 | | The Daily Reckoning | Wednesday, November 24, 2010 |
- Uranium marches higher...even as stock markets buck and kick,
- Pumping up your portfolio with super stem cells and quantum computers,
- Plus, Bill Bonner checks the status of the Daily Reckoning Crash Alert Flag...
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How to Be a "Slumlord"
What if you could get dirty-rich by acting like a slumlord? Even better, what if you didn't have to own any physical property, but you raked in "rent" on an IDEA?
Well, our buddy Patrick has figured out just how you can "slumlord" great ideas. It's like scalping out some fat "rent" checks on every mobile phone and tablet computer...
This is a pretty new and unknown strategy and he explains it fully in this new video...
|  | | | Noise in the Markets | | Discernable Trends in Uranium Despite Market Volatility | |  | | Eric Fry |
Reporting from Laguna Beach, California...
Snap...Crackle...Boom!
We aren't talking about Rice Krispies, dear investor; we're talking about the sound effects of global macroeconomic trends. During the last few days, Ireland's credit-worthiness snapped, after which the floor underneath the sovereign bond markets seemed to crackle. And lastly, North Korea's deadly target practice on the South Korean island of Yeonpyeong caused a "Boom!" heard 'round the world.
Not surprisingly, the stock markets around the world are also crackling a bit, but not as much as one might expect. It's true that the Dow tumbled 142 points yesterday and 25 points the day before that. But it's also true that this two-day selloff arrived just after last Thursday's 174-point rally and just before this morning's 134-point advance. In other words, there's a lot of volatility, but no discernible trend.
Nevertheless, a handful of discernible trends continue to unfold, notwithstanding the frightening headlines about explosive geopolitical tensions and implosive sovereign debt markets. The uranium price, for example, continues its dogged advance, even while most other commodities are succumbing to a "correctional phase."
As such, one of the most fascinating headlines coming out of Asia this morning had nothing to do with the Koreas of North and South; it had to do with China's voracious appetite for uranium.
As Bloomberg news reports, "Cameco Corp., the world's second-largest uranium producer, agreed to supply the fuel to China Guangdong Nuclear Power Holding Co. through 2025 to meet rising demand in the world's fastest-growing nuclear market. Cameco plans to sell 29 million pounds of uranium... That's equivalent to about 13,000 metric tons.
"China and India are leading the biggest atomic expansion since the decade after the 1970s oil crisis to cut pollution and power economies," Bloomberg continues. "Chinese uranium demand may rise to 20,000 tons annually by 2020, more than a third of the 50,572 tons mined globally last year, according to the World Nuclear Association...[Guangdong Nuclear], the country's largest reactor operator after China National Nuclear Corp. is building about 17 gigawatts of reactors, and by 2020, expects to have more than 50 gigawatts in operation, according to Cameco."
This long-term contract between Guangdong and Cameco should come as no great surprise to constant readers of The Daily Reckoning...or even to occasional readers of The Wall Street Journal. The November 9, 2010 edition of The Daily Reckoning, "Uranium - Our 'Trade of the Decade' Heats Up!" reiterated the (very) bullish case for this radioactive energy source.
On the same day, The Wall Street Journal ran the following headline: "Traders Go Nuclear on China Uranium Reports." In the story that followed, the Journal noted, "Forecasts of stronger uranium demand in China have spurred bullish nuclear-sector options trading to its highest pitch all year... USEC (USU) options, for example, were seeing robust interest. Volume in the company's bullish contracts hit its highest point in 14 months..."
Whether or not such short-term bets pay off, long-term bullish bets on uranium and uranium stocks are becoming more compelling by the moment. A global "uranium rush" is already underway, but very few investors seem to notice or care.
"According to the International Atomic Energy Agency, world demand for uranium was 135.8 million pounds in 2009," observes Matt Badiali, our colleague over at the S&A Resource Report. "That will likely rise to 201.1 million pounds by 2020. To meet that demand, we'd need to almost double the amount of uranium mined worldwide in just 10 years.
"That's a tall order," Badiali continues. "So nuclear power companies and uranium miners alike are jostling for control of existing supply. The Russian state-owned nuclear group, Rosatom, recently bought 17% of Canadian uranium miner Uranium One. The deal gives Rosatom the right to purchase up to 20% of Uranium One's global uranium production. In a similar move to grab future production, Korea Electric Power (KEPCO) agreed to buy 20% of junior uranium company Denison Mines' production...
"Also, China National Nuclear Corporation, which oversees China's nuclear industry, recently announced an agreement with French uranium miner AREVA to buy 440 million pounds of uranium over the next 10 years for $3.5 billion. That's $79.55 per pound...a 34% premium to the current price of uranium.
