July 1, 2014
- The new version of “soccer riots”… complete with an investing angle
- Billions flowing into “smart cities” to fight the 21st century’s top security challenge
- The unlikely asset class that outperformed stocks during the first half of 2014
- The 5 bids farewell to a longtime favorite gold chart
- Janet Yellen’s most vocal critics cite loud noises, bad manners
- Truthers, birthers, JFK, gold and Velveeta: Our “conspiracy” mailbag splits at the seams
The term “soccer hooligan” got a whole new meaning this year.
While the minds of many Americans are fixed on the USA-Belgium matchup at the World Cup later today… we’re thinking more about something that happened outside the Colombia-Uruguay match last weekend.
Clouds of tear gas near Maracana Stadium in Rio…
“About 350 anti-World Cup protesters marched toward the Maracana closely guarded by about 250 police, who fired tear gas to disperse them just as they came within sight of the stadium,” reports the AFP newswire.
The first such protests broke out just over a year ago. In the beginning, they drew hundreds of thousands of people outraged at the $11 billion cost of putting on the World Cup… while Brazil’s schools, hospitals and public transportation were still, for lack of a better term, Third World.
Few of the protesters were violent, then or now. But the swift reaction speaks to the skittishness of both riot police… and the government that employs them… not only now, but long after the tournament is over.
“This isn’t going to end with the World Cup,” protester Pablo Rodriguez said last weekend. “Even if Brazil wins the Cup, it’s not going to improve anything for poor people, for those living in the favelas, for the dispossessed.”
“Rio has many dark sides, including has some of the poorest, most violent neighborhoods in the world,” says our military affairs expert Byron King. He’s seen these neighborhoods on his travels there.
“The local term is ‘favelas,’ which are slums so grim that they make the London of Charles Dickens look like Beverly Hills. Some of the worst neighborhoods of Rio have been under 24/7 police occupation for months at a time; other areas have been practically abandoned to their fate.
“But Rio isn’t an isolated case — it’s part of a bigger picture. Rio is an archetype of the 21st-century city that has far-thinking military planners deeply concerned. To them, these rising third-world cities are the battlefields of tomorrow.”
“High-level strategists are starting to build a consensus that large, unstable cities are evolving into the world’s No. 1 security threat,” Byron goes on.
“Think of vast areas, already teeming with millions of people, further urbanizing as people leave small towns and countryside to join their fate to that of the global economy. Now throw in severe limits to water, sewage, electric, natural gas and trash pickup.
“Place the population in a position of grinding poverty, with stagnant wages (for those who hold jobs), high local unemployment and organized crime. Meanwhile, shrink the police force, thanks to the kind of budgetary problems you get with a minimal tax base. What happens? Well, it’s so new and startling, the sociologists had to make a new name for it.”
The term is “mega-slum.” On this map of the world’s 30 biggest, Rio doesn’t even show up…
“According to forward-thinking military planners,” says Byron, “these urban disaster areas will be the greatest national security challenge of the 21st century. They’ll be ground zero for the worst kinds of organized crime and the perfect recruiting ground for terrorist organizations… not to mention the perfect place to hide from the law or an invading army.”
The local government in Rio is keenly aware of all this…
So they’ve set out to create the world’s first “smart city.”
“Think of all the things it takes to keep a city running,” says Byron: “power generation, water, road and rail grids, traffic control, waste disposal, policing and emergency services, constant maintenance… the list goes on and on.
“Now, imagine that all those things could be tracked by computers based in a central command post. Furthermore, imagine that the city’s computers could make intelligent, immediate adjustments to the flow of utilities, traffic, public safety systems and much more.
“Throw in an experienced team of city planners and staff, working shifts around the clock, making decisions the computers aren’t qualified to make and effecting solutions quickly and remotely, at the touch of a button.”
