Saturday, October 6, 2012

Jobs report 114,000 new hirings against expectations of 115,000/unemployment rate falls to 7.8%/gold and silver drop on obvious raid/Implats fires 12,000 miners from their S.Africa mine/

Good morning Ladies and Gentlemen:

Gold closed down $15.50 to $1778.60 while silver fell in sympathy down to $34.52 a drop of 52 cents.
It is customary for the bankers to whack gold either the day before the jobs report or immediately after the report is given.  This has been going on for years and today they did not disappoint.  The bankers are in desperate shape to keep silver below the 35.00 dollar barrier and gold below the 1800 dollar marker.  The open interest on both metals have been rising steadily and it has put tremendous pressure on the bankers as they supply the necessary non backed paper to keep gold/silver from skyrocketing.  Meanwhile demand for physical metal continues unabated. From South Africa we learned that the big Implats mining corporation decided to fire 12,000 workers. This will surely go over well in South Africa.  This nation may be the second one to enter into hyperinflation after Iran as the rand  sinks rapidly in value against all other currencies as this country implodes. Over in Germany we witnessed German factory orders fall last month by 1.1%.  Fighting is escalating between Syria and Turkey and rioting continues in Greece and now Bahrain.
We also see trouble brewing in Cyprus which is discussed in detail by Wolf Richter. However the big story of the day was the release of the jobs numbers which came in at 114,000 instead of the projected 115,000.  The  USA needs 150,000 new jobs just to keep up with population growth.
Even though the jobs report was bad, the unemployment level fell to 7.8%  as supposedly huge numbers of part timers were hired.  No president has ever been elected with an unemployment rate over 8% so we must have seen Obama's hand in this.  Even Jack Welch of GE found the jobs number report incredulous.

We will go over these and other stories, but first.... 

Now let us head over to the comex and assess the damage on Friday.
The total comex gold open interest rose by a huge 8,419 contracts to rest this weekend at 492,479.
The Thursday close was 483,988.  The active gold October contract saw its OI rise by 13 contracts to rest at 741.  We had only 2 notices filed on Thursday so again we gained 15 contracts or an additional 1500 oz of gold will stand for physical gold in October.  The non active month of November saw is OI fall by 127 contracts from 1392 down to 1265.  There is now no question that all eyes are focusing on the big December contract where many feel will be the ultimate battleground between longs and the gold/silver short bankers.  The December gold contract saw its OI rise by a huge 7,677 resting this weekend at 357,677.
The estimated volume Friday, at the gold comex came in at a fair level of 143,629. The confirmed level on Thursday was much better at 173,596.

The total silver comex continues to play havoc to our bankers.  The total silver complex rose another 1274 contracts to finish the week at 141,109 compared to Thursday's close of 139,835.  No doubt the high OI in both silver and gold and the release of the jobs report was ample excuse for the bankers to raid.  They had to remove as many gold leaves from the gold tree as possible and likewise for silver. The non active October silver contract saw its OI rise by 8 contracts.  We had 11 delivery notices filed on Thursday so in essence we gained another 19 notices or an additional 95,000 oz of silver will stand for delivery in October. The non active November silver contract saw its OI rise by 2 contracts to rest this weekend at 44. The big December contract continues to set record levels rising 825 contracts to finish the week at 88,232. The estimated volume today was rather weak at 36,168.  The confirmed volume on Thursday was much the same at 38,670.

Comex gold figures for Oct:

Oct 6-.2012    

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
No of oz served (contracts) today
(192) 19,200 oz
No of oz to be served (notices)
(549)   54,900 oz
Total monthly oz gold served (contracts) so far this month
(6569)  656,900 oz
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

Today, we again had no activity inside the gold vaults.

The dealer had no deposit and no withdrawals.
The customer had no deposit or withdrawal
There was no adjustments.
Thus the dealer inventory rests this weekend at 2.560 million oz

The CME reported that we had a rather chunky 192 contracts filed for 19200 oz of gold.  The total number of notices filed so far this month  is represented by 6569 contracts or 656,900 oz.  To obtain what is left to be served upon, I take the OI standing for October (741) and subtract out today's notices (192) which leaves us with 549 notices or 54900 oz left to be served upon our longs.

Thus the total number of gold ounces standing in this active month of October is as follows:

656900 oz (served)  +  54900 oz (to be served upon)  =  711,800 oz or 22.13 tonnes.
we gained an additional 1500 oz Friday.  Also this is the first time in over two years that we have seen in any active month (silver and gold) the amount of metal standing is increasing as the month progresses. In other words, the amount standing today is higher than the amount standing on first day notice.  Demand is on fire!!


Oct 6.2012:

Withdrawals from Dealers Inventory72,236.88 oz (Brinks)
Withdrawals from Customer Inventory 101,838.36 (Brinks,Delaware)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory702,262.32 (HSBC)
No of oz served (contracts)16  (80,000)
No of oz to be served (notices) 304  (1,520,000)
Total monthly oz silver served (contracts)186  (930,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month72,236.88 oz
Total accumulative withdrawal of silver from the Customer inventory this month210,920.28

Again, we had quite a bit of activity inside the silver vaults today.
However we had no dealer deposit but a sizable dealer withdrawal:

1. Out of Brinks:  72,236.88 oz

We had the following customer deposit:

1.  Into HSBC:  702,262.32 oz

We had the following customer withdrawal;

1. Out of Brinks:  100,007.70 oz
2. Out of Delaware:  1830.60 oz

total withdrawal  101,838.36 oz
we had one adjustment of 978.80 oz at JPMorgan of silver removal due to a counting error.

The CME reported that we had 16 notices filed for 80,000 oz.  The total number of notices filed so far this month is represented by 186 contracts or 930,000 oz.
To obtain what is left to be filed upon, I take the OI standing for October (320) and subtract out Friday's delivery notices (16) which leaves us with 304 notices or 1,520,000 oz left to be served upon our longs.

Thus the total number of silver ounces standing in this non active month of October is as follows;

930,000 oz (served)  +  1,520,000 oz (to be served upon)   =  2,450,000 oz
we gained another 95,000 oz of silver standing.

