Tuesday, February 5, 2013

Huge imports of gold into China/Argentina issued price controls for two moths/ Greece orders seamen back to work/

Good evening Ladies and Gentlemen:

Gold closed down $2.80 to finish the comex session at $1674.40.  Silver finished the day down 16 cents at $31.86.  The bankers orchestrated another raid today once they discovered last night that the OI for silver was above 150,000.  They needed to remove as many silver leaves as possible. It seems that raids are happening much more frequently which kind of shows you the desperation of the bankers.

Today, China announced a huge 114 tonnes of gold imports into its ports in December.  For the whole year of 2012, China imported 832 tonnes of gold thus showing this nation has an insatiable appetite for gold.  The world produces (ex China and ex Russia)  183 tonnes of gold per month and thus China is gobbling up 62% of that gold. Together with gold loving citizens from India, the total importation from both  is almost 100% of global monthly production.  When you factor in hoarding from Canadian citizens, USA citizens, Europeans and Japanese, you can visualize the problems facing the bankers as these guys will be left with a ton of paper gold obligations that they cannot possibly deliver upon and thus they will default.  Chaos will ensue!

In other news today, Argentina issued price controls for two months.  This will be the forerunner to hyperinflation for this once proud and prosperous nation.

Over in Greece, the government has issued orders for the seamen to return as the Greek isles have been stranded by the strike.

And finally a commentary showing Egypt is close to collapse.




We will discuss these and many other stories but first let us head over to the comex and assess trading today............





The total comex gold open interest fell slightly today to the tune of 332 contracts, falling from 423,613 down to 423,281 which is near a two year low.  The active gold delivery month of February saw it's OI fall by 1185 contracts from 3571 down to 2386.  We had 1106 delivery notices yesterday so we lost a tiny 79 contracts or 7900 oz of gold standing.  It looks like the remaining gold OI are resolute in their conviction and will not be goaded into accepting paper fiat. The non active March gold contract month saw it's OI rise by 9 contracts up to 1247.   The next big active delivery month for gold is April and here the OI fell slightly by 285 contracts down to 255,161.  The estimated volume was pretty good today coming in at 162,838 compared to yesterday's poor, confirmed volume of 121,728.  It seems when the bankers want to raid, the comex volumes rise.

The total silver comex OI rose by a considerable 1995 contracts from 148,857 up to 150,852.  No doubt the rise into the 150,000 column sent out the signals to our bankers to orchestrate a raid. The non active February silver contract month saw it's OI fall from 19 down to 17 for a loss of 2 contracts.  We had 6 delivery notices filed yesterday so we gained 4 contracts or an additional 20,000 oz of silver will stand for delivery in February.  The next big active delivery month for silver is March and here the OI fell by 645 contracts from 74,159 down to 73,514.  It is this lofty level of March that is bothering the bankers.  They witnessed massive gold deliveries in February and they are frightened the same will happen to silver in March. The estimated volume at the silver comex was extremely good today at 48,474.  The confirmed volume yesterday was  not as good coming in at 40,226.  We are now starting to see tiny rollovers into the next active delivery month of May.







Comex gold/February contract month:
Feb 5.2013    




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
2,411.25 oz (HSBC)
No of oz served (contracts) today
 63    (6,300  oz)
No of oz to be served (notices)
2382  (238,200) oz
Total monthly oz gold served (contracts) so far this month
10,311  (1,031,100 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
nil
Total accumulative withdrawal of gold from the Customer inventory this month


 
75,941.547




We had some activity at the gold vaults.
The dealer had no deposits and no    withdrawals.




We had 1   customer deposit:


Into HSBC:  2411.25 oz

total deposit:   2,411.25 oz



We had 0  customer withdrawal:



total withdrawal: nil oz









We had 0 adjustments:








Thus the dealer inventory rests tonight at 2.925 million oz (90.97) tonnes of gold.




The CME reported that we had 63 notices filed for 6300 oz of gold today.   The total number of notices so far this month is thus 10,311 contracts x 100 oz per contract or 1,031,100 oz of gold.  To determine how much will stand for February,  I take the OI standing for February (2386) and subtract out today's notices (63) which leaves me with 2323 notices or 232,300 oz left to be served upon our longs.

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

1,031,100 oz (served ) + 232,300 oz (to be served upon) = 1,263,400 oz or 39.29  Tonnes.



we lost 79 contracts or 7900 oz of gold.






Silver:



February 5.2013:   The February silver contract month




Silver
Ounces
Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory  703,895.61(CNT,Scotia)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory  1,850,118.53 (Brinks, CNT, HSBC)
No of oz served (contracts)0  (nil  oz)  
No of oz to be served (notices)17  (85,000  oz) 
Total monthly oz silver served (contracts) 72  (360,000  oz) 
Total accumulative withdrawal of silver from the Dealers inventory this month10,327.000
Total accumulative withdrawal of silver from the Customer inventory this month890,208.27


Today, we  had huge activity  inside the silver vaults.

 we had no dealer deposit and no dealer withdrawal.




We had 3  customer deposits of silver:

i)Into Brinks:  596,638.52 oz
ii) Into CNT:  603,039.000 oz  (again they revert to a perfectly round number)
iii) Into HSBC:  650,441.01 oz




total deposit: 1,850,118.53 oz





we had 2 customer withdrawals:

i) Out of CNT:  83,652.91 oz  (notice how the decimals)
ii) Out of Scotia;  620,242.70 oz





total customer withdrawal:  703,895.61  oz






we had 0  adjustments:


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

  
Registered silver remains today at :  37.204 million oz
total of all silver:  158.695 million oz.




The CME reported that we had  0  notices filed for nil oz of silver for the February contract month. To obtain what is left to be served upon our longs, I take the OI standing for February (17) and subtract out Friday's notices (0) which leaves us with 17 notices or 85,000 oz left to be served upon our longs. 

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

360,000 oz (served)  +  85,000 oz (to be served upon)  =  445,000 oz

We  gained 20,000 additional silver oz standing today.









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:   Feb 5.2013:



Tonnes1,328.09

Ounces42,699,500.65

Value US$71.424  billion.





Feb 4.2013:




Tonnes1,328.09

Ounces42,699,500.65

Value US$71.104    billion











Feb 1.2013:















Tonnes1,328.09

Ounces42,699,500.65

Value US$71.235     billion 





Jan 31.2013:






















Tonnes1,328.09

Ounces42,699,500.65

Value US$71.054   billion











Jan 30.2013:















Tonnes1,328.09

Ounces42,699,500.65

Value US$71.599    billion












Jan 29.2013:















Tonnes1,328.09

Ounces42,699,500.65

Value US$71.002   billion























we neither gained nor lost any gold at the GLD today.



and now for silver:



Feb 4:2013:



Ounces of Silver in Trust335,175,993.900
Tonnes of Silver in Trust Tonnes of Silver in Trust10,425.14



feb 1.2013:



Ounces of Silver in Trust335,175,993.900
Tonnes of Silver in Trust Tonnes of Silver in Trust10,425.14



Jan 31.2013:



Ounces of Silver in Trust335,756,245.200
Tonnes of Silver in Trust Tonnes of Silver in Trust10,443.19


Jan 30.2013



Ounces of Silver in Trust335,756,245.200
Tonnes of Silver in Trust Tonnes of Silver in Trust10,443.19



Jan 29.2013:

Ounces of Silver in Trust335,756,245.200
Tonnes of Silver in Trust Tonnes of Silver in Trust10,443.19



Jan 28.2013:




Ounces of Silver in Trust335,756,245.200
Tonnes of Silver in Trust Tonnes of Silver in Trust10,443.19








we  neither gained nor lost any silver at the slv.







end




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





Sprott and Central Fund of Canada. 




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




1. Central Fund of Canada: traded to a positive 3.0 percent to NAV in usa funds and a positive 2.8%  to NAV for Cdn funds. ( Feb 5 2013)   

2. Sprott silver fund (PSLV): Premium to NAV rose to 2.25% NAV  Feb 5./2013
3. Sprott gold fund (PHYS): premium to NAV  rose to 3.20% positive to NAV Feb 5/ 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 3.0% in usa and 2.8% 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 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








And now for the major physical stories we faced today:

First gold trading from Europe and Asia courtesy of Goldcore.

Early this morning,the world discovered the huge hoarding of gold by Mainland China.
 (see discussion below)

It seems that Platinum is in short supply as the huge producer Anglo American's production fell 8% this year.

Gold in yen rose to 156,000 yen/oz a new record nominal high.
With massive imports of gold expect this year or next China will announce a doubling or trebling of their official reserves.


