A Forecast Fulfilled

by Addison Wiggin – January 7, 2011

  • 2011 prediction fulfilled in the first week: Dramatic developments in the Alzheimer’s fight
  • Perplexing jobs report: Not a lot of new jobs, but unemployment rate falls sharply. The 5 uncovers the discrepancy
  • Geithner threatens “catastrophic consequences” if Congress refuses to raise the debt ceiling… Opposition folds like a lawn chair
  • Reader accuses The 5 of ignoring blatant precious metals manipulation… Our reply, plus reader input on offshore drilling, China’s euro rescue and Goldman’s Facebook deal

2011 is shaping up to be the year science makes the ultimate breakthrough treating one of man’s most vexing diseases. This week has already brought two developments bearing out one of Patrick Cox’s most critical predictions for the year.

The editors and staff of Alzheimer’s Weekly just named their “most promising trial drug” of the previous 12 months. They did not take this step lightly. They thoroughly evaluated more than 100 trials of Alzheimer’s and dementia treatments. They reviewed more than 10,000 journal articles.

A lot is riding on this designation… because 2010 was a tough year for Alzheimer’s research. In August, Eli Lilly suspended trials of a much-hyped drug called semagacestat.

Turns out it actually made some patients’ symptoms worse. “It was a true crash-and-burn,” the Alzheimer’s Weekly editors write, “over a decade in the making and ending in a spectacular anti-climax.”

“The drug was carrying a risk, a risk of skin cancer, and wasn’t improving memory,” adds Dr. Paul Aisen of the University of California, who was involved in the early trials.

Alzheimer’s Weekly has a rigorous list of criteria in evaluating which treatments are the most promising. They include…

  • Is it easy to produce, and at a low cost?

  • Can the treatment be taken in pill form?

  • Does it treat the disease and not just the symptoms?

  • Does it attack more than one potential cause?

  • Does it have potential to make a difference in the near term?

  • Are human trials coming soon?

Just two drugs meet all of these criteria. But the research on one of them is tied up with a treatment the American Heart Association labels a “real danger.”

That leaves just one. Let’s zero in on the third criteria of the Alzheimer’s Weekly editors — treating the disease, and not just the symptoms. Or in medspeak, “disease modification.” Pfizer’s Aricept is the big dog of existing Alzheimer’s treatments — and it comes up way short in this department.

Not so with the treatment we’re talking about. In a recent interview with Breakthrough Technology Alert editor Patrick Cox, the CEO of the company behind this treatment explains, “In validated standard approach animal models, which everybody does, we’ve seen an efficacy that far exceeds Aricept, and at very low doses.

“We also have seen actual disease modification. Aricept is the market leader and is a symptomatic treatment only — there is no disease modification.”

Now the second major development bearing out Patrick’s forecast: This same company applied this week to begin human trials of the drug we’ve just been describing.

This speaks to the last of the Alzheimer’s Weekly editors’ criteria… human trials in the near term. “A drug not in human trials is at least five years away from availability,” they write. “Our readers are interested in what can be done for people living with dementia now.”

That’s ultimately why they named this drug the most promising among more than 100: “It is out of the lab and in the clinic, undergoing trials on real people to help their Alzheimer’s.” It’s about to shake up the $5 billion Alzheimer’s treatment industry in a big way.

Coupled with the news yesterday about another of Patrick’s “wealth quake” opportunities — a significant breakthrough in the treatment of heart disease and autoimmune disorders — Patrick’s 2011 forecasts are already bearing fruit… and the year is just one week old.

To learn about the immense wealth potential underlying all five of Patrick’s forecasts, give this presentation a look right now.

On the surface, the Bureau of Labor Statistics delivered a head-scratcher of an unemployment report this morning: An anemic 103,000 new jobs in December, but a dramatic fall in the U-3 unemployment rate from 9.8% to 9.4%.

Let’s dive into the particulars:

  • Private-sector employers added 113,000 jobs, the bulk of the gains coming in leisure/hospitality and health care

  • The federal government added 10,000 jobs, while state and local governments cut 20,000

  • The underwhelming November figure of 39,000 new jobs overall was revised to a merely whelming 71,000

  • U-3 unemployment is now the lowest since May 2009

  • U-6 unemployment, including part-timers who want to work full-time, fell from 17.0% to 16.7%.

