Halloween Surprise: How Will The US Banks Plug Their $120B Capital Shortfall? Trick Or Treat?

scary banker

 

Source: searchglobalnews.wordpress.com

The Federal Reserve had a nasty surprise for the financial markets right before the Halloween weekend (the perfect timing to sweep something under the carpet and hoping the markets will have forgotten about it by Monday). At 8PM on Friday night (again, perfect timing, the Fed made sure all Bloomberg terminals were switched off and the average Wall Street trader was already spending his salary in a fancy Manhattan bar), a statement was issued, confirming the major banks in the USA would need an additional capital injection of $120B to secure the safety of the financial system and to get rid of the capital shortfall.

The governors of the Federal Reserve have confirmed and approved a draft version of the proposal, and it will now be made available for public comments. The remarkable part of the proposal is the fact the council of governors is proposing to fill the gap by raising additional debt, instead of issuing new shares to increase the equity level on the banks’ balance sheets.

Banks capital shortfall 1

Source: opengov.com

The six major banks will be hit by this new proposal, and it’s widely expected JP Morgan and Citigroup will have the hardest task to comply with the Fed’s requirements. So okay, if the $120B could be covered by new (probably subordinated) debt issues, the damage could be limited to the banks just paying a few billions in interest expenses per year. Nothing to lose your sleep over.

However, what’s really disturbing here is that these same banks, 6 years after the global financial crisis, are still facing shortcomings on the balance sheet front. Despite the government and the Federal Reserve claiming that the ‘crisis is over’ and the American economy is ‘healthy again’, apparently the banks would still have difficulties to deal with any decent-sized economic crisis.

Banks Capital Shortfall 3

But wait, that’s not all. On Friday, the European Central Bank also announced the results of a review of the situation of the Greek banks in the Euro-system. Apparently, there still is a huge hole in the Greek financial sector (surprise, surprise), and the Greek banks would need an additional capital injection of in excess of $15B , just to survive any adverse economic scenario in the country.

Banks Capital Shortfall 2

Source: politico.com

And this will very likely prove to be a much tougher challenge for these banks as the combined market capitalization of the four largest banks in Greece is less than $5B. Oops. Do you see the problem here?

It will be close to impossible to inject another $15B in those 4 Greek banks without a complete nationalization or at least absorption by a larger entity. And okay, yes, approximately $25B of Greece’s next rescue package is earmarked to be used to support the banks, but that’s only kicking the can further down the road.

Let it be clear. We are NOT out of the danger zone yet, and with a shortfall of $120B at the six largest banks in the USA and a $15B shortfall in Greece (roughly 3 times the market capitalization of the four largest Greek banks COMBINED), the situation actually looks pretty bad. There’s no way the Federal Reserve could maintain its position that ‘everything is going great in the USA’.

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First published here: http://www.zerohedge.com/news/2015-10-31/halloween-surprise-how-will-us-banks-plug-their-120b-capital-shortfall-trick-or-trea

COT Data For Gold At Topworthy Level

There has been a rapid movement over the past few weeks by commercial traders of gold futures to increase their net short position as a group.  That is a development which has importance for the future of gold prices.

The data for this week’s chart come from the weekly Commitment of Traders (COT) Report, published each week by the CFTC.  Within that report, the CFTC breaks down futures traders into 3 groups.  That agency provides a full page of wonky definitions of each category, but here are my abbreviated versions

Commercial Traders.  The big money, and thus presumably the smart money.  Think Goldman Sachs for stock index futures, or Archer Daniels Midland for wheat futures.

Non-Commercial Traders.  The big speculators, AKA hedge funds.  They usually have the opposite position from the commercials, with the exact difference between them consisting of the positions held by…

Non-Reportable Traders.  The small money, and nearly always the dumb money.  They are called non-reportable because the size of positions they hold is so small that the CFTC deems them not to merit reporting individually.

