A USA Today survey of 46 economists says 90% of them are more optimistic than three months ago.
So now, all the economists are predicting economic growth. One even says U.S. economic growth is now "self-sustaining."
Economists remind me of the joke about the feisty old woman who said the Earth was sitting on the back of an immense turtle. Asked what the turtle was sitting on, she replied, "You can't trick me. It's turtles all the way down!"
Economists are like the turtles... They all tend to agree. So is there one master economist they're all watching and agreeing with? And does he make his own opinions? Or is it just economists all the way down?
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James Montier, of the investment firm GMO, says economists always predict economic growth around the long-term average of 4%. And that's why they're almost always wrong... and completely and utterly worthless.
Will the World Dominators become the best-performing stocks of 2011? If you believe stocks tend to rise in January – perhaps because people are cutting losses for the tax break – they just might be...
Yesterday, the Dow Jones Industrials Index crossed above 12,000 and closed slightly below that number. The last time the Dow closed above 12,000 was June 19, 2008. Oil was $131 a barrel, gas was $4 a gallon, and gold was just $900 an ounce. Of course, the Dow was headed down back then, not up like it is today.
Since March 6, 2009, the S&P 500, Nasdaq, and Russell 2000 all beat the Dow. The Russell 2000 crushed the others, up 121% since March 6, 2009. The Russell is made up mostly of speculative and highly cyclical small-cap stocks.
So far this year, the tables have turned in the Dow's favor. The Russell 2000 is down 1.3%. And the Dow Industrials are up 3.55%. To date this year, the Dow is also outperforming the S&P 500 (+2.7%) and the Nasdaq Composite (+2.1%).
Unlike those other indexes, the Dow is made up primarily of World Dominating franchises like Coca-Cola, McDonald's, Intel, and ExxonMobil.
I've been banging the World Dominator drum for a few years now. These aren't just blue-chip stocks. These are the No. 1 companies in their industries. They obliterate competition, gush cash, grow incessantly (though often slowly), and raise their dividends every year.
Overall, my World Dominator picks have treated investors well. To this point, they've showed positive returns. And those that pay dividends have raised them each year.
Until now, I've covered the World Dominator stocks in Extreme Value, our expensive, high-end value investing service. I've decided to start covering these stocks in our lower-priced newsletter, The 12% Letter, which I took over last October. The February 2011 issue of The 12% Letter will arrive in subscribers e-mail inboxes today after market close.
I've just added a World Dominator to The 12% Letter portfolio. It has an 80% market share, gushes cash, just raised its dividend 15%, achieved record sales in 2010, and recently announced an investment for 2011 that'll keep it in the No. 1 position globally. It's financially stronger than most U.S. banks with more than $20 billion in cash and less than $3 billion in debt. And it has gross profit margins greater than 50%... and double-digit net profit margins.
To find out more about stocks that yield 10%-16% and access our proprietary World Dominating Dividend Grower stock list, click here...
Though it's not in the Dow 30, Berkshire Hathaway is still on my World Dominator list. It outperformed other World Dominators last year, rising 20%. If it rose another 20% this year, it would still be trading at a discount to intrinsic value. It's easily worth $160,000 a share and selling for around $124,000 today.
Standard & Poor's warned it may downgrade a swath of municipal bonds... "We believe that continued revenue decreases for state and local government may increase fiscal strain on budgets, and monitoring of liquidity will be especially important in 2011," said Standard & Poor's analyst Gabriel Petek.
During the first three quarters of 2010, S&P cut ratings on 343 state and local government-issued bonds (26% higher than all of 2009). In 2008, S&P only downgraded 37 state and local government-issued bonds. While downgrades are likely, Petek doesn't think we'll see a "notable increase" in municipal defaults. No surprise, but we disagree. The ratings agencies drive while looking through the rearview mirror. Their downgrades are reactionary. (Remember the subprime crisis?)
Lenders made so much credit available to municipalities because they believed lending to cities and states was risk-free... Just like they believed a pool of subprime mortgages rated triple-A could never default because housing always goes up. Once a few cities go bankrupt (like Harrisburg, Pennsylvania) or even states (like Illinois... see today's End of America box below), the market will wake up. Over the last 40 years, the default rate on investment-grade municipal debt was 0.03% (according to Moody's). Would you like to bet defaults go higher or lower from here?
