Saturday, December 22, 2012

The amount standing for deliveries in silver advances another 1.7 million oz/Silver OI advances/Iraq purchases official gold equal to 41 tonnes in last 3 months/Brazil purchases 14 tonnes with Russia adding 3 tonnes/

Good morning Ladies and Gentlemen:

Gold closed up by $14.00 to finish the comex session and the week at $1659.10
Silver closed up 53 cents at $30.14.  No doubt all bourses were influenced by the cancelling of the Plan B vote by the Republicans in the House. Immediately it dawned on many that the USA may go over the fiscal cliff.  Asian stocks plummeted but European stocks seemed to take the news in stride.

In physical news, we witnessed that Iraq is the latest country's central bank to purchase gold.  In 3 months this nation has purchased 41 tonnes of gold.  The Russians announced another 100,000 oz (3 tonnes ) of gold that they purchased to which they added to their official reserves. Finally Brazil continues on a torrid pace of acquiring gold.  This month they added 14 tonnes of metal.

As far as silver is concerned the big raid orchestrated on Thursday did not see the OI (open interest) complex contract.  It rose again as many investors are resolute in their conviction of the value of silver and they seem immune to the crooked antics of the bankers.  What is more fascinating is the fact that the number of ounces of silver standing for December has increased every day from the 6th of December onward including Friday.  Actually on Friday we saw the biggest jump this month in ounces standing.... a whopping 1.7 million oz. We are also witnessing many round number of ounces of silver being either deposited or withdrawn and it seems to me that the comex is settling in paper and not metal.
No wonder we hear that investors do not want to have JPMorgan or HSBC settle upon them with metal and they seek non comex vaults.  Strange things happening inside the comex silver vaults. We will go over these and other stories but first.............................................................................

Let us now head over to the comex and assess trading today.
The total comex gold open interest fell as expected by 7,242 contracts  from Thursday's level of 437,684 down to 430,442.  The raid this week certainly had a toll on newbie longs as these guys were fleeced again by the crooked bankers.  The front active December contract saw it's OI fall by 9 contracts from 312 down to 303.  We had 16 delivery notices filed on Thursday so in essence we gained 7 contracts or an additional 700 oz of gold will stand for delivery in December.  The next non active month of January saw it's OI rise by 139 contracts up to 1302.  The next big active delivery month is February and here the OI got annihilated to the tune of 9,226 contracts, falling from Thursday's level of 272,858 down to comex closing Friday at 263,632.  The estimated volume at the gold comex on Friday was quite tame at 128,577.  The confirmed volume on Thursday, the day of the monstrous raid came in at 201,142.  Our banking heroes supplied all the necessary non backed short paper.

The total silver comex OI surprisingly increased by a whopping 1755 contracts, rising from Thursday's level of 141,142 up to 142,897.  The longs in silver are stoic and remain quite resolute in their convictions.  No raid orchestrated by the bankers will force them to vacate their long positions.  The bankers are very nervous this weekend as you will see below the huge increase in the amount of silver standing for December. The active contract month of December strangely saw it's OI rise by 328 contracts from 639 up to 967 despite 12 delivery notices filed on Thursday.  We thus gained a monstrous 340 contracts or an additional 
1,700,000 oz of silver will stand for December.  As I pointed out to you repeatedly, the amounts standing has gone up every day in this delivery period from the fifth day after first day notice until day  (Dec  6 including today).  You will recall we had about 12.6 million oz standing on Dec 5 and from that day forth we have gained in silver oz standing. The January non active silver month saw it's OI gain 152 contracts up to 621.  The next big active silver month is March and here the OI rose by 426 contracts from 80,377 up to 80,377.  It seems that the raid had no effect upon our silver longs other than a lower price.  They responded in kind by buying more contracts thankful for the banker's largess.  The estimated volume today was pretty good at 38,905.  Get a load of the confirmed volume yesterday: a monstrous 96,307 contracts with the bankers supplying copious non backed paper. 

Comex gold figures 

Dec 21.2012    The  December contract month


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
3,568.65 (HSBC)
No of oz served (contracts) today
 134 (13,400 oz)
No of oz to be served (notices)
169  (16,900 oz)
Total monthly oz gold served (contracts) so far this month
2902 (290,200  oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

541,034.68  (16.8 tonnes)
Today, we  had tiny activity  inside the gold vaults 

The dealer had no deposits  and no   withdrawals.

We had 1  customer deposits:

 i)  Into HSBC:  3,568.65 oz

total deposit:  3,568.65 oz

we had 0   customer withdrawals:

Adjustments: 1 

603.165 oz was adjusted out of Scotia customer account into the dealer account at Scotia.

Thus the dealer inventory rests tonight at 2.619 million oz (81.30) tonnes of gold.

The CME reported that we had 134 notices  filed  for 13,400 oz of gold. The total number of notices filed so far this month  thus rises to 2902 notices or 290,200 oz of gold. To obtain what will stand for December, we take the open interest standing for December (303) and subtract out today's notices (134) which leaves us with 169 contracts or 16,900 oz of gold left to be served upon our longs.

Thus the total number of gold ounces standing for delivery in December  is as follows:

290,200 oz (served)  + 16,900 oz (to be served upon)  =  307,100 oz  (9.55 tonnes of gold).

we gained 700 oz of gold standing in the December delivery month.


Dec 21.2012:   The December silver contract month

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory  50,186.913 oz(Brinks, Scotia)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory891,271.12  oz  (Brinks,Scotia)
No of oz served (contracts)382   (1,910,000 oz)
No of oz to be served (notices)585 (2,925,000 oz)
Total monthly oz silver served (contracts)3333  (16,665,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month3,419,037.72
Total accumulative withdrawal of silver from the Customer inventory this month10,478,432.46

Today, we again had good activity  inside the silver vaults.

 we had no dealer deposits and no   dealer withdrawals:

We had 2 customer deposits of silver:

i) Into Brinks:  387,097.55 oz
ii) Into Scotia:  504,273.59 oz

total deposit:  891,271.12

we had 2 customer withdrawals:

I )Out of brinks:  18,553.000 oz  (now Brinks is getting into the act of round number withdrawals/deposits)
ii) out of Delaware:  31,633.913 oz

total customer withdrawal:  50,186.913  oz

we had 1  adjustments:

Today, we had 120,553.0000 oz of silver leave the customer and enter the dealer account at Scotia.  And now Scotia is using round numbers of transfers.

I have still not received any answer from the CFTC  regarding the round numbered deposits in gold and silver we have been witnessing lately, especially from the CNT vault.  Today, it was Brinks and Scotia.

Registered silver remains today at :  42.656 million oz
total of all silver:  146.904  million oz.

The CME reported that we had 382 notices filed for 1,910,000 oz. 

To determine the number of silver ounces standing for December, I take the OI standing for December  (967) and subtract out Friday's notices (382) which leaves us with 585 notices left to be filed or 2,925,000 ounces left to be served upon our longs.
Thus the total number of silver ounces standing in this  active month of December is as follows:

16,665,000 oz (served) + 2,925,000 (oz to be served upon)  =  19,590,000 oz

we gained another 1,700,000 oz of addition silver  standing for December.


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.

Total Gold in Trust   Dec 21.2012



Value US$71.704 B.

Dec 20.2012:



Value US$71.645B

Dec 19.2012:



Value US$72.276B.

Dec 18.2012:




Value US$:73,536,083,510.56

Dec 17.2012:




Value US$:73,612,875,345.04

we neither gained nor lost any gold ounces into/out of the GLD vaults.

and now for silver:

Dec 21.2012:  (at 6 pm est)

Ounces of Silver in Trust318,143,414.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,895.37

Dec 20.2012:

Ounces of Silver in Trust317,369,318.700
Tonnes of Silver in TrustTonnes of Silver in Trust9,871.29

Dec 19.2012:

Ounces of Silver in Trust317,369,318.700
Tonnes of Silver in TrustTonnes of Silver in Trust9,871.29

Dec 18.2012:

Ounces of Silver in Trust317,369,318.700
Tonnes of Silver in TrustTonnes of Silver in Trust9,871.29

Dec 17.2012:

Ounces of Silver in Trust317,369,318.700
Tonnes of Silver in TrustTonnes of Silver in Trust9,871.29

Dec 14.2012:

Ounces of Silver in Trust317,369,318.700
Tonnes of Silver in TrustTonnes of Silver in Trust9,871.29

Late Thursday night, the SLV was updated and revealed a gain of 774,000 oz of silver was added to the SLV vaults.  Strange that they should add silver ounces in a big drop in silver price.

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 4/5. percent to NAV in usa funds and a positive 4.0%  to NAV for Cdn funds. ( Dec21 2012)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 1.12% NAV  Dec 21./2012
3. Sprott gold fund (PHYS): premium to NAV  fell to 1.30% positive to NAV Dec 21.2012. 