(courtesy Goldcore)





China's Gold Imports From Hong Kong Double To New Record In 2012

GoldCore's picture




Gold climbed $5.70 or 0.34% in New York yesterday and closed at $1,673.50/oz. Silver inched up to $31.86 in Asia, then it fell back to $31.38, and then rose to a high of $31.91, but eased off in afternoon trade and finished with a loss of 0.35%.
Gold rose to a new record nominal high on the TOCOM at 0.156 million yen per ounce. The resignation of Bank of Japan Governor, Shirakawa on March 19 is pressuring the yen as is increased tensions in the Pacific between China and Japan -  Japan accused China of targeting a Japanese naval vessel and helicopter.
Platinum and palladium edged off multi month highs today as profit taking set in after recent gains.
Those who look through a rose coloured glass of mixed economic data see a recovering global economy and this perspective and supply issues may have helped propel palladium and platinum to outperform gold and silver so far this year.
Platinum futures rose to their highest point in nearly 17 weeks as output contracted at Anglo American Platinum Ltd. (AMS), the world’s biggest producer. 
Anglo American, said that production fell just over 8%. “Supply challenges” will continue this year, the company noted. Global platinum output fell 10% in 2012, according to estimates by Johnson Matthey.
Gold has been trading in a narrow range between $1,660/oz and $1,680/oz since the end of last week. A break above $1,680/oz should see us quickly challenge $1,700/oz and a break lower could lead to a testing of support at $1,650/oz. 
Today U.S. ISM non-manufacturing PMI reports at 1500 GMT, but investors await the ECB meeting’s monetary policy decision on Thursday.
Physical buying in Asia is quiet ahead of the Chinese Lunar New Year which starts on Saturday.
Gold imports into mainland China from Hong Kong almost doubled to new high in 2012 as Chinese people continue to play catch up in terms of gold ownership. The Chinese were forbidden from owning gold for over 50 years.
Rising incomes, economic jitters and concerns about currency debasement and inflation in the world’s second largest economy led to increased demand in China which contributed to gold seeing another year of gains.
The very poor performance of the Chinese stock market in the last 10 years (see chart below) and concerns about property bubbles are also leading Chinese investors and savers to diversify into gold.
Mainland China imported a whopping 834,502 kilograms or 834.5 metric tons of gold, including scrap and coins in 2012.
This compared with about 431,215 kilograms or 431.2 metric tons in 2011, according to Bloomberg calculations based on data from the Census and Statistics Department of the Hong Kong government.
Imports in December 2012 rose to a monthly record of 114,405 kilograms, according to data from the department today.
The unrealised important fact is that the people of China were banned from owning gold bullion by Chairman Mao in 1950. This prohibition continued until 2003 and it means that the per capita consumption of over 1.3 billion people is rising from a very small base.
Since the market in China was liberalised, gold in yuan terms has risen by 259% while the stock market has performed poorly.
Even after the significant increase in demand seen in recent years - Chinese per capita gold ownership remains well below that of the levels seen in India.
Culturally, India is known to have the greatest affinity for gold in the world. China had a similar cultural affinity prior to the "cultural revolution" and in time its levels of gold ownership will likely rival those seen in India, Vietnam (see below) and other Asian countries.
Chinese people experienced hyperinflation in 1949, within the lifetime of many Chinese people living today. Therefore, like in Germany, there is a greater awareness of what can befall a nation and a people when a paper currency is debased.
Many market participants and non gold and silver experts tend to focus on the daily fluctuations and “noise” of the market and not see the “big picture” or major change in the fundamental supply and demand situation in the gold and silver bullion markets. This is particularly due to investment, store of wealth and central bank demand from China and the rest of an increasingly wealthy Asia.
The doubling in demand in 2012 is solely private demand and does not take into account official Chinese buying. 
It is worth noting that the People’s Bank of China’s gold reserves are very small when compared to those of the U.S. and indebted European nations. They are miniscule when compared with China’s massive foreign exchange reserves of more than $3 trillion.
The People’s Bank of China is almost certainly continuing to quietly accumulate gold bullion reserves. As was the case previously, they will not announce their gold bullion purchases to the market in order to ensure they accumulate sizeable reserves at more competitive prices. They also do not wish to create a run on the dollar – thereby devaluing their sizeable reserves. 
Expect an announcement from the PBOC, sometime in 2013 or 2104, that they have doubled or even trebled their reserves to over 2,000 or 3,000 tonnes.
COMMENTARY
Video: Gold "Good Place To Hide", Apple "Not So Much" – The Wall Street Journal
For breaking news and commentary on financial markets and gold, follow us on Twitter.




end


The key data figure is the huge imports into China in 2012.  Total imports are over 832 tonnes of gold. In December alone 114 tonnes of gold were imported into China almost all of it through Hong Kong.  The world produces ex China ex Russia, 2200 tonnes of gold or 183 tonnes per month.  Thus on a monthly basis, China alone accounted for 62.2% of this monthly global production.
India, the other gold loving nation brings in roughly 800 tonnes of gold yearly or 66 tonnes per month.  Thus these two countries take up almost 100% of monthly global production.

Remember this is physical metal heading from west to east.  They leave behind the massive paper gold bubble with mammoth gold obligations owing to holders of this paper.  Paper gold has been hypothecated and rehypothecated orchestrated by the criminal banks.  No doubt much of the paper gold originated at the FRBNY much to the largesse of foreign sovereigns who stored their gold in NY to prevent the confiscation of this ancient metal of kings through wars.

You will note that the escalation in purchases by China is becoming exponential as each month they seem to be purchasing more and more.  The bankers must be pulling their hair out as they realize the derivative mess it leaves behind.

I guess I was right when I testified in Washington to the 5 commissioners. I stated that I can see the day when all the gold leaves New York, the comex  and arrives on Eastern shores.

(you can see my testimony by pressing on my image on the right side of my blog)

(courtesy GATA/Reuters)





and no one knows how much the central bank is buying'

 Section: 
Hong Kong-to-China Gold Flow Hit Record in 2012
By Rujun Shen
Reuters
Tuesday, February 5, 2013
SINGAPORE -- Hong Kong's net gold flow to mainland China jumped 47 percent in 2012 to a record high of 557.478 tonnes, indicating robust demand in China, which vies with India to be the world's top gold consumer.
Hong Kong shipped 114.372 tonnes of gold to China in December, also a record high for monthly exports. The former British colony received 19.644 tonnes of gold from the mainland in that month.
Its total gold shipments to China in 2012 jumped 94 percent from the 2011 total to over 832 tonnes, but imports also were six times higher at 274.684 tonnes, data from the Hong Kong Census and Statistics Department showed on Tuesday (www.censtatd.gov.hk).
  "It is not a surprise," said Dan Smith, head of metals research at Standard Chartered. "Consumer and investment appetite was quite strong and no one knows how much the central bank is buying."
Investors are waiting for a research report from the World Gold Council due next week, which will show whether China overtook India last year as the world's top gold consumer.
"This is a very strong number," said Nick Trevethan, senior commodity strategist at ANZ in Singapore. "China's implied gold demand looks set to approach or exceed 1,000 tonnes based on Hong Kong trade data and the annualised gold production number."
The implied demand could reach 1,050 tonnes if gold inflow from other channels is factored in, he added.
China produced 322.8 tonnes of gold in the first 10 months of 2012, up 11 percent from a year earlier, the Ministry of Industry and Information Technology said.
Physical buying at the start of 2013 was strong as seasonal demand picked up before the Lunar New Year, which falls on Feb. 10. But buying has since ebbed as prices moved higher and settled in a rangebound mode.
Traders have said the pre-holiday demand is not as strong as in the past few years as improving global and domestic economies sap some investors' interest in gold.

end




Blanchard analysts are looking for gold to average $1850 per oz this year.

(courtesy Lawrence Williams/Mineweb)

Upside fundamentals for gold still intact




Blanchard analysts are looking for gold to average $1850 an ounce over the whole of 2013 – which in itself suggests it could indeed hit new highs at some stage during the year.Author: Lawrence Williams
Posted: Tuesday , 05 Feb 2013
CAPE TOWN (Mineweb)


Major U.S. gold and gold coin dealer, Blanchard & Co. reckons that investors are yet again finding themselves entering a new year amid uncertainty, with the debt ceiling, taxes and government spending all playing a role in shaping the 2013 economy. Legislators walked the fiscal cliff tightrope until the 11th hour at the end of 2012, and something few expected happened in the financial market – gold declined in price.
Blanchard analysts – while surprised – say the counterintuitive downturn in gold’s price when it should have moved upward is the result of investors and consumers keeping their money in their pockets – just like most major banks. This may well be a more cautious view on what has happened to gold – to this observer the timings of the actual downward movements in the gold price, just when it seems like it is about to break out of the current trading range, and almost on a daily basis, does suggest an organised market attack on the yellow metal designed to keep the price firmly within limits. The tendency of the markets seems to be to move upwards again following these manufactured dips and one wonders how what looks to be some kind of suppression scheme can go on before it falters and collapses – It could be days, weeks, or even months, but recent price movement patterns do suggest there is a likely breakout ahead, Blanchard analysts thus add that these current price dips present a good buying opportunity for people looking to enter the market or for adding to existing long positions as the upside potential for strong gains is fundamentally intact…


http://www.mineweb.com/mineweb/content/en/mineweb-whats-new?oid=176265&sn=Detail


end









And now for your important paper stories which will certainly have an influence on gold and silver.


First, overnight sentiment

Important points:

1.  If you thought that the Euro/USA surge was over, guess again as the Euro reversed its downward spiral rising  at one point by over 100 basis points from its low of 1.3460.  At 7:30 am this morning the cross is at 1.3538 on NO NEWS.  Currency wars at its finest!!

