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JPMorgan et al Get Stuffed


 -- Published: Sunday, 10 July 2016 | Print  | Disqus 

By Ed Steer

09 July 2016 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price was sold lower in fits and starts until about ten minutes before the COMEX open.  At that point a rally began that was stepped on minutes before the job numbers were released.  Then JPMorgan et al pulled the pin — and in seconds the price was down almost 25 bucks.  Then it came roaring back — and that rally was capped less than forty-five minutes later, as it was about to go vertical.  From there it was quietly sold off until shortly before noon in New York.  At that juncture, the price began to creep higher almost without interruption until 4:30 p.m. in the very thinly-traded after-hours market.  The gold price didn’t do much after that.

The low and high ticks were recorded by the CME Group as $1,336.30 and $1,371.80 in the August contract.

Gold finished the Friday session in New York at $1,365.40 spot, up $5.60 from Thursday’s close.  Net volume was monstrous at just under 252,000 contracts.

160709gold

And here’s the 5-minute gold tick chart courtesy of Brad Robertson as usual.  The volume began to pick up about an hour before the COMEX open, culminating in a massive 25,000+ contract volume spike following the release of the job numbers.  The scale of the chart below hides the fact that the volume that followed really didn’t drop back to background levels until after 14:00 Denver time/4:00 p.m. in New York.

The vertical gray line is midnight in New York, noon the following day in Hong Kong and Shanghai—and don’t forget to add two hours for EDT.  The ‘click to enlarge‘ is a must here.

160709 5-minute gold

The silver price really didn’t do much until 1 p.m. in London on their Friday afternoon, which was twenty minutes before the COMEX open in New York.  At that juncture it was sold lower for ten minutes and, like gold, had a tiny rally into the job numbers before ‘da boyz’ pulled the pin.  The ensuing rally also had to be capped at the same time as the gold rally — and after selling off a bit during the next half-hour, began to quietly rally anew.  It’s high tick came at 4:30 p.m. EDT in after-hours trading — and closed within pennies of that mark.

The low and high ticks were reported as $19.28 and $20.39 in the September contract, which was an intraday move of $1.11.

Silver closed yesterday at $20.25 spot, up 60.5 cents from Thursday’s close.  Net volume was very heavy at a hair over 76,000 contracts.

160709silver

Like silver, platinum was sold lower in fits and starts in Far East and Zurich trading, with its low tick, such as it was, coming on the job numbers as well.  The rally from there got capped about twenty minutes before the London p.m. gold fix — and was then sold lower until shortly before 10:30 a.m. in New York.  Then it began to rally as well, with the price getting capped a few bucks below the $1,100 spot mark.  From there it was sold down a bit into the close.  Platinum finished the Friday session at $1,095 spot — and up 7 dollars from Thursday.

160709platinum

The palladium price didn’t do a lot until 8:30 a.m. EDT.  It was sold down to its low tick moments after the job numbers — and then joined in the rally fun, with all the gains in by the COMEX close.  It traded pretty flat for the rest of the day.  Palladium closed the Friday trading session at $616 spot — and up 7 bucks the ounce as well.

160709palladium

The dollar index closed very late on Thursday afternoon at 96.25 — and continued sliding lower once trading began at 6:00 p.m. EDT on Thursday evening.  It got rescued from going below the 96.00 level twice between noon and 2 p.m. HKT, before rallying quietly until around 11:25 a.m. BST in London.  It sold off a bit at that juncture, but then was launched skyward on the job numbers.  The rally ran into big selling in just a few minutes.  The 96.70 high tick came around 8:50 a.m. in New York — and by around 9:10 a.m. EDT, had been sold down to its 95.83 low tick.  ‘Gentle hands’ appeared and took it back to almost the 96.50 level by 10:45 a.m. EDT — and it chopped lower for the rest of the day.  The index closed yesterday at 96.29 — up 4 whole basis points from Thursday.

You have to wonder just how much effort and dollars went into propping up the world so-called ‘reserve currency’ yesterday.  And it’s a good bet that a lot of dollar trades got blown up yesterday on the big intraday price move that occurred around 8:30 a.m. in New York.

160709intraday

And, as usual, here’s the 6-month U.S. dollar index chart which I present for entertainment purposes only.  If the powers-that-be weren’t propping it up, there would be a great smoking crater where the dollar index used to be.  Some day that might happen.

160709 6-month USD

The gold stocks opened just above unchanged, then dipped into negative territory until the London p.m. gold fix was done.  Then they rallied in stair-step fashion, with all of the gains that mattered in the bag by shortly after 3 p.m. EDT. The HUI finished the Friday session up 2.80 percent.

160709HUI

It was virtually the same trading pattern for the silver equities, although they didn’t make it into negative territory at all.  Like gold, all their gains were in by minutes after 3 p.m. as well.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up an impressive 4.54 percent.  Click to enlarge if necessary.

160709Silver 7

And here are two charts from Nick that tell all.  The first one shows the changes in gold, silver, platinum and palladium for the past week, in both percent and dollar and cents terms, as of Friday’s closes in New York — along with the changes in the HUI and Silver Sentiment/Silver 7 Index.  The Click to Enlarge feature really helps on all three charts.

160709Weekly

And here’s the year-to-date chart as of the close of trading on Friday, July 8.

