Thursday, January 10, 2013

USA dollar tumbles as Euro rises to 1.3252/Spanish 10 year bonds fall in yield to below 5%/Greek unemployment skyrockets to 26.8%/Italian bad loans rise 16.7% to 121.7 billion euros/

Good evening Ladies and Gentlemen:

Gold closed up $22.50 to finish the comex session at $1677.30  Silver also had a fine day rising by 66 cents to close the day at $31.88. Gold rose as the dollar sank with the Euro rising by .0199 to finish the session at 1.3252.  Spanish bonds are now under 5% with a successful auction.  However Greek unemployment exploded northbound at 26.8% with youth unemployment hovering around 56.5%.  Italian bad loans rose by a whopping 16.7% to 121.7 billion euros.  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 OI rose by 176 contracts from 441,304 up to 441,480.  The non active
January contract remained constant at 60.  We had 0 delivery notices on Wednesday so we are in perfect balance as we neither gained nor lost any gold ounces standing for the January delivery month.
The next big active delivery month is February and here the OI fell by 9,623 contracts from  239,672 down to 230,049 as our paper players are starting to roll into April.  The estimated volume at the gold comex today came in at a very weak 151,113 if you consider the many rollovers.  The confirmed volume yesterday was slightly better at 157,901.

The total silver comex OI rose by a rather large 1299 contracts from 137,542 up to 138,841 as some of the players wish to get back into the action.  The non active January contract month saw it's OI fall by 129 contracts from 271 down to 142.  We had 197 delivery notices filed yesterday so in essence we again gained in silver ounces standing to the tune of 68 contracts or an additional 340,000 oz of silver will stand in the January contract month.  The next big active month is March and here the OI rose by 553 contracts from 76,670 up to 77,223.  The estimated volume at the silver comex was fair at 40,059.  The confirmed volume yesterday was also in the same ballpark at 40,701.

Comex gold figures 

Jan 10.2013    The  January contract month

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
48,182.458 (Scotia)
Deposits to the Dealer Inventory in oz
0   (nil)
Deposits to the Customer Inventory, in oz
4,533.15 (HSBC)
No of oz served (contracts) today
 0    (nil)
No of oz to be served (notices)
60  (6,000 oz)
Total monthly oz gold served (contracts) so far this month
893  (89,300 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

280,497.5 oz

The dealer had no deposits  and no   withdrawals.

We had 1   customer deposits

i) into HSBC:  4,533.15 oz

total deposit:  4,533.15 oz

We had another of our dandy customer withdrawals from Scotia:

Out of Scotia:  48,182.458 oz

Total customer withdrawal:  48,182.458 oz

We had 0 adjustments:

Thus the dealer inventory rests tonight at 2.282 million oz (70.97) tonnes of gold.

The CME reported that we had 0 notices filed or zero oz of gold. To obtain what is left to be served upon, I take the OI for January  (60) and subtract out today's delivery notices (0) which leaves us with 60 notices or 6,000 oz of gold left to be served upon our longs.

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

89,300 oz (served)  +  6000 oz (to be served upon) =   95,300 oz or 2.96 tonnes.
we neither gained nor lost any  oz of gold standing for the January delivery month.

Generally, January is a very weak delivery period for both gold and silver and thus the 2.96 tonnes of gold is quite a surprise.
Also at the beginning of this month I promised you that we will see advancing amounts of metal standing and it sure looks like that is where we are heading.
You will see the same in silver with increasing amounts standing in that arena.


January 10.2013:   The January silver contract month

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory  150,114.000  (Scotia)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory   614,226.165 (Brinks,Scotia,Delaware)
No of oz served (contracts)1  (5,000 oz)
No of oz to be served (notices)141  (705,000 oz)
Total monthly oz silver served (contracts)506  (2,530,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month914,342.42
Total accumulative withdrawal of silver from the Customer inventory this month1,786,680.2

Today, we  had good activity  inside the silver vaults.

 we had no dealer deposits and no dealer withdrawals:

We had 3 customer deposits of silver:

Into Brinks:  995.3 oz
Into Scotia:  596,526.4 oz
Into Delaware: 16,704.465 oz

total customer deposit; 614,226,165 oz

we had 1 customer withdrawal:

i) out of Scotia:  150,114.000 oz  (another perfectly round number)

total customer withdrawal:  150,114.000  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. 

When you see massive deposits and withdrawals you know that there is turmoil inside the silver vaults. 

Registered silver remains today at :  39.531 million oz
total of all silver:  150.77 million oz.

The CME reported that we had 1  notice filed for 5,000 oz of silver.  To obtain what is left to be served upon, I take the OI standing for January (142) and subtract out Wednesday's delivery notice (1) which leaves us with 141 notices or 705,000 oz left to be served upon our longs.

Thus the total number of silver oz standing for the month of January is as follows:

2,530,000 oz (served)  +  705,000 (oz to be served upon)  = 3,235,000 oz
we  gained 340,000 oz of additional silver  standing for January. This is turning out to be a great delivery month for silver as we now surpass the  3 million oz mark in amounts  standing.


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:   Jan 10.2013 



Value US$72.027 Billion

Jan 9.2013:



Value US$71.398 Billion

Jan 8.2013



Value US$71.324  billion

Jan 7.2013:



Value US$70.955  Billion

January 4.2013:



Value US$71.078  billion

Jan 3.2013:



Value US$72.340  billion

The GLD  lost 2.11 tonnes of gold today even though gold gained.

and now for silver:

Jan 10:2013:

Ounces of Silver in Trust325,115,347.800
Tonnes of Silver in Trust Tonnes of Silver in Trust10,112.22


Ounces of Silver in Trust325,115,347.800
Tonnes of Silver in Trust Tonnes of Silver in Trust10,112.22

Jan 8.2013:

Ounces of Silver in Trust325,115,347.800
Tonnes of Silver in Trust Tonnes of Silver in Trust10,112.22

Jan 7.2013;

Ounces of Silver in Trust323,470,757.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,061.07

Jan 4.2013:

Ounces of Silver in Trust323,470,757.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,061.07

we neither gained nor lost any silver at the SLV.

And now for our premiums to NAV for the funds I follow:

Sprott and Central Fund of Canada. 

(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded to a positive 5.4 percent to NAV in usa funds and a positive 5.5%  to NAV for Cdn funds. ( Jan 10 2013)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 1.54% NAV  Jan 10./2013
3. Sprott gold fund (PHYS): premium to NAV  fell to 1.70% positive to NAV Jan 10/ 2013..

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 5.4% in usa and 5.5% 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.



Here are your major physical stories:

The U.S. government may default on its debt as early as February 15,  thirteen days earlier than widely expected, according to a new analysis by the Bipartisan Policy Center adding urgency to the debate over how to raise the federal debt ceiling.

"If we reach the X Date and Treasury is forced to prioritize payments, handling payments for many important and popular programs will quickly become impossible, causing disruption to an already fragile economic recovery," said Steve Bell, Senior Director of the Economic Policy Project at BPC.

(early gold/silver trading courtesy of Goldcore)

U.S. May Default On Debt As Soon As February 15

-- Posted Thursday, 10 January 2013 | Share this article | Source:

Today’s AM fix was USD 1,663.00, EUR 1,269.37 and GBP 1,036.65 per ounce.       
Yesterday’s AM fix was USD 
1,663.50, EUR 1,272.37 and GBP 1,035.35 per ounce.