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 4.5% in usa and 4.0% in Canadian.This fund is back in premiums to it's former self with respect to premiums per NAV. 

The silver Sprott fund announced a big silver purchase and this reduces the premium to NAV temporarily.  It seems that the bankers are picking on Sprott to short their funds trying to cause an avalanche in selling in the precious metals.  They are foolhardy in their attempt.

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.



and now let us head over to the COT report and see what we can glean from it:


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, December 18, 2012

 Our large speculators:

Those large speculators that have been long in gold added a very tiny 686 contracts to their long side.

Those large speculators that have been short in gold added a huge 6604 contracts to their short side and it seems these guys were expecting a raid.

Our commercials:

Those commercials that have been long in gold and are close to the physical scene added 2008 contracts to their long side.

Those commercials that been short in gold from the beginning of time, covered a large 10,738 contracts.  

Our small specs:

Those small specs that have been long in gold pitched a rather large 2780 contracts from their long side.

Those small specs that have been short in gold performed exactly like their bigger cousins, the large specs by adding a huge 4048 contracts to their short side.


More bullish than last week as the commercials went net long by 8730 contracts.

This report is from Dec 11.2012 through until Dec 18.2012.

No doubt we will get more liquidation from the large specs that will be reported on next week due to the raid on Thursday.


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

Tuesday, December 18, 2012

Our large speculators:

Those large speculators that are long in silver strangely covered a huge 3659 contracts from their long side.  They guessed correctly that a raid was forthcoming and they decided to pitch some of their longs.

Those large specs that have been short in silver, covered a very tiny 148 contracts from their long side.

Our commercials;

Those commercials who have been long in silver and are close to the physical scene added 832 contracts to their long side.

Those commercials who have been short in silver and are subject to the silver probe covered a rather smallish 1752 contracts.  I would have expected the bankers to cover a lot more of their shortfall.

Our small specs:

Those small specs that have been long in silver added a very tiny 21 contracts to their long side.

Those small specs that have been short in silver decided that the time was right to cover a rather large for them 906 contracts form their short side.

Conclusion: still increasingly more bullish as the bankers (commercials) go net long again to the tune of 920 contracts.  

Here are your major physical stories:

Just take a look and see which sovereign nation is buying gold:  Iraq.

This nation has bought 31 tonnes of gold in the last 3 months.  They would probably purchase the
gold and leave it in England.  There would no doubt be many obligations on that same 31 tonnes of gold.

Brazil also increased it's purchases of gold this month to the tune of 14.7 tonnes. However Brazil probably took lessons from Chavez and had this gold sent to San Paulo. In the last 5 months or so their reserves have increased to 61 tonnes of gold.

Russia continues to tell the world that it has bought 100,000 oz of gold.  Rumours are surfacing that maybe they are purchasing more and hiding the gold in their official figures. Russia now has 938 tonnes of official reserves.

What is totally amazing is that central banks this year have bought 425 tonnes of gold.

(your early morning gold trading with commentary courtesy of goldcore)

Iraq Quadruples Gold Reserves In Two Months - First Time In Years

Tyler Durden's picture

From GoldCore
Iraq Quadruples Gold Reserves In Two Months - First Time In Years
Today’s AM fix was USD 1,648.25, EUR 1,246.97 and GBP 1,014.56 per ounce.
Yesterday’s AM fix was USD 1,667.00, EUR 1,259.25 and GBP 1,024.96 per ounce.
Silver is trading at $29.89/oz, €22.73/oz and £18.49/oz. Platinum is trading at $1,551.25/oz, palladium at $673.00/oz and rhodium at $1,040/oz.

Cross Currency Table – (Bloomberg)

Gold was down $20.60 or 1.23% in New York yesterday and closed at $1,648.70/oz. Silver dropped to as low as $29.592 and finished with a sharp loss of 3.66%.
Gold is marginally lower in dollars today and on course for its largest weekly drop since June (-2.6%), as COMEX speculators continue to have the upper hand over store of wealth buyers including central banks.
Prices fell below $1,650 an ounce on Thursday for the first time since August despite strong fundamentals which have not changed. 
Gold has come under pressure from heavy liquidation by hedge funds and banks on the COMEX this week. The unusual and often 'not for profit' nature of the selling, often in illiquid Asian trading, has again led to suspicions of market manipulation.
Short sellers, technical and momentum traders have the upper hand and are pressing their advantage in these less liquid holiday markets. Nervous longs are being stopped out through stop loss orders and concerns regarding the clear downward short term trend.
The recent drop in the gold price has resurrected physical purchases in the market keeping premiums steady at $1 to $1.10/oz above London prices.  
"Definitely, there's physical buying. It's from all over the place. Physical dealers are buying" a physical trader in Singapore told Reuters.
Despite the recent weakness, bullion is 5.6% higher this year in dollar terms and barring a massive year end sell off looks set for a 12th annual gain.
The standoff between the White House and Congress over the 'fiscal cliff' turned into a public relations crisis last night when John Boehner, Republican House Speaker, was humiliated by not being able to gain enough support to secure passage of his own bill.
Gold will be supported by the strong likelihood that central banks will continue buying bullion after data showed Brazil boosted its reserves for a third month, Russia continued to diversify into gold and Iraq entered the gold market for the first time in many years and quadrupled their gold reserves in just two months. 
Brazilian holdings expanded the most in 12 years, rising 14.7 metric tons in November. The nation’s holdings doubled since August. Russia’s bullion reserves increased by 2.86 tons to 937.8 metric tons in November.
Central banks have bought 426.5 tons of gold so far this year.
Iraq quadrupled its gold holdings to 31.07 tonnes over the course of three months between August and October, data from the International Monetary Fund showed on yesterday.
The IMF's monthly statistics report showed the country's holdings increased by some 23.9 tonnes in August to 29.7 tonnes.
That was followed by a 2.3-tonne rise in September to 32.09 tonnes and then a cut of 1.02 tonnes in October to 31.07 tonnes.  There was no data for November.
It is Iraq's first major move in years to bolster its gold reserves.
More recently, Brazil raised its gold holdings by 14.68 tonnes, or 28 percent, in November, bringing its bullion reserves to 67.19 tonnes.
The addition comes on the heels of an even bigger increase in October when the South American country added 17.17 tonnes to its reserves. In September, it increased holdings by 2 tonnes.
Meanwhile Turkey cut its gold holdings last month by 5.84 tonnes to 314 tonnes from October. The country allows commercial banks to use gold as collateral for loans, and changes to its balance sheet are often connected to such activity.
Belarus upped its reserves by 1.39 tonnes to 42.7 tonnes, while Russia, which had both bought and sold gold on a number of occasions this year, increased its holdings by 2.86 tonnes to 937.8 tonnes.
The central bank of Iraq’s quadrupling of gold reserves is important as there are many oil rich nations in the world with sizeable dollar and euro currency reserves and only a small allocation to gold by these central banks alone could lead to higher gold prices.
The smart money will continue to dollar cost average and buy gold on dips.
(Bloomberg) -- Turkish Jewelers Offer to Act as Gold Dealers for BanksTurkish jewelers, which have lost business after banks campaigned to collect gold from individuals, are seeking cooperation with lenders, Sabah newspaper reports.
“No one can collect gold stuffed under the pillow better than jewelers,‘‘ Sabah quotes Alaattin Kameroglu, chief of Istanbul Chamber of Jewelry, as saying. ‘‘We seek to act as dealers for banks in gold collecting.”
So-called “under the pillow” gold in Turkey totals between 800-1,000 tons, Kameroglu predicts
Banks have been able to collect between 15-20 tons of this amount: Kameroglu
(Bloomberg) -- Sudan Central Bank Sees Gold Exports at 50 Tons in 2013
Country exported 43 mt of the precious metal in 2012, worth $2 billion, state-run Suna news agency says, citing Central Bank Governor Mohamed Khair al- Zubair.
For breaking news and commentary on financial markets and gold, follow us on Twitter.
House Republicans cancel Plan B tax vote – Market Watch



The following is the report on Brazil doubling its gold reserves.

(courtesy Glenys Sim/Bloomberg)

Brazil Doubles Gold Reserves as Central Banks Buy Bullion
By Glenys Sim - Dec 21, 2012 2:10 AM CT

Brazil boosted gold reserves for a third month in November to double the country’s holdings since August as central banks from Russia to Belarus and South Korea add the metal to diversify their assets.
Brazilian holdings expanded 14.7 metric tons in November to 67.2 tons, the most since November 2000, according to data on the International Monetary Fund’s website. The country bought 17.2 tons in October after adding 1.7 tons in September, the first increase since 2008. Russia’s holdings increased 2.9 tons last month and Belarus’s reserves expanded 1.4 tons, the data show. Turkey pared holdings 5.9 tons and Mexico sold 0.1 ton.Central banks have been expanding reserves as the metal heads for a 12th annual gain and investors hold a record amount in bullion-backed exchange-traded products. Nations bought 373.9 tons in the first nine months of the year and full-year additions will probably be at the bottom end of a range from 450 to 500 tons, the London-based World Gold Council estimates.
"Central banks, particularly in the emerging economies, are looking to increase the proportion of gold in their reserve assets," Alexandra Knight, an analyst at National Australia Bank Ltd., said from Melbourne. "That will drive prices of gold because they can be quite significant purchases."Gold for immediate delivery traded at $1,647.41 an ounce at 4:09 p.m. in Singapore, up 5.4 percent this year. Still, the metal slumped to $1,635.70 yesterday, the cheapest since Aug. 22, as data showed the U.S. economy is improving.


