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JPMorgan et al Smash the Precious Metals Using the Job Numbers as Cover

 -- Published: Sunday, 7 August 2016 | Print  | Disqus 

06 August 2016 — Saturday


By Ed Steer

The gold price didn’t do much in Far East or early London trading on their Friday, as the world waited for the job numbers report at 8:30 a.m. EDT yesterday morning.  And when they were announced, JPMorgan et al were ready.  Most of the damage was done by 10:45 a.m. EDT, but shortly before the COMEX close, quiet selling pressure appeared once again — and gold was closed almost on its low of the day.

The high and low ticks were reported by the CME Group as $1,371.00 and $1,340.40  in the December contract.

Gold was closed in New York yesterday at $1,335.40 spot, down $25.00 on the day.  Net volume was just over 195,000 contracts — and that includes October and December.


Here’s the 5-minute gold chart courtesy of Brad Robertson as usual.  The volume spike in the first five minutes after the job numbers was something north of 20,000 contracts — and it didn’t really die off to what could be called background levels until after the 1:30 p.m. EDT COMEX close, which is 11:30 a.m. Denver time on the chart below.

The vertical gray line is 10:00 p.m. Denver time, midnight in New York — and 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.

160806 5-minute gold

It was more or less the same price pattern in silver, so I shall spare you the gory details.  The spike low of the day came shortly after 2:30 p.m. in the thinly-traded after-hours market.

The high and low ticks in this precious metal were recorded as $20.47 and $19.715 in the September contract.

Silver finished the Friday session at $19.655 spot, down 65.5 cents from Thursday’s close.  Net volume was way up there at 62,407 contracts — and there was decent roll-overs out of September.


Platinum made it up to $1,164 spot in the first hour that Zurich was open for business on their Friday morning, but ‘da boyz’ didn’t spare this precious metal on the job numbers, either — and the $1,135 low tick came right at the Zurich close.  It rallied ten bucks by the COMEX close, but sold off a few dollars in the after-hours market.  Platinum finished trading in New York yesterday at $1,144 spot, down 12 bucks on the day.


The trading pattern in palladium was similar to what it was in platinum — and the powers-that-be closed that metal down 9 bucks — and back below $700 at $694 spot.


The dollar index closed very late on Thursday afternoon in New York at 95.79 — and continued to crawl lower from its 5:00 p.m. EDT peak.  The 95.55 low tick came at 12:30 p.m. BST in London — and from there it ‘rallied’ 5 basis points into the jobs report.  The 8:30 a.m. ramp job came to an end at the London p.m. gold fix — and the high tick at that juncture was 96.52.  It began to head south with some conviction at that point, but ‘gentle hands’ appeared about fifteen minutes before the COMEX close — and it inched higher for the rest of the Friday session.  The dollar index closed on Friday at 96.26 spot, up 47 basis points from Thursday.


Here’s the 6-month U.S. dollar index and, as I said in yesterday’s column, you can read into it whatever you wish, as it’s just as managed as everything else out there is these days.  As GATA’s Chris Powell said back in 2008 — “There are no markets anymore, only interventions.

160806 6-month USD

The gold stocks crashed about 4 percent at the open, but did recover a it by the 10 a.m. EDT gold fix in London.  After that, they didn’t do much, as the HUI closed down 3.43 percent.


The silver equities also got hit for about 4 percent at the open, but from there they rallied until just before the 1:30 p.m. COMEX close.  After that they faded a bit as the trading day came to a close.  But despite the fact that silver got clocked for 65 cents the ounce, Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down only 2.18 percent.  It certainly appeared that someone was ‘buying the dip’ yesterday.  Click to enlarge if necessary.

160806Silver 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, which is also the month-to-date chart as well, since August 1 was on Monday.  It shows the changes 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 these charts.


And here’s the year-to-date changes as of the close of trading yesterday.


The Daily Delivery Report showed that 395 gold and 1 lonely silver contract were posted for delivery within the COMEX-approved depositories on Tuesday.  In gold, the only two short/issuers worth mentioning were International F.C. Stone and ABN Amro with 268 and 125 contracts out of their respective client accounts.  JPMorgan was, once again, the largest long/stopper with 245 contracts for its client[s] plus another 10 for its own account.  Once again Macquarie Futures were there in second place to pick up 77 contracts for its own account.  The rest of the issuers and stoppers are in yesterdays Issuers and Stoppers Report — and that’s linked here.

So far this month, Macquarie Futures has picked up 2,473 gold contracts for its own account — and their accumulation has only started in the last month.  JPMorgan so far in August has stopped 2,969 contracts for its client account, plus another 447 contracts for itself.

