Where U.S. corporate cash is not...

The trend Porter is most excited about today...

The massive stimulus coming from the Federal Reserve will boost stocks... And in today's Digest Premium, Porter shares which sectors he's particularly bullish on.

To subscribe to Digest Premium and access today's analysis, click here.

Where U.S. corporate cash is not... Lighting shareholder cash on fire... You can't print energy... Porter's propane call is looking good... Paulson agrees with Sjug...

 Yesterday, a Wall Street Journal story described how many U.S. companies keep cash held by their foreign subsidiaries in U.S. banks... So the money isn't really held overseas. It's right here in the U.S.

But that's not the story. As much as I (Dan Ferris) hate to agree with an academic and politician… Edward Kleinbard – University of South Carolina law professor and former chief of staff for Congress' Joint Committee on Taxation – is exactly right when he notes that wherever the money is… it's "not in the hands of the firm's shareholders."

Of course, U.S. corporations are simply doing what anyone would do... They're keeping their earnings in a place where it'll be taxed at lower rates than if it were "brought back home" and taxed at the U.S. corporate rate (35%).

It's called tax efficiency, and many companies do it.

But that's no excuse for stiffing shareholders. Shareholders own that money, and it's being kept from them under false pretenses – that paying higher tax rates would destroy shareholder value. But that's baloney.

 Microsoft is a typical example… Its management lit a big chunk of its mammoth cash hoard on fire recently. Last year, the company wrote down its 2007 acquisition of online marketing firm aQuantive from $6 billion to ZERO. That $6 billion is gone, and it's not coming back.

As if giving fate the finger, Microsoft later spent $8.5 billion on video-chat service Skype in 2011. And now, it's thinking about lighting some more cash on fire by taking a stake in has-been computer-maker Dell.

Microsoft's misguided mergers and acquisitions "tax" shareholder money at a 100% rate. That's a lot worse than the U.S. government's puny 35% corporate tax rate.

 I don't dislike the management at Microsoft the way many people do. But I must admit, they're just like almost every other U.S. corporate management team when it comes to mergers and acquisitions. They're incompetent value-destroyers.

Corporations keeping large cash hoards under the pretense of tax efficiency are guilty of a massive, pervasive fiduciary breach.

 Apple is another miserable cash-hoarder. It's now got more than $137 billion in cash and short-term investments. The company has been growing its cash pile every quarter since at least December 2008, according to the folks at the financial blog Zero Hedge.

Maybe the market is getting tired of these morons pretending to know what to do with all the cash they're earning. It's certainly getting tired of something Apple is doing... Apple's share price plummeted 11% today.

The stock was trading around $455 a share today – about 35% below its high of $705, hit last September. The company is still selling plenty of its popular gadgets... and the share price just keeps dropping.

Gee... it's almost like the market is saying the equity isn't worth spit if the jerks in charge forget to pay the profits to the company's owners.

 Equity is a residual claim on the earnings of a company. Equity holders own those big cash hoards. They should be marching on U.S. companies with torches and pitchforks, demanding the money be returned home (officially), the taxes paid, and the net cash paid out in dividends and share repurchases.

If Microsoft did this, its share price would be $40 or better, instead of languishing in the $20s. Apple would probably be closing in on $1,000 a share, instead of sinking to less than $500.

And remember… it's not the share price that concerns me (even though that's what the average herd member is obsessed with). It's the valuation of the business. They're both fantastic, cash-gushing businesses. But both businesses trade at absurdly low, single-digit multiples of free cash flow… once you back out the value of the huge cash hoards. In other words, the market is downgrading the businesses because management is awful at paying shareholders their fair share of the profits.

Since early 2008, Microsoft has created roughly $0.50 of market cap for every $1 of earnings it has retained. That's value destruction. Apple has created about $2.40 in market cap for every $1 retained. That's excellent. But if Apple begins to demonstrate Microsoft's pyrotechnic proclivity with shareholder cash instead of merely hoarding it, I'm willing to bet the market will keep its valuation depressed, too.