Cross Currency Table – (Bloomberg)
Gold edged off $0.80 or 0.05% in New York yesterday and closed at $1,657.40/oz. Silver climbed to $30.57 in Asia then slipped back to $30.05 by late morning in New York, but it also rallied back higher in afternoon trade and finished with a loss of just 0.07%.
Gold, 1 Month Chart – (Bloomberg)

President Barack Obama will nominate White House Chief of Staff Jack Lew tomorrow as his choice for Treasury secretary, replacing Timothy F. Geithner.  Lew’s nomination as Treasury secretary is subject to Senate confirmation.
Gold inched higher on Thursday, as market watchers await a rate decision by the European Central Bank at 12.45 GMT. European Bank Chief, Mario Draghi’s news conference is at 1330 GMT. Investors will also view the Bank of England rate decision at 1200 GMT.

U.S. weekly Initial Jobless Claims are out at 1330 GMT.
Most economists feel that the ECB will leave rates unchanged and continuing ultra loose monetary policies for gold bullish, especially in euros.
XAU/EUR, 1 Month – (Bloomberg)

German industrial output figures came in less than forecast and rose less than forecast which showed contraction in Europe’s largest economy in Q4.
The Japanese yen was at a 2 1/2-year low today on expectations that the Bank of Japan policy will take a new approach to boost inflation later this month.
The U.S. government may default on its debt in 38 days or as soon as February 15, half a month earlier than widely expected, according to a new analysis adding urgency to the debate over how to raise the federal debt ceiling.

The analysis came courtesy of the Bipartisan Policy Center (BPC), which released a revised “debt limit analysis.”

"If we reach the X Date and Treasury is forced to prioritize payments, handling payments for many important and popular programs will quickly become impossible, causing disruption to an already fragile economic recovery," said Steve Bell, Senior Director of the Economic Policy Project at BPC.

The government hit the $16.4 trillion statutory debt limit on Dec. 31, but the Treasury Department is able to undertake a number of accounting schemes to delay when the government runs into funding problems.

The Treasury has said that the accounting schemes, known as “extraordinary measures,” ordinarily would forestall default for about the first two months of the year, though officials were clear that
they could not pinpoint a precise date because of an unusual amount of uncertainty around federal finances.

If Congress does not raise the debt ceiling by the deadline, the White House has said that the nation probably will default. In a previous episode — in the summer of 2011 — officials determined that the best course would be to withhold all of a given day’s federal payments until enough money became available to pay them.
XAU/JPY, 1 Month – (Bloomberg)

The consequences of an immediate 40% cut to government services would be brutal. Practically all government employees would suddenly see their pay checks go to zero. The government would only have enough money to pay Social Security checks and Medicaid providers on certain days. The U.S. defence budget would collapse which could lead to considerable geopolitical uncertainty.

The risk of a U.S. default next month or in the coming months and more importantly the appalling U.S. fiscal situation and indeed the appalling fiscal situation of Japan, the UK and many European nations shows the importance of having an allocation to gold in a portfolio.
COMMENTARYGold, Silver Gain: U.S. Default Seen as Soon as Mid-February – Barron’s
What's up with gold—or down? – Market Watch
Trillion Dollar Coin and Krugman and World Of Monetary Idiots – Zero Hedge
Fitch’s house price predictions: more crash and correction to come – Planet Property
14 Fitzwilliam Square
United Kingdom:
No. 1 Cornhill


I brought this to your attention on Tuesday and again on Wednesday, the huge importing of gold from Mainland China.  So far this year a total of 720 tonnes of gold has been imported and generally this gold will be used by its citizenry to accumulate gold and also help in the fabrication of jewellry.
China produces around 360 tonnes of gold and it is assumed that the 360 tonnes goes into official reserves. China may also take some of the importation of gold into official reserves.  China has not disclosed it's official reserves since 2009.

(courtesy zero hedge)

Chart Of The Day: Chinese November Gold Imports Soar To 91 Tons; 2012 Total 720 Tons

Tyler Durden's picture

Regular readers are familiar with our monthly series showing the inexorable surge in Chinese gold imports. It is time for the November update, and it's a doozy: at 90.8 tons, this was thesecond highest gross import number of 2012, double the 47 tons imported in October (which many saw, incorrectly, as an indication of China's waning interest in the yellow metal), and brings the Year to Date total to a massive 720 tons of gold through November. If last year is any indication, the December total will be roughly the same amount, and will bring the total 2012 import amount to over 800 tons, double the 392.6 tons imported in 2011.
Indicatively, should the full year total import number indeed print in the 800 tons range, it will mean that in one year China, whose official reserve holdings are still a negligible 1054 (and realistically at least double, if not triple, this number), will have imported more gold than the official holdings of Japan, last pegged at 765.2 tons (and well more than the ECB's 502.1 tons).
Finally, putting the November import number in context, so far in 2012 China has bought some $39 billion worth of gold. How many US Treasurys has China bought in the same time period?Under $10 billion.
Finally, let's not forget that recently China surpassed South Africa as the world's biggest producer of gold with annual output in the hundreds of tons. Add the net imports number to this total (which amounted to some 281 tons in 2012 according to Bloomberg) and one can get a sense of how big China's appetite for hard assets, instead of trillion dollar coin-backed "promises of repayment", has become.


A plan to confiscate gold?

(courtesy Rick Santelli/CNBC)

To "The Precious Metal Purchasing Act" From Executive Order 6102 - Santelli's Take

Tyler Durden's picture

"Ever heard of SB3341?" is Rick Santelli's opening salvo in today's rantless discussion of the concerns he has with Illinois' 'Precious Metal Purchasing Act'. While passed in the Illinois Senate last year, and moth-balled in the House since, Rick notes that "the long and short of it is is they want an audit trail to any precious metals, whether you're talking coins or bullion."It does not seem too much of a stretch to this Chicagoan to the 1933 Executive Order #6102 that confiscated gold and cleared the way eventually for Nixon's 1971 disconnect of the dollar from gold. As Liberty Blitzkrieg's Mike Krieger notes: "So let me get this straight.  First they want gun registration and now precious metal registration?  I’m sure the government would only use such information in our best interests, because as we all know: Your Government Loves You.  Sounds reasonable, after all, only 'terrorists' buy guns and gold anyway."

From the bill (found here)
...Provides that a person who is in the business of purchasing precious metal shall obtain a proof of ownership, create a record of the sale, and verify the identity of the seller. Provides that a person who is in the business of purchasing precious metal shall not pay for the precious metal in cash and shall record the method of payment.

Requires the purchaser to keep a record of the sale for one year or, if the purchase amount is over $500, for 5 years.