The CME Preliminary Report for the Friday trading session showed that gold open interest in August fell by 404 contracts, leaving 2,738 still open, minus the 395 contracts mentioned two paragraphs ago.  Yesterday’s Daily Delivery Report showed that 1,019 gold contracts were issued for delivery on Monday, so that means that 1,019-404=615 gold contracts got added to the August delivery month.  Silver o.i. in August dropped by 56 contracts, leaving 240 still around, minus the 1 lonely silver contract mentioned earlier.  Thursday’s Daily Delivery Report showed that 63 silver contracts were posted for delivery on Monday, so that means that 63-56=7 silver contracts were added to the August delivery month.

Looking at September and October in gold.  Gold o.i. in September fell by 1,662 contracts, leaving 6,276 contracts still open — and October o.i. in gold rose by 316 contracts, bringing the contracts in October still open up to the 48,432 contract mark.

Despite the big drop in the gold price yesterday, a very large 229,077 troy ounces was deposited in GLD.  That deposit takes GLD back almost to its 2016 high which occurred during the first week of July.  Of course, after Friday’s activity — and maybe Monday’s as well — we could see an equally huge withdrawal.  There were no changes in SLV.

There was no sales report from the U.S. Mint on Friday — and month-to-date the mint has sold a laughable 5,500 troy ounces of gold eagles, plus 75,000 silver eagles.  The retail bullion market in the U.S. must be in a world of hurt.

There was a whole bunch more gold deposited at the COMEX-approved warehouses on Thursday.  They received 170,172.450 troy ounces in three different warehouses — and every bar received in all three was in kilobar form.  The gold received at Brink’s, Inc. and Delaware was the U.S./British standard 32.150 troy ounce weight, while the gold received at HSBC USA — 2,500 kilobars — was the Shanghai Gold Exchange weight of 32.151 troy ounces per kilobar.  There was 4,822.500 troy ounces/150 kilobars shipped out of Canada’s Scotiabank.  The link to all of this kilobar activity, in troy ounces, is here.

It was hugely busy in silver as well, as 801,093 troy ounces were reported received — and very healthy 1,749,110 troy ounces were shipped out.  Virtually all of the in/out activity was at CNT and JPMorgan.  The link to all that action is here — and it’s worth a look if you have the interest.

For a change it was rather quiet over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They only received 615 — and shipped out only 378.  All of this activity was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.

The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, showed the expected deteriorations in the Commercial net short positions in both silver and gold.  However, they weren’t nearly as bad as I expected they would be.

In silver, the Commercial net short position increased by 1,998 contracts, or 9.99 million troy ounces of paper silver.  They achieved this by adding 1,008 contracts to their short positions, plus they also added 3,006 contracts to their short position as well, with the difference between those two numbers being the weekly change.  The Commercial net short position is at another new record high of 545.6 million troy ounces of paper silver.

Ted said that the Big 4 traders added about 2,000 contracts to their already outrageous short position — and he ‘5 through 8’ did precisely the same thing.  The small commercial traders, Ted’s raptors, reduced their short position by around 2,000 contracts.  With the new Bank Participation Report in hand, Ted now pegs JPMorgan’s short position at around 35,000 contracts.  Ted says that JPM hasn’t had a silver short position this big since back in 2008/09 when they took over the short positions of Bear Stearns.

Under the hood in the Disaggregated COT Report, it was quite a different story, as the Managed Money traders, instead of adding to their already record long positions, plus reducing their short positions, actually ran for the hills — selling 2,710 long contracts for enormous profits, plus they added 3,281 contracts on the short side.  Ted’s comment to me was that it was non-technical funds in this category that were responsible for these rather counterintuitive changes.  But, having said that, it’s also safe to assume that the brain-dead Managed Money traders that are technically oriented, did add to their long positions, plus reduce their short positions during the reporting week, so it’s reasonable to assume that these non-technical funds sold far more long contracts — and added more short contracts than this report shows.  Even though Ted and I talked about all this for a while, I’ll be more than interested in his final interpretation of these changes.  Of course with these surprise changes, the ‘Other Reportables’ traders, plus the ‘Nonreportable’/small trader categories in the Disaggregated Report went in the other direction to make up the difference.  Ted also mentioned the fact that there may have been a reporting error as well, but the numbers are what they are.

Here’s the 9-year chart for the silver COT Report — and it’s still ugly in the extreme. Click to enlarge.

160806COT - silver

In gold, the Commercial net short position increased by 15,004 contracts, or 1.50 million troy ounce of paper gold.  They arrived at this number by reducing their long position by 3,509 contracts, plus they added 11,495 contracts to their short positions.  The sum of those two numbers is the change for the reporting week.  the Commercial net short position in gold is back up to 32.40 million troy ounces.

Ted said that the Big 4 added around 12,500 contracts to their short positions — and the raptors, the commercial traders other than the Big 8, added another 4,000 or so contracts to their short positions as well.  The ‘5 through 8’ traders reduced their short position by about 1,500 contracts.

Under the hood in the Disaggregated Report, things were a lot more straight forward than they were in silver, although the Managed Money traders accounted for not quite half of the 15,004 contract change in the Commercial net short positions.  During the week they added 9,765 long contracts, plus the added 2,457 short contracts — and the difference between those two number is 9,765-2,457=7,308 contracts.  Almost every other long contract necessary to balance things out came from the ‘Other Reportables’ category, as the ‘Nonreportabe’/small trader category was basically unchanged.

