The S&A Digest: Checking in with Miami's 'Biggest Bull'

Miami's biggest bull... Signs of a top... More 'smart money' moves... Turnaround for Motorola... Condolences in the mailbag...

 Signs of a market top: PSIA pick Microsoft (MSFT) beat out Google for a 1.6% stake in networking website Facebook. The software giant paid $240 million for its small stake, valuing the business at $15 billion. The company expects to break even this year with revenues of $150 million. Shares gained more than 2% and reached a new 52-week high.

When I first started at Stansberry & Associates, I told Porter about all the perks Facebook employees receive... He told me to go work there. Well, Porter, it's looking better and better.

 Often times in The Digest, we tell you what the "smart money" is doing. We don't recommend you blindly jump into a position just because Warren Buffett is buying. But following famous investors is a great idea generator and can lead to profits.

Look at Carl Icahn: On October 4, we noted he increased his position in software maker BEA Systems (BEAS) to 13.22% at close to $14. Two weeks later, Oracle made a bid for the company and shares jumped above $18. BEAS rejected the bid. Today, BEAS announced it will accept $21 per share. If someone bites at $21, Icahn will bank more than 50% gains in a matter of months.

 Some of the smartest money... Hedge fund SAC Capital, run by superstar trader Steve Cohen, recently disclosed its 6% stake in steel company Wheeling-Pittsburgh (WPSC). Wheeling-Pittsburgh trades at book value and at 0.18 times sales.

 Also, Wintergreen Advisers has increased its share of Extreme Value pick Consolidated Tomoka (CTO) to 23.9%, up from 22.6% in July.

 Extreme Value pick Motorola (MOT) reported its first gain of the year, but earnings were down 94% from last year. Analysts cheered the better-than-expected numbers, and Oppenheimer upgraded shares of the cell phone maker. Motorola remains far from its glory days, but the company is making "progress," according to CEO Ed Zander. Shares gained more than 4%.

 New highs: Nokia (NOK), Annaly (NLY), Coca-Cola (KO).

 Most of you agreed with Porter's thoughts on Ann, but someone, who obviously didn't bother reading the essay, says she tells the "truth." Give us more... feedback@stansberryresearch.com.

 "Everybody has to start someplace. Maybe one of your duties in life is to educate Ann. We are all ignorant, just in different subjects. But with such a bold, and opinionated public speaker, if the world is to benefit in any way, perhaps she needs to be taught 'more perfectly' in those things she is lacking. Wear your armour, of course." – Paid-up subscriber BJS

 "You had to suffer through dinner with Coulter to figure out she's a one dimensional idiot? My condolences." – Paid-up subscriber B. Fromme

 "Ann Coulter just tells it like it is, i.e., she tells the truth. Bush haters can't stand her because they have a hard time listening to the truth!!!" – Paid-up subscriber Warren Klecan

 "That was an interesting read about your dinner with Ann Coulter. She has always come across as ignorant and belligerent to me, so it was nice to see someone agree. I've been reading your recommended book, Mobs, Messiahs and Markets, and chapter two roughly states that 'People will tend to follow the person with the most confidence, no matter how wrong the message.' Ann Coulter is living proof of that. She is confident, but totally ignorant of the facts." – Paid-up subscriber Darren Nelson

 "Thank you for confirming what I always thought to be true - Ann Coulter is a complete and utter fool." – Anonymous

Regards,

Sean Goldsmith

Baltimore, Maryland

October 25, 2007

Checking in with Miami's 'Biggest Bull'

By Tom Dyson

I just spoke with Jack McCabe.

Just to jog your memory, Jack is the "go-to" guy for journalists writing about Miami's condo bust. A local real estate analyst, he's quoted in every single article on Miami's condo meltdown that I've ever read. Literally. Why is Jack so popular? Well, he understood what was happening in Miami a long time before anyone else...

For instance, I last spoke to Jack in March 2006. He suggested I short WCI Communities and Corus Bank. WCI is down 81% and Corus is down 60% since our conversation.

Jack still thinks Corus is going broke. But now, he likes WCI Communities! 

Jack says Carl Icahn is the key to WCI's turnaround. WCI needs to do three things: restructure debt, sell assets, and make impairments. People listen to Icahn. He can make these things happen. The old board and management are twits. They have no credibility in the industry and could not push forward the necessary reforms. Now that Icahn controls this company, the situation should start improving.

As a side note: Carl Icahn came on the board in August, after the company released second-quarter results. Third-quarter results should reflect his influence. I expect we'll see a huge impairment charge as Icahn cleans house.

On the other hand, Corus Bank has loaned billions of dollars to condo developers. Most of them (90%) are private companies that are still throwing up condos in Miami. The chickens are only now starting to come home to roost as loans stop performing. The worst for Corus is still ahead, says McCabe.

As for condo prices, Jack shares my view. In short, prices are down about 30% from the top, and we expect another 30% drop is coming. It may be time to buy in two years, he says.

I asked Jack what it was like to be quoted in every single bearish article, and he says it's ironic because he's so bullish on Miami long-term. "I'm the biggest bull out there," he says.

Good investing,

Tom Dyson

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