This week, we're excited to welcome back a familiar voice to Investor Hour: Austin Root, the chief investment officer of Stansberry Asset Management ("SAM").
It has been more than two years since Austin's last conversation with Dan. During that time, Austin left behind a storied career at Stansberry Research – as the director of research, director of corporate development, and the editor and portfolio manager of Portfolio Solutions – to join SAM, where he develops and manages investment strategies across all portfolios.
This year, investors have had to contend with a turbulent market. But Austin has done a stellar job of helping SAM clients navigate – and even outperform – these choppy markets. He shares some of his unusual strategies in today's interview but says his job isn't just about maintaining a great stock-picking record. Rather, it's about drilling down these "mission critical" basics that every investor should incorporate into their portfolio...
Performing well is not just about identifying great stocks. More important than picking the stocks themselves is asset allocation, risk management, position sizing. These are all mission-critical aspects to investment success.
Also in this week's interview, Austin recounts what it was like to work with some of the investment world's biggest celebrities – like Steve Cohen, Julian Robertson, and George Soros. Plus, he shares the top four qualities that he looks for in investments, his favorite book on value versus growth investing, and more.
About Stansberry Research and SAM
Stansberry & Associates Investment Research, LLC (“Stansberry Research”) is a subscription-based publisher of financial information. Stansberry Research is not regulated by the SEC because it is a publisher. Stansberry Research and Stansberry Asset Management (“SAM”) are separately operated and are overseen by different boards. Although SAM will utilize investment research published by Stansberry Research, SAM has no special or early access to such research. They receive information from Stansberry Research just like any other subscriber does – after the issues are published.
This disclosure is being provided to you by Stansberry Research, a subscription-based publisher of financial information, in accordance with Rule 206(4)-3 under the Investment Advisers Act of 1940, as amended (“Advisers Act”). The disclosure is intended to inform you of an agreement (“Agreement”) between Stansberry Research and SAM, an investment adviser registered with the Securities and Exchange Commission (“SEC”), relating to advisory client solicitation services.
You should receive, separately, a copy of SAM’s client brochure (Form ADV Part 2).
Name of Solicitor: Stansberry & Associates Investment Research, LLC (referred to herein as “Stansberry Research”)
Name of Investment Adviser: Stansberry Asset Management, LLC (referred to herein as “SAM”)
Nature of Relationship between Solicitor and Adviser: An arrangement exists permitting Stansberry Research to be compensated by SAM to use the “Stansberry” name, for advertisements in Stansberry Research publications and for advisory client solicitation services by Stansberry Research on behalf of SAM.
Stansberry Research and SAM are and will remain separate corporate entities that are separately operated and are overseen by different boards and different management teams. SAM’s management team is responsible for the investment decisions of SAM. No member of SAM’s management team nor any other officer or employee of SAM is an officer, editor, writer or other employee at Stansberry Research. Similarly, neither Porter Stansberry nor any other officer, editor, writer or other employee at Stansberry Research is an officer or employee of SAM.
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CIO of Stansberry Asset Management
Austin Root is the Chief Investment Officer of Stansberry Asset Management.
Dan Ferris: Hello, and welcome to the Stansberry Investor Hour. I'm your host Dan Ferris. I'm also the editor of Extreme Value, published by Stansberry Research. Today, we'll talk with my friend and former Stansberry Research colleague Austin Root. He is the chief investment officer over at Stansberry Asset Management – we'll learn all about that. In the mailbag today, we have some interesting questions... one of them is about the difference between a brand-new product that my friend and colleague Mike Barrett started up versus my newsletter, Extreme Value... because they're a bit similar, but they're different. And a few other things... and remember, you can call our listener feedback line: 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my opening rant this week, I want to talk about a new paper by a guy named Jeremy Grantham, for a wonderful reason. That and more right now on the Stansberry Investor Hour.
So why do I want to talk about Jeremy Grantham's latest paper? Well, because he agrees with me, of course. [Laughs] You may know Grantham as the cofounder of a fair-sized money-management firm – I think they actually do have about $100 billion under management, last time I checked, if I recall correctly. But it's, you know, ballpark, somewhere around there. And Grantham cofounded the firm and he's done a really thorough study of bubbles, asset bubbles. I think they've studied 33 of them, at this point. I was trying to track down the number and I never found it on their website, but it's, you know, maybe a couple or a few dozen. And he's separated this whole category of what he calls superbubbles. I've been calling them mega-bubbles.
But that's one thing we have in common: we've separated the current episode and lumped it in with 1929, the 2000 dot-com era, and I've also discussed the Japan bubble, the biggest bubble outside the United States, the 1989 peak in Japan, which then went into, like, a 20, what, two-year bear market – incredible. And he discussed a couple others in there, too. He's thrown in different pieces that he's written. He has discussed the financial crisis of 2008, and even the bear market of 1973 and '74, the bubble that preceded that. But the big ones, the big ones that he and I both talk about are 1929, 2000, and the present one, which peaked – November 2021, the Nasdaq peaked... the S&P 500 peaked January 2022.
So, there are the three big ones, so we agree on that much. But he also, in this new paper which just came out just a couple days ago, and you can get it – it's for free at GMO.com. And it's called "Entering the Superbubble's Final Act" by Jeremy Grantham, dated August 31. And the other thing we agree on is – I'll just read a little quote from the piece here, he says: "Most of the time, 85% or thereabouts, markets behave quite normally. In these periods, investors are happy enough, but alas, these periods do not truly matter. It is only the other 15% of the time that matters, when investors get carried away and become irrational." You know, and then he talks about various episodes, 2009, '74, etc.
And then he says: "These times of euphoria and panic are the most important for portfolios, and the most dangerous for careers." So they're dangerous for investors... they're also dangerous for careers because people like yours truly, we take a big risk. I mean, we sell stock picks, research, right? We sell recommendations of what you ought to buy. And then, Dan comes along flapping his tongue, saying, "You know, a lot of what you buy at this time, or that time, over the past couple of years, is going to be worth a lot less in the next few years," [laughs] you know? And nobody, including every reader and every listener, just, nobody wants to hear it. While the market's going up, nobody wants to hear it.
And even after it's gone down 20%, some people are, like, "Will you shut up already? I'm sure this thing is going to be over, soon." And I'm saying, "Well, you know, maybe not." Because, as Grantham also says, he says that this 15% of the time is very different from ordinary bull and bear markets. Averaging ordinary bull and bear markets with this handful of outliers, the superbubbles, dilutes the data and produces misleading signals. So, I think that's what's happening right now: you're getting a lot of people talking about, "Where is the bottom? It's around here somewhere, this thing's bottomed already... blah blah blah." I don't think that's true. You know, I stop short of making predictions, and I don't think you should – for example, you should never just go all in and refuse to believe that you could be wrong.
