Saturday, December 29, 2012

Obama states no new deal/Dow plummets/Euro shortfall in Europe may be a harbinger of events/gold and silver fall/ CME lowers gold margins by 9%


Good morning Ladies and Gentlemen:

Gold closed down $7.80 to finish the week at $1654.90.  Silver finished the comex session down 26 cents to $29.92


In the access market gold and silver rebounded with the Obama news (below)

Gold 1656.30
silver: 30.03

Gold and silver were under pressure all day as the risk off button was pressed by our manipulators.
Europe bourses was down badly as investors were hopefully waiting for some sort of settlement on the  USA fiscal cliff. Europe received bad news from Spain which continues to see deteriorating  conditions within its real estate sector which in turn is bringing down it's banks. Then late in the NY trading session, this surfaced:



(courtesy zero hedge)


Obama: "My Offer Is Nothing" - Stocks Plunge

Tyler Durden's picture






Looks like today everyone in Congress was short. Here's why:
  • OBAMA SAID NOT TO MAKE NEW OFFER IN FISCAL CLIFF TALKS
  • OBAMA OFFER DETAILED BY SOURCE FAMILIAR WITH WHITE HOUSE MTG
  • OBAMA SAID REITERATING PROPOSAL FROM LAST WEEK ON FISCAL CLIFF
  • OBAMA PLAN INCLUDES RAISING TAXES ON EARNERS OF $250,000 AND UP, EXT OF UNEMPLOYMENT INSURANCE, ADDRESSES OTHER OUTSTANDING ISSUES-SOURCE
So much for a deal, and so much for the invisible DJIA support at 13,000.



end




The Dow tanked from that moment as if everyone was looking into an abyss.
Then late last night, the CME announced that it was raising margins of oil and other freight stuff but lowering the margins by 9% on gold. (not silver).  These guys are crooks and you can bet the farm that they are planning something awful like driving the OI in gold higher only to fleece newbie longs again.

A cafe member of Lemetropole pointed out that in July 2011, gold advanced for 11 straight days, something that it has not done in the previous 12 years.  He correctly points out that the USA had reached its debt ceiling then and negotiations between the Republicans and the Democrats were in full steam.  Timothy Geithner had to use extra measures by borrowing from the Federal Pension funds to finance the government.
Part of the borrowings were from the ESF which everyone knows is the trading and funding arm for gold/silver manipulation.  The ESF has around 40 billion dollars and once this fund was withdrawn, the boys could no longer manipulate gold to the same extent as before.  Once the debt ceiling was resolved on August 1 2011, it was business as usual for our clowns.  We will probably see the same conditions as we begin the 2013 year as negotiations commence on a new debt ceiling level.

I would also like to point out another big development in Europe and that is the massive liquidity shortfall in euros by the EU banking system.  Yesterday, we learned that the now defunct SMP, the funding arm of the ECB in purchasing the junk from the sovereigns and banks, had for the first time a failed sterilization of its debt with investors.  The SMP has 208 billion euros of bonds in its portfolio and it engages in a sterilization program whereby new bonds would be purchased and the old stuff sold.  However the SMP only got bids of 191 billion euros and this means that the banks are massively scrambling to find euros.  Zero hedge correctly stated on Thursday that the rise in the Euro is due to the repatriation of investments back to the euro due to financial turmoil.

We will also go over details on the big monetization inside Japan.
We will cover 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 by 820 contracts from 424,279 down to 423,459.  The active December contract month is now off the board.  However there was a flurry of activity of the delivery front.  Late last night we had 43 notices filed and then again early Friday morning another 209 notices were served and this must be settled by Monday night.
Thus the total notices total 252 and there were only 54 longs standing on Thursday, so somebody was in great need of gold. The non active January month saw it's OI fall 150 contracts down to 838.  The next big active contract for gold is February and here the OI rose by 1397 contracts from 253,375 up to 254,772.  The estimated volume Friday was a very weak 70,151.  The confirmed volume on Thursday was also very weak at 112,118.
Let's chalk the volume to the holiday season.

The total silver comex open interest plays to a different drummer than gold.  This weekend we see that the OI rose by 2030 contracts from 140,124 up to 142,154.  The active December contract month is now off the board.  However, there was also a huge flurry of activity in the silver delivery arena.  Late Thursday night, 57 notices were filed and then early Friday another 47 notices. This makes the total 104 notices even though only 54 longs were still not satisfied by Thursday night.  Again, it seems that the boys were badly in need of silver. The non active January month saw it's OI fall by 95 contracts to 420. The next big active contract month is March and here the OI rose by 1614 contracts from 78,735 up to 80,349.  It seems that we have some very determined players wishing to take on the establishment in silver. The estimated volume on Friday was weak at 17,204 as it seems that our high frequency traders were off on holidays.  The confirmed volume on Thursday was better at 39,228.

I would like to point out that the total notices served in silver this month is 3922 contracts.  Once served, the OI is reduced. If one were to add the 3922 notices served to the OI registered for this weekend at 142,154 we would have a total OI of 146,076.
There is no question that we have a few major players in silver taking their time slowly picking off the flesh of our bankers and destroying their basic fabric of the banking cartel...the silver (and gold) price suppression scheme. 


Comex gold figures 



Dec 28.2012    The  December contract month


final standings for December in gold.

 




Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
nil
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
7812.45  (Scotia)
No of oz served (contracts) today
 43  +  209  =   252 ( 25,200 oz)
No of oz to be served (notices)
month complete
Total monthly oz gold served (contracts) so far this month
3253  (325,300 oz)  10.12 tonnes
Total accumulative withdrawal of gold from the Dealers inventory this month
nil
Total accumulative withdrawal of gold from the Customer inventory this month


 
581456.42  (18.08 tonnes)
Today, we  had tiny activity  inside the gold vaults 

The dealer had no deposits  and no   withdrawals.





We had 1  customer deposit:


i) Into Scotia:  7812.45 oz


total deposit:  7812.45 oz











we had 0   customer withdrawals:




total customer withdrawal  zero oz



Adjustments: 0

Thus the dealer inventory rests tonight at 2.621 million oz (81.33) tonnes of gold.

You should also note that the dealer or registered account has not withdrawn one oz from their their inventory category for the entire month.  Very unusual especially when a dealer serves notice on a long (customer)


The CME reported that we had two sets of notices  filed, 43 late Thursday and 209 early Friday morning  for a total of 252 notices or 25,200 oz of gold. The total number of notices filed for this month  thus rises to 3253 notices or 325,300 oz of gold. This will conclude the December delivery month.

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

3253 contracts x 100 oz per contract  =   325300 oz or 10.12 tonnes of gold.




Silver:




Dec 28.2012:   The December silver contract month


Final standings for silver for December


Silver
Ounces
Withdrawals from Dealers Inventory620,178.000 (CNT)
Withdrawals from Customer Inventory  93,021.48  (Brinks, Delaware)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory   50,834.000 oz (CNT)
No of oz served (contracts)57  +  47 =  104  (520,000 oz)
No of oz to be served (notices)month complete
Total monthly oz silver served (contracts)3922  (19,610,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month5,050,848.9
Total accumulative withdrawal of silver from the Customer inventory this month11,325,055.0

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

 we had no dealer deposits but did have a  dealer withdrawal:

i) out of CNT:  620,178.000 oz (another perfectly round withdrawal ending in .000)

We had 1 customer deposits of silver:

i) Into CNT:  50,834.000  oz  (another perfectly round number of a deposit)

total deposit: 50,834.000 oz


we had 2 customer withdrawals:


i) out of Delaware:  2137.77 oz
ii) out of Brinks:  90,883.71 oz

total customer withdrawal:  93,021.48  oz






we had 0  adjustments:


I have still not received any answer from the CFTC  regarding the round numbered deposits/withdrawals in gold and silver we have been witnessing lately, especially from the CNT vault.  

  
Registered silver remains today at :  42.064 million oz
total of all silver:  147.081  million oz.





