From Thomas Lifson in The American Thinker Blog:
Lois Lerner, the head of the IRS operation that targeted Tea Party groups is being thrown under the bus by Obama.
As both John McCormack of The Weekly Standard and Bryan Preston of the PJ Tatler noticed, in the wake of her taking of the Fifth Amendment before the Issa Committee today, two Obama media operatives, both veterans of Journolist who were called into the White House yesterday for consultations, both called for her firing…
The synchronicity is striking.
It’s also an indication of just how worried the White House is, and how it intends to contain the scandal. First, get reliably friendly bloggers and columnists on board with a story that focuses attention away from the White House. Then, isolate and target someone who has already become a central figure in the scandal and, more importantly, who does not work directly for the White House…
Once again, Obama has demonstrated to his underlings that loyalty is one way street with him. That may be a mistake because Lerner may well have waived her Fifth Amendment protections by giving testimony on the questions before her, in the form of a statement claiming she did nothing illegal. Once she started testifying, she cannot stop, claimed Rep. Trey Gowdy.
The matter is being referred to counsel, and Lerner may be compelled to testify. Now, she has no reason at all to protect higher-ups…
More on the IRS scandal:
From The Reformed Broker:
… There was one thing Jon Hilsenrath did say in my interview with him on TV last night that I think is very important and clears up a big misconception.
He explained that Bernanke himself will not be using the term “taper” that everyone else is bandying about. The reason why is that the Fed does not want to create the impression that one policy move will necessarily be attached to three or four others.
In other words, suppose the Fed were to drop its rate of monthly asset purchases from $85 billion to some less number in one of the next meetings. This could be a one-off action with nothing else behind it, designed to temper the market’s expectations and gauge the effects.
I’d remind you that what Bernanke, as a self-styled “student of the Depression” fears the most, is a premature tightening a la FDR in 1937-1938, just as the nation was finally on the mend.
If you think that this central bank, which has just spent the last six years patiently reflating the economy, is about to yank the rug out from under it at the last moment, then you haven’t been paying attention…
More on the Federal Reserve:
From Mercenary Trader:
1. Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position: not ever, not never! Adding to losing positions is trading’s carcinogen; it is trading’s driving while intoxicated. It will lead to ruin. Count on it!
2. Trade Like a Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.
3. Mental Capital Trumps Real Capital: Capital comes in two types, mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.
4. This is Not a Business of Buying Low and Selling High: It is, however, a business of…
More on trading:
From Kimble Charting Solutions:
The Power of the Pattern highlighted in August of 2010, that a large “bullish ascending triangle” had formed in silver… and that a “huge move” was in store!
Result of this pattern… 148% rally in 19 months!
The Power of the Pattern reflected last June that a series of “bullish ascending triangles” which lead to big time rallies in silver had taken place, and that a “bearish descending triangle” was forming.
Result of this pattern… silver is down 21% in 11 months…
Below is an update on these “ascending and descending triangles” in silver…
More on silver:
From Eric Peters Autos:
Driving can be fun; it’s often necessary. But rarely is it cheap.
From buying a car to maintaining it to paying the seemingly endless fees associated with the “privilege” of being “allowed” to use the damn things – repetitive/annual taxes, insurance-at-gunpoint, etc. – many of us end up spending a far-from-small fortune to get from point A to B.
Here are some ways to notch that down some:
There’s nothing wrong with buying new, as such – if you can afford to do so. And the test for that is…
More on autos:
From Economic Policy Journal:
BuzzFeed has obtained the “Golden Pitchbook” used by top brokers at John Thomas Financial. In its pages: How cold-calling brokers pressure prospects to buy stocks from the troubled firm…
John Thomas Financial Inc. is a brokerage house straight out of the movie Boiler Room, with brokers fueled by vending machines stocked with nothing but energy drinks and music from Rocky films blaring from speakers. Its founder, Anastasios “Tommy” Belesis, even had a role in the sequel to Wall Street.
Junior brokers cold-call prospects for up to 14 hours a day, working from a memorized script that they rehearse by screaming pitches across the room to each other before the opening bell, a former employee of the firm told Buzzfeed.
Buzzfeed obtained both that script, used by brokers of every level at the 200-employee firm, as well as another script known internally as the “Golden Pitchbook,” which is given only to a privileged few senior brokers at the firm.
