Porter and Buck welcome Greg Diamond, senior analyst of Ten Stock Trader and co- host of The Investors Marketcast. Greg explains why we’re at a big inflection point in the stock markets and how Ten Stock Trader just posted a 25% gain in less than 24 hours. Porter asks Greg to reveal the one trend he sees in the markets right now that can help you make money. Porter tells you the first thing he looks at when buying or selling a stock, and how he finds businesses that produce products his grandchildren (and their grandchildren) will be using.
Founder of the Trends Research Institute, Gerald Celente, joins the show to explain his methodology of spotting future economic, social, and technology trends. Porter asks Gerald how massive corporate and consumer debt is weighing on markets and what he thinks about the possibility of a populist debt jubilee. Gerald tells you why what’s happening in the Middle East right now can send a shockwave through the equity markets, and how autonomous driving is still a “nerdy pipe dream” that’s decades away from becoming reality.
Porter answers listener questions about selling put options, proper position sizing for bond portfolios, and the secret origins of the ubiquitous Country Club Guy.
Founder, Trends Research Institute
Announcer: Broadcasting from Baltimore, Maryland and New York City, you're listening to the Stansberry Investor Hour.
Tune in each Thursday on iTunes for the latest episode of the Stansberry Investor Hour. Sign up for the free show archive at InvestorHour.com. Here are the hosts of your show, Buck Sexton and Porter Stansberry.
Buck Sexton: Hey, everybody. Welcome to another episode of the Stansberry Investor Hour. I am nationally syndicated radio host, and amateur grill constructor after this past weekend, Buck Sexton. With me here is the founder of Stansberry Research and slayer of the deep aquatic realm – that is an awesome title – Mr. Porter Stansberry.
Porter Stansberry: I do like that. Country Club Guy, what do my wife and her sister call me? They call me King Triton?
Country Club Guy:Or Global Slayer of Animals.
Porter Stansberry: Maybe so. We had a great fishing trip, Buck. We did some spear fishing. We did some marlin fishing. We had success on all fronts. We got a blue marlin and two sailfish, about 25 dolphinfish. For those of you who don't know, I'm not killing Flipper. I'm fishing.
Country Club Guy:Your name came up at the gym this morning, at the country club. Yeah, I do work out, people. Someone said, "Hey, I heard Peter" – a mutual friend –
Porter Stansberry: Our buddy. The rat.
Country Club Guy:– who's an architect and was on the trip – he said it was pretty amazing. I said, "How'd you know?" He goes, "I called his office for seven straight days because he's doing a project for me and he's not in." So that's how your name's all around the club.
Porter Stansberry: Ah. Word's getting out. Anyways, we caught almost a boat record. So our boat record is a 60-pound bull dolphin. And I caught a 57-pound bull dolphin the morning before we flew home. So we had a great trip. But that's all fun and games. We're I think talking with a real media star, folks. I got word from Buck from a mutual friend of ours, someone who is very involved in the careers of folks like Rush Limbaugh and others, complimenting you and, believe it or not, this podcast. I think the compliment of the podcast was gratuitous because he was e-mailing me. But I think what he was really saying is: Looks like you're going togoing to be tapped to be the next big-dog conservative radio star. I think –
Buck Sexton: That's the plan.
Porter Stansberry: I'm pretty sure you know of the man I speak. Might have something to do with where you cook lot ofa lot of food?
Buck Sexton: Hm.
Porter Stansberry: Hm. But before we have any more mysteries – I guess I'll tell you off the air. I don't want towant to mention his name on this podcast. But you know –
Buck Sexton: I know who you're talking about, and he's one of the great individuals –
Porter Stansberry: You know who I'm talking about.
Buck Sexton: Of course I do. He's the greatest.
Porter Stansberry: But tell me how you got into the grill-building business. Because after fishing and finance, my other hobby of course is cooking. So what grill did you put together?
Buck Sexton: So my girlfriend, Ms. Molly, who's very lovely, decided that she thought that I was being wimpy because I was going to TaskRabbit somebody to assemble our Weber grill. We have a little patio here in New York, which – any outdoor space in New York City makes you feel like you've really – the next level is to have a washer/dryer in your apartment, Porter. I'm not there yet. But in New York, if you get outdoor space of any kind, even if it's barely big enough for a Chihuahua to run around, you feel like you've done something.
So we were assembling a grill – or, rather, I was going to have the grill assembled. Because TaskRabbit is so easy, Porter. You sit there on your couch, someone shows up, they just do whatever you need to do, and then they go. And she's like, "Don't be a wimp. Assemble the grill yourself."
So, sure enough, I figure out, because I have to assemble this grill, that I don't even own any tools. So I had to go down the hallway and have the embarrassing – because it was a Sunday and there's no stores open that sell tools that were near me on a Sunday – I had to ask people for a screwdriver, things like that. Sure enough I got it together, assembled a Weber grill that's just big enough I'd say for three or four burgers.
I have to tell you: very proud of myself right now.
Porter Stansberry: You did something manly, Buck.
Buck Sexton: That's right. Manly stuff. I didn't even have to go to YouTube to see how somebody else did it. I used the crappy instructions.
Porter Stansberry: [Laughs]. That's always my first move. I go to YouTube. I had to assemble one of those Nerf hoops that you hook on the back of a door for my kids. You know, the bedroom door Nerf hoop thing? Had no idea how to do it. Had to go to YouTube.
Country Club Guy:Really?
Porter Stansberry: Yeah. I'm all thumbs when it comes to putting things together. But I have built a heck of a lot oflot of grills. So I've gotten used to those kind of instruction books. You could of called me but you did the real thing. You did it yourself.
Buck Sexton: Next time – if I go for a grill that actually you can cook more than one frozen patty at a time on, then I'll have to reach out. But I felt like my man card got a stamp on Sunday. I was very proud of myself.
Porter Stansberry: Yeah. The truth is: The farmer that lives on our property puts most of the things together for me including: he's building the basketball hoop for my kids. And my wife was like, "Doesn't that make you feel a little weird: that another man's putting together your kids' basketball hoop?" Yeah [said hesitantly].
Buck Sexton: It's called success.
Porter Stansberry: Yeah. Someone had to go fishing in the Bahamas all week. So, you know, division of labor.
Buck Sexton: There you go.
Porter Stansberry: Well, listen, before we get into finance stuff, I did want to give you a chance to bring me up to speed on the crazy craziness that's going on in our swamp, our nation's capital. What is the latest with the war between the president and the FBI?
