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By Profit Confidential

After yesterday’s Federal Reserve antics, we were taken by the reaction of one well-known writer, who said, “I didn’t know whether to laugh or cry.” That is truly the most apt phrase for the current situation.

To sum up the bigger picture:

Almost 100 years ago to the day, the U.S. “subcontracted” money and the banking system to third parties. These third parties called themselves the “Federal Reserve” but, of the few unchallenged facts one can determine about the actual ownership of the Fed, it becomes clear they are neither “federal” nor a “reserve.”

As an aside, the only two presidents in U.S. history who fought the central banking system tooth and nail were Lincoln and Kennedy. The original “greenback,” named by Lincoln, was named so because it was “free” money not based on debt. This is a historical fact.

Once the Fed was in place, the U.S. moved from an economy that paid for goods with free money, to an economy that paid for goods with debt or promises. Any doubts about this were completely removed in 1971, when Nixon took the U.S. off the gold standard. However, within a year, by 1972, Nixon had put deals in place with Middle Eastern countries that effectively made the greenback the only way to buy oil. This effectively made the buck the world’s reserve currency, and the U.S. was back on top.

By the 1980s, scholars began to notice that the U.S., as well as other countries that had adopted the central banking template, were in danger of imploding via deflation. The computer revolution of the 1990s delayed the evolution of the deflationary scenario temporarily, culminating in the 2000 stock market crash as expectations exceeded reality.

In the same approximate period, “central planners” loosened the chains that for decades had kept the banks in the role as enablers to the system, and allowed the banks to become deal-makers in their own right. This is now considered part of the paradigm by which the U.S. attempted to transition from a manufacturing to a pure service economy, and the derivative market exploded.

Cynics began to note that, when the economy produced a widget or a loaf of bread, the consumer could actually use the widget or eat the bread. Plus, there were jobs to be had making the widget or growing the wheat for the bread. However, when the economy produced profits through 100% paper trades in the invisible derivative market, the gains (which were indeed real) provided benefit to only a very tiny percentage of the economy, a portion which later came to be known as the “1%.” And there, because of the efficiencies in the banking sector, no new jobs were created or even needed, as the older manufacturing jobs continued to disappear.

This was hardly a viable model. Strange and bizarre attempts were made to artificially boost this new “Franken-conomy” by, for example, encouraging anyone with a pulse to buy a home on credit (the so-called NINJA loans—NO INCOME NO JOB NO ASSETS NO PROBLEM).

This, in turn, created yet another “bubble” or Ponzi scheme, whereby neighbors were flipping homes to neighbors at higher and higher prices. The banking sector, in its new role as Master (not Slave) could not resist taking all the new debt being created in the bubble and re-packaging it into a new type of derivative instrument, and then selling it at a profit to less predatory organizations seeking a higher return.

The system collapsed. Books and Hollywood movies have been done about this event. The current issue of Businessweek right now is 100% devoted to the behind-the-scenes stories of this event. The federal government intervened on a scale never before seen in the history of the modern world and used public money to “bail out” the banking sector on the grounds the sector was “too big to fail.”

The banking sector happily accepted the money and gave much of it back to its own people as bonuses for the year. To this day, no executives have been punished for any of this.

Meanwhile, the public was told this was all in their best interest.

Although the banking sector was now in great shape, the rest of the economy was in tatters. Also, the federal government itself was painfully aware that much of the debt service it owed to foreign countries from the decades prior to the crash would become un-payable if rates of interest on that debt rose or remained high. Although this was never made clear to the public, the U.S. was close to bankruptcy.

The Fed then proposed a solution. It would use its money creation power to intervene in credit markets and purchase its own debt. Even now most Americans still do not understand this process. You owe Visa a lot of money. You are a poor risk. Visa charges you 22% a year on the balance. You call Visa and say that, because you are able to print money under the law, you are going to buy back all your debt from them with new money.

Wait, it gets better. Because you have just created such a strong demand market for your own debt (after all, you are buying it) you suggest to Visa that they should not charge you 22%, which is the rate for a poor risk creditor, but rather one percent, which is the rate for a rock-solid credit risk. Visa agrees, and drops your rate to one percent. As word gets around that Visa now considers you a great risk, and is only charging you one percent, everyone else wants to loan you money (because you are such a great risk) and also offers one percent. Bang! One percent is now the new lending rate because of the key trend-setter.

The new ultra-low lending rates really, really help your pals in the banking sector (who can now make money by reinvesting in any investment with a rate of return higher than one percent, which is most of them!) and also helps lower the service costs on your own payments to foreign creditors. You are happy.

Once again, the public is told this is in their best interest (hah!) and it will bring in a new era of prosperity. But the new era of prosperity does not arrive as planned. Jobs disappear. Manufacturing disappears. More Americans are on food stamps than at any prior time in history.

