A Colossal Mess

October 24, 2012

  • The medicine the feds won’t take: Faber looks anywhere but the United States for opportunity
  • Bullishness affirmed, and an eye-popping chart: Chris Mayer’s final take-aways from Myanmar
  • Byron King ventures 1,000 feet underground, discovers profit opportunity from a five-year supply-demand squeeze
  • A true game-changer: Patrick Cox on one drug that could zero out nearly 20% of all health care spending
  • Rough justice in Italy for a missed earthquake prediction… but what about missed economic predictions?
  • A third-world affliction in a first-world country… voting as an act of self-defense… give-and-take on “closeout” government spending… and more!

   “My medicine for the U.S. is: Reduce government by minimum 50%,” says the estimable Marc Faber.

Alas, the patient will refuse the treatment: “I think the deficit here [in the U.S.] — irrespective of who is in the White House — will stay above a trillion dollars per annum for at least as far as the eye can see,” Faber tells CNBC.

Result: “Eventually, you have either huge changes occurring in a peaceful fashion through reforms, or, usually, through revolutions… I think the timeframe would be within five-10 years you have a colossal mess … everywhere in the Western world.”

  Seen in that light, Faber’s near-term outlook for stocks is positively sunny: “I think here we’re going to go down 20% from the recent top at 1,470” on the S&P.

“The technical position of the market is poor and the corporate earnings are worsening. And I believe that if the statistics were precise – which they aren’t – (…) I think there’s hardly any growth.”

  Might as well take this opportunity to survey the damage from yesterday.

The major U.S. stock indexes are recovering from the drubbing, however weakly. At 1,414 the S&P is down 3.8% from its QE-juiced Sept. 14 high.

Precious metals are oscillating near yesterday’s levels – gold at $1,705, silver at $31.79. The dollar index sits at 79.3, at the high end of its post-Sept. 14 trading range.

The Fed issues another policy pronouncement later this afternoon; unlike last time, little drama is anticipated.

100  “I think China and Japan could have a rebound here,” says Faber, who sees considerable opportunity in Asia.

“If Greece could rebound by 65%” — and its stock market has done just that since June — “the greatest garbage could rebound by 65%.

“Thailand from the 2009 lows is up 250%,” he adds. “Other markets like the Philippines, Indonesia, Malaysia, Singapore, are up by a similar amount.”

Which leads to the question: Where can new explosive opportunities be found?

  “This is a market of 65 million people where everyone is basically at the starting line,” says Masaki Takahara, managing director of the Japanese trade organization Jetro. “There is no other market like this.”

The market is Myanmar, or Burma if you prefer — the most recent stop on Chris Mayer’s years-long survey of investing opportunities across six continents.

“If there is one word to capture the potential for tourism in Myanmar, that word would be ‘Bagan,'” he says.

“Bagan is an ancient city,” Chris marvels, “the home of medieval kings who ruled what is today Myanmar beginning back in the ninth century. In the 13th century, Kublai Khan’s Mongols swept through and that was the end of that.

“But during its glory days,” he goes on, “Bagan was the site of a pagoda building boom that lasted for centuries. Devout Buddhists as they were, the medieval kings believed building pagodas atoned for their sins.

“They must have been a sinful lot,” Chris quips“Along with my friend Lawrence Mackhoul of Leopard Capital, we took off from Yangon to Bagan to have a look around. One day, we set out late in the afternoon to watch the sunset over the pagodas, which we heard was the thing to do.”

  And the tourists?

“We did not find many tourists out and about. In fact, it was locals who sat on a pagoda with us watching the sun go down,” Chris writes, pointing to the chart below from CSLA:

“But there is much more to see in Myanmar beyond Bagan. We also visited Mandalay, a city of a million people north of Yangon on the banks of the muddy Irrawaddy River. This is the main commercial hub for Upper Burma. We hooked up with my friend Doug Clayton, the head leopard at Leopard Capital, and visited several local businesses.

“It struck us how the Thandwe airport was right on the water — prime real estate! Only in a nonmarket environment could someone put an airport there. Anyway, we must’ve visited every resort in Ngapali trying to get a sense for how far Myanmar has to go. Most were pretty nice. We tried to imagine how it might develop.”

  “This was a world-class resort,” says Chris about his stay at the best of the lot, Sandoway Resort.

“We had a fabulous room for only $140 per night, which included a kingly breakfast of fresh fruit, fresh-baked croissants (‘These are better than what you get in Paris!’ Lawrence remarked) and more. The landscaping was immaculate. The service was excellent. And the white sand beaches were virtually deserted.

