The Argentine Boom…And Why It’s Killing the Peso

October 13th, 2010

“This country is in a boom,” said the editor of a financial magazine in Buenos Aires. “Everything is going up. Everything is selling. And inflation is roaring at 25% per annum.”

To hear him tell it, Argentina is everything America wishes to be. Its people shop. Its restaurants are full. Its economy is growing at more than 8% a year.

Why?

“Inflation. Everyone wants to get rid of cash. You hold onto it and it’s worth less and less. So you buy an apartment.”

Amazingly less than 10% of property transactions in Argentina include mortgages. People pay with cash. Still, prices are not as low as you would expect. The lot next to our office is on the market for $250,000.

“It should be about $100,000,” said a friend who keeps an eye on real estate. “But everything is high.”

The cab ride from the airport was 70 pesos when we came 4 years ago. This time it was 128 euros. Two glasses of wine at a local bar were 40 pesos. They would have been half that a few years ago.

“There’s a boom going on,” continued the financial editor. “But it can’t go on forever. You can’t have 25% inflation and have a healthy economy. People don’t make wise investments. They just try to avoid getting ripped off by inflation. They don’t make long-term investments. They just try to park their money where it won’t disappear. That’s why real estate is so expensive. People will save their money and buy an apartment whether they need it or not. They figure it will still be there in five or ten years. The peso won’t be. At least not today’s peso.”

Nor will the dollar.

Regards,

Bill Bonner
for The Daily Reckoning

The Argentine Boom…And Why It’s Killing the Peso originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Argentine Boom…And Why It’s Killing the Peso




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Real Estate, Uncategorized

US Debt on the Shoulders of 90 Million People

October 13th, 2010

Now that the federal government’s fiscal year ended on September 30 and they had to “square up” their accounting, we find some very interesting things, if you will forgive the use of the phrase “very interesting” when I should have used the more descriptive Poop In Your Pants Scary (PIYPS).

One of these PIYPS things is that the one-year increase in the national debt, thanks to the unbelievable fiscal insanity of the deficit-spending Obama administration and the corrupt and moronic Congress, which is not to mention the monstrous monetary insanity of the loathsome Federal Reserve creating so much new money for them to borrow that inflation in prices will destroy us all. It is now revealed that in FY 2010, the national debt rose $1.72 trillion! In one year!

The government, of course, only counts $1.3 trillion of this as “deficit spending,” but nevertheless, $420 billion more debt somehow appeared from somewhere to equal the $1.72 trillion increase in the national debt in one year.

The sheer staggering size of this incredibly enormous $1.72 trillion in borrowed money spent by the federal government is more than all the $1.3 trillion the government collected in personal and corporate taxes!

And remember that this $1.72 trillion is just the deficit-spending, and we are not even including the gigantic $3.5 trillion federal budget for 2010! Gaaaahhhh! We’re Freaking Doomed (WFD)!

If you are thinking that we are NOT doomed by astonishing long-term Congressional fiscal irresponsibility and Federal Reserve monetary treachery, then perhaps you will change your mind if I came over there, hauled you up out of that seat and slapped your face repeatedly until you got some smarts, which usually happens to most people pretty fast, usually about the time I reach out and grab them by the throat so that I can keep their heads from moving around while I am administering a therapeutic dose of Mister Slappy.

There are, of course, a lot of logistical problems associated with my kind, generous Mr. Slappy offer, not the least of which is that, after awhile, my hands would get really sore from the slap, slap, slapping. Ow!

This is why I am going to try to achieve the same “get smart” effect by using my new Mogambo Pedantic Method (MPM) of using real, “it’s going to happen to you” horror to terrorize and shock you into a huge fight-or-flight response, flooding your system with enough adrenaline and other save-your-butt biological hormones and doodads to make your central nervous system more receptive to threatening stimuli.

What threatening stimuli? Well, just the federal budget deficit – alone! – means that each, each, EACH of the 90 million American private-sector workers in the Whole Freaking Country (WFC) must produce enough profit by their labors (as they are the only workers who can actually make a profit from their labors) to pay down another $18,889 in federal debt accumulated over the last year!

And this crushing new debt burden comes on top of these sad, selfsame, sorry 90 million private-economy workers making enough to pay the painful principal-and-interest payments to support their $150,000 share of the $13.5 trillion national debt already in existence!

And this staggering load of debt is, with only some exaggeration, barely enough to even Scratch The Surface (STS) of all the debt that is owed, where $60 trillion is the total of all private debts on top of the national debt, and (staggeringly) all of it relying totally on these same few 90 million people being so immensely productive and profitable that everyone, literally, benefits.

The kicker is that they are supposed to do this on an average household income of $54,000 a year! Hahahaha!

If you are, like me, already raging from an overload of adrenaline in your system generated by the sheer, mortal horror of all of this, then leave it to the Mighty, Mighty Mogambo (MMM) to administer a sedative that will make you smile: Buy gold, silver and oil!

With them you will protect yourself from the federal government’s apparent plan to destroy you by turning the dollar into worthless crap, and it’s so easy to do that you, too, will rejoice as do I, shouting loud huzzahs to the beautiful, blue sky, specifically, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

US Debt on the Shoulders of 90 Million People originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
US Debt on the Shoulders of 90 Million People




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

US Debt on the Shoulders of 90 Million People

October 13th, 2010

Now that the federal government’s fiscal year ended on September 30 and they had to “square up” their accounting, we find some very interesting things, if you will forgive the use of the phrase “very interesting” when I should have used the more descriptive Poop In Your Pants Scary (PIYPS).

One of these PIYPS things is that the one-year increase in the national debt, thanks to the unbelievable fiscal insanity of the deficit-spending Obama administration and the corrupt and moronic Congress, which is not to mention the monstrous monetary insanity of the loathsome Federal Reserve creating so much new money for them to borrow that inflation in prices will destroy us all. It is now revealed that in FY 2010, the national debt rose $1.72 trillion! In one year!

The government, of course, only counts $1.3 trillion of this as “deficit spending,” but nevertheless, $420 billion more debt somehow appeared from somewhere to equal the $1.72 trillion increase in the national debt in one year.

