The current tensions between Russia and Ukraine have been all over the news… perhaps even contributing to this week’s big market sell-off.
But Dan Ferris’ guest this week on Stansberry Investor Hour has some reassuring words for any concerned listeners: You can relax.
Dan sits down with one of his favorite guests — geopolitical expert Marko Papic, who is the Partner and Chief Strategist at an alternative investment asset management firm. Marko is Dan’s “No. 1 macro guy” and specializes in geopolitics, macroeconomics, and markets. And Marko says it’s life as usual right now for folks in Ukraine, and the media noise surrounding the possibility of war is just over-done news hype…
Marko clarifies that if a war does happen, yes of course there would be global and market implications. But for right now, it’s just a local regional issue being sensationalized by the media.
They also discuss inflation, which Marko says will continue to be an issue. He reminds everyone “This isn’t the 1970s…” and that regular folks today “don’t have the stomach for a real recession” needed to fight inflation.
Dan plays a bit of devil’s advocate with him about commodities and emerging markets investing, which Marko says is his No. 1 capital allocation idea right now. Despite this being a contrarian idea, he tells Dan that “commodity-linked plays should pay off in 2022.”
They touch on COVID’s continuing effect on the markets, as well as value-growth trades. Plus, don’t miss Dan’s opening rant about this week’s “flash crash.”
Partner and Chief Strategist at Clocktower Group
Marko leads Clocktower Group's strategy team, providing bespoke research to clients and partners on geopolitics, macroeconomics, and markets. Prior to joining the firm, he founded BCA Research's Geopolitical Strategy practice in 2012. Marko began his career in finance as a senior analyst at Stratfor. He holds graduate degrees from the University of Texas at Austin and the University of British Columbia.
Announcer: Broadcasting from the Investor Hour Studios and all around the world, you're listening to the Stansberry Investor Hour. [Interlude plays] Tune in each Thursday on iTunes, Google Play, and everywhere you find podcasts for the latest episodes of the Stansberry Investor Hour. Sign up for the free show archive at investorhour.com. Here's your host, Dan Ferris.
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 No. 1 macro guy, Marko Papic. We'll check in with him about Ukraine and other topics. In the mailbag today, questions about bank deposits, tech stocks, and more. 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, did you notice the flash crash on Tuesday? I'll talk about that and more right now on the Stansberry Investor Hour. What flash crash am I talking about? Well, I’m talking about the print in the SPY, the SPDR S&P 500 ETF. It is the biggest ETF in the world. It has, according to data compiled by Bloomberg, a market cap of just over $400 billion. Right?
Biggest ETF in the world. I mean, and the S&P 500, biggest equity index in the world. They're well over $1 trillion. Actually, they were saying $1 trillion a couple years ago. It's probably trillions now attached to the S&P 500 Index. So Tuesday, January 25 at around 2:08 p.m. Eastern time – I don't have the exact time, it was right around there with – I'm confident within about three or four minutes.
It looks like the SPY, the SPDR S&P 500 ETF, went from 440 instantly to 370 and back up. That's 16%. That's a hell of a move instantly. One slight problem with this. I can't verify that the trade happened. One source indicated that maybe the trade was canceled, so maybe this is what they call a spoof. Right? Because the volume spiked as well at that time. And I'll tell you what I’m going to do. I’m going to go ahead and assume it happened, because I know it can happen.
And if you can spoof and pull back the trade and not do it and pull the quote down that fast and then back up, you can trade it. Right? So I'm going to assume it did happen. And wow. So I've talked about sort of this. We're getting in the direction of what I've talked about, haven't I? Last two times – this year and the year before – my top surprises for the year, my top 10 surprises, included the possibility of the S&P 500 falling 20% or more in a single day.
And of course, the "or more" is controversial because there's a circuit breaker mechanism whereby if the S&P 500 falls 20% in a single day, the exchange shuts down. So, you know, "How can it fall more than that?" and my belief is that markets are not machines created by human beings, they're things that happen when human beings get together. And all the machinery is just sort of, you know... it's a sign of the times.
You know, if we had markets – and we did have them. We've had them [laughs] for eons. But 200 years ago, we didn't do it with computers. But it's the same thing. It's the same human, natural phenomenon. So humans don't control them. Humans are in them, the way fish are in water. So it's a little rich and a little arrogant to me to suggest that you can say, "The S&P 500 will never lose more than 20% in a single day because we've got circuit breakers." I don't know that it really works that way.
But this thing appears to have happened on Tuesday, showing that, "Yes, the biggest ETF in the world that covers the biggest index in the world can indeed fall pretty darn close to 20% in an instant." And I just wanted to point it out to you. Even if we find out ultimately that the trade was canceled, I still think that this validates – it's in the direction of validating my thesis. And it's something that you need to know can happen. Right?
I believe markets are riskier than they appear. More things can happen than will happen, surely, but you don't get to know in advance which ones are going to happen [laughs]. OK? So there is just massive uncertainty in markets, more than is acknowledged. And in an event like – let's say this is it. Let's say the bear market has begun and the top is in and, you know... even if the top isn't in, this could be the beginning of the end of the great bull run that started in March of 2009.
If that is true, then this little blip – whatever it was that occurred on Tuesday, this little mini flash crash, I'm calling it – we can see more of that. It could get – it's my belief that we're hardly into this. If this is a bear market and if this is the end of this, we haven't scratched the surface. Right? I mean, this is the proverbial tip of the iceberg. It is not the big one. Right? So anyway. I just wanted to point out that that can happen. Maybe it did happen on Tuesday. It looks like it did happen.
Another thing I wanted to point out really quick before we talk with Marko Papic is that big money has been flowing into the big gold and silver ETFs, the GLD and SLV, the big ones that hold gold and silver. And I think it's 149,000 ounces was the last thing that I saw, just in the past week, into the gold ETF and maybe 2.3 or 2.4 million silver ounces into the big silver ETF. That's interesting to me. I think that we're at least seeing signs that institutions are kind of changing their tune. Right?
Sell-off in the Nasdaq, big flows into gold and silver. That may wind up – this may wind up being a harbinger of things to come. And I just wanted to point it out to you. I still think my basic, what I call, truly diversified portfolio holds. Right? Good stocks. Sell your garbage. Sell your – if you don't know by now that your speculative garbage is pretty much done, you know, you're not paying attention. Sell your speculative garbage.
And by all means, hold on to your good, long-term business stocks. But have plenty of cash and have gold and silver and maybe some bitcoin. That's the last thing I want to point out before we move onto Marko, is that just a couple of days – you know, Monday and Tuesday – we started to see a move in bitcoin. And bitcoin looked like it was kind of bouncing off a bottom, I think maybe around $32,000. And that was interesting because, at the time, the equity indexes were still falling.
