Greek 'drug addicts'... The most important country on Earth... News = noise... Apple hits $500 a share... Einhorn's big mistake: Selling Apple at $18 a share... The Google/Apple Wars... Moody's downgrades Europe... Jeff Clark warns bulls... 'Porter Stansberry, you jerk'...
The Greek economy is making headlines again...
Elstat, Greece's national statistics group, says the Greek economy contracted by 7% in the fourth quarter, even more sharply than the third quarter's 5% contraction. The Greeks are scrambling to implement "austerity measures" necessary to get a 130 billion-euro bailout.
Greece is like a drug-addicted relative who takes a shower and wears a tie once a year on Christmas... just so he can show up at the family party to collect gifts and checks that he can use to score later on.
So for a few days after Christmas, he's flush with cash and has plenty of drugs to keep his nerves steady. He almost seems normal for a little while... and then they find him one day, face-down in a ditch. You can run from reality, but you can't hide.
We've been hearing an awful lot about Greece the past year or so... as though it's terribly important what happens there.
I wonder if that's true... Before all the hubbub, Greece seemed like a bit player in the global economy. And what about this 130 billion-euro bailout? Should we really bail out an entire country that seems to think evading taxes is your right as a citizen? It doesn't make any sense to me.
Yet suddenly, Greece is the most important country in the world. How did that happen? As far as I can tell, it's a creation of news sources... and of news consumers, who can't get enough bad news. Everybody loves to be distracted by bad news. It almost feels like you care about the victims. After all, you're watching them on the news all day. That means something... doesn't it?
Well, no... It means nothing. That's one of the secrets of investing (and of life): News is noise. I can't tell you how many times my wife has asked me how I haven't heard about such and such event. "Dan, you're on the computer all day," she says, as though using a computer means exposing myself to the pure noise of news and advertising.
Here's a perfectly noisy, meaningless headline: Shares of Apple, the world's largest publicly traded company, passed the $500-a-share mark yesterday. It's a meaningless event. Yet, it was on the front cover of every major financial news source this morning. I'm sure if I turn on CNBC right now, I wouldn't have to wait long to hear about it from the money honeys and male models working the teleprompters there.
I remember when hedge-fund manager David Einhorn bought shares of Apple around $250 a share in the second quarter of 2010. I thought he was nuts. The stock had run up from $90 a share since January 2009. But the stock was cheap then (especially considering the growth potential, which Apple fully realized).
Today, Apple's market cap is skirting $470 billion. Shares have doubled since last September. But even at all-time highs, Apple still trades for less than 12 times expected earnings. And the company has nearly $50 billion of cash. The S&P 500 trades for 13.5 times forward earnings.
Einhorn appeared on public television this morning and talked about Apple. He admitted to originally buying the stock for $14 a share in 1999. He sold at $18. He called it one of the biggest investment mistakes he's made...
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I looked up in 1999, in December, we bought Apple at $14 a share. And then in January of 2000, we sold it for about $18 a share... The [internal rate of return] on that was fantastic. But it was one of the worst sales that I've ever come upon. And from there, it took off. And it seemed to trade at a very high multiple for a long time, and obviously, deservedly so, because of all the great things that they've done over the last 10 years. |
Yesterday, Moody's downgraded the debt ratings of six European countries and threatened to cut the triple-A ratings of France and the United Kingdom. The rating agency downgraded Spain from A1 to A3, Italy from A2 to A3, and Portugal from Ba2 to Ba3. All three countries have negative outlooks. Moody's also cut the ratings for Slovakia, Slovenia, and Malta.
"Policy makers have made steps forward, but we do not think they have done enough to reassure the market that we are on a stable path," said Alistair Wilson, chief credit officer for Europe at Moody's. "What will guide long-term ratings is the clarity and the performance of policy makers and the macro picture."
In his latest issue of the S&A Short Report, Jeff Clark recommends one of the only cheap trading opportunities left in the market. And he thinks you can double your money fast...
The S&P 500 is up 22% since bottoming last October. And with the big gains comes complacency... While the market has soared, volatility has plunged. The Volatility Index (VIX), the market's "fear gauge," is down more than 50% in the past four months. We discussed the lull in the VIX here. It was trading at 45 last October. But last week, the VIX fell below 17.5.
Jeff sees a huge opportunity trading volatility today. Without giving away too many details, the chart is setting up for a huge breakout. The last time volatility surged, this security gained 400%. Jeff believes readers can make at least a quick 50%-100% return this time.
I must warn you... this trade is different from most of what Jeff recommends in the S&A Short Report. But it should be just as profitable. To sign up for the S&A Short Report and learn how Jeff is playing a big spike in volatility, click here...
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New 52-week highs (as of 2/13/12): iShares Dow Jones U.S. Home Construction Fund (ITB), PowerShares Buyback Achievers Fund (PKW), V.F. Corp (VFC), Westport Innovations (WPRT), Enterprise Products (EPD), and Philip Morris International (PM).
We'd love to know how much time you spend reading news and what you learn, if anything, while doing it. Be honest. Write to us at feedback@stansberryresearch.com.
"Porter Stansberry – you jerk! you insufferable genius egomanic! Im addicted now to your brilliant insights, un-American gripes and sensible 'get rich slow' Friday Digest rants. I was quite happy being ignorant then you have to go push all this stuff into my brain and make me think! I was hoping to join the Alliance, give you my Interactive Brokers login and wake up rich one fine day but noooo – I have to wade through all these compelling recommendations, calculate sensible position sizes and manage my stop losses myself!
"My wife is on to us hanging out too. She caught me chuckling into my ipod when listening to Stansberry Radio podcasts and studying your 'End of America' posts on my ipad late at night. I used to imagine you as an evil troll spewing out libertarian bile at the masses but then when I met you at an Alliance conference years ago I discovered your a surprisingly nice guy! You listened intently to my uninformed drivel and had the obvious respect of those in your company. Its kinda hard to stay mad at you even though your younger, richer and smarter than I am.
"Happy Valentines day Stansberry. Im sure your as lovely as the day we met! Best wishes to you and your family too." – Paid-up subscriber Paul
"You guys are losing credibility on UniCredit. You have been predicting it's "imminent" demise for over a year. When are you going to either get it right or admit you are wrong?" – Paid-up subscriber Mike Hudson
Porter comment: Well... considering we first warned about UniCredit in the spring of 2010... then watched it fall about 90% from there... And considering that I wrote most of my January 2012 issue about why the European Central Bank's actions meant that UniCredit would be bailed out and Europe's banking system would not collapse...
I think we're on solid ground by saying that we got it right.
I wonder why you think we didn't.
What else were you expecting us to say?
Goldsmith comment: Mea culpa... In yesterday's Digest, I wrote we believe UniCredit "will fail." The bank has already failed, as evidenced by its plunging share price and crushing debt load. However, the European Union has made it clear they will backstop any major sovereign or financial sector failures... UniCredit's safe for now.
Sean Goldsmith and Dan Ferris
New York, New York and Medford, Oregon
February 14, 2012