The sheer staggering size of this incredibly enormous $1.72 trillion in borrowed money spent by the federal government is more than all the $1.3 trillion the government collected in personal and corporate taxes!

And remember that this $1.72 trillion is just the deficit-spending, and we are not even including the gigantic $3.5 trillion federal budget for 2010! Gaaaahhhh! We’re Freaking Doomed (WFD)!

If you are thinking that we are NOT doomed by astonishing long-term Congressional fiscal irresponsibility and Federal Reserve monetary treachery, then perhaps you will change your mind if I came over there, hauled you up out of that seat and slapped your face repeatedly until you got some smarts, which usually happens to most people pretty fast, usually about the time I reach out and grab them by the throat so that I can keep their heads from moving around while I am administering a therapeutic dose of Mister Slappy.

There are, of course, a lot of logistical problems associated with my kind, generous Mr. Slappy offer, not the least of which is that, after awhile, my hands would get really sore from the slap, slap, slapping. Ow!

This is why I am going to try to achieve the same “get smart” effect by using my new Mogambo Pedantic Method (MPM) of using real, “it’s going to happen to you” horror to terrorize and shock you into a huge fight-or-flight response, flooding your system with enough adrenaline and other save-your-butt biological hormones and doodads to make your central nervous system more receptive to threatening stimuli.

What threatening stimuli? Well, just the federal budget deficit – alone! – means that each, each, EACH of the 90 million American private-sector workers in the Whole Freaking Country (WFC) must produce enough profit by their labors (as they are the only workers who can actually make a profit from their labors) to pay down another $18,889 in federal debt accumulated over the last year!

And this crushing new debt burden comes on top of these sad, selfsame, sorry 90 million private-economy workers making enough to pay the painful principal-and-interest payments to support their $150,000 share of the $13.5 trillion national debt already in existence!

And this staggering load of debt is, with only some exaggeration, barely enough to even Scratch The Surface (STS) of all the debt that is owed, where $60 trillion is the total of all private debts on top of the national debt, and (staggeringly) all of it relying totally on these same few 90 million people being so immensely productive and profitable that everyone, literally, benefits.

The kicker is that they are supposed to do this on an average household income of $54,000 a year! Hahahaha!

If you are, like me, already raging from an overload of adrenaline in your system generated by the sheer, mortal horror of all of this, then leave it to the Mighty, Mighty Mogambo (MMM) to administer a sedative that will make you smile: Buy gold, silver and oil!

With them you will protect yourself from the federal government’s apparent plan to destroy you by turning the dollar into worthless crap, and it’s so easy to do that you, too, will rejoice as do I, shouting loud huzzahs to the beautiful, blue sky, specifically, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

US Debt on the Shoulders of 90 Million People originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
US Debt on the Shoulders of 90 Million People




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Gold and Commodities Respond to QE2

October 13th, 2010

It took a while, but stock traders have decided they like what they saw from the minutes of the Federal Reserve’s September meeting.

After picking apart the opaque document the way Kremlinologists of old picked apart the pronouncements of the Soviet Politburo, they’ve sent the Dow close to 11,100.

We’re not convinced QE2 – the popular euphemism for a second round of quantitative easing – is a given. There’s a lot of talk in the minutes about going ahead with the “money printing” if the economic data the Fed reviews looks weak. But at the same time, their analysis of recent data from around the country appears to have been fairly sanguine.

For all the Fed governors’ public hand-wringing and jawboning about the lack of inflation in the system, they don’t appear to be freaked out enough to go launch what will no doubt be a vastly unpopular program – at least not yet.

The Bank of Japan, on the other hand, made it abundantly clear it’s going to prop up the stock market with its own version of QE2. BoJ Governor Masaaki Shirakawa made some rather unseemly new noises about the Bank’s desire to buy ETFs.

Gold, in response, popped to near Monday’s record at $1,357. Then the dollar weakened a bit, pushing gold up to $1,366. “Unfortunately, it’s a race to the bottom (in the currencies), and we’re winning, in terms of the dollar,” Charles Nedoss of Olympus Futures in Chicago, and one of our recommended brokers in Resource Trader Alert, told Kitco this morning.

$1,366 turns out to be a key technical level, triggering some short-covering, Nedoss explains. Now we’re up to $1,371 – a $21 gain on the day.

Not to be outdone, the CRB index, a broad measure of commodities, broke above 300 on the open this morning. China released customs data for September showing higher imports of commodities in general, and record imports of crude oil in particular.

The last time the CRB saw 300 was on the way down in October 2008 – when every asset class was being sold off to raise cash.

CRB Index Up 15%

The CRB has moved up smartly, more than 15% in just six weeks, a move that “signals no relief for the uncomfortable shorts in the market,” says Resource Trader Alert editor Alan Knuckman.

“What does it take to turn those shorts into buyers?” he asks. ”Unfortunately for them, this failure to get clues from their surroundings and stubbornness is a positive for the markets.

“With little background in biology,” Alan confesses, “I lack the expertise to know whether a frog in the pot of water lacks the intelligence to know when the burner is on. It is said that the gradual increase in temperature is ignored until it reaches a steady boil… For now this means HOT COMMODITIES!!!”

Addison Wiggin
for The Daily Reckoning

Gold and Commodities Respond to QE2 originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Gold and Commodities Respond to QE2




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, ETF, Uncategorized

Gold and Commodities Respond to QE2

October 13th, 2010

It took a while, but stock traders have decided they like what they saw from the minutes of the Federal Reserve’s September meeting.

After picking apart the opaque document the way Kremlinologists of old picked apart the pronouncements of the Soviet Politburo, they’ve sent the Dow close to 11,100.

We’re not convinced QE2 – the popular euphemism for a second round of quantitative easing – is a given. There’s a lot of talk in the minutes about going ahead with the “money printing” if the economic data the Fed reviews looks weak. But at the same time, their analysis of recent data from around the country appears to have been fairly sanguine.

For all the Fed governors’ public hand-wringing and jawboning about the lack of inflation in the system, they don’t appear to be freaked out enough to go launch what will no doubt be a vastly unpopular program – at least not yet.