So maybe – remember. We had Mike McGlone from Bloomberg on the show a couple weeks ago, and he said that he thought this was the year that bitcoin would decouple and stop behaving like just another tech play, just another volatile, risk-on tech play. Right? And I don't know. Maybe that's what that was about. Maybe there's money going out of equities and into bitcoin, and it started happening Monday and Tuesday. We'll see.
I personally have blown out – I blew out my Ethereum. I had some Ethereum. I blew that out, and I – what do I have? A tiny amount of Solana that I don't care if it goes to 0, it's so tiny. But I've been thinking about adding to my bitcoin. Haven't done it yet. But who knows? Who knows? I certainly am not selling my bitcoin. For whatever that's worth to you [laughs]. And I'm still not going to tell my Extreme Value readers to sell it. That I know of. You know? We can change our minds, but I don't see any problems right now.
So with all of that, with the flash crash and the flows into gold and silver and maybe bitcoin is decoupling as a risk-on tech play, that's all I have to say about that for this week. And let's talk with Marko Papic. Let's do it right now. [Music plays and stops]
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[Music plays and stops] Time for our interview. Today's guest is Marko Papic. Marko is a partner and chief strategist at Clocktower Group. He leads the firm's strategy team, providing bespoke research to clients and partners in geopolitics, macroeconomics, and markets. Prior to joining the firm, Marko founded BCA Research's Geopolitical Strategy Practice in 2012, the financial industry's first dedicated political analysis investment strategy.
Marko began his career as a senior analyst at Stratfor, a global intelligence agency where he contributed to the firm's global geopolitical strategy as well as its analyst recruitment and training program. In his academic work, he helped create the Center for European Union Studies at the University of Texas at Austin. Marko holds an MA in political science from the University of Texas Austin, MA from the University of British Columbia. And with that, Marko, welcome back to the show.
Marko Papic: It's such a pleasure, Dan. Thanks so much for having me.
Dan Ferris: You bet. So I have to say, Marko, at this point you're like my main go-to macro guy. And my wife watches all this news on TV and she gets worried about things. And I used to think to myself, "Well, I'll make a note to talk to Marko about that." Now I just tell her. "Hold on. Don't worry. I'll talk to Marko."
Marko Papic: That's a lot of pressure.
Dan Ferris: Yeah [laughs]. I know. I know. Don't worry. I'll face the full brunt. But the issue now, of course, that's on everyone's mind and certainly on every news program is, of course, the Ukraine. And a friend of mine who actually works for Stansberry Research has lived there for over a decade. And I shot him an e-mail this morning and said, "Hey. How are you doing, man?"
And he said, "We're fine. Everything is fine. People are going about their business." He says, "I live near the main street of this whole country's finance industry with like 20 bank offices within a few miles. Everybody's going to work. Nobody's worried about anything. The store shelves are full and nobody's panicking or anything." And yet, to watch Western mainstream media [laughs] you wouldn’t come up with that conclusion. You certainly would not. So between those two, where do you fall on this issue?
Marko Papic: You know, I think I’m definitely with your friend in Ukraine, actually. I mean, first of all, we've seen Russia be aggressive before. And usually, it's preceded with quite a considerable amount of propaganda on domestic television and news. So for example, before the annexation in 2014, you know, Russian TV was basically telling its citizens that neo-Nazi hordes were on their way through Crimea, who ethnically cleanse Russian speakers. That hasn't happened this time around. And I think that Vladimir Putin is very, very sensitive to domestic sensibilities. And there doesn’t seem – to me, this is a very qualitative statement, so obviously I got to hedge a little.
Dan Ferris: Sure.
Marko Papic: I could be completely wrong. But there doesn’t seem to be this propaganda machine in Russia to prepare the country for a long and really difficult Afghanistan 2.0. 3.0 if you count the American Afghanistan experience as the second, Soviet the first. So this would be Afghanistan 3.0 for Russia if it invaded Ukraine. And there's no real prep for the domestic audience on that front.
Dan Ferris: OK. So my friend in Ukraine also says, "You know, there is actually some worry" – I don't know how much, he didn't say – "of a coup in the Ukraine," which would result in kind of inviting Russia in, maybe. How does that sound to you?
Marko Papic: You know, I don't think that that's possible. Not that the coup is not possible. But I think a pro-Russian government in Ukraine is never going to happen. And let me explain why. Imagine if you took Texas and Florida out of the United States of America. You would like never again have a Republican president. And the mistake that Vladimir Putin made in 2014 is that he took, you know, Ukraine's Florida and Texas out of Ukraine.
Crimea, which consistently voted for pro-Russian politicians, and large parts of Donbas no longer vote. And so, Ukrainians are all lying that they don’t want to live under Russia's sphere of influence. But sociopolitical change could happen where the leadership in Ukraine says like, "OK. Cool. We don't want to be in the Russian economic sphere of influence. But we'll take the Finland deal that Finland got in 1945."
In the Finland deal during war of 1939, what Finland got is it gave up about 10, 15% of its territory and its second-largest city, just gave it to the Soviet Union, promised it would remain neutral, would not join Western international organizations like NATO or some sort of an economic European community. And in exchange for that neutrality, it would be allowed to have a domestic kind of Western democratic and capitalist system. And that's I think all really Putin wants. I mean, these guarantees of NATO accession are vacuous. Because Putin knows what everybody else knows. Germany and France would never accept Ukraine into the NATO.
Dan Ferris: Yeah. If that actually is part of [laughs] the official narrative that is repeated ad infinitum these days. So final question, of course, is do you care at all in terms of capital allocation here?
Marko Papic: That's a great question. No. Of course. And that's something that we're thinking about a lot. I mean, look. If I’m completely wrong, Putin rolls tanks into Kyiv and we have a massive war on Europe's borders. I do think that there would be macro implications for investors sitting in the U.S. and everywhere else. Right now, I think this is a local/regional issue. Why?
Because the No. 1 driver of markets right now as they're melting down is optimism. It's actually optimism. And I know that a lot of people don't want to hear that, but actually what's driving markets are two things. One, COVID is over. Omicron is basically the common cold. To be frank with you, Dan, we knew that two weeks after it emerged in South Africa. I had all the data I needed to make that call, but obviously the media reemphasized its danger for the next few months... and still is, by the way.
Dan Ferris: Mm-hmm.
Marko Papic: But the markets are down. The markets are down. They're like, "OK. Cool. COVID's done." The second issue is China. China's panicking. It's pulling the stimulus lever. In Q2 of last year. COVID and China conspired to basically create the tailwinds to safe-haven assets. What are safe-haven assets? It's two things: bonds and U.S. banks.
