- Published on Monday, 14 May 2012 08:00
- Written by Sara Nunnally, Editor, Inside Investing Daily
- Hits: 726
China is ditching America's debt. If things turn worse from here, it is very bad news.
On Friday, I shared with you the idea that the U.S. is the best of the worst. So I want to give you a sense of where the U.S. is headed if we don't shape up.
China Investment Corp. (CIC), the investment arm of China's sovereign wealth fund, announced it would stop buying European government debt.
Boom. That should be the clarion call of the canary in the coalmine.
CIC president Gao Xiqing said in an interview during the World Economic Forum in Addis Ababa, Ethiopia, "Two or three years ago we started moving gradually from Europe and North America to Asia and Latin America."
The CIC said at the end of 2010, government bonds accounted for 47% of its diversified fixed income securities. But this asset class represented 76% of its global portfolio.
I get the feeling the CIC thinks it's overextended.
With $439.6 billion in its portfolio, the CIC has more than a little clout. But the bigger question is, how does the Chinese government feel about European and American debt?
When big buyers of bonds like China step out of the game, it's time to reevaluate. Just how much does China buy? And how vulnerable are we?
Check this out:
Chinese holdings of U.S. Treasuries have been falling since July 2011. Indeed, China holdings fell 10% from July 2011 through February 2012. And that spells bad news for the U.S. should the global economy deteriorate further.
China's not the only one dropping Treasuries. The U.K., Thailand, Turkey and Poland are all holding less of our debt...
And China might just be more interested in picking up gold than Treasuries, if you take the country's first-quarter buying as any indication.
In the first three months of 2012, China imported 135.5 metric tons of gold from Hong Kong alone. That's a whopping 587% increase over the amount of gold imported in the first quarter of 2011.
That is astounding...
The U.S. Treasury auctioned off $72 billion worth of Treasuries last week... but more and more, that buying is coming from the Fed, not our go-to foreign buyers.
I don't think the Chinese will stop buying our bonds just yet, though.
It could just be that we're China's "too big to fail" investment. But with this European debt announcement by the CIC, I'm not 100% sure of anything.
And you shouldn't be either.
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Superbugs Need Superdrugs
By Ryan Cole, Editor, Small Cap Insider
The biggest public health threat of the 21st century isn't AIDS. It isn't Ebola or West Nile or malaria. It might not even be heart attacks or cancer.
"Antibiotic resistance is likely the biggest public health challenge we'll be facing this century," Amy Pruden, an expert on antibiotic resistance at Virginia Tech University, said recently.
As I covered in my most recent Small Cap Insider newsletter, the facts are grim:
- Methicillin-resistant Staph infections -- MRSA -- now make up over half of all staph infections
- More MRSA cases are caught outside of hospitals -- this is no longer a hospital bacteria. It's fast taking over the entire world, with people contracting MRSA in locker rooms and gyms... athletic fields... bathrooms and airports... really, anywhere people congregate.
- MRSA isn't the only drug-resistant infection out there. Vancomycin-resistant enterococcus (VRE) and multidrug resistant tuberculosis (XDR TB) could easily become even bigger problems moving forward.
- While very, very few cases of infection are resistant to both methicillin and vancomycin (currently, our last line of defense), that won't be true for long. That's because not only are bacteria good at evolving defenses themselves, but they are very good at sharing that information with other bacteria -- including other species. All it takes is one patient contracting two infections at once -- a common occurrence in hospitals.
- It beats every type of bacteria just as well as vancomycin... and kills vancomycin-resistant and methicillin-resistant germs as well.
- While every antibiotic attacks bacteria in one of two ways -- either interrupting cell functioning, or degrading cell walls -- this drug does both at once. That makes it especially effective -- and much more difficult for bacteria to defend against.
- It only requires a single dose -- so no more treatment courses that peter out and give us stronger strains to contend with.
- It isn't metabolized by the human body -- which means it won't interact with other drugs.
Simply put, we're on the verge of a return to the dark ages. Before penicillin, pneumonia was often a death sentence... an infected cut would lose you a limb or worse... and TB was one of the greatest killers in the world. Without a new antibiotic, we'd be right back where we started.
To be even clearer -- while those of us not on the front lines aren't aware, we're at war. We've been at war for millennia with bacteria, and for most of that time, the bacteria were winning. We gained the edge recently... but bacteria have fought back, and we're losing again.
Even today, most of us know someone or have ourselves fought with a drug-resistant infection. It's a scary thing -- something that seems minor quickly balloons into a health crisis. Heck -- one of our own editors recently saw his own athletic injury get infected by a drug-resistant bacteria, and require extensive, ongoing treatment.
It's not unusual for infected patients today to lose a leg or arm... and, in an increasing number of cases, death is the end result.
Sleeping With the Enemy
Making matters worse, we're helping bacteria along. By not completing our antibiotic treatments... by giving livestock vast amounts of nontherapeutic antibiotics... and by failing to hold ourselves to high sanitation standards in hospitals... we've given bacteria a head start.
Seeing one recent article about livestock antibiotic runoff, Inside Investing Daily editor Aaron Gentzler recently dubbed it our "Pooh Problem."
Taken together, leaking antibiotics into the environment is like handing your battle plans over to the enemy and giving them time to enact a counter-defense.
And that's exactly what bacteria have been doing. Without action, we'd soon make for weak prey again, as we have for almost our entire history.
Fortunately, we are taking action.
The Next Penicillin
Even though the FDA has seen fewer and fewer antibiotic agents come through its doors... and has approved even less... we've got a few new drugs that are extremely promising.
One in particular -- the subject of my most recent newsletter -- is extremely exciting.
This drug is already through two Phase III trials, and will be heading to the FDA for approval soon. If you'd like to find out more about it -- and how you can profit from the company that will soon be saving millions of lives -- follow this link to gain access to my research.
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