Thus, a “control room” in Rio that looks like the Johnson Space Center, only more high-tech…
“The applications of this kind of control technology to future military conflicts are manifold,” says Byron. “For example, imagine the edge this type of system would have on monitoring — or suppressing — insurgencies in, say, Cairo or Kiev, or planning the defense of, say, Baghdad against an invading Islamist horde. Then again, it might come in handy to deter terrorists in a city like, say, New York.”
Creepy and Big Brotherish? Yes, as Byron freely acknowledged when he told us last February about the high-tech security in place for the Winter Olympics in Sochi. “The point,” he says now, “is that the tech has already happened. It’s here. It’s out there.”
And if you’re so inclined, Byron has pinpointed the company best poised to profit from it all. You can think of it as the intersection between physical warfare and the cyberwarfare he’s been telling us about for the last year and a half. The investment opportunity is still in its early stages… but as you can see here, the train’s leaving the station.
Stocks are in rally mode today: As we write, the Dow is only 60 points away from 17,000.
Small caps are even stronger, the Russell 2000 up 1.3%, to 1,208 — which happens to be its all-time closing high set four months ago.
It being the first Monday of the month, traders are digesting manufacturing reports from around the world. In each of these measures, 50 is the dividing line between a growing factory sector and a shrinking one…
- China: The official government number edged up to a six-month high, at 51.0. A separate gauge kept by HSBC leaped to 50.7 — its first above-50 reading all year
- Eurozone: Down to 51.8, the lowest reading since last November
- United States: The ISM manufacturing survey edged down to 55.3. Within the survey, new orders are up strong, which should bode well going forward. Emphasis on the word “should”…
The S&P 500 ended the first half of 2014 up about 7%. But long-term Treasuries performed even better, up more than 11%. “So much for expert predictions of a great shift out of bonds and into stocks,” quips money manager Barry Ritholtz at his Bloomberg blog this morning.
Crude is holding steady at $105.38, traders again not rattled by developments in Iraq.
President Obama has notified Congress he’s sending “at least 200” combat troops there, in addition to the 300 “advisers” he sent last week. Whatever happened to “no boots on the ground”?
Meanwhile, the Sunni and Kurdish factions have walked out on parliament, so don’t count on any “political solutions” from a “unity government.”
Gold zoomed up no sooner than we hit the “send” button on yesterday’s 5, and most of those gains are holding up this morning. At last check, the bid was $1,329.
It is time to retire one of our favorite gold charts. It is no longer relevant.
Since early 2012, we’ve dutifully documented a steady increase in China’s gold imports via Hong Kong. Along the way, we’ve passed along two major theories behind China’s gold accumulation.
Our friend Chuck Butler at EverBank World Markets believes China is angling for a gold-backed yuan that would supplant the dollar as the world’s reserve currency. Jim Rickards, author of The Death of Money, believes a large gold stash would give China a “seat at the table” whenever the world monetary system collapses and needs to be reorganized. (Remarkably, he has documentation that Western central banks are aiding China in this aim, as he explained in a recent issue of Apogee Advisory.)
Two months ago, we detected a change in trend in the chart. The figures since then confirm that trend. To which we say, whatever…
As we pointed out in late April, China’s gold imports have always been a black box. Only the Hong Kong figures are disclosed. Imports via Shanghai and Shenzhen are a closely guarded secret. And now imports are coming through Beijing, too, likewise undisclosed
We’re heartened to see an expert like Lawrence Williams at Mineweb concur. “With new regulations,” he writes this week, “it is indeed possible that imports through these other ports of entry may be rising.”
Janet Yellen — Fed chair, bad neighbor.
The genteel residents within the gates of a community called Hillandale — an even tonier section of Washington’s tony Georgetown neighborhood, with a typical home price of $3 million — are plenty upset with Yellen. She moved in a couple of years ago, but when she ascended to the chairmanship in February, the security detail was amped up.
“The government is paying $5,000 or $6,000 a month or more to rent a whole townhouse in Georgetown to put cops in,” complains lawyer William Shawn, who lives down the street. Neighbors have written up a list of grievances — among them, oversize vans loaded with weapons, cameras and take-out pizza, peeling through the otherwise placid streets when not parked in front of the townhouse.