Everybody and their aunt plowed into American markets and overvalued tech plays because China was basically deleveraging in 2021 and COVID was a big deal. Those two macro drivers are now reversing. Bond yields are shooting up and obviously tech stocks are getting crushed. And so, I don't think that Ukraine can really change that unless – and this is ironic, and I'm just going to throw it out here. This is a completely crazy view. But unless Putin does invade Kyiv, it rallies the bond yield and then FAANGs catch a bit again.
[Laughs] That would be ironic, wouldn't it? That actually invasion of Kyiv stops the sell-off. But Chinese inflation, COVID dissipating and the Fed being hawkish, I think that's driving this market. I don’t want to catch a falling knife with tech stocks. What I want to start doing is diversifying into emerging markets, into commodity-producing economies like Chile, like Brazil, that are actually weathering this downturn quite well. And that tells me the market doesn’t care about Russian World War III. Because if it did, EMs would not be outperforming U.S. stocks.
Dan Ferris: What do you think about Japan right now? That was the one that I sort of caught my eye recently. Mostly because I read the stuff on GMO's website, and they highlighted Japan recently. They said, "The traditional perception of it is not valid anymore." You know? People used to think of it as this low-return nightmare for all eternity just because of the way they run their businesses. What do you think of Japan right now?
Marko Papic: I mean, I think that this year – 2022 – will be a year driven by non-U.S. stocks, if I'm right that Omicron is in the back, China's inflating. Japan is pretty high beta to China. And if China's panicking and stimulating – which we think they will be doing... haltingly, by the way. It will be... it won't be obvious. It'll be halting – I think Japan should do well. I think Europe, also, high beta to China. And as I said, commodity producers to me would probably be more interesting.
So like Latin America in particular. Russia, too, once this in the bag. Russia will have huge geopolitical alpha opportunity provided I'm right that it doesn't invade Kyiv. But I think commodity producers are interesting, Dan, because commodities ignore dollar strength, ignore total social financing collapse of China – just ignored it, just plowed ahead. But EM equities of commodity producers and EM currencies of commodity producers did not follow that party. You know? And I think there's considerable catch-up potential this year.
Dan Ferris: OK. I was going to – so that sort of gets us into another topic that's on a lot of people's mind, which of course is inflation. And there's still, you know, a fairly strong camp that is saying, "Well, you know, this is more transitory, and it's not 1973 all over again," or something. How do you feel about that?
Marko Papic: I mean, they will never be convinced. You know? That camp will just stay that camp. I mean, I think – yeah. It's definitely difficult for me to see. Because that camp... what's the point of that argument? The point is that "Look. Eventually, we'll be below 2% and everything will be fine, and you'll be able to invest the way you've invested over the past 12 years in this kind of disinflationary cycle." I just think that's not true, to be polite. You know? And I think that –
Dan Ferris: Well, it's certainly foolish to count on it, right? It's foolish to commit to that at this point, right? Even if you're – I don't even feel like you need a long-term view. It's just, "Do you want to bet that way right now?" I don't really think that's a good idea.
Marko Papic: I think a lot of folks, you know, maybe – Dan – think, "Well, Marko, you said that you're no longer in the COVID's-important camp. If you're basically in the Covidiot camp like it doesn’t matter anymore" – which I am – "should you not then also have a view that inflation will peak? Because clearly, COVID brought inflationary pressures." In my view, that would be like, "Well, nothing is a 1 or a 0. You know, nothing is black and white. There's a lot of grays in between."
And obviously, I agree that COVID and the stimulus packages have a lot to do with inflation. But what we're seeing is also geopolitical issues that are not transitory. You know? U.S.-China confrontation, this new national-security prerogative to build redundancy into our production lines – that's inflationary. So is the green-energy transition. Which I believe in, I think it's going to continue. But it's going to increase energy prices. These are all quite inflationary, big-picture issues that the Fed can't deal with by raising interest rates.
Dan Ferris: Right.
Marko Papic: And so, I do think that – again, I think inflation will continue to be an issue. The question for me is, "What does the Fed want?" I highly doubt they want to return to 2 to 3% inflation. I think, honestly, some point this year they'll take just peaking as a win. They'll find a new term to give it to us. Sort of transitory.
Dan Ferris: Sure.
Marko Papic: But this time, they'll be like, "We're asymptotically approaching our mandates." You know? And like, "Oh, what does that mean?" That means they're cool with 5% CPI.
Dan Ferris: [Laughs] Right. The goal post will be moved until the game is won.
Marko Papic: Well, unless they want a recession. You know, unless they're willing to incur a recession for a rest. You know, elevated CPI.
Dan Ferris: I’m glad you brought that up because, you know, Jamie Dimon on their latest – on JPMorgan's latest conference call, he hearkened back to the era of Paul Volcker. And he said, "You know, this is nothing. We went up 200 basis points on the Fed funds in a weekend," or overnight or whatever. And he said, "I think they're going to raise rates six, seven times this year." I thought, "First of all, you know, it's not 1979." I mean, it's just not. Right?
Marko Papic: That's the answer to that.
Dan Ferris: I mean, it's not 40% or whatever, 35%, debt to GDP. It's a different world here, right? I mean, no?
Marko Papic: Well, absolutely. Also, I don't think there's a political buy-in. So one bone I have to pick, one thing that I disagree with right now, there's this narrative out there that inflation's a political problem. You know? It's like #InflationSucks. Yeah. It is. Don't get me wrong. Biden's like out there swearing at reporters when he gets asked, blah-blah-blah.
But when you say it's not 1979, what I take from that comment – aside from your point about debt and a different world, I also take the point that 1979, the United States of America had experienced eight years of inflationary malaise. Today, we've got like – what – six months of CPI elevated and everyone's about to light themselves on fire? And what I mean by this is, I highly doubt that the median voter in America truly is ready to face a recession in order to deal with the current inflation.
Dan Ferris: Yes. Right.
Marko Papic: Paul Volcker…
Dan Ferris: Go ahead.
Marko Papic: Paul Volcker would've been – sorry. Paul Volcker would've been, you know – he would've been hanged had he tried... had he been in power, the way. He tried that in 1971 or 1972. In other words, the U.S. median voter was not ready for pain. And you might counter and say, "Well, Marko, voters are never ready for pain" – I disagree with that. I think when voters put a lot of austerity politicians, into power in 2010 – in the UK, in the U.S., when the Tea Party rose – people were ready for tightening their belts and realizing that the government had to kind of tighten the belt. We are nowhere near that right now. We will be at some point, and then I will take the bet of recession over inflation.
Dan Ferris: Right. So I just Googled because I couldn’t remember it. My memory would not serve me back to 1974. But that was the year that they did the Whip Inflation Now grassroots movement. So 1974, right? So I don't know what was the S&P 500 1973 to 1974? Like minus 50 or 60% or something crazy? So yeah. Maybe that's what it takes, huh?
