 | | The Daily Reckoning | Wednesday, September 14, 2011 |
- Gold stocks: the most empathetic of all investments,
- Could this technology finally be the death knell for cancer?
- Plus, Bill Bonner on warm flames, zombie moths, church to liquor store ratios and plenty more...
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|  | | | Gold Stocks are Cheap | | Examining the Not-So-Similar Paths of Gold and Gold Stocks | |  | | Eric Fry |
Reporting from Laguna Beach, California...
What’s wrong with gold stocks?
For the last several months, they’ve been trading a lot like stocks...but nothing like gold. Such is the occasional curse of the gold stock investor. In some market phases, gold stock investors failed to “get paid,” even when gold is soaring.
One of your editor’s friends, a gold stock expert, used to joke, “Gold stocks are the most empathetic of all investments. They fall when the stock market is falling, and also fall when the gold price is falling.”
While not entirely true, this observation is not entirely false either. For long periods of time, gold stocks can produce far more frustration than satisfaction. The last three-and-a-half years illustrate the point. Since the day the gold price first jumped above $1,000 an ounce on March 13, 2008, the yellow metal has soared 83%. But over the same time frame, gold stocks, as represented by the Philadelphia Gold and Silver Index, have gained a meager 9%.
While it’s true that plus-9% is better than the minus-3% the S&P 500 Index has delivered since mid-March 2008, no investor buys a gold stock to make 9% while the gold price is soaring 83%.
Furthermore, there may never have been a more difficult “plus 9” in the history of financial markets. Between March 2008 and late October of the same year, the XAU Index plummeted 67%. An investor would have had to stay put during that entire, sickening decline — and resist the temptation to cut his losses during the ensuing rebound — in order to eke out his “plus 9.”
On paper, therefore, riding the bull market in gold during the last few years has been “easy money.” In the real world, it has been anything but. Gold and gold stocks both recovered throughout 2009. Even so, during most of the ensuing two years — from October 2009 to the present — owning gold stocks has remained an exercise in frustration.
On October 2, 2009, gold traded below $1,000 an ounce for the very last time (at least so far) and ended the New York trading session at $1,002.80. Since then, the gold price has soared 82%. But again, gold stocks have lagged far behind. Over the last few months, gold stocks have delivered even less glittering results. While gold is up 30%, the XAU Index has gone nowhere. Perhaps gold stocks are due for a change of fortune.
As the chart below illustrates, the XAU Index has spent most of the last 20 years selling for about 20% to 25% of the level of the gold price. During the depths of the 2008 crisis, the XAU plummeted to 11.1% of the gold price. This ratio subsequently rebounded somewhat, but has been rolling back over during the last few months and has almost returned to the crisis lows of 2008. At today’s quote, the XAU sells for 11.9% of the gold price.
In other words, gold stocks are very lowly priced, relative to gold. This looks like a buying opportunity, not simply because gold stocks are cheap relative to gold, but also because gold stocks are cheap from almost every fundamental perspective. (We will examine that theme more closely in tomorrow’s Daily Reckoning).
No “Absolute Law of Mean-Regression” can guarantee that gold stocks will begin outperforming gold itself. Furthermore, no absolute law of any kind can guarantee that outperformance would be synonymous with positive performance.
Thus, the only absolute law that pertains is this one: Cheap is better than expensive, all else being equal.
Gold stocks are cheap.
| | | | New Weapon Technology Set to Soar |
Iraq. Afghanistan. Libya. Syria. Iran. The list of countries in turmoil goes on and on. And our military is being stretched to its breaking point.
That’s why this ONE tiny company’s revolutionary new weapon breakthrough couldn’t come at a better time. This secret technology is set to supercharge our military well into the 21st century. And save countless soldiers’ lives along the way.
And right now, you can get all the details on this explosive company, priced under 22-cents a share, in resource expert Byron King’s newest report. Click here for all the details.
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| | The Daily Reckoning Presents | | Blockbuster Anti-Cancer Technology | |  | | Patrick Cox |
The science story with the biggest buzz recently was probably the successful treatment of three leukemia patients by scientists from the University of Pennsylvania.
While the leukemia research is important, I don’t think that many understand where it fits in the bigger picture of cancer therapy development. I believe, in fact, that there are a half-dozen more- promising therapies.
The anti-cancer treatment that caught the media’s attention is actually a gene therapy from the University of Pennsylvania. Scientists genetically modified three patients’ own cancer-fighting T-cells and gave them back.
For some time, we have been able to modify T-cells to specifically attack cancers. The breakthrough is that this new technology creates T-cells that are very successful at replicating.
While this is exciting, it is not an optimal therapy, for one simple reason: It is a procedure, not a drug.
