Dave Gonigam – May 29, 2012
- The news they tried to bury on a holiday weekend: Percentage of Americans receiving a government check
- Chris Mayer on the comedown from “speculative froth” in Q1… and some uncomfortable questions for China bulls
- Byron King with the best (and most unlikely) way to profit from the new flexible smartphone screens
- A gift from the patent gods: Patrick Cox with great news for a company stalking killer viruses
- New milestone in the bursting of the housing bubble… reader laments the latest “sign” of withering freedoms… the ultimate in ridiculous warning labels… and more!
It’s a truism among the governing classes that if you want to bury bad news, you disclose it at the close of business on a Friday. Fewer people are paying attention on the weekend.
If it’s a holiday weekend, so much the better.
So as the “unofficial summer” span between Memorial Day and Labor Day gets under way in earnest, we want to make sure you don’t miss the following story they tried to bury…
Nearly half of all Americans live in a household getting a government check, according to the Census Bureau.
These are first-quarter 2011 figures, the most recent available. But while the data set isn’t the most current, the trend is pretty obvious…
The breakdown is as follows…
- 15% of Americans live in a household on food stamps
- 26% of households have someone enrolled in Medicaid
- 2% have someone getting unemployment benefits
- 16% have someone receiving Social Security benefits
- 15% have someone in Medicare.
This puts a new spin on a number Addison spotlights in The Little Book of the Shrinking Dollar: “For the first time since the Great Depression, U.S. households as an aggregate are collecting more money in payments from the government than they’re paying in taxes.”
That is, households paid $2.2 trillion in tax year 2010. But they received $2.3 trillion. “Obviously, something’s gotta give,” says Addison.
“While we’d say the first step is to spend less, that’s not how the government thinks. They’d rather find ways to play out the charade.” The book spells out how they do so… and more importantly, you’ll learn how to preserve the purchasing power you still have.
“The speculative froth was evident,” says Chris Mayer, with an assessment of where markets and the economy stand as we head into summertime 2012.
“Besides a hot start — the market rose over 20% from late last year through March with nary a hiccup — there were other bad signs out of the first quarter that made me nervous:
- The Fed lashed itself to the mast of near-zero interest rates through 2014. This drove investors to reach for yield across the spectrum, which will surely end badly
- The issuance of junk bonds — the most-speculative grades of debt — reached a quarterly figure of $75 billion, a record since 1980
- The S&P 600 SmallCap Index — a measure of the most speculative stocks — hit a record high in late March
- The Nasdaq — also rife with speculative names — had its best quarter in 21 years.”
“China’s boom is over — for now,” Chris goes on, as he sees his call of last July fulfilled in real-time.
Yes, the Chinese government reported 8.1% GDP growth in the first quarter — which Chris doesn’t buy for a minute.
“If it’s true that China’s economy grew that fast, then explain why steel production is down so sharply year over year? Not slowing, but down. Why are sales of excavators, backhoes and bulldozers down? And not by a little, but a lot — down anywhere from 27% to 48% from a year ago.”
“Why are Mercedes and BMW marking down cars by 20-25%? Why are Chinese buyers now deferring raw material cargoes? In some cases, they are defaulting on their contracts.”
“These anecdotes do not point to an economy growing 8% a year in real terms. These point to an economy in trouble.”
“Therefore, do not own what China buys the most of — namely, commodities. At the very least, do not own coal, iron ore or copper. If you do, you better be very sure that what you own will survive what’s coming.”
U.S. stocks are starting the summer doldrums with a decent little rally: Every major index is up at least 1%.
The financial media are chalking this up to polls that show growing support for the pro-bailout parties in Greece’s election next month… and rumors Chinese leaders are going to cut interest rates. (If China’s in an unstoppable boom, why would they do that?)
Traders might even be finding hope in the latest housing numbers: The Case-Shiller home price index fell in March, but at the slowest rate in 12 months.
The 20-city figure fell 2.6% year over year. It now sits at the same level it did in late 2002.
Meanwhile, the broader national index — which S&P issues on a quarterly basis — is even worse. It’s back to summer 2002 levels.
Those were the days: WorldCom became the biggest bankruptcy in U.S. history (it now looks like a piker next to Lehman and WaMu), while Mike Myers milked the Austin Powers franchise one too many times (Goldmember)…
Five of the 20 metro areas in the 20-city index reached new post-bubble lows: Atlanta, Chicago, Las Vegas, New York and Portland.
With money moving back into “risk assets” today, precious metals are pulling back. Gold is down about 1%, to $1,558. Silver’s back below $28.
“Independent researchers say the potential is enormous,” reports our resource maven Byron King, eyeing a $53 billion market over the next three years.
Byron first turned us on to the potential of graphene a year ago. It’s gotten only bigger since then. Scientists are finding still more uses for this unique form of graphite — the same stuff you find in the middle of a pencil, but in layers only one atom thick.
“Korea’s Samsung has invested heavily into graphene research,” according to the BBC, “and the Finnish firm Nokia has just announced its plans to team up with partners… to explore graphene opportunities.” Those partners include the scientists who won the 2010 Nobel Prize for discovering graphene.
“The potential for graphene applications is endless,” says Byron. “It’s already proving to be an amazing substitute for flat-screen technology. Samsung is currently using graphene to create a virtually indestructible, and flexible, screen on its ‘Galaxy Skin’ phone.”