The CME reported that we had 57 notices filed late Thursday night and another 47 notices filed early Friday morning for a total of 104 contracts or 520,000 oz
The total number of notices filed for December thus rises to 3922 for 19,610,000 oz of silver.

So the final standings for silver is as follows:

3922 contracts served x 5000 oz per contract =   19,610,000 oz.
Quite a good showing for silver




end



The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.



Total Gold in Trust   Dec 28.2012  ( at 8 pm)









Tonnes1,350.82

Ounces43,430,228.26

Value US$71.959  Billion








Total Gold in Trust   Dec 27.2012  ( at 6 pm)











Tonnes1,350.82

Ounces43,430,228.26

Value US$71.873  Billion













Dec 26.2012:













Tonnes1,350.82

Ounces43,430,228.26

Value US$72.178 billion.






Dec 24.2012:

















Tonnes1,350.82

Ounces43,430,228.26

Value US$72.180 Billion










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


and now for silver:


Dec 28.2012:  9 pm Friday night



Ounces of Silver in Trust322,981,444.700
Tonnes of Silver in Trust Tonnes of Silver in Trust10,045.85



Dec 27.2012:



Ounces of Silver in Trust322,981,444.700
Tonnes of Silver in Trust Tonnes of Silver in Trust10,045.85



Dec 26.2012:


Ounces of Silver in Trust322,981,444.700
Tonnes of Silver in Trust Tonnes of Silver in Trust10,045.85




Dec 24.2012:



Ounces of Silver in Trust322,981,444.700
Tonnes of Silver in Trust Tonnes of Silver in Trust10,045.85






no change in the silver inventory


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 2.9 percent to NAV in usa funds and a positive 3.3%  to NAV for Cdn funds. ( Dec28 2012)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 1.48% NAV  Dec 27./2012
3. Sprott gold fund (PHYS): premium to NAV  fell to 1.50% positive to NAV Dec 26.2012. 

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 2.9% in usa and 3.3% 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.

 

end  

At 3:30 the CME released the long awaited COT report from Dec 17 right up to December 24th Christmas eve.

Let us first head over and see what we can glean from the gold COT 

(Gold COT courtesy of Silverseek.com)




Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
200,436
50,340
24,184
139,479
327,143
364,099
401,667
Change from Prior Reporting Period
-2,205
5,480
-2,278
1,699
-12,771
-2,784
-9,569
Traders
183
70
71
52
48
271
162


Small Speculators




Long
Short
Open Interest



62,201
24,633
426,300



-6,658
127
-9,442



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Monday, December 24, 2012


Now we see how the collusive banking system works:

Our large speculators:

Those large specs that have been long in gold panicked again as they pitched 2205 contracts from their long side.

Those large specs that have been short in gold added a whopping 5480 contracts to their short side.

The banking crooks enticed the black box spec operators to go massively short with their constant raiding of gold.

Our commercials:

Those commercials that are long in gold added 1699 contracts to their long side.
Those commercials that are short in gold covered a huge 12,771 contracts from their short side.

Our small specs:

Those small specs that have been long in gold covered a monstrous 6658 contracts from their short side.

Those small specs that have been short in gold were goaded into going short another 127 contracts.


Conclusion:  you cannot get more bullish than this.  The speculators were goaded into going massively short and the commercials went net long this week to the tune of 11,072 contracts.

The bankers are up to something!! Are they planning to go net long on all gold (and silver) portfolio?


Silver COT courtesy of silverseek.com)




Silver COT Report: Futures
Large Speculators
Commercial
Long
Short
Spreading
Long
Short
39,620
8,977
30,380
44,302
91,010
-5,269
77
3,761
3,955
-4,676
Traders
82
34
56
39
37
Small Speculators
Open Interest
Total
Long
Short
140,751
Long
Short
26,449
10,384
114,302
130,367
-3,119
166
-672
2,447
-838
non reportable positions
Positions as of:
147
110

Monday, December 24, 2012
  © SilverSeek.com



Our large speculators:  

Those large specs that are long in silver pitched a rather large 5269 contracts from their long side.
Those large specs that were short in silver only went further short by 77 contracts.  Note the difference between gold and silver.

Our commercials:

Those commercials that have been long in silver added a very healthy 3955 contracts to their long side.

Those commercials that have been short in silver, covered a rather large 4676 contracts to their long side.

Our small specs: 

Those small specs that have been long in silver covered a huge 3119 contracts from their long side.
Those small specs that have been short in silver added a tiny 166 contracts to their short side.

The specs in silver refused to be goaded into going more short by the antics of the crooked banks.

Conclusion; more bullish than last week as the bankers went net long by 8631 contracts. 








Here are your major physical stories:

 Your early morning trading in gold/silver courtesy of Goldcore.

The world awaits the fiscal cliff:


(courtesy Goldcore)






‘Fiscal Cliff’ Distracts As ‘Fiscal Abyss’ In Japan, UK and U.S. Cometh

Tyler Durden's picture




From GoldCore
‘Fiscal Cliff’ Distracts As ‘Fiscal Abyss’ In Japan, UK and U.S. Cometh
Today’s AM fix was USD 1,658.75, EUR 1,259.68 and GBP 1,031.37 per ounce.
Yesterday’s AM fix was USD 1,655.25, EUR 1,247.65 and GBP 1,022.96 per ounce.
Silver is trading at $30.16/oz, €22.97/oz and £18.79/oz. Platinum is trading at $1,533.70/oz, palladium at $701.00/oz and rhodium at $1,040/oz.
Gold climbed $4.10 or 0.25% in New York yesterday and closed at $1,664.20/oz. Silver slipped to $29.685 in London, but it rose to a high of $30.466 in New York and finished with a gain of 0.8%.

