Wed, Dec 4, 2013|Sean Goldsmith

Treasury yields are creeping up...

This short-selling guru has a new target...

Jim Chanos has made a fortune selling stocks short at his hedge fund, Kynikos Associates.

Today, in Digest Premium, we discuss the details of his latest target. It's one of the companies responsible for the healthcare.gov website debacle.

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 12/03/2013

Stock	Symbol	Buy Date	Return	Publication	Editor
Rite Aid 8.5%	767754BU7	02/06/09	683.6%	True Income	Williams
Prestige Brands	PBH	05/13/09	461.8%	Extreme Value	Ferris
Enterprise	EPD	10/15/08	242.4%	The 12% Letter	Dyson
Constellation Brands	STZ	06/02/11	235.2%	Extreme Value	Ferris
Ultra Health Care	RXL	03/17/11	196.9%	True Wealth	Sjuggerud
Altria	MO	11/19/08	179.5%	The 12% Letter	Dyson
McDonald's	MCD	11/28/06	171.3%	The 12% Letter	Dyson
Hershey	HSY	12/06/07	160.1%	SIA	Stansberry
Ultra Health Care	RXL	01/04/12	159.2%	True Wealth Sys	Sjuggerud
Automatic Data Proc	ADP	10/09/08	152.2%	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

1	True Income	Williams
3	Extreme Value	Ferris
3	The 12% Letter	Dyson
1	True Wealth	Sjuggerud
1	SIA	Stansberry
1	True Wealth Sys	Sjuggerud

Stansberry & Associates Hall of Fame

(Top 10 all-time, highest-returning closed positions across all S&A portfolios)

Investment

Sym

Holding Period

Gain

Publication

Editor

Seabridge Gold	SA	4 years, 73 days	995%	Sjug Conf.	Sjuggerud
ATAC Resources	ATC	313 days	597%	Phase 1	Badiali
JDS Uniphase	JDSU	1 year, 266 days	592%	SIA	Stansberry
Silver Wheaton	SLW	1 year, 185 days	345%	Resource Rpt	Badiali
Jinshan Gold Mines	JIN	290 days	339%	Resource Rpt	Badiali
Medis Tech	MDTL	4 years, 110 days	333%	Diligence	Ferris
ID Biomedical	IDBE	5 years, 38 days	331%	Diligence	Lashmet
Northern Dynasty	NAK	1 year, 343 days	322%	Resource Rpt	Badiali
Texas Instr.	TXN	270 days	301%	SIA	Stansberry
MS63 Saint-Gaudens		5 years, 242 days	273%	True Wealth	Sjuggerud

This short-selling guru has a new target...

Jim Chanos has made a fortune selling stocks short at his hedge fund, Kynikos Associates.

Today, in Digest Premium, we'll discuss the details of his latest target. It's one of the companies responsible for the healthcare.gov website debacle.

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

Treasury yields are creeping up... U.S. energy exports hit record high... Doc's indicators show an improving economy... Apple hits a new high... Ferris comments on Apple...

The most important number in finance, the yield on 10-year Treasurys, jumped six basis points (0.06%) today to 2.84% – its highest level since September. Treasury yields move higher as investors have more faith in the U.S. economy. And we saw two bullish bits of news today...

Payroll processor Automatic Data Processing (ADP) showed the economy added 215,000 jobs in November. That beat expectations of 170,000 jobs and the 184,000 jobs added in October.

And the Census Bureau announced the U.S. trade deficit narrowed to $40.6 billion in October. That just missed expectations of a $40 billion deficit. But it's an improvement from September's $43 billion deficit. Total exports rose to a record $192.7 billion, up $3.4 billion from a month ago. Imports only rose $1 billion to $233.3 billion.

And the announcement included this interesting tidbit... U.S. exports of petroleum-based products (notably refined fuels) equaled $12.5 billion in October – the highest on record. Investors in the shale-energy boom take note.

The market was flat on the news... Gold rose 2% to about $1,250 an ounce – an unusual move considering the strength in Treasurys and the economic news.

In short, more data show our economy is steadily grinding higher... as Dr. David "Doc" Eifrig has consistently reported to his Retirement Millionaire subscribers.

But before going into the "positives" surrounding the economy, first consider this negative bit...

In October, total margin debt on the New York Stock Exchange stood at a record $412.5 billion (up from $401.2 billion in September). Margin debt is the total value of securities purchased on margin. It's a way for folks to get exposure to securities with less cash upfront. Playing with margin can amplify your gains... But it can also make your losses much greater.

Today, investors are chasing an already-at-record-highs market even higher... And they're using record amounts of debt to do so. It works beautifully until we see a correction... and the levered masses are forced to liquidate their positions and pay that debt back.

Why is this bad news? It's just another sign of the excess and froth in today's market. Asset prices are at all-time highs, debt is at all-time highs... What could go wrong?

