June 12, 2013
- While one group of scientists races to identify a new flu threat, another races even faster to snuff it out: Patrick Cox handicaps the lucrative outcome
- “The benefit of the doubt”: Ritholtz on what to make of the spike in stock market volatility
- Put the laws of mean reversion on your side: Chris Mayer examines a down-and-out sector due for a bounce
- Front-running the forex market: Chuck Butler makes sense of a Bloomberg scoop and offers up his favorite currency for the next 10 years
- The NSA’s impact on book sales and Bitcoin trading… a “troll the NSA” campaign set for tonight… four cheeky questions about “criminal fog”… and more!
The bird flu strikes again. Last Thursday, a study was released explaining how the two viruses that make up the bird flu — H5N1 and H7N9 — could reach pandemic status with only a few mutations.
“The advent of H7N9 in early 2013 is of concern for a number of reasons,” Ram Sasisekharan told Cell, the journal that published the study.
According to MIT News, the jump from virus to “pandemic flu” would merely “take a change in one or two amino acids.” The mere 123 cases recorded this year — mostly in China — could explode into the millions.
“Flu viruses have a high mutation rate,” says our Patrick Cox with the essential background.
“New strains constantly emerge to which we haven’t developed immunity. Furthermore, influenza is present not only in humans, but also in other animals like birds and pigs. Sometimes, a virus can jump between species or combine its genes with a human-specific version, creating a deadly and highly infectious new variety.”
Even in an average year, the flu lands 200,000 Americans in the hospital… and kills 40,000. “Just in adults, influenza imposes an economic burden of $83 billion per year in the U.S.” — a number equal to the entire annual budget for a large state like Florida.
So the race is on for a game-changing flu vaccine. Patrick has noticed a front-runner created from DNA and pure water.
The typical flu vaccine protects you against — at most — a few strains. The DNA-based vaccine offers much broader protection. Too, it has a long shelf life: “Current vaccines need preservatives to maintain the stability of the many proteins contained by inactivated viruses,” explains Patrick. “In the past, these have included toxic substances like mercury. DNA, however, is a very stable molecule.”
The company behind this breakthrough has already designed a vaccine to fight one of the bird flu strains, H7N9. Testing in animal models is already underway. Stay tuned…
[Ed. Note: As we’ve gently reminded you from time to time, Patrick is on the trail of an even more immediate profit opportunity involving DNA technology. Think super-high-tech bar codes: We’re talking about using DNA from plants to mark products — a foolproof anti-counterfeiting technique. The Pentagon has thrown its weight behind the company in a way other businesses could only dream of.
Right now shares are just 21 cents, and Patrick sees them going as high as $10. A big claim, for which he furnishes ample proof. We invite you to examine it right now. And we do mean this minute: Patrick’s presentation will be pulled offline tonight at midnight. Give it a look while you still can.]
Another day, another bout of volatility: After closing down some 100 points yesterday, the Dow regained all of them on the open… and as of this writing has surrendered about 60. That leaves us at 15,158.
For the moment, all the major indexes are in the green, however slightly.
“It would not be a big surprise to us,” Vancouver stalwart Barry Ritholtz wrote his clients in May, “if the markets get a little soft over the next quarter or two.”
“So far,” he writes by way of update this morning, “nothing we see undercuts that view. Given our longer-term perspective, we would rather not make a wild guess as to when this cyclical market is going to end. So far, we see no data supporting the most extreme and negative views.
“As such, I continue to give this bull market the benefit of the doubt.”
Precious metals have bumped up slightly. As we write, gold is $1,384, silver $21.83.
The year 2013 is on pace to have the fewest bank failures since 2008.
Last Friday, the FDIC swooped in to shut down two submerging banks — Mountain National Bank in Sevierville, Tenn., and 1st Commerce Bank in the Las Vegas suburbs.
That makes 16 so far this year — not much by the standards of years gone by, when it seemed we were tallying the carnage every Monday morning in The 5…
“Banks just reported record profits for the first quarter,” says our recovering banker Chris Mayer, who’s been poring over FDIC data. “The results beat the record set six years ago, before the financial crisis.
