How to Make a Fortune as $300 Billion in Corporate Debt Explodes
The 'Big Trade'... How to make a fortune as $300 billion in corporate debt explodes... A synchronized, global credit collapse... Let's meet in London November 5...
Three weeks ago, I (Porter) told you a little about what I believe is the biggest and most important opportunity I've ever seen in my entire 20-year career.
If you haven't noticed, a historic mania has developed in the world's bond markets. Central banks have pushed so much new money into bonds (in an effort to manipulate interest rates lower) that corporate bonds have begun trading with negative yields, meaning that corporations are now being paid to borrow.
This, as you might realize, makes absolutely no sense. Sooner or later, it's going to cause catastrophic problems with the world economy – perhaps even the collapse of the entire financial system.
I hope you'll print out today's Digest, read it carefully, and continue to monitor a few of the data points I'll detail below. What I've written here is a guide to understanding how this incredible global mania will end... and when.
I'm also including a detailed description of what I'm calling the "Big Trade." It's a relatively simple way individual investors can create synthetic credit default swaps (CDS) on a few dozen of the world's weakest corporate credits. Remember, CDS were the instruments that a few investors used to make billions of dollars when the mortgage bubble burst almost 10 years ago. And I think we'll soon have another chance at those types of profits.
This morning, the European banking system moved one step closer to the brink...
One of Europe's largest banks, Deutsche Bank, is teetering on disaster... And German Chancellor Angela Merkel has said the country won't provide a bailout. Meanwhile, Deutsche's CEO John Cryan is blaming "speculators" – not shoddy lending and a stagnant economy – for the bank's woes. He's trying to reassure the bank's 100,000 employees that Deutsche remains strong, despite its clients rushing to withdraw funds.
Deutsche has roughly $2 trillion in assets. That's almost 11% of U.S. GDP. By this metric, that's slightly larger than U.S. banks Wells Fargo, which has $1.9 trillion in assets, and Citigroup, which has $1.8 trillion in assets.
But here's the thing... Deutsche has a tangible common equity ratio of just 2.9%. That's the bank's tangible equity divided by its tangible assets. What this means is the bank can sustain losses of only 2.9% before its equity capital is wiped out. By comparison, Wells Fargo sits at 7.7%, while Citigroup shows 10.3%.
According to the International Monetary Fund, Deutsche is the riskiest financial institution in the world... the "most important net contributor to [global] systemic risks." But the problems don't stop with Deutsche. The likelihood of a "Lehman moment" in Europe gets closer each day.
The European Central Bank estimates that European banks hold bad loans totaling nearly 1 trillion euros – that's the equivalent of 9% of euro-area gross domestic product (GDP). Italy's Banca Monte dei Paschi di Siena, the oldest bank in the world, needs to raise 5 billion euros of equity (on top of the 8 billion it has raised in the past few years) and dump 28 billion euros of bad debt. The bank is also considering encouraging its bondholders to swap debt for equity – essentially admitting default. Its shares are down 85% this year. Italy's UniCredit is also doomed... As are banks like Banco Popular Espanol SA.
We could soon see the equivalent of a 2008 crisis in Europe. Rest assured the financial problems coming to roost abroad will spark a global selloff in equities. Nothing will be spared (save gold and silver). You need to be prepared. Luckily, we've seen how this all plays out before. And we made handsome profits...
The last time I saw the markets with this kind of clarity was June 2008.
That's when I penned what's perhaps the most famous issue of my newsletter (or any newsletter). The headline gave it all away: "Fannie Mae and Freddie Mac Are Going to Zero."
In that letter, I explained why the world's two most important mortgage banks (Fannie and Freddie) were certain to fail. I showed why rising mortgage default rates would also cause at least Lehman Brothers, Citigroup, and Merrill Lynch to follow suit. And I warned that virtually the rest of the entire global financial system could follow. I didn't mince words...
Fannie Mae and Freddie Mac, the two largest and most leveraged owners of U.S. mortgages, are sure to go bankrupt in the next 12 months...
I recommend you sell an equal amount of each stock short.
