Tuesday, November 5, 2013

Gold inventories at GLD hold constant/silver inventories fall/gold falls but silver refuses to buckle

Good evening Ladies and Gentlemen:  

Gold closed down $6.40   to $1308.00 (comex closing time ).  Silver was down 6 cents at $21.62. 



 
 In the access market today at 5:15 pm tonight here are the final  prices: 

gold: $1313.00
silver:  $21.69






 GOFO numbers are now partly in the negative as gold is now extremely scarce as the boys are finding it harder to find physical. Gold is in backwardation from 1 month .  Today, decrease in negativity

Here are today's readings with Monday's comparison:


i) One Month:  -.001670000%   vs  yesterday: -.0133000000%
ii Two Months:  +.008330000%.  vs yesterday:  -.0000000000
iii) Three Months:  +.0200000% vs yesterday:  -.00833000000%
iv) Six months:  +.04500000%  vs   yesterday:   +.046670000%

Let us now head over to the comex and assess trading over there today.



Here are today's results:

 

The total gold comex open interest fell today by 418 contracts from 387,478 down to 387,060 as gold rose yesterday by $1.50 .    The November front month saw it's OI fall from  16 down to 13 for a loss of 3 contracts. We had 0 delivery notices so we lost 3 contracts or 300 oz of gold will not be standing. The biggest of all delivery months is the December contract month.   The December OI fell by 2444 contracts to 200,002. The estimated volume today was fair at 117,587 contracts. The confirmed volume on yesterday  was poor coming in at 86,774.



The total silver Comex OI fell  by 434 contracts as silver was down in price on Monday  ( 13 cents ).  The total OI now rests tonight at 118,166 contracts.   We are now seeing the  OI with respect to silver and gold rise slowly  and I believe we can assume that both precious metal contracts are all in strong hands.  The front  non active front month for silver ( November) saw its  OI contract by 2 contracts down to 14. We had 3 delivery notices filed yesterday so in essence we gained one contract or an additional 5000 oz of silver will stand for delivery.   The big December contract saw its OI fall by 765 contracts down to 71,986. The estimated volume today was poor coming in at 28,496 contracts.  The confirmed volume on yesterday was also poor  at 25,202.
Comex gold/September contract month


Nov 5.2013   the November  contract month


Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
 96.45 (Brinks)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
nil
No of oz served (contracts) today
 0  (nil)
No of oz to be served (notices)
13 (1300 oz)
Total monthly oz gold served (contracts) so far this month
0  (nil)
Total accumulative withdrawal of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month


 




We had tiny activity in the Comex gold vaults today

The dealer had  0 deposits  and 0 dealer withdrawals today


We had 0 customer deposits today.



total customer deposits: nil  oz




 we had 1 customer withdrawal

i) out of Brinks:  96.45 oz  (3 kilo bars)

 Total Customer withdrawals: 96.45   oz


Today we had 0  adjustments.



Thus tonight   with respect  to JPMorgan gold inventory, here is JPMorgan's Tuesday night inventory :

JPM dealer inventory rests  tonight to 234,450.395:  oz or 7.292 tonnes

JPM customer inventory rests  tonight to: 528,215.620 oz  or 16.429 tonnes



Today, 0 notices was issued from  JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contract of which 0 notices were stopped (received)by JPMorgan dealer ( house account) and 0 notice stopped by JPMorgan customer account.
The total dealer comex gold remains falls badly tonight  to  658,443.045 oz or 20.48 tonnes of gold . The total of all comex gold (dealer and customer) remains at    7,155.237 oz or  222.55 tonnes.



Tonight, we still have the continuing disturbing piece of news concerning the low dealer gold inventory for our  3 major bullion banks(Scotia, HSBC and JPMorgan). These 3 dealer gold inventory  falls  tonight  to  16.425 tonnes.

i) Scotia:  162,121.611 oz or 5.043 tonnes
ii) HSBC: 131,673.323. oz or  4.09 tonnes
iii) JPMorgan: 234,450.395 oz or 7.292 tonnes

total: 16.425 tonnes

Brinks dealer account which did have  the lions share of the dealer gold saw its inventory level remains constant tonight  at  116,927.48 oz or 3.63 tonnes.  A few months ago they had over 13 tonnes of gold at its registered or dealer account.






 Today we had 0 notices served upon our longs for nil  oz of gold. In order to calculate what will  standing for delivery in November, I take the total number of notices served  (0) x 100 oz per contract to give us nil oz served from which add the difference between the OI standing for November (13) minus the number of contracts  served today (0)x 100 oz per contract

Thus  we have the following gold ounces standing for gold in November

0 notices x 100 oz per contracts already served this month or nil oz + (13- 0) x 100 oz = 1300 oz or .0404 tonnes of gold.

Ladies and Gentlemen: we have a three-fold problem:

i) the total dealer inventory of gold remains tonight  at  a very dangerously low  level of only 20.48 tonnes

ii)  a) JPMorgan's customer inventory rests tonight at  528,215.620 (16.429 tonnes)  This inventory will drop once the notices are filled from the JPMorgan customer account

ii  b)  JPMorgan's dealer account rests tonight at  234,450.395 oz


iii) the 3 major bullion banks have collectively only 16.425 tonnes of gold left in their dealer account.(JPMorgan, HSBC,Scotia)

and no gold is entering the dealer comex vaults  . The fireworks will begin in earnest in December once this huge delivery month is upon us.


end







now let us head over and see what is new with silver:




Silver:


Nov 5/2013:

  
 November contract month
  

Silver
Ounces
Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 51,436.35 (CNT, Scotia)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 890,762.32 (Brinks, HSBC)
No of oz served (contracts)1  (5,000 oz)
No of oz to be served (notices)13  (65,000 oz)
Total monthly oz silver served (contracts) 63  (315,000)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal of silver from the Customer inventory this month809,793.15


Today, we  had good activity  inside the silver vaults.
 we had 0 dealer deposits and 0  dealer withdrawals.


We had 2 customer deposits:

i) Into Brinks:  600,321.57 oz
ii) Into HSBC;  290,440.75 oz


total customer deposits:  890,762.32     oz


we had 2 customer withdrawals:

i) Out of CNT:  29,742.73 oz
ii  Out of Scotia:  30,693.62

total withdrawals: 51,436.35  oz
  
we had 0  adjustments  today



Registered (dealer) silver   :  44.235 million oz
total of all silver:  170.209 million oz.

The CME reported that we had 1 notices filed for 5,000 oz today
To calculate what will stand for this  active delivery month of November, I take the number of contracts served  for the entire  month at 63  x 5,000 oz per contract = 315,000 oz to which I add the difference between the OI standing for November (14) and the notices served today (1) x 5000 oz =   380,000 oz





In summary:

63 contracts  x 5000 oz per contract (served) or 315,000 oz +  (14 -   1 ) x 5000 oz =  380,000   oz

we gained 1 contract or an additional 5,000 oz will stand for the November delivery month.

end





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


And now the Gold inventory at the GLD:


Nov 5.2013:  no change



Tonnes866.32

Ounces27,852,949.60

Value US$36,394,888,214.76





Nov 4: 2013: no change:






Tonnes866.32

Ounces27,852,949.60

Value US$36,764,338,649.45








November 1:







Tonnes866.32

Ounces27,852,949.60

Value US$36,382,560,915.31












Oct 31:2013:  













Tonnes872.02

Ounces28,036,311.27

Value US$37,106,196,484.97











Oct 30.2013:  no change in gold inventory..for 3 straight days..have they run out of physical gold?










Tonnes872.02

Ounces28,036,311.27

Value US$37,968,719,704.17









Today, so far as of 6 pm we  neither gained nor lost any gold from the GLD:


  

The registered  vaults at the GLD will eventually become a crime scene as real physical gold  departs for eastern shores leaving behind paper obligations to the remaining shareholders.   There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat  (same banks). 


