THE S&A DIGEST: Road Kill

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

As of 07/05/2013

Turnaround in housing… Why drink wine when you can take a pill?… Matt Badiali is on fire… Going postal… Why guns and Ph.D.’s don’t mix…

Another troubling sign: The total value of acquisitions worldwide this year is $3.52 trillion, which exceeds the previous record of $3.33 trillion. That record was set in 2000… right at the top of the market. Does it mean the stock market will collapse tomorrow? No. But I’d say it means we’re closer to a top than a bottom. And you make a lot more money buying at the bottom.

China is taking some of its $1 trillion in reserves and handing it over to U.S. fund managers, including T. Rowe Price, UBS, and Pimco. Suckers.

We wrote it, did you buy it? "D.R. Horton is one of the largest homebuilders in America. It is well diversified. It typically builds homes that people can afford, so it should be just fine. The shares are cheap. Let’s make D.R. Horton our horse in the homebuilding stocks race." – Steve Sjuggerud, True Wealth, October 2006.

Today, Banc of America Securities upgraded its view of the homebuilding sector to neutral. Oppenheimer upgraded D.R. Horton specifically. The median prices of homes have started to inch up, while supply is inching down. It sure looks like a bottom to us… Wall Street is still "neutral." Meanwhile, Sjug is up more than 10% on D.R. Horton so far.

Supplement companies are now offering Resveratrol, the ingredient in red wine that is supposed to boost endurance and prolong life span. Thankfully, they can’t encapsulate the charm of taking a good bottle out of your cellar…. wiping the dust off… remembering where you were when you bought the bottle... and the things that have happened in your life since you bought it, while you were waiting to enjoy its charms and complexity. Of course, you probably won’t get a hangover if you take too many of the pills.

Matt Badiali’s picks are on fire. Every recommendation in his S&A Oil Report portfolio went up yesterday. New highs in Matt Badiali’s portfolio: Marathon Oil (MRO), Oneok (OKE), Xcel Energy (XEL), Chevron (CVX), Eni (E), and Allegheny Tech (ATI). Other new highs in our recommended portfolios: Sirna (RNAI), Alnylam (ALNY), Macquarie Global (MGU), American Capital (ACAS), ExxonMobil (XOM), American Real Estate (ACP), Kayne Anderson (KYN)…

"I’ll be back soon with some deer for ya. We got 14 of ‘em last weekend. They’re at the butchers now, but I’ll bring ya some, don’t worry."

My mail man, Tommy, is a legend in Baltimore County. He keeps an eye on your house… and has a side business for anything you might need. Noticing an ancient locust tree was leaning over precariously in our backyard, he warned us that we should take the tree down before it fell over. And he offered to do the work for next to nothing. Then, after he’d stuffed our barn full of unsplit fire wood, he offered to come back with a splitter. He split and stacked eight cords of wood for $150. "Don’t know why you wouldn’t split it yourself… but I’m happy to do it for ya."

I’m a bit uncertain about the deer meat…

While Tommy was working in the barn, I took him a cold beer. He took a break from his work, and chatted me up about the approaching deer season. "Lotta deer out here. County is overrun with ‘em. Ain’t no limit on does. You kin take as many as you kin shoot. And I find a bunch on my route. Road kill, you know. They’re still fresh though, so I scoop ‘em up and take down tha County for a tag."

I was tied up in meetings most of the day yesterday and didn’t get a chance to read the mail bag. It has become the favorite part of my day. Most of you are wonderfully witty and keenly observant. I depend on you to highlight our mistakes… and make me laugh. Keep your notes coming: feedback@stansberryresearch.com.

"Congratulations! I rate you even higher on the obnoxious scale for wearing the ‘I’d Fire You Again’ T-shirt," says paid-up subscriber Dennis Galli.

Porter Comment: Take it easy, take it easy. It was only a joke. I wore no such shirt. And, in fact, I shared beers after the contest with one former member of my staff. He’s doing fine. Hard feelings fade quickly when everyone profits from a change.

More on the paintball contest: "General Stansberry: You put a gun in the hands of a Ph.D.??? You deserve to be shot!" – Paid-up subscriber John Fritchey

Sjuggerud Comment: A gun in the hand of a guy who thinks he knows everything? Isn’t that the definition of Marxism?

And one more wry observation on our paintball defeat: "Porter: Commiserations on your ‘death’ & subsequent defeat. You must be part Canadian. We’re used to being shot in the back by Americans in what the army calls ‘friendly fire’!!! Cheers, Shaun Clarke (partly drunk, & maybe a family member)."

Porter Comment: Actually George Huang is from Vancouver… so maybe it was payback?

