July 11, 2013
- The country where inflation runs 92% a month
- Famous Bernanke supporter turns tail, invokes Zimbabwe 2008 hyperinflation
- Markets rally after Bernanke… Jim Rickards on why the “taper” won’t happen
- New gold run-up, and an update on how the 2011-13 slide compares with 1974-76
- A virus you’ve carried with you since childhood… and how it could knock out cancer
- “Hitler chic” inspires KFC lawsuit… Obamacare diagram outrage… golden back-and-forth… and more!
First came civil war… then came hyperinflation.
“The Syrian government,” reports The Associated Press, “is buying up local currency and raising penalties for black market deals to try to stop the fall of the pound, which has tumbled to record lows against the U.S. dollar.”
Transact in a currency other than the pound and you could get up to 10 years in prison.
“This strategy proved wildly unsuccessful,” says Johns Hopkins economist Steve Hanke, “when it was utilized by Iran in October of 2012.”
“Indeed, as was the case in Iran, attempts to suppress currency exchange have sparked a panic — a run on the Syrian pound.”
Result: “Syria’s implied monthly inflation rate is now 91.9%.” That’s well into what the wonks consider hyperinflation territory of 50% a month.
Mr. Hanke is now up and running with his Troubled Currencies Project we mentioned in passing last week — a venture he’s taken up in his role as senior fellow at the Cato Institute.
“For various reasons — ranging from political mismanagement, to civil war, to economic sanctions — some countries are unable to maintain a stable domestic currency,” Hanke writes. “Often, it is difficult to obtain timely, reliable exchange rate and inflation data for countries with troubled currencies.”
So he’s is collecting black market exchange rate figures and from that deducing an implied inflation rate. Here’s the current reading in the five countries he’s tracking…
Well, nothing like a little hyperinflation to goose the stock market.
“Syria’s bourse has become a haven for investors to hedge against the world’s worst performing currency,” reports the Abu Dhabi-based newspaper The National. “Shares listed on the Damascus Securities Exchange have risen by as much as 50% this year.”
And check out the one-year performance of Venezuela’s stock market….
All of which we say as prelude to the following…
“Stocks Flirt With Records on Bernanke Assurances,” reads the main headline this morning at MarketWatch.
“Highly accommodative monetary policy for the foreseeable future is what’s needed,” he said in a speech after the closing bell yesterday afternoon.
“For the past month,” writes our Greg Guenthner in this morning’s Rude Awakening, “markets screamed for a little bit of clarity. They got it — along with an unceremonial burial of any hawkish thoughts that might have surfaced over the past several weeks.”
As we write, the Dow reads 15,407 — two points below its record close the day after Memorial Day.
“The stock market in Zimbabwe,” notes the mercurial Dennis Gartman this morning, “applauded that country’s monetary policy even as the Zimbabwe dollar plunged into utter and complete chaos.”
Mr. Gartman has undergone a change of heart tantamount a to a born-again televangelist suddenly declaring he’s an atheist. “We have heretofore been open, consistent supporters/defenders of Dr. Bernanke’s term in office,” he writes in The Gartman Letter.
No more after the speech yesterday: “We shall not defend him further, although the stock market, the bond market and the gold market are applauding loudly.”
“They’re not going to taper,” Currency Wars author Jim Rickards told us in an interview last week that went out to Apogee Advisory readers yesterday.
“They will not actually reduce asset purchases [at the Fed’s next major meeting] in September. They said they would based on [economic] forecasts. My expectation between now and September is that as the data come in, it’ll be very clear their forecast is wrong, again. You go back over the last four years and look at the Fed’s forecasts for the last four years. They were wrong every time and they were wrong by a lot — meaning, why should we believe the forecast now?”
[Ed. note: We’re privileged to share Mr. Rickards’ company in two weeks’ time at the 2013 Agora Financial Investment Symposium — our last-ever “big show” as we transition to smaller events in more locales. If you can’t join us in person, watch this space to learn how you can access high-quality audio and high-definition video recordings. As always, early movers will get the best deal. We’ll have the order form ready next week.]