I have so much confidence in this trade I recommend you use a 25% stop loss, not a trailing stop loss, as the position could be volatile for the remainder of this year. And unlike most short sell positions that I recommend you buy to cover after you're up 50%, I recommend you hold these positions until the shares literally no longer trade.
About a month after I published my report, Hank Paulson, the U.S. Treasury Secretary, officially denied that Fannie and Freddie were in peril, claiming both firms were "adequately capitalized." Rarely has a bigger lie ever been told – Paulson's was a $5 trillion fib. The entire financial system imploded about 90 days later, wiping out even AAA-rated collateral, not to mention wiping out Fannie and Freddie. Remember: The government has always lied about every "financial crisis," including what's happening in Europe right now. And it'll certainly lie about the next one, too.
Nine months after I warned Fannie and Freddie would fail, not a single leveraged U.S. financial institution would have survived without the explicit backing of the federal government. Trillions of dollars were ginned up in an alphabet soup of bailout plans. In about a year, the world had turned upside down, from the supreme confidence of the stock market's highs in November 2007 to the biggest panic since at least the Great Depression.
It will happen again. Soon.
As I'll detail below, we now have less than 12 months until rising default rates on corporate debt, along with a sharply slowing global economy, cause a new wave of panic in the financial markets. I've been warning about these trends since they first appeared in mid-2014. Longtime readers will be familiar with the themes and data I summarize below.
What's new is that these trends are now accelerating and causing steep declines in earnings, production, and employment. I'll get to these details, too. But first...
I want to talk about what you can do to position yourself to profit from these trends safely. I'm not talking about "betting the farm" that you can nail the timing of the next big market turn. I'm only talking about setting up a portion of your portfolio so that when the huge wave of corporate credit defaults hits, your portfolio will be well-protected – insured, if you will – against losses.
The real opportunity you have today isn't just the clear trends that have emerged or the ridiculously large number of vastly overleveraged corporations. The real advantage we have today is that insurance against corporate defaults is cheaper than it has ever been before. The same trends that created the bubble in corporate bonds have also warped the market for equity options, driving the Volatility Index ("VIX") – which reflects the price of options – to near all-time lows.
Even if I had been clever enough to recommend puts on Fannie and Freddie in June 2008, establishing that kind of position would have been extremely expensive. Following the Bear Stearns bailout of March 2008, the VIX remained elevated throughout the year. And by late 2008, the VIX was trading at historic highs above 80. (Today the VIX is around 12. The all-time low is around 10.)
This is very important to understand... our opportunity in my new "Big Trade" only exists because, so far, the obvious risks in the global bond market aren't being priced into the options market.
This dichotomy – a huge bubble in bonds and historically low options prices creates our opportunity. It's an even bigger opportunity than the one I saw in 2008.
Back in June 2008, the $5 trillion U.S. mortgage market blew up. Losses on mortgages, which reached almost a 10% annual default rate, sent shrapnel across the world's financial system and nearly destroyed every leveraged financial-services firm in the developed world. But today, we face a much, much bigger problem.
U.S. corporate bonds outstanding are currently worth almost $8 trillion, roughly 45% of U.S. gross domestic product (GDP). These obligations include nearly $2 trillion worth of junk bonds. Annual default rates of around 15% are typical for junk bonds at the peak of a credit-default cycle. (More on this later.)
This cycle is likely to be far worse than average. Thanks to the government's 2008/2009 intervention, we haven't gone through a legitimate market-clearing cycle since 2002. Bond-market veterans are expecting something around $1.5 trillion in defaults through 2021 – or about three times more in defaults than we saw in the mortgage crisis.
To see the coming end game clearly, you have to think about actions taken by the world's central banks. Year after year, since the early 1980s, central banks have made capital cheaper and cheaper. That has sent the yield on benchmark debt (like the 10-year U.S. Treasury) to all time-lows. In many places around the world (Japan and Europe, for instance), capital isn't merely cheap – it's free or even paying a negative yield. That's a world turned upside down.
But what's the end game? How will all of these manipulations become unglued? How will this vast global shell game finally unravel?
The inevitable outcome of these policies is unprecedented amounts of global overcapacity. Why?
