How to catch a 400-pound fish
I'm writing to you today from the Darien jungle in Panama, perhaps one of the most forbidding places in the entire world. Incredibly, they have Internet here now. How I came to be here may interest you. It's a story about how things actually get done in the real world...
In May 2003, I came to the Darien for the first time on the invitation of one of the world's leading experts in networking technologies – David Isenberg. I'd developed a friendship with David thanks to our mutual interest in the role the Internet would play in society and the economy. We headed to Panama to go fishing at the Tropic Star Lodge, by far the best place in the world to land big marlin and sailfish. (In fact, about three months ago, they landed a 1,200-pound black marlin here.) The Tropic Star is perched, quite literally, on the side of a mountain in one of the most inhospitable jungles on the planet.
Perhaps incongruously, the legendary Texas wildcat oilman, Cactus Schroeder, joined us on our adventure. Neither David nor I had ever met Cactus before. Another mutual friend had invited him on the trip. He certainly seemed like an interesting enough guy on paper. During a period of time when nearly every other wildcat driller had gone belly up (1985-2003), Cactus had thrived, personally discovering millions of barrels of oil.
In person, Cactus is as down to earth, modest, and charming as any person I've ever met. We spent three days fishing together, caught 41 sailfish, and generally had one of the best times of our lives together. Not surprisingly, we are still close friends today.
On the trip seven years ago, Cactus told me something peculiar was going on with one of the smaller independent oil and gas companies he had worked with over the years. Suddenly, the company was refusing to sell any partial interests in a new, big natural gas field it was pioneering with its partner, the oil and gas explorer Anadarko. As Cactus explained, that was highly unusual. No matter how good the field, it's always risky for small companies to drill wells. They sell partial interests to offset the risk of a dry hole.
But suddenly, this one had stopped selling partial interests. Cactus said he'd never seen the company do that before, and he thought it meant the company was probably into a huge new discovery. I won't bore you with the rest of the details... but using this information, I was able to recommend one of the first major producers in the Powder River Basin, which has become one of the largest new, alternative sources of natural gas of the last 20 years. The stock Cactus passed along was trading around $5 at the time. It was soon trading near $30.
Ever since that trip, I've been thinking about coming back to Tropic Star and renting out the entire lodge with a handpicked group of successful people from all over the world. And finally, after nearly seven years, I was able to put it all together. Cactus is here. So is Van Simmons, one of the most knowledgeable dealers of rare coins in the world. Frank, who owns one of the world's largest private jet-leasing companies, got a little seasick today, but he's hanging tough. I checked e-mail on my cell phone a minute ago, and David said to me, "Hey, I wrote the software that allows you to do that..." We have probably the world's most successful professional gambler. There's also the owner of one of the largest private health care groups in the United States.
And I'm not the only writer. Probably the most popular author in the U.S. right now is here with us. He's sold more than 50 million books... and that's not to mention all of the movies. Another guy in our group is the CEO of one of the world's most profitable holding companies, with interests in more than 50 different operating companies around the world. The owner of Cuba's only five-star hotel invited me to come to his resort for my 40th birthday party in two years – and told me how to sneak into the country without the U.S. knowing I'd gone.
Speaking of avoiding the rules... Another guy here has (at least) two completely separate identities, has served in the intelligence forces of a major world power, and could probably tell you more than you need to know about how to disappear or become someone completely new.
As you might have figured out by now, the trip was organized through my new global wealth club, The Atlas 400. We now have 50 members – halfway to our first year's goal of 100. Building this club has been a personal dream, and I'm happy with how it is going. Even though we come from different places and we're in different businesses, we all agree on a few basic principles – like independence, self-reliance, and the value of hard work. We are all self-made men. We all understand there's always something more to learn, somewhere new to go, something left to discover.
So far we've traveled together to Germany for Oktoberfest and driving Porsche racecars on the company's private track. We spent a long weekend together in Miami and sat in the front row at the Super Bowl. Now we're reeling in giant marlin at the best fishing lodge in the world. We are interested in more adventures and adding new members. The Atlas 400 is owned by its members and has been organized as a not-for-profit entity. The initiation fee is $25,000. The annual dues are $5,000. Our next shindig is the annual meeting in New York City, June 4 and 5 at the Plaza Hotel and Per Se. If you would like to apply for membership, please click here. All applicants will be interviewed and must be approved by the club's board of directors.
Although a couple of my analysts (whose names will no longer be mentioned...) still seem convinced deflation is on the horizon, I've been adamant since late 2008 that, thanks to the world's paper-backed monetary system, deflation would be impossible. The real problem, I argued, would be the inflation that follows the crisis.