So that's why I always counsel a diversified portfolio. Hold on to your securities that are just the highest-quality businesses. Like, if you own Costco, let's just say, which is an Extreme Value recommendation, I mean, do you need to sell it? Even if it's down 40% or something, do you really need to sell Costco? Are people not going to go to Costco and not still be in love with that business, you know, in 10 years, five years, whenever? Ah, hm, I don't know, I think they are. And we have a bunch of those in Extreme Value, a whole bunch of them. So you need to own stocks, you need to have plenty of cash because there's no substitute for it. It is the ultimate diversifier.
You get these downdrafts when everybody is selling every asset, gold, stocks, bonds, commodities, everything, and what do they – they're basically buying cash, at that point, right? You're selling assets and buying cash. And those are the real panicky moments when people make their biggest mistakes. That's why Grantham is saying, and I'm saying this, 15% of the time, when you get these mega-bubbles and then they start falling apart, that makes all the difference. People ruin themselves, you know, they ruin themselves, they lose 80% of their retirement, they leave the stock market forever, and, you know, their lives change dramatically, for the worse. So that's why, and I've said this before, I've made it my mission, at this point in my career, you know, I've been around this business going on 25 years here, and it's time for me to speak up and help people protect their wealth, and get them through this superbubble mess.
And then, the second part of my mission will be to, you know, get them to embrace buying fantastic businesses, and other things, value plays and other things, you know, as the bubble deflates and creates bargains. And, you know, one day, it'll all be over. These things usually – usually – usually, that's important – don't last more than a couple of years. Like, a two- or three-year bear market is kind of long. So, and even Japan notwithstanding, you know, a two- or three-year bear market is still pretty long even for, like, a mega-bubble episode. So, that's what I'm about, and when I read stuff like – you know, I don't agree with Jeremy Grantham about everything, but he and I are definitely on the same page [laughs] when it comes to, you know, mega-bubbles are different, that's the big point. It's not just a run-of-the-mill bear market.
And this 15% of the time, this makes you or breaks you as an investor. It's horrible that it works out that way, but you can't afford to turn your back on that fact. If you read or if you read my recent Stansberry Digest, you know, I talk about people who – there are two groups of people, right? There's the bull group and the bear group. And I've mentioned some of the bull group, like Cathie Wood, from Ark Innovation ETF, and Adam Neumann, the real estate guy from WeWork who is, he's back in action, these days, still raising money. And I also mention Bill Hwang of Archegos Capital Management – he actually got arrested in April. And these are the bull group, like, they're the ones who put on leverage and buy crazy-garbage businesses that are going up, you know, 200% in one year and –
And, you know, Newman is making these exaggerated claims about asset classes, like, you know, existing commercial and residential [laughs] real estate properties, whose return characteristics are pretty, you know, pretty well-known and they're – you know, you're not going to get a 10-bagger out of them without waiting some time for it. So, you know, people listen to these folks and they just get creamed, you know? They listen to them on the way up, everything's going up, everything looks like it's going to be wonderful forever and people lever up. The one I added to the list that, like, almost pained me to do it because I like the guy so much, was Michael Saylor. And I only added him to the list because he told everybody to buy bitcoin with every penny they had, and then borrow all they could borrow and put that into bitcoin.
And he said that – the first time I heard him say it was 18 months ago, and it's turned out very badly [laughs] if you followed that advice – it's horrible. I think he's basically right, over the long term, but you don't lever into that and only own one asset. That's the insane part that I disagree with. And to be honest, you know, he's like a true-blue entrepreneur, when he says – he did change the world... he pioneered business intelligence, which you might also know as data mining. So, he's more like Aubrey McClendon, remember, the guy from Chesapeake Energy, who became a billionaire and was in the Forbes 2020 Club, which is – his company produced 20% annual returns for 20 years, right? So, you know, he was the real-deal entrepreneur. But he ultimately, also, was too levered up.
The company was too levered up and crashed when oil and gas prices crashed, and he himself was too levered up and he had to disgorge his company's stock position to pay his margin loans, right? So it's really, leverage is the key problem and the key issue. You don't ever want to use leverage with those risky assets. Risky volatile assets and leverage is just a recipe for disaster, right? So that's the, you know, that's the bull club, you don't want to listen to them. But then there's the bear club and nobody – it's funny because everybody wants to listen to the bull club on the way up, you know, and nobody wants to listen to the bear guys like Grantham and me and a few others. But, you know, in the end, like, Grantham is really good.
Like, they did very well, that firm, GMO, that Grantham started, they did very well through the 2008 crisis. And I think that if you prepare for a wide variety of outcomes and don't use leveraging, and the opposite of leverage is holding plenty of cash and prepare for that variety of outcomes. I'm probably going to continue to avoid bonds in the mix because bonds and inflation and rising interest rates, that's just a bad cocktail. So, you know, stocks, plenty of cash, some gold and silver, maybe a little bitcoin is not, you know, it's not a bad – I think it's a great long-term speculation, but that's all it can be. So, that's where I am, this week. Be careful who you listen to. I hope it's not too late to tell you that.
But I think you should be listening to the bear. I hope the bears, like myself and Grantham, are getting a bigger audience, [laughs] now that we've turned out to kind of be right about it, by all appearances. The problem is, like, I think investors won't be prepared, are mostly having trouble believing that this is one of those mega-bubbles, and it's different. It's that 15% of the time when it's not a regular bull and bear market, it's not just a big dip you can buy, so you have to be extra careful. That's what I think will hurt people. So, getting you through that is what I'm all about.
I think I'm going to leave you right there. You get the message, right? "Dan's bearish until he's not." And I see no reason to change my viewpoint, and I see every reason – and when I see guys like Grantham basically underscoring everything I've told you, yes, I'm going to indulge my confirmation bias and tell you about it because I think it's the right thing to do, I think Grantham and I are right. And, you know, I can be wrong, but time will tell, and being prepared for a wide variety of outcomes, how bad could that be, right?
OK, let's talk with a guy who's very good at preparing for a wide variety of outcomes. His name is Austin Root. Let's talk with him right now, let's do it now.
One of the most successful entrepreneurs in America, over the past 50 years, is going public with his fourth and final prediction about a scenario he calls "America's Nightmare Winter" – whoa. You've probably never heard of Bill Bonner, but in addition to owning an interest in businesses all over the globe, he also owns more than 100,000 acres, with massive properties in South America, Central America, and the U.S., plus three large properties in Europe – and I've been to one of them... it's a gorgeous, gorgeous château. And I've known Bill for many, many years... he hired me into this business. And he says we're about to enter a very strange period in America which could result in the most difficult times we've seen in many, many years.