Well, just follow the money.
When credit is too cheap (or free... or better than free), vast amounts of new money will be borrowed. Look at the huge amounts of capital that have been invested over the last decade in discovering new oil resources – about $700 billion annually since 2006, or more than 10 times more than has ever been invested in any previous 10-year period. Can all of these projects succeed? Of course not. It was only a matter of time until increases to production and additional capacity caused prices to collapse and weaker producers to fail.
The same thing is now taking place across vast portions of the global economy – not just oil and gas. Super cheap (and even free) capital has caused massive distortions in capital spending around the world. Economists from the so-called Austrian school call these "malinvestments." They're made with "funny money," not legitimate savings. These artificial booms don't produce lasting prosperity. They're merely a kind of inflation... and they're always followed by a sharp collapse.
That's what we're about to see. It's obvious that far too many capital projects have been started. Too much risk was taken in industries and countries all around the world. Now we see profit margins and earnings falling, because there's far too much supply. We see defaults rising as weaker producers fail. And we see production stop growing and begin to decline. Employment will decline next... and then defaults will really begin to grow.
So... do we actually see these trends playing out around us? Yes, as I've been documenting for months in the Digest. Here's a review...
Let's start with commodity prices.
Look at the world's commodity markets – oil, steel, shipping, agriculture, minerals, materials, etc. The prices of these commodities have been falling steadily for years.
To see the impact of the overcapacity across the entire commodity sector, study the Baltic Dry Index, which measures the price of shipping bulk commodities. It's a great indicator of the basic supply-and-demand equilibrium for the entire commodity complex. The index hit an all-time low earlier this year and has only rebounded slightly because of dozens of bankruptcies among shipping firms and the resulting scrapping of ships. (Around 1,000 ships have been scrapped this year, about 7% of global capacity.) But there is likely more pain ahead... French bank Credit Agricole just warned this morning that it is preparing to set aside extra loss provisions on its $15 billion shipping portfolio this year.
Another obvious sign: The global oil cartel OPEC has just agreed to cut oil production, but the amount of oil being produced at America's top fields continues to grow. America is now producing so much oil that the OPEC cuts will only result in about a 1% decrease in global supply.
But those are just the general signs of global overcapacity. There's a growing body of evidence the U.S. economy is heading into a recession soon. We've written about these signs repeatedly over the last several months...
| • | The longest-running and most troubling sign is the ongoing declines in U.S. industrial production. Declines in industrial production are among the most important and longest-running leading indicators of a recession. In August, U.S. industrial production had officially fallen by 1.1% for the year – it was the 12th consecutive month of contraction. In the last 100 years, we've never had a 12-month streak of continually declining industrial production that wasn't followed by a recession. |
| Ironically, back in April, the Wall Street Journal wrote that the declines in industrial production weren't a problem for the economy because "This time should be different." If those words don't set off your alarm bells, nothing will. | |
| (The newspaper's theory was that the U.S. economy is now driven by consumers, not producers. Yes, really. And guess what has been powering consumers? Credit, of course. But how long will that last? Can we truly consume our way to prosperity?) |
| • | The U.S. transportation sector has been in decline since 2014, based on the Dow Jones Transportation Average. Transportation stocks have been a leading economic indicator for more than 100 years, as transportation reflects the growth (or decline) in orders for consumer and durable goods. |
| • | Based on forecast earnings, the S&P 500 will soon report its sixth consecutive quarterly decline in earnings. In August, the second-quarter reporting was completed, showing that the S&P 500 had seen five consecutive earnings declines for the first time since 2008/2009. Earnings are declining because profit margins have declined for eight quarters in a row, beginning in the second quarter of 2014. |
| With the index trading at 25 times last year's earnings, a sustained decline in earnings will eventually trigger a rout in stock prices. | |
| Excluding the massive tech-stock bubble in 2000, U.S. stocks have never been this expensive relative to earnings. And if you include corporate debt in these calculations (if you compare earnings with the entire enterprise value, not just the market cap), then you'll see that U.S. stocks have never before been this expensive in history. Trust me when I tell you... this bubble won't end any differently from the others. It isn't different this time. It never is. |
| • | Of greatest concern to me is the overall level of corporate debt. Corporate debt in the U.S. has consistently topped out at a little less than 45% of GDP. Historically, the debt cycle has turned at that point. Defaults rise, issuance declines, and a bear market begins. Today, that level sits at 45.4%. |
| This summer, the default rate on U.S. junk bonds spiked up to 5.1% according to credit-ratings agency Moody's, and is expected to hit 6.4% before the end of the year. Historically, default rates above 5% have signaled the beginning of a new credit-default cycle. That's likely to be especially true this time, given that the default rate hit record lows in 2014 and has been steadily rising since. |
| • | Finally, as I mentioned earlier, there's an ongoing European banking crisis that nobody seems to want to talk about. Shares of Deutsche Bank are now down more than 66% over the past two years. Italy's largest bank, UniCredit, is down just as much. Same with the Royal Bank of Scotland, a leading British bank. Globally, it seems very unlikely that this credit cycle can continue to expand in the face of a serious banking crisis. Likewise, it seems unlikely to me that U.S. banks with lots of global exposure won't eventually face the same headwinds. |
Even if you haven't really understood everything I've written above, I know you'll understand this...
