Here in Scott County, Tennessee, you can buy a 300-acre farm with five working natural gas wells and plenty of water for about $500,000. We mentioned a few weeks back we were interested in learning more about farmland. We think it's a good idea to move assets out of the U.S. dollar, and buying a farm is one way to do it. Unfortunately, we know nothing about working a farm and less about buying one. But thanks to our subscribers, we're learning fast.
Visiting Scott County this week, I asked my dad, who dabbles in local real estate, where I could get a farm that would have plenty of natural gas. I like the idea of having a completely self-contained farm, with its own power plant and water supply. "There's a farm like that for sale up on Hurricane Road..." Dad told me. "And there's plenty of gas up here. It's everywhere..."
If you're interested in good land, check out Scott County. Here's the view from our place:
Have you ever heard of the Liberty Dollar? It's essentially a warehouse receipt you can use to barter for goods. Each Liberty Dollar is a receipt for so much gold, silver, and copper. Assuming the guys running the system are honest, it's a much sounder currency than the government's paper dollar. The problem is, it's expensive to set up such a system and difficult to get people to accept your warehouse tokens at face value.
I wouldn't have personally used Liberty Dollars. I prefer to own my gold directly. I can wire money to my bullion dealer anytime I'm holding too much paper money. On the other hand, I certainly applaud the fact that a few Americans at least have gotten fed up enough with the government's funny money and done something about it. Everyone, it seems to me, has the right to use whatever kind of money he likes – or at least they should...
But it turns out you don't have that right... The feds arrested all of the backers of the Liberty Dollar this week. Says U.S. Attorney Ed Ryan: "When groups seek to undermine the U.S. currency system, the government is compelled to act. These coins are not government-produced coinage, yet purchasers were led to believe by those who made and sold them that they should be spent like U.S. Federal Reserve Notes."
Mmmnnn... Since Congress abrogated its legal responsibility to "mint coins" back in 1913, when it created the privately owned Federal Reserve, who has done more to "undermine" the value of the U.S. dollar? If the government wanted to protect the value of the dollar, you'd expect it to be consulting with the Liberty Dollar guys, not arresting them.
Besides the irony of the government (which relies on paper currency) arresting the backers of a sound currency on a counterfeiting charge, I wanted to bring this matter to your attention because it represents the first step in what I believe will be increasing government efforts to restrict your ability to escape the dollar. The government doesn't want you to be able to use commodities like money. It doesn't want you to be able to escape the huge inflation that's coming.
For its scheme to work, you have to keep the value of your assets in their worthless currency. The government's biggest fear is a run on the dollar. And it'll do everything it can to prevent it – including seizing your gold. Think it won't happen? It did in 1933. And it will again.
An update to our copyright protection warning... A few weeks ago, I reminded everyone our publications are copyright protected. Outside of the fair use rules, forwarding our subscription materials or sharing copies of our work with other people is forbidden, unless you have my explicit written permission.
Well, unfortunately, about 100 subscribers didn't take the hint. So let me be even more clear: The technology we use to distribute our content via e-mail keeps track of whether or not you forward it to someone else. We now have a record of about 100 subscribers who have been doing this regularly. Those 100 people will get a letter from us next week.
Please understand... We abhor lawyers. In almost any dispute, we would rather part as friends than fight. We have never been involved in a lawsuit against a customer, an employee, or a partner before. But copying our work is no different than stealing from us. And if you continue to do it even after we've warned you repeatedly to stop, I will go after you with every lawyer I can hire. I will not settle. And I will publish your name and keep it up on our website forever. This is your last warning.
Beginning with my January 2008 issue of PSIA, I've been warning you about the troubles plaguing Chicago-based condo lender Corus Bancshares (CORS). Shares have fallen from $9.55 at the time of my original analysis, to $0.26 today – a 97% drop. So... there's not much point in continuing to write about it, except the bank is the poster child of reckless (and feckless) lending. I'm convinced the bank's owners knowingly defrauded both investors and the FDIC. I'm following the story now just to see how it all turns out... and how much it costs us all.
