Porter Stansberry is the founder of Stansberry Research, founder and board member of MarketWise (MKTW), and founder of his newest boutique research firm, Porter & Co. Today, Porter’s here to explain how this time, it’s not the collapse of a single stock or industry he’s tracking... but the entire market.
FROM THE DESK OF PORTER STANSBERRY: “How We’ll Know the Exact Day This Bull Market Will End”
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time, it’s not the collapse of a single stock or industry he’s tracking... but the entire market. Porter, welcome. It’s a rare privilege to have you sit down with us for an important message like you are sharing today. PORTER: Thanks, Amy. Pleasure to be here. And I can’t wait to talk about these things. AMY: Now since we have the chance to speak to you today, Porter, there’s a lot of things I want to try to squeeze in... Ĩ I want to get your take on AI, and the incredible run up in Nvidia’s stock. Ĩ I want to talk about the Fed’s recent meeting where they cited an expectation for at least one rate cut this year... Ĩ I want to ask you about what you are calling the most dangerous investment in America today... Ĩ And before the end of today’s presentation, you’ve promised to tell us how we’ll know the exact day this bull market will end. PORTER: Sure, Amy. We can talk about all those things. AMY: Porter – you’ve gone on the record as recently as last year, saying you expected to see a market crash in 2024...
HOST: Hi, everyone, and thank you for joining us. I’m Amy Gamper, and I’m here at the request of one of the most respected names – and biggest personalities – in finance. He is the founder of Stansberry Research, founder and board member of MarketWise (MKTW), and founder of his newest boutique research firm, Porter & Co. I’m referring, of course, to the Porter Stansberry. A man Barron’s called “remarkably prescient” for warning
about the dangers in the financial markets ahead of the Great Recession... Including his prediction that the world’s largest mortgage brokers, Fannie Mae and Freddie Mac, were headed towards bankruptcy. He did the same with General Motors (GM) in January 2007... And with America’s biggest mall operator, General Growth Properties (GGP)... Today, Porter’s here to explain how this
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But so far, this market continues to be one of the most resilient in history. Ĩ The S&P 500 has posted 26 new all-time highs so far this year. Ĩ The index is up nearly 30% since October, which is pretty astounding. Ĩ As a result, the S&P 500 has added over $10 TRILLION in market cap in the past roughly eight months or so. Meanwhile, our elected representatives in Congress continue to accelerate spending... The Congressional Budget Office says that our elected leader’s deficit spending for the month of May was $348 billion – up $108 billion from last year.
Americans at home don’t seem to feel that way. 55% of Americans believe the economy is shrinking. And today, 76% of people in this country are living paycheck to paycheck. PORTER: That’s disastrous. AMY: So, are things going as well as our financial newspapers are telling us? Or does the future hold something grimmer? PORTER: Well first of all, Amy, all those facts are really important and you’re right about all of them. But the thing that you’ve got to remember is that we’re actually looking at two very different Americas today... We have political insiders, like Nancy Pelosi who are doing great.
Total government debt in our country has reached a staggering $35 trillion. At this pace, we’re on track to spend $3 trillion MORE every year that we don’t have. For the first time in history, we’re on track to spend more on the interest on our debt than we
spend on Defense and Medicare this year. That’s just paying for the interest on the debt, not even paying our debt down! PORTER: Yeah, that’s scary. AMY: And while headlines report that the economy is doing better than ever...
One estimate I saw recently says she made over $4 million this year on Nvidia. And not the stock. She’s buying the call options. It’s just gambling. But not for her, of course. She knows she’s going to win.
Her account this year is up nearly 30%! That’s just in the first 6 months of this year. That’s double the 16% of the S&P so far this year. Think about that. Warren Buffett is famous for achieving 20%-plus returns throughout his career. And Pelosi is, of
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course, making him look like an amateur. People must think that she’s the greatest investor of all time, but that’s not true, of course. She just has access to all the inside information she needs to cheat. And besides, which, the real “Michael Jordan” of investing is Stanley Druckenmiller. Druckenmiller averaged 30% returns across his three- decade career! These are really rare returns, but we’re supposed to believe that Nancy Pelosi can do the same thing in six months with only the same public information others have? It’s really obviously corrupt.
times as productive as they were 50 years ago with the advancement of technology... And despite the fact that women have entered the work force in a major way over that time... Meaning it now takes two people to earn what one earner could have made in a household 50 years ago. Americans had to spend more money on food last year than any other year in history.
The cost of food has gone up 35% since 2020 alone... Yet elitists like Paul Krugman publish tone-deaf articles
Or look at Dr. Anthony Fauci. Did you know that Fauci, despite a
like this in the New York Times :
career working in the government, became worth more than $10 million during the pandemic? Or Jerome Powell, the head of the Federal Reserve, who is worth $55 million at least . Possibly twice that much.
AMY: The same man who once said back in 1998...
