Following this weekend’s news that the massive Calgary fire, while still spreading, may soon be under control courtesy of some wet weather and favorable winds, as well as the stunner from Saudi Arabia that Ali al-Naimi was out, replaced with a puppet of the hawkish deputy drown prince Mohammed bin Sultan – a succession many saw as bearish for future oil prices – algos had refused to give up on recent momentum, and pushed WTI just why of $46/bbl overnight. However, to Bank of America this proved too much, and the bank’s strategist Paul Ciana has come out with a new trading recommendation as follows: “Sell WTI Crude Oil: Sell crude oil into event driven stress at $45.75, stop at $48.25. Target market profile levels of $38.50 and possibly $35.25.“
If this was Goldman, we would say sell everything and buy WTI on 3x margin. With BofA, however, we are less sure – this may even be a correct recommendation…
Here are the details from the BofA technician:
Price action at fair value resistance suggests correction
Three intraday crude oil rallies were sold last week resulting in prices closing near the open of the trading day. According to Japanese candlestick analysis; Wednesday, Thursday and Friday each formed a doji* candle suggesting indecision amongst market participants to effectively push prices higher. On April 29th crude oil reached an intraday high of $46.78 and closed near the open of the day forming the first of four doji candles in six trading sessions. Thursday can loosely be considered a gravestone** doji, which as the name implies is bearish.
Aggregate volume and open interest bearishly diverge
The rally to the YTD high occurred on light volume. Considering the total (aggregate) volume across all WTI crude oil futures contracts, volume during the rally in the latter half of April was less than the rolling 15 day average. The decline from the YTD high occurred on greater than average volume. Since the rally began from the YTD low, the trend in aggregate open interest has bearishly diverged from price.
A look back at the golden cross is insignificant
Since 1983 there have been 23 occurrences when the 50 day moving average crossed above the 200 day moving average. By the time the 50 day average crossed back below the 200 day average, price was higher only 9 out of 23 times. When analyzing price action between the up cross and down cross points, the high price was before the low price 13 out of 23 times.
In our March 1st report, our market profile chart implied a close over $34.25 would prompt a rally to $39-$40, and it did. We later pointed to a sustained rally to $45.50 that would continue to fill the remainder of the prior distribution gap. Price reached this level in the end of April filling some of the 8/1/2015 – 2/29/2015 distribution gap.
Our updated market profile chart now shows $46.75 is the top of the value area in the 8/1/2015 – 2/29/2015 distribution and that aligns with the bottom of the value area of the 1/1/2015 – 7/31/2015 distribution. This ($46.75) is a major resistance level. A close through it could prompt a rally to $51.00 which opens the possibility of filling another distribution gap. However previously mentioned technical conditions suggest a decline and so we see $38.50 (3/31 POC) and $35.25 (value area 3/31) as major support levels.
Preliminary signs of a developing base
If crude oil prices were to decline for the next four to eight weeks, it would start to form the right shoulder of a head and shoulders bottom. While this is very preliminary, a decline to the mid to upper $30’s followed by a rally through resistance of about $45 would form an intermediate sized head and shoulders bottom that could project crude oil prices much higher.
Seasonal average trends show May is bad for crude
When comparing the 5, 10 and 30 year average price trends, May stands out as a weak month. Prices have declined on average over the past 5 and 10 years in May. The average trend over the past 30 years also leans lower.
Macro risks: Alberta fires, Saudi Oil Minister replaced
According to Bloomberg, wildfires in Canada have spread to the main oil-sands facilities knocking out approximately 1 million barrels of production per day. However the new Saudi oil minister, Khalid Al-Falih is said to be a close ally of Prince Mohammed bin Salman who is known for prioritizing market share (supply) over prices. These events could add increased short term volatility to trading.
Back in February we showed that it is not only China which is troubled by non-performing loans: America’s own nascent private Peer 2 Peer industry was having very similar issues, evident most notably in the books of category “leader” LendingClub, whose write-offs had soared to nearly double the company’s own forecasts.
First, a quick reminder on the industry dynamics over the past year. As we reported last May, P2P loan volume was set to surpass $76 billion in 2015 and one driver of the boom is demand from the likes of BlackRock, Morgan Stanley, and Goldman, who had all underwritten securitizations of loans originated on P2P platforms like LendingClub, the number one player in the space. For those unfamiliar, P2P loans create the conditions whereby borrowers can refi high-interest debt via personal loans, transferring credit risk from large financial institutions to private lenders in the process.
It’s not entirely clear what the implications of that shift might ultimately be, especially if the market continues to grow rapidly. “One thing,” we said, “is clear”: Using a relatively low-interest P2P loan to pay off a high-interest credit card is no different in principle than using a new credit card that comes with a teaser rate to pay off an old credit card. In the end, the borrower will very often max out the old card again and thus end up with twice the original amount of debt.
The same dynamic applies to P2P lending. “So what’s to stop consumers from levering their credit cards back up?” Bloomberg asked last year. “Such behavior could spell bad news for investors in P2P loans if an interest rate hike or an unforeseen shock pressures borrowers,” Michael Tarkan, an equities analyst at Compass Point Research said.
“We’ve created a mechanism to refinance a credit card into an unsecured personal loan,” he added. “This may prove to be a superior model, but we just don’t know because it hasn’t been tested yet through a full credit cycle.”
No, we “just don’t know”, but we may be about to find out because a new presentation from LendingClub indicates that the cracks are starting to show. “LC Advisors, an investment adviser owned by LendingClub that helps people buy loans arranged by the company, said last week in a presentation that some of the debt is ‘underperforming vs. expectations,’” Bloomberg wrote on Friday. “A chart on one of the slides shows that write-off rates for a portion of five-year LendingClub loans were roughly 7 percent to 8 percent, compared with a forecast range of around 4 percent to 6 percent.” Here’s the slide in question:
What the slide above shows is that LendingClub is terrible at assessing credit risk. A write-off rate of 7-8% may not sound that bad (well, actually it does, but because P2P is relatively new, we don’t really have a benchmark), it’s double the low-end internal estimate. That’s bad. In other words, we said, the algorithms LendingClub uses to assess credit risk aren’t working. Plain and simple.
Our warnings about LendingClub continued:
“Their business is to take data and use that to underwrite risk,” the aforementioned Michael Tarkan told Bloomberg by phone. “If you’re an investor in the loans on the platform, this creates a concern around that underwriting model.”
It sure does, as does common sense. Matching up individual borrowers and lenders may sound like a good idea in principle, but effectively, you’ve got a brand new set of companies (the P2Ps) attempting to assess individual borrowers’ credit risk on the fly in cyberspace, an absurdly difficult proposition and one that obviously comes with myriad risks especially when those credits are sliced up and sold to investors.
Securitizations of these loans are just consumer ABS deals. That is, they’re no different than securitized credit card receivables or the nightmarish deals that emanate from Springleaf and OneMain.
Throw in the fact that LendingClub is raising rates “to prepare for a potential slowdown in the US economy” and the fact that 70% of the jobs created by America’s supposedly “robust” labor market are in the food and bev/ retail sector, and you can bet that charge-offs will skyrocket should the US careen into a recession.
Then again, it could be worse for LendingClub investors. The company could be run by Ding Ning.
Moments ago all these warnings were validated (quite painfully for those still long the company) and the Peer2Peer bubble may have finally burst, when as part of its Q1 earnings release, the board of directors announced that on May 6, 2016 it had accepted the resignation of Renaud Laplanche as Chairman and CEO. His resignation followed an internal review of sales of $22 million in near-prime loans to a single investor, in contravention of the investor’s express instructions as to a non-credit and non-pricing element, in March and April 2016.
“A key principle of the Company is maintaining the highest levels of trust with borrowers, investors, regulators, stockholders and employees. While the financial impact of this $22 million in loan sales was minor, a violation of the Company’s business practices along with a lack of full disclosure during the review was unacceptable to the board. Accordingly, the board took swift and decisive action, and authorized additional remedial steps to rectify these issues,” said Mr. Morris. “We have every confidence that Scott and the management team are well positioned to lead Lending Club forward.”
The company also announced that Scott Sanborn will continue in his role of President and will become acting CEO, assuming additional managerial responsibilities for the Company. Mr. Sanborn will be supported by director Hans Morris, who has assumed the newly created role of Executive Chairman.
However, the reason why LC stock has wiped out over a quarter of its market cap in the premarket is that the market is much more concerned not about what was said, but what was left unsaid. The fear is that the board merely used one specific infraction by the CEO to fire him, even as the entire underlying portfolio is deteriorating at a rapid pace (as shown in the analysis above).
So is this the beginning of the end for the P2P lending model? We expect the answer will reveal itself as we get more details not so much about the now former CEO Laplanche’s transgressions as about the book quality of both LC and its peers. As of this moment, the market is now very optimistic on the future prospects before the P2P lending space, especially since there is rarely just one cockroach.
Soros Chart Signals BOJ Bond Buying Already Enough to Weaken Yen (BBG)
Dollar Jump Catches Traders Short in One More Currency Calamity (BBG)
Even China’s Party Mouthpiece Is Warning About Debt (BBG)
Fed’s Evans sees U.S. growth picking up to 2.5 percent, favors ‘wait and see’ on rates (Reuters)
Alberta Fire Set to Move From Oil-Sands Sites in Wind Shift (BBG)
Canada hopes cooler weather aids battle with Alberta wildfire (Reuters)
Noble Group Slumps Most Since ’11 After Fitch Debt Ratings Move (BBG)
Bill Gross, Mohamed El-Erian Warn Against Counting the Fed Out (BBG)
Euro zone finance ministers to start talks on Greek debt reprofiling: EU officials (Reuters)
Greek lawmakers pass painful reforms to attain fiscal targets (Reuters)
Greek reforms must be reviewed before any debt restructure: Germany (Reuters)
Economic A-Team Down to Last Man as Erdogan Exerts His Power (BBG)
Russia showcases Syria hardware in Red Square military parade (Reuters)
For Rousseff-Hating Investors, a Bullish Trade Becomes Personal (BBG)
Pentagon report reveals confusion among U.S. troops over Afghan mission (Reuters)
Miami Faces Glut of Upscale Hotel Rooms as Brazilians Stay Home (BBG)
Technicians from SWIFT left Bangladesh Bank exposed to hackers – police (Reuters)
Overnight Media Digest
WSJ
– Twitter Inc cut off U.S. intelligence agencies from access to a service that sifts through the entire output of its social-media postings, the latest example of tension between Silicon Valley and the federal government over terrorism and privacy. (http://on.wsj.com/1Yhf496)
– Hillary Clinton is consolidating her support among Wall Street donors and other businesses ahead of a general-election battle with Donald Trump, winning more campaign contributions from financial-services executives in the most recent fundraising period than all other candidates combined. (http://on.wsj.com/1Yhf8FF)
– A California judge is expected to rule Monday on whether to dismiss the lawsuit challenging media mogul Sumner Redstone’s mental competency after he signaled Friday that the petitioner faced an uphill climb. Both sides filed court briefs over the weekend to sway the judge to their side. (http://on.wsj.com/1YhffRE)
– Beijing Higher People’s Court ruled in favor of U.S. social media giant Facebook Inc in a trademark case against a Chinese beverage company that owned the trademark “face book.” (http://on.wsj.com/1YhfhsQ)
FT
* The UK’s Pensions Regulator started investigating BHS’s pension scheme stretching back to the time when Philip Green sold the struggling business for 1 pound ($1.44) last year.
