Episodes

Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.

Corey McLaughlin: And I'm Corey McLaughlin, editor of the Stansberry Digest. Today we're going to talk with our colleague, Dave Lashmet, editor of Stansberry Venture Technology.

Dan Ferris: And our topic for Corey and I today will be something like Fed make big mistake again.

Corey McLaughlin: And remember, if you want to ask us a question or tell us what's on your mind, e-mail us at [email protected].

Dan Ferris: That and more right now on the Stansberry Investor Hour. All right, amigo, I'm just letting the listener know Corey e-mailed me this morning.

Corey McLaughlin: Fed make big mistake.

Dan Ferris: Well, yeah, Fed make big mistake. That was the e-mail that Corey sent me this morning. And I have to say, it's probably true because –

Corey McLaughlin: All right.

Dan Ferris: – because we all know the situation, right? But let's just frame it quickly. The economy appears to be in fairly good shape just by the headline numbers of growth and maybe even inflation is indicating more economic activity. There's basically you look at these numbers and then you hear the Fed saying this week, "We promise we're going to cut rates soon." And it doesn't connect. It's a total disconnect. So if, you know, inflation might be ticking up or remaining somewhat volatile, let's just say, and if the economy is growing and unemployment is still near all-time record lows or 40-some-odd-year lows, not too far above them, why are they talking cuts? You know? It just doesn't make a lot of sense.

Corey McLaughlin: Yeah. I think it surprised me a couple weeks ago and we haven't talked about the Fed in depth in a while, but it surprised me a couple of weeks ago when Jay Powell was testifying before Congress and literally promised that the Fed would be cutting rates later this year. Said we can and will, right? So the market is definitely expecting it, right, no matter what and they're believing it. And which, one, that creates a problem for the Fed in and of itself. Like if they even wanted to change policy, which they could, it would lead to some – I think a lot of market volatility, I think.

Dan Ferris: Right.

Corey McLaughlin: Just with the rejiggering of those expectations. And yeah, I just the longer this like volatile inflation goes on, which oil prices are up 20% since December. That's not insignificant.

Dan Ferris: Right.

Corey McLaughlin: And they're just kind of pretending that everything is OK. Like that doesn't matter. Which it will matter eventually I mean to a lot of people.

Dan Ferris: It will.

Corey McLaughlin: So I just don't get it. I'm not the only like – I thought I was like alone in thinking this, but then I heard other people talking about it –

Dan Ferris: No.

Corey McLaughlin: – after the Fed meeting this week.

Dan Ferris: Oh yeah.

Corey McLaughlin: And I was like, OK, I'm not crazy here.

Dan Ferris: You're not alone. Like it's all over sort of macro financial Twitter. Bob Elliott who we've had on the show, former Bridgewater guy who founded a company called Unlimited Funds now, his tweet I thought actually summed it up pretty well. He says, "The majority of Fed board members project that through the end of 2025, growth remains above potential, unemployment remains at secular lows, core PCE remains above mandate for the fifth year, and the Fed will cut 175 basis points or more."

Then he says, "One of these things is not like the others." And it's the cuts because you don't cut under those circumstances. It makes no sense. So then the next question begged by all this is are the Fed telling us we think this is, you know, these other three things, you know, the growth and the unemployment and the core PCE, they're not going to be looking so hot by the end of 2025? Are they telling us that? I don't think they are. I think Powell would say it.

Corey McLaughlin: I don't think so either because they just came out – yeah, no, one of the – this was one of those meetings where they do the quarterly projections and they bumped up the expectations for GDP for the year. So, to over 2%. It was like in the ones when they did this three months ago. So no, they're projecting more growth, same rate cuts, same amount of rate cuts, lower unemployment and lower inflation somehow. So I don't know. Something is missing there.

The only thing I can think of is that maybe – and they'll never say it but the political angle of all of this and the amount of debt that – the amount of fiscal debt that the government has and just the – it's like $1 trillion every 100 days in interest payments right now. And Powell also said a couple months ago, like it's time to have an adult conversation about the debt. So he's obviously thinking about it. So that's where I come down. Like that's the only thing that makes sense to me. He sees a lot of like possible trouble ahead with that and the refinancing of corporate debt and that whole thing, that whole thing, the big thing.

Dan Ferris: Right, but the political angle. What you started out with, the political angle, to me that's it. It's an election year so they have to keep jawboning about cuts. Don't worry. We're going to cut, and the market of course loves it, you know, including gold of course, right? There's a reason gold is making new all-time highs about $2,000 and it's because, well, it doesn't make a whole lot of sense to promise cuts under these circumstances... but it does make it if you view the Fed as being much more beholden to political interest and much less independent. Like everybody talks about their independence which is baloney.

I did a whole issue of The Ferris Report about this and I used the example of Arthur Burns in the 1970s and I called the issue "The Corruption of Arthur Burns" because there's all these telephone transcripts in which it just basically catalogs how heavily influenced by Richard Nixon he was. I would almost say controlled, you know. And he did the same thing. He apparently, you know, you can't say it with certainty but his actions indicated that he was interested in helping Nixon get reelected basically with monetary policy.