Marko Papic: Look. I think we are in a political world that is much different from the '70s. I think there's so much polarization. Income inequality's much greater than it was in the '70s. And I think that they're going to basically – inflation is a headline risk. It's something that's in front of our noses. The moment that yield curve starts inverting or threatening to invert, the moment recession rises in probability, they'll back off. You know? They don't have the stomach for what I think is necessary.
And by stomach, I specifically mean – like, the median voter's not ready yet for real pain. They're ready for sort of like, "Oh, inflation sucks. Please do something with it." But let's see what people are talking about when S&P 500's down another 10, 15%. Let's see what happens when there are cracks in the system and unemployment starts inching higher or businesses cannot deal with higher rates, things like that. I think at that point you'll see them back off, which is something that Volcker would not have done. He knew what he was doing. He was like, "Hey. You want inflation to stop, we need unemployment to go up, we need a recession."
Dan Ferris: Right. OK. I'm with you. [Laughs] I'm with you on this issue. So I just had to cover Ukraine. I had to cover inflation. You mentioned China. Do you have like a No. 1 sort of capital allocation idea right now? Is there something that you're more excited about to do right now than you were – I don't know – a few months ago or several months ago?
Marko Papic: Yeah. I think the sell-off – which I've been expecting since early December – the Santa rally ripped my face off, as it's known to do to bears. And so, I actually really only turned bearish for the first meaningful time since COVID started in December. And what I've been very encouraged by is the performance of the EM assets as I said. You can sniff out, you know, underperformance relative to dollar, relative to U.S. equities, of some of those emerging markets. So I would say that – and this is, by the way, not a popular view. We talk to institutional investors –
Dan Ferris: Yes, that's right.
Marko Papic: You know, the numbers are terrible.
Dan Ferris: That's an understatement. I mean, EM is like, "Forget it."
Marko Papic: "Forget it." And the No. 1 thing I keep getting allocators in institutional space is, "Marko. Politics, politics, politics." And I'm like, "Look. I mean, politics were terrible when you were plowing hundreds of billions of dollars into EM in the last decade." Which didn't work out. Yeah, it's not worse than it was back then. And you already see, like, the Chilean President who's a leftist, just appointed a bunch of moderates to his cabinet.
But it doesn’t even matter. Look. Commodity producers are cheap. Their currencies are cheap. Their balances of payments are in surplus. The accounts are in surplus. They went through their balance of payments. And last year, you know what they were doing? They were jacking up rates. You know, other than Turkey, they were jacking up rates.
They were doing exactly what we taught them to do through IMF or World Bank programs while America was basically printing like the most populous regimes in the world. So emerging markets took the pain last year, they took the hit of tight monetary policy. They're cheap. Their current accounts are in surplus and commodities have risen massively. Karl Marx could rise from the grave and run Brazil and I'd still buy it. Like, I just don’t care who's in charge. The macro setup is really neat at this point.
And I think that we're going to end the year 2022 and we're going to be surprised. Again, a lot of that hinges on whether China does truly stimulate. China has got a lot of problems. You know, a lot of problems. They're panicking. I think they're going to continue to be stimulating. The policymakers there really want to shift away from their austerity of last year. So a lot of it does hinge on that forecast being correct. So far, so good though.
Dan Ferris: Right. So just for our listeners' sake, would you say that, you know, it would not be unreasonable – let's just say – to put on a little bit of... you know, just something like a Chile ETF or a Brazil ETF? I mean, they're loaded with the big commodity producers anyway, aren't they?
Marko Papic: Yeah. Yeah. And it doesn’t even matter if they're not. So it's interesting because Chilean equity market, I could – yeah, it doesn’t have any copper exposure, but it doesn’t matter. It's not like banks in Chile are going to do poorly if there's like manna from heaven dropping. Copper is at all-time highs. And this is the thing. Dan, last year, copper and all these metals should've gotten killed and they didn't.
Dan Ferris: Yeah.
Marko Papic: The market is telling you we're in a commodity supercycle, because of inflation, because of the green agenda, because of all these – because of underinvestment. Right? It's screaming at us that we're in a commodity supercycle. And I think a lot of investors have not done the second, third derivative of that trade. Which is then, of course, you know, moving into emerging markets.
Dan Ferris: OK. But short term here, Marko, you and I know how this kind of thing works out. I mean, last year commodities screamed. I think the Bloomberg commodity – well, S&P... what is the one that I look at on Bloomberg? S&P GSCI, the former Goldman Sachs Commodity Index? It was like 40% or something last year. So that's a pretty ripping-hot year, and it would make sense for that to correct. I mean, that would be a pretty normal time for that thing to correct a little bit. Right? And right now, we are in a – you know, we're in a drawdown. We're double digits down in the S&P 500 as you and I speak.
Marko Papic: Yeah. And WTI is up today. You know, yesterday was not a one-day move. But I don't know. I don’t know. Look. Dan, here's the thing. Omicron hits, it goes down 7% in a day. I remember this because I had a bet the day before with a good friend of mine saying oil was going to lug through dollar strength. Boom. Omicron use comes up, oil's down 6% in a day. I looked like an idiot.
And yet, we're at $80 oil. Right? After that December blip, November/December blip. So I don't know what to tell you. I mean, from 2001 to 2011, commodities almost outperformed every year. I mean, that's what the supercycle kind of looks like. I think we're in another one right now. But you're right. But you're right. Betting on just the Commodity Index itself is not kind of my pitch.
My pitch is more "Let's go into the second or third derivative of that and let's look at what – let's correlate it with commodities that didn't appreciate last year." And a lot of that has to do with these Latin American equity markets and currency markets. Also Russia. I think that – if I’m right and if Putin's right with what he got... and by the way. You know what he got? He got all of us to look hysterical.
Dan Ferris: Yes.
Marko Papic: You know?
Dan Ferris: He certainly did.
Marko Papic: And literally, that was the term the Russian foreign ministry used. "You guys are hysterical." Like, that's a win. That's a, "Check." Let's imagine in a scenario Russia says, "OK. Cool. That’s it. We got these guys to dance around for a tune. It looks great on domestic TV. We look strong. They look weak. They look discombobulated. Let's just pull back here." You know? If that happens, Russia's also another interesting buy. Now, I wouldn't be buying it right now. Let's be very clear, Dan. I'm not telling anyone to go out there and try to capture a falling knife.
Dan Ferris: Right. No.
Marko Papic: There's still a lot of things to get resolved. They can go to a limited incursion that still gives you 20% down. But I do think that commodity-linked plays are going to be an interesting alpha opportunity kind of tactically next year. I mean this year.
Dan Ferris: And just to be clear for the listener, I'm playing devil's advocate here. Because we're just about to put out a report that's got like 10 names in it that are – it's like this 10-stock inflation-beating report that's got commodities all throughout [laughs]. You know, it's like commodities and infrastructure, and I always throw an insurance –
Marko Papic: I want to read this report.
