The wealthy hate paper money today...

Energy insights from a resource legend...

In today's Digest Premium, resource-investing legend Rick Rule recalls a conversation he had with Freeport-McMoRan CEO Jim Bob Moffett years ago... And why the company has had such massive success...

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

The wealthy hate paper money today... More auction records... How to move $100 million across borders... Why muni-market fears are overblown... Hedge funds are buying munis... Feedback on Porter's Social Security rant...

 The ultra-wealthy are fleeing from paper money...

In the November 11 Digest, we briefly discussed how the price of prized collectibles – like wine, art, watches, etc. – increases with inflation. We cited the record $1.1 million someone paid for a Rolex Daytona at auction.

For the world's elite, these rare and globally recognized assets are always in demand.

 But the Rolex was just the beginning...

Yesterday, auction house Christie's announced a rare Patek Philippe watch sold for a record $2.2 million. In total, the watch auction brought $43.9 million – the highest for any watch auction in history.

 And it's not just watches. Fine art is breaking auction records, too...

A 1969 triptych by painter Francis Bacon titled "Three Studies of Lucian Freud" sold for $142.4 million at a Christie's auction yesterday – the highest price ever paid for a piece of art at auction. You can see an image of the work in this New York Times article.

A sculpture by contemporary artist Jeff Koons, "Balloon Dog (Orange)," sold for $58.4 million – an auction record for a living artist.

In total, the art auction totaled $691.6 million – smashing the previous record of $495 million Christie's set in May.

 These huge prices can be partly attributed to the record amount of money in the world today and people's lack of faith in paper money. But as we outlined in the February 14 Digest Premium, the wealthy also amass collectibles for another reason...

 For more of our thoughts on collectibles, you can read the May 3 and May 6 Digest Premiums.

 If you're looking for another way to shield some of your wealth from the IRS, but multimillion-dollar pieces of artwork isn't in your cards, we have another option for you...

Dr. David "Doc" Eifrig has long espoused the benefits of investing in municipal bonds. Issued by state and local governments, these bonds pay healthy, tax-exempt yields to creditors. "Muni" bonds have sold off recently as investors feared increased defaults (following Detroit's bankruptcy and worries of a default in Puerto Rico) and general bond-market disruptions due to rising interest rates.

But Doc thinks fears of the sector are overblown... And munis are one of the few places you can collect double-digit income in today's market. He explained why he's bullish on muni bonds in the October issue of his new Income Intelligence service...

 Recently, hedge funds have started to recognize the value there... and they're piling in.

Whether that's a good thing or a bad thing has yet to be determined – though they are providing liquidity and requesting more disclosure from issuers. But their presence in the $3.7 trillion sector is a major shift. According to the Wall Street Journal, this institutional money is buying everything from discounted Puerto Rico debt to highly rated bonds from Stanford University.

Hedge funds now hold billions of dollars' worth of municipal debt, up from almost nothing five years ago.

 Even though new money is entering the market, Doc thinks you can still make big profits in the sector. He recommended a municipal-bond fund in Retirement Millionaire in 2011. His readers are sitting on gains of nearly 25%. But it's still one of the best places to collect big income today. You can read Doc's explanation of the municipal-bond market as an income-producing asset here.

 New 52-week highs (as of 11/12/13): Becton-Dickinson (BDX), Chicago Bridge & Iron (CBI), CVS Caremark (CVS), EnerSys (ENS), Energy Transfer Equity (ETE), Fidelity Select Medical Equipment & Systems Fund (FSMEX), 3M (MMM), Marvell Technology (MRVL), Sturm, Ruger (RGR), RPM International (RPM), and Constellation Brands (STZ).

 As expected, we received loads of feedback about yesterday's Digest on Social Security. We were surprised at how supportive most of that feedback was. We'll ask Porter to take on the detractors (still, there were many) in later Digests. Send your e-mails to feedback@stansberryresearch.com.