2. Spanish bonds are rising in price with news of a stronger services PMI at 47 rising from December's level of 44.7
3. However Italy's service PMI came in far worse at 43.9 from last month's 45.6.  Expectations
were for a reading of 45.8.

4. With the Euro so high, all of the PMI numbers are very unstable.

5. The big number to disappoint and the number that tells the story is the huge drop in European retail sales of minus .8%.  Expectations were for a drop of  minus .5% so this disappointed investors. December's level showed a drop of minus .1%
v

6. In Spain, politicians are dealing with a graft scandal. Rajoy had this to say on the matter:

(according to El Pais): Rajoy Says ‘"It’s All Untrue, Except Some of It." No seriously, he said that.

7. And zero hedge reports on our front runner Bersani in Italy:

:"As for the getting worse part, according to a La7 poll, the block of frontrunner Bersani is now losing ground before Italy's vote in two weeks, while Hollande made demands to have an exchange-rate policy and that it was not all up to the ECB to set rates. So French socialists must see the EURUSD rate too then?"

8.  Comments on Europe courtesy of JPMorgan, BNP Pariabas, Soc Gen, Citibank,

(your overnight sentiment courtesy zero hedge)


Overnight Europe-Open Levitation Returns

Tyler Durden's picture





Just when one thought the old overnight futures levitation on a surging EURUSD regime was over, and was replaced by some semblance of normalcy, here comes Europe, sending the EURUSD screeching higher by some 100 pips from a support threatening 1.3460 on no news, with absolutely nothing changed, and pushing US futures to virtually unchanged from yesterday morning wiping out the entire day's losses in 3 short hours of near-zero volume overnight trading.
On the chart below spot the moment Europe opens: apparently the mere fact of Europe opening is now fundamentally strong news.
What little news there was was decided mixed. Initially PIIGS bonds resumed sliding, but retraced following Spain's January Services PMI which printed at 47, spiking from December's 44.3, even as the Employment PMI plunged to 42.0, the lowest since January 2012. How the economy's services are faring better when there is no economy to speak of is perhaps best answered by Argentina's set of economic data metrics.
Then we got Italian Services PMI, which in turn was far worse than expected and the prior number, or 43.9, vs Exp. of 45.8 and 45.6 last, a French Services PMI which was unchanged and in line with expectations, and a German PMI just inching above expectations, from 55.3 which was also the expected print, higher to 55.7, resulting in a blended European Services PMI of 48.6, vd the 48.3 expected, or a 10 month high. Naturally, this number is unsustainable with the EURUSD this high, but that takes us back to the much discussed economic chicken or redenominated currency egg problem at the heart of the Eurozone so we won't spend more time on it.
But perhaps the most indicative number of what is really happening was the European retail sales number which too missed expectations, declining -0.8%, below the -0.5% expected, and down from a downward revised -0.1%.
In a nutshell: this is what passes for a good day in Europe. In the meantime, the political scandal scene in both Italy and Spain is unchanged, and getting worse, especially with Rajoy summarizing it all with this absolute pearl according to El Pais: Rajoy Says ‘"It’s All Untrue, Except Some of It." No seriously, he said that.
As for the getting worse part, according to a La7 poll, the block of frontrunner Bersani is now losing ground before Italy's vote in two weeks, while Hollande made demands to have an exchange-rate policy and that it was not all up to the ECB to set rates. So French socialists must see the EURUSD rate too then?
Some additional comments from sellsiders on the ongoing fiasco in Europe via Bloomberg:
BNP Paribas:
  • EUR correction in full swing as Spanish and Italian headlines adding upward pressure on euro-zone risk premium: note to clients
  • Spanish bond auction need to get decent result to ease bond market tensions
  • BNP still sees Italy’s center-left as likely winner of lower house
  • EUR correction shouldn’t surprise as much of good news already priced in; however, a broad range of investors are still underweight EUR and will be tempted to buy dips
SocGen:
  • Correction can continue until ECB’s meeting on Thursday although Spanish and Italian political concerns seem unlikely to be the catalyst for a real turn in trend, Kit Juckes, strategist at SocGen, writes in note
  • Too soon for bears to come out in earnest
Citigroup:
  • Next big test for peripheral sentiment is Spanish auctions on Thursday; shift in investor mood recently may result in weaker demand for bonos, Valentin Marinov, strategist at Citigroup, writes in note
  • Downside risk for EUR/GBP could grow on renewed widening of peripheral bond yield spreads; concerns about hung Italian parliament and reform process after elections could prompt more profit-taking in periphery
  • Indications on Thursday that demand for SPGBs may be weakening, due in part to larger than expected LTRO repayments, could also push Spanish yields higher and EUR
  • EUR/GBP could drop towards 0.85 near term, though move will be viewed as tactical correction; longer term risks are still to upside
JPMorgan:
  • Berlusconi win in vote may not prompt Italy aid
  • All sides would have interests in managing possible fallout
A recap of key FX events from SocGen:
Contagion made a brief comeback in Europe yesterday as markets wonder what to make of political developments in Madrid and whether plummeting Italian markets are a sign of investors deserting local securities before the election. Unless a change of the guard takes place and puts government reforms on shaky ground, this should prove not more than a bump in the road. However the reaction has made for some pretty compelling viewing as three days have been enough to unwind virtually all of the tightening in the 2y bono/bund spread of January. Profit taking in stocks was overdue some will argue after an unbroken eight-month winning streak, especially when the last leg up was accompanied by lower volumes. A market that was technically on the cusp of being overbought last week has gone into mean reversion mode, something that has not yet fully come to fruition in EUR/G10 crosses though we have taken a first step. Does this all of a sudden turn the EUR into a sell on rallies? It is unclear down which path the allegations of corruption against Mr Rajoy will take us, but the level of spread widening was certainly persuasive enough for some to take a defensive stance. An 3-big figure move is standard procedure if retracements of last September, October and December are any guide. With fresh Spanish supply coming on Thursday, this could be the way forward until then, with 400bp an obvious key target for the 10y spread over bunds. Prior to yesterday, the 15d rolling correlation of EUR/USD with the S&P 500 was 0.79 and with the 2y bono/bund spread it stood at -0.52. The EU services PMI (final data) should not make a big difference and will only serve to reaffirm the divergences in the euro area, something that will certainly spring up during the ECB's Q&A on Thursday
In the US the only release likely to retain market participants' attention will be the Non-manufacturing ISM report.

end



The very humourous:  "It is ALL UNTRUE, except for some things"

Mariano Rajoy's Mindblowing Defense: "It Is All Untrue, Except For Some Things"

Tyler Durden's picture





In case there was any doubt that the European circus could get any more ridiculous, here comes Spain's uber-unpopular Prime Minister Mariano Rajoy, already embroiled in a massive kickback political scandal, with a quote that just blows everyone away: "I repeat what I said Saturday: everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets." And scene as your frontal lobe explodes.
From El Pais:
Answering reporters’ questions for the first time since details emerged late last week about an alleged slush fund his Popular Party (PP) controlled, Prime Minister Mariano Rajoy said on Monday in Berlin that all the information that has been published by the media “is untrue — except for some things.”

The somewhat confusing statement came during a question-and-answer session Rajoy held alongside German Chancellor Angela Merkel following their meeting to discuss Spain’s economy and the reforms being carried out by his government.

“I repeat what I said Saturday: everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets,” the 57-year-old prime minister said.

The conservative leader did not clarify what things he believes are false, nor did he answer a Spanish reporter’s question as to who he or his party plan on suing for alleging that many officials, including himself, were given bonuses from a secret fund on top of their regular salaries.

...

On Saturday, Rajoy appeared before the cameras to refute the allegations, but reporters were kept in a separate room and not allowed to ask the prime minister any questions.

A visibly upset Merkel had to respond on two occasions to questions about the ongoing corruption cases in Spain, including an uncomfortable mention about illegal financing in her conservative Christian Democratic Union in 1999, when Helmut Kohl was leader. At one point she tried to avoid answering a reporter’s question on whether she was concerned about Spanish corruption.

“What is important is the relationship between the two governments,” she said.

Meanwhile, more PP officials have come forward to acknowledge the information contained in Bárcenas’ bookkeeping. Santiago Abascal, a former PP member of the provincial parliament in Álava, whose name appears as receiving two million pesetas [about 12,000 euros] in 1999, said he asked the party for the money after his business was attacked by terrorists. “I told the party that I couldn’t make ends meet and they gave me two million pesetas,” he said.
Luckily, while it is governed by pathological liars, Spain would never lie about its Services PMI number, the key reason for the overnight 100 pips and Dow Jones futures move higher.
The best news: Europe is truly "fixed", if only in the football game context.


end




Justin Burkhardt discusses the data released yesterday which halted the Euro rally and started its downfall only to reverse early this morning:

(courtesy Burkhardt/zero hedge)


Spanish Data Halts Euro Rally

Burkhardt's picture




Spanish Data Halts Euro Rally
Justin Burkhardt | FXFocus.com
Back to square one. Spain is in the spotlight once again with data unsettling enough to shatter the Euro’s 4 month rally against the dollar. Record unemployment coupled with depressing growth data and political woes paint Spain to look like a sinking ship.

