Gold closed up $15.40 to $1392.00 (comex closing time). Silver rose by 3 cents to $22.49 (comex closing time)
In the access market at 6:30 pm, gold and silver are trading at the following prices :
Gold was on the defensive early last night until the halting of the Nikkei exchange. Then all of the bourses were massively in the red and only gold stood out. By the time the comex opened, gold was trading around $1390.00. The bankers refused to quit as they knocked gold down again but the physical buying was just too great as gold closed near its highs at $1392.00. Silver was a little more subdued closing up only 3 cents on the day.
At the Comex, the open interest in silver fell by 1,308 contracts to 147,311 contracts with silver's rise in price yesterday by 3 cents. The silver OI is holding firm at elevated levels . The open interest on the gold contract rose by 5,242 contracts to 451,335 . The gold deliveries for May rose a bit today to 9.45 tonnes and this is an off month for gold. The number of silver ounces, standing for delivery in May lowered a bit standing at 17.210 million oz. ( On first day notice: 14.860 million oz.)
Again, at the Comex, gold is departing as investors are frightened to death of a confiscation similar to what happened at MFGlobal or Refco. Tonight, the Comex registered or dealer gold remains at 1.668 million oz or 51.88 tonnes. The total of all gold at the comex fell slightly and still well below the 8 million oz at 7.897 million oz or 245.6 tonnes of gold.
The GLD reported another loss in gold inventory of 1.5 tonnes. The SLV inventory of silver lost a gigantic 5.648 million oz. The game will end when the last ounce of gold from the GLD/LBMA leaves London's shores for Chinese waters.
Today we have a great commentary from Bill Holter as he tackles the huge rise in yields on the Japanese 10 yr bonds (now 1%) and the USA (now 2%) and what this means. You do not want to miss this very important commentary.
Today, we have an important commentary from Ted Butler as he approached the GAO to complain that the CFTC was not doing anything with its 5 year investigation on the silver mess. They have responded and seem anxious to tackle this mess. The GAO is only answerable to Congress.
James Turk is now reporting that gold is being delayed at the LBMA due to tightness in the metal.
The big story of today was Japan. Not only did the authorities halt the Japanese bond market for the 3rd time, but they also halted for the first time in many years, the Nikkei as it lost a monstrous 1143 points. From high to low point, the Nikkei lost 1500 points.
We will go over these and other stories but first.....................
Here are the details:
The total gold comex open interest rose by 6961 contracts from 446,087 up to 451,335 with gold falling by $1.20 yesterday. The front non active delivery month of May saw its OI fell by 16 contracts down to 1056. However we had 18 delivery notice filed on Wednesday. Thus we gained 2 gold contracts in May or an additional 200 oz will stand. The next active contract month is June and here the OI fell by 14,912 contracts to 159,968 as most of these paper players rolled into August. June is the second biggest delivery month in gold's calender and first day notice is a week today as Friday is a holiday. The estimated volume today was huge at 233,608 contracts. The confirmed volume on Wednesday was extremely good at 397,981 contracts.
The total silver Comex OI completely plays to a different drummer than gold. It fell by 1308 contracts from 148,619 down to 147,311, with silver's slight rise in price of 2 cents yesterday. The front active silver delivery month of May saw it's OI fall by 15 contracts down to 149. We had 10 delivery notices filed on Wednesday so we lost 5 contracts or 25,000 of silver will not stand for delivery in May. The next delivery month for silver is June and here the OI fell by 22 contracts to stand at 372. The next big active contract month is July and here the OI fell by 2711 contracts to rest tonight at 77,863. It looks like we had some short covering as the bankers might be thinking that the silver situation was a little steamy for them. The estimated volume today was good, coming in at 43,080 contracts. The confirmed volume on Wednesday was huge at 80,863.
Comex gold/May contract month:
We had 0 customer deposits today:
total customer deposit: nil oz
We had 1 customer withdrawal today:
i) Out of Scotia: 64,136.441 oz
total customer withdrawals: 64,136.441 oz
1982 contracts x 100 oz per contract or 198,200 oz (served) + 1056 notices or 105,600 oz (to be served upon) = 303,800 oz or 9.45 tonnes of gold.
We gained an additional 200 oz of gold standing for the May delivery month.
This is extremely high for a non active month.
It is also interesting that the USA produces around 20 tonnes of gold per month
and thus the amount standing for gold this month represents 47% of that total production.
The big June delivery month will surely be exciting to watch judging by the huge demand for gold in May. We will also see if the boys have any trouble servicing the last 1,056 contracts in the May delivery month We have 4 more trading sessions before first day notice. We will also watch what happens with JPMorgan with respect to its customer gold. It remains now at 9.25 tonnes of gold.
i) Out of Scotia: 60,354.66 oz
total customer withdrawals: 60,354.66 oz
May 23/2013
Ounces
| |
Withdrawals from Dealers Inventory in oz
|
nil
|
Withdrawals from Customer Inventory in oz
|
64,136.441 (Scotia)
|
Deposits to the Dealer Inventory in oz
|
nil
|
Deposits to the Customer Inventory, in oz
| nil |
No of oz served (contracts) today
|
0 (nil oz)
|
No of oz to be served (notices)
|
1056 (105,600)
|
Total monthly oz gold served (contracts) so far this month
|
1982 (198,200)
|
Total accumulative withdrawal of gold from the Dealers inventory this month
|
10,656.61
|
Total accumulative withdrawal of gold from the Customer inventory this month
| 732,237.45 oz |
We had fair activity at the gold vaults.
The dealer had 0 deposits and 0 dealer withdrawals.
We had 0 customer deposits today:
total customer deposit: nil oz
We had 1 customer withdrawal today:
i) Out of Scotia: 64,136.441 oz
total customer withdrawals: 64,136.441 oz
We had 1 adjustments
Out of Brinks: 600.01 oz was adjusted out of the customer account and back into the dealer account at Brinks.
The JPMorgan customer vault remains at 297,426.75 oz today or 9.25 tonnes
as there were no transactions
Out of Brinks: 600.01 oz was adjusted out of the customer account and back into the dealer account at Brinks.
The JPMorgan customer vault remains at 297,426.75 oz today or 9.25 tonnes
as there were no transactions
Tonight the dealer inventory remains tonight at a low of 1.668 million oz (51.88) tonnes of gold. The total of all gold falls again to its low point at the comex, resting tonight at 7.897 million oz or 245.62 tonnes.
The CME reported that we had 0 notices filed today for nil oz of gold.
To calculate the quantity of gold ounces that will stand, I take the OI standing for May (1056) and subtract out today's notices (0) which leaves us with 1056 notices or 105,600 oz left to be served upon our longs.
To calculate the quantity of gold ounces that will stand, I take the OI standing for May (1056) and subtract out today's notices (0) which leaves us with 1056 notices or 105,600 oz left to be served upon our longs.
Thus we have the following gold ounces standing for metal in May:
1982 contracts x 100 oz per contract or 198,200 oz (served) + 1056 notices or 105,600 oz (to be served upon) = 303,800 oz or 9.45 tonnes of gold.
We gained an additional 200 oz of gold standing for the May delivery month.
This is extremely high for a non active month.
It is also interesting that the USA produces around 20 tonnes of gold per month
and thus the amount standing for gold this month represents 47% of that total production.
The big June delivery month will surely be exciting to watch judging by the huge demand for gold in May. We will also see if the boys have any trouble servicing the last 1,056 contracts in the May delivery month We have 4 more trading sessions before first day notice. We will also watch what happens with JPMorgan with respect to its customer gold. It remains now at 9.25 tonnes of gold.
end
Silver:
May 23.2013: May silver:
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory | 60,354.66 oz (Scotia) |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | 1,149,707.77 (CNT Scotia) |
| No of oz served (contracts) | 40 (200,000) |
| No of oz to be served (notices) | 109 (545,000 oz) |
| Total monthly oz silver served (contracts) | 3333 (16,665,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | 903,273.57 oz |
| Total accumulative withdrawal of silver from the Customer inventory this month | 4,750,363.0 oz |
Today, we had good activity inside the silver vaults.
we had 0 dealer deposits and 0 dealer withdrawals.
We had 2 customer deposits:
i) Into CNT: 600,055.70 oz
ii) Into Scotia: 549,652.07 oz
total customer deposit; 1,1149,707.77 oz
We had 1 customer withdrawals:
We had 2 customer deposits:
i) Into CNT: 600,055.70 oz
ii) Into Scotia: 549,652.07 oz
total customer deposit; 1,1149,707.77 oz
We had 1 customer withdrawals:
i) Out of Scotia: 60,354.66 oz
total customer withdrawals: 60,354.66 oz
we had 1 adjustments today
i. Out of the CNT vault: 161,149.10 oz was adjusted out of the customer and back into the dealer account at CNT
i. Out of the CNT vault: 161,149.10 oz was adjusted out of the customer and back into the dealer account at CNT
Registered silver at : 43.716 million oz
total of all silver: 165.338 million oz.
The CME reported that we had 40 notices filed for 200,000 oz. We have a total of 3,333 notices filed so far this month for 16,665,000 oz. To calculate the number of ounces that will stand in silver, I take the OI standing for May (149) and subtract out today's notices (40) which leaves us with 109 notices or 545,000 oz left to be served upon our longs.
