Quasimodo and Clark

Today, our trading expert, Jeff Clark, is unequivocal:

In a recent issue of the S&A Short Report, Jeff showed his readers how to make as much as 200% from the current highly bearish setup in the market today. Click here for access to the Short Report.

I'm with Jeff. My two Extreme Value short recommendations are falling, down 2.7% and 4.8% on the day as I write.

On September 24, billionaire hedge-fund manager David Tepper made a bullish call on stocks based on the Fed's money-printing. Here's what we wrote in the September 27 Digest:

"What, I'm going to say, 'No Fed, I disagree with you, I don't want to be long equities.'" said Tepper. "We're a bond place, but we changed up to a little bit more equities recently." Tepper's reasoning is solid. He said either the economy will naturally improve over the next three months, in which case stocks will perform best... Or the economy won't do well over the next three months, and the government steps in. In which case, every asset class will rise except bonds.

Tepper has some experience making money from government intervention. Last year, his $7.5 billion fund returned 132%, mostly from betting on financials. You can watch his interview with CNBC here.

His fund, Appaloosa Management, returned more than 21% last year. Tepper says "the biggest opportunities" are still in equities this year, but it will be "harder and not without risk." After the S&P 500's 13% rally last year, we're due for a correction – which we've coincidentally seen in the past two days. Or as Tepper says, "When things go up too high, they will go down."

If Tepper likes credit creation for generating bullish tailwinds, maybe he should go long everything in the world for the next decade. The World Economic Forum says the world will need $100 trillion of new credit to support world economic growth over the next 10 years. If world governments respond to this call for the printing of enough money to buy the U.S.'s inflated economy more than seven times over, I would expect prices to rise. All prices. Everywhere. Every stock, every commodity. Everything... (Except bonds.)

One stock getting crushed in today's correction is one of Porter's favorite shorts, Seagate Technology, down nearly 6% today. The world's largest hard drive-maker announced second-quarter earnings fell more than 70% to $150 million from $533 million a year earlier. Sales fell 10% to $2.7 billion.

How is Luczo handling the situation? He's apparently starting to realize he has no hope of trying to sell more hard drives. He's now trying to boost shareholder value by repurchasing stock and instating a quarterly dividend. Given that his entire industry is becoming obsolete, taking cash out of the business and returning it to shareholders is a wise strategy. Too bad it's several years too late.

I was wondering why my recent health care-oriented stock pick was up today, while the rest of the market was falling. Then, I found a little article on the Business Insurance website dated yesterday that said the U.S. House of Representatives voted 245-189 to repeal Komrade Obama's health care reform law. Only three Democrats voted for the repeal.

Competition is a powerful force in the business world. It's a powerful force in government, too. And now, the government is getting serious about eliminating the competition. In the biggest one-day takedown of one of its biggest competitors, the government has arrested more than 100 members of the five New York crime families: the Gambinos, Genoveses, Bonnanos, Luccheses, and Colombos.

While we don't recommend day trading, it's working great for one of our new subscribers. Any great trades so far this year? Tell us at feedback@stansberryresearch.com.

New highs: Sprott Resources (SCP.TO).

"Sean you are a very cool/diplomatic. When I see the complaints people have after spending $39 bucks for S&A, I have to scratch my head. I am Very Happy with the new letters that I am subscribed to. Thank you, I appreciate the efforts.

Ferris comment: While Jeff's Short Report recommendations aren't exclusively "shorts," he has excelled at short calls throughout a decades-long career, primarily as an options trader. Jeff frequently comments on which stocks lead the market up and down, and what to expect for the next day or two. To learn more about the Short Report, you can click here. You can also find short sale recommendations in Stansberry's Investment Advisory, True Wealth, and Extreme Value.

Regards,

Dan Ferris and Sean Goldsmith
Medford, Oregon and Baltimore, Maryland
January 20, 2011

A Few Words about Monsanto...
By Porter Stansberry

I'd like to take a moment to write about Monsanto... a stock recommended in my newsletter, Stansberry's Investment Advisory, and one that has a uniquely bad reputation among some of our readers.

