Your last chance for Alpha... Alibaba even bigger than we thought... More GoPro madness... Mergers hit seven-year high... And they're getting bigger... Reaching the $100 million mark... Wealthy foreigners stashing cash in NYC real estate... How you can get money abroad... A visit to one of our favorite spots...
Before starting today's Digest, another quick reminder...
Tonight is your last chance to watch Porter's special webinar about The Alpha Strategy. It's a strategy Porter has used to generate average returns of 52.5% across all open positions (as of June 17). And on the webinar, he'll explain what setups he looks for to enter into these trades.
Also, ending at midnight tonight, Porter makes a special offer to anyone who views the webinar... It's a way for you to receive his research for life (a $1,000 value) for free.
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In May, S&A Short Report editor Jeff Clark recommended going long Internet company Yahoo as a way to play next month's initial public offering (IPO) of Alibaba – the Chinese e-commerce giant. Yahoo owns a 24% stake in Alibaba... And Jeff expects Alibaba's massive debut, which could be the largest in U.S. stock market history, could send shares of Yahoo soaring.
From the June 11 Digest:
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But Alibaba could be valued at even more than $200 billion, according to Gene Munster of investment bank Piper Jaffray.
Yesterday, Piper Jaffray upgraded Yahoo to "overweight" from "neutral" and raised the price target on YHOO to $43 – it's trading at $35.50 today. Last month, valuation expert and NYU finance professor Aswath Damodaran estimated Alibaba to be worth $142 billion. Piper Jaffrey now expects Alibaba to garner $221 billion at the time of the IPO.
GoPro, the mobile-camera maker we discussed yesterday, is ripping again today.
The company, whose shares debuted at $24 last week, is up another 16% today to more than $47 a share – almost double its IPO price. GoPro's market capitalization is approaching $6 billion.
Again, the company's valuation isn't stratospheric... But we fear the company will ultimately face problems because of the low barriers for competition to enter its market.
GoPro's surging share price is just one example of the market's insatiable thirst for IPOs...
In another "sign of the top"...
Through the first half of 2014, mergers in the U.S. hit a seven-year high for that time frame. According to Thompson Reuters, deals announced in the first half of 2014 were worth nearly $1.77 trillion – up almost 73% from a year ago, and the highest first-half total of any year since 2007.
And the deals are getting bigger...
Forty-six deals worth more than $5 billion were announced in the first half of the year, up 130% from a year ago. On a dollar basis, those deals are worth $740.7 billion – up 231% from a year ago.
With easy credit and an implied backstop from the Federal Reserve, companies are willing to pay more and more for acquisitions.
Normally, when a takeover is announced, shares of the acquiring firm fall – shareholders punish the acquirer, fearing they overpaid. Today, shares of acquiring firms rose on deal announcements, which only boosts the confidence of companies considering acquisitions.
"We went back and looked to the share-price reaction of acquirers. It's higher in 2014 than we've seen in at least the last 20 years," Patrick Ramsey, a co-head of Bank of America Merrill Lynch's America's mergers business told the New York Times. "That's a huge source of confidence and validation not just for the people doing the deals, but for their peers and others."
As we've written many times in the Digest, quantitative easing and inflation help the wealthy... As they accumulate more dollars and subsequently lose more and more faith in paper money, those dollars chase high-end real estate, art, wine, and other collectibles.
And the ultra-wealthy can bid prices for the world's premier real estate and collectibles to stratospheric levels. We're seeing this play out now in New York City real estate, where top apartments are approaching $100 million sale prices.
Boosting prices even higher, the wealthy are now using NYC real estate as a "Swiss bank account" of sorts... As banking secrecy becomes less and less secure, the global elite are parking tens of millions of dollars in New York City property – hiding behind a maze of legal structures and holding companies.
According to the Census Bureau, approximately 39% of all the apartments between 49th and 70th streets and between 5th and Park avenues in NYC – an area that includes coveted Midtown and Upper East Side addresses – are vacant 10 months a year.
From New York Magazine:
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If you don't have $50 million, or $100 million, sitting around to hide your wealth in a New York City condo, consider offshore real estate (which doesn't require The fishing trip seemed like a bust...
We had taken a small boat into the waves, along the coast... The undeveloped hills looked like the California coast in the 1970s. Nothing but forest and the occasional modern home tucked into the trees.
