In The News Today

Posted at 11:06 AM (CST) by & filed under In The News.

Dear CIGAs,

GOFO = Gold forward rates, the difference between cash gold and future gold.
Backwardation = Negative GOFO
Negative GOFO = When the nearby future gold price exceeds the spot future gold price.

This time it is terminal.


Jim Sinclair’s Commentary

Bloomberg’s big story today.


The Rise of the Intangible Economy: U.S. GDP Counts R&D, Artistic Creation
By Peter Coy

On July 31, the U.S. Bureau of Economic Analysis will rewrite history on a grand scale by restating the size and composition of the gross domestic product, all the way back to the first year it was recorded, 1929. The biggest change will be the reclassification—nay, the elevation—of research and development. R&D will no longer be treated as a mere expense, like the electricity bill or food for the company cafeteria. It will be categorized on the government’s books as an investment, akin to constructing a factory or digging a mine. In another victory for intellectual property, original works of art such as films, music, and books will be treated for the first time as long-lived assets.

It’s a great idea, if late. The BEA has the 20th century economy down cold. It can tell you about personal income trends in Anchorage, Alaska, or America’s annual output of rubber products and plastics. Now the agency is putting more attention on R&D—the lifeblood of the 21st century economy—by moving it from an experimental “satellite” account into the heart of measured GDP.

GDP is the main yardstick of macroeconomics—the sum total of all goods and services produced in the country. Business R&D was never counted in that total. It was considered an expense, an “intermediate input,” that ate into profit. Intangible investments such as R&D and the creation of artistic originals have been like physicists’ dark matter: influential but invisible. As Federal Reserve Chairman Ben Bernanke said in a 2011 speech, “We will be more likely to promote innovative activity if we are able to measure it more effectively and document its role in economic growth.”

The effect of the revision will be immediate. Measured GDP will get a one-time boost of about 2.7 percent when the government starts counting R&D and artistic creation as investments. (New Mexico and Maryland will get the biggest lifts.) The future growth rate will probably be fractionally higher, too. With R&D treated as an investment, measured economic growth from 1959 to 2007 would have been 3.39 percent annually instead of 3.32 percent, the BEA estimates.




Smugglers find channels to bypass gold import curbs
Following recent govt moves, seizures shoot up in Nepal and Bangladesh

On Friday, members of the Armed Police Battalion at Dhaka’s Shahjalal Airport arrested one Mizanur Rahman Ripon, who had returned from Singapore with 400 g gold, besides other things. The haul was worth over seven million takas. Earlier, on July 6, Customs had seized gold bars weighing 25.3 kg and worth around 90 million takas from the toilet of a Biman Bangladesh Airlines aircraft.

Last week, the Nepal Police seized 35 kg gold biscuits being smuggled from China. The seizure was done at Tatopani, one of the busiest trading points between Nepal and China located 120 km north of Kathmandu.

These consignments might well have been meant for India, given that local demand in these countries, according to traders, is negligible when compared with that in India.

As India has been taking measures to clamp down on imports of the yellow metal, instances of gold smuggling have started increasing in its neighbouring countries. Local traders in those countries, who confirm a sudden surge of such instances, are even requesting their respective governments to take corrective steps.


Jim Sinclair’s Commentary

Watch out gold bank manipulators, there is a new Sheriff in town.

U.S. and UK fine high-speed trader for manipulation
By Huw Jones and John McCrank
Mon Jul 22, 2013 5:33pm EDT

(Reuters) – Regulators in the United States and Britain fined U.S. trading firm Panther Energy Trading LLC and owner Michael Coscia nearly $6 million for manipulating commodities markets, in the latest crackdown on abuses in high-speed automated trading.

Regulators have been taking a tougher line on high-frequency and algorithmic trading in the wake of the so-called flash crash on Wall Street in May 2010. That was when a free-fall in blue-chip stocks temporarily wiped out $1 trillion in shareholder equity from the markets.

High-frequency trading uses computer algorithms to allow traders to dart in and out of markets faster than the blink of an eye. This is usually legal but Panther and Coscia allegedly used the software to post and then cancel orders to profit from the false impression of activity they had created, the regulators said.