As a reminder the total comex gold had inventories of around 11 million oz in 2011. Today the total comex gold remains to   7.155 million oz  (222.56 tonnes)

GLD gold:  866.32 tonnes.


end





and now for silver:

Nov 5.2013: we lost a tiny 14,400 oz


Inception Date4/21/2006
Ounces of Silver in Trust337,510,405.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.
10,497.75
Indicative Basket Silver Amount48,164.300



Nov 4.2013:  no change:

Sponsor's Fee0.50%
Inception Date4/21/2006
Ounces of Silver in Trust337,654,563.200
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.
10,502.23





November 1/2013:  no change in silver inventory


Inception Date4/21/2006
Ounces of Silver in Trust337,654,563.200
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.
10,502.23



Oct 31.2013:  no change in inventory


Inception Date4/21/2006
Ounces of Silver in Trust337,654,563.200
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.
10,502.23


Oct 30.2013:  no change in inventory


Inception Date4/21/2006
Ounces of Silver in Trust337,654,563.200
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.
10,502.23









Today, we lost a tiny 14,400 oz of silver inventory at the SLV vaults.


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  at Negative 4.0% percent to NAV in usa funds and Negative  3.8%  to NAV for Cdn funds.  Nov 5.2013)  

2. Sprott silver fund (PSLV): Premium to NAV fell to positive 2.73% NAV Nov 5.2013 

3. Sprott gold fund (PHYS): premium to NAV fell to negative .50% to NAV Nov 5 2013  



Note: Sprott silver trust back into positive territory at 2.73%. 
Sprott physical gold trust is back in negative territory at  -.50%.

Central fund of Canada's is still in jail. 


end




And now your overnight gold and silver trading and comments:


Notes: 

1. Gold demand in Turkey jumped 3 fold up to 16 tonnes in September.  Year to date:270 tonnes 
2.Discussion of the gold market inside Turkey
3.  (courtesy Mark O'Byrne/goldcore)

end


Turkey’s Gold Imports In 2013 May Surpass Record Over 269.5 Metric Tonnes

Published in Market Update  Precious Metals  on 5 November 2013
By Mark O’Byrne

Today’s AM fix was USD 1,311.25, EUR 971.30 and GBP 817.08 per ounce.
Yesterday’s AM fix was USD 1,314.25, EUR 972.94 and GBP 823.47 per ounce.
Gold inched down $0.60 or 0.05% yesterday, closing at $1,314.20/oz. Silver slid $0.22 or 1.01% closing at $21.62. Platinum climbed $6.55 or 0.5% to $1,450.25/oz, while palladium rose $7.46 or 1% to $745.25/oz.

Gold in USD, 1 Year - (Bloomberg)
Gold has had five consecutive days of weakness as a stronger greenback has led to traders selling gold on the COMEX. Even though the U.S. Fed maintained their ultra loose monetary policies last week, maintaining $85 billion a month in bond purchases, gold has lost its shine with momentum driven and computer driven traders and hedge funds.
The sharp rise in the gold mining shares yesterday, the XAU was up 2.5% and the HUI was up 2.9%,  was encouraging for gold.
Declines are likely to be limited as lower prices is leading to physical buying globally. While much of the focus continues to be on ETF selling and Indian and more recently Chinese demand, some market participants fail to realise the extent of global demand which remains broad based. This is seen in the recent gold data out of Dubai and Turkey.
Turkey’s gold imports jumped more than threefold in October to 15.98 metric tons, from 4.8 tons in September, according to the Istanbul Gold Exchange’s website. That’s the highest since July, the data shows.
Turkey has already imported 251.4 metric tonnes in 2013, year to date, meaning that it will come very close to or surpass the record import year in 2005 when 269.5 metric tonnes of gold were imported (see table below).
Year to date imports are more than double the amount of gold imports in 2012 and more than triple those in 2011.
Turkey’s gold sales to neighboring Iran declined to $1.5 billion so far this year from a record $6.5 billion for all of last year. This may indicate a fall in demand from Iran or that Iran is now importing gold from other countries such as Dubai in the UAE.

Istanbul Gold Exchange
Gold is being remonetised and becoming money again in Turkey. Unlike India which has embarked on a campaign of repression against gold, the Turks are being far more enlightened. They are allowing the considerable and growing gold holdings of the population to be remonetised in order stimulate demand and grow the economy. 
The country's central bank last year allowed commercial banks to hold a portion of their lira reserves in gold and banks are making it easier to buy gold in Turkey..
Some Turkish banks are now offering customers the ability to use their gold based deposits for collateral on gold backed loans and using gold as access to Turkish Lira or for access to credit cards.
Isbank and Turkiye Garanti Bankasi AS, the country’s biggest lender by market value, offer gold-backed loans, where customers can bring jewellery or coins to the bank and take out loans against their value. Garanti also has a credit card linked to gold deposit accounts.
Government efforts to help ease the nation’s current account deficit are encouraging householders to bring their gold coins which it is estimated that there are $302 billion of hidden gold stashed in homes in Turkey.
This hidden gold is second only to the U.S., and Turkish gold based deposit accounts have grew 15% this year calculated until the end of July, which is a 3 fold increase in standard savings accounts according to the Turkish Central Bank.
The gold accounts give customers an amount in Turkish lira equivalent to the weight of the precious metal they deposit in the bank. Bank customers can then withdraw cash or take out loans, while the bank is able to sell or hold onto the gold.
Turkiye Is Bankasi AS (ISCTR), Turkey’s largest bank by assets, said gold deposits increased 10 times in the two years through June.
The campaign by Turkey’s banks, featuring ads for “golden age” accounts and products such as gold gift checks, is targeted at Turks who traditionally give gold coins or jewellery as presents at weddings, births and circumcision ceremonies. The custom gained popularity a decade ago as Turkey’s inflation rate topped 70%, making gold an attractive store of wealth.
The World Gold Council estimates that by bringing 5,000 metric tons (5,512 tons) of gold bullion into the banking system -- an amount greater in value than Ireland’s GDP, Turkey aims to reduce gold imports and external borrowing.
Government statistics cite Turkey’s current-account deficit, has narrowed its gap 23% from $77 billion (2011) to $59 billion (ending August). Record gold sales from Turkish companies to the United Arab Emirates and Iran increased its exports. Exports of precious metals to the UAE and Iran, climbed to $9.2 billion (ending August 2012) from $645 million last year driven by western sanctions on Iran.
Many of the gold exported is coming from the population that are shifting their gold stash from their homes to the banks since Turkish gold production is only 25 metric tons.
The Turkish Government endeavours include the August 16th central bank decision to raise the proportion of reserves lenders can keep in gold to 30% from 25%, having increased its efforts to get more bullion out of the homes and into the monetary system.

IMF Turkey Gold in Mill Fin Troy Oz
Banks are diversifying and offering diversification with a range of gold related services.
Turkey’s regulators have been discussing planned legislation to enable customers to buy or sell gold at bank branches or transfer gold into other accounts, according to an Aug. 29 report in Milliyet, a daily newspaper. Bank Asya has said it will soon start purchasing and selling bullion at its branches.
Jewellers in Istanbul’s Grand Bazaar, one of the world’s largest covered markets, have opposed the move. They say banks buying and selling gold would cut their revenue and push them into underground trading, according to Bloomberg.
The 6th century-old Grand Bazaar houses 4,000 jewellers, and about 1.5 metric tons of scrap gold is processed into bullion there every day, according to Istanbul Gold Exchange data. Transaction volume totalled 8.5 billion liras ($4.7 billion) last year.
The move by the Turkish banks may soon be followed by desperate banks in other emerging and developed markets.
Turkey has been aggressively adding to its gold reserves in recent years and now has the world's 11th-largest gold reserves. Its holdings rose to 15.762 million ounces or over 490 tonnes at the end of September (see chart above).
Gold is gradually being remonetised again in Turkey and this trend will soon be seen globally.
With gold soon to become a Tier 1 asset, banks will attempt to get a significant amount of investment grade gold bullion onto their balance sheets in order to buttress them.