These are the same people who told us to lock down and that we couldn’t send our kids to school. They told us “lab leak” theories were racist. And they told us inflation was “transitory.” And yes, for wealthy people, it’s a great time to be alive... if you have absolutely no regard for your neighbors or for the millions of Americans, for whom, life hasn’t been getting better for the past 50 years. It has gotten worst. Just take a look at this chart. This really tells the story of the two different Americas. While wages and productivity rose in tandem for most of our country’s history... For the past 50 years, wages in real terms – so after inflation – are basically in the same place they were 50 years ago. That’s even though American workers are multiple
“By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”
PORTER:
That’s right. You know, there’s a great Mark Twain quote that goes, “If you don’t read the newspaper, you are uninformed. If you do read the newspaper, you are mis-informed.” I think that explains the world today very well. And that’s because the people that govern our society and write our newspapers aren’t worried about the cost of milk and eggs... Instead, they’re worried about instituting Diversity Equity and Inclusion departments at corporations and indoctrinating the students at our most prestigious universities to believe America is evil and needs to be destroyed.
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Renowned hedge-fund manager Ray Dalio...
They see protesters waving the flags of genocidal terrorist groups like Hamas and never once stop and wonder what their role was in promoting that kind of violence. But I know you and anyone reading today realize that all the social problems we’re seeing today are actually the result of core economic problems at the root of our country. This accelerating cultural decline in America is a direct result of the disastrous monetary policies of our country over the past half century. It’s really simple. If people can’t earn an honest wage by going to work and doing an honest job because all of those gains to productivity keep being printed away by the Federal Reserve, then they’re not going to believe in the social contract that underlies the integrity of our country. It’d be nice if none of that had happened, but seeing this continue, I’m very worried that America is heading off a financial cliff. And mark my words, America is heading off that cliff very fast... AMY: Back in 2011, you produced a financial documentary that went viral. Along the way, it ended up becoming known widely as “The End of America” documentary. Over 5 million people all across America watched it. And in it, you predicted a future for America that upset a lot of people. Your major prediction was that we were heading down a path that would lead to the U.S. losing its world currency reserve status... and that our country would experience a sort of cultural decline as our government grew ever more in debt... At the time you were openly mocked in the financial community. Your ideas were considered “fringe,” even “fear mongering.” Forbes called it “’financial porn’: economic commentary filled with lurid fantasies about imminent collapse.” Fortune called you a “Doomsayer.” And U.S. News called you a “conspiracy theorist.” But today the idea that America could lose its reserve currency status is a warning that other famous financial analysts like yourself have begun to sound the alarm too... Like “bond king” Jeffrey Gundlach...
And even, Stanley Druckenmiller...
But that’s not all… That same warning you shared more than 15 years ago is finally being acknowledged in mainstream publications like... The Wall Street Journal ...
The Guardian ...
Reuters...
And more... Yet, Porter, you outlined exactly how this would all play out over 15 years ago. Long before Fitch Ratings downgraded the United States’ credit rating
and pointed to “expected fiscal deterioration over the next three years,”
a “high and growing general government debt burden” and an “erosion of governance” to explain why they were downgrading our debt. Porter, why do you think you were able to see these facts so clearly, even when others couldn’t?
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Biden is in great health? And every other lie they’ve told us over the last five years? So, to keep ourselves objective and independent we refused to take commissions. We refused to accept advertising. And we refused to accept outside investors. That continues to be the guiding light of our business today, just as it was 25 years ago. And I believe that anyone who was willing to roll up their sleeves and do truly objective investment analysis on those institutions back when I first started warning our readers about them, they would have come to the same conclusion. In fact, I have met dozens and dozens of government officials and senior investment bankers who have told me “Porter, I’ve been reading your newsletter for 20 years and I wish I could say the things that you get to say every month.” AMY: Well, we know now you were right about GE, and Fannie and Freddie, and the others. But after everything we’ve seen since the global financial crisis... and more specifically, how high the market has soared this year... do you still believe the dollar is in imminent trouble? PORTER: Absolutely. I’m hopeful, though not optimistic, that we can return our country to sensible monetary policy. But look, this bubble that we’re experiencing right now is a direct consequence of all of the money that the government has pushed into the banks to bail them out of their losses on the bond market during the pandemic. It’s a return to the same boom and bust cycle we’ve been on since the early 1970s. So, it’s not surprising that you would see a big blow off top before a really serious depression. And I think that’s probably what we’re experiencing right now. Plus, of course, the other thing that’s pushing the market to unbelievable heights is the unlimited fiscal spending, right? If our elected leaders continue to spend so recklessly and without any discussion in public at all about the threat of these debt levels, then it’s possible that this train can run a lot further than anybody, including me, thinks. AMY: Is that why you continue to warn about the coming crash for stocks?
PORTER: You know, it’s a great question, Amy.
