17 September 2016 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
Another budding, albeit tiny, rally in gold got capped in Far East trading on their Friday morning — and after it was sold back to unchanged, the price didn’t do much until ‘da boyz’ showed up with their spoofing and algos at precisely 8:30 a.m. in New York as the dollar index blasted to the heavens. The low tick came at, or shortly after the London p.m. gold fix — and the subsequent rally got capped even before London closed for the weekend at 4 p.m. BST/11 a.m. EDT. It was sold lower until 2 p.m. in the thinly-traded after-hours market — and then crawled higher until exactly 4:00 p.m. in New York. It didn’t do much after that.
The high and low ticks are barely worth looking up, but the CME recorded them as $1,321.50 and $1,309.20 in the December contract.
Gold finished the Friday session at $1,310.00 spot, down $4.10 from Thursday. Net volume wasn’t overly heavy at a hair under 120,000 contracts, which is surprising considering the fact that gold set a new intraday low, plus closed at a new low for this move down as well.
Here’s the rather truncated 5-minute gold tick chart courtesy of Brad Robertson. He had to leave the office earlier than normal, so the chart only goes to about five minutes before the COMEX close, which is 11:30 a.m. Denver time. As you can tell, all the price/volume action that really mattered came between 6:30 and 10 a.m. MDT, which was 8:30 to noon EDT.
The vertical gray line is 10:00 p.m. Denver time, midnight in New York — and noon China Standard Time [CST] the following day in Shanghai—and don’t forget to add two hours for EDT. The ‘click to enlarge‘ is a must here.
The silver price didn’t do much until the one-hour-and-change price swoon between 11 a.m. and 12:20 p.m. China Standard time. From there it rallied back to almost the $19 spot mark before getting turned lower a few minutes before the London open. It quietly sold lower from there until JPMorgan et al appeared with their algos and their spoofing around 9:10 a.m. in New York, which was forty minutes after gold got hit. The low tick was in less than 15 minutes later. By 10:45 it had gained a bunch of that sell-off back, but didn’t do much after that.
The high and low ticks were recorded as 19.085 and $18.715 in the December contract.
Silver finished the day in New York at $18.755 spot, down 20 cents from Thursday’s close. Net volume was slightly elevated at 39,000 contracts.
And here’s the 5-minute tick chart for silver — and it too ends at 11:30 a.m. Denver time, which was the COMEX close. And as you can tell at a glance, all the volume that mattered came in the one hour interval between 6:30 and 7:30 MDT, which was 8:30 to 9:30 a.m. EDT.
Like for gold, the vertical gray line is 10:00 p.m. Denver time, midnight in New York — and noon China Standard Time [CST] the following day in Shanghai—and don’t forget to add two hours for EDT. The ‘click to enlarge‘ is a must here as well.
Platinum’s tiny rally in morning trading also met the same fate as gold’s tiny rally. It traded about three bucks lower until noon Europe time. From that point the sell-off didn’t get far — and it rallied until 2 p.m. Europe time. But once New York opened, that was it. The last low tick print came at, or just after, the London p.m. gold fix. It rallied 7 or 8 bucks until just before Zurich closed at 11 a.m. EDT — and then met the same fate as gold and silver at that juncture. It traded flat from there into the close, finishing the day at $1,015 spot, down another 12 bucks.
Palladium was the outlier yesterday. Up until 1 p.m. Europe time, which was the noon silver fix in London, it didn’t do a lot. But starting at that point it began to head higher — and then really took off once the London gold fix was in. A short buyer of last resort appeared just before 11 a.m. EDT, which was the close of Zurich trading in Europe and gold and silver trading in London…which was an identical inflection point for the other three precious metals as well. Then shortly before 1 p.m. EDT the market went ‘no ask’ briefly until the short buyer of last resort returned…capping the price, then driving it lower. As it was, palladium finished the day at $672 spot, up 19 dollars from Thursday’s close. But the mind boggles at what its closing price would have been if it had been allowed to trade freely.
I would guess that both price spikes involved short covering, as the palladium market is so thin and illiquid that buying or selling more than a few hundred contracts at once can move the price by quite a bit — and that appeared to be the case on Friday. It was equally obvious that ‘da boyz’ had to step in, or else!
The dollar index closed very late on Thursday afternoon in New York at 95.26 — and began to creep higher around 2:35 p.m. in Shanghai. It really took off at 8:30 a.m. in New York — and the index topped out at 96.11 at precisely 3 p.m. EDT. It sold off a handful of basis points from there, closing at 96.02 — and up 76 basis points from Thursday.
