I'm back from Munich after a fantastic week in Germany. I didn't think it was possible, but this year far eclipsed our first Atlas 400 trip to Germany. And I know the 14 other people on the trip felt the same way.
I'd like to thank our hosts at Porsche and BMW for putting on great events. The German auto manufacturers are fiercely competitive. Just mentioning the name of a competitor in rival territory evokes scowls from the employees. That's why, when we arrived at the BMW facility in Aschheim, our hosts pulled me aside and asked "exactly" what we did at Porsche. They were determined to host a better event. And they'd never planned an itinerary for outside guests before. Aschheim is the most-secretive BMW facility in the world. It's where the company tests and develops all of its new cars.
BMW gave us each our own car to test... We chose from new M3s, M6s, 550s, and 7 series. First, we drove to the test track. After the test track, we headed to a giant "wet circle," where we tested drifting in M3s. Before trying it ourselves, a professional BMW racer took each one of us for a ride. She explained in clipped English how easy it was (it truly looked easy with her behind the wheel). It wasn't. No one in the group could drift around the circle. (Kudos to Matt, who made the circle last year.)
The wet circle and test track were fun, but the highlight of the BMW event for me was the Autobahn simulator. The facility has two 4-kilometer straight-aways with turnarounds at each end. Coming out of the corner, you floor the gas pedal. And you don't let up for about two minutes. I got the M3 up to 180 mph. It was incredible. I've been shopping around for a new M3 online. I'll let you know if I pull the trigger.
On a side note, if you're looking for a bigger car that still has some "get up," check out the BMW 550. It's a full-sized sedan with more than 400 horsepower. I was amazed at how fast the thing was.
After Microsoft issued record-low 0.87% debt, more companies are taking advantage of cheap paper. Today, Extreme Value World Dominator pick Wal-Mart announced a $4.2 billion bid (148 rand per share) for South African retailer Massmart. The deal would give Wal-Mart 290 stores in 13 countries in sub-Saharan Africa, and first-mover advantage in the largely untapped African market. I'm sure we'll hear about this "deworsification" from Dan when he returns to the Digest this week.
Southwest Airlines, which carries more passengers than any other U.S. airline, offered $1.42 billion for fellow discount carrier AirTran. The deal, mostly funded with debt, will allow Southwest to compete on the same level as larger carriers like Delta and United. The market loved the takeover, sending Southwest shares up nearly 10%.
In another takeover bid, consumer-products giant Unilever announced it would buy hair-products company Alberto Culver for $3.7 billion in cash.
And finally, a takeover that puts money in our readers' pockets... Last May, Matt Badiali recommended several gold miners with operations in China. One company, Continental Minerals, boasted a huge Chinese deposit and support from the Chinese government. Plus, some major local miners already owned a stake...
The project looks fantastic, and Chinese national companies took notice. Zijin Mining owns 13.8% of Continental [Minerals]. And Jinchuan Group, China's largest nickel miner, owns 11.8%. That's an enormous vote of confidence from the Chinese government. These are exactly the kind of partnerships we want to see. – Matt Badiali, May 2010, S&A Resource Report
On Friday, Jinchuan Group announced it would buy Continental for C$420.3 million, or C$2.60 a share. Resource Report readers made more than 23% on the recommendation in five months.
Last Thursday, Dan said Microsoft's bond issuance wasn't necessarily a bubble in the bond market. Morgan Stanley disagrees. The investment bank released a series of charts showing how crazy the rush to safety in bonds has become. The chart below, from Morgan Stanley, shows mutual fund inflows into bonds eclipse those of equities during the tech boom...
Despite bond yields languishing at record lows, mutual funds (Main Street's favorite investment vehicle) are still pouring into bond funds. Of course, when a security becomes popular, it usually pays to be a contrarian. Billionaire hedge-fund manager David Tepper is certainly in that camp. Last Friday on CNBC, Tepper described the Fed's statements that it would support the economy amid signs of a downturn as a "put." Tepper is so confident in the government's ability to goose the market that he's shifting his predominantly bond-focused fund into equities...
"What, I'm going to say, 'No Fed, I disagree with you, I don't want to be long equities.'" said Tepper. "We're a bond place, but we changed up to a little bit more equities recently." Tepper's reasoning is solid. He said either the economy will naturally improve over the next three months, in which case stocks will perform best... Or the economy won't do well over the next three months, and the government steps in. In which case, every asset class will rise except bonds.
Tepper has some experience making money from government intervention. Last year, his $7.5 billion fund returned 132%, mostly from betting on financials. You can watch his interview with CNBC here.
New highs: Atlantic Power (AT), Imperial Metals (III.TO), Silver Wheaton (SLW), Anheuser-Busch InBev (BUD), DirecTV (DTV), HMS Holdings (HMSY), iShares Silver Trust (SLV), Enterprise Products (EPD), Altria (MO), Philip Morris (PM).
In the mailbag... one reader asks about the best places to trade options, and another pledges allegiance to Chevrolet. Send your e-mail to feedback@stansberryresearch.com.
"On sold options, your total return is based upon margin requirements. Please comment in your newsletter what online brokerages only require a 20% capital requirement. Since this is key to your return statements, it is vital knowledge. You don't need to recommend any brokerage, just let us know what what you found. I have options accounts at OptionsHouse, E-trade, and Scottrade. None of them come close to a low %20 requirement." – Paid-up subscriber Derek
Goldsmith comment: I e-mailed Retirement Trader editor Dr. David Eifrig for an answer to your question. He recommended you access his special report, How to Buy Securities and Set Up Your Option Account. In it, he lists his seven favorite brokers. If you're not a Retirement Trader subscriber and want to learn more about the service (and David's brokerage writeup), click here.
"It is sad to see the pre-judgement that imports are a better value than our own U.S. products. I've owned both, and I think the Chevrolet and Saturn are a better value than the Nissan and Honda I've experienced, and I think it is reprehensible for our own people to carry outmoded stereotyped prejudices that damage our own country in decreasing our standard of living as a nation.
"It is a cold and callous prejudgement I have read from you, and it is magazines like Kiplingers and the personal prejudices of Consumer Reports reviewers that have deliberately reinforced these notions, driving down the resale value of our own products in a way that does not reflect the true value of our cars.
"I know one more thing: When you drive imports, you are driving just an automobile, nice as it may be. When you drive our own products you have an auto that you have a true sense of pride in. Only in a U.S. auto can you be the king of the road, driving down a U.S. highway in a U.S. car is the only way, my friend. Put that in your pipe and think about it." – Paid-up subscriber LT
Goldsmith comment: I've never had this much fun driving domestic automobiles.
Regards,
Sean Goldsmith
Baltimore, Maryland
September 27, 2010