Because the use of gene therapies using patients’ individual genes is extremely expensive, it is not the best “mass market” solution for treating cancers. To keep costs and delays down, we need off- the-shelf products.
Regenerative medicine is the exception to that rule, because it is the only way to turn the cellular clock of aging back to zero.
Fortunately, there are therapies in development that will be as effective as the U of Penn technology at killing cancers. They will not, however, require genetic engineering for each patient.
Off-the-Shelf Genetic Engineering
One company is developing a technology for attacking cancers that will employ off-the-shelf genetically engineered stem cells.
I spoke with them recently about this lead therapy, which is based on the use of genetically engineered stem cells. Originally, the company will use the government-approved embryonic cell line. Eventually, it is expected that induced pluripotent stem cell lines will be used, due to objections to embryonic cells.
The cells that they will use, by the way, are not capable of developing into embryos. In fact, they are potentiated endothelial cells that have been further modified through genetic engineering. The first drug candidate is a truly brilliant and, to me, surprising application of regenerative medicine.
Endothelial stem cells are the cells that repair the cardiovascular system. They are rare in adults, but are naturally attracted to the new blood supplies created by cancers via angiogenesis. These cells, if transfused into a patient with cancer, will hone in on and stick to cancer cells.
In time, they would be cleared from the body by the immune system because they are transplants. In reality, however, they won’t live long enough to be removed.
Using Stem Cells as Remote-Controlled Cancer Killers
These endothelial cells will have genes turned on using genetic engineering that create very specific enzymes. Once they have attached to the cancer cells, a prodrug will be administered to the body.
A prodrug is not an active drug itself. It is a substance that can be converted into one in the presence of certain enzymes. Since those enzymes exist only in the new endothelial cells that have congregated around the cancers, they convert the prodrug into a lethal cancer-killing drug at the site of the cancer. Once the payload is delivered, another genetically engineered switch is activated via a harmless drug that causes the endothelial cells to undergo apoptosis, cell suicide. They are then removed from the system.
I think the most interesting thing about this therapy is that it is systemic. That is, because the genetically engineered cells are attracted to cancers wherever they are in the body, even metastasized cancers can be targeted.
They are currently doing preclinical studies with transgenic mice. These are mice with human cancers.
This same technology can also be employed for use in diagnostics. Because markers can be attached to these cancer-seeking endothelial cells, it will be possible to use them to locate cancers before they become dangerous. Because different cancers have different markers, it becomes theoretically possible to identify the exact nature of a cancer and tailor therapies for maximum effectiveness.
It bears repeating that the cost of these diagnostics and therapies will be far less expensive and time-consuming than the U of Penn technology.
In times such as these, it’s easy to get discouraged. Don’t be. In five or ten years, maybe less, people will look back and marvel at the people who had the foresight to buy transformational companies like this one when the entire market seemed ready to jump off a building.
I’ve prepared a full write up on this for readers of my Breakthrough Technology Alertresearch service. I’m making the report available to the general public until midnight, tonight. For all the details on this company and others with game-changing technology, click here. The report goes offline a few hours from now.
Yours for transformational profits,
Patrick Cox
for The Daily Reckoning
| | | | Patrick Cox’s Technology Profits Confidential Presents... |
It’s Too Late to “Save America” — Here’s Why That’s GOOD NEWS
A famous investment research expert reveals the ONE REASON why America’s next collapse could be great news for fast-acting Americans.
Urgent new briefing reveals incredible wealth opportunity — watch here right now.
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| | | | Bill Bonner | | Correcting America’s Position in the Global Economy | |  | | Bill Bonner |
Reckoning from Baltimore, Maryland...
Baltimore is a great town. It has more liquor stores than churches. But it is being taken over by zombies. More below...
Yesterday, the Dow went up 44 points. Gold rose $16.
Just noise. Pay no attention.
Both stocks and gold are moving against what we think SHOULD they should be doing. Of course, Mr. Market doesn’t give a hoot what we think.
At least interest rates and the dollar are following our script. Interest rates are going down. The dollar is going up.
And here’s something interesting. If you look back to the founding of the US Republic you will find only one time — in 1945 — when interest rates were this low. The US 10-year note hit an all-time low of 1.55% right after the war. That was its lowest point ever.
Today, around 2%...the 10-year is within 50 basis points of making a two-century low.
And guess what? We think it will.
Why? Because the Great Correction is for real. And it is bigger than even we realized.
Remember, there is a Great Correction underway, no doubt about that. But we don’t know yet exactly WHAT the correction intends to correct.
The bubble in housing — check.
The bubble in the financial industry — check.
The boom in stocks — probably.
The paper-based dollar reserve system — probably.