"Nuclear power companies can afford to pay those kinds of premiums to lock in fuel supplies," Badiali winds up, "because the cost of fuel makes up less than 4% of the cost to generate electricity. That means power companies are not all that 'price sensitive.' It won't make much difference to them if they pay $60 a pound or $150."
These dynamics should intrigue forward-looking investors. As the uranium land-grab continues - and an increasing percentage of the world's uranium supply is "spoken for" - the uranium price should continue its upward trajectory.
In the column below, guest editor, Ray Blanco, examines another trend that should intrigue forward-looking investors...
| | | | SHOCKING NEW WEALTH BREAKTHROUGH: |
Technology Behind US Government Code-Cracking Helps Predict Stock Prices
And - it's Secretly Making People On Wall Street $57 Million Per Day In Profits...
So far, you could be $99,100 richer using a similar tool.
Urgent video shows you how...
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| | The Daily Reckoning Presents | | Profiting from Information Overload | |  | | Ray Blanco |
Throughout most of history, human beings could expect to grow old and die in a world very much like the one into which they were born. Change was slow, by modern standards. People lived as hunter-gatherers for hundreds of thousands of years, before agricultural technology took root and changed society about 10,000 years ago.
Then, only 200 years ago, the industrial revolution radically remade society yet again.
In the late 20th century, the electronic computer started a new revolution, which is still ongoing. Today, culture is still playing "catch up" with the radical democratization of information and opinion that new, computer-enabled media and ubiquitous network connectivity is creating. Yet modern nanotechnology, in its various forms, promises to usher in a new technological growth phase mere decades after the information technology revolution began.
In each case, the amount of time between one fundamental technological shift and the next has grown shorter. The result, from an economic standpoint, is that each new "technology growth phase" accelerates wealth creation, and improves the quality of life for everyone by reducing costs and solving problems.
To give an example of how technology keeps things cheap, the price of oil has been slowly rising over the last few months. However, what would the price of oil be today if we were still using the same technology that struck black gold at Spindletop in 1901? The short answer is that oil would be far more expensive, if any was available at all anymore. The story of the last 100 years would be very different without the inexpensive energy that fueled it.
Another example: what would the price of food be today without the Green Revolution? At one time, more than 90% of the US population was involved in agriculture in one way or another. Today, it is around 2%. In past times, an extended economic downturn like the current one meant hunger for many. Today, the problem of the poor is too many calories. If it were not for transformational innovation in food production, many of us wouldn't be able to secure enough daily calories to survive.
For many people, however, it starts to become difficult to process accelerating technological change. Even for those of us that track technology, it is impossible to monitor everything. Nanotech-enabled life extension technology, for example, is going to shape the future economy and culture in ways we cannot even begin to imagine.
Since most people do not immediately recognize the importance or implications of transformational technologies, those that do gain an advantage. As investors, this creates unique opportunities for us to profit.
It is for this reason that I like to update you periodically on the latest advances announced in science journals. I will mention a couple here...
Stem Cells Will Pump You Up
For an older person, it takes longer to recover from a strenuous workout or a muscle injury than for a younger one. Muscle mass declines with age as well. As our understanding of cellular biology improves, we anticipate new treatments targeting tissues like muscles to restore them to a more youthful state.
Researchers at the University of Colorado at Boulder recently demonstrated that young stem cells transplanted into the leg muscles of mice prevented age-related atrophy and repaired injury. The stem cells not only repaired the injury, but doubled muscle mass as well. Even two years later, the now-old mice retained higher levels of muscle mass. According to Bradley Olwin, a co-author of the study, "the transplanted stem cells are permanently altered and reduce the aging of the transplanted muscle, maintaining strength and mass."
When transplanted into healthy tissue, however, there was no measurable change in muscle growth. The stem cell grafts only appear to create new growth in muscles that are damaged by injury. The researchers are working to understand what mechanism signals the stem cells to grow in hopes of developing drugs to mimic their behavior. Such technology could be applied to degenerative muscle diseases. It could also find an application in halting or reversing the muscular atrophy that accompanies aging.
Quantum Computing Leaping Forward
Practical, commercialized quantum computers would represent a disruptive transformation of the computing industry. Instead of encoding information on relatively large blocks of material, quantum computers could store information on single electrons or atoms, called qubits. Such machines would be incredibly powerful and solve problems that are impossible for current computers. Manufacturing computers with individual parts made of such tiny bits of matter is difficult with current technology, though. Many qubits can be missing, or faulty.
