Is 'free' cheap enough for you?... Porter in Pennsylvania... A Cinderella story... Goldman going down... Dykstra's back... A lottery ticket in your couch...

Goldsmith comment: Porter took Good Friday off to drive to Pennsylvania and spend time with his in-laws... who have been teasing him relentlessly about driving through a garage door.

Looks like things are finally coming undone at Goldman Sachs... The bank plans to fire up to 15% of the workforce in its investment banking and related divisions, the New York Post reported. We've repeatedly questioned Goldman's accounting practices in The Digest. How, Porter has often asked, could Goldman report blockbuster numbers while everyone else was losing billions? Needless to say, if things were going well – as Goldman would lead you to believe – we wouldn't be seeing these layoffs.

This could have been the greatest Cinderella story in all of finance... In 1969, at a New York bridge tournament, Bear Stearns' then-CEO Ace Greenberg met a 35-year-old Purdue University dropout named Jimmy Cayne – then working as a professional card player. Taken with the young man, Greenberg hired Cayne on the spot as a stockbroker. Bear has long been known for its disdain of MBAs. Instead, Greenberg preferred to hire PSDs, or "poor, smart, with a deep desire to become rich." Cayne rose quickly, becoming CEO in 1993, but the hire ultimately didn't work out for Bear...

In today's Digest, Dr. George Huang reveals his third criterion for a winning biotech trade. It's simple, but incredibly effective. See below...

Eliot Spitzer's prostitute, "Kristen," missed out on a $1 million paycheck. She was offered the bounty for a "nonnude" magazine spread and a "nude-nude" video clip for Girls Gone Wild. GGW founder, Joe Francis, rescinded the offer when his staffers found previous video footage of Kristen (she partied on their bus for seven days) from a party in Miami. Francis told the AP, "It'll save me a million bucks. It's kind of like finding a winning lottery ticket in the cushions of your couch."

Former World Series champ Lenny Dykstra, who went by the nickname "Nails" in his playing days, recently released his own options-trading service The Dykstra Report. It costs $495 a year – funny, considering he complained to Porter that his $49-a-year newsletter was too expensive.

Still, we stood up for Lenny when Fortune trashed him in 2006, and we're happy he has his own newsletter. Maybe we shouldn't have turned him down when he asked us for a job...

My name is Lenny Dykstra, I am a former Major League Baseball player for the NY Mets and Philadelphia Phillies. I wanted to check in and let you know I subscribe to your service... along with Dr. Steve S., plus a couple others. I have been writing on Jim Cramer's TheStreet.com a few times a week; every week. I have been working on something very big for "all athletes... from all sports" it will be called the PLAYERCLUB. This will give the athletes a chance to buy guaranteed cash-flow "while they are playing" so that when they are done... because they are to old to play professional sports any longer because they 35 years old... they will have $200,000 dollars coming in every year so they: stay married, so their kids grow up in a normal home... It will be big.

We've never seen a day trader hold his money for long, but we hope Nails pulls it off.

New highs: Wal-Mart (WMT), Ventas (VTR).

Not much going on today since the markets are closed, but send us your comments anyway... feedback@stansberryresearch.com.

"Hey guys, you claim to read every word of any message to feedback@stansberryresearch.com yet after a week or more, NO confirm, why is that?

In the mailbag... our critics celebrate my Monday crash. Go ahead, celebrate our mistakes, lampoon our bad ideas, and call us fascists. We promise to read whatever you write: feedback@stansberryresearch.com 

"On Dec. 31, 2007 I signed up for The Private Wealth Alliance. In the nearly 3 months since, let's say that I've seen 'nuff, & go our separate ways. I used more colorful words in my first CANCEL email, perhaps you thought I was joking. I expect the common courtesy of a RSVP CONFIRM & the crediting back of the $1,000. cost to my Cr. Card Acct." – Paid-up subscriber Joe Severa

"After writing your feedback two weeks ago and receiving no response, I am cancelling my membership to your private wealth alliance. What a dissapointment this has been... I trust that over the long run you will get what you have coming to you. Good riddance to you...." – Paid-up subscriber Justin Vietor

Goldsmith comment: We do read all your comments, but never promised to respond to all of them. We're not a personalized research service, and we have thousands of subscribers. We can't reply to every one.

Of course, we'll be sorry to lose you as subscribers. But if you'd like to cancel, please contact our customer-service department at 888-261-2693. It handles these matters. The e-mail listed in The Digest is for editorial feedback.

"first, i want to congratulate porter, and ask everyone to give him a little credit! not for the crash... im sorry about that, but for the courage, to accept mistakes, and be able to make fun of himself in front of the people who pay for his 'inteligence'... (that will be us). – normally professors in universities play smarties... doctors play it allmighty.... 'religious' play it saint, and people who sell 'investment ideas' try to show themmselves as a super geniouses, so everyone will react in an inmature way to want to be like them... etc etc. eventually giving them their money! etc etc and although porter has his things... we all know, at least he is NOT like the rest!..." – Paid-up subscriber Mr. Barnatan

Goldsmith comment: Trust me, it doesn't come naturally.