Considered a performance reward for top brokers, the “Golden Pitchbook” is handed down from their mentors at the firm who have also received the elusive tome, the source said… Here are some of the techniques outlined in the “Golden Pitchbook” used by JTF brokers…
More on Wall Street:
From Bruce Krasting:
In February, when Ben Bernanke gave his report to Congress, he spoke of his concern about “excessive risk taking.” On May 10 he repeated his warning:
… very low interest rates, if maintained for a considerable time, could impair financial stability. For example, portfolio managers dissatisfied with low returns may “reach for yield” by taking on more credit risk, duration risk, or leverage.
So what is Ben talking about? What does it mean when he says “reach for yield?”
I think I may have found a good example of what Ben is referring to. Consider this bank financing that was completed last week:
Borrower: KIK Custom Products
1st lien = $420Mn – Priced at LIBOR plus 425bp – priced at 99.
2nd lien = $220Mn – Priced at LIBOR plus 825bp – priced at 98.
Floor pricing = Minimum LIBOR was set at 1.25% (100bp over current LIBOR rate)
Company rating = Caa/B-
Fees = Undisclosed – must have been big – 3+%
Book runner = UBS
KIK Custom Products makes bleach and soap. The company is owned by CI Capital Partners, a NYC based LBO outfit. There is no publicly available financial information for KIK, but the pricing/rating and the sponsor tell me that this is a highly leveraged deal.
What kills me is that this is a recap deal. This financing replaces the existing debt of KIK, and therefore it is on substantially better terms than what existed before the recap.
This is a junk deal. It’s not suitable for widow and orphans – but that’s where this paper is going to end up. This loan will work its way into the many Loan Mutual Funds that are available to retail investors. Small investors have been pouring money into bank loan funds. Every month for the past four-years money has flown into this investment class. So far this year $20Bn has found its way to junk bank loan funds. Another $900Mn came in last week.
As an ex junk guy, I have no problems with the KIK deal – provided that this dodgy paper ends up in the hands of true “Sophisticated Investors.” But I do have a problem with the fact that this deal could not have happened were it not for Ben Bernanke and his unending squeeze on returns for small investors…
More on QE:
From Zero Hedge:
In all the hoopla over Japan’s stock market crash and China’s PMI miss last night, the biggest news of the day was largely ignored: copper, and the fact that copper’s ubiquitous arbitrage and rehypothecation role in China’s economy through the use of Chinese Copper Financing Deals (CCFD) is coming to an end.
Copper, as China pundits may know, is the key shadow interest rate arbitrage tool, through the use of financing deals that use commodities with high value-to-density ratios such as gold, copper, nickel, which in turn are used as collateral against which USD-denominated China-domestic Letters of Credit are pledged, in what can often result in a seemingly infinite rehypothecation loop (see explanation below) between related onshore and offshore entities, allowing loop participants to pick up virtually risk-free arbitrage (i.e., profits), which however boosts China’s FX lending and leads to upward pressure on the CNY.
Since the end result of this arbitrage hits China’s current account directly, and is the reason for the recent aberrations in Chinese export data that have made a mockery of China’s economic data reporting, China’s State Administration on Foreign Exchange (SAFE) on May 5 finally passed new regulations which will effectively end such financing deals.
The impact of this development can not be overstated: according to independent observers, as well as firms like Goldman, this will not only impact the copper market, as copper will suddenly go from a positive return/carry asset to a negative carry asset leading to wholesale dumping from bonded warehouses, but will likely take out a substantial chunk of synthetic shadow leverage…
More on China:
The overnight headlines are dominated by Japan’s equity markets’ massive reversal. Here is the 30-day chart of the Nikkei for a sense of the saying, “escalator up, elevator down”:
I drew the red line to mark where the Nikkei closed, since it’s hard to tell because it fell so hard near the close. Amazingly, the Nikkei’s move higher has been so strong that it closed right at its 20-day moving average, despite a 10% intraday reversal. So though the move overnight felt big, most buyers in the last three months are still comfortably in the green.
Two things are most notable to me about this price action. First, it’s very, very rare that you see such a large reversal from a multiyear high in a large equity index (in single stocks, they can happen all the time). Almost always, moves of this magnitude only occur after a topping process of several weeks or months. The unprecedented nature of current market positioning is worth noting.
