Is the worst of the credit collapse over? It looks that way...
Says Ken Chenault, CEO of American Express, "Although it is still too early to point to any sure signs of an economic recovery, the number of cardmembers who are falling behind in their payments, the volume of bankruptcy filings and the level of loan write-offs were better than we had expected."
Amex reported 4.4% of the company's cardholders were a month behind (or more) on their payments, down from 5.1% in March. At Capital One, loan-loss provisions decreased by 11% from the first quarter. Accounts more than 30 days past due also declined slightly, from 4.36% to 4.34%.
But even if the worst of the credit-related losses are behind us, it will take longer for the economy to begin growing again – in part because credit will not be extended as easily now.
Hats off to Dr. Steve Sjuggerud, who seems to have correctly predicted the end of the bear market of 2007-2009 and the end of the current recession. In his March 20 issue of True Wealth, Sjug wrote:
In January 2000, I told my 40,000 paid subscribers we were at the peak of the stock market mania. Today, more than nine years later, I believe the exact opposite... I am extremely bullish on stocks, starting now. I believe the entire stock market could rise by 50% from its lows last week over the next 18 months. And the next seven to 10 years could be phenomenal, as I'll show. The important thing I want you to understand now is March 2009 is exactly the opposite of January 2000...
At the same time, Steve explained why he believed the economy was bottoming. He drew out the "script" he expected the markets to follow. And it has all come to pass. Incredible work, Sjug.
By the way, besides simply urging his subscribers to buy stocks as aggressively as they could, Sjug also told them exactly what to buy. At the end of March, he recommended buying silver via the best low-cost silver producer. He also recommended a mortgage REIT and an S&P 500 index fund. The first two recommendations are up more than 30% – beating the market, which is up 25% in the same period. But that's not all...
The next month (April), Sjug told his readers, "It's time to speculate." He told them to buy Hong Kong stocks (via an index fund), Russian stocks (via an index fund), tech stocks (via an index fund), and a specialty stock fund managed by legendary investor Bruce Berkowitz. All of these recommendations have beaten the S&P 500 by a wide margin. Hong Kong and Russia are up more than 30% in three months!
I'd never seen Sjuggerud recommend six different stock investments in two months before. But he nailed it. He got his readers as long as possible at the best possible moment. Great work, Sjug.
If you'd like to profit on Sjug's next big market call, click here.
If you've already profited from Steve's uncanny ability to time the market this year, please let us know (feedback@stansberryresearch.com). The money we earn writing these letters keeps dinner on the table and Momma in new shoes, but the truth is, we write letters rather than do other things in finance because we have a passion for helping regular investors. Nothing inspires us more than hearing from you – especially when we've helped you do well in the market.
It's one of the many things I've read about the mortgage market that just leaves me shaking my head in dismay: Fannie Mae and Freddie Mac are now requiring the folks appraising the properties that back their loans to actually be familiar with the area where they are doing appraisals. Seems like a common-sense rule, doesn't it? Apparently not to the government-led giants of home mortgages. They didn't promulgate the new rule until threatened with a lawsuit by the New York state attorney general.
Even though the government appears unable to run its own two mortgage companies, OBAMA! wants to create an entirely new regulatory agency to police the financial decisions you make. I'm not making this up. The new agency – the Financial Protection Agency – will be led by a so-called financial regulatory "czar," who will determine if the financial products you're offered (credit cards, mortgages, home-equity loans) are "fair."
According to the legislation that's now proposed (Financial Protection Agency Act of 2009), the government will design a set of "standard" financial products that financial-products companies will be forced to offer. And the agency will have the power to forbid financial firms from making any competing offers if the government deems these products to be harmful.
Not only does OBAMA! intend to control what kinds of financial products you are allowed to use, he's installing a leading intellectual mother hen to be in charge of the whole thing – Cass Sunstein. Sunstein is a 55-year-old lawyer who has never worked – not one day in his life – outside the government or the academy. He is currently the Felix Frankfurter professor of law at Harvard Law School. His new book is literally called "Nudge." (The full title is Nudge: Improving Decisions About Health, Wealth, and Happiness.) This guy clearly believes he knows what's best for you. He wrote a book to prove it. And damn it, you're going to do what he says.
If that doesn't scare the crap out of you, consider his previous book, 2004's The Second Bill of Rights: FDR's Unfinished Revolution and Why We Need It More than Ever. In this tome, Sunstein explains why every American ought to have a legal right to a home, health care, and protection against "monopolies." He also believes the Internet weakens democracy (see his arguments in yet another book, Republic.com). The government, Sunstein seems to believe, can provide you with everything you need... as long as you'll stop thinking for yourself and turn your Internet browser off.
Someone reading this Digest is undoubtedly saying to his wife right now, "Porter is overdoing it again because some Harvard lawyer wants to trample on his precious civil rights." And you might be right. But try to explain this one to me: In 2004, Sunstein wrote another book, called Animal Rights. In the book, Sunstein argues animals ought to have standing in Federal courts. He wants to create an animal plaintiff bar. (Again... I'm not making this up.)
Not walking your dog enough? Tell the pooch to call Sunstein & Sunstein, where you don't pay until your owner does.
New highs: AmeriGas Partners (APU), Crucell (CRXL).