According to a study published in Physical Review Letters quantum computers can be made to function even if they have a large number of malfunctioning components. In this paper, the international scientists published a discovery of a way to correct for these errors by using an error correcting system that mimics how humans correct for faulty data.
According to the lead author, Dr, Sean Barrett, "Just as you can often tell what a word says when there are a few missing letters, or you can get the gist of a conversation on a badly-connected phone line, we used this idea in our design for a quantum computer."
This paper, however, is theoretical in nature, so engineers will need to build quantum computers with enough tiny particle-sized qubits to demonstrate this concept's utility. In the meantime, Burnaby, Canada- based D-Wave claims to have built large-scale supercooled quantum computers containing hundreds of qubits.
D-Wave has worked with Google in the past to perform quantum-enabled pattern recognition. Google has demonstrated that this technology can spot individual objects, like cars, in tens of thousands of pictures. Recently, D-Wave submitted a proposal to Google and the Jet Propulsion Laboratory to develop a quantum computing facility based on its technology.
Finally, IBM is jumping into the fray with renewed vigor. Recent quantum computing discoveries in academia suggest the possibility of building quantum computers using more conventional, common methods used in semiconductor manufacturing. This has piqued IBM's interest, and it has raised the stakes by enlarging its research in the field. It has put together a large group to embark on a five-year mission to explore the possibilities, seek out new technologies, and profit from going where no one has gone before.
Ad lucrum per scientia (toward wealth through science).
Ray Blanco, for The Daily Reckoning
Joel's Note: Ray and his colleague, Patrick Cox, are monitoring these and other exciting "disruptive" technologies for a select group of forward-thinking investors. If you're interested in joining their ranks, we suggest you start by having a listen to their latest presentation, right here.
| | | | | | | Bill Bonner | | Financial Problems - Thy Name is Debt! | |  | | Bill Bonner |
Reckoning from Baltimore, Maryland...
Is our "Crash Alert" flag still flying?
It is?
Good. Just checking.
Don't breathe too hard. Don't touch anything. We're on tiptoes... So many things could bring this stock market crashing down. We can go around the world and point at them. China. Ireland. America itself...
And, oh yes, North Korea is firing rockets at South Korea....
Yesterday, the Dow lost 142 points. Gold rose $19.
Over time, the tensions, contradictions and pressures build up. You try to fix one thing with a little central planning...but the thing doesn't cooperate. So you try to fix something else. And then another thing goes phlooey and you have to fix that.
One day you're trying to keep Ireland afloat in the North Atlantic. The next day you're worrying about an explosion in the Middle Kingdom. And then, wouldn't you know it, a problem flares up right at home.
Financial problems - thy name is debt!
What's the matter in China? Too much debt in the LGFVs - Local Government Funding Vehicles. A municipality thinks it will be a better place if it had a new mall. So it makes a deal. It helps borrow the money. It helps with the plans. The pols feel like big shots. Money changes hands...some of it legit, a lot of it under the table.
What's not to like?
Well, do that a few thousand times all over China and pretty soon you have a lot of debt based on projects that never really made any sense in the first place. And where is the debt? In the banks, probably. Who knows what's in the banks? But they're the same banks that are funding the most reckless, breakneck speed capital investment program of all time.
Americans consume. The Chinese build. They're building roads, bridges, towns, railroads, rail links, railheads - everything you can think of. Of course, some of this is necessary. Some of it is productive. But how much? How many local governments are making wise, productive investment decisions?
The Chinese are now spending almost half of their GDP on fixed investments - you know, the kind of stuff that has concrete and steel in it. One out of every two dollars goes to building something more or less permanent.
But how many of those decisions are going to pay off? How much of that investment is going to pay for itself? How much of the debt is going bad?
Darned if we know. No one knows. But Dear Readers are advised to be somewhere else when all this blows up.
It will. We're sure of it. You can't make that many capital investment decisions without making a lot of bad ones. You can't grow that fast without some pretty severe growing pains.
And that's just China. What about the Emerald Isle? Their problem is debt too. But it's not LGFV. It's MBL - mortgage backed lending. Europe's big banks lent to Irish banks so the Irish banks could lend to Irish homeowners. Trouble is, the Irish homes are now not worth what the Irish homeowners paid for them. So, the micks and paddies have a lot of debt that is never going to be repaid.
Who will take the losses? Normally, it's a simple question with a simple answer: the people who made the bad investments. But not now.
The news yesterday was that it would take $114 billion to keep Ireland open for business. And Spanish bond yields were hitting new records - investors are afraid they might be the next to go.
European authorities - including the Irish themselves - are afraid that if they let the chips fall where they may...many of them will fall on their own heads. They're afraid of "contagion" - that is, they're afraid that if the Irish get sick, they might get sick too. If Irish debt is allowed to collapse, in other words, so will their own bad debt. And who knows where that will lead?
