Wed, Jan 29, 2014|Sean Goldsmith

Emerging-market madness...

Stansberry & Associates Hall of Fame
(Top 10 all-time, highest-returning closed positions across all S&A portfolios)

Investment

Sym

Holding Period

Gain

Publication

Editor

Seabridge Gold	SA	4 years, 73 days	995%	Sjug Conf.	Sjuggerud
Rite Aid 8.5% bond		4 years, 356 days	773%	True Income	Williams
ATAC Resources	ATC	313 days	597%	Phase 1	Badiali
JDS Uniphase	JDSU	1 year, 266 days	592%	SIA	Stansberry
Silver Wheaton	SLW	1 year, 185 days	345%	Resource Rpt	Badiali
Jinshan Gold Mines	JIN	290 days	339%	Resource Rpt	Badiali
Medis Tech	MDTL	4 years, 110 days	333%	Diligence	Ferris
ID Biomedical	IDBE	5 years, 38 days	331%	Diligence	Lashmet
Northern Dynasty	NAK	1 year, 343 days	322%	Resource Rpt	Badiali
Texas Instr.	TXN	270 days	301%	SIA	Stansberry

Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)

As of 01/28/2014

Stock	Symbol	Buy Date	Return	Publication	Editor
Prestige Brands	PBH	05/13/09	391.0%	Extreme Value	Ferris
Constellation Brands	STZ	06/02/11	268.3%	Extreme Value	Ferris
Enterprise	EPD	10/15/08	253.4%	The 12% Letter	Dyson
Ultra Health Care	RXL	03/17/11	214.0%	True Wealth	Sjuggerud
Ultra Nasdaq Biotech	BIB	12/05/12	195.2%	True Wealth Sys	Sjuggerud
Altria	MO	11/19/08	180.4%	The 12% Letter	Dyson
Fluidigm	FLDM	08/04/11	179.9%	Phase 1	Curzio
Ultra Health Care	RXL	01/04/12	174.3%	True Wealth Sys	Sjuggerud
GenMark Diagnostics	GNMK	08/04/11	172.7%	Phase 1	Curzio
McDonald's	MCD	11/28/06	166.0%	The 12% Letter	Dyson

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

Top 10 Totals

2	Extreme Value	Ferris
3	The 12% Letter	Dyson
1	True Wealth	Sjuggerud
2	True Wealth Sys	Sjuggerud
2	Phase 1	Curzio

'How I became a millionaire after everyone rejected me...'

Bestselling author Tucker Max appeared on last week's first-ever episode of The James Altucher Show.

In today's Digest Premium, Max explains how he managed to sell nearly 3 million books despite getting rejected from dozens of publishers and agents...

To continue reading, scroll down or click here.

'How I became a millionaire after everyone rejected me...'

Bestselling author Tucker Max appeared on last week's first-ever episode of The James Altucher Show.

In today's Digest Premium, Max explains how he managed to sell nearly 3 million books despite getting rejected from dozens of publishers and agents...

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

Emerging-market madness... Huge intervention from Turkey's central bank... South Africa tightens... Nigeria doesn't want the U.S. dollar... Mobius says the selloff is temporary... More on Apple's earnings... Home prices are on the rise... Two great stocks are near their lows... Jeff's big announcement...

The selloff in emerging markets continues...

Yesterday, we shared Steve Sjuggerud's latest thoughts on emerging markets. In short, he acknowledged how cheap emerging markets are today. But the trend is down...

So while emerging markets are undoubtedly "cheap" and "hated" – two things Steve looks for in an investment – we're missing the important third aspect: "in an uptrend."

Yesterday, we noted the Turkish lira hit a record low against the dollar... Today, Turkey's central bank took drastic measures to stop the decline.

We checked in with Kim Iskyan, editor of the S&A Global Contrarian (which we're currently "beta" testing). Kim specializes in foreign markets... And he gave us his thoughts on Turkey's move...

