Waiting for the Fed...

Waiting for the Fed... CNBC: stuck in the past... Get your free copy of the Extreme Value Owner's Manual... Soaring natural gas demand imminent... Coming your way – record dividends...

 If you sat around waiting to find out what the Federal Reserve said today, you desperately need to be reminded of what superinvestor Warren Buffett has said so many times over the years: "If (Fed Chairman) Ben Bernanke whispered in my ear exactly what he's going to do tomorrow, it wouldn't change anything I'm going to do today."

It wouldn't change the outcome, either.

You don't make money in the stock market by sitting around waiting for "news." You make it by knowing how to earn a profit by putting money at risk... and by taking as little risk as possible.

The best way to reduce your risk in the stock market is to invest the bulk of your money only in the very best businesses. Equity in a business doesn't have value to its owner if the business doesn't produce cash in excess of what it takes to maintain and grow the business. So if you're not putting most of your money into safe businesses that reliably gush cash like Niagara Falls gushes water, you're likely making a big mistake.

 Every now and then, I turn on CNBC or go to its website. It can tell you in an instant how the thundering bovine herd in the stock market is feeling. Every now and then, it suggests a decent way to zig toward money everyone else seems intent on zagging away from.

The biggest headline on CNBC's home page this morning announced: "Dow at best level since Dec. 2007."

That's typical CNBC: Eyes in the rearview mirror, feet planted firmly in the past. In 2007, the S&P 500 earned $66.18 a share. As of September 6, Standard & Poor's estimates it'll earn $90.41 a share, a 37% rise over 2007 earnings.

So those 500 companies are worth about 37% more than what they were worth in 2007. Telling me about today's price versus 2007's isn't really worth... well... anything.

It's all part of the grand obsession CNBC shares with most of the financial news media – the past, whether it's five years, five weeks, or five minutes ago. CNBC is great at telling you the random events that just happened have a great deal of meaning.

But the folks sitting behind the anchor desk, like the thundering herd of stock market participants who follow them, don't seem to have the slightest clue of the difference between a good business and a bad one... an undervalued, low-risk investment and an overvalued dog.

 What do they know? They know price quotes. And they know the headlines. Put the two together, put on some nice clothes, see the folks in the makeup department, and maybe you, too, can get lucky enough to make a six-figure salary for reading a teleprompter and acting like you know something that's worth a dime to your viewers.

 The talking heads can't help you do what you need to do: Make money without taking too much risk. Maybe you've worked for decades to build a nest egg, and you want to see it grow safely.

What should you do?

 Well, obviously, the first thing you do is turn off CNBC. That should help you dramatically reduce the time you spend thinking about the economy, politics, and the meaning of the few hundred stock quotes they obsess over minute by minute.

 The second thing you do is read the Extreme Value Owner's Manual. We normally reserve this educational report for Extreme Value subscribers only. But the investing concepts and strategies it describes are so valuable... we want everyone to have access to it. Among the things it discusses...

- The one idea that always makes money (p. 5)

- How to make 10 times your money without taking big risks (p. 25)

- Where to find extraordinary income streams that always go up (p. 57)

- A new study that reveals the world's greatest investment strategy (p. 62)

- Four must-reads that will radically change your view of stocks (p. 64)

Those are just five of the 25 chapters we've put in this book, which has been several years in the making. All the chapters are short and easy to read. We did that on purpose. We believe we've discovered insights worth a great deal of money to investors. So we wanted to make sure investors would take them to heart. The best way to do that was to make those insights enjoyable and easy to digest.

A few years ago, Mercedes-Benz ran a TV commercial in which a company executive said the luxury carmaker decided to give away key safety technology because it was "too valuable not to give away."

That's how I feel about the Extreme Value Owner's Manual. I think everybody needs to read this and take it to heart. It won't take long to read it carefully... but I think it can help you make money safely for the rest of your life. Click here to get your free copy of the Extreme Value Owner's Manual.

 Natural gas use in trucks is about to soar... That's what PIRA, an energy consulting firm, told Reuters last week.

