iftttwall – Page 26128

Yes, Legal Pot Does Cost More Than Black-Market Pot (for Now at Least)

Colorado’s state-licensed pot stores
opened last week, and already they are
running out:

The two operational pot shops in Pueblo collectively sold
$87,000 of marijuana on Jan. 1, per the Pueblo Chieftain,
and store owners say if demand persists anywhere near the current
high, they’ll be sold out in the very near future. Likewise, Toni
Fox, owner of the 3D Cannabis Center in Denver, told the Colorado
Springs Gazette that a sellout is imminent. “We are going
to run out,” she said on Thursday, Day 2 of
legal-recreational-marijuana sales. “It’s insane. This weekend will
be just as crazy. If there is a mad rush, we’ll be out by
Monday.”

None of this is a surprise to Fox. “I would think that I would
be able to sell out of the cannabis that I had every day, because
the demand is going to be so great,” she told me a year ago. “When
recreational opens up and there’s a limited supply, I don’t have a
problem resetting my prices to street value and hopefully making a
profit finally.” The stores are charging as much as $70 for an
eighth of an ounce, compared to $20 or $25 per eighth for medical
marijuana before recreational sales became legal.

The problem, as I explained last
month, is that the short-term supply of legal marijuana is fixed.
All that’s available is repurposed medical marijuana, which was
grown under a six-plant-per-patient quota. Demand will continue to
exceed supply at least until marijuana from the first plants
officially grown for the recreational market is harvested this
spring.

The high prices are exacerbated by
new taxes: a 15 percent excise tax, plus a special 10 percent
sales tax. Denver, which is where three-quarters of the marijuana
stores are located, is imposing its own special sales tax of 3.5
percent. All of that is in addition to standard sales taxes, which
in Denver total 8 percent.

Black-market dealers do not collect any of those taxes, of
course. Nor are they burdened by Colorado’s regulations or
cultivation limits. The upshot is that prices for legal marijuana
are, counterintuitively, higher than prices for black-market
marijuana—a situation that critics of the hefty taxes imposed by
Colorado and Washington have been
predicting for months. One black-market dealer
tells The Pueblo Chieftan he sells high-quality
marijuana for $225 to $300 an ounce, compared to $400 or more
charged by state-licensed stores. “People will get real tired of
paying the taxes real fast,” he says. “When you can buy an ounce
from me for $225 to $300, the state adds as much as $90 just for
the tax.”

Prices in the legal market should go down this spring as
marijuana grown especially for recreational sales becomes
available. But the extra cost imposed by regulation and taxes will
remain a problem, especially since voters authorized the state
legislature and the Denver City Council to raise their special
sales taxes as high as 15 percent each. Politicians say the taxes
are necessary to pay for the strict regulatory enforcement that
will keep
the feds at bay. But if a robust black market persists after
legalization, that regulatory regime will be largely
irrelevant.

from Hit & Run http://reason.com/blog/2014/01/06/yes-legal-pot-does-cost-more-than-black
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What Is A "Velocity Logic" Event?

Just before the start of the first POMO of the new year, gold was slammed lower by 2.1% on more than 8000 contracts in what the CME subsequently said was not an erroneous trade. Humor aside, how the CME justified the immediately following 10 second halt, was trough the invocation of a "velocity logic" event, not to be confused with the familiar "stop logic" circuit breaker which we have profiled in the past. Which obvioisly brings up the question: what is a velocity logic event.

Here, straight from the exchange's mouth, is the explanation:

Velocity Logic is designed to detect market movement of a predefined number of points either up or down within a predefined time. Velocity Logic introduces a momentary suspension in matching by transitioning the futures instrument(s) and related options into the Reserved/Pause State.

When a lead month futures instrument is placed in the Reserved State, the following actions occur in the corresponding options markets:

Options auto-reserve functionality automatically pauses matching in the associated options and options strategies markets.
All resting mass quotes are canceled when the auto-reserve functionality is initiated.

