Sunday, June 30, 2013

Visualize It: How Much Pot Has the U.S. Seized at the Mexican Border?

Dude, intergalactic blunts!
From The Center for Investigative Reporting:
From 2005 to 2011, American authorities seized 17 million pounds of marijuana along the U.S.-Mexico border. That’s a lot of pot.

But how do you get your head around visualizing just how much weed that is? What exactly does 17 million pounds of pot look like, say, in relation to the Statue of Liberty? How many joints could be made out of that stash?

One journalist at The Center for Investigative Reporting was determined to find out. Using a lot of algorithms I don’t understand (calculating the width, length and volume of the typical joint, etc.), news applications developer Michael Corey came up with this very funny and innovative visualization, which has the distinction of being the first video to bring together the Sydney Opera House, the All Your Base Are Belong to Us meme, and a giant flying, intergalactic blunt. If you want to nerd out on the specifics of the painstaking math behind the graphics, Corey breaks it down here....MORE

Move over, Messi: Israel, Iran to vie in robot soccer event

FIFA this ain't.
From the AP via Times of Israel:

Some 300 teams take part in a competition aiming to field a team of cyborgs that can beat humans by 2050
Robots in the 'standard platform' division compete at the RoboCup championships in Eindhoven, Netherlands, on June 27, 2013.  (photo credit: AP/Toby Sterling)
Robots in the 'standard platform' division compete at the RoboCup championships in Eindhoven, Netherlands, on June 27, 2013. (photo credit: AP/Toby Sterling)
 EINDHOVEN, Netherlands (AP) — With the score tied 1-1, it’s gone to a penalty shootout in a tense soccer match between teams from Israel and Australia.
As the Australian goalkeeper in his red jersey braces for the shot, the Israeli striker pauses. Then he breaks into a dance instead of kicking the ball. 

Perhaps he can be forgiven: He’s a robot, after all.

Welcome to the RoboCup, where more than a thousand soccer-playing robots from forty countries have descended on the Dutch technology Mecca of Eindhoven this week with one goal in mind: beat the humans.

The tournament’s mission is to defeat the human World Cup winners by 2050 — creating technology along the way that will have applications far beyond the realm of sport.

To achieve the goal, organizers have created multiple competition classes — including small robots, large robots, humanoid robots and even virtual robots — with plans to merge their techniques into a single squad of all-star androids capable of one day winning a man vs. machine matchup.

For now, Lionel Messi doesn’t need to look over his shoulder. Humanoid robots have difficulty keeping their balance, and the largest — human height — move more like, well, robots than world-class athletes.

“To be honest, I think a 3-year-old could win against any of the humanoid teams,” says Marcell Missura of the University of Bonn, whose NimbRO team won the “teen” humanoid class in Mexico City last year.
NimbRO’s 3-foot (120 centimeter) striker sports a shock of white hair and a flashy pink bandanna as it towers above a Japanese opponent in one match. That’s because the Japanese player doesn’t have a head, just a prong with a camera mounted on top....MORE
Finally, a video preview of the level of athleticism which will be exhibited and, beyond the athletics, a display of the central ethos of sport or, swiping a line from "Robot Soccer Goes Big Time":
A hilarious and terrifying vision of our sporting future....

The Guy Who Wrote the Only Business Book Steve Jobs Ever Bothered to Read Talks Academia and Big Data

From The Economist:
Clayton Christensen: Still disruptive
AFTER several years of rotten health, Clayton Christensen crossed the Atlantic this week to give a series of lectures at Oxford, the university in which he was a Master’s student some 36 years ago. The topic was the continued relevance of "disruptive innovation", a term he coined in 1997 with his influential book the "The Innovator’s Dilemma". After the lecture, the Harvard professor answered some of our questions.

You have not had an easy time of it over the last few yearsNo. I had a horrible heart attack and still have symptoms of that sometimes. Then cancer, which is in remission. But the stroke is the hardest thing because I just lost my ability to speak and to write. So I have had to relearn that literally one word at a time, and sometimes I use the wrong word or can't find words. But overall I feel very blessed

It is incredibly brave to start lecturing againMy wife comes most of the times I teach and stands on the front row to help me. She's been wonderfully supportive

In your lecture you suggested that firms are too beholden to data. How does that view fit with the age of big data?It is truly scary to me. By definition, big data cannot yield complicated descriptions of causality. Especially in healthcare. Almost all of our diseases occur in the intersections of systems in the body. For example, there is a drug that is marketed by Elan BioNeurology called TYSABRI. It was developed for MS [multiple sclerosis]. It turns out that of the people who have MS a proportion respond magnificently to TYSABRI. And others don't. So what do you conclude from this? Is it just a mediocre drug? No. It is that there is one disease but it manifests itself in different ways. How does big data figure out what is the core of what is going on?

You have written much about how technology will disrupt higher educationTwo thing are salient. Firstly, the technology per se is not disruptive or sustaining. Rather it is the way it is deployed in the market. So if all that Harvard did was provide MOOCs to everyone so they could employ the technology in existing business models, it wouldn’t change much. But where it would make huge difference is on the delivery of education amongst a population that can't come to Harvard Business School. And those are people who are working, or who have kids, and they can't drop it all to get a traditional education. So firms have started corporate universities, and rather than saying you need to take this course for a semester and you have to learn what we say you need to know, corporate universities call Harvard up and say: “We need to teach strategy in a week. It needs to be customised to the, say, chicken industry. And it needs to start on this day and finish on this day.” And that's a very different delivery of content. So MOOCs will be important when we are using that to replace learning from a teacher to learning on the job. But these will be a one to one replacement of a real teacher.

