The S&A Digest

The rumors are true... A bottom in subprime?... Short sells hit a record... American Eagle buyback... Even adjusted for inflation, gas is expensive... On the ground in Detroit... More about briskets, "compounds," and Scott County, Tennessee...

Clearing up a rumor... Yes, it's true...

We've gotten a surprising amount of mail inquiring about our Private Wealth Alliance. How can we afford to make this offer? What's the catch? Why would we offer permanent, lifetime access to all of our best analysts – Steve Sjuggerud, Tom Dyson, Matt Badiali, Jeff Clark... and yes, even Dan Ferris... for less than $1,000?

I can explain the economics of our offer very simply. We believe that the more of our research you actually get to see and use, the more impressed you'll be with our services, and the more likely you are to seek an even higher level of service from us. Quite simply, we're willing to bet the profits we lose offering the Private Wealth Alliance that in the future you'll decide to buy even more research from us. We know from tracking the behavior of other subscribers that a substantial percentage of our audience will "upgrade" from the Private Wealth Alliance to a higher level of service. But, you are under absolutely no obligation to do so. The Private Wealth Alliance gives you the chance to save thousands of dollars and get a "free ride" on the backs of the high rollers in our subscriber file.

If you want to receive all of our best research for the absolutely lowest possible price, the Private Wealth Alliance is for you. We're happy to offer it – with our standard money-back guarantee if you're not 100% satisfied. Yes, it's "for real."

(The details of our Private Wealth Alliance offer are simple: If you pay $950 to join, you'll only have to pay $99 per year to continue to receive True Wealth, Porter Stansberry's Investment Advisory, Penny Letter, the S&A Oil Report, The 12% Letter, and The Big Trend Report.)

Signs of a bottom in subprime... Fremont General (FMT) sold its commercial lending business to iStar Financial for $1.9 billion and a minority stake in the business. Also, a group of investors paid $80 million for preferred stock in Fremont Investment & Loan and common stock in Fremont. Shares surged 53% in premarket trading. Shares of other subprime lenders joined the rally, with Accredited Home Lenders (LEND) gaining more than 10% and PSIA pick American Home Mortgage (AHM) gaining 4%.

Contrarian dose of the day... Despite the current market rally, the number of stocks sold short on the New York Stock Exchange reached an all-time high of 11.76 billion shares as of May 15. While the index has gained 10% since mid-March, the number short sells has gained 12%.

Extreme Value pick American Eagle (AEO) today announced a 23% jump in first-quarter profit. The company also will buy back an additional 23 million shares through 2009, increasing its total repurchase authorization to 27.2 million shares, 12.4% of outstanding shares.

Inside Strategist and PSIA pick USG (USG) will cut 500 jobs, or 10% of its salaried workforce, as demand for its products has been hurt by the housing slump. Shares gained 3.1% yesterday.

The average price of gasoline jumped to $3.218 yesterday, just half a penny shy of the 1981 inflation-adjusted record of $3.223.

Bullish signs for Japan... Goldman Sachs has become the second U.S. investment bank in a month to release a yen money market fund. The GS Yen Liquid Reserves Fund last week followed the release of a similar product by JP Morgan, the JPY Cash Liquidity Fund. Steve Sjuggerud has been bullish on Japan since October... Steve has made more than 10% since February with his Japanese real estate recommendation.

While we were out... Hedge fund mogul Eddie Lampert bought 15.2 million shares, $800 million, in 12% Letter pick Citigroup (C). Though his motives are unknown, many believe that Lampert may be the catalyst needed to get the world's largest financial-services provider's stock moving. Shares gained 4% last Wednesday on the news.

Our uber-contrarian, Tom Dyson, is in Detroit this week. He's been sending me e-mail updates about the situation... "Did you know? Wayne County, home to Detroit, lost more people from the beginning of 2005 to the end of 2006 than any U.S. county except the four counties in Louisiana and Mississippi devastated by Hurricane Katrina, according to Census figures released in March."

Tom is so excited about how cheap Detroit has gotten, he says he wants to buy a skyscraper. He likes the 65-story David Stott building. It's only $3.9 million. It's got unobstructed views of the new baseball stadium.

A flurry of new highs across our portfolios: McKesson (MCK), Pharma HOLDRs (PPH), EnCana (ECA), Janus Capital (JNS), KHD Humboldt Wedag (KHDH), Plains Exploration & Production (PXP), ExxonMobil (XOM), BG Group (BRG), ConocoPhillips (COP), Eni (E), Marathon Oil (MRO), Petrobras (PBR), Petro-Canada (PCZ), Royal Dutch Shell (RDS-A), Schlumberger (SLB), Macquarie Global Infrastructure (MGU), Vector Group (VGR), American Express (AXP), Disney (DIS), Kodiak Oil (KOG), Oneok (OKE), Nokia (NOK).