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Here are some of the key physical stories that have relevance to the price of gold and silver:


Will Indians keep buying gold?

 Section: 
8p ET Monday, November 4, 2013
Dear Friend of GATA and Gold:
Premiums on gold in India will decline over time as smuggling the monetary metal past the government's heavy-handed import restrictions is institutionalized, according to an Indian analyst interviewed by Sprott Asset Management's Henry Bonner. Bonner's commentary is headlined "Will Indians Keep Buying Gold?" and it's posted at the Sprott Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end

Gold market manipulation cited in Future Money Trends interview of Jay Taylor

 Section: 
4:45p ET Monday, November 4, 2013
Dear Friend of GATA and Gold:
Dan Ameduri of Future Money Trends today interviews financial letter writer Jay Taylor about the gold market and its manipulation. The interview is 18 minutes long and audio as well as a transcript are posted at the Future Money Trends Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end

James Turk:  QE will increase bond monetization not tapering it:



(courtesy James Turk/Kingworldnews)

QE will increase but rates will rise anyway, Turk says

 Section: 
3:45p ET Monday, November 4, 2013
Dear Friend of GATA and Gold:
The Federal Reserve will be increasing its bond monetization, not "tapering" it, GoldMoney founder James Turk predicts to King World News today. But interest rates are likely to rise anyway, Turk adds, as there will continue to be more general selling of government bonds than buying by the Fed.
"It is extremely critical that investors understand that they should absolutely not be holding dollars or Treasury paper," Turk says. "They are incredibly overvalued and therefore they will be the ultimate losers here. Physical gold and silver are the place to be, and can continue to be picked up at prices that reflect severe undervaluation."
An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end




Tracing the huge growth in gold consumption for the Chinese:

(courtesy zero hedge)


Tracing The Great Chinese Gold Rush

Tyler Durden's picture





 
As we recently noted, China is taking over the world on gold bar at a time. This growing world super-power has, it would appear (by words and deeds) grown tired of being on the receiving end of the USDollar and Fed money printing. The Real Asset Company illustrates how, in the space of a few decades, China has opened up her huge gold market which is now hungrily devouring the world's physical gold.


(click image for large legible version)
end





Bart Chilton submits his resignation to the President;




Bart Chilton Submits Resignation to President

 

and zero hedge comments:




Bart Chilton Jumps CFTC Ship

Tyler Durden's picture





 
On the day when the CFTC begins considering 'speculative position limits', believed to be "the signal rule of [his] tenure at the Commission," Bart Chilton has had enough. Having "left traders in their own" during the shutdown, Chilton expressed "excitement" at his new endeavours after sending his resignation letter to President Obama this morning (more poetry? - or body doubles?) "I'm reminded of the old Etta James song, 'At Last,'" said Mr. Chilton, one of the agency's three Democratic members. "At last, we've got this rule here," and at last, he would be leaving the CFTC. This leaves us wondering whether Chilton, no longer burdened by the shackles of his meagre compensation, perhaps can finally do what he has been promising to do for years - become a whistleblower - after all he has insinuated so many times he knows where all the "dirt" is; unless, of course, it was all for show.


"At Last"
Statement of Commissioner Bart Chilton, Dodd-Frank Meeting on Position Limits
November 5, 2013
For two reasons, this is a significant day for me.  I am reminded of that great Etta James song, At Last.
The first reason is that, at last, we are considering what I believe to be the signal rule of my tenure here at the Commission; I’ve been working on speculative position limits since 2008.
The second reason today is noteworthy is that this will be my last Dodd-Frank meeting.  Early this morning, I sent a letter to the President expressing my intent to leave the Agency in the near future. I’ve waited until now—today—to get this proposed rule out the door, and now—at last—with the process coming nearly full circle, I can leave. It’s with incredible excitement and enthusiasm that I look forward to being able to move on to other endeavors.
With that, here is a bit of history on the position limits journey that has led us, and me, to this day.  The early spring of 2008 was a peculiar time at the Commission.  None of my current colleagues were here.  I and my colleagues at that time watched Bear Stearns fail. We had watched commodity prices rise as investors sought diversified financial havens.  When I asked Commission staff about the influence of speculation on prices, some said speculative positions couldn’t impact prices. It didn’t ring true, and as numerous independent studies have confirmed since, it was not true.
I began urging the Commission to implement speculative position limits under our then-existing authority.  And I was, at that time, the only Commissioner to support position limits.  Given the concerns, I urged Congress to mandate limits in legislation. A Senate bill was blocked on a cloture vote that summer, but late in the session, the House actually passed legislation.  Finally, in 2010, as part of the Dodd-Frank law, Congress mandated the Commission to implement position limits by early in 2011.
Within the Commission, I supported passing a rule that would have complied with the time-frame established by Congress—by any other name—federal law. A position limits rule was proposed in January of 2011 and finally approved in November.
In September 2012, literally days before limits were to be effective, a federal district court ruling tossed the rule out,claiming the CFTC had not sufficiently provided rationale for imposing the rule.  We appealed and I urged us to address the concerns of the court by proposing and quickly passing another new and improved rule.  I thought and hoped that we could move rapidly.  After months of delay and deferral, it became clear: we could not.
But today—at last—more than three years since Dodd-Frank’s passage, we are here to take it to the limits one more time.
Thankfully, we have it right in the text before us. The Commission staff has ultimately done an admirable job of devising a proposed regulation that should be unassailable in court, good for markets and good for consumers.
I thank everyone who has worked upon the rule: Steve Sherrod, Riva Adriance, Ajay Sutaria, Scott Mixon, Mary Connelly, and many others for their good work.
In addition, I especially thank Elizabeth Ritter, my Chief of Staff, Nancy Doyle, and also Salman Banaei who has left the Agency for greener pastures. I thank them for their tireless efforts on the single most important, and perhaps to me the most frustrating, policy issue of my tenure with the Commission. I have had the true honor of working with Elizabeth since prior to my confirmation. I would be remiss if I did not reiterate here what I have often said; nowhere do I believe there is a brighter, smarter, more knowledgeable and hard-working derivatives counsel. She has served the public and me phenomenally well. Thank you, Elizabeth.
And finally to my colleagues, past and present, my respect to those whom we have been unable to persuade to vote with us on this issue, and my thanks to those who will vote in support of this needed and mandated rule. At last!

end

Before leaving, Bart voted in favour to limit excessive commodity bets:

(courtesy Reuters)


