenues, earnings, and iPhone sales for Q4 ? Looking ahead we have tier 1 data from the US in the form of Existing Home Sales (Sep), with large cap corporate earnings to come from Coca-Cola, Verizon and McDonalds
DB’s Jim Reid concludes the overnight event recap:
After the hostile skirmishes in financial markets last week the battle seems to have moved more onto a chess board this week. As central bankers started to become more dovish as last weekend approached, so markets stabilised. However this makes actual dovish action less likely as markets take some of the pressure off the authorities. Indeed following Bullard’s recent conversion to the dovish side late last week we’ve subsequently seen Rosengren, Williams and yesterday Fisher all play down last week’s volatility and its impact on the US economy. So we might be at a bit of a stalemate until newsflow allows one side to declare check!! It’ll probably be a while before anyone can declare checkmate though as still weak global macro fundamentals battle it out with the probability of more liquidity to come.
The main focus overnight has been on China as the country released a host of economic stats. Q3 GDP came in at 7.3% YoY, a modest beat over expectations of 7.2% but still the lowest read seen since early 2009. China also reported strong September industrial production growth of 8% (7.5% exp.), rebounding off August lows whilst retail sales and fixed asset investment were slightly short of market consensus at 11.6% and 16.1% respectively.
In response Asian markets are broadly flat-to-down as we write, with the Shanghai Composite and Hang Seng posting moves of -0.3% and 0% respectively whilst Japanese equities are notably underperforming following the 4% rise yesterday on news that the GPIF would increase its allocation to domestic equities. The other main event post the US market close last night was the impressive results from Apple with early hints at strong demand for the new iPhone 6 following earnings beats on revenues, profit and phone sales. Shares rose in afterhours trading.
Before all this, yesterday saw the S&P 500 close up +0.9%, helped by a pre-earnings +2% gain in Apple. This gain came in stark contrast to some other big tech names yesterday as shares in SAP (down -5.8%) in Europe and IBM (down -7.2%) in the US both ended the day significantly lower after their Q3 earnings reports. US credit followed the lead from the equity markets and as CDX IG closed -1bp tighter whilst CDX HY tightened -11bps.
Over in Europe yesterday was another weak day even as US equities managed to rise for the third day in a row. The Stoxx 600 closed the day down -0.5% as the CAC and DAX fell -1% and -1.5% respectively. Credit also struggled with iTraxx Main and Crossover widening by +3bps and +11bps respectively. These moves came even as European data on the day beat expectations, with Italian August Industrial Orders MoM rising +1.5% (vs expectation of a -0.2% fall).
Staying in Europe, yesterday saw the ECB begin their purchases of covered bonds in the market. We will get their updated balance sheet numbers every Monday afternoon (starting next week) where we’ll get a good idea how successful they are going to be at getting close to their soft target for the balance sheet. So every Monday’s release will now be important in this regard but for now we had some early indications from the FT which suggested that the ECB purchases included Spanish, German and French issues. These purchases weren’t enough to stabilise peripheral debt as Italian, Spanish and Portuguese 10Y yields rose +10bps, +9bps and +18bps respectively whilst German and US 10Y yields both fell slightly, by -1bp and -5bps respectively.
Looking to the day ahead we will get UK government borrowing data, with public sector net borrowing expected in at £9.4bn for September and also US September existing home sales data which consensus estimates put at 5.1M. Portugal’s finance minister is expected in Parliament this morning to speak about the 2015 budget proposal, whilst the EU, Russia and Ukraine’s energy ministers’ are holding Gas talks in Berlin. On these talks, yesterday, “a Russian government source close to gas talks” told Reuters that, “The devil is in the details. I don’t think that Russian gas will be delivered soon to Ukraine.” In other news, as US earnings season continues we will get results from Coca-Cola, McDonald’s, Lockheed Martin and Verizon among others

end

My goodness. We now have two major newspapers fighting for rumours. The London’s financial times rejects the Reuters rumour.
There is no discussion of covered bond buying (corporate bond purchases)
It really does not matter..the rumour mill was in full blast to ignite the bourses around the world!!

(courtesy zero hedge)

FT Rejects Reuters Unsourced Trial Balloon About ECB Buying Corporate Bonds, Futures Refuse To Plunge

Submitted by Tyler Durden on 10/21/2014 08:08 -0400
• Asset-Backed Securities

• Bond

• European Central Bank

• Eurozone
• Germany

• Italy

• Reuters

inShare

Precisely half an hour ago, we mocked the overnight Reuters trial balloon about ECB corporate bond buying, whose only purpose was to send futures higher, when not only did we question the credibility of the report based on “one person familiar with the work inside the ECB, speaking on condition of anonymity” and said that now “we await Germany to throw up all over what is a clear Reuters trial balloon floated by “one person familiar with the work inside the ECB, speaking on condition of anonymity” to see what the market reaction is to even more stimulus (as if it is unclear).” Well, it wasn’t Germany. At least not yet. It was Reuters’ competitor in the coverage of ECB rumors and innuendo, the FT, which moments ago blasted this, via Bloomberg:
• ECB SAID NOT TO HAVE PUT CORPORATE BOND BUYING ON AGENDA: FT
So just in case anyone forgot how credible the Reuters rumor mill is when bailing out European risk (think summer of 2011 and 2012), here is a stark reminder.
More from the FT:
The European Central Bank has not yet put the issue of buying corporate bonds on the agenda for its December policy meeting, according to two people familiar with the matter.