160709y-t-d

The CME Daily Delivery Report showed that 18 gold and 55 silver contracts were posted for delivery on Tuesday within the COMEX-approved depositories.  In gold, ABN Amro and ADM were the short/issuers out of their respective client accounts — and JPMorgan stopped 10 of those contracts for its client account.  In silver, the biggest short/issuers were ABN Amro with 32 contracts –and Scotiabank with 20.  The three long stoppers were HSBC USA and JPMorgan with 22 and 18 contracts for their own accounts — and ABN Amro picked up 15 for its client account.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Friday trading session showed that July open interest in gold rose by 8 contracts.  Since Thursday’s Daily Delivery Report showed that 4 gold contracts were posted for delivery on Monday, that means that 4+8=12 contracts were added to the July delivery month.  July o.i. in silver declined by 91 contracts.  Thursday’s Daily Delivery Report showed that 117 silver contracts were posted for delivery on Monday, that means that another 117-91=25 silver contracts were added to the July delivery month.

After a rather large withdrawal on Thursday, there was a decent deposit in GLD yesterday, as an authorized participant added 95,477 troy ounces.  And as of 7:52 p.m. EDT yesterday evening, there were no reported changes in SLV.

There was a very small sales report from the U.S. Mint yesterday.  They sold 3,000 troy ounces of gold eagles — 2,000 one-ounce 24K gold buffaloes — and zero silver eagles.

Month-to-date the mint has sold 9,500 troy ounces of gold eagles — 3,000 one-ounce 24K gold buffaloes — and 250,000 silver eagles.  July is off to an absolute horrid start without JPMorgan at the trough — and it’s just further proof that retail bullion sales in North America are bordering on worse that awful.

There was very little gold movement over at the COMEX-approved gold depositories on Thursday.  Nothing was reported received — and only 1,378 troy ounces were shipped out of Brink’s, Inc.  I shan’t bother linking that activity.

It was far busier in silver.  Although nothing was reported received, a very chunky 2,292,442 troy ounces were shipped out the door from various depositories.  Of note was the fact that 279,169 troy ounces was shipped out of JPMorgan.  The link to all this silver action is here — and it’s worth a look if you have the interest.  It takes a while for the page to download.

There was big ‘in’ action over at the COMEX-approved depositories in Hong Kong on their Thursday, as 14,098 kilobars were reported received — and a tiny 448 were shipped out.  All of the action was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.


In the new Commitment of Traders Report, I must admit that I wasn’t overly surprised to see new record high commercial net short positions in both gold and silver for positions held at the close of COMEX trading on Tuesday.  And I must caveat any comments about this report with the fact that because of the Independence Day holiday on Monday, not all the data may be in it.  But, having said that, it was bad enough as it was.

In silver, the Commercial net short position increased by 3,567 contracts, or 17.8 million troy ounces of paper silver.  The commercial net short position now stands at 98,768 COMEX contracts, or 494 million troy ounces.  They did this by selling 953 long contracts, plus they added another 2,614 contracts to their already record short position.

Ted says that the Big 4 commercial traders added about 1,200 contracts to their short positions, but the ‘5 through 8’ actually covered around 800 contracts during the reporting week.  Ted’s raptors, the commercial traders other than the Big 8, sold the remaining 2,500 long contracts they held, plus they added 700 contracts on the short side as well.  With the new [and very ugly] Bank Participation Report in hand, Ted pegs JPMorgan’s short position in the 28-30,000 contract range.

Under the hood in the Disaggregated COT Report, it was well over 90 percent a Managed Money traders affair, as they increased their long positions by 2,489 contracts — and they covered 834 short contracts — for a total change of 3,323 contracts.  The 200-odd contract difference from that number and the commercial net short position change, came from the ‘Other Reportable’ and ‘Nonreportable’/Small Trader categories.

Here’s the 8-year COT chart for silver courtesy of Nick Laird as usual.  As you can see from the blue bars, we’re at another record high net short position.  Click to Enlarge.

160709COT - silver

In gold, the Commercial net short position increased by 13,886 contracts, or 1.39 million troy ounces of paper gold.  The commercial net short position is at another record high at 34.02 million troy ounces.  They arrived at that number by selling 3,434 of their long contracts, plus they added 10,452 short contracts, almost all courtesy of the Managed Money traders who were going long in droves.

Ted said that the Big 4 commercial traders added around 7,100 contracts to their record short position, the ‘5 through 8’ commercial traders added approximately 3,700 contracts to their short positions as well — and the raptors/small commercial traders other than the Big 8, increased their collective short positions by about 3,100 contracts.  It was “all for one, and one for all” in gold again this week.

Under the hood in the Disaggregated COT Report, it was almost entirely a Managed Money show as well.  They added 14,175 long contracts, but they also added 2,149 short contracts, with the difference being the net change for the week — 12,026 COMEX contracts.  The 1,850-odd contract difference between that number and the commercial net short position change came almost exclusively from the traders in the ‘Other Reportables’ category.

Here’s the 8-year COT chart for gold — and as you can tell from the blue bars, it’s yet another week for the record books.  Click to Enlarge.

160709COT - gold

Ted pointed out on the phone yesterday that not only are the Big 4 traders in both silver and gold at new record high short positions, but the ‘5 through 8’ traders now fall into that category as well.

Ted also mentioned that the $2.5 billion paper loss that the Big 8 held at the close of trading on Wednesday, is remains about the same after Thursday and Friday’s trading activity.  The CFTC did increase margin requirements by small amounts either on Thursday evening, or Friday morning — and Ted says that he was surprised they weren’t bigger.


Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading on Tuesday.  It shows the days of world production that it would take to cover the short positions of the Big 4 and Big 8 traders in each physically traded commodity on the COMEX.  Click to enlarge.

160709Days to Cover

As I say in every Saturday column—the short positions of the Big 4 and 8 traders in silver continues to redefine the meaning of the words ‘obscene’ and ‘grotesque.’  For the current reporting week, the Big 4 are short 162 days [more than 5 months] of world silver production—and the ‘5 through 8’ traders are short an additional 70 days of world silver production—for a total of 232 days, which is almost 8 months of world silver production, or just under 534 million troy ounces of paper silver held short by the Big 8.