Second, Japan mostly matters because…
More on Japan:
From Casey Research:
As many of you may know, International Man has its roots in the book of the same name. It was first published in 1978 by bestselling author, speculator, and renowned world-traveler Doug Casey.
The original intent of that book was to give readers a general sense of the exciting and opportunity-rich world that lay outside of their national borders, with a review of over 100 countries, valuable “opportunity intelligence,” and the resources that anyone could follow to realize these opportunities.
Even though the book is now clearly out of date, the need for information on internalization is more relevant than ever, as governments the world over become more desperate…
Doug Casey has said over and over that spreading your political risk beyond one single jurisdiction is the single most important thing he can recommend today.
Political risk is minimized when you don’t depend absolutely on any one particular country. Having all your eggs in one basket only makes it easier for someone to grab them all. Being internationalized makes it much harder for any particular government to control you.
We will no doubt see the major underlying trend of increasing political risk (especially for Westerners) get worse as governments sink deeper into fiscal and moral bankruptcy.
It is only prudent and logical to assume that you will, somehow and someway, continue to be squeezed harder in the pocketbook and subjected to escalating arbitrary and burdensome regulations and restrictions. In short, expect more government and less freedom all around.
The window to protect yourself from these risks by diversifying internationally gets verifiably smaller with each passing week…
More from Doug:
The dollar hit a four-year high of 103.31 yen Friday, and legendary investor Jim Rogers, chairman of Rogers Holdings, doesn’t think that’s a good thing.
“The [yen], which is one of the major currencies of the world, has collapsed 27 percent in no time,” Rogers told Yahoo. “It’s a very, very dangerous move.”
The dollar has gained 25 percent against the yen since Dec. 4, trading early Wednesday at 102.99 yen
The yen has dropped as Japan’s Prime Minister Shinzo Abe has pursued fiscal stimulus and appointed a central bank governor willing to implement a massive easing program.
“[Abenomics] has made the stock market go up quite a lot, it’s been dramatic, but it’s made the currency collapse,” Rogers explained.
The Nikkei 225 Stock Index has jumped nearly 80 percent over the last year, and Rogers says he’s not going to “jump on the bus.”
“I still own Japanese shares, I sold some last week, not all, but some,” he noted.
“If [Japanese equities] drop down for…
More from Jim Rogers:
From Jim Quinn of The Burning Platform:
A confluence of events last week has me reminiscing about the days gone by and apprehensive about the future.
I’ve spent a substantial portion of my adulthood rushing to baseball fields, hockey rinks, gymnasiums, and school auditoriums after a long day at work. I’d be lying if I said I enjoyed every moment. Watching eight year olds trying to throw a strike for two hours can become excruciatingly mind-numbing.
But, the years of baseball, hockey, basketball, and band taught my boys life lessons about teamwork, sportsmanship, winning, losing, hard work, and having fun. There were championship teams, awful teams and of course trophies for finishing in 7th place.
As my boys have gotten older and no longer participate in organized sports, the time commitment has dropped considerably. Last week was one of those few occasions where I had to rush home from work, wolf down a slice of pizza and head out to a school function. It was the annual 8th grade Spring concert.
My youngest son was one of a hundred kids in the 8th grade choir. I think it was mandatory, since none of my kids like to sing. As my wife and I found a seat in the back of the auditorium where we could make a quick escape at the conclusion of the show, neither of us were enthused with the prospect of spending the next ninety minutes listening to off-key music and lame songs. I’ve been jaded by sitting through these ordeals since pre-school.
But a funny thing happened during my 30th band concert. I began to feel sentimental about the past and sorrowful about the future for these Millennials…
It’s not a stretch to suggest that Americans are over medicated. In 2011, doctors across the nation wrote an astounding four billion medical prescriptions… an average of 13 prescriptions for every man, woman, and child in the United States.
In the next few weeks the American Psychiatric Associations is releasing their updated fifth version their Diagnostic and Statistical Manual of Mental Disorders (DSM-5); the so-called “bible” of psychiatric diagnoses. The new manual promises to take mental illness and the use of prescription drugs to a whole new level.
You may not be considered “crazy” or “mentally ill” today, but under the new guidelines experts say half of us will be diagnosed with a psychiatric condition in the future.