 On Tuesday, we talked about the true meaning of inflation. And we talked about the policies of the U.S. Federal Reserve and the Bank of Japan (the country's central bank) to print money and buy their countries' sovereign debt so they can maintain 2% inflation "targets." And we talked about what that could do to your savings.

But… as long as you're saving something other than what the central banks are printing, then working and saving are still the right thing to do.

As we pointed out Tuesday...

• They're printing currency – dollars and yen.
• They're not printing gold and silver.
• They're not printing real estate.
• They're not printing houses.
• They're not printing wonderful businesses.
• And they're not printing hydrocarbons.

 A year ago, the European Union (EU) banned imports of "liquefied petroleum gas" (LPG) from Iran (effective six months later, in July). The EU intended the sanctions to punish Iran for its nuclear-weapons ambitions... but there's one big beneficiary that few people anticipated at the time the ban was put in place.

It turns out, Europe's ban on Iranian LPG has sent a lot of new business to the resurgent U.S. petroleum industry...

 LPG is essentially a mixture of butane and propane. It's mainly used as fuel for heating homes, cooking, and, in some parts of the world, transportation. It's also increasingly being used as a refrigerant.

Propane and butane – which are also natural gas liquids (NGL) – are byproducts of natural gas extraction and petroleum refining... So with the U.S. producing more natural gas and petroleum than it has in years (a trend we've written about frequently)... we have a lot of LPG to sell in Europe. In fact, the U.S. is the world's No. 1 propane producer. Saudi Arabia is No. 2.

 According to a report from the Bloomberg news service, the Energy Department, and Norwegian ship broker Joachim Grieg & Co... U.S. LPG sales surged 27%, while Iran's sales plunged 18%.

The EU sanctions prohibit any vessel insured in the 27-nation bloc from carrying Iran's energy products. Bloomberg says that applies to about 90% of the world's merchant fleet…

"In Iran, you clearly see the declining trend, but don't forget the U.S. is expanding, so there's some substitution," said Steve Engelen, head of research at Joachim Grieg. "More buying and selling and shifting trade tends to be positive for shipping."

 Propane is a small part of most shipping companies' cargoes. But volumes are increasing... 2012 was up 4.5% from 2011. And Norwegian investment bank Pareto Securities forecasts seaborne trade will expand 8.4% this year. Daily rates for shippers are also up. Prices averaged $30,000 for very large gas carriers (VLGCs) – up 25% from 2011.

 In the December issue of his Investment Advisory, Porter identified NGL exports as a huge potential market for the U.S. energy industry... He explained to readers that NGLs represent a way around the difficulties the U.S. faces in exporting its newfound abundance in oil and gas. (It's against the law to ship out crude.) Here's what he told readers...

Porter ended up recommending one of those firms... and he was right on the mark. Subscribers who bought shares of the stock Porter recommended in that issue are already up 23%. And there's plenty more upside.

 Last year, Porter produced a four-report series covering all the facets of America's new oil boom... As part of that work, he developed The Global Oil Value Monitor – a database of 77 North American oil and gas producers. Porter and his research team use this tool to analyze the assets held by these firms and signal when their equity is cheap.

Porter shares all the data used in The Global Oil Value Monitor each week as part of the Stansberry Data supplement to his Investment Advisory. The weekly Data report also provides similar comprehensive access to Porter's work on the insurance sector and "trophy asset" investments. To learn more about an Investment Advisory subscription and how to access Stansberry Data, click here...

 Billionaire hedge-fund manager John Paulson parroted our own Steve Sjuggerud in a speech Tuesday night in New York City.

Paulson gained fame and fortune shorting the subprime crisis… and turned housing bull several years after. He reiterated his optimism about the housing sector on Tuesday. Paulson cited the "strong recovery" in home prices and the fact that inventory is falling. Those factors will lead homebuilders to create more supply.

"This is probably the best time in our lifetime to consider buying a house," Paulson said. "Affordability... has never been higher."

