Grow Your Portfolio the Intelligent Way

July 2007 Issue

By Richard C. Young

The Karabiner 31…

France fell to the Nazis in 1940, and tiny Switzerland looked to be next. A Wehrmacht attack from Germany was all but a certainty. Should the Germans have crossed the Rhine, however, the Swiss 8th Mountain Division was majestically prepared to deal the Nazis a savage blow. Bridges were ready to be blown at a moment’s notice, and roads were mined. A wide-ranging system of underground tunnels was heavily fortified by concrete. And machine gun pillboxes were at the ready.

A Rifle in Every House


But it was the Karabiner 31 (K31) that was really Switzerland’s oh-so-simple secret weapon. As Stephen P. Halbrook explains in his excellent The Swiss and The Nazis, not only was "every able-bodied man in Switzerland enrolled in the militia army, but even youngsters and old men were issued rifles." As S.H. writes, "In radically democratic Switzerland, every male on reaching the age of 19 was enrolled in the militia army and issued a military rifle to keep at home. The national sport was not skiing, but shooting, and everyone, from teenagers to the elderly, was encouraged to participate."

The Swiss K31


The Swiss were superior marksmen, and their rifle of choice was the K31. The bolt-action rifle with the six-shot magazine could be fired faster than the German Mauser. And as Mr. Halbrook notes, the K31 was superior for long-range sniper activity. Indeed, the K31 is so superior that it is still used today in 300-meter rifle matches.

Detailed Planning & Simplicity


The German attack never came. Switzerland was spared. Mr. Halbrook contends that Switzerland and the U.S. share a common heritage. "Both have been from their beginnings independent republics. The birth of the Swiss Confederation in 1291 and the U.S. in 1776 are extraordinary episodes in history…how exactly tiny Switzerland stood down the Nazi monolith is a lesson worth remembering." Rigorous, detailed planning by the Swiss, coupled with the simplicity of the Karabiner 31, keyed the miraculous Swiss defense against the Germans.

Swiss Patience Required


Detailed planning, simplicity, and a lot of Swiss patience are central to the investment strategy I regularly advise for you. And odd as it may seem, few investors engage in detailed planning. These same investors are seldom patient, of course, and are rarely tuned into the extraordinary benefits and sophistication of simplicity.

Your Portfolio Mix


At the start, retired investors and investors saving seriously for retirement (76 million boomers will begin retiring next summer) must answer two basic questions: (1) What is the proper mix of stocks and bonds? (2) How much money can be drawn annually from an investment portfolio? I have used Ibbotson data and examined 20-year rolling time periods from 1926 on. I have concentrated on minimum returns in order to advise a portfolio mix most likely to assure a draw of my advised 4%. The highest minimum return over 20-year rolling periods was achieved with a portfolio mix of 50/50 bonds and stocks. That minimum return was 4.6%. I would treat a 50% fixed-income portfolio component as suitable. And there is no way I’d go over 4% (inflation adjusted) for my annual draw. In fact, if possible, investors of suitable means are advised to cut back to a 3.5% draw (of an initial portfolio). Of course, the two best ways to make sure that you and your spouse do not outlive your money are to (1) work longer, and (2) slash your annual living expenses.


To clarify for you what a 50/50 portfolio mix might achieve, turn to Table #56 on the last page of your Economic Analysis. Displayed are annual returns from a 50/50 portfolio mix of my highly favored Vanguard Wellesley Income and Dodge & Cox Balanced funds. I own big positions in each and plan to add annually to each as foundation blocks in my own portfolio. I, of course, strongly advise the same strategy for your inimitable self. Table #56 shows a paucity of down years and a whole gang of annual double-digit gains.


Most of my big holdings, and I hope yours, are laid out for you in my newly expanded and enlarged What’s Up & What’s Down (pg. 7). You will note heavy participation for global funds, real estate, and precious metals. Many of my own biggest holdings come from this group. Check out the returns for Vanguard Precious Metals & Mining. You will be slack-jawed. And I invest in the platinum-heavy VPM&M not for offense, but as a defensive counterbalancer. In years when VPM&M is down, I don’t care a lick, as almost everything else I own (and trust you own) will be up.