Your early morning overnight sentiment from Europe/Asia:  

Major points:

1, No change in policy at the Bank of England and the ECB
2. Chinese trade slightly better than expected.
3. Spanish bonds now under 5% with successful auctions.
4.  Greek unemployment explodes higher at 26.8%
5.  Italian bad loans at banks soared 16.7% to 121.8 billion euros.
6.  Loans to business in Italy dropped at the fastest pace ever. 
7. Details courtesy of Deutsche Bank

your early morning market sentiment from Europe early this Thursday morning:

(courtesy zero hedge)

Bored Markets Looks To ECB Announcement For Some Excitement

Tyler Durden's picture

The main macro event today will be the interest rate announcement by the ECB due out at 7:45 am (with the Bank of England reporting earlier on its rate and QE plan, both of which remained unchanged as expected, which will remain the case until Carney comes on board) which is expected to be a continuation of the policy, with no rate cut despite some clamoring by pundits that Draghi should cut rates even more. Overnight, we got Chinese December trade (better than expected) and loan (slightly worse than expected) data, coming in precisely as a country which has a new communist politburo leadership implied they would. Of particular note was that the US has now replaced the EU as the largest Chinese export market: what happens when the euro weakens even further? But at least the net benefit to European GDP as a result of declining imports will, paradoxically, help. Elsewhere, Spain auctioned off more than than the expected €4-5 billion in its first 2013 auctions of 2015, 2018 and 2026 bonds, sending the 10 year SPGB yield to under 5%, or the lowest since 2010, a process driven by expectations of a Spanish bailout. Thus the incredible odyssey of Schrodinger Spain continues, whose interest rates are improving on hopes it is insolvent. Fundamentally, things got better nowhere, with Greek unemployment rising to 26.8% in October from 26.0% previously, while bad loans in Italy soared by 16.7% Y/Y to €121.8 billion, while loans to businesses dropped at the fastest pace ever. And so the scramble to offset the trade and economic collapse of Europe using central bank tools continues.
Looking at today’s calendar, the main focus will be on the ECB meeting which will be followed by Draghi’s press conference at 8:30 am. Consensus expectations are for no changes in policy from either central banks. Draghi's press conference will make for interesting viewing following his statement last month that rate cuts were "discussed". On the data front, French IP and CPI for November are scheduled. In the US, weekly jobless claims and wholesale inventories will be the main highlights;  The Fed’s Esther George and James Bullard will be speaking at separate events today. The US will also reopen its 30 year, $300 million of which were prebought by the Fed yesterday.
More from Deutsche Bank
Markets continued to edge up yesterday, helped by the upbeat global outlook from Alcoa the night before. This morning the latest trade numbers from China are likely to provide further short-term fuel for markets. The largest surprise was on the exports side, which increased 14.1%yoy in December (vs 5% expected) and is the highest yoy increase since May 2012 before the 3Q12 slowdown. In the detail, exports to the US rose 8.5% in 2012 while shipments to the EU fell 6.2%. Notably, the US has now replaced the EU as the largest Chinese export market. In terms of products, motor vehicle exports were amongst the best performers, rising 20% in 2012. Imports also surprised to the upside, rising 6%yoy (vs 3.5% expected) and the trade surplus widened to $31.6bn (vs $20bn expected and $19.6bn the previous month). Imports from the US gained 8.8% while those from the EU rose only 0.4%. A spokesperson for the China's Customs department said that while it was hard to quantify the loss in trade from the island dispute with Japan, exports show signs of “warming up” in Q1.
The overnight market reaction to the data has been positive with most major equity indices moving firmly into positive territory following China’s trade numbers. Gains are being paced by the Hang Seng (+0.9%), Nikkei (0.75%) and Shanghai Composite (+0.55%) with financials and resources stocks outperforming. The Australian dollar is trading 0.34% firmer against the USD after rallying 40 ticks post-trade numbers. On the fixed income side, 10yr USTs have sold off 2bp in Asian trading while the benchmark Australian IG index is 1bp tighter as we type.
Outside of the trade data, China also released its latest bank lending numbers which made for slightly less impressive reading. New loans of RMB454bn were made in December vs RMB550bn expected and RMB523bn in November. Over in Japan, the JPY is poised to close weaker for the second consecutive day against the USD following a report in the Asahi that the BoJ is weighing further easing at its next meeting, echoing a similar report from Reuters yesterday. The Asahi added that BoJ officials are considering buying assets on  an “unlimited basis”. With the focus on Japanese markets, including the Nikkei which has risen 23% since snap elections were called by PM Abe in November, the WSJ reminded its readers that there have been a number of false dawns in the past two decades. This includes the 34% rally in the Nikkei in 1990, 50% rally in 1992, 55% in 1995, 62% in 1998 and 140% from 2003 to 2007. Nevertheless even if this latest policy change doesn't amount to much, markets could still go considerable higher before being disappointed.
Recapping yesterday’s price action, the S&P500 (+0.27%) started the US earnings season on a positive note, managing to halt a two-day slide as markets took comfort from Alcoa’s relatively upbeat 2013 guidance. Interestingly though, Alcoa itself finished the day down 0.22%. 10yr UST rallied 1.5bp on the day to close at 1.853%, despite a small 2bp selloff following weaker demand for the  treasury's 0yr note auction. The VIX (+1.4%) made a new post-financial crisis low at the open of 13.22 yesterday, which was the lowest level since January 6th 2007.
Over in the US, reports suggest that President Obama is set to formally nominate White House Chief of Staff Jack Lew as his next Treasury secretary today. Lew previously served as Obama's budget director and a senior State Department official. He also was budget director during the Clinton administration and has been negotiating bipartisan compromises over taxes and spending since the 1980s, when he was a top aide to then-House Speaker Thomas O'Neill Jr. Lew will replace Tim Geithner who will likely step down by the end of the month. (Washington Post).
Staying on the political theme, the FT wrote that support for Merkel’s conservative Christian Democrat bloc is at a “record high” just nine months out from the next election, at the expense of both Merkel’s political opponents and allies. Latest opinion polls indicate that  the CDU/CSU enjoys 42% support, which is 17ppt clear of the Social Democratic party (25%) and FDP (just 2%).
In other interesting headlines, US oil production exceeded 7m barrels per day for the first time in 20 years according to data from the US Energy department. The US met 83% of its energy needs in the first nine months of 2012, which is on pace to be highest annual rate since 1991 (Bloomberg).
Before we preview the usual day ahead, we wanted to highlight that the UK National Statistician will today announce her decision on whether there should be changes in how the Retail Price Index is calculated. This series is used to calculate coupons on UK linkers. DB’s Markus Heider thinks that the National Statistician will choose to stop using the “Carli formula” for price items that use it. This would effectively reduce the RPI’s premium to CPI to a minimum, with resulting downside risk to GBP breakeven markets which have not fully priced in the potential change. Is this another form of financial repression?

ECB keeps rates unchanged:

(courtesy zero hedge)

ECB Keeps Rates Unchanged

Tyler Durden's picture

No change from the ECB as expected, and despite a hint by Draghi last time that the governing council may cut rates, it did not. The boredom continues until 8:30 am Eastern when Draghi takes the podium and resumes his rendition of Greenspan.
At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.75%, 1.50% and 0.00% respectively.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.


The big news of the day, as unemployment in youth rises to 56.6%.

