You may recall Nancy Pelosi's argument last month that extending unemployment benefits (past the current two-year limit) is the best way to stimulate the economy..."It injects demand into the economy... It creates jobs faster than almost any other initiative you can name."
Imagine our disbelief after reading today's Wall Street Journal article claiming not only that unemployment benefits don't stimulate the economy, but that they actually stunt growth. According to the article, since the economy bottomed in mid-2009, the number of job openings has risen more than twice as fast as hires. You would think with unemployment at 9.5% (some 15 million Americans out of work), people would be scrambling for jobs. If open positions were getting filled at their normal rate, another five million Americans would have jobs, bringing unemployment below 7%.
Why don't unemployed folks fill the many open positions? Because the government is paying them to do nothing. Take this example from the Journal:
Michael Hatchell, a 52-year-old mechanic in Lumberton, N.C., says he turned down more than a dozen offers during the 59 weeks he was unemployed, because they didn't pay more than the $450 a week he was collecting in benefits. One auto-parts store, he says, offered him $7.75 an hour, which amounts to only $310 a week for 40 hours.
"I was not going to put myself in a situation where I was making that small of a wage," says Mr. Hatchell. He has since found a better-paying job at a different auto-parts dealer.
If you pay people not to work, they won't work.
We wrote it, did you short it?
A $100 pair of shoes that tones your butt and helps you lose weight?! It sounds ridiculous, but it's true. No one ever went broke underestimating the intelligence of the American people, nor their desire for a no-exercise/no-diet weight-loss plan. So Skechers and Adidas-owned Reebok have turned so-called "toning shoes" into a nearly $1-billion-a-year business. Skechers' toning shoes, known as Shape Ups, helped the company triple its market share in U.S. women's athletic shoes this year to 17%, or $225.7 million...
It's dangerous to fight against the trend, which is undoubtedly "up," with these [shoe companies], but at some point, the "tight-butt shoe bubble" will make a fantastic short sale. – S&A Digest, June 24, 2010
We wrote that four days after Skechers' all-time high of $43.85. The company announced blowout earnings on Friday, but shares are in a freefall. Maybe the market is waking up to the ridiculous "shape-ups" fad. Shares are down 8% today and 24% since our Digest mention.
You know your trading desk is doing a great job when even a small loss makes headlines...
The mighty Goldman Sachs lost money on 10 days in the second quarter, ending a three-month streak of profitable trading days. Despite its 10 losing days, Goldman still made $5.61 billion from trading – more than any of its competitors. Most people wonder how anyone can trade so profitably for so long...
Goldman isn't using the same strategies as your average investor. To find out the secret behind Goldman's huge profits, we simply hired one of its former employees. Retirement Trader editor Dr. David Eifrig spent a decade on several of the top trading desks in the world, including Goldman Sachs. He learned the trading strategies Goldman uses to make billions of dollars. But he tired of the unbridled greed and corruption on the Street. He actually wanted to help investors, instead of "ripping their faces off" – Wall Street lingo for a successful trade.
Doc has used the trading strategies he learned at Goldman to create a small fortune for himself. And he's taught several of us at Stansberry how to improve our trading... One employee is doing particularly well. Once you give Doc's trading system a try, you'll have a hard time investing any other way... It's simply too easy and profitable.
Even if you don't consider yourself a trader, we hope you'll give Retirement Trader a shot. You won't find a better strategy to produce fast and safe income. And you won't find a better teacher than the guy who actually sat on Goldman's trading desk. You can learn more about Retirement Trader in this video presentation by Doc. Also, today is your last opportunity to try Retirement Trader at a huge discount.
New highs: MFA Financial (MFA-PA), Western Digital (WDC), McDonald's (MCD), Altria (MO).
We don't normally publish this much feedback, but we received some great responses from Friday's discussion of bonds and our bond service, True Income. If you missed it, read it here.
I'm sure many of you thought Porter was exaggerating the potential returns you can earn with True Income. Well, he wasn't... We'd love to hear about your experiences with bonds... feedback@stansberryresearch.com.