Russia purchases another 100,000 oz and total reserves sits at 30.2 million oz or 238 tonnes of gold.

(courtesy Nick Laird/Ed Steer commentary)

Since yesterday was the 20th of the month, The Central Bank of the Russian Federation updated their website with their November data. It showed that they added another 100,000 ounces to their gold reserves, which now sits at 30.2 million troy ounces. I'm beginning to wonder if, like the Chinese, the Russians aren't reporting all the gold they're squirreling away. I guess we'll find out in the fullness of time. Nick Laird's most excellent chart below tells all.
(Click on image to enlarge)


Demand for gold continues to rise as tiny gold bars are the rage:

(courtesy Reuters)

Tiny gold bars latest rage for jittery investors

By Oliver Hirt
Friday, December 21, 2012
ZURICH, Switzerland -- Private investors in Switzerland, Austria, and Germany are lining up to buy gold bars the size of a credit card that can easily be broken into 1-gram pieces and used as payment in an emergency.
Now Swiss refinery Valcambi, a unit of U.S. mining giant Newmont, wants to bring its "CombiBar" to market in the United States and build up its sales presence India, the world's largest consumer of gold, where the precious metal has long served as a parallel currency.
Investors worried that inflation and financial market turmoil will wipe out the value of their cash have poured money into gold over the past decade. Prices have gained almost 500 percent since 2001 compared to a 12 percent increase in MSCI's world equity index

Sales of gold bars and coins were worth almost $77 billion in 2011, up from just $3.5 billion in 2002, according to data from the World Gold Council.
"The rich are buying standard bars or have deposits of phsyical gold. People who have less money are buying up to 100 grams," said Michael Mesaric, CEO of Valcambi. "But for many people a pure investment product is no longer enough. They want to be able to do something with the precious metal."
Mesaric said the advantage of the "CombiBar" -- which has been dubbed a "chocolate bar" because pieces can be easily broken off by hand into one gram squares -- is that it can be easily transported and costs less than buying 50 one gram bars.
"The produce can also be used as an alternative method of payment," he said.
Valcambi is building a sales network in India and plans to launch the CombiBar on the U.S. market next year. In Japan, it wants to focus on CombiBars made of platinum and palladium.
Elsewhere, demand is particularly strong among Germans, still scarred by post-World War I hyperinflation, when money became all but worthless and it took a wheelbarrow full of notes to buy a loaf of bread.
"Above all, it's people aged between 40 and 70 that are investing in gold bars and coins," said Mesaric. "They've heard tales from their parents about wars and crises devaluing money."
The CombiBar is particularly popular among grandparents who want to give their grandchildren a strip of gold rather than a coin, said Andreas Habluetzel head of the Swiss business of Degussa, a gold trading company.
Other customers buy gold for security reasons.
"Demand is rising every week," Habluetzel said. "Particularly in Germany, people buying gold fear that the euro will break apart or that banks will run into problems."
Some fund managers, however, remain sceptical.
Stephan Mueller, who manages bank Julius Baer's $6 billion gold fund, said one problem with using gold as a method of payment is that people have to take its value on blind trust.
"Gold is a useful store of value," Mueller said. "However, I doubt whether it will succeed as a method of payment."
Nonetheless, as developments in the euro zone lurch from one crisis to another, demand for gold that can be sold in vending machines is also growing.
"Sales rise according to the temperature of the crisis," said Thomas Geissler, whose firm Ex Oriente Lux operates 17 gold vending machines in Europe, the United States and the United Arab Emirates.
The machines saw record sales in 2010, one day after the then Deutsche Bank CEO Josef Ackermann raised doubts over whether Greece would be able to pay its debts.
Since the launch of the machines, which operate under the name "GOLD to go", 50,000 customers have withdrawn more than 21 million euros in gold. The average buyer is male, over 50 years old and well off.
"Customers are hoarding gold mostly at home as a precaution against a crisis, just as their fathers and grandfathers did before them," Geissler said.


The big news on Friday was the big premium for physical silver in Shanghai.
While silver traded at $29.61 in USA, over in Shanghai silver was trading at $32.50 a premium of $2.89 per oz.  The Chinese are willing to pay more to get the real stuff.  Expect arbitrage to intensify between these two markets:

(courtesy Kingworldnews/Andrew Maguire)

Paper raid on metals causes 'unprecedented' silver premiums, Maguire tells King World News

7:56p ET Friday, December 21, 2012
Dear Friend of GATA and Gold (and Silver):
London metals trader and silver market whistleblower Andrew Maguire reports via King World News tonight that premiums for delivery of physical silver in Shanghai today reached "unprecedented" and "ludicrous" levels, so distortive was the Western central bank intervention against the monetary metals in London and New York. Maguire says the bullion bank agents of the central banks "are fully aware of the physical drain" caused by their paper raid, "and I guarantee you that they are going long on this final stage of the selloff."
An excerpt from Maguire's interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Commmittee Inc.


And now your major paper stories which will have an influence on the physical price of gold and silver.

Your early morning market sentiment:

the markets are worried about the USA fiscal cliff.  The worry is that if we do not get an agreement then a 3 month delay assures a deeper recession. The Hang Seng was down with major worries concerning the USA fiscal cliff.

Britain's latest quarter saw GDP rise .9% year over year.  Not great !! They expected a reading of a growth of 1%.  It's deficit widened to 17.5 billion pounds from 16.3 billion pounds.

The UK banks are threatening again not to lend as regulators are demanding increasing reserves because of their loan losses.
Sweden is also experiencing growth problems with it's GDP in the latest quarter rising by only 1.1% instead of the previous quarter at 2.7% (year/year)

Probably the best economy of them all, Norway saw it's unemployment rise to 2.4% from 2.3%.

This nation has the highest GDP per person in the world.

Jim Reid of Deutsche Bank does a thorough review of European/Asia trading

(early morning sentiment from Europe/Asia, courtesy zero hedge)

