It's Official: 246% Gains in Just 10 Months
It's official: 246% gains in just 10 months... Big news in 'picks and shovels'... This 'science fiction' could soon become reality... P.J. O'Rourke: How the 'revolt' will affect your savings...
Editor's note: Last week's essay from best-selling author and Digest contributor P.J. O'Rourke – The Revolt Against the Elites, Part I – was among the most popular we've ever published. Be sure to read to the bottom of today's Digest for the second installment...
We begin today with some great news for Stansberry Resource Report subscribers...
Regular readers may recall gold-mining major Goldcorp (GG) agreed to buy junior miner and Stansberry Resource Report portfolio holding Kaminak Gold (TSX V: KAM) in an all-stock deal in early May.
This week, it became official... The deal closed on Tuesday, and Stansberry Resource Report subscribers received approximately 0.11 share of Goldcorp for each share of Kaminak they held.
This morning, Matt Badiali sent a notice telling subscribers to lock in gains after shares closed below his "tightened" 10% stop loss yesterday.
Congratulations to Stansberry Resource Report subscribers... They will record an official gain of 246% in just 10 months as of yesterday's close.
In related resource news, we note Japanese construction-equipment giant Komatsu has agreed to buy U.S. mining-equipment maker Joy Global (JOY).
Komatsu – the world's second-largest manufacturer of construction and mining equipment behind Caterpillar (CAT) – will reportedly pay $2.9 billion, or $28.30 per share. This represents a premium of about 20% to JOY's closing price on Wednesday.
Longtime subscribers may recognize Joy Global as a "picks and shovels" company. As Matt explained in a 2011 essay in our free Growth Stock Wire e-letter, the phrase "picks and shovels" refers to a classic story of a German immigrant during the California Gold Rush in the 1850s...
Rather than the "all or nothing" route of looking for a big gold strike, this guy sold basic goods to the miners. He eventually started producing a new type of durable pants. They became a huge hit... and he got rich.
His name was Levi Strauss. Levi didn't risk it all on trying to find the big strike, he just sold the stuff everyone else needed to try to find the next big strike themselves.
The idea of owning "picks and shovels" has become an investment cliché for good reason. It can be an incredibly profitable, diversified way to profit from rising commodity prices.
Of course, miners don't actually use picks and shovels anymore... they use the heavy-duty mining equipment JOY produces. But the idea is the same.
Back in early April – just as gold was preparing to break out to new highs, Stansberry Resource Report analyst Brian Weepie reminded Growth Stock Wire readers that JOY was one of the top three "picks and shovels" companies in the mining industry today.
He noted that these companies hadn't moved up as much as the gold producers they served, but eventually they would.
He was right. Shares of JOY are up more than 75% since his essay.
If the rally in gold continues as we believe it will, JOY shares should do well. Apparently, Japan's largest construction-equipment maker agrees.
Switching gears, we see that Alphabet (GOOG) – best known for its Google search engine – is using artificial intelligence ("AI") to cut its data-center electricity bills.
Bloomberg reports that technology from DeepMind, a company Google acquired in 2014, was able to cut data-center power usage by several percentage points... translating into a 15% improvement in power-usage efficiency for Google's computers.
That may not sound like much, but consider this... The company used 4.4 million megawatt hours (MWh) of electricity in 2014... and may pay about $25-$40 per MWh, according to Bloomberg analysis. Simple math suggests its power bill likely approaches $1.5 billion per year.
Google purchased DeepMind for about $600 million. If it's able to save 10%-15% in electricity costs using this technology, the acquisition could pay for itself in just a few years. But DeepMind's value could extend far beyond electricity savings...
When Google acquired DeepMind, it wouldn't even confirm what the company's AI technology could do... That is, until it announced that it had used DeepMind technology to create a computer that mimics the short-term memory of the human brain. MIT Technology Review reported the news this way...
The result is a computer that learns as it stores memories and can later retrieve them to perform logical tasks beyond those it has been trained to do.
Since then, DeepMind has mastered simple tasks, including playing video games like the Atari arcade classic Breakout, in which a player hits a ball into bricks to knock down a wall.
In April 2014, the AI first encountered the game in front of a technology conference. At first, the program struggled to even control the paddle.
After about an hour of play, the program turned into a talented amateur... only missing the ball every third or fourth time. The audience laughed.
Then something happened. It stopped missing the ball. As The New Yorker magazine reported at the time (emphasis added)...