Dan Ferris: Yeah. All right. Well, as soon as we get it out, I'll forward you a copy. It's just 10 stocks from my current portfolio that we've kind of set aside and said, "Yeah. If you're worried, these are the ones."
Marko Papic: Nice.
Dan Ferris: And there's an insurance company in there too. I always throw that in because, you know, they insure property and hard assets and things. And property and hard assets goes up, insurance premium goes up... anyway. I just want to say you made an interesting comment. You said, "It didn't even matter that they didn't have copper exposure like in the Chile ETF," or whatever.
And I immediately thought, "Yeah. And the money is going to wind up in the banks if you know anything about how mining companies are run and what happens to them full cycle. Right? The cash is going to – there's going to be more cash in the bank at the end of that cycle than in the copper company. Right? You know, Marko, you sound like an old soul to me, man. You really do. I mean, I know –
Marko Papic: From the third world.
Dan Ferris: Yeah.
Marko Papic: I grew up in war and hyperinflation, my friend. So, like, this is – I've literally lived through hyperinflation. Which I don't think we're going to get through, just to be clear. I don't think you have to stack gold bars like in your apartment. But I do think that, you know, what people are missing is that their anchor is what worked last decade. And trends tend to not – I mean, for whatever reason, trends tend not to work for a lot longer than a decade. I think this tech trend in the U.S. was probably going to expire in 2020 with just a run-of-the-mill recession and we were going to rotate to something else.
Dan Ferris: Yeah.
Marko Papic: I think the reason it didn't is that COVID juiced up tech stocks for three more times. There was the big COVID surge in 2020 when we were just buying risk, because there was stimulus. Then there was Delta in 2021, and there was like the last Santa rally led by Omicron. But I think now we're at the end of that decadelong trend. And it's just – you know, it's not the end of the world. We're just going to be rotating violently. We could've done it nice and easy last year, but Delta prolonged that tailwind for tech stocks. And now here we are.
Dan Ferris: OK. So one of the – I think of it as a macro bet, anyway. One of the macro themes that – and there aren't a lot of them besides inflation that mean a whole lot to me as a sort of bottom-up traditional value guy. But one of them that does mean something, of course, is the value-growth trade. Right? You can subtract the value stocks from the growth and you get an index of how that performs. And of course, we value is cheaper relative to growth right now than since like dot-com peak. You know? It's just insane. Do you care about that one at all?
Marko Papic: Of course. Massively. Oh my goodness. Yes. Yes. You know, I had this great chart, Dan. It's COVID cases globally going up and down. Like daily cases. And it correlates perfectly, with MSCI IT over MSCI Energy, which is a proxy for value growth. Not perfect but pretty good. And, you know, one-to-one correlation throughout 2021. It was all about that. And then, Omicron – cases go through the roof, outperformance of growth versus value collapses.
Dan Ferris: Right.
Marko Papic: It's the market speaking to you that growth outperformed value because of two reasons, really. One, this is a human virus, not computer virus... obvious but important.
Dan Ferris: Yes.
Marko Papic: We all plowed into tech plays because of that. I mean, I don't want to say any names of any stocks, but when you were buying a bike company with an iPad on it... you know? Like, you're doing it [laughs] for this reason. We're all stuck at home, blah-blah-blah. That narrative worked really well. The other one is that – you asked, "Is the country full of people who don’t really – aren't really scared of COVID?"
This is important. Because if you were sitting in Taiwan or China or Europe, you were looking around and you were looking at what your policymakers were doing. With lockdowns, you were like, "I want to be where the Covidiots are. You know, I want to put money in the place where people are kind of like blasé about this stuff."
And that's why so much equity moved into the growth-heavy U.S. market. As COVID dissipates, that flow is going to drain the other way. So I do definitely care about growth value. It seems to have been perfectly correlated with the 10-year yield. When COVID broke, all the stuff, and now we're going the other way. And, you know, like, America is still going to do well in terms of economic performance.
Don't get me wrong. It's just that the advantage the U.S. had – which was this kind of like, "Hey. Live and let live," attitude, which America adopted first, that gave the U.S. that advantage last year. It's spreading everywhere else. You see Australia adopting that attitude too. Europeans are slowly as well. There's a few holdouts in the G20, but they're going to be swept by the side.
Dan Ferris: Yeah. And interesting, possibly just coincidental, that the attitude about COVID no longer being such a great advantage just happens to coincide [laughs] with what looks like the beginning of the end of this massive bull market – going back to 2009, let's say. And the growth, the value and all the rest of it. It's interesting how these things come together.
Marko Papic: Yeah. Again. Like, I think the growth value would've happened with the 2020 recession –
Dan Ferris: Anyway. Yeah.
Marko Papic: You know? Like, this was the just juicing-up moment. Now, the question is, "Are we in a true bear market or can we rotate out of it?"
Dan Ferris: Right.
Marko Papic: So it's like rotation versus recession, is my big question mark.
Dan Ferris: Right.
Marko Papic: And I think – and this is ironic. Maybe most people wouldn’t agree with this. But I think as long as the 10-year is selling off, as long as the yield is rising, we're good actually.
Dan Ferris: Yeah.
Marko Papic: I mean, if you own tech stocks you're not. But it's good because it suggests that they can raise rates.
Dan Ferris: Yep.
Marko Papic: But if the 10-year suddenly catches a bid and they keep being hawkish, then we're going to invert the yield curve, and then we have a recession and then you need to hold cash or gold. You know?
Dan Ferris: Right.
Marko Papic: If there's nothing else left – you're not going to be picking value stocks in front of a recession.
Dan Ferris: No.
Marko Papic: And so, that's why I think if you believe in value, if you believe in cyclicals or commodities or emerging markets, you need the 10-year to keep selling off, and that keeps being really bad for anyone still holding tech stocks.
Dan Ferris: What about... I know one thing on our listeners' minds. Anytime we talk about rising interest rates and we directly address the 10-year – anytime we talk about rising interest rates, they point to the amount of debt the federal government has issued and said, "There's no way you can do this because at some point, you know, the interest payments overwhelm the budget," et cetera. You know the narrative, right?
Marko Papic: Sure. Yeah.
Dan Ferris: But of course, I always say, "Well, who says they have to earn a penny?" Right? They can print as much as –
Marko Papic: That's a good point. That's a great point.
Dan Ferris: The government doesn't have to earn money to pay that debt with. Right?
Marko Papic: Well, there's also other things like, you know, the U.S. doesn’t lend out the variable interest rate. You know? It's not borrowing on a variable teaser rate. You know? The U.S. government – you know, there's like maturity issues and things like that that allow the U.S. government to weather a move from 0.5 to like 2.5. What the Fed wants, I think the Fed wants to crush the one asset it can crush, which is real estate assets.
