Dear Reader,
Chris here. David is busy with other things, so I’m with you for today’s Dispatch. We have lots of great stuff from other members of the team today, but I want to start off with a couple cool recent advancements in the tech world.
So, let’s get to it…
By its name, you probably wouldn’t think TA-65 were anything special. It’s just a chemical compound that activates an enzyme in the human body. Yawn. But what makes it exciting is the particular enzyme, called telomerase, that the compound activates. You see, telomerase activation is thought to be a keystone of future regenerative medicine and a necessary condition for clinical immortality.
Here’s some background:
At the end of a chromosome, there’s this region of repetitive DNA that protects the end of the chromosome from deterioration. This region of repetitive DNA is called a telomere and is thought by scientists to be an aging clock of sorts in our bodies. With every cell division, our telomeres gradually shorten, and it’s this telomere decay, so to speak, that many scientists believe imposes the limit on our lifespans and decline in health as we age.
Astounding as it may be, scientists have shown on numerous occasions that a human cell that does not undergo this telomere decay will divide indefinitely and is, effectively, immortal.
The enzyme telomerase not only prevents telomere decay but it actually lengthens the telomeres, basically reversing the aging process. So the discovery of a telomerase inducer safe for human use, TA-65, is a pretty big deal.
Here’s what William Andrews, Ph.D., co-author of a new study on TA-65 and president and CEO of Sierra Sciences, LLC, had to say about the whole thing:
We are on the cusp of curing aging. TA-65 is going to go down in history as the first supplement you can take that doesn't merely extend your life a few years by improving your health, but actually affects the underlying mechanisms of aging. Better telomerase inducers will be developed in the coming years, but TA-65 is the first of a whole new family of telomerase-activating therapies that could eventually keep us young and healthy forever.
Call me extremely skeptical about the idea of staying young and healthy forever; I just don’t see that ever being possible. But the discovery of TA-65, and telomerase inducers in general, is a step forward that has potential medical applications to extend human lifespans and reduce the risk of many common diseases, including Alzheimer’s and cancer.
Whether you’re a speed freak like me or not, you have to be impressed with the technological marvel that is the new Bugatti Veyron Super Sport. This super car just became the fastest production car ever made by shattering the record of 412.28 km/h (256.18 mph) set by SSC’s Ultimate Aero TT just two years ago. Bugatti’s new super car pushed the record to an amazing 431.072 km/h (268 mph).
Now, you might not consider a jump of 20 km/h that impressive. But engineers in the know equate it to shaving a second off the world record in the 100-meter dash, i.e., a gargantuan achievement. The reason it’s so impressive is that you’re not just trying to push the envelope of speed, you also have to create a car that can safely travel at such extreme speeds, while also performing smoothly at low speeds. That isn’t easy or cheap. Only two companies, Bugatti (owned by Volkswagen) and Shelby Supercars, have managed to break the 400 km/h barrier with a production vehicle. And they spent a fortune doing it.
Practical or not, machines like the Bugatti Veyron Super Sport are engineering and technological marvels that inspire and attract countless young minds to pursue these fields. In my view, that can’t be a bad thing.
Now I’m going to vacate the stage to several of my esteemed colleagues. Please enjoy.
The gold price hit $1,274.95 on intraday trading Tuesday, settling at $1,269 by day's end, a new nominal record. Some gold followers are saying this is extremely bullish for the near-term price since it broke so decisively through its June 28th high of $1,261. If they're right, how high might this particular surge go?
While the endgame for gold is far off, in my opinion, it's worth looking at short-term surges, especially if you're trying to determine to buy at a particular level. Plus, it's just darn fun.
I looked at all major surges in the gold price since 2001. What constituted a "surge," in my opinion? Any large jump or uptrend that's clearly visible on an annual chart. So instead of looking at yearly gains or seasonal tendencies, I simply measured the percent gain of all big upswings that were the most obvious, regardless of when they occurred.
I put the findings to a chart.
You can see there haven't been that many large price advances, about one annually until last year. You'll also notice the biggest "surge" this year is comparatively small. In fact, you have to go back to mid-2001 to find one that didn't advance at least 20%. Meaning, we may very well be in for a bigger surge yet this year.
