"The last bull run of my life"… Icahn buys BEA… Ackman buys Sears… Value City spin-off… Oh, that government snafu…

"I'm almost sure that there's going to be a cut [at the Fed's October 31 meeting]. We're well on our way in a bull market that continues as the Fed drops interest rates. This is the last bull-market run that I'm going to experience in my career and lifetime.'' – Bill Gross, PIMCO's 63-year-old Bond King, as quoted on Bloomberg.

Carl Icahn boosted his stake in the software company BEA Systems (BEAS) to 13.22%, according to documents filed today with the SEC. This marks the fourth time in less than a month that Icahn has increased his position in BEAS. In fact, Icahn increased his stake to 11.05% in forms filed yesterday.

Not surprisingly, Icahn is pushing for a sale of the company. He says it is increasingly difficult for a stand-alone technology company, such as BEA, to profit in the current competitive environment.

Activist hedge-fund manager Bill Ackman, of the $40 million stock tip fame, has disclosed that he currently holds 5 million shares of Sears Holding Company – which makes him the fourth-largest shareholder. Last year, he stopped chairman Eddie Lampert's attempt to take full control of Sears, saying the price was too cheap. Shares of the U.S.'s largest department store gained more than 3% in morning trading.

We wrote it, did you buy it?

Retail Ventures said that it was 'exploring strategic alternatives' for Value City. That's corporate jargon. It means Retail Ventures is trying to cash out of the business somehow. In this case, that probably means selling Value City.
– Dan Ferris, S&A Penny Letter, October 2007

Yesterday, Retail Ventures announced it will sell 24 of its Value City stores to Burlington Coat Factory and will use the proceeds to pay down debt. The deal is expected to close in the first quarter, and the number of stores in the deal is subject to change. Value City will continue operating 89 stores. Says Dan Ferris, "At the current share price, the stock market is assigning zero value to Retail Ventures' Value City business... zero... nada... zip." To read more from Dan, click here…

New highs: Advisory Board Company (ABCO), KHD Humboldt Wedag (KHD), Gen-Probe (GPRO).

In the mailbag… some readers like our advertising. And we clear up a misunderstanding about which Canadian tax snafus you were asking about. Comments to: feedback@stansberryresearch.com.

"Complaints about the advertising you do to stay in business are truly ignorant. About 20 years ago, I canceled my subscription to the local paper (SJ Mercury News) for a month. I discovered the stuff I missed most was the ads, the comics, and the finance page. Nearly all the rest – editorial, news, etc. – was a bunch of fabrications and of little real use. I only resubscribed when I was aware of why I was taking the paper. I didn't give a damn what congress was trying to do to me on the front page; I wanted to know what Mervyns had on sale on Monday. Ads have to have a strong strain of truth, or the public quickly catches on. I appreciate them very much, most definitely when (like yours) they are well done and interesting." – Paid-up subscriber Wright

"I'm not completely convinced that the advertising model is the best one for the Web, although when I worked in Radio and TV (briefly) at NBC News, it was the financial engine that put our two sons through college. So I can't complain too much. However, there has to be a balance. You seem to strive for it, and I admire your honesty in admitting that it's the way you stay in business, but I'm always wondering whether the use of advertising by your company may be a bit overdone. Ah well, keep trying!" – Paid-up subscriber Mike Maus

"Thank you for giving me the opportunity to purchase UNG and sell calls against this stock. I'm optimistic it should be a very good recommendation. I'll have to admit I was very disappointed when I first received your material and found out this was all about 'Covered Calls'. I'm sure you wouldn't find much interest if people knew this from the start. I've been doing 'covered calls' for at least 20 years off and on with moderate success. After reading your material, I discovered there were a couple things I wasn't doing... that did make sense. At that point, I was eager to try your system and I'll have to say after 3 or 4 days, I'm very happy with the way my trades are going. If most retired people (like me) had a way to produce an additional $2,000 to $4,000 every month... they would be very happy. JEFF, do you have any more 'seasonal' ETF Covered Call strategies you'll be recommending soon? I think the ETF approach is great because it should be less volatile. If it's also seasonal (like UNG) then we should expect similar results every year. THANKS FOR TEACHING AN 'OLD DOG' (80 years old)... SOME NEW TRICKS." – Paid-up subscriber Bob Hanes

"I never see AAPL on your list of new highs, it just blasted past KO in market cap and is now one of the 20 largest corporations in America. Are the highs on the list only stocks that you cover in your newsletters?"
– Paid-up subscriber Jym Warhol

Porter comment: Yes, the new highs we publish in The Digest are just from our recommended portfolios. However, we do publish a list of all the "important" companies hitting highs daily in Growth Stock Wire.

Yesterday, we misunderstood the question regarding Canadian oil sands legislation from paid-up subscriber Jim Bandler. Tom Dyson, our man on the ground at the Athabasca oil sands, took a shot at a more accurate answer…

Dyson comment: Back in February, the Alberta finance minister picked six independent experts to evaluate Alberta's tax and royalty system. The ministry called this entity the "Royalty Review Panel." Last week, the panel delivered its response to the government.

The full document is 105 pages long. To sum it up, the panel recommends that Alberta's government extract more taxes from its energy companies. The report's stated agenda: "These resources belong to the people of Alberta and they are entitled to their fair share of the booty." The press seems to think the proposals will increase tax revenues by $2 billion a year.

Here's the thing: Three types of energy companies operate in Alberta – oil sands, conventional oil, and natural gas. Oil sands companies will pay the brunt of the tax increases, while natural gas and conventional oil companies will hardly be touched.

The day the announcement came out, the stock prices of Suncor and Syncrude – the two oil sand majors – fell 4.3% and 4.5%, respectively. Suncor has lost another 3% since, and Syncrude is down 2% since. Oil prices are down 2% over the period.

I think these proposals will cost the people of Alberta in the long run, so I hope they don't enact them. Regardless, the proposal could represent good news for my readers.

We're investing heavily in the oil sands... but through backdoor natural gas plays no one seems to know – or care – about. If the government enacts this proposal, the relative value of my picks will increase versus the expensive oil companies everyone else follows. I'll be expanding on this theme in my next 12% Letter... and recommending more Alberta natural gas plays...

Regards,

Porter Stansberry
Baltimore, Maryland
October 4, 2007

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