Buck Sexton: And before I get into all the latest on the D.C. swamp, I want to give you a quick roadmap of what's coming up on the show.
Joining us in a little bit today, we'll have Greg Diamond. He is lead analyst of the new Ten Stock Trader service at Stansberry, which just closed a 25% 1-day gain on its inaugural trade recommendation. Greg has 13 years of portfolio management experience across every asset class, trading for a $3 billion hedge fund and a $35 billion pension fund. Greg is also the only CMT or Chartered Market Technician at Stansberry.
Later on in the show, we'll talk with pioneering trend strategist and founder of the Trends Research Institute, Gerald Celente. Gerald's motto has always been, "Think for yourself." And he's here today to talk to you about his observations and analysis of current events forming future trends. We'll ask him what the future might hold for cryptos, interest rates, and stock markets.
Porter Stansberry: What is the latest with the war between the president and the FBI?
Buck Sexton: So you'd think at this point that the president would have met his match. Because he's going after not just the entirety of the mainstream media, but President Trump has also been willing to call out the leadership of the intelligence community, which is obviously very powerful. In some countries the intelligence community or the intelligence agencies are really the most important and powerful organ of the whole government. It's actually true in a lot of authoritarian governments. There's a reason why people like Saddam Hussein, for example, used to be intelligence officers. Or Vladimir Putin was an intelligence officer. But Trump has gone after that sector. And now what we're seeing is that it's not smoke and mirrors – it's not all some big front.
Porter, you had two big things come out in the last week or so. And I've been kind of of short-handing them as Comey's leaks and McCabe's lies. So, Comey, who's on this book tour – you've seen him, right? He's the lanky, super-awkward former FBI director. He's like 6'8" by the way. You get to a certain level where someone's height really does stand out. I mean, he's a large dude. I bet he can't dunk, though, even though he's 6'8".
So he is on this book tour and it comes out that, sure enough, some of the information that he shared with The New York Times, that went through an intermediary, a cutout, was probably classified.
Now, there's a fight over whether it was or was not, and people are saying – they'll say things like "classified after the fact," which, Porter, that's not actually a thing.
Information is either classified or it isn't. It doesn't get a classification because of the stamp. It's the same thing like with insider trading: you can't say, "Well, no one told me it was insider trading." If it's confidential market-moving information, it's on you to know. Same thing's true with classified.
But it looks like he may've leaked some stuff that would fall in that realm, which could be criminally prosecuted. That's a little bit more on the edge. At a minimum, though, what he did is highly unethical. This is the former FBI director, Porter. This is a big deal. This is the guy who was running the premier federal law enforcement agency in the country and he was waging a one-man vendetta against the president and, at a minimum, broke FBI regulations – may've broken the law. This doesn't seem to surprise you though.
Porter Stansberry: No. I mean, really nothing in politics surprises me. One of the things I love to explain to people is that there is no such thing as the national interest. There are only and there are always competing interests. And trying to understand who's on your team and who's not on your team isn't always easy.
But one thing I can tell you is that when you go after your boss, you better be right. And so, you know, the FBI is a part of the executive branch, and the boss is the president. And if you start targeting your boss, you better be right or you're going to go down, and you're going to go down hard. And that's what's happened with both McCabe and Comey.
And I've rarely seen anyone behave in a more publicly self-righteous way. And I'm telling you: I don't know enough about it to know if Comey did the right thing or the wrong thing. But judging by the arrogance of the man, have to suspect it's the wrong thing.
Buck Sexton: I've been calling him – and publicizing this because I think it gets across the point – calling Comey Sancti-Comey, which people have sort of latched onto. That's been working pretty well.
Porter Stansberry: [Laughs]. I like that. Sancti-Comey. I did like it too that he believed that he was so sure that Hillary was going to win that he felt safe doing something that might derail her campaign, which is kind of funny, because it was his arrogance that got him trouble there once again.
Buck Sexton: And, by the way, your point about coming at your boss – it reminds me, since you're in Baltimore, of the great wisdom of Omar, the robber of drug dealers, who once said in the show The Wire, "If you come at the king, you best not miss."
Porter Stansberry: That's right. That's a great line. Nice call-out there. That's fantastic.
Buck Sexton: Thank you.
Porter Stansberry: Omar is one of my favorite TV characters of all time.
Buck Sexton: Oh, so I got one more though. Because there's McCabe too. So the No. 2 guy at the FBI – so Comey's already looking really bad with all this. He's on this book tour... By the way, to be the FBI director, you're supposed to be above the political fray, and he is intentionally not only inserting himself in it – this is Comey now – but trying to profit off of it on top of that, which is just grotesque.
But okay, one more thing. The Office of the Inspector General of the FBI put out a report, which I have read – it's 30-ish pages. And it details why McCabe, who was the acting director of the FBI, No. 2 under James Comey at the FBI, why he got fired. And the reason he got fired is: He was engaged in a series of lies about leaks that he gave to the press to make him look better with regard to the investigation not of Hillary's e-mails, which is one criminal investigation that was going on, but with the Clinton Foundation. Because the New York field office of the FBI was looking into that as well. And not only did McCabe lie about it, including twice under oath – which, by the way, Porter, that's a felony, isn't it? Other people go to jail for that.
Porter Stansberry: I think that's called perjury.
Buck Sexton: It is indeed. Not only did he lie under oath twice, according to this report from the internal inspector general of the FBI, who usually the tie goes to the FBI guy when it's from the inspector general – this is classic. He called the New York field office to ream them out about a leak to I think it was The Washington Post that he himself gave.
That's the guy who's running around pretending to be the last honest man in America who's just getting roughed up by Trump. So this is the swampiest of swamps, man. This is the methane-filled-
Porter Stansberry: Yeah. Maybe he changed his name to McCabe from Machiavelli. I mean, that's pretty good. That's pretty evil.
Buck Sexton: Yeah.
Porter Stansberry: Well, they fired him before he got his pension, right?
Buck Sexton: That's right. They did. Which, by the way, is a huge – for these bureaucrats, that's the ultimate sanction, man. To take away – sometimes people get fired but keep their pensions. To fire him if – I don't know if it's going to take away his pension or not. I'd have to look at that. But they did fire him before he qualified for it. I think it might delay his pension but not eliminate it.
Porter Stansberry: Oh. They never get it I guess. You know, here in Baltimore we had a mayor that accepted hundreds of thousands of dollars in gift cards, untraceable cash payments, from developers.
And she turned around and was giving them to her staff as tips and bonuses. And she got caught because someone we know sent her a thank-you note, and the thank-you note showed up in the legal discovery process.