Greek Unemployment Soars To New Record, 56.6% Of 15-24 Year Olds Without Job

Tyler Durden's picture

Judging by ongoing momentum moves in various European stock and bond market indicators, one could be left with the impression that something in the continent is actually improving. And while hope of improvement is certainly be high, the reality is vastly different as confirmed by the just released Greek unemployment data, which saw the broad unemployment rate soar to a fresh record high of 26.8% in October (24.1% males, 30.4% females - that's nearly one in three), up from a pre-revision 26.0% in September, and up from 19.7% a year ago, the youth (15-24 age group) unemployment rising again to a new all time high of 56.6% (up from 56.4%), and the ratio of those employed (3.68MM) to unemployed (1.34MM) plunging to a record low 2.75x. At this rate it may well hit 1.00x quite soon. But even sooner, perhaps in a few months, the total number of inactive workers (3.34MM) will surpass all those who are working. In short, the Greek collapse is just getting worse and worse.
From the report:
Unemployment rate in October 2012 was 26.8% compared to 19.7% in October 2011 and 26.2% in September 2012.1 The number of employed amounted to 3,680,894 persons. ?he number of unemployed amounted to 1,345,715 while the number of inactive to 3,344,478. The corresponding figures for October 2007 to 2012 are presented in Table 1.

The number of employed decreased by 309,335 persons compared with October 2011 (a 7.8% rate of decrease) and by 16,015 persons compared with September 2012 (a 0.4% rate of decrease).

Unemployed increased by 368,102 persons (a 37.7% rate of increase) compared with October 2011 and by 36,219 persons compared with September 2012 (a 2.8% rate of increase).

Inactive persons –that is, persons that neither worked neither looked for a job– decreased by 23,828 persons (a 0.7% rate of decrease) compared with October 2011 and by 7,478 persons compared with September 2012 (a 0.2% rate of decrease).

Ambrose Evans Pritchard talks about the poverty trap between Northern Europe and Southern

(courtesy Ambrose Evans Pritchard/UKTelegraph and special thanks to Robert H for sending(

Brussels fears 'poverty trap' for half of Europe as North-South gap widens
Unemployment in the eurozone jumped to a record high of 11.8pc in November as the region slid deeper into recession, with alarming rises across the Mediterranean that threaten extreme social distress.
The report said the biggest single cause of the jobs crisis is a 'demand shock' to the Euroland economy.
By Ambrose Evans-Pritchard
7:31PM GMT 08 Jan 2013
Telegraph UK
The jobless rate has reached an all-time high of 26.6pc in Spain, rising to 56.5pc for youth. It is much the same picture in Greece, where unemployment has spiked from 19pc to 26pc over the past year as austerity bites in earnest, with Portugal not far behind as it follows suit with draconian cuts. There are now 18.8m people looking for work across the eurozone.
“A widening gap is emerging,” said Laszlo Andor, the European Social Affairs Commissioner. “Peripheral states appear to be caught in a downward spiral of falling economic output, rapidly rising unemployment and eroding individual incomes.”
Mr Andor’s unemployment report said the welfare systems of southern Europe are unravelling as governments slash benefits, leaving families exposed to the full brunt of the crisis. The “automatic stabilisers” are no longer functioning properly.
He said there is a rising risk that the long-term jobless will fall into an “enormous poverty trap” if the crisis is allowed to drag on. “Severe material deprivation” has surged to 31pc in Latvia and 44pc in Bulgaria, casting doubts on claims that these two euro-pegged countries have shaken off the crisis .
Spain’s long-term jobless now number 2m, while the country’s GINI coefficient measuring inequality has risen from 31.2 to 34 since the crisis began.
The report said the biggest single cause of the jobs crisis is a “demand shock” to the Euroland economy, deeming other factors to be “less relevant”. The findings reflect deep dissent within the EU policy apparatus over the contractionary policy settings, and undercut claims by hard-liners that labour reforms in the Club Med bloc are enough to pull the region out of slump.
Mr Andor’s grim warnings came a day after Commission chief Manuel Barroso claimed the eurozone crisis had “essentially been overcome”.
Graeme Leach, from the Institute of Directors, said the European Central Bank has bought time with its bond-buying pledge but the deeper economic crisis grinds on with a “terrifying” human cost. “The figures are shockingly bad. This saga is far from over,” he said.
The North-South gap makes it very hard for the ECB to run monetary policy for the whole bloc. Unemployment is just 4.5pc in Austria, 5.4pc in Germany, and 5.6pc in Holland.
Real household income, after tax, had fallen 17pc in Greece, 8pc in Spain, 7pc in Cyprus, and 5pc in Ireland between 2009 and 2011, a slide still gathering speed. Mr Andor said labour market reforms would bear fruit eventually, adding that the jobless rate may be near its peak in Spain.
Jobs data tend to be a lagging indicator so the latest rise in unemployment may reveal much about economic growth prospects for 2013


I really want you to concentrate on the following Mark Grant commentary.

He talks about 3 words:

i) Postponement
ii) Draghi
iii Accounting

and what that seems to Europe and the USA for this year.

Your most important commentary for today

(courtesy of Mark Grant)

Postponement, Draghi, And Accounting

Tyler Durden's picture

Via Mark J. Grant, author of Out of the Box,
The last year in the financial markets may be defined by several words which include “postponement, Draghi and accounting.” These are the underpinnings of what occurred in the last twelve months and they are the bedrock for what is likely to take place in 2013. We begin the New Year from where the old one left off and the future will be defined by how the utilization of these three words gets enacted.

I do not like to make things complicated. In fact, I try my very best to make things simple. During my career on Wall Street I have been confronted numerous times with economists, much to my chagrin, who try to make things more complicated in an effort to prove their vast intelligence I would guess but, in the end, most institutional investors, very bright people themselves, are alienated by this exercise as I am. If you can understand where you are standing and what is going on around you then the next steps are not that complicated and the winning strategy of last year is often the losing strategy of the next which is why it is so critically important to gauge your current surroundings correctly.


The world has done everything humanly possible to put off any tough financial decisions and that is especially true in Europe and in America. The leaders on both Continents just cannot take the heat and so everything possible has been pushed forward in the hopes that economies will improve and that growth will cure the ills brought on by the lack of any real leadership. Unfortunately this has not been the case and so the central banks of the world have picked up the slack which has been an interesting exercise but one fraught with consequences. With all of the central banks on the planet engaging in this exercise and no place to invest off-world the possibilities for the use of capital were constrained and hence our very low yields.
The Fed is pumping $95 billion a month into various markets and the combined actions of all of these central banks means that eighty percent of all new supply is soaked up by these institutions leaving a small window for private capital. It was in the spring of last year that I suggested buying long maturities of whatever credits you could stand and this strategy has been a winning one that continues because there is no place else to go; the compression has been unrelenting. You cannot fight city hall and you cannot fight the worlds’ central banks and so regardless of other fundamentals that would function in normal times the ability to print money and then use it in various known and only guessed at ways wins the battle.


The centerpiece of the success of lower yields in all of the countries in Europe rests squarely upon Draghi’s “Save the World” plan where the ECB will backstop everything. This speech was the single most important one of 2012 by any stretch of imagination and its ramifications define the economic landscape in Europe from then until now. Mr. Draghi’s promise, attached to the condition of the entire European Union backing the concept, has not been put to the test but I fear it will during this year. It will then depend upon various individual nations and whether they will go along with using their citizen’s money to pay for the debts of other nations. Any rise in nationalism may thwart Mr. Draghi’s promise but this will all play out as one nation after another hits the wall which they will because there is no longer enough free capital in many nations to prevent it. A careful examination of the numbers and the possibilities limit what can be done in 2013 and the countries in question are Greece, Portugal, Cyprus, Spain and Italy. In each of these nations the government has raided public sector funds, pension funds, any monies that will not impact the national debt to GDP ratios and while 2012 allowed them latitude; 2013 will not because each of these nations has about exhausted what was available. I predict that 2013 will put the Draghi promise to the test and there will be considerable rancor during the process. The other side of the coin here is social unrest that I believe will surface in the spring so that the present general belief that things have improved in Europe is nothing more than a hope which is fashioned by political design. In other words; don’t count on it.


