OUZILLY, France – There are two ways you can destroy a country: pull down its money or build up its military.

Usually, they go hand in hand – one hand ruining the economic body, the other attacking the soul.

A Different Candidate?

“I would vote for Trump.”

The remark last came from an unlikely source.

The French press treats Trump like a clown or a con artist. Until last night, we had not encountered a single Frenchman with a favorable view of the Republican candidate.

We usually sink in our chair when the conversation turns to U.S. politics.

“Are you voting for Hillary?” they ask, assuming the answer is surely yes.

“No,” we say.

Then we get a look of deep suspicion. “You mean you are voting for Trump?”

“Not either,” we reply.

Then we have some explaining to do.

“I don’t want to encourage them,” we begin. The conversation generally goes downhill from there.

But last night, it was our companion who had some explaining to do – not so much to us, but to our other open-mouthed guests:

“Trump is a guy who has made a career in the real world. He knows something about how an economy actually works. Yes, of course, he appears vulgar and ignorant. But that’s because he understands how the press actually works.

“He has built a public persona to capture media attention. It was the only way an outsider like him could win the nomination. In private, he is a very different person. He is thoughtful and intelligent. At least, that is what I read.

“Hillary is just like [French president] François Hollande and almost the entire political class of Europe. They are professionals at one thing only: getting in office and holding on to power.

“They have no idea how the real world works. They’ve never had a job. Or a business. Or any real contact with the world most of us live in. So, they inevitably make a mess of whatever project they are involved in.

“From one failed project to another… one unfulfilled promise to another one… one disaster to another.

“Trump is different. He might actually succeed.”

Another World

Politicians are different from the rest of us.

We have to create wealth (even if it is as humble as digging a ditch) to survive.

For most people, work is not a hobby. We are not dilettantes who can shuffle from one loss-making, flibbertigibbet enthusiasm to the next.

We have to do something that other people are willing to pay us for. We have to succeed to pay the bills. Failure is not an easy option. Our lives depend on it.

Politicians and their cronies live in another world.

What? QE didn’t work, you say? What? The War on Drugs hasn’t reduced drug use? The War on Poverty hasn’t reduced poverty? The War on Terror has created MORE terrorists?

You don’t say… really?

Well, we’ll just spend more (of your) money on them!

What? Our budget is half a trillion in the red?

We’ll just borrow more money; besides, it will stimulate the economy.

The Parasitocracy doesn’t create wealth. Instead, it lives on the wealth of others. And lives well!

Federal Advantage

The Washington, DC, area now has the highest house prices in the nation.

USA Today puts it as the third richest city, after San Francisco and San Jose.

The median two-bedroom apartment in DC now rents for $3,100, according to MoneyWatch. That’s $500 a month more than in LA.

But inside the Beltway they can afford those rents. Federal employees earn 78% more than similar workers in the private sector. Breitbart:

According to a study of data from the Bureau of Economic Analysis, conducted by the Cato Institute, compensation for federal workers is 78% higher on average than compensation for private sector employees.

“Federal civilian workers had an average wage of $84,153 in 2014, compared to an average in the private sector of $56,350,” according to the Cato review.

“The federal advantage in overall compensation (wages plus benefits) is even greater. Federal compensation averaged $119,934 in 2014, which was 78% higher than the private-sector average of $67,246.”

In other words, taking is better paid than making. People who work for the feds earn more than those who add real wealth.

Party of War

But it is not the threat to his purse that draws another unlikely endorsement of the New York real estate developer.

Adam Walinsky, lifelong Democrat and former speechwriter for Robert Kennedy, tells us why he, too, is voting for Trump:

Today’s Democrats have become the Party of War: a home for arms merchants, mercenaries, academic war planners, lobbyists for every foreign intervention, promoters of color revolutions, failed generals, exploiters of the natural resources of corrupt governments.

We have American military bases in 80 countries, and there are now American military personnel on the ground in about 130 countries, a remarkable achievement since there are only 192 recognized countries.

Generals and admirals announce our national policies. Theater commanders are our principal ambassadors. Our first answer to trouble or opposition of any kind seems always to be a military movement or action.

Walinsky believes Trump will take his foot off the gas… slowing down the war machine:

Trump marks himself as a man of singular political courage, willing to defy the hysteria of the Washington war hawks, the establishment and the mainstream media who daily describe him as virtually anti-American for daring to voice ideas and opinions at variance with their one-note devotion to war.

Trump: shrewd businessman who will buck the Establishment?

Or jackass shyster without a clue or a prayer?

You decide!

Regards,

Signature

Bill

Investor Focus


By Chris Mayer, Chief Investment Strategist, Bonner Private Portfolio


There are two factors that almost every “100-bagger” stock has in common.

A couple of years ago, I published a study of 100-baggers – stocks that returned 100-to-1 – over a 50-year span. And the importance of these “twin engines” turned up again and again.

The best way to show you how the twin engines work is with an example…

Let’s say we have a stock that earns $1 per share and trades for 20x company earnings. That would make the stock $20.

Now, five years later, earnings have tripled to $3 per share.

If the stock still trades for 20x earnings, then you’ll have tripled your money, as the stock would trade for $60 per share.

That’s a nice result. And shows you the power of the first engine: earnings growth.

But the second engine I look for is a low multiple on those earnings.

