The Magic Material

Posted On Oct 8, 2012 By Addison Wiggin

October 8, 2012

  • Bendable smartphones, water purification, even sequencing DNA: New wonders from the “magic material” that’s been on Byron King’s radar for more than a year…
  • Playing politics with the unemployment numbers? John Williams unpacks the full story
  • Buying a year’s supply of rice: Real-life tales from inflationary Iran, and a vivid recollection of history repeating
  • How Uncle Sam benefits from the Fed’s low, low rates…
  • An eye-opening 12-month gold forecast… the bacteria that poops the yellow metal… miscellaneous reader reflections on gold, birth rates, the presidential debate (ugh)… and more!


  “I call it a magic material,” Dr. Parama Banerjee of Monash University says fondly of her latest research.

Banerjee’s “magic material” is “a coating so thin it’s invisible to the human eye has been shown to make copper nearly 100 times more resistant to corrosion,” Monash University reports, “creating tremendous potential for metal protection even in harsh environments.”

An attentive reader has probably guessed by now we’re on the graphene beat again. For good reason, as the evidence is laid out: We are inching closer and closer to a full-blown mainstream recognition of this alchemical phenomenon.

Admittedly, although we’re known to occasionally beat dead horses, and sometimes the wrong horses, this mustang is ripe and well.

If you’re not up to speed on the “miracle material,” it’s, essentially, an infinitesimally thin layer of carbon atoms that’s grabbing gobs of attention for its unusual strength and dexterity.

 What kind of attention?

Researchers from Rice University are making strides in creating a fusion of graphene and silicon oxide in aims of creating a seemingly indestructible new form of flexible and transparent memory. “Memory today is not transparent, hence cannot be used on glass while retaining the see-through properties,” Dr. James Tour told

Hello, bendable smartphones of the future.

A team in the World Health Organization (WHO) led by Thalappil Pradeep are studying its abilities to absorb pesticides from water, a growing and serious health hazard in both emerging and developed countries.

“Their study showed,” reports, “that graphene picks up these pesticides in very large quantities” — in fact, more than its own weight. “For instance, one gram of graphene was found to adsorb 1.2 grams of the pesticide endosulfan, ‘higher than any material investigated for the purpose.'”

  Last, but certainly not least, engineers at The University of Texas at Dallas have discovered a way to make graphene small enough to…wait for it… sequence DNA.

“Sequencing DNA at a very cheap cost would enable scientists and doctors to better predict and diagnose disease, and also tailor a drug to an individual’s genetic code,” Dr. Moon Kim, professor of materials science and engineering, explains.

“If we could sequence DNA cheaply,” Dr. Kim goes on, “the possibilities for disease prevention, diagnosis and treatment would be limitless.”

And these are only what we could found saddled on the surface. With these discoveries alone, concludes, “a giant new future industrial use for graphene will get under way. Our new Carbon Age is going to surprise us with the eventual size of the needed demand for graphite.”

As one eternal investing truth goes, investors are either on the surprised side or the poised-for-the-reckoned side. What’s The 5‘s side? Well, we’d like to think of ourselves on the “told you so” side.

100  “Risk assets”, as they’ve come to be known, are falling a bit this morning on razor-thin holiday volume. The S&P 500 has given up about half a percent, gold is down to $1,771, and crude has slipped to $89.24.

The slump today might well turn out to be short-term noise. “As we move into the fourth quarter,” Options Hotline editor Steve Sarnoff wrote his readers last night, “corporate earnings, European sovereign debt, Middle East tensions, and our fiscal cliff will come into view. But Bernanke and crew’s QE3 money pumping policy remains likely to propel prices. Current trends may be set to accelerate over the weeks ahead.”

  “Unbelievable jobs numbers,” tweeted former General Electric CEO Jack Welch on Friday. “these Chicago guys will do anything..can’t debate so change numbers.”

As our friend Barry Ritholtz reminded us the same day, Welch knows a thing or two about fixing the numbers to achieve a desired result… heh.

“Only politics prevents the Bureau of Labor Statistics from releasing the correct number,” says’s John Williams. Then again, Mr. Williams has documented how the figures have been tortured under every president for the last 30 years.

The popular “U-3” unemployment rate reported in the media fell to 7.8%. But if you include part-timers who want to work full time, and people who’ve given up looking for work, the figure held steady at 14.7%. That’s the government’s “U-6” figure.