U.S. regulator revives plan to limit excessive commodity bets -RTRS


05-Nov-2013 11:43
By Douwe Miedema


WASHINGTON, Nov 5 (Reuters) - The U.S. derivatives regulator on Tuesday reintroduced a plan to curb commodity market speculation, reviving a crucial Wall Street reform after a judge knocked down an earlier version of its rule on position limits.
The redrafted rule, which was formally released for public comment after a 3-to-1 vote by the Commodity Futures Trading Commission, eases one major irritant for big banks by lowering the threshold for aggregating trading positions held by part-owned affiliates. But it threatens to create a new rift with commodity merchants looking to hedge certain transactions, such as rent on grain storage facilities.
The rule has been one of the most hotly debated aspects of an overhaul of Wall Street after the financial crisis. It is re-emerging as some of the largest global banks face political pressure to reduce their control over commodities markets.
The Dodd-Frank reforms that followed the 2008 financial crisis gave the CFTC greater powers to limit swap and futures positions held by large traders to prevent them from cornering the market, while exempting farmers and others who use derivatives to protect against price swings.
But a U.S. district court vacated the CFTC's first rule in September 2012, saying the law had called for imposing such limits only if the agency determined that they were necessary. The court found they were not.
The new rule eases the so-called aggregation hurdles, above which a firm needs to count positions its affiliates hold in addition to its own positions. To exempt these affiliate holdings, big banks like Goldman Sachs Group Inc GS.N and Barclays Plc BARC.L will need to prove they do not control the affiliate.
Above the aggregation hurdle, only nonconsolidated units can be exempted.
"The aggregation restriction that was in before was very excessive and that was a sensible adjustment," said Craig Pirrong, a finance professor at the University of Houston who has been critical of efforts to set limit on positions.
But the text of the rule will also change certain details of what constitutes hedging, an activity that is exempted from position limits under the Dodd-Frank law. This may rile big commodity merchants, experts have said.
The rule will now be published for public comment, after which commissioners will have to vote again to approve it.
LOSING STEAM?
The financial industry's fight to fend off new limits may be losing some of its vigor as the large pension funds and institutional investors, the so-called massive passives that plowed more than $400 billion into raw material markets over the past decade, show signs of cooling interest.
The limits were partly a response to the 2008 surge in oil and grain prices, which some blamed on the influx of new capital. But with growing signs that the commodity supercycle is winding down, many investors are shifting away from passive, long-only indexes in favor of more active long/short strategies that are less likely to risk breaching the new limits.
The redrafted rule would allow exemptions for positions held by firms in which banks own stakes of up to 50 percent, the CFTC said in documents prepared ahead of a public vote. An earlier version of the rule had set the hurdle at 10 percent, a level that the industry deemed draconian.
Reuters had first reported the main changes in the CFTC's newly drafted rule. (Full Story)
The CFTC's rules would limit a trader's maximum size in derivatives to 25 percent of the estimated deliverable supply of the underlying commodity, for a range of agricultural, energy and metal contracts.
The new rule also reintroduced so-called conditional limits, which allow traders to hold five times as much as that limit in cash-settled contracts, provided that they do not hold a single position physical-settled contracts.
It was not immediately clear to what extent the new proposal would limit "anticipatory hedging," or trading in advance of a planned transaction, which had been one of the biggest concerns for merchants like Cargill.
The rule will no longer allow an exemption for derivative contracts entered into by traders to make good rent they pay on empty storage facilities, CFTC staff said.
The agency had found no sufficient link between market prices and storage facility rents to allow the practice, a form of anticipatory hedging, the staff said.
The CFTC staff also said that futures exchange CME Group Inc CME.O had provided new estimates of deliverable supply that were higher than the agency had initially used, so that the percentage position limits were also higher.
Frank Tang
Precious Metals Correspondent
Reuters
end




And now for overnight sentiment in the paper markets:




1. Overnight very quiet, with red ink showing up in Europe and Asia
2. China does not want to stimulate its market
3. European commission downgraded growth for 2014
4. Bullard and Rosengren state that the Fed balance sheet has room for more QE
5  Details Jim Reid/Deutsche bank


end


Futures An Unfamiliar Shade Of Green On Chinese Taper Fears As Li Hints At Stimulus Curbs

Tyler Durden's picture





 
This morning US futures are an unfamiliar shade of green, as the market is poised for its first red open in recent memory (then again the traditional EURJPY pre-open ramp is still to come). One of the reasons blamed for the lack of generic monetary euphoria is that China looked likely to buck the trend for more monetary policy support. New Premier Li Keqiang said in a speech published in full late on Monday that adding extra stimulus would be more difficult since printing new money would cause inflation. "His comments are different from what people were expecting. This is a shift from what he said earlier this year about bottom-line growth," said Hong Hao, chief strategist at Bank of Communications International. Asian shares struggled as a result slipping about 0.2 percent, though Japan's Nikkei stock average bounced off its lows and managed a 0.2 percent gain. However, in a world in which the monetary tsunami torch has to be passed every few months, this will hardly be seen as supportive of the "bad news is good news" paradigm we have seen for the past 5 years.
More from Reuters:
In one of the few occasions when a top official has specified the minimum level of growth needed for employment, Li said calculations show China's economy must grow 7.2 percent annually to create 10 million jobs a year. That would cap the urban unemployment rate at around 4 percent, he said.

"We want to stabilize economic growth because we need to guarantee employment essentially," Li was quoted by the Workers' Daily as saying on Monday. His remarks were made at a union meeting two weeks ago but were only published in full this week, just days before a pivotal Communist Party plenum to set policy opens.

Yet even as authorities keep an eye on growth, Li sounded a warning on easy credit supply, which he said had topped 100 trillion yuan ($16.4 trillion) in the world's second-biggest economy.

"Our outstanding M2 money supply has at the end of March exceeded 100 trillion yuan, and that is already twice the size of our gross domestic product (GDP)," Li was quoting as saying.

"In other words, there is already a lot of money in the 'pool'; to print more money may lead to inflation."

His comments echoed the government's hawkish stance on inflation, analysts said, and were separately affirmed on Tuesday by the central bank, which promised to keep policy prudent with appropriate fine-tuning as well as to "resolutely repress" property speculation.