But the real excitement comes in the upper level courses of undergraduate programmes and the second year of MBAs and the like. I think they will be served by networks rather than by MOOCs. On the network is, say, Clay Christensen’s little tutorial on a particular subject. And you have another tutorial on something else. So the content is developed by users and teachers. So if I need to develop strategy for a week in the chicken industry, I just take this and that and slice them together and that is going to be the dominant model. The MOOCs will just be entry level courses.....MORE
HT: Farnam Street who pointed out the highlighted bit.
Previously on Professor Christensen: 

Sell-side Analysts Are Destroying America (Apparently)

Matt Levine at DealBreaker:

Here’s sort of a pleasing paper on equity research analysts. The background is basically that there’s this constellation of questions that reduce to “do public markets make companies Bad?,” and one of the main mechanisms by which that might happen would be if markets make companies focus on short-term earnings and shareholder distributions rather than long-term value creation for all stakeholders through sustainable innovation. So you try to find ways to measure (1) how public a company is and (2) how innovative it is, more or less, and then see how they interact. Analyst coverage is sort of a proxy for, like, intensity of public-ness,1 while patents are sort of a proxy for innovation.2 So does more research coverage make companies more or less innovative?
In terms of economic significance, our analysis suggests that an exogenous average loss of one analyst following a firm causes it to generate 18.2% more patents over a three-year window than a similar firm without any decrease in analyst coverage.
Note the “exogenous”: if you just look at raw analyst coverage versus patents, you get “a positive raw association between analystcoverage and the firm’s innovation output,” which is sort of obvious; Google and Apple have more analyst coverage and more patents than, say, Yummy Flies, Inc.3 When you control for things like company size, etc., though, fewer analysts goes with more and more influential patents. The authors also look at some quasi-natural experiments – like: if two brokerage firms merge and fire one of your analysts, your analyst count goes down for no real reason – and find that these no-real-reason analyst changes significantly correlate with future innovation. Which suggests there’s some sort of causal relationship between coverage and innovation. Then there’s a lot of regressions and stuff....MORE

Saturday, June 29, 2013

"Using Metadata to Find Paul Revere"

From Kieran Healy:
London, 1772.
I have been asked by my superiors to give a brief demonstration of the surprising effectiveness of even the simplest techniques of the new-fangled Social Networke Analysis in the pursuit of those who would seek to undermine the liberty enjoyed by His Majesty’s subjects. This is in connection with the discussion of the role of “metadata” in certain recent events and the assurances of various respectable parties that the government was merely “sifting through this so-called metadata” and that the “information acquired does not include the content of any communications”. I will show how we can use this “metadata” to find key persons involved in terrorist groups operating within the Colonies at the present time. I shall also endeavour to show how these methods work in what might be called a relational manner.

The analysis in this report is based on information gathered by our field agent Mr David Hackett Fischer and published in an Appendix to his lengthy report to the government. As you may be aware, Mr Fischer is an expert and respected field Agent with a broad and deep knowledge of the colonies. I, on the other hand, have made my way from Ireland with just a little quantitative training—I placed several hundred rungs below the Senior Wrangler during my time at Cambridge—and I am presently employed as a junior analytical scribe at ye olde National Security Administration. Sorry, I mean the Royal Security Administration. And I should emphasize again that I know nothing of current affairs in the colonies. However, our current Eighteenth Century beta of PRISM has been used to collect and analyze information on more than two hundred and sixty persons (of varying degrees of suspicion) belonging variously to seven different organizations in the Boston area.

Rest assured that we only collected metadata on these people, and no actual conversations were recorded or meetings transcribed. All I know is whether someone was a member of an organization or not. Surely this is but a small encroachment on the freedom of the Crown’s subjects. I have been asked, on the basis of this poor information, to present some names for our field agents in the Colonies to work with. It seems an unlikely task....MUCH MORE

Weather Derivatives: "How to Insure Against a Rainy Day"

From Nautilus:
We are all familiar with the concept of insurance. Your home insurance protects you against fires, theft, and flooding. Your car insurance protects against serious accidents—not running out of gas. Life insurance… well, you know. With the notable exception of health insurance, the insurance industry is geared toward protecting us against the extraordinary event. It is part of how we have come to terms with the uncertainty in life. But in protecting against unfavorable weather, companies are starting to push the boundary of the insurable well into the mundane, everyday event. And they can do this courtesy of a financial instrument called a derivative.

After hundreds of years of seemingly adequate coverage by standard insurers, companies have realized the caprices of daily weather can be as costly as major storms. Employing innovative financial instruments, a wide range of weather-dependent businesses are banking on derivatives to shield their profits from Mother Nature.

One of the first weather derivative agreements involves everyone’s favorite energy company, Enron.1 In 1996, Koch Energy, owned by Kansas billionaires Charles and David Koch, approached Enron to negotiate something like an insurance policy. But it was not something they could buy from regular insurers. They weren’t looking for insurance against a catastrophic event like a hurricane or a blizzard, something that might damage their plants or pipelines. Instead, they wanted protection from something much less alarming: a warm winter in Wisconsin in the following year. Their profits depended on the demand for natural gas, and warm winters, when people used less heat, were costly. So Koch and Enron entered into a negotiation over probabilities.

Enron agreed to pay Koch an amount based on a measure of energy consumption called a “Heating Degree Day” or HDD. The HDD compares the average temperature outside with the temperature at which people commonly turn the heat off in their buildings—say, 65 degrees. If the daily temperature over a winter averaged 35 degrees, Koch would sell enough gas every day to produce 30 HDDs worth of heat. An average temperature of 50 degrees would cut those sales to 15 HDDs, slicing revenues in half. The two companies agreed that Enron would pay Koch $10,000 per HDD if the temperature fell below a predetermined level, and Koch would pay Enron a set fee if the temperature rose above the agreed-upon trigger point. After this early experiment, derivatives became standardized so that the buyer and seller settle the contract at the end of the weather season or year—as opposed to standard insurance practice, where the premium is paid upfront—and the seller pays if the temperature reaches a preset threshold.

Like a standard insurance policy, then, Koch and Enron were buying protection from one another. Unlike a standard insurance policy, the payout was not based on after-the-fact damage assessment. No insurance claims adjuster was involved, and no proof of damage was required. The payout was, instead, indexed mathematically to exact, pre-agreed-upon metrics: the data collected at a particular set of Milwaukee weather stations. The contract was signed far in advance of any reasonably accurate weather forecast.
A smattering of other weather derivative deals were made in 1996, as well. Aquila Energy and ConEd arranged for a derivative based on “Cooling Degree Days,” the inverse of HDDs, using data from the weather station in Central Park in New York City. Since then, the market has grown rapidly. The roster of weather derivative buyers now includes ski slopes and golf courses, wind and solar energy farms, the biggest public utilities and oil companies, crop farmers, and airlines. These financial instruments can be bought and sold on publicly traded markets like the Chicago Mercantile Exchange, which trades in standardized weather derivatives and estimates that more than $25 billion worth were written in 2012. Koch Industries has become a significant player in the market, both selling and buying derivatives.
They wanted protection from something much less alarming: a warm winter in Wisconsin the following year.
To see the appeal of a weather derivative to a buyer, consider the John F. Kennedy International Airport in New York City. The Port Authority of New York, which manages the airport, expects a little more than 23 inches of snow a year.  Bordering the Atlantic Ocean on Jamaica Bay, JFK has 25 miles of taxiways and 9 miles of runways. According to Martin Malinow, president of Endurance Global Weather, a company that writes weather-related derivatives to cover risks not already handled by standard insurance policies, it could cost an average of approximately $1 million an inch to clean snow off this network.  “If you have a year that is very snowy —50 inches—they are going to incur an extra $27 million in expenses,” says Malinow....MUCH MORE

