Saturday, January 26, 2013

Gold and silver whacked again/Silver OI explodes higher/Swiss Parliamentarians trying to force SNB to repatriate gold held offshore/

Good morning Ladies and Gentlemen:

Gold closed down by 13.10 dollars at $1656.40.  Silver also fell by 52 cents to finish the week at $31.18. In the access market here are the final numbers;

gold;1659.30
silver: $31.18

Today was probably meant as a recapitulation day prior to options expiry as the bankers have freedom to carry out their criminal collusion as they know the CFTC will do absolutely nothing.  The study of gold/silver trading is absolutely useless in a manipulative environment.

In physical news, the open interest on both gold and silver rose despite the raid yesterday.
However, it was the huge increase in the silver OI which must have scared the living daylights out of the bankers. No matter how hard the bankers muster an "artificial storm", the silver leaves will not leave the silver tree.

In other physical news, the boys engaged in a class action on the silver manipulation are trying once again to file.

Swiss parliamentarians are trying to get enough support (100,000 citizen votes) in order to force Switzerland to repatriate its 1094 tonnes of gold  much to the chagrin of the SNB.

Their aim is threefold:

 i) repatriate the 1094 tonnes of gold wherever it is
ii) prevent the SNB from ever selling gold again
iii) forcing the SNB to purchase gold equal to 20% of official reserves in 5 years.



On the paper front two noteworthy events.

i) a rather good German confidence number
ii) a better than expected 137 billion euro repayment by core countries banks back to the ECB

both of these events propelled the Euro northbound.

However:  please remember that a stronger Euro kills exports of Spain and Italy and does considerable damage to German exports.  Also the Target 2 imbalances on Spain and Italy rise causing more grief for Germany.






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


The total comex gold open interest surprisingly rose by 2279 contracts yesterday despite gold's fall in price.  The OI rests this weekend at 458,197 whereas Thursday's close came in at 455,918. The non active front delivery month of January saw it's OI remain constant at 29. We had 0 delivery notices filed in gold on Thursday so we neither gained nor lost any gold ounces standing for the January contract. We are now less than 1 week away from first day notice which will be on Thursday, Jan 31.2013.  (options expiry is Monday Jan 27.2013).
The February gold contract saw it's OI fall by 12,401 contracts from 160,918 down to 148,517.  Most of these longs rolled into April and June. The estimated volume at the gold comex on Friday came in at a rather slow 191,656 if you consider all of the rollovers.  The confirmed volume on Thursday was much better at 232,903.

The total silver comex OI baffles just about everyone.  The bankers were hell bent on seeing major silver leaves fall from the silver tree.  They instead got many new- born babies reading to sprout.  The total silver OI for the complex rests this weekend at an astonishingly high 148,351.  As the Thursday level came in at 144,195 we gained a massive 4,156 contracts on a fall in silver price of 71 cents.  Somebody big was waiting in the wings ready to tackle JPMorgan and co- conspirator (Scotia).  To me it looks like we have some major players of Eastern persuasion using proxies to accumulate many longs.  They know full well that the CFTC officials are toothless as they refused to charge JPMorgan and friends as the major concentrated short. It is also quite possible that China is also the major short as well with JPMorgan as its proxy.  It has been rumoured that the initial supply of silver needed to suppress silver's price came from China's hoard of 300 million oz acquired by Chinese communist leader Mao Tse Tung in 1949. China supplied the silver to the west in the early 1990's to aid in its suppression of our precious metals. With the left hand they supply and suppress  and with the right hand they slowly buy back physical  silver and store it on their shores.  They also use the suppression to massively buy gold at cheap prices. If this is so, then the regulators have quite a problem to solve, as our precious metals leave our shores for the East.

The non active January silver delivery month saw it's OI fall from 17 to 10 for a loss of 7 contracts.  We had 7 delivery notices filed on Thursday, so we neither gained nor lost any silver. The next big active contract month is March and here the OI advanced 1405 contracts from 78,766 up to 80,171.  The estimated volume Friday at the silver comex came in at 39,427 which is rather light, compared to the huge confirmed volume on Thursday at 56,340.  No doubt another raid was called for due to the massive rise in OI in the silver complex.










Comex gold figures 



Jan 25.2013    The  January contract month




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
3665.10 (HSBC)
No of oz served (contracts) today
 0    (nil oz)
No of oz to be served (notices)
29 (2,900 oz)
Total monthly oz gold served (contracts) so far this month
968  (96,800 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
17,799.16
Total accumulative withdrawal of gold from the Customer inventory this month


 
317,417.61 oz
We had another  totally uneventful day at the gold vaults.
The dealer had no deposits and no    withdrawals.



We had 1   customer deposit:

i) Into HSBC:  3665.10 oz




total deposit:   3,665.10 oz



We had 0 customer withdrawals:



total withdrawal:  nil oz









We had 0 adjustments:  








Thus the dealer inventory rests tonight at 2.267 million oz (70.5) tonnes of gold.


The CME reported that we had 0 notices filed for nil oz of gold.The total number of gold notices standing thus remains at 968 for 96,800 oz of gold. To obtain what is left to be served upon, I take the OI for January  (29) and subtract out Friday's delivery notices (0) which leaves us with 29 notices or 2900 oz of gold left to be served upon our longs.

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

96,800 oz (served)  +  2900 oz (to be served upon) =   99,700 oz or 3.102 tonnes.
we gained 100 oz of additional   gold standing for the January delivery month.

Generally, January is a very weak delivery period for both gold and silver and thus the 3.102 tonnes of gold is quite a surprise.


Silver:




January 25.2013:   The January silver contract month





Silver
Ounces
Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory  37,301.75 oz (CNT,Delaware, Scotia, Brinks)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory   1,354,601.91 oz (HSBC, Brinks)
No of oz served (contracts)7  (35,000 oz)
No of oz to be served (notices)9  (45,000 oz)
Total monthly oz silver served (contracts)718  (3,590,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month2,592,665.3
Total accumulative withdrawal of silver from the Customer inventory this month8,265,942.0

Today, we  had huge activity  inside the silver vaults.

 we had no dealer deposit and no dealer withdrawal.



We had 2  customer deposits of silver:

I) Into Brinks:  760,320.45 oz
ii) Into HSBC:  594,281.46 oz

total deposit:  1,354,601.91 oz



total customer deposit; 1,354,601.91 oz

we had 4 customer withdrawals:



i) out of Scotia:  30,287.80 oz  

ii) out of Delaware: 999.45 oz

iii) Out of CNT;  2013.000  oz (another perfectly round number at CNT)

iv) Out of Brinks;  4001.50 oz




total customer withdrawal:  37,301.75 oz






we had 1  adjustments: 

Out of CNT:  35,226.66 oz added to the dealer account (note the decimals); 35,207.90 oz removed from the customer account at CNT and 18.76 oz totally removed from the CNT vault. 

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

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

  
Registered silver remains today at :  38.046 million oz
total of all silver:  152.267 million oz.





The CME reported that we had  1  notices filed for 5,000 oz of silver.The total number of notices filed so far this month rises to 718 for 3,590,000 oz.  To obtain what is left to be served upon, I take the OI standing for January (10) and subtract out Friday's delivery notices (1) which leaves us with 9 notices or 45,000 oz left to be served upon our longs.

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

3,590,000 oz (served)  +  45,000 (oz to be served upon)  = 3,640,000 oz
we neither  gained nor lost any silver   standing for the January delivery month. This is turning out to be a great delivery month for silver as we now surpass the  3 million oz mark in amounts  standing heading towards 4 million oz.




end



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


Total Gold in Trust:   Jan 25.2013 





Tonnes1,329.90

Ounces42,757,586.04

Value US$70.952  billion






Jan 24.2013:





Tonnes1,331.71

Ounces42,815,673.37

Value US$71.520   billion






Jan 23.2013:









Tonnes1,334.11

Ounces42,893,124.18

Value US$72.476  billion








Jan 22.2013:









Tonnes1,335.92

Ounces42,951,213.14

Value US$72.586  billion







Jan 18 2013:





Tonnes1,332.61

Ounces42,844,715.54

Value US$72.323   billion





Jan 17.2013:






Tonnes1,332.61

Ounces42,844,715.54

Value US$71.746 Billion










we lost another 1.81 tonnes of  gold at the GLD.
The farce continues!!




and now for silver:



Jan 25:2013:


Ounces of Silver in Trust336,578,312.500
Tonnes of Silver in Trust Tonnes of Silver in Trust10,468.76



Jan 24.2013:

Ounces of Silver in Trust343,687,009.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,689.86


Jan 23.2013:



Ounces of Silver in Trust343,687,009.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,689.86


Jan 22.2013


Ounces of Silver in Trust345,137,860.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,734.99



Jan 18.2013:


Ounces of Silver in Trust345,137,860.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,734.99



Jan 17.2013:

Ounces of Silver in Trust345,137,860.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,734.99





we lost a massive 7.109 million oz of silver from the SLV vaults.