Flash-forward to September 2013. The Dow Jones Industrial Average “has been well managed.” It is up. Gold has been well managed. It is down. Politicians have been demanding that the “heroin” of the low rates (from the self-buying of debt) be removed from the system, because it is addictive and is stifling what little remains of the capitalist system. You want to do this. You announce you will do it (taper). But the numbers, even after being re-defined many times to the point of insanity—ARE STILL BAD. The experts say that removing the medicine will kill the patient.

Against this backdrop, you surprise everyone by saying the current regime of low or manipulated rates will continue until there is improvement. (Well, not quite everyone. Your “pals” knew what was coming and were able to make millions by front-running key markets. Zerohedge asked in an editorial yesterday, “WHO TOLD THE TRADERS IN ADVANCE?”)

Analysts who read your pronouncement and understood the implications “don’t know whether to laugh or cry.”

And now, kind reader, you understand why.

(Reprinted from Lombardi’s Profit Taker e-Alert issued September 19, 2013.)

Article by profitconfidential.com

By MoneyMorning.com.au

Today’s Money Weekend begins with seaweed.

The Australian reported on Monday that researchers from James Cook University ‘are close to producing a low cost biofuel extracted from seaweed that will be powerful enough to fly a jet aircraft.‘

Intriguing, isn’t it?

The seaweed is a macro-algae. After harvest, it can turn into different products, from biofuel to food, depending on the environment where it grew. 

There’s something even more fascinating. It can grow on polluted water and help clean the degraded site.

The technology and research are still very much in the early stages. But this could prove to be part of a much larger trend, one that is set to shake up major global industry… 

Big Market, Big Problem

That trend is how technology and research can combine to reduce pollution. It’s happening across so many different industries.  

And there is one country where pollution is so chronic it’s estimated that 80% of its rivers cannot support any aquatic life.

You probably already guessed – China.

Regardless of your view on Chinese growth and local government debt levels, tackling the pollution in China surely must be a megatrend of the next decade or more.

It’s already showing up in one industry – automobiles.

Take this from the Wall Street Journal this week:

‘China rolled out a new incentive program for environmentally friendly cars and buses to help battle increasing levels of pollution. Buyers of electric cars can receive up to 60,000 yuan ($9,800) in subsidies, while buyers of certain gasoline-electric hybrids can get as much as 35,000 yuan…The program seeks to "speed development of the new-energy automobile industry, reduce emissions and help control pollution," the ministry said.‘

China is the biggest car market in the world. 

The problem for the Chinese government is that, even with the subsidies, sales of electric cars and hybrid vehicles are a minuscule percentage of the market. According to the WSJ, sales of electric cars were just over 11,000 out of total vehicle sales of 19.3 million.

That’s a lot more regular cars on the road. It’s also a lot of exhaust fumes. As you can see…

Sources: Business Week

One of the problems for the growth of electric cars is a lack of battery-recharging infrastructure across the country. That hinders the growth of the market. That’s a typical problem everywhere, especially in a country as big as China.

Regardless, the automakers have plenty of plans for alternative-energy vehicles on the table. After all, it’s not just China that wants to reduce pollution. It’s a global market and a global problem.

 Over in the US, they plan to double the average fuel efficiency of regular cars in America. By 2025, the benchmark will be 54.5 miles per gallon (5.2L per 100km).

Pollution isn’t a problem with easy solutions. But it is spurring on entrepreneurs to find an answer.

If Kris Sayce and technology analyst Sam Volkering over at Revolutionary Tech Investor are right, there’s one way car manufacturers are tackling this problem in particular that might be the one worth focusing on for investors. 

They make the case that the answer lies in reducing the weight of both electric and petrol cars to make them more fuel efficient. 

A New Material That Could Change Everything

‘When you reduce the weight of a car without changing its engine capacity you get greater power to weight ratio,’ reports Revolutinary Tech Investor in the latest issue.

They continue:

‘Now if you reduce the weight of the car and reduce its overall capacity you get the same performance as before but the added benefit of lower fuel consumption…

‘In the case of electric cars, carmakers need to be conscious of the weight. If carmakers try and run an electric car using a typical car frame it will drain the battery fast.‘

But how do you reduce the weight?

You might remember a while ago we mentioned that carmakers were working with aluminium. It’s lighter than steel.

The problem is aluminium is not as strong as steel. The aluminium solution, even mixed with steel, isn’t ideal. But what if there was a material that could match the strength of steel but increase the fuel efficiency?

Revolutionary Tech Investor says it will be a lightweight material that’s five times as strong as steel and more resilient to extreme temperatures.

The problem until now has always been the cost of producing it.

This is what has Kris and Sam so excited. They’ve identified a company with a proprietary process to produce a unique version of this material that could cater to the automakers (and other industries) without the crippling costs.