For those of you new to the story, Monsanto is the world's leading producer of GMO seeds – genetically-modified organisms. The company speeds up the evolutionary process by applying genetic engineering to seeds. It says the resulting foods are better than their naturally occurring rivals in important ways.

When we recommended the stock back in November, we inadvertently kicked a big hornet's nest. A sizeable industry exists to oppose GMO seeds. Many people who wrote to us went so far as to suggest they believe Monsanto is intentionally poisoning the world's food supply in an attempt to engineer a massive holocaust.

I can't recall ever receiving so many angry – and even disturbed – e-mails about any other topic. (Not even when Dan insulted the Catholic priesthood...)

Here's a brief sample of the hundreds of angry letters we've received...

I have never been so angry and appalled... Monsanto is The most treacherous, selfish and ultimately without-scruples-or-morals corporation in America. Do you have any idea how many farmers they have ground into the dust and destroyed with their self-serving corporate policies? Are you a paid crony FOR Monsanto? This is VERY suspect. Your last email rebuttal against the person raising concerns about Monsanto sounds like it was written BY Monsanto. Lets see if you publish this! Farmers are not "flocking" to their products! They have been systematically FORCED to use there products or face lawsuits and loss of there family farms.

For the love of God pull your head out and take a look. Just go to you tube and take a look. The truth is there – you won't find it in the mainstream media or in Monsanto's PR bullshit. You of all groups should Know better. I am appalled. Standing up for Monsanto is no different than standing up for JP Morgan. Get a clue! Either publish a confession of the true and morbid facts about Monsanto, or some kind of retraction within the next 30 days or I will cancel my subscription. I know many, many others on my email list alone who would do the same.

GMO food is a crime against humanity! Jesse Ventura did a show on the Bilderberg group wanting to cut down on the world population. A friend told me he woke up one night in 1992 at 2am and that was the discussion being had on national TV. There are powerful people that want to cut down on the population as they feel we are putting to much pressure on the worlds resources...

Not all the people who wrote letters about Monsanto were full of piss and vinegar. Some thoughtful people sent sincere letters merely to caution us that our knowledge of the company's technology seemed incomplete. For example, paid-up subscriber Dr. Gregory Rodgers (MD) wrote:

I am a recent Alliance member and a long time subscriber. Your company, its writers and specifically you have influenced me greatly on investing and true free market principals. It was with much dismay that I saw your most recent recommendation was Monsanto in the most recent issue of your newsletter.

Reading your body of work over the past several years, I get a general sense of the man you are and the values you hold. To state it simply, you are a patriot and a freedom lover. So how in the hell do you justify having your subscribers buy Monsanto? It may be profitable but to support Monsanto with a BUY recommendation is like imaging Ron Paul on the board of IG Farben in the 1930s era. It just does not compute.

Now I recognize trading Monsanto stock, or derivatives of it, is likely to be profitable and that you have a duty to your clients to make research recommendations that will make them money. I also get that buying shares of Monsanto in the secondary market, no money goes directly to Monsanto, however the increased share demand does influence the share price and sends a message to the corporate leadership that the market tacitly approves of their attack on our food supply, our farmers and our health. I also get that a company is not and cannot be evil but only reflect the underlying characteristics of the men and women that steer the corporation.

We appreciate notes like these. As we are fond of saying, "God does not whisper in our ear." We do not know everything and are always willing to learn. So when we first saw these notes flooding our mailbox several weeks ago, we printed some of them and asked for Monsanto's critics to provide us with the data... We wanted to see scientific studies proving Monsanto's products are harmful or dangerous. By "scientific" we mean independently produced studies, conducted on a double-blind basis, that are repeatable. We didn't get any. Not one.

As Warren Buffett has mentioned over the years, when you tell people you're in the market for a poodle, people will send you lots of cocker spaniels. And so in reply to our request, we got dozens of references to the same three "scientific" sources: a website called Mercola, a book called Seeds of Destruction, and various YouTube videos by the author of Seeds of Destruction, Alex Smith, who seems to have built a successful promotional company around his thesis that Monsanto is evil.

