I (Porter) just finished the Steve Jobs biography for a second time. It's called Steve Jobs. And Walter Isaacson, a former executive at CNN and Time who also wrote biographies about Benjamin Franklin and Albert Einstein, wrote it.
In addition to being a wonderful story about one of the most important figures in business, it's also a great "how to" book for business. In particular, the book includes a dialogue at the very back where the author transcribes Jobs talking about his philosophy of business and entrepreneurship. It's outstanding. I encourage everybody to read it.
Jobs stresses the importance of focusing on making great products, not making a profit. He discusses how difficult it is to build a truly great business and not just flip a business for a profit... and the role honesty played in growing Apple.
Many of the points Jobs made in the book rang true with me... because I incorporated them into building my own business.
Tomorrow, I'll tell you the lessons I learned while building Stansberry & Associates...
Editor's note: We encourage you to read Steve Jobs in its entirety. You can buy a copy here. We've included a snippet from the section on business Porter refers to above. From Steve Jobs:
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My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary. Sure, it was great to make a profit, because that was what allowed you to make great products. But the products, not the profit, were the motivation. Sculley [who replaced Steve Jobs as Apple's CEO from 1985 until 1997] flipped these priorities to where the goal was to make money.
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It's a subtle difference, but it ends up meaning everything: the people you hire, who gets promoted, what you discuss in meetings...
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One of the most important business books Porter's ever read...
Porter reads 10 to 20 books a month (most focus on business and history). Today, in Digest Premium, he shares what he believes is one of the most important books you can read on business and entrepreneurship...
To continue reading, scroll down or click here.
One of the most important business books Porter's ever read...
One of the most important business books Porter's ever read...
Porter reads 10 to 20 books a month (most focus on business and history). Today, in Digest Premium, he shares what he believes is one of the most important books you can read on business and entrepreneurship...
To subscribe to Digest Premium and access today's analysis, click here.
Caterpillar: Bullish on growth... Durable goods orders up... Investors getting bullish... Treasury yields crack 2%... Secretive commodities guru shares his thoughts... The billionaire face-off... Why Porter doesn't like debt...
Caterpillar, the world's largest manufacturer of mining and construction equipment, reported a drop in earnings and revenue today. But the company's 2013 forecasts sent shares rising more than 2%, despite the miss...
Caterpillar is a bellwether of the global economy... When economies and countries are expanding and building, they buy more products from Caterpillar. When they're shrinking, they buy fewer. You can quickly gauge the health of the global economy simply by studying the trends in Caterpillar's sales and earnings numbers.
The company's fourth-quarter net income dropped 55% to $697 million ($1.04 per share) from a year ago. Excluding a $580 million write-down on its ERA Mining Machinery unit in China and a $300 million tax benefit, earnings equaled $1.46 per share – still below estimates of $1.70.
Revenue fell 6.8% to $16.1 billion.
However, Caterpillar forecast full-year 2013 earnings of $7-$9 a share on revenue of $60 billion to $68 billion. The company is bullish on growth from the U.S. and China. Estimates had pegged per-share profit at $8.54 on sales of $65.2 billion.
Assuming the company hits the top end of its estimates, 2013 will be a record year for Caterpillar. But the company expects a weak first quarter, saying revenue may drop and earnings may be "significantly lower" as customers reduce orders to thin inventory.
CEO Doug Oberhelman said Caterpillar expects the U.S. economy to improve this year... But the real growth will come from China. "The range of our 2013 outlook reflects the level of uncertainty we see in the world today," Oberhelman said in the statement. "We're encouraged by recent improvements in economic indicators, but remain cautious."
In total, the company expects global growth of at least 2.5%, up from 2.3% in 2012.
A report from the Commerce Department today showed orders for durable goods in the U.S. rose in December for the fourth consecutive month. Companies' orders for long-lasting goods rose 4.6% in December, besting the highest analyst forecasts. (The median estimate of 76 economists surveyed by Bloomberg was 2% growth.) That was driven by a 10% increase in airplane orders.
This was the first four-month increase in demand since comparable records began in 1992.
And in general, investors are becoming more bullish... According to the latest sentiment survey from the American Association of Individual Investors (AAII), 52.3% of investors are bullish today, up 840 basis points from the previous week. (A basis point is 1/100th of a percent.) Only 24.3% of investors are bearish today, a decrease of 310 basis points from the week before.
This bullishness is a result of the government's continued money printing and bond buying. The Fed is currently purchasing $85 billion of government and mortgage debt every month. One effect of the Fed's purchases is to drive investors into riskier assets (like stocks)...
As investors move into stocks and other riskier assets, they inevitably sell out of Treasurys, which pushes up interest rates on longer-term U.S. debt. And as if on cue... today, for the first time since last April, yields on the 10-year Treasury crept to more than 2%...
Another commodity expert, Claude Dauphin, has similar views as Oberhelman. Dauphin, CEO of private commodity trading firm Trafigura, is confident in growth. But he says the boom days are over, and commodities are unlikely to enjoy another rally like they did from 2003 to 2007.
Trafigura began in 1993, when Dauphin and several other senior traders left Marc Rich & Co – a giant commodities trading firm that's known today as Glencore. According to the Financial Times, Trafigura is the world's third-largest independent oil trader (behind Vitol and Glencore) and the second-biggest trader in base metals after Glencore.
