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Weekend Edition

The Best of The S&A Digest
Saturday, March 29, 2008

Goldsmith has compiled a recession-proof portfolio in his S&A Dividend Grabber. He has recently recommended a world-class health care company, a blue-chip food producer, and the only mortgage REIT currently beating the market.
 
His most recent recommendation is the best pure-play on global infrastructure. When you buy this company, you get $800 million in timberland free – and it's only a $600 million stock. His readers are up almost 20% in one week on this recommendation. We are currently offering a special price on Dividend Grabber, but only if you buy before midnight on Monday. 
 
Our friend Chris Weber wrote up a note on why he thinks gold and silver are due for a pullback:
 
When you hear of metals detectors by Florida beach communities being sold out to people wanting to find Spanish gold in the sand; when you hear of people bringing their gold jewelry into pawn shops to cash in on the high gold price... that's the sign that things are about to cool down. It's been almost exhausting to watch the gold and silver prices rise without interruption over these past six months or so.
 
It would not surprise me to see now beginning a correction that may be long and even violent. That in fact would be in the normal course of things. People who'd waited to buy until just recently will panic and sell. That's normal too. The precious metals market needs a rest, and I think it'll get it. Let's see how far down it goes. There may be some good opportunities to come.
 
Starting at 16, Chris Weber turned $650 earned from his paper route into $1.8 million in cash within a decade through a series of remarkable investments. Since then, he's parlayed that wealth into a multimillion-dollar fortune, thanks to his ability to recognize developing trends.
 
South Korea's National Pension Service, the world's fifth-largest pension fund, will no longer buy U.S. Treasuries. The fund also plans on selling Treasuries to buy higher-yielding European government debt. In fact, 16 Asian central banks said last weekend they may invest $1 trillion in each others' bonds instead of Treasuries.
 
From a reader: You should not be fully invested all the time if you want to make big money. Do I have it right?
 
You've got to remember one thing about mutual funds and mutual-fund managers: Mutual-fund shareholders always redeem (sell) at the worst possible time. Thus, fund managers who want to hold securities through down markets (like the value guys) must have enough ready cash to meet demands for redemptions without resorting to liquidating their positions. That's not the most efficient way to manage your own account, and it's not the way they'd choose to manage their funds... It's a penalty they pay for being public mutual-fund managers. (And it's yet another reason you should almost never invest in a mutual fund.)
 
As to how much cash you should hold... I can't give personalized investment advice, and there's no single right answer to this question. It simply depends on your situation and your goals. Consider my situation, for example. I have one tremendous advantage over most of my peers: I'm still relatively young (35). Because I have a 30-year time horizon, I'm unlikely to outperform long-term compounding investments with trading or market timing. Additionally, because I am still working and earning income, I am able to contribute substantially more capital each year to my investment account. It makes sense for me to be fully invested, all the time.
 
On the other hand, most of our readers are retired, most of them have relatively short time horizons, and most of them must generate income from their accounts. For these subscribers, it makes more sense to remain mostly in cash and safe fixed-income securities, except when the stock market provides truly exceptional and very safe opportunities.
 
At our last Spring Editors' Conference in Naples, Florida, Tom Dyson recommended buying ice breakers – ships that can navigate icy, polar terrain. He argued global warming and rising oil prices would make this a feasible investment. We all laughed out loud. But Tom's supercontrarian bet may pay off in the long run. Oil companies are now looking for crude off the coast of Greenland, where there's an estimated 50 billion barrels. At $100 a barrel, that's $5 trillion of oil.
 
Inside Strategist editor Brian Heyliger is another guy who's not afraid to take contrarian positions. He recommended homebuilder Hovnanian last Wednesday, and his readers are up 15% in about a week (he expects total gains to come in around 50% by mid-year). As Brian proved, if you make smart bets in negative markets, you can make serious money. 
 
Regards,
 
Porter Stansberry and Dan Ferris




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