November 27, 2013
- In which The 5 briefly indulges in “I told you so”…
- A 2011 turning point: The real story behind the cost of Thanksgiving dinner
- A profit opportunity from holiday overindulgence
- Tuning out the Black Friday noise… tuning in an underpriced retail play
- Is the Iran nuclear deal all about squeezing China?
- Clock’s running: Readers rise to The 5’s defense
We hate it when we’re right.
We hate it worse when we’re right about Obamacare. “Stop talking about politics!” comes the inevitable email. If that’s your sentiment, please bear with us for 20 seconds…
The American Enterprise Institute is out with a study that says nearly 80 million people could see their employer-provided health insurance canceled because it doesn’t meet Obamacare standards. Fox and Drudge ran with the story yesterday.
We warned at the start of the month that the cancellations won’t be limited to 9 million people in the “individual market.” We said roughly half of all workers who get their health insurance through their employers would end up losing their plans, per a document issued by the Department of Health and Human Services… in 2010.
About 157 million people are covered by employer plans. Bada. Half of that is 78.5 million. Bing.
We won’t belabor the point… other than to say what we said yesterday: Obamacare is not an “it only affects someone else” story. It will impact a friend. It will impact a loved one. And it might even impact you.
Politics, like it or not, is climbing right into your wallet. Don’t be caught unprepared when there are mitigating steps you can take right now — spelled out in a report you can get only from the Laissez Faire Club.
Now on to some holiday fare…
The good news: Thanksgiving dinner will cost a bit less this year. The bad news: The cost in general is at a new and uncomfortable plateau.
Every year, the American Farm Bureau Federation dispatches more than 150 volunteer shoppers across the land to check grocery prices. After crunching the numbers, the group concludes that feeding 10 people this year costs $49.04 — down from $49.48 a year ago.
The Farm Bureau press release was full of empty calories: “The cost of this year’s meal, at less than $5 per serving, remains an excellent value for consumers,” said AFBF president Bob Stallman.
Dig deeper and we find a disturbing long-term trend. There’s a “new normal” since 2011. That was the year the Fed effectively exported inflation worldwide, begetting the increases in food prices that touched off the Arab Spring. Since then, the price of Thanksgiving dinner has hovered just below $50.
This year, the turkey cost less, a 16-pound bird down 47 cents, to $21.76. But 3 pounds of sweet potatoes jumped 21 cents, to $3.36.
If you overindulge tomorrow, science is finding a way to help you overcome the consequences.
“There’s one fat you don’t want to lose: brown fat,” says our Ray Blanco on the science-and-wealth beat. “Brown fat, also called brown adipose tissue, helps regulate and burn glucose, increases insulin sensitivity and helps eliminate fatty acids.”
We lose these cells as we age, raising the risk of Type 2 diabetes. “About 22 million Americans contend with it,” says Ray, “and the total cost associated with the disease is estimated to be $245 billion for 2012 alone.”
On Monday, researchers at a conference in London heard all about a way to regenerate our depleted brown fat. It involves stem cell lines that can make brown fat cells grow again.
Better yet, “the stem cells can express two genes,” Ray explains. “One codes for betatrophin, which causes insulin-producing beta cells to multiply. The other codes for adinopectin, which regulates glucose and fatty acids and has been shown to reduce insulin resistance in animals.”
The breakthrough could mean billions to the company that developed it. Right now, it has a market cap of a little over $200 million… so you can imagine the staggering profit potential. And this treatment for diabetes is only one arrow in the company’s formidable quiver. We’re floored every time we examine what’s in the company’s pipeline… but you should really check it out for yourself.
“The annual fabrication of seasonal retail sales data is an American holiday tradition,” writes uber-blogger and money manager Barry Ritholtz.
Already this morning, we see a barrage of “Black Friday” stories. “Most U.S. retailers will have to offer both big discounts and stellar service to get consumers to spend freely,” says Reuters, by way of teeing up said fabrication.
“Sometime over the next week,” Mr. Ritholtz warns, “you can expect to see/read/hear the following lie: ‘Retail sales over the holiday weekend were surprisingly strong, up XX% from last year. This bodes well for the upcoming holiday shopping season.’
“If this were written accurately, it would instead read something like this: ‘We don’t know how strong Black Friday sales were just yet, and won’t for a few days. We don’t know how this holiday retail season will stack up against last year’s; we certainly haven’t the foggiest clue as to how the rest of the holiday season will go.'”
The most worthless report of the bunch comes from the National Retail Federation. “The methodology employed by the NRF survey is defective,” says Barry.