Quad Witching Cliff-faller

Tyler Durden's picture

It may not be apparent immediately, but in the aftermath of last night's epic collapse in fiscal cliff negotiations, which incidentally was perfectly obvious to anyone with half a brain and who experienced last summer's debt ceiling fiasco, which sadlyexcludes all paid political and financial - including sellside - commentators, all of whom expected a prompt resolution to this polarized issue as recently as a week ago, there is major behind the scenes panic.
Because while banks would write profuse, long-winded essays to explain the logic and rationality of the "deal", now that they are all faced with adjusting their narrative the best they can come up with are two sentence fragments such as this one from Citi's Steven Englander "Problem is that it is the right wing of the Republican Party that wouldn’t give Boehner their support, making it less likely that he could win broad support among Republicans for a compromise with the White House. Also he will have to spend next couple of days negotiating with both his own party and the Democrats without knowing how much he can deliver." The answer: nothing at all. In fact as Scott Rigellsaid “I’m not sure the people who have been up here 20 or 30 years really understand what the next iteration of this process is”.  He is speaking for pretty much everyone else who has now been made a total fool by the Black Swan that is Congress.
Furthermore, now that the leadership of the GOP is in limbo, following the not so silent conservative coup within the GOP, one can not only forget a deal being cut in 2012, but most likely there will be no deal at all until the hard deadline - that of the debt ceiling some time in March, which will be breached next week, but which the Treasury can extend for three months as a result of plundering the G-fund all over again. The implication, as we showed yesterdayis that a 3 month delay assures a US recession, and a ~20% or so minimum correction in the stock market, which has been priced for absolute perfection for months, and which will once again have to be used by Wall Street as a means to get a consensus out of DC. Just as we predicted over a month ago.
Reality finally penetrating through the market's thick skull of complacency has meant a decline virtually around the globe in all asset classes: Asian equities have been volatile but are trading weaker led by a 0.85% drop in the Hang Seng while 10yr UST yields have rallied 4bps to 1.756% as we go to print. Gold continues to underperform and is down to $1642/oz (-0.3%) overnight and is poised to finish lower for four straight sessions in its longest losing streak in more than 2 months.
The point is, however, that stock will be much, much lower by the time it all ends, unless of course, as we also jokingly (but now appears far more probable), Congress simply punts to Bernanke who has no choice but to do QE5 in the next few weeks to avoid what would now be a 5% market crash (where everyone is levered to the gills).
Finally while we may have avoided the Mayan apocalypse, we do have a quad witching and a NASDAQ rebalance to look forward to. Enjoy!
Some other overnight news via BBG:
  • Britain’s GDP rose 0.9% Q/q, down from previous estimate of 1%, while the deficit excluding bank support was GBP17.5b vs. GBP16.3b
  • U.K. banks, under pressure from the Bank of England to increase capital, may do exactly what the central bank doesn’t want them to do: Cut lending
  • UK current account -GBP12.8 billion vs -GBP14 billion exp.
  • The proposal by a Bank of Japan board member to scrap interest paid on lenders’ deposits raises the prospect of a flood of cash into a bond market where yields are near a nine-year low
  • Italian consumer confidence rose from 84.9 to 85.7, higher than consensus 85.1. No really.
  • Sweden sees 2013 GDP growth of 1.1%, versus 2.7% previously
  • Norwegian unemployment rises to 2.4%, above expectations of 2.3%
Busy day with lots of US events, all of which are completely irrelevant to the GETCO algos who are now merely looking for their next opportunity to flash crash futures:
  • 8:30am: Chicago Fed Nat Activity Index, Nov. (prior -0.56)
  • 8:30am: Personal Income, Nov., est. 0.3% (prior 0.0%)
  • Personal Spending, Nov., est. 0.4% (prior -0.2%)
  • PCE Deflator M/m, Nov., est. -0.1% (prior 0.1%)
  • PCE Deflator Y/y, Nov., est. 1.5% (prior 1.7%)
  • PCE Core M/m, Nov., est. 0.1% (prior 0.1%)
  • PCE Core Y/y, Nov., est. 1.6% (prior 1.6%)
  • 8:30am: Durable Goods Orders, Nov., est. 0.3% (prior 0.0%, revised 0.5%)
  • Durable Goods Ex-Transportation, Nov., est. -0.2% (prior 1.5%, revised 1.8%)
  • Capital Goods Orders Non-Defense, Ex-Aircraft, Nov., est. 0.0% (prior 1.7%, revised 2.9%)
  • Capital Goods Shipments Non-Defense, Ex-Aircraft, Nov., est. 0.8% (prior -0.4%, revised -0.1%)
  • 9:55am: U. of Michigan Confidence, Dec. final, est. 75.0 (prior 74.5)
  • 11:00am: Kansas City Fed Manufacturing Activity, Dec. est. -5 (prior -6)
And a more expansive recap from DB's Jim Reid
So you're all still there? Haven't you something more interesting to do in the last few hours of civilisation? To be fair the same could be said of us. But stoically we all carry on. However judging by the thousands of out of office messages I got yesterday many people have now left to prepare for Xmas/the apocalypse (delete as appropriate).
To be fair when I woke up this morning to find that overnight S&P futures had at one point slumped 50 points I thought that doomsday was starting. Yes we've seen a stunning development overnight to the fiscal cliff story with a chaotic delay to the scheduled House vote on the GOP’s ‘Plan B’ fiscal bill. Before we detail this, this will be my last contribution to the EMR this year but Anthony and Colin will keep publishing over the Xmas period to keep us up to date with the latest fiscal cliff developments. We would normally have paused by now but US politicians have kept us honest up until the bitter end and look like keeping the guys busy next week. So happy holidays to everyone from me and many thanks for reading in 2012 and for the support and interaction. Also thanks to Colin and Anthony for their invaluable contribution to this document. It couldn't be done without them.
Assuming the end is not nigh, see you all in the second week of 2013, as on Boxing Day I'll be off to slide down mountains in the name of fun for 12 days. So back to the dramatic overnight news. After a quick huddle in Boehner’s office, the House Speaker eventually scrapped the vote conceding that he didn’t have enough support from his Republican caucus to pass the bill. In a brief statement afterwards, Boehner said that “now it is up to the President to work with Senator Reid on legislation to avert the fiscal cliff”. Perhaps indicative of the current state of talks, Republican congressman Scott Rigell said that “I’m not sure the people who have been up here 20 or 30 years really understand what the next iteration of this process is”. In a press release, the White House said that Obama was still “hopeful” for a deal.
So cliff clock continues to tick and a deal before the Christmas break is now looking increasingly unlikely. Indeed the Senate will meet briefly today but will not reconvene until next Thursday (27 December). Similarly the House will also not meet again until after Christmas and the hope is that there will be bipartisan agreement then to avoid the fiscal cliff.
However if the Republicans weren't prepared to support a bill raising taxes for million-dollar annual earners, is compromise now getting much less likely? Are we heading over the cliff in a dramatic fashion? Or is this more a failure of leadership from Boehner? I have never known such a big story to break when no-one is really watching due to the holiday season. Even in the darkest days of the financial crises there did seem to be a 'bad news' amnesty as we approached Xmas. This uncertainty is pressurising markets overnight. As we said at the top S&P futures plunged nearly 50points to reach a low of 1392 after the negative headlines before recovering to 1423 as we type although there were also chatter of ‘fat fingers’ behind the dive in stocks. Asian equities have been volatile but are trading weaker led by a 0.85% drop in the Hang Seng while 10yr UST yields have rallied 4bps to 1.756% as we go to print. Gold continues to underperform and is down to $1642/oz (-0.3%) overnight and is poised to finish lower for four straight sessions in its longest losing streak in more than 2 months.
In the currency space, the JPY (+0.4%) continues to rally against the USD following yesterday’s BoJ meeting. The Nikkei reported overnight that the BoJ "appears certain to embrace an inflation target" with the question now being the target rate, the time frame and accountability (Nikkei). Cliff concerns are also lifting market volatility into year end with the VIX up 13.5% in the last 2 days.
Fiscal cliff aside, yesterday’s US dataflow made for more encouraging reading. The final Q3 GDP was revised up 0.4 ppt to 3.1% due to a combination of stronger personal consumption (1.6% vs. 1.4% previous), net exports (-$395B vs. -$403B) and government (3.9% vs. 3.5%). Inventories ($60.3bn vs. $61.3bn) were only revised slightly lower. The Philly Fed's manufacturing index recovered in December (8.1 vs -3.0 expected and -10.7  previous) driven by new orders and shipments. Existing home sales topped expectations in November (5.04 million vs. 4.90m expected), resulting in a 5.9% increase in sales volumes for the month.
Finally, jobless claims increased to 361k vs. 344k the previous week, settling broadly at the average that was recorded prior to Hurricane Sandy.
Away from the US news flows remain fairly quiet. In Spain, Catalan President Artur Mas said he would work with the Catalan Republican Left, or the ERC party to push for a referendum on independence from Spain in 2014 (Reuters). In Italy, the Italian senate approved the 2013 budget law and the bill now heads to the Chamber of Deputies where it is due to be passed either today or Saturday. PM Monti is reportedly scheduled to address the Italian public over the weekend but is also set to speak at the Conference of Ambassadors in Rome later today.
Looking at the day ahead, the market’s reaction to the latest fiscal cliff drama will likely be the main focus on what is likely going to be a thin volume day for trading. In terms of data, France’s business confidence and German/Italian/UK consumer confidence surveys are scheduled in Europe. In the US, November’s durable goods orders and personal spending are the data points of note.


Early morning discussion on currency crosses:

(courtesy Marc to Market)

Market Discovers Fiscal Cliff, Sends Dollar Higher

Marc To Market's picture

It had seemed that many participants were looking past the US fiscal cliff and were to be content taking on more risk.  However, yesterday's late developments have provided a cold slap of reality.  Our base scenario, under which the US does in fact go over the cliff appears more likely now that Speak Boehner's "Plan B" failed to draw sufficient Republican support to allow a vote.   Indeed, there is some speculation that the failure of Boehner's gambit may see a leadership challenge right after the New Year.  
The lack of a coherent Republican strategy has prompted a large unwind of risk-on and thin holiday market conditions may be exacerbating the price action.  In the risk-off mode, the US dollar and yen have performed best.  The dollar-bloc, which has generally lagged in recent days, remains under pressure.