Kansas Could Preserve The Human Race

Who knew?
From the AP's Big Story:
 Coby Cullins
Coby Cullins stands next to a scale model of the Vivos Shelter and Resort during a tour of the facility in Atchison, Kan., 
Tuesday, June 18, 2013. A California man is creating what he calls the world's largest private underground survivor shelter,
 using a complex of limestone caves dug more than 100 years ago beneath gently rolling hills overlooking the Missouri River. 
(AP Photo/Orlin Wagner

ATCHISON, Kan. (AP) — After most of the world's population is wiped off the map by a wayward meteorite or hail of nuclear missiles, the survival of the human race might just depend on a few thousand people huddled in recreational vehicles deep in the bowels of an eastern Kansas mine.

That's the vision of a California man who is creating what he calls the world's largest private underground survivor shelter, using a complex of limestone caves dug more than 100 years ago beneath gently rolling hills overlooking the Missouri River.

"I do believe I am on a mission and doing a spiritual thing," said Robert Vicino, who has purchased a large portion of the former U.S. Army storage facility on the southeast edge of Atchison, about 50 miles northwest of Kansas City, Mo. "We will certainly be part of the genesis."

Before it comes time to ride out Armageddon or a deadly global pandemic, though, Vicino says the Vivos Survival Shelter and Resort will be a fun place for members to take vacations and learn assorted survival skills to prepare them for whatever world-changing catastrophe awaits....MORE

"210 Reasons for the Fall of the Roman Empire"

Not my area of expertise, I'll leave it to Classicists and other scholars to tease out the critical points from the fatuous.
From Wired:

Why did the Roman Empire decline? Was it due to barbarian encroachment, internal political rot and corruption, or even lead poisoning? Several decades ago, a historian decided to compile the numerous reasons that other historians have stated as Rome declined. And 210 reasons were found.

A brief selection from the list:
  1. Abolition of gods
  2. Abolition of rights
  3. Absence of character
  4. Absolutism
  5. Agrarian question
  6. Agrarian slavery
  7. Anarchy
  8. Anti-Germanism
  9. Apathy
  10. Aristocracy
Now, clearly not all of them can be correct, as there are many contradictory causes in the list. For example: asceticism (11) and hedonism (90); lack of religiousness (118), Christianity (32), and polytheism (157);  militarism (135) and loss of army discipline (125). I recommend playing along at home and trying to find more contradictions....MORE
HT: Marginal Revolution:

The Top 10 Private Spaceship Companies

Virgin Galactic's private SpaceShipTwo spacecraft and its mothership WhiteKnightTwo flies over the Golden Gate Bridge with the Virgin America plane
Virgin Galactic's private SpaceShipTwo spacecraft and its mothership WhiteKnightTwo 
flies over the Golden Gate Bridge with the Virgin America plane "My Other Ride is a 
Spaceship" on April 6, 2011 en route to open Terminal 2 at San Francisco International Airport.
Credit: Mark Greenberg/Virgin America

NASA retired its iconic space shuttle fleet in 2011, leaving the United States without a homegrown way to get its astronauts and cargo to space. But that should change soon.

A new generation of American private spaceships is on the horizon, with their sights set on both orbital and suborbital space. Here's a look at 10 of the most promising crew-carrying commercial craft in development today.

FIRST STOP: XCOR's Lynx Space Plane
An artist's rendition of XCOR Aerospace's Lynx space plane high above the Earth. Roughly the size of a small private airplane, the craft is designed to make several flights a day into a zero-gravity environment. 
An artist's rendition of XCOR Aerospace's Lynx space plane high above the Earth.
 Roughly the size of a small private airplane, the craft is designed to make several 
flights a day into a zero-gravity environment. Credit: Mike Massee/XCOR
XCOR Aerospace's Lynx is a two-person suborbital space plane designed to take off and land on a conventional airport runway. In addition to flights with paying passengers, the rocket-powered vehicle is being designed to carry scientific experiments on brief research flights.

XCOR has already signed a deal with the Southwest Research Institute, a nonprofit organization based in Boulder, Colo., to fly some of its scientists and experiments to suborbital space.

The Lynx could be in flight-test operations by the end of 2012, accoring to XCOR officials. The company plans to charge $95,000 per seat when the space plane is up and running.

NEXT STOP: Virgin Galactic's SpaceShipTwo 
Suborbital SpaceShipTwo Glides over Mojave Spaceport
Suborbital SpaceShipTwo glides over Mojave Air and Space 
Port in California. Credit: TSC
The six-passenger SpaceShipTwo is Virgin Galactic's entry into the suborbital spaceflight field. Like Lynx, SpaceShipTwo is designed to ferry tourists, researchers and their experiments. And like XCOR, Virgin also holds a contract with the Southwest Research Institute for scientific flights.

SpaceShipTwo will be carried to an altitude of about 50,000 feet (15,000 meters) by a mothership known as WhiteKnightTwo. At that point, the spacecraft's rocket will kick on, boosting SpaceShipTwo up to 62 miles (100 kilometers) or so above Earth's surface.

Virgin Galactic has already collected deposits from more than 500 customers willing to pay $200,000 for a seat aboard SpaceShipTwo. Virgin officials say they hope to begin rocket-powered flight tests of SpaceShipTwo later this year, with commercial operations perhaps starting in 2013 or 2014.

NEXT STOP: Armadillo Aerospace's Vertical Lander 
 Proposed design of Space Adventures' suborbital vehicle in ascent. 
Proposed design of Space Adventures' suborbital vehicle in ascent.
Credit: Background Photo: Richard Garriott/Design: Matt Ross
Armadillo Aerospace's Suborbital Vehicle
Armadillo Aerospace, a Texas-based company founded by computer game entrepreneur John Carmack, is developing a vertically launched spaceship for suborbital flights.

Armadillo's spacecraft will have room for two passengers. The space tourism firm Space Adventures is booking seats on the craft for $110,000 each. An Arizona man recently won a free flight on the vehicle in a contest sponsored by Space Adventures and Seattle's Space Needle, though the date of his trip has yet to be set.

