September: The Best of Times, the Worst of Times
- Breakthrough innovations amid a monetary disaster
- Why we’re on the verge of the highest stakes since the Panic of 2008
- The wireless-charging revolution set to start next week
- The World Bank’s latest move on the monetary chessboard
- Why are Americans saving up again?
- Why Republicans won’t fix Obamacare… Fed fiddling among real wildfires… your editor commits sacrilege… and more!
“It’s like the Tale of Two Americas, but with much more at stake,” our executive publisher and founding editor of this e-letter Addison Wiggin told me late last year.
For benefit of newer readers, we should back up a bit. The “Tale of Two Americas” was something we began teasing out in these pages in early 2012. Addison described it as “the contrast between the overwhelming rot penetrating governments and the financial system on the one hand… and the staggering entrepreneurial potential that can overcome the rot on the other.”
That is, none of the problems that led to the Panic of 2008 had been fixed. (Still haven’t, for the record.) But the innovation going on in America’s biotech labs, in Silicon Valley, in the shale energy patch was undeniable.
You couldn’t afford to pass up the opportunities. Our editors guided readers to gains of 266% on a firm with a treatment for ovarian cancer… 225% playing options on a shale oil producer… and a 1,000% on Tesla Motors.
By late 2014, it felt as if the theme had played itself out. Crude prices had taken a spill. We sensed the stock market moving sideways, as the Fed had withdrawn the methadone drip of “quantitative easing.” (We were right; the Dow industrials might be near a record this week… but the index is only 400 points higher today than 20 months ago.)
The stakes going into September 2016 are as high now as they’ve been at any time since the Panic of 2008.
On the one hand, a major monetary “reset” is about to get underway only days from now with a meeting of G-20 leaders in China — about which more shortly.
But we remain ever watchful for groundbreaking innovations that will build new fortunes despite the “macro” backdrop. And we have every expectation for a major development only nine days from now.
“The consumer electronics space is ferociously competitive, and no one can rest on his or her laurels,” says our Ray Blanco by way of background.
“Many businesses, once they have come out with a very popular and profitable new product, tend to sit back on their haunches. Eventually, a scrappy new upstart makes them obsolete.”
To date, Apple has avoided that curse. But many people are starting to wonder: Where’s the hot new product? (No, the Apple Watch doesn’t count). When’s the last time Apple did something to move the needle on its signature product, the iPhone? (No, bigger screens two years ago don’t count.)
Then again, maybe those aren’t the right questions to ask.
It’s not as if Tim Cook and the rest of the executive suite at 1 Infinite Loop are clueless to their quandary. “Apple knows it needs to come up with something very special,” says Ray, “to stay ahead of the competition and keep commanding a premium price for its products.”
Which prompts another question, perhaps the right one to ask: “Who likes to have to plug in their iPhone?” Ray asks.
“Being able to charge an iPhone over a distance of 15 feet wirelessly would be a key differentiator in the smartphone market.”
As you might be aware, earlier this summer, Ray had reason to believe Apple was about to unleash that very game-changer.
As you might also be aware, it didn’t happen on Ray’s original anticipated timetable.
But a funny thing has happened in the weeks since: The share price of the tiny company Ray thinks is quietly partnering with Apple didn’t collapse. It pulled back about 25% in a week… and then started climbing back.
As of two weeks ago, the price recovered its previous highs, and it continues to climb in anticipation of the next potential catalyst — Apple’s introduction of the next iPhone nine days from now, on Wednesday, Sept. 7.
After a visit to Apple headquarters earlier this month, Ray’s more convinced than ever the wireless-charging story is for real. You owe it to yourself to hear his up-to-the-minute case…
OK, can everybody just shut up about a September rate increase now?
This morning, the Commerce Department issued its latest read on “core PCE” — the Federal Reserve’s preferred measure of inflation.
It’s now five months in a row the figure has hovered near 1.6% — higher than a year ago, for sure, but nowhere near the Fed’s 2% inflation target.
This is the chart that matters most when the Fed meets in three more weeks for its latest “policymaking” meeting. It matters way more than the unemployment number due on Friday.
Meanwhile, Americans stopped spending out of an empty pocket last month.
That’s the takeaway from the other big numbers issued by the Commerce Department this morning. Personal incomes grew 0.4%, while consumer spending grew 0.3%. It’s the first time in four months incomes grew more than spending. The savings rate, meanwhile, grew to 5.7% — the first increase since March.
The charitable interpretation of these numbers is that Americans are feeling less stretched now than they did earlier in the year. The more plausible interpretation is that Americans sense rougher times ahead and they want to have something salted away.
As well they should in light of the more perilous flip side of our Tale of Two Americas.
This week, the World Bank will follow through on plans to issue bonds denominated in “special drawing rights.” SDRs, as we’ve been explaining for a couple of years now, are the International Monetary Fund’s supercurrency, circulated among central banks and governments.
Total issuance: About 500 million SDRs, worth roughly $700 million. And while the bonds are denominated in SDRs, they’ll be payable in Chinese yuan for both Chinese and foreign banks.
“The Chinese want to invest in SDRs so they can stop investing in dollars,” Jim Rickards said here in The 5 two weeks ago.
“How much longer will investors sit in dollars waiting for the wipeout to come?”
That’s the fascinating backdrop for the meeting of G-20 leaders in China next Sunday, Sept. 4. And that meeting is the prelude to Friday, Sept. 30 — when the yuan joins the basket of currencies that comprise the SDR.
