Rallies of Depressions Past, The Future of Oil Drilling, Bioinformatics and More!

by Addison Wiggin & Ian Mathias

  • For the future of stocks, The 5 peers into the past… a quick look at Depression-era rallies
  • Byron King follows the oil… an incredible example of the new energy frontier
  • Patrick Cox expands our tech investing vocab… why you should check out the bustling bioinformatics industry
  • Plus, how far would you go to save your job? French workers pose nude, kidnap bosses, rig factories with explosives

 

  This time last week, we began with a typical bar stool question: Where’s the market headed? Since stocks have been intent on going nowhere (the S&P has piddled forward to a 0.5% gain so far this week), we’ll turn that query on its head today:

Where’s the market been?

The answer is that the market’s caught up in one of the biggest bear market rallies in American history. See for yourself:

The current bear market rally is longer in duration than any Depression-era rebound, and is second only in magnitude to the initial crash snapback in 1929.

Bill Bonner suggested yesterday that we are “at the beginning of a long period of adjustment — a depression.” Hmmm… and the current stock rebound looks a lot like the rally of 1929, during the very early stages of the Great Depression. So if history is to repeat, that would put us:

  Stocks look poised to flounder around break-even again today. Major indexes opened up flat, with the Nasdaq the exception… and better-than-expected outlooks from Intel and Dell and word that the iPhone is headed to China have given tech investors a lift.

  Trading volume continues to amaze us. Much like we reported Wednesday, Citigroup — just one single stock — accounted for 20% of NYSE trading volume yesterday. According to Wall Street Journal analysis, trading of Citi, Bank of America, Fannie Mae, Freddie Mac and AIG has accounted for an average 31.5% of daily NYSE trading volume since Aug. 5. Twice this week, they’ve measured over 40% of trading volume.

There are 3,162 stocks on the NYSE, and these guys get 31% of the volume? C’mon…

  In the currency world, the dollar index is down almost a point from yesterday’s high. “The improved economic data this week finally caught up with the dollar” says Chuck Butler.

“The euro is back above $1.43, and the Aussie dollar is back above 84 cents. These two have become the two indicators of a currency rally. With euros being the offset currency to the dollar, and Aussie dollars being the proxy for global growth…

“Speaking of Aussie dollars, as we were above, it appears to me as though the Aussie dollar will put in a monthly gain for August, which, by my calculations, would be the seventh month of gains for Aussie dollars… Even in the go-go days of Aussie dollars, when they were amassing a 75% gain versus the U.S. dollar, circa 2002-July 2008, they didn’t put together seven consecutive months of gains! It’s been 20 years since the Aussie dollar put together a string of monthly gains like that!”

  A lower dollar spells higher commodity prices. Good old gold peaked out of its trading range this morning, up about $10, to $957. And oil’s up $2 from yesterday’s low, to $72 a barrel.

  “Where is the future of the oil industry?” Byron King asks, with his answer in tow. “Offshore driller Transocean just took delivery of a new ultra-deep-water drilling ship named Discoverer Clear Leader. This sixth-generation drill ship is currently under long-term contract to Chevron.

phpUQUyAN

“The new vessel is 835 feet long and 125 feet wide, or about the size of a World War II aircraft carrier. It generates 40 Megawatts of power, enough to light about 40,000 homes. The derrick is 226 feet high. The ship can drill wells in 12,000 feet of water, which is the depth of seafloor where the Titanic sank. The ship can operate and hold its position steady in waves up to 30 feet high.

“Clear Leader can drill to a total depth of 40,000 feet, which surpasses the limits of any previous technology. By comparison, almost no airliners fly above 40,000 feet altitude. So imagine flying across the country and looking down at the ground from, say, 36,000 feet. Now imagine you’re on a ship at sea, dangling a drill string that goes farther than that into the earth.

“If you want to see an excellent animation of deep-water drilling from Transocean, here’s a nice visual demonstration that gives you a perspective on what it’s all about…

“I hope you can see why the deep-water developers, and equipment and service suppliers, are such a unique brood. There are just so few of these kinds of companies out there, and it’s such a difficult technical field. But deep water is where the ‘big’ oil is being found these days (along with unconventional plays like oil sands). So for investment purposes, we need to follow the oil.”

If you aim to “follow the oil,” we could think of no better guide than Byron King. A Harvard-trained geologist and longtime veteran of the oil and gas industry, he’s a worthy steward of the Outstanding Investments, one of our flagship publications. Learn more about Byron and OI right here.

  Two items in the data cupboard today:

Personal spending in July rose 0.2%, thanks mostly to the oh-so-natural “cash for clunkers” program, reports the Commerce Department. Personal income growth remained stagnant.

Thus, no surprise, the August reading of the University of Michigan consumer sentiment survey edged down a bit. Their gauge of consumption attitudes fell from 66 in July to the present score of 65.7.

  “Bioinformatics is a truly transformational emerging discipline,” says our tech editor Patrick Cox, once again expanding our investment vocab.

“The sequencing of the human genome has resulted in the emergence of an enormously important new branch in the biotechnological sciences. The most common terms for this field are ‘bioinformatics’ or ‘computational biology.’

“Until recently, cell biology has been something of a ‘black box.’ We could observe how cells functioned, but had little insight into the actual mechanisms. Now, though, scientists are learning how cells work on the molecular level. Using mathematical models and new technologies for detecting molecular processes, researchers are extracting raw data from DNA and modeling the ways genes work and interact…

“The process of unraveling and decoding the DNA software involves massive amounts of data collection. Then, once collected, correlation and other forms of computer analysis are performed on those data to figure out cause and effect. How big is this challenge?