But how about this? It looks to us as though America’s outsize position in the world is going to be corrected too. Check this out, from The Economist:
By 2030 China’s economy could loom as large as Britain’s in the 1870s or America’s in the 1970s
It is perhaps a measure of America’s resilience as an economic power that its demise is so often foretold. In 1956 the Russians politely informed Westerners that “history is on our side. We will bury you.” In the 1980s history seemed to side instead with Japan. Now it appears to be taking China’s part.
These prophesies are “self-denying”, according to Larry Summers, a former economic adviser to President Barack Obama. They fail to come to pass partly because America buys into them, then rouses itself to defy them. “As long as we’re worried about the future, the future will be better,” he said, shortly before leaving the White House. His speech is quoted in “Eclipse”, a new book by Arvind Subramanian of the Peterson Institute for International Economics. Mr. Subramanian argues that China’s economic might will overshadow America’s sooner than people think. He denies that his prophecy is self-denying. Even if America heeds its warning, there is precious little it can do about it.
Three forces will dictate China’s rise, Mr. Subramanian argues: demography, convergence and “gravity”. Since China has over four times America’s population, it only has to produce a quarter of America’s output per head to exceed America’s total output. Indeed, Mr. Subramanian thinks China is already the world’s biggest economy, when due account is taken of the low prices charged for many local Chinese goods and services outside its cities. Big though it is, China’s economy is also somewhat “backward”. That gives it plenty of scope to enjoy catch-up growth, unlike Japan’s economy, which was still far smaller than America’s when it reached the technological frontier.
Buoyed by these two forces, China will account for over 23% of world GDP by 2030, measured at PPP, Mr. Subramanian calculates. America will account for less than 12%. China will be equally dominant in trade, accounting for twice America’s share of imports and exports. That projection relies on the “gravity” model of trade, which assumes that commerce between countries depends on their economic weight and the distance between them. China’s trade will outpace America’s both because its own economy will expand faster and also because its neighbours will grow faster than those in America’s backyard. And more thoughts...
We keep thinking about how easy it would be to save America. We’re almost tempted to send a letter to the president or something. But why bother? He wouldn’t listen. He wouldn’t understand. He wouldn’t care.
The country is in decline precisely because it is not in his interest to understand. That’s what zombification is all about. The zombies take over. They control the government, the military, the schools, the doctors...even big businesses. They rig the system so that competition is difficult...and honest work scarcely pays.
It is a situation vividly illustrated here in Baltimore. It’s a great city in some ways; it has more liquor stores than churches, for example. But it is a zombie city too...living largely off of taxes and debt. The more “services” the city offers to zombies...the more it attracts zombies to take advantage of them...the higher taxes go...the more the real, private sector moves to the suburbs...and the more zombies are left in control of the city.
It would be easy to fix Baltimore, if the zombies would let you. Just cut taxes...and eliminate the warm flames that bring the zombie moths hovering around. Cut city jobs. Cut handouts. Stop paying people to do nothing.
Maybe we’ll run for mayor. Our slogan: Zombies Out of Baltimore!
We’d get 2 votes. Maybe three. You don’t get elected in Baltimore — or America — by criticizing the zombies. They’re the biggest single voting bloc!
*** But what caught our attention recently was the problem of security. People are worried about terrorism. Signs up on US 95 still ask for “Terror Tips,” for example.
So here...we’ve got a tip. You want to stop being a target of terrorists? Easy. Stop asking for trouble.
First you have to realize that the Pentagon is as zombified as every other bureaucracy. “Fighting terrorism” is just another zombie make- work project. But it is not just a waste of money. It is worse than that. It makes enemies. America has more enemies now than it had before it began its ‘War on Terror.’
It is a lot less safe.
Gareth Porter explains:
In December 2007, at a conference in Washington, DC on al Qaeda, former State Department Coordinator for Counterterrorism Daniel Benjamin offered a laundry list of things the United States could do to reduce the threat from al Qaeda. But he said nothing about the most important thing to be done: pledging to the Islamic world that the United States would pull its military forces out of Afghanistan and Iraq and end its warfare against those in Islamic countries resisting US military presence.
During the coffee break, I asked him whether that item shouldn’t have been on his list. “You’re right,” he answered. And then he added, “But we can’t do that.”
“Why not?” I asked.
“Because,” he said, “we would have to tell the families of the soldiers who have died in those wars that their loved ones died in vain.”
His explanation was obviously bogus. But in agreeing that America’s continuing wars actually increase the risk of terrorism against the United States, Benjamin was merely reflecting the conclusions that the intelligence and counter-terrorism communities had already reached. Regards,
Bill Bonner
for The Daily Reckoning |
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