Gold, fueled by Bernanke, has rallied to a three-week high at $1,281.
Chalk up some of that move to hot money flowing away from greenbacks. The dollar index touched 84.7 only two days ago… and as of this writing has retreated below 83.
“Barring a black swan event, gold will likely log its first annual loss since 2000 this year,” suggests Jeff Clark at Casey Research.
Mr. Clark has an updated plot of gold’s performance since the September 2011 high compared with the wicked drop of 1974-76.
“During the big correction of the 1970s,” writes Mr. Clark, “gold declined 47% and took 187 weeks to recapture old highs. While the current correction hasn’t been as deep as that of the mid-’70s, the decline is already longer, and it’s the most prolonged of the current cycle.”
That fits the pattern of gold’s less intense drops during the last decade: “The bigger the correction, the lengthier the recovery.
“The message here is obvious: Add to your inventory at depressed levels. And don’t worry about missing the bottom.”
“One sometimes finds what one is not looking for,” said Alexander Fleming, the biologist who accidentally discovered penicillin.
Fleming’s unintentional encounter changed history and helped conquer mankind’s most vile afflictions like syphilis, gangrene and tuberculosis.
Acts of serendipity in science aren’t limited to Sir Fleming, though. Other scientific accidents include Viagra, the microwave, X-rays, the pacemaker, dynamite and safety glass.
And more recently, one company accidentally discovered how a common double-stranded RNA virus — one that you’ve undoubtedly contracted at some point in your life — could eradicate cancer cells, leaving the healthy ones untouched.
Enter the reovirus.
The reovirus, our tech guru Ray Blanco explains, is “an extremely common virus that infects the upper respiratory and gastrointestinal tracts.
“We’ve all contracted it,” Ray writes, “usually by the age of 12, although you probably didn’t notice it.”
Recently, an experiment was conducted in one small company’s lab “designed to test whether an enzyme could prevent reovirus infection in cells. The cells used for the experiment were from a cancer cell line.”
It is common practice to use cancer cells in labs because of their perceived “immortality.” Unlike other cells, they don’t deteriorate and die after a number of replications.
Using the benign reovirus, the researcher set out to test whether an enzyme could prevent reovirus infections on the cancer cell.
His experiment failed. The enzyme had no effect on the reovirus’ infection.
To his surprise, though, he discovered that the control group proved otherwise.
“The control group of cells,” Ray writes, “which did not have the enzyme applied, mysteriously showed reduced viral infection.”
Thanks to this accidental discovery, Ray goes on, “we now know that reovirus infects only cells with activated Ras protein pathways.”
Ras (an abbreviation for rat sarcoma), when activated, provides the doorway for the virus to hijack a cell’s growth receptors and accelerate the cell’s growth and division. Uncontrolled cell growth is the trademark of cancer infection.
Healthy cells have what is called protein kinase R (PKR), “which is part of a cell’s internal virus defenses. PKR blocks reovirus replication in healthy cells,” Ray writes by way of explaining why humans are unaffected by infections of the reovirus.
Cancer cells are a different story: The Ras deactivates this defensive protein PKR in cancer cells… meaning its cause of strength could potentially be a seed to its own destruction.
Because of this deactivation, the reovirus is free to run wild, creating tens of thousands of copies of itself, eventually overloading the cancer cell.
“Deactivated PKR,” Ray writes, “might explain a number of cases in which cancer patients have mysteriously seen their tumors regress. Descriptions of these cases go back to the mid-1800s. Many describe how a patient with cancer saw the condition improve or disappear after catching the flu, chickenpox, measles, varicella or some other infection.
“Up to two-thirds of cancers have Ras activated in one form or another, and in some types, such
as pancreatic cancer, the figure is up to 90%.”
With reovirus therapy, which is now undergoing preclinical studies, future cancer treatments may have the potential to eradicate cancer cells without harming the healthy cells.