The euro weakened and shares rose in Italy, Spain and Germany jumped after Reuters reported two sources as saying that the policy making governing council could discuss the possibility of buying the assets at its final meeting of 2014, reports Claire Jones.

While corporate bond purchases are an option that policy makers have discussed in recent months, one of the people familiar with the matter said preparations for buying the debt have not intensified in recent weeks.

However, the person said corporate bond purchases are being considered, along with other ideas, as a possible means to extend the ECB’s programme of private sector asset purchases – which at the moment are confined to asset-backed securities and covered bonds – should inflation and growth in the eurozone continue to disappoint.
Of course, in a normal world, the entire overnight ES gain would evaporate in seconds, even as the origianl “source” has long since sold out of their risk. In this centrally-planned market, however, the ramp will stick. Just because.

end

News from the Russian/Ukraine front on their natural gas purchases:

(courtesy Eric Zuesse/Washington Blog/and special thanks to Robert H for sending this important development to us;)

Germany’s Merkel Agrees with ‘Angry’ Slovak Leader that Ukraine Bums EU to Pay for Russian Gas
Posted on October 21, 2014 by Eric Zuesse.
But Merkel says EU taxpayers will have to subsidize Ukraine.
Eric Zuesse
On October 21st, the German Economic News headlined (as translated), “Merkel: EU Taxpayers Should Finance Debt of Ukraine,” and reported that, “Angela Merkel visited [Slovakia's Prime Minister] Robert Fico on Monday [in the Slovak capital of Bratislava]. Both leaders demand that Kiev should take more responsibility,” and not push the EU to pay Ukraine’s past-due gas bills from Russia’s Gazprom.
Ukraine’s leader, Petro Poroshenko, was “demanding” that the EU bail out Ukraine, which is months behind on its gas bill from Gazprom, and which furthermore has been getting Slovakia to reverse flow of Russia’s gas, in order to meet Kiev’s own heating-needs.
“Ukraine and Russia negotiate Tuesday morning in Brussels about the dispute over gas supplies,” to Europe, through Ukraine’s pipelines from Russia.
“Russia demands that Ukraine pay its past-due gas bill of $4.5 billion, but doubts Kiev’s solvency.”
Merkel proposes that the EU provide a bridge-loan to help Ukraine get through the winter. She says, “It could not be expected that the EU will take over Ukraine’s gas debt to Russia. Fico’s anger is understandable.”
BusinessWeek headlined on Monday that, “Russia Won’t Accept Terms to End Sanctions Over Ukraine,” and reported that, “Russia’s top diplomat [Sergei Lavrov] said his country won’t accept [Obama's and the EU's] conditions to end sanctions after talks in Italy produced no breakthrough over the truce in Ukraine.” That truce is between the residents in Ukraine’s southeast, and the Ukrainian Government, which has been bombing them ever since May, in order to end their desire to break away from that Government and support instead their own republic or republics, set up by themselves. Those regions had voted at around 90% for the Ukrainian President, Viktor Yanukovych, who was overthrown on February 22 in Kiev, after America’s State Department official Victoria Nuland appointed Arseniy Yatsenyuk to lead Ukraine until a new President would be elected by voters in Ukraine’s northwest, on May 25th. The people in Ukraine’s southeast wanted to join Russia.
Russia isn’t buckling to the U.S.-EU pressures. BusinessWeek notes that Russia’s President Vladimir Putin, whose nation pipes about 15 percent of the EU’s natural gas needs through Ukraine, “said last week that supplies to Europe would be reduced if the Ukrainian government siphoned off fuel for its own use.”
So, Russia seems to be standing firm on getting its back-due payments from Ukraine, and on refusing to accept the West’s conditions for ending sanctions against Russia, and on prohibiting Ukraine from reverse-flowing any more of Russia’s gas.
Russia thus seems to be standing firm on everything pertaining to Ukraine and the EU. If this will keep up, then the EU’s taxpayers could end up paying a very hefty price for ‘winning’ Ukraine to join the EU.
The United States, by comparison, suffers very little from the entire matter.
———-
end

Robert H to me on the above development: so true!!

“Russia says no. You want gas for deadbeats you paid for it. This is a major slap to the EU and the US and their sanctions which means Russia does not care.
But what will the farmers of France or Poland say when the EU pays for the Ukraine to have gas with no likelihood of return of funds while farmers forgo their product due to sanctions? Let alone the retailers or manufacturers who are hurting. Once a bear turns his back on you it is over, much like the Chinese.”

end

We are not making this up:
(courtesy zero hedge)

Obama Humiliated Again After Weapons Airdropped For Syrian Rebels End Up In ISIS Hands

Submitted by Tyler Durden on 10/21/2014 16:34 -0400
• White House

inShare1

While we strongly suspect few are truly surprised by this turn of events, it is still yet another embarrassing stamp in the “do nothing stupid” foreign policy passport for President Obama’s administration. As The Daily Beast reports, an ISIS-associated YouTube account posted a new video online Tuesday entitled, “Weapons and munitions dropped by American planes and landed in the areas controlled by the Islamic State in Kobani.”
While the authenticity of this latest video could not be independently confirmed, there is no doubt that the ISIS fighters in the clip are in possession of a rich bounty of American hand grenades, rounds for small rockets, and other supplies. The White House stated on CNN, “we feel very confident that, when we air drop support as we did into Kobani… we’ve been able to hit the target in terms of reaching the people we want to reach.” Perhaps not all of them…
Pentagon spokesman Rear Admiral John Kriby confirms the latest embarrassment for the administration:
• KIRBY SAYS WEAPONS IN VIDEO ARE OF TYPE THAT U.S. DROPPED
• KIRBY SAYS KOBANI REMAINS A `MIXED, CONTESTED ENVIRONMENT’

end

The following is something that is of great concern: the 2014 Ebola is mutating as fast as the seasonal flu
(courtesy The Spatiotemporal Epidemiological Modeler (STEM) Project/zero hedge)