This Reserved State is maintained for a few seconds after the futures instrument has resumed trading. During the reserved period, customers can submit, modify and cancel orders. Mass quotes are rejected.

Allowing the user community this momentary opportunity to enter, modify, or cancel orders in this situation provides the ability to re-establish the proper market prices. The market data Security Status (tag 35-MsgType=f) message is used to communicate the instrument status during the Velocity Logic event.

And some more:

The following examples describe the Velocity Logic event and the use of the Security Status message.

State	Description
Market Remains Open	An aggressing order that requires particular market scenarios (e.g., Fill and Kill, Minimum Quantity, Fill or Kill) that would trigger Velocity Logic will be rejected via an Execution Report-Reject message (tag 35-MsgType=8, tag 39-OrdStatus=8), with tag 58-Text=Order price submitted/derived violates Velocity Logic Threshold. The market will remain open.
Market Is Reserved	If the execution price has moved the market up or down outside a predefined points value within a predefined time period, the Velocity Logic functionality is triggered and the instrument is placed in reserved state for a predetermined amount of time. A FIX/FAST Security Status (tag 35-MsgType=f) message is generated to notify the market of this state. If the reserved market is the front month lead future, the underlying options will also be halted and all products in the same product group are placed in Pre-Open State. CME Globex products with lead month futures instruments are outlined in the GCC Product Reference Sheet. Icon When the market is in a reserved state, any external event, such as a market close or manual market intervention, will cause the market to transition from the reserved state and proceed with processing of the external event.
Market Reserved Activities	While the market is in a reserved state: A timer is activated that determines the length of time the market will be in reserved state. Time may vary. A counter is activated that counts the number of times the Indicative Opening Price (IOP) verification will be performed. An expanded price range is determined for verification of the Indicative Opening Price value. When time has elapsed, verification is performed on the current Indicative Opening Price. If the Indicative Opening Price is inside the new expanded no-review range, the market reopens. The Indicative Opening Price is communicated via the Indicative Opening Price data block (tag 35-MsgType=X, tag 269-MDEntryType=4, tag 286-NoMDEntries=5).
Market Reopens	The FIX/FAST Security Status (tag 35-MsgType=f) message is generated. If the Indicative Opening Price is outside the new expanded range, the instrument remains in the reserved state for another time interval and the Indicative Opening Price verification is performed again. This process continues until either the market is adjusted within the Indicative Opening Price range or the predefined maximum number of iterations has been performed. While the options market is in the Pause state, clients can cancel resting orders. No other actions are allowed. During the Pause state CME Globex cancels all options quotes. Once the futures Velocity Logic event has been resolved, the options market transitions from 'Pause' to 'Open' with no indicative opening price; price discovery occurs via customer quote submission.

* * *

We suggest you familiarize yourself with the above: we have a distinct feeling both Stop and Velocity Logic events will become far more frequent in the Fed's balance sheet renormalization days ahead.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/DuTpw3lsAT4/story01.htm Tyler Durden

What Is A “Velocity Logic” Event?

Here, straight from the exchange's mouth, is the explanation:

Velocity Logic is designed to detect market movement of a predefined number of points either up or down within a predefined time. Velocity Logic introduces a momentary suspension in matching by transitioning the futures instrument(s) and related options into the Reserved/Pause State.

When a lead month futures instrument is placed in the Reserved State, the following actions occur in the corresponding options markets:

Options auto-reserve functionality automatically pauses matching in the associated options and options strategies markets.
All resting mass quotes are canceled when the auto-reserve functionality is initiated.

This Reserved State is maintained for a few seconds after the futures instrument has resumed trading. During the reserved period, customers can submit, modify and cancel orders. Mass quotes are rejected.

Allowing the user community this momentary opportunity to enter, modify, or cancel orders in this situation provides the ability to re-establish the proper market prices. The market data Security Status (tag 35-MsgType=f) message is used to communicate the instrument status during the Velocity Logic event.

And some more:

The following examples describe the Velocity Logic event and the use of the Security Status message.