PIRA believes gas demand in large trucks and fleet vehicles could reach 14 billion cubic feet per day by 2030 (around 20% of today's daily gas production) – up from the 90 million cubic feet per day consumed in 2011. Even in PIRA's low estimate, it believes demand would hit 7 billion cubic feet per day.

The group says most of this growth reflects private-sector initiatives that are happening "with or without federal government assistance."

 But this is nothing new to Frank Curzio's Small Stock Specialist readers or Porter's Investment Advisory subscribers. Both Frank and Porter have described how natural gas will play a much larger role in the world's energy demands in the future – specifically, as a transportation fuel.

 Regular Digest readers have known the U.S. is sitting on incredible amounts of natural gas in shale plays like the Bakken in North Dakota and the Eagle Ford in Texas.

New technologies including horizontal drilling and hydraulic fracturing (aka "fracking") have made it possible to extract this gas. Even OBAMA! is talking about the abundance of natural gas sitting right below our feet.

 In June, we detailed Frank's view that low prices for natural gas will lead it to become a major transportation fuel in the U.S. Frank refers to trucks and automobiles switching to natural gas as his "Eagle Diesel" thesis.

To discover how you can profit from the "Eagle Diesel" trend in transportation, click here. (You won't go to a long promotional video.)

 The adoption of natural gas as a transportation fuel is one of the biggest trends in the market today. Here's what Porter wrote about it in the February issue of his Investment Advisory...

Porter has also recorded a video describing this phenomenon, which you can watch here.

 U.S. companies are on pace to return a record amount of cash to investors this quarter... Companies on the benchmark S&P 500 stock index paid out a record $67 billion in dividends in the second quarter. And they're on track to outpace that amount in the quarter through September.

The dividend yield for the S&P 500 is currently 2.1%, besting 10-year Treasurys by 43 basis points (a basis point is one one-hundredth of a percent). If you account for share buybacks, the average yield is more than 4%.

"As long as this remains a low-interest-rate environment, investors' demand for dividend-paying stocks will be strong," James Wong, who manages the Value Leaders Fund for the asset-management firm Payden & Rygel, told the Financial Times.

 For the past few years, we've shouted from the mountaintop that all investors should be buying high-quality, dividend-paying stocks. We call it the "dividend magnet" trade... In a world of zero-percent interest rates, blue chips with solid dividends will attract capital like a magnet.

And we've been right. Over the past three years, the S&P 500 Dividend Aristocrats Index (comprised of companies that have raised their dividend for at least 25 consecutive years) has outperformed the overall S&P 500 by nearly three percentage points on an annualized basis.

 You can see the trade working in shares of companies like Wal-Mart and Altria Group. Both are trading near 52-week highs. (And showing strong double-digit gains for my Extreme Value subscribers.) Take a look at this three-year chart of Altria Group (which currently yields 5.1%).

 As we've also explained, buying shares in high-quality companies that consistently raise dividends is one of the best ways to fight inflation. Inflation is a rate of change. And as long as a company raises its dividend payment at a faster rate than inflation, your capital is protected. For a more complete explanation, click here.

 I (Sean Goldsmith) just returned from our Atlas 400 trip to Napa Valley. It's our second trip to Napa in two years. Before getting into the details of our trip, a bit about our club...

If you're not familiar, Porter and I started Atlas three years ago. We wanted to gather the best and brightest people we knew – and many we didn't – and host extraordinary events around the world. We understand the importance of personal connections in our lives... And we believed the best way to make these strong bonds was to take people away from the office and daily activities and put them in a fishing boat in Panama, or in the middle of the Kalahari Desert, or in a race car...

 Last year, our friends at the Sonoma winery Lookout Ridge hosted a party for the group on their property... And they invited several of the best winemakers in California to attend.

Lookout partners with these famous winemakers to produce wine under the Lookout Ridge label... And for every bottle of wine Lookout sells, it donates a wheelchair to a person in need. It's a wonderful charity. You can learn more about it here.

 As I've explained, Atlas offers its members experiences that are off-limits to most everyone. And thanks to the connections we made through Lookout Ridge, we were able to have that kind of experience in Napa this year.