Doc addressed this phenomenon in the most recent issue of Retirement Millionaire. He explained margin debt to readers this way...

These high debt levels are usually a sign that investors are margining their accounts in order to buy stocks that are most likely trading at or near highs. The current surge in the popularity of margin trading tells me the market is staying emotional. People are getting caught up in the rush of the S&P 500 continuing to hit historical highs. So these investors are leveraging their money in order to buy expensive stocks.

But other indicators tell him the bull market isn't ending just yet.

In yesterday's Digest, we noted True Wealth editor Steve Sjuggerud's view that we're in the "sixth inning" of the bull market. Doc offered a similar perspective to his subscribers...

Our current bull market in stocks is in its 54th month, dating back to April 2009.

The median length of U.S. bull markets has been 52 months. The median measures the middle data point – there are as many data points above the median as below. That minimizes the effect of extreme outliers. We're past the median now. So you're finding fewer and fewer historical examples of bull markets that ran longer than the current upswing... And that means this bull market is getting closer to the end than the beginning.

Doc follows many different economic indicators to "take the market's temperature," and most of these indicators have been grinding higher for years. We can't share all of Doc's favorite market indicators with you. (That's for Retirement Millionaire readers only.) But we'll give you a couple from his last issue to consider...

Another indicator I look at is the Federal Reserve of Philadelphia's "Leading Index." It combines data on things like housing permits, unemployment insurance claims, interest-rate spreads, and manufacturing surveys in an attempt to predict where the economy is headed.

When the index is above "0," it indicates the economy is growing. When it's falling down to "0" (or below), that signals a slowing economy. Usually when a descending line crosses about 0.8, we're headed for a recession.

Note that the chart below shows we've remained well above 0.8 since the recession ended, with no downtrend.

Increases in employment and income also help push my next indicator – construction spending – higher. As more homebuyers enter the market, supply has to increase to meet the demand. As the chart below shows, things are growing steadily, although remaining far below prerecession levels... This is, again, consistent with no recession or slowdown in sight.

In that issue... Doc told readers exactly where the economy stands today... And he also reviewed the entire Retirement Millionaire portfolio to help readers position their portfolio going into 2014. He also dedicated an entire section of his December issue to tell you "what to do with your extra cash."

Doc currently has 25 "strong buys" in the portfolio... These are stocks and bonds he thinks you should own right now. Many of them pay large dividends. And they should enjoy capital appreciation as this market continues its upward march.

So if you're looking for a way to put money to work today... And you're curious about where we stand in this bull market, Doc's latest issue is a must-read.

And in addition to his market-related advice, Doc also shares his popular "Retirement Millionaire Secrets." These are money-saving tips, health and travel advice, and other secrets Doc has learned that help him live the millionaire lifestyle in retirement.

This month, he tells readers the one piece of information you must know before applying for a credit card. And a way you could get up to $2,000 back from the government when you file your taxes.

Doc also recently released a book compiling his extensive research into how to prepare you and your family to survive any kind of crisis – natural, manmade, or economic. His insights include secrets like the best medical supplies and medications to have on hand (and how to get them) to the No. 1 way to prevent almost any home break-in.

You can sign up for Retirement Millionaire right now for only $39 for one year. You'll receive immediate access to everything I just discussed... And you'll receive a new Retirement Millionaire issue every month for one year. If you decide within the first four months that the service isn't for you, you can get a 100% money-back refund. To learn more, click here...

Shares of Apple hit a 52-week high yesterday. As you can see from the one-year chart below, shares of Apple have gone "round trip."

Dan Ferris holds Apple in his exclusive World Dominator portfolio for Extreme Value. We asked him to comment on the technology giant as it's hitting new highs:

Apple said it finally got a telecom provider in India to offer its iPhone 5s and 5c. Reliance Communications will subsidize the iPhone models on a two-year contract. Reliance is the third-largest mobile phone provider in India by number of subscribers.

This is a big deal because the contract system never really took off in India. Reliance tried it back in 2003, and it was a big flop. The problem is you don't have a common identification system – like Social Security numbers in the U.S. – to determine the customers' creditworthiness. And you need that when you're signing them up for a two-year contract and handing them a $600-plus phone for $200 or less.

So Reliance will require subscribers to have a credit card to participate in the offer. Credit card companies will handle the billing. This will limit the number of subscribers initially, but this is still a great way for Apple to access the second-largest mobile phone market.

This is a great development overall. It helps get more iPhones into the hands of folks who might not want to pay the full, unsubsidized price ($865). For $48.50 per month, you get an iPhone 5s, plus unlimited calling, Internet, and no extra fees. That's a total of $1,162 over two years for the latest iPhone, plus unlimited phone and Internet. I paid $200 for my iPhone, and I still pay $150 a month (or so) for three people to get unlimited calls and texts.

