April 30, 2014
- The new red scare: Why we’re yawning at the “China surpasses U.S.” news
- As the Fed prepares its latest announcement, The 5 makes sense of its last one
- When cancer becomes a one-pill-a-day disease that allows a normal life
- The real story behind the “White House Backs Interstate Tolls” headline
- Criminal bankers… porn star punishments… overseas gold storage in your IRA (for real)… and more!
Maybe we haven’t had enough coffee yet… but we’re finding it hard to get up any kind of reaction to the following…
Ooh, but that wasn’t supposed to happen till 2019, the link at the Financial Times says.
Seems the wonks at the World Bank have decided that fiat currency goes a lot further in developing countries than they used to think. Thus, they’ve revised their forecasts. We went in search of a chart representing this revision and found one at The Economist…
And you know what? After staring at the chart and downing another cup, we still can’t rouse ourselves.
For one thing, the United States still has a population roughly a quarter the size of China’s. So there’s still a lot more “economic output” per person in the U.S., right?
But there’s a more fundamental problem: In the end, the statisticians are still relying on gross domestic product — GDP – which, as we’ve long pointed out, is a statistical abstraction that has no bearing on your life or your job or your standard of living.
“It’s just a number that economists can play with,” our Chris Mayer reminds us.
Chris points to a recent Financial Times piece that says Nigeria has become Africa’s largest economy, simply because the government there changed the way it measures GDP.
We can never cite this example enough, courtesy of Agora Inc. founder Bill Bonner: If you mow your lawn and your neighbor mows his, GDP is unchanged. But if you mow each other’s lawn and pay each other $30 to do so, GDP miraculously grows by $60.
“GDP,” concludes Chris, “is an abstraction too far removed from reality. Yet people make real-world policy on this fantasy as well as a witch’s brew of sister concoctions.”
God must have a wicked-good sense of irony: The China-will-surpass-the-U.S. story came out the same day the Commerce Department issued the latest “fantasy” GDP figure… and the Federal Reserve will draw on GDP in deciding “real-world policy” later today.
The GDP number for the first quarter stunk. It registered an annualized increase of 0.1% — lower than even the most pessimistic guess among dozens of economists polled by Bloomberg.
Digging into the numbers, we see consumers are still spending, but business investment is down and exports are darn near collapsing.
But hey, chalk it up to the rough winter, right? That’s what they’ve done with every other lousy number this year.
Thus, the big U.S. stock indexes are ruler-flat as we write this morning, holding onto yesterday’s modest gains. Gold is also little changed, at $1,292.
As for the Fed, its latest policy pronouncement comes this afternoon, around the time this episode of The 5 hits your inbox.
We don’t know what the committee will say, but we do know there’s no Janet Yellen news conference this time, thus no opportunity for her to make the kind of “stumble” the media pounced on after her first news conference as Fed chairwoman six weeks ago.
Then, she was pressed to specify how soon the Fed might allow the fed funds rate to start rising once the current round of bond buying/money printing is wound down later this year. She said, “about six months.”
There was a momentary market panic, the Dow shedding 100 points.
We’ve been thinking about this “stumble” ever since, and we’ve come to the following conclusion: What else was she going to say?
Imagine if she’d told the truth: “I can’t tell you when we’ll make that call. It all depends on the economic data and whether they meet certain thresholds. And frankly, those thresholds might change another six or 12 months down the line, depending on other variables, and I can’t tell you what those variables might be right now. In fact, even the kind of data we find relevant now might be less relevant in another six or 12 months; we might find other data more relevant by then.”
That would be an honest answer. It would also tank the market a lot harder and longer than 100 points in an afternoon… because the obvious takeaway would be, “These people have no idea what the hell they’re doing.”
“The next time you hear quacking about biotech, I want you to understand this person is a sore loser,” writes our investment director Paul Mampilly, with an excellent antidote to the noise on business TV.
“These people have missed out on the huge gains of the last five years.” True, the sector’s down 20% this year… but it’s still up 235% since 2009.
“What’s been driving this success? The answer is lifesaving products for cancer, like Gleevec. Gleevec has transformed one particular kind of cancer called chronic myeloid leukemia (CML). CML used to a death sentence. But today, if you have CML, it’s a chronic disease. People who have this form of cancer pop a pill once a day. And then they go about their lives just like everyone else. Gleevec has almost no side effects.
“I can tell you there at least 20 companies looking for similar pills that can make every type of deadly cancer into a chronic disease.”
Paul recommended one of those companies to an elite circle of readers yesterday. It has the potential to double in a day. In fact, Paul sees four opportunities for the company to deliver that kind of performance this year. The company is a true “Phase 3 rocket”… and if you don’t know what Paul means by that expression, you can learn by clicking right here.
Here come the tollways, or so today’s Washington Post informs us.
“With pressure mounting to avert a transportation funding crisis this summer, the Obama administration Tuesday opened the door for states to collect tolls on interstate highways to raise revenue for roadway repairs,” the paper reports.
