I got an iPad yesterday. So you'll forgive me if I haven't a clue of what's going on in the world at the moment...
The iPad is a little computer you can carry around with you... so you'll never, ever, ever have to be away from the Internet. Like all Apple products, the iPad is slender, simple, and attractive... like something you might see in a sci-fi movie. It makes you feel rich and cool when you hold it.
Problem is, the iPad doesn't actually do much. It does things you already do, but in a more attractive package. This lack of usefulness prompted one writer to suggest recently Apple's products are symbols of "peak empire," like the amusements that distracted the Romans as their once-vast empire crumbled.
I disagree. I think iPods and iPads could save humanity from itself... precisely because they're so useless. Writer Eric Hoffer said, "A society becomes stagnant when its people are too rational or too serious to be tempted by baubles." Judging by the proliferation of reality TV shows, I doubt many people are in danger of being too rational or serious. But why take the chance?
And if you think you can salvage the iPad's uselessness by using it for work, think again. It doesn't come with any of the software you need to work. There's no keyboard, except the on-screen software keys, which are just useful enough for e-mail, but not nearly good enough for pounding out 20,000 words a month. It comes with no real word processing software. It has just a simple notepad that looks like a yellow legal pad with a playful, script-like font – just enough to jot a few fleeting thoughts, a short love letter, or a quote you want to remember.
I think Steve Jobs and company made extra damn sure the thing was strictly a plaything. It's for web surfing, videos, music... fun stuff! (If you must pollute your fun with work, you can e-mail on it.) I've heard the propaganda about "increasing mobile productivity." But I doubt the iPad will ever increase anyone's productivity, mobile or otherwise. It'll decrease it by tempting you to buy more digital books, spend too much time on Facebook, and buy too many songs on iTunes...
No wonder Greenlight Capital's David Einhorn thinks Apple can earn more than $20 a share next year, more than 30% above its trailing 12-month earnings of $15.15 per share. If you back out Apple's enormous cash hoard, the company is trading for an enterprise value of about $294 per share, just shy of 15 times Einhorn's ballpark for next year's earnings. That's a low multiple for a company that can grow earnings more than 30%.
The iPad could really explode next year. Low-end estimates show Apple is selling about 3.8 million iPads per quarter, a little more than 15 million a year. If tech-market researcher IDC is right, 43 million tablet computers will be sold next year. If Apple's iPad sales grow 30%, it'll sell about 20 million of them next year, almost half the market.
I bet it does more than that. The device is far too attractive and useless not to become ubiquitous. Even though the stock has soared 50% this year, I think long Apple is still a good trade for the next year or so.
Carlyle Group, the world's second-largest private equity group, tried to go public at the top of the market in 2007. But plans fizzled as the world fell apart. Private-equity groups frequently rely on borrowing to finance their investment strategies. When financing became almost nonexistent, the bloom fell off their rose. Fast forward three years... The market has recovered, investor sentiment is at a record high, and record-low bond yields are pushing investors into riskier assets. And guess what? Carlyle is trying to go public again.
We've seen how this plays out before... In mid-2007, Blackstone Group, the world's largest private-equity shop, was going public. Blackstone was the hottest IPO in town. The private-equity sector was incredible four years ago. I don't know if you remember, but you couldn't sell a stock short because every company was a potential takeover. And Blackstone was posting incredible numbers (thanks to the availability of easy credit).
China was sold... The Chinese government's investment arm put $3 billion in Blackstone. (On a side note... KKR, the third huge private-equity shop, also tried to go public in 2007. It didn't make it in time, but eventually IPO'd this year). Here's what we wrote about the Blackstone situation:
Private-equity powerhouse Blackstone Group is set to go public the week of June 25. The offering will raise as much as $4.75 billion. New shareholders will hold a 12.2% stake, while the Chinese government will hold a 9.7% stake. Why would a successful business like Blackstone look to sell? See what famed short-seller Jim Chanos says here...
