TheCROW’SNEST

October 2014

October 2014 IssueTheCROW’SNEST

“Listen! The wind is rising, and the air is wild with leaves, We have had our summer evenings, now for October eves!”

— Humbert Wolfe

hoy Crow’s Nesters,

I hope the summer treated you well.

Here in Baltimore, we’re getting started on the cool autumn months. And what better way to ring in the cold weather than with the Federal Reserve’s QE taper that has been softly breathing down our necks for months now, sending shivers down our spines.

We’re in for quite a ghoulish Halloween if the market reacts to the strangling of that free Fed money the way I think it will...

Is the economy stable enough to start pulling back the QE? Will stocks get creamed when the rug is pulled out? Should we trust the Fed to look after the interests of individual investors?

We’ll find out, but since this is The Crow’s Nest, let’s frame this discussion around the “Pirates Code.”

Let’s compare the rules and regulations for bloodthirsty pirates and see how they stack up against the code by which Wall Street and the Fed conduct themselves. Surely these institutions should hold up against the ethics and morality of high-seas thieves and scoundrels... right?

Well, let’s start with the Wall Street/Fed code: Don’t squeal on each other. As economist and poster boy for the revolving door between the government and Wall Street Larry Summers once said: “Insiders don’t criticize other insiders.”

That has been the modus operandi for Wall Street and the Fed for a long time now. But how did bloodthirsty pirates keep each other in check? Surprisingly, in a much more ethical and democratic way than the Fed...

On the next page is the official rundown of how pirates deal with one another:

1

October 2014 IssueTheCROW’SNEST

2I’d like to break these down one at a time.

October 2014 IssueTheCROW’SNEST

I. Every man has a vote in affairs of moment; has equal title to the fresh provisions, or strong liquors, at any time seized, and may use them at pleasure, unless a scarcity makes it necessary, for the good of all, to vote a retrenchment.

This sounds reasonable and fair. Everyone should enjoy in the spoils of the ship to an equal degree. I’m not making a socialist argument here, just pointing out the facts. In the market today, the rich have far outpaced the individual investor like you and I.

When asked about the Fed’s quantitative easing programs, billionaire investor Stanley Druckenmiller was quite up front about it:

“First of all...I love this stuff. OK, this is fantastic. It’s fantastic for every rich person. This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.”

Even the Fed’s own research shows this. In its Survey of Consumer Finances, it states:

Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013. The top 3 percent of households claimed 30.5 percent of all income in 2013, up from 27.7 percent in 2010, while the next 7 percent held steady at nearly 17 percent – and the bottom 90 percent’s share declined to 52.7 percent.

So the super-rich have been taking the lion’s share of the strong liquor and leaving us with their backwash. They’ll also be the first ones out when things start crashing down. So while pirates may have the ethics to “go down with the ship” and make sure one another are equally respected, we expect no such treatment from the Fed and Wall Street.

There’s nothing the rest of us crew members can do about it.

And while pirates were allowed to actually vote on whether or not to keep up the spending or pull it in depending on their current status, we have no vote on the matters of the Federal Reserve — it is a private institution, by the way — and we sure do not have any say over how Wall Street conducts itself.

No vote of retrenchment here, we’re slaves to whatever they feel necessary.

II. If they defrauded the company to the value of a dollar in plate, jewels, or money, marooning was their punishment. If the robbery was only betwixt one another, they contented themselves with slitting the ears and nose of him that was guilty, and set him on shore, not in an uninhabited place, but somewhere, where he was sure to encounter hardships.

This I love. If you betray the trust of your fellow pirates and try to cheat them out of money or steal their possessions, you’ll find yourself bleeding from the nose and ears on a deserted island — left for dead.

I guarantee you if we instituted this policy on Wall Street criminals, you’d see things shape up pretty quick.

But right now, there is still nobody that has even served hard jail time for Wall Street’s crimes. They act with total impunity knowing that their insiders at the Fed will look the other way. More on that phenomenon below.

3

October 2014 IssueTheCROW’SNEST

III. No person to game at cards or dice for money.

Isn’t this the definition of Wall Street? One big rigged casino? The beauty for them is that the Fed and Wall Street are the “house” and we are the addled-gamblers, shoving coins into a rigged machine and praying for that unlikely payday.

They don’t call slot machines the one-armed bandit for nothing. The house always wins...

IV. The lights and candles to be put out at eight o’clock at night: if any of the crew, after that hour still remained inclined for drinking, they were to do it on the open deck.