The Bank of Japan, on the other hand, made it abundantly clear it’s going to prop up the stock market with its own version of QE2. BoJ Governor Masaaki Shirakawa made some rather unseemly new noises about the Bank’s desire to buy ETFs.

Gold, in response, popped to near Monday’s record at $1,357. Then the dollar weakened a bit, pushing gold up to $1,366. “Unfortunately, it’s a race to the bottom (in the currencies), and we’re winning, in terms of the dollar,” Charles Nedoss of Olympus Futures in Chicago, and one of our recommended brokers in Resource Trader Alert, told Kitco this morning.

$1,366 turns out to be a key technical level, triggering some short-covering, Nedoss explains. Now we’re up to $1,371 – a $21 gain on the day.

Not to be outdone, the CRB index, a broad measure of commodities, broke above 300 on the open this morning. China released customs data for September showing higher imports of commodities in general, and record imports of crude oil in particular.

The last time the CRB saw 300 was on the way down in October 2008 – when every asset class was being sold off to raise cash.

CRB Index Up 15%

The CRB has moved up smartly, more than 15% in just six weeks, a move that “signals no relief for the uncomfortable shorts in the market,” says Resource Trader Alert editor Alan Knuckman.

“What does it take to turn those shorts into buyers?” he asks. ”Unfortunately for them, this failure to get clues from their surroundings and stubbornness is a positive for the markets.

“With little background in biology,” Alan confesses, “I lack the expertise to know whether a frog in the pot of water lacks the intelligence to know when the burner is on. It is said that the gradual increase in temperature is ignored until it reaches a steady boil… For now this means HOT COMMODITIES!!!”

Addison Wiggin
for The Daily Reckoning

Gold and Commodities Respond to QE2 originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Gold and Commodities Respond to QE2




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, ETF, Uncategorized

Look For Pullback In Gold and Silver As A Buy Point

October 13th, 2010

These past few weeks, as the equity markets rallied based on the belief of further quantitative easing by the Fed in November’s meeting, the dollar has collapsed, which I warned readers about a couple of weeks ago. Since that time, gold and silver have had a historic and parabolic rise as investors feel the Fed will continue to ease through the end of the year. Investor sentiment has reversed completely over the last eight to 12 weeks, since I signaled a buy on gold. There are no concerns as bullish sentiment on equities and precious metals reaches record levels. Investors feel the Fed will solve everyone’s problem by devaluing the US dollar. The temporary Band-Aid isn’t fixing any of the core problems. Unemployment is still high and housing is weak. Neither the financials nor the homebuilders are participating in this rally, which leads me to suspect this entire rise in the markets isn’t sustainable as it’s been on low volume and key sectors haven’t yet participated.

In countries where there’s a huge deficit, the only solution to pay back debts is through a devalued currency. Japan has recently intervened to try to devalue the strengthening yen. A strengthening currency to countries with huge obligations can heighten the risk of default, which many countries are facing. Also, a strong currency puts pressure on international corporations that export products abroad. A weak dollar will cause the products to be more expensive to American consumers, hurting demand and growth. More sovereign debt defaults in emerging markets are expected. It appears that many investors ran to the dollar from the euro after the European Debt Crisis. I expect something similar to occur now. The euro is reaching a key resistance level and is overbought. This means a pullback should occur. The US Dollar is extremely oversold and at long-term support. The bearish sentiment on the US dollar is extremely bearish, which indicates a reversal should occur.

As global economies feel the consequences of the United States’ actions, I expect further fallout from weak economic growth and the sovereign debt burdens in Europe. Many investors are pricing in a major move from the Fed. I’m not so convinced, as equity markets are higher and the dollar has moved significantly lower. Investors should realize that unless we see another sovereign debt issue or another bank failure, another major round of easing is unlikely at this point. I believe the investment community is expecting too much from the Fed and it appears the Fed is doing an excellent job stimulating the markets just through speculation of a move rather than the actual move itself.

This last easing from the Fed has met with some more critics and it has definitely increased international tensions. The US dollar has collapsed and is now testing long-term support. I don’t know at this point if the Fed will be so quick to act the next time around unless there’s another deflationary crisis.


Technically the dollar is due for a bounce and investors should look for any pullbacks in gold and silver as a buy point. Instead of the risk associated with buying bullion at these extended prices, many juniors that would be extremely profitable at lower gold and silver prices haven’t broken out yet.

I believe these junior mining companies are presenting a great buying opportunity. Remember on these recent parabolic moves, the faster it goes up, the faster and harder the correction. Last Thursday showed a huge volume reversal day. This indicates to me that some of the smart money are hedging their long gold and silver bullion positions for a correction. Although we may see further upside, the move is about to get exhausted as it has taken out many technical targets and measured moves. Be careful of getting caught up in the hysteria.

Read more here:
Look For Pullback In Gold and Silver As A Buy Point

Commodities

Look For Pullback In Gold and Silver As A Buy Point

October 13th, 2010

These past few weeks, as the equity markets rallied based on the belief of further quantitative easing by the Fed in November’s meeting, the dollar has collapsed, which I warned readers about a couple of weeks ago. Since that time, gold and silver have had a historic and parabolic rise as investors feel the Fed will continue to ease through the end of the year. Investor sentiment has reversed completely over the last eight to 12 weeks, since I signaled a buy on gold. There are no concerns as bullish sentiment on equities and precious metals reaches record levels. Investors feel the Fed will solve everyone’s problem by devaluing the US dollar. The temporary Band-Aid isn’t fixing any of the core problems. Unemployment is still high and housing is weak. Neither the financials nor the homebuilders are participating in this rally, which leads me to suspect this entire rise in the markets isn’t sustainable as it’s been on low volume and key sectors haven’t yet participated.

In countries where there’s a huge deficit, the only solution to pay back debts is through a devalued currency. Japan has recently intervened to try to devalue the strengthening yen. A strengthening currency to countries with huge obligations can heighten the risk of default, which many countries are facing. Also, a strong currency puts pressure on international corporations that export products abroad. A weak dollar will cause the products to be more expensive to American consumers, hurting demand and growth. More sovereign debt defaults in emerging markets are expected. It appears that many investors ran to the dollar from the euro after the European Debt Crisis. I expect something similar to occur now. The euro is reaching a key resistance level and is overbought. This means a pullback should occur. The US Dollar is extremely oversold and at long-term support. The bearish sentiment on the US dollar is extremely bearish, which indicates a reversal should occur.

