U.S. investments off limits to U.S. investors

For fear of violating U.S. securities law, Goldman Sachs announced today it won't allow U.S. investors to invest in Facebook. Instead, the entire $1.5 billion offering will go to overseas investors.

Funny, isn't it? U.S. securities law has once again screwed only U.S. investors... and Goldman Sachs still gets paid. As much as I hate them, I really should be long Goldman Sachs. It gets paid no matter what, every single day, often to the tune of $100 million. And when the law screws you out of an opportunity, Goldman can still sell it overseas. The securities laws never harm Goldman. And that pesky little $550 million settlement Goldman paid last year? Heck, it made it all back the following week. Goldman has $900 billion in assets. What's $550 million? (It's 0.0006% of assets, that's what!)

I've noticed the gold stocks in my account selling off lately (though today was a pretty good day). I'm willing to bet this is something like a winter vacation for those stocks. They had a huge run in 2010, and many investors probably waited to sell after January 1 so they could defer paying taxes another year. After this selloff ends, I think we'll see another massive run as the world becomes increasingly concerned about the value of the currency in its pockets and bank accounts.

 The Daily Crux, our financial news aggregator, recently published a list of 20 economic records set last year. Like the Goldman/Facebook deal, the list shows what's going on in the world and who's making all the money.

For some, 2010 was a banner year... Financial firms are expected to pay out an all-time high compensation of $144 billion. The Federal Reserve earned record profits of around $81 billion. Government spending is at an all-time record of about $6.85 million per minute. And the number of Medicare recipients hit a new record (50 million-plus).

By other measures, for regular people who need to keep working to pay bills and eat, 2010 was a disastrous year... A record number of people became so discouraged they stopped looking for work. The federal debt hit $14 trillion. Banks foreclosed on more homes than ever before (2.87 million). More homes were repossessed than ever before (more than 1 million). The average time needed to find a job hit an all-time record. The number of Americans on food stamps hit a new all-time record (43 million-plus), and...

The value of the U.S. dollar hit an all-time low in 2010.

Those records are just another way of saying Goldman Sachs and its friends get paid, the government gets paid... and you and me? Well... we're the ones doing all the paying!

Illinois is in the worst financial condition of any U.S. state, but California isn't far behind. Already this year Chowchilla, California – an 11,000-person town north of Fresno – defaulted on its January bond payment for an $8 million city hall renovation. The city technically defaulted earlier, after it used its bond reserve fund to make a payment.

Today, another California city, Mammoth Lake, appealed to the California Supreme Court to reverse a ruling that the ski town owes a local developer $30 million. The 7,500-person town hired the contractor in 1997 (in the middle of the tech boom) to improve the local airport and develop a $400 million hotel. Then the economy crashed, and the town is upside down. Never mind Standard & Poor's absurd double-B rating on Mammoth Lake and the fact that you can get tax-free financing to build ski resorts... the California Supreme Court shouldn't take this case. The town hired a contractor and agreed to pay him. The contractor did the job. Now the town wants to welsh.

Nobody should be surprised if the court lets the town screw the contractor. Either way, the municipal bond market looks worse every day...

And that's why David Rosenberg is buying it. The oft-quoted economist says this is a great long-term buying opportunity for municipal bonds. Of course, "long-term" means he has no idea if they'll continue to get crushed this year or not. Rosenberg says some muni bonds are trading at yields of more than 8% – higher than junk bonds right now and more than 100% of U.S. Treasury yields. Normally, they trade at around 82% of Treasury yields.

Rosenberg says to concentrate on bonds from non-cyclical revenue sources like water and power and to look for opportunities in "regions with a manageable refinancing calendar, A or better credit rating, low levels of foreclosure rates and excess housing inventory, low unfunded pension obligations, and growing population bases."

Billionaire investor George Soros is well positioned to benefit from the food crisis. Soros owns 34% of Adecoagro, a Luxembourg-based agricultural firm. The company announced its plans for a $400 million initial public offering last week. And this isn't Soros' first foray into agriculture. As of the end of the third quarter, he also held a large position in Monsanto, AGCO (an agricultural equipment manufacturer), Mosaic, and Potash.

Soros is smart, but he doesn't have a monopoly on good ideas. I've got a food crisis stock to beat all others. It's a small company in North America that has built from scratch one of the largest farms in the world today. This company has already invested almost $60 million into its farm subsidiary, which I visited last year. I stood on the plains and looked in all directions. I couldn't see the end of the vast land holdings this company is using to grow wheat, barley, field peas, and other crops.

Extreme Value readers who took my advice on this stock are already up more than 80%. I believe large, triple-digit gains lie ahead in the next few years. With the way the food crisis is playing out, the stock could double this year. I just raised my buy limit on it to reflect the excellent performance of some of its other investments (like its hoard of more than 70,000 ounces of gold bullion). To get access to this opportunity and others just like it, click here.

New highs: Nautilus Minerals (NUS.TO).

More readers write in about how they've benefited from our advice. How have you done since March '09? Tell us at feedback@stansberryresearch.com.

"Hi, I wanted to thank you for recommending the purchase of physical silver. I began buying in ernest in Jan. 2009, with the goal of establishing a 10,000 ounce position. Most of it was purchased during the period of time when silver traded between $15-18. 10K ounces seems like a lot, but it is still way less than 10% of my overall net worth. When silver went from $18 to $28, we booked over $10/ounce profit on most of it, and some: a lot more. Your reco resulted in over 6 figure profit and a 70% return on investment in the 4-month period: Sept-Dec. 2010. This has been the safest investment I ever made. I look forward to the next $10 move in silver. You guys rock" – Paid-up subscriber Nathan Thompson

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