The debt to GDP ratios for each nation in Europe are nothing more than gimmickry. They lack any semblance of truth. It is not a matter of they could be legitimately counted one way or another because the not counting of liabilities, contingent, actual and those belonging to various branches of the government do not change the fact that they must be paid for in the end. If Bankia’s debt at the ECB are accepted because they are guaranteed by the government of Spain and then Bankia cannot pay them who do you think will be forced to pick-up the bill? This example is happening in Greece, Portugal and now Spain so that the shifting and cover-up of liabilities will come to the fore as the debts must be paid and the capital of the sovereigns, without question, will diminish. Phony accounting does not change the facts; it just tries to fool investors as the primacy of its goal.
In normal circumstances this would not be enough for any longer duration of time to prevent a return to higher yields but when the central banks act in concert with this scheme and hand out money like manna from heaven then the plan succeeds as demonstrated by what took place last year. I caution you however, one year’s winning strategy can be the next year’s disaster and as Spain, Greece and Portugal line up again for more and more money the political considerations may change the course of events. All that stands between the two vicious sirens of the running out of money and the demands for more of it is an untested promise made by Mr. Draghi which will be put to the test in 2013 I believe. Those of you that represent the large battleships of the investment world will be strained and perhaps constrained by your size in moving assets. You will have to be way out in front to prosper in my view and the shift will likely be painful. Longer dated floating rate notes and bonds tied to inflation may well hedge some of the aggravation as newly printed capital to bail-out the sovereigns curtails any inflow of money into the equity markets.

The central banks, phony accounting and a promise by the ECB may well have saved 2012 from an implosion but 2013 brings a new set of circumstances that are far less appealing than last year. Stay safe!


No wonder Deutsche Bank made huge libor bets as they knew the casino was rigged:

the following will make you sick:

(courtesy zero hedge)

A Glimpse At Deutsche's Riskless EUR68 Million DV01 Libor "Bet"

Tyler Durden's picture

At the height of the financial crisis in 2008, Deutsche Bank made some extraordinarily large bets. As the WSJ reports, documents uncovered from the Libor rate manipulation investigation show huge outsized bets that would swing EUR68 million on a 1bps shift in the Libor rate that they have since been charged with manipulating. Sure enough, with regards the risk (which was large enough to be brought to management's attention), officials "dismissed those concerns because the bank could influence the rates they were betting on."
The bets (which made the bank at least $654 million) were a series of steepening trades (as opposed to outright positions) which were implicitly highly leveraged to provide the most bang for their manipulated and un-capitalized buck (and perhaps explains the fact that Deutsche had to hide a $12 billion loss during this period in order to avoid a government bailout) in what was a remarkably volatile time for these rates.

Given this scale of trade, it is evidently clear that risk control was entirely ignored (as these 'pairs' trades were not even included in the bank's Value-at-Risk calculations) and the comfort with such a 'bet-it-all-on-double-0' strategy implieseveryone was in on the Libor manipulation.
As part of its cooperation with investigators, Deutsche Bank still is checking all the trades for any suspicious signs. Suspicious signs indeed... but another serious glimpse at the reality of the past (and today's - cough London Whale cough) hidden over-levered reality in banks.


And then this, one the same subject

special thanks to Robert H for sending this to us:

(courtesy Denise Roland/UK Telegraph)

Banking Standards Commission accuses former UBS bosses accused of 'staggering ignorance' over Libor rigging
Former UBS executives who presided over the bank during years of Libor-fixing were reprimanded for levels of ignorance "staggering to the point of incredulity" on Thursday.
Ex-chief executive Marcel Rohner has not returned to full-time work since departing UBS in 2009.
By Denise Roland
3:33PM GMT 10 Jan 2013
Telegraph UK
The quartet of former executives - including ex-group chief executive Marcel Rohner and Huw Jenkins, former head of UBS's investment arm- came under fire as they appeared before parliamentarians to give evidence over failings at the Swiss bank which allowed Libor-rigging to continue unnoticed for several years.
They were grilled on how they missed what regulators described as an "epic" scandal at UBS, which saw the bank hand $1.5bn (£940m) to regulators in fines last month.
Swiss national Dr Rohner said he was "shocked" and "ashamed" when he read about the rigging of Libor interest rates but said during his period as chief executive he was trying to save the bank from collapse and was unaware of the misconduct.
He and his colleagues denied knowledge of early alarm bells over Libor fixing at the bank, including a Wall Street Journal story in April 2008 and a Bloomberg report months earlier.
The 48-year-old, who was group CEO for 20 tumultuous months between 2007 and 2009 when the bank suffered more than $50bn in mortgage write-downs, insisted he was unaware of these media reports as his focus at the time was on raising cash from investors.
"I did not think it [the Libor rate] was having a big impact on the market at the time," he said.
Commission chair and conservative MP Andrew Tyrie lashed out in response to this statement, saying: "The level of ignorance in this board seems to be staggering to the point of incredulity."
Other commission members also chimed in with their disbelief.
Baroness Susan Kramer said: "I'm struggling to see how something of this scale and this central was off radar", while Lord Nigel Lawson berated the board as "grossly incompetent".
Lord John McFall compared the former board members to Casablanca character Captain Renault, a corrupt policeman who profited from gambling at Rick's Bar while publicly voicing his shock at the practice.
Sheepish silence from the former executives followed Mr Tyrie's closing remarks: "We've heard of appalling mistakes that can only be described as gross negligence and incompetence.
"You were ignorant and out of your depth."
The ex-board members admitted they presided over a raft of shortcomings at UBS which Dr Rohner said was among those institutions that "had more serious problems than others."
He said the business had grown too complex to manage, saying "We embarked on things we were not fit for, it turned out," and admitted that some people hired by UBS in the past were "clearly mercenaries".
Jerker Johansson, who was chief of the investment arm for just over a year from 2008, conceded management had been negligent not to detect the misconduct and under persistent questioning said Libor rigging was tantamount to stealing.
The Financial Services Authority in its final report on UBS said interest rate rigging was so widespread at the bank that every submission it made over a six-year period from 2005 to 2010 inclusive was suspect.
Libor, the London interbank offered rate, is used as a benchmark for pricing trillions of dollars of loans. Even small inaccuracies in the rate affect investment returns and borrowing costs meaning that UBS and other banks implicated in the rigging scandal are at risk from civil lawsuits.
More than a dozen banks are under investigation in the Libor probe and further settlements with regulators are expected this year.
The influential Parliamentary Commission on Banking Standards, a cross-party panel of MPs and Lords, is expected to make recommendations on reforming the banking sector to government and the industry before the end of March.