Governments around the world have brewed up the biggest economic hurricane in the history of capitalism. They've printed so much money that they've warped the entire global economy, financing absurd surpluses in markets all around the world. That is crushing profit margins, causing default rates to rise and production to fall.
Look at China's debt expansion. Total private debt grew from $10 trillion to $30 trillion in just the last five years. And no surprise, you'll find tens of thousands of empty apartment buildings all over China. You'll also find huge stockpiles of raw materials.
Look at the United States' $80 billion auto bailout. You'll find record car sales, but falling earnings for the major carmakers. You'll also find a startup (Tesla) that has never made any money and now has total debts of almost $7 billion. And investors believe the company is worth $30 billion!
Over the last several years, governments and central banks around the world have created a bubble that's bigger and more dangerous than any other in the history of capitalism. It has grown so large that investors have come to believe that bonds should have a negative yield... that falling production doesn't matter... and that companies that can't even repay their debts should be worth tens of billions.
Soon... very soon... the enormous consequences of this huge, global bubble are going to be recognized. The storm is on its way. We know it because rising default rates will cause bond investors to panic. Bond prices, which are now at all-time highs, will plummet. That will cause the cost of capital to soar, sending equity prices crashing. The die is cast. But incredibly, despite the inevitable nature of this coming default cycle, "hurricane insurance" has virtually never been cheaper!
Let me give you one example of the kind of trade you can still make today – either as a hedge if you're still fully invested, or as a speculation to make 20 times your money (or more) over the next 24 months.
Cheniere Energy is a fiction of the credit bubble. It is a financial experiment, wrapped in the veneer of an energy company.
The company is the creation of a clever stock promoter (Charif Souki). He rallied gullible investors who believed in the "Peak Oil" theory – that the world was running out of oil and production was in permanent decline. He convinced them to put up billions to build a new liquefied natural gas ("LNG") import plant on the Gulf Coast. (The previous five LNG plants that had been built in America all had gone bankrupt.)
Sure, there's no plausible economic reason to import LNG to North America, which has immense natural gas resources. The business model was akin to bringing sand to the beach. Nevertheless, in the madness of the Peak Oil days of the mid-2000s, investors stupidly fell for the idea. (For the record, we warned about the company at the time. See the June 2006 issue of my newsletter, titled "Madness.")
Cheniere soon collapsed under the weight of its debts and its absurd business model. But then... cheap capital came to the rescue. Souki figured he could simply borrow enough money to turn the whole project around. Cheniere wouldn't import natural gas, it would export it. It sounds like a joke, but that's exactly what happened.
Switching business models after your build-out is expensive. In total, the company has accumulated almost $19 billion worth of debts over its lifetime. Sadly, it has produced zero profits. And the future doesn't seem bright, either.
You see, the entire economic rationale for exporting LNG (which has to be chilled to negative 274 degrees Fahrenheit) was that it was illegal to export crude oil. Thus, LNG was thought to be one of the few legal ways to export America's soaring energy production.
