Cliff averted!...

 The fiscal cliff has been averted by the glorious leaders of the People's Republic of Amerika! It's a miracle!

I (Dan Ferris) always viewed the fiscal cliff as something of a hoax. As we noted yesterday, it's just political theater, manufactured by little people trying to look bigger.

But as usual, most people read the headlines and swear by every word. They behave as they're told to behave by the government, news media... whoever...

Judging by yesterday's market action, it seems many investors were sitting around, wringing their hands all last fall, waiting to see what the government would do. Now that the government has assured them they're safe... these folks are buying stocks again.

It makes no sense to me... letting the government tell you when to buy and sell. It just shows you, the vast thundering herd of stock market participants really doesn't have a clue what it's doing.

The herd doesn't know a wonderful business from a total fraud. It lets newspapers and TV shows tell it what's important, instead of figuring it out for itself. Thanks to the Internet, the herd gets endless stock quotes streaming in every second of the trading day, telling it the value of nothing and the price of everything.

We humans are our own worst enemies in the stock market. As a group, we buy at the top, sell at the bottom, and blame everyone from our brokers to the government for the loss.

Clearly, it pays to become one of the few who can reverse that tendency, buy at the bottom when stocks are cheap, and sell at the top when they're dear. If you get that rhythm approximately right and not precisely wrong, you can make a fortune.

And if you can't become that person, you could do the next best thing and put your money in the hands of such a person... or group of persons...

 That's why – in my next issue of Extreme Value, due out tomorrow after market close – I am excited to share two groups of managers who have proven their ability to buy dirt-cheap assets and realize gigantic upside by selling them when they're in high demand.

One of these groups invested $55 million in 2007... and sold out less than a year later for $240 million – more than four times its original investment. These guys are so good, they've made a few dozen investments since 2007 and have only one that didn't work out. They've made 28% a year the last five years. It's positively insane that the stock market gives this management team zero credit, valuing its company's stock at less than net asset value.

The other group invested $650,000 in a project several years ago... and exited to the tune of more than $200 million. It's had similar successes over the past several years. The stock IPO'd in the late '90s at $0.10 a share and trades around $10 today – a 100-bagger! It's got 50%-100% upside potential over the next couple years. But again, the market is giving this brilliant management team zero credit for its superior ability... creating a unique opportunity to buy shares very cheaply today.

In tomorrow's issue of Extreme Value, I'll have full details on my recent conversations with four of the insiders in these management teams. Readers will learn details on these two opportunities I've never even hinted at before.

 Extreme Value isn't for everyone. But if you're a long-term investor who likes to protect your downside and make several times your money safely, it could be for you.

My subscribers and I consider Extreme Value to be like an exclusive little club, devoted to deep research into a handful of the most compelling investment opportunities in the world. We never speculate on garbage. We recognize 99% of all stocks aren't worth a second look. And we'd prefer only like-minded souls join us. To learn more and find out if you've got what it takes to join Extreme Value (without sitting through a long promotional video), click here.

 The U.S. Energy Information Agency recently released an updated report on domestic oil production... As Digest readers know, the massive amount of oil coming from the U.S. shale plays (like the Bakken shale in North Dakota and the Eagle Ford in Texas) is changing the domestic energy landscape.

 Oil production in the Marcellus shale will soon surpass the Arab nation of Qatar (at 770,000 barrels a day). And the Wall Street Journal reported the U.S. will be in a near tie with Saudi Arabia (daily production of 11.6 million barrels of oil) as the world's largest petroleum producer by the end of this year... The U.S. is expected to become the world's largest oil producer by 2020.

We believe the exploding supply of domestic oil and natural gas will drive prices down. And it will also mean lots of jobs and money for the U.S. economy... Already-depressed natural gas (a byproduct of oil drilling) prices are attracting manufacturing to the U.S.

 Austrian steelmaker Voestalpine AG announced last month it may construct a $661 million factory in the U.S. Nucor, the biggest U.S. steelmaker, plans to construct a $750 million facility in Louisiana by the middle of this year.

Chemical company LyondellBasell is planning to invest billions of dollars in new plants around the Gulf of Mexico. Fertilizer company CF Industries is also looking to build new plants. In total, chemical-related companies have announced $45 billion in projects over the next several years (most of which will be in Texas and Louisiana).

 Getting back to the booming U.S. oil production... Take a look at the chart below of Texas oil production. The state hasn't produced this much oil per day since April 1987. Production in October (the most recent available data) jumped 32% from a year ago. October also represented the third straight month that Texas produced more than 2 million barrels per day.