And it should be pointed out here that in the COT Report above, the Commercial net short position in silver is 494 million troy ounces.  So the Big 8 hold a short position larger than the net position—and by a monstrous amount—40 million troy ounces!!!  That’s how grotesque, twisted, obscene—and dangerous—this COT situation in silver has become—and gold’s not far behind, as is platinum.

And as an aside, the two largest silver shorts on Planet Earth—JPMorgan and Canada’s Scotiabank—are short about 116 days of world silver production between the two of them—and that 116 days represents around 72 percent [almost three quarters] of the length of the red bar in silver in the above chart.  The other two traders in the Big 4 category are short, on average, about 23 days of world silver production apiece.

The Big 8 traders in gold are short 44.8 percent of the entire COMEX futures market in gold, plus they are short 46.4 percent of the entire COMEX futures market in silver—and these positions are held against thousands of other traders in the COMEX futures market in these two precious metals.   Ted pointed out that if you subtract out the market-neutral spread trades in both these precious metals, the Big 8 are actually short a hair more than 50 percent of the total open interest in both metals.

That’s outrageous, but the CFTC looks the other way — and the precious metal miners don’t utter a word in protest.


The July Bank Participation Report [BPR] data is extracted directly from the above Commitment of Traders Report Report.  It shows the COMEX futures contracts, both long and short, that are held by all the U.S. and non-U.S. banks as of Tuesday’s cut-off.  For this one day a month we get to see what the world’s banks are up to in the COMEX futures market, especially in the precious metals—and they’re usually up to quite a bit.

In gold, 5 U.S. banks are net short 93,370 COMEX contracts in the July BPR.  In June’s Bank Participation Report [BPR], that number was 61,854 contracts, so they’ve increased their collective short positions by a monstrous 31,516 contracts during the reporting period — or 51 percent.  Three of the five banks would include JPMorgan, Citigroup—and HSBC USA.  As for who the fourth and fifth banks might be—I haven’t a clue, although Goldman Sachs comes to mind for most, as one of them.  But if they are in that group, my guess is that they would most likely be net long gold.

Also in gold, 25 non-U.S. banks are now net short 98,464 COMEX gold contracts.  In the June BPR they were net short 72,072 COMEX contracts, so the month-over-month change is pretty big, as they’ve increased their collective short positions by 26,392 contracts, or 36.7 percent.  But, as I’ve stated for years, it’s reasonable to assume that a goodly amount of this short position in gold held by the non-U.S. banks is owned by Canada’s Scotiabank.

As of this Bank Participation Report, the world’s banks are net short 29.3 percent of the entire open interest in gold in the COMEX futures market, which is a decent increase from the 26.9 percent they were short in the June BPR.

Here’s Nick’s chart of the Bank Participation Report for gold going back to 2000.  Charts #4 and #5 are the key ones here.  Note the blow-out in the short positions of the non-U.S. banks [the blue bars in chart #4] when Scotiabank’s COMEX gold positions [both long and short] were outed in October of 2012.  CLICK to ENLARGE is a must here!

160709BPR - gold

In silver, 5 U.S. banks are net short 32,329 COMEX silver contracts—and it was Ted’s back-of-the-envelope calculation from yesterday that JPMorgan holds between 28-30,000 contracts of that net short position on its own.  The net short position of these five U.S. banks was 20,382 contracts in the June BPR, so there’s been a 11,947 contract increase in the net short positions of the U.S. banks since then, or 58.6 percent. Based on the July BPR numbers in silver, it’s a mathematical certainty that the other 4 U.S. banks are about market neutral in the COMEX futures market in silver — and if they are net short, it’s only by a few thousand contracts at most.  As Ted says, JPMorgan is the ‘Big Kahuna’ in silver as far as the U.S. banking system is concerned — and these numbers prove it in spades.

Also in silver, 19 non-U.S. banks are net short 38,020 COMEX contracts—and that’s a big increase from the 30,283 contracts that these same non-U.S. banks held short in the June BPR.  I’m still prepared to bet big money that Canada’s Scotiabank is the proud owner of a goodly chunk of this short position—at least the same as JPMorgan, if not a bit more.  That most likely means that a few of the remaining 18 non-U.S. banks might actually be net long the COMEX silver market.

As of this Bank Participation Report, the world’s banks are net short 33.2 percent of the entire open interest in the COMEX futures market in silver—compared to the 26.4 percent net short that they were net short in the June BPR — and the lion’s share of that is held by Canada’s Scotiabank and JPMorgan.

Here’s the BPR chart for silver.  Note in Chart #4 the blow-out in the non-U.S. bank short position [blue bars] in October of 2012 when Scotiabank was brought in from the cold.  Also note August 2008 when JPMorgan took over the silver short position of Bear Stearns—the red bars.  It’s very noticeable in Chart #4—and really stands out like the proverbial sore thumb it is in chart #5.  CLICK to ENLARGE!

160709BPR - silver

In platinum, 5 U.S. banks are net short 9,892 COMEX contracts in the July Bank Participation Report.  In the June BPR, these same banks were short 8,311 COMEX platinum contracts, so they’ve increased their net short position by 19 percent in one month.

I’d guess that JPMorgan holds the lion’s share of that 9,892 contract net short position.

Also in platinum, 14 non-U.S. banks are net short 12,570 COMEX contracts, a decent increase from the 10,507 contracts they held short in June, or just under 20 percent month-over-month.

