A short target plunges the day after our recommendation...

A short target plunges the day after our recommendation... Tesla's sales slowing in China... Tesla won't be profitable until 2020... GoPro tanks... GoPro is now forced to compete with Apple... Apple's growing dividend... The euro hits a new low... Copper is getting crushed... Fear is running rampant...
 

 "It wouldn't surprise us at all to see the stock suffer a 10% drop in a single day at some point in the next six months... or worse."

Yesterday, Brian Hunt and his research assistant Ben Morris shorted electric carmaker Tesla in DailyWealth Trader. It's always enjoyable when the timing works out...

Before we get to the decline, we'll cover the laundry list of reasons to short Tesla. The company loses money every year. CEO Elon Musk called the stock overvalued... Tesla's current market cap is $24 billion – valuing it at nearly 40% of BMW, which sells 70 times more cars and earns $7.9 billion (compared with Tesla's ongoing losses). It's building a $5 billion "gigafactory."

More and more companies are also starting to compete with Tesla – from BMW to General Motors.

Oh yeah, and the company's cars catch on fire.

 And while lower fuel prices won't directly hurt Tesla, they're yet another reason this market darling could come back down to earth. From DailyWealth Trader...
 

Tesla's cars are powered by expensive, lithium-ion batteries. Tesla's Model S starts at around $70,000... If you upgrade to its best battery, prices climb to over $100,000. People who drop that kind of money on a car aren't too worried about fuel economy. So lower gas prices aren't likely to change their decision to buy. But a large chunk of Tesla's future rests on its ability to sell cheaper cars to the broad market. That's what the company hopes to do with its Model 3... which it aims to sell for $35,000 starting in 2017. Folks thinking about buying these cars will be thinking about fuel costs... And gasoline prices will be a big factor in Model 3 sales. We expect booming North American shale oil production will keep the price of crude oil below $60 per barrel for years... which will keep gasoline prices low for years. If gas prices stay low, buyers simply won't be as interested in more expensive electric cars.   Low gasoline prices alone won't send Tesla's shares lower. They'll simply add to the long line of things that could damage Tesla's business and its share price. This includes competition in the electric-car space from outstanding car makers like BMW, the massive capital spending requirements for factories, and most of all, the fact that Tesla stock is priced for perfection...

 Yesterday, Tesla made a far-from-perfect announcement...

Musk said he expects his company to become profitable in 2020 when it reaches annual sales of 500,000 cars. He also said sales are slowing in China, where the consumer is hesitant to buy electric on reliability concerns and existing charging infrastructure.

Shares of Tesla fell nearly 6% today... not the 10% drop Brian was hoping for, but pretty darn good for the following trading session. Tesla shares rose 48% last year. But they're down almost 14% year-to-date.

 Another momentum darling – mobile camera manufacturer GoPro – also took a hit...

Shares fell 12% yesterday after consumer-products giant Apple was granted a patent for a competing "action camera."
 

 It's never a good thing when you have to compete against the world's most valuable company... especially one as dominant as Apple.

As we noted in the June 30 Digest, GoPro views itself as more than a camera company. From the company's SEC filings (emphasis added):
 

GoPro is transforming the way consumers capture, manage, share, and enjoy meaningful life experiences. We do this by enabling people to capture compelling, immersive photo and video content of themselves participating in their favorite activities. Our customers include some of the world's most active and passionate people. The volume and quality of their shared GoPro content, coupled with their enthusiasm for our brand, are virally driving awareness and demand for our products. To date, we have generated substantially all of our revenue from the sale of our cameras and accessories, and we believe that the growing adoption of our capture devices and the engaging content they enable, position GoPro to become an exciting new media company.

 Creating a new media company will be difficult with Apple in the game... Around 43% of smartphone users in the U.S. own an iPhone. As of April, Apple had 800 million iTunes accounts linked to a credit card. More people also use Apple desktops, laptops, and iPads.

In short, there are lots of people already locked into the Apple universe. And it will be easy to integrate the new action camera into that world – edging out GoPro. Shares spiked higher today before pulling back to about even with the broad market selloff. Much like Tesla, GoPro was way overvalued. And news that your new competition is Apple can send shares plunging...
 

 On the topic of Apple, we failed to give Dan Ferris proper credit in yesterday's Digest (where we discussed the company potentially increasing its dividend and share-buyback plan).

Dan wrote about Apple extensively in his Extreme Value advisory. His original recommendation was in the July 2013 issue. He wrote about Apple again in November 2013, when billionaire activist investor Carl Icahn took a position in the company.

Icahn urged Apple to borrow money and buy back stock. Dan disagreed... and in an open letter to Apple CEO Tim Cook, he picked apart Icahn's plan and outlined his own desired financial plan for the company – the so-called "iPlan."

Dan urged Apple to bring its foreign-held cash (more than $100 billion) back home, pay taxes on the money, and distribute the funds to shareholders.

He knew Apple was becoming a more mature company. And as mature companies tend to do, Dan expected Apple would pay more cash to shareholders.
 

 From the November 2013 issue of Extreme Value...
 

Apple's already clearly on the right track – paying out 36% of free cash flow (adjusted for the $17 billion in debt Apple took on to buy back shares) in share repurchases and dividends last year. That's not the level I have in mind. I'd like to see Apple pay out at least 50% of free cash flow (independent of any debt-funded amounts). But I'm confident Apple will raise the amount of its payout, as most large, mature companies eventually do.