Here’s the 9-year COT chart for gold — and although not at a record high, is still at nose-bleed levels no matter how you care to interpret it.  Click to enlarge.

160806COT - gold

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.

160806Days to Cover

This week’s chart is hugely different from last week.  When I asked Nick why the days-to-cover for the Big 8 traders in silver dropped from 238 days in last week’s chart, to 215 days in this week’s chart, even though the short position in silver was at another new record high: he responded by saying — “It’s because I just updated them all with the latest years production numbers.

I must admit that until I have a firm handle on this, which won’t be until next week, I’ll offer the chart with no comment except to say that the short positions in all four precious metals are outrageous, with silver [as always] being the most egregious of the lot.

The other thing that can be pointed out is the short position of the Big 4 in gold vs. the short position of the ‘5 through 8’ traders — the red bars vs. the green bars in the chart above.  Since one of the largest, if not the largest, trader in the ‘5 through 8’ got bailed out — and the short positions of the non-U.S. bullion banks plunged because of that — see the Bank Participation Report in gold below — the short position of Big 4 now represent 72.5 percent of the short position of the Big 8 traders in gold.  In silver, that number is 69.3 percent.  Talk about concentration — and I know that Ted will have lots to say about it later today in his weekly review.

The Big 8 traders in gold are short 49.1 percent [almost half] of the entire open interest in the COMEX futures market in gold, plus they’re short 46.5 percent of the entire COMEX futures market in silver—and these positions are held against thousands of other traders in these two precious metals who are long the COMEX futures market.   Ted pointed out that if you subtract out the market-neutral spread trades in both these precious metals, the Big 8 are actually short more than 50 percent of the total COMEX open interest in both metals.

How much more outrageous can this get?  And neither the CFTC nor the miners say, or do, anything.

The July Bank Participation Report [BPR] data is extracted directly from the above Commitment of Traders 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 96,818 COMEX contracts in the August BPR.  In July’s Bank Participation Report [BPR], that number was 93,370 contracts, so they’ve increased their collective short positions by a rather smallish 3,448 contracts during the reporting period.  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, but I doubt very much of their positions, long or short, would be material.

Also in gold, 28 non-U.S. banks are net short 74,981 COMEX gold contracts.  In the July BPR 25 non-U.S. banks were net short 98,464 COMEX contracts, so the month-over-month change is monstrous, as they’ve decreased their collective short positions by 23,483 contracts, or 23.8 percent.  Ted’s comment was that the trader in the ‘5 though 8’ category in gold that got bailed out in last week’s COT Report, was a foreign bank.  But which bank it was may never be known.  However it might be Canada’s Scotiabank, as they’re the only foreign bank that I know of with a short position approaching that size.

I’ll be very curious to see what Ted has to say about all this in his weekly review this afternoon.

As of this Bank Participation Report, the world’s banks are net short 29.5 percent of the entire open interest in gold in the COMEX futures market, which is not a big change from the 29.3 percent they were short in the July 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.  That’s why I suspect that it was Scotiabank that got rescued last week. CLICK to ENLARGE is a must here!

160806BPR - gold

In silver, 4 U.S. banks are net short 37,134 COMEX silver contracts—and it was Ted’s back-of-the-envelope calculation from yesterday that JPMorgan holds around 35,000 contracts of that net short position on its own.  The net short position of these five U.S. banks was 32,329 contracts in the July BPR, so there’s been a 4,805 contract increase in the net short positions of the U.S. banks since then. Based on the August 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, 15 non-U.S. banks are net short 37,794 COMEX contracts—and that’s down a hair from the 38,020 contracts that 19 non-U.S. banks held short in the July 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—about the same as JPMorgan holds.  That most likely means that a few of the remaining 14 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 33.4 percent of the entire open interest in the COMEX futures market in silver—which is virtually unchanged from the 33.2 percent that they were net short in the July BPR — with the lion’s share of that is held by JPMorgan and Canada’s Scotiabank.

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!

160806BPR - silver

In platinum, 5 U.S. banks are net short 14,054 COMEX contracts in the August Bank Participation Report.  In the July BPR, these same banks were short 9,892 COMEX platinum contracts, so they’ve increased their net short position by 42 percent in one month.

I’d guess that JPMorgan holds the lion’s share of that 14,054 contract net short position.

Also in platinum, 16 non-U.S. banks are net short 12,169 COMEX contracts, which is virtually unchanged from the 12,570 contracts they held short in July.

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 15 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 33.0 percent of the entire open interest in platinum in the COMEX futures market, which is down a bit from the 35.2 percent they were collectively net short in the June BPR.  CLICK to ENLARGE is a must here as well.

