THINGS TO LOOK FOR NEXT WEEK

Here from Mark to Market is a list of 10 things to look for next week.

Though the Market's closed for Fourth of July and Friday will most likely be somewhat abbreviated, we will be going into what many consider the critical second half.

http://www.marctomarket.com/2013/06/ten-things-to-watch-in-week-ahead.html#more

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One of the big items coming next week is the June jobs report. As we recently pointed out in posting an article by Johns Hopkins economist Steven Hanke, the Fed's zero interest rate policy has hurt not helped small and medium-sized businesses trying to create jobs.

It caused a credit crunch.  Here a link to what may happen next week when the report airs.

http://www.marketwatch.com/story/us-economy-hiring-far-from-top-speed-2013-06-30

LEVITY AND TRUTH

Keats said beauty is truth and truth is beauty. And that brings us to the truth in levity.

http://www.dailyspeculations.com/wordpress/?p=8471

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WEEKEND BRIEFS

It's everywhere. Can it be stopped? Should it be stopped? Is it just another form of Big Brother?

The WSJ recently ran a piece about companies tracking kid apps. When children use their parents' phone to play games or go to some innocent-sounding site like "How to Draw," there are companies that track and collect and share data. 

http://online.wsj.com/article/SB10001424127887324520904578553662943430052.html?KEYWORDS=Apps+for+kids

Here's one more example.
http://www.testosteronepit.com/home/2013/6/29/surveillance-society-if-you-drive-you-get-tracked.html

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The US might be seen by investors as a safe haven for investing or as a beacon of hope in a much-needed global economic recovery, but given the recent revelations about its spying activities, it now surely one of the most hated countries on the planet.

Here's the latest from a Google story.

http://www.guardian.co.uk/world/2013/jun/30/nsa-leaks-us-bugging-european-allies
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What a difference a fortnight makes.

Now it's one big happy Federal Reserve family after Big Ben ruffled investor psyches 10 days ago and the market went semi-ballistic. Fed members mysteriously seemed to circle their monetary policy wagons.

All's well that ends in agreement. And the latest from those boys and girls implies that they all said one thing and we investors heard another. They were misunderstood. Some of them weren't calling for an end to QE. Or higher interest rates for that matter.

Despite claims that Fed member comments this past week were not coordinated, the denial speaks for itself. It was coordinated. Jittery markets and blame are bureaucratic nightmares.

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                                Have An Escape Route

Follow the news. Just make sure you have an escape route marked off when you need it.

Bond investors are panicking. Big mutual funds and other institutional bond runners are being inundated with calls and redemptions from investors. As one fund manger put it: "It's uncharted territory for a lot of people."

And that's the point. Wall Street preens investors for stability not the unexpected. Putting specific numbers on things may be welcome and praised by some, but it also leaves one wide open. In boxing it's the one you didn't see that does the damage.

That's what happened to more than one big-time bond fund manager from Bill Gross to Jeff Gundlach in the recent interest rate-QE turmoil.  Most spent the last week wiping scrambled bond prices off their faces.

"I am wrong 30% of the time and right 70% of the the time, and this was one that was wrong," Gundlach was quoted in Friday's WSJ.

Big egos are to big fund managers as salt is to pepper. When you see one you'll most likely find the other.

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                        The Heroin Ain't Free

The clarion call by central bankers that they ain't going to take away the monetary heroin anytime soon reminds one of all those historic examples of various governments claiming they weren't going to devaluate their currencies or default on their bonds.

And they did.

Some pundits say falling bond prices will trigger the long anticipated rush of money from bonds to equities. Could happen. But that puppy's been in the market for longer than it takes a friend to grow a chest-length beard.

And if it doesn't? Historically, the Fed has less wiggle room than ever. Times have changed and historical comparisons to 1994 are off base. Back then stocks held up while bonds went south. Bach then the Fed was trying to cut off inflation at the pass.

This time, if one believes the official numbers, there isn't any inflation, Just an unraveling of an unprecedented monetary stimulus package that's longer in the tooth than a pack ancient tigers.

Addiction to the heroin is not any different from global governments' addiction to fiscal irresponsibility. Once it gets going it's hard to give it up.

In either case, like fiscal irresponsibility, this heroin comes with a price.
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NELSON PELTZ

Nelson Peltz is a well-known billionaire investor.
Recently, his firm, Trian Fund Management, took a huge position in Mondelez, a company we've written about before. Mondelez (MDLZ),  the big snack food company Peltz was at least partly responsible for getting Kraft to spin off, is as we've noted a decent way to play the BRICs.

But the story gets more intriguing. Pepsi is also a giant in the snack food business, a company Peltz is also quite active in, building his ownership to 12 million shares, according to the latest issue of Fortune. Around the same time Peltz doubled his holdings in MDLZ.

Put these two behemoths together, something many speculate Peltz wants to do, and you're talking huge. You're also talking some money being made. Activist Peltz held more than 5% of Heinz stock when that deal went down at a nice premium.
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                              CREDIT CRUNCH

Most of us realize that jobs are created by small and medium-sized businesses. So has near zero interest rates helped these SMEs?

Here's one view.
http://www.financialsense.com/contributors/steve-hanke/federal-reserve-vs-small-business 

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THE PH'd COMMODITY

Following copper, as one Wall Street wag several years ago reported, was supposed to be the equivalent of a Ph'd in economics. It was a statement about the metal's economic sensitivity.

Now, however, the precious industrial metal seems to have joined the unpopular club after a decade of being in the commodity limelight, according to today's WSJ. Demand is waning on a global scale while more supply hits the market. For a while labor problems hit the industry crimping production.

No longer. According to some, supply between now and 2015 should easily outstrip demand. Copper is quoted in dollars and over the past several years tends to correlate to US dollar movement more so than other industrial metals. 

The housing market is inextricably connected to copper. So what  
happens there with rising interest rates is also a consideration, though higher interest rates could lend support to a stronger dollar.

MESSY, MESSY

What goes up comes down. And what runs smooth turns messy every now and then.

That's the current situation in China. But to be more accurate, the mess is pretty much global despite all attempts by those in power to cover it up. Damage control, cover up, semantical gymnastics aside, there's a four letter word to describe it--grim.

http://www.fool.com/investing/general/2013/06/25/the-most-important-number-china-needs-to-worry-abo.aspx

FINE LINE

Sometimes it's a fine line between winning and losing.

And the same holds true for credibility. Once blemished it's difficult to ever fully restore. Here's an article that touches on the subject we've been writing about for a while now.

http://www.minyanville.com/business-news/markets/articles/Bill-Gross253A-The-Fog-That2527s-Yet/6/25/2013/id/50524?camp=newsletter&medium=email&from=recapemai

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                                     The Drum Beat Increases

The drum beat against the euro intensifies.  Make little mistake the euro lives and breathes on borrowed time. It's problems are symptomatic of those in other developed nations, politicians and bureaucrats and social so-called do-gooders run amok.  It's just not the Germans who will sooner or later grow weary of paying.

http://www.spiegel.de/international/europe/new-anti-euro-figures-in-germany-offer-vague-ideas-and-fan-fears-a-906675-3.html
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COMMON SENSE

Common sense is one of those topics one hears much about but, truth be told, sees and hears little around. Gold prices are an example; they've been going down for a while now after a 12 year run-up.

