Fergie and Bonnie selling access

Everybody wants to sell access to something these days...

Fergie, aka, the Duchess of York, wants to sell access to her former husband, Prince Andrew, the Duke of York. Price: 500,000 British pounds (US$721,000), with a down payment of 40,000 pounds (US$57,000). She got caught by a reporter, and I assume she'll have to find a new job.

Then there's Bonnie Hoxie, a former Disney employee. She's been arrested and accused of trying to sell early access to Disney's second-quarter earnings report to "hedge funds and investment companies," according to the Wall Street Journal.

I have to wonder why anyone would want access to Disney's earnings report. I mean... It's Disney. What's the big secret? It's like getting access to Wal-Mart's earnings. Who cares? Great business. Makes a ton of money. Big deal.

Not that Fergie and Bonnie don't have a fundamentally sound business idea. Selling access to powerful people who can provide valuable insight and information is a wonderful business... as long as you don't break any laws!

For example, in our monthly conference call service, Off the Record, we sell (legally, of course) access to the insiders who run the businesses behind some of our best investment ideas. This month, we interviewed the men behind a unique company that's already made investors more than 50 times their money... and could produce huge returns like that again over the next several years. Right now, we're offering a discount to our regular subscription fee... if you sign up before tomorrow at 5:30 p.m. To find out more about Off the Record, click here.

The U.S. Coast Guard, in its wisdom, has permitted BP to move forward with its next attempt to cap the blown-out well that's gushing oil into the Gulf of Mexico. BP is going to use a technique called a "top kill." That's when you pour drilling mud and cement into the hole. The mud slows it way down, and the cement seals it off permanently. I wish them luck.

With oil spilling into the Gulf, blood is running in the streets... BP's stock is trading for less than seven times trailing earnings, with a current yield of 8%. If history is any guide, the spill will cost BP hundreds of millions, which it will be able to pay. The spill is also likely to lead to new rules and regulations that'll restrict competition even more than the existing ones. That'll provide giants like Chevron, BP, and ExxonMobil with a bigger competitive advantage over smaller companies than they already have.

This could be a great opportunity to buy BP and the oil giants in general. I've recommended one of them in my Extreme Value World Dominator portfolio. It's cheaper than it's ever been and poised to take advantage of the huge opportunities onshore in unconventional natural gas plays throughout North America. It's one of the best-managed businesses on Earth, and one of the most profitable businesses in history. It's paid a dividend every year for more than 100 years and raised its dividend every year for more than two and a half decades.

With the way Mr. Market is acting lately, I'd put the World Dominator portfolio up against any long stock portfolio for the next few years. Most stocks, though they're down the last few weeks, are still way overpriced. The World Dominators are dirt-cheap. As a group, they're likely the best equity bargains in the world today. I run a list of my favorite World Dominators, with current buy/sell advice, on the last page of every Extreme Value issue. Click here to sign up.

 Yesterday, I said the collateral in the banking system, mostly U.S. homes, was falling in value lately, as El Presidente's tax-credit scheme expired, causing housing demand to dry up quick. Perhaps those distressed mortgages sitting on bank balance sheets won't sit there too much longer... Today, American Banker reports roughly $10 billion in distressed mortgages have been offered for sale since March 31. That's "more than we've seen cumulatively over the last couple of years," according to Jim Daurio of Kondaur Capital, an investment firm that buys mortgages.

Only 30% of that $10 billion offering has changed hands so far, as investors continue to get a feel for the distressed mortgage market. But Daurio says that's still more than has traded over the last few years.

One buyer in the game is billionaire vulture investor Wilbur Ross. Ross hired James Lockhart, former head of the Federal Housing Finance Agency, the conservator for Fannie and Freddie. Lockhart says it'll take another "year or so" for the country to work its way through the distressed mortgage assets. Lockhart's new employer sees opportunity there. Ross created a $1.5 billion fund to buy distressed mortgages. Lockhart told American Banker the best thing for the mortgage market is for banks to get loans off their balance sheets and into the hands of investors who'll sort them out one way or the other.

So far, all my trader friends are right. They said we'd get a rally, and stocks are up today. Jeff Clark told Growth Stock Wire readers yesterday "traders should be drooling over this setup." Jeff, like other experienced (and wealthy) traders I talk to regularly, knows a short-term recovery rally has likely begun today.

For months, Jeff has been saying a market decline is inevitable. Last week's action proves he knew exactly what he was talking about. Jeff managed money for years before retiring in style to live the writer's life and trade his own account. Today, he's one of the most widely read trading gurus around. To find out where Jeff says the market is headed next, and the right option play to take advantage of it, click here.

Porter, Sean, and Steve are attended the Ira Sohn Investment Conference this afternoon in New York. It's one of the premier events in the industry. I expect they will come back with at least one good investment idea. Ira Sohn is where David Einhorn first announced his idea to short Lehman Brothers. I picked up on it shortly thereafter, and Extreme Value readers made more than 80% in a matter of months. And that was during 2008, when the market was falling off a cliff. Let's hope the guys find another idea like that one.

New highs: Not no how. Not no way.

 In today's mailbag, readers defending the deflationistas and Komrade OBAMA!... Take your best shot here: feedback@stansberryresearch.com.

"Porter, you are a pip. Suddenly there's 'short term deflation.' You must have changed your definition. You have been shouting that inflation has nothing to do with prices(?) but is 'a sharp increase of the money supply.' Deflation ought then to be considered a decrease in the money supply... but wait... it's now housing prices going down. Magic! You're always right. And if not, just change definitions. Amazing!