Currency Ranked Returns in US Dollars – (Bloomberg)
Gold pared back early gains and edged down on Friday and tick tock goes the US “fiscal cliff” clock as time is running out for the somewhat irrelevant New Year’s deadline. 
Gold bullion prices are on target for their first weekly gain in a month after the sharp fall in December (-3%)  led to bargain hunters buying the dip. Gold bottomed on December 29th last year prior to very strong gains in January 2012 and we believe a similar pattern may be seen again this year. 
The yellow metal looks set to rack up its 12th straight year of gains on low to zero interest rates, concerns of the eurozone debt crisis and diversification into bullion by central banks.
2013 should see global gold demand grow on further strength from China and a recovery in India, helping the precious metal continue its bull run into its 13th year, according to the World Gold Council. 
U.S. CFTC commitment of traders’ data is at 1930 GMT today.
President Obama meets congressional leaders from both parties regarding the fiscal cliff and if a deal isn’t struck it will likely fuel safe haven buying of gold. 
Negotiations to avert the ‘fiscal cliff’ offer great political drama, but they won’t solve America’s looming budget and debt crisis and may cast the nation into another recession or worse.
A deal is likely to be done but any deal will be another cynical exercise of kicking the can down the road while failing again to address the root causes of the debt crisis which is too much debt at all levels of American society.
The political and media side show that is the so-called “fiscal cliff” will soon be overshadowed by the appalling and rapidly deteriorating situation regarding the U.S. national debt. 
Treasury Secretary Timothy Geithner has alerted Congress that the nation will once again hit the debt ceiling on Monday, but that his department can take “extraordinary measures” to keep paying the bills for another few months.
Incredibly, the debt ceiling was raised from $14.294 trillion in August 2011, to its current level of $16.394 trillion. Thus in the span of only sixteen months, the Obama administration has added a whopping $2.1 trillion to the national debt.
The U.S. federal deficit is now exceeding $1 trillion dollars every year —up from $161 billion in 2007, the last year before the financial crisis. Spending is up some $1 trillion, as outlays for Social Security, Medicare, Medicaid and other entitlements have increased by an amount equal to the entire 2013 military budget – a budget which may again surpass the combined military expenditure of every other nation in the world.
U.S. unfunded liabilities are now estimated at between $50 trillion and $100 trillion and by the end of the decade (in less than just 7 years), runaway entitlement spending will require shutting down the military or crippling many other vital domestic spending programs to head off massive deficits that will likely lead to a dollar crisis and significant inflation.
No matter what deal is eventually agreed, whether before or after the new year, it will at best nibble at the edges of the trillion dollar annual deficits that are being piled up.
While all the focus has been on the so called U.S. ‘fiscal cliff’, amnesia has taken hold and many market participants have forgotten about the far from resolved Eurozone debt crisis – not to mention looming debt crisis in the UK and Japan.
In Japan, the national debt is seen topping ¥1 quadrillion by the end of March 2013. A policy of money printing pursued for a decade has failed abysmally and now politicians look set to pursue currency debasement in an even more aggressive manner – with attendant consequences.
The UK is one of the most indebted countries in the industrialised world - the national debt now stands at more than 1 trillion pounds ($1.6 trillion) and total debt to GDP in the UK remains over 500%. 
Gold is traditionally sought out as a safe-haven and inflation hedge that investors diversify into in times of trouble. This is because throughout history, those who own physical gold have been protected from financial, economic and monetary crisis.
Also, much recent academic research has shown gold is a proven safe haven asset.
Gold has lately been behaving like any risk asset. However, buyers should continues to focus on the long term as gold ownership will protect people from the fiscal abyss facing major economies and currencies internationally in the coming years.
NEWSWIRE
(Bloomberg) -- Silver ETP Holdings Expand to Record 18,915.75 Metric TonsAssets in exchange-traded products backed by silver rose to an all-time high of 18,915.75 metric tons yesterday, data tracked by Bloomberg showed.
(Bloomberg) -- Economist Dennis Gartman Says He’s Buying Gold Priced in YenGartman says he bought bullion priced in euros yesterday.
(Bloomberg) -- Gartman Buying Gold Again in Euros and May Add to Purchases
Economist Dennis Gartman is buying one unit of gold in euros today.
A close above 1,265 euros this week “would force us to add to the position,” Gartman said in his daily report today.
(Bloomberg) -- Shanghai Gold Exchange to Raise Margin Requirements for Holidays
The Shanghai Gold Exchange will raise the margin requirement for gold contracts to 13% from 12% starting with the settlement on Dec. 28, according to a statement posted on the bourse’s website today.
The bourse will widen the trading bands for gold contracts to 10% from 9% from Dec. 31, the statement says.
Silver contract margin requirement will be unchanged and the trading bands will be increased to 13% from 12%, it says.
The exchange made the changes to prevent risks during market closure from Jan. 1 to Jan. 3, the statement says.
For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS

end


Ben Traynor weighs in on gold/silver trading overnight from Europe Thursday night:

(courtesy Ben Traynor/bullionvault)


"Gold Market Overhang" Poses Risk of Another Price Fall, Fiscal Cliff "Will See Minimal Last Minute Deal"



By: Ben Traynor, BullionVault


-- Posted Friday, 28 December 2012 | Share this article | Source: GoldSeek.com

London Gold Market Report

THE SPOT MARKET gold price fell back to $1660 an ounce Friday morning, close to where it started the week, as stock markets also edged lower, ahead of talks in Washington aimed at avoiding the $600 billion "fiscal cliff" of spending cuts and tax rises due within days.

Gold will break its four-week losing streak today if the spot price ends the week above $1657 an ounce, while spot silver needs to close above $30.03 an ounce to do likewise.

"The weight of the [gold] market still overhangs with resistance seen at $1673, the November low, and $1685, the December support," says the latest technical analysis from bullion bank Scotiabank.

"While the market holds below $1685 the technical risk remains for another leg lower."

"There's some buying but you don't see heavy activity," one physical gold bullion dealer told newswire Reuters this morning.

Silver meantime eased back towards the $30 an ounce mark, while other commodity prices were little changed.

On the currency markets, the Euro fell against the Dollar Friday morning, dropping 0.6% in two hours, with traders blaming thin volumes and stop loss selling.

President Obama is due to hold talks with congressional leaders later today, as part of ongoing negotiations on how best to tackle the US federal deficit. The US economy is due to hit the so-called fiscal cliff next week unless Congress agrees to halt planned spending cuts and extend tax cuts from the Bush administration.

Democrats have proposed maintaining the Bush tax cuts for anyone earning $250,000 a year or less, while Obama has indicated he would consider raising that threshold to $400,000. 

Republican House of Representatives speaker John Boehner meantime has said he would consider allowing the cuts to expire for anyone earning more than $1 million a year, after previously expressing outright opposition to a rise in taxes. Boehner included this proposal in his so-called 'Plan B' last week, but failed to garner enough support from fellow Republicans for it to be put to a House vote.

"The way to avoid the fiscal cliff has been right in the face of Republican leaders for days and days and days," Senate majority leader Harry Reid, a Democrat, told the Senate Thursday, adding that Boehner's unwillingness to agree a deal is motivated by concerns about being re-elected speaker of the Republican-controlled House next week.

"I say to the speaker, take the escape hatch that we've left you. Put the economic fate of the nation ahead of your own fate as Speaker of the House."

"Republicans aren't about to write a blank check for anything Senate Democrats put forward just because we find ourselves at the edge of the cliff," countered Republican Senate minority leader Mitch McConnell.

"That having been said, we'll see what the president has to propose."

"Time is running out for the long-awaited solution in fiscal-cliff negotiations," says Kai Fachinger, portfolio manager at Sustainable Asset Management in Zurich. 

"As the positions of the two parties are just too far off, it's likely to happen in the very last second."

"[We expect a] deal to happen at the last minute," agrees Dominic Schnider at UBS Wealth Management.

"But it will be a minimal deal...I think that should be gold supportive."

Vietnam's central bank meantime will play the role of market maker in the gold market next year in a bid to control the domestic gold price, Vietnamica reports, citing comments from State Bank of Vietnam governor Nguyen Van Binh.

Earlier this year the SBV claimed the exclusive right to manufacture gold bars in Vietnam.

Ben Traynor


end




I found the following interesting:


(from Bull Market Thinking)















I just got off the phone with a major silver producer. Of worthy note, is that over the last 3 months, phone calls from what this gentlemen referred to as “generalists” have spiked, and are continuing during this quiet holiday period.
“What is a generalist?” I asked.
“A generalist is a fund manager oriented towards general market investments—not precious metals specifically,” he replied.
“What is occurring due to the extremely low valuations of gold and specifically quality silver producers,” he explained, is that “general market growth and value-focused funds are now eyeing these companies.” 
Further, this gentlemen joked that generalists are also referred too as cockroaches, in that when you see one—there are usually ten more hiding behind them, looking to buy.
When asked how many generalist funds are quietly calling silver producers during this time he responded, “It could be hundreds…or thousands. We’re talking pension funds, mutual funds, value funds…guys who move the price of the stock and move the price of silver itself…those who need a week or more to take a position” 
Very interesting conversation indeed.
Best,
Tekoa Da Silva
Bull Market Thinking



end  






Oh NO!! I smell a big plot here.  Are they sucking in players before pulling the trapdoor?

Why only gold and not silver?

