This billionaire is bullish... Stocks are still the best... Buying on dips... How to safely generate large income... Yahoo surges on Alibaba IPO... S&A Short Report subscribers profit...
We're still at the Value Investing Congress (VIC) in New York City.
VIC cofounder John Schwartz doesn't want reporters to leak the valuable information from his conference – after all, it's an expensive event to attend – so we'll respect his wishes. We will, however, share the thoughts (but not the stock picks) of billionaire hedge-fund manager Leon Cooperman.
Cooperman was a partner at Goldman Sachs and head of Goldman Sachs Asset Management. He left in 1991 after 25 years to start hedge fund Omega Advisors. Today, he has nearly $11 billion under management (nearly $3 billion of which belongs to the general partners).
Cooperman is an old-school stock analyst. His presentations always remind me of Dr. David "Doc" Eifrig, who was sitting next to me at VIC yesterday. Cooperman uses lots of economic indicators and data.
And, like Eifrig, Cooperman is optimistic today... He believes we have another 12 to 18 months of solid returns left in the S&P 500. He also thinks Europe and Japan will perform well.
Cooperman believes the U.S. dollar will show strength as other central banks continue easing. (Today, the dollar hit a 14-month high of $1.289 against the euro and a six-year high of 106 against the yen.)
Cooperman doesn't like bonds today... He has essentially sold out of high-yield (or "junk") bonds. He also expects negative returns for Treasurys and corporate debt. During the presentation, Doc whispered, "He didn't say municipal bonds."
As we've discussed many times, Doc is bullish on "munis" today. Muni bonds are bonds issued by state and local governments to fund anything from a new sports stadium to roads. The interest on munis is tax-exempt.
Today, you can buy muni-bond funds for large discounts to their net asset values and collect tax-equivalent yields of nearly 10%.
Cooperman noted a lot of positive economic indicators... Corporate America is liquid, household liquidity is up, unemployment claims are down, and small businesses are recovering. Plus, he noted a sentiment we share in the Digest. Cooperman quoted Sir John Templeton – founder of Templeton Mutual Funds...
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In other words, as we said in last Friday's Digest, we're not at the top yet... People are worried today. They aren't euphoric.
Steve Sjuggerud gave yet another example of why we still have a few innings of this bull market left in today's DailyWealth.
Still, the market is fully valued... At around 19 times earnings, the S&P 500 isn't cheap. It's not expensive, but it's also no bargain.
It can be mentally difficult to put new money to work when the market is trading at all-time highs, even if you believe we're headed higher. Still, it's wise to be long... And buying on any weakness has been a winning strategy.
As we wrote in the July 30 Digest...
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For months, we've been telling you about a strategy you can use to name the price you're willing to pay for stocks... And get paid upfront for the privilege.
It's a way to collect hundreds – even thousands – of dollars immediately... All for agreeing to buy shares in a great company for less than market prices.
We're talking about selling put options. The strategy is simple...
In short, when you sell a put on a stock, you're agreeing to buy the stock at a specific price (called the "strike price") on a specific date ("option expiration"). In return, you're paid an amount of money upfront (the "premium").
We've written loads on the topic... You can read two Digests we dedicated to the topic here and here. So we won't go in-depth about it today. But we're confident that once you start selling puts, you'll be hooked.
Many S&A employees (myself included) personally use this strategy to collect thousands of extra dollars a month... It's one of the safest and most consistent ways to generate extra income (all with a few clicks of the mouse).
But it's important to follow a couple simple rules when selling puts...
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Only sell puts on high-quality companies you would be happy to own at a price you're willing to pay.
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| 2. | Only sell the number of option contracts (each contract controls 100 shares) you're willing to cover if you're "put" the stock. |
Following this strategy, Doc has amassed an unparalleled track record in Retirement Trader, closing 181 of 183 positions for a gain for his subscribers... with an average annualized return of more than 50%.
Shares of Yahoo jumped 5.6% yesterday in advance of the initial public offering from Alibaba (China's Amazon.com).
Alibaba announced it will go public on September 18. On Friday, the company announced an initial price range of $60-$66, which would value the company at around $162 billion... making it the largest tech IPO in U.S. history.
Yahoo owns 22.4% of Alibaba. Its shares have traded as a proxy in anticipation of the massive IPO...
S&A Short Report subscribers have been along for the ride...
In the May 6 issue of the S&A Short Report, Jeff Clark told readers that Yahoo was undervalued, given its large stake in Alibaba. He recommended buying call options...
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Four months later, it's obvious Jeff was correct. Yahoo is trading nearly 13% higher, from $37 a share at the time of his recommendation to nearly $42 a share today.
