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Weekend Edition
The Best of The S&A Digest
July 26, 2008
 I hate being in the crowd when it comes to the stock market. And the short side of the market is very, very crowded. More than $1.4 trillion of worldwide equities, approximately 2.8%, is on loan... about one-third higher than at the start of 2007. And most of that is going to short sellers.
Short selling on the New York Stock Exchange rose to 4.6% last month, the highest since at least 1931. It seems inevitable we're going to have a big rally, just to shake out the weak hands from the short side.
Two hedge funds, SAC Capital and AQR Capital Management, are betting heavy on a long-term bull market in death. The two funds are piling into Service Corp International, the biggest owner of funeral homes and cemeteries in the U.S.
After about four decades of declines, the U.S. death rate will rise to 9.3 per 1,000 people by 2020 and 10.9 per thousand in 2040, according to projections from the National Funeral Directors Association. The group said the mortality rate was 8.1 per 1,000 in 2006.
What did Keynes say? In the long run, we are all dead.
Goldsmith also made a bet in the death-services industry in his S&A Dividend Grabber. This company is the leading manufacturer of caskets and urns, and it has an exclusive contract with Service Corp International. Sean thinks this company is worth at least 50% more than it's trading for today.
A lesson for people who don't know how paper money "works." Zimbabwe's troubled central bank introduced $100 billion banknotes in a desperate bid to ease the recurrent cash shortages plaguing the country's inflation-ravaged economy.
As high as they are, though, the bills still aren't enough to buy a loaf of bread. They can buy only four oranges. The new note is equal to just one U.S. dollar.
A great arbitrage opportunity: a $100 billion bill was going for US$80 on eBay this week.
In other currency news, PIMCO's Bill Gross is bearish on the euro... the Bond King says the currency is 30% overvalued in relation to the dollar. A panel of Bloomberg analysts expects the euro to be lower against the dollar, yen, and pound by January.
From the "you gotta be kidding me" file... BankAtlantic has sued a Wall Street analyst for pointing out that it is one of the most likely candidates to follow IndyMac into federal receivership.
Rather than bore you with the details of the analyst's report, I'll simply point out that BankAtlantic's share price has fallen from $20 to under $2 and it was one of the most aggressive lenders in South Florida. Why should pointing these facts out to investors lead to a lawsuit? I'm just glad no one has sued me... this year. Yet.
Federal Reserve Chairman Ben Bernanke testified before Congress yesterday. I don't want to say the financial situation doesn't look good, but he testified via satellite from the Cayman Islands. – Jay Leno, The Tonight Show
This is by far the worst thing to come from our rampant inflation... Due to rising chicken and beef costs, McDonald's will raise the price of its beloved Dollar Menu. The menu, which makes up about 14% of McDonald's U.S. sales, will look very different by next year, said COO Ralph Alvarez. He did not disclose how much prices will increase.
Barrick Gold, the world's largest gold company, expects a considerably higher gold price within the next five to seven years... a surprising announcement, considering Barrick's generally conservative price estimates. CFO Jamie Sokalsky expects mining output to decline 10%-15% over the next five years. All other major producers agree...
Pierre Lassonde, the former president of Newmont Mining, the second-largest gold company, pointed out there have not been any major discoveries of more than 30 million ounces in many years, which is why he also expects a drop-off in production.
Porter and Steve have both recommended plays that should soar as precious metals continue to climb. As Steve wrote in his most recent True Wealth...
How high can gold go? Our two historical examples suggest that gold simply keeps going – almost indefinitely... The sky is the limit.
Right now, you can gain free online access to Porter and Steve's recommended list...
Regards,
S&A Research
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