A New All-Time Record in Oil

A first sign of a top?... The largest 'social media' IPO since 2014... 'Twice as expensive as Facebook, and four times more costly than Twitter'... The Fed's biggest 'dove' throws in the towel... Jobless claims fall to 40-year lows... Inflation is still rising in Europe... A new all-time record in oil... Is OPEC's deal already in doubt?... Are you missing out on the biggest 'stealth' bull market of 2017?... P.J. O'Rourke: Lessons about media from some old newspapermen...

This morning, shares of Snap (SNAP) began trading publicly for the first time...

The firm – which owns Snapchat, the ultra-popular photo- and video-messaging app – raised $3.4 billion in its initial public offering ("IPO"), making it the biggest social-media IPO since early 2014.

Snap said it sold 200 million shares at $17 each, giving the firm a market value of about $20 billion. At that price, Snap would be valued at more than 21 times this year's sales, according to advertising-data firm EMarketer.

This is twice as expensive as social-media juggernaut Facebook (FB), and four times more expensive than Twitter. Media firm Techonomy Media CEO David Kirkpatrick called it a "nosebleed" valuation, but noted "there's a nosebleed's worth of demand." As Bloomberg reported yesterday...

Snap raised $3.4 billion in its IPO, pricing shares above the marketed range, in the biggest social-media IPO since Twitter more than three years ago.

"There is a huge amount of people who really just want to get in on the hot new thing, who see this as the first opportunity of its type in a number of years," Kirkpatrick said in an interview on Bloomberg TV. Still, "they've got some serious work to do to actually make a real business that makes profits."

Incredibly, Snap quickly became even more expensive than that...

Snap began trading above $24 per share – more than 40% higher than its $17 IPO price – giving the company a valuation of more than $30 billion. Shares were trading above $25 as of midday trading.

Clearly, many investors believe Snap could be the next big social-media success. We're not convinced...

Longtime Digest readers know we've warned about several popular technology IPOs in recent years, including Zynga, Twitter, Etsy, GoPro, and Fitbit, among others. Each of these firms soared following their IPO, then quickly began falling.

We suspect Snap may be next. But we aren't alone. The Wall Street Journal highlighted the bearish case from one notable analyst – Trip Chowdhry, co-founder of Global Equities Research – this morning...

[Chowdhry believes] the hype around the disappearing-photo app company has the hallmarks of duds Fitbit Inc., GoPro Inc, Zynga Inc., Groupon Inc. and Twitter Inc.

Like all of the above, he says that Snap will likely beat analyst estimates for a few months, giving early investors cover to exit at higher prices. Then it could come crumbling down.

He writes that, for one thing, the disappearing app niche is assailable by rivals such as Facebook Inc.'s Instagram:

"The popularity of SNAP is based on a set of filters and the disappearing act of pictures, which is a flimsy foundation. Instagram can easily include these features and given its higher number of users; it will only get more popular if it does that.

He goes on that it would be wise to avoid buying this stock now or else buying and getting the heck out while the going is good:

"SNAP is not a multi-year story. The investing horizon should be in months not years. Let all the hot air go out, let the private investors cash out, let's see how the Industry evolves in 1.5 years... and then if all looks good, then maybe invest in SNAP."

One of the Federal Reserve's strongest opponents of higher interest rates has had a change of heart...

In a speech at Harvard University yesterday, Fed Governor Lael Brainard – known as the Fed's biggest "dove" – agreed it was likely time for the central bank to begin tightening monetary policy again. From her speech...

Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path... We are closing in on full employment, inflation is moving gradually toward our target, foreign growth is on more solid footing and risks to the outlook are as close to balanced as they have been in some time...

The contrast with the situation a year ago is sharp... Scope for additional monetary policy accommodation is limited, leaving the economy vulnerable to adverse demand shocks.

According to the CME Group's FedWatch Tool, the probability of a March hike jumped again today to 79.7%. In other words, don't be surprised if the Fed raises rates again later this month.

This morning's job market data gave the Fed further "cover" to raise rates soon...

The U.S. Department of Labor reported the number of Americans filing for unemployment benefits plunged by 19,000 to 223,000 last week. This is the fewest in nearly 44 years since March 1973.

Jobless claims have now remained below the "healthy" 300,000 level for 104 straight weeks, the second-longest streak in history.

Elsewhere, the latest data suggest the European economy continues to recover as well...