State	Description
Market Remains Open	An aggressing order that requires particular market scenarios (e.g., Fill and Kill, Minimum Quantity, Fill or Kill) that would trigger Velocity Logic will be rejected via an Execution Report-Reject message (tag 35-MsgType=8, tag 39-OrdStatus=8), with tag 58-Text=Order price submitted/derived violates Velocity Logic Threshold. The market will remain open.
Market Is Reserved	If the execution price has moved the market up or down outside a predefined points value within a predefined time period, the Velocity Logic functionality is triggered and the instrument is placed in reserved state for a predetermined amount of time. A FIX/FAST Security Status (tag 35-MsgType=f) message is generated to notify the market of this state. If the reserved market is the front month lead future, the underlying options will also be halted and all products in the same product group are placed in Pre-Open State. CME Globex products with lead month futures instruments are outlined in the GCC Product Reference Sheet. Icon When the market is in a reserved state, any external event, such as a market close or manual market intervention, will cause the market to transition from the reserved state and proceed with processing of the external event.
Market Reserved Activities	While the market is in a reserved state: A timer is activated that determines the length of time the market will be in reserved state. Time may vary. A counter is activated that counts the number of times the Indicative Opening Price (IOP) verification will be performed. An expanded price range is determined for verification of the Indicative Opening Price value. When time has elapsed, verification is performed on the current Indicative Opening Price. If the Indicative Opening Price is inside the new expanded no-review range, the market reopens. The Indicative Opening Price is communicated via the Indicative Opening Price data block (tag 35-MsgType=X, tag 269-MDEntryType=4, tag 286-NoMDEntries=5).
Market Reopens	The FIX/FAST Security Status (tag 35-MsgType=f) message is generated. If the Indicative Opening Price is outside the new expanded range, the instrument remains in the reserved state for another time interval and the Indicative Opening Price verification is performed again. This process continues until either the market is adjusted within the Indicative Opening Price range or the predefined maximum number of iterations has been performed. While the options market is in the Pause state, clients can cancel resting orders. No other actions are allowed. During the Pause state CME Globex cancels all options quotes. Once the futures Velocity Logic event has been resolved, the options market transitions from 'Pause' to 'Open' with no indicative opening price; price discovery occurs via customer quote submission.

* * *

We suggest you familiarize yourself with the above: we have a distinct feeling both Stop and Velocity Logic events will become far more frequent in the Fed's balance sheet renormalization days ahead.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/DuTpw3lsAT4/story01.htm Tyler Durden

Stocks Plunge To 2014 Lows

US equities, despite the Bernanke bounce on Friday afternoon and the first POMO of the year today, are in trouble (relatively speaking). The S&P is down the most in th elast 3 days since pre-Taper. Trannies are the most troubled, down over 2% from the 2013 closing highs. Gold and silver are back in the green (up for the 3rd day as stocks drop for the 3rd day in a row). Treasuries are well bid (10Y at 2.95% – 10-day low) while the USD is being sold this morning (on JPY strength which is carrying stocks lower).

From the 2013 closing highs…

and from the “Taper” lows…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/7YVNzPjuRYw/story01.htm Tyler Durden

Detroit Emergency Manager "Freezes" Pension Fund

So far, city employees of bankrupt Detroit have stoically withstood all direct and indirect eliminations of their entitlements and retirement benefits, which was to be expected: after all as per a recent finding, they are merely an unsecured claim in an insolvent entity. However, following the latest shot across the bow from Detroit’s emergency manager Kevyn Orr, which freezes pension plans for all non-uniform employees, said stoicism will likely be acutely tested.

As Detroit News reports,

Emergency Manager Kevyn Orr has frozen the city’s pension plans for all non-uniform employees, closing the General Retirement System effective Jan. 1.

Orr’s Dec. 30 action freezes earned pension benefits for employees in the General Retirement System and creates a new 401(k)-style defined contribution retirement plan for existing and future city workers, according to a copy of the emergency manager’s order obtained by The Detroit News.

