Saturday, November 8, 2008
When it comes to your money and the government, our general advice is to seek out tax-protected and tax-deferred investments, like muni bonds and master limited partnerships. One of our readers is seeing good results already...
To protect myself [from the Democrats] I have changed the majority of my income producers to MLPs in the past month. I have locked in dividends averaging 14%, and I already have several MLPs that have increased 50% in price since I bought them. By the way, there is something about MLPs that you have completely overlooked. The dividends I receive are taxable (at 15%) only on 20% of the dividend. The other 80% is TAX DEFERRED. Obviously, when you sell, you pay the piper. However, being retired, and close to 80 years old, I don't intend to ever sell. When I pass on, my heirs will pick up the MLPs at a stepped-up basis, and the deferred taxes never get paid...
The month of November will be the biggest month of dividends I have ever received, and every 3 months after that I expect most of my dividends to increase at a rate of an average of 10% per year. It will be interesting to see how long it takes our new government to close this loophole. I can only hope it will be grandfathered. – Paid-up subscriber J. Bandler
In regard to MLPs, we've been beating the drum about as loudly as we can. Tom Dyson is doing most of the work on the sector. He even prepared a special report dedicated to MLPs for his 12% Letter subscribers. To learn more, click here.
The Federal Reserve recently hired someone to "assess the safety and soundness of domestic banking institutions." The new employee has plenty of experience with unstable banks. Former Bear Stearns chief risk officer (from 2006 to 2008) Michael Alix will be senior adviser to William Rutledge, executive vice president of the bank supervision group.
Prior to serving as chief risk officer, Alix ran credit-risk management for Bear from 1996 to 2006. I am not making this up. The Fed hired the guy who let Bear go in the tank. WOW. It's just like George Carlin always said: The government is "stunningly full of bulls."
The International Energy Agency (IEA) predicted oil will rebound to more than $100 a barrel as soon as the economy recovers – though who knows when that will be. The IEA also doubled its long-term forecast from $108 a barrel for 2030 to $200 a barrel. The group believes companies will have a harder time pumping new oil to replace aging wells. "Current global trends in energy supply and consumption are patently unsustainable," the IEA's report states.
The funny thing is, the IEA will look like it knew what it was talking about in a couple of years when the Iranian, Mexican, Venezuelan, and Norwegian state oil companies – representing 25% of the world's export supply – essentially go off line. The state-run oil companies are under-investing in future reserves and production because the governments take too much cash out of the oil companies to fund social "progress." This will seriously crimp supply and cause oil prices to soar.
What's the difference between a pigeon and a Wall Street banker? The pigeon can still make a deposit on a Porsche. That little joke appeared in a recent Wall Street Journal, along with not-surprising news that German luxury carmakers BMW and Mercedes, after having a relatively good first nine months of the year, are finally acknowledging the damage done by significantly worse U.S. sales this year, despite strong sales in China.
Now that Yahoo's ad deal with Google is off, Yahoo CEO Jerry Yang says he's open to a new offer from Microsoft. Late Wednesday, at the Web 2.0 conference in San Francisco, Yang said, "To this day, I believe the best thing for Microsoft to do is to buy Yahoo."
Microsoft offered $33 a share for Yahoo earlier this year, which Yang said was too low. Yahoo shares are trading around $12.
I think the best thing for Microsoft to do is buy back $40 billion worth of stock, or pay out a big special dividend – anything to prevent management from making a big, expensive, and risky acquisition.
As other retailers like Mervyns and Linens 'N Things go bust, Wal-Mart is ready to take advantage of opportunities to grab some distressed real estate. Any community would rather see Wal-Mart move into a vacant Mervyns location, saving jobs and real estate values, than see the building sitting dark. And Eduardo Castro-Wright, head of Wal-Mart's U.S. division, says the potential for Wal-Mart in 15 leading U.S. markets right now is "bigger than the entire retail market of India and Russia combined."
I've been urging investors to own Wal-Mart, saying it was the best stock you could buy anywhere in the world. Wal-Mart is up about 13% this year, while the S&P is down nearly 40%. Now, I'm saying the best stock you could buy anywhere is another big, safe U.S. blue chip with lots of upside to it.
Right now is without a doubt the greatest opportunity of my lifetime to buy world-dominating franchises like this one. If you want to learn more about the greatest business in America, click here.
Porter Stansberry writes and edits the daily S&A Digest, which comes free with a subscription to one of our premium products.
Date Range:10/30/2008 to 11/6/2008
Date Range:10/30/2008 to 11/6/2008