The Rude Awakening
Wall Street, New York
Tuesday, November 15, 2005

-------------------------

-------------------------

Eric Fry, reporting from an unseasonably warm New York
City...

"It's not a coincidence," says Chris Mayer, editor of
Capital and Crisis, "that the LBO (leveraged buyout) boom
of the 1980s coincided with last major peak in corporate
cash levels. A cash-laden company is an irresistible target
for any corporate raider, or any other company who's
shopping for acquisitions...

"So now that American companies are flush with cash again,
I'd expect to see merger and acquisition activity pick up
dramatically...and that's great news for us value-
investors. The same cash-rich and value-laden companies
that we value investors prize are also the ones that most
corporate acquirers prize. So I say, 'Bring on the
corporate raiders!'"

Already, Chris' subscribers have benefited from the new M&A
trend on Wall Street. Chris does not do any raiding of his
own, of course, but he thinks like one. As a former banker,
Chris has the skills and talent for identifying real-world
value.

In other words, he's a master of identifying value where
others often fail to see it...or, at least, before the
corporate raiders buy it! That's what makes his newsletter,
Capital and Crisis, such a fascinating and worthwhile read.
In fact, at $49 a year, Capital & Crisis is a deeply
undervalued asset in its own right. The price of his
newsletter may not be any higher in one year, but I
wouldn't dare to make the same prediction about the stock's
he has been recommending lately.

I love Chris' letter. So do yourself a favor and give it a
test drive right here: Capital & Crisis 

--- Advertisement ---

4 Minutes a Week is All it Takes...

To TRIPLE your money over the next 6 months... GUARANTEED!

Introducing one special "alternate" investment - which does
not involve buying stocks or bonds and even soars when
stocks fall apart...

Just over the last two years, you could have made at least
eight times more buying this secret investment instead of
buying traditional stocks...

Is that something you are willing to pass up?

Learn about this GUARANTEED investment secret NOW!

http://www.agora-inc.com/reports/RTA/ERTAFB49 

-------------------------

Ka-Ching!...Love That Sound!
By Chris Mayer

Corporate America is flush with cash...Lots of it. This
little-noticed fact could create great opportunities for
value investors like ourselves.

American consumers may be strapped for cash, but American
corporations are loaded. Just look at the companies in the
S&P 500 Index (generally representative of the market as a
whole). Corporate coffers hold in excess of $2 trillion, a
staggering amount of dough, and an all time high. For
perspective, it's 3.5 times more than in 1993.

Even excluding financial companies, which often hold a lot
of cash, the amount of cash held by S&P 500 industrial
companies is also at an all time high.

Cash as a percentage of long-term debt is about 40%. In
other words, for every dollar borrowed, companies have
about 40 cents in cash. See the nearby chart, "Too Rich"
reprinted from the Wall Street Journal.

To look at this trend another way, cash as a percentage of
stock market value is higher than at any time since the
early 1980s, according to Standard & Poor's.

What do you suppose American companies are going to do with
all that cash? After buying another Gulfstream or two for
the corporate fleet...and maybe some new oak paneling for
the conference room, they might begin to devise more
worthwhile uses for their cash, like buying back their own
stock or acquiring other companies.

Stock buybacks jumped 92% in the second quarter of this
year compared with a year ago. In general, these buybacks
reduce the number of shares outstanding, which boosts both
earnings and book value per share, thereby rewarding
shareholders.

But we would also expect cash-rich companies to scout
around for acquisitions, especially acquisitions of other
cash-rich or value-laden companies. In other words, the
companies with lots of cash on the books are not merely the
hunters, they are also the hunted. That's why value
investors who buy solid, cash-rich companies will stand to
reap big profits throughout the upcoming wave of merger and
acquisition activity on Wall Street.

Indeed, this is already happening. Worldwide corporate
merger and acquisitions are on the rise...And already,
Capital and Crisis readers are benefiting from the trend.

Earlier in the year, ProLogis acquired Catellus Development
Corp for a nice premium. Catellus, a cash - and asset -
rich company, was one of my earlier recommendations for
this letter. Capital & Crisis readers made 21% in only
eight months.

But there's another way that value investors reap gains by
investing in cash-rich companies: shareholder activism.
That's when one or more shareholders of a company agitate
for some sort of value-unlocking event like a stock buy-
back or a special dividend.

We've also seen this process play out on some of the
portfolio holdings in Capital & Crisis. A while back,
Chiquita Brands felt the heat from shareholders, such as
famed investor Leon Cooperman, to "unlock" some of its
hidden value. Chiquita eventually paid a dividend, bought
back stock and made an acquisition. We closed out Chiquita
recommendation for a 57% gain in 12 months.

Among our current holdings, Intrawest (NYSE: IDR) has felt
pressure from activist shareholder, Pirate Capital, to
unlock the value in its rich land holdings. And Imperial
Sugar (NASDAQ: IPSU), in our Special Reports Portfolio,
fought off an unsolicited bid to buy the whole company for
$16 per share. Still sitting on a lot of cash and assets,
Imperial Sugar recently declared a $2.50 special dividend.
For what was then a $13.5 stock, that translates into a
yield of 18% - plus the stock rose $2.00 on the day.