Mr. Williams goes a step further and throws in all the people who gave up looking for work more than a year ago. That’s how the government measured unemployment back in the Carter administration, and that figure clocks in at 22.8%.

That’s only a bit below the record set a year ago at 23.0%.

 “Better buy now,” advised the rice merchant in Tehran.

The retired factory guard took him up on the advice, buying 900 pounds of the stuff to feed his extended family for the next 12 months.

“As I was gathering my money,” the retiree told The New York Times, he got a phone call. “When he hung up, he told me prices had just gone up by 10%. Of course, I paid. God knows how much it will cost tomorrow.”

Iran’s currency, the rial, collapsed 40% last week under the pressure of Western sanctions and homegrown blundering. We’re not sure if Iran is in hyperinflation, as Cato Institute researcher Steve Hanke asserted in Friday’s 5, but at the very least they’re on the cusp.

Austrian economists describe three stages of inflation. In the first stage, people still hang onto their money, expecting prices to come down. In the second stage, people part with their money to stock up on goods before prices rise again. In the final hyperinflationary stage, people buy anything they can get their hands on — even if they don’t need it — because the goods are more valuable than the currency.

As we said on Thursday, Iran today is looking more and more like Iran during the 1978-79 revolution.

 Now there’s corroboration from someone who lived through those days.

“The new government wanted to prevent flight capital from leaving the country,” recalls Chicago-based derivatives specialist Janet Tavakoli, who married an Iranian while in college.

“In the panic to leave the country with some of their wealth,” she wrote in her 1998 book Credit Derivatives, “citizens found that although there was an official exchange rate of 7 tomans (10 rials) to the U.S. dollar, there was no means to convert money. Banks were closed much of the time. The government put a further restriction on conversion of currency. Citizens could take only $1,000 in U.S. currency out of the country and could take only a suitcase of clothing. The idea was to prevent citizens from taking valuable carpets, now labeled national protected works of art, out of the country.”

“Before a currency goes into free fall,” she writes now at Huffington Post, “its value can be chipped away while a distracted population fails to notice that the currency buys cheaper-quality clothing and less food in a package at a grocery store… That’s the current situation with the U.S. dollar.”

Iran, she says, is far beyond that stage. Where it leads this time, we have no idea… but it’s nowhere good.

  The U.S. Treasury is reaping the fruits of the Federal Reserve’s zero-rate policy: Uncle Sam coughed up the lowest interest expense in seven years during fiscal 2012.

The Treasury paid $359.8 billion in interest on a national debt totaling $16.1 trillion. That works out to a “blended” interest rate of 2.23%… compared with nearly 5% in 2006, when the national debt totaled $8.5 trillion.

We recall the words of economist Herbert Stein in the 1970s: “If something cannot go on forever, it will stop.” Five percent interest on the national debt is far more in line with the historical average… which spells doom for an asset class that sits in nearly every investment portfolio. We tease out the implications in the latest issue of Apogee Advisory, hot off the virtual presses. Not a subscriber yet? Here’s where to become one.

  Another consequence of Fed policy: $2,400 gold inside of a year, according to BlackRock fund manager Evy Hambro.

That’s his take on QE3, or as we’ve taken to calling it here, QEternity. “The gold chart,” Hambro writes in his weekly report, “has turned decidedly bullish with the 50-day moving average rising above the 200-day moving average. The last time this happened was in February 2009, which interestingly was shortly after the implementation of QE1. Then, gold was $900 per ounce and never looked back.

“Should we witness a similar rally, prices would be taken to $2,400 per ounce by midsummer next year — and $1,760 per ounce would be the new floor.”

  That is, unless some modern-day alchemists succeed in turning excrement into gold on a wide scale.

Gold-pooping bacteria?

Now we’ve heard everything…

“This microbial magician,” Slate’s YouTube narrator says, “named Cupriavidus metallidurans, when placed in a minilab full of gold chloride, a nasty toxin, gobbled up the poison and, in about a week, processed it out as 24-karat nuggets of the precious yellow metal.”


“Scientists have discovered bacteria that eats toxic material and, well, poops pure gold.”

