The S&A Digest: Wrestling With a One-Armed Man

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

As of 06/26/2013

Wrestling with a one-armed man... Gore's Prize... Name our new website... Dyson's top idea... Icahn on price targets... Where to hide your gold...

At last.

Fall arrived here in Baltimore today. It has been near 90 degrees and unbelievably humid... until this morning. Opening the door this morning, I braced for the heat... but breathed in cool, crisp, fresh air. The maple trees that line our drive are letting go of their leaves, just a few at a time. The dog has a spring in her step. This is my favorite time of the year...

Al Gore won the Nobel Peace Prize today, for his "work" on Global Warming. Ha, ha, ha. Try not to strain anything laughing too hard. Remember: These are the same Swedes who gave their peace prize to Yasser Arafat.

No, I'm not surprised that the Nobel committee fell for Gore's flimflam. "Global warming" is the perfect political problem. No one can observe it directly, we can only see what people claim are its results – a perfect set up for politicians. It's a global problem that no one can see or measure. So there's no limit to the things that politicians can blame on global warming, no end to the "crisis," and no limit to what government can demand of us to solve it. The only good news is that your sons are extremely unlikely to be drafted into the Army to fight it... but I'm sure that won't stop people like Al Gore from trying.

The domain name Wallstreet.com goes up for auction today. The reserve price for the address is $4 million-$5 million, but many believe Wallstreet.com will fetch more than the $9.5 million that Porn.com sold for earlier this year. The auction could end the age-old battle of what's more important... money or sex.

Speaking of website domain names... we would like to humbly ask for your assistance. We have a new business project in development and we can't – despite months of trying – settle on a domain name for the website, which is the heart of the project. Our idea is to create a free news "aggregator" website, much like the Drudge Report. Except, instead of focusing on tabloid news, celebrities, and politics, our site will focus on financial developments and the financial side of tabloid news. Our new free website will feature the content you get now from dozens of sources, only we'll filter all of the content to make sure only the most important news and the best-written essays make it to our page. We have a list of possible domain names... but truthfully, we're not big fans of any of these: Bullmarketdaily.com, Lunchisforwimps.com (inspired by the movie Wall Street), Wallstreetleak.com, Marketmammon.com, Mammon.com, Streetbook.com...

Let us know if you like any of these... or, even better, if you have a suggestion of your own: feedback@stansberryresearch.com.

Tom Dyson may be visiting you soon...

If only my publisher would let me, I'd come to your door in person and convince you to buy this stock. That's how good this deal is...

It's a way to buy into in the absolute best, blue-chip, dividend-paying stocks in America. But... instead of paying full share price for each of these companies, if you buy through this vehicle, you get each one at a 12.5% discount to their actual share values! I'm talking about companies such as Chevron, AT&T, General Electric, Bank of America, and Pfizer. And thanks to the structure of this investment, it's now paying a 6.36% dividend each year. So you get a diversified portfolio of America's best large-cap stocks at a 12% discount, plus a dividend yield that's about double what you'd ordinarily get by owning blue-chip stocks. The full story can be found in the special report I wrote in February 2007, called The Secret System That's Beaten the Stock Market for 41 Years. You can find it on The 12% Letter page of the Stansberry & Associates website. For more information about the 12% Letter click here.

Takeover rumors abound... Shares of PSIA pick Lexmark (LXK) jumped nearly 7% on Wednesday on rumors that Michael Dell may make a bid for the computer printer maker. Option volume also surged to 12 times its average. Apparently, we weren't the only ones who thought this world-class company was too cheap.

Meanwhile, S&A Oil Report pick BG Group (BRGYY.PK) jumped 4.7% to a record high on rumors that Petrobras and Royal Dutch Shell were in talks to jointly buy BG. According to the report, Petrobras was interested in BG's Brazilian assets, and RDS would buy the rest. The talks ended without success, but traders are still optimistic about a deal.

According to a recent Bloomberg interview, Carl Icahn is "very concerned" that the market has reached its peak. He doesn't believe earnings can continue their run and references Graham and Dodd's "regression to the mean" theory as proof. Simply put, companies' earnings are too high to be sustained. Icahn also believes U.S. managers are failing... especially when it comes to keeping up with Asian competitors.