I think that’s because what you believe about the world often depends on where you sit. It’s difficult to be objective about the hand that’s feeding you. For example, how could anyone in finance have missed the fact that General Motors couldn’t make enough money selling cars to pay the interest on its existing debts and pension obligations? Well… General Motors and its local dealers were the largest buyers of advertising in the United States. Virtually every newspaper and every media network needed GM to buy advertising to maintain budgets. Or ask yourselves, how could anyone in finance have missed the fact that Fannie Mae and Freddie Mac were insuring subprime mortgages that were certain to contain hundreds of billions in losses? Well… Fannie Mae and Freddie Mac sit squarely in the center of the entire global financial system. Which professional in finance could warn of their impending collapse without risking a global financial panic? Or take General Electric… Ahead of the financial crisis, General Electric was a major issuer of corporate debt and paid millions and millions in fees to Wall Street’s biggest banks. It also owned the major financial cable channel, CNBC. Which media outlet could afford to report critically about their management or their declining financial results? You see, virtually every media outlet has some kind of obvious bias that greatly distorts the facts they report. But what investors have to have to be successful is absolute, desperate objectivity. You have to know your own biases and you have to know the media’s biases. You’ve got to be objective. That’s the reason the entire investment newsletter industry was born. We pioneered a new mode of financial thinking – one that operated independently from Wall Street and the mainstream financial media. We built our business around one key goal: to give our subscribers the information we’d most want if our roles were reversed. To do so requires a dedication to publishing the facts we uncover without fear or favoritism. It’s not easy to tell the unpopular truth, but it’s what we do. This is the role of the free press in our society. But it’s an obligation the mainstream media has forgotten. I mean, how many times did the media tell you that Joe
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Forest fires are a natural and healthy phenomenon. Forest fires eliminate dead growth which fertilizes and allows nature to “reset” so to speak. It provides a clean slate for a healthy new forest to regrow. Bailouts on the other hand, are like fire suppression. Instead of allowing the dead growth to burn and become fertilizer, it allows all that dead growth to accumulate... And eventually you have so much dead growth that you can’t afford to have a forest fire. That’s because the fire would become too large and too out of control. We saw this several years ago in California, when practically the whole state was on fire. Decades of fire suppression in state parks and elsewhere, created so much dry, and flammable fuel that a single spark from a cigarette They had a front row view as trillions of dollars were printed during COVID and the enormous inflationary crisis that it created. Everybody knows something has gone terribly wrong, but most people don’t really understand what to do about it. So to fight inflation, as we know, the Fed embarked on the fastest and most aggressive rate hiking policy in history. That caused the value of U.S. Treasuries to plummet by as much as 50%... turned into a disaster for the state. That’s where our country is today. And many Americans have woken up.
PORTER: Amy, when I first made my End of America documentary in 2011, I thought I had already seen the peak of monetary insanity. Of course, things have only gotten worse since then. But I believe that 2008 was a significant turning point that we’ll look back on as the moment when the general American public received a front row view of how our government and the Federal Reserve distort our money and our economy. Americans got to see first-hand how Wall Street was bailed out, and even received huge compensation packages. Meanwhile, virtually no relief was offered to millions of Americans who lost their homes, their jobs, and in many cases their lifesavings in the aftermath of the mortgage crisis. And now they get to have their savings wiped out by inflation. And I think that was the moment when Americans, maybe even people reading this today, knew that something was not right with our money. The Occupy Wall Street movement was an early manifestation of that. So was the creation of bitcoin around the same time in 2010. Now of course, I wasn’t the first to predict or see this inevitable outcome... My mentor Doug Casey, for example, first warned that America was heading in this direction back in the 1970s. When Nixon severed the tie to the gold standard, Doug could see what the government was doing to our money. But it wasn’t until the aftermath of the mortgage crisis when Americans, and people internationally too, began to seek an alternative to the U.S. dollar. AMY: And you think that was a critical turning point? PORTER: 2008 was definitely the critical turning point. It was the most obvious time where the whole world could see, “Oh, America is not going to make good on these debts. They’re going to keep printing money.” I think the best way to explain it is to borrow a metaphor from the chief investment officer of Universa Investments, Mark Spitznagel, who’s a genius. Amy, when the government bails out banks, like they did in 2008... What they are doing is akin to suppressing a forest fire.
Remember, these are the same “risk free” assets that banks were forced to hold after the mortgage crisis. And the same assets so called “experts” have told retirees to hold for decades in a traditional 60/40 portfolio. And as these bonds crashed in value, it led to a run on banks
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like Silvergate... Silicon Valley Bank... First Republic... Signature Bank and more... Now of course, the government stepped in to bail out all these banks too... Another fire
And that’s just inflation. You probably won’t be surprised to learn that they’ve changed how they calculate them over the years. And that every time they make these changes, inflation seems to conveniently come down. If you measure the dollar to the value of gold, which is a measure that is impossible for the government to pervert, the dollar has lost 90% of its value since 1999. AMY: That’s a shocking number. PORTER: It is. And Americans are finally waking up to this fact because they’ve seen their quality of life decline so much. More than ever before, Americans are learning about economics and financial history, and they’re realizing we’re playing a rigged game. And it is rigged because of the government. But as my friend Richard Maybury, the famous author of the Uncle Eric book series would say... “It’s the only game in town. You must hold your savings in some form. There is no escape.” So while I worry about our country’s debt, and what our leaders are doing to our dollar, which is the kind of thing you normally only see in a banana republic... We all are faced with the same dilemma. We must store our money somewhere. Cash isn’t a great solution, obviously, as I just mentioned. And I would stay away from any long-dated U.S. government debt, which will likely be defaulted on, either through inflation or through outright default. I think that in 20 years, people are going to find it absolutely unbelievable that so much of the world’s wealth was once stored in the credit of U.S. treasuries. No one will believe that anyone was ever stupid enough to lend our government money. I like to own real estate. I have a nice farm in Baltimore County. And I’ve always owned gold as a hedge against what I knew would happen to the dollar. And I’ve done very well personally with those investments. But for most people, and certainly for people reading right now, we need to have liquid assets in addition to gold and land.