"I am neither a ‘drunk’ nor an ‘addict.’ but I do find your S&A Digest worth reading and generally entertaining. More importantly, I have been an Alliance member for two years and am happy to confirm that my profits from selectively cherry-picking the recommendations of your various newsletters have far exceeded the cost of membership. ACP, NOK, MSFT, INTC, ZTR, and VGR are prime examples. As for homebuilders, I think Sjuggerud is going to be right again. I made considerable money on DHI a year ago and will probably buy it again soon…" – Richard Avitabile

"Your comments about Google Earth are laughable. What has Google & Yahoo! done in China? They fell on their knees to the Chinese government, allowing that regime to inflict damage to their civilian population, for those that dare to use Google and/or Yahoo! to improve their knowledge of the world. I believe both Google & Yahoo! have been instrumental in at least burying their corporate heads in the sand, as the Chinese government has persecuted people… The CEOs that backdated their stock options are pussycats to these thugs." – Paid-up subscriber Philip Cole

"…Is there a place we can find a listing of the 115 [companies under investigation for backdated options] so we can decide about staying or exiting? – Paid up subscriber Marci Irvine

Porter Comment: The best list is maintained by The Wall Street Journal, whose reporting helped to uncover the scandal earlier this year. The list is available on their website.

"It seems that the SEC and Justice and (now) Porter Stansberry are America’s version of ‘soak the rich stand up for the middle man’ socialism…. As a former employee and former shareholder in Apple (during the alleged fraud) I don’t want Steve Jobs to go to jail. If I had given Steve Jobs some money to make money for me, if some of his actions were ‘fraudulent’ and he enriched himself a bit too much (a bit more than we have verbally agreed to) but he still came back with a return on my investment of a few hundred percent I would not give a damn. I wonder why a government agency would care either. In particular the absurdity of the SEC and Justice going after corporate malfeasance in Apple is like the Vietnam adage of ‘destroying a village to save it’. If Jobs is jailed, Apple (one of America’s iconic companies) will collapse and Justice will have revenged the shareholders in Apple by impoverishing them, for which we should award them a Soviet Order of Lenin medal, for statist services against US capitalism." – Reader Eoin Norris

Porter Comment: The actions of these men threaten the fabric of capitalism, which is based on trust and fair dealing. And these companies are far more than their CEOs.

Henk van der Wijk replied to my tongue-in-cheek allegation that he must be a drunk because he’d learned to like the Digest, comparing it to acquiring a taste for olives. "…More than an alcohol problem, a civilization gap seems to pop up here: Putting olives in martinis? We don’t do things like that here in Holland."

"Now you know why God flushed that toilet once and we shouldn’t be trying to rebuild it," wrote paid-up subscriber "Renee" in reference to New Orleans and the taxicab mishap suffered by a friend there last week.

Porter Comment: Nothing beats the warmth and generosity of a bigoted religious fundamentalist.

"I’m an Alliance member. Would you mind sharing your recipe for smoked brisket?" – Joohee Paek

Porter Comment: No problem. But this isn’t my recipe. It’s the recipe that’s been used at the Greenbrier Resort for almost 100 years. It’s outstanding.

You’ll need a whole brisket. Trim the fat cap lightly. (My butcher does this for me, leaving about 1/8 of an inch of fat over the entire top of the brisket.)

For the rub you need:

1/4 cup kosher salt

1/4 cup light brown sugar

1/4 cup sweet paprika

2 tablespoons pure chili powder

2 tablespoons black pepper

1 tablespoon onion powder

1 tablespoon garlic powder

1/2 teaspoon dried oregano

For the mop sauce you need:

1 cup of beer

1 cup apple cider

1 cup vinegar

1/3 cup beef or chicken stock

1/3 cup vegetable oil

1/3 cup Worcestershire sauce

2 tablespoons Tabasco sauce (or more, to taste)

Salt and pepper (to taste)

Put the rub on 10-12 hours before you smoke the brisket. Cover all sides liberally. Leave the meat in the fridge for as long as overnight.

Set your smoker up to go for as long and at as low a temperature as you can handle. Use oak or mesquite wood. Ideally, you’ll cook this beast at around 208 degrees for 12 to 14 hours.

After you put the meat on, check the temp every hour or so to make sure all is well. Don’t allow the temp to go over 250 degrees, or you’ll have tough brisket on your hands. Keep it low. Cook it slow.

After five or six hours, you’ll notice that the meat looks dry. It’s time to mop. Get the mop sauce out and mop the meat every hour or so. At around 10 hours in, cover the brisket in foil and leave the rest of the mop sauce in the foil wrap.

Keep smoking it until you achieve a high internal temperature, around 190 degrees. You’ll know it’s done because when you stick your meat thermo in, the middle of the brisket will feel like pudding – it’ll be that soft.

When it’s done, take the beast off the smoker and wrap it tightly in a few kitchen towels. Stuff it in a Dutch oven or other pot. Let it rest for two or three hours. Don’t worry, it’ll stay hot… and it will absorb all the fat would otherwise run out as soon as you slice it.

One step left: Amaze your friends with the best tasting piece of beef they’ve ever had. I serve my brisket with a Brunello – a big, fruit-foward red wine from Tuscany. This year it was a 2003 Togata, which was our favorite from a tasting trip we took in September. It's important to let Brunellos breathe for several hours before serving them.

Regards,

Porter Stansberry

Cockeysville, Maryland

November 30, 2006

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