The market surged today on news of Pfizer's $68 billion buyout of fellow drugmaker Wyeth. The deal, the largest pharma acquisition in nearly a decade, was 29% above Wyeth's closing price on January 22 – the day before talks were reported.
We've been highlighting nearly every takeover in the medical sector this year because we believe it's going to be a mega-trend... probably the easiest way to make triple-digit returns this year. This latest takeover is just more proof Big Pharma companies are sitting on billions of dollars in cash they're itching to spend.
If Pfizer is willing to buy Wyeth for $68 billion, what's to stop other Big Pharma players from spending a couple hundred million or even a billion dollars to acquire small biotech companies? Big Pharma needs innovative new drugs. And it's much easier to buy a biotech company than develop the drugs from scratch.
Phase 1 editor Rob Fannon is busy looking for the next takeover target. He's researching small biotech companies with great drugs in the pipeline – drugs Big Pharma will pay dearly for. These companies could get taken over at triple-digit premiums and quickly add thousands of dollars to your portfolio. If you'd like to learn more about Phase 1, click here... We're currently offering the service at a generous discount.
BlackRock, the largest publicly traded U.S. money manager, is buying Greek, Italian, and Spanish government bonds. Prices reflect 10% to 20% odds that the euro monetary union will disintegrate. The spread between German 10-year bonds and comparable Greek bonds hit 297 points last week (nearly 3%). The spread between German and Spanish securities widened to 123 points.
"You have got to ask yourself at what point this becomes ridiculous," said Scott Thiel, BlackRock's head of European fixed-income. "[The spreads] are too high if you step back and take a deep breath. We've begun to add back exposure."
It might be wiser to ask yourself at what point the European monetary union becomes ridiculous. As my friend Doug Casey likes to say, the dollar is an IOU from a bankrupt government. But the euro is an IOU from nothing.
From 2007 to 2008, U.S. home prices fell an average 10.6% nationally, the biggest annual drop since 1976 – as far back as we have data. Thirty-four states saw price declines... California led the decline with a 27% drop, followed by Nevada at 23%. The best-performing real estate was in West Virginia, where prices rose 4.2%. The other top gainers were Texas, South Dakota, Montana, Mississippi, Utah, and New Mexico.
So have we seen the bottom yet in real estate? Not a chance. At least half a dozen national homebuilders will go bankrupt this year, judging by their balance sheets and debt-to-asset ratio covenants on their lines of credit. The land they hold will have to be auctioned off – and there's a lot of it.
How bad will it be? My bet is prices for raw ground will fall 95% from the peak. Prices for ready-to-build lots will fall 85% from the peak. And the average home price will fall 50% from the peak. Remember, in the Great Depression, a quarter of the entire state of Mississippi was auctioned in one day.
More layoffs... Caterpillar, the world's largest bulldozer and excavator manufacturer, will cut 20,000 jobs. Demand for the company's machinery has plummeted as builders broke ground on the fewest homes in 50 years last month. Home Depot is axing 7,000 jobs. Sprint Nextel will slash 8,000 employees, or 14%. ING Group, the biggest Dutch financial-services company, will cut 7,000 jobs and oust CEO Michel Tilmant after two consecutive quarterly losses. Royal Philips Electronics, Europe's largest TV maker, will cut 6,000 jobs.
I realize the news is grim. I wish there was something better to report.
New highs: nyet, comrade.
In the mailbag... The best letters we've gotten in years. Hundreds of you were as amused and bemused as I have been over the last few days. We can't print them all of course... but thank you so much for all of your kind words and funny thoughts. Send your comments here: feedback@stansberryresearch.com.
"I hate to do it, but I have to write in support of the felon. The reason is simple. As you so aptly noted yourself, most everything in this country is taxed and regulated to death. Add to this the fact that most everything is now a federal crime or a felony. My wife and I had an unfortunate run-in with TSA when we accidentally left a small martial-arts knife in a carry-on bag. Yes, it was stupid – but it was an accident. They arrested my wife on felony weapons possession in an airport! It cost us over $5,000 and months of aggravation to finally get the case dismissed. It was hellish and inexcusable treatment in a 'free country'. And penalties like never being able to vote again are completely and utterly opposite to the idea of paying your debt to society – such penalties mean you NEVER pay enough for your 'crime'. It's positively un-American... but that's the new Amerika for you." – Paid-up subscriber Michael Morning
"I will not disrespect your mother, no matter how I disagree with how she raised her son; you don't have to disrespect my President, no matter how stupid or malicious you consider his actions to be. Instead of childish name-calling you are certainly capable of taking the time to frame a clever, devastating critique a la Dorothy Parker or Maureen Dowd." – Paid-up subscriber Rav
Porter comment: Yes... if I could only write like Maureen Dowd. We all have dreams...