In the mailbag we found... real letters!

In this age of instant gratification and instant communication, we mourn the lost art of handwritten letters and postcards. Thankfully, some of our readers are old enough to remember the joy of getting real mail and have taken the time to share that gift with us...

Dr. D. Hywel Davies wrote to us on May 9, from Switzerland. "I was touched when I read your statement that you did not mind people writing to you by hand, and that might even welcome it... I am writing with a fountain pen (Caram d Ache) and real ink and it's as smooth as well, making money should be... I sailed out of Baltimore on the SS Ellinis in 1973 when I went on my sabbatical year."

We also received a card from Pascal Buckley Waugh – written on beautiful Crane & Co. stationary. "Michael asked me what I liked so much about the Digest. I replied, 'Porter's relentless integrity.' It's there, week after week. You take a lot of flak for saying true things people don't want to hear – I'm reminded of my grandfather's saying that 'Good people are often nice, while nice people are rarely good.' So, thank you Porter Stansberry. I've learned a hell of a lot from you and have a great deal of respect for you."

As I hope you know by now, we read our mail. All of it. Good and bad. Whether delivered via computer or by hand & stamp. Although we can't reply directly, we often reply in these pages. Send your comments here: feedback@stansberryresearch.com or to Porter Stansberry, C/O The S&A Digest; 1217 St. Paul Street, Baltimore, Maryland 21202.

"I am confused Porter, I live in the country but I have never seen a compound? What is a country compound? Now, Cottontown, my new address, has country music estates, but not compounds. Does this mean you mean you have a well-guarded estate? That is high electric fences with armed personnel? I am sorry too say I always thought compounds were for people like Kennedy in Massachusetts or Florida. Even in the good old moonshine days there was no heavy security around the stills. Maybe you mean a gated community." – Paid-up subscriber Bernie Krantz

Porter comment: I'm laughing out loud, Bernie, at the thought of a gated community in Scott County, Tennessee. I put the word "compound" in quotes to emphasize sarcasm. Scott County is one of the poorest counties in America. It's rural Appalachia. Defunct coal mines. Depressed economy. Lots of obese people, walking around Wal-Mart, wearing what you'd call a "jump suit" if you were being kind... or a pup tent if you weren't.

What the local people lack in sartorial splendor, they make up for with genuine Southern hospitality. There's zero crime here. Everyone knows everyone else. And it's an extraordinarily beautiful place, with 3,000-foot mountains, vast tracts of timberland, clean streams, and great weather. Plus, you can live like a king in Scott County for next to nothing. Land goes for about $2,000 an acre. Good construction costs about $80 per square foot. A full-time maid/cook – who speaks English – runs about $25 per day. There aren't any income taxes. It's a great place to have a second home, if you enjoy the outdoors.

"Porter, try taking your wrapped brisket to 202-3 degrees. I have been told that the collagen fibers will start to melt rehydrating your brisket. We bring up the smoker temp to 250 after it is wrapped." – Paid-up subscriber Jim Sevcik

Whatever your opinion on Global Warming, one point that no one can refute is that a little smoke in the atmosphere to do ribs, or brisket done properly, is well worth it! Even the best financial minds gotta take some time out to lick their fingers once in a while." – Paid-up subscriber Frank Fischer

"It is impossible for me to purchase all of the recommendations made in your various products to which I subscribe, so I read each newsletter and recommendation and select those I understand and that make sense to me at that point in time. However, as for the depth of my understanding of any recommendation, I rely on the newsletter author for updates. Are you suggesting that methodology is improper? Are you suggesting I should be able to regurgitate the author's point verbatim in a casual conversation or identify market trends or developments independent of the author's updates? If so, why have updates?" – Paid-up subscriber Marty Nahigian

Porter comment: I suggest you know enough about your investments to explain to someone else, without notes, how the business works, why you bought (margin of safety, growth potential), and why you'd sell (price appreciation, risks). I assume that our materials, as well as SEC filings, company reports, and the mainstream press, will be your major sources of information. Whether you write out note cards on each company (like I recommended) or not, the point is simply to remind you that investors are business owners and business owners have a responsibility (at least to themselves) to know what business they're in. There are certainly other investment strategies (namely, broad diversification)... but what I've learned is that the best investors act and think like business owners.