Spain’s Gross Domestic Product (GDP) contracted 1.8% in the fourth quarter of 2012 from the year prior. The news just added coal to the fire, coming only one day after the announcement that Spain’s retail sales had fallen 10.7% in Q4 compared to a year ago. This is the 30th consecutive month that Spain’s retail sales have fallen… and the decline is largely blamed on a hike in the value added tax (sales tax).

To make matter worse, Mariano Rajoy (Spain’s Prime Minister) is being pressed to resign from his post on allegations of corruption.

"The prospect of Rajoy's resignation has roiled markets as any fresh political instability in (the) euro zone's most important periphery economy could undermine the sense of investor confidence and send Spanish yields higher, making it much more difficult for the government to implement its austerity measures," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

Clearly the implications of a Rojoy resignation, if that were to come to fruition, would ripple throughout the Euro-Zone…


FOREX Insights

The EUR.USD pulled out a full on reversal, which began in the European session and continues through the U.S. session today. The news did come as a bit of a shock, but Forward Thinkingclients were prepared for this directional change in the EUR.USD. Last night I issued my weekly analysis of the EUR.USD painting a bearish picture for my clients. I stated that all signs pointed to a “correction”, the pair dropped an astonishing 138 pips from that market update through today.

Insights such as these have positioned Forward Thinkingclients to remain ahead of the curve, a true advantage in this market. Isn’t it time for you to get on the right side of this market?


One Watch 
EUR – Euro-Zone Retail Sales (Tuesday)
EUR – European Central Bank (ECB) Rate Decision (Thursday)
Your currency analyst,
Justin Burkhardt

end


Wolf Richter tackles the confidence crisis in Spain today:

(courtesy Wolf Richter/www.testosteronepit.com)




The Confidence Crisis In Spain Sends Out Shock Waves

testosteronepit's picture




It should have been a glorious event for Spanish Prime Minister Mariano Rajoy: a tête-à-tête with German Chancellor Angela Merkel. At the press conference following the 24th German-Spanish government consultation, he’d stand next to her, illuminated by her glory. He’d brag about implementing structural reforms, cleaning up the bailed-out banking sector, and moving Spain forward. He’d point at yields on government debt trending down toward normalcy. No, Spain wouldn’t need another bailout. All due to his excellent governance.
Merkel would endorse him with her benevolent smile. It would cement his political position in Spain. She’d rave about how the country has emerged from the debt crisis thanks to his tireless, bold, and courageous work in tightening the belts of his people.
But instead, Spanish stocks took a nosedive. Yields jumped. And the press conference turned into a slugfest about the corruption scandal in Spain.
The scandal burst into the open when El País published documents, allegedly handwritten by Luis Bárcenas, the ex-treasurer of Rajoy’s conservative People’s Party (PP). According to these ledgers, leading members of the PP had been paid bribes for years, with Rajoy receiving about €25,000 per year. Bárcenas himself is up to his neck in hot water; it was discovered that he had €22 million in Swiss bank accounts. The opposition has called for Rajoy’s head.
So Merkel and Rajoy were confronted with questions about the scandal—and Merkel with a blast from her past, a reference to the “black money affair” of the 1990s when her party, the CDU, under Chancellor Helmut Kohl, used an elaborate system of Swiss bank accounts to hide illegal political contributions.
The scandal broke in late 1999 with the arrest of CDU treasurer Walther Leisler Kiep for tax fraud. It ballooned relentlessly. After a few weeks, even Kohl—by then no longer chancellor—admitted to the “black accounts.” It led to an investigation by a parliamentary committee. Turns out, Kohl had used the funds to support candidates who sided with him. Numerous corporations and politicians were tangled up in it, including current Finance Minister Wolfgang Schäuble.
In short, it was a press conference from hell. Merkel emphasizedthat the Bárcenas scandal had not been part of their discussion. Instead, they’d talked about educational and health policies and renewable energy. And Rajoy, she said, explained his successes in implementing structural reforms and fighting unemployment....
Alas, Spain’s unemployment rate hit 26% in December, leaving 5.97 million people unemployed, up from 5.27 million when Rajoy took office in late 2011. Youth unemployment surged to 55.1%. On Monday, more bad news: the number of people receiving unemployment compensation jumped in January to the historic high of 4.98 million—up from 2 million in 2007. And the number of employed people dropped by 263,243. El País declared morosely, “the labor market begins the year with the destruction of 8,500 jobs per day.”
Nevertheless, Merkel had the “greatest respect and admiration” for what Rajoy has implemented in terms of structural reforms. It would take time for them to do their magic, she conceded, and youth unemployment was “depressingly” high. Yet she was “convinced” that the Spanish government, “with Mariano Rajoy as head,” would be able to resolve the problems. “Germany will support him with all its power,” she said.
But wasn’t she worried about Rajoy’s loss of authority? Merkel dodged; she’d already said everything, she said. “We will continue to work well together,” she added. “We have a very trusting relationship.” 
Rajoy spent his time furiously defending himself. “I have the same desire, the same hope, strength, and courage that I had when I arrived to overcome one of the most difficult situations of the past 30 years,” he said. His ability to lead the government has not been weakened. His party has a “stable majority” and “clear goals” and would continue the reform efforts. And no, he would not resign.
But the questions kept coming. Rajoy had initially denied all Bárcenas-related allegations in their totality. But some of the elements in those documents inconveniently turned out to match reality. So why were these elements true but not those relating to him and other members of the party leadership? Yes, some things were true, he conceded, but “nothing that refers to me and my colleagues in the party is true.”
He was flailing to avoid the dire fate that befell George Papandreou, the conniving prime minister of Greece, and Silvio Berlusconi, the scandal-prone prime minister of Italy. Under pressure from Merkel’s Eurozone clan, they were sacked in November 2011 and replaced by unelected technocrats.
Merkel’s support suggests that replacing Rajoy isn’t on the table just yet, though Spain is sinking deeper into its crisis that started with a pricked real estate and credit bubble, morphed into a debt crisis, a banking crisis, an economic crisis with an unemployment fiasco, and now into a confidence crisis that is sending tremors through the most important institutions of the Spanish democracy.
As Deutsche Bank co-CEO said reassuringly, “In this uncertain world, I cannot exclude anything.” Read.... The Putrid Smell Suddenly Emanating From European Banks
As if the Eurozone troubles weren't enough: on the other end of the Mediterranean is Egypt, with parliamentary elections in April, against a backdrop of violent protests, a state of emergency in three key provinces, weapons caches discovered in Cairo, and radical Salafi forces who think the Muslim Brotherhood is far too moderate. Read....   Investors Beware: Egypt’s Revolution is Not Over.


end



The following is heading our way: after price controls, hyperinflation will gallop into Argentina.

I would like to point out to you that 6 months ago, Cristina Fernandez de Kirchner, the leader of Argentina confiscated citizens pensions and replaced their investments with Argentinian bonds.
Now these bonds are basically worthless.

Argentina will go down just like Zimbabwe.

(courtesy zero hedge)



Argentina Freezes Supermarket Prices To Halt Soaring Inflation; Chaos To Follow

Tyler Durden's picture




Up until now, Argentina's descent into a hyperinflationary basket case, with a crashing currency and loss of outside funding was relatively moderate and controlled. All this is about to change. Today, in a futile attempt to halt inflation, the government of Cristina Kirchner announced a two-month price freeze on supermarket products. The price freeze applies to every product in all of the nation’s largest supermarkets — a group including Walmart, Carrefour, Coto, Jumbo, Disco and other large chains. The companies’ trade group, representing 70 percent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government’s news agency Telam reported. As AP reports, "The commerce ministry wants consumers to keep receipts and complain to a hotline about any price hikes they see before April 1."
Perhaps they will. What consumers will certainly do is scramble into local stores to take advantage of artificially-controlled prices knowing very well they have two short months to stock up on perishable goods at today's prices, before the country's inflation comes soaring back, only this time many of the local stores will not be around as their profit margins implode and as owners, especially of foreign-based chains, make the prudent decision to get out of Dodge while the getting's good and before the next steps, including such measures as nationalization, in the escalation into a full out hyperinflationary collapse, are taken by Argentina's female ruler.
As such expect photos of empty shelves from Buenos Aires to start popping up in a few days, comparable to how threats of a gun and weapon ban by the US government did more for the top and bottom line of US arms dealers than any military conflict ever could.
Economist Soledad Perez Duhalde of the abeceb.com consulting firm predicted on Monday that the price freeze will have only a very short term effect, and noted that similar moves in Argentina had failed to control inflation. Consumers shouldn’t be surprised if the supermarkets are slow to restock their shelves and offer fewer products for sale, she added.
In other news Argentina, just like the rest of the "developed" world, appears to have a slight inflation tracking problem:
Polls show Argentines worry most about inflation,which private economists estimate could reach 30 percent this year. The government says it’s trying to hold the next union wage hikes to 20 percent, a figure that suggests how little anyone believes the official index that pegs annual inflation at just 10 percent.
The BLS has the solution: just exclude any product whose price is rising from your CPI calculation, and voila. For everything else there is a hedonic adjustment.
The ironic comparison to the US does not end there however:
A more effective way to contain inflation would be to “reduce government spending, which is financing an expansion of the money supply, and to have a credible price index.”
Wait, are they still talking about Argentina or the US?
The government announced the price freeze on the first business day after the International Monetary Fund formally censured Argentina for putting out inaccurate economic data. The IMF has given Argentina until September to bring its inflation and economic growth statistics up to international standards. If Argentina doesn’t comply, it could face expulsion from the world body in November.
Well good thing the US complies with the IMF's stringent "seasonally adjusted" data reporting quality control. Or else, the US may have been expelled from the IMF too. And then who would fund the creeping bailout of Europe (aside from Germany of course)?
The IMF censure “is not just a new error ... it’s also a clear example of the organization’s unequal treatment and double standards in regard to certain member countries,” Lorenzino said. “Argentina, just as it agreed with the IMF to do, will keep working to improve its statistical procedures in accordance with good international standards.”
So to summarize: first capital controls, then a currency crisis, then expectations of sovereign default, then a rise in military tensions, and finally - price controls, after which all out chaos usually follows.
Study this sequence well: it is coming to every "developed" country near you in the months and years ahead.
But, as with every other hyperinflationary implosion, there is a silver lining: the stock market is soaring...
... at least in Peso terms. When priced in USD, the 360% stock market "rise" is more like -9% in the past 21 years. But luckily, the general public has a gene that prevents it from grasping the difference between nominal and real - something Ben Bernanke is very well aware of.

