The S&A Digest: How We'll Cash-Out on One-Year, 75% Gains

No Digest next week... Doug's still bullish on gold... "Inevitable"... Send in the clowns... Al Gore's latest nonsense... Cafayate featured in USA Today... A new word: Danskered... When setbacks bring us big gains...

Attention suffering readers of The Digest, you will have a week to recuperate...

S&A's entire editorial staff is heading to the Jekyll Island Club next week for our annual Spring Editors Meeting. We thought it would be interesting to visit the birthplace of the current paper dollar/Federal Reserve system in the twilight of its existence.

Spending a few days sequestered with our editors and a handful of invited guests gives us a chance to recharge our intellectual batteries and discover the best new ideas in finance. We will return to our regular posts on April 7. While we will not be publishing The Digest during our meeting, we will continue to review the mailbag. If there are investment ideas you'd like us to consider, please don't hesitate to share them.

Also... with all of these highly competitive editors together at one location, it would be a great time for you to tell us which editors you think are the best... and the worst. Send your comments to: feedback@stansberryresearch.com.

Our friend Doug Casey – who will join us in Jekyll next week – weighs in on the future of gold:

Gold has been in a bull market since 2001. It's gone up, on average, about 25% per year compounded, and there's absolutely no reason the bull market should stop now. On the contrary, there's every reason to believe that the gold bull market, having gone through its Stealth stage and still being in its Wall of Worry stage, is going to hit the Mania stage. To sell now would be to leave the big money on the table.

My best advice is, be right and sit tight. And that means staying long until you see a golden bull tearing apart the New York Stock Exchange on the front cover of Newsweek magazine, at which point it will be time to sell. Strictly gazing through a crystal ball, I think it's going over $1,200, no problem. Just to reach its previous high in purchasing power, gold will have to go over $2,500 – probably more like $3,000 after you discount the phoniness in the government's CPI numbers. But because this crisis is much more serious than the one in the late 1970s and early '80s and much more far-ranging, $3,000 is actually a fairly conservative number. I'll say it again: gold is not just going through the roof, it's going to the moon.

Although I believe the price of gold (and even more so, silver) is going higher, I wouldn't describe my position as "bullish." I would describe my position on the monetary metals as "inevitable."

Every single human experiment with paper money has failed – in exactly the same way. Paper money is easy to inflate. And the temptation to inflate the money supply always proves irresistible to the men charged with defending its value. Why? Because inflating the money supply makes everyone feel richer and gives the government an enormously powerful tool. Unfortunately, there is no free lunch. And sooner or later, the inflation is discovered and the fraud unwound. I can't know if the current crisis will finally spill over into a global run on the dollar... but I'm very sure that event will happen at some point, and almost surely during my lifetime.

Given the absurd amount of leverage in our financial system, the huge dollar claims held in foreign investors' hands, and our country's newfound affinity for spending what we haven't yet earned (both in the private and the public sector), I think you're an absolute fool if you don't yet own a substantial amount of gold and silver. Given the historical trend – paper money's perfect track record of failure – it doesn't really matter whether or not the price goes down over the next few months or not, except as an opportunity to buy more at slightly better prices.

Goldsmith has compiled a recession-proof portfolio in his S&A Dividend Grabber. He has recently recommended a world-class health care company, a blue-chip food producer, and the only mortgage REIT currently beating the market. His most recent recommendation is the best pure-play on global infrastructure. When you buy this company, you get $800 million in timberland free – and it's only a $600 million stock. His readers are up almost 20% in one week on this recommendation. We are currently offering a special price on Dividend Grabber, but only if you buy before midnight on Monday. To learn more about it, click here...

In an upcoming 60 Minutes interview, Al Gore equates global warming skeptics to fake moon-landing conspiracy theorists and flat-Earth cultists. He apparently doesn't discuss the bogus data used in his documentary. Nor does he mention the extensive list of working scientists who dispute the man-made global warming hypothesis. None of these people believe the Earth is flat.

The word is getting out about Cafayate, Argentina. About five years ago, several of my friends and business partners started buying up ranches and land parcels in Salta, Argentina. I tagged along on a few of their trips, and I've passed along what and where they were buying to our readers. I know a handful of readers followed up on the tip, loved the area, and bought property. They've done well, I'd wager. USA Today published a big spread about the area in today's paper, including details about my partner's new vineyard and golf course residential development in Cafayate.

We invited our S&A Alliance subscribers to buy into the community last fall before the lots were widely marketed. All 70 pre-construction lots were sold in about two months. In another five or 10 years, Cafayate will be a world-famous spot for the very wealthy, like Aspen or Davos. It's that beautiful.

Send in the clowns. Former Bear Stearns CEO Jimmy Cayne sold 5.6 million shares for $10.84 apiece earlier this week. The sale represents nearly all of Cayne's shares. Cayne, a billionaire when Bear traded near $160, netted about $60.1 million from the deal.

The Iraqi stock market is outperforming the U.S. stock market. Godvig Capital's Iraq-focused hedge fund returned 10.3% in February. The fund was buoyed by rising oil prices, exports, and low inflation, according to manager Bjorn Englund.

New highs: Westshore Terminals (WTE-UN.TO), Keyera Facilities (KEY-UN.TO), Comstock Resources (CRK).