(courtesy zero hedge)



CME Lowers Gold Margin By 9%

Tyler Durden's picture




Adding to the confusion, for some, that is today's trading session, here comes the CME which in a post-closing announcement, proceeds to hike outright margins on a variety of petroleum and freight products, but more importantly just cut the margins on gold by 9%. Is it that time when the establishment is clearing the path for everyone to rotate out of equities (and/or bonds) into gold, just to set the trap and pull the trapdoor once everyone is once again left holding paper gold? We shall see, but following tonight's selloff, gold is now less than 5% less than stocks YTD. It may well be up to the last trading session of the year to determine who wins in 2012: rock or paper.
Source: CME






Your early morning overnight sentiment from Europe/Asia:


Major points:

Only one:  the fiscal cliff is on everybody minds and nervousness prevailed in Europe.
All European bourses were down as they await news from across the pond:

(courtesy zero hedge)


Same Cliff Different Day

Tyler Durden's picture




We could say that news is actually relevant or matters in this "market" but we would be lying, just as we would be lying if we said that this market has not become so utterly predictable, with yesterday's late day market surge - on yet another ridiculous catalyst - visible from so far away, it was almost painful to watch it take place in real time. Sure enough, futures are now sliding back, and giving back much of yesterday's gains - but don't worry, in a day full of even more meetings and flashing red headlines, at least some combination of carefully phrased MSM words will set off today's algo-driven buying frenzy, guaranteeing yet another "retail investor" decides they have had it with this farcical "free market" casino for ever.
There was actual news out of Europe, where Italy sold 5 and 10 year bonds in the first underwhelming auction in months, placing just €5.88 billion of a maximum €6.0 billion target, at rates that were higher compared to the November auction: €3 billion in 10 Years sold at 4.48% compared to 4.45% in November, although the Bid to Cover was modestly higher at 1.47 compared to 1.18 previously; €2.87 billion in 5 Years sold at 3.26% vs 3.23% in November, and a virtually unchanged BtC of 1.29 vs 1.24 last. We also learned that the French economy grew by 0.1% in Q3, below consensus expectations of a 0.2% growth rate, with the surprise once again held in capital investment, or the lack thereof, which fell 0.3% Q/Q. Finally we learned that Spanish November retail sales tumbled 7.8% in constant prices, but somehow this was better than expected. A far bigger problem for Spain is that its housing prices are expected to continue tumbling as Telegraph's Ambrose Evans-Pritchard reminded(original Zero Hedge article from June).
As noted earlier, none of this actually matters. What matters is today's second to final episode of the Fiscal Cliff drama, summarized by Jim Reid best: President Obama is expected to meet with Congressional leaders at the White House today. The meeting will be attended by Senate Majority Leader Harry Reid, House Speaker John Boehner, House Minority Leader Nancy Pelosi and Senate Minority Leader Mitch McConnell. The President had a call with Reid, Boehner and Pelosi late Wednesday night to receive update on the negotiations but no details about the conversations have been given. As noted by the Washington Post, perhaps the most significant development is that McConnell, who has signalled an interest in cutting a deal, will be engaged directly in White House discussions for the first time. According to the WSJ, most officials believe any deal is most likely to emerge in the Senate so all eyes will be on the congressional leaders’ meeting later today ahead of a hectic (and cold) weekend ahead for those in Capitol Hill. Beyond that, the Dow Jones Newswires also noted that Republicans will hold a closed-door caucus meeting at 9am ET Monday.
And just in case political headlines were not enough, prepare to see massive market surges on flashing red headlines forecasting clear skies: "while the House may be in session from Sunday through to the 2nd of January, we may need to watch the weatherman for some cues on how travel plans will be affected by the Northeast winter snow storm that is causing havoc in many parts of the country."
What can one say: fun "market."
More from Jim Reid:
It was a session of two halves for US markets with ‘hope’ arriving late in the day to arrest the ever increasing pessimism of a deal before year end. With just five days left on the cliff-countdown calendar, yesterday saw the S&P 500 drop as much as -1.29% to hit an intraday low of 1,402 and the Dow cross below 13,000 for the first time since early December. These early losses were prompted by comments from Senate Majority Leader Harry Reid who said that it looks like the fiscal cliff is where the US is headed. Overall there has been little progress made over the last 24 hours other than more finger-pointing from both sides, which are still seemingly as far apart as ever. Hopes of an 11th-hour deal rose later during the day on reports that the House of Representatives will reconvene on Sunday (6.30pm ET). The news sparked a late rally to see the S&P 500 (-0.12%) close off the day’s lows and the Dow march back up to 13,096. The VIX index also recovered and finished the day unchanged after having reached a 5-month high of 20.9 at one point yesterday.
In the latest development after the closing bell overnight, President Obama is expected to meet with Congressional leaders at the White House today. The meeting will be attended by Senate Majority Leader Harry Reid, House Speaker John Boehner, House Minority Leader Nancy Pelosi and Senate Minority Leader Mitch McConnell. The President had a call with Reid, Boehner and Pelosi late Wednesday night to receive update on the negotiations but no details about the conversations have been given. As noted by the Washington Post, perhaps the most significant development is that McConnell, who has signalled an interest in cutting a deal, will be engaged directly in White House discussions for the first time. According to the WSJ, most officials believe any deal is most likely to emerge in the Senate so all eyes will be on the congressional leaders’ meeting later today ahead of a hectic (and cold) weekend ahead for those in Capitol Hill.
Indeed, while the House may be in session from Sunday through to the 2nd of January, we may need to watch the weatherman for some cues on how travel plans will be affected by the Northeast winter snow storm that is causing havoc in many parts of the country. Beyond that, the Dow Jones Newswires also noted that Republicans will hold a closed-door caucus meeting at 9am ET Monday.
Continuing on with the theme, DB’s Frank Kelly yesterday said that he remains hopeful that both sides will reach a significantly watered-down version of an agreement to delay spending cuts before year-end, although he notes that the sense of urgency amongst Congressional members has been lacking. Frank’s comments were made before all the overnight developments we mentioned above. For those interested in his latest take on the situation, Frank will again host a conference call today as part of a daily update series. His call and replay details are provided at the end of today’s EMR for those interested.
In reality the weaker data also weighed on yesterday’s price action. US consumer confidence fell short of market consensus (65.1 v 70.0) and was down for the second consecutive month reflecting fears of the ‘fiscal cliff’. The sharp decline in future expectations (66.5 v 80.9) caught our eye which also turns out to be the biggest one-month fall since August 2011 – a time when market volatility picked up sharply amid US debt ceiling and rating downgrade concerns. Although initial jobless claims (350k v 360k) and new home sales (4.4% v 3.3%) came in better than expected, risk sentiment was largely driven by the budget impasse.
Moving on to the overnight session, Asian equity markets are off to a reasonably positive start overnight as hopes of a deal are lifted ahead of the meeting today. The Nikkei (+0.8%) is stronger as the JPY hits a 28-month low against the greenback (86.5) as a disappointing industrial production (-1.7% v -0.5%) print boosted the case for more monetary accommodation. Elsewhere, Japan’s headline CPI fell -0.2% yoy in November which was in line with consensus.
Turning to the day ahead, data flow will be relatively thin with the main highlight being the Chicago PMI and US pending homes sales. Ahead of that, Italy is targeting to auction up to EUR3bn in each of 5yr and 10yr bonds and France will be reporting its final Q3 GDP and consumer spending numbers. Fiscal cliff developments remain the key focus though with the White House meeting later likely to take center stage. Meanwhile the Senate also convenes today at 9am US EST (2pm London).



end



Marc to Market talks about events inside Asia and Europe before trading begins in NY.
The only notable event was the growth factor inside France for the latest quarter coming in at only 0.1% growth instead of the expected .2% growth. The social programs orchestrated by their new leader Hollande is having a damaging effect on their economy

(courtesy Marc to Market)




Euro Winds Down

Marc To Market's picture




The relatively calm foreign exchange market and equity market in Asia ended
abruptly in Europe.  It is difficult to find the culprit, other than
position squaring in thin markets, but the euro has come off a cent, dragging
the franc.  The MSCI Asia Pacific Index gained more than 0.5%, while
European bourses are broadly lower, with the Dow Jones Stoxcx 600 off 0.3% near
midday in London, led by utilities and financials.  Fixed income markets
are subdued.  Italy's bond auction was adequately received, especially
holiday conditions.  

There have been a few developments to note.  First Japan's data was
disappointing and this can only bolster the new government's attempt to
stimulate the economy both monetarily and fiscally.  Worker cash earnings
fell a whopping 1.1% in November, nearly three times larger than the
consensus.  This may have been a factor behind the poor retail sales,
which were flat.  The consensus had expected a 0.4% increase.  Weak
incomes and domestic demand may have, in turn, weighed on output.  In
November, industrial production fell 1.7%,  more than three times the
decline expected. 