And they're like, "Why would the mayor receive a thank-you note for a $100 gift card? What's going on?"
And that led to one thing and another. Anyway, she got thrown out of office for accepting bribes. Didn't stop her from running for mayor again, and also didn't do anything to damage the 80%-of-salary pension she qualified for. Which is classic.
But, listen, I want to switch gears and go onto a subject that's near and dear to my heart, which is the community of interest that supports a separate set of rules for minorities than it does for other folks. And the morass and the tragedies that occur as an example. That occur as a result, rather.
So, can anybody explain to me what in the hell went on at Starbucks? Because, probably because I am an "unwoke" white man, I simply do not understand it. You're at Starbucks and you're not buying anything and the staff sees you use the restroom, which you're not supposed to do if you're not a customer, and the manager asks you to please leave the premises because you're not a customer and you're not following the rules. Seems like the manager's doing his job. Seems like if you're Starbucks, you're interested in serving people who are buying coffee.
If you've ever been to a public library, you must know the problem of vagrants that only use public facilities for the bathroom. And Starbucks isn't a public facility. It's a private business. Seems like they have the right to decide who can and can't use their buildings, who can and can't use their restrooms. But that would just be common sense. And apparently that no longer applies.
So the manager asks the guys to leave. And by all accounts – and I'm judging by the police reports and by the passersby – the guys refused to leave. So the manager calls the cops. Says, "I got these guys in my store. They won't leave." The cops who are, by the way, African American, come in and they say, "Sir, you need to leave the store." The guys refuse.
Now, I don't know about you guys. I've never had a police officer pull a gun on me. I've never really had a police officer be anything except for mildly aggressive. Like: I know he meant business. But never once, whether he was polite or mildly aggressive, did I ever tell a cop "No" [laughs]. "No, I'm not going anywhere."
So they get arrested and there's this whole shebang. And I cannot help but believe in some way, shape, or form, this entire thing was staged. They were at the ritziest Starbucks in Philadelphia, the one on Rittenhouse Square. And the guys were the perfect stooges, meaning that they are young, black men who are not criminals and who are hardworking and good people otherwise. So it's not like they just picked up some bums and threw them at a Starbucks.
And they had this perfect story: that they were having a meeting there with a white financial backer. And all the cell phones were ready. And of course the entire industry of people who exist to – what do they call it? Activists?
Buck Sexton: Social-justice warriors.
Porter Stansberry: The entire thing was all ready to go, and before you know it, this is a giant viral thing. And Starbucks reacts exactly the way any corporation in that situation acts, which is they roll over like a whipped dog and piss themselves. You know? And what they should've done was they should have said, "We welcome all members of the black community who will pay for coffee. The members of the black community who will not pay for coffee are not welcome."
It's that simple. This is not some crazy debate. It's not as though they had a line for black customers and a line for white customers. It's not as though they told a black customer he couldn't use the bathroom.
They said, "You have to buy coffee to hang out in our store."
Doesn't everybody know that?
And then the media's like, "Well, they don't have a written policy."
Really? They've got a fucking sign up that says "Starbucks." That's where you buy coffee, right?
It doesn't say, "Unemployed black men, please use our bathrooms." It says, "Coffee."
Buck Sexton: There were pieces in The Washington Post I think the next day about whether a business even has a right to ask people to leave the premises if they are not customers.
So your whole premise of "Everyone knows this," which everyone does, Porter, was being challenged by some of the biggest papers in the country, who're like, "Well, can you really ask someone to leave if they're not really a customer?"
Uh, yeah, dude. I think you can [laughs].
Porter Stansberry: It's private property. And I'm going to go back even further and deeper, as Buck knows that I will. Because I'm a maniac and I –
Buck Sexton: Batten down the hatches.
Porter Stansberry: Yeah. I can't wait for this to get replayed out of context somewhere else and everyone to accuse me of just being a complete asshole.
But this is what the problem is when you try to legislate private behavior. So America used to be a land of free people. We had private property. We had our own rights.
And the general social contract was: "You leave me alone, I leave you alone. You got the right to worship the way you want. Jimmy, in the control booth, you can put solar panels on your roof if you want. That's no problem. You guys can do whatever dumbass thing you want to do. But you can't interfere with me and what I want to do," right?
But that's no longer the case. What's happened now is that some people's rights have expanded into the field of others.
So, for example, Jimmy with the solar panels – it's great he's got them on his roof, but guess who has to pay for them? Me.
It's fantastic that black people have civil rights. They always should've. Clearly, obviously, our country has a terrible history of civil rights and minorities. That's a terrible, terrible problem.
But the way to solve it is not by trampling the rights of other people. Two rights do not make a wrong. And you cannot expand the rights of a privileged group, whichever the color of their skin or their background, whether it's American Indians, African American people, immigrants from Asia – I don't care what color you are. It doesn't make any difference.
The society has to agree to a set of rules. And if those rules are going to be fascism, or it's going to be socialism, which is really just the same thing expressed in a different way, then the government gets to say things like, "Yeah, you can't stop anyone from using your bathrooms."
And that leads to gigantic problems. Because if you can't stop anybody from using your bathrooms, then pretty soon you can't stop anybody from drinking your coffee without paying. You can't stop anyone from using your parking lot without paying. And et cetera and et cetera and et cetera.
So what I'm begging for is a simple return to common sense in America. There's a difference between public property and private property. And that had better be recognized by everybody regardless of whatever their social goals are, or there's going to be really terrible consequences.
That's my soap box. I'm done.
Buck Sexton: It's one of the places that Rand Paul actually got into some trouble some years ago. Because they like to ask libertarians about the Civil Rights Act and public accommodations. The idea being, because of the history of racism that you mentioned, people are willing to say, "You know what? You're not allowed to discriminate in a private business and–
Porter Stansberry: I think that's a terrible application of the law. Not because it's wrong morally, but because it sets the wrong legal precedents, and we end up where we are at Starbucks. You're exactly right, Buck.
Buck Sexton: That was what Rand Paul was getting jammed up for saying. And he got steamrolled on that one.
Porter Stansberry: But listen, do you want to have a private civil society or do you want to have a society that's dominated by government? Look, I went to the Masters Golf Tournament. The Masters is a private club. And for many years it didn't have black members and it didn't have women members. It's a private group. They can accept or not accept whoever they want.
Now, they got jammed up because the public decided, "We're not going to support the Masters Golf Tournament unless Augusta National Country Club begins to accept women and minorities."