I think Asia is an ideal market for the iPhone. Anyone who has been to a big Asian city knows Asians LOVE their luxury goods. They love gold, diamonds, Louis Vuitton purses, expensive liquor... you name it. The iPhone remains the ultimate status symbol among mobile phone offerings... even though Samsung and Nokia have upped the ante the past year or so.

I bet iPhone does really well in India and China and other Asian countries as they become wealthier. That will likely drive iPad and Mac sales somewhat, too. That's what happens. Apple gets you in with an iPhone, then you get an iPad... then it takes over your life. The Reliance/iPhone launch is taking place just ahead of the Indian festival of Diwali, a time when people spend a lot of money on consumer goods.

And around $560 a share today, Apple still trades at an enterprise value (market cap plus debt minus cash) of a little more than eight times trailing free cash flow. It's still really cheap, and it just had the most successful iPhone launch in its history, selling 9 million units the first weekend. Now it's in India, the second-largest mobile phone market in the world. What's not to like?

New 52-week highs (as of 12/3/13): Apple (AAPL), Automatic Data Processing (ADP), Energy Transfer Partners (ETP), NVE (NVEC), ONEOK (OKE), Penn Virginia (PVA), Constellation Brands (STZ), and Wal-Mart (WMT).

More Social Security comments in today's mailbag... You can weigh in on this or any other topic at feedback@stansberryresearch.com.

"Let me try to clear up some misperceptions in regard to the subject. First of all, Social Security could be a Ponzi Scheme, which depends upon the newcomers to finance the obligations of the older participants when they come due, which it is, and still have money in the fund. And the Federal Government's website, Social Security Online, Statistical Tables shows a balance in the fund of $2,5 trillion dollars at the end of 2011.

"But... let me quote from an article on point from the Heritage Society dated 9/2004: 'When the government issues a bond to one of its own accounts, it hasn't purchased anything or established a claim against another entity or person. It is simply creating a form of IOU from one of its accounts to another.'

"According to the Office of Management and Budget under the Clinton Administration in 1999:

These (trust fund) balances are available to finance future benefit payments and other trust fund expenditures – but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund pension plans. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.

"That last part is at best disingenuous. What are they going to reduce; farm subsidies, the military? The article continues:

In short, the Social Security trust fund is really only an accounting mechanism. The trust fund shows how much the government has borrowed from Social Security, but it does not provide any way to finance future benefits.

"Having said that, that's not what was supposed to happen. That money should be in the account and would be if each of the succeeding administrations, starting I believe with Reagan, had not used the then current balance for current expenses. If you, as a fiduciary responsible for the funds of another, had done that you would go to jail. Only the Federal Government steals, embezzles, converts with impunity.

"For a more detailed explanation, I recommend the easily readable small book The Big Lie by Allen W. Smith, PhD. I hope this helps Mr. Foster to understand." – Paid-up subscriber David Nichol

"Wrong! Social Security is NOT a Ponzi scheme. In a Ponzi scheme, the victims are willing participants." – Anonymous

Sean Goldsmith
Miami Beach, Florida
December 4, 2013

This short-selling guru has a new target...

One of the greatest short-sellers of all time has a new target in his crosshairs...

Jim Chanos, founder of hedge fund Kynikos Associates, is famous for calling the collapse of Enron. He also profited from WorldCom's demise, the subprime crisis, and other frauds and bubbles over his decades-long career.

And now he's shorting CGI Group...

CGI Group is an $11 billion information technology (IT) firm. As you can see from this chart, the stock is trading near its all-time high.

CGI Federal – a subsidiary of CGI Group – has suffered under the media spotlight recently because it's the firm behind the healthcare.gov fiasco (the online portal for "Obamacare"). A quick recap... The government spent $1 billion developing this website. And it doesn't work.

In a memo to clients originally reported on by Newsweek magazine, Chanos thinks "the PR mess" surrounding healthcare.gov could "reduce the likelihood of future government contracts." The company had nearly $5 billion in sales in 2012... Government contracts made up $950 million of that. (CGI is the 29th-largest federal IT contractor.)

Chanos says the situation was so bad, the company may have "to give money back to the government."

But the bungled website isn't the only reason Chanos is bearish on CGI Group...

Chanos' 10-page memo says the company's cash flow is falling, and it's booking less new business... It has used various "accounting conventions" to improve its earnings – like booking revenue already counted by Logica, a technology firm CGI acquired last year for $2.7 billion.

The stock is down more than 4% to less than $35 per share on the news. But if Chanos is right, it could go much lower. And he's not the only CGI bear...

Deutsche Bank gave the company a rare "sell" rating. It says shares are worth $24.

– Porter Stansberry with Sean Goldsmith