We only caught one fish that day, a small grouper. But as we pulled up disappointed alongside a floating dock... we were greeted with frosty Toñas, the local Nicaraguan beer, and fresh limes. I took a swig and jumped into the ocean.
When I climbed back aboard, fresh oysters were waiting... We slurped them down with a dash of salt, lime, and hot sauce. Some of the best oysters I've ever had.
And while we were enjoying the Toña and oysters in the sun, our friends from "The Ranch" were preparing fresh sushi with our grouper.
If you've never visited Bill Bonner's development, Rancho Santana – "The Ranch" – I hope you'll join us there next month.
We're taking a small group of subscribers with us to look at investment properties and enjoy the ocean.
The event will take place August 6-10. We've got renowned chef Heather Terhune from Chicago's Sable Kitchen & Bar on the property to prepare our meals while visiting Nicaragua.
But more important than the food is what's going on in Nicaragua. As I've written in the past, the two major upcoming developments for The Ranch are the paved road from the closest town, Tola, and a new airport minutes from our property. But improvements are thanks to a new development just down the street from ours owned by Nicaragua's richest man, Carlos Pellas.
Pellas is connected in Nicaragua... And he built a five-star resort minutes from our property. He'll make sure both a paved road and an airport are in place to attract more visitors to his property.
At first, the airport will have a passport office and accommodate 72-seat planes. The government will be heavily involved in the project... And eventually, they'll be able to land jumbo jets there.
I spoke with someone from Rancho this morning... He said a big survey crew and bulldozers were working at the airport yesterday. If they're not already moving dirt, they will start soon.
They're also working to extend the paved road all the way to the gates of Rancho Santana. The government is committed to making this strip of land along the coast Nicaragua's premier attraction... And it realizes the important role Rancho Santana plays.
Retirement Millionaire editor Dr. David "Doc" Eifrig thinks it's a great place to get some money offshore and potentially retire. He recently took six couples to Rancho for a visit.
And other people are catching on. Nicaragua has been on the front page of the Wall Street Journal, the New York Times, the Financial Times, Departures (the magazine for American Express platinum members), Delta Air Lines' in-flight magazine, and Golf Magazine – to name a few.
They're all praising the country as the next major destination.
In five years, maybe less, the word will be out. But for now, Nicaragua still offers a great opportunity.
You can purchase beautiful lots for around $200,000... Comparable land in the United States would cost you seven figures. And the cost to build in Nicaragua is low... You can have a premium home for $100 per square foot. Plus, the construction is amazing.
One of my friends built one of the most impressive houses I've ever seen atop a hill in Rancho Santana. You walk in the front door and look directly onto the ocean. We're hosting cocktails at his house during our visit.
In addition to beautiful homes going up, the owners continue putting more and more money into the development... A new, 17-room inn on the property should be finished this year. And they're building a second clubhouse on one of the five beaches on the property.
One of the development's owners also built a great gym and basketball court as part of a local community center across the street from Rancho Santana. It's a great place to get some exercise when you're in town.
Again, our visit takes place August 6-10... It's a great opportunity to explore foreign real estate investments and relax.
If you would like to join us, please e-mail Rancho Santana's Marc Brown at marcb@ranchosantana.com. Because we can only take a small group, we ask that only folks who are seriously interested in investing in the country join the trip. Marc makes the final decisions. Please put "S&A Trip" in your e-mail subject line.
New 52-week highs (as of 6/30/14): Activision Blizzard ( In today's mailbag, two readers describe their experiences putting our research to work. Send your comments to feedback@stansberryresearch.com.
"I enjoy reading the feedback you receive from your subscribers because I can quickly discern which ones 'get it' versus which ones really don't have a clue. One of my first rules of investing is to always take ownership of my investing decisions. The way I look at it, anytime you or your analysts make a recommendation as my 'advisors,' it is incumbent on me to follow behind and complete my own due diligence. I never blindly follow any recommendation. I look to you for idea generation, not to make my stock or bond picks for me.
"My suggestion for your readers is to take your common-sense advice to heart (don't chase yield alone, keep position sizes reasonable, diversify investments, etc.) and to take specific stock or bond recommendations with a grain of salt. In the long run, you are absolutely correct that there is no teaching, only learning. I have learned a lot from you and I look forward to continuing my subscription(s)... just keep the ideas flowing and I will use the ones that make the most sense to me." – Paid-up subscriber Ken C.
