Category: zerohedge

It has become a daily farce.

Having soared above yesterday’s highs on the Iraqi’ deputy oil minister’s comments on renewed production freeze meetings, not even 10 minutes later Russia immediately poured cold water all over it: 

• RUSSIA SAYS NO AGREEMENT ON OIL MEETING IN MAY IN RUSSIA

But no reaction in crude as the HFT algos’ upward momentum has already been ignited, which was the only purpose behind the leak in the first place… as $43 stops taken out

 

Stocks likewise continue to surge.

 

Which is funny, because seconds before Noval issued his rejection, we tweeted the following:

When Iraq says “major oil producers” will meet in Russia it means Iraq, Venezuela and Ecuador. Not even Russia will be present.

— zerohedge (@zerohedge) April 20, 2016

Following promptly by this: RUSSIAN ENERGY MINISTER NOVAK SAYS HAS NO INFORMATION ABOUT MEDIA REPORTS ON OPEC MEETING IN RUSSIA IN MAY

 

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Here we go again…OIL PRODUCERS MEETING TO REVIVE OUTPUT FREEZE PROPOSAL: IRAQ

Seriously – are we really going to start this again!???

• *OPEC, OTHER PRODUCERS TO MEET IN RUSSIA POSSIBLY IN MAY: IRAQ
• *IRAQ SEES OIL PRICES RISING SLOWLY DESPITE DOHA TALKS OUTCOME
• *IRAQ OIL EXPORTS TO STAY AT 3.9M B/D IN MAY: DEP. OIL MINISTER

Of course the algos love it…

 

Of course, it is perhaps a little odd that this meeting in Russia wasn’t mentioned this morning by Russia’s Novak who instead noted that Russia was never going to cut outpout!!

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By The SRSrocco Report

It looks like something big may happen to the silver market and the Chinese are preparing for it.  After China launched it’s new Yuan Gold Fix today, the prices of the precious metals surged.  At one point today, silver was up 5%.  Silver is now trading at the $17 level, a price not seen in over a year.

Even though gold has taken center stage today due to Chinese rolling out there new Yuan Gold fix, something quite interesting has been taking place in the silver market over the past six months.  While Comex silver inventories have been declining from a peak of 184 million oz (Moz) in July 2015 to 154 Moz today, silver stocks at the Shanghai Futures Exchange have been doing the exact opposite.  And in a BIG WAY:

Shanghai Futures Exchange (SHFE) silver inventories bottomed on August 20th 2015 at 233 metric tons (mt), or 7.5 Moz.  However, silver inventories at the SHFE began to really pick up in 2016 as they surged to 802 mt in Jan from 596 mt in December.  This continued at a more rapid pace during the next few months reaching a staggering 1,706 mt today (54.7 Moz).

CHECK OUT our new PRECIOUS METALS INVESTING PAGE at the SRSrocco Report.

Thus, silver inventories at the SHFE have more than tripled in less than six months.  Why have the Shanghai Futures Exchange silver inventories jumped this much in such a short time? Do the Chinese know something we don’t?

To give you an idea just how much the SHFE silver inventories have grown, let’s compare it to largest bullion bank Comex silver inventories in the world… JP Morgan.  There’s been a lot of talk about the huge buildup of silver on JP Morgan’s Comex inventories.  Here a chart of JP Morgan’s Comex silver inventories, courtesy of Nick Laird at Sharelynx.com:

JP Morgan started accumulating silver right at the price of silver topped at $50 in 2011.  In April 2012, JP Morgan had about 4 Moz of silver in its inventories.  JP Morgan’s silver inventories continued to grow as the price of silver declined to a low of $14.  Today, JP Morgan holds 69.4 Moz of silver in its Comex warehouses.

However, the Shanghai Futures Exchange silver inventories surged at a much more rapid rate.  If we take a look at the chart below, you will see what I mean:

It took four years for JP Morgan to build their silver inventories from 4 Moz to 69.4 Moz today, whereas the SHFE silver stocks jumped from 7.5 Moz to 54.7 Moz in only eight months.  And remember, most of the silver inventory gains at the SHFE came in the past four months.