And he's made three similar predictions in his 50-plus-year career, and each time, it proved to be exactly right. Although he was mocked each and every time, and I remember all of them. This is why I strongly encourage you to read about Bonner's fourth and final prediction, totally free today. It's all spelled out in a free report that we've put together called "America's Nightmare Winter." Get the facts yourself, go to www.nightmarewinterscenario.com to get your free copy of this report. Even if he's only partially right, it'll dramatically affect you and your money, so again, go to www.nightmarewinterscenario for this free report.
All right, it's time for our interview, once again. Today's guest is Austin Root. Austin Root is the chief investment officer at Stansberry Asset Management – we just call it SAM, around here. As CIO, Austin is responsible for the development and management of investment strategies across all SAM portfolios. Prior to joining SAM, Austin was the director of research at Stansberry Research, where I work, and the portfolio manager for the company's flagship portfolio products, Stansberry Portfolio Solutions. Austin cofounded and ran North Oak Capital, a New York-based hedge fund that received a strategic investment from Julian Robertson in Tiger Management. He also held senior investment positions at SAC Capital Advisors and Soros Fund Management.
Austin began his career at the Blackstone Group – lots of cool stuff, there, to talk about. Austin has experience investing across asset classes, including public equities, derivatives, venture capital, private equity, real estate, and fixed-income securities. He earned an MBA from Stanford Graduate School of Business, and a B.S. in commerce from the University of Virginia. He is an accomplished fellow. Austin Root, welcome to the show, man. It's good to talk [crosstalk].
Austin Root: Yeah, thanks so much, Dan. It's great to talk with you, and thanks so much for having us. I'm excited.
Dan Ferris: Yeah, it's been a while, gosh. When did you start at SAM?
Austin Root: Yeah, so, gosh, so it was, you know, I started reading your research and presented a couple times at the Stansberry Alliance Conference, prior to joining Stansberry Research. So we met probably a decade ago, and then it was four years at Stansberry Research. And then, it was June of last year, June of 2021, that switched over to Stansberry Asset Management.
Dan Ferris: Yeah, well, I think they made a good choice.
Austin Root: Thank you.
Dan Ferris: Yeah, so, it sounds to me like – how many Stansberry Asset Management portfolios are there? Like, how many different strategies do you manage?
Austin Root: Yeah, so there are five core strategies and – you know, we actually tailor two of those a little bit to resemble the Portfolio Solutions products. We have a Total Alpha product that's similar to the Total Portfolio, and then, as you recall, Porter and I put together something called the Forever Portfolio, when the market was going haywire at the beginning of COVID, just saying, "Look, buy these stocks, own them essentially forever, and 10 years from now, you'll be so glad that you did." Those are the first two, but the other three, really, core products are goal oriented. We think every investor should be goal oriented, so, you know, typically, investors kind of have some combination of three goals, they want to: get wealthy, stay wealthy, or generate income.
And so, our get-wealthy, we have a growth-oriented get-wealthy strategy called Venture Growth. We have a stay-wealthy, which is called All-Weather. It's essentially, you know, that bomb shelter, protect your capital, capital preservation. And then, we have an aptly named Income Strategy for generating sturdy current income.
Dan Ferris: Yeah, so I have to believe that the stay-wealthy is a popular choice, these days.
Austin Root: It is, that's our core flagship, that's a big chunk of our assets. And look, to toot our own horn a little bit, we've done a good job of that. We're pretty close to flat on the year and outperforming the market, in what is, as you know, a pretty choppy market.
Dan Ferris: Choppy. [Laughter] Choppy is a nice way of putting it.
Austin Root: Yeah, a little choppy.
Dan Ferris: And you're flat, in 2022.
Austin Root: Close to flat.
Dan Ferris: That's pretty impressive.
Austin Root: Yeah.
Dan Ferris: Close to flat. How do you get close to flat in 2022?
Austin Root: Let's see, so, first and foremost, we don't feel like we have to be invested, both fully invested or in every product. So, we're sitting on nice dry, you know, stores of dry powder, so that's cash and that's gold. And, you know, recently, now that short-term U.S. Treasurys generate a real yield, we have some of those short-term Treasurys that generate more than 3%. The other piece of it, Dan, is – so that's, we don't mind not being fully invested. I think a lot of investment managers feel like they have to be 100% invested. The other piece of it is, we don't feel like we have to be invested in certain things all the time. So we have avoided fixed-income and bonds, up until very recently with the U.S. Treasurys, because when interest rates or default rates are going up, you don't want to own bonds.
And when they're both going up, kind of right now, you really don't want to own them. So, you know, the traditional 60% equity, 40% bond portfolio that a lot of people think is going to protect you, that had the worst start of the year, ever, and largely because things were so correlated. So the last piece of that, Dan, is we're always in search for uncorrelated or at least less-correlated assets. And so, one thing that we do that a lot of investment managers don't do is we embrace a strategy called merger arbitrage, where you're taking idiosyncratic risk. You know, basically, the example, here, maybe that's in the public markets, is Elon Musk buying Twitter. The risk of that deal has nothing, really, to do with the market. It really has to do with "Will that deal close or not?"
And so, we try to identify opportunities where we can generate a nice return, but the up and down of that investment is not going to be super correlated with the rest of the market. So that's what we've done, and that's helped us.
Dan Ferris: Got you. That sounds really hard. We actually, we had Hugh Hendry on the program, we've had him on a couple of times. And he has a great track record which correlated to nothing [laughs], over a period of many, many years. Presumably, you're not buying, like, German real estate, though, so –
Austin Root: No, yeah, no, it really is, as you know, I mean, it really is hard to find uncorrelated assets or negatively correlated assets. So, we try to find less-correlated assets, but then fill our portfolio up of, you know, world-class companies. We can talk more about that, the kind of things that we're looking for. A lot of them are Stansberry Research-sourced ideas, and then marry those with our own investment analysis, to hopefully come up with a big, you know, an optimized blend of both.
Dan Ferris: Right. And just for the listener, I am sure there's, like, a handful of lawyers in the audience. [Laughter] So, you know, for example, like, I'm not allowed to talk to Austin about the stuff in my newsletter. There is a wall between Stansberry Asset Management and Stansberry Research.
Austin Root: Yeah.
Dan Ferris: But basically, you guys, you're just subscribers, and you use the publications how you wish, and that's your only connection, right?
Austin Root: That's right, that's a great way to point out that we are a separate entity, you know, we get your published research when you publish it, and not before that. And we utilize that research to make our great strategies, and your great picks sort of inform and are the feedstock for what we do, but it's not on a basis that's ahead of anyone else. It's just, we're using that as, like I said, a feedstock for investing.
Dan Ferris: Yeah, but not your only source of ideas.
Austin Root: That's right.
Dan Ferris: Because I've seen some of the presentations, in the past, from folks at SAM, and I remember thinking, "Oh, damn, they found it first," you know? [Laughs] There were a couple of really fantastic ideas that I hadn't seen anywhere in any Stansberry publication. So, you know, when you're not looking at Stansberry publications, where are you looking?
