The next housing bubble starts here...

 Hey, I've got a great idea. Let's fix the enormous damage done by the last housing bubble... by creating a new housing bubble!

Mortgage rates have hit new all-time lows. U.S. 30-year mortgage rates averaged 3.91% last week, according to Bloomberg. Housing starts were up the last two months, along with existing home sales. The National Association of Realtors (NAR) says the inventory of unsold properties sank to its lowest level in six years (2005 was the peak of the last bubble). The NAR also reported November sales of previously owned homes at a 10-month high.

If this keeps up, interest rates will sink to less than 3% and housing sales will soar over the next couple years. Everybody who didn't buy a house he couldn't afford the first time can get one this time.

 If you want to get a good, solid feel for how bankers think, read the American Banker, a daily newspaper for the banking industry. Today's edition contains an article called "Five Ways to Improve the Banking System in 2012." None of them say, "Get the government out of the banking business," or "Abolish the Fed," or "Stop running the deposit insurance scam." Bankers know where their bread is buttered, and it's not by customers.

At the top of American Banker's list is a call for more regulations. It says the first thing to do is "define 'shadow banking' and start regulating it." Good start. Get the competition out of the way. That's what bankers do. They push more regulation to keep new competition to a minimum. There's a reason they won't let Wal-Mart into banking… It ain't to protect you.

Also on the list is "Confirm President Obama's nominees for key regulatory posts." Bankers don't merely want to stay in bed with the government. They want to have its children.

Another item on the list is to "focus on the impact of a protracted period of low interest rates." Low rates make it harder to earn a big spread. That's what banks do. They borrow short, lend long, and pocket the difference. When rates are low, they pay less, but they earn a lot less, too. Gee, it's almost like the Fed isn't taking care of its progeny. What gives?

 Banking is such a fun topic. I feel like a kid whose mom allowed him to play in the mud after a rainstorm. What a great big, fun, wonderful mess!

For example, there's Royal Bank of Scotland and Blackstone Group. They're cooking up a neat little scam, which appears to be perfectly legal. RBS is selling Blackstone 25% of a portfolio of loans, described by RBS as "sub-performing." Blackstone is paying a 30% discount to face value. But RBS won't have to write down the remaining loan values by 30% because Blackstone is only buying 25% of them. So RBS is retaining majority ownership. Since ownership didn't change hands, the transaction isn't required to result in a writedown of the loans' value. How convenient. It's as though someone sat down with the rulebook and said, "How can we use this to hide the truth?"

Lloyd's pulled a similar trick by selling loans for discounts of up to 40%... but without having to write down any loan values, due to previous writedowns.

In other words, the rules are allowing these two banks to get away with lying about the value of their assets.

 An even bigger scam is the European Central Bank's (ECB) offer of nearly half a trillion euros' worth of three-year loans to more than 500 stressed European banks. The banks will use the money to buy sovereign debt issues, in an effort to prop up the market. Financial Times reports one Spanish bank official described this use of the funds as "normal and natural."

In an era of one financial scam after another, central bank money-printing to buy sovereign debt is perhaps the ultimate scam. They're printing money to support the value of government paper. It's perverse.

 I've been telling folks to buy Wal-Mart stock since October 2006. A year after that, I started telling them to buy World Dominators, the big, safe – and these days super-cheap – businesses that dominate their industries. Wal-Mart, Intel, Microsoft, Coca-Cola... you get the picture.

One of the great things about World Dominating businesses is that, when times are tough, they're able to steal market share from their competitors. Wal-Mart is doing exactly that… Bank of America Securities analyst Robert Ohmes recently pointed this out in a research note. Ohmes itemized seven ways Wal-Mart is beating the competition. One of them is its holiday marketing campaign, which is twice the size of last year's.

Overall, Wal-Mart is getting back to the basics that made it the world's No. 1 retailer. It's re-emphasizing its everyday low-price strategy, as opposed to the limited-time promotional pricing used by others. It's also lowering gasoline prices and once again offering the broadest possible assortment of goods on the shelf. Low prices and a huge assortment of goods were two of founder Sam Walton's original visions for the company.

By offering lower prices, Wal-Mart has revolutionized more than one industry. It put 32 grocery chains out of business by offering lower prices and larger variety. It lowered drug prices with its $4-prescription program. It's also trying to keep the banking industry from gouging those who can't afford it, by offering cheap money orders and other financial services.

Most folks probably don't know that Wal-Mart is at the heart of a revolution in the world of retirement savings and investment, reducing Wall Street's (expensive) role, and helping to diminish the role played by Social Security, 401(k)s, pensions, and other retirement programs. To discover how the system works for yourself, click here.