This morning, Eurostat – the European Union's statistical office – reported euro-area consumer prices rose at a 2% annual rate in February...

Inflation has nearly doubled from December's 1.1% rate, and is now in line with the European Central Bank's (ECB) official target.

On the other hand, so-called "core" inflation – which ignores more volatile food and energy prices – remains at just 0.9% for the third straight month. As Bloomberg reports, this puts the ECB and president Mario Draghi in a difficult position...

The divergence between the two inflation indicators highlights the challenges facing the ECB in choosing the right amount of monetary stimulus. While headline inflation is moving upward in line with the central bank's goal of a rate below but close to 2%, the persistent weakness of core inflation is a source of concern for officials including ECB President Mario Draghi.

Some European officials and analysts have already been calling for the ECB to begin raising rates like the Fed. While those calls are likely to grow louder following today's data, we continue to expect Draghi to remain "dovish" until (or unless) core consumer prices begin to rise, too.

Speaking of energy prices, the bearish signs for crude oil continue to pile up...

Yesterday, the U.S. Energy Information Administration reported domestic oil supplies increased by 1.5 million barrels last week.

U.S. inventories have now risen for eight straight weeks. And while this week's increase was less than analysts expected, it pushed total U.S. stockpiles to a new all-time record of 520.2 million barrels.

Meanwhile, the latest Bloomberg News survey shows oil-cartel OPEC is still falling short of its promises, two months into its historic agreement to cut production.

As regular readers know, OPEC members agreed last November to slash its total output by 1.2 million barrels per day ("bpd"). But despite lowering production by another 65,000 bpd in February, OPEC is still producing more than 400,000 bpd more than originally promised.

Said another way, OPEC members are only 70% in compliance to date... And this figure includes much-higher-than-expected cuts by OPEC leader Saudi Arabia. According to Bloomberg, the Saudis produced just 9.78 million bpd in February, nearly 300,000 bpd less than it promised.

Non-OPEC members of the deal aren't doing any better... Bloomberg reports they've achieved just 66% of their promised cuts to date. In fact, a report from the Russian Ministry of Energy this afternoon said the country maintained its output at 11.11 million bpd in February. This means Russia – the world's single largest producer – has cut production by just 100,000 bpd, or just one-third the reduction it originally promised.

But even these production cuts may not last for long...

The current deal is set to expire in June. And history – not to mention today's half-hearted compliance by many members – suggests an extension is unlikely.

In other words, OPEC production could soon rebound alongside that of U.S. shale producers... and today's elevated supplies could move even higher. As Barclays analyst Michael Cohen explained in a recent note...

Supply is likely to return with a vengeance in [the second half of the year] and 2018... Oil market participants are playing a game of musical chairs. Fewer chairs are set each year, and when the music stops new participants remain. It is clear that OPEC must sharpen its elbows or else it will find itself without a seat.

Worse, as we've discussed, OPEC could discover U.S. producers are more resilient to falling prices than they were the first time around...

Industry consolidation and continuing technological improvements have made them far more efficient than they were even a year ago.

In fact, consulting firm Rystad Energy recently reported the "break-even" price for the U.S. shale industry has now plunged from above $50 per barrel to an average of just $35 per barrel.

One last note before we sign off today...

We've heard from a handful of readers who are concerned about the recent performance of gold stocks. And for good reason...

Over the last couple of weeks, gold stocks – as tracked by the VanEck Vectors Gold Miners Fund (GDX) – have fallen around 10%. Meanwhile, the price of gold is up a little more than 1% over the same time frame.

Some folks have asked if this is a bearish sign. After all, we often say gold stocks tend to lead gold higher in a bull market. So is this divergence a reason to sell?

In a word, no. It's true that gold stocks tend to lead the way higher, but it's important to remember that no market relationship holds true 100% of the time. More important, if you "zoom out" just a little, you'll see that's exactly what has happened this year...

Since the sector bottomed in December, gold prices are up a little more than 10%. Over the same period, gold stocks have rallied more than 35%. Even after the recent pullback, gold stocks are up more than twice as much as gold so far. In other words, gold stocks have rallied much more than gold... So it's not unusual to see them pull back much more, too.

But we continue to believe a new leg in the ongoing bull market has begun, and much higher prices are likely this year. This correction may run a bit further... But we view it as buying opportunity, not a reason to sell.

If you don't already have a portion of your portfolio in precious metals and the very best gold and silver stocks, this is a great time to start adding new positions.