As global economies feel the consequences of the United States’ actions, I expect further fallout from weak economic growth and the sovereign debt burdens in Europe. Many investors are pricing in a major move from the Fed. I’m not so convinced, as equity markets are higher and the dollar has moved significantly lower. Investors should realize that unless we see another sovereign debt issue or another bank failure, another major round of easing is unlikely at this point. I believe the investment community is expecting too much from the Fed and it appears the Fed is doing an excellent job stimulating the markets just through speculation of a move rather than the actual move itself.

This last easing from the Fed has met with some more critics and it has definitely increased international tensions. The US dollar has collapsed and is now testing long-term support. I don’t know at this point if the Fed will be so quick to act the next time around unless there’s another deflationary crisis.


Technically the dollar is due for a bounce and investors should look for any pullbacks in gold and silver as a buy point. Instead of the risk associated with buying bullion at these extended prices, many juniors that would be extremely profitable at lower gold and silver prices haven’t broken out yet.

I believe these junior mining companies are presenting a great buying opportunity. Remember on these recent parabolic moves, the faster it goes up, the faster and harder the correction. Last Thursday showed a huge volume reversal day. This indicates to me that some of the smart money are hedging their long gold and silver bullion positions for a correction. Although we may see further upside, the move is about to get exhausted as it has taken out many technical targets and measured moves. Be careful of getting caught up in the hysteria.

Read more here:
Look For Pullback In Gold and Silver As A Buy Point

Commodities

Three Reasons To Consider Indian ETFs

October 13th, 2010

As emerging market economies continue to draw attention and appeal and are likely to remain at the forefront of global economic growth in the future, India and the exchange traded funds (ETFs) that track the Asian nation have long-term appeal and for good reason.

The International Monetary Fund (IMF) expects the Indian economy to grow by 8.5% this year and to continue its expansion in the coming years.  One reason India is expected to continue to witness healthy economic growth is its demographics.   To put it bluntly, India is blessed with a young and capable workforce that is relatively well-educated and skilled in the English language.  Furthermore, the Economist states that India’s dependency ratio, which is the proportion of children and old people to working age adults, is one of the best in the world and will remain so for a generation further enabling the country to surpass the growth of its rival emerging markets over the next quarter century.

A second reason India is likely to see healthy economic growth is due to the strength of its private companies.  India is hardly dependent on state patronage, the fuel behind China’s growth, and is primarily fueled by entrepreneurs and business investment.  Furthermore, business confidence appears to be rising in India and IPOs and debt origination are starting to reappear bolstering the nation’s capital markets.    

Lastly, India’s government has started to address the major issues that could potentially hinder economic growth.  The nation’s overall literacy rate is increasing due to a surge in cheap private schools for the poor and the government is focusing on improving mass transport, power generation, water systems and pollution control. 

At the end of the day, India has exceptional potential and could outpace China and other emerging markets in the long-term future.  Some ETFs to play India include:

  • the iPath MSCI India Index ETN (INP), which is structured as a senior, subordinated debt instrument. 
  • the WisdomTree India Earnings Fund (EPI), which is designed to measure the performance of companies incorporated and traded in India that are profitable.  The ETF holds companies such as Reliance Industries and Infosys Technologies (INFY). 
  • the PowerShares India Portfolio (PIN), which boasts Oil & Natural Gas Corporation and Hindustan Unilever in its top holdings.
  • the Market Vectors India Small-Cap Index ETF (SCIF), allowing investors access to smaller companies in India, which tend to have more localized businesses and earnings growth that are more likely to reap the benefits of increasing purchasing power of the Indian consumer.

Although an opportunity seems to exist in these ETFs, it is equally important to consider the risks that are invloved.  To help mitigate the downside effects of these risks the use of an exit strategy is important.  Such a strategy can be found at www.SmartStops.net.

Disclosure: No Positions

Read more here:
Three Reasons To Consider Indian ETFs




HERE IS YOUR FOOTER

ETF, Uncategorized

Biotech, An American Success Story

October 13th, 2010

BioTime Inc. (AMEX: BTIM) announced a breakthrough agreement with Big Pharma. Israeli pharma giant Teva Pharmaceutical Industries Ltd. and BioTime’s majority-owned Israeli subsidiary Cell Cure Neurosciences Ltd. have entered into an exclusive license option agreement. Together, they will develop and commercialize Cell Cure’s Regen for the treatment of age-related macular degeneration.

As far as I can tell, this is the first Big Pharma deal with a subsidiary of a public stem cell company. Obviously, it is great news for BioTime. It is also, however, an important milestone in the maturation of regenerative medicine. I expect the entire industry to benefit from this agreement.

BioTime stock performance

Big Pharma, as you know, is famously risk averse. Typically, established pharmaceuticals shy away from early-stage technologies, preferring to pay more later for less risky therapeutics. In the past, pharma firms have waited for one of their own to act first. Then, fearing that they would be frozen out of an emerging technology, the herd followed. I’m not saying this was the beginning of the regenerative medicine spike, because the economy is still hurting. It is, however, a necessary precursor.

In this case, the actual arrangements of the deal are particularly interesting. Teva, while one of the 15 biggest international pharma companies, is also one of the least bureaucratic and most innovative. 2009 revenues were almost $14 billion, with more than 35,000 employees in 50 countries. Teva has major facilities in Israel, North America, Europe and Latin America. It has grown itself largely by providing high-quality generic drugs and is one of the largest generics manufacturers. Now it is expanding cutting-edge patentable therapies.

Israel is the logical place for this to happen. Israeli biotech is the most aggressive in the world. Israel has more startups per capita then any other country. BioTime’s minority stakeholder, incidentally, is Hadasit Bio-Holdings Ltd. Hadasit was “founded and floated” on the Tel Aviv Stock Exchange so the public could invest in IP generated by Israel’s leading medical research center – the Hadassah University Hospital. Hadassah has produced the majority of Israel’s hospital-based translational research.

