In scientific circles, this type of anecdotal evidence, no matter how persuasive, cannot be relied on or cited. Those are the rules, even if they’re regularly broken.

Economists and analysts, however, have different rules. We make predictions that scientists cannot make, at least publicly…

I predicted that further research would prove that this substance citrate is one of the most important breakthroughs in modern medicine. This is because I am convinced of its ability to halt or ameliorate the underlying mechanisms of autoimmune disorders, in part at least from personal experience.

Therefore, I am enormously gratified to see the first clinical data validate my assumptions and predictions. We don’t yet have multiple double-blind studies, but first published results are, in a word, stunning.

Data was just released regarding this substance’s impact on hs-CRP (high-sensitivity C-reactive proteins).

CRP levels, as you know, are strong indicators of various medical conditions as well as general health. High CRP levels are associated with increased risk of diseases ranging from heart disease to cancers.

The bottom line is that low doses of this substance dropped highly sensitive C-reactive protein levels by about a third in test group of mostly obese smokers. Because reductions in CRP levels have the most impact on health when they are high, these reductions are extremely meaningful.

Though it is not blinded data, it is still extremely meaningful. We already knew, from animal and cell studies, that this substance outperformed other anti-inflammatories ranging from Lipitor, aspirin and ibuprofen to Celebrex.

Until now there had been no clinical evidence that this substance works as well in human studies as it does in cell and animal studies. This is, therefore, an important point in the history of this technology…

Remember, numerous studies link statin use to reduced risk of heart and other diseases. Others believe that inflammation is the driver behind most cancers.

When all is said and done, I believe the impact of widespread use of this substance will have a profound impact on our demography as well as investors’ bank accounts…

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

One of the Most Important Breakthroughs in Modern Medicine was originally featured in the Penny Sleuth.

The SEC and the IRS are only the beginning of the story…

In the United States, the Food and Drug Administration determines what can legally be sold. It even exercises control over what can be said by companies about medical therapies. Elsewhere, other regulatory authorities play similar roles.

It was not always that way, of course. Prior to the 20th century, there was virtually no regulation of medical therapies. Medical decisions were considered the domain of doctors and patients, who bore the responsibilities and risks associated with the use of any product. Even currently banned Class A drugs used for recreational purposes were available for sale without limitations.

Today, the average cost of bringing a medical product from conception to market is around $400 million, according to The Cato Institute. The time required can be as long as 10 years.

As a result, the FDA is widely considered in need of major reform, though the nature of those reforms is a matter of debate. Responding to criticisms, the FDA has implemented some programs to accelerate review procedures.

For example, Big Pharma is allowed to directly pay the costs of the process in some cases, which can result in a faster ruling. The FDA’s response to criticisms has often focused on the need for more money to accelerate reviews. Given budgetary pressures created by the financial and entitlement crises, this is unlikely. The FDA’s desire to expand oversight is, therefore, not likely to be accomplished, in the near term at least.

The FDA currently controls only the initial approval of a therapy. It does not prohibit the use of approved therapies for uses other than which they were approved, though many in the agency would clearly like to take over what is a far-less-regulated market than many believe. These unapproved, but legal, uses are referred to as off-label.

Currently, biotechs typically target applications with the highest probability of approval, knowing that a drug or device will be widely used for unapproved purposes as soon as it is available for sale. However, the FDA prohibits the advertising of uses other than those for which a therapy was approved.

The FDA has also become very aggressive policing the publication of unapproved medical information by companies that do not sell drugs. Recently, for example, the FDA sent Diamond Foods a letter stating, “your walnut products are drugs,” because the company had publicized well-documented research about the benefits of omega-3 fatty acids found in walnuts. Diamond was threatened with “seizure” if the company did not immediately stop educating the public to the benefits of walnuts.

The move is rife with irony, as the National Institutes of Health has lagged decades behind nutritional researchers regarding fats in general. For many years, the federal government officially endorsed the old, simplistic food-pyramid philosophy based on the notion that all fat consumption should be reduced. Researchers have shown, overwhelmingly, that most people are deficient in certain essential fats… especially omega-3s, which play an important role in reducing heart disease and other diseases.

Many consumers don’t have that understanding and could benefit from it, but the FDA frequently prevents companies from talking about the benefits of their products. This, by the way, is an example of what my dietitian wife calls regulatory “information hoarding.”