As longtime readers may recall, we launched our Stansberry Gold & Silver Investor service last spring to take advantage of the new bull market in precious metals. And folks who joined us have done incredibly well.

Today, the second leg up in the bull market has begun... And we believe even larger gains are likely in the months ahead.

That's why we've decided to open Stansberry Gold & Silver Investor to new subscribers for an extremely limited time. Better yet, we've been working hard "behind the scenes" over the past eight months to make this service even more valuable than it was before...

In short, Porter and his team have been developing a new tool – what they've dubbed the "G-2 Indicator" – to help them find the most explosive opportunities in the precious metals sector.

This indicator is rarely triggered... In fact, they back-tested 10 years of data on more than 200 publicly traded gold and silver stocks and found just a handful of signals. But when it appears, it often leads to rapid gains of 100% or more... sometimes in a single day.

Right now, the "G-2 Indicator" has triggered a buy signal on not one – but three – tiny gold stocks. Stansberry Gold & Silver Investor senior analyst Brett Aitken has prepared a short presentation explaining it all. Click here to read it now. (This link does not lead to a video.)

New 52-week highs (as of 3/1/17): Apple (AAPL), AmerisourceBergen (ABC), Automatic Data Processing (ADP), American Financial (AFG), American Express (AXP), Axis Capital (AXS), Allianz (AZSEY), Boeing (BA), Becton Dickinson (BDX), Berkshire Hathaway (BRK-B), CBRE Group (CBG), C.H. Robinson Worldwide (CHRW), CME Group (CME), Cisco (CSCO), iShares Select Dividend Fund (DVY), WisdomTree Japan Hedged Equity Fund (DXJ), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), Facebook (FB), First Trust Emerging Markets Small Cap AlphaDEX Fund (FEMS), BlackRock Floating Rate Income Strategies Fund (FRA), Huntington Ingalls Industries (HII), 3M (MMM), Altria (MO), Monsanto (MON), AllianzGI Equity & Convertible Income Fund (NIE), Prestige Brands (PBH), PowerShares S&P 500 BuyWrite Fund (PBP), PowerShares High Yield Equity Dividend Achievers Fund (PEY), PNC Financial Warrants (PNC-WT), Stanley Black & Decker (SWK), Tallgrass Energy GP (TEGP), Travelers (TRV), ProShares Ultra Financials Fund (UYG), and W.R. Berkley (WRB).

In today's mailbag, one Stansberry Alliance member shares Stansberry Alpha results... while another weighs in on the new Stansberry Newswire. What's on your mind? Let us know at feedback@stansberryresearch.com. Plus, read below for the latest essay from Digest contributing editor and famed satirist P.J. O'Rourke, who discusses the upcoming White House Correspondents' Dinner.

"Stansberry Bosses, I'm a proud Alliance member, and want to thank you for everything you guys do for ALL us subscribers. We appreciate everything! As of today's close, I'm up 323.61% on my 2 AXP Jan 18 '19 calls I bought in October. You guys rule! Porter, I think you should run for president. 'President Porter Stansberry' has a nice ring to it." – Paid-up Stansberry Alliance member Matt E.

"Thank you for all the updates in the Stansberry Newswire service! I love the format... Also, all the new services offered makes the Alliance value even more incredible than it was before!!! Thanks for all the hard work!!"- Paid-up Stansberry Alliance member T.K.


Justin Brill
Baltimore, Maryland
March 2, 2017

Lessons About Media From Some Old Newspapermen

By P.J. O'Rourke

So President Trump won't attend the April 29 White House Correspondents' Dinner. Why does this make news two months before the fact? Why does this make news at all?

The White House Correspondents' Dinner makes news because it's the media's annual opportunity to slap its own back, shake its own hand, and use one of its arms to raise the other in triumph. So many celebrity nuisances, big-potato business types, and political high muckamucks are brought in to assist the self-congratulation that anyone with an eye on the "Big State" wonders, "Are they all in it together?"

A question with an answer that sounds a lot like the one for, "Is professional wrestling fixed?"

It's a bun fight of less importance to the life of the nation than the county fair 4-H Club calf-and-heifer prize showing. You can eat a cow. There's no livestock at the WHCD that I'd care to have a rump roast from.

Yet this year, it's supposed to be important because the president of the United States uninvited himself.

Maybe Trump is distancing the presidency from the "Deep State." Or maybe something less interesting is going on.

Trump has decided to cast the media – or a large portion of the media – as adversaries.

