The S&A Digest: How to Accomplish Your Toughest Goals

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

As of 07/02/2013

Goals for 2007 and how to accomplish your toughest... A street named Pelosi.... China funds soar... The warmest year ever... "Put this brick through your window"...

House Speaker Nancy Pelosi (D-Calif.) called herself "the most powerful woman in America" and led a celebratory round of applause by saying, "let’s hear it for power." To ensure she retains a shred of modesty, our fine city, Baltimore, insisted she visit this week and attend a ceremony where a street will be named in her honor.

We wrote it, did you dump it? "Better fence in your copper gutters… Criminal gangs have been caught stealing large amounts of copper from Italian factories, railways, and cemeteries. They’re selling it to buyers in China. So far, 22 people – Romanian immigrants – have been arrested since mid-October. Signs of a market top? Sell whatever gypsies are stealing…" S&A Digest (11/16/2006). Since November, copper prices have been steadily falling – nearly 19%.

The world’s best-performing mutual funds last year invested heavily in China and in only a few companies. They are planning the same strategies for 2007, focusing on insurance, real estate, and banking. Five China funds topped the list of 1,506 funds with at least $1 billion in assets. The No. 1 fund was the $3.2 billion JP Morgan JF China fund, which doubled in value.

According to Britain’s Meteorological Office, 2007 is predicted to be the warmest year ever due to global warming and El Niño. The 10 warmest years to date have been after 1994. Prediction: Global warming hysteria reaches a peak this year… only to be followed by the 10 coldest years on record.

New highs: Oakley (OO), American Real Estate (ACP), Plum Creek (PCL), American Capital (ACAS).

During the bear market of 2002, a former subscriber mailed us a brick with following written on it: "Throw me through your window." We promise to read the things you send us… but not necessarily to act upon your requests. Send us your thoughts and recriminations here: feedback@stansberryresearch.com.

"Okay, Porter... Your fancy words have snagged me into Phase 1 Investor! I know zero about biotech and myriad other medical mysteries, so as a naïve virgin in these environs, I hope Mr. Fannon will be gentle. Why would I jump off this cliff? Because I have come to trust what you and your silver-penned cohorts have done in finding, researching and recommending good stuff. Not that it’s all perfect, but it’s good enough that 16 months into Alliance I’ve recovered my initial investment over 18 times. It might have been twice that if I had acted faster and with greater resolve, but I’m learning." – Paid-up subscriber D.K. Davis

"Regarding Steve Jobs, I can only say this: I hope you’re right. I worked in Silicon Valley from 1971 thru 1994. I saw plenty of his kind – brilliant, driven, superior, and not terribly moral. There is something about being gifted in technology that breeds a sense of elitism without responsibility, and, in his case, that included a reputation for ruthlessness. You have no idea how good it feels to think of him in Greybar getting his buns cruised by murderers! After all, he got his start by building and selling phone hacking boxes, didn’t he? Maybe we can get Bill Gates to join him!" – Paid-up subscriber Fred Whittman

"Maybe you should hire this guy or at least find out his secret and pass it along. I two would like to make over 80% returns per year." – Paid-up subscriber John Van Winkle, regarding Bill Ribblett, whose feedback we published yesterday, and his great returns using our service

Porter Comment: Bill, are you interested in a job?

"Was clearing out my e-mail backlog and saw a comment in an old S&A Digest from a subscriber who was angry that OHB, a rec from Sjug. Conf., was later distributed to a larger audience. Is this guy insane? The day the wider rec came out, OHB shot up, naturally. Since I already held shares, I was pleased indeed. So let me give an alternative request. Please, please reveal each and every Sjug. Conf. rec. to a broader audience, approximately 1 month after the initial publication. Nothing would make me happier. The initial commenter must hate making money." – Paid-up subscriber Sean Owen

"If you cant say it in 1 or 2 sentences don't bother sending it to me. I have over 30 messages, all too long to read." – Paid-up subscriber J.R. Petters

Porter Comment: Instructions on how to remove yourself from The Digest distribution list are located at the bottom of each message. Canceling The Digest won’t cancel your subscription to our newsletters.

"I am 60 with a sizable retirement fund just getting into the stock market on my own. I took the plunge to become an Alliance member. I now have close to $25,000 in stocks recommended in newsletters and am investing about $1,500 - $3,000 a month (depending on my cash flow), selecting one or two stocks from your various newsletters. You recommended to someone else that a high-return mutual fund might be a better investment. So I am confused. If I want to build a stock portfolio with sizable increases each year, [should I] keep adding to my investments and reinvesting from occasional sale of these stocks…? And, how do I learn from you when is a good time to sell the recommendations you made…?" – Paid-up subscriber Ralph Wolff

Porter Comment: Most mutual funds are garbage, and I’d never recommend them to anyone under any circumstances. A handful of mutual funds (ones that we’ve recommended in our letters, for example) serve their investors well… but probably not as well as you could do for yourself, if you’re willing to spend some time doing research and/or reading newsletters. Plus, even if the fund is only charging 1% per year, if you have a big account (say $500,000), you’re going to end up paying a lot of money to your managers over time. In that example, you’ll probably end up paying $75,000 over 10 years. However, for beginning investors with very small account sizes ($1,000-$5,000) a good mutual fund might be the best way to start investing. It’s diversified and the chances are good that you’ll make far more than you would in a money market account.