While I’d say that a 8pm bedtime for a group of drunken scalawags and scoundrels seems rather quaint, on the other hand, Wall Street never sleeps. They are working out inside deals while we are sleeping soundly, waiting for the market to open. By the time we rub the sleep from our eyes, high-frequency traders at the behest of Wall Street investment firms have already set themselves up for huge paydays, acting on insider information before we can even open up our brokerage accounts for the day.

At least pirates were forced to embrace their vices on the open deck, where they could actually be accountable for their actions. The Fed and Wall Street operate in the shadows — far out of view from us, the sleeping crew.

V. No man to talk of breaking up their way of living, till each had shared one thousand pounds. If in order to this, any man should lose a limb, or become a cripple in their service, he was to have eight hundred dollars, out of the public stock, and for lesser hurts, proportionately.

Pirates basically made sure the crew was taken care of in the most basic of necessities. Should a fellow crew member lose an arm doing battle with an enemy ship, they would be compensated and cared for.

This metaphor is totally appropriate when talking about Wall Street. When they take a blow — like the 2008 financial crisis — and set themselves up for complete disasters, do we leave them to take their medicine and deal with the consequences of their reckless actions?

Hell no! The government steps in and BAILS THEM OUT!

This is akin to only bailing out the Captain when the ship is sinking, and leaving the crew to a watery grave.

Have you ever lost money on a stock purchase? I certainly have... and there was most definitely no life raft for me. And if a smooth-talking lender talks you into a predatory loan on say, your house, and the adjustable interest rates skyrocket, is there any quarter for you?

You’re just supposed to walk the plank...

Now, I’m perfectly comfortable living with my own decisions — good or bad — and am ready to suffer consequences. Wall Street has no such code. That’s why we’ll continue to have bubbles and crashes as they devise more and more instruments of financial destruction while the Fed looks on knowingly with a bag of money in hand in case they get in too deep.

In essence, you are far more likely to be treated fairly dealing with a group of bloodthirsty pirates than you are by Wall Street or the Fed.

4

October 2014 IssueTheCROW’SNEST

With this type of “code” at the helm, we’re doomed to live and die by their actions. And all of their action have simply been setting us up for another crash of epic proportions.

So, let’s band together like the pirates and claim our share of the wealth, outside of this crooked system. I have found a way to safely gain 11%, 14% even 18% gains by actually fighting the Big Banks. And the best part? It’s totally divorced from the pumped up stock market and the Fed’s free money policies.

You can read all about our new LC-25 contract strategies in the Tie Down the Mast section.

I’ve also outlined five ways you can start banking additional monthly income using the “shared economy” that is also completely outside this manic stock market mafia. You can read that in the Plugging the Leaks section.

Meet Me at The World MoneyShow Toronto — October 16-18, 2014!

Come join us in beautiful downtown Toronto as I join Outsider Club founder Nick Hodge and our Wealth Daily colleague Christian DeHaemer in a round-table dialogue about the most overlooked investment trends of the 2010s.

We’ll all be available for questions and discussions as well. You’ll also be able to rub elbows with financial luminaries like Peter Schiff of Euro-Pacific Capital and Roger Conrad of the Capitalist Times.

You’ll get the latest stock picks, current market outlooks, most profitable investing and trading strategies, and more when you attend the Show at the Metro Toronto Convention Centre.

Registration is free, so reserve your place today!

I’ll also be giving a solo presentation about Market Crash Investing. I’ll be publishing my talk in next month’s issue, along with all of the best post-crash picks for safe, easy profits.

If you’d like to join us in Toronto, you can do so for free by going here.

Now, on to some of our current positions...

5

October 2014 IssueTheCROW’SNEST

Charting the CourseSILVER

There’s a reason they call silver the “Devil’s Metal” — following its whipsaw price fluctuations can make you feel possessed by some awful demon.

Since silver is a constantly shifting monetary asset, an investment vehicle, and an industrial metal, the price cycles can leave your head spinning like Linda Blair in The Exorcist.

And by the way it’s been going — I have a significant investment in physical silver myself — I’m not above channeling some dark magic to turn this thing around.

Perhaps I could learn a thing or two from Bolivian silver miners, who have their own unique approach to dealing with the dangers of silver...

The Cerra Rico in Bolivia is known as the “mountain that eats men” because over 8 million miners have met their fate inside the mine since the 16th century. Before entering, miners at Cerra Rico sacrifice a goat and splash the blood over the mine entrance for good luck.