I'm not saying that Powell wants Biden to get reelected. I'm not saying that. But he doesn't want the election to be – he doesn't want things to be chaotic. He doesn't want to get blamed for making things chaotic, right? So he's like, "Don't worry. Don't worry. We're going to cut." Makes no sense and he's going to – if they follow through on all this, if they're right about the projections through the end of 2025 and they follow through, you know, PCE will be ticking back up. We will be back. You know, CPI, all of it will tick back up. Oil, probably natural gas will get off the bottom here, and gold will keep going, you know, $2100, er, $2,200, $2,300, $2,500, whatever. $2,500 seemed like a distant dream not very long ago. It's like was it every going to get up there. Now, it's in spitting distance -

Corey McLaughlin: Closer.

Dan Ferris: – but it's a few hundred bucks, yeah, so.

Corey McLaughlin: Yeah. Just one more note on the political angle of this. And this is the kind of thing that makes you think about, you know, you have Janet Yellen, a former Fed chair, as the Treasury secretary currently. You have Powell's former and the Fed's like No. 2 person, Lael Brainard... a senior economic adviser for the Biden administration right now. So, you know, there's all – they preach financial – they preach political independence but there's so many conflicts like that that you could easily point to.

And then the second point, like what does this mean for the markets? It's probably not all that bad, you know, generally speaking because if – in the short term if inflation picks up and economic growth picks up and these cuts do what they usually do, that's not a terrible thing for, I don't think, the direction of like the stock market in the short term. However, you get into this just this high inflation story again in a year or two and we're in that cycle that we've talked about a while ago, like hiking – keep your incremental cuts in a longer hiking cycle, like you know. And so I think that's where it's headed. That's the only way I can see it.

Dan Ferris: Nah, it makes a lot of sense, doesn't it? It just the pattern, the seventies pattern that you just described, yeah, you know, it was sinusoidal. It was really three kind of peaks that went higher and higher of interest rates and inflation and then there were cuts in between there. Basically the cuts didn't work and we wound up with double digit like grotesquely bad inflation. We know like over history, we know how this goes, you know? Do they save the currency or do they save the bond market and the banks? Well, they always save the bond market and the banks. They always sacrifice the currency.

So eventually, we kind of know where this is headed but that's long term. In the meantime, the dynamics are not easy to figure out at all. Like the dynamics with the dollar, I keep seeing people talking about the dollar being, you know, imploding and even hyperinflation gets mentioned in the U.S. dollar every now and then like nuh-uh, nope. If the U.S. dollar goes that way, everything else will have gone that way, you know, well before it... and we're not there yet so.

Corey McLaughlin: Yeah, that's a totally different story.

Dan Ferris: Yeah, totally, yeah.

Corey McLaughlin: Well, it's a totally different level of the story, I would say.

Dan Ferris: Yes, it is. Yeah, different level of the story. In other words, I just don't want anyone to think we're saying, you know, this is a one-way trip. It's a done deal. They're going to cause inflation. The dollar's toast. Life just ain't that simple.

Corey McLaughlin: Right.

Dan Ferris: But markets do get a hint of what's coming and the gold market certainly seems to have a hint. You know, I saw an article yesterday that pointed out that like retail investors are selling. They're redeeming the big publicly traded gold trusts and they are certainly not buying gold stocks. And the central banks are doing the buying. So that's maybe what's pushing the price up here. History unfolds and it all turns out very oddly. Who knows what will happen next? You better be prepared is all I have to say.

Corey McLaughlin: Yeah, for sure. You look back on it and then it makes a lot more sense, but one other thing on the Volcker/Arthur Burns reference. That was a really good issue you wrote by the way.

Dan Ferris: Oh thanks.

Corey McLaughlin: I saw one comment over the past week that Jerome Powell may have started off sounding like Paul Volcker and, to your analogy, wanting to be the coolest kid in high school. But now he's sounding more like Arthur Burns and looking like it.

Dan Ferris: Yep.

Corey McLaughlin: And I think that is a narrative and idea to consider if you haven't been considering it because I think the next part of this is just higher inflation than normal which we've had already and we've seen what that story is like. And I'm seeing some of the same things happen again. Like energy stocks are taking off again. Gold's taken off. I mean it's like I feel like it's back in 2020 with some of the details different and so, yeah, just be on the lookout for that, for those things, I would say.

Dan Ferris: And maybe, just maybe, you know, speaking of gold and energy, maybe we also get a run out of biotech stocks that we talked about with Erez Kalir recently.

Corey McLaughlin: Right. Yeah.

Dan Ferris: Because they're sort of beaten all to hell as he described so who knows. Who knows what kind of a run we get over the next – well, just call it through the end of 2025 since we're talking about Fed projections. And if they're right, oof, well, you know, some of this stuff could scream, I guess. Gold is already starting to. I'd love to see the gold stocks start to. I think that's a great opportunity there. It's been weird for the past couple years to see gold up and gold stocks some of them like way down. Like past couple of years, Newmont's down by like more than half, you know.