The problem, we’re told, is the federal Highway Trust Fund might be depleted as early as this August. We suspect the toll talk is actually a trial balloon to jack up the federal gasoline tax. “It hasn’t been raised since 1993!” scream some of the do-gooders.
Well, that’s true. But maybe the Highway Trust Fund wouldn’t be in such dire straits if Congress didn’t routinely raid it for day-to-day government expenses the same way it does the Social Security “trust fund.”
Nor does this help: “Today, an estimated 40% of highway trust fund revenues go to mass transit, bicycle paths and sundry other earmarks and diversions,” says former White House budget director David Stockman at his invaluable Contra Corner blog.
Oy…
Another snooze, along with the China story: The prospect of criminal charges against two global megabanks.
The New York Times breathlessly touts “a development that could produce the first guilty plea from a major bank in more than two decades.”
Oh, we don’t doubt it’s going to happen. After all, Attorney General Eric Holder has a “legacy” to think about, and he needs to live down his concession that “too big to jail” is official U.S. policy.
“I am concerned,” he told a congressional hearing last year, “that the size of some of these institutions [banks] becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”
So here’s the new development: The feds are preparing a criminal case against Credit Suisse for offering tax shelters to Americans… and France’s BNP Paribas for doing business in countries targeted by U.S. sanctions.
Color us unimpressed: Neither bank is American. And both will be punished only for acts that run counter to official policy in Washington. Contrast that with HSBC, which laundered money for Mexico’s Sinaloa drug cartel and got away with a $2 billion cost-of-doing-business settlement. That’s because according to U.S. court documents, the U.S. government worked hand in hand with Sinaloa for more than a decade to take down Sinaloa’s rivals.
And to think some people still believe the U.S. is a better place to do business than developing countries because we have the “rule of law”…
Meanwhile, JPMorgan Chase gets to demonstrate its ethical bona fides… by closing the accounts of porn stars.
“I’m just upset and still in shock it’s even happening. I’m not doing anything illegal,” says Penthouse Pet Teagan Presley. [In other news, Penthouse is still publishing…]
Presley got a letter dated April 16 informing her that the bank is closing her account, her husband’s account and their two business accounts. They’re getting conflicting stories about why: One day it was because of how they earn a living; another day it was because they supposedly did business with a convicted felon.
At least three other adult stars have gotten the same treatment.
Chased away: Cougarland star Veronica Avluv…
The now ex-customers can blame the government: In 2012, the FDIC issued banks a letter warning them about third-party payment processors and the money laundering they do (unauthorized money laundering, that is, unlike the kind HSBC did).
“Examples of telemarketing, online businesses, and other merchants that may have a higher incidence of consumer fraud or potentially illegal activities or may otherwise pose elevated risk include credit repair services, debt consolidation and forgiveness programs, online gambling-related operations, government grant or will-writing kits, payday or subprime loans, pornography, online tobacco or firearms sales, pharmaceutical sales, sweepstakes and magazine subscriptions,” said the FDIC warning. “This list is not all-inclusive.”
Take note if you’re involved in any of those businesses… heh.
Wells Fargo, meanwhile, appears less worried about the FDIC’s guidance. “Of course we encourage these industry workers to come to us with their business, and we will gladly help them,” a Wells Fargo flack tells TMZ.
“The last line caught my attention,” writes a frustrated reader after we touted the Hard Assets Alliance’s option for overseas gold storage in an IRA.
“Imagine my disappointment,” he goes on, “when I clicked through your link and found they have storage options in New York and Salt Lake City.
“Truth in advertising? Who doesn’t like good hype?”
The 5: Whoops, our bad: We sent you an outdated link. Here’s the correct one for all the details about the Hard Assets Alliance’s precious-metals IRA. Rest assured you can keep 1-ounce U.S. Gold Eagles in Zurich, Switzerland… in your IRA.
As we explained a few weeks ago, Zurich is an ideal location because it won’t charge you value-added tax (VAT) on Eagles stored there, while Singapore and other jurisdictions will.
Cheers,
Dave Gonigam
The 5 Min. Forecast.
P.S. This just in: The Hard Assets Alliance has become an even better deal now with word that they’ve now scrapped all account minimums.
This is huge: The minimum used to be $5,000 for domestic delivery or storage and $10,000 for storage overseas. Now? It’s zero.
That’s right, you can buy in any quantity at any time. And as we’ve said for nearly two years now, the website interface is far and away the simplest in the business. If you’ve ever been frustrated buying metal online before, you will have a refreshingly pleasant experience with the Hard Assets Alliance.
Details on how to open an account are right here. If you already know you’re interested in a precious-metals IRA, check this out.
Please note: Agora Financial is so impressed with Hard Assets Alliance we have formed a marketing relationship. So once you fund your account, we may receive a fee… but that fee in no way affects your transaction costs.