Jeff recommended several Yahoo trades... But S&A Short Report subscribers who followed his original advice are up 80%. And larger gains could be on the way... According to market analysts, price targets for Yahoo are as high as $50 per share.
On Saturday, October 18, we're hosting our final Stansberry Conference of 2014 in Nashville.
We've secured former U.S. Congressman Ron Paul as our keynote speaker. You'll also hear from author and financial expert Jim Rickards... Agora founder and Porter's mentor Bill Bonner... Extreme Value editor Dan Ferris... and many, many more. Plus, you won't believe what Porter has up his sleeve...
If you're interested, you'll need to act quickly. We're only offering 250 seats for just $250 each. That's half off our normal retail price. Then, we're raising the price for good. To learn more, click here.
New 52-week highs (as of 9/8/14): Berkshire Hathaway (BRK), WisdomTree Japan Hedged Equity Fund (DXJ), Enterprise Products Partners (EPD), ProShares UltraShort Euro Fund (EUO), Intel (INTC), KLA-Tencor (KLAC), Eli Lilly (LLY), Medtronic (MDTC), Altria Group (MO), Microsoft (MSFT), ONEOK (OKE), Plains All American Pipeline (PAA), PowerShares QQQ Fund (QQQ), ProShares Ultra Health Care Fund (RXL), and Sysco (SYY).
More feedback is trickling in about our marketing efforts... And another subscriber has a question about stop losses. Send us your thoughts to feedback@stansberryresearch.com.
"I want to comment on Doug's somewhat rude and short sighted complaint about Stansberry advertising. First, you should know I am a paid up subscriber and sometime subscriber to Phase 1. That means I subscribe to everything and get new products when they are released. Extreme Value is a no brainer (made beaucoup bucks with IRG back in the day and others). You see Doug, what you need to do is learn how to get to the meat of teaser. I start from the position everything that is Stansberry is the best. No service comes close.
"Porter's yearly ratings shuts down what isn't working. So I just need to know what the offer is and whether if fits in my plan at the moment. For example, if Stansberry teased a service that was dedicated to weekly and monthly options using put credit spreads, and it was 250 pages, I would read every word ferociously; even if it took me a week. I would hang on every breathlessly toned word. You get the point.
"Anecdotally, early on in my subscription life with Stansberry, I too was aggravated by the Stansberry's teases. One day I called Stansberry to ask a question about something or other, and Porter picked up the phone. I had the ear of the Maestro. So after he addressed my issue, I asked about the advertising. I believe it was polite and civil. I simply asked why so much and why the breathless tones yadda yadda. Much like this commentary. In any case, he answered me simply: "it goes with the territory". Brilliant, Succinct. I understood completely. I don't know Porter, never met him, spoke with him that once, read him often, learn from him and his editors daily, made more money than I would have ever made without his service, and hope he wears a life jacket when he goes fishing." – Paid-up subscriber Joseph Levatino
"I have been an Alliance member for about eight years and have really enjoyed being a part of the learning team. Your discipline of having a plan pertaining to stop losses has saved my bacon and made me a fair amount of money in the past. My question today is associated with a Stansberry Alpha trade that we did in July of 2013 with Devon Energy. The $70 call we are holding was paid for by the funds received from the $55 put. No out of pocket money, great strategy! At one point in June the call option was worth $11 and after paying $2.60 for it I was salivating at the profits that we obtained from this trade. Today the stock has pulled back some and we are in the $4 range on the option.
"Normally I would just sit back and quietly watch to see how this unfolds and see what wisdom I can foster from you calling the shots. But from my conservative perspective, a stop loss on this trade appears like it would have been very beneficial. And, I know that, hind sight is always twenty-twenty. But, for future reference, is there a reason that we didn't use the methodology of a stop loss when buying a call option as we would when owning the stock? Thank you so much for all you do." – Paid-up subscriber J.A. Wyoming
Goldsmith comment: Thanks for writing in, J.A. Stansberry Alpha – and most S&A pubs that involve options trading – do use stop losses. But the stops are based on your potential purchase obligation, not on the price of the option itself. Here's how Porter and his research team explain it:
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Regards,
Sean Goldsmith
September 9, 2014
Billionaire fund manager: The U.S. is going broke...
Regular Digest readers are familiar with Porter's "End of America" thesis – that the massive amount of U.S. government debt will eventually cause the rest of the world to abandon the U.S. dollar as the world's reserve currency.
In today's Digest Premium, resource billionaire Eric Sprott explains how this scenario will unfold... and why the U.S. reminds him of Detroit a decade ago...