After Icahn gave his macro views, the interviewer grilled him on his current holdings. Specifically, he asked Icahn for price targets on BEA and Motorola. Icahn's simple response: "I don't do that, I'm not gonna pick prices. You know, I own a lot of it. So obviously, I like it... I just think the risk/reward is good." Target prices make for good stock marketing – which is why brokers use them. Real investors, on the other hand, know that nothing is that precise when it comes to estimating intrinsic value.

New highs: BHP Billiton (BHP), streetTRACKS Gold (GLD), Arcelor Mittal (MT), Nokia (NOK), Occidental Petroleum (OXY), PetroChina (PTR), Raytheon (RTN), Seabridge Gold (SA), Schlumberger (SLB), Verizon (VZ), Provident Energy Trust (PVX), Berkshire Hathaway (BRK-A), BG Group (BRGYY.PK).

The argument continues... Some of our readers prefer inflation because it allows them to make easy money shorting the dollar, via low-cost loans. We admit – that works. But know that the long-term costs of inflation vastly outweigh the benefits: You can only mortgage the house so many times before you lose it. What do you think? Let us know: feedback@stansberryresearch.com.

"I used to follow your recommendations in the Oxford Club and was an early subscriber when you formed the Pirate Investor. You and your team are doing a great job. The reason for my e-mail is to mention a stock you may have forgotten. Back in July 2006, following a recommendation by a beta version of the Private Investor, a publication you subsequently decided not to proceed with, I made an investment in Dry Ships (DRYS) purchasing stock at $11.59/share. I use a 25% trailing stop on all of my investments (even those recommended by Dan Ferris). I also make further purchases using my original stake, whenever the stock closes up 33% above the previous purchase price. With DRYS presently above $120/share this has to be one of the best recommendations made by your team. Having made 9 further purchases as the stock climbed, I am sitting on substantial profits. Well done."

– Paid-up subscriber Jan Randles

"Regarding your love affair with gold: If we're concerned with investing and inflation protection, then aren't positions in the oil and gas patch better than gold since they pay fat dividends while you're holding them? If we're concerned with survival in the times described in Kunstler's The Long Emergency, then gold (or diamonds) will have no value in that future because you can't USE gold for any practical purpose. People will not be willing to trade their food, fuel, clothes, labor, guns, ammo, etc. for a useless chunk of metal, no matter it's rarity, in the hope than the next person will be willing to give him something useful for it. In a survival society, only things of immediate usefulness will have value." – Paid-up subscriber Henry Walker

"Porter – You indicated you hold your gold outside the USA. If you know of a legal & safe way to do this, could you share it with your subscribers? I am sure many of us would be interested." – Anonymous

Porter comment: I wonder whose newsletter you were reading? I can't imagine anyone being so foolish as to say publicly where he keeps gold. Seems like an invitation to be robbed. What I wrote was that I prefer to buy gold each year – as personal savings, not an investment – and then make it "disappear." I don't tell anyone where I keep it – not even my wife. As for keeping gold out of the country, that seems wise, given our government's powers and propensities. If you don't have your own property overseas, it should be a simple matter to open a bank account and get a safe deposit box in almost any major city in the world. I'd favor the independent city-states, like Singapore or San Marino, in addition to the traditional fortress of wealth, Switzerland.

"You may write what you want, but that doesn't mean you are right. Take that 'one man's debt is another's asset' statement. You forget to allow for the fact that not all debt is equal. There is 'bad' debt that funds consumption and 'good' debt that funds asset acquisitions. When I incur debt to buy appreciating assets, then inflation devalues my debt and it increases the asset I aquired, while the holder of my debt has a decreasing asset. It doesn't take a phd to see that." – Paid-up subscriber Erich K.

Porter comment: This is like wrestling with a one-armed man... "Bad" debt still counts as an asset to the lender. Inflation of our currency doesn't make that loan disappear; it simply favors the borrower over the creditor. No value is created – the lender is robbed, nothing more. And in the process, the value of our currency is destroyed. As our currency loses its purchasing power, we are all made poorer and our assets become cheaper in real terms. That's why Europeans are buying up our property and the Chinese are buying up our bonds. Thus, the question I asked earlier: Would you rather be an owner or a renter? If we continue to devalue the dollar so that our government can escape its disastrous fiscal policy, it will only be another 10 years or so before foreigners own all of the best real estate in America and all of the best corporations. I suspect our children will resent that.

Regards,

Porter Stansberry

Baltimore, Maryland

October 12, 2007

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