Thus the total number of silver ounces standing in this active delivery month of May is as follows:
3333 contracts x 5000 oz per contract (served) = 16,665,000 + 109 contracts x 5000 oz = 545,000 oz ( to be served) = 17,210,000 oz.
we lost 5 contracts or 25,000 of silver which will not stand for May today. The total standing for silver is still superb for May.
The total amount standing for May in silver represents 51.22% of ANNUAL silver production from the USA
Thus the total number of silver ounces standing in this active delivery month of May is as follows:
3333 contracts x 5000 oz per contract (served) = 16,665,000 + 109 contracts x 5000 oz = 545,000 oz ( to be served) = 17,210,000 oz.
we lost 5 contracts or 25,000 of silver which will not stand for May today. The total standing for silver is still superb for May.
The total amount standing for May in silver represents 51.22% of ANNUAL silver production from the USA
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.
Now let us check on gold inventories at the GLD first:
May 23.2013:
May 22.2013:
May 21:2013
May 20.2013:
May 17.2013:
May 16.2013:
May 15.2013:
may 14.2013:
May 10.2013:
May 8.2013:
may 7.2013:
May 6.2013:
Today, the GLD reported another a loss in inventory of 1.5 tonnes of gold. Yesterday 3.01 tonnes were withdrawn which followed Tuesday's 8.42 tonnes. Monday we lost 6.91 tonnes. Everyday we witness massive amounts of gold leave London's vaults. This is equivalent to a bank run..let's call it a bullion bank run!!
Now let us check on gold inventories at the GLD first:
May 23.2013:
Tonnes1,018.57
Ounces32,747,937.28
Value US$45.192 billion
May 22.2013:
Tonnes1,020.07
Ounces32,796,277.52
Value US$46.177 billion
May 21:2013
Tonnes1,023.08
Ounces32,892,959.74
Value US$44.743 billion
May 20.2013:
Tonnes1,031.50
Ounces33,163,669.76
Value US$44.913 billion
May 17.2013:
Tonnes1,038.41
Ounces33,386,040.80
Value US$45.683 billion
May 16.2013:
Tonnes1,041.42
Ounces33,482,727.36
Value US$46.226 billlion
May 15.2013:
Tonnes1,047.13
Ounces33,666,434.30
Value US$47.457 billion
may 14.2013:
Tonnes1,051.65
Ounces33,811,468.47
Value US$48.465 billion
May 13.2013:
Tonnes1,051.65
Ounces33,811,468.47
Value US$48.364 billion
May 10.2013:
Tonnes1,051.65
Ounces33,811,468.47
Value US$48.222 billion
May 9.2013:
Tonnes1,054.18
Ounces33,892,812.62
Value US$49.641 billion
May 8.2013:
Tonnes1,051.47
Ounces33,805,784.75
Value US$49.598 billion
may 7.2013:
Tonnes1,057.79
Ounces34,008,852.21
Value US$49.089 billion
May 6.2013:
Tonnes1,062.30
Ounces34,153,900.65
Value US$50.153 billion
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. As you can see, the bleeding of physical gold from this locale continues unabated. 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)
As a reminder the total comex gold had inventories of around 11 million oz in 2011. Today it fell a bit and now stands at 7.897 million oz (245.62 tonnes)
end
Inventory at SLV (6 pm est)
May 22.2013
May 21/2013:
May 20.2013:
May 17/2013
May 16.203:
Inventory at SLV (6 pm est)
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 322,245,369.800 |
| Tonnes of Silver in Trust | 10,022.95 |
May 22.2013
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 327,893,650.100 |
| Tonnes of Silver in Trust | 10,198.63 |
May 21/2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 327,893,650.100 |
| Tonnes of Silver in Trust | 10,198.63 |
May 20.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 329,631,679.700 |
| Tonnes of Silver in Trust | 10,252.69 |
May 17/2013
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 329,631,679.700 |
| Tonnes of Silver in Trust | 10,252.69 |
May 16.203:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 334,121,683.000 |
| Tonnes of Silver in Trust | 10,392.35 |
May 15:2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 335,666,675.000 |
| Tonnes of Silver in Trust | 10,440.40 |
May 14.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 335,666,675.000 |
| Tonnes of Silver in Trust | 10,440.40 |
May 13.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 335,666,675.000 |
| Tonnes of Silver in Trust | 10,440.40 |
May 10.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 335,666,675.000 |
| Tonnes of Silver in Trust | 10,440.40 |
May 9.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 335,666,675.000 |
may 8.2013
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 335,376,960.800 |
| Tonnes of Silver in Trust | 10,431.39 |
may 7.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 335,376,960.800 |
| Tonnes of Silver in Trust | 10,431.39 |
May 6.2013:
| Inception Date | 4/21/2006 |
| Ounces of Silver in Trust | 335,376,960.800 |
| Tonnes of Silver in Trust | 10,431.39 |
My goodness, we lost an astronomical 5.648 million oz of silver. We now have both the SLV and GLD vaults as crime scenes as the bankers rob the inventory to pay sovereigns of Eastern persuasion.
end
My goodness, we lost an astronomical 5.648 million oz of silver. We now have both the SLV and GLD vaults as crime scenes as the bankers rob the inventory to pay sovereigns of Eastern persuasion.
end
end
And now for our premiums to NAV for the funds I follow:
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
(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 1.4% percent to NAV in usa funds and a negative 1.6% to NAV for Cdn funds. ( May 23/13) .
1. Central Fund of Canada: traded at negative 1.4% percent to NAV in usa funds and a negative 1.6% to NAV for Cdn funds. ( May 23/13) .
2. Sprott silver fund (PSLV): Premium to NAV rose to .80% NAV May 22/2013
3. Sprott gold fund (PHYS): premium to NAV rose to - .48% positive to NAV May 22/ 2013 (today's not out yet)
3. Sprott gold fund (PHYS): premium to NAV rose to - .48% positive to NAV May 22/ 2013 (today's not out yet)
end
end
And now for the major physical stories we faced today:
Early gold/silver trading from Asia and Europe early Friday morning
Note: Turkey is paying $25.00 per oz above spot for gold bars as supplies dwindle.
Singapore and Hon Kong is 5 to 6 dollars premium over spot. Dubai is paying 7 to 10 dollars over spot.
Note: Turkey is paying $25.00 per oz above spot for gold bars as supplies dwindle.
Singapore and Hon Kong is 5 to 6 dollars premium over spot. Dubai is paying 7 to 10 dollars over spot.
(courtesy Goldcore)
-- Posted Thursday, 23 May 2013 | | 1 Comment  Today’s AM fix was USD 1,386.00, EUR 1,074.92 and GBP 919.16 per ounce. Yesterday’s AM fix was USD 1,385.25, EUR 1,071.43 and GBP 917.75 per ounce. Gold fell $10.20 or 0.74% yesterday to $1,367.60/oz and silver finished up 0.07%. Gold is up today while stock indices globally are sharply down after the Nikkei crashed 7.3%. The stock crash in Japan is leading to weakness in European equities and will lead to losses when U.S. markets open.  Gold - 1 Day – (Bloomberg) The Nikkei decline is being attributed to the poor Chinese PMI data but the more likely reason is speculators profit taking leading to panic selling. Currency debasement and rampant speculation had led the Nikkei to increase by an incredible 85% in just over 6 months. Bernanke hinting at reducing Federal Reserve bond buying and balance sheet expansion and a more prudent U.S. monetary policy and the still very fragile Japanese economy likely also contributed.  Nikkei - 1 Year – (Bloomberg) Gold is oversold on a host of benchmarks and was due a bounce and the Nikkei plummet and stock weakness in Europe, the FTSE is down by 1.9% and the CAC and DAX by more than 2.4%, have led to gold buying. Stock losses appear to have contributed to speculators covering short positions and some speculators and investors buying gold again. Silver too has benefitted from the renewed ‘risk off’ environment and risen 1.4%. If there are sharp losses on Wall Street today –increased safe haven demand should be seen. Sharp falls in U.S. equities seem possible given the recent outsize gains despite increasingly poor fundamentals. However, sharp losses on Wall Street could lead to further short term gold weakness if there is margin call selling. There was short covering action yesterday and we expect more short covering however the scale of the losses in Japan overnight and risks of sharp falls in European and U.S. markets mean that in the short term, gold may be vulnerable. There remains the risk of a massive short squeeze in the gold market as speculators such as Wall Street banks and hedge funds have made “the biggest bet ever against gold prices.”  Chart courtesy of Zero Hedge This is likely to propel gold higher recovering much of the losses in recent months. It is likely to do so as the shorts are trend following speculators who are again completely ignoring the very positive gold fundamentals with massive demand for physical and rising premiums globally. Gold’s price premium on the Shanghai Gold Exchange stood at $22/oz and remained above $20/oz for a fourth consecutive trading day overnight. India is paying a premium of nearly $40 per 10 gramme bars. Dubai buyers are paying a premium of $7-10 per kilogramme. Turkey is reported to be paying a premium of $25 an ounce over spot prices. Hong Kong and Singapore buyers are paying premium of $5 per ounce for gold bars. Markets are becoming more and more casino like and are now the preserve of speculators. For prudent pension owners, investors and savers this makes an allocation to physical gold more important than ever.  Precious Metals Currency Ranked Returns in USD – (Bloomberg) Gold’s fundamentals remain sound and volatility in stock markets will lead to renewed safe haven demand for the precious metals. Gold has had a difficult few months but will reassert itself as an important diversification and safe haven asset in the coming months. NEWS “Gold is up today, so far, while everything else is down” - Bloomberg
Gold Halts Two-Day Decline as Stocks Drop Globally - Bloomberg
US Treasury Secretary Tapping Federal Retiree Pension Fund To Avoid Default – Washington Post COMMENTARY They Better Pray There Is No Short Squeeze... – Zero Hedge Why Ounces Are More Important Than False Paper Prices – Max Keiser Big Silver Shorts cover Madly – Got Gold Report Jim Sinclair Gold Seminar - London, June 1 – JS Mineset For breaking news and commentary on financial markets and gold, follow us on Twitter. www.GoldCore.com end An excellent commentary today courtesy of Bill Holter. He asks the same question that I ask: if the Fed is purchasing 1 trillion USA per year and they stop, who on earth will purchase these instruments as all nations are having financial problems of their own. He discusses events of today where the USA 10 year bond surpassed 2% and the Japanese 10 year bond hit 1%. And more important, he discusses the true meaning of QE, the "purchasing of stuff". These printed dollars bids up assets. Without this printed money, the whole house of cards will come tumbling down. And the real problem with a violent rise in interest rates: it sets off derivative triggers to our major bankers. a must read.... (courtesy Bill Holter/Miles Franklin) A "whiff" is all that is needed
This link was headlined on Drudgereport.com as "Fed chairman warns ending stimulus would carry substantial risks". Well no kidding! As I've written many times, "no more QE...no more system", period. Who would step in and purchase $1 trillion+ of Treasury securities that the Fed is currently buying? And if they did find buyers (doubtful), how high would the yields need to be to attract the buyers? ...and of course the next question would be, are those rates too high and at levels that take up more in interest expense than the Treasury even takes in?
