Day 1: Aerospace and Doomsday Debt Ceilings

July 24, 2013

  • Day one: Kicking off this year’s last-ever Agora Financial Investment Symposium, A Tale of Two Americas…
  • Chris Anderson on aerospace companies on credit cards, as Bill Bonner’s “doomsday machine” begins its screeching halt…
  • “What’s changed?” resource guru Rick Rule asks. Deep discounts? Rick explains how to make 400-500% on the way up…
  • Hormageddon is upon us… BioTime’s CEO on science and technology… why your children need a 3-D printer… and more!

  “Regular people like me,” says Makers author Chris Anderson, “can create aerospace companies in three years on credit cards. We’re actually selling against Lockheed-Martin at this point.”

Meanwhile, central bankers have created a “doomsday machine,” says Agora Inc. founder Bill Bonner. “The 42-year experiment in credit-based money is coming to an end.”

Two propositions, self-evident — but not mutually exclusive. That’s the Tale of Two Americas that unfolded on the stage in Vancouver during day one of the last-ever Agora Financial Investment Symposium.

But the day began with two seemingly contradictory statements that were more, um, childish in nature.

  “You’re stupid,” came the emphatic insult. “No, you’re stupid,” came the equally emphatic retort.

Our leader of the pack, Addison Wiggin, got it in his mind that because this is our final Symposium, he should bring along the family for the full British Columbia experience — even fly from Baltimore to Seattle and rent a minivan to finish the journey into Canada.

Understand Addison and his wife have three children — ages 13, 10 and 7.

When the kids weren’t fighting among themselves in the back seat, they were ignoring the gorgeous scenery and burying their heads in their electronic devices — playing Minecraft with friends scattered around the world.

In Minecraft, you mine things underground and build more things on the surface. As it happens, part of the family’s full British Columbia experience included a visit to the Britannia mine — once the largest source of copper for the British Empire, today a museum.

Suddenly this virtual “mining” thing the kids were doing on their tablets had a real-world connection. By the time the tour was over, the 10-year-old said he wanted to be a geologist when he grew up.

“Success!” said Addison.

Minecraft and a real mine… Fantasy becomes real

Addison’s wide-ranging introduction to the week also included this recollection from when he was finishing production on the documentary I.O.U.S.A. five years ago. Then, the worry was $500 billion in deficits and a $10 trillion national debt. “It seems quaint and kind of comforting,” he quipped, “to think of those times.”

Five years later, the national debt totals $16,738,126,867,888.58. And that figure is achieved only through accounting machinations to stay under the “debt ceiling.”

100  On the subject of numbers… major U.S. stock indexes are mixed this morning. The Dow and S&P are down a bit, the Nasdaq up a bit.

A sizeable earnings “miss” by Caterpillar is dragging down the Dow, at 15,522 as we write. On the sunny side, June new-home sales rang in ahead of expectations.

Oil is back up to $106.44. Gold is losing the ground it gained yesterday, back to $1,334.

  “Are we having fun yet?” asked resource guru and Sprott USA chief Rick Rule of the assembled crowd in Vancouver.

Ouch: Gold has slid from $1,900, silver’s been cut in half and uranium is down 60%. The resource stocks have been crushed to the tune of 75% or more, bringing on what Rick calls owl-stock syndrome — “when you call your broker and say you want to sell, and he says, ‘To whoooo? To whooo?'”

Quite a change from the environment of 2009-10. “So what’s changed?” he asked, launching a call-and-response interaction with the audience.

  • Has any G-20 nation balanced its budget?
  • Has the U.S. national debt become sustainable?
  • Are the big banks now solvent?
  • Have competitive currency devaluations ceased?
  • Has world population growth leveled off?

The only thing that’s changed, Rick hypothesizes, is that people developed a collective delusion that the likes of Ben Bernanke, Shinzo Abe and Angela Merkel have fixed everything, “that the problems that existed in 2008 were handled. They kissed it and made it all better.”

So perceptions have changed, but the narrative has not. “If the narrative that exists in the world today is unchanged from 2009-10, the fact the narrative is the same and prices are off 75% is a good thing.” Deep discounts, indeed.

When will the recovery come? No way to tell, says Rick, but come it will. And when it does, the math will work as it has at previous bottoms in the resource space: “If you deploy capital aggressively and well at the bottom, you make 400-500% on the way up.”

[Ed. Note: No doubt Rick will name some of his favorite potentially explosive plays in the resource space — or as he must call them for legal purposes, “conflicts of interest” — during the small-group breakout sessions later today.

In addition to the recordings of every session in the main hall, we’re assembling a concise report with every name and ticker symbol our expert panelists reveal in the breakout sessions. Whether you choose audio or video recordings of the Symposium, this report is yours as part of the package. We’ll have it ready in about 10 days. You can ensure your receipt as soon as it’s ready, right here.]

  “The idea of economics as a science is totally, totally preposterous,” said Bill Bonner as he mused about the thoughts that might go into a new book.

Its tentative title is Hormageddon — a portmanteau of hormesis, the notion that a small amount of poison can be beneficial, and Armageddon. “Take a public policy that might be good in a teeny bit,” he explains, “and it turn into a disaster.”

Hormageddon has four essential components, all of which must be present…

1. A bad idea, “a triumph of theory over experience”

2. Large-scale central planning

3. “Sever the feedback loop.” People who make mistakes — e.g., bankers in 2008 — don’t pay for it

4. The creation of zombies.

Bill ran down the checklist of all four items to see whether they’re present now, or will be soon. It was as hilarious as it was horrifying; your editor can’t begin to do it justice. Wait till you hear him describe how he can take a walk in the park a mile from the hotel and nothing happens to the economic statistics, but if he were to have a heart attack and die at the park, he would miraculously add to GDP!