It's just it shows you how different those ideas are. Like you hold gold as an insurance policy maybe, as inflation hedge and you buy gold stocks really as a speculation on the mining industry. It's a highly capital intensive, highly competitive, just crazy highly cyclical industry. And they are different bets. I do acknowledge – I just want the listeners to know, I acknowledge the difference in those two bets. But at some point, those alligator jaws of that chart of gold stocks and gold, they have to close up, I think. And this could be it. This could be the catalyst – more cuts or promises of more cuts even.

And just mentioning the biotech, there's things to do, right? There are things to do right now that you probably ought to do. So kind of an interesting moment. As you pointed out, bullish in the short term, right? Not a bad one to be in the markets right now. Not a bad moment, you know. And speaking of biotech, our guest today is an expert on biotech among other technologies. He's probably one of the smartest – definitely one of the smartest people I know and one of the sort of my –

Corey McLaughlin: Me too.

Dan Ferris: Yeah. One of the most reliable experts I think that I've ever encountered in biotech and some other technologies, too. Like I had a lot of questions about the semiconductor industry recently and he was the first guy I went to, and he answered like almost all of them. So brilliant guy, has a great track record. Lots of triple digit winners. And he wants to talk to us about biotech and specifically these weight-loss drugs and stuff today and who knows, whatever else is on his mind. I can't wait to find out. His name is Dave Lashmet. He's our friend and colleague and editor of the Venture Technology newsletter here at Stansberry and let's talk to him. Let's do it right now.

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Dave, welcome back to the show. Always good to talk with you. Actually I've become personally more interested in a field you know all about just recently because we had Erez Kalir from Porter and Co on, and he got me all interested in biotech because they're super dirt cheap by like Ben Graham's standards. So you know, like biotech is something I never care about because I don't know anything about all the science behind it which I know is your bailiwick. So I thought, well, we've talked to Erez. I think we should probably talk to Dave, too, about this. I don't know if you've heard him talk about this, he's super excited about biotech right now. Are you in the same headspace as him? Are you super excited about, you know, one or more biotech stocks right now?

Dave Lashmet: For years, the idea of biotech as a sector has been appealing to our analysts, but I don't ever look at it as a sector. I'm a microeconomist, so I look bottom up, not top down, to find a drug that's so important that it will actually have a microeconomic effect like the weight-loss drugs. I look at the 6% problem. Six percent of drugs start Phase I trials succeed, and it's a 94% burnout rate. So if you picked stocks, even if they have drugs in people, you have a 94% failure rate... and none of our subscribers can take that kind of hit.

So you have to figure out some way to pick not only the drugs that will work but the drugs that will work with limited competition in a mass market with large morbidity or mortality if it's not treated... and that's sort of the magic formula that I look for and my team looks for. We go to conferences, and we don't really have an agenda. We don't look at the company's financials at first because they all tend to be developmental companies, but we'll pick huge companies – Novo Nordisk, Eli Lilly. These are $100 billion to $300 billion firms. I think Lilly might be $500 billion right now. But they still have one drug that's so big and so powerful, it will move their share price. So that's what I'm hunting.

I think Erez is cleverly using money ball so that he's looking for forgotten assets. He's looking at it top down and financial, and he's an MBA so he can do that. I think it's clever. I don't think that it – I mean so far it's been working which is great. I mean more power to him. I like when people analyze drug companies and do it on an individual basis. I think that the macro play about we're buying biotech now at all of it forgets that you must have 94% losers. Like historically, 94% of the drugs that are in play are not going to make.

Dan Ferris: Wow. So this reminds me, that 6%, 94% reminds me of somebody I know who is very good at picking exploration mining stocks because many of those will go to zero... and I'm sure that firm once told me that they had – I know they had a year where they crushed it and all the money came from 5% or 6% of the stocks because they went 100, 200, 1,000-to-1 kind of crazy numbers like that. But it seems like, you know, counting on that is probably not a great idea. So that particular play, like you say, the sector play is riskier than kind of knowing what you're doing about the science it sounds like you're telling me.

Dave Lashmet: Yeah, I can't beat the 6% problem set either. I just wait until drugs are more advanced before I'll jump in. So there's three phases. The first one basically establishes whether or not, despite all your mouse trials and all your test-tube trials, if it turns out to be poisonous in people, then it's not going to fly. So you take four people who are essentially end of life or willing to be experimental guinea pigs and you give them a trace amount. It probably won't be effective. It also probably won't kill them, but at least you get an indicator. Then they step up doses in the course of Phase I to sort of figure out, OK, are we getting anything like the effects that we saw in animal models? That's all Phase I does for you.

So it's not until Phase II that you get into dozens of people with the disease that you get data about that compound and you get early efficacy data and you get early safety data. And for us, that's enough because if no other drug treats a condition, we don't really care if it is a 45% improvement or a 46.3% improvement or a 48.9% improvement. We don't have to see a thousand patients because we've seen dozens of patients, and they're all getting better, and that's good enough. Right? So we can strike earlier than certainly Wall Street, certainly most investors because we can fire after Phase II. So we have all the Phase I data, all the Phase II data.