More miraculously, the company’s formula has been shown to work with the body’s immune system, rather than against it, like nearly all modern cancer treatments. In fact, the immune system transports the viruses to the malignant cancer cells.
Hitler strikes again…
It was last September when we covered Rajesh Shah’s grand opening of his clothing store in Ahmedabad, India, named, simply, Hitler.
“It was only when the store opened I learnt that Hitler had killed 6 million people,” Mr. Shah told the AFP news agency.
Last December, we discovered that the clothing store was only a microcosm of India’s odd affection for the late dictator. A cafe in Mumbai, a pool hall in Nagpur, two Punjabi films and a hit Indian soap opera, all named after the ruler.
Today, we discovered even more of what CNN has now dubbed as a “thing”: “Hitler chic.” This time it seems to have spread to Thailand.
In one case, KFC is considering suing a fried chicken restaurant in Ubon Ratchathani for replacing their bow-tied Colonel Sanders with Hitler.
“The place opened last month,” resident Alan Robertson told the Daily Mail, “and nobody quite knows what to make of it. I went in for a bite last week and got some fried chicken, which was pretty good, and asked the guy behind the counter why it was called Hitler. He just shrugged his shoulders and said the owners had thought it was good image.”
The latest in ‘Hitler-chic’
Other instances, mostly found in Bangkok, include Hitler-esque cartoon pandas, Teletubbies, Ronald McDonalds and various other pop-culture references lining the city’s fashion-savvy shops.
“It’s a lack of exposure to history,” Bangkok high school teacher Harry Soicher told CNN. “If you don’t live in Thailand, you may find it hard to believe they really mean no harm.”
“You have got to be kidding me!” a reader writes after yesterday’s episode. “That was just one diagram of the clusterf*** called Obamacare and is only about government agencies’ computers talking to each other?
“Dr. Paul warned that this was headed toward another great big bureaucratic mess, costing as much to administer and push more paper around. OK, so when do the job postings come out? Maybe we can all get ourselves an Obamacare job, because this is sure to make small-business owners unable to hire because of the exorbitant costs.
“What really saddens me is the politicians that passed it are still patting each other on the back.”
The 5: Well, small businesses with fewer than 50 full-time employees have been exempt all along, even before bigger businesses got a one-year reprieve.
Problem is, once they reach 50 full timers, they must provide not only insurance, but the “right kind” of insurance, lest they face a penalty of $40,000, plus $2,000 for each full timer.
We can’t wait to see if it’s cheaper for some businesses to pay the penalty than to provide coverage…
“I am glad I got his attention,” writes a gold-minded reader in the ongoing tit for tat he’s carrying on with another reader.
“I just don’t understand the point the writer is trying to make. How far underground should you go [to hide your gold]? I guess I would think how far and how deep and how destructive would a financial collapse be, and in all reality how important is gold in relation to the world economy.
“That aside, what I view and what I work for is building a sound financial footing sustainable for my future family generations. Is gold a part of that? Yes, in a small way. I am more inclined personally to silver, and real estate; they don’t appear to be under the threat of confiscation such as gold and your bank account.
“If there’s a devastating financial collapse, the government will confiscate anything they can that
has value. Cyprus is just an example. In the reorganization after a collapse, they would go after gold, not to mention anything else of any value.
“It just strikes me that you are looking at the extreme edge. We are individuals in this situation, not large financial institutions or central banks. We have to think protection as individuals.
“For me it is to buy physical gold and silver and hold in my possession. I will accept the government risk. But then again, I am just a working man working toward a self-sustaining family estate that hopefully can last my children and grandchildren for the next 100 years.
“Want to go underground? Get a second passport, sell your gold, convert the cash to Bitcoins, open up a bank account or safe-deposit box where you can get citizenship where you go with the passport, renounce your citizenship to the US of A and then convert your Bitcoins back
to gold. That is pretty underground.”
The 5: Heh, and a lot of effort.
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. We’ve come up with a few more reasons to hold onto your gold and buy at depressed prices. Give this a look…