Sunday, September 22, 2019

Steve St. Angelo – It’s All About Energy

by Kerry Lutz, Financial Survival Network:

We’re doomed! So says our good friend Steve St. Angelo. The return on energy invested (eroi) is going down to crisis levels. This will result in a future crisis and this is what assures the ultimate value of gold and silver. That’s why there’s so much debt holding up the edifice of the economy. Once the debt goes, everything goes with it.

Click HERE to listen

Read More @ FinancialSurvivalNetwork.com

Find The Sentence That Dooms Pension Funds (Don’t Worry, It’s Highlighted)

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by John Rubino, Dollar Collapse:

The “pension crisis” is one of those things — like electric cars and nuclear fusion — that’s definitely coming but never seems to actually arrive. However, for pension funds the reason a crisis hasn’t yet happened is also the reason that it will happen, and soon:

The Risk Pension Funds Can’t Escape

(Wall Street Journal) – Public pension funds that lost hundreds of billions during the last financial crisis still face significant risk from one basic investment: stocks.

 

That vulnerability came into focus earlier this month as markets descended into correction territory for the first time since February 2016. The California Public Employees’ Retirement System, the largest public pension fund in the U.S., lost $18.5 billion in value over a 10-day trading period ended Feb. 9, according to figures provided by the system.

The sudden drop represented 5% of total assets held by the pension fund, which had roughly half of its portfolio in equities as of late 2017. It gained back $8.1 billion through last Friday as markets recovered.

“It looks like 2018 is likely to be more turbulent than what we have experienced the last couple of years,” the fund’s chief investment officer, Ted Eliopoulos, told his board last Monday at a public meeting.

Retirement systems that manage money for firefighters, police officers, teachers and other public workers are increasingly reliant on stocks for returns as the bull market nears its ninth year. By the end of 2017, equities had surged to an average 53.6% of public pension portfolios from 50.3% one year earlier, according to figures released earlier this month by the Wilshire Trust Universe Comparison Service.

Those average holdings were the highest on a percentage basis since 2010, according to the Wilshire Trust Universe Comparison Service data, and near the 54.6% average these funds held at the end of 2007.

One reason public pensions are so willing to bet on stocks is because of aggressive investment targets designed to fulfill mounting obligations to millions of government workers. The goal of most pension funds is to pay for those future benefits by earning 7% to 8% a year.

“Equities always take up a disproportionate share of the risk budget that any plan has,” said Wilshire Consulting President Andrew Junkin, who advises public pension funds. “You can never get away from it.”

That stance paid off during 2017’s market rally as public pensions had one of their best years of the past decade. They earned 12.4% in the 2017 fiscal year ended June 30, according to Wilshire Trust Universe Comparison Service.

But the risks are sizable losses during market downturns, which then can lead to deeper funding problems. The two largest public pensions in the U.S.—California Public Employees’ Retirement System, known by its abbreviation Calpers, and the California State Teachers’ Retirement System—lost nearly $100 billion in value during the fiscal year ended June 30, 2009. Nearly a decade later, neither fund has enough assets on hand to meet all future obligations to their workers and retirees.

 

Many funds burned by the 2008-2009 downturn tried to diversify their investment mix. They lowered their holdings of bonds as interest rates dropped and turned to real estate, commodities, hedge funds and private-equity holdings. These so-called alternative investments rose to 26% of holdings at about 150 of the biggest U.S. funds in 2016, according to the Public Plans Database, compared with 7% more than a decade earlier.

At the same time, the amount invested in stocks crept upward as markets roared back—and equities remain the single largest holding among all funds. The $209.1 billion New York State Common Retirement Fund increased its equity holdings to 58.1% as of Dec. 31 as compared with 56% as of June 30. That allocation is now higher than the 54% held as of March 31, 2008.

The $19.9 billion Teachers’ Retirement System of Kentucky now has 62% of its assets in equities, close to the 64% it had in 2007. It sold $303 million in stocks Jan. 19-20 to rebalance its portfolio following gains. From Feb. 6-8, as U.S. markets plunged, the fund bought another $103.5 million of stocks.

“We are definitely a long-term investor and look to volatility as an investing opportunity,” said Beau Barnes, the system’s deputy executive secretary and general counsel.

Calpers had a chance to pull back on stocks in December and decided against it. Directors considered a 34% allocation to equities, down from 50%. They also considered a higher allocation.

In the end, the fund opted to raise its equities target to 50% from 46% as of July 1 and its fixed-income target to 28% from 20%. It had 49.8% of its portfolio in equities as of Oct. 31, according to the fund’s website. That is close to the 51.6% it had in stocks for the fiscal year ended June 30, 2008.

To put the above in historical context:

Thirty or so years ago, state and local politicians and the leaders of their public employee unions had a shared epiphany: If they offered workers hyper-generous pensions they could buy labor peace without having to grant eye-popping and headline-grabbing wage increases. And if they made unrealistically high assumptions about the returns they could generate on pension plan assets they could keep required contributions nice and low, thus making both workers and taxpayers happy. The result: job security for politicians and union leaders and a false sense of affluence for workers and taxpayers.

Read More @ DollarCollapse.com

China’s Most Powerful Weapon in the Coming Trade War

by Nick Giambruno, International Man:

“When any market is down 90%, you’re obligated to go and investigate.”

That’s what Doug Casey often says. And it’s part of the reason I put my boots on the ground in China a few months ago.

As I told you yesterday, the country has a monopoly on a little-known resource market. For years, stocks in this sector only went down. The industry was left for dead… until recently.

The last time this happened, the price of this resource skyrocketed over 10 times almost overnight.

And, as I’ll show in a moment, I think there’s a strong chance a similar mania will start soon…

China’s Monopoly

Most people have never heard of the material China controls. But it’s essential to modern life.

