Do we panic now?...

Two things that could bankrupt our country in a decade...

Historically, tax revenues as a percentage of GDP max out at 20%. In today's Digest Premium, Porter explains how two current government expenses could eat our country's entire income in the next decade...

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

Do we panic now?... Our problems are solved (for a few months)... Volatility plunges... Gold soars... Doug Casey on the government shutdown... China downgrades the U.S... S&P almost downgrades the U.S... Lots of sectors are hitting new highs... And one's been left behind...

 We can all stop panicking... The government is open for business.

Or maybe that's a good reason to panic.

Just after midnight last night, President Obama signed a bill to reopen the government and raise the U.S. debt ceiling. "We'll begin reopening our government immediately," Obama said last night at the White House. "And we can begin to lift this cloud of uncertainty and unease from our businesses and from the American people."

 Yes, the uncertainty and unease has disappeared from the American people... That is… until we do this all over again in about four months.

The current deal funds the government at Republican-backed spending levels until January 15. And it extends the debt limit until February 7.

 The government didn't solve anything... It merely delayed the date of its difficult decision.

We haven't done anything to address our fiscal issues. America's debt and spending are still out of control. And the past two weeks have been a comical distraction to the serious decisions we have to make as a nation.

 But looking at the market today, you'd think all is well... The stock market was mostly flat as of midday trading today.

The Volatility Index (the "VIX"), the market's fear gauge, was down around 7.5% earlier this afternoon. The VIX measures the prices people are willing to pay for options that protect the value of their stock holdings. That's why we call the index the market's fear gauge: The higher the VIX, the more people will pay to insure their stocks…

So investors are complacent. They seem unaware that our issues haven't changed... only delayed.

 Gold acted as it should. The precious metal is up more than 3% today to nearly $1,325 an ounce. Yields on the 10-year Treasury dropped to 2.6%.

 Our good friends at Casey Research recently published an interview with founder Doug Casey on libertarianism and the U.S. government. Doug is one of the great libertarian thinkers of our time. We always love to hear what he has to say. You can find his comments on the government shutdown below...

 At least China understands what's happening with the U.S. economy. Remember, China is the largest foreign holder of U.S. Treasurys, with around $1.3 trillion.

Chinese ratings agency Dagong downgraded the U.S. this morning from "A" to "A-", maintaining a negative outlook. From Dagong's press release...

 Standard & Poor's (S&P), one of the big three U.S. credit-ratings agencies, said it was minutes away from further downgrading the U.S., according to an exclusive report from Newsweek. The company's global head of sovereign ratings, John Chambers, told the magazine...

 Chambers said the U.S. would have gone into "selective default" if an agreement wasn't reached. That is the lowest of S&P's 20 ratings... a rating that currently belongs to just the Caribbean island of Grenada.

If, as a nation, we're minutes away from sharing the same credit rating as Grenada, perhaps we're not worthy of such a high sovereign rating.

And perhaps S&P would have done its job – assigning an accurate rating to the U.S. – if it wasn't so afraid it would get bullied by the government afterward.

 Earlier this year, the U.S. Department of Justice sued S&P for failure to warn investors that the housing market was collapsing. It said S&P knowingly inflated the ratings of risky mortgage investments and that S&P gave those high markings to win repeated business from the banks issuing the mortgage securities.

S&P said the lawsuit was "retaliation" for its 2011 U.S. credit downgrade. The government's hypocrisy is laughable.

 If you take a look at our "new highs" list below, it's clear: We're in a bull market. Dozens of sectors are trading at 52-week highs – insurance, health care, private equity, technology, European stocks, etc.

The trend is definitely up.

 Today, S&A Resource Report editor Matt Badiali sent us a note about one industry where the trend is definitely down – coal.

Coal is probably the most hated fuel in the U.S. today. It's dirty and old-fashioned. It's been the target of environmentalists – and the politicians they pay for – for a generation.

Worse, the flood of cheap natural gas coming from U.S. shale formations has caused coal to lose its place as the No. 1 fuel for power generation. Coal prices fell as demand slacked.

Coal mines are closing, mostly in the East. Coal-fired power plants are shutting down due to old age and new environmental regulations.

And investors have bailed. The Market Vectors Coal fund – which holds shares of more than 30 coal-related businesses – trades for around $20 a share. That's off more than 50% from its peak in 2011.

And that's why Matt sees opportunity in the sector.

 The time to invest in a resource is when everything seems to be going wrong in its sector, Matt says. When a resource is beyond hated, when the idea of investing in it revolts people… that's when you look for opportunity.

And when you see a glimmer of improvement – what True Wealth editor Steve Sjuggerud calls "going from bad to less bad" – that's when you know it's time to invest.

 Dirty as it is, coal remains one of the most important fuels for power generation today. Although natural gas has replaced it as the No. 1 energy producer… coal still fueled 31% of U.S. electric power generation in 2012.

And Matt says things may be getting a little less bad…

 According to the Energy Information Administration (EIA), coal demand from power plants is up 10% over the same period in 2012. Meanwhile, the industry produced less coal. Production is down 3% from 2012 and down 7% since 2011.

Low production may sound like a bad thing… But less supply and more demand is a recipe for stronger pricing, which will be good for coal companies' bottom line.