Considering the size of the dollar index move, the precious metals didn’t get sold off by much. Silver didn’t get hit until an hour into the dollar index rally — and palladium rallied hard. It was another case of the HFT boyz and their algos gone wild again in a strictly COMEX affair.
Here, as always, is the 6-month U.S. dollar index which, as I keep saying, is equally as managed as the precious metals. “There are no markets anymore, only interventions.” — Chris Powell, GATA, April 2008
The gold shares gapped down about a percent at the open in New York yesterday morning — and then rallied briefly into positive territory after the post-p.m. London gold fix rally. Once it was obvious to the traders that the price was at its high for the day, the stocks got sold down until around 2:15 p.m. EDT. At that point some bottom fishing appeared — and they rallied quietly for the remainder of the Friday trading session. The HUI closed down 1.99 percent.
The silver equities followed an almost identical price pattern, except their respective low ticks came shortly before 2 p.m. in New York and, like the gold shares, rallied quietly for the rest of the day. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 1.97 percent. Click to enlarge if necessary.
And here are three charts from Nick that tell all. The first one shows the changes in gold, silver, platinum and palladium for the past week, in both percent and dollar and cents terms, as of Friday’s closes in New York — along with the changes in the HUI and Silver Sentiment/Silver 7 Index. The Click to Enlarge feature really helps on all three charts.
And the chart below shows the month-to-date changes as of Friday’s close.
And below are the year-to-date changes as of the close of trading yesterday.
The CME Daily Delivery Report showed that zero gold and 27 silver contracts were posted for delivery on Tuesday within the COMEX-approved depositories. In silver, the only two short/issuers were ABN Amro and International F.C. Stone with 19 and 8 contracts out of their respective client accounts. There were 7 long/stoppers in total — and Scotiabank and JPMorgan picked up 11 and 3 contracts respectively for their own accounts. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Friday trading session showed that gold open interest in September fell by 11 contracts, leaving 137 still around — and none were posted for delivery on Tuesday as per the above paragraph. Thursday’s Daily Delivery Report showed that 11 gold contracts were posted for delivery on Monday, so the numbers match perfectly, so nothing was added or subtracted from the September delivery month. Silver’s o.i. in September dropped by 91 contracts, leaving 711 still open, minus the 27 silver contracts mentioned in the previous paragraph. Thursday’s Daily Delivery Report showed that 149 silver contracts were actually posted for delivery on Monday, so that means that 149-91=58 more silver contracts were added to the September delivery month. These new additions every day are not inconsequential amounts, as 58 contracts is 290,000 troy ounces, or 9 tonnes of the stuff. The day prior to that it was 10 tonnes added.
October open interest in gold declined by 1,964 contracts, leaving 37,569 still around.
Much to my amazement, there was a big deposit in GLD yesterday, as an authorized participant, or maybe more than one, added a hefty 333,917 troy ounces. I’ll be more than interested in what Ted has to say about that in his weekly review this afternoon. And as of 7:09 p.m. EDT yesterday evening, there were no reported changes in SLV.
There was another sales report from the U.S. Mint yesterday. They sold 10,500 troy ounces of gold eagles — 1,500 one-ounce 24K gold buffaloes — along with 100,000 silver eagles.
Month-to-date the mint has sold 47,500 troy ounces of gold eagles, which is a very decent amount. Plus they’ve sold 7,500 one-ounce 24K gold buffaloes, which is about average for this time of month — but only 1,050,000 silver eagles, which is a bit more than 50 percent lower that the average monthly sales for the first six months of this year. In all fairness, however, it should mentioned that September sales should turn out to be noticeably stronger than they were in July and August. But that’s not saying much, as JPMorgan has definitely left the building.
After a week of nothing much happening, there was finally some decent activity in gold over at the COMEX-approved depositories on Thursday. Only 546.550 troy ounces/17 kilobars [U.K./U.S. kilobar weight] were reported received over at the Manfra, Tordella & Brookes, Inc. depository, but 93,979 troy ounces were shipped out the door for parts unknown. Of that amount there was 63,437 troy ounces shipped out of JPMorgan — and the balance came out of Canada’s Scotiabank. I’m sure Ted will have more to say about that shipment out of JPM in his commentary today. Another link to this activity is here.
It was another big day in silver, as 1,751,281 troy ounces were reported received, but only 251,443 troy ounces were shipped out. Of the ‘in’ amounts, 1,156,123 troy ounces ended up at HSBC USA, plus 595,157 troy ounces were received at CNT. The ‘out’ activity was at Brink’s Inc. and Scotiabank. The link to all that action is here.
It was pretty quiet over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday. Only 616 were received — and another 458 were shipped out. All of the activity was at Brink’s, Inc. as per usual — and link to that, in troy ounces, is here.