Diamond Foods, of course, quickly complied with the FDA’s ban on unapproved educational activities. However, the event highlights the tension between the agency and providers of natural products that may have health benefits.

This tension was codified in the Dietary Supplement Health and Education Act of 1994 (DSHEA). Sponsored by Sens. Tom Harkin (D-Iowa) and Orrin Hatch (R-Utah), the law specifically excludes naturally occurring substances, sold as dietary supplements, from the FDA approval process.

This was, in a sense, the birth of the modern American nutraceutical industry. Combining the words “nutrition” and “pharmaceutical,” nutraceuticals are foods or substances derived from foods, either synthesized or purified, and sold for health benefits. In Japan, the nutraceutical market emerged in the 1980s. Today, almost half of all Japanese consume nutraceutical products. The U.S., however, is catching up. Drug and health food stores have long stocked a wide range of nutraceuticals.

Increasingly, even grocery stores dedicate shelf space to natural products ranging from natural vitamin supplements to electrolyte-rich sports drinks.

Furthermore, we are also seeing nutraceuticals increasingly appear in foods to promote good health. Many foods are now being fortified with health-promoting ingredients. These include cereals with added omega-3 fatty acids, fruit juices with herbal ingredients that have biochemical properties and milk with vitamin D.

Even more esoteric products are sold in GNC and sports-oriented supplement stores. While many products may have little or no real value, it’s also clear that some have powerful biological effects.

One such product is creatine, 2-(methylguanidino) ethanoic acid. Creatine is a nitrogenous organic acid that occurs naturally in vertebrates, thus qualifying the product for nutraceutical status. It helps supply energy to all cells in the body, though most users are probably primarily interested in its effects on muscle cells…

Creatine increases the formation of adenosine triphosphate, which transports chemical energy within cells. The result for many, especially those who do not eat a great deal of meat, is increased muscle mass and anaerobic strength. For that reason, creatine is widely and legally used as a supplement by athletes who rely on strength, as opposed to aerobic abilities.

Creatine is the subject of scientific inquiry for other reasons as well. There is some evidence that it assists in muscle-damage repair experienced during intense training. One study has demonstrated increased cognitive abilities in humans, and animal studies point to potential in the treatment of ALS and Huntington’s disease. Some people are taking creatine for those reasons, but because it is a nutraceutical, manufacturers cannot publish any such possible benefits. To get permission to do so would cost many millions of dollars.

Today, the U.S. nutraceutical market is worth approximately $87 billion in sales, but is expanding rapidly.

There are many reasons for this growth.

In part, the nutraceutical movement is an expression of the widespread desire to take control and responsibility for one’s own health in an increasingly impersonal and bureaucratized health care system. As such, the current state of the nutraceutical industry is very similar to the pharmaceutical market in the 22-year period between the institution of the Pure Food and Drug Act of 1906 and the Food, Drug and Cosmetic Act of 1938. Government can monitor for purity and certain aspects of commercial speech, but not much else. Though this was not planned, this minimal regulation has actually increased public confidence in nutraceuticals.

Moreover, public perception of nutraceuticals is changing as more and more validated therapies appear. This is certainly my experience. Not that long ago, the health food store industry offered little of real benefit except basic dietary nutrients. More often than not, natural products were ineffective placebos at best, and harmful at worst. This has changed, and this change will accelerate for one reason — exponential growth in science, powered in large part by rapid improvements in information technology.

Given the frustrations of those who feel, often rightly, that they have been prevented from bringing important drug therapies to market because of onerous regulatory hurdles, it was predictable that many innovators and entrepreneurs would turn to nutraceuticals as an avenue of exploration. In this endeavor, there have been notable successes that have changed the face of biotech.

Serious scientists are applying the latest and most-sophisticated technologies to the uncountable natural molecules that exist in our biosphere.

Bioinformatics, molecular biology and nutrigenomics are contributing to this new field outside the bureaucratic hand of the regulators — with all the opportunities and risks that it implies. You do not want to ignore companies best positioned to profit from this disruptive revolution…

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

Invest In This Emerging Multibillion-Dollar Market was originally featured in the Penny Sleuth.

We were able to talk to scientists and engineers at a couple of the companies that most impress us. Ironically, these are companies that make nearly no physical products themselves…

They sell, in the words of one of the people we spoke to, mathematics. It is the mathematics that makes the incredibly complicated new world of interconnected computer devices possible. Ray’s bringing one of these companies to his Technology Profits Confidential readers next month.

