The Next Big Thing Is Here

Posted On Apr 5, 2016 By Dave Gonigam

  • High demand: Virtual reality headsets on 3-month back order
  • VR’s “you are there” sensation: One of the most profitable advances of the last century
  • JPMorgan’s crackdown on cash, a day after the Panama Papers?
  • Treasury’s crackdown on “inversion” mergers, also a day after the Panama Papers?
  • Stupid (and costly) TSA tricks… reader visits a mostly cash country… the trouble a business owner got when he opened up shop in the U.S.… and more!

Growing pains, apparently. Folks who’ve been waiting for the hottest tech gadgets in years will have to wait a bit longer.

The Oculus Rift virtual-reality headset began shipping last week… but already a parts shortage has cropped up. “First set of Rifts are going out slower than we orig estimated,” tweeted CEO Brendan Iribe, “so we’re giving free shipping for all pre-orders.” If you haven’t ordered yet, you won’t get delivery till July.

A competing device called the Vive was supposed to debut today. But payments on many pre-orders were accidentally declined — a payment-processing error. The Vive’s creator — the Taiwanese mobile phone giant HTC — promises to clear things up as quickly as possible.

Despite these glitches, virtual reality stands to become one of the most profitable advances of the last century. It’s already the most fun.

Strap on a headset and you can go anywhere you want, speak any language, know virtually everything, “live forever”… and have realistic in-person experiences that first took place centuries ago.

The earliest attempts at VR go back to the late 1980s. “Using a helmet that positions video screens over your eyes,” says our Ray Blanco, “all you’d see is a computer-generated world. Through motion sensors in the helmet or controllers in your hands, you could look around your environment just as you would in the real world.

“The technology didn’t quite live up to the hype. For years, VR headsets were bulky and uncomfortable. The graphics were blocky and unconvincing. And the equipment required to generate these digital worlds took up a lot of space… and cost far more than consumers would be willing to spend.”

But just as the clunky “bag phones” of 30 years ago evolved into the sleek smartphones of today, VR has come into its own.

“Imagine watching a live event and feeling almost like you are there,” says Ray. “Not only 3-D realism and high-resolution images, but being able to turn your head and look around to your sides or behind you. Watching a concert or sporting event would never be the same again.

“Imagine being able to talk to a virtual William Shakespeare… observe ultra-realistic dinosaurs in their native environment… explore King Tut’s tomb, either as looked when it was rediscovered in the 1920s or as it appeared when he was first buried!”

As you might also imagine, the profit potential is immense. Top media sources project staggering growth of 81,000% — a $30 billion a year-business by 2020. A $500 investment becomes $405,000.

But you won’t make that kind of money investing in the Oculus Rift’s parent company — which happens to be Facebook. Nor by going on the Taiwanese stock market to invest in HTC.

Ray has discovered a backdoor way to invest in VR technology — at the very moment it’s going mainstream. “It is only a matter of time before these companies announce bank-busting profits and Wall Street wakes up to these stocks’ oversized growth potential,” he says.

“When they do, you’ll already be in line for the kind of profits that only early-stage tech investors ever enjoy.”

Want in? Ray shows you how to get started right here.

The safety trade is on today… and gold is benefiting.

Gold is up more than 1% as we write, the bid $1,229. Treasuries are also rallying, sending yields down: The 10-year note yields 1.73%, the lowest since late February.

The major U.S. stock indexes are all in the red, the S&P 500 down two-thirds of a percent at 2,052. The losses were steeper at the open, but then the ISM services index for March turned in a better-than-expected performance. Crude has steadied at $35.76.

The safety trade extends to the currencies as well, with the Japanese yen hitting a 17-month high against the dollar.

“Nothing has changed with the fundamentals of Japan,” says Chuck Butler at EverBank Global Markets and our go-to currency maven. “Its economy, debt problem, demographics are still what I would call a basket case.

“So just like the rally we saw with the safe havens a couple of months ago, I expect this rally to not last too long.”

Jim Rickards concurs. He anticipated short-term yen strength in the pages of Currency Wars Alert three weeks ago. As of this morning, his recommended trade is up 24%.

We can’t help but view some of the morning’s business headlines through the prism of the Panama Papers — the leaked documents revealing offshore investments held by dozens of high-profile global figures.

We still don’t know who’s behind the leak, but we suggested yesterday a connection to the war on cash. Since “tax evasion” is one of the justifications for the war on cash, publicity about hidden offshore assets presumably would gin up support for the war on cash.

Coincidentally or not, news broke after the close yesterday that JPMorgan Chase is now capping ATM withdrawals for noncustomers at $1,000 per card per day.

That limit strikes us as surprisingly generous… but it seems that new-generation ATMs designed to replace the activities of human tellers can accommodate $50 and $100 bills, and some people are pulling out tens of thousands of dollars at a time.