That could put a huge wind at its back as fuel efficiency becomes a dominant trend of a trillion dollar industry. That’s a pretty good place to be in anyone’s book.

The even better news is it trades on the ASX. For the full story, click here. 

Callum Newman+
Editor, Money Weekend

From the Port Phillip Publishing Library

Special Report: Are You Waiting for a Real Estate Crash That Isn’t Going to Come?

By MoneyMorning.com.au

13 is meant to be an unlucky number. However, 2013 has been lucky for share investors, with the Australian market up over 10%.

If we hark back to 2012, that year started with investors feeling far from lucky. The uncertainty facing Europe had markets on a knife-edge. Thanks to the ‘unlimited’ and ‘indefinite’ money-printing rhetoric of US and European central bankers, 2012 ended in a state of near euphoria – as highlighted in this Financial Times article:

click to enlarge

The bulls have indeed reigned supreme in 2013.

However the year is not yet over. A little look back at history tells us the number 13 and the last four months of the year have been decidedly unlucky for investors.

In 1974, the S&P 500 index started the year around 100 points. In September 1974 the market fell 35% to 65 points (hard to believe it was ever that low).

From its 1974 low the S&P 500 climbed to 335 points – guess when? August 1987 (13 years later). We all know what followed – October 19, 1987. The day they call Black Monday triggered a fall of 33%.

The share market phoenix again rose from its 87/88 low of 220 points to reach 1520 points in August 2000 (bingo, 13 years later). The tech wreck started the slide and over a year later the market ground its way 46% lower.

Here we are today, 13 years later and the S&P 500 has risen from its 2000/01 low of 800 points to over 1700 points.

Note to superstitious share investors: perhaps you should consider taking some profits while the S&P is riding high.

There is still time for 2013 to be the year the market finally meets its long-awaited fate with economic reality. If this does eventuate, be assured central bankers will cease all talk of ‘taper’ and increase the rhetoric to ‘tamper’ further with market mechanisms.

Besides death and taxes, the only other certainty is that desperate governments and their sycophant bankers will do all they can to maintain the illusion of economic recovery.

Debt and deception are the fraying ropes holding this whole rotten mess together. Yet, for now, the vast majority is happy for the charade to continue. So 2013 may or may not be the year the ropes break and the extent of the deception is revealed.

Lance Armstrong’s deceit also happened to last 13 years (1999 to 2012) so Bernanke and Co. could easily mask their use of Economic EPOs for a little while longer.

Complicit in this deception are various government agencies. Over the past three decades the official reporting mechanisms on unemployment, inflation and other economic indicators have been doctored so much they bear no resemblance to the truth – I refer to them as Michael Jackson statistics.

ShadowStats.com is a website dedicated to ‘keeping the bastards honest’. John Williams (who publishes ShadowStats) produces data using the pre-tampered methodology. Williams’s data shows the US is in its seventh consecutive year of recession and US unemployment rate as 20%.

God forbid if the public knew the real state of the economy. More mushroom treatment awaits the uninformed.

Deficit spending is another part of the deceit. Governments spending money they don’t have creates an illusion of health in an economy. To highlight this fact, look at those European countries that have been forced to adopt austerity measures (live within their means).

All of them are either in recession or depression. This is the harsh reality of the underlying economic conditions in those countries. Governments’ spending money they don’t have (temporarily) hides this reality.

This would not be a major problem if the world were not already awash with private and public debt.

Running annual $1 trillion deficits is why the US continually encounters fiscal cliffs and debt ceilings. The enormity of the debt problem means it just keeps raising its ugly head on a more frequent basis.

Groundhog Day is here again with the next US debt ceiling due to be hit in mid-October. The political players will all muscle up for a very public show of brinkmanship and at two minutes to midnight guess what – the debt ceiling is raised another few metres. Why bother with the whole charade?

Given the lack of political will to address this issue it’s going to continue to fester and at some stage no amount of lying, statistical trickery and useless dollars notes will hide this monstrous gaping wound from the public’s view.

According to Professor Laurence Kotlikoff of Boston University the total US government debt and unfunded pension and healthcare liabilities is approx. $222 TRILLION (this is 14 times the official government debt of $16 TRILLION). Baby boomer retirees are only going to further increase this liability. Clearly this situation is untenable.

• Either welfare and health entitlements are reduced or
• Future generations gladly agree to pay higher levels of taxation to fund the excessive consumption of an era they did not live in or
• Successive US administrations embark on a path of high inflation to dilute the level of debt or
• A combination of some or all of the above.

This dilemma is not unique to the US; it is a problem facing all western governments.

In a token attempt to address this looming welfare disaster and get the US budget back in the black, agreement was reached to ‘raise taxes and decrease spending’ by 31 December 2012.