Good idea, in theory. Trouble is, Congress changed the law. Now you can simply pump crude oil onto a boat, which is far cheaper than chilling natural gas to negative 274 degrees.
So... who is going to pay for all of Cheniere's LNG and all of its debt?
Nobody will.
Just as sure as you're reading this Digest, Cheniere will declare bankruptcy during the next credit-default cycle, wiping out its equity holders and probably 80% or more of its debt. That's why Wall Street's best short-seller, Jim Chanos, has called Cheniere one of his best short ideas... or as he puts it, "financial engineering gone crazy."
And yet, today Cheniere still has a $44 share price and an equity value of $10 billion.
More incredibly, for only $0.85 you can buy a put option with a $20 strike price that's good through January 2018.
That means, for $0.85, you can buy the right to sell Cheniere for $20 any time before January 2018.
If Cheniere goes to zero before that point, you can still sell your shares for $20, earning $20 for $0.85 invested, a return of 23 times your capital.
And even if you're only half-right, you'll walk away with a profit. In other words, even if Cheniere doesn't actually default before then (and it might not), you'll still do very well.
My bet is that equity holders are going to wake up at some point in the next six months or so and realize that they're never going to see a penny of dividends, and that this company is just a debt bomb waiting to explode. The share price will one day take a huge dive to less than $10. And you'll end up making something between 10 and 15 times your money on that day. I'd say there's a 90% chance of that happening at some point in the next 12 months.
That's what happens during a credit-default cycle. Everyone wakes up and realizes how stupid they're being. Or as investing legend Warren Buffett says, "Only when the tide goes out do you discover who's been swimming naked."
How should you use this kind of information?
Let's say you have a $1 million portfolio. And let's say you're not stupid. You can see what's coming. You've raised some cash (20%). You've bought some gold and other hedges (20%). But you still have something like 30% in stocks and 30% in bonds – your core, long-term holdings. You're going to be fine as this whole thing explodes because you're diversified and you've raised cash.
But why not turn this situation into a windfall?
Let's say you take half of your cash (10% of your portfolio) and you buy the kind of insurance I'm suggesting – long-term put options on companies that are headed for bankruptcy, like Cheniere. To increase your odds of success, you don't buy puts on just one company. You buy 10 different positions. And you diversify across time, too. You buy a little bit of insurance every month for the next year. Any time the VIX hits new lows, you can buy puts cheaply.
And let's estimate that you only end up doing half as well as I describe above. Instead of making 10- or 15-times returns, you "only" make five-times returns. Investing just 10% of your portfolio, you'll have generated $500,000 in profits, enough to equal 50% of your entire portfolio.
Another way to look at this approach is... even if you lose 100% of your money on nine out of 10 of those put contracts, you'll still make a lot of money on the 10th. Making five times your money with this strategy is the least I expect is possible. I think making 10 or 15 times your money isn't unlikely. And I'm sure that we'll make 20 times on at least one or two of these trades.
Sadly for our country, it will not be hard to execute this trading strategy over the next several years.
To help you get started, we've created our own index of deeply indebted stocks that all have serious flaws with their business models. If you're going to shoot fish in a barrel, you have to pick the fish first.
As you may know, the best index of high-quality, blue-chip stocks is the Dow Jones Industrial Average. It has 30 component stocks.
We're calling our group of debt-financed losers "The Dirty Thirty." You can think of them as the polar opposite of blue-chip investments. These are more like giant toilet bowls of vastly inflated garbage.
Just wait until you see these losers...
On average, companies in The Dirty Thirty have market capitalizations of $6 billion. These are big companies. And they're carrying huge debts. On average, they're carrying more than $10 billion worth of debt.
None of these companies, in our opinion, has any reasonable chance of repaying its debts... or refinancing them. Virtually all of these companies have negative operating margins. On average, they lost $100 million on their operations last year, in terms of free cash flow. And as a group, they lost almost $3 billion in cash last year.
Meanwhile, these companies are trying to support more than $300 billion in debt.