“What happens is that people are stopped heading into a mall, asked how much they spent last year and how much they plan on spending this year. That increase is how much of the press will misreport sales for the upcoming holiday season.”
As if you could accurately remember, off the cuff, how much you spent last year. “The track records of these surveys are awful.” The worst was 2009, when the survey projected a 43% drop in sales from 2008. Not surprising, perhaps, but when actual dollars and cents were toted up, the result was a 3% increase.
“Investors who don’t enjoy losing money,” Mr. Ritholtz concludes, “should ignore the media coverage of these misleading, inaccurate surveys with extreme prejudice.”
“American teenagers collectively control $208.7 billion in spending each year,” says our Jonas Elmerraji, eyeing a sensible holiday retail play.
“That makes teenagers a very desirable demographic, especially when you consider that factors like fashion and trendiness often trump value in a teenage budget. As you might expect, those factors can provide a cash cow for companies that market products to teens.”
Alas, the marquee name in the sector is a train wreck. Abercrombie & Fitch is run by Mike Jeffries, “a 69-year-old retail veteran who thinks he’s 19,” says Jonas.
Never mind, for instance, Jeffries’ remarks about not wanting fat people to wear his firm’s clothes: “Abercrombie sports the highest corporate expenses in the industry,” Jonas explains, “by a factor of nearly two in some cases. A big part of that hefty cost structure comes from Jeffries’ salary, the biggest in the industry.”
Improbably, Jonas has uncovered a genuine bargain in the sector. If it were valued the way the Street values Abercrombie & Fitch, $1,000 in shares would jump to $2,147 next year. “That’s basically like getting a $1,147 allowance from the teenagers shopping in this firm’s stores.” Good enough to make the cut for the Penny Stock Fortunes portfolio. For access, look here…
Every major U.S. stock market index is in the green this morning, if only slightly. The strongest of the bunch is the Nasdaq, powering further into 4,000 and higher territory.
Gee, the “pivot” was awfully quick.
Two years ago this month, when Hillary Clinton was still secretary of state, she penned an essay in Foreign Policy with the presumptuous title “America’s Pacific Century.”
“As the war in Iraq winds down and America begins to withdraw its forces from Afghanistan,” she wrote, “the United States stands at a pivot point.” She was declaring that Washington’s empire would shift its attention from the Middle East to Asia.
Sorry for this rude interruption of the holiday cheer… but it’s worth quickly examining the nuclear deal with Iran in light of the pivot strategy. Our Byron King passed along an essay last weekend by one Matt Hipple from the Center for International Maritime Security. “In a time of sequestration,” Mr. Hipple writes, “resources are going to be stretched thin.
“Facility development in Qatar, Dubai, Bahrain, etc…. in response to Iranian threats and the massive project of ballistic missile defense will in the immediate term continue to be important, but if successful in changing Iran’s strategic calculus from military to economic success, those efforts can give way to the bigger projects of presence in Asia and projection in Africa.”
In other words, if Iran figures less into the Pentagon’s “threat matrix,” that frees up resources for the “pivot” to Asia. Something to think about after the U.S. flew B-52s on Monday over islands claimed by both China and Japan.
The islands might be “strategically irrelevant and economically marginal,” as one expert said in our virtual pages last December… but Washington appears determined to make Japan’s fight our own.
We’ll dive more into the ramifications for your portfolio next week. There’s ample time; the story likely won’t blow up in the next few days… but it’s also not going away.
An uneventful week for gold on Monday and Tuesday remains uneventful today. At last check, the bid on the Midas metal is $1,243.
“Yes, it is a five-minute read,” begins today’s meta-mailbag.
“In response to the writer who said your 5 Min. Forecast newsletter is not a five-minute read, all I can say is that I can normally read it in well under five minutes, because, unlike that reader, I don’t have to follow each line of the text by pointing at it with my finger! ‘Nuff said.”
“I am amazed by the amount of time readers waste complaining that they cannot get through The 5 in five minutes,” writes our next correspondent.
“I find this interesting since it usually takes me three-five minutes to read it… and understand the info well enough to explain it to others. I do not always read the reader letters, and it might take a bit longer if I delved into some of the links for more information. I just assumed that someone that reads this type of newsletter understands the core principles of investment and finance. You do not partake in much ‘rocket science,’ so I do not see any great difficulty in assimilating the information you distribute!
“Keep up the good work! I will not insist you change the name to The 3 (or 4), since that is my normal read time!”
“If you would simply note,” a third reader suggests, “that the five-minute time estimate was provided by a government agency — any government agency, but in particular the Bureau of Labor Statistics — no one would take the estimate seriously. You would be covered for one minute to 10.”