I think that's the real political problem. I think that's a real like renting – rent costs are still going to rise. You know, they're between 20 and 40% of CPI depending which CPI you take for or whatever. So I think that it is in the interest of the government and the Fed to raise long-end yields – which are associated with mortgage rates – high enough, allow them to increase high enough to kind of take some of the heat out of this real estate market.
Dan Ferris: Mm-hmm.
Marko Papic: So that's something to watch for. You know, I was the biggest bull in real estate. I told this not just in my research. You know, I write for institutional investors so it's not like they really care about home prices. But I told all my buddies, "Hey, listen. Go buy five condos. Do whatever you can. Like, just buy real estate." That was the trade for two years. It made a lot of sense. Now, you know, I think the Fed is mad.
You know? There's enough people like me who kind of did that, and I think that they want to curb that. I think that that's something that's in their interest. That's not going to hurt the U.S. government. It's going to hurt people who are leveraged to the real estate market. And I think that it's not going to really become a problem for U.S. debt unless the 10-year goes north of like 5%. Which I don't see happening anytime soon.
Dan Ferris: Yeah. So that will crush the Airbnb crowd. Because I'll tell you, those guys are minting money right now.
Marko Papic: That's a great point.
Dan Ferris: Before we moved into our house, we were kind of in between and didn't have a place to go. and we thought, "Oh, we'll just do an Airbnb." And we did but we paid $7,000 for kind of a little three-bedroom nothing house. I was like, "Holy shit. I'm in the wrong business once again." You know?
Marko Papic: Yeah. Used cars, same thing. But, you know, this is on their mind. This is on their mind. And they know when the U.S. government will be in trouble, and they're quite comfortable raising that 10-year higher. I think that's what they're engineering. That's why there is a focus on letting the QT happen kind of faster than it has in the past. I think that's what they're doing.
They're trying to engineer a steeper yield curve. Which, one – again – allows them to raise rates. You got to have the 10-year blow off for you to raise front-end rate, otherwise, you invert the yield curve and we have a recession. So they're letting it happen for that reason. And, two, I think they're trying to take some of the heat out of the real estate market.
Dan Ferris: Let me run another idea by you. We had a guest recently who said, "You know, if the stock market and, in general, asset prices" – and we threw housing in that bucket too. He said, "If the stock market falls far enough and, let's say, housing falls far enough too, the Fed won't have to do anything, or it may have to do a lot less." And he said, "They're in this jawboning phase now." Right? Haven't actually done anything and here we are down double digits on stocks. What do you think of that –
Marko Papic: That's a great point. I mean, I think it's fair. I think it's fair. I don't think they have to do much. Look. Again, it kind of depends where we are. If asset prices deflate – including S&P 500 Real Estate prices – I think that solves some of their problems. I think inflation CPI, provided oil prices don’t go to $200 because of some geopolitical event.
But I think that inflation will peak at some point this year. Just for kind of second-derivative reasons. And I think they'll take that as a win at some point. Not anytime soon. That's all – I don’t want to tell your listeners like, "Hey. There's a Fed put. Go out and buy. This is a buying opportunity." No. They're going to be stern. They're going to be mean. They're going to be old school, until they're not.
Dan Ferris: Right. Right. That makes sense. All right. Well, we've actually – like, time has flown here. So it's time for my final question, which you've answered a couple of times already, so you might remember what it is. It's the same for any guest no matter what the topic. And that is, if you could leave our listener today with a single thought, what would it be?
Marko Papic: That's awesome. I think right now – I want to hearken back to your Ukraine question if that's OK.
Dan Ferris: Yeah.
Marko Papic: And all I would say about that is, let's just be aware that Russians have their propaganda, we have our own. And I think that's very important. Because if you're an investor trying to make asset allocation decisions, just be sure you understand that our own media can often obfuscate issues or make them seem more alarmist. And I think that's a little bit of what's going on with the Russia situation. I think that's the way to approach it. So keep in mind Russia has its RT, we have our own media organizations as well.
Dan Ferris: Very good. That's excellent. And the general idea, I would say, is equally good. You know, turn that critical eye on yourself or on your own... it's a good idea. Thank you for that.
Marko Papic: You know, the guy I learned this business from – I mean, there's a lot of people I learned the business from. But one of them, Tony Beck – great guy, in BCA Research for a long time now at Alpine – he always used to say when something happened, is, "Don't do anything. Just go take a cold shower." You know? And I think that applies definitely to this situation.
Dan Ferris: Excellent. If you're worried about the Ukraine, in the shower you go [laughs].
Marko Papic: "In the shower you go." Yeah.
Dan Ferris: All right. Well, thanks a lot, man. It's great to talk to you. You're actually one of my favorite people that we've interviewed in the last couple years because –
Marko Papic: Oh, that means a lot, man. Thank you.
Dan Ferris: Look. We've interviewed a lot of great people. Don't get me wrong. We have a lot of great guests.
Marko Papic: Well, sure. Yeah.
Dan Ferris: But, you know, there's this sweet spot of talking about a complicated thing in a way that everyone can understand, and just me being able to fire anything at you and you being totally comfortable with it. And you're definitely in that sweet spot, and I'm sure the listeners appreciate it, so thanks.
Marko Papic: That means a lot, Dan. I mean, you've done this longer than I have, so you actually know when you say that what it means. And to me, it's always like I generally want people who listen to me to walk away with it and either learn something or make money or hopefully both [laughs].
Dan Ferris: Right. Yeah.
Marko Papic: And hopefully learn that I don't know how to –
Dan Ferris: Yeah, that's what we don’t want them to learn [laughs]. All right.
Marko Papic: Hope that doesn’t happen. Watch Putin tomorrow. "You know what? I subscribe to Stansberry Research. I heard this guy Marko say I wasn't going to invade. Now I'm going to invade."
Dan Ferris: That's right. Yeah. Yeah. Putin's listening to us. That's right.
Marko Papic: That'd be awesome.
Dan Ferris: All right.
Marko Papic: Thank you, Dan.
Dan Ferris: Thanks a lot, Marko. We'll talk to you again sooner rather than later, hopefully.
Marko Papic: Hey, anytime. Thanks, guys.
Dan Ferris: Bye-bye.
Marko Papic: Bye-bye. [Music plays and stops]
Dan Ferris: I hope you enjoy the talks with Marko as much as I do because I get a lot out of him. Like I said, he's in the sweet spot. You know, he's a great talker, he puts things in language we all understand – they're complicated issues. And I hope you notice, like, this... every time we talk to him, his knowledge of history shines through. All the time. He was talking about Finland, remember. I was like, "Oh, yeah. Geez, 1949. That's quite an example to pull out of your head."