160806BPR - platinum

In palladium, 4 U.S. banks were net short 4,283 COMEX contracts in the July BPR, which is up quite a bit from the 2,532 contracts they held net short in the July BPR.  Even if JPMorgan held all these contracts themselves, and they might, it’s a pretty small amount, but it’s still a month-over-month increase of 69 percent.

Also in palladium, 15 non-U.S. banks are net short 4,480 palladium contracts—which is a pretty big increase from the 2,534 COMEX contracts that these same banks were short in the July 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.

As of this Bank Participation Report, the world’s banks are net short 29.9 percent of the entire COMEX open interest in palladium.  In July’s BPR they were only net short 23.2 percent.

Here’s the palladium BPR chart.  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 their footprint is pretty small now, but has been increasing for the last two months as palladium has rallied.  However, I would still be prepared to bet big money that, like platinum, JPMorgan holds the vast majority of the U.S. banks’ remaining short position in this precious metal.

160806BPR - 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. However, this month may be different, because as I said further up, it looks like it was Scotiabank that got bailed out of its gold short position.

But JPMorgan and Canada’s Scotiabank still remain the two largest silver short holders on Planet Earth in the COMEX futures market.  And it appears that JPMorgan is back in the position of being King Silver Short, but Scotiabank is a very close second.

Here’s a chart the Nick Laird passed around several hour after I’d filed Friday’s column, so here it is now.  It was his answer to a story in Forbes headlined “So Why Do Indian Households Invest So Much In Gold?” — and that story is linked here, plus I have another story about it in the Critical Reads section as well.

Anyhow, Nick went on to say in his covering e-mail that “The real reason why Indians invest in gold is that they would lose too much value by investing in assets valued in Indian Rupees. It’s a simple case of physical vs. fiat and how to preserve one’s wealth.”  Give that man a cigar!

Here’s the gold price in Indian Rupees going all the way back to 1976 — and the reason why they buy so much gold is self-evident.  Click to enlarge.

160806India Gold

And Nick’s next chart is the withdrawals from the Shanghai gold exchange, updated with July’s data — and they reported that the withdrawals for that month totalled 117.6 tonnes.  The ‘click to enlarge‘ feature works well here too.


Despite my best efforts to hack and slash in the editing room, I still have a decent number of stories for you today — and I hope you can find the time in what’s left of your weekend to read the ones that interest you.


July Jobs Report: Trying to Find Meaning in the Meaningless — Jeffrey Snider

The BLS released yet another perfect payroll report for July. It hit on all the major themes, putting further distance to the shocking May number. All the right people have been reassured by all the right parts.

U.S. employment rose at a solid clip in July and wages rebounded after a surprise stall in the prior month, signs of an improving economy that opened the door wider to a Federal Reserve interest rate increase in September…

We view this report as easily clearing the hurdle needed to keep the Fed on track for a September rate hike. The bar for not moving now is much higher,” said Rob Martin, an economist at Barclays in New York.

Unfortunately for anyone who still thinks the Establishment Survey contains useful information, the quotes above were written in August 2015, not August 2016, about the July 2015, not July 2016, jobs figures. That happy sentiment last year at this time was derived from the initial estimate of +215k, less than the current July’s +255k. After revisions showed that, at least according to the BLS view of the trend-cycle world, the labor market last summer was supposedly much stronger than first thought, the Establishment Survey now registers an impressive +277k for July 2015.

And it mattered not one bit.

This commentary by Jeffrey showed up on David Stockman’s website yesterday — and I thank Roy Stephens for today’s first news item.  Another link to it is here.

Earnings beats are concealing bad results

Investors shouldn’t be fooled by this season’s “better-than-expected” earnings—they are still pretty bad.

With nearly 90% of the S&P 500 companies having reported second-quarter results through Friday morning (437 out of 505), aggregate earnings-per-share for the group are on course to decline 3.5% from a year ago, according to FactSet.

Many Wall Street strategists are pleased, because that is a lot better than expectations of a 5.5% decline on June 30, just before earnings reporting season kicked off. So are investors, as the S&P and NASDAQ Composite Index   closed in record territory Friday, and the Dow Jones Industrial Average closed less than 0.3% away.

But that is like saying you should be happy with the “D” you got, because it would really be a “B” if the teacher changed the scale to grade on a curve.

This commentary appeared on the Internet site at 4:13 p.m. on Friday afternoon EDT — and it comes courtesy of Scott Linn.  Another link to this story is here.

This Bond Sale May Solve Wall Street’s $566 Billion Problem

Bonds sold on Thursday could determine whether Wall Street banks stay in the $566 billion business of packaging commercial mortgages into securities.

The nearly $871 million issue, from Wells Fargo & Co., Bank of America Corp., and Morgan Stanley, is the first to comply with new rules designed to make commercial mortgage-backed securities safer for investors.

To meet new regulations, the banks are keeping some of the offering. Bankers across the industry are unsure of a crucial piece of information about the assets that they hang onto: Will regulators view them like bond investments or mortgage loans? If regulators treat them like bonds, more underwriters are likely to exit the business, which generates $2 billion of annual revenue for them, according to research firm Coalition Development.