It’s used to make crucial components for advanced electronics like iPhones, electric cars, flat-screen TVs, computers, and sophisticated military equipment—like guidance systems, drones, anti-missile systems, radars, and fighter jets.

The United States’ top-line fighter jet, the F-35, contains nearly 450 kilograms of this material.

There’s no substitute for this resource in these advanced electronics. The US military and US consumer depend on it.

The problem is that finding this material isn’t cheap. And once you find it, mining it is expensive and messy. It takes about 40 tonnes of rock (40,000 kilograms) to get only about 250 kilograms of this valuable material.

The costs are even higher if you separate the material from the ore in an environmentally friendly way.

But China is willing to do the dirty work.

Beijing helps by subsidizing the industry. Meanwhile, many companies in other countries—operating without hefty state subsidies—go bankrupt.

Plus, China doesn’t fret about the environmental fallout as much as other countries. This lets it produce the material at a much lower cost than its competitors.

Until recently, one company in the US still produced a small amount of this material. Then, after a spat with a neighboring country, China flooded the market with supply. This oversupply drove the last US company out of business.

According to a US Congressional report:

[China] flooded the market by more than tripling the previous world supply of the materials. During this time, [Chinese firms] were largely unprofitable but were allowed to survive through direct and indirect support by the Chinese government.

This backing enabled [China’s industry] to continue to mine and export these materials at prices far below the actual costs of production…

Mines in the United States and elsewhere, unable to remain profitable against cheap Chinese exports, went out of business.

This is how China undercut everyone else and came to dominate the industry. Today, China produces around 90% of global supplies of this material.

In short, no one poses a serious threat to China’s monopoly. China can simply hold prices lower for longer than any competitor can stay solvent.

This unchallenged monopoly could quickly become a huge problem for the US. But the US government won’t just sit on its hands…

The US-China Trade War Is Heating Up

Regular readers know I think a full-blown trade war between the US and China is imminent. And we’ve already heard the opening shot.

Let me explain…

Early on in his presidency, Donald Trump indicated that he wouldn’t handle China like the previous US presidents.

In January 2017, he became the first president in 40 years to speak with the leader of Taiwan, an island off the coast of China that Beijing considers a renegade province.

Even during the campaign, Trump famously threatened a 45% tariff on Chinese goods entering the US.

He also said China was sucking “the blood out of the United States” and “we can’t continue to allow China to rape our country, and that’s what they’re doing.”

Read More @ InternationalMan.com

Turkey Will Be Ground Zero in the Next Global Debt Crisis

by Jim Rickards, Daily Reckoning:

Turkey is a beautiful country with a rich history including Greek, Roman and Muslim influences that make it one of the most fascinating places on Earth. It is literally a bridge between East and West: The mile-long Bosporus Bridge just north of Istanbul connects Europe and Asia across the Bosporus Strait.

Turkey has been a magnet for direct foreign investment from abroad and dollar-denominated loans by international banks to local enterprises. This investment enthusiasm is understandable given Turkey’s well-educated population of 83 million and its rank as the 17th-largest economy in the world, with a GDP of just under $1 trillion.

The flood of bank lending and direct foreign investment has given rise to another flood of hot-money portfolio investors in Turkish stocks chasing high returns with cheap dollar funding in a variation of the global carry trade. So-called emerging-market (EM) funds offered by Morgan Stanley, Goldman Sachs and others are stuffed full of Turkish stocks and bonds.

  Your correspondent in central Istanbul, Turkey, on the site of the ancient Hippodrome, where chariot races were still held in late antiquity. In my many visits there since 1996, I have observed Turkey’s shift from a firmly secular society to one dominated by religious and authoritarian rule. As Turkey turns its back on Western society, it still relies on Western institutions to deal with potential debt, currency and reserve crises. Turkey’s new alienation from the West may mean that Western help will not be available in a future financial crisis.
Your correspondent in central Istanbul, Turkey, on the site of the ancient Hippodrome, where chariot races were still held in late antiquity. In my many visits there since 1996, I have observed Turkey’s shift from a firmly secular society to one dominated by religious and authoritarian rule. As Turkey turns its back on Western society, it still relies on Western institutions to deal with potential debt, currency and reserve crises. Turkey’s new alienation from the West may mean that Western help will not be available in a future financial crisis.

But there’s a dark side to this seeming success story. Turkey’s external dollar-denominated debt is so large that a combination of rising U.S. dollar interest rates and a slowing global economy could quickly turn Turkey from model EM to the canary in the coal mine of the next great global debt crisis.

The risk of a major debt crisis beginning in Turkey is heightened by the rise of Turkey’s President Recep Tayyip Erdoğan as an autocratic strongman in the mold of Argentina’s Juan Perón and other populist nationalists who have ruined strong economies.

Begin with a look at the Turkish debt situation. Turkey’s debt is huge, one of the highest debt burdens of any EM. Turkey owes $450 billion to foreign creditors, of which $276 billion is denominated in hard currency, mostly dollars and euros. The remainder of $174 billion is denominated in Turkey’s local currency, the lira.

Both kinds of debt are problematic. The lira debt is a growing burden because lira interest rates have skyrocketed from 6% to 12% in the past five years.

The foreign currency debt is problematic for two reasons. The first is that the lira has devalued from 1.75 to 3.89 to the dollar since 2013, which increases the amount of lira needed by local companies to repay their external debt. The second reason is that U.S. and euro interest rates are starting to rise, which also makes the external debt burden more difficult to service.

Turkey’s hard currency reserve position is adequate for the moment, with about 100% coverage of foreign debt. The problem is not an immediate debt crisis but the likelihood that foreign credit could dry up or reserves could drain quickly, leading to a tipping point and a rapid loss of confidence.