* Environment and Food Secretary Liz Truss said British whisky benefited from trade deals brokered by the EU to open up export markets and leaving the EU will place one of the UK’s most successful exports in jeopardy.
* Barclays will partner with Bottomline Technologies to offer UK companies the ability to send payments instantly to customers using their mobile phone number.
* The amount of whistleblowers complaining about UK companies not complying with pension laws rose nearly a third last year.
NYT
– The behind-the-scenes lobbying has become fashionable in Washington as the battle over encryption shifts to Capitol Hill between police and tech giants. It is the next phase of a bitter divide that spilled into public view this year when Apple refused to comply with a court order to help bypass security functions on an encrypted iPhone. (http://nyti.ms/23ADwDC)
– William C. Dudley, the Federal Reserve Bank of New York president, who helped pilot the Fed’s post-crisis stimulus campaign, believes that the central bank is on the right track and sounded pretty calm about the nation’s current economic situation. (http://nyti.ms/1OjEoFV)
– For two decades, Saudi Arabia’s oil minister, Ali al-Naimi, was the architect of Saudi and OPEC cartel policies, including the one that has now sent the price of oil into a deep collapse. However, Naimi was unceremoniously ousted and replaced by Khalid al-Falih over the weekend. (http://nyti.ms/1O9TQcS)
– Manuela Herzer, a former lover of the ailing media mogul Sumner M. Redstone, who is waging a legal battle over his mental competency, made a last-ditch attempt over the weekend to keep her salacious lawsuit alive.(http://nyti.ms/23ABMu5)
Canada
THE GLOBE AND MAIL
** Alberta’s oil sands have been spared a direct hit from the devastating wildfire that forced the shutdown of more than 1 million barrels per day of production, but it remains unclear when companies can restart operations. (http://bit.ly/1T6yAXJ)
** Toronto-based insurer Manulife Financial Corp is doing away with drawing blood, testing urine and collecting other biometric data for term life insurance policies of up to C$1 million ($774,233) purchased by new customers from ages 18 to 40. (http://bit.ly/1T6yG1q)
** The Canadian tourism industry is grappling with a demographic problem that could threaten its future: Millennials are spending far more of their travel dollars outside the country than at home. (http://bit.ly/1T6yKhE)
NATIONAL POST
** A legislative fix that appears to have been effective in reducing marriage fraud is about to be repealed for political and ideological reasons. (http://bit.ly/1T6zumU)
** Alberta Premier Rachel Notley said the massive Fort McMurray wildfire that forced 80,000 people to evacuate last week had stabilized to the point that she’s able to visit the devastated oilpatch city. (http://bit.ly/1T6zxPD)
Britain
The Times
Brexit will raise risk of world war, PM claims
David Cameron will today raise the spectre of war if Britain votes to exit the European Union as he asks whether leaving is a risk worth taking. (bit.ly/1Ojpxez)
Carmakers ‘will quit UK’ if steel crisis drags on
Nick Reilly, one of the British motor industry’s most senior executives, has warned that volume carmaking will disappear from the country if the steelmaking crisis is not resolved. (bit.ly/1O9scfY)
The Guardian
Offshore finance: more than $12tln siphoned out of emerging countries
More than $12 trillion (8 trillion pounds) has been siphoned out of Russia, China and other emerging economies into the secretive world of offshore finance, new research has revealed, as David Cameron prepares to host world leaders for an anti-corruption summit.(bit.ly/1Wj8VvG)
ADVERTISING
inRead invented by Teads Blacklisted workers win 10m pounds payout from construction firms
About 10 million pounds will be paid in compensation to more than 250 building workers who were “blacklisted” by some of Britain’s biggest construction firms under a settlement to be announced on Monday.(bit.ly/23AcUmh)
The Telegraph
Saudi Aramco plans London listing but doubts grow on $2.5 trillion claim
Saudi Arabia is planning a three-way foreign listing in London, Hong Kong, and New York for the record-smashing privatisation of its $2.5 trillion oil giant Aramco, anchored on a triad of interlocking ties with three foreign energy companies. (bit.ly/1NnH0rr)
Downing Street accused of ‘manipulating’ spy chiefs after they warn against Brexit
David Cameron has been accused of “manipulating” the former head of MI5 into warning that Britain’s national security would be put at risk by a Brexit. (bit.ly/24ECNav)
Sky News
Referendum Rivals Clash Over Single Market
Brexit campaigner Michael Gove has said the UK would be better off outside the single market, with the Chancellor hitting back and calling the prospect “catastrophic” for jobs and incomes.(bit.ly/1Txwjix)
Top pensions lawyer to aid MPs’ BHS probe
A leading pensions lawyer is being drafted in to assist a parliamentary probe into the collapse of BHS, the high street retailer, amid a furious row about the stewardship of its 20,000-member retirement schemes.(bit.ly/1VPEIUr)
The Independent
David Cameron to invoke war dead as he makes case for EU as guardian of peace
Pulling out of the European Union would usher in an era of British isolationism that would be a betrayal of our history and against our fundamental future national interest, David Cameron is to warn. (ind.pn/1WhLmmy)
TTIP trade deal under threat after Germany claims US not making ‘any serious concessions’
The controversial Transatlantic Trade and Investment Partnership (TTIP) has been thrown into further doubt after a senior German minister claimed the United States was not willing to make “any serious concessions”. (ind.pn/1WTVlxh)
Two weeks after Austria’s dramatic result in its first round presidential elections which saw the right wing, anti-immigrant Freedom Party sweeping its competition, gathering over 35% of the vote and leaving the other five candidates far behind, moments ago Austria unveiled the latest casualty from Europe’s anti-refugee, right wing revulsion when the country’s Chancellor Werner Faymann resigned after losing the support of his colleagues in the Social Democratic party.
“I am thankful for seven and a half years and wish my successor much luck,” he said at a hastily arranged press conference, the oe24.at news site reported. “I am standing down because I no longer have support in the party.”
As the Guardian notes, Austria has been braced for political turmoil ever since rightwing populist Norbert Hofer won a landslide victory in the first round of the country’s presidential elections last month.
Hofer, of the rightwing Freedom party, defied pollsters’ predictions to beat the Green party’s Alexander Van der Bellen into second place, gaining 36% of the vote. The two candidates will go head to head in a run-off ballot on 22 May.
Faymann faced calls to resign after the vote, saying at the time that the result was a “clear signal to the government that we have to cooperate more strongly”.
Many commentators say the crisis of the political establishment in Austria has much to do with the fact that the two centrist parties have governed the country in a “grand coalition” for the past 10 years.
The overnight session has been one of alternative weakness and strength: it started in China where stocks tumbled 2.8% to a two month low following an unexpected warning in the official People’s Daily mouthpiece that debt and NPLs are too high, not to expect more easing will come, and that the Chinese Economy’s performance won’t be U- or V-shaped but L-shaped.
This took place after another month of disappointing, sharply weaker trade data as fears about China’s slowdown returned. An expected freefall in key commodity prices led by a crash in the iron ore complex did not help Chinese sentiment, as China’s latest commodity bubble has by now clearly burst.
Concerns about China, however, were promptly forgotten and certainly not enough to keep global assets lower, with European stocks gapping higher at the open and rallying from a one-month low, shaking off the Chinese trade data drag that pushed Shanghai shares lower along with industrial metals, driven by a “surprising” surge in the USDJPY which has moved nearly 200 pips higher since its post-payrolls low. Another driver is the jump in oil, which rallied just shy of $46 a barrel, buoyed by Canadian wildfires that are curbing production and speculation that the Saudi Arabian oil minister succession will be bullish for oil prices.
Certainly helping Europe rebound was the latest Goldman trade recommendation which came out about an hour ago, and was as follows:
GOLDMAN SACHS CUTS STOXX 600 12-MONTH TARGET TO 345 FROM 380
GOLDMAN SACHS CUTS EURO STOXX 50 12-MOS. TARGET TO 3070 VS 3500
As is common knowledge always do the opposite of what Goldman recommends and at last check, the Stoxx Europe 600 Index advanced 1.4% with health care and technology companies leading the gains. Apart from mining companies, all of the 19 industry groups on the Stoxx Europe 600 Index advanced. Copper fell to its lowest in almost a month after imports into China slipped from a record, while iron ore tumbled following an increase in stockpiles at Chinese ports. Oil climbed as high as $45.94 a barrel in New York and gold retreated as a gauge of dollar strength rose for a fifth day.
S&P 500 futures added 0.3 percent, after U.S. stocks Friday halted a three-day decline amid investor speculation that the payrolls data will encourage the Federal Reserve to raise interest rates gradually. Traders are pricing in little chance of higher borrowing costs next month, with December the first month with more than even odds of a hike.