As part of the order, Orr also eliminated the pension “escalator,” effectively eliminating any future cost-of-living increases for all retired city employees in the General Retirement System.

The emergency manager’s order also closes the pension system’s Annuity Savings Fund, an added benefit for some municipal workers.

…

City employees who were not already vested in the retirement system “shall not be entitled” to pension benefits, according to the order.

…

Tina Bassett, a spokeswoman for the General Retirement System, called Orr’s pension freeze “an outrageous and over-zealous action.”

“Again the EM’s office demonstrates a lack of integrity and willingness to make a good faith effort when negotiating with our pension system,” Bassett said in a statement. “Currently we are in the midst of mediations that we thought were going rather well. We can only wonder, why take this action now and for what purpose?”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/A1GhMarw5S4/story01.htm Tyler Durden

Detroit Emergency Manager “Freezes” Pension Fund

As Detroit News reports,

Emergency Manager Kevyn Orr has frozen the city’s pension plans for all non-uniform employees, closing the General Retirement System effective Jan. 1.

Orr’s Dec. 30 action freezes earned pension benefits for employees in the General Retirement System and creates a new 401(k)-style defined contribution retirement plan for existing and future city workers, according to a copy of the emergency manager’s order obtained by The Detroit News.

As part of the order, Orr also eliminated the pension “escalator,” effectively eliminating any future cost-of-living increases for all retired city employees in the General Retirement System.

The emergency manager’s order also closes the pension system’s Annuity Savings Fund, an added benefit for some municipal workers.

…

City employees who were not already vested in the retirement system “shall not be entitled” to pension benefits, according to the order.

…

Tina Bassett, a spokeswoman for the General Retirement System, called Orr’s pension freeze “an outrageous and over-zealous action.”

“Again the EM’s office demonstrates a lack of integrity and willingness to make a good faith effort when negotiating with our pension system,” Bassett said in a statement. “Currently we are in the midst of mediations that we thought were going rather well. We can only wonder, why take this action now and for what purpose?”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/A1GhMarw5S4/story01.htm Tyler Durden

Why do we have faith in gold? (one simple statistic)

January 6, 2014
London, England

[Editor’s Note: Tim Price, Director of Investment at PFP Wealth Management and frequent Sovereign Man contributor is filling in for Simon today.]

On December 31st, 1964, the Dow Jones Industrial Average stood at 874. On December 31st, 1981, it stood at 875. In Buffett’s words, “I’m known as a long term investor and a patient guy, but that is not my idea of a big move.”

To see in stark black and white how the US stock market could spend 17 years going nowhere– even when the GDP of the US rose by 370% and Fortune 500 company sales went up by a factor of six times during the same period– the price chart for the Dow is shown below.

So the US stock market suffered a Japan-style lost decade, and then some. Back to Buffett, again:

“To understand why that happened, we need first to look at one of the two important variables that affect investment results: interest rates.

“These act on financial valuations the way gravity acts on matter: The higher the rate, the greater the downward pull. That’s because the rates of return that investors need from any kind of investment are directly tied to the risk-free rate that they can earn from government securities.

“So if the government rate rises, the prices of all other investments must adjust downward, to a level that brings their expected rates of return into line.

“In the 1964-81 period, there was a tremendous increase in the rates on long-term government bonds, which moved from just over 4% at year-end 1964 to more than 15% by late 1981. That rise in rates had a huge depressing effect on the value of all investments, but the one we noticed, of course, was the price of equities.

“So there–in that tripling of the gravitational pull of interest rates- -lies the major explanation of why tremendous growth in the economy was accompanied by a stock market going nowhere.”

So how you feel about asset allocation this year should largely be a function of how you feel about interest rates.

And if you fear that interest rates are more likely to rise– triggered, perhaps, by a combination of Fed tapering and general weariness / revulsion at the manipulation of so many financial assets– then you should perhaps question your commitment to western equity markets as well as to bonds.

As Buffett wrote in a 1999 article in Fortune magazine, “Secular equity bull markets occur when long-term rates are dropping… and secular bears occur when rates are rising.” This is hardly rocket science.