In terms of the weekly MOF portfolio flows, they continue to be consistent
with expectations of a weaker yen.  With this assumption, Japanese
investors would, all else being equal, prefer foreign bonds over foreign stocks
and indeed that is exactly what they continued to do--buy foreign bonds and
sell foreign shares.  Foreign investors, in anticipation of further yen
weakness, show a continued preference for Japanese stocks over
bonds.  

In Europe, the economic news, on the face of it, would seem positive.
Spain, for example, reported a (small) current account surplus in Oct (~865 mln
euros).  This is the third surplus of the year and supports our
expectation for reduced imbalances within Europe to ease the Target2
imbalances.   Spain reported capital inflows of  12 .1 bln euros
after 31 bln in Sept.  Foreign portfolio inflows were 6.3 bln euros after
9.3 bln in Sept.  Spain also reported retail sales that had only
fallen 7.8% year-over-year rather than 10% the market expected.  

France revised Q3 GDP to 0.1% from 0.2%, but Nov household consumption was a
bit stronger at 0.2%.  
In Germany, the first state to report Dec inflation figures, Hesse, reported
a large rise of 0.9% on the month, which lifted the year-over-year rate to 2.2%
from 1.8%.  Although following the last ECB's meeting and reports that a
majority had favored a rate cut, what now appears to be a spike in German
inflation would seem to reduce the odds of a rate cut in January. 

Turning to the US, we note that any glimmer of hope that Washington will
avoid the worst of the fiscal cliff sees risk-assets (e.g. equities) rally and
the dollar weaken (except against the yen).  The market sees the
possibility of one last ditch effort.  Today, Obama meets with the top two
officials from both the House of Representatives (Boehner and Pelosi) and the
Senate (Reid and McConnell).  Reports suggest the key now turns not so
much on tax increases as the $109 bln in automatic spending cuts.  Most
investors still seem to be looking past the near-term uncertainty and assume
that the one way or the other, the full impact of the cliff will be
diminished. 


end


Early Friday morning we see a reversal from yesterday as the dollar strengthens against the Euro.
The Japanese yen stopped it's massive fall by rising the dollar.  The pound also strengthened a bit against the dollar with the Canadian dollar remaining at par.  Generally a risk off situation:





Your early Friday morning currency crosses;

Euro/USA    1.3187 down  .0060
Japan/USA  86.05  down .464
GBP/USA     1.6135 up .0023
USA/Can      .9951  down .0001

end




Friday morning Ambrose Evans Pritchard commented on the deteriorating conditions inside Spain's housing crisis.  It is one unmitigated disaster and it helps us to understand what the need for liquidity is overwhelming!!!



(courtesy Ambrose Evans Pritchard/UK Telegraph/and special thanks to Robert H for sending this to us)


Spain’s house prices to fall another 30pc as glut keeps growing
Spain's property slump will deepen for much of the next decade, and tracts of buildings along the Mediterannean coast will have to be demolished, the country's top consultants have warned.
The Spanish government says the housing market has already 'touched bottom' after falling 30pc since 2008.
 By Ambrose Evans-Pritchard
5:50PM GMT 27 Dec 2012
Telegraph UK
RR de Acuña & Asociados expects home prices in Madrid, Barcelona and other major cities to fall a further 30pc in a relentless slide until 2018,but it may be even worse in sunbelt regions where 400,000 Britons either live or own homes.
Fresh losses could reach 50pc and drag on for 10 to 15 years in those places where construction ran wild during the bubble, bringing the total decline from peak to trough towards 75pc.
"The market is broken," said Fernando Rodríguez de Acuña, the group's vice-president. "We calculate that there are almost 2m properties waiting to be sold. We have made no progress at all over the past five years in clearing the stock," he said.
"There are 800,000 used homes on the market. Developers are sitting on a further 700,000 completed units. Another 300,000 have been foreclosed and 150,000 are in foreclosure proceedings, and there are another 250,000 still under construction. It's crazy."
The overhang is vast for a country with 48m inhabitants and annual demand near 200,000. It is coupled with an outflow of workers and the start of an aging population crisis.
The government says the housing market has already "touched bottom" after falling 30pc since 2008, even though premier Mariano Rajoy admits that there will no economic recovery until 2014.
The International Monetary Fund forecasts contraction of 1.3pc next year, while Citigroup and Nomura both expect the depression to continue into 2014. The unemployment rate is 26.2pc and rising.
As a member of the eurozone, Spain no longer has the monetary levers to engineer a soft landing for "nominal" house prices. This makes it much harder to break the vicious cycle of debt-deflation. The property sector and the banks are each dragging the other down. The share price of nationalised Bankia fell 14pc on Thursday after the authorities said the lender is worthless, with "negative value " of -€4.2bn (-£3.5bn).
Bankia will need a further €13.5bn of taxpayer funds, taking the total to €18bn. Some 350,000 small investors - many talked into buying Bankia's preferred shares as a form of saving - have lost their money.
Banco de Valencia fell to €0.09 after state rescue fund (FROB) said it would seize 99.9pc of the company before selling it on to CaixaBank, a total wipe-out for shareholders.
El Confidencial reported that bank rescue costs will push the budget deficit to 9pc of GDP for 2012, far above the orginal EU target of 4.5pc, later modified to 6.3pc.
There has been scant improvement since 2009, when the deficit peaked at 11.2pc. The IMF says the deficit is still stuck at 7pc even if bank costs are stripped out.
It warns against austerity overkill, arguing that too much fiscal tightening can be self-defeating in a regional slump without offsetting monetary stimulus. New research by the Fund suggests that Spain's "fiscal multiplier" may be three times higher than originally assumed.
Mr Rodríguez de Acuña said Spain's property crisis varies enormously by region, with the worst damage on the Club Med belt. Even so, recent firesales in the inland city of Toledo have shocked analysts.
Santander recently slashed prices by 60pc to clear a backlog of properties. When Banco Sabadel followed shortly after, it had to offer haircuts of 70pc. Another large bank suspended its Toledo sales two weeks ago after prices went into meltdown.
"We think prices will recover in the traditional coastal areas like the Canaries or Malaga within five to eight years, but for now banks are offering huge discounts and nobody is calling. Marbella has already fallen by 50pc and prices are going down and down," Mr Rodríguez de Acuña said.
"In places like Castellon [near Valencia] where over-development was mad, banks are not financing anything and there is a high probability that these properties will never be sold. They will have to be knocked down," he said.
Spain's bank rescue from the EU bail-out fund (ESM) is bringing the crisis to a head quickly, and brutally. Brussels insists that Madrid crystallise the losses in the portfolios of the rescued banks, ending the "extend and pretend" policy that has concealed the full gravity of the crisis until now.
The big trio of healthy banks - Santander, BBVA, and Caixa - have all rushed to sell their backlog before the state's "bad bank" unloads its holdings. They have already written down 95pc of the value of their land portfolio. "There is little more to lose," said Mr Rodrigues de Acuña.


end

The following is perhaps the most important commentary of the day, that is the euro liquidity shortfall.

The ECB on Thursday night just had it's first failure to sterilize since November 2011.

The SMP has 208 billion euros of bonds under it's belt and it engages in sterilization by selling bonds to investors and then using the cash to buy new stuff to bailout needy countries like Spain, Greece, Italy and Portugal.  However in the latest offerings they only received bids on 191 billion euros and that signifies a massive shortage of euros in the banking system.  As we pointed out to you on Thursday, the rise in the Euro is not just because of the uSA fiscal cliff but also the repatriation of euros back from failed investments.

And what happened in 2011?  We had huge turmoil in Europe.  To bail out Europe a decision was made  to rescue Europe with the introduction of the famous LTRO 1 AND LTRO 2.  Europe's banks today should be flushed with euros but I guess the Euros are all flushing down a big black hole.
You can just hear the sucking of funds down the toilet!!