Usually by the time we find a company, we're getting some indication from the FDA or the European counterpart, the EMA, that the results are good enough to move on to Phase III. Then we have about a three-year wait where the company has no profits – if it's a small company, it has no profits. If it's a big company, the drug still hasn't struck and it's not yet for sale. So there's a long period of purgatory, moratoria, whatever you want before what you know will happen will happen. And because every investment is an investment in the future, we think we have a pretty good understanding about what will happen in the future, and we're routinely right, and we're sometimes wrong.

Corey McLaughlin: Right. To that point about the time involved in the trials, I mean I'm thinking back to so I joined Stansberry Research in like 2019 and one of the first times I saw you in person you were talking about the weight-loss drugs and that was right before COVID started. And at that point, I guess they were in trials and obviously the pandemic kind of overshadowed them now, but now like there was – I'm thinking back on it, there's so much time between then and now where those companies are becoming more known in the mainstream. I mean Oprah just had a weight loss special that had people from Novo and Eli Lilly on it. But you were on this like way before, right? Like can you just tell me when or tell us when like you first started getting interested in the weight-loss drugs and what you say from them?

Dave Lashmet: So I mean I've been interested in a while and I've actually picked other weight-loss drugs that didn't quite – they ended up treating genetic obesity but not general obesity. So really, really rare genetic conditions. So they become like an orphan drug that very, very few people need them but they're very, very sick... and there's a niche of biotech that treats rare genetic conditions. So I thought that that would go mainstream, but it didn't. So I've clearly been in the space since about 2018.

But the funniest, weirdest moment was I was at a cardiology conference, The American Heart Association in like 2016 so, you know, nine years ago. And somebody was talking about their heart patients, a doctor on the stage. Five thousand heart doctors in the room. He said, "Look, this drug is the best we can do unless we can get patients to lose weight." And the crowd broke into laughs and titters. Like that wasn't supposed to be a laugh line, but 5,000 cardiologists knew there was no way that they can get their heart patients to lose weight. I mean that's the background I had going in. That's why I've been looking basically at general obesity drugs since 2018.

In 2019, I was in Paris for the European Society of Cardiology Meetings. I was meeting a friend for lunch and I had to pass 900 doctors in line to get into a small room. I'm like, I don't know what is in that room, but I know that 900 doctors are in line to go see it. That's when I learned the wisdom of the crowd of doctors in Europe. And U.S. has some weird, free market medicine where doctors will overperform a procedure if it helps them buy a boat. In Europe they don't do that. They're on flat salary, right? So there's no economic reason that those people were in line. They were just in line because they thought it was going to be a great drug. That's when I came back from Paris and I said, "Ozempic is going to be a weight-loss drug and there's not going to be any limit to how much we can sell."

2019, I saw like massive crowds of doctors in Europe at ESC and I'm like, look, they're voting with their feet. This is exactly the cardiology problem that in 2016 could not be met – how do we get patients to lose weight. It's like an answer to that is pretty valuable. So we wrote it up for  Stansberry's Investment Advisory in 2019 by like November. So this is like six months later. The conference was in June, and we had an argument internally about what this thing would be worth. I'm like, $5 billion, $10 billion, or more. Our other analyst is like, well, Wall Street is saying it could be worth no more than $3 billion. So do you guys want to guess what it's worth, the two drugs from Lilly and Novo are worth in 2023?

Dan Ferris: $100 billion?

Dave Lashmet: $28 billion.

Dan Ferris: I went a little too far.

Dave Lashmet: It's 130% year over year.

Corey McLaughlin: And still plenty of room for growth, right? You just wrote the Digest about this, like the amount of capital investment these companies are making just to keep up with demand, right? Just the way that these drugs are produced a lot of these people don't understand. You literally have to grow them, right?

Dave Lashmet: Yeah, I mean if people listen to the presentation, they get a free report where I explain all this... but I really like Dan's idea about trophy assets and I try to use it when I can. But these are weird. They're unbuilt trophy assets. So Lilly committed to $10 billion in spends to build more factories to make this drug. The way that we styled it in the Digest because one of us might have been marlin fishing with Porter, I don't want to mention any names, and you guys ended up titling it like "This part of biotech has never seen this investment."

No part of biotech has ever seen this investment. $10 billion of factory only ever competes with the new factory making B-21s for Northrop and like Intel's newest chip fabs are like $8 billion factories. Like you could put a lot of them and so you could have 16 if you build like two or three or four factories, right? But a brand-new top of the line chip factory is about $4 billion. Lilly is spending $10. No one has ever spent this kind of money in biotech before. Novo Nordisk is spending six and then they bought a company for another $11 billion. So between the two of them, they've put in $27 billion in the next three years to make factory. That's just crazy.

So what we did in the Digest is compare it to Budweiser. Budweiser spends about $4.5 billion on capex. If you average it over three years, it's closer to five. That's what these companies are spending. Budweiser makes – what was the number – 18 billion gallons?