So he's really got an excellent perspective on macro issues. And like I said. You know, a friend of mine who works for Stansberry Research lives in the Ukraine, has lived there for like a decade or so. And they're not worried. So maybe we shouldn't be either. You should at least entertain the other side of the issue. You know, the other possibility that, "Maybe it's not as bad as the Western media makes it out to be." At least do that.
All right. That was great, man. And now, I’m fired up to do the mailbag. Let's do it right now [music plays and stops]. If you own gold or gold stocks, please listen to this warning immediately. The man who predicted the 2020 crash sees major warning signs. An event in 2022 could have a massive impact on gold and other sectors. The man is Marc Chaikin.
And he says, "Move your money in the early days of 2022." That means right now, folks. The last time Marc issued a public warning like this, the market went on to see its biggest one-day drop in history. To get the full details visit www.2022tradingsystem.com. Again, that website is www.2022tradingsystem – all one word – 2022tradingsystem.com. Check it out. [Music plays and stops]
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 you can call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. OK. First up this week is a very thoughtful question from Steve. Just Steve.
Steve says, "Hi, Dan. I appreciate what you do. I'm an Alliance member and became one shortly after graduating college and flying in the Navy. I've learned/developed my own investing style and have you, Porter, Steve, and Doc to thank for my outstanding education. So here's my questions or disconnect with the tech sector. Most market insights are lumping all of today's tech together."
"That's a mistake. Many of today's SaaS companies are in secular growth markets, data, data security, et cetera. These companies are critical to their client's success. They have exceptional unit economics, margins, strong free cash flow, many with no or little debt. Not only are these companies critical to their client's success, you could argue they could be their reason their clients succeed in the future."
And then, he gives some examples. Autodesk, Palantir, et cetera, et cetera. He's got a bunch of examples there. "The current sell-off is treating these tech companies like dot-com day pre-rev pipe dreams. They are not. The reality is, even in a rising interest rate Fed" – oh, rising interest rate Fed, [laughs] sorry – "they'll improve margins, likely take market share, and compound returns."
"That said, great companies can be disconnected from stock price, so valuations matter. And regardless of what we think, market sentiment moves markets. As a long-term investor 20-plus years, how can we not see this sell-off as an opportunity? A correction is healthy. Multiple compression is healthy. But these are companies that will grow and thrive, so how can we not see this as a buying opportunity? My best, Steve."
Steve, I don’t disagree with you at all. My only caveat would be this. You know, in a bear market – if this is one – you know, no one is spared. Right? This is a point that I've made a few times [laughs] since about 2017 or 2018. In a bear market, great companies gushing free cash flow with all these great attributes that you list here can fall 50% just like everything else.
So you're right that it is a buying opportunity for great businesses, as long as you do plan to hold them for the long term, but don't be surprised if they get hammered along with everything else. Great question, though. This is definitely a critical thing for people to think about and I'm glad you brought it up. Next is Sheldon S.
Sheldon S. says, "Question. I understand that bank depositors are considered unsecured creditors in the event of a bank failure. Bank accounts are supposedly ensured up to $250,000, but I understand that FDIC has only enough money to pay about 30 cents on the dollar if there are widespread problems. Are investments held in a brokerage account street name also treated as being owned by the brokerage? Does the expression, 'If you don't hold it, you don't own it,' apply the same as for precious metals and crypto? Sheldon S."
So, Sheldon, the FDIC, I think they actually hold something equivalent to like 1% [laughs] or 2%. I haven't looked at it lately and I didn't look it up for this. But I know it's in the ballpark of 1 or 2% of all the deposits in the country. So it's worse than you said. But, you know, I think the chances of you not getting your cash up to $250,000 – which you went... I didn't read the other part of your e-mail, but you were talking about losing 75% of your money in a worst-case scenario.
No. I think worst-case scenario is you get all of it back and it's just not worth that much anymore. You know? It's cash, and cash becomes trash in a real crisis. But look. Regardless of what you think of fiat money, the way this system works, I don't think you're going to have a problem getting your bank deposits back. Now, you asked about brokerage accounts. That's not covered by the FDIC. That's covered by something called SIPC.
I forget what – I think it's securities... I forget what it's called [laughs]. I forget what SIPC stands for, SIPC. But that's completely different. So maybe you want to... what I would say, what I always tell people, is don't ask me these questions. Ask your broker. Ask, you know, your equity broker – your online equity broker – and your crypto exchange. Shoot them an e-mail, call them on their customer service line. Do whatever you have to do to make sure you understand your relationship.
You have a relationship with a counterparty who is holding your assets. Right? You need to understand that relationship. That's the real point. That's the real reason I put this question in there. Because it's not a question for me. It's a question for your broker, between you and your broker. It's about that relationship, so thank you for asking, Sheldon. Next is Alex W.
And he says, "Hello, Dan. I enjoyed listening to Egon" – Egon von Greyerz from last week. "He seems very knowledgeable. He made a statement that you allowed to pass without question, and I'd like to take issue with it. When discussing bitcoin, he said, quote, 'They' – central banks – 'will never let it replace the monetary system.' End quote. I'd like to correct the statement to read, 'They'll never let it replace their monetary system.'"
I'm going to stop there, Alex. Your e-mail was longer and more specific, and I get it, but that's the point. It'll never replace their monetary system. And then, you did go on to say, "It would've stopped you in your tracks if Egon had said, 'The U.S. central bank will never let bitcoin or gold replace the monetary system.'" I don't know if it would or not. And you finished up by saying, "They may not let it replace the U.S. dollar, but that didn't stop the dollar from replacing the pound. All the best, Alex W."
So, Alex, I get it. Like it or not – like it or not – the U.S. dollar is... I think it's around 78 or 79%, was the last number I saw within the last few months – of global transactions. And I think, still, either in the high-50s or 60% of global foreign exchange. You know? It's a dollar world, like it or not. But you are technically correct and I cannot disagree with you at all. I don't disagree. I don’t want to disagree. You know?
Gold is money. Yeah, it's taxed [laughs] – you're going to pay 28% tax when you sell it in the U.S. Gold is money. Bitcoin may or may not come into widespread use as a payment – as a currency. It's not a currency now. You know, it's sort of like an intermediate payment system. It's kind of redundant most of the time. Most of the time, you're just converting dollars to bitcoin and then bitcoin back to dollars.
But it proves that it kind of works, right? It definitely works. I've transacted in bitcoin. But your point is well-taken and I don't disagree. That's really what I wanted to say to you. But I also [laughs] wanted to point out that it's a freaking dollar world, man. Don't fool yourself. But you sound like a smart, thoughtful guy, so maybe you're not fooling yourself. Next is Paul B.
