As we've been reporting... Iraq holds the greatest untapped oil resources in the world. Even more importantly for investors, the oil in Iraq is seeping from the ground in many places. Extraction costs are near the lowest in the world at around $2 a barrel. And the mainstream press is now beginning to catch on...
The most popular article on the Wall Street Journal today is about the Iraqi oil situation. You can read the article here. Of course, the Journal only covers Big Oil's interest in the area and doesn't touch on the smaller players. But when the names we're recommending hit the mainstream media circuit, they will soar.
For example, Chinese oil giant Sinopec today agreed to buy S&A Oil Report pick Addax Petroleum (AXC.TO) for around $7.24 billion, thereby gaining access to the Swiss company's Iraqi and African oil reserves. The $46-a-share bid – which trumped bids from rival Korea National Oil – is a 16% premium to Addax's Tuesday closing price and a 47% premium to Addax's closing price on June 5 – the day before the company announced it was in takeover talks. Shares are up around 10% today, and Matt Badiali's Oil Report readers are up nearly 50% on the trade.
As you probably know... we're publishing a new Phase 1 report on the two most promising Iraqi oil stocks. Look for it this week.
As if we needed another reason not to buy Citigroup... Bloomberg reports Citigroup just now suspended mortgage loan applications at its "correspondent division" – a division that buys loans from banks and independent mortgage originators and was responsible for half of Citi's $115 billion in mortgages last year. A recent review found "some property appraisals and income-verification documents were missing" for the loans. Or put simply, Citi bought loans made to people with no income and without proof of the value of the property. The bank wouldn't say how many loans had "missing" documentation, but as of December 31, 2008, the bank had $73 billion of mortgages on the books that had been originated through the correspondent channel. Amidst all this, Citi announced it would raise employees' salaries by 50% this year to offset smaller bonuses.
Warren Buffett is in New York City today for his annual lunch at Smith & Wollensky to benefit the Glide Foundation. The winner of today's lunch is a Chinese fund manager who bid $2.1 million on eBay for the honor. Buffett did a pre-lunch interview with CNBC from the restaurant, and he doesn't think things are as rosy as people believe... "The economy will be in shambles this year and probably well beyond," Buffett stated. He said he receives reports for Berkshire Hathaway's roughly 70 businesses – "a lot of them daily" – and he can't see any signs of a rebound. Sectors ranging from retail to manufacturing to electricity face lower demand.
And Buffett put the inflation-versus-deflation argument to rest: "I don't worry about deflation at all. We won't see deflation in any significant amount." Instead, he says the government "sowed the seeds of substantial inflation down the road." We flooded the system with dollars, and we're monetizing debt. Both lead to inflation.
In the ongoing investigation of former Countrywide CEO Angelo Mozilo, the SEC is now probing into the "Friends of Angelo" program, whereby the former mortgage executive would grant loans with attractive terms to influential borrowers... including elected officials.
Rep. Darrell Issa, a Southern California republican and the ranking minority member of the House Committee on Oversight and Government Reform, wants to subpoena Bank of America (which now owns Countrywide) for records regarding the controversial program. "We want to know the size and scope of influence," Issa said.
It's a known fact democratic Sen. Chris Dodd, chairman of the Senate Banking Committee, and Sen. Kent Conrad, a North Dakota democrat, both received "Friends of Angelo" loans. And Issa said loans also went to influential republicans, making it a "bipartisan problem."
Not surprisingly, Issa was denied his subpoena by committee chairman, New York democrat Edolphus Towns. A spokeswoman for Towns said the "Friends of Angelo" program wasn't on his priority list right now... Why do we get the sneaking suspicion the Friends of Angelo subpoena will never become a top priority?
More copyright angst in the 'bag. Send yours to: feedback@stansberryresearch.com.
"I truly can't believe that I am feeling the call to respond to your 'nastygram' via the Stansberry Digest regarding the forwarding of MY newsletter, but frankly your tone and position really pissed me off... Frankly I think you're wrong and wrongheaded. I closely watched the music business cannibalize itself from the '70s onward by making a federal case about people making copies of music that they had purchased. They only exacerbated the situation, while wonder of wonders bands like the Grateful Dead who freely encouraged taping of their concerts and sharing of recordings amongst the fan base thrived both financially and from tremendous good will... Now... here's my point!!
"I'm paying you a not insubstantial amount of $$$ for your advice and ideas... If part of my research/decision-making process involves forwarding the newsletters that I BOUGHT to my mentor (dad) so that I can discuss whether to risk MY money on YOUR ideas, well frankly I feel that action is totally [within] my rights.... But don't make the mistakes of the music industry and make people feel badly about burning a copy of a cd... or making a cassette copy of the record they bought for their car. Yeah... it's
the artists music... but it's the fans music too... Life is short Porter, but I hope while we're here we can have a peaceful and profitable relationship. Your loyal followers and sound financial advice are the two most important assets you have. Put the same care into handling both sides of your business." – Anonymous
Porter comment: You are paying us a substantial amount of money for our ideas and research. And to protect the value of those ideas, we must demand our copyright be respected by every subscriber.
