Reporting live from a fishing boat...

Shorting the world's most expensive country – just don't tell them…

In today's Digest Premium… one of our favorite market analysts shares his top global investment idea… and it's one Porter has focused on, too…

To subscribe to Digest Premium and access today's analysis risk-free, click here.

Reporting live from a fishing boat... Warren Buffett in Washington... 'Creditworthiness is like virginity'... Tepper on the taper... The mutual-fund hoax... A wonderful mailbag...

  We're on the verge of the debt-ceiling deadline...

The government is still shut down... Senator Harry Reid sent stocks surging yesterday after he expressed optimism on a deal being reached. But no deal has happened.

All headlines are focused on the shutdown and debt ceiling. But we maintain the same stance we've had all along. The only thing the shutdown has accomplished is to show the American people how petty their politicians are... And how easy it is to live without them.

  No, we're not reporting live from Washington, like most mainstream media outlets. Instead, we're reporting from a fishing boat in the middle of the Bahamas. Trust us... The benefit to you is no different.

CNBC's Squawk Box is reporting live from Washington. What is it reporting on? The right is bickering; the left is bickering... So it interviewed Warren Buffett for his opinions on the shutdown.

  Like us, Buffett isn't worried about the shutdown... And he's amazed at how irresponsible our government is by using the debt ceiling as a bargaining chip.

But, he said that's no reason to stop buying stocks. The stock market is the most attractive of all asset classes today, Buffett said. And he's still buying great businesses.

  And proving Porter isn't as outrageous as some thought, Buffett also told an interviewer from CNBC that the dollar is not in imminent danger of losing its place as the world's reserve currency... But it could be in the future.

Buffett, like anyone with a general understanding of economics, knows an entity cannot perpetually take on more debt without consequences. The main consequence is a loss of creditworthiness and the loss of trust from our nation's creditors.

"Creditworthiness is like virginity," Buffett said. "It can be preserved, but not restored very easily."

  Another billionaire investor, David Tepper, appeared on the cable financial channel Tuesday to discuss the Federal Reserve's bond-buying program – something with much more impact on the markets than a bunch of whiny politicians.

Tepper, the founder of the Appaloosa Management hedge fund, said the Fed will delay tapering due to the budget debate... "They're not tapering for a long time now."

  As we've said many times, when the government buys $85 billion worth of bonds a month... and continues to buy them into perpetuity... stock prices can go higher than anyone expects. Or as Tepper put it... "Generally speaking, markets will go up, [because] my basic belief has been when you have large [quantitative easing], markets go up."

  In May, Tepper said the market could be reaching a "1999"-type peak, unless the Fed began to taper. But now, he's changed his mind... "I don't think you're going to get '1999' because I was talking about not tapering in a world where you didn't have politicians who have nearly lost their minds," he said on Tuesday.

"Putting aside some of this stuff in D.C., because this is really making it difficult to invest right now," Tepper said, stocks could hit valuations of 18-20 times earnings (compared with 15 times today). "You could have a pretty large increase in stock prices to get there next year."

  Tepper is no stranger to making money from the government's manipulation of our economy. When Tepper "went long" stocks in late 2010, he famously described his reasoning, saying: "What, I'm going to say, 'No Fed, I disagree with you, I don't want to be long equities'?"

  Few asset managers truly earn their fees. From hedge funds that charge 2% of assets and 20% of profits to mutual funds that charge 1% of assets under management – these firms are incentivized to gather assets... And in the case of mutual funds, they earn their fees regardless of performance.

Most people would be better served putting their money in a low-cost index fund. Just consider these facts the finance blog Carpe Diem pulled from the 2013 Fact Book published by the Investment Company Institute trade association:

  Still, millions of people hand their savings over to overpaid managers in return for subpar results. Consider the latest numbers from the world's largest asset manager, BlackRock.

As we explained yesterday, quantitative easing is great for the wealthy and asset gatherers – like hedge and mutual funds. (That's because there are more assets to gather.)

Last quarter, investors poured $25.3 billion into BlackRock funds... The company earned $730 million in the quarter, up from $642 million a year ago.

