The S&A Digest

A blond big-boobed nobody... S&P still cheap?... Wal-Mart rules generics... Icahn wants another go with WCI... Bin Laden's effect on stocks... GM beats Toyota

Goldsmith comment: Porter is busy with his issue today, so I'll be stepping in for the Digest.

 Chinese insurance companies will soon be allowed to invest money in U.S.- and London-listed stocks.

 Just six months after the rollout of its $4 generic prescription program, Extreme Value pick Wal-Mart (WMT) announced that 37.8% of all prescriptions filled are $4 prescriptions.

 Extreme Value pick JP Morgan Chase (JPM) is selling its wholly owned Niagara Holdings – a specialty inorganic chemicals, catalysts, and engineered glass products producer – to private-equity giant Carlyle Group for $1.5 billion.

 It appears Carl Icahn is still in the market for Inside Strategist pick WCI Communities (WCI). The billionaire investor asked the company to delay its June 15 annual meeting for up to 30 days while he retools his offer. WCI shareholders rebuffed Icahn's previous $22-a-share tender offer.

 It's a bull market... and how far does it have to run? Companies in the S&P 500 are 45% cheaper now, relative to historical profits, than when the index last peaked in 2000.

 Shares of Ford (F) and PSIA short sell General Motors (GM) outperformed shares of Toyota over the past 12 months. GM led the Dow Jones Industrial Average last year with a 58% gain, and Ford has gained 11% this year. Toyota gained 28% last year, and is down 10% so far this year.

 Big Oil company BP may lose its $18 billion Russian oil field, which has enough natural gas to supply Asia for five years, as President Vladimir Putin extends state control over foreign projects. BP depends on Russia, the world's biggest oil producer, for a quarter of its production and 18% of its proven oil and gas reserves.

New highs: Buckle (BKE), Anglo American (AAUK), Plumb Creek Timber (PCL), PowerShares DB G10 (DBV), POSCO (PKX), Plains Exploration & Production (PXP), Freeport McMoRan (FCX), McKesson (MCK), Nokia (NOK), ConocoPhillips (COP), Marathon Oil (MRO), Pioneer Natural Resources (PXD), Anheuser-Busch (BUD), Cemex (CX).

 There are some e-mails in here that I really wish Porter could comment on. You'll have to wait until Monday for more of his wit. In the meantime, I'll do my best. Give us something to talk about at feedback@stansberryresearch.com.

 "Having been raised by one of the original sit downers when the UAW was formed in Flint Mi. by a man who wept when he remembered Walter Ruther and what he did for the average working man, and having heard the horror stories about that time, and having worked in the auto industry for 36 years as both a hourly union member and as a member of management I have learned about and experienced both sides. The bottom line falls at management's feet. But one has to remember that when the union wrenched management's right to run the company from them by a series of terrible strikes that cost the owners (shareholders) hundreds of millions of dollars the management capitulated to salvage the company. At one point in my career I was in labor relations and experienced first hand the ruthlessness of negotiations. In the interest of brevity I will say simply that the unions became so powerful that the management surrendered the right to make good decisions. I have been retired for 15 yrs. and when I retired the companies' burden rate (real cost) for labor was around $50/hr. $35 of that was booked whether the employee was at work or not for benefits." – Paid-up subscriber Admar

 "Porter, I have been hearing quite a bit lately about Bin Laden acquiring nuclear weapons for an attack on America. If this were to happen do you think the stock market would recover and how can we as investors protect our investments from the devastating affect his could have?" – Paid-up subscriber Roger from Afghanistan

Goldsmith comment: If a nuclear war breaks out, you've got bigger problems than the stock market.

 "For the investor that wants more shares – I will gladly trade him 100,000 shares of a penny stock (at $0.25 each) for 63 shares of BRK/A (at over $100,000 each)." – Paid-up subscriber Stan

 "I was baffled to read that Doug Casey will 'debate' Ann Coulter. What is to debate about with a belligerent, empty-headed, lying, political hack? You can disagree with Newt Gingrich, and I do disagree with him on many issues, but he is a heavyweight and an original political thinker, similar to Doug Casey. Ann Coulter is a blond big-boobed nobody, not worth listening to." – Paid-up subscriber Thomas

 "You wrote about people being biased toward higher share count. I've also noticed the opposite among stock market 'dabblers' – bias toward high-price stocks like Google. They find GOOG stock more impressive than stocks with lower prices." – Anonymous

 "I signed up for the newsletter about a month ago. I've read every letter,

 every day. So impressed, I became an alliance member about 1 hour before the deadline ended. I turned 23 on April 3. I thought I might have a shot at

 being the youngest Alliance member... I realize you probably don't have a

 huge younger following, but any information targeting my age bracket would

 be greatly appreciated!" – Paid-up subscriber James

 "Doug Casey is so boring. He doesn't like our politics, our constitution or our banks. He thinks he is a genius and everybody else is stupid. What is he doing still living in this sorry country? Why is he quoted in your newsletter? What are we supposed to get from his tirades? What is he doing to make things better? Let him rant in his own newsletter." – Paid-up subscriber Warren Heinemann

 "Porter, can you address why they halted trading 15 minutes before the market closed today on OmniVision? I read that trading went on after the bell and the stock hit $19. Since I have options on it per Jeff's Short Report, I didn't know what to do. There was no explanation in the news portion of my Fidelity account, so if you can explain this it would be helpful." – Paid-up subscriber Sharen Kirkham

Goldsmith comment: As you should have discovered this morning, you and other S&A Short Report readers made a lot of money on this trade. OmniVision surged after the earnings announcement, so Jeff recommended closing the second half of the position this morning for a 180% gain. The other portion was closed last week for a 100% gain.

 "Your 'sign of a market top' that 'US GDP grew at 0.6%, half the estimated 1.3%...' is the type of sad and misleading statement that pop commentators should be shot for as they are WORNG. I would expect better from you guys. Real analysis shows that the market is forward looking and in fact interest rates and not historical economic growth (nor even profit growth) are the real drivers of the market. Want the analysis? I'll send it to you (for free)." – Paid-up subscriber Tim Boyle

Goldsmith comment: Sorry for being WORNG, Tim.

Good investing,

Sean Goldsmith

Atlanta, Georgia

June 1, 2007

Stansberry & Associates Top 10 Open Recommendations

Stansberry & Associates Hall of Fame