Remember the US ‘fiscal cliff’ debate dominating the news late last year? As it turned out, it was more like a ‘pothole’. They went straight over the top of it. The following chart from ZeroHedge shows you how much the agreed tax increases will raise compared to the extent of the deficit problem.

After all the posturing nothing really changed and it is business as usual – continue spending more money (courtesy of the Fed’s printing press) than you raise in taxes and keep adding to the official US$16 TRILLION debt pile.

At the time, the compromise to avert the ‘fiscal cliff’ gave Wall Street sufficient reason to push markets higher. Dig yourself deeper into debt and the markets rejoice. Go figure.

However this pattern of behaviour has been repeated time and again throughout the year. The mere hint of restraint sends the market into a temper tantrum. Conversely, confirmation the ‘money candy’ is not going to be withdrawn is greeted with great delight. To be fair, irrational behavior is not confined to Wall Street.
 
Have you ever wondered why rational thought and basic common sense does not prevail in the hallowed halls of power? My guess is rational people are not hypocrites. Without this character trait they are therefore unsuited for high office.

Prior to being elected President in 2008, Barack Obama was a US Senator. In 2006, President Bush requested an increase in the US debt ceiling.

Senator Obama’s response to this request was: ‘Increasing America’s debt weakens us domestically and internationally,‘ and ‘Leadership means that ‘the buck stops here’. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.‘

In conclusion, Obama said ‘raising the debt ceiling would constitute a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.‘

The following chart shows just how expensive that failure of leadership (hypocrisy) has been and continues to be.

click to enlarge

Another six trillion dollars of debt and seven years later, Senator Obama’s common sense approach was replaced with President Obama warning Congress the markets will go ‘haywire’ if US Debt Ceiling is hit and not extended. My layperson interpretation of this comment is, ‘The markets will throw a big fat tantrum if we don’t keep spending money we don’t have.’

I sincerely hope Obama exercises a more disciplined approach in his parental role than he does with his economic reasoning. Feeding the markets more sugar may provide a short-term feel good, but longer term it leads to decay.

So expect more of the same hyperbole in the coming weeks as the mid-October debt ceiling deadline approaches. The debt sand pile continues to mount up – not just in the US but also in every other major western economy.

The GFC should have been the wake-up call on an era of excess – those responsible for taking us to the brink (Wall Street banks) should have been punished, not rewarded. Instead, it provided the impetus for a bunch of professional academics and spineless, self-serving politicians to impoverish a country while enriching those on the inside.

Time will soon tell us whether the 13-year cycle repeats itself in the next few months or not. However each day this charade of economic stability continues, we are one day closer to it being a very unlucky day for investors who believe you can manufacture prosperity out of thin air.

Regards,

Vern Gowdie+
for The Daily Reckoning Australia

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By www.CentralBankNews.info     India’s central bank began to wind up its recent exceptional measures aimed at shoring up the embattled rupee currency, raising the policy rate by 25 basis points to combat inflation while cutting the marginal standing facility (MSF) rate by 75 basis points to ease short-term liquidity conditions.
    The Reserve Bank of India (RBI), which saw the rupee plunge from May through August, also cut the minimum daily maintenance of the cash reserve ratio (CRR) to 95 percent from 99 percent while keeping the overall CRR rate unchanged at 4.0 percent.
    The repo rate under the liquidity adjustment facility (LAF) was raised to 7.50 percent from 7.25 percent, reversing some of the RBI’s rate cuts earlier this year when it was seeking to boost growth. The RBI has now cut its policy rate by a net 50 basis points this year.
    As a consequence, the reverse repo rate under the LAF is adjusted to 6.5 percent and the Bank Rate down to 9.5 percent so the MSF and bank rate are recalibrated to 200 basis points above the repo rate.
    “We believe that easing the exceptional liquidity measures was warranted given that the external environment has improved and given that the government and the RBI have used the time since the measures were put in place to narrow the current account deficit and ease its financing,” the new governor of the RBI, Raghuram Rajan, said.
    The RBI raised the MSF rate – the rate at which banks access funds for emergency needs – by 200 basis points in July as part of a series of tightening measures aimed making the rupee more attractive.
    Following news that the U.S. Federal Reserve was planning to reduce its asset purchases in the second half of this year, the rupee depreciated by some 20 percent from early May through August as investors adjusted their global portfolios.
    Helped by a string of tightening measures, the rupee bounced back in late August and was trading at 62.6 to the U.S. dollar today compared with 68.6 in late August.
    As part of the RBI’s exceptional tightening measures, the MSF became the central bank’s effective policy rate but Rajan wants the repo rate to return to its role as the effective policy rate as policy slowly returns to more normal conditions.
     “Recognizing that inflationary pressures are mounting and determined to establish a nominal anchor which will allow us to preserve the internal value of the rupee, we have raised the repo rate by 25 basis points,” Rajan said.
     The exceptional tightening measures, coupled with the Federal Reserve’s decision this week to delay a tapering of quantitative easing, has given the RBI some breathing room, but Rajan also cautioned that the “postponement of tapering is only that, a postponement.”

