Big news! We made an offer on our "McMansion"-style dream house… and the sellers accepted. We're under contract and hoping to move in the first week of June.
It happened so fast. We went to our realtor's office one day last week to sign our acceptance of the offer on our current home. An hour later, we were touring a beautiful home. My wife and I instantly agreed it was "the one." We wrote an offer the next day, and it was accepted early the following morning. It still looks like we'll easily get a 30-year fixed-rate mortgage for no more than 5%. A whole new chapter of our lives is unfolding before us. I've told some of the wealthiest, smartest investors I know about this move. They all nod their heads and ask, "And you're borrowing as much as you can at that rate, right?" I say yes, and they smile and say, "Good move, Dan. Congratulations."
Porter kicked off our Spring Editors Conference in St. Michaels, Maryland, this morning. He warned everyone about inflation. And he gave his favorite way to protect yourself from inflation... Buy gold, silver, copper, and oil. Hold them outside the U.S. The only "pure play" for copper is in the futures market. But that's difficult to trade. So Porter recommends buying Freeport-McMoRan. For silver and gold, own bullion and store it in a self-storage facility. When the government comes looking for your precious metals, it'll look in the banks... Not a locked shed off the interstate.
One attendee asked Porter if he liked shorting currencies. He doesn't. If you're shorting the euro, you're long the dollar (or some other currency). The only way to truly short every currency is to own gold. Porter said another way to play inflation is to buy highly leveraged companies. As inflation takes hold, the value of their debts will vanish.
After Porter and a couple other speakers this morning, I presented my No. 1 Extreme Value stock pick. The presentation was well received. Everyone in the audience – including a few of the richest, most sophisticated mining investors around – agreed the stock was an excellent, low-risk opportunity with a really good chance of making many times your money over the next few years. The stock got above our maximum buy price for a little while... but now it's below it, and I'm strongly recommending it again. If you want to know which stock it is, you can access Extreme Value by clicking here.
We wrote it, did you short it?
Gannett is a rare treasure for the short seller: It's the leading business in an undeniably obsolete business, it holds a tremendous amount of debt, and on its balance sheet you will find an array of worthless assets purchased at all-time high prices. In short, there's no way this business can succeed and there are dozens of ways it can fail. – Porter Stansberry, PSIA, March 2010
The latest figures show average weekday newspaper circulation fell 8.7% in the six months that ended March 31. Sunday circulation fell 6.5%. The numbers are bad, but still an improvement from the period from April through September of last year. Weekday circulation dropped 10.6%, and Sunday circulation fell 7.5%. USAToday, Gannett's cornerstone paper, lost 13.6% of its circulation and averaged 1.83 million.
Small-cap stocks are the most expensive compared to large caps since 1982. From Bloomberg:
At the end of the first quarter, small stocks sold for an average price-to-earnings multiple of 18.6 compared with 15.7 for large stocks. The 18 percent gap between the two is the widest since Leuthold [Group LLC] began gathering the data in December 1982, Floyd said. In 2000, small stocks sold at about a 40 percent discount to large stocks, he said.
Leuthold defines large stocks as those with a market cap of more than $9 billion. Small stocks are between $300 million and $1.4 billion. As I wrote in my February 2010 issue of Extreme Value, famed value investor Jeremy Grantham of Grantham, Mayo, Van Otterloo is also buying in the blue-chip sector. The largest holdings in his GMO Quality Fund include Microsoft and Johnson & Johnson. "Quality stocks are pretty damn cheap right now," said Ben Inker, director of asset allocation at GMO. Inker and Grantham are buying blue-chips because they'll withstand a downturn better... "If Greece blows up, will that drive Coke into bankruptcy?" he asked.
Most investors don't think big blue-chip companies are sexy enough. I understand this viewpoint, but I think it's a big mistake. I recommended Intel in Extreme Value about a year ago. It's up 60%. I recommended TJX Companies (which runs discount retailer T.J. Maxx) in late 2008. It's up more than 100% since. We sold earlier, so we didn't get the full 100% out of it, but we made more than 50% in a big hurry, taking very little risk. The point remains: If you buy blue chips when they're cheap, they can really surprise you with the amount of money they make in a short time. You take far less risk with big, cheap blue chips than with 99.99% of all other stocks, no matter how cheap they get. I've been recommending a core portfolio of blue-chip stocks, which I call World Dominators, because they're all the No. 1 companies in their industries. Intel is one of them. It's 80% of the global microprocessor market.
As I'm typing this, S&A's in-house geologist Matt Badiali is spelling out his latest oil investing idea. Matt's incredibly knowledgeable about the oil and gas business. He's telling us how big oil reservoirs form in the Earth's crust, and how we've developed the technology in the last 10 years to tap the source of those big reservoirs. It's like there's this giant oil spigot underground, gushing oil, filling up reservoirs. But instead of buying the reservoir, Matt knows how to help investors buy the underground oil spigot. It looks like readers of Matt's Resource Report are in for a compelling, profitable idea. To get access, click here.
New highs: Washington REIT (WRE), WisdomTree Japan (DFJ), ConocoPhillips (COP), San Juan Basin (SJT), Kinder Morgan Energy Partners (KMP), Enterprise Partners (EPD), Keyera Facilities (KEY-UN.TO), St. Joe Company (JOE), Akamai (AKAM), Brady Corp. (BRC), DirecTV (DTV), Northern Dynasty (NAK), Silver Wheaton (SLW), Jinshan (JIN.TO), Westmoreland Coal (WLB).
In the mailbag, one subscriber recalls her father teaching her about investing... send your notes to feedback@stansberryresearch.com.
"Just wanted to pass along my condolences for the passing of your father. I enjoyed reading the autobiography of your father and learning of his interesting life's accomplishments. I'm sure you are missing him immensely.
"I also recently lost my father. He was my mentor in the world of investing. He was a Lifetime Member to Sjuggerud Confidential and I have fond memories when he first took me to the Investment U conference in Delray Beach and decided to invest in your newsletter as a Lifetime member. His membership passed on to me, and I now enjoy reading True Wealth and the other Stansberry & Associates newsletters. I hope I can find the time to be as devoted a reader and investor as my father and enjoy the financial success and freedom that I know comes in following your investment advice.
"I look forward to your future issues and perhaps will meet you again at a future conference or event." – Paid-up subscriber Ellen Black
Ferris comment: Everyone here at S&A sends you our condolences. Sounds like you're very lucky to have had him in your life.
"I am sure that all of your readers would like to know what stop-loss software you use or would recommend." – Paid-up subscriber Jim Dunn
Ferris comment: Steve Sjuggerud likes www.tradestops.com. A longtime True Wealth subscriber developed it.
Regards,
Dan Ferris and Sean Goldsmith
St. Michaels, Maryland
April 27, 2010How we won our dream house... Four 'must-buy' commodities... The No. 1 Extreme Value stock... More worthless paper... Big blue-chip stocks, big money... Matt's next big oil play...