 More specifically, he believed Apple shareholders would earn a 5%-plus yield based on their original purchase price. As he wrote in an Extreme Value update on April 27...
 

If you bought Apple when we recommended it last June, you likely paid around $440 per share. Back then, the annualized dividend yield was about 2.7%. After the recently announced dividend increase, you'll be earning about 3% on your original purchase price. If you stick with Apple's stock for five to 10 more years, you'll earn 5%-plus on that original purchase price. And you'll have earned substantial capital gains.

Kudos again to Dan on a great call.
 

 The euro weakened to $1.173 against the U.S. dollar today. That's a fresh nine-year low... and it's the weakest level since the euro was launched in 1999. Fears of quantitative easing from European Central Bank (ECB) President Mario Draghi were stoked again after a European Union lawyer said the ECB's plan to buy European sovereign debt is legal.
 

 The Dow sold off nearly 250 points on news that the World Bank lowered its 2015 global growth forecast from 3.4% to 3%. It said global growth was too reliant on the U.S. The same day, December U.S. retail sales came in weaker than expected.
 

 And copper – a metal used in everything from electronics to construction – is getting slammed...
 

The metal dropped 5.7% to $2.51 per pound – the fifth consecutive down day, pushing copper to its cheapest level since July 2009. Copper, like most other commodities, has fallen victim to the slowdown in China.
 

 

 We asked Stansberry Resource Report editor Matt Badiali for his thoughts on the metal...
 

David Hightower, founder of commodity-research publication The Hightower Report, thinks copper is the most undervalued commodity right now on a fundamental basis. He points out that Japan, which is 90% dependent on foreign sources of energy, is getting a huge stimulus from low oil prices. When you think of what Japan produces, copper is integral to most of it. However, the big dog in the copper market is China. According to the Financial Times, "aggressive selling in China" caused copper to plunge to its lowest point in five-and-a-half years. Citi analyst David Wilson told the Financial Times that "there was massive selling on the Shanghai overnight which has prompted more selling on the [London Metals Exchange]." If China is dumping a commodity, we're probably approaching the bottom in copper prices. We're not there yet. Copper prices reflect economic health... and today, it's hard to point to any single economy doing well. It's probably too soon to make a bet on rising copper prices today.

 The slowdown in the EU, cratering commodity prices, and huge swings in the U.S. stock market all point to one thing: More fear in the markets today.

Investors are getting skittish... That's why they jumped into Treasurys (pushing the yield on the 10-year down to 1.81%) and gold (rising to nearly $1,240 an ounce) today.

And the Volatility Index (the "VIX") – the market's "fear gauge" – just crossed a reading of "20," an important barrier, according to Porter. The VIX soared nearly 7% today to almost 22.
 

 New 52-week highs (as of 1/13/15): Brookfield Asset Management (BAM), Bristol-Myers Squibb (BMY), Brookfield Property Partners (BPY), CDK Global (CDK), Cempra (CEMP), Altria (MO), and ProShares Ultra FTSE China Fund (XPP).
 

 Clarifying a bit of confusion in today's mailbag. What's on your mind? Drop us a line at feedback@stansberryresearch.com.
 

 "I am one of your faithful subscribers. In the future, when there are complicated trades such as [Liberty Media] LMCA, it would be great if you could have a little insert with an explanation about the trade executions – or an update on your website with real time updates on complicated trades. I did buy LBRDA, but I also bought LBRDK because I thought that was stock, but luckily sold off LBRDK before expiration happened. I did not have time to make phone calls and read the prospectus about how to execute on LBRDA or at least not enough money invested to make it worth my time.

"That is why I have you guys, I don't mind doing some research but I do not want to have to do extra work beyond that. It was just easier to sell it all off and buy your other easily executed recommendations. Thank you for all the other help and guidance that your team provides!" – Paid-up subscriber Greg Zinis
 

Goldsmith comment: Hi, Greg... Sorry for your confusion, but Porter and his team went to great lengths to make sure you were fully informed about Liberty Media every step of the way.

For any Stansberry's Investment Advisory subscribers who aren't familiar with the Liberty Media situation, be sure to read the September issue.

In short, we advised readers to buy shares of Liberty Media... When they received shares of the spinoff, Liberty Broadband, they also got the right to buy additional shares in Liberty Broadband at a 20% discount. Porter and his team advised everyone to take advantage of that discount.

Given the complexity of the situation, Porter's team sent a special e-mail alert on December 19 explaining, in detail, every step of the rights offering as they understood it. They also immediately posted the update to the website. Stansberry's Investment Advisory subscribers can access it right here.

In case you missed that e-mail, Porter and his team then included a shorter version of the update in the January issue of Stansberry's Investment Advisory, stating...
 

The process is fairly complex and varies from brokerage to brokerage. We outlined every step of the process in our December 19 e-mail. If you missed it, it is available in the "E-mail Updates" section of our website. There isn't much time to waste. These rights will most likely expire for good on January 6.

Their updates reflected the steps in the process as well as the urgency of the required actions. Furthermore, they knew this would be unnecessarily complicated (thanks to Liberty Media chief John Malone's involvement) so they asked our in-house lawyer to buy shares alongside subscribers. That way we could hold their hand at each stage along the way.

One final point: The rights traded under the ticker LBRKR. The non-voting Liberty Broadband stock is LBRDK... That's what you would receive for exercising your rights in LBRKR. We never said to sell LBRDK. Again, we know it's complicated. But please refer to the update above.

Regards,

Sean Goldsmith

January 14, 2015