Ebola 2014 Is Mutating As Fast As Seasonal Flu

Submitted by Tyler Durden on 10/21/2014 15:13 -0400
• BATS

inShare2

Yesterday we reported that according to Peter Jahrling of the National Institute of Allergy and Infectious Disease – one of the top authorities in the world on Ebola – and who is on the front lines fighting Ebola disease in Liberia, there is something different about the current Ebola outbreak in that not only does it spread more easily than it did before, but the viral loads in Ebola patients are much higher than they are used to seeing. “I have a field team in Monrovia. They are running [tests]. They are telling me that viral loads are coming up very quickly and really high, higher than they are used to seeing…. It may be that the virus burns hotter and quicker.”
That is one observation on how different the current Ebola outbreak may be from the traditional fare. Another one comes courtesy of Operon Labs, which as cited in detail below, notes that “the current Ebola 2014 virus is mutating at a similar rate to seasonal flu (Influenza A). This means the current Ebola outbreak has a very high intrinsic rate of viral mutation. The bottom line is that the Ebola virus is changing rapidly, and in the intermediate to long term (3 months to 24 months), Ebola has the potential to evolve.”
The question is evolve into what?
Submitted by The Spatiotemporal Epidemiological Modeler (STEM) Project
Ebola 2014 is Mutating as Fast as Seasonal Flu
Background:
The current Ebola 2014 virus is mutating at a similar rate to seasonal flu (Influenza A). This means the current Ebola outbreak has a very high intrinsic rate of viral mutation. The bottom line is that the Ebola virus is changing rapidly, and in the intermediate to long term (3 months to 24 months), Ebola has the potential to evolve.
We cannot predict exactly what the Ebola virus will look like in 24 months. There is an inherent stochastic randomness to viral evolution which makes predictions on future viral strains difficult, if not impossible. One basic tenet we can rely on is this: Viruses tend to maximize their infectivity (basic reproduction number) within their biological constraints (Nowak, 2006).
These evolutionary constraints can be extremely complex, and can include trade-offs between virulence and infectivity, conditions of superinfection, host population dynamics, and even outbreak control measures.
One of the few statements we can make with confidence that the Ebola genome is changing at a specific rate, which is explained below.
Ebola Mutation Rate:
Analysis of the available research suggests that the Ebola 2014 virus is currently mutating at a rate 200% to 300% higher than historically observed (Gire, 2014).

Ebola Genome Substitution Rates (Gire, 2014)
Furthermore, the Ebola-2014 virus’s mutation rate of 2.0 x 10?³ subs/site/year is nearly identical to Influenza A’s mutation rate of 1.8 x 10?³ subs/site/year (Jenkins, 2002). This means Ebola 2014 is mutating as fast as seasonal flu.

Disclaimer: This paper contains no evidence (for or against) alternate modes of transmission for Ebola, nor is this paper postulating that genetic changes have impacted EVD clinical presentation (although evidence for this has started to emerge). This paper is simply demonstrating what appears to be a rapid rate of evolution in the Ebola 2014 Virus. Many recent Ebola viral mutations have been synonymous mutations, some have been in intergenic regions, while others are non-synonymous substitutions in protein-coding regions. All have unknown impact at the present time. Such questions should be the subject of future scientific research. This article simply points out that Ebola in 2014 is undergoing rapid mutation and adaptation. The future implications of Ebola’s rapid evolution are unclear.
We chose to compare Ebola-2014 to Influenza A (Seasonal Flu) because Influenza is one of the fastest-mutating viruses (Jenkins, 2002). Unlike chickenpox (VZV), which people usually only contract once per lifetime, Influenza can infect a single individual many times repeatedly over the years. One of the reasons Influenza is able to re-infect humans each year is because the Influenza’s high mutation rate allows the virus to generate ‘escape mutants’. Escape mutants are Influenza viruses which are no longer recognized by human immune systems. Each winter presents us with a new mutated strain of the Influenza virus. Rapid mutation is beneficial to Influenza genetic fitness (in regards to antigenic regions), because it allows a ‘new’ Influenza virus to circulate year after year.
The benefit of a high mutation rate in Ebola 2014 is different — the genetic changes in Ebola-2014 allow for rapid exploration of the entire fitness landscape in a brand new host — humans. We need to be aware that the Ebola-2014 virus is undergoing rapid adaptation.

Ebola in Zoonotic Reservoir: Viral Genome adapted to Fruit Bats. (Green)
Ebola in Human Hosts: Viral Genome adapted toHumans. (Red)
Ebola Genotype will move Green -> Red during serial passage through Humans.
Until the Ebola outbreak is brought under control, the Ebola-2014 virus will continue to seed and adapt in its growing pool of West African human hosts. We need to consider that as the weeks and months go on, the rapidly-changing Ebola-2014 virus will undergo repeated export from the West African region to countries around the world.
As new Ebola cases grow in West Africa and elsewhere, we are effectively conducting ‘serial passage’ experiments of Ebola-2014 through human hosts. The repeated passage of Ebola-2014 through humans is exerting selection pressure on the Ebola-2014 virus to adapt to our species (instead of fruit bats). The introduction of Ebola-2014 into a large pool of West African human hosts (coupled with the complex dynamics of evolutionary selection pressure) may allow the Ebola-2014 virus to become more transmissible as the months go on, particularly in the absence of effective control interventions.
The high mutation rate we see in Ebola-2014 reflects its ability to rapidly explore the fitness landscape. The ability of Ebola to undergo rapid genome substitutions and SNPs, coupled with genetic recombination, will allow ‘survival of the fittest’ in Ebola-2014 genetic variants (on both the intra-host and inter-host levels). New Ebola sub-clades are created with each passing month (there are already four sub-clades as of August 2014). New Ebola genetic variants are created with each new infection, though most are selected against. Rapid adaptation emerges from the high intrinsic Ebola-2014 mutation rate, coupled with the virus’s ability to undergo RNA recombination during superinfection.

