February 1, 2013
- Britain’s classic problem revisited…. and one developing investment opportunity…
- The numbers are in… and the markets are looking for any reason to rally…
- Recent Fed reports point toward a small-time bank run… but why?
- “Freedom cities” cause chaos in Honduras… Byron on coins and the Whiskey Rebellion… and more!
“It’s the classic problem,” we reiterate David Willetts, Britain’s science minister, from yesterday’s 5, “of Britain inventing something and other countries developing it.”
Several years ago, while filming a series of interviews with the venture capitalist Juan Enriquez, we became aware of the cultural difficulty Britons seem to have in properly commercializing important paradigm-shifting discoveries they’ve made.
For amusement, we begin today’s episode with a few egregious examples… and a developing investment opportunity:
* Penicillin: Alexander Fleming, while working at St. Mary’s Hospital in London in 1928, noticed a blue-green mold dissolving bacteria in a petri dish. But on May 25, 1948, American microbiologist Andrew J. Moyer was granted the patent for a method of mass production of penicillin, and the German pharmaceutical company Grunenthal GmbH was the first to hit it big.
* The light bulb: Sir Joseph Swan of Newcastle announced on Dec. 18, 1878, he had created a working light bulb. On Jan. 17, 1879, he publicly demonstrated it in Sunderland 10 months before Edison. GE, the American corporation founded by Edison, is now one of the largest corporations in the world.
* Heck… even apple pie. The first reference was made to apple pie by the “father of English literature,” Geoffrey Chaucer, in 1381:
But there’s nothing as American as, well, apple pie, right? (A case of reductio ad absurdum, of course… but you get the point.)
The latest example? A material discovered in 2004 at the University of Manchester by Nobel Prize winners Andre Geim and Konstantin Novoselov, graphene, has made quite the entrance.
Britain is again way behind in research and development. One South Korean company could be set to roll out graphene as soon as this month. According to rumors floating around the webosphere, the flexible smartphones we mentioned in our virtual pages last year are quickly becoming a reality.
The company in question is currently hollowing out the core of Apple — the company, not the tart.
In January, at the Consumer Electronics Show in Las Vegas, Samsung showcased their flexible smartphone prototype under the brand name Youm.
“This kind of display,” Brian Berkeley, Samsung’s senior vice president of display, said as he picked up the phone and bent the screen back and forth, “is going to allow our partners to create a whole new ecosystem of devices. Devices with bended, foldable and rollable screens.”
Despite the rumors, Samsung hasn’t given the target date for production of these phones. But just last week, Business Wire released that Samsung has mass-produced over 300 million OLED panels.
They’re getting better at it too. “While it took Samsung Display 4½ years to reach the initial 100 million production mark for OLED panels, the next 100 million units were produced in just 11 months, and the last 100 million units were produced in only seven months.”
In addition, “A U.S. appeals court has denied Apple a rehearing on the rejection of an injunction on sales of Samsung Electronics’ Galaxy Nexus,” PCWorld reports. That phone already uses a form of OLED technology.
Meanwhile, Samsung more than doubled its share of the tablet computer market in the fourth quarter, as total unit shipments jumped 75%.
And only two days ago, the company told their followers via Twitter they were going to “launch a device so revolutionary only an ad in America’s biggest game can do it justice.”
Whatever the Super Bowl commercial reveals, this is good news for graphene investors.
Without being tied up in court, and rapidly growing their presence in the mobile technology markets, they now have some breathing room to roll out their next creation: the flexible AMOLED, the first graphene phone.
The big Super Bowl announcement?
As you know, our own Byron King has been following a company that caught the graphene bug long before the mainstream caught hold. This company is a producer positioned well to supply any new launch, which makes the Samsung rumors slightly more urgent if you haven’t already taken advantage of the opportunity.
[Ed Note. Byron has updated one special report to reflect these rumors, here.]
The ISM index — a leading indicator of manufacturing strength in the U.S. — exceeded expectations this morning by rising past 53%. You’ll recall any measure above 50% means growth.
An alternative reading by Markit puts the final Purchasing Managers Index at 55.8 in January — a nine-month high.
Unemployment figures are also in: 157,000 new jobs in January, a little below the 165,000 expected. Retail, construction and health care were the big gainers, while transportation and warehousing show declines.
MarketWatch reported this morning that at that rate, “the U.S. would have to add jobs at double January’s pace for an extended period to drive down unemployment back to pre-recession levels of under 5%.”
