Private-equity profits and Ferraris...

Follow these rules to protect your money…

In today's Digest Premium, Retirement Millionaire editor Dr. David "Doc" Eifrig shares easy-to-follow rules to make sure you're preserving your hard-earned capital.

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

Private-equity profits and Ferraris... The weather hurts home starts and mortgage applications... Household debt hits its highest level since 2008... Bill Ackman exiting commercial real estate... Profiting from malls' decline... Learn how to use 'flash bids'...

 Could there be a connection?

Private-equity firm Carlyle Group announced its fourth-quarter profit rose nearly six-fold to $71 million from $12 million a year ago.

Economic net income, a private-equity measure that includes realized and unrealized gains, was $576 million ($1.64 per share) for the quarter, up from $182 million a year ago. Analysts were expecting $0.96 a share in earnings.

 As we've explained many times, the government's current monetary policy is a boon for private-equity firms. Low interest rates allow these firms to borrow money cheaply. And the huge amount of money sloshing around the economy as a result of quantitative easing means more cash is flowing into these firms' coffers. And the resulting price inflation allows private-equity shops to sell assets at high valuations and mark up the value of the assets still on their books.

 Carlyle's assets under management grew 11% from last year to $188.8 billion. And in the fourth quarter, it finished raising its largest fund ever – a $13 billion global buyout fund. (It targeted $10 billion.) In total, investors poured $22 billion into Carlyle in 2013.

 As you can see from the chart below of True Wealth recommendation Blackstone Group (the world's largest private-equity firm), these stocks have had an incredible run.

 But some of the industry's top executives think it's time to cash out... It's better to be early and enjoy the billions and billions of dollars in profits they've made over the past five years.

As we noted in the December 10 Digest, Leon Black, the billionaire head of private-equity firm Apollo Group, said it was time to take money off the table...

"It's almost biblical: There is a time to reap, and there's a time to sow," Black said at a conference in April. "We think it's a fabulous environment to be selling. We're selling everything that's not nailed down in our portfolio."

 Carlyle heeded Black's warning... The company made $17.4 billion selling assets in 2013. Meanwhile, it invested only $8.2 billion. It had proceeds of $6.3 billion in the fourth quarter alone. Carlyle sold stakes in banking firm BankUnited, TV-ratings tracker Nielsen Holdings, and transportation-equipment maker Allison Transmission Holdings. Also, eight firms backed by Carlyle had initial public offerings (IPOs) in the fourth quarter.

 These blockbuster earnings are par for the course in the industry... Blackstone and Small Stock Specialist portfolio holding Kohlberg Kravis Roberts also announced huge profits.

 We wonder if these masters of the universe earning record profits has anything to do with this next bit...

Italian carmaker Ferrari posted record 2013 revenue of 2.3 billion euros – up 5% from a year ago. The company's "trading profit" – its earnings before interest, taxes, and one-time items – rose 8.3% to 363.5 million euros.

Global sales for Ferrari and fellow high-end sports-car maker Maserati global sales more than doubled in January to 2,400 units.

So much for the government's money printing helping Main Street...

 Also, it seems Ferrari buyers are immune to the cold weather that destroyed home demand this winter...

As we noted yesterday, the National Association of Homebuilders announced dismal sentiment in January due to the cold winter. It was the biggest monthly drop for the index since its 1985 inception.

 Today, we learned housing starts fell 16% month over month... It was the biggest percentage drop since June 2013 and the biggest monthly drop in three years. Building permits fell 5.4%.

The excellent financial blog Zero Hedge noted that despite the rush to blame bad weather for the weak figures, permits for the western U.S. plunged 26%, while most other regions improved.

And mortgage applications have fallen 16% in the past five weeks, the biggest drop in 14 months... Applications are now close to the lowest level since 1995.

 Americans are saddling themselves with more and more debt as the economy is slowing...

According to the Federal Reserve Bank of New York, aggregate consumer debt increased $241 billion in the fourth quarter, the largest quarterly increase since the third quarter of 2007. As of the end of 2013, total consumer debt was $11.5 trillion. But despite the big increase, we're still 9.1% below the third-quarter 2008 peak of $12.7 trillion.

