We're not the only ones calling for the End of America... What Sam Zell and Ray Dalio are saying... Klarman betting big on U.S. real estate... Badiali's latest winner... A great mailbag...
If you're reading this Digest, you've probably seen our End of America video. And you know we don't literally mean that America will cease to exist. However, we do believe the U.S. dollar will lose its status as the world's reserve currency. And when that happens, our quality of life will plummet.
We know our marketing can be hyperbolic. We received hundreds of angry e-mails from people who deemed the End of America video "un-American," "ridiculous," and about every other jab you can name. But we couldn't be more sincere. We think the U.S. government's reckless fiscal policies are dangerous. And while few worry about the consequences today, the debasement of our currency will be a life-changing event for you and your children. Now, we're no longer the lone Cassandra...
Just look at yesterday's write-up of Bill Gross. Or yesterday's Wall Street Journal, which featured an article titled "Why the Dollar's Reign Is Near an End." Even legendary investor Warren Buffett agrees. In a recent CNBC interview, he said the dollar will become "less important" as America loses its "dominance" in the global economy. And today, two more billionaires chimed in.
Real estate billionaire Sam Zell told CNBC today, "My single biggest financial concern is the loss of the dollar as the reserve currency. I can't imagine anything more disastrous to our country." He continued, "I'm hoping against hope that ain't gonna happen, but you're already seeing things in the markets that are suggesting that confidence in the dollar is waning." Zell predicts a "25% reduction in the standard of living" if the U.S. loses its place as the reserve currency.
And Ray Dalio, the billionaire founder of Bridgewater Associates, said the dollar's dominance will wane as emerging markets raise interest rates to cool their economies over the next 18 months... "It's inevitable that the dollar's role as the world's currency will diminish from the dominant world currency to one of a few," he said. This was the first TV interview Dalio has ever granted. And he chose to discuss the U.S. dollar during that interview.
Can we guarantee the U.S. dollar will lose its spot as the world's reserve currency? No. But we can guarantee the government's actions will (and already have) permanently impair the value of our currency. Regardless of the outcome, you need to protect yourself.
If you subscribe to Stansberry's Investment Advisory, read the five special reports we sent with your subscription. Everyone should read the interview series with Porter we ran in the December 20-24, 2010 Digests. And you can find lots of free essays on the topic in the Growth Stock Wire and DailyWealth archives. You already know some of the things you can do (buy gold, silver, agriculture, etc.).
Porter also recommends having some of your net worth offshore in the form of real estate (physical real estate, not securities) or savings. As Porter wrote in the February 25 Digest:
| I've greatly increased – more than doubled – my exposure to real estate. I've been buying cheap apartment buildings in south Florida out of foreclosure. I've been buying unique, trophy real estate there, too. I think the middle of the market is still going to fall a lot... But the top end and the bottom end represent an outstanding value – one of the best opportunities of my life. |
Quality real estate is a great inflation hedge. One million dollars cash was a lot of money 20 years ago. Today, it buys a lot less. But $1 million of real estate 20 years ago is worth much more today.
One of the hedge-fund managers we respect most, Seth Klarman of Baupost Group, is loading up on quality real estate. He recently committed $300 million of equity financing for the Streets of Buckhead development in Atlanta, Georgia. The project, a mixture of high-end retail and residential, stalled after the crisis. With Baupost's help, real estate developer OliverMcMillan raised $1.5 billion to revive the project. You can read the full story here.