The average of all surges in the gold price since 2001 is 23.5%. If we hit the average, gold would spike to $1,428 in the current run-up. Note that I measured from the bottom of the surges, not the breakout point; the bottom I used in our case was $1,157 on July 28.
If our current surge were to match the 35.5% biggie, gold would hit $1,567. A 20.8% advance (the smallest of those greater than 20%) would take it to $1,397. With these numbers, Bud Conrad's call for $1,350 gold by year-end would be met and surpassed.
The only caveat I'd point out is that we logged three surges last year, the only time that occurred in the current bull market. On that basis, it's certainly possible we could be due for a breather this year and have thus seen our biggest advance. But given the current global economic and monetary circumstances, I wouldn't place a bet on that. A survey of 29 analysts by Bloomberg a couple weeks ago reported they see gold averaging $1,500 in 2011 – and most analysts tend to make conservative projections.
Note that there were always small pullbacks in the time periods I looked at; it was never a straight line. So Wednesday's minor drawdown was typical of what occurred during these surges. Also, there were always corrections or at least periods of consolidation after the surge and before the next big upswing.
Regardless of what gold does over the next few months, I think 20%+ surges will continue throughout this bull market, with the occasional 30% punch. And a doubling of the gold price in a matter of months is also likely in our future, a sure sign of the Mania phase. Gold surged 128.5% from October 8, 1979, to January 21, 1980. A similar vault today would have the price jumping from, say, $2,400, to $5,484 in less than four months. Yes, I think that's entirely possible and perhaps probable.
How high will gold ultimately go? I look at it this way. The sovereign debt crisis in Europe isn't over. The sovereign debt crisis in the U.S. hasn't started. We will almost certainly see more quantitative easing (i.e., money printing). We have artificially low interest rates. The U.S. dollar is basically at the same level it was two years ago. We have no official inflation and certainly no big inflation. Less than 5% of U.S. citizens own any form of gold. Central banks are widely expected to be net buyers of gold again this year. Investment demand for gold is still only 32% of all uses of gold, a far cry from the 54% level reached in 1979. I could go on, but you get the idea.
The only way you can benefit from these surges is to be long gold. If you haven't been a part of one, I guarantee you, it's a lot of fun. Gold is more important than that, of course; it's your personal safe-haven asset. Buy on pullbacks, slowly increasing your holdings so that what you own makes a difference in your portfolio, both for asset protection and profit potential.
And then, hang on.
[Ed. Note: The most profitable way to take advantage of a surge in gold is to own gold stocks. But not all precious metal equities equally benefit from gold's advances. To own the best producers in the gold industry, try a risk-free trial of Casey's Gold & Resource Report…it’s only $39 a year. Click here for more.]
By Marin Katusa, Chief Energy Strategist
Over the next five years, it’s a realistic expectation for oil to go over US$200 per barrel. But predicting the next nine months can be a bit trickier. So it’s lucky that investors have a compass at hand to navigate the economic landscape – the gold-to-oil ratio.
Mathematically, the gold-to-oil ratio is the per-ounce price of gold divided by the cost of a barrel of crude oil.
In plain English, it tells you how many barrels of crude oil you can buy if you were carrying around one ounce of gold instead of dollar bills.
The chart below plots the gold-to-oil ratio over the last 20 years. While gold was far from a bull market in the 1990s, an ounce of gold – on average – could buy more than 18 barrels of oil.
Jumping forward through time, the ratio had (on average) dropped to almost half of what it had been nearly a decade ago. From 2000 to 2008, one ounce of gold could barely buy you 10 barrels of oil. Things got better by early 2009, with the going rate being nearly 20 barrels for one ounce of gold, and for now it’s hovering around the 15-barrel mark.
Of course, this begs the question that if gold prices went up, does that mean oil will get more expensive too?
The frustrating answer is that it depends. In general, gold prices will rise most steeply when investors expect rough seas ahead for the economy – things like inflation and bank failures. Oil prices, on the other hand, tend to fall when an economic slowdown is expected.