Molecular dating of the Ebola-2014 outbreak (Gire, 2014).
Probability distributions for both 2014 divergence events are overlaid above.
This phylogenetic tree is based on 99 Ebola viral genomes deep-sequenced from 78 distinct patients in Sierra Leone (Gire, 2014). We can see in the figure above that there are at least four Ebola genetic clusters (or sub-clades) based on phylogenetic analysis: These Ebola clusters are called GN, SL1, SL2, and SL3 by Gire et al. The key takeaway is that even prior to July 2014, the current Ebola outbreak had already accumulated significant genetic diversity. Furthermore, the dominant circulating Ebola variants have changed over time. Up to four different Ebola-2014 viral sub-clades (groups of genetically related Ebola isolates) have circulated between humans since the onset of the 2014 Ebola outbreak.
As the number of people affected by the 2014 Ebola outbreak has grown, so has the number of Ebola unique viral mutations and unique viral genetic lineages. We can expect Ebola 2014 viral lineages to grow as some function f(i) proportional to the number of people infected with Ebola.

Ebola-2014: Acquisition of genetic variation over time (Gire, 2014).
Fifty mutational events (short dashes) and 29 new viral
lineages (long dashes) were observed.
The diagram above suggests that as the Ebola-infected host pool grows, so does the number of unique Ebola viral lineages (Gire, 2014). This implies that Ebola acquires genetic diversity as it infects more people, particularly if the virus undergoes recombination during superinfection (Niman, 2007). The growing number of new Ebola viral lineages will undergo natural selection for some ‘optimum’ balance of virulence, infectivity, tissue tropism, immune suppression, and other parameters which maximize the reproductive fitness of the Ebola virus in humans. What that final virus might eventually look like 2 years from now is anyone’s guess. But the explosion of genetic variation suggests that the Ebola virus will become more difficult to contain as time goes on, which is why early action is important.
The idea that the Ebola-2014 Virus jumped species, but is now somehow ‘static’ or ‘frozen in time’ is a mistake. The Ebola-2014 virus is undergoing a period of rapid adaptation in human hosts, as evidenced by the Ebola RNA sequences deposited in Genbank, and the studies referenced with this article. Hopefully, interventions (like contact tracing) will be able to stop Ebola-2014 before the virus optimizes its genotype.

These are two scenarios to outline what may happen in the future. The critical variable determining the global outcome of Ebola is the response in West Africa, not the response in the United States.
Best Case Scenario:
WHO immediately deploys contact-tracing teams on the ground in West Africa. The US Military is deployed as well, and constructs hospitals sufficient to care for the sick. The hospitals are staffed by qualified (read: well trained) caregivers. Teams on the ground track down and care for Ebola-infected patients across West Africa, distributing self-treatment kits, food, medicine, and expertise. An effort is made to involve local authorities and community leaders. These efforts cause measurable reductions in the basic reproduction number of the virus by the end of 2014.
Within 3 months to 9 months, the outbreak in West Africa peaks, levels-off, and begins to fade. The Ebola virus never has the opportunity to acquire any significant mutations, due to its limited host pool. Ebola is fully under control by early 2015. Sporadic cases in other countries are dealt with by treatment and contact tracing. By Q4 2015, multiple Ebola vaccines and drugs are in the pipeline limiting the overall threat Ebola poses.
Worst Case Scenario:
The international response is perpetually behind the curve. Every response action is 8 to 12 weeks too late. Statistics from the WHO become volatile and are unreliable as the lack of deployed personnel make hard numbers impossible to pin down. By 2015 the number of infections is in the hundreds of thousands in West Africa. The West African region exports ‘asymptomatic infectives’ which go undetected by basic screening. These individuals ‘seed’ outbreaks in other countries.
As more people become infected, a significant mutation arises that allows for a longer asymptomatic but infectious period, increasing the R-0. Globally, cases continue to double every 16 days, contact tracing infrastructure outside the West becomes saturated, and hospitals are overrun. By early-to-mid 2015, the global pool of Ebola-infected patients are in the millions, mainly centered in West Africa and Southeast Asia with multiple strains of varying virulence. A sudden change in the outbreak epidemiology caused by a recombinant Ebola strain causes confusion about how to respond. Efforts at developing treatments/vaccines become logistically complex and ineffective.
The implication of the Ebola 2014 mutation rate is this: A single Ebola mutation doesn’t necessarily mean the virus will become ‘airborne’, or that the virus has altered tissue tropism, or that the virus spreads more easily. But a high intrinsic rate of Ebola mutation means that such changes may become possible in the future. If the number of people infected grows into the hundreds of thousands, or even low millions, then the probability of a significant ‘constellation’ of accumulated Ebola mutations with phenotypic impact becomes more likely. The problem is that accumulated Ebola mutations will scale with the size of the population infected. Conversely, in a small population, such Ebola mutations are not likely to have a significant impact. It’s a bit like the virus is buying lottery tickets… The more lottery tickets the Ebola virus ‘buys’, the more chances it has to ‘win’.
Next Steps:
The general consensus in the scientific and epidemiological community is immediate intervention in West Africa is necessary in order to avoid taking the risky outcomes possible in a ‘worst case’ scenario. A suitable response would need to include airlifting self-treatment kits with thermometers, the distribution of life-saving drugs, the construction of Ebola treatment centers, hospital staffing, contact tracing teams, and so forth. A robust international response must happen soon in order to ensure that the current situation with the Ebola outbreak remains a ‘best case’ outcome.
References:
[1] Genomic surveillance elucidates Ebola virus origin and transmission during the 2014 outbreak. (Gire et al, 2014).