In the mailbag... It's not our fault: We can only print what we receive. If you're tired of the Dansker, send us something worthy of discussion: feedback@stansberryresearch.com.

"New Submission for the Dictionary: Dansker (dan-scur-d) v. 1. A person who does not understand the meaning of the word no. (Ex: I was danskered last week by an intern who sent me 20 emails on why he should be hired after our official rejection letter.) 2. Continuing to harass, offend, use bad judgment, and spam. (Ex. That newsletter lost me 234 dollars, I am going to dansker them until they respond.)" – Paid-up subscriber JD

Dear Porter, is that guy Steve Dansker for real? Of course he is. Rest assured we readers can recognize a rude aggressive and possibly unhappy spoiled dolt when we see one. I take comfort in knowing that he is damaging himself more than he knows with his displays of mean spirited and aggressive egotism. Danskers are a dime a dozen. However, I wouldn't waste my dime on one." – Paid-up subscriber RR

"Freedom of speech is not a double edge sword until jackboots like Dansker start trying to abuse their position in an effort to squelch it. I hope you are taking this fellow seriously, Porter, and have consulted people who get paid to protect folks from loose cannons like Dansker. Dansker IS the FBI agent who said you need to be careful about insulting people who work for Homeland Security, is he not? (If he isn't then I have gotten confused and disregard this email.) Shades of SS and KGB in my opinion." – Paid-up subscriber Tim

"Re: Tom Dyson's visit of pawnshops, I can provide you with first-hand insight. In September of 06' my divorce was finalized and I heard the last nail being driven into my coffin. Although by no means filthy rich, I lost just about every asset I had to the tune of roughly $320 K. I haven't tallied up the final figure of what that marriage cost me because I don't need to be further depressed. Much of what I lost were gains made by following recommendations provided by several of your publications. I might add at this point that if I still held these investments, the figure above could easily be doubled. Fortunately, the ex had no interest in my weapons collection, my coin collection, or a very high-end metal detector – all of which at one time or another have been in a pawnshop. While the 240% interest rate is astronomical, I (like 'Bart', the guy you interviewed in Texas) need to feed my Suburban with a 40 gallon tank just to keep working my way back to where I was. I'm getting there, but it will take a while. It feel that pawnshops fill a need for an growing number of people who find themselves in need of immediate cash for whatever the reason. Additionaly, most of the pawnshops today are no longer the dingy storefronts sited on side streets in questionable neighborhoods - for the most part they are brightly lit, clean, and professionally operated. As mentioned earlier, I've subscribed to several of your publications since about 2002, and even though I can no longer afford to go golfing twice a week, you can be damned sure I won't let my subscriptions lapse – I view the insight you provide coupled with my own due dilligence should have me back on track within another 3-4 years." – Paid-up subscriber JG

"As an Upstate New Yorker who spent three years going to school in Austin, Texas, it really was a bit of a culture shock to see the many pawn shops and check cashing places. It's sad to see how bad people can get ripped off in these places. I wonder if it's ignorance, or panic/financial emergency, or perhaps both? I guess where there's a need, there will be a market..." – Paid-up subscriber Mike

Porter comment: It has always been my experience that the folks who look down their noses at pawnshops or check-cashing operations have never required the services these businesses render. It is yet another classic example of how America has lost its way: We don't even have the good courtesy to mind our own business anymore.

Regards,

Porter Stansberry

Baltimore, Maryland

March 28, 2008

How We'll Cash-Out on One-Year, 75% Gains

By Dr. George Huang, editor, The S&A FDA Report

Throughout this series, I've told you the best way to avoid large losses when trading biotech stocks is to buy biotech companies only after they experienced an "approvable letter" setback from the FDA. If you purchased an entire basket of these companies and held it for a year, your average return would've been about 12%.

But if you cherry-picked only the companies that fit our four criteria (you can read about them here, here, here, and here), roughly 25% of the total, your returns would look much better...

As you can see, with this four-tiered trading screen, our one-year average returns trump market averages more than six times over. But that's not all...

We dug even deeper into our results and identified three exit strategies that were the primary catalysts for these extraordinary short-term gains. Here's the first...

Our first strategy is to sell after we've seen a short-term revision of expectations. This exit strategy comes into play when the market realizes, "Oops, I shouldn't have unloaded the stock without reading the press release first." In essence, when a setback isn't quite as cumbersome as initially thought, and the market realizes its error, stock prices shoot back up to pre-approvable letter levels.

For example, in June 2006, Pozen (POZN) received an approvable letter for its migraine drug Trexima. The stock traded down from more than $14 to $6, a ridiculously low price.

Essentially, the market completely wrote off the drug without even bothering to find out that Pozen's Big Pharma partner, GlaxoSmithKline, had anticipated the possibility of an approvable letter and was already conducting additional clinical trials to satisfy the agency's concerns.

Furthermore, investors forgot about Pozen's great pain drug, which was in the pipeline and ready for a partner. A few months after the approvable letter, Pozen signed a $375 million deal with AstraZeneca. The deal brought investors back and jumpstarted the recovery of Pozen's stock price.

After six months, the market fully realized its mistake and sent the stock back to $18 per share – a quick 200% gain for shrewd traders.

Next week, I will explain how our second FDA Report criteria (other drugs in the pipeline) can drive biotech stock prices higher in any market condition, leading us to our next exit strategy.

Good investing,

George Huang

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As of 06/21/2013