It’s starting to sound like a reasonable idea, since silver has turned into the metal that eats investors... I may do the same to my computer screen after writing this article.

It has been an absolute bloodbath in the silver market. Since cresting at close to $50 in 2011, silver has been beaten back to 2009 levels. Here’s the bloodcurdling chart:

It’s not a pretty picture. Silver has shed all of those great gains from 2011, and this can leave precious metals

6

October 2014 IssueTheCROW’SNEST

investors scrambling for answers. But take a deep breath...

There are two questions you should be asking yourself: how long can it go, and when should I buy more?

Well, if we look at official data, there are some obvious reasons for silver’s slaughter.

The dollar is reaching new highs...

The stock market seems to break a new record every single month...

Official inflation is practically non-existent...

Did I just write that? Am I living in a crazy delusion of some kind?

I am seriously questioning my sanity and reality when I see numbers like this. How can this be? If you simply take a look at what is happening in the world right now, it boggles the mind as to how we’re churning out such impressive numbers.

So, let me get this straight...

The dollar is hitting highs.

Yet we’ve debased it enough through quantitative easing that it should have been simply crushed over the past few years.

This is a case of the prettiest cow in the slaughterhouse. The dollar has hit a four-year high against the Japanese yen and a nine-month high against the UK pound.

The ironic part is that these currencies — and especially emerging market currencies — are taking a hit in part because America is set to ease off of its bond buying next month. So we print upwards of $4 trillion to quell our markets, all of that extra money does nothing to debase our currency, yet when we stop doing it, other countries’ currencies get crushed and the dollar rises to the top?

Talk about a global scam of epic proportions....

Speaking of scams, how about the record-setting stock performance?

The stock market has run up to record highs and seems to hit a new one every week. All the while, the smart money is slowly backing out, CEOs are selling off their own personal stock in record numbers, and billionaires are betting on a crash.

7,181 insiders bought their own stock this year while 23,323 sold off their shares. You hear that? It’s the sound of rich people laughing as they take their money off the table.

George Soros, one of the world’s most successful investors, has put in a $2.2 billion bet that the crash is coming this year. He’s confident enough that he almost doubled his short position on the S&P 500 ETF (NYSE: SPY).

And while inflation hasn’t shown up on those fancy government reports, when you go to the grocery store, you 7

October 2014 IssueTheCROW’SNEST

are feeling it every day. It’s true, the Core Consumer Price Index (CPI) hasn’t moved all summer — but that doesn’t account for either food or energy. And that’s where we’re feeling the sting.

The price for a gallon of milk is the highest it’s been since 2011 and up a whopping 21% from last year alone. God help you if you like a splash of milk in your morning coffee, because coffee is up over 50% since last year!

You won’t find any bargains in the meat aisle, either. Meat prices are up 8.8% this year and show no signs of getting any cheaper.

Overall, food is up 2.9%, well above the “official” inflation figures.

Energy has followed suit, as our electricity bills are up over 4% and gas has risen 5.8%. So we’re feeling inflation, whether the government wants to admit it or not.

You see, each and every reason for precious metals tanking is a bunch of hot air. All of the signs are there, so when the Fed chickens finally come home to roost and they “taper” the grand QE experiment, the market will finally be forced to stand on its own wobbly legs.

And just like a bandy-legged goat calf, it will topple right over.

When the Fed is forced to admit that we simply can’t succeed without massive government intervention, things will change very quickly for the stock market — and precious metals in particular.

The long and short of it is that silver could still take another dive. As long as these charades keep playing out, there is no reason to see a big recovery in the precious metals market. But our time will come, and buying at seriously depressed prices is exactly how I like to build my positions.

That’s right, we’re buying silver all the way down. But since I know my psychic limitations, I don’t dare try to predict the bottom. That’s to say, I never back up the truck at any one time.

Your best bet is to dollar-cost average your position — that’s scheduling to buy a bit at a time regardless of the cost — when it dips and hang on tight for the long term. By dollar-cost averaging, you can help bring down the average cost of the silver you currently hold and reduce some of the pain of that position.

It’s not going to be pretty, and it sure won’t be fun — but, eventually, we’ll have the last laugh.

Since the 1930s, only one bull market has lasted longer than this one... and its time is about up. When it finally comes crumbling down, we’ll see the rise of precious metals once again. And it’ll be a sharp, quick rise.