"I, like you, have a sizeable chunk of 401(k) investments. The reasons for this are irrelevant and I manage them very carefully. Last year they made a lot of money but then, everyone who has a brain stem made money last year. You had some choice words about mutual-fund managers and I have to agree completely. Charles Schwab manages the funds and I have a total of 6 funds in my account. On their website, Schwab has an investor's tool that they use to help investors choose the best funds for each investor based on a number of factors such as goals, comfort level, and years to retire.
"I used that tool and indicated I was a 'very aggressive' investor and the computer spit out a list of 6 funds they felt were best for me. I wasn't satisfied with the output on the tool so I reentered the tool and indicated that I was a 'very cautious' investor. Again, the tool spit out the same 6 funds out of a pool of 24 funds. Do you think they were pushing certain funds?
"I called them up and eventually a supervisor dribbled BS in the phone for 5 minutes that made no sense at all. I really wished I had recorded that conversation." – Paid-up subscriber Tom Schwarzkopf
Regards,
Sean Goldsmith
Baltimore, Maryland
July 1, 2014
What happens when creditors abandon the U.S.?
In today's Digest Premium, former U.S. politician and businessman David Stockman explains why the current monetary policy is unsustainable... And what would happen if the U.S. government had to pay real interest on its ballooning debt...
To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.
What happens when creditors abandon the U.S.?
Editor's note: Yesterday, we excerpted a portion of Porter's conversation with U.S. politician and businessman David Stockman, who appeared on episode 165 of Stansberry Radio. In it, Stockman recalled the time when he was most disgusted with his peers in Washington. In today's Digest Premium, we continue the conversation, where Porter asks: "How does this all end?"
Porter Stansberry: It seems to me that there is no political constituency for a balanced budget or for being responsible with taxpayers' money. In short, our creditors don't get a vote, and neither, really, do the people who pay all the taxes. So... how does this all end? When does the day come when the creditors say, "We're not lending you any more money?"
David Stockman: Well, it's a good question, but I think you have to add a piece to the picture, and that is the absolutely destructive role of the Federal Reserve – I call it our monetary politburo – in undermining any remaining sense of fiscal discipline that still existed after the Reagan era... And when we got into the Greenspan-Bernanke-Yellen era, we saw constant massive expansion of the Fed's balance sheet, which is just another way of monetizing the public debt.
That's what they do. And this whole idea that we could centrally manage the whole financial system and the economy by sitting in the Fed's Eccles Building and 12 wisemen dialing the interest rates and monthly purchase rate for securities and so forth... That's where it all fell apart.
Suddenly, the politicians realized they were financing this rapidly swelling national debt with free money that was being created by the Federal Reserve. And when interest rates are driven down to under 3% on the 10-year Treasury, the carry cost of the debt was practically nothing. Therefore, kicking the can became the policy of choice.
I spent time in Congress. I was elected three times. I'm not totally anti-politician, but I can tell you this... If you make it so easy to kick the can... if you allow a $17 trillion debt to be financed at $250 billion a year, when it really should be $700 billion or $800 billion under normal interest rates... politicians are going to take the easy way out.
They're not going to fall on the sword. They're not going to lay out the real painful choices to the public. They're not going to vote against the squeaky wheels and the powerful constituents when the Fed is printing the money and doing the job of financing the debt for them.
That's where the crisis comes. When the Fed finally reaches the point where the entire monetary system is threatened... and the Fed is no longer the big fat thumb in the market buying up the monthly and weekly issue of Treasury debt, then we're going to see the rubber meet the road, so to speak. We're going to have the day of reckoning, because there is no demand out in the real marketplace among real investors for massive amounts of additional Treasury debt at these lower interest rates.
And when interest rates normalize, bar the door. The carry cost on the federal debt, which by then will be $20 trillion, will soar by $500 billion a year. The politicians will finally panic, but I'm afraid by then it might be too late. We'll be in a very serious bond-market crisis.
What happens when creditors abandon the U.S.?
In today's Digest Premium, former U.S. politician and businessman David Stockman explains why the current monetary policy is unsustainable... And what would happen if the U.S. government had to pay real interest on its ballooning debt...
To continue reading, scroll down or click here.