The S&A Digest: "Fed Votes to Weaken U.S. Dollar"

"Fed Votes to Weaken U.S. Dollar"... Falling rates appeal to Zell... New York parking space: $300,000... Where to find 13.6% dividends... ExxonMobil safer than Treasuries...

 Ever wonder why the headlines of the Wall Street Journal never say, "Fed Weakens Dollar"?

I do, especially when the Fed drops interest rates to 2%, like it did yesterday. When the Fed cuts rates, it is destroying the currency to help out its friends on Wall Street. You might not be able to afford a vacation this year, but some overeducated paper shuffler in New York will get a bonus big enough to buy a Ferrari.

So naturally, the analysts are all gushing over the Fed these days. Check out the following comments, made in the wake of yesterday's rate cut...

"One of the areas where the Fed has clearly helped restore confidence is by providing more support for the market view that debtholders of systemically important financial institutions will always be made whole."

~ Lou Crandall, chief economist at Wrightson ICAP in New York

 "The Fed's moves did work. They took pressure off the market in a particularly bad moment and they convinced everyone that everything is OK."

~ Christopher Whalen, managing director, Institutional Risk Analytics for Lord, Whalen

"[The Fed has] prevented the market from having a complete meltdown... and you have to give them credit for that. And you notice all the capital infusions since then? Investors are spending money, and that's exactly what the Fed wanted to happen."

~ Adam Schneider, credit crisis leader at Deloitte Consulting

This isn't analysis. It's cheerleading. These guys ought to get fired soon, but they'll probably get kudos for being quoted in American Banker.

And yet, some rich investors who really know what they're doing are making new investments in areas hit hard by the credit debacle...

 Billionaire Wilbur Ross is trying to raise $4 billion to invest in American regional banks that have been hit by the credit crunch.

 Sam Zell thinks institutional investors are returning to the market for mortgage-backed securities linked to commercial real estate and new construction. "Is it in large volumes? No," he said. "Is it the first natural step in the evolution? Yes."

 New York City property owners aren't jumping for joy over any lousy rate cut. New York City mortgages that were 60 days delinquent hit 2.5% in the fourth quarter, the highest since 1992... and a 15% increase over the previous quarter. Of course in 1992, you could buy a Manhattan condo for $300,000. Now $300,000 in New York will buy you a parking space. The delinquency rate is up 74% since last year.

Yields from property may be at risk. But not those from primordial goop sucked out of the ground...

 This week, Penn West Energy Trust (PWE) sent out its monthly dividend check.

Penn West is an $11 billion oil and gas trust based in Calgary, Canada. The company is currently yielding 13.6%. Oil at $110 will bring that higher still. Penn West is the safest high-yielding energy stock out there.

So far, Monthly Dividend Program readers have received nine dividend checks, with another 10 on the way this month. All in all, the program's Top 10 monthly dividend stocks – including Penn West – are up 5%. If you're interested in a complete system to make extra income every single month, we encourage you to check out the course. Click here to learn more.

 In America, $4 gasoline seems like the end of the world. People are whining from coast to coast about high gasoline prices... though I rarely hear the same voices whine about the fact that a new refinery hasn't been approved in the U.S. since the 1970s. Nor do I hear anyone complaining about federal and state gasoline taxes, which are huge.

The reality of the impact of gasoline prices is, of course, nothing like what most people think. The price of fuel is increasingly irrelevant. It's maybe 20% or so of the cost of driving your car.

Oil prices aren't up because the world is running out of oil. It isn't. Oil and gasoline prices are up because they're priced in dollars, and the big reveal of the dollar's intrinsic value is under way. In fact, the cost of getting a barrel of oil out of the North Sea today is just about what it was to get it out of Spindletop, the East Texas gusher that produced oil from 1901 to about 1936. The dollar, on the other hand, has lost much of its value since then.

 For investors, the answer to $4 gas is easy. Buy Extreme Value pick ExxonMobil (XOM). It's done the equivalent of building a new grassroots refinery every three years, in a country where that's been impossible to really do for more than 30 years.

ExxonMobil made almost $11 billion of profit last quarter. That was less than Wall Street "expected." But where I come from, $11 billion is a lot of money.

Kurt Wulff, analyst at McDep.com, says ExxonMobil shares are safer than Treasuries. "We had thought that inflation-linked government securities were the safest investments to anchor a diversified portfolio, but... a proportionately large investment in the world's leading corporation is 'safer.'"