The key part of that sentence is "after a 12 year run-up." Now we don't expect everyone to get it.  That they won't is a given. But here is a link to one of the more common sense discussions on today's global financial mess.  The US dollar has more hot air in it than the Goodyear blimp.

People want what they want.  Keep that in mind when you're doing your homework.  And Bernanke and others want a economic recovery without addressing any of the real causes that caused the mess in the first place.

It's human nature. Bet against it.

http://www.moneynews.com/InvestingAnalysis/Axel-Merk-dollar-gold-safe-haven/2013/06/24/id/511559

MORE DAMAGE CONTROL

If at first you don't suceed, switch to your damage control mode.

That appears to be the Federal Reserve's latest ploy after Big Ben stuck his economic shoe in his mouth and sent the stock market reeling recently. Calm those frayed investor nerves. Refill the punch bowl. Let them know we're still serving.  

If you're a big bank, don't fret. The drinks are still on the house.

For every seller there needs to be a buyer. And the bridge that connects the two in most cases is called credibility. So here's the multi-trillion buck question: How much if any does the Bernanke-led Fed have left?

http://www.reuters.com/article/2013/06/25/us-usa-fed-idUSBRE95O0B020130625

INTERESTING READS

Asia Down
http://www.zerohedge.com/news/2013-06-25/asia-crumbling-chinas-worst-2-days-almost-4-years-nikkei-450-pts-session-highs

Energy Pick
http://www.insidermonkey.com/blog/what-does-seth-klarman’s-baupost-see-in-bp-plc-adr-bp-179239/

Another Way To View Energy
http://ourfiniteworld.com/2013/06/24/energy-products-return-on-investment-is-already-too-low/#more-38254

UK Equities Face Turmoil
http://www.reuters.com/article/2013/06/25/markets-britain-factors-idUSL5N0F10A520130625

Save On the Benefits
http://jobs.aol.com/articles/2013/06/24/nation-temp-workers/

SOOTHING NERVES THE FED WAY

There's the old tale about the three monkeys: see no evil, hear no evil and fear no evil. 

And then there is this, the variance of opinions among current members of the Federal Reserve Board. It's sure to calm investor nerves. It just make one feel so much better to know that these watchers of the public trough have their economic acts so smoothly in place. 

In a previous life they could have all been weather forecasters.

http://money.cnn.com/2013/06/24/news/economy/federal-reserve-qe3/index.html?iid=HP_LN

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                       Higher Interest Rate Impact

One of the things you want to ask yourself  is what impact higher interest rates will have on energy prices. 

 We've been talking energy for a while now. It's been one of the forgotten commodities in the equity rally that started at the first of the year and all the palaver about future US energy independence.  This might well be a place you want to take a: "Not-so-fast approach."

It could turn out to be a unexpected opportunity to make some serious money.

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SHAKE, RATTLE AND DUMP

Below is a link to an article that will rattle some bond investors. It also emphasizes something we've been alluding to for some time and just mentioned in yesterday's post, Treating Lab Numbers.

It's called fiscal accountability or letting a financial fever run its course. Fevers spike to help fight off unwanted bugs. More often than not fevers spike owing to excesses. It's one of the most basic built-in protection mechanism the human body has. Most are self-limiting and will do just fine without human intervention. 

Too bad the same can't be said for recessions.

http://www.cnbc.com/id/100836919

TREATING LAB NUMBERS AND OTHER BRIEFS

In medicine one of the first things you're taught is never treat a lab number. Treat the patient.

The Bernanke-led Fed continues to treat a lab number, 6.5% unemployment. So Big Ben, beyond a feel-good factor, what's the magic in that number versus, say, 6.3 or 6.6 or 5.9? When you don't allow recessions to run their course, you're treating artificial economic numbers.

When Bernanke announced last week his proposed timeline for slowing down QE, he was playing the calendar game not the market game. They're different. The real market's based on the economy, the real economy.

Like all those New Year's resolutions people make every year, they're calendar events. And truth be told most fail. Bernanke's trying to slide one past you here. The lab number is artificial--6.5% unemployment--in an economy where job-force participation is at record lows.

What's really worrying Big Ben is the bubbles his QE-based plan are creating in paper assets and housing. There's really not much to toast here despite all the Wall Street celebrating up until last week.

As one Wall Street wag recently noted, "Housing is the bright spot. But even it is staring down the muzzle now of higher interest rates."

So here's the bottom line. We all know the danger associated with unintended consequences. But often overlooked by many are the dangers of intended ones.

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Spin and hype are four-letter words.

Politicians love to spin, MSM hype. These are givens. So how does one make sense of the market's reaction to what Big Ben Bernanke spewed forth this past week? The short answer is one doesn't.

The long answer is just look for disparities, opportunities. If everyone wants something usually it's either overpriced or over-hyped. Bargains are not often found sleeping on the new high list, notwithstanding what the technical or momentum crowd will tell you, though they have their point.

You find the bargains often on the new low list among the unwanted and discarded. There are about to be more of those coming on the market soon. As always do your homework. ________

What do you get when you open a mall in South China twice the size of the US's Minnesota Mall of America? A vacancy rate of 99% since opening in 2005.
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So where's the pain in all this?

Well, two places to look, and there are others like energy and gold mining, are both bonds--junk and municipals.

In the muni market, according to the WSJ weekend edition, quoting one fund manager: "Everybody wants a bid and nobody's looking to buy."

Other signs are several big public offerings in New York and California among others were postponed. Both of these once-over bought markets will correct and start coughing up higher yields that will entice some yield-starved investors start to hunting once the volatility dies down.
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A LOOK AT REAL ESTATE

As nearly everyone knows real estate is an important cog in the US economic recovery cycle.

Here's an interesting graphic. Consider it like an overlay. 

http://www.marctomarket.com/search/label/Great%20Graphic

INTERESTING CHART

Here's an interesting chart on gold versus equities from Visualizing Economics.  

As the commentary notes the government officially controlled the price of gold for a time. What is unknown is how long have governments been unofficially controlling its price?

http://us7.campaign-archive2.com/?u=2255a3ccd536bad1df6704870&id=b8bf31666b&e=00dd041c9f

BRIEFS

The market spoke today. Bond yields spiked in anticipation of a stronger second half, the real idea behind Bernanke and crew ending the QE madness.

Bonds don't like the threat of rising interest rates. A stronger second half, should it happen, means less deflation and less deflation can spell rising inflation.

The bond market's been in a bullish gear for a long time. That in itself shouldn't be misconstrued. But at some point regression to the mean might again become meaningful.  Bull markets usually take on a life of their own and usually go on longer than most think.

During the QE madness banks have been privy to what essentially is free money. It was money they were suppose to lend out for the sake of the general market to help stimulate a recovery not play the carry game with.