Still, Li's remarks underscore the fine line China must walk to create economic growth and jobs for social stability, while guarding against excesses that may hurt itself in the long run.
In other news, the latest European "recovery" may be over before it started, if only in the minds of gullible pseudopundits, when the European Commission downgraded growth prospects for 2014 from 1.2% to 1.1%, on the heels of the recent shocking inflationary numbers, with Spain and France revised down the most. Not helping matters was the UK PMI which like the recent Chicago PMI, printed at a ridiculous 62.5, above 60.3 previously and well above the 59.8 expected - the highest print since 1997, making it increasingly less likely the BOE will inject liquidity in the short-run.
On today's US  docket there are more central bank speakers including Asmussen from the ECB; and Williams and Lacker from the Fed. Elsewhere the European Commission releases its latest growth forecasts which as noted was merely the latest haircut. In terms of data, the US ISM nonmanufacturing is the main reports to look out for on this planet.
Main US events
  • US ISM non-manufacturing, cons 54.0 (9:00 CST)
  • US IBD/TIPP economic optimism, cons 41.8 (9:00 CST)
  • API Inventory release (15:30 CST)
  • Fed speakers: Lacker, Williams
Overnight news bulletin from Bloomberg and RanSquawk
  • EU sees 2014 Euro-area economic growth at 1.1% vs. Prev. est. 1.2%, maintained 2013 forecast for Euro-area contraction of 0.4%.
  • UK Services PMI (Oct) M/M 62.5 vs. Exp. 59.8 (Prev. 60.3) - highest since May 1997.
  • Chinese HSBC Services PMI (Oct) M/M 52.6 (Prev. 52.4) - Chinese Premier Li Keqiang has reiterated the country's 7.5% GDP growth target for 2013 stays in tact, but weak export sales are a risk.
  • Treasuries steady before ISM Services, speeches from Fed’s Lacker and Williams after Rosengren and Powell yesterday said policy should remain stimulative for “some time.”
  • Market focused on Friday’s nonfarm payrolls (est. 120k from 148k, unemployment rate 7.3% from 7.2%
  • The EU trimmed its forecast for euro-area growth next year to 1.1% from 1.2%, raised unemployment est. to 12.2% from 12.1%
  • A gauge of U.K. services rose to 62.5 in Oct. from 60.3 in September, the fastest pace in 16 years as the economy showed signs of pulling away from the rest of Europe
  • Reserve Bank of Australia left rates unchanged at its policy meeting; AUD fell after Governor Glenn Stevens said the currency is “uncomfortably high”
  • Mizuho Securities Co. said Bank of Japan dominance has killed the JGB market, leaving it unable to reflect either the success of stimulus policies or fiscal risks
  • Japan’s government needs to do more to shore up its books to stave off a bond crisis should inflation return, said former Ministry of Finance official Takatoshi Kato
  • U.S. Senate Democrats are packing the calendar this month with bills appealing to the party’s base as they seek a distraction from Obamacare’s troubled start
  • Sovereign yields mostly higher, EU peripheral spreads narrowing. Nikkei +0.2%, Shanghai gains 0.1%. closed for Japanese holiday; European stocks, U.S. equity-index futures fall. WTI crude, gold, copper lower
Market Recap from RanSquawk
Despite the cautious sentiment which resulted in stocks trading lower in Europe this morning, Bunds remained under pressure, which saw the 10y yield rise above 1.7% in the process, as market participants positioned for a raft of supply. Basic Materials and health care sectors outperformed, with Fresenius trading up over 2.5% following earnings and Shire up over 1% after the company announced positive top-line results for Vyvanse. Looking elsewhere, this morning also saw market participants digest the latest EU macroeconomic forecasts, which saw the European Commission downgrade growth projections for next year to 1.1% vs. Prev. est. of 1.2%, with GDP projections for France and Spain revised down the most. This together with the release of much better than expected UK services PMI reading which came in at its highest level since May saw EUR/GBP fall to its lowest since early October. The move lower was also exacerbated by touted leverage names selling, which in turn resulted in GBP/USD outperform EUR/USD. Going forward, market participants will get to digest the release of the latest ISM non-manufacturing report and the latest set of API data after the closing bell on Wall Street.
Asian Headlines
Chinese HSBC Services PMI (Oct) M/M 52.6 (Prev. 52.4)
Chinese Premier Li Keqiang has reiterated the country's 7.5% GDP growth target for 2013 stays in tact, but weak export sales are a risk.
EU & UK Headlines
UK Services PMI (Oct) M/M 62.5 vs. Exp. 59.8 (Prev. 60.3) - highest since May 1997.
UK services PMI new business component 63.4 in October vs 60.6 in September, highest since series began in 1996.
NIESR raised its UK growth forecast to 1.4% for 2013 and said that the BoE unemployment target is subject to considerable uncertainty, adding that the knock-out related to financial stability risks will probably lead to a rate increase in H2 2015.
EU sees 2014 Euro-area economic growth at 1.1% vs. Prev. est. 1.2%, maintained 2013 forecast for Euro-area contraction of 0.4%. Raises 2014 jobless forecast to 12.2% from 12.1%.
  • Keeps 2014 CPI forecast at 1.5%.
  • Sees UK economy expanding 1.3% in 2013, 2.2% in 2014.
  • Sees French economy expanding 0.2% in 2013, 0.9% in 2014.
  • Sees German economy expanding 0.5% in 2013 and 1.7% in 2014.
EU's Rehn says sees increasing signs economy has reached turning point.
UK DMO sold GBP 1.25bln in 0.25% I/L 2052 Gilts, b/c 1.96 and avg. real yield 0.032%. While Austrian debt agency sold EUR 1.5bln worth of bonds vs. Exp. EUR 1.65bln.
US Headlines
Goldman's top economist Jan Hatzius says his baseline expectation is that at the March 2014 Fed meeting, the FOMC will lower the level at which it would start considering rate hikes.
Fed's Powell (Voter, Neutral) said US monetary policy is likely to remain highly accommodative for some time and timing of when the Fed will trim pace of bond buying is necessarily uncertain and depends on evolution of economy. At the same time, Fed's Rosengren (Voter, Dove) said the Fed can be patient on adjusting policy because taper in December versus April is not too significant to the balance sheet.
Equities
Risk averse sentiment dominated the price action in Europe this morning, as market participants positioned for a raft of key risk events due to take place later on in the week. As a result, health care sectors was among the best performing in Europe, also supported by solid earning by Fresenius and also Novartis, which advanced at the open following reports that the company has identified its animal-health business as a top candidate for a sale.
FX
GBP/USD outperformed this morning, supported by the release of yet another encouraging macroeconomic data from the UK, with UK Services PMI for the month of October rising to its highest level since May 1997. In addition to that, NIESR said that the knock-out related to financial stability risks will probably lead to a rate increase in H2 2015.
The RBA kept rates unchanged, alongside expectations, at 2.50%. However, the RBA signalled concern over AUD stating that AUD is still uncomfortably high and that a lower AUD is likely needed to achieve balanced growth. The central bank added that the setting of monetary policy remained appropriate and that the full impact of past cuts are still to be felt.
Commodities
China 2013 gold output may rise 6.7% Y/Y to reach a record high of around 430 tons, according to Deputy General Manager of China National Gold Group Corp. Du Haiqing.
State Dep. spokesman Harf said US Secretary of State Kerry asking Congress to halt movement on new sanctions adding that Iran progress on nukes could lead to limited relief. Harf said US not calling for existing sanctions.
Anadarko Petroleum are set to take over operations at Chevron's Coronado discovery in the US Gulf Of Mexico's Shenandoah mini-basin following the co. increasing its stake.
SocGen's Ken Broux summarizes the key overnight macro news
ECB president Draghi will offer concluding remarks today at 14:30 cet at a scheduled event in Frankfurt, but this comes only two days before the monthly ECB council meeting so it is unrealistic to expect him to make off-the-cuff comments on last week's inflation data and whether it changes the nature of the discussion at this Thursday's meeting. The autumn macroeconomic forecasts from the EC are due this morning and may give the market a heads up on the inflation (and growth) outlook in the euro area in 2014.
The currency and bond markets are waiting on tenterhooks not just for the ECB meeting but also for the advance estimate of US Q3 GDP, which coincides with the start of Draghi's press conference on Thursday, and for the US employment report on Friday. The UST 10y yield backed off 3bp yesterday, returning below 2.60%, but we are over 10bp above the low (2.469%) registered the day after the delayed September payrolls data was released. The non-manufacturing ISM and its employment component will be in the spotlight today as we look for anecdotal hiring data during and immediately after the government shutdown. Given the low 125k consensus estimate for payrolls on Friday, one could wonder why yields are not lower than they are. A greater degree of scepticism over the state of the US economy is evident in the currency markets, where the USD surrendered partial gains made over the last 24 hours and PLN, HUF, BRL and ZAR outperformed.
The RBA left rates unchanged as expected overnight. However RBA Governor Stevens' comment saying the Aussie is still “uncomfortably high” knocked AUD/USD back below 0.9500 after the pair traded a 0.9521 high earlier. For EUR/AUD, having dropped 1.9% already since last week, a test of 1.4128 now looks on the cards and could tempt tactical bears to push for a pullback below 1.40 depending on the ECB's signal on Thursday. It is a similar story for EUR/GBP, where a strong UK services PMI this morning could force a test of Fibo support at 0.8429. In EM, Romania's central bank was forecast to cut its benchmark rate by 25bp to 4.0% and USD/RON rallied back over 3.31 yesterday, its highest level since 30 September.
We conclude with DB's overnight recap by the comprehensive Jim Reid:
Yesterday we heard three Fed speeches, all from FOMC members, but perhaps the most interesting comments came from the St Louis Fed’s James Bullard in an interview on CNBC. Bullard who is considered a centrist on the dove-hawk scale, said that “preconditions for tapering” had been met but that he was willing to be patient because inflation remains low. He also said that he was in no hurry to taper because the Fed “had room on the balance sheet”. Pressed on this point, Bullard pointed that the size of Fed’s balance sheet relative to US GDP was in the low twenties (in percentage terms) and was behind Japan, Europe and the UK on that measurement. Bullard once again dismissed the notion that a low participation rate in the labour market was a signal of a weaker employment picture than the headline unemployment rate indicated. The Boston Fed’s Rosengren, who is usually dovish, compared two "hypothetical" approaches to QE: one in which the rate of buying is unchanged until April 2014; and another fairly aggressive approach in which the buying is reduced to $75 billion in December, $50 billion in January, $25 billion in March, and completed altogether by April. "Start dates differing by a quarter or two would generate only relatively small changes in the overall size of the Fed's balance sheet,"
Rosengren said, which led him to conclude that it was better to be patient before reducing the pace of QE. Jerome Powell described the timing of the Fed’s tapering as “necessarily uncertain” because it depends on the strength of the recovery. But then he went on to say that the Fed is likely to push on with stimulus for some time. So it seems from yesterday’s comments that the Fed is willing to err on the side of caution with respect to policy accommodation, which probably helped 10yr UST yields stabilise at 2.60% yesterday (-2bp) after ticking higher for three consecutive days.
While the markets debate the Fed and the ECB’s next moves, stocks continue their march higher. Indeed, after passing the 1700 mark just a little more than a month ago the S&P500 is now only 34 points away, or less than 2% from the 1800 mark. Indeed, the S&P500 has been on an impressive run since its most recent bottom on the 8th October. Since that day, the index is up almost 7% and there has only been four negative days out of the last 19. Reports continue to suggest strong inflows into the equity asset class, mostly at the expense of fixed income funds. Data from earlier in the week from TrimTabs showed that there were $54.2bn into all equity mutual funds/ETFs in October, the third-largest inflow on record. On the other hand, bond mutual funds and ETFs redeemed $13.5bn in October, almost triple the outflow of $4.9bn in September. Bond funds posted five consecutive monthly outflows for the first time since late 2003.
Looking at overnight markets, some of the underperformance in Asian EM yesterday has been reversed this morning, helped by the halt to the slide in US treasuries. After gapping wider yesterday, buyers of Indonesian paper are returning, and bonds are generally about half a point firmer while 5yr CDS is around 5bp tighter. EM currencies are generally trading with a firmer tone including the Korean Won (+1.1%) and Malaysian Ringgit (+0.1%). AUDUSD is trading 0.4% lower after the RBA described the AUD as “uncomfortably high” in its policy statement this morning. Chinese equities are the notable underperformer overnight (HS China Enterprises index -0.7%, CSI300 -0.7%) led by banking stocks (-1.2%). There have been a number of reports as to why Chinese banks are lagging. The first is that the Chinese government may issue the first batch of private bank licenses next year as part of financial sector reforms (Bloomberg). There are also reports that the PBOC is preparing to once again drain cash from onshore money markets to suppress inflation and prevent an oversupply of liquidity (SCMP).
Coming back to yesterday, though the S&P500 and Stoxx600 added 0.36% and 0.31% respectively, there was notable underperformance in financials on both sides of the Atlantic (European banks -0.2%, US banks -0.2%). Swiss banking groups UBS (-5.3%) and Credit Suisse (-6.7%), were the standout laggards after the country’s finance minister hinted that current leverage ratios of around 4% were too low. The prospect of higher capital levels perhaps explained some of the outperformance in the European senior and subordinated financial credit indices which tightened 3bp and 4bp respectively, against a 1bp tightening in the broader European iTraxx.
Looking at the day ahead, we have more central bank speakers on the cards including Asmussen from the ECB; and Williams and Lacker from the Fed. Elsewhere the European Commission releases its latest growth forecasts. In terms of data, Spanish unemployment, UK services PMIs and the US ISM nonmanufacturing are the main reports to look out for on this planet. Who knows what's going on elsewhere in the Milky Way.