So… how does the unemployment rate fall so dramatically when job growth is still subpar?

Here’s your answer — a chart that shows the percentage of working-age population in the labor force. It fell to 64.3% last month — a level last seen when Christopher Lloyd was taking moviegoers Back to the Future:

Herein lies one of the Bureau of Labor Statistics’ favorite tricks. If you gave up looking for work more than a year ago, you’re no longer counted as part of the labor force. Thus, employers added only 103,000 jobs in December… but incredibly, we have 556,000 fewer unemployed people!

And there you have it — headline unemployment fell to its lowest in 20 months because more people gave up looking for work. Big problem for Uncle Sam, because that means more people with no income to tax.

Our call last month — a federal deficit easily exceeding White House estimates of $1.4 billion — is looking more and more likely.

Thus, a raising of the national debt ceiling looks more and more like a slam-dunk today. With the national debt at $14.01 trillion, and the ceiling at $14.29 trillion… this is going to become an issue within weeks.

Yesterday, Treasury Secretary Tim Geithner wrote a letter to Congress saying a refusal to raise the debt ceiling would have “catastrophic economic consequences that would last for decades.”

As if running up the debt indefinitely wouldn’t be catastrophic… but we digress.

Opposition to raising the debt ceiling is crumbling all around. “Will the debt ceiling … have to be raised? Yes,” says House Budget Committee Chairman Paul Ryan — a darling of deficit hawks.

Even Tea Party favorite Sen. Rand Paul appears to be backing down. “I’ll vote to raise the debt ceiling if we attach a balanced budget rule to it,” he says. “If they say no more debt will be added and from here on out we’ll balance the budget, I’ll vote one time to raise the debt ceiling.”

Later today, we’re issuing our own letter to Congress, responding to Secretary Geithner, in hopes we might stiffen someone’s spine. A quixotic endeavor, perhaps, but we’ll pass along a copy to you… so you can see why we’re doing it. Keep an eye on your inbox.

For once, stock traders have seen through the Labor Department’s smoke and mirrors. A drop to 9.4% unemployment hasn’t prevented a 60-point fall in the Dow.

Likewise, the weak employment numbers have propelled more expectations of “full speed ahead” for QE2… and put a floor under gold for the moment. After early-morning trading as low as $1,354, the spot price has recovered to $1,371 — about where it was this time yesterday.

Romania’s leaders are on notice: If bad things happen this year, it’s because their revisions to the tax code crossed the vital constituency of… witches.

Yesterday, a coven of witches hurled poisonous mandrake into the Danube River to cast a spell on the president and other leaders. Seems for years, witches, astrologers and fortunetellers were among a handful of professions exempt from the Romanian tax code.

No longer. They’re subject to the 16% flat-rate income tax like everyone else. Queen witch Bratara Buzea plans to cast her own spell using what she says is an especially potent combination of cat excrement and a dead dog.

“My curses always work!” she declares. “We do harm to those who harm us.”

Hmmm… in a country that takes it superstitions seriously (it’s the place that gave birth to the Dracula legend, after all), does that amount to a terrorist threat?

And since the EU shares its information with the United States, is she on the no-fly list now?

“Maybe I missed the context,” writes a reader, “but how did the fourth reader’s statement Wednesday about the Deepwater Horizon earn a ’jackass’ rating? If it was attached to some kind of complaint about Byron King, as your reply seems to imply, then I’d escalate to something less flattering than jackass.

“I’m speaking as someone who, as an Outstanding Investments subscriber, bought Transocean and Cameron Intl. about a month before the big spill. I joked at the time that if I’d bought BP, I could’ve had a trifecta.

“I didn’t have the guts to double down on them as they crashed, but Byron’s insights and analysis kept me from losing sleep or panic selling. Less than a year after the biggest man-made environmental disaster in history, RIG is back to within 18% of where I bought and climbing, and CAM is up 40%. Byron is, well, outstanding, and I’m looking forward to the day my portfolio can justify writing a check to join the Reserve.

“And please don’t stop being uncouth. It’s one of your most endearing qualities.”

The 5: Addison will be pleased to hear that. Your editor du jour is a bit more circumspect by nature, and thus, for example, avoided the word “crap” in relation to either the Romanian hex story… or the unemployment numbers.

“How about telling us, now that the drilling ban is ‘lifted,’ how many of those rigs are already gone?” from the Gulf of Mexico.