 The message should sound familiar to True Wealth subscribers… Steve's been bullish on housing for a few years. Here's how he described his current outlook on housing in the January issue:

 New 52-week highs (as of 1/23/12): Altius Minerals (ALS.TO), Advent Claymore Convertible Securities and Income Fund (AVK), Berkshire Hathaway (BRK), iShares Australia Fund (EWA), iShares Insurance Fund (IAK), iShares Home Construction Fund (ITB), Lucent Technologies (LUTHP), PowerShares Buyback Achievers Fund (PKW), Sequoia Fund (SEQUX), ProShares Ultra S&P 500 Fund (SSO), W.R. Berkley (WRB), Monsanto (MON), 3M (MMM), Chicago Bridge & Iron (CBI), Hershey (HSY), Alleghany (Y), Blackstone Group (BX), Kohlberg Kravis Roberts (KKR), Southern Copper (SCCO), Enterprise Products Partners (EPD), C&J Energy Services (CJES), Union Pacific (UNP), CVS Caremark (CVS), Walgreens (WAG), and Emerson Electric (EMR).

 In today's feedback… a subscriber shares his success. And another offers Sean Egan her support. Send your story to feedback@stansberryresearch.com.

 "I am so glad you commented on the egregious actions the SEC took against Sean Egan's credit rating firm. I was shocked when I heard he was barred from business for 18 months for some stupid, trumped up charge. I sincerely doubt there was any misstatement on his application, and agree with you that this was Big Brother retaliating for his downgrade of US debt.

"Sean would make regular appearances on CNBC in the past, and his analysis was always excellent, in my humble opinion. When he downgraded the rating on U.S. Treasuries, CNBC (perhaps it was the shrill voice of Maria Bartiroma I am recalling) gave Sean such a hard time. Then they never had him on again.

"Hmmm! These are the same producers that now pay Henry Blodget as a contributor and often have the criminal Steven Ratner on as an 'expert.' The only one I care to listen to anymore is Joe Kernan, especially when he can't contain his contempt for weasly co-anchor Andrew Ross Sorkin. Sheesh, if our world is informed by such idiotic news announcers/analysts, we really are in a world of hurt.

"Stay true, and thanks for the investment ideas and philosophies." – Paid-up subscriber Mary

Ferris comment: Don't worry, Mary. You're only in a world of hurt if your TV doesn't come with an off switch. I totally agree about CNBC. It's in the business of being status quo. Its primary job is to stoke investor prejudices and overstate the importance of price quotes and economic news. And it's very good at its job…

 "I subscribe to a couple S&A publications including Porter's Investment Advisory. I am a small time investor and tend to cherry-pick from the publications I receive and make a handful of investments each year. Last year, I invested in Chicago Bridge & Iron based on Porters recommendation and couldn't be happier with the result thus far." – Paid-up subscriber Tim

Good investing,

 The Federal Reserve has committed to purchasing $85 billion in government and mortgage debt per month into perpetuity. This massive stimulus will inflate the Fed's balance sheet to $4 trillion by the end of this year. I (Porter) think this stimulus will cause the economy to be much stronger than people expect... And economically sensitive areas of the markets will thrive.

 For example, transportation stocks will do well. As the economy picks up, people will transport more goods. One example of a good transportation stock, which I've recommended in my Investment Advisory, is Union Pacific. (Rail, in particular, is benefiting from shipping oil out of shale regions.) The following chart of the Dow Jones Transportation Index – a basket of 20 major cargo, passenger, and package-shipping firms – shows what transportation stocks are doing.

A lot of the basic-material stocks will do better than anybody expects. Capital-equipment stocks will do better than anybody expects. A capital-equipment stock worth looking at, believe it or not, is legendary automaker Ford. Cars are a big capital investment for a lot of companies. Also, consider engine manufacturer Cummins and heavy-equipment-maker Caterpillar.

  Inflation-sensitive stuff will really soar. Silver will have a great year. Real estate will have a great year. Those are the areas I would be poking around for value.

The trend Porter is most excited about today...

The massive stimulus coming from the Federal Reserve will boost stocks... And in today's Digest Premium, Porter shares which sectors he's particularly bullish on.

To continue reading, scroll down or click here.

The trend Porter is most excited about today...