"I've never understood all of the people in this country who hate Wal-Mart. I know they put the little guys out of business and are supposedly bad employers, but I have four examples of why I love Wal-Mart:

"1) When my brother, who has a heart issue, worked there, they were very understanding of his condition, fair and accomodating;

"2) While my husband and I are in our late-20s and doing alright financially..., we'd prefer not to waste money. So we go shopping there frequently for everything from toilet cleaner to tires to everything in between (thus leaving more to invest...);

"3) Everywhere a new Wal-Mart has come into our area, it has ended up creating a ton of retail activity, as they are typically the anchor tenants of huge new developments and full-blown commercial areas where previously nothing or only small shopping centers existed (and we're not in the sticks); and

"4) I actually listened to your advice, bought WMT and am a very happy camper.

"I'm sure the Wal-Mart haters (including several in my extended family) will now be mad at me too, but for us it's obviously hard to see the down side." – Paid-up subscriber Sarah Grooms

Goldsmith comment: We've never understood the animosity toward Wal-Mart, either.

"Your recent Canadian trust picks are interesting but there may be some holes in your analysis. At least you did not address this issue which one would think to be obviously needing attention. That is: INFLATION! It appears, based on money supply recently, that we are headed for double digit inflation even using the government's gimmicked numbers. Now an investment yielding 8-11% might seem a decent hedge. Yet even an 11% yield might at best keep your original investment even with inflation and income investments themselves do not prosper during inflationary times. Thus my stock price could whither while the yield at best keeps up with inflation. And, by your own admission, dividends are likely to rise only about 3% per year so, looking at it as an income stream, it is ALREADY losing to even the government's understated inflation of today - much less what it will be tomorrow. Not a road to riches. Plus, the canadian currency is pretty stretched on the upside vs the dollar. In future years the pendulum is bound to swing back (fall) which will further drag on this potential return. This above is a macro analysis which contrasts with your bottom up approach. Seeing as you recommended Citibank when many writers, including many colleagues at agora, were warning about an incipient banking/mortgage/derivatives crisis, I would respectfully suggest including some macro analysis in your recommendations." – Paid-up subscriber Charles Michael

Dyson comment: Tangible assets... in Canadian dollars... which pay a dividend that rises with inflation. I couldn't think of a better place to have my money when inflation spirals out of control...

Goldsmith comment: Income trusts are a great asset for your portfolio right now. They pay huge dividends that adjust for inflation, and they're backed by real assets. Tom recently released an in-depth report covering the Canadian income trust market, and he gives the two best companies to buy today. 12% Letter subscribers have already received this report. If you'd like to receive Tom's analysis of the income trust market, click here...

Regards,

Sean Goldsmith
Baltimore, Maryland
March 21, 2008

Is 'Free' Cheap Enough for You?
By Dr. George Huang, editor, S&A FDA Report

In my last essay, I discussed only buying biotechs with "multiple shots on goal" – companies that are not one-drug wonders. A drug pipeline not only creates a necessary layer of safety for traders, but it often is the catalyst that propels the stock higher after an approvable-letter setback.

Today, I'll reveal our third criterion that essentially eliminates downside risk for FDA Report trades...

Is the stock cheap?

This question may seem obvious... After all, don't all these stocks get pummeled after approvable letters? The short answer is "yes." But, more importantly, how cheap is really cheap?

How about free? Here's the gold standard of "cheapness" for biotech stocks – sometimes these bloodied stocks actually trade for less than the combined value of the cash, properties, and equipment on their balance sheets. If you wanted to start a biotech, you would pay less to buy out the whole company than to build it from scratch... plus the pipeline comes for free. It happens more often than you would think...

In 2006, Neurocrine Biosciences received an approvable letter for its insomnia drug Indiplon. Neurocrine's Big Pharma partner, Pfizer, pulled out of the marketing deal. The stock traded for less than $9 a share for about six weeks after that. At those prices, Neurocrine had a market cap of about $340 million. But the company had $240 million in cash and $120 million in net property and equipment. You could have bought the stock at a 6% discount to liquidation value, while owning Indiplon and a pipeline of five other drugs for free. The market realized its error and sent the stock soaring 60% within six months.

For the most part, when these opportunities arise, we jump on them. Where else can you buy a company for 90¢ and get back $1?

This is just one example of how we strive to consistently buy biotechs with absolutely minimal downside, practically eliminating our chance of losing money in a trade while retaining limitless upside.

It's hard to argue about a stock that trades for less than the cash it has in the bank. In my next essay, I will reveal the final criterion in the FDA Report trading plan...

Good investing,

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