    India’s inflation rate has started accelerating as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices.
    India’s wholesale inflation rate – the RBI’s preferred inflation gauge – rose to 6.1 percent in August from 5.79 percent in July. The RBI aims to maintain WPI inflation at 5.0 percent by March 2014 while it’s medium-term objective is to keep it at 3.0 percent.
    “As the inflationary consequences of exchange rate depreciation and hitherto suppressed inflation play out, they will offset some of the disinflationary effects of a better harvest and the negative output gap,” the RBI said.
    But while inflation is rising, India’s economic growth is weakening with continuing sluggishness in industrial activity and services, the pace of infrastructure project completion is subdued and new project starts are muted, the RBI said.
    “Consequently, growth is trailing below potential and the output gap is widening,” the RBI said.
    In the second half of the fiscal 2013-14 year, growth could pick up as infrastructure projects are expedited and the government approves investments, it added.
    India’s annual growth rate fell to 4.4 percent in the second quarter of 2013, the 14th quarter in a row with a falling growth rate.

    www.CentralBankNews.info
 
  

Article by Investazor.com

As Wednesday Fed decided to maintain the Quantitative Easing Program in place, we could see the American dollar dropping but indices as DAX, Standard & Poor’s 500, Nasdaq and Dow Jones Industrial Average reaching historical highs. This decision was felt and integrated in the price of gold. Since Ben Bernanke announced a possible change of the stimulus program, we saw the price of gold increasing at a steady pace.

Since the beginning of 2013, gold lost nearly 20% anticipating a reduction in the stimulus program but starting with June, when the possible tapper was announced, gold start climbing, like it encapsulate the uncertainty and lack of trust of the investors, and clearly indicating the continuity of the QE3. Also, Lawrence Summers’s withdrew as a candidate to head the Federal Reserve made the gold climbing as a proof that Janet Yellen has now more chances to assume Ben Bernanke’s responsabilities and to continue the unconventional monetary policy.

If Fed will cut the stimulus, gold is expected to get on an increasing trend, reaching $1400 per ounce while if the stimulus is maintained, gold will oscillate at lower values, most probably respecting the boundaries of a range. Even if by the end of the year the FOMC will meet again, there are poor chances to see the QE3 tapered. Most probably, the decision will be taken by the new chairman of Fed which will integrate the decision in a new strategy to run the American economy.

As St. Louis Fed’s Bullard delivered a speech later today, he expressed his view regarding the stimulus program which is effective and benefic for the economy. He doesn’t see any problem in having Yellen as head of Fed. Also, the fact that the QE3 wasn’t tapered at the last meeting isn’t a surprise for him who doesn’t expect this decision to be taken by the end of this year. Even if they would have decided to taper, $10 billion would have made a difference, in his opinion.

The post Gold is Reacting to News About QE3 appeared first on investazor.com.

By The Sizemore Letter

I hate ObamaCare—but probably not for the reasons you might think.

I’m not an Obama basher, and I consider the latest republican threats to shut down the government unless ObamaCare is defunded to be a carnival sideshow.  But nonetheless, I hate the program and I’d love to see it scrapped.

Why?

Because it is a façade of reform that does nothing to actually fix our broken health system.  Rather than the radical change it is billed as by both its supporters and its detractors, ObamaCare is an incremental reform at best and one that does nothing to address the real reasons for soaring health costs: a system in which the user of health care—the patient—is generally not the payer and in which doctors are compensated for the amount of care provided, regardless of benefit, rather than for actual results.

All of this is made worse by the peculiar American notion that it is the employer’s job to provide health insurance.  Most other Western countries have socialized medicine paid for by the taxpayer.  But don’t think that the American taxpayer gets off easy.   The American taxpayer foots the bill too, albeit indirectly through corporate tax breaks.  The end result is a quasi-socialized model that effectively funnels public money to private insurance companies.  It also makes American labor more expensive than its foreign competitors and wastes company resources that would be better spent maximizing profit on providing social services.

There are other negatives that are underappreciated.  America is rightly proud of its dynamic, flexible labor market, and Americans are unique among Westerners in their willingness to uproot and move halfway across the continent for the right job.   Yet tying insurance to employment locks many Americans into less-than-optimal jobs, and worse, it discourages risk taking.  Given that most small businesses are run on a shoestring budget, losing employer-provided insurance is a major disincentive to the aspiring entrepreneur.  We’ll never know how many small businesses fail or are never even attempted due to the prohibitively high cost of health insurance.

To be fair, ObamaCare didn’t cause these problems, but it does makes this worse with its individual mandate.  Today, an entrepreneur can take his or her chances and choose to go uninsured  in the early stages of a new business when the shekels are tight.  And for a young person without a family to support, that is a sensible option.  But under ObamaCare, that will no longer be possible.  ”Self insuring” is not allowed.

