THE S&A DIGEST: Recession Pending

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

As of 07/05/2013

James Grant is right about the euro… Timberland goes private… our mistake with Pelosi’s voting record… another subscriber makes a million dollars with S&A

"I would suspect if the United States is not in a recession, it will be in one in about a year," says our friend Jim Rogers. We’ll see Rogers later this week in New Orleans, and we’ll ask him why he thinks a recession has started. We have our own thoughts on the topic… as you’ll see tomorrow.

This, on the long-term trend of the euro currency, from Jim Grant’s latest Interest Rate Observer: "The odds of success in the paper money of a sovereign nation are short enough – you can search in vain for an example of an uncollateralized monetary unit that didn’t lose its value eventually. The odds of success in the paper money of a confederation are shorter still. And the odds of success in the paper money of a confederation encompassing Italy, Portugal, and Greece must verge on the negligible…"

Jim Grant is, by far, the most eloquent writer on the world’s finances. He’s also underappreciated as one of our industry’s best big-picture thinkers. Jim’s right about the euro… but the thing won’t fall apart until after at least three of Europe’s most respected financial ministers solemnly promise to a major news outlet that the euro will not be devalued…

In the September issue of my newsletter (PSIA), I noted that footwear maker Timberland was an exceptionally cheap blue-chip stock…

"I’ve been watching Timberland closely... and I’d like to add it to our ‘no risk’ portfolio. It is a great company and a terrific stock, too. It has over $100 million in cash and no debt. It produces close to $200 million a year in cash. The stock is currently worth $1.7 billion, or considerably less than 10 times average cash earnings."

The word on Wall Street is the company is now for sale. Typically, the company’s bankers make such information public in the hope that "being in play" pushes the stock price up, forcing the private-equity bidders to raise their offers. The stock is up 5% today… but is still flat for the year. What’s holding the stock price back? Why would the controlling family want to sell? Maybe for the same reasons I didn’t pick the stock for my newsletter’s model portfolio:

"Over the years, Timberland’s stock price has reacted violently to revenue shortfalls, driven by a slowing economy and/or falling consumer confidence. So, despite the fact that the stock is extremely cheap, I’d rather wait to see what happens later this year… If the consumer pulls back during the holiday season, we could see another 50% decline in Timberland’s stock price, to below $20."

Most mutual funds are financial roach motels: Your money checks in, but rarely checks out. Of course, there are certainly exceptions. The very best funds are almost all found in the small-cap sector, where experienced managers can provide investors with substantial outperformance – and that’s worth paying for. But there’s a catch: Almost all of the good small-cap funds are closed to new investors. One that’s not is the recently launched Dividend Value Service Fund (RYDVX). Headed by the most experienced manager in the small-cap sector (42 years), Charles Royce, the fund earned investors more than 21% over the last year and more than 14% a year since its inception (May 2004).

A fund I’d avoid? How about this one… The Blue Fund "may not perform as well as non-politically focused funds," says the prospectus of this politically friendly, New York-based fund, which opened for business October 17, 2006. For merely 1.75% of your invested assets per year, your money will be directed into the stocks of companies that have… shall we say… "friendly" relations with the Democratic Party.

And now… the mailbag. (Send us your views and we’ll pass them along: feedback@stansberryresearch.com.)

Paid-up subscriber Tim Ghirardelli writes: "Porter, or is it Dick? Are you guys making too much money or what? You simultaneously sound arrogant, punch-drunk, and just plain bored-stiff. Lose the silly insincere drivel and stick to business. Your petty anecdotal comments are tiresome and reflect poorly on character… No doubt you’ll publish this note and follow it with some flippant comment just to indulge your narcissistic tendencies… Talk to you next time, Dick, errr I mean Porter."

Peter tells us he’s fed up, too… but he’s real nice about it: "Am sorry, but you have been sounding more and more stupid lately. I am thinking of canceling… Well, good luck."

Esierra asks, "How can you expect people to buy your investment advice when you insult about half of your potential customers by disrespecting their leaders? That makes no business sense at all!"

Porter Comment: Dear subscribers… I recognize the vast majority of you see straight through the lies, buffoonery, and outrageous hypocrisy of our poll-addicted "leadership." But mostly, I simply feel sorry for the poor political saps. Think about it… Barnum (of the eponymous circus) said that you’d never go broke underestimating the intelligence of the American public. Can you imagine having to craft what you say and do every day according to the whims and fantasies of the average voter? It would drive a man crazy. And looking at Washington, that’s what happened.

Wayland Standefer says we let him down. "You could have printed Pelosi’s voting record BEFORE the election."

Rumsfeld proved to be a popular target… Eric Calvert points out, "Rumsfeld is the ass who pushed aspartame through FDA and congressional approval, himself being a major stockholder in the product. It converts to formaldehyde in the human body. Gee, how many think that’s a good thing? Maybe if enough people drink Diet Coke, they can cut down on the cost of embalming once they’ve died. Maybe funeral homes will charge less if they are already partially embalmed?"

And… a "Full Bird" with actual Rummy experience takes our side in the spat. Says Don M., "Facks are facks. I'm a full Colonel… and I served under Rumsfeld when I was on active duty. He is the reason our men did not have the proper equipment to fight a war in Iraq. GOOD RIDDANCE!"

And now… e-mails from people who actually like us…

Michael Meek: "Porter, You are the Will Rogers of our time. Of course, he was a socialist and you are libertarian, but you get my drift. Keep on printing those nasty, revealing letters you receive. Your responses are funny and good."

Tom Buttney: "I’m a small-time investor, a lineman by trade 45 yrs old… This year will gross $150k. I don’t really understand what some people are beefing about. You guys consistently make money. Would not have gotten into silver, gold, gas & oil so early without you. Keep up the good work."

Ring a bell… another subscriber has made more than $1 million with our work: "Not all your recommendations have proven to be winners, but many more have to the tune of over half-million a year for the past three years," writes A. L. Capel Jr.

Regards,

Porter Stansberry

Baltimore, Maryland

November 14, 2006

Stansberry & Associates Top 10 Open Recommendations

Stansberry & Associates Hall of Fame