The auditorium begins to buzz... The AI uses four quick rebounds to drill a hole through the left-hand side of the wall above it. Then it executes a killer bank shot, driving the ball into the hole and through to the other side, where it ricochets back and forth, destroying the entire wall from within.
Now there are exclamations, applause, and shocked whispers from the crowd. Hours after encountering its first video game, and without any human coaching, the AI has not only become better than any human player but has also discovered a way to win that its creator never imagined.
Alphabet is now also using DeepMind technology in its self-driving cars...
Jeff Brown, technology expert and editor at our corporate affiliate Bonner & Partners, had a chance to sit in one of the first versions of Google's self-driving car in 2011. And he says the progress over the past few years has been astonishing, thanks in large part to this technology...
[The early version] was packed with computing equipment, sensors, storage devices, and GPS equipment. On the outside of the car was a large light imaging, detecting, and ranging (LIDAR) array for determining distance to objects, as well as radar devices and cameras. It definitely looked like a prototype.
Today, a mere five years later, cars with self-driving capabilities not only look like ordinary cars... they are already on the road and driving themselves. You just might not have realized it yet.
As of April, Google has 23 Lexus SUVs and 34 other prototype vehicles driving every day. In total, Google's self-driving cars have logged more than 1.5 million miles.
Technological advances like AI don't happen in linear progressions... Instead, "tipping points" are reached... after which nothing else is the same ever again.
Right now, Jeff believes that we are at this sort of tipping point... a vast wave of change that will upend the way we work, sleep, shop, and receive health care.
For example, Jeff notes that machine learning allows an AI to learn from its experience... and never forget it...
An individual AI can share its learning with all other AIs in a network – instantly. The speed at which an AI can learn makes Moore's law look slow by comparison. We will have human-level intelligence in less than 10 years as a result, and along the way many fortunes will be made.
As we mentioned on Tuesday, Jeff has put together a list of 21 private companies that are benefiting from this technological shift – a trend that he has been watching for 30 years – and are poised to go public in the next 12-18 months.
The last time a tipping point like this was hit, investors had a chance to make 10-20 times their money. And Jeff believes that each one of these 21 companies has the potential to hand early investors gains of 1,000% or more.
If you haven't had a chance to see Jeff's special interview... learn his three rules for finding hyper-growth tech stocks... or hear his rationale for why several large, billion-dollar companies will likely go bankrupt, practically overnight... click here.
One final note before we sign off today...
As Porter noted last week, it's not too late to join us at the 2016 Stansberry Conference, September 19-20 in Las Vegas.
But discounted early bird tickets are going fast... and the price will increase on July 31 (if they don't sell out first).
Whether you meet us in person at the ARIA Resort & Casino or choose to watch online, you're going to love this year's show...
Porter will be hosting some incredible guest speakers like Steve Eisman, who was the subject of Michael Lewis' best-selling book and the Oscar-winning film The Big Short. Andrew Left will be there, too. You may remember Andrew as the activist investor who uncovered fraud at Valeant Pharmaceuticals (VRX) and made a fortune shorting the stock. Just recently, Andrew was back in the news with his short of Facebook (FB)... and yet another new short of Valeant (which he called "a sinking ship").
We've also invited our friend Meb Faber, who runs Cambria Investment Management... Robert Edsel, author of the best-selling book The Monuments Men (which was later turned into a movie)... Hugh Herr, head of MIT's Human Biomechatronics Research Group... and more than 30 other experts in precious metals, natural resources, technology, medical science, entertainment, motivation, and entrepreneurship.
And just like last year, renowned humorist (and Digest contributor) P.J. O'Rourke will be there, too. As he put it recently, "If you weren't planning on coming, damn it, change your plans. It's an ideal way to begin the fall. You'll be getting back to work and having fun at what I think of as a 'vacation with brains.'"
For full details on how you can join us in Las Vegas or watch from your computer, click here.
New 52-week highs (as of 7/20/16): Automatic Data Processing (ADP), Ciner Resources (CINR), Cisco (CSCO), Fidelity Select Medical Equipment and Systems Fund (FSMEX), Welltower (HCN), iShares Core S&P Small-Cap Fund (IJR), 3M (MMM), Paycom Software (PAYC), Constellation Brands (STZ), and ProShares Ultra MSCI Brazil Capped Fund (UBR).
In today's mailbag, subscriber Paul H.'s comments were a big hit with Digest readers. What's on your mind? Let us know at feedback@stansberryresearch.com.
