The S&A Digest

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

As of 06/28/2013

Weight-loss mania... Market top in alternative energy... We didn't make up the Mormon facts... Citigroup breakup... Bidding war for Dow Jones?... More technical difficulties

Our basement is flooded.

We have had personal trainers and weight-loss hopefuls zipping in and out of our building for the past three days. The companywide weight-loss challenge kicked off on Monday, and Agora was nice enough to choose the small gym in our basement as the hosting grounds.

We expect the traffic to die down in about two weeks once the fad wears off...

Tom Brown, CEO of hedge fund Second Curve Capital, believes that 12% Letter pick Citigroup (C) should be split into four separate entities. His opinion carries weight. Second Curve Capital is arguably the best fund focusing exclusively on financial stocks. Citigroup executives admitted that the bank could fall victim to a takeover. They plan on stepping up the company's investor relations to explain why the whole is greater than the sum of its parts.

The bank has been on a buying binge recently. Today, Citigroup, already the largest bank in the U.S., announced it will buy Bisys, a financial services company, for $1.45 billion. Yesterday, Citi completed the $1.09 billion acquisition of Egg Banking – the world's largest pure online bank. Citi also recently bought Japan's third-largest brokerage, Nikko Cordial, for $7.7 billion and scooped up the hedge fund Old Lane Partners for an undisclosed amount.

We believe Citigroup will make an attractive acquisition target because the stock is undervalued relative to its vast assets.

PSIA pick Verizon (VZ) is one step closer to rolling out its fiber-optic-based FiOS television service nationwide. The telecom giant signed a deal with Gemstar-TV Guide International to add interactive program guides and recording functions to the service.

Signs of a top in alternative energy... Venture capital last year put $1.5 billion into alternative energy companies, up 141% from a year earlier. In the same period, public offerings for alternative energy companies hit $4.1 billion, up from $1.6 billion in 2005.

More on buyouts... Yesterday, News Corp. made an unsolicited $5 billion bid for Dow Jones (DJ), controller of The Wall Street Journal, shooting share prices up 55%. The Bancroft family, the company's controlling shareholders, said they will vote against the offer, which should spur rival bids.

Interestingly, options trading for Dow Jones increased 14-fold, hitting an 18-month high, the day before the deal was announced.

New highs: Buckeye Partners (BPL), Coca-Cola (KO), Kodiak Oil (KOG).

A message from our customer service team: We recently experienced technical difficulties with our e-mail customer service system. Although our IT department corrected the problem earlier today, you may experience a delay in receiving a response to any e-mail sent in the past 24 hours. We apologize for any inconvenience this may be causing you. For faster service, you may call our Customer Service Department at 888-261-2693 between the hours of 9 a.m.-5 p.m. Monday through Friday. We have representatives standing by to assist you.

We're ready for the mailbag to get back to normal... please stop sending your advisory board resumes. We will not consider any more applicants. Please do continue to send us your complaints at feedback@stansberryresearch.com.

"I am retired, have a little bit of money not very much at all, did some trading before, [and] have a very basic understanding of options. I have thrown myself at your mercy and blindly trust you guys... I read between the lines that the different editors are expecting a correction. Will you let us know if we have to get out of certain stocks? I cannot lose this money, little ups and downs come with the territory, but a big correction... it is all I have... I have learned so darned much from you guys, thanks a lot." – Paid-up subscriber Paula Zina

"I'm a Mormon. You may want to remove me from your subscriber list since I'm probably a crook. I mean when the SEC opens an office in Salt Lake, what other possible reason could they have but to crack down on Mormon crooks? Gee, I don't know, Porter. You think there's an SEC office in Baltimore? Must be a Mormon or two in Baltimore that needs watching seeing as how we're all crooks. Then again, maybe they're there to keep an eye on you and your tireless hype machine that sends me more solicitations for can't miss, home run, retire early, huge return offers than any other source BY FAR! You've admitted in these dipatches that you've learned what it takes to sell newsletters, and it's clear by reading almost anything you send exactly what you've learned: write a headline that pushes the greed button, carefully select whatever facts you can to justify the headline, make a can't-lose guarantee, and head to Florida to fish, golf, and take shots at others who do the same thing. What's your religious affiliation, Porter? I bet the lot of you are all the same – a bunch of self-serving hypesters who play fast and loose with truth. I mean there's an SEC office in Baltimore. Just coincidence? I don't think so."

