The S&A Digest: Would the real inflation rate please stand up?

Would the real inflation rate please stand up?... JumboChina... Icahn's still hunting... It's not the Swedes fault (whoops)... How to hide a gold brick... Casey's reading list...

Forget the mailbag. Here's someone who knows what he's talking about when it comes to inflation...

Steve Leuthold has been managing money since 1969. His firm, Leuthold Weeden, isn't widely popular among individual investors, but is highly regarded among professional investors. Why? It's extremely contrarian. "Undervalued and Unloved" – symbol UGLYX – is its newest mutual fund. As you might imagine, advisors have a hard time explaining to people why they'd want to own such a fund. Leuthold puts out some of the very best investment research we see. These guys share our passion for understanding history, economic cycles, and for crunching numbers. And unlike our government, Leuthold has a huge economic incentive to accurately measure the real rate of inflation. As my colleague Tom Dyson reminded me today, Leuthold tracks the prices of 70 different commodities each week. He records how prices change, year over year. And he publishes the average figure. Right now, Leuthold's Diffusion Index has passed 90% for the third time this year. While the government wants you to believe that inflation is largely contained, it's actually printing money as fast as it can to ward off a mortgage-debt led financial crisis.

The seven sisters now have a big brother... The second-largest company in the world is now True Wealth pick PetroChina (PTR). Shares of Asia's top oil and gas company jumped close to 12% today on news of increased production and hopes of new discoveries. The boost raised the company's market cap to $430 billion, unseating GE as the No. 2 company behind ExxonMobil. Steve's readers are up more than 110% in six months.

Tonight at midnight is your last chance to try Jeff Clark's trading service, the S&A Short Report, at 33% off the normal price. If you've ever wanted to stick your toes into trading, Jeff is the best guide in the business. To learn more, click here.

"There is value there, and if that value doesn't manifest itself I, as an activist, would think very seriously about coming back," says Carl Icahn in regards to the struggling Motorola. Icahn didn't win a board seat earlier this year, but he kept his 70 million shares, indicating an Icahn-led restructuring is still likely.

67% of U.S. executives think they're overpaid relative to performance, according to a study by the National Association of Corporate Directors. Of the 70 polled U.S. CEOs, only 2.2% thought compensation was too low, while one-third thought it was "just right."

New highs: Berkshire Hathaway (BRK-A), PetroChina (PTR), Gen-Probe (GPRO), Cheung Kong (0001.HK), BG Group (BRGYY.PK).

In today's mailbag... thousands of website name ideas. Thanks for your ideas... we're sorting through them, but right now we're no closer to a decision. Sometimes too much information is as much trouble as too little. Also... we apologize for confusing our Nordic geography. Of course, it's the Norwegians who give Nobel prizes, not Swedes. (You'd think with a "Sjuggerud" on staff, we'd at least have the Norwegian prizes straight...) Keep us honest here: feedback@stansberryresearch.com.

"I'm sorry, but I just took all your name suggestions for myself... You may buy them from me if you like." – Paid-up subscriber Matt

Porter comment: We'll bid based on intrinsic value...

"If Al Gore won the Nobel Peace Prize, don't blame the Swedes: the Peace Prize is the Nobel that is awarded by the Norwegians, not the Swedes. Being Swedish myself I don't enjoy seeing my country of birth being falsely accused like this. Furthermore, the Nobel Committee (at least in Sweden) has nothing to do with the choice of winners. This is handled by various scientific and literary academies. Anyhow, when it comes to the Peace Prize, it is true that several of the choices over the years have been incredibly misguided and have seriously compromised its dignity and prestige." – Paid-up subscriber Hans S.

"Gameplan for gold storage? Buy the big brick, spray paint it flat grey in colour and place it in your home as a doorstop with the stamped-logo side down.

"It all started a long time ago when my father asked his banker if he could ever see gold unpegged from $35.00 ounce. The banker laughed hard and answered, 'No, it will never happen.' My dad had another opinion and decided to buy the big brick thru the Canadian bank's gold bar department. The painted doorstop sat in our house for a good many years and people asked from time to time what it was made of. My father's answer was always the same. 'It is a gold brick,' and everyone laughed at this standard reply. When gold went thru $820.00 an ounce in early 1980, he dropped it back to the bank manager's desk who was nearing retirement and asked him to cash it in, grey paint and all. He got the last laugh." – Paid-up subscriber David Kiessling

Regards,

Porter Stansberry

Baltimore, Maryland

October 15, 2007

* * * * * * * * *

Editor's note: Doug Casey is one of the world's best resource speculators and advisors – and has been for more than 30 years. He also made a fortune in real estate, buying Aspen, among other places, long before prices soared. Casey is the original International Man, having visited nearly every country in the world (170, at last count) and lived in 10 of them. But... I think Casey's most outstanding talent is his gift with a pen. He has written several bonafide best-selling books – including one of the best-selling financial books of all time, Crisis Investing, which was on the New York Times list for 29 consecutive weeks.

