The S&A Digest: Central banks to the rescue...

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

As of 06/27/2013

Central banks to the rescue... Slickly marketed gunslingers... Dr. Doom's prediction... Investing in anger-management classes... Extra jam

After injecting $130.7 billion into the market yesterday, the European Central Bank added an additional $83.8 billion today. The added capital comes on the back of Japan's central bank injecting $8.4 billion and the U.S. Federal Reserve doling out $24 billion.

One hundred billion dollars here, $80 billion there, and soon you're talking about real money. Make sure you own some gold and silver, folks...

The SEC will begin tearing through the books of the five largest banks on Wall Street, checking for subprime exposure. In particular, the SEC is checking to see if the banks calculate the value of their subprime assets and customer assets in a consistent way. What's your guess?

A Citi Investment Research analyst upgraded shares of S&A Penny Letter pick Westwood One (WON) from "sell" to "hold" today, citing that the worst is already priced into the stock.

Financial stocks are now at their cheapest point in a decade. The subprime scare has erased $600 billion, 8%, of value from the financial sector – the worst of any industry. Financials are now trading at 11 times earnings, the lowest since 1995.

The ratio has fallen from 13 since the start of the year and is the lowest among the 10 industries in the MSCI World – a global equity index. We'll put our quantitative analyst, Ian Davis, on the task to determine what happens when financials get this cheap.

Permabear Marc Faber, publisher of the Gloom Boom & Doom report, is calling for benchmark indexes to fall by 30%. He believes the Dow Jones Industrial Average will fall below 12,000. Faber also predicts that the bailout by central banks will cause severe inflation... see above.

New highs: Advisory Board Company (ABCO), Alexander & Baldwin (ALEX), eBay (EBAY), FLIR Systems (FLIR), Coca-Cola (KO), Plum Creek (PCL), Seabridge Gold (SA), Stewart Information Services (STC).

And now... the mailbag. More vitriol directed toward our politicians. Sadly, not much toward us. Come on folks... picking on politicians is easier than picking on the global-warming nuts. Send us your comments to: feedback@stansberryresearch.com.

"You seem to be a band of slickly marketed gunslingers who, under the guise of due diligence and in-depth analysis, are pandering to greed by shooting for returns that even the all-time investment greats can't obtain. You seem to be better at selling newsletters than at trading or investing. Not once in the last two or three months did I read in any of my subscriptions, about the prospect of a meltdown and the effect it might have on your picks. Fortunately, I've been mainly a reader rather than a follower of your advice, thinking that it would provide some market education. It certainly has, and not in the way I anticipated." – Paid-up subscriber Ed Zeldin

"I usually enjoy reading the Digest everyday, but was very unhappy to see the e-mail from David Woodworth that you published yesterday. I try really hard to not listen to rap, watch [WWE], or do anything else that exposes me to negative, angry, or stupid ideas or people. Yet here, in the middle of the Digest, was this e-mail from a guy who obviously should be investing in anger-management classes rather than investment newsletters. Please don't do this to me again." – Paid-up subscriber Mark

"I have found your copywriting and newsletters very compelling and re-assuring. They are written with a sense that nothing or very little can [go] wrong if one invests in the products you suggest. They are written so strongly and compellingly that one begins to suspend disbelief and just take the analysts view. I, as most subscribers, am educated and not completely naive of the financial markets, and yet I have found myself naively drawn in to your advertisements and newsletters; sometimes taking deep losses. I read one of your responses to the SEC complaint and situation that has arisen from it that basically said, 'If they do not like the message I send out, change the channel' implying that you are not responsible for what others take away from your newsletters. While I value freedom of speech greatly, I also know I am responsible for what I say. If I overstate my case on a stock to build up my subscriber list and increase profits, I am liable for being deceptive and to take the legal penalty. Isn't this your situation? Please understand I also think you do good. You educate people and entertain with your quips, but isn't it true you also take advantage of people's naivetey, and people (including me) get hurt by that." – Paid-up subscriber Thomas Gargiulo

Porter comment: I happily take responsibility for all the things I write –especially when my ideas produce great profits for my readers. When I am wrong about a fact or when I make a mistake in strategy, I admit it and explain to my readers what I've learned and how I'll try not to make a similar mistake again. (See what I wrote about American Home Mortgage, for example.)

On the other hand, I don't take credit for anything that people do with our information. I am not compensated for the gains they might make, nor do I accept any liability for what may occur following our advice. We write about money and investment ideas. We do our best. But it is up to you to decide which of our ideas are good enough for your money. You have to decide if we're worthy of your consideration. Freedom only comes with responsibility.

"I read your article about your lawsuit and the court's decision. It just reinforces my opinion that the federal government (including the courts), and not the mafia, is the largest organized crime family in the U.S.A. I agree you were not selling stock and only giving a report, which could possibly help your subscribers. The courts have struck another blow to our freedoms, which they seem to be doing all too often over the last four decades. Good luck with your appeal, I hope you win!" – Paid-up subscriber Bob R.

"Mitt Romney is the biggest douchebag running for president. He is a classic wax-museum, dark-suit-blue-tie-wearing liar who will say anything to get votes. He never answers a question directly, but gives a beat-around-the-bush politician-like answer with no substance. But his hair is perfect, so we should elect him." – Paid-up subscriber Matt Calabro

"The whole area of bank regulation is an absolute maze and few people outside the industry have any real understanding of it. They are the better for not knowing. To be clear, I do not take lightly those who may be concerned about any government taking abusive action against its citizens, and I'm familiar with the U.S. government's actions in respect of gold under FDR. But in this case, in this day, I'd say the risk of another federal gold seizure is far outweighed by the likelihood that someone will misplace their coffee can in the backyard." – Anonymous

Porter comment: Every experiment with paper money has failed. We don't know exactly what will happen to the banks or when the dollar will collapse. We only know it will happen. Make sure you write down how many steps from the corner of the house the gold is buried.

** "I haven't been a subscriber to the S&A group of newsletters all that long, but what I have seen is a well thought-out approach to stock selection, whether it be Stansberry, Ferris, Sjuggerud, Badialdi, or any of the others. Having put together a few professional teams of various kinds in my life it appears to me the S&A crowd has picked some of the cream of the crop. The education aspect is one I particularly enjoy. However, what I really like in this period of dropping markets, are the updates each of the editors are taking time to provide regarding the stocks in their newsletter portfolios. It is reassuring to know that someone besides me is watching some of these stocks go south, knowing that at some point (if the editor has done his job as well as I think he has done) they will start their recovery, whether it is next month or next year. So... thanks for the affirmations and updates... they are greatly appreciated!" – Paid-up subscriber Robert

Porter comment: Thanks, Robert. We've found over the years that readers appreciate frequent position updates much more so when the stock market is falling. As Jeff Clark put it this morning, "It's always better to provide too much rather than too little. Smuckers has a policy of always putting just a little bit more jam in the jars than the weight that's printed on the label. I've never bought jelly from anyone else."

Good investing,

Porter Stansberry

Baltimore, Maryland

August 10, 2007

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