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Weekend Edition

The Best of The S&A Digest
Saturday, May 26, 2007

WCI Communities (WCI) urged shareholders to reject Carl Icahn's slate of directors and reiterated that Icahn's $22-a-share bid for the company is inadequate. The Florida real-estate company believes higher bids are on the way.
 
Seems like an interesting opportunity... The stock is trading around $20. If shareholders accept Icahn's bid, you make around 10%. And there's a chance that the company isn't bluffing and a higher bid will materialize. Meanwhile... is the market for Florida condos going to get materially worse than it is already?
 
Our managing editor, Brian Hunt, is a relentless bull. He gets visibly upset anytime someone is bearish. His latest reason the market will probably continue to rally: "ETF country funds aren't anywhere near the overvaluations usually seen at intermediate tops... China Fund, India Fund, etc., most country funds are at discounts to NAV. Plenty of room for more froth."
 
One more reason to be bullish: Everyone is afraid of the U.S. dollar. As Tom Dyson noted in DailyWealth: "The latest Daily Sentiment Index (DSI), from MBH Commodity Advisors hit 90% dollar bearish. Sentiment tracker Market Vane is at 83% dollar bearish. And the latest Commitments of Traders (CoT) data show a record amount of bullish bets for euro versus the dollar."
 
Although I wasn't at Berkshire Hathaway's annual meeting, I've read several excellent reviews. The best, by far, is on Jeff Matthews' blog.
 
Buffett says, regarding your investments: "If you can't write an essay describing 'why I'm going to buy the entire company at the current valuation,' you have no business buying 100 shares of stock."
 
 Berkshire Hathaway is planning to buy two gold jewelry manufacturers, Bel-Oro International and Aurafin. Terms of the deal were not announced, but Berkshire plans to combine the two companies into a new business called Richline Group. The new company will account for about 6% of the market for gold jewelry.
 
Contrarian dose of the day... Despite the current market rally, the number of stocks sold short on the New York Stock Exchange reached an all-time high of 11.76 billion shares as of May 15. While the index has gained 10% since mid-March, the number short sells has gained 12%.
 
Our uber-contrarian, Tom Dyson, is in Detroit this week. He's been sending me e-mail updates about the situation... "Did you know? Wayne County, home to Detroit, lost more people from the beginning of 2005 to the end of 2006 than any U.S. county except the four counties in Louisiana and Mississippi devastated by Hurricane Katrina, according to Census figures released in March."
 
Tom is so excited about how cheap Detroit has gotten, he says he wants to buy a skyscraper. He likes the 65-story David Stott building. It's only $3.9 million. It's got unobstructed views of the new baseball stadium.
 
Bullish signs for Japan... Goldman Sachs has become the second U.S. investment bank in a month to release a yen money market fund. The GS Yen Liquid Reserves Fund last week followed the release of a similar product by JP Morgan, the JPY Cash Liquidity Fund. Steve Sjuggerud has made more than 10% since February with his Japanese real estate recommendation.
 
Regards,
 
Porter Stansberry




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Date Range:5/17/2007 to 5/24/2007