Addison Wiggin – October 31, 2011
- Another entertaining guess at what Project X is all about. Getting colder… and more outrageous…
- Surprise! Stock traders realize they’ve been snowed by the latest Greek “fix”: Jim Rogers on why a rerun is inevitable
- Michael Pento pinpoints the ultimate viction: the US dollar and its “reserve currency” status
- Another pharma giant unloads promising research unit at pennies on the dollar… our Patrick Cox on why that’s good for your money…
- A case of mistaken identity…. intergenerational warfare, again…new tales of new taxes and weird fees!… a smear campaign and more!
“I sure hope it is a new political party,” writes a reader to begin the week, “with Addison Wiggin and Bill Bonner at the helm.”
Heh.
The reader is trying to guess what’s going on with the program we’ve been referring to as “Project X”.
“Either one as president would be the beginning of a fix for our beloved nation,” the reader continues. “My greatest challenge would be choosing one over the other.”
As flattering as the compliment appears to be, should an election turn out this way, we’d demand a recount. Or an investigation.
Some more thoughts on “Project X,” below. But first, the numbers…
After a strong run-up Thursday followed by a weaker one Friday, major U.S. stock indexes are in retreat.
The Dow, the S&P, the Nasdaq and the Russell 2000 have all surrendered more than 1%, a move attributed, in part, to a realization that the eurozone rescue plan bears a striking resemblance to Gertrude Stein’s description of Oakland: “There is no there there.”
“Politicians have delayed addressing the [eurozone] problem yet again,” says commodities guru and Vancouver veteran Jim Rogers, giving voice to that realization.
“It will come back in a few weeks or a few months,” he told Investment Week, “and the world will still have the same problem, but this time, only worse, because the European Central Bank and other countries will be deeper in debt.”
“Most European countries are increasing their debt, rather than decreasing their debt,” Rogers said. “Until that changes, the problems are going to continue, just as they will in the U.S.”
Too, there’s the realization that past bets on the eurozone can still come back to haunt: thus, the collapse of MF Global, the holding company for a broker-dealer run by Goldman Sachs alum and former New Jersey governor Jon Corzine.
MF Global filed for Chapter 11 bankruptcy this morning, thanks to bad bets on eurozone government debt.
Among other impacts: The New York Fed will have to find someone to take MF Global’s place as a primary dealer — one of 20 megabanks required to bid at every U.S. Treasury auction in exchange for a passel of government privileges.
Even with today’s losses, stocks will, likely, close the month in what the establishment media were touting as “the biggest monthly gain since 1974.”
Claims like this always stir up our skepticism. There was, indeed, a monster rally in October 1974. The S&P rose nearly 18%.
But most of those gains evaporated by Christmas that year.
On the other hand, October 1974 did mark a significant bottom. The S&P was up nearly 50% by early 1976.
Currency markets are in a tizzy after Japan jumped in over the weekend with another one of its periodic “interventions” to weaken the yen.
The final straw appeared to be when the yen hit another record high against the dollar in early Monday trading. Thus, for the third time this year, the Bank of Japan stepped in — this time, spending north of 5 trillion yen to buy dollars.
It worked. The dollar immediately jumped 4%. We’ll see how long the effects last this time; the previous intervention was in August.
With the yen making up nearly 13% of the dollar index, that benchmark is up well over 1% today, back above 76.
Stronger dollar, weaker gold today. But not substantially weaker. The Midas metal is off less than $20 from Friday’s levels, at $1,725.
Silver is off more sharply, about 2.5% at last check. But it’s still looking its strongest in more than a month, at $34.39.
“Is it really any mystery why gold and gold stocks skyrocketed right after the announcement of the agreement to bail out Greece?” asks Michael Pento, reflecting on last week’s action.
“European citizens of any means rushed to avail themselves of gold, the proven store of wealth when governments are busy corrupting their currencies.”
A better question: “From what source is this money supposed to come?” Michael asks after the news the bailout fund will be increased nearly threefold, to 1 trillion euros. “Perhaps from the Chinese, but I sincerely doubt they would divert one-third of their entire currency reserves to purchase European debt.”