In an effort to stop the depreciation in its currency – which has threatened to drag down other emerging-market currencies – Turkey's central bank delivered the monetary system a knockout blow... The central bank increased interest rates dramatically – between 4.25% and 5.5%, depending on the rate.

In response, the lira appreciated as much as 7.7% against the dollar... although it's still down nearly 28% over the last year.

It looked like Turkey might be the first domino in emerging markets to fall... And it's good news that things look like they have stabilized. But that's probably not the end of the story... because politics are getting in the way again.

Turkish Prime Minister Recep Tayyip Erdogan was opposed to the interest-rate hikes... He has made it clear that he'll hold the central bank responsible for continued volatility in the lira, and for any effect on growth. (When interest rates rise, borrowing costs increase... So companies borrow less, and economic growth can suffer as a result.)

The central bank will have to watch its back, and it might not be able to do what it thinks is best, for fear of political revenge by the Prime Minister. Markets like predictability... and the Prime Minister looking to undercut his own central bank isn't a recipe for stable currency and monetary policy.

And South Africa jumped on the tightening bandwagon... The country, which we recently discussed in terms of platinum production, raised its benchmark rate from 5% to 5.5%. Its currency, the rand, jumped on the news. Then, like the lira, it round-tripped back down.

Meanwhile, Nigeria's central bank made a move out of the dollar...

Currently, 85% of its $43 billion in reserves are held in U.S. dollars. However, the country's central bank plans to increase the portion held in Chinese yuan from 2% to 7%.

"It was clear to us that the future of international economics and trade will shift in large part to business with and by China," Nigerian central bank head Kingsley Moghalu said. "Ultimately, the renminbi (the yuan) is likely to become a global convertible currency."

Nigeria joins others like South Korea, the UK, and certain eurozone members who have signed swap agreements with China – allowing the free trade of the renminbi.

Back to the emerging-markets rout for a moment...

Mark Mobius, executive chairman of Templeton Emerging Markets Group, thinks the problems in emerging markets are temporary. Mobius noted a huge amount of money flowed into emerging-markets bonds leading up to talks of the Federal Reserve's "tapering" efforts. "As soon as tapering talk started, then everybody got cold feet and started to exit," Mobius said.

The Fed has since tapered, lowering its monthly bond purchases from $85 billion to $75 billion. But that's not the same as tightening. "I keep on telling people that the balance sheets of central banks around the world – the Fed, Japan, Europe, and so forth – are still enormous," Mobius said. "There's no good reason why this [emerging-market selloff] is happening. I believe it will be temporary... and we will be able to find buying opportunities along the way."

And in an interview today with Bloomberg, Mobius added...

People are enjoying what they see as a bull market in the U.S... As we go forward, we're going to see a lot of overweight positions in the U.S. So, given the fact that emerging markets are still growing fast, given that they have low debt-to-GDP ratios, given that they have high foreign-exchange reserves, we believe that money will be flowing back in again to emerging markets.

If you're already invested in emerging markets, mind your stop losses. As we noted above, they are cheap and hated today. But we're looking for a strong uptrend before they really take off.

Following yesterday's discussion of consumer-electronics giant Apple's "disappointing" earnings, Dan Ferris, who recommended shares in his Extreme Value letter, e-mailed me to say there was "lots of good news" in Apple's announcement. Dan said the market's reaction, which sent shares down 8% yesterday, was "silly."

He noted the bullish portions of Apple's conference call. Among them:

•	iPhone accounts for 69% of the smartphone market in Japan.
•	iPhone accounts for 41% of smartphone subscribers in the U.S., as of the three-month period ending in November.
•	iOS (Apple's operating system) devices already account for 57% of all mobile web browsing in China.
•	iPhone has a 59% share of the U.S. commercial smartphone market.
•	Apple sold 4.8 million Macs in the quarter, up from 4.1 million a year ago.