And so they changed their rules. But that is a fantastic example of how private civil society ought to work. The club changed its rules. The government didn't change the rules for the club. The club changed its rules.
And I think the same thing would happen with any large corporation today that tried to insist on refusing to serve people because of race or gender. It just wouldn't work. Public pressure would shut them down. So you don't need the government to do that anyway.
Buck Sexton: That is the traditional libertarian perspective, by the way.
Porter Stansberry: I guess I'm a traditional libertarian. At least I'm traditional at something.
Buck Sexton: All right. So let's talk some finance here. We got Greg Diamond with us. Greg has 13 years of trading and portfolio-management experience across every asset class. Greg has traded for a $3-billion hedge fund and a $35-billion pension fund. He's spoken at business schools on trading and technical analysis, is a member of the Market Technicians Association, and holds the Chartered Market Technician designation. Greg is a member of the Stansberry NewsWire team, whose daily market videos can be found each morning on YouTube. He's cohost of the Investors MarketCast podcast, and now lead analyst for the new Ten Stock Trader service. Please welcome to the Stansberry Investor Hour Greg Diamond.
Greg Diamond: Gentlemen, thank you for having me.
Porter Stansberry: Greg, great to see you again. Thanks for being with us. Let's start off with the fact that I don't believe in technical analysis at all.
Greg Diamond: I know you don't.
Porter Stansberry: I think it's a bunch of dorks drawing lines and assigning meaning to them.
Greg Diamond: I love it. This is basically how our first conversation went when I first met Porter on a fishing trip and was like, "Okay, this is going to go really really well" [laughs].
Porter Stansberry: Yeah. I think it's a bunch of worthless voodoo and hoodoo. And yet you have built a great career using it. So tell me and our audience why I'm wrong. What is it about technical analysis that gives you an advantage over old folks like me who just use basic fundamentals?
Greg Diamond: Well, I think it's a concept that a lot of people think of: just trend lines and drawing things. And the way that I look at it and the way that I'm bringing Ten Stock Trader to people's minds is a different way to approach it. And that is: when I look at the markets, it is nothing but the behavior of human investors over time.
And as you know, human behavior really never changes. It goes in cycles. It repeats. And if you look at a chart, that is the history of market participants' behavior repeating, time and time and time again. And so when you begin to study that, when you begin to study the history of that, you'd be able to profit from those past patterns that have happened in the future.
Porter Stansberry: And in some ways, fundamental analysis is similar. For example, a lot of the worst market crashes are in the fall. And the reason for that is because the money has to come out ofshould have the banks to pay for all the harvest. And so there's a cyclicality to when credit is very tight.
Likewise, interest rates seem to always go up in the spring. And that's because there's a great demand for capital for planting. So there are these cycles. And you can see them in a chart the way that I see them and understanding what bank balances are and things like that.
Buck Sexton: That's right. And we've had this discussion before: It's not that I think fundamental analysis is wrong.
Porter Stansberry: Right. I'm saying that technical analysis is wrong.
Buck Sexton: [Laughs].
Porter Stansberry: I'm the guy who has to bring up the evidence, right? You can just say, "It's worked for me."
So one thing I will tell you, though: In my mind, technical analysis does seem to have a big advantage over fundamental analysis in regards to short-term dynamics.
So, for example, I've seen many cases where stocks are deeply, deeply undervalued. One simple one is McDonald's. Back in the mid-2000s, 2006-to-2008 time frame, McDonald's was trading well below historical norms, and the business was doing great, and yet there was such a hulu over that movie. Remember Supersize Me?
Buck Sexton: Right.
Porter Stansberry: So McDonald's was dealing with a bunch of bad publicity. And as a result, a lot of people didn't want to own the stock anymore. Pensions were under pressure to dump it because the food isn't healthy. All those things that were going on.
Nothing changed about the business. Sales, revenues, profits all kept going. And as a fundamental guy, I'm like, "Oh, this is a fantastic opportunity to buy one of the world's greatest brands."
But technical people probably could've shaved two years off that holding period because you guys would've said, "That may well be, but let's wait until there's an established uptrend – let's wait until we can see the mood has changed in the market."
Greg Diamond: That's right.
Porter Stansberry: Is that part of what you do?
Greg Diamond: Absolutely. And the other thing too that's so great about it is: It is a strategy and risk-management system all wrapped into one. So, look, you might've been right on your fundamental analysis, but what's the end goal in investing? It's making money.
Porter Stansberry: Making money.
Greg Diamond: Right? And so if I have a system that's saying, "Hey, look, the fundamental analysis is saying this, but price isn't going along with that." Okay, then it's not time for me to invest in that yet. Wait for the uptrend to happen and then we'll get back in.
Porter Stansberry: And that's something that you do see also in a lot of fundamental investors.
Like my friend Steve Sjuggerud likes to buy things that are cheap, hated, and in an uptrend, where the market is giving you some indication that those problems will be solved.
Definitely the market is forward-looking. We both agree about that.
Let's talk then about your new product. We hired you because you have tremendous amount of experience managing huge portfolios. You're a true financial professional. And we've brought you in and we've asked you to do something that's just incredibly difficult.
So we want you to tell us what stocks to watch each week that have the potential to move a lot. And how have you gone about building that system for us?
Greg Diamond: So, it is based on my experience – and, as you mentioned, I worked for a $3 billion hedge fund and a $30 billion pension fund.
And in those experiences managing hundreds of millions of dollars, trading up to almost a billion dollars a day sometimes, I came away with various rules and a system that I talked about earlier.
And one of the biggest things that I learned probably was through a trading legend, Stanley Druckenmiller. I'm sure you've heard of him.
And we were at a conference and he said, "I don't like diversification. I put all of my eggs in one basket and I watch them very very closely."
And that had a profound effect on me from managing hundreds of millions of dollars and there's all these different things going on.
And so basically, I came to the conclusion, learning sometimes the hard way, that more positions equals more potential problems.
And so what I wanted to do with this trading service, with Ten Stock Trader, is: I'm going to focus on just a few things. I'm going to be really good at those few things. And so, with Ten Stock Trader, there's only going to be a maximum at any time of ten positions.
And then I will balance that with different options plays, long/short equities, and ETFs, sometimes levered. But I want to keep that basket and all those eggs in one basket and focus on that.
Porter Stansberry: All right. So the product is called Ten Stock Trader. And the idea is that each week, when you come out on Monday –
Greg Diamond: That's correct.
Porter Stansberry: – you'll be following no more than ten ideas at a time.
Greg Diamond: Correct.
