Weekend Edition
The Best of The S&A Digest
April 19, 2008
Looking at the credit data, it seems people have begun to stop paying their bills in order, from most expensive to least. Houses came first – that's the most expensive bill. Autos came second. (The largest independent auto-finance company lost $300 million last year on its $25 billion auto loan portfolio as defaults rose higher than 7%.) What will be next? Credit cards.
Even though interest rates on credit-card debt are sky high, the minimum payments are small, which is allowing people to keep borrowing. At least for now.
Equifax (a leading credit bureau) reports total credit-card balances increased 8.1% in the first quarter of this year – more than double the previous average rate of growth. Naturally, the steepest increases in credit-card borrowing occurred in the same states where the mortgage crisis is the worst. Credit-card balances rose nearly 15% in the first quarter in California and Florida and more than 20% in Nevada.
Like drug addicts, consumers cannot survive without more and more credit, and they're now turning to the most expensive and unreliable source. They will soon hit bottom.
In the latest issue of my newsletter, PSIA, I tell my subscribers how to profit from the coming collapse of U.S. credit-card debt, which now stands at $1 trillion. If you never read another issue of my letter, make sure you read this one. Click here to learn about a risk-free subscription.
Interested in trend following? Ed Seykota, the system-trading pioneer, composed a bluegrass song outlining the basics of his strategy. Check out The Whipsaw Song here.
Oil prices hit an intraday record above $115 a barrel this week, and Jeff Clark is perfectly positioned to profit from the move. In Advanced Income, Jeff found the one undervalued oil sector: refiners. While every other oil stock is trading at all-time highs, refiners are at 10-year lows.
Jeff created a trade to profit from the turnaround in refiners, and it pays you 8% up front. He noticed a similar trend last month, and that trade is already up 18%. To learn more about Advanced Income and receive Jeff's latest recommendation, click here.
Energy costs rose 2.9% last month, while food prices rose 1.2%. The Fed cuts interest rates 100 basis points and injects more than $100 billion to prop up the liars and cheats on Wall Street, and I'm paying $5 for a box of cereal and nearly $4 for a gallon of gas. But maybe I'll soon be paying a little less for gasoline...
It says right here in the Wall Street Journal Republican presidential candidate John McCain wants Congress to put a temporary halt on the 18.4-cent federal gas tax and 24.4-cent diesel tax from Memorial Day to Labor Day.
Tax cuts are the only true economic stimulus the government can offer. Everything else it does is merely a redistribution of seized wealth or a manipulation of the money supply.
China's sovereign wealth fund recently invested $2 billion in oil major BP. A Chinese investment could soon become the ultimate contrary indicator...
In the past year, Chinese government-controlled entities invested $5 billion in Morgan Stanley, bought 9.9% of Bear Stearns (at around $150 per share), and invested $3 billion in Blackstone Group at the top in private equity.
Our favorite commodities bull, Jim Rogers, had a front-page Barron's interview recently. Rogers told the same story (long agriculture/China, short banks), but gave some specific stocks this time.
He's still short investment banks through the Amex Securities Broker/Dealer Index (XBD). He's short Citigroup (C) and Fannie Mae (FNM). He's also short some U.S. homebuilders, including Lennar (LEN). Meanwhile, he's a big fan of international airlines like Lufthansa, Austrian Airlines, and Japan Airlines. He's bullish on the renminbi, and his only exposure to emerging markets is through China and Taiwan.
If foreign stocks aren't your thing, maybe you should check out our Monthly Dividend Program. Goldsmith compiled a portfolio of 10 stocks paying monthly dividends, and the portfolio is up 5% in a month.
Readers have already made 9% on an oil stock that yields more than 13%. They've also pocketed 9% on a hotel REIT yielding close to 7%. And that's just capital gains. There are still 120 dividend checks on the way. To receive Goldsmith's report, which shows you exactly how to pick the best monthly dividend payers and gives you our 10 favorite, click here...
Regards,
Porter Stansberry and Dan Ferris