“Consider this: Each human cell contains about 3 gigabytes (3 billion bytes) of pure data and instructions. If this information were written in book form, it would require 5,000 volumes, each 300 pages long. That’s 120 times larger than the kernel of the Windows operating system, which is about 25 megabytes of code. This data resides, of course, in each cell’s pinpoint-sized nucleus.

“The decoding of all these systems is a huge computational challenge. It has only just begun and it would not be possible, in fact, without recent advances in computer technologies. As more powerful computing comes online, the pace of bioinformatics discovery will accelerate. Quantum computing, because it is particularly suited to sorting out cell biology, will enable a ‘quantum’ leap in understanding.”

Patrick focuses on these transformational investment themes in his Breakthrough Technology Alert. Basically, he’s looking to find the once-in-a-generation technologies that change the course of day-to-day life as we know it… and make initial investors very rich. Learn about a few more of his favorite ideas here.

  Last, would you pose nude with your co-workers if it might keep you from getting fired? How about kidnapping your boss, asking for job security as ransom? Or if the going got really tough at work, would you consider filling your office with explosives and threatening to detonate unless you got a bigger severance package?

Desperate French have answered yes to each of those questions this summer. Seriously… something get into the Burgundy?

“Boss-napping” has become a bizarre trend over there, with even big-name companies like 3M, Sony and Michelin suffering sudden hostage crises after layoffs or pay cuts. There have been three separate recession-related bomb threats in France this summer. In each instance (which were at totally unrelated companies), workers rigged some kind of gas canister bomb around the job site and threatened to detonate unless they got bigger severances.

And today, we learn French workers at the Chaffoteaux et Maury factory in Brittany have made a wall calendar of their naked selves. The proceeds, in typical French form, will be used to fund a trip to Italy where the jilted workers will protest at their parent company, Ariston Thermo Group.

Nude boiler factory workers? Sorry, we’ll pass.

The craziest part… these stunts actually worked. All three of those bomb threats ended with the workers getting paid, like when laid off New Fabris workers got an extra $16,900 in severance (each) after rigging their factory with bombs. The boss of Sony France agreed to re-open layoff talks after his staff held him hostage for a night.

  In the inbox today, responses to the lashings we took in yesterday’s 5:

  “I get really tired of all the whiney people blaming you guys for choices they make,” a reader writes, “when they listen to you guys and things don’t always pan out. In a nutshell, that’s what’s wrong with American society: It’s always someone else’s fault.

“Suck it up! Take responsibility for your own choices. Listening to other people’s advice doesn’t absolve you for choosing. It’s like eating a strawberry shortcake and blaming the person who put it in front of you. (Which also explains why so many Americans are overweight… just another physical symptom of the same disorder).”

  “Wow! What a bunch of soreheads,” another responds, this one specifically addressing Dan Amoss’ recommended bets against the Bank of Montreal.

 

“If the ones who are complaining had checked out Yahoo Finance before opening bell on the 25th, they would have seen the announcement that BOM had issued a glowing report.

“They could have done as I did — bought some stock to offset at least some of their loss.

I sold my stock today for a gain.

 

“And you must remember these puts are for December. I’m holding onto my puts, because I believe Dan Amoss is right.”

The 5: We don’t mind some complaining from time to time… it’s better than no feedback at all. Just please don’t fill our offices with gas canisters and take Addison hostage.

 “Byron is right to be cynical about politicians and their attempts to spin everything and use it to their own benefit,” writes the last, this one responding to Byron King’s forecast that Ted Kennedy’s passing would be used to advance health care reform. “They have terrible approval ratings yet still vote themselves raises every time the issue comes up. Wish we could all do that! I appreciate your irreverent attitude toward politicians, as long as your criticisms are bipartisan.”

The 5: That’s part of the plan. Thanks for reading.

We received hundreds of other Kennedy-related e-mails… some glowing, some not and many, unsurprisingly, R-rated. We won’t fill your inbox with these kinds of opinions, but if you’re looking for a forum to discuss the issue, feel free to take it over to the 5 Min. blog.

Have a nice weekend,

Ian Mathias

The 5 Min. Forecast

P.S. Chris Mayer just sent over his latest special report. It’s great story about Carl Wilhem Scheele, an 18th century genius that changed science forever. Many know his story, but only few realize his impact today’s investing landscape. Chris is calling this one of the “biggest opportunities of the new world economy.” Check it out here.

rspertzel

Recent Alerts

“A Radical Environmentalist Government”

A spate of wind turbine collapses is indicative of Canada’s “Just Transition” legislation… Read More

The Weaponized Dollar Misfires

The weaponized dollar keeps misfiring… So what do you do about it? Read More

S&P 500 on Steroids

Why is the S&P holding up so well when everything else looks terrible? Read More

Update: Four Years (Max) to China War

If China were to make a move on Taiwan… this week might be as good a time as any. Read More

No Family, No Faith, No Freedom

It’s a topic we’ve addressed now and then over the years in these virtual pages — so-called “deaths of despair.” Now the “mass formation” theory provides some context. Read More

An Unstoppable Metal Trend for 2023 (And Beyond)

“The copper squeeze has begun, which is definitely a plus for mining shares,” says Paradigm’s mining-and-metals expert Byron King. Read More

The Day the Social Security Checks Bounce

Here we go again: As of tomorrow, the U.S. Treasury will resort to “extraordinary measures” to stay below the debt ceiling. Read More

Davos: Whitewashing the Great Reset

It’s as if everything about Davos that’s burst into public consciousness during the last three years… just… never… happened. Read More

How to Play the Energy Rally of 2023

Paradigm’s trading authority Alan Knuckman joins us today with the final round of the Paradigm team’s 2023 predictions. Read More

Biggest Social Security Changes in 40 Years

A bipartisan venture we’re eyeing in 2023 — and this one’s totally flying under the mainstream radar — is Social Security reform. Read More