8,000 Benchmark Huggers


Of the more than 8,000 mutual funds in existence today, only a handful are worthy of consideration for serious money. The majority of mutual funds are style-box-conscious, benchmark-hugging closet index funds masquerading as something unique. The end game for most funds is to gather assets. Portfolio managers are compensated for asset gathering, not investment performance. Active management for most fund groups is really just tinkering with benchmark weightings. Fund companies push this refuse on unsuspecting individual investors by bribing the armies of brokers and salesmen with performance-destroying front-end sales loads and 12b-1 marketing scabs. Funds that offer a truly compelling reason to invest are rare, and many of the worthy are now closed to new investors. Those that remain open will not stay open indefinitely.


For investors of means, the obvious choice for unique/exclusive portfolio management is a boutique-registered investment advisory firm. Look for firms that charge less than 1% and manage assets across a broad spectrum of securities, emphasizing individual stocks. Don’t fall for the style-box-conscious CFP pitch, either. This crowd will set you up with the no-load versions of funds sold by the hucksters at brokerage firms and insurance companies. You do not want to pay a management fee for investment advice that calls for investment in a group of benchmark-hugging closet index funds that blanket the style box.


As I have written in the past, I expect the ETF industry to hollow out the mutual fund industry. My chart on ETFs shows the growth since 12/31/2001 in ETF assets compared to the growth in mutual fund assets. ETFs have caught on in a big way. More ETFs were unveiled in 2006 than in all previous years.



ETFs offer many compelling advantages over the closet index funds sold to individual investors. Convenience for ETFs is a biggie. You can buy and sell ETFs from any brokerage account anytime the market is open. Mutual funds, on the other hand, are priced once per day and available only on select brokerage platforms. If the fund you want to buy is not available on your broker’s platform, your only option is to send money directly to the fund company, creating an onerous paperwork nightmare for yourself. You also don’t have to worry about your ETFs closing. ETF sponsors are not concerned with fund flows.

No Capital Gains


The unique structure of ETFs minimizes the need to pay capital gains distributions to investors. Unlike mutual funds, ETF shares are created and redeemed in large quantities by authorized participants (APs). Most APs are institutional investors who create and redeem shares by exchanging ETF shares with baskets of securities called creation and redemption units. The exchange of shares and securities has no cost or tax implications to underlying ETF shareholders. ETFs further minimize capital gains distributions by delivering securities with the lowest cost basis and, therefore, highest tax liability to APs redeeming ETF shares. Many of the leading ETF providers have never paid a capital gain distribution on the majority of their funds. Contrast that with mutual funds that must sell positions and realize capital gains to raise cash for redeeming shareholders. Advantage: ETFs.


The most widely publicized advantage that ETFs offer over traditional mutual funds is cost. According to Morningstar, the closet indexers charge an average of 1.4%, while the average ETF charges 0.30%, according to Young Research’s in-house database of 500+ U.S.-listed ETFs. The cost difference is an insurmountable hurdle for even the most astute benchmark hugger.


My endorsement of ETFs is not a green light to load up on all of the 500+ ETFs listed in the U.S. You must be selective. For serious money, only a small portion of ETFs is worth consideration. Most ETFs are copycat or fad funds. Do investors really need 38 healthcare-sector funds and 34 technology-sector funds? Many ETFs will fail. The survivors will be niche funds and ETFs with the lowest expense ratios.

Barclay’s #1


Barclays is my favored ETF provider, followed by State Street and Vanguard. Barclays is a powerhouse in investment management. Did you know the firm has a hand in 65 of the world’s 100 largest pension funds? Barclays offers the broadest array of ETFs without the gimmicks of a provider like WisdomTree. WisdomTree sells a jumbled mess of dividend-weighted "index" funds. I am a big fan of dividends, but dividend-weighted indexes are a ghastly idea. And WisdomTree most likely did not even come up with the idea of dividend-weighted indexes. I am convinced the investment manager "borrowed" the idea for dividend-weighted index funds from Rob Arnott, former editor of the Financial Analysts Journal. Rob developed fundamental index funds based on a composite of fundamentals, such as revenue, earnings, book value, dividends, and employees. Rob’s fundamental "indexing" strategy is the original. The funds WisdomTree pushes are generic look-alikes.