I can tell you about the hottest topics and most-dazzling presentations at CES this year. Most of them involve televisions. When I say television, though, I’m talking about an entirely new iteration of the old technology.

“Smart televisions” are finally becoming truly user-friendly. Moreover, the various online sources of content are being knit together by Google and hardware manufacturers. This convergence of all content on the wirelessly connected family screen presents an enormous challenge to traditional broadcast and cable networks. Games, educational materials, entertainment, telephony and home electronics management are coming together.

In the past, I’ve never gotten particularly excited by HD television. Yes, new HD large-screen televisions have been improvements, but I’ve never found them particularly compelling. I think that’s about to change.

New screen technologies, OLED and active matrix, have crossed some tipping point. I was astonished by the clarity of next-generation screens. The Korean manufacturers, in particular, can make screens with clarity that is getting very close to actual vision. This is particularly true in regard to 3-D screen technology.

I said to my Breakthrough Technology Alert subscribers several years ago that entertainment as we knew it would change when 3-D screens reached an acceptable level. That point will not come at once, because individuals have different preferences, but for many, it has already arrived, even though the highest-quality screens still require glasses. That will change within a few years. 3-D televisions are in the works now that will allow a room full of people to each receive, without glasses, both left and right eye signals — even if they move around.

The big events of the CES were all about 3-D, especially the live broadcasts by the ESPN 3-D channel. Fortunately, I know some of the key people at Cameron Pace Group, the company that owns the state-of-the-art technology used to shoot and broadcast most top-level 3-D. Cameron Pace is run by James Cameron of Avatar fame as well as Vince Pace, the inventor of the technology and a well-known cinematographer. As a result, Ray and I were able to go behind the scenes inside the semitrailers outside the convention hall that powered the 3-D broadcast.

I’m not going to go into a lot of detail about this company right now, but I will in the future. And I promise to keep you updated…

A lot of 3-D photography is happening right now, even though the forum doesn’t yet exist for the programming. When 3-D screens are more widely deployed, you’re going to be surprised to find that many of the most-successful shows on television today will then be released, for a second revenue stream, in 3-D.

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

Inside the Consumer Electronics Show: The Hottest in 3D and OLED Technology was originally featured in the Penny Sleuth.

Traders obsessed with short-term results have never been as successful as patient long-term investors. Get-rich-quick investment advice is a fantasy. Get-rich-slow is a validated strategy for real wealth.

Today, it is more important than ever to keep the long-run perspective firmly in mind…

Lest you’ve forgotten, world financial markets are in a state of unparalleled disorder. More capital has been drained from markets, thanks to the irresponsibility of politicians and the acquiescence of naive citizens, than at any time in modern history. The damage done by bombers and tanks in world wars has been matched by the unintended consequences of central planning and bureaucracies.

Fortunately, however, the political and philosophical trend lines are all pointing to true long-term reform. The pendulum’s swing cannot be stopped, and the coming decades will be unmatched in terms of technological progress and wealth creation.

This is exactly the time to be investing in the future. Metaphorically, and sometimes actually, there is blood in the streets. You’ve probably heard that Baron Rothschild, the famously successful 18th-century British investor, said, “The time to buy is when there’s blood in the streets.” In fact, some believe the original quote was, “Buy when there’s blood in the street, even if the blood is your own.”

Remember, investors who bought and held a diversified portfolio of disruptive technologies before and during the Great Depression got rich. Those who lost confidence because they weren’t seeing the quarterly gains typical in bull markets missed their golden opportunity to “buy low.”

This, I repeat, is a chance of historic magnitude to buy the companies that are going to change the world and power the recovery — like the one I am going to tell you about today.

Producing Purified Stem Cell Populations

One company has accomplished a major milestone: The demonstration that the company can produce purified cell populations…

As I’ve explained in discussions about other stem cell companies, the ability to produce pure cell populations is critical. The FDA is extremely concerned that the introduction of unpurified stem cells might cause inappropriate cell growths, or even cancers.

Geron’s nonpurified stem cell lines did, in fact, produce microcysts in early tests.

For liver or any other SC therapy, therefore, it is critical that the cells used in a therapy are only the type needed for that therapy.

While I had little doubt that this company would solve this problem, I had no idea what the solution would be.