 Our first night in town, we had a private dinner with Andy Erickson (the former winemaker at Screaming Eagle, California's most sought-after wine) and his wife – a fellow powerhouse in the wine world – Annie Favia. Though he'd be the last to tell you, Andy is a legend in Napa. And having him host a dinner and pour his wines was an honor for our group.

We also had a Tuscan-style lunch surrounded by the old vines at Corison – winemaker Cathy Corison won winemaker of the year last year. And she poured a vertical tasting (three different years) of her top cabernet. Cathy was one of the first female winemakers in the Valley. And her Bordeaux-style reds are among the best we tasted.

 And we had a western-themed farewell dinner atop the valley at Kenzo winery. The almost-4,000-acre estate is the largest in Napa. Owner Kenzo Tsujimoto made his fortune founding video-game company Capcom (which makes the famous "Street Fighter" title). He brought his Japanese design to the winery... The vines are trimmed into perfect rows. The facilities have a simple, zen-like aesthetic. It's gorgeous.

 Spurred by the history of Kenzo, one of our members (a top executive at a giant technology firm) told the group about cutting-edge technologies in the video-game space... products that aren't on the market yet. We learned about small, publicly traded companies that are producing "the next big thing." It was a fascinating, and likely profitable, discussion.

 The food, wine, and surroundings were beautiful. We're grateful to our hosts for a wonderful few days... And we'd like you to join us next year...

We're currently arranging two major events for 2013. Next August in Scotland, we'll stay in beautiful castles, taste the country's finest whiskys, and roam the countryside hunting grouse. For the golfers... We've got a day or two arranged on the links.

We'll also head to Tuscany, where we're hunting for truffles, taking butchering and cooking classes from top chefs in the region, visiting Tuscany's top wineries, and driving through the countryside in Ferraris.

These will be two of the greatest events we've hosted... And they're already filling up.

 But before those adventures, 18 members (including Porter and me) are headed back to Germany at the end of this month. Germany was the first event we arranged for Atlas. And this will be our third time in the country. It's by far the most popular event we host, and we'll undoubtedly do it again.

We race cars at the private race tracks of Porsche and BMW. We meet with some of the top business leaders in the area to discuss the economy... And given the time of year, we dance and sing at Oktoberfest. I'll update you on our experiences this year when I return next month.

 If you'd like to learn more about The Atlas 400, I'd encourage you to watch a video we produced with clips of some of our adventures around the world, interviews with actual members, and a brief bit from Porter on why he founded this club.

If you've been considering applying to Atlas, I'd encourage you to do so soon. We're close to our 100-member mark, at which point we'll increase the initiation fee by 50%. You can watch the video here...

 New 52-week highs (as of 9/10/12): Guggenheim BulletShares 2015 High Yield Corporate Fund (BSJF), SPDR Barclays Capital High Yield Bond Fund (JNK), Abbott Laboratories (ABT), BLADEX (BLX), and Two Harbors (TWO).

 In today's mailbag... one subscriber notes a key facet to World Dominators he looks for... and another asks about investing conferences. Send your questions to feedback@stansberryresearch.com.

 "I agree with your strategy to invest in World Dominating Companies, but think you're leaving out an additional key factor: how competent is the CEO? The CEO makes the key decisions, sets the company culture, and hires other top execs. They can make the company thrive (Steve Jobs, Hewlett and Packard, Jack Welch, etc), or they can ruin the best. In this dynamic world, you can quickly go from being on top to being broke. I would appreciate it if you would comment on top management of the companies that you recommend." – Paid-up subscriber Edward Jacobsood

 "What are the best conferences to attend annually in the usa for the novice investor?" – Anonymous

Goldsmith comment: Every year, Dan and I attend the Value Investing Congress, hosted by our friends Whitney Tilson and John Schwartz. We also look forward to the Grant's Interest Rate Observer conference. Both attract some of the best investors in the world... guys like Jim Chanos and David Einhorn.

The fall dates for these conferences are approaching fast, so if you'd like to attend this year, act quickly.

Regards,

Dan Ferris and Sean Goldsmith

Medford, Oregon and New York, New York

September 11, 2012