S&P is also proposing changes to the way it rates bond insurers. If it makes the changes, bond insurers with investment-grade ratings could face downgrades of one or more tiers unless they raise capital or reduce risk. That's good news for Porter's latest short, the only remaining investment-grade bond insurer, Assured Guaranty (AGO). Assured Guaranty insured 98% of the municipal bond issues last year (all of its competitors exited the field – which should have set alarm bells ringing at AGO). And if it gets downgraded, it will need to keep more capital in reserves. In other words, if AGO gets knocked down a few pegs, it may not be able to come up with enough capital to keep the insurance it has in force. Here's what Porter wrote:
[W]e suggest shorting the last municipal-bond insurer standing – Assured Guaranty (NYSE: AGO). All the other companies in this space have either gone out of business or stopped writing new insurance because the risks have become too large. When knowledgeable insurers like Warren Buffett completely step away from a market... you're wise to follow. But that's not what Assured has done. Instead it has written 98% of the municipal policies for the last year. It even boasts in its annual report it has no real competition. Look out below... – Porter Stansberry, January 2011, Stansberry's Investment Advisory
Porter shorted AGO at $19 (based on the January 13 close price). Shares plummeted over 7% today to below $15. Stansberry's Investment Advisory readers are up over 21% on the short in less than two weeks.
Yesterday, we told readers about Frank Curzio's recent success with Nautilus Minerals. The stock soared today after the company announced high-grade gold and copper mineralization at its Solwara I project. In plainspeak... the company thinks the seafloor holds a lot of high-quality gold and copper. Now, it's just looking for a partner to dig it out.
While Nautilus raced higher this past week, another one of Frank's favorite mining companies is still well below its buy-up-to price. And like Nautilus, this little-known company is a unique business. Frank says this company is "the most fantastic opportunity [he's] ever seen." On a recent trip to China, one of the country's top financial analysts (he's ranked No. 2 by Thompson Reuters) told Frank about a small obscure island nearby – one few people know exists – that holds billions of dollars of resources. Because of its resource wealth, this island is one of the most valuable pieces of land in the world (on a per-acre basis).
Among its resources, the island has one of the world's largest deposits of a metal Frank calls "Supernova Gold." Scientists believe this mineral is synthesized in the cores of large stars before they supernova. It's also believed meteorites containing the metal slammed into Earth millions of years ago.
Like gold, this metal has also been used as a currency. Unlike gold, it's a "transitional metal," meaning it combines easily with other elements. This quality makes it a key element for industrial uses, including steel and batteries.
A couple international mining giants already earn billions of dollars every year from mining Supernova Gold on this tiny island. It's near China, so miners can easily export the metal to the world's biggest consumer. These two companies have been the exclusive miners on this island for the past 40 years.
But in a move that went unnoticed by even the mining press, a small-cap resource firm won four exploration licenses on this island... all located immediately next to huge, producing mines.
Less than 24 hours after our company secured its licenses, the mining giants bought up thousands of miles surrounding it. But the heavyweights were too late. They had already let this competitor enter their market.
The company is in the earliest stages of development. It's sitting on some of the world's richest "Supernova Gold" deposits. It has zero debt. And it's preparing to spend its cash to mine the metal. (Mining costs for Supernova Gold are cheap – only $50 a ton – because the deposits literally sit on the surface.)
Frank believes subscribers could make 20 times their money buying this stock... And that's based on super-conservative estimates. The company's own estimates are much higher.
Once word gets out about this mining company, its shares will explode. You have to get in early if you want maximum profits. To read Frank's report on this small Supernova Gold company, click here...
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New highs: Atlantic Power (AT), Sprott Resources (SCP.TO), Automatic Data Processing (ADP), Dun & Bradstreet (DNB), Procter & Gamble (PG), Wal-Mart (WMT).
We'd love to hear stories from the front lines of your town, city, or state about cutbacks in services that might be affecting your life. We also want to hear from anyone who has made World Dominator stocks a core position in his portfolio. Are you happy with these stocks? What are your plans for them? E-mail your stories, comments, and questions to feedback@stansberryresearch.com.
"I'm interested in buying shares of Silver Wheaton. What is a 50% Trailing stop?" – Paid-up subscriber Drew Carlile
Ferris comment: A 50% trailing stop means you'll sell the stock anytime it closes 50% below the highest closing price after you bought it. It's a way of protecting yourself against big losses and also a way of protecting your profits.
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon and Baltimore, Maryland
January 25, 2011