So I’d recommend buying physical silver on the dips, and simply holding our Silver’s Doubling Effect position, ProShares Ultra Silver AGQ.

Eventually it will turn around, but I’m not trying to lose double my money in the meantime. If you are the adventurous type and are willing to wait for things to turn around, by all means, start snapping up shares of AGQ as it goes down and you’ll be sitting pretty with a dollar-cost-averaged position when things start returning to normal.

Plus, you’ll be twice as rich when it comes time to cash in.8

October 2014 IssueTheCROW’SNEST

In the meantime, please excuse me... I’m heading out to find a goat.

Solazyme

The last few weeks have not been kind to Solazyme. It has hit a 52-week low of $7.02.

Much of this is due to the amount of short interest it has attracted. Short interest grew almost 8% from the end of July to the middle of August.

Also, they have missed some price targets.

The company reported ($0.43) EPS for the quarter, missing the Thomson Reuters consensus estimate of ($0.36) by $0.07. The company had revenue of $15.94 million for the quarter, compared to the consensus estimate of $17.13 million. During the same quarter in the prior year, the company posted ($0.28) earnings per share. The company’s quarterly revenue was up 42.6% on a year-over-year basis.

All in all, I’m incredibly bullish on the company: especially at these seriously depressed prices. When the company starts producing profit next year, it will start turning around in a heartbeat.

And there are some encouraging trends...

They are forecasting a doubling in revenues this year to $75 million and a huge jump to $275 million next year. Now that the production groundwork has been laid with their Brazil plant coming online, we can hope that they start acquiring new partnerships to have vehicles for their ramped up production and lower production costs.

Their award winning skin-care product Algenist has shown some very promising growth:

• Continued sales momentum: up 21% in quarter y/y

• Launched in four new countries

• Planned expansions to SpaceNK and Bloomingdales

• Ulta rollout across all 700 U.S. locations (increases retail footprint >40%)

And there is some interesting action happening with their stock. Trade-Ideas just published this analysis:

Solazyme is a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Solazyme as such a stock due to the following factors:

• SZYM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $11.3 million.

• SZYM has traded 118,929 shares today.

• SZYM is trading at 2.11 times the normal volume for the stock at this time of day.

• SZYM is trading at a new high 3.08% above yesterday’s close.

‘Strong on High Relative Volume’ stocks are worth watching because major volume moves tend to 9

October 2014 IssueTheCROW’SNEST

indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from ‘superinvestors,’ or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize.

We’ll be keeping a close eye on this one in the meantime. Stay tuned for regular updates.

We’re still buying Solazyme (Nasdaq: SZYM) under $12 for now.

IRM(72)

Nothing much to see here: all of our IRM(72) Positions are cranking, just like they should

• Abbott Labs (NYSE:ABT) is up a solid 16% with a 2.4% dividend

• HCP Inc. (NYSE:HCP) is up about 11% with a very generous 6.4% dividend

• Aqua America is up a respectable 7.58% with a 2.6% dividend. But remember, they give you a 5% stock discount when you buy as part of their dividend reinvestment plan, so make sure you have done so.

Delta-9 Stocks

Last month we introduced you to our Delta-9 portfolio, which focuses on medical marijuana.

Medical marijuana is a natural substance that comes from the cannabis plant, which has a medicinal history that goes back thousands of years. In fact, archaeologists have found evidence of medicinal cannabis use in China dating all the way back to the Neolithic period, around 4000 B.C.

It was only modern scare tactics and government overreach that banned it in the first place. Thankfully, those prejudices are going away.

We’re calling these stocks Delta-9 stocks after active ingredient THC, which is short for trans-Δ9- tetrahydrocannabinol ( (6aR,10aR)-delta-9-tetrahydrocannabinol). Delta-9 has a much nicer ring to it...

INSYS Therapeutics (Nasdaq: INSY)

We’re already crushing it on this one: INSYS is up 26.23% since we recommended it less than a month ago.

Here’s a roundup of why:

• The FDA granted Insys Orphan Drug Designation for use of pharmaceutical cannabidiol, or CBD, for the treatment of both Lennox-Gastaut Syndrome and Dravet Syndrome, two rare forms of epilepsy in children, and for the treatment of glioblastoma multiforme, an aggressive and often incurable form of brain cancer.

• INSYS had a very strong launch of Subsys, a spray form of fentanyl used for treating pain in cancer 10

October 2014 IssueTheCROW’SNEST

patients. He predicted that by 2020 it could have 40% share of that market.