As expected, there was improvement in the Commercial net short positions in both silver and gold in yesterday’s Commitment of Traders Report for positions held at the close of trading on Tuesday. The headline numbers in the Legacy COT Report were a disappointment, but under the hood in the Disaggregated COT Report, the Managed Money traders more than made up for the shortfall.
In silver, the Commercial net short position only declined by 2,907 contracts, or 14.5 million troy ounces of paper silver. I must admit that I was expecting a number quite a bit more than double that amount. The Commercial net short position is now down to a sky-high 96,675 contracts, or 483.4 million troy ounces of paper silver.
They arrived at that commercial net short position number for the week by reducing their long position by 491 contracts, but they also reduced their short position by 3,398 contracts — and the difference between those numbers [2,907 contracts] was the change for the reporting week.
Ted said that the Big 4 commercial traders actually increased their short position by about 1,800 contracts — and the ‘5 through 8’ traders increased their short position as well by around 500 contracts. It was Ted’s raptors, the commercial traders other than the Big 8, that did all the heavy lifting, as they increased their long position by approximately 5,200 contracts. As Ted said on the phone yesterday, this week’s report drives the concentration ratios of the Big 8 traders to new record highs in silver, as you’ll read about in the “Days to Cover” section that immediately follows this COT analysis.
It was a wildly different story under the hood in the Disaggregated COT Report, as the Managed Money traders decreased their long positions by 5,206 contracts, plus they covered 3,928 short contracts. The sum of those — 9,134 contracts — is the net change for the reporting week — and was far in excess of the 2,907 contract change in the commercial net short position. And, as is always the case, the difference was made up the traders in the ‘Other Reportables’ and ‘Nonreportable’/small trader category.
Ted pegs JPMorgan’s short position in silver at around 32,000 contracts, which is up 2,000 contracts from the prior week’s report.
Here’s the 9-year chart for the silver COT Report — and even with the decline in the Commercial net short position during the reporting week, it’s still ugly in the extreme. This week’s changes were barely a rounding error in the grand scheme of things. Click to enlarge
In gold, the Commercial net short position dropped by 18,602 contracts, or 1.86 million troy ounces. I was hoping/expecting a number double that amount. The commercial net short position now stands at 31.13 million troy ounces which Ted says is still wildly bearish.
They arrived at the weekly change by increasing their long position by 6,371 contracts, plus they reduced their short position by 12,231 contracts. The sum of those two numbers is the change during the reporting week.
Of that 18,602 contract change for the week, Ted said that the Big 4 traders only decreased their net short position by about 2,700 contracts — and the ‘5 through 8’ traders did about the same, as they decreased their short position by around 2,400 contracts. Like in silver, it was Ted’s raptors that did all the work, as they reduced their net short position by a chunky 13,500 contracts. The ratio of these changes during the reporting week also drives the concentration ratios of the Big 4 and ‘5 through 8′ commercial traders higher as well.
Under the hood in the Disaggregated COT Report it was a very different story in gold as well. There, the Managed Money traders decreased their long positions by 20,061 contracts, plus they added 6,497 short contracts, for a 27,098 contract swing for the reporting week. That was quite a bit larger than the commercial net short position change in gold, which was 18,602 contracts. Of course the difference was made up in the other two categories, as these numbers have to add up and balance — and right to the very last contract as well!
Here’s the 9-year COT chart for gold — and it’s still at nose-bleed levels no matter how you care to interpret it — even after the improvements in this weeks’ report. Click to enlarge.
Ted mentioned in his mid-week column ten days ago that some of the volume from the big post-Labour Day rally on that Tuesday [Sept 2] in both gold and silver had not been reported in a timely manner — and showed up on Wednesday. That may be one of the reason that the commercial net short positions didn’t decrease as much as expected during the reporting week just past.
Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading on Tuesday. It shows the days of world production that it would take to cover the short positions of the Big 4 — and Big ‘5 through 8’ traders in each physically traded commodity on the COMEX. Click to enlarge.
As I say in every Saturday column—the short positions of the Big 4 and 8 traders in silver continues to redefine the meaning of the words ‘obscene’ and ‘grotesque’ — and it’s at a new record this week. For the current reporting week, the Big 4 are short 152 days [5 months] of world silver production—and the ‘5 through 8’ traders are short an additional 67 days of world silver production—for a total of 219 days, which is just over 7 months of world silver production, or 532.1 million troy ounces of paper silver held short by the Big 8.
