The Daily Reckoning February 20th

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How to Play Tech’s Retail Dilemma

“I give them two years before they’re turning out the lights on a very painful and expensive mistake…”

That’s a quote from a pessimistic analyst in a Bloomberg Op-Ed dated May 20, 2001 — just one day after Apple opened its first retail locations.

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The arguments against brick-and-mortar retail are sound, for the most part. It’s an expensive proposition to open a retail location that could quickly become nothing more than a showroom for Amazon.com. And almost everywhere you look, old-school retailers are getting crushed as consumers opt for the convenience of online purchases.

Yet Apple has proven that if you do it right — and if your product line is good enough — retail can thrive, even in the tech space. Twelve years after its first foray into upscale malls in high-rent districts, Apple’s retail juggernaut brought in the sales. Apple makes roughly $6,050 for every square foot of store space. That’s more than twice high-end jeweler Tiffany & Co.’s $3,017 per square foot, according to consulting firm Retail Sails (via Forbes).

But the billion-dollar question goes to Google:

Can the king of search make retail work?

Google vs. Apple

Google topped $800 for the first time today. Over the past five months, it has separated itself from Apple, helping to lead the Nasdaq higher while Apple steadily slipped. Now rumors are swirling that Google is planning to open stand-alone retail locations — possibly as early as the holiday season.

Google stores could be a boon for the company. It’s already proven it can innovate (working prototypes of Project Glass and self-driving cars come to mind). But if Google can demonstrate the worth of its new innovations at retail locations to an endless supply of potential customers, a new period of growth could be in its future.

Don’t bet against them…

Greg Guenthner
for The Daily Reckoning

How to Play Tech’s Retail Dilemma appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

A Natural Elixir…Good for What Ails Ya!

Let me begin by saying that I don’t blame you if you are skeptical about what I’m going to tell you now. It took me six months to come to grips with the reality and the magnitude of this discovery, despite plenty of solid research from world-class scientists. Finally, I did two things. I talked to scientists at the Johns Hopkins Medical School and the Roskamp Institute, and I began taking the supplement and giving it to friends and family.

A big part of my skepticism came from the fact that this is a “natural” product, a nutraceutical. I’ve seen so much junk science come out of the health food store subculture, my prejudices against anything with a nutraceutical label ran very deep.

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Having accepted the possibility that a natural substance might actually outperform drugs, I was led to the work of respected professor Claudio Franceschi, who founded the Laboratory of Immunology at the University of Bologna, Italy. Franceschi developed a theory of accelerating aging that he termed “inflammaging.” His work is widely available on the Web, but I’m going to give you my very abbreviated take on it.

Until the mid-20th century in the Western world, the most hazardous time in a person’s life was birth and the following months. Economic progress and medical advances have changed that, but we all come from lineages that have one thing in common. Our ancestors’ immune systems were fully activated from their very first moments to fight injury and infection. If it were not so, they would not have survived to pass on their genes to you.

What worked for much younger populations in earlier times, however, is a major problem today. Your immune system is on constant high alert, ready at a moment’s notice to mount an “inflammatory response” to infections or injuries common only a century ago. The highly tuned immune system you inherited from your ancestors is not equipped for less hazardous times. I think of our immune systems as guards suffering from sleep deprivation and a caffeine overdose with their fingers on hair triggers.

Our immune systems are designed to overreact because in the past, a false alarm was far less dangerous than a weak or delayed response. We see evidence of this in young people who have allergies. It’s not the pollen or the peanuts that make people sick, but their own overreacting immune systems. As we age, the immune system misfires more and more often, and the resulting cellular damage provokes even more inflammation. It’s a vicious accelerating circle that contributes to all diseases.

In the paper “Inflamm-aging: An Evolutionary Perspective on Immunosenescence,” Franceschi and his team point out:

The persistence of inflammatory stimuli over time represents the biologic background (first hit) favoring the susceptibility to age-related diseases/disabilities. A second hit (absence of robust gene variants and/or presence of frail gene variants) is likely necessary to develop overt organ-specific age-related diseases having an inflammatory pathogenesis, such as atherosclerosis, Alzheimer’s disease, osteoporosis and diabetes.

In other words, you may have a genetic predisposition to atherosclerosis, Alzheimer’s disease, osteoporosis or diabetes, but it is your own immune system that triggers these conditions. Many researchers studying this phenomenon have focused on NF-κB, the nuclear factor kappa-light-chain enhancer of activated B cells, as the root cause of the problem.

NF-kappaB, as it is often abbreviated, is the alarm system of our immune system. It is a transcription factor capable of activating your DNA to mount an immune defense. It exists outside of the nucleus in virtually every cell in your body, but if it detects something indicating injury or infection, it migrates into the nucleus and initiates an immune response.

As we age, NF-kappaB calls in more and more false alarms until we are in a state of chronic low-level inflammation. Eventually, this chronic inflammation tends to localize at some point of vulnerability until we have a health-threatening disease that ends our lives prematurely.