"How about a Dan Ferris' Wealth Alliance, a one-time fee for all Dan Ferris newsletters now and in the future? If 100 of us sign up for a Dan Ferris' Wealth Alliance would that justify a Dan Ferris International newsletter?" – Paid-up subscriber Larry Morrow

Porter comment: That's a good suggestion... However, I'm afraid with three Alliance offers already available (Private Wealth Alliance, True Wealth Alliance, and S&A Alliance) if we add another option, we'll further overwhelm our already overwhelming array of subscription choices. But we'll think about it.

"I read today with interest the special offer for the S&A Gold Report. I'm tempted. However, given the types of recommendations he gives and the unique opportunities he seems to have to make money, I was wondering why do I not see Matt Badiali on the top 10 Open List or in the S&A Hall of Fame?"

– Paid-up subscriber, Don Diggs

Porter comment: Because Matt is very new to our group (though not to geology). We only started publishing the S&A Gold Report last June. It's not even a year old yet. Some of Matt's picks, like the ones that are up 65%, 71%, 49%, 94%, and 105%, will undoubtedly end up on our top 10 lists... but they're not there yet. Doesn't it make sense to subscribe now... before his best ideas have run up that much?

"I don't know if there's a correlation between what we see happening at the governmental level & at the individual level insofar as what I call the 'spend, don't save' mind set, but somewhere along the line there's going to be the proverbial day of reckoning." – Paid-up subscriber John Kemp

Porter comment: We've all come to believe that spending creates wealth. It doesn't. Saving and investing creates wealth. But try telling the voters you want to cut spending and encourage them to save money.

"You list top 10 open recommendations – does that mean you recommend buying at current levels or are they just 'open' to see where you are from some previous date?... You talk a lot about some stocks but [how do I] find if they all are good buys when you mention them or are you saying there are good buys at that time?" – Paid-up subscriber Mike Preston

Porter comment: We publish two lists of stocks in the Digest. The first list is our top-10 "open" positions. These are the 10 stocks we've covered in our newsletters that have gone up the most and have not been sold. Whether they're still "buys" or not is up to the analyst that's following them. And that advice can be found on the portfolio page of his newsletter.

The second list, our Hall of Fame, is our best-performing recommendations that have been "sold" – positions subscribers should have taken profits on.

"'Porter comment: No... I'm not really interested. Global warming isn't a scientific issue. There's nothing scientific about it, from either side. There's far too much we don't know and can't know about the Earth's climate.'" This is an incredible statement. Clearly, you know absolutely nothing about science at all... The fact that the left has trumped up the man-made global warming myth does not mean we have no data on climate or no legitimate theories on what influences climate. To throw up your hands and say 'This is too hard. We'll never know...' is tantamount to giving in to the post-modernist fallacies that drove this junk science from the beginning. If every scientist approached his study with this attitude, we'd still be using stone knives and dress in bear skin." – Paid-up subscriber Cathy Cuthbert

Porter Comment: No, I didn't say anything about the future of the study of climate. In fact, I'm confident our understanding of the factors that drive the Earth's climate will continue to improve... and that the things we believe about the climate today will be considered laughable in 20 years. I'm also confident that variables, like the Earth's seismic activity and huge explosions on the surface of the sun, will make forecasting the climate with any certainty impossible. That's not because we can't understand what affects the Earth's climate. It's because the forces at play in determining the Earth's climate can't be accurately predicted.

"I get mail all the time about different stocks. Some are just the old 'pump and dump,' but sometimes others have turned out to be real good tips. So I get this teaser tip about the next big profit producer. It's a manufacturer of VoiP equipment for the cable systems. I have an old VoiP modem laying on my desk, so I turn it over and see the name ARRIS on it, do a little research on (ARRS), and to me it looks like a good stock. I was ready to move on this one until I noticed the return address was from Salt Lake City, UT. Porter, any comment, (no, not about the Mormons, just the stock)?" Paid-up subscriber, T.M.S. Michigan

Porter comment: I don't know anything about Arris, but I certainly wouldn't assume, simply because a business is headquartered in Utah, that it's not a legitimate business. Now... if you'd told me that you were looking at a company from Utah that sent you a flyer in the mail promising that you'd make 40% a year and trumpeting its close association with God... I'd be a lot more suspicious.

"You guys send out too many offers for new newsletters – perhaps you should provide some of this new and fantastic inside information to the ones of us who already pay your tab with subscriptions!! I'm getting sick and tired of a new sucker punch every day." – Paid-up subscriber Ron Lawrence

Porter comment: Have some patience with us... it's the advertising that pays for the research you enjoy. Without one, we couldn't produce the other.

Good investing,

Porter Stansberry

May 22, 2007

Stansberry & Associates Top 10 Open Recommendations

Stansberry & Associates Hall of Fame

Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)

As of 06/28/2013