Israel’s economy is more than able to spearhead this technology. Few Israeli banks were hit by the toxic debt that brought down so many countries. Moreover, the Israeli government didn’t make the Keynesian mistakes made by the US in response to the financial crisis. Israel’s stimulus package consisted mostly of tax cuts. The economy responded, as a result, in only two quarters. Growth this year was projected in August at 4.7% annualized.

I can’t help but editorialize a bit here, by the way. Twenty years ago, Israel seemed mired in socialism, much like Canada. Israelis, like Canadians, learned there are limits to utopian political visions and instituted market reforms. This should comfort the chronically depressed who believe America is sliding inevitably into permanent decline. Nothing is further from the truth.

The technology at the heart of this agreement, OpRegen, is a proprietary formulation of embryonic stem cell-derived retinal pigment epithelial cells. The press release says it was, “designed by Cell Cure to help save the sight of the baby boomer generation.” AMD is, in fact, the leading cause of blindness in the aging.

“The US Centers for Disease Control and Prevention estimate that about 1.8 million people in the United States have advanced-stage AMD and another 7.3 million have an earlier stage and are at risk of vision impairment from the disease. Most people are afflicted with the dry form of the disease, for which there is currently no effective treatment.”

This is also from the press release: “The ongoing development of OpRegen by Cell Cure is funded through equity investments by BioTime, Teva and Hadasit Bio-Holdings, made simultaneously with this agreement. Additional nondilutive funding for the development of OpRegen has been provided by the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of the State of Israel.

“Subject to the terms of the agreement, if Teva exercises its option to obtain an exclusive license to OpRegen, Teva will have responsibility for funding clinical trials from that point on, obtaining regulatory approvals and marketing the product.

“Cell Cure will be entitled to receive milestone payments and royalties if certain development, regulatory and commercial milestones are achieved. A portion of the milestone payments and royalties received by Cell Cure would be shared with BioTime’s subsidiary ES Cell International Pte Ltd. and with HBL’s affiliate Hadasit Medical Research Services and Development Ltd., the technology transfer arm of the Hadassah Medical Organization (‘HMO’), which have licensed to Cell Cure certain patents and technology used in the development of OpRegen invented by professor Benjamin Reubinoff and professor Eyal Banin.”

Now, I’d like to quote from BioTime CEO Michael West’s blog, where he puts the deal in perspective. I recommend reading the entire post. West is unusual among scientist-CEOs in that he really can write. Rather than paraphrase his words, let me go to the source.

During most of the history of biotechnology, small companies have been the hotbed of medical innovation. But these small firms generally lack the capital to fund the expensive clinical trials necessary for FDA approval and launch of new therapeutics. Therefore, the biotechnology industry has long depended on partnerships with large, profitable pharmaceutical companies to help them fund this work. In reward for funding the development costs, the large partner gets to sell the final product and capture the lion’s share of profits. And the smaller biotechnology company is generally rewarded with upfront monies, substantial milestone payments and a royalty on future product sales.

The problem with this model is that many biotech companies do not have a broad technology platform; they sometimes have only one or two products, and therefore these collaborations often “give away the shop,” leaving little left for the company to develop on its own. In the case of companies in the emerging field of regenerative medicine using human embryonic stem (hES) cells, the problem is not one of giving away the shop. There are many hundreds of potential new therapeutics possible now that we have a means of manufacturing all the cell types of the human body…

On Oct. 10, 2010, BioTime announced a deal between BioTime’s majority-owned subsidiary Cell Cure Neurosciences Ltd. and the pharma giant Teva Pharmaceutical Industries Ltd., both based in Israel. This is the first in what we hope will become a series of strategic corporate alliances for BioTime subsidiaries that will fund the expensive development costs of a wide array of therapeutics in a manner minimizing equity financing and consequent dilution to BioTime shareholders.

In the Cell Cure/Teva agreement, Teva has an option to complete clinical development and to commercialize one cell type – retinal pigment epithelial (RPE) cells for the treatment of retinal disease. While the potential market for a treatment for macular degeneration is very large (some 7 million Americans are at risk of the disease), this agreement still leaves all of our other potential therapeutic products, including the greater than 140 diverse and scalable progenitor cell types that we have isolated from hES cells, open for future possibilities, including commercialization.

This deal may be the first of its kind…but it won’t be the last!

Patrick Cox
for The Daily Reckoning

Biotech, An American Success Story originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Biotech, An American Success Story




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Biotech, An American Success Story

October 13th, 2010

BioTime Inc. (AMEX: BTIM) announced a breakthrough agreement with Big Pharma. Israeli pharma giant Teva Pharmaceutical Industries Ltd. and BioTime’s majority-owned Israeli subsidiary Cell Cure Neurosciences Ltd. have entered into an exclusive license option agreement. Together, they will develop and commercialize Cell Cure’s Regen for the treatment of age-related macular degeneration.

As far as I can tell, this is the first Big Pharma deal with a subsidiary of a public stem cell company. Obviously, it is great news for BioTime. It is also, however, an important milestone in the maturation of regenerative medicine. I expect the entire industry to benefit from this agreement.

BioTime stock performance

Big Pharma, as you know, is famously risk averse. Typically, established pharmaceuticals shy away from early-stage technologies, preferring to pay more later for less risky therapeutics. In the past, pharma firms have waited for one of their own to act first. Then, fearing that they would be frozen out of an emerging technology, the herd followed. I’m not saying this was the beginning of the regenerative medicine spike, because the economy is still hurting. It is, however, a necessary precursor.

In this case, the actual arrangements of the deal are particularly interesting. Teva, while one of the 15 biggest international pharma companies, is also one of the least bureaucratic and most innovative. 2009 revenues were almost $14 billion, with more than 35,000 employees in 50 countries. Teva has major facilities in Israel, North America, Europe and Latin America. It has grown itself largely by providing high-quality generic drugs and is one of the largest generics manufacturers. Now it is expanding cutting-edge patentable therapies.

Israel is the logical place for this to happen. Israeli biotech is the most aggressive in the world. Israel has more startups per capita then any other country. BioTime’s minority stakeholder, incidentally, is Hadasit Bio-Holdings Ltd. Hadasit was “founded and floated” on the Tel Aviv Stock Exchange so the public could invest in IP generated by Israel’s leading medical research center – the Hadassah University Hospital. Hadassah has produced the majority of Israel’s hospital-based translational research.