For this reason, a substance that would calm down NF-kappaB activation without suppressing legitimate immune system function has been called the “holy grail” of modern medicine. To make a long story short, that Holy Grail has been found in members of the solanaceous plant family, which includes eggplant, peppers and tobacco.

In fact, this alkaloid was discovered while searching for an effective smoking cessation aid. Researchers have long known that there’s more than nicotine in tobacco that leads smokers to smoke. This was obvious due to fact that smoking has powerful and pleasurable calming effects, via MAO inhibition, that nicotine does not provide. Moreover, despite the clear dangers of smoking, the tobacco plant has known medicinal values.

Jonnie Williams, the CEO of a company dedicated to lessening the harm of tobacco, Star Scientific, discovered that extra ingredient. After spending years and millions of dollars to find a safe food form of the substance, he proved safety with two years of Harvard University toxicity studies. Then, he put smoking cessation mints containing his anatabine citrate on the market.

Almost immediately, people began posting reports online of improvements in a variety of inflammation-related conditions. Intrigued, Williams took his substance to several important research organizations, including the Roskamp Institute and Johns Hopkins Medical School.

Personally, since I began using the supplement two years ago, I’ve seen remarkable improvements in my health. Due to a bad car accident in college, I was far into the inflammaging death spiral. Tibial periostitis (shin splints) kept me even from walking distances. Severe cervical arthritis had left my right arm mostly unusable, making most upper-body exercises nearly impossible. Within months, both conditions were significantly improved. After two years, I have no symptoms. As a result, I was able to begin running and lifting weights again.

Additionally, my seasonal allergies, while still occasionally evident, no longer take me down. The same is true for my family and many of my friends. My optometrist was surprised to find that sight in my right eye, lost through trauma-induced glaucoma, had improved. I’ve dropped more weight than I care to admit, and my numbers are all better.

Many others, including golfer Fred Couples, have also found life-changing relief from serious inflammatory conditions. Jonnie Williams’ wife’s thyroiditis, on the verge of needing surgery, reversed and no longer bothers her.

Even the dramatically successful results that have come from humanized animal studies are not proof that this natural compound, found in the over-the-counter nutraceutical Anatabloc, will work similarly in humans. But the conditions we’ve seen improved in animals include, by the way, Alzheimer’s, thyroiditis and multiple sclerosis. I could go on and on, but anecdotal stories such as these are not valid scientific evidence, though I’ve heard scores of even more remarkable accounts from the research scientists themselves who have given the supplement to friends and family.

Unbelievable, right? I understand. So I’m not telling you to trust me or take the product.

Rather, I’m telling you to watch for final data from three major studies under way now. The Roskamp Institute, a leading brain disease research center, is doing the Alzheimer’s trials. Roskamp, directed by two of the scientists who discovered the amyloid connection to Alzheimer’s, Drs. Michael Mullan and Fiona Crawford, has also overseen an interventional study in Flint, Mich. Dr. Paul Ladenson, with colleagues from Johns Hopkins, is following up an animal study of thyroiditis with a human study.

Preliminary results from the Flint study have been released, revealing that the active ingredient in Anatabloc, at much lower doses than I take, reduced C-reactive protein (CRP) levels in 61% of diabetic patients. CRPs are associated with the onset and severity of diabetes and other diseases. These patients, in fact, all had other diseases and extremely high CRPs, so results are far more significant than they may appear.

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The Hopkins thyroid study results should be completed in December, but we already know that the human studies are providing statistically significant results. If they are similar to the animal studies, which provided the first-ever improvements in thyroid disease, we will be able to reach extremely important scientifically validated conclusions.

In fact, positive results from all three ongoing studies would confirm the thesis that anatabine citrate does not treat specific diseases directly. Rather, it dramatically reduces the NF-kappaB-induced inflammation that affects all diseases. If this is true, and I’m personally convinced that it is, it means that we will be able to delay or prevent most of the conditions that prematurely shorten life.

I won’t tell you how much longer I think we’ll live, because you wouldn’t believe me. I will say, however, that the impacts, both positive and negative, on programs such as Social Security and health care, as well as the medical, housing, insurance and other industries, will be “unbelievable.”

One nutraceutical I’m very excited about is nicotinamide riboside, or vitamin NR, a superior form of niacin developed by Cornell and Duke universities and licensed by ChromaDex. Vitamin NR has profound implications for mitochondrial function, cholesterol, fat loss and nerve health. It appears to me that it would work synergistically with anatabine citrate and, therefore, with Anatabloc. Hopefully, we will have data within the year.

Stay tuned!