“The picture is not completely rosy,” he hastens to add. “The banking industry has 20% more assets than it had six years ago. So thanks to low interest rates, profit margins are down. In fact, net interest margins — the spread banks make between deposits and loans — sit at six-year lows.”
“This is a positive from my point of view as an investor,” says Chris, throwing us a curve.
“Nearly every other industry is reporting record-high profit margins. The laws of mean reversion suggest these will come down, and conversely, bank profit margins will recover. I’d rather invest in places where the numbers are down and look to improve.
“If you can find well-capitalized banks with no credit troubles and pay less than tangible book value,” Chris concludes, “you have done well.” Today’s 5 Min. Forecast PRO serves up a shopping list to get you started, and tomorrow’s will zero in on a favorite that’s caught the eye of our Dan Amoss.
Not a PRO-level reader yet? You can become one by following this link. We won’t even make you watch a “long-winded presentation” to get started. Seriously, click the link.
“While I’m somewhat surprised, I’m not really,” writes EverBank’s Chuck Butler in today’s Daily Pfennig.
He’s reacting to a Bloomberg scoop last night that began like this: “Traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice.
“Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial.”
Evidently, this has been going on for at least 10 years.
Chuck’s take: “After the LIBOR manipulation, the gold and silver manipulation and the Plunge Protection Team, it would be more surprising that someone wasn’t manipulating spot prices!”
That said, “Now that this has been exposed, it means foreign-exchange spot trades are now pretty clean.” Good news if you’ve been thinking about strategies to diversify out of the dollar.
[Ed. Note: We pressed Chuck for his favorite strategy this morning. His email reads, in part, “I tell everyone: If you were to buy just one currency to hold for the next 10 years, what would it be… ‘renminbi’…”
Since China began loosening its dollar peg eight years ago, the renminbi has appreciated 30%. “In my opinion,” says Chuck, “that’s just the tip of the iceberg, for I still believe that China has designs on replacing the dollar as the reserve currency of the world with a gold-backed renminbi at some point in the future, probably by the end of the decade.
“I know this isn’t a sexy pick… but it’s my pick.”
EverBank offers you a way to play it. It is not for everyone: The minimum is steep. It pays no interest. But it’s hands down the easiest way you can get renminbi exposure. Check it out here. We may be compensated if you choose to act, but we wouldn’t bring it to your attention if we didn’t think it was worth your while.]
“The thing to really think about here,” Mr. Butler adds pensively, “is how far does all the manipulation go in our lives?”
Via Ed Steer at Casey Research, he picks up a quotation from Orwell’s 1984: “How often, or on what system, the Thought Police plugged in on any individual wire was guesswork. It was even conceivable that they watched everybody all the time. But at any rate, they could plug in your wire whenever they wanted to.”
We’ll note here sales of 1984 have spiked 6,000% at Amazon in recent days.
Nor is that the only intriguing money flow we’re spotting…
“Say what you will,” the digital currency whiz Coindesk writes, “about the revealing of the U.S. government’s program for phone surveillance as well as data collection from American tech companies known as ‘PRISM.’
“Since the story broke, it has clearly had an effect on the price of Bitcoins.”
Examining the timeline in which the NSA story unfolded, Coindesk noticed a correlation between the NSA revelations and Bitcoin’s recent plunge. The first signs of a sell-off began last Friday, when Obama spoke up about it for the first time.
But the flapdoodle didn’t really hit the fan for Bitcoin until Sunday, June 9, when The Guardian published its eye-opening piece on an NSA tool called Boundless Informant.
“On Sunday,” Coindesk goes on, “when the market for Bitcoins is slow-moving historically, the price dropped during heavy volume trading.
“The rash of sell-offs in the past week indicates that some might be concerned about the role of Bitcoin, considering how much the United States government knows about what occurs on the Internet.”
The recent sell-off shows, Coindesk opines, that despite what Bitcoin experts think is important to people about decentralized currencies, sentiment still drives the digital doubloon… and sentiment isn’t immune to government action.