Corey McLaughlin: Yeah, 80 Olympic-size swimming pools a day of beer.

Dave Lashmet: Right. So that's how much capacity they're building in vats that basically work the same because they also have to keep yeast alive exactly like brewers use. In fact, they use genetically modified brewer's yeast.

Corey McLaughlin: Yeah, it's fascinating.

Dave Lashmet: They're on the scale of the largest beer company in the multiverse –

Dan Ferris: Right.

Dave Lashmet: – to make this drug. So it's not quite a trophy asset, but what's intriguing about it is this will relate to future sales, right? I tried to use build it, they will come but that's a movie reference to Field of Dreams so they go, you can't possibly, you know, choose a beloved movie title as your go-to line... but it's true, right? We know the demand is there, so what you have to do is make more supply. What's stopping these weight-loss drugs from continuing to build at 140% CAGR is supply, not demand.

Dan Ferris: Wow, that's huge. So maybe my $100 billion wasn't so ridiculous. I'm just a little early with it.

Dave Lashmet: Oh no, I mean on track, it will hit $75 billion in 2024... but they kind of have to get more factory up and running and qualified. I think that 2024 will be close to $50 billion in revenue and 2025 they will be at $75 and 2026 they'll be at $100 billion.

Dan Ferris: I have to tell you, when the conversation turns to these weight-loss drugs, my mind always goes to the same place and I can't help it. I can't stop it, and that is that it just kind of bothers me that, look, I understand if people have a genetic condition or something else... but I don't know. There's something about using a drug to do something that you should've kind of done yourself. You should exercise and you should eat right and you should do these things.

I just feel like too many people are going to say, well, I can't do those things so I'm just going to take this drug. It bothers me a little bit. Philosophically. I just I don't know. I have to say it bothers me. But you know, if that's the way it's going, if that's where the demand is, who am I – I should just own Novo Nordisk and Lilly and not feel so bad. Let my philosophical worries for another day.

Dave Lashmet: I think what's weird is that it's that insidious. So in 1980 when you and I were somewhere in high school, about 6/10ths of 1% of the population was morbidly obese and so it could be the butt of jokes. And about 6% of Americans were medically obese. Now the morbid obesity number is 6% and the obesity number is about 40% and that's self-reporting. Self-reporting a million people that the CDC calls every year, the self-reported weight we know is underweight. People lop off a few pounds when they do it. So the problem is 10 times worse in the same population. Maybe since 1980 we've had a 50% population rollover. Half the people have died. There's new people. But largely it's the same American cohort and it's 10 times worse. So it's not genetic. It's the simple equation of calories in and calories out. So I'm actually going to blame seat heaters.

Dan Ferris: Who?

Dave Lashmet: Seat heaters. Like my car has a seat heater and, phew, it's so nice.

Corey McLaughlin: All our comforts, yeah.

Dave Lashmet: Down the center of your back is an area of special kind of fat called brown fat that burns to keep you warm, but if the environment is always heavily heated, you never need that, and you don't increase your metabolism to stay warm. So one of the things we've come across in a few days really working with Corey on the Digest is to call what these drugs do, these weight-loss drugs do, the winter switch. So there was a side effect we've been tracking pretty carefully where both on the experimental side to try and get the pills instead of injectables as well as the injectables that your resting heart rate is going up five beats per minute when you're on these drugs. Well, that's to stay warm.

Like effectively they're boosting your basal metabolism which does burn more weight, and then there's another side effect called loss of appetite. So if you're on a chemo drug or any kind of drug you want and the patients lose appetite, that's a problem. But here it's a feature not a flaw. So if you combine loss of appetite and higher resting heart rate, what you get is the winter switch.

What's being triggered is how at least in Northern Hemisphere and temperate Southern Hemisphere people have adapted to winter which is there's not that much food and you have to stay warm. What these drugs are doing is flipping a switch in your brain to put you into winter mode which makes you want to eat less and stay warm. We can see it in study after study after study in the boost to resting heart rate.

So this week the FDA finally got around to approving something I saw in November which is the heart benefits of these drugs. It reduces stroke and heart attack by 20% in heart patients who are obese but don't have diabetes. So they got a new label like on Friday. At least Wegovy did from Novo Nordisk to be heart protective. So even though it's boosting your resting heart rate, it's actually vastly better for heart patients to lose weight which is what I saw eight years ago. We got to get these patients –

Dan Ferris: Wow.

Dave Lashmet: – weight. And it's the same people but because we have electric bikes and seat heaters and –

Dave Lashmet: I sat next to a cardiologist –

Corey McLaughlin: Drive-thru and chicken chalupas from Taco Bell, yes. Which are my favorite.

Dave Lashmet: Calories in are a factor, but we've also made sure that we don't have calories out by heating our rooms higher and higher over time, right?

Dan Ferris: Wow.