NEXT STOP: Bigelow Aerospace's Private Space Labs 
Bigelow Aerospace Aims for an International Market 
Hang Time: in Earth orbit courtesy of Bigelow Aerospace expandable modules. The company
 unveiled a business plan to populate space with habitable complexes for international space 
agencies and multinational corporations. Credit: Bigelow Aerospace

Beyond Dawkins: "The new science of memes"

From Quartz:
More and more of the things that set the internet on fire are of that species of charmingly moronic pairing of text and image that allows even the post-literate to feel like they have partaken of a shared cultural moment. And now, scientists are beginning to understand how the curiously addictive visual tropes known as “memes” are born, why they die, and whether or not it’s possible to predict which will “go viral” and be harvested by the night-soil merchants up at meme warehouses like Cheezburger.

Treating memes like genes tells us which are likely to spread
The internet, of course, was barely in its infancy when Richard Dawkins, a British evolutionary biologist, coined the term “meme” back in 1976. And he meant it as a much more nuanced concept, encompassing pretty much any idea that is good at propagating from one human brain to another—whether it is dialectical materialism or the tune to Happy Birthday.

But Dawkins was deliberate in his comparison of memes to genes. Like the molecular units of inheritance, memes “reproduce” by leaping from one mind to another, “mutate” as they are re-interpreted by new humans, and can spread through a population. The internet has radically accelerated the spread of memes of all kinds; but it has also led to the rise of a specific kind of meme, the kind encapsulated by a phrase or a picture. And importantly for scientists, the life of a such a meme is highly measurable.

New research from Michele Coscia of Harvard University goes so far as to suggest a decision tree—which is sort of like a flow chart—that can show at any given point in an internet meme’s life how likely it is to go viral. In order to generate this chart, Coscia tracked 178,801 variants of 499 memes, all gathered from what is arguably the internet’s biggest clearinghouse for memes, Quickmeme.
This is how you sort out how likely your meme is to go viral.Michele Coscia
This decision tree is a bit challenging to parse, but here goes. The number at the top, 35.47%, is the total proportion of all the memes Coscia analyzed that were “successful.” By his definition, success meant receiving a high enough score on Memebase, where users can vote a meme up or down. (His threshold for “success” was necessarily somewhat arbitrary.)...MORE

Goldman Neurotics: "Goldman Sachs tends to hire insecure overachievers"

From Here is the City:
Are you a very well motivated genius, or an insecure overachiever ?

Is Goldman Sachs a firm that employs a lot of high performing, highly intelligent, very well motivated geniuses - or simply an organisation that preys upon the insecurities of intelligent people who need a lot of external validation ?

eFinancialCareers reports that Andrew Stead, the ex-head of European convertible bond trading at Goldman Sachs, thinks it might be the latter.
Goldman Sachs Blink
Goldman attracts a lot of insecure overachieving people, says Stead. It’s not that Goldman deliberately sets out to attract insecure over-achievers – that’s just the way it pans out.

'I don’t think recruiters at Goldman target people who are insecure and overachieving in particular', said Stead. 'It’s more that they set out to hire people who are very capable, willing to work long hours and able to make it through their very rigorous interview process. Insecure overachievers are who filter through'.
Stead joined Goldman straight from university in 1995 and left the bank in 2004. He was interviewed 76 times by three different divisions at Goldman before gaining a job offer – something which he says was excessive even by Goldman’s notoriously hyperactive interviewing standards.

The neurotic workaholics who come through Goldman’s recruitment funnel are beneficial to its business model, says Stead: 'People go the extra mile and they will typically do so for less than the market rate. They want the prestige. It’s the same for the top law and accountancy firms'....MORE

The End of QE and Stock Markets: Boom or Crash?

From Antonio Fatas and Ilian Mihov on the Global Economy:
Here is a follow up to my previous post about what to expect when Quantitative Easing is reversed. The point I made earlier is that the more likely scenario for tightening of monetary policy is that this will happen when growth gets stronger. Krugman makes the same point in his latest post. But I can also see plenty of articles talking a much more pessimistic view and describing all the bad things that will happen when central banks change their current monetary policy stance from expansionary to neutral, including a large downward adjustment to stock markets. I am surprised that there are very few historical references in those articles, so let me produce two to refresh our historical memory.

What has happened to the stock market in previous cycles after the central bank decided to abandon its policy of low interest rates and start raising those rates? I will use US data and I will focus on the last two episodes:

1. After the 1990 recession, interest rates remain low until February 1994 when the Federal Reserve started increasing rates from a level of 3% to 6.6% in May of 1995.
2. After the 2001 recession, interest rates were lowered to 1% and then started to increase in June 2004 from that level to 5.25% in June 2006.

The image below plots the evolution of the stock market in the months that followed both episodes. The Dow Jones Index is rebased to be equal to 100 the month when interest rates started going up -- I also provide the previous 12 months to get a perspective on what happened during the previous year. [Note: I stop the series when I see interest rates declining again as growth slows down in 1997 or as we enter the recession of 2007.]

In both cases we see a similar patter. Initially the stock market moves sideways. During the first year there are gains of about 1%. But the years that follow, and once the increases in interest rates have stopped we see large increases in the index -- interest rates stopped increasing in the first episode 12 months after they started going up; in the second episode it happened about 24 months later. This is more or less when the stock market starts its climb....MORE

Friday, June 28, 2013

"Martha Stewart Would Kill Donald Trump, Marry Michael Bloomberg"

From New York Mag's Daily Intel:
NEW YORK, NY - FEBRUARY 12:  Martha Stewart attends the Dennis Basso Fall 2013 fashion show during Mercedes-Benz Fashion Week at The Stage at Lincoln Center on February 12, 2013 in New York City.  (Photo by Andy Kropa/Getty Images for Mercedes-Benz Fashion Week)Ageless Queen of Everything Martha Stewart was recently asked to play a game of "Shag, Marry, Kill" (better known as FMK) with billionaires Donald Trump, Michael Bloomberg, and Bill Gates, and her answer is almost as good as the part of the interview where she talks about rollings joints. Seriously: Someone lock this woman down.

Cyborg Finance: The New Investor

From Capital Chronicle:
Little pre-abstract primer for this paper:
Detective Del Spooner: Human beings have dreams. Even dogs have dreams, but not you, you are just a machine. An imitation of life. Can a robot write a symphony? Can a robot turn a canvas into a beautiful masterpiece?
Sonny: Can you?

