October 30, 2010

How the Banks Put the Economy Underwater

By YVES SMITH

IN Congressional hearings last week, Obama administration officials acknowledged that uncertainty over foreclosures could delay the recovery of the housing market. The implications for the economy are serious. For instance, the International Monetary Fund found that the persistently high unemployment in the United States is largely the result of foreclosures and underwater mortgages, rather than widely cited causes like mismatches between job requirements and worker skills.


This chapter of the financial crisis is a self-inflicted wound. The major banks and their agents have for years taken shortcuts with their mortgage securitization documents — and not due to a momentary lack of attention, but as part of a systematic approach to save money and increase profits. The result can be seen in the stream of reports of colossal foreclosure mistakes: multiple banks foreclosing on the same borrower; banks trying to seize the homes of people who never had a mortgage or who had already entered into a refinancing program.


Banks are claiming that these are just accidents. But suppose that while absent-mindedly paying a bill, you wrote a check from a bank account that you had already closed. No one would have much sympathy with excuses that you were in a hurry and didn’t mean to do it, and it really was just a technicality.


The most visible symptoms of cutting corners have come up in the foreclosure process, but the roots lie much deeper. As has been widely documented in recent weeks, to speed up foreclosures, some banks hired low-level workers, including hair stylists and teenagers, to sign or simply stamp documents like affidavits — a job known as being a “robo-signer.”


Such documents were improper, since the person signing an affidavit is attesting that he has personal knowledge of the matters at issue, which was clearly impossible for people simply stamping hundreds of documents a day. As a result, several major financial firms froze foreclosures in many states, and attorneys general in all 50 states started an investigation.


However, the problems in the mortgage securitization market run much wider and deeper than robo-signing, and started much earlier than the foreclosure process.


When mortgage securitization took off in the 1980s, the contracts to govern these transactions were written carefully to satisfy not just well-settled, state-based real estate law, but other state and federal considerations. These included each state’s Uniform Commercial Code, which governed “secured” transactions that involve property with loans against them, and state trust law, since the packaged loans are put into a trust to protect investors. On the federal side, these deals needed to satisfy securities agencies and the Internal Revenue Service.


This process worked well enough until roughly 2004, when the volume of transactions exploded. Fee-hungry bankers broke the origination end of the machine. One problem is well known: many lenders ceased to be concerned about the quality of the loans they were creating, since if they turned bad, someone else (the investors in the securities) would suffer.


A second, potentially more significant, failure lay in how the rush to speed up the securitization process trampled traditional property rights protections for mortgages.


The procedures stipulated for these securitizations are labor-intensive. Each loan has to be signed over several times, first by the originator, then by typically at least two other parties, before it gets to the trust, “endorsed” the same way you might endorse a check to another party. In general, this process has to be completed within 90 days after a trust is closed.


Evidence is mounting that these requirements were widely ignored. Judges are noticing: more are finding that banks cannot prove that they have the standing to foreclose on the properties that were bundled into securities. If this were a mere procedural problem, the banks could foreclose once they marshaled their evidence. But banks who are challenged in many cases do not resume these foreclosures, indicating that their lapses go well beyond minor paperwork.


Increasingly, homeowners being foreclosed on are correctly demanding that servicers prove that the trust that is trying to foreclose actually has the right to do so. Problems with the mishandling of the loans have been compounded by the Mortgage Electronic Registration System, an electronic lien-registry service that was set up by the banks. While a standardized, centralized database was a good idea in theory, MERS has been widely accused of sloppy practices and is increasingly facing legal challenges.


As a result, investors are becoming concerned that the value of their securities will suffer if it becomes difficult and costly to foreclose; this uncertainty in turn puts a cloud over the value of mortgage-backed securities, which are the biggest asset class in the world.


Other serious abuses are coming to light. Consider a company called Lender Processing Services, which acts as a middleman for mortgage servicers and says it oversees more than half the foreclosures in the United States. To assist foreclosure law firms in its network, a subsidiary of the company offered a menu of services it provided for a fee.


The list showed prices for “creating” — that is, conjuring from thin air — various documents that the trust owning the loan should already have on hand. The firm even offered to create a “collateral file,” which contained all the documents needed to establish ownership of a particular real estate loan. Equipped with a collateral file, you could likely persuade a court that you were entitled to foreclose on a house even if you had never owned the loan.


That there was even a market for such fabricated documents among the law firms involved in foreclosures shows just how hard it is going to be to fix the problems caused by the lapses of the mortgage boom. No one would resort to such dubious behavior if there were an easier remedy.