Part of the reason for the increased silver stocks at the Shanghai Futures Exchange was probably due to the Chinese government abolishing the ban on silver concentrate imports in November 2015.  According to the article, China abolishes ban on silver concentrate ore imports, unwrought bismuth exports:

China has abolished its ban on imports of silver concentrate ore and its refined concentrates, as well as exports of unwrought bismuth effective November 10, the Ministry of Commerce said in a directive posted on its website Tuesday.

 

MOC said the abolition is due to those products having complied with the country’s industrial policy, do not belong to high-energy consuming and high polluting sectors, as well as having comparatively high technological content.

Regardless, the Shanghai Future Exchange silver inventories have never been this high before.  The highest level they reached was 1,143 metric tons back in May 2013.  For whatever reason, the SHFE is accumulating a lot of silver, and quickly.

As I mentioned in my previous article, Record Breaking Silver Factors In 2015 Can Make 2016 Quite Interesting:

India and China plan on adding a lot of Solar Power by 2020-2022.  India plans to reach 100 gigawatts by 2022 and China 100 gigawatts by 2020.  That will take a lot of silver.

Either way, China is accumulating a lot of silver compared to the net exports years ago.  If the new Chinese yuan gold fix is going to put a lot of pressure on the U.S. Dollar in the future, mainstream investors may need to start protecting themselves now before it may be too late to acquire silver at a reasonable price.

Please check back for new articles and updates at the SRSrocco Report.  You can also follow us at Twitter below:

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Submitted by Michael Snyder via The End of The American Dream blog,

More than 25 million people live in the vicinity of Mt. Popocatepetl, including Mexico City’s 18 million residents.  At 2:32 local time on Tuesday morning, the most dangerous volcano in Mexico roared to life in spectacular fashion, and this has many experts extremely concerned about what is coming next.  Popocatepetl is an Aztec word that means “smoking mountain”, and historians tell us that once upon a time entire Aztec cities were buried in super-heated mud from this volcano.  In fact, the super-heated mud flows were so deep that they buried entire Aztec pyramids.  A full-blown eruption of Mt. Popocatepetl would be a catastrophe unlike anything that modern Mexico has ever experienced before, and considering what has been happening in Ecuador, Japan and at Yellowstone over the past week, I believe that there is great reason for concern.

The eruption of Mt. Popocatepetl very early this morning took residents of the area very much by surprise.  The following is how one Mexican news course reported the news…

The volcano Popocatépetl came to life at 2:32 this morning, sending out a column of ash that fell on much of the city of Puebla and closed the airport.

 

The National Disaster Prevention Center, Cenapred, said the volcano spewed ash to an altitude of about three kilometers above the crater.

 

The explosion was accompanied by the emission of incandescent fragments which were reported to be landing up to 1.6 kilometers away, northeast of the volcano, which is commonly known as El Popo.

But words cannot really describe just how spectacular this eruption was.  If you are interested, you can view video footage of the moment when Popocatepetl erupted right here…

Meanwhile, seismologists all over the globe are speculating about which area of our planet may be hit next.

For example, scientists in India believe that the tremendous amount of tectonic strain that has built up out there could ultimately produce a magnitude 8 or magnitude 9 earthquake, and they are convinced that this quake “can come at any time”…

A subduction process similar to the one that caused the Ecuadorean quake is happening under the Himalayan region as well, where the Indian plate is getting inside the Chinese landmass.

 

This northward push has been creating a huge amount of tectonic strain in the region, making it particularly prone to earthquakes.

 

Scientists believe there is so much energy stored in the area that an earthquake of magnitude greater than 8, possibly even 9, would be needed to release it. This earthquake can come at any time.

Here in the United States, some experts are deeply concerned that the west coast is particularly vulnerable.  One of those experts is former USGS scientist Jim Berkland.  The following is what Wikipedia has to say about him…

Jim Berkland studied geology at the University of California, Berkeley earning the Bachelor of Arts degree in 1958. Thereafter he worked for the United States Geological Survey while pursuing graduate study. In 1964, he took a position at the United States Bureau of Reclamation.^[3] After further graduate study, he taught for a year at Appalachian State University, 1972–1973, then returned to California to work as County Geologist for Santa Clara County from 1973 until he retired in 1994.^[4]

During a recent interview with Bobby Powell, Berkland explained that most “megaquakes” take place either during a new moon or a full moon, and he pointed to the San Andreas Fault and the Cascadia Subduction Zone as areas that he is particularly concerned about at the moment…

Is “The Big One” imminent? Famed USGS scientist Jim Berkland, the man who predicted the Loma Prieta “World Series Earthquake,” has a terrifying warning for the West Coast of the US in the wake of massive earthquakes in Ecuador and Japan that have left hundreds dead, awakened volcanoes around the Pacific Ocean’s “Ring of Fire,” and kicked off earthquake swarms in Hawaii, Arizona, and Yellowstone National Park.

