Canada’s Scotiabank: The King Silver Short on the COMEX

03 December 2016 — Saturday


Gold’s tiny rally in early morning trading in the Far East was capped at 9:20 a.m. China Standard time for the second day in a row on Friday — and really didn’t do much after that.  There was no price activity worthy of the name at the release of the job numbers, but the low tick of the day came shortly before 9 a.m. in New York.  The subsequent rally got capped at, or just after the London p.m. gold fix — and sold off quietly from there until 2:20 p.m. — and actually rallied at it into the close — finishing the day almost on its high tick, such as it was.  Unheard of for a Friday afternoon session.

The high and low ticks are barely worth looking up, but were recorded as $1,177.30 and $1,166.40 in the February contract.

Gold finished the Friday trading session at $1,177.10 spot, up $5.50 on the day.  Net volume was certainly up there at just under 158,000 contracts.161203gold

Silver’s Far East rally on Friday morning also got capped around 9:20 a.m. CST, the same as gold.  After that, it didn’t do a lot until 9 a.m. in London.  Then it was sold down to its low tick of the day, which came at, or just before the noon London silver fix.  Its rally from there got sold down a bit on the job numbers, with the New York low coming precisely at 9:00 a.m. EST.  Then away it went to the upside.  Like gold, its price was capped and turned lower at, or just after, the London p.m. gold fix.  It rallied anew around 12:15 and, like gold, was sold lower until around 2:15 p.m. EST — and from there rallied a bit into the close.

The low and high ticks in this precious metal were reported by the CME Group as $16.375 and $16.87 in the March contract.

Silver closed in New York on Friday at $16.72 spot, up 24 cents from Thursday’s close.  Net volume was very decent at 58,500 contracts.161203silver

Here’s the 5-minute silver tick chart courtesy of Brad Robertson.  The rally and subsequent sell-off in early Far East trading certainly didn’t have much volume associated with it and, as usual, the only volume that mattered occurred at the start of COMEX trading, which was 6:20 a.m. Denver time on the chart below — and really didn’t drop back to background levels to stay until around 12:30 p.m. MST, which was 2:30 p.m. in New York.

The vertical gray line is 10:00 p.m. Denver time, midnight in New York — and 1:00 p.m. China Standard Time [CST] the following afternoon in Shanghai—and don’t forget to add two hours for EST.  The ‘click to enlarge‘ is a must for this chart.161203-5-minute-silver

Platinum’s rally in Far East trading on their Friday was capped at 9:20 a.m. CST as well — and after getting sold back to unchanged, chopped sideways until very shortly after the COMEX opened.  Like gold and silver before it, its price was capped at, or minutes after, the London p.m. gold fix.  And also like gold and silver, was sold down until around 2:20 p.m. EST — and it traded flat after that.  Platinum was closed at $928 spot, up 13 dollars on the day.161203plati

The palladium price was up a few dollars in Far East trading on their Friday — and didn’t do much until about ten minutes before Zurich opened.  Then down it went, with the low tick of the day coming shortly after 1 p.m. Europe time.  Then, like gold, silver and platinum before it, it rallied until at, or shortly after, the London p.m. gold fix…was capped…and then traded flat until 1 p.m. EST.  It then sold off until 2:20 p.m. EST like the other three precious metals — and rallied quietly into the close from there.  Palladium finished the Friday session in New York at $739 spot, down another 11 bucks.161203plad

The dollar index closed very late on Thursday afternoon in New York at 100.92 — and continued its Thursday decline into morning trading in the Far East.  That decline ended abruptly at 12:00 o’clock noon in Shanghai — and began to chop quietly higher staring at 1:30 p.m. CST.  The index made it above the 101.00 mark a couple of times in late morning trading in London, but began to head lower into the job numbers.  There was some jumping around at 8:30 a.m. EST, but the downward trend remained in place — and the dollar index finished the Friday session at 100.67 — down 28 basis points from Thursday.161203intraday-gif

Here’s the 6-month U.S. dollar index — and it’s looking very much the sad puppy right now.  An index searching for a short seller perhaps.161203-6-month-usd

The gold shares were in rally mode right from the 9:30 a.m. open on Friday — and their respective high ticks were in by around 11:15 a.m. EST.  From there there they chopped very quietly lower into the close.  The HUI finished the day up a respectable 3.42 percent.161203hui

The silver equities were really on a tear yesterday.  Their chart pattern was very similar to their golden brethren, except they chopped sideways from 11:30 a.m. onward.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up a chunky 5.44 percent.161203silver-7

And here are the usual three charts from Nick that tell all.  The first one shows the changes in gold, silver, platinum and palladium for the past week, in both percent and dollar and cents terms, as of Friday’s closes in New York — along with the changes in the HUI and Silver Sentiment/Silver 7 Index — and the Click to Enlarge feature really helps on all three.161203weekly

And the chart below shows the month-to-date changes as of Friday’s close, such as it is, with only two days gone in the month so far.161203month-to-date

And below are the year-to-date changes as of the close of trading yesterday.161203year-to-date