The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable.


Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?


There are alternatives. One measure that both homeowners and investors in mortgage-backed securities would probably support is a process for major principal modifications for viable borrowers; that is, to forgive a portion of their debt and lower their monthly payments. This could come about through either coordinated state action or a state-federal effort.


The large banks, no doubt, would resist; they would be forced to write down the mortgage exposures they carry on their books, which some banking experts contend would force them back into the Troubled Asset Relief Program. However, allowing significant principal modifications would stem the flood of foreclosures and reduce uncertainty about the housing market and mortgage securities, giving the authorities time to devise approaches to the messy problems of clouded titles and faulty loan conveyance.


The people who so carefully designed the mortgage securitization process unwittingly devised a costly trap for people who ran roughshod over their handiwork. The trap has closed — and unless the mortgage finance industry agrees to a sensible way out of it, the entire economy will be the victim.


Yves Smith is the author of the blog Naked Capitalism and “Econned: How Unenlightened Self-Interest Undermined Democracy and Corrupted Capitalism.”

Food Price Increases: The Rising Cost of Survival

by: Rick Mills

October 31, 2010

As a general rule, the most successful man in life is the man who has the best information

Socio-economic turmoil - lawlessness, poverty, lack of adequate medical facilities and attention, low to no employment, low wages, disease, no clean drinking water or water for irrigation and shortages of food or unaffordable food can all cause socio-economic pressure to build in many countries that were once stable environments for investment.


In 2007 and 2008 roughly 40 food riots occurred – two of the more publicized examples were when people took to the streets after rising corn prices made tortillas very expensive in Mexico and skyrocketing food prices in Haiti led to the overthrow of that country’s Prime Minister.


The U.N. Food and Agriculture Organization (FAO) reported a five per cent increase in the international price of food over July and August 2010.


"I think everyone is wondering if we are going to have a repeat of 2008 when there were food riots around the world." Johanna Nesseth Tuttle, director, Global Food Security Project

 The world’s developing economies mostly rely on food imports to sustain themselves. On average their citizens spend a much larger percentage of their wages on food than do their counterparts in developed nations. Some published estimates are as high as 50 to 60 percent of income going towards food.


Our agriculture system is concentrated on producing a very few staple crops - there is a very serious lack of crop diversity. Corn, wheat, rice and soy are the main staples and production is oftentimes half a world away from where the majority of the crop would be consumed. Taken together, this means if we get hit by a particularly bad harvest in one area, if a severe El Nino strikes, or more localized severe weather phenomena strikes, food supplies can get totally out of control in many countries.


Considering that the global food supply chain is weak (easily disrupted by lack of transportation, weather, insurgency, stealing) and non-existent in many areas then you have a recipe for potential disaster in many regions of the world. When, not if, this food supply shortfall happens, for whatever reason, then almost any city, and almost any countryside could be aflame with strikes, riots and civil disobedience.

Climate Change


The worry about, and direct threat of, ongoing climate change impact on agriculture isn’t about the slow almost imperceptible changes caused by a gradual shift in our weather patterns. The greatest worry is that climate change might intensify already extreme events. 
This seems to be happening today, witness the incredible drought and massive wildfires in Russia, the flooding in Pakistan, unbelievable hailstorms in Texas and unprecedented cold snaps in China.

And with extreme events being exacerbated by climate change an already stressed agricultural industry (by loss of arable land, shortage of fresh water for irrigation, increasing human population, staple food crops used for bio-fuel production, increasing energy costs and developing countries changing diets) is increasingly having a more difficult time feeding and clothing the world.


Many climatologists believe that the ongoing climate change the earth is undergoing will increase the frequency and severity of extreme weather events.


Inflation


As I said, the most severe consequences of non-existent or more expensive staple foods are felt in developing countries whose citizens spend an exorbitant percentage of their incomes feeding themselves and their family compared to families in the western world. The recent riots in Mozambique were caused by a 30 percent hike in the price of bread after a double digit increase for water and energy - this happened in a country where many spend nearly 75 percent of the household budget on food. People in the poorer countries simply cannot afford increases in the price of food - in Mozambique the per-capita income is $800 per year.


The USDA believes food inflation will quicken it’s pace during the final months of 2010 and into 2011.