Porter Stansberry: So it's a basket of stuff you can actually watch and understand. Do you think it's likely that you're going to be trading the same particular financial products again and again and again? Like there'll be an S&P trade that you go back to – there'll be – I'm making it up – a QQQ trade that you go back to.
Greg Diamond: Yeah. Absolutely. You've heard the saying: You don't leave fish to find fish. And so when you find a trade that's really good, I'm going to stick with it. And so that is absolutely the case. I'll definitely have things where I'll just keep hammering, keep hammering, hammering.
Porter Stansberry: All right. And I know that you're in a beta process where our Alliance members have been receiving this product.
Greg Diamond: That's correct.
Porter Stansberry: And how's it going?
Greg Diamond: It's going great. I've gotten tremendous amount of feedback. It's a trading service but it's also an educational service in terms of my ideology, my experiences working for a pension fund, working for a hedge fund. My old boss worked for a legend. So it's more about my experiences as well as obviously making money and creating alpha. I put on my first trade last Thursday and got out within less than 24 hours for a 25% return. So: off to a good start.
Porter Stansberry: Go with God, my son. Go with God.
Greg Diamond: [Laughs].
Porter Stansberry: If all of your trades are like that one – what's 25% in 24 hours annualized, Greg?
Greg Diamond: Uh, a lot.
Porter Stansberry: You would soon be the richest man in the universe. So although I don't think they're all going to be that good –
Greg Diamond: No.
Porter Stansberry: – I'm certainly glad to see you started with a bang.
Greg Diamond: Me too. And there's also a portfolio management kind of ideology that – I mentioned the ten stocks, but there's also going to be a global macro hedge fund view, a core view where I want to understand sector analysis and global macro analysis of all the major asset classes and have a position in those asset classes to gain alpha and capture momentum when stocks are really moving.
Porter Stansberry: All right. So, listen, let's get you out ofshould have here on this. Give the readers – sorry, the listeners of the podcast – a simple trading idea. So maybe not a recommendation but a pattern that you've seen before, a pattern that you think is emerging. Toss the dogs a bone.
Greg Diamond: Okay. It's actually going to be really long-term. And I talk about this in the promo and I've talked about it on the NewsWire and I mention it in Ten Stock Trader. And that is the nine-year cycle in stocks.
We saw it happen at the top of 2000. You know what happened after that.
You saw it happen nine years later, and what happened? We had the bottom in 2009.
Now it's 2018, another nine years later. And so what I'm looking at: I think over the next six months – excuse me. Over the next six weeks, rather, I think we're at a very very large inflection point.
Now, I don't know exactly what's going to happen, and this is why I'm kind of just getting my toes wet in terms of the trading recommendations that we're doing. But based on that nine-year cycle, I see a huge inflection point in the stock market for huge potential moves.
Porter Stansberry: So is that a higher or a lower move?
Greg Diamond: Right now it's just volatility.
Porter Stansberry: [Laughs]. So he's not committed one way or the other. I'll fill in there. I think that we're very close to a generational peak in the stock market.
And I think we're going to see a radical change in the people's perception of stocks and the stock market as a whole over the next 12 months. Because with the 2000 tech collapse, the Fed pumped up the market again. With the '09 mortgage collapse, the Fed pumped up the market again.
And we're now at record valuations. We're now at record low credit spreads. We're now at record low corporate levels of debt. We're now at record-level consumer level of debt. We're at the top of the market again. And I can't envision how it'll be possible for the Fed to pump up the market again after the next big 30%-plus decline.
Greg Diamond: Yeah. I agree with you. And here's the other thing too about technical analysis and kind of the way that I trade that I learned: I don't really care about being right or wrong. Meaning: "I think XYZ's going to happen and you need to do this." You see that all the time on Wall Street: Analyst – "Well, the stock's down 30%, but the blah blah blah, this is still good." "Yeah, but I'm down 30%." So leave the bias at the door. And that's what I do.
And let me ask you just one more question, as a fundamental analyst. What's the first thing you look at when you want to buy or sell a stock?
Porter Stansberry: The first thing I look at when I want to buy or sell a stock?
You know, honestly it's capital efficiency. I want to know before I even bother looking at a business, in detail in terms of price or volatility or momentum – I want to know that it's a great business.
And I can't tell that by looking at the normal things like P/E ratios or net income. You can't tell. I have to look underneath the hood and see really what's going on with the cash and the business.
Greg Diamond: And then after that you're going to look at a chart.
Porter Stansberry: No. After that I probably will look at valuation. And then I'll look at fundamentals. Like: Is this company growing its customer base? Is this a new thing? Like is this a video-game business that's going to grow because video games are growing on movies and other forms of entertainment?
Or is this a value trap? Is this like Western Union? And so I want to stay out of the former and participate in the latter. Or, sorry, the other way around [laughs].
I want to look for companies that I'm certain that my grandkids will use their products, and I want to avoid ever investing in companies that have a very limited lifespan. Because you can't know when the lights are going to get turned out. AKA, the bond investors at Toys "R" Us. Right? Every year, more and more toys are being bought online. Every year, less and less toys are being bought at retail. Who's going to win that race? The bondholders or the market trend? And the answer is the market trend every time. One of my longest positions I ever held in my newsletter was shorting Kodak. Why? There is no way you're getting out of that trap. There's no way a chemical film company's ever going to beat digital photography. Can't happen. So that's the thing I look at.
And then, after all that, then I might look at a chart and go, "Oh, look at all those idiot technical analysts. I'm going to pick up the stock when they won't buy it."
Greg Diamond: [Laughs]. I will say: in my time here – and I've been at Stansberry for about a year and a half now, and I will say I have learned a tremendous amount on the fundamental-analysis side. So I will give you guys some credit for that, for expanding my horizon. And it's a learning process. And that's what I love about the stock market and just being in finance in general. So it's been a great experience.
Porter Stansberry: Hey, Greg? When the facts change, I change my mind. And who knows? Ten Stock Trader – it might win me over.
Greg Diamond: I like to hear it.
Porter Stansberry: All right. Thanks for joining us.
Greg Diamond: Thank you, gentlemen.
Country Club Guy:One last thing: Charts are for sailors.
Porter Stansberry: Country Club Guy.
Greg Diamond: Well-played, Jammer.
Porter Stansberry: All right. Great. Listen, we want everybody to go to www.TenStockTrader.com. And once again my crack staff has created a URL that you will type wrong.
Why? Well, is it the number 10 or is it the word ten? Well, it's the word ten. So that's www.Ten – T-E-N – StockTrader.com. All one word: TenStockTrader.com. Please go take a look at what Greg's doing. I'm sure it comes with a refund. Try it out. If you like it, keep it. If you don't, we'll give you your money back.
