The S&A Digest: Last chance for Steve's webcast

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

As of 06/25/2013

Last chance for Steve's webcast... That's no groundhog... The last central banker... Congress' new plan: Keep your house – for free... Another banana republic farm bill... New rules for oil and gas reserves... Amazon's new Kindle... Fade CalPERS... Real estate auction!...

A reminder... this is the last day to view Steve's Sjuggerud's first-ever webcast.

In the online interview, Steve explains his favorite investments to profit from the banking crisis this year... providing the names and stock symbols of his favorite hundreds of percent upside ideas. But we urge you to act quickly... one of his top ideas released information this week on how it will likely pay out double-digit dividends in 2008 – if you get in now. You can sign up here to watch the webcast.

What's that groundhog doing in the pond, I thought to myself as I watched my dog, Ruby, barking madly at what looked like a big rat swimming in the half-frozen bog down the hill from my house...

Suddenly, the "groundhog" raised a big, paddle like tail, and smacked the water, sending out an incredibly loud, high-pitched crack that echoed off the surrounding hillsides. Ruby, my valiant Hungarian-bred hunting dog, tucked her tail and backed up a few steps, silenced. She'd never seen a beaver before. I'd never seen one in my backyard. Sure enough, the little bugger was building a house... and damming up the stream that spills out of the pond. Mmmn... I wonder how big it will become... Hope I don't get flooded out.

My friend Bill Bonner has famously said of Alan Greenspan's 2001-2004 credit bubble: Greenspan was like a squirrel watching a bank robbery. He saw the whole thing happen, but understood nothing. Greenspan's op-ed in The Wall Street Journal Wednesday was nothing short of comic. Greenspan says, with a straight face, "There was clearly very little the world's central banks could do to temper this most recent surge in human euphoria."

How can you read a line like that and not laugh out loud? Greenspan blames the problem instead on global capital flows, as if all the money mysteriously appeared from Mars. Meanwhile, all the money came from his central bank! My sides hurt by the time I'd finished reading. It's a comedy that precedes a tragedy – especially for the middle class, which is being wiped out by inflation.

I'd love to get a signed copy of that op-ed piece. I think it's a major nail in the dollar's coffin. Sooner or later, our politicians are going to need someone to blame for all of the inflation. And if, as Greenspan says, the central bank is powerless to prevent such booms and busts, why have a Federal Reserve at all? If you know Greenspan, please ask him to send me a signed copy.

Speaking of where money comes from... The Fed said it would inject $40 billion into U.S. banks and provide $24 billion more for additional loans to central banks in Europe, to provide "confidence" for the markets. This is how central banking works. You print money and lend it to banks, which find any number of ingenious ways to lose the money. Then you print more – a lot more – and repeat step one. There's never been a major paper currency regime in history that didn't end in an inflationary collapse. The U.S. dollar will not be an exception. As we have been saying for a long, long time: If you don't own gold yet, you're taking a big risk – and a dumb one.

We knew it wouldn't take Congress very long to figure out how to make the mortgage mess a lot worse... A new mortgage bankruptcy bill, authored by Rep. John Conyers, the chairman of the House Judiciary Committee, would treat mortgage debt like credit debt in bankruptcy. Or, in other words, the new law would put an end to foreclosure. Under the new law, declaring bankruptcy would allow homeowners to pay a fraction of the amount owed on their mortgage – but keep the house. Two questions to consider when forming your opinion about this idea. First, who wouldn't declare bankruptcy if doing so allowed them to own their home at a fraction of its market value? Second, who in his right mind would lend to homebuyers under these terms?

What would you say about a bankrupt African nation that was borrowing money to pay its farmers NOT to grow crops? Sounds crazy, doesn't it? The policy was promoted with the idea that allowing many small farmers to make a profit with inefficient farms was better for the country because it kept more people employed. But, each year the program cost more money as more and more farm goods required "crop support." Meanwhile, the payments for large, efficient farmers NOT to grow crops became one of the most valuable tools for enriching political cronies and campaign supporters. As such, the program took on a life of its own. Now it's not really about farming or agriculture, it's about politics. In fact, some of the richest people in the country receive hundreds of thousands of dollars from the program, even though they're not farmers at all, but wealthy landowners. Sounds ridiculous, doesn't it? Like something only a banana republic would do.

Nope. I've actually been describing the U.S. Farm Bill, which is up for renewal this week in Washington. Subsidies for U.S. farmers, which began in the Great Depression, have grown into one of the largest domestic spending programs in the country. The current bill is worth $290 billion and will include payments to "needy" beneficiaries such as David Rockefeller and Microsoft co-founder Paul Allen – two of the richest men in the world. You'll be shocked – shocked – to know that a handful of powerful U.S. senators and congressmen have collected more than $6 million in subsidies over the last decade.