Ben Bernanke testified yesterday before Congress and spoke about the "tapering" of QE. We have also been offered a trial balloon(s) over the last few weeks regarding cutting back on QE. The results (even though nothing has been shaved back)? Japanese treasury securities are now over 1% and U.S. Treasuries are over 2%. The Japanese Nikkei average ended last night down over 7% after opening up 3%...can you say "reversal day"? Stock markets all over the globe are down over 2% (except of course the freemarkets in the U.S.). It is important to understand that these dislocations have taken place strictly based on the "THOUGHT" of lesser Quantitative Easing.
Before I write any further, I'd like to go back to basics and remind you exactly what "QE" is. QE is "code" for outright monetization. It is high falutin (sp?) gobbledygook speak for plain old fashioned PRINTING. "Printing" to purchase Treasury securities that no one else wants nor would purchase. Pure printing to be used to buy "stuff". "Stuff" as in assets that need "help" to keep their prices high so that the message that "all is well" continues to ring throughout the realm. Pure and unadulterated printing that is used to paint the pretty (false) pictures so the populace will continue to sleep in oblivion.
The point is this, even the slightest whiff that the monetization will slow (forget about actually stop) will cause an outright panic and implosion of asset values as EVERYONE tries to be the "first one out". Think of it this way, in any Ponzi scheme wouldn't you be an immediate "seller" if you knew that no more sucker money (or even just less money) was going to enter the scheme? And this, in a nutshell is THE problem! Without the infusion of new money, current asset values are not and cannot be justified in any world that we know of.
All you need to look at are 2 markets right now, the Japanese and U.S. Treasury markets. They have crossed 2 "round numbers", 1% and 2% respectively. This CANNOT continue, rates CANNOT go up...or the entire system will collapse in a heap into one giant black hole of insolvency. Forget about banks and insurance companies, forget about housing, forget about equity values, forget about the economic ramifications...think "derivatives". The "few" trillion of these Treasury securities have a "leech" market attached to them. This market is at a minimum 100 times the size of the paper market itself and is where the banks trade amongst themselves. "Someone, somewhere" is going to lose, lose big and go broke...which of course will break the daisy chain of false values and solvency.
Please keep in mind that all of the above is happening at the exact same time that hedge funds have built the biggest short position in "paper" Gold ever. http://www.zerohedge.com/news/
|
end
A must read for today. Normally at the London fix, there is a delay of 2 days before gold is transferred to the buyer. This is referred to as T plus 2. Due to the shortage of metal, delays are now 5 days or greater, known as T plus 5.
(courtesy James Turk/Kingworld News)
Gold deliveries delayed in London, Turk tells King World News
Submitted by cpowell on Thu, 2013-05-23 17:58. Section: Daily Dispatches
1:55p ET Thursday, May 23, 2013
Dear Friend of GATA and Gold:
GoldMoney founder and GATA consultant James Turk today tells King World News of delivery delays in the London gold market, adding to evidence of strain in the gold market around the world, and predicts that the paper shorts are about to be overrun. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
end
Gene Arensberg discusses the COT report and how the big silver shorts are covering like mad:
(courtesy gotgoldreport/GATA)
Gene Arensberg discusses the COT report and how the big silver shorts are covering like mad:
(courtesy gotgoldreport/GATA)
Gene Arensberg's Got Gold Report: Big silver shorts cover madly
Submitted by cpowell on Thu, 2013-05-23 05:15. Section: Daily Dispatches
Eric King interviews Robert Fitzwilson
1:13a ET Thursday, May 23, 2013
Dear Friend of GATA and Gold:
Gene Arensberg's latest edition of the Got Gold Report has been posted in video format and it finds the big commercial traders unloading their short positions in silver to the lowest point in 13 years:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
end
(courtesy Kingworldnews/Fitzwilson)
Robert Fitzwilson: Restoring markets requires letting gold rise
Submitted by cpowell on Thu, 2013-05-23 03:54. Section: Daily Dispatches
11:53p ET Wednesday, May 22, 2013
Dear Friend of GATA and Gold:
Writing for King World News, fund manager Robert Fitzwilson says that the world won't see economic growth until markets are allowed to work again, and part of that requires allowing the price of gold to rise against paper assets. Fitzwilson's commentary is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
end
An interview with GATA secretary/Chris Powell
(courtesy GATA)
Goldbroker interviews GATA secretary about gold market manipulation
Submitted by cpowell on Thu, 2013-05-23 19:41. Section: Daily Dispatches
3:38p ET Thursday, May 23, 2013
Dear Friend of GATA and Gold:
Goldbroker's Fabrice Drouin Ristori interviewed your secretary/treasurer about gold market manipulation the other day, leading off with the question of how long it can continue, and the interview was posted today here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
Ted Butler on the silver investigation:
(courtesy Ted Butler)
Gold Anti-Trust Action Committee Inc.
end
Ted Butler on the silver investigation:
(courtesy Ted Butler)
From Ted Butler this evening;
In the last paragraph of the January 5 Weekly Review; I made reference to something I was working on that I preferred not to disclose at that time. I’d like to do so now and ask for your assistance. A little over a year ago, a subscriber sent me a constructive suggestion for how to force the CFTC to do their job and end the silver manipulation. Since I had promised myself that I would never leave any stone unturned in the attempt to end the manipulation, I followed Jeff’s suggestion, although I admit to doing so with as close to zero expectation for success as was possible. The suggestion was to complain to the Government Accountability Office (GAO) about the CFTC. I filed a complaint on their web site hotline www.gao.gov and promptly forgot about the matter. After all, over the years I had complained to every government agency possible and never heard back from anyone.
In December, I got a follow up call from the GAO that caught me so much by surprise that I didn’t know why they were calling me at first. They requested additional information (which I provided) and I have had several conference calls with the agency concerning my allegations of malfeasance by the CFTC in matters related to the silver manipulation. It was only after the first phone call from the agency that I took the time to find out what this agency was all about and I suggest you do the same.
I thought I knew it as the General Accounting Office, but the name was changed in 2004. What I also learned was that this was a unique government agency, separate and distinct from all the other federal agencies, including the CFTC. The GAO reports only to Congress and exists to ensure that all the other federal agencies stay on the up and up. In a practical sense, the GAO is the Inspector General of all the federal agencies. As such (and you can verify this on your own), this agency seems tailor-made to investigate why the CFTC won’t do its job when it comes to the silver manipulation.
Generally, the GAO audits and investigates as directed by law or congressional mandate, ideally at the request of the leadership of the congressional committee that has requisite jurisdiction. However, they can take some cases on their own initiative and that is the approach by which things have advanced to date. I took this approach and stayed quiet about it because I was concerned that as soon as JPMorgan learned of this initiative, they would call in their political favors and make sure any review by the GAO of the CFTC was squashed. That may still turn out to be the case, but that fear is not enough so as to not try at all.
According to my read on the situation, the GAO is interested in pursuing the matter, but a request to investigate from the right committee or representative would seal the deal. I can tell you that in my conversations with them to date, this agency sounds fiercely independent and interested in doing the right thing. What is the right thing in my view? The right thing would be an impartial and objective review for why the CFTC won’t conclude a more than 4.5 year formal silver investigation or make any comment about the unusually large price takedowns that are unique to silver. You know the CFTC would not tolerate such price volatility in any other market, only silver. Can you imagine the uproar if it was the stock market that fell 10% in thin Sunday evening dealings?