http://www.ncbi.nlm.nih.gov/pubmed/25214632

[2] Rates of Molecular Evolution in RNA Viruses: A Quantitative Phylogenetic Analysis. (Jenkins et al, 2002).

http://www.ncbi.nlm.nih.gov/pubmed/11821909

[3] Isolates of Zaire ebolavirus from wild apes reveal genetic lineage and recombinants. (Wittman et al, 2007).

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2040453/#!po=17.8571

[4] Ebola Recombination: Recombinomics Commentary. (Niman, 2007).

http://www.recombinomics.com/News/11150702/Ebola_Recombination.html

[5] Evolutionary Dynamics: Exploring the Equations of Life. (Nowak, 2006).

http://www.amazon.com/Evolutionary-Dynamics-Exploring-Equations-Life/dp/0674023382

end

And now for your major data points today:

Portuguese 10 yr bond yield: 3.50 up 2 in basis points from Monday night.
(Portugal imploding)

Your closing Portuguese 10 year bond yield Tuesday night: another fall of 7 in basis points on the day

Portuguese 10 year bond yield: 3.41%

Your closing Japanese yield Tuesday down 1 in basis points from Monday night

yield .48% !!!

Japanese 10 year bond yield: .48%

And now for your closing Japanese 10 year bond yield / a rise of 1 in basis points from the morning: ( Japanese markets imploding)

Japanese 10 year bond yield: .49%

end

Your opening currency crosses for Tuesday morning:

EUR/USA: 1.2748 down .0046

USA/JAPAN YEN 106.86 down .090

GBP/USA 1.6142 down .0015

USA/CAN 1.1253 down .0033

This morning the Euro is down , trading now just below the 1.28 level at 1.2748 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 9 basis points at 106.86 yen to the dollar. The pound is down from Monday as it now trades just above the 1.61 level to 1.6142. The Canadian dollar is slightly up this morning with its cross at 1.1253 to the USA dollar.

Early Tuesday morning USA 10 year bond yield: 2.20% !!! up 1 in basis points from Monday night/ (USA economy not doing so well with this low yield)

USA dollar Index early Tuesday morning: 85.19 up 23 cents from Monday’s close

end

The NIKKEI: Tuesday morning down 307 points or 2.03%
Trading from Europe and Asia:

1. Europe all in the green
2/ Asian bourses mixed / Chinese bourses: Hang Sang in the green, Shanghai in the red, Australia in the green: /Nikkei (Japan) red/India’s Sensex in the green

Gold early morning trading: $1249.00

silver:$ 17.44

end

Your closing Spanish 10 year government bond Tuesday/ up 9 in basis points in yield from Monday night.

Spanish 10 year bond yield: 2.26% !!!!!!

Your Tuesday closing Italian 10 year bond yield up 10 in basis points and trading 34 in basis points above Spain./

Italian 10 year bond yield; 2.60%!!!!!

end

IMPORTANT CLOSES FOR TODAY
Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond: Europe falling apart this afternoon

Euro/USA: 1.2730 down .0064
USA/Japan: 106.78 down .160
Great Britain/USA: 1.6174 down 0.0033

USA/Canada: 1.1225 down .0061

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 1.28 level to 1.2730. The yen was up during the afternoon session,and it gained 16 basis points on the day closing well above the 106 cross at 106.78. The British pound lost some ground during the afternoon session and it was down for the day as it closed at 1.6174

. The Canadian dollar was well up during the afternoon session, and it was up on the day closing at 1.1225.

Your closing USA dollar index:

85.26 up 30 cents on the day

your 10 year USA bond yield, a riseof 2 basis points: 2.20%!!!!!!!!!

European and Dow Jones stock index closes:

England FTSE up 105.26 or 1.68%
Paris CAC up 90.00 or 2.25%
German Dax up 169.20 or 1.94%
Spain’s Ibex up 236.90 or 2.39%

Italian FTSE-MIB up 517.62 !!! or 2.79%

The Dow: up 215.14. or 1.31%
Nasdaq; up 98.03 or 2.27%

OIL: WTI 82.81

Brent: 86.22

end

And now for your big USA stories

Today’s NY trading

What Rout? Stocks Have Best Day In A Year

Submitted by Tyler Durden on 10/21/2014 16:07 -0400
• Bond

• China

• Copper

• Crude

• McClellan Oscillator

• NASDAQ

• None
• Volatility

• Volume Spike

inShare

Since 13 minutes after the US equity market opened, the NYSE was broken for 150 symbols from AAPL to XIV (inverse VIX). KO, MCD, & IBM all fell notably on earnings. Credit, Treasuries, and JPY carry all traded ‘risk-off’. But none of that mattered…broken markets and ECB rumors were all that was needed – Nasdaq soared by most in 2014 today, extending its 3-day swing to the best since Dec 2011. Despite USDollar strength (driven by EUR weakness), commodities all rallied with Copper and oil best (WTI >$83 again) but volatility in crude was significant. Treasury yields were mixed (flat to 5Y, +2-3bps 10Y & 30Y). VIX was smashed briefly to a 15 handle (down over 50% from its peak last week).Trannies are up almost 8% from Bullard’s “QE4″ comment last week… normal? Volume was dismally below average.

