The S&A Digest: Steve for a lifetime

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

As of 06/21/2013

Steve for a lifetime... Perma-bear Porter strikes again... So does perma-bear Grantham... MBIA fires Fitch... Heyliger on insiders...

Goldsmith comment: Porter was going to write The Digest between flights today, but delays and the usual airport chaos tied him up. He'll return on Wednesday.

 If you've ever been interested in receiving all of Steve Sjuggerud's research for life, we encourage you to learn more about the True Wealth Alliance. This lifetime offer gives you access to True Wealth and Sjuggerud Confidential at a huge discount. And now... it gives you access to Steve himself. In addition to Steve's monthly advisories, True Wealth Alliance members will receive his new quarterly Partners Letter.

In the Partners Letter, Steve will provide his outlook on the markets, share personal stories from his travels, and give his top three picks for the quarter. We will send the first letter on March 25, and one every quarter thereafter. Existing True Wealth Alliance and S&A Alliance members will receive the Partners Letter. Our True Wealth Alliance offer ends tomorrow at midnight. To learn more, click here...

 Last September, we wrote this bullet about perma-bear Jeremy Grantham...

Grantham, who oversees $150 billion as chairman of Grantham, Mayo, Van Otterloo, predicts credit-market declines will cause up to half of all hedge funds to close their doors within the next five years. If his predictions come true, it could be market shattering – considering the $1.7 trillion the approximately 9,800 existing hedge funds control. Grantham also forecasts the demise of at least one global bank and "one or two" major private-equity players. The perma-bear has never been so bearish and believes we are in the midst of a "global bubble."

Grantham's prediction sounded extreme at the time, but today, it looks closer to reality. Since February 15, six hedge funds, totaling more than $5.4 billion, have shuttered. According to the website Hedge Fund Implode-O-Meter, at least 56 distinct funds are out of business since mid-2007. We haven't seen a bank collapse, but we're close with Citigroup. And private-equity firm Carlyle Group's bond fund – Carlyle Capital – is in default. And we're only six months into Grantham's five-year prediction...

 And what will happen when these troubled funds try to sell assets to meet margin calls? Nothing good according to Warren Buffett... "Unfortunately for the people that are deleveraging, it was leveraged at crazy valuations in many cases. So people that are out, have been out, on a limb financially are having the limb sawed off."

 What happens when you disagree with a ratings agency? If you're MBIA, the world's largest bond insurer, you fire it. MBIA asked Fitch Ratings to stop issuing credit ratings on the company because the grades have become less valuable to investors. And MBIA has every right to do so, because ratings agencies are paid by the companies they rate...

 At last year's Alliance conference, Porter announced Freddie Mac and Fannie Mae would go bankrupt. And with news coming out that the government won't guarantee the mortgages, that outcome doesn't seem far off. Porter's also gone on record – many times – that General Motors will go bust. GM hit a 52-week low today, down 51% since last October. And although I hate to mention it, Goldman Sachs hit a low today, too. We won't know the outcome of the mortgage crisis for some time, but just look at this chart of Freddie Mac...

Imagine how that chart makes Richard Pzena feel.

From Inside Strategist editor Brian Heyliger: "All in one day [last Friday], nine different insiders collectively dumped $629,000 into Ambac. The news boosted shares on Friday, but they're down 22% today. We saw this before with E*Trade. We passed and avoided a 25% loss. Ambac's insider moves are the same as E*Trade's: a PR campaign to attract the media and investors."

 Insider buying can signal a huge bull run in a stock. But, as was the case with Ambac and E*Trade, it can also be a feeble attempt to bolster a stock price, ultimately harming investors. Discerning one from the other is the key to successfully using the insider buying strategy. Since taking over Inside Strategist last month, Brian's recommended three trades. Readers are already in the black on two. The S&P 500 is down 6.18% since Brian took over Inside Strategist. To read more about Inside Strategist, click here...

 New highs: Sabine Royalty Trust (SBR), Westshore Terminals (WTE-UN.TO).

 Not surprisingly, I mention drinking, and the e-mails pour in. Whatever gets you writing... feedback@stansberryresearch.com.

 "What do you mean, have a stiff drink after work today? I had a hell of a week. I fired 4 people and 1 quit. You just can't hire good help these days." - Paid-up subscriber Stephen

 "Take the edge off with a 2-3 oz. of Cutty Sark Scotch on the rocks with a few (6 or 7) chips or 5 or 6 shrimp and sauce. Sip the scotch and the ancillaries for 1/2 hour. My wife joins me with a cream sherry." – Paid-up subscriber Oliver Gould

Goldsmith comment: I used to exclusively drink scotch – Macallan and Lagavulin. Now, I'm really enjoying single-barrel bourbons like Blanton's. Has anyone else discovered the joys and serenity craft bourbon can bring?

 "In November of 2005 I bought 30 MS 65 St. Gaudens $20.00 common date coins. I will have to say Steve brought my attention to gold in general, but I shopped around & used what he said was a fair price being 2-21/2 times the price of gold & found the best price being $1350.00 ea. I believe spot was about $ 600.00 & some dealers were as much as $1550.00. The price sounded like it was fair & my total was $40,500.00. The spot price of gold continued to rise, but the MS-65's stayed the same. About 8 mo. ago I called the dealer that sold them to me his offer was $1050.00, after 2years of the spot price going up I was going to get $300.00 less for my coins. What I knew I had to do was move my coins at the best price I could get & purchase Bullion in some form. I sold all but 2 & purchased 5-10oz bars. I lost $4000.00 on the Saints, but it turned out to be the best loss I've ever taken. My point is for laymen investors the only way is bullion in bars or coins & shop around for price. This is a good way for laymen to buy any form of precious metal. Had I purchased $40,000.00 in bullion at the time I bought the saints, not only could I have bought at least 65oz, but today I would have $63,000.00 + on that one transaction.

"There have been several other financial letters saying gold is a good investment, but they never tell you in what form & I guarantee you if you call one of these dealers they will tell you that Saints are the best of both worlds & even better now because the premium is so low compared to a couple of years ago. Please unless you are an expert buy bullion!! It is easy to sell anywhere & you know where you stand all the time. Maybe someday Steve will be correct, but today my money is in bullion bars & coins." – Paid-up subscriber Jim

Goldsmith comment: I just checked the PCGS price guide from Collector's Universe (the company that invented the grading system) and MS 65 St. Gaudens $20s are selling for $2,050. I don't know why you were having trouble selling at these prices. But Jim, just be happy you own gold... in whatever form.

Regards,

Sean Goldsmith

Baltimore, Maryland

March 10, 2008

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