“Had to chuckle,” writes a fourth, “over that ‘complaint’ you published about The 5 not being readable in five minutes. It’s as if the reader is saying, ‘What, you’re giving us more than promised? Well, cut it out.’
“As for me, keep ’em coming. I appreciate your good-natured take on the events and follies of our time.”
“Your good reader who complained about content and time of The 5 may be right… for himself,” chimes in one of our regulars.
“However, for myself, I have always preferred quality over quantity. Of all the newsletters that I’ve received willingly or unwillingly over many years, The 5 remains heads and shoulders above all others… and I mean all others. It is my first read with my first cup of coffee early in the morning before all others in the household are up and out of bed or nest (I have birds).”
“Wow, some folks certainly do have a deep bag of tricks when it comes to finding something about which to complain.
“Last time that I watched 60 Minutes — and it has been a while, because they opted to quit asking any legitimately probing questions — the show ended before its full 60 minutes were up. I also spotted an item at the local dollar store that cost more than a dollar.
“Call me crazy, but I am still OK with the names of both. Maybe some people take the word literal too literally? Regardless, thanks for The 5, and Happy Holidays to the entire crew!”
“I think people should lighten up,” writes our final correspondent with some tough love for fellow readers. “Maybe you’re a slow reader or maybe the person editing it is a fast reader.
“Either way, there are a lot more things that need fixing. Read it and enjoy it, and if it takes longer, suck it up.”
The 5: Ummm… are the “lot more things that need fixing” a reference to our daily missive or to the world at large?
Happy Thanksgiving,
Dave Gonigam
The 5 Min. Forecast
P.S. U.S. markets are on an abbreviated holiday schedule this week, and so is The 5.
Stocks won’t trade tomorrow, and the market closes at 1:00 p.m. EST Friday. As for us, we’ll move our usual Saturday wrap-up 5 Things You Need to Know to Friday. The regular weekday edition of The 5 returns on Monday.
We didn’t plan it this way, but it’s become our day-before-Thanksgiving custom to run our friend Jeffrey Tucker’s review of The Idea of America — a splendid collection of essays selected by Agora Inc. founder Bill Bonner and Pierre Lemieux. From Jefferson to Emerson to Mencken to Rothbard, the essays are as timely now as they were when they were written. With our best wishes and food for thought on Thanksgiving, enjoy.
The Idea of America
reviewed by Jeffrey Tucker
There are occasions in American life — and they come too often these days — when you want to scream: “What the heck has happened to this country?!” Everyone encounters events that strike a particular nerve, some egregious violations of the norms for a free country that cut very deeply and personally.
We wonder: Do we even remember what it means to be free? If not — and I think not — The Idea of America: What It Was and How It Was Lost, a collection of bracing reminders from our past, as edited by William Bonner and Pierre Lemieux, is the essential book of our time.
I’ll just mention two outrages that occur first to me. In the last six months, I came back to the country twice from international travel, once by plane and once by car. The car scene shocked me. The lines were ridiculously long, and border control agents, clad in dark glasses and boots and wearing enough weaponry to fight an invading army, ran up and down the lines with large dogs. Periodically, U.S. border control would throw open doors of cars and vans and let the dogs run through, while the driver sat there poker-faced and trying to stay calm and pretending not to object.
When I finally got to the customs window, I was questioned — not like a citizen of the country, but like a likely terrorist. The agent wanted to know everything about me: home, work, where I had been and why, whether I would stay somewhere before getting to my destination, family composition and other matters that just creeped me out. I realized, immediately, that there was no question he could ask me that I could refuse to answer, and I had to do this politely.
That’s power.
The second time I entered the country was by plane, and there were two full re-scans of bags on the way in, in addition to the passport check, and a long round of questioning. There were no running dogs this time; the passengers were the dogs, and we were all on the agents’ leashes. Whatever they ordered us to do, we did, no matter how irrational. We moved here and there in lock step and total silence. One step out of line, and you are guaranteed to be yelled at. At one point, an armed agent began to talk loudly and with a sense of ridicule about the clothes I was wearing, and went out of his way to make sure everyone else heard him. I could do nothing but smile as if I were being complimented by a friend.
That’s power.
Of course, these cases are nothing like the reports you hear almost daily about the abuse and outrages from domestic travel, which now, routinely, requires everyone to submit to digital strip searches. We have come to expect this. We can hardly escape the presence of the police in our lives. I vaguely remember, when I was young, that I thought of the police as servants of the people. Now their presence strikes fear in the heart, and they are everywhere, always operating under the presumption that they have total power, and you and I have absolutely none.