“Decentralization doesn’t mean it is disconnected from all of the other complex systems that make up the economic system. Governments are huge influences in the economy,” Coindesk concludes, “and will continue to be into the future.”
Darn.
Still, we can have some fun with this far-reaching influence…
Now that the cat’s out of the bag, a plan to “troll” the NSA is in effect… tonight at 7 p.m.
The reported developers, two creative directors from Buzzfeed, call it, appropriately, “Operation Troll the NSA.”
The one-page website for the ruse, with over 65,000 Facebook likes and 5,495 re-tweets at the time of writing, said this:
“When something happens that threatens Internet freedoms,” Huffington Post reports, “the Internet responds as only the Internet can: by trolling.”
Verbiage pulled from the fishing technique of slowly dragging a lure from a moving boat, “trolling” in Internet slang means to post “inflammatory, extraneous or off-topic messages” online with the intent of “provoking readers into an emotional response or of otherwise disrupting normal on-topic discussion,” says Wikipedia.
In this case, they want to disrupt and mislead the NSA’s systems by deliberately plugging buzzwords.
“The idea behind the effort,” International Business Times reports, “is for as many people as possible to call or email a script filled with so-called ‘keywords of terror’ in an attempt to overwhelm the spy agencies tasked with intercepting electronic communications in the pursuit of suspected ‘terrorists,’ criminals and other bad actors.”
We’ve posted a screengrab of the script for your viewing pleasure below:
“Why not test it out?” they ask. “It’ll be fun.”
“Revelations concerning the federal government and the level of ‘watching’ they have been doing,” a reader writes in a more serious tone, “reminds me of a movie made in 1998 called The Truman Show.
“Fifteen years ago, we laughed as the unwitting subject of the film had every second of his life recorded by the government. Now it appears the movie was a prelude of things to come. Odd, isn’t it, that something created as a farce now causes us to fear how much of the movie is now real?
“One has to wonder if the events Orwell and Huxley wrote about many years ago will materialize.”
“Do you and Greg Guenthner really understand why little people like me buy gold?” a reader writes in frustration. “Its current price is not the point.
“The only way I can buy more is to have it at or below $1,000. Its true worth is that it will retain more purchasing power than fiat money when my need arises. My cost average is about $384 an ounce. I am retired and sandbagged by the low interest on CDs, so I can only afford more when it is cheap.”
The 5: No arguments here. The likes of Jim Rogers and Marc Faber have been holding off adding to their own positions, waiting for a further shakeout…
“Today’s 5 Min. Forecast was excellent as always,” a reader writes, throwing us yet another curve by not including the inevitable “but.”
“Just wanted to let you after watching the Zero Hour presentation, I went right back to my email to get the phone number for First Federal and took advantage of the Panda offer. Nice convergence. When I saw the reminder in the column, I was happy to see I was ahead of the curve. Thanks to you at Agora, I’m feeling that more and more these days.”
“About the ‘criminal fog,'” a reader writes, with a laundry list of questions after yesterday’s episode…
“a.) Does ‘criminal fog’ refer to bank robbery, or perhaps just one of the latest Obama administration’s sleaze du jour that they are trying to hide? You know, the old dodge of, ‘I just learned about that (insert name of scam here) in the newspaper, like you. I don’t remember where I was that night, because I was in a criminal fog.’
“b.) I was reading about the MF Global caper the other day. Do you think this might work on anyone named ‘Jon’?
“c.) Speaking of Jon and crony banksters, is it true that any thefts over $1 billion automatically trigger an immediate follow-up countervailing spray to eliminate the DNA markers?
“d.) Finally — and a little less tongue-in-cheek — exactly what else would this technology be used for? What nefarious ends might this be repurposed for? I don’t even want to think….
“As they say at the National Enquirer… inquiring minds just want to know!”
The 5: Heh…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. Final reminder: Patrick Cox’s “crime of the century” presentation — replete with the story of the high-tech fog and other lucrative tidbits — goes offline tonight at midnight. Act while there’s still time.