The odds will probably be greater than 50 percent, according to the new manual, that you’ll have a mental disorder in your lifetime…
The increasing number of disorders comes about because some “problems” that were not previously considered to be mental illness were reclassified as such by their inclusion in the DSM—and it is the DSM that functionally defines mental illness in the United States.
You see, in the DSM-5 the definitions for mental illness have been expanded to include a whole host of new symptoms and conditions…
Dr. Allen Frances, the author of Saving Normal, says that the new requirements will “turn everyday anxiety, eccentricity, forgetting and bad eating habits into mental disorders.”
The changes being introduced by the DSM-5 are nothing short of a sweeping overhaul of our mental health care system, and they will have effects that many experts can’t even fathom. But those behind the DSM, who work very closely with government experts, know exactly what they’re doing.
Let’s connect the dots a little bit to get an idea of how this is going to have a direct impact on your life in the very near future.
Under the new regulations set forth by the Affordable Care Act, also known as Obamacare, certain groups of Americans like school children, seniors, those on government health plans, active-duty military personnel, and veterans will be required to submit to mental health screenings…
More on health care:
Dr. Henry Miller, senior fellow at the Hoover Institution, and Gregory Conko, senior fellow at the Competitive Enterprise Institute, in their Forbes article “Rachel Carson’s Deadly Fantasies,”wrote that her 1962 book, Silent Spring, led to a world ban on DDT use.
The DDT ban was responsible for the loss of “tens of millions of human lives – mostly children in poor, tropical countries – traded for the possibility of slightly improved fertility in raptors (birds). This remains one of the monumental human tragedies of the last century.” DDT presents no harm to humans and, when used properly, poses no environmental threat.
In 1970, a committee of the National Academy of Sciences wrote: “To only a few chemicals does man owe as great a debt as to DDT… In a little more than two decades, DDT has prevented 500 million human deaths, due to malaria, that otherwise would have been inevitable.” Prior to the DDT ban, malaria was on the verge of extinction in some countries.
The World Health Organization estimates that malaria infects at least 200 million people, of which more than a half-million die, each year. Most malaria victims are African children. People who support the DDT ban are complicit in the deaths of tens of millions of Africans and Southeast Asians. Philanthropist Bill Gates is raising money for millions of mosquito nets, but to keep his environmentalist credentials, the last thing that he’d advocate is DDT use. Remarkably, black congressmen share his vision.
Wackoism didn’t end with Carson’s death…
More government insanity:
Federal Reserve Chairman Ben S. Bernankesaid the U.S. economy remains hampered by high unemployment and governmentspending cuts, and raising interest rates or reducing asset purchases too soonwould endanger the recovery.
“A premature tightening of monetarypolicy could lead interest rates to rise temporarily but would also carry asubstantial risk of slowing or ending the economic recovery and causinginflation to fall further,” Bernanke said today in testimony to the JointEconomic Committee of Congress in Washington. Monetary policy is providing “significantbenefits,” he said.
Bernanke is leading the most aggressiveeconomic stimulus in the Fed’s 100-year history in an effort to spur growth andreduce an unemployment rate that stands at 7.5 percent almost four years into arecovery from the longest and deepest recession since the Great Depression.
While the labor market has shown “someimprovement,” the Fed chairman said “high rates of unemployment andunderemployment are extraordinarily costly.”
“Not only do they impose hardships onthe affected individuals and their families, they also damage the productivepotential of the economy as a whole by eroding workers’ skills and –particularly relevant during this commencement season — by preventing manyyoung people from gaining workplace skills and experience in the first place,”he said.
Stocks extended gains after the comments.The Standard Poor’s 500 Index climbed 0.4 percent to 1,676.47 at 1;12p.m. in New York, while bond investors took their cue from comments Bernankemade about possibly trimming the Fed’s purchases. Yields on the U.S. 10-yearnote rose above 2 percent for the first time since March.
Lou Crandall, chief economist at WrightsonICAP LLC in Jersey City, New Jersey, said Fed officials want to get away fromthe notion that scaling back the purchases is a signal that they are on a pathto end them altogether. He added that the Fed is probably several months awayfrom even taking that first step.
“They need to see inflationexpectations remain in a desired range, they need to see that the peakhome-buying season goes as well as it can, and they need to see that we haveabsorbed the bulk of the huge fiscal consolidation” before they reduce thepace of purchases from $85 billion a month, Crandall said.
William Dudley, president of the FederalReserve Bank of New York, also signaled that it’s too soon to tighten policy.