I report on the relevant developments in the COT Report data in every Friday’s Daily Edition.  Not every week has meaningful insights for every one of the futures contracts that I follow.  Generally speaking, these data are most valuable when they show an extreme reading, because extremes suggest that a move in the other direction is likely.  But figuring out what an extreme reading consists of can be a bit of a trick.

For gold, a big part of that trick is knowing that the commercial traders have been continuously net short since late 2001, and so the game consists of evaluating their current position relative to the range of recent values.  Part of the reason for that bias by the gold commercials to the short side is that a lot of the commercial traders are actually gold mining companies who use the futures markets to sell their future production at a price known when they enter the contract.  Since they are always producing, and since financing is sometimes tied to a requirement to fix the sales price, we get a seemingly bearish bias in the data.

Gold prices bottomed at the end of July 2015, when the commercial traders were at their smallest net short position in years.  As gold prices rebounded, the commercials gradually started upping their short positions.  That movement toward a larger net short position just recently gained a lot of urgency, as if they knew that a top was coming very soon and they needed to get positioned for it.  This is something we commented on in our Daily Edition as it was happening, and last week we noted that the level was high enough to get ready for a trend change.  That’s a cue to be extra attentive to indications of trend change, and we outlined such criteria for our Daily Edition readers.

That trend change was brought about by the FOMC’s Oct. 28 announcement, which hinted at a probable rate hike in December 2015.  How did the commercials know that was the way that the ball was going to bounce?  They do seem to have that talent a lot of the time, which I suppose is how they got to be the big money.

This chart is only current through last week’s COT Report data, because this coming Friday’s report is not out yet.  The reports are released each Friday at 3:30 Eastern time, and they reflect traders’ positions held as of the preceding Tuesday.  So even when we get the COT Report for this week, we will only know how the commercial traders were positioned before the FOMC meeting, and not how they may have responded to the news.  That we can update after getting next Friday’s COT Report.

cot_gold_30_oct_2015

If you are interested in following the insights I find in the COT data on gold, bonds, and occasionally copper, crude oil, gasoline, coal, silver, and currencies, you might be interested in our Daily Edition.

Tom McClellan | The McClellan Market Report | www.mcoscillator.com

First published here: http://goldsilverworlds.com/trading/cot-data-for-gold-at-topworthy-level/

Month-End Technical Review For Gold And Silver

A proverbial picture [chart], being worth 1,000 words, we will let the charts speak for themselves, with observations/comments attached to each one.

From our perspective, the charts are saying, irrespective of what anyone is reading or following regarding gold and silver, there appears to be no change in trend for the near term.  The state of China’s economy; possible confrontation between China and the US now sending ships to irritate/challenge China’s control over it part of the ocean where she is building new bases; flagging response to the Fed’s ongoing failure of injecting more and more fiat in an already over bloated fiat economy, in fact, world-wide; Russia’s ongoing embarrassment of Washington with Russia’s pinpoint air force accuracy bombing ISIS terrorists, and commensurate challenge of taking control of the Mid East from the flailing Sunni Arab coalition, Western political disarray, etc, etc, etc.

Then there is the never-ending slew of new directly related information as to facts and fundamentals about gold and silver and the ever-missing market interpretations arising from all available information.

As we always maintain, charts are the cumulative distillation of all news and also the input from all buyers and sellers that can impact the market that would otherwise be impossible to assemble and then assimilate in order to make sense of it all.  The charts’ developing market activity accomplishes that.  It then becomes a function of how well the charts can be understood in the message[s] being conveyed for all to see.

The most obvious competition for Precious Metals [PMs], is fiat currency, and no country has been more manipulative in internationally suppressing the price of gold than the US Federal Reserve, aided and abetted by the corporate federal government.  It is a perfect cover for the international elite bankers/globalists pulling the strings behind government, while at the same time, having the masses believe it is the government actually in control.