“Even if they did, the Chinese would have to sell bonds they currently hold of another country, most likely, the U.S. But that would send yields sharply higher here, and the Chinese would then soon be on the spot to bail out America.”
“Real interest rates continue to fall across the globe as fiat currencies are being debased at an ever-alarming rate. This is the case, just as the debt of the U.S. continues to soar, both in nominal terms and as a percentage of GDP.”
“That leaves me to several conclusions. First, the U.S. dollar will lose its status as the world’s reserve currency. Second, inflation and interest rates in our country are about to soar, and the ultimate bailout of the American citizen can only be found in gold.”
On the day before he hangs it up as president of the European Central Bank, Jean-Claude Trichet declared it was “absolutely normal” to seek Chinese help to leverage up the eurozone bailout fund.
His successor, Mario Draghi, will make his case to the Chinese during a G-20 summit in Cannes Thursday and Friday.
“China can neither take up the role as a savior to the Europeans nor provide a ‘cure’ for the European malaise,” reads a commentary from China’s official Xinhua News Agency, as if to underscore Michael Pento’s point and skewer M. Trichet.
“Obviously, it is up to the European countries themselves to tackle their financial problems.”
Imagine that.
Mr. Pento’s Survive and Thrive is forthcoming. We’ll give you details as they materialize.
If the notion of the Chinese bailing out Europe doesn’t make sense to you, either… well, you’re not alone. Nearly 30,000 people have viewed the following explanation online (2 minutes, 49 seconds):
Pharmaceutical giant Roche reports they’ve sold their “RNA therapeutics” division this morning.
“RNA interference,” explains our biotech specialist, Patrick Cox, by way of background, “has the ability to up- or down-regulate RNA, the macromolecules that do our DNA’s work.”
“Therefore, RNAi has extraordinary potential to address virtually every disease and to restore youthful functioning to the aged.”
So why unload such a promising division, including a state-of-the-art research lab?
“Big Pharma has gone through a cycle in regards to RNA interference,” Patrick explains. “When a new, transformational science appears, pharma jumps in, initially with high expectations. The giants buy IP and talent. Then, under pressure for quarterly results, they realize, once again, that Big Pharma doesn’t do innovation. So they divest.”
“This presents enormous opportunities, because truly important science goes on the chopping block, selling for a fraction of its worth. We’ve seen this recently in human monoclonal antibodies. After Big Pharma dumped mABs, they went on to create fortunes for investors.”
Ditto for RNA interference: The buyer happens to be in Patrick’s Breakthrough Technology Alert portfolio.
“Is your hero Patrick Cox the same Patrick Cox of Tax Masters?” asks a confused reader with his dander up. “The same Patrick Cox who has been accused in many states of massive tax fraud and deceptive advertising, and juking people already in debt?”
“If he is, shame on you, and shame on me for listening to him.”
The 5: No.
“I find it amusing,” writes a reader commenting on responses to our Project X preliminaries, which we published on Friday, “how many ‘boomer’ responses you have published in which the respondent is worried about their retirement. The pattern, clearly, illustrates that the only thing most, if not all boomers, care about is their own hide.”
“Not one has even remotely thought about any generation behind them.”
“For example: What did the boomers do when the feral (not a misspelling) guvmint under Lyndon Johnson merged the Social Security trust fund into the general fund? What did the boomers do when Nixon de-linked the dollar from gold?”
“Nothing.”
“They have had plenty of opportunities to ‘correct’ the system all along, and now, when they fear the government won’t be there for them, they whine and cry like little b******. Get bent!”
“I am a Generation Xer, and the only thing I truly worry about is what life will hold for my daughter. What mess will be left for her and her generation by the likes of the boomers? I am doing the best I can to help her in the future, at the sacrifice of my own wants and wishes.
“See the difference?”