Greg, thanks for having you.
Greg Diamond: Thank you, sir.
Porter Stansberry: Well, Buck, up next we've got another guy who peers into the future and sees big trends.
Buck Sexton: Let's get into it. We have Gerald Celente with us now. Gerald is a pioneer trend strategist and founder of the Trends Research Institute. He's the author of the national bestseller Trends 2000 and Trend Tracking: Far Better Than Megatrends, and publisher of the internationally-distributed quarterly, Trends Journal. For more than three decades, Celente has built his reputation as a fearless teller of the truth, an accurate forecaster, and an analyst whose expertise crosses many arenas, from economics to politics, from health to science, and more.
Most importantly, Celente is a pure political atheist. His motto is "Think for yourself," and he considers himself a citizen of the world. Gerald has earned his reputation as the most trusted name in trends by accurately forecasting hundreds of social, business, consumer, environmental, economic, political, and technology trends. Please welcome to the show: Mr. Gerald Celente.
Porter Stansberry: Hi, Gerald. Porter Stansberry here. Thanks for joining us.
Gerald Celente: Thank you very much. Great being on.
Porter Stansberry: Gerald, my first question for you is a big one, but it's actually pretty simple as a root. And that is: few people have accomplished as much as you have in terms of identifying big trends and getting them right. You pretty much are the guy who sort of invented the whole idea of a futurist. And what I wonder is: How do you do it? I mean, I know how I try to find trends: reading the news, talking to people, traveling, reading books. But what's the secret to your process?
Gerald Celente: It's called "globalnomics," and that means making connections between different fields. And as you mentioned, I'm a political atheist. I began my career briefly at a graduate school. I was the No. 2 guy running the mayoral campaign in Yonkers, New York, a sizeable city, a couple hundred thousand people, about 300,000. And I taught American politics and campaign technology at St. John's University and was also the assistant to the Secretary of the New York State Senate and a chief government affairs specialist for the chemical industry back in the '70s.
So I got into the political realm, and I realized what it is. And it's basically the same people you couldn't stand in high school and college that wanted to be class president and head the student council. But yet, people really identify with their politics. It's identity politics. People call themselves labels: Democrat, Republican, Conservative, whatever. And what I've learned to do is just look at issues for the way they are and not the way I want them to be. And with the economists, for example, they tend to be one-dimensional. They're not looking at global events. They're not looking at changes in the family, environmental, sociological. So they're only taking one viewpoint.
What we do is we try to take as many viewpoints as possible and then try to find the facts within those to determine where the trend is going. Like for example, I read the Global Times and other Chinese news online, to different Israeli news. I go to Fars News Agency, Iran. I go to Al Jazeera to get the other side. So I keep looking at all the different sides, geopolitics, economics, and putting the pieces together to see where the trend is going.
But I have to tell you: in the environment we're in now, this isn't fake news. It's more than that. It's dumbed-down news. It's propaganda. It's lies. And it's agendas. So people are really going to where they like to go to to get their emotions fulfilled rather than seeing the bigger picture.
Porter Stansberry: Yeah. That's for sure. I thought that's all that newspapers were for. But I see your point. Let me ask you this about what's going on in America today. My group here has spent a lot of time studying the growth in income inequality, and in particular studying the impoverishment of the millennials, mostly because of college loans. Do you see that issue – the growing gap between the rich and the poor and the indebtedness of the millennials – as playing a role in the trends for the United States, both politics and economics?
Gerald Celente: It's playing worldwide. Look at what's going on in Europe with the steady elections in Italy, and Cinque Stelle of the Five Star Movement – became the major party, 32%. And you go to Germany, the Alternative für Deutschland, the AFD party. They got about 13% out of nowhere. The Freedom Party in Austria. So it's going on around Europe. And what's happened is that globalization has lowered the standard of living. And when you're talking about the United States, there used to be laws in place. The Robinson–Patman Act, Sherman Antitrust Act, Clayton Antitrust Act that prevented the monopolies from taking over everything.
So going back to the millennials, what's their future? What are they going to do? So now you have record numbers living with their parents. Like it's about 140-year record or something. And then you mention their debt levels out of college. Almost, what, $30,000? Those kind of numbers on average. And then you look at all the ones that didn't go to college. What's their future going to be like? Why is there an opioid crisis going on? If you were born nowhere and had nothing to push you forward, you don't know who your father is and your mother's a drug addict, where're you going to be going in this world?
So we've gone from the land of opportunity where the fact is that, since 2009, the majority of the wealth created went to the 10%. And we have the greatest gap between rich and poor of all the industrialized nations. And three people – Bezos, Gates, and Buffett – have more money than 60% of Americans combined. So what's the future? Well, you could get a job in Slavelandia working at Amazon and what, making $13.48 an hour or something like that on average – I'm not exactly sure of the cents. But I know the $13. And what are they doing? I'll tell you what: "You open up a slave camp over here and we're going to give you a tax break. Because, Bezos, you're only worth over $110 billion and you need a tax break which means that we, the people, will subsidize your operation."
So this is going on all over. They just brought Foxconn in from Taiwan into Wisconsin. What did they give them? $5 billion, $9 billion break? And you got morons saying that they're going to pay it off by 2040? Who's making this stuff up?
So that's what's going on. So when you're looking at the bigger picture, that's why you see these so-called "populist movements." And they give populist movements a dirty word. How dare you want to maintain your nationality? How dare you want to maintain your integrity? How dare you don't want to bring in cheap imports so you don't have any jobs here?
So, yes, you're going to see the populist movement. However, the millennial generation is identity politics. They're not looking at the bigger issue. I'll give you a good example. "Let's protest against gun violence." Okay. How's missile violence for you? [Laughing]. The United States just sent in, what, $120 million worth of missiles into Syria a week and a half ago? Where're the protests? You want to stop violence? Let's stop at the top. But they don't see the bigger picture. So we don't see them as a movement right now. It depends upon a new third party coming in that'll break apart the monopoly, and we don't see that happening quite yet.
Porter Stansberry: No. You're going to have to have a lot more disillusionment and anger and failure before a third party will work. One politician we're watching very carefully because what we see in the presidential election – skipping for a minute the midterms, which I think are probably going to go the Democrats' way – that seems to be the pattern in American politics, although I'm far from an expert. But I think the presidential race in 2020 is going to be sort of a referendum on capitalism versus socialism in America. I think everyone was pretty shocked by Bernie Sanders' strength. And in another two years, the millennials are going to be further in debt and further behind their parents. And they'll be the largest voting group in the country. So there's an African-American politician from San Francisco – Kamala? Am I pronouncing that correctly? "Kamala" –
Buck Sexton: The senator, Kamala Harris.