After approaching $1.06 last week, the Australian dollar approached $1.04 in Asia before finding a bid in Europe.  Resistance is seen now near $1.0460.  The greenback has moved above CAD0.9900 for the first time in two weeks and may close above its 20-day moving average for the first time in a month.   The New Zealand dollar is the weakest of the three.  It is off more than 1% on the day.  It is off 2 cents on the week.  With today's drop, the NZD has retracement nearly 61.8% of the rally from Nov 16's ~$0.8065 to last week's high near $0.8475. 
The European currencies are faring better than the dollar-bloc.  Consider that the euro finished last week near $1.3165 and is now at pixel time above $1.32.  For its part, sterling finished last week near $1.6175 and now is nearer $1.6240. 
There have been a few developments in Europe to note.  First, the UK's Q3 GDP was revised slightly lower to 0.9% from 1.0%.  On a year-over-year basis, the UK economy was flat.  Second, Italy's the passage of the 2013 budget and the balanced budget law will likely allow the dissolution of parliament over the next few days to allow for a late Feb election.  Monti will deliver an end of the year address in which he is now expected to declare his intention to lead a centrist coalition.  Monti appears more popular outside of Italy than within it, but securing 15-20% of the vote could still be decisive.  In the mean time, Monti goes from un-elected technocrat prime minister to caretaker.  
It is not Italy, Spain, or even Greece that is the most pressing case in Europe as the year winds down, but tiny Cyprus.  As we have noted before, the focus is on the recapitalization needs of its banks, which overwhelm the government's finances. S&P has slashed for the second time in two months to CCC+ from B and maintains a negative outlook, ostensibly do to its reliance on short-term financing.  
The key issue now is that the IMF reportedly is pressing for a restructuring of its debt, which means a private sector haircut.  Cyprus may not be Greece and Greece may be unique, but it is difficult to see how Cyprus's debt situation can be put on sustainable footing without a restructuring of its debt.  There is some talk of seeking Russia's assistance again, but this only adds to the country's debt burden.  As the IIF's Tran notes the problem with the private sector burden sharing is that the creditors told that the Greek experience would not be repeated.  
Turning to Japan, the dollar has once again tested the JPY83.80 area for the third time in four days and it held.  The modest gains in the yen appear to be largely a function of unwinding crosses against the dollar-bloc.  An LDP spokesperson noted that the BOJ's charter need not be modified if the BOJ capitulates.  The BOJ governor, whose term ends in a few months, does not appear sympathetic to a 2% inflation target or open-ended QE.  
We have suggested that open-ended QE is more a way to market  present the QE rather than substantive. The decision to buy foreign bonds lies with the Ministry of Finance not the central bank.  Lastly, we note reports that the LDP does not want to trigger a large slide in the yen's value, but would be content for  the dollar to trade in the JPY85-JPY90 range.


Your early morning currency crosses: (  showing much  USA strength against major currencies like the Euro . The pound also fell against the dollar with the Canadian dollar slightly weaker against the dollar . The yen also fell a touch against the dollar. 

Your early morning currency crosses;

Euro/USA    1.3208 down  .0029
Japan/USA  8411  down .31
GBP/USA     1.6235 down .0036
USA/Can      .9912  up .0037


Big news out of Italy on Friday:  Mario Monti resigns and will not run for Prime Minister:

(courtesy zero hedge)

Monti. Out.

Tyler Durden's picture

The rumors have been flying around all morning, but now it's news...
Italian credit spreads leaked wider all morning and EURUSD lower though the correlation to losing a technocrat is perhaps a stretch. And so the great "Mark-to-Monti" Goldman rotation (as described previously) is complete, with Goldman losing a technocratic scribe, who is no longer needed thanks to yet another Goldmanite now in charge of the ECB, but far more importantly, Goldman has now gained control over that most prized of central planner jewels: the Bank of England.


If you have time this weekend, I urge you to watch this 1 hour documentary on the causes of the Spanish collapse due to the real estate bust which in turn caused massive unemployment of young workers .  In the documentary you will see pharmacies devoid of pharmaceuticals and young pharmacists state that in Valencia the government has not paid them for 6 months.

a must see video:

(courtesy zero hedge/ BBC/Spanish crash documentary)

The Great Spanish Crash - Documentary

Tyler Durden's picture

Forget what you are told by various European officials. Ignore the endless parade of manipulated market savants who 'see' sovereign spreads falling and claim that indicates all is well in Europe. To truly understand the situation, watch this must-see documentary from the BBC's Paul Mason on the rise and fall of Spain. From dictatorship to democracy and from construction boom to economic bust, Mason pulls no punches in this down-to-earth realization that things are far worse than any 'market' would suggest. It is critical to understand that free markets are the stick (or carrot depending upon your style of vigilantism) to incent governments to be proactive. With the very visible hand of ECB-funded banks bailing one another out, all the politicians are doing in this 'lull' is nothing at all! Instead, the watchers (and prognosticators) simply observe the market and their bias is to believe that they 'fixed' it. This documentary will explain why that is absolutely not the case.


The following came from a navy seal reporting to Bill Murphy of GATA on Friday.
We should be cognizant of the fact that we may have a banking holiday very shortly:


I don’t know whether this will help in offering any explanation as to the reason(s) behind the incredible amount of intense attacks on gold and silver we are currently witnessing but here goes.

As you may remember from prior e-mails to you, we are a Military contractor and therefore from time to time we receive certain information as to what’s going on. Today I was informed that FOR THE FIRST TIME EVER some (if not all) of the Navy Seal Officers (at least in Team 7) were forewarned to have their wives and family members stock up and keep in reserve two weeks of food and one month’s supply of money.
The exact time as to when this would be required was undefined; however, it sure sounds to me like the long awaited National Bank Holiday may be not too far away.



The following is interesting.  Will they go into losses on their interest rate swaps as well?

(courtesy Market Watch)

London trading fiasco ripple to hit J.P. Morgan

MADRID (MarketWatch) -- U.S. regulators are expected to soon take action against J.P. Morgan Chase & Co. JPM -1.63% over its role in allowing a group of London-based traders to rack up losses of more than $6 billion this year, The Wall Street Journal reported in its online edition on Friday. J.P. Morgan isn't expected to be fined, but the Office of the Comptroller of the Currency, led by Comptroller Thomas Curry, is due to take enforcement action, the WSJ said, citing people familiar with the investment bank's talks with regulators. The OCC wants the bank to fill in holes in its risk control in relation to outsize bets taken by Bruno Iksil, a trader who was nicknamed "The Whale", and others in the London branch of J.P. Morgan's Chief Investment Office. A spokesman from J.P. Morgan declined to offer comment to the WSJ. The report, citing people close to the company, also said that Chief Executive Officer Jamie Dimon is still expected to get a bonus despite the London losses.


your closing 10 year bond yield from Spain:



5.251000.02100 0.40%



Your closing Italian 10 year bond yield:  (now safely below 5%)
However yields rise due to the Monti resignation.

Italy Govt Bonds 10 Year Gross Yield


4.472000.04900 1.11%


Your 4:00 pm currency crosses: (  showing huge  USA strength against major currencies
like the Euro on closing. The pound also fell against the dollar , with the Canadian dollar also losing  strength  against the dollar . The yen gained against all currencies on Friday.
Euro/USA    1.3186 down  .0051
Japan/USA  84.21  down .291
GBP/USA     1.6167 down .0140
USA/Can      .993  up .0055


Your closing figures from Europe and the USA:

 (in the red for all except Spain..go figure.. 

i) England/FTSE down 18.35 points or  0.31%

ii) Paris/CAC  down 5.33 or .15%.

iii) German DAX: down 35.87 points or 0.47%  

iv) Spanish ibex: up 26.80  (.32%)

and the Dow: down 121.88 points  (.91%)


And now for major USA stories

The big bombshell came late Thursday night when Boehner dropped the vote for Plan B.
Immediately bourses traded deeply into the red and USA futures plummeted.

Here is the story from Bloomberg on the dropping of the Plan B vote:

(courtesy Bloomberg)

Boehner Drops ‘Plan B’ As Budget Effort Turns to Disarray

House Speaker John Boehner scrapped a plan to allow higher tax rates on annual income above $1 million, yielding to anti-tax resistance within his own party and throwing already-stalled budget talks deeper into turmoil.

House members and senators won’t vote on the end-of-year budget issues until after Christmas, giving them less than a week to reach agreement to avert tax increases and spending cuts set to take effect in January. The partisan divide hardened yesterday, making the path to a deal more uncertain.

House Speaker John Boehner takes a question during a news conference in Washington. Boehner and Jay Carney, the White House spokesman, both left open the possibility that high-level budget talks could resume and that a broader agreement is possible. Photographer: Andrew Harrer/Bloomberg

“The odds go up that we go over the fiscal cliff,” said Representative Rob Bishop of Utah, a Republican.

Standard & Poor’s 500 Index futures dropped 1.3 percent at 9 a.m. in London, after falling as much as 3.4 percent in Asian trading. The Stoxx Europe 600 Index slid 0.6 percent. U.S. Treasuries rose, sending the 10-year yield down 3 basis points to 1.76 percent.

The failure cast doubt on Boehner’s ability to navigate the competing political and legislative forces bearing down on him. To get a tax-and-spending deal, Boehner must gain enough support from Republicans to keep control of his party while relying on Democrats for the votes needed to send any measure to President Barack Obama.

“It weakens the entire Republican party, the Republican majority,” said Representative Steven LaTourette, a nine-term Ohio Republican who is retiring after this session. “If you’re not a governing majority, you’re not going to be a majority very long.”