Boys may boys as the old saying goes and banks will be banks. Making money on the spread is the real business of banks, especially the Wall Street kind. If you bother to check, bonds and stocks for the past few years have been moving in opposite directions.

Thursday's sell off in both may signal the beginning of the end of that.

What this most likely means for investors is rising volatility. The VIX, an index that reportedly gauges investor angst, was up nearly 30% and CNN Money's Fear and Greed index slumped back into negative territory.

In commodities those denominated in US dollars like oil and gold took a hit with oil falling below $95 a barrel as the money seeking a safer harbor poured into the dollar pushing it higher against it trading partners.

A stronger dollar would suggest an anticipated rebound for the US in the second half. If that happens things could indeed get interesting.
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                           The Return of Volatility

If you're a believer the sell-off might start you to consider some of those issues we've mentioned in previous posts. Conventional wisdom states a stronger dollar won't be good for US firms that make most of their money overseas. The hyped-up news about surplus US energy supplies might also provide opportunities that many aren't expecting.

Familiarity may breed contempt, but volatility often times begets opportunity. 
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A LITTLE DIFFERENT APPROACH

There's a lot of talk in the investment world about charts, fundamentals, technical analysis and the like. Terms like momentum, trends, profit taking, price-to-earnings ratios, yield curve are just a few.

If you look closely nearly every area in life or line of work has its own vocabulary. To be even modestly successful it's one we all must learn at least something about.

Another important area many believe is called behavioral finance, a kind of catch all term about how we humans interpret all those pieces of data. In short, it's a summary about how we humans behave when dealing with greed and fear, success and failure, disappointment and triumph.

We don't claim it will make you another Warren Buffett. But even pure number cruncher types, despite their claims to the contrary, have emotions and those emotions lead to words and those words precede thoughts and actions.

                               WATCH YOUR WORDS

                      Our thoughts are often worse than we are.

                                                           George Eliot

Most of us are familiar with self-talk. If you’re not, you should be. It’s something all of us do every day, carrying on a private conversation with ourselves in our head. A few of us even do it out loud.

Every time you make a mistake and cry out something like, “You dummy!’ or even worse, that’s one form of self-talk.  Most self-talk goes on more privately, between just you and yourself kicking it around in your mind. Psychologists say we have nearly 20,000 thoughts a day but are only aware of about 2,000. It’s also been called self-coaching. Check out the literature and you’ll even find books about it.

Lots of you won’t believe what we’re saying here. That’s okay. Folks didn’t believe Columbus when he suggested the world may not be flat or Galileo either. The path of history is littered with examples of people and things once thought not to be credible only to find out later they were.

 Keep in mind that lots of people try things just to prove they won’t work for them. That’s their problem, not yours. As an old chemistry professor used to say, “Render unto Caesar what is Caesar’s.” If it doesn’t work for you, fine. But that doesn’t mean it won’t work for others. Nor does it mean because it worked for others and not you it doesn’t work or isn’t real.

In journalism there is an old saying: “The pen is mightier than the sword.” Since we all today live in the electronic age we might have to substitute computer for pen. But you get the idea, the power of words. Confucius, when asked what would be the first thing he would change if he became Emperor of China, replied that he would reinstate the precise meaning of words. For what it’s worth, it doesn’t sound as if a lot of today’s lawyers or politicians would’ve ever voted for Confucius.

Think if you will for a second about these words. Words become thoughts and thoughts become the basis for all personal transformations. Words have power. A kind word can build, a harsh one destroy. Words become thoughts and thoughts become ideas and ideas, good or bad, often get carried out.

It’s an established medical fact that the body is roughly 80 percent water. It’s an established fact that the body’s seemingly hard, solid bones are really porous with canals for blood vessels and nerves. Marrow, a relatively soft material in bone is actually responsible for creating blood cells. Even given the millions of blood cells floating around in the human body, blood is still mostly water. The vital organs that make up and help regulate the body are mostly comprised of, you guessed it, water.

So once again appearance proves deceiving. We admire rock hard six packs, rippled muscles, strong, firm bodies. Firm for most of us is in and flab is out. But if you extract all the solid material in a human body it wouldn’t amount to more than a small heap not several feet but less than a few inches high. The rest is water.

Someone once observed that the strongest thing in your body is your thinking. It can also be your weakest. Shakespeare noted that there is little either bad or good but thinking makes it so. Roman Emperor Marcus Aurelius put it a little differently: “The soul becomes dyed with the color of its thoughts.” Most of us are aware of the biblical admonition about reaping and sowing. You can’t plant corn and expect to get water melons, genetically modified grains notwithstanding.

Several years ago when I was doing internal medicine I saw lots of patients every day with a variety of aches and pains from sore backs to arthritic joints to heart and stomach problems, to name a few. Many of them in complaining about their conditions would without the slightest hesitation unleash a fury of expletives on the particular area bothering them. Some of these names you would not level at your mother-in-law let alone worst enemy. But here they were calling their painful elbow a dirty so-and-so or their agonizing headache a lousy, rotten this or that.

Over time I began casually asking some of them how they would respond if anyone spoke to them that way. Despite the blank looks and an occasional leer, the most frequent answer, the one that always surprised me the most was: “I never really thought about it that way before.”

My response was always the same: “Maybe you should start.” Storms rile up the seas just as a lack of wind creates calmness. If the human body is 80 percent water, it’s subject to the same forces.

So watch your words. Choose them carefully, especially when you’re talking to yourself. Words affect your attitude and attitude influences your performance, in an out of the gym.

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BRIEFS

Who is the current biggest lame duck?

Well, if your Home Depot co-founder and billionaire investor Kenneth Langone, it's Big Ben Bernanke. Langone made his comment on CNBC recently.

More than once Bernanke has hinted at his desire to step down after he finishes his second term as Fed  chairman. And judging from President Obama's recent comments on the Charlie Rose show, Oama is not jumping up and down to reappoint Big Ben.

Obama's treatment of Bernanke caught the attention of observers who claim it unfair and not deserving of Bernanke's service.
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BIG BEN

Big Ben spoke today.

The Fed left things alone, to put it plainly. Some pundits are saying rates won't get changed until at least 2015. That could turn out to be true. But the market, as it always does, will have the last say.

And the market has already started raising rates.
Bernanke repeated his previous palaver, claiming tapering doesn't amount to hiking interest rates.

Below is a statement from the FOMC.

"To support continued progress toward maximum employment and price stability, the committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens," the FOMC said.

The Fed may push this as an example of more transparency. But the market may interpret it differently.

THE THREE MUSKETEERS

So like the three musketeers, which is it: one for all or all for one?

According this researcher since 2009, it's all three driving the market.

http://blogs.wsj.com/moneybeat/2013/06/18/the-rally-in-three-charts-hint-its-not-all-about-the-fed/?mod=WSJBlog&mod=MarketsMain

DIAMONDS

Diamonds may be a girl's best friend as the saying goes, but they ain't much of an investment asset.

