The S&A Digest: Porter's sick

Porter's sick... A new kind of LBO... Zell enters China... Signs of a top... Weber on Gold…

Goldsmith comment: Porter's got the flu... I'm on Digest duty again.

PSIA pick Covanta (CVA), Sam Zell's holding company, bought a 40% stake in a joint venture with Guangzhou Development Industry. The joint venture will develop energy-from-waste projects in the Guangdong Province of southern China. China creates 280 million tons of waste every year, most of which is dumped into landfills. The Chinese Ministry of Construction outlined a "National Waste Disposal Plan" to increase the energy generated from waste. Right now, about 2% of the country's waste goes to energy production, and the government wants to increase that number to 30% by 2030.

November was the worst month in collateralized debt obligation (CDO) history. Some $45 billion worth of CDOs have gone into default, up from $5.5 billion at the end of October. And 2,007 CDOs were downgraded in November, more than half of the CDO downgrades for the entire year.

Signs of a top for Goldman... After yet another record year, the average bonus for Goldman Sachs employees will be $360,000. CEO Lloyd Blankfein is set to earn $70 million, a 30% increase from last year.

Signs of a top in oil... Singapore Airlines today announced the first nonstop, 22-hour flight from Houston to Moscow. The inaugural flight will be March 20.

Signs of a top in China... China will allow foreign companies to sell stocks and bonds in the country for the first time. Beijing will allow "qualified" companies to sell yuan-denominated shares, but only locally incorporated banks can sell bonds in the currency.

Signs of a bottom in debt prices... Private-equity firm Blackstone raised $1.3 billion to buy CDOs and leveraged-buyout loans from distressed banks.

It's no surprise, but Chris Weber is bullish on gold... And he knows what he's talking about. Twenty-five years ago, Chris helped write the Minority Report for the U.S. Gold Commission with current presidential candidate Ron Paul. The book explains the relationship between gold and the U.S. dollar and gives ideas for reintroducing the gold standard. You can access a free online version here. To read more from Chris Weber, click here.

New highs: Plains Exploration (PXP), Covance (CVD).

Steve Dansker... you're off the hook. We'll be moving on to our next controversial topic as soon as we identify it. We're always accepting recommendations... feedback@stansberryresearch.com.

"Mr. Goldsmith: 1. Thanks for your apologies for the Sjuggerud video debacle. I am sorry to say that I flamed Porter on that night. Finally got to see the video and I must say it was pretty much the best-produced web video I have seen. Uh, maybe you can rent Charlie Rose's table? 2. In response to Mr. Kurzet's comments on 12/11: right on! Few are aware of the connection between the American system of public education and the secular compulsive schooling out of Prussia in 1819: 'The Prussian mind, which carried the day, held a clear idea of what centralized schooling should deliver: 1) Obedient soldiers to the army; 2) Obedient workers for mines, factories, and farms; 3) Well-subordinated civil servants, trained in their function; 4) Well-subordinated clerks for industry; 5) Citizens who thought alike on most issues; 6) National uniformity in thought, word, and deed.' Thank you, Otto von Bismarck. I cannot vouch for the accuracy of this source – but it has less the ring of urban myth than it has the gut feeling of 'strewth.'" – Paid-up subscriber Ed Kobialka

"Dividend Grabber profit: 11/21/07 purchased 500 shares RWT for 29.6299/share. 12/10/07 sold 400 shares RWT for 34.6901. Net profit $2,024.08 – nice. Plus got a $300 dividend. I told you that I thought this sub and the Short Report would work for me – and I was right! I do a bit with your sub as well (not losing money), but I really like trading. What is really really nice is that when I feel it best to sit and not do currency trades, S&A subs have been providing profit. Therefore, I'm making money monthly." – Paid-up subscriber Margaret Hutchison

"So last night I had a very strange dream that I can remember very little of. I was at some S&A event, and I was curious to know what you looked like. Well, I darted past a few guys that looked like your college interns and went straight to the back. I rounded a corner and behold! there was Porter talking to a couple. You were sitting at a cluttered desk and looked like a computer nerd... long hair, mustache, a little chubby with a t-shirt on. After less than a second, I retreated from the room immediately... what a nightmare! haha!!" – Paid-up subscriber HC

Goldsmith comment: That's a dead-on description.

Regards,

Sean Goldsmith

Baltimore, Maryland

December 13, 2007

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