(a very important commentary...courtesy zero hedge)



Another Flashing Red Light: Euro Liquidity Shortage Leads To First ECB Sterilization Failure Since November 2011

Tyler Durden's picture





The ECB's original bond monetization program (the SMP) may now be defunct, having been replaced with the mythical OMT which will work as long as it never has to be used (see Spain), but its after effects linger on. Specifically, the aftermath of the SMP manifests itself in the weekly sterilization of accrued SMP bond purchases, which at last check amounted to some €208.5 billion. Why do we bring this up? Because a few hours earlier, the ECB failed, for the first time, to find enough demand and interest to sterilize the full amount of rolling peripheral bond purchases, and was instead able to find only enough bidders, 43 of them or the lowest in a year, to "sterilize" just €197.6 billion of the total weekly allottment. The last time the ECB failed in a sterilization action? November 29, 2011one day before thecoordinated global central bank bailout of 2011.
In other words, just like last year when things were going from bad to worse in Europe, the old continent's banks are suddenly facing a major liquidity shortage, which however would not be news to anyone who read our piece from yesterday "Surge In Marginal Lending Facility Usage To One Year Highs Confirms Year End EUR Repatriation" in which we said that Europe's banks"suddenly find themselves needing gobs of liquidity - not USD-denominated liquidity, but domestic, EUR-based." Sure enough, today we just got confirmation of how truly bad this issue is.
But what makes things much worse is that sterilization failures like today are not supposed to happen in a post LTRO 1 and 2 world in which the European banks are flush with €1 trillion in excess liquidity. And yet it did.
This is how the historical weekly sterilization have looked in the past year. What is obvious is that despite our speculation that this is merely a year end window dressing event, since the last such failure in November 2011, there has been no seasonality to the Bid to Cover pattern, which instead has deteriorated in virtually a straight line since one year ago. Anything below 1.0x on the right (Bid to Cover) axis means a sterilization failure as there were not enough bids tendered to cover the full needed amount.
Here is how the WSJ described the last time, in November 2011, there was such a dramatic failure of the ECB to telegraph liquidity sufficiency:
The data suggest that banks are hoarding cash amid the euro zone’s intensifying debt crisis.
The ECB only drained EUR194.199 billion in its weekly operation, below the target of EUR203.5 billion. The target amount equals the total volume of purchases under the ECB’s program for buying euro-zone government bonds on the secondary market.
It is the first time that the ECB has missed the mark on a draining operation since May and only the sixth time since the ECB started its bond-buying program in May 2010. It is also the first time that the draining operation has failed since the ECB revived the program in August.

Peter Chatwell, an Interest Rate Strategist at Credit Agricole CIB, said banks’ concerns about collateral may have prompted them to use their cash differently than they have in the past. Banks right now may “not want to give money to the ECB when there are [treasury] bills on offer and they can be used as collateral at the ECB.”
...
Following the announcement of the failed operation, the euro dropped against the dollar, reversing gains made earlier Tuesday after Italy’s debt auction.
Ironically enough, today the EUR has soared in the aftermath of the sterilization failure.
Which means two things:
i) either the Bank of International Settlements is actively manipulating the EUR higher in hopes of making market participants ignore this development, as it has done in the past (documented here), or
ii) the surging EUR, as we have speculated repeatedly, is nothing but a function of accelerating asset repatriation as European banks scramble to procure EUR liquidity.
Of course by rising, the EURUSD drags higher all correlated risk pairs, which in turns sends global markets higher. Sadly, this is happening for all the wrong reasons, and reminds us of the quarterly bank DVA/CVA fudge where a bank's bottom line isbetter the worse a bank's current viability is (as defined by its credit spread risk).
Because what is happening behind the scenes is some confused DE Shaw or GETCO algo is interpreting yet another European liquidity shortage as a risk on signal.
Which, in turn, once again shows what a total farce this market has become.
Source: ECB

end





The Japanese yen has followed the USA dollar closing by comparing the Fed's balance sheet with the Japanese balance sheet.  The correlation is extremely high.  

Japan has total sovereign debt of 1.033 quadrillion yen (12.1 trillion dollars), with GDP of approximately 5.8 trillion usa dollars 

The Bank of Japan has approximately 100 trillion yen  (1.17 trillion dollars) of bonds (assets).
The USA this year will monetize at least 1 trillion dollars of bonds.
To keep the same currency ratios, then the Japanese central bank needs to purchase an additional 100 trillion yen on purchases.  

Only one major problem:  the total issue per year is approximately 44 trillion yen.
From whence are they going to obtain the necessary bonds in order to keep the two currency levels in balance?

Fun and games in Abe's land:

(courtesy zero hedge)


Presenting Abe's 'Super-Secret' Devaluation Plan - Double-Down

Tyler Durden's picture





Much has been made of newly appointed uber-easer Abe's plans to weaken the JPY by any means possible. Since the global financial crisis began in early 2008, USDJPY has tracked remarkably closely with the ratio of Federal Reserve assets to Bank of Japan assets - as the currency wars escalated. Assuming the Fed proceeds with its planned QE3/4 $1tn expansion, then BoJ assets would need to expand by around JPY100tn to meet this target. The current BoJ holdings of JGBs just crossed JPY100tn - so this new printing is double the current holdings and considerably more than double the planned JPY44tn purchases for the year. Good luck with that given the expected JGB issuance this year is only around JPY44tn and good luck persuading anyone that the BoJ is not directly funding the government in the ultimate reacharound. As the Fed monetizes 1 year of Treasury issuance so the BoJ has to monetize over 2 years of JGB issuance - sustainable?
The current collapse in USDJPY to 86 has actually recoupled with the
ratio at around 0.0184x (Fed 2.92tn / BoJ 157.833tn). This implies the market is priced for around JPY56tn of JPY printing already (25% more than planned); but, given the USDJPY
target of 90 that has been implicitly discussed, this would mean the ratio of
Fed/BoJ would need to drop to 0.0165x.
The recent drop in USDJPY has recoupled with the current Fed/BoJ ratio once again...

but given the Fed's grand QE3/4 plan, the BoJ will have to be very aggressive to weaken the JPY - obviously - though monetizing double the planned JGB issuance this year seems like a stretch for even Abe (if he hopes to maintain any semblance of market confidence).




your closing 10 year bond yield from Spain:  





SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE




SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE

GSPG10YR:IND

5.255000.02800 0.53%








end.













Your closing Italian 10 year bond yield: 
climbing faster in yield than Spanish bonds





Italy Govt Bonds 10 Year Gross Yield

GBTPGR10:IND

4.497000.03100 0.69%
As of 11:59:37 ET on 12/28/2012.




end.









Your 4:30 pm Friday currency crosses:  after Obama made his announcement of no new deal, the USA dollar plummeted against the Euro, the Japanese yen, and the British pound.  The dollar only advanced against the Canadian dollar. 



Euro/USA    1.3218 down  .0029
Japan/USA  85.96  down  .531
GBP/USA     1.6167 up .0055
USA/Can      .99658  up .0016





end.






Your closing figures from Europe and the USA:

a bloodbath everywhere, from England, France, Germany, Spain and the USA.

Red ink to all:

 


i) England/FTSE  down 28.93  or  .49%

ii) Paris/CAC  down 54.01 or  1.47% 

iii) German DAX: down 43.49 or .57%

iv) Spanish ibex: down 149.90  or 1.81%

and the Dow: down 158.20 points or 1.21% 

end. 