Dave Lashmet: When we don't have to heat up to stay warm because we'll just boost the thermostat. And also like I was in New Amsterdam area at a medical conference in 2023 next to a Dutch doctor who was freaked out about electric bikes because all his patients used to bike everywhere but now they're electric biking everywhere. So they're just not getting the same caloric burn even though they're moving by bike. So in the U.S. we just get into Dan's F-150 and we'll just drive. But in Denmark, they used to bike everywhere and now they electric bike everywhere so. They can go up any hill without any trouble which means they're not putting their heart through the paces.

And when Wall-E, the cartoon, showed people getting larger and larger and larger in the opening montage so that they had to sit in electric carts, like go to a hospital. Notice that every bed is reinforced, twice as wide. MRIs have had to have a bigger circumference. The cylinder that you have to put someone in is larger to get people in because those are the people that are going to have health problems. Wheelchairs are a chair and a half. Like we're like basically on the Wall-E mode.

Dan Ferris: That's weird. Ugh.

Corey McLaughlin: Yeah, like culturally, like we've – a lot of different people have created this problem and now we're trying to come up with the solution all in one generation it seems like just from the food that people eat. I mean we clearly – I'm talking Americans, Europeans like clearly eat too much which is what I've realized. I've started paying attention to calories more recently as I am now approaching slightly more advanced age and it's like noticeable. Like I've just noticed you just eat too much. And now, again, like of course there's some people where it's a lot more severe and genetic and obesity as a disease... but yeah, it is pretty crazy just how quickly, relatively speaking in the history of humanity, like we got to this point and these drugs developing, just how huge the market is.

Dave Lashmet: Yeah, I mean Wally kind of meant it as a joke, right? But it's really not a joke.

Dan Ferris: No, it's not.

Dave Lashmet: I have a different option than you guys. What I'm following is the insane profile. So me and two of our colleagues are doing a triathlon, half Olympic, well, more than Olympic but the half Ironman so I have to swim so that I don't let down my team of friends. So I have to swim a lot. So I'm increasing my output and then eating what I want.

Dan Ferris: Yeah, I've heard other people tell me that, too. They say, "I just exercise more and I eat anything I want." Whatever works. But I'm a bit shy. I've never heard this thing about the winter switch before. But let me ask you something else, Dave. When I talk to people about this weight-loss drug thing, they start talking – like we spoke with a fella named David Cervantes and I talked to him at our conference, our Stansberry Conference about this.

Dave Lashmet: Right, right.

Dan Ferris: He thinks it's a massive – it's going to be a massive change in the global economy. Like people are going to take these drugs and airplanes are going to use less fuel and food companies are going to sell less whatever garbage, chips and dips and stuff. Do you do any of that research or do you just stick to the science?

Dave Lashmet: So accidentally I can agree with him. The accident was I went to the big island of Hawaii with my family three days before the half Iron Man in Kona, and everyone on the plane was tan and really thin. It was like a 1950s aircraft. We went so freaking fast, that we were there sooner. Like everyone on the plane weighed like a buck as women and a buck fifty as men. The pilot's like, "Ah, we're going to be landing 45 minutes early" across the Pacific. So they saved like 45 minutes of fuel because everybody had an 8-pound bike and no other gear but swim shorts and they all weighed a buck fifty. Like it's crazy.

Dan Ferris: Wow.

Dave Lashmet: I'm sure that that would play out. I'm sure if we generally lose weight, that planes will get lighter... but that's a supply driven constraint. We know the demand is there. So you have to have enough supply before you're going to see it in airline fuel. You have to get enough patients on these drugs to have a population level effect.

Dan Ferris: Right. And that's going to take a few years. Two or three years it sounds like.

Dave Lashmet: I mean even in World War II, Hershey bars were a thing... and I don't think that Hershey is necessarily in trouble. Like so you want to eat less. You can still choose what you eat. If you have a smaller portion size and a small chocolate bar afterward, you know, we might not see anything in Hershey sales. It's hard to look 10 years ahead and see some marginal change in some other business. Where we know that the focal point is going to be Lilly and Novo.

Dan Ferris: Sure. Sure. My only qualification there is like those second order effects can be huge and completely nonlinear and unexpected. If you could learn to expect them, there could be an opportunity somewhere, but I hear you. It's very, very hard to –

Dave Lashmet: It's because of the supply constraint, right? Like one of our colleagues, Ken, talked about trying to trace down these subscriptions – prescriptions for Lilly's drug and he had to go to 10 pharmacies to find it. And the constraints, as more and more people get on the drug, the constraints, the demand constraints are loosening because the approvals are for more and more conditions – general obesity for two different drugs and a heart condition which right now isn't even covered by most insurances because it's only been approved like Thursday. So as more and more people can get drugs for free, there's going to be more demand.

Dan Ferris: I see. And it makes me wonder about – you mentioned heart condition. It makes me wonder about that guy who got a laugh talking about in 2016 at the conference you mentioned talking about, well, this is the best we can do now because our patients need to lose weight to do any better. I wonder if that impacts big, important – you know, sales of big, important heart drugs eventually.