I actually believe that President Obama had good intentions when he created the tax subsidies for low-income purchasers of health insurance.  But good intentions often have unintended consequences.  Subsidizing insurance for low income earners does nothing to address the reasons for it being expensive in the first place, and it actually exacerbates the problem by shielding patients from the true cost of the services they receive.  If there were not a deep-pocketed insurance company or government program to bilk, patients would push back against unnecessary or extravagant costs, and doctors and hospitals would be forced to run their operations more efficiently.

You want real reform?  Outlaw health insurance for everything but catastrophic injuries or illnesses.

Think about it.  You have homeowners insurance for major damage; think fires and tornados.  But you don’t use it every time you need to pay someone to re-caulk your bathtub.  Why should health insurance be any different?  It should be there in the event you need chemotherapy or brain surgery.  But do you really need your insurance to cover a round of antibiotics for strep throat?

Yes, there are some people who cannot afford even basic health care.  But provisions can be made for them.  And in any event, offering free basic care to low-income patients  is still cheaper than the status quo, which sees the uninsured clogging up hospital emergency rooms with non-emergency cases.

The other option, of course, is to go the direction of Canada and the UK and offer fully socialized medicine.  That’s not my preferred solution, but it’s not quite the horror story it’s made out to be in the American press.  I used the National Health Service while a student at the London School of Economics, and I had no complaints.  The UK’s medical services are roughly on par with those of the United States yet cost only half as much as a percentage of GDP. The difference in cost is shocking and indefensible.

And this brings us back to ObamaCare.  I still hate it.  Mr. Obama didn’t create the health care cost crisis, but his attempt at fixing it does nothing to address its root causes.  Until patients are aware of the costs and benefits of services they receive and doctors are incentivized to heal rather than perform a series of reimbursable procedures, there can be no real reform.

This article first appeared on InvestorPlace.

This article first appeared on Sizemore Insights as I Hate ObamaCare

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Source: Daniel E. Levy of The Life Sciences Report

http://www.thelifesciencesreport.com/pub/na/provectus-pharmaceuticals-inc-and-pv-10-rose-bengal-as-a-novel-cancer-therapeutic

Despite all of the advances in diagnosis and treatment, the family of diseases that falls under the umbrella of “cancer” still represents a significant unmet medical need. Consequently, research continues in the discovery and development of therapeutic agents with novel mechanisms of action, wider therapeutic indexes and lower overall toxicities. In this interview with The Life Sciences Report, Peter Culpepper, CFO and COO of Provectus Pharmaceuticals Inc., describes his company’s innovative rose bengal formulation and its use as a cancer therapeutic.

MANAGEMENT Q&A: VIEW FROM THE TOP

The Life Sciences Report: Rose bengal is commonly known as a dye. Can you tell me about the history of this compound as a therapeutic agent?

PC: Rose bengal is a very unusual compound. It was originally used as a textile dye in the late 1800s, and later found a wide variety of diagnostic applications. There are more than 3,500 peer-reviewed publications describing the use of rose bengal in staining diseased tissue or identifying tissue irregularities.

Provectus Pharmaceuticals Inc. (PVCT:OTCQB) has determined how to use rose bengal therapeutically—the first to do so. In the late nineties, and after more than a hundred years of diagnostic use, we identified rose bengal’s therapeutic potential for treating cancers and serious skin diseases by taking advantage of its photosensitivity characteristics.

TLSR: A recently published study by the Moffitt Cancer Center demonstrated that a single injection of PV-10, your rose bengal formulation, may revolutionize melanoma treatment. This could be very significant for Provectus. Can you comment on the results of that study?

PC: Moffitt Cancer Center is one of the National Cancer Institute’s 41 comprehensive cancer centers in the U.S. Moffitt is particularly active in melanoma research and has a strong understanding of rose bengal and its safety profile. Beyond this, Moffitt wanted to learn if this agent induced an immune response. This was important because PV-10 is an injectable, and is not delivered systemically.

The Moffitt study established that concentrations of rose bengal will destroy diseased tissue. Furthermore, an immune response follows: The study concluded that when PV-10 ablates, or reduces the growth of directly injected tumors, a robust antitumor T-cell response follows. This was observed in all cancer types studied—not just in melanoma. While Provectus sponsored this study, Provectus is not listed as an author. This is an independent study that proves to the industry that PV-10 works systemically.

TLSR: Regarding toxicity, what makes your rose bengal formulation attractive for development?

PC: Rose bengal operates through a novel mechanism of action. Our formulation, PV-10, is 10% rose bengal in a saline solution, the highest achievable concentration of rose bengal in an injectable. We found that, in this solution, rose bengal is agnostic to any type of cancer. The attractiveness for development is that PV-10 can be used in every cancer that you can get a needle into. It has multi-indication potential and can treat solid tumors in the breast, prostate, bladder and elsewhere.