Our thoughts: Chief Executive Stephen Schwarzman and his partner Peter Peterson started this company in 1985 with $400,000. They've worked hard for 22 years. And they're no dummies. They've seen a top in the credit markets before... and this time they're cashing out. – Sean Goldsmith, June 13, 2007, Digest
Signs of a market top... The upcoming Blackstone Group IPO will use 17 underwriters. – Sean Goldsmith, June 14, 2007, Digest
So how did the Blackstone IPO play out? Great for Schwarzman and Peterson. They each made billions of dollars. The new investors, on the other hand, didn't fare well. Take a look at the chart below. Shares of Blackstone traded as high as $38 on their first day. On February 26, shares were down to $3.87, a 90% plunge.
Is Carlyle destined to repeat Blackstone's failure? We can't say. But there are a lot of similarities. First of all... If you own a profit-gushing private business, why would you ever sell (unless it's to cash out)? Carlyle's principals know the markets, and they see an opportunity to pull some cash out today.
The kicker... Carlyle today announced it raised $500 billion from Abu Dhabi's sovereign wealth fund. Digest readers know our feelings toward sovereign wealth funds. These government-controlled pools of money are some of the worst investors in the world. If they're buying, we're either avoiding or selling short.
The junior resource sector is in the midst of one of the great bull markets in its history. I'm not sure how many times we'll have to beat you over the head with enormous returns before you decide to invest in these stocks, but here's one more... Today, Phase 1 recommendation Mirasol Resources (MRZ.V) announced solid drilling results. Here's Matt Badiali's view on the news:
[Mirasol] put out the results of seven holes so far. Drilling on the Virginia silver vein system is just starting. The company is drilling into rocks that had high silver values on the surface.
If it can confirm that silver on the surface exists below too, then this will be a huge silver discovery. So far, the drilling is confirming that theory... Mirasol hit some ridiculous high-grade rock, including 15 feet of rock that held 43.8 ounces of silver per ton of rock.
Shares of Mirasol soared 25% on the news to more than $5.60 a share. Phase 1 subscribers are up 115% since September (that's an annualized 404% return). And that's on the low end of the spectrum for the Phase 1 returns this year... Subscribers have made nearly 300% in Paramount, 130% in AuEx Ventures, around 110% in Almaden, more than 160% on Rainy River, and nearly 600% on ATAC Resources.
We'll say it again... Buying into the junior resource sector today – in the midst of a raging bull market – could make you more money, in a shorter period of time, than any investment you will see again in your lifetime. When these stocks start booming, it's incredible... They don't just double or triple, they can go up thousands of percent.
In the latest issue of Phase 1, editor Frank Curzio recommended another junior resource stock. It mines a precious metal (not gold or silver) on a little-known island. And it owns hugely valuable swaths of land there. If you're looking for the next triple-digit Phase 1 winner, this is it. We're airing a special conference call for subscribers tonight. Also, tonight is your last opportunity to buy Phase 1 at a generous discount. You can learn more by clicking here...
New Highs: WisdomTree Japan SmallCap Dividend (DFJ), PowerShares Dynamic Biotech (PBE), Enzon Pharmaceuticals (ENZN), WD-40 Company (WDFC).
In the mailbag, subscribers respond to Porter's interview on the Alex Jones radio show. What did you think of it? Send your e-mail to feedback@stansberryresearch.com.
And if you haven't yet heard Porter's controversial End of America video, make sure to check it out here.
"Thank you Porter for laying out in clear precise terms exactly what is being done to devalue the dollar and the unique threat which comes from trashing the only global reserve currency.
"I'm a regular watcher/ listener to all the AJ programs, as are millions of other patriotic Americans who are not afraid to hear the truth, no matter how ugly it is.
"Thanks for being on, I was so impressed with your cool, concise presentation I decided to sign up for your newsletter." – Paid-up subscriber Pete
"We LOVED your interview on the show!!!! Please return more often!!!! Signed up for your newsletter 2 weeks ago. So glad we did." – Paid-up subscriber Ray Clark
Ferris comment: I liked the way Porter didn't let the host push the crisis out into the future. The host kept asking when the crisis will begin. And Porter kept saying, "What do I have to tell you to convince you it has already begun?" That's one thing Porter says that absolutely nobody ever says.
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon and Baltimore, Maryland
December 16, 2010