We don't. But we want to find out. Because we don't see any better way to get rid of it than just letting it collapse. And so what? A few banks go bust. A few large investors jump off bridges. Heck, there are plenty of bridges in Europe. What's the trouble?
And more thoughts...
When we are in a thoughtful mood, we try to get out of it as soon as possible. Nothing like thoughts to trouble a man's sleep.
But sometimes a thought gets a grip on us and we can't get rid of it until we've meditated, prayed, and drunk a whole bottle of Bordeaux.
Thus it was that we were puzzling over the strange events of the last few years. Why was Ireland so desperate to save its banks? Why did the US rush to keep Fannie and Freddie out of juvenile detention? Why put at risk the entire world financial system in order to try to get US employment down from 9% to 6%?
People have a deep-seated fear of capitalism, we conclude. They will do almost anything to avoid it. Capitalism works by "creative destruction." They're happy with the creative part. But they can't bear the destruction. Ireland's biggest banks go broke? No way! America's leading housing lender in Chapter 7? We can't let that happen!
They imagine that the "destructive" part of capitalism is a kind of disease or mechanical breakdown. If must be something that can be fixed, they conclude. And so they look for the cure...the fix...the solution.
They must realize that adding paper money to a society that is already saturated in debt is a rather far-fetched solution. But what else can they do? They tried the elixirs and the home cures. Monetary stimulus didn't work. They tried fiscal stimulus, too. And even after the biggest stimulus of all time what have they got? Nearly 10% unemployment, falling house prices, little or no real (non-government) growth, falling incomes, and consumer price increases that are the lowest ever (if you take the figures at face value).
What do they have left but "unconventional" methods. And so what if they don't really make any sense. You gotta do something, right?
The simpleminded morons.
*** "Corporate profits are the highest on record," says the latest news. Some investors take this as good news. But if profits are already the highest on record...how likely is it that they will go higher?
The high margins probably result from the weakness in labor costs. Businesses were startled by the downturn of '07-'09. They cut costs (employees) quickly. So far, they've been reluctant to hire people back. That leaves the poor ex-employee without a job, but it also leaves the business with a decent bottom line.
But after you've cut expenses, what do you do next? If you're going to add to your profits you have to count on growth in revenue. So, where are these extra sales coming from?
Most likely, sales growth will be very slow...and profits will inevitably decline from these all-time highs. Falling profit margins will be another reason to get rid of stocks, so stock prices (and p/e ratios) will probably fall.
*** The New York Times reports that "house sales fell sharply in October." We don't have additional information or insights. But what did you expect? It's a Great Correction, after all.
Regards,
Bill Bonner
for The Daily Reckoning
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Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor atjoel@dailyreckoning.com
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| |  |  |  | QE236: Engineering Higher Inflation
How do you get it growing? Add more debt! Well, that’s what quantitative easing really is. The feds print up more money. The dollars are claims against resources – just like other debt. The QE program is meant to cheapen the value of all debt (that is, by lowering the value of the currency in which it is calibrated). And that’s why everyone has his eye on inflation. If the value of the debt (and the dollar) doesn’t go down, the program is a big failure.
China: Bull Market or Bubble? The Story Continues...
Debt Delenda Est | Economics Professor Ignores Fiat Money Failures
Unfortunately, it is not only Robert Zoellick of the World Bank that has notoriously turned against a gold standard, but The DailyBell writes about similar sentiments from Nouriel Roubini, university professor, in their article “Roubini: Here’s Why a Gold Standard Won’t Work.” Naturally, I can’t believe my eyes! The fact is that the gold standard is the only system that HAS worked all through history, and you would think that Mr. Roubini would know that!
The Robert Zoellick-Gold Standard Affair
The Madness of Inflating Away the Debt Burden | Bernanke Speech Marks Striking Shift in US Policy
Fed Chairman Bernanke’s speech on Friday was his most important since his “helicopter money” speech of November 2002. In it he conceded the Dollar Standard is flawed. He said, “As currently constituted, the international monetary system has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances.”
Take a Look Inside the Federal “Credit Card Machine”
Congress Takes Vigorous Steps to Look Like it’s Planning to Reduce Deficit | |
| | The Daily Reckoning: Now in its 11th year, The Daily Reckoning is the flagship e-letter of Baltimore-based financial research firm and publishing group Agora Financial, a subsidiary of Agora Inc. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Published daily in six countries and three languages, each issue delivers a feature-length article by a senior member of our team and a guest essay from one of many leading thinkers and nationally acclaimed columnists. |  |
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