I believe that an impartial review of the CFTC by the GAO could end the silver manipulation. At the very least, it would be most welcome to hear from an objective government source which is not tainted by the conflict of having denied a silver manipulation has existed on countless past occasions over decades. If you agree, here’s what I would ask you to do. First, please check and see if your elected representatives are on any of the following committees that have jurisdiction over the CFTC. Don’t let that stop you from contacting the appropriate chairmen directly or your own representatives even if they are not on the appropriate committees.
http://financialservices.house.gov/about/members.htm
http://democrats.agriculture.house.gov/singlepages.aspx?NewsID=34&LSBID=23%7C69
http://www.ag.senate.gov/about
http://www.finance.senate.gov/about/subcommittees/#energy (energy, natural resources and infrastructure)
If you decide to contact your representatives, email me (info@butlerresearch.com) and I will send you my email exchange with the GAO which you can then forward to your elected officials. Each representative has an email system that you must work through that favors actual constituents. In this case email is better than snail mail, as it can take a month to screen correspondence through the postal system. And please follow up by phone and email.
All you have to do is forward my email correspondence to the GAO (which I will send to you upon your request) with a cover note saying that the GAO is considering investigating the CFTC’s handling of the silver market and you are asking that your senator or congressman to also ask the GAO to investigate. Please ask that your representative ask the committee chairman to request that the GAO investigate the CFTC on the issue of the never-ending silver investigation and the agency’s refusal to comment on the unusual price takedowns in silver. It will take a few minutes but it just might make all the difference. The idea is to get a fair and impartial investigation, something that the CFTC is not capable of.
I wouldn’t ask you to write to the CFTC any longer, as it is clear that they are not about to lift a finger to end the manipulation. I don’t regret doing so in the past, but the time has long passed to appeal to the CFTC. The GAO prides itself on its integrity and impartiality and I think they are up to the task of getting to the bottom of this. Your involvement may make the difference. But please keep it to the unresolved silver investigation and the lack of regulatory reaction to the extreme price takedowns.
In closing, please remember these are not trivial matters and you are appealing to those at the highest levels of our country whose job it is to deal with such important issues. I believe that makes it a noble quest. And it sure beats suffering silently.
end
And now your more important paper stories which will influence the price of gold and silver:
Your overnight sentiment
Major points:
Early last night (see below) the Japanese stock market opened badly down with a massive sell off into the close. The yields on the Japanese bonds rose to 1% which caused the authorities to halt trading in the bond market for the 3rd time since Abe announced his new policies. The mark to mark losses to the banks on their tier one assets are enormous. The banks just cannot withstand such a large sell off in such a short time. This triggers derivative losses as we have outlined to you on previous occasions.
While this was going on, China, (see below) reported its first below 50 falsh HSBC PMI manufacturing index results and it came in at 49.6 and thus China is now officially in contraction mode. The problem is that the world needs China to produce goods at warp speed. A slowdown in China will send negative signals throughout the globe.
After the Nikkei was solidly up on the day, suddenly this bourse swooned. At the end of the day
it was down 1143 points and it had an interday swing of 1500 points.
The yen rose dramatically on the day closing at 101.72 and at one point it was 200 basis points higher trading against the uSA dollar.
Thus global risk is off day with all bourses in the red. Gold and silver reversed course and are both higher on the day with gold at 1390.00 and silver at 22.64.
Here are the trading in Asia and Europe so far this morning:
(your early morning sentiment/courtesy of zero hedge)
Submitted by Tyler Durden on 05/23/2013 06:51 -0400
end
Not only was the bond market halted but so was the Nikkei stock exchange.
It ended down 1143 points and the swing from top to bottom was 1500 points. It was the biggest drop in 26 months:
(courtesy zero hedge)
Submitted by Tyler Durden on 05/23/2013 00:33 -0400
Early last night (see below) the Japanese stock market opened badly down with a massive sell off into the close. The yields on the Japanese bonds rose to 1% which caused the authorities to halt trading in the bond market for the 3rd time since Abe announced his new policies. The mark to mark losses to the banks on their tier one assets are enormous. The banks just cannot withstand such a large sell off in such a short time. This triggers derivative losses as we have outlined to you on previous occasions.
While this was going on, China, (see below) reported its first below 50 falsh HSBC PMI manufacturing index results and it came in at 49.6 and thus China is now officially in contraction mode. The problem is that the world needs China to produce goods at warp speed. A slowdown in China will send negative signals throughout the globe.
After the Nikkei was solidly up on the day, suddenly this bourse swooned. At the end of the day
it was down 1143 points and it had an interday swing of 1500 points.
The yen rose dramatically on the day closing at 101.72 and at one point it was 200 basis points higher trading against the uSA dollar.
Thus global risk is off day with all bourses in the red. Gold and silver reversed course and are both higher on the day with gold at 1390.00 and silver at 22.64.
Here are the trading in Asia and Europe so far this morning:
- Nikkei: -7.32%
- Hang Seng: -2.54%
- DAX: -2.64%
- FTSE 100: -1.9%
- CAC 40: -2.3%
- FTSE MIB: -2.56%
(your early morning sentiment/courtesy of zero hedge)
Japan Stock Market Crash Leads To Global Sell Off
Yesterday afternoon, following the rout in the US stock market, we made a spurious preview of the true main event:
We had no idea how right we would be because the second Japan opened, its bond futures market was halted on a circuit breaker as the 10 Year bond plunged to their lowest level since early 2012, hitting 1% and leading to massive Mark to Market losses for Japanese banks, as we also warned would happen. That was just the beginning, and suddenly the realization crept in that the plunging yen at this point is not only negative for banks, but for the entire stock market, leading to what until that point was a solid up session for the Nikkei to the first rumblings of a ris-off.
Shortly thereafter we got the distraction of the Chinese Mfg PMI which dropped into contraction territory for the first time since late 2012, and which set the mood decidedly risk-offish, although the real catalyst may have been a report on copper from Goldman's Roger Yan (which we will cover in depth shortly) and whose implications may be stunning and devastating and may have just popped the Chinese credit bubble (oh, btw, short copper).
And then all hell broke loose, with the Nikkei first rising solidly and then something snapping loud and clear, and sending the index crashing a massive 1,143 an intraday swing of 9% high to low, leading to an over 200 pips move lower in the USDJPY, and leading to a global risk off across the world. Looks like Mrs Watanabe's infatuation with the "get rich scheme" known as the stock market is once again over, and it is time to start from scratch for Kuroda and Goldman proxy company.
Perhaps best summarizing things in the centrally-planned world is the chart of the overnight USDJPY:
... and offsetting this is our old friend, gold, which once again reminded that when the entire centrally-planned construct implodes, as it was on the edge of doing so in Japan last night, it will be the only thing standing:
But don't worry: the short covering squeeze we warned about last night hasn't started yet. Not even close.
All of this is hardly the ringing endorsement that central-planners have
everything under control despite all time highs in stock markets around
the world.
everything under control despite all time highs in stock markets around
the world.
Speaking of stock markets around the world, what goes up always comes down. This is just the start:
- Nikkei: -7.32%
- Hang Seng: -2.54%
- DAX: -2.64%
- FTSE 100: -1.9%
- CAC 40: -2.3%
- FTSE MIB: -2.56%
And so on. And this excludes the plethora of secondary side-effects as US traders walk in and realize their positions have been devastated overnight, and that unless the PPT steps in, the world is facing a tsunami of index margin calls.
A quick summary of what happened from DB's Jim Reid
So at the closing bell, the S&P 500 was 32pts off the highs at 1655 and the UST 10-year yield was 15bps above the lows at 2.0395%. These are big intraday moves. Indeed we haven't seen such ranges for the S&P 500 and Treasuries since 7th November and 14th September last year, respectively. In other markets the US dollar clearly benefited from the hawkish interpretation of the Fed headlines with Dollar index up nearly 1.2% above the lows while Gold fell over 3% from the
intraday highs to close at $1370/oz.
intraday highs to close at $1370/oz.
The FOMC minutes that came later was also viewed to be less dovish than the Fed commentary we’ve seen recently as the minutes noted that “a number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently stronger and sustained growth”. Markets clearly seized upon the hawkish tone from yesterday’s Fed headlines even though the Chairman himself at the Q&A session made it clear that a step to reduce the flow of purchases will not be an automatic mechanistic process of ending the program
but rather that any change in the flow of purchases would depend on incoming data and Fed’s assessment of the outlook. Whilst a slowing of QE is possible in a few months we can’t help to think that the Fed could be forced to restart its QE in a beggar-thy-neighbour environment where central banks in most part of the developed world are still largely on an easing bias in order to steel a share of the global GDP. We think QE or derivations thereof will be around for many years to come.
but rather that any change in the flow of purchases would depend on incoming data and Fed’s assessment of the outlook. Whilst a slowing of QE is possible in a few months we can’t help to think that the Fed could be forced to restart its QE in a beggar-thy-neighbour environment where central banks in most part of the developed world are still largely on an easing bias in order to steel a share of the global GDP. We think QE or derivations thereof will be around for many years to come.
Back to markets, the overnight session is basically seeing a continuation of the risk-off flow that dominated the second half of the US session. Asian equities are mostly in the red and the latest Chinese flash PMI is clearly not helping. The HSBC May Flash PMI for China fell to a 7-month low of 49.6 versus a final April reading of 50.4. The May print was not only the first sub-50 print in 7 months but also extends the downward trend that we've seen since the end of Q1 as for this particular series the final reading for March, April and May were 51.6, 50.4 and 49.6 respectively. The rise in Treasury yields is also having an impact on Asian
rates markets which saw the 10-year part of the Australia and Japanese curve trace 8bp and 1bp higher. Asian and Australian credit spreads are also 2-4bp off overnight as markets digest the disappointing Chinese PMIs. Other Chinese growth related assets including copper (-2.2%) and AUDUSD (-0.6%) are also coming under selling pressure. The AUD in particular is at its lowest level versus the USD since Q3 2010.
rates markets which saw the 10-year part of the Australia and Japanese curve trace 8bp and 1bp higher. Asian and Australian credit spreads are also 2-4bp off overnight as markets digest the disappointing Chinese PMIs. Other Chinese growth related assets including copper (-2.2%) and AUDUSD (-0.6%) are also coming under selling pressure. The AUD in particular is at its lowest level versus the USD since Q3 2010.
