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Join the forum discussion on this post - (1) Posts The monthly Chain Store Sales report will be released today. This report on sales in chain stores gives a look at the health of stores that make up about 10% of all retail sales. The Monster Employment Index for June was released today, and the index moved down 3 points to a value of 138, but was an increase of 21% from last July. At 8:30 AM EDT, the U.S. government will release its weekly Jobless Claims report. The consensus is that there were 455,000 new jobless claims last week, which would would be an slight decrease in claims from last week’s number. At 10:30 AM EDT, the weekly Energy Information Administration Natural Gas Report will be released, giving an update on natural gas inventories in the United States. At 12:00 PM EDT, Treasury Secretary Tim Geithner will hold a press briefing on the Social Security and Medicare Trust Fund. At 4:30 PM EDT, the Federal Reserve will release its Money Supply report, showing the amount of liquidity available in the U.S. economy. Also at 4:30 PM EDT, the Federal Reserve will release its Balance Sheet report, showing the amount of liquidity the Fed has injected into the economy by adding or removing reserves. Join the forum discussion on this post - (1) PostsAs I write this, with 3,035 of 3,354 precincts reporting, Missouri’s voters support “Proposition C” to the tune of 72.7%. Here’s the full text, but the upshot is in the ballot description:
Not sure what the full story is on the insurance thing. For months, the mainstream media has been howling about the expenses of “the lawsuit” that Proposition C would entail … but I don’t see how it entails a lawsuit at all, unless the feds sue Missouri’s government. Missouri’s government doesn’t have to sue, it just has to enforce its own law, e.g. arrest and jail any IRS thugs who show up trying to collect fines from uninsured taxpayers, make sure Missouri employers know not to honor any garnishment/withholding orders pursuant to those fines, freeze federal assets in Missouri banks if necessary to make Missouri taxpayers whole for federal theft of assets pursuant to the fines, etc. Looks like Missouri’s voters are sporting some big, hairy balls tonight. And yes, junkie that I am, I voted today, swearing up and down that this was the last time (it only encourages them). I keep trying to break the habit, but I really did want to be part of this nullification vote. For many years, India has been in a slow processes of evolving towards a dual centre-state GST. The rough picture is one with two This process has faced two challenges: politics and administration. On the political side, the puzzle lies in having The administrative challenge is one of project management. The Indian policy landscape contains many important ideas where the Today there is news of a concete project management strategy for the GST: see this story by Surabhi Agarwal in the Mint. So while there might be many failures on the political side of the GST, atleast we now know that there will be some coherent project management which will yield a working GST system within a year or two. The idea of bringing NSDL into this problem is not new. Ever since the Tax Information Network (TIN) was built by NSDL for the income tax department, it was well understood that handling of VAT credits is much like handling of TDS. In 2004, the Task  The Mortgage Bankers’ purchase index was released at 7:00 AM EDT, and there was a week to week increase of 2.0% in the Purchase Index and a week to week decrease of 5.9% in the Refinance Index as the housing market showed a slight improvement for the second week in a row from the weakness shown since the second financial stimulus program for home sales came to a close at the end of April. The Challenger Job-Cut Report was released at 7:30 AM EDT, and it showed that there were 41,676 layoffs in July, which is about 2,000 more than the number of layoffs that were reported in June. At 8:15 AM EDT, the ADP Employment Report will be released. Investors will be watching this number to get advance notice on the state of the job market in advance of the government’s report on Friday. At 10:00 AM EDT, the ISM non-manufacturing index for July will be released. The consensus estimate is that it decreased 0.8 points last month to a value of 53.0, but will continue to signal economic growth as it remains well above the mid-point of 50. At 10:30 AM EDT, the weekly Energy Information Administration Petroleum Status Report will be released, giving investors an update on oil inventories in the United States. At 4:00 PM EDT, Treasury Secretary Tim Geithner will give a speech on fiscal policy and tax policy in Washington DC. Join the forum discussion on this post - (1) PostsI have a book in my library called The Social Construction of Reality. Its basic thesis is that reality is socially constructed, or to put it another way, reality is what people believe it is. For example, if you moved to a new town and a rumor was circulated that you were an axe murderer, then you can imagine that people would avoid you, police would monitor you and if there was a murder, you would be an immediate suspect. Even though it was not true, you would in effect be experiencing the life of an axe murderer, at least in how people related to you. For you it would become reality because the social group believed it to be true.
