Dave Gonigam – September 13, 2011
- Social Security: Worse than you think, and why it’s a good thing…
- Biotech breakthroughs mean longer life… and the resulting investment opportunity…
- Commodities holding up despite market downdraft… and why sugar prices will stay high
- Readers with their own suspicions about Social Security… up close and personal FEMA… and more!
Maybe it’s the campaign season. Maybe it’s the president’s promise to cut payroll taxes even as Social Security nears insolvency. Or maybe it’s just the hard math of demography rearing its ugly head, yet again.
Whatever the case, we’re hearing a lot of carping these days about Social Security. To wit, you’ll need these two basic assertions to get a grip on today’s episode of The 5…
- If you think what you hear about Social Security is bad — the reality is even worse
- Within the greatest threat to Social Security are also the seeds of an unparalleled investing opportunity…
Let’s begin.
There were 42 workers supporting each Social Security recipient at the end of World War II. Today, there are only three.
By itself, that looks like an unsustainable trend. But the actual number of workers supporting each recipient is even lower — 1.75.
CNS News, a conservative website, broke down the Labor Department data to exclude government workers from the ratio. Makes sense: Government workers draw their paychecks, ultimately, from the revenue taken in taxes from private-sector workers.
Thus, if you exclude the 18.1 million full-time government workers, that leaves 111.7 million full-time private-sector workers supporting 53.4 million Social Security recipients.
That’s a ratio of 1 3/4 workers to 1 collector of benefits.
“Policy wonks on both sides of the aisle,” Patrick writes, “have known about the unsustainability of Social Security for a long time.”
By a circuitous route, Patrick points us to a new National Review Online piece by Stanley Kurtz — who takes note of a pivotal 1995 article by Robert Shapiro, then serving as an aide to Bill Clinton, warning the Democratic Leadership Council about the long-term effects of Social Security spending.
“Shapiro’s 1995 article,” Kurtz says, “complains that Social Security, as currently structured, is crowding out funding for young children, who suffer poverty at twice the rates of the elderly. Shapiro … calls on Americans to ‘end our long collective silence about the character and problems of Social Security.’”
“The first section heading in Shapiro’s piece reads ‘National Ponzi Scheme.’ There, Shapiro recalls [Paul] Samuelson’s 1967 Ponzi comparison and suggests that, given today’s demographics, Social Security is ‘fiscally unsustainable’ without major restructuring.”
Even Paul Samuelson, author of the iconic textbook that’s misled generations of economics students, called Social Security a Ponzi scheme — 44 years ago.
Social Security has been a terminal patient… for a long time. Now “recent biotech breakthroughs,” Patrick Cox goes on,” are in the process of radically increasing healthy life spans. This makes the Social Security model even less viable.”
“If the current promises to retired people are to be kept,” wrote Patrick earlier this summer, “far more resources must be transferred to older people, who are going to live significantly longer.
“Even a relatively small one-time increase in life spans, such as a year, would be catastrophic to the budget. In fact, I think the increase will be a lot more than a single year.”
“A lot more.”
The companies leading the way in these biotech breakthroughs, we suspect, will create vast new fortunes for early investors. To say Patrick is enthusiastic by recent developments would be an understatement, as any attendee to Vancouver this year can attest.
Imagine diabetics being able to monitor their blood sugar without drawing blood. That’s the promise of a new device that’s now under clinical tests.
For now, the idea is to put it to work in hospitals first. “Hospitals today are stuck using an obsolete glucose monitoring technology,” says Patrick. “Nurses manually take blood samples, wasting hours of their time and resources every day. A needle-free technology that would wirelessly inform hospital staff of patients’ blood sugars is desperately needed.”
Once proven in hospitals, the technology could be rolled out to diabetes patients for everyday use. No more needles and swabs.
It won’t take long for this idea to play out: “Clinical studies for devices are usually much quicker than drug trials,” says Patrick, “which can run years before side effects can be ruled out.”
“The science of carbohydrates as drugs,” says Patrick,” pivoting to another mind-bending concept, “is practically brand-new.”
It goes by the name “glycoscience.” Now a tiny company that essentially “owns the field,” in Patrick’s words, is joining forces with the University of Michigan for a research project that could one day knock out most cancers.