Turning to the day ahead, the flash Euroarea manufacturing and service PMIs for May will be a focal point of the European session. The consensus is for a small 0.2 to 0.4pt improvement in PMIs across the Euroarea, France and Germany. The UK’s Q1 GDP revisions and Euroarea advance consumer confidence data are also worth watching. Across the Atlantic, the US preliminary PMI is out today together with April new home sales, the house price index for March and weekly jobless claims. Mario Draghi and the Fed’s Bullard will be speaking today in London – Draghi’s speech is scheduled towards the end of the US session.
end
Not only was the bond market halted but so was the Nikkei stock exchange.
It ended down 1143 points and the swing from top to bottom was 1500 points. It was the biggest drop in 26 months:
(courtesy zero hedge)
Japanese Stocks Halted; Plunge 1500 Points To Close Down 7.3% - Biggest Drop In 26 Months
UPDATE 1: They are panicking... BOJ injected 2 trillion yen ($19.4 billion) into the financial system to stem volatility following a circuit breaker in JGB futures trading.
UPDATE 2: Nikkei 225 is now down 1500 points from its highs and down 1150 (over 7%) from yesterday's close
All the time it is just the quadrillion JPY second-largest bond market in the world that is experiencing volatility on an unprecedented scale, the BoJ and her partners in crime are more than willing to 'officially' say "please do not worry." But when the equity market - that barometer of everything good and holy about Abenomics starts to crater, you can bet the excuses will come fast and furious. Today's drop of over 1500 points (over 9%) from the earlier highs is the largest drop for the Nikkei 225 since March 2011. The Nikkei 225 just lost the all-powerful 15,000 level and is suffering another VaR shock with a 6-sigma move today. In fact given the price levels this drop is on par with the post-Lehman moves in 2008. The question now (with US equity futures also fading fast -20 points and JPY crosses getting hammered) is how will the Japanese risk appetite for peripheral European crap hold up with this crimping in their plan as Japanese bonds and stocks dump?
The Nikkei 225 is down 7% (1000 points) from its earlier highs...
High-to-low this is the biggest drop in 26 months...
Close-to-close this is the biggest drop in the Nikkei in over 26 months!!
The Final closing data is a disaster with JPY surging back to 101.50 (carry trades getting baumgartner'd everywhere), stocks down over 7%, and 10Y JGBs swinging from +11bps at the open to -6bps at the close for the second biggest range day in a decade...
Charts: Bloomberg
end
The closing yield on the 10 year Japanese bond early this morning:
Japan Govt Bond Year to maturity 10 Year Simple Yield
GJGB10:IND
0.930.04 4.27%
As of 00:01:00 ET on 05/23/2013.
end
Graham Summers asks the big question: will Japan trigger a global financial meltdown?
Answer: yes
(courtesy Graham Summers/Phoenix Research Capital)
Submitted by Phoenix Capital Research on 05/23/2013 12:26 -0400
end
Richard Koo of Nomua discusses the rise in Japanese yields is the death blow to Japan:
(courtesy Richard Koo/Nomura/zero hedge)
Submitted by Tyler Durden on 05/23/2013 14:23 -0400
end
Graham Summers asks the big question: will Japan trigger a global financial meltdown?
Answer: yes
(courtesy Graham Summers/Phoenix Research Capital)
Will Japan Trigger a Global Financial Meltdown?
Japan’s bond market is officially losing control.
We have definitely taken out the multi-year trendline here, making a new high higher after a higher low. This is BAD news as it indicates that Japan’s bond market could be entering a cyclical downturn.
If this happens then the great global bond market rig of the last five years is coming to an end. Most analysts have been ignoring bonds because stocks are at record highs.
BIG MISTAKE.
As Japan has indicated, when bonds start to plunge, it’s notgood for stocks. Today the Japanese Bond market fell and the Nikkei plunged 7%. The entire market down 7%... despite the Bank of Japan funneling $19 billion into it to hold things together.
This is what it looks like when a Central Bank begins to lose control. And what’s happening in Japan today will be coming to the US in the not so distant future.
If you think the Fed is not terrified of this, think again. The Fed has pumped over $1 trillion into foreign banks, hoping to stop the mess from getting to the US. As Japan is showing us, the Fed will fail.
For some insights on how to prepare for a market collapse, visit us at:
Richard Koo of Nomua discusses the rise in Japanese yields is the death blow to Japan:
(courtesy Richard Koo/Nomura/zero hedge)
Richard Koo Warns Of "Beginning Of The End" For Japanese Economy
The surge in Japanese long-term interest rates is likely causing some lost sleep among bond market participants and policymakers (despite their ignorance of the moves in the BoJ minutes) as Nomura's Richard Koo notes, if this trend continues (now added to by the collapse in stock prices) it could well mark the “beginning of the end” for the Japanese economy.
Although the stock market has (until now) welcomed the yen’s continued slide against the dollar, Koo warns that this trend needs to be carefully monitored, as simultaneous declines in JGBs and the yen can be interpreted as a loss of faith in the Japanese government and the Bank of Japan. The biggest concerns are that the extreme volatility in Japanese stocks and bonds is occurring at a time when the BOJ was buying large quantities of government bonds.
Until the recent events there was an expectation in the JGB market that bond prices would not fall substantially even if the Bank’s aggressive easing program depressed the yen and lifted inflation expectations as long as the BOJ remained a major buyer. It is now clear that even large-scale BOJ purchases of JGBs cannot stop yields from rising.
Via Richard Koo, Nomura,
The lies are working (too well)...
Mr. Kuroda’s psychological tactic of repeating a lie often enough that it becomes the truth has succeeded brilliantly.The problem is that it works on lenders as well as on borrowers. Moreover, borrowers are agents in the real economy and need time to react, whereas lenders are financial sector entities that can respond instantaneously, creating the possibility that lenders will react sooner than borrowers.The fact that the BOJ has also reversed the traditional order of things and is trying to spark an economic recovery by generating inflation has increased the possibility that higher long-term rates driven by inflation concerns will emerge sooner than higher long term rates rooted in a recovery in the real economy.
But that is leading to a 'bad' (uncontrollable) rise in rates...
If we refer to higher interest rates driven by an economic recovery as a “good” increase and higher rates sparked by inflation concerns as a “bad” increase, I think there is a significant possibility that the latter will emerge first in this case.That would not only weigh heavily on the first shoots of private loan demand to arise in a long time but could also focus attention on the banks’ and the government’s financial health, damping the positive momentum in the economy and markets seen over the last four months.This kind of contradiction in timing is called the “time inconsistency problem,” and it will continue to hang over the policies of the Kuroda BOJ.
Simply out, Koo's perspective is that the BoJ needs to rein itself in...
BOJ needs to declare it will not tolerate overshooting of inflationWhat can the BOJ do? To begin with, the Bank and the government could make it clear that they are targeting a 2% rate of inflation but at the same time, they will not under any condition tolerate a significant overshooting of that rate.By stating that they will not accept an overshooting of the target, the Bank of Japan and the government could reassure the markets that there will be no plunge in the yen and no bouts of uncontrollable inflation.
end
You have to love BB's Weidmann on discussing Japan's massive QE:
I wish them luck....
Submitted by Tyler Durden on 05/23/2013 15:07 -0400
end
The collapse of the Nikkei this morning caused the CME to hike margins by 33% in Nikkei related futures:
(courtesy zero hedge)
Submitted by Tyler Durden on 05/23/2013 16:52 -0400
end
I wish them luck....
Quote Of The Day
The only sane central banker in the world, the Bundesbank's Jens Weidmann, take the prize for today's quote of the day with the following:
- ECB'S WEIDMANN WISHES JAPAN `GOOD LUCK IN THEIR EXPERIMENTS'
So do we. They will need it.
And some other pearls from his speech:
- WEIDMANN: JAPAN SHOWS MONETARY POLICY CAN BE PUSHED INTO DIFFICULT SPOT
- WEIDMANN: COUNTRIES MUST RESPECT THE RULES OF MONETARY UNION
- WEIDMANN SAYS ASKING ECB TO CALM MARKETS CREATES A WEAK EUROPE
- WEIDMANN SAYS STATE INSOLVENCIES MUST BE POSSIBLE IN EURO AREA
And now cue the Princetonians.
end
The collapse of the Nikkei this morning caused the CME to hike margins by 33% in Nikkei related futures:
(courtesy zero hedge)
CME Hikes Nikkei-Associated Margins By 33%
Two years ago it was only gold and silver that saw the CME's wrath on a daily, and sometimes hourly basis. Back then, however, it was due to soaring prices. Today, it is due to the bone-crushing price collapse in the Nikkei which has just seen the CME hike most Nikkei-related outright futures margins by 33%. So not only will those who resume trading Nikkei-related products in the futures market see a big loss in their P&Ls, they will also have to post some 33% more margin. We can only hope they still have some collateral and aren't margined up 100%. That would not be good for the Japanese pennystockmarket and "experiment" no matter how much good luck Jens Weidmann wishes them.