Nasdaq’s best day in 2014, best 3-day swing in almost 3 years…

Most shorted stocks rose 2.4% – the biggest day in 7 months!

Only 2 things mattered today… ECB rumors and a Broken NYSE…

As cash indices exploded today – Dow up 207 (despite -65 points from IBM, KO, and MCD) – Trannies up over 3%

VIX was smashed lower (to a 15 handle briefly)…

Led by a surge in XIV (inverse VIX ETF) after NYSE broke – and WTF was that huge volume spike?!

As all the major indices explode off the Bullard QE4 comments…
TS INTRA

The long bond and credit were not buying the plan…

Nor was JPY carry…

Treasuries did sell off intrday but steepened just 2-3bps on the day

As the USDollar surged on EUR weakness after rumors of ECB corporate bond buying hit… leaving the USD unchanged from Friday

Despite the USD strength, commodities gained ground – with an earkly spike in gold and silver faded as oil and copper rose…

Notably Copper is best post China GDP ‘beat’ and Gold almost roundtripped…

Charts: Bloomberg
Bonus Chart: The McClellan Oscillator (tracks internal breadth changes) has reached its highest since Sept 2013 (and signaled excess buying then)…

end

As explained above, we had two bad income reports from McDonald’s and Coca Cola and these guys are good bell weather forecasts for the global economy:

First:

McDonald’s…

McDonalds Sales Plunge In Worst Month Since 2003 Following Dollar Meal “Sticker Shock”

Submitted by Tyler Durden on 10/21/2014 09:24 -0400
• Bureau of Labor Statistics

• China

• Cohen

• McDonalds

inShare6

Moments ago, McDonalds not only released earnings and revenues, both of which missed – something which was largely expected since the backward looking data had been telegraphed by MCD’s recent global selling collapse – blanketed by atrocious commentary, but it disclosed its September global retail sales which were for lack of a better word, a disaster, after reporting global sales which dropped 3.8%, below the 3.2% expected, and the worst global month since at least 2003. The pain was everywhere, with Europe plunging 4.2% (est -0.9%), Asia down 7.5%, and the US down a whopping 4.1%, far below the 2.8% expected, and also the worst month in over a decade.

In fact, McDonalds sales in the US have have now gone a whopping 11 months without posting a positive sales month, the longest stretch on record!

But while collapsing MCD sales are a combination of both the insolvent US consumer, who can no longer afford to buy either MCD or Coke (as we commented earlier) especially after purchasing the latest and greatest iThing on credit, as well as shifting tastes and eating the “cool food du jour”, things are only going to get worse from here.
Because in a world that is allegedly flooded with deflation, the one place where everyone considered safe for “dollar meals”, just got more expensive. Bloomberg reports:
Mike Hiner used to take his grandsons to McDonald’s (MCD) when they wanted a treat. With higher wage and food costs pushing up prices at the Golden Arches, he’s increasingly taking them to IHOP, Denny’s and Chili’s instead.

The loss of bargain-seeking customers like Hiner underscores a growing challenge for McDonald’s Corp.: While the company still offers several items for $1, its menu is quietly getting more expensive. McDonald’s said its prices were up about 3 percent through the end of June compared with 12 months earlier. That’s more than the 2.5 percent gain in prices for food Americans purchased away from their homes in the year through August, according to the Bureau of Labor Statistics.

The chain’s diminishing appeal among budget diners — coupled with rising meat costs — are projected to take a bite out of third-quarter earnings due to be reported tomorrow. Analysts estimate that McDonald’s revenue fell 1.8 percent to $7.2 billion in the period. Net income, which also were hurt by a food-safety scare in China, slid 11 percent to $1.36 billion, according to the projections.
And sure enough, see the charts above. But that is only the beginning:
Some Americans are extremely price sensitive, and any increases may send them elsewhere, said John Gordon, principal at San Diego-based Pacific Management Consulting Group, an adviser to restaurants and franchisees.

“If you encourage and kind of seed the notion that you can come in for a couple bucks and get some food — and then you can’t do that anymore — there’s bound to be a reaction,” he said.
There is also bound to be a reaction when the already broke US consumer maxes out their credit card on a telephone and forgets to eat.
The result has been that fast-food chains, long thought of as the cheapest place to grab a quick bite, may now have that reputation working against them, said Joel Cohen, president of Cohen Restaurant Marketing Group in Raleigh, North Carolina. The higher prices may be driving some customers to seek alternatives either at fast-casual chains like Panera Bread Co. (PNRA) or even at sit-down places, he said.

“It’s sticker shock,” Cohen said. “You’re up at price where you could just about be dining at a casual-dining restaurant.”
And when you hear the phrase “sticker shock” in the same sentence as a McDonalds dollar meal, you know the end is in sight.

end

and now Coca Cola..