$600 Billion

Boehner said President Barack Obama and Senate Majority Leader Harry Reid should come up with legislation to avoid more than $600 billion in tax-and-spending changes that would probably cause a recession in the first half of 2013 if left in place. Until Dec. 17, Obama and Boehner had been edging closer to a deal that would have included $1 trillion each in tax increases and spending cuts.

Obama wants Boehner, 63, to allow a House vote on a Senate- passed bill that would extend tax cuts on income up to $250,000. That bill doesn’t address several parts of the so-called fiscal cliff, including the payroll taxunemployment insurance, estate tax, spending cuts, expanded unemployment insurance and miscellaneous tax breaks.

A House leadership announcement said the chamber will hold no more votes until after the Christmas holiday and will return “when needed.” Reid said yesterday that the Senate won’t address the end-of-year budget issues until Dec. 27.

Bipartisan Solution

“The president’s main priority is to ensure that taxes don’t go up on 98 percent of Americans and 97 percent of small businesses in just a few short days,” White House spokesman Jay Carney said in an e-mailed statement. “We are hopeful that we will be able to find a bipartisan solution quickly.”

The failure of what Boehner called Plan B demonstrated the clout of anti-tax Republicans and made it less clear what budget legislation Congress could pass. The White House had said it would veto the tax bill and Reid said it would be dead on arrival in the Senate.
“I’ve seen lots of tough votes before,” said Representative Jack Kingston, a Georgia Republican. “And it’s a birthing process if you will, with lots of labor pains.”
Many Republicans, including Mick Mulvaney of South Carolina, John Fleming of Louisiana and Tim Huelskamp of Kansas, said they opposed the bill because it included tax increases.
“We just couldn’t get enough consensus,” Fleming said. “Raising taxes on any American, to me, is not the right message.”

Core Principles

The vote’s cancellation “didn’t solve the problem but it avoids creating bigger problems, Republicans caving on core principles,” Huelskamp told reporters.
Republican leaders spent the day trying to build support for their legislation, using votes on unrelated bills to bring members to the floor and asking Republican senators to call House members.
Just after 7 p.m. in Washington, instead of starting debate on the bill, leaders began a recess. Boehner conferred with his leadership and then called a 7:45 p.m. meeting.
That session lasted fewer than 15 minutes as Boehner told colleagues he didn’t have enough votes to bring the bill to the floor. Republicans have 241 members of the 435-member House.
Boehner started the meeting with a prayer for serenity and told Republicans he didn’t have the votes and was sending them home for Christmas, LaTourette said.

‘Too Big’

“It was just too big a hill to climb,” said Texas Republican Joe Barton.
Democrats said they saw the failed attempt as proof that Boehner can’t control his own members.
“Speaker Boehner’s partisan approach wasted an entire week and pushed middle-class families closer to the edge,” Adam Jentleson, a spokesman for Reid, said in a statement. “The only way to avoid the cliff altogether is for Speaker Boehner to return to negotiations, and work with President Obama and the Senate to forge a bipartisan deal.”
Representative Chris Van Hollen, a Maryland Democrat, said on Bloomberg Television that the House should vote on Obama’s proposal to allow higher tax rates for households earning $250,000 or more, even if it undermines Boehner’s support among Republicans.
“That’s the risk he takes,” Van Hollen said. “I would hope he would put the country before Republican caucus politics.”

Economic Effects

Fewer than two weeks remain to avert the tax-and-spending changes, though many of the economic effects could be reversed with an agreement in early 2013.
If Congress doesn’t act, tax rates for income at all levels would rise next month, along with taxes on estates, capital gains and dividends. More than $100 billion of spending cuts would go into effect, half in defense programs.
Earlier yesterday, Republicans barely got enough votes to pass a spending-cut measure they brought up in a bid to gain support for Boehner’s Plan B among lawmakers wary of increasing tax rates without also reducing federal program costs.
That bill passed 215-209 with one member voting present. It would eliminate most of the automatic cuts scheduled for 2013 and replace them with $314.5 billion worth of other cuts tofood stamps, federal workers’ benefits and other programs.
Republicans have held a firm anti-tax stance for 22 years.

Permanent Extensions

Republicans tried to sell Boehner’s bill to their members as the best deal they could hope for with Obama in office.
Before the bill was pulled from the floor, Oklahoma Representative Tom Cole, a member of the leadership whip team, said it offered “a chance to make 85 percent or 90 percent of the Bush tax cuts permanent for 99 percent of the American people.”
They had scheduled the vote over the objections of anti-tax groups such as the Club for Growth and the Heritage Foundation.
Under Boehner’s bill, on incomes above $1 million, the tax rate on ordinary income would go to 39.6 percent from 35 percent, and the top rate on capital gains and dividends would go to 23.8 percent from 15 percent, including a 3.8 percent tax from the 2010 health care law that starts in January.
Some lawmakers expressed uncertainty about the path ahead, even before Boehner’s decision. “Don’t make me lie to you,” said Representative Charles Rangel, a New York Democrat first elected to Congress in 1970. “I have no idea what the hell is happening.”
To contact the reporters on this story: Richard Rubin in Washington; James Rowley in Washington at
To contact the editor responsible for this story: Jodi Schneider at


Just follow the flowchart prepared by Goldman Sachs on what to expect next with the fiscal cliff ticking down to the wire:

(courtesy Goldman Sachs/zero hedge)

A Fiscal Flowchart For Dummies: Here Is What Happens Next

Tyler Durden's picture

Confused by what is about to take place amid the loud noise, political posturing and rhetoric that as soon as tomorrow will hit an unseen before level as Obama's plan to split the GOP has worked so well it has completely backfired and thrown any game theoretical forecasts out of the window? Here is Goldman's fiscal flowchart, which is not for faint of heart, as ever more signs point to the box with the all caps "recession" written all over it.  


Mark Grant is back and this time around, he discusses the fiscal cliff.  The Democrats are very happy that no one has to work because they will relect these politicians to keep the flow of cash moving in that direction. If that is not enough, the government can just print the green stuff into existence.

Today reality struck that there will be no deal as the Dow plummets:

(courtesy Mark Grant/out of the Box and onto Wall Street) 

The Party's Just Beginning

Tyler Durden's picture

Via Mark Grant, author of Out of the Box, 

“For thousands more years the mighty ships tore across the empty wastes of space and finally dived screaming on to the first planet they came across--which happened to be the Earth -- where due to a terrible miscalculation of scale the entire battle fleet was accidently swallowed by a small dog.”
             -Douglas Adams, The Hitchhiker's Guide to the Galaxy

Still here. We are still here. It is true that we have many hours to go before today crosses across all of the time zones and becomes tomorrow and, in any event, the Chateau Petrus will not have been in vain. I am holding classes in deduction now in Nassau on my boat. Other boat owners have dropped by and are all inquiring about the fiscal cliff. “The plunge is at hand,” I tell them as Congress adjourns, the rank and file Republicans turn on the House Speaker and the Lords of Chaos are in charge once again. All of the stuff and nonsense about taxing the wealthy and gibberish about who and when and where to tax is like so much marshmallow spread on a peanut butter sandwich; it just doesn’t matter. The galling omission of not concentrating on what is truly important, the cost of entitlements and social programs and what the nation can and cannot afford shows the true worth of our nation’s leaders which is about equal to a wooden nickel or a three dollar bill. It is the Lost Boys living in Never-Never Land and Wendy nowhere in sight.
“In the first place God made idiots. He did this for practice. Then he made politicians. This was a mistake. Then he tried to correct His mistake by having the people elect the politicians of their own choosing. He then realized that he had made idiots twice and he pondered his miscalculation for seven days. Next he made dogs and finally being satisfied that he had done something correctly he went off on holiday. One day he may come back and finish the exercise.”
                        -The Wizard
So here we are on December 21 and we have no plan to deal with the financial condition of the country. The Democrats are perfectly happy that no one has to work because those people will re-elect them. Then the people that do work should hand out money to everyone else because my money should now be everyone’s money and everyone needs to share in the sandbox and Karl Marx has left the London library and is now residing in Washington D.C. The fall back position of the Democrats is that if this is not enough money then the Fed can print zillions of pieces of paper saying, “In God We Trust” which may be the only thing to trust in because no one will trust the little pieces of paper after some time. One day someone will wake up and announce that these green bills are not money and that they are just paper and the Munchkins will say, “Oh My God” and head down the yellow brick road to find the Wizard and he will be on my boat in the Bahamas and the Wicked Witch of the West will hand out the bad news. All quite simple. Very similar to Dorothy falling from the sky. The wind begins to twitch, the house falls and Oz realizes that they have encountered a “horse of a different color.”
Now what has happened this morning is that someone has woken up the Lullaby League. These market participants have been sleeping and whiling away their hours thinking everything was fine and that Good Witch Glinda was going to wave her magic wand and make everything all hunky and dory.  They have been dreaming that the Sorcerer Bernanke could change green paper into money and at will and forever just like Sorcerer Draghi who lives but a continent away.Alchemy has returned to the world and the stuff of magic has discovered the Middle Earth where the elves and the goblins play. This morning no one is happy that they have been awakened. The dwarves are about and Grumpy is leading the protest.
So the Munchkins have been awakened and I predict the Wicked Witch is right. The people of Oz have left the poppy fields where they slept in a flower induced dream and will soon be headed into the Emerald City to demand answers. The melting has begun.
“Going so soon? I wouldn't hear of it. Why my little party's just beginning.”
                   -The Wicked Witch of the West 


Best commentary of the day.  Bruce Krasting discusses areas of the fiscal cliff of which everyone totally avoids.  His big area of concern:  the AMT patch which will disappear and thus it will have grave consequences for the 2012 taxation year. He calculates a drag on 1st quarter GDP of 2.5%.
This is huge...

a must read

(courtesy Bruce Krasting)

Mayans Forecast Boehner Fail?