Reached at his office, Coscia declined to comment.

The U.S. Commodity Futures Trading Commission (CFTC) fined Panther and Coscia $1.4 million and ordered them to pay back $1.4 million in illegal profit on trades made between August 8, 2011, and October 18 of that year. It also banned them from trading on any CFTC-registered trading platform for one year.


Jim Sinclair’s Commentary

Apparently this dog belongs to a talking head.


Jim Sinclair’s Commentary

Bart Chilton yesterday said "The CFTC is looking into futures exchange warehouse stock situation."

The fifth gold spot (cash market) exchange to announce its inception. The change is coming.

S. Korea to open gold trading market in 2014   2013-07-22 14:37:35

SEOUL, July 22 (Xinhua) — South Korea’s financial regulator said Monday that it will open the gold exchange next year where gold spots can be traded in the public market.

Gold spot market, or gold exchange, will be open in the first quarter of 2014 to allow gold spots to be traded in the public market like listed stocks, according to the Financial Services Commission (FSC).

The introduction came amid growing underground gold transactions to evade value-added taxes. Underground gold trading accounts for more than half of the country’s annual gold transactions, the regulator said.

Market players will be licensed members that will meet certain financial requirements. Those will include smelters and importers of gold as well as gold craftsman and distributors.

To stimulate transactions in the new gold market, tariff tax exemption will be offered while providing reduction in corporate and income taxes.


Jim Sinclair’s Commentary

You can be sure it will.

US military intervention in Syria would create ‘unintended consequences’
General Martin Dempsey, top military officer, warns senators that each option under consideration would be costly and uncertain
Spencer Ackerman in Washington

The top US military officer warned senators on Monday that taking military action to stop the bloodshed in Syria was likely to escalate quickly and result in "unintended consequences", representing the most explicit uniformed opposition to deeper involvement in another war in the Middle East.

Alluding to the costly, bloody occupations of Iraq and Afghanistan, General Martin Dempsey, chairman of the joint chiefs of staff, said that once the US got involved militarily in the Syrian civil war, which the UN estimates to have killed about 93,000 people, "deeper involvement is hard to avoid".

"We have learned from the past 10 years, however, that it is not enough to simply alter the balance of military power without careful consideration of what is necessary in order to preserve a functioning state," Dempsey wrote to senators John McCain and Carl Levin on Monday. "We must anticipate and be prepared for the unintended consequences of our action."

Dempsey’s letter came after McCain announced he would block the general’s reappointment to chair the joint chiefs of staff, the most senior position in the US military, until Dempsey provided the Senate with his assessment of the merits of US military action in Syria.

McCain is the leading congressional advocate of using direct US military force to tip the balance of power against Assad, an Iranian ally. Dempsey’s public comments about Syria over two years have been skeptical of the wisdom of greater US military involvement.


Jim Sinclair’s Commentary

One of many.

Chicago bond ratings slashed by Moody’s
11:09 a.m. CDT, July 18, 2013

Moody’s Investors Service has slashed Chicago’s general obligation and sales tax ratings by three notches to A3 from Aa3 due to the city’s large and growing pension liabilities and related budget troubles.

The move affects $8.2 billion of Chicago’s general obligation and sales tax debt, Moody’s said in a statement. It will make it more expensive for the city to borrow money, and Moody’s said it may further downgrade the ratings if conditions don’t improve.

"The current administration has made efforts to reduce costs and achieve operational efficiencies, but the magnitude of the city’s pension obligations has precluded any meaningful financial improvements," Moody’s said.

The credit rating agency added that its negative outlook is based on the "dramatic spike in annual pension payments scheduled to take effect in the 2015 budget year."

Moody’s said it expects the payments "will place material strain on the city’s operating budget."

"The outlook incorporates the likelihood of continued growth in unfunded liabilities in the city’s four pension plans given currently suppressed contributions from the city," Moody’s added, noting its outlook also takes into account Illinois’ constitutional protection of pension benefits.