 

“Beware the new and full moons,” Berkland says in this exclusive interview. The “maverick geologist” says that 20 of the last 25 “megaquakes” have occurred on the dates of new and full moons, the result of “equinoctal tides,” extreme gravitational forces that cause solid earth to expand and contract much as ocean tides rise and fall.

 

Berkland says that he is particularly worried about the San Andreas Fault in the LA Basin and the Cascadia Subduction Zone along the coast of Oregon and Washington State, where a long overdue earthquake would undoubtedly be accompanied by a massive tsunami that could kill thousands and cause billions of dollars in property damage.

Even though I recently wrote a major article about the vulnerability of the Cascadia Subduction Zone, I want to make it clear that I am not forecasting that any particular disaster will hit any particular area at any particular time.

But what we can say with certainty is that the crust of our planet is becoming increasingly unstable.  Our world is being pummeled by dozens of earthquakes of magnitude 4.0 or greater, and as you read this article a total of 38 volcanoes are erupting worldwide.

And it is quite interesting to note that in 1906 there were major earthquakes in Ecuador and Japan that preceded the historic San Francisco earthquake.

On January 31st, 1906 an enormous magnitude 8.8 earthquake hit Ecuador, and that was followed by a magnitude 7.1 earthquake in Japan on March 17th.

Of course most Americans know about the magnitude 7.8 earthquake that hit San Francisco on April 18th of that year, but most people don’t understand that it came in the context of these other major quakes.

Could we be witnessing a similar pattern today?

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Following API’s 3.1mm reported build overnight, expectations were for a 3mm build and DOE reported a 2.08mm build. Cushing saw a 235k draw from API and was expected to drop 1mm barrels but DOE reported just 248k drop in inventories as Gasoline inventories drewdown just 110k barrels (drastically less than the 1mm exp) and Distillates saw a large 3.55mm draw – the most in 3 months. Production appears more of a focus for now and fell once again last week to 8.953mm barrels (down 4.41% YoY) – lowest since Oct 2014. Crude prices had slipped overnight as Kuwait’s strike ended and Russia threatened to increase supply but the production slowdown and lower than expected inventory data sent WTI back above $42.

API

• Crude +3.1mm
• Cushing -235k
• Gasoline -1mm
• Distillates -2.5mm

DOE

• Crude +2.08mm (+3mm exp)
• Cushing -248k (-1mm exp)
• Gasoline -110k
• Distillates -3.55mm

 

Production fell once again last week to its lowest since October 2014…

 

And the reaction in crude…

 

Charts: Bloomberg

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While it is debatable if this is the “most hated bull market in history” (which as Jesse Felder explained quite well recently it isn’t, and even if it is, it is simply because every uptick is on the back of more artificial stimulus and no reflection of actual organic growth and fundamentals), it certainly is the most entertaining one, thanks to headlines such as this one from Yahoo Finance.

 

More from the author, who may or may not have mastered sarcasm to an art form:

The ability of stocks to move up on good news and easily discount bad news are the hallmarks of a sustainable bull market.

 

U.S. stocks had been in a holding pattern for three weeks due to an early Spring Break and the recently commenced earnings season. Monday, equities rallied—lead by energies, of all sectors—despite the failed Doha oil summit. After the bell, the smallest quadrant of the so-called FANG stocks, Netlfix (NFLX), got hammered because its growth projections didn’t meet expectations. Tuesday was no better, with Intel announcing massive layoffs and lowering guidance

 

Yet, here we are, with the S&P 500 pushing up against all-time highs. It’s do or die time for the bulls, but they retain the edge. If they can push through overhead supply that extends to 2135, it’s clear sailing to the promised land of hallucinated multiples.

