Goldsmith comment: Porter is traveling to Miami. He should be back on Monday for Digest duty.
According to Warren Buffett, it's time to buy stocks. Buffett has long used the relationship between the total value of U.S. stocks and gross national product (the output of the U.S. economy) as a buy signal. In 2001, after cooling from the tech mania, the ratio still stood at 133%... Too expensive for Buffett, who believes "If the percentage relationship falls to the 70% to 80% area, buying stocks is likely to work very well for you."
As of late January, the ratio was at 75%... and as we outlined yesterday, Buffett is certainly buying U.S. stocks. Now is a great time to start adding gold-standard companies like Wal-Mart, Procter & Gamble, Johnson & Johnson, and Microsoft to your portfolio. They may fall farther from here, but that's fine... you can just buy more.
In addition to Wal-Mart and teen clothier Buckle, two other (unexpected) retailers are growing in the midst of the recession. French luxury goods firms LVMH and Hermes both posted gains in 2008. LVMH, maker of Louis Vuitton, reported a 4% increase in fourth-quarter sales – fiscal-year sales also jumped 4% to 17.2 billion euros. And Hermes, whose absurdly expensive wares are unattainable to most everyone, increased sales 8.6% in 2008 to $2.3 billion. Both companies saw strength in handbag sales.
On March 30, a U.S. drugmaker will reveal the results of late-stage trials for a new drug that could become the bestselling pill in the history of medicine. One medical source says, "It could tap the largest pharmaceutical market ever." Early investors stand to make as much as 400% overnight. We'll bring you more details on Monday. In the meantime, you can learn more here...
The U.S. lost 598,000 jobs in January, the most since December 1974. That brings total job losses since the recession started in December 2007 to 3.6 million. And layoffs are only increasing... half the total job losses occurred in the past three months.
New highs: none.
In the mailbag... One subscriber recommends precious metals. And another knows where the GM bailout money has gone. Anything you'd like to share? Send it here: feedback@stansberryresearch.com.
"Firstly, you guys do a heck of job with your analysis... I haven't seen any better in my 17 years of professional financial money management. As far as I'm concerned the financial crunch/recession today is the warm-up show for the day coming when the US Government loses its triple AAA rating and the following depression. In my view, there is only one asset class to own for the next x number of years (x being anywhere from 5-20 years). And that class is precious metals. My personal holdings are MFN, GG, AUY, SLW, ABX and CGR; I would suggest anyone reading this to start devoting serious time to this space and make sure you own at least 10% of your net worth in precious metal stocks and physical bullion." – Paid-up subscriber Jay Arnold
Goldsmith comment: We've been recommending gold stocks and gold coins for years, and we agree you should definitely have some of your portfolio dedicated to precious metals.
"You are beginning to think like the gov't. since when is the lost of 522,000 jobs 'possibly good news'. just because it was not as bad as expected does NOT make it good news." – Paid-up subscriber Wyndall
Goldsmith comment: It was a joke... sarcasm. Layoffs are horrible. We were just pointing out how arbitrary forecasters' numbers are... And how they're always wrong.
"The Buick Open is on as I write. I wonder if any of the GM bailout money is in the winners pot? What about the Masters (Cadilac). And don't forget NASCAR." – Paid-up subscriber Robert Stokey
Regards,
Sean Goldsmith
Baltimore, Maryland
February 6, 2009