That's more money than Fannie Mae and Freddie Mac lost combined on their mortgage investments during the last crisis. And that's just the debt we expect will go bad from the 30 worst corporate borrowers in the U.S. Trust me, what's coming over the next three to five years is going to be worse – a lot worse – than the mortgage crisis.
Here's my favorite stat about The Dirty Thirty, America's leading corporate deadbeats. As a group, over the last 10 years, they've lost $40 billion in cash. That's the net free cash flow from this group of companies over the past 10 years. Now, you can argue if you want that much of these negative cash flows were capital investments. And I'm sure that's true. But the point of making capital investments is to build profitable businesses. And over the last decade, that hasn't happened.
These firms have taken billions and billions of the credit made available by the central bank... and they've squandered it. As these debts come due, and it simply won't be possible to extend the charade. Not because interest rates are necessarily going to increase, but because investors can't finance companies that lose this much capital year after year.
Using this universe of the worst corporate credits, all we have to do is drill down into the individual names to figure out who offers us the best risk-to-reward setup in terms of put-option prices, which will change from month to month. We can also dig into the debt structures of each individual company to figure out when critical parts of its capital structure are going to mature.
In short, not only will we know who is going to go bankrupt... we'll know when. And we'll know which individual options contract offers us the most upside.
As you may know, at the heart of our distressed-debt research service (Stansberry's Credit Opportunities) is a huge analytical engine we built to develop our own proprietary credit ratings. Most of the time, our ratings (on around 40,000 separate bond issues) match the major credit-rating agencies'.
But not always.
Where we find discrepancies, there are tremendous opportunities for investors – both on the long and the short side.
High-yielding bonds trading at a big discount to par can be outstanding investments, as long as they don't default. (And so far, our investments in this space have been outstanding, with annualized average returns of more than 40% and zero losses.)
We've used the same database to find The Dirty Thirty.
On average, these 30 companies have a Stansberry Research credit rating of "5" – which is deeply distressed, and one notch above "toxic." Just think about that for a minute... more than $300 billion of corporate debt that is trading right now is only one notch above "toxic" – and that's only the debt of the 30 worst issuers.
As the coming credit-default cycle builds, I have no doubt that at least 90% of these firms will see their credit ratings downgraded by the major ratings agencies, a move that will cause their share prices to plummet.
Two important words of warning...
One, I wouldn't ever recommend buying expensive options. During the crucible of the last crisis in the fall of 2008, I began recommending selling options on high-quality companies because the prices on put options had gone up so much. The VIX soared past 80 at times. These trades were highly profitable – on average, we made 50% measured against capital at risk on each put we sold.
Therefore, for my "Big Trade" to work, we can only buy puts when they're cheap.
And as the economic data get worse and worse and the default rate on corporate bonds increases, puts will become much more expensive. You can't wait until these problems are obvious to other investors. You have to build these positions now, before it's too expensive to buy the insurance you need.
Secondly, a lot of big investors are quietly getting positioned in just the way I've outlined here. The only way for really big investors to position themselves for this "Big Trade" is to simply bet against the entire pool of high-yield corporate debt, as there's just not enough liquidity to bet billions against individual names.
If you look at the short-interest bets against the biggest high-yield exchange-traded fund, the iShares iBoxx High Yield Corporate Bond Fund (HYG), you'll see that it's reaching record proportions. In fact, the U.S. Securities and Exchange Commission rules essentially prevent any additional net short-selling of these securities...
Just as a handful of major investors made billions and billions in the last Big Trade (shorting mortgage securities), a handful of hedge funds and big investors will make a killing as the corporate debt mania blows up.
I'd like to help you be one of them.
So, in November I'm launching a new research service called Stansberry's Big Trade to track The Dirty Thirty.
We will use the low cost of put options to make huge, 10- to 20-times gains, as the corporate-default cycle develops, and hundreds of companies default on their debts, wiping out their equity investors.
You should think of this service as the "flip side" of our work in Stansberry's Credit Opportunities. We're already analyzing 40,000 corporate bonds every month. Rather than just looking for high-yielding names that we're confident won't default, we can easily flip our analysis upside down and find bonds we're certain will default. When those names have big equity values (and cheap put options), we'll make our trades.