"Dear Porter, you're clearly NOT fired! But I think you might want to consider hiring Paul H. to help summarize your products in the Digest. Well done Paul." – Paid-up subscriber Bret
"Paid-up subscriber Paul H nailed it in the mailbag section!" – Paid-up subscriber Anton L.
"Holy cow! That guy is LOL FUNNY!" – Paid-up subscriber Jim F.
"Two thumbs up for the comment by Paul H." – Paid-up subscriber Neil S.
"I am (STILL) LMAO over the comparisons made by subscriber Paul H. in regards to the different analysts' styles. Really good observations, but still a big nod to the authors. "Pik Yer Poison" at your own peril!" – Paid-up subscriber Charlie T.
"Paul H hit it out of the park with his analysis of the analysts – and also about P.J. Maybe you should hire him! A good understudy for P.J. Keep da faith!" – Paid-up subscriber Doug V.
"Be careful P.J., Paul H. is hot on your trail! What a great Digest tonight..." – Paid-up subscriber Gary R.
P.J. O'Rourke comment: Gary – It's true, Paul H. has discovered the secret to my analytical technique!
"The bottom line is that I'm making money on the 'sky is falling' guy's perspective and financial advice. Thank you, Porter and Stansberry crew. Additionally, like Andrew K. I would very much like to spend more of my time with other wealthy folks – is there a Stansberry club of members that meet somewhere, sometime?" – Paid-up subscriber Paula T.
Brill comment: Yes, Paula... Members of the Stansberry Alliance – our elite lifetime service – are granted exclusive access to our annual Alliance Meeting and regional Alliance "meetups" held around the country, where they can meet and network with Stansberry Research editors and other Alliance subscribers. If you're interested in learning more about Alliance membership, you can call our Director of Sales Michael Cottet at (888) 863-9356.
If Alliance membership isn't an option for you at this time, you're not out of luck. As we mentioned above, our annual Stansberry Conference is coming up this September 19-20 in Las Vegas. This event offers a similar chance to meet and learn from Stansberry Research editors, other successful subscribers, and some of the biggest names in finance and elsewhere. Click here for all the details.
Regards,
Justin Brill
Baltimore, Maryland
July 21, 2016
Revolt Against the Elites, Part II: How the Rebellion Will Affect Your Pocketbook
Last week, I wrote about how we are in the midst of a worldwide rebellion against political, intellectual, and financial "elites."
Donald Trump is one example. Britain's exit from the European Union (the so-called "Brexit") is another. Support for Bernie Sanders, skepticism about transnational and international organizations of every kind, volatile markets, shaky currencies, and various political deadlocks and meltdowns in developed and developing countries alike all point to a loss of confidence in the "establishment" – the elites who've been running everything everywhere since the end of World War II.
When the world is losing confidence in its leaders, where can an investor be confident about putting his money?
The short answer is, "Hide it!" Seek a safe place to store value. I won't go into detail because Stansberry Research has been doing that for you.
Porter and his associates have all sorts of wise technical advice about the strategies and tactics of finding and using methods to store value. That's not my department. I'm just a political analyst running around with my head in my hands shouting, "Bury the bullion under the swing set and stock up on ammo!"
But the longer answer is to be aware of trends that will result from distrust of leaders and instability in leadership. We can spot a few of these trends...
Weak/Strong Governments
A global rebellion against elite "insider" leadership results in weaker leaders. Our own election is an example. We have an "outsider" candidate, Trump, who's a vague and unpredictable loudmouth. And we have a second-rate elite "insider," Hillary Clinton, who has been so damaged by attacks from another "outsider" (Bernie) that no one likes her. (Actually, no one ever liked her. The fact that she has become even more dislikable is almost amazing. How did she do it?)
One of them is going to get elected, and half the country is going to hate him or her. We'll have a weak leader. But paradoxically, that won't mean a weak government. Weak leaders overcompensate by abusing government power to show that they aren't weak. Best case: Barack Obama. Worst case: Bashar al-Assad.
Look for Hillary or Trump to take the little tack hammer of executive privilege that the Constitution provides and turn it into a 100-ton pile driver.
With Hillary, we'll get the same kind of executive actions and presidential orders we've gotten from Obama. These will continue to expand the executive branch's control over regulatory action, foreign policy, and social issues, which are supposed to be the responsibility of the legislative and judicial branches of government.