"I was glad to see your digest on Friday where you talked about Bonds and what good deals can be found. I have made some good investments with the True Income newsletter and have seen good returns so far. I was not originally aware that you could trade them in before maturity, an ignorance that kept me from realizing the good values that can be found in the bond market. For me stocks have been scary for the last 6 months, as I keep waiting for the hammer to fall on the market (long overdue I think). So bonds have been a great way to make safe returns without the worry of what Mr. Market will do. Thank you for adding True Income to your arsenal.
"That being said, I have [a] question: If I want to research great bond deals on my own, where would you recommend I start?" – Paid-up subscriber Darren
"I just signed up for True Income, but I still have a couple of questions about buying bonds. Are there good brokers to make trading bonds easier? With the bonds recommended in True Income, I have to call my broker (rather than enter the order online), and they always want to push the bonds yielding 3%. I would prefer a broker that just takes the order and executes it.
"Second, and more importantly, how do I research a bond? I can find information on stocks all over the place, but I don't know where to look to find out more about a bond." – Paid-up subscriber Todd
"I had to write this brief note after reading Friday's S&A Digest talking about your True Income bond advisory service.
"I had purchased discounted bonds occasionally over the last 30 years. After reading your True Income letter for the last couple of years, I have significantly increased my purchases of discounted bonds. I like getting paid while I wait, earning interest at rates significantly above CD or money market rates, and earning a yield to maturity in the 10% to low teens compounded annual return range, or even better. And while the interest is taxable at ordinary income rates, the appreciation in the bonds (i.e., purchase discount below par value) is taxed at favorable long-term capital gains rates. Over the long run, these yields exceed anything an investor can realistically expect to earn in equities.
"All of the recommendations have not worked out as expected in True Income. There are risks and no guarantees, as companies can file bankruptcy. Mike Williams does recommend spreading your bond investment $$ among a few of the recommendations. Of the recommendations purchased, I sold one at a fairly significant % loss, but the rest are performing as expected, resulting in a 10% or better overall annual return in a period that included the 2008 – 09 market calamity.
"True Income has become one of my favorite letters in my Alliance membership. Discounted corporate bonds can be a profitable part of anyone's portfolio." – Paid-up subscriber DR
"I love True Income and have been a subscriber since it was first available. I even joined Income Alliance because TI together with Advanced Income are what I consider the corner stones of my retirement. I do have a couple of issues with your S&A Digest from 8/6. This is selfish but I don't want to compete with thousands of others when buying the bonds TI recommends. They are pretty thinly traded already.
"My second issue is truth in advertising. It would be fantastic if all of Mike's recommendations were bonds trading at 50% discount two years out which would allow gains of 150% but this just isn't so. Plus you didn't once mention that 2 of Mike's recommendations did go bankrupt and owners of these took a 50% loss on Tribune and 90% loss on Aleris. Of course if you tell people these things you probably won't get many takers. This plays great into my first point because again I just love True Income." – Anonymous
"Please let Porter know that some of us are buying bonds. Like most casual investors, I had never even considered bonds (much less actually bought one) before becoming an Alliance member. But after seeing Mike Williams' stellar returns over the past year, I thought what the heck and made the phone call to my broker. I manage not only my own account, but my wife's and mother's as well, and all of us now have bonds in our portfolios. As of this writing, I have not lost money on any of these investments, which I certainly can't say for the stock we hold.
"I once read that the two best pieces of advice Porter would give to the neophyte investor would be (1) buy bonds and (2) sell covered calls. I have implemented both of these strategies to my benefit. Yes, it's tough watching a position run away to the upside and miss out of some of the gains because it gets called away from you after a couple of dollars. But that is more than made up for by the times that it moves slightly downward, or only a little ways up, and you get to keep all of the call premium – sometimes several call premiums – before the stock gets taken away from you. I'll take these more or less guaranteed smaller but steady gains over the usual uncertainty any day.