Here's a link to a story that spills the diamonds on the diamond charade.

http://blog.priceonomics.com/post/45768546804/diamonds-are-bullshit

COACH

We've written about Coach COH before. If you go through our posts you'll find the blurb.

Below is link to more info on company. We think it's a clear bargain compared to Michael Kors. We think COH will make intelligent and important acquisitions as well as manage any previously thought disturbances in the long run.

http://ycharts.com/analysis/story/unlike_its_handbags_coach_may_now_be_a_steal?utm_medium=email&utm_campaign=YCharts+Analysis+Digest+MRK+COH+KORS+-+Non-Pro+-+DIGEST&utm_content=YCharts+Analysis+Digest+MRK+COH+KORS+-+Non-Pro+-+DIGEST+CID_931395e7da6cd13fb78fea4880d8e9ab&utm_source=email&utm_term=Unlike%20Its%20Handbags%20Coach%20May%20Now%20Be%20a%20Steal

MONDAY READS

Have Jobs Will Travel
http://www.spiegel.de/international/germany/italians-flock-to-berlin-to-join-flourishing-start-up-scene-a-903908.html

$100 Barrel Oil?
http://www.cnbc.com/id/100819317

The Fed And The Market http://www.thefiscaltimes.com/Articles/2013/06/16/Will-the-Fed-Be-Able-to-Rein-in-Volatile-Markets.aspx#page1

Economist Defends The 1%
http://scholar.harvard.edu/files/mankiw/files/defending_the_one_percent.pdf

Fed Meeting Hangs Over Market
http://www.reuters.com/article/2013/06/17/us-markets-global-idUSBRE88901C20130617

Figure It Out
http://www.bloomberg.com/news/2013-06-16/big-short-on-aussie-tells-loomis-time-to-buy-australia-credit.html

Good Or Bad For Economy
http://money.cnn.com/2013/06/14/pf/credit-cards/index.html?iid=Lead

ABOUT TIME

For a long time we've railed against the CDC nonsense about the flu vaccine.

Now a Johns Hopkins flu expert steps into the breech of what has been suspected for some time. First these flu scares are just that--over-hyped scares.  But the over-reaction about the flu isn't the only area where the CDC is little more than a panic-mongering group of pseudo-scientists who love power and authority.

That power and authority is the life's blood of their funding. Much of what they do is little more than incestuous scientific masturbation. Keep the funds coming. Vaccine makers love the CDC.

These vaccines, like the ones for pneumonia and herpes zoster, to name just two, are aggressively hawked by health care organizations and big-time workman's comp providers, mostly as a so-called preventative and public service.  Hundreds of firms have one of these health care providers come out annually and inoculate their entire staff.  It's like an annual annuity that just keeps throwing off income.

Walk into any major pharmacy during the so-called flu season and you'll see ads for the flu shot. The smell of money is everywhere. This is a self-perpetuating sham. America is the most over-medicated, over-inoculated nation on the planet.

Another one is the tetanus vaccine. It used to be marketed for every 10 years. Now overly-aggressive health care providers push it on unsuspecting patients every five or eight years. And they have, like more and more things in medicine, expanded or widened the net for those who supposedly should get it.

http://www.newsmaxhealth.com/Newswidget/flu-shot-risks-benefits/2013/06/14/id/510050?promo_code=F492-1&utm_source=Test_Newsmax_Feed&utm_medium=nmwidget&utm_campaign=widgetphase1

A FEW CENTS SHORT

I'm a few cents short. 

I'm a few cents short of putting gasoline in my car. Ain't it funny how the money can change our lives. I'm a few cents short of seeing you tonight, a few cents short of being where you are.

I'm a few cents short of holding you in my arms, a few cents short of keeping us from falling apart.

Those are the words of a John Michael Montgomery song from the past. Most of us know that feeling. Most of us at one time or another have been a few cents short. 

Today it's more like a few dollars. It's funny how the money can change our lives. And that's the big concern among investors if and when Bernanke and crew cut off the liquidity spigot. The proof's in the market's recent jitteriness.

Turning off the spigot finally is a newly sharpened blade. For investors caught on the wrong side of that action it could turn out like a dark and stormy night, a season full of rain and a horde of investment portfolios full of pain.

A popular gym saying a while back was go big or go home. Here it's more like get it right or get poorer.

The trend may be your friend, but politicians, bureaucrats and markets ain't. All three can turn into your darkest nightmare. Take your eye off the bouncing ball now and you'll most likely turn up more than a few cents short.

BRIEFS

Once again investors need to learn a vital lesson from what's going on in Detroit.

Profligate governments that will not voluntarily right their fiscal houses should have their financial feet held to the free-market flame. One way to do it is never, ever, no matter how enticing the offer, lend them your money for unsecured securities. 

Avoid investing in any institutional firms that might do so also. Forget the rating agencies; they've proved irrelevant for the most part.  Shareholders can send a message to companies that buy this unsecured government garbage.  We will avoid your products and dump your equities.

http://online.wsj.com/article/SB10001424127887324688404578545373282545626.html?mod=ITP_pageone_0

  _________

       
                             Addictive Nipple

 If  you already don't know, Ben Bernanke's set to speak next Wednesday. By some estimates Bernanke might be the second most powerful bureaucrat on the globe. People hang on every utterance.

The important utterance this time, as it has been for awhile, will be about liquidity--to continue or not to continue it, the economic equivalent of Hamlet.

Liquidity is the oxygen of any free market, but to paraphrase Winston Churchill, never have so many depended on so few for so much. The few, besides Big Ben, include Japanese, Chinese and EU central bankers.

Fear begets people heading for exits. The nipple can become addictive.
_______

INVESTMENT OUTLOOK

We never use the term tip. Tips are more dangerous than my old girlfriend.

Do your homework. Energy has been one of the orphans in this segment of market euphoria. The market will set interest rates, not Bernanke. Bonds hate inflation. Talk about energy surpluses is rife in the news. Economic slowdown fears are on nearly everyone's lips. 

 Expect the unexpected.  Look where most aren't. Energy.

------

AT IT AGAIN

A while back we wrote  about the market, not the Fed, raising interest rates. The Fed for what it's worth is a lagging indicator, always behind the curve.

They were behind the curve cutting rates when this whole mess started and they're behind now. Look at mortgage rates. The opening paragraph of a front page story in today's WSJ states: "A surprise spike in mortgage rates threatens to halt refinancing boom that has delivered strong profits for U.S. banks over the past two years."

Part of the the Fed's ploy to bail out the banking industry, an industry that still needs a real housecleaning since little has changed, was to convince regular folks all is well with the Fed on the scene. The housing market is about as close to ordinary folks as the White House is to Pennsylvania Avenue.  Make no mistake, the Fed's being on the scene is the problem.

See the recent issue of  Pimco guru Bill Gross' Investment  Outlook. Gross points out interest rates nearly everywhere are lower than a duck's belly and the duck ain't looking too healthy either.  For openers Gross cites the cost of money in the UK.