end





Now the Greek government are threatening the striking seamen with arrests unless they resume work:

(courtesy zero hedge)


Greek Government Threatens Striking Seamen With Arrests Unless They Resume Work

Tyler Durden's picture




Over the weekend we reported on the second Greek strike of the year, the first being that of subway workers which ended prematurely into its ninth day when the government threatened to arrest all strikers who had snarled traffic in Athens to a halt, this time involving Greek seamen who had left the Greek isles in geographic isolation for a week. Earlier today, the strike which had gone on for a week, was voted to be extended another 48 hours which mean ships would remain tied up in port until early Friday, while the seamen's union will meet anew to debate whether to further extend their walkout. Needless to say, the union is angry at pay arrears and government austerity policies. As of moments ago the union will be even angrier, as the government just announced it would order civil mobilization - or said otherwise, deploy the arrest threats - once again as a repeat desperate measure to halt this latest strike.
From Bloomberg:
  • Greece’s government ordered civil mobilization to end 6 day strike, according to e-mailed statement from Shipping Ministry today.
  • Prime Minister Antonis Samaras authorized Shipping Minister Konstantinos Mousouroulis to take emergency action to get crews back to work, ministry says
So just as Argentina "proved" it was in charge of the economy when it prohibited price hikes, so Greece is gingerly following suit in the same footsteps, by making it clear it will not tolerate dissent. Until, as in Argentina, the reaction to this latest bout of enforced central planning bubbles over and the people realize they have had enough. The only question then is whether the riot police and army will be, miraculously, too busy striking to protect the government. As other people's money in Greece runs out one more time, and is simply stolen by the government, we will certainly find out by the summer.


end





I urge everyone to read very carefully every word that Mark Grant comments on today.

He comments on what will happen to Italy and Spain and it will not be good.

We have two big investigations ongoing in Spain and Italy and these generally have a habit of  uncovering many improprieties.  His message to all investors:  get out of any investment in Spain and Italy.

As far as everything else, his key phrase:

 "What we are faced with now is also a bubble but one unlike we have ever seen before because all of the major central banks have acted in concert which pumped money in from everywhere while, at the same time, limited what could be done with our new found small bits of paper because the playing field was leveled by distortion en masse. I would say that the entire financial , every market, every space is in a bubble as a result of what they central banks have done. It is a quite systemic bubble which inflated everything and anything but also cancelled out inflation as it took place across the entire playing field so relative values were hardly changed"

(courtesy Mark Grant/Out of the Box and Onto Wall Street)


The Observation Of Trifles

Tyler Durden's picture




Via Mark J. Grant, author of Out of the Box,
It is one of those tenets of life that is factual and etched in the stones of our passage; everything is just fine right up until the moment when it is not. Black swans are few and far between, being bitten by a wombat is quite unlikely for most of us but financial or political surprises may be expected as a matter of course. There is a valid point here which is that “surprises” are a normal part of our lives and not something that should take us aback and not something for which we should be unprepared. If you begin to view “being surprised” as a normal part of money management and not as events that are unexpected you accomplish something new; you have changed your mind and you have changed your world and you will then manage money in a somewhat different and more accurate fashion. The unexpected should always be expected by those that wish to win at the Great Game!

We are presently caught in the “see-saw effect” where heighted concerns about Spain and Italy drive Treasury prices higher, their sovereign debt lower and risk comes off the table. The world had quit worrying about Europe, not the brightest of positions but none the less, and then Monte Paschi bumbled upon the scene with not only oversight issues implicating Mario Draghi but charges of fraud and bribery that could reach to the very top of the Italian government before it all ends. Then charges of graft and corruption in Spain not brought by the leading newspaper on the left or by the one on the right but by both of them in concert which focuses the issue. The cries are loud for the Prime Minister to resign in Spain and the evidence appears damning and a full investigation is promised and underway.

“You must pursue this investigation of Watergate even if it leads to the president. I'm innocent. You've got to believe I'm innocent. If you don't, take my job.”

                             -Richard Nixon

Now having been around for more than a few years let me give you a general assessment of what is going to happen to Italy and Spain and it will not be good. You see, the less enlightened will stand aside and wait for the facts to come out which will be manipulated by both governments to the extent that they can be but when one of these investigations is underway the normal political cover-ups become much more difficult or impossible with the public’s focus on the issues. In almost every case when investigations like these are underway the situation darkens because the event of the process itself uncovers all kinds of things that had been hidden or brushed under the rugs. One thread leads to another, one path open up another one and here comes Pandora with her Box of troubles.The smart move now, in my opinion, is to exit Italian and Spanish credits, the sovereigns, the banks and whatever else you might own until these investigations are concluded. There are also several avenues open for speculation here but I am speaking primarily to those of you that are investors and I see a substantial amount of real risk now in Spain and Italy and so I offer my viewpoint for your consideration. There is always a “who” and “what” to any full-scale investigation but the fact that an investigation has been launched and is underway is the catalyst many times for quite unpleasant revelations.

“You know my method. It is founded upon the observation of trifles.”

                    -Sherlock Holmes

Now if we shift to the other end of the see-saw we are tossed in the exactly opposite direction. Interest rates are beginning to rise as the causal effect of the central banks spewing money about with such great fervor. The action, in the first instance, buoys each and every market as demand exceeds supply and as money managers rush about trying to find places to put these little pieces of blue and green paper but that is the “first instance” and one that has been carrying on for five years. Then we run into Newton’s “every action has a reaction” principle and the Great Game shifts as the consequences of printing giant hordes of cash ensue. Please do not be naive; there are always consequences and to not understand or appreciate them is a mistake of the first order.

The financial world is used to bubbles. We like to speak about them, point to them, bet upon their comings and goings and wave facts and figures about them like wild men when we appear in the media. It is the way of the markets. We have had bubbles in Real Estate, dot.com, bonds, stock markets and all kinds of other singular spaces. What we are faced with now is also a bubble but one unlike we have ever seen before because all of the major central banks have acted in concert which pumped money in from everywhere while, at the same time, limited what could be done with our new found small bits of paper because they playing field was leveled by distortion en masse. I would say that the entire financial system, every market, every space is in a bubble as a result of what they central banks have done. It is a quite systemic bubble which inflated everything and anything but also cancelled out inflation as it took place across the entire playing field so relative values were hardly changed. This is also why it has not been pronounced or particularly noted to date. The normal effects of one central bank acting alone has been cancelled out by them all working together. A clever ploy no doubt and one that has worked magnificently! Really magnificently!

Major money managers, I can report with accuracy, are now beginning to get nervous about what is to come. The lowering of yields and the tremendous compression of credit to sovereigns and the giant increases in the world’s equity markets have probably run their course unless Spain, Italy or some other risk event or events enters the scene. Interestingly, neither course will be good for the equity markets but the bond markets, and your portfolios, could get severely whipsawed in the days to come. We are surely on the see-saw and it is teetering; of that much I am sure.

“There is nothing more to be said or to be done tonight, so hand me over my violin and let us try to forget for half an hour the miserable weather and the still more miserable ways of our fellowmen.”