If there is a large player in platinum among the non-U.S. banks, I wouldn’t know which one it is.  However I’m sure there’s at least one big one in this group.  The reason I say that is because before mid-2009 when the U.S. banks showed up, the non-U.S. banks were always net long the platinum market by a bit—see the chart below—and now they’re net short.  The remaining 13 non-U.S. banks divided into whatever contracts are left, isn’t a lot, unless they’re all operating in collusion—which I doubt.  But from the numbers it’s easy to see that the platinum price management scheme is an American show as well, with one big non-U.S. bank involved.  Scotiabank perhaps?

And as of this Bank Participation Report, the world’s banks are net short 35.2 percent of the entire open interest in platinum in the COMEX futures market, which is up quite a bit from the 29.8 percent they were collectively net short in the June BPR.  CLICK to ENLARGE is a must here as well.

160709BRP - platinum

In palladium, 4 U.S. banks were net short 2,534 COMEX contracts in the July BPR, which is up a bit from the 1,802 contracts they held net short in the June BPR.  Even if JPMorgan held all these contracts themselves, and they might, it’s a pretty small amount.

Also in palladium, 14 non-U.S. banks are net short 2,479 palladium contracts—which is a pretty big increase from the 775 COMEX contracts that these same banks were short in the June BPR.  But if you divide up the short positions of the non-U.S. banks more or less equally, they are immaterial, just like they are in platinum.

For the fifth month in a row it should be noted—and it’s obvious in the chart below—that the banks, both U.S. and foreign, appear to be heading for the exits in the palladium market, as their net short positions haven’t been this low for many years.

As of this Bank Participation Report, the world’s banks are net short 23.2 percent of the entire COMEX open interest in palladium.  In June’s BPR they were only net short 11.1 percent.

Here’s the BPR chart for it.  You should note that the U.S. banks were almost nowhere to be seen in the COMEX futures market in this metal until the middle of 2007—and they became the predominant and controlling factor by the end of Q1 of 2013.  But as I mentioned in the previous paragraph, their footprint is pretty small now.  However, I would still be prepared to bet big money that, like platinum, JPMorgan holds the vast majority [if not all] of the U.S. banks’ remaining short position in this precious metal.

160709BPR - palladium

As I say every month at this time, the three U.S. banks—JPMorgan, Citigroup, HSBC USA—along with Canada’s Scotiabank— are the tallest hogs at the precious metal price management trough.  Until they decide, or are instructed to stand back, the prices of all four precious metals are going nowhere—supply and demand fundamentals be damned.

JPMorgan and Canada’s Scotiabank still remain the two largest silver short holders on Planet Earth in the COMEX futures market.  Right now Scotiabank appears to be the King Silver Short, but JPMorgan is running the show.


Here are two charts that Nick Laird passed around yesterday evening.  They show The Perth Mint’s gold and silver coin sales, updated with June’s data.  The ‘click to enlarge‘ feature helps here if you need it.

160709Perth Mint - gold

160709Perth Mint - silver

I don’t have all that many stories for you today, which suits me fine.


CRITICAL READS

S&P 500 at Record’s Door as Rally With Bonds Rewrites History

That U.S. stocks were able to erase their Brexit trauma and pull within inches of a record Friday was impressive enough. That they did it on a day bonds yields were flirting with all-time lows was unprecedented.

Shares tracked by the S&P 500 Index briefly rose above a closing high that has stood for 13 months, helped along by the strongest employment report since October. At the same time, yields on 10-year Treasuries slid within mere basis points of their all-time intraday low set this week.

It isn’t supposed to happen that way — in fact, it never has. At no time in history have government bonds and U.S. equities, generally viewed as risk-on/risk-off complements, ended the same trading session this close to their respective records, according to data compiled by Bloomberg.

That it’s happening now is testament to the forces splintering sentiment in markets fixated on the pace of global growth and Federal Reserve policy. Stocks have been on a particularly violent roller coaster, erasing two 10 percent corrections in 10 months and restoring $1.4 trillion lost in the Brexit aftermath in just eight sessions.

The stock market and bond market are expressing very different opinions,” said Jack Ablin, the Chicago-based chief investment officer of BMO Private Bank, which oversees about $66 billion. “It seems, at least on the surface, to be incongruous. Obviously I’m happy for the bulls, but I get the sense that there’s something dysfunctional going on.

Dysfunctional?” No!  Really?  That’s what happens when every financial market in America is rigged seven ways to heaven.  This Bloomberg story put in an appearance on their website at 3:29 p.m. Denver time yesterday afternoon — and I found it on Doug Noland’s website.  Another link to this news item is here.


U.K. Consumer Sentiment Dives Most Since 1994 on Brexit Effect

U.K. consumer confidence plunged the most in 21 years, the latest sign that Britons’ vote to leave the European Union is harming the nation’s outlook.

Gfk’s core index slid to minus 9 in a special post-referendum survey conducted from June 30 to July 5, from minus 1 earlier in June. That’s the biggest slide since December 1994 when increases in tax, interest rates and job insecurity weighed on spending. While confidence among respondents who said they voted to remain in the EU dropped to minus 13, the decline was tempered by a lesser slide of minus 5 among those who said they opted to leave.

Anxiety is growing as investors and households try to gauge the economic ramifications of the June 23 decision. With both major political parties engaged in heated leadership battles and the politicians who campaigned to leave slow to put forward plans of what a post-Brexit relationship with the E.U. will look like, the exit strategy may remain unknown for months to come.

During this period of uncertainty, we’ve seen a very significant drop in confidence,” said Joe Staton, head of market dynamics at GfK. “Every one of our key measures has fallen, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months.

This Bloomberg news item appeared on their Internet site at 5:05 p.m. MDT on Thursday afternoon — and I thank Brad Robertson for sending it our way via Zero Hedge.  Another link to this story is here.


Growing Unease as British Mutual Funds Block the Exit Doors

As one British mutual fund after another bars its doors to fleeing investors, traders and regulators alike are asking the same question: What does it mean for nervous global markets?