Porter Stansberry: Senator Kamala Harris who seems to have taken up that mantle. And I expect her to campaign on a platform that will call for a Jubilee, the repudiation of debts, and also for a universal national income. Whether it's her candidacy or someone else's though, those are surely going to be ideas that the Democrats bring forward in order to win the millennials over. And I wondered if you think those things, which to me seem completely antithetical to American tradition, will come forward and will be adopted.
Gerald Celente: I believe you're right on target with that. They'd find a lot of popularity. I mean, if a guy like Bernie Sanders – I mean, my God. Again, I used to run political campaigns at the beginning of my career. "I'll give you free education. I'll give you free health care. You buy two knishes, you get one free."
Porter Stansberry: [Laughs].
Gerald Celente: I mean, come on, Bernie, I've seen this act before.
Porter Stansberry: Gerald, that's fantastic. I wonder if Bernie and Arianna can get together.
Gerald Celente: Yeah. I mean, really. It's a joke. I seen guys like him in Coney Island when I was a kid. But that's how desperate the people are. And, yes, a candidate like her could win. And it will not propel a populist movement. A populist movement being for "we the people." You're not going to see that unless we see a new third party. And, again, we don't see that happening now. So it'll be a degradation of where we are, going backwards further.
Porter Stansberry: Gerald, I did want to bring in Arianna for a minute and see if Arianna would like to comment about Bernie Sanders' buy-two-knishes-and-get-one-free policies.
Buck Sexton: [Doing an impression of Arianna Huffington]. It's okay as long as you do the stretching and you make sure that you only have free-range knish. You want the knish to have a name, to come from a background where it is supported, and, you know, fair wage for the knish. And then it's okay. As long as your assistant likes it.
Porter Stansberry: [Laughs]. Gerald, I thought that impersonation was fantastic. And, as you can tell, my co-host, Buck, does a pretty good Arianna.
Gerald Celente: Yes.
Porter Stansberry: Well, this is scary stuff. How do you think the financial markets are going to react to a move to the left for the country if that's what occurs?
Gerald Celente: Well, you know, I think the financial markets have a ways to go before that happens. And right now, as we're looking at the markets, to us, they're clearly overvalued by historical values if you look at the Shiller Index. And they're overleveraged with the ETFs, etc. And they're very susceptible to rising interest rates. So we believe that we're going to see a – we were among the first to forecast a Trump rally, just two weeks after he got elected. And at the end of the year we said there'd be a correction in 2018. And that happened, and of course we're out of that correction territory. But we also are very concerned about a market correction, possibly a bear market.
But on the bigger issue, again, taking a globalnomic perspective of what's going on in the Middle East, look what just happened a few weeks ago. They rolled out the red carpet for the Crown Prince over there from Saudi Arabia. Oh, the wonderful Saudis. Hey, where's the #MeToo movement when that cat was here, man? You know? I mean, how many people did they behead this year? "Oh, they're going to give women the right to drive a little bit in June. Oh that's really progressive, isn't it?" And, I mean, he met with everybody. But then what happened right after –
Porter Stansberry: And, Gerald, if I could interject, who blew up the Twin Towers again? Was it the Iraqis or the Afghanistan people?
Gerald Celente: Oh yeah. It was only, what, 15 out of 19 Saudis, right? In the alleged –
Porter Stansberry: It was all Saudis that actually blew up the damn buildings.
Gerald Celente: Right. Yeah: 15 out of 19. Yup. And, again, look what they're doing in Yemen. It doesn't make the news at all. Somebody mows down, what, nine, 10 people in Toronto, a terrible thing – crazy guy did it in a van. But the day before, the Saudis only killed 46 people in a wedding party in Yemen including the bride, bombs away, supplied by the United States. So what I'm saying is: our major concern is what's going on in the Middle East. And we're concerned that a United States/Israel/Saudi plan to destabilize Iran is growing strongly. And going back and taking a globalnomic viewpoint of the markets and looking ahead in the short period, if there is a – oh, by the way, you know how he became a prince?
Porter Stansberry: Yeah. Well, I know there's a lot of violence and murder in that family.
Gerald Celente: No, no. A princess kissed a frog and the frog became a prince. Don't you know your history?
Porter Stansberry: No [laughing].
Gerald Celente: I mean, come on. What prince? This is a gang that they came out in 1934. They named the whole country after them. So going back to it, this guy – Saudi Arabia needs oil to be even – for their budget to break even at $100 a barrel. He's coming out and saying they want $80-to-$100-a-barrel oil. The agreement is coming up in three weeks for Trump to sign off on whether or not they're going to end the Iranian agreement. The Israelis, the Saudis, and Trump have said they didn't want it.
If we see destabilization in the Middle East that's blowing stronger now coming about, that we believe will crash global equity markets around the world. And drive oil prices up above $100 a barrel. They're already, by the way, have increased. A gallon of oil has gone up $0.40 in a year. So already you're seeing that the average tax break that the American middle class have gotten from the tax breaks from Trump is $930 according to the Brookings Institute. That means that already half of that has been eaten up on rising oil prices.
Now let's go back to – the earlier guest was talking about Toys "R" Us, and we're also looking at people shopping online. But look at what retail sales are doing. They've been very weak. What's going to happen if oil prices go up higher, already under a weak retail sale environment? What happens to the markets?
Porter Stansberry: Yeah, it won't be pretty.
Gerald Celente: No. And that's what we're concerned about. We're mostly concerned about the Middle East.
Porter Stansberry: I see that as a possible trigger. I agree. I also think something that people really haven't put their finger on yet at all has changed in the financial markets themselves. The dearth of liquidity in the bond market is setting up a future where huge shocks are going to occur. People don't realize that Toys "R" Us bonds are trading above par less than six months before they cratered to zero. And if you look around the corporate bond market, I could send you case after case after case of examples where bond prices are simply not realistic at all. And so we're not even under any market stress right now and yet there's already sort of a frozen corporate bond market and many instances where the current prices do not reflect at all the actual underlying weakness of the fundamentals.