“Three or four months from now I thinkyou’re going to have a much better sense of, is the economy healthy enough toovercome the fiscal drag or not,” Dudley said in an interview with MichaelMcKee on Bloomberg Television that aired today.
Fed officials started a third round ofasset purchases known as quantitative easing in September and increased them inDecember to $85 billion a month of Treasuries and mortgage-backed securities.
In response to a question from Kevin Brady,a Texas Republican who chairs the committee, Bernanke said the flow of assetpurchases is linked to the economy’s performance, and the labor market inparticular.
As the outlook for the labor market “improvesin a real and sustainable way, the committee will reduce the flow of purchases,”Bernanke said, without specifying a time.
“If we see continued improvement, andwe have confidence that that is going to be sustained, in the next few meetingswe could take a step down in our pace of purchases,” Bernanke said. “Wecould either raise or lower our pace of purchases going forward. Again, that isdependent on the data.”
Treasuries fell after that comment, pushingthe yield on the 10-year note up to 2.03 percent at 1:12 p.m. in New York from1.93 percent late yesterday.
The Fed aims to drive down interest ratesand encourage investors to seek higher returns in riskier assets, broadeningthe impact of the central bank’s stimulus. Lower borrowing costs for householdsand businesses allow them to refinance and pare debt, freeing up more cash forspending or dividends.
“With unemployment well above normallevels and inflation subdued, fostering our congressionally mandated objectivesof maximum employment and price stability requires a highly accommodativemonetary policy,” Bernanke said in his prepared remarks.
The personal consumption expenditures priceindex rose 1 percent for the year ending March, below the central bank’s 2percent goal. At the same time, “measures of longer-term inflation expectationshave remained stable and continue to run in the narrow ranges seen over thepast several years,” Bernanke said.
Bernanke’s strategy, combined withexpectations of faster growth in coming years, has helped support a 17 percentrise in the SP 500 this year.
Returns on riskier assets have become moreattractive with U.S. 10-year notes yielding as little as 1.63 percent May 2. Anindex of high-risk, high-yield junk bonds tracked by Bank of America has atotal return of 5.4 percent this year versus minus 0.3 percent for an index ofTreasury and agency securities.
The Fed chairman said the central bank ison the watch for financial imbalances that may result from its lowinterest-rate policy. “Our sense is that major asset prices like stockprices and corporate bond prices are not inconsistent with the fundamentals,”Bernanke said in the question-and-answer period following his remarks.
In his prepared text, Bernanke recognized apersistent complaint from congressional constituents — the low returns saversare earning as a result of the Fed’s policies.
“Recognizing the drawbacks ofpersistently low rates, the FOMC actively seeks economic conditions consistentwith sustainably higher interest rates,” the Fed chairman said. “Unfortunately,withdrawing policy accommodation at this juncture would be highly unlikely toproduce such conditions.”
“In considering whether arecalibration of the pace of its purchases is warranted, the committee willcontinue to assess the degree of progress made toward its objectives in lightof incoming information,” Bernanke said, referring to the Federal OpenMarket Committee, the Fed panel that sets monetary policy.
Rising stock prices, consumer confidence,and housing values may be creating a foundation for self-sustaining growth thisyear. U.S. gross domestic product expanded at a 2.5 percent annual rate in thefirst quarter, helped by gains in consumer spending, after increasing at a rateof just 0.4 percent in the prior quarter.
“Compared to two years ago, threeyears ago, there are bright spots in this economy in housing, energy andautomotive that would say this tepid recovery is moving into a phase where itcan stand on its two legs,” Michael Jackson, chairman and chief executiveof AutoNation Inc. (AN) told investors on an earnings call April 18.
Fed officials said in their statement May 1that the Federal Open Market Committee “is prepared to increase or reducethe pace of its purchases to maintain appropriate policy accommodation as theoutlook for the labor market or inflation changes.”
Since then, some regional Fed bankpresidents have indicated that they may be inclined to pare back the purchasesif economic data continues to show the expansion gaining strength, while otherssaid continued stimulus is necessary.
Philadelphia Fed President Charles Plosserlast week called for shrinking purchases at the Fed’s next meeting; SanFrancisco’s John Williams said the central bank “could reduce somewhat”the pace of purchases as early as this summer “if all goes as hoped,”and Boston’s Eric Rosengren said low inflation and high unemployment suggestthere may be a need for more stimulus, not less.