• Dronabinol OS, the company’s cannibinoid treatment for nausea in AIDS patients is widely expected to be approved next year.

• They have just been named the 2014 Arizona Bioscience Company of the Year by the Arizona Bioindustry Association

We’re buying INSYS Therapeutics (Nasdaq: INSY) up to $45 a share.

Plugging the LeaksAt this very moment, you may be sitting on a pile of money you didn’t know you had...

With the rise of the peer-to-peer or “sharing” economy, many folks around the country have unlocked new ways to monetize assets that they had never even considered before.

Just as eBay made it possible for anyone with a computer to easily sell unwanted items to others, a number of new businesses are sprouting up that allow you to do the same thing — without having to actually sell anything.

Own a house? Turn it into a de facto hotel for the weekend while you’re out of town and make a few hundred dollars.

Have an extra car? Transform it into a taxi for up to $100 a night.

Love dogs? Get paid to dog-sit from the comfort of your home.

Some people are already pocketing up to $3,000 a month on stuff they aren’t even using.

So let’s take a look at a few ways to squeeze cold, hard cash out of things you already own...

1) Rent Your Home With Airbnb

Airbnb is the most popular “sharing” website out there right now, and it’s big business: The peer-to-peer rental market alone is worth $26 billion.

The San Francisco company was founded in 2008 and is already being used in 33,000 cities in 192 countries around the world. It has blown up faster than the founders could have ever expected...

“Tonight we have 140,000 people around the world staying in Airbnb rooms. Hilton has around 600,000 rooms. We will get up to 200,000 people per night by peak this summer,” founder Brian Chesky told the New York Times.

11

October 2014 IssueTheCROW’SNEST

Even the founder of eBay is impressed with the company’s fast success. In an interview with Fortune, eBay CEO John Donahoe said, “Airbnb will be the next eBay. I firmly believe it.”

Whether you have a house, an apartment, or even just a spare private room, you can rake in thousands by listing it on Airbnb. The average New York City Airbnb renter averages $21,000 a year! 

There’s plenty of money to be made if you’re willing to share your living space now and again. Here’s how to get started...

First, visit the Airbnb website and create a profile with the details of your living arrangement. Post some flattering pictures of your place, list the price you would accept for a nightly or weekly rental, and let Airbnb’s community of travelers come to you. Airbnb takes care of the monetary transaction and skims a mere 3% off your fee to set up the entire transaction.

If you are a bit sketched out by the concept of strangers living in your home (and I don’t blame you), fear not: Airbnb allows you to communicate with potential renters beforehand so you can feel them out and decide whether or not you are comfortable with them.

If you feel more secure with a vacationing European couple dwelling in your sacred space than you would be with, say, a group of college kids on a spring break trip, you have the power to set the rules and accept or deny guests based on your comfort level.

The company also does background checks, and all reviews are publicly posted to ensure you don’t have crazed maniacs posting up in your home.

If you aren’t comfortable renting out your home but still want to cash in on the sharing economy, keep an eye out for an Airbnb IPO in the coming year. In the meantime, you can start collecting checks right now by listing your home.

I used Airbnb last year on a trip to Austin, Texas and couldn’t have envisioned a better experience. My brother and I went down for the South by Southwest Festival and were having some serious trouble finding an available hotel room that wasn’t booked or wildly overpriced...

After checking out Airbnb’s listing for just a couple minutes, I found a plethora of beautiful homes just minutes from the bustling downtown area. The one we chose was a fraction of the cost of a sterile hotel room — and boasted a full kitchen, a rooftop deck, and even a wet bar!

Not only was the environment of the house more inviting than a hotel, but I was also able to chat with the owner of the home before our trip. She gave us a wealth of information about local attractions and restaurants that we would not have taken advantage of had we opted for a traditional hotel stay, plus she had a bowl of fresh guacamole waiting for us when we arrived!

Our host told us she usually rented her place out with Airbnb during big concerts and conferences and pulled in enough to cover her mortgage during most months — and then some.

12

October 2014 IssueTheCROW’SNEST

2) Transform Your Car into a Taxi With RelayRides

Take a look outside. Is your car sitting unused in your driveway or on the street?

In a typical week, there are several evenings in which my car just stays parked outside my house...

That’s what makes RelayRides so popular with drivers looking to turn their unused rides into straight cash.

