I don't feel good

I don't feel good... A letter you ought to read... Einhorn's latest buys... Insiders buying at Citi... Rogers' gold... Don't rent a tent here... More lies from Stansberry...

Dan Ferris has been saying for a few weeks that it still feels too good to be a bottom. I don't think so. I feel terrible. Stocks are now down, on average, for the last 10 years. Most investors who bought stocks for the first time in 1998 have lost money. That's 10 years of pain. I don't think most people can take much more. For a lot of people, 2008 will be the last year they own stocks – ever. The irony is, there hasn't been a better time to be an investor since '73-'74. It's extremely difficult to be a rational investor. And right now, it doesn't feel very good.

A letter you ought to read... Marty Whitman released his fourth-quarter shareholder letter today. Whitman's Third Avenue Value Fund (TAVFX) was down 29% in the quarter. He admitted he did not have proper liquidity to meet redemptions or take advantage of current opportunities, so he was forced to sell "noncore positions." The fund sold out of its positions in Legg Mason, Microsoft, Intel, and USG. It also reduced its positions in bond insurers Ambac and MBIA by 2 million and 4.3 million, respectively.

The only new positions were the senior unsecured debt of Forest City Enterprises and GMAC. Of today's market, Whitman explains: "The opportunity of a lifetime seems to be present for passive investors who follow a few simple caveats." Those three caveats – which form the long-time basis of his "safe and cheap" mantra – are: 1) Be a buy-and-hold investor, 2) Don't use borrowed money to invest, and 3) Don't buy the stocks of businesses that need continual access to the capital markets for survival. You can read the entire letter here.

David Einhorn, head of hedge fund Greenlight Capital, had two notable new positions. He bought more than 660,000 shares of Ticketmaster, a spinoff from the IAC Interactive breakup. And he purchased 2.5 million shares of engineering firm URS. Einhorn also sold his more than 1 million-share position in health care giant WellPoint.

Citigroup will cut a whopping 52,000 jobs by early next year – that's on top of the 23,000 jobs the bank already cut this year. The bank aims to cut annual costs 20% to around $50 billion. Shares fell more than 6% on the news...

But insiders are buying the stock for the first time in a long time. Inside Strategist editor Brian Heyliger says Citi execs, lead by CEO Vikram Pandit, plowed $17 million into their bank's shares as prices fell below $10.

Jim Rogers did yet another video interview recently with the Financial Times. This time he explained his short strategy for the dollar. The interviewer asked Rogers if he had taken advantage of the recent upswing in the dollar to unload his position. Rogers responded, "We're in a period of forced liquidation of everything." There are "gigantic short positions in the dollar, and they're all having to cover, so this rally will go much longer than expected." He said he'll wait to sell at higher prices. Though he can't call the exact top, he'll wait until "euphoria" surrounds the dollar to start selling. After all, it's a "flawed and maybe even doomed currency." Rogers flashed two gold coins on screen after the comment.

One quick personal story... about a tent. We have a party every year at our house in the fall. You might recall I mentioned it last month. We typically have 60-80 people. We hire a caterer and a tent company. The tent goes up over the big stone patio behind our house, so we have plenty of room for all the food, the band, and the people. It never fails: No matter how nice the weather has been before our party, the day of our party, it always rains like water pouring out of a bucket. This year was no exception. Only this year, the folks putting up the tent never quite got the job done. They started on Wednesday. But they lollygagged. By Saturday morning, the tent still wasn't finished. Not even close. And then it started pouring. Still, the gutters weren't done and the sidewalls weren't finished. Water was leaking in everywhere.

As our guests started arriving at 4 p.m., they had to step over the tent company's ladders. The catering team from Andy Nelson's Barbecue brought in the whole roasted pig around 5 p.m. Luckily, they hadn't carved it already, because as soon as they brought it in, part of the tent collapsed, sending a huge amount of water over the pig. The tent was finally finished at about 6 p.m. – two hours after the start of the party. It stopped raining about 5:45 p.m.

You can imagine my surprise when I got a bill for $4,000 from Trimboli's Tents & Events. I called the owner. "What's your policy for adjusting a bill when your tent arrives three days late and two hours after the party has started? What's your policy when the tent fails and sends water all over the roasted hog?"

"We got no policy. Either you pay, or we'll handle this another way..."

New highs: Anheuser-Busch (BUD), short sale of Gannett (GCI).

In the mailbag... We're liars again. According to our subscribers, we simply make stuff up. Call our bluff, here: feedback@stansberryresearch.com.