Of course, 2014 could be yet another year in which equity markets rise further, driven by hopes and expectations of still more QE. But that’s not a bet we’re entirely comfortable making.

Since we’re primarily attracted by valuations and not by momentum, we’re now fishing for equities in a clearly demarcated pool (Asia and Japan– because that’s where values are most compelling).

We are not interested in most western markets because the value isn’t visible to us and the underlying growth (fundamentals, anybody?) looks pathetic.

And our monetary authorities have showered financial markets with kerosene by ensuring that the conventional ‘risk-free’ alternative to equities (i.e. government debt) is anything but.

Yet our exposure to ‘alternative’ assets, primarily precious metals, proved variously problematic last year.

2013 was the year that the mainstream financial media went aggressively anti-gold, and in his magisterial (and deeply witty) 2013 Year In Review, Cornell chemistry professor and economic agent provocateur David Collum cites three pertinent quotations from the New York Times:

“There is simply nothing in the economic picture today to cause a rush into gold. The technical damage caused by the decline is enormous and it cannot be erased quickly. Avoid gold and gold stocks”;

“Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels”;

“The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators’ dreams into a nightmare.”

But as Collum also points out, these quotes are from 1976, when the spot price of gold fell from $200 to $100 an ounce. Thereafter, gold rose from $100 to $850.

Why do we continue to keep the faith with gold (and silver)? We can encapsulate the argument in one statistic.

Last year, the US Federal Reserve enjoyed its 100th anniversary, having been founded in a blaze of secrecy in 1913. By 2007, the Fed’s balance sheet had grown to $800 billion.

Under its current QE programme (which may or may not get tapered according to the Fed’s current intentions), the Fed is printing $1 trillion a year.

To put it another way, the Fed is printing roughly 100 years’ worth of money every 12 months. (Now that’s inflation.)

Conjuring up a similar amount of gold from thin air is not so easy.

from SOVErEIGN MAN http://www.sovereignman.com/finance/why-do-we-have-faith-in-gold-one-simple-statistic-13355/
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Libertarian Businessman Says Goodbye to California with the New Year

Now, give us all your money. Libertarian businessman and

park privatization advocate Warren Meyer is celebrating the new
year by getting the heck out of California, like so many other
businesses. He posted the many reasons why it’s so hard to do
business in the Golden State, particularly in Ventura County,

on his blog. Here’s a sampling of some of the reasons:

It took years in Ventura County to make even the simplest
modifications to the campground we ran. For example, it took
7 separate permits from the County (each requiring a substantial
payment) just to remove a wooden deck that the County inspector had
condemned. In order to allow us to temporarily park a small
concession trailer in the parking lot, we had to (among other
steps) take a soil sample of the dirt under the asphalt of the
parking lot. It took 3 years to permit a simple 500 gallon
fuel tank with CARB and the County equivalent. The entire
campground desperately needed a major renovation but the smallest
change would have triggered millions of dollars of new facility
requirements from the County that we simply could not afford.
In most states we pay a percent or two of wages for
unemployment insurance. In California we pay almost 7%.
Our summer seasonal employees often take the winter off,
working only in the summer, but claim unemployment insurance
anyway. They are supposed to be looking for work, but they
seldom are and California refuses to police the matter.
Several couples spend the whole winter in Mexico, collecting
unemployment all the while. So I have to pay a fortune to
support these folks’ winter vacations.
California is raising minimum wages over the next 2 years by
$2. Many of our prices are frozen by our landlord based on
past agreements they have entered into, so we had no way to offset
these extra costs. At some point, Obamacare will stop waiving
its employer mandate and we will owe $2000-$3000 extra additional
for each employee. There was simply no way to support these
costs without expanding to increase our size, which is impossible
(see above) due to County regulations.