And now for major USA stories:


I pointed this out to you this week

(courtesy Bloomberg)

Home Depot to Lowe’s Busiest Season Threatened by Strike


Home Depot Inc. (HD) and Lowe’s Cos. (LOW) have the most at stake among retailers facing a dockworkers’ strike, with possible port closings cutting off shipments right before the lucrative gardening season.
Home Depot, the biggest U.S. home-improvement chain, is making plans in case 15,000 workers at ports from Maine to Texas walk off the job, and Lowe’s said that it is monitoring the talks. About 45 percent of the commerce that flows in an out of the U.S. goes through East Coast ports, according to the National Retail Federation.
Home Depot has contingency plans in the event of a strike. Photographer: Andrew Harrer/Bloomberg
Dec. 28 (Bloomberg) -- Ellen Braitman summarizes the top stories this morning on the Bloomberg Business Report. (Source: Bloomberg)
A port strike may cause some disruption to imports of frozen or refrigerated agricultural goods such as fruits, vegetables and fish. Photographer: Tim Rue/Bloomberg
Retailers “would be hit far and wide from apparel to home goods to patio furniture to barbecues,” Jonathan Gold, the NRF’s vice president for supply chain and customs policy, said yesterday in a telephone interview from Washington. “It is a major concern. At this point, we don’t anticipate a settlement.”
The International Longshoremen’s Association has vowed to walk out if a deal isn’t reached before the Dec. 29 expiration of its contract with the U.S. Maritime Alliance, whose members include container-carrier companies. Talks broke down last week after nine months of negotiations. A strike would be the first at East Coast and Gulf Coast ports since 1977.
While most retailers have their biggest quarter around the year-end holidays, Home Depot may generate 28 percent of its annual revenue in the quarter ending in July as consumers stock up for home and garden projects, according to analystssurveyed by Bloomberg. Lowe’s may get 29 percent of its revenue in the period, analysts estimate.

‘Big Time’

“For Home Depot and Lowe’s, spring is a very big time for them,” David Strasser, an analyst at Janney Montgomery Scott LLC in New York, said in a phone interview. “They have their Christmas in April and May.”
Home Depot has contingency plans in the event of a strike, Stephen Holmes, a spokesman for the Atlanta-based company, said yesterday by e-mail, while declining to discuss those preparations. Lowe’s, based in Mooresville, North Carolina, is monitoring the situation and will make changes to its shipping and transportation if needed, Maureen Wallace, a spokeswoman, said in an e-mail.
Home Depot fell 0.1 percent to $61.07 yesterday in New York, and Lowe’s slid 0.2 percent to $35.13. Home Depot has risen 45 percent this year while Lowe’s has gained 38 percent.
A majority of clothing chains haven’t made plans for a strike just weeks before they’re expecting to receive spring merchandise, which hits shelves in February, said Tony Ward, a New York-based retail specialist at consulting firm Kurt Salmon.

Apparel Retailers

Retailers and apparel makers that have shifted orders from China, where wages are rising, to factories in Brazil, Costa Rica and other Latin American countries are particularly vulnerable because many of those goods enter the U.S. through East Coast ports, he said.
“Quite a bit of that product that retailers had planned to move through the East Coast is now challenged by the potential of a strike,” Ward said. “It is a very large concern for retailers that have a big spring season.”
Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), the two largest U.S. discount chains, also may be hurt by a strike, said Georgia Ports Authority Executive Director Curtis Foltz, who oversees the Port of Savannah, the third busiest port for container cargo behind New York-New Jersey and Los Angeles-Long Beach.
“Their product won’t be unloaded off ships, nor will it be moving out of our facilities during any work stoppage,” he said in a phone interview.
David Tovar, a spokesman for Bentonville, Arkansas-based Wal-Mart, declined to comment.

Target Plan

Target is monitoring the situation and has a “well- defined” contingency plan, Jessica Deede, a spokeswoman for the Minneapolis-based company said in an e-mail, while declining to describe the plan.
The shutdown of ports from Maine to Texas would damage the “fragile” U.S. economy, already hurt by superstorm Sandy’s damage to the Port of New York and New Jersey and other northeastern U.S. shipping hubs, NRF President Matthew Shay told President Barack Obama in a letter last week. He urged the president to use “all means necessary,” including invoking emergency powers under the Taft-Hartley Act, to head off a strike.
An eight-day strike at the Port of Los Angeles and adjacent Port of Long Beach last month ended without presidential intervention.

‘A Harbinger’

“That’s a harbinger for what we can expect,” Strasser said. “My guess is it won’t be resolved by Saturday, but a week from now it will be.”
A port strike may cause some disruption to imports of frozen or refrigerated agricultural goods such as fruits, vegetables and fish, said Ken Shea, a Bloomberg Industries analyst in Skillman, New Jersey.
U.S. packaged-food makers don’t face “a significant near- term risk” because most of their goods are transported by trucks and trains, Shea said yesterday in an e-mail. The International Longshoremen’s Association said it would continue to handle containers of perishable items with a limited shelf life during a strike.
ConAgra Foods Inc. (CAG)’s shippers have committed to shifting its finished-food shipments to smaller ports, and the company has the option to use Canadian ports, Becky Niiya, a spokeswoman for the Omaha, Nebraska-based company, said in an e-mailed statement.

Consumer Demand

Retailers already are coping with consumers concerned about the potential tax increases and benefit cuts that would go into effect in January without action in Congress. U.S. holiday sales grew 0.7 percent from Oct. 28 through Dec. 24, slowing from 2 percent a year earlier, according to MasterCard Advisors SpendingPulse.
The Conference Board’s index of consumer sentiment fell to 65.1 from a revised 71.5 reading the prior month, figures from the New York-based private research group showed yesterday. The gauge was projected to fall to 70, according to the Bloomberg survey median.
The dispute between the International Longshoremen’s Association and the U.S. Maritime Alliance centers on container royalty fees, or levies that supplement wages. The Federal Mediation and Conciliation Service, which has guided talks since September, organized a meeting between the two sides this week in an effort to salvage negotiations. All three parties declined to provide further details on the new talks.

Taft-Hartley

If federal mediation fails, the only remaining tool in the government’s arsenal is Taft-Hartley, which empowers the president to intervene in strikes that are deemed national emergencies, said Phillip Wilson, president and general counsel at the Labor Relations Institute in Broken Arrow, Oklahoma.
President George W. Bush was the last president to invoke the act. In 2002, he ended a lockout that closed West Coast ports for 10 days.
That shutdown cost the U.S. economy $1 billion a day and resulted in supply-chain disruptions that lingered for more than six months, according to the NRF.
“The economy was in a much different place back in 2002,” Gold said. “It was much stronger. There’s no telling what kind of impact this would have on the economy.”
To contact the reporters on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net; Brooke Sutherland in New York at bsutherland7@bloomberg.net
To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net
end. 




The Mississippi river is receding faster than expected, playing havoc to our shippers:

(courtesy Bloomberg/Jim Sinclair commentary)



Mississippi River Recedes Faster Than Expected, Shippers Say December 27, 2012
By, Jim Snyder
(Bloomberg) — Water levels in the Mississippi River south of St. Louis are falling faster than anticipated, requiring more urgent action to keep the nation’s busiest waterway open, according to a group of shipping companies.
Debra Colbert, senior vice president of the Waterways Council Inc., said the U.S. Army Corps of Engineers now projects river levels may fall to a point at which many tugboats can’t operate by Jan. 3 or Jan. 4. Previous estimates indicated that the river would remain navigable until at least the middle of the month, she said.
"The problem is the window to do anything about this is closing quickly," Colbert said today in a telephone interview.
Shippers carry about $7 billion in goods including crude oil and grain on the Mississippi in December and January. Tugboat and barge operators have warned that thousands of jobs in Illinois, Missouri, Louisiana and other states in the country’s midsection were at risk if the river shuts down, and they’ve asked Washington to find ways to increase the flow.
Most tugboats need about 10 feet of water to operate effectively. By the end of next week, only vessels with a draft of no more than 8 feet will able to run through the area of the river near Thebes, Illinois, 128 miles (206 kilometers) south of St. Louis, Colbert said. The draft is the distance from the surface of the water to a boat’s lowest point.



end



The Chicago PMI rises but the employment index slides to a 3 year low and that did not go over well with investors.  Many respondents were very worried about Obamacare

(courtesy zero hedge/Chicago PMI)




Chicago PMI Rises Even As Employment Index Slides To Three Year Low; Respondents Warn On Obamacare