  So if you don't want to hand your money over to a mutual fund that overcharges and underdelivers, what should you do?

Our goal at Stansberry & Associates has always been to empower individual investors to take control of their finances... As individual investors ourselves, we strive to produce the kind of research we'd want to read.

And to date, we've helped hundreds of thousands of people learn more about the markets, to generate profits on their own, and stop paying huge fees to other people for mediocre results.

  We currently publish 19 services that focus on everything from value investing to options trading. In short, we have a product that will work for every individual and investment style.

  New 52-week highs (as of 10/15/13): Blackstone Group (BX), East West Petroleum (EW.V), short position in J.C. Penney (JCP), and WPX Energy (WPX).

  In today's mailbag, a very special note from a subscriber who has used our services to change his life. How have we helped you? Let us know... feedback@stansberryresearch.com.

  "I am a stay-at-home dad with two kids ages five and two and I drive a school bus as a substitute in the afternoons. Having quit my career as an accountant to raise my kids, I thought my future would be as a full-time bus driver when my kids were both in school. In March of this year, I was introduced to Stansberry & Associates. Although I had never traded options before I knew immediately that subscribing to a few newsletters was in my best interest to explore the possibilities.

"Just as I was a newly enrolled member, you had your first open house at no charge. I was so new that the offer expired before I had the chance to understand the wealth of information I had let pass by. I took a few months in the summer to read some books on the subject of trading options and realized on my own that selling puts and covered calls on quality companies was my preferred strategy and that this was exactly your philosophy.

"I began using the S&A Digest, Growth Stock Wire, and the DailyWealth newsletter information to paper trade for a month. I saw the success I would have by just following recommendations to invest in good-quality companies using a strategy of selling puts to acquire the stocks at a better price or making income. In late August, armed with the success of paper trading, I convinced my wife to open a brokerage account and I signed up to your DailyWealth Trader service.

"I have been very satisfied by the immediate results the newsletters and DWT have provided. In September, I netted over $400 in expired put premiums and currently have $2,000 in premiums waiting for expiration in the coming months. This does not include gains which will be realized if covered calls are exercised from DWT recommendations. To date I have not lost a penny following your recommendations because I am only selling puts and covered calls. In fact, just by reading your newsletters and listening in on a Stansberry Alpha seminar I figured out how to take advantage of the FCX opportunity in August without subscribing to the Alpha service...

"I knew that your trading services were going to be valuable to my future success. The open house opportunity has allowed me to see that firsthand... I have become so convinced of the need to have this tremendous information on a continuing basis that I have joined as a Flex Alliance member. I know this direct trading knowledge will surely pay for itself over and over. Knowing the reckless fiscal path our national government seems to be taking all of us on, I can think of no better experts to guide me through the troubled financial waters that surely lie ahead. Now I will have lifetime access to information that will surely create a positive change my financial future." Paid-up subscriber Michael Keller

Regards,

Shorting the world's most expensive country – just don't tell them...

Editor's note: In today's Digest Premium... we're sharing part of a conversation Porter had with Meb Faber, cofounder and chief investment officer of the Cambria Investment Management firm.

Meb is one of our favorite "quantitative" analysts... And he's used his market insights to develop simple, investable trading strategies. He also writes an excellent finance blog: http://www.mebanefaber.com.

Meb appeared on the most recent episode of Stansberry Radio, the weekly podcast co-hosted by Porter and Aaron Brabham. Below, we're excerpting Meb's discussion of how he identified the cheapest and most expensive stock markets in the world. (The transcript has been edited for length and clarity.)

Porter Stansberry: I got to know Meb by inviting him to our spring editorial get-togethers. Once a year in the spring, we get together with our best contacts and our analysts, and we just all swap ideas. Meb was writing all these incredibly dense papers that would find these weird anomalies in the indexes or the way the markets were organized. And he would exploit them.

And I just wanted to know, Meb. You're always working on something. What's the latest and greatest, most new, cool, clever thing that you have figured out about anomalies out there?

