I went to a gun show on Sunday and ran into a friend, who introduced me to a friend of his, an independently wealthy gun collector and big game hunter. We walked up and down the aisles and spotted a .50 caliber revolver, a mammoth-looking handgun. I chuckled and said, "Why in the world would anyone need that?"
Without skipping a beat, my new acquaintance, Paul, spoke up in a quiet, deadpan voice and said, "I know a guy who had a leopard on top of him in Africa. He pulled out a .357 and fired six shots into it, one of which finally hit it in the spine. If he'd had the '500' [as the .50 caliber handgun is called], he could have done the job with one or two shots." In a bear attack, too, the .50 is a necessary tool for self-defense, he said. (My alternative solution to the bear/leopard problem, "Stay away from bears and leopards," wasn't well received.)
The two schooled me a bit on various handguns. My friend Tim showed me a handgun that fires a .410 gauge shotgun shell and has the words "Public Defender" printed on it. He said, "If you've got an honest-to-God armed intruder in front of you, you're crapping your pants, and your aim might not be so great. This little gun will stop him cold dead." No pun intended. In fact, no pun at all.
After the show, I went to two local stores to try to buy some ammo. I was looking for .22s, .38s, and .357s. They had plenty of .22s and a few .38s (for about $15/box!), but no .357s anywhere in town. Customers stake out the store and buy them up as soon as they come in. One salesman told me ammunition makers are operating at full capacity, running three eight-hour shifts, making millions of shells a day, and they still can't keep up with demand.
The ammo shortage story is as old as Obama's presidency, but I hadn't experienced it firsthand before because I don't own a gun (yet). My friend said he'd take me shooting if I bought the ammo.
As the insurance provided by guns became more popular over the past year, more traditional forms of life insurance have struggled. Financial services trade group Limra International reports U.S. life insurance sales to individuals fell 20% in the second quarter – leading to the biggest six-month decline since 1942.
As it goes for life insurers, so it goes (and much worse!) for the Federal Deposit Insurance Corporation, the government agency that has guaranteed your bank deposits up to $250,000.
Echoing a theme we've been reporting on for several months, a Wall Street Journal editorial called "The Coming Deposit Insurance Bailout" naively asserts the government should face reality sooner rather than later. The author recommended the FDIC tap its $100 billion Treasury line of credit.
But I believe the author is wrong to suggest it is "taxpayers who are the ultimate deposit insurers." I think the Federal Reserve is the deposit insurer of last resort. Taxpayers can and will be drained like vampire victims, but only the Fed can print the endless stream of funds necessary to finance an inherently bankrupt scheme. Sooner or later, the taxpayers will start pulling out there guns and telling the government to back off. But the Fed will never stop pressing the "print money" button.
Billionaire real estate mogul Sam Zell has raised $625 million to buy distressed securities, including those backed by commercial real estate. Zell's reputation was recently dented by his botched $8.3 billion buyout of the Chicago-based publisher Tribune Co. But regardless, Zell is a master real estate investor. After all, he did sell his Equity Office Properties portfolio to Blackstone for $39 billion at the exact top of the market.
Zell will use the new Zell Credit Opportunities Fund to take advantage of the trillions of dollars in maturing commercial real estate debt that will trigger a wave of foreclosures and loan sales. Because most of the equity in these properties has been erased, buying debt is the best way to take ownership on these properties in the long term... Vulture investors will purchase mortgages at a discount, then foreclose on the underlying property in the case of default, a strategy known as "loan to own."
"On the debt side, the opportunity is extraordinary," Zell recently told guests at a Citigroup conference. "If you're buying a high-quality piece of paper now, it will be more likely to rise in value than fall."
Zell isn't the only one, either... Marty Whitman's Third Avenue Management has introduced its first debt fund, The Third Avenue Focused Credit Fund. The fund will buy a wide range of credit instruments, including bank loans, junk bonds, convertible securities, and defaulted debt.
Having already dominated the brick-and-mortar retail industry, Wal-Mart, the world's largest retailer, is going online...
