Introducing Stansberry Radio...
I have a big announcement... Thanks to Clear Channel Radio, we've been given an opportunity to produce a two-hour talk radio show. Our "pilot" episode will air tomorrow – live. You can hear us on XM channel 168. The show will run 3-5 p.m. Eastern time. Our first two guests will be Bill Bonner and Doug Casey.
If you've ever wanted to ask me (or them) a question, this is your chance. The toll-free call-in number is (888) 860-8785. Keep in mind, we can't give you any personal investment advice, so if you're calling to ask about a particular stock, please understand we won't be able to discuss it. If you're reading this Digest from outside the United States, you can listen to the radio program tomorrow on this website: www.stansberryradio.com.
As for the rest of today's Digest, I've decided to re-publish the most popular essay I've ever written. For some subscribers, this will only be a reminder about the serious problems we face in America. But for the many subscribers we've added in the last several months, this will be all new.
If it resonates with you... if you see these same problems in your communities... I encourage you to pass this Digest along to your friends. This is a message we must get across to our fellow citizens. Robbing Peter to pay Paul will not lead to national wealth or prosperity. It will only lead to bigger problems for our children and grandchildren.
I hope to hear from you tomorrow on the radio.
This Is Why There Are No Jobs in America
I'd like to make you a business offer.
Seriously. This is a real offer. In fact, you really can't turn me down, as you'll come to understand in a moment...
Here's the deal. You're going to start a business or expand the one you've got now. It doesn't really matter what you do or what you're going to do. I'll partner with you no matter what business you're in – as long as it's legal.
But I can't give you any capital – you have to come up with that on your own. I won't give you any labor – that's definitely up to you. What I will do, however, is demand you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you're allowed to operate your business. That's my role in the affair – to tell you what to do.
Now in return for my rules, I'm going to take roughly half of whatever you make in the business each year. Half seems fair, doesn't it? I think so. Of course, that's half of your profits.
You're also going to have to pay me about 12% of whatever you decide to pay your employees because you've got to cover my expenses for promulgating all the rules about who you can employ, when, where, and how. Come on, you're my partner. It's only "fair."
Now... after you've put your hard-earned savings at risk to start this business, and after you've worked hard at it for a few decades (paying me my 50% or a bit more along the way each year), you might decide you'd like to cash out – to finally live the good life.
Whether or not this is "fair" – some people never can afford to retire – is a different argument. As your partner, I'm happy for you to sell whenever you'd like... because our agreement says if you sell, you have to pay me an additional 20% of whatever the capitalized value of the business is at that time.
I know... I know... you put up all the original capital. You took all the risks. You put in all the labor. That's all true. But I've done my part, too. I've collected 50% of the profits each year. And I've always come up with more rules for you to follow each year. Therefore, I deserve another, final 20% slice of the business.
Oh... and one more thing...
Even after you've sold the business and paid all my fees... I'd recommend buying lots of life insurance. You see, even after you've been retired for years, when you die, you'll have to pay me 50% of whatever your estate is worth.
After all, I've got lots of partners and not all of them are as successful as you and your family. We don't think it's "fair" for your kids to have such a big advantage. But if you buy enough life insurance, you can finance this expense for your children.
All in all, if you're a very successful entrepreneur... if you're one of the rare, lucky, and hard-working people who can create a new company, employ lots of people, and satisfy the public... you'll end up paying me more than 75% of your income over your life. Thanks so much.
I'm sure you'll think my offer is reasonable and happily partner with me... But it doesn't really matter how you feel about it because if you ever try to stiff me – or cheat me on any of my fees or rules – I'll break down your door in the middle of the night, threaten you and your family with heavy, automatic weapons, and throw you in jail.
That's how civil society is supposed to work, right? This is Amerika, isn't it?
That's the offer Amerika gives its entrepreneurs. And the idiots in Washington wonder why there are no new jobs...
New 52-week highs (as of 5/19/11): Dreyfus High Yield Strategies Fund (DHF), Invesco High Yield Investments Fund (MSY), Coca-Cola (KO), Pepsi (PEP), Forest Laboratories (FRX), Sprint (S), Procter & Gamble (PG), McDonald's (MCD), Take-Two Interactive (TTWO), Altria Group (MO), Philip Morris International (PM).
In the mailbag today, an intriguing question about who is selling gold? Send your questions to feedback@stansberryresearch.com.
"In [yesterday's] Digest in the End of America section it was reported that central banks purchased 129 tons of gold in Q1. Recently you reported that U of Texas endowment fund purchased $1 Billion worth of gold bars and Mexico bought 100 tons. With all this buying, WHO is selling? Where is all this gold coming from? Is it physical gold or only paper (GLD)? Inquiring minds want to know." – Paid-up subscriber Les Kidd
Porter comment: I don't know the answer for certain, but I've seen lots of advertisements recently from smelters looking to buy gold to sell on the open market. I'm sure you've seen these "We Buy Gold" ads. Clearly, some physical gold is coming onto the market at these prices.
More important, I know a lot of the gold purchased today is being bought on the futures markets. In these markets gold is promised for delivery in the future. The amount these promises represent dwarfs the physical supply. That's an indication that physical gold prices could soar if institutional investors follow the University of Texas and demand delivery.
Admittedly, that's speculation on my part... but the intriguing answer to your question might actually turn out to be: No one is really selling gold at all. The supply of gold is merely being maintained by paper contracts. If that's so, the sales of gold futures contracts might one day prove to be very troublesome for the bullion banks.
"C.W. – If you don't believe the guys at Stansberry Research, perhaps you'll believe another subscriber. The 12% returns they're talking about [in our 12% Letter] include capital gains. If a stock yields a 2% dividend and grows its dividend at 10% a year, that dividend growth will cause the stock to go up in price at 10% per year, on average. The 10% capital gain plus the 2% dividend gives you 12%. If you were really forced to, you could sell a few shares now and then to generate the additional spending money that you require.
"I hope you don't have to, though; better for your security and peace of mind to let the investments compound. Before the crash of 2008, I had almost all my investments concentrated in high-yielding REITs and bank stocks. It was fun while it lasted but we all know what happened in the end – the dividends were slashed and the value of my portfolio was cut in half; I lost 100s of thousands of dollars. You don't want to go there, C.W. Better to listen to the guys at Stansberry Research and absorb their wisdom." – Paid-up subscriber JR
Porter comment: If you'll take another look at last Friday's Digest, where I wrote about my secrets to investing safely for income, you'll notice that my third rule is to avoid owning high-yielding stocks whose dividends are not sustainable. Yes, there is a time to buy these kinds of securities... but they are risky and should never be seen as safe or permanent holdings of any portfolio.
Regards,
Porter Stansberry
Baltimore, Maryland
May 20, 2011
Introducing Stansberry Radio... XM Channel 168, Saturday 3-5 p.m Eastern time... The most popular essay we've ever published... Why there are no new jobs in this 'recovery'... Who is selling gold?… Maybe no one...