For example, the price of gold between 2000 and 2008 almost tripled, but the gold-to-oil ratio actually decreased. And when gold prices went up in late 2008/early 2009, oil prices plunged – hence the spike past 20.
So what the gold-to-oil ratio really helps reflect – to a degree – is the disparity in how investors of the mom-and-pop retail variety and the currency-swapping, derivative-strategizing institutional investors view inflation and its timing.
Given the pattern of the above chart, we believe that we’re entering a period in which the gold-to-oil ratio will be around 15. And watching the gold price is giving us a great idea of what’s going to happen next in the market...and whether the next wave of investment dollars is going into oil or gold.
[Ed. Note: Marin is simply the best in his field when it comes to assessing energy investments and picking the best of the best available. Currently, one of the energies he is bullish of for the near future is geothermal power. Click here to read more.]
By Vedran Vuk
Ever since the crisis began, analysts have adjusted unemployment by adding part-time workers. By including involuntary part-time workers to unemployment, the rate becomes 15.3%. This is an important statistic to follow – however, only if we can put it in context.
Few analysts examine the same rate during the boom years. Without doing so, the analysis compares apples to oranges. A closer look at the data makes the stat less significant, but it also reveals more about the unemployment situation.
The 2007 unemployment rate was 4.6%, about half the current rate of 9.6%. The adjusted unemployment rate had approximately the same ratio. The 2007 unemployment rate with involuntary part-time workers was 7.5%, about half the current 15.3%. Adding involuntary employment to the overall rate doesn’t reveal anything new. No matter how you look at it, unemployment has doubled.
Relevancy always depends on the reference point. Now that we’re comparing apples to apples, the adjusted rate loses its shock appeal. A chart best illustrates the historical adjusted rate compared to the regular unemployment rate:
Currently, part-time employment due to economic reasons compromises 5.7% of the workforce – not far from 1982 and 1983’s 5.6%. Over 55 years of data, the average has been 3.7%. Most of us don’t think of involuntary part-time employment during boom times. But nonetheless, it’s still there.
Involuntary part-time workers are split into two main categories. The first includes individuals who could only find part-time jobs. The second represents those who experience slack work due to market conditions. There is a significant difference between these workers. The slack work category does not necessarily require the creation of new jobs. They simply need their old hours back.
With a few exceptions, these rates have remained proportional over time. However, slack work recently broke the trend with a large peak in comparison to previous years. In 2010, slack part-time workers totaled 4%, down slightly from 2009’s 4.3%. 1982 marks a distant third place with 3%. Last year, three out of four involuntary part-time workers were part-time due to slack work. No other recession has had such a large majority in this category.
There’s an upside to the slack work anomaly. As just mentioned, the 4% representing slack work do not necessarily need new jobs. They simply want their pre-recession hours back. If the economy comes roaring back, about half of these workers would drop from the adjusted unemployment rate almost instantly. The part-time workers who couldn’t find full-time jobs only represent 1.5% of the workforce. In 2007, this group was at 0.8%. Hence, the commonly held idea that there are tons of part-time workers seeking full-time jobs is only half true. Many just need the economy to pick up for additional hours.
With so many workers suffering from slack work, a quick economic spark could have huge effects. Consumer confidence would feel an instant boost from these workers meeting their old payrolls.
But there is a catch. Perhaps some jobs are on permanent slack. Take construction as an example. During the boom, everything was overbuilt; those hours aren’t coming back overnight. Labor was misallocated, and many workers will need to find new careers. However, the data shows that much of the slack appears to be coming from the hospitality and retail sectors. This would suggest that a sudden turnaround could have the desired effects.
Nonetheless, I haven’t seen any economic sparks lately. The stimulus failed the first time around, and another shot wouldn’t perform much better. Further, there are few indicators of a boom around the corner. The slack work reveals that if the engine could start, we might go from 0 to 60 a little faster than anticipated. Unfortunately, that engine is still broken and overheated, with no repair in sight.
Chris again. Thanks, guys. And thank you, dear reader, for spending some time with us today. I hope you found today’s missive valuable. David will be back with you tomorrow. Until then, thank you for reading and for subscribing to a Casey Research service.
Chris Wood
Casey Research, LLC