Sure enough, in March 2009, the U.S. announced it would print its way out of trouble. Ever since, stocks have soared. It's hard for stocks not to soar when the government pumps $2 trillion into the economy. Alas, there's no such thing as a free lunch. As the economy heats back up, you can bet your last paper dollar there will be a huge rise in inflation.
Last week brought positive economic news across the board... American companies added 162,000 jobs in March – the most in three years. Heavy equipment maker Caterpillar, one of our favorite economic bellwethers, is among the U.S. companies adding jobs. Larry Summers, the director of OBAMA!'s National Economic Council, told ABC News he sees things getting even better:
We're in a very different place than we were a year ago. A year ago, we were losing 600,000 jobs a month. Now the process of job creation has started. We expect that it will accelerate.
U.S. GDP rose 5.7% in the fourth quarter (better than an expected 4.6%), the fastest pace in six years. Manufacturing in the U.S., China, Japan, and Europe also improved. U.S. manufacturing grew the most since July 2004. Global sentiment indicators also improved. In the stock market, 90% of the S&P 500 is trading above its 50-day moving average. Check out this chart from Bespoke Investment Group.
Industrials are the most overbought sector, with 100% trading above their 50-day moving average. And 97% of the financial sector is above its 50-day MA, while 92% of technology stocks are above the average. Meanwhile, only 75% of energy stocks are above their average.
And what about the inflation I see coming? Well, 10-year Treasury yields bottomed at 2.07% in December 2008. Treasuries now yield 3.86% – a 179-basis-point increase. There's a lot more to come...
New highs: Fairholme Fund (FAIRX), Financial SPDR ETF (XLF), Johnson & Johnson (JNJ), McDonald's (MCD), Kinder Morgan Energy Partners (KMP), Enterprise Partners (EPD), Keyera Facilities (KEY-UN.TO), Altria (MO), Markel (MKL), Longleaf Partners (LLPFX), Carpenter Technology (CRS), MAG Silver (MVG), Jinshan (JIN.TO), Rowan Drilling (RDC), United American Indemnity (INDM).
In the mailbag... no real lambasting. Just whining about the absence of this year's April Fools' Day message. Ah, you can't have it all. Ever been to Tropic Star Lodge? Tell us your fish stories: feedback@stansberryresearch.com.
"I loved your article. It was an excellent explanation of the current situation... I have a minor grievance to your final statement: 'It is truly an irony of humanity that we seem unable to learn and remember even the most obvious and basic truth of economics.' I wouldn't be too quick to judge humanity for Krugman's insanity. It is intellectuals who seem most oblivious to truth. The history of economics is rife with examples of 'trained' economics discredited by nonprofessionals whom merely wrote what they observed. There are millions of economic nonexperts in the U.S. who observe the same things you have discussed and have reached the same conclusions as you. The just don't have Nobel Prizes." – Paid-up subscriber Andrew J. Horn
Porter comment: That's a good point... and an indictment of democracy that many people aspiring to power continue to articulate the idiocy of socialism.
"Porter I rely on you to not just tell us how bad it is out there & protect our wealth. You also MUST release a cracker of an April Fools digest once a year. I was hoping to see one of your sparkling write ups of a cancer curing drug, gold in the ground finding infrared technology, magic ETF that goes up 20% a week etc. Shame. Maybe next year." – Paid-up subscriber Paul
Porter comment: My sincere apologies. I do love crafting the April Fools' Day Digest, but from time to time, my schedule simply won't allow it. This year, I was en route to Panama, and it wasn't feasible.
"My wife and I have been married for 39 years. From day one this lady dragged me kicking and screaming into her worldview on debt and savings. At first, it drove me nuts! Where was the fun in stacking money into our savings account, and paying extra on our mortgage while our friends were buying new cars and dining out twice a week? We had more than a few shouting matches over it, I'll tell you. When we paid off our first mortgage in 7 years, and had money set aside, it stopped feeling like purgatory. I actually began to enjoy finding the best deal I could in a used car, used tools, cheap eats, cheap thrills, etc. As the years rolled on, and the bank account grew, I became a convert. Now, we're looking at retirement, are in good shape, and with the help of Stansberry and Associates, and your pubs I subscribe to (I'm a PW Alliance member) we're doing better than ever; everything we own is paid for. My thanks to all of you guys for your guidance on position sizing, trailing stops, suggested stocks, bonds, etc., and the heartfelt expressions of concern for the state of our nation and economy. Keep up the good work, and give 'em hell." – Paid-up subscriber Raoul Simon
Porter comment: It sounds like you've learned the lessons Dan wrote about in Thursday's Digest. His piece was one of the most insightful things he's ever written. If you missed it, check it out. And Dan, thanks so much for being part of my team. You're a national treasure.
Regards,
Porter Stansberry and Sean Goldsmith
Pinas Bay, Panama
April 5, 2010