end


The number of companies that are behind in their Greek taxes explodes from 182,000 to over half a million in just one month


(courtesy zero hedge)




Greek Companies Unable To Pay Taxes Explode From 182K To Over Half A Million In One Month

Tyler Durden's picture





The US bug, whereby the worse the economy, the higher the stock market and bond prices must have shifted to Greece, because while the Greek stock market was the best performing "asset" class in October, and Greek bond yields are plunging just because the greater fool stock posse has now moved to the insolvent nation if only for a few months, the economic reality just gets worse by the minute. Case in point - Greek corporations, or what's left of them, and what Greece needs more than anything - taxes. Kathimerini reports, in what is now nail overkill on the Greek economic coffin, that "hundreds of thousands of enterprises are unable to fulfill their tax obligations, according to the data published on Monday by the Finance Ministry. Within just one month, from the end of August to end-September, the number of corporations that have fallen behind on their taxes soared from 182,785 to 526,477." No, you read that right: the number of companies that went in arrears on their tax obligations has tripled to over one million in one month. The same month in which the Grecovery was rumored to be in full swing and when John Paulson was buying every Greek stock he could find.
It's a crazy pills world as Kathimerini reports.
According to a senior ministry official, most of those 343,692 additional enterprises that failed to meet their obligations have entered special payment programs in the hope of settling their debts in 12 installments. The total amount that corporations owe to the state comes to 39.3 billion euros, but only 647.69 million euros of that has been arranged for payment.
There was a silver lining: with virtually nobody working officially, as unknown amounts have shifted to the gray economy, the taxpayer debt have plunged. Why? Simply because if one doesn't officially make money, a luxury corporations can't afford, one doesn't officially have to pay any taxes, hence no taxpayer debts.
Surprisingly, the opposite trend is apparent in taxpayer debts, as debtors numbered 2.8 million at the end of August, a figure which fell to 2.59 million at end-September. In total, they owe 22.6 billion euros.

A ministry source pointed to the improvement in debt collection, as total receipts in the year to end-September amounted to 2.13 billion euros, up by 35 percent year-on-year.

September revenues grew by 37.2 percent from September 2012, which the general secretary for public revenues, Haris Theoharis, attributes to “the high level of collection of past years’ debts.”
Good luck collecting in current year debts when the unemployment hits fresh record highs, and thus the base of taxpaying individuals craters.
As for corporations, our best advice is for Greece to tax the bankruptcy process. That's the only way the dying country can possibly collect any "owed" funds from what is left of the country's once thriving businesses.
But at least the Greek economic skeleton still has its precious euro.
Meanwhile, elsewhere in the same basket case country...
Three police officers were injured on Monday as a group of protesters smashed into a courthouse in the city of Iraklio on Crete where the trial of 92 farmers arrested in 2009 was under way.

The three officers suffered scrapes and cuts from falling glass when a group of farmers smashed through the courthouse’s main door at around 3 p.m. demanding that their colleagues be acquitted of all charges.

The 92 farmers standing trial are accused of obstructing public transportation, among other charges, after staging a blockade of Iraklio Airport in January 2009.



end




Another great commentary from Ambrose Pritchard Evans on the problems inside the troubled nations of Europe vs Germany





Italy's Mr Euro urges Latin Front, warns Germany won't sell another Mercedes in Europe