Rose bengal has been used as a liver diagnostic for decades, and is useful for treating liver cancer. This is important because many cancers metastasize to the liver. Also, because PV-10 is minimally invasive and rose bengal is optically dense, direct injection into solid tumors is straightforward—you can image it as it is being delivered.

Finally, rose bengal is small molecule, not a biologic. It is synthesized in large quantities in a straightforward manufacturing process. Thus, PV-10 is a cost-effective, multi-indication injectable that can potentially be used in both the pre- and post-surgical arenas, either as a stand-alone or as an adjunct cancer therapy.

TLSR: Going back to your previous statement that PV-10 works by stimulating the immune system, can you describe how that is accomplished?

PC: A study presented at the Eighth World Congress of Melanoma describes the cytotoxicity of unformulated rose bengal, and its ability to preferentially kill diseased tissue over healthy tissue with a wide therapeutic window. The study, titled “Rose Bengal—Phototoxicity Versus Intrinsic Cytotoxicity,” concluded that an interplay of cell necrosis and autophagy (in which a cell “digests” itself) is a possible mechanism of action.

We call this interplay “autolysis.” Through autolysis, we are forcing cell destruction by delivering enough rose bengal to the tumor site. Following autolysis, work at the Moffitt Cancer Center demonstrates that cellular antigens are exposed to the immune system. The “antigen storm” that follows PV-10-induced autolysis results in the immune system being activated against the cancer. Rapid destruction of the tumor follows.

TLSR: Rose bengal operates in the absence of light-stimulated activity. Can you comment on that?

PC: Rose bengal is unique partly because it has photodynamic characteristics. It can be used as a photodynamic therapy (PDT) agent, as we’re demonstrating in the treatment of skin diseases like psoriasis and atopic dermatitis. But rose bengal can used for both PDT and non-PDT applications. For cancer, we don’t need light. Rose bengal delivers a pure cytotoxic effect that is safe and well tolerated. It is not metabolized in the body and it has a 30-minute half-life once in the bloodstream. Due to this rapid systemic clearance, intravenous delivery was never able to achieve therapeutic levels. Our therapeutic levels are achieved through direct injection into tumors.

TLSR: How would PV-10 be better than traditional chemotherapeutic agents, antibody-drug conjugates and photodynamic therapy?

PC: PV-10 differs from traditional chemotherapy because of its specificity. There is a wider therapeutic window with rose bengal, compared to chemotherapeutic agents, because it only goes to diseased cells. As a compound, rose bengal does not interact with normal cell membranes. It does, however, interact with cancer cell membranes. Furthermore, rose bengal prefers the lower pH intracellular environment of cancer cells, though it can also prefer higher pH environments. Rose bengal goes different ways in different scenarios, which makes it a very flexible molecule.

Chemotherapeutic agents are not specific enough to avoid toxicity challenges. Even antibody-drug conjugates don’t target individual properties of cells. We’re not looking at a particular protein or enzyme, or a particular pathway. Rose bengal destroys cancer cells because it is attracted to cancer cell walls. This is why rose bengal works on every tumor type that we’ve tried.

TLSR: There are cancers, such as esophageal cancer, that respond very well to photodynamic therapy. Do you envision instances where you would leverage the photodynamic properties of rose bengal as a cancer treatment?

PC: Esophageal cancer could be one example. But there is a complication. Because rose bengal is optically dense, if you have too much in a particular area, it absorbs light and will not facilitate the mechanism that allows cell destruction. Too much rose bengal limits its PDT capability. That’s why the concentration of rose bengal in the skin formulation, where we need to take advantage of light, is much less than in the formulation we use inside the body, where we don’t need light. Most solid tumors, according to our research and the research of others, react to rose bengal without light.

TLSR: We have talked about melanoma as your initial target indication. How are clinical trials progressing?

PC: We presented final phase 2 data for the use of PV-10 against metastatic melanoma at last year’s European Society for Medical Oncology (ESMO) congress. We reported a 51% objective response, a 25% complete response and a 26% partial response. We also found that results improved when patients received all the PV-10 they needed for their lesions. Disease control is very good, and progression-free survival is very good. These results, and additional data, will be presented at this year’s European Cancer Congress (ECCO). Finally, the key opinion leaders in the cancer community believe that PV-10 should be developed to approval.

TLSR: Can you comment on what kind of efficacy you’re seeing for PV-10 in additional cancers?

PC: The most exciting results on that front would be in primary liver cancer. We have already done a phase 1 study in hepatocellular carcinoma (HCC). These patients have advanced disease, and have already gone through appropriate local therapies, including surgery. Direct injection of PV-10 in the liver lesions of these patients resulted in substantial ablation of the lesions with sustained regression. There is significant durable response, with no evident disease detected during the follow-up period, as determined by CT scan.