"Although inflation has been relatively weak for most of 2009 and 2010, higher food commodity and energy prices are now exerting pressure on wholesale and retail food prices." USDA food economist Ephraim Leibtag


“We continue to be shocked and amazed at the size of the cotton moves. These are, without question, going to translate into higher prices for consumers but more at the low end.” Sharon Johnson, cotton analyst, First Capital Group


There was a massive hailstorm in Texas (the centre of U.S. cotton production) and a severe cold snap in China (the world’s top cotton producer). Both these extreme weather events happened on top of already record low cotton inventories. With cotton inventories drawn down to record lows farmers might be tempted to shift their production focus from soybeans and grains to cotton.


Fresh water for irrigation and drinking is getting harder to source and more expensive. Food, the energy used to produce our food, and cotton – most of the world lives in cotton – are all moving higher.


The Rising Cost of Survival


It seems to this author that the increase in the price of food is the straw that breaks the camel’s back. The real cause of angst is the rising cost of living being felt in developing areas of the world. Many of these people, already living in poverty, and those on poverties edges, are far less capable of absorbing the increased costs of what is really just basic survival for themselves and their families. Yet this is the first group of people who are impacted by the coming unstoppable waves of inflation and real shortages - whether localized or temporary because of supply chain breakages or poor harvests.


Hundreds of millions of marginalized people, people perhaps counted by the billions, across all nations, will feel the extreme pinch of increased prices, across all asset classes, on their household budgets. But especially so in what those people need the most – water, food and clothing – the bare essentials necessary for survival.


Country Risk


One of the most serious and, in many cases now unpredictable, risks facing investors is "country risk" - where the political and economic stability of the host country is questionable and abrupt changes in the business environment could adversely affect profits or the value of the company’s assets.


When a countries citizens get upset, when the drama hits the streets, when the riots start and those in power fear they are losing control and are in danger of being overthrown - regime change in many of these developing countries can quickly become a reality - they will act to please their populace. One of the first actions often taken is the nationalization of foreigners assets – often accompanied by placing the blame for the countries woes on anybody but the government, misdirecting the mobs attention.


All governments fear social unrest - social unrest breeds an upswing in regional militancy and insurgency - the 2007-08 food shortages and consequent rioting recently helped to trigger the collapse of governments in Haiti and Madagascar. Today, in Egypt, half the population depends on government subsidized bread. If Egypt’s present government cannot continue to subsidize bread for the masses upcoming parliamentary elections will be effected. In Serbia a public warning about a coming 30 per cent hike in the price of cooking oil has led to threats of demonstrations by trade unions.

The bottom line? Foreigners, no matter how entrenched in the country, have always made easy targets. Greedy, capitalist hating Marxist governments have never before needed an excuse to nationalize others assets, and they did so time after time. Now investors have something else to ponder and monitor – one that concerns all food importing countries governed by any political ideology.


Conclusion

The United Nations Food and Agriculture Organization acknowledges that higher prices are causing hardships. But they quickly add the situation that exists today is far less dire than the one in 2007-08. Hmmmm maybe, but this author does not believe that is going to be the case for long.


The relief we’ve seen, in the last two years - from this food, or rather from this higher cost of survival driven social unrest - is very temporary, a calm before the storm. A shortage of fresh clean water for irrigation and drinking, fragile and easily disrupted food supply chains and extremely expensive (or non-existent) food, clothing and energy basics for emerging and developing nations is going to be the coming norm. And it’s going to cause chaos.


"Long-term growth in global demand for agricultural products - in combination with the continued presence of U.S. ethanol demand in the corn sector and EU biodiesel demand for vegetable oils - holds prices for corn, oilseeds, and many other crops well above their historical levels." USDA


Quantitative easing and a global currency race to worthless. Inefficient supply chains, intensified weather phenomena and a race to secure dwindling supplies of commodities by developed economies (and their richer inhabitants) all mean the very basics of human survival will become increasingly scarce for the poorer people in the developing world.
Are there storm clouds on your radar screen...no?


Well, there’s a storm brewing on the horizon. Maybe you should be keeping a weather eye on developments in the countries you’ve invested in.


Disclosure: No positions

A CROSS OF GOLD

CLICK ON : http://www.gata.org/files/Vieira-ACrossOfGold-10-21-2010.pdf

October 29, 2010

The Cancer Sleeper Cell

By SIDDHARTHA MUKHERJEE


In the winter of 1999, a 49-year-old psychologist was struck by nausea —a queasiness so sudden and strong that it seemed as if it had been released from a catapult.


More puzzled by her symptoms than alarmed — this nausea came without any aura of pain — she saw her internist. She was given a diagnosis of gastroenteritis and sent home to bed rest and Gatorade.