Austin Root: Yeah, we're canvassing all sorts of sources. You know, you mentioned my bio, I've had the distinct honor and privilege to work with a lot of thoughtful investors and smart investors. So, our whole team has similar backgrounds, so we do have a good network of folks to share ideas... we're avid readers, like you, Dan, so we're poring through things. So, there's lots of sources I don't want to discredit, though, Stansberry Research, I mean, you have a lot of great things, there. I wanted to, if you'd permit me, Dan, I wanted to sort of explain what we do and why it may be applicable and helpful to your listeners and your readers, starting with a quote from Porter Stansberry, if you don't mind.
Dan Ferris: Absolutely, yeah.
Austin Root: He said, his quote is: "No matter how much I trust our products and admire our analysts, I would advise every single subscriber of Stansberry Research to hire a money manager." And so, why is that? And so why do we exist? Why do we think we're the right money manager for someone that respects and reads Stansberry Research? Well, I think there's four main reasons, and again, if you'll permit me, I'll go through this with four distinct numbers, and we'll see if this exercise will work. So those four distinct numbers are: 716, 28, 108, and 100,000. OK? 716, 28, 108, and 100,000.
So, let's start with the first one, 716. That is the number of open active recommendations currently across all of Stansberry Research. So –
Dan Ferris: Whoa.
Austin Root: Yeah, so these are great world-class investment recommendations that you, Dan, and the rest of the Stansberry Research team produce, but look, it's just too much for any one person's portfolio. If you invested in all 716, your portfolio would be way, way overdiversified, as you know, and if 1 stock doubles and you own all 716, it has barely any impact on your portfolio. So, the first thing we do, Dan, and why Porter thinks Stansberry Research subscribers should hire the right money manager, which we think, humbly, is us, is to curate those recommendations, those 716 recommendations, pare them down to a "greatest hits" version of Stansberry Research, with portfolios and strategies that are concentrated in our best ideas, the best-of-the-best ideas. That way, when a stock doubles, it really does have a good impact on your portfolio.
So, I know you subscribe to this notion, Dan, you've written about it in EVI, diversification is good, but overdiversification is bad. So, that's the first number, 716... next number is 28. Do you know what that signifies?
Dan Ferris: Stansberry editors?
Austin Root: Pretty close, exactly, there are 28 different investment newsletters that Stansberry Research publishes regularly. And so, again, each of these publications is excellent and serves a purpose and it's incredible investment research, but, you know, to use them the best way, subscribers need to figure out, "What are my investment goals? And how do each one of these publications help me reach those investment goals?" And so, at SAM, we talked a little bit about this already, we tailor our strategies for our clients to meet those individual investment goals. And it can be really powerful for folks to think about, "What am I trying to accomplish?" and then invest accordingly.
So, that's what we're trying to do, here, and we talked about those main goals, you know, do you want to invest conservatively and protect your assets? Do you want to generate income? Do you want to grow your wealth, pass it on to future generations? So that's point two, goal-oriented investing. The third number is 108. You probably know where I'm going with this one, but I'll tell you... that is the number of new investment recommendations that Stansberry Research published just in the last month. So –
Dan Ferris: Oh, whoa. [Laughs]
Austin Root: Yeah, yeah. So again, these are awesome, but how do you try to fit that into your existing portfolio? How do you put it all together? That's really what SAM – we strive to be experts at putting it all together. You know, Dan, like, performing well is not just about identifying great stocks. Arguably, and you've written about this as well, more important than picking the stocks themselves is asset allocation, risk management, position sizing, these are all mission-critical aspects to investment success. And so, we really help our clients put it all together. And then, the final one, I'm exaggerating a little bit, but any guesses as to what 100,000 is? That is the number of e-mails that Stansberry Research subscribers get on a monthly basis. Or, at least, not really, but it certainly feels that way, right?
Dan Ferris: It feels like 100,000, yeah. [Laughs]
Austin Root: And we've talked to subscribers and clients about that and – and the point I'm trying to make here is that, and the point that Porter has made, is that successful investing is time-consuming work. It's hard and it's often very stressful. At SAM, we want to take that burden off our clients, we want to make your investment lives easier and better. So, you know, as you know, as we just talked, these are tricky choppy markets, and we want to help our clients navigate them more smoothly, with better outcomes. But also, importantly, less time commitment and less stress. So, that's our goal and that's – you know, we've had some success with folks working to those goals.
Dan Ferris: Well, yeah, I mean, if you're nearly flat [laughs], that's – at this moment in time, that's the definition of success, really. I mean, you can't expect more than that all you want, but if you're nearly flat, as we speak here, just call it September of 2022, I mean, that's really quite remarkable. I'd want to get eyes on exactly all those positions and see when you did exactly what you did. That would be very interesting to me.
Austin Root: Dan, thank you, I mean, yeah, we're plugging away. And again, not every strategy is that way... our growth strategy, it's not been a great year for growth, so we're struggling a little, there. Folks can go to StansberryAM.com, that's our website... there you'll have information about us. We're having a, you know, Dan, folks can learn more about us on September 8... we have a webinar, 7 p.m. Eastern. So, we're going to try to explain, you know, these are crazy markets and trying to explain what we're doing and how we do it, to try to help people navigate.
Dan Ferris: OK, do we have a link or a URL or something, so folks can sign up for the webinar, yet? Or –
Austin Root: Yeah, so let's – go to StansberryAM.com, and there's a banner over the top, and they can click the link there and get registered. So, we'll also send out an e-mail to your listeners, as well, with an easy link, right there, after the podcast. So, thank you.
Dan Ferris: OK, great, thank you for that. You know, I have to say, I hope this doesn't get, you know, come from too much out of left field, considering what we've talked about so far, but it's hard for a guy like me not to be just a teensy bit starstruck, like, with, you know, Soros and SAC Capital and Tiger. I mean, Tiger gave you money, which is pretty cool.
Austin Root: Yes.
Dan Ferris: I mean, so, you know, I don't want to spend a whole lot of time on this, but I always want to ask the same questions, like a dumb question, like, what was it like? You know, what was it like interacting with, you know, either the individual, like, Julian Robertson, or Steve Cohen, Soros if you interacted with him directly or whatever –
Austin Root: Yeah, no, thank you, Dan, that's very kind. And I was fortunate to work alongside and for some incredible investors. I mean, which one, let's see. So, I would say Steve Cohen, you know, if they all had superpowers, investment superpowers, his one was cutting to the chase, figuring out what matters most to move this stock, and why. And so, you had a very short window to pitch your ideas, and I was fortunate to be able to pitch my idea directly to Steve. Steve sat in the middle of a giant trading floor, in Stanford, Connecticut, when I worked there, dozens of screens around him, and, you know, you had a very short window to be able to pitch your idea. And he had just an incredible ability to listen and then cut to the essence of what was going to move that stock.