Apple shares fell to less than $500 briefly today but quickly recovered. It looks like we may be setting a floor in the stock.

The S&P/Case-Shiller housing index – made up of data from 20 metropolitan U.S. cities – climbed 13.7% from November 2012 to November 2013 – its biggest 12-month increase since February 2006.

Steve Sjuggerud has been encouraging readers to invest in housing for years now. In today's DailyWealth Market Notes, we revisited Steve's thesis...

Three years ago yesterday, Steve told DailyWealth readers, "Right now is the best time in history to buy a house in America." In the March 2011 edition of his True Wealth newsletter, he told subscribers they could take advantage of the situation by buying the iShares U.S. Home Construction Fund (ITB).

The fund holds shares in big homebuilders like PulteGroup. It also owns companies that do well in a good housing market, like Home Depot. Steve's subscribers are up about 87%... And he says there's more to come. "Because U.S. housing is still REALLY affordable... It's darn cheap!"

As you can see in the chart below, ITB's huge run peaked in May 2013... And it has been consolidating those gains since. It has been stuck in what traders call a "box." But with home prices and existing home sales rising, and a limited supply of homes on the market, we expect Steve will continue to be right... and ITB will soon "break the box" to the upside.

Despite the recent selloff, stocks are still within 4% of their all-time highs. There are a few stocks that offer some value...

Shares of cigarette maker Philip Morris International are trading near a 52-week low. At today's prices, Philip Morris offers a 4.6% yield.

Retail giant Target is also trading near its 52-week low. Shares are selling off because hackers stole approximately 110 million Target customers' debit- and credit-card information.

Often, these negative, singular events make for great entry points. Remember Wal-Mart's "scandal" in Mexico two years ago?

In April 2012, the New York Times accused Wal-Mart's Mexican subsidiary of bribing government officials. (We wrote a Digest about it here.)

Shares quickly fell from $60 to $55. Dan used the opportunity to re-recommend Wal-Mart, saying in an Extreme Value weekly update...

Legal problems rarely scuttle businesses all by themselves. Scandals with companies like Enron and WorldCom happened because those companies committed fraud in their financial reporting. Wal-Mart isn't accused of committing fraud. It's still a fantastic, World Dominating business. This won't remove Wal-Mart's status as a World Dominator.

This should be a one-time, solvable problem for Wal-Mart. I don't see any reason to change our maximum buy price.

Target is experiencing a similar case today... There was a security breach. It's a big deal, but it will pass.

In the latest issue of The 12% Letter, Dan wrote about Target...

Security breaches aren't death sentences for great retail operations. They've happened before, they'll happen again, and they can be handled without affecting the business much...

Target won't rise 10-fold or even five-fold any time soon. But it's still a great business, and its management has responded well to the crisis. Target Chairman/CEO Gregg Steinhafel sent a letter to customers offering one year of free credit monitoring and identity-theft protection. He also made it clear that the point of intrusion is sealed off and the malicious software left behind has been eliminated. Target also hired a team of security experts to work with law enforcement officials to solve the crime. Steinhafel assured customers that they would have "zero liability for any fraudulent charges resulting from the intrusion."

Target's security breach will wind up like the others. The headlines will get whatever mileage they can out of it. Some clueless investors will sell the stock. Then everything will go back to normal. Let's say the entire episode costs Target $360 million, about twice as much as it cost TJX. That's not even two days' of sales. The business will barely feel it financially.

I don't know how much the data breach will cost Target. But history hints that it won't be much in relation to the company's annual sales. Bottom line: This incident will soon be forgotten. It will have zero impact on Target's earnings power. The business will continue to grow, rise in value, and – most important to income investors – pay higher dividends each year.

One last note... As expected, the Fed announced it would cut its bond-buying program from $75 billion a month to $65 billion. We'll discuss the outcome of today's Federal Open Market Committee announcement and President Obama's MyRA retirement-plan idea later this week.