But the nausea persisted, and then additional symptoms appeared out of nowhere. Ghostly fevers came and went. She felt perpetually full, as if she had just finished a large meal. Three weeks later, she returned to the hospital, demanding additional tests. This time, a CT scan revealed a nine-centimeter solid mass pushing into her stomach. Once biopsied, the mass was revealed to be a tumor, with oblong, spindle-shaped cells dividing rapidly. It was characterized as a rare kind of cancer called a gastrointestinal stromal tumor, or GIST.


A surgical cure was impossible: her tumor had metastasized to her liver, lymph nodes and spleen. Her doctors halfheartedly tried some chemotherapy, but nothing worked. “I signed my letters, paid my bills and made my will,” the patient recalled. “I was told to go home to die.”


In June, several months after her diagnosis, she stumbled into a virtual community of co-sufferers — GIST patients who spoke to one another online through a Listserv. In 2001, word of a novel drug called Gleevec began to spread like wildfire through this community. Gleevec was the exemplar of a brand-new kind of cancer medicine. Cancer cells are often driven to divide because of mutations that activate genes crucial to cell division; Gleevec directly inactivated the mutated gene driving the growth of her sarcoma, and in early trials was turning out to be astonishingly effective against GIST.


The psychologist pulled strings to enroll in one of these trials. She was, by nature, effortlessly persuasive, and her illness had made her bold. She enrolled in a Gleevec trial at a teaching hospital. A month later, her tumors began to recede at an astonishing rate. Her energy reappeared; her nausea vanished. She was resurrected from the dead.


Her recovery was a medical miracle, emblematic of a new direction in cancer treatment. Medicine seemed to be catching up on cancer. Even if no cure was in sight, there would be a new generation of drugs to control cancer, and another when the first failed. Then, just short of the third anniversary of her unexpected recovery, cancer cells suddenly began multiplying again. The dormant lumps sprouted back. The nausea returned. Malignant fluid poured into the cisterns of her abdomen.


Resourceful as always, she turned once more to the online community of GIST patients. She discovered that there were other drugs — second-generation analogues of Gleevec — in trial in other cities. Later that year, she enrolled in one such trial in Boston, where I was completing my clinical training in cancer medicine.


The response was again striking. The masses in her liver and stomach shrank almost immediately. Her energy flowed back. Resurrected again, she made plans to return home. But the new drug did not work for long: within months she relapsed again. By early winter, her cancer was out of control, growing so fast that she could record its weight, in pounds, as she stood on the hospital’s scales. Eventually her pain reached a point when it was impossible for her to walk.


Toward the end of 2003, I met her in her hospital room to try to reconcile her to her medical condition. As usual, she was ahead of me. When I started to talk about next steps, she waved her hand and cut me off. Her goals were now simple, she told me. No more trials. No more drugs. She realized that her reprieve had finally come to an end. She wanted to go home, to die the death that she expected in 1999.


The word “relapse” comes from the Latin for “slipping backward,” or “slipping again.” It signals not just a fall but another fall, a recurrent sin, a catastrophe that happens again. It carries a particularly chilling resonance in cancer — for it signals the reappearance of a disease that had once disappeared. When cancer recurs, it often does so in treatment-resistant or widely spread form. For many patients, it is relapse that presages the failure of all treatment. You may fear cancer, but what cancer patients fear is relapse.


Why does cancer relapse? From one perspective, the answer has to do as much with language, or psychology, as with biology. Diabetes and heart failure, both chronic illnesses whose acuity can also wax and wane, are rarely described in terms of “relapse.” Yet when a cancer disappears on a CT scan or becomes otherwise undetectable, we genuinely begin to believe that the disappearance is real, or even permanent, even though statistical reasoning might suggest the opposite. A resurrection implies a previous burial. Cancer’s “relapse” thus implies a belief that the disease was once truly dead.


But what if my patient’s cancer had never actually died, despite its invisibility on all scans and tests? CT scans, after all, lack the resolution to detect a single remnant cell. Blood tests for cancer also have a resolution limit: they detect cancer only when millions of tumor cells are present in the body. What if her cancer had persisted in a dormant state during her remissions — effectively frozen but ready to germinate? Could her case history be viewed through an inverted lens: not as a series of remissions punctuated by the occasional relapse, but rather a prolonged relapse, relieved by an occasional remission?


In fact, this view of cancer — as tenaciously persistent and able to regenerate after apparently disappearing — has come to occupy the very center of cancer biology. Intriguingly, for some cancers, this regenerative power appears to be driven by a specific cell type lurking within the cancer that is capable of dormancy, growth and infinite regeneration — a cancer “stem cell.”