Israel’s economy is more than able to spearhead this technology. Few Israeli banks were hit by the toxic debt that brought down so many countries. Moreover, the Israeli government didn’t make the Keynesian mistakes made by the US in response to the financial crisis. Israel’s stimulus package consisted mostly of tax cuts. The economy responded, as a result, in only two quarters. Growth this year was projected in August at 4.7% annualized.

I can’t help but editorialize a bit here, by the way. Twenty years ago, Israel seemed mired in socialism, much like Canada. Israelis, like Canadians, learned there are limits to utopian political visions and instituted market reforms. This should comfort the chronically depressed who believe America is sliding inevitably into permanent decline. Nothing is further from the truth.

The technology at the heart of this agreement, OpRegen, is a proprietary formulation of embryonic stem cell-derived retinal pigment epithelial cells. The press release says it was, “designed by Cell Cure to help save the sight of the baby boomer generation.” AMD is, in fact, the leading cause of blindness in the aging.

“The US Centers for Disease Control and Prevention estimate that about 1.8 million people in the United States have advanced-stage AMD and another 7.3 million have an earlier stage and are at risk of vision impairment from the disease. Most people are afflicted with the dry form of the disease, for which there is currently no effective treatment.”

This is also from the press release: “The ongoing development of OpRegen by Cell Cure is funded through equity investments by BioTime, Teva and Hadasit Bio-Holdings, made simultaneously with this agreement. Additional nondilutive funding for the development of OpRegen has been provided by the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of the State of Israel.

“Subject to the terms of the agreement, if Teva exercises its option to obtain an exclusive license to OpRegen, Teva will have responsibility for funding clinical trials from that point on, obtaining regulatory approvals and marketing the product.

“Cell Cure will be entitled to receive milestone payments and royalties if certain development, regulatory and commercial milestones are achieved. A portion of the milestone payments and royalties received by Cell Cure would be shared with BioTime’s subsidiary ES Cell International Pte Ltd. and with HBL’s affiliate Hadasit Medical Research Services and Development Ltd., the technology transfer arm of the Hadassah Medical Organization (‘HMO’), which have licensed to Cell Cure certain patents and technology used in the development of OpRegen invented by professor Benjamin Reubinoff and professor Eyal Banin.”

Now, I’d like to quote from BioTime CEO Michael West’s blog, where he puts the deal in perspective. I recommend reading the entire post. West is unusual among scientist-CEOs in that he really can write. Rather than paraphrase his words, let me go to the source.

During most of the history of biotechnology, small companies have been the hotbed of medical innovation. But these small firms generally lack the capital to fund the expensive clinical trials necessary for FDA approval and launch of new therapeutics. Therefore, the biotechnology industry has long depended on partnerships with large, profitable pharmaceutical companies to help them fund this work. In reward for funding the development costs, the large partner gets to sell the final product and capture the lion’s share of profits. And the smaller biotechnology company is generally rewarded with upfront monies, substantial milestone payments and a royalty on future product sales.

The problem with this model is that many biotech companies do not have a broad technology platform; they sometimes have only one or two products, and therefore these collaborations often “give away the shop,” leaving little left for the company to develop on its own. In the case of companies in the emerging field of regenerative medicine using human embryonic stem (hES) cells, the problem is not one of giving away the shop. There are many hundreds of potential new therapeutics possible now that we have a means of manufacturing all the cell types of the human body…

On Oct. 10, 2010, BioTime announced a deal between BioTime’s majority-owned subsidiary Cell Cure Neurosciences Ltd. and the pharma giant Teva Pharmaceutical Industries Ltd., both based in Israel. This is the first in what we hope will become a series of strategic corporate alliances for BioTime subsidiaries that will fund the expensive development costs of a wide array of therapeutics in a manner minimizing equity financing and consequent dilution to BioTime shareholders.

In the Cell Cure/Teva agreement, Teva has an option to complete clinical development and to commercialize one cell type – retinal pigment epithelial (RPE) cells for the treatment of retinal disease. While the potential market for a treatment for macular degeneration is very large (some 7 million Americans are at risk of the disease), this agreement still leaves all of our other potential therapeutic products, including the greater than 140 diverse and scalable progenitor cell types that we have isolated from hES cells, open for future possibilities, including commercialization.

This deal may be the first of its kind…but it won’t be the last!

Patrick Cox
for The Daily Reckoning

Biotech, An American Success Story originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Biotech, An American Success Story




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

A Chart Update on the Dow Jones and Transports Near Fresh New 2010 High

October 13th, 2010

Did you know that the Dow Jones Industrial Average and the ‘confirming’ Dow Transports Index were mere points away from a fresh new 2010 high – which would make a new recovery high not seen since September 2008?

That’s just before the worst of the 2008 Bear Market hit – and we’re close to topping those ‘panic’ levels seen 2 years ago.

Let’s fly-by for a quick update on these two important indexes:

Though I focus most of my analysis on the S&P 500, the principles are the same in related equity indexes.

Case in point, on a firm breakout above 1,130 in the S&P 500, the upside target became 1,170, then 1,200 to 1,220 on a break above 1,170 (this morning).

The Dow showed a similar structure and has experienced the expected outcome as seen in the “passing through open air” (no overhead resistance) that began with a breakout above the key 10,700 level.

That set the next ’stopping point’ price target to 10,900, which was mainly just a target from the May price swing high.  And now that we’re above THAT level, the target shifts to the retest of the 2010 high at 11,260 or 11,200 (for a round number reference).

It’s a great lesson in the “Open Air” concept – that when a price breaks key overhead resistance, and there are no known reference levels above, odds favor a “slice” higher for a move up to the next known resistance level – which is usually a pure price target (as shown above).

That despite all the negative divergences in volume and momentum – price is still king.

So what now?  Today gave us the anticipated “Popped Stops” rally on the firm break above 11,000 (as bears/short sellers again threw in the towel, buying-back positions at a loss which drives price higher).

Such is the importance of the “Popped Stops” concept which sets-up excellent opportunities for intraday traders.