The way the October silver month is heading we may reach north of 3 million oz which would be a super showing for silver in this non active month.

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.

Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

First the SPDR gold trust:

Oct 6 2012:

Total Gold in Trust



Value US$:76,451,681,813.27

oct 4.2012




Value US$:76,784,773,291.37

Oct 3.2012:




Value US$:75,561,982,869.74

Oct 2.2012




Value US$:75,470,190,180.33

we had no gain of gold into the GLD 


And now for silver:

Oct 6.2012

Ounces of Silver in Trust318,941,345.000
Tonnes of Silver in Trust Tonnes of Silver in Trust9,920.18

oct 4.2012:

Ounces of Silver in Trust318,941,345.000
Tonnes of Silver in Trust Tonnes of Silver in Trust9,920.18

 Oct 3.2012:

Ounces of Silver in Trust318,941,345.000
Tonnes of Silver in Trust Tonnes of Silver in Trust9,920.18

today, we had no change in inventory of silver into the SLV vaults.

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)

1. Central Fund of Canada: traded to a positive 5.8 percent to NAV in usa funds and a positive 5.8%  to NAV for Cdn funds. ( oct 6 .2012)  

2. Sprott silver fund (PSLV): Premium to NAV rose to  4.80% to NAV  Oct 6/2012   :
3. Sprott gold fund (PHYS): premium to NAV rose to 2.96% positive to NAV Oct 6.2012.  

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 5.8% in usa and 5.8% in Canadian.This fund is back in premiums to it's former self and it is  about time. Even the Sprott silver fund is almost back to a normal positive to NAV with its premium  at 4.2%. Investors are seeking out physical supplies.  .

It looks like England may have trouble in finding gold and silver for its clients.
It is worth watching the premium for gold at the Sprott funds which is a good indicator of shortage as investors bid up the premiums.


The CME releases the COT report at exactly 3:30 pm.
The report gives position levels of our major players.

Let us first dissect the gold COT:

Gold COT Report - Futures
Large Speculators
Change from Prior Reporting Period

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, October 02, 2012

Our large speculators:

Those large specs that have been long in gold continued to pour it on to the tune of an additional long position of 5440 contracts.

Those large specs that have been short in gold added a small 1010 contracts to their short side.

Our commercials:

Those commercials that have been close to the physical scene and also are long in gold pitched a huge 8,256 contracts.

Those commercials that have been short in gold covered a tiny 1341 contracts from their short side.

Small specs:

Those small specs that have been long in gold, added a very tiny 112 contracts to their long side.
Those small specs that have been short in gold covered a huge 2,363 contracts.


The bankers still went net short this week to the tune of 6915 contracts. It looks like the bankers have difficulty in supplying increasing amounts of the gold paper so they used some of their long side to help out in that department trying to keep gold's price from rising to sharply.  The report is still very bearish.


And now for our silver COT report:

(quite different than gold.)

Silver COT Report: Futures
Large Speculators
Small Speculators
Open Interest
non reportable positions
Positions as of:

Tuesday, October 02, 2012

Our large speculators;

Those large speculators that have been long in silver added a rather large 2458 contracts to their long side 

Those large speculators that  have been short in silver covered a large 1650 contracts.

Our commercials;

Those  commercials that have been long in silver added another 1337 contracts to their long side.
Those  commercials that have been short in silver added a monstrous 7518 contracts to their short side and right under the watchful eyes of the regulators.

Our small specs:
The small specs that have been long in silver added a rather large 940 contracts to their long side
The small specs that have been short in silver covered a large 1133 contracts from their short side.

Conclusion;  the large and small specs realized that physical silver was in short supply and they loaded the boat.  The bankers had no choice to supply the necessary paper.  The net short position of the bankers advanced another 6181 contracts and that is very bearish from a commercial standpoint.


And now for some important physical stories:

Sprott's Embry, Agnico's Boyd interviewed at King World News

3:35p ET Friday, October 5, 2012
Dear Friend of GATA and Gold:
Sprott Asset Management's John Embry today tells King World News that gold buyers have figured out how to play the raids staged by the market manipulators and are buying the dips, knowing that supplies are tight and the trend favors them. Embry adds that he won't get really excited about the gold market until there is a $100 up day. An excerpt from Embry's interview is posted at the King World News blog here:
Also at King World News, Agnico-Eagle Mines CEO Sean Boyd says central bank buying is offsetting weakening gold demand from India. Boyd says central banks will carefully diversify out of paper and into metal, taking pains not to disrupt the markets. An excerpt from Boyd's interview is at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc


The following is a big story as the huge Amplats corporation decides to fire 12,000 striking South African workers.  They are one of the largest producers of platinum in the world.  These strikes are crippling South Africa and the fear is that the South African rand plummets like the Iranian riyal and hyperinflation enters here in full blast.

(courtesy zero hedge)

Amplats Refuses To Follow In Lonmin's Footsteps, Fires 12,000 Striking South African Workers

Tyler Durden's picture

Several weeks ago, the platinum producing company that started it all (after police killed 34 of its striking workers at its Marikana South African mine) Lonmin, conceded and agreed to a 22% wage hike. In doing so it once again proved that in game theory he who defects first, defects best. Shortly thereafter the strike spread to all other South African mining industries, and has even spilled over into the trucking industry, whose ongoing strike has crippled the country and threatens to paralyze all commerce. The only reason for the continued worker boldness: Lonmin folding to worker demands, in the process empowering all other workers in the African country to demand equitable treatment. Which is why today's news that that "other" platinum miner in South Africa has decided to go the opposite route, and instead of yielding to worker demands for a raise, has gone and fired 12,000 workers taking part in a three-week strike. How this dramatic shift in the balance of power affects the already struggling country, and its mining sector remains to be seen. However, if recent events are any indication, he doubt local workers will just put down their banners and go back to work as per the old status quo. In the meantime, look for ever less platinum,and gold, to be produced by this mining powerhouse.
From Reuters:
Two months of labor unrest has spread from mines to other parts of Africa's biggest economy, causing political problems for President Jacob Zuma and his ruling African National Congress (ANC), the veteran liberation movement long closely tied to unions.

