This record-setting deal is about to go bust...

 In yesterday's Digest Premium, I (Porter) discussed why I had been expecting the correction in gold… And why I'm glad it happened. This correction was natural. And it will give us a great opportunity to buy back into the sector.

Whether you're talking about rare coins, bullion, or gold stocks… their prices generally move in the same direction. And equities are the easiest to buy because you can value them based on their earnings. Gold and rare coins are hard to value because the valuations of those things all come down to how you feel about the underlying currency.

You can't value a gold coin that doesn't have an earnings multiple or a book value. Gold's only true utility is that it's a financial asset that's universally recognized and isn't anyone else's liability. So it's a touchstone for value. But unfortunately, that makes it impossible to assign it any real intrinsic value. 

So you have to do the harder thing of just deciding at what price you would rather own gold than own the dollar. And that's very difficult to judge – especially if you're levered or impatient.

 My personal solution has been to buy a little bit of gold every time I find myself with excess capital at the end of the year. I remind myself to buy some in December or January based on excess cash. And I don't try to time the market in any way.

However, I have backed off in my purchases because I was reluctant to buy into a commodity at the height of the bull market. So I'm hoping that we see a strong correction in gold (even bigger than we've already seen).

I would not be surprised to see gold fall to less than $1,200 an ounce in this correction. And if it does, I will be looking to purchase some more in significant size. 

 I recall that during the last big gold bull market from 1974 through 1980 (nearly as long of a bull market as the current one)… gold fell nearly 50% between 1975 and 1976.

The big decline marked about the halfway point of the bull move. So I would expect a similar move… In other words, gold could fall around 50% from its peak. And I believe that would mark roughly the halfway point of this bull cycle.

 If you read my newsletter during 2008 – when we had the last big massive correction in gold – you'll see that one of my telltale signs was suicides. When well-known gold investors start killing themselves, it's usually time to start buying. I don't mean to sound crass or tasteless, even though many people will read it that way. My life has been touched by suicide on several occasions. It's a devastating and horrible human tragedy... I wouldn't wish it upon anyone.

But that is what happens when people become emotionally committed to an asset class. When that asset class falls apart, they kill themselves. And so we will be looking to see if a well-known, high-profile gold bull takes the proverbial leap out the window. That would make me strongly bullish.

 I believe this entire correction began because of a rumor that's picked up traction over the last few days… that the Federal Reserve will wind down quantitative easing (money printing).

I think that's the real reason why commodities and Chinese equities have fallen out of bed. Over the next several months, a fear of a lack of monetary stimulus could develop in the economy… And the global economy actually could begin to slow…

Then, I'd expect the Fed to come out – as it has through the last several years – in August or September and say, "Oh, no, no, no… We are going to continue printing. In fact, we're going do things to make it even more stimulating."

 I think we could see this bear market in gold continue until the end of summer… And if we see bad economic numbers in the fall, the Fed would ramp up the printing presses as they have every year around that time. Then, you'll see gold strongly reverse course.

– Porter Stansberry with Sean Goldsmith

 Private-equity firms Kohlberg Kravis Roberts (KKR) and TPG Capital joined forces with investment bankers at Goldman Sachs in 2007 to make the largest leveraged buyout in history...

The three financial titans contributed $8 billion of equity and $40 billion of debt to purchase Texas utility company TXU, now known as Energy Future Holdings (EFH). In a leveraged buyout, the buyers borrow money to take control of a targeted firm and usually repay it from the target's cash flow.

 The takeover happened at the peak of the market. Stocks were trading at their highs. Credit was flowing. And natural gas prices, which dictate what TXU could charge for power, were around $13 per million British thermal units (MMBtu). The buyers were essentially making a leveraged bet on natural gas prices...

We know what happened to natural gas prices since then, thanks to the massive amount of gas coming from U.S. shale. Prices have collapsed...

 The rout in gas prices killed EFH's business... Revenue at Texas Competitive Electric Holdings, an EFH unit that controls the parent company's power plants, fell from $9.8 billion in 2008 to $5.6 billion last year. EFH posted $1.26 billion of operating income in 2007… and has lost money every year since then. Its annual losses totaled more than $1 billion in both 2011 and 2012.

 EFH's gross debt is now at $46 billion. The company is trying to extend the maturity and amend the terms of its debt to keep it alive.

The companies said on Monday they've been in talks with lenders to assemble a "pre-packaged" Chapter 11 bankruptcy proposal.

As one person involved in the talks told the Financial Times, "The day of reckoning is no longer mañana. It is just around the corner."

 Unfortunately for EFH's owners, the creditors in this case are some of the world's smartest distressed debt investors. Apollo Capital, Oaktree Capital, GSO (part of Blackstone Group), and Centerbridge have been buying debt at a fraction of face value in hopes the owners will default – ceding control of EFH to its creditors.

We don't know how this will play out, but it will be fascinating to watch.

 But… the bigger and far more important question is this: How can you take one of the safest and steadiest businesses in the world, utilities, and turn it into a roulette game?

 The answer is the government's manipulation of the money supply in favor of financial firms. The KKR-led group would never have achieved a leveraged buyout of $48 billion without government aid.