It looks like the two big losses at the SLV and GLD were somehow involved in the raids at the comex from Wednesday through Friday.

From the 17th of January until yesterday a total of 8.559 million oz has been withdrawn by authorized participants. (bankers)


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





Sprott and Central Fund of Canada. 




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



1. Central Fund of Canada: traded to a positive 2.0 percent to NAV in usa funds and a positive 1.7%  to NAV for Cdn funds. ( Jan 25 2013)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 1.59% NAV  Jan 25./2013
3. Sprott gold fund (PHYS): premium to NAV  fell to 2.52% positive to NAV Jan 25/ 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 2.0% in usa and 1.7% 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. 
I am now glad that these two funds are starting to show a bigger positive to NAV 

It looks like England may have trouble in finding gold and silver for its clients.
It is worth watching the premium for gold at the Sprott funds which is a good indicator of shortage as investors bid up the premiums.

 

end




At 3:30 pm, the CME released the COT report which shows position levels of our major players. The
COT report is from Tuesday, Jan 15 through to Jan 22.2013: 


Let us now head over to the god COT:


Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
195,795
43,898
46,176
153,048
348,998
395,019
439,072
Change from Prior Reporting Period
2,840
-3,941
11,630
-2,962
7,875
11,508
15,564
Traders
193
63
77
60
49
289
163


Small Speculators




Long
Short
Open Interest



66,350
22,297
461,369



2,088
-1,968
13,596



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, January 22, 2013

Our large speculators:

Those large specs that have been long in gold added another 2840 contracts to their long side
Those large specs that have been short in gold covered a rather large 3941 contracts.

Our commercials;

Those commercials that have been long in gold and are close to the physical scene pitched a large 2962 contracts.

Those commercials that have been short in gold from the beginning of time, added another huge 7875 contracts to their short side and thus it was these guys that were supplying the non backed paper.  They were preparing for the raid orchestrated Wednesday through Friday.

Our small specs;

those small specs that have been long in gold added another 2088 contracts to their long side
those small specs that have been short in gold covered 1968 contracts from their short side.

Conclusions:  the commercials went net short again to the tune of 10,837 as our bankers supplied again the non backed paper, and thus from a commercial standpoint, very bearish. This was a perfect set up for the raid by the tail end of this week.

and now for our silver COT:

Silver COT Report: Futures
Large Speculators
Commercial
Long
Short
Spreading
Long
Short
41,282
10,189
28,972
44,790
92,188
2,900
379
-557
-1,547
3,819
Traders
81
32
48
35
38
Small Speculators
Open Interest
Total
Long
Short
142,279
Long
Short
27,235
10,930
115,044
131,349
1,050
-1,795
1,846
796
3,641
non reportable positions
Positions as of:
137
104

Tuesday, January 22, 2013
  © SilverSeek.com  


Our large specs:

Those large specs that have been long in silver added a rather large 2900 contracts to their long side

Those large specs that have been short in silver added another 379 contracts to their short side.

Our commercials:

Those commercials that have been long in silver and are close to the physical scene covered 1547 contracts from their long side.

Those commercials that have been short in silver added another large 3819 contracts to their short side.

Our small specs:

Those small specs that have been long in silver added 1050 contracts to their long side
Those small specs that have been short in silver covered 1795 contracts from their short side:

Conclusions:

again very bearish from a commercial standpoint as our commercials went net short another 5366 contracts.


end



And now for the major physical stories we faced today:

First gold trading from Europe and Asia courtesy of Goldcore.

Major points of interest:

1. gold continues to rise with respect to the yen as the yen plummets again
2. As we explained on Thursday, Russia is now backing away from sovereign paper and buying riskless gold.  They bought 600,000 oz last month or almost 19 tonnes of physical gold.

3. Bank of America is warning of a "bond crash" if yields rise. They are correct as this blows up all derivatives of JPMorgan and friends.
4. To the the huge financial risk the WGC is stating that it would be futile with Europe sells off any of its gold.
5. What the WGC refuses to state is that probably half of the European gold has already been leased out and never to be returned.  That is the same as being already sold.
6. The WGC argues for growth with bonds backed by gold. One small problem: the gold has already been leased.

(courtesy Goldcore)


Gold Backed Bonds - An Alternative To European Austerity?

Tyler Durden's picture




From GoldCore
Gold Backed Bonds - An Alternative To European Austerity?
Today’s AM fix was USD 1,670.25, EUR 1,243.39, and GBP 1,058.93 per ounce.
Yesterday’s AM fix was USD 1,677.00, EUR 1,258.06, and GBP 1,059.18 per ounce.
Silver is trading at $31.55/oz, €23.54/oz and £20.04/oz. Platinum is trading at $1,689.00/oz, palladium at $723.00/oz and rhodium at $1,200/oz.
Gold dropped $17.90 or 1% in New York yesterday and closed at $1,667.70/oz. Silver slipped to a low of $31.60 and finished with a loss of 1.8%. Most traders were at a loss to explain the counter intuitive losses given the bullish backdrop.
Gold in Euros – 5 Years (Daily) - Bloomberg
Overnight gold bounced back from an almost 2 week low and was again especially strong in yen terms - strengthened by the Bank of Japan’s stance on aggressive monetary easing.
Russia’s Central Bank said it will continue to buy gold bullion as it seeks to diversify its foreign reserves away from paper assets, such as the euro, it views as more risky.
At Davos, George Soros, one of the largest buyers of gold in the world today, warned of currency wars and that “interest rates are going to take a big leap” - probably this year.
Bank of America warned of a “bond crash” comparable to 1994 that would trigger a string of upsets across the world. In 1994, the bond crash bankrupted Orange Country, California, and set off the Tequila Crisis in Mexico. 
Today, the world is much more fragile and the increasingly likely bond crash could lead to a Lehman style systemic crisis – but on an even greater scale.
These risks and the recent price drop has fuelled buying interest in physical metal and a minority of smart money gold buyers continue to diversify into allocated gold on the dip .
At 1500 GMT new U.S. new home sales data is released.
Across Europe, economic growth is faltering and in many Eurozone countries, sovereign debt yields are dangerously high and austerity measures are creating much hardship.
The World Gold Council has been exploring ways that Eurozone member states could use their gold reserves to help bring down the cost of borrowing.
The Eurozone is the largest sovereign holder of gold in the world and has over 10,000 tonnes of gold reserves. The Eurozone, including the ECB, has 10,787.4 tonnes of gold worth over a significant €450 billion.  Some of the countries worst affected by the crisis, including Portugal and Italy, own a significant proportion of these assets. Italy alone holds nearly 2,000 tonnes of gold. 
The Eurozone as a whole has 32.6% more gold reserves than the U.S. which has 8,133.5 tonnes of gold.
Due to the ongoing global debt crisis and significant systemic and monetary risk, it would be financial and monetary folly of the highest order to sell gold. Indeed, prudent creditor nation central banks are continuing to add to their gold reserves.
Most agree that outright sales of gold are not the answer. Aside from the obvious problem that the outstanding debt level of the struggling European countries far surpasses the value of their gold reserves, existing EU laws prohibit such a move to finance governments, as do the provisions of the Central Bank Gold Agreement, which limits gold sales.
To illustrate this point, the gold holdings of the crisis hit Eurozone countries (Portugal, Spain, Greece, Ireland and Italy) represent only 3.3% of the combined outstanding debt of their central governments.
A one-time sale of all of their gold reserves would probably not cover even one year’s worth of their debt service costs. This would be akin to an individual selling everything they owned in order to make one month’s mortgage payment.