The private sector, according to the Bureau of Labor Statistics, added 167,000 jobs, but growth was hampered by a loss of 9,000 government jobs.
The unemployment rate ticked up to 7.9%.
But it’s not all sun and roses: 2.4 million unemployed people weren’t included because they were only “marginally attached to the labor force” according to the BLS. “Marginally attached” being a polite way of saying, “They freakin’ gave up.”
Our friend John Williams at ShadowStats.com still pegs the number of unemployed in excess of 22% of the U.S. population — nearly one in four citizens.
So… what might you expect those numbers to do on Wall Street? They caused traders to buy! As we write, the awaited Dow 14,000 is inches away at 13,946, up 85 points.
The Nasdaq is up too, 17 points, to 3,159. The S&P slithers behind. Still, it’s up 7 points, at 1,505.
“After ‘consolidating’ for the last few days,” our technical guru Jonas Elmerraji writes, “the S&P 500 is pushing through to new 52-week highs today. That means we’re 4% and change away from a new all-time high in the big index. Another way to think about it is that in the history of stock investing, Mr. Market has spent only 2½ months higher than it is now. If that’s not bullish for market psychology, I don’t know what is.
“Stocks have been following our market outlook to a T this year — and well before that, as well. I’m not bringing that up to pat myself on the back; I’m bringing it up because a technically predictable market is tradable. That means that we should have some serious opportunities yet to come in 2013…”
“If you feel pressure to be in the stock market,” Dan Amoss writes, “consider a mutual fund that underperformed the S&P 500 index in 2012…
“That’s right: You want a mutual fund that underperformed because it had the discipline to avoid dangerous, overvalued highfliers. Homebuilding stocks are among the highfliers. After soaring in 2012, homebuilders are priced in anticipation of another U.S. housing bubble.
“Mutual fund managers with fierce independent streaks are rare. Even rarer are managers who appreciate how central bank interest rate manipulations can distort the stock and bond markets.”
Precious metals joined the rally after the “granddaddy” of economic indicators, NFP numbers, disappointed expectations.
Gold spiked to $1,680 before it met resistance and slid down to $1,668, up $4.50. Silver flew past $32 upon the news, and then limped back down to $31.70, up 23 cents.
According to recent Fed reports, $114 billion was withdrawn from the largest 25 U.S. banks over the first week of January, the biggest outflow since Sept. 11, 2oo1.
The reasons? Some cite the recent FDIC policy changes, and some are citing the massive run for silver as reported by the U.S. Mint…
And some are pointing to the expats and a new tax law coming in effect in June called FATCA…
“According to government figures,” Time magazine writes, “nearly 1,800 Americans relinquished their passports in 2011, a process that requires a special application and a $450 exit fee.”
Although that’s just a drop in the bucket compared with the estimated 6 million Americans living abroad, Time goes on, “the numbers are growing dramatically — a sevenfold increase since 2008, and that is not counting thousands of applications waiting to be processed in U.S. consulates and embassies around the world.
“The U.S. is the world’s only industrialized nation that taxes citizens who live overseas, even if their income is generated in a foreign country and they never return to America.”
“FATCA is the straw that broke the camel’s back,” says Jackie Bugnon, director of the Geneva-based expatriate advocacy group, American Citizens Abroad (ACA).
FATCA, or the Foreign Account Tax Compliance Act, goes into effect in July. It will require all foreign banks to report to the IRS information about accounts held by all Americans.
Because local banks will now have to shell out the money for expensive new infrastructure in order to comply with the IRS rules, “access to foreign financial institutions is being shut off and Americans abroad are treated like criminals,” Bugnon says.
Meanwhile, one of the world’s most dangerous cities just had their street surveillance cameras switched off because of unpaid bills.
What city? Tegucigalpa, Honduras.
And now the service providers are threatening to turn off their police radios, too.
Bad timing. The people are revolting.
The Honduran government owes its teachers $12.4 million in back pay since 2010. Also, its citizens are in an outrage over a charter city plan just passed in Congress that will create “special development regions” on already inhabited indigenous land.
You may recall, we drew interested in the charter cities on Sept. 26, 2012.
“This will be one of the most important transformations in the world,” MKG Group CEO Michael Strong then proclaimed, “through which Honduras will end poverty by creating thousands of jobs.
“The future will remember this day as that day that Honduras began developing.”