We aren’t talking about a few bucks here and there. Active RelayRides users rake in an average of $250 per month renting their vehicle just a few days a month. More active members easily pull in $1,000 a month.

By listing your vehicle on the website, you’ll be matched with transportation-challenged individuals ready to pay you to take your wheels for a quick spin. And you can do so comfortably, knowing that RelayRides takes care of all the insurance and roadside assistance should anything go wrong with your vehicle while it’s being rented.

Think about it... You could rent your car out while you’re working during the day or rent out your extra family car on weekends.

There are plenty of possibilities for you to turn your car into a moneymaking machine. Start pulling in cash now by listing your car on RelayRides.com.

3) Sell Your Knowledge With Udemy Online Teaching

Everyone has a story to tell. And everyone has something they can teach another. Instead of bottling up all of those skills you have and letting them go to waste inside your head, why not profit from them?

A new online teaching tool allows you to share your knowledge and become a paid teacher! Not only can you help students learn about your passion, but the average instructor earns $7,000, and a whopping 96% of instructors make sales.

It’s called Udemy Online Teaching. It current hosts over 3 million students and 18,000 courses.

Udemy is essentially a marketplace where anyone with skills to sell can create and upload their very own courses. But it doesn’t just throw you into teaching without support; it offers tools for teachers to build their courses as well.

And the best part is it’s entirely free to set up your class, and it really isn’t that time-intensive. The minimum requirement is at least 30 minutes of content, of which 60% must be video content.

You can learn more about setting up your courses here.

Here are just a couple of Udemy success stories:

• Tara R., a graphic design enthusiast from Seattle, WA, made $30,371 — which averages out to $2,761 each month since she opened her account.

• Delores M., a yoga instructor from Phoenix, AZ, was able to generate $43,600 after she started her account — bringing in an average of $3,633 each month.

13

October 2014 IssueTheCROW’SNEST

• Ken S., a writer from Erie, PA, was able to make $65,003... averaging $5,416 a month since he got started.

Here’s how to get started with your very own course.

4) Get Paid to Play With Dogs With DogVacay

Are you an animal lover? Do you have a home? Would you like to get paid to play with dogs?

I thought so...

Now you can turn your love of dogs into a part-time income generator with DogVacay, a peer-to-peer dog-sitting service that matches dog owners with dog sitters all over the country. Home boarding is a great way to avoid leaving your dogs at a kennel — which they absolutely hate.

Rates start at $25/night, and all reservations include FREE pet insurance, 24/7 customer support, and daily photo updates.

“DogVacay has been life changing. I’ve always loved dogs and it allowed me to leave my full time job as a developer to pursue my passion of working with dogs,” according to Micheal L. from New York.

Joanne from Orlando says she “signed up with DogVacay while I was in grad school because I love dogs but couldn’t have one of my own. I had no idea it would turn into a full time business that I love!”

Whether you’re a professional dog sitter or a regular dog-lover, DogVacay makes it easy to earn money watching dogs in your home. Simply create a free profile, set your rates, and decide which dogs to take and when. DogVacay handles the rest!

It is completely free to set up an account, and you can do so right here.

5) Get Paid for Simple Chores With TaskRabbit

Back in 2008, a small start -up launched in Boston with no full -time employees and 100 “runners.”

Today, it is in 19 cities and spreading fast. If you haven’t heard of TaskRabbit yet, you’ll be hearing plenty about it soon. TaskRabbit is perhaps the simplest way to participate in the sharing economy.

The website, with a mobile phone app, acts as a matchmaking service for individuals and businesses looking for one time or temporary workers.

TaskRabbit focuses on cleaning, handyman services, personal assistance, and moving help, but virtually any service can be listed through it. Think of it as eBay for labor.

Here is how it works: People willing to do work put in an application through the website. The company then runs background and criminal checks and verifies their identities.

Once everything is in order, the profile the worker creates is listed, along with his or her hourly rate.14

October 2014 IssueTheCROW’SNEST

Other people looking for work pick the type of help they need, choose a starting date for the work, and enter their addresses.

If anyone is available, their profiles, rates, and reviews show up, and they can be contacted to see if they want to accept the job.

TaskRabbit also provides up to $1 million in insurance for any job, customer support services, and handles the payment system.

For workers, this provides a guarantee that payment is quickly received, and it exposes them to far more potential employers than online or traditional classified ads can provide.

Plus, it puts them above competitors by showing they are safe and reliable through the vetting and review system.