Shell said on Friday it could not honor fuel delivery contracts around Johannesburg because of a two-week truckers' strike. Police shot dead another striking miner overnight, taking the death toll to 48 in the worst labor unrest since the end of apartheid.

The rand fell two percent to within sight of a three-year low against the dollar amid fears the (ANC) is powerless to manage the spreading labor unrest.

Zuma has been criticized for his low-key response, especially after police killed 34 strikers at Lonmin's Marikana platinum mine on August 16.

In a speech to business leaders late on Thursday he put a positive spin on the situation, stressing that since the end of white-minority rule South Africans have shown "the capacity to overcome difficulties when we work together".

"We should not seek to portray ourselves as a nation that is perpetually fighting," he said
And while the government is hopeless to do anything, casualties pile up:
More than 75,000 miners, or 15 percent of the workforce in a sector that accounts for 6 percent of output, have been out on unofficial strikes and tensions with security forces and mining bosses are running high.

Near the "platinum belt" city of Rustenburg, 120 km (70 miles) northwest of Johannesburg, workers said a miner was killed by a rubber bullet fired by police overnight.

"He was shot here by the police," Mbubhu Lolo, a striker from Anglo American Platinum, also known as Amplats, told Reuters, pointing to his midriff.

Police would not confirm the cause of the death, although the ground nearby was strewn with spent rubber-bullet shell casings and teargas canisters after clashes involving water cannon the previous evening.

On Friday, protesters in a shanty town near the Amplats mine barricaded streets with rocks and burning tyres, watched by a contingent of more than 30 riot police backed by armored vehicles.

Earlier in the week, strikers torched an Amplats training centre and two conveyor belts, making it harder to restart operations when it does manage to resolve the standoff.
In the meantime, the entire economy is grinding to a halt:
The mining sector unrest has shaken investor confidence, and signs of it spreading into manufacturing - which accounts for 15 percent of output - and an expanding truckers' strike have caused even more alarm.

"There is fuel available across the country, so the issue is not fuel supply, but the challenge is delivering it safely to our retail sites," oil giant Shell said after invoking a "force majeure" clause that allows it to break contracts due to situations beyond its control.

Other petrol companies are holding their breath, especially around the commercial hub Johannesburg, but have not yet followed Shell's move.

Raising the stakes in its two-week stoppage by 20,000 truckers, the SATAWU transport union said it wanted co-workers on South Africa's railways and ports to strike next week, a development that would affect coal and other mineral shipments.

Coal output from one of the world's biggest suppliers has so far been unaffected but any disruption could hit power utility Eskom, which is already struggling to prevent a repeat of a 2008 power crisis when the grid nearly collapsed. Some 85 percent of South Africa's electricity is generated by coal-fired plants.

Many supermarkets and logistics firms are running on back-up plans because of the truckers' strike. U.S. car giant General Motors said production at its Port Elizabeth plant on the south coast has been affected.
All that remains now is for the USDZAR to continue surging, hyperinflation to quietly come knocking in a full repeat of Iran, and for the government to be replaced by yet another technocrat instituted by none other than the bank with all the tentacles, and which already controls North America, and Europe: Goldman Sachs. Remember: Africa is the only continent left that still has secured debt capacity - the rest of the world has long been tapped out.

Follow what Tom Fitzpatrick tells Kingworld news.  The key investors are not focusing on the higher open interest and thus they are not worried about the next raid.  They are concentrating on acquiring physical metals and running the bankers out of the town agreeing with John Embry (above)

(courtesy Tom Fitzpatrick/GATA/Kingworldnews/

Sovereigns may prove bigger than commercials shorting gold, Fitzpatrick says

9:13p ET Thursday, October 4, 2012
Dear Friend of GATA and Gold:
CitiGroup market analyst Tom Fitzpatrick today tells King World News that gold investors may worry too much about the rising open interest in gold futures, which often indicates preparation by the big commercial trading shorts to run small speculative longs out of the market.
Fitzpatrick says: "People are concerned about the commercial shorts in gold, but at the end of the day there are a number of different players in the gold market. The ones we are most focused on are the players who are taking gold out of the market and are not going to be putting it back onto the market. Those large entities are obviously official authorities, central banks, sovereign wealth funds, etc. So while it is possible to chop around because of commercial speculation, and maybe that worries day-to-day traders, for us it is not really a dynamic we are focused on in the big-picture view."
An excerpt from Fitzpatrick's interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc

Turk, in his latest commentary describes gold as a currency and its value is a function of inflating government issued currencies.

Your lecture on the meaning of gold:

(courtesy James Turk)

James Turk: Determining the value of gold

9p ET Friday, October 5, 2012
Dear Friend of GATA and Gold:
In his latest commentary, GoldMoney founder and GATA consultant James Turk explains that as gold is money, its value is calculated as a function of ever-inflating government-issued currencies. "Some say that the gold price rises and falls," Turk writes, "but they are grabbing the wrong end of the stick. It is the purchasing power of national currencies that rises and falls. Here is an analogy to make this point clear. When standing in a boat and looking at the shore, it is the boat (currencies)and not the land (gold) that is bobbing up and down."
Turk's commentary is headlined "Determining the Value of Gold" and it's posted at GoldMoney's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc

JPMorgan will not like this:  

(Mukherji and Wallop/Dow Jones newswires)  

