We're receiving an enormous amount of positive feedback about our newest project at S&A...
About a year ago, we set out to produce a special online investment digest. Our goal was to create a forum where investors could go to quickly catch up on the world's best financial media. But we didn't want another boring website that simply collected headlines. We wanted to create something much more useful... a website that gathers investment "insight" as well as news. We also wanted to make it a breeze to use. And free.
We're pulling ideas from newspapers... magazines... shareholder letters... industry reports... advisories... blogs... you name it. If it provides insight you can use to make smarter, safer investments, you'll find it digested on our new website. It should save you hundreds of hours a year... and again, it's absolutely free.
We can't tell you the address yet, because we're just now finishing the "beta testing" stage with our S&A Alliance members... but it should be ready within a week or so. Here's some of the feedback we've received so far...
As a business, Stansberry & Associates Investment Research continually amazes me. – Christian Colón
I'm immediately making this my home page. Thanks! – L.Y.
It's nice to have access to financial articles all in one place. Congrats on yet another great benefit of being a part of S&A. – Dan Langer
Absolutely love it! It is well formatted, gets quickly to an overview, and allows you to dive in deeper, should you desire. Keep them coming!! – Greg Wood
I love this service. – Stu Gardiner
A great information source!! – John Barber
It's great. Very informative. – J.R.
We'll share more on this service tomorrow. For now, back to our usual Digest fare...
November was the 28th consecutive month of declines for the S&P's Case-Shiller Housing Index. The index was up 155% in the seven years before its July 2006 peak. It's down 25% since then.
Three banks have failed so far this year. The latest, First Centennial of California, was closed up and seized by regulators on Friday. It's the biggest failure so far, with a little more than $800 million in assets.
Is this a recession... or a depression? I've been reading some of the better Great Depression literature, including Paul Johnson's A History of the American People, and Murray Rothbard's America's Great Depression, both of which I recommend.
It seems the word "recession" came about as a politicized euphemism for depression. People became inured to the word recession, so other, softer terms, like "slowdown," appeared. So maybe let's stop calling it a recession, and start calling it what it is: a depression. It sure seems like a better term to me...
Companies in the U.S. and Europe announced more than 76,000 job cuts yesterday, and the drumbeat of layoffs continues today...
Technology bellwether IBM cut 2,800 people in its sales and software groups. Glass company Corning will ax 3,500 employees after fourth-quarter profit dropped 65%. Texas Instruments, the second-largest U.S. chipmaker, will cut 3,400 jobs, 12% of its workforce.
American Express slashed 7,000 jobs – the largest U.S. credit-card company by purchases announced a 72% quarterly drop in profit. Numbers still met expectations and shares jumped 5%. The most daunting number for Amex was its increase in loan defaults, which rose to 6.7% from 3.4% a year earlier.
Of course, John Paulson is still making gobs of money... Paulson made at least $420 million on his short position in Royal Bank of Scotland – he's largely covered. He's still short British banks Barclays and Lloyds.
AIG's erstwhile liquidation continues, as it raises cash to pay back the U.S. government. AIG is selling its asset-management business, Global Real Estate Fund, with $12.4 billion under management. The fund's advisors are Merrill Lynch and Bank of America. AIG is also selling its Latin American consumer-finance businesses, one of which it bought last year. And several bidders have emerged for AIG's aircraft-leasing business, International Lease Finance Corp. – whose bond Mike Williams has recommended in True Income. Sovereign wealth funds in Singapore, China, and the Middle East have bid, as well as private-equity firms Kohlberg Kravis & Roberts, TPG Capital, and Carlyle Group.
I'm sure there's plenty of value in AIG's many parts, but I just don't know if it's possible to figure it all out. I still view the company as a massive, impenetrable black box... just like all the other giant financial companies.
Ladies and gentlemen, I give you the Trefoil Inflation Indicator. The Trefoil, of course, is the emblem of the Girl Scouts of America. According to a TV news report I saw last night, the cost of producing Girl Scout cookies has risen 30%. Something had to be done, but the Girl Scouts didn't want to scrimp on quality. So this year, you're going to get the same tasty cookies as every other year, and they'll come in the same colorful boxes. But the boxes will be smaller.
The Girl Sco
uts' disclosure on the changes could serve as a model for everyone from used car dealers to corporate America. It's spun in an upbeat way. But it's very specific and, unlike opaque SEC filings, you can actually read and understand the Girl Scouts fact sheet on the changes. The sheet also gives Girl Scouts some advice everyone in the financial industry could benefit from these days: "Always tell the truth."
This may be an easy way to make a quick 10%... Wyeth is currently trading around $44, approximately $4.75 below the current value of Pfizer's offer – which is about $48.75 a share. Pfizer is offering $33 a share in cash and 0.985 Pfizer shares for each Wyeth share. A 10% spread implies a roughly 50% chance the deal will close by year-end.
We wrote it, did you short it?
One sector Chanos is short, the for-profit educators, is still climbing. Two of the biggest players, Apollo Group (APOL) and ITT Educational (ESI), have both soared since April 2008. Investors believe that, as the economy worsens, people will need more education to obtain jobs. But Chanos argues these prospective students will have an increasingly difficult time finding loans for their degrees (these for-profit educators charge as much as an Ivy League school). And as we've laid out before, he doesn't find these degrees all that valuable. – January 23, 2009, S&A Digest
Since this bullet, ITT Educational and Apollo Group are down 7% and 3%, respectively. And if insider selling is any indication, these shares may be heading lower. Apollo Group Chairman John Sperling and his son Peter have sold $71 million in Apollo stock from January 15 to 22. They've also dumped another $89 million in stock under a prior agreement – probably a prudent move considering Apollo's stock is up more than 50% in three months.
New highs: none.
There's lots of bad news out there right now. Tell us what you see here: feedback@stansberryresearch.com.
"I thought, 'Access to Jeff Clark's brain for free? You've got to be kidding me! Of course I'll sign up.' Then reality. I have to subscribe to the Short Report. Oh, well. Back to saving up that fee!" – Paid-up subscriber David Skofstad
Ferris comment: David, you're referring to Jeff Clark's Direct Line, where he makes real-time comments on market action. This alone is well worth the cost of a Short Report subscription. Everyone we've talked to loves it. See for yourself...
I invest small each time (2000-3000 dls) and the returns are small (10-15%) but consistent and I'm happy with that. – A.B.
The blog is priceless. – T.A.
We have many more like these, but you get the idea. In addition to the Direct Line, you get Jeff's explicit and easy-to-follow options trades. These are what will make you really rich. Jeff just closed a gold trade for a 20% gain. And Short Report readers are already up 13% on an oil trade Jeff initiated last week.
Today's market is the kind of trading environment Jeff dreams of. He's producing huge gains for his subscribers almost weekly. If you'd like to learn more about the S&A Short Report, click here... We're currently offering the service at a big discount.
Regards,
Dan Ferris
Medford, Oregon
January 27, 2009