Near as we can tell, Chase is doing the same thing it was doing 2½ years ago when it ceased international wire transfers for small-business customers — going out of its way to look compliant with federal regulations targeting “drug dealing, money laundering and tax evasion.” And terrorism. Can’t forget that.

But the timing is, well, interesting

Then there’s the Treasury Department’s move yesterday to crack down on “inversions” — whereby a U.S. company merges with a foreign one, allowing it to have a headquarters in a country with lower corporate income taxes.

The new rules are “more aggressive than anticipated,” says The Wall Street Journal… and they threaten to deep-six the planned merger of Pfizer with Ireland-based Allergan. Allergan’s U.S.-traded shares are down more than 16% today.

We’ll never shed a tear for crony-capitalist Big Pharma here at The 5, but it’s harder for capitalists of either the crony or the principled variety to do business if government keeps changing the rules with no warning.

Anyway, here again the timing is interesting — a crackdown on an “overseas tax dodge” only hours after many wealthy people were exposed for “overseas tax dodges.”

And we’re still waiting to see large numbers of Americans exposed by the Panama Papers.

To date, most of the leaks of client info from the secretive Panamanian law firm Mossack Fonseca appear to concern people from countries that are targeted by Western sanctions — especially those close to Russian President Vladimir Putin. (We monitor several global TV news channels here; the coverage on the Kremlin’s English-language outlet RT has played the victim card to a surprising degree.)

Skeptics, to say nothing of the conspiracy minded, point out the Panama Papers are being vetted by the International Consortium of Investigative Journalists. The ICIJ gets funding indirectly from George Soros’ Open Society Foundations and the U.S. Agency for International Development — one of several government agencies Washington uses to engineer “regime change” overseas.

The longer we go without large numbers of Americans and other Westerners exposed — sorry, the prime minister of Iceland doesn’t cut it — the more credibility the skeptics will have.

One other point, one perhaps we should have made yesterday: Not all the activities revealed in the Panama Papers are illegal. But revealing them via this leak casts a pall on the legal acts, too. Maybe that’s the idea…

It’s come to this: We’re grateful to find a story about the TSA that involves only blowing large amounts of money instead of groping Americans and a 96% failure rate in weapons detection.

For years, TSA agents have been telling air travelers getting in line at security whether to go left or go right. Recently, they’ve been outfitted with iPads. On those iPads is an app with a random number generator that tells TSA agents whether to tell you to go left or right.

The TSA goes high-tech…

Cost to develop this app? $47,400 — part of a $1.4 million contract with IBM.

“We don’t know everything the TSA got for that $1.4 million,” writes developer Kevin Burke — whose persistence using the Freedom of Information Act brought this information to light.

“They might have just gotten the iPad app; they might have gotten iPads, or work on multiple different apps, including the TSA Randomizer. We only know it’s associated with the TSA Randomizer based on the FOIA request that returned this document.”

Bonus points: Since the story went viral yesterday, a guy on YouTube replicated the app and its functions in the space of 10 minutes.

“I pay cash for almost everything I can,” writes a Canadian reader about the war on cash

“I am currently in the Philippines on vacation. This seems to be an all-cash society. Before I left, my banks told me that my debit cards would work at bank machines but not at debit machines… haha… What debit machines? I haven’t seen one yet.

“I could have used my debit cards to get cash here, but the banks wanted to charge 15–20% (screwing me on the exchange rate while boasting ‘no fees for exchange.’ Crooks! I explained this to my kids as selling $100 bills for $80. Bad idea. I have been sending myself Western Union through my banking app on my phone for a reasonable fee.

“I had to give my credit card to a major hotel chain for a deposit, but they were happy to settle in cash.”

“Like many of your readers, I am frustrated by the policies at U.S. banks,” reads another email, “although I do appreciate that they are in turn frustrated by the vast array of regulations they must comply with and the penalties attached to an inadequate compliance program, wholly apart from any actual questionable transactions.

“One of my companies, domiciled in the U.K., recently bought an insurance company domiciled in one of the 50 states. My U.K. company then moved the insurance company to an offshore jurisdiction (offshore from the U.S. perspective) for regulatory reasons, although the insurance company was and continues to be a U.S. taxpayer. All premiums and investment income are from U.S. sources, and all payments go to U.S. claimants and U.S. vendors. Only dividends are paid outside the U.S. to a U.K. company.

“Well, after the U.S. bank of the insurance company learned about the change of ownership, etc., they told us that they do not want to hold the insurance company’s accounts any longer. The reason they gave was that the company was no longer in their ‘footprint,’ whatever that means.

“So where does one put a very large amount of U.S. dollars? I have discovered that it is impossible to open an account at a U.S. bank if the account holder will be a non-U.S. company that is owned by another non-U.S. company. What is the answer? I am hoping The 5 can tell us.”

The 5: Alas, we’re stumped. Maybe there’s a law firm in Panama that could help?

Best regards,

Dave Gonigam
The 5 Min. Forecast

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