 Chemical and steel companies aren't the only sector benefiting from this production boom... Companies that transport the oil and gas are also making a fortune. Surging domestic oil and gas production has jammed pipelines, forcing producers to ship their product by rail.

Warren Buffett's Union Tank Car – which leases railcars – is currently operating at full capacity. And railcar manufacturer and lessor American Railcar Industries, controlled by billionaire investor Carl Icahn, has a backlog through 2014. Trinity Industries, the biggest railcar producer, is converting wind-tower factories to meet the growing demand for railcars.

 Rail carloads of crude oil tripled last year to more than 200,000... "People who want to ship oil can't get [railcars]," Toby Kolstad, president of consulting firm Rail Theory Forecasts, told Bloomberg. "They're desperate to get anything to move crude oil."

 The shortage of cars means higher prices... In some cases, rates have more than quadrupled to $2,500 a month. And the manufacturers, which until recently had suffered from overcapacity, are wary to boost production too much. You can expect this trend to continue...

"It still feels very much like an emerging market," Beth Whited, vice president and general manager of railroad company Union Pacific's chemicals business, told Bloomberg. Union Pacific's crude oil team is taking large numbers of requests for service to new locations every week, she said.

 On Christmas Eve, we published one of the most popular and controversial DailyWealth issues of recent memory... Retirement Millionaire editor Dr. David "Doc" Eifrig discussed "the most dangerous 'everyday' threat to your privacy." In the essay, Doc discusses the many ways hackers can access your private information (from your e-mail account to your credit-card information) and wreak havoc on your life.

The threat exists because of the massive amount of private data available online and how connected everyone is today. From the essay...

In the essay, which you can read for free here, Doc lays out several simple steps you can take to make sure your online passwords and information are safe.

Doc takes his privacy and personal liberties seriously. And he's prepared a special report outlining all his findings. The report, which is available to his Retirement Millionaire subscribers, outlines an array of methods for hiding your tracks online... including a technique that ensures your e-mail messages are never found (even if someone has access to your account).

Beyond the Internet privacy strategies... many readers are particularly interested in reading his suggestions on how to legally hide money and income from the U.S. government... Doc has used this method to shield more than $50,000 in income. As we said... the research is available to his Retirement Millionaire subscribers. To learn more about Doc's publication – and the work he's done on privacy issues – click here.

 New 52-week highs (as of 1/2/13): Berkshire Hathaway (BRK), ProShares Ultra MSCI Emerging Markets Fund (EET), iShares Germany Fund (EWG), iShares High Yield Corporate Bond Fund (HYG), iShares Dow Jones U.S. Home Construction Fund (ITB), SPDR Barclays High Yield Bond Fund (JNK), PowerShares Buyback Achievers Fund (PKW), Sequoia Fund (SEQUX), Guggenheim China Real Estate Fund (TAO), Targa Resources (TRGP), Constellation Brands (STZ), Monsanto (MON), Alico (ALCO), Kohlberg Kravis Roberts (KKR), Southern Copper (SCCO), Cheniere Energy (LNG), Sunoco Logistics Partners (SXL), Union Pacific (UNP), CVS Caremark (CVS), Walgreens (WAG), Home Federal Bancorp (HOME), Emerson Electric (EMR), and Integrated Device Technology (IDTI).

 Please take the time to write to us and let us know how you're thinking about your investments in the New Year. Are you bearish, bullish, or somewhere in between? Write us at feedback@stansberryresearch.com.

 "Thanks for taking the time to read my letter; for months I've pondered this writing, then a letter in today's Digest finally got my fingers moving... Rop Harbi wrote in today's Digest; 'I read widely, but you guys have been the most useful'...

"I've been a business owner here in Northern California since 1978, continually growing my business and my revenue until early 2008... At our best we were over 140 employee/teammates strong with plenty; my business flourished for 30 years...

"Well, now I'm down to 60 employees, an antiquated business and working endless hours to make ends meet... My lifetime savings has been put back into the business since 2008 and though there is light, at 50 years old, I'm no longer seeing this business allowing me the future I had imagined; that I had planned for the 30 years that lead up to 2008... I knew I would need something else, something in addition, in order to live my retirement to the degree I'd always imagined... And so I immersed myself in study...

"My story of finding Stansberry Research is a story of 'creating my own luck,' but I will save you from that, for now... What I'm asking today is if all of you; Porter, Dan, Steve, Matt, Jeff, Amber, Doc, Frank and everyone else, could compile a list of your 3-7 favorite books... I'm hoping you could list them individually by the one who recommends them, and also that if a book should repeat in another's list, please let it...