Mortgages were the largest component of household debt... Mortgage balances were $8.1 trillion at year-end, up $152 billion from the third quarter.

Nonhousing debt for Americans also increased 3.3%... Auto-loan balances jumped $18 billion. Student-loan balances jumped $53 billion. And credit-card balances increased $11 billion.

 Hedge-fund manager Bill Ackman helped rescue mall real estate investment trust (REIT) General Growth Properties (GGP) from bankruptcy in 2009... And he turned $60 million into $1.6 billion in the process.

But Bloomberg reported last week that Ackman sold his final 28 million shares back to GGP via a buyback for $556 million.

Ackman is cashing out of U.S. commercial real estate. Perhaps, given his troubled investment in foundering retailer J.C. Penney, he sees the writing on the wall for U.S. malls.

 Porter and his team of analysts have also been digging into the numbers of U.S. mall operators. And they're worried. Rising competition from online retailers, like Amazon, is only one of the problems malls face. As they wrote in this month's issue of Stansberry's Investment Advisory:

 In the issue, Porter explains his favorite way to profit from a decline in the mall industry. And he also makes a new recommendation in the energy space...

Next month, the U.S. government will open up the deep water off Florida's coast for drilling... It's auctioning the rights to drill a specific site. The oil majors are watering at the mouth to win this auction... The area holds an immense amount of oil... So much, estimates can't do the deposits justice.

We can't know which firm will win the auction or who will drill successful wells. But the Investment Advisory team found a company that supplies the infrastructure to these deepwater drillers.

This company is cheap... And the folks who control it (one of the richest families in the world) are famous for treating shareholders well.

 Investing in the boom in American energy production has been a core strategy in Stansberry's Investment Advisory. Porter and his team have been covering the boom for years. It's the source of some of the best-performing positions in their model portfolio… including natural gas infrastructure firm Chicago Bridge & Iron (up 123%) and energy-shipping company Targa Resources (up 106%). To learn about subscribing to Stansberry's Investment Advisory – which gives you access to all their work on the energy boom – click here...

 Also, make sure you tune in for our latest webinar on Thursday, February 20...

Phase 1 Investor editor Frank Curzio has prepared a special presentation to explain a strategy he calls "flash bids"... It's a way to buy certain stocks for 25%-30% below their current prices. And it's a strategy Frank has used time and time again for the microcap stocks he recommends in Phase 1, our most expensive research service.

In the webinar, Frank will explain exactly what a flash bid is and how you can use it to buy stocks for huge discounts to their current price... Plus, we're giving everyone who signs up for this free webinar a one-time, special offer to sign up for Phase 1.

Again, we're hosting this free, live event on February 20. You can reserve your spot here...

 New 52-week highs (as of 2/18/14): Activision Blizzard (ATVI), Becton-Dickinson (BDX), ProShares Ultra Biotechnology Fund (BIB), BP (BP), Dolby Laboratories (DLB), GigaMedia (GIGM), Hershey (HSY), iShares Biotechnology Fund (IBB), Integrated Device Technology (IBB), SPDR International Health Care Fund (IRY), National Fuel Gas (NFG), Penn Virginia (PVA), ProShares Ultra Technology Fund (ROM), ProShares Ultra Health Care Fund (RXL), Targa Resources (TRGP), and ProShares Ultra Utilities Fund (UPW).

 We're on a roll... more positive feedback. But the streak can't last long. Send your e-mail to feedback@stansberryresearch.com.

 "Please understand that you are probably doing far more good than you can possibly know in helping grow financial literacy. This has certainly been true for me.

"I laugh at many of the questions you are asked. Others, I just shake my head in disbelief. Many are completely contrary to the core concepts you preach over and over. Some get it (are willing to learn) and others, well, they are probably selling their EBT cards to fund their trading accounts.

"So as one of those who has benefited tremendously from your newsletters, I just want you to understand that there are many more like myself who are spending our time learning and creating wealth and so, we are probably the least likely to call in.

"As a long-armed Flex Alliance member, I just wanted you to hear from the rest of us who are busy growing our wealth through your education.