Meyer noted at the end that while California’s high-tax climate
is often eyed as being a business-killer, it wasn’t as large an
issue for him. California’s horrible regulatory structure and fee
system doesn’t get nearly enough attention as everybody argues
about the taxation limits put in place by Proposition 13. Whenever
any progressive whines that Proposition 13 is tying the state’s
hands in collecting revenue, he or she needs to be reminded that
the state and the various municipalities within the state milk
every single cent they can get out of businesses. Unfortunately,
state politicians only seem to care when regulations threaten their
favorite train or stadium projects.

from Hit & Run http://reason.com/blog/2014/01/06/libertarian-businessman-says-goodbye-to
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Gold Flash Crashes, Halts Trading

Rumors of a ‘fat finger’ abound from the gold futures pits but the precious metals complex just collapsed instantaneously… and futures markets were halted on Stop Logic. Of course, the timing is perfect as it occurs right before the first POMO of the year…

With massive volume flying though the futures markets…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mJ–LLvEMto/story01.htm Tyler Durden

Services ISM Misses, Slides To Lowest Since June; New Orders Records First Contraction After 52 Months Of Growth

First it was the Manufacturing ISM posting its first drop since September, and now it was the Services ISM’s turn to not only record its second miss to expectations (of 54.5) in a row, but drop from 53.9 to 53.0, for the lowest print since June. However, the most notable development in today’s release in addition to the slide in Inventories from 54.0 to 48.0 (impacting Q4 GDP) was the tumble in New Orders down from 56.4 to 49.4 – back to contraction territory: this was the first contraction in the New Orders index since July 2009 after 52 consecutive months of growth. Is it time to start worrying about the Untaper yet?

Is the spike in economic activity in Q3 now over:

The full breakdown:

From the report:

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. “The NMI® registered 53 percent in December, 0.9 percentage point lower than November’s reading of 53.9 percent. This indicates continued growth at a slightly slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased to 55.2 percent, which is 0.3 percentage point lower than the 55.5 percent reported in November, reflecting growth for the 53rd consecutive month, but at a slightly slower rate. The New Orders Index contracted after 52 consecutive months of growth for the first time since July 2009, when it registered 48 percent. The index decreased significantly by 7 percentage points to 49.4 percent, and the Employment Index increased 3.3 percentage points to 55.8 percent, indicating growth in employment for the 17th consecutive month and at a faster rate. The Prices Index increased 2.9 percentage points to 55.1 percent, indicating prices increased at a faster rate in December when compared to November. According to the NMI®, eight non-manufacturing industries reported growth in December. Despite the substantial decrease in the New Orders Index, respondents’ comments predominately reflect that business conditions are stable.”

These industries contracted in December:

The eight industries reporting contraction in December — listed in order — are: Mining; Arts, Entertainment & Recreation; Educational Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Utilities; Wholesale Trade; and Accommodation & Food Services.

From the respondents:

“Hiring activity seems to remain steady at mid- to senior-level management positions. However, it is uncertain what impact the Affordable Healthcare Act will have on hiring and full-time status in 2014 as more companies are re-evaluating their healthcare benefits strategies for all positions.” (Management of Companies & Support Services)
“Business is steady. We are at year-end and the holidays, so it’s a little quiet. Expect things to pick up after the first [of the year].” (Construction)
“Early, severe winter weather has had a major impact on business. Both customers and employees were unable to reach the workplace.” (Arts, Entertainment & Recreation)
“Steady, with no significant shifts in demand or supply.” (Finance & Insurance)
“Overall, we are still seeing the pickup in business which began in the 3rd quarter.” (Wholesale Trade)
“General business conditions have improved.” (Information)

Finally, a look at commodity prices and availability:

Commodities Up in Price

Airfares; Beef Items; Dairy; Diesel Fuel; Gasoline*; Milk; and Shrimp.

Commodities Down in Price

Chicken; Computer & Peripherals (2); #1 Diesel Fuel (2); #2 Diesel Fuel (3); Fuel (3); Gasoline* (4); Soybean Oil; and Tires.

Commodities in Short Supply

Shrimp is the only commodity reported in short supply.

So… buy shrimp?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Xju2EdsNWiI/story01.htm Tyler Durden