It is impossible to keep issuing endless amounts of fiat without eventually destroying the economy, and this has been on an international scale via the IMF, BIS, and central banks. It is a testament to the insidious strength of the globalists to subvert and distort the world economy and still maintain control over those being ruled.

The US-issued fiat Federal Reserve Notes, widely accepted as “dollars,” has maintained its
relative strength, as noted by what appears to be a weak reaction, [see chart],given the degree of the rally from the 80 area.  What we know about weak reactions [pullbacks in a rally], is that they almost always lead to higher prices.

The premise behind that observation is simple.  If sellers have spent as much effort as they can to get price lower, and all they can accomplish is a mild correction, it is an indication that the market is in stronger hands preventing price from going lower.  Once the sellers have expended themselves, new buyers, recognizing that price has held well, will rush in and add to the demand to push price higher.

The sideways TR since the March ’15 high has the earmarks of a weak reaction, holding the 93 area on each attempt to breach that level and take price lower.  The failed August probe lower has held twice in retest attempts, the latest 3 weeks ago.  Some might interpret last week’s failed retest of 98 and lower close as negative.  While the range is smaller, indicating a lack of buyer ability to maintain the rally, but equally compelling is the fact that the sell off did not make much progress moving price lower.  TRs [Trading Ranges], can be difficult to trade because price if failing to go to newer highs or newer lows.  Best to let the TR play itself out and “go with” the confirmed directional breakout.

dollar_30Oct15

Twelve times a year, we get to present the monthly charts in order to keep a higher time frame perspective.  Higher time frames are much harder to turn and change trend, so it pays to always be aware of what a monthly chart is indicating.   A fact that all can agree on is that price is at recent lows when compared to the 2011 highs.  That indicates the trend is down.  It would be impossible to argue otherwise, whether one is an experienced chart reader or has no experience.

The comments on the chart further amplify the logic of understanding what the message of this particular chart is conveying.  There is no identifiable piece of evidence that indicates any sign for change, and no change can occur before one sees such sign[s].  That may sound simplistic, but it is also true.

gold_30Oct15

Before we see a possible change on the monthly chart, a change on the next lower time frame weekly chart will show up first.  What we like to see in reading charts is a form of synergy where the respective lower time frames are in sync.  We see that on the weekly: the trend is down.  A similar channel shows a downward direction, and even within the channel, as is noted, price labors on rallies and has greater EDM [Ease of Downward Movement], indicating sellers are still in overall control.  From 1,200, it took price 5 weeks to reach the last swing low.  Since, the current reaction rally is in its 14th week and has yet to fully retrace to 1,200.

The current rally not only has failed to retrace all the loss from 1,200, over the last 14 weeks, the rally also failed to get much past a halfway retracement within the channel. Buyers need to demonstrate an ability to effect change, and any change on the weekly will first show up on the next lower time frame, the daily chart.  You may be able to sense how the charts “talk” to anyone wanting to observe their message.

Charts are organically evolving in the sense that they reflect the efforts of living buyers and sellers, and computerized input still results from live direction in their origin.  Charts change constantly, especially on the lower time frames.  Being able to “read” the developing “story” is the best edge one can have.

While still nearer the lows, we can see the potential for change developing on a small-scale, since the July swing low.  There is a small high followed by a higher low, and then another higher high, last week.  If the next reaction lower holds above the last swing low, forming another higher low, the short-term trend will change to at least sideways.

The next question is, does the daily confirm the weekly, which we noted already confirms he monthly, thus adding to the synergy of time frames?  When charts are complimentary over time frames, it makes taking positions within the obvious momentum potentially more profitable.

gold_weekly_30Oct15

It is easier to see the high in August followed by a higher low and then the higher October swing high, which is now being corrected.  To the extent one can say gold has been trying to change trend to go higher, the angle of the rally is somewhat lax, bars are overlapping, gains harder to sustain themselves, yet price is marginally working higher.