Meb Faber: We wrote a paper about a year ago called Global Value. And knowing you, this is something that you'll probably really like...

Robert Schiller, a professor in the late 1990s, wrote a paper (and then a book) where he looked at the U.S. stock market on the 10-year "smooth earning." Way back in the early part of the 20th century, [influential value investor] Benjamin Graham proposed smoothing out earnings. His preferred time was five to seven years...

Shiller called it a "cyclically adjusted price earnings" (CAPE) ratio... People often call it "the 10-year P/E" or "the Shiller CAPE." And it works really well at forecasting stock returns over five to 10 years. Like a lot of value indicators, it's not great on a one-year time frame or a month time frame, the time frame a lot of people operate [by]. But in general, it projects returns. And again, it's not rocket science. The higher it is, the worse returns you have in the future and the lower it is, the better returns.

Stansberry: Yeah. So if you buy stocks when they're cheap, you tend to do better.

Faber: Yeah. I mean, again, not rocket science. The average for this value is around 17. Usually, it peaks in the high 20s. And a bear market bottoms in the single digits.

Well, we scratched our head. We said, "Hey, that's interesting... It didn't exist anywhere for 40 or 50 countries around the globe. Can we create that for..."

Stansberry: Oh, I like this idea.

Faber: "...for Russia, Germany, and all these other countries." And so we went and did that... We took it back to 1980. And the interesting thing we found – and it's not surprising – is that the same results apply to the foreign [markets].

And not only that, but you have a bigger example of boom and bust in foreign [markets] because you have a greater universe. And often some of the economies are smaller. A very simple takeaway from the paper was that if you invested in the top 25% of the cheapest countries, rebalance once a year, you would beat the market by, I think it was, 4% a year...

The cheapest stuff in the world... right now, is –

Aaron Brabham: Russia, right?

Faber: Well, right. One of the reasons this works is... the emotion of just revulsion. The countries right now are Russia, Italy, Greece, Spain, and Ireland. A lot of these bombed-out European countries, no one wants to own that, right?

Stansberry: Exactly.

Faber: Greece is trading at one of the lowest values we've ever seen...

Stansberry: Who's been buying Greece all year?... That would be me.

Faber: Good, yeah. Right there with you. We did an article in January where we said, what's your best idea this year? And we agreed, we said the same thing. A lot of the smart money, a lot of these hedge funds – Third Point, Baupost – are going out and picking up a lot of these assets for –

Stansberry: I followed my friend Erez Kalir, who runs a small fund called Ironbark Investments. He does a fantastic job. He went over there for 90 days and met with all the top executives and the best companies. That's great research. He came back and gave me some ideas.

And then... I told my subscribers, "Look, you're not going go over to Greece and buy individual stocks there. I mean, I doubt you'll do that. So just do this. Buy the long Greece [exchange-traded fund (ETF)]. And then you can hedge it by shorting the French ETF. Pretty much, France is one of those things that is always a great hedge. You can compare France against anything...

Faber: Well... I think there are better choices of what to short, and that's usually what's the most expensive. And right now, the most expensive in the world... is Colombia. I actually gave a speech in Bogota that was incredibly unpopular in January.

Stansberry: Yeah, that's not smart.

Faber: I stood up and I said, "You guys are the most expensive market in the world." And they pulled me aside and said, "You don't understand. This time is different, and the pension funds are..."

Stansberry: But that's the same country that shot its own player on the national soccer team, right?

Faber: Yeah, right...

Stansberry: You don't want to do that, Meb.

Editor's note: Hosted by Porter Stansberry and co-host Aaron Brabham, Stansberry Radio is a free weekly podcast from S&A. Every week, Porter and Aaron invite an expert guest to discuss his top investing ideas. World-famous hedge-fund manager Jim Rogers, value-investing legend David Dreman, and publisher Steve Forbes have all appeared on the show. To find all their episodes and sign up to make sure you never miss one, click here.

Shorting the world's most expensive country – just don't tell them…

In today's Digest Premium… one of our favorite market analysts shares his top global investment idea… and it's one Porter has focused on, too…

To continue reading, scroll down or click here.

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