So, that's kind of always been ingrained in my mind since, "OK, what matters most to this?" George Soros... I did not have as much interaction with. When I was at Soros, I was on the private equity side, so, we did interact, and so, when we had a major investment committee meeting, he would join. His son was in our group, so I had more interaction with Jonathan Soros. But George, big-picture, just, the things we've all read about that he did even before I joined, you know, in terms of knowing the macro, that was exceedingly important to him. As we would put capital to work in these private equity investments, he was thinking, "OK, how does this fit in terms of in secular trends and our global macro outlook?" So that was always helpful to think about.
Because as you've, gosh, I think you talked about it recently on a podcast, you want to worry top-down, you want to think about these macros top-down. But a lot of times, the best way is to invest bottom-up. So, he was helping, as we were laser-focused on the individual investment, he's helping us think about the top-down worries. And then, just one more, I mean, Julian Robertson, unfortunately, just recently passed away, and, gosh, I appreciate all that he did for me and for so many investors, getting us started and, yes, investing in our hedge fund. One of the greatest things he did for all of these investments, so the Tiger Cubs and the Tiger Seeds, we would have, every two weeks, we would have, on the top floor near his office, giant conference room, we'd have a meeting and we would go through ideas.
And we would pitch ideas to one another, just like, Dan, we had at Stansberry Research, where you'd go through your ideas and have an investment meeting, and people can talk the pros and the cons. But Julian was incredible because he was good at both of those things from the other guys: he understood the fundamental bottom-up investment story, and he also got the top-down macro. So, if you were to ask him, he became famous and his career started by being just a great stock-picker. He would say, "Look, I want to own the 200 best companies in the world, and I want to short against it the 200 worst that I can find," and that's what he did. And yet, if you were to ask him what his favorite trade was, it was a macro trade, it was shorting housing during the housing bubble in 2006, '07, and '08, so.
Dan Ferris: Do you know, how did he short that? Was he just short equities? Or – because, you know, some people, they bought the CDS and –
Austin Root: CDS was the biggest part of his trade because they could get big, there. But they were also short a bunch of equities, as well.
Dan Ferris: Right. Yeah, CDS was the rocket fuel, man.
Austin Root: Yeah.
Dan Ferris: That was the one, like, even the people who bought it, the returns they – you know, they were just, like, looking off the chart at the ceiling, you know, because that's where the lines were headed.
Austin Root: It's amazing, yeah.
Dan Ferris: All right, so, well, thank you for indulging me a little contact with the big starts, there. Another thing I have to throw in about Soros, though, is, like, he gave, like, a Google talk or something, once, and he said, you know, "The secret of my success, if you want to know it, is I'm always wrong, but I always fix it." You know, "I'm always wrong, always," he said, "But I go in and fix it, and then, you know, that's how I make money." I found that really interesting because we have many, many traders, like, Market Wizards-type folks and other traders on the program here, and they always are telling me, "Well, I'm actually wrong more than half the time, but I cut my losses quickly and let my winners run and all that stuff."
And I found it interesting that this guy who is known, as you said, for having a really good view of the whole top-down picture, that's what he's known for, he's not telling us that that's his secret. He's telling us something completely different. I found that interesting.
Austin Root: Well, I mean, I guess adding to that, you know, he had courage in his convictions, right? So he may be – that's the batting average versus slugging percentage: he may be wrong a lot, but when he hit, he put a lot of wood behind it, and so, he was hitting home runs.
Dan Ferris: Yeah, very interesting. And very interesting and, like, dangerous for normal people, right?
Austin Root: Mm-hmm.
Dan Ferris: I mean, you know, I know, like, I've heard him talk and I've heard Stanley Druckenmiller talk, and, you know, they talk about having a lot of conviction on one idea and putting leverage into it and stuff. And I'm thinking, "God, everyone within the sound of my voice would be ruined by trying to imitate this," right?
Austin Root: Yeah, leverage is a dangerous thing, absolutely, absolutely. If you'll indulge me again, Dan, I had a question for you.
Dan Ferris: Sure. [Laughs]
Austin Root: So you, you know, you're extremely well-read, you've read more investment books than anyone I know, I think, but you also have the benefit of working with a team, Stansberry Research, you know, 30 analysts and editors that are thinking about the world in lots of different ways. I just, so, you know, we're talking, here, at the beginning of September, I just picked a couple of things from some gurus at Stansberry Research, recently written, and I was curious how you deal with this. So, on the one hand, you have folks like Greg Diamond, Marc Chaikin, Corey McLaughlin, very bearish. So, Corey recently wrote the latest bear market rally is over and we're still in a bear market... Greg Diamond is warning about new losses... Marc Chaikin says the worst is yet to come.
On the other hand, the same day, same publishing date, Brett Eversole and Steve Sjuggerud's team said the bear market bottom is in. Because they're looking at some quantitative stuff that says when stocks recover at least 50% of their overall losses, you know, over the last 72 years, you haven't seen new lows go in. And so, that indicator's had a perfect record so they're looking at that. So, Matt McCall – Matt McCall was also bullish, you know, he said that it's just a matter of time before the market takes off in a huge way. How do you, Dan, circle the square on those different things? And then, how should our, you know, as a reader, as a reader personally and then as other readers, how should they think through those conflicting views?
Dan Ferris: Well, you actually touched on – let's take the last one first, how the reader should do it. You touched on this by saying that every investor should be goal-oriented, and that goes a very long way. That sorts through all those, you know, 28 publications and 100,000 e-mails and all the rest of it pretty well, provided you know yourself. And there's two parts to that: you have your conscious goals that you're looking at as an investor, but you're also responsible for knowing yourself and what you can expect yourself to do. If you've got your hand on the buy and sell button for 80% of your, you know, liquid investable assets, you had better have a lot of confidence that you will behave well in years like 2022. Because most people won't.
Austin Root: Gosh, I 100% agree with you, Dan, yeah.
Dan Ferris: Yeah, so, knowing yourself and having those goals, like, you know, like, we provide research at Stansberry Research, and we don't do what they do at SAM. So, if you're not, you know, letting SAM do it, you'd better let somebody do it, or be really great at it yourself, that's number one. And as far as sifting through, you know, this one's bearish and that one's bullish, I've said many, many times, and I know you'll recognize this phrase, "Prepare, don't predict," you know? In the next issue, the September issue of Extreme Value, which will come out on Friday, I'm going to do the prepare, you know, don't predict thing again, and I'm going to remind people, like, don't be – I'm going to tell them to hold plenty of cash, as I have many times. But don't be underinvested, either.