Silver Steals the Glitter of Gold in India


Indian investors, known for their voracious appetite for gold, are increasingly shifting their attention to silver, which has risen sharply in value over the past few months, and which analysts say has more room to rise before the end of the year.
Spot silver traded in New York has risen by 27% since the end of June, while the price of spot gold has increased by a relatively anemic 12%. Gains in both precious metals are largely the result of concern that stimulus efforts by central banks will cause inflation.
Total silver demand world-wide in 2011 was 1,040.5 million troy ounces; out of that, India accounted for 12.6%, according to precious-metals consultancy GFMS. The vast majority of India's silver consumption is imported.
Indian precious-metal buyers see silver as undervalued compared with gold, says one dealer.
"People are seeing silver as a better investment bet" than gold over the next few months because the former is seen as "far more undervalued," said Vasanth Challani, a Chennai-based dealer in gold and silver.
"I have been investing steadily in both silver futures contracts and physical silver over the last five to six months," said Rajaram Somani, a 33-year-old investor based in the western Indian city of Gujarat. "Silver is looking much better than gold as gold prices are mostly range-bound."
He said he didn't sell any of his investments in silver when prices reached a four-month high on Sept. 13, anticipating prices will rise further.
While investors across Asia have piled into silver during its rally, analysts say it is India's investors that could determine whether it continues to rise.
The volume of silver futures contracts traded at India's largest commodity exchange, the Multi Commodity Exchange, jumped 30% in September compared with July, while volumes fell by 10% for gold futures contracts during the same period.
Prolonged currency weakness in India pushed domestic rupee-denominated gold prices to records earlier this year, while silver never exceeded the record it hit last April. Rupee-denominated silver is currently being quoted around 20% below the record.
Some Indian investors cashed out on their silver investments in mid-September as prices hit a near-term high.
Indian investors have paused in their buying because the two-week period that ends Oct. 15 is considered inauspicious, but are expected to resume their purchases as soon as the period ends. Buying is expected to peak from a week ahead of the Hindu festival of lights, or Diwali, dealers said.
Demand will likely increase starting a month ahead of Diwali, which is marked on Nov. 13. Traditionally, it is considered auspicious to buy either silver or gold on Diwali, but silver usually attracts more buying because it is cheaper.
Meanwhile, most return-focused investors have chosen to hold on to their purchases in anticipation of rising prices over the next three to six months, dealers said.
Although seasonal buying may lead to an uptick in jewelry demand, the buying trend for the most part hasn't carried over to the ornamental market.
With the rupee having gained 7.3% against the dollar since the end of August, silver prices will likely soften in rupee terms in the near term.
Kishore Narne, vice president at Anand Rathi Commodities, said he is advising clients to buy on price dips around Diwali, when the Mumbai-based brokerage expects silver prices to weaken.
Silver is in vogue in other parts of Asia, too. Silver futures were up 29% on the Shanghai Futures Exchange at the end of September compared with the end of June, while gold gained 13%, according to data from the exchange's website. Silver has been one of the biggest gainers in the metals complex in Shanghai.
Silver's price direction in the short term could depend on Indian investors, an analyst said. "Chinese demand for physical silver delivery hasn't changed that much, and actually most people are focusing on the Indian investors and their demand for silver instead," said Mark To, an analyst Wing Fung Financial Group.
Silver is used both as a precious-metal investment and in applications that take advantage of its conductivity, including smartphones and semiconductors, which haven't seen an outright collapse in consumption, even in developed economies where the silver market is centered.

—Debiprasad Nayak in Mumbai contributed to this article.


Expectations early Friday morning was for a print of 115,000 jobs creation in the USA which eventually settled on 114,000.  The unemployment rate became 7.8% as many part timers were hired.

In Europe German factory orders declined by 1.1% as Germany falters as the debt crisis picks up steam.

Brent oil is up 4%

The mechanism for the OMT was released where the ECB will suspend purchases for a month while the troika assess whether the nation is undergoing austerity measures according to plan.

And tensions between Syria and Turkey escalate.

These are your early morning sentiment prior to the jobs report in the USA

(courtesy zero hedge)

Overnight Sentiment: Quiet Ahead Of Payrolls

Tyler Durden's picture

The market is so focused on this morning's BLS number it has completely ignored the latest round of Reuters "news" (after their last two market-testing, unsourced "exclusives" about European developments were roundly refuted nobody can blame it) on how the OMT will proceed once operational (assuming of course Spain ever requests an activation of the mechanism that has allowed it to consider not requesting it). So, on to the thing of importance via BBG: expectations is for a NFP print of 115,000 and an unemployment rate of 8.2%. Any major surprises to either side will likely be risk negative. The unemployment rate has held above 8% level for 43 consecutive months; U.S. labor force participation rate last month declined to 63.5%, lowest since Sept. 1981. Back to Europe, a possible bailout for Spain is not imminent, a European Union official said, as concerns grow over the country’s ability to reach its deficit-reduction targets. The German recession accelerates as factory orders fell 1.3% in August, more than forecast. Switzerland’s foreign-currency reserves rose to a record 429.3 billion francs at the end of September from 420.8 billion francs at the end of August.Around the world: the Bank of Japan held off from more easing after adding to stimulus last month; shoppers from China’s mainland curbed spending at Hong Kong luxury stores during the Golden Week holiday.
BofAML Corporate Master Index narrows to new YTD tight 164bps as $7.33b prices; Markit IG at 95bps, YTD low 83bps. High Yield Master II at 562bps as $2.04b prices; Markit HY at 486bps; YTD low 445bps. EUR/USD little changed at $1.3012. Spanish and Italian bond yields decline, peripheral spreads mixed. Crude gains. European stocks, U.S. equity-index futures gain modestly.
Of all the data above, perhaps the most important one, and least appreciated, is the continued deterioration of the German economy (we already discussed the dramatic collapse of France in recent months) as an indication of the profound risk to the Euro core as the crisis drags on.
From Bloomberg:
German factory orders fell 1.3 percent in August, reflecting weakening immunity to the debt crisis. Car sales fell 11 percent in September, according to the Federal Motor Transport Authority. The IMF will cut its German GDP forecasts for this year and 2013 to 0.9 percent, Handelsblatt reported yesterday citing government sources.
More details on the Reuters story about how the OMT will operate once activated:
Until now, the details of how the ECB plans to conduct the bond-buying programme unveiled last month by President Mario Draghi have been murky.

Economists have questioned what the bank's exit strategy might be, or in other words how it would put a stop to "Outright Monetary Transactions" once it had begun to buy the sovereign debt of struggling euro zone countries.

The answer appears to be that the ECB would suspend its purchases on a regular basis for a period that could last up to a month or more.

During that time, inspectors from the EU or "troika" - the ECB, European Commission and International Monetary Fund - would assess whether a country is meeting the conditions of its aid programme. An aid programme is a prerequisite for the ECB to intervene in the secondary bond markets.