At 50 basis points short-term rates there, he notes, "are now nearly 2% lower than they have ever been, which is a long time."  At no time during the last three centuries has "the Bank of England dropped rates below 2%."

For another view see "Landlord, Inc." in the latest issue of  "Forbes."

FRIDAY'S READ

Here's a thought for you. Give some time to it and see what you think.

The nearly total unanimity of belief that something is true doesn't make it true.

Most plants need some water. Water is a form of energy. Without water many plants wither and die.

Energy comes in many forms, sunlight, water, wind, air. Words and thoughts have their own kind of energy. Strung together just so and they can become propaganda.

 And that brings us full circle to unanimity. For a belief to become so pervasive someone, in fact, lots of someones have to be putting energy into it.

Media and politicians and lobbyists and bureaucrats and marketers should readily bubble to mind. Wall Street is another example, possibly one of the more dangerous ones when it comes to your economic well being.

Perhaps the most recent case, as the WSJ noted yesterday, is that of TIPS, Treasury Inflation Protected Securities, and the mass exodus out of them by investors. There can never be a mass exodus without first having a mass entry.

 The explanation, according to one line of thinking, is concern the Federal Reserve will soon reverse or start tapering its now notorious bond buying scheme.

The fear of too much liquidity created by the Fed caused investor concern about future inflation. So investors scrambled into TIPS, pushing their prices up and potential returns down paying up for what can basically be described as a feel-good premium.

The US economy is on the mend and the Fed's succor no longer needed goes this line of thought. In early 2012 there was an investor rush out of EU sovereign debt. The near total unanimity of belief then was default.  And it still might happened. During the interim, however, numerous other things have happened, many of them contrary to the then prevailing near unanimity.

Another apparent gathering unanimity of thought today is, like the smartest kid in the dumbest row at school, the US economy is the strongest weakling among a core of global economic weaklings. So money will continue to flock here pushing up the prices of all kinds of US assets.

THURSDAY READS

How Much Worse
http://www.zerohedge.com/news/2013-06-12/guest-post-why-things-will-get-worse-much-worse

Capital Flight Spreads
http://www.bloomberg.com/news/2013-06-13/emerging-markets-from-brazil-to-india-act-to-stem-capital-flight.html

Bailing On Argentina Again
http://www.reuters.com/article/2013/06/13/us-argentina-economy-insight-idUSBRE95C04T20130613

Falling Junk
http://blogs.marketwatch.com/thetell/2013/06/12/martin-fridson-the-junk-bond-market-hasnt-come-down-to-earth/

Small Caps In Favor
http://investorplace.com/2013/06/a-point-for-the-bulls-small-cap-stocks-reclaim-leadership/

Level Playing Field?
http://online.wsj.com/article/SB10001424127887324682204578515963191421602.html?mod=ITP_pageone_0

Five Hundred 
http://www.reuters.com/article/2013/06/12/us-usa-congress-fundraising-insight-idUSBRE95B05520130612

DOUBLE-EDGED

The following is one of the contrarian articles we often look for, not that what it proposes won't happen. That's not the point.

Note in the article the contrarian point a our drug stocks falling off patent-experiation cliffs. We've been riding those drug stocks higher for some time. No hubris intended. 

Without risk there's no upside. Period. Pepsi knocking out a recent all-time high notwithstanding. That's not the question. The question is how long and why do I want to own it and when did I buy it. 

It's snack food company and there is political risk here, too. Know why you're buying and owning a company.  We own Pepsi. And we will either sell covered calls, buy puts or whatever, but we will continue to own some shares.
http://investorplace.com/2013/06/4-high-fliers-that-could-crash-land-soon/view-all/
------

Be careful what you wish for is an old bromide.

In reality, it's a newly sharpened blade of a double-edged sword, especially when it comes to liquidity. 

http://www.futuresmag.com/2013/06/12/us-30-year-bonds-tapering-proves-a-double-edged-sw?eNL=51b89b621b4f3aee33000053&_LID=287557&t=financials&page=2

WEDNESDAY READS

Trouble Ahead
http://www.cnbc.com/id/100810640

Market Turmoil Opportunity
http://finance.fortune.cnn.com/2013/06/12/market-turbulence-el-erian/?iid=HP_Highlight

Money At The Fed
http://finance.fortune.cnn.com/2013/06/12/federal-reserve-bank-deposits/?iid=HP_LN

Bubbles Not Jobs
http://www.testosteronepit.com/home/2013/6/10/proof-feds-qe-is-great-for-bubbles-for-jobs-not-so-much.html

Most Bang
http://investorplace.com/2013/06/podcast-how-to-get-the-most-bang-for-your-tuition-buck/

Economy On The Mend http://www.marketwatch.com/story/former-fed-president-talks-qe3-tapering-2013-06-11?dist=tbeforebell

Bourses Sink
http://news.investors.com/investing-international-leaders/061113-659594-asia-europe-bourses-tumble.htm?ref=HPLNews

EXIT STRATEGY AND SOME MUSINGS

Musings of a Cut Man

Just waiting

Lying here in my hotel room waiting to go down to breakfast with trainer and fighter. It's Saturday, 6-8-13. Got a fight later today at Home Depot Center in Compton.

There are 11 fights, all outside. We're scheduled to go in around 4 or 5. But they make you show up hours early. So there's a lot of waiting. Usually the night before go to a movie. Saw decent one last night, The Internship, a comedy. Good to have some laughs.

You want your fighter relaxed, rested and ready. The three Rs. And they ain't readin', 'ritin' and 'rithmetic.

Walking back to hotel saw one of those white big Ford F 150 jobs. Ford has made a decent comeback. It reminded me of you. Think you had one of those once. Maybe still do. 

Anyway, brought to mind a piece I wrote a while back while I was waiting. Here it is. 

Many of us aren't grateful enough.

We don't fully grasp the importance of gratitude. It's such an easy, simple take-it-for granted thing.

No, this isn't going to be another of those motivational pieces that makes you feel great for the next 30 seconds or until your IBS flares up again. This is much more serious.

Country songs, especially the slower ones, usually tell a story. Often a heart-ripping one.

A few years ago on the backroads of my more energetic youth I first learned about the magical power of gratitude. I'll try to make this brief and not too heavy or sad.

Me and my significant other, as they say, had tried and tried and tried.Things got bad, they got worse and I had no idea what to do. Then one day driving home from work in my big white Ford F-150 with the Montana mud flaps, moose antlers on the hood and the empty gun rack in the back, I heard it on the radio for the first time, a song about a guy and his significant other.

Like us they had tried and tried. He grit his teeth, tried not to complain. While she continued to spend money like it was so much falling rain. And one day without warning or cause she announced it was pack-up the suitcase time. 

He sounded more than sad as he walked her to the door and she said she wasn't coming back anymore.

He tossed her bags in the truck and headed for the bus station. After he dropped her off, he just sat there in silence until the bus slowly pulled out of sight. 

That's when it really hit him. It was finally final. She was gone. Every time I think about that song it makes me appreciate gratitude even more. Especially the chorus: "Thank God and Greyhound. You're gone."