However, there may be an alternative to selling gold for desperate cash strapped nations facing vicious austerity. The alternative is to use European gold reserves in a way that will buy time for growth to take hold. 
The World Gold Council and leading academics and international think tanks believe that using a portion of a nation's gold reserves to back sovereign debt would lower sovereign debt yields and give some of the Eurozone's most distressed countries time to work on economic reform and recovery.
According to research done by the World Gold Council using the European gold reserves as collateral for new sovereign debt issues would mean that without selling an ounce of gold, Eurozone countries could raise €413 billion. This is over 20% of Italy's and Portugal's two year borrowing requirements. 
The move to back sovereign bonds with gold would lower sovereign debt yields, without increasing inflation, which would help to calm markets. This should give European countries some vital breathing space to work on economic reform and recovery.
Some citizens would be concerned that there may be a risk that the sovereign nations who pledge their gold as collateral could ultimately end up losing their gold reserves to the ECB, or whoever the collateral of the gold reserves are pledged to, in the event of a default.
Unlike currency debasement and the printing and electronic creation of money to buy sovereign debt, under schemes such as Draghi's “outright monetary transactions” (OMT), the use of gold as collateral would not create fiscal transfers between Eurozone members, long term inflation or currency devaluation risk.
The proposal shows how gold is being increasingly seen as a safe haven asset and currency.
Indeed, it suggests that those who have suggested returning to some form of gold standard are not as deluded as they have often been portrayed.
Mobilising Europe's gold is a temporary move which the World Gold Council and leading academics believe will help to create a more permanent solution which in time would help the Eurozone extract itself from its debt crisis.
Europe and the world faces an exceptionally challenging period and unconventional policy responses are called for. 
A gold-backed bond may offer at least a partial solution to Europe’s woes. 
The video 'Leveraging Gold Reserves To Help Lower Eurozone Sovereign Debt Yields' explores why such a measure could offer an alternative to austerity for the Eurozone: 'Leveraging Gold Reserves To Help Lower Eurozone Sovereign Debt Yields' 
NEWS
Who Are the Whales Buying Gold? – Economic Policy Journal

For breaking news and commentary on financial markets and gold, follow us on Twitter.




end


Although Lanci disparages the Bundesbank for "lying" on its changed position on repatriating Germany's gold reserves, and also speculates that German gold may not be readily available due to the fact that the FRBNY may have loaned out this gold to bullion banks to facilitate the gold carry trade over the years, he shows that gold loans are respectable. He refuses to put compelling questions to the primary sources, the central banks themselves.

We need a few journalists to drop their assumption that central banks should not be questioned and
begin attempting real journalism.  If this were to occur, then central banking as we know today will end as their primary power is to never account to anyone what they have done in our democratic world. The central banks  of today with respect to the gold issue as Chris Powell so eloquently states, receives:

"a power conferred on it only by incompetent, cowardly, or dishonest financial journalism."

(courtesy Chris Powell/GATA/Lanci/Cameron Hanover Managing Partner)



Suspicion about Bundesbank's gold dealings with Fed is getting respectable

 Section: 
11:37 ET Friday, January 25, 2013
Dear Friend of GATA and Gold:
Interviewed today for market analysis by Daniela Cambone of Kitco News, Cameron Hanover Managing Partner Vince Lanci disparages the Bundesbank for "lying" as it changed positions on repatriating Germany's gold reserves. Lanci also speculates that the German gold may not be readily available because the Federal Reserve Bank of New York may have loaned it to bullion banks to facilitate the gold carry trade over the years.
Lanci doesn't claim to know anything in particular on the subject. What is remarkable about his interview with Kitco News is its showing that the Bundesbank's gold repatriation has made discussion of central bank gold loans respectable even as financial journalists and commentatators still are not prepared to put the compelling questions to the primary sources, the central banks themselves, as GATA long has been doing in litigation and through ordinary inquiries:
As is shown by the material posted at the first link above, the Federal Reserve grudgingly admitted to GATA in 2009 that it has secret gold swap arrangements with foreign banks. Thus swaps as well as loans should be part of any questioning of central bank gold policy.
And as was documented by the confidential International Monetary Fund report obtained and published by GATA last month, central banks loan and swap gold and conceal the transactions to facilitate their secret interventions in the gold market:
The Bundesbank isn't alone in changing its tune here. In an interview with Kitco News a month ago Lanci himself sounded much more skeptical of central bank gold market manipulation than he sounds today:
How much longer can this neglect of the obvious continue? If suspicion now can be expressed in respectable circles that central banks may have secret policies and practices with gold, maybe it won't be too much longer before a few financial journalists drop their assumption that central banks should not be questioned and begin attempting actual journalism. If that ever happens, it will be the end of central banking as we know it, as central banking's primary power arises from its never having to account for itself in ordinary democracy, a power conferred on it only by incompetent, cowardly, or dishonest financial journalism.
Video of the Kitco News interview with Lanci is 10 minutes long, with the gold discussion beginning at 4:15, and is posted here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.







Turd Ferguson reports that the class action lawsuit has been refiled.
This is encouraging especially if allowed. The guys can have a great look at JPMorgan's books:

(courtesy GATA/Turd Ferguson/TF Metals)




Turd Ferguson: Silver market rigging foes are fighting back

 Section: 
2p ET Friday, January 25, 2013
Dear Friend of GATA and Gold (and Silver):
Turd Ferguson of the TF Metals Report has some encouraging analysis of the revised silver market-rigging class action lawsuit in U.S. District Court for the Southern District of New York. Ferguson's commentary is headlined "Fighting Back" and it's posted at the TF Metals Report here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end

Two commentaries in a row by JIm Sinclair telling us not to be intimidated by the antics of the bankers these past 3 days:

(courtesy Jim Sinclair)


Jim Sinclair: Defend yourself by not giving in

 Section: 
2:13p ET Friday, January 25, 2013
Dear Friend of GATA and Gold:
Jim Sinclair, mentor and hand holder in chief to the gold universe, this week appeals to gold investors not to be intimidated by what is only the usual market manipulation by bullion banks.
"How many times have you seen this not to recognize what it is?," Sinclair writes. "Well, this is the big one and last play to denude you of your position. ... Fundamentally we are approaching the period in gold when it will move up the most points in the shortest time. The paper gold market is being used to shake the bullish tree harder this time than any time before because of what is to come. Fear is the most powerful emotion in markets and it is being used perfectly to enrich the grand names of finance at your expense."
Sinclair's commentary is headlined "Defend Yourself by Not Giving In" and it's posted at JSMineSet.com here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end

And study every word he says:

Jim Sinclair: Gold is the ultimate battle between good and evil

 Section: 
4:50p ET Friday, January 25, 2013
Dear Friend of GATA and Gold:
Jim Sinclair today offers his most stirring and eloquent call to gold investors to have the courage of their convictions and to stand firm against the market riggers and tape painters. If gold investors do stand firm, Sinclair writes, they will win.
"Gold," Sinclair writes, "is the ultimate battle between good and evil. It is the ultimate battle between deficits and surpluses. Gold is the battle between paper currency backed by nothing and guaranteed by nothing versus sound money. This period of the market is the deciding battle of the Mahabharata. This period, today, is an attempt to drive you out of your wits, which is in my opinion the last and largest attack you will see perpetrated on us before gold closes over $3,500. This period of pain will not be measured in months, but counted in history as days."
Sinclair's commentary is headlined "Defend Yourself by Not Giving in, Day 2" and it's posted at JSMineSet here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


end

A must see report from Egon Von Greyerz on gold. Please study his 3 graphs provided:

(courtesy Kingworldnews/Von Greyerz)




Three charts ensure gold's continued ascent, von Greyerz tells King World News

 Section: 
4:55p ET Friday, January 25, 2013
Dear Friend of GATA and Gold:
Interviewed today by King World News, Swiss gold fund manager Egon von Greyerz produces three charts he construes to ensure gold's continued ascent. "Looking at gold and silver," von Greyerz says, "we are seeing another small pullback as both of these metals prepare to launch. So the manipulation short-term continues. But the continued rise of both of these metals is inevitable. Everyone who deals in the physical market sees strong demand whether it's in coins or bars."
An excerpt from von Greyerz's interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


end


From our friends over at the Silver doctors web site:


GOLD BANK RUN ACCELERATING…NOW THE SWISS WANT THEIR GOLD BACK- ALL 1040 TONS OF IT!