All we can do is watch the character of this current reaction already underway and watch how much lower it goes, noting the size of the bar ranges and accompanying volume.  For now, there is little to be excited about in terms of a change in trend for gold, even silver.

gold_daily_30Oct15

The set up for silver is slightly different from gold.  The further price declines, the less is the net downward progress, but price is still going lower, so do not try to anticipate a change where none has yet occurred.  The inability of price to rally up and away from the support area remains problematic.

What can be said about monthly silver is that price, for October, has a higher high, higher low, and higher close.  That observation follows three months of a clustering of closes.  This could be subtle sigh of possible change, but it would still need to be confirmed by stronger overall performance to the upside.

silver_monthly_30Oct15

What has to be respected the most in reading the weekly chart is the fact that the current rally from the August swing low has not been able to rally above and hold, a halfway retracement in the current TR.

NMW  [Needs More Work]

silver_weekly_30Oct15

We saw the developing “story” in silver as being more positive in some time, up until last Wednesday’s failed breakout rally.  Like the fiat “dollar,” discussed in the first chart, the rally from the early October low was holding its gains from the past few weeks.  The reaction was weak, and weak reactions lead to higher prices, which is how we were viewing developing activity in silver.

The breakout rally on Wednesday did not hold.  It was not confirmed, a term we often employ in judging market activity.  It made sense to buy the breakout, which occurred on
strong volume, but nothing is guaranteed, and a small loss resulted, the cost of doing business.

So far, the correction has not extended lower when sellers had every opportunity to press the trapped new buyers but failed to do so.  Now, we simply have to watch how the market activity unfolds next week, for how it unfolds will be the message from the market as to what to expect moving forward.

If it is not clear, then there is nothing to do.  Go with the flow.

silver_daily_30Oct15

First published here: http://goldsilverworlds.com/price/month-end-technical-review-for-gold-and-silver/

Silver Prices to Resume Bullish Trend

Silver Remains Bullish
Silver is in the midst of a mini-Renaissance. After trending downward since the middle of May, the silver price rebounded in early October, and is up 9.3% since the beginning of the month, near $15.85. Unlike previous increases which were very short lived (January, March, and May 2015), silver prices have held steady over the last few weeks.

This has resulted in more than a few analysts calling for silver prices to trade sideways. Keep in mind, at the beginning of the year, analysts had been calling for silver prices to average just $13.00 per ounce.

The post Silver Prices to Resume Bullish Trend appeared first on Profit Confidential.

First published here: http://www.profitconfidential.com/silver/silver-prices-to-resume-bullish-trend/

Silver’s Bearish Signal

By Short Side Of Long:

Several days ago, we published a post titled “Why Are Precious Metals Declining?” and stated that precious metals sector has just gone through “a rather sharp reversal in sentiment [which] usually tends to signal a correction during uptrends or a potential for another leg down during downtrends. This is unless of course, assets like Silver can continue a sustained rally with a break above the 200 day MA. We continue to track the overall sector very closely…”

silver_bearish_oct2015

We have been monitoring the price action with a magnifying glass. Interestingly, Silver did not manage to follow through. The metal posted a false break out above the 200 day moving average during the FOMC meeting, which was followed by a extremely sharp reversal at this important pivot level. To us, this signals an extremely bearish setup and therefore we have taken appropriate action over the last 24 hours.

silver_cot_oct2015

While the next Commitment of Traders positioning report will be released tomorrow, the current data we have available shows that hedge funds and other speculators are extremely optimistic on precious metals, and in particular Silver (NYSE: SLV). We are at record high managed money net longs (hedge funds), which must be very surprising to gold bugs. The fact that the price has not made a higher high nor cleared the 200 day moving average – and yet every Tom, Dick and Henry piled into this trade – tells us there is still room further downside.