Putting the global rebound in perspective, consider that Chinese trade figures released over the weekend showed exports fell in dollar terms in April and imports dropped for the 18th month in a row, while U.S. jobs figures on Friday were weaker than economists forecast, several Federal Reserve officials have said over the past week that U.S. interest rates are headed higher, comments that have given a boost to the greenback; this happens as earnings season is set to conclude the worst quarterly report in decades.
In other words, lots of central bank multiple expansion, and lots of buybacks are taking place behind the scenes.
Euro-area finance ministers and International Monetary Fund officials are meeting Monday to decide whether Greece’s government has done enough belt-tightening to gain another aid disbursement. Germany reported a bigger increase in March factory orders than economists forecast, while companies including Enel SpA and Tyson Foods Inc. are scheduled to announce earnings.
Global Markets Snapshot
Stoxx 600 up 1.4% to 336.3
Eurostoxx 50 +1.6%,
FTSE 100 +0.8%, CAC 40 +1.4%,
DAX +1.9%, IBEX +1.5%
FTSEMIB -0.1%
SMI +1.3%
S&P 500 futures up 0.3% at 2058
Brent Futures up 1.5% to $46.1/bbl
Vstoxx Index down -2.1% at 24.6
MSCI Asia Pacific down 0.2%
Nikkei 225 up 0.7% to 16216
Hang Seng up 0.2% to 20156.8
Kospi down 0.5% to 1967.8
Shanghai Composite down 2.8% to 2832.1
Euro down 0.09% to $1.1394
Dollar Index up 0.07% to 93.96
German 10Yr yield up 2bps to 0.16%
Italian 10Yr yield down 1bps to 1.49%
Spanish 10Yr yield down 1bps to 1.59%
Top Global News
Brexit Battle Rages in Week of Bigwig Barrage on U.K. Risks: Carney, Lagarde, Osborne due to speak as decision day nears
Cameron Evokes War, Churchill Memory in Bid to Avoid Brexit: Britain has ‘fundamental national interest’ in EU, Cameron says
Bill Gross, Mohamed El-Erian Warn Against Counting the Fed Out: Gross says Fed rate increase may come in June as wages rise
Bloomberg Editorial: The IMF Is Right About Greece’s Need for Debt Relief: any plan to resolve its financial crisis has to involve debt relief
Filipinos Vote as Populist Mayor Rides Wave of Discontent: Duterte leads main rivals by 11 points in final opinion polls
World’s Most Expensive Rough Diamond Sells for $63m: 813- carat diamond recovered by Lucara in Botswana last year
Twitter Cuts Off U.S. Spy Agencies From Analytics, WSJ Reports: move comes after Apple battled with Justice Department
Looking at regional markets, Asia stocks started the week mostly lower following Friday’s NFP miss coupled with weak Chinese trade data in which exports and imports printed below estimates. ASX 200 (-0.4%) was pressured with sentiment soured by a decline in imports from its largest trading partner, although advances in oil amid uncertainty after Saudi replaced oil minister Al-Naimi helped stem losses. Nikkei 225 (+0.7%) outperformed after a 6-day losing streak as JPY weakness boosted exporter names, while the Shanghai Comp (-2.8%) led the region lower amid weak trade data and the PBoC decreasing its liquidity injection. 10yr JGBs traded lower amid increased appetite for riskier assets in Japan, while mild support was seen early in the long-end as the 20yr yield declined to fresh record lows, with the BoJ also in the market to purchase around JPY 1.2trl of government debt.
Asian Top News
Takata Projects Second Annual Loss on Air-Bag Recall Charges: Company forecasts 13 billion yen loss; had estimated profit
Soros Chart Signals BOJ Bond Buying Already Enough to Weaken Yen: Japan monetary base rises to 96% that of U.S. in dollar terms
Japan Finance Minister Fires Another Verbal Salvo at Strong Yen: Aso says Japan has means to intervene
Chinese Imports From Hong Kong Raise Red Flag Amid Yuan Worries: Import surge from Hong Kong may show capital exit, OCBC says
Goldman Fund Manager Bearish on Aussie as Dollar Bets Falter: Fund bearish Aussie against kiwi, loonie after RBA rate cut
Rajan Stimulus Working as Rare Issuers Revive Rupee Bond Market: Issuance in May has second-best start for month in 11 years
Mitsubishi Heavy Surges After Profit Outlook Beats Estimates: Forecasts 13% increase in op. profit this fiscal year to 350b yen, exceeding est. of 334b yen
Commonwealth Bank Profit Gains 4.5%, Bad-Debt Charges Rise: Provisions for impaired loans up 67% on corporate defaults
In Europe, equities trade firmly in the green this morning (Euro stoxx: +1.5%), opening higher and going on to close the opening gap throughout the session as higher oil prices fuel risk appetite with gains exacerbated by the upside in IT names. The notable movers this morning come from the materials sector, with the likes of Anglo American, ArcelorMittal, Glencore and Rio Tinto all among the worst performers in Europe after the soft trade balance data from China. Fixed income markets have seen similar price action to equities so far this morning, opening lower before going on to grind higher over the following 2 hours. Of note, EUR denominated corporate bond sales may pick up this week with some noting that a total of EUR 15bIn worth of debt could be sold, as companies look to take advantage of low interest rates after publishing their quarterly earnings as well as the prospect of ECB buying IG bonds in June as part of its QE program. Furthermore, it was also reported earlier in the session that Italy are exploring the sale of a 50yr bond.
European Top News
Total to Buy French Battery Maker Saft in $1.1 Billion Deal: acquisition forms part of plan to expand clean-energy business
Imagination Tech Climbs on Bid Speculation Spurred by Tsinghua: Chinese state-backed technology co. Tsinghua Unigroup buys 3% stake in co.
Investec Finances Four Emirates A380s in $1 Billion Jet Deal: bank says low oil price makes superjumbo more attractive
Glencore Becomes Top Holder in Iron Ore Miner After Debt Revamp: has also secured marketing offtake rights
Ikea in Talks to Take Over Some BHS Stores, Times Reports: Swedish retailer registered interest with BHS’s administrators
Italy Favors Erdemir-Led Group for Ilva vs Mittal: Repubblica: group seen as able to counter possible bid by Arcelor Mittal
Korian Plans to Buy Foyer de Lork; Deal EPS Accretive This Year: deal to be financed with cash from Korian, available credit lines
G4S 1Q Continuing Businesses Rev Rises 4.5% to GBP1.51b: comments ahead of CEO Ashley Almanza presentation at JP Morgan conf.
Abengoa Assets Have EU1b Less Value Than Estimate: Confidencial: reports citing sources it doesn’t identify
Adidas May Be Only Bidder for German Soccer Team Sponsoring: FAZ: cites unidentified people close to the negotiations
In FX, the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose 0.1 percent following its biggest weekly jump since November. The greenback’s reaction to weaker-than-expected U.S. jobs figures on Friday was muted by comments from Fed Bank of New York President William Dudley, who said in a New York Times interview that it remained a “reasonable expectation” the central bank would raise interest rates two times this year.
Aside from the one way surge in the USDJPY, moves across key pairs have been relatively quiet, though some early volatility seen in GBP, but losses since recouped with Cable back in the mid 1.4400’s. This may signal some moderation in the USD reversal we are seeing at the moment, with the greenback fighting back hard after the headline miss in US jobs on Friday. EUR/USD is proving resilient under 1.1400, as is USD/JPY ahead of 108.00, but direction hard to read as yet — as is usually the case on the Monday after US payrolls. CAD should perhaps be a little stronger with Oil moving higher again, but the USD perspective is strong, and specs are quick to pounce on any dip at present. USD/CAD still trading on a 1.2900 handle, but strong resistance seen ahead of 1.3000. AUD/USD through key support under .7400, but downside momentum lacking on stable stocks. EU Sentix investor confidence slightly better than expected this morning, while UK Halifax HPI showing some softening, but both to little effect on the markets.
In commodities, iron ore plummeted in Asia after port stockpiles in China expanded to the highest in more than a year, following moves by local authorities to quell speculation in raw-material futures. The SGX AsiaClear contract for June settlement tumbled 7.9 percent to $51.17 a metric ton, the lowest in a month, retreating alongside contracts for steel and coking coal.
Copper fell with industrial metals, extending its worst weekly slide since November, after China slashed purchases from a record high. The metal fell 1.7 percent to $4,728 a metric ton, having touched the lowest in almost a month. Nickel lost 2.7 percent and zinc dropped 1.5 percent. Gold fell 0.8 percent to $1,278.56 an ounce, declining for the fifth time in six days as the dollar strengthened. Silver dropped 0.4 percent and platinum slid 1.1 percent.
Crude rose as expanding Canadian fires knocked out about 1 million barrels a day of production, outweighing the new Saudi Arabian oil minister’s pledge to maintain the country’s policy of near-record output. China’s crude imports rose 7.6% Y/Y last month, marking the third straight month that crude imports surpassed 30 million tons. Day by day, China shipped in 7.9 min/bpd in April. In the first four months of the year, China imported 123.67 min tons of crude, which is equivalent to a 12% on-year rise. Saudi Arabia on Saturday replaced its long-serving oil minister Ali al-Naimi, who had held the post since 1995, with Khalid al-Falih, chairman of the state oil Co., Saudi Aramco as his replacement. In separate reports, Saudi’s new oil minister Khalid al-Falih stated that hat he will maintain Saudi’s stable oil policy.
Bulletin Headline Summary from RanSquawk and Bloomberg
Light newsflow thus far with European equities trading firmly in the green with higher oil prices helping fuel risk appetite.
Saudi Arabia have replaced their long-serving oil minister Ali al-Naimi with Khalid al-Falih, chairman of the state oil Co., Saudi Aramco named as his replacement.
Highlights today include US Labour Market Condition alongside Fed’s Kashkari.
Treasuries little changed in overnight trading as global equities and oil rally, precious metals sell off; this week will see $62b in U.S. Treasury auctions.