With last week’s announcement by the Bundesbank of the repatriation of 674 tons of German gold from Paris and NY over the next 7 years, we predicted that an avalanche of gold repatriation requests would soon be made to the BOE and the NYFed. 
It appears that Switzerland may be next to the game, much to the dismay of the SNB.  The Swiss gold initiative, an initiative to Secure the Swiss National Bank’s Gold Reserveslaunched in March 2012 by four members of the Swiss parliament, has grown to 90,000 supporters. 
Once 100,000 supporters are achieved, the Swiss Parliament must take up the referendum
The initiative asserts that the Swiss people should have a right to vote on 3 thingsnone of which will please the banking cartel:


1. To keep Swiss gold physically in Switzerland (ie repatriate Switzerland’s gold)
2. Preventing/forbidding the SNB from selling any more of its gold reserves
3.  Requiring the SNB to massively increase their gold holdings to a minimum of 20% of its reserves within 5 years, held within Switzerland
.
Not surprisingly, the Swiss National Bank doesn’t wish to disclose where it’s physical gold is held, but it may soon be forced to once the initiative achieves 100,000 supporters. 
674 tons repatriated here, 1040 tons repatriated there, pretty soon we’re talking real money! 

From the Post Finance, via google translate:

Gold initiative prepares the SNB headache
by Lukas Hässig – home to Switzerland must get their gold from abroad? The SVP initiative calling for the missing, only 10,000 signatures. The SNB could get into trouble.
“Already in March 2013 is the deadline for the submission of Gold initiative,” wrote the St. Gallen SVP National and co-founder Lukas ReimannAlthough it was with some 90,000 signatures on its way. “But to crack the necessary 100’000, now the use of all is needed.”
Where are the 1,040 tonnes of gold the Swiss National Bank? The question is now being seriously discussed with us. The response of the SNB remains nebulous. Most of it is here, but some lie abroad, said the central bank. “We do not want to be precise,” says SNB spokeswoman Silvia Oppliger. “Maybe we will express more precisely, should the gold initiative come about.”
German gold repatriation provides in USA for red heads
The German Bundesbank initially thought that she needed to accept the emotional issue any further. But so are a growing number of applied citizens and politicians were not satisfied. They put the central bank so long under pressure until it gave way recently. Now bring the Germans back 674 tonnes of gold from the U.S. and from France to England. This corresponds to a value of 27 billion euros currently.
The large gold repatriation of our northern neighbor provides worldwide headlines. «Germany Moving Its Gold Back Home To Satisfy The Paranoid”, headlines the U.S. Internet newspaper Huffington Post; pure populism to appease a population that is seeing ghosts. In Germany, had previously taken hold doubt the actual existence of the gold that is stored in the gold vaults of the Americans. The bars may indeed be covered with a thin layer of gold and otherwise consist of inexpensive iron was feared.
SNB would have to buy up to 100 billion gold
Interestingly, Switzerland has been a long time before the Germans and taken without public vertebral the topic. Circles from the People’s Party launched 16 months ago, the gold initiative. Because the project in parliament remained chance would just started as the last remaining means an initiative, the initiators said then. By referendum, they want to force the SNB to store all the gold in Switzerland and sell no single ton more. In addition to the SNB within 5 years after voting to increase their gold holdings massively so that it accounts for a fifth of the minimum in the whole balance.
At current prices, the rest would go into the money. Currently, the share of gold in all the assets of the National Bank is only at 10 percent. If the SNB reduced its balance sheet is not strong, then it remains a possible adoption of the initiative no other choice than double its gold reserves to 2000 tonnes.
A ton of gold currently costs about $ 55 million. Now can be expected: 2000 tons came to 110 billion dollars, equivalent to about 100 billion francs. By comparison, the SNB now has a capital of 62 billion francs. This does not include higher gold prices that could arise due to the demand of the SNB.
Headache at the guardian of the currency
Where did all that money to come for gold purchases is not clear. It would be nice to reduce the mountain of about 170 billion euros in order to buy gold bars. Only it would take for the many Euros first buyer, and the single currency would yet remain so stable that billion-sales of the SNB would not immediately strengthen the franc against the euro again. This consideration alone makes it clear that the gold initiative although many Swiss arrives, but whose implementation the responsible persons would cause big headaches.

In other news, tungsten futures opened limit up Friday.
If you don’t hold it, you don’t own it!!

end



end



 And now for the major paper stories:





Major points:

1. German confidence (IFO) up this morning.
2. UK,  4th quarter GDP shocked many coming in at a negative .3% drop on expectations of only a negative .1% drop.  The 3rd quarter showed a rise of .9%
3.The big news of the morning was the repayment of 137 billion euros by 278 banks.  This propelled the Euro/USA cross to dizzy heights at 1.3466.  The high Euro stabilizes the peripheral countries like Spain and Italy as its sovereign bond trades higher in price and lower in yield.  The chances for a bailout are slim with a high Euro/USA cross.  However, the higher Euro destroys the exports of all 27 members of the Euro zone.
It hurts Germany badly as already their GDP is contracting.  A further rise in the Euro will damage Germany as their exports in price becomes too high compared to non Euro nations.  The peripheral Euro nations like Spain 
gets destroyed as they become totally noncompetitive with non euro zone countries and with fellow EU countries, we see huge imbalances with respect to Target 2 figures.  Germany thus has a two fold problem:

i) huge target 2 imbalances which they would have to eat if these peripheral nations leave the monetary euro zone

ii) their exports plummet 

Thus the high Euro helps keep the peripheral countries from seeking a bailout but at the same time we see growth halt as exports plummet and eventually this gets so bad that they will seek a bailout.

4.  The high repayment of the LTRO causes the balance sheet of Europe to fall belong 3 trillion euros while the USA balance sheet rises each month by 85 billion USA.

5. German PMI strong at 48.8 vs expected 470.  However France sinks into a abyss falling to 42.9 from 44.9

6.  Deutsche Bank provides all the details

(Your early morning sentiment from Europe courtesy of zero hedge)