Charles Evans of Chicago said May 20 thathe’d like to see monthly employment growth of 200,000 or more for at least sixmonths before judging the labor market substantially improved. Payrolls haveincreased an average 208,000 a month over the last six monthly reports throughApril.
“If I had high confidence that thiswas going to be maintained over the next six months and beyond, I would bequite amenable to discussions about adjusting the flow of purchases downward,”Evans told reporters after his speech. “I’d like to see a few more monthsof data.”
Fed officials have left the benchmarklending rate near zero since December 2008 and have expanded the balance sheetto $3.35 trillion compared with $879 billion on May 9, 2007, with quantitativeeasing.
To contact the reporter on this story:Craig Torres in Washington at email@example.com.
To contact the editor responsible for thisstory: Chris Wellisz at firstname.lastname@example.org.
More on QE:
Three top Federal Reserve officials are calling for an end to the latestQE insanity
Federal Reserve shocker: The “end of QE” rumor was true
Nine things you need to know about the “end of QE”
From Chris Martenson:
As the global equity and bond markets grind ever higher, abundant signs exist that we are once again living through an asset bubble – or rather a whole series of bubbles in a variety of markets. This makes this period quite interesting, but also quite dangerous.
With equity and bond markets at or near all-time record highs, with all financial assets consistently shrugging off bad – or worse – news as the riskiest of assets continue to find consistent upward bids, we find ourselves in familiar and bubbly territory.
I can summarize my thoughts in one sentence: How could this be happening again so soon?
In times past, it took one or more generations between bubbles for people to financially recover and forget the painful lessons before they would consider doing it all again. Yet here we are, working our way through our third set of bubbles in less than two decades, which must be some sort of world record.
I will confess to my biases right up front: I have always been deeply skeptical of both the practice of running up debts at a faster pace than income (the common practice of the entire developed world over the past several decades) and the idea that the solution to too much debt is more debt, enabled by cheaper money courtesy of thin-air money printing.
In short, instead of seeing central banks as sophisticated stewards of intricate monetary policies, I view them as serial bubble-blowers and reckless debt-enablers whose only response, when confronted with the inevitable consequences of their actions, is to serve up more thin-air money at an even cheaper rate. And when that doesn’t work, then they simply try even more of the same, but in larger quantities.
While I think central banks are populated by earnest people with impressive credentials who have rationalized their actions as being necessary and in service of the greater good, I also think that the biggest ones hold an entrenched set of institutional views that are dogmatic, fail to incorporate the idea of economic and resource limits, and are seemingly immune to healthy introspection.
Somewhere along the way, I would have hoped they might have noted that each new crisis is larger than the one before – necessitating an even larger response that begets an even larger crisis next time, etc., and so on. A corporate bond hiccup in 1994 led to monetary loosening that enabled the development of the Long Term Capital Management (LTCM) fiasco of 1998, which was followed by the tech bubble, and then the housing bubble, and here we are with a now global equity and bond bubble that is larger than all the prior bubbles combined. Much larger.
It was famously said that the market can remain irrational longer than you can remain solvent. And if the trading maxim, don’t fight the Fed, is worth heeding, then surely one should absolutely not take on all of the central banks at once, either. So, the risk I run here in seeing things through my ‘common sense’ filter is that perhaps this time the Fed, et al., have got it right, and a true and lasting recovery is at hand…
More on bubbles:
From The Gold Report:
“Half science, half art, half luck,” is how Brent Cook describes a geologist’s work in distinguishing an anomaly from a deposit. But in his interview with The Gold Report, the publisher of Exploration Insights suggests investors will have an easier time distinguishing good drill results from bad if they know how to dissect a company’s press releases. And despite the current preference for cost cutting over discovery, Cook discusses several miners whose futures are bright.
The Gold Report: After the Prospectors and Developers Association of Canada Convention in March, you said that the next 12–18 months could define how investors, speculators and mining companies perceive and value both the junior and major mining sectors. That was before the volatility of mid-April. With higher production costs being the new normal, what percentage of miners can make money at the current gold price?
Brent Cook: That is a tough call because companies use different methods to report their gold prices and gold costs. Cash costs are just one factor. When you throw in exploration, general and administrative expenses, royalties and such, it goes up quite a bit.