“It’s important to diversify into 10% physical gold to preserve your wealth before it’s too late,” says Jim. But if it feels as if you should be doing more, Jim shows you what to do — and how much is at stake — when you follow this link.
The major U.S. stock indexes are recovering from Friday’s losses. At last check, the Dow had picked up exactly 100 points, to reach 18,495.
Treasury rates, which spiked after Fed chair Janet Yellen’s speech at Jackson Hole, Wyoming, on Friday, are in retreat now. The 10-year note yields 1.59%. Gold is quiet at $1,322.
In the slow-motion train wreck of the Obamacare “marketplaces,” a few more boxcars are getting crushed as open-enrollment time approaches.
“Enrollment in the insurance exchanges for President Obama’s signature health care law is at less than half the initial forecast,” says this morning’s Washington Post. Even with the stick of increasing fines, healthy people are turning down the carrot of health insurance on the individual market. And no wonder, considering how the premiums keep rising.
You might have heard that major insurers like UnitedHealthcare and Humana are pulling out of the exchanges because there aren’t enough young, healthy people buying insurance to make it profitable to cover the older, sicker people who are buying insurance.
Now comes a study by the nonpartisan Kaiser Family Foundation, which says next year only one company will offer insurance on the “marketplaces” in nearly a third of all U.S. counties, and only two will be available in another third…
And don’t look for a fix from Republicans in Congress.
“There has been no shortage of votes to repeal Obamacare,” writes the Independent Institute’s John C. Goodman at Forbes. “At last count, the House has voted to repeal some or all of the hated legislation 60 times!”
But Goodman says there’ve been zero hearings investigating the problems caused by Obamacare. What gives?
For all its faults, Obamacare has provided insurance to millions of people who didn’t have it before. “Whatever problems they are having would be even worse if they had no insurance at all,” Goodman writes. “And that is what would happen if the Republicans repealed Obamacare and did not replace it with something else.
“Having a hearing wouldn’t just put Democrats on the spot. It would put Republicans in the potentially embarrassing bind of having to explain how they would solve these very same problems.”
In a way, Obamacare has become just like NPR and the National Endowment for the Arts. If Republicans ever got around to actually abolishing these programs and agencies, what would they have to bitch about? How would they rile people up in their fundraising letters?
No, forget the politicians. You need to take matters in your own hands. It’s possible to opt out of Obamacare and obtain immediate world-class affordable care. Our Laissez Faire unit spells it out in a report called The Ultimate Guide to Affordable Health Care. Access here.
“Is it a coincidence,” a reader writes, “that there were wildfires burning in Grand Teton National Park while the Fed members were in nearby Jackson, Wyoming?
“I can just see this pack of dopes running around playing with matches in the woods and then running away when a fire starts, disavowing any responsibility for the damage but looking forward to their next campout shortly thereafter!”
“If readers subscribe to a financial publication and the editors add opinionated nonrelated content, the readers will skim the publication and develop a dismissive attitude toward the publication,” a reader writes.
We got a bit of negative feedback after handing over the Saturday essay to David Stockman last weekend. “Does the anti-Hillary rant mean you want Trump to win?” asked another.
The 5: The answer to the last question is no.
We suspect folks didn’t read all the way down to the end. Too bad. We’ll share that last bit, because of how much it matters…
“[Hillary] thinks war is peace; deficits don’t matter; the baby boom is entitled to the social insurance they didn’t earn; and that the Fed’s serial bubble machine is leading the nation back to prosperity.
“Actually, it’s leading to the greatest financial bubble in human history. After 90 months of ZIRP and a decade of Wall Street coddling and subsidization by the Fed, the windfalls to the 1% have become unspeakable in their magnitude and illegitimacy.
“Soon 10,000 people will own a preponderant share of the wealth; 10 million people will live grandly off the droppings; 150 million will live off the state; and the rest of America will be left high and dry waiting for the house of cards to collapse.”
We don’t much care to talk about politics. But as Addison Wiggin wrote a few years ago here in The 5, “Politics are the problem, and you ignore them at your peril.”
“I love Yes’ ‘Close to the Edge’ and have been a ‘Red Rocker’ (Sammy) fan for many years,” a reader writes after our musical diversions of last week.
“I recently listened to a cut off of a Rush album 2112, ‘The Temples of Syrinx.’ I am pretty sure I know what Geddy, Neil and Alex are singing about. We may not have to wait until 2112 to get it. Profoundly great album. I just replaced my old, scratched-up vinyl recording of 2112 from the ’80s with a freshly pressed master from Japan.
“It really is timely stuff. I am so glad I stumbled upon Rush in high school. Besides Neil Peart being one of the best drummers that ever lived, Wikipedia mentions that Peart’s inspiration for the lyrics to “Anthem” came from Ayn Rand’s book Anthem (which, incidentally, is the name of a record label they back). Pretty cool. I never knew.”
The 5: At the risk of committing both progger and libertarian sacrilege here… your editor’s not a big 2112 fan.
There, I said it.
Epic as it might be, I just don’t find the music that interesting. In fact, it’s put me off from exploring later and by all accounts better Rush works like Hemispheres and Permanent Waves. My loss, I know…
The 5 Min. Forecast
P.S. This just in: Apple has confirmed it will hold an event on Sept. 7, one week from this Wednesday.
We have a good idea what the marquee announcement will be. And if you act before Sept. 7, it could mean a huge windfall. We urge you to check it out right now while the story’s still developing.