Any exit would be another blow for Wall Street bond businesses, which have already experienced 30 percent drops in revenue in the last three years after getting hammered by litigation, regulation, and shrinking customer volume. The decline of their commercial mortgage bond units could also make it harder for property owners to borrow. Banks already have $1.9 trillion of the real estate loans on their books, and regulators are pressuring them to reduce risk from the assets.

This Bloomberg article was posted on their Internet site at 5:00 p.m. Denver time on Wednesday — and I thank West Virginia reader Elliot Simon for finding it for us.  Another link to this story is here.

A Global Derivatives Expert Shines the Light on Systematic Risk

As promised in last week’s edition of The Passing Parade, below you’ll find my notes from a wide-ranging and very interesting conversation I had with a friend of mine who recently retired from a position as a very senior risk manager for one of the world’s largest banks.

Unlike most people in his elevated position, my friend—we’ll call him John—is about as down to earth as can be. He lives simply, drives an old truck, and exudes none of the arrogance found in many of his peers.

In fact, if you were to meet him you’d never guess that, until recently, he operated at the very pinnacle of the world of high finance, overseeing tens of billions of dollars of stock, bond, and option transactions on a daily basis.

Given the positions he has held, I strongly suspect he is one of the few people in the world who understands the quadrillion-dollar spider web of derivatives contracts stretching around the globe.

Wow!  This long and somewhat involved interview between David Galland and ‘John’ is definitely a must read.  It appeared on the Internet site yesterday sometime — and it’s the second offering of the day from Roy Stephens.   Another link to this very long, but worthwhile interview is here.

Decline of Empire: Parallels Between the U.S. and Rome, Part III — Doug Casey

Wars made Rome. Wars expanded the country’s borders and brought it wealth, but they also sowed the seeds of its destruction, especially the three big wars against Carthage, 264-146 BCE.

Rome began as a republic of yeoman farmers, each with his own plot of land. You had to be a landowner to join the Roman army; it was a great honor, and it wouldn’t take the riffraff. When the Republic was threatened—and wars were constant and uninterrupted from the beginning—a legionary might be gone for five, ten, or more years. His wife and children back on the farm might have to borrow money to keep things going and then perhaps default, so soldiers’ farms would go back to bush or get taken over by creditors. And, if he survived the wars, an ex-legionary might be hard to keep down on the farm after years of looting, plundering, and enslaving the enemy. On top of that, tidal waves of slaves became available to work freshly confiscated properties. So, like America, Rome became more urban and less agrarian. Like America, there were fewer family farmers but more industrial-scale latifundia.

War turned the whole Mediterranean into a Roman lake. With the Punic wars, Spain and North Africa became provinces. Pompey the Great (106-48 BCE) conquered the Near East. Julius Caesar (100-44 BCE) conquered Gaul 20 years later. Then Augustus took Egypt.

The interesting thing is that in the early days, war was actually quite profitable. You conquered a place and stole all the gold, cattle, and other movable property and enslaved the people. That was a lot of wealth you could bring home—and then you could milk the area for many years with taxes. But the wars helped destroy Rome’s social fabric by wiping out the country’s agrarian, republican roots and by corrupting everyone with a constant influx of cheap slave labor and free imported food. War created longer, faraway borders that then needed to be defended. And in the end, hostile contact with barbarians” actually wound up drawing them in as invaders.

This commentary by Doug is another one that’s certainly worth reading, but it ends in an infomercial as well.  It was posted on the Internet site yesterday sometime — and another link to it is here.

Those Hacked DNC Emails: It Was NSA, Not Putin — Judge Andrew P. Napolitano

On the eve of the Democratic National Convention, WikiLeaks — the courageous international organization dedicated to governmental transparency — exposed hundreds of internal emails circulated among senior staff of the Democratic National Committee during the past 18 months.

At a time when Democratic Party officials were publicly professing neutrality during the party’s presidential primaries, the DNC’s internal emails showed a pattern of distinct bias toward the candidacy of former Secretary of State Hillary Clinton and a marked prejudice toward the candidacy of Sen. Bernie Sanders. Some of the emails were raw in their tone, and some could fairly be characterized as failing to respect Sanders’ Jewish heritage.

The revelation caused a public uproar during the weekend preceding the opening of the Democratic convention in Philadelphia last week, and it caused the DNC to ask its own chairwoman, Rep. Debbie Wasserman Schultz, to resign. When she declined to do so, President Barack Obama personally intervened and implored her to leave. She submitted to the president’s wishes, gave up her public role as chair of the convention and eventually resigned as chair of the DNC late last week.

In order to take everyone’s eyes off this intrusive and uncomfortable bouncing ball, the leadership of the DNC, in conjunction with officials of the Clinton campaign, blamed the release of the DNC emails on hackers employed by Russian intelligence agents. Many in the media picked up this juicy story and repeated it all last week.