China’s problem with fake trade invoices appears to be getting worse. Imports from Hong Kong surged a record 204% last month, data on Sunday showed, intensifying the spotlight on a channel used to get capital out of the country
The yuan fell the most in two weeks amid speculation depreciation concerns are prompting investors to shift money overseas and as the dollar headed for its biggest five-day gain since November
China’s stocks capped their biggest two-day loss since late February, led by commodity producers and industrial companies, as trade data disappointed and the People’s Daily warned about the country’s rising debt in a front-page article
For all the Communist Party’s rhetoric about giving a decisive role to markets, China’s financial system remains dominated by state-owned lenders. The PBOC has also been expanding support for “policy banks” that support government objectives
Euro-area finance ministers will debate possible debt-relief measures for Greece Monday, after IMF Managing Director Christine Lagarde warned them that the fiscal targets envisaged in the country’s latest bailout agreement are not realistic
Voters tuning into the fraught battle over the U.K.’s future will hear from heavy-hitters who have already warned about the risks of leaving the single market
U.K. house prices fell 0.8% in April after a surge of rental investors rushing to beat a tax change bolstered the market earlier in the year, according to Halifax
German factory orders advanced 1.9% in March from the prior month as strong global trade helped offset a lull in domestic demand, data from the Economy Ministry in Berlin showed
U.S. economic fundamentals are “good” and “wait and see” stance for monetary policy is appropriate, said Chicago Fed Pres. Charles Evans, speaking on panel at International Financial Services Forum in London
Three of the world’s most influential bond investors and the head of the Federal Reserve Bank of New York say the U.S. central bank is on course to raise interest rates even after an April jobs gain that was smaller than economists forecast
Sovereign 10Y yields mixed, Greece rallies 25bp; European and Asian equity markets higher; U.S. equity- index futures rise. WTI crude oil rallies, precious metals drop
US Economic Calendar
10:00am: Labor Market Conditions Index, Apr. est. -1.0 (prior -2.1)
TBA: Mortgage Delinquencies, 1Q (prior 4.77%)
TBA: MBA Mortgage Foreclosures, 1Q (prior 1.77%)
11:30am: U.S. to sell $31b 3M, $26b 6M bills
1:00pm: Fed’s Kashkari speaks in Minneapolis
DB’s Jim Reid concludes the overnight wrap
It’s always a relatively quiet week after payrolls but the debate over Friday’s employment report will continue to rumble on with the 160k number below the 200k expected with the unemployment rate unchanged after hopes had been for a dip lower (5.0% vs. 4.9% expected). Those of a bullish persuasion might just conclude that this is reflecting an economy getting close to full employment and running out of workers. The bears might argue that full employment this cycle is less useful for the economy given the large amount of people who have left the work force. One concern we continue to have is that with corporate profits well off their late 2014 peaks, are the slightly softer recent employment numbers reflecting a corporate sector that is more reluctant to hire now with profits waning? As the chart we used in our 2016 outlook showed (repeated in last Thursday’s EMR), the last 11 recessions have started only after corporate profits peaked. The average time it took from peak profits to recession is 2 years. If profits have peaked then this is another of the supportive late cycle indicators we have and it will be interesting to see if employment slowly takes the brunt of reduced profitability over the next 12 months.
So as well as further digesting those employment numbers from Friday, there’s also been some important newsflow over the weekend to contend with. The first comes from the Oil market and specifically out of Saudi Arabia with the news that the Kingdom has appointed a new Oil minister. Khalid Al-Falih replaced Ali al-Naimi on Saturday following 20 years of service as part of a major reshuffle by King Salman. Much of the focus however is on what this means for Saudi production and output with the bulk of the commentary suggesting that we shouldn’t expect to see a huge change in policy. Ahead of the June OPEC meeting, Falih was reported as saying yesterday that Saudi Arabia would ‘remain committed to maintaining our role in international energy markets and strengthening our position as the world’s most reliable supplier of energy’. Indeed Bloomberg, the FT and the WSJ are all suggesting that the new appointment should result in some continuity in oil policy.
The other big story for energy markets are the tragic wildfires spreading through Canada currently. Over the weekend the fires which have raged through Alberta are now said to have spread to the oil-sands facilities north of Fort McMurray. The chatter is that roughly 1m barrels of production from the region could be impacted however the improving weather conditions overnight are helping to the slow the spread for now. A number of producers have declared a force majeure in the region while evacuations are taking place. This morning WTI opened nearly 3% on higher on the news and close to $46/bbl, but has settled slightly now and is currently +2% higher at around $45.50/bbl.
Meanwhile, the other news over the weekend concerns the latest economic data out of China. FX reserves were reported as rising unexpectedly last month by $6.4bn to $3.22tn (vs. $3.20tn expected), the second consecutive month that reserves have increased. The softer US Dollar last month and resulting impact on valuation adjustments looks to have been a big factor in that however. Also out over the weekend were the April China trade numbers. In US Dollar terms exports were reported as declining -1.8% yoy last month (vs. 0.0% expected) from +11.5% in March. That said, a sharper than expected fall in imports (-10.9% yoy vs. -4.0% expected; -7.6% previously) has resulted in the trade surplus increasing. In CNY terms exports were reported as increasing close to that expected by the market (+4.1% yoy vs. +4.3% expected).
lancing at our screens, bourses in China have opened this morning on the back of that data on a weak note. The Shanghai Comp and CSI 300 have tumbled -2.23% and -1.71% respectively, although it’s a bit of a mixed performance elsewhere in Asia. The Kospi (-0.67%) and ASX (-0.37%) are also lower, however the Nikkei (+0.54%) and Hang Seng (+0.61%) are off to reasonable starts. Base metals have weakened post the China data, although it’s a bit more mixed in currency markets.
Moving on. As you’ll see at the end in the week ahead, earnings season is winding down now with the vast majority of the big reports now behind us. With that, it’s a good time to recap how the quarter has gone so far. As it stands we’ve now had 437 of the S&P 500 companies report their latest quarterly numbers. Earnings beats are currently standing at 75%, which is roughly in line with recent quarters, while sales beats stand at 54% – a touch ahead of the recent trend. More importantly however, the bottom-up Q1 EPS of $27.01 is -5.3% yoy according to our US equity strategists, while bottom-up sales are currently -2.0% yoy. Significantly, if you strip out the impact of energy names, earnings are actually flat yoy while sales are +1.7% yoy. If you go further and strip out financials as well, then earnings are actually +3.4% yoy and sales +2.4% yoy. So the combined impact from those two sectors has been very material. Meanwhile, as we’ve noted previously this has been a massive quarter for downward revisions to earnings expectations. In fact, despite the Q1’16 EPS beat running at +2.4% versus a +3.2% average from Q1’11 to Q4’15, that EPS has been revised down by nearly 10% since the turn of the year which is the most since 2011 and compares to an average downward revision in that time of -3.9%.
Back to Friday and a quick recap of the rest of the data. Average hourly earnings for the US in April were reported as increasing +0.3% mom as expected last month. That’s had the effect however of lifting the YoY rate by two-tenths to +2.5%. The labour force participation rate declined two-tenths to 62.8% unexpectedly, while average weekly hours rose one-tenth as expected to 34.5hrs. The broader U-6 measure of unemployment edged down one-tenth to 9.7% and so matching the recent low in February. Markets reacted in a typical knee-jerk fashion with the US Dollar weakening, Treasury yields sharply lower and risk assets weaker. That said markets quickly went into reverse gear as investors digested the data. The USD index closed a smidgen higher (+0.12%) after being down as much as half a percent. 10y Treasury yields closed up over 3bps higher at 1.780% after touching as low as 1.703% in the immediate aftermath, while finally the S&P 500 ended up with a +0.32% gain after also being down as much as half a percent. Credit markets were little changed by the end of play however.
It was hard to determine what swung sentiment back the other way. Some pointed to comments from the Fed’s Dudley, arguably one the closest-followed Fed officials. Dudley said that the employment report was ‘a touch softer, maybe, than what people were expecting, but I wouldn’t put a lot of weight on it in terms of how it would affect my economic outlook’. Dudley went on to confirm and stick to the Fed’s script of still expecting two rate hikes this year. The futures market gave little weight to this however as we saw the June probability dip into single-digit territory at 8% (from 10% at Thursday’s close).
Away from the employment report and later on in the evening, the March consumer credit reading printed at $29.7bn (vs. $16.0bn expected). The revolving credit component which includes credit card spending was reported as increasing at the biggest annualized pace since July 2000. Elsewhere, in Europe the sole data release was out of Spain where industrial production was reported as increasing +1.2% mom in March and more than expected. We’ll get the rest of the IP reports for Europe this week. Price action had been relatively mixed to close the week in Europe on Friday. The Stoxx 600 closed -0.36% however the DAX (+0.18%) managed to jump back into positive territory by the end of play.
Away from the data there is more Fedspeak for us to digest this week. We’ll hear from both Evans and Kashkari today, Rosengren and George on Thursday and Williams on Friday. The ECB’s Constancio is also scheduled to speak this morning. Earnings season is beginning to wind down meanwhile. We’ve got just 20 S&P 500 companies due to release their quarterlies including Macy’s and Walt Disney. In Europe there are 90 Stoxx 600 companies due to report however including more of the Banks.
With stocks the biggest beneficiary of the late January “Shanghai Accord” (that shall not be named), it stands to reason that the US Dollar was the biggest loser. Sure enough, overnight the WSJ writes that the “powerful rallies that have lifted stocks, crude oil and emerging markets for the past three months have one important thing in common – the falling dollar – and investors are growing anxious that it could prove to be the weak link.”
But is a strong dollar about to make another appearance and unleash the next leg lower in risk assets?
While the dollar is down 4.5% this year and near a one-year low against a basket of currencies, other investments have surged. U.S. crude prices are up 69% from their February lows. Gold was up 16.5% in the first quarter, its best in three decades. And emerging-market stocks, bonds and currencies have enjoyed double-digit gains in 2016.
Morgan Stanley analysts quantified the relationship, and found that the correlation between a weak dollar and their own index of investor appetite for riskier assets is near its highest level in 20 years. As the WSJ writes, “the concern is that it is a relationship that could easily go in the opposite direction.”
The dollar is heavily dependent on perceptions of what the Federal Reserve will do with interest rates, and those perceptions could change quickly. Meanwhile, analysts warn that the fundamentals for oil, emerging-market assets and even many stocks look too weak to support the recent price gains on their own.
“Currency is the most influential factor for markets this year,” said Graham Secker, head of European equity strategy at Morgan Stanley. “If the dollar starts moving higher, global risk appetite will fall.”
