Good news for Detroit...

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Three important lessons from Intel's annual meeting…

Last month, Intel's new CEO spoke about Intel's need to make more chips for mobile devices...

In today's Digest Premium, Dan Ferris shares the three big takeaways from the address.

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

Good news for Detroit... The rule of law stands... Pensions may be cut... What Doc says this means for munis... What's going on with gold?...

 Finally, some good news for Detroit...

As longtime Digest readers know, the city of Detroit is one of our favorite cautionary tales... It's an ongoing example of what happens when the government's efforts to redistribute wealth fail.

Detroit, once one of the most prosperous cities in America, filed for bankruptcy protection on July 18. And in case you've missed it… this bastion of political scandal, socialism, and malinvestment got the OK to walk away from many of the obligations that have been weighing it down.

 We've been following the decline of the city for years – and how its collapse is a microcosm of what is happening to the U.S. It's some of the best, and most controversial, editorial we've produced.

You can read Porter's original essay from October 28, 2009 here. And he wrote another essay following the news of Detroit's bankruptcy in the July 26, 2013 Digest.

As Porter wrote in July…

 And then… Porter describes how 1960 changed everything for Detroit…

 So what's the good news?

On Tuesday, Judge Steven Rhodes ruled Detroit could shed billions of dollars of debt by reducing the amount the city owes to unions, pension funds, and retirees.

"This once proud and prosperous city can't pay its debts. It's insolvent. It's eligible for bankruptcy," Rhodes said in announcing his decision. "At the same time, it also has an opportunity for a fresh start."

 Rhodes ruled that pensions can be cut... And he said a provision in the Michigan Constitution protecting pensions may not stand up in bankruptcy. He's upholding the contract.

Detroit is $18 billion in the hole... And its pensions are underfunded by $3.5 billion. The ability to cut pensions is a potential fresh start for the city.

 Of course, the unions are aghast.

Following the ruling, Sharon Levine, an attorney for the city's largest union (representing half the city's workers), said the labor organization would appeal the decision and that city officials got "absolutely everything."

"It's a huge loss for the city of Detroit," Levine said.

 To the contrary...

Creditors were vindicated for the sins of the General Motors bankruptcy. The government bailout of GM didn't bail out the company... It rescued the union – the United Auto Workers.

GM went bankrupt primarily because it couldn't make a profit building cars... And the main reason it couldn't was because its labor costs were too high. The competition, whose labor costs were a fraction of GM's, crushed them.

When GM entered bankruptcy, it owed $20 billion to the trust established to pay health care for its retired workers. And its pension program was underfunded by $30 billion.

 You can read the full story in the June 15, 2012 Digest. In short, the government gave GM a $50 billion bailout. Bondholders (who sit ahead of pensions in the credit structure) were nearly wiped out. Taxpayers lost $25 billion. Meanwhile, the unions recovered 93% of what was owed to them. It was a boondoggle.

 Judge Rhodes' ruling in the Detroit case could be a major milestone... Imagine, actually upholding a contract and honoring the original deal that was made with creditors in the case of a bankruptcy. We hope the precedent sticks.

 I asked Retirement Millionaire editor Dr. David "Doc" Eifrig, who is bullish on municipal bonds (those issued by state and local governments), what he thought of the ruling... and how it could influence municipal finance.

 Doc said he believes the ruling will restore some confidence in the municipal-bond market... The fact that the judge upheld the seniority of bondholders' claims adds certainty.

 Doc currently has three funds that hold municipal bonds in his Retirement Millionaire model portfolio... And they're all rated "strong buys." Also, as we discussed earlier this week, Doc's latest issue is a review of every open position in the Retirement Millionaire portfolio.

He currently has more than 20 positions that are rated "strong buys." It's an important issue to read to help you reposition your portfolio going into 2014.

 In addition to his financial advice, Doc packs his issues of Retirement Millionaire with insights into building wealth, saving money, and protecting your health. It's all designed to help subscribers live a "millionaire lifestyle" on much less money than you'd expect.

Doc also recently released a book compiling his extensive research into how to prepare you and your family to survive any kind of crisis – natural, manmade, or economic. His insights include secrets like the best medical supplies and medications to have on hand (and how to get them) to the No. 1 way to prevent almost any home break-in.