Dave Lashmet: I mean the market's already responding to that. The market doesn't know how to measure what other conditions will be affected by the power of the weight-loss drugs because everyone is looking at it based on the trial results. The final phase of trials is Phase III. Those are also called pivotal trials because those lead to approval. The pivotal trials are really impressive.

One of the studies I saw only looks at excess weight. So they say you have a BMI of 25 goal. If you have a 50, if we get down to 25, that's the goal, right? So that's actually only 50% weight loss to bring you from 300 pounds to 150 pounds or whatever, right? So it doesn't look that impressive like oh, they lost 30% of their weight. Well, that's not 100%. It's like anybody want to lose 100% of their weight? No. You're gone. That's skeleton weight, right? What you have to do is go back to essentially your high school weight depending on how you went through high school. But what we can see in the long term trends is people gained weight over time a little by little by little. So we want to pull people back to those earlier conditions and –

Dan Ferris: And then keep them there.

Dave Lashmet: Yeah, well, that's a different problem set, right?

Dan Ferris: Yeah, which I –

Dave Lashmet: Keeping them there is a different problem set.

Dan Ferris: I hadn't thought of that.

Dave Lashmet: Still, if you look at the Phase III data, you see these 15% to 25% rate loss, we know medically that 5% means something. Ten percent means a lot more. Fifteen percent is so unprecedented, we're trying to figure out what it is. If you get stomach banding surgery and you lose 15% of your weight, literally cures Type 2 diabetes. You no longer have Type II Diabetes. Cures it. So now we have drugs that do 20 or 25% weight loss in obese patients, not young healthies but in obese patients... and it's pretty remarkable what the changes are... but it's still supply constrained which is why there's such a big building spree.

It's not until the building spree is done that we'll begin to touch the level of demand. There's 100 million obese American adults... 100 million that need weekly injections so that's only like 5.2 billion fully filled syringes a year. Oh, no problem. Just for the U.S. market. What kind of output is that? Right? It's not software. You can't just do another download. You have to make 5.2 billion vials.

Dan Ferris: Well, I don't know. I feel like we've covered this. I just feel like I have a lot of homework to do and I really – I was thinking about, well, maybe I could get at this with a biotech ETF... but after talking to you and hearing all this, you know, research just into this one drug, I'm thinking, eh, eh, maybe I'll let Kalir handle this. He's probably going to study these things a lot more closely than I will.

Dave Lashmet: Well, in our report, right, we give you the two, Novo and Lilly, for free and we tell you why I like them. And I just wrote this report like last week so it's as fresh as you get, and I've been to all these conferences so reasonably I have a pretty good idea about what they're worth. I'm not saying I invented these drugs. I am saying I know what they're worth. But then we talk about vaguely five other companies that we think have equal promise in medicine, and we just don't give anything away. So like if you want to find our best research, you buy it from us. Why? Because it's expensive to fly me to Paris.

Dan Ferris: So there's probably – I mean just the numbers you've described here, my guess is that like there's a massive opportunity here that maybe most folks don't really truly understand. I'm willing to bet the average investor who has listened to this interview up to this point is saying, "Oh, well, I didn't know that." And they're hearing you go, $75, $100 billion by what was it 2026 or something? I mean they're going, whoa. I know I was. I didn't know it was like that. So yeah, I feel like you've – I don't know. You've delivered today, Dave. You really have as you always do.

Corey McLaughlin: Yeah, me too. I think the people are seeing maybe why or hearing why, Dave, what do you have like 30 different picks in your publication that have doubled, I think, right?

Dave Lashmet: Yeah, yeah.

Corey McLaughlin: Since the inception which was – and you can talk smaller companies that become big but in these areas that I mean from reading your stuff, like people, I assume, are getting a sense here too. Like just the amount of detail and knowledge of these different areas and why specifically – like why you're able to place bets in these places, I think, hopefully people are getting too so.

Dave Lashmet: Yeah, thanks. I mean I talked to Dan on this show because we don't hang out, weirdly. We live like 300 miles apart so that's probably our excuse.

Dan Ferris: Yeah.

Dave Lashmet: But what I look for, even when I pick big companies, is a 10-to-1 reward-to-risk ratio. And not just for the drug to succeed but for the technology to pull the company up by a 10-to-1 percentage. So if it's a huge company but it has 100% upside, but it has 10% downside, that's the 10 to 1 that we're looking for. So anything I put in my portfolio, I hope to see a 10-to-1 reward-to-risk ratio. And really that's the hidden – that's what's driving my picks.

So my portfolio is tested against the S&P 500. Why? It's ridiculous. I don't know. But because I have a global view and I don't really have a cap size, size for market cap that I'll pick, I'm willing to take on the S&P 500... and I noticed that Warren Buffett lost over the last five years to the S&P 500... and he's in the S&P 500. Berkshire Hathaway is in it and he lost, and his biggest holding is Apple which is also in the S&P 500, and Buffett still lost. And what's really funny is, I beat him. I beat Buffett over the last five years. I just couldn't quite bet the S&P 500, but neither could he. It's like, oh no, we're only making 10.5% a year. It's like that's a lot.

Dan Ferris: Yeah.