Young Research #1 in ETFs


This month I am dramatically broadening my coverage of the ETF universe with the addition of nine ETFs to my Monster Master List. In coming months, you will see some changes to my Mutual Funds MML that will make it even more user-friendly. With this month’s nine additions, you can now construct a diversified ETF-only portfolio.


If I were starting with a blank slate today, I would rely heavily on ETFs. Jeremy Jones, CFA, our director of research at Young Research & Publishing, tells me that 55% of his holdings are in ETFs and over 75% of his recent purchases have been ETFs from my Monster Master List. You can take comfort in knowing that we are investing right along with you.  


My additions this month include (1) Market Vectors Gold Miners, (2) SPDR DJ Wilshire International Real Estate, (3) SPDR Russell / Nomura Small Cap Japan, (4) iShares MSCI Japan Index Fund, (5) iShares MSCI Canada Index Fund, (6) iShares S&P Global Materials Sector Index Fund, (7) iShares MSCI EAFE Value Index Fund, (8) Vanguard Value ETF, and (9) Market Vectors Russia ETF.


Not one of my ETF additions this month is a fixed-income fund. Recently, Barclays and Vanguard came out with a number of new fixed-income ETFs, but I still favor the actively managed, rock-bottom-expense-ratio mutual funds from Vanguard. I am not a fan of fixed-income indexing when an actively managed fixed-income product is available for the same price. Vanguard remains #1 in fixed income. You can add to your shares of Vanguard GNMA, Vanguard Short-Term Investment-Grade, and Dodge & Cox Income.

Nasty Foes


If you are investing for yield, I advise A-rated (or better) blue-chip preferreds. Quality is of the utmost importance in today’s booming leveraged buyout market. LBO firms are snapping up BBB-rated companies and adding mountains of debt to balance sheets. Rating agencies are slashing the credit ratings of LBO targets, which causes their fixed-income prices to plummet. LBO firms are a nasty foe for fixed-income investors. When you stick to the highest-quality preferreds, you minimize your chances of getting broadsided by an LBO freight train.

Preferreds to Buy Now


To dodge the LBO freight train, you can buy any or all of the following recently issued high-quality preferreds: GE Capital 6.05% (NYSE: GEG) rated AAA/AAA, Morgan Stanley 6.50% (NYSE: MSK) rated A1/A-, Wells Fargo 6.25% (no symbol yet) rated AA2/AA-, or Merrill Lynch 6.45% (NYSE: MERprM) rated A1/A.

Undervalued Land


On April 24, the SEC announced that it will consider allowing U.S. public companies to file financial results using international financial reporting standards (IFRS). Under U.S. accounting standards, companies must report the value of property on balance sheets using historical cost. But under IFRS, companies have the option of reporting property at market value. Still awake? Here’s why it matters. St. Joe (NYSE: JOE), Alico (NASDAQ: ALCO), and Alexander & Baldwin (NASDAQ: ALEX) all own thousands of acres of land purchased decades ago at a pittance of current market value. If allowed, these companies would be happy to report the market value of their land holdings on their balance sheets. The result would likely be a powerful move up in the share price of each.


My chart on Alico (NASDAQ: ALCO) shows the stock is on the verge of breaking through resistance at $60 per share. Continue to add to your position in this Florida farmland behemoth.



I am adding Norilsk Nickel (OTC: NILSY), a top holding in the Market Vectors Russia ETF, to my stock Monster Master List. I’ll have the exciting details for you on Norilsk in next month’s report.

Sweden


In spite of some of the world’s highest taxes and most generous welfare benefits, Sweden has consistently delivered strong growth, high employment, and low inflation. In the last quarter of 2006, Sweden’s economy grew at a blistering rate of 5%. Well…blistering for Europe.