Employers don’t need to worry about reliability, safety, or inferior work due to the vetting process and review system in place.

Plus, they will pay far less and have far more flexibility for very short -term jobs than through temp agencies, cleaning services, and similar systems.

For providing the matchmaking service, insurance, customer support, and payment system, TaskRabbit takes a 20% cut of the hourly rate charged.

For anyone looking for some extra cash, retirees looking for flexible part- time work on their terms, or anyone in need of a helping hand, it is a great platform.

You can find more information through the TaskRabbit website.

So there you have it: five easy ways to boost your income each month with the sharing economy.

Time to get sharing!

October 2014 IssueTheCROW’SNEST

Tying Down the MastLC-25 Contracts

What if I told you there is a way to lock in 11.05%, 14.05%, or 17.33% annualized returns, and the company paying is legally obligated by a contract to send you monthly payments?

You can get started with as little as $25, and you can use tax-free retirement accounts. But your broker and banker will refuse to ever discuss this opportunity.

In fact, your banker in particular wishes you couldn’t do this because it directly eats into his business.

While your savings and checking accounts pull in absurdly small interest rates, banks are able to use your money to create much greater profits through loans.

That is exactly what you can now do too. And this company will manage it all for you.

That company is Lending Club.

Lending Club has been operating what are essentially crowd-sourced loans since 2007.

Since its inception, the company has facilitated over $5 billion in loans to prime credit borrowers.

Borrowers obtain loans with better terms than they can find through their traditional banks or credit cards. The average borrower saves 31% on the total interest they will pay.

These loans are funded by investors, circumventing the cost and complexity of traditional banking and cutting down intermediation costs.

Compare the returns on your money at a bank or through fixed-income investments, and you can see that nothing else can deliver the same results.

It is a win-win scenario for everyone involved.

How Lending Club Works

Lending Club operates an entirely online operation that acts as a portal for borrowers and lenders. Since 2006, hundreds of thousands of borrowers have received loans from funding provided by nearly 100,000 people ranging from individuals to institutional investors.

16

October 2014 IssueTheCROW’SNEST

Borrowers submit a simple application. The company then evaluates the information by accessing credit reports and verifying income, employment, and any other pertinent information.

About 10% of the applications are accepted, and the average borrower is in relatively good financial shape:

• 700 FICO score

• 16.7% debt-to-income ratio (excluding mortgage)

• 15.7 years of credit history

• $72,751 personal income (top 10% of U.S. population)

• Average loan size: $14,056

After verification is complete, the company determines a fixed interest rate and presents a variety of offers to qualified borrowers.

The company then matches accepted offers with funds from investors and handles collecting payments and distributing them to investors.

The borrower pays a one-time origination fee ranging from 1.11% to 5% of the loan amount, depending on the loan grade and term length.

Lending Club then collects a service fee of 1% of each payment given to the investor, comparable to some low-cost ETFs and a fraction of the fees that can be incurred through mutual funds.

Investors select “prime consumer notes,” which are fixed-income investments designed to provide monthly cash flow in the form of payments of principal and interest.

Investors can also choose to have the monthly payments reinvested.

Generally, investors choose to spread their funds across hundreds or thousands of notes with various interest rates to diversify and benefit from more consistent performance.

The notes are graded from A1 through G5 and carry an interest rate that is appropriate for the risks:

For investors, there are a number of different account types available:

17

October 2014 IssueTheCROW’SNEST

• Individual accounts

• Joint accounts, or two or more individuals holding joint interests

• Trust accounts, established in the name of a trust, with a trustee controlling assets for the beneficiary

• Corporate accounts, in the name of an entity controlled by any designated representative

• Custodial/minor accounts, set up to take advantage of tax benefits without having to set up a trust

• Individual retirement accounts, which include various types of IRAs with easy rollovers

Once the account is in place, it is time to set up your portfolio.

Building Your Portfolio

With the account in place and funds transferred in, you’re ready to get started.

Lending Club gives you the option of automating the process by letting it pick loans on your behalf. It will diversify your portfolio and adhere to one of three risk-and-reward options you select.

The company that offers these LC-25 Contracts sets up three levels of risk for investors that provide average return rates that go slightly up or down every couple of months.

And because the average rates are as high as they are right now, I highly encourage you to lock in these contract rates while you can. To illustrate this, here are the levels:

• LEVEL 1 — This level has the lowest risk and currently offers average annual returns of 11.05%. So if you’re very cautious about how you invest your money, this level would probably work best for you... and could allow you to DOUBLE your money in just 6.5 years.