This isn't just the best way for you to hedge your portfolio. It's the best opportunity for huge speculative gains I've ever seen in my career.
If this sounds like a good idea to you, please sign up here to learn more about the webinar we'll host in November to share all of our initial research. The webinar will be completely free, and you'll be able to learn a lot about how to find and execute these kinds of trades yourself.
Or if you're already certain you want our research, you can, of course, simply subscribe right now.
If you do so, we'll send you The Dirty Thirty next Friday. And as we build out our research on these names, we'll continue to send you new research each week until we officially launch in November.
We want to make sure that our research about these companies and the specific put recommendations we make reach subscribers who are experienced and sophisticated enough to use our work correctly. And we also want to make sure that our subscribers will continue to receive our research throughout the entire coming credit-default cycle. So we're charging a premium subscription price for Stansberry's Big Trade... $5,000. However, each subscription will last through 2021. There's nothing more to buy and you won't have to pay any renewal fees.
(Please understand... because you're getting so much of our research up front – all 30 names – we cannot offer any refunds on this new product. Do not subscribe to Stansberry's Big Trade if you're not completely confident in our ability to deliver high-quality, actionable research. If you have any questions or concerns, please simply sign up for the FREE webinar to learn more.)
To sign up for the free webinar, click here. Or to order now, please click here.
New 52-week highs (as of 9/29/16): BlackRock Floating Rate Income Strategies Fund (FRA) and Nuveen Floating Rate Income Opportunity Fund (JRO).
What do you make of my "Big Trade"? I can't wait to hear from you. Send me a note to feedback@stansberryresearch.com.
Regards,
Porter Stansberry
Baltimore, Maryland
September 30, 2016
P.S. From time to time, we sit down with small groups of subscribers. This fall (November 4-5), we're hosting a unique gathering of subscribers in London. We're organizing a meeting at the iconic Claridge's hotel in Mayfair. We've gotten together a group of tickets to a legendary football match – Chelsea versus Everton. If you're interested in being a part of this small group (we only have room for about a dozen people), please reach out to my colleague Jamison Miller here.
The cost of the weekend is $5,000, which includes football tickets, transfers, and a VIP dinner with Erez Kalir, CEO of Stansberry Asset Management. I'll be there too, of course. We'd love for you to join us.
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Solicitor Compensation: Stansberry Research will be compensated for its solicitation services by SAM.
Solicitor Compensation Arrangement Terms: For its solicitation services, Stansberry Research will be compensated by SAM as set forth in the Agreement. This compensation is initially a flat annual dollar amount and may be amended in the future by mutual agreement of Stansberry Research and SAM.
Additional Disclosure: On April 10, 2003, the SEC filed a civil complaint against Pirate Investor LLC (the predecessor of Stansberry Research), its founder, Porter Stansberry (together with Pirate Investor LLC, the "Stansberry Parties"), and others, and amended its complaint on November 14, 2003. In its amended complaint, the SEC alleged that the Stansberry Parties violated the antifraud provisions of the federal securities laws by offering to sell information obtained from a senior executive of an unnamed company listed on the New York Stock Exchange. The complaint also alleged that the information was false. The SEC alleged that by engaging in such conduct, the Stansberry Parties violated Section 10(b) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and Rule 10b-5 thereunder. On October 2, 2007, the United States District Court for the District of Maryland entered a permanent injunction (the "Injunction") permanently enjoining and restraining the Stansberry Parties from future violations of Exchange Act Section 10(b) and Rule 10b-5 thereunder, and imposed civil penalties including disgorgement and fines.
As a result of the Injunction, among other things, Advisers Act Rule 206(4)-3 generally precludes Mr. Stansberry and Stansberry Research from receiving cash solicitation fees for the solicitation of advisory clients from investment advisers registered or required to be registered under the Advisers Act. However, on September 30, 2015, the SEC staff issued a "No Action Letter" providing relief to Mr. Stansberry and Stansberry Research that, subject to certain undertakings, enables Mr. Stansberry and Stansberry Research to receive cash solicitation fees from registered investment advisers without the threat of regulatory enforcement action.
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