 As many of our readers who follow Alex Jones know, the voice of Porter's End of America commercial is no stranger to controversy... We saw that first-hand as station after station refused to run our ads simply because of that voice. If you want to hear more of Alex Jones at his most controversial… and his most candid… you don't want to miss the latest episode of Stansberry Radio.

In the program we've released today, Porter welcomes Alex to the show. We guarantee you haven't heard Alex like this before. He shares several interesting and provocative ideas on government (mind) control… where he invests his own money… and Ron Paul and the upcoming elections. We expect this episode will be one that's listened to by hundreds of thousands of people.

Porter also continues the discussion on his Corruption of America thesis that's sure to garner even more attention. As we mentioned earlier, financial blog Zero Hedge picked up the story and it's slowly making its way around the web. Don't miss this show and please feel free to pass it around during the holidays. Should any fights break out over Christmas dinner about some of what you hear, please be sure to let us know. We'll be glad to post your story.

You can listen to the show for free by clicking here. And to make sure you don't miss future episodes, including upcoming guest Steve Forbes, please subscribe to the show on iTunes by visiting www.StansberryRadio.com.

New highs: None.

 There's nothing in the mailbox but praise for Porter's December issue of Stansberry's Investment Advisory. If you want to gush and haven't done so, write Porter at feedback@stansberryresearch.com.

 "Thanks, Porter. You have given us all a gift in your analysis of the politics of the welfare state in America over the last 50 years, and furthered my own personal understanding of the inner workings of this frighteningly corrupt political machine. Please, please keep standing up for all of us." – Paid-up subscriber Candace Howard

 "Why the U.S. was downgraded…

"Let's now remove eight zeros and pretend it's a household budget…

 "I have enjoyed your insight and commentary for many years, and that has not changed.

I appreciate anyone shin[in]g the light of day on long-held 'truths,' and the data you cite on Detroit and inner city poverty are troubling. I have been investing in Oakland, CA recently and now see some things first-hand.

"But your last newsletter and most of your others lack intellectual rigor or completeness. It is just human nature to accumulate the facts that suit our point of view or slant on the world. We all do it, it is hard to escape. The treatment of the corruption of our democratic system and the far right seems to have been rather thin, almost an oversight. What about the Koch brothers, and the other corporations now granted the right by the Supreme court to participate as 'people' in our political process?

"Lastly, the lack of appreciation for science is troubling with you and some of the other writers. So a PhD at Intel doubts Solar energy... that doesn't mean he is right. Even engineers and scientists are prone to the same subjectivity as the rest of us. Porter, with regards to the failure of Solyndra and BP and others giving up, hasn't it dawned on you why this is good news for Solar energy? I won't even get into the flat-lander theatrics on global warning.

"Keep it up. I am even willing to short [stocks] with you, though it seems we are losing most of the time!" – Paid-up subscriber B.G.

Ferris comment: Well, I have to wonder how any adult who calls himself a liberal, conservative, Democrat, or Republican with a straight face can know much at all about intellectual rigor. If you have data that show I'm wrong, go ahead and provide it. If you have data that show Porter is wrong about Detroit or any of the other material in his December issue, I know him well enough to know he'd love to see it. But I won't try to answer for him. He can do that for himself.

However, if you're honestly going to tell me Extreme Value lacks intellectual rigor, I'm going to assume you've never read it or that you're trying to pick a fight. For intellectual rigor, I'll put my advisory up against anything produced in the newsletter industry or on Wall Street.

What other newsletter tells you up front that the best thing we do for you is to reject stock picks that aren't good enough? Between Extreme Value and my other advisory, The 12% Letter, I wrote a total of 24 newsletter issues in 2011. For most newsletters, that means 24 stock picks. For me, it resulted in just 11 stocks.

Six of those were large-cap World Dominator stocks, like Microsoft and Intel – the cheapest, safest stocks in the world right now. Four of my 2011 picks were related to the U.S. boom in oil and natural gas, about which I've written approximately 20,000 words… And my 11th pick was a short sale that's given my subscribers a 30% profit to-date. For that one, I spelled out in detail how the company is playing games with its accounting in order to cover up the fact that its hypergrowth days are behind it and huge new competition is beating it on price and quality.

Finally, I'll say this. Investing isn't about providing a mountain of data. It's about sifting through that mountain, understanding how the business works, and being able to boil the situation down to its essentials. I'll go head to head with anyone at that. I've been doing my own research for about 20 years, and I've been in this business 14 years. If you want to criticize my intellectual rigor, you're going to have to match my effort. I put out about 20,000 words a month of original research and insight. That's a medium-length book every year. Good luck.

Regards,

Dan Ferris

Medford, Oregon

December 22, 2011

The next housing bubble starts here... Bankers and bureaucrats: true love... The RBS/Blackstone loan scam... ECB's 500 trillion euro bailout... Wal-Mart steals market share... Alex Jones on Stansberry Radio...