Source: CME
end
(courtesy zero hedge)
Chinese Economy Enters Contraction With First Sub-50 PMI Print Since October
Submitted by Tyler Durden on 05/22/2013 22:04 -0400
For the first time since October 2012, HSBC's China PMI (Flash) printed at a sub-50 level (49.6) missing expectations (50.4) quite notably. This is the worst two-month drop in 17 months. This is problematic for the PBoC who are being arbitraged left, right, and center and know that any stimulus will merely serve to exacerbate the problems they face (as we noted here that China simply cannot function with 'moderate' growth). Every one of the main index's 11 sub-indices is signaling 'problems' - from slower rates of output, slower new orders, employment dropping at a faster rate, stocks rising, and output prices falling. As HSBC notes, "The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of 2Q, casting downside risk to China’s fragile growth recovery." Of course, none of this should come as any surprise to ZH readers - as we noted here, Chinese power consumption grew at its slowest rate since May 2009.
Charts: MarkitEconomics
While many would argue that youth unemployment (the real scariest chart here), in fact we suspect it is the following two charts that are really keeping Mario Draghi up at night. The lip service paid by the French and the Germans to growth strategies and youth unemployment pale in relation to the desperation of the European collateralizer-of-last-resort to de-fragment his transmission channels and unleash his own QE to the starving banking systems of Spain and Italy. As BNP notes, recent data on Italian and Spanish banks’ bad and non-performing loans (NPLs) have reignited the debate on the health of the banking sector in the eurozone’s peripheral economies and its implications for the bloc’s credit supply and, ultimately, economic growth. But what is worse is that interest rates on new loans for a company in Italy or Spain are almost double those in Germany and France. It is against this backdrop that Draghi expressed plans to revive the ABS market - but implementation will prove significantly more challenging than market hopers believe (as is clear in credit markets) and direct purchases will probably face vetoes by a number of influential members of the board.
Via BNP,
...
The deterioration of credit quality and the resulting problems for the banking sector are not news in Spain. The implications for bank balance sheets of the plummeting construction sector were the main trigger of the country’s fiscal crisis. Conversely, in Italy, the sounder state of the banking system allowed it to better withstand the initial shock of the financial crisis. However, a double whammy of indirect crisis effects is now hitting banks in both countries. The rise in government bond yields and the downgrades of sovereign debt ratings have pushed up the cost of funding, while the contraction in GDP has led to a worsening of loan quality.
...
Interest rates on new loans for a company in Italy or Spain are almost double those in Germany and France. With bank lending accounting for around 80% of the financing of the corporate sector in both Italy and Spain (the percentages are even higher for small companies, which find it harder to tap into alternative sources of financing, such as the capital markets), this is damaging firms’ competitive position and proving a significant obstacle to growth.
...
It is against this backdrop that we must view the ECB’s plans to revive the ABS market, as hinted at by central bank chief Mario Draghi at the last ECB press conference. Implementing the plan, we believe, may prove challenging.
Direct purchases would leave the ECB’s balance sheet vulnerable to credit risk and probably face vetoes by a number of influential members of the board. Other alternatives, like the direct involvement of the EIB, are more likely, but not free of problems, as higher levels of non-performing loans ultimately mean more risk.
end
Early Thursday morning currency crosses (7 am)
While many would argue that youth unemployment (the real scariest chart here), in fact we suspect it is the following two charts that are really keeping Mario Draghi up at night. The lip service paid by the French and the Germans to growth strategies and youth unemployment pale in relation to the desperation of the European collateralizer-of-last-resort to de-fragment his transmission channels and unleash his own QE to the starving banking systems of Spain and Italy. As BNP notes, recent data on Italian and Spanish banks’ bad and non-performing loans (NPLs) have reignited the debate on the health of the banking sector in the eurozone’s peripheral economies and its implications for the bloc’s credit supply and, ultimately, economic growth. But what is worse is that interest rates on new loans for a company in Italy or Spain are almost double those in Germany and France. It is against this backdrop that Draghi expressed plans to revive the ABS market - but implementation will prove significantly more challenging than market hopers believe (as is clear in credit markets) and direct purchases will probably face vetoes by a number of influential members of the board.
Via BNP,
...The deterioration of credit quality and the resulting problems for the banking sector are not news in Spain. The implications for bank balance sheets of the plummeting construction sector were the main trigger of the country’s fiscal crisis. Conversely, in Italy, the sounder state of the banking system allowed it to better withstand the initial shock of the financial crisis. However, a double whammy of indirect crisis effects is now hitting banks in both countries. The rise in government bond yields and the downgrades of sovereign debt ratings have pushed up the cost of funding, while the contraction in GDP has led to a worsening of loan quality....Interest rates on new loans for a company in Italy or Spain are almost double those in Germany and France. With bank lending accounting for around 80% of the financing of the corporate sector in both Italy and Spain (the percentages are even higher for small companies, which find it harder to tap into alternative sources of financing, such as the capital markets), this is damaging firms’ competitive position and proving a significant obstacle to growth....It is against this backdrop that we must view the ECB’s plans to revive the ABS market, as hinted at by central bank chief Mario Draghi at the last ECB press conference. Implementing the plan, we believe, may prove challenging.Direct purchases would leave the ECB’s balance sheet vulnerable to credit risk and probably face vetoes by a number of influential members of the board. Other alternatives, like the direct involvement of the EIB, are more likely, but not free of problems, as higher levels of non-performing loans ultimately mean more risk.
end
Early Thursday morning currency crosses (7 am)
Thursday morning we see some euro strength against the dollar from the close on Wednesday with this time trading just below the 1.29 mark at 1.2884. The yen this morning,is a lot stronger trading up 142 basis points to 101.72 yen to the dollar (dollar down). The pound, this morning is a little stronger against the USA dollar, still below the 1.51 column at 1.5072. The Canadian dollar currency is also a lot stronger against the dollar but still remaining in the 1.03 column at 1.0331. We have the sentiment this morning with a mainly risk off situation with all of our European bourses in the red. The Nikkei exchange plummeted this morning with an intraday swing of 1500 points,(down on the day by 1150 points) having received the stop signal with a higher yen (see above stories). Gold and silver are up in the early morning, with gold trading at $1393.00 (up $16.40) and silver is at $22.49 up 3 cents in early morning European trading.
The USA index is down this morning by 42 cents at 83.94
Euro/USA 1.2884 up .0036
USA/yen 101.72 down 1.42
GBP/USA 1.5072 up .0030
USA/Can 1.0331 down .0042
end
And now your closing Spanish 10 year bond yield: ( up 11 in yield)
(a huge jump in yield!!)
SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE
GSPG10YR:IND
4.290.11 2.70%
As of 11:59:00 ET on 05/23/2013.
end
Your Italian 10 year bond yield (rise 12 in yield ...a huge jump in yield plus now over the 4% level)
Italy Govt Bonds 10 Year Gross Yield
GBTPGR10:IND
4.030.12 3.02%
As of 11:59:00 ET on 05/23/2013.
end
Key crosses Friday 5 pm:
The Euro strengthened considerably this afternoon closing now above the 1.29 mark at 1.2937. The yen weakened a tiny bit this afternoon resting at 101.80. The pound strengthened more from this morning , closing above the 1.51 barrier at 1.5110. The Canadian dollar also strengthened more this afternoon from this morning against the dollar closing at 1.0290.
Thursday morning we see some euro strength against the dollar from the close on Wednesday with this time trading just below the 1.29 mark at 1.2884. The yen this morning,is a lot stronger trading up 142 basis points to 101.72 yen to the dollar (dollar down). The pound, this morning is a little stronger against the USA dollar, still below the 1.51 column at 1.5072. The Canadian dollar currency is also a lot stronger against the dollar but still remaining in the 1.03 column at 1.0331. We have the sentiment this morning with a mainly risk off situation with all of our European bourses in the red. The Nikkei exchange plummeted this morning with an intraday swing of 1500 points,(down on the day by 1150 points) having received the stop signal with a higher yen (see above stories). Gold and silver are up in the early morning, with gold trading at $1393.00 (up $16.40) and silver is at $22.49 up 3 cents in early morning European trading.
The USA index is down this morning by 42 cents at 83.94
Euro/USA 1.2884 up .0036
USA/yen 101.72 down 1.42
GBP/USA 1.5072 up .0030
USA/Can 1.0331 down .0042
end
And now your closing Spanish 10 year bond yield: ( up 11 in yield)
(a huge jump in yield!!)
SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE
GSPG10YR:IND
4.290.11 2.70%
As of 11:59:00 ET on 05/23/2013.
end
Thursday morning we see some euro strength against the dollar from the close on Wednesday with this time trading just below the 1.29 mark at 1.2884. The yen this morning,is a lot stronger trading up 142 basis points to 101.72 yen to the dollar (dollar down). The pound, this morning is a little stronger against the USA dollar, still below the 1.51 column at 1.5072. The Canadian dollar currency is also a lot stronger against the dollar but still remaining in the 1.03 column at 1.0331. We have the sentiment this morning with a mainly risk off situation with all of our European bourses in the red. The Nikkei exchange plummeted this morning with an intraday swing of 1500 points,(down on the day by 1150 points) having received the stop signal with a higher yen (see above stories). Gold and silver are up in the early morning, with gold trading at $1393.00 (up $16.40) and silver is at $22.49 up 3 cents in early morning European trading.