If such a phoenixlike cell truly exists within cancer, the implication for cancer therapy will be enormous: this cell might be the ultimate determinant of relapse. For decades, scientists have wondered if the efforts to treat certain cancers have stalled because we haven’t yet found the right kind of drug. But the notion that cancers contain stem cells might radically redirect our efforts to develop anticancer drugs. Is it possible that the quest to treat cancer has also stalled because we haven’t even found the right kind of cell?


Even the earliest theories of cancer’s genesis had to contend with the regenerative power of this illness. The most enduring of these theories was promulgated by Galen, the Greek physician who began practicing among the Romans in A.D. 162. Galen, following earlier Greek physiologists, proposed that the human body was composed of four cardinal fluids: blood, phlegm, yellow bile and black bile. Each possessed a unique color (red, white, yellow and black) and an essential character, temperature and taste. In normal bodies, these fluids were kept in a perfect, if somewhat precarious, balance. Illness was the pathological overabundance or depletion of one or more fluids. Catarrh, pustules, tuberculotic glands — all boggy, cool and white — were illnesses of the excess of phlegm. Jaundice was obviously an overflow of yellow bile. Heart failure arose from too much blood. Cancer was linked to the most malevolent and complex of all fluids — black bile, imagined as an oily, bitter fluid also responsible for depression (melancholia takes its name from black bile).


Fantastical as it was, Galen’s system nonetheless had one important virtue: It explained not just cancer’s occurrence but also its recurrence. Cancer, Galen proposed, was a result of a systemic malignant state, an internal overdose of black bile. Tumors were the local outcroppings of a deep-seated bodily dysfunction, an imbalance that pervaded the entire corpus. The problem with treating cancer with any form of local therapy, like surgery, was that black bile was everywhere in the body. Fluids seep back to find their own levels. You could cut a tumor out, Galen argued, but black bile would flow right back and regenerate cancer.


Galen’s theory held a potent grip on the imagination of scientists for centuries — until the invention of the microscope quite literally threw light on the cancer cell. When 19th-century pathologists trained their lenses at tumors, they found not black bile in overabundance but cells in excess — sheet upon sheet of them that had divided with near-hyperactive frenzy, distorting normal anatomy, breaking boundaries and invading other tissues. The crucial abnormality of cancer was unbridled cellular proliferation, cell growth without control.


We now have a vastly enriched understanding of how this runaway growth begins. Cancer results from alterations to cellular genes. In normal cells, powerful genetic signals regulate cell division with exquisite control. Some genes activate cellular proliferation, behaving like minuscule accelerators of growth. Others inactivate growth, acting like molecular brakes. Genes tell a limb to grow out of an embryo, for example, and then instruct the limb to stop growing. A cut prompts the skin to heal itself, but heaps of skin do not continue to grow in excess. In a cancer cell, in contrast, the accelerators of growth are jammed permanently on, the brakes permanently off. The result is a cell that does not know how to stop growing.


Uncontrolled cell division imbues cancer cells not just with the capacity to grow but also with a crucial property that often accompanies growth: the capacity to evolve. Cancer is not merely a glum cellular copying machine, begetting clone after clone. Every generation of cancer cells produces cells that in turn bear additional mutations, changes beyond those already present in the accelerator and brake genes. And when a selective pressure like chemotherapy is applied to a cancer, resistant mutants escape that pressure. Just as antibiotics can give rise to resistant strains of bacteria, anticancer drugs can produce resistant cancer cells.


This process — evolution’s slippery hand driving cancer’s adaptation and survival — provided biologists with an explanation for cancer’s recurrence after treatment. Relapse occurs because cancer cells that are genetically resistant to a drug outgrow all the nonresistant cells. Chemotherapy unleashes a ruthless Darwinian battle in every tumor. A relapsed cancer is the ultimate survivor of that battle, the direct descendant of the fittest cell.


And yet this theory seemed incomplete. Some cancers relapse months or even years after a chemotherapeutic drug has been stopped — a delay that would make little sense if relapse were simply due to resistance. In other instances, treating a recurrent cancer with the same drug can lead to a second remission — an outcome difficult to explain if the recurring cancer has acquired resistance to the original drug. Could there be a deeper explanation for cancer’s persistence and regenerative power beyond simple mutations and resistance?


In 1994, a researcher at the University of Toronto named John Dick performed a striking experiment that would upend the received wisdom about cancer relapses. Trained as a stem-cell biologist, Dick was particularly interested in blood stem cells.