Unfortunately, there are numerous economic and geopolitical catalysts for such a loss of confidence. The principal catalyst is a sharp deterioration in Turkey’s relations with the West and increasing links between Turkey and Russia that could lead to a crisis.

Recent polls show that 68% of Turkish citizens believe that Turkey’s alliance with Europe and the U.S. is breaking down. The same poll shows 71.5% of Turkish citizens believe that Turkey should enter into an economic, political and security alliance with Russia.

Another irritant is the widespread belief in Turkey that the U.S. played a role in the attempted military coup d’état against President Erdoğan in July 2016. This suspicion is heightened by the fact that the U.S. refuses to extradite Erdoğan’s political enemy, Fethullah Gülen, who lives in exile in Pennsylvania.

Erdoğan alleges that Gülen tried to force him from office in 2013 based on false charges — what Erdoğan called a “judicial coup.” The combined impact of a so-called judicial coup and an actual military coup attempt have led to profound distrust between the U.S. and Turkey.

The U.S. court system is also currently hearing a trial in which a Turkish-Iranian gold dealer, Reza Zarrab, has turned state’s witness and is providing testimony involving bribes and kickbacks by the Erdoğan government.

The U.S. government’s main charge is that Turkey helped both Russia and Iran avoid U.S. government economic sanctions. A newly passed Russian sanctions bill would impose severe penalties on Turkey if it goes ahead with a proposed purchase of Russian anti-aircraft systems.

A more serious point of contention between the U.S. and Turkey involves the role of the Kurds in Syria. From Turkey’s perspective, the Kurds are a separatist movement that threatens the territorial integrity of Turkey. The most extreme Kurds are pushing for an independent Kurdistan that would include parts of present-day Turkey, Syria, Iraq and Iran.

From the U.S. perspective, the Kurds are a potent fighting force who have been instrumental in the decimation of ISIS and are now playing a key role in support of Syrian freedom fighters opposing the regime of Syrian President Bashar al-Assad. The Kurds are bitter enemies of Turkey and good friends with the U.S.

Another confrontation between the U.S. and Turkey is emerging over the status of Qatar. Saudi Arabia economically isolated and physically blockaded Qatar because of its support for terrorists and Islamic radicals. The U.S. has tried to mitigate this conflict but on balance supports the Saudi position.

Turkey has come to the aid of Qatar with both financial support and a military presence. A war between Saudi Arabia and Qatar would, in effect, be a proxy war between the U.S. and Turkey, two erstwhile NATO allies.

In short, U.S.-Turkish relations are at their lowest point since the breakup of the Ottoman Empire in 1922.

This deterioration in relations has important economic implications. If Turkey were to find itself in financial distress — a highly likely outcome in the near future — the usual place to turn for a financial lifeline is the IMF. However, the U.S. and its Western allies, especially Germany, have effective veto power over IMF bailouts.

The U.S. might demand conditions on any IMF assistance to Turkey in the form of compliance with Russia sanctions. Turkey would likely reject such conditions leading to an impasse on the subject of IMF aid.

Read More @ DailyReckoning.com

GOLD UP 90 CENTS TO $1329.95/SILVER UP 15 CENTS, BUT CROOKS RAID IN ACCESS ON DOVISH FOMC

by Harvey Ogan, Harvey Organ Blog:

WITH YESTERDAY’S WHACKING, COMEX SILVER OPEN INTEREST SURPRISINGLY RISES BY 3800 CONTRACTS AND ON TOP OF THAT OVER 1300 EFP CONTRACTS ISSUED FOR SILVER/ IN GOLD COMEX OI LOST 7921 CONTRACTS BUT THERE WAS A HUGE 13000 PLUS EFP TRANSFER DESPITE THE HUGE DRUBBING GOLD TOOK YESTERDAY/MORE SWAMP STORIES FOR YOU TODAY

GOLD: $1329.95 UP $0.90

Silver: $16.63 UP 15 cents

Closing access prices:

Gold $1324.50

silver: $16.50

SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)

SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)

SHANGHAI FIRST GOLD FIX: $XXXX DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME: $XXXX

PREMIUM FIRST FIX: $xxx

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SECOND SHANGHAI GOLD FIX: $XXXX

NY GOLD PRICE AT THE EXACT SAME TIME: $xxx

discount of Shanghai 2nd fix/NY:$

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LONDON FIRST GOLD FIX: 5:30 am est $1328.60

NY PRICING AT THE EXACT SAME TIME: $1328.75

LONDON SECOND GOLD FIX 10 AM: $1339.85

NY PRICING AT THE EXACT SAME TIME. $1340.30

For comex gold:

FEBRUARY/

NUMBER OF NOTICES FILED TODAY FOR FEBRUARY CONTRACT: 0 NOTICE(S) FOR nil OZ.

TOTAL NOTICES SO FAR:1784 FOR 178400 OZ (5.5489 TONNES),

For silver:

FEBRUARY

76 NOTICE(S) FILED TODAY FOR

380,000 OZ/

Total number of notices filed so far this month: 386 for 1,930,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Bitcoin: BID $10,971/OFFER $11,050: DOWN $203(morning)

Bitcoin: BID/ $10,379/offer $10,499: DOWN $811  (CLOSING/5 PM)