Overnight Futures Ramp Right On Schedule




Tyler Durden's picture




At this point it has gotten painfully tedious, and the one phrase to describe trading is - Same Pattern Different Day. With equity futures closing decidedly weak on earnings reality after US market close, the slowly, steady overnight ramp seen every single day for the past month has returned as always, this time on yet another largely expected German confidence indicator beat (following the just as irrationally exuberant ZEW some time ago, and yesterday's far better than expected PMI), this time the IFO Business Climate, which printed at 104.2, on expectations of 103 and up from 102.4. This was driven by both the current assessment rising from 107.1 to 108 and the Expectations rising from 97.9 to 100.5. Naturally, all confidence indicators will be skewed in a way to prevent the market from doubting for a second that Germany may actually succumb to the same recession that has gripped all other European countries (which Germany is an inch away from after its negative Q4 GDP). In other words: there is hope. As for reality, UK Q4 GDP came in at -0.3% on expectations of a far lower drop to -0.1%, and down from the olympics-boosted 0.9% in Q3. The UK certainly can't wait for Mark Carney to come and show them how cable devaluation is really done, cause this time it will be different, if only it wasn't different for everyone else.
But the most anticipated news of the day was the previously reported LTRO repayment, which came in far "stronger" than expected. Initially this was taken as positive as it means the ECB's balance sheet will shrink at a time when everyone else is engaging in open balance sheet busting FX warfare, even if in reality this is a deflationary outcome leading to even more appreciation for the EURUSD, and even more pain for both the European trade and current account balance. As Deutsche Bank explained, "the market will likely continue to have some focus on the fact that the ECB balance sheet is likely to be steadily shrinking for a period at a time when the Fed is effectively increasing its by $85bn/month and where Japan is seen by many to be set to notably increase its interventions. So while the repayments are not a big deal in themselves the contrast between the ECB and many other central banks means that the Euro is probably biased to appreciate for the foreseeable future.This might provide an unwelcome headwind for growth in Europe later in the year." And, naturally, a few hours before the LTRO announcement, none other than Italy's Monti said that a strong EUR could harm exports, something we already showed for Spain.
More from Deutsche Bank:
Today is the day the ECB unofficially starts to exit from unconventional monetary policy as Euro-area banks now have the option to repay some of the 1 trillion Euros of LTRO money afforded to them last year. Banks can now hand back money with one week's notice, and today at 11am London time is the first announcement of what they have initially done. It’s likely that any repayment will be biased towards stronger banks and as such there's no real immediate systemic risk from this story. However the market will likely continue to have some focus on the fact that the ECB balance sheet is likely to be steadily shrinking for a period at a time when the Fed is effectively increasing its by $85bn/month and where Japan is seen by many to be set to notably increase its interventions. So  while the repayments are not a big deal in themselves the contrast between the ECB and many other central banks means that the Euro is probably biased to appreciate for the foreseeable future. This might provide an unwelcome headwind for growth in Europe later in the year. Despite the promise of the OMT, Europe is in danger as being seen as the least active in the near-term in the currency war skirmishes that are focusing investors minds at the moment. Maybe actions elsewhere and a higher Euro will eventually lead to the ECB balance sheet expanding again after some market stress but this is further down the road.
While on European matters, Draghi is expected to speak at Davos today at 930am London time so it'll be interesting to hear if he continues to give off an air of increased confidence and whether he discusses the currency at all. Data wise Europe had a mixed day yesterday but the US was strong. In terms of the flash PMIs, Germany (48.8 vs 47.0 expected for Manufacturing, and 55.3 vs 52.0 for Services) was strong but weakness in France (42.9 vs 44.9 expected for Manufacturing, and 43.6 vs 45.5 expected for Services) was notable. The overall European number beat expectations but Germany played a large part in this. Our European economists think that these numbers are consistent with a flat Italian and Spanish composite reading when the data comes out next Friday. The Flash Markit US PMI number was very strong (56.1 vs 53.0). This release is still in its infancy with little track record but if it’s close to being consistent with the official ISM then US markets are not mis-priced at current levels. Indeed in our ISM/S&P 500 simple regression model, at current levels US equities are broadly pricing in an ISM of 54.7. The last ISM was at 50.7 though so the flash PMI is well ahead for now and a bit of caution is required. In Europe the market is much more ahead of the economy as our simple model suggests that equities are broadly pricing in a French, German and Euro-area PMI of 54.5, 56 and 54, respectively (against yesterday’s flash manufacturing numbers of 42.9, 48.8 and 47.5). This is all quite sweeping but in general the US economy is showing signs that it might be living up to some of the faith the equity market has recently shown in it whereas Europe still has a long way to go.
As we said in the 2013 outlook, liquidity and the benefit of the doubt will likely dominate in Q1 and market should generally be in decent shape. However we do need to see Europe show more consistent and broad growth for European markets not to have a set-back in Q2. The jury is still out on this and a steadily increasing Euro won't help.
Moving on to the market, yesterday saw the S&P 500 breach the symbolic 1500 mark for the first time since 2007 before chatter of a Financial Transactions Tax helped reverse all of those earlier gains. US data flow was generally positive supported by a larger-than-expected drop in initial jobless claims (330k v 355k) and the stronger preliminary PMI as mentioned above. Although we should note that the regional manufacturing surveys from the Kansas Fed yesterday (-2 vs +1) and the Richmond Fed on Tuesday (-12 v +5) were both disappointing.
The S&P 500 finished the day virtually unchanged with the NASDAQ (-0.74%) being a standout underperformer amongst major  indices as sentiment for Tech stocks softened on the back of Apple’s results.
Turning to Asia and overnight markets are mixed. The Nikkei (+2.5%) is leading the pack as the continued fall in consumer prices probably added further easing optimism. Core CPI fell - 0.6% yoy in December which is a touch more than expected (-0.5% yoy).
The JPY fell to 90.5 against the Dollar and is now 2.7% off the intra-week highs. Elsewhere the Hang Seng (- 0.3%) and the KOSPI (-1.1%) are both lower with the latter particularly being impacted by the renewed weakness in JPY.
In other news EU’s Olli Rehn said that he is unsure that the Euro is overvalued now but would not want to see a currency war of competitive devaluations which would have a negative effect on the Euro. On the peripheral countries, Rehn said there are several options under consideration to help Dublin and Lisbon return to markets including possibly extending the maturity of bailout loans or providing a new precautionary credit line.
In terms of today, Germany’s IFO survey and UK GDP for the fourth quarter will be the data highlights in Europe. The New home sales report is the only major release in the US. So all eyes will be on the ECB’s LTRO prepayment announcement and Draghi’s speech at Davos today.

end


The official story on the return of 137 billion euros of LTRO funds by the 278 banks.
However the removal of this liquidity buffers adds to the risk scenario to the periphery.

Citibank and Goldman Sachs give a terrific account on this:

(courtesy zero hedge/Citibank/Goldman Sachs)


Banks Return €137 Billion In LTRO Funds To ECB: Goldman's Take

Tyler Durden's picture




As expected, moments ago the ECB announced the results of the first LTRO repayment option. According to media reports, a total of €137.2 billion will be repaid as 278 banks participate in the repayment. The consensus expectation was for a repayment figure of €84 billion, so a figure substantially more than both the expected, as well as the whispered goldilocks number of €100 billion. The banks that will free themselves of the LTRO stigma will be disclosed in time - there is no public list, however as a reminder some 523 banks participated in the first LTRO. Since Europe is currently in the risk on phase, don't expect an immediate retaliation against the primarily non-core banks that opt to keep the LTRO funds. The market response so far has been one of risk on, due to the perceived implication that the interbank market is healthier than expected, coupled with a push up in the EURUSD as the repayment is, as noted previously, a gross deleveraging of the ECB balance sheet coming at a time when every other bank is explicitly devaluing their currency. Indeed, moments after the announcement the EURUSD ramped up to 1.3460 despite some ugly UK GDP news earlier.
However, the bigger question is how will the market react when a substantial chunk of even inert liquidity is removed, and with it - a backstop to risk, which as Citi warned: if too much LTRO is repaid, the risk goes straight to peripheral bond yields, which have a feedback loop to the currency rate, and thus to overall market risk. Read more in the previously posted Citi note below.
Goldman's immediate post-mortem:
LTRO: Banks retain LTRO funds and return only 13% (€137 bn)

€137 bn putback, €882 bn outstanding

Today (January 25) at 11:00 GMT the ECB announced the amount of LTRO funds the banks returned; banks repaid €137 bn of the LTRO, leaving €882 bn outstanding.

The ECB does not disclose the country breakdown and we will have more colour when  NCBs publish their monthly balance sheets. Nevertheless, we expect large part of the putback to come from banks in the core, while we expect limited activity from the peripheral banks. For the latter, the terms of LTRO still make a repayment uneconomical, in our view.

Quantum: as expected

The €137 bn repayment brings total LTRO outstanding to €882 bn. The amount of putback is broadly in line with market expectations, and leaves meaningful excess liquidity in the system.

From here, banks have the option to repay (partly of fully) the LTRO on a weekly basis until expiry.  We see a >12m reduction process as the most likely outcome of further banks’ repayments.

Exit structure: an ongoing option

ECB’s LTRO offer was structured as “take it or leave it”. This resulted in two, dramatically high, bank liquidity injections (€0.5 tn each). The structure of the putback option, however, is the opposite, allowing banks weekly repayments – full or partial – over the entire duration of the facility (January 2015).

Signaling and maturity are crucial

Without time pressure, a putback decision is driven by economics. We believe that for peripheral banks, LTRO money still offers an attractive reinvestment proposition.

Moreover, we believe the banks will use 4Q2012 results to outline longer-term path of repayments, in order to signal their  ‘resilience’.

Finally, with 2 years remaining, LTRO remains an attractive facility for the majority of banks, that cannot achieve comparable terms in the funding market. But in a year’s time, this is unlikely to be the case. We believe a longer-term exit path will be the most likely outcome.

And, as a reminder from yesterday, Citi's pre-mortem:



ECB will release data on the early LTRO loans repayment tomorrow. The release will help gauge the liquidity needs of the European banking sector and the prospects for a further reduction in Eurozone excess liquidity from here given that the repayment of LTRO loans will likely continue over a period of time. Consensus expectations seem to be centered around EUR100bn. Recent EURUSD resilience appears based on the market's growing concern that LTRO repayments will be larger than expected (thus reducing the ECB balance sheet / tightening more than expected) and driving up the EUR vs the USD (e.g. ECB vs Fed balance sheet). Critically, as Citi notes, the repayment of LTRO loans will free up collateral in the form of peripheral bonds. This seems to be particularly the case ahead of tomorrow given that Spanish and Italian banks were among the biggest borrowers under LTRO’s first tranche. If these banks opt to benefit from the spectacular rally in BTP and Bono markets and liquidate some of their LTRO collateral (and shrink their balance sheets in the process) this could fuel renewed upside pressure on the peripheral bond yields. This could then dampen any EUR upside post LTRO repayment - and as the main carry-driver for US equity performance, could lead to a risk-off switch quite rapidly. So tomorrow's LTRO repayment needs to be Goldilocks - too little and its clear banks have liquidity problems still; too much and the market's reaction could be notably risk-off.