The CME Daily Delivery Report showed that 1,612 gold and 23 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  In gold, the two largest short/issuers were S.G. Americas with 1,000 contracts — and JPMorgan with 514 out of their respective client accounts.  There were twelve long/stoppers in total, with the three largest being JPMorgan with 655 contracts for its client account [plus another 95 for its own account] — and HSBC USA and Scotiabank stopping 486 and 222 contracts respectively for their own accounts.  In silver, ADM issued 20 contracts of the 23 posted — and JPMorgan and Macquarie Futures picked up 11 and 7 contracts respectively for their own accounts.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Friday trading session showed that gold open interest in December declined by 989 contracts, leaving 3,272 left, minus the 1,612 mentioned in the previous paragraph.  Thursday’s Daily Delivery Report showed that 216 gold contracts were actually posted for delivery on Monday, so that means that another 989-216=773 short/issuers were let off the delivery hook by the long/stoppers holding the other side of their trades.  Silver o.i. in December fell by 411 contracts, leaving 2,073 still open, minus the 23 mentioned in the previous paragraph.  Thursday’s Daily Delivery Report showed that 407 silver contracts were posted for delivery on Monday, so that means that 411-407=4 short/issuers in silver were let off the delivery hook by the long/stoppers holding the other sides of those trades.

There were no reported changes in GLD yesterday, but there was a small withdrawal from SLV, as an authorized participant took out 155,532 troy ounces.  I suspect that this amount would represent a fee payment of some kind.

There was no sales report from the U.S. Mint yesterday.

There was a very decent amount of gold movement at the COMEX-approved depositories on the U.S. east coast on Thursday.  There was 80,377.500 troy ounces/2,500 kilobars [SGE gold kilobar weight] deposited — and all of that went into Brink’s, Inc.  There was also 341,269 troy ounces shipped out.  Of that amount, there was 51,910 troy ounces withdrawn from Brink’s, Inc. — and a very chunky 289,359.000 troy ounce/9,000 kilobars [SGE gold kilobar weight] taken out of HSBC USA.  The link to that action is here.

More and more gold in kilobar form is making an appearance everywhere as time goes by.  As I stated several years ago, the day is coming when 4 nines fine gold kilobars will be the new [and only] contract weight traded everywhere on Planet Earth.  It’s a safe bet that all gold being refined these days is in 4 nines fine kilobar form.

No silver was reported received yesterday, but 863,917 troy ounces were shipped out.  There was 260,822 troy ounces shipped out of CNT — and the rest…603,094 troy ounces…was withdrawn from Canada’s Scotiabank.  The link to that activity is here.

It was a fairly quiet day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  Only 282 were received — and 1,102 were shipped out.  Except for 23 kilobars received at Loomis International, the rest of the in/out activity was at Brink’s, Inc.  The link to that, in troy ounces, is here.

As expected, the Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, showed improvements in the Commercial net short positions in both gold and silver…but not quite as much as Ted and I were hoping for.  And the reason for that, once again, was the fact that the Managed Money traders didn’t co-operate on the short side like they normally do — and that, as Ted pointed out last week, was why the improvements weren’t as great as expected once again.

Although the headline numbers weren’t as impressive as we were hoping for, it was what was happening under the hood that made up for it.

In silver, the Commercial net short position declined by only 2,787 contracts, or 13.94 million troy ounces of paper silver.   Ted was hoping for 5,000 contracts minimum.  They arrived at this number by selling 4,898 long contracts, plus they covered 7,685 short contracts, with the difference between those two numbers being the change for the reporting week.

Ted said that the Big 4 traders decreased their short position by about 2,500 contracts — and he attributes all of it to JPMorgan.  The ‘5 through 8’ big traders covered around 500 contracts of their short positions — and Ted’s raptors, the Commercial traders other than the Big 8, sold about 200 contracts of their long position.

Under the hood in the Disaggregated COT Report, it was another of Ted Butler’s “man bites dog/horse goes man-back riding” scenarios, as the Managed Money traders sold 962 long contracts, which would represent just about the last of the long positions they would have left at these prices.  But the real surprise was the fact that [for the second week in a row] they actually reduced their short position by 1,085 contracts!!!  For the reporting week, they were actually net long 123 COMEX silver contracts!   All the heavy lifting [including those 123 contracts] came via the traders in the ‘Other Reportables’ and ‘Nonreportable’/small trader categories.

And as I mentioned last week, besides what the Managed Money traders were up to, both Ted and I were interested in what the “non-blinking” non-technical fund long contract holders were up to — and this report showed that they hold 56,969 COMEX contracts on the long side.  Who are these guys — and why weren’t they taking profits when silver was much higher in price during the summer?  As I told Ted on the phone, I suspect that they are related to the Commercial traders in some very arms-length way, but that’s just a suspicion.  But it’s the only one that makes any sense, because starting about three years ago, Ted said that this huge long position in this category didn’t exist at all.  I expect that he’ll have something to say about all this in his weekly review this afternoon.

The Commercial net short position in silver now sits at 377.2 million troy ounces.  Ted pegs JPMorgan’s short position at around 18,000 contracts, which is the lowest it’s been all year.

Here is the 9-year COT chart for silver — and unless the Managed Money traders are prepared to pile in on the short side at these low prices, Ted says that this weeks’ price action in silver has all the hallmarks of a price bottom being put in.161203cot-silver

In gold, the Commercial net short position only declined by 24,349 contracts — and I know that Ted was hoping for 30,000 — or more.  So was I.  They arrived at this number by reducing their long position by 5,347 contracts, plus they reduced their short position by a chunky 29,696 contracts…with the difference between those two numbers being the change for the reporting week.

Ted said that the Big 4 traders reduced their short position by only 8,500 contracts — and the ‘5 through 8’ by about 1,600 contracts.  Ted’s raptors, the Commercial traders other than the Big 8, covered their remaining 9,600 short contracts, plus they added 4,600 long contracts, for a total weekly swing of around 14,200 contracts.

Under the hood in the Disaggregated COT Report, the Managed Money traders only accounted for 17,448 contracts of the 24,349 contract change in the Commercial net short position.  They sold 9,778 long contracts, but they only added 7,670 short contracts.  As Ted pointed out in his weekly review last Saturday, the reason that the Commercial traders couldn’t cover more short positions by buying longs, is because the Managed Money traders refused to go short, so there was no long position for the Commercial traders to buy.  The difference between the Commercial net short position and what the Managed Money traders did…24,349 – 17,448 = 6,901 contracts…was made up almost exclusively by the traders in the Nonreportable/small trader category.

The Commercial net short position in gold is now down to 16.78 million troy ounces.

Here’s the 9-year COT chart for gold — and it still indicates wildly bearish on an historic basis.  But under the current circumstances, that’s not what should be read into this.161203cot-gold

As Ted has pointed out — and I’ve hinted at here — the sole reason why the Commercial net short positions aren’t anywhere near historical bullish extremes with gold and silver prices this far below their respective 200-day moving averages, is for the simple reason that the Managed Money traders refuse to go short to the extent they did in the past.  If the Manged Money traders refuse to go short, they don’t have a long contract to sell to the Commercial traders.  Then the Commercial trader can’t cover their short positions, or go long themselves.  And if the Managed Money traders haven’t gone short by now…as Ted says…they probably won’t.  And if that’s the case, then the bottoms are mostly in for both gold and silver.

As Ted said on the phone yesterday, if someone had told him a year ago that he would be bullish for silver prices with a Commercial net short position sitting at 377.2 million troy ounces, he would have thought them mad.

You couldn’t make this stuff up!

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 ‘5 through 8’ traders in each physically traded commodity on the COMEX.  These are the same Big 4 and ‘5 through 8’ traders discussed in the COT Report above.  Click to enlarge.161203days-to-cover

For the current reporting week, the Big 4 are short 126 days of world silver production—and the ‘5 through 8’ traders are short an additional 48 days of world silver production—for a total of 174 days, which is a bit under 6 months of world silver production, or about 422.8 million troy ounces of paper silver held short by the Big 8.

In the COT Report above, the Commercial net short position in silver is 377.2 million troy ounces.  So the Big 8 hold a short position larger than the Commercial net position to the tune of 422.8 – 377.2 = 45.6 million troy ounces…give or take.  And don’t forget that Ted pegs JPMorgan’s short position at around 90 million ounces of the 437.4 million troy ounces held short by the Big 8 — which works out to around 37 days of world silver production.  How concentrated — and ridiculous is that?

And if that isn’t bad enough, the Big 8 are short 54.1 percent of the entire open interest in silver in the COMEX futures market — and that number would be closer to 60 percent once the market-neutral spread trades were subtracted out.  In gold it’s up to 42.5 percent of the total open interest that the Big 8 are short.

And as an aside, the two largest silver shorts on Planet Earth—JPMorgan and Canada’s Scotiabank—are short about 82 days of world silver production between the two of them—and that 82 days represents around 65 percent of the length of the red bar in silver in the above chart.  The other two traders in the Big 4 category are short, on average, about 22 days of world silver production apiece.

As I stated just above, based on Ted’s estimate of JPMorgan’s short position of 18,000 contracts, JPMorgan is short around 37 days of world silver production all by itself.  Because of that, the approximate short position in silver held by Scotiabank works out to around 45 days of world silver production.  For the second week in a row, Scotiabank is the King of the silver shorts in the COMEX futures market.

In gold, the Big 4 are short 45 days of world gold production, down from 48 days last week — and the ‘5 through 8’ are short another 16 days of world production [down from 17 days last week], for a total of 61 days.  Based on these numbers, the Big 4 in gold hold about 74 percent of the total short position held by the Big 8 — and that’s off its record of high by around 10 percentage points.  How’s that for a concentrated short position within a concentrated short position?

The “concentrated short positions within a concentrated short position” in silver, platinum and palladium held by the Big 4 are about 72, 72 and 68 percent respectively of the short positions held by the Big 8.

I have a decent number of stories for you today — and I hope you’ll find a few in here that are of interest.


Americans Not in the Labor Force Soar to Record 95.1 Million: Jump By 446,000 in One Month

So much for that much anticipated rebound in the participation rate.

After it had managed to post a modest increase in the early part of the year, hitting the highest level in one year in March at 63{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}, the disenchantment with working has returned, and the labor force participation rate had flatlined for the next few month, ultimately dropping in November to 62.7{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}, just shy of its 35 year low of 62.4{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} hit last October. This can be seen in the surge of Americans who are no longer in the labor force, who spiked by 446,000 in November, hitting an all time high of 95.1 million. 

As a result of this the US labor force shrank by 226,000 to 159,486K, down from 159,712K a month ago, and helped the unemployment rate tumble to 4.6{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}, the lowest level since August 2007.

Adding the number of unemployed workers to the people not in the labor force, there are now over 102.5 million Americans who are either unemployment or no longer looking for work.

This brief 2-chart Zero Hedge posting appeared on their Internet site at 11:50 a.m. EST on Friday morning — and the charts are worth a quick look.  Another link to this news item is here.

Bank of America Says We Might Be Seeing a Sign of the Bull Market’s End

Stocks have continued to hit new highs this year despite concerns over global growth, geopolitical events, and an earnings recession. That dissonance may be coming to an end as analysts at Bank of America Corp. predict we are approaching the market’s last hurrah. The crux of the argument is that the firm’s contrarian sell side indicator, which measures Wall Street’s bullishness on equities, jumped to a six-month high in November, its biggest gain in more than a year. Right now, the index is pointing toward a rally of almost 20 percent for U.S. stocks over the next 12-months, but the analysts believe that a rally of that magnitude could mark the end of the bull run.

[T]he post-election bounce in Wall Street sentiment could be the first step toward the market euphoria that we typically see at the end of bull markets and that has been glaringly absent so far in the cycle,” a team led by Savita Subramanian, head of U.S. equity and quantitative strategy at the firm, wrote in a note Thursday.

The Sell Side Indicator does not catch every rally or decline in the stock market, but the indicator has historically had some predictive capability with respect to subsequent 12-month S&P 500 total returns,” the bank said.

This Bloomberg article appeared on their Internet site at 9:53 a.m. on Thursday EST — and it’s a story I plucked from yesterday’s edition of the King Report.  Another link to it is here.

Meet the Renegades: An interview with economics professor and author, Michael Hudson

With every major financial recovery since the second World War beginning in a place of greater debt than the one before it, how could we not have foreseen the financial crisis of 2008? In this episode of Meet the Renegades, economics professor and author, Michael Hudson argues we did.

How could an economy that created so much debt also save the banks rather than the economy itself, following the 2008 financial crisis? Michael discusses the phenomenon of debt inflation and how the economic curriculum should change.

If you’re teaching economics, you should begin with the relationship between finance and the economy, between the build up of debt and the ability to pay.

Michael discusses the ‘Great Moderation’, a common misrepresentation of a healthy economy in which job productivity was increasing, labor complacency was at an all-time low was a complete myth. Michael argues that ‘traumatized’ workers were too in debt to fight for better working conditions leading up to the 2008 financial crisis and how this reflects neo-classical ideas.

Michael offers solutions – urging the importance of writing down the debt and keeping basic services in the public sector, ridding the economy of financial tumors through a proper tax policy based upon the this public sector model.

This 30-minute video interview is definitely worth your while, if you have the interest, that is.  It was posted on their website back on November 2 — and I thank Tolling Jennings for pointing it out.  For length reasons, it had to wait for my Saturday column — and another link to it is here.

McCarthyism is Breaking Out All Over — Paul Craig Roberts

Seasoned journalist, White House official, and historian Pat Buchanan has responded to the Washington Post’s fake news about the independent journalists on the 200 List being Russian agents by reminding us that the US government has always been a major disseminator of fake news.

No one knows who is behind the newly created PropOrNot website that came up with the list of 200 “Russian agents,” but it is as likely as not the State Department funded National Endowment for Democracy, which has been peddling propaganda as fake news since its inception. Indeed, it was created for the purpose of destabilizing the Soviet Union. Of course the CIA could be involved, or Israel, or George Soros, or some neoconservative group, or some new government funded organization as a tool of the propaganda war that the Obama regime has vowed to fight.

By publicizing the fake list in the Washington Post, the presstitute newspaper has brought buckets of shame and condemnation upon its head, destroying in the process the thin shred of credibility that the Main Stream media still possessed.

As Pam Martens reports, another imbecile has now composed a list of 200 suspect professors who also dissent from the official bullshit fed to the American people.

Gee…I wonder what Paul really thinks?  You can find out more by reading this brief commentary that appeared on his website on Friday.  Another link to it is here — and I thank Roy Stephens for sending it our way.

The ‘Washington Post’ ‘Blacklist’ Story Is Shameful and Disgusting — Matt Taibbi

Last week, a technology reporter for The Washington Post named Craig Timberg ran an incredible story. It has no analog that I can think of in modern times. Headlined “Russian propaganda effort helped spread ‘fake news’ during election, experts say,” the piece promotes the work of a shadowy group that smears some 200 alternative news outlets as either knowing or unwitting agents of a foreign power, including popular sites like Truthdig and Naked Capitalism.

The thrust of Timberg’s astonishingly lazy report is that a Russian intelligence operation of some kind was behind the publication of a “hurricane” of false news reports during the election season, in particular stories harmful to Hillary Clinton. The piece referenced those 200 websites as “routine peddlers of Russian propaganda.”

The piece relied on what it claimed were “two teams of independent researchers,” but the citing of a report by the longtime anticommunist Foreign Policy Research Institute was really window dressing.

The meat of the story relied on a report by unnamed analysts from a single mysterious “organization” called PropOrNot – we don’t know if it’s one person or, as it claims, over 30 – a “group” that seems to have been in existence for just a few months.

It was PropOrNot’s report that identified what it calls “the list” of 200 offending sites. Outlets as diverse as, and the Ron Paul Institute were described as either knowingly directed by Russian intelligence, or “useful idiots” who unwittingly did the bidding of foreign masters.

Matt lays down a broadside on The Washington Post in this opinion piece that showed up on the Internet site on November 29.  It comes to us courtesy of ‘aurora’ — and another link to it is here.

Want Groceries in Venezuela? First Stop at Six ATMs

Domingris Montano did the calculations as she stood in the rain at the midpoint of a queue outside a bank in Caracas. She needed to buy groceries. A package of rice would cost 3,500 bolivars, more than half the daily withdrawal limit, and the automated teller machine might be empty by the time her turn came. Maybe she could hit a few more before dark?

I’ve had to go to six different ATMs just to get 6,000 bolivars,” said Montano, a 36-year-old hair stylist, poking her head out from under her umbrella to see if the people ahead of her at the Banesco Banco Universal CA branch were moving forward. They weren’t.

Lines are nothing new in Venezuela, where the economy is shattered, inflation is soaring and the currency fell a staggering 67 percent against the U.S. dollar on the black market last month alone — making 6,000 bolivars worth just $1.30. Now added to the indignities of daily life in a country desperately short on most everything except crime is the ATM hustle, as banks crack down on what customers can take out, setting measly maximums.

Resourceful residents employ a variety of tactics, including the multiple debit-card ploy: If you somehow wrangle more than one, you can go to town at the dispenser, to the horror of those behind you. Banks have set it up so people have to retrieve their money in as many as seven transactions — maybe the hope is they’ll get tired and give up — and everyone who can see what’s going on at the window counts. At seven, there’s a sigh of relief that deliverance is a step closer. If a second card appears and the whole process starts over, there’s swearing under the breath and praying the guy doesn’t pull out a third.

This sad, but very interesting story put in an appearance on the Internet site at 5:00 a.m. EST on Friday morning — and I thank George Hamilton for bringing it to our attention.  Another link to it is here.

Iceland’s Pirate party invited to form government

Iceland’s president has invited the anti-establishment Pirate party to form a government, after the right- and left-wing parties failed in their bids.

Guðni Jóhannesson made the announcement on Friday after meeting with the head of the Pirate’s parliamentary group, Birgitta Jónsdóttir.

I met with the leaders of all parties and asked their opinion on who should lead those talks. After that I summoned Birgitta Jónsdóttir and handed her the mandate,” he said.

Iceland held snap legislative elections on 29 October, in which none of the seven parties or alliances obtained a clear majority.

This news item was posted on Internet site at 7:02 p.m. GMT on their Friday evening, which was 2:02 p.m. in New York — EDT plus 5 hours.  It comes to us courtesy of Roy Stephens — and another link to it is here.

Norway Buying $130 Billion In Global Equities as Sovereign Wealth Fund Continues to Bleed Cash

After being forced to withdraw at least $15 billion to fund 2017 budget deficits, the $860 billion Norwegian sovereign wealth fund has announced that it will change it’s portfolio allocations to try to make up the difference.  The change will result in 75{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} of the fund’s capital being allocated to global equities, up from the current 60{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}.  Sure, because funneling another $130 billion to the global equity bubble is just the prudent thing to do for an extra 40bps of “expected average annual real returns.

The central bank’s board, which oversees the fund, on Thursday recommended an increase in the equity share to 75 percent from 60 percent. That will raise the expected average annual real return to 2.5 percent over 10 years and to 3.5 percent over 30 years, compared with 2.1 percent and 2.6 percent, respectively, under the current setup.

The world’s largest sovereign wealth fund said that it expects an annual return of only 0.25 percent on bonds over the next decade and that the expected “equity risk premium,” or return on stocks over government bonds, will be just 3 percentage points in a cautious estimate.

In our analyses, this is clearly evident in global data: internationally, growth in firms’ cash flows and equity returns are correlated with growth in the global economy, Deputy Governor Egil Matsen said in a speech Thursday in Oslo. “Global economic growth in the coming years is expected to be below its historical level. This ‘pessimism’ is partly related to the driving forces behind the low level of the real interest rate.

Of course, the decision comes after the fund has been forced to withdraw capital over the past two years to fund budget deficits that are expected to reach over 8{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} of GDP.

This Zero Hedge posting showed up on their website at 2:45 a.m. EST on Friday morning — and I thank Richard Saler for sending it our way.  Another link to it is here.

This Tiny Sliver of Russian Territory (and Its Weapons) Is What NATO Fears Most

In 1945, Soviet armies occupied East Prussia, a portion of Germany territorially detached from the rest of the Reich since 1918 (briefly reunified in 1939). Ethnically German and featuring the historic Prussian city of Königsberg, the territory represented a problem for the Soviets. They had no interest in returning it to Germany, especially as such a move would increase tension with the Poles, and they did not want to create an independent German socialist state, the birth of the German Democratic Republic remained in the future. Stalin decided to simply annex the territory, expelling the German inhabitants and replacing them with Russians.

Until 1991, the Kaliningrad enclave was territorially contiguous with the Soviet Union, if not the Russian Federation. After the secession of the Baltic Republics and the collapse of the USSR, Kaliningrad was separated from the rest of Russia. When the Baltics joined NATO, it became hostile territory deep inside the Western alliance. This has left Kaliningrad deeply vulnerable, but has also made it a potentially deadly military threat. Recently, the Russian government has taken to publicly highlighting the deployment of some of its most lethal military systems to the enclave. Intended to defend Kaliningrad, these systems could also represent a critical offensive threat to the heart of the NATO alliance.

This very interesting article appeared on the Internet site on November 25 — and it’s certainly worth reading, even if you’re not a serious student of the New Great Game.  It’s another contribution from Roy Stephens, for which I thank him — and another link to it is here.

Tales of the New Cold War: U.S. False Narratives Condemning Russia — John Batchelor Interviews Stephen F. Cohen

Batchelor begins with a list of serious events that Trump may face when he becomes president: the Syrian Civil War bogging down in East Aleppo, a recent breakdown in new negotiations to resolve the Ukrainian Civil War, and a continuing build up of NATO troops on the Russian border. Cohen begins with a statement of outrage against the Washington Post and its soon to be infamous list of “fake news outlets”. Like many other readers, however, I found myself welcoming that list – as one that states what news outlets in the United Stages have real news and real journalism. For example, when long term bias is expressed in a major MSM outlet over an election candidate, the loss of credibility is profound because it automatically alienates about half the voting electorate. That alone is an argument for unbiased journalism. Many, this writer included, are of the opinion that the MSM there is in serious and permanent decline.

But I find myself disagreeing a little with both pundits this time and for the following reasons: The Syrian Civil War is clearly winding down (albeit with some unresolved factors like Turkey and the Kurds); the Minsk2 Accord is probably a dead issue given it takes a government in Kiev to stop fighting to resolve it; and concerns about a build up of NATO troops in Europe may be resolved over fiscal realities and negotiations during the awakening of a new détente with Russia.

But Cohen’s theme is about five false narratives of the MSM and how it affects the NCW (New Cold War) and the Trump presidency: 1) Putin caused the crisis with Russia (NCW), 2) The Russian crisis (NCW) has greatly strengthened the Trans Atlantic Alliance, 3) Obama’s policy of isolating Putin from world affaires is a workable solution, and 4) the war in Ukraine was caused by Russia, and finally 5) the ISIS terrorists have suddenly become “rebels” fighting Syrians and Russians. All of these false narratives are failures in their goals, and Cohen provides an in depth exploration of how they are false and how most have backfired for Washington. We refer to most of these failures as “blow back” events now. But most worrisome for them is the resolution of the Syrian War – as Cohen outlines how the war party is going to be digging in and “fighting any signs of détente” from the Trump administration. The recent attack by the Washington Post against any moderate (alternate) news source in the US is but one element of this, and it shows that the war party will not go down without a fight. The black humour is intended. The “multi-globalists” are now winning. Some even say globalism is dead.

The discussion then shifts to Russia where the focus for government is foreign policy and the economy – with lively politics always present between more conservative elements and neo-liberal groups. Cohen believes that while infighting goes on between the Kremlin and the Federal Assembly, Putin holds most of the power. Surprisingly, Cohen opines that how the Kremlin perceives a Trump presidency is more a wait and see stance than celebration. As usual there is much more to hear in the podcast.

This interview was posted on the Internet site on Tuesday — and for all the usual reasons, had to wait for today’s column.  As usual, I thank Ken Hurt for the link, but the big kudos always go to Larry Galearis for his Trojan work in providing us with the above executive summary.  Another link to ‘all of the above’ is here.

After Trump, Brexit…December 4 is the Next Flashpoint in the Global Populist Revolution

On December 4, Italy is holding a referendum that will determine the fate of the entire European Union.

Donald Trump’s victory—which shocked Europe’s political and media elite—gives the populists backing the “No” side of Italy’s referendum the political rocket fuel they need for a virtually guaranteed win.

That momentum will be all but impossible to reverse. Anti-elite sentiment is rising on both sides of the Atlantic. And I bet the global populist revolution will continue.

If Italians buck the establishment—and it looks like they will—it will clear a path for a populist party to take power and for Italy to exit the euro.

If that happens, the fallout will be catastrophic for global markets.

This must read commentary, with the usual infomercial at the end, appeared on the Internet site yesterday — and another link to it is here.

Doug Noland: Trump, Bonds, Peripheries, China and Italy

And speaking of serious dilemmas, let’s not forget Europe. Italy’s political referendum will take place Sunday. Prime Minister Matteo Renzi has threatened to resign if voters don’t approve his plan for political reform. Between political opposition and a spirited anti-establishment movement, the vote is not projected to go Renzi’s way. But after sailing through Brexit and Trump’s win, there’s not a great deal of trepidation heading into Sunday. It is true that Italy is well-accustomed to political instability. Perhaps it’s complacency’s turn to be surprised.

The Italian banking system is a mess, and prospects for the Italian economy remain poor. Years of QE have done little to promote reform but a lot to inflate a Bubble in Italian debt (much of it held by Italian banks). It might be at least a year until Italian voters have the opportunity for voicing opinions on remaining in the euro. Yet in this unfolding uncertain global liquidity backdrop, it would not be surprising if the markets again begin pondering the long-term viability of the euro monetary experiment. The Germans and Italians sharing a currency forever? The Trump win has both emboldened Italy’s powerful anti-establishment movements and heightened Italy’s vulnerability to a deteriorating global financial backdrop.

Global financial conditions have begun to tighten – ominously, even in the face of $2.0 TN of ongoing global QE. While pretty clear in the near-term, intermediate and long-term QE prospects are really fuzzy. Heightened uncertainty now has “money” on the move, with associated instability an immediate issue for the fragile Periphery. Europe remains a global weak link, with their banking system at the heart of the continent’s fragility. Italian banks are the European banking system’s weak link. In this context, Italy’s Sunday referendum should not be taken lightly. In the event of a no vote and Renzi resignation, will political uncertainty (and capital flight) push Italy’s fragile banks over the edge? Recall 2012: Fears surrounding Italian banks and Italy’s long-term commitment to the euro over time escalated into fears of euro disintegration.

Doug’s weekly Credit Bubble Bulletin was posted on his Internet site in the wee hours of Saturday morning EST — and in my opinion, it’s always a must read.  Another link to it is here.

Tehran rejects Senate sanctions renewal as JCPOA breach

Iran’s Foreign Ministry said on Friday the U.S. Senate’s vote to renew sanctions law against Tehran flouts the terms of an international nuclear deal finalized last year.

As announced repeatedly by the country’s senior officials, the recent bill passed by the U.S. House of Representatives and Senate to extend sanctions against Iran runs counter to BARJAM (JCPOA) and the U.S.’s commitments under international law on non-interference in domestic and international relations of other countries,” read part of an announcement carried on the official website of the Foreign Ministry.

On Thursday, the U.S. Senate overwhelmingly voted 99-0 to reinstate the Iran Sanctions Act, a ten-year extension of sanctions in place since 1996.

The bill had already been passed two weeks ago by the House of Representatives with a landslide margin of 419-1, now at Obama’s desk for final approval.  If not extended, the ISA expires by the end of 2016.

This news story, filed from Tehran, showed up on the Internet site yesterday — and I thank Roy Stephens for his final contribution to today’s column.  Another link to it is here.

Mint ending production of 2016 American Eagle, American Buffalo bullion coins

U.S. Mint officials announced November 30 that production had ended at the West Point Mint for American Eagle 1-ounce silver bullion coins and American Buffalo 1-ounce gold bullion coins. Remaining 2016 inventories will be sold until depleted. U.S. Mint officials did not disclose how many 2016 bullion coins remain in inventory.

The West Point Mint is completing production of all four sizes — 1-ounce, half-ounce, quarter-ounce, and tenth-ounce — of 2016 American Eagle gold bullion coins. Upon completion of production of these coins, remaining 2016 inventories will be sold until depleted. The number of coins remaining for each size has not been disclosed.

The United States Mint will begin accepting orders January 9 from the bureau’s authorized purchasers for 2017 American Eagle gold and silver bullion coins and American Buffalo gold bullion coins. The Mint expects to begin accepting orders for 2017 American Eagle 1-ounce platinum bullion coins sometime in late January.

This worthwhile item was posted on the Internet site on Wednesday — and I thank Tolling Jennings for his second offering in today’s column.  Another link to it is here.

No limit on holding gold if it matches income declaration, Indian government says

The government on Thursday sought to quell rumors by clarifying that there is no limit on legitimate holding of gold and jewellery, including from inheritance, and there would be no seizure of bullion up to a certain limit even if that does not seem to match income.

There is no limit on holding of gold jewellery or ornaments by anybody provided it is acquired from explained sources of income including inheritance,” the finance ministry said in a statement.

As rumors of government crackdown on gold holdings raged, the ministry first came out with a statement saying the steeper up-to-85-percent tax in the new taxation laws amendment bill will not apply to legitimate gold holding, including those acquired through inheritance or agricultural income.

However, with apprehensions persisting in the absence of clarity on limits on holdings, the ministry came out with another statement hours later saying there is no limit on gold holding from explained sources of income.

This gold-related news item put in an appearance on the Internet site at 10:17 a.m. IST on their Friday morning — and I found it embedded in a GATA release.  Another link to it is here.