You hear slogans about the “land of the free,” and we still sing patriotic songs at the ballpark — and even at church on Sunday — and these songs are always about our blessed liberty, the battles of our ancestors against tyranny, the special love of liberty that animates our heritage and national self-identity. The contrast with reality grows more stark by the day.
And it isn’t just about our personal liberty and our freedom to move about with a sense that we are exercising our rights. It hits us in the economic realm, where no goods or services change hands that aren’t subject to the total control of the leviathan state. No business is really safe from being bludgeoned by legislatures, regulators and the tax police, while objecting makes you only more of a target.
Few dare say it publicly: America has become a police state. All the signs are in place, among which the world’s largest prison population. If we are not a police state, one must ask: What are the indicators that will tell us that we’ve crossed the line? What are signs we haven’t yet seen?
We can debate all day about when, precisely, the descent began, but there can be no doubt when the slide into the despotic abyss became precipitous. It was after the terrorists hit on Sept. 11 in 2001. The terrorists wanted to deliver a blow to freedom. Our national leaders swore the terrorists would never win, and then spent the following 10 years delivering relentless and massive blows to liberty as we had known it.
The decline has been fast, but not fast enough for people to be as shocked as they should be. Freedom is a state of being that is difficult to recall once it is gone. We adapt to the new reality the way people adapt to degenerative diseases, grateful for slight respites from pain and completely despairing of ever feeling healthy and well again.
What’s more, all the time we spend obeying, complying and pretending to be malleable — in order to stay out of trouble — ends up socializing us, and even changing our outlook on life. As in the Orwell novel, we have adjusted to government control as the new normal. The loudspeakers blared that all of this is in the interest of our security and well-being. These people who are stripping us, robbing us, humiliating us, impoverishing us are doing it all for our own good. We never fully believe it, but the message still affects our outlook.
The editors of The Idea of America are urging a serious national self-assessment. They argue that freedom is the only theme that fully and truly animates the traditional American spirit. We are not united in religion, race or creed, but we do have this wonderful history of rebellion against power in favor of human rights and freedom from tyranny. For this reason, the book begins with the essential founding documents, which, if taken seriously, make a case for radical freedom not as something granted by government, but as something that we possess as a matter of right.
The love of liberty is rooted in our Colonial past, and it is thrilling to see Murray Rothbard’s excellent account of the pre-revolutionary past printed here, with follow-ups to make the point by Patrick Henry and Thomas Paine. Lord Acton makes the next appearance with a clarifying essay about the whole point of the American Revolution, which was not independence as such, but liberty. He forcefully argues that the right of secession, the right to annul laws, the right to say no to the tyrant, the right to leave the system, constitute great contribution of America to political history. As you read, you wonder where these voices are today and what would happen to them if they spoke up in modern versions of the same thoughts. These revolutionaries are pushing ideas that the modern regime seeks to bury, and even criminalize.
The voice of the new country and its voluntaristic themes is provided by Alexis de Tocqueville, along with the writings of James Madison. As Bonner and Lemieux argue in their own contributions, the idea of anarchism, that is, living without a state, has always been just beneath the surface of American ideology. Here, they bring it to the surface with an essay by proto-anarchist J. Hector St. John de Crevecoeur, who said of America, “We have no princes for whom we toil, starve and bleed: We are the most perfect society now existing in the world.”
The anarchist strain continues with marvelous writings by Thomas Jefferson, Henry David Thoreau, Voltairine de Cleyre, plus some court decisions reinforcing gun rights. The book ends with another reminder that American is an open society that is welcoming to newcomers. The final choice of Rose Wilder Lane’s “Give Me Liberty” is inspired.
The value of this book is dramatically heightened by the additional material from Bonner, whose clear prose and incisive intellect is on display here, both in the foreword and the afterword, as well as Lemieux, whose introduction made my blood boil with all his examples of government gone mad in our time. Bonner in particular offers an intriguing possibility that the future of the true America has nothing to do with geography; it exists where the free minds and free hearts exist. The digitization of the world opens up new opportunities for just this.
The contrast is stark: what America was meant to be and what it has become. It can be painful to take this kind of careful look. Truly honest appraisals of this sort are rare. Adapting, going along, pretending not to notice, are all easier strategies to deal with the grim situation we face. But this is not the way America’s founders dealt with their problems. This book might inspire us to think and act more like we should.
We should prepare.
In the words of Thomas Paine:
“O ye that love mankind! Ye that dare oppose, not only the tyranny, but the tyrant, stand forth! Every spot of the Old World is overrun with oppression. Freedom hath been hunted round the globe. Asia and Africa have long expelled her. Europe regards her like a stranger, and England hath given her warning to depart. O! receive the fugitive, and prepare in time an asylum for mankind.”