Except it will be worse with Hillary. She's more of a bully and a busybody than Obama, and she has more "ideas." Letting her write the regulations will be like letting wrestling promoter Vince McMahon script the high school football game. "The left tackle hits the quarterback with a chair!"
It's harder to say what Trump will do. But he's the epitome of "executive privilege" if ever there was one. Expect him to meddle "bigly" in immigration, trade, and international treaty commitments.
Likewise, around the world, weak leaders will be making themselves into strong pains in the neck. Government decisions will be less predictable, increasingly arbitrary, and more quickly reversed.
This will be no time to use common sense. When weak people are making decisions, don't ask, "Is this the right thing to do?" or "Is this the smart thing to do?" Ask, "Is this the thing to do to make weak people look strong?"
More Funny Money
It's obvious that smoking-hot printing presses spewing out national currencies and central banks charging negligible or negative interest rates are having disastrous effects. Expect the disaster to continue... and to accelerate.
Weak leaders have a weak hold on their constituents. The easiest way to strengthen that hold is to promise more entitlements and economic "stimulus" paid for with soon-to-crash cash.
The public is being treated like children bribed with candy. Leaders are hoping it won't be until the kids get home and unwrap their lollipops that they'll discover... "Hey, this thing is made of lard!"
Immigration Hell
One of the principal causes of the Revolt Against the Elites is the chaos of mass immigration. Some of the immigration is caused by war, terror, and gross misrule. Some is caused by economic privation. The causes really can't be separated. War, terror, and misrule are the prime movers of modern economic privation. Elites are refusing to address the cause of immigration. And anti-elites are refusing to accept the chaos.
The result is across-the-board crackdowns on immigration. Immigrants are simply being dumped into refugee camps, squatter shantytowns, and – if they've managed to make it across a border – urban slums.
This is a very big – and very sad – humanitarian problem.
But besides being a humanitarian problem, it's an economic mistake. The United Nations estimates there are 50 million refugees worldwide. Think of the enormous human capital represented by those 50 million people. All of it is being wasted. Even more so because these are the people with the intelligence, courage, and drive to get out of the hellish places they were in and try to find a better life for themselves and their families.
If they had safe places to go back to, they could be making those places prosperous and hence increase the prosperity of everyone in the world. Instead, they're stuck in a no man's land of utter non-productivity.
An expensive non-productivity. If we assume it takes just $0.50 per day to feed and shelter refugees, leaving them in camps costs the taxpayers of various developed countries more than $9 billion a year.
And the fact is, developed countries need immigration. The populations of developed countries are aging, their workforces are shrinking, and their numbers of old and ill dependents on entitlement programs are growing. Immigration is what has kept the United States from suffering the severe demographic problems facing Japan, western Europe, and other places with slow- or no-growth populations.
Of course, this immigration has to be well-organized, selective, and systematic to guarantee the integration of immigrants into our societies. Anger about mass immigration isn't likely to lead to that kind of system.
As it is, by failing to make use of the human capital of 50 million refugees, we're acting like people who want a house and find a truckload of two-by-fours, a barrel of nails, bundles of shingles, and bags of cement in our empty lot and say, "What's this junk?"
Continued Slowing of Economic Growth
In theory, an anti-elite movement should result in diminished government, and therefore increased private enterprise. But the reverse is more probable.
Frustration with elites about immigration is one example of how frustration can lead to non-productivity.
Another principal cause of the Revolt Against the Elites is globalization.
Just because elites have mishandled globalization by neglecting the problems it causes for ordinary people doesn't mean we don't need globalization. The elites have mishandled energy, too – kowtowing to OPEC... plowing millions into clean-energy scams like Solyndra... refusing to build the Keystone pipeline... encouraging the use of natural gas and then banning fracking. This doesn't mean we don't want the chandelier to go on when we flip the light switch in our dining room.
Any time we get in the way of the free flow of goods and services, we're being about as useful to the economy as someone who parks his tractor-trailer sideways across three lanes is being useful to I-95.
When somebody as far out on the end of the political teeter-totter as Bernie agrees with somebody as far out on the other end as Trump, that's a sure sign they're both wrong. And free trade is what they're wrong about.
We're facing a future that combines arbitrary government, bad monetary and fiscal policy, poor use of human capital, and a determination to limit or reduce the size of free markets.
Is There Any Good News?
Yes. Given what a mess the world is shaping up to be, the defense industry could be a sensible investment.
Regards,
P.J. O'Rourke
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