 

end

Let us have a look at the data for today\

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In silver, the total open interest ROSE BY A HUGE SIZED 3777 contracts from 199,852  RISING TO 203,629 DESPITE  YESTERDAY’S 29 CENT LOSS IN SILVER PRICING. SHOCKINGLY WE HAD ZERO COMEX LIQUIDATION. HOWEVER, WE WERE AGAIN NOTIFIED THAT WE HAD ANOTHER FAIR SIZED NUMBER OF COMEX LONGS TRANSFERRING THEIR CONTRACTS TO LONDON THROUGH THE EFP ROUTE:  1293 EFP’S FOR MARCH AND AND 28 EFP’S FOR MAY AND ZERO FOR ALL  OTHER MONTHS  AND THUS TOTAL ISSUANCE OF 1321 CONTRACTS.  WITH THE TRANSFER OF 1321 CONTRACTS, WHAT THE CME IS STATING IS THAT THERE IS NO SILVER (OR GOLD) TO BE DELIVERED UPON AT THE COMEX AS THEY MUST EXPORT THEIR OBLIGATION TO LONDON. ALSO KEEP IN MIND THAT THERE CAN BE A DELAY OF 24 HRS IN THE ISSUING OF EFP’S. THE 1321 CONTRACTS TRANSLATES INTO 6.605 MILLION OZ DESPITE  WITH THE CONTINUAL DROP IN OPEN INTEREST IN SILVER AT THE COMEX.

ACCUMULATION FOR EFP’S/SILVER/J.P.MORGAN’S HOUSE OF BRIBES, / STARTING FROM FIRST DAY NOTICE/FOR MONTH OF FEBRUARY:

40,269 CONTRACTS (FOR 15 TRADING DAYS TOTAL 40,269 CONTRACTS OR 201.345 MILLION OZ: AVERAGE PER DAY: 2685 CONTRACTS OR 13.423 MILLION OZ/DAY)

TO GIVE YOU AN IDEA AS TO THE HUGE SUPPLY THIS MONTH IN SILVER:  SO FAR THIS MONTH:  201.345 MILLION PAPER OZ HAVE MORPHED OVER TO LONDON. THIS REPRESENTS AROUND 28.77% OF ANNUAL GLOBAL PRODUCTION

ACCUMULATION IN YEAR 2018 TO DATE SILVER EFP’S:  449.88 MILLION OZ.

ACCUMULATION FOR JAN 2018: 236.879 MILLION OZ

RESULT: A HUGE SIZED GAIN IN OI SILVER COMEX DESPITE THE  29 CENT GAIN IN SILVER PRICE.  WE ALSO HAD A GOOD SIZED EFP ISSUANCE OF 1321 CONTRACTS WHICH EXITED OUT OF THE SILVER COMEX AND TRANSFERRED THEIR OI TO LONDON AS FORWARDS. SPECULATORS CONTINUED THEIR INTEREST IN ATTACKING THE SILVER COMEX FOR PHYSICAL SILVER . FROM THE CME DATA 1321 EFP’S  FOR  MONTHS MARCH AND MAY WERE ISSUED FOR TODAY  FOR A DELIVERABLE FORWARD CONTRACT OVER IN LONDON WITH A FIAT BONUS.   WE GAINED  5098 OI CONTRACTS i.e. 1321 open interest contracts headed for London (EFP’s) TOGETHER WITH A INCREASE OF 3777  OI COMEX CONTRACTS. AND ALL OF THIS HAPPENED WITH THE FALL IN PRICE OF SILVER OF  29 CENTS AND A CLOSING PRICE OF $16.48 WITH RESPECT TO YESTERDAY’S TRADING. YET WE STILL HAVE A FAIR AMOUNT OF SILVER STANDING AT THE COMEX.

In ounces AT THE COMEX, the OI is still represented by just OVER 1 BILLION oz i.e. 1.0195 BILLION TO BE EXACT or 146% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT FEBRUARY MONTH/ THEY FILED: 386 NOTICE(S) FOR 380,000 OZ OF SILVER

In gold, the open interest  FELL BY AN SURPRISINGLY SMALL 7921 CONTRACTS DOWN TO 528,154 DESPITE THE HUGE FALL IN PRICE OF GOLD WITH YESTERDAY’S TRADING ($24.15). HOWEVER, IN ANOTHER DEVELOPMENT, WE RECEIVED THE TOTAL NUMBER OF GOLD EFP’S ISSUED FOR WEDNESDAY AND IT TOTALED AN HUGE SIZED  13,134 CONTRACTS OF WHICH  APRIL SAW THE ISSUANCE OF 13,134 CONTRACTS AND  JUNE SAW THE ISSUANCE OF 0 CONTRACTS AND THEN ALL OTHER MONTHS ZERO.    The new OI for the gold complex rests at 530,573. ALSO REMEMBER THAT THERE WILL BE A DELAY IN THE ISSUANCE OF EFP’S.  THE BANKERS REMOVE LONG POSITIONS OF COMEX GOLD IMMEDIATELY.  THEN THEY ORCHESTRATE THEIR PRIVATE EFP DEAL WITH THE LONGS AND THAT COULD TAKE AN ADDITIONAL 48 HRS SO WE GENERALLY DO NOT GET A MATCH WITH RESPECT TO DEPARTING COMEX LONGS AND NEW EFP LONG TRANSFERS. DEMAND FOR GOLD INTENSIFIES GREATLY AS WE CONTINUE TO WITNESS A HUGE NUMBER OF EFP TRANSFERS TOGETHER WITH THE MASSIVE INCREASE IN GOLD COMEX OI  TOGETHER WITH  THE TOTAL AMOUNT OF GOLD OUNCES STANDING FOR FEBRUARY COMEX. EVEN THOUGH THE BANKERS ISSUED THESE MONSTROUS EFPS, THE OBLIGATION STILL RESTS WITH THE BANKERS TO SUPPLY METAL BUT IT TRANSFERS THE RISK TO A LONDON BANKER OBLIGATION AND NOT A NEW YORK COMEX OBLIGATION. LONGS RECEIVE A FIAT BONUS TOGETHER WITH A LONG LONDON FORWARD. THUS, BY THESE ACTIONS, THE BANKERS AT THE COMEX HAVE JUST STATED THAT THEY HAVE NO APPRECIABLE METAL!! THIS IS A MASSIVE FRAUD: THEY CANNOT SUPPLY ANY METAL TO OUR COMEX LONGS BUT THEY ARE QUITE WILLING TO SUPPLY MASSIVE NON BACKED GOLD (AND SILVER) PAPER KNOWING THAT THEY HAVE NO METAL TO SATISFY OUR LONGS. LONDON IS NOW SEVERELY BACKWARD IN BOTH GOLD AND SILVER (BIG RISE IN BOTH GOFO AND SIFO) AND WE ARE WITNESSING DELAYS IN ACTUAL DELIVERIES. IN ESSENCE TODAY DESPITE YESTERDAY’S TRADING IN GOLD,  WE HAVE A GAIN OF 5213  CONTRACTS: 7921 OI CONTRACTS DECREASED AT THE COMEXAND A HUGE SIZED  13,134 OI CONTRACTS WHICH NAVIGATED OVER TO LONDON.(5131 oi gain in CONTRACTS EQUATES TO 15.95 TONNES) AND ALL OF THIS GAIN HAPPENED WITH A MONSTROUS RAID AND A FALL IN PRICE OF $24.15