Once a country agreed a rescue package with its EU partners, the ECB would open a buying window of "one to two months", one of the sources said.

"After that period the ECB will stop buying and there will be an assessment phase. After that assessment it will be decided if the ECB buys more or stops," the source added. "We will go in the market heavily during the time the window is open."

A second source confirmed the procedure. Multiple officials said the Bundesbank, which opposes Draghi's OMT programme, would still participate in the bond-buying, which would be conducted by national central banks based on their share of ECB capital.

The ECB declined to comment, as did the Bundesbank.
So many "anonymous sources", so little time to gauge the EURUSD response as one after another harebrained plan pops into Eurocrats minds, only to be shelved and resurrected one year later as "brand new."
For everything else, we go to DB's Jim Reid:
Recapping some of yesterday’s other market moves, it was a strong day for Brent as a +4.08% move helped it recover all of its previous day’s losses. Tensions between Syria and Turkey perhaps drove some of the move, though the Turkish deputy PM said yesterday that Syria had apologised for the mortar strikes of the previous day. 2yr Turkish benchmark bond yields rose 18bps yesterday while the Lira weakened the most in two months. Elsewhere the region also saw a worsening of the currency crisis in Iran accompanied by further riots as widely reported by the press.
According to the WSJ, the US and EU are working on new coordinated measures intended to accelerate the recent plunge of the Iranian Rial and drain its FX reserves. The WSJ also suggested that the US and EU are also considering a de factor trade embargo early next year. The Rial has dropped nearly 40% against the USD since 24th September and a Bloomberg article also noted that Chicken prices in Iran have doubled over the past year!
While on the topic of inflation, Gold had another positive day (+0.7%) on the back of the Fed minutes. The precious metal is now only about 5% below the August 2011’s all-time highs. Platinum (+1.9% yesterday) is now up 25% since the August lows as mines in South Africa continue to struggle with labour unrest.
Back to Europe there was no lacking of Spanish headlines yesterday. Spanish 10yr bond yields finished the day 9bp higher despite a decent Spanish auction. Spain’s economy minister yesterday said that "there is a little bit of misunderstanding--Spain doesn't need a bailout at all". This proved to be a bit of a mood dampener. Touching on an earlier theme the Head of Spain's central bank, yesterday told a parliamentary budget committee that the Spanish government's 2013 budget was based on "over-rosy" forecasts for economic growth and tax revenue. He added that the government should consider further steps this year to meet next year's deficit target of 4.5% of GDP. On a more positive note, de Guindos added that the conditionality which may be imposed by the troika is "not going to be very far to the situation we have now in Spain". Schauble offered some encouraging words saying that that though they are not in a programme “what Spain and Italy have achieved is grand”. A Reuters report yesterday suggested that EU leaders are considering allowing the ESM to provide insurance for investors who buy government bonds by guaranteeing the first 20 to 30% of losses. Sounds vaguely familiar to us. Such a scheme has been flagged before and has always struggled to get off the ground.
Overnight markets are broadly firmer with the Hang Seng and ASX200 adding 0.4% and 0.8% respectively. The Nikkei is lagging the rest (-0.1%) though probably not helped by BoJ’s decision to hold off from further easing despite increasing political pressure. This was a largely expected outcome though according to Bloomberg polls. Asian credit continues to grind tighter and is set to finish the week on a firmer tone.
Moving on to the day ahead, we have a relatively light day in terms of European data. German factory orders and Spanish IP are perhaps the main prints. Rajoy, Hollande and Monti will attend the Mediterranean Summit in Malta today and the trio will probably bring up the topic of Spanish aid when they gather on the sidelines (5pm London time). However before this, all eyes will be on payrolls!


Mark Grant feels that Greece has now reached the end of the line as both Austria, Finland and the Netherlands will not issue any more money.

(courtesy Mark Grant/out of the box and Onto Wall Street)

Poor Athens; The Gods Flee Mt. Olympus

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Via Mark J. Grant, author of Out of the Box,
“Look now how mortals are blaming the gods, for they say that evils come from us, but in fact they themselves have woes beyond their share because of their own follies.”


When asked, and oh so many times, how I thought that Greece would play out, I have always offered the same answer. “They will continue to beg, they will say anything, do anything, until the money stops and then they will proclaim Greece for the Greeks and revolt.” The Greeks only assume the mantle of serfdom to keep the pipeline of capital flowing. As an outsider I would say that they have damaged their national psyche in the process and caused undue pain for their citizens but it must seem simpler, to the elite of Greece, to beg rather than go back to work. The problem for Europe now is that the amount of money is so large and the pain will be so great that they wince at the consequences of their misbegotten strategy. Europe provided money, demanded austerity, and kept the charade in play far longer than good sense would dictate. This should have all been shut down years ago but the poorly performed play limped along as the benefactors wanted neither the shame of closing it down nor the financial loss that it will ultimately entail. Now, however, I would assert; the tragedy is about to end and the farce about to begin.

“What I like to drink most is wine that belongs to others.”


The final act, so long in coming, is starting as a matter of necessity. In a real sense the recession on the Continent is causing it and demands from several major players that are converging in a final act of contrition directed at the gods of yore are quite close, closer than many think, to forcing what must be forced which is an end to the long running and ill performed jest. In fact the Greek word “tragoedia” actually means “goat-songs” and the old goats on the Continent are about to find themselves roasted on the spit.

Austria has said no more money. The Netherlands has said no more money. From several sources I have heard that it is now a losing cause in Berlin to wring more money from the Germanic coffers while the IMF has stated quite clearly that they will not fund unless someone besides them takes the hit. If you pay attention you will notice that the grand coalition of the IMF and the EU has reached the hard place in the road to Marathon while the sovereign nations in Europe are split along party lines of needing and those expected to provide for the needy and so the end is near. In the latest act of desperation the Greeks now want the ECB to extend the maturities of their debt and while Mr. Draghi may be singing “Save the World” for the Spanish and the Italians he has made it quite clear that no such Greek debt forgiveness will be happening within the corridors of the European Central Bank. The doors are closing down the long hallway in which Greece has run for more than two and one-half years now and the alms givers, seeing that not only has nothing has been done but that demands for money increase are finally turning a deaf ear to the pleas as their own coffers decrease.