To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.
Billionaire fund manager: The U.S. is going broke...
Editor's note: Regular Digest readers are familiar with Porter's "End of America" thesis – that the massive amount of U.S. government debt will eventually cause the rest of the world to abandon the U.S. dollar as the world's reserve currency. In today's Digest Premium, resource billionaire Eric Sprott explains how this scenario will unfold... and why the U.S. reminds him of Detroit a decade ago...
Every year, the U.S. Treasury publishes data showing how much the present value of known liabilities increased in a year. These liabilities are Social Security, civil service pension funds, military support payments, etc. The list goes on and on.
Last year, the number went up to something in excess of $5 trillion. The national debt increased by around $1 trillion, but unfunded obligations went up $5 trillion. In essence, you're adding $6 trillion of obligations to an economy that has a GDP of $17 trillion and a government that has $4 trillion in expenses and $3 trillion in revenue.
How can the government possibly take on the obligation of another $5 trillion of unfunded obligations? It reminds me of Detroit. We knew 10 years ago that Detroit was broke. Finally, it went broke, and finally Detroit told pensioners, "Oh, by the way, we can't keep that promise we made to you." Ultimately, that's what will happen in the U.S.
And it's not just the U.S. Japan is in a horrible financial situation. It prints money and its economy never gains any traction and hasn't for 24 years. These countries are giving all these financial accommodations, and yet we get no traction. You've heard the discussion that the 1% is gaining wealth and the 99% is going backwards. There have been lots of studies that show people's real disposable income is going down.
These countries have all this debt and these obligations, and at the same time, they're printing money. That keeps bond rates low and allows them to avoid paying the price of having these obligations. In other words, if the U.S. had to pay 6% on its debt instead of 1%, the deficit would explode.
Money printing has served a temporary purpose, which has helped governments continue to fund deficits where the cost of the deficit isn't that high in terms of annual interest costs... But if rates popped higher, that would change dramatically. People worry about the debt, the interest rate goes up... The higher interest rates go, the more they worry about the debt. It's a vicious cycle.
Someday people will come to their senses. We've seen Russia and China and others decrease their involvement in the U.S. dollar. Those are the countries that are out of the grip of the Western democracies. They are the ones who can make a difference, and we've already seen what they think. They openly talk about de-dollarization. The New Development Bank (whose members are the "BRICS" countries) talks of that.
We don't know when or what will trigger it, but we all know what's going to happen in the end. People should take time to place their bets. But they should do it soon. We won't all be able to make the bet when the government defaults on its bonds, because by then it will be too late. If you think it's all going to end up in a mess, you have to start placing your bets now.
– Eric Sprott
Editor's note: In tomorrow's Digest Premium, Eric will share some of his favorite ways to protect your wealth from the government's loose-money policies.
Billionaire fund manager: The U.S. is going broke...
Regular Digest readers are familiar with Porter's "End of America" thesis – that the massive amount of U.S. government debt will eventually cause the rest of the world to abandon the U.S. dollar as the world's reserve currency.
In today's Digest Premium, resource billionaire Eric Sprott explains how this scenario will unfold... and why the U.S. reminds him of Detroit a decade ago...
To continue reading, scroll down or click here.
Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)
As of 07/21/2014
| Stock | Symbol | Buy Date | Return | Publication | Editor |
| Prestige Brands | PBH | 05/13/09 | 411.6% | Extreme Value | Ferris |
| Enterprise | EPD | 10/15/08 | 316.2% | The 12% Letter | Dyson |
| Constellation Brands | STZ | 06/02/11 | 310.5% | Extreme Value | Ferris |
| Ultra Health Care | RXL | 03/17/11 | 268.2% | True Wealth | Sjuggerud |
| Ultra Health Care | RXL | 01/04/12 | 222.2% | True Wealth Sys | Sjuggerud |
| Altria | MO | 11/19/08 | 210.2% | The 12% Letter | Dyson |
| Targa Resources | TRGP | 12/13/12 | 187.6% | SIA | Stansberry |
| Blackstone Group | BX | 11/15/12 | 179.1% | True Wealth | Sjuggerud |
| McDonald's | MCD | 11/28/06 | 178.1% | The 12% Letter | Dyson |
| Automatic Data Proc | ADP | 10/09/08 | 158.2% | Extreme Value | Ferris |
Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.
| Top 10 Totals |
| 3 | Extreme Value | Ferris |
| 3 | The 12% Letter | Dyson |
| 2 | True Wealth | Sjuggerud |
| 1 | True Wealth Sys | Sjuggerud |
| 1 | SIA | Stansberry |