I spoke to the leading researcher who helped me understand this breakthrough technology. Essentially, this company has discovered how to replicate a feature of early embryonic development that begins the process of cell differentiation. Known as the “primitive streak,” it is the initial division of undifferentiated embryonic cells into “bilateral symmetry.” Some bioethicists, in fact, consider this event the “ensoulment” or beginning of life.

Regardless, the primitive streak has unique characteristics that provoke very specific movement of cells within the embryo.

The important thing to know is that this company has created artificial primitive streaks. Therefore, they can provoke purified cells to migrate into purified cell populations.

First American Donors for Cell Bank

This company also enrolled the first U.S.-based donor in its program to establish the clinical-grade human parthenogenic stem cells capable of immune-matching most humans.

They have already gone through the rigorous bureaucratic and regulatory process to assure that the cells created by these donor cells are acceptable to the FDA.

Regulatory approvals were obtained from the Institutional Review Board (IRB) and the Stem Cell Research Oversight (SCRO) Committee. Cell lines have already been collected offshore, but the American side is critical to the company’s road map.

HpSCs are not just effective replacement cells; they are young. People who use these cells for therapies will have organs and tissues with life spans that will extend for as much as a hundred years or more.

This will change the nature of medicine as we know it…

Patrick Cox
for The Penny Sleuth

Mass Marketing Regenerative Medicine: A Small-Cap Biotech Set for Explosive Gains was originally featured in the Penny Sleuth.

This time with a revolutionary broad-spectrum cancer diagnostic technology.

Moreover, its deployment timeline, as an in vitro diagnostic device, is remarkably short. It could be on the market in Europe in little more than a year. Many countries outside of Europe take their lead from the EU, so it should move rapidly into Canada and other markets. With post-market data from European users, I would expect that approval in the U.S. would take another year.

Right now there are a number of the remarkable cancer therapies now working their way through the regulatory labyrinth. These are radically more effective and nontoxic cancer treatment technologies.

The truth is that even existing cancer therapies, though primitive compared with technologies just around the corner, are usually effective if the cancer is detected early enough. This is why the multibillion-dollar cancer diagnostics business is one of the fastest-growing sectors in health care…

Existing cancer diagnostics, however, have serious problems. Many are extremely inaccurate, revealing as few as half of existing cancers. More importantly, they are expensive and very narrow in the cancers they detect. This is because of the unique nature of the disease itself.

Cancer isn’t one disease at all. The medical term is malignant neoplasm, which encompasses any condition of uncontrolled cell growth. There are hundreds if not thousands of different types of malignant neoplasm, and many have almost nothing in common. If all the existing diagnostics were used to test one individual for early-stage cancers, it would cost many tens of thousands of dollars — perhaps more. If all people were checked for all cancers on a regular basis using existing diagnostics, it would bankrupt our entire health care system. As a result, most people are tested for cancers only when there is reason to believe they may have the disease. Unfortunately, cancers have already become established and aggressive at that point.

In a better world, there would be a simple blood test that would cheaply and quickly reveal the most-common cancers. Then, nearly all cancers could be caught in their early stages, when they are still easily treatable.

One company has just made this a better world…

Scientists have been using the newest scientific technologies to crack the genetic code for all the body’s different cell types. This entails large-scale genomic testing and analysis of the results using increasingly powerful computers and instruments. This is bioinformatics, perhaps the most-important application of computer technology in terms of human benefit.

This system has been used to examine hundreds of normal and cancer cell types. In the process, they discovered that many genes were being activated in cancers that were never before associated with malignant neoplasms.

Having identified the genes activated by the most-common cancers, it was a relatively simple process to design a test for the proteins expressed by those genes. This is off-the-shelf technology. There are many medical device companies that manufacture diagnostic devices that identify proteins in blood. Early in-house tests found that it was more accurate in terms of identifying cancer-free individuals than is commonly observed in PSA (prostate-specific antigen) cancer tests. This discovery convinced the company to prioritize development of the technology.

It will probably cost no more than existing diagnostics that test for only one type of cancer. It will be far, far less expensive than the total price of all the many cancers it will detect.

My guess, looking at wholesale prices for similar laboratory devices, is that the cost in materials for testing an individual for a broad spectrum of the most-common cancers will not be more than $15. It will cost more than that because there is some labor involved, but the profit margin, I believe, will, nevertheless, be fantastic. It will save many thousands of dollars because it will replace many different tests — though it will cost no more than a single diagnostic test for a single cancer.