You know, if you've only got 10% of your money in stocks or 0% in stocks, you are probably making a mistake. You know, if you're a self-directed investor and you think you're going to, like, wait it out until the bear market bottom comes, well, what if you're wrong and Steve Sjuggerud and Brett Eversole are right, and the bottom is in and you're missing all this, you know? And you actually, you touched on another thing at the beginning, you said, "You know, Porter and I got together and created the Forever Portfolio," and you did it at the brilliant moment, too, right, in early 2020, there, right? So, I would just caution people against thinking that they can predict these things, and that they know, well, you know, either know for a fact that the bottom is in or the bottom isn't in.
That's not where you make your decisions. That's one of our top-down worries, you know? We prepare for things... we don't base our investment decisions on predicting. And I think those two ideas, you know, knowing yourself and "prepare, don't predict," that covers a lot of ground for me.
Austin Root: It makes a ton of sense.
Dan Ferris: Yeah. And I'm one of those bearish people too, by the way, and I'm still making equity recommendations, so.
Austin Root: Yeah, that's right, I think that folks that read your Digest and aren't yet subscribers of EVI may not fully appreciate that. Like, yeah, you need – there's a troublesome macro backdrop, you need to be hedged, you need to have dry powder. But you also, you guys are identifying some world-class investments and businesses to invest in alongside that conservative, hedged positioning.
Dan Ferris: Right, so, and, you know, I'm going to put on my third of these, you know, macro pairs trades, and then I'll probably not do any more of that in Extreme Value. And we'll go back to, like, we have a couple of them, if we can just get another 10% to 15% down on the price, we're going to be really excited about them. And they are amazing businesses. I don't want to tell you what the name is [laughs] because that's for the subscribers, but I know you would recognize them instantly as incredible compounders and with great management teams. So, yeah, it's –
Austin Root: Well, I and the rest of the readers are looking forward to that.
Dan Ferris: Yeah, I'll tell you, it's not easy, you know, all this stuff. If it sounds like I'm not giving, you know, we're not giving definite answers, that's because it's not easy. Charlie Munger said if you think it's easy, you're stupid, so.
Austin Root: [Laughs] Right. I got a book question for you, Dan. Have you – well, let's see, so I thought you were going to ask me the question, what kind of investor am I. And a lot of people say they're either value or growth. There's a book, that was written about 20 years ago, that had a big impact on me called Valuegrowth – smashed together, one word. A professor in I think Britain, named Glen Arnold, put this together, but it's really stuck with me, and in my mind, I am a smashed-together Valuegrowth investor. Have you read that book? Are you familiar with it?
Dan Ferris: I have not, and I'm bringing Amazon up right now to search for it, so I can get it. [Laughs]
Austin Root: You know, and at the heart of it, he's, like, "Look, it doesn't make sense to split value from growth because aren't we all value investors? You know, aren't we all trying to find things to and own that are less at a discount to the intrinsic value, that we think eventually the value will trade up?" So we're all value investors, but then at the same time, growth plays, necessarily plays, a big part in how you calculate value. So, we're kind of always growth investors, too. So, you know, I'm a Valuegrowth guy, together, and I think that's a really cool book, actually, he goes through looking at some great investors over time, Buffett and Munger among them, which made me think of it. And then, _____ taking their lessons learned and sort of applying it in this framework of, you know, just finding the types of companies that you and I have talked about in the past.
I mean, when we invest in companies, we look for four things. We look for durable franchises with runways for growth. They have good returns on investment and thick profit margins. They're run by ethical leaders that ideally have – that they're good at what they do and they ideally have skin in the game and they're vested alongside our shareholders. And then finally, they trade a reasonable price... they don't trade at nosebleed valuation. So, I'm always looking for all four of those things, and this book sort of talks about kind of doing both of those things, as it can be really valuable for investors.
Dan Ferris: So that really makes me wonder, before you read that book, where was your mind before you read that book? Were you more value, more growth, you know, something else entirely?
Austin Root: Yeah, I was, so, it was earlier in my – it was written 20 years ago, so luckily, I had been informed for a decent chunk of my career – I'm not super young. But, yes, the early part of my career, prior to reading that book, I think the – I probably skewed more to the value side, finding things, you know, that traded at a fraction of what I thought they could, what it was worth, I guess. Buffett and other people have talked about more of the cigar-butt investing, and so, you know, when I would run quantitative screens, it was finding things that traded at low P/Es or low price-to-book. But have sort of come to realize that, you know, quality and growth are really important, too, for long-term capital appreciation
Dan Ferris: I have another question for you, then. Before that time in your life, maybe when you were very young, first heard about the stock market or anything, did you ever go through a period where you were just kind of looking at price charge, trying to predict where prices would go, and thinking that that was the important thing?
Austin Root: Sort of. I can think – so we had a stock market competition in middle school, and there was an award for whoever picked the stock that went up the highest percentage over that quarter, and then whoever had the largest dollar-value change over that quarter. And I knew nothing about the market, you know, I wanted to make money, like anyone else. But I had never heard of this company, I didn't even – but I picked Berkshire Hathaway because it had, simply, the largest share price. And so, it only went up – it went up less than 1% over the quarter, but I easily won that because it was up, I don't know, $300 in nominal terms, in terms of the share price. So, that fascinated me, and, yeah, I mean, watching things going up and wanting to own things that go up, that's probably, first and foremost, where I was at. But, yeah, how about you, were you always a value investor?
Dan Ferris: No, no, I was, you know – this is actually, this is a progression that I've seen in people, and I think it has to do with, like, it's availability bias, right? The most available piece of data is the price, and then you look at a chart of the price, which is pretty widely available, even before the Internet, and you're, like, "OK, well, I can look at the price in the newspaper and, you know, maybe I can get a chart or something." But you can always find the price, so that's what people focus on, they want the price to go up, why will the price go up. And then at some point, if you continue to grow, you say, "Well, I want to buy low and sell high. I want the cheapest thing so that I can make the most." And then at some point, you're, like, "All this cheap stuff is cheap for a reason, man. I've got to get out of this." [Laughs]
And then you figure out what, you know, what lots of people – and the classic example, of course, is Warren Buffett, you know, he stopped the cigar butt thing – the story is he met Charlie Munger and stopped the cigar butt thing, and focused on really great businesses with great management teams, etc. And this is, it's just a progression and a kind of growth that I see – I won't say I see it again and again, but I see something like it, over and over and over. You know, a typical thing for a guest on the show, here, will be, "I got really excited during the dot-com boom, and I bought these things and they all went up 500%, and then I lost it all, you know, and I wanted to figure that out." And some of those people will go off after that and say, "Well, then I became, you know, a market wizard."
And then some will go off and say, "Well, I became a Valuegrowth guy," like Austin. So, it's interesting to me how people wind up here, and a lot of people do wind up here. I mean, that's what Extreme Value is, right? you know that: we're just trying to find – you could just about describe what you did, what you're looking for, as what we're looking for in Extreme Value: great businesses, great management, the ability to grow. And a price that does not reflect that growth has been our thing for the past few years, now.