Now we witness, South Africa downgraded by Fitch as the massive strikes cut into this nation's growth:

(courtesy Bloomberg)

South Africa Downgraded by Fitch as Strikes Hurt Growth

South Africa’s credit rating was cut to the second-lowest investment grade by Fitch Ratings because of slowing economic growth, a widening budget deficit and rising joblessness.
The rating was lowered to BBB from BBB+, while the outlook was raised to stable from negative, Fitch said in a statement from London yesterday. That followed downgrades by Standard & Poor’s and Moody’s Investors Service last year.
“Social and political tensions have increased as subdued growth, coupled with rising corruption and worsening government effectiveness, have constrained the government’s ability to improve living standards, reduce the 25.5 percent unemployment rate and redress historical inequalities as rapidly as the population demands,” Ed Parker, a managing director at Fitch, said in the statement.
The continent’s largest economy probably expanded at the slowest pace since a 2009 recession last year, limiting the government’s ability to meet budget deficit targets and its room to stimulate growth and create jobs. The worst mining violence since the end of apartheid in 1994 shut platinum and gold mines last year, lowering South Africa’s growth rate by about 0.5 percentage point, according to the National Treasury.
“There has been a significant deterioration in South Africa’s credit worthiness,” Razia Khan, head of Africa economic research at Standard Chartered Plc in London, said in a phone interview yesterday. Fitch’s case “is much more substantive than speculative” about future events.

Slower Growth

The government is forecasting growth of 3 percent this year, compared with 2.5 percent in 2012. The budget gap is set to widen to 4.8 percent of gross domestic product in the 12 months through March from 4.5 percent a year earlier, Finance Minister Pravin Gordhansaid in October.
S&P cut the nation’s debt by one level to BBB on Oct. 12 and Moody’s lowered it on Sept. 27 by the same magnitude to Baa1. Both retained a negative outlook on the ratings.
Slower economic growth is due in part to the recession in euro-area nations, crimping demand for manufactured exports, the Treasury said in an e-mailed statement after Fitch’s decision. The ruling African National Congress’ adoption of the 20-year National Development Plan at its conference last month will help ease poverty, create jobs and build infrastructure, it said.
The ANC re-elected Jacob Zuma as president, chose businessman Cyril Ramaphosa as his deputy and rejected calls to nationalize mining assets at the meeting.

Risk Premium

“The conference resolutions give certainty on economic policy, which the Fitch report does not seem to fully appreciate,” the Treasury said. The government’s budget shows an “unambiguous commitment to maintaining debt and expenditure growth within sustainable levels. These principles will continue to underpin South Africa’s fiscal stance.”
South Africa’s risk premium has dropped since the ANC conference, even as the Fitch downgrade loomed. The extra yield on the nation’s bonds due March 2021 over similar-maturity U.S. Treasuries narrowed 37 basis points since Dec. 15, a day before the ANC conference began, to 440 yesterday, the narrowest since December 2007, according to data compiled by Bloomberg.
Moody’s and S&P both cited the jobless rate as creating pressure on the government to boost social spending, limiting its ability to meet budget gap targets. Violent strikes at mines that began in August at Lonmin Plc. (LMI)’s Marikana platinum shaft, which left more than 46 people dead, has also undermined the growth outlook.
“We would agree with Fitch and see the move as justified,” Peter Attard Montalto, a London-based analyst at Nomura International Plc, said in an e-mailed note to clients. “Indeed, we worry that in our baseline many of the negative rating sensitivities that Fitch highlights come true –- in particular that there is a failure to generate faster employment growth, structural reforms remain slow and so there is little improvement in competitiveness.”
The rand extended its decline after the rating was cut, dropping as much as 1.1 percent to 8.6858 per dollar in Johannesburg yesterday. It was trading 0.7 percent weaker at 8.6569 against the dollar as of 10:09 p.m.
To contact the reporter on this story: Andres R. Martinez in Johannesburg
To contact the editor responsible for this story: Nasreen Seria at

Target 2 imbalances are eating its way through Europe's core.  It now seems that the taxpayers of Europe are taking on some of this leaking gas:

(courtesy Pater Tenebraum/Acting Man blog)

TARGET-2 Imbalances - "The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core"

Tyler Durden's picture

Via Pater Tenebrarum of Acting-Man blog,
As Der Spiegel reports, capital flight from Southern Europe has stopped and even slightly reversed in recent months. This is a belated reaction – so it is surmised – to the 'OMT' announcement effect.
However, the move is still quite small at this stage, although we suspect that several officially unconcerned central bankers in the 'core' are letting out a sigh of relief that their TARGET claims haven't just risen even further.
“As recently as the summer of 2012, investors and those with savings accounts in crisis-stricken countries were moving their money out as quickly as they could. Billions of euros were withdrawn from accounts in Greece and Spain and banks in stable countries such as Germany put a cap on the amount of money they were willing to lend business partners in countries hit hardest by the euro crisis.

But since last autumn, this trend has come to a stop. Indeed, the most recent numbers indicate that a slight reversal is underway, with ECB statistics showing that deposits in Spanish and Greek banks have recently ticked upwards. Furthermore, Germany's central bank, the Bundesbank, reported this week that imbalances in Europe's so-called Target2 settlement system, in which euro-zone central banks and the ECB transfer money across the common currency union, have declined. As the euro crisis progressed, the system had become massively imbalanced, which could result in massive losses for countries such as Germany should Greece, for example, be forced to exit the euro zone.

Just prior to the ECB's massive intervention on the bond markets in August, 2012, the Bundesbank had Target2 claims worth €751 billion ($981 billion). But by the end of December, they had sunk to €656 billion. The imbalance is still dramatic, but the trend reversal provides cause for hope, particularly because it is mirrored by falling debts at the other end of the transfer system. Taken together, the combined Target2 debts owed by Italy, Spain, Greece, Portugal and Ireland shrank from €989 billion at the end of August, 2012 to €902 billion at the end of October. More current data is unavailable.”
Here is the chart that illustrates the situation:
The Bundesbank's TARGET-2 claims versus the TARGET-2 liabilities of the PIIGS as of end October

However, as Hans-Werner Sinn reminds us (Sinn was the first mainstream economist to ring the alarm bell over the growing imbalances in the central bank payments system), the calming of the situation is entirely due to the risks having been shifted, not to the risks having gone away. The ESM with its new power to finance e.g. banks directly, simply shifts more of  the risk to taxpayers residing in the 'core' countries. Quoth Sinn:
“The markets have been calmed because new ways have been found to make taxpayers in those European countries that are still healthy liable," Sinn says. He is not just referring to the bond purchases that could be undertaken by the ECB — purchases that taxpayers are ultimately liable for. Rather, he is also referring to new rules allowing the crisis backstop fund, the European Stability Mechanism, to provide aid directly to banks.

"The debt crisis is eating its way ever further into the budgets of Europe's core countries," he says. "But policymakers are celebrating the obfuscation of this fact as a success."
He certainly has a point.


