The S&A Digest: Back to Work

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

As of 06/24/2013

Back to work... Recession looming... Merry Christmas from Tommy... How to accomplish your goals for 2008... Market timing with Jeremy Grantham... Merry Christmas from Fred Frailey...

We begin the new year with... a lot of work to do. Coming this week is our annual review of last year's track record, the latest S&A 16, and I'll be writing my January issue of PSIA. (If you're not familiar with the S&A 16, it's a balanced model portfolio that we send our S&A Alliance subscribers each quarter. It's essentially our 16 best ideas to buy now.)

Despite our large "to do" list, we can't pull our mind away from the big question looming in front of us like a giant freighter in Baltimore's Inner Harbor. How will the world's economy react to America's broken mortgage machine? Since at least 2000, by our reckoning, most of the financial gains around the world have been powered by the staggering increases in America's debt load.

Although it rarely pays to be bearish, it seems likely to us that the great mortgage/spending binge of 2003-2006 should create a bust of similar proportions. And for the first time in at least 20 years, we find friends of ours going bankrupt. I'd wager friends of yours are going bust, too...

Legendary investor Robert Rodriguez sees similar things happening in the markets: "The severity of the credit crunch has been totally misunderstood and underestimated by the vast majority of equity investors. Economists will be debating whether it's technically a recession, but from the standpoint of economic profits and stock market profits, it will be a recession."

Robert's averaged 18% a year for more than 20 years in the stock mutual fund he runs (FPA Capital Fund). He's a great market timer too, opening his fund to new investors at market bottoms. As of today, 47% of his fund is in cash...

Another legendary investor, Jim Rogers, also sees a recession for 2008. He blames Alan Greenspan's printing money like a "wild Indian." It's no surprise that Rogers is massively short the U.S. dollar. He believes the currency will underperform for years and calls it his "permanent investment short." He's not buying any stocks, unless it's a short. In particular, Rogers is betting against investment banks. He's bullish on – again, no surprise – agricultural commodities. He likes cotton, coffee, and sugar.

At least one man in America could care less about what happens to the economy – our dear mailman, Tommy. He's got a government sinecure and an entire mail route full of odd jobs. Just before Christmas, we had to take down one of the huge, old maple trees that line our driveway. (It breaks my heart to cut down a tree, but this one was so old, its roots were rotting and it was beginning to fall over.) What do you want us to do with the wood, the contractor asked. Just leave it in the yard, I told him. Tommy will be around shortly. Sure enough, Tommy showed up the next day with his splitter, "Figured you'd want me to take care of this for you..."

For Christmas, Tommy brought us the most beautiful, fresh venison roast I'd ever seen. "Where'd you smack the deer?" I asked. I don't think we've ever gotten a Christmas present from our mailman before... I probably shouldn't have asked any questions.

"Oh, I didn't shoot that one. That'en there was road kill. I found it this morning. It was down on Falls Road, across from the big field. Still warm when I found it."

Purchases of $200 oil call options rose tenfold in the past two months to 5,533 contracts, a record increase for the period. The contracts gained 36% since early December.

Steve Sjuggerud tells you how to achieve your goals for the new year in today's DailyWealth. His program works – don't miss it.

New high: UltraShort Real Estate (SRS).

The mailbag has been nearly empty for days. How depressing. But with our annual review coming out this week, you're about to be loaded up with new ammunition. I'm sure you won't let it go to waste... Send your comments here: feedback@stansberryresearch.com. (Oh, by the way, how did you like our Twelve Days of Christmas?)

"According to a recent letter by Jeremy Grantham, the U.S. stock market is currently about one-third above normalized valuations of the past century. Translation: Within the next few years, the S&P could quite easily see a number well under 1000. Let me make a plea to you at S&A research: If the S&P does in fact fall below that number, would you PLEASE consider reinstating Dan Ferris' Penny Letter? As for me, I plan on keeping Dan's final list of Penny Letter (in his Jan 2008 letter) stocks in anticipation of that wondrous day. If the S&P does indeed fall below 1000, Dan's Jan 08 list might be comparable to Biff's list of stocks in Back to the Future 2!! I know that Dan is a market agnostic. I can respect that. Nevertheless, folks like Jeremy Grantham (and John Hussman, of the Hussman Strategic Growth Fund – HSGFX) are experts on overall 'market-VALUATION' (versus market-timing). I believe that investors would do quite well to listen to such people at this period in stock market history, and then combine their insights on the market at large with Dan Ferris' brilliant insights with individual stocks. I drool at the prospects ahead!" – Paid-up subscriber Matt Malone

"Regarding your reply to 'Mr. Million'... you cant neglect the fact that you 'almost' recomended SHLD! in more than a few DailyWealth or GSW your editors spoke greatly about SHLD and Eddie Lampert (not only about companies LIKE shld...) and how its like getting into his ESL hedge fund for free... etc etc. and although you didnt say BUY IT NOW! being a financial dvisor your subscribers trust, praising a company and its ceo several times, gives you as much guilt as recomending it!" – Paid-up subscriber Mr. Barnatan, regarding December 21 Digest

Porter comment: Actually, we did recommend one of the companies Eddie Lampert controls. But it wasn't SHLD. And if I had to be responsible for all of the stocks people have claimed I "almost" recommended, why would I bother with making actual recommendations and maintaining model portfolios?

"Guess what came in the mail today! An invitation to subscribe to Kiplinger's! I had to go back and search the archives to remember exactly what Mr. Fred Frailey had done (as published in the November 6, 2007 Digest) and precisely how I had responded (as published in the November 7, 2007 Digest). I have returned their postage paid envelope containing those two issues of The S&A Digest along with a note expressing my astonishment that they would attempt to solicit a subscription to their publication from an obtuse, 'unsuspecting reader' such as myself. I just love surprise Christmas gifts that show up at the last moment!" – Paid-up subscriber Ken McGaha

Regards,

Porter Stansberry

Baltimore, Maryland

January 7, 2008

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