Obviously we are wrong with a tight stop above the 200 day moving average, however looking at the dumb money positioning and various bloggers opinions, we believe there is a lot of potential disappointment coming.

hedge_funds_Oct2015

First published here: http://goldsilverworlds.com/price/silvers-bearish-signal/

Gold Up 3% In October and Enters “Seasonal Sweet Spot”

Gold Up 3% In October and Enters “Seasonal Sweet Spot”

– Gold down 1.3% this week on Fed “noise”

– Gold up 3% in October on robust demand

– Stronger gains in euros, Swiss francs, Japanese yen

– October poor month for gold seasonally

– November, December, January and February the “seasonal sweet spot”

– Confirmation of surging demand for bullion in Germany, India and China in Q3

Gold is headed for a 1.3% fall this week after the Fed’s latest suggestion that they may increase interest rates in December or in the New Year. However, for the month of October gold is 3.1% higher from $1,115/oz to $1,150/oz and has seen even larger gains in other currencies.

Gold’s Seasonal Performance – U.S. Global Investors (1969-2010)

 

This strong performance in October comes despite October being traditionally a weak month for gold. This bodes well as we enter the “seasonal sweet spot” for gold.

Seasonally, while October is a weak month for gold, the months of November, December, January and February are positive months for gold. October often sees declines in the gold price followed by strong gains in November, December, January and February (see table above and chart below).

Today sees the end of October trading.  November is, after September, one of the strongest months to own gold.

This is seen in various data showing gold’s monthly performance over long time frames – 1975 to 2015 and indeed more recent time frames – 2000 to 2015.

Autumn and winter is the seasonally strong period for the precious metals.

This is believed to be due to robust physical demand internationally and especially in India for weddings and festivals. More recently, the emergence of China as the largest gold buyer in the world and their massive gold buying into year end as jewellers and bullion dealers stock up for Chinese New Year has reinforced and exacerbated this long seen trend.

It may also be related to traders being aware of the seasonals and therefore leading to self fulfilling price gains or price falls in certain months.

The fundamentals including the current macroeconomic, systemic, geopolitical and monetary conditions are positive for gold. These fundamentals in conjunction with the strong seasonals suggest higher gold prices are likely in the coming months.

Given the bullish fundamentals and the fact that gold already looks oversold with very poor sentiment today, any further weakness is likely to be short term.

Bullion buyers expect higher prices due to a combination of geopolitical, macroeconomic and monetary risk.

Geopolitical risk remains high given increasing chaos in much of the Middle East and rising tensions between NATO and Russia. The Middle East is increasingly volatile and we appear to on the brink of a war in the region. This comes at a time of deep tensions with an increasingly assertive Russia.

Given the confluence of still elevated geopolitical, systemic and monetary risks,  we are bullish as we enter the seasonal ‘sweet spot’ for gold in the November, December, January and February time frame prior to Indian festivals and Chinese New Year demand.


Gold looks quite strong and appears to have bottomed during the summer – this is especially the case in euros, pounds and even more so in currencies such as the New Zealand dollar and the Australian dollar. 

The technicals have improved too and these allied with the strong fundamentals – of an uncertain global economy, volatile and vulnerable stock markets and robust global demand for gold, particularly from China, India and Germany – are positive.

This week came confirmation that contrary to the widely held belief that gold demand is subdued it is actually very robust and indeed surging in key markets. Surging demand for coins and bars and a rise in buying by central banks pushed physical gold demand up 7% in the third quarter.

Demand for gold coins and bars jumped by 26% year-on-year in the last quarter, GFMS analysts at Thomson Reuters reported in the Q3 update of their Gold Survey 2015. Retail investment surged in top consumers India, China and Germany, with buying rising 30 percent, 26 percent and 19 percent respectively. Those three markets alone accounted for an additional 26 tonnes of bullion buying.

Despite the ongoing Federal Reserve “noise” to the contrary, ultra loose monetary policies are set to continue for the foreseeable future which is highly supportive of gold and will lead to continued demand for bullion internationally. 

We continue to believe our long held view that these conditions will lead to new real, inflation adjusted record highs for gold over $2,400/oz in the coming years.


