- How the State Department aided a “tawdry and juvenile” venture
- If North Korea really did hack Sony, then what?
- Guenthner spies what could be “your most important investment of 2015”
- Stocks as “pieces of ownership in real businesses” (What a concept)
- Credit for calling the housing bubble… what “penny stock fortunes” are all about… about our marketing messages… and more hornets’ nests stirred up by our Friday episode
“[B]laming North Korea is the easy way out for a number of folks, including the security vendors and Sony management who are under the microscope,” writes Marc Rogers.
If you want an expert in cybersecurity, you can’t do better than Rogers: Among other accomplishments, he screens papers for presentation at the annual Def Con hacker conference. That’s a big deal.
If you’re skeptical about official government claims… and you possess a modicum of Web search skills… you can find dozens of experts like Rogers who aren’t nearly as certain as the FBI that North Korea’s to blame for the hacker attack on Sony.
Last Thursday, we expressed our own (decidedly nonexpert) skepticism. Not least because the original messages from the hackers said nothing about North Korea, or the Seth Rogen movie The Interview, about the assassination of North Korean leader Kim Jong Un. Only after the feds brought it up did the hackers latch onto that angle.
But this morning, we lay our skepticism aside and pose this question: Assume for the moment the North Korean government is responsible. What are we to make of it?
“When you poke somebody with a sharp stick, you get a response,” Byron King wrote his Military-Tech Alert readers on Friday.
“What Sony executives,” he wondered, “came up with the harebrained idea to make a movie about assassinating a named, identified, sitting foreign leader — let alone the leader of a nation that’s notoriously unpredictable and paranoid, like North Korea. Are Sony executives stupid?
“Look at it this way. How would the ‘politically correct’ U.S. media react if a foreign filmmaker created a movie about assassinating President Obama? I don’t mean offing some generic, central-casting POTUS — a ‘President Smith’ or such. And what if, along the way, the movie script used all manner of insulting racial stereotypes in the name of being — ahem — ‘funny’? What movie chains would show such a movie? What newspapers would publish favorable reviews?
“In essence, Sony made a corporate decision to insult the Norks, and guess what? Sony’s computers got hacked. Yes, something bad happened — to Sony; not to anyone else, mind you. In the future, perhaps Sony should exercise better business judgment.
“Consider this, too,” said Byron: “Did the U.S. government ‘help’ Sony in any way by reviewing the script or such? Then shame on Uncle Sam. Hollywood is tawdry and juvenile enough without U.S. government assistance.”
Indeed, Sony got considerable government help producing the movie.
Lost in the ridiculous media hoopla about the hack is a Daily Beast article about some of the leaked emails from Sony — emails far more important than what some midlevel executive dished about Angelina Jolie.
The emails reveal at least two U.S. government officials screened a rough cut of The Interview… and signed off on it, including a final scene of Kim Jong Un’s head exploding.
[Oops, did we throw in a spoiler? Well, finance is our beat, not movie reviews…]
“Emails between the Sony Entertainment CEO and a security consultant,” says the article, “even appear to suggest the U.S. government may support the notion that The Interview would be useful propaganda against the North Korean regime.”
For sure: CEO Michael Lynton bragged about corresponding with a “very senior” State Department official in an email to a consultant from the RAND Corporation — the nonprofit think tank joined at the hip with the government.
“In the larger picture, what does the Sony hack say about the U.S. electric grid?” Byron asks rhetorically. “Or air traffic control system?
“It’s no secret that the systems are vulnerable; more than most of the public really knows (or wants to know).
“I’ve seen innumerable accounts of hacks and attempted hacks at all manner of U.S. infrastructure — electric, oil and gas, water, railway, telephone, etc. We’re routinely under assault from domestic players, criminal organizations and international competitors. Bad guys work at it constantly. Yes, be worried.”
But carrying on a theme from Friday’s episode, don’t retreat to a bunker. Indeed, you want to ponder the investment possibilities. Byron is certainly doing so: “Cyberwar is a major new, investable sector. I’ll present more investable software plays in 2015.”
Already, his earliest Military-Tech Alert readers have had the chance to bag cyberwar gains as high as 150% in a year and a half.
Major U.S. stock indexes are mostly in the green this morning. At last check, the S&P 500 is flirting with a record at 2,072.
Gold is sliding further away from $1,200 — down almost a percent at last check, to $1,184. Crude, which staged a rally late last week, is giving it all back today; as we write, a barrel of West Texas Intermediate fetches $55.53.
“A major breakout in microcap stocks is underway,” says Greg Guenthner of our trading desk. “You’re looking at double-digit gains in a matter of just a couple of months when it starts to take off.”
It was 12 days ago when Greg explained in this space that small caps were reclaiming their leadership role.
The small-cap Russell 2000 index has been outperforming the S&P 500 since mid-October. “That’s important,” he says today, “since small stocks have taken a back seat to the biggies this year.
“That’s unusual — they’re usually out in front, setting the pace during a rally. So while the S&P has gained more than 12% year to date, the Russell has gone nowhere.
“But after a year of sideways action, smaller stocks are heating up.
“The Russell 2000 small-cap index has just broken above its August highs. It’s only a matter of time before it sets a new record. The charts are setting up perfectly.”
Greg urged his Rude Awakening PRO readers to play it accordingly on Dec. 10. They’re already sitting on 4% gains. “This could be your most important investment of 2015,” he tells his paying subscribers today.
“The people who did the dumbest things did the best this year,” writes our Chris Mayer, summing up a lunch conversation with an investment strategist at a large consulting firm.