Coke Blows Up Guidance, Is Latest Consumer Bellwether And Buffett Favorite To Disappoint, Stock Stumbles

Submitted by Tyler Durden on 10/21/2014 08:02 -0400
• Reality

• recovery

• Ukraine

inShare4

Yesterday it was IBM, today it is the turn of that other Buffett favorite and consumer-spending bellwether, Coke, to disappoint and push the stock lower, when not only did KO miss on the top line, reporting $11.98 billion in sales, below the Estimate $12.12 billion, but utter some unpleasant words about the future, guiding “below its long-term EPS growth target for 2014.” And because nothing says strong consumer like one of the biggest consumer staples blowing, we will merely wait for MCDs to come out next and complete the “recovery” picture.
And while elow we present some of the most amusing tidbits from the KO report, nothing beats “structural changes” as in:
• Reported net revenues were even in the quarter and declined 2% year to date. Excluding the impact of structural changes, comparable currency neutral net revenues grew 1% in the quarter and 2% year to date.
• Reported operating income increased 10% in the quarter and 2% year to date. Excluding the impact of structural changes, comparable currency neutral operating income grew 5% in both the quarter and year to date, while the Company continued to invest for growth in its brands with its global system partners.
• After adjusting for structural changes, the Company delivered comparable currency neutral net revenue growth of 1% in the quarter, capturing global price/mix of 1%. On a year-to-date basis, comparable currency neutral net revenues grew 2% after adjusting for structural changes.
Is “strucutral changes” anothera name for “everything that lost us money”?
And yes, FX is becoming a headwind:
• Third quarter reported EPS was $0.48, a decline of 13%, and comparable EPS was $0.53, even with the prior year quarter. Comparable currency neutral EPS increased 6%.
• Reported operating income [for Eurasia and Africa] grew 15% in the quarter, which included a 9 point headwind from foreign currency
• Reported operating income [for Latin America] decreased 9% in the quarter, which included a 6 point headwind from foreign currency
Talk to the Fed, guys. Talk to the Fed.
Moving on to the impact from Russia, which is about to wreak havoc on MCD as well:
• Volume grew 5% in the Eurasia and Africa Group in the quarter leading to volume and value share gains in NARTD beverages…. with the exception of the Russia, Ukraine and Belarus business unit, where volume declined 3%.
Surprisingly, no FX impact in North America but…
Reported net revenues decreased 2% in the quarter, which included a 2 point headwind from structural items related to refranchised territories and changes to our process of buying and selling recyclable materials. Positive price/mix of 1% was offset by a decrease in volume. Reported operating income decreased 5%, which included items impacting comparability, principally net gains/losses related to economic hedges. Comparable currency neutral operating income decreased 1%, primarily driven by increased brand investments and the impact of structural items, partially offset by gross margin expansion.
The bottom line: the “structurally adjusted” “FX-excluding” future is so bright… if only it wasn’t for reality:
• We expect the impact of structural items to be a 1 to 2 point headwind on net revenues and an approximate 2 point headwind on operating income during the fourth quarter of 2014.
• We continue to expect fluctuations in currency exchange rates to have an unfavorable impact on our reported results in 2014. Based on current spot rates, our existing hedge positions, and the cycling of our prior year rates, we expect an approximate 7 point headwind on operating income during the fourth quarter of 2014. We now estimate currency will be a 6 point headwind on our full-year operating income, which is at the high end of the outlook we provided last quarter.
• We continue to expect operating leverage to be flat to slightly positive for the full year.
• We are now targeting full-year 2014 net share repurchases of $2.5 billion.
• Given the above, the Company expects to be below its long-term EPS growth target for 2014.
Bottom line: when one excludes reality, everything is great.

end

Could this lead to another subprime catastrophe?

(courtesy zero hedge)

Subprime Bubble Pop 2.0? Department Of Financial Services Slams America’s Largest Subprime Servicer

Submitted by Tyler Durden on 10/21/2014 13:57 -0400
• David Einhorn

• default

• fixed

• Lehman

• Lehman Brothers

• New Century

• New Normal

• None

• Reality

• Recession

• Subprime Mortgages

inShare

Once upon a time, in the distant 2005 and 2006, the world just couldn’t get enough of such subprime mortgage superstars as New Century Financial. In fact, some may have forgotten, but none other than David Einhorn was a director of New Century until March 2007, when suddenly everything fell apart and a few weeks later the company was bankrupt. The subprime collapse that followed, which contrary to Ben Bernanke’s promises was “not contained”, is what according to most catalyzed the plunge of the US economy into the greatest depression since 1929, led to the default of Lehman Brothers and nearly ended the financial system.
Fast forward to 2014, when the US has a new subprime servicing superstar, which just like in 2006, also happens to be a hedge fund darling. The company: Ocwen Financial (a name which originated when some drunk banker or executive spelled Newco in reverse) which currently is responsible for servicing over $106 billion in subprime mortgages. A darling so prominent among the hedge fund community, it was one of the most beloved hedge fund hotel stocks in late 2012 and 2013, and judging by its current list of holders, still has a plethora of who-is-whohedge and mutual fund holders.

Well, in what may be a resounding echo of March 2006, moments ago the New York Superintendent of Financial Services said that Ocwen had engaged in abuses that could potentially harm hundreds of thousands of borrowers. As AP reports, the state regulator issued a letter Tuesday to Ocwen Financial Corp., documenting the same kinds of suspicious actions that worsened the housing crisis and the Great Recession.
Ocwen inappropriately backdated foreclosure warnings and letters that denied mortgage loan modifications, making it nearly impossible for borrowers to appeal the company’s decision, according to the letter from Benjamin Lawsky, New York’s Superintendent of Financial Services.

