THE S&A DIGEST

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

As of 07/05/2013

Who pays when "prop" traders lose big…? Apple’s options problems grow… Defending our currency – with criminal sanctions… Poor Miss USA… Badiali’s long-lost love doesn’t recognize him… My drunken colleague complains… Subscribers doubt our ethics… more…

More signs of a top... outrageous pay packages for investment bankers. John Mack, the new CEO of Morgan Stanley, will earn $41 million this year. Not to be outdone, Lloyd Blankfein, CEO of Goldman Sachs, will earn more than $50 million. The earnings of the heads of Lehman Brothers, Bear Stearns, and Merrill Lynch will all be between $40 million and $50 million.

The shareholders and the clients of these banks are morons...

At Goldman, "prop" trading generated $6.63 billion in revenue – 70% of the total quarterly revenue. "Prop" trading means proprietary trading, where Goldman puts the firm’s money on the line. As such, these are very high-margin dollars. Goldman doesn’t break out the impact of trading on its bottom line, but it’s safe to say "prop" trading must have accounted for something around 90% of the company’s profits in the quarter. What’s wrong with this?

Goldman used to be a partnership, where the partner’s capital was on the line. Good quarters (like the one past) were paired with bad quarters. But now that Goldman is owned by the public, the traders at the firm have been offered a one-way bet. If they take risks and make big gains, they get huge bonuses. This year, Goldman will spend 48% of its revenue for the year on compensation! On the other hand, if the traders blow up the firm? That’s too bad for the shareholders.

And Goldman’s customers? How do you think Goldman knows where to put its money in the market?

We warned you... Apple was forced to delay the filing of its 10-K due to the options backdating that took place. The filing, which was due yesterday, will be delayed until some time next month.

China and the U.S. have struck a deal to allow the Nasdaq Stock Market and the New York Stock Exchange to establish formal offices in China. This might allow the exchanges to "cut out the middleman." Instead of Americans borrowing money from the Chinese to invest in American stocks… the Chinese might decide to simply invest themselves.

Now you know... According to economist Robert Shiller, inflation-adjusted house prices in the past five years logged the second-fastest cumulative growth since the administration of William McKinley 110 years ago.

The U.S. Defense Department has requested an additional $99.7 billion to fight the "War on Terror" in Iraq. This request comes on top of an already granted $70 billion for 2007. The possible $170 billion spent in 2007 would be a record.

Richard Russell on a simple, foolproof way to stick it to our government: "With base metals hitting record highs, U.S. pennies and nickels now cost the government more than their net worth. This tempts people to melt down the U.S. coinage for the metal value. Accordingly, new regulations bar the melting down of 1-cent and 5-cent coins with penalties of up to five years in prison and a fine of up to $10,000. So what’s next, cardboard pennies and nickels?"

Porter Comment: Look at the historical track record of governments that make it a crime to deface their worthless currencies.

Speaking of sticking it to the government... Belgium’s state television broke into regular programming late Wednesday to announce the country was disintegrating... The Dutch-speaking half of the country had declared independence. The king and queen had fled the country. Television images showed the royal entourage boarding a plane. Embassies began urgently tracking down Belgian authorities to find out the legal status of the breakaway republic. Foreign journalists jammed the government’s phones, too, looking for a quote. But the entire news report was a hoax!

The royal family was offended by being portrayed as fleeing the crisis. The vice premier said the situation was "totally unacceptable."

The reigning Miss U.S.A. may lose her crown for inappropriate behavior in New York City bars. (There’s got to be a video of it somewhere on the Internet...) Representatives of the contest did not say specifically what Tara Conner did to put her crown in jeopardy. Donald Trump – the paragon of virtue who owns the Miss U.S.A. and Miss Universe pageants – will decide next week if Ms. Conner is able to keep her crown.

New highs: Telstra (TLS) at $15.81, Akamai (AKAM) at $54.40, MCG Capital (MCGC) at $20.80, Coke (KO) at $48.90, Tejon Ranch (TRC) at $54.43.