"My desire to have you share them by the individual recommender is to enjoy the connection of your personalities and methods to the books you think are the most beneficial... Thereby creating a library effect; if you will...

"I know you've all recommended books here and there, and I've read several on those suggestions, but I'll be danged if I can find them when I want them... A complete, single and findable list of recommendations, in the most favored order of each, by each and from all of the brilliant minds at Stansberry Research, would certainly be worth a darn lot to me...

"And in closing, please accept my appreciation for your help in helping me, to help myself... Yep, if you get down to creating your own opportunities, little lucky gems will most certainly appear... And there will be the big ones, too, like Stansberry Research... I think of you guys as my charts; with the rudder, the wind and the sails left up to me... My thanks is ever so sincere..." – Paid-up subscriber Donny C. Dunn

Ferris comment: If you're talking about investment books, here are the three everyone should read and re-read regularly:

If you're just talking favorite noninvestment fiction and nonfiction books, that's a lot harder, but here's a few I like a lot:

Steve Sjuggerud and Brian Hunt also published a good book list for DailyWealth readers. You can view it here.

And if you're interested in trading... Brian has compiled a list of classic trading-related books, titled "Five Books That Can Make You a Millionaire Trader." You can view the list here.

Regards,

The 'best opportunity of the next two years'... Why the Dow Jones' best performer last year still has room to run...

In today's Digest Premium... we look at one stock that doubled last year and still has big gains ahead of it. It's part of a trend Porter has called "the best opportunity of the next two years."

To subscribe to Digest Premium and access today's analysis, click here.

Cliff averted!... The herd's biggest enemy: itself... Two groups of successful contrarians... U.S. oil production booming... $45 billion in new chemical projects... The "crude oil express"... Doc's popular, controversial essay...

The 'best opportunity of the next two years'... Why the Dow Jones' best performer last year still has room to run...

In today's Digest Premium... we look at one stock that doubled last year and still has big gains ahead of it. It's part of a trend Porter has called "the best opportunity of the next two years."

To continue reading, scroll down or click here.

 In the April 2012 issue of Stansberry's Investment Advisory, we recommended bank stocks. We said this sector represented "the best opportunity of the next two years."

Our prediction was correct… but early.

 In June, we stopped out of the three bank stocks we recommended (Royal Bank of Scotland, Citigroup, and Bank of America). Since then, Bank of America went on to be the 2012 best performer in the Dow Jones Industrial Average with a 109% return. And the bank – along with the rest of the financial sector – has room to run.

 Despite our advice, many investors are still wary of financial stocks. They still have a bitter taste from the 2008-2009 financial crisis.

But the banking sector hasn't been this healthy in more than a generation. Consider how banks make money...

They borrow money at a low rate and lend it at a higher rate. Right now, banks can borrow money basically for free. The Federal Reserve has pledged to keep rates near zero for years, so banks pay their depositors (the source of their borrowing) almost nothing.

They then lend that money at a higher rate (currently around 3.5% for a 30-year, fixed mortgage and 4%-5% for business loans). And bank lending is on the rise (approaching pre-crisis levels)... 

 The Fed announced last month it would continue buying $40 billion a month of mortgage-backed securities and $45 billion a month of long-term Treasurys (and maintain its zero-percent-interest-rate policy) until unemployment falls to 6.5%. (It's currently 7.7%.)

 While this policy makes it cheap for banks to borrow money, it also pushes down the long end of the yield curve. In other words, long-term yields are falling, compressing the "interest-rate spread" banks collect between short-term borrowing and long-term lending.

 But eventually, this easy-money policy will lead to inflation. That inflation will cause long-term interest rates to rise. And banks' interest rate spread will explode (meaning higher profitability).

 The coming inflation will cause real estate prices to rise. (That trend has already started.) And these rising prices will allow banks to reverse the massive write-downs they took during the financial crisis. Consider this bit from the April 2012 issue of Stansberry's Investment Advisory…

 As we said above, Bank of America's stock price more than doubled last year. Rising real estate prices and increasing loan volumes are already improving bank profitability. But lending volumes will continue increasing, bank margins will improve, and the sector will continue reversing the write-offs from 2008 and 2009. These three factors will send bank stocks soaring over the next several years.

 In tomorrow's Digest Premium, we'll discuss a recent bullish announcement from Bank of America CEO Brian Moynihan… and the key factor it reveals about investing in the huge opportunity banks represent.

The 'best opportunity of the next two years'... Why the Dow Jones' best performer last year still has room to run...