You said “But if “smart” dollars of size (or let’s just say all dollars of size) are not getting a bid from real physical gold of size… and only “idiot” dollars are getting a bid from “paper gold”… can we really say the gold basis is reflecting reality?” My contention is that if the social belief is that paper gold is as good as physical gold then for all intents and purposes it is. As a result the basis reflects that and does not go into backwardation because people are accepting paper gold bids for their dollars. Saying this does not mean I condone it, but while the social belief continues, what the real “level of physical gold’s bid for dollars” is does not matter regarding price. There is little proof I have for my claim that we are still in phase two of the Degrees of Distrust as the gold market is opaque by nature. One fact I do have is the recent revelation by the Financial Times that the 346t of gold for the BIS swap “came mainly from investors’ deposit accounts at the European commercial banks”. That is 346t of trust by those investors and indicates there are a lot of people who still believe in the system. I can’t 100% sure where we are at, but would caution against too much optimism. If we are still in phase two then a lot of education is still called for. I think the mass market is still not into gold in any major way and when it does it needs to be directed into products that take real physical off the market. We have to ensure investors are properly informed, that they understand the true “gold reality”.  The ISM released its manufacturing report on business on Monday. Their index continued to show healthy growth in the sector. Perhaps even more encouraging is the employment growth measured in the report. It now registers an increase in jobs for 8 straight months and now at an accelerated pace. Manufacturing continued to grow in July as their PMI registered 55.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. According to their report on business: “The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (58 percent) corresponds to a 5.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for July (55.5 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually.” The figures for motor vehicle sales in July will be released today. The consensus estimate is that 8.8 million autos were sold last month, which would be 500,000 more than the number of autos sold in June. At 7:45 AM EDT, the weekly ICSC-Goldman Store Sales report will be released, giving an update on the health of the consumer through this analysis of retail sales. At 8:30 AM EDT, the monthly Personal Income and Outlays report for June will be released. The consensus for Personal Income is an increase of 0.1% over the previous month, which would be the fifth month of gains in a row. The consensus for Consumer Spending is an increase of 0.1%, and the consensus Core PCE price index change is an increase of 0.1%. At 8:55 AM EDT, the weekly Redbook report will be released, giving us more information about consumer spending. At 10:00 AM EDT, the Factory Orders report will be released. The consensus is for an increase of 0.3% in orders in July, after a drop of 1.2% in June. Also at 10:00 AM EDT,the value of the pending home sales index for June will be announced. Join the forum discussion on this post - (1) Posts
Join the forum discussion on this post - (1) PostsThe reporting by LBMA of negative lease rates is often misunderstood, resulting in some commentators coming to incorrect conclusions. Given my recent discussions with FOFOA on backwardation, some explanation of negative lease rates would probably be useful.
In the real world the cost of borrowing gold outright is never negative – no bullion bank will pay you to take gold. In fact, I am aware that some lenders have a minimum rate below which they will not lease. Makes sense, would you risk lending 1 tonne of gold worth $37 million on an unsecured basis at 0.1% for 3 months just to earn $9,400? So why does the LBMA report negative lease rates? Our starting point is how the lease rate is calculated: Lease Rate = LIBOR – GOFO (see the LBMA’s Guide for why this is so) First point to note is that the lease rate is calculated from LIBOR and GOFO; the LBMA does not question its market making members for their actual lease rates. It is therefore based on the accuracy of LIBOR and GOFO. If we look at how these two rates are determined (see here and here) then we see a number of differences: 1. Set at different times – GOFO rate submitted at 10:30am and fixed at 11am, but LIBOR rates are requested between 11.00am and 11.20am and fixed shortly thereafter. 2. Set on different sides – LBMA’s website GOFO is the rate “at which the Market Making Members will LEND gold on swap against US dollars”, which involves using the USD interest bid rate. For LIBOR banks are asked “At what rate could you BORROW funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size”, that is the USD interest offer rate. 3. Set by different banks – LIBOR is set by 16 banks, GOFO by 8, with 6 common to both. LIBOR drops the top and bottom quartiles before averaging, GOFO drops the highest and lowest before averaging. It could therefore be possible that the 4 banks use to set LBMA’s GOFO (which they would calculate/relate to their estimate of LIBOR) don’t have their LIBOR rates included in BBA’s LIBOR. Probably worth noting that within a bank LIBOR and GOFO would be set by different desks. Now these are minor differences as we would not expect rates to move too much between 10:30am and 11:00am, or much difference in the bid/offer spread, or too much divergence between banks on their rate so the dropping of high and low rates should not affect the average too much. However, I think when rates get close to zero, these differences could have a material impact. Consider also that questions have been raised about LIBOR’s usefulness at these low rates, see here and here. The fact is that GOFO and LIBOR are not “in alignment”. The resulting calculated lease rate is therefore just an approximation based on two averages. Caution should thus be exercised when trying to draw conclusions from it. GOFO, however, should be able to be relied on. It should relate to the basis, although not equate to the basis as the basis is calculated from futures prices whereas GOFO is a forward rate – the economics of those two are slightly different.  |
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