Enjoying the local rum… and wondering what it all means“It was a great trip,” Chris reminisces. “The country has a lot to offer, and tourism is an easy winner here. There is much to see and enjoy. I saw only a fraction. There are still the Himalayas to the north, hundreds of islands in the Myeik Archipelago further south, river cruises on the Irrawaddy, the floating markets at Inle Lake and much more.

“The trip affirmed my bullishness on Myanmar,” Chris concludes, “and my wish to find some way to capitalize on the transformational changes taking place.” Readers of his premium advisory Mayer’s Special Situations will be among the first to know.

 After a couple hours walking — and at times crawling — underground, my T-shirt was soaked with sweat,” writes Byron King, returning from his own travels.

On his latest visit to South Africa, he visited one of the country’s newest gold mines. “Next time you want to bellyache about your job, consider coming to South Africa and trading places with some of these shovel-swinging miners for a couple of days.”

Byron with muddy boots: 1,000 feet underground, in 25 pounds of safety gearInvesting opportunities in South Africa are dicey right now with the miners’ strikes he’s related here in The 5 in recent weeks… but he says you overlook one fact at your peril: 70% of the world’s production of “platinum group metals,” or PGMs, comes from South Africa.

“Over the next five years, almost every one of the new vehicles produced will come with a catalytic converter using either platinum (for high-temp exhaust) or palladium (for lower-temp diesel exhaust).” And emerging markets continue to drive the growth of the global auto industry.

  Meanwhile, “under the best of circumstances, PGM output will hold steady” over that same five-year time frame.

“The problem,” Byron explains, “is lack of recent capital investment in new PGM mines to bring new output to market. Even if people started digging tomorrow morning, it would be impossible to build up any significant new PGM production in under five years.

“Where will those PGMs come from? Expect price increases for PGM, as well as recycling programs across the globe. Even then, it might not be enough.”

Byron is poring over PGM possibilities for readers of Energy & Scarcity Investor. He’ll be on the case as soon as he wraps up a conference call only days from now on another lucrative resource sector.

  “The possibilities for a powerful anti-obesity compound are nearly limitless,” writes Patrick Cox.

Last week, a new study by the Rand Corp. found that 7% of Americans were severely obese — at least 100 pounds overweight. A decade ago, it was only 4%. A separate study this year estimated that obesity factors into 20% of all health care spending.

The FDA is stepping up its approval of anti-obesity drugs. Unfortunately most of them attack the problem the old-fashioned way — trying to fool the brain into feeling satisfied.

One company Patrick follows is trying something completely different. “It works by targeting and removing capillaries feeding white fat cells,” Patrick explains. “Fat tissue contains considerable vasculature in order to maintain itself and grow. Reducing that vasculature starves fat cells, resulting in cell death.”

With this treatment, obese lab animals drop one-third of their weight in a single month. Now it’s in Phase 1 clinical trials with people. “I expect we’ll be hearing data no later than the middle of next year,” Patrick says… and that could prove a powerful catalyst for the stock.

Patrick profiles two other companies in the current Breakthrough Technology Alert

  • One of them “edits” genes within their cells — a method with huge potential to destroy viruses within the body, including HIV
  • Another has the only technology that passes Pentagon standards to prevent the counterfeiting of microchips.

And soon Patrick will reveal a technology he believes “will revolutionize the entire exercise and fitness field, both commercially and scientifically.”

Clearly, our editors have a lot of opportunities coming through the pipeline… and a few of our readers have access to all of them.

For a few more hours, we’re still offering access to the Agora Financial Equity Reserve. If you’re a buy-and-hold investor, this suite of services delivers everything you want and none of the trading services you don’t.

The premium advisories put out by Patrick, Byron and Chris cost nearly $4,500 per year. Equity Reserve members get them free for life — along with our other five stock-oriented publications.

“I love it,” writes a satisfied member. “I’m amazed that I’m enjoying the services I hadn’t considered subscribing to MORE than the ones I had already subscribed to before joining the Reserve… I’m getting good investment ideas, as well as being thoroughly entertained…”

“I made $10,000 in the first week,” says another, “which more than paid for [my membership].”

“[A] single recommendation paid for my entire Equity Reserve subscription… keep up the good work!”