He says, "Hi, Dan. I love the show, your newsletter, and your other Stansberry contributions." Well, thank you, Paul. Paul continues, "I gravitated toward the show way back when Porter and Buck Sexton ran it and thoroughly enjoy what you've brought to it." He says, "I've heard you talk about portfolio production with long-term option puts. I recently read in Doc's Advanced Options newsletter that one could use long-dated bear spreads to protect from a market crash. Could you give some examples of either or both and compare the two strategies? Thanks, Paul B."
Not really, Paul. I don't do those spreads. I don’t know them, I've never used them. Doc is much smarter than me. I mean, this guy – you know, he kind of created... I forget exactly what he did at Goldman Sachs, but I think he created their options... some options program that they still have. So, you know, he's smarter than I'll ever be and knows more about all this than I care to.
All I do is look out, you know, usually 9 to 12 months and go out of the money 20, 30, 40, 50, 60, 70% and just put a small amount of money and I don’t even really care about the pricing, whatever it is. I just look at the market. And if the market is, you know, surging upward – amidst what I think is the biggest bubble in history – I do what I just said. I go out that far in time and that far down in price, and I spend an amount of money that I don't care if I lose all of it or not.
And it's either going to go to 0 or pay off at some point. And lately, the past few days this week, I was in the green finally [laughs]. You know, after being in the red and getting a lot of – having a lot of positions expire worthless. But it's a few thousand bucks. It's meaningless – this is not what I did that for, in other words. We're not anywhere near. Like, I'm not – the only thing that I did... there was one position that – it expires in June, and we're here in the end of January.
And it's actually slightly underwater but it's way up from where it was, just because the market had all these down days. And I'm thinking about blowing that one out. And then, my nearest position will expire in September. But who knows? I might leave it alone. I think if Greg Diamond is right – we had him on the program fairly recently within the past couple weeks here. If Greg Diamond is right, the top is in and it could get really ugly starting March/April. So maybe I'll just leave that June put right where it is.
That's about all I can tell you, Paul. It's not very sophisticated, right? It's just like I'm throwing some money at a cheap insurance policy is the only way I think of it. Ludvik H, our very thoughtful and frequent correspondent and faithful listener, has written in this week once again. And he says, "A question. Why buy now? We have a bubble everywhere, so why invest? Why not go out of the market, exit, go into safe havens like gold, silver?
Some people also say bitcoin. I think I would prefer real estate, but that is just a cash flow opportunity. I'm thinking about investing in real estate. In the coming three months, I'll listen to books and podcasts, then make a decision if..." He says, "Then I'd like to counter that it is a highly illiquid asset." Good counter, Ludvik. I think you're right to acknowledge the highly illiquid nature of real estate.
When everything's falling apart, you know, you can't sell real estate any easier than you can sell anything else. Less easy, even. And he continues. He says, "I liked the CBOT guest." I think you might be talking about Mike McGlone. You might be talking about back in December, Bubba Horwitz. "But why" – oh, Bubba Horwitz did not work for Bloomberg. Mike McGlone is who you're talking about.
Because then you said, "Why move to Bloomberg? And you can specify with 21 reasons or motivations." I don't know the 21 reasons or motivations [laughs] why he went to Bloomberg and is not trading anymore. I do know, though, Ludvik, that if you asked this kind of question to like Steve Sjuggerud or somebody, "Why aren't you still back in your hedge fund days, like in your early part of your career" – and the lifestyle is just really... it's awful for some people. You know?
You're waking up at 3 a.m. looking at price quotes and all kinds of stuff. And this lifestyle is much, much better and you're doing almost the same – you know, a lot of the same kind of work. So I don't know what Mike's reasons were, but it wouldn’t surprise me if it was something like that. And finally, Ludvik says, "Maybe a stupid question. But how is the Bloomberg Terminal different from the radio network, the magazine, and TV?"
It's way different. It's this massive tool that is just... it is so deep and so filled with information you can do equity screening and trading, options research, research on any asset class in the world. It is incredible. And it's incredibly expensive. Stansberry has a Bloomberg account for me that I use every single day. And, you know, I think this thing is like – you know, it's like $2,500 a month I want to say. Something like that. It's really expensive.
But it's worth it if you're in certain businesses like ours, that we depend on our ability to research things as deeply and quickly as possible. And deep and quick are not exactly compatible all the time, and a tool like Bloomberg is essential to get that kind of work done. I hope that explains it to you, Ludvik. And thanks for the questions. I’m sure we'll be hearing from you again very soon. All right. Last up this week is Derek F. Alliance member Derek F.
And Derek says, "Hi, Dan. I've been enjoying listening to the Stansberry Investor Hour since the early Porter days of the show and, of course, everyone you've hosted. Towards the end of show No. 242, you were talking about Russia and said, "The current regime is a bunch of crooks. Oligarchs. Putin went to the oligarchs and said, 'I'll leave you alone but I need 50% for me.'"
Meaning 50% of the oligarch's companies. "I'm in the middle class. The regime I live under approximately taxes my income at 28% nationally, 7% state, social security 12.4%, sales tax 8% and now well over a 10% inflation tax. The oligarchs in my country – in tech, pharma, finance, defense, and the government – write the laws for themselves and their business interests so they can afford to be excluded or deal with taxes."
"But us in the middle are never left alone and must bear the brunt of our regime's leviathan of taxes both directly and indirectly while it pulverizes us out of existence. Doesn't it seem like the Russian oligarchs have a better deal than the middle class in the USA? Alliance member Derek F." Derek, I hear you loud and clear. And your point is well-taken because, in the Russian oligarch situation, you're right.
It's a one-time thing. You take 50%, then you're done and you leave me alone. Whereas we've never left alone by our government, are we? Everywhere you turn, there's another tax. And look. We get stuff from taxes. Right? We get roads, we get whatever else we get. I don’t want to go into the whole list. But I think anyone who believes that there isn't a better way to do it than tax is not in the conversation.
You're so off base that, if you think that taxing people this way – and basically violently seizing their income and assets this way – is the only way to pay for these, perhaps, essential services... which there's really no such thing. Essential is whatever is essential to you – then you're not in the conversation. You're not in the conversation if you think this is not way too much and the government hasn’t gone way too far. Government has gone way too far. We do pay way too much taxes. Most of the money is really kind of flushed down the toilet.
And this idea that government was the sort of utility that operated, you know, courts and basically was there to prevent infringements against our person and property is long gone. Now it's been seized by idealogues as this instrument for do-gooding. And that's always bad. So I agree with you, Derek. I really do. And I'm glad that you asked the question. I know this isn't a political show. OK? But you were responding to something I said, and you were right. I think your interpretation was spot on [laughs], Derek. So good on you. Thanks for the question.
And that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We provide a transcript for every episode. Just go to www.invesotrhour.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 who might enjoy listening to the show, tell them to check it out on their podcast app or at investorhour.com.
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