On Friday, February 17, Trump famously Tweeted: "The FAKE NEWS media (failing @nytimes, @NBCNews, @ABC, @CBS, @CNN) is not my enemy, it is the enemy of the American People!"

One of the great newspapermen of all time, H.L. Mencken, pointed out how right Trump is. In Heathen Days, the third volume of his autobiography, Mencken says, "The plain people... are always, in fact, against newspapers..."

A critic of the Deep State might find this hopeful. But Mencken, as he went on to say, was less optimistic about the motives of us the plain people: "... and they are always in favor of what reformers call political corruption. They believe that it keeps money in circulation, and makes for a spacious and stimulating communal life."

Most of our problems come not from the media and its opponents or the president and his opponents. They come, of course, from ourselves. Another old newspaperman, Walt Kelly, put it succinctly in his "Pogo" comic strip that once ran in some 500 newspapers: "We have met the enemy, and he is us."

As for "fake news," it has been with us forever. Mencken has a gleeful passage in his autobiography's first volume, Newspaper Days, about reporting for the Baltimore Herald during a slow news week in 1903:

A wild man was reported loose in the woods over Baltimore's northern city line, with every dog barking for miles around, and all women and children locked up. I got special delight out of the wild man, for I had invented him myself.

Everyone in the media and politics (and most other forms of enterprise) is in the business of attracting attention.

Another lesson from Mencken is to be wary about "feuds" between politicians and the press.

In Heathen Days, Mencken recounts how, during the 1910s, his newspaper, the Baltimore Sun, was engaged in a political feud with Baltimore Mayor James H. Preston. Never mind that both Preston and the Sun's editor were diehard Democrats.

According to Mencken, if Preston "proposed to enlarge the town dog-pound," the Sun would denounce it "as an assault upon the solvency of Baltimore, the comity of nations, and the Ten Commandments." While if the Sun editorialized in favor of clean alleys, "Preston went about the ward clubs warning his heelers that the proposal was only the opening wedge for anarchy, atheism, and cannibalism."

Everyone in the media and politics is in the business of stirring things up – or looking as if they're doing so.

Mencken confesses, "My own share in this campaign of defamation was large and assiduous." And then he goes on to say, "I was fond of [Preston], thought he was doing well as mayor, and often met him amicably at beer parties."

Mark Twain was also an old newspaperman. He instructs us to be equally wary of feuds between media outlets themselves. In an 1869 humor piece for the Buffalo Express, "Journalism in Tennessee," Twain wrote with only some exaggeration about witnessing a confrontation between the editor in chief of the Morning Glory and Johnson County War-Whoop and Colonel Bascom, proprietor of a rival paper, the Thunderbolt and Battle-Cry of Freedom...

Both pistols rang out their fierce clamor at the same instant. The chief lost a lock of hair, and the Colonel's bullet ended its career in the fleshy part of my thigh. The Colonel's left shoulder was clipped a little. They fired again. Both missed their men this time, but I got my share, a shot in the arm. At the third fire both gentlemen were wounded slightly, and I had a knuckle chipped... They then talked about the elections and the crops a while, and I fell to trying up my wounds.

Nothing like that happens at Stansberry Research, I'm glad to say.

I've been writing for the Stansberry Digest for nearly a year and a half. I like the way Porter and his team treat the media. They sort through it for provable facts pertinent to their mission and analyze those facts with unbiased rigor.

This, for instance, gave me the luxury of waiting until Wednesday to watch President Trump's Tuesday night address to the joint session of Congress.

Unlike Twain, I avoided the media crossfire and was safely out of the way until I could see what happened after the president and the pundits ran out of ammo.

(FYI: Not much.)

I pretend to have no expertise in investment, but I've spent 47 years in the media. By the way, I hate the word "media." Call it for what it is – gossip, tittle-tattle, self-righteous bloviation, light diversion, lots of advertising and catering to advertisers, plus histrionic reports (variable in accuracy) of other people's tragedies, disasters, and woes – "If it bleeds, it leads!" – so that viewers, readers, and listeners can feel pity from a comfortable distance or schadenfreude or relief that it didn't happen to them.

You may agree or disagree with the Stansberry Digest, but it has no fake feuds, no bogus factoids, no desperate pleas for attention, no stirring the pot for the sake of the splashes it makes, no theatrical quarrels staged for public titillation... And it has no table at the White House Correspondents' Dinner.


P.J. O'Rourke