The S&A Digest: Housing Gets Worse

Housing gets worse... Lampert is buying Home Depot... Whitman is still buying Handleman... The wisdom of Dave Mullett... More "Sjuggerud" buyers... Lots of venom in the mailbag...

We have not seen a nationwide decline in housing like this since the Great Depression. I don't think we're in the ninth inning of unwinding this. If we are, it's an extra-inning game.

– Wells Fargo & Co. CEO John Stumpf speaking yesterday at a New York investment conference.

The mortgage mess is far from over, and the second-largest U.S. mortgage lender is "not immune" to the problems, Stumpf said. But Wells Fargo should be able to survive due to its "minimal" exposure to CDOs and asset-backed paper, he said. Warren Buffett agrees... He just announced a position increase in Wells Fargo yesterday.

PSIA pick Intel (INTC) will increase its dividend 13% to 12.75 cents a share. The increase will start in the first quarter of 2008.

While Intel's working to give its money away, competitor Advanced Micro Devices is scrounging for capital. The world's second-largest semiconductor manufacturer sold an 8.1% stake in newly issued shares to Mubadala Development, an Abu Dhabi sovereign wealth fund. AMD will use the cash for general corporate purposes.

Eddie Lampert's hedge fund, RBS partners, showed a new, 14.7 million-share stake in Extreme Value pick Home Depot (HD). Lampert also picked up 464,000 shares of Clear Channel and increased his stake in the battered Citigroup to 27.8 million shares, up from 24.8 million.

Marty Whitman's Third Avenue Management increased its holdings in S&A Penny Letter pick Handleman (HDL) by 117,049 shares. The value house now holds 3.8 million shares, 18.4%.

In the mailbag... Unbelievably, we received still more mail about my letter from the "chairman." I've been shaking my head all week – and ducking. Not since the beginning of the latest Iraq war have more incendiaries been lobbed at someone. Maybe I should dig a spider hole. And just wait until all of these disgruntled people read my next April Fools' Day "recommendation." They'll show up at my house with pitchforks and torches! How have we disappointed you, dear subscribers? Let us know: feedback@stansberryresearch.com.

"Well, I have to say that I don't appreciate being made fun of and ridiculed for thinking that it really WAS the Chairman of GM!!! I sent it along to others. No, I did not, nor do I now, think it was at all funny. I will have to seriously question anything that I see here in the future. You presented it as coming from GM, and I trusted what you have in your publication. I won't any more... Disappointed in you, and quite frankly pissed." – Paid-up subscriber Jonathan R.

Porter comment: You honestly thought the chairman of General Motors would say in a letter to a group of newsletter subscribers, "I have become nothing more than a dressed-up street hustler, running a shell game on you, our loyal shareholders?"

Also, in our latest letter from the "chairman," we referenced the first such essay I wrote (and included a link). It says plainly: "[h]ere is what I would have written to my shareholders, were I the chairman of General Motors." As this was the fourth such letter I had written as "chairman" and because it was so plainly a parody, it simply didn't occur to us that anyone would (or could) have mistaken our note for the real thing. We did not intend to cause you any harm or embarrassment. We sought to inform and entertain.

"You don't seem to understand how many of your subscribers pinch pennies hard to be able to subscribe to your newsletters for INVESTMENT ADVICE, not comedy... and many of these subscribers are extremely unsophisticated and really not able to recognize your attempts at humor. How do I know that...??? I'm an Enrolled Agent who prepares the tax returns of some of these unsophisticated investors... SHAME ON YOU... You can be sure the next time someone asks me to recommend an investment newsletter, it WON'Tnow be any of the Stansberry group's." – Paid-up subscriber B

Porter comment: We don't choose our subscribers. They choose us. And we're glad to have each and every one of them. But... if we were going to lose a few, we'd try to pick off the ones without a sense of humor first...

Considering your response to our GM letter, it's a good thing you didn't see my April 1, 2002, BLAST e-mail, "Afrikan Gold." (We've posted a copy on our website for subscribers who haven't seen this classic e-mail – HERE.)

I figured – on April 1 – any recommendation as outrageous as this one, with the symbol "SUKR," featuring a lead character named "Usherwanti DerVeeboten" would be immediately recognized as a joke. Boy, was I wrong...

One of the world's largest equity trading desks – Citigroup's New York desk – called my private line (I still don't know how they got the number) within minutes demanding to know why they couldn't find the stock on any market in the world. I replied, "It's April 1st, and you want to know why you can't find a stock you've never heard of, that's reported to be piling gold up with front loaders in Africa, and has a symbol that sounds a lot like 'sucker?'" The guy on the other end of the phone just said "oh f---" and hung up. Our customer service lines were jammed for days with angry customers.

Now SUKR was just a gag, a joke. But my parody of GM is serious. All the facts in the piece are, as one hedge-fund manager told me, "spot on." And I've gotten widespread praise for the research that's behind the piece.