This week, six asset management firms in Britain decided to refuse, for the moment, cash demands from those seeking to escape funds that invest in commercial real estate in the country. The rush for the exits followed the unexpected decision by British voters to leave the European Union.

So far, the numbers are small enough. Of the 35 billion pounds, or $45 billion, invested in these funds, just under £20 billion has been affected.

Yet to see, in real time, fund companies turning away investors because they cannot quickly unload assets that are hard to sell brings to life a nightmare situation that has long kept central bankers and large investment managers awake at night.

This very worthwhile read showed up on The New York Times website on Friday — and it’s courtesy of Patricia Caulfield.  Another link to this commentary is here.


Europe’s Bank Crisis Arrives in Germany: €29 Billion Bremen Landesbank on the Verge of Failure

Several weeks ago, the Financial Times reported that the German Landesbank NordLB was considering taking full control of its smaller peer Bremer Landesbank (BLB), which is struggling under the weight of a portfolio of bad shipping loans. BLB, in which NordLB already owns 54.8%, warned last week that it would have to take a €400m write-down on its shipping portfolio, and that as a result it was facing a “mid-triple-digit million loss” this year.

As the FT added, the admission prompted concerns about the health of the Bremen-based bank, which had €29bn in assets at the end of 2015, and BLB’s owners have since been holding talks on how to bolster the stricken lender’s capital position.

In a statement made one month ago, NordLB’s chief executive, Gunter Dunkel, and Bremen’s finance minister, Karoline Linnert, said that BLB’s owners — NordLB, the city of Bremen, and the savings banks association in Northrhine Westphalia — had agreed to keep BLB’s capital “intact at an appropriate level”. “The form and size of the capital increase are currently being intensively discussed,” NordLB and the city of Bremen said. “The necessary decisions will be carried out by the end of 2016.

The market quickly read, and internalized the news, then promptly moved on: after all, with a bigger backer set to rescue the bank, there is nothing to worry about.

Just one problem: that may no longer be the case.

This news item put in an appearance on the zerohedge.com Internet site at 9:27 a.m. EDT on Thursday morning — and it’s something I found in yesterday’s edition of the King Report.  Another link to this story is here.


Airbus is Running Out of Buyers for Its Enormous A380s

Since its commercial introduction in 2007, the Airbus A380 has brought a long-lost sense of glamour back to travel. Its first-class cabins feature private showers and buttery leather armchairs. It sports in-flight lounges where bartenders mix bespoke cocktails. A broad staircase reminiscent of a 1920s ocean liner links the two decks. Financially speaking, it’s a disaster of similarly grand proportions.

An initial flood of interest from airlines has turned into a slow drip, and Airbus is leaning heavily on one customer, Emirates, for sales. Not a single U.S. carrier has bought one, and Japanese airlines, among the biggest cheerleaders for huge planes, have taken just a handful. Airbus has delivered 193 A380s—early on it predicted airlines would buy 1,200 supersize planes over two decades—and has only 126 in its order book, to be built over the next five years or so. Worse, many orders appear squishy, because airlines are shifting away from super-jumbos. As the aviation world starts gathering on July 11 for the Farnborough International Airshow in England, where carriers often announce big orders, there’s little indication any A380 contract will be unveiled.

Airbus concedes its timing was off with the A380, which lists for $433 million but almost always sells at a discount. The financial crisis hit just as production was picking up in 2008, and soaring oil prices made airlines reluctant to buy the four-engine behemoth. The company only last year managed to start breaking even on production, and it’s acknowledged it will never recoup the €25 billion ($32 billion) it spent on development. Zafar Khan, an analyst at Société Générale, says the concern is that if production slips far below 30 planes a year, the program could fall back into the red. “The crying happens when it’s losing money,” Khan says.

This very interesting Bloomberg piece is something else that Brad Robertson picked off the Zero Hedge website yesterday.  It was posted on their Internet site at 10:01 p.m. MDT on Thursday evening — and another link to this story is here.


E.U. Commission Seeks Sanction on Spain, Portugal on Deficits

Spain and Portugal were hit by a European Union move to fine them for breaching budget deficit limits in an unprecedented step to enforce rules designed to avert another debt crisis.

European finance ministers must now decide whether to back the proposal by the European Commission. Should the recommendation be approved, the commission would have 20 days to propose fines that could reach as high as 0.2 percent of gross domestic product, and a suspension of some regional funds. The penalties could be reduced or canceled for “exceptional” circumstances.

Punishing the Iberian countries could be a contentious issue. That’s because while other countries including France and Italy have all received warnings in recent years after missing targets on deficit or debt, no country has so far been sanctioned. Populist parties have been making gains across Europe, a wave that’s been driven in part by a rejection of the EU’s supranational powers.

Fines may not be the best way to punish countries that fail to deal with their expenditures — they could make things worse,” Javier Diaz Gimenez, a Madrid-based economics professor at IESE Business School, said in a phone interview. “While public embarrassment alone won’t be enough to stop the spending, they also won’t want to give euroskeptic parties an opportunity to criticize the E.U.

This Bloomberg article was posted on their Internet site at 8:00 a.m. Denver time on Thursday morning — and updated about 3.5 hours later.  It’s the second story that I borrowed from yesterday’s edition of the King Report — and another link to it is here.


Italy — and Systemic Failure: George Friedman

We are now at the point where the mainstream media has recognized that there is an Italian banking crisis. As we have been arguing since December, when we published our 2016 forecast, Italy’s crisis will be a dominant feature of the year. Italy has actually been in a crisis for at least six months. This crisis has absolutely nothing to do with Brexit, although opponents of Brexit will claim it does. Even if Britain had unanimously voted to stay in the EU, the Italian crisis would still have been gathering speed.