My chart on Sweden versus Euro-land shows Sweden’s GDP growth has outpaced the broader Euro area with great consistency. I also like what I see from the newly empowered center-right government. After 12 years of Social Democratic rule, the Swedes have voted to empower the market-oriented center-right. Since taking power, the center-right has slashed taxes and cut unemployment benefits. And guess what happened? Just as with the Bush tax cuts, economic growth picked up. In December of last year, only three months after the center-right took power, retail sales grew at an astounding 10.9%.

Strong underpinnings from powerful economic growth and a current account surplus estimated at 6.6% of GDP in 2007 are two more reasons to favor the krona for diversification away from the U.S. dollar. I want you to purchase the iShares MSCI Sweden Index Fund for krona exposure.

Australia


Along with Canada, I view the Australian dollar as a long-term growth currency and a hedge against your positions in the yen and the Swiss franc. The carry trade crowd is attracted to Australia’s high short-term interest rates. If the global economy continues on a path of uninterrupted growth, you can expect the Australian dollar to outperform the yen and franc, as well as the U.S. dollar.


Australia’s vast supply of mineral resources and close proximity to China and India bode well for long-term economic growth. Though the country is endowed with commodity wealth, Australia is far from being entirely reliant on the vagaries of commodity prices. Australia’s economy is overwhelmingly service-based. Close to 80% of output comes from the services sector. A stable services-based economy and a great endowment of mineral wealth is a great one-two punch.

The World’s Most Resilient Economy


The 2006 IMD world competitiveness yearbook ranks Australia as the most resilient economy in the world and the country with the lowest risk of political instability in the world. Australia’s GDP numbers support IMD’s findings. My chart on Australian GDP growth shows a 16-year span of uninterrupted growth.


I want you to invest in Australia through the iShares MSCI Australia Index Fund. Counted among the top 10 holdings are BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RTP), which are both favored stocks on my Monster Master List.


Expanding currency coverage will become a regular part of my monthly strategy reports for you. If your portfolio is light in any of the six countries I have reviewed this month and last month, fill in the gaps with new money.



Top 10 Common Stock Countdown

This month I’ve made enhancements to the layout of Intelligence Report. Every issue will now feature expanded commentary on my Top 10 Countdown stocks, as well as Young Research price charts. You will also notice that What’s Up & What’s Down is now inside each report with my expanded, and now legible without a telescope, remarks. In place of What’s Up in my Economic Analysis, I have added four needed strategy charts. I plan on making additional improvements to the Economic Analysis over the next few months.


(1) Jardine Matheson (US ADR: JMHLY). Talk about a durable business. Jardine was established in 1834, decades before ExxonMobil (then Standard Oil) and even the country of Hong Kong. Jardine set up the first railroad in China and the first ice-making factory in Hong Kong. The company also pioneered the first sugar mill in Hong Kong. Today, Jardine is an Asian-based conglomerate with interests in everything from real estate to automobiles. You are in good company with an investment in Jardine. Among the company’s top-10 holders are Third Avenue Management and my long-time favorite Mutual Advisors, the managers of the Mutual Series Funds. My relative strength chart on Jardine shows consistent power versus the S&P 500. 


(2) Newmont Mining (NYSE: NEM). Lately, Newmont shares have had a rough go of it. The stock is down 13% year to date. Takeover rumors are circulating. Newmont would make a nice addition to any of the global mining powerhouses, including BHP, Rio Tinto, Xstrata, or Anglo American. Newmont is building a nice base versus the S&P. Buy NEM and look for a takeover.  


(3) Plum Creek Timber Company (NYSE: PCL). What’s there not to like about Plum Creek? Timber is my all-time favorite asset. You buy some land, plant some trees, and watch the value of your investment grow. If log prices go down, you wait for better days to harvest. Meanwhile, the value of your timber investment grows as your trees grow. That is a business to admire. You can sit on your hands for 20 years and still make money. Plum Creek shares provide exposure to timberland without the liquidity constraints of direct timberland investment. Plus you get a 4.2% tax-advantaged dividend. My chart on Plum Creek shows that as investors have shaken housing industry concerns, the stock has regained relative strength versus the S&P 500.