But just when you think the dollar tide is about to turn, you get such ugly US macroeconomic update as Friday’s payrolls report, and suddenly it feels like the USD has much more room to fall (and, in tried and true centrally-planned fashion, the worse the data, the higher stocks could rally).
To be sure, conventional wisdom and positioning agrees with a “lower dollar for longer” thesis: hedge funds and other speculative investors are now more bearish on the dollar than at any other time since February 2013, according to CFTC data.
However, that bearish positioning also means any sign the Fed is turning more hawkish could send investors scampering to buy dollars, pushing the U.S. currency sharply higher.
“The market has become complacent,” said Steven Englander, head of G-10 FX strategy at Citigroup Inc. “There’s the risk…the Fed gives a sudden indication that really surprises the market.”
The biggest risk, of course, is that Goldman will remain bullish on the USD as it has for the past 5 months, leading to thousands of pips in P&L pain for Goldman FX clients.
But maybe not even Goldman flip-flopping will be necessary for the USD to make a U-turn.
Here is another report, courtesy of Morgan Stanley’s Hans Redeker, head of global FX, who believes that another round strength for the USD is “inevitable.” Here’s why:
Inevitable USD Strength
The USD bull market has paused for now but diverging global output gaps keep us confident that USD will resume its bull trend later this year, with the Fed raising rates in December and China’s cyclical recovery losing momentum. Currencies work as the great equaliser within open capital account economies, bringing diverging output gaps back into line. Here the work a higher USD needs to achieve is not yet complete. This week we marked-to-market our USD forecast, delaying the next appreciation phase.
Global imbalances have stayed strong but these imbalances are no longer expressed by current account differences and worries concerning foreign funding needs. Instead, current account differentials have developed into output gap differentials. Concretely, Asia’s current account surpluses have converged into supply, which within a world of demand deficiency has created overcapacity and falling investment returns.
Theoretically, there are three possible outcomes to deal with overcapacity. Austrian School-like destruction, increasing exports and finally providing debt-funded domestic demand. Creative destruction, once the backbone of a functioning capitalist system, is no longer seriously considered as the social costs of this approach appear unacceptably high. What remains are adjustments via exports and increasing local demand against ever-rising balance sheets.
Last autumn, China’s stakeholding economic model had opted for a debt-funded domestic demand push and increasing exports funded by falling export profit margins and the lower RMB. On a trade-weighted basis, CNY has fallen 4.6% since November and declining investment efficiency has undermined corporate profits. Debt continues to increase, reaching 260% of GDP, which is high for a middle income economy. Work from Reinhart and Rogoff further deepened by the BIS describes how debt reduces the credit multiplier and the potential of economies to grow.
These findings are important for FX investors. It has been China’s currently strong, but debt-funded, cyclical rebound in conjunction with the Fed broadening its reaction function pushing USD well off its January peak. USD measured by the Fed’s broad USD index has lost 6.4% since then and may fall further in the near term as investors monetise the EM risk premium. The Fed’s broadened reaction function, emphasising often globally determined financial conditions, has internationalised the Fed’s global reach, supporting EM investor confidence.
Importantly, China’s credit-fuelled demand push has propelled commodity prices and has converged global inflation rates somewhat, which has been a plus for the EM and commodity FX bloc. With an equivalent of US$9.9 trillion of DM sovereign bonds negatively yielding, demand for positively returning carry products is high. The ECB and the BoJ are seeing limitations within their remaining monetary toolboxes pushing their currencies lower, which has been an additional factor reducing USD demand.
Going forward, FX markets will have to deal with two questions in determining how long USD can stay offered. First, for how long will the Fed’s more international approach stay in place, and second, for how long will China’s economy surprise positively? At first glance, it appears as if the two questions are independent from each other. However, global output gap divergence results in diverging global inflation rates, suggesting central banks diverging and not converging policies. The Fed may increase rates only slowly, but other monetary authorities dealing with the deflationary characteristics of overcapacity and debt overhangs may have to deploy easier policies.
Tackling overcapacity via an autonomous increase in debt-funded demand may work within environments of low debt, but within high debt environments with implicitly low credit multipliers this approach only buys time. Time bought allows USD to correct lower, assets to rally and the global economy to look better. Once markets learn that diverging output gaps and hence global imbalances have not gone away, we believe that USD will rally once again. Indeed, the recent USD decline has not set the starting point of a long-term decline. Instead, we view it as a correction within a secular USD bull trend.
Who knows, maybe just once Goldman and its “strong USD” trade will, after being wrong for over 6 months, finally be right.
Akin to ancient Rome, the United States has over-extended herself. She has created a climate that could easily be transformed into a war on a slight pretext. Wars, as it is well known are also a means a nation can extricate itself from debt and financial responsibility. – The U.S. Endgame, Jeremiah Johnson (nom de plume, retired U.S. Special Forces, excerpt from Zero Hedge
One would have to be blinded from either denial or ignorance not see the escalating political and military tension between the U.S. and Russia/China. While the U.S. media spins the story into a tall-tale in which BRIC nation leaders are the provocateurs, the truth is that the U.S. has transformed its illegitimate “war on terror” into war on the world in a
last-gasp attempt hold onto the economic and geopolitical hegemony it has enjoyed for several decades.
When you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you – you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed. – Francisco’s “Money Speech,” from “Atlas Shrugged”
If you reread that passage, think about how it applies to the Patriot Act, Homeland Security Act, Wall Street, the Justice Department and Hillary Clinton. It’s pretty obvious the U.S. is collapsing economically, politically
and socially.
Perhaps the one last chance at saving the United States is embracing the truth – the truth as it is and not the “truth” the U.S. Government would have you believe. But economic and political truth is seeded in honest money – think about the Federal Reserve, the Comex and the political elitists in the context of this passage from “Atlas Shrugged:”
Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. – Francisco “Money Speech”
The San Francisco Fed’s “President,” John Williams was blowing his weekly smoke on Monday. He said that higher interest rates would trigger “big movements downward” in asset valuations. He didn’t exactly discover plutonium with that revelation. But with his comments, Williams inadvertently admitted that the policy makers were responsible for creating what is now the biggest asset bubble in history. This is not going to end well.
The Shadow of Truth hosted Alasdair Macleod for a discussion which ties into the ongoing financial, economic and political collapse of the United States. Alasdair offers some original insight into the manner in which the inevitable geopolitical and financial “reset” might unfold:
Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns – or dollars. Take your choice – there is no other – and your time is running out – Francisco “Money Speech”
Please email with any questions about this article or precious metalsHERE
Rory Hall, Editor-in-Chief of The Daily Coin, has written over 700 articles and produced more than 200 videos about the precious metals market, economic and monetary policies as well as geopolitical events since 1987. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver and Silver Doctors, SGTReport, just to name a few. Rory has contributed daily to SGTReport since 2012. He has interviewed experts such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Gerald Celente and Peter Schiff, to name but a few. Visit The Daily Coin website and The Daily Coin YouTube channels to enjoy original and some of the best economic, precious metals, geopolitical and preparedness news from around the world.
HSBC’s London Gold Vault: Is This Gold’s Secret Hiding Place?
HSBC’s main gold vault in London regularly comes under the media spotlight for a number of reasons. These reasons include:
a) the HSBC London vault stores a very large amount of gold on behalf of gold-backed Exchange Traded Funds, primarily the well-known SPDR Gold Trust (GLD)
c) the location of the HSBC vault in London is not publicised and so the secrecy creates intrigue
d) HSBC every so often throws out some visual or audio-visual media bait about the vault, most famously in the case of CNBC’s Bob Pisani and his camerman and producer visiting and filming inside the actual vault
Despite all of the above, no one seems to have ever tried to figure out where this gold vault is actually located. Until now.
In some ways HSBC has done a very good job keeping the location of its London gold vault under wraps. The main challenge is where does one begin to look for a vault in London from scratch. At first it would appear that there is nothing in the public domain pointing to the HSBC vault location. This is not entirely true however. The gold bullion activities of HSBC in London stem from two companies that over time became part of the HSBC group. My approach was to start by thinking about which London locations HSBC used to be based at. I took this approach because it became obvious that the HSBC London gold vault being used was still a battered looking old vault space in 2004 and 2005, which was after the entire HSBC company had moved to its spanking new London headquarters in Canary Wharf by 2003.
In New York, the location of the HSBC Bank USA precious metals vault in Manhattan is well-known and is even listed in CFTC documents such as here. The vault is at 1 West 39th Street, SC 2 Level , NewYork, NewYork 10018 , which is the same building as 450 Fifth Avenue, which is the former Republic National Bank building that HSBC took over in 1999-2000. This Republic building at 450 Fifth Avenue, when it was being built, “had special vault requirements that reportedly added significantly to the project’s cost“. So its hard to see why HSBC makes such a big deal of not revealing its London vault location.
History of HSBC gold operations in London
In 1993, HSBC Holdings plc relocated its headquarters to London after having acquired Britain’s Midland Bank the previous year. Midland in turn had fully acquired Samuel Montagu in 1974 to form Midland Montagu. Samuel Montagu & Co was a City of London bullion broker, and one of the 5 original gold fixing members of the London Gold Fixing, and in turn, Midland Montagu was also a Gold Fixer. In 1999, HSBC began using the name ‘HSBC’ for the Gold Fixing seat of Midland Montagu.
Between 1999 and 2000, HSBC completed the acquisition of Republic National Bank of New York. Republic National Bank of New York had been a big player in the world gold markets, and in 1993, Republic National had bought one of the London Gold Fixing seats from Mase Westpac, meaning that from 1993 both Republic National and Midland Montagu held Gold Fixing seats, and that HSBC ended up with 2 of the 5 Gold Fixing seats. Therefore, in 2000, following the Republic National takeover, HSBC in London sold one of its newly acquired seats to Credit Suisse.
