THE S&A DIGEST: Rummy's Gone

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As of 07/05/2013

The twin brother of Don Rumsfeld?… why we’re up more than 200% in Akamai… the Wizard of Wharton slips into dementia… the Digest is a HOOT!

Don’t hit delete yet. Today’s Digest is brief. And there’s only one rant about global warming…

But first… the Digest’s take on Rummy.

"He’s a ruthless little bastard. You can be sure of that…" said President Nixon to Bob Haldeman in the Oval Office on March 9, 1971. He was speaking of Donald Rumsfeld. (You can listen for yourself here).

As everyone knows, the "ruthless little bastard" resigned yesterday, in large part because Iraq has turned into a major political liability, à la Vietnam.

My contribution to the discussion? Only this: Am I the only person who thinks Don Rumsfeld even looks like Robert McNamara?

I found one reason my recently recommended online-education stock jumped 14% yesterday: The Sloan Consortium, a higher-education trade group, reported that roughly one in six college students took at least one online course last fall. That’s 850,000 more students than the year before, an increase of 40%.

The new telecom boom continues… Akamai (AKAM) specializes in making sure that high-quality content – such as software and video – is distributed efficiently and with low latency across the Internet. In effect, the company built a private Internet – like a toll road – to guarantee Internet content distribution. And like most toll roads, it’s a great business. In the most recent quarter, the company’s quarterly cash flow rose 149%, from $19.5 million last year to more than $48.5 million. Sales rose 47%.

Subscribers to my newsletter will recall my November issue last year, when I predicted: "Next year Akamai’s revenues should grow by around 15%. Its costs should remain stable, thanks to declining bandwidth prices at around $165 million. Thus it should bring in around $300 million in revenue and net something close to $140 million."

Sales for 2006 just passed $300 million, and I’m on track for my cash-flow prediction: Through the third quarter, cash from operations has totaled $108 million and is on track to exceed $140 million.

We’re up more than 200% on the stock.

Cisco (CSCO) also announced robust sales. Routers, switches, and Internet services are flying off the shelf like it’s 1999… Excluding sales related to its Scientific Atlanta acquisition, sales rose 16%. And because the company has spent $37 billion buying back its own stock over the years, earnings per share were up even more: $0.26 versus $0.20 last year. Even though the stock hit a multiyear high today ($27), there’s a lot more to come. The rollout of a new Internet Protocol (IPv6) next year will cause government and large corporations to revamp their networks.

Are you statistically illiterate? Eat at McDonald’s. The company is offering a $5 million prize in its latest Monopoly game. To win, you must collect four corresponding railroad pieces. The odds of doing so? Approximately 1 in 41,497,391,309. The chance of hitting the jackpot in the Mega Millions lottery (currently $63 million) is a mere 1 in 175,711,536.

"He’s demented… he’s making comparisons between apples and elephants," said Charlie Munger at this year’s Berkshire Hathaway meeting, when asked about Wharton professor Jeremy Siegel. Siegel, who calls himself the "Wharton Wizard," has added global warming to his dubious list of theoretical phenomena, alongside stock-market efficiency.

The "Wizard" says that if global warming continues, "the earth will be as warm as it was 3 million years ago when the seas were between 15 and 35 meters higher than today...." My question to the "Wizard": How many SUVs were on the road 3 million years ago?

Warren Buffett once commented that he should endow a dozen finance professors… so that folks would continue to believe that the stock market is efficient.

Paid-up subscriber Bernie Krantz suggests a very contrarian way to use the Digest. "Where did this j____ get his golden spoon? I am waiting for downfall. What ever he recommends I do the opposite, and so far it has paid off."

Porter Comment: Actually, Bernie, everything I’ve recommended this year in my newsletter has gone up… As Bill Bonner told me, "Porter, you’re not as dependable as you used to be…"

Reader Mazdak Farhat thinks we’re… Nazis?

"Steve, I have never been in Nicaragua. I do not have any property over there. I am not supporting Ortega. But, please have an iota of conscience when you write. The greatest wealth destruction in Nicaragua was caused by the mass murderers who were unleashed by Reagan. Where ever you look from Vietnam to Venezuela, from Asia to Latin America, from Middle East to… all the death and destruction is caused by American capitalism. The way Dan Ferris writes about Wal-Mart and you on Nicaragua, I wish there was a Nazi party in the U.S.A. that you guys could join and enjoy. Shame on you."

Paid-up multi-issue subscriber Marti Wise claims to be sober and not my kin when she writes: "I truly enjoy Porter’s sense of humor. I really look forward to his articles the most. His sarcasm and his point of view is a HOOT!!"

Opinions… everyone’s got one. Send us yours, here: feedback@stansberryresearch.com.

Good investing,

Porter Stansberry

Baltimore, Maryland

November 9, 2006

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