Everything I have seen published by both the companies and the analysts suggests that the all-in average cost of production for larger mining companies is…
More on gold stocks:
A cheap regimen of vitamins in use fordecades is seen by scientists as a way to delay the start of Alzheimer’sdisease and dementia, a goal that prescription drugs have failed to achieve.
Drugmakers including Bristol-Myers SquibbCo., Pfizer Inc. (PFE) and Eli Lilly Co. (LLY) have spent billions ofdollars on ineffective therapies in a so-far fruitless effort to come up with atreatment for dementia and Alzheimer’s.
Now, in the latest of a steady drumbeat ofresearch that suggests diet, exercise and socializing remain patients’ besthope, a study published today in the Proceedings of the National Academy ofSciences shows that vitamins B6 and B12 combined with folic acid slowed atrophyof gray matter in brain areas affected by Alzheimer’s disease.
“You don’t have any other options forthese patients, so why not try giving them this cocktail of B vitamins?”says Johan Lokk, a professor and head physician in the geriatric department atKarolinska University Hospital Huddinge in Sweden, who wasn’t involved in thestudy.
Alzheimer’s disease and dementia mostlyaffect older people. As people live longer, the number afflicted by theconditions is growing. Delaying dementia with an inexpensive vitamin regimenmay help stem the surge in cases, which the World Health Organization predictedwould more than triple from 36 million worldwide in 2010 to 115 million in2050, as well as the cost, estimated at $604 billion in 2010 by Alzheimer’sDisease International.
Vitamin makers and retailers such as Pfizer’sconsumer health-care unit and GNC Holdings Inc. (GNC) in the U.S. and ReckittBenckiser Group Plc and Holland Barrett Holding Ltd. in Europe stand tobenefit. The Nutrition Business Journal estimates the global market forvitamins, minerals and supplements was $30 billion in 2012 and forecasts saleswill grow 3.6 percent by 2017.
In the PNAS study, researchers tracked 156people ages 70 and older who had mild memory loss and high levels of a proteinpreviously linked to dementia. Among people with elevated homocysteine, thestudy found that the amount of gray matter declined 5.2 percent in those takinga placebo, compared with 0.6 percent in those who took the vitamin cocktail.The supplements cost about 30 cents a day in pharmacies and health-food stores.
“It’s the first and onlydisease-modifying treatment that’s worked,” said A. David Smith, professoremeritus of pharmacology at Oxford University in England and senior author ofthe study. “We have proved the concept that you can modify the disease.”
The U.S. Food and Drug Administration hasn’tcleared new drugs for memory loss conditions in a decade. Approved medicinessuch as Eisai Co.’s Aricept ease symptoms without slowing or curing dementia. Ajoint U.S.-European Union task force in 2011 found that all disease-modifyingtreatments for Alzheimer’s in the previous decade failed late-stage trials “despiteenormous financial and scientific efforts.”
Since then, at least four more experimentaltreatments have failed. New York-based Bristol-Myers dropped development ofavagacestat in December after data showed the therapy wasn’t effective enoughto move into the final stage of testing. Solanezumab, from Indianapolis-basedLilly, failed to meet the main goal of two large studies last year, though thecompany plans to conduct further research.
Bapineuzumab from Pfizer, Johnson Johnson and Elan Corp. failed to improve patients’ memory or thinking,according to test results released in August. This month, Baxter InternationalInc. said Gammagard, which is used to help patients with immune disorders, didn’thelp Alzheimer’s patients in a late-stage study.
Meanwhile, scientists are exploring the useof experimental drugs to prevent Alzheimer’s. Independent trials will beginthis year and run for three to five years.
Older people’s brains shrink about 0.5percent a year from the age of 60, and faster in people with vitamin B12deficiency, mild cognitive impairment or Alzheimer’s disease, Smith said. Ifthat pace can be significantly slowed before full-blown Alzheimer’s develops,it may delay the disease’s progression so that older people can enjoy betterlives until they die from another cause.
“If you delay the onset by five years,you can halve the number of people dying from it,” says Jess Smith, aresearch communications officer at the Alzheimer’s Society, a U.K. charity. Sheisn’t related to A. David Smith.