A sea change is happening in finance. Machines appear to be on the rise and humans on the decline. Human endeavors have become unmanned endeavors. Human thought and human deliberation have been replaced by computerized analysis and mathematical models. Technological advances have made finance faster, larger, more global, more interconnected, and less human. Modern finance is becoming an industry in which the main players are no longer entirely human. Instead, the key players are now cyborgs: part machine, part human. Modern finance is transforming into what this Article calls cyborg finance.
Fortunately this did not adopt the premise Asimov's "I, Robot". Technology is (so far at least) man's proxy but not exactly harnessed for the goal of social harmony.

“Does it Pay to Invest in Art? A Selection-corrected Returns Perspective”

From CXO Advisory:
Unbiased Return on Art
For an illiquid asset class such as art, many individual assets do not trade within commonly used return measurement intervals (such as a year). When a relatively few works of art account for most of the trading, measured returns derive mostly from these few works. If the returns for frequently and seldom traded art differ, there would be a disconnect between measured returns and overall asset class performance. In the June 2013 version of their draft paper entitled “Does it Pay to Invest in Art? A Selection-corrected Returns Perspective”, Arthur Korteweg, Roman Kraussl and Patrick Verwijmeren examine such sample selection bias for art (paintings) as an asset class. Using a sample of 20,538 paintings sold 42,548 times at auction during 1972 through 2010, they find that:
  • Paintings that trade more frequently exhibit higher price appreciation, thereby biasing estimates of asset class returns at commonly used measurement intervals (see the chart below).
  • Correcting for this selection bias reduces the average annual gross return across all paintings in the sample from 11% to 7%, and the gross annual Sharpe ratio from 0.4 to 0.1 during 1972 through 2010. It changes the correlation of returns with equities from negative to about zero.
  • Implications for asset class allocations are:
    • Based on uncorrected (biased) statistics, a mean-variance investor would allocate twice as much to art as to stocks and achive a gross annual portfolio Sharpe ratio of 0.5 (compared to 0.3 for stocks alone).
    • After correcting for bias, a mean-variance investor would allocate less than half to art than to stocks, with no meaningful improvement in gross portfolio Sharpe ratios compared to stocks alone.
  • Accounting for high trading frictions, costs of insurance and physical security, and risk of forgeries further weakens the case for art as an investment. Non-monetary enjoyment of art is mitigating.
The following chart, taken from the paper, shows the effect of correcting for selection bias on a gross price index for all paintings in the sample, normalized to a value of 100 in 1972. The uncorrected (No selection) index exhibits relatively strong growth over the sample period. Correcting for selection bias in three ways (Models A, B and C) substantially lowers index performance....MORE

"Cosmic Currency: PayPal and SETI Developing Space Cash System"

...The novel project will investigate the best options for cosmic currency in a cash-free interplanetary society. It also seeks to study the potential changes in store for banks and financial regulations as humanity increasingly expands its activities in space....MORE

Building PayPal Galactic for Off-World Payments Will Take Years
MOUNTAIN VIEW, Calif. — Developing a cosmic cash system to meet the needs of future space tourists and interplanetary settlers is a complicated task that will take several years to complete, leaders of the new project say.

On Thursday (June 27), online-payment company PayPal and the SETI (Search for Extraterrestrial Intelligence) Institute unveiled PayPal Galactic, an initiative that aims to figure out the best way to process financial transactions beyond Earth.

This is much easier said than done, with many big questions demanding attention right off the bat, officials said.

"What will be our standard currency up there? How will the banking system need to adapt?" PayPal president David Marcus said here at the SETI Institute during the project's unveiling on Thursday. "How will risk and fraud management evolve? IP address from space? That's not a country for us; how are we going to deal with that?"

It's also unclear at the moment how off-world banking transactions will be regulated, and which bodies here on Earth would do the regulating, Marcus added, stressing that such issues will take a while to work out.

"We will focus on answering those questions and inviting everyone around the table who wants to participate — scientists and the industry as well," Marcus said. "We're really, really looking forward to having the conversation for the next couple of years."...MORE

Grains Plummet on USDA Reports

Corn $5.1350 down .25; Wheat $6.5825 down .15.
Some of the headlines: 
USDA: Soybean Stocks Tumble 45% To Lowest Level Since 2004
US Planted Corn Acreage Highest Since 1936; Stockpiles Down 12%
Wheat Stockpiles on June 1 Drop From Year Earlier, USDA Says
US June 1 Soybean Stockpiles Drop to Lowest Since 2004
US 2013 Soybean Acreage is Estimated at Record High, USDA Says
US Wheat Acres in 2013 to Rise Fourth Straight Year, USDA Says

 We'll be back with more.


Ahead of Today's Release, Here's the Headline from the Last USDA Report "Grain futures plunge as US supplies beat forecasts"

"Swedish Credit Drives Frenzy in Dragon Tattoo Quarter"

That's the latest catch at "Strange Bloomberg Headlines" along with
Penguins Not Protests on Turkish TV Fuel Anger
Mao’s Red Flag May Need to Evoke Panda DNA to Beat Audi

Targeting the Bottom for Gold

FT Alphaville's Izabella Kaminska has been remarkably restrained.

If you read the comments on some of her gold posts from 2012-2013 you'd come away with the impression she practiced some debauched puppies-in-a-blender Ilse Koch/Cruella deVil cultism.

Of course she did, from time to time, bait the gold-buggery crowd with headlines like "Bricks of gold, bits of code: the worship of things shiny and useless" but overall she was fair, almost clinical in her examination of gold and the lovers thereof.

So having watched the over $500/oz. plummet from last December she must have been tempted to sneak in one little told ya so, but she hasn't.

Me on the other hand, I'm probably not as circumspect....


In today's installment, "How low can gold go?", she, without snark, says:
...This has now led a whole bunch of people getting excited about an upcoming bottom in gold, as well its prospective speedy revival.

But on the subject of gold bottoms, some bottom talk is more compelling than others. Campbell Harvey, from Duke University, for example, has been arguing for a while that in real terms the gold price has been overvalued for some time.

So, on the basis that gold really is the inflation hedge some people think it is, its value should currently more about the … $800 mark:

But since gold doesn’t really do a good job of moving with inflation, it’s hard to say if common sense valuations will prevail. In fact, Harvey questions the entire correlation between gold and real yields, and suggests its outperformance is mostly the result of a “fear trade”....MORE
The r-squared for gold and real rates is .82 (depending on the timeframe, of course)

And from Thompson Reuters' Alpha Now, the almost indecipherable (but nailed it) "Gold price decline accelerates but may be oversold" (June 27):
The price of gold has accelerated its downward spiral since June 20 and on June 26 marked its lowest level since August 2010. Investors who had purchased the yellow metal as a hedge against higher inflation have been squeezed out aggressively this year. But there are indications gold is oversold.

