The S&A Digest

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

As of 07/02/2013

Gore is "insane"... Newsweek predicts global cooling... Japan hits a new high... Watching the mortgage insurers... A positive turn in Venezuela could boost Harvest Natural Resources...

Japan's Nikkei index closed at a six-year high yesterday, led by banks and real estate developers.

Will the meltdown in subprime lending spread to the rest of the mortgage business and into other types of finance? It doesn't look like it. How do we know? Check out shares of the two main mortgage insurers, PMI Group (PMI) and MGIC Investment Corp (MTG). Over the last three months, both stocks are up 10%.

Fears surrounding Hugo Chavez's sudden nationalization of key Venezuelan industries are fading after the government bought Verizon's stake in CANTV for a fair price. Famed investor Mohnish Pabrai owns a big stake in Harvest Natural Resources (HNR), which produces oil and gas in partnership with the Venezuelan government. The stock is down to $10 from $14 on fears the terms of its deal will be "reworked." If Venezuela doesn't start to confiscate foreign properties and the current deal with Harvest is approved by the legislature, Harvest's stock could soar.

We wrote it – it was our first S&A Gold Report recommendation – did you buy it?

Cumberland is a $215 million market cap company. A conservative estimate, based only on its booked reserves, means you pay $74 per ounce of gold in the ground! That's an 89% discount at the current gold price! If that's not enough value, Cumberland also has $27.6 million in cash and no debt. At the very worst, you are left with a great company whose assets you bought at a significant discount.

– Matt Badiali, S&A Gold Report, June 2006

Today, Agnico Eagle made a $710 million bid for Cumberland (CLG). That would value the share price at C$8.88, for a gain of nearly 94% since Matt's recommendation.

Could it be yours? Today at midnight, a $3.5 million Connecticut lottery ticket will be deemed worthless. Lottery winners are usually given one year to redeem their prize, but a surprising number of people fail to do so. In the past, a $14 million jackpot went unclaimed in Illinois, and the record is an unclaimed $51.7 million in Indiana.

We made a small blunder yesterday that confused several readers... At the top of yesterday's Digest, our first teaser read: "Gore is insane," but there was no corresponding bullet. The president of the Czech Republic, Vaclav Klaus, told a reporter Al Gore must be "insane" to believe in global warming. We have no position on Gore's sanity... we're worried about his health. The poor bastard must be 50 pounds overweight. His eyelids have begun to droop so precipitously low, it looks like he's going to lose an eyeball at any moment. He has always moved with the fluidity and grace of a frozen caveman. But now his gait is positively wooden. Is he suffering from gout? When we saw him at the Grammy Awards on Monday night, we thought they sent Frankenstein to the podium. Take a look here.

On global warming, we do have a position. It is the uber-bunk of our time, the big lie that's too popular for politicians to ignore. Ironically, today's big lie is the exact opposite of the last big lie, which was spawned by Paul Ehrlich's Population Bomb, a best-selling book of the early 1970s. Ehrlich, a professor at Stanford University, predicted the world's population would grow too rapidly to be supported by farming, resulting in a mass famine. Ehrlich wrote that in 10 years England would cease to exist because everyone there would starve to death. Part of the drama was the risk of global cooling.

As Dennis Gartman reminded me today, a 1975 Newsweek cover story proclaimed:

The evidence in support of these predictions has now begun to accumulate so massively that meteorologists are hard-pressed to keep up with it. In England, farmers have seen their growing season decline by about two weeks since 1950, with a resultant overall loss in grain production estimated at up to 100,000 tons annually... Last April, in the most devastating outbreak of tornadoes ever recorded, 148 twisters killed more than 300 people and caused half a billion dollars' worth of damage in 13 U.S. states. To scientists, these seemingly disparate incidents represent the advance signs of fundamental changes in the world's weather. The central fact is that after three quarters of a century of extraordinarily mild conditions, the earth's climate seems to be cooling down. Meteorologists... are almost unanimous in the view that the trend will reduce agricultural productivity for the rest of the century. If the climatic change is as profound as some of the pessimists fear, the resulting famines could be catastrophic.