I’ll be presenting on this topic at the Las Vegas Trader’s Expo in November (17-20).

Here is a link and description of my presentation:

“The Popped Stops Play:  How to Profit When Good Trades Go Bad”

Today’s Trend Day is an excellent example of that concept – as was the break and surge above the resistance at 10,700.

Yes, they are.  The key index levels to watch on the Transports are 4,500 (notice the recent ’surge’ of “Popped Stops” and new bulls buying on the breakout from that level) and the 2010 high of 4,800, which is now the immediate target.

It’s a bull’s game to lose above 4,800 and of course at new highs in the Dow – should they materialize.

I did something unusual with the chart above – drawing a dual Arc Trendline structure – almost like a “Rounded Reversal” or “Cup with Handle” style pattern.  I find these very interesting.  They’re also called “Mirror Image” patterns as well.

Anyway – the main idea is to watch what happens as these markets rise to test the respective 2010 highs.

If you are unfamiliar with the concept, take the time to study the charts and learn the “Open Air” concept and how it can help your trading.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
A Chart Update on the Dow Jones and Transports Near Fresh New 2010 High

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The Illusion of Modern Money

October 13th, 2010

Nothing comes from nothing, nothing ever could

– The Sound of Music

Expect a miracle. Or a fraud.

It is impossible for printed money – money created out of thin air – to bring real wealth. It’s just paper. Or not even paper. These days it’s nothing more than the wispy imagination of the Internet.

A clerk types in a number. Presto! A bank a thousand miles away has a billion dollars.

Is the world one jot richer? Of course not. Same buildings. Same businesses. Same output. Same purchasing power.

But wait… What then, do those billion dollars really do?

Ah…that…well, they look like real money. They act like real money. And they buy things – just like real money.

So, wouldn’t you know it, people think they ARE real money.

They feel richer. They spend. They invest. They speculate. Just as if they had more real money. But it would be a miracle if this phony money created a real boom. But that seems to be what investors are betting on.

The Dow held about steady yesterday. Gold lost a little ground. Nothing big either way.

But the Dow rose over 11,000 last week. The S&P 500 is selling at a p/e ratio 50% higher than the long-term average. Investors must think that corporations are going to grow 50% faster than they did during most of the 20th century.

Huh?

Let’s see…

…we’re in the early stages of a Great Correction…

…there is about $20 trillion worth of bad credit still to be eliminated…

…unemployment is at levels not seen since the Great Depression…

…so many houses are headed to foreclosure that banks have had to stop taking them back…

…what little “growth” there has been seems to all have come from the government. And now the government itself is headed for a debt crisis…

Hey…and our president tells us that things are getting better every month. Which just proves that he has no idea of what is going on.

Things are not getting better. The US government is so deep in the hole it may never be able to get out. It borrows a dollar for every dollar it receives in taxes. So, it’s still digging the hole deeper.

And in early November, the Fed is expected to announce that it will join the QE party. That is what has investors’ attention. That is what they’re betting on – more hot money from the Fed.

“The job of the Fed is to take away the punch bowl” when the party gets out of hand, said Fed chief William McChesney Martin. Instead, the Fed is pouring in more alcohol and handing out car keys.

Investors are convinced that it will announce a new round of quantitative easing in November. They think the number will be between $100 billion and $1.5 trillion. A big number, in other words.

Why? Because the economy is not improving. Because it is a Great Correction. And because the Fed believes it can add money and boost Americans’ “animal spirits.” And because they are really a bunch of dumbkopfs.

If you believe you can really improve the situation by adding phony money, why not add a lot more of it? Ha ha… never mind.

You’re just counting on a miracle…or a fraud. We wouldn’t count on a miracle. But we wouldn’t bet against the fraud. Adding phony money can’t create real prosperity. Nothing comes from nothing. But it can create a boom…and a bubble…in speculative assets. That is, it can work as a fraud. Speculators take the hot new money and bid for gold, copper, platinum. China shares. Everything goes up as the hot money gets passed from hand to hand. And then…it burns someone.

Right now, we’d be a little concerned that investors have already bought the rumor of more QEII. So, if the Fed comes out with the predicted announcement, investors are likely to sell the news. The only thing that would push prices higher is if the Fed did MORE than was already anticipated…that is, if it went ALL OUT in its fight with the slump.

Then, you’d really see some accidents!

Bill Bonner
for The Daily Reckoning

The Illusion of Modern Money originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Illusion of Modern Money




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

The Illusion of Modern Money

October 13th, 2010

Nothing comes from nothing, nothing ever could

– The Sound of Music

Expect a miracle. Or a fraud.

It is impossible for printed money – money created out of thin air – to bring real wealth. It’s just paper. Or not even paper. These days it’s nothing more than the wispy imagination of the Internet.

A clerk types in a number. Presto! A bank a thousand miles away has a billion dollars.

Is the world one jot richer? Of course not. Same buildings. Same businesses. Same output. Same purchasing power.

But wait… What then, do those billion dollars really do?

Ah…that…well, they look like real money. They act like real money. And they buy things – just like real money.

So, wouldn’t you know it, people think they ARE real money.

They feel richer. They spend. They invest. They speculate. Just as if they had more real money. But it would be a miracle if this phony money created a real boom. But that seems to be what investors are betting on.

The Dow held about steady yesterday. Gold lost a little ground. Nothing big either way.

But the Dow rose over 11,000 last week. The S&P 500 is selling at a p/e ratio 50% higher than the long-term average. Investors must think that corporations are going to grow 50% faster than they did during most of the 20th century.

Huh?

Let’s see…

…we’re in the early stages of a Great Correction…

…there is about $20 trillion worth of bad credit still to be eliminated…

…unemployment is at levels not seen since the Great Depression…

…so many houses are headed to foreclosure that banks have had to stop taking them back…

…what little “growth” there has been seems to all have come from the government. And now the government itself is headed for a debt crisis…

Hey…and our president tells us that things are getting better every month. Which just proves that he has no idea of what is going on.

Things are not getting better. The US government is so deep in the hole it may never be able to get out. It borrows a dollar for every dollar it receives in taxes. So, it’s still digging the hole deeper.