You really have to get the recordings for yourself. Just be careful if you choose the audio option that you don’t accidentally drive off the road laughing.

  “My conviction,” said BioTime CEO Dr. Michael West, “is that science and technology are the greatest hope for many countries around the world, especially the United States, to get out of this economic crisis.”

Dr. West, a perennial favorite here in Vancouver, delivered three theses — two of them conventional wisdom and a third that smashes existing paradigms.

The first is that “the driver of our economic crisis is the aging of our population and the disability of age-related degenerative disease.” The second is that “it’s possible to intervene in the process of aging on a cellular level.”

The third is a mind-bender and one that confounds popes and presidents alike: “The tools are now in place to enable regenerative medicine for age-related disease,” says Dr. West. “Regenerative” means it’s possible to take cells from, say, your skin… and turn them into youthful and healthy heart cells, or pancreas cells, or liver cells.

Last year, Dr. West told the Vancouver audience that degenerative diseases play a role in 80% of all health care costs. Solve that and you solve a sizeable chunk of the “unfunded liabilities” on Uncle Sam’s balance sheet…

  “By the end of this talk,” said Makers author Chris Anderson, “I want to convince you that if you have children, you probably want a 3-D printer.”

He presented a compelling case. Young people today “are building stuff. That used to be a skill you learned in college. Today, kids do it for fun.” In a few years, those kids will be in the throes of the third industrial revolution.

The first is the one you read about in history books — replacing muscle power with machine power, replacing a spinning loom with a spinning jenny, for instance. The second was the digital revolution, replacing brain power with machine power. “Desktop publishing” was made possible first with laser printers, then with the Web. Anyone can be a publisher today.

The third industrial revolution combines the first two. Soon anyone will be able to be a manufacturer. If you have an idea and an Internet connection, you’re set. You can bring your idea to life on a 3-D printer, or you can upload the design to people who have more sophisticated equipment to do the job.

Anderson himself is a case study. Last year, he gave up his day job as editor of Wired magazine to devote his energies full time to 3D Robotics — a firm that literally started on his dining room table and today allows tinkerers to build their own drone aircraft (unarmed, we hasten to add). He and his business partner employ 70 people and, indeed, compete with Lockheed Martin.

Anderson’s presentation weaved in stunning visuals — everything from “makerspaces,” in which inventors work side by side using rented gear, to photos of a very young Anderson with his grandfather, who invented one of the early lawn sprinklers. “He was an inventor, but not an entrepreneur.” Now anyone can be both.

Really, though, this is only a taste of day one here at the Symposium. For the full experience — the next best thing to actually being here — you need access to the high-definition video, or at least the high-quality audio. We make both available. And you can sign up for access right now. The audio files can be in your inbox on or about Aug. 2, and the video streams will be available later in August. Choose your options here.

  And now we transition from regenerative medicine and the Maker movement to… that relic known as the U.S. Postal Service.

Its idea of innovation: the cluster box.

Yes, it’s likely to turn out just as bewildering as the name suggests.

“If you’re moving to a newly built house,” CNN Money writes, “say goodbye to mail delivery at your door.”

In an endless effort to cut costs, the postal service is moving toward a “centralized delivery” method, where postal workers unload mail in one box for each neighborhood.

According to CNN, it costs $353 per stop in most American cities when you add in salaries and cost of transport. The postal service spends a total of $30 billion each year on mail delivery.

Ending door-to-door deliveries would save $4.5 billion a year, more than the $3 billion it would’ve saved from stopping Saturday delivery.

It doesn’t end there…

“In the past year,” CNN goes on, “the cash-strapped Postal Service has been asking companies in industrial parks and shopping malls to also adopt this form of mail delivery.”

“Prior to this spring,” a Postal Service spokeswoman told CNN, “we’d work with the construction companies, and they could decide if the houses would get cluster boxes or curbline delivery — now the Postal Service makes that decision.”

A government monopoly in action…

  “Two weeks ago,” reads the first of several precious metals field reports we solicited in the mailbag, “I bought 180 silver rounds for $2.50 per ounce over spot. I believe the market was in the upper $18 range.”

  “CNI, a dealer in California, buys and sells Maple Leafs in lots of 25. They pay spot plus $1.00 each, and they charge spot plus $2.40.

“American Silver Eagles they buy and sell in lots of 20. They pay spot plus $1.50 and charge spot plus $3.25

“Paying only a couple of dollars over spot at a small storefront is a fantastic deal. I would expect them to charge as much as $10 over spot. That’s why I don’t buy from them, but I think a lot of people would.”

  “I bought through Gold Bullion International ($25,000 minimum to set up, $5,000 per purchase) and I got Silver Canadian Maples for $22.51 on Monday, July 22. They continue to have one of the lowest premiums and, thus far, constant supply.

“Thanks for your fabulous newsletter!”

Regards from Vancouver,

Dave Gonigam
The 5 Min. Forecast

P.S. “The two adult male grizzlies,” writes Symposium Roving Reporter Jim Amrhein, “rose up from where they’d been reclining in the lower half of the compound — and began to lumber up toward this footbridge.”

Where Jim was standing.

For anyone who can’t be with us in Vancouver this week, Jim’s dispatches convey a you-are-there quality this humble scribe can’t begin to touch; it’s the ideal supplement to The 5’s coverage. Check out today’s edition, right here.


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