YESTERDAY, WE HAD 6434 EFP’S ISSUED.

ACCUMULATION OF EFP’S GOLD AT J.P. MORGAN’S HOUSE OF BRIBES: (EXCHANGE FOR PHYSICAL) FOR THE MONTH OF FEBRUARY STARTING WITH FIRST DAY NOTICE: 172,222 CONTRACTS OR 17,222,000  OZ OR 535.67 TONNES (15 TRADING DAYS AND THUS AVERAGING: 11,481 EFP CONTRACTS PER TRADING DAY OR 1,148,100 OZ/ TRADING DAY)

TO GIVE YOU AN IDEA AS TO THE HUGE SIZE OF THESE EFP TRANSFERS :   SO FAR THIS MONTH IN 15 TRADING DAYS: IN  TONNES: 535.67 TONNES

TOTAL ANNUAL GOLD PRODUCTION, 2017, THROUGHOUT THE WORLD EX CHINA EX RUSSIA: 2200 TONNES

THUS EFP TRANSFERS REPRESENTS 535.67/2200 x 100% TONNES =  24.34% OF GLOBAL ANNUAL PRODUCTION SO FAR IN FEBRUARY ALONE.

ACCUMULATION OF GOLD EFP’S YEAR 2018 TO DATE:  1169.08 TONNES

ACCUMULATION OF GOLD EFP’S FOR JANUARY 2018: 653.22  TONNES

Result: A  GOOD SIZED DECREASE IN OI AT THE COMEX WITH THE HUGE FALL IN PRICE IN GOLD TRADING YESTERDAY ($24.15).  HOWEVER, WE HAD ANOTHER GOOD SIZED NUMBER OF COMEX LONG TRANSFERRING TO LONDON THROUGH THE EFP ROUTE: 13,134 CONTRACTS AS THESE HAVE ALREADY BEEN NEGOTIATED AND CONFIRMED.   THERE OBVIOUSLY DOES NOT SEEM TO BE MUCH PHYSICAL GOLD AT THE COMEX AND YET WE ALSO OBSERVED A HUGE DELIVERY MONTH FOR THE MONTH OF DECEMBER. I GUESS IT EXPLAINS THE HUGE ISSUANCE OF EFP’S…THERE IS HARDLY ANY GOLD PRESENT AT THE GOLD COMEX FOR DELIVERY PURPOSES. IF YOU TAKE INTO ACCOUNT THE 13,134 EFP CONTRACTS ISSUED, WE HAD A NET GAIN IN OPEN INTEREST OF 5213 contracts ON THE TWO EXCHANGES:

13134 CONTRACTS MOVE TO LONDON AND  7921 CONTRACTS DECREASED AT THE COMEX. (in tonnes, the GAIN in total oi equates to 16.21 TONNES).

we had: 0 notice(s) filed upon for NIL oz of gold.

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With respect to our two criminal funds, the GLD and the SLV:

GLD

WITH GOLD UP $0.90 /NO CHANGE IN GOLD INVENTORY AT THE GLD/

Inventory rests tonight: 827.79 tonnes.

SLV/

 

WITH SILVER UP 15 CENTS TODAY: 

A BIG CHANGE IN SILVER INVENTORY AT THE SLV/A DEPOSIT OF:1.226 MILLION OZ OF SILVER

/INVENTORY RESTS AT 315.271 MILLION OZ/

end

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver ROSE BY A HUGE 3777  contracts from 199,730 UP TO 203,629 (AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) DESPITE  THE HUGE SIZED FALL  IN PRICE OF SILVER  (29 CENTS WITH RESPECT TO  YESTERDAY’S TRADING).   OUR BANKERS USED THEIR EMERGENCY PROCEDURE TO ISSUE ANOTHER GOOD 1293 PRIVATE EFP’S FOR MARCH AND 28 EFP CONTRACTS OR MAY  (WE DO NOT GET A LOOK AT THESE CONTRACTS AS IT IS PRIVATE BUT THE CFTC DOES AUDIT THEM) AND 0 EFP’S FOR ALL OTHER MONTHS .  EFP’S GIVE OUR COMEX LONGS A FIAT BONUS PLUS A DELIVERABLE PRODUCT OVER IN LONDON. WE HAD SOME COMEX SILVER COMEX LIQUIDATION. IF WE TAKE THE  OI GAIN AT THE COMEX OF  4092 CONTRACTS TO THE 1321 OI TRANSFERRED TO LONDON THROUGH EFP’S, WE OBTAIN A GAIN OF  5098  OPEN INTEREST CONTRACTS .  WE STILL HAVE A GOOD AMOUNT OF SILVER OUNCES THAT ARE STANDING FOR METAL IN JANUARY (SEE BELOW). THE NET GAIN TODAY IN OZ ON THE TWO EXCHANGES:  25.49 MILLION OZ!!!

