Cargill: honest talk about global commodity markets... The real IPAD... JPM lending more – in Europe... ECB cuts rates (again)... A swing trader's stock market... How Europe will play out... Doody's "Top 10" gold stocks... Congress' playing field left unleveled...
If you're long commodities like beef, sugar, or wheat, take note...
Minnesota-based Cargill says it's laying off 1.5% of its workforce – up to 2,000 employees – over the next six months. Cargill is a huge company, with $119 billion in sales and 138,000 employees in 63 countries. It's one of the world's largest producers and marketers of food, agricultural, financial, and industrial commodities.
It's also a privately held company, still in the hands of the founding families, the MacMillans and Cargills. Cargill doesn't have a stock price to worry about, unlike its publicly traded competitors – London-listed Glencore and Hong Kong-listed Noble Group. So it can afford to be more honest about the condition of its industry...
In September, Paul Conway – Cargill's deputy chief executive – said, "We are going through a long, slow, anemic, tough recovery." A Cargill press release about the job cuts said, "These actions are in response to the continued weak global economy and are part of an overall effort to reduce expenses and simplify work processes."
Trouble in paradise... Consumer technology giant Apple lost a trademark case in China.
It seems Shenzhen, China-based Proview Technology registered trademarks for the name IPAD before Apple's iPad was created. Proview tried unsuccessfully to market its own tablet computer in 2000. According to a Financial Times article, Proview trademarked the IPAD name in the European Union, China, Mexico, South Korea, Singapore, Indonesia, Thailand, and Vietnam between 2000 and 2004.
Apple tried to sue Proview over the rights to its IPAD trademark in China... and lost.
JPMorgan Chase (JPM) knows which side its bread is buttered on. JPMorgan Chase is an enormous, "too big to fail" bank. Measured by assets, it's larger than any other U.S. bank, with $2.29 trillion in assets, as of September 30. Heavy-handed financial industry regulations and accommodating central banks around the world give it an enormous competitive advantage over smaller institutions. It can easily shoulder any new regulatory burden. It's got money coming out of its ears... much of it borrowed at juicy, low rates, thanks to its pals over at the Fed.
JPM has about $354 billion in debt. Most of it – about $279 billion – is long-term debt. Interest expense last quarter was $3.343 billion. Multiply that by four, and we get total annual interest expense of around $13.4 billion. That's less than 4%... on more than $354 billion of debt. I bet your business pays more than that... probably a lot more!
JPM is a giant funny-money scheme, one you and I will wind up bailing out if it fails.
Maybe you already knew all this about JPMorgan Chase... But did you know the megabank is increasing its lending in troubled European countries? JPM has increased its European lending and trading exposure from around $14 billion on June 30 to $15.9 billion as of November 17.
JPM CEO Jamie Dimon says his company has a "battleship balance sheet." What it really has is a Federal Reserve printing press.
And let's not forget the European Central Bank (ECB) printing press. It's helping Dimon and JPM, too...
The European Central Bank cut interest rates for a second straight month, down a quarter percentage point to 1% – matching a record low. European stocks jumped on the news.
But if recent history is any indicator, stocks will give up their gains tomorrow. The European market has been great for swing traders. With every bit of good news, eager market participants – all expecting drastic measures to save Europe – bid up stocks. Then a group releases a bearish report, and stocks sell off. It's like clockwork...
Over the weekend of November 26, a rumor leaked in Italian newspaper La Stampa that the International Monetary Fund (IMF) raised a 600 billion-euro bailout fund to save Italy. Markets spiked.
The following Monday, Moody's and the Organization for Economic Co-operation and Development (OECD) released bearish reports on Europe. Markets fell.
Two days later, on November 30, world central banks colluded to provide emergency U.S. dollar loans to Europe. Markets gapped higher.
The next day, markets realized it wouldn't work... Banks will just hold the cash, not lend. Markets fell.
Take a look at this five-day chart of the FTSE 100, the 100 largest companies on the London Stock Exchange. If you ever believed markets are efficient, this should convince you otherwise...