Bruce Krasting's picture

Is it possible that the Mayans, in their infinite wisdom, somehow anticipated that Boehner would fail to bring any legislation that might patch the cliff? The Boehner “fail” happened last evening, it was already 12/21 in Asia. So far, the Mayans’ timing for the Beginning-of-the-End is spot on. The cracks in the system have been spreading ever since the fateful no-vote in Congress last night. At this point, we are faced with the very real prospect that those cracks will get longer and wider in the next few days. If this happens, people will start falling into the widening rifts.

I have watched, read and listened to almost all of the endless discussion on the topic of the cliff. I’m convinced that there is not a single commentator that has properly evaluated the economic consequences of failure to address the deadline that is now just days away.

All the analysis I’ve looked at considers the consequences to the 2013 economy of changing tax rates and reduced spending that will occur if no deal is reached. But this does not include the consequences of the retroactive tax increase for 2012 that will take place.

I wrote about this on November 14 (Link). To repeat, if we go off the cliff, as many as 60 million taxpayers will be forced to file a separate Alternative Minimum Tax form (unbelievably complicated). Of the 60 million, as many as 33 million will be faced with a higher 2012 tax bill. This will result in some folks digging into their pockets to pay Uncle Sam the extra $3,000 to $4,000 this will cost (a disaster for some). Others, will get a smaller refund that they think they are due (bye-bye to that trip to Disneyland). The numbers are big. The "surprise" 2012 tax that the cliff will bring comes to a very lumpy $100-120 Billion.

The drag from the 2012 AMT look-back will be felt in the first quarter. It will “feel” as if this is a 2.5% reduction in 1stQ GDP just from the AMT. By itself, the retroactive AMT tax will produce negative economic growth. ADD to this, the fiscal consequences that kick in on 1/1/13. If spending is adjusted by this much, it will translate into fall in economic activity in excess of 4% in the 1stQ. If the year gets off to such a dismal start, the US will face a technical recession in the first half of the year, the full year will be lucky to breakeven.

A very steep drop in activity in the USA for the next three-months is not in the market’s mind today. It’s as if investors have forgotten that Europe and Japan are already in recession and China is still a question mark. Now we face the prospect of a very hard landing for the US.

Maybe the Mayans had it right all along…..


At 4:30 we had another Obama conference on the Fiscal cliff with lots of finger pointing and no plan as of yet. Most pundits knew there would be no big news on the fiscal cliff as it was scheduled 30 minutes after the market closed and thus the news was bad.  The President also announced Kerry as the new Secretary of State:

(courtesy zero hedge)

Twas The Last Obama Conference Before Cliffmas...

Tyler Durden's picture

... and all through the collocated server house, GETCO algos were stirring, hoping (as this is the only "strategy" left) that maybe, just maybe, Obama can pull a unicorn out of his skittles-dispensing hat. He won't, and most likely we will get one last does of stern fingerpointing, harsh language and accusative condemnation of those wascaly wepublicans. But find out for yourselves in 15 short minutes, when the market may be closed, but futures will still be open, although at least subject to the limit down rule. Of course, if the news was good, it would have come before 4 pm...
In all seriousness, what Obama will discuss is a last ditch extension, one which merely kicks the can by a week or two. From Politico:
Obama’s $2.4 trillion proposal is still on the table — and it remains his preference. But administration officials said Friday that it would be difficult to pass unless House Speaker John Boehner (R-Ohio) decides to rejoin the talks. And he has given no indication that he will.

So the White House is looking at one option under consideration by the Senate Democratic leadership: a smaller package that would extend the Bush-era tax rates on income below $250,000, pause the across-the-board spending cuts known as the sequester and renew unemployment insurance benefits, according to Senate and administration officials.

It would hold off a significant portion of the fiscal cliff, minimizing any economic shock in the new year. But it means a host of tax provisions would likely expire, little would be done to address the debt and deficit, and no process would be set up for overhauling the tax code next year. There would be no agreement on entitlements, and no resolution on raising the debt ceiling.

Faced with few good options and a shrinking timeline, Democrats are trying to put the squeeze on Boehner after he failed Thursday to come up with enough votes for his bill extending tax breaks on income below $1 million.

Dropping the income threshold to $250,000 would be a complete capitulation for Boehner, and the math for getting the votes is tough.

But the White House assumes that, if the Senate passes a bill, an isolated House Republican majority will feel pressured to act, similar to the way the 2011 payroll tax cut fight and debt limit showdown played out.
Or not.  

The big University of Michigan consumer confidence index was released and it showed a big fall to 72.9 from last flash reading of 74.5.  The reading was expected to show a value into the low 80's.  Confidence across the nation is still very low and remember that the consumer is 70% of GDP:

(courtesy Dow Jones newswires/U. of Michigan Consumer Confidence Sentiment index)

DJ December Reuters/Michigan Sentiment Index Falls to 72.9 Vs 74.5 in Early December

Fri Dec 21 10:07:33 2012 EDT
U.S. consumers feel worse about the economic outlook at the end of December, according to data released Friday. The pessimism could cause shoppers to pull back during the last few days of holiday shopping.
The Thomson-Reuters/University of Michigan consumer sentiment index's final reading for December stood at 72.9, the lowest reading since July, according to an economist who has seen the report. The preliminary December index had dropped sharply to 74.5 compared with the end-November reading of 82.7.
Economists surveyed by Dow Jones Newswires had expected the end-December index to increase to 75.0.
The current-conditions index declined to 87.0 from a preliminary reading of 89.9, while the expectations index slipped further to 63.8 after the early reading plunged to 64.6 from 77.6 at the end of November. The expectations reading is now at a one-year low.
Worries about the fiscal cliff may explain the steep drop in the Michigan numbers in December compared to November. Media coverage has spelled out the tax increases and government spending cuts that will kick in in early 2013 if a deal is not reached.
Within the Michigan survey, the one-year inflation expectations reading fell to 3.2% from the preliminary December reading of 3.3%. The inflation expectations covering the next five to 10 years remained at 2.9%.


This is a kick in the teeth to the USA.  China has cancelled huge tonnage of USA soybeans as China purchases this product from South America where the price is cheaper.

(courtesy Reuters)

UPDATE 3-China makes largest cancellation of US soy in 14 years

Thu Dec 20, 2012 12:39pm EST

* USDA says China cancels 540,000 tonnes of US soybeans

* Second such cancellation this week

* CBOT soybean futures tumble

* Traders say China shifting demand to South America

Brazil on track for bumper crop

CHICAGO/WASHINGTON, Dec 20 (Reuters) - China has scrapped purchases of 540,000 tonnes of U.S. soybeans, the U.S. Department of Agriculture said on Thursday, marking the largest such cancellation by the world's top importer of the oilseed in at least 14 years.

It was also the second cancellation this week. On Tuesday, the USDA said China had cancelled purchases of 300,000 tonnes, and traders said that another 120,000 tonnes that were scrapped by buyers the USDA did not specify were likely for China too.

Chicago Board of Trade soybean futures tumbled on the news, falling as much as 2.4 percent, 34-1/4 cents, to a low of $14.02-3/4 a bushel. At 11:30 a.m. CST (1730 GMT), futures were down 1.9 percent, or 27 cents, at $14.10 per bushel.

Prices in the U.S. grain export market also fell sharply due to the cancellations, with basis bids sinking 10 to 18 cents per bushel for soybeans shipped to terminals at the Gulf Coast.

By law, exporters must report promptly the sale of 100,000 tonnes or more of a commodity to the same destination in one day. Sales of smaller amounts are reported on a weekly basis.

Traders said the cancellations were due to a likely bumper crop in Brazil, the world's second-largest soybean exporter, where China could book supplies at much lower prices.

Brazil's government food supply agency Conab forecast the soybean crop at a record 82.6 million tonnes.

Agronomist Michael Cordonnier of Soybean and Corn Advisor consultancy said the weather in Brazil's soybean areas have generally been favorable to the crop and that he expected the harvest to kick off by early January.