Tyler Durden's picture





If there was any good news in today's Chicago PMI, it is that the headline number beat expectations of 51.0, rising from November's 50.4, to 51.6, leaving the two months of sub 50 prints in September and October in the past, or so the ISM institute would like us to believe. Because a casual glance at the data reveals that things are actually getting worse, with the Employment index plunging from 55.2 to 45.9, the lowest print in three years, while the all critical Capital Equipment buying policy plunged to a new 28 month low. So much for that CapEx spending. In fact the only indicator that posted an increase in today's release was the New Orders index which jumped to 54.0 while Order Backlogs, Supplier Deliveries, and Prices Paid all dropped. And for those hoping that in Q4 that inventory glut will finally clear itself, we have news: it won't -the Inventory index posted yet another jump, from 47.1 to 49.8. And while the data was ugly, perhaps the saddest, or funniest blurb, came from one of the respondents, which probably captures business sentiment in America with absolute precision: "We are on a hiring freeze in Q4, waiting to assess the outcome of the fiscal cliff deliberations. We are also planning cutbacks due to increased healthcare costs and Obamacare related expenses." Nuf said.
Full respondent list:
  1. Capital will shift to new products from current product support.
  2. We have more work than we have people to do build it, nice problem to have, except most of what we have needs to ship before the end of the year, backlog into 2013 is looking strong!
  3. Lots of uncertainty on 2.3% Medical Device Tax.
  4. We were forced to reduce staff this month because of weak order intake.
  5. We have received several smaller orders but some larger orders are still pending. Sales seem to be softening. Let's see what the new year brings.
  6. Sales and Marketing are expressing to operations our customers are forecasting the market to pick up in 2013, but then again we all know forecasts are 50/50; therefore we'll see, which is exactly where we are today.
  7. We just acquired a smaller competitor. But business in general is still quiet.
  8. We are forecasting higher Big Data costs originating from 3 areas. 1. Over the past 24 months we have witness a dramatic rise in the number data intermediaries and middlemen aggregating data and "locking up" access to information. From a procurement point of view, these  middlemen are performing a service and building out the data ghettos in places and channels that no one wanted to dive into. Their data products are specialized and difficult to collect and probably deserve their premium prices (for now). Costs are reflective of middlemen with "locked up" access prices keep increasing for data that was previously free, but tough to collect. 2. The large and sole sourced data generators (Big Boxes/Channel Masters) have been rapidly increasing the cost for access to their data and setting more restrictive limits on the usage of their data. 20% YOY increases are not uncommon for basic Big Data access fees. Growing demands for revenue sharing with some approaching 50% of gross revenue.
  9. Business borrowing remains relatively slow. Credit is difficult to obtain or is relatively expensive for all but the most economically healthy borrowers.
  10. We are on a hiring freeze in Q4, waiting to assess the outcome of the fiscal cliff deliberations. We are also planning cutbacks due to increased healthcare costs and Obamacare related expenses.

end



Your daily sermon courtesy of Mark Grant

(out of the box and onto WallStreet)


Run-Time Error -2147418113: Catastrophic Failure

Tyler Durden's picture





Via Mark J. Grant, author of Out of the Box,
Apparently this is the message that popped up on the Congressional computer system when they were scheduling the last, last, last minute meeting before jumping over the cliff. The techies worked for hours I have heard but to no avail. What is interesting about this is that neither the computer geeks nor the people in charge of our government has any responsible position that is really useful to prevent the failure that is about to take place. The best that can even be hoped for now is some minor change in the rigging which may be heralded as “the fix to fix all fixes” but will be of little importance when considered in the light of day. I think the odds of any grand scheme that will honestly make a difference is equivalent to the value of a toe nail clipper when performing brain surgery.

If all of the focus is on taxes, which has been the case to date, then all of the solutions considered are for a problem that is of a secondary nature. No one wants to be really honest you see. No one wants to confront the primary issue which is that the social programs in place or being considered are not affordable. If we cannot afford the debt we now have then we surely cannot afford new debt for new programs. Until and unless the focus of the debate shifts around to what is really important then no useful conclusion will be reached which is why I am bereft of any optimism at this point. I would also note that the leadership skills of those in Washington D.C., on either side of the aisle or in the White House, have all of the adroitness of a runaway barge on the Mississippi river. The demi-gods may go with the flow but that is about it.

“We penetrated deeper and deeper into the heart of darkness. It was very quiet there.”

                  -Joseph Conrad

The equity markets have not panicked yet but I fear that is coming. There is a double edged sword here and both equally able to cut you. The first is that we go over the cliff and nothing happens and stalemate is not averted and we join John Lennon in “Nowhere Land” and hope and prayers give way to loss of faith and the prayers turn from a better day to thoughts that Salvation may not come. The second is that some deal is struck and that the effects of compromise are worse than the original construct. The crux of the problem is at the core of the values of the country. Some people want a more socialized environment where wealth is spread and those that earn pay for the lifestyles of those than do not or cannot while the opposite camp rejects that notion except for a safety net which is far below the desires of the other camp. America is divided and the lines are distinct. The socialization on the Continent has infected the American shores and the “have nots,” larger in numbers, are squared off with the “haves” in a fight to determine the core values of the country.

In the meantime the Fed buys, bonds compress and may compress more than I originally thought as a flight to safety takes place besides more demand than supply and panic ensues as an answer, if found at all, is not a solution but the hollow cry of the political banshee in the feckless wind. The drama may ring with “out, out damn spot” but I fear the dry cleaner is not functioning well these days and that being hung out to dry is all that may be reasonably expected.

“This thing that we call 'failure' is not the falling down, but the staying down.”

                     -Mary Pickford

end


I will conclude this commentary with this wrap up of events courtesy of Greg Hunter of USAWatchdog



(courtesy Greg Hunter/USAWatchdog)





Weekly News Wrap-Up 12.28.12

28 DECEMBER 2012 NO COMMENT
11By Greg Hunter’s USAWatchdog.com 
There are just two stories that should be on everybody’s radar this week.  The first is the “Fiscal Cliff” or, as I like to call, it the “Blame Game Theater.  The other big story is the Middle East.  Both of these stories are multi-faceted.  The “Fiscal Cliff” should be of great interest to all Americans.  This is simply a disgrace, and both sides should be taken to the wood shed for letting this get out of control.  The deal they have been talking about is less than half of what the Erskine Bowles commission was asking for (around $4 trillion), and that only slows the growth of government.  Many say the best thing we could do is go over the “Fiscal Cliff. “ At least we would get some real spending cuts.  I have taken some heat for suggesting tax increases.  I DO NOT think taxing more so we can spend more is the answer, but blowing another bubble and putting it off only makes things worse.
In 2001, we should have gone into recession, but instead, we got a housing bubble.  In 2008, we should have taken the big banks to receivership; instead, we bailed them out and continue to bail them out as they are technically insolvent.  If they were solvent, we would not need phony accounting and a $40 billion a month bailout provided by the Fed to infinity.  If we do go over the Fiscal Cliff, John Williams at Shadowstats.com says that “Would Trigger Confidence Problems That Never Could Be Recovered Fully.” This is not only a debt crisis, but a real crisis in leadership by both parties.  
The other big story is the Middle East.  They are trying to come to some solution in Syria, but both sides are still fighting it hot and heavy.  44,000 Syrians have died in the nearly two year old civil war, and there is really no end in sight.  The fighting has already spilled over into surrounding countries and the possibility of a wider war is what makes this very dangerous.   
On the Eastern side of the Middle East, Iran is conducting war games from the Persian Gulf to the Northern Indian Ocean.  The U.S. and its allies have heavy presences there to stop Iran from blocking the Strait if war breaks out.  40% of the world’s sea-borne oil exports pass through the Strait of Hormuz.  It makes me nervous when any country conducts war games in close proximity to potential adversaries.  War can start by accident.  It can also be started by either side on purpose.  Either way, war in the Middle East would be a global disaster, especially with such a fragile global economy.  By the way, nothing is settled between Israel, Iran and Hamas.  I look for renewed fighting to break out in 2013.  
Join Greg Hunter for the Weekly News Wrap-Up for his analysis of these stories and more.

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