                     -The enviable Mr. Holmes




end



A great commentary on what is happening inside Egypt.  The author believes that not only the government will collapse but so will it's economy as inflation is running rampant and foreign reserves are down to only 21 billion dollars. The world does not need another civil war like it is experiencing in Syria right now

(courtesy OilPrice Premium/zero hedge)


Guest Post: Investors Beware - Egypt’s Revolution Is Not Over

Tyler Durden's picture




Courtesy of OilPrice Premium
Investors Beware: Egypt’s Revolution Is Not Over
In April, Egypt will hold crucial parliamentary elections. Preparations for this are being undertaken against an extremely volatile backdrop of violent protests, a state of emergency in three key provinces, weapons caches discovered in Cairo, and growing calls from radical Salafi forces who think the Muslim Brotherhood has far too moderate an agenda.
All of these should be warning signs for investors, if economic indicators aren’t enough.
Popular Uprising, Take II
A number of developments over the past months, weeks and days have triggered country-wide unrest in Egypt, which was already volatile.
  • The Muslim Brotherhood president made a very controversial power grab in order to push through an Islamist constitution that has sparked fears among Christians who have no rights under this constitution, and mass protests by those who originally launched the revolution
  • Muslim protesters attempted to storm a Coptic Christian church in Luxor in the country’s south and attacked Christian-run shops and Christian-owned vehicles after rumors that a Christian man had sexually assaulted a 6-year-old girl. Police dispersed the marauders with tear gas. Christians claim the accusations are false and purposefully intended to spark protests and violence, blaming a local Salafi group that is attempting to enforce its own brand of Sharia law in the area.
  • A Coptic man who was an outspoken atheist was sentenced to three years in prison for blasphemy. This particular case has done much to increase the community’s fears of what is to come under the new constitution.
  • Trials of security forces responsible for violence against protesters in 2011 have fallen short of the justice demanded by the general population
  • Verdicts were handed down late last week against civilians involved in the violence that broke out at soccer match a year ago. 21 people were sentenced to death, sparking mass protests and clashes with security forces this week. As of 31 January, more than 50 people had been killed and a state of emergency was imposed and the military was deployed the provinces surrounding the three main flashpoints: Port Said, Suez and Ismailiyah.
Forces Line Up Against the Muslim Brotherhood
The secular opposition in Egypt is out in full force, and its power is being boosted by these recent protest developments. The military - which loyally maintains its own Facebook page - has informed the public that the government faces collapse. On another front, radical Salafi figures are plotting the Brotherhood’s demise.
While it is the Western tendency to toss the various Salafi groupings and political parties in with the Muslim Brotherhood, the reality is that the Brotherhood has some moderate Salafi allies, but the more radical groups are hoping to make a power grab to sideline the Brotherhood. There is a new figure emerging from the dust of this power play, and that is the dangerously charismatic Hazem Abu Ismail. Abu Ismail is forming his own coalition and has had significant success in luring away the Brotherhood’s supporters and forming a radical coalition to challenge the Muslim Brotherhood in April parliamentary elections.
The Muslim Brotherhood and the military have only a very shaky alliance. Despite President Morsi’s recent moves to chip away at the military’s power by removing key generals and replacing them with someone believed to be more sympathetic to the Brotherhood cause, the president may have underestimated the effect of this move.
Amid these latest, ongoing riots and the state of emergency, the military is attempting to present itself as the savior of the people. It is the military’s perception that they are responsible for making the 2011 revolution happen in the first place, but they overlook the population’s sense of betrayal when the military aligned itself with the Muslim Brotherhood and hijacked the revolution. For now, the population does not seem to be buying in to the military’s attempts to paint itself as the protector of the protest movement, while police clash with demonstrators and deaths, injuries and arrests mount.
The military has a tendency to play a quiet game in the background and hedge its bets. Its statement on Facebook is a clear message, though, that it is ready to step in and take over at the next sign of imminent government collapse. It may even be ready to help that collapse manifest more quickly.
So, the Brotherhood faces mounting opposition on three fronts: the secular opposition, the military (whose loyalty is uncertain), and Salafi radicals coming at them from an entirely different and potentially more dangerous angle.
Economic Disaster
Egypt’s tourism revenues—the economy’s mainstay—are down from $14 billion annually in 2010 to $6 billion in 2012. Only 7 million tourists visited Egypt in 2011, down from 14 million in 2010. While the first half saw a slight rebound, this will again be reversed due to the current atmosphere of violence and uncertainty.
Foreign direct investment (FDI) has also taken a major hit, which has declined at a rate of over 90% since the revolution and in comparison to 2009-2010. Here’s where the math gets really bad: In the first half of 2010 there was new FDI of $4.1 billion. The first half of 2011 saw $100 million in net OUTFLOW of FDI. Again, the first half of 2012 indicated a rebound, but it was only temporary. 
Foreign currency reserves have fallen by $21 billion, and Egypt now has enough reserves for less than 3 months of imports (not enough to get it to elections). Inflation is soaring and full-scale currency devaluation looks imminent. The population is hoarding dollars as the Egyptian pound continues to lose value. This panic was exacerbated in January when the president banned citizens from leaving the country with more than $10,000 in cash, which sparked an immediate run on banks’ foreign currency reserves. Austerity measures are necessary, and this will add more fuel to the fires in terms of socio-economic unrest.
Caught Between Libya and Syria: Too Many Weapons, Too Much Meddling
In the meantime, Qatar is using Egypt as a sort of springboard to fame. Qatar is for all intents and purposes the banker of the Muslim Brotherhood, and it has vowed to do whatever it takes to ensure that the Brotherhood does not lose power in Egypt. So far, on the official level, that has resulted in financial aid to stem currency devaluation. This aid has already started coming in, but will not be enough. In return for this Qatari largesse, Egypt has had to throw the Qataris a few perks: 1) it will have to provide “technical support” to the Syrian rebels (and Salafi militants by default) in Syria; 2) Qataris have been exempted from Egypt’s new rules governing foreign ownership, which keep foreigners from having sole proprietorships or simple partnerships.
The conflicts in Libya (which should be considered ongoing) and Mali reverberate in Egypt. Both conflicts have opened up a transnational Salafi jihadist pipeline that extends all the way from Libya to Syria (and branches out in numerous places along the way). Egypt is the central venue for that pipeline, and recent weapons caches discovered there were likely bound for the Syrian theater. Libya has created a mini-industry for arms that seems to have no end to supplies.
This all adds a very dangerous element to Egypt’s domestic political crisis and the intensifying unrest.
Conclusion
The Egyptian government is facing potential collapse and a re-run of a revolution that has never really ended. The economy is facing total collapse, and Qatari aid efforts will only go so far. The first half of 2013 will produce only worse economic indicators and the market will feed off of this. The regulatory environment in the meantime remains uncertain at best, and much will depend on which group (or combination of groups) comes out on top after the dust settles and if April elections indeed proceed. If this turns out to be a successful power grab by radical Salafi forces, it will not proceed without a great deal of bloodshed, and it will destroy Egypt’s investment climate.






Your early Tuesday morning currency crosses;  (8 am)

 

Tuesday morning we  see some euro strength  against the dollar   from the close on Monday. The yen this the morning again fell badly  against on the dollar, retreating this time  crossing the "93" column to rest at 93.22 yen to the dollar .    The pound, this morning  remains constant against the USA dollar along with the Canadian dollar   We have a risk is on situation  this morning with most European bourses in the green. Gold and silver are  both up  in the early morning, with gold trading at $1677.80 (up 3.40)  and silver at $32.02 (up 26 cents)




Euro/USA    1.3551  up .0038
USA/yen  93.22  up  1.066
GBP/USA     1.5749  down .0005
USA/Can      .9970 down .0005

end






your closing 10 year bond yield from Spain: 

...a slight drop in yield.




SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE

GSPG10YR:IND

5.380.06 1.10%
As of 11:59:54 ET on 02/05/2013.


yesterday's closing yield;



SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE

GSPG10YR:IND

5.440.23 4.42%

As of 11:59:48 ET on 02/04/2013.




end.



Italy Govt Bonds 10 Year Gross Yield

 

GBTPGR10:IND

4.460.01 0.22%
As of 12:00:00 ET on 02/05/2013.





Yesterday's closing 10 year bond yield:






Italy Govt Bonds 10 Year Gross Yield

GBTPGR10:IND

4.470.14 3.21%
As of 11:59:53 ET on 02/04/2013.



Friday's close:




Italy Govt Bonds 10 Year Gross Yield

GBTPGR10:IND

4.330.02 0.42%
As of 12:00:00 ET on 02/01/2013.









end.








Your 5:00 pm closing Tuesday currency crosses:


The Euro continued with its morning strength rising close to the 1.36 level.
The yen had a miserable day, falling almost into the "94 column".  The pound weakened against the dollar as the UK is still engaging in their massive QE program.  The Canadian dollar is finally regaining its strength finishing the session well above par to the USA.  The uSA index fell .03 to 79.53



Euro/USA    1.3583 up a huge  .0071
USA/Yen  93.67  up a huge  1.517
GBP/USA     1.5659  down .0096
USA/Can      .9954  down .0023







end.




Your closing figures from Europe and the USA:
everybody in the green today as investors as the central banks print massive little bits of green paper.


i) England/FTSE up 35.92   or 0.52%

ii) Paris/CAC up 34.79 or  .95% 

iii) German DAX: up only 26.43 or 0.35%

iv) Spanish ibex up 220 pts  or 3.77%

v) Italian bourse (MIB) up 173.26 points or 1.05%

and the Dow: up 99.21 points or 0.71% 


end.