The letter refrains from saying whether the backdating was intentional or the result of poor oversight by Ocwen. The company managed $106 billion worth of subprime mortgages at the start of 2014, according to Inside Mortgage Finance.

end

I will leave you tonight with this piece from Mike Krieger

(courtesy Mike Krieger)

Land Of The Free? 1 In 3 Americans Are On File With The FBI In The US Police State

Submitted by Tyler Durden on 10/21/2014 17:44 -0400
• Cronyism

• FBI

• Florida

• Obama Administration

• Tim Geithner

• Wall Street Journal

inShare

Submitted by Mike Krieger of Liberty Blitzkrieg blog,
The sickening transformation of these United States into an authoritarian police state with an incarceration rate that would make Joseph Stalin blush, has been a key theme of my writing since well before the launch of Liberty Blitzkrieg. One of the posts that shocked and disturbed readers most, was published a little over a year ago titled: American Police Make an Arrest Every 2 Seconds in 2012. In the event you never read it, I suggest taking a look before tackling the rest of this piece.
Fast forward to fall 2014, and the Wall Street Journal has a powerful article about how children in schools systems across the U.S. are being arrested or turned over to police custody for doing things that children have always done since the beginning of time. Things such as wearing too much perfume, sharing a classmates’ chicken nuggets, throwing an eraser or chewing gum.
As a result of our insane societal obsession with authority and disproportionate punishment, the WSJ reports that “nearly one out of every three American adults are on file in the FBI’s master criminal database.”
USA! USA!
From the Wall Street Journal:
A generation ago, schoolchildren caught fighting in the corridors, sassing a teacher or skipping class might have ended up in detention. Today, there’s a good chance they will end up in police custody.

In Texas, a student got a misdemeanor ticket for wearing too much perfume. In Wisconsin, a teen was charged with theft after sharing the chicken nuggets from a classmate’s meal—the classmate was on lunch assistance and sharing it meant the teen had violated the law, authorities said. In Florida, a student conducted a science experiment before the authorization of her teacher; when it went awry she received a felony weapons charge.

Over the past 20 years, prompted by changing police tactics and a zero-tolerance attitude toward small crimes, authorities have made more than a quarter of a billion arrests, the Federal Bureau of Investigation estimates. Nearly one out of every three American adults are on file in the FBI’s master criminal database.
Did you catch that too? “Zero-tolerance attitude toward small crimes.” Indeed, the big criminals go to Wall Street, crash the economy and then receive trillions in taxpayer bailouts. Or they get a top job in the Obama Administration, such as Jedi-master of cronyism, Tim Geithner, being chosen as Treasury Secretary.
Back to the WSJ…
At school, talking back or disrupting class can be called disorderly conduct, and a fight can lead to assault and battery charges, said Judith Browne Dianis, executive director of the Advancement Project, a national civil-rights group examining discipline procedures around the country.
If these rules were in place in my day, I would have been arrested about 150 times.
“We’re not talking about criminal behavior,” said Texas State Sen. John Whitmire, the Democratic chair of the senate’s Criminal Justice Committee, who helped pass a new law last year that limits how police officers can ticket students. “I’m talking about school disciplinary issues, throwing an eraser, chewing gum, too much perfume, unbelievable violations” that were resulting in misdemeanor charges.

According to the U.S. Education Department’s Office of Civil Rights, 260,000 students were reported, or “referred” in the official language, to law enforcement by schools in 2012, the most-recent available data.

The number of school police officers rose 55% to about 19,000 in the 10 years to 2007, the last year for which numbers were available, according to a 2013 study from the Congressional Research Service.

The schools crackdown has had its intended effect. Victims’ surveys compiled by the Education Department show that there is a lower rate of violent crime committed in schools, falling to 52 incidents per 100,000 students in 2012 from 181 incidents per 100,000 in 1992.Supporters say that alone proves the worth of aggressive policing.
Well yeah, and pigs in a pen are easily controlled too, but are these the types of children we want to raise?
And what about the downside, such as:
Brushes with the criminal justice system go hand in hand with other negative factors. A study last year of Chicago public schools by a University of Texas and a Harvard researcher found the high-school graduation rate for children with arrest records was 26%, compared with 64% for those without. The study estimated about one-quarter of the juveniles arrested in Chicago annually were arrested in school.

A science experiment that went awry turned into a 17-month battle for Kiera Wilmot and her mother as they tried to clear the honor student’s arrest record. According to the police report, she was on school grounds outside the classroom trying out an experiment that hadn’t been authorized by her teacher. Ms. Wilmot, now 18, said she put a piece of aluminum inside a bottle with two ounces of toilet cleaner to see what would happen. The teen’s mother said she was trying to simulate a volcanic eruption.

“It popped,” blowing the top off the bottle, she said. She was handcuffed by the school-resource office, escorted out of the Bartow, Fla., school and taken to a juvenile facility where she was charged with possessing or discharging firearms or weapons at school and making, throwing, possessing, projecting, placing or discharging a destructive device.
Think about what sorts of lessons we are teaching talented students about experimenting and being creative. A modern Benjamin Franklin would most likely be rotting away in solitary right now.
So as we militarize the police, we police the schools. See the direction this is all headed in?
Keep chanting muppets.

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

Don’t risk what you cannot afford to lose….
There is significant risk involved in trading futures and/or options on futures. Futures and/or options of futures trading may not be suitable for all investors. Investors should consider these risks and evaluate their suitability based on their financial conditions. Past performance is not indicative of future results.

Source: http://fortwealth.com/blog/?p=6071