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Weekend Edition

The Best of The S&A Digest
Saturday, February 7, 2009

The situation today in the markets is particularly challenging for anyone who is retired. If you've lost part of your nest egg in the big selloff in stocks, what should you do? Should you stick it out? But what if it gets worse? And if you stay in the markets, how can you maximize the income from the assets that remain? Is there any safe way to trade options or short stocks – safe enough that even someone on a fixed income can try it?
 
We've heard all of these questions – and dozens more just like them – from our audience, which includes a large percentage of retirees.
 
So we're launching a unique advisory – Retirement Millionaire – written for people who are either retired or close to retirement, by Dr. David Eifrig. Eifrig isn't your typical newsletter editor. He worked on Goldman Sachs' proprietary derivatives trading desk in the 1980s, became a medical doctor in the 1990s, and decided to work for us after retiring twice. Nobody knows more about the financial needs of retirees.
 
Some topics he's already covered for his readers include how to get free prescription drugs and how you can actually get paid to own gold. And we're offering his service for only $39 – but only through Monday.
 
Bernie Madoff's client list is out, and there are plenty of "stars" on it – baseball legend Sandy Koufax, actor John Malkovich, talk-show mogul Larry King. No surprise here. These folks got rich by being popular entertainers, not by knowing how or with whom to invest.
 
What's really telling is that Madoff's client list is loaded with people who should have known better – private-equity investor Thomas H. Lee and real estate mogul Stephen L. Green of SL Green Realty. You'll even find money managers like Sandy Gottesman, an early Berkshire Hathaway investor and longtime Buffett acquaintance who manages $10 billion at his investment firm, First Manhattan.
 
The Madoff lesson is simple: Your money is your money, and you're the one who suffers if it disappears. Don't let self-styled experts intimidate you. Always ask all the questions you need to ask. Money is serious business.
 
SocGen equity strategist James Montier says dividend swaps in Europe, the U.K., and Japan are priced as though dividends will collapse as much as 66% and stay collapsed "pretty much forever!" Somehow, I think forever is overdoing it a little.
 
I don't know how to buy dividend swaps (small investors probably can't), but Porter, Tom Dyson, and I have recommended a slew of stocks that have paid dividends consistently for decades.
 
This is a great time to buy the best dividend payers. My personal favorites are Procter & Gamble and ExxonMobil. If you're an investor in search of steady, growing streams of income, you should definitely own these two.
 
In Orange County, 1,718 homes that last year sold for $1 million or more are either in foreclosure or were seized by a bank. That equals more than half of the county's 2,862 $1 million-plus home sales in 2008. The California beach county was responsible for one-third of default notices on $1 million homes statewide.
 
Loews Corporation CEO Jonathan Tisch was on CNBC discussing the troubled hotel industry. The Tisch family has been in the hotel business for 65 years. He says right now is a "difficult moment" and that consumers aren't traveling because they don't know what their homes are worth and their 401(k)s have been "shredded."
 
Tisch says there's an "AIG effect," resulting in trip cancellations, especially by public companies operating on government bailout money. Even those that aren't canceling meetings are spending a lot less on food and wine.
 
Tisch isn't predicting a rout in the industry, though. He says hotels are trimming expenses, so their profit and loss statements shouldn't look too bad. And Tisch says the pain hasn't been bad enough to create fire-sale prices on hotels. When the Tisches do start buying hotels again, that could be a great signal it's time to buy the best hotel stocks.
 
On March 30, the FDA will announce results for a new drug that could become the bestselling pill in the history of medicine. One medical source says, "It could tap the largest pharmaceutical market ever."
 
Early investors stand to make as much as 400%, overnight.
 
Regards,
 
S&A Research




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