"While I understand references to the founding fathers, the good old days, freedom, liberty, etc., it never seems to dawn on those making these statements that ONLY white men feel that way. That means it excludes white women, and all minorities of either sex. There were no good old days unless you were a white man. Some of those rules and regulations you abhor were necessary to at least mitigate some the atrocities that have occurred and still occur, despite Obama, to minorities in this country. Do you have any friendship
with the type of people I am referring to. If you do just ask them." – Paid-up Subscriber Wallace
Porter comment: The political wisdom of our founders, as expressed in the Declaration of Independence and in the Bill of Rights, was perhaps the single most important achievement in the history of Western civilization. That the founders (in most cases) were also slave owners doesn't lesson the quality of their thinking. It does reveal they didn't live up to the full measure of their own ideals. In that way, they were much like the rest of us.
"Hi I get about 12 different news letters. Some I paid a lot for (one time) YOU ARE THE ONLY ONE THAT REALLY TELLS IT LIKE IT IS YOU ARE ALSO THE ONLY ONE THAT ISN'T ALWAYS TRYING TO SELL US SOMETHING ELSE. GREAT JOB." – Paid-up subscriber Ray
Porter comment: Apparently there's been some terrible mistake...
"Do they pay so they can write??? Do they ask for refunds after they call you names??? Your latest was poetry as you laid into them and made my cold, end of the day, fat tire taste so much better. Keep it up Porter you are the man. – Paid-up subscriber Hilary S. Gavenda
Porter comment: It is a very enticing idea... but if we started letting people pay to have their letters published, our beloved Digest would soon read like most newspapers in the country. Some things we just won't do. Not even us.
"Porter mentioned the possibility of the nonpayment of taxes by a large percentage of our population. I really feel that this could happen and as to the results of such an action I am sure I would not like to be alive at the time because the financial fallout would be beyond belief..." – Paid-up subscriber Anonymous
Porter comment: Try it. Let me know how it goes. I'm still fighting the SEC. And I can only take on one government agency at a time. It's hellishly expensive.
"I love The Digest! It is the best entertainment in my email. I laugh so much when I read the ridiculous letters from subscribers and even more at your responses. I read The Digest late at night, and it is so easy to go to sleep after a good hard laugh." – Paid-up subscriber Luis
"You are awfully wise for 36. Keep up the great work and continue to stand your ground on your opinions. That's what this country was founded on – LIBERTY – the right and power to believe in a manner of one's own choosing." – Paid-up subscriber Alan Tipton (41 years old)
"Thank you Mr. Stansberry for your clear head and your ability to articulate those thoughts. I love reading what you have to say. I am old enough to remember the days when we felt free in America. My grandchildren will just have to take my word for it. Thanks Again." – Paid-up subscriber Dave Hoffert
This is quite simply the end all and be all of all S&A Digest comments, tremendous: 'That was the idea behind the founding of our country. Remember, "give me liberty or give me death?" Can you imagine how Patrick Henry would feel about our country today? Not an aspect of my life isn't taxed or regulated – from the things I'm allowed to publish to the cars I'm allowed to buy to how I'm allowed to enjoy my wife's body in the privacy of my own home! What has happened to our country? What has happened to our people? Where did all the Americans go? Where did all of these do-gooders come from telling us what to do and what we must pay for the privilege of living in our own country? And who are all of these whipped dogs who beg and plead for handouts from their masters in Washington? It's disgusting.'" – Paid-up subscriber Michael Kessler
Porter comment: Yes... That's what all of the folks in Washington – on both sides – have forgotten. Sadly.
Regards,
Porter Stansberry
Baltimore, Maryland
January 26, 2009