And it should be pointed out here that in the COT Report above, the Commercial net short position in silver is 483.4 million troy ounces. So the Big 8 hold a short position larger than the net position—and by about 48.7 million troy ounces. That’s how grotesque, twisted, obscene—and dangerous—this COT situation in silver has become—and gold and platinum aren’t far behind.
And if that isn’t bad enough, the Big 8 are short 55.0 percent of the entire open interest in silver on the COMEX futures market — which is a new record high concentration. How insane is that? And if you subtract out the market-neutral spread trades, it’s a reasonable assumption the Big 8 are short more than 60 percent of the total open interest in silver. In gold it’s ‘only’ 47.6 percent of the total open interest that the Big 8 are short. This is nuts!
And as an aside, the two largest silver shorts on Planet Earth—JPMorgan and Canada’s Scotiabank—are short about 102 days of world silver production between the two of them—and that 102 days represents around 67 percent [two thirds] of the length of the red bar in silver in the above chart. The other two traders in the Big 4 category are short, on average, about 25 days of world silver production apiece.
And based on Ted’s estimate of JPMorgan’s short position of 32,000 contracts, JPMorgan is short around 67 days of world silver production all by itself. Because of that, the approximate short position in silver held by Scotiabank works out to around 35 days of world silver production, maximum.
In gold, the Big 4 are now short just about 74 days of world gold production — and the ‘5 through 8’ another 24 days of world production, for a total of 98 days. The Big 4 in gold are short just under 76 percent of the total short position held by the Big 8. How’s that for a concentrated short position within a concentrated short position???
And just as an aside those numbers in platinum are 70 and 69 percent respectively.
I have an average number of stories today — and I hope you’ll find enough time in what’s left of your weekend to read the ones that interest you.
CRITICAL READS
U.S. retail sales, factory output slump; third-quarter growth forecast cut
U.S. retail sales fell more than expected in August amid weak purchases of automobiles and a range of other goods, pointing to cooling domestic demand that further diminishes expectations of a Federal Reserve interest rate increase next week.
The economic growth outlook also took a hit from other data on Thursday showing a drop in manufacturing output last month. The reports, which extended August’s run of weak data, prompted economists to cut their growth estimates for the third quarter.
“With households not buying, manufacturers stopped producing. If the Fed is data dependent, then the next time a hike would likely come is December,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
The Commerce Department said retail sales declined 0.3 percent after edging up 0.1 percent in July. Sales were up 1.9 percent from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales slipped 0.1 percent last month after a similar drop in July.
This Reuters article, filed from Washington, put in an appearance on their Internet sit at 1:31 p.m. on Thursday afternoon EDT — and I found it in yesterday’s edition of the King Report. Another link to this news item is here.
Goldman Downgrades S&P 500, Stoxx 600 to ‘Sell’, Cites “Elevated Valuations and the Risk of Shocks“
The gloves finally come off.
After tactfully warning clients for months that staying invested in US stocks and bonds is an unacceptable risk, overnight Goldman’s Peter Oppenheimer finally changed Goldman’s official “tactical” bias, and as of this moment recommends selling not only bonds, as well as the S&P500 and Europe’s Stoxx 600 “due to elevated valuations across assets and the risk of shocks.”
Here is the full list of Goldman’s latest recos:
We are Underweight S&P 500 as we see strong positioning, headwinds from the resumption of the Fed rate hike cycle and a strong Dollar, and increasing political uncertainty into the US elections.
We are also Underweight Europe into year-end due to elevated political uncertainty (from Brexit and the Italian referendum) and uncertainty on ECB policies. A ‘no’ vote in the Italian referendum (a 40% probability, in our view) could put pressure on Italian risky assets, in particular banks, and increase political uncertainty in Italy and the Euro area.
Negative macro surprises and the global bond sell-off since last week have driven a reversal of the ‘Goldilocks’ summer rally. Risk parity and balanced funds suffered in particular, with a sharp increase in equity/bond correlations. We think bond yields will increase more until year-end, and downgrade bonds to Underweight on a 3-month horizon (in line with 12-month). However, while rate volatility could pick up in the near term, we expect the most pressure in the back end and continued anchoring of the front end by central banks next week.
There’s a bit more to this list of G.S. recommendations than is show here — and you can find them in this Zero Hedge piece that was posted on their website at 7:12 a.m. EDT on Friday morning. Another link to this article is here.
SEC is gearing up for next smack down on bogus earnings numbers
The Securities and Exchange Commission is getting ready for the next step in its effort to crack down on the use by companies of customized numbers that the regulator says can mislead investors.
In May, the SEC’s Division of Corporation Finance confirmed it had established an internal task force to closely review the use of “non-GAAP” numbers — those that do not comply with Generally Accepted Accounting Principles—and to check whether companies were responding to new guidance on those metrics that was issued on May 17.