You can sign up for Retirement Millionaire right now for only $39 for one year. You'll receive immediate access to all his Retirement Millionaire reports and his "field manual" on emergency preparedness... And you'll receive a new Retirement Millionaire issue every month for one year. If you decide within the first four months that the service isn't for you, you can get a 100% money-back refund. To learn more, click here.

 New 52-week highs (as of 12/5/13): Apple (AAPL), NVE (NVEC), Penn Virginia (PVA), and Third Point Reinsurance (TPRE).

 In today's mailbag, a Social Security recipient that understands the scam... Send your feedback to feedback@stansberryresearch.com.

 "I am almost 60 years of age. Like most of us, I was sold on the idea that S.S. would take care of my basic needs. All I needed to do is become debt free by the time I retire. 15 years ago I saw my parents struggle on S.S. I began to budget investment funds.

"The problem now is that I started too late with modest finances. I warn my children not to wait to save and invest, but I cannot see how they can pay for us boomers and themselves and the ridiculous spending of the Government. I know the economic disaster is coming, but I cannot fathom how my $85K can take care of my wife and me for the long haul when it happens. Thank you for continuing to beat the drum to inform those who have not yet stuck their heads in the sand." – Paid-up subscriber Dan Hinman

 "First off, a tip o' the hat to the whole team at Stansberry Research... I look forward to reading your perspectives on the markets and investments every day (and have learned volumes along the way). But, I'd appreciate a little clarity about the near- and long-term future of gold and silver.

"Even though everyone's aware of the Fed suppressing gold prices by manipulating the futures derivative market and printing dollars as part of QE2Infinity, and mom and pop retail traders are pouring their kids' college funds into a juiced-up market, it seems to me that gold should have left $1200 support in the dust months ago (and the spread between gold and silver prices should have narrowed too).

"Considering how 'successfully' the yen collapsed thanks to Abenomics, Ben's money printing should have done a number on the dollar by now. As far as physical gold goes, supply can't meet demand by the Chinese to back the yuan. So, what's really holding gold and silver back?" – Paid-up subscriber Bruce Fleming

Goldsmith comment: Long term, we're still bullish on gold. Most Western governments are in "no way out" debt positions. They can only repay their giant and growing debts with devalued currencies. Also, the developing nations of China and India have a centuries-old affinity for gold and silver. As they grow richer, they will accumulate a lot more gold.

As for the short term, that's anyone's guess. Gold has gone up every year for the past 12 years. And no asset goes up in a straight line... There are always corrections to shake out leveraged latecomers. People see asset prices rising and economic data improving, so they don't think they need to own gold. They're selling gold and buying houses, stocks, etc.

But eventually, the long-term trends will reassert themselves... there will be a monetary crisis... and gold will rally.

Regards,

Sean Goldsmith
Miami Beach, Florida
December 6, 2013

Three important lessons from Intel's annual meeting…

Last month, Intel's new CEO spoke about Intel's need to make more chips for mobile devices...

In today's Digest Premium, Dan Ferris shares the three big takeaways from the address.

To continue reading, scroll down or click here.

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(Top 10 highest-returning open positions across all S&A portfolios)

As of 12/05/2013

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

Three important lessons from Intel's annual meeting…

 Finally, some good news for Detroit...

As longtime Digest readers know, the city of Detroit is one of our favorite cautionary tales... It's an ongoing example of what happens when the government's efforts to redistribute wealth fail.

Detroit, once one of the most prosperous cities in America, filed for bankruptcy protection on July 18. And in case you've missed it… this bastion of political scandal, socialism, and malinvestment got the OK to walk away from many of the obligations that have been weighing it down.

 We've been following the decline of the city for years – and how its collapse is a microcosm of what is happening to the U.S. It's some of the best, and most controversial, editorial we've produced.

You can read Porter's original essay from October 28, 2009 here. And he wrote another essay following the news of Detroit's bankruptcy in the July 26, 2013 Digest.

As Porter wrote in July…

 And then… Porter describes how 1960 changed everything for Detroit…

 So what's the good news?

On Tuesday, Judge Steven Rhodes ruled Detroit could shed billions of dollars of debt by reducing the amount the city owes to unions, pension funds, and retirees.