On a long-term basis, gold has broken below $1,281/ounce, from the 38.2% Fibonacci of the uptrend between March 2001 and September 2011.
In the short-term, gold faces a downside target of $1,180/ounce from the 1.236% Fibonacci projection of the downtrend between September 2012 and April 2013, and then at $1,093/ounce (1.382%).
Only a close above $1,281/ounce would signal that gold has formed at least a short-term bottom.
Gold accelerates
Source: Thomson Reuters Eikon  Click through to enlarge.

We're targeting the 76.4% = $863.75 level.
$1213.30 last after an intraday bottom of $1179.40:

Understanding the World: “What Makes Wikipedia So Valuable For Users Is What Gets In Its Way Of Becoming A Valuable”


Jimmy Wales Is Not an Internet Billionaire” is the title of Amy Chozick’s short, sharp New York Times Magazine portrait of the Wikipedia founder, a singular figure in the Information Age, who was right about crowdsourcing knowledge when almost everyone else thought he was wrong, when he was treated like a punchline. The collective nature of the virtual encyclopedia made it impossible for Wales to cash in, but somehow I think he’ll slide by. Let’s weep for others. An excerpt:

Wikipedia, which is now available in 285 languages, gets more than 20 billion page views and roughly 516 million unique visitors a month. It is the fifth-most-visited Web site in the world behind Google, Yahoo, Microsoft and Facebook; and ahead of Amazon, Apple and eBay. Were Wikipedia to accept banner and video ads, it could, by most estimates, be worth as much as $5 billion. But that kind of commercial sellout would probably cause the members of the community, who are not paid for their contributions, to revolt. ‘The paradox,’ says Michael J. Wolf, managing director at Activate, a technology-consulting firm in New York and a member of the Yahoo! board, ‘is that what makes Wikipedia so valuable for users is what gets in its way of becoming a valuable, for-profit enterprise.’

Wales suffers from the same paradox. Being the most famous traveling spokesman for Internet freedom brings in a decent living, but it’s not Silicon Valley money. It’s barely London money. Wales’s total net worth, by most estimates, is just above $1 million, including stock from his for-profit company Wikia, a wiki-hosting service. His income is a topic of constant fascination. Type ‘Jimmy Wales into Google and ‘net worth’ is the first pre-emptive search to pop up. ‘Everyone makes fun of Jimmy for leaving the money on the table,’ says Sue Gardner, the executive director of the Wikimedia Foundation, the nonprofit that runs Wikipedia.

Wales is well rehearsed in brushing off questions about his income. In 2005, Florida Trend magazine reported that he made enough money in his brief stint as an options-and-futures trader in Chicago, before starting Wikipedia, that he would never have to work again....MORE

UPDATED--Ahead of Today's Release, Here's the Headline from the Last USDA Report "Grain futures plunge as US supplies beat forecasts"

Update: Grains Plummet on USDA Reports
Original post:

Is it any wonder that yesterday's story was "Commodities-- Tomorrow's USDA Inventory Numbers and the Intentions Survey: 'We Hate This Report"?'

Here's the most recent drought monitor map, the corn belt is is the best shape it's seen in a couple years and even Nebraska and Kansas are showing some improvement so the fear is: Bumper Crop.
More after the report comes out.
Corn down 7.25 cents at $5.3125; Wheat up 1.5 cents at $6.7525; Soybeans at $12.6850.

US Drought Monitor, June 25, 2013

Here are the 6 and 12-week animations if you are curious about the progress.
See also Wednesday's "Deutsche slashes hopes for corn, soybean prices".

Chinese Study Says Bloggers Are Losers

From Bloomberg:
Chinese microbloggers: deadbeats.

That, at least, seems to be the deduction made in the 2013 edition of the “Annual Report on the Development of Chinese New Media” released Tuesday by the Chinese Academy of Social Sciences, the country’s most influential government think tank.

The report claims that of China’s 300 million microbloggers, 74.88 percent only have a high-school education or less and 94 million are students; 92.2 percent earn less than $813 a month, while fully 91 million lack any income at all (which makes sense if 94 million are students).

What, then, do these poor, uneducated and mostly unemployed microbloggers spend their time doing? The report gives them credit for exposing 156 corrupt officials between 2010 and 2012, but notes that such crime-fighting pursuits of microbloggers are tightly wrapped up with another favorite pursuit: rumor-mongering. Of 100 microblogged “hot topics” tracked over a year, rumors appeared in more than one-third. Predictably, these rumors were not high-minded. Rather, 17.3 percent were about the entertainment industry, and the rest related almost exclusively to law-and-order issues: murders, abducted children, organ theft -- the report even mentions corneal-theft rumors.

It’s not surprising that among microbloggers there’s considerable skepticism and anger at the findings. Chinese microblogs, after all, are dominated by elite voices, especially those belonging to entertainment, business and literary celebrities. For all their faults -- they are certainly rumor-filled -- they also happen to be the most socially disruptive and politically potent tool available in contemporary China, in large part because they’re available to anyone with a few coins to drop at an Internet cafe or to spend on a used smartphone at the local electronics market....MORE

Thursday, June 27, 2013

BIS: "Asset encumbrance, financial reform and the demand for collateral assets "

I was asked about this paper earlier in the week, couldn't find it, found it via Ritholtz and now want to post a public bookmark.
From ZeroHedge:

Central Banks' Central Bank Warns About Rehypothecation Threats
...The most recent, and perhaps most notable, observation on the topics of asset encumbrance, collateral and rehypothecation was none other than the BIS with its just released report titled appropriately enough, "Asset encumbrance, financial reform and the demand for collateral assets." In this report, variants of the word "rehypothecate" appear no less than 24 times. More importantly, the whole point of the paper is to serve as a warning, which means that slowly but surely the world's bankers are finally willing to expose in broad daylight (ironically), the true risks permeating the real financial system located deep in the shadows, where maturity, risk and collateral transformation all take place, however without the nuisance of deposits. Whether this is so they can abuse it all over again (most likely) or out of actual altruistic (unlikely) motivates, is unclear.
However, for those still confused by what remains a very nebulous topic for most, here is what the BIS has to say on the key topic of rehypothecation and its assorted instances in modern finance.
Rehypothecation and reuse of collateral assets

Rehypothecation refers to the right of financial intermediaries to sell, pledge, invest or perform transactions with client assets they hold; and it allows prime brokers and other financial intermediaries to obtain funding using their client collateral. Collateral reuse, in turn, usually covers a broader context where securities delivered in one transaction are used to collateralise another transaction, including the ability to reuse collateral through change in (temporary) ownership. Yet the terms rehypothecation and reuse of securities are often used interchangeably; they do not have distinct legal interpretations.