"You keep predicting a drop in interest rates, and I agree that it should be the next step. However, the Fed seems to disagree with both of us. What say you to all their rhetoric?" – Paid-up subscriber Scott Brown

Porter Comment: Rates will fall this year. Ignore the rhetoric.

How to Accomplish Your Toughest Goals

Last year, I had two goals.

One, I wanted to get back in good shape. Starting this business and getting married have kept me out of a regular gym routine since 2001. I resolved to hire a trainer and work out at least three times per week.

I hired a trainer (Chuck). I worked out three times per week, for the most part. And I did get back in shape – I’m stronger than I’ve ever been in my life, and my endurance has increased dramatically. However, I was hoping that weight lifting would also enable me to lose weight, as it has in the past. But that didn’t happen. I still weigh 246 pounds… which is where I started the year.

My other goal was to make one substantial investment in a stock I am willing to hold for 10-20 years. I’ve become convinced that long-term investing will be far more profitable for me than rapid trading… or even two- to three-year investing. I’ve seen the effects of compounding in my newsletter portfolio (Exelon). After about five years, compound returns are impossible to beat. And they get better and better every year.

My personal investment plan is to make one, relatively large, long-term investment each year for the next 10 years. I believe doing so will provide me with enough diversification and with enough capital appreciation to serve as a financial "lifeboat" for myself and my family. Twenty years from now, ideally, these savings should be enough to last me for the rest of my life and provide me with enough income to live on. Yes, I have other savings, and yes, I’ll keep my trading account and my other investments. But… I bet making just one, extra, long-term investment each year will provide me with the greatest financial gains.

The hard thing about long-term investing, though, is making sure you’ve picked the right business and paid the right price. Pick the wrong business and there won’t be increasing earnings to compound. Pick the wrong price and no amount of growth will matter.

And… wouldn’t you know it… I flubbed my first selection. My mistake? I bought something simply because it was extremely cheap – not because it was an exceptional business. This mistake wasn’t very costly… it mainly cost me time. And the upside to the experience is that figuring out where I went wrong with my analysis has been fun.

Over the holiday, I went back and read almost all of Warren Buffett’s annual reports. At one time, Buffett bought mainly very cheap stocks (like I had done). Then he figured out he’d do a lot better buying great businesses and holding them forever. That’s what I want to do with my long-term account. I think I’ve figured out where I went wrong… and tomorrow I’ll show you how Buffett analyzes businesses.

My goals for this year?

The two hardest goals for me to achieve will be running the marathon and expanding into the investor education market.

I’m not built for speed. I look like an inverted weeble-wobble. I have very short legs and a huge upper body. But I know that running is the only sure-fire way for me to lose weight.

Expanding our business into the investor education market will be painful because we don’t have any experience in the field. It will be frustrating to work on a project that probably won’t produce positive results until late next year. We have a lot to learn. It’s worth doing, though. I know we can produce a good product that will help lots of people, and I know we can do this job with more integrity than I see in the market now.

I’ve got a secret weapon that will help me accomplish both of my tough goals. It’s called "peer coaching."

The idea is wonderfully simple. I’m going to give a list of questions I’d like a trusted friend to ask me once per week. The questions should be as specific as possible, and they should be aimed at increasing my level of motivation and determination. Nobody has time to ask many questions for you… so you have to keep the list short.

Here are my peer coaching questions for January:

#1. Where are you on your 16-week marathon training program? How is it going? What could you do to spend more time training? Do you need to buy new shoes?

#2. What have you done this week to help launch the investor education business you want to start? What’s one thing you could do today to help move that effort along?

#3. Have you decided where you’ll enroll for your bareboat license?

#4. What businesses have you looked at this week for your 20-year savings program? Do you really think these firms are the best in the world at what they do? Are they cheap enough to buy now?

#5. What’s one thing you could do for your wife next week to surprise and delight her?

I know how influenced and motivated I am by my friends. I’ve always spent a lot of time cultivating friendships. I choose people whom I’d like to be more like. Spending time with them inevitably motivates me to make better choices, develop better habits… to become a better person.

Putting these relationships to work more directly on my goals for 2007 gives me a much better chance at achieving my toughest goals.

I bet it will work for you, too.

Best regards… and Happy New Year,

Porter Stansberry

January 4, 2007

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