"Please don't spend so much emotional energy on the fools (although I think your 'sucker list' could prove quite lucrative and would be a great way to move assets from the least productive to the most productive).

"Please don't quit because of these fools. I'm confident that does not represent the vast majority of your audience.

"Maybe on your next show you can request 'the rest' of your audience respond about what they have learned and how you have helped them. I think it would be energizing." – Paid-up subscriber John Plumberg

Regards,

Sean Goldsmith 
Delray Beach, Florida 
February 19, 2014

Follow these rules to protect your money…

Editor's note: Today's Digest Premium is an excerpt from the most recent Retirement Millionaire. In that issue, editor Dr. David "Doc" Eifrig shared nine rules to follow to make sure you're not wasting money.

As Doc explained to subscribers, "never overpay" is a cardinal rule for preserving wealth... and he decided to dedicate the March issue to nine more "nevers" that will help you protect your money.

We've included the first two rules from the list below…

No. 1: Never Buy a New Car

Most people have heard that when you buy a new car, it loses a big chunk of value as soon as you drive it off the lot... But how much?

We ran a quick test using my favorite American car – the Ford Taurus. According to the Kelley Blue Book independent vehicle-valuation service, you can still buy a new 2013 Taurus for $25,504. The "fair price" for a used 2013 Taurus in excellent condition: $19,358. The car drops in value by 24% that first year. Is it worth an extra $6,000 just to be the first to drive this car? Not to me.

You can see how big your savings are going from new to used when you look at a few more years in this table below. The table below shows the current prices you could get on the following model years and mileages, according to the Kelley Blue Book.

Don't ever pay extra for the "new car premium." The savings of $8,000 every six or seven years over a few decades of car driving adds up to nearly $100,000 extra money in retirement. The dividends from investing that money over time could allow you to drive a brand-new car and do other things with the extra money in your retirement. But spend it early and you're broke in your later years.

No. 2: Never Buy Expensive Insurance-Investment Products

There's an idea floating around out there that whole-life insurance policies are a great way to build wealth and income for your future. The idea is that whole-life insurance policies allow you to save up your own money and get insurance for your family in case of death. Late in life, you can draw down on the cash value of the policy to support your idealized lifestyle... Or if you die early, your family will get paid the agreed insurance amount.

But that sort of protection can be had with much cheaper term-life insurance. And the big trouble with whole-life is the fees. Whole life typically takes a big upfront commission when you start saving. If you understand the phenomenon of compounding, you know that a small change in your savings early on can lead to a big change in your wealth.

If you put away $1,000 per year with investment returns of 7% starting right now, you'd have $44,865 in 20 years. One program I've heard about takes nearly 25% in fees out the first year. That's a joke. Don't ever do it.

Under those terms... you'd end up with just $40,995 after 20 years. That means $1,000 of savings today is worth $4,000 in the future. So why pay a big chunk of your most valuable savings to fees? You've started in a hole, and you'll never climb out.

Add to that, the most generous whole-life policies pay about 4.5% a year. The stock market returns about 8% a year on average. So you're not only starting behind, you're running at a slower pace.

If you reinvest in a company with growing dividends of just 6% a year and start with an average boring stock paying a 3% dividend, you're looking at having $29,033 in 30 years... 1,093% more wealth!

Also, whole-life only works if the insurance company is still able to pay you in 30 years. In this day of low interest rates and low returns for insurance companies, that's a real risk over the next decades. Avoid life-insurance products.

Editor's note: You can access Doc's seven other rules for preserving your capital in Retirement Millionaire. Also in the March issue, Doc shares "a rare opportunity" in the stock market today… This company's shares were wrongfully punished due to a corporate mishap. But those issues will pass. And today, you can pick up shares for a big discount… And collect a 3% dividend. To access this issue, you can sign up for Retirement Millionaire for only $39 a year here…

Follow these rules to protect your money…

In today's Digest Premium, Retirement Millionaire editor Dr. David "Doc" Eifrig shares easy-to-follow rules to make sure you're preserving your hard-earned capital.

To continue reading, scroll down or click here.

Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)

As of 02/18/2014

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

Stansberry & Associates Hall of Fame
(Top 10 all-time, highest-returning closed positions across all S&A portfolios)