Certain types of collateral rehypothecation (and reuse) can play an important role in financial market functioning, increasing collateral velocity and potentially reducing transaction and liquidity costs. Rehypothecation decreases the (net) demand for collateral and the funding liquidity requirements of traders, since a given pool of collateral assets can be reused to support more than one transaction. This lowers the cost of trading, which is beneficial for market liquidity.

Securities lending-type transactions (including collateral swaps), which have been structured as collateralised loans, would not exist without rehypothecation. In the repo market, participants would not be able to cover short positions without the ability to reuse collateral. However, repos do not directly rehypothecate collateral because they are structured as a sale and repurchase transaction.

While certain types of rehypothecation can be beneficial to market functioning, if collateral collected to protect against the risk of counterparty default has been rehypothecated, then it may not be readily available in the event of a default. This, in turn, may increase system interconnectedness and procyclicality, and could amplify market stresses. Therefore, when collateral is rehypothecated, it is important to understand under what circumstances and the extent to which the rehypothecation has occurred; or in other words, how long the collateral chain is.
And some of the more vocal warnings...MORE
HT: The Big Picture

Rehypothecation and reuse of collateral assets

EIA Natural Gas Weekly Update

The number I was looking for was the Bentek estimate of production:
 ...Bentek Energy reported dry gas production this week averaged 64.7 Bcf/d, up nearly 2% from a year ago....
Front futures $3.59 -0.15.

From the EIA:
...Total consumption increased week-on-week with large gains in power demand. According to Bentek Energy Services estimates, total natural gas consumption in the United States increased by 3.0%, driven by an 11.1% increase in the power sector. Warmer temperatures across most of the country, and the corresponding increase in air conditioning load, likely contributed to the demand increases. Natural gas consumed in the power sector increased across most of the country. However, gains were particularly strong in the Northeast and Midwest where week-over-week consumption increased 35.5% and 78.3%, respectively, as temperatures increased by around 20 degrees Fahrenheit from the previous week. Increases in natural gas consumed for electric generation offset the decreases of natural gas used in the industrial, residential, and commercial sectors.

Total supply increased 1.3% during the week due to higher natural gas production and imports. According to Bentek, dry natural gas production and imports increased by 0.5% and 9.3%, respectively, during the week. Dry natural gas production this week was 2.0% higher than a year ago....MUCH MORE including the Heating Degree Day table and:
Deviation between average and normal (°F)
7-Day Mean ending Jun 20, 2013
Mean Temperature Anomaly (F) 7-Day Mean ending Jun 20, 2013

Gold Breaks Under $1200

Sure he says, "This may be too cute by half".*
No kidding.
Front futures $1202.20 down a bunch $27.40. The low so far $1198.
From ZeroHedge:
From the moment Bernanke spoke, Gold and Silver began to accelerate to the downside. Gold legged lower into the NYMEX pit close and faded further in search of the $1200 round number (trading at $1199.90). Down around 12% from the FOMC (gold is now -38% from its highs in 2011).
Silver is following (down over 14% from FOMC) as the Gold-to-Silver ratio test 65x (double its lows in April 2011 around 32x) and back to the ratio that existed as Lehman failed....MORE
...So to sum up today's remarkable market... Equities and Bonds are rallying hard on the basis that there will be no end to QE; and gold is crashing because QE is ending?

* Yesterday's ""Charts Suggest Gold Will Bounce" (GLD)".

It did bounce, eighteen stinking bucks ($1244.20).
"Still humping the American Dream, that vision of the Big Winner somehow emerging from the last minute pre—dawn chaos of a stale Vegas casino. Big strike in Silver City. Beat the dealer and go home rich. Why not? I stopped at the Money Wheel and dropped a dollar on Thomas Jefferson—a $2 bill, the straight Freak ticket, thinking as always that some idle instinct bet might carry the whole thing off. But no. Just another two bucks down the tube. You bastards! No. Calm down. Learn to enjoy losing.... 
-Hunter S Thompson
Fear and Loathing in Las Vegas

Commodities-- Tomorrow's USDA Inventory Numbers and the Intentions Survey: "We Hate This Report"

From Agrimoney:
History reveals path through US grain stocks data minefield
Brace yourselves.
Crop data from the US Department of Agriculture have a habit of moving markets, being taken as market standards, for grains and oilseeds especially.
But the USDA's quarterly stocks briefings have a particular knack for sparking volatility.
Witness the last report, in March, when the department's revelation that US stocks of soybeans, wheat and, in particular, corn were higher than investors had expected sent prices tumbling.
Corn futures tumbled 12.6% in two sessions in Chicago, on a front contract basis.
The previous stocks report, released in July sent prices soaring, after inventories were seen falling well short of market expectations.
Friday's data will "going to set the tempo for a while, and influence how we are going to transition from a period of tight supplies to one where we think there will be ample supplies," Jerry Gidel, chief feed grains analyst at Rice Dairy, said.
'We hate this report'
"We hate this report," Rich Nelson, director of strategy at Allendale, the Chicago broker, told
"You put out your numbers. But it is very difficult to know if they will turn out anything like what the USDA says. Futures prices may well go limit up or limit down."...MORE

Corn $5.38; Wheat; $6.73; Beans $12.74.

"Martin Wolf on the Fed: 'Careless talk may cost the economy”'

From Bloomberg:
Until now, I have refrained from trying to explain Fedspeak to the masses. The truth is it's not opaque. It's not indecipherable. It's simple. Or at least you can choose to believe it is, as I have.
At last week’s press conference, Federal Reserve Chairman Ben Bernanke fielded questions from reporters employed by some of the world's most esteemed news organizations. Here is a summary, translated from Fedspeak into ordinary American English and heavily condensed for easy tweeting. (Compare it to a raw transcript, if you like.)

BERNANKE: Good afternoon. The Federal Open Market Committee concluded a two-day meeting earlier today. The economy has good things and bad things. We're on top of it. QE will continue. Subject to change. It depends.
STEVE LIESMAN, CNBC: Can you clarify something?
LIESMAN: So if unemployment falls to 7 percent, then what?
Bernanke: There are many factors we look at. Next question....
Wait a minute, that doesn't sound like Martin Wolf, it sounds more like a Greenspan presser....