And now the major USA stories of the day:

Colleges are now suing the students who received Perkin loans:

(courtesy zero hedge)



Student Loan Bubble Forces Yale, Penn To Sue Their Own Students

Tyler Durden's picture




We have not been shy about exposing the massive (and unsustainable) bubble of credit being blown into the economy via Student Loans from the government. We have not been afraid to note the dramatic rise in delinquencies among these loans - and the implications for the government. However, as Bloomberg reports, it appears the impact of this exuberance has come back to bite the colleges themselves. In what can only be described as a vendor-financing model, the so-called Perkins loans (for students with extraordinary financial hardships) have seen defaults surging more than 20%. The vicious circle, though, has begun as the ponzi of using these revolving loan funds to 'fund' the next round of students is collapsing thanks to the rise in delinquencies. Schools such as Yale, Penn, and George Washington are becoming very aggressive at going after delinquent student borrowers. While financially hard-up graduates complain of no jobs, the schools are not impressed: "You could take a job at Subway or wherever to pay the bills ... It seems like basic responsibility to me," but perhaps that is the point - avoiding responsibility is seemingly rewarded in the new normal.

Via Bloomberg,
Yale Suing Former Students Shows Crisis in Loans to Poor

Needy U.S. borrowers are defaulting on almost $1 billion in federal student loans earmarked for the poor, leaving schools such as Yale University and the University of Pennsylvania with little choice except to sue their graduates.

The record defaults on federal Perkins loans may jeopardize the prospects of current students since they are part of a revolving fund that colleges give to students who show extraordinary financial hardship.

Yale, Penn and George Washington University have all sued former students over nonpayment, court records show. While no one tracks the number of lawsuits, students defaulted on $964 million in Perkins loans in the year ended June 2011, 20 percent more than five years earlier, government data show. Unlike most student loans -- distributed and collected by the federal government -- Perkins loans are administered by colleges, which use repayment money to lend to other poor students.

“If you borrow to go to school, it may not be just the government that ends up coming after you if you can’t pay,” said Deanne Loonin, an attorney with the National Consumer Law Center, a nonprofit advocacy group in Boston. “We offer credit very easily.” If the student doesn’t benefit financially from the education, “the government or the school comes after them very aggressively.”

Perkins Pot

The increase in the amount of defaulted loans among poor students comes as President Barack Obama says he wants to expand access to college for working-class families and increase funding for the Perkins program. Under his proposal, the pot for Perkins loans would increase to $8.5 billion from about $1 billion. The Education Department would service the loans instead of colleges.

Aaron Graff, a farmer’s son from Denver, graduated from George Washington in 2010 with the help of $62,500 in scholarships over two years, according to his financial-aid award letters. He defaulted on $4,000 in Perkins loans.

Graff, 30, said he hasn’t been able to find a full-time job. He earns $800 a month from teaching high-school equivalency courses and restores basements for extra money. He said he is trying to pay off other student loans first because they were co-signed by his parents.

“I live on the bare minimum,” he said. “It’s not like I’m defaulting on my student loans to live the lavish life. I’m defaulting on my loans because I really don’t have it.”

...

Student Obligations

“Perkins loans are issued from a revolving fund, so any monies recovered through litigation increase universities’ ability to help other students with education costs,” Candace Smith, a spokeswoman for George Washington, said in an e-mail. The university doesn’t comment on specific lawsuits, she said.

...

“You could take a job at Subway or wherever to pay the bills and that’s something you need to do if you have agreed in taking a loan to pay it back,” McCluskey said. “It seems like basic responsibility to me.”

The interest rate on Perkins loans is 5 percent, and students get a nine-month grace period after leaving school or graduating. In the 2007-2008 academic year, 64 percent of Perkins loan recipients reported parental income of less than $50,000, according to Mark Kantrowitz, who runs finaid.org, a website on educational lending.

College Costs

With college costs climbing faster than the rate of inflation over the past four decades, students have taken out more loans, swelling outstanding education debt to $1 trillion, more than what Americans owe on their credit cards.

The University of Pennsylvania filed at least a dozen Perkins lawsuits last year, according to court records. Penn, based in Philadelphia, gave out more than $8 million in Perkins loans in the year ending June 2012, according to the school.

...

Promissory Note

...

Penn refers loans to a collection agency when they have been delinquent for 120 days. Michelle Brown-Nevers, an associate vice president, declined to discuss thresholds because she said she didn’t want to reveal collection practices.

...

Yale is suing Elizabeth M. Triggs, who studied there between 2001 and 2006 and signed five promissory notes totaling $8,255 under the Perkins program, according to a filing in Superior Court of New Haven last year.

Unpaid Perkins

...

Students who take out Perkins loans aren’t eligible for government income-based repayment plans when they run into financial trouble, unlike borrowers from the more popular Stafford loan program used by many middle-income families. Such repayment plans let students with high debt relative to their paychecks make smaller payments over time. Colleges can work with Perkins students to develop individual plans.

Financial Counseling

...

The federal government also lets universities and debt collectors charge higher collection feesthan Stafford when they pursue a Perkins debtor.

On the first attempt, schools can charge 30 percent of loan principal, along with interest and late fees. They can charge 40 percent for the second effort and an additional 40 percent on litigation, according to the Education Department.

The fees are higher than the 25 percent allowed for government-backed Stafford loans because the lower value of the Perkins ones makes them less appealing to collection agencies in terms of commissions, said Dan Madzelan, a former Education Department official.

Not Practical

The University of California system tries to use its own personnel before suing Perkins debtorsbecause balances are relatively small, said Coolidge. When borrowers don’t have assets or income, winning a judgment doesn’t actually result in collecting the money, she said.

“It’s not that we wouldn’t do it,” she said. “It’s not that practical.”



end.




John Williams:

the real federal budget deficit hit a record 6.6 trillion dollars if you include the present value of future obligations per year.  And more important, he is calling for hyperinflation as a real certainty

(courtesy Jim Sinclair/john williams)


Jim Sinclair’s Commentary
John Williams give us the real figures which will help now as well as the balance of your investment career. Please consider paying him for his services and getting the full write ups.
- GAAP-Based Federal Budget Deficit Hit Record $6.6 Trillion in 2012
- Five-Year Average Annual Shortfall at $5.2 Trillion
- With U.S. Facing Mortal, Long-Range Solvency Issues, Hyperinflation Remains a Virtual Certainty
No. 500: SPECIAL COMMENTARY  U.S. Government GAAP-Based 2012 Financial Data
Web-page: http://www.shadowstats.com


end





January ISM service numbers miss but who cares, as nobody is watching:

(courtesy Dow Jones newswires)





DJ U.S. January ISM Non-Manufacturing Index Slips to 55.2
Tue Feb 05 10:17:59 2013 EDT



The U.S. non-manufacturing sector expanded last month but at a slower pace, as business activity and production decelerated, according to data released Tuesday by the Institute for Supply Management.
The ISM's non-manufacturing purchasing managers' index slipped to 55.2 in January from a revised 55.7 in December. December's reading was originally reported at 56.1, the highest since February 2012.
Forecasters surveyed by Dow Jones Newswires had expected last month's PMI to slip to 55.0. Readings above 50 indicate activity is expanding.
The largely as-expected ISM report comes after Friday's modest reading on January labor markets. The Labor Department reported nonfarm payrolls increased 157,000, falling short of expectations. The unemployment rate ticked up to 7.9%.
The ISM subindexes in January were mixed. The firm said respondents' comments varied regarding current economic and business conditions, though most were optimistic about the direction of the recovery.
The business activity/production index fell to 56.4 from a seasonally adjusted 60.8 in December but still marks growth for the 42nd-straight month. The new-orders index declined by 3.9 percentage points to 54.4.
The employment index last month rose to 57.5 from 55.3.
Cost pressures among non-manufacturers rose a bit last month. The prices index increased to 58.0 from a revised 56.1.
The ISM non-manufacturing report is comprised mainly of comments from service-sector companies that make up the bulk of the U.S. economy, but it also includes construction and public administration



-END-



Well that about does it for today.

I will see you tomorrow night.

harvey

29 comments:

Anonymous said...

Harvey, +1. just love what you do. the days not complete without reading your work. Keep up the effort.

very soon the global cabal will call in the strike and the prices for pms will fly and meet reality.

Anonymous said...

Funky, who do you work for?

Harvey Organ said...

Funky Monkey:

you are no longer allowed on this site so beat it.

Anonymous said...

FMB is gone.

Shimbob rocks!

Shimfarkle

Anonymous said...

He doesn't look very "gone" to me.

Anonymous said...

monkey-why don't you crawl back to your mothers basement..lol

Phil said...

I have not found FMB to be making comments that I would consider way off base recently. No swearing or anything like that. Just his normal contradictory comments which have been more coherant than some other comments on this blog. I do not think he is a paid JPM troll. He is just someone who has an unpopoular opinion.

He has improved a lot over the past year.

DUH said...

FMB gives me a chuckle every time he posts and without failure, every time I read him (or the other trolls for that matter), I just get more motivated to increase my stack.
I can smell their desperation >-D

J said...