But the Russians had nothing to do with it.

This interesting commentary showed up on David Stockmans’ website on Thursday — and it’s a repost from the Lew Rockwell website.  It’s the third offering of the day from Roy Stephens.  Another link to this article is here.

We are all Keynesians now, so let’s get fiscal — Ambrose Evans-Pritchard

The Bank of England has done everything possible under the constraints of monetary orthodoxy to cushion the Brexit shock. It is now up to the British government to save the economy, and the sooner the better.

Monetary policy is close to the limits. The Bank’s pre-emptive £170bn stimulus package is brave – and unquestionably the right thing to do in these dramatic circumstances – but it is not an economic bazooka and much of the boost will leak into asset price inflation.

Governor Mark Carney said the package should be enough to eke out a “little growth” and avert a recession in the second half of the year.

Catastrophist talk of an instant downward spiral following a No vote in the referendum – mostly emanating from George Osborne’s coterie – was always premised on the willfully-false assumption that the Bank of England would sit idly by and let it happen. Today’s actions have at least demolished that canard. As Mr Carney said, the imperative now is to make Brexit a “success”.

This AE-P commentary put in an appearance on the Internet site at 7:12 p.m. BST on their Thursday evening, which was 2:12 p.m. in New York — EDT plus 5 hours — and it’s the fourth and final contribution from Roy Stephens.  Another link to this article is here.

Saving the system — Alasdair Macleod

Monetary policy, we are told, is all about staving off recession and stimulating economic growth.

However, not only is monetary debasement in any form counterproductive and destroys the personal wealth of the masses, but the economists who devised today’s monetarism have completely lost their way.

This article addresses the confusion surrounding this subject, and concludes the real reason for today’s global monetary policies is an ultimately futile attempt to prevent a systemic and economic crisis.

This longish commentary by Alasdair was posted on the Internet site on Thursday sometime — and I found it embedded in a GATA release.  Another link to this article is here.

Doug Noland: Updating Government Finance Quasi-Capitalism

The policy response to the 2008/2009 crisis was nothing short of phenomenal. A Trillion of QE from the Fed, zero rates and massive bailouts. Still, the Fed at the time claimed to be committed to returning to the previous policy regime as soon as practical. The Fed devoted significant resources toward mapping out a return to normalcy, going so far as releasing in 2011 a detailed “exit strategy” for normalizing rates and returning its balance sheet to pre-crisis levels.

But with the European crisis at the brink of turning global back in 2012, it had become clear by that point that thoughts of returning to so-called “normalcy” were illusionary. It may have been the ECB’s Draghi talking “whatever it takes,” but he was speaking for global central bankers everywhere. QE was no longer just a crisis measure. It would effortlessly provide unlimited ammo for which to inflate securities markets and spur risk-taking and economic activity. If zero rates were not providing the expected market response, no reason not to go negative. If buying sovereign bonds wasn’t getting the job done, move on to corporates and equities.

Such a deviant policy backdrop coupled with an already deeply distorted and speculative market backdrop ensured descent into a truly freakish financial landscape. Most obvious, markets have come to largely disregard risk. Serious cracks in China and Europe have been largely ignored by global markets. The increasingly alarming geopolitical backdrop is completely disregarded. Brexit was regarded – for about a trading session. Global economic vulnerability is on full display, though massive QE and negative-yielding developed country sovereign debt ensures a “money” deluge into the corporate debt marketplace. Concern for risk has hurt performance. Recurring bouts of concern puts one’s career at risk – whether one is a portfolio manager, financial advisor, trader, independent investor, analyst or strategist.

I am most nervous because I see no dialing back Government Finance Quasi-Capitalism. Government intervention – in the U.S., Europe, Japan, China and EM – has been so egregious and overpowering that retreat has become unthinkable. Policymakers would have to admit to historic misjudgment – and then be willing to accept the consequences of reversing course. Global markets and economies are now fully dependent upon aggressive fiscal and monetary stimulus. Bubbles are in the process of “going to unimaginable extremes – and then doubling!” Bursting Bubbles will evoke finger-pointing and villainization. That’s when the geopolitical backdrop turns frightening.

Doug’s weekly Credit Bubble Bulletin is always a must read for me.  This week’s edition was posted on his Internet site around midnight Denver time last night.  Another link to his commentary is here.

Trump Jaw-Jaws NATO, WW3, Crimea, Ukraine, ISIS — John Batchelor Interviews Stephen F. Cohen

This week we see our pundits finally reacting to the DNC (and Clinton) allegations that Donald Trump and Putin are somehow comrades – the concept that Trump is a Putin apologist or worse…. Cohen, on the other hand, finds this interesting that in light of all the very recent Putin bashing Trump is still talking in terms of a kind of détente. Given that the whole of the now obviously compromised nature of anti-Russian, anti Putin stance, a presidential candidate is taking such a radical position has to be bizarre in American politics! Even as it is, Trump’s statements are somewhat clumsily expressed. Clinton, on the other hand, is clearly the warmonger and stays firmly hostile against Russia. We are increasingly hearing that voting for Clinton is a vote for war – at least from those that pay attention to the details behind these events.

