The S&A Digest: Born free

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

As of 06/26/2013

Born free... Dollar sinks (shock!)... Whitman channeling Bonner... Weber: Gold to hit $3,000... Major HIV discovery... Lundin on the move, again... My tax faux pas...

Yesterday, the Fed cut interest rates by half a point to 4.75%, the first cut in four years. Stocks surged... and the dollar fell to a new low.

"The U.S. has so far in the 21st Century achieved prosperity and paid for prosperity with a steadily deteriorating credit-worthiness..." says Marty Whitman, one of the world's most renowned value investors. If that sounds familiar to you, perhaps you've been reading my friend Bill Bonner's books: Empire of Debt and his latest, Mobs, Messiahs, and Markets. Thinkers like Bonner and analysts like Whitman see something in our economy the Fed, Congress, and most investors studiously ignore: While asset prices have risen (fueled by the booming credit markets), the real wages of most Americans have been falling. At some point, these two forces must collide. Housing, for example, has become extraordinarily expensive, as compared to wages. What happens to our "prosperity" when most people can't afford to buy anything, unless it was made in China?

"I've repeatedly said that my target for gold was $3,000 per ounce... With so few people owning gold or silver, it makes me think that we are still very close to the start of the bull market, and not near its end..." – Chris Weber, in the latest issue of his newsletter, The Weber Global Opportunities Report.

Predicting $3,000-per-ounce gold might sound ludicrous... except, in this case, the man doing the talking made a fortune in gold in the 1970s, bought bonds in 1982, and started buying gold again in 2001. Argue with Weber at your own financial peril. When it comes to interest rates, currencies, and precious metals, there isn't a better analyst in the entire world.

"September is a good month for biotech stocks... They hold lots of conferences and release lots of data," explains George Huang, half of our all-star biotech team. Yesterday, one of the team's first recommendations, Sangamo (SGMO), presented data showing that cells can be made permanently resistant to HIV. The study also showed that some of the treated cells survive and multiply after an HIV infection. Shares soared more than 12% on the news. For more about Phase 1, click here.

As we mentioned earlier this week, the Lundin family has taken a liking to Matt Badiali's list of prospect generators. Yesterday S&A Gold Report pick Cornerstone Capital Resources (CGP.V) announced it will raise $3.025 million through a private placement. The largest buyer is the Lundin family. Close behind are our friends Rick Rule and Doug Casey. To get a copy of Matt's prospect generators report, click here.

New highs: Alnylam (ALNY), CGG-Veritas (CGV), BHP Billiton (BHP), streetTRACKS Gold (GLD), Arcelor Mittal (MT), Annaly (NLY), Plum Creek (PCL), POSCO (PKX), Sangamo (SGMO), Schlumberger (SLB).

In the mail... more debate about Advanced Income and the quality of Dan Ferris' work. Join the fun. And add your voice to the raging chorus of malcontents and bellyachers: feedback@stansberryresearch.com.

"Since the fed has opted for the path of least resistance (interest cuts) it seems obvious that the direct consequence of such act will be the demise of the dollar. Can you please help us to find investments that can offset the dollar downfall as well as investments that will do well on an environment of very high inflation." – Paid-up subscriber Antonio

Porter comment: Mnnnn... Let's see, maybe you've heard us mention gold or silver once or twice in the last five years? Seriously, the last issue of my newsletter (Porter Stansberry's Investment Advisory) I spent half of the space explaining how to get 16-to-1 leverage over gold (for free) in the perfect inflation hedge.

"I just had to add my two cents to the recent discussion on Jeff Clark's Advanced Income newsletter. I love covered call writing and I was pleased when I learned that Advanced Income uses that strategy... The naysayers should consider this; instead of waiting for a stock to go up to make money, consider making money every month whether it goes up or not! Yes, you limit your upside, but how many times do you pick winners that actually go up significantly in a short period of time? I'd rather make my 7% every month (with leverage) whether my stocks go up or not than to sit waiting for a stock to go up. You do the math on 7% per month compounded..."

– Paid-up subscriber and "huge fan of Advanced Income" Mark Radford

"Porter, if indeed 'the middle class is overwhelmingly invested in the stock market with 401k plans and IRAs' (and I think it is true), then increases in capital gains and dividend taxes would not affect them. They are destined to pay ordinary income rates on all their ultimate withdrawals (except Roth IRAs) but there are no taxes on dividends or gains along the way. This is not by way of supporting the idea, I simply wanted to point out that this is not really a criticism of it." – Paid-up subscriber J McDonald

Porter comment: Yes, that's certainly true and a valid criticism of what I wrote – technically. But limits on contributions to those tax-free accounts mean very few members of the real 'middle class' don't have taxable investment accounts too. The fact is, the 'middle class' – families earning $75,000-$250,000 per year – pay for about half of all income taxes collected, with the 'rich' paying the other half. It's impossible to give $1,000 to 100 million Americans without the 'middle class' funding about half of the payout. OBAMA! knows this, of course. In politics, 'middle class' is a euphemism, a phrase that excuses all political plunder and vote buying. Anytime a politician promises to aid the 'middle class,' grab your wallet.

"OPAWTAH! doesn't like Obama's observation that we depend on each other, especially in perilous time. Does OPAWTAH! think we can all act independently of each other? Oh OPAWTAH!, it's no wonder so few of my holdings are your picks (one good one, though – NOKIA!)."

– Paid-up subscriber James Wood

Porter comment: We all are born independently of each other. The ties that bind us, in a civil society, are voluntary. The idea of America was based almost entirely on this notion – that individuals have a God given right to their liberty because, in fact, they are born free. America has become encumbered and corrupted by men who seek to live at the expense of others and through the coercion of their neighbors. History shows very clearly what happens to nations who follow the pied piper of political promises.

"here's my take on the likes of Brian Davis... weak bellied ingrates... the cost of the subscription is mini-mini-mini compared with the entertainment factor – i.e Porter – and the education factor – i.e Dan Ferris. All of you are bright and sharp and I find several of your newsletters wonderful read, but Dan? he wins everytime... he is an uber teacher... giving the nuts and bolts of investing with such ease and elan. I have learned more from his writing than anyone else's. And Porter, don't feel left out... I like your brights too."

– Paid-up subscriber "Jane Doe"

Regards,

Porter Stansberry

Baltimore, Maryland

September 19, 2007

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