Here's the latest: The Office of the Comptroller of the Currency stepped in last year and gave Corus a June 18 deadline to sell itself or raise $390 million. If the bank failed to do so, it risked being placed under conservatorship or receivership. Several buyers expressed an interest in some of Corus' assets, including Related Group, the largest condo developer in south Florida, and Related Cos, a developer that owns New York's Time Warner Center. Los Angeles billionaire Thomas Barrack's Colony Capital, a real estate-focused private-equity firm, is the latest firm to consider some of Corus' assets. Barrack told the Financial Times in April that he planned to raise $4 billion to buy distressed banking assets.
Corus' loans could be attractive, at the right price, because they weren't divided into securities, and any foreclosures wouldn't be subject to lawsuits from other lenders. Also, many of the developments Corus financed are high-end buildings. So far, there is no word whether Corus was able to sell itself or raise the capital. Currently, Corus has 49 loans backing 11,162 units in finished condominium projects all over the country. Buyers have closed on only 4,572 of them... 1,690 units were "presold," meaning a buyer put a down payment on the unit before the building was finished. However, the
buyer can, and at this point likely will, abandon the down payment and walk away from the condo. The remaining 4,900 units, 44% of the total, are vacant.
Corus also has 27 loans backing 5,628 units in unfinished buildings. In Florida, Corus' largest market, it has 1,334 condo units under construction – buyers have only closed on 42 of them. It has another 1,029 presold units. It hasn't closed a single unit in an unfinished building in California; Washington, D.C.; New York City; Austin, Texas; or Hawaii.
So far this year, there have been around 27 significant mergers in the health care sector – two just this week. Health care is the only sector rife with deal flow, making it one of the only places you can make quick gains using a merger-arbitrage strategy.
I know "merger arbitrage" sounds boring, but stick with me for a second... It's one of the easiest ways to make money in stocks. When a company announces a takeover bid for another company, the company to be acquired always trades below the "takeover price," because there's always a chance the deal won't go through. Traders take advantage of that spread – usually piling on leverage to amplify returns – for quick gains.
In the S&A FDA Report, editor George Huang has tweaked the traditional merger-arbitrage strategy (buying the acquired and shorting the acquirer) to make the profits even safer and more consistent. He's recommended five of these trades, and every one of them is up... The best performer soared 100% in less than two months.
We're not the only ones noticing this phenomenon... John Paulson, a merger-arbitrage expert and one of the best hedge-fund managers in the world, has taken positions in two of the trades George has recommended – Wyeth and Schering-Plough. We don't know how Paulson's doing, but we're already up 27% and 39%, respectively.
George just recommended a new trade this week... A small biotech company received a takeover bid, but it's trading 25% below the takeover price. You never see spreads this big. And George says the deal is a lock, meaning a quick 25% gain is all but guaranteed. Once these companies merge, they will develop one of the most promising cancer vaccines in existence. The small-cap we're buying will own half the rights. We saw a similar situation earlier this year with another biotech firm, Dendreon. That stock returned 450%. We think our company can do even better.
We're currently offering a large discount on the FDA Report... To learn more and access George's latest trade, click here.
Speaking of which...
New high: George's new FDA Report pick.
In the mailbag, more people who think we should torture anyone we can get our hands on. Yes, let's just round people up and beat them to death for fun. Send your thoughts here: feedback@stansberryresearch.com.
"I have a friend who is a big Obama supporter. I mentioned that if you try to flee the US that the government would confiscate half your wealth. My friend does not believe this is true. Can you provide a reference or link to the government regulation on this topic so I can forward it to my friend?" – Paid-up subscriber Bruce
Porter comment: Just type "The Hero's Act of 2008" into google.com. The bill, which was passed in June 2008, requires citizens who desire to leave the U.S. and give up their citizenship to pay their estate taxes before they leave. That means you have to surrender roughly 50% of your global assets if you want to leave the country. The old Soviet Union used the same kinds of taxes to prevent its citizens from leaving. This is only the beginning, trust me. The currency controls will be next – controls that will make it illegal for you to move your assets out of the country.