By Ambrose Evans-Pritchard


Politics and society


Last updated: November 4th, 2013

The plot is thickening fast in Italy. Romano Prodi – Mr Euro himself – is calling for a Latin Front to rise up against Germany and force through a reflation policy before the whole experiment of monetary union spins out of control.
"France, Italy, and Spain should together pound their fists on the table, but they are not doing so because they delude themselves that they can go it alone," he told Quotidiano Nazionale
Should Germany persist in imposing its contractionary ruin on Europe – "should the euro break apart, with one exchange rate in the North and one in the South", as he puts it – Germany itself will reap as it has sown. "Their exchange rate will double and they will not sell a single Mercedes in Europe. German industrialists know this but all they manage to secure are slight changes, not enough to end the crisis."
Professor Prodi is the prime minister who prepared Italy for EMU in the 1990s, and then presided over the launch of the euro as European Commission chief. Some readers may remember that I crossed swords with him 15 years ago, but that dispute is ancient history now and has no bearing on today's economic debate.
He rightly warns that nothing of substance will change as a result of the Bundestag elections. "German public opinion is by now convinced that any economic stimulus for the European economy is an unjustified help for the 'feckless' South, to which I have the honour of belonging. They are obsessed with inflation, just like teenagers obsessed with sex. They don't understand that the real problem today in deflation, as I have been saying for a year," he said.
This is the nub of the matter. The policy regime has become maniacally restrictive because every decision is filtered through "game theory" calculations, the belief in Berlin that the naughty Latins will somehow cheat unless their feet are held to the fire.
The ECB is playing this game too. It is no longer a central bank. It has become an enforcer of political pressure. The ECB is not even trying to meet its 2pc inflation target. It has abandoned its 4.5pc M3 money growth target and its twin pillar monetary structure.
As the Richmond Fed wrote in a paper earlier this year: "The ECB needs to start recognising that Europe’s problems are more than structural. It needs to stop using monetary policy as a lever for achieving structural changes and to end its contractionary policy.”
Be that as it may, Il Professore said the European Union – which he led for five years – has broken down as functioning system. "Today there is only one country and only one in command: Germany. "
He said it has long been obvious that Italy cannot restore control over its public finances in recession conditions. "The debt to GDP ratio has been rising for three years despite austerity. It is a failed policy." (119.3pc in 2010, 120.8pc in 2011, 127pc in 2012, 132.3pc in 2013, according to the IMF's Fiscal Monitor).
This too goes to the heart of the matter. Italy is a fiscal saint, the only major country in the industrial world to run a primary budget near balance for over seven years, and a surplus this year of 2.5pc of GDP. Yet the debt trajectory is accelerating upwards.
This is entirely due to the "denominator effect". The contraction of nominal GDP – the result of a quadruple whammy of tight fiscal, tight money, tight credit, (regulatory overkill) and a Teutonic exchange rate – has forced Italy to service a rising debt burden on a shrinking economic base. It is a classic debt-deflation trap, as described by Irving Fisher 1933.
Il Professore says Italy should be given a waiver on the €51bn put aside in budget deficit calculations for EU bail-out policies, giving the country leeway for a mini-blitz on investment. Better still, the Maastricht treaty should be changed to eliminate the 3pc deficit ceiling. "It is stupid that this has not been changed for 20 years. A 3pc deficit makes sense at certain moments, at other times it should be zero, at others 4pc or 5pc."
Stupidissimo indeed. But instead of revising Maastricht, Berlin has rammed through the even stupider Fiscal Compact, locking Europe into 20 years of chronic deflation and depression. (Yes, you could in theory offset that with monetary stimulus, but the opposite is happening. EMU monetary policy is becoming tighter and tighter as incipient deflation raises the "real" interest rate.)
Prof Prodi says Germany is living in an Alice-in-Wonderland world of intellectual confusion, thinking that it can run a current account surplus of 7pc of GDP (almost three time's China's surplus), with an inflation rate of almost zero, without at the same time blocking recovery. But no amount of protest makes any difference. "It has not effect on German policy because France, Italy, and Spain lack any common approach, even though all these countries they have identical interests."
As readers know, I have been arguing for a long time that the Greco-Latin Bloc and those with shared interests such as Ireland should seize control of the European institutions and dictate the policy with a very sharp knife held to the throat of Berlin's ├╝ber-bully Wolfgang Schauble.
They have the majority votes in the EU Council of Ministers. They have a majority on the ECB's Governing Council, and indeed on other bodies such as the European Investment Bank, which could be mobilised for a Marshall Plan (that empty promise from some wretched and now forgotten EU summit, never delivered like all those New Deal EMU pledges that came before).
They have natural justice, economic authority, and the EU treaties on their side. They can and should deploy their combined political power to impose a full fiscal and monetary reflation strategy on the EU, Abenomics for Europe. Germany might find that a few years of 3pc inflation and a mini-boom are not so painful after all. But if it finds this outcome so intolerable, the exit door is wide open. It can leave EMU. (And destroy part of its banking system in the process.)
As Prof Prodi says, nothing is being done to break the vicious circle – vicious too for Germany in the end, if only they could shake their collective heads free of so many economic shibboleths – because no Latin leader has yet emerged to carry the fight. The issue has apparently become less urgent over the summer as Europe's recession touched bottom. A few green shoots allowed everybody to engage in another round of wishful thinking, but this is a trap.
In the end, the leadership must come from France, still the great and generous heart of Europe. That may happen yet, even if Francois Hollande gives every impression of being a vacillating amateur, buffeted by events, incapable of saying boo to a mouse. Record unemployment must ultimately stiffen his spine, and if he cannot rise to the challenge, his governing authority in France will collapse, and perhaps the Fifth Republic will collapse with it. We must not let this happen to France.
But the fact that Italy's Mr Euro is saying such extraordinary things is itself a sign of the tectonic rumblings in the Latin world. Every week it seems that yet another towering figure of the European cause joins the rebels. For me personally, it is refreshing to be part of consensus at last.

end



Bill Holter discusses how the USA is losing favour with respect to Egypt and Saudi Arabia and this will have huge consequences.

a must read...

(courtesy Bill Holter)




The grand game of chess.



Two months ago Vladimir Putin played a game of chess that cooled the tempers from rising toward a global world war.  The U.S. believed the game to be checkers which would be over after a double or triple jump.  Fortunately president Obama decided that the board was set up with strange looking pieces and decided not to play the game.  It looks however like Mr. Putin never stopped playing http://debka.com/article/23414/As-Kerry-met-Egyptian-and-Saudi-leaders-planning-advanced-for-a-Russian-naval-base-in-Egypt .
  Sec. of State Kerry visited both Egypt and Saudi Arabia over the weekend, he made almost no statement afterwards nor was there any sort of public communique.  Sometimes "no news is good news" but not in this case.  No statement means that no deal was struck nor were any wounds healed.  Instead, in the background while Mr. Kerry was trying to smooth over diplomatic divides, Russia was negotiating a deal with Egypt to use and construct a naval port in the Suez canal region. 
  This is important why you ask?  First off, Russia was "thrown out" of Egypt back in 1972 so any deal now would be a reversal of their eviction.  A port in the canal area will give them a stronghold over shipping.  It would also show not only a "thaw" in relations but a genuine warming.  This should not come as a surprise as the U.S. who once always did what we said, now cannot be counted on to either do or not do as we say.  As I have said before, "trust" is the most important aspect when business is conducted and is exactly what we have been undermining willfully or not. 
  We have since the potential Syrian conflict pulled most of our naval assets out of the region, Russia has not.  In fact they have slightly expanded their presence and are now off the coasts of Cyprus, Syria, Lebanon, Israel, Egypt, the Suez Canal and Libya.  The fear has been for several years that Israel will attack Iranian nuclear sites, Russian naval vessels off of their coast adds another piece to the Israeli/Iranian chess game.  Like it or don't like it, Russia/Putin have positioned themselves militarily AND diplomatically in a favored position in the Gulf oil region...a position that the U.S. held since the 1940's. 
  I ask you this, if you were a business partner that had no qualms and had no plans of "changing" the arrangement, would you host your "partner's" foe a week before high level talks?  Would you at least issue a press release that "all was made happy" during these high level talks?  We have not heard anything from Egypt nor Saudi Arabia and very little from John Kerry.  You could almost say "crickets".
  One last question and this one involves a little speculation.  If you were losing confidence in your business partner and considering no longer doing business with them (not using their currency), how would you act towards them?  Have you ever seen a couple before they broke up?  One or both start acting a little squirrely, the communication is tense and not as free flowing as during good times?  This is what I think you are seeing now.  The U.S. is being "distanced".  We are being distanced through little or no communiques and even distanced publicly as John Kerry was placed in the back row at the end and by himself after the Asian business summit.  I caught some flack last month while pointing this out and was told "tall guys in the back?".  I don't think so Tim (Allen).  The U.S. has always (in my lifetime) been at the front and at the center of every business, military or diplomatic meeting of any sort...ALWAYS!  But this has changed.  A lot has changed.  So much so that we seem to be playing checkers while the game is chess!  Regards,  Bill H.

PORTUGUESE GOVERNMENT BONDS 10YR NOTE 

GSPT10YR:IND


As of 02:28:00 ET on 11/05/2013.

Your closing 10 year Portuguese bond yield Tuesday night: 

PORTUGUESE GOVERNMENT BONDS 10YR NOTE 

GSPT10YR:IND

6.090.03 0.41%
As of 11:59:00 ET on 11/05/2013.







Your closing Japanese yield Tuesday morning: par in basis point in yield to .60%



(with all of that massive QE, the long bond keeps falling in yield???)


Japan Govt Bond Year to maturity 10 Year Simple Yield


GJGB10:IND

0.600.000.33%
As of 02:58:00 ET on 11/05/2013.




And now for your closing Japanese 10 year bond yield from NY:



Japan Govt Bond Year to maturity 10 Year Simple Yield

GJGB10:IND

0.600.000.00%

As of 02:58:00 ET on 11/05/2013.