“The 66- and 55-year-olds crying in their soup about their situations,” writes another in a similar vein, “and apparently, resigning themselves to the role of spectator in the decline of our affluence and fall of our freedom, only confirms my conviction that, as Pogo said, ‘the enemy is us.’”
“We, the so-called baby boomers, were too busy living the good life, indulging ourselves, while our chosen representatives involved us in unnecessary wars, foreign policy debacles and social welfare programs absolutely unnecessary.”
“We have granted ourselves benefits not earned or paid for, at the expense of our own children.”
“I suggest that our spoiled generation, the one that followed the ‘Greatest Generation,’ is reaping the harvest of their neglect, and that if we simply slide off into the sunset of life without a fight, we will suffer, along with our children, terrible consequences.”
“I am almost 71. I too am guilty of neglect. I was busy paying my way, raising my family and living the dream. I worked two jobs in order to go to college, and when it became apparent that medical school was beyond my financial capability, I evaluated my options and chose to learn a trade.”
“I did so with the expectation that I would be able to, eventually, go into business for myself. I did just that at the age of 27. It hasn’t been easy, but I am successful and still at it.”
“It is time to stop the welfare state. Young and old alike are in this together and must act now to take back our government. There are hard choices ahead. I hope we have the courage of the ‘greatest generations’ of the past to do so.”
The 5: We didn’t mean to start another intergenerational war … but the theme, apparently, resonates. Hmnn…
“Here in California,” writes a reader, changing the subject, and kicking off a short round of new taxes and weird fees, “when you get your smog checked, there is now a $2 charge to check the air pressure in your tires.”
“I assume the air is free, if needed.”
“It’s not new on the books,” writes another, “but New Hampshire land/home owners are subjected to a view tax, as well as a slightly lower seasonal ‘peekaboo’ view tax. Live free or die!”
The 5: A tax on people who come to the state to look at the fall foliage? That’s a novel idea. Must have been imported from the People’s Republic of Maine.
“I’m on a septic tank,” writes a reader from Oklahoma. “I have my own water well. There are no storm sewers where I live. But the city charges me a monthly fee of $30 for ‘drainage.’ My best guess is this is a fee for the cost of ‘gravity.’”
“No problem.”
“Where do I go to cancel the ‘service,’ and then get a refund when it’s cancelled?”
“Minneapolis wants to level fees,” chimes in another Midwesterner, “because too many people go south for the winter, and then don’t use Minneapolis water. Now they’ve proposed $30 extra per month.”
“I think the people in the water department need more funds for their 401(k) plan.”
“I live in western Maryland,” writes a reader returning to the inspiration for this thread, “and the problem we have with the so-called ‘flush fee’ is that it is supposed to be for ‘cleaning up’ the Chesapeake Bay… which is in eastern Maryland.”
“The furthermost western counties, in the mountain area of Maryland, are on the other side of the Eastern Continental Divide. All of that water goes to the Gulf, which is, obviously, nowhere near the Chesapeake Bay.”
“This is nothing more than another tax that Maryland haphazardly institutes, at will, for more malfeasance of taxpayer funds.”
“Ironically,” writes a sixth with our final obvious gripe for the day, “imposing a ‘flush fee’ seems the most logical of things for a government to do these days!”
“There’s not much of a difference when it comes to spelling ‘fiscal’ and ‘fecal,’ and there doesn’t seem to be much of a difference in terms of government policy, either.”
The 5: We do love a tasty morsel of irony.
Cheers,
Addison Wiggin
The 5 Min. Forecast
P.S. We were the subject of a small smear campaign in Friday’s edition of Roll Call — a two-bit newspaper targeted to staffers on Capitol Hill. The journalist writing the piece, apparently, objected to the fact that we’d rented the “Tea Party” mailing list for one of our promotional campaigns.
Forget that we might share the Tea Party’s desire for limited government and lower taxes and, thus, find new readers on that list, the piece all but implies that we’re guilty of fraud… but haven’t been caught yet. It’s smarmy. But got me thinking…
Please look for more thoughts about the Roll Call article and the critical demand for our Project X in a follow-up letter later today. Stay tuned.