Why I'm not a pessimist...

After Warren Buffett announced his deal to acquire Heinz (in partnership with Brazilian private-equity firm 3G Capital), the billionaire investor told CNBC he was looking for another "elephant" to buy. Buffett has cash... and he wants to put it to work.

Following the deal, we did an analysis that compared McDonald's with Heinz. McDonald's, like Heinz, is a capital-efficient business with a strong brand... exactly the type of company Buffett wants to own.

If you go back and look at my December issue, we published a full analysis of the best capital-efficient companies that are trading at low prices. We'll run this entire essay in Monday's Digest Premium.

I also think there may be an opportunity for Buffett in the for-profit education sector – companies like DeVry and Apollo Group.

But Buffett could add tremendous legitimacy to the for-profit education sector. And he could give the companies the financial backing they need to get back on their feet and to be able to lower the prices for students. And he could help clean up these companies. They're a mess right now.

Look at one of the industry's leading companies, Strayer Education, for an example of what I'm talking about. In just the last three years, overhead at Strayer has gone from $120 million to $150 million. That's a big increase in terms of percentage (25%)... especially when you know that in the same time, its net income is flat.

But there's a great opportunity because the stocks are dirt-cheap. They're priced for bankruptcy. Strayer still has an annual return on assets of more than 30% and is trading for less than five time cash earnings.

Schools are one of those places where you find lots of consumer dedication. Just look how people relate to their alma maters. If you had the ability to build a credible, high-quality for-profit college, it could be an amazing business... Imagine if you could own Harvard.

Buffett has said he's not interested in turnarounds. So I don't expect this to happen. But it would be an interesting situation.

In today's Friday Digest... a message I doubt you will ever forget. And a message that's unlike anything you've read from me in a long, long time...

Stansberry & Associates and I, in particular, have become well-known in financial circles for doom-and-gloom-type themes. That's mainly because our professional lives as financial writers and analysts happened to correspond with the largest speculative bubbles in history.

As a result, I spent most of my 30s writing about one disaster or another that was absolutely going to happen... from the collapse of MCI-WorldCom and the dot-com/telecom bubble... to the mortgage/housing bubble... and to today's sovereign-debt bubble (which, by the way, is the largest and most dangerous bubble yet... by a wide margin).

Here's the thing... I'm not a pessimist. Not at all. What I know about human history and the evolution of technology makes me unbelievably optimistic about my future and the future of my children. I have no doubt that the next 25 years will contain the greatest creation of wealth in human history. All around the world, technology is allowing people to move from the Stone Age into the Computer Age. The growth potential for humanity has never been greater. And I believe it will accelerate.

Please... take a moment to watch this video, which was published yesterday by Google. I've been writing for the last year or so about the future of computing – how computers will come to greatly augment human sensory perception and human action. We call the companies involved in this latest expansion of computing "Sensory Masters." This video gives you a peek into this new world. And by the way, all the technologies in this video exist right now. This isn't science fiction.

The video shows an application for computer-assisted vision... a kind of vision that allows you to communicate across the world with your voice... to record perfect memories with your eyes... and to access information directly from the Internet with what seems like only your mind. And this is only the beginning.

To learn more about what's possible with these kinds of new technologies, I strongly suggest reading two science-fiction books: Daemon and Freedom, both written by Daniel Suarez. Yes, these books are fiction... but they point toward the future of computer-assisted life.

These new technologies will continue to change our world at an ever-accelerating pace. They will create demand for additional global bandwidth, computer storage, and computer processors... demand we can't even imagine today. And we're helping our subscribers follow the best ways to make money in these trends in our newsletters. So please, don't ever mistake us for pessimists.

Now... just because we believe the future will be better than we can imagine doesn't mean we're not still very concerned about the finances of the U.S. government. And it doesn't mean I'm not still convinced that the U.S. dollar will lose its status as the world's reserve currency. It doesn't mean I doubt pain and trouble await millions of Americans who still don't understand the absurd risks our leaders are taking with our financial system.

Anyone with basic math skills should be able to understand that we will never repay our $20 trillion-plus federal debts (if accounted for honestly) – an amount equal to a staggering $175,000 per taxpayer. And that's only if you treat taxpayers equally, which, unfortunately, in America, we do not. As things stand today, we're counting on about 10% of the population to repay about 90% of these obligations. And that, my friends, will never, ever happen. What will happen will be a truly epic financial disaster.

Here's the worst part... these financial problems have been staring us in the face since 2009. We know exactly what's causing them – vastly too much debt and not enough savings. But what has changed? Not a damn thing. The government's debts continue to grow and grow.

And the private sector? Let's look at the poster child (in my view) of corporate over-indebtedness, General Electric. You'll recall that GE almost went bankrupt in 2008 because it was totally dependent on the short-term financing available in the money markets. When that funding dried up, GE couldn't borrow a penny from anyone in the world on any terms it could afford. Why not? It owed creditors almost $700 billion, which made it the world's fourth-largest debtor, bigger than most of the sovereign borrowers on Earth.