“Ancient of days! August Athena! Where, where are thy men of might? Thy grand in soul? Gone--glimmering through the dream of things that were.”

                       -Lord Byron

Soon, quite soon, the Greeks will be forced back to their ancient traditions and the existence will be Spartan and the trials of Hercules will be enacted once again.

“Men shut their doors against a setting sun.”

                  -William Shakespeare, Timon of Athens

And now our resident expert, Wolf Richter focuses on the state of affairs in Cyprus. 
This is quite a story:

(courtesy Wolf Richter/

The Incredibly Ballooning Bailout Of Cyprus

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Wolf Richter
Cypriot President Christofias dug in his heels. On Greek TV. Not behind closed doors with the Troika, the austerity gang from the European Commission, the IMF, and the ECB that have performed such miracles in Greece. But as Cyprus veers toward bankruptcy, his game of playing the Russians against the Troika has fallen apart, banks are in worse condition than imagined, and the bailout amounts jumped again. How can a tiny country get in so much trouble in such a short time?
The real-estate and construction bubble, fed by corruption and abetted by banks, burst two years ago. Home sales and prices have collapsed. Some 130,000 homeowners (in a country of 840,000 souls) are tangled up in a nationwide title-deed scandal [Another Eurozone Country Bites the Dust]. The Troika estimated that 50,000 homes would be dumped on the market—though only 4,876 homes were sold during the first nine months of the year! Losses have gutted banks. Unemployment has reached record levels. And the construction industry, once a major employer, is being annihilated.
The index of building contracts, after a two-year downhill slide, has reached the lowest point in its history, and “activity is expected to continue dropping,” lamented the Federation of Associations of Building Contractors (OSEOK). Contractors are going out of business. Over the last four months, the morass has deepened. And now there are only enough pending construction projects for seven months, and after that, there are no projects.
Locked out from the financial markets since early summer 2011, Cyprus was bailed out by Russia last November with a €2.5 billion loan. In June, as the banks began to topple under a mountain of Greek debt and rotting mortgages, Cyprus asked for a bailout. The Troika took a look and figured €6 billion for the banks and €4 billion for the government. €10 billion in total. Alas, in August, Central Bank Governor Panicos Demetriades told parliament that the banks alone would need €12 billion! And the rumor consensus has settled on €15 billion for both the banks and the government.
Then Russian Finance Minister Anton Siluanov spilled the beans last week: Cyprus would indeed seek a €15 billion bailout from the Troika, and an additional €5 billion from Russia, for a total of €20 billion. A vertigo-inducing 107% of GDP.
But he cautioned that Russia and the Troika would need to coordinate the loans—thus throwing a monkey wrench into Christofias’ efforts to use the negotiations with Russia as a lever against the Troika to get a better deal and more lenient conditions.
Conditions that the Troika had already spelled out in a memorandum. Which was promptly leaked. It included measures that would make Cyprus a more efficient and competitive economy. Cypriots have seen how well that has worked in Greece. So, a whack at the bloated public sector: privatization of state-owned enterprises, a 15% cut in the public payroll by the end of 2013, a 10% cut in benefits, elimination of the automatic Cost of Living Adjustments (CoLA) that index salaries to inflation, and an increase of contributions to pension plans. The CoLA elimination would also hit unionized private sector employees, as would the elimination of the 13th month salary.
“You cannot tell someone they won’t receive a 13th salary. It automatically means you paralyze the market” declared communist President Christofias during the TV interview yesterday. “I can assure you, I will not sign any memorandum which scraps CoLA. The same applies to two or three other measures.” Hence, no privatizations, no public sector payroll reductions.... But he also made some sense: “What happened with the banks was a crime,” he said.
He would, however, try to cooperate with the Troika. “We aren’t just saying ‘no’ to them,” he added. “We are giving them counterproposals.” His cabinet met on Wednesday to finalize them. They focus apparently on a VAT increase, a luxury car tax, sin taxes on cigarettes and alcohol, disincentives for public sector workers to take early retirement, and a 5% wage cut for those earning over €1,500—the mindboggling phenomenon of a government cutting private sector pay plans is something we have already seen in Greece.
Yet, Cyprus has something that Greece and other Eurozone debt-sinners don’t have: lots of Russians with money. The island has become an offshore haven for their businesses. The money flows are staggering. Hence Russia’s involvement in keeping Cyprus afloat. Read.... Bankrupt Cyprus And The Russian Connection.
And here is a thought: there is little that would rock the oil world more than a revolution in Saudi Arabia. And with a coming leadership crisis, it is becoming all too likely. Read.... Why an Islamic Revolution in Saudi Arabia Is a Surefire Way to Send Oil to $300 a Barrel.


Fighting between Turkey and Syria escalates:

(courtesy zero hedge)

Hostilities Between Turkey And Syria Resume As Two Countries Exchange Fire

Tyler Durden's picture

It seems like it was only yesterday that crude plunged ahead of the first presidential debate as the escalation between Turkey and Syria hit a fever pitch, with Syria supposedly firing shell into Turkey and Turkey relatiating promptly, as it concurrently summoned NATO and demanded an Article 4 redress while passing a bill allowing its military to conduct cross-border operations in Syria, essentially giving itself a carte blanche to invade Syria without declaring outright war. Today, 48 hours later, Turkey may just get the opportunity to execute on this brand new law.
Reuters reports that "the Turkish military returned fire after a mortar bomb fired from Syria landed in countryside in southern Turkey, the state-run Anatolian news agency reported the governor of Hatay province as saying on Friday. Turkish artillery bombarded Syrian military targets on Wednesday and Thursday in response to shelling by Syrian forces that killed five Turkish civilians further east along the border." Ignore that the official plotline said that Syria "apologized" for its offense, even as "an online video purporting to be from Jabhat al-Nusra, a jihadist group accused of ties to al-Qaeda, claimed responsibility."
So which is it: Syria or Al Qaeda doing everything in its power to incite the full fury of a NATO retaliation which would certainly level Damascus in one campaign, something Syria knows too well. Something which Al Qaeda certainly knows too well, as it knows that all that the developed world needs is an excuse for war, preferably one which is framed as self-defense. Finally, one wonders: just who is funding Al Qaeda these days, a question needing further exploration if this headline from two weeks ago, "Turkish Airline Flying Al-Qaeda from Pakistan to Syrian Borders", before any of the recent escalation, proves true.
In other words, is Turkey flying in the same people who are taking responsibility for launching attacks into its own territory, and why?
More in Hurriyet


Rioting in Bahrain:

Meanwhile, In Bahrain...