“suppressed”... But all that bad debt... all the debt from 2008 and all the bad debt from last year’s bank bail outs is still owned by our government. The taxpayer will, one way or another, pay for that bad debt – NOT the banks. And so, for the past 15 years, I’ve been telling this story and explaining why the U.S. dollar is inevitably going to be replaced as the World Reserve currency... and why that will forever end our ability to continue to spend and add debt the way we’ve been accustomed to for the past 70 years. And that end, I believe, is a lot closer than anybody else is expecting. That’s the entire story. That’s the world we are living in. And that’s the reason why most Americans don’t feel safe. It’s also the reason why America doesn’t feel like the America that you and I grew up in. That’s the most important macroeconomic story you need to understand if you are investing in the markets today. We are approaching an enormous fiscal, monetary, and cultural cliff. AMY: But when exactly do you expect it to happen? PORTER: Well, I’ve been talking about this for 15 years now, Amy. And my belief isn’t that the dollar will disappear entirely. The dollar will exist as long as our country exists. But the value of those dollars will continue to decline as they have for the past century, since the creation of the Federal Reserve. Just consider, since the start of the pandemic, the purchasing power of any dollars you hold in your bank account have declined by at least 20%-plus . Poof. 20% of your cash gone. And that’s if you trust our government’s reporting of the numbers.
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And despite the many taxes, regulations, and other restrictions placed on the free market in our country, we continue to have the most dynamic and astounding economy in the world. And this is why, Amy, I’ve NEVER recommended people go out and sell all their stocks. And I still don’t recommend anyone reading sell their stocks today. That’s despite some big threats in the market today that realistically could create a 50% drop or more in stocks... Like the massive underwater bond portfolio banks across the country are sitting on...
safer vehicle to protect and grow the value of your savings over time. And you don’t have to take my word for it... Since 2009, foreign holdings of U.S. stocks have
DOUBLED... In other words, the international community has poured money into
our stock market for two reasons... First, because property rights in our country are safer than virtually any other country in the world... And secondly, because American companies have historically been the greatest compounders of wealth in the world. That remains the case today. In short – there is no alternative to owning U.S. stocks, no matter how you slice it. And while I do believe further bailouts will accelerate the demise of the dollar, stocks are still going to continue to rise because they will hold their purchasing power as the dollar declines. Not to mention the real chance that Jerome Powell lowers interest rates this year, which could send the market into an even crazier melt-up scenario than we’ve seen already. AMY: Are you saying that you think the market is going to continue to rise from here? PORTER: What I’m saying, Amy, is that the game is rigged to send the market higher over time. So while banks should have been forced to mark down their assets in 2008, they were bailed out. While interest rates shouldn’t have been kept at artificially low rates for more than a decade, they were suppressed... And while the global economy should not have been shut down as it was during the COVID pandemic, it was... These acts of monetary interference by our leaders have changed the market in meaningful ways, possibly even in some ways that we haven’t realized yet. And while there’s a dozen very good reasons why the market shouldn’t continue to soar, what I’m saying is that as an investor you must put your money somewhere. And that’s especially true for working Americans. My father spent his entire career working for the Coca-
The huge credit crisis that is being created in the commercial real estate industry...
And the massive AI bubble in stocks that seems to grow larger and more dangerous every day...
AMY: Why is that, Porter? Those all sound like very good reasons to sell stocks. PORTER: When you look around the world, the U.S. stock market is still the best game in town. Yes, certainly, our government has and continues to make fatal mistakes. But there’s no other country in the world that has created the type of innovation we continue to pioneer here in America. American businesses are still the greatest creators of wealth anywhere in the world. There isn’t any other stock market in the world that is a
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Cola company. He depended on the stock market to guarantee he had the opportunity to retire. If that’s not your situation, you are very lucky. But for most people, they are counting on their stock investments to give them peace of mind and financial security for the future. So you can’t afford to be out of the market. Think about this. In the past 20 months or so – since October 2022, the S&P 500 is up 51% ... That turns a $1 million retirement account into $1.5 million if you had just stayed in an S&P index fund... and I’m sure the number is far higher for the Nasdaq. That extra half a million makes a huge difference if you are trying to retire. And it is funny...