It is insane to believe that a private company will ever be able to repay debts of this magnitude, especially once you understand that GE only earns 1.6% on its assets. That's why the U.S. government had to bail out the company and guaranteed all of its debts through last year. And that's why I've long predicted that GE will eventually go bankrupt, too.

So... if you were GE's managers... don't you think the last few years would have been a good time to start paying down some of this debt? You've got the Federal Reserve essentially making it impossible for you to lose money. Yes, you're only making 1.6% on your assets... but the Fed is allowing you to finance those assets essentially for free. And that's exactly why your cash flow is up about $10 billion annually since 2009.

But what did GE do with this extra money? It paid out $20 billion in cash dividends and bought back $12 billion in stock. As a result, it now has less equity on its balance sheet ($116 billion) than it had at the end of 2009 ($117 billion).

I'm not making this up. Rather than deleverage, GE has actually become more leveraged over the last three years, much like the rest of America.

So... how do you reconcile these two views? How can you simultaneously believe that life will get tremendously better... and that our government, our way of life, and our financial system are all on the verge of an epic, generational crisis? Simple. That's the way progress happens. It's not uniform. Just consider the 20th century. More people were violently killed in the last century than in all of human history before that point, combined.

That 100-year period saw the rise of communism and socialism, two of the greatest wealth-destroying ideas ever planted in the human mind. It saw China, the single-largest ethnic population, succumb to a civil war and spend most of the period locked in a totally senseless, self-imposed isolationism. It saw two World Wars, the Great Depression, Stalin, the Cold War, and the "Domino Theory" that sent so many U.S. citizens to die in jungles, for nothing. And yet...

During the last 100 years, we also saw the discovery of antibiotics – the greatest medical advance of all time. We saw average life expectancy double, from around 30 years to more than 60, globally.

See the point? We expect a financial crisis because we understand accounting and math. But we expect prosperity because we understand history, technology, and progress. There's no contradiction...

My staff and I have produced enough in-depth research on the new technology boom to fill a book. Our October issue covered the massive upgrade in our wireless communication network, which is being driven by greater usage of smartphones and tablets (and products like Google's "Glass").

Our August issue covered the extraordinary demand for digital sound production and storage. Last month's issue covered the booming demand for data storage. And this month's issue covered a special company that dominates a vital tech industry. Although I doubt you've heard of this company, know that it is every bit as ingrained in your life as Microsoft, Intel, and Apple are.

Each of our issues details the "no brainer" companies you should own to profit from the tectonic shift taking place in our world today. Thanks to the early-2000s Nasdaq crash… most people are still turned off from technology investing. Many of these dominant players can be bought for extremely low multiples to their cash flows and asset bases.

I'm confident no other newsletter in the world has covered these trends as well as we have... and gotten its readers into the best technology investments in the world. While I believe the sovereign-debt bubble will end badly, huge fortunes will also be made during the next phase of the computer revolution.

I recommend readers keep a large portion of their wealth in gold, silver, income-producing real estate, and very safe "capital efficient" companies. But you're crazy not to take a portion of your capital and invest in these businesses. In 10 or 20 years, they will be 10... 20... or 100 times their current size. It's inevitable... just like the computer revolution was inevitable in the 1970s... or the automobile revolution was inevitable in the 1920s.

As with a lot of our research, we invite you to give it a try, risk-free. That's right: You can access all the research I just mentioned for free. If you decide within the first four months that it's not right for you, we're happy to give you 100% of your money back... although we're confident you'll agree it's worth 10 times what we charge. You can click here to learn about a subscription to my Investment Advisory (without watching a long promotional video).

New 52-week highs (as of 2/21/13): W.R. Berkley (WRB), Chubb (CB), Government Properties Income Trust (GOV), and Sysco (SYY).

We received loads of feedback, mostly positive, about Doug Casey's new book, Totally Incorrect. We'd love to hear your thoughts... feedback@stansberryresearch.com.

"[Totally Incorrect] needs to be a required read for all freshmen at all universities and JR and Community Colleges." – Paid-up subscriber Roy Pickles

"Got the book. Still reading it. What impresses me about his essays are that they force me to re-think my own positions. And on those rare points I disagree with, more often than not, I find myself coming around to his way of thinking. Kinda makes you wish we could just start a new nation exclusively for libertarian thinkers." – Paid-up subscriber Robert Baxter

"I'm enjoying reading Casey's book. It will definitely piss off the 'politically correct' reader." – Paid-up subscriber Henry

Porter comment: Doug is one of the great thinkers of our time... And he's one of my personal mentors.

Regards,

Porter Stansberry
Miami Beach, Florida
February 22, 2013