 "While I have read/listened to so many important pieces of information (I subscribe to Extreme Value, Retirement Trader, Retirement Millionaire, The 12% Letter... thus I have amassed so much information), I haven't heard such a moving piece as your recent audio clip on Social Security! So much of the collected information over the past few years, and quite a variety at that, and this piece you just did on the Social Security scam is quite revealing and simply put to the listener in a real raw but basic format – makes me sick to my stomach – which it should anyone! Not as sick as the Federal Reserve's printing and all the politics involved in killing the country, but certainly part and parcel to the same bleed on society that you describe in End of America.

"I understand that the only thing that can be done is to not accept the Social Security at any time and why, but I do not understand how that will do anything that takes the system apart other than put more of the money (not being taken) into the politicians' hands? I believe they will continue to 'take' in order to 'give' like you said, after all why would it stop, but what's to prevent them from amassing what you do not take? How do we put a stop to it I guess is what I am after? Thank you Porter for your blunt and honest audio clip." – Paid-up subscriber Maine Fisherman

 "You are right about the Ponzi scheme. Supposedly there are IOUs for the money those of us who paid in and Congress 'borrowed' to pay for other gov't expenditures. I know it will not be paid back. Unfortunately we have been on the 'dole' now for about 14 years. It helps us pay our bills (and no it is not our only income source) and yes, supports our life style which is not extravagant by any stretch of the imagination. We along with a lot of other retirees believed the lie and did not become aware of what was going on until after we retired. So for now we are breaking the law." – Paid-up subscriber Chas P

Regards,

Sean Goldsmith
Miami Beach, Florida
November 13, 2013

Energy insights from a resource legend...

Editor's note: In yesterday's Digest Premium, we featured analysis from famed resource investor Rick Rule about copper giant Freeport-McMoRan.

In today's piece, we continue to excerpt Rick's conversation with Porter from episode 108 of Stansberry Radio Premium, including a discussion about why Freeport has had such massive success...

Rick Rule: You may know I've known [Freeport-McMoRan CEO] Jim Bob Moffett for many, many years. Many years ago as a pup analyst, Moffett described high-risk, high-reward exploration as a 35% internal rate of return business and production as an 8% internal rate of return business. And he said, "If you have the courage for the irregular results and the capital-intensive nature of exploration, who wouldn't prefer to be in a 35% internal rate of return business relative to an 8% internal rate of return business?"

Another interesting anecdote is the last time Freeport was big in the Gulf [of Mexico], which was probably 20 years ago, we used to internally do benchmarking with the various domestic producers on things like recycle ratios and the amount of reserve discovered by dollar expended.

By any metric that we employed, Freeport was always in the top five producers in the Gulf. And if you added all the metrics together, it was always the best. I asked Jim Bob 20 or 25 years ago why that was true, and he said something very interesting. He said that in those days, if you were a young, hotshot geologist with Shell and you were just poking the lights out in the Gulf, you might get a pay raise from $75,410 to $81,314... And if your political skills were good, you might get a credenza. In Freeport, you got a performance bonus that vested over two or three years to the point where you'd be making $250,000 a year. In other words, people got paid for performance.

Probably more important, Moffett would go to these very smart, young geologists and say, "Don't be afraid to drill a very smart, high-impact dry hole on my watch. Don't make a habit of it, but we didn't build Freeport by making billion-cubic-feet corner-shot wells. We built it with 200 billion-cubic-feet discoveries, and you don't make those without some failures. So don't be afraid of a very, very, very smart failure."

That shows the culture of Freeport and it goes to show why it had the ability to dream up the Davy Jones plan in an area that had been drilled, Porter, since before you were born.

Editor's note: Rick appeared on the subscriber-only Stansberry Radio Premium version of the podcast. To learn more about a subscription to Stansberry Radio Premium (which would give you access to Rick's full interview), click here.

Energy insights from a resource legend...

In today's Digest Premium, resource-investing legend Rick Rule recalls a conversation he had with Freeport-McMoRan CEO Jim Bob Moffett years ago... And why the company has had such massive success...

To continue reading, scroll down or click here.

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