More importantly, it will save the staggering costs, in pain and death as well as money, associated with treating most late-stage cancers. This means that insurance companies will want to pay for the test. Because physicians are already familiar with this type of testing, it will not require overcoming a learning curve. All these factors convince me that we are very likely looking at a true blockbuster…

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

Profit Opportunity From This World-Changing Cancer Diagnostic Tool… was originally featured in the Penny Sleuth.

We see clearly the ongoing convergence in the arena of mobile computing. Tablet computers, including the iPad, the Kindle Fire and the Android variants, are at the top of a lot of Christmas wish lists. The newest smartphones are also objects of widespread lust.

The convergence, however, is much bigger than these powerful new devices that meld computers with phones and televisions. As the carnival barker said, “You ain’t seen nothing yet.”

Faster and smaller chips, combined with faster data flow and sophisticated cloud computing, are opening up new realms for enterprise. One that is not yet understood by most people is the arrival of expert systems, sometimes called artificial intelligence or AI.

My problem is with those who are predicting that AIs will soon transform the world. These people, not surprisingly, are almost all from the physics side of the scientific divide. Moreover, they regularly betray a shocking lack of understanding regarding biological systems and consciousness.

You will frequently read projections of the forthcoming “singularity” based on Moore’s law. People make good livings by forecasting the day that transistors on chips match the number of neurons in the human brain. This is childishly simplistic.

Some proponents of this view are convinced that computers, once they have as many circuits as a biological brain, will become capable of self-awareness. I’m skeptical for a number of reasons, but primarily because we have only begun to understand the biological brain. Every year or so, in fact, a new layer of mind-boggling complexity is found in our DNA. The more I learn about genomic function, the more I understand how little we really know.

Our cells and the DNA that controls their growth and interactions are complex on the level of individual molecules, not crude microcircuitry. Nothing that nanotechnologists are doing even approaches the level of multifaceted precision at that scale. Proteins, the stuff that DNA works with, are capable of transforming in ways that defy imagination. Each time a protein “folds,” it presents different ions and other electronic components in amazingly interactive ways.

If I were to show you a teddy bear that could turn into a helicopter, and then into a bowl of pasta with a really, really good glass of Carménère, it would still pale in comparison to gene behaviors.

My point is that projections about the emergence of self-aware computers remind me of certain religious convictions. On the other hand, expert systems are a reality. Expert systems (ESs) are software-embodying decision trees capable of integrating and analyzing a vast array of information and data.

For example, expert systems are used in remote mining locations when experienced mining engineers cannot be on-site. This software is designed by experienced mining and software engineers. The ES will suggest avenues of action based on information and can even ask for specific tests needed to improve decisions. The same is true in medicine, a field in which diagnostic programs include information beyond the scope of any single specialist. These programs interact with doctors and nurses to identify medical conditions with extreme accuracy.

Expert systems are already integrated into your computer software. When something goes wrong and your operating system suggests a course of action, often after asking a series of questions, you are dealing with an expert system. User interfaces often embody extremely complex ES software. Interfaces could, of course, be much more useful if they had the processing power and access to more data. Human-language interfaces are beginning to take advantage of new computer power, but Moore’s law and the cloud are in the process of providing far more.

Robotics is an area completely reliant on expert systems. When you see a robot fold a towel, you are seeing a machine access an expert system that has attempted to lead the machine through the many decisions involved in towel folding.

This is the relatively near future, when we will have expert systems capable of washing and folding laundry as well as cooking, cleaning and arranging delivery of needed groceries. This means, of course, that many jobs will become obsolete. Restaurants, for example, will employ robots that will draw upon expert systems integrating the knowledge of top chefs.

Robots, however, are often hard to recognize. Technically, modern cars integrate dozens of robotic systems. Moreover, powerful expert systems don’t actually need physical bodies. The 3-D television and computer screens that are coming onto the market now are going to accelerate the development of ES avatars.

Already, expert systems exist that can outperform your typical outsourced customer-support technician. It’s cheaper today to hire actual workers in Manila or Bangalore, but that will change. This means that bank and online stores will also be able to employ virtual characters to deal with routine customer issues.

The benefits of this ES technology will flow not only to businesses, but directly to consumers. I’ve already mentioned household tasks that will be taken over by appliances driven by expert systems. We’ll also get much more useful personal assistants capable of helping with everything from complicated scheduling problems to personal portfolio, budget and tax planning.