The extraordinarily high level of non-performing loans (NPLs) has been a problem since before Brexit, and it is clear that there is nothing in the Italian economy that will allow it to be reduced. A non-performing loan is simply a loan that isn’t being repaid according to terms, and the reason this happens is normally the inability to repay it. Only a dramatic improvement in the economy would make it possible to repay these loans, and Europe’s economy cannot improve drastically enough to help. We have been in crisis for quite a while.

The crisis was hidden, in a way, because banks were simply carrying loans as non-performing that were actually in default and discounting the NPLs rather than writing them off. But that simply hid the obvious. As much as 17 percent of Italy’s loans will not be repaid. As a result, the balance sheets of Italian banks will be crushed. And this will not only be in Italy. Italian loans are packaged and resold as others, and Italian banks take loans from other European banks. These banks in turn have borrowed against Italian debt. Since Italy is the fourth largest economy in Europe, this is the mother of all systemic threats.

This must read commentary by George put in an appearance on the geopoliticalfutures.com Internet site yesterday — and I thank Scott Otey for pointing it out.  Another link to this article is here.


Doug Noland: Sovereign Market Dislocation and Derivatives Turmoil

By this point, there’s a prevailing numbness that has enveloped the markets. The extraordinary passes almost as the typical and familiar. One can only say “incredible” and “amazing” so many times – and for so long. The naysayers, well, they’ve been bloodied into submission. And while tired debates remain fixated on “bull vs bear”, “expansion vs recession” and “inflation vs deflation”, global markets are in the midst of a phenomenal development with momentous ramifications.

Global sovereign debt markets have wildly dislocated, with a concerted yield collapse unparalleled in history. At the same time, there are literally hundreds of Trillions of interest rate swaps, swaptions and myriad sophisticated derivatives and derivative trading strategies – comprising by far the largest market in the world. Hands down it’s the murkiest. Still, extraordinary moves in yields, various spreads and yield curve structure ensure that there are enormous (and rapidly growing) embedded gains and losses lurking throughout the derivatives marketplace. Wonder where?

It’s also worth noting that the Japanese yen, another heavy-weight in the derivatives universe, gained almost 2% this week, pushing y-t-d gains versus the dollar to 16.6%. Ominously, Japan’s TOPIX Bank index was clobbered 6.4% this week, boosting 2016 losses to 41%.

The “Moneyness of Risk Assets” has been a centerpiece of my global government finance Bubble analysis. It was an epic misconception to print “money” by the Trillions, incentivize massive flows (and speculative leverage) into risk markets in order to reflate the U.S. and the world – and then respond to inevitable instability with “whatever it takes” activism and further market manipulation. The Fed and global central bankers have nurtured the illusion that risk markets are safe and liquid (money-like). They have spurred “contemporary finance” and the transformation of increasingly risky assets into perceived safe and liquid securities. Ironically, as the liquidity myth is illuminated in UK real estate funds, a sovereign debt market dislocation ensures “money” floods into potential liquidity traps in risk markets around the world.

Doug’s must read weekly Credit Bubble Bulletin was posted on this website around midnight last night MDT — and another link to this must read article is here.


Cold War Never Ended on the Eve of NATO Summit: John Batchelor Interviews Stephen F. Cohen

The NCW [New Cold War] and International terrorism are Cohen’s theme this week. And once again the terrorism, which is essentially anti East and anti West, is the most serious threat on a long-term basis. The NCW, on the other hand, is essentially an artificial construct out of Washington that tragically runs interference for solutions of problems on a broad front and is exploited by the terrorism movement. But Cohen thinks things are changing and that President Obama and Putin are secretly talking about an alliance to fight terrorism. ISIS is, after all, not a gang-sized organization, as was the norm of terrorists of old, it holds territory with division sized forces, has organized infrastructure, owns bank accounts, and, says Cohen, is making efforts to acquire nuclear WMD. This is an existential threat to all and there appears to an increasing awareness of this.

Furthermore attitudes are changing in Europe toward Russia, favourably (except for the Baltic States and NATO), and Russia is now held in high esteem in the M.E theatre and improving in most of Europe. Most of these trends are not supportive of the NCW, and Washington’s truculence is being seen as increasingly counter productive for Europe and the real national interests of the United States. And yet the United States while (ostensibly?) seeking to solve the Syrian Crisis – its latest stated policy – continues to pressure Russia along its borders with NATO provocations, activities that indicate in the Baltic States that the old cold war never ended.

But Cohen delivers a revelation of hope. He states he has reliable sources in the White House close to Obama that have stated that this president does not want a NCW to be his legacy. Recent comments by Putin also express a wish for cooperation with the United States. Cohen wonders if Obama is having a “Reagan moment” as that president shared the effort with Russia’s Gorbachev to end the old cold war? But Cohen also acknowledges that the complexity of the politics in Europe presents inertia to maintain the NCW – and there is a similar inertia in Washington that may see Obama isolated in his efforts for rapprochement. And I think one could also speculate that the president may be extremely concerned if Hillary Clinton wins the White House and escalates her war propensities.

This 40-minute audio interview was posted on the audioboom.com Internet site on Tuesday.  I thank Ken Hurt for the link, but as always, the big Thank You goes out to Larry Galearis for the executive summary you see above.  It’s a must listen for any serious student of the New Great Game.  Another link to this interview is here.


Kremlin says NATO talk of Russian threat absurd, short-sighted

The Kremlin said on Friday it regarded NATO’s suggestion that Russia posed a threat as absurd, saying it hoped that common sense would prevail at the military alliance’s summit in Warsaw.

The Kremlin spoke out after U.S. President Barack Obama urged NATO leaders to stand firm against a resurgent Russia over its 2014 seizure of Ukraine’s Crimea.