Trump’s understanding of the strategic nature of NATO is also astute, as are his funding questions regarding budgetary fairness with US allies. But on whether Russia should be treated as a hostile power Trump has clearly come out in favour of moderation. (What is striking in Cohen’s commentary is that prior to the current Ukrainian Civil War there was zero interest for Russia in amalgamating Crimea into Russia from Ukraine!)  Cohen and Batchelor are starting to explain Donald Trumps ideas of how to deal with foreign even “unaligned countries” like Russia and China and they have nothing to do with the Wolfowitz Doctrine or hegemony, and that puts him at odds with both parties and the neocon factions present therein. There follows an interesting discussion on American history of interference in Russian politics and Ukraine as a measure of contrast with what Trump intends as president.

Finally the discussion leads to Syria where events are beginning to take an historic turn for Russia, Syria and ISIS. While the move to détente with Washington weakens – due to Sec. Defence, Ash Carter’s strong statements of opposition – Russian and Syrian forces are preparing for the final assault on Aleppo. To this end they are creating safe corridors for civilians out of the city and even a surrender route for ISIS troops. A major assault is in the works and, if successful, will see Assad get his country back. However, for Obama’s hopes for a “mini-détente” for his legacy as president, the train may have already left the station.

This 40-minute audio interview was posted on the Internet site on Tuesday — and I thank Ken Hurt for sending the link.  But the big THANKS always goes out to Larry Galearis for providing the above executive summary.  Another link to this interview is here.

A Gloomy Egypt Sees Its International Influence Wither Away

In a televised speech, Abdel Fattah el-Sisi, a general turned president, warned Egyptians that they lived in a broken country surrounded by enemies who would never leave them alone.

Take a good look at your country,” he said during the speech in May. “This is the semblance of a state, and not a real state.

Egypt needed law and order and strong institutions if it was to reverse its downward spiral and become “a state that respects itself and is respected by the world,” he said.

While rare in its bluntness, Mr. Sisi’s assessment is widely shared by Egyptians.

After five years of political and economic turmoil, a sense of gloom hangs over the country. Traditionally a leader of the Arab world, politically and culturally, and home to a quarter of its population, Egypt has become inward-looking and politically marginalized in a way not seen for generations.

The country is a basket case — end of story.  This essay, filed from Cairo, appeared on The New York Times back on Tuesday, but for content reasons had to wait for my Saturday column.  It comes courtesy of Patricia Caulfield — and another link to it is here.

Airbus A380 Customer Qantas Doesn’t Want the Last Eight on Order

Qantas Airways Ltd. said it doesn’t want the remaining eight A380s it still has on order because the dozen it operates now are sufficient to meet demand, further dimming future sales prospects for the largest passenger plane that’s struggled to find buyers.

Our intention is that we’re not taking those aircraft,” Qantas Chief Executive Officer Alan Joyce said Friday at an airline conference in Brisbane, Australia.

Qantas was one of the original operators of the A380 and looked to become one of the biggest buyers of the double-decker built by Airbus Group SE. Joyce has pushed back delivery of the remaining planes for about two years now, joining customers including Virgin Atlantic Ltd. that haven’t outright canceled orders but are unlikely ever to have them fulfilled. That leaves Emirates of Dubai as the one committed buyer of the aircraft.

Airbus announced a drastic cut in production last month of the flagship super-jumbo, saying it would build about 12 of the planes annually compared with close to 30 in recent years. The number of aircraft Joyce said he needs is in line with most other operators of the model, including Deutsche Lufthansa AG and British Airways. Emirates’ orders account for close to 50 percent of the model’s backlog.

This brief, but very interesting Bloomberg story, was posted on their website at 4:49 a.m. MDT yesterday morning — and it’s courtesy of Brad Robertson via Zero Hedge.  Another link to this news item is here.

Why Do Indians Spend So Much on Gold? RBI to Study

The Reserve Bank of India has set up a committee to study Indian household financing patterns and why Indians spend large sums on gold.

The panel will look at various facets of household finance in India and to benchmark India’s position vis-a-vis both peer and advanced countries, the RBI said in a statement on Thursday.

The panel, headed by Tarun Ramadorai, professor of financial economics at the University of Oxford, will have representation from financial sector regulators SEBI, IRDAI, and PFRDA apart from the RBI.

It will consider “whether, how, and why the financial allocations of Indian households deviate from desirable financial allocation and behaviour (for example, the large household allocation to gold).

This story showed up on The Times of India website on Thursday sometime.  I found it on the Internet site, complete with Chris Powell’s headline which read “Maybe Indians buy so much gold because their currency is so crappy“.  Another link to this gold-related news item is here.