"I've read articles on the practice of waterboarding and other 'toture' techniques here and in the general press and I'm a bit bemused. I spent 21 years in the USN, nine of which was in the Navy Diving and Submarine service. Standard training for military divers includes drownproofing which involves tossing the trainee into open water where the only option is to tread water, stay afloat for 20 minutes. Any attempt to hold on to anything is repelled by gaffers with long poles shoving the trainees head away. After the first 20 minutes, a diver comes up from below and ties the two ankles together and the trainee is made to find a way to stay afloat for another 20 minutes, after that the diver comes from behind and ties the wrists together behind the back and the trainee then tries to stay afloat for the last 20 minutes. A full hour where you never latch on to anything and are fully concentrated on staying afloat. Most trainees make it just fine, a few have near drowning experiences requiring admission to an ICU. Torture maybe but it is standard training for any enlisted or officer who wants to be a diver. I'm sure if you look at standard training for Navy Seals, Marines, Army, Green Berets, or any other special force units you will find many training scenarios which would be classified as torture by those who are not aware that this is standard training for the troops." – Paid-up subscriber ARM
Porter comment: Sure, why not just round up thousands of people, from dozens of countries, the vast majority of whom are innocent of any offense. Handcuff them to the ceilings of their jail cells for days at a time. We can beat them for days – or until their legs are pulpified and would have to be amputated, even if they lived. They'll confess to anything after we've tortured them enough. And if we end up killing nearly 100 inmates, who really cares?
Of course, among the people we round up will be innocent citizens of allied countries. Some will be black-bagged because of mistaken identities. Still, we'll beat them like everyone else. You can never tell who is really a terrorist. Besides, any abuse of a captive prisoner is justified – whether they did anything or not – because a group of criminals attacked America in 2001. That's why we can ignore all pretense of being a civilized nation, because 19 people stole four planes and blew up some buildings.
Oh, also, we can ignore hundreds of years of our civil traditions and a set of laws (the Constitution) our government has sworn to uphold because we train our soldiers using some very demanding techniques few people would ever choose to endure.
Uh? There's no logic behind this argument. How we train our troops has no bearing whatsoever on the legal and ethical question of whether or not the Army should be beating prisoners to death in foreign prisons. And just because we were attacked by terrorists is no reason to abandon our laws or our ethics. I don't want my government to beat or torture any prisoner, no matter what he's done. That's why the Constitution expressly forbids cruel or unusual punishment. The extreme mistreatment of our prisoners is a stain on our national honor – and I'd be willing to bet most of our country's troops and our veterans wo
uld agree with me. It's unnecessary, it's cruel, and it dehumanizes our troops.
By the way, you should know the majority of people writing in to the mailbag seem to be in favor of torturing anyone we can get our hands on. It apparently hasn't dawned on them yet that their government is far more likely to cause them harm than any crazy terrorist.
"As an Irish subscriber to your newsletter, the contrariness of your opposition to the Obama/democrat regime amuses/horrifies me. On the one hand, you rail against the recent iniquities of the banks and financial houses and on the other you condemn the efforts by the administration to regulate those institutions, saying it stifles innovation. That's what got us where we are-in a mess! Nor does an attempt to achieve social justice in anyway equate to communism... Hardly a very christian attitude. It is always easy to be dogmatic about another man's problems, how would you feel if you were out of work because your employers gross mismangement. While I do not belive in handouts I believe that any society shoud be judged on how it treats it's weakest members." – Paid-up subscriber Charles O'Malley (retired dentist)
Porter comment: The Obama regime has confiscated private property (the collateral of secured bondholders at Chrysler and GM) and distributed the assets to the autoworkers' union. I object vehemently to these actions. I objected in the same way when the Bush administration passed the Hero's Act I mentioned above. Both of these things demonstrate how depraved our government has become. There's no stopping it now.
Meanwhile, far too many Americans think the problems with our government are the fault of one political party but not the other. That's absurd. The problem isn't who is running the government this year. The problem is we've surrendered far too much of our liberty to our government and it will be next to impossible to get it back. That's especially true now that more than 50% of the citizens don't pay federal taxes.
Regards,
Porter Stansberry
Scott County, Tennessee
June 19, 2009