RESULT: A STRONG SIZED INCREASE IN SILVER OI AT THE COMEX DESPITE THE HUGE SIZED FALL OF 29 CENTS IN PRICE (WITH RESPECT TO YESTERDAY’S TRADING ). BUT WE ALSO HAD ANOTHER GOOD 1321 EFP’S ISSUED TRANSFERRING COMEX LONGS OVER TO LONDON. TOGETHER WITH THE GOOD  SIZED AMOUNT OF SILVER OUNCES STANDING FOR FEBRUARY, DEMAND FOR PHYSICAL SILVER INTENSIFIES AS WE WITNESS MAJOR BANK SHORT COVERING ACCOMPANIED BY INCREASES IN GOFO AND SIFO RATES INDICATING SCARCITY.

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY: Bloomberg

3. ASIAN AFFAIRS

i)Late TUESDAY night/WEDNESDAY morning: Shanghai closed /Hang Sang CLOSED UP 558.26 POINTS OR 1.81% / The Nikkei closed UP 45.71 POINTS OR 0.21%/Australia’s all ordinaires CLOSED UP 0.03%/Chinese yuan (ONSHORE) closed UP at 6.3415/Oil DOWN to 61.48 dollars per barrel for WTI and 65.14 for Brent. Stocks in Europe OPENED DEEPLY IN THE RED  .   ONSHORE YUAN CLOSED XXX AGAINST THE DOLLAR AT XXX. OFFSHORE YUAN CLOSED XXX AGAINST  THE ONSHORE YUAN AT XXX//ONSHORE YUAN /OFFSHORE YUAN NOT TRADIN

Read More @ HarveyOrganBlog.com

Is that Cartel of Wall Street Lawyers Fixing Bank CEO Pay?

by Pam Martens and Russ Martens, Wall St On Parade:

Nothing buttresses Senator Bernie Sanders’ position that fraud on Wall Street is not a bug but a feature better than the news last week that the Citigroup Board was bumping up CEO Michael Corbat’s pay by 48 percent to $23 million for 2017. Corbat has sat at the helm of the bank since October 2012 as the bank has paid more than $12 billion in fines and restitution for serial abuses of the public and investors, including its first criminal felony count in more than a century of existence. The felony count came on May 20, 2015 from the U.S. Department of Justice over the bank’s involvement in a bank cartel that was rigging foreign currency markets. Numerous other charges against the bank have focused on money-laundering. Citigroup’s long history of involvement in money-laundering also gives the appearance of being a feature not a bug. (See a timeline of the charges against Citigroup under Corbat’s tenure at the end of this article.)

Aside from the feeling that overseeing a business model of fraud on Wall Street is a road to riches for Wall Street’s mega bank CEOs, there is the disquieting question as to whether this strangely uniform obscene pay of the top dogs on Wall Street is being orchestrated by another invisible cartel.

On October 14, 2016 Bloomberg News’ reporters Greg Farrell and Keri Geiger landed the bombshell report that the top lawyers of the biggest Wall Street banks had been meeting secretly for two decades with their counterparts at international banks. At the 2016 secret meeting, held in May at a posh hotel in Versailles, the following were among the big bank lawyers: Gregory Palm, part of the Management Committee at Goldman Sachs; Stephen Cutler of JPMorgan (a former Director of Enforcement at the SEC); Gary Lynch of Bank of America (also a former Director of Enforcement at the SEC); Morgan Stanley’s Eric Grossman; Citigroup’s Rohan Weerasinghe; Markus Diethelm of UBS Group AG; Richard Walker of Deutsche Bank (again, a former Director of Enforcement at the SEC); Robert Hoyt of Barclays; Romeo Cerutti of Credit Suisse Group AG; David Fein of Standard Chartered; Stuart Levey of HSBC Holdings; and Georges Dirani of BNP Paribas SA.

Reuters reported last Friday how Corbat’s $23 million pay compared to his peers on Wall Street. It noted that Jamie Dimon, CEO of JPMorgan Chase is now making $29.5 million. (Dimon has presided over three criminal felony counts at the bank within the past four years while keeping his job and watching his pay skyrocket.) Morgan Stanley CEO James Gorman is making $27 million. Lloyd Blankfein, whose bank is tiny compared to JPMorgan Chase, is making $22 million. And Bank of America’s CEO Brian Moynihan is being paid the same as Corbat, $23 million after recently getting a 15 percent pay boost.

Every one of the top lawyers of these banks were at that secret confab in 2016.

The most recent proxy filed by JPMorgan Chase goes to inordinate lengths to justify what it is paying its CEO Jamie Dimon. It includes a graph comparing his pay to peer bank CEOs and another graph that shows what percent of profits he and the CEOs of peer banks are receiving. (How that became a relevant metric is anyone’s guess. These are not, after all, family-owned businesses but banks that are subsidized by a taxpayer backstop for their trillions in insured deposits which typically earn less than one percent interest as the banks simultaneously charge 10 to 20 percent interest on their credit cards issued to the struggling middle class of America.)

A better metric would be how much shareholders have lost from fines and settlements under the reigning CEO. In Jamie Dimon’s case, it’s north of $36 billion since the financial crisis in 2008. Additionally, there’s those three criminal felony counts, the first in the bank’s more than century-old existence. Two felony counts were leveled by the U.S. Justice Department in 2014 for the bank’s role in Bernie Madoff’s Ponzi scheme. Another felony count came the very next year for the bank’s role in the foreign exchange rigging.