The 5: Comprehensive numbers are hard to come by. But we’re previously reported Diamond Offshore has moved at least two rigs overseas, and Transocean two more. The more that Washington keeps the oil service firms twisting in the wind, the more they’re going to move the rigs to places where they’re wanted.

“As much as no nation wants an offshore blowout,” Byron King wrote recently, “most nations in this world DO want to pursue energy production. They need the oil. They’re willing to make deals and allow drilling, under appropriate supervision.”

One of the most promising concessions lies about as far from Washington, D.C., as you can get… and a Canadian penny stock stands to reap some big gains — maybe as early as this month when it allows potential partner firms to begin inspecting its data.

Byron can hardly contain his excitement about this firm… for reasons he makes clear here.

“Last week in The 5, you mentioned an article from the U.K. Daily Mail claiming that China would back the euro. That seems to me to be HUGE news for the markets, yet I have seen this mentioned in only one other daily. Could you do a follow-up on what is going on? The markets seem to be ignoring this development.”

The 5: And they still are. “The euro and European financial markets are important parts of the global financial system,” said Yi Gang, the head of China’s State Administration of Foreign Exchange just today.

“They are one of the most important investment territories for China’s foreign exchange reserves in the past, present and future,” he added. Meanwhile, China’s vice premier just committed to buying $7.9 billion in Spanish government debt, according to Spain’s respected daily El Pais.

And yet the euro sits at $1.298… barely a penny less than it was when that first report came out, just before Christmas.

“I learned many years ago to avoid doing business with or investing in anything that Goldman Sachs is associated with,” writes a reader reacting to our Goldman/Facebook coverage this week. “I lost that time, but I did learn. What bothers me the most today is the human traffic between the executive offices of Goldman Sachs and the executive offices of our federal government.

“There is a fraternity here that will do whatever they can to protect each other’s interests, even if those same interests are not what is best for the general population of the USA.”

The 5: The human traffic flow continues: Today the president is naming Larry Summers’ replacement as head of the National Economic Council. He’s Gene Sperling — who had the gig during Clinton’s second term but more recently collected $887,727 as a Goldman consultant in 2008.

And that comes on the heels of Bill Daley becoming White House chief of staff, after seven years as a senior executive with J.P. Morgan Chase.

“Despite the clear, manipulative price takedown in silver and gold by the major bullion banks (those with massive short positions which need to get covered), you still try to relate precious metal prices to things like the strength of the dollar.

“You’re smarter than that, 5. This is the first time that I have seen you running with the sheeple, eyes wide asleep!”

The 5: More like eyes open, but refusing to be distracted. Three brief points…

  • No market moves up in a straight line. We shouldn’t be shocked gold and silver are taking a breather

  • We’re well aware of, for instance, JP Morgan’s silver shenanigans. Our investment director Eric Fry described it a month ago in this article, with simplicity and eloquence

  • “If you have manipulation to keep the price down, it eventually goes ballistic,” said Marc Faber last year. “So all the people that are bitching about the manipulation of silver and gold should be happy that it is manipulated, because it still gives them an opportunity to buy it at a depressed price.”

We like that point of view. It allows us to watch these downdrafts with patience and detachment. If you prefer to fume over every suspicious-looking jot and tittle in the weekly Commitments of Traders reports, that’s your prerogative… but it doesn’t seem like a very happy way to live.

Have a good weekend,
Dave Gonigam
The 5 Min. Forecast

P.S.: “Noticed yesterday an invitation to Patrick Cox’s 2011 outlook,” writes an existing reader of Breakthrough Technology Alert. “Will I be given this info as part of my subscription?

“Would hope so, and just to be picky, why wouldn’t I have this info before you start
selling it to those not yet subscribed?”

Relax, you’re not missing a thing. Just log into the Breakthrough Technology Alert home page, click on “Reports” and enjoy. You’ll get all the names and ticker symbols.

If you’re not already a member of Breakthrough Technology Alert, be advised we’re removing Patrick’s 2011 forecasts from the Internet next Thursday. If you haven’t checked out this comprehensive review of five potential “wealth quakes,” take the opportunity now.

P.P.S.: Addison is scrambling to meet another deadline with the documentary today. He didn’t even have time to share the details with this editor… but he’ll be back on Monday to share them with all of us.

rspertzel

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