Stem cells, regardless of their origin, are defined by two cardinal characteristics. The first is hierarchy, or potency. A stem cell is the originator of the many different cell types in a tissue; it sits, like the founder of a massive clan, at the tip of a pyramid of growth. The second is self-renewal: even as stem cells create the cells that make up a tissue, they must also renew themselves. This dynast doesn’t just produce a clan; in each generation, it rebirths itself. The perpetual rebirth of a founding cell yields a virtually inexhaustible supply of cells in a tissue, a reservoir of growth that can be tapped repeatedly on demand.


In humans, all circulating blood cells — white cells, red cells and platelets — arise from a population of blood stem cells exclusively dedicated to the genesis of blood. In their normal, unperturbed state, these blood-founding cells hibernate deep in the cavities of the bone marrow. But when circulating blood cells are killed — by chemotherapy, say — the stem cells awaken and begin to divide with awe-inspiring fecundity, generating millions of cells that gradually mature into blood cells. A defining feature of this proc­ess is its regenerative capacity: in generating blood, the blood stem cells also regenerate themselves. Each round of blood formation restores their supply. If the entirety of blood is again depleted, by another round of chemo, it can be regenerated again and yet again — theoretically, an infinite number of times — because the stem cells replenish themselves in every cycle.


Blood, in short, is hierarchically organized. Its reservoir of renewal is concentrated in a rare population of highly potent cells. As long as these cells exist in the marrow, blood can be regenerated. Eliminate this reservoir, and the vast organ-system of blood gradually collapses.


Now imagine that cancer is also hierarchically organized — with a secret cellular reservoir dedicated to its renewal. Typically, cancer is envisioned as a mass of dividing cells, with no difference between one cell and its neighbor. But what if some cells in a tumor are dedicated “founders,” capable of infinite regeneration, while others are limited in their capacity to divide and unable to continuously generate new cells? Cancer cells bear mutations that enable rapid growth, but what if only some cells within a tumor possess indefinite growth? Such a model of cancer would still retain the essential pathological features of the disease — distorted growth, invasiveness, the capacity to mutate and evolve. Yet the driver of regeneration would be different: as with blood, only a certain subpopulation of cells in the tumor would be responsible for a cancer’s regeneration. Might such cells lie at the root of relapse?


John Dick had an obvious place to begin looking for such cancer-regenerating cells — in leukemia, or cancers of white blood cells. Dick implanted human leukemia cells into immune-paralyzed mice and found that these leukemias could survive and grow in these mice. But not every leukemia cell could. Dick and his students implanted fewer and fewer leukemia cells — one million, 100,000, 1,000 and so on — to determine the smallest number of cells required to cause cancer in a mouse. The answer was surprising: one needed to implant between a quarter-million and one million cells to be sure of implanting at least one cell that could generate leukemia. The rest could not; the other 999,999 cells, in short, had evidently grown out of that single cell — but were themselves incapable of regenerating the cancer.


When Dick’s team focused on defining the characteristics of this one-in-a-million cell, there was another surprise. All cells express subsets of proteins on their cell surface that correspond to their identity like tiny bar codes. The bar codes on the surface of the leukemia-generating cell bore a familiar mark: of all cell types found in blood, it most closely resembled the blood stem cell. And when Dick transplanted this cell from one mouse to the next, he found that he could generate and regenerate the leukemia — just as a blood stem cell would generate blood cells.


Dick’s leukemia-forming cell was, in effect, the normal stem cell’s malignant doppelgänger. It possessed the blood stem cell’s incredible regenerative ability — but unlike a normal stem cell, it could not stop regenerating, dividing and producing more cells. It, too, was an inexhaustible reservoir of growth, but of unstoppable growth. Noting the analogy between this cell and the blood stem cell, Dick called the one-in-a-million cell the “leukemia stem cell.”


In time, biologists began to see the implication of Dick’s experiment. If leukemia possessed stem cells, then — much like normal blood — its regenerative capacity may be contained exclusively within that select population. And if so, it was this rare stem cell — not the other 999,999 — that had to be attacked by a new generation of drugs. Traditional chemotherapy, of course, makes no distinction between a cancer’s stem cells and any other of its cells, between the roots and the shoots of a tumor. All cells are treated equal — and what is poison to one growing cell is largely poison to another. Indeed, most forms of chemotherapy in use today are derived from enormous chemical hunts begun in the 1970s, decades before the birth of the cancer-stem-cell theory. Many of these chemicals came into use because of their ability to kill dividing cancer cells in a petri dish. The fact that most such drugs turn out to be nearly indiscriminate poisons of cellular growth should hardly come as a surprise: they were selected to be generic cell killers.