All these materials suggest foods made from genetically-modified seeds or hormones are extremely dangerous and cause allergies, infertility, infant mortality, immune dysfunction, and even death. These are serious allegations, and we haven't ignored them. Let us be perfectly clear: We remain willing to review any evidence that these allegations are true. But to date, we've gotten only "cocker spaniels" – no poodles. We have yet to see any evidence that any of the anti-Monsanto allegations are true. That doesn't seem to matter to the anti-GMO crowd, which appears built around the promotion of fear in an effort to sell books and videos. (And yes, as publishers we certainly know a little about how that works...)

But what about the science? Well, Europe has banned most GMO foods and seeds. Various European governments have spent hundreds of millions of dollars on research, conducted by dozens and dozens of independently organized and managed scientists, most of which had a bias against Monsanto, as an American company. Surely the Europeans found something truly dangerous about GMO seeds?

In December, the European Commission, the executive branch of the European Union, published a book that collected and summarized ALL the GMO research commissioned by the European Union since 1982. The book presents 25 years of research, involving more than 500 independent research groups working on grants totaling more than $300 million. This is the most comprehensive publication ever produced on the safety of GMO foods. The most restrictive government in the world on GMO issues published it. And none of this funding came from Monsanto, which is widely hated in Europe. According to this book:

There is, as of today, no scientific evidence associating GMOs with higher risks for the environment or for food and feed safety than conventional plants and organisms.

If you want to read the entire book, you can get a free copy. It's 268 pages long. Please read it before you send us another angry letter.

Does this mean Monsanto's products are definitively safe? No, of course not. They may yet be proven dangerous. New technologies always involve unknown risks. For example, even if Monsanto's seeds are safe, if every farmer begins to use Monsanto seeds, there could be a problem from the resulting lack of genetic diversity, which might cause our food supplies to be dangerously vulnerable to disease. These kinds of risk are still unknown. On the other hand, you can't forget the food supply faces known risks if we don't use high-tech seeds – like a worldwide food shortage if crop yields decrease.

Regardless of what we say on this matter, once someone has made up his mind about something as new and complex as genetically modified seeds, there's almost no chance additional facts are going to change his mind. On the other hand, we have always been compelled to compile evidence for our beliefs. We also have always been willing to change our minds when we encounter new evidence. We remain so on this issue. We hope that if you disagree with us, you'll at least respect our willingness to consider all of the information that becomes available.

One final note on this matter. You might wonder if we got any letters in support of Monsanto's products. We did... and from a surprising source – farmers. Yes, that's right. While hundreds of subscribers have claimed that Monsanto is evil and "enslaves" farmers, the farmers who read our newsletters wrote in to say nearly exactly the opposite. Two examples are below:

You are right on in your response to the criticism of GMO technology in crops and seed production. If we did not have the development of GMO, food prices would be much higher and starvation in the world would be much more widespread. I know many depict Monsanto as the "evil empire" and as I farmer, I do not like their over priced tech fees, but the reality is that they are the leading edge in preventing run-away food prices in the world. If all producers were forced to go "organic" we could not feed the world. I have organic farming neighbors, and know for a fact that their crops produce from 50% to 75% of what conventional farming produces next door. Reduce production by 25% and you would have world-wide rioting for food. Furthermore, no science has ever shown that GMO food performs or reacts any different in the human body than organic produced food. A lifelong agricultural producer and steward of the soil. – Paid-up subscriber Roger Aberle

I'm a farmer/rancher in Montana. I certainly agree with Porter Stansberry's position on Monsanto seeds. A major part of their seed offerings are "Roundup Ready" seeds. The desired plants that grow from their seeds can be sprayed with Roundup, without any damage, while the Roundup kills the weeds. If Roundup wasn't used in this kind of seeding, the farmer would likely use 3 or 4 other herbicides, and not end up with fields so clean. Much better product, easier to use, and increases desired crop production. Beyond that, Roundup is a systemic herbicide that must be taken up through the entire plant to kill that plant. Once it hits the ground, it's essentially an inert substance, harmless to anything, I do believe. – Paid-up subscriber TMC