Our resident expert on Cyprus affairs gives another blockbuster accounting today:

(courtesy Wolf Richter/

Russian “Black Money” Threatens To Boot Cyprus Out Of The Eurozone

testosteronepit's picture

German Bailout Chancellor Angela Merkel, who is trying to avoid any tumult ahead of the elections later this year, has a new headache. Cyprus, the fifth of 17 Eurozone countries to ask for a bailout, might default and exit the Eurozone under her watch. Using taxpayer money or the ECB’s freshly printed trillions to bail out the corrupt Greek elite or stockholders, bondholders, and counterparties of decomposing banks, or even privileged speculators, is one thing, but bailing out Russian “black money” is, politically at least, quite another.
Cyprus is in horrid shape. Particularly its banks. Their €152 billion in “assets” are 8.5 times the country’s GDP of €17.8 billion. “Assets” in quotation marks because some have dissipated and because €23 billion in loans, or 27% of the banks’ entire credit portfolio, are nonperforming. That’s 127% of GDP! And then there are the Russian-owned “black-money” accounts.
A “secret” report by the German version of the CIA, the Bundesnachrichtendienst (BND) was leaked last November, revealing that any bailout of Cyprus would benefit rich Russians and their €26 billion in “black money” that they deposited in the now collapsing banks. The report accuses Cyprus of creating ideal conditions for large-scale money laundering, including handing out Cypriot passports to Russian oligarchs, giving them the option to settle in the EU. Much of this laundered money then reverses direction, turning minuscule Cyprus into Russia’s largest foreign investor [read...  The Bailout of Russian “Black Money” in Cyprus].
Now Cyprus needs €17.5 billion—just about 100% of its GDP—of which €12 billion would go directly to the murky and putrid banks. The package should be wrapped up and signed on February 10 at the meeting of the European finance ministers.
“I cannot imagine that the German taxpayer will save Cypriot banks whose business model is to abet tax fraud,” grumbledSigmar Gabriel, chairman of the opposition SPD that has been a supporter of euro bailouts; and Merkel, hobbled by opposition within her own coalition, had relied on them to get prior bailouts passed. “If Mrs. Merkel wants to have the approval of the SPD, she must have very good reasons,” he said. “But I don’t see any....”
The Greens are resisting the Cyprus bailout for the same reasons. And 20 members of Merkel’s own coalition are categorically opposed to it. For the first time, Merkel has no majority to get a bailout package passed. The opposition smells an election advantage.
Before the German finance minister can vote in the Euro Group of finance ministers for disbursement of bailout funds, he must seek parliamentary approval. The German Constitutional Court said so, inconveniently. But without his yes-vote, which weighs 29%, the qualified majority of 73.9% cannot be reached. The bailout disbursement crashes. That’s what Cyprus is contemplating.
Fearing defeat, sources within the government now made it known that they wouldn’t even present a bailout package unless Cyprus agreed to “radical reforms,” including massive privatizations of the bloated state sector—precisely what communist President Dimitris Christofias has ruled out.
The Russian “black money” is so unpalatable that even the bailout-happy President of the EU Parliament, Martin Schulz, got cold feet. Before a bailout package could be put together, he said, “it must be disclosed where the money in Cyprus is coming from.”
Markus Ferber, head of Merkel’s coalition partner CSU, demanded a guarantee that “we help the citizens of Cyprus and not the Russian oligarchs.” In addition, he wants Cyprus to reform its naturalization law. If Cyprus wants to get bailed out, he mused, it must make sure “that not everyone who has a lot of money can get a Cypriot passport.”
Foreign Minister Guido Westerwelle (FDP), who is no Eurosceptic, hammered home that the Cyprus won’t get special treatment. The European community is “ready for solidarity, but only in return for real structural reforms,” he said. “Greece didn’t get a blank check, Cyprus won’t either.” And those reforms included “banking transparence.” They’re all out there now, griping about German taxpayers bailing out Russian “black money.”
Having learned a lesson from Greece, Cyprus has gone on a charm offensive to persuade the other 16 Eurozone countries that its “black money” problem has evaporated and that more reforms aren’t necessary. On Monday, Central Bank President Panicos Demetriades invited the finance ministers to a dog and pony show that would explain the banking sector and the perfectly legit activities of the Russian funds.
If Greece is any guide, Merkel will vociferously demand more reforms and transparence in the banking sector. The February 10 deadline might pass. Cyprus will come up with a list of promises. Gradually the rhetoric will change. Words like “progress” will show up. “Black money” will disappear from the media. This might even culminate with a heartwarming meeting in Berlin between Merkel and Christofias. And suddenly, votingagainst the Cyprus bailout, once a safe bet, will become politically risky. It worked before. It might work again. If not, Cyprus with all its “black money” might become the first Eurozone country to go bust.
The European Commission issued its report on bank bailouts, the “2012 State Aid Scoreboard.” Turns out, the amount that the 27 EU states had handed to their banks amounted to €1.6 trillion. 13% of GDP—to bail out bank stockholders, bondholders, and counter parties, and enrich privileged speculators. Read....The EU Bailout Oligarchy Issues A Report About Itself.

Your early Tuesday morning currency crosses; 

This morning we continue to see the euro strength somewhat against the dollar. The yen however continues to weaken against the dollar.  The pound shows slight strength against the USA dollar as does the Canadian dollar.  We have a slight risk is on situation with most European bourses in the green as well as gold and silver:

Euro/USA    1.3104 up  .0049
USA/yen  88.234  up  .107
GBP/USA     1.6105 up .0039
USA/Can      .9857  down .0016


your closing 10 year bond yield from Spain:  




4.904000.23000 4.48%
As of 12:00:00 ET on 01/10/2013.


Your closing Italian 10 year bond yield: 
a huge drop in yield.

Italy Govt Bonds 10 Year Gross Yield


4.158000.11500 2.69%
As of 11:59:52 ET on 01/10/2013.


Your 3:00 pm Tuesday currency crosses: 

The Euro picked up some huge strength today rising to the 1.325 make.  The Yen continues to lose steam as the government is detailing its spending platform.  The Pound and the Canadian dollar also rose again today against the USA dollar

Euro/USA    1.3252 up   .0199
USA/Yen  88.18 up .050
GBP/USA     1.6152 up .014
USA/Can      .9840  down .0035


Your closing figures from Europe and the USA:
England, Germany and the USA in the green.  France basically flat
and Spain modestly in the green:

i) England/FTSE up only 2.86  or 0 .05%

ii) Paris/CAC  down 14.33 or  0.39% 

iii) German DAX: down 12.00 or .16% 

iv) Spanish ibex: up 12.5  or 0.15%

and the Dow: up 80.71  points or .60% 


And now for major USA stories:

USA initial claims miss for the 4th consecutive week, printing at 371,000 jobless.  They expected a jobless number of around 365,000. What is interesting is that non seasonally adjusted number soared from 490,000 up to 552,000.

Initial Claims Miss Fourth Week In A Row; Prior Week Revised Lower

Tyler Durden's picture

Initial claims came, saw and missed for the 4th week in a row, printing at 371K, on expectations of a decline from 372K to 365K. As happens at the end of every year when employers turn on the pink sheet machine, the not seasonally adjusted number soared from 490K to 552K in the week ending January 5, a difference to the seasonally adjusted print of 181K. This is to be expected. What was unexpected is that the last week print saw its first downward adjustment in what seems years (it actually is years), with the December 29 week claims number declining from 372K to 367K, probably as a result of all the year end guessing that goes on to assist the other guessing that goes into the seasonal adjustment guessing. In short: everyone is guessing. States that saw a surge in layoffs in the week ended December 29 were MI (+15K) and PA (+12K) due to "Layoffs in the manufacturing industry", and  "Layoffs in the transportation, construction, food and beverage manufacturing, and metals industries." Finally those claiming extended benefits plunged by 76K in the last week of 2012, putting further pressure on the strength of the US consumer. Overall a report that confirms that 6 years after the start of the Depression, propped by some $15 trillion in central bank reserve liquidity injections the bulk of which has been used to prop stock markets, there is still no actual improvement in the economy.


