Goldsmith comment: Porter is caught up in meetings and finishing his latest issue of PSIA, so he's off Digest duty today. As usual, he had time for one "Porter comment."
We will publish Porter's latest PSIA issue, titled The Only Trend that Matters for the Next Decade, after market close today. In this issue, Porter recommends his two favorite trades this year. I can't disclose any details without giving away too much. But I can say one recommendation is long and one is short. They are both super-safe, long-term trades. And the long trade will pay you nearly 8% a year in cash. To access Porter's latest issue, click here...
Digest readers are familiar with short seller Jim Chanos' China thesis (from the December 17, 2009 Digest):
Chanos also believes a massive bubble is forming in China. He thinks China is misstating its GDP numbers by "underdepreciating a shaky capital base." Just last night, Chinese authorities talked about increasing loan volume by another $1.2 trillion. On the topic of credit excesses, not valuation excesses, signaling inflation... Chanos says there's "no bigger credit excess than China right now."
Chanos is shorting China through the Hong Kong-listed "H shares." He also sees short "opportunities in all commodities producers." If, as Chanos predicts, China is fudging its numbers, its forecasted commodity demands will be much lower than expected. He's shorting copper, cement, and iron-ore producers worldwide.
Chanos isn't shy about broadcasting his short positions to the world. He explained his take on China to CNBC, Politico, and anyone else who would listen. The more China skeptics out there, the more money Chanos makes. On his media circuit, Chanos caught the ear of a fellow investment guru with the opposite opinion...
Possibly the world's biggest China bull, Jim Rogers, who penned the book A Bull in China, tired of Chanos' bearish opinions. The New York Times today quoted Rogers saying, "I find it interesting that people who couldn't spell China 10 years ago are now experts on China. China is not in a bubble."
Rogers, also known for shamelessly touting his books, clearly aimed that remark at Chanos, who only started studying China last summer.
So which guru is correct? Chanos has an exceptional record of discovering profitable short sales (Enron, Boston Market, for-profit educators, etc...). But Jim Rogers is rarely wrong predicting macro trends.
Porter likes to tell the story of when he met Jim Rogers in 1998. Commodities were in a free fall. Rogers was having dinner with Porter and Sjuggerud in the penthouse of the Windsor Court Hotel in New Orleans. They were discussing trailing stops as an investment strategy. Rogers said he never used trailing stops.
Porter said, "Jim, you're piling into commodities, but they're continuing to go down. When will you know to get out?"
Rogers replied, "That's easy, I'm never wrong."
We're siding with Chanos on a short-term China correction. But we think Rogers will be proven right in the long-term...
Our own Jeff Clark has been weighing in on the China debate recently. Jeff is bearish, but he isn't shorting any stocks. And to make his latest trade, you don't have to send your money overseas. Instead, Jeff shows his readers how to use a little-known U.S. investment to take advantage of the huge volatility in China's stock market. Jeff says, "You could collect thousands of dollars in income from China traders." And despite Jeff's bearish position, the trade he constructed will make money no matter which way the market goes. It's a much safer bet than anything Chanos has discovered. To learn more, click here...
New highs: Fairholme Fund (FAIRX), iShares Hong Kong (EWH), Cresud (CRESY), Valhi (VHI), New York Times (NYT), Patterson-UTI (PTEN), Cohen & Steers REIT & Preferred Income Fund (RNP), iShares High Yield Bond Fund (HYG), AmeriGas Partners (APU), Humboldt Wedag (KHD), Longleaf Partners (LLPFX), Sequoia Fund (SEQUX), Prospect Capital (PSEC), Encore Acquisition (EAC), Connacher Oil & Gas (CLL.TO).
In the mailbag... why Dykstra? Ask us any questions, here: feedback@stansberryresearch.com.
"I track your newsletters by looking at equal dollar buys of all stocks, include dividends, and compare to the same dollar buys of the equal weight S&P spyder RSP. The Resource Report beat by over 46%, and PSIA beat by 104%. Thanks for some great picks. Just wish I could have bought more of them." – Anonymous
"Congrats. Your day has finally come to be the next mayor of Baltimore. Just whatever you do don't steal from the poor. Maybe you could pass some more new laws that would make life in the city better for everyone like free icecream after every doctors visit. The costs could be paid for by tourists that enter the city and go to the Ravens games. Or just casual tourists walking around. Of course you would need to double the city law enforcement to determine who the tourists were but that is good for employment of course. Don't worry about any unintended consequences they all work themselves out in time. Just roll up your sleeves and dive in to the new job of being mayor. Good luck." – Paid-up Bryant Hansen
"Do you own any shares of GlaxoSmithKline? The more I read your newsletters, the more I think I should be taking Paxil." – Paid-up subscriber Alice
"Dykstra... Who cares?" – Anonymous
Porter comment: He's an archetype... for all of America... of people who thought they were rich, but were only stupid and in debt...
Regards,
Sean Goldsmith
Baltimore, Maryland
January 8, 2010