"I wasn't going to give an opinion on this subject until I saw the responses. The only thing I have found humorous about your GM parody so far is how sharp you think you are. I can see this by your responses. If you are as sharp as you think you should have realized how easily your PAYING subscribers could have been fooled by that piece. Considering these people subscribe to your print for investment ideas, information and direction why would they not. I get the biggest kick out of your grab 'butt' buddies who jump in and poke fun at the people who didn't get. If they are such advanced investors and so well informed why do they need you? Truly special. My suggestion is that you submit your 'humor' to Mad magazine or National Lampoon. Who knows they may find you funny and I won't be wasting my time reading useless info." – Paid-up subscriber Bob Garber

"First, my condolences about the hubbub. Geez. But I was talking to a guy the other day, and he mentioned that the incompetent person rarely realizes he's incompetent. The most dangerous phrase is not 'I don't get it.' The phrase to watch out for is 'What's there to get?' This frightens me greatly. That phrase plays in my head all the time. Anyway, I think the thing about lacking a sense of humor is that the people who lack one don't understand the very concept ('What's there to get?') Since a lot of humor is used for derision, they tend to assume that's all it's about. And since they don't enjoy the humor itself, all that comes across is a sense of mean-spiritedness. So, to them, it's quite unseemly. Coarse. Crude. Mean. Improper, even. I fear that Humor Deficit Disorder (HDD) is one of the great undiagnosed illnesses of our time. I blame the government. Or maybe Ralph Nader. Anyway, for the love of God, please don't give up the humor. There's no helping these people anyway. Keep up the good work, and good luck." – Paid-up Alliance subscriber Dave Mullett

Porter comment: Dave Mullett, meet your nemesis, Bob Garber.

"No... No... No... Don't stop the parodies... and KEEP the humor... it was delightful (and oh-so true...). Don't let the fools who can't accept the humor ruin a 'breath of fresh air' in your excellent commentaries. Most of us got the joke and appreciated the light approach to a serious subject!!!!" – Paid-up subscriber Steve Marshall

"There you go again! Willing to spoil your 'oh so excellently humorous' detailed account of professional mismanagement just because some of your –non literate– rich subscribers are not able to comprehend the intricacies of parody. Wealth without education can be a bore." – Alliance member R. Carmona

"I look forward to your next 'letter' from the 'Chairman' of GM. I don't think you should characterize your letter as a parody, though. I assume the numbers in your letter are correctly taken from GM's financial statements and your financial analysis in the letter sets forth exactly what you think is bound to happen. That is not parody. It is tragedy. I am sorry that a number of readers thought it was a real letter from the GM chairman, but I would be even sorrier if you were not setting forth actual numbers and your actual thoughts about what the numbers unhappily portend for what was once one of America's great corporations." – Paid up subscriber "Murray"

Porter comment: Let's not get distracted by our discussion of parody. The numbers I used are all too real. Every one I cited came from the annual reports filed with the SEC and signed by the real, honest-to-goodness chairman of GM. Unless something dramatic happens (something like a miracle), General Motors will soon go bankrupt.

"Don't you dare stop writing, or change anything about your GM 'chairman letters'. Satirical though it is, there's nothing funny in your content. Rather, they are well written explanations of the true state of General Motors" – Paid-up subscriber Mike Rollins

"It was actually the best presentation of an economic-financial analysis of a corporation that I've ever read. Don't listen to those who didn't get it." – Paid-up subscriber Helmut Wild

"Guess what Stansberry... I'm paying for financial news... ADVICE... not to hear how much you're looking forward to your boys club trip to the Yucatan Peninsula. Or to read on as you frat boys kiss one another's ass about your collective accomplishments. I began my subscriptions with Steven Sjugerrud's True Wealth because he is intelligent and insightful and does his homework, not because of his life history. I don't (thankfully) get this BS from Rob Fannon, Jeff Clark, or Tom Dyson. They have their eye on the ball. This country is in financial turmoil and paid subscribers want the facts, sir. Knock off the locker room patter – and by the way most people that have money for these subscriptions have enjoyed the better things in life. PLEASE stop showing off for your reading audience... be a traveler, not a tourist." – Paid-up subscriber C.S.

Porter comment: Our Alliance meetings are nothing like a "boys' club," as anyone who has attended will tell you. Instead, it's a serious conference – the only one you'll ever attend where all of the speakers are "real" and not dressed up salesmen pitching you one thing after another. We spend about $250,000 putting on the event, and we don't charge members a dime to attend.

Now... if it is a boys' club you're looking for... Wait until next year. I want to start a travel club – The Matador Club. The idea is gather together a group of like-minded boys (and girls) who enjoy very luxurious, active vacations. The Matador Club will organize outrageous travel adventures for groups of 25 to 50 people. Like renting out a big estancia near Buenos Aires and playing polo for a week. Or renting out Pinas Bay, the only place in the world you can reliably catch blue marlin, black marlin, white marlin, and Pacific sailfish on the same day. Maybe chartering a 250-foot yacht and cruising the islands... high-end wine tours in Italy. That kind of stuff... but always to places and with people where we've had long business relationships, where we will be treated as friends, not just customers.

"I grew up in the '50s and '60s [in Australia] and my parents always told us about the wonderful land of the free – the strong U.S. dollar – the winning attitudes of the Americans. It seems your government has taken your freedom, ruined your economy with warmongering and bad management, the dollar is cactus. For goodness sake, don't lose your sense of humour... it may be all you have left!" – Paid up subscriber Kath

"I, too, became a subscriber because of the name [Sjuggerud]. I left Wisconsin in '65 but my older sisters know the name, also. We grew up in Rhinelander, Appleton, and Madison. Madison West was a big contender in basketball. All of my sisters' friends and mine ended up in Viet Nam, along with our cousin Obed Jeremiah, who just passed away at 62. Won't give you our Scandinavian names, for security reasons. Nice to know someone is from my old haunts..." – Anonymous

Porter comment: Who knew that 'Sjuggerud' would have such a powerful marketing draw? Maybe we should only hire analysts with Norwegian heritage...

Regards,

Porter Stansberry

Baltimore, Maryland

November 16, 2007

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As of 06/25/2013