And while the coal fund is way off its recent peak… it may be rebounding, Matt notes. The fund bottomed in July at $17.25. Yesterday's closing price represents a 14.6% increase in just three months.

Matt said he's researching potential investment opportunities a rebound in coal may create… and expects to have more details on the phenomenon for subscribers in next month's S&A Resource Report.

 New 52-week highs (as of 10/16/13): Aflac (AFL), Blackstone Group (BX), Chubb (CB), Chesapeake Energy (CHK), Carrizo Oil & Gas (CRZO), Devon Energy (DVN), iShares Germany Fund (EWG), SPDR Euro Stoxx 50 Fund (FEZ), Fidelity Select Medical Equipment & Systems Fund (FSMEX), iShares Dow Jones U.S. Insurance Fund (IAK), Kohlberg Kravis Roberts (KKR), Longleaf Partners Fund (LLPFX), Laredo Petroleum (LPI), Occidental Petroleum (OXY), PowerShares Buyback Achievers Fund (PKW), ProShares Ultra Technology Fund (ROM), ProShares Ultra Health Care Fund (RXL), Sequoia Fund (SEQUX), Sanchez Energy (SN), Constellation Brands (STZ), Cambria Shareholder Yield Fund (SYLD), Triangle Petroleum (TPLM), Walgreens (WAG), and WPX Energy (WPX).

 In today's mailbag, an eagle-eye subscriber spots an error. Send your e-mails to feedback@stansberryresearch.com.

 "Loved the note from Michael Keller. Great lesson to us all, that we don't have to be one of the 'sheeple' that get robbed from Wall Street in their investment endeavors. The best thing I've gotten from my S&A education is confidence. Inflation hedges, trailing stops, world dominators, dividend reinvestment, real estate and SAVING... I sleep well at night and I don't care about what happens in the market on a daily basis." – Paid-up subscriber Michael M.

 "I'm an Alliance member and have access to Porter's Stansberry Investment Advisory. In the 10/15/13 Premium Digest Sean mentions an energy play that could double in just over a year that is supposedly listed in the August 2012 Stansberry Investment Advisory. Unfortunately, that advisory is all about tech. Can someone please let me know which is the right issue for the company referenced? It's also not mentioned in the goodbye to Ben issue just released. Thanks!" – Paid-up subscriber Todd

Goldsmith comment: Thanks for spotting our error, Todd. The stock in question is actually from a special report originally released in August 2012 and updated in October 2012, titled "America's Secret Shale Play." Subscribers can access it on the Special Reports page of the Stansberry's Investment Advisory website.

If you don't already subscribe to Porter's letter, and you'd like to gain access to this report – which includes a company whose stock Porter believes could double in the next 12 months – click here to learn more about Stansberry's Investment Advisory.

Regards,

Two things that could bankrupt our country in a decade...

 Stanley Druckenmiller, one of the most successful hedge-fund managers of all time, recently gave a presentation on how senior citizens are robbing young people.

The presentation highlights a lot of facts that we've been covering for a long time – people are living longer, the elderly are receiving huge entitlement payments, and they're consuming a huge percentage of gross domestic product (GDP). This is an idea I (Porter) have covered as part of my "End of America" thesis... I call the Baby Boomers a "generation debt." And they're slowly bankrupting our country.

 For example, Druckenmiller says that by 2050, Baby Boomers will be taking more than 20% of GDP in entitlements... And historically, tax revenues as a percentage of GDP have a ceiling around 20%. So our government's entire income will be spent paying for the Baby Boomers.

But the problem will likely occur even sooner...

If the U.S. government had to pay a fair rate on the nearly $17 trillion in debt – remember, the Fed is artificially manipulating interest rates – it would equal around $1.5 trillion a year in interest. Today, we're paying around $250 billion a year.

So if you just put those two problems together (paying a fair interest rate and paying out entitlements), you see that these problems will arise in short order, not decades from now. I expect we'll see these problems come to a head by 2020 or 2025.

 The math doesn't work anymore. There's nothing left in the budget after these two things. And that's if you assume that debts don't grow anymore at all, which of course they will. It's also assuming entitlements won't grow anymore, which of course they will due to politics and inflation.

 Another top hedge-fund manager, David Einhorn of Greenlight Capital, gave a similar presentation called "Don't Worry about the Grandkids" at an investment conference in New York.

Einhorn's point was that we keep saying that we're creating this problem for our grandkids, and we're not. We're creating this problem for ourselves. It's not going to take 30 years to get there.

This financial day of reckoning for our federal government is going to occur sometime in the next decade, and most people don't expect that. They believe we'll be able to find some way to avoid the problem, like we do every year with the deficit. We just saw this play out with the government shutdown and debt-ceiling debate.

But there is no doubt, with our current taxes and policies, that we cannot outgrow this problem. Nor is there any political will whatsoever in our country to deal with it... which means sooner or later, we'll be in a serious crisis.

– Porter Stansberry with Sean Goldsmith

Two things that could bankrupt our country in a decade...

Historically, tax revenues as a percentage of GDP max out at 20%. In today's Digest Premium, Porter explains how two current government expenses could eat our country's entire income in the next decade...

To continue reading, scroll down or click here.

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