Regards,

Patrick Cox
for The Daily Reckoning

A Natural Elixir…Good for What Ails Ya! appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

When It Comes to Gold, Stick to the Facts

Gold dipped below $1,600 last week, falling to a six-month low, much to the chagrin of gold investors. I find the timing of the correction peculiar, given the G20 Finance Ministers Meeting taking place this weekend. There’s been a growing debate over Japan’s move to devalue its currency to stimulate growth, with reaction from the G-7 leaders stating that “domestic economic policies must not be used to target currencies,” reports Reuters.

While the G-7 tried to legitimize the currency debasement with this statement, in reality, investors seem to be able to see through to the real motivations.

The main reason the mainstream media gave for the correction in the yellow metal is hedge funds’ selling of gold late last year. According to quarterly filings, Hedge Fund Manager George Soros sold half of his holdings in the SPDR Gold Trust ETF (GLD) in the fourth quarter of 2012. Bloomberg attributed the sell as a move that may “bolster speculation that gold’s 12-year bull-run is coming to the end.” However, Soros may have liquidated his gold holdings because he identified a significant short-term opportunity in the currency markets.

I have said many times that government policies are precursors to change, and late last year, Japan’s new leader, Prime Minister Shinzo Abe, openly indicated his intention to drive down the currency to make the economy more competitive and increase inflation. As a result of Japan’s policy changes, the yen weakened, driving up the price of gold in Japan’s local currency.

In other words, a gold investor in Japan was likely ecstatic with his gold trade over the past few months.

Take a look at the comparison of gold’s return in different currencies. The chart below compares the percentage change of gold in the Japanese yen to the metal’s percentage change in U.S. dollar terms over the last six months. From the middle of August 2012 until about November, gold prices in both currencies closely followed each other.

However, as a result of changes in government policies, over the six-month period, gold rose nearly 19 percent in yen, while only increasing less than one percent in U.S. dollar terms.

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George Soros seemed to anticipate the effect that Japan’s government policies would likely have on the velocity of money. This turned out to be a brilliant move, as “wagering against the yen has emerged as the hottest trade on Wall Street over the past three months,” says the Wall Street Journal. The newspaper reported that Soros gained “almost $1 billion on the trade since November,” during a time the yen declined nearly 20 percent in four months.

I admire Soros for his ability to identify significant effects that government policies have on markets as easily as recognizing when ice turns to water. More importantly, he quickly acts on these emerging events.

This isn’t his first big win in foreign markets. In 1992, based on British government policy changes, Soros shorted British pounds and bought German marks, earning $1.8 billion for his fund.

Just like recognizing how new equilibriums can alter the dynamics of an environment, government policies can significantly change the velocity of money. Global investors watch for these trends to know where to invest in commodities and markets, find new opportunities and adjust for risk.

I discussed the potential motivation behind Soros’ trade with Simon Hobbs last week on CNBC. I explained how gold’s correction was reaching an extreme, indicating a potential buying opportunity. You can see on our oscillator model how gold has dropped nearly 2 standard deviations on a year-over-year basis. An event like this has happened only about 2 percent of the time over the last 10 years. Following these extreme lows, gold has historically increased as much as 15 percent over the next year.

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Back in June 2012, I told CNBC the same thing: Gold had reached an extreme low, and only a few months later, the metal climbed nearly 10 percent.

During short-term gold corrections, it’s much more important to focus on the facts, including the fact that gold is increasingly viewed as a currency. Rather than buying real estate, lumber or diamonds, central banks around the world are buying gold. According to the World Gold Council (WGC), over 2012, central bank demand totaled 534 tons, a level we have not seen in nearly 50 years.

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Emerging market central banks have been adding gold to their reserves, including Mexico, Brazil, the Philippines, South Korea and Russia. Over the past decade, Russia has accumulated a total of 958 tons of gold, making its gold reserves the eighth largest of all central banks, says the WGC.

Another fact about gold is the persistence of the Love Trade. As you can see below, jewelry demand declined slightly, about 3 percent in 2012, and more than half of this demand came from India and China, the countries with a cultural affinity toward gold. India’s gold purchases declined 12 percent due to an import tax and a weak rupee. However, even though the gold price experienced a significant increase in local currency, India’s demand is “all the more remarkable and serves to emphasize the importance of gold to Indian consumers,” says the WGC.

Notably, India had a better-than-expected fourth quarter, and retained its rank as the largest gold market in the world.

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In China, there was a slowdown in GDP in the first half of the year, which weighed on gold purchases. For the year, the WGC indicated that there was only a slight increase in demand over the previous year.

In 2013, the WGC expects both markets to remain strong, forecasting growth rates of about 10 to 15 percent. I believe as GDPs in Chindia rise, so will their gold demand. And as long as the precious metal is attractive to both the fear trade and the love trade, hold tight to gold, with a 5 to 10 percent weighting in gold and gold stocks, and rebalancing annually.

Frank Holmes

Original article posted on Daily Resource Hunter

When It Comes to Gold, Stick to the Facts appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

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avatarThe Daily Reckoning - The Daily Reckoning posted Wednesday, February 20th, 2013.

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