"This once proud and prosperous city can't pay its debts. It's insolvent. It's eligible for bankruptcy," Rhodes said in announcing his decision. "At the same time, it also has an opportunity for a fresh start."

 Rhodes ruled that pensions can be cut... And he said a provision in the Michigan Constitution protecting pensions may not stand up in bankruptcy. He's upholding the contract.

Detroit is $18 billion in the hole... And its pensions are underfunded by $3.5 billion. The ability to cut pensions is a potential fresh start for the city.

 Of course, the unions are aghast.

Following the ruling, Sharon Levine, an attorney for the city's largest union (representing half the city's workers), said the labor organization would appeal the decision and that city officials got "absolutely everything."

"It's a huge loss for the city of Detroit," Levine said.

 To the contrary...

Creditors were vindicated for the sins of the General Motors bankruptcy. The government bailout of GM didn't bail out the company... It rescued the union – the United Auto Workers.

GM went bankrupt primarily because it couldn't make a profit building cars... And the main reason it couldn't was because its labor costs were too high. The competition, whose labor costs were a fraction of GM's, crushed them.

When GM entered bankruptcy, it owed $20 billion to the trust established to pay health care for its retired workers. And its pension program was underfunded by $30 billion.

 You can read the full story in the June 15, 2012 Digest. In short, the government gave GM a $50 billion bailout. Bondholders (who sit ahead of pensions in the credit structure) were nearly wiped out. Taxpayers lost $25 billion. Meanwhile, the unions recovered 93% of what was owed to them. It was a boondoggle.

 Judge Rhodes' ruling in the Detroit case could be a major milestone... Imagine, actually upholding a contract and honoring the original deal that was made with creditors in the case of a bankruptcy. We hope the precedent sticks.

 I asked Retirement Millionaire editor Dr. David "Doc" Eifrig, who is bullish on municipal bonds (those issued by state and local governments), what he thought of the ruling... and how it could influence municipal finance.

 Doc said he believes the ruling will restore some confidence in the municipal-bond market... The fact that the judge upheld the seniority of bondholders' claims adds certainty.

 Doc currently has three funds that hold municipal bonds in his Retirement Millionaire model portfolio... And they're all rated "strong buys." Also, as we discussed earlier this week, Doc's latest issue is a review of every open position in the Retirement Millionaire portfolio.

He currently has more than 20 positions that are rated "strong buys." It's an important issue to read to help you reposition your portfolio going into 2014.

 In addition to his financial advice, Doc packs his issues of Retirement Millionaire with insights into building wealth, saving money, and protecting your health. It's all designed to help subscribers live a "millionaire lifestyle" on much less money than you'd expect.

Doc also recently released a book compiling his extensive research into how to prepare you and your family to survive any kind of crisis – natural, manmade, or economic. His insights include secrets like the best medical supplies and medications to have on hand (and how to get them) to the No. 1 way to prevent almost any home break-in.

You can sign up for Retirement Millionaire right now for only $39 for one year. You'll receive immediate access to all his Retirement Millionaire reports and his "field manual" on emergency preparedness... And you'll receive a new Retirement Millionaire issue every month for one year. If you decide within the first four months that the service isn't for you, you can get a 100% money-back refund. To learn more, click here.

 New 52-week highs (as of 12/5/13): Apple (AAPL), NVE (NVEC), Penn Virginia (PVA), and Third Point Reinsurance (TPRE).

 In today's mailbag, a Social Security recipient that understands the scam... Send your feedback to feedback@stansberryresearch.com.

 "I am almost 60 years of age. Like most of us, I was sold on the idea that S.S. would take care of my basic needs. All I needed to do is become debt free by the time I retire. 15 years ago I saw my parents struggle on S.S. I began to budget investment funds.

"The problem now is that I started too late with modest finances. I warn my children not to wait to save and invest, but I cannot see how they can pay for us boomers and themselves and the ridiculous spending of the Government. I know the economic disaster is coming, but I cannot fathom how my $85K can take care of my wife and me for the long haul when it happens. Thank you for continuing to beat the drum to inform those who have not yet stuck their heads in the sand." – Paid-up subscriber Dan Hinman

 "First off, a tip o' the hat to the whole team at Stansberry Research... I look forward to reading your perspectives on the markets and investments every day (and have learned volumes along the way). But, I'd appreciate a little clarity about the near- and long-term future of gold and silver.