For me it was Amtrac. And all I can say is, thank God and Joe Biden for government subsidies.

So here's an investing tip. Make sure your exit strategy's in place. But it's mobile. You can move it. If it goes off, be grateful you have some cash to get a better position. If you miss it, so what.

Opportunities are a lot like IBS. You never know when they're going to show up. But you always have to be ready. 

Ok old friend when you find work, drop me a line.

TUESDAY READS

Beware Stinking Thinking http://www.minyanville.com/trading-and-investing/stocks/articles/Rotation-from-Non-US-Stocks-to/6/10/2013/id/50249

Gold Falls http://www.bloomberg.com/news/2013-06-11/gold-trades-near-two-week-low-on-stimulus-outlook-assets-gain.html

Book's Sales Soar
http://www.zerohedge.com/news/2013-06-11/sales-george-orwells-1984-have-surged-6884-last-24-hours

Cultural Split http://www.reuters.com/article/2013/06/10/us-turkey-protests-cultures-insight-idUSBRE9590GS20130610

Off At Open http://money.cnn.com/2013/06/11/investing/stocks-markets/index.html?iid=HP_LN

Senior Income http://money.cnn.com/2013/06/10/retirement/retirement-income/index.html?iid=HP_Highlight

Labor Market Turmoil
http://online.wsj.com/article/SB10001424127887324904004578537251643591248.html?mod=ITP_pageone_2

Spying On World http://www.spiegel.de/international/world/prism-leak-inside-the-controversial-us-data-surveillance-program-a-904761.html

Positive At Last
http://blogs.marketwatch.com/thetell/2013/06/10/tips-yield-turns-positive-on-10-year-note-for-first-time-since-2012/

Six Ways Low Rates Hurt http://www.thefiscaltimes.com/Articles/2013/06/10/6-Ways-Low-Interest-Rates-Hurt-Retirees.

MONDAY READS

Asian Stocks up 
http://www.bloomberg.com/news/2013-06-10/asian-stocks-rise-on-u-s-jobs-data-japan-shares-rally.html

Tax Cut Possibility http://www.testosteronepit.com/home/2013/6/9/made-in-america-renaissance-begins.html

Trouble In Paradise
http://www.thefiscaltimes.com/Articles/2013/06/10/Obamas-Scandals-Help-the-Tea-Party-Hurt-His-Friends.aspx#page1

Better World?
http://www.reuters.com/article/2013/06/09/us-usa-security-identity-idUSBRE9580DW20130609

They Won't Say
http://www.marketwatch.com/story/10-things-economists-wont-tell-you-2013-06-08

Big Brother Rides Again
http://news.investors.com/ibd-editorials/060713-659266-nothing-modest-about-obamas-encroachments-on-privacy.htm?ref=HPLNews

Consider The Source Article
http://money.cnn.com/2013/06/07/technology/security/nsa-data-prism/index.html

When Bond Yields Rise
http://www.marketwatch.com/story/where-to-put-your-money-when-bond-yields-rise-2013-06-08?link=MW_home_latest_news

Market In Knots?
http://www.marctomarket.com/2013/06/currency-positioning-and-technical_8.html

THURSDAY READS

Keep Your Eye On Food Prices
http://www.financialsense.com/contributors/jr-nyquist/food-energy-prices-may-skyrocket

Are You Ready? http://www.financialsense.com/contributors/christopher-quigley/get-ready-to-be-cyprused-at-a-bank-near-you

Conquer Wrap Rage
http://www.moneytalksnews.com/2013/06/05/how-to-open-plastic-packaging-without-injuring-yourself/?utm_source=newsletter&utm_campaign=email-2013-06-05&utm_medium=email

It's Back
http://www.creditwritedowns.com/2013/05/us-declining-savings-and-deleveraging-leads-to-releveraging.html

Get Ready
http://www.reuters.com/article/2013/05/31/pimco-ecb-idUSL5N0EA3DA20130531

Mini Dictators Come In All Professions
http://www.pharmalive.com/how-docs-can-get-rid-of-sales-reps-in-a-few-easy-steps

UP DATE ON MENDELEZ

We've written about this company before, most recently just a few days ago and befor that back in March.  So we won't repeat ourselves. Here's another link.

http://www.marketwatch.com/story/3-value-stocks-the-smart-money-is-buying-now-2013-06-04?pagenumber=2
________

Interesting gold graph from Visualizing Economics about real price of gold.

http://visualizingeconomics.com/blog/2013/6/4/the-real-price-of-gold-since-1791?utm_source=Email+Subscribers+for+Blog&utm_campaign=44b3ac0208-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_98db807ad8-44b3ac0208-3309561
________

WEDNESDAY READS

Sorry Now
http://wallstreetsectorselector.com/2013/06/sellers-remorse-for-gold-stocks/#

Abe's Big Plan
http://www.marketwatch.com/story/japans-abe-unveils-major-new-policies-2013-06-05

June Swoon?
http://news.investors.com/investing-mutual-funds/060413-658757-mutual-funds-gained-again-in-may.htm?p=full

JP Morgan In The News Again
http://www.bloomberg.com/news/2013-06-05/jpmorgan-s-alabama-debacle-set-to-cost-bank-1-5-billion.html

Here It Comes Again
http://online.wsj.com/article/SB10001424127887324423904578525701936124838.html?mod=ITP_pageone_0

Fed Policy Hurts Retirees
http://www.foxbusiness.com/personal-finance/2013/06/03/low-rates-make-retirees-gnash-their-teeth/?cmpid=prn_investorplace

Safe Water?
http://www.medscape.com/viewarticle/772712

Good Jobs? What Good Jobs?
http://blogs.wsj.com/economics/2013/06/04/feds-raskin-bemoans-quality-of-new-jobs/

MORE ON MERCK

Lots of investors have been frightened by Obama Care and it's so-called negative implication on health care in general. Rather than saving money or lowering overall costs, as its proponents propose, we believe just the opposite.

It will prove a disaster of major proportions. Disasters draw attention.

With that theme in tow, as pointed out previously, pebbles tossed in water have ripples. Those ripples often take the form of necessity leading to adjustments or altered behavior. Big pharma will adjust, people want cures, wanting cures crosses all boundaries, cultural, racial, religious, age and gender.