I also have always thought that the HSBC vault is in central London, and not in some far-flung outer London location. The LPMCL website (www.lpmcl.com) still displays text that says that the bullion clearer’s vaults are in ‘central London locations’:
“The five London bullion clearing members each maintain confidential secure vaulting facilities within central London locations, using either their own premises, or those of a secure storage agent…”
Anyone who knows London will understand that ‘central London’ refers to a small number of central districts, and not some broader inside the M25 (ring road) definition. Before moving to Canary Wharf in circa 2003, HSBC occupied a number of buildings clustered around the north bank of the River Thames, including 10 Lower Thames Street (the Banks’ Headquarters), 3 Lower Thames Street (St Magnus House), 10 Queen Street Place at the corner of Upper Thames Street (Thames Exchange – containing a trading floor), and Vintners Place (adjoined to Vintners Hall on the other side of Queen Street Place and Upper Thames Street).
HSBC Bank USA NA (London branch), until 2015, was also the HSBC entity that was listed as a member of London Precious Metals Clearing Limited (LPMCL) on the LPMCL website. See, for example, September 2009 imprint of LPMCL website. The next step is therefore to see where HSBC Bank USA NA (London branch) was formerly located.
The Financial Services Register (FSA Register) lists HSBC Bank USA, Reference number: 141298, effective from 24 January 2000, with a registered address of Thames Exchange, 10 Queen Street Place, London EC4R 1BE. Recalling the Republic National connection, the previous registered name for this entity was “Republic National Bank of New York”, with the same address, effective from 18 December 1995 to 24 January 2000. The FSA Register entry also lists various well-known names of the HSBC gold world alongside this HSBC Bank USA entity, including Jeremy Charles, Peter Fava and David Rose.
Recalling the Samual Montagu / Midland Montagu connection to HSBC, an entity called Montagu Precious Metals is also listed with an old address at “2nd Floor, Thames Exchange, 10 Queen Street Place, London EC4R 1BQ.
An old gold information website called GoldAvenue from the year 2000, written by Timothy Green, also lists HSBC Bank USA (London branch) address as:
HSBC Bank USA London branch Thames Exchange 10 Queen Street Place London EC4R 1BQ
That same Gold Avenue web page also correctly listed the HSBC New York vault address as:
HSBC Bank USA 452 Fifth Avenue New York, NY 10018
which is the same building as West 39th Street, New York, in Manhattan.
The precursor to the SPDR Gold Trust was called Gold Bullion Ltd, a vehicle set up by Graham Tuckwell, promoted by the World Gold Council, and listed on the Australian Stock Exchange. Gold Bullion Ltd’s first day of trading was 28th March 2003. Following Gold Bullion Ltd’s launch, the SPDR Gold Trust (GLD) was then launched in 2004, but originally it was called STREETracks Gold Shares, and it even had another former working title of ‘Equity Gold Trust’ in early 2004.
A May 2003 Marketwatch article about Gold Bullion Ltd and the early incarnation of the SPDR Gold Trust (Equity Gold Trust) can be seen here, and a speech by Graham Tuckwell about Gold Bullion Ltd to the LBMA annual conference in Lisbon in 2003 can be seen here. Most importantly, an early draft Prospectus of Gold Bullion Ltd (in MS Word), dated 10 February 2003, lists the Custodian of Gold Bullion Ltd as:
CUSTODIAN BANK HSBC Bank USA Thames Exchange 10 Queen Street Place London EC4R 1BQ
Therefore, Thames Exchange goes to the top of the list for further consideration, as does it’s neighbour Vintner’s Place. Thames Exchange and Vintners Place were both HSBC buildings and both buildings are situated right across the road from each other, with Queen Street Place literally bisecting the 2 buildings. Queen Street Place is also the road that acts as the approach road to Southwark Bridge, with the 10 Queen Street Place building and the Vintners Place building literally creating a canyon either side of the road.
You will see below why Queen Street Place is interesting. Queen Street Place is very near the Bank of England and is in the City of London, so it’s under City of London Police protection. It’s also very near the River Thames, as is the JP Morgan London vault. To get to the Bank of England from Queen Street Place, you literally walk a mintute north up Queens Street, and then a few minutes north-east along Queen Victoria Street and you’re at the Bank of England.
An official HSBC letter-headed note documenting the Thames Exchange address and proving HSBC occupied this building can be seen here. Similarly, an official letter-headed note documenting the Vintner’s Place address, and proving that HSBC occupied that building can be seen here.
HSBC moves out of the City of London – 2002/2003
A Property Week article from 20 April 2000, titled “JLL to mastermind HSBC’s City exodus“, covered the huge HSBC move out of the City to Canary Wharf in the early 2000s:
“Army of firms called in to help co-ordinate bank’s relocation to Docklands by 2002“
“HSBC has stepped up its retreat from the City of London by instructing agents to open negotiations on the disposal of its outstanding City liabilities.
In one of the most hotly contested pitches of last year, Jones Lang Lasalle has beaten rivals to secure the lead role as strategic adviser for the bank’s relocation to Docklands [Canary Wharf] in 2002.
In addition to JLL, the bank has instructed another seven firms to mastermind the disposal of its 121,000 sq m (1,302,445 sq ft) City portfolio.”
“HSBC has ruled out acquiring freehold or long-leasehold interests and has instructed agents to negotiate the best surrender or assignment of the occupational leases on its 12 City buildings.”
“Morgan Pepper is advising on HSBC’s 17-year lease at Thames Exchange, 10 Queen Street Place, EC4. The Scottish Amicable building is currently under offer to Blackstone Real Estate Advisors for £73m.
Insignia Richard Ellis, Chapman Swabey, Strutt & Parker and Wright Oliphant have positions on the bank’s remaining interests in Vintners Place EC3; Bishop’s Court at Artillery Street, and HSBC’s 37,160 sq m (400,000 sq ft) office complex at St Magnus House and Montagu House.
By the time STREETracks Gold Trust (the original name for the SPDR Gold Trust) was launched in 2004, HSBC Bank USA’s address had moved to HSBC’s new headquarters in Canary Wharf, in the Docklands, east of the City of London. By early 2003, Equity Gold Trust also listed the HSBC custodian with the Canary Wharf address.
“The phased occupation of the [Canary Wharf] building was completed in February 2003 when the last of over 8000 staff moved in, with HSBC Group Chairman Sir John Bond officially opening the building as the Group’s new head office on 2 April 2003.”
However, the old HSBC gold vault did not ‘move’ at the time the rest of HSBC moved lock, stock, and barrel to Canary Wharf between 2002-2003. In fact, the HSBC vault remained where it was in a slightly rundown shabby space with cream-colored walls. See multiple photos of the vault space below. The HSBC vault did however transform from an ‘old’ vault into a ‘new’ vault sometime between 2006 to early 2007. My belief, which I’ll explain below, is that this vault didn’t move, it just received an extensive renovation.
A diagram of the HSBC headquarters in Canary Wharf where the whole London HSBC workforce moved to by early 2003 can be seen below. Notice the car parks in basements B2, B3 and B4. You can also read about the basement construction in the Arup document above. This is not the location for a beat-up old vault that can be seen in the below old gold vault shots. Besides, the vertical pillars/piles in the old and new HSBC vault are nothing like the huge structural pillars/piles found in the HSBC headquarters in Canary Wharf.
The pillars in the old HSBC vault photos are pillars that would be found in an old arched vault, while the support pillars in the new HSBC vault photos are those that would be found in relatively shallow spaces under a road, such as pillars/supports used in the cut and cover New York subway system.
Arup diagram of HSBC Headquarters, Canary Wharf. lower section and basement
HSBC Gold Vault Photos
December 2004:
Here you can see an early gold vault photo of Graham Tuckwell, joint managing director of Gold Bullion Securities, and Stuart Thomas, managing director of World Gold Trust Services, in the ‘old’ HSBC vault in December 2004 checking a HSBC bar list:
In fact, there are lots more photos of the inside of the ‘old’ vault on the StreetTRACKS website here http://ift.tt/1rJdKRC
June 2005:
See five photos below of vault in June 2005:
‘Old’ vault looks quite beaten with concrete pillars, old floor, old air conditioning unit, and awful decor, and some type of desk an chair and wiring on the very right hand side of the photo.
Managing Director Stuart Thomas, Director of Corporate Communications, George Milling-Stanley of World Gold Trust Services, and CFO and Treasurer James Lowe (wearing a gold tie) of World Gold Trust Services
When the gold is stacked 6 pallets high, as in the above photo, it nearly reaches up to where the pillars start to broaden out. Recall for a moment the definition of a vault. A vault is any space covered by arches, or an arched ceiling over a void. This is why the Bank of England ‘vaults’ are called vaults, because in the old vaults of the Bank of England (before the Bank of England was rebuilt in the 1920s/1930s), the gold was stored in the arched vaulted basements. The pillars in the shots of this ‘old’ HSBC vault look like pillars/piles that are the lower parts of arches, since they taper outwards as they go higher and they are positioned in a grid like formation.
You can see how all the pallets of gold were located in a space with quite a lot of walls and chunky support pillars that broaden at the top (i.e. support pillars). Very similar pillars can be seen in old parts of the London Underground pedestrian tunnels, and also in the Vintner’s Hall wine vaults, which is next door to the vaults under Queen Street Place.
The NEW HSBC Vault 2007
During the second half of 2007, a series of 4 photos appeared on the STREETTracks website of a ‘New’ HSBC gold vault in London. The headline title of this series of images was
“The gold in trust at HSBC’s gold vault in London. The gold is being held in Trust for the shareholders of GLD. These images as at June 2007?
This STREETTracks web page can be accessed via the following link, however, the photos don’t render properly.
The MarketWatch website and a GLD SEC submission mentioned the ‘new’ vault move in an article on 11th January 2008:
“…StreetTracks Gold Shares, a wildly popular exchange-traded fund so awash in investor cash that its backers recently scrambled to find a bigger vault to accommodate their ever-growing horde of the precious metal, now valued at $18 billion.”
“Because the StreetTracks reserve expanded faster than expected, its managers had to move the stores to a bigger vault about six months ago to make more room, says George Milling-Stanley, a spokesman for the gold council.”
Graham Tuckwell, Chairman of ETF Securities, also referred to the ‘old’ and ‘new’ vaults at the LBMA Conference in Hong Kong in November 2012. On page 3, section C “Is the Gold Really There?”, Tuckwell shows 2 photos to the audience, one from “10 years ago” and one a recent photo. In the old photo, which is probably this photo
he says “the fellow on the left is a 10-year younger version of me“. He also says: “That was the old vault when we started doing it, and you can see that we are doing a bit of a check“.