The USA index is down this morning by 42 cents at 83.94
Euro/USA 1.2884 up .0036
USA/yen 101.72 down 1.42
GBP/USA 1.5072 up .0030
USA/Can 1.0331 down .0042
end
And now your closing Spanish 10 year bond yield: ( up 11 in yield)
(a huge jump in yield!!)
SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE
GSPG10YR:IND
4.290.11 2.70%
As of 11:59:00 ET on 05/23/2013.
end
Thursday morning we see some euro strength against the dollar from the close on Wednesday with this time trading just below the 1.29 mark at 1.2884. The yen this morning,is a lot stronger trading up 142 basis points to 101.72 yen to the dollar (dollar down). The pound, this morning is a little stronger against the USA dollar, still below the 1.51 column at 1.5072. The Canadian dollar currency is also a lot stronger against the dollar but still remaining in the 1.03 column at 1.0331. We have the sentiment this morning with a mainly risk off situation with all of our European bourses in the red. The Nikkei exchange plummeted this morning with an intraday swing of 1500 points,(down on the day by 1150 points) having received the stop signal with a higher yen (see above stories). Gold and silver are up in the early morning, with gold trading at $1393.00 (up $16.40) and silver is at $22.49 up 3 cents in early morning European trading.
The USA index is down this morning by 42 cents at 83.94
Euro/USA 1.2884 up .0036
USA/yen 101.72 down 1.42
GBP/USA 1.5072 up .0030
USA/Can 1.0331 down .0042
Thursday morning we see some euro strength against the dollar from the close on Wednesday with this time trading just below the 1.29 mark at 1.2884. The yen this morning,is a lot stronger trading up 142 basis points to 101.72 yen to the dollar (dollar down). The pound, this morning is a little stronger against the USA dollar, still below the 1.51 column at 1.5072. The Canadian dollar currency is also a lot stronger against the dollar but still remaining in the 1.03 column at 1.0331. We have the sentiment this morning with a mainly risk off situation with all of our European bourses in the red. The Nikkei exchange plummeted this morning with an intraday swing of 1500 points,(down on the day by 1150 points) having received the stop signal with a higher yen (see above stories). Gold and silver are up in the early morning, with gold trading at $1393.00 (up $16.40) and silver is at $22.49 up 3 cents in early morning European trading.
The USA index is down this morning by 42 cents at 83.94
Euro/USA 1.2884 up .0036
USA/yen 101.72 down 1.42
GBP/USA 1.5072 up .0030
USA/Can 1.0331 down .0042
end
And now your closing Spanish 10 year bond yield: ( up 11 in yield)
(a huge jump in yield!!)
SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE
GSPG10YR:IND
4.290.11 2.70%
As of 11:59:00 ET on 05/23/2013.
end
Your Italian 10 year bond yield (rise 12 in yield ...a huge jump in yield plus now over the 4% level)
Italy Govt Bonds 10 Year Gross Yield
GBTPGR10:IND
4.030.12 3.02%
As of 11:59:00 ET on 05/23/2013.
end
Key crosses Friday 5 pm:
Key crosses Friday 5 pm:
The Euro strengthened considerably this afternoon closing now above the 1.29 mark at 1.2937. The yen weakened a tiny bit this afternoon resting at 101.80. The pound strengthened more from this morning , closing above the 1.51 barrier at 1.5110. The Canadian dollar also strengthened more this afternoon from this morning against the dollar closing at 1.0290.
The USA index was whacked big time today with the final index number down 67 cents to 83.67
Euro/USA 1.2937 up .0089
USA/Yen 101.80 up 1.34
GBP/USA 1.5110 up .0067
USA/Can 1.0290 down .0084
end.
Euro/USA 1.2937 up .0089
USA/Yen 101.80 up 1.34
GBP/USA 1.5110 up .0067
USA/Can 1.0290 down .0084
Your closing figures from Europe today.
i) England/FTSE down 143.48 2.10% ( a huge drop)
ii) Paris/CAC down 83.96 or 2.77% (a huge drop)
iii) German DAX: down 178.91 points or 2.10% (also a big drop)
iv) Spanish ibex down 118.80 or 1.40% (a big drop)
v) Italian bourse (MIB) down a whopping 537.06 (3.06%
and the Dow down 12.67 points .08%
v) Italian bourse (MIB) down a whopping 537.06 (3.06%
end.
And now for USA news:
this is bothersome to some Fed officials, as we are now hitting record levels of 30% delinquencies on student loans. Also 30% of 20 to 24 year old "students" are unemployed and NOT IN SCHOOL.
(courtesy zero hedge)
end.
Delinquent Student Loans Hit Record, 30% Of 20-24 Year Olds Are Unemployed And Not In School
Almost a year ago we shared a calculation according to which "Over $120 Billion In Federal Student Loans In Default", suggesting that the next credit crisis has already arrived. Since then the topic of the student loan bubble has become a household topic. Sadly, that does not mean it has gotten any better. In fact, according to the latest Education Department data it has gotten as bad as it has ever been. As Bloomberg reports, not only have overdue student loans reached an all-time high but the number of young people aged 20-24 out of school and unemployed is at a record high: not quite astronomic by European standards, but hardly a ringing endorsement of an economy set to transition labor tasks to the next generation, especially with the employment of those 55 and older at all time highs.
From Bloomberg:
Eleven percent of student loans were seriously delinquent -- at least 90 days past due -- in the third quarter of 2012, compared with 6 percent in the first quarter of 2003, according to the report by the U.S. Education Department. Almost 30 percent of 20- to 24-year-olds aren’t employed or in school, the study found.The research is being released amid concern in Congress and President Barack Obama’s administration about rising college costs and $1 trillion in outstanding student loans, the largest category of consumer debt besides mortgages. Borrowers say the burden is affecting their choice of jobs and their ability to buy homes and get married.“Today’s economy puts young graduates in a difficult position,” Jack Buckley, commissioner of the National Center for Education Statistics, which published the report, said in a statement. “A college diploma no longer guarantees a direct pathway to the middle class, making it harder to justify the expense of a degree.”
It's not all bad news: those saddled with tens of thousands of student debt at least have a leg up on those with no college education, supposedly:
College graduates have an edge in the job market, showing the need for higher education, Buckley said. The employment rate for young adults who are college graduates is 87 percent, compared with 64 percent for those with only a high-school diploma, the report found.
Which is great news for college grads looking for temp jobs and other openings for which they never even went to college. Oh well: new normal and all that. And if all else fails, they can just open an E*Trade account, take some trading lessons from the E*trade baby, and just BTFD.
end
this is what is worried a few Fed governors yesterday.
In a nutshell: "bubbles"
In a nutshell: "bubbles"
(courtesy zero hedge)
Spot The Bubble: Average New Home Price Soars By Most Ever In One Month To All Time High
Submitted by Tyler Durden on 05/23/2013 10:35 -0400
Curious why in yesterday's FOMC minutes the following line "a few participants expressed concern that conditions in certain U.S. financial markets were becoming too buoyant"received special attention? Here is the reason: as the chart below shows, according to the census bureau, the average new home sale price just hit a new all time high, rising by a record 15.4% to a record $330,800. In a country in which real disposable consumer income is flat at best and in reality declining, it only makes sense that the average new home price just hit a level not seen since the prior credit-bubble fueled housing peak.
Average new home sale price:
And the sequential change in the average new home sale price:
Obviously both of the above charts are justified by the average real disposable income per capita in the US:
Or maybe not...
end
Dan Norcini is getting a little exasperated at the Fed induced volatility in the markets.
He states that their actions has destroyed USA markets. Dan gives his two cents worth on Fed
speak. He is bang on!!
(courtesy Dan Norcini/Kingworldnews)
Dan Norcini: Fed-caused volatility has destroyed U.S. markets
Submitted by cpowell on Thu, 2013-05-23 04:56. Section: Daily Dispatches
12:55a ET Thursday, May 23, 2013
Dear Friend of GATA and Gold:
Futures market analyst Dan Norcini, interviewed Wednesday by King World News, threw up his hands in exasperation at the Federal Reserve's jawboning the markets back and forth, resulting in tremendous volatility.
"This sort of perverse volatility is further evidence that the Fed has destroyed the integrity of the U.S. financial markets," Norcini said. "They are now a mere playground with no useful or legitimate commercial purpose."
Norcini's interview is excerpted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
The following is getting little press but the damage caused by the Oklahoma tornadoes is huge:
(courtesy zero hedge)
Oklahoma Tornado Devastation: Before And After Picture
Submitted by Tyler Durden on 05/23/2013 13:12 -0400
The biggest story of the early part of the week was the massive 1+ mile-wide Tornado ploughing through a suburb of Oklahoma City leading to dozens of deaths and billions in damage. And while the story has already faded from the 15 minutes of collective random access memory, the following aerial picture showing just how devastating nature can be when it so chooses, is one to behold.
h/t @911buff
end
Initial claims in line with expectations:
(courtesy BLS and zero hedge)
Initial Claims In Line With Expectations, Not Nearly As Bad As Needed To Send Stocks Higher
Submitted by Tyler Durden on 05/23/2013 08:40 -0400
One of the consequences of yesterday's endless Fed PR campaign was making it very clear that any good news going forward will be bad news for the market as it brings the T-word that shall not be named (wink wink Hilsenrath) that much closer. Which is why today's initial claims print, which just came in line with expectations at 340K, on consensus was looking for 345K, will hardly be a good thing for the market which now needs horrible economic data to assume that the taper will be delayed indefinitely. The last month's data was as always revised higher from 360K to 363K just so the media can claim an improvement of 23K for the week. Sure enough, futures not only did not ramp on the news, but are continuing to trade at the weak levels seen before the print. Continuing claims also came in better than the expected 3 million at 2.912 million, the first sub-3MM print since 2008. Hardly the bad enough news the market was looking for. And while the report in general was a big snooze, of note was the surge in California initial claims last week when the headline number soared, jumping to 15,060 due to "layoffs in the service industry." Will the weakness persist?