Frankly, it might be the only way at this point. And the best way to do that is by owning stocks. BUT... and this is a big BUT, Amy... if you are going to be an investor today, you need to have a plan in place for when you are going to sell. Because whether it is next week, next month, or next year, all of the problems that I’ve mentioned will materialize at some point. And I think sooner rather than later. AMY: But Porter – getting out of stocks at the right moment is a lot harder than it sounds... After all, most experts recommend a buy and hold strategy. That seems to fly in the face of common wisdom. PORTER: Well, if you are only holding the very best high quality stocks, that are capital efficient and regularly reward shareholders with large dividends, I agree the best holding time, as Buffett would say, is forever. And we have a lot of stocks in our model portfolio that we have owned for a decade or more. But most Americans don’t hold those kinds of stocks. Most Americans, sadly, own stocks that they are only emotionally invested in. That’s why, back in August 2009, I wrote an essay called “The 7 Real Secrets of the World’s Best Investors.”
because sometimes when I make a stock recommendation, I get criticized because my long-term view is so bearish on the dollar. But I believe there’s always opportunity if you look hard enough... and I’ve never used the problems I see with our currency as an excuse for not finding good stock opportunities. Like JDS Uniphase... Microsoft... W.R. Berkley... Hershey... AND American Financial... And even though there may be bubbles in certain asset classes... Owning America’s best businesses is still the absolute No. 1 way to protect and grow the value of your wealth today.
And the first secret I included on that list was, “Secret No. 1: You can time the market...” The reason I wrote that essay was because of how often readers would write to me or approach me at our conference following the great financial crisis and say: “Porter, I was reading your newsletters warning about the crash. Man, you were right on the money.” And I’d say, “Well great. How did you do?” And they’d tell me, “Oh, I didn’t do anything. I got killed.”
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Believe it or not, this sort of thing happens all the time. And it kills me that I can’t get people to take sensible precautions. AMY: In other words, even though you told readers to buy right
PORTER: Well, buy-and-hold is touted because it will
mathematically produce the best average results. But unfortunately, no one’s out there whose name is John Average. You’re not going to get the average results. You’re going to get the results that you earn yourself. And that requires – if you’re going to really be a buy-and-hold investor, that requires an immense amount of emotional fortitude that most people simply lack. A great example is to look at the mutual fund industry. That industry has boomed since the 1980s. And why? Well, because they used a bunch of faulty academic research to “prove” you couldn’t time the markets. Why would they promote the idea that you can’t time the markets? Because they get paid based on assets under management. They need you to leave your money with them, good times or bad. No matter what, a mutual-fund manager isn’t going to return your money and tell you, “Sorry, it’s just not a good time to buy stocks...” It’s kind of like a casino that way. A casino never wants you to leave the table. Same thing with the mutual fund people. So they have to invent a world where it is always a good time to buy stocks. You undoubtedly know their mantra: buy and hold. But it’s all a lie. It doesn’t work. And even if it did work, few people would be able to apply the strategy because most individual investors do not have the risk tolerance. They do not have the emotional fortitude to buy and hold. What happens? You know what happens. They chase hot sectors and investment fads and buy in at the worst possible time. Then, after prices collapse, sooner or later, the pain and fear become unbearable, and they liquidate their investments – usually at the exact bottom. It’s buy-and-fold. There are a lot of people today that are buying Nvidia, and they are going to find themselves in this boat. At some point over the next several months, Nvidia will likely collapse by 50 percent. There will be a giant sell-off, and they will find themselves panicking and selling at the bottom. And that’s why I’m here today. Not to tell you to sell all your Nvidia shares and buy gold. If you are the kind of person that wants to take full advantage of what this bull market can offer you... If you want to wring out all the gains possible...
at the bottom in October 2002... And then called the top in February 2007... If your followers didn’t follow that advice they would’ve been destroyed.
PORTER: Amy, whether you are reading an investment letter from Porter & Co., or Stansberry Research or any other financial publisher... It doesn’t matter how completely dedicated we are to getting you the information you need in the form of research... At the end of the day, we’re just publishers. We can’t execute your buy and sell orders for you – we can’t manage your money. Most importantly, we can’t know your exact personal situation. It may not be appropriate for you to be 100 percent invested in stocks. It probably isn’t if you’re 85 years old. I would recommend that you never own stocks that you’re not prepared to hold for at least three to five years. But we don’t know the exact makeup of what assets you own, or what strategies you most like to follow. But just because we don’t know you in that kind of way doesn’t mean that we want to see you make the kind of mistakes so many of our subscribers have told us they made over the years. You see, among investment professionals, they mockingly call “buy and hold” “buy and fold” behind closed doors. And they call it that because that’s what happens. People think they’re investors as long as it’s a bull market. But sooner or later, the pain gets so bad and the loss is so big, they panic and sell. And when they do, Wall Street wins. AMY: Frustrating. If that’s true, then why is it so widely touted by financial advisers and investment advisers?