Klarman's a hardcore value investor. His fund has returned more than 20% a year since its inception in 1982. His out-of-print book, Margin of Safety, sells for between $500 and $1,500. He wrote the foreword for a recent edition of Security Analysis, the value investor's bible, written by Benjamin Graham and David Dodd. Like most value investors, he looks for deals in the dregs. He explains in his latest letter to investors:
| As in football, you are well-advised to take advantage of what your opponents give you: if they are defending the run, passing is probably your best option, even if you have a star running back. If scores of other investors are rigidly committed to fast-growing technology stocks, your brilliant tech analyst may not be able to help you outperform. If your competitors are not paying attention to, or indeed are dumping, Greek equities or U.S. housing debt, these asset classes may be worth your attention, regardless of the currently poor fundamentals that are driving others' decisions. Where to best apply your focus and skills depends partially on where others are applying theirs. |
You can read more excerpts from his 2010 letter here.
| Mirasol is a $126 million "prospect generator." That means the company specializes in exploration – not mine development. When it finds a promising project, it brings in a partner to fund the expensive drilling.
Currently, Mirasol is working on the Deseado Massif, the spur that sticks out of the southern tip of Argentina. Its exploration program turned up a series of high-grade silver veins. The company has dubbed the discovery "Joaquin." I was struck by Mirasol's experience (the three principals have nearly 100 years combined experience!). I followed the company since then. I also think the Deseado Massif is an exceptional place for exploration. Joaquin was no fluke... Virginia could be just as large. Mirasol's chart looks like a winner: – Matt Badiali, November 24, 2010, S&A Junior Resource Trader |
Since Matt's recommendation, Mirasol released excellent drill results. Shares soared. S&A Junior Resource Trader readers are up 67% in less than four months. If you're not familiar with junior resource stocks, I urge you to read our interview series on the topic from the December 29 and 30 Digests (here and here).
Junior resource stocks aren't for everyone. They're volatile. And lots of them crash. That's why it's important to have an experienced analyst with loads of mining contacts sleuthing these stocks for you. But if you're experienced enough to trade junior resource stocks, it's also one of the fastest ways to become rich. From our interview with Editor in Chief Brian Hunt (who helped create the S&A Junior Resource Trader):
| The reason some of our readers should be interested in this sector is because it holds the highest potential to produce not just hundreds but thousands of percent gains in the coming years. It's that simple.
It's is one of the best chances you'll have to get filthy rich in stocks over the next decade. That's why an investor or trader should be interested in this idea. |
If you believe in our End of America thesis, the junior resource sector is a no-brainer. As the government continues debasing our currency, money will continue flowing into commodities. (It's already happening.) Gold, silver, oil, and agriculture are already soaring. And the junior resource sector is racing higher. Take a look at the chart below. It shows the one-year return of the TSX Venture Exchange, which is a proxy for the junior resource market in Canada, versus gold bullion.
To learn more about Badiali's S&A Junior Resource Trader, click here... Many of his favorite recommendations are still in buy range. But due to the volatility of these stocks, they may not be for long.
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New 52-week highs (as of 3/2/11): Mirasol Resources (MRZ.V), Suncor (SU), Hershey (HSY), Molina Healthcare (MOH), Texas Pacific Land (TPL), Cenovus Energy (CVE), EV Energy Partners (EVEP), North American Energy Partners (NOA), Philip Morris International (PM).
This is one of the best mailbags we've had in a while... And it turns out we've had a 14-year-old subscriber. Send us your feedback to feedback@stansberryresearch.com.
"When reading your interview this eve, many latent thoughts surfaced. On my paternal side, one of the male family members emigrated here from Scotland as an indentured servant, in the late 1700s with a name change and probably only a few steps ahead of the Brit hangman. On the maternal side, the family came together in the early 1800s from the Austrian Alps after getting crosswise with the Kaiser of the time in what was then the remnants of the Austro-Hungarian Empire.
"Skip to Mid-America after FDR goaded Japan into 'Pearl Harbor.' In the 1930s and early '40s, our family took the Saturday Evening Post and at the time, Garet Garret was one of the editors who wrote a weekly series of short financial editorials. (Later published in book form as The People's Pottage.)
"Shortly after 'Pearl Harbor' the editors of the Post wrote to famed historian, Charles Beard requesting that he do a series of articles about 'The Lessons of History.' A few weeks later on the editorial page, the Post published his reply (which, at approx. age 17, I have never forgotten).