The FT calls Dauphin one of the most reserved and powerful figures in the industry. Dauphin almost never speaks in public. But as the FT reports, he included a letter to lenders and bondholders with the company's annual report. In it, he wrote:
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…the good old days of the last decade, when raw materials markets rallied in tandem, are all but over.
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And according to the FT report, he goes on the say...
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A return to [the] buoyancy of the commodities markets between 2003 and 2007 is unlikely... the extreme pessimism witnessed in 2012 is expected to dissipate.
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Dauphin forecasts 3.5% in global growth, which coincides with the forecast of the International Monetary Fund (IMF). He thinks China's growth will be slower and more prolonged than in the past. But he says this year will exceed 2012. He is, however, less optimistic about developed countries.
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Despite uncertainty within mature markets, forward-looking indicators suggest that growth in Asia, Latin America and Africa will underpin commodities demand for some time.
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Last year, Trafigura moved its key trading legal headquarters from Switzerland to Singapore. And according to a December FT report, the company is relocating staff from its historic Lucerne office to Geneva, Singapore, and Mumbai. Dauphin's comments seem to confirm the company's recent moves closer to where he thinks the action will be in commodities – Asia.
Our in-house commodities expert, Matt Badiali, also foresees a resurgence in global commodities prices and hinges his outlook on the Far East. In the January issue of his S&A Resource Report, Matt explains his most recent views on the commodities sector. He uncovers the myth in China's slow growth, explains why he expects a surge in China's energy demand, and why its metal imports will soar. In the issue, Matt recommended his readers buy a stock that's positioned to benefit from a rebound in China's economy. To learn more about Matt's research – and access his latest outlook on the commodities sector – click here...
We'll leave you today with some comic relief... Last week on CNBC, billionaire investors Bill Ackman and Carl Icahn faced off for 30 minutes on live television. The two investors have a contentious history, including one deal gone bad. And they're currently on opposite sides of the Herbalife bet. (Ackman believes the nutritional supplement company is a pyramid scheme and worth nothing. Icahn allegedly has a long position in the company.)
The exchange was full of insults, like Icahn calling Ackman a "liar" and "major loser." And the traders on the floor of the exchange provide a soundtrack of "oohs" and "ahhs," which you hear in the background, as the financial titans trade blows.
You can view the video here...
New 52-week highs (as of 1/25/13): Advent Claymore Convertible Securities and Income Fund (AVK), Berkshire Hathaway (BRK), WisdomTree Japan Hedged Equity Fund (DXJ), iShares Australia Fund (EWA), iShares Germany Fund (EWG), iShares Italy Fund (EWI), Fidelity Select Medical Equipment & Systems Fund (FSMEX), Cambria Global Tactical Fund (GTAA), iShares Dow Jones Insurance Fund (IAK), SPDR International Health Care Fund (IRY), iShares Dow Jones Home Construction Fund (ITB), Lucent Technologies (LUTHP), PowerShares Buyback Achievers Fund (PKW), ProShares Ultra Health Care Fund (RXL), Sequoia Fund (SEQUX), ProShares Ultra S&P 500 Fund (SSO), W.R. Berkley (WRB), Anheuser-Busch InBev (BUD), Johnson & Johnson (JNJ), Prestige Brands (PBH), CF Industries (CF), Ericsson (ERIC), 3M (MMM), Chicago Bridge & Iron (CBI), Consolidated Tomoka (CTO), American Financial Group (AFG), Loews (L), Travelers (TRV), Becton-Dickinson (BDX), BLADEX (BLX), Enterprise Products Partners (EPD), Procter & Gamble (PG), Walgreens (WAG), Emerson Electric (EMR), and Integrated Device Technology (IDTI).
In today's mailbag… a list of sates with more folks on welfare than people employed... and a question about a recent Digest Premium. Send your feedback to feedback@stansberryresearch.com.
"States with more people on welfare than people employed: California, Hawaii, New Mexico, Mississippi, Alabama, South Carolina, Illinois, Ohio, Kentucky, New York, Maine.
"Source: The McAlvany Intelligence Advisor February 2013" – Anonymous
"I'm a paid subscriber to a number of your publications. In a recent Digest Premium, Porter was discussing real estate and made this comment:
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In the meantime, I have positive cash flow from these investments. By the way, I've done all these investments without using any debt whatsoever. I'm a little bit nervous about the long-term future of the banking system. I'm risk-averse and don't want to have borrowed money from a lot of shaky banks.
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"My questions is this, what does borrowing from banks have to do with shaky banks? How would it impact you if you had a loan and the bank failed? I too am very concerned with the state of the economy and the banking system but don't understand his statement.
"I've always been a saver but late to investing, your publications have served me well." – Paid-up subscriber Carmela W.
Goldsmith comment: I'd like to make one clarification... The professional real-estate investors Porter has invested with use debt to make their purchases. But Porter hasn't used debt for his private purchases (like the Miami house).
The reason he doesn't take out mortgages from banks when buying property is simple... He believes we're heading toward a global financial crisis. And when the crisis hits, the rule of law will break down… and there will be differences in currency values between cash held and cash owed.
That's what happened in Argentina... There, all the cash you had in deposit was converted into pesos and devalued by 75%... All the money you owed in mortgages wasn't.
He doesn't want to enter a global financial crisis by getting highly leveraged.
Regards,