Once upon a time Merck ran one of the finest research units. Despite some obvious potholes ahead, we believe they are headed in that direction again though it won't necessarily look or act exactly like the previous one.

http://online.wsj.com/article/SB10001424127887324063304578523560981960152.html?mod=WSJ_qtoverview_wsjlatest

http://online.barrons.com/article/SB50001424052748704509304578515391643495844.html?mod=BOL_hps_highlight_top

TUESDAY READS

Problems Everywhere
http://www.zerohedge.com/news/2013-06-03/18-signs-massive-economic-problems-are-erupting-everywhere

Interesting Read
http://cafehayek.com/2013/06/quotation-of-the-day-652.html

Losing Momentum
http://www.cnbc.com/id/100786488

Not Everyone Wants To Cut Austerity
http://www.bloomberg.com/news/2013-06-03/slovenia-shows-why-the-eu-shouldn-t-discard-austerity.html

Natural Gas Boom
http://money.cnn.com/2013/06/04/news/economy/natural-gas-exports/index.html

Fed-Inspired Move
http://www.marketwatch.com/story/us-stocks-mixed-ahead-of-manufacturing-data-2013-06-03?pagenumber=2

Weak Manufacturing Numbers
http://online.wsj.com/article/SB10001424127887324563004578523100247860088.html?mod=ITP_pageone_0

EU Fiddles
http://www.thefiscaltimes.com/Columns/2013/06/03/Post-Austerity-Europe-Gropes-for-a-Game-Plan.aspx#page1http://www.zerohedge.com/news/2013-06-03/18-signs-massive-economic-problems-are-erupting-everywhere

NOT ON MY WATCH

Today's WSJ  lead story, "Deficit Deal Even Less Likely," cites the near-term shrinking fiscal deficit coupled with a slowing increase in health care costs and "partisan gridlock" as the reasons.

In its "What's News" section just to the left is a related story many will fail to connect. But make no mistake, they're connected.  In fact, the Illinois story holds part of the key to the deficit deal.

Illinois faces America's worst state-pension crisis, a nearly $97 billion shortfall. Higher borrowing costs are just one of the many negative ramifications of failing to resolve the issue. 

In Illinois Democrats enjoy big majorities in the House and Senate, making the issue mostly an intraparty squabble. And that should tell you something about politicians in general. They are not now and never will be your friend.

Bottom line both of these entities, the federal and state governments, are doing their best impersonations of the EU. Postpone the pain for as long as possible. Postpone it long enough and maybe it will just go away.

It's just one more less subtle way of saying: "Not on my watch."

http://online.wsj.com/article/SB10001424127887324423904578521600404730028.html?
mod=ITP_pageone_0

http://online.wsj.com/article/SB10001424127887324423904578521651802578678.html?KEYWORDS=illinois+pension

MONDAY READS

A Case Made To Keep Bernanke
http://www.reuters.com/article/2013/06/02/us-wapshott-bernanke-idUSBRE9510DU20130602

Gold Standard
http://online.barrons.com/article/SB50001424052748704895304578499103401657408.html?mod=BOL_hpp_mag#articleTabs_article%3D1

Micro In
http://www.reuters.com/article/2013/06/02/us-usa-apartments-micro-idUSBRE95105M20130602

Good And Not So Good
http://www.telegraph.co.uk/finance/jobs/10089932/If-companies-can-fire-at-will-they-can-also-hire-at-will.html

Heads Up
http://www.marctomarket.com/2013/06/heads-up-developments-before-new-week.html#more

Peak Gas Prices
http://www.marketwatch.com/story/gasolines-price-peak-are-we-there-yet-2013-05-31?pagenumber=2

 Your Theory On Gold Prices?
http://www.businessinsider.com/chart-gold-top-home-prices-bottom-2013-6?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

Networking Tips
http://www.inc.com/magazine/201306/inc-staff/4-ways-to-be-a-better-networker.html

AN UPDATE ON MERCK

A while back we wrote about Merck, the big drug company, in a pieced called Full Disclosure. 

Like other big drug companies, Merck faces its difficulties generating growth owing to patents expiring on some of its big revenue generators and lack of new drug development.

Still another problem looms with its number one seller, Januvia, an oral hypoglycemic to treat diabetes. Recent research at UCLA apparently poses questions about the drug's safety. In this case, the issue is whether Januvia causes pancreatic cancer or pancreatitis 

At least one other drug in this class, not from Merck, has been reported to cause cancer in men. Pebbles that fall into water cause ripples. And Merck is not alone since other major drug companies also produce similar drugs for diabetes.

That's the potential downside.The upside for Merck is a recent report in the New England Journal of Medicine about Merck's 
new cancer drug for melanoma, a serious form of skin cancer.

More studies are scheduled but the US Food and Drug Administration last month called the treatment a "breakthrough therapy."

http://in.reuters.com/article/2013/06/02/health-cancer-melanoma-merck-idINL2N0EE00320130602

BRIEFS

If you don't mind owning companies that produce unhealthy foods, then you might find this link useful.

These are hardly the only ones. Repackaging or, as they say in Hollywood, reinventing oneself, is hardly new. Here's the link.

http://www.minyanville.com/business-news/editors-pick/articles/healthy-Foods-That-Aren2527t-healthy-foods/5/31/2013/id/50044


C12H22O11

Some of you may not recognize the simple chemical formula above. It's sucrose or as it's popularly known, sugar. Sugar is derived from two sources--sugarcane and sugar beets; and both are processed differently.

Sugar has a long and in many ways checkered past. Much like crude oil today sugar was once the most profitable, sought-after commodity on the planet. Wars have been waged to gain access to the sweet-tasting sugary stuff, not to mention huge fortunes made and people enslaved.

 The history of sugar can be broken down into several phases starting with the extraction of the juice from sugar cane plants about two thousand years ago in Southeast Asia, it's spreading to India where turning the juice into tiny crystals was invented and to Persia where invading Arabs discovered the highly profitable pleasure-giving substance and took it to Spain and North Africa centuries later.

Christopher Columbus was said to have taken sugar cane plants with him to the West Indies owing to the region's ideal growing conditions for it. The Portuguese introduced sugar to Brazil in the 15th century. When England in the 17th century blockaded France during the Napoleonic Wars, French refineries found themselves cutoff from sugar imports, causing the price of sugar to soar in France.

Growing sugar cane is labor intensive. England at the time had become, as one writer later wrote, "totally hooked on the issue of sugar." Want, as is frequently the case, had for England become necessity.  And in this case that meant defending, since much of the sugar trade then depended on slavery, sugar and slavery if need be by using the world's most powerful navy.

Sugarcane requires a tropical climate to grow successfully, not so sugar beets; they can do well in more temperate areas. Napoleon put huge pressure on French scientists to use sugar beets to produce the critical sweet stuff and produce they did. Planting more than 5,000 acres, in a very short time the French turned out nearly 8 million pounds of sugar from homegrown beets and Napoleon again had one of the main food sources along with salt to fuel his huge army.

America got into the sugar game rather late. Sugarcane was brought to America in1619,  just a decade after Jamestown, Virginia was settled in 1609. But sugarcane proved difficult to grow in the local climate, so much of the early sugar came in via Cuba and points south. In 1789 the US government imposed a tariff on sugar imports. Since the US was a non-sugar producer at the time, the move was viewed as non-protectionist. In 1803 when the US negotiated the Louisiana Purchase that tariff aided a fledgling sugar industry there, spiking further development in an effort to raise revenue.