At one time, only the wealthiest people could afford to have servants who would take care of all the little details of their lives. Soon, however, the convergence will supply everybody with the artificial equivalent. In fact, they will have to, as the Japanese clearly understand.

Anybody who follows robotics knows that Japan leads the world in terms of humanoid robot development.

The Japanese, however, are preparing for a tsunami of another sort. It is the rapid increase of aging citizens in a country with a shrinking population. There are simply not enough young people to take of an aged Japanese population.

Robots and ES avatars are going to be a part of most of our lives. Like the kings and queens of other eras, we will not need to deal with routine annoyances and chores.

Obviously, there are going to be investment opportunities within the industries that commercialize this aspect of convergence. There will also be important consequences for existing businesses that we will need to take into consideration.

“You ain’t seen nothing yet.”

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

[Editor’s Note: Later this week we will be releasing a exclusive interview with Patrick Cox where he will reveal all of his 2012 predictions, and the 5 companies small-cap companies that could lead to explosive gains for early movers. Be sure to keep an eye on your inbox...]

2012 and Beyond: Explosive Opportunities With The Rise Of This Technology… was originally featured in the Penny Sleuth.

Of course, considering the size of the electrical distribution network, these kinds of infrastructure upgrades and installations represent a huge investment. There are hundreds of billions of dollars to be made in the smart grid business both in the U.S. and abroad.

Toshiba projects the global smart grid to grow 600% over the next 10 years, to a total of $75.6 billion. Investors in the best smart grid companies will make fortunes. The adoption of smart grid technologies is being driven not by ideology, but by irresistible economic realities…

Since Edison and Tesla’s early breakthroughs in electrical distribution and generation, electricity has taken the burden off of human muscle power for household chores, granting us appliance-created leisure time. It has lit the dark of night with the flick of a switch. By powering global communications networks, it has lit our minds, as well. With a few keyboard inputs, we have access to more information than any previous generation in history.

For decades, the power grid grew rapidly. In 1940, more than 10% of U.S. energy consumption was distributed via the electrical grid. Today, more than 40% of U.S. energy consumption is supplied in this way. With advancing electric-automobile technology beginning to displace some of our petroleum use as a transportation fuel, the 40% figure will only continue to rise.

Our electrical distribution network, however, is a relic tracing its roots back to those early grid projects from a century ago. Despite increasing demand, the electrical grid still retains a design with roots from its early days. The vast majority of it still does not use the latest in information technologies to provide information to consumers, or to monitor itself and report to utilities.

In part because of its obsolete design, the reliability of our electrical grid is showing signs of deterioration in the face of increasing demand. The North American power grid is interconnected in such a way that a small technical or human error can cause widespread cascading failures.

Over the last 20 years, power outages have gone up more than 125%.

As one of the most complex systems ever built, our electrical grid has proven increasingly prone to failure from a variety of causes. Hotter- or colder-than-usual weather or trees falling across power lines have taken down service to millions of customers.

Smart grid deployments are picking up steam around the world and are entering the sharp bend in the technology adoption S-curve. Networked management of electrical use is necessary to intelligently and efficiently use and allocate scarce resources… and the timing is perfect to claim a stake in next-generation power grids.

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

600% Growth From This Emerging Technology… was originally featured in the Penny Sleuth.

To qualify for transformational status, a technology must save money and resources. The bankrupt Solyndra, poster child for the so-called green economy, did not save money. Solyndra’s entire justification was based on the notion that CO2-producing energy sources would be replaced with “clean energy” sources and mandated by various regulations and laws.

Efforts to raise the cost of traditional energy sources were part of this plan. We’ve heard, for example, certain well-placed politicians and activists brag that they would like to see energy at twice current costs. This bizarre sentiment is evidence, however, of either gross economic illiteracy or sociopathic tendencies.

As energy is the largest component of the economy, ranging around 17%, depending on vacillating energy costs, a doubling in costs would utterly cripple the economy. End of story. It would cause massive hardship that would hit lower-income groups particularly hard. In fact, current restrictions on oil, coal and natural gas extraction have already artificially increased the cost of fuel substantially. The same could be said about nuclear, especially safer thorium power.