 

* * *

 

The shorts are not putting up enough of a fight. If they can’t get traction in the wake of the current rout in tech earnings, it’s margin call time. Breadth and volume are not great, but they’ve both reversed their downtrends from 2015. The bottom line is this seven year bull might be creaky, but it still has a bit of steam in it.

 

Yes, fundamentals are terrible. But if you want to be rational, someone with a lot more money is going to take the other side of your trade until you’re insolvent.

To be sure, one could just call “someone” by their real name: central banks, but what difference does it make.

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Existing home sales rose more than expected in March, bouncing back from a dismal February (+5.1% in March from revised -7.3% Feb). Year-over-year, existing home sales rose just 1.5% to a SAAR of 5.33m (vs 5.28m expectations). However, sales dropped at the lowest-end (due to unaffordability and lack of supply) and sales at the highest-end (above $1mm) disppointed, rising at onbly 4.6% YoY due to buyersbeing “spooked by January’s stock market correction.”

Home Sales growth has stagnated…

 

As NAR explains,

Closings came back in force last month as a greater number of buyers – mostly in the Northeast and Midwest – overcame depressed inventory levels and steady price growth to close on a home,” he said.

 

“Buyer demand remains sturdy in most areas this spring and the mid-priced market is doing quite well. However, sales are softer both at the very low and very high ends of the market because of supply limitations and affordability pressures.”

 

The median existing-home price for all housing types in March was $222,700, up 5.7 percent from March 2015 ($210,700). March’s price increase marks the 49th consecutive month of year-over-year gains.

So both high- and low-end sales disappointed…

“The choppiness in sales activity so far this year is directly related to the unevenness in the rate of new listings coming onto the market to replace what is, for the most part, being sold rather quickly,” adds Yun. “Additionally, a segment of would-be buyers at the upper end of the market appear to have been spooked by January’s stock market correction.”

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VIX crashed out of the gate this morning, plunging to 12.50 lows – the lowest since August 2015 (right before the market crashed).

 

The front-end of the ‘greed’ index has collapsed, driving the term-structure of ‘fear’ to its steepest since Dec 2014 as we suppose everyone and their pet rabbit is confident that The ECB will do something and The Fed won’t.

 

What happened next?

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With oil – until recently the key signal for the S&P – down substantially overnight, many were scratching their heads why US equity futures not only rebounded from overnight lows but proceeded to wipe out all overnight losses and are currently trading in the green. The reason: another overnight ramp in the USDJPY which is the default fallback signal for stocks whenever oil isn’t going higher.

 

But what precipirated the bounce in USDJPY? 

The answer: a note from Goldman released overnight titled “Bringing forward our main scenario for additional easing to April from June” in which the bank announced it is now making an April easing by the BOJ as its main case scenario instead of June as was the case before, and it now expects that the BOJ to double its pace of equity purchases via ETFs from the current ¥3.3 trillion to ¥7.0 trillion as soon as the BOJ’s next meeting on April 26-27.

This is precisely what we wrote last week in “The Bank Of Japan Already Owns Over Half Of All ETFs; It Wants To Own More“, and Goldman now agrees.

Here is the summary from Goldman’s Naohiko Baba:

The Bank of Japan (BOJ) is due to hold its next monetary policy meeting (MPM) on April 26-27. To date, our base-case scenario has been for additional easing at the June MPM, and we had regarded possible easing at the April MPM as a risk scenario (see our February 17 Japan Views). However, we now make easing in April our base-case scenario, given the rising risk that business confidence has been dented by recent financial market instability and the Kumamoto earthquakes, and in view of BOJ governor Haruhiko Kuroda’s recent proactive statements on possible additional easing in response to the sharp deceleration in inflation in April.