Many of the study’s subjects—the phase 1 trial was small, involving only six subjects—have been followed for years. Because of its success, the study was expanded to look at safety and efficacy in up to 36 additional patients. Of particular interest are patients on sorafenib, the current standard of care. Our next studies will be designed to look at PV-10 both in addition to, and against, sorafenib.

Following HCC, we have enabling data against breast cancer. We believe there’s significant promise in breast cancer because PV-10 can function in the tissue-sparing capacity, much like in the Moffitt study treating melanoma patients. Down the road, we are interested in additional indications, including refractory scalp sarcoma, squamous cell carcinoma, and both pancreatic cancer and ocular melanoma metastasized to the liver.

TLSR: Would you envision being able to treat primary pancreatic cancer, and other difficult cancers like glioblastoma?

PC: We have an investigator who’s interested in treating primary lesions in the pancreas. We have seen potential for the immunologic affect of the agent in the pancreas and there’s a rationale for direct injection of PV-10 into pancreatic lesions. However, because pancreatic cancer presents with multiple smaller lesions, you have to hope that once you ablate the lesions, the immune system will be appropriately harnessed to assist in the regression of pancreatic cancer that is not directly treated.

In addition to pancreatic cancer, there’s a significant interest in bladder cancer and cancers of the head and neck, which are generally very difficult to surgically remove.

TLSR: When do you expect to launch PV-10 for melanoma?

PC: A lot depends on how fast we get regulatory clarity from the FDA, which we expect this year, in 2013. It’s fair to say that it would make sense to consider a breakthrough therapy designation. The breakthrough therapy designation could enable us to accelerate the path. Should we obtain breakthrough therapy designation, we could see a PV-10 market entry for melanoma sometime in late 2014. Without the breakthrough therapy designation, we are looking at a standard phase 3 study design, with product launch sometime in 2016.

TLSR: How soon after melanoma would you expect to launch for treatment of additional cancers?

PC: Liver cancer would be our next indication. If we can show, in a pivotal, powered, randomized study, that PV-10 is superior in combination with, or versus, the standard of care, sorafenib, we could have an opportunity for an accelerated path in liver cancer as well, including the breakthrough therapy designation. Furthermore, as indicated in our FDA filings, with an appropriate partner we would be able to leverage considerable additional development resources to advance in additional indications.

TLSR: We talked about how PV-10 works as a potential additive and in synergistic response to other cancer therapies. What kind of market share do you expect for PV-10 as a co-therapy?

PC: When we do the discounted cash flow analysis, we’re looking at a maximum penetration of 25% for the different cancer indications. The key opinion leaders want to use PV-10 for surgical candidates, as a monotherapy post-surgery and in combination with other therapies when significant inaccessible disease burden to PV-10 exists. These scenarios cover all the bases, because PV-10 is well tolerated and can be used on either an outpatient basis or for short hospital admissions. We anticipate 35% market penetration for melanoma alone. For at least one third of all stage 3 and stage 4 melanoma patients, lesions can be directly injected.

TLSR: Are there instances where a patient might be a non-responder to PV-10? Do you envision a way to determine if a patient will be a responder versus a non-responder?

PC: Rose bengal and PV-10 are completely agnostic to tumor biomarkers. It doesn’t matter if a patient is refractory or naive. It doesn’t matter what type of therapy the patient is on. PV-10 responds equally, across the board, to all lesions in all patients.

For some lesions, the morphology is such that the response does depend on lesion size. In these cases, repeat injections may be necessary. If you keep at it, you’ll be able to fully ablate all the lesions you can directly access. In this regard, PV-10 is a general tool that is independent of and complementary to personalized medicine.

TLSR: Thank you Peter. I enjoyed our conversation and hope we have the chance to talk again.

PC: I appreciate it as well. Thanks Daniel.

Peter Culpepper, CFO and COO of Provectus Pharmaceuticals Inc., has spent 20 years in the financial field in the U.S. and abroad. His experience includes working with private start-ups, publicly traded global conglomerates, large nonprofits and a national accounting firm. Previous employers include Neptec Inc., a privately held optical networking component manufacturer; Metromedia Company Inc.; and PageNet, the largest wireless messaging company in the world. Culpepper has also taught undergraduate and graduate business courses for the University of Phoenix. He is a licensed certified public accountant in Maryland and Tennessee. His professional affiliations include the American Institute of Certified Public Accountants, Financial Executives International and the Financial Executives Networking Group. Culpepper holds a master’s degree in business administration (finance) from the University of Maryland, as well as bachelor’s degree in philosophy from the College of William and Mary and an associate’s degree in accounting from the Northern Virginia Community College.

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