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All I’m saying is, go for it... But please, please , dear god, have an ironclad exit plan in place that is not based on emotion. AMY: What exactly does that exit plan look like? PORTER: Well, here’s the thing... Timing the bottom of a market is a much more forgiving task than timing the top of a market. And even though I’ve nailed the timing on many calls over the years, I’m by no means an expert on timing markets... But as the founder of MarketWise, which is the parent company of Stansberry Research, Investor Place, Alta Research, Chaikin Analytics, Altimetry Research, and more... I’m no longer simply looking out for the readers of my letter. I’m now looking out for over 5 million subscribers who all have subscriptions to dozens of different analysts who might not share my view of where the market is going. And that’s OK. Independent thinking is the lifeblood of our business. But I feel a responsibility to each one of you, no matter which MarketWise business you have a relationship, or whose publication you might subscribe to. Because there are big reasons to be worried right now. Remember mortgage-backed securities? AMY: Yes, they were what caused the great financial crisis right? PORTER: Exactly. Well, Amy, have you heard of CLO’s? Or “Collateralized Loan Obligations?” AMY: No, I haven’t. PORTER: Well, Amy, you will. This is the financial vehicle that private equity companies have used to turn all their commercial real estate into a type of security that they could sell to investors.
Well over the past 2 years, as rates rose, the distress rate for CLO’s has risen from just 1% to nearly 10%... That’s because of buildings like 1407 Broadway in New York City. The value of this building has plunged in value from $510 million in 2019 to $136 million today.
The owner is almost certainly going to default on the $1 billion in debt it holds on to the building, including a $350 million loan from Barclays Bank. What the government may not have realized when it sent everyone home from work during COVID is that they weren’t coming back... And this is just one example. There are a million commercial real estate buildings like this all across America. Buildings with tons of bad debt just like 1407 Broadway that nobody has marked down to the current value. And it is our banks that lent all this money. Now, I can’t tell you that the bad debt in commercial real estate will be the nail in the coffin for this bull market... I’m sure the government will continue to bail banks out, just as it did with Silvergate and Silicon Valley.
But remember, every bail out, every deficit dollar, every government boondoggle is just adding fuel to a forest that should have burned years ago. So, this is important. I can’t tell you exactly what is going to be the pin in this latest bubble.
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But I want to introduce you to someone who probably knows more about timing the market than anyone else I know. He’s going to tell you exactly how we’ll know the exact day this bull market will end. I know that sounds impossible, but he’s done it before. He’s going to show you the strategy he successfully used to get out of stocks before the 2020 COVID crash. It’s no exaggeration to say it could be the most amazing thing you can ever do for yourself and your financial results. This is something that could be orders of magnitude more important and transformative for your wealth than any trend or any single stock opportunity. It could mean the difference between holding onto the gains you’ve made in stocks over the last decade... OR losing everything when the next crash comes. AMY: It’s obvious to me how much you care, and how deeply you believe in your message today, Porter. Thank you again for joining us. PORTER: It’s been my pleasure. It’s always great to talk about these things. They’re important issues. AMY: Folks, Porter is still planning to tell us what he thinks is America’s #1 dangerous investment today… But first, without any more delay, let’s introduce our second guest, Keith Kaplan. He’s never worked at a hedge fund or trained under any professional investors. Instead, he’s spent the many years working behind the scenes at some of the biggest Fortune 500 companies in the country.
And had fallen over 30% by March 23, 2020. Today, he’s joining us to show you his secret for timing these huge market moves... Including how to know when to sell any stock you own. I know that probably sounds difficult to believe. But you must see this data. I think it will surprise you. Please join me in welcoming to the stage, Keith Kaplan. AMY: Hi Keith. KEITH: Glad to be here. Thank you, Amy. Nice to see you, Porter. PORTER: Glad you could join us, Keith. AMY: Keith, you are the CEO of TradeSmith, a financial technology company with nearly two decades of history making the tools individuals need to reduce their risk and improve their investment results. Today, over 55,000 individuals rely on TradeSmith to track over $30 billion in portfolio assets. PORTER: That’s incredible. AMY: It sure is. But, with all due respect, am I really to believe you’ve accomplished all that and you don’t even hold a degree in finance? KEITH: Well, Amy, my background is in software. I’m not a professional investor.
But as you’re about to see, he has an extraordinary track record of perfectly timing market crashes... Most recently, he knew to sell nearly all of his stocks on February 28, 2020 – right before the worst of the COVID crash. Here’s an actual image of his brokerage account. Stocks began to crash a week later...
And like a lot of people, I spent most of my investing career as a prisoner to “analysis paralysis.” I consider different opinions of what to do with my money and then I freeze and do nothing. But luckily, there’s a solution... And it actually has to do with a strategy I was using, which led me to sell nearly all my stocks ahead of the COVID crash in March 2020.
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Because just DAYS later, Franco-Nevada started to fall... It was surprising because gold stocks are typically “safe havens” during times of crisis... But it didn’t stop until it plunged almost 20%.