Here’s what scientists understand so far: Complex carbohydrates — think whole grains, fruits and vegetables — contain compounds that that hold the potential to shield your cells from cancer.
What they’re setting out to accomplish now is this: transforming those complex carbohydrates into a drug that can not only protect your cells from cancer, but knock out cells that have already turned cancerous.
“It’s difficult for me to envision a path,” says Patrick, “wherein this technology does not come to play a major role in most cancer treatments. I truly hope that you don’t wait to invest in this technology until after it begins.”
Meanwhile, Patrick sees only good things for the company whose promising “nutraceutical” has been on the market for two weeks now.
“It is nearly unbelievable,” Mr. Cox says, “that a natural alkaloid found in tomatoes, tobacco and bell peppers is better at controlling chronic inflammation than Celebrex, Voltarol, ibuprofen or aspirin.”
But that’s what research from Florida’s Roskamp Institute turns up. The alkaloid Patrick refers to suppresses inflammation nearly three times as well as aspirin, and nearly four times as well as Celebrex.
And because inflammation is behind most of the diseases of aging, this same substance — on sale now — has the potential to forestall the onset of those diseases. Cancer, heart disease, autoimmune disorders… the list is nearly endless. No wonder Patrick calls this “the last stock you’ll ever need.”
You might call it a “cornerstone” stock. It’s what you buy when it’s just a radar blip. Then you forget about it… while it grows and matures into a huge wealth engine.
Apple, for example. Yahoo. Cisco. Market history is littered with stocks that — with a little patience — could’ve turned just pennies on the dollar into huge fortunes.
The problem is true opportunities for “cornerstone” stocks don’t come around very often. When they do, you have to pounce.
Not only could this be “the last stock you ever need,” it could be a “cornerstone” to a decades-long run of massive portfolio growth for you… a true portfolio-saver if ever there was one.
Pie in the sky… especially in this market?
No. In this market, it just means you can get in for even fewer pennies on the dollar compared with your long-term potential. Patrick’s presentation is available for your review from now through midnight tomorrow. So they is not much time remaining to let him make the case. Begin here:
Unlike yesterday, European markets are shrugging off the latest scare from the PIIGS countries.
There was talk yesterday the Chinese would step forward to buy Italian bonds. But for now, it’s just talk, and an Italian bond auction today got a lukewarm response.
Still, the major European indexes all closed up 1.5-2%.
The euro itself is up slightly, to $1.369. Thus, the dollar index, weighted 57% to the euro, is down slightly — hanging on to 77 by a thread.
U.S. stocks are flat today, after yesterday’s big move down that turned into a big move up by the close. For the moment, the Dow remains above 11,000.
Gold, after taking another beating yesterday — but never falling below $1,800 — is recovering to $1,827. Silver is up to $40.83.
The commodity complex is holding its own of late, despite the overall downdraft in stocks.
The broad CRB index, after bottoming at 316 on Aug. 9, sits at 334 today. That’s the key level our resource trader Alan Knuckman eyes, because it’s the halfway point between the 2008 highs and the 2009 lows.
Sugar prices remain near recent highs of 30 cents a pound — far above the 10-year average of 13 cents.
The International Sugar Organization forecasts persistent prices between 23-28 cents a pound as China and Indonesia step up their imports and draw down a global surplus.
Like most commodities, sugar took a hit in early August, but has recovered smartly since:
A 5-cent move might not seem like much… but for readers of Alan Knuckman’s Resource Trader Alert, it’s made summertime extra sweet. After recommending a position in early June, he urged readers to sell half for a 100% gain two weeks later. Today, they were filled on the rest of the position for a total gain of 364%.
Just goes to show… Alan’s approach can make you money no matter what’s going on in Congress or at the Fed. You can be on board for his next trade by following this link:
We don’t usually pass along chain emails… but the photo in this one that hit our inbox today got our attention:
After a casual Internet search, we’ve determined this picture dates to October 2009. Presumably, the little girl has given up her pacifier, and maybe even her dollhouse… but her debt has ballooned to $47,145, according to the U.S. National Debt Clock website.
Ouch… 23% in two years.