Austin Root: One hundred percent. We are, just to plug Extreme Value, we are avid readers, at SAM, of Extreme Value. I look forward to each one of your issues, particularly, frankly, when you're recommending one of these world-class businesses. But, yeah, if your listeners want to read – if I can scrap everything I said that the beginning and say, "Look, you just read five newsletters from Stansberry Research," EVI would be one of those five.
Dan Ferris: All right, you heard him. [Laughter] He doesn't make anything from Stansberry Research.
Austin Root: That's right, yeah.
Dan Ferris: He's just being honest, folks. All right, I appreciate it. But let's face it, you know, Extreme Value is never going to be read by, you know, hundreds of thousands of people, but then every one counts. So, I appreciate it.
Austin Root: Yeah, it should be, it should be.
Dan Ferris: There you go. All right, well, actually, we have been talking for some time, now, so, but I do want to give you an opportunity, like, I'm going to ask you my final question, but I also want to hear you tell me, like, I just want the SAM tidbit. I want the SAM, like, sum it up, you know, what should our listener know about SAM? What is SAM going to do for them that nobody else is, maybe is the question?
Austin Root: Yeah, I'd say that there's maybe three things that are different from us, from a typical investor. So, I don't know, Dan, you've probably seen this, too, over the last 30 or 40 years, the investment community has bifurcated into two types of financial services providers. There are the stock pickers, the T. Rowe Prices of the world that all they do is spend time picking stocks, and then, they don't have any relationship with the individual investor clients... you get those funds through someone else. And then there are the asset gatherers, they're the investment advisor that will help you with the goals and think through how to structure your portfolio. But they're not actually doing the investing... they're using the T. Rowe Prices of the world to do that investing, and they're putting you in a bunch of funds.
We're striving to do both. You know, we want to be – you know, I, listen, you, Dan, and Steve Sjuggerud and Doc Eifrig and Porter Stansberry, you guys built Stansberry with the Golden Rule, which is, you know, creating a product that you would want if the roles were reversed. That's what we're trying to do at SAM: I would want my financial advisor to know what I'm invested in and why. And so, that's what we're really trying to do, build informed portfolios, and helping you with your investment goals and asset allocation and all the bigger sort of financial planning things. That's point one. Point two is, we are small enough to know you but large enough to serve you.
There are so many mega-financial advisors out there that can't say that, but we can say that. You'll have a dedicated customer relationship manager that you can call about anything, but on top of that, I, as chief investment officer, you can reach out to me, talk to me. We have live meetups, we have webinars, we have lots of written communication, so, we stay in touch with our folks. And then the final piece, I think, that makes us most unique is we have Stansberry DNA. We greatly respect the research that's being done here. So if you're someone that trusts and respects the work that's being done at Stansberry Research, but you want a steady hand to help you do it, to help you along that journey and just make it easier, life a little bit easier and enable you to sleep better at night, and produce what we think are decent returns, we're the shop to partner with.
Dan Ferris: All right, excellent. So, that's SAM specific. Now I'm going to ask you my final question, which is the same for every guest, no matter what the topic, even if it's nonfinancial. And the final question is: If you could leave our listener with a single idea today, what would it be?
Austin Root: A single idea, and it could be investing or about life, anything.
Dan Ferris: Yes, anything.
Austin Root: Well, I've been thinking about this concept, notwithstanding something we said before, but I've been thinking about this concept a lot, lately, and that is: embrace concentration. In all that you do, I encourage folks to embrace concentration. So, in the investment life that means, don't be afraid of having larger investment positions in your very best ideas. Go ahead and hold those big ideas, so long as you still believe in them. Don't overdiversify... because that 200th idea will never be as good as your very best one. So that's the investment side of embracing concentration. I think on the life side, I just think it means filling up your day with things that you really love doing, and with people you really love spending time with. Concentrate the bulk of your day on what matters most to you. And I think that everyone, myself included, and you Dan, your life will be happier and better for it if you embrace concentration.
Dan Ferris: Sounds good, thank you, that was really a good one. Listen, it's been great just to talk with you again. It's been I don't know how long since we have, and I hope that we will get a chance to do it again. Maybe we'll check back in with you in six or 12 months or something.
Austin Root: That's great, Dan. It's been absolutely a pleasure for me. Yeah, I look forward to seeing you. You'll be in Boston for the Alliance Conference?
Dan Ferris: I will, I'll be there.
Austin Root: Great, so we'll see each other in person, but, yeah, I'd love to come back. I really appreciate this opportunity, and I'm a longtime listener and so it's great to be a participant, as well.
Dan Ferris: All right, thanks a lot, man. I guess that's bye-bye for now. We'll talk to you soon [crosstalk].
Austin Root: Awesome. Thanks, Dan.
Dan Ferris: Wow, really great to hook up with Austin Root, again. It's been years, I think, since he and I have spoken, and obviously, I mean, all you have to do is look at his resume, and he's a pretty impressive guy, right? You know, Soros and Robertson and Steve Cohen, it's pretty amazing, so it didn't surprise me at all when I heard the news that he was going to be in charge over at Stansberry Asset Management. And again, if you want to look at the webinar and see what Austin and Stansberry Asset Management and all of that, go to StansberryAM.com, and there's a banner at the top of the page and you can sign up for the upcoming webinar. I encourage you to do it, you know, even if you, you know, you don't think you're going to become a client or whatever, just, you know, it's another opportunity for education and learning about investing from somebody who really knows investing and has spent his career investing lots of other people's money. And also, just a great guy, as you could tell... really, a great conversation. I hope you enjoyed it as much as I did.
All right, let's take a look at the mailbag. Let's do it right now.
Look, I think you know, by now, I'm always trying to tell you the really hard truths, even when, especially when, what I have to say is unpopular. Today, the hard truth is that your wealth is in danger. Everything you may have made in the bull market over the last decade could disappear very quickly... some of it's probably gone already. This process has already started, and even if the financial markets somehow avoid a devastating crash from here, inflation is still eating 8% of your money every year. I've spent 20 years helping people prepare for extreme market shifts just like the one we're going through right now, in my role at Stansberry Research. I recommended 24 triple-digit winners, and I called the collapse of Lehman Brothers with near-perfect timing.
Well, today I am issuing my biggest warning ever. If you want to preserve your retirement and your lifestyle in the coming years, you need to act. I recently went on camera to lay out a simple one-step plan for what to do... you can set yourself up in minutes and likely forget about inflation, rising prices, or the worst effects of a market crash, for years to come. This plan does not involve options, shorting, crypto, or anything complicated, and it doesn't require perfect timing. The perfect time to act is right now, and you could see triple-digit upside in the coming years. To watch my full interview with the brilliant financial journalist and hard-asset expert Daniela Cambone, simply go to www.crashprotection2022.com. Again, that's ww.crashprotection2022.com, to watch our full interview for free.