Said one neighbor to The Wall Street Journal, anonymously, because she fears reprisals: “We have this group, overweight, wearing the most ridiculous blue uniforms with the most ridiculous blue caps, and they have guns that are visible.”
Oooh, icky firearms!
Geez… the Federal Reserve versus a homeowner’s association. Can’t root for anyone in this dispute…
“I believe the market is manipulated, but I also believe we landed on the moon,” reads the first entry in a bulging mailbag after we asked yesterday if you buy into any “conspiracy theories.”
“I do not believe the government planned Sept. 11,” the reader adds. “But beyond that, anything goes.”
“Sept. 11 has been a complete ‘wag the dog’ from start to finish,” another reader disagrees.
“I don’t believe Obama is a U.S. citizen,” writes a third, with another familiar theme.
We won’t dig into the whys and wherefores of either topic; they occupy plenty of Internet bandwidth as it is. While your editor is neither “truther” nor a “birther,” I firmly believe that to the extent such folks help discredit whatever regime is in power at the moment, they serve an invaluable civic function. Heh…
“The precious metals markets are absolutely being manipulated,” reads the first of two emails on the subject that we’ve had to truncate to squeeze into our 5 Mins. today.
“Any serious examination of trading patterns and methods will confirm this beyond question. Paper precious metals contracts (with no physical backing remotely possible) of enormous size are dumped at low volume trading periods in order to suppress prices.”
“Are you deaf, dumb, blind and as gullible as a 3-year-old, to boot?” reads the second of those emails, the reader unsatisfied with our gradual conversion into the manipulation camp.
“God, how lazy and trusting can you get? The same Fed and banking cabal you rightly rail against doesn’t want to face the music a rising gold price would be blasting loud and clear. What a shocker!
“It’s a conspiracy fact, Dave. The insiders are protecting their fiat franchise. Did you actually expect them to behave otherwise? I lose more respect for you guys every day.
“Last thing. I’m an unabashed believer in conspiracies. What the hell do you think the establishment of the Fed was?”
The 5: Thank you for the warm welcome into your camp.
We sorta figured you’d appreciate it if someone with a skeptical and deliberate approach to things took time to come around to your view because it would bolster your position. But if it’s more important for you to be right than to be happy, that’s your prerogative…
“I remember the assassination of JFK,” a reader writes, directly addressing our new “conspiracy” expose, “and even though I was young, I remember saying that LBJ was in on it.
“Of course, that was never a painted picture until now, and I am reading about it. Nice to be on the right side of things once in a while.”
The 5: The record might be forever fuzzy about LBJ’s involvement. But he certainly did undo one of the most important pieces of JFK’s legacy, something that affects your standard of living down to this very day. That’s what’s at the heart of our investigation.
“No way you can expect anyone to speak their mind in all honesty,” a reader complains of our original query, “with all the surveillance going on. Unless you have some security we don’t know about. If so, please share!”
The 5: Hmmm… The whole point of labeling something a “conspiracy theory” is to rule it out of the realm of respectable discussion. Elites don’t have to suppress dissenters if the dissenters can be marginalized just as easily, no?
“I believe that Kraft Food Co. has conspired with the U.S. government,” reads the nonsequitur of the day, “to make us believe that Velveeta is cheese.”
“Conspiracy theory,” writes our final correspondent: “A provider of financial newsletters sends out a free daily digest of news and investment angles, sprinkled with humor and user feedback, but mockingly implies it can be read in a five-minute time span.”
The 5: You’re going to start that debate all over again?
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. As we said yesterday, the granddaddy of all “conspiracy theories” — or at least the one that began to erode people’s trust in government — was the JFK assassination.
We urge you to examine the new evidence we’ve compiled. It’s not out of line to say your financial future depends on it, so give it a look right away.