That is, unless the government shut them down, first. Which it did. A five-judge panel in the constitutional chamber of Honduras’ Supreme Court pulled the rug out from the plan with a 4-to-1 vote.
Last week, though, the Honduran congress had a change of heart. They renamed the project “Special Development Regions,” and 110 votes of 128 gave the green light for the cities.
“Teachers have been demonstrating almost every day because they haven’t been paid in six months,” reports The Associated Press, “while doctors complain about the shortage of essential medicines, gauze, needles and latex gloves.”
Honduras “has been on the brink of bankruptcy for months,” AP goes on, “as lawmakers put off passing a budget necessary to pay for basic government services. Honduras is also grappling with $5 billion in foreign debt, a figure equivalent to last year’s entire government budget.”
We’re still intrigued by these free enterprise zones… once we get some on-the-ground investigation under way, we’ll let you know.
Just in time for the Super Bowl: The ambiguously named National Chicken Council announced a 12.3 million chicken wing shortage this year for the Super Bowl due to high feed costs and droughts.
Two men from Alabama aren’t helping to remedy the situation: Police in Gwinnett County arrested them after they stole a reported $65,000 in chicken wings from a storage facility.
According to incident reports, they “backed up an Enterprise rental truck to one of the bay doors, and loaded 10 pallets of Tyson frozen chicken wings.”
Here’s the kicker: Police still don’t know where they’ve stashed the wings.
“Hello,” one reader writes. “I’ve been happily reading The 5 for about three years.” He then goes on to prove rather adept at using commas: “As a matter of trivia, my experience and interest in U.S. military air defense tells me that rocket launcher-looking-thing at the Seattle gun buyback in today’s edition is actually a highly specialized, U.S.-made, $50,000-plus, ground-to-air, self-guided, shoulder-fired, badass ‘Stinger’ missile capable of downing many different sizes and categories of aircraft, which the ‘mujahedeen’ of Afghanistan used donated units, sometimes sitting aboard camels, to down many Soviet aircraft during the Soviet ‘crack at’ Afghanistan in the 1980s. [Phew!]
“I’m guessing that this was just a spent demo unit — hopefully, somebody got at least 50 bucks for it. Certainly, civilians aren’t supposed to have them!
“Thanks for all the hard work invested in keeping us informed!”
“Hello!” another writes, enthusiastically. “I’m a fan of history, and thus coinage. I couldn’t help but count the number of stars on that beautiful coin: Unless my eyes deceive me, there are 15 stars!
“Anyone know the significance behind that number?”
The 5: We’re glad you asked.
“In 1794,” Byron King writes, “there were 15 states, not the original 13 Colonies.
“Vermont joined the union in 1791; Kentucky came onboard in 1792. By 1794, there were 15 states, represented by 15 stars.
“And yes, this is a ‘beautiful’ coin in many ways… artistically and as a statement of the fidelity of the newborn nation to honest money.
If you’re interested, Byron outlined the history of the $10 million coin in Whiskey & Gunpowder back in 2004:
“The Whiskey Rebellion started the country on its path to becoming a continental power, and later a world power. Post-Whiskey Rebellion, the political life of the nation began to concern itself with the meaning of ‘perpetual union’ and the implications of the concept.
“The lands south of the Great Lakes began to fill up with American immigrants, not Canadians. Within a decade, President Jefferson would purchase the Louisiana Territory from France, and through the explorations of Lewis and Clark (whose boat was constructed on the banks of the Monongahela River, just south of Pittsburgh), America would move the western frontier of the nation to the Pacific Coast.
“The westward movement of the United States also prompted federal efforts to expend resources on what were called ‘internal improvements,’ both to construct roads, canals and mail routes to the interior, and also to put gold and silver coins into the western frontier economy.
“Not coincidentally, on Oct. 15, 1794, as Washington’s army was encamped in western Pennsylvania, the U.S. Mint in Philadelphia struck 1,758 silver dollars. These coins were intended to compete with the foreign currencies then circulating freely in the U.S. These ’1794 Silvers,’ of which only a few are known still to exist, are considered the nation’s first true issue of real money and are all but priceless in today’s numismatic market.”
Enjoy your weekend,
The 5 Min. Forecast
P.S. While we await Samsung’s “revolutionary” announcement during the Super Bowl, there’s one company that’s set to profit from any movements in graphene’s evolution. And according to Byron, you could be making money hand over fist from it as soon as Feb. 28, 2013 — a few short weeks from now. Click here for all the details.