"Even though everyone's aware of the Fed suppressing gold prices by manipulating the futures derivative market and printing dollars as part of QE2Infinity, and mom and pop retail traders are pouring their kids' college funds into a juiced-up market, it seems to me that gold should have left $1200 support in the dust months ago (and the spread between gold and silver prices should have narrowed too).

"Considering how 'successfully' the yen collapsed thanks to Abenomics, Ben's money printing should have done a number on the dollar by now. As far as physical gold goes, supply can't meet demand by the Chinese to back the yuan. So, what's really holding gold and silver back?" – Paid-up subscriber Bruce Fleming

Goldsmith comment: Long term, we're still bullish on gold. Most Western governments are in "no way out" debt positions. They can only repay their giant and growing debts with devalued currencies. Also, the developing nations of China and India have a centuries-old affinity for gold and silver. As they grow richer, they will accumulate a lot more gold.

As for the short term, that's anyone's guess. Gold has gone up every year for the past 12 years. And no asset goes up in a straight line... There are always corrections to shake out leveraged latecomers. People see asset prices rising and economic data improving, so they don't think they need to own gold. They're selling gold and buying houses, stocks, etc.

But eventually, the long-term trends will reassert themselves... there will be a monetary crisis... and gold will rally.

Regards,

Sean Goldsmith
Miami Beach, Florida
December 6, 2013

Editor's note: Today's Digest Premium is excerpted from the November 27 update editor Dan Ferris sent to subscribers of his 12% Letter.

 Semiconductor giant Intel (INTC) held its annual investor day on Thursday, November 21. CEO Brian Krzanich spoke about Intel's need to make more chips for the mobile-device market.

There were three big takeaways from the meeting that investors need to keep in mind.

 First, Intel is a typical American corporation. That means that no matter what goes wrong or what challenges it faces, it's unlikely to admit errors. No one will come out and say, "We've made a big mistake" or "We have a big problem." This is unfortunately a necessary evil when dealing with a big corporation.

Intel Chief Financial Officer Stacy Smith gets a lot of well-deserved criticism for putting a phony positive spin on everything he reports. But the whole management team really deserves the same criticism... Intel should have been much more deeply involved in mobile computing by now. It entered the tablet market in 2013 with the Samsung Galaxy smartphone. But most of its profits still come from making PC chips. The rest come from making chips for servers – big racks of powerful computers used in data centers.

Intel's prior CEO was offered the iPhone chip and turned it down. Somebody should say, "We really blew it, and now we're trying to catch up." But nobody at Intel ever says that. Krzanich said Intel will ramp up production of tablet chips fourfold in 2014. So that's a good start toward getting deeper into mobile computing.

It will catch up. But I (Dan Ferris) wish it would be more candid about it.

 Second, Intel needs to ramp up production dramatically to maintain profitability at current levels. It generated $11 billion of net income on $53.3 billion in sales last year. Mobile chips are smaller and cheaper than the PC chips Intel currently makes. So to maintain similar profit margins, Intel will have to make more of them.

Intel has a great deal of excess manufacturing capacity. Putting it to use is becoming more and more important. I'm betting Intel will operate closer to full capacity within the next year or two. That will make it much more profitable than most people believe right now. Intel has traditionally run at 95% capacity, keeping 5% in reserve, just in case. But it built lots of new capacity the last few years so it could start making chips for other companies. Smith put up a slide on investor day that suggests capacity usage is less than 80% today and will rise to 80% next year.

 Third, Krzanich made it crystal clear that Intel will make chips for "any company able to use [Intel's] leading edge" chip-making plants. I'm very happy to hear this. The previous CEO, Paul Otellini, built Intel's massive excess manufacturing capacity so Intel could grow its business and start a "foundry business," manufacturing other companies' chips... But then he was too picky about which companies he would make chips for. He didn't want to be seen as helping competitors.

The way I see it – and apparently the way Krzanich sees it – having a competitor pay you for taking its chips from design to reality isn't a bad thing. It proves owning the most advanced chip-making plants in the world is extremely valuable.

Considering how the world is increasingly filled with more and more computerized, connected, always-on, Internet-capable devices – from cars to vending machines to... who knows what's next – Intel should be making a lot more chips in another couple years than it's making today.

– Dan Ferris