“But,” The Washington Post reports, ruining the party, “before you grab your lab coat and rush out to nab some of the gold-pooping bacteria, stop. It is about as rare as the precious metal itself. And if you’re thinking you can synthesize the reaction in your basement using your gold jewelry, think again. The bacteria is grown on large concentrations of gold chloride — the toxic metal in question — also known as liquid gold.”

Michigan State’s assistant professor of microbiology and molecular genetics Kazem Kashefi and his colleague associate professor of electronic art and intermedia Adam Brown teamed up to create an art installation of this gold-pooping process, receiving an honorable mention, to boot.

It’s a signal accomplishment: Surely, “Discovered bacteria that poops gold” will burnish the ol’ CV, line up grant money and lock in tenure.

The process, according to Kashefi, is called “microbial alchemy,” and is on full display at Michigan State in the art installation they call, “The Great Work of the Metal Lover.”

  “Chuck Butler is correct,” writes one of our regulars about gold.

“The case for the barbarous relic is very simple: It is a protection against the barbarousness of man, in all its manifold facets. Given everything from the 94 million people various flavors of leftists murdered last century to today’s similarly abhorrent display of the same, ranging from downtown Detroit (the only city you can walk 12 blocks from and still be at the ‘scene of the crime’); to Jon Corzine ‘losing’ $1.6 billion and walking scot-free; to the Enrons, WorldComs, Peregrines (even tiny Cedar Falls, Iowa has something rotten in Denmark), Solyndras and Bernie Madoffs (hey! Why actually kill people when you can milk them for all their worth… basically, an ‘Arbeit macht frei,’ only extended over a lifetime!), gold and silver are final guarantors of stability and solvency.

“Tell Mr. Keynes and his acolytes in the Obama government that I will give up my ‘barbarous relics’ when people stop acting so barbarously. And until Obama, Hillary, with perhaps help from Kim Jong Il, Pol Pot and Robespierre bring in that utopia that by all accounts is just around the corner, I’ll cling on to my barbarous relics.”

  “Based on Pimco’s ‘Ring of Fire,'” a reader quips after Thursday’s episode, “it is apparent that the PIIGS are not the main problem in the global economy. It is the FUKUS, with Japan thrown in as an aside.”


 “The only people who might cut back on kids or delay them,” writes a reader on the falling U.S. birth rate, “are the responsible ones who expect to have to pay for them. The birth rate for the ones who expect someone else to pay for their kids will probably not be affected.”
  “Ya just had to love the debate,” a reader writes. “You know, the one for the next most powerful leader in the universe.

“I managed about 45 minutes until I grew tired. Two well-groomed, seemingly intelligent men, mostly articulate, pandering to the nation and debating what?

“Who are we going to tax, how much, where are we going to spend it, and don’t touch Social Security and 67 million voters and the military-bully complex.

“The debate in a nutshell: nothing for the people — well, maybe the 47% and growing — but all about bigger, better, we-can-fix-it government.

“Where was the third voice, the voice of the libertarian. Oh, sorry, must have been something I ate.

“The vote, regardless of whom it is for, is basically worthless until it all crashes and we start over. Probably not in my lifetime.”

  “I may be wrong,” a reader writes humbly, “but I think that Jesse Ventura postulated several years ago that there be a place on every ballot — read EVERY! — for None of the above.

“Then if no candidate gets a majority, the office could be left vacant for the term. Can you imagine the fiscal savings the voters could affect in this country come November. It really could save the country!! Our politicians behave the same locally as the guys in Washington, regardless of their affiliation! Wake up, America. Too late is almost here!”

  I didn’t realize when I signed up for The 5 that I would be getting inundated with all the politics. Sure, it’s an important time for our country, but too much is more than enough.”

The 5: We try to steer clear, but as long as politicians insist on mucking around with things, we keep getting dragged into the muck…

“So in keeping with your philosophy,” the reader goes on, “I would like to add my piece. In our daily paper, a cartoon of Real Life Adventures by Wise/Aldrich showed one man saying to another, ‘I wish somebody who has the good sense not to want to be president would run for president.'”

The 5: Well, that is the problem in a nutshell, isn’t it?


Addison Wiggin

The 5 Min. Forecast

P.S. On the above subject of graphene, Byron King has lined up a conference call with five of his fellow resource hounds that you won’t want to miss.

Graphene is one of three miracle substances on the agenda. You can listen in starting on Oct. 28, but attendance is invitation-only. For access, follow this link.

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