The SEC is updating the rules for reporting oil and gas reserves. The move hasn't been widely reported yet, but this week the SEC began a process that will likely result in the first major changes to reserve reporting since 1978. We expect the biggest impact from the rules to come in companies with a large, marginal resource base – like oil-sands producers and coal-bed methane producers – which should be allowed to greatly increase the size of their "proven" reserve base. This sets up a great test of the efficient market hypothesis. If you believe markets are efficient, changing the rules about reporting reserves shouldn't change stock prices: Nothing has changed about what the company owns. Our bet though is that the size of the increases in many companies will be enormous and that it will result in much higher valuations for some companies. Keep an eye on Matt Badiali's reporting in our S&A Oil Report.

I bought one of Amazon's new wireless electronic books this week. The product is called "Kindle." It's like an iPod, but for books. And it's better than iPod because it operates on Sprint's EVDO wireless network, so you can buy electronic books wirelessly, without hooking the device up to a computer. You don't have to have an account with Sprint, the wireless access charges are simply included in your book download price, which is roughly $10 per book. Downloads take less than 60 seconds – for an entire book!

I am a fan of the product, despite its design flaws. If you buy one, two things will bother you: Both sides of the device have page forward/page back buttons, which means no matter how you hold it, you inevitably change pages when you don't intend to. Additionally, when you change pages, the screen turns black for a split second. I've gotten used to both problems, and now I don't notice them. I've been reading on the device all week, and I've come to prefer reading on it to reading regular books for one primary reason: I can read my Kindle easily with one hand, which is a tremendous advantage. Although I haven't used this feature yet, I'm most interested in the device because it will allow me to take 200 books with me when I travel, not to mention almost all of my periodical subscriptions. No more buying The Wall Street Journal at airports.

One thing about the Kindle that no one has said much about yet – the device will clearly evolve into a total media solution, meaning books, music, and movies. Most interestingly, it also features a wireless e-mail address but charges users $0.10 per e-mail received. To receive e-mail, you first must approve all senders using the Amazon.com website, which manages your Kindle account. This is brilliant. It completely eliminates spam and, in theory, Amazon could become a major secure provider of e-mails. Getting $0.10 per e-mail delivered is probably a great business.

And another to profit from the fall in mortgages... Hedge-fund manager John Paulson raised $1 billion last year after telling investors he saw opportunity in the U.S. subprime mortgage market. The bet paid off... Paulson's Credit Opportunities I fund gained 550% from January through the end of October (one of only 30 funds to double investors' money this year). Paulson's firm will bank between $2 billion-$4 billion in fees.

Signs of a market bottom... The California Public Employees' Retirement System (CalPERS), the largest U.S. public pension, may move $29 billion out of stocks and bonds and into private equity, commodities, and real estate. The proposed change would decrease CalPERS' $260.7 billion fund to its lowest stock position in 13 years.

The British are coming... to our shopping malls. Read about it in today's DailyWealth.

And so are the Germans... German airline Lufthansa will pay about $305 million for an up to 19% stake in JetBlue. Lufthansa will buy 42 million newly issued shares and appoint a director to JetBlue's board. When the dollar collapses, as it is doing now, buying U.S.-dollar assets is cheap for foreign companies. Want to keep your job? Better learn a foreign language...

Thanks for your well wishes. My flu is progressing nicely. From sore throat and post-nasal drip to a deep, phlegm-filled cough and runny nose. I'll be fine in three or four more days...

In the mailbag, today we are called to task for a heinous crime: We ran an advertisement for a product we probably wouldn't personally buy. Does this make us immoral? Send your complaints... and evaluation of our moral fiber... here: feedback@stansberryresearch.com.

"I started with Steve Sjuggerud True Wealth, no complaints. I added the Penny letter. Then a couple of more, then finally succumbed to the S&A Alliance... I see a theme in the solicitation methods... and can recognize similar product offering from your parent Agora. Certainly, it must work, the hook is deeply set in my throat. All this lead in is not to complain about quality of the analysis, advice, editorials or even endless internal offers, but today just one more unbelievable offer floated by us saying 'I encourage you to have a look and decide for yourself.' It comes across as an endorsement of sorts from George Rayburn (who looks more credible... via the video... than some of the written word with over used hyperbole). Yes, its time to rob banks legally. Is this a trial balloon... are you getting commissions or fees for opening your audience to an offer not available from your own service? I read, then deleted, this offer, or one almost verbatim from somewhere a while ago... If this is valid enough to warrant a referral from you, why don't you crack the code or hire one of these do-gooders and put it in your quiver. Oddly enough, I have acquired a taste, or tolerance, for your long winded background stories and history lessons... and I tend to grade other solicitations by your standards... but please... this FOREX secret code (I hope the fat cats don't find out this guy's selling the keys to their little secret... or he may be swimming with the fishies) and offer was just too intense... Yes, it took a long time to make my point... as you do, and as good as the offer might be... it was really cheesy, lowbrow, base." – S&A Alliance member P.L. Johnson

"I just received your recent 'What's all the excitement about?' e-mail, which unless my eyes deceive me, looks suspiciously like a Forex trading ad. Allow me to quote one of the sages of our time:

"'Porter comment: Do the math on what happens if you pay someone 2.4% daily. Then try to figure out whether or not it is possible. Says Sjuggerud: "Anytime you hear the word 'Forex,' run. Get away. Nobody calls it 'Forex' anymore, except scamsters. Currency trading, yes. Forex, no. Simple rule.'