"And now the 'brain-dead' deflationists, as you have called them – and me – appear to be right. Yes, we will have inflation someday, but timing is everything and your constant drumbeat has led people astray.

"That said, in my opinion you are a good analyst and have lots of very good ideas. I agree with you that we are headed for financial hell and currency collapse, but don't let that strongly held opinion blind you to what is happening around you. With all the asset destruction happening, and in the near future, the Fed can't even print fast enough to overcome it. Once that has worked down, watch out... but not yet. Velocity is low, the multiplier is below one, real estate is still weak, etc. Hang in there... you'll be right eventually. Good luck to us all." – Paid-up subscriber DG

Ferris comment: Porter's not the pip. I am. That was me in yesterday's Digest. Remember when I said the banking system is the engine of inflation? I said that because most of our money is created through the lending and depositing process. The collateral behind those would-be loans is falling off a cliff, so lending activity is depressed, meaning money-creation activity is depressed. The inflation Porter and I have written about is in the monetary base, the foot of the Fed's balance sheet, not in the banking system, where money is multiplied into existence.

So... technically speaking, I believe we're seeing deflation at the moment. The seeds of money creation aren't allowed to grow into big trees right now, due to collateral destruction.

And yes, I agree with Porter that deflationists are brain-dead because there's no way out for government but to print more money. Banking system or not, they'll find a way to goose the economy with more dollars.

It may seem like a complicated topic right now. But one day in the next several years, you'll look back and think it was childishly simple. Too much debt. No way out. Print money. Gold soars.

"I asked this once before, didn't get a reply so here goes again. Who owns the Federal Reserve Bank? Is it an agency of the U.S. Government?" – Paid-up subscriber jkboats

Ferris comment: No. The Federal Reserve is not an agency of the U.S. government. It's a private bank, technically owned by member banks. That's who owns the stock. But we all know it's controlled by its Board of Governors.

"You claim that the S&A family of analysts are NOT allowed to own any of their own investment recommendations. So how is it possible that all of you own gold? All of you recommend gold as an investment, and all of you claim to own gold. Come on, what's the loophole? I am only trying to pump you for an answer..." – Paid-up subscriber Scott Eklind

Ferris comment: It's not a loophole. Gold isn't subject to the United States' onerous securities laws. We're free to buy it, own it, talk about owning it, recommend coin dealers... all without the SEC's interference.

"It seems like there is an awful lot of optimism surrounding Annaly. I would not play the contrarian bet, but I would exercise caution in this position. It seemed like one day out of the blue, the bond purchasers in Greece decided that they were going to stop buying and that action sent interest rates up and caused a whole lot of overdue raucous in Greece and the EU. Yes, the Fed has said over and again that they are going to keep interest rates near zero, as always, for an extended period of time. Some people think that could mean a year or two. I don't.

"Although I wouldn't begin to guess at a time frame, I am throwing into the mix that the Fed may at some point have no choice. And it could happen just as quickly as it hit Greece. If that happens, how quickly do you think you'll be able to get out of Annaly? So with all of the optimism, I would simply suggest that you follow Stansberry's rules and limit your position size. If it were me, I also think I would tighten up my stops. I can't imagine what price I would actually get if I tried to sell at a 25% stop loss (with everyone else) when the interest rates in the bond market finally turn on a dime." – Paid-up subscriber Matt Mazza

"In Tuesday's Digest someone wrote, 'How is it possible that we send our best and brightest to Washington, and the only thing they never fail to do is screw up? It reminds me of what Edward Abbey said: 'One man alone can be pretty dumb sometimes, but for real bona fide stupidity, there ain't nothin' can beat teamwork.'

I don't take issue with the teamwork part, but it's been my observation that we send to Washington not our best and brightest but surely the ones with the most money to spend on getting their names plastered on billboards, TV advertisements, and the like. If we indeed send our brightest, how do we explain Obama? It's been said that in the land of the blind the one-eye man is king. Could it be that in the land of the dumb-s**ts the s**t is king?" – Paid-up subscriber Luis Andersen

"I'm a new subscriber... and frankly, I'm appalled by your repeated references to President Obama as Komrade Obama. Frankly, I don't like everything the Administration has done, but one can disagree with people and ideas, with respect. He is the President of our Country, and you should be ashamed of your rudeness! Please apologize." – Paid-up subscriber Suzanne Buttner

"I am so fed up with everything Stansberry does regarding politics that I am cancelling all that I have associated with it. We finally get intelligent people in the Executive Branch and you guys do nothing but nastiness. I don't care how good your recommendations are, I do not need to pay to read your garbage. GIGO. Good bye." – Former paid-up subscriber CS

Ferris comment: It seems you're so terrified we're right you're going to cut off your nose to spite your face. You're throwing away investment advice you admit is good, because we refuse to stroke your ego regarding your political leanings. Within a few years, every investor in the country will wish he'd heard and understood the often sharp criticisms we make once or twice a week around here.

Please think twice about what you're doing. I can't speak for anyone else, but when I started out in this business about 14 years ago, I was on a mission to try to give the best investment advice I could. Since then, and especially since Komrade Obama has taken over, the "intelligent people in the Executive Branch" have upped the ante. They're destroying the economy, one great swath at a time. So now I'm on a mission to try to help investors play it safe enough not to lose money, while still earning adequate returns.

My job is harder than ever, solely because the politicos have made it harder, and for no other reason. I doubt you'll get anything quite like our perspective if you cancel.

Regards,

Dan Ferris
Medford, Oregon
May 26, 2010