Authored by Valentin Marinov of Citi,
Hopes for sizeable LTRO repayment leave EUR vulnerable
  • Markets could be positioning for a larger LTRO repayment amount than the EUR100bn currently anticipated by the market.
  • This could mean that EUR would trade in buy the rumour/sell the fact fashion with investors taking profits on euro longs in the aftermath of the release.
  • The higher EUR movers across the board the greater would be the negative kneejerk reaction to a smaller than expected LTRO repayment.
EUR remained well supported across the board despite a mixed bag of Eurozone data and renewed indications that Germany maybe unhappy about the latest price action in EURJPY. EUR resilience seems linked to tomorrow’s announcement of the early repayment of the LTRO loans by European banks.With the euro so bid against higher yielding currencies like AUD and NZD and European short-term rates still bid we suspect that markets could be positioning for a larger LTRO repayment amount than the EUR100bn currently anticipated by the market. Corroborating this view seems to be the fact that EURGBP surged after headlined about a large UK lender looking to repay almost all of its LTRO loans in February hit the screens.
Being long EUR may seem like a reasonable bet at present.If the LTRO repayment amount indeed exceeds market expectations and comes in at say EUR150bn, Euro rates and EUR could go higher from here as investors bet on further aggressive withdrawal of liquidity and contraction of the ECB balance sheet (see also Figure 1 and 2). The EUR-funded carry trades put in place on the back of further ECB easing by the ECB could suffer more as a result. At the same time, a smaller than expected LTRO repayment amount (say 50bn) could be in part explained by the fact that this week is only the first of many when the European banks can repay the ECB loans. Markets could thus opt to ignore a smaller than expected number and EUR-downside need not be pronounced.
With EUR having moved to new multi-month highs against sterling and CAD and now trading close to recent highs against USD, JPY, AUD and NZD, it seems that the market may have priced in a more sizeable repayment amount to a certain degree already. In turn, this could mean that EUR could trade in buy the rumour/sell the fact fashion with investors taking profits on their euro longs in the immediate aftermath of the release. This also means that the higher EUR movers across the board the greater would the negative impact from a smaller than expected LTRO repayment amount be from here.
There are other reasons to expect that any EUR upside on the back of larger LTRO repayment amount could be only temporary. As argued in "EUR ahead of LTRO" (below) Friday published yesterday the repayment of LTRO loans will free up collateral in the form of peripheral bonds. This seems to be particularly the case ahead of tomorrow given that Spanish and Italian banks were among the biggest borrowers under LTRO’s first tranche. If these banks opt to benefit from the spectacular rally in BTP and Bono markets and liquidate some of their LTRO collateral (and shrink their balance sheets in the process) this could fuel renewed upside pressure on the peripheral bond yields. This could then dampen any EUR upside post LTRO repayment.
EUR ahead of LTRO Friday
  • The LTRO repayment on Friday will affect ECB’s balance sheet and short-term rates. It will free up collateral, can weaken domestic demand for peripheral debt and push peripheral sovereign yields higher. Our results suggest that EUR could be driven by the response of the peripheral bond markets and less so by the response in short-term rate markets.
  • Smaller than expected LTRO repayment (less than 100bn) could the short squeeze in Euro FI to a halt and weigh on EUR. The downside need not be pronounced if peripheral spreads keep tightening, however. Larger repayment could support EUR via higher rates but only if the repayment does not trigger renewed increase in the peripheral bond yields.
ECB will release data on the early LTRO loans repayment on 25th of January. A month later, the banks will have another opportunity to repay LTRO loans taken up as part of the second program announced in February 2012. The release will help us gauge the liquidity needs of the European banking sector and the prospects for a further reduction in Eurozone excess liquidity from here given that the repayment of LTRO loans will likely continue over a period of time. Market expectations seem to be centered around EUR100bn. Citi’s economists expect repayments between EUR50bn-100bn.

The overall impact from the LTRO repayment on EUR will go through two channels:
1)     The first is the impact of LTRO repayments on the size of the ECB-balance sheet and the short-term Eurozone rates. A sizeable drop in the ECB balance sheet and Eurozone excess liquidity could be seen as supportive for EUR against currencies where the market is expecting central bank balance sheet expansion like the Fed, the BoJ and the BoE. In Figure 1 we plot EURUSD against the ratio of ECB and Fed balance sheets. The historic relationship would suggest that aggressive shrinkage of the ECB’s balance sheet relative to Fed’s could be EURUSD positive. In Figure 2 we plot EURUSD against EUR-USD 2y swap rate differential. If the LTRO repayment fuels further short-covering in European FI this could lead to wider rate spread and thus higher EURUSD.


2)     The LTRO loan repayments will also free up collateral in part in the form of peripheral government bonds. In turn, this could weaken the domestic demand for Bonos and BTPs and add to the upside pressure on peripheral bond yields. As shown in Figure 3, the EURUSD rally over the last few months was driven by sharp tightening in peripheral bong yield spreads to Germany. If that process slows down and even goes into reverse as a result of the LTRO repayments, with foreign investors too slow to fill up the gap in demand, this can add to the EUR headwinds. If, however, foreign investors buy peripheral debt at more attractive levels, the impact on EUR need not be pronounced.


Possible outcomes:
1)     LTRO repayment of less than 100bn could dampen the latest pick up in the Eurozone short-term rates and add conviction to the view that the ECB balance sheet would shrink only gradually over time. Given the close correlation of late between EUR and short-term rates – this outcome could weigh on EUR. That said, to the extent that the outcome is perceived as maintaining the constructive outlook for the peripheral bond markets, the EUR-negative impact of the outcome need not be pronounced.

2)     Larger than expected LTRO repayment could point at further upside for Eurozone short-term yields and support EUR especially against low yielding currencies like USD, JPY and to a degree GBP. Any potential gains could be contained if the repayment amount triggers renewed widening in the peripheral bond yields to Germany.


The overall impact of the LTRO announcement on EUR will also depend on the relative importance of the two drivers – the relative monetary condition in the Eurozone vis-à-vis the rest of the world and the peripheral bond yield spread. In Figure 4 we plot the sensitivity of EURUSD to changes in EUR-USD 2y rate spread and the average Spain and Italy 10y bond yield spread to Germany.

In particular we use t-statistics derived on the basis of regression betas from a multivariate model of EURUSD on the two drivers. The dashed lines in the chart indicate the statistical significance of the sensitivity measures - +1.64 indicating minimum level of significance for positive t-statistics and -1.64 indicating the same for negative t-statistics.
As shown, EURUSD responds positively to wider EUR-USD rate spread (positive t-statistics in Figure 4) and negatively to wider peripheral bond yield spreads (negative t-statistics in Figure 4). The results indicate that the impact of changes in the peripheral bond spreads is now more statistically significant than that of the EUR-USD rate spread.
We think that the decisive driver of the EURUSD response to the LTRO repayment could be the reaction in the peripheral bond markets to the LTRO repayment announcement.Renewed tightening in the peripheral spread in response to smaller repayment amount could help EUR withstand a potential tightening in the EUR-USD 2y rate spread. At the same time, renewed widening of the peripheral bond yield spreads in response to larger LTRO repayment amount could more than offset any positive impact from widening EUR-USD rate spread.


end

Marc to Market discusses 3 major currencies:

i) the yen
ii) the pound
iii) the euro

During the past 48 hours, Japan reported a bigger trade deficit thus softening the yen again.
In Japan, two major developments saw exports falling and the Japanese CPI drop another .1% indicating that deflation is still present in the land of the rising sun. Thus more stimulative bond purchases by the Bank of Japan will be necessary to achieve an inflation rate of 2%

Sterling has traded poorly all week and tonight its rests at 1.5797 pretty close to its bottom in quite a while. It is trading below it's 200 day moving average. Today's downward spiral is attributed to it's very weak reported drop of .3% in 4th quarter GDP. Most investors were expecting a drop of only .1%.