Keith Higgins, director of the SEC’s corporation finance division, told MarketWatch in an email on May 31, that “staff will be incorporating this new guidance into our review of filings, which we expect will result in the issuance of comment letters directed at those practices.”
Corp Fin professionals are ready to send out those comment letters targeting companies that were selected for extra scrutiny at the beginning of the summer. The letters will address non- compliance with the new guidance in releases published during the second-quarter earnings season.
This news item was posted on the marketwatch.com Internet site at 7:16 a.m. on Friday morning EDT — and it comes courtesy of Scott Linn. I had a similar story in my column either on Thursday or Friday on this subject, but this one is better — and another link to it is here.
The Demolition of Truth: Psychologists Examine 9/11 — PBS Television
September 11, 2001 marked one of the most tragic days in American history. Fifteen years later, the events of that day continue to have a visceral and even traumatic impact on many Americans. Additionally, millions of Americans and citizens around the world question the official account of that day.
THE DEMOLITION OF TRUTH presents testimony from highly-credentialed scientists, engineers, and military experts, including Dr. Robert Bowman, Dr. Lynn Margulis, Dr. Niels Harrit, and many more. This expert testimony is interwoven with analyses by social scientists who examine the psychological impact of 9/11 and the phenomena that have kept us blinded to truths too painful to acknowledge, even to ourselves.
The film concludes with steps we can take, individually and collectively, toward healing. An epilogue by actor Ed Asner summarizes these analyses, emphasizing the role played by mainstream media that, lamentably, parrot their government sources rather than question them.
This commentary appeared on Colorado Public Television on Sunday, September 11 — and I must admit that I was shocked to see that they held nothing back, even naming names — and talking about the ‘New World Order’ in the process. It runs for 1:57:28 — and was obviously used as a fundraiser for that station, plus others as well, I’m sure. Without doubt, it falls into the absolute must watch category — and if you feel like making a donation to their station along the way, public television is a very worthwhile cause. This program was posted in my Tuesday column — and I mentioned then that I would be posting it in today’s column if you didn’t have the time for it back then. I thank ‘Zoey’ for sharing it with us. It’s posted in the public domain on the youtube.com Internet site — and another link to it is here.
The IYI: Intellectual Yet Idiot — Nassim Nicholas Taleb
What we have been seeing worldwide, from India to the U.K. to the U.S., is the rebellion against the inner circle of no-skin-in-the-game policymaking “clerks” and journalists-insiders, that class of paternalistic semi-intellectual experts with some Ivy league, Oxford-Cambridge, or similar label-driven education who are telling the rest of us 1) what to do, 2) what to eat, 3) how to speak, 4) how to think… and 5) who to vote for.
But the problem is the one-eyed following the blind: these self-described members of the “intelligenzia” can’t find a coconut in Coconut Island, meaning they aren’t intelligent enough to define intelligence and fall into circularities — but their main skills is capacity to pass exams written by people like them. With psychology papers replicating less than 40%, dietary advice reversing after 30 years of fatphobia, macroeconomic analysis working worse than astrology, the appointment of Bernanke who was less than clueless of the risks, and pharmaceutical trials replicating at best only 1/3th of the time, people are perfectly entitled to rely on their own ancestral instinct and listen to their grandmothers (or Montaigne and such filtered classical knowledge) with a better track record than these policymaking goons.
Indeed one can see that these academico-bureaucrats wanting to run our lives aren’t even rigorous, whether in medical statistics or policymaking. They cant tell science from scientism — in fact in their eyes scientism looks more scientific than real science.
The Intellectual Yet Idiot is a production of modernity hence has been accelerating since the mid twentieth century, to reach its local supremum today, along with the broad category of people without skin-in-the-game who have been invading many walks of life. Why? Simply, in most countries, the government’s role is between five and ten times what it was a century ago (expressed in percentage of GDP). The IYI seems ubiquitous in our lives but is still a small minority and is rarely seen outside specialized outlets, think tanks, the media, and universities — most people have proper jobs and there are not many openings for the IYI.
This short ‘intellectual’ dissertation by Nassim Taleb showed up on the medium.com Internet site late yesterday morning EDT. It’s worth reading, but don’t get lost in the words while you’re battling your way through it. I thank reader U.D. for passing it around — and another link to it is here.