And now… your recriminations. Well... actually there is only one very threatening letter today... and it comes from a colleague. The Christmas spirit must have infected our subscribers... or maybe it’s the fact that we’ve been so "lucky" this year with our stock picks...

PLEASE NOTE: Our office will be closed from Christmas through New Year’s Day. We think it’s important for our staff (more than 50 people now) to spend time with their families during the holidays. I hope you’ll understand. Give us a call on January 2, and you’ll find us hard at work again. ALSO, if there’s a golfer in your life, spend a few dollars buying Mike Palmer’s book, Secrets of the Irish Links. There’s no more honest, useful, and beautiful book available about golf… See for yourself here.

"I am really disappointed that S+A continues to publish, print, and e-mail re Tom Dyson’s promo on Canadian royalty trusts... This is very misleading advertising. Even though you give lip service to the proposed elimination beginning 2011. Novice investors are suckered in without any depth and breadth of the downside. I am astounded about S+A and T. Dyson’s gall. You have definitely put me on ALERT. I honestly thought you all had higher ethical standards." – Paid-up subscriber Alison Paul

Porter Comment: Well... sorry to disappoint you, Alison. We revamped our promotion to reflect the current situation, which we honestly find very attractive. Tom Dyson recently (November 14) wrote a new special report, featuring the three Canadian royalty trusts he likes most right now. Subscribers already have seen it... and the stocks are up 20% in a month. To get your copy, subscribe to Dyson’s 12% Letter and see the special report Four Years of Outrageous Dividends... if, that is, you don’t doubt our ethical standards.

"I have been a member for about half a year and I have been reading the reports put out by Matt Badiali. My wife grew up in State College, Pennsylvania, with a gentleman by the same name. It’s not a very common name so I mentioned it to her. She was, however, unable to tell from his photo in one of the newsletters, if it was him with just a bit more age and weight..." – Paid-up subscriber Todd Galant

Porter Comment: Says our own Badiali: "Yep, I dated her... and I’m getting my head shot redone."

"I for one try to read as much as I can from the S&A Digest. Both for information and entertainment, keep it coming. I know that Steve Sjuggerud is planning a trip to Argentina soon. If any of you travel there from Dulles on United Airlines stop by the cockpit and ask for ‘Paco.’ It would be a pleasure to meet you." – Paid-up subscriber and United Airlines 767 first officer Anthony "Paco" Trueba

"My account was handled previously with a growth fund at Franklin Templeton. Needless to say my $4,000 investment has been with them for over five years and was only worth $4,052 when I pulled the plug! My problem is this: Your investment strategy of picking 16 stocks and dividing them evenly creates a problem with the amount I have to invest – $4,000. This equates to about $250 per stock! Can I really invest such a low minimum per stock and expect decent returns?" – Paid-up subscriber Scott A. Ehlert

Porter Comment: Yes... your annual percentage gains will be the same, whether you invest $250 or $250,000. And, if you hope to replicate our results, you’ll need to buy the entire portfolio. Unfortunately, there’s no way to know in advance which of the 16 will go up the most...

"I decided that I couldn’t afford not to become an S&A Alliance member..." – New Alliance subscriber Daniel Hale

Porter Comment: Exactly!

Finally... the colleague who, at last year’s Christmas party, told my wife "I’d like you better if you were dead" sent me a note complaining about my Digest yesterday: "Since your general tone is strutting and peacockish, it’s unseemly and inconsistent to portray yourself as a victim as you did... Also, if the account were true it shows you’re a coward. Because, if that happened you should’ve knocked me out..."

Porter Comment: Come now... Quite the opposite is true. We found the matter delightfully entertaining… and we ascribe no value whatsoever to the ramblings of drunks. In fact, we attend such functions eager with anticipation... much like Nascar fans who watch gruesome wrecks with morbid fascination. Who will be the laughingstock of the Christmas party this year? We only hope it won’t be... us.

Regards,

Porter Stansberry

Cockeysville, Maryland

December 15, 2006

Stansberry & Associates Top 10 Open Recommendations

Stansberry & Associates Hall of Fame