Then Tuckwell goes on to say: “This photograph was taken just over a year ago on a recent vault visit“… “Our gold, from the London product, the GBS, is on the left and the gold from the US product, the GLD, is on the right in this picture“. GBS was the Australian product and GLD being the State Street product, listed in November 2004.
As it turns out, there are vaults beneath the road under Queen Street Place, between 10 Queen Street Place (Thames Exchange) and Vintners Place, and these vaults were renovated during the period that would coincide with the HSBC London gold vault transforming from an ‘old’ vault to a ‘new vault’.
Southwark Bridge and The Queen Street Place Vaults
Southwark Bridge is a bridge over the River Thames connecting the City of London (financial district) on the north bank of the river, to the area of Southwark on the south bank. The first Southwark Bridge (Queen Street Bridge) opened in 1819 and was an arched bridge with “vaults under the north abutment of the bridge“. There is also a reference to the vaults under Queen Street Place in a 1908 Corporation of London Record Office record.
A second bridge, the current Southwark Bridge, replaced the earlier bridge, and it opened in 1921.
A book titled ‘Design Applications of Raft Foundations‘, when discussing the development that became Vintners Place, mentions the vaults under Queen Street Place and shows that the vault space begins maybe 2.0 metres under the roadway, and with the vault space height being about 5 metres high which looks a very similar height to both the ‘old’ and ‘new’ HSBC vault spaces.
In fact, there were up to 17 vaults under Queen Street Place judging by a planning application from 1992 which listed a Vault Q (assuming Vaults A – Q), and the application said that the vaults had been used for storage.
Alterations to Vaults under Queen Street Place
Keeping in mind that the ‘old’ HSBC gold vault became a ‘new’ HSBC gold vault sometime in 2006, or early 2007, then the following, in my view, becomes highly relevant. In September 2004, a building control planning application was submitted to City of London planning department for Alterations to Vaults in the Thames Exchange building at 10 Queen Street Place. See link for the application. See screenshots also.
Following this in November 2005, another building control planning application was received by the City of London planning department for “Fit out of Vaults between 10 Queen Street Place and Vintners Place“. See link below and also screenshots.
Blackstone bought Thames Exchange from Scottish Amicable in 2000 while it was still being leased to HSBC. HSBC then surrendered the lease of the building when it moved to Canary Wharf in 2003. Blackstone then renamed Thames Exchange to 10 Queen Street Place and began renovating it while leasing it to City law firm SJ Berwin for its new London headquarters. However, SJ Berwin only moved its London headquarters from Gray’s Inn Road to 10 Queen Street Place sometime between February and April 2006, so the renovations appear to have gone on during 2003-2005. Norwich Property Trust purchased 10 Queen Street Place from Blackstone in 2006, after it had been renovated. Notably, Norwich retained TFT Consultants to inspect 10 Queen Street Place. TFT Consultants states in a case-study on its website that:
“We inspected this prominent riverside mixed-use building including extensive vaults underneath Southwark Bridge approach road and prepared a TDD report for Norwich Property Trust.”
Property investor Jaguar bought the 10 Queen Street Place building from Norwich in 2008, and then the Malaysian haji pilgrims fund purchased 10 Queen Street Place from Jaguar in September 2012.
Coincidentally, Vintners Place, which adjoins Queen Street Place on the other side of the vaults was also sold in September 2012 when Downtown Properties and a South Korean consortium bought it from Atlas Capital. The tenants at the time included Jefferies International, and Sumitomo and Thomson Reuters. Vintners Place also adjoins Thames House, Five Kings House, and The Worshipful Company of Vintners also has its headquarters in a building called Vintner’s Hall on the corner of Queen Street Place and Upper Thames Street.
Vaults under Queen Street Place – old layout – dated 28 November 2002
And more zoomed in. Notice all of the individual vaults and doors, and all of the walls with rows of pillars marked between the walls.
Vaults under Queen Street Place – old layout zoomed in
Compare the above plans to the ‘proposed’ plans. In the proposed plans, which are revision C08 dated 06 April 2006, all of the individual vaults have been removed by removing all the doors and walls, leaving just rows of pillars, and beams (given that it’s a top-down view looking down).
Vaults under Queen Street Place – proposed vaults – 2006 updates
You can see the changes a bit more clearly in the following slightly zoomed in version. Notice the facilities added on the right, such as toilets, kitchen, changing rooms, office, telecoms room etc, and also the rows of supports/ pillars on the left hand side, which is about 7 rows of supports / pillars in the open space, 5 of which run at the same angle, then there is a V shape where the pillars then run at a different angle.
Vaults under Queen Street Place – proposed vaults – 2006 updates – zoomed in
Anyone who has the inclination, given these sets of plans of the vaults under Queen Street Place, please check back over the photos of the ‘old’ HSBC vault and ‘new’ HSBC vault and decide for yourself if the photos in the ‘old’ cramped vault with the pillars and cream wall is reminiscent of the pre-alteration plans above. Likewise, decide for yourself if the ‘new’ HSBC London gold vault with the open plan design and layout of vertical steel support columns looks like the plans above of the ‘proposed’ alterations and ‘Fit Out’ of the vaults under Queen Street Place.
When G4S built its subterranean gold vault in Park Royal, London in 2013 / 2014, it fitted it out the area beside the vault with toilets and a kitchen – See second last sentence in red box below from the G4S building contractor document. Because, if you are working down in a vault all day, there will need to be toilets and a kitchen area, as well as changing rooms, phones and desktop computers etc. For background to G4S vault, see “G4S London Gold Vault 2.0 – ICBC Standard Bank in, Deutsche Bank out“.
The Pisani Files – “This is it folks, this is the Motherlode!”
Now we come to the Bob Pisani videos that were filmed by CNBC in the HSBC London gold vault in 2011. I say videos in plural because there are 4 video segments, and actually 5 segments in total including a trailer. The videos are quite exciting and fast-paced but frustrating because the camera is quite shaky and moves around rapidly for a lot of the vault segments, possibly on purpose. The background music is quite catchy also (at first).
1. The Motherlode
The first video is on a CBNC web page and embedded in an article titled “Gold’s secret hiding place”, however the video is titled “Gold Rush – The Mother Lode”. Its dated Wednesday, 31 Aug 2011 with a byline of “CNBC’s Bob Pisani recently got an exclusive inside look at the HSBC gold vaults in London, where the gold for the SPDR Gold Trust (GLD) is stored.” The video is 4:55 mins long, and introduced by Pisani from the New York studio. The vault shots begin at 1:18, and interestnigly, at 0:40 mins, the camera is in a vehicle travelling down Lower Thames Street.
Let’s call this 2nd video “Gold’s Secret Hiding Place”. This version, which is different to the Motherlode, is on YouTube. I’m not sure of the official segment name. This version is 5:06 mins long, and Bob says the vault is “in a super-secret location only known to a few people”. This is also the version where Bob hands in his cellphone and travels in a blacked-out vehicle saying “we have no idea where we’re going. We only know our final destination. The vault!”
There is a neat online app called Pause House which allows you to look at any YourTube clip frame-by-frame, and can be used on the above clip for those who want to get a good look at the vault interior. (Pause House).
3. The Third version
Lets call this the Third version. Its 2:43 mins long. Pisani starts on Waterloo Bridge on the River Thames and he points towards Westminster Bridge (the exact opposite direction to Southwark Bridge). Then he is in the blacked-out vehicle, and then in the vault from 1:04 mins. At this stage the music might be annoying, so luckily, there is no background music when Bob talks in the vault.
4. Inside the Secret Vault
This clip is 2:42 mins long and is dated Thursday, 8 Mar 2012 with a byline of “CNBC’s Bob Pisani gets unprecedented access inside the largest private gold reserve in the world.” Its slightly similar to version 3 above
5. Version 5 is just a 31 second trailer about the CNBC 2011 gold series, published in March 2012, with gold vault footage only appearing for a few seconds.
There is one sentence in both “Motherlode” and “Gold’s Secret Hiding Place” that I consider very interesting. And it relates to the ‘old’ and ‘new’ vaults. What Bob Pisani says has obviously been told to him by someone at HSBC, since he would not know anything about the vault in advance.
At 3:37 mins in Motherlode, Pisani says “In 2005, there was less than 200 tonnes of gold here, now there’s 6 times as much“.
At 4:05 mins in Gold’s secret hiding place, Pisani says “In 2005, there was less than 200 tonnes of gold in this vault backing the GLD. Now there’s 6 times as much.”
Pisani is essentially saying, probably without realising, that it is the same vault. i.e. that the vault in 2005 is the same vault as in 2011. However, given that the vault in 2005 was the ‘old’ vault, and that the vault in 2011 was the ‘new vault’, this suggests that it is the same space, and that the vault space was just renovated. It therefore supports the view that the vaults under Queen Street Place are a very strong candidate to be the HSBC London Gold Vault that stores the GLD gold and the ETF Securities gold.
Fruiterers Passage
You might have spotted above that one of the existing vaults under Southwark Bridge was turned into a riverside walkway. This was probably vault Q, which looked to be the vault nearest the river. This walkway runs under the beginning of the abutment on the north of SouthWark Bridge and is called the slightly humorous name ‘Fruiterers Passage’. The Passage was opened circa the year 2000 (and named after the Worshipful Company of Fruiterers), and is ornately tiled with ceramics, even around its pillar enclosures. Take a look at a photo of Fruiterers Passage and compare it to a photo of the new ‘HSBC’ gold vault that features the yellow-painted steel support pillars. The dimensions and spacings of the pillars in both photos look very similar, even identical.
A video walk-through (2:45 mins) of Fruiterers Passage can be seen here. The first 20-30 seconds shows Southwark Bridge, and then the walk through the Passage begins:
Although there are lots of security cameras around the City of London, the cameras in Fruiterers Passage and security warnings near the entrance to the Passage seem particularly explicit.
Size Matters
A MarketWatch article from 11 January 2008 quoted George Milling-Stanley as saying that the vault was sizable but “not quite as big as a cricket pitch.” On another occasion, Milling-Stanley used another sporting analogy and described the ‘new’ vault as “about the size of a football field“. Can a sporting analogy (or two) help determine the size of the HSBC London gold vault? Possibly, but it’s not as clear-cut as you might think.