Tyler Durden's picture

It appears social unrest is resurgent on the streets of Bahrain once again.  Following the funeral procession earlier in the week (of ayoung boy who died in earlier street battles with police), protesters are once again gathering and marching to the Pearl Roundabout. Police are active with tear gas and fires are breaking out... via Twitter: #Bahrain is in chaos.
Crowds are gathering... (h/t @ALWEFAQ)

Police are actively dispersing the crowd... (h/t @Peacelooving)

with tear gas in the cemetery of the martyr... (h/t @ALWEFAQ)

and the streets... (h/t @ALWEFAQ)

and the protesters are resonding... (h/t @AhmedAli)

It seems the police did not get away undamaged... (h/t @MazenMahdi)

and despite the tear gas and shotgun blasts, youths are gathering ince again... (h/t @SanabisYouth)

Your opening Spanish 10 year bond yield at 7 :45 am:


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5.771000.14000 2.37%

Your 10 year Italian bond yield:

Italy Govt Bonds 10 Year Gross Yield

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5.052000.08300 1.62%
As of 07:36:39 ET on 10/05/2012.


our key currency crosses early this morning at 8 am showing  USA dollar weakness:

Eur/USA  1.3006  
USA/Japan 78.422 
GBP/USA    1.6190  
USA/Canada  .9805 down

Your early European trading levels prior to NY opening  (8: 00 am) 

green ink all around.
German Dax
Spanish ibex

all up  nicely.


And now data on Europe closing figures:

 First,your closing Spanish 10 year bond yield:  (back up in yield)


 Add to Portfolio


5.903000.09200 1.58%

Your closing 10 year Italian bond yield;  (rising again in yield)


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5.134000.09200 1.83%
As of 11:59:55 ET on 10/04/2012.

Your closing figures from Europe: and USA :  all bourses finished with a buying spree!!

FTSE  up 43.24 points or 0.74%
Paris CAC up 55.44  points or 1.64%
German DAX up 92.96 points or 1.27%

and Spanish Ibex up  141.6    points or 1.81%.

The Dow closed up 34.74      points.

Your closing currency crosses tonight:  

Euro/USA 1.3038
USA/Japan: 78.67

GBP/USA  1.6129
USA/Can:  .9773

And now for some USA stories.  

The bureau of labour statistics again provide suspect data.  The unemployment rate falls to 7.8% from 8.2% on the hiring of massive numbers of part-timers.  The labour participation rate inches back up from 63.5 to 63.6%

(courtesy zero hedge)

NFP Prints 114K, On Top Of Expectations Of 115K; Unemployment Rate Tumbles To 7.8% On Expectations Of 8.2%

Tyler Durden's picture

Complete pre election "massaging" farce.
The Labor force participation rate rises a touch from  30 year lows of 63.5% to 63.6%:
The reason: the biggest reported jump in the number of employed people since January 2003, at +873,000 to 142,974. At least according to the Household data survey, which just happens to be used in the calculation of the unemployment rate. Just little bit off from the Establishment survey of +114,000.

and the diverging path of U-3 and U-6 unemployment rates...

The real reason for the drop in unemployment rate:  the biggest surge in part timers.

(courtesy zero hedge)

Reason For Today's Unemployment Rate Plunge: Part-Time Jobs For Economic Reasons Surge Most Since QE1 Announcement

Tyler Durden's picture

We already noted the absolutely stunning surge in reported Household Survey jobs which "added" 873,000 jobs, or the most since 2003 and the second most in the past decade, which was just a little bit off the Household Survey used in the monthly NFP jobs changes, which came at 114,000, or about 8 times less. But what was the reason for this epic jump in Household survey jobs? Simple, and those who have read our series on America's transition to a part-time worker society know the answer. The reason is that the number of part-time people employed for economic reasons soared by 582,000 to 8,613,000, the most since October 2011, and the largest one month jump since February 2009, when "restoring" confidence in the economy was all the rage... and just before the Fed announced the full blown QE1 in March of 2009. Odd symmetry.
So putting it all together, what does this mean for the true state of the US economy? Recall back in September one of our Charts of the Day was the number of Unemployed and Underemployed for the month of August, which was 25.8 million. Readers may be surprised to learn that when putting it all together, in September this number increased to 26.2 million.

Here's what John Williams' Shadow Statistics report said about today's number in its opening two paragraphs:

The August-to-September change in the headline unemployment rate almost certainly was not a 0.3% decline. The Bureau of Labor Statistics (BLS) knows the reported change in unemployment was wrong—other than by extreme coincidence—and it knows what consistent reporting actually showed. Only politics prevents the BLS from releasing the correct number, whether the unemployment rate actually declined, held even, or rose as predicted by consensus forecasters. The lack of transparency here in the data preparation allows for direct political manipulation.