We don’t offer Equity Reserve membership year-round. In fact, the current membership drive ends tonight at midnight. Once you sign up, you’ll have a full 30 days to decide if it’s right for you. But the only way you’ll know is to sign up. You can review all the privileges and benefits of membership in this invitation from publisher Joe Schriefer.

  Greece’s stock market might be up 65%… but the country’s slide into third-world conditions is accelerating. The country has registered its first case of malaria since 1974.

Why now?

“Austerity budgets,” The Telegraph reports, “have resulted in drastic cutbacks in municipal spraying schemes to combat mosquito-borne diseases.”

Apparently, it’s gotten so bad that Medecins Sans Frontiers (MSF), an international charity whose normal milieu is third-world countries, is handing out treatments.

“For a European country, letting this kind of situation develop and not controlling it is a big concern,” Apostolos Veizis of MSF told the Telegraph.

“You can’t run after malaria,” Veizis explains. “In a country in the European Union, we should not be running after a disease like this in emergency mode. Even in poorly resourced countries in Africa, they have a national plan in place. What I expect from a country that is a member of the EU is at least that.”

We guesstimate, for the time being, those 16 million tourists that normally visit Greece this year might seek out a refuge less… viral. May we suggest Nicaragua?

Soooo, Samaras…. got buyer’s remorse for that $122 million racetrack yet?

  “The verdict is perverse and the sentence ludicrous,” the respected scientific journal Nature writes in disgust.

Just when we’d though we’d seen it all…our War on You file goes international today with a story that’s so unreasonable it surprised even our most cynical sensibilities.

“Six Italian scientists and a government official,” Sky News reports, “have been found guilty of multiple manslaughter for underestimating the risks of a killer earthquake in L’Aquila in 2009.”

Seven men were sentenced six years in jail and ordered to pay more than $11.5 million in damages to the survivors in L’Aquila… for not having sufficient psychic abilities.

“This is a historic sentence,” one proponent and lawyer Wania della Vigna said, “above all for the victims.” Well, she got the first part right.

“It also marks step forward for the justice system,” an obviously confused Vigna goes on, “and I hope it will lead to change, not only in Italy, but across the world.”

“They are not guilty of anything,” the surprisingly more sensible government lawyer Carlo Sica said, “the earthquake’s no one’s fault.”

Unfortunately, Mr. Sica, there’s no place for logic when it comes to pointing fingers.

On the other hand, the sentence sets an interesting precedent.

What might be a fitting punishment for failed forecasts along the lines of “It’s a pretty unlikely possibility — we’ve never had a decline in housing prices on a nationwide basis”?

Among other whoppers, compiled here for the historical record…

Click the video to see more “Prophecies of the Beard”…  “In my own little world as a Department of Defense employee,” writes a reader on the subject of “closeout” government spending at the end of the fiscal year, “I have conspired with several other people this past fiscal year and saved the taxpayers about $250,000. This year, I hope to do about the same, maybe a little bit more.

“I am responsible for about 340 facilities and communication services to about 50,000 people. I am well paid for my efforts.

“I spent over 20 years in the free enterprise system (investment sales, telecommunications, owned my own business and was part-owner of a restaurant). I try to bring principles of reasonable thrift and common sense to what I do for the people of the United States.

“In DoD, at least, the employees take what they do seriously — they or a family member may well find themselves on the front line.”

  “In the military,” writes a reader as if in reply, “each unit formulated a closeout list of goodies that was prioritized and sent off to command level where every unit’s ‘wish list’ was combined and prioritized again.

“Then it was a simple process of allocating unspent money against the highest priority, then the next and so on. This process went on until midnight, Sept. 30. The goal — spend every dime. At midnight, the party began to celebrate another year of 100% spending. The other government agencies have to be following the same procedure.”

  “I can see it now,” writes a reader weighing in on The War on You. “Last night, I watched Extreme Couponing, where the gals bought thousands of dollars of miscellaneous food and couponed it to a cost of $0-60 dollars. Pretty amazing.

“I can just see the congressional staffer in the backroom now, drafting legislation to prevent extreme couponing and limiting the rights of people to coupon only something like $250 per year. No, I am wrong, they will make the stores report the earnings like gambling winners: A gal will have to report the savings as earnings and pay ordinary taxes.

“No way will Uncle Sam let that source of income slip by.”

The 5: For crying out loud, stop giving them ideas!


Dave Gonigam

The 5 Min. Forecast

P.S. Last chance to claim your “loyalty reward” — doors to the Equity Reserve close tonight at midnight. It could be months before they reopen. Act here.


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