The S&A Digest

Who needs college when you can paint?... Another one bites the dust... Ah, Summers in Singapore... Jim Rogers weighs in... And more college...

Goldsmith comment: The boss was up until 6 a.m. working on his latest issue... which will be published today. He's asked me to step in for him, again.

 Graham Summers recently traveled to Zurich and Dubai in order to see how these two economic powers amassed such amazing wealth... and he passed the secrets on to you. Now he's off to Singapore. Aside from its canings, Singapore is also known for its strong market-based economy. It is the 18th wealthiest country in the world and one of the four "Asian Tigers." If any of you have contacts in Singapore, or reside there yourself, please send us a note.

 Yet another mortgage lender is forced to close its doors. Last night, American Home Mortgage (AHM) announced that nearly 7,000 employees will lose their jobs as the company ceases most of its operations. Experts believe AHM will seek bankruptcy protection no later than Monday.

What's scary about this situation? Last year, AHM originated $59 billion in mortgages... and most of those were to people with better credit than subprime. Shares are now trading at about $0.75 – down from around $20 at the start of July.

 "Given solid wage growth among consumers and strong balance sheets among corporates, we do not anticipate that the credit crunch in the highly leveraged asset classes will tip the economy into recession." Morgan Stanley today raised its industry outlook for large-cap banks, believing the bad news and credit tightening are already priced in. The Ultra Financial ProShares (UYG), an ETF that returns twice the performance of the Dow Jones U.S. Financials Index, is down 24% since its launch in February.

 Jim Rogers disagrees. Rogers believes the subprime debacle has "a long way to go... This was one of the biggest bubbles we've ever had in credit, I have been and am still short the investment bankers in America. I'm also short homebuilders." When it comes to macro bets, Rogers is usually spot-on. He predicted the commodities boom in 1999, and is currently calling for oil to hit $100 per barrel (which suddenly doesn't seem that far off).

 Since June 22, investment banks have shelved 46 buyout deals. How many deals were put on hold last year? Zero. Investment banks are predicting a several-month-long period during which no buyouts will occur, as they are stuck with hundreds of billions in unsold debt.

 Company of the day: Audible, Inc. (ADBL) offers audio entertainment on the web. The company provides audio editions of books, newspapers, magazines, and TV shows. The $290 million company has yet to turn a profit. The balance sheet looks good, with $19 million in cash and no debt. Audible brought in $13 million in cash in the past four quarters.

 New highs: Gen-Probe (GPRO), Nokia (NOK), Oakley (OO), Raytheon (RTN), Sigma-Aldrich (SIAL).

 How long can we beat a dead horse? Well, we'll see if we get any more e-mails about college over the weekend and let you know. If you'd like to weigh in on anything else, please do... feedback@stansberryresearch.com.

 "More on the college issue... [My education in accounting] was worth it, in that I feel I have a decent understanding of accounting, which I feel enables me to work in any company or start any company. Which is what I did. I now own my own side business, a juice and smoothie bar, which I do all the books for. It is still a start-up company (only one year into it) so it hasn't provided me a return yet, but it is paying for itself at the moment. If sales continue to increase at the rate they are, I will be making pretty good money off of it by this time next year, and I only spend a couple of hours a week working on it. (I do agree with a previous comment that I could have learned just as much or more if I had been an apprentice to a CPA. I do wish that old tradition was used more today.) But, on the flip side of that coin, my older brother didn't go to college. He went to prison instead. When he got out after a year or so, the only job he could get was as a painter. After a year or so painting, he decided to start his own painting company. Within another year, he had enough contracts and guys working for him, he no longer paints and earns three times what I earn in a year. In fact, he just hired my younger brother to manage a job for him out of town for six months and is going to pay him the equivalent of my yearly salary for six months of work, and he doesn't have to lift a paintbrush either. And my younger brother got his degree in finance, but is now going to triple his salary managing a bunch of painters. Maybe I should have been a painter." – Paid-up subscriber Nate

