Goldsmith comment: Porter is doing some last-minute updates on the latest Inside Strategist issue, so I'm on The Digest today. If you didn't know, Porter recently took over as editor of Inside Strategist.
For the latest issue, Porter found a way to buy select real estate assets for 70 cents on the dollar. One of our favorite asset managers last year founded the company he's recommending for the sole purpose of buying discounted assets for pennies on the dollar. To sign up for Inside Strategist and receive his full report, due out tonight, click here...
The outstanding thinker and writer Michael Lewis wrote a great article for Vanity Fair covering the absurd collapse of the Icelandic economy. The small fishing nation of only 300,000 essentially transformed itself into a leveraged-to-the-hilt hedge fund. According to the article:
In 2003, Iceland's three biggest banks had assets of only a few billion dollars, about 100 percent of its gross domestic product. Over the next three and a half years they grew to over $140 billion and were so much greater than Iceland's G.D.P. that it made no sense to calculate the percentage of it they accounted for. It was, as one economist put it to me, "the most rapid expansion of a banking system in the history of mankind."
When the market turned down, Iceland's liabilities were so large it had zero chance of recovering. The three major Icelandic banks went bankrupt and the krona (the local currency) fell by two-thirds. Now, people are setting their Range Rovers on fire to collect insurance money and pulling out money in foreign currencies to hide in their homes. You can read the full article here...
In the past few months, analysts from every brokerage firm and investment bank you can think of have been touting infrastructure stocks to profit from OBAMA!'s enormous financial stimulus package... figuring some of that money would be allotted to improving the U.S. infrastructure. Meanwhile, short-selling whiz Jim Chanos was piling onto his short position in infrastructure stocks.
Turns out, not surprisingly, Chanos was right. The PowerShares Dynamic Building & Construction ETF (PKB), which contains infrastructure bellwethers like Caterpillar and Fluor, is down nearly 60% from its highs last year and nearly 40% since OBAMA! took office. As you can see from the chart below, this ETF surged on the buildup of OBAMA!'s election in November, then again after he took office in January. Then... reality set in.
But don't worry everyone... It's safe to buy stocks. OBAMA! says so...
Yesterday, after the Dow dropped below 7,000 and the S&P 500 closed at its lowest point since 1996, OBAMA! tried to restore confidence, telling America, "What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you've got a long-term perspective on it."
Dan Ferris nailed another one...
Of the 10 biggest banks, only two haven't cut their dividends: Wells Fargo and U.S. Bancorp. It's a good bet they both reduce payouts to preserve capital before the year is out. – Dan Ferris, S&A Digest, March 3
Today, U.S. Bancorp cut its quarterly dividend 88% to $0.05 per share. The cut will save U.S. Bancorp $2.6 billion a year... Shares dropped around 10% on the news. Next up, Wells Fargo.
New highs: none.
We leave you today with the kind of story we'd like to see a lot more of these days. It turns out you don't have to roll over like a dog and wet yourself in the presence of our tax- and power-thirsty government. If you've got a story about how you stuck it to the man, tell us... feedback@stansberryresearch.com.
"My neighborhood in New Jersey went through a mandatory property re-evaluation that goes into effect this year. My house was originally assessed at $125,000. The new evaluation? $410,000. My property taxes would now be approaching $10,000 a year! Are you kidding me?
"I went down to the Tax Assessor's office to file an appeal. I began looking at all the properties that sold last year, but the Tax Assessor said, 'Sorry, only properties sold between Jan 1st and Oct 1st.' How convenient. The massive collapse in the real estate market happened after those dates. Thanks guys!
"But that didn't discourage me.
"Then I questioned the square footage they had recorded for my home. The Tax Assessor replied, 'We measure square footage on the outside of the home.' Really? That's interesting, since I live on the inside of my home! So every nook and cranny, whether livable, or even big enough for storage is included. Thanks guys!
"But that didn't discourage me.
"To make a long story short, I compiled so much evidence that the Tax Assessor promptly wanted to 'settle' rather than have me file an appeal, and go to the Tax Court to present my case. Thanks, but no thanks!
"As long as we roll over and play dead, we will bled dry. Every neighbor I spoke to was outraged. How can they raise our taxes so much at a time like this? Where do they think this money is going to come from? Comment after comment. Complaint after complaint. But when I said, 'Well go fight them on it,' all I got was a blank stare. 'You can't fight City Hall!' 'What's the point, they are going to do what they want, anyway!'
"When I asked the Tax Assessor how many people have filed an appeal? She smiled proudly, and declared 'Five.'
"THAT discouraged me. Sure, I won the battle, but obviously, we are losing the war. Tomorrow, how my dead mother was required to pay 37% taxes on her Estate!!" – Paid-up subscriber Mark Tobino
Regards,
Sean Goldsmith
Baltimore, Maryland
March 4, 2009