And the details:

• At its end-January MPM, the BOJ decided to introduce a negative interest rate to head off the risk that rising financial market volatility could dampen business confidence and delay the shift away from a deflationary mindset. We think the BOJ would have originally been looking to keep monetary policy unchanged at the April MPM while it assessed the effect of the negative interest rate, given that it generally takes at least six months for policy effects to become apparent.
• However, market volatility did not let up, and the yen continued to appreciate and share prices continued to be unstable despite the introduction of the negative rate. On top of that, the Kumamoto earthquakes in mid-April have caused significant supply chain disruption in the manufacturing sector, particularly in transportation equipment, heightening concerns that business confidence could deteriorate further. In addition, the failure at the end of last week of the major oil producing nations to reach a deal to freeze oil production casts further doubt on the BOJ’s consumer price outlook, and the latest G-20 meeting confirmed a major gap between Japan and the US on appropriate currency levels, reducing considerably the likelihood of currency market intervention.
• We also note that the daily price index (Nowcast), frequently cited by Governor Kuroda as evidence of bullish corporate price setting, has slowed sharply in April (see Exhibit 1). We have forecast that inflation would stall particular from the start of in the new fiscal year as the cost-push factor due to past weak yen fades away, but the slowdown has been slightly more rapid than we had expected. We now see a stronger likelihood that March nationwide core CPI (yoy), due out the same day as the April MPM, could be negative.
  
• Governor Kuroda’s recent proactive comments regarding the possibility of additional easing have also been attracting market attention. In an interview published in the April 18 Wall Street Journal, Mr. Kuroda said, “If excessive appreciation continues, that could affect not just actual inflation, but even the trend in inflation through its impact on business confidence, business activity, and even through inflation expectations. Although our monetary policy is not targeted to the exchange rate, we continue to carefully monitor exchange-rate movements. And as I always emphasize, if necessary to achieve 2% inflation target at the earliest possible time, we would not hesitate to take further easing measures”.
• Taking these words at face value, we believe the BOJ would likely need to act in the face of the recent market situation, the continuing deterioration of business confidence and inflation expectations, and the rapidly decelerating aforementioned daily price index. Based on the above, we think the probability of the BOJ opting for additional easing at its April MPM has risen sharply of late.
  
• The main issue for the BOJ, in our view, will be the means of applying additional easing (Exhibit 2). From an exchange rate perspective, the most effective means would be to widen the negative interest rate. However, financial institutions have not reacted positively to negative interest rate and we think there is a general unease among the population with respect to the policy, so we think the BOJ is unlikely to take rates deeper into negative territory at this stage.
• Another option would be to increase quantitative easing by again stepping up JGB purchases (currently at the rate of 80 trillion yen per year), but the marginal effect would be minimal as the decline in the yield curve is already more than sufficient, and we think additional expansion would even risk giving the impression that the BOJ is closer to the limit of purchasing JGBs at the current pace.
• By a process of elimination, we think the BOJ is most likely to ease mainly via the qualitative measure, with increasing ETF purchasing the central pillar, with a view to improving business confidence. We think the market is already factoring in an increase in annual purchasing from ¥3.3 tn to ¥5-6 tn, and we thus think the BOJ may look to slightly more than double its current figure to around ¥7 tn.
• We also see a possibility that the BOJ may combine the expansion of ETF purchases with a cut in the interest rate of its loan support scheme. A cut in the interest rate at which financial institutions can borrow from the BOJ under the scheme from 0% currently to -0.1% would be good news for financial institutions, which have seen earnings depressed by the negative rate on current account balance. Not only would this offset some of the negative impact about the negative interest rate policy, but it might also ease the upward pressure on the yen if the market starts to factor in a possible deeper move into negative territory for interest rates on current account balance in the future.
• In addition to the aforementioned lending support scheme, the BOJ also has in place a fund supplying scheme to support financial institutions in areas affected by the Great East Japan Earthquake of March 2011. Under the scheme, which was set up just after that earthquake, the BOJ supplies funds to financial institutions in affected areas, helping those institutions provide funding for restoration and rebuilding work. The interest rate on financing via the scheme is currently +0.1%, the ceiling for total lending is ¥1 tn, and the deadline for new applications is April 30, 2017. We see a possibility that the BOJ may expand the scope of the scheme to cover areas affected by the Kumamoto earthquakes, and that it may cut the interest rate to -0.1% (in line with that of the loan support scheme), increase the maximum lending amount, and extend the application deadline (we note, however, that uptake under the scheme by financial institutions in areas affected by the Great East Japan Earthquake peaked at ¥511.2 bn in April 2012, well short of the ¥1 tn ceiling).
  

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