Europe's latest discussions... Gold and silver jump... Berlusconi whines... IBM buys back $7 billion in stock... Shorting Netflix... More sketchy trades at SAC... Steve Sjuggerud for $5...
Editor's note: Many thanks to all our Alliance members who made it to Santa Barbara, California for this year's conference. It was a wonderful affair. We hope you enjoyed yourselves.
"The sovereign debt crisis threatens the very existence of the euro zone," said Howard Archer, chief European economist at the research firm IHS Global. "It is therefore absolutely imperative that European policymakers finally deliver a major package."
European officials are currently discussing ways to save their union. The talks focus on three aspects: restructuring Greece's debt, bolstering European banks, and increasing the scope and power of Europe's rescue fund – the 440 billion euro European financial stability facility (EFSF). These three efforts can be summed up in three words... print, print, print.
The market is acting accordingly... Gold is up nearly 3% to $1,699 an ounce. Silver is above $33. Despite recent strength, it's not too late to add to your precious metal positions. The next European bailout will be a big one.
You may also want to consider platinum. Rick Rule, the consummate resource expert, is buying platinum. And during his speech at our Alliance meeting yesterday, Porter also said he's bullish...
"Platinum is now cheaper than gold," he said. "That shouldn't happen. And it won't last."
.gif)
On Wednesday, representatives from all 27 European Union (EU) members will meet for a second time. When the EU announced the first round of bailout measures in July – which were much more modest – it took three months for all member governments to approve. It doesn't appear things are any smoother this time around...
Under pressure from the EU for a concrete turnaround plan, the Italian government is at risk of collapse. Italian Prime Minister Silvio Berlusconi will present a plan Wednesday in Brussels. If EU representatives find it unacceptable, Italy may lose European Central Bank support for its bonds. In other words, Italy will be shut out from the credit markets. But instead of focusing on this difficult task, Berlusconi whines...
"No one in the EU can nominate themselves as special administrators and speak in the name of elected governments and the European people," Berlusconi said. "No one is in the position of giving lessons to his partners."
Unfortunately for Berlusconi, that's the deal Italy agreed to when it joined the EU and gave up its own currency.
In the October 13 Digest, we noted IBM's historical success buying back stock…
|
Since the end of 2006, according to regulatory filings, IBM has repurchased $60.3 billion of shares that would be worth more than $91 billion today. More than 60% of those 504 million shares remain off the company's books; that means they haven't been replaced, for example, by shares issued as part of executive pay packages. |
|
Partly as a result, IBM's shares outstanding have declined by a fifth over that period and its stock price has nearly doubled. While it has increased its per-share dividend by 150%, its overall dividend costs have increased just 100%. |
Today, IBM announced a $7 billion stock buyback program – in addition to the approximately $5.2 billion remaining at the end of September from a prior program.
Yesterday, one of our Alliance members asked me why I don't increase my short book if I think stocks aren't very cheap. The answer is I'm not a great short seller, and I only short when I find something really crazy...
The market reminded me that, once again today... Shares of Netflix – a stock I shorted earlier this year – fell 40% today, as the company announced the loss of 800,000 subscribers last quarter. Netflix CEO Reed Hastings said, "long-term members felt shocked" after the company increased prices by about 60% and split the DVD and video-streaming businesses apart, creating a new brand name called Qwikster for DVDs. Hasting also said "more of them have expressed [their shock] by canceling Netflix than we expected."
So if I recommended shorting Netflix earlier this year and the stock has slumped… why am I a bad short seller? Because I recommended shorting below $200 a share, and bailed out as it soared… eventually hitting $300 a share.
I recommended shorting Netflix, OpenTable, and Salesforce. They're all getting killed now. They turned out to be great shorts because they're poor businesses that traded for absurdly high valuations. Sadly, the only one I stuck with was Salesforce, which I think still has a ways to go down...
In the October 20 Digest, we discussed the latest Security Exchange Commission (SEC) allegations against SAC Capital, the hedge fund founded by billionaire Steve Cohen. Today, the Wall Street Journal reports regulators submitted new information on 18 suspicious trades, so-called "referrals," to the SEC. The Financial Industry Regulatory Authority (Finra) submitted a 320-page document to the SEC outlining the flagged trades SAC made between 2002 and 2011. According to the article…
|
In the 18 referrals made by Finra and the NASD between 2002 and 2011 that were reviewed by the Journal, investigators said they were vexed by SAC's repeated appearance in routine screens of suspicious trading near mergers and acquisitions, earnings announcements and other market-moving news. |
The trades in question do not include the MedImmune and Cougar Biotechnology takeovers. In total, the referrals helped SAC make/save more than $15 million.
There's a good chance you already read S&A's free daily e-letter, DailyWealth. But if you haven't yet signed up for DailyWealth Premium, you're missing out on some of the most valuable and timely information we offer.
Why am I bringing this up? Because for the next couple weeks, you can sign up to receive DailyWealth Premium for the "old" charter price of just $5 a month.
Every day in DailyWealth Premium, Dr. Steve Sjuggerud (and our other top editors) report on investment opportunities and ideas average investors never consider.
As many Digest readers know, Steve is one of the most connected analysts you'll find anywhere in the world. He keeps in close contact with Rick Rule, one of the world's top investment bankers in the resource industry. He was invited to the New York Stock Exchange to ring the opening bell with Eduardo Elsztain, one of the world's best distressed-asset investors and one of Argentina's wealthiest individuals.
Over the past few years, Steve has also brought insight to DailyWealth readers from personal experiences with Bond King Bill Gross and Investment Biker author Jim Rogers. DailyWealth Premium also features the best guest insight we can find from investors we respect, like Mark Ford, Doug Casey, and Mebane Faber.
In short, when you sign up for DailyWealth Premium, you get access to our best ideas (and other research Steve reads)... Plus, Steve personally chooses only the best information and recommendations for you. You will not find a better value than DailyWealth Premium anywhere. And the special rate of $5 per month is only available for the next couple weeks. To learn more, click here...
|
New 52-week highs (as of 10/24/11): V.F. Corp (VFC), Intel (INTC), Activision Blizzard (ATVI).
In today's mailbag… we're laying the Social Security debate to rest. Send feedback on something else to feedback@stansberryresearch.com.
"While we may not agree on the presentation [on the dole, engaging in a 'criminal' act, etc.], I am frankly astonished [and appreciate] that you would spend the time to respond yet again to my thoughts on the matter. I'm not one of those people who threaten cancellation of your service at any hint of disagreement with what you have to say.
"On the contrary, I very much agree that SOMEONE, sometime in the near future is going to have to venture into the sacred realm of Soc. Sec. overhaul. If that person turns out to be you [as you seem to have somewhat of a 'bully pulpit'], I wish you nothing but success and am quite willing to consider all alternatives to this present system even if it might mean changes in present benefits. Good luck in that endeavor and, again, thank you for your response." – Paid-up subscriber George Earhart
"Thank you for having the 'stones' to state the truth about Social Security, even if it isn't popular or profitable for your subscription renewal. Stealing from one generation to support another generation is bad enough, but it's shameful for any current recipient to delude himself that he is only taking his fair share. This is akin to 'dine and dash' where the parents take their kids out to a nice restaurant and then flee the premises while their kids are left at the table with a token $10 bill to pay the WHOLE tab. Not cool." – Paid-up subscriber "who is old and doesn't want to dump my generation's mess on my children" Tom Burton
Regards,
Sean Goldsmith and Dan Ferris
Santa Barbara, California
October 25, 2011