Ironically, it’s actually never been clear that solar technology is “clean,” either. Scientists have done cradle-to-grave analysis of solar technologies, measuring their impact on the environment throughout manufacturing, utilization and disposal. Solar technology’s environmental impact may be worse than traditional energy sources. This is because many of the high-tech components require extremely sophisticated and energy-intensive manufacturing processes that produce a wide variety of exotic pollutants. I’d prefer the unproven risks of CO2, known to some as plant food.

Recent scholarship, including the CERN Cloud study, has cast further doubt on the CO2 or anthropogenic climate change models. This comes in the wake of the admitted failure of the climate models over the last decades. This, in turn, has created a crisis among those committed to the anthropogenic view.

The fulcrum event was probably the leaking of University of East Anglia emails involving top proponents of AGW. These emails revealed panic over the their model’s failure and tactics for subverting the peer-review process to keep the truth hidden. Phil Jones, the U.N.’s climate point man and head of the East Anglia climate unit, admitted shortly afterward that there has been no significant global warming in 15 years.

The scientific argument has become so politicized, however, that controversy will continue to rage for some time. A series of high-level resignations from the American Physical Society over the organization’s unwillingness to discuss contrary climate views are just the latest example of the political battle.

While I don’t personally believe the CO2 AGW theory, science is an ongoing process. Consensus is not reliable when it comes to the truth. The vast majority of scientists have been proven wrong over and over, so I certainly could be wrong about this area as well. It is not true, incidentally, that the “vast majority of scientists” believe that humans are driving climate change. Nor has it been the case for some time.

Even so, there are things I can say about AGW as an economist. Namely, it is that we should apply honest cost/benefit analysis to American laws and regulations that are motivated by the CO2 model. This has not been done because every effort, from Kyoto forward, to establish international CO2 controls has failed. Even when some European nations signed on, the most significant and growing carbon producers, including India and China, refused. Moreover, the Europeans never actually fulfilled the terms of their pledges. Canada has also been far less willing to sacrifice economic growth to assuage green demands, perhaps because it’s colder up there.

As a result, any policies that raise American costs to reduce CO2 emissions are essentially meaningless. They will have little or no impact on global CO2 levels and climate. Well, they may not be meaningless, but the true meaning has nothing to do with economics.

Green policies that do not significantly lower global CO2, including the subsidization of solar industries, are gestures in support of a particular worldview. It is, therefore, a symbolic ritual. A similar example is the ritualistic sorting of the garbage. In California, regular trash and recyclables have often been taken by two different trucks to be buried in the same landfill because no market exists for recyclables. In some cases, governments pay others to process supposedly valuable trash.

The public, by the way, isn’t buying these rituals. Historically, consumers have never been willing to support “green” products, despite what they have told pollsters. There is evidence, in fact, that they will prefer an identical product that does not make “green” claims.

Today, AGW hardly shows up on polls of the American public’s important issues. It is similar in Canada. Less than half of Americans now believe that humans are contributing significantly to global warming, and about two-thirds believe fraud has been committed by proponents of increased government control of CO2.

I predicted this general trend, by the way. I also predicted that, eventually, we would stop obsessing about reducing energy consumption and increase production. There’s plenty of energy, believe me. The horror stories of Peak Oil have slipped silently into the night for good reason, primarily vast and unpredicted reserves of shale oil and gas. Moreover, technological progress like one company’s axial flux induction machines will continue to increase energy efficiency.

You can reduce energy consumption significantly by using axial motors. This is a good thing, no matter what your views of CO2 are, because it saves money. This enables economic growth, which creates jobs, the list goes on…

In the case of refrigeration and electrical generation, the specific reductions are more than half. When this technology is universally used, reductions in the cost of energy will yield transformational benefits to the entire world. It will also yield, I’m convinced, extraordinary profits for early investors. That’s the sort of “green” that I unapologetically support.

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

Forget Solar: A “Green” Energy Technology You Should Be Looking At… was originally featured in the Penny Sleuth.

Partly, it is because North America saw mobile phones so early. When other regions finally rolled out mobile phones, infrastructures were more modern. The larger reason, however, is that there is so much at stake.

Right now, there are a limited number of players in the lucrative payment network world. Visa, MasterCard and American Express would like to move to your phone. They fear, however, that enabling electronic wallets in phones would allow aggressive young players onto their turf. PayPal, Amazon and Google are, in fact, financial networks, and they would love to do your banking. This could open a whole new world for us as technology investors…

So far, progress has been slow, but the emergence of Android is opening up new possibilities. Work is being done by the Mobile Payments Industry Workgroup that would establish standards. What we know for sure is that the established payment networks will do their best to keep out upstarts. We also know they will fail.