Chinese gold demand hugely down on a year ago — Lawrie Williams

The Shanghai Gold Exchange (SGE) has just announced its latest monthly gold withdrawals figure for July, which came to 117.6 tonnes, making withdrawals for the year to end July 1,090.7 tonnes, suggesting a full year total of perhaps north of 1,800 tonnes.  Given the PBoC equates SGE withdrawals to its calculation of Chinese gold demand, despite this being hugely in excess of consumption as calculated by the main precious metals research consultancies – in part due to their rigid categorisation as to what should actually be included in their figures -the latest SGE figure might be seen as pretty respectable given they would seem to represent somewhere between 50 and 60% of global new mined gold output.  That is until one compares the latest figures with last year’s SGE gold withdrawals at the same time!

To put it in perspective, last year in July the SGE reported gold withdrawals out of the exchange for that month at a massive 285.5 tonnes, comfortably more than double this year’s statistic.  The year to end July figure in 2015 was 1,463.9 tonnes – which means Chinese gold demand, as expressed by the SGE reports, is running 25% below the levels of a year ago.  Admittedly 2015 was a huge new record year for SGE gold withdrawals – almost 2,600 tonnes for the full year – and the July withdrawals figure was also a record for a single month.  Even so, the latest July figure is the lowest since February this year when the SGE was closed for a week for the Chinese New Year holiday and does suggest that the weak Chinese demand noted by many observers is still in full swing.

This commentary by Lawrie appeared on the Internet site yesterday — and it’s certainly worth reading.  Another link to this article is here.


I took these photos very late in the afternoon on Thursday — and for that reason, the colours are far more vivid than they would be if I’d taken them very early in the afternoon, which is when I normally go out.  The first is a female red-necked grebe in non-breeding colours looking for a young ‘un to give that freshly-caught fish to.  She was a little further away that I wanted, so the image quality is not what I would like.  The second photo is of a pair of Cherry-Faced Meadowhawks ‘doing it’ in the grass.  They were ‘doing it’ in the air too, but until they landed there was no way that I was going to get the shot.  I took it from about 5 meters away, and it’s heavily cropped as well, so the image quality is not what I would like either.  The ‘click to enlarge‘ feature really helps here.

160806 2016 08 01 1

160806 2016 08 01 4

160806Cartoon 8

160806Cartoon 4


Today’s pop blast from the past is a classic from back in 1970 and, arguably, the opening guitar riff is one of the greatest in the history of rock.  Let’s see…2016-1970=46 years ago!  How did we get to be so old?  The link is here.  Enjoy!

Today’s classical ‘blast from the past’ is Antonín Dvořák’s Cello concerto in B minor, Op. 104 which he composed in 1894/95.  I’ve heard it live several times — once with the great cellist Mstislav Rostropovich and also with Yo Yo Ma.  I was listening to it on my home stereo system yesterday — and thought I’d present it as today’s classical selection.  Here is Mstislav himself, who is considered to be the greatest cellist of the 20th century, with the London Symphony — and the link is here.

Not surprisingly, JPMorgan et al used the cover of the job numbers, to beat the living daylights out of all four precious metals, plus copper yesterday.   But it was mostly silver and gold they were after. They also ramped the dollar index pretty good as well.  But the dollar effect faded after the London p.m. gold fix — and had to be ‘rescued’ in afternoon trading in New York.

Since this is my Saturday column, here are the 6-month charts for the Big 6+1 commodities.

160806 6-month gold

160806 6-month silver

160806 6-month platinum

160806 6-month palladium

160806 6-month copper

160806 6-month NG

160806 6-month WTIC

I would suspect, but don’t know for sure, that this is the start of the long-awaited engineered price decline — and how long it lasts, or how deep it goes, is unknown at the moment.  If they’re serious about this, I’m sure they’ll lay another beating on the precious metals at the open on Sunday evening in New York, so I’ll be watching for that when the time comes.

The headline to Alasdair Macleod’s commentary further up is “Saving the System” — and that’s what all these wild financial machinations are about — and have been for almost a generation now.  But after the 2007-2009 melt-down, the situation has become ever more desperate.

And because of that, I think it very apropos at this juncture to dredge up Peter Warburton’s April 2001 essay “The Debasement of World Currency:  It is inflation, but not as we know it” which is linked here.

I’ve lost count of the number of times I’ve linked this piece — and the number of times I’ve quoted from his essay what I consider to the three most important paragraphs ever written about the precious metals price management scheme in particular — and the war against all commodities in general — and here they are:

Central banks are engaged in a desperate battle on two fronts

What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.

It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil, and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world’s large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then the stock of the investment banks would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.

Central banks, and particularly the U.S. Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the US dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade.

If this doesn’t describe what’s going on right now, I don’t know what does.  However, I’m sure that even Warburton has been taken aback by how long and how far this fight has gone on without the whole system imploding.

But sooner or later it will — and probably sooner, rather than later.

I’m done for the day — and the week — and I’ll see you on Tuesday.



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