Friday’s summit is expected to formally agree to deploy four battalions in the Baltic states and eastern Poland, a move the alliance says is meant to deter possible Russian aggression.

It is absurd to talk about any threat coming from Russia at a time when dozens of people are dying in the center of Europe and when hundreds of people are dying in the Middle East daily,” Dmitry Peskov, a Kremlin spokesman, told reporters.

You have to be an absolutely short-sighted organization to twist things in that way,” said Peskov, saying Russia hoped common sense and an understanding of the need to avoid confrontation would prevail.

I’m afraid that common sense doesn’t prevail in the U.S. as they go all-out for total world domination.  The psychopaths and sociopaths of the world are in complete control in the U.S. government now.  This Reuters article was posted on their Internet site at 7:22 a.m. on Friday morning EDT — and it’s another Brad Robertson/Zero Hedge contribution.  Another link to this story is here, which is certainly worth reading if you’re a serious student of the New Great Game.


NATO Paranoia Versus Eurasia Integration — Pepe Escobar

As the NATO summit in Warsaw gained traction, Kremlin spokesman Dmitry Peskov could not contain a wry observation; “We aren’t the ones getting closer to NATO’s borders.

This is a statement of fact. But NATO does not dwell on facts; only myths. One of the Beltway’s ironclad myths is that NATO periodically drags the U.S. back into its “traditional role” of guaranteeing the security of Europe. It’s actually the other way around; Washington periodically needs to re-imprint on European vassals the absolute need for more NATO.

For too long NATO had been focusing on “out of area” operations; since at least 1993, when the concept first sprang up.

This has resulted in NATO “projecting stability” in Afghanistan – miserably losing a war to a bunch of tribesmen with Kalashnikovs — and Libya — turning a stable nation-state into a wasteland ravaged by militias.

This is another must read commentary for any student of the New Great Game.  This one appeared on the sputniknews.com Internet site at 6:08 p.m. Moscow time on their Friday evening, which was 10:08 a.m. in Washington — EDT plus 8 hours.  I thank U.K. reader Tariq Khan for finding it for us — and another link to this article is here.


Angst-Ridden Japanese Investors Seen Seeking Haven in Swiss Gold

Japanese investors are buying gold to store in Switzerland because of negative interest rates and fears the yen will depreciate as the government grapples with the heaviest public debt burden in the developed world, according to BullionVault Ltd., an online trading and storage company.

The number of buyers jumped 62 percent in the first six months from the second half of 2015, Atsuko Sato Whitehouse, head of Japanese markets at the London-based investment service, said this week. She didn’t provide details. The Bank of Japan has embarked on unprecedented bond buying to bolster the economy, prompting speculation the yen could plunge if stimulus efforts fail.

Many of our Japanese customers think it’s too risky to hold gold bars at home and they want to keep them in Switzerland because they are anxious about the future of Japan,” Whitehouse said in an interview. The country’s growth has stagnated for a decade, defying fiscal and monetary stimulus which has driven up public debt to more than double the value of annual economic output.

This gold-related news item showed up on the Bloomberg website at 3:00 p.m. MDT on Thursday afternoon — and I found it embedded in a story over at Zero Hedge last night.  Another link to this article is here.


Jim Rickards and Egon von Greyerz discuss $10,000 gold

I was very pleased to welcome Jim Rickards to Zurich recently.

In this important 16 minute video, recorded in a Swiss vault, Jim and I cover many vital factors that investors must be aware of to protect themselves against the major risks in the financial system.

Among the topics covered are:

  • Why gold will reach at least $10,000
  • The timing of gold’s rapid rise
  • The significance of gold exports from the U.K. to Switzerland
  • Swiss banks in breach of contract
  • Central banks and gold
  • The importance of silver
  • How to buy gold and silver
  • Hyperinflation and velocity of money
  • China and gold
  • The End Game

This video interview was posted on the goldswitzerland.com Internet site  on Friday sometime.  I haven’t had time to watch it yet, but it will certainly be on my ‘to do’ list later today or Sunday.  Another link to this interview is here.


Gold Price Cuts India Demand as Government Schemes Don’t

High gold prices have seen India’s gold import volume fall sharply, something the government has been trying to achieve with new schemes to deter household demand since the end of 2015, writes Katie Hillan at BullionVault.

With gold prices in Rupee terms rising over 16% in 2016 so far, gold imports into India have fallen year-on-year for four months straight due as consumers cut their demand.

At this level,” says trade body director Bachhraj Bamalwa at the All India Gems and Jewellery Trade Federation, “no one wants to buy. Everyone is waiting for a correction.”

This gold-related news item showed up on the bullionvault.com Internet site at 4:13 p.m. BST on their Friday afternoon — and it’s something I found on the Sharps Pixley website late last night.  Another link to this gold-related article is here.


The PHOTOS and the FUNNIES

I’ve just been too busy this week to spend any time at the pond, so I had to find something in my own back yard.  We have a small waterfall with an even smaller pond — and there are cattails growing in it, courtesy of the company that installed it about four years ago.  We’ve all seen them growing in sloughs as we drive by, as they’re ubiquitous throughout the world.  But until you actually see one through its entire life cycle, close up and personal, you’d never think that these things have flowers, but they do.  The flower [and there are thousands of them all packed together] is at the top — and the ‘seeds’ are at the bottom.  When it’s through flowering, they all fall off, leaving the lower ‘seed’ part behind, which grows bigger and fatter as the season progresses.

