I wish I had a pen and paper handy yesterday. I caught someone making sense on CNBC and didn't get a chance to write down her name.
The analyst, an older woman with grey hair, said the IPO market is really slow this year, despite some headlines here and there about companies like Zynga, the online games maker that's going public soon.
That made perfect sense to me. I just recommended a stock in Extreme Value that went public in July and was recently trading at a dirt-cheap valuation, around seven times earnings. The market has this one all wrong. The stock is totally mispriced. It's growing sales and profits at triple-digit rates and providing a product that's in desperately short supply to an industry undergoing a once-in-a-century boom. It's already up about 10% in a few weeks. I think shares will double or triple in the next year... Sales will continue to soar as the company remains in hyper-growth mode.
Management is smart, too. It used the IPO proceeds to pay down debt, so it's got plenty of cash and zero debt. The company is no fly-by-nighter, either. It's been in the same business since 1997. It's got a great reputation and has multiyear contracts with some of the biggest names in its industry. It's hard to see how it won't make a ton of money.
If you want to read about this stock, which is still well under our maximum buy price, you need to check out the current issue of Extreme Value. Click here to learn more about my advisory and discover this unique opportunity to double your money – or better – in 2012.
Another trading expert on CBNC yesterday said he wouldn't be surprised if gold fell to $1,100 an ounce. A trader I know says, "Sell all the rallies in gold."
If you're speculating on the gold price, those sorts of insights are pretty important to you. It's like that with stocks, too. If you spend most of your time trying to trade short-term share price movements, obsessing over price quotes and their potential direction in the next few days is important. Lots of people make money doing that sort of thing. Heck, my colleague Jeff Clark has been on the hottest gold trading streak I think I've ever seen. I bet he could tell you what to make of all this...
But Jeff and I are different. I take a longer-term view. I'm only interested in gold as a long-term holding. Gold (and silver) is how I save money. I buy Krugerrand coins on a fairly regular basis.
Once I buy my gold or silver, I don't view its value in terms of U.S. dollar price quotes. To me, that money has exited the dollar-based, central-bank-manipulated financial system. It's mine, and its value is safe... no longer under the control of some weird academic banker who thinks the Great Depression was caused by the failure to print enough money.
So... really... what do I care that gold was down 5% yesterday? Does it mean the Fed will stop printing U.S. dollars like crazy? Does it mean the U.S. government no longer has $15 trillion of debt it'll never repay? I don't think so. It just means a bunch of people are really scared, and they're going to their warm, fuzzy place, which is the U.S. dollar. The dollar might make them feel good. But it won't preserve the value of their savings. I can't imagine selling gold out of fear. The more scared I get, the more gold I want.
But let's look at the other side of this... perhaps it doesn't matter to you that Dan Ferris doesn't care about gold dropping 5% in one day. Good for him. He sounds like a nut on this topic half the time, anyway.
So yes, gold fell from nearly $1,640 an ounce to less than $1,572 an ounce. Gold stocks, as we mentioned yesterday, were hammered. We all took a hit. But look on the bright side. At least you aren't John Paulson...
Paulson, the billionaire fund manager famous for shorting the subprime crisis, turned 56 yesterday. But we doubt the noted gold bull had time to celebrate...
Paulson was already suffering the worst year of his career (with some of his funds down more than 40%). His one bright spot was his dedicated Gold Fund. His other funds also have gold-denominated shares (meaning you own the fund in terms of gold, not dollars), which alleviated some of the losses.
But as the largest owner of gold exchange-traded fund GLD, his year got worse yesterday. GLD fell 10% from the end of last month. And all eight of the gold stocks Paulson owns fell with the precious metal... The declines equal a $672.1 million loss for Paulson, assuming his positions stayed constant since September 30.
Foreign-owned banks operating in the U.S. suffered the largest drop in deposits in history over the past six months... According to the Federal Reserve, cash on deposit at foreign-owned banks (think Deutsche Bank) fell 25% ($291 billion) to $879 billion from the end of May to the beginning of December. That's the first time deposits have fallen for six consecutive months since 2002.
In total, foreign-owned banks' share of U.S. deposits has fallen from a high of 16.8% in May 2008 to 10.4% in the week ended November 30. And where is all the money going? The "giant funny-money scheme," we described last week... aka JPMorgan Chase. JPMorgan saw deposits increase by $96.9 billion in the third quarter. (Wells Fargo was second with a $57.8 billion increase.) It's ironic that JPMorgan is ramping up its European lending (from $14 billion on June 30 to $15.9 billion as of November 17), while depositor money is fleeing the area.
On the topic of Europe, International Monetary Fund (IMF) chief Christine Lagarde today warned the European debt crisis is "escalating," and the crisis will require action from countries outside the European Union (what a subtle plea to the Federal Reserve). Russia said it's considering providing up to $20 billion to the IMF. But we all know who will eventually provide the capital... Fed Chairman "Helicopter Ben" Bernanke... though he's denied this in closed-door meetings with senators...
Senator Bob Corker, a Republican from Tennessee, said Bernanke made it "very clear" in the private meeting that the Fed would not rescue any European financial institutions. Lindsey Graham, a South Carolina Republican, said "[Bernanke] doesn't have the intention or the authority" to bail out countries or banks. We disagree... We find taking the opposite side of anything a government official says is usually a winning bet.
|
New 52-week highs (as of 12/14/11): Eli Lilly (LLY), short of First Solar (FSLR).
How nutty is Dan Ferris? Are you buying gold and/or gold stocks... or selling one or both? Write us at feedback@stansberryresearch.com.
"My patience was rewarded this week. On December 6th I received the Short Report pick to buy Hecla Mining January $6 calls for up to $0.65. As is the case many times after I received the email I looked at the options and they had already ran up past the recommended price. Many were still selling at $0.90. I expect many subscribers were excited and did not hold to the recommended price and bought up higher.
"I looked at the chart of HL and after looking at the chart I did not like the buy. HL was coming up on the 100 day MA and most times this year it has touched the 100 day and then been slammed back down... so not only did I not buy the call I bought a December $6 put. Yesterday I sold my put options for over a 100% gain and then with the price of HL now down to about 40 cents below the 50 day MA I then enterred into the January $6 Call options at a price half of what some were paying a week ago and also still about 50% lower than the recommended price. Patience (and a little technical analysis) rewarded." – Paid-up subscriber Rich
"Bought my 3rd Put ever in October. It was the March 2012 First Solar $46... sold today for a huge gain. Probably could have held out for more but followed my old adage, Bulls make Money, Bears make money, Pigs get slaughtered!
"My other Put was VALE, it too got into the money today too after languishing. Might take profits there soon too.
"The third Put was something I lost money on. That was the Euro earlier this year. I bought at $133, but sold at a loss. Had I held on, would have made money here too. Really enjoy your newsletters and appreciate the education!" – Paid-up subscriber Tim Doyle
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon and New York, New York
December 15, 2011
CNBC caught making sense?!... A solid double in 2012... Gold down 5%: Who cares?... Be happy you're not Paulson... Run on foreign banks... Lagarde: euro crisis escalating... Fed: No euro bailouts... Julian Robertson fears money-printing...