"I don't see any reason not to assume a record crop in Brazil," he said by phone from Hinsdale, Illinois.

Garrett Toay, risk management consultant at Toay Commodities Futures Group in Des Moines, Iowa, said China was likely cancelling extra U.S. soybeans it had purchased as insurance in the event of a poor crop in South America.

"They could have overbooked here as protection," he said, adding that it was likely that China was shifting some of its purchases to South America.

"China is assuming there is nothing wrong with the Brazilian crop," Toay said.

After some initial concerns over the weather hurting Brazil's soybean crop, the country seems to be on the path to harvesting a bumper crop early next year.

U.S. soybean export sales in the 2012/13 marketing year (Sept/Aug) totaled more than 30.3 million tonnes as of Dec. 13 - nearly 83 percent of the USDA forecast of 36.61 million.

The majority of the sales - almost 19 million tonnes or 62 percent - were to China.

USDA data showed that 3.1 million tonnes were sold to "unknown destinations," and traders believe a sizable part of the amount was bought by China.


You will enjoy this latest scam using taxpayer money

(courtesy Wolf Richter.www,

The Biofuel Subsidy Scams

testosteronepit's picture

Corporate subsidies, in an era of fiscal-cliff attacks on Social Security and Medicare, have dodged attention despite their magnitude and absurdity. Take the renewable-fuels subsidy ecosystem—and a train of tankers filled with biodiesel that shuttled back and forth across the border between Sarnia, Ontario, and Port Huron, Michigan, twelve times, without unloading its cargo. It generated millions of dollars in profits.
The mystery train was an outgrowth of the EPA’s Renewable Fuel Standard mandate that requires oil companies to blend (subsidized) biofuels with (subsidized) fossil fuels—or alternatively, purchase Renewable Identification Numbers, or RINs, as offsets.
Each RIN is a serial number for a batch of biofuel, such as biodiesel or ethanol. RINs are generated when the biofuel is produced or imported. Under the mandate, oil companies must blend 1 billion gallons of biodiesel a year into the fuel stream. Each refiner’s contribution is determined by its market share. If a refiner doesn’t want to comply, it can instead buy RIN credits from biodiesel producers. Hence, a $2 billion market for biodiesel RIN credits, policed by the ever so vigilant EPA. But RIN credits can be traded independently from the batches of biofuel that generated them. And this has opened up some opportunities.
Last year, Clean Green Fuels in Maryland was accused of selling 32 million fake biodiesel RIN credits to oil companies and brokers. In June 2012, CEO Rodney Hailey was convicted of wire fraud, money laundering, and of violating the Clean Air Act.
Absolute Fuels in Texas, was sent an EPA Notice of Violation in February this year. On July 19, owner Jeffrey David Gunselman was arrested for having allegedly created on his computer more than $50 million in RIN credits that he then sold. He didn’t even have the facilities to produce biodiesel. Earlier this month, he pleaded guilty to a laundry list of charges and is contemplating a maximum sentence of $20 million in fines and 1,268 years in the hoosegow.
Another Texas company, Green Diesel, received a Notice of Violation on April 30. The issue: 60 million fake RINs. By then, CEO Philip Rivkin had apparently skedaddled to Europe, out of harm’s way. 
Buyers of these credits got tangled up as well: “30 refiners settled with the EPA without admitting wrongdoing.” The usual suspects. Exxon would pay a fine of $165,000; ConocoPhillips $250,000, and BP $350,000. They’d also have to buy real RINs to replace the fake ones. The chaos in the RIN market prompted the House Energy and Commerce Oversight Subcommittee to hold hearings.
But a small outfit in Toronto, Bioversel Trading Inc., was particularly resourceful in milking the RIN system—and may not have done anything illegal, according to an excellent investigative series by CBC News. Bioversel hired Canadian National Railways (CN) to shuttle the same trainload of biodiesel twelve times across the US-Canadian border without unloading the cargo. All in the second half of June, 2010. For $2.6 million.
To generate RINs from importing biodiesel into the US, ownership of each trainload was transferred to Bioversel’s US partner, Verdeo, which then, rather than selling the biodiesel in the US, exported it back to Canada. But by exporting the biodiesel, Verdeo would have been required to “retire” the associated RINs, instead of being able to sell them. So Verdeo retiredethanol RINs instead, which cost only a fraction. The difference, less the cost of transportation back and forth, was profit.
It might have remained under wraps. But the “importer of record,” Northern Biodiesel of Ontario, NY, found out that the same rail cars were being shuttled back and forth and generated new RINs each time they came into the US; something was fishy. So the owner blew the whistle.
CBC News contacted the EPA to get some clarity, but the agency refused to comment. And the railroad? Didn’t they have a clue? Nope. “As required by law, CN discharged its common carrier obligation regarding these biodiesel shipments,” spokesman Mark Hallman wrote to CBC News. “CN is not aware of any pending investigation of an alleged fraud. CN has and will continue to co-operate fully with....” etc. etc.
Alas, CBC News had obtained a copy of an internal CN email, dated June 14, 2010, sent by Teresa Edwards, CN’s Sarnia transportation manager. In addition to some technical details, it included these priceless words: “It will be the same cars flipping back and forth and the product will stay on the car. Target is to get at least 25 flips across the border and back by June 30.” And a word of corporate encouragement: “This move has the potential to make a lot of money for CN so need everyone’s assistance to maximize the number of trips we make and ensure that it all moves smooth.”
In a follow-up email, dated June 28, 2010, of which CBC News also obtained a copy, Edwards wrote: “The Bioversal move back and forth across the border at Sarnia has now completed. Records show that we moved 1984 cars total.... This equates to approximately 2.6 million dollars of revenue....”
Though the Canada Border Services Agency and the EPA are investigating, CBC News emphasized that it “has found no evidence Bioversel or its partners broke any laws.” Apparently, regulations at the time permitted importing biofuels to generate RIN credits, re-export the fuel, retire cheaper ethanol credits instead of biodiesel credits, and laugh all the way to the bank. A perfect example of how huge corporate welfare programs, such as fuel subsidies, throw off unexpected crumbs in surprising directions.
Another investigation, this one into the potentially deadly industry practice of mechanical tenderization of beef, has turned into a nightmare for steak lovers. The risks have been known since at least 2003. Yet the industry resists even the most basic labeling requirement that would save lives. Read....The Beef Industry’s Deadly Secret: “Blading” and “Needling” 


I will leave you this weekend with this wrap of event during the week

(courtesy Greg Hunter/

Don’t expect a debt deal Christmas present.  It ain’t going to happen.  This is a political football. It is also about putting blame on the other party and getting a deal that hurts the other party’s base the worst.  Solving this debt crisis problem will involve real pain and sacrifice if we ever want to balance the budget.  Even the so-called Erskine-Bowles plan only meant a total of $4 trillion to the budget over the next decade.  That plan slowed the growth of government, forget about actually cutting it.  What Congress and the President should be doing is a full court press on the economy.  Instead, the Fed is propping up the banks and the government to the tune of $85 billion a month.  And there is not a single word about that enormous pink elephant in the room.  The economy is headed into a tailspin, and inflation is going to crush the middle class. 
The President is demanding a gun plan.  Not much is really talked about in terms of people who have successfully protected themselves or families with a firearm.  Just last week in Oregon, a shooter was stopped by an armed citizen with a concealed carry permit.  The President and Congress have already gutted the 4th Amendment and “Due Process” with “Indefinite Detention” contained in the NDAA.  Now, they are going after the Second Amendment (The Right to Bear Arms).  The economy is headed for a real crash.  This will create inflation and poverty all at the same time as the Fed keeps printing money to bail out the big banks, which are technically insolvent.  You want to see some real violence, then watch what happens when the currency is inflated away.  Stopping law abiding citizens from protecting themselves is not the answer.  Next on the list are probably Freedom of Speech and the First Amendment. 
If the government really wants to crack down on something, why not jail some bankers for fraud and crime?  HSBC was fined nearly $2 billion for money laundering for drug cartels and terrorists.   What about criminal prosecutions?  UBS was fined $1.5 billion in the LIBOR interest rate rigging fraud.  London Inter-Bank Offered Rate is used in up to $800 trillion in transactions globally.  JP Morgan Chase and other banks recently paid fines for fraudulent mortgage-backed securities.  So, alleged money launders and fraudsters only get a small fine?  Do the powers that be want to disarm the public just in time for the next financial calamity?  
Finally, today is the first day of winter 12/21/12.  It is also the end of the Mayan calendar, which is NOT the end of the world, just the end of a 5,000 and 26,000 year cycle.  That doesn’t mean bad stuff will not happen.  The most predictable calamity is a financial crash because nothing has been fixed since the 2008 meltdown.  The banks are too big to fail and the bankers are too well connected to jail.  Nothing will get better under this backdrop. 
Join Greg Hunter as he analyzes these stories and more in the Weekly News Wrap-Up.

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