But if tumors contain dedicated stem cells, then delivering maximal doses of poisons to kill the bulk of the tumor might achieve one response — a shrinkage of the tumor — but have no effect on relapse. If the rare stem cell lurking within a tumor somehow escapes death, then it will reassert itself and grow again. Cancers will come back like a garden that has been cleared by hacking at its weeds while leaving the roots behind.


The publication of John Dick’s paper eventually produced an avalanche of interest in cancer stem cells. In 2003, another laboratory, led by Michael Clarke at the University of Michigan, isolated a rare population of cancer-regenerating cells from human breast cancers, thereby extending Dick’s model beyond leukemia to a “solid” tumor. In 2005, a Harvard professor named Martin Nowak used mathematical modeling to demonstrate that another human leukemia known as CML also possesses a rare subpopulation of regenerating cells. In the winter of 2006, Dick’s lab and an Italian team independently discovered cancer stem cells in colon cancers. Laboratories around the United States rushed to extract cancer stem cells from brain, prostate, lung and pancreatic cancers. Pharmaceutical companies joined the bandwagon, spending millions, and then tens of millions, on mammoth chemical searches for drugs that might destroy cancer stem cells. The National Institutes of Health issued dozens of grant requests to study and isolate cancer stem cells. The paradox of this moment was not lost on researchers. For decades, cancer had been imagined as a degenerative disease — an illness caused by the corruption of genes and cells over time, often a side-effect of aging. Yet in the search for a new generation of anticancer drugs, it was to the science of regeneration — to embryos and stem cells — that the field turned.


In 2005, by the time I finished my training, the cancer-stem-cell model had acquired an overheated quality. The boil and froth inevitably brought challenges. In Michigan, a stem-cell biologist named Sean Morrison returned to John Dick’s original test for stem cells — diluting and rediluting cells to find the cells that could regenerate a cancer. Morrison first tested the model in mouse leukemias and confirmed Dick’s results in human leukemias. He subsequently tried the experiment with another type of cancer — melanoma, deadly blue-black cancers that arise in the skin and metastasize often to the lungs and brain. Others had suggested that only a few cells — about one in a million — could regenerate the tumor in mice. But when Morrison tested the melanoma cells’ regenerative capacity by conducting a variation of Dick’s experiment, he found that some 25 percent of the cells from a melanoma could grow a tumor in a mouse. If stem cells were this common in tumors — if one in four cells could grow cancer — then their very definition might be reduced to semantic oblivion. How could a tumor have a stem-cell-like “hierarchy” if every cell occupied the primary spot?


New questions emerged again in May this year at the Wistar Institute in Philadelphia. A group there was working on melanoma, the cancer that Morrison studied. As previous studies had, the Wistar study also identified a subpopulation of self-renewing cells marked by a distinct bar code within human melanomas. But when these cells were studied more deeply, they appeared to possess no greater ability to regenerate cancers in mice than the nonrenewing cells — thus seemingly disconnecting the link between self-renewal and cancer regeneration.


The Wistar and the Morrison studies are among the many that have begun to challenge the universality and the reliability of the cancer-stem-cell model. “Look,” Morrison told me, “this is all going to become more complicated. Some cancers, including myeloid leukemias, really do follow a cancer-stem-cell model. But in some other cancers, there is no meaningful hierarchy, and it will not be possible to cure a patient by targeting a rare subpopulation of cells. The field has a lot of work to do to figure out which cancers, or even which patients, fall in each category.”


Even Morrison, however, acknowledges that the existence of such cells would have a transformative impact on cancer. “For a model to be useful, it need not be universal,” he says. “Even if the stem-cell model applies only to certain forms of cancer, it would be absolutely worthwhile studying the biology of these stem cells. Universal cures and theories of cancer have so often failed that we may as well spend time talking about specific theories for specific forms of cancer. And it’s in specific cancers that the stem-cell theory might still apply — and powerfully so.”


My patient, the psychologist, returned to her hometown in the South. “No bed like your own bed,” she told me in parting, smiling her pointed, distinctive smile. A week later, when I called her, there was no answer on the phone. I assume that she died — in her own bed, on her own terms — with the same dignity with which she lived. I finished my clinical fellowship in Boston in 2005 and then moved to New York four years later to set up a laboratory. Our lab studies leukemia stem cells. We, too, have joined the quest to create drugs that will wipe out malignant stem cells while sparing normal stem cells.