So if there is a shock, whether it's oil prices or if there is a shock because of a soaring government deficit – and, by the way, just today the 10-year traded over 3% for the first time in eons, the first time since the financial crisis. So it could be interest rates that lead to an equity shock. It could be the Middle East that leads to an equity shock. There's all kinds of things. And just look at how much of the corporate bond market in the U.S. is consumed by one or two corporate bond ETFs. Well, those corporate bond ETFs have daily and hourly liquidity. You're supposed to be able to sell those and get your money.
But the underlying market, the corporate bond market, has unbelievable dearth of liquidity. So how in the world is that going to square? What's going to happen when the average investor says, "Whew, interest rates are spiking like crazy – I have to get out of bonds," and goes to sell – how are those ETFs going to generate that liquidity?
Gerald Celente: Exactly.
Porter Stansberry: They will not be able to. And that of course will set off a chain reaction of fear and panic so that people will have to sell whatever can be sold. And that's the cycle that you don't want to see happen. I mean, it is so obvious to anyone who would look at what's going on right now. But no one will. The SEC will not act until much later, until after people have lost billions or trillions of dollars. So I'm very concerned about what happens in the next bear market because of the plumbing of the financial system itself. It's really changed since the last crisis, and most people don't recognize it.
Gerald Celente: I agree with you. Also with the interest rates, as you point out. I mean, look what happened back in February. I mean, that's when the correction began: because of the fear of rising interest rates. And now you're mentioning about the 10-year yield going over 3%. And the concerns about rising inflation. And the Fed now suggesting that they're going to raise rates possibly four times this year instead of three. And the markets can't take it. Despite what are they going to – it's an estimated, what, $800 billion worth of stock buybacks this year because of Trump allowing them to repatriate the money and also with the bringing down the tax rate from 35% to 21%.
And, by the way, you go back to when George Bush did this, the repatriation. I believe it was 2004, 2005. Ninety-six percent of that repatriated money went into stock buybacks, not capital improvement. So this is artificially continuing to overvalue and overinflate the overleveraged markets. And when interest rates go up, what's going to happen? Again, what's going to happen with car sales? What's going to happen with housing sales? What's going to happen with the debt level? What is the consumer debt? What is it, like $13.4 trillion or something?
Porter Stansberry: Yeah. Record high.
Gerald Celente: Yeah. So what's going to happen? And, again, you're seeing what's going on in Japan. You just heard, over the weekend, the governor of the Bank of Japan saying that they were going to keep negative bond yields and they have to keep them low. And you heard the same thing going on in the EU: they have negative interest rates as well. I mean, who ever heard of this? They never taught you quantitative easing and negative- and zero-interest-rate policy in Economics 101. They're making this stuff up.
Porter Stansberry: Gerald, I've only got time for one more question and I wondered about – you're so good at long-term trends. This development we see in automation of automobiles and in the electrification of automobiles – do you think these are going to be rapid developments or do you think this is going to take a long time? So, you know, in 10 years let's say, do you think more than half the cars on the road will have automation? Do you think more than half the cars on the road will be electric? Because that has a lot to do with what the future curve is going to look like for oil prices.
Gerald Celente: Yes and no. Because consider that oil – look what oil did to coal and look how long coal stuck around. And the same thing'll happen there. We don't see advancements in electric vehicles until there is a new development in battery power. They're limited. It's an 1800 technology. And we haven't seen the kind of advancement yet that we see the numbers really increasing. And what do you have, about 1% now of the world's automobiles are electric? And in 2020, they're talking maybe 2%. So we don't see that happening. And we don't see autonomous cars happening probably in the next 25 years.
I mean, I don't know what world – this is geek-world to us, and it's not the real world. I mean, people are not going to sit in their cars in heavy traffic and just be driven around. And the technology isn't there. And we don't see it coming. We think it's a very, very hyped-out market. You saw what happened when the Uber crash happened in Arizona. The technology just isn't there. Matter of fact, it was one of our top trends for 2017: the driverless cliff. And that's where we see the driverless cars going. There may be driverless going from point A to point B. You know, bus routes, that kind of thing. And possibly even truck routes to an extent. But we don't see that happening very soon.
Porter Stansberry: Very good. Thank you very much for your insights and your time today, Gerald. It was a great opportunity to catch up with you and I very much appreciate it.
Gerald Celente: Oh, great being on with you, and thanks for having me.
Buck Sexton: All right. Thanks again to everybody for writing into our mailbag, filling the inbox with useful feedback. Folks out there, they get a special high five from the Stansberry squad: Alan M., Steve T., Thomas P., David C., Marshall S., Larry B., and Evan J. And that's just the ones that we thought of. Your comments and questions are critical to the show. It gives us something fun to talk about. It also makes sure we stay on track. And it keeps Porter from mansplaining too much. So please write to us at [email protected]. And, with that, let's hear from Bob. Maybe Bob wants to mansplain:
"Gentleman, I love the podcast and use it for my workouts, although my muscles would prefer if you stayed within the 60 minutes. Here's my question. How does an investor establish appropriate position sizes for bonds? With stocks, we have various tools, whether trade stops or your portfolio products. In the most recent issue of Credit Opportunities, there are three bonds below your buy-up-to prices. They have wildly different yields to maturity: 15%, 25%, and 55%, with maturities one, two, and three years out. I've thought about matching dollars invested, although matching par amounts would seem to take the perceived level of risk into account. But I'd be curious to hear your take. Finally, who is this character known as Country Club Guy who occasionally chimes in on the podcast? What's his deal?"
Porter Stansberry: What is the deal with Country Club Guy? Let's answer the easy question first. So, Country Club Guy got started when we started out podcast, the version of it even before this latest. I forget what the original podcast was called.
Country Club Guy:Stansberry Radio, "too loud for radio."
Porter Stansberry: Stansberry Radio, too loud for radio. Well, it wasn't on the radio, so that's why it was so loud. But we started that maybe 10 years ago. And back then, Country Club Guy was just a friend of mine who I knew from the country club. And because he was in the investment business himself – he was a desk jockey. He was a sales trader. So he would call around to different firms and trade stocks for big-league institutional investors, hedge funds and pension funds and T. Rowe and places like that. So he was a stock jockey. Sat in front of a terminal all day. You know, the kind of guys you see like in the movie Wall Street at the desks with the –
Country Club Guy:Two phones to the ears –
Porter Stansberry: Two phones, seven screens –
Country Club Guy:– yelling at people.
Porter Stansberry: – yelling at people. He was a –
Country Club Guy:It's not that complicated. We just make it look that way.
Porter Stansberry: [Laughs]. He was a sales trader for a big investment firm in town. And we wanted to have his input on the show but we didn't really want to use his name because he also had a professional life. And so he was Country Club Guