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As most people are still trying to figure out exactly what Jill Stein is doing and why she’s doing it, a judge in Montgomery County Pennsylvania, just north of Philadelphia, has decided he’s seen enough.  After hearing arguments from attorneys representing Jill Stein’s campaign and the Montgomery County Board of Elections, Judge Bernard A. Moore dismissed the petitions of voters in 78 precincts to recount votes or forensically analyze voting machines due a lack of evidence and improperly filed petitions.  Per The Times Herald of Montgomery County:

“What we keep going back to is that our voting machines are not connected to the internet,” said board of elections Solicitor Nicole Forzato. “Montgomery County takes great, great pride in being concerned about its infrastructure for IT generally, and they have gone through a vigorous process to make sure our technology general, including voter services technology and the voting machines are safe and secure to use. ”

 

The judge did not give an explanation of his dismissal, but objections made by Forzato focused on two areas: first, that there was insufficient evidence to suggest that the machines had been tampered with in any way and second, that the petitions were not filed properly with the proper fees.

 

Stein campaign attorney Ilann Maazel argued that voting machines throughout Pennsylvania were vulnerable to hacking. He stated that the effort to request a recount or analysis of the machines was to make sure every vote was counted.

 

“We know that Donald Trump won the vote of machines in Pennsylvania. We want to know who won the vote of the people,” Maazel said.

 

Maazel also argued that the manner in which the petitions were filed, county-by-county and district-by-district, was a result of “byzantine” election statutes in the commonwealth.

 

“They’re requiring fees that don’t exist, they are proposing deadlines that don’t exist,” Maazel said. “The Republican Party is saying that over 27,000 people in 9,000 districts have to request a recount or there can’t be a recount anywhere. What kind of system is that? That is a disgrace.”

Of course, this result is not terribly shocking given that even Jill Stein admits there is “no evidence of fraud at the ballot box.”

Dr. Jill Stein: At this point, there is no evidence of fraud at the ballot box https://t.co/kmTJr2r9XX https://t.co/WgtiXav4WX

— CNN Politics (@CNNPolitics) November 29, 2016

 

As we noted yesterday, Jill Stein was also defeated in a Wisconsin court for failing to present any credible evidence of vote tampering.

While this should come as a shock to precisely no one other than some disaffected Hillary supporters who were hoping for a miracle, Jill Stein’s request for a full “hand recount” in the state of Wisconsin has officially been denied by Dane County Circuit Judge Valerie Bailey-Rihn.  According to the StarTribune, the request was denied after the judge found that Stein failed to show any mistakes or irregularities that would bring a machine recount into question.

 

A Wisconsin judge has refused to order local officials to conduct the state’s presidential recount by hand.

 

Green Party presidential candidate Jill Stein requested the recount last week. She alleged — without evidence — that the state’s voting equipment may have been hacked.

 

The state Elections Commission has ordered the recount to begin Thursday but rejected Stein’s request that county clerks conduct the recount entirely by hand. Stein filed a lawsuit seeking an order for a statewide hand recount.

 

Stein’s attorneys argued during a hearing Tuesday evening that the best way to determine if a cyberattack occurred is to check ballots by hand against electronic tabulations from Election Day. State lawyers countered there’s no evidence to suggest any attack took place.

 

Dane County Circuit Judge Valerie Bailey-Rihn refused to issue the order, saying Stein’s team failed to show any mistakes or irregularities that would bring a machine recount into question.

It’s time to let this one go, Jill.  It was a good effort.

via http://ift.tt/2fIJrJC Tyler Durden

For anyone still curious what hyperinflation in real time looks like, here is the visual answer…

And as SHTFPlan.com's Mac Slavo notes, Venezuela is deep into the death spiral, and things are likely to get worse before they get better.

 

As the South American nation’s paper currency continues to lose value with each passing day, the people of Venezuela are forced to carry piles of cash just to buy basic goods and services – with many merchants now literally weighing the next-to-worthless cash rather than wasting time to count it.

Clearly, this does not bode well.

Venezuela continues to repeat the mistakes of other failed states as its currency comes dangerously close to all-out hyperinflation, as has happened in Zimbabwe and Weimar Republic Germany.

via the UK Independent:

Inflation in Venezuela is expected to reach 720 per cent this year, with the largest bolívar bill now worth just five US cents on the black market.

 

Some shopkeepers have reportedly taken to weighing rather than counting the wads of cash customers hand them, and standard-size wallets have become all but useless in the socialist South American state. Instead, many people stuff huge volumes of cash into handbags, money belts, or backpacks, in scenes analysts have said are suggestive of “runaway” inflation.

 

[…]

 

Humberto Gonzalez, who runs a delicatessen in the city, said he uses the same scales to weigh slices of salty white cheese and the stacks of bolívar notes handed over by his customers .

“It’s sad… at this point, I think the cheese is worth more.”

 

[…]

 

“When they start weighing cash, it’s a sign of runaway inflation,” he said. “But Venezuelans don’t know just how bad it is because the government refuses to publish figures.”

For several years now, President Maduro opted to continue printing more and more cash as a means of dealing with the oil crisis and the collapsing value of the bolívar, and as a result, the money just isn’t worth much at all.

The printing press simply cannot save the country from a death spiral, but it doesn’t mean Maduro is prepared to let go of power. He has maintained that Venezuela’s problems are due to economic warfare being waged by the United States to topple the oil-rich socialist regime.

Bremmer Rodrigues, who runs a bakery on the outskirts of Caracas, said his family are at a loss over what to do with their bags of bills. “It’s a mountain of cash, every day more and more.”

 

[…]

 

The shrinking value of the currency has meant that withdrawing the equivalent of £5 from an ATM produces a fistful of more than 100 bills. Some ATMs now need to be refilled every three hours, because the machines can only hold so much cash. This means there are often a limited number of functioning ATMs in Caracas, and long queues to withdraw money.

Venezuela is scheduled to reissue the currency at higher denominations, but it is unclear how much that will help the larger problems that the country faces.

Maduro has attempted to stave off collapse and avoid the inevitable by ruling with an iron fist.

As a result, the people have been forced to endure incredibly long lines to buy food rations; everyday life has been disrupted in every way possible, as crime and poverty have taken a toll on the population.

Food shortages and inflated black market prices for staples, meat and other necessities have driven many to poach stray animals for food and take other desperate measures. Malnutrition is becoming a rampant problem, and the health of the society in general is at a very stressed point.

As Shaun Bradley reported:

Life in Venezuela now consists of empty grocery stores, record rates of violent crime, and widespread shortages of just about everything. The economic and political conditions have been deteriorating for years, but recent stories coming from this once-rich nation are astonishing. Bars have run out of beer, McDonald’s can’t get buns for their Big Macs, and rolling blackouts are a regular occurrence. The average person spends over 35 hours a month waiting in line to buy their rationed goods, and even basics like toilet paper and toothpaste are strictly regulated.

 

Jason Marczak, director of the Latin America Economic Growth Initiative, spoke about the crisis:

 

“When people are literally going hungry and children are dying at birth because there aren’t the right medical supplies … when basic things like Tylenol aren’t even available … this causes a huge amount of angst in the population.”

via http://ift.tt/2gORvVd Tyler Durden

In light of today’s visit by President-elect Trump to Indiana to take credit for saving some 1,100 Carrier jobs from being offshored to Mexico, a recurring question is just what the Trump quid to Carrier’s “pro quo” to get the deal done.

As reported yesterday, Carrier did issue a press release, perhaps to confirm that it hadn’t merely caved to Trump team pressure, when it said that “the incentives offered by the state were an important consideration” and added that “this agreement in no way diminishes our belief in the benefits of free trade and that the forces of globalization will continue to require solutions for the long-term competitiveness of the U.S. and of American workers moving forward.”

As we further noted, shortly after the deal, questions emerged as to what the motive behind Carrier’s decision may have been. “Was Carrier pressured into doing a deal that was not in the best interest of shareholders of its parent, United Technologies? Was strongarming involved? Did Trump make a major concession as part of a political deal or did Carrier simply bend over backwards to appease the President-elect?”

Overnight, The Hill similarly focused on the nuances of the deal, adding that fiscally conservative groups are staying quiet about the deal for the time being. “But if it turns out that Trump and Pence have offered any special concessions to Carrier — either at the federal level or the state level, given that the vice president-elect is still the governor of Indiana — then those free-market groups are likely to cry foul.”

“The particulars of this agreement haven’t been released, but our position on corporate welfare is well-known and that has not changed,” said Brent Gardner, chief government affairs officer at Americans for Prosperity. The group is the major grassroots organization within the network of conservative mega-donors Charles and David Koch.

 

Chart Westcott, a Texas-based investor who belongs to the Koch donor network, said that considering United Technologies is a major defense contractor, he would have no trouble if “Trump went in there and simply was using his leverage … saying, ‘Look, you want to do business with us? This is part and parcel of doing business, is not shipping American workers overseas.’ ”

 

“I’d see that as a positive,” Westcott said. “That’s just saving American jobs using the leverage and the bully pulpit of the U.S. president.”

 

But if Trump cut a deal with Carrier in which American taxpayer dollars are being spent, “then that’s a huge moral hazard and not necessarily a good thing for the U.S. taxpayer, even if it is great for the workers at Carrier,” Westcott added. “That’s the kind of government interference that I oppose.” “So the devil,” he added, “really is in the details.”

Conveniently, we now have the details. As Fortune reports, citing a source close to the company, Trump called Greg Hayes, CEO of Carrier’s parent company United Technologies, two weeks ago and asked him to rethink the decision to close the Carrier plant in Indiana. Hayes explained that the jobs were lower-wage and had high turnover, and the move was necessary to keep the plant competitive, according to the source. He said the plan would save the company $65 million a year.

Trump then replied that those savings would be dwarfed by the savings UTC would enjoy from corporate tax-rate reductions he planned to put in place. During the recent campaign, Trump threatened to slap tariffs on Carrier imports from Mexico.

So what were the “incentives”? In the end, UTC agreed to retain approximately 800 manufacturing jobs at the Indiana plant that had been slated to move to Mexico, as well as another 300 engineering and headquarters jobs. In return, the company will get roughly $700,000 a year for a period of years in state tax incentives. Still, some 1,300 jobs will still go to Mexico, which includes 600 Carrier employees, plus 700 workers from UTEC Controls in Huntington, Ind. 

In summary, the “math” works out to $636 per year per job saved in tax savings: hardly an egregious sum, and one which could likely be extended to other companies (unless, of course, those other companies decide to hold Trump hostage and demand escalating pay schedules) if and when Trump’s fiscal stimulus package is implemented. It remains to be seen if the popular response, outside of conservative groups, will interpret this trade off as taxpayer funded “moral hazard.”

via http://ift.tt/2gJLtZN Tyler Durden

• Blockchain technology – What is it?

• Latest developments – Royal Mint Gold & CME, Goldman Sachs and Santander

• Why do we need it? It’s about value

• Blockchain is an extension of economics

• Blockchain allows us reduce uncertainty and risk

• How will it change your life?

By @Skoylesy . Editor @MarkTOByrne

For those of you who follow anything to do with blockchain and blockchain technology,  you will know that the space has had its ups and downs in the last couple of weeks.

The exciting news is that two major players in the gold market, the Royal Mint and CME Group have announced a blockchain-backed gold project, and the surprising news is that the R3CEV consortium is apparently under threat.

Making a mint on the blockchain

The Royal Mint and CME Group have announced that they are working on a blockchain project together. The project will see the creation of Royal Mint Gold (RMG) digital tokens which will each be backed by 1g gold.

We will look at the Royal Mint’s announcement in more detail shortly, particularly at how they expect the implementation of a blockchain-backed platform to mean that they are able to remove storage fees.

But the focus of today’s research note is to look at why blockchain is grabbing everyone’s attention.

The use of blockchain technology in the gold space is nothing new, it is something we discussed recently in regard to changes in the gold market and the risks posed to the London gold market.

However, the move by the world’s oldest gold organisation is an illustration of just how complimentary the technology that was first known for backing ‘digital gold’ (bitcoin) and the longest surviving money, really are.

Goldman Sachs and Santander Drop Out of R3 Consortium

In recent weeks, both Goldman Sachs and Santander have dropped out of the R3CEV consortium, whilst a further five (including Morgan Stanley and National Australia Bank) are also rumoured to be about to leave.

R3 is a blockchain company formed of a consortium of near 70 banks and financial institutions (including those focused on insurance). It leads research and development in distributed ledger technology, and is currently raising $150m.

However the move by those mentioned above is a positive sign, and one that shows the blockchain (or distributed ledger technology) industry is maturing. Shake-outs are inevitable in new technology industries as institutions, governments and regulators negotiate their way through new developments and working out what it means for them.

Those companies that are set to leave the consortium are still committed to the ground-breaking technology. Goldman Sachs and Santander are both, for example, still shareholders in Blythe Masters’ Digital Asset Holdings. The former co-led a $60 million investment into the business alongside IBM.

Even CME Group, as mentioned earlier, are involved in multiple blockchain projects, as a member of the industry body Post Trade Distributed Ledger Group (PTDL) (fellow members include the London Stock Exchange, Euroclear and HSBC) and the Hyperledger project.

But what is it about this technology that is so groundbreaking and has the likes of Goldman Sachs investing millions and ex-senior JP Morgan banker, Blythe Masters breaking rank and joining a (well-funded) start-up?

Why are established gold-market participants deciding this is the technology they need to bring the space into the 21st century?

Uncertain about blockchain?

Bettina Warburg, presented a TED Talk over the summer in one of the best explanations we have seen for a long-time, that will help you to understand the power of blockchain technology.

 

Ultimately blockchain’s genius comes down to its ability to reduce uncertainty in the transfer of value – whether that value is information, a digital asset, a contract note, an agreement or a deed – you name something that is effectively information and it has value.

The exchange of value is something we have sought for millennia to reduce the uncertainty of, and it has resulted in the formal and informal institutions and systems we have today.

Ranging from regulators, to oversized banks like Goldman Sachs, to lawyers, to barter systems.

What is blockchain?

“So what is the blockchain?” Warburg explains it well:

“Blockchain technology is a decentralized database that stores a registry of assets and transactions across a peer-to-peer network. It’s basically a public registry of who owns what and who transacts what. The transactions are secured through cryptography, and over time, that transaction history gets locked in blocks of data that are then cryptographically linked together and secured. This creates an immutable, unforgettable record of all of the transactions across this network. This record is replicated on every computer that uses the network.”

Never seen before

The concept of blockchain, something that can be decentralised, can operate autonomously, is auditable and apparently immutable is something that is difficult to get our heads around. The closest description Warburg can provide is Wikipedia.

“We can see everything on Wikipedia. It’s a composite view that’s constantly changing and being updated. We can also track those changes over time on Wikipedia, and we can create our own wikis, because at their core, they’re just a data infrastructure. On Wikipedia, it’s an open platform that stores words and images and the changes to that data over time.”

There are of course further technical details to blockchain, but at its core it is a very similar concept.

“On the blockchain, you can think of it as an open infrastructure that stores many kinds of assets. It stores the history of custodianship, ownership and location for assets like the digital currency Bitcoin, other digital assets like a title of ownership of IP. It could be a certificate, a contract, real world objects, even personal identifiable information….It’s this public registry that stores transactions in a network and is replicated so that it’s very secure and hard to tamper with.”

This is where much of the attraction comes for the gold market. In itself gold is an immutable form of money, it cannot be edited, multiplied and in many ways it is an autonomous currency.

However the market that drives the prices is none of these things. By placing gold on a blockchain, we may get the first steps to a truly autonomous gold market that is about price discovery rather than price creation.

Why do we need it? It’s about value

Bettina points out that much of human behaviour comes down to how we exchange value. This has lead to a huge number of industries developing that are, at their core, about value.

They are about how we attribute value to items, how we exchange value and how we maintain value.

Blockchain will “fundamentally change how we exchange value”.

Why is this? Because the blockchain has a capability that no human-managed organisation has yet managed to master – the removal of uncertainty through technology.

Blockchain is an extension of economics

It still surprises me the number of people who haven’t heard of bitcoin, and even those who have heard of bitcoin are unaware of blockchain. Blockchain is the technology that underpins bitcoin, but it is so much more than the ledger of a cryptocurrency.

Blockchain means that we may no longer have to use the layers of bureaucracy in order to reduce uncertainty. Warburg sees the potential of blockchain as an extension of Nobel Prize winning economist Douglass North’s ‘New Institutional Economics’.

Institutions, in this context, are just the rules (and organisations, whether informal or formal) that implement them e.g. the law or just bribery.

“As Douglass North saw it, institutions are a tool to lower uncertainty so that we can connect and exchange all kinds of value in society. And I believe we are now entering a further and radical evolution of how we interact and trade, because for the first time, we can lower uncertainty not just with political and economic institutions, like our banks, our corporations, our governments, but we can do it with technology alone.”

Knowing that these organisations exist form the rail on which we operate our lives, our businesses and our economies. In the future blockchain will act as the rails that reduce uncertainty, on top of which we will exchange value through digital assets.

The uncertainties of life

“Blockchains give us the technological capability of creating a record of human exchange, of exchange of currency, of all kinds of digital and physical assets, even of our own personal attributes, in a totally new way. So in some ways, they become a technological institution that has a lot of the benefits of the traditional institutions we’re used to using in society, but it does this in a decentralized way. It does this by converting a lot of our uncertainties into certainties.”

For Warburg there are three uncertainties when it comes to transferring value:

1) Not knowing who you are dealing with
2) Degrees of transparency in complex transactions and supply chains
3) Reneging on an agreement – no recourse if it goes wrong

The uncertainty of the unknown party

Today, with many of the transactions we are able to take part in, the uncertainty is reduced thanks to verification. Whether this be by receiving a bank transfer from someone who has been verified by their own (also verified bank) or if it is booking AirBnb which you trust thanks to social verification, GoldCore customer reviews on Ekomi, personal reviews and links to Facebook profiles.

Warburg points out this is a very fragmented system. I have bank accounts in the UK, but if I want to open an additional one in the same country I have to be verified all over again. One verification does not determine the next. “Think about how many profiles you have,” says Warburg.

“Blockchains allow for us to create an open, global platform on which to store any attestation about any individual from any source. This allows us to create a user-controlled portable identity. More than a profile, it means you can selectively reveal the different attributes about you that help facilitate trade or interaction, for instance that a government issued you an ID, or that you’re over 21, by revealing the cryptographic proof that these details exist and are signed off on. Having this kind of portable identity around the physical world and the digital world means we can do all kinds of human trade in a totally new way.”

In the project announced by the Royal Mint and CME Group there is expected to be transparency over the ownership records – to those who have access to the ‘permissioned’ ledger.

Degree of transparency

At the moment there is very little transparency and accountability when it comes to the London Gold Market and it’s over-the-counter (OTC) trading. This can be difficult to contend with given so much physical gold demand is, in its simplest from, based on transparency and trust. Yet as gold product providers such as ETFs and digital gold providers grow in power we appear to forget why we trust gold in the first place.

For many one of the key issues with the way gold products are traded is a lack of transparency over the underlying asset or currency – physical gold.

However, blockchain can potentially be used to bring some of the much-missed transparency to the gold market. This is when we start to use the phrase ‘trustless’ which is a bit of a mind-upset for those who are new to bitcoin and blockchain.

A trustless transaction is where the participants do not need to trust one another, as instead a blockchain (which is verified, immutable and decentralised) is used to monitor and validate the information in a supply chain. Imagine what this could mean in a network of goods and data that currently can be tampered with – medicines, technology, designer items.

This means that in theory it should not matter when you are dealing with a multi-party horizontal supply chain, which each have different infrastructures, about whether you can trust them or not as there is ‘one single truth’.

This is something we have not had before – we have an unbelievable lack of transparency, which currently we rely on layers of verification agents (lawyers, compliance, personal trust) to provide visibility.

“We can create a decentralized database that has the same efficiency of a monopoly without actually creating that central authority. So all of these vendors, all sorts of companies, can interact using the same database without trusting one another. It means for consumers, we can have a lot more transparency. As a real-world object travels along, we can see its digital certificate or token move on the blockchain, adding value as it goes. This is a whole new world in terms of our visibility.”

Reneging – no going back with blockchain

The ability to solve this uncertainty is the application of blockchain that really put it on the map. Smart-contracts are where we are seeing some serious innovation. Currently we rely on legal entities and processes to guarantee our transactions.

Supply finance is one particularly complicated area that is built on layers of organisations and timings in order to facilitate deals. A more familiar example is the process of buying a house – something that is inordinately lengthy, time-consuming and expensive for what is basically the exchange of a good (too often) financed with debt.

Both of these examples rely on third parties to create trust within a transaction, to enforce it because of the checks that are put in place. But blockchain now enables us to do away with the bureaucracy and red tape, as the code acts as the enforcer.

Warburg uses the example of purchasing a smart-phone online:

“Blockchains allow us to write code, binding contracts, between individuals and then guarantee that those contracts will bear out without a third party enforcer. So if we look at the smartphone example, you could think about escrow. You are financing that phone, but you don’t need to release the funds until you can verify that all the conditions have been met. You got the phone.”

And this, I agree with Warburg, is one of the most exciting things about blockchain’s ability to lower our uncertainties:

“…because it means to some degree we can collapse institutions and their enforcement. It means a lot of human economic activity can get collateralized and automated, and push a lot of human intervention to the edges, the places where information moves from the real world to the blockchain.”

Will it change my life?

The reason blockchain is so groundbreaking is because it is both a technological disruption and economic evolution. It has combined the human need to reduce uncertainty with mathematics and technology. Its end result is a system free of layers.

“…the very thing that keeps the blockchain secure and verified, is our mutual distrust. So rather than all of our uncertainties slowing us down and requiring institutions like banks, our governments, our corporations, we can actually harness all of that collective uncertainty and use it to collaborate and exchange more and faster and more open.”

It is difficult to see how it won’t change our lives.

The implications for a world that is affected from the top to the bottom by institutions that are required to manage our mutual distrust, is unfathomable.

But this is where many will take issue. Why would an institution be it government, bank, legal entity, regulator or compliance company decide to invest in and implement a system that is, at its core, designed to do their job?

Why embrace a blockchain that could expose unethical, illegal practices?

Why operate on a blockchain that removes the need for expensive lawyers, compliance officers etc.

In truth the concept of blockchain in practice is far more complex than it initially appears. There can be multiple blockchains. Some operate privately between a select network, some are public (such as the bitcoin blockchain) and others a hybrid of the two.

Blockchains can be implemented to do an inordinate number of processes that we are hardly aware of, the whole time keeping the current status-quo just more efficient. And this is why everyone is looking into using the technology.

That may seem depressing but it will lead to many, many positive developments in terms of ethical behaviours, regulated activities, efficiencies in deal-making and even reducing payment costs.

For many the discussion is beyond this, it’s not will or how but when?

The short-answer is not for a while. Unless you are an avid bitcoin user, trader or enjoy taking part in initial coin offerings. In the long-term it probably will affect your life, but the masses may barely know about it.

At the moment there are few applications (other than bitcoin) that are up and running in the real world. But the possibilities really do appear to be infinite and it is with this in mind that regulators are launching incubators, insurance companies are hosting hackathons, banks are investing in blockchain tech projects and venture capitalists (VCs) are snapping up anything that merely mentions the phrase ‘decentralised ledger’.

For Warburg, we will soon see a world where blockchain technology and distributed, autonomous organisations will “have quite a significant role.”

We concur.

Watch Warburg Blockchain Ted Talk
Read Blockchain Promises To Be As Disruptive A Technology As Internet
Read Bitcoin and The Blockchain – Banks Must Embrace Or “Die”
Read Gold, Silver, Blockchain and Fintech – Solutions To Negative Rates, Bail-ins, Cash Confiscations and Cashless Society

 

Gold and Silver Bullion – News and Commentary

Gold sinks to lowest in 10 months; firm dollar, chance of U.S. rate hike weigh (Reuters.com)

Gold Slips As China Curbs Imports To Slow Capital Flight (ZeroHedge.com)

Tumbling Gold Prices Mean More Pain for Barrick & Newmont But… (Barrons.com)

Bank of England Sees Economic Risks From Trump and Brexit (WSJ.com)

Bucket of gold flakes valued at $1.6 million stolen from truck (Edition.com)

World is feeling the might of China’s commodity traders (Bloomberg.com)

John Embry – Some Long Time Gold Holders Are Now Capitulating… (KingWorldNews.com)

Michael Oliver – Conspiracy Theorists Would Use This As Evidence Of Central Bank Manipulation Of The Gold Market (KingWorldNews.com)

Paul Craig Roberts Denounces Gold Market Rigging (USAWatchDog.com)

China’s ‘extraordinary leverage’ tops Bank of England’s growing list of concerns (CNBC.com)

Gold Prices (LBMA AM)

01 Dec: USD 1,168.75, GBP 930.09 & EUR 1,099.68 per ounce
30 Nov: USD 1,187.40, GBP 952.06 & EUR 1,115.44 per ounce
29 Nov: USD 1,187.30, GBP 952.45 & EUR 1,119.98 per ounce
28 Nov: USD 1,189.10, GBP 956.51 & EUR 1,117.99 per ounce
25 Nov: USD 1,187.50, GBP 953.30 & EUR 1,121.83 per ounce
24 Nov: USD 1,187.25, GBP 953.60 & EUR 1,125.04 per ounce
23 Nov: USD 1,213.25, GBP 980.00 & EUR 1,143.00 per ounce

Silver Prices (LBMA)

01 Dec: USD 16.30, GBP 12.91 & EUR 15.35 per ounce
30 Nov: USD 16.67, GBP 13.39 & EUR 15.66 per ounce
29 Nov: USD 16.54, GBP 13.26 & EUR 15.61 per ounce
28 Nov: USD 16.68, GBP 13.45 & EUR 15.73 per ounce
25 Nov: USD 16.47, GBP 13.21 & EUR 15.55 per ounce
24 Nov: USD 16.31, GBP 13.09 & EUR 15.43 per ounce
23 Nov: USD 16.56, GBP 13.36 & EUR 15.59 per ounce

Recent Market Updates

– RBS Fail Bank of England Stress Test
– Peak Silver – Supply Deficits Mean Higher Prices
– Bail In Risk – €4 Trillion Banking System In Italy Poses Contagion Risk as Referendum Looms
– Gold Down 13.5% In 13 Days – Trump Bearish For Gold?
– War On Cash Just Got Real – India and Citibank In Australia
– Russia Gold Buying In October Is Biggest Monthly Allocation Since 1998
– Stocks, Bonds, Pension Funds “Will Be Wiped Out…” – Rickards
– Physical Gold Is A “Long-Term Position” as “Hedge Against Governments”
– Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold”
– Islamic Gold – Vital New Dynamic In Physical Gold Market
– Peak Gold Globally – “Bullish For Gold”
– Gold Price Should Go Higher On Global Risks and Trump – Capital Economics
– President Trump – Why Market Loves Him and Experts Wrong

 

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Submitted by Ronan Manly, BullionStar.com

 

Introduction

Exchange traded investment vehicles backed by physical gold refer to a group of trusts, funds, or other legal entities which hold gold bars with a custodian in a vault and which issue securities, units or other fractional ownership claims against that gold. These securities are pitched and marketed as an alternative to direct ownership of gold bullion and these products have seen significant expansion and evolution over the last 10-12 years.

There are a number of such products including Exchange Traded Funds (ETFs) and Exchange Traded Certificates (ETCs). These product classes now represent a relatively large footprint within the gold investing space. In addition to the very large and well-known SPDR Gold Trust (GLD) and iShares Gold Trust (IAU), there are several other similar products from providers such as ETF Securities, Source ETFs, and Xetra-Gold. At the time of writing, GLD held nearly 900 tonnes of gold, ETF Securities products held over 300 tonnes, iShares gold ETFs held approximately 275 tonnes of gold, and Xetra-Gold held 110 tonnes. Therefore, their combined gold holdings are now larger than all but the world’s largest central bank gold reserve holdings.

As popular as these securities are, it’s important to look at what exactly these products provide, and what they don’t provide when compared to ownership of segregated physical gold bars or gold coins.

 

Exposure to the Gold Price, not to Gold

A common investment objective of all of these gold-backed vehicles is to provide the security holder with exposure to the price of gold, not to actual physical gold.

For example, the investment objective of SPDR Gold Trust shares is to “reflect the price of gold bullion”. The iShares Gold Trust “seeks to reflect generally the performance of the price of gold” The Source Gold P-ETC “aims to provide the performance of the spot gold price”. Xetra-Gold is an “opportunity to participate in the performance of the gold market”, in a product that has “no beneficial ownership to gold”. These products therefore do not provide their holders with direct ownership of gold.

 

ETFs: Paper at the end of the day

No Right to Underlying gold – Cannot take Delivery

Although these products do hold physical gold that backs the respective securities, a primary concern is that they do not, and never will, allow the unit holders to obtain access to the underlying gold. The gold bars held in these vehicles are almost always large ‘variable weight’ gold bars, commonly called London Good Delivery bars, which weigh anywhere between 350 ounces and 430 ounces.

For example, in ETFS Physical Gold (Ticker PHAU), “each individual security has an effective entitlement to gold”. For Source Physical Gold P-ETC, “each Gold P-ETC is a certificate which is secured by gold bullion”. For the SPDR Gold Trust, the “gold shares represent fractional, undivided interests in the Trust” which owns the underlying gold. But in none of these vehicles can the unit holder take delivery of the underlying physical gold that backs the shares or units.

Xetra-Gold does offer a roundabout option to its holders to convert their securities into physical gold if they so choose. This route, however, does not even involve access to the specific underlying gold bars of the product. Instead, Xetra-Gold holds an additional pool of unallocated gold for conversion purposes. In the words of Xetra, “in order to facilitate the delivery of physical gold, the issuer holds a further limited amount of gold on an unallocated weight account with Umicore AG”. Umicore is a Belgian headquartered metals refiner and recycler.

 

Counterparty Risk

Another common trait of gold-backed ETFs and similar vehicles is that they all have quite complex structures, long prospectuses filled with numerous risk warnings, and lots of moving parts. Lots of moving parts also means lots of participating entities such as trustees, custodians, marketing agents, Authorised Participants (APs), issuers, and market-makers, which potentially also means significant counterparties risks. A retail investor would also generally need a brokerage account to hold and trade these ETFs and securities, which is another layer of counterparty risk.

For example, the SPDR Gold Trust (GLD), marketed as a gold-backed ETF, is technically a grantor trust, established under the laws of New York State, and registered as a non-managed investment pool. It has a Trustee, a Sponsor, a Marketing Agent, and a Custodian, among other involved entities. Similarly, the iShares Gold Trust (IAU) is set up as a grantor trust. The Source Physical Gold P-ETC is an exchange traded certificate collateralised by gold bullion. ETF Securities Physical Gold securities are secured, undated, limited recourse debt securities that are listed on exchanges such as the London Stock Exchange. In the event of extreme financial market crisis, the complex structures of these products and the potentially complex counterparty risk scenarios that could arise should not be overlooked.

 

Vault Visits and Personal Audits Prohibited

The gold bar holdings underlying these collective investment pools are mostly stored in the London precious metals vaults of HSBC and JP Morgan, and in some cases, similar vaults in New York, Zürich and Frankfurt. Without exception, retail holders of gold-backed ETF units / shares / certificates can never visit these custodian vaults. In the case of the London vaults of HSBC and JP Morgan, the vault locations aren’t even publicly disclosed, so even if you wanted to turn up at the vault, you wouldn’t know where to go. Some large institutional holders of the SPDR Gold Trust and the iShares Gold Trust have on occasion been allowed into these HSBC and JP Morgan vaults, but this simply demonstrates that institutional clients get preferential treatment from these Trusts relative to smaller investors.

It goes without saying that since retail investors can’t ever visit the vaults in which ETF gold is stored, and since even institutional holders only get a quick vault ‘tour’, these ETF holders can never perform their own independent audits of the stored gold. This would not be practical anyway given that the ETF gold is a pool of undivided interests in the form of large Good Delivery bars, so there are no ear-marked gold bars individually identifiable per holder.

BullionStar allocated and segregated vault storage

Contrast this with segregated and allocated private vault storage offered by a company such as BullionStar, where the storage customer is always welcome to go to the premises and view their own gold holdings in person.

 

High Cost for Non-Physical Ownership

The costs of investing into gold-backed ETFs are not cheap. For example, the SPDR Gold Trust has an expense ratio of 0.40% per annum which covers fees incurred by the Trust to pay the multitude of entities involved in running the Trust, such as sponsor fees, marketing agent fees, trustee fees, custodian fees, listing fees, and legal fees. And these ETF’s do not even provide investors with ownership of physical segregated and allocated gold ownership.

Contrast this to BullionStar’s storage costs. BullionStar operates a secure storage vault in Singapore which is integrated into its shop and showroom premises.

BullionStar secure vault storage

BullionStar’s Bullion Savings Program (BSP) for gold is a fully backed physical precious metal allocation program that only costs 0.09% per annum. For example, when a customer buys 1 BSP Gram of gold, 1 gram of gold is allocated to the program from BullionStar’s stock inventory. The BSP is available in gold, silver and platinum metals. For silver and platinum, the cost of the BSP is only 0.19% per annum. BSP Grams can be converted to physical bars when sufficient grams have been accumulated and conversion is free, i.e. there is no conversion cost.

BullionStar BSP gold grams can be converted to 100 gram PAMP gold bars anytime there is a sufficient balance in the holder’s account. This conversion level is attainable and realistic and is far more practical than converting ETF units to 400 ounce gold bars which, although it may be theoretically possible, would be beyond the reach of all but the largest institutional ETF holders. Similar to BSP gold grams, BSP silver grams can be converted to 15 kilogram silver bars once a sufficient balance is reached, and platinum grams can be converted to 1 kilogram platinum bars.

Vault storage in BullionStar’s secure storage vault is only 0.39% per annum for gold bullion products (gold bars and gold coins). This storage cost is for fully allocated, fully audited and fully insured vaulted gold.

 

No Sub-Custodian Agreements in the London Vaulting System

A custodian is an institution that holds securities or physical assets in safekeeping on behalf of the owner. Similarly, a sub-custodian is an institution that provides custody / safekeeping services on behalf of a custodian. A custody contract is formed between asset owner and the custodian. From the perspective of the asset owner, the sub-custodian can be viewed as an unrelated third-party.

In addition to the secrecy surrounding the locations of the London precious metals vaults, an outdated and informal system of conventions is still used between custodians and sub-custodians in the London Gold Market. For example, the SPDR Gold Trust prospectus states that “the sub-custodians selected and available for use by the Custodian include: Bank of England, The Bank of Nova Scotia-ScotiaMocatta,…JPMorgan Chase Bank, and UBS AG”.

However, the same prospectus also states that there are no written sub-custodian agreements or contracts in the London gold market:

“There are expected to be no written contractual arrangements between sub-custodians that hold the Trust’s gold bars and the Trustee or the Custodian, because traditionally such arrangements are based on the LBMA’s rules and on the customs and practices of the London bullion market.”

The LBMA here refers to the London Bullion Market Association. Therefore, in the London Gold Market, which is the world’s center for the storage of the gold that backs the large gold ETFs, there are no subcustodian agreements. This lack of sub-custodian agreements in the London Gold Market goes against how all other financial markets are run. In comparison, the world’s equity and bond markets employ very sophisticated and highly detailed custody and sub-custody agreements covering the roles and legal responsibilities of both parties, and their liabilities under various scenarios.

The use of sub-custodians in the London vaulting system by gold-backed ETFs is not just a theoretical issue. It happens in practice and has happened quite recently. In the SPDR Gold Trust 10-Q filing with the SEC for the quarter ended March 31, 2016, the filing revealed that the Bank of England had acted as a custodian for GLD as recently as February 2016.:

 

“During the quarter ended March 31, 2016, the greatest amount of gold held by sub-custodians was approximately 29 tonnes or approximately 3.8% of the Trust’s gold at such date. The Bank of England held that gold as sub-custodian.”

Therefore, this lack of sub-custodian agreements in the London Gold Market is a real and somewhat underappreciated concern.

HSBC gold vault London

 

Inadequacy of Insurance

Given the sheer scale of some of the gold-backed ETFs such as the SPDR Gold Trust and iShares Gold Trust, and the value of the gold held in these Trusts, one would assume that the insurance coverage of the gold held must be vast and in excess of the value of the gold held. For example, the SPDR Gold Trust, at the time of writing, held nearly US$ 34 billion worth of gold bars.

However, insurance cover of the gold held in these Trusts is not sufficient. In fact, these Trusts don’t even insure their gold, as they leave the responsibility of insurance to the custodian. However, the custodians of the Trusts only insure the contents of the vaults (specie insurance) for limited general insurance cover that vastly falls short of the value of the gold bars held in those vaults. For example, the GLD prospectus states:

            “The Trust does not insure its gold. The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody”

The GLD FAQ reiterates this situation:

“The Trust is not a beneficiary of any such insurance and does not have the ability to dictate the existence, nature or amount of coverage. Therefore, Shareholders cannot be assured that the Custodian will maintain adequate insurance or any insurance with respect to the gold held by the Custodian on behalf of the Trust.

If the gold held by the custodian on behalf of the Trust becomes lost, or gets stolen or confiscated, the Trusts shareholders would have to bear the loss.

 

Insolvency Risks

Physical gold has been held as a form of savings and as a store of value for thousands of years. Gold-backed ETFs and associated products have only existed for the last 15 years or so. It’s not clear how gold-backed ETFs and their custodians and trustees would perform in a fully fledged systemic financial crisis. In contrast, physical gold has a long and proven history of acting as a reliable safe-haven status during financial crises.

What, for example, would happen if an ETF’s custodian such as HSBC became in danger of failure? This is not merely a theoretical issue as this scenario is covered in the GLD prospectus:

 “If the Custodian becomes insolvent, its assets may not be adequate to satisfy a claim by the Trust or any Authorized Participant. In addition, in the event of the Custodian’s insolvency, there may be a delay and costs incurred in identifying the gold bars held in the Trust’s allocated gold account.”

Arguably, the default of a custodian entity is a real risk when holding a gold-backed ETF, and the ETF price should be discounted by quantifying the cost of this risk using a proxy such as the price of purchasing Credit Default Swap (CDS) insurance on the debt securities of a custodian bank.

 

A Shareholder, not a Gold Holder

In gold-backed ETFs, such as GLD, that are structured as publicly traded Trusts, the unit holders are actually shareholders of the Trust. These trusts are governed by Trust Indentures which are legal documents laying out the roles and responsibilities of the Trustee, Sponsor, Custodian, and Marketing Agent. In some scenarios, such as fee arrangement changes, the wording of the indentures cannot be amended without the approval of more than 50% of shareholders.

Since the unit holders of the ETFs are actually the shareholders of the Trust, the unit holders have voting rights on the indenture wording change, and can be contacted by proxy voting agents operating on behalf of the Trust. This was starkly illustrated over 2014 / 2015 when the SPDR Gold Trust chose to launch a proxy solicitation campaign in an attempt to change the fee structure of the Trust to make it more advantageous to the Sponsor, which is a subsidiary of the World Gold Council.

During the proxy campaign, GLD shareholders were bombarded for months on end by disruptive phone calls from the proxy voting services Broadridge and D.F. King who were attempting to gather the required number of shareholder votes. Many small GLD shareholders who thought they were buying physical gold when they bought SPDR Gold Trust units, were not impressed when they realised that they  were actually shareholders on the receiving end of constant phone calls soliciting their vote and even phone calls trying to convince them to update their already cast vote. This type of disruptive fiasco would obviously not happen when owning segregated physical gold bars or gold coins.

 

ETFs Valued using LBMA Gold Price

ETFs and similar investment vehicles are usually valued based on their Net Asset Value (NAV). The NAV is the value of assets, less the value of liabilities, divided by the number of shares outstanding. ETFs usually trade at prices in and around the NAV but they can trade at either a discount or a premium to the NAV.

In the case of the large gold-backed ETFs, the NAV is calculated based on the LBMA Gold Price benchmark which is a price derived from a daily auction of unallocated gold in London where the only direct participants are a small group of LBMA bullion banks. In fact, the rules of access to the auction prevent any entity except LBMA bullion bank members from being direct participants in this auction.

Since March 2015, this auction is the successor to the scandal ridden London Gold Fix auction, and is essentially the same process, run by some of the same banks. The new LBMA auction will not even reveal who the auction chairman is, so the entire process is still not transparent. As such, the NAVs of these ETFs are formed by a gold price which is central to the London Gold Market’s system of unallocated gold transfers, where there is zero trade reporting, zero position reporting, an opaque system of clearing and vaulting, and where vastly more gold is traded than there is physical gold backing.

In a scenario under which the paper price of gold diverged from the physical price, the fact that these ETFs are valued based on the LBMA gold price and not on physically settled gold transactions has potential implications for the trading price of these ETFs, and the discounts / premiums to their NAVs.

 

ETF Ownership Perpetuates the Opaque LBMA run London Gold Market

Investment flows into gold-backed ETFs tend to channel gold demand that might otherwise have gone into physical gold into products whose supply is met by tapping the pool of LBMA bank controlled gold inventories and even the pool of central bank gold lending.

The actual mechanism for adding gold bars to the large London-based gold ETFs requires the custodians to allocate gold from the unallocated metal credit balances of the Authorised Participants (APs). These APs are mostly bullion banks. The unallocated metal balances of the bullion banks are essentially a general pool of bullion bank unallocated gold credits that have been created via the fractional-reserve gold banking system.

There is very little transparency around where the additions to the large London vaulted gold ETFs come from. The physical gold which the custodians HSBC and JP Morgan source is not provided by  the APs and bullion banks, by definition because the APs and bullion banks only transfer unallocated gold to the custodians. More importantly, the APs and bullion banks don’t normally maintain large physical gold inventories.

The custodians may even be directly borrowing from central banks which store their gold at the Bank of England, as a recent case of SPDR Gold Trust gold held in the sub-custody of the Bank of England during Q1 2016 implied.

The investment flows into ETFs therefore support and prop up a) the LBMA unallocated gold accounting system, b) the opaque London gold clearing and vaulting system, and c) the bullion banks that are at the heart of the fractional reserve unallocated gold system.

 

ETF Ownership Directly Funds World Gold Council

The World Gold Council is a member-owned non-for-profit organisation that was established to promote the demand for physical gold. The Council’s members currently comprise 19 gold mining companies from around the world.

Another concern specifically regarding the SPDR Gold Trust is that the majority of the fees earned by the Trust flow to the World Gold Council (WGC) due to the sponsor of the Trust being a fully owned subsidiary of the World Gold Council.

In fact, a large majority of WGC’s revenue are derived from fees from the SPDR Gold Trust. The WGC also receives recurring income each year from ETF Securities in connection with a historic transaction it previously entered into with this ETF provider. Therefore, the World Gold Council has a strong and vested interested in marketing and promoting investments into gold-backed ETFs, and less incentive in promoting direct ownership of segregated and allocated gold.

GLD fees fund the World Gold Council

Additionally, since the SPDR Gold Trust leaves it to the custodian HSBC to allocate physical gold to the Trust, the SPDR Gold Trust is also reinforcing the LBMA fractionally reserved and  unallocated gold accounting system, as well as the opaque London gold clearing and vaulting system. Therefore, there is a potential conflict of interest in that retail demand for the GLD does not necessarily increase the demand for the physical gold mined by WGC’s members.

For those who are not impressed with the World Gold Council’s track record in promoting the physical gold industry, these are important philosophical considerations.

 

The Quantity of Gold Represented by each ETF Share Declines over Time

Since gold backed ETFs accrue their expenses and pay those expenses by selling some of the gold held in the Trust / Fund, the quantity of gold represented by each share / unit declines over time. As the SPDR Gold Trust prospectus states:

 “The Trust does not generate any income and regularly sells gold to pay for its ongoing expenses. Therefore, the amount of gold represented by each Share has gradually declined over time.”

When the SPDR Gold Trust was launched in 2004 (originally called StreetTRACKS Gold Shares when it launched in November 2004), it was structured so that each GLD unit was worth 1/10^th of an ounce of gold. This is also called the Trust’s ‘Initial Pricing’.

At the time of writing, December 2016 (12 years after launch), the NAV per GLD share expressed in gold ounces had declined to 0.095338 ounces per share. Therefore, since launch in November 2004, the value of each GLD share has declined by 0.004662 ounces of gold due to the fact that the Trust’s expenses are paid by continually selling a portion of the Trust’s gold. Therefore for a holder of GLD since launch date, that holder has lost 4.662% of the gold that was initially backing each share.

There is another metric displayed on the GLD website which also illustrates this point, and its referred to as “Monthly Gold Sales per Share”. As an example, at the time of writing (November 2016), this figure was stated as being US$0.04133. Annualizing this cost into “Annual Gold Sales per Share” brings it to US$ 0.49596. Expressing the annual gold sales per share in terms of the GLD NAV (which was US$115.454 at the time), means that the annual gold sales equate to 0.4296% of the Trust’s NAV, which is about the same as the Trust’s estimated expenses of 0.40% per year.

 

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• Oil hits six-week high after OPEC deal, sterling jumps (Reuters), Oil Holds Gains After OPEC Deal (WSJ), Hangover Awaits as OPEC Celebrates (BBG)
• Opec agreement: the winners and the losers (FT)
• Russia’s Pledge to OPEC Will Mean ‘Herding Cats’ to Deliver Cuts (BBG)
• Mnuchin Made Millions From Financial Crisis (WSJ); Trump reverses stance by turning to Goldman alumni for key roles (FT)
• Treasury Pick Says ‘No Absolute Tax Cut’ for Wealthy (WSJ)
• Death toll rises to seven in Tennessee’s Great Smoky Mountains fires (Reuters)
• From Mexico to Vietnam: A Giant Aluminum Stockpile Is on the Move (WSJ)
• Ukraine says missile tests will avoid Crimea, mollifying Russia (Reuters)
• Dollar Slips Before Jobs Data as Oil Trades Near $50; Bonds Drop (BBG)
• Fillon Pitches Bitter Economic Medicine in French Presidency Bid (WSJ)
• German Wunderkind Turns to Plan B After Abu Dhabi Investors Walk (BBG)
• Putin curbs anti-Western rhetoric, says wants to get on with Trump (Reuters)
• Two Views of U.S. Jobs Data: Strong Enough for Fed But Not Trump (BBG)
• Dollar General posts surprise drop in comparable sales (Reuters)
• China’s Dalian Wanda Group Faces Renewed U.S. Regulatory Scrutiny (WSJ)
• Trump ‘Villains and Heroes’ to Mingle at Annual Mercer Costume Party (BBG)
• Thiel’s 1517 Fund Is Stalking the Next Zuckerberg (BBG)
• Swiss upper house backs immigration bill avoiding EU quotas (Reuters)
• Qatari news site says website blocked, blames state censorship (Reuters)

 

Overnight Media Digest

WSJ

– Donald Trump’s nominee for Treasury secretary, who worked for Goldman Sachs and billionaire investor George Soros, made millions buying failed IndyMac. His resume appears at odds with the president-elect’s campaign rhetoric, which targeted Wall Street bankers. http://on.wsj.com/2gmVknM

– In a letter sent on Wednesday, incoming Senate Minority Leader Chuck Schumer said the takeovers of U.S. companies by China’s Dalian Wanda Group Co and others warrant further scrutiny to determine whether they are being orchestrated by Chinese government interests – possibly leaving U.S. companies to compete on an uneven playing field. The move increases the likelihood of a re-examination of how the U.S. allows the nation to invest in American companies. http://on.wsj.com/2fNCt19

– Colombian legislators approved a peace agreement late Wednesday with the country’s communist guerrillas, ending Latin America’s longest armed conflict, which killed hundreds of thousands of people over the course of 52 years. http://on.wsj.com/2gXf4PX

– OPEC representatives reached a landmark deal to reduce oil output, propelling crude prices more than 8 percent after months of wrangling and market uncertainty about the ability of the once-mighty group to strike an agreement. http://on.wsj.com/2g6W8Ko

– High-income households will not receive an “absolute tax cut” under a Trump tax plan, the president-elect’s new pick for Treasury secretary Steven Mnuchin said on Wednesday, a promise that is at odds with tax proposals from Donald Trump and House Republicans. http://on.wsj.com/2gmaae3

– The federal government is on track to forgive at least $108 billion in student debt in coming years, as more and more borrowers seek help in paying down their loans, leading to lower revenues for the nation’s program to finance higher education. http://on.wsj.com/2gIcsSV

– Donald Trump said he is taking steps to separate himself from his businesses “to fully focus on running the country”. But House Democrats and others questioned whether conflicts of interest would remain if his adult children take operational control of his global real-estate empire. http://on.wsj.com/2gUVQKK

– The House on Wednesday passed far-reaching legislation aimed at bolstering federal funds for biomedical research and speeding up drug and medical-device approvals by the Food and Drug Administration, a goal long sought by the pharmaceutical industry. http://on.wsj.com/2gXfeXt

– Malicious software disguised as legitimate apps for Android smartphones and tablets has seized control of more than one million Google accounts since August, according to research from security firm Check Point Software Technologies Ltd . http://on.wsj.com/2gUY2Sn

– Facebook Inc Chief Operating Officer Sheryl Sandberg put more than $100 million into her charitable fund with plans to give to groups that promote women’s rights and help grieving families. http://on.wsj.com/2fNQkV5

 

FT

Belgian postal company Bpost SA said it made a final offer for Dutch rival PostNL NV, sweetening the cash component of the bid by 0.376 euro to 3.201 euros per share, valuing the bid at about 2.54 billion euros in cash and stock.

Takeda Pharmaceutical Co Ltd’s negotiations to acquire Valeant Pharmaceuticals International Inc’s Salix stomach-drug business have stalled over price disagreements, people familiar with the matter said on Wednesday.

Invitation Homes LP, the U.S. rental homes manager owned by private equity firm Blackstone Group LP, has confidentially filed for an initial public offering that could come as soon as January and raise as much as $1.5 billion, according to a source familiar with the matter.

 

Canada

THE GLOBE AND MAIL

** A stringent examination of the state of wireless competition in four provinces is delaying BCE Inc’s $3.1-billion deal to acquire Manitoba Telecom Services Inc . https://tgam.ca/2fHZsj7

** Toronto-Dominion is raising mortgage rates again, and this time the lender is going much farther than its recent hikes. https://tgam.ca/2fI4a05

** Protests, legal challenges over aboriginal rights and the fate of an endangered population of killer whales are among the hurdles facing Kinder Morgan’s Trans Mountain pipeline project. https://tgam.ca/2fI1Czb

NATIONAL POST

** The agreement by OPEC members to cut production Wednesday could provide much-needed cushion for Canadian oil producers, though there are lingering doubts over whether the cartel can ultimately meet its stated targets. http://bit.ly/2fHYnb5

** Rogers Media laid off 27 staff at its English-language magazine publications Wednesday, a day after it announced 60 layoffs at its publications in Quebec. http://bit.ly/2fI4Rqb

 

Britain

The Times

* The European Union (EU) will continue to need the city of London after Brexit, Bank of England Governor Mark Carney said, as he warned Brussels against seeking to damage the UK’s financial sector. http://bit.ly/2fMWrcz

* Royal Bank of Scotland Group Plc has given warning that it would be unable to handle a new financial crash after failing the latest round of Bank of England stress tests designed to assess the strength of the United Kingdom’s largest lenders. http://bit.ly/2gMgbxO

The Guardian

* Speaking as he launched a new product that Philip Morris International Inc claims is less harmful than traditional smoking, Chief Executive Officer André Calantzopoulos predicted a “phase-out period” for cigarettes. http://bit.ly/2fQ3HYj

* Labour MPs turned out in force on Wednesday to help defeat a parliamentary motion 439-70 that called for Tony Blair to be held to account for allegedly misleading parliament over the Iraq war. http://bit.ly/2fN17z7

The Telegraph

* A former business analyst at Logica and a man who was his neighbour have pleaded guilty to three counts of insider dealing during the IT consultancy’s 1.7 billion pounds ($2.13 billion) takeover by rival CGI Group Inc four years ago. http://bit.ly/2gmqsUb

* Food giant Nestle SA claims it has found a method to almost halve the amount of sugar in its chocolate. http://bit.ly/2gK9OMy

Sky News

* Ford Motor Co Chief Executive Officer Mark Fields said it is important that manufacturers in the United Kingdom are treated equally as Brexit looms. http://bit.ly/2gitQj1

* The most senior British member of the European Court of Justice (ECJ), Eleanor Sharpston, has told Sky News that the ECJ has “ultimate authority” over Article 50, the formal process to divorce the EU. http://bit.ly/2fBGR89

The Independent

* The Organisation of the Petroleum Exporting Countries has reached a deal amongst all 14 members to curtail oil supply for the first time in eight years. http://ind.pn/2gKncim

* Claims that Boris Johnson told at least four EU ambassadors that he supports freedom of movement have been dismissed as a “total lie” by sources close to the foreign secretary. http://ind.pn/2fSMGg1

 

via http://ift.tt/2gpgsJS Tyler Durden

In a sign that investor enthusiasm about the Apple “rebound” may have been premature, Digitimes reports that Apple has begun to reduce orders for iPhone 7s as initial “sales momentum has started fading”, according to sources from Taiwan’s handset supply chain.

The Digitimes sources said that initial shipment momentum of the iPhone 7 was in part driven by strong demand for the jet black iPhone 7 models and in part by the mishap brought upon by Samsung Galaxy Note 7. However, demand for the iPhone 7 devices in China and other markets has scaled down significantly since their launch less than three months ago, the sources noted.

However, always willing to dismiss a weakness on behalf of Apple as a one-time event, instead of paying attention to sales performance of the iPhone 7 devices, component suppliers and consumers alike have been shifting their focus to the next generation iPhone to be released in 2017, commented the sources.

Market rumors have indicated that the next generation iPhone will come with OLED displays, glass cases, dual-lens cameras, enhanced CPUs, and advanced sensors, while supporting mixed reality (MR) and wireless charging technologies.

 

Affected by consumers’ high expectations on the next generation iPhone, makers in the supply chain are mostly conservative about the shipment outlook for the iPhone 7 in the first half of 2017, expecting shipments in this six-month period to be at least five million units less than those shipped in the second half of 2016.

Who, in addition to AAPL, is most likely to be impacted: according to Bloomberg, Dialog Semi has the largest exposure to Apple among European suppliers at ~69% of revenue, while other suppliers include AMS, Infineon, Imagination Technologies, STMicro. AAPL was modestly lower, -0.4%, in premarket trading, at $110.

via http://ift.tt/2gYe5yP Tyler Durden

In early October, when speaking before the NY Fed, Bridgewater’s Ray Dalio made a prophetic warning: a 1% rise in yields from near-record low level would trigger “the worst decline in bonds since the 1981 bond market crash.” Less than two months later he has been proven right because while we have yet to see a move quite as large as the one Dalio envisioned, the November surge in global yields has already resulted in the worst monthly loss in the Bloomberg Barclays Global Aggregate Total Return Index, which lost 4% in November, the deepest slump since the gauge’s inception in 1990, and equivalent to $.17 trillion in losses. Over the past two months, the cumulative loss in the index’s market value is now a massive $2.8 trillion leading leading Bloomberg to declare that “the 30-year-old bull market in bonds looks to be ending with a bang.“

The conventional wisdom behind the move is by now familiar: hopes for U.S. economic momentum and Donald Trump’s election win,  with promises of tax cuts and $1 trillion in infrastructure spending, have spurred investors to dump debt that was offering near-record-low yields and pile into stocks.

Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to start raising interest rates — and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may be buying fewer sovereign securities going forward. Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to record highs.

“A lot of people are beginning to think that it is the end of the bull rally,” said Roger Bridges, the chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management’s Australia unit, which oversees $14 billion. U.S. 10-year yields may rise to 2.7 percent in January, Bridges said. “The trend is your friend.”

While the market’s fixation has been on recent equity market gains, the reality is that these have been more than offset by mark-to-market losses across the bond world. According to Bloomberg, the record rout which wiped our $1.7 trillion from the global index’s value in November, is nearly three times greater than the gain in world equity markets’ capitalization which rose by a more modest $635 billion.

And, as noted this morning, the pain continues: the yield on 10-year U.S. notes rose 56 basis points in November, the biggest jump since 2009, and was at 2.41% in early trading on Thursday. The average yield on the Bloomberg Barclays Global gauge climbed to 1.61 percent on Nov. 23, after touching a record low of 1.07 percent on July 5.

The rise in yields shows the limitations of the quantitative easing policies at the biggest central banks, Bridges said. Bonds will be especially vulnerable if the European Central Bank discusses reducing its debt-purchase program at its Dec. 8 meeting, he said.

With many investors having shifted out of risky assets and into duration in the past year, it remains to be seen how much of this loss will impact retail investor’s investing psychology once month-end P&L statements are sent out at the end of the month.

via http://ift.tt/2gLKiXf Tyler Durden