New Portfolio highs: Southern Copper (PCU).

The mail never stops. And so, we keep reading your notes. We read every single letter that's sent to us at feedback@stansberryresearch.com. We print a representative collection in these pages, but we can't reply to you individually. (Also, please understand... we don't handle customer-service requests through this channel. Please call our customer-service team directly at 888-261-2693.)

"I can't be as vitriolic as some of your subscribers. I today closed out a 6-day put position up 212% on Jeff Clark's recommended WTW short. Not bad for a free newsletter [The Growth Stock Wire]." – Paid-up subscriber Shawn McGuire

"I am disappointed with your last S&A Digest. The first headline "Gore is Insane" made me open right away to find out what this moron has done now. Alas, no mention of his insanity... Please explain?" – Paid-up Anonymous

Porter Comment: Yes... as I explain above... we edited out the Gore brief but forgot to delete the header about Gore. Sorry about that...

"After years of doing all of my own research and discovery, I have come to value the efforts each of your authors put into their reports... Though I fully understand and subscribe to the rationale of your training stops, sometimes the message is lost in the moment. I can tell you that it takes a great deal of effort to overcome the emotions involved in selling a loser, selling out of a winner 'too soon,' or watching a stock continue to climb when I didn't have the money to buy a position at the time it was recommended." – Paid-up subscriber Dave Black

Porter Comment: From what I've seen, it takes a few months to learn what you need to know to be a stock investor – the math, the SEC filings, the theories, etc. I've taught dozens of analysts these concepts. But it takes years and years to learn the emotional discipline required to avoid bad decisions.

"I cannot believe the trash I read from many of the morons who subscribe to your services. I'm a fairly new member of the Alliance and absolutely love everything you and your guys write and send. I've changed my portfolio to many of the opportunities you have recommended, particularly the advice on buying the stocks of companies on the hate lists, like homebuilders. Keep up the good work and tell the losers who write the hate e-mails to go to hell. Don't be polite to these morons." – Paid-up subscriber Ron Martin

Porter Comment: I'm polite to every customer, because I've got nothing to hide and nothing to apologize for – except for my stock picks that don't work out. We're not afraid to print the letters of our detractors because we're always willing to refund your money and part as friends. Can you name another business that does these two things – publicizes criticism against itself and offers refunds?

"While some of your subscribers do not seem to like the marketing materials you send, even referring to it as 'junk' mail, I would like to advise you that in the summer of 2001 I received one of your promotional e-mails touting a small vaccine company working to develop a nasal spray flu vaccine. I decided there was enough information presented on the company being promoted for me to dissect the information provided and find the company on my own. There was, I did, and it was a small Canadian company named ID Biomedical. I liked what I saw when I researched the technology and spoke to officers of the company via the telephone and after a reasonable amount of due diligence, I purchased some shares in the later summer of 2001 at around $3.00/share. In December 2005, I sold those shares at slightly less than $30.00/share. Always remember: One man's junk is another man's treasure. Thanks for the 'junk' e-mail."

– Paid-up subscriber Ken McGaha

"Per Ian's recent study on the yen, I was drawn to the BMI. While I am bullish on Japan as well as Iceland (no, you don't need to turn bearish), I did notice that Iceland has the most expensive Big Mac relative to the USD. Should this be a concern with Steve's Iceland recs? I must admit I'm ignorant when it comes to understanding forces that move currencies, but I have a lot of money in Iceland! Thoughts?" – Paid-up subscriber Brian Heyliger

Porter Comment: Iceland is always at the top of the list. It's an exception to the standard because it's a tiny island nation, where everything that's imported is very, very expensive. In the case of Iceland, the Big Mac Index simply doesn't work very well.

Regards,

Porter Stansberry

Baltimore, Maryland

February 14, 2007

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