Foreign Central Banks Sell a Record $343 Billion in U.S. Treasuries in the Last Year
One month ago, when we last looked at the Fed’s update of Treasuries held in custody, we noted something troubling: the number dropped sharply, declining by over $17 billion, bringing the total to $2.871 trillion, the lowest amount of Treasuries held by foreigners at the Fed since 2012. One month later, we refresh this chart and find that in the latest weekly update, foreign central banks accelerated their liquidation of US paper held in the Fed’s custody account, which tumbled by $27.5 billion in the past week, the biggest weekly drop since January 2015, pushing the total amount of custodial paper to $2.83 trillion, the lowest since 2012.
Then today, in addition to the Fed’s custody data, we also received the latest monthly Treasury International Capital data, which showed that the troubling trend presented last one month ago, has accelerated. Recall that a month ago, we reported that in the latest 12 months we have observed a not so stealthy, if massive $335 billion in Treasury selling in the period July 2015- June 2016, something truly unprecedented in size and scope.
Fast forward one month, when in the latest monthly update, that of July, we find that what until a month ago was “merely” a record $335 billion in central bank sales in the LTM period ending June 30, one month later, this number has risen to a new all time high $343.4 billion, or well over a third of a trillion in Treasuries sold in the past 12 months.
What is becoming increasingly obvious, is that both foreign central banks, sovereign wealth funds, reserve managers, and virtually every other official institution in possession of US paper, is liquidating it at a never before seen pace. In some cases, like China, this is to offset devaluation pressure; in others such as Saudi Arabia, it is to provide the funds needed to offset the collapse of the petrodollar, and to backstop the country’s soaring budget deficit.
This 3-chart Zero Hedge piece from very late Friday afternoon EDT is certainly worth a minute of your time — and another link to this worthwhile article is here.
Deutsche Bonds “Dropping Like a Stone” as “Most Dangerous Bank in the World” Plummets
“They are dropping like a stone,” warns one European credit strategist as signals from the bottom of Deutsche Bank’s capital structure signal a “huge increase in the potential for a coupon skip.“
Bloomberg reports, the bank’s 1.75 billion euros ($2 billion) of 6% additional Tier 1 bonds, the first notes to take losses in a crisis, are crashing… as the world’s most systemically dangerous bank faces existential problems once again.
Deutsche Bank AG’s riskiest bonds plummeted after the German lender received a $14 billion claim from the U.S. Justice Department to settle an investigation into the firm’s sale of residential mortgage-backed securities.
“They are dropping like a stone,” said Tomas Kinmonth, a credit strategist at ABN Amro Bank NV in Amsterdam. “The fine, even if reduced, could surpass all provisions held by the bank.”
This brief 4-chart Zero Hedge article was posted on their website at 9:20 a.m. on Friday morning EDT — and it’s also worth a minute or so of your time. Another link to this story is here.
The Existential Madness of Putin-Bashing — Robert Parry
Arguably, the nuttiest neoconservative idea – among a long list of nutty ideas – has been to destabilize nuclear-armed Russia by weakening its economy, isolating it from Europe, pushing NATO up to its borders, demonizing its leadership, and sponsoring anti-government political activists inside Russia to promote “regime change.”
This breathtakingly dangerous strategy has been formulated and implemented with little serious debate inside the United States as the major mainstream news media and the neocons’ liberal-interventionist sidekicks have fallen in line much as they did during the run-up to the disastrous invasion of Iraq in 2003.
Except with Russia, the risks are even greater – conceivably, a nuclear war that could exterminate life on the planet. Yet, despite those stakes, there has been a cavalier – even goofy – attitude in the U.S. political/media mainstream about undertaking this new “regime change” project aimed at Moscow.
There is also little appreciation of how lucky the world was when the Soviet Union fell apart in 1991 without some Russian extremists seizing control of the nuclear codes and taking humanity to the brink of extinction. Back then, there was a mix of luck and restrained leadership, especially on the Soviet side.
This longish commentary is certainly worth reading, even if you’re not a serious student of the New Great Game. It showed up on David Stockman’s website on Friday sometime — and I thank Roy Stephens for pointing it out. Another link to it is here.
Tales of the New Cold War: Syria/Ukraine Ceasefires. Obama Trash-talking Putin and Trump — John Batchelor Interviews Stephen F. Cohen
So far it has been a strange week that sees progress in ceasefires at two different flash points of the NCW (New Cold War), Syria and Ukraine. It may be too soon to tell whether the Syrian one, begun Monday, will endure as there have been numerous violations by the militants, but Russia has nevertheless called for a 48 hour extension of the ceasefire today (Sept. 14). The Ukrainian situation is very strange with Donetske rebel leader Alexander Zakharchenko suddenly announcing a unilateral cease fire yesterday that has, stranger still, apparently been received favourably by President Poroshenko in Kiev. Poroshenko announced that he will consult his parliament to make constitutional amendments that would allow autonomy to Donetsk and would follow the Minsk2 agreement. This is an amazing turnaround by Poroshenko who only very recently repudiated Minsk2. My only problem with this effort is why we should expect the Ukrainian Rada to cooperate with Poroshenko’s proposal? We know the hostility towards the Donbass rebels is strongly held there. If the Rada rejects the effort, then everything stays the same and Poroshenko cannot be blamed. So my optimism is more guarded.