And now we witness the phony Philly Fed number revised upwards:

(courtesy zero hedge)

Revision Wipes Outs "Surprising" December Philly Fed Surge

Tyler Durden's picture

On December 20, when we posted on the miraculous surge in the Philly Fed, offsetting the far weaker NY Fed data, we were left scratching our heads as the upwardly inflecting data made little sense in the context of broader data. To wit: "Three days ago the New York Fed released the December print Empire State index which showed a broad contraction across all key verticals. Today, in fine "keeping them baffled with bullshit" form, the Philly Fed swing precisely the other way, and despite expectations for a second consecutive negative print of -3 to be precise, up from -10.7 last month, the General Business Activity indicator printed at 8.1, the highest print since April, with New Orders at 10.7, the highest since February, and Employment at 3.6, the highest since April. Naturally, the algos pretending to trade on news, took this news and ran futures higher..."
We also added, rather providently, "Needless to say, all economic data in the US at this point is completely meaningless, with regional distortions, seasonal adjustments, political pressures and overall central planning making a mockery of the US economic data apparatus."
Today, 20 days after the data release, we get the explanation for this very surprising jump, which naturally put the algos in a buying tizzy and sent the market higher by 1% (before it flash crashed late in the night) on the date of its release, as well as the latest validation of our skepticism, courtesy of the Philly Fed annual data revision. To wit: "Overall, the data revisions adjust the current year-end indexes moderately downward. There were more pronounced downward adjustments of the six-month expectations indexes over the last two months of 2012." And of course, it is the last data point - December - that matters most. So how does December looks like pre and post-revision? Well, it is self-explanatory: look at the chart and decide for yourselves - blue is originalred is revised.
This is the kind of "credible" data that drives headline scanning algos.


Bruce Krasting describes what happens when you delay for one year entitlements to pension money:

you will enjoy this

(courtesy Bruce Krasting)

On "Noteworthy"

Bruce Krasting's picture


The most recent report from the Congressional Budget Office(CBO) used the following language it the summary section:

The resulting rise in the projected rates of.............isnoteworthy.

"Noteworthy" is an interesting word for the CBO to use. Normally, the reports don't use words like that, so the word is, by itself, noteworthy. If I was writing the report I would have stepped it up from the CBO language. I would have used:

Holy Smokes! Look at this will ya! The country is trying to fix one problem - but the consequences of the "fix" - will be far greater than the benefits! We're shooting ourselves in the foot! What are these people doing??

The CBO report is a discussion of the Full Retirement Age (FRA).How could that be interesting, and why is it noteworthy? Some background.
In a few years, Social Security will (gradually) increase the FRA from 65 years, to 66. This change in eligibility has been on the books for some time, so no one should be surprised when it happens.
If you put your economics hat on for a moment, and ponder the broader implications of changing the FRA, you probably would conclude that increasing the FRA causes older people to stay in the workforce longer. That conclusion is pretty obvious, and by itself, is not noteworthy. What is worthy of note is how significant the implications of adjusting the FRA are. The CBO estimates:

Men aged 62-64 = +3%
Men aged 65-69 = +4%
Women aged 62-64 = +4%
Women aged 65-69 = +4%

If you look at these results and conclude that the 3-4% changes over a 5-8 year period is a rounding error, and not of any consequence, you would be wrong. This is a very big deal. In this case, "Holey Smokes" for me, and "Noteworthy" for the CBO, are appropriate reactions.

Put the Eco 101 hat on again, and you can immediately conclude:

Changing the FRA by just one year, will translate into a generational increase in youth unemployment.

Changing FRA will reduce upward mobility for all workers who are under 50. This will be a permanent change.

The timing of the CBO blog is interesting. The change in FRA will not happen for years, and its consequences will take years more to be felt. - "Who cares? We have plenty of pressing stuff today; worry about this one later" - is one way of thinking about this. But actually, the CBO report is very timely and on point.
Over the next month we will (hopefully) hear some serious proposals on how to change the direction of spending and debt. The CBO sent a message to the legislators who will be crafting the "fixes". There was no reference to the debt ceiling in the report, but the conclusions are obvious. I think what the CBO was trying to say was:

Beware of what you do with your fixes. Changing the age limits for SS and Medicare will backfire one day. You are trading an accounting problem for a social/economic problem to be. There is already a huge intergenerational transfer of wealth programed into the system with SS/Medicare. Do you really want to add to that burden?

Note: I'm quite sure that changing age limits will be part of the "fixes". They are "painless" solutions, as the changes would not become effective for many years, and be phased in thereafter. So this is a politically cheap way of kicking the can a generation or so, and then claiming success.
I have no answer to this. I know it's not a Platinum Coin. Nor is it 200 - 300% debt to GDP. I see that it is tempting to bend things to preserve a system today, at the expense of future generations. I also believe that some bending is necessary.
But lets not kid ourselves, we are shooting arrows at younger workers. The arrows will take years to land, but they will land, and when they do, they will hit 24 year olds.
What will come in the next few weeks will prove to be a huge pass-of-the-buck. No doubt, everyone will celebrate that result. Shooting arrows at kids who are five years old today is nothing to celebrate, even if the arrows won't hit for another decade or two.



Well that about does it for tonight

I will see you bright and early Saturday morning



Anonymous said...

Thanks Harvey! 8)

Anonymous said...

Kudos Harvey, couple of good days this week and some of your observations + predictions look good. You think the tide is turning or is this another fake out to suck more long holders in? I sure hope we see this turn for good.


Anonymous said...

Don't hold your breath Max!

Anonymous said...

Max, you mean you've never heard to adage:

The best way to make a small fortune is to start with a large fortune and then take Harvey's advice!

Anonymous said...


You left your panties at my flat.

And honestly I think I like Funky Monkey's little dingy better than yours.


DUH said...

Thanks Harvey for the articles and analysis.

Thanks trolls for the humor.
Without you investing would not be as fun.

Anonymous said...

ThTs for sure the trolls on this site are awsome when they are around.

Anonymous said...

Yes, the trolls are like a fungus. They kind of grow on you. Good thing silver is anti fungal.

Anonymous said...

In 20 days silver is going to $44.

Watch this space folks.

Anonymous said...

What is the basis for your bold prediction? TA, fundamentals, inside knowledge, or a hunch?

Anonymous said...

Actually silver is going to $52.52 in less than 30 days.

Anonymous said...

or more.

KPD13 said...

Thanks as always. Any comment on the 19+ million ounces sent for delivery in December. There has been little change in inventory at comex or slv

If those deliveries are real silver price should be coiling like a cobra right now.


Anonymous said...

"coiling like a cobra"? what the hell does that mean?

Anonymous said...

Physical holders mettle will someday prove to the world that their metal has sustained the banker's dishonest medle.

Anonymous said...

and one monkey said to the other "what is he doing with that football?"

(that makes about as much sense)

Anonymous said...

can anyone spell r-e-t-a-r-d-e-d

Anonymous said...

yes, it's spelled L I B E R A L

Anonymous said...


(right Harv?)

Anonymous said...

Coiled like a cobra... Ready to strike...

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