By the time of the Civil War Americans were receiving much of their sugar fix from Cuba and Louisiana.  At the 1904 World's Fair in Saint Louis, an event that celebrated the centennial birthday of the Louisiana Purchase in 1803 and helped sponsor the 1904 Olympic Games on US soil for the first time, sugar played a prominent role since it is said the exhibition included a five-foot statue of Miss Louisiana carved out sugar cubes; and a new treat called Fairy Floss, also known as Cotton Candy, along with Jell-O made their debut. Another new favorite at the time was ice cream.

The term carbohydrate is an interesting one, meaning a substance that contains carbon, oxygen and hydrogen. Sucrose, table sugar, has been conveniently classified as a carbohydrate, a huge, deceptive misnomer of the first order. Here is one example from surgarcane.org, a Brazilian website affiliated with the Brazilian Sugarcane Industry Association, of how the misnomer gets spread. Under the heading Health and Nutrition:

Crystalline sucrose sugar is a carbohydrate and moderate sugar intake can be part of a healthy diet. Sugar not only sweetens foods and beverages, but also provides users with an instant jolt of energy. Humans should derive 50 to 55 percent of their daily energy consumption from carbohydrates.

Even with the most careful reading there's much room for confusion there.

In the early 1970s the Federal Trade Commission prohibited sugar manufacturers from advertising sugar as an energy and nutrient booster. Yet today we have numerous, expensive energy and so-called sports drinks, many of them loaded with sugar and caffeine as their energy boosters, with catchy names like Red Bull, Monster, Rock Star and Full Throttle.

Full Throttle, made by Coca-Cola, debuted in 2004. Here's a partial look at its ingredients: carbonated water, high fructose sugar (HFCS) and/or sucrose, citric acid, natural and artificial favors, sodium citrate, sodium benzoate (a preservative), d-ribose, caffeine, acacia, B6 and B12, B3, yellow 5, calcium pantothenate and glycerol ester of wood rosin. Now it would take way too much space to adequately discuss each of these ingredients (We do that in our next book about sports drinks.), but here's a brief sample. Sodium citrate is both a salt and a preservative; d-ribose is a sugar produced in the body, often recommended as a supplement in the bodybuilding world, glycerol of rosin is a stabilizer; yellow 5, also known as tartrazine, a food dye with, to say the least, though it's been around for a long time, a curious past.

Another hugely popular sports drink, Red Bull, marketed as a sports-improving product, contains caffeine, sucrose, phenylalanine, glucose, taurine-- a B vitamin and glucuronolactone, DGL, an energy booster often found in sports drinks. What makes Red Bull even more interesting is the results of two recent studies (December 4, 2012) published in the Journal of Strength and Conditioning showing that sugar-free Red Bull doesn't "influence high-intensity run time-to-exhaustion in young adults."


More importantly, a second study on sugar-free Red Bull published in the same issue involved the drink and resistance trained men. The study's title says it all: "Acute Ingestion of Sugar-free Red Bull Energy Drink has no Effect on Upper Body Strength and Endurance." As already noted, sports drinks are expensive. Most get whatever energy kick they have from caffeine and sugar. So bottom line save yourself some lucre, just brew some coffee or tea and throw in some sugar. Or eat a piece of good, quality dark chocolate that is at least 70% cocoa. Chocolate has caffeine and sugar plus anti-oxidants.

The distinction needs to be appreciated between naturally vitamin-rich occurring carbohydrates and processed, refined carbs where most if not all of the nutritional value has been stripped out. What makes this distinction even more important is in today's world of environmental concerns about planet earth most of the focus is on a pre or before the fact emphasis, ignoring, in the main, post or after the fact. One could ask the question: who cares if the planet remains pristine, producing quality natural substances if they're sullied and decimated afterwards in the name of progress and convenience?

Over the last two decades in the US there's been roughly a 25 pound increase in sugar consumption per person to an average of 135 pounds per person per year. In 1700 the average person consumed 4 pounds per year. By 1800 that number jumped to 18 pounds and in 1900 to about 90 pounds. By 2009 more than 50% of Americans were gulping down around 1/2 pound a day or about 180 pounds per year. Now keep in mind that these numbers are just estimates, but estimates or no, also keep in mind that there are forces at work to convince everyone they are actually much lower as you will see.

In the late 1970s and early 80s world wide sugar prices soared and beverage makers switched to sweetening their products with the much cheaper high fructose corn syrup (HFSC), a move that would in the eyes of many have far reaching unanticipated effects on the health of many Americans. Before long food processors followed and the HFSC race was on. In the beverage trade the percent of drinks using HFCS instead of sugar jumped from 5% to 44% in less than a generation. History reveals a similar tale in the world of processed foods. And why not since cost is a constant consideration in doing business.

The etymology of the word sugar is somewhat telling because of its geographical implications. The English word for sugar has its roots in Arabic, sukkar, which traces to Persia and the word shekar. Since Italian merchants, particularly around Venice, were noted for heavily trading the pleasant tasting commodity, it's believed that's the path the term took into England, via Italian merchants. The current Italian word for sugar is zucchero. In Spain and Portugal it's called azucar and acucan. In France the old French term, zuccheo, has given way to, sucre.

One of the reasons science has been unable to show a direct link between sugar consumption and many inflammatory diseases is nearly all reputable studies, in order to be taken seriously, need what's called a control group; that is, a large group of subjects who don't use the stuff being studied. Given that the average American today consumes around 2-3 pounds of sugar a week that's a pretty tall order.

In October, 2012, the New York Times ran an article stating the USDA, to the delight of sugar producers, came up with a new methodology to calculate sugar consumption in the US and, according to the new measurement, the average American eats only 76.7 pounds of the sweet stuff a year. Extending the benefit of the doubt that the new figures are accurate, it's still a big number. Imagine drinking 76 gallons of gasoline a year on average. Here is the interesting point. What the Times story also revealed is an e-mail obtained under the Freedom of Information Act between officials among sugar industry groups discussing the benefits of the reduced estimate and "how they might persuade the USDA to make a change that would lower it even more."

Another story, December, 2012, in Health magazine, regarding the new standards, stated that the American Sugar Alliance certainly understands the importance of perception, noting the trade group vigorously "lobbied the authors of the report to lower the numbers even more."

One of the problems with estimating sugar consumption from foods (and this is any accountant worthy of the name's dream come true) is the USDA breaks foods into two groups, that purchased and actually eaten and that purchased and allowed to spoil or  tossed out for whatever reason unconsumed.  Using this as one of the criteria the USDA concluded a lower number was appropriate. The food gets bought but doesn't always get eaten. Besides, everyone realizes that poor folks waste more vittles than the wealthy. Just as everyone realizes that Type 2 diabetics among the wealthy are more prevalent than among the poor.

 In William Dufty's classic Sugar Blues, he notes the economic significance of the sugar trade throughout history. "The prophets tell us a few things about the status of sugar cane in ancient times: It was a rare luxury, imported from afar and very expensive." Judging from the impact it's had on peoples' health not to mention the health care system, a few things are still quite clear. It's no longer imported from afar and today it's hardly a rare luxury. But it remains very, very expensive.

The above is an excerpt from our forth coming book, Nutrition the Easy Way.