Cohen sees the Syrian cease fire, if it holds for seven days, as a real positive if it can lead to cooperation between Russia and the USA against ISIS. This would essentially result in a military alliance. Cohen sees this, if it happens, as a “crossroads in history”. As expected, the opposition to this in the USA will be stupendous – and Cohen itemizes some examples that the Furies surely are descending. In the past cooperation in the old Cold War occurred over the recognition of “shared interests”. However, the current argument is that there are no shared interests and this concept is said most loudly in the US, and thus we watch as the vilification of Putin enters a new stage of hysteria. The question, Cohen states, is whether Obama can stand up to the pressure?
The changes in Ukraine are no less interesting. Batchelor asks the questions that if Poroshenko does make the effort for peace with Donetsk to the Rada is he serious, has he be been “arm twisted”, and is this a positive thing? Cohen does think it positive as it would end the civil war. He goes on to speculate that Poroshenko was convinced to do this from huge pressure from the EU, possibly Washington as well, to comply. What he had to lose by thwarting this would be more serious than the coup threat he is facing from the Right Sector. And Batchelor goes on to speculate about the Normandy Four and their respective political problems that also played a role in forcing this issue. Again there are lots of ways this can fail.
And conforming to recent pattern the last part of the discussion moves to the presidential race. Trump has stayed on message that he is not in favour of the NCW, stands up strongly in the face of massive media criticism over this, and has from the beginning in embracing this policy. The subtext of his firmness is a message that he actually can stand firm on matters of principal against opposition – and be a strong president. Cohen points out that in this regard he and Obama both share pro détente positions where Washington and Russia should cooperate against ISIS in Syria. All in all it has been a positive week where on all fronts there is a movement away from the NCW.
This 40-minute audio interview put in an appearance on the audioboom.com Internet site on Tuesday, but for length and content reasons had to wait for Saturday’s column. I thank Ken Hurt for sending along the link but, as usual, the biggest of all Thank Yous goes out to Larry Galearis for wordsmithing the above executive summary. Another link to ‘all of the above’ is here.
Assad’s Death Warrant: Mike Whitney
“Secret cables and reports by the U.S., Saudi and Israeli intelligence agencies indicate that the moment Assad rejected the Qatari pipeline, military and intelligence planners quickly arrived at the consensus that fomenting a Sunni uprising in Syria to overthrow the uncooperative Bashar Assad was a feasible path to achieving the shared objective of completing the Qatar/Turkey gas link. In 2009, according to WikiLeaks, soon after Bashar Assad rejected the Qatar pipeline, the CIA began funding opposition groups in Syria.”
— Robert F. Kennedy Jr., Why the Arabs don’t want us in Syria, Politico
The conflict in Syria is not a war in the conventional sense of the word. It is a regime change operation, just like Libya and Iraq were regime change operations.
The main driver of the conflict is the country that’s toppled more than 50 sovereign governments since the end of World War 2. We’re talking about the United States of course.
This short essay easily falls into the absolute must read category. It was posted on the counterpunch.org Internet site on Thursday — and I thank Patricia Caulfield for bringing it to our attention. Another link to this brief must read commentary is here.
Japan Looks to Bring in More Foreign Workers as Population Falls
Two aides to Japanese Prime Minister Shinzo Abe said the nation is planning to bring in more overseas workers to bolster the shrinking labor force.
Masahiko Shibayama, a lawmaker in Abe’s ruling Liberal Democratic Party lawmaker who serves as a special adviser to the prime minister, said in an interview in Singapore on Friday that policies under consideration may result in a doubling of foreign workers in Japan.
“Probably a lot of strategies are going to be adopted in the coming few years,” Shibayama said. “I don’t think it’s a fixed goal of the government but, in my opinion, doubling the number of foreign workers cannot be avoided in this global market situation. We have to make a sustainable system for accepting more and more foreign workers.”
Immigration has often been proposed as a solution to Japan’s demographic woes in an aging society with a low birthrate. Abe has vowed to stop the population from falling below 100 million from the current 127 million, though the idea of bringing in more foreigners has yet to take root amid concerns about the potential effect on a relatively closed society.