In the mailbag each week, you and I have an honest conversation about investing or whatever is on your mind. Send questions, comments, and politely worded criticisms to [email protected]. I read as many e-mails as time allows and respond to as many as possible. Or call our listener feedback line: 800-381-2357, tell us what's on your mind, and hear your voice on the show.
We have a really good question, this week, and I want to start with this one. This is from Tom S., he's a Stansberry Alliance member, and he says, "Dan, I appreciated your interview with Mike Barrett. This may seem like a naïve or stupid question, but can you describe the differences between Mike's new subscription, Select Value, and your Extreme Value? As always, I appreciate your approach on the podcast, and appreciate your humility and honesty. Thanks in advance, Tom S." So I pinged Mike Barrett because I thought, "Well, I think he'll be able to explain this better than me," because he's deeply involved in Extreme Value, and Select Value is his product, he's the guy in charge.
So, Mike says: "The best way to visualize the difference between the two is to look at the Extreme Value portfolio page online or the last page of the issue. Five years, 10 years, even 20 years from now, we expect most of the existing recommendations to still be there, particularly, the crown jewels. These are excellent investment ideas for long-term permanent equity capital." And he points out that Automatic Data Processing has been on the back page for 14 years – still there. Then Mike says, "Select Value Opportunities takes a different approach. Here, we're taking the same valuation framework that we use in Extreme Value, and combining it with Stansberry's powerful IT platform, to find shorter-term investment opportunities among the market's 100 leading stocks, some of which also happen to be covered in Extreme Value.
"By reranking the market's leading stocks daily on a valuation basis, a service not available anywhere else, Select Value expects to find a large number of actionable investment ideas that are more opportunistic in nature... meaning, the ideas are more appropriate for capital commitments up to two years." That's Mike's answer. As usual, it's very thorough and to the point, as well. I hope that helped you, Tom.
Next is Wade S. Wade, I feel like it's been a long time since we've heard from you. Good to hear from you again. Wade says, "Dan, your AMC – " he's talking about the company AMC Entertainment, the meme stock, one of the meme stocks. "Dan, your AMC discussion spurred a thought: what AMC's management is doing sounds unethical at best, in creating special securities that effectively dilute uninformed shareholders. Sounds like something that a tort lawyer might see as an opportunity, or something incumbent corporations might see as an opportunity to promote regulations that increase barriers to entry. P.S. I don't like the stick-it-to-the-man sentiment, either. It's a subtle and insidious expression of envy. Full expression of envy are movements like the Cultural Revolution and other violent communist and socialist revolutions. Happy listener, Wade S."
Yeah, I hear you, the AMC APEs, the shareholders call themselves APEs, they think they're sticking it to the man, but they're not. They're having it stuck to them by the market-makers like Ken Griffin, you know. His net worth goes up a billion, and somehow they think they're sticking it to the man. It's ridiculous. And, you know, they're naïve and uninformed, and, yes, I believe AMC's management is exploiting them. I think what's going to happen, though, with the securities that were created, they basically created what is nearly identical to common stock, but they called it something else. And I think the shareholders are probably going to say, "Look, just convert it all to common stock." I think they are going to force that, eventually, you know, sooner, maybe, rather than later.
But, yeah, AMC, you know, it's actually sad, like, maybe I make fun of these people or something who are buying this garbage, but ultimately, it's sad. Because people have so much conviction, right? In my rant, I talked about Michael Saylor's conviction is just too high. You can't go into anything and say, "It's impossible that I'm wrong about this," and yet, here they are. And AMC is just flushing their money down the toilet. They bought that gold-mining stock, Hycroft, you know, that thing was shuttered because $1,700 to $1,800 gold is not enough to make it worth mining it at that location. They need, you know, $2,500, $2,000, $2,500, or more, right? And when are they going to get that? Who knows. It's a bad situation and the poor shareholders are just not an informed group.
Anyway, next comes Lodewijk H. And Lodewijk H. is our longtime listener and very frequent correspondent, he usually writes me two or three e-mails a week. And the question this week is one that he has written before – I haven't read it. He says, "How do you make money on the war in Ukraine?" Lodewijk, I think the main way to do that, these days, the most direct way, is just to be long oil and oil equities. I'm not on the ground over there. You're in Europe, right? I'm not in Europe, so you probably know more about the political situation and are more informed about that than I am. But overall, the play that is most directly related to what's happening in Ukraine is oil. And I think the other fundamentals, you know, the constant, basically, the Green Movement, this idea that you're going to spend all this capital on all these alternatives and be able to get away from fossil fuels really quickly, I think it's completely bankrupt.
It's why things cost more, you know, and it's why there's an energy shortage in places like – well, you know, in Europe, in places, they're talking about having a really cold, hard winter over there because of the cost of energy. And there's even, you know, you probably saw in the news that California says, you know, you're not going to be able to get an internal combustion engine, gasoline, you know, a normal car, there, starting in I think it's 2035. And very recently, like, not long after they said that, they said, "Um, if you have an electric car, don't charge it until after a certain time of day because there's not enough electricity." I mean, it's so obvious what's going on, here, right? The green technology is basically virtue signaling, and there's a long, long, long way to go before this stuff can be ubiquitous. If we ever want it to be.
You know, fossil fuels work great. It's the devil we know versus the devil we don't, and the devil we don't is making people poorer, right now. And that whole problem means that – and you can see this in the financials of oil and gas companies, I may have even mentioned it on the show once or twice, they're spending less. They're investing less in generating oil and gas because they know the government, Joe Biden has said, you know, "We want to put you out of business forever." [Laughs] Not a huge incentive to go spending a lot of money, you know? Your incentive is just to take your profits and buy back the stock, or give shareholders bigger dividends, or something like that. So, oil.
That's all I got for you, Lodewijk. Good question, though. It's always a good question to, you know, look at some world event and say, "Is there a way to, you know, invest and benefit from this?" even if it's something horrible like war. I know – Lodewijk also wrote in his e-mail that, you know, he doesn't like it, but, you know, there's capital to allocate, so we need to do that. And I'm sure you feel the same way as I do.
Well, that's another mailbag, and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We do provide a transcript for every episode, just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy. If you liked this episode and know anybody else who might like it, tell them to check it out on their podcast app or at investorhour.com. And do me a favor, subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow, with a rate and a review. Follow us on Facebook and Instagram... our handle is @investorhour. On Twitter, our handle is @investor_hour. If you have a guest you want me to interview, drop me a note at [email protected] or call the listener feedback line: 800-381-2357. Tell us what's on your mind and hear your voice on the show.
Till next week, I'm Dan Ferris. Thanks for listening.
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