“We will be mass-producing flexible… displays from the latter half of this year, as the demand from our clients is significant,” says Samsung vice chairman Kwon Oh-hyun.
Beyond flexible phone screens Byron says, “This one material alone could prove more revolutionary than — and soon replace — plastic, Kevlar and the silicon chip… all in one fell swoop!”
But achieving all of this requires graphite… which requires mining it from the earth. That’s Byron’s forte… and he’s hot on the trail of a “bonanza-grade” deposit in a mining-friendly country.
“Solid management,” is his assessment. “Great ore body. Strategic mineral. Very mineable. Three-year development plan. Money in the bank. Every appearance of becoming a cash cow.”
Byron’s so excited about this opportunity, he’s hosting an invitation-only conference call next month with five experts in the fields of graphene and other high-tech metals. Learn how you can listen in at this link.
“The scope of this patent award is gigantic,” says Patrick Cox, determined not to be outdone in superlatives today.
The U.S. Patent and Trademark Office has issued a broad and sweeping patent to a company that’s combining biotechnology and nanotechnology to wipe out viruses.
But it’s bigger than that, Patrick says: The firm “has become the owner of an entire new field of science — the use of polymers for drug delivery far, far beyond the field of viruses.”
The polymers essentially lure viruses to their demise. The viruses attach themselves to the polymers and they die. This treatment has the potential to treat bird flu, swine flu, even garden-variety seasonal flu.
But that’s not what the polymers were designed to do in the first place. “They were designed to contain a drug payload that would kill diseases without endangering the patient,” Patrick explains. The newly awarded patent encompasses this purpose.
It’s great news coming on the heels of a successful meeting with the FDA — in which the regulators gave every signal that they’d approve human trials for flu treatment soon.
The market for flu drugs already tops $7 billion. “This company could be close to eliminating scores of dangerous viruses,” says Patrick. “Someday…down the road this is…when it could be an industry leader… potentially raking in profits… potentially saving lives… long after it could have made forward thinkers like you very wealthy.”
For the next 36 hours, we’re still offering access to Patrick’s high-end advisory, Breakthrough Technology Alert, at a substantial discount off the regular fee. You’ll learn about this flu-killing company as soon as you sign up… as well as a company that could beat Alzheimer’s in a way no one else has tried.
“Just read about ‘the $20 trillion drain’ in The 5,” a reader writes of our episode last Friday about the fight against Alzheimer’s.
“I submit to you that there are so many technological advances not only medical but also in physics that could be monumental advances in the near future. Just check out Patrick Cox and his experience with stem cells. The creation of graphene and other energy creation advancements are just the tip of the iceberg.”
“Some of the advances are and have been suppressed by the existing conglomerates and I feel certain that the coming economic crash will open the door for many of these new advances to come to light.”
“These events could offset the crash significantly as long as there is a good distribution of food and barring some absolute moron from trying to confiscate our guns. These two conditions could produce blood in the streets and send us back 100 years in time.”
“Love The 5, keep it up.”
The 5: You’ve pretty much nailed Addison’s hypothesis: We’re undeniably heading into a crisis… but what comes out the other side of it will be a wonder to behold.
And as Patrick Cox constantly reminds us, the time to invest in it is now: Just as fortunes were made with radios and refrigerators in the ’30s, new fortunes are taking shape right now. And there’s no reason you can’t take part.
“So please tell me what would have happened to the poor guy,” writes a reader of the fellow in Denver fined for putting a “for sale” sign on his car, “if he had a sign in the window saying ‘Romney is a schmuck’ or ‘Obama is a bum’ or ‘Get out of Afghanistan now’?”
“What the blazes is wrong with the USA? Have all the politicians and local sheriffs and lawmakers gone mad? No wonder some people want to leave.”
“Oh, well. I guess I’ll whip up some lemonade and see if I can sell it on the black market out of my garage!”
“Keep up the great work. Love reading The 5.”
“I’m LOL at this Facebook IPO fiasco!” a reader writes. “Do these mighty-fine ‘investors’ figure that it was a shoot-to-the-moon sure thing? As you well know, stocks go up and DOWN.
“Wished I had shorted, as my gut feeling told me, being there were no puts available (?).”
“Love your work!”
The 5: Which reminds us… We’ve seen rumors that institutions and hedge funds were short Facebook before the IPO… which is a really interesting trick since at that time there were no publicly traded shares available to borrow!
Meanwhile, FB slipped below $30 this morning. Too bad, so sad…
The 5 Min. Forecast
P.S. We daresay Patrick Cox’s bold predictions will come true despite the ridiculous lengths some companies take to avoid litigation in a lawsuit-happy America.
“Never use while sleeping,” says the warning label on an electric razor — one of five finalists in the Wacky Warning Labels Contest, sponsored by the Center for America. There’s also a globe that warns it should not be used for navigation.
Our favorite, though, has to be this one on a children’s neck pillow…
Laugh all you want, but “more and more people aren’t laughing about the warnings,” says Bob Dorigo Jones, who evaluates the contest entries. Instead, “they’re becoming so alarmed by warning labels that they’re not using the products they bought.
“One woman told me her mother bought several heating pads and later returned all of them to the store because each one warned: ‘Caution, Risk of fire.’”