Japan’s demographics are terrifying — and basically irreversible, no matter what Abe says or does. When you’re country is basically a ‘hermit kingdom’, this is the end result at some point. This Bloomberg news item showed up on their Internet sit at 12:09 a.m. Denver time on Friday morning — and I thank Brad Robertson who brings it to us via Zero Hedge. Another link to this story is here.
China Ups the Game in the South China Sea
The Joint Sea-2016 started this Monday; that’s the fifth annual China-Russia naval drill, featuring stalwarts from both navies in action at the eastern waters of Zhanjiang, in Guangdong province, the HQ of the People’s Liberation Army (PLA) Navy Nanhai Fleet.
Considering this is the first time that the Joint Sea is happening in the South China Sea, apocalyptic alarms from the usual suspects could not be more predictable – and thoroughly dismissed by the Beijing leadership.
The Joint Sea-2016 intervenes just after a quite significant holding hand moment last week in Laos. Hand holders were no less than China’s premier Li Keqiang and Filipino President Rodrigo Duterte, a.k.a. The Punisher, clad for a change in full suit and tie regalia.
There were good reasons for such camaraderie. After all China and ASEAN had just agreed that the framework for a legally binding code of conduct in the South China Sea will be in effect before the end of the year.
This commentary by Pepe appeared on the sputniknews.com Internet site on Monday evening Moscow time — and I thank ‘aurora’ for passing it around yesterday. Another link to this opinion piece is here.
Doug Noland: Risk Off, the BOJ and China
Is a meaningful de-risking/de-leveraging episode possible with global central banks injecting liquidity at the current almost $2.0 TN annualized pace?
Thus far, central bankers have successfully quashed every incipient Risk Off. Market tumult has repeatedly been reversed by central bank assurances of even more aggressive monetary stimulus. The flood gates were opened with 2012’s global concerted “whatever it takes.” Massive QE did not, however, prevent 2013’s “taper tantrum.” Previously unimaginable ECB and BOJ QE coupled with ultra-loose monetary policy from the Fed were barely enough to keep global markets from seizing up earlier in the year.
It’s my long-held view that market interventions and liquidity backstops work primarily to promote speculative excess and resulting Bubbles. While celebrated as “enlightened policymaking” throughout the markets, an “activist” governmental role (fiscal, central bank, GSE, etc.) is inevitably destabilizing. The upshot of now two decades of activism is a global marketplace dominated by speculation and leveraging.
I’ll posit that a given size of “liquidity backstop” fosters a commensurate speculative response in the marketplace, ensuring that a larger future backstop/intervention will be required come the next serious de-risking/de-leveraging episode. The essence of the current (global government finance) Bubble is that central banks have committed to doing “whatever it takes” – and this moving target “whatever it will take” has kept inflating right along with speculative market and asset Bubbles across the globe. This scheme has gone on for years. A Day of Reckoning cannot be postponed indefinitely.
Doug’s Credit Bubble Bulletin appeared on his website around midnight Denver time last night — and is always a must read for me. Another link to his commentary is here.
The PHOTOS and the FUNNIES
With nothing at the pond these days, I was forced to go hunting in the flower beds at home — and came up with this honey bee, pollen sacs full, digging for nectar in one of the last flowers of summer/fall. I used a 12mm extension tube with my zoom lens set on 70mm at f9 for this shot. Depth of field is at premium in situations like this, but it turned out OK. The Click to Enlarge feature really helps here.
The WRAP
Today’s pop ‘blast from the past’ is from their 1972 album Machine Head. The band was formed in 1968 — and it, together with Led Zeppelin and Black Sabbath, have been referred to as the “unholy trinity of British hard rock and heavy metal in the early to mid-seventies“. That they were — and the song needs no introduction — and the link is here.
Today’s classical ‘blast from the past’ is one I’ve posted before — and it sits diametrically opposite to the hard rock ‘blast from the past’ linked above. By the time Jules Massenet’s Opera Thaïs had its premiere performance in Paris on 16 March 1894 — this entr’acte for violin and orchestra had already been transcribed for seven different instruments. The opera itself is rarely performed anymore, but the Meditation lives on in concert halls around the world to this day. I’ve heard it a couple of times live — and there isn’t a dry eye in the house when it’s over. Here’s the incomparable Sarah Chang doing the honours. The youtube.com video is not that great, but the sound is wonderful — and that’s all that matters. The link is here. Enjoy.
Gold, silver and platinum were all closed at new lows for this move down. Palladium was the only outlier, as it rocketed higher. And as I mentioned in my discussion on both gold and silver at the top of this column, I was surprised that the volume numbers weren’t higher in both silver and gold.
Since this is my Saturday