For two years, we've told you how the situation in Europe will play out. In case you forgot, we'll remind you again... World central banks will print trillions of dollars to save Europe from collapsing. And until the ECB and Fed start monetizing assets on a huge scale, we'll continue to see this kind of back-and-forth action.
In the meantime, you need to own gold. While bullion is the best asset to protect yourself from currency devaluation, it's also good to bolster your portfolio with a select group of high-quality precious-metals stocks…
There's no better group of gold stocks to buy in the world than John Doody's "Top 10 List." In every issue of his Gold Stock Analyst, John maintains his Top 10 List, the 10 best gold stocks to own right now. Over the past 10 years, the Top 10 has returned an average 43% a year. You won't find performance like that anywhere else.
Tomorrow morning, John will reveal his latest investment. (It's a big change to his normal routine, but one he thinks will produce huge wealth.) If you're interested in making money on precious metals stocks with John, click here. And until midnight tonight, we're offering his service at a generous discount.
Buried beneath the European headlines... the U.S. House Financial Services Committee canceled a vote today on legislation banning insider trading in Congress.
Some of you may not know this, but insider trading among our politicians is perfectly legal. For example, during the heat of the credit crisis in 2008, there were plenty of closed-door meetings between Congress, Fed Reserve Chairman Ben Bernanke, and Treasury Secretary Hank Paulson.
Congressman Spencer Bachus, chairman of the financial services committee, who was at most of these meetings, was buying put options (making bearish bets) on the market.
New Hampshire senator Judd Gregg pushed $70 million of taxpayers' money toward redeveloping a defunct Air Force base. What taxpayers probably didn't know is that he and his brother have a commercial interest in this air base.
Nancy Pelosi, former Speaker of the House, received 5,000 shares of Visa stock before it became public at $44 a share in 2008. Two days later, it was trading at $64. Pelosi received this stock, despite legislation making its way through the House that would have been damaging to credit card processors like Visa. Surprisingly, this legislation never became law.
These are just some of the examples of our politicians receiving free gifts and taking advantage of insider information that would put most of us behind bars if we acted upon it.
Peter Schweizer, world famous author and research fellow at Stanford University, sheds some light on this brand of corruption in his recent book: Throw Them All Out: How our Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison.
Schweizer was recently on 60 Minutes talking about dozens of examples of how our politicians have made millions of dollars though insider trading. Our own Frank Curzio sat down with Schweizer to discuss this alarming trend for his S&A Investor Podcast. Frank says: If you hated our politicians before, you hate them even more now after listening to this interview.
The S&A Investor Podcast is a free radio show where Frank interviews world-famous investors, breaks down the markets, and provides educational tools to help investors make money. You can listen for free by clicking here.
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New 52-week highs (as of 12/7/11): Abbott Laboratories (ABT), Eli Lilly (LLY), McDonald's (MCD), Intel (INTC), Altria Group (MO).
In today's mailbag... some rare flattery from a satisfied customer. We're glad to hear you like what we're doing... But you know we live for the mean stuff. Send your scathing criticisms to feedback@stansberryresearch.com.
"I had heard your podcast for the first time. One word: phenomenal. It was full of intrinsic enthusiasm, perfect sincerity, clear-thinking rationale, and truthful exposition. You showed an extraordinary breadth of knowledge in a straightforward manner that is rarely heard.
"I know you think of your Alliance members as partners in your business, and in that vein, I must encourage you to keep up the tough approach in asking questions. If there is a way to invest in the future success, I would certainly like to know.
I have spoken to people in many walks of life, all over the world, and I believe the art of conversation is truly missing. It's not something that should be merely relegated to French salons of the 18th century.
"Next time Jim Rogers comes on, I would like to know more about how he put himself on a path to make millions." – Paid-up subscriber Sandeep Sohal
Ferris comment: Thanks for the note, Sandeep. Other readers who want to hear Porter talk with Jim Rogers can find the interview here.
And if you want to get some insight about Rogers' earlier career, you can read John Train's The New Money Masters. The first chapter is all about Rogers. Enjoy!
Regards,
Sean Goldsmith and Dan Ferris
New York, New York and Medford, Oregon
December 8, 2011