(4) Unilever (NYSE: UL). My chart on Unilever shows a powerful upside breakout versus the S&P 500. For years, Unilever has been overshadowed by larger, more efficient competitors like Procter & Gamble and Nestle. No more. The private equity crowd cracked the smelling salts for ordinary investors after expressing an interest in taking Unilever private. Unilever’s portfolio of brands includes Lipton tea, Hellmann’s Mayo, Ben & Jerry’s ice cream, and good old Vaseline. If UL continues to underperform its rivals, you can be sure the company will be taken out. Buy.

(5) Southwest Water (NASDAQ: SWWC). When is the last time you stopped drinking water because the economy started to slow? You probably drank more beer, but beer is mostly water-based. Water stocks are about as defensive as they come. In today’s frothy market, adding a few defensive names to your portfolio is not a bad idea. My chart on Southwest Water shows that in terms of relative strength the worst is over for the stock.  


(6) Citigroup (NYSE: C). Over the past year, I have recommended Citigroup to you numerous times. Citi pays you a 3.9% yield and sells for 12X earnings. Eddie Lampert, the billionaire hedge fund manager who is often compared to a young Warren Buffett, just took an $800 million dollar stake in Citigroup. Lampert is a top-notch value investor who will push CEO Prince and company for change. Citi is flat on its back in terms of relative strength versus the S&P 500. Buy. 


(7) Federated Investors (NYSE: FII). My Big Idea is centered on the retirement of 76 million babyboomers starting in 2008. As boomers leave the safety of a steady paycheck behind, the hunt for income will begin. Fixed-income investment managers will be a big benefactor of the sea change that gets under way in 2008. Federated is a leading investment manager with more than 84% of assets in fixed-income and money market funds. FII gave shareholders a 17% dividend pay raise in the first quarter. My year-to-year rate of change chart shows limited downside momentum and lots of upside potential. 


(8) Barrick Gold (NYSE: ABX). Gold is a wealth guardian and a doomsday ally. Gold is the world’s hardest currency. Every other currency is subject to the whims of politically (or otherwise) motivated bureaucrats itching to hit the duplication button on the printing press. Today, Barrick is the world’s largest gold producer. Barrick has 27 operating mines and 123 million ounces of proven and probable gold reserves. My relative strength chart on Barrick versus the S&P 500 shows the stock is flat on its back with lots of room to move up.


(9) Whole Foods Market (NASDAQ: WFMI). Whole Foods is like night and day compared to the colossal, crowded-aisle Wal-Mart Supercenters that litter our landscape. Whole Foods has a fabulous organic section, hormone-free meats, and great selection of prepared foods. You can dine in or out. As indicated by the bottoming in my year-to-year rate of change chart on the stock, the worst should be over for Whole Foods.   

(10) Johnson & Johnson (NYSE: JNJ). A portfolio of America’s leading consumer brands, a leading medical devices business, and a leading pharmaceutical business are all packaged together in a company that has been around since the 1880s. JNJ has paid a dividend since 1944 and has increased its dividend for the past 44 years. JNJ is a beaming bright blue chip that excels during good times and bad. My long-term trend chart shows the stock trading at a wide discount to trend (a rarity). Buy JNJ today. 

What’s Up and What’s Down

YTD, we are on pace to have another great year. In just five months, the DOW is up 9.7%. The top performers on my list are once again dominated by international and natural resource names. Malaysia is up an eye-popping 34.5%, followed by Singapore up 21.3%, Vanguard Precious Metals & Mining up 21.1%, Fidelity Canada up 19.2%, and T. Rowe Price New Era up 19.2%. Japan, with a loss of 2.7%, is a laggard. You know I’m big on the cheap yen and reasonably priced Japanese stocks. The Economist tells us that "Japan is unique among democratic countries. Of all people arrested, confessions are obtained from 95%. And 99.9% of all arrested are convicted…. Judges get promotions for the speed which they process case loads. And juries do not exist." When the global economy slows, Japanese stocks will counterbalance some of your more cyclical international positions. Stay with your Japanese holdings. After leading the market for most of this decade, real estate funds have dropped toward the bottom of the pack, with two of the four funds on my list down slightly YTD. A weaker US$ has managed to keep Fidelity International Real Estate and Third Avenue Real Estate in the black YTD. Vanguard REIT and T. Rowe Real Estate are both down less than 1%. In a properly diversified portfolio, you should expect some of your positions to be down while others are up.