This single strategy saved my family a fortune. And most importantly, I was able to sleep peacefully through it all knowing that our financial future was secure. AMY: I know everyone at home is eager to hear your story, Keith. Why don’t you start with telling us how you knew to sell your stocks a week before the COVID crash? KEITH: Of course. Compared with what most investors went through, it was pretty uneventful. On February 27, 2020 I received an alert on my phone, telling me stocks were in sell mode. It’s really that simple. Here’s what it looked like... the image that saved me tens of thousands of dollars... After reviewing everything, I decided to sell almost all my stocks. Although, admittedly, I didn’t want to. The market was barely down. I was pretty certain some would continue to be winners. AMY: Can you give us an example? KEITH: Ah yes. Out of the 16 stocks I sold that day, the most difficult to part with was Franco-Nevada. I first bought FNV around $68 in November 2016. So right here. By the time I got
Luckily, I locked in a 54% gain thanks to the alert instead of giving most of it back. Without that alert, I don’t think I would have ever sold it. Or look at Carnival cruise lines... If you held any shares of Carnival during the crash... things got ugly. It fell almost 80% in less than a month. That makes it one of the greatest casualties of the 2020 crash.
But my system warned about Carnival all the way back on Thursday, February 3, 2020 – weeks before the stock fell off a cliff. Can you imagine how many Carnival investors probably held on as it fell 40%... 50%... 60%... just promising themselves that they would sell when things got better?
But things never got better for Carnival’s stock. Even four years later, it’s still down 75% from its pre-pandemic prices. If this situation sounds familiar to
the alert warning me about these stocks on February 27 th , I was sitting on gains of around 66%. So of course I didn’t want to sell it. You never want to sell your winners when they’re just picking up steam! But I’m glad I did.
you, trust me... Up until a few years ago, I made similar mistakes over and over again with my investments. And I didn’t even need a market crash to lose money! I just kept selling at the exact wrong times. The good news is – this isn’t our fault. It’s simply human nature. No matter your background, education, or net worth there is ONE consistent problem that everyone makes – from the most novice investor, to the most successful pro. And that problem is knowing when to sell. I’ve analyzed the portfolios of real-world investors...
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including folks with as little as just a few thousand dollars, to folks like Warren Buffett... Bill Ackman... and David Einhorn who manage multibillion-dollar portfolios. I’ve looked at portfolios during bull markets, bear markets, flat markets... and the ONE thing I inevitably see is that most investors end up selling their winners too early... and selling their losers too late. And this mistake costs them huge sums of money, over the long term. It isn’t just me who has noticed this situation... In fact, two leading economists did similar research on this subject that won them Nobel Prizes. And the conclusion they reached – which earned them that prize – is that investors are risk-seeking when it comes to their losses... and risk-averse when it comes to their gains. And it can be especially damaging in moments of high uncertainty and risk – like we’re seeing today. Porter – I’m sure you’ve had some experience selling a winner too early... or a loser too late? PORTER: Of course. Every professional investor makes that exact same mistake. And they make it for the exact reason that you mentioned, which is that we are very risk-averse when it comes to our existing gains and we are way too risk- seeking when it comes to our losing positions. We don’t want to admit we’ve made a mistake. KEITH: I completely agree, Porter. And I’ve personally experienced it myself. Until a few years ago, basically every investment I ever made was one where I sold for a small gain... only to see the stock take off soon after... or times when I would buy a stock and ride it all the way to zero. For example, back in 2016, I bought a company called Advanced Micro Devices. The company had been all over the news because of a big story involving a contract with Intel, and a bunch of valuable patents.
Instead, it quickly went up, went down, and then back up to around my breakeven point. I decided I couldn’t take the rollercoaster ride, held my nose, and sold AMD for a 3.5% loss. Trust me, I know how stupid that sounds today. A 3.5% LOSS on a stock that went on to quickly soar over 1,000%... so painful. All because I sold way too soon. And this is the reality I’ve had to face about myself – I am an extremely emotional investor. If I put all my money in AMD and just left it there, I could have done nothing else and made more money on this ONE trade than probably any other trade in my entire life. But instead I lost money. AMY: Yeah, that’s the kind of investment that could have had a massive impact on your finances. PORTER: It would change everything. KEITH: Oh yeah. It sounds crazy... but there’s a simple reason for this: Our emotions get in the way... whether we notice it or not... and it causes us to buy our stocks high and sell our stocks low. Based on the real-world portfolios I’ve analyzed over the years, this problem gets EVEN WORSE during times of uncertainty, like we’re seeing today, and like what Porter expects we’ll continue to see. So... no matter where you think stocks will head next... if you can simply find a way to keep your emotions in check – that alone will cause your performance to improve, no matter what happens next in 2024. Above all else, you’ve got to have a systematic way to help you decide when to buy, when to sell, AND how much to invest – without getting overly emotional about it. In fact, I know that you, Porter, early on in your business career, began using a simple strategy to help your readers know when to sell one of your recommendations... which helps prevent your readers, and even I’m sure it helps you analysts in some cases – not get too emotionally attached to a stock. PORTER: You’re talking about trailing stops, right, Keith? KEITH: Right. I know you’ve been a big proponent of trailing stops for years. Can you explain what a simple trailing stop is, for the folks tuned in at home?