How might someone go about finding such a drug? Traditionally, three strategies have produced anticancer drugs. The first relies on serendipity: someone hears of a chemical that works on some cell, it is tested on cancer and — lo! — it is found to kill cancer cells while sparing most normal ones.


The second approach involves discovering a protein present or especially active in cancer cells — and relatively inactive in normal cells — and targeting that protein with a drug. Gleevec, the drug used against GIST, was designed to destroy the functioning of a family of proteins that are uniquely hyperactive in GIST and in certain leukemias. (There are only a few drugs with such exquisite specificity for cancer cells.)


The final strategy involves identifying some behavior of a cancer cell that renders it uniquely sensitive to a particular chemical. Most traditional chemotherapies, for instance, attack the rapid division of cells. These drugs kill cancer cells because those divide the most rapidly, resulting in a narrow discrimination between cancer cells and normal cells.


Nearly every drug in oncology’s current pharmacopeia can trace its origins to some variation or combination of these three approaches. But notably, while each method depends crucially on discriminating between normal cells and cancer cells, almost none make any distinction among the cells of any cancer.


The stem-cell hypothesis of cancer poses new challenges for all three modes of drug discovery. To start, cancer stem cells might be fleetingly rare — one in a million, in Dick’s original case. A serendipitous discovery involving a rare cell demands an unusual confluence of luck — chance multiplied by chance. Defining specific targets in cancer stem cells might work, but here again there is a battle against numbers. Finding such genes unique to cancer stem cells first requires isolating and extracting these rare cells from real tumors, a formidable technical hurdle.


The most difficult challenge for drug discovery, though, lies perhaps in modeling the self-renewing behavior of cancer stem cells. To create drugs, researchers typically begin with a simple cell behavior — say, its growth or death, or its capacity to change shape. Chemicals are then tested for their ability to alter this behavior. But in order to reach cancer stem cells, we might need to devise assays far more complex than conventionally used. The most traditional metric by which an anticancer chemical is judged — its ability to reduce the size of a tumor, or to kill cancer cells in a petri dish — won’t work, of course. If a chemical kills only the one-in-a-million cell that drives relapse, then it may not register as a tumor-shrinking or cancer-killing agent. A traditional drug hunt would most likely miss this kind of chemical — and yet this is precisely what is needed to attack the roots of cancer. To find drugs for cancer stem cells, then, we will need not just to find new chemicals, but also to find new strategies to test these chemicals.


Still, for cancer researchers, the stem-cell hypothesis is as exciting as it is vexing. The capacity to tear out the roots of a tumor, and thereby dispel the specter of relapse, represents a sea change in our thinking about cancer. Indeed, the effort to isolate and target cancer stem cells is central to a much larger paradigm shift sweeping through cancer biology. Until recently, much of the field was focused on understanding the most salient feature of the cancer cell: its ability to divide uncontrollably. But our understanding of cancer has reached far beyond distorted cell division. Cancer cells co-opt neighboring blood vessels to supply themselves with oxygen. They enable their own movement through the body by hijacking genes that allow normal cells to move. When some cancers metastasize and punch holes in the bone to support their survival, they imitate an accelerated form of osteoporosis — in effect, recapitulating the aging process in bone.


Cancer, it seems, is not merely mimicking the biology of rapidly dividing cells, but that of organs — or even organisms. At its cellular core, a tumor might nourish itself with its own supply of oxygen; it might organize its environment to fuel its growth; it might regenerate itself from a dedicated population of stem cells. Perhaps if we looked at cancers using appropriate conceptual lenses, we might find that tumors possess their own anatomy and physiology — a parallel universe to that of normal cells and organs. Such a tumor can hardly be described as a disorganized group of cells. It is a cellular empire, with its own sustenance, grammar, logic and organization. It is a growing being within a growing being.


Hence the quest to discriminate between normal and malignant cells is progressively beginning to resemble one of those devastating surgical operations to separate conjoined twins. Every drug that kills cancer stem cells might also kill the normal stem cells. This operation, too, might end in tragedy for both twins.


But it might not — and therein resides the hope for a next generation of drugs. If stem cells can be found for certain forms of cancer, and if a drug can be found to kill these cells in humans, then the clinical impact of such a discovery would obviously be enormous. And its scientific impact would be just as profound. Centuries after the discovery of cancer as a disease, we are learning not just how to treat it — but what cancer truly is.


Siddhartha Mukherjee is an assistant professor of medicine in the division of medical oncology at Columbia University. This article is adapted from his book “Emperor of All Maladies: A Biography of Cancer,” which will be published by Scribner next month.