The S&A Digest: Exit visas from Hell

Exit visas from Hell... Is Florida over?... Buying Hong Kong... Red Hillary... Garters on the trading floor... Kudos?...

Here's an expression you should keep handy: "Exit visas from Hell."

Legendary investor Curtis Jensen, manager of the Third Avenue Small-Cap Value Fund, coined the phrase to explain why the fund likes to keep a large cash balance in reserve for market panics. "Much of the Fund's purchase activity occurred during the last few weeks of July, as liquidations of a wide variety of assets began in earnest, and market volatility intensified... Our ability to take advantage of these conditions is a result of our patience and a willingness to hold cash – the dry powder that allows us to issue 'exit visas from Hell' to panicked or leveraged sellers of equities."

Marty Whitman – one of our favorite value investors and the long-time head of Third Avenue Value – has established a huge position in Hong Kong real estate companies. He says: "In the next several years, lots of income producing real estate located in Hong Kong, Mainland China, and Singapore may be sold to captive Real Estate Investment Trusts (REITs) at very attractive prices..." He owns Cheung Kong, Henderson Land, and Wheelock.

Hillary Clinton seems poised to push America one step closer to direct socialism. Her plan? Tax (at a 50% rate) the estates of people worth more than $7 million and distribute the money to poor people, via a new kind of 401(k) plan – "American Retirement Accounts." Everyone who makes less than $60,000 per year would get $1,000, as long as they also contributed $1,000 to the account. Funny... that's the same amount OBAMA! is promising to pay people who vote for him. I wonder when one of the political consultants will wise up and tell their candidate to promise $10,000 payments?

The secret to being a supertrader... is wearing garters? Andrew Tong, a former employee of hedge fund SAC, accused current SAC employee and top trader Ping Jiang of sexual harassment that included a "top-secret training program." The program allegedly required Tong to wear "certain kinds of clothes to work." Allegedly, one aspect of the program, based on Jiang's belief that traders are too aggressive and should be more effeminate, had Tong taking female hormones, which he bought on the black market.

According to Tong, as a result of the hormones, he suffered emotional and physical distress, started wearing women's clothes, and was unable to perform sexually with his wife, with whom he was trying to have a baby. Other accusations allegedly included "sexual relations between two men."

We just published our latest issue of the S&A Oil Report this week, titled There Are No Easy Barrels Left. One look at Matt Badiali's current portfolio forces me to admit, that yes, it is a big, big bull market in oil right now. Twenty-one of Matt's 35 recommendations are up double digits, and only seven are down. His three biggest open winners have soared 82%, 80%, and 56% in less than two years.

Matt's latest recommendations are in the nascent field of deepwater drilling services. This is a very young sector of the oil business. Up until the mid- 1990s, Big Oil didn't have the computing power to map large sections of the ocean floor. With the leap in technology of the past 10 years, however, spending on deepwater oil exploration is exploding... and large oil fields are turning up in the Gulf of Mexico (more holes in Peak Oil). To learn more about Matt's research, click here.

Speaking of track records... Anyone notice that I've almost gotten squeezed out of the Top 10 entirely? Fannon is climbing the ranks, and Ferris continues to dominate.

New highs: BHP Billiton (BHP), Covance (CVD), Google (GOOG), Markel (MKL), Occidental Petroleum (OXY), Petrobras (PBR), SK Telecom (SKM), Schlumberger (SLB), Verizon (VZ), Berkshire Hathaway (BRK-A), Great Basin Gold (GBN).

Letters of appreciation? That's what we found in the mailbag today. We must be near a market top! Either our subscribers have been drinking too much... or most of our picks have done well lately. Surely someone can find something to stick in our eye... Send your comments to: feedback@stansberryresearch.com.

"Mr. Stansberry should stick to the microeconomics of stockpicking. He is good at that. He has no clue about the merits and demerits of inflation. Inflation does not devalue assets, it revalues assets in nominal terms. Inflation devalues debt claims because they remain unchanged in nominal terms. The loss of value in debt claims is effectively transferred to the equity holders, i.e. those who have the claims on revalued assets, net of devalued debt claims. Similar thinking explains why governments like inflation. Inflation is the best way to reduce government debt relative to GDP and relative to tax revenues." – Paid-up subscriber Alain

Porter comment: One man's obligation is another man's asset. Inflation destroys both, equally. Inflation isn't the best way to do anything: It's immoral, and it destroys the trust citizens have in their government and each other. And I'll write what I please...

"This is my second letter of appreciation to you folks with respect to your stock advice and the gains I have made since subscribing to Steve's newsletter. This information has been nothing but money for my portfolio. I really enjoy it because as a former Kramer tv viewer, I was never able to buy at the right time. Your information is frankly better and deeper. For example Yamana gold which Kramer is constantly flogging, is second rate compared to Seabridge gold which is your choice. I made great money on mdco and I made huge money on PCU which was a former pick of yours that keeps flying. I dropped back to 72k during the pullback but now I am back to 86k already! You see, I am just a little guy, a route salesman for frito lay so I will be getting a pension, but thanks to you and your research, I just might be able to get out a little earlier than I thought! My deep and heartfelt thanks."

– Paid-up subscriber Kim Horchner

"In response to Peter's mention of the 'dart-throwing' method of winning stock picking (which implies that S&A or any analysts' opinions are basically worthless at the moment) I'd like to say that the last time I heard such nonsense was when I was deterred (temporarily) back in early 2005 from buying Alnylam, Seabridge, and Northern Orion by an arrogant guy with an M.S. in finance who knew so little about stock picking that he hid behind the same 'success is random' theory to which Peter alluded. Since my degree was in Asian Languages, I figured he knew more about investing than me. Ha, ha. Well, I have printouts of three amazingly profitable stock charts, plus two middle fingers to show his ass the next time I see him. By the way, I was eyeing those stocks before I ever heard of S&A. That's why I subscribed. I had heard about Dr. Sjuggerud on the Yahoo! Northern Orion Resources (NTO) Message board. Some guy named Mel apparently had sold his house and bought all the NTO he could, and was a big fan of 'Dr. Steve.' Also, this reminds me of back in January '06 when I was recommending Seabridge Gold, Coeur d'Alene Mines and NTO to my dad and his financial advisor, while the advisor, an 'expert in banking stocks' was keen on New Century Financial Corp, 'a good stock for retirement portfolios because of its nice dividend yield.' I love reading your newsletters and I'm addicted to The Digest. Keep up the exceptional work!" – Paid-up subscriber Anthony Wilson

"I'm sure you have probably seen this article about 'the end of the WalMart era.' This might be the time to load-up big on WalMart for anyone who is a contrarian about adverse headlines like this. They often seem to come at the bottom for a good stock." – Paid-up subscriber Jeff Blake

Porter comment: Yes, indeed. I also noticed a Wall Street Journal article last week titled "Is Florida Over?" The article suggested Florida land prices have a lot further to fall because no one wants to live there anymore...

Regards,

Porter Stansberry

Baltimore, Maryland

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As of 06/26/2013