“Regarding the comment about reduced withholding for Social Security,” a reader writes in reply to another reader, “I smell two rats:
- A reason to reduce payments to current recipients because of reduced revenue.
- A way to reduce payments to future (if there are any) recipients by lowering their qualifying ‘contributions’”
“It’s the old ‘got you coming and going’ scheme.”
The 5: “At the end of the day,” Lifetime Income Report’s Jim Nelson wrote to readers last Friday, “isn’t this exactly why programs like Social Security are failing? Why are we only accelerating their demise? Maybe that’s the plan all along…”
“Although I have a modest nest egg,” adds another, “most of my monthly ‘income’ comes from Social Security. I have been retired for over 16 years. And yes, I paid in the max over my 40 years of work. When I say that I don’t want Social Security ‘cut,’ it’s very, very personal.”
“If my monthly stipend from Social Security disappeared, my nest egg would also disappear very quickly.”
“So tell everyone to get off the ‘cut Social Security bandwagon.’ There are those of us out there who have paid our dues and still need the government support we paid for.
Where did we go wrong? I was a Certified Financial Planner the last five years of my working life and did everything I could to keep me and my clients’ portfolios ‘up.’”
“Yes, I made a mistake — and have paid for it. But for my personal life — I began working in 1963 and paid the max into Social Security every year. And yes, I invested every year. But it didn’t turn out well. So why should I not expect the government to support me in response to the money I paid them for over for over 40 years?”
The 5: It’s not about what’s fair, it’s about what’s reality. And the reality is the money’s been spent. The money you put into the “trust fund”? As our friend David Walker quips, “You can’t trust it, and it isn’t funded.” Congress has raided the trust fund every year for more than 40 years to pay its other bills.
“FEMA rolled into several smallish towns in Texas last week while the wildfires were raging,” says a reader account of the Texas wildfires we were discussing last week, “but being fought by volunteer firemen from local, nearby and even faraway towns.
“As animal shelters were opened at county fairgrounds (with sizeable ready-to-go stables and similar setups) and volunteers were pouring in from all over Texas — at their own expense, mind you — FEMA rolled in, ordered them to leave, to get out of the way because, of course, ‘We’re from the government, we’re here to help.’”
“The excuse given by FEMA was that the ‘local governments hadn’t requested their help.’”
“No! They didn’t!”
“Local officials were too busy trying to save lives, house those whose homes went up in flames or evacuate those who were potentially in harm’s way, not to mention trying to find enough water sources to fight fires! And in Texas, offering one’s help to friends without asking first is still considered an acceptable social convention.”
“In the meantime, the fires continued to be fanned by winds off of a tropical storm, and when the firefighters were forced to pull back, they took off.”
“Fortunately for Texans, used to taking care of ourselves, most of the self-paid volunteers stayed nearby, and when a civilian group literally ordered FEMA to get the h*** out of the way, the volunteers went to work, many of the fires were stabilized, people and animal shelters were manned (volunteers) pretty quickly, and while the situation is still dangerous, it got a lot less so once the government got out of the way.”
“How many billions are devoted to FEMA cruises, high-end hotel rooms for their red-tape jockeys and who knows what else? Lots. They had one of those going on as a workshop on how to deal with things like Texas Task Force 1 who step in to actually DO something. Texas burns while FEMA cruises and fiddles.”
“By the way, my business partner’s son is a master’s degree full-time student and volunteer firefighter. According to him, FEMA was their biggest impediment on one 150-acre fire. Once FEMA got out of the way, they had the fire tapped out in a few hours.”
“Too bad, it could have been kept to less than 15 acres had the extra volunteers been allowed to join in early on.”
The 5: Amen.
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. “I couldn’t do this six months ago,” said Patrick Cox as he raised his right arm above his head before the crowd during our Symposium in Vancouver last July.
“I couldn’t lift something from a shelf; I couldn’t hug my daughter with my right arm.” Doctors said surgery was the only solution. Then he started taking the “nutraceutical” he’s so enthusiastic about.
It’s been available to the public for two weeks now… and early returns for its maker are more than promising. But it’s nothing compared with what the firm’s CEO has planned next. You can learn about it right here… but only through midnight tomorrow.