The UK industrial sector( minus 1.8) was the worst hit with the service sector stagnating.
The UK is on notice for a downgrade. The government wants to continue with austerity measures yet the B. of E wants to discontinue stimulative measures as King states, these do not work.

The Euro got a big boost on two fronts:

i) the big German confidence number
ii) the 137 billion euro repayment mainly by core banks.

your daily conversation on currencies courtesy of Marc to Market

(courtesy marc to Market)


Three Impulses Drive FX into the Weekend

Marc To Market's picture




As the week draws to a close, there are three independent drivers in the foreign exchange market.  The first two are the weakness in the yen and sterling.  The third is the push higher in the euro. 
We had not expected the dollar to close above JPY90 in North America yesterday and it has not looked back.  Comments from some Japanese officials, suggesting a dollar move to JPY100 would be acceptable.  Prime Minister Abe apparently dissatisfied with the BOJ moves this week again threatens to revise the BOJ's charter, though his appointments in March-April could rectify the situation.
Arguably just as important as the jawboning is the data.  In the last 48 hours Japan has reported a larger trade deficit, an extension of the streak in which exports are falling and news that consumer prices that show the extension of deflation.  The headline CPI fell 0.1% year-over-year and while this appears better than the 0.2% decline in Nov, core reading deteriorated.  Excluding fresh food (-0.2% from -0.1%) and excluding food and energy (-0.6% vs -0.5%) show movement in the wrong direction.  In addition, Tokyo CPI, which is for Jan instead of Dec was -0.6% year-over-year on the headline.   The bottom line is that much more aggressive easing of monetary policy will be necessary if the 2% inflation goal will be credible.
Sterling has traded poorly all week, following last week's convincing break of the trend line going back to last June  It also finished last week below the 200-day moving average for the first time in five months.  It has not looked back either.  The fundamental catalyst today is the weaker than expected Q4 GDP.  It contracted by 0.3%.  The market was expected a milder 0.1% decline, though there were some last minute rumors of a stronger report.  The economic weakness was concentrated the industrial sector (-1.8%), but services stagnated, offering no offset.  Sterling extended this week's losses and fell to its lowest level since August.
Although the idea of the UK leaving the EU has been debated following the PM's referendum call (2017) earlier this week, the real problem is more immediate.  The government wants to stick to its austerity strategy and the BOE shows a reluctance to provide more monetary stimulus.  The IMF has suggested the government ease up on its austerity drive, but this was rejected.  Diluting its agenda, and the UK government faces a credit downgrade and potential political backlash.  However,  a deeper recession can threaten the very same thing. 
Sterling has also been crushed against the euro for the fourth consecutive week.  The euro has moved above GBP0.8500 for the first time since late 2011.  Against the dollar, the euro has finally busted through the $1.34 level that has capped it in recent weeks.  The next target is near $1.35.  Cross rate pressure, stronger German IFO report, and larger than expected repayment of LTRO funds. 
The ECB reported 278 banks will repay 137.2 bln euros that were borrowed under the LTRO facility.  A news wire polls had produced a consensus of about 85 bln euro repayment.  Recall that in the first LTRO from late 201l,  which is now subject to repayment, some 489 bln euros were borrowed.  The greater than expected repayment saw short-term euro rates move higher on ideas of less liquidity.  The euro traded to new highs for the day ostensibly on higher yields and larger reduction of the ECB's balance sheet.
The stronger German IFO follows the better than expected ZEW survey and the gains in the PMI (especially in the service sector).  At 104.2, the IFO climate reading stands at a 7-month high.  The IFO economists think the results points to a 0.2% expansion in Q1 13, while the Markit economists say their PMI is consistent with 0.3% growth. 
Lastly, we note that the dollar-bloc currencies continue to be sidelined.  The antipodean currencies are little change, sitting in relatively narrowed ranges near multi-week lows.  Meanwhile, the US dollar is holdings above CAD1.0 for the first time in 2-months.  A move above CAD1.0050 could spur another cent advance in the coming weeks.
end

Strikes are still paralyzing Greece

(courtesy Wall Street Journal)





Greece:


Strikes still paralyzing Greece: The WSJ discussed the lingering austerity backlash in Greece. The article noted that the government had to invoke constitutional law on Thursday to force striking subway workers back to work after they refused to obey court orders to call off an eight-day strike. The strikers, along with those working in the city's tram and urban-rail services, are protesting a government decision to scrap their contracts as part of the broader public wage reform demanded by the troika. According to the article, immediately following the government's decision, unions representing all of Athens's transit companies announced their own rolling 24-hour strikes until 29-Jan. * * * * *


end





Your early Friday morning currency crosses;

 

Friday morning we  see huge euro strength  against the dollar. The yen was the big story of the morning yesterday as it lost big time against on the dollar, falling to 91.08 yen against the dollar.    The pound, this morning shows a little strength against the USA dollar with the Canadian dollar again retreating as it goes below the USA in value.  We have a slight  risk is on situation as most European bourses  are in the green. Gold and silver are  down  in the early morning, with gold trading at $1664.80 and silver at $31.47 as the bankers try and thwart the exercising of options on these precious metals.  

Euro/USA    1.3466 up  .0099
USA/yen  91.088  up .523
GBP/USA     1.5814  up .0034
USA/Can      1.0057  up .0037

end






your closing 10 year bond yield from Spain: 

(back up in yield)



SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE

GSPG10YR:IND

5.173000.16200 3.23%
As of 12:00:00 ET on 01/25/2013.








end.





Your closing Italian 10 year bond yield: 
slight decrease in yield.




Italy Govt Bonds 10 Year Gross Yield


 GBTPGR10:IND
4.129000.03300 0.79%
As of 11:59:59 ET on 01/25/2013.









end.





Your 4:00 pm Friday currency crosses:



The Euro strengthened dramatically in the morning but sold off a bit in the afternoon  and then held the 1.3457  level  throughout the rest of the day. 
The Yen after tumbling   in the morning regained some of what it lost in the afternoon finishing  at 90.97, still very weak . The pound continues to weaken finishing off at 1.5797   ; the  Canadian dollar was also a  big loser of the day, falling badly to the USA dollar and  now the USA dollar is trading well above the Cdn dollar.
Currency wars  again!!







Euro/USA    1.3459 up    .0092
USA/Yen  90.97  up .436
GBP/USA     1.5797 up .0018
USA/Can      1.0073  up .0049





end.






Your closing figures from Europe and the USA:
England, Germany and the USA in the green/France and Spain in the red:



i) England/FTSE up 19.54  or 0.31%

ii) Paris/CAC up 25.99 or  0.69% 

iii) German DAX: up 109.84 or 1.42% (German confidence numbers up big)

iv) Spanish ibex:up 59.00 or 0.68%

and the Dow: up 70.65 points or .51% 



end.  


And now the major USA stories of the day:

Illinois' credit rating lowered by S and P to BBB as their pension burdens continue to escalate



(courtesy Bloomberg)



Illinois Credit Rating Lowered by S&P as Pension Costs Rise



The Dow have advanced for 9 straight days.  You would think that earnings are stellar.
Nope:  earning season is far worse than one would suspect"

(courtesy zero hedge)