Starting Monday, Wal-Mart stole a page from the Amazon playbook, and began offering merchandise from outside retailers on its site in exchange for a share of the revenue. It added nearly 1 million new items to Walmart.com, as part of its new online mall, known as Wal-Mart Marketplace.
Wal-Mart customers can buy the other retailers' merchandise on the company's website, but Wal-Mart never touches the merchandise... The partners will ship from their sites and handle all exchanges and returns.
"Our vision is to make Walmart.com the most visited and valued online site," said Kerry Cooper, Walmart.com's chief marketing officer.
The next chapter in eBay's Skype saga is unfolding... eBay bought Skype, the largest international voice carrier that uses a voice-over-Internet protocol, in 2005 for a total of $3.1 billion. eBay expected its customers to use Skype to communicate, but that never happened, and eBay tried to sell the company back to its founders. They refused, so eBay considered taking the company public... Possibly because eBay doesn't believe a Skype IPO would be well received, it has agreed to sell the company for around $2 billion to tech wunderkind Marc Andreessen, the founder of Netscape.
Skype is yet another free-use business model having trouble generating revenue. The company has a paid service, but most users are content with the free version, which allows you to call other Skype users anywhere in the world from your computer.
Andreessen sits on the board of social networking giant Facebook, another free-use business model. He also created Ning, a build-your-own social networking website application. Perhaps he sees some synergy between Skype and the social networking mania...
New highs: PowerShares Insured National Muni Bond (PZA), Novavax (NVAX).
Guns, cigarettes, and alcohol in today's mailbag. Let us know what you hide in your backyard: feedback@stansberryresearch.com.
"Although the guns definitely add a measure of protection the people advocating 'guns only' have to remember that those who do wish to deal with one another will not only find barter cumbersome, but that gold and silver are effective currencies. They are the original currencies for good reason. And there will be a lot of non-violent people in a broken down society seeking to transact with one another without gun pointing. The people advocating 'guns only' strategy have to ask themselves how will their neighbors will look at them and how much good will can be lost. In a broken down society the goal is to lift it back up, not plunge it into some Mad Max episode!" – Paid-up subscriber Cisco
"Karen and Erich...History shows they b Right... cept it was cigs and aclcohol that was in demand... people was not much interested in gold in Germany during their period of... uh... economic adjustment... If you wanna bury sumthin in the back yard... make it a large full gasoline tank or two. Get you one of them Siaga shotguns with the big round clips (more then a few clips) and a bunch of buckshot shells for closeup... A long range rifle and a surplus grenade launcher... for the kids. A .50 cal you can get all kinds of shells, phospherus, exploding, etc. for the wify... an armored vehical to go grocery shoppin in with a machine gun on top would be da catz ass. What realy be kewl is iffin you had a couple of them robots with machine guns mounted on them like the cops have and one of them pilotless planes the airforce has... with rockets... A inline muzzle loader in case you last the first year after that shells be hard to come by... use the gold to make bullits for da muzzle loader." – Anonymous
Ferris comment: Doug Casey also recommended stockpiling cigarettes as a possible currency alternative in a societal breakdown.
"Regarding the 'Big firms can force their terms on suppliers and customers' articles. When giving examples you missed the biggest offender of them all... Wal-Mart. I did an AR audit for the Oklahoma City Coca-Cola bottler and was surprised to find Wal-Mart pays in 60 days. Also, Wal-Mart has a nasty practice of truncating invoice values down to the next $5.00 level and then paying the reduced invoice. You can't imagine how effective this is in getting discounts on invoices in excess of the already negotiated discounts." – Paid-up subscriber Bill Russ
Ferris comment: Wal-Mart is definitely a force to be reckoned with, like every other World Dominating business: Microsoft in PC software, UPS in package delivery, Berkshire Hathaway in reinsurance, Procter & Gamble in consumer products, Intel in microprocessors...
"Do you propose to form an armed militia anytime soon? You might even find a suicide bomber amongst your wild-eyed devotees." – Paid-up subscriber Bill Murray
Ferris comment: Hmmmm... They used to say if you really wanted to make some money, start a religion. Starting an army sounds like it might have possibilities, though.
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon, and Baltimore, Maryland
September 1, 2009