The problem is that the BLS knowingly has been preparing the seasonally-adjusted headline unemployment numbers on an inconsistent and non-comparable basis for some time. The September number was prepared using a different set of seasonal factors than was used in coming up with the August number. The reporting difference can be large, when proper consistent month-to-month changes are used. ***



Consumer credit widens by 18 billion dollars last month as the USA continues to dole out student loans and car loans:

Consumer Credit Soars As Uncle Sam Resumes Handing Out Billions In Student Loans With Reckless Abandon

Tyler Durden's picture

Following a major miss in July consumer credit which declined by $3.3 billion (since revised to a -$2.5 billion decline), it was only natural that August would be the opposite, and see a rebound over consensus. Sure enough, the August total consumer credit number came in at $2.73 trillion, an increase of $18.1 billion from last month, on expectations of an increase by $7.25 billion. Why did the number rise? Same reason as always: a government-funded pump into non-revolving (i.e., Student and Government motor loan) credit which soared by $14 billion while revolving credit posted a modest $4.2 billion increase unable to even offset the July decline. But in headline scanning algo news, this was the highest jump in post-revision (recall last month the Fed completely redid its consumer credit series data which is now useless for any analysis going back before December 2010). Yet oddly even with this massive pump the stock market has refused to rebound and instead is acting in a very odd fashion and the now traditional green color of stock moves has taken on an odd reddish hue that is unfamiliar to the current generation of traders.

From a funding standpoint, it appears that Uncle Sam has had enough, and after taking a breather in July with a tiny $1 billion injection into Student Loan, injected a whopping $24 billion of the total $40 billion in new NSA credit in August: this is highlighted on the chart below showing total credit by source. Needless to say, the biggest source of consumer credit in the past 4 years has been the Federal Government.

Finally, those curious why the government will do everything in its power to pump any and every possible dollar into the economy under the guise of student subsidies, here it is again: at last check there were $914 billion in Federally-Funded student loans and rising at a rate of $20 billion per month.

The Noose Tightens On Germany’s “Success Recipe”

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Wolf Richter
Deceptive calm and optimism have settled on the German financial markets. Chancellor Angela Merkel is preparing to go to Greece next week to meet with Prime Minister Antonis Samaras—her first visit to Greece since 2007, long before the crisis had broken out. He’d already praised her for saying “that her heart was bleeding” at the sight of the suffering Greeks, or at the sight of herself with Hitler mustache and Nazi uniform in Greek tabloids. She’ll be noisily welcomed.
Perhaps she is trying to mend fences because Germany, after hyperventilating for two years about its superior economic model, is worried about the economy, and about its export markets, and above all, about the election next year. It would be a heck of a lot easier for her to hang on to power if Germany isn’t in a deep recession by then because exports dried up.
They’d done that before. When the financial crisis hit the US, China, and to a lesser extent Europe, Germany’s customers stopped calling. In the third quarter of 2008, GDP plummeted 2.1% on a quarterly basis, and in the first quarter of 2009 a horrid 3.8%. Annualized, a double-digit swoon. The worst in the history of the Federal Republic. A nightmare no German exporter would ever forget.
They were saved not by their own ingenuity and hard work, and not by their superior economic model, but by the besotted stimulus and QE frenzy in the US, China, and elsewhere. The recovery was steep. And a couple of years later, the gloating started. They called it the German “success recipe.” Well, that was last October.
Now the crisis has wormed its way into every aspect of the economy, and the downturn in export orders is once again spreading fear and trepidation. But this time, the part that had been considered invulnerable is getting slammed: domestic demand.
Monday, it was the machine-tool massacre. Orders for machine tools, one of the coddled key industries in Germany, dropped11% from prior month, with export orders down 6%—cause: uncertainty, the China slowdown, the Eurozone fiasco. Butdomestic orders dove 18%.
Tuesday, it was the auto industry massacre. Sales of new passenger vehicles, as measured by registrations, dropped adizzying 10.9% from September last year. German auto sales had been holding up well despite the crisis and remained positive until summer. But July wasn’t good. August was worse. And September’s huge drop pushed sales for the year deeper into the negative.
There were some winners, notably the Koreans Kia (+44%) and Hyundai (+15.2%)—which have been on a tear since the financial crisis—as well as Porsche and Audi. Mercedes barely eked out a gain. The list of losers was long and included even BMW and market leader VW. Ford fell by 8.8% and Opel by 13.2%. And a harbinger of movements in the larger economy, commercial vehicles (buses, trucks, and tractors) tumbled 15%, with tractors plunging 25.8%.
Wednesday, it was the Composite PMI for manufacturing and service. It declined again in September, after having plunged in August at the steepest rate since June 2009. It was the seventh month in a row of declines. Due to the lack of incoming work, businesses have been living off their shrinking backlog. When that is exhausted, production will nosedive.
Thursday, construction took it on the chin. It had been doing well until six months ago. In September, the intake of new orders by contractors fell sharply, due to “weakening demand in the wider economy.” And the Draghi-Bernanke effect began to rattle some nerves: input price inflation had picked up.
Employment has come under pressure. Opel and Ford are leaking red ink from their head gaskets. Other employers are trying to cut costs as well. But it’s not easy. There are negotiations underway to reinstitute part-time work (Kurzarbeit). Lufthansa just announced that it would slash its administrative work force through early retirements and buyouts. Even the Monster Employment Index, whose year-over-year growth in online ads has been over 30% earlier this year, stumbled on Friday. Its index for August edged up only 7% from prior year, but and on a month-to-month basis, it has been losing ground and is now down 3.2% from its peak in April.
And then came the industrial orders bloodbath. Seasonally adjusted, they dropped 1.3% in August from July, much worse than expected. Export orders only stagnated, thanks to an uptick in orders from the Eurozone, which are still down 12.6% for the year. But domestic orders dropped 3% overall, and 6.8% for capital goods, which left observers breathless.
With shrinking order books and rising inventories, German industry is facing some challenges. Consumers have become reticent. Corporate titans have been busy with disappointing preannouncements. So Metro AG, Germany’s largest retailer and wholesaler, just issued an earnings warning, blaming the weakness in its major markets. And its stock got pummeled.
But the Draghi-Bernanke effect took care of the markets, no worries. Instead, Germany is struggling with its largest wave of foodborne illness. From China. But exports to China are crucial, so the issue will be downplayed assiduously. For that debacle, read.... Chinese Strawberries Sicken 11,200 German Children.
And across the Rhine, something unusual happened. Unusual for France. The government is jacking up taxes, including the capital gains tax. But it was just too much for the hapless entrepreneurs, VCs, artisans, and mom-and-pop business owners: they revolted. Read.... A Capitalist Revolt in Socialist France.

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