As Chris said here last week, it’s been a tough year for stock pickers — that is, if the idea is to outperform an index in a particular calendar year.
“Facebook, which trades for almost 20 times sales, is up 42% this year. Never mind that 20 times sales is a preposterous valuation that makes it nearly impossible to generate any worthwhile return for shareholders.
“Or take GoPro, which makes cameras you can mount on your forehead. You could’ve paid the highest price on its first day of trading in June and you’d be up 75% through today. Never mind that the stock trades for a ridiculous 170 times trailing earnings.
“Or take any number of biotech stocks that have ripped higher on nothing more than a story.”
That’s not what Chris is all about: “I look at stocks as pieces of ownership in real businesses. I want to understand those businesses and how they generate returns. I want to pay a good price to own them. And then I want to hold onto them.”
With that philosophy, he’s delivered longer-term outperformance, in a big way: Recommendations he issued before 2014 are up 39%… 130%… even 223%. “The goal is not to win in any given year,” Chris concludes. “It’s to generate great returns over several years.”
[Ed. note: We’re heading into the home stretch of our year-end membership drive for the Agora Financial Reserve.
The Reserve gives you access to nearly everything we publish — Chris’ peerless value-oriented research… Greg’s daily short-term trades… Byron’s military-tech plays… 17 services in all, including two new Jim Rickards trading services set to launch in the first quarter of next year.
It’s not for everyone. You need a certain amount of time to weigh all the available analysis… and a net worth substantial enough to take advantage of the different services we offer. But Reserve membership is a compelling bargain compared with a subscription to even three or four of our premium advisories.
Our publisher Joe Schriefer spells it all out in this invitation. Please note this offer will be withdrawn at midnight next Sunday night.]
“Thanks for Friday’s 5,” a reader writes after we devoted the entire issue to the question of conflicting guidance from different editors.
“This is one of the reasons yours is the first email I go to each day. You are not afraid to honestly and objectively address the hard questions that go with your job. You should permanently post this article on your main page, or send it to every new subscriber. I also appreciate the way you often address the frustration of some readers over your links to marketing promotions.
“I have been around since 2004, and Agora’s call back then was instrumental in my decision to sell my house in 2005. It turned out to be a great move.”
“Uh, that’s complete BS,” another reader writes about our claim “no one else” said housing was in a bubble 10 years ago.
“Plenty were,” the reader adds. “Not in the mainstream, but you were most definitely NOT alone.
“One other thing,” he goes on. “It’s really unconscionable — you didn’t suggest to the middle-aged divorcee that she stick with a more conservative strategy than chasing after the whatever’s-hot-today momo plays Jonas offers.
“That’s [expletive deleted] gambling. The actual name of the service is Penny Stock Fortunes. Penny stocks … for a woman who’s just managing to rebuild her finances. Really? Hey, she’s a grown-up and can do whatever idiotic thing she damn well pleases, but when she asks your advice and you don’t steer her to something more appropriate? That’s really not right.”
The 5: On your first point, we’ll concede a bit of hyperbole. But no one else was saying it to me when I was working in mainstream media… and even then I did a good job of keeping an ear to the ground for alternative voices.
On your other point: Have you read Penny Stock Fortunes lately? “The only ‘momo plays’ in the portfolio weren’t momo plays when I recommended them,” says Jonas. He applies tried-and-true valuation metrics to small-cap stocks, and then looks at the technicals to decide on an entry point.
Or would you rather Jonas had sold Tesla Motors after it doubled and passed up the subsequent 800% gains?
“I see I am not alone now,” writes a fellow who takes exception to the way we’re marketing Jim Rickards’ entry-level newsletter — which kicked off our discussion here on Friday.
“I am a 62-year-old investor with over $2.5 million invested, and I have recommended your pubs to many, many of my friends and family.
“But when they are considering your pubs and looking at some of the ones I send them, they always have something to say about these type of headlines and scare tactics.
“Neither they (nor I) are naive investors with our heads in the sands. Most own some physical gold, have some guns and ammo, etc. (Of course we do… we are from Alabama)
“I know that headlines and emails like the ones you have from Rickards help ‘tease’ people into reading further, and I know you guys are good at what you do in terms of hooking the reader and producing results — i.e., buying your pubs.
“But I feel that if the info is interesting enough, then you do not need to use these tactics. I think what he has to say would be even more believable and credible if presented in a less sensationalistic manner.
“You guys are better than this.”
The 5: We’re still figuring out the best way to convey Jim Rickards’ message in a way that resonates with the widest number of people.
It might take some time, because Jim’s message is unique… and if we jump right in with the discussions he has with physics experts about complexity theory, well, we’re fairly sure that’s a nonstarter.
“My mission,” he said when we undertook to do business together last summer, “is to help everyday Americans not be ripped off by people who know better who won’t be honest with the American people. Bankers, government — both parties. There are enough people in positions of real power who see what I see and won’t be honest with people about it. And they’re perfectly prepared for all those people to lose all their money. I think that’s despicable.”
That’s a big deal for a guy with his background. So yes, we’re still trying to measure up. Thanks for your patience during this shakedown cruise.
“In advising your confused readers, you forgot one hallmark of financial prognosticators: ‘Always certain, seldom right.’
“Keep up the good ideas and entertainment!”
The 5: Ummm… The version we always heard was “Sometimes wrong, but never in doubt.”
Best regards,
Dave Gonigam
The 5 Min. Forecast
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