The Rude Awakening
Laguna Beach, California
Wednesday, April 3, 2007 ------------------------- - Following the gold barons,
- Befriending the right trend, and
- Eating enough chocolate
------------------------- Eric Fry, rested and recovered from his trip to France, reports… "The trend is your friend," according to one of the oldest expressions on Wall Street. But sometimes it's tough to determine the real trend, and therefore, the real friend. Consider today's trading action, for example. The Dow soared more than 100 points this morning, apparently rejoicing in the news that pending home sales in February actually increased. Today's steep drop in oil prices provided additional cause for rejoicing on Wall Street. But which of these seeming trends should the prudent investor befriend? Rising share prices or falling ones? Rising home sales or falling ones? Rising oil prices or falling ones? Until today's action, falling home sales and rising oil prices had been very friendly trends to any investor who trusted in them. Will this friendship now degrade into a kind of betrayal? In other words, does today's less bad housing data and today's less high oil price reverse the trend in either market? Maybe, but long-running trends rarely abandon their friends so abruptly. And prudent investors rarely abandon long-running trends so abruptly. Instead, prudent investors usually scorn dramatic "counter-trend" price movements as "one-day wonders." These spectacles dazzle and amaze…but rarely alter the underlying trend. In other words, you can't really trust 'em. Homebuilding stocks are quite friendly today. But how will they behave tomorrow?…Choose your friends wisely. Today's edition of the Rude Awakening takes a quick peak at the relatively friendly gold market. But today's edition also takes a quick peak at the "neurobiology of chocolate" - a topic that has nothing to do with friendly stock market trends, but may have a little something to do with optimizing human intelligence. Chocolate enhances cerebral functionality, according to researchers at the University of Nottingham Medical School. These findings seem to corroborate the inconclusive case-study that your California editor has been monitoring: His French girlfriend is a very bright and accomplished PhD in molecular biology. "What makes her so smart?" he has often wondered. "Is it genetics? The exacting French educational system? Hard work?…or chocolate?" You editor has reached no final determination, but he has observed that his girlfriend drinks a cup of chocolate milk every single morning. A mere coincidence? Take a glance at the column below, then decide for yourselves. ---------------------------- The Neurobiology of Chocolate
By Jonathan Kolber Chocolate is one of the few nonprescription drugs that's still legal. Evidence is mounting that chocolate is not only good, but also good for you. According to Medical News Today, some types of cocoa contain substances that enhance cerebral blood flow. The research was presented at the American Association for the Advancement of Science (AAAS), and entitled, "The Neurobiology of Chocolate: A Mind-Altering Experience?" Not surprisingly, Mars Inc. sponsored the research. The company has been sponsoring research on the nutritional and medical potential of cocoa's naturally occurring flavanols for 15 years. Dr. Ian Macdonald of the U.K.'s University of Nottingham Medical School looked at changes in regional brain blood flow in participants who drank a flavanol-rich cocoa. His team found that "consumption of this particular flavanol-rich cocoa beverage was associated with increased blood flow to gray matter for two-three hours." Dr. Macdonald said that this special cocoa might help with people who are cognitively impaired, as well as with fatigue. In a related study from by Harvard Medical School and Brigham and Women's Hospital, Dr. Norman Hollenberg found that Kuna Indians of Panama have unusually low blood pressure and incidence of cadiovascular disease. They drink the type of cocoa considered promising every day.
The study is particularly significant in that the Indians break cleanly into two groups: those who drink the cocoa daily and those who never drink it.
Among those who never drink it, the rate of cardiovascular disease was 83 age-adjusted deaths per 100,000, versus nine for those who drink it daily. For cancer, the rate was 68 versus four. Apparently, the flavanol works by enhancing nitrous oxide (NO2) circulation. NO2 improves circulation by dilating blood vessels. Dr. Hollenberg also found a "striking blood flow response" following consumption by volunteers for several weeks, as well as a total lack of adverse effects. Ordinarily, flavanol cocoa is bitter. Mars is starting to market a version that isn't. I have tried it and it has a strong, but not unpleasant flavor. Expect to pay about $2 per day for the recommended "dosage." There are tantalizing indications that the special cocoa will have other benefits, as well. Dr. Henriette van Praag o the Salk Institute studied a particular flavanol, epicatechin, in mice. The mice were significantly more effective at solving and remembering a maze than other mice. While I do not see a specific investment opportunity in chocolate on the horizon (however much we might wish it were so), I do see the field of so-called "functional foods" as an emerging sector. As the ranks of baby-boomers increases, so will the demand for foods and nutritional supplements that impart a specific health benefit. I have already recommended one "functional foods" company to the ubscribers of my Emerging Capital Report, and am actively pursuing other opportunities in the extremely dynamic and rapidly growing industry. --- Must Read: Urgent Buyout Profit Alert --- Beat Big Pharma to 3,000% gains on this shocking breakthrough. A small, under-the radar pharmaceuticals pioneer has brought America's most readed disease to its knees…and you could easily make 30-60 times yourmoney, or MORE. Click here to read more. ---------------------------------------------- The Anti-Stock
By David Galland [A note from Doug Casey, founder of Casey Research: Just how well will gold shares hold up in a steep sell-off of broader equity markets? David Galland, Managing Editor of ourInternational Speculator concisely answers that question below. In addition to reassuring those of you with an interest in gold, his findings should serve as an important reminder that the really big returns will ome to those willing to be bold when everyone else is timid… and, in time, timid when everyone else is bold.] Here at Casey Research, we remain extremely bullish on gold. But we don't want to get too smug about being on the winning side of the gold bull market. It is critical to keep in mind that bull markets make investors feel much smarter than they actually are. Consequently, it is when things are really going in your favor - as they have these many years now in the gold market - that you have to be most on guard, because pride really does come before the fall. For proof of that contention, just think of those people you know who were profitably early into the dot-com bubble, but failed to sell when the selling was good. So, being on guard, I thought it worth revisiting the question of how gold stocks perform during a broader stock market decline. As you can see from the chart below, while gold stocks and the S&P 500 can both move together, they can also move in distinctly different directions…especially when the S&P 500 is falling sharply.
Notice the time period around the last big stock market meltdown in 2000. While there were spikes in the volatility of gold stocks during that period, the general trend for gold stocks was solidly up…at the same time that the general trend in broader stock indices was decidedly down. It is also worth noting that while the market suffered a solid "thwapping" (a technical term meaning a hard slap up the side of the head) during this period, the thwapping did not result from a monetary crisis, nor even from any particularly dire economic fundamentals, but rather, from the panicked unwinding of a speculative bubble in dot-com stocks. By contrast, a real crisis might trigger the next big move up in gold - a real monetary crisis that begins with a falling U.S. dollar. The picture above paints a pretty clear picture of gold's - and gold stocks' - role in a crisis. Sit tight, and you'll be more than alright. -------------------------- | 