Meanwhile, Carl Icahn, the legendary corporate raider, has
been stirring up many other corporate boardrooms lately,
from Temple-Inland to Kerr McGee to Time Warner – and, most
recently, at Fairmont Hotels & Resorts. [Fairmont is a
stock recommended by my friend, colleague and fellow value-
investor, Dan Ferris. Last March, Dan identified Fairmont
in his Real Estate Shareholder newsletter as an attractive
value investment. Apparently, Carl Icahn agrees, as Dan
explains below]

But Icahn is not the only activist investor who's making a
noise these days. The Wall Street Journal recently noted
the "recent wave of hedge fund activism" as hedge funds put
pressure on corporate chieftains to unlock the value in
their shares. This means that we should see more corporate
"events" in 2006 – such as restructurings, buybacks,
special dividends, mergers, acquisitions, and the like.

Shareholders are becoming more involved in how companies
are managed and how their resources are deployed. Right
now, we're only seeing the beginnings, the seedlings, of
what could later grow into a much larger trend. As Larry
Robbins, the successful money manager behind $5.2 billion
Glenview Capital has pointed, "being an activist has gone
from being taboo 18 months ago to where you now have
Fidelity and Templeton [two big mutual fund families]
leading the charge to restructure [companies in which they
have a sizable interest]."

As shareholder activism continues to heat up, Capital and
Crisis readers are in a good position to capitalize.
Because many of our portfolio companies are loaded with
cash and/or assets, and have little or no debt, they are
exactly the sorts of companies prized by shareholder
activists...or acquirers.

And no matter whether an activist or an acquirer unlocks a
stocks value, the shareholder wins...That's a very nice
position to be in.

[Joel's Note: Finally, a positive outlook for investors!
With the new wave of mergers and acquisitions hitting Wall
Street, there are going to be a few companies throwing some
serious cash around. Make sure you know where to invest to
secure some of that cash for yourself. This is Chris
Mayer's specialty. 2006 is setting up nicely for Capital
and Crisis readers. Make sure you are one of them:

Return of the Corporate Raider
http://www.agora-inc.com/reports/FST/EFSTFB06

--- Advertisement ---

The Only Stock You'll Need to Own Over the Next 10 Years

Buffett already has over $300 million in this company...
it's one of the biggest in his portfolio, even though it's
hardly a household name... and buying it now is like buying
into Berkshire nearly 40 years ago!

With your permission, I'll send you a FREE report that
shows you how to get in
as soon as possible...

http://www.agora-inc.com/reports/FST/EFSTFB16

-------------------------

Did You Notice?
By Dan Ferris

Last week, billionaire corporate raider, Carl Icahn, bought
9.3% of Fairmont Hotels and Resorts (NYSE: FHR), and says
he wants management to do something to boost the share
price. Icahn says he wants Fairmont "to pursue strategic
alternatives." Such alternatives include the sale of the
entire company, or the sale of its owned hotels and non-
core assets. Icahn proposes that the proceeds be
distributed to shareholders via a share repurchase or
dividend payment. Either way, this increases the likelihood
that shareholders will realize the significant underlying
value in Fairmont sooner rather than later.
 
The company's reply to Icahn's statement indicated that
it's already doing some of the things he suggests. Even
before Icahn's arrival on the scene, Fairmont's management
team had done a nice job of growing shareholder value. The
team has amassed an excellent track record of buying
hotels, fixing them up, and selling them at a profit. It
bought the Kea Lani Maui for $250 million in February 2001,
and sold it in June 2004 for $355 million. Management has
traditionally treated shareholders pretty well, reducing
debt and other liabilities and buying back stock, so it
ought to be able to get the proceeds to shareholders
without delay, if appeasing Icahn is something they think
they ought to do.

I first wrote about Fairmont in March of this year in my
investment letter, Real Estate Shareholder. Though my
estimate of Fairmont's net asset value was $45 back in
March (and thereabouts today), I also think Fairmont could
easily be worth $60 per share to a private market buyer. 
Fairmont is loaded with assets, including 65,000 acres of
pristine land adjacent to one of its luxury hotels in
Canada. 

And in the meantime, you'd have a solid net asset value of
about $45 per share to protect you on the downside. The
company isn't burdened with too much debt, nor is it a
distressed business. Business is good and it's well-
managed. Icahn's actions could be just the ticket to get
some of that value into shareholders' pockets. 

[Joel's Note: There is nothing like the smell of cash-laden
companies to bring the top value investors to the fore.
Such is the case with Dan Ferris. Couple his savvy insights
with some of Mr. Mayer's and you could be enjoying a
seriously profitable 2006. Act now and get the ol' account
on the move in the right direction:

Grab Your Real Assets!
http://www.agora-inc.com/reports/RES/ERESFB00

For any comments, suggestions or general banter, email your
migratory editor at aussiejoel@the-rude-awakening.com

Cheers,

jOEL

-------------------------

And the Markets...