Yep, censorship at its worse here.... clearly the silver shills are desperate.

What happened to the $100 - $150 silver you promised this year?

What happened to the $50 - $75 silver you promised for 2012?

Silver peaked 22 months at $50 and 23 years ago... that is what happened.

Why don't you take your SILVER LOSSES now and instead buy platinum and asian stocks before they soar.

clive mossmoon said...

Hi Harvey. Could you comment on this article by Keith Weiner. He says the silver "basis" indicates a correction coming. He also says the high OI indicates frothy speculative activity which makes a correction more likely.
I am under the impression from reading your comments that a high OI represents new contracts either short or long, and indicates that the bankers are not able to shake out the longs.
Weiner says a rising silver basis indicates more physical silver coming on the market. But these are paper contracts, yes? They may or may not reference physical metal. Is this correct?

Thank you Harvey.

http://monetary-metals.com/why-does-the-paper-gold-price-track-the-physical-gold-price-part-ii/

Phil said...

To J

Thinking about that and probably will exit my silver position by the end of 2013. Not a good place to be. Gold has intrinsic value. Silver is Los Vegas. I have lost faith in Sprott.

clive mossmoon said...


ps:

The link I gave reqires a quick registration to the site.

Here is a vid he made based on the article:

http://www.youtube.com/watch?feature=player_embedded&v=BdxxDl3h4O8

J said...

Even Jim Sinclair thinks silver is nuts.

I was late to platinum but it has risen $200+ since I bought in december.

Plat (or maybe palladium) is THE metal to own for now, until the supply issues get sorted and the masses buy it - like the sheeple who bought silver and got sheared!

The time to sell silver has long passed. Silver might get to $34 or $37, maybe, but only if stocks soar another 40% again.

If silver ever closes 2 days below $30 then watch out below!!... it will be ugly!

Gold is dead money and, at best, a hedge against disaster.
NOT an investment that returns anything.

You have negative real returns on gold for 2 years which will continue. It will take something like World War 3 for gold to ever break its highs of two years ago. Might happen, might not.

You guys need to read Martin Armstrong. He has nailed gold on the way up and down. Right now, he says gold is going down this year, maybe way down.

J said...

To Clive Mossmoon:

Dont listen to the silver marketing shills - they've said for two years that silver is in severe shortage and will imminently surge in price to fantastic figures (instead prices have ground lower 40%, while many good stocks have doubled).

Do your own due diligence. For example, study chinese silver supplies especially if you can research & read it like I do. There is more silver in China right now than will be needed globally for 60 years, and lots more being produced daily.

If you have an honest dealer, ask them about silver supply. Honest dealers will tell you there is LOTS of silver coinage available, no shortage at all. Is why the price trend has been lower overall for two years.

J said...

Phil,

Yes, Sprott is a self-serving scumbag and a hypocrit who pretends to help people but instead fleeces them.

Why do you say that gold has an intrinsic value unlike silver?

All precious metals have costs to mine them (intrinsic value). In addition, the white metals have industrial applications, but at high prices there will be substitute materials, thus prices are capped. Gold has no such use and therefore has less intrinsic value.

A small allocoation to these is always prudent for diversification. But they are often underperformers.

People in here cling to silver and gold with hopes of getting rich... Wont happen! Less chance than if they bought lottery tickets, haha.

Anonymous said...

It is simply amazing how Harvey's basic PM/finance news aggregation blog increasingly attracts so many desperate, persistent paid trolls. Half the comments here routinely read like they were written by Jon Nadler. Something's getting ready to pop.

PeaknikMicki said...

J, you are either wrong or lying about Jim Sinclair. He came out quite recently suggesting Silver AND Silver Mines besides Gold and Gold mines being THE place to be.

In the past he said Silver will give a cheap thrill followed by a spiritual experience devoid of a teacher. (and that is why he has been cautious recommending Silver until now.)

PeaknikMicki said...

A quick search finds this:

Jim Sinclair Feb5 2013: "The price of gold and silver will be a product of the declining value of the US dollar in 2013."

Other statements;
"we are approaching the period where gold and silver will achieve their greatest gains of the entire bull market in the shortest period of time"

"You need only not to trade the paper gold market to thwart at least your contribution to panic. You need only to hold your fully paid shares in a gold or silver entity if it qualifies as sound to frustrate the short hedge fund."

26 Jan 13
"You have to have courage, and I offer you my absolute conviction of the correctness of being long gold and long good gold shares, long silver and long silver shares at this time. "

Regarding Armstrong a good question was asked yesterday; why was he super bullish in jail but the moment he got out he turned bearish. His time cycle counts that he used to predict price movements wouldn't have changed form then to now.

Anonymous said...

+1 on the 11:34pm comment. Couldnt agree more.

Max

Rick Genscher said...

I certainly agree with the 11.34pm comment

Even the European Union is waking up to the fact they could do some internet trolling too. For the 2014 elections they have put aside 3,5 million euros for internet 'assistants' to 'massage the voters to a more congruent election outcome'.

Anonymous said...

It is clear in my mind that TPTB control the market by using paper promises and manipulating the reality of physical supply.

What's curious, is people like J simply anaylze and make decisions based on this constructed paradigm to continue on and on. And I would have to agree, until something causes this machine to break, J has a case.

In that regard it makes little sense to debate such beliefs. J has no interest in protecting my family as I do.

The thing is, no one can argue that the purchasing power of the dollar (or all fiat currencies) is shrinking. But if all you look at is dirivatives or the change in price from day to day then yea, who cares about any of the issues Harvey explains.

I am not a day trader. My main concern is not about becoming Rich by gaming the system. No, I am interested in protecting the purchasing power of what I have worked my ass off to earn to this point.

It's that simple. Silver and Gold represent a life boat that hopefully will allow me to stay a float when that Tsunami comes.

And yes, I belief a tremendous, incomprehesible, horrific crash is coming, and from my experience, most people are simply going to lose "everything". There will be weeping and nashing of teeth but that won't change a thing at that time.

The time to prepare is today.



Anonymous said...

+1 on the 6:25am comment. Longer term view looks pretty good and I agree about the insurance analogy.

On so many levels the present situation is unsustainable and its eventually gonna throw up.

Anonymous said...

Physical silver is a win win situation no matter how you slice it.

There is enough hard evidence out there to prove that most of the easy to get in the crust of the earth silver has already been mined.

There is barely enough levels pulled out of the ground present day to fill the quotas of need.

It is also obvious to all who want to find out that all of the reserve silver held by the U.S. government is gone.

There are over 10,000 reasons for physical silver and growing.

The stuff is like heroin for many an industry.They can't do without it.Nothing can substitute it.

Looking into the future physical silver will be needed even more to help revive civilization most likely. Mankind cannot live without it !

Now with all of this and so many more facts backing this PRECIOUS metal not mentioned here , are you going to believe some chooch who comes along claiming that physical silver is useless !!??!?

Commonsense folks !

clive mossmoon said...

@J:

"There is more silver in China right now than will be needed globally for 60 years"

There will NEVER be a "shortage" in silver, you silly troll, any more than there was a "shortage" in rhodium between 2004-2008 when the price went from USD300 to USD10,000. The issue is RATE OF PRODUCTION versus RATE OF CONSUMPTION. Silver is an element after all.

(Note to Harvey: It is always a bullish sign when the shills come out of the woodwork. I would take it as a well-deserved complement!)

J said...

^ When it comes to what is or isn't happening with metals in China, you don't know what you're talking about probably because you aren't a player here like me.

You surely cannot rely on all those writing false articles from the other side of the world about silver (or gold) in China.

Some *HUGE* silver discoveries in China last year and before.
Visited first-hand and seen the surveys.
We finance them here in hong kong and know what it is we're backing.

We price projects using a $17 forward discount for silver.
Given the massive increases in supply that will come on stream.

J said...

@ Peak ... okay then, my misinterpretation about JS

Seemed to me he preferred gold to silver.

He is missing the plat and pallad rocket...

So learn to do your own analysis rather than rely on biased opinions and skewed data from others.

J said...

Platinum popped today like I posted it would @ 8:58

Too bad silver losers, you went nowhere yet again.

Anonymous said...

Graphene will take ove silver for industrial uses. It is way beeter for conducting electricity and for solar panels than anything on the planet. YOu can wrap a coffe mug with graphine and it will hold the weight of a car. Tvs are going to be as thin as saran wrap and you will be able to rolle them up and take them to yur friends house.

I also agree that fmb is being a lot more civil and even if he wasn't its freedom of speech. Let's not copy our bankers and govts havrey. I get a kick out of fmb its the best comedy around.

Has anybody heard of graphene here.with vanadium and graping we will be able to hold super computers in our hand. And we are not too far away from that

PeaknikMicki said...

Graphene has higher thermal conductivity than Silver but electrical conductivity is just above Copper.

It is more likely to be used in combination with silver rather than instead of.

But sure, it is an interesting material and can perhaps replace some use of copper, silicon etc.

If it is a replacement for silver in the future, I don't know. Please educate me if you have an answer.


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