• LEVEL 2 — This level has a slightly higher amount of risk but currently offers average annual returns of 14.05% — allowing you to DOUBLE your money in just over five years.

• LEVEL 3 — This level has the highest risk of the three (yet it is far less risky than most blue-chip stocks) and currently offers annual returns of 17.33%. And if you’re willing to accept this slightly higher risk, this rate of return allows you to DOUBLE your money in just over four years.

If these three options are too restrictive, there is a fourth option: The ‘More Options’ button allows you to choose the exact target interest rate you would like, and then it invests in the available loans that match your chosen rate.

The loans are either for 36 months or 60 months. The 60-month loans will provide additional interest over time but will lock up funds for longer.

If you want a quick and easy start, this is your best option. However, there are a lot more options you can pursue.

Using a search engine and filters, you are able to choose between a wide range of options and individual notes and manually build a portfolio.

18

October 2014 IssueTheCROW’SNEST

Here is a look at the screen where you can browse notes, along with all of the optional filters you can use to limit the visible loans and get more information about the borrowers:

I highly suggest you check out this introductory video posted on YouTube, which goes through the Lending Club menus and gives basic explanations of everything you’ll see.

Click the image to watch the video.19

October 2014 IssueTheCROW’SNEST

Diversification is Key

As you have probably noticed by now, Lending Club’s system is designed to promote diversity.

This is supported by the small minimum investment requirement and the automated system that spreads money around as far as possible.

Volatility in your portfolio is directly related to how far you can spread your money across the loans and influenced by the grade of loans in which you invest.

The charts on the right demonstrate how greater diversification, or owning more notes, can reduce the volatility of returns.

Moving from left to right in the first chart, as the number of notes per account increases, the lines in the chart get closer together. This illustrates that as accounts hold more and more notes, each note represents a smaller portion of the total, and their returns may become more stable and consistent.

The 90th percentile shows the point where 90% of accounts have returns that are less than or equal to this value.

The 10th percentile shows the point where 10% of accounts have returns that are less than or equal to this value.

In the second chart, you can see some real-world statistics from Lending Club data and how it can affect the adjusted net asset returns (with the interest built into the total).

While Lending Club is highly selective when approving loan applications, bad things happen to good people, and a very small percentage of loans default.

Spreading your funds around minimizes exposure to this and virtually locks in predictable and highly profitable returns.

Rotating Funds

Another important part of investing in loans through Lending Club is checking your account fairly often.

Loans sometimes do not get fully funded, which means funds will be returned to your account without being used and just sit there.

If you choose to reinvest, you’ll also have a steady stream of interest accruing in your account that will need to be reinvested.

Sometimes people will pay off loans early, resulting in extra funds available to invest, and sometimes you may not find enough of the type of loans you’d like to invest in.

You certainly won’t have to log in every day, but you will have a rotating portfolio of notes over time.

Logging into your account once a week or so will let you make sure your funds are being used to collect interest and aren’t doing nothing on the sidelines.

20

October 2014 IssueTheCROW’SNEST

Get Started

Now it’s time to start pulling in double-digit returns each and every month! You can get started with your Lending Club account right here.

If you have any questions about starting your account and setting up your portfolio, you can call the toll free number, (888) 596-3157, from 6:00 a.m. to 5:00 p.m. PST, Monday to Saturday.

You can also send an email for any further clarification.

Am I Eligible?

Lending Club will eventually be available for the entire U.S. However, since it is such a new concept, many states have not gotten around to authorizing it. At this moment, residents of the District of Columbia, Kansas, Maryland, Ohio, and Oregon are not eligible to trade notes on the Note Trading Platform.

You can check this map to see if you qualify

I’ll be sending you guys a full report from the Toronto MoneyShow after I speak. I’ll be unveiling my “Market Crash Fire Sale” stock list of the best and safest stocks to purchase immediately after a correction.

Until then...

Godspeed,

Jimmy Mengel

Investment Director, The Crow’s Nest

The Crow’s Nest, Outsider Club LLC Copyright © 2013, 111 Market Place, Suite 720, Baltimore, MD 21202. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. The Crow’s Nest or Outsider Club LLC does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. Neither the publisher nor the editors are registered investment advisors. Subscribers should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. Unauthorized reproduction of this newsletter or its contents by Xerography, facsimile, or any other means is illegal and punishable by law.

21