Over the last complete five-year period, the #1 performing fund, among all Vanguard funds, has been Precious Metals & Mining. And it has almost certainly been my #1 advised Vanguard fund for you. Your average annual gain has been a staggering 30.85%. To have missed out here is a monumental travesty, for there is no reason for you not to have been in big from the very start right along with me. Such gains will probably not be repeated soon. I own this fund strictly as a defensive counterbalancer, as I hope you do. Today, it is closed to new investors. On another note from Vanguard, Wellington Fund, founded in 1929, has provided from the beginning a 60/40 balanced mix return of 8.42%/year, even lugging the rotten early performance of the 1929 Crash and the Depression. Every investor wants either the 60/40 stock/bond Wellington or the 40/60 stock/bond Wellesley (not both).

  
2005
% Change
2006
% Change
2007 YTD
% Change
Dow Jones 30 Ind. 1.7 19 9.7
Dow Jones 15 Ut. 25.1 16.6 9.7
Dow Jones Trans. 11.6 9.8 14.4
S&P 500 Index         4.3 15.1 8
NASDAQ Comp.      2.2 10.3 7.4
Value Line 2 11 8.8
Dodge & Cox Bal. 6.6 13.9 6.4
Holland Balanced 1.8 11.6 4
Vanguard Bal. Index 4.7 11 5.7
Wellesley Income 3.5 11.3 4.3
Wellington 6.8 15 6.8
Dow Diamonds Trust, Series 1 2.5 18.9 9.5
Mutual Shares (Z-Shares) 10.4 18.4 9.2
Vanguard 500 Index  4.8 15.6 8.2
Vanguard Growth Index 5.1 9 8.3
Vanguard Value Index 7.1 22.2 8.7
Vanguard Equity Income 4.4 20.6 8.5
Third Ave. Value 16.5 14.7 9.3
Third Avenue Small-Cap Value 11.1 11.4 9.1
Dodge & Cox International 16.8 28 11.2
Fidelity Canada Fund 27.9 15 19.2
iShares Australia 16.7 30.8 18.3
iShares Hong Kong 7.3 29.3 5.8
iShares Singapore 14.3 45.8 21.3
iShares Switzerland 13 30 7.7
T. Rowe Price Japan 40 -5.7 -2.7
T. Rowe Price Em Eur & Mediterranean 59 34.7 5.1
iShares Sweden 10.3 43.7 13
iShares Malaysia -0.6 36.4 34.5
Third Avenue International 18 17.1 6.8
Fidelity International Real Estate 14.9 42.9 3.6
T. Rowe Price Real Estate 14.5 36.8 -0.4
Third Ave. Real Estate Value 14.4 30.2 7.9
Vanguard REIT Index 11.9 35.1 -0.8
American Century Global Gold 28.9 26.8 -4.1
iShares Goldman Sachs Natural Resources 36 16.4 16.7
PIMCO Commodity Real Return 20.5 -3 4.7
streetTracks Gold Shares 17.8 22 3.7
T. Rowe Price New Era 29.9 17 19.2
Jennison Natural Resources 54.6 21.7 18.7
Vanguard Precious Metals & Mining 43.8 34.3 21.1
Amer. Century 2025 (US Treasury STRIPS)   14.2 -1.6 -1.5
Dodge & Cox Income 2 5.3 1.8
PIMCO All Asset 6.5 5.3 3.9
Vanguard GNMA 3.3 4.3 1.5
Vanguard High-Yield Corp. 2.8 8.2 4.3


Back in the 1970s, I concentrated on my 50-page monthly Young’s World Money Forecast. Not surprisingly, many of my most loyal subscribers were foreign. One back-of-the-envelope measure I would include in any reincarnation of YWMF is the Misery Index. Here the unemployment rate for any given country is combined with that country’s rate of inflation. Everything else equal, the lower the Misery Index, the harder the currency. I calculated the Misery Index for 42 developed and developing countries. The worst readings were for South Africa and Egypt. The best were for, perhaps surprisingly, Thailand, and, not surprisingly, Singapore and Norway. And the hard currency king and certainly no surprise was Switzerland, with projected full-year inflation and unemployment rates of 0.6% and 2.9%.