I didn’t know it then, but my timing turned out to be perfect. Of course just looking at that chart, It’s
obvious I should have parked my shares and let them ride. But instead, I got spooked. Right after I bought the stock, it didn’t go straight up like I expected it to.
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Compare that with a big-cap, blue-chip stock like Johnson & Johnson... It has only fallen 25% or more six times since going public in 1944, and
PORTER: Sure, it’s essentially a predetermined price you’re committed to selling a stock at, after it has fallen. Let’s say you own a blue-chip stock like Microsoft. You might tell yourself that you will sell your position when the stock drops 25%. And then – no matter what – if Microsoft drops 25%, you will sell that stock. But if Microsoft rises further before falling 25%, then you keep moving your stop loss higher so that it is always 25% below your highest profit point. This is one of the easiest ways you can protect the profits on your winners and cut the losses on your losers short. But it is a very useful tool because it can remove ALL of the unnecessary emotion that goes along with managing a stock portfolio. KEITH: I love that, Porter. Thank you. And here’s the point I would like to make today... and it is something I hope you will all agree makes sense once you hear the data for yourself. As helpful as trailing stops can be for most investors... they’re far from perfect.
they were all during massive market collapses. So, in this case, I’d argue a 25% trailing stop would be too wide . Because historically, when Johnson & Johnson has fallen in 25%, the market is in serious trouble. My point is: No two stocks are the same. So, it doesn’t make sense to use the same 25% trailing stops across the board. Which is why I simply don’t use them anymore on my own investments. Instead, we developed a different kind of trailing stop altogether. It’s called the Volatility Quotient. Or “VQ,” for short. And now it’s the basis of nearly all my investment decisions. AMY: A “VQ?”That’s not something I’ve heard before. Can you explain what it is? KEITH: For starters, you can think of a VQ as a smarter, BETTER, and CUSTOMIZED trailing stop. Every stock or fund in the world has a unique VQ. That includes mutual funds, index funds... even ETFs.
The biggest problem with a standard 25% trailing stop is that it’s a one-size-fits-all approach to every stock in the market. Let’s look back at my Advanced Micro Devices trade. Remember, it’s up over 1,000% since I first bought it.
But historically it’s had some pretty big swings. Get this... AMD has fallen 25% or more 71 times since it IPO’d in 1980. PORTER: It’s a volatile stock. KEITH: Very volatile. So, it doesn’t make sense to use a 25% trailing stop on Advanced Micro Devices because that’s a normal swing for this stock.
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From blue chips like American Express... to high- flying growth stocks like Tesla... to tiny gold miners like Northern Dynasty Minerals. The VQ just tells you how volatile a stock is, and then calculates the exact price to sell it, based on its current price and volatility. To put it another way, it helps show you how much “wiggle room” you should give a stock before it’s time to sell. And on the flip side, it can tell you the perfect price to buy back in... which would have seriously improved my returns on Advanced Micro Devices. More conservative stocks like Johnson & Johnson have a lower VQ... whereas more volatile ones like Tesla or Advanced Micro Devices tend to have a higher VQ. Let me show you another example from the 2020 COVID crash. Airlines took a huge beating. And Delta Air Lines was no different... In early February, Delta was sitting at an all-time high of $60. But by the following month, the stock crashed 65%... absolutely crushing investors, even the mighty Warren Buffett who owned Delta shares. However, let’s say you were monitoring your Delta position with a VQ trailing stop. You knew that Delta’s VQ was 19 – which classified it as medium risk. Medium risk means that some swings are normal. But “normal” is not what we saw in March 2020. If you were following a 25% trailing stop, you would have exited the stock on March 9th... not bad. Certainly better than the 65% loss that many people suffered. But if you’d known out right here, on February 26th. A week before the stock started to crash. That would have turned a catastrophic 65% loss... into a much more manageable 8% loss. AMY: Delta’s VQ, you would have acted much sooner, getting So, the VQ is essentially a “smarter” trailing stop that could help protect your gains and minimize your losses when a stock starts to fall?
KEITH: Yes. But that’s not all... The VQ could actually help you make money – by making sure you don’t sell too soon and miss out on a massive runup. PORTER: Keith, I have one question. Obviously, there’s some proprietary math going on to determine what the VQ is. And there’s a whole lot of stocks and funds in the market. You guys must have pretty big computers that are running a lot of numbers. KEITH: Absolutely. We’ve invested over $22 million in our infrastructure over the years, and we actually cover, Porter, 150,000 different securities in the market. PORTER: That’s incredible. The question I’ve got for you is: What period of time do you study to understand what the VQ for each security is? KEITH: That’s a great question. So, we have a very big historical look back on stocks. We have all of the data in the markets. And typically with the VQ, we’re measuring at a minimum the last 18 months if it’s a newer stock. But we go all the way back to its history to understand how the VQ, the volatility of that stock, has changed over time. Every single week, we adjust the VQ based on all of our mathematical models. PORTER: Every week? KEITH: Every week. PORTER: That is an enormous compute that’s going on. That’s incredible. KEITH: Yeah. Actually, if you don’t mind Porter, I’d like to borrow you for a back-tested example.
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