In the mailbag... Amerika, love it or leave it. Plus, a reply from JR on where he escaped to and where he's looking to go this time around. Enjoy. And send us your thoughts: feedback@stansberryresearch.com.
"The country I fled to years ago was The Bahamas. I lived there 6 years, but it is no longer suitable. The Bahamian government has completely caved into U.S. demands. What made me leave there was when two agents of the U.S. IRS came to the house I was renting to check up on me. Can you imagine? The IRS running around in a sovereign foreign nation and checking up on U.S. citizens. As I mentioned in my feedback – I was 100% legal in the way I was set up and so there was nothing to fear – and they gave me no problems.
"But that invasion by the IRS into a foreign nation was unsettling and enough to make me leave. I then hung out in South Africa, living as a tourist for 3 years, just enjoying life – not working. It was easy. I did some trading from my mountain retreat, and that kept me with more than enough to meet living expenses. The exchange rate was 5½ to 1, and after I left it got a wide as 10 to 1. Nice! However, SA is a dangerous place, especially if you don't know which places to avoid.
"So, where am I headed? I have a number of options because of my business connections. They include Europe, South America, and Central America. I am in process of checking them all out to decide which is best. I have also heard that Australia welcomes retirees from the U.S. The tax situation must be looked into there. The two best so far are Uruguay and Argentina – via Doug Casey's La Estancia de Cafayate. It is very helpful to go to a country where you can get a favorable exchange rate. For however long the U.S. dollar can hold its own, there are some good choices. However, those are becoming fewer and fewer, and you must plan for an eventual death of the U.S. dollar." – Paid-up subscriber JR
"To JR and all the others looking to leave America... My passport over the last 20 years has no room for any more rubber stamps. In all my travels I appreciate getting back to the good ole USA. I love being able to jump in my car and drive to the next state without going thru armed checkpoints or worrying about being held up by someone with a gun waiting to collect money. I love sending my adopted child to a GOOD school and appreciating the education she gets.
"I love being able to vote and not having the election fixed (except in Florida). And I love paying taxes. Taxes that go to schools, roads, airports that facilitate FREE travel, etc. If JR makes 850k and pays 70% taxes, shame on him for being so stupid. If he would use his brain like giving to those less fortunate and other human and creative efforts, his taxes would be much less but his main emphasis seems to be living in another country where he can live as an 'American citizen' and 'free load' off another country, paying no taxes, just as he wants to do here. As many who 'Bitch' about taxes, he wants all the glory without paying for it. The infrastructure of America has crumbled because of not keeping up with the dollars for repairs etc.
"It takes money, well spent. Your publication seems to keep focusing on bashing Obama but look who got us into this mess over the last two administrations. Where are your rants about the needless wars they go us into? If everyone would focus their time on their work, focus their time on our country as a community and not just 'what can I get out of this' we might band together and get out of this mess handed down to us. I am proud to be an American, have fought two terms in Viet Nam even though I did not agree with the reasons for being there, and would fight again to defend our country. Those who would not can leave and not look back. Who needs you and your 'Give Me' attitude?" – Paid-up subscriber RT Cossey
Porter comment: I certainly don't think it's wrong to do whatever you can to legally avoid paying taxes. Whether that means donating to charity or living the life of a tax exile is rightfully up to the individual. What I think we all object to (even you, Mr. Cossey) is the idea that the state has an unlimited claim to our wealth or our lives. And this problem – a lack of individual rights and the unlimited power of the government – has existed in America for a long time, at least since WWII. It has nothing to do with the OBAMA! administration alone.
But... besides these big, macro questions, you asked a personal one at the end of your note: "Who needs you and your 'give me' attitude?"
Well... let's see. I started my own business in 1999 when I was 26 years old. Since that time, I've employed probably 100 different people and continue to directly employ at least 60 people. The business has paid millions and millions of dollars in various taxes as a result of our success, including payroll taxes, income taxes, corporate taxes, sales taxes, real estate taxes, licensing fees, matching 401k payments, etc. And I have paid millions of dollars personally in income taxes.
I've become an important client to several law firms (unfortunately), accounting firms, printing companies, marketing consultants, Internet-service providers, etc. My company and its affiliates are the largest employers in our section of Baltimore (Mt. Vernon). We have restored half a dozen historic buildings over the last 10 years and we paid for and built a house for Habitat for Humanity. I've mentored a dozen or more investment analysts – young and old. I've had the same business partners for my entire career, including one who has been my friend since childhood. I've made several of my partners millionaires. And I've made millions of dollars for our subscribers over the years, including many million-dollar profits from individual recommendations.
I'd like to think the thousands of subscribers to our newsletters and the millions of people who read our free daily e-letters get real value from my efforts to build and improve this business. I'd like to think our lifetime subscribers need me to keep working hard to continually improve the quality of our products.
So... I guess those are some of the folks who would like me to keep working, living, and investing in the United States. I don't expect any of them to say "thank you," of course. My decisions and my efforts were my free choice and were given in exchange for the opportunity to succeed. But it would be nice if the government would see me (and small-business entrepreneurs like me) as people to be respected and appreciated, instead of just another cow to be milked. Fat chance, I know...
Regards,
Porter Stansberry
Baltimore, Maryland
July 24, 2009