– David Tippetts, a paid-up Mormon subscriber "who stole money from his grandmother to pay for his subscription"

Porter comment: The last big Ponzi scheme in America was pulled of by James Paul Lewis Jr. He got busted in late 2004. According to the government, Lewis bilked $813 million from more than 3,000 investors. Lewis promised his victims they'd earn 40% a year. He was sentenced to 30 years in prison – the maximum – for what Federal Judge Carney described as a "crime against humanity." You'll never guess where James Paul Lewis Jr. went to church, along with most of his victims.

Stories like this one are so common that even Utah-based newspapers label their own communities as fraud-ridden.

The Ogden Standard-Examiner: "The cultural emphasis in the Mormon Church that equates financial success with spiritual success, and an unquestioning allegiance to authority figures, may partly explain why 10,000 Utah investors have been swindled out of more than $200 million during the past decade."

The Ogden Standard-Examiner, quoting Ken Thornberg, director of the Better Business Bureau office in Idaho: "I would say – and I am not exaggerating – that 75 percent of the country's major investment schemes are hatched in the Salt Lake City-Provo area."

And the link between Utah, Mormonism, and financial fraud is widely discussed in the national press, too.

The San Diego Union: "In recent years, Utah has been called the fraud capital of the United States, and many defendants in fraud cases have been Mormon officials who used church connections to victimize other members."

Newsweek: "Utah, the land of the Mormons, has earned itself another name: the Stock-Fraud Capital of the Nation."

One last point... Guess which state has the highest number of bankruptcy filings per household? You'll never guess.

"I am not angry, not a relative, and just slightly intoxicated, so please read this anyway. I enjoy reading the daily Digest and have one question. In Tuesday's installment, you advise a reader to subscribe to Jeff Clark's S&A Short Report, and my question is, how would I do this? If I go to your web page, and click on 'Research Products,' there is no link to actually order a specific product (except for Extreme Value). Am I doing something wrong or do I have to wait for a promo e-mail? Maybe your webmaster can add a 'shopping cart' feature or hyperlink?!!?" – Paid-up subscriber Thomas M. Corjay

"Could you explain once again why it is you cannot invest in the stocks you recommend? I've heard of other people that recommend stocks but don't invest in them until 24-48 hours after the recommendation has been sent out. Regardless, here's a service I'd probably be willing to pay money to see. Say you published your investments, your personal investments. You don't recommend to buy or sell, [you] just publish what you do. It's up to me to buy or sell after you do so, definitely not a recommendation. Call it: 'Pay to Peek' if you want..." – Paid-up subscriber Alfredo Dominguez

"Porter, I believe you are a hell of an investment advisor. I've made a lot of money following many of your investment suggestions and your services are well worth the cost. However, I think it's time that you stopped looking at our enviremental problems through your wallet. Yes, I'm one of those liberal capitalists who worries about our planet and many other things that you and the other conservatives rant about. Why not just stick to investment advice, so I don't have to get steamed virtually every time I read your stuff." – Paid-up subscriber Sheldon Rubin

"Porter... I have been in 'Wall Street' for 47 years. I have been a partner in a member firm of the NYSE, a member of the District 12 NASD nominating committee, president and CEO of my own firm, and an active member of the NASD Arbitration Board. In short, my entire adult career has been in the securities industry. I am still actively functioning as a principal in a young and exciting firm headquartered in Tampa, Fla. All of this verbiage is only offered to establish the fact that I am anything but a neophyte when it comes to discerning good investment advice from garbage. I read with some humor that your outstanding investment letter and Matt Badiali’s [S&A Gold Report] were not publishing grand slams. Frankly, I think that's great for me, if not so good for you. The less people who follow the incisive rational of your editors, the less competition I have in jumping on their recommendations. There is no doubt whatsoever that these letters are among the most astute in the industry. I implore you not to let them out from under your tent. Patience, my dear Porter... You are going to be revered for having kept the faith. Common sense, combined with intellectual curiosity, and a nose for sniffing out the truffles in this fascinating market are not found in abundance. You make me wish I had put my name up for consideration as a member of your new board of advisors. I think I would have truly enjoyed the association. Perhaps it is better that I did not, however, we obviously think too much alike." – Paid-up subscriber Donald R. McGahan

"Apropos Barney Frank and internet gambling – where were you moralizing assholes during the six years when the most corrupt administration in history – the Bush, Cheney, Rumsfeld, Wolfowitz cabal – had it all their own way and drove the country into an unwinnable war and into unfathomable debt, while enriching their favored few?" – Paid-up subscriber Albert de Zutter

Porter Comment: Right here. Where were you?

Regards,

Porter Stansberry

Baltimore, Maryland

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