"I have made money on many of your recommendations and lost money on others. Honestly speaking, I'm about even at the moment. But the continuing education I get from your various newsletters has been invaluable, and is starting to tip the scales over to the plus side. I bought some gold the other day and that, plus the bonds and options strategies I've implemented, have me facing the economically uncertain future with far more equanimity than would otherwise be the case. Thank you for the services you put out. Now if there were only a way to keep your Alliance members from receiving the same information multiple times via your various services, it'd be perfect!" – Paid-up subscriber Chris Chardon
"Your S&A Digest today (06 August 2010) feels like it was directed right at me.
"Your argument for investing in Bonds is very compelling. So much so that some weeks ago I actually bought your advisory service True Income. The problem is that like possibly many other of your subscribers who balk at investing in Bonds there is not enough guidance on how to deal with brokers who are after all 'stock brokers.' Maybe I am missing something and hopefully you can guide us. I cancelled True Income mainly because I couldn't figure out how to engage with an appropriate broker. This is particularly critical for those of us who reside abroad. Maybe a bit more coverage on this subject would arouse serious interest and followers into Bonds.
"So we now know WHY. Give us more about HOW." – Paid-up subscriber Claude Guillaume
"I read you're putting in some publications for True Income in your Digest. I totally agree its a great service. I love it and I hope its gonne be arround much longer. In fact its been the most profitable service I've ever used. I bought Freescale at 150, Rite Aid at 200, Aleris at 12.5 and Tribune at 35. Freescale and Rite Aid I sold for 400% gains and Tribune turned out to be a ten bagger! And all that in just over a year. Aleris is a bust but they were just 5% of the invested bonds capital so I'm ok with that." – Paid-up subscriber Erik Frieg
Mike Williams comment: Your comment about the lack of service from brokers is by far the most common complaint I hear from subscribers. The simple fact is, large brokers are not particularly interested in selling you this type of merchandise. There is just too much business risk in it for them. Fidelity is the most frequent name mentioned as providing spotty service.
But I encourage you to be persistent. And have a heart-to-heart talk with a senior person at your brokerage firm about its real interest in servicing your needs. If your broker is not interested in serving your investing needs, I recommend you interview other brokers. I use Schwab, and I have to call them and work the order every time.
There is no question it is harder to buy these types of bonds than other bonds or stocks. This is part of the reason I frequently add preferred stocks to True Income's portfolio. They are simple to buy and sell and have similar characteristics to our portfolio.
You can prepare yourself with all the information you need before you call your broker. Use the websites I gave you in the "True Income Basics" special report. Use these websites to study the transaction patterns. They report ALL bond transactions so you can see volume, size, and price. I do this before I make any recommendation. I study the pattern for the past 30 days to ensure retail investors (i.e. small investors) can successfully buy the recommendation. (True Income subscribers can find my "True Income Basics" report posted under the special reports link of the True Income page on the Stansberry & Associates website.)
You can research bonds and their issuers with these websites and the SEC website.
Goldsmith comment: We know a lot of you will never try True Income because you think it's too difficult to buy bonds. But if you read the feedback above, you'll see our readers are successfully buying and selling bonds... And making huge returns.
We always find it surprising that given the exact same information at the same time, one subscriber will make money on a trade and one will inevitably lose money. Or in today's case, one subscriber will successfully purchase a bond and the other won't... And then they get mad at us. We're just trying to provide you with the best investment information we can...
And there is no better high-yield bond analyst than Mike Williams. He's been analyzing these situations for decades. If you follow his advice and build a portfolio of his recommended bonds (as opposed to cherry-picking), you will make money. I urge you to re-read Friday's Digest and watch this video presentation discussing Mike's True Income service. As you'll read, subscribers are readily making triple-digit returns on bonds. It's incredible.
Regards,
Sean Goldsmith
Baltimore, Maryland
August 9, 2010
Nancy Pelosi's idiocy revealed... The government getting what it paid for... Toned-butt shoes going down... Goldman breaks perfect trading streak... Why you should consider Retirement Trader... Readers making a fortune in bonds...