Notwithstanding that a ‘cricket pitch’ is the (smallish) 22 yard strip between the wickets, the quotation was presumably referring to a ‘cricket field’. However, there is no standard shape of a ‘cricket field’, let alone standardised dimensions, since the ICC rules only state that the field can be circular or oval with a variable diameter of between 450 and 500 feet on the ‘long’ side (sometimes giving 16,000 sq yards). Regarding Milling-Stanley’s ‘football field’, analogy, it’s not clear whether this analogy was intended for a US audience or non-US audience. So it could mean ‘American’ football, or soccer or rugby.
In soccer, there is no standard size ‘field’. The sidelines (touch lines) have to be between 100 and 130 yards (110 to 120 yards for international matches), while the goal lines (end lines) must be between 50 and 100 yards (70 to 80 yards) in international matches. This could result in over 7000 sq meters or over 1.75 acres. The American football field is thankfully standardised, being 120 by 53.33 yards or 6400 sq yards.
Overall, Milling-Stanley’s descriptions give a flavour for permissible dimensions, but based on Bob Pisani’s video tour, I see the vault as a rectangular space but not quite as big as a soccer pitch. So lets look at the space in Google Earth. I’ve just added a yellow rectangle for illustrative purposes to show where the vaults under Queen Street Place are located.
Bird’s Eye View – Queen Street Place looking north from Southwark Bridge – 10 Queen St Place on right, Vintners Place on left
The Marketwatch January 2008 article also said that the HSBC vault was “located on the outskirts of London” but how would the journalist know this since the same article also said that “a spokeswoman for HSBC declined to provide vault details, citing security policies”. As financial journalists mostly repeat what is told to them, I think this “located on the outskirts of London” bone was thrown out as a red-herring, and means the exact opposite.
Conclusion
At its peak holdings in December 2012, the SPDR Gold Trust stored 1353 tonnes of gold. Some observations from looking at the vault space in the Pisani videos and from talking to other people, are that:
a) the HSBC vault looks quite full in 2011, but it still looks like the space would be hard pushed to store the 1200 tonnes of gold that Pisani says were there
b) based on modelling the number of realistic-sized pallets that could conceivably fit into the Queen Street Place vault space (as per the vault plans), it also seems that it would be hard pressed to store 1,200 tonnes, unless they were crammed in. And the pallets in the CNBC segments are not fully crammed in to the space.
Remember also that the 1200 tonnes of gold reference only referred to the SPDR Gold Trust holdings in mid-2011 around the time the CNBC video segment was filmed. See blue line in chart below (chart from www.sharelynx.com) for GLD holdings over its lifetime. HSBC is also the gold custodian for ETF Securities’ gold-backed ETF which held about 170 tonnes at the time of Pisani’s visit. That would be nearly 1,400 tonnes of gold just between the GLD and ETFS holdings, which would be about 228 piles of pallets stacked 6 high crammed in. Furthermore, that’s not even taking into account any gold holdings of other HSBC customers, and Pisani also says in the videos that HSBC confirmed to him that its vault also stores gold for a range of clients.
When GLD held 1353 tonnes in December 2012, this in itself would be 225 piles of pallets, each 6 high. ETFS held about 170 tonnes in December 2012 also, which would be another 28 piles of pallets stacked 6 high. If this location is the famous storage area for the SPDR Gold Trust then possibly during the boom times when GLD holdings peaked, the HSBC vault may not have been big enough to accommodate the GLD gold let any other gold. Which would mean that HSBC was storing GLD gold elsewhere such as at the Bank of England vault, or the JP Morgan vault, both very close to Queen Street Place. It would also mean that GLD sources new gold inflows from gold that is at the Bank of England, i.e. leased central bank gold.
Another point to consider is that if the vaults under Queen Street Place are the correct location for the HSBC vault, then where did the gold that was being stored there in late 2005 / early 2006 go to during the vault alterations? This would have been at least 200 tonnes of gold as of late 2005, rising to over 350 tonnes of gold by late 2006. As the Bank of England is literally up the road from Queen Street Place, moving it to the Bank of England vaults would be the most likely option during the renovation.
In summary, using publicly available information and evidence, I have described where I think the HSBC London gold vault may be located. Whether I am correct is another matter.
"After comprehensive judgment, our economic recovery cannot be U-shaped, cannot be V-shaped, but will be L-shaped," warns an 'authoritative' person according to a shocking report published by Government mouthpiece People's Daily. The report, explaining why investors should not expect growth to pick up soon or expect more stimulus to come soon further sets expectations for China to "face the issue of rising non-performing loans" and not continue to create zombie companies. The result – a bloodbath in stocks and commodities…
Chinese stocks are down 4.5 to 7% in the last 2 days… as turmoil returns…
The report (found here), as Bloomberg summarizes, suggests China shouldn't loosen monetary conditions to enable growth…
China should abandon idea of loosening money conditions to accelerate economic growth, People’s Daily reports, citing interview with an “authoritative” person who wasn’t identified.
Monetary conditions shouldn’t be loosened to cut levels of leverage
China won’t use stock, forex and property-market policies as tools to ensure economic growth
Economic growth won’t be too low without stimulus as potential is sufficient
China should face the issue of rising non-performing loans of banks and not cover it up or delay handling it
Economy’s performance will be L-shaped for quite some time, instead of just 1-2 yrs
Economy’s performance won’t be U- or V-shaped
China will limit bankruptcies for “zombie” cos; at the same time it will definitely close cos. that can’t be saved, instead of converting debt to equity or forced restructuring
And the impact on stocks and commoditiers (as the latter's bubble implodes) is clear – Short-term…
And Long-term…
As the churn collapses, volume disappears and Iron ore, Steel rebar, and copper all collapse back to un-credit-speculated reality – smashing The Baltic Dry lower also.
We are all living in Hybrid War time. From R2P (“responsibility to protect”) to color revolutions, from currency attacks to stock market manipulations.
From judicial-financial-political-media enabled “soft” coups – as in Brazil – to support for “moderate” jihadis, multiple stages of Hybrid War now cross-pollinate and generate a vortex of new mutant viruses.
Hybrid War, a Beltway concept, has even been turned upside down by the conceptualizers. NATO, affecting puzzlement at the very existence of the concept, interprets the Russian “invasion” of Ukraine as Hybrid War. That serves prime Hybrid War purveyors such as the RAND corporation to take it further, peddling war game scenarios of Russia being able to invade and conquer the Baltic states — Estonia, Latvia, and Lithuania — in less than 60 hours.
And that, in turn, foments even more Western military hysteria, encapsulated by the new NATO commander, a.k.a. Dr. Strangelove; Gen. Curtis Scaparrotti, who made sure he would come up with a stage entrance worthy of his predecessor, Philip Breedlove/ Breedhate.
Slightly amused at the whole conceptual circus, Russians respond with actions. Extra deployments in our Western borderlands? No problem; here’s your asymmetrical answer. And say hello, soon, to our new toy: the S-500s.
What Hillary wants
The notion that Moscow would have any interest at all to capture Baltic states is ludicrous in itself. But with the evidence of direct occupation of Afghanistan (the Taliban will never quit) and R2P in Libya (a failed state devastated by militias) spelling miserable failure, NATO badly needs a “success”. Enter warmongering rhetoric and conceptual manipulation – and this when it’s actually Washington that is deploying Hybrid War all across the chessboard.
Reality occurs beyond NATO’s looking glass. Russia is way ahead of the Pentagon/NATO in A2AD — anti-access/area denial; Russian missiles and submarines may easily prevent NATO fighter jets from flying in Central Europe and NATO ships from “patrolling” the Baltic Sea. For the “indispensable nation”, that hurts – so bad.
Relentless rhetorical hysteria masks the real high-stakes game in play. And that’s where US presidential candidate Hillary Clinton fits in. Throughout her campaign, Clinton has extolled “a major strategic objective of our transatlantic alliance”. The major “strategic objective” is none other than the Transatlantic Trade and Investment Partnership (TTIP) – a NATO-on-trade complementing political and military NATO.
The fact that TTIP, after the latest Dutch leaks, now runs the risk of being mired in Walking Dead territory may be a temporary setback. The imperial “project” is clear; to configure NATO, which already mutated into a global Robocop (Afghanistan, Libya, Syria), into an integrated political-economic-commercial-military alliance. Always under Washington’s command, of course. And including key peripheral vassals/contributors, such as the Gulf petromonarchies and Israel.
The imperial “enemy”, of course, would have to be the only authentic project available for the 21st century: Eurasia integration – which ranges from the Chinese-led New Silk Roads to the Russia-led Eurasia Economic Union; BRICS integration, which includes their New Development Bank (NDB), in tandem with the Chinese Asian Infrastructure Investment Bank (AIIB); a resurgent, still independent Iran – Eurasia-connected; and all other independent poles among Non-Aligned Movement (NAM) nations.
This is the ultimate, ongoing 21st confrontation that will keep generating multiple, localized hybrid warfare forms – as it takes place not only across Eurasia but across the whole Global South. It’s all interlocked – from Maidan to the secret TTIP negotiations; from provoking China in the South China Sea to an oil price war and an attack on the ruble; from the NSA spying on Petrobras feeding a slow motion, legalistic regime change process in Brazil to an EU ravaged by twin plagues; a refugee crisis ultimately provoked by NATO’s wars (and instrumentalized by Turkey) coupled with Salafi-jhadi terrorism also spawned by the same wars.
Even with France and Germany still dithering – as in paying too heavy a price for sanctions on Russia — Washington’s “project” counts on a ravaged EU being a perpetual hostage of NATO. And ultimately, a hostage of NATO on trade – because of those US geostrategic imperatives against Eurasia integration.
This implies another necessity; the conceptual war – it’s the evil Russians who are waging Hybrid War, not us! — must be won at all costs, by instilling constant fear into the average EU citizen. In parallel, it’s also essential to put on a show; thus one of the most massive US-designed military operations on European soil since the end of the Cold War – complete with Navy and Air Force displaying nuclear capability.