Gold and Silver Will Protect From Coming Financial Crash – Jim Rickards

Gold and silver coins will protect from the coming financial crash – James Rickards, author of The Road to Ruin told Sean O’Rourke in a must listen to RTE Radio interview this week.

Rickards is the best selling author on finance and money and advises the US intelligence community on international economics and financial threats.

His advice to people with savings or investments to protect from the coming crash? Buy gold and silver coins.

“For savers and investors at any level, modest or wealthier – put 10{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} of your invest-able assets in physical gold or silver, for smaller amounts, silver might do very well.”  

“It’s the future of money… Here is why . First of all it is non-digital. Everyone thinks they have money; what they have are electrons in banks…” You can have confiscation, negative interest rates, bank closures.

This 13-minute audio interview with Jim was posted on the Internet site on Wednesday — and I found it on Mark O’Byrne’s website last night.  There’s a bit of a transcript — and another link to it is here.

China gold premiums hold near 3-year high, cash crunch curbs Indian demand

Gold premiums in China held near three-year highs this week amid limited supply of the precious metal with traders saying Beijing was restricting imports, while prices in India swung to a discount as a severe cash crunch dampened appetite.

The import curbs may be part of China’s efforts to limit outflows of the yuan after the currency’s slide to its weakest in more than eight years, traders say. China allows only 15 banks to import gold, including three foreign lenders.

There is severe restriction on the banks’ quota to import gold into China. Each one of them have to justify their need,” a Hong Kong-based banker said.

Gold was sold in China at about $24 an ounce above the international spot benchmark this week. Premiums went as high as $30 last week, the most since January 2014, according to Thomson Reuters data.

Supply has been limited and so the premiums have held firm,” said Cameron Alexander, analyst with Thomson Reuters-owned metals consultancy GFMS.

This Reuters news item, co-filed from Bengaluru and Mumbai, was posted on their Internet site at 3:52 p.m. India Standard Time on their Friday afternoon — and I found it on the Sharps Pixley website on Friday evening Denver time.  Another link to it is here.


As per usual, here are two more of the finalists for the 2016 Comedy Wildlife Photography AwardsClick to enlarge.161203photo-1



Today’s pop ‘blast from the past’ dates from 1965 .  It was composed by Paul McCartney — and is off the Beatles Rubber Soul LP, which was released on this date precisely…03 December…back in 1965 — which is 51 years ago today.  The link to that is here.  Canadian singer Anne Murray covered it in 1974 — and it was a huge hit for her as well.

Back in 1965, stereophonic sound as it was called in those days, was in its infancy — as was record engineering in general — along with all the other associated technology that went with it.  So the Anne Murray version has a totally different dynamic than the version by The Beatles.  The link to her cover is here.

Today’s classical ‘blast from the past’ is from Antonio Vivaldi’s “Four Seasons”.  A month or so ago, I posted “Autumn” — but now it’s December in Edmonton…and even though we don’t have a lot of snow, it’s definitely winter outside.  Here’s Anne Sophie Mutter doing the honours again for that season — and the link is here.

It was the second month in a row where JPMorgan et al were missing in action on the job numbers report — and I was perfectly happy about that.  I was also happy that the precious metals performed positively during the New York session.

But make no mistake about it, if you look at the price inflection points for all four precious metals on Friday, you’ll note that, with the exception of palladium before the COMEX open, they were all being carefully managed to perfection — and prices were not allowed to so much as hint that they wanted to break out to the upside.  But if left to their own devices, that’s precisely what they would have done.  That’s been the trend for a while — and it can be all laid at the feet of JPMorgan et al, as short buyers and long sellers of last resort.

Here are the 6-month charts for all four precious metals, plus copper, once again.  With the exception of palladium, their respective price patterns look like their painting  bottoming pattern of some sort.161203-6-month-gold


Of course this current state of affairs is all predicated on the fact that the food supply for the Commercial traders, the Managed Money traders, continue to refrain from going as short as they have done in the past on these engineered price declines.  And if that proves to be the case, then the only fodder for the Big 8 going forward would be what remaining positions they can wring out of the Other Reportable and NonReportable/small trader categories.  At this stage of the price cycle, those carcasses have been picked pretty clean as well.

If this is indeed the situation, then anyone with a decent short position to cover is going to be hooped.  So now we have to wait and see it that is indeed the case.  Going forward, nothing else matters.

But as Ted Butler has pointed out on countless occasions, JPMorgan certainly has enough physical silver in good delivery form to cover its remaining short position in that precious metal — and  perhaps gold as well.  But that latter point is pure conjecture on my part.

With a veritable sea of black swans out there, with probably more manifesting themselves over the weekend, it remains to be seen how much longer ‘da boyz’ can keep a lid on things.  For many years Ted has speculated that JPMorgan has been in a position on more than one occasion to unleash a double-cross on the remaining ‘Big 7’ traders, and let them burn in hell in a short covering squeeze for the ages.  We’re definitely at one of those moments right now.

That’s all I have for the day — and the week — and I’ll see you here on Tuesday.


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