"I am more than willing to admit my penchant for believing hyperbole-filled advertising copy and purchased my S&A subscription with an eye towards avoiding such things in the future. If for some reason, you think this particular one is real enough to invest in (and hence purchase additional outside research products), by all means let us know. Otherwise, please keep the external ads to a minimum unless they come fully commented upon and excoriated as necessary. I think many of us would appreciate it if some small fraction of our subscriptions went towards validating and/or debunking the 'interesting opportunities that cross [your] desks,' especially if they are generating lots of excitement in the industry – prior to it being sent out to us, and we as individual members and subscribers conducting our due diligence. There are many of us (myself included) that could use the extra protection from the sharks in the water. Obligatory, ego-deflating comment: Porter, not that we hang on your every word or anything, but throw us a bone here before you start prostituting your credibility and plugging other peoples' research with a simple 'decide for yourself' thrown in. That's what we're counting on you for. Do your job, man!" – Paid-up subscriber Alex T

Porter comment: Truth be told, I didn't want to run that advertisement. You probably first saw it appear (in other places) about six months ago. But I delayed running it for months and months. Why? I think the odds of our typical subscriber making money by trading currencies (which usually requires a lot of margin) is close to zero – secret code or not. I'm not saying it can't be done... I'm just saying it's much, much harder than it looks.

So why did we eventually run the ad? From time to time, we feel pressure to run advertisements from other publishers even for products we don't endorse (and we certainly didn't endorse this one). Why? It's simply how our industry works. If we expect to be able to run our advertisements in other publications (which is how we grow our business), we have to be willing to allow them to do the same.

Understand, we can say "no." And we will not run ads for some products under any circumstances because we believe the advice being offered is dangerous or because the advertising is, in our opinion, fraudulent. This product isn't one of those. This is merely a course on currency trading. And if you want to learn to trade currencies, this course will be helpful. It's just that we don't endorse currency trading to start with...

"Man, oh man. After doing another week's worth of catch-up on my S&A e-mails, I couldn't hold back any longer. I can't, really can't, believe that some of the letters you get are serious, when in fact they are serious. From the 'I want you to lead me around by the hand' attitude, to the 'I haven't got the intestinal fortitude to think' attitude, to the 'don't bug me about the mess we're in and it might somehow go away' attitude, to the 'how dare you suggest the person in the mirror is to blame' attitude... I think I'm going to be sick. What makes me scared now is the fact that you still are our once-revered neighbors to the south. What I mean is, the problem south of the border isn't going away, despite my inclination to want it to magically evaporate. I wonder if I should maybe be thinking about what might happen to us up here if you guys wipe out. Perhaps it is the lessons learned while playing in the brutally honest (win or lose, I take the credit) arena of trading over the last couple years that has removed much of my sympathy and patience for the obese, greedy, obnoxious, arrogant, and lazy attitude of Typical America. Wouldn't it be great if we somehow reversed the stupidity and regained the pioneering mindset that made us great? I think it's still possible, but not likely. The fact that we are in the proximity of, and reaping the effects of Typical America attitude makes us all accomplices to some degree. Anyway, I think I'll submit some truly ignorant, whiny, blame-laying feedback to you – using pseudonyms – just to see if I can push your buttons; the banter can be hilarious at times. You've got a great blend of informed, thought-provoking, globally oriented, honest, self-deprecating, interesting, abrasive, and creative content. Don't change a thing. I love it." – Paid-up subscriber Rick

"Today I attended a real estate auction in Longmont, Colorado. There was one home up for auction, a BI-level, three bedroom, 2 bath house, 1880 square feet. The auction was held inside the house, about 30 people were in attendance. Most homes in the area are worth about $170,000-180,000. This particular house was in rough condition, mostly cosmetic. Repairs would cost $10,000-$30,000 depending if a person was willing to do the work themselves or hire it out. The bidding started at $25,000, two minutes later the auction ends with a woman making the highest bid of $140,000. This is economics at it's finest! The risk is contained between the previous owner and the bank. No costly, prolonged government bailout that spreads risk among everyone. Instead, in two minute's time, you have an auction that allows the home to be sold, the bank take their loss and you get an economy that will recover at a much faster pace." Paid-up subscriber Bob Greene

Porter comment: There's a big condo auction in Miami Beach tomorrow at the convention center. If you go, please send me your notes.

"No offence Goldsmith, but you're boring." – Paid-up subscriber 'Ignorant Dupe'

Regards,

Porter Stansberry

Baltimore, Maryland

December 14, 2007

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