"Your lead story in the Nov. 14th Digest??? Regarding your 'old friend?' I'm assuming this was told with tongue in cheek? I pray you don't actually believe your subscribers would fall for such bullsh**. Why can't you just be honest and say something such as 'please buy our Alliance subscription so we don't have to go to Washington for a bailout.' It's nonsense... dross... and beneath the idle musings of even you..." – Paid-up subscriber Raymond

Porter comment: I'm quite certain no one would bail us out, under any circumstances. But even if such a bailout was needed (it isn't) and was offered (it won't be), I wouldn't accept. It is not the proper role of government to provide welfare of any kind. I would never participate willingly in such crimes, any more than I would knowingly buy stolen property.

As for your statement that no one would believe my story, you'll have to get in line to call me a liar. You should have seen the e-mails I received when I first wrote General Motors would go bankrupt. Not only was I liar, I was an evil, Toyota-driving short-seller. Likewise when I told subscribers both Fannie and Freddie were worthless – I was an enemy of housing for the poor. Or the numerous times I explained why Goldman's accounting was completely fraudulent. Then, I simply hated America and should leave the country. Yes, I only write lies, lies, lies, and more lies...

Why you'd bother paying to receive our newsletters if you think I'm a liar is a mystery. But frankly, it doesn't matter to me whether you believe me or not. The meeting I had last Wednesday took place exactly as I described it. And as I told you, the old friend Steve Sjuggerud and I met would like to come to our meeting in Hong Kong to discuss a new investment fund he's going to launch that will purchase the assets of failed REITs. This new fund won't interest most people, because few people can come to Hong Kong, fewer still will have enough capital to meet the minimum investment required, and even fewer would choose to invest a lot of money with someone they don't know very well. The point of my story wasn't to talk about this fund – or else I would have simply named the friend in question. The point of the story was to give you a warning about the REIT sector. Lots of people invest in REITs. If you're holding highly leveraged REITs, they're probably in trouble. Otherwise, my friend wouldn't be so interested in the sector.

"Your description of the recent N.Y. meeting sounds more like a gangster gathering. Why would an honest businessman or investor need that kind of security? A slight exaggeration?" – Paid up subscriber Helen

Porter comment: I don't know if any of the security was for my friend or not. As I explained, he didn't mention it. On the other hand, he lives in a city where wealthy people are frequently targeted. It would not be unusual for a man like him to have a security team. So I wasn't surprised to see security measures being taken.

"This is my first missive after a moderately long readership. I've missed a few Digests so maybe this has been covered, but just in case.... Obama has threatened to seize/confiscate 401k savings and 'protect them' for us in a nice 'safe' government plan at 3%. Can he legally do this? What about Roths and other self-directed IRAs? I don't know whether to feel nervous about this possibility. If he does try it, there will be an enormous outcry. I'm concerned that, because Congress has another retirement plan, they have no personal stake in this and may just give this to him during the honeymoon period. What can you tell us about the legal status of and protection for IRAs?" – Paid-up subscriber Patricia K.

Porter comment: I haven't seen or heard OBAMA! make any reference to seizing anyone's retirement accounts. And it doesn't seem like something he would attempt to do for many reasons.

"Respectfully, toning down the regular and to some ears gratuitous allusions to the jet set life style, ironically stereotypical of the rich and famous corporate class you regularly rail against; particularly during times fraught with serious amounts of real pain, and daily growing fear (rational and other wise) is wise, good council. Sincerely glad for you, that as you say thru hard work you have earned it, and can afford such things. But the likely unintentional, but regular tedious comments about this, is at best, beside the point of your sage informative chronicles: what we pay for, and at worst is rather provocatively thoughtless bad manners just now. Bottom line from a fan, give the Champaign and caviar commentary bling bling a rest. Leaving more time and room for your witty sharp market insights, which we greatly enjoy, generally admire, and subscribe for." – Paid-up subscriber C. Lee Bruner

"Short and simple: 'I do not need any more poor friends.' This quote given to me by a mentor in the business I work in, and it applies especially so here in your arena."

– Paid-up subscriber Jerry Dalrymple

"I am always surprised by your subscriber's letters. The two yesterday where they are mad at you for making money and drinking 20 usd drinks and asking you to stay in Motel 6 so you can lower your service fees is amazing. What a couple of idiots! They act like communists. Why should you lower your service to anyone. You can charge whatever the hell you want and I will decide for myself if I want to pay that price or not. But to be honest that is why I am an Alliance member which has been a fantastic deal. I have learned alot of things from your letters... I am really looking forward to seeing you guys finally in Hong Kong in a few weeks. Make sure this mystery guest makes it over to HK I would also enjoy that. But again, this Alliance membership has been great." – Paid-up subscriber Michael M, Luxembourg

Porter comment: We're currently offering our best Alliance deal in history. Everyone that signs up is guaranteed at least a $2,600 rebate check from me, and several customers will get the Alliance absolutely free. The price may never be this cheap again. And the deadline is tonight at midnight. Click here to learn more about the Alliance.

Regards,

Porter Stansberry

Baltimore, Maryland

November 17, 2008

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