160709 2016 06 26 2

160709Ramirez 2

160709Ramirez 1

160709Cartoon 4


The WRAP

Gold still represents the ultimate form of payment in the world. Fiat money, in extremis, is accepted by nobody.  Gold is always accepted.” — Alan Greenspan, speaking to the U.S. Congress in 1999


Today’s pop ‘blast from the past’ is from 1969 — forty-seven years ago if you’re doing the math.  Arnold George Dorsey was born in Madras, British India (present-day Chennai, India) in 1936, one of ten children to British Army NCO Mervyn Dorsey, who was of Welsh descent, and his wife Olive, who was of German descent.  His family moved to Leicester, England, when he was ten.  But everybody now knows him as Engelbert Humperdinck — and a link to one of his greatest hits is here.

Today’s classical ‘blast from the past’ is one that I’ve posted before, but it’s been many years.  Sergei Rachmaninoff’s  Piano Concerto No. 3 in D minor, Op. 30 — composed in 1909 — has the reputation of being the most technically challenging piano concertos in the standard classical repertoire.  And for very good reason.

The concerto is respected, even feared, by many pianists. The great Josef Hofmann, the pianist to whom the work was dedicated, never publicly performed it, saying that it “wasn’t for” him. Gary Graffman lamented he had not learned this concerto as a student, when he was “still too young to know fear.

When I was on the board of the Edmonton Symphony Orchestra I spent some time with a Russian pianist who had just performed the work less than an hour earlier — and I was driving him to a reception after the performance.  The sheet music was a book just under an inch/2 cm. thick.  He called the piece “just buckets of notes“.  Having taken 7 years of classical piano, I know piano music well.  Just flipping through pages of 32nd notes, he said that some pages are played in just a few second.  I was aghast — and the memory of that incident way back when, still lingers today.

However, Ukrainian-born virtuoso pianist Anna Fedorova makes short work of it.  And if you do watch it, just watch her hands and fingers.  At times, the camera cannot keep up — and her playing appears disjointed.  This video is an audio and visual tour de force — and is worth your while if you have the time and the interest.  The link to the youtube.com video is here.  Full screen please!


Well, with new and higher CFTC margin requirements for gold and silver in their pockets, JPMorgan et al hit these two precious metals with everything they had at 8:30 a.m. EDT — and within an hour they were worse off then when they started, as the buyers were there in force.  I would expect there was short covering going on yesterday, because the price action after the engineered price declines, certainly bore all the hallmarks of that — and the preliminary changes in open interest [from Friday’s Preliminary Report] in both these metals, tends to indicate that as well, although it’s dangerous to rely on those numbers.

Ted was amazed at the turn of events yesterday — and it was another day where prices crept higher in the thinly-traded after-hours market on a Friday, which was an unheard of event until about a month ago.

Since this is my Saturday column, here are the 6-month charts for the Big 6+1 commodities.  The four precious metals are flirting with extremely overbought — and silver has been there for so long, that it hardly seems worth mentioning anymore.

160709 6-month gold

160709 6-month silver

160709 6-month platinum

160709 6-month palladium

160709 6-month copper

160709 6-month NG

160709 6-month WTIC

I was talking to one of my subscribers yesterday — and they were asking about my stock portfolio.  In the interest of full disclosure, I posted a list of them back in February I believe, so it’s time for an update.  I’ve made no changes to it since then, as I’m a ‘buy and hold’ investor, which probably wasn’t the smartest thing to do all things considered over the last fifteen years.  The ticker symbols are from the Toronto Stock Exchange.  My three largest positions are in First Majestic Silver, Silver Wheaton — and Silver Bullion Trust ETF.  The ‘click to enlarge’ feature may or may not help here.

160709Stock Portfolio

I also have rather large positions in these three mutual funds as well.  These are on the TSX as well.

160709Mutual Funds

And please don’t e-mail me asking about why I own this stock, but not that stock, as I don’t follow the precious metal mining companies at all — not even the ones I own shares in.  As I said back in February, I have Coeur Mining Inc. in my portfolio, but have no recollection of ever purchasing it.  So it’s obvious in hindsight that a junior I used to own [which one that might have been, is lost on me] — and I obviously received CDE shares in return.

As the headline from last Saturday’s column stated — “So…Where to From Here” — and it still applies today.  In fact, even more so.  ‘Da boyz’, with their HFT traders and spoofing, tried to panic the Managed Money longs.  But even if they did, there was another big buyer that stepped into the market at 8:31 a.m. EDT yesterday — and bought every long contract in sight that wasn’t nailed down.  One wonders if it could have been one or more of the ‘Big 8’ — as they would certainly have known this was coming.

The fact is that I’m speculating.  Nobody knows for sure.  Nobody.  However, all the short holders ended up the day worse off then before the job numbers smack-down.  They got stuffed good and hard — and I’ll certainly be interested in what Ted has to say about all this in his weekly commentary, which will be posted on his website this afternoon.

We are definitely in uncharted waters here — and getting further into them all the time — and how this situation resolves itself in the the days and weeks ahead is known to only a few.  But I’d bet a reasonable chunk of change on the fact that they’re making this up as they go along as well — and don’t know what to do next.

As Jim Rickards said in an e-mail exchange I had with him about this story I sent him — “The currency wars are never over until the system collapses.  My favorite currency right now is gold.

Nixon closed the gold window “temporarily” in 1971.  I’ll be surprised if we make it to the end of the year without a new gold standard of some sort in place, or on the way.  And if not that, then precious metal prices that will make your eyes glaze over, as Alan Greenspan’s “in extremis” comment from 1999 becomes de rigueur once again.

This particular iteration of fiat currencies has lasted 45 years — and it’s long past it’s ‘use before’ date — and is about to draw its last breaths.

The Sunday night open in New York could prove interesting.

Enjoy what’s left of your weekend — and I’ll see you on Tuesday.

Ed

http://www.edsteergoldandsilver.com/


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