The era of obscene pay on Wall Street has occurred side-by-side with the era of serial charges of crimes. There is only one way to interpret this: the Boards of Directors of these banks have lost their moral compass.

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A sampling of charges against Citigroup since Michael Corbat became CEO:

July 1, 2013: Citigroup agrees to pay Fannie Mae $968 million for selling it defective mortgage loans.

September 25, 2013: Citigroup agrees to pay Freddie Mac $395 million to settle claims it sold it toxic mortgages.

December 4, 2013: Citigroup admits to participating in the Yen Libor financial derivatives cartel to the European Commission and accepts a fine of $95 million.

July 14, 2014: The U.S. Department of Justice announces a $7 billion settlement with Citigroup for selling toxic mortgages to investors. Attorney General Eric Holder called the bank’s conduct “egregious,” adding, “As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits.”

November 2014: Citigroup pays more than $1 billion to settle civil allegations with regulators that it manipulated foreign currency markets. Other global banks settled at the same time.

May 20, 2015: Citicorp, a unit of Citigroup becomes an admitted felon by pleading guilty to a felony charge in the matter of rigging foreign currency trading, paying a fine of $925 million to the Justice Department and $342 million to the Federal Reserve for a total of $1.267 billion. The prior November it paid U.S. and U.K. regulators an additional $1.02 billion.

May 25, 2016: Citigroup agrees to pay $425 million to resolve claims brought by the Commodity Futures Trading Commission that it had rigged interest-rate benchmarks, including ISDAfix, from 2007 to 2012.

July 12, 2016: The Securities and Exchange Commission fined Citigroup Global Markets Inc. $7 million for failure to provide accurate trading records over a period of 15 years. According to the SEC: “CGMI failed to produce records for 26,810 securities transactions comprising over 291 million shares of stock and options in response to 2,382 EBS requests made by Commission staff, between May 1999 and April 2014, due to an error in the computer code for CGMI’s EBS response software. Despite discovering the error in late April 2014, CGMI did not report the issue to Commission staff or take steps to produce the omitted data until nine months later on January 27, 2015. CGMI’s failure to discover the coding error and to produce the missing data for many years potentially impacted numerous Commission investigations.”

January 23, 2017: The Consumer Financial Protection Bureau (CFPB) fined Citigroup $28.8 million for “giving the runaround to borrowers trying to save their homes.”

May 22, 2017: Citigroup signed a deferred prosecution agreement with the U.S. Department of Justice and paid a $97 million fine over charges that its Banamex unit committed “criminal violations by willfully failing to maintain an effective anti-money laundering” program.

Read More @ WallStOnParade.com

Charles Nenner – Beware of Statistics

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by Kerry Lutz, Financial Survival Network:

Unemployment at all time lows, consumer confidence at all time highs, what could possibly go wrong, go wrong, go wrong? Well according to Charles Nenner, a lot. These are actually contrary indicators that show the economy is close to a peak. If he’s right, and there’s every reason to believe he is, then there’s rough sledding ahead. We may be getting close to a recession. He sees the dollar heading higher shortly, the VIX Index bottoming and higher oil prices ahead. Gold/silver will be turning the corner after the summer. Check out his twitter feed @NennerResearch.

Click HERE to listen

Read More @ FinancialSurvivalNetwork.com

4% US 10-year Treasury Note Yield Will Be a Floor Not a Ceiling

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by Michael Pento, Market Oracle:

The two most important factors in determining the level of sovereign bond yields are the credit and inflation risks extant within a nation. When determining a country’s ability to service its debt investors must analyze not only the absolute debt level, but also the ratios of debt and deficits to GDP. In addition, the current rate of inflation must also be viewed within the context of debt in order to make an accurate assumption as to the level of future inflation.

When analyzing historical measures of these criteria, the conclusion reached is that the U.S. 10-year Note yield should rise to at least four percent in the coming quarters.

The last time long-term interest rates were not the preoccupation of central banks was before the Great Recession, which began in December of 2007. Therefore, it is important to view where the 10-year Note was trading at that time in relation to inflation, the absolute level of debt, as well as debt and deficits to GDP.  

The average yield on the 10-year Note was 4.6% during that year, with a high water mark of 5.23%. According to the BLS, Consumer Price Inflation (CPI) averaged 2.8%. The debt to GDP ratio was just 61%, and the annual deficit registered a paltry 1.1% of the economy. Importantly, the level of Publicly Traded debt was $5.1 trillion back in 2007.

Turning to the conditions of today, the 10-year Note yield has dropped to just under 2.9%; but those same metrics are foreboding much higher interest rates to come. While CPI averaged 2.1% last year, a mere 0.7 percentage points below 2007, debt levels have become gargantuan and are projected to skyrocket “big league” from here. As of the end of 2017, the debt to GDP ratio shot up to 103% of GDP, and the level of Publicly Trade Debt climbed to $14.8 trillion, which helped elevate the Deficit to a much higher—but still manageable compared to where we are headed–3.4% of GDP.

Therefore, it is rational to conclude that the Benchmark Treasury yield would already be greater than the 4.6% average seen back in 2007 if it were not for the still massive–but now rapidly waning–bid from global central banks.

However, the interest rate dynamics get much worse from there. In fiscal 2019, which begins this October, the deficit to GDP ratio is going to absolutely go into warp drive. The baseline scenario is for a $1.2 trillion deficit next fiscal year, according to the Committee for a Responsible Federal Budget. But you also must add to that figure the $360 billion worth of Treasury sales from the Federal Reserve. Therefore, the deficit to GDP then catapults to 7.5% of GDP. And if you add in the $240 billion worth Mortgage Backed Security sales from the Fed, which the primary dealers must also absorb and will crowd out Treasury purchases, the deficit rises to an incredible 8.6% of GDP!