The Oxford group studied people in theOxford, England, area who had mild cognitive impairment, also known as MCI, orsome memory loss. One in six people over 70 have MCI and about half of thosedevelop dementia within five years, A. David Smith said. Alzheimer’s accountsfor 50 percent to 80 percent of all dementias, according to the Alzheimer’sAssociation.
Study volunteers were given either aplacebo or 0.5 milligrams of vitamin B12, 20 milligrams of vitamin B6 and 0.8milligrams of folic acid. Their brains were scanned using magnetic-resonanceimaging and blood levels of the protein homocysteine were measured at the startof the trial and two years later. The MRI scans compared how much gray matterwas lost in brain regions most affected by Alzheimer’s disease.
“It’s a big effect, much bigger thanwe would have dreamt of,” A. David Smith said. “I find thespecificity of this staggering. We never dreamt it would be so specific.”
The research reinforces previous findingsthat supplements slowed brain atrophy and cognitive decline in the group.
Smith and his colleagues at Oxford reportedin 2010 that the atrophy rate in patients’ whole brains was reduced about 30percent in those taking the vitamins and 53 percent in those on the vitamins whoalso had elevated homocysteine. They published study results in 2012 of memorytests that found people on the treatment who had high homocysteine were 69percent likelier to correctly remember a list of 12 words.
The studies, known as Vitacog, were fundedby seven charities and government agencies and vitamin maker Meda AB (MEDAA) ofSolna, Sweden. Smith is an inventor on three patents held by Oxford Universityfor B vitamin formulations to treat Alzheimer’s disease or MCI.
Vitamin B12 is found in liver, fish andmilk and folic acid in fruit and vegetables. Deficiency of folate and Bvitamins is already linked to dementia. Researchers such as Smith are studyingwhether less-than-optimal levels of B vitamins and folic acid contribute to itsdevelopment.
“If you have somebody who has outrightAlzheimer’s disease, this isn’t really going to help them much,” saidJoshua Miller, a professor in the department of nutritional sciences at RutgersUniversity in New Brunswick, New Jersey. “If you can catch them at anearlier level, they may be able to benefit from it but only if you haveelevated homocysteine.”
A U.S. study published in 2008 found thatpeople who had moderate or severe Alzheimer’s didn’t benefit from thesupplements. There’s no evidence that B vitamins enhance cognitive function inhealthy people, A. David Smith said.
Doctors in Sweden began measuringhomocysteine in people who report declining memory about two years ago, saidLokk at Karolinska. Swedish patients with high homocysteine are given folicacid and B vitamins, even if they aren’t deficient.
“We think the increased homocysteinelevel could be deleterious to the brain,” Lokk said. “We wanted to beon the offensive in diagnosing and treating patients. In our opinion, it isharmless and cheap.”
Vitamin B12 is probably the key to slowingthe brain’s shrinkage and cognitive decline, Miller said. The FDA said in 1998that folic acid had to be added to breads, cereals and other products that useenriched flour, to reduce neural tube defects such as spina bifida in newborns.A study by Miller and his colleagues in people of Mexican and South and CentralAmerican ancestry age 60 and older in Sacramento, California, the followingyear found their homocysteine was still high and that very few had low folate.Europe doesn’t require fortification of flour and breads.
Other studies have suggested that folicacid stimulates the growth of existing cancer cells. The data aren’tconclusive, so people at risk of cancer should avoid extra folic acid, Lokksaid. This could include men older than 70 who may have undetected prostatecancer, A. David Smith said.
“We’re not suggesting everyone over 60take this; we’re suggesting it should be targeted to people over 70 with highhomocysteine and memory problems,” he said.
It’s too early to put everyone on Bvitamins, said Jess Smith of the Alzheimer’s Society.
“The evidence for supplementing isjust not there yet,” she said. “We need bigger studies and moreevidence that looks at what homocysteine is doing and what is actually going onin the brain.”
A. David Smith agrees. He plans a study ofB vitamins in 1,200 people over 70 with MCI and elevated homocysteine. He needs6 million pounds ($9.1 million) to pay for it. Miller plans another large studyand wants to see if folic acid in flour in the U.S. leads to different resultsthere. Meanwhile, the lack of blockbuster-drug potential presents fundinghurdles.
“The pharmaceutical companies aren’tgoing to make any money on this and the supplement companies aren’t going tohave enough money to do it,” Miller said. “This would have to begovernment-funded. I’m just not sure the climate is right for it now.”
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