Will the market rally hold?... Bankruptcy looming for Sharper Image?... Signs of a top in metals... Menacing mail from an "800-pound gorilla"…

Jeff Clark is bullish...

In today's S&A Short Report update, Jeff told readers, "Yesterday's decline is still contained within the recent uptrend – as defined by a series of higher lows and higher highs. So the bulls still have the ball. However, if the S&P fails to hold above 1,465, then the pattern is negated, and it will be the bears' turn to march back down the field. And the November lows may just come back into play. It is too early, however, to make that call."

So is hedge-fund manager Leon Cooperman... "I view this market drop as a long overdue correction rather than the end of the bull market." Cooperman thinks the bad news is already priced in. He cites attractive market valuations relative to government bond yields, and an S&P price close to the previous market trough.

More than half of mainland China's investment managers have less than two years' experience, according to Beijing-based research firm TX Investment Consulting. A third have been running money for less than a year. They're about to learn an important lesson…

From a recent 13D filing... Clinton Group, a New York hedge fund with billions under management, recently purchased 1,092,270 shares, 7.2%, of electronics retailer Sharper Image (SHRP). Sharper Image shares are down 79% to $3 from a 52-week high of $14. Most investors assume this is a bullish sign for the stock. But many times, we've seen a control-seeking investor, like Clinton, buy a token amount of stock in addition to a big position in a company's bonds just before the business files for bankruptcy. This gives them a better chance at controlling the company when it's reorganized.

Signs of a top in metal prices... The world's biggest waste-management companies, SUEZ and Veolia, are dismantling airplanes and selling the scraps. More than 10,000 airplanes will reach the end of their lives by 2025, and close to a third of them are already grounded in deserts and tarmacs. SUEZ and Veolia expect the business to generate billions in revenues... Both see recycling as their fastest-growing sector.

  Oil and gas producer EnCana (ECA) will double its dividend to $1.60 per share, a 2.4% yield. The company will also buy back 2% of its shares, $1 billion, in 2008. EnCana said 2008 cash flow will exceed capital expenditures due to strong natural gas prices and gains on sales. Dan Ferris recommended EnCana in a 2004 issue of Extreme Value. His readers are up 250% on the pick.

New high: McDonald's (MCD).

In the mailbag... Dansker is back. And now he's mad. Feel like sending us vaguely threatening messages? Go ahead. We read them all: feedback@stansberryresearch.com.

"It's not smart to piss off 800-pound gorillas. Think about it." – Paid up subscriber (and FBI "consultant") Steve Dansker

Porter comment: I do seem to have a knack for upsetting powerful people... I wonder why?

"I do not normally reply to these feedbacks but after reading Mr. Steve Dansker's reply on Tues., I am compelled to respond. Mr. Dansker's response is typical of someone who has lived, his whole life, sucking off of the govt's teet. How can you, sir, accuse someone of being spoiled and say that they don't have a clue? When you have worked for the govt your whole life? To be blunt, you are nothing more than a grossly overpaid welfare recipient. And if your daughter was stupid enough to get caught in a neg am loan, well that's her fault not mine. Why should I have to pay for her mistakes? When you go out and try to run your own business for say 10 yrs, and you see what kind of red tape the govt. puts you through, then maybe you will get some respect. Until then, you should just collect your welfare check and say Thank You to the people who are actually paying you, not insult them..." – Paid-up subscriber "All Small Business Owners"

"It may be painful to hear, but your daughter got *herself* into this loan problem. And what about *you*, her father? Did you try to stop her with some kind words of wisdom? It was not the fault of the Realtor, the loan company or Uncle Sam. And it is not the job of Uncle Sam to bail her out, especially since it is actually the everyday TAXPAYER who will now be assuming her burden. Shame on you... Please don't show my full name to this FBI fascist." – Paid-up subscriber "anonymous"

Porter comment: My guess is that it would take the FBI about five minutes to crack our website and trace the IP address of this e-mail. Of course, our government's agents would never do anything like this without a court order... would they?

"In regards to Mr. Dansker, who is upset his daughter is caught up in a Neg Am loan and has lost 27% of her home's value, you need to assign blame where it belongs, with your daughter. She had other financing options, but chose to go for the lowest payment possible in the hopes that her house would appreciate and offset the ballooning interest back payment, something she was made FULLY AWARE of before signing. The banks are paying the price for their stupidity in offering these loans, and your daughter needs to accept the same responsibility for her actions. This recent government offer to help is nothing more than a political move in an election year. Your fooling yourself if you think it will hold off a recession. If this interest rate freeze is approved, banks will find another place to make their money, such as fees, ATM charges and higher loan rates. Either way, your daughter will still end up footing the bill, except now I'll be paying part of it too. Be sure and tell your daughter thanks for me." – Paid-up subscriber Darren Nelson

"Porter, I would bet you five dollars to a case of beer that this Steve Dansker fellow spent 35 years or so in the internal revenue service, personnel office or some other government sinecure, all the while going to his two-week summer training with the Navy where he was dutifully promoted for attendance. He graduated as a GS something, and a Navy captain. It is apparent that he has never faced the realities of life in parts of the country that still demand personal accountability. Folks like this have to defend the government because without it they would be helpless." – Paid-up subscriber Hugh McKenney

Regards,

Porter Stansberry
Baltimore, Maryland
December 12, 2007

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