Q4 Earnings Season: Far Worse Than Most Suspect

Tyler Durden's picture





There has been some confusion about the quality of the ongoing Q4 earnings season, which has seen some 47% of the S&P 500 companies report to date (and with 53% still left things can certainly change). The confusion apparently is that this has been a "good" earning season so far. Nothing could be further from the truth, and as Goldman shows in its midterm Q4 earnings report, the reality, not spin, is that earnings are tracking at $24.03, or some 6% below the consensus estimate at the start of earnings season of $25.51. This revised number, which could well drop even more from here, means that Q4 earnings will post a minuscule 1% growth in EPS year over year compared to Q4 of 2011 when Europe was imploding, and when the world's central banks had to arrange a global bailout to prevent yet another Armageddon.
It gets worse: in Q4, only 34% of companies posted positive earnings surprises, well below the 42% average, based on the correct methodology which is relative to the standard deviation of consensus estimates two weeks prior to reporting date. This is the lowest beat ratio in all of 2012, and is the second lowest in the entire post Lehman failure period, except for the sub-30% number which we saw in Q4 2011, which as noted above, is when the world was ending.
But fear not: there is much hope that this time the future, unlike all those previous times, will be different and grow vertically from here in a straight line straight to the Utopia that would mean the S&P at 1500 is fairly priced (assuming a 13.5x multiple in a central bank-propped up world is fair).
Here are the facts:
  • Using a mix of realized and consensus earnings, 4Q EPS is tracking 6% below the consensus estimate at the start of reporting season, $24.03 vs. $25.51
  • Positive earnings surprises are tracking below average this quarter (34% vs. 42%). The percentage of firms missing earnings estimates by one standard deviation or more is above the 40 quarter average (18% vs. 14%).
  • 36% of firms beat consensus sales expectations by more than one standard deviation, below the 10-year historical average of 38%. In addition, 19% of firms have missed sales estimates by that magnitude (versus 18% historically).
In summary, the S&P 500 is expected to earn some $98 for all of 2012, which means that as of this moment, the market is trading at a quite rich 15+ multiple (although what multiples mean under central planning nobody knows yet).
So how does the S&P500 go from 98 in earnings in 2012, to the consensus 111 in S&P500 EPS in 2013? A magic escalator apparently.
Finally, for those curious what exactly is the primary driver of this "surprising" weakness in the current earnings season, the answer is underfunded pensions - a topic that will recur over and over as more employees retire and their employer retirement promises are found to have massively underperformed relative to acctuarial plans:
Accounting and definition differences have lowered index-level results. Results comparable to consensus analyst estimates may differ from the Standard & Poor’s definition due both to accounting differences and definitions of earnings from  operations. These differences are usually small, but pension charges had a significant impact in 4Q.
The Telecom Services sector is expected to post a loss following large pension charges. Verizon’s (VZ) $7.2 billion of pre-tax pension and severance charges and AT&T’s (T) $10 billion pre-tax pension charge are both considered part of operating  arnings. The after-tax impact of these charges reduced index-level EPS by about $1.22 and represents the majority of index-level earnings decline.
Luckily, none of the above matters. Why? Because Benny has your back, and fundamentals are so Old Normal.
Source: Goldman

end






The sad story on Egan Jones:

(courtesy Simon  Black/Sovereign Man Blog/zero hedge)



Scam Complete: The US Government Takes A Page From Diocletian’s Book...

Tyler Durden's picture





Via Simon Black of Sovereign Man blog,
Early in the 4th century, Emperor Diocletian issued an infamous decree to control spiraling wages and prices in the rapidly deteriorating Roman Empire.
As part of his edict, Diocletian commanded that any merchant or customer caught violating the new price structures would be put to death.
This is an important lesson from history, and a trend that has been repeated numerous times. When nations are in terminal economic decline, governments will stop at nothing to keep the party going just a little bit longer.
I thought of Diocletian’s desperation a few days ago when I read about the recent sanctions imposed on US rating agency Egan-Jones. It’s a similar story–
For years, major rating agencies (S&P, Moody’s, and Fitch) have championed the outright fraud of our financial systemby pinning pristine credit ratings on insolvent governments and their heavily inflated currencies.
In doing so, the rating agencies are effectively claiming that the greatest debtor that has ever existed in the history of the world is nearly ‘risk-free’.
Clearly this is a ridiculous assertion. With a debt level over 100% of GDP, the US is so broke that the government must borrow money just to pay interest on the money it’s already borrowed.They’ve lost over a trillion dollars a year since 2008, yet they still spend money on things like drones and body scanners. It’s crazy.
As with any good scam, the government must maintain public confidence.  The moment someone says ‘the Emperor has no clothes,’ that shallow, fragile confidence will come crashing down and expose the scam. Dissent must be vigorously and swiftly pursued.
So when S&P finally downgraded the US one notch in August 2011, the SEC and Justice Department announced that S&P was under investigation, just two weeks later.
Egan-Jones, a smaller rating agency, has been even more aggressive, downgrading the US credit rating three times in 18 months. And while the federal government may not have imposed Diocletian’s death penalty, they are just as willing to squash dissent.
In a country that churns out thousands of pages of new regulations each week, it’s easy to find a reason to go after someone. As you read this letter, in fact, you are probably in violation of at least a dozen regulatory offenses.
In the case of Egan-Jones, the SEC brought administrative action against the agency within two weeks of their second downgrade. And a few days ago, the case was settled.
I’m sure you have already guessed the ending: Egan-Jones is banned from for the next 18 months from rating US government debt. They’ve effectively been silenced from telling the truth.
The lesson here is obvious. Just as in Roman times, bankrupt nations today will stop at nothing to keep up the scam just a little bit longer.
Given that all this is happening at a time when Congress isvoting to suspend the debt ceiling entirely, these actions are the clearest sign yet of just how desperate the government has become.
Could the warning signs be any more obvious?


end

John Williams of shadowstats weighs in on the USA financial scene..patience is wearing thin.
Budgets are very optimistic

(courtesy Jim Sinclair)

Jim Sinclair’s Commentary
Here is the latest from John Williams’ www.ShadowStats.com.
- Congress Tries to Buy More Time to Balance Fiscal Conditions
  But Patience of Global Markets is Finite
- Ongoing Economic Downturn Means Budget Prognostications Are Overly Optimistic
- QE3 Begins to Surface:  Monetary Base at All-Time High, Broad Money Growth Rises
"No. 497: Monetary and Fiscal Developments, December Home Sales"
Web-page: http://www.shadowstats.com

end




I will leave you with this commentary from "George Washington" where the author describes
how the British economy is in worse shape than during the depression and then he compares that to the
present USA economy



(courtesy George Washington/zero hedge)



British Economy Is WORSE than During the Great Depression

George Washington's picture




Leading British newspaper the Telegraph reports today:
Ministers today admitted Britain is facing “very, very grave difficulties” after figures showed the economy did not grow at all in 2012.

***

Economists from the Royal Bank of Scotland said the last four years have produced the worst economic performance in a non post-war period since records started being collected in the 1830s.

***

It’s the worst economic performance since at least 1830, outside of post-war demobilisations,” he told The Daily Telegraph. “It’s worse than the 1920s, it’s worse than the Great Depression.”

He said the economy has been “heading this way for a long time” because of the scale of the problems that came to a head in the 2008 financial crash.

***

The top economist at RBS, which is mostly owned by the Government, said it is difficult to recover when much of the world is facing similar problems.

“It’s the scale of what happened in 2008 but also the build-up to that,” he said. “Compared with other recessions [like in the 1980s and 1990s], this is happening all over the world. There’s not a quick and easy way to export your way out of this.”
(In a separate article, the Telegraph notes that the UK is heading for an unprecedented triple dip, as its economy shrunk .3 percent in the fourth quarter of 2012).
We’ve repeatedly warned that this is worse than the Great Depression …

What Do Economic Indicators Say?

We’ve repeatedly pointed out that there are many indicators which show that the last 5 years have been worse than the Great Depression of the 1930s, including:
Mark McHugh reports:
Velocity of money is the frequency with which a unit of money is spent on new goods and services. It is a far better indicator of economic activity than GDP, consumer prices, the stock market, or sales of men’s underwear (which Greenspan was fond of ogling). In a healthy economy, the same dollar is collected as payment and subsequently spent many times over. In a depression, the velocity of money goes catatonic. Velocity of money is calculated by simply dividing GDP by a given money supply. This VoM chart using monetary base should end any discussion of what ”this” is and whether or not anybody should be using the word “recovery” with a straight face:

 British Economy Is WORSE than During the Great Depression

In just four short years, our “enlightened” policy-makers have slowed money velocity to depths never seen in the Great Depression.
(As we’ve previously explained, the Fed has intentionallysquashed money multipliers and money velocity as a way to battle inflation. And see this)
Indeed, the number of Americans relying on government assistance to obtain basic food may be higher now that during the Great Depression. The only reason we don’t see “soup lines” like we did in the 30s is because of the massive food stamp program.
And while apologists for government and bank policy point to unemployment as being better than during the 1930s, even that claim is debatable.

What Do Economists Say?

Bad Policy Has Us Stuck

We are stuck in a depression because the government has done all of the wrong things, and has failed to address the core problems.
Instead of bringing in new legs, we keep on recycling the same old re-treads who caused the problem in the first place.
For example:
  • The government is doing everything else wrong, as well. See this and this.
This isn’t an issue of left versus right … it’s corruption and bad policies which help the super-elite but are causing a depression for the vast majority of the people.


end



Well that about does it for today.

I will see you on Monday.

Harvey









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