Dave Lashmet: And we're really not getting that many blowouts. We're getting some, but we're getting – any one that doubles is on the path to making more. And the most you can lose is 100%. We tend to get out before 100% loss, but we think we're doing OK.

Dan Ferris: Yeah, I would say more –

Dave Lashmet: But I want to tell you guys something before we finish. I'm looking at a new pill for weight loss, not an injection, that I'm going to talk about in my issue that drops a day after this recording drops. So we might actually resurrect the package around this pick. So these winter switches, there's 45 drugs approved or in development chasing the winter switch. There's two drugs in the world in development chasing the hunger switch and they're both owned by the same company. The deal only happened to buy the pill version instead of the protein in January. The stock went up a little bit. It fell back down. So it's' a pill for weight loss with no competition that's valued at zero dollars. That's my next issue.

Dan Ferris: Wow. Wow. We are at the end here. And I usually ask my final question at this point, and you've answered it many times, and it's the same question for every guest no matter what the topic even if it's a nonfinancial topic. If you've already said the answer, by all means feel free to repeat it. The question is, if you could leave our listener with a single thought today, what would that be?

Dave Lashmet: I think that the popularity of weight-loss drugs is in front of their availability. As these factories get built, that's going to roll into revenue which is going to roll into profits which is going to roll into earnings per share which is going to drive these stocks up over time. So one of my friends, a doctor I work with, said, "You know, I don't like Novo and Lilly because I don't like their P/E, their price-to-earnings ratio." I'm just like, wait. Just wait. When earnings go up, earnings are going to go up.

Dan Ferris: Right. They're going to earn their way into it, yeah.

Dave Lashmet: Right. They're going to earn their way. They're both ridiculous growth companies and they're going to keep growing. The idea that you'd look at it in the static sense and say, well, if Oprah knows about it, there's no one else who can be served. It's like, that's not true because you have to make 5.2 billion vials and you have to have the capability to take a brand-new drug and make 5.2 billion pristine vials. That's ridiculous.

Dan Ferris: All right. All right, Dave, it's always a pleasure to just plumb the depths of that big brain of yours. Thanks for being here. Really a pleasure to talk to you.

Dave Lashmet: And you see this sunlight in Seattle that's like breaking out in the background?

Dan Ferris: I do.

Dave Lashmet: It was crazy overcast when we started. I'm not really this bright. It's just the sun sighting.

Corey McLaughlin: The rare sun sighting, wow.

Dave Lashmet: I know, right? What's that big yellow ball in the sky?

Dan Ferris: All right, thanks again.

Dave Lashmet: Thanks very much, guys.

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It's like clockwork, man. Have Dave Lashmet on, learn a bunch of cool scientific stuff that indicates some huge opportunity, right? Every single time. It's great.

Corey McLaughlin: Every single time. He does not disappoint. You always learn something, and this is obviously a huge topic right now, weight-loss drugs and biotech generally so.

Dan Ferris: Yeah, Dave Lashmet is to biotech what Rick Rule is to exploration mining. They know everybody in the space. They go to all the events. They know all the technology and all the ins and outs of the business, and they find enormous freaking winners. I mean it's amazing, and it's fun to know them.

Corey McLaughlin: Yeah, I mentioned his double – I mentioned that ones that have doubled that he's recommended. One of those was Nvidia way back in 2016, I want to say. So he's not just like in biotech. I mean that's tech. The chips will be used in bio as well, but yeah, a lot of like just breakthrough technologies, industries, that sort of thing so. Yeah, definitely can find the areas and have like the science to back it up and like why this is going – or why the potential is there at the very least.

Dan Ferris: And I've heard obviously the weight-loss drugs are a huge topic, right? The whole world's talking about it. Never heard of the winter switch before. I've never heard that before. It just –

Corey McLaughlin: Yeah, no, it's fascinating.

Dan Ferris: Yeah, really cool. Man, knowing Dave Lashmet, I remember one time early on in the business and I think it was just like Porter and me and Lashmet and Steve Sjuggerud and that was it, you know. It was just us four, and Porter said, he said – like we both, Dave and I, had a similar style of presentation. We just bombarded you with everything we knew. We just like bombarded you with facts and information. You know, less storytelling, lots of information. It was probably hard to sit through.

Porter got up one time after one of us had spoken and he said, "These guys are dangerous. They're like spies. They're dangerous because they know too much." So it's really good to have watched Dave over all these years just like learning one complicated thing after another and being able to sort of tell these cool stories about it. And finding like 30 triple digit gainers. You mentioned Nvidia. Nvidia was like a 13 or 14 bag or something like that. It was like incredible. So yeah.

Corey McLaughlin: Yep. Yep. Yeah, it is incredible.

Dan Ferris: All right. Lots of good fun, man. Love Dave Lashmet. Love having him on the show. So that's another interview and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as we truly absolutely 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, please. And also 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. Have a guest you want us to interview? Drop us a note at [email protected] or call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my co-host, Corey McLaughlin, until next week I'm Dan Ferris. Thanks for listening.

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