If you'd read the July 2006 issue of Extreme Value, you'd have come across this:

"I think you should take 15%-20% of your account, BUY ExxonMobil (NYSE: XOM) and hold onto it for at least 20 years. I think you should continue to buy whenever the price is right – which is almost always – in order to keep a large portion of your account in it. You should also reinvest all of the dividends you receive."

ExxonMobil was $64 a share then. It's around $90 now, plus it's paid more than $2 in dividends. If you fear anything... inflation... the credit crunch... ExxonMobil is your ticket. It's a natural inflation hedge, and it's one of the few AAA corporate credits on Earth, with more than $36 billion in cash on its balance sheet.

 New highs: Sadia (SDA), Aracruz Celulose (ARA), StatoilHydro (STO), Chevron (CVX).

 Sean Goldsmith, Tom Dyson, and I will hit the Berkshire Hathaway annual meeting this weekend. If you plan to be among the 30,000 or so people attending, let us know at feedback@stansberryresearch.com.

 "I am most fortunate to have to pay about $250,000 in Federal Income Tax every year. Of course, that means that I'm making great big money in order to do that. However, when the dumbocrats wistfully suggest that the 'rich' need to pay more money to feed the appetite of the government, I realize how 'dumb' the dumbocrats really are!! I'd like to compare how much I pay in Federal Taxes to any of those dummies and then have them tell me face-to-face that I should have to pay more taxes. Already I pay the same amount of taxes that at lease 20 to 25 other average citizens pay. And they want the rich to finance the government? C'mon. What I'll do is to quit working so hard and not earn as much money so I won't be able to be considered 'rich' anymore. Then what will these dummies ask us for?" – Paid-up subscriber Dave Johnson

Ferris comment: You raise an interesting point. The government taxes alcohol and tobacco and freely acknowledges these "sin taxes" as penalties designed to discourage use. But when it comes to our incomes, they throw Economics 101 out the window. They don't seem to understand that, at some point, income taxes will force us to take our work and our portable property elsewhere.

 "We are paying a higher percentile of taxes with way less representation than the king & queen of England gave the founders of this country many years ago. The political party affiliation doesnt make one iota of difference. There is so little separation of party, politicians are the same, greedy, self serving bullshit artists that will say anything to get into office. Once they accomplish this seemingly minor feat, the only thing they want to do is pass bills into law that serve their own selfish needs, without caring one bit about what the working class majority of this country thinks about the current state of affairs. By the way we (the working class majority) are the people paying the bills around here. What happened to good old fashioned government, when they actually asked the peoples opinion by voting on a majority rules basis, instead of just whatever suits their wallet at any given moment." – Paid-up subscriber Mike B.

Ferris comment: Yeah, we're really a bunch of whipped dogs, aren't we? We shouldn't be paying taxes. We should be dragging politicians into the street and beating them within an inch of their lives.

 "I am glad to see you include some of Richard Russell's comments in the Digest. He has been writing a market letter for 50 years now. He does this on a daily basis as well as a 6 pg market letter every three weeks. I have been reading him since 1960, and I have a hard time remembering when he has come through as bullish as he has been since about the third week in February. Sometimes it is worthwhile to pay attention to the wisdom of almost 84 yrs (Russell) and me almost 83 yrs. Some of the charts Russell comes up with – especially the point and figure ones and the Dow 65 stock composite – which nobody else even talks about, are invaluable to help read the current state of the MARKET!!!! It has sure helped me avoid doing the wrong thing whether it be buy or sell many, many times." – Paid-up subscriber Ludy E. Langer

 "Ron Paul's campaign fizzled so that leaves me with no choice but to vote for some third party.

 Clinton: Horrible

 Obama: Horrible

 McCain: Horrible

What's the point of choosing among horrible, horrible, and horrible?" – Paid-up subscriber Bob

 "Democrats, Republicans, who the hell cares? How about this; screw the party affiliation and pay attention to who would be best for our country! We missed the boat with RON PAUL!!!!!!" – Paid-up subscriber Tom Congdon

Ferris comment: Given the choices, perhaps it's better to abstain. If you vote, you'll only encourage them.

Regards,

Dan Ferris

Medford, Oregon

May 1, 2008

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