USA 10 year bond yield:  2.62%


USA dollar Index Tuesday morning: 80.59 up 3 cents





end



Your opening currency crosses this Tuesday morning:

EUR/USA:  1.3491  down   .0024
USA/JAPAN YEN  98.22    down  .408
GBP/USA  1.6046    up .0026
USA/CAN  1.0424  up   .0008

This morning the Euro is a little weaker trading just below the 1.35 level at 1.3491..  The yen is a lot stronger this morning trading just above  the 98 cross. It closed in Japan up 41 basis points at 98.22 yen to the dollar  (dollar down). The pound  is now showing major strength as it trades  just above the 1.60 level  to 1.6046.  The Canadian dollar is  showing minor weakness falling to 1.0424 to the dollar.






The NIKKEI this morning: up 23.80 points or 0.17%


Trading from Europe;  negative as most bourses in the red.

Gold early morning trading:  $1312.00
silver:$21.65  



 

end






Your closing Spanish 10 year government bond: Tuesday night:a huge change in yield of 9 basis points from Monday  night.


SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE


GSPG10YR:IND

4.100.09 2.29%
As of 12:00:00 ET on 11/05/2013.



end





Tuesday closing Italian 10 year bond yield: a  rise of 6 basis points and trading 7 basis point higher than Spain.



Italy Govt Bonds 10 Year Gross Yield

 

GBTPGR10:IND

4.170.06 1.41%
As of 12:00:00 ET on 11/05/2013.





end




Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond: 

Euro/USA:  1.3473 down.0042
USA/Japan:  98.56 down   .068
Great Britain/USA:  1.6047 up .0077.
USA/Canada:  1.0454 up .0036.




The euro weakened rose in this afternoon  session closing well below the 1.35 level to 1.3473.  The yen weakened   in the afternoon, falling by  7 basis points on the day  closing well above the 98 level to 98.56 (dollar up). The British pound rose  this afternoon to 1.6047. The Canadian dollar fell during  the afternoon to 1.0454.




Your closing USA dollar index:


80.69  up 14  cents on the day.  


Your closing 10 year USA bond yield  up 6  in basis points.

US Generic Govt 10 Year Yield

 

USGG10YR:IND

2.660.06 2.26%

As of 15:22:00 ET on 11/05/2013.




end 




Closing bourses figures for Tuesday:





i) England/FTSE  down 16.78 points or 0.25% .


ii) Paris/CAC down  35.25 points or 0.82%


 iii) German DAX: down 28.12 points or  0.31%  
  
iv) Spanish ibex down 78.10  points or .79%

v) Italian bourse (MIB) down 218.76  or  1.13%

and the Dow down 8.00 points  or  .05% ....





end



And now the big USA stories:




A good look at one of the big USA cities with zero cash on hand.  It is on the edge of bankruptcy:

(courtesy zero hedge)






A Case Study In A City On The Edge Of Bankruptcy: Fresno, California

Tyler Durden's picture





"The reality is we're doing less with less," is the dismal reality facing Fresno police chief and appears to sum up the situation facing many of America's cash-strapped cities (as we previously discussed here). Fresno's problem, as the mayor put it, "we have no money in the current account all." The situation was so dire that covering an unexpected expense—a new air-conditioning unit or firetruck, for example, would mean slicing into the payroll or borrowing from another depleted city fund. "We can get through the day to day. [But] if there's a derailed train, a natural disaster, where's the money going to come from?" Like many other cities, Fresno saw its sales- and property-tax revenue plummet as the economy tanked. In response, the city slashed services and staff. Fresno now can pay its bills, but it can't do much more than that.



Via WSJ,
...

"Our problem is we have no money in the checking account at all," Mayor Ashley Swearengin said to the silent room. "None." The situation was so dire that covering an unexpected expense—a new air-conditioning unit or firetruck, for example—would mean slicing into the payroll or borrowing from another depleted city fund, she said.

...

The sprawling city of about 500,000 people had less than a day's worth of available cash in its general fund, based on its 2012 financial report.

...

Fresno currently has just $1.5 million in emergency reserves—a fraction of the $10 million a city its size should have, based on standards from a national government-finance group.

...
"We can get through the day to day. [But] if there's a derailed train, a natural disaster, where's the money going to come from?" said Karen Bradley, the city's assistant controller. She said she sometimes worries about the freight trains that rumble through town multiple times a day.
...
Like many other cities, Fresno saw its sales- and property-tax revenue plummet as the economy tanked. The city ran up $36 million in deficits by 2011, mostly from revenue shortfalls, cost overruns on grant-funded projects and debt incurred to build a $26 million convention-center garage.
The garage became an albatross

...

As revenue declined and creditors fretted over Fresno's deficits, the city decided to use the cash it had to pay down debt. To rectify the garage deficit, the city borrowed from its water and solid-waste funds to pay back an array of other city departments that the parking garage had raided. Such moves helped Fresno clear out a tangle of internal debts, but left the city low on cash and barely able to cover operating expenses.

In response, the city slashed services and staff. Fresno now can pay its bills, but it can't do much more than that.

...

In the past four years, the city reduced its workforce by 1,200 people—a 29% cut. The police department lost 426 employees, or 30% of its staff. Now, 72 dispatchers handle some 1,000 emergency calls a day, down from 91 dispatchers four years ago. Residents are encouraged to go online to report nonviolent crimes such as auto thefts and break-ins.

"The reality is we're doing less with less,"Fresno Police Chief Jerry Dyer said.

...

City officials are seeing small signs of hope:Revenue is up slightly this year as the economy improves and tax proceeds rise. Officials say their plan should keep Fresno out of bankruptcy and put it on track to build $5.8 million in reserves by the end of 2018—still below the $10 million target.
Let's hope!!!



end.


A must read...

(courtesy zero hedge)




Barry Sternlicht Warns "Everyone Is Holding Cash Because They Know When It Ends It's Gonna Get Ugly"

Tyler Durden's picture





 
"The Fed is playing a very dangerous game," Starwood Capital's Barry Sternlicht warns,"and they need to stop." Sternlicht has quadrupled his firm's net worth in this time and, to the incredulity of the CNBC anchors, warns, "this is bad, this is a heroine addiction.. and now they are printing more money than the deficit." The outspoken CEO of the $29 billion fund, noted "all my friends who are money managers.. are much closer to the sell button than they ever were before," adding that "everyone's holding cash," since if they start to get nervous "volatility will come back instantly." Simply put, he concludes, "you know when this ends, it's gonna get ugly."
On Fed QE and investors' heroin addiction:
"they should knock this off. This is bad. This is a heroin addiction. The more you get on it, the worse it's going to get; the more asset values inflate."


Further to Sternlicht's point that "you're gonna hold cash",
new survey of family offices by Citi finds that thewealthy are cash heavy—meaning they may fall short of the investment returns they're expecting.

Wealthy families have about 39 percent of their assets in cash, according to a recent poll of more than 50 large family office representatives from 20 countries conducted by Citi Private Bank.

end 

Sorry for being late as I was in the dentist's chair tonight

I will report as usual tomorrow night

harvey

2 comments:

BornSkeptic said...

Holter, don't you know that Debka lacks any credibility? In my experience, 90% of their stories turn out to be bullshit. Here's what Wikipedia says about Debka: "Wired.com's Noah Shachtman wrote in 2001 that the site "clearly reports with a point of view; the site is unabashedly in the hawkish camp of Israeli politics,".[3] Yediot Achronot investigative reporter Ronen Bergman states that the site relies on information from sources with an agenda, such as neo-conservative elements of the US Republican Party, "whose worldview is that the situation is bad and is only going to get worse," and that Israeli intelligence officials do not consider even 10 percent of the site's content to be reliable.[1] Cornell Law professor Michael C. Dorf calls Debka his "favorite alarmist Israeli website trading in rumors."[4]"

disqus_Rbfqk4GGqp said...

from Bill Holter: to Born Skeptic

"whose world view is that the situation is bad and only going to get worse"...sounds about right to me. Why don't you write in to Jim Sinclair as he has cited them often? Ciao.

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