When there's too much credit flowing, people make bad decisions. Money flows into unsafe and unreasonable assets. Utilities aren't inherently unsafe, but everything is risky if the price is too high – especially when there's tons of leverage involved.

 We're in a similar situation today... Jamie Dimon, the CEO of banking colossus JPMorgan Chase, said banks have too much capital on their balance sheets… and are accumulating more every year.

Dimon said the banks won't know what to do with it... We disagree. Just like at the top of every boom/bust cycle, bankers will start making bad decisions and spending money on risky assets. It's all part of what Steve Sjuggerud has labeled the "Bernanke Asset Bubble."

Easy credit will pump our market to extraordinary heights... We'll start seeing more deals like TXU. Only this time, we bet they'll be bigger… When these deals start cropping up, we'll know we're heading for another market top. Just like we did in our Digests between 2006 and 2008, we'll keep you abreast of these "signs of the top."

 Our friend (and Porter's mentor) Mark Ford gives some of the best "real world" financial advice we know... Since launching his Palm Beach Letter advisory two years ago, Mark has discussed with readers everything from living like a billionaire on a regular salary, to amassing a multimillion-dollar art collection, to the one gigantic retirement mistake almost everyone makes.

We recently sat down with Mark and asked him how to get a raise at work. It may seem like a simple topic. But simply increasing the amount of money you earn by a couple percentage points each year will greatly increase the amount of wealth you accumulate over your lifetime. It's the magic of compounding. You can read the full interview (originally published by our e-letter, DailyWealth), for free, here.

 World dominating computer-chip maker Intel reported a drop in first-quarter profits of 25% compared with the first quarter last year… while sales declined 2.5%, the Wall Street Journal reported. The declines reflected slumping sales for both desktop and laptop computers, which use the company's microprocessors, the newspaper said. PC sales fell 14% in the first three months of 2013, market research firm IDC said last week.

Despite the news, Intel's share price popped a little.

Rick Whittington, an analyst with the brokerage Drexel Hamilton, said, "It was a respectable quarter, given all the bad news surrounding the personal computer market."

 Intel CEO Paul Otellini, who is set to step down next month, spoke of the company's strong market position during yesterday's conference call with Wall Street analysts. He talked about how he joined Intel in 1974 when the company was still a startup. Back then, he said, the company had revenues of just $134 million. As he told listeners, a revolution in computing had just begun... "But it would take us another decade before we realized how dramatically it would change our business and the world."

As you know, the company has come a long way since then. Last year's $53 billion in sales were almost 400 times 1974 sales.

Otellini said his company had never been in a better position to participate across the computer spectrum, from industrial machines to the smallest battery-powered devices. Chief Financial Officer Stacy Smith added...

Today, Intel shares trade just shy of $22. The stock has been trading between $19 and $23 since October.

 Intel is a stalwart of several S&A model portfolios - including Dan Ferris' 12% Letter, where readers are up about 6% since February.

 New 52-week highs (as of 4/16/13): Berkshire Hathaway (BRK), SPDR International Health Care Sector Fund (IRY), Coca-Cola (KO), Johnson & Johnson (JNJ), Prestige Brands Holdings (PBH), Hershey (HSY), Travelers (TRV), Kohlberg Kravis Roberts (KKR), ONEOK (OKE), Procter & Gamble (PG), Wal-Mart (WMT), Walgreens (WAG), and GenMark Diagnostics (GNMK).

 Is capitalism evil? More subscribers take up the question in today's mailbag... We welcome you to weigh in at feedback@stansberryresearch.com.

 "The problem here is definitions. If you define 'capitalism' as what we have in the U.S., then it is 'evil' for ordinary U.S. citizens. But if 'capitalism' means an economic system where fraud and force are not permitted, then we are a long way from 'capitalism.'

"Capitalism – free trade – benefits both parties or they would not trade, hardly evil. Of course, a competitor may not see it that way. The competitor has two choices: make his product more desirable or find a way to forcibly prevent his competitor from trading; the latter is where the 'evil' comes in." – Paid-up subscriber Richard D. Fuerle

 "It is funny to me that people think the church preaches morality and not how to make money. After further review, the Christian Bible is obsessed with money, it preaches about wealth continuously. Many of your subscribers bitch and complain, but it just appears they just don't have a clue, I guess the real clue is they don't understand themselves." – Paid-up subscriber Steve Foste

 "Prof. R.J. Rummel of Univ. of Hawaii, in his book Death by Government, has painstakingly detailed that roughly 170 million people were murdered by their own governments in the last century, with about 99% of those deaths coming at the hands of socialist countries.

"The Soviet Union murdered about 62 million of its own people (as they themselves revealed with they opened their archives after the fall of the Berlin Wall); Mao's people's workers' paradise murdered 35 million, and the National Socialists murdered about 21 million in total. Stephane Courtois' Black Book of Communism estimates a 'mere' 100 million murdered by Communism last century.

"As a matter of fact, it is the Mr. Christianssens (if that is his real name) of the world that not only evil, but projecting their own evil onto others." – Paid-up subscriber JV

Regards,

How far could the correction in gold go…