"Mr. Beard thanked the editors for thinking of him but replied that he had in the past given the subject a great deal of thought and decided that the Lessons of History could be contained in four short paragraphs which were written below, and permission granted for anyone to utilize as desired. They are:
"1. Those whom the Gods wish to destroy, they first make mad with Power.
"2. The Bee fertilizes the flower it robs.
"3. The Mills of the Gods' grind slowly; Yet they grind exceedingly fine. And last, but not least;
"4. When it is dark enough, you can see the stars." – Paid-up subscriber Frank
Porter comment: What a fantastic letter.
Wow.
Not just the ending... but all of the references. Garet Garret – Edward Peter Garret – is one of my heroes. Few people know his book The Driver served as a forerunner to Atlas Shrugged.
Yours could easily be the best letter we have ever received.
No wonder I read all these things!
Thanks. Thanks. Thanks.
"I read your advice to Adam the 17 year old and I must say, those words of wisdom often fall on deaf ears. I subscribed to the True Wealth newsletter when I was 14 (I'm 23 now – I took a few years off in between but I missed the Digest too much). In the beginning, when you only have a few thousand dollars, information overload and dreams of being an overnight millionaire can be overwhelming. Looking back now (after making all the rookie mistakes), the most valuable piece of advice is to look for high probability trades.
"I remember reading about TASR back then and doing hypothetical calculations thinking 'if I had put it all in that stock, I'd be able to buy a car and fund college.' Those thoughts were deadly. I ended up drifting away from the core investment principles I learned here and chasing after unlikely 100 baggers – only to be burned.
"Oh, and another thing. Saving is one of the least sexiest things to do – especially when your friends' parents are buying them BMWs. However, I'd have a lot more if I didn't blow a large chunk of my savings on a used 7 series, which consequently blew up on me three years later. Don't let MTV dictate your wants and needs – learn to save!" – Paid-up subscriber Johnny
"I am a longtime reader and now Alliance Member and read the 2/26 DailyWealth article 'The Most Compelling Argument for Owning Silver I've Ever Heard' last Saturday.
"The article was so compelling that this potential investment opportunity REALLY struck me... I was in Jackson Hole, Wyoming from last Saturday 2/26 until today 3/2. After (successfully) proposing to my (now) fiancée at the top of Rendezvous Peak (elev. 10,450) at Jackson Hole mountain on Sunday, we went and had a nice dinner at The Wild Sage in the town of Jackson.
"On our walk back to the Jackson town square, we walked into the Silver Dollar Bar to quickly warm up, whereupon I had this 'eureka' moment from this visual of a 40+-foot-long bar laden with Morgan Silver Dollars. Note the ones closer to the front of the bar are a little more worn... I'm not sure why they didn't apply another protective layer over the face, but maybe attraction of that silver sells more beer and liquor.
"I say this somewhat tongue-in-cheek, but you could do worse with the money than invest in a silver bar in a monopoly location in a great town near a world-class mountain... and also get a probably hard-to-get liquor license.
"I doubt the place is for sale, but I wouldn't be shocked if one of your subscribers owns it. I enjoy all your publications and they have helped me learn to be a better investor – for now, I'll stick with my 'silver streamers' and Ferris-picks, but the Silver Dollar Bar was interesting." – Paid-up subscriber Stephen B.
"I just read about the guy who lost 6 grand on the Tribune bonds he purchased. I had to smile because when I had a subscription to True Income Mike was still recommending Tribune bonds even though they were then selling for about $140 per bond. I bought 30 bonds and later sold them at $310 for a nice double +. Thanks Mike ;>) Now that I'm a Flex Alliance member (BTW, simply one of the greatest Alliance memberships!!) I plan to re-subscribe to Mike's True Income publication and do as you recommend... put 40%-50% of my retirement account into bonds recommended by Mike and his team." – Paid-up subscriber Jim
Regards,
Sean Goldsmith
Baltimore, Maryland
March 3, 2011