Here & There


A small and little-known Swiss bank is one of the core retirement holdings at our family investment management company (YoungInvestments.com). Of all the countries in my extensive review, only two run a current account surplus and have a balanced budget and low interest rates: Singapore and Switzerland. All of this, of course, supports my own purchases of the iShares for Switzerland and Singapore and my enthusiastic buy advice for you. The Luxury Goods Supercycle (LGS) is a key Dick Young investment theme. American Express (NYSE: AXP) is a LGS leader and a must-own for you. You can now put your monthly mortgage payment on your AMX card. And you will earn credit card rewards in the deal. And further enhancing AMX’s footing is a new deal with Citigroup. Citigroup is switching a big group of Visa-branded American Airlines credit cards over to the AMX logo. Buy AMX. Nelson Peltz has taken a big position in my highly favored LGS player Tiffany (NYSE: TIF). Join N.P., and buy Tiffany. Dell is going to sell its junky PCs at where else but the junk repository Wal-Mart. And here’s a shocker. Wal-Mart is hauling its high-end (sort of) fashion apparel out of its stores. What a disaster. Privately owned Publix, which ranks #1 in customer satisfaction, is eating Wal-Mart’s little lunch. Wal-Mart ranks, well, last. And J.C. Penny’s e-biz is blitzkrieging Wal-Mart’s. Avoid Dell and Wal-Mart. France’s new president, the center-right Nicolas Sarkozy, is pro profound change for France. He is positive on the U.S. and Israel and is also annoyed with Mr. Putin. Mr. Sarkozy also will be tough on Iran. The IAEA believes Iran could have 3,000 centrifuges in operation in June. I look for more Bush sanctions. Overall the #1 problem for the U.S. and investors, if you believe FBI intelligence, is radical Islam/al-Qaeda—a serious nuclear threat to the U.S. and Europe. A globally counterbalanced portfolio is your best financial protection.

Warm regards,

Richard Young signature

Richard C. Young

P.S.: The takeover arena is red hot. Go to our IR website for all the info on Young Research’s brand-new Distressed Securities & Takeover Candidates (DSTC) strategy service, now including ultra-timely e-mail alerts. And go to YoungResearch.com for some great surprises on (1) the essential music front, (2) the best places to live globally, and (3) a great luxury resort to head to off-season (summer) in the Florida Keys, plus the first installment of my Key West Insider and Local Key West Best Bets.


P.P.S. Your $1,000 charitable donation will get you a once-in-a-lifetime Golden Circle ticket for the June 22 Memphis 50th anniversary Stax Records concert, along with VIP privileges and a 50-CD box-set package. Call Deanie Parker at 901-261-6332 or go to deanie@soulsvilleusa.com. Featured will be Booker T. & the MGs, Isaac Hayes, and Mr. "Knock on Wood" Eddie Floyd. You can also get regular event-only tickets for $25 and $50 at 901-525-3000.


P.P.P.S. DayJet should start its VLJ taxi service in Florida this summer. Simon Cowell, who dropped out of school at 15, will earn $38 million a series for the next five years for his caustic judging activities, plus another $13 million per year with U.K.-based ITV, plus-plus-plus, which will give him the cash to buy my favorite motorcycles of the year: Harley’s XL 1200N Nightster and Ducati’s 377-pound, 175-mph, 1098 S Tricolore.

Richard C. Young’s Intelligence Report® (ISSN 0884-3031) is published monthly by ACP Phillips Investment
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