New 52-week highs (as of 1/28/14): Aware (AWRE), Denison Mines (DML.TO), Virginia Mines (VGQ.TO), and Vringo (VRNG).

Judging from the mailbag, some of you missed Jeff Clark's big announcement. Don't worry, it's not too late. Send your notes to feedback@stansberryresearch.com.

"He gets an A from me! His chart reading is spot on. Just because a pattern has developed doesn't mean price has to follow through. It's a trading service and that's just the way it is with trading. The trader (subscriber) is responsible for his own trades. Nothing forces me to trade any recommendation, but seeing the analysis is important to me. (I happen to have 6 long call positions (not all Jeff's) which all together total LESS THAN 2.5% of my trading capital and which are now underwater thanks to the recent market action. I'm not crying.) All of the subscriptions I carry are excellent!" – Paid-up subscriber Forrest

"What the hell happened to Jeff Clark's major announcement and video to be released this past Saturday night? No video, no announcement, no nothing and not a mention since last Wednesday's blurb in the S&A Digest. Just wondering..." – Paid-up subscriber WG

Goldsmith comment: Our apologies if you had issues accessing Jeff's announcement. It's still available for two more days. (After that, we're taking it down forever.)

Jeff's announcement has to do with Federal Reserve Chairman Ben Bernanke's last day in office – this Friday. He thinks Bernanke's departure could spark another 2008-like crisis. Luckily, 2008 was the best year of Jeff's trading career... And he thinks he'll have another opportunity to make huge profits.

You can see Jeff's announcement here.

Regards,

Sean Goldsmith

Miami Beach, Florida
January 29, 2014

'How I became a millionaire after everyone rejected me...'

Editor's note: Over the past two days, we've featured content from the inaugural episode of S&A's brand-new radio podcast, The James Altucher Show. Today's Digest Premium is adapted from James' interview with bestselling author Tucker Max, whose book I Hope They Serve Beer in Hell was a New York Times No. 1 bestseller...

In 2001, my book – I Hope They Serve Beer in Hell – started as e-mails I (Tucker Max) sent to my best friends from law school.

Those e-mails started getting forwarded around to other people. I started getting those e-mails forwarded back to me from other friends and other social groups, which was a little ridiculous.

So I sent them out to publishers, because my friends said, "These things are really funny, and you've been fired from your two jobs as a lawyer and restaurant employee. Maybe you should be a writer and write these stories."

Every publisher and agent rejected me. There wasn't one person who showed any interest. In fact, aside from the form rejection letters, I actually got a couple personalized rejection letters. Someone took time out of his day to write stuff like, "This is the worst thing I've ever read. You need to never write anything again, not even instructions on how to get to the grocery store." It was really bad.

You see, big publishers like Simon & Schuster used to be gatekeepers. They got to decide who became an author and who didn't. My career is one of the last ones that bridges that time period. If I had tried to write in 1995 and send it all out, it would have been rejected and there would have been nothing else I could have done. I would have just been an unpublished author.

But after 2000, there was the Internet. You had a way to reach people with your writing that you didn't have to have a gatekeeper for. I put myself on the Internet and it blew up and MTV came and filmed me. Then a girl sued me and I won the case... My stories were all over the place, and all the publishers that rejected me came back and said, "Hey, we'd love to publish your stuff now because now we see how big you are and we want to make money."

Today, if the gatekeepers all say no, you can just walk directly around them. There's no more fence. Anyone can publish anything. That's how I was able to sell two-and-a-half million books.

– Tucker Max

Editor's note: Thanks to our faithful readership, The James Altucher Show is the top-ranked business podcast on iTunes – and No. 5 among all podcasts. To sign up to receive episodes of The James Altucher Show for free – click here and subscribe on iTunes. And to receive a free gift, be sure to e-mail James at james@stansberryradio.com with the subject line "Podcast Subscriber."