Here's Martin Wolf on the Fed: “Careless talk may cost the economy”. HT: (FTA)
(Wolf chews out the Fed and the BIS and sides with Bullard. -nc)

Now back to the press conference:
...CRAIG TORRES, Bloomberg News: We'd like to push for a little deeper explanation on thresholds and triggers.
BERNANKE: I'm sure you would.
BINYAMIN APPELBAUM, New York Times: I want to talk about thresholds and triggers, too.
BERNANKE: Low rates. Large portfolio. Large stimulus. Bringing economy smoothly towards full employment. No costs. No risks. I am the Walrus....

EIA Weekly Natural Gas Storage Report: Still Adding, Price Collapses

There is a lot of gas around and the weather is beautiful.
From the Energy Information Administration:

for week ending June 21, 2013.   |   Released: June 27, 2013 at 10:30 a.m.   |   Next Release: July 3, 2013

Working gas in underground storage, lower 48 states Summary text CSV JSN

Historical Comparisons
billion cubic feet (Bcf)

Year ago
5-Year average
Region 06/21/13 06/14/13 change
(Bcf) % change (Bcf) % change
East 1,143   1,085   58  
1,472   -22.4   1,232   -7.2  
West 433   420   13  
455   -4.8   388   11.6  
Producing 957   933   24  
1,128   -15.2   944   1.4  
   Salt 263   261   2  
267   -1.5   176   49.4  
   Nonsalt 694   673   21  
860   -19.3   767   -9.5  
Total 2,533   2,438   95  
3,055   -17.1   2,564   -1.2  


Working gas in storage was 2,533 Bcf as of Friday, June 21, 2013, according to EIA estimates. This represents a net increase of 95 Bcf from the previous week. Stocks were 522 Bcf less than last year at this time and 31 Bcf below the 5-year average of 2,564 Bcf. In the East Region, stocks were 89 Bcf below the 5-year average following net injections of 58 Bcf. Stocks in the Producing Region were 13 Bcf above the 5-year average of 944 Bcf after a net injection of 24 Bcf. Stocks in the West Region were 45 Bcf above the 5-year average after a net addition of 13 Bcf. At 2,533 Bcf, total working gas is within the 5-year historical range.


Here's the 5-minute chart from FinViz:

Commodities: The New Credit Suisse Backwardation ETN (CSCR)

You've gotta say this for CS, they're creative.

There are only three components to a profit in futures:
1) The interest earned on the collateral you deposit
2) The price movement of the physical commodity
3) The yield from rolling the contract forward in time.

That's it, and right now high quality collateral is paying ~zip, zilch, nada.
So what's left? How bout this little beauty:

The Credit Suisse Commodity Rotation Exchange Traded Notes (the "ETNs") are senior, unsecured debt securities issued by Credit Suisse AG ("Credit Suisse"), acting through its Nassau Branch, that are linked to the Credit Suisse Commodity Backwardation Total Return Index (the "Index"). The Index is a long-only commodity index that follows a rules-based strategy to select 8 out of 24 eligible commodities based on the price of the commodity futures contracts of various terms. The Index provides exposure to the commodities for which the prices of futures contracts that are nearer to expiration are highest relative to the prices of futures contracts for the same commodity that are longer to expiration. The Index is equally weighted and rebalanced monthly. The ETNs do not guarantee any return of principal. Any payment on the ETNs is subject to our ability to pay our obligations as they become due. 
As I said, creative.
See also April's "Fancy Finance: Credit Suisse Rolls Out Silver-linked ETN (SLVO)".

And it just might beat directional bets which quickly teach you that trading price movements is very, very tough and is more about risk management than it is about forecasting supply and demand.
Anyhoo, a 0.85% annual fee may be a bit steep or it may be just the ticket if you find yourself in need of a senior unsecured obligation of Credit Suisse's Nassau branch.

Zacks has more info and here is the CSCR fact sheet.
And here's Northern Trust's graphic presentation of the components of return:

EMH: "In India, Gold-Related Shares Melt Down"

So much for the Efficient Market Hypothesis and price incorporating the news. Look at this series of headlines:
Feb. 19
May 12 
Ahead of Hindu Holy Day Warnings on Gold Purchases and Discounts on Coins
May 15 
Reserve Bank of India Launches Inflation Bonds to Reduce Demand for Gold
As Indian Central Bank Restricts Gold Imports Spot Falls to a Three Week Low
June 21 
"No Gold Rush in India After Latest Plunge"

As was pointed out in one of the May 15 posts:
 The RBI is not fooling around. They've raised the tariff on gold coming into the country, they've pushed for dematerialized gold trading to reduce the need for physical, on Monday they restricted importation to legitimate jewelers and now they are offering a product meant to absorb some of the inflation-linked demand....
Here's the latest, from MoneyBeat:
Gold-related Indian companies have seen their shares hammered this week, as global gold prices hit a three-year low and the Indian government’s efforts to restrict gold imports hit bottom lines.

Shares of jewelers such as Tribhovandas Bhimji Zaveri Ltd 534369.BY +0.54%PC Jeweller Ltd. 534809.BY +1.96%, and Gitanjali Gems Ltd. 532715.BY -9.99% have fallen by as much as 40% this week as overseas funds, especially, have dumped holdings. Investors fear that recent efforts by the Indian government to curb gold imports will hurt the jewelers’ profit margins.

Meanwhile, stocks of lenders such Muthoot Finance Ltd. 533398.BY +3.30% and Manappuram Finance Ltd. 531213.BY +3.77% have fallen 10%-18%, due to fears that falling gold prices will make it difficult for them to maintain margins on loans made against gold collateral and will cut revenue from auctions of physical gold.

“I am negative on gold retailers. The government’s reforms have put these companies’ business model at risk,” says Mitesh Shah, an analyst with Mumbai brokerage Inventure Growth & Securities Ltd. 533506.BY -3.85%

Gold prices slid to $1,223.80 a troy ounce on Thursday. International gold prices have fallen 25% this year, while prices in India have dropped 15% as the rupee has slid to a record low against the U.S. dollar. The rupee has fallen 11% against the dollar since the beginning of May....MORE
So naturally yours truly decides this is a fine time to be long at $1226. The action since the rec. is desultory at best, $1231 last:

Live 24 hour Gold Chart