I met Doug in the 1990s and we became friends when mutual friends suggested we travel to China together. For me, the experience was monumental. Doug was consumed by many of the same intellectual passions as I was, but he'd thought about them longer and better than I had. Casey is probably the only person I know well who isn't regularly offended by me... And I believe that coincidence is probably mutual. As I'm sure you can tell, Doug is a hero of mine: he's completely iconoclastic and utterly brilliant. What books does he think are worth reading? We thought you'd want to know...

Doug Casey's Top 10 Books

With about 100,000 new books (not counting reprints, classics, etc.) published in English alone every year, it's literally impossible to even read all the titles, forget about the contents.

And so much of our reading time these days is consumed with online and offline newspapers and magazines. And newsletters. I, therefore, tend to rely on the recommendations of friends whose opinions I value for book recommendations. Therefore, thank you for the implied compliment of asking this question. Let me handle the answer by subject. And I'll limit myself strictly to nonfiction that literally has the potential to radically alter your views of reality itself. All are available either from Amazon.com or, preferably, Laissez Faire Books (www.lfb.com).

My most important philosophy book is Ayn Rand's The Virtue of Selfishness. I remember when I first read it (and it was also the first thing I read of hers), I had to put it down after the first page, thunderstruck that someone was actually saying these things. Things that I'd always intuitively believed but had never been able to crystallize in my mind and enunciate. My only problem with Rand is that she really didn't go far enough. That was up to the Tannehills.

My most important political book is Morris and Linda Tannehill's The Market for Liberty. It was originally printed in an almost Samizdat-size edition of 500 copies. I took it along as part of my reading materials on a treasure hunting expedition in 1971. It was an ill-fated adventure, and when the boat sank, my copy went down with it. But the material, which clearly explained how society would work without government, was burned into my consciousness. Cleverly, the authors never used the hot-button word "anarchy." That was left up to me and my friend Karl Hess when we wrote, respectively, the foreword and introduction to The Market for Liberty when it was republished in the early '80s. It seems that in response to my recommendation in my 1980 New York Times bestseller, Crisis Investing, thousands of people wrote the publisher, LF Books, to order the long out-of-print volume, so it did the reprint. So it was something of a "Back to the Future" twist in that the publisher asked me to write the foreword for a book that had changed my political thinking 10 years earlier.

My most important economics book was undoubtedly Henry Hazlitt's Economics in One Lesson. Economics, being the study of how the world works, and how men go about producing and trading for what they want in the material world, is extremely important. But even people who are financially successful are usually ignorant of its basic principles and believe all manner of things that are not only untrue but the opposite of the truth. And reading a college text on the subject is worse than a waste of time, in addition to being boring. Hazlitt's book is precise, cogent, correct, and eye-opening.

My most important financial books were Harry Browne's How to Profit from the Coming Devaluation, which I read in 1972, just after it actually occurred. The book was written in 1969, and Harry predicted what would happen, and for the right reasons. It introduced me to hard money investing. It's still a good read, believe it or not. In second place is Ben Graham's justly famous The Intelligent Investor. Perversely, I rarely use it (directly) with the type of stocks I buy. But I always keep its approaches in mind; the book is indispensable. Third is The Battle for Investment Survival by Gerald M. Loeb. That I picked up many of my methods from it is evidenced from the extensive quotes I used from it in my book Strategic Investing.

My two most important "self-improvement" books were Marcus Aurelius' Meditations, and Harry Browne's How I Found Freedom in an Unfree World. Surprising to me, Bill Clinton also places Meditations as one of his most important reads. If Bill had also felt that way about Harry's book, the world would almost certainly be a much better place today. But then, if he had, he never could have been elected president.

My most recent important book is one that I really haven't learned anything new from, because I've agreed with almost everything in it for many years. But I'll add it to the list because it's totally brilliant, completely uncompromising and, I think, probably the best book ever written on the subject. I refer to Richard Dawkins' The God Delusion. After I read his groundbreaking Selfish Gene, I asked a friend of mine at Oxford – where Dawkins was teaching – to set up a lunch with him for me. It would be fun to see him again. Where do I possibly differ from him? Let's just say that George Patton may have had an insight Dawkins has missed.

So, along with an apparently congenital disposition towards a certain set of attitudes, these books could be instrumental in turning someone into an anarchist-atheist-libertarian, with nihilistic and solipsistic tendencies. Approach them with caution, or you may find yourself unwelcome in conventional company. But you may also find you start attracting a much more interesting crowd.

Good Investing,

Doug Casey

P.S. To read more from Doug Casey, visit http://www.caseyresearch.com/.

Stansberry & Associates Top 10 Open Recommendations

Stansberry & Associates Hall of Fame

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

As of 06/26/2013