 "May I chime in on the university debacle? There is quite the negative feedback on higher education. If you are 24 today without a degree, you are doomed to work at Starbucks forever. My sister is 24 and 14 years younger than me. She can't find a job paying more than $9 an hour or so. Employers just do not hire uneducated 25-year-olds any more and say, 'Let me show the way, son!' Those days are long gone. One gentleman stated, 'Experience is the key to success.' I believe this to be true as well. However, if you don't have perseverance, you probably won't obtain experience. College is about perseverance... not giving in to the path of least resistance. That feeling is exhilarating! Or maybe it's just me. When I was a kid, we grew up VERY poor. At one point we lived in the Fresno Rescue Mission. Yes, the one on G street. We all have our opinions, and truth be told, they are ALL right. Right for you, because your perception is your reality. What seems REAL to you is REAL to you. For me, education was freedom from poverty. So my perception is a positive one. At the end of the day, education teaches you to be open-minded enough to see another's viewpoint... And actually consider and validate their ideas. Criticizing higher education is a different version of religion. 'Only OUR religion will go to heaven.'" – Paid-up subscriber C. Hutton

 "I dropped out of electrical engineering school because I hated calculus. I went and got a two-year electronics degree. I was hired by Micron a week after I got out of school. A little hard work and a lot of common sense got me to the senior engineer level and I am happy that I have never had to use calculus." – Paid-up subscriber Jim Dale

 "How do Americans defend against the weakening dollar? With the dollar approaching the important resistance point of about 80 [against the euro]... what can individuals do?" – Paid-up subscriber Stephen DiGiacomo

Goldsmith comment: The same thing rich people have done for centuries to protect themselves against currency debasement: Own monopoly-like businesses and precious metals.

 "I have a company 401K that I want to roll over into an IRA. I want to be able to buy and sell the investments that are recommended by Stansberry, so a discount broker won't do the trick. What brokers do you recommend? Also, what's involved with opening a Swiss bank account and can IRA money be in another country?" – Paid-up subscriber Kevin S.

Goldsmith comment: We're not allowed to recommend brokers. As with all tax questions, we recommend checking with your financial planner or accountant.

 "While your replies to disgruntled subscribers are sometimes harsh, I figure you're tired of hearing complaints about people failing to do their own research AFTER getting a researched recommendation. I believe you're providing a suite of newsletters with offerings covering a gamut of markets and interesting investment opportunities. As for me? I'm up 50% with my selection from your recommendations based on my preference, choice, and risk disposition."

– Paid-up subscriber Leonard H.

 "Oil just traded at $79 a barrel. Yet you keep scorning the 'peak oil theory' (which merely says the easy oil era is over and the oil bull is here to stay). Why don't you answer a simple question: Where is the oil going to come from to meet the China-India demand and make up for the declining major oil fields around the world? Natural gas is not an answer: Heavy trucks and cars don't run on it. The Chinese are building cars that run on gasoline. Technologies to convert natgas can't possibly meet the huge demand and the declining oil fields." – Paid-up subscriber Fernando

Goldsmith comment: Fernando – we don't disagree that most of the "cheap oil" has been found... and that oil prices will likely remain strong as long as the credit bubble doesn't cause a global depression. We do disagree with anyone who believes we're headed for an apocalyptic scenario caused by the increase in finding costs for oil. Mankind has proven for centuries that when the price of a given commodity rises a great deal, investment in alternatives and new technologies will alleviate supply crunches. Watch what happens if oil reaches $100 a barrel. You'll see rivers of oil flowing out of the Athabasca tar sands and American oil shale.

 "Porter I don't seem to understand why you won't post any of my letters."

– Paid-up subscriber Steve Hunter

Goldsmith comment: There you go, Steve.

Regards,

Sean Goldsmith

Baltimore, Maryland

August 3, 2007

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