Part of the reason for this is political. Part is cultural.

The politics are that Wall Street and the major banks have never enjoyed lower public regard and support. Consumers sense that the bailout profited rich bankers more than consumers. The customer base is not going to support politicians who continue to put the interests of favored banking institutions above those of consumers.

Eventually, market forces always win. Currently, retailers are capable of dealing with only a few credit and debit card companies. This limits competition and keeps prices higher than they would otherwise be. A sophisticated mobile payments infrastructure, which is inevitable now that the Android has broken free, will arise. In fact, it will arise before most people know it’s happened.

The cultural factor I referred to is the difference between the old-school financial institutions and the new electronic services. I have little confidence that Visa or MasterCard is going to do what’s necessary to exploit the convergence. They’re too habituated and institutionalized.

PayPal, Amazon and Google, however, are populated by people who want to transform the financial world. They will find a way to force themselves into an industry that has lost serious credibility and clout due to its participation in the ongoing subprime mortgage fiasco.

Fortunes will be made by financially sophisticated app developers. One of the companies covered in Breakthrough Technology Alert is clearly in this category.

We are moving very rapidly toward developing an electronic infrastructure that would enable brand-new forms of banking. Given our recent experience with the federally controlled financial system, the need is clear.

I won’t detail here how I think this new banking will function. For now, however, I’d just like to warn you that you shouldn’t be too surprised to see completely transformed financial institutions arise from the current rubble.

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

Banking 2.0: How Mobile Innovators Will Take On Big Finance was originally featured in the Penny Sleuth.

You can try to out-trade the supercomputers sitting on the floors of the big exchanges, if you want. They’re located there because they have the advantage of the time that it takes light or electricity to travel even a few blocks. This allows the firms who pay fortunes to the exchanges for proximity to the trading computers to beat firms located just down the street.

On the other hand, you can invest in the future, which no computer can calculate.

I think it’s good to periodically consider the man whom Money magazine picked in 1999 as the last century’s greatest stock picker, John Templeton. He started his investing career in 1939 by borrowing about $10,000, which was real money in those days. With war escalating in Europe and most investors in panicked despair, he didn’t buy gold. He bought 100 shares in each of the 104 companies priced under a dollar on the New York and American stock exchanges.

Almost all were innovation startups, and 34 were in bankruptcy. He then ignored his portfolio for four years. At that point, only four of the 104 were worthless, and he had quadrupled his money.

It wasn’t luck. Templeton was one of the few who understood portfolio mathematics. It is axiomatic that a diversified portfolio of true innovation companies, held for the long run, will pay off big. This is based on the simple assumption that human progress will continue, and things will get better.

If this is not true, by the way, we’re all hosed anyway. There is no investment, including metals, that will do much good in a Mad Max scenario. So you might as well bet that things are going to get better — much better.

I hear people on the financial shows say that this is not the time to invest for the long run. The European Union and the euro are melting down. Governments all around the world, including the states of California and Illinois, are racing toward default. George Lucas is re-editing Star Wars again.

In 1939, however, it was not just a shared currency, unemployment and growth rates at stake. National Socialism was on the march in Germany, with variants preparing for war from Italy to Japan. Economies were not just wobbling, they were targeted by armadas of bombers and fleets of submarines.

Before it ended, the carnage would be so great that we can’t, to this day, even accurately say how many people died — though it was probably around 60 million. It might have been 10 million more or 10 million less. The destruction was so great that records and even memories of millions disappeared forever. The percentage of total human wealth consumed by the war dwarfs all that is at risk today. But John Templeton got rich. He got rich because he had faith that progress could not be permanently stalled and that those who invest in that progress win in the long run.

It’s not the politicians who will pull us out of this iatrogenic debacle — it’s scientists, engineers and investors.

The market punishes, in the long run, the misallocation of resources. It rewards, in the long run, true innovation that increases total wealth and health. In the long run, market forces always prevail.

Ignore fluctuations and short-run market conditions. Have faith in the future, and keep your eye on the long run. Remember, as well, that your long run has gotten a lot longer, even very recently. Moreover, it will continue to lengthen as unprecedented medical advances likely come to market.

Yours for transformational profits,

Patrick Cox
for The Penny Sleuth

Quadruple Your Money In 4 Years was originally featured in the Penny Sleuth.