Let’s say you find a similar stock trading for just 10x earnings. The stock is $10 and earns $1 per share.

Now, five years later, earnings have tripled to $3 per share.

But, the cat is out of the bag. The market has come to appreciate the power of its business model, and the stock trades for 20x earnings.

Now the stock is $60, as in the prior example… and you’re up sixfold instead of threefold.

But it can go against you if you don’t have both engines working.

Say you pay 50x earnings for a stock, and earnings triple over five years. If the price-earnings ratio falls to 15x, you lose money. Think about that: You could own a stock where earnings tripled… and lose money if that’s the only engine running.

Understanding the twin engine concept is one thing, but finding stocks that have both components is another.

In 1982, Aflac was a small insurance company with $585 million in sales. Twenty years later, sales were up to $10.2 billion. That’s a 17-fold increase. Earnings per share did better – they went from four cents to $1.30. But the stock was up 100-fold.

How so?

Well, the market valued earnings at just 10x in 1982. But 10 years later, it traded for almost 30x earnings. The twin engines again.

Perhaps the most extreme example of the twin engines at work is MTY Foods…

Between 2003 and 2013, the fast food franchiser’s sales went up 7.8x. Earnings went up 12.4x. But the stock was up 100x… because in 2003, you could’ve bought the stock for just 3.5 times earnings. By 2013 it traded for 26x. (A tip of the cap to Chip Maloney at the MicroCap Club for the example.)

That’s the power of the twin engines…

The table below lists five stocks with low price-to-earnings (P/E) ratios compared to their estimated long-term growth rate in earnings per share (LTG EPS) for the next five years:

Ticker Short Name LTG EPS P/E  Market Cap
(in millions of $)
UCP UCP, Inc. 20.0 9 70
AL Air Lease 15.0 9 3,000
ASNA Ascena Retail 20.0 12 1,480
AFH Atlas Financial 20.0 12.5 206
NCLH Norwegian Cruise 30.0 16 8,000

I particularly like Atlas Financial (AFH), which insures small fleets of taxis. This is an old recommendation of mine, which we bought around $6 per share. Today, at $17, it’s still a compelling bargain with lots of room to grow. The management team, led by CEO Scott Wollney, is excellent. And they have “skin in the game” – they own 12.5% of the stock.

Another one I like is Air Lease (AL), which leases aircraft to airlines. The company will double the size of its fleet over the next five years. It also has the strongest management team in the business, led by chairman Steven Udvar-Hazy, who invented the aircraft-leasing industry. Management also owns 10% of the company.

But each of the five companies I listed has the “twin engines” I look for in an investment. I recommend checking them out…

P.S. Yesterday, I launched my newest investment advisory, Chris Mayer’s Focus. It’s designed to help you build a concentrated portfolio of small-cap stocks with “twin engines” – along with a few other traits – that could make them huge stock market winners.

I’m talking about investing in the “next Apple,” the “next Starbucks,” or the “next Wal-Mart” – long before Wall Street is paying any attention to these companies.

This new project is very close to the way I personally invest… And I’ll take you deep behind the scenes of every recommendation I make. To learn how you can sign on for an incredible discount, click here.


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Want to Be a Better Investor? Put Away Your Computer
Want to know the secret to making more money in the stock market? It’s simple: Just turn off your computer and put away your smartphone. Always checking on the market is a big mistake.


Mailbag

On Wednesday, Bill questioned the consensus view that deflation is here to stay. And it got readers thinking…

Deflation. What deflation?

I was in the store the other day and there was a young man buying Twinkies. To my surprise, Twinkies still exist. Wow, they were 50% smaller and a bit more in cost. To buy the same volume of Twinkies as in the not so distant past it would cost me 100+% more.

Inflation/deflation – who cares? The ship is dead in the water. Sooner or later it will be thrust into a pile of rocks and sunk. So let the Fed and politicians think they are doing something. It keeps their egos fed.

– Lee K.

Meanwhile, the debate over former Fed chief Paul Volcker and his handling of the 1970s inflationary crisis continues…

[Diary reader] Dave F. is right about Paul Volcker and the early 1980s in one regard – it was a difficult time. I know. I was there too. Things were so bad in my profession (finance) that I had to find a different line of work for a while. But I also knew what Volcker did was necessary.

The point Dave misses is that the hard times were short-lived. By the mid-80s the pain was over. The economy, businesses, and Americans in general recovered… and then enjoyed more than 15 years of prosperity.

Compare that to today’s near decade of out-of-control debt, sluggish GDP, failing businesses, and declining real wages. Although I’m not optimistic, I hope the music keeps playing for the time I have left. But I fear for my children and grandchildren. It shames me that their future has been squandered by my generation’s lust for temporary gain regardless of the long-term cost.

– Bill K.

And finally this from a satisfied Bonner & Partners customer….

All of the changes and additions that have been made since my initiation to the Bonner group have been exciting and interesting… and are becoming even more so in this rapidly moving world. I wish you all well in your many activities. Despite having run companies and started companies myself, I continue to admire what you are all doing.

– Phillip M


In Case You Missed It…

Last night, thousands of your fellow readers learned one of the key reasons why Chris Mayer is the only investment analyst that Bill follows with his own family trust money.

But for those who did not attend Chris’s masterclass, we’ve prepared a special presentation to highlight some of the secrets to his tremendous success ­– including the investment strategy he uses in his own personal portfolio.