Each subscriber is entitled to one copy of our materials. You may use your one copy in any way you see fit. You own your copy. For example, you are welcome to print your copy and share it with your father or anyone else. Or you may take the copy we send you in the mail and share it with your friends or put it on display in the library where hundreds of people might read it. But you may not reproduce our subscription newsletters by forwarding them. Likewise, you may not print multiple copies of our reports and distribute them. You may not use a photocopier to reproduce copies of our subscription materials. Quite simply, copyright laws forbid you to make a copy of our work without our permission. You own your copy; you don't own the right to reproduce our work.
Even though technology now makes it vastly easier to violate copyright protections (via forwarding our newsletters), it doesn't mean copyright law no longer exists or it's not enforceable.
And by the way, your musical analogy simply doesn't fit. We're financial publishers, not musicians. We don't (typically) get paid for live performances. (By the way, like the Grateful Dead, we choose not to enforce our copyright protections on any of our free e-letters, including The Digest, because we hope the sharing of these publications will lead new people to purchase our subscription materials.) And there's another, even more fundamental difference...
A musical performance is relatively timeless and can be copied without degrading the value of the performance. Our newsletters, on the other hand, are extremely time- and use-sensitive. Investment advice is only really valuable if you know about it before most of the other market participants. Widespread copying and distribution of our work thus degrades the value of it for all subscribers.
While I regret that you're offended by our efforts to remind our subscribers about our copyright protections, many other subscribers told me they appreciated our efforts. They value our work and don't want to see it devalued by freeloaders.
I hope you'll think about our position and the reasons behind it and reconsider your view. But if you still disagree with us, we're always happy to part as friends. We realized a long time ago, you can't please everyone.
"It is readily apparent to many people that the whole lot of you caught up in the Big Rat Race are headed straight over the cliff, just like a pack of lemmings, a la Wile E Coyote. Do you imagine that that does NOT include you? Au contraire! Just for instance, do you really believe, as you last wrote, that 'Mexico is a little ahead of us when it comes to being fed up with politics' and that America's political crisis is vote 'against a large, nontax-paying majority'?
"If so, I'm very sorry to break it to you, Sir, but the VAST majority of American voters pay taxes, and Mexico is a cesspool, still less standard of democracy, which I'm shocked you don't know. On these, as well as many other issues, you display utter ignorance, indeed complete confusion. Do you really think you can escape the mess you've made of your miserable, failed life by buying farmland? Who's going to work that land? You? Illegal aliens? Slaves? Or will you bag some property in, where was it, Costa Rica?
"Do really you think the local gendarmes will appreciate your 'Constitutional property rights'? Or do you imagine that you'll just buy them off? Ever hear of Indira Ghandi, Park Chung Hee, Qing Emperor Guangxu, or Julius Ceasar, to name but few? Na, guess not. Which is why we keep having to read ALL your imbecilic rants and raves, which reveal utter ignorance – about everything, not to mention stocks: You don't know your ass from a hole in the ground! Beware, Ceasar, the Ides of March!" – Paid-up subscriber Ross Linehan
Porter comment: You're simply wrong about who pays federal taxes. According to IRS data, the bottom 50% of wage earners paid a total of 2.99% of all taxes – almost none. The top 50% paid 97%. With OBAMA!'s new scheme to pay out cash to people who pay little or no taxes (so-called refundable tax credits), more than 50% of American citizens will pay no net federal taxes starting next year.
This revenue policy spells big trouble for America down the road. Why? When more than half of the people in the country aren't paying for any of the costs of government, it becomes impossible to win an election by promising to reduce the size of government, even when doing so becomes critical (like when there's a huge budget crisis or a runaway deficit). And that's how democracies have always fallen apart historically: The moment the majority is allowed to tax the wealth of the minority away from them, the society falls apart.
"Shame on you, Porter. Until now I have regarded you as a bright, insightful analyst and have given you the benefit of any doubts when it comes to the way you market your services. But your comments about Mike Williams' True Income letter are flat out dishonest. I am sitting on a 97% loss in Aleris, a terrible recommendation in which Williams overlooked a $3B intangible that makes up 60% of the company's net worth and a 1% gross profit margin on its processing operations. Not much substance to withstand an economic downturn. It's my bad that I accepted his recommendation without doing an analysis of its financials, mistakenly thinking that Williams did that for me.
"I held all the way down because Williams assured his readers that the company had the ability to repay its obligations. Blatantly untrue. Three of his first nine recommendations are in some form of bankruptcy reorganization... You are shamelessly touting a 175% gain on one of his recommendations, which is deceptive. Three total busts (on bond investments no less) out of nine is an egregious record. I would say most of his readers are seriously upside down in several of his recommendations. I would like you to post this and reply to it in your daily newsletter. Tell your readers the truth so they can make a fair evaluation." – Paid-up subscriber Bob Moroney
Porter comment: To my knowledge, no other financial newsletter publisher in the United States matches our transparency in regard to track record. We publish track records in all of our newsletters, and at the end of each year, we review the performance of all of our letters and issue each letter a grade – from A to F. We also constantly publish letters like the above to give our critics a fair hearing. Why? Because we believe in the quality of our work.
Mike Williams has done an outstanding job recommending high-yield bonds to our subscribers. I can prove this to anyone who will simply take the time to look at his track record or read one of his issues. I am immensely proud of his excellent work – there's nothing else like it published anywhere. We have not misrepresented his performance in any way. In fact, his entire track record, including his three troubled recommen
dations, are sitting there in plain sight on the last page of his newsletter, month after month.
Regards,
Porter Stansberry
Baltimore, Maryland
June 24, 2009