DAILY PRICES
Today’s Gold Prices: USD 1147.75, EUR 1042.70 and GBP 748.04 per ounce.
Yesterday’s Gold Prices: USD 1159.00, EUR 1057.38 and GBP 759.28 per ounce.
(LBMA AM)

Gold was down again yesterday, losing $11.00 during the day to close at $1145.80. Silver was down $0.39 yesterday closing at $15.60.  Platinum lost $10 to $988.  Gold is 1.3% higher for the week but 3% higher for the month (see chart above).

 

IMPORTANT NEWS
Asia Gold-Buying picks up in small volumes as prices dip to 3-week low – Reuters
Gold ends at 3-week low as bets for December rate hike grow – MarketWatch
Gold falls to three-week low on rate hike talk – Reuters
Venezuela cenbank gold holdings drop 19% between January and May – Reuters
White House hopeful Cruz bashes Fed, endorses gold standard – Reuters
Rally in U.S. Stocks Stalls Amid Earnings, Odds for Higher Rates – Bloomberg

 

IMPORTANT ANALYSIS
 
Gold – “Still a Safe Haven” – Butler on Sky News (Audio: 12m 51s)
Time to prepare for another round of European QE – MoneyWeek
The Cosmic Origin Story Of Gold – Forbes
This index signaled the 2000 and 2007 crashes—and it’s falling again – CNBC
Another recession is coming – the only question is how bad – Telegraph

Read more News & Commentary on GoldCore.com


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First published here: http://www.zerohedge.com/news/2015-10-30/gold-3-october-and-enters-%E2%80%9Cseasonal-sweet-spot%E2%80%9D

The Discipline of Silver

Consider these round number costs in digital (dishonest) dollars:

di

Silver – The real physical metal, not the paper stuff traded on the COMEX:

  1. Requires massive effort and discipline to mine and refine.
  2. Silver has been a store of value for over 3,000 years.
  3. Would you prefer 30 pieces of silver or 30 pieces of colored paper?

Debt based paper and digital fiat currency:

  1. Can be borrowed or printed into existence with minimal effort.
  2. Has been deteriorating in value since it was introduced.
  3. In 1913 a “dollar” purchased about two ounces of silver. A paper “dollar” today purchases about 0.05 ounces of silver.
  4. In ten years a “dollar” probably will purchase less than 0.005 ounces of silver.
  5. The value of paper and digital dollars, euros, yen, and pounds is dependent upon the honesty, integrity, and discipline of governments and central bankers. Be prepared!

The discipline of silver is real, like the metal. It has value now and will have value regardless of what Presidents or Fed Chairpersons promise regarding such nonsense as:

“Quantitative Easing”

“Balancing the budget”

“Hope and Change”

“No foreign wars”

“Price stability”

“Strong dollar policy”

“Kinder and gentler government”

“Prosperity for all”

“A fair tax structure”

“Trickle down economics”

“Abenomics”

There is discipline in silver metal but very little in fiat paper currencies. The price of silver will rise as currencies devalue because silver is real, necessary for 1000’s of industrial uses, and because an increasing number of investors understand that silver is underpriced and retains value. Read Steve St. Angelo.

Further, our debt based monetary system requires ever increasing debt, inflation, and expansion. Think about the implications of $400,000 helmets and $85 Billion per month in QE. The continued devaluation of all fiat currencies is a given, based on debt, government spending and central bank policies. Hence silver and gold prices will rise substantially in upcoming years, partially because people want and need it, and mostly because fiat paper currencies are devaluing every day.

Not convinced? Ask yourself which has more lasting value:

  • A Hillary Clinton speech or 20,000 ounces of silver?
  • An F-35 helmet or 25,000 ounces of silver?

The answers will not be the same for everyone but the questions are worth contemplation.

We at Deviant Investor believe that: Paper dies, silver thrives!

 

Gary Christenson | The Deviant Investor

First published here: http://goldsilverworlds.com/money-currency/the-discipline-of-silver/