And in early November, the Fed is expected to announce that it will join the QE party. That is what has investors’ attention. That is what they’re betting on – more hot money from the Fed.

“The job of the Fed is to take away the punch bowl” when the party gets out of hand, said Fed chief William McChesney Martin. Instead, the Fed is pouring in more alcohol and handing out car keys.

Investors are convinced that it will announce a new round of quantitative easing in November. They think the number will be between $100 billion and $1.5 trillion. A big number, in other words.

Why? Because the economy is not improving. Because it is a Great Correction. And because the Fed believes it can add money and boost Americans’ “animal spirits.” And because they are really a bunch of dumbkopfs.

If you believe you can really improve the situation by adding phony money, why not add a lot more of it? Ha ha… never mind.

You’re just counting on a miracle…or a fraud. We wouldn’t count on a miracle. But we wouldn’t bet against the fraud. Adding phony money can’t create real prosperity. Nothing comes from nothing. But it can create a boom…and a bubble…in speculative assets. That is, it can work as a fraud. Speculators take the hot new money and bid for gold, copper, platinum. China shares. Everything goes up as the hot money gets passed from hand to hand. And then…it burns someone.

Right now, we’d be a little concerned that investors have already bought the rumor of more QEII. So, if the Fed comes out with the predicted announcement, investors are likely to sell the news. The only thing that would push prices higher is if the Fed did MORE than was already anticipated…that is, if it went ALL OUT in its fight with the slump.

Then, you’d really see some accidents!

Bill Bonner
for The Daily Reckoning

The Illusion of Modern Money originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Illusion of Modern Money




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Fed Announces Dollar Debasement. Markets Rejoice.

October 13th, 2010

During yesterday’s trading session, the Dow Jones Industrial Average inched ahead 10 points to a new five-month high of 11,020. The financial news services attributed the advance to new disclosures from the Federal Reserve that it would continue debasing the dollar. True.

“Traders pushed shares higher Tuesday,” The Associated Press explained, “after minutes from the [September 21] Federal Reserve meeting kept hope alive that the central bank would take more action to stimulate the economy. The Fed had said…it was concerned that inflation was too low, and suggested it could step up its purchases of government bonds and take other action to encourage lending.”

That’s right; the guardians of the dollar’s purchasing power are concerned that they might not be debasing the dollar fast enough to “stimulate the economy.”

Such is the popular wisdom that guides America’s New Economy. Central bankers and politicians may still pay tribute to the traditional wealth-generation processes of capital accumulation and re-investment. But when these traditional processes fail to produce the desired short-term results, the shamans of the New Economy do not hesitate to implement the traditional wealth-destruction processes of debt issuance and currency debasement…and preferably, both at once.

Debt and debasement are essential, they argue, to stimulate the economy until the private sector re-establishes itself.

This theory is not without flaws.

The private sector has a very tough time re-establishing itself when the public sector is busy moving the goalposts farther down the field. Amassing debts and debasing the currency might produce a short-term economic benefit, but over the long term, such processes undermine wealth creation. In fact, the adverse effects are already evident. The US economy hasn’t produced a single net new job since 1998. At the same time, per capita wealth has barely budged over the last ten years.

Back in 2000, the US was the richest country in the world, based on wealth per adult. Ten years later, the US is clinging to seventh place.

High Average Wealth Per Adult

If we expand our top-down analysis to include ALL Americans, the national wealth picture becomes even more troubling. According to www.usdebtclock.org, Americans, on average, owe $52,501 in personal debt. In addition, each American’s share of the national debt totals about $176,173. Together, these direct and indirect liabilities total $228,674.

On the other side of the ledger, Americans, on average, possess net savings of…are you ready for this?…$979. Looking at these numbers, words like “insolvent” come to mind.

Eric Fry
for The Daily Reckoning

Fed Announces Dollar Debasement. Markets Rejoice. originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Fed Announces Dollar Debasement. Markets Rejoice.




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Fed Announces Dollar Debasement. Markets Rejoice.

October 13th, 2010

During yesterday’s trading session, the Dow Jones Industrial Average inched ahead 10 points to a new five-month high of 11,020. The financial news services attributed the advance to new disclosures from the Federal Reserve that it would continue debasing the dollar. True.

“Traders pushed shares higher Tuesday,” The Associated Press explained, “after minutes from the [September 21] Federal Reserve meeting kept hope alive that the central bank would take more action to stimulate the economy. The Fed had said…it was concerned that inflation was too low, and suggested it could step up its purchases of government bonds and take other action to encourage lending.”

That’s right; the guardians of the dollar’s purchasing power are concerned that they might not be debasing the dollar fast enough to “stimulate the economy.”

Such is the popular wisdom that guides America’s New Economy. Central bankers and politicians may still pay tribute to the traditional wealth-generation processes of capital accumulation and re-investment. But when these traditional processes fail to produce the desired short-term results, the shamans of the New Economy do not hesitate to implement the traditional wealth-destruction processes of debt issuance and currency debasement…and preferably, both at once.

Debt and debasement are essential, they argue, to stimulate the economy until the private sector re-establishes itself.

This theory is not without flaws.

The private sector has a very tough time re-establishing itself when the public sector is busy moving the goalposts farther down the field. Amassing debts and debasing the currency might produce a short-term economic benefit, but over the long term, such processes undermine wealth creation. In fact, the adverse effects are already evident. The US economy hasn’t produced a single net new job since 1998. At the same time, per capita wealth has barely budged over the last ten years.

Back in 2000, the US was the richest country in the world, based on wealth per adult. Ten years later, the US is clinging to seventh place.

High Average Wealth Per Adult

If we expand our top-down analysis to include ALL Americans, the national wealth picture becomes even more troubling. According to www.usdebtclock.org, Americans, on average, owe $52,501 in personal debt. In addition, each American’s share of the national debt totals about $176,173. Together, these direct and indirect liabilities total $228,674.

On the other side of the ledger, Americans, on average, possess net savings of…are you ready for this?…$979. Looking at these numbers, words like “insolvent” come to mind.

Eric Fry
for The Daily Reckoning

Fed Announces Dollar Debasement. Markets Rejoice. originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Fed Announces Dollar Debasement. Markets Rejoice.




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

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