Such a massive deficit in an era of relative peace-time prosperity is not only disgraceful, it is downright catastrophic. After all, the National Debt is now projected to rise to 135% of GDP by 2027. And when, not if, the next recession strikes, the recipe for a complete bond market failure is already fait accompli, as annual deficits could broach $3 trillion!

Stock market perma-bulls are proffering a view reasons to counter the arguments for a pernicious spike in bond yields. All of which should prove to be false.

Some take solace in the fact that the Fed will just stop raising short-term rates and thus stem the rising tide of the longer-term yields. However, central banks do not directly control yields out along the curve unless actively engaged in trading it. For example, the last time the Fed Funds Rate was where it now stands (1.4%) was back in August 2004; yet the 10-year yield still was above 4.25%. At that time the CPI was 2.6%, just a few tenths higher than today. In contrast, the Debt and Deficit to GDP was 59% and 3.3% respectively. Both of which are lower than now, and far better than what’s in store in the next few quarters. Hence, it is incorrect to assume a Fed going on hold will prevent the 10-year rate from mean reverting—at the very least.

Others argue that the money printing efforts from the Kamikaze Counterfeiter, Haruhiko Kuroda, over at the Bank of Japan (BOJ) will keep yields in check. However, offsetting the BOJ’s printing press and soon to follow collapse of the yen, is the waning appetite for U.S. debt on the part of global sovereign banks and the near record low savings rate of just 2.4% for American consumers.

Oh and by the way, the maniac money printer (Mario Draghi at the ECB) will be forced to completely end QE come the end of this year. Therefore, the German 10-year Bund should rise dramatically from its current 0.7% level, closer to the 4.5% yield witnessed prior to the Great Recession. This is true despite the humongous size of the ECB’s balance sheet, precisely because the debt to GDP ratios in the peripheral nations have just about doubled since 2008.

Another argument is the specious and inane one about an influx of new retirees that will sit idly by and watch their bond holdings collapse in value simply because they are old and have no alternative. With bank cash deposit yields rising quickly, the rational to lock up savings in long-term bonds that are falling in price, especially bond funds that never mature, is untenable.

Of course, there is the proposition that falling stock prices and the ensuing recession will force investors back into the Safehaven of U.S. Treasuries. Under normal circumstances this would be true. And maybe in the short-run it will happen again. However, since annual deficits are already approaching double digits, it seems ludicrous to expect that a dramatic drop in revenue and a further explosion in deficits will compel investors to load up on Treasuries. Indeed, the lesson gleaned from the 2012 European debt crisis is that insolvent nations do not enjoy lower borrowing costs simply because the economy falls apart.

Lastly, most contend that the stock of Fed assets (currently $4.4 trillion) will prevent yields from rising anywhere near 4%. Nevertheless, even when reducing the near $15 trillion of Publicly Traded debt by the amount of bonds held at the Fed, the debt to GDP ratio is still higher than the adjusted GDP ratio for 2007.  Of course, what is even more important is the flow of Fed asset sales. This is because the erstwhile investor front running of the Fed’s $85 billion per month asset purchase program will become front run sales ahead of the $50 billion per month dumping spree that will occur just eight months from now.  

Nominal GDP increased by 5.3% in Q3, and by 5.0% during Q4 of 2017. The Atlanta Fed now predicts that Q1 2018 will post real GDP of 3.2%. With inflation rising at 2.1% YOY, that pushes nominal GDP above 5% for the last three quarters.  And since the U.S. 10-year Note yield has historically moved in tandem with current-dollar GDP, it is a rational conclusion to expect the Benchmark yield to rise back to that nominal 5% level, as central banks remove their indiscriminate bond bids. Especially in light of the fact that those same bids will become indiscriminate offers come the end of this year on a net global basis.

So there really is only one hope for the bond (and stock) market bulls to keep the Benchmark rate from mean reverting; but it would prove to be only a temporary one at that. The new Fed Chair, Jerome Powell, may have to perform his best impression of Mario Draghi when he soon vows to do “whatever it takes” to keep long-term Treasury yields from rising. What Mr. Draghi essentially said back in July of 2012 was, ironically, that he would print as many euros as needed in order to save the euro. And by doing so, rescue the sovereign bond market and the economy. It was only a temporary salve in Europe and would be even less effective in the United States. This is because the inflationary impacts on the world’s reserve currency would be nothing short of devastating.

When realistically viewing the sovereign bond market in the context of massive increases in debt, deficits and central bank asset sales, you have the recipe for a complete fixed income implosion. Therefore, you have the potential for Benchmark yields to soar way past the four percent level in the next few quarters…unless the printing presses get ramped up again worldwide. 

Those soaring sovereign bond yields in the U.S., and indeed across the globe, will fracture the Junk Bond and leveraged loan markets, which will send Collateralized Loan Obligations crashing. According to S&P Global Market Intelligence, volume for leveraged loans increased 53% in 2017, putting it on pace to surpass the 2007 record of $534 billion. At the same time the borrowing window will slam shut on the 10% of total corporations that must issue new debt just to pay off existing obligations because cash flow is less than interest expenses, this according to the Bank for International Settlements.

According to the CMG Group, if the yield on the 10-year Treasury were to rise from the low of 1.4% seen in 2016, back to the 4.4% level; the loss to investors would equal 24%. Losing nearly one quarter of investors’ value in a “risk free” Treasury—especially after 37 years of inculcation that prices always go up—will truly be shocking.

The recession resulting from the plunge in asset prices and mounting debt service costs will send those deficit and debt to GDP ratios soaring even higher than already projected. Hence, yields could rise unabated without the central bank’s attempt to once again cap interest rates.

Read More @ MarketOracle.com