THURSDAY, MAY 23, 2013
What's Fueling The Stock Market?
(Hint: It isn't fundamentals)
The run-up in the stock market (the SPX for purposes of this article) has been nothing short of stunning. Since hitting a sell-off bottom on October 4, 2011, the SPX has run-up a nearly non-stop 47.8%. In just the last month, the SPX has run up 7.5%. This is in the face of deteriorating economic indicators and declining corporate revenues. The stock market has for sure taken most observers and professionals by surprise, except for maybe the most passionate "perma-bulls."
Given this incredible move higher in stocks, I wanted to investigate a couple of possibilities for what is fueling this near-parabolic stock rally. Based on what I've been able to come up with, it's pretty clear that stocks are rocketing higher on Fed fuel and not fundamentals. But don't take it from me, it seems that some high profile billionaire investors are unloading their big positions, especially anything related to consumption: Billionaires Are Dumping Stocks. Let's take a look "under the hood" of the economic and financial system and see if we can figure out why.
While Bernanke was giving his report on the economy and monetary policy to the Joint Economic Committee of Congress today, in which he pretty much laid to rest any fears that the Fed would "taper" its monetary policy and bond purchase program anytime soon, I decided to look into some of the Fed's monetary data as reported on the St. Louis Fed website. Specifically I wanted to look at the Adjusted Monetary Base, which is the sum of the currency in circulation plus the commercial bank reserves held at the Fed, because this monetary account is the one directly affected by the QE program.
Here's the most current snap-shot of the Monetary Base going to back to 1984, when the data-series began:
Close to $2.8 trillion in money has been printed and used to purchase assets from the banking system, ranging from highly distressed toxic waste to short-term Treasury notes.
Next I decided to "blow up" the chart above and look at just the last twelve months and compare it to the same time period for a chart of the S&P 500:
(click to enlarge)
(click to enlarge)
As you can see, there is nearly a 1:1 correlation between the near-parabolic growth in the Monetary Base since the end of November 2012 and the near-parabolic trajectory of the SPX since mid-November (marked by the vertical red lines). I don't have time to run the data, but my University of Chicago B-School training visually tells me that the correlation is probably around .8, if not higher, meaning 80% of the move in stocks since November can be attributed to the increase in the Fed's Monetary Base.
Without doing a data dump of recent corporate earnings reports, we know that regardless of the net income being reported (net income being potentially subjected to many forms of GAAP accounting manipulations), that the revenues being reported by the largest of the SPX companies are flat to down. This is not the sign of an economy that is capable of growth and true earnings expansion. To give one example, Caterpillar (CAT) recently reported its April revenues. Globally sales were down 9% from March, but they were down a shocking 18% in North America: CAT April revenues. This is primarily heavy machinery related to construction and homebuilding. If CAT's sales are plunging like this, it means that construction and homebuilding are likely getting ready to drop pretty hard.
My point here is that economic and corporate fundamentals are not supporting the rapid move higher in the stock market and the concomitant rapid expansion in the market values of individual companies. To reinforce this point, I wanted to show a chart that I sourced from Zerohedge, which maps out the accelerating decline in the per share operating income of the S&P 500 over the last 12 months:
(click to enlarge)
In other words, based on economic and corporate earnings reports which are suggestive of a slow down in the economy, combined with the fact that corporate operating income is plunging, there can be no doubt that the run-up in the stock market is unequivocally not supported by fundamental factors.
That leaves only the money being printed by the Fed. Wall Street analysts can crow all they want about how the economy is improving and corporate earnings will improve, but the proof so far is in the numbers, which show that just the opposite is occurring.
Moreover, Fed officials can talk all they want about tapering QE, but if you look at their actions based on the recent move in the trailing twelve month Monetary Base above, not only are they not tapering, they are actually increasing the rate at which they are injecting liquidity into the banking system. In my mind, at least, there can be no doubt that the money being printed by the Fed is what is fueling the stock market.
Now we can debate whether or not the Fed is serious about "tapering" its printing. But I have no doubt based on the evidence I presented today that if the Fed were indeed to "taper," the stock market suffer a serious and rapid decline.
The real question now is for how long can this stock market "melt up" last? No one can possibly know that answer for certain, but at this point buying stocks right now is not about analyzing fundamentals and value, but more akin to playing stock market roulette. Anyone who has been fortunate enough to take advantage of being long the stock market should seriously consider hedging or taking a significant portion of their investment off the table.
The run-up in the stock market (the SPX for purposes of this article) has been nothing short of stunning. Since hitting a sell-off bottom on October 4, 2011, the SPX has run-up a nearly non-stop 47.8%. In just the last month, the SPX has run up 7.5%. This is in the face of deteriorating economic indicators and declining corporate revenues. The stock market has for sure taken most observers and professionals by surprise, except for maybe the most passionate "perma-bulls."
Given this incredible move higher in stocks, I wanted to investigate a couple of possibilities for what is fueling this near-parabolic stock rally. Based on what I've been able to come up with, it's pretty clear that stocks are rocketing higher on Fed fuel and not fundamentals. But don't take it from me, it seems that some high profile billionaire investors are unloading their big positions, especially anything related to consumption: Billionaires Are Dumping Stocks. Let's take a look "under the hood" of the economic and financial system and see if we can figure out why.
While Bernanke was giving his report on the economy and monetary policy to the Joint Economic Committee of Congress today, in which he pretty much laid to rest any fears that the Fed would "taper" its monetary policy and bond purchase program anytime soon, I decided to look into some of the Fed's monetary data as reported on the St. Louis Fed website. Specifically I wanted to look at the Adjusted Monetary Base, which is the sum of the currency in circulation plus the commercial bank reserves held at the Fed, because this monetary account is the one directly affected by the QE program.
Here's the most current snap-shot of the Monetary Base going to back to 1984, when the data-series began:
(click to enlarge)
Close to $2.8 trillion in money has been printed and used to purchase assets from the banking system, ranging from highly distressed toxic waste to short-term Treasury notes.
Next I decided to "blow up" the chart above and look at just the last twelve months and compare it to the same time period for a chart of the S&P 500:
(click to enlarge)
(click to enlarge)
As you can see, there is nearly a 1:1 correlation between the near-parabolic growth in the Monetary Base since the end of November 2012 and the near-parabolic trajectory of the SPX since mid-November (marked by the vertical red lines). I don't have time to run the data, but my University of Chicago B-School training visually tells me that the correlation is probably around .8, if not higher, meaning 80% of the move in stocks since November can be attributed to the increase in the Fed's Monetary Base.
Without doing a data dump of recent corporate earnings reports, we know that regardless of the net income being reported (net income being potentially subjected to many forms of GAAP accounting manipulations), that the revenues being reported by the largest of the SPX companies are flat to down. This is not the sign of an economy that is capable of growth and true earnings expansion. To give one example, Caterpillar (CAT) recently reported its April revenues. Globally sales were down 9% from March, but they were down a shocking 18% in North America: CAT April revenues. This is primarily heavy machinery related to construction and homebuilding. If CAT's sales are plunging like this, it means that construction and homebuilding are likely getting ready to drop pretty hard.
My point here is that economic and corporate fundamentals are not supporting the rapid move higher in the stock market and the concomitant rapid expansion in the market values of individual companies. To reinforce this point, I wanted to show a chart that I sourced from Zerohedge, which maps out the accelerating decline in the per share operating income of the S&P 500 over the last 12 months:
(click to enlarge)
In other words, based on economic and corporate earnings reports which are suggestive of a slow down in the economy, combined with the fact that corporate operating income is plunging, there can be no doubt that the run-up in the stock market is unequivocally not supported by fundamental factors.
That leaves only the money being printed by the Fed. Wall Street analysts can crow all they want about how the economy is improving and corporate earnings will improve, but the proof so far is in the numbers, which show that just the opposite is occurring.
Moreover, Fed officials can talk all they want about tapering QE, but if you look at their actions based on the recent move in the trailing twelve month Monetary Base above, not only are they not tapering, they are actually increasing the rate at which they are injecting liquidity into the banking system. In my mind, at least, there can be no doubt that the money being printed by the Fed is what is fueling the stock market.
Now we can debate whether or not the Fed is serious about "tapering" its printing. But I have no doubt based on the evidence I presented today that if the Fed were indeed to "taper," the stock market suffer a serious and rapid decline.
The real question now is for how long can this stock market "melt up" last? No one can possibly know that answer for certain, but at this point buying stocks right now is not about analyzing fundamentals and value, but more akin to playing stock market roulette. Anyone who has been fortunate enough to take advantage of being long the stock market should seriously consider hedging or taking a significant portion of their investment off the table.
