Goldsmith comment: Porter's on a plane back to Baltimore. I'm finishing up my work here in Munich, then returning tomorrow. Expect to hear from Porter on Friday.
Germany has defeated us... My friend and I were walking through downtown to lunch today and a local overheard us saying "no more beer." I'm not sure if it's always this way or simply because of Oktoberfest, but it seems every German drinks beer – large ones – with every meal. We were out of our league... The local laughed and ridiculed us all the way to our destination, which, I'm ashamed to say, was McDonald's.
Last night, the group couldn't stomach another plate of sausage, meatballs, gravy, and potatoes, so I booked a steakhouse for the club's farewell dinner. The restaurant was a great spot called Rustikana. It's popular with the locals... Hardly anyone spoke English, and they made us wear paper bibs for dinner.
I was a little worried when I saw the pretzels hanging from the ceiling, but when the waitress brought over a six-foot long platter of barbeque ribs and huge mugs of Spaten, the "prosting" and merrymaking began.
Rustikana was much better than the supposed "best restaurant in Munich," Tantris, which we booked for our welcome dinner. The service was unfriendly, and the food was mediocre. I'm writing a letter to Michelin questioning Tantris' two-star rating.
The highlight of our trip was undoubtedly the Porsche event. The CEO went out of his way to ensure we had a great experience... even though we pulled up to the headquarters in Leipzig, Germany in a fleet of Mercedes.
After handing over our cameras and cell phones – Porsche doesn't want its manufacturing secrets leaked to the Chinese – we took a VIP tour of the one-year-old factory. The floors and every piece of machinery were sparkling... And the factory was nearly silent, despite hundreds of workers toiling in their red Porsche overalls. The Leipzig factory, which produces the Cayenne and the new Panamera models, makes around 240 cars a day.
After our three-course lunch at Porsche's executive kitchen, we headed to the company's new test track. A line of seven Porsches – Panameras and 911s – awaited the group... I went straight for the first car in line, a gunmetal gray Panamera Turbo – a 500-horsepower beast of an automobile and the most expensive of the group at $130,000. A 911 pace car lead the way around the track to break us in before we were let loose to race at over 100 miles per hour.
We hired a National Geographic photographer to take pictures throughout the trip. We'll post some next week.
If you couldn't make it to Germany this year, you'll have another chance. We are definitely making this trip an annual event for The Atlas 400.
One of the best macro hedge-fund managers in the world, Peter Thiel of Clarium Capital, is still betting on a major downturn, even though his short bets have erased Clarium's 50% gain from mid-year 2008. Thiel told the Wall Street Journal, "The recovery is not real... Deep structural problems haven't been solved and it's unclear how we will create jobs and get the economy growing again – that's long been my thesis and it still is."
Thiel says we won't have any sustainable growth despite the government bailouts.
Another fund-manager heavyweight, PIMCO's Bill Gross, is also betting on a fall. Gross has repositioned his fund to profit from deflation by buying Treasuries (the falling interest rates will push up the value of today's Treasuries). Before, he was long inflation – which is the only economic factor that could keep this rally going.
If you're looking for some of the best short opportunities when this crazy rally fizzles, make sure you check out Jeff Clark's Short Report. According to Jeff, "there's a major sell signal brewing... Yes, it has been brewing for a few weeks now. But it's like a hurricane that stalls off the coast... Just because it takes a little longer to get here doesn't mean the storm is any less intense." Click here to learn more...
And thanks to Dan Ferris, who sent along the "quote of the day" from the Wall Street Journal...
"The DIF [Deposit Insurance Fund] balance going negative doesn't mean we've run out of money," FDIC Chairman Sheila Bair told reporters Tuesday.
Yes, the head of the organization in charge of protecting our nation's bank deposits doesn't think having a negative balance is "running out of money." Hmm...
Well, I suppose if you have the U.S. government waiting to throw billions of dollars your way, she could be right. Anyhow, as we've been writing for months in the Digest, the FDIC is broke, and now it's official. The government said the FDIC won't return to a positive balance until about 2012. The organization's next step is to ask the banks it's supposed to insure for a bailout. I can tell you right now, this won't be good for the taxpayer...
Our resident biotech expert, Dr. George Huang, closed another huge trade this week. In nine months, his FDA Report subscribers just about doubled their money on QLT, a small biotech that specializes in eye care. Back in December, when readers got in, QLT was trading about 20% below cash on the balance sheet. And that's not counting over $100 million in royalties the company brings in every year.
George didn't have too long to wait for the market to come to the same conclusion he did. After seeing QLT's fantastic results in the second quarter, investors finally realized what a bargain the stock was. It soared over 30% in August alone. His readers closed out the trade on Monday for an 87% total return...
And that's not at all unusual for FDA Report picks. Since George launched his advisory, readers have closed 17 trades with an average return of 40% and an average holding period of less than four months. His hit rate is more than 70%: unheard of in the biotech sector. Most recently, he found a dominant medical-device firm trading at absurdly low valuations. The stock should climb at least 60% in the next few months. To learn more about the FDA Report – and a class of "disappearing stocks" George is tracking right now – click here.
New highs: Managers Fremont Bond Fund (MBDFX), Vanguard Inflation Protected Securities (VIPSX), Fairfax Financial (FFH).
We apologize for the confusing Digest schedule this week. Everything should return to normal next week. In the meantime, tell us how little you missed us here: feedback@stansberryresearch.com.
"Dan, do not feel the slightest bit of remorse at not being able to identify companies which offer 'extreme value'. If there are no 'extreme values' to be had that is very valuable information. Telling us the market is overvalued is well worth the price of admission. If you believe it is time to 'go to the beach' I suspect it is time to go to go to the beach. I once read of a study performed at Santa Anita which suggested that some small number of bettors did win over time. What distinguished them from the herd? They placed their bets very infrequently. I suspect you are telling us the same thing. When there is no value to be had, keep your powder dry and wait. Falling share values are to be celebrated and enjoyed, not rising values." – Paid-up subscriber Michael
Goldsmith comment: Ferris is one of the most diligent stock analysts I know. And when the market becomes an "extreme value" again, no one will make more money over the next few years than his readers. You can learn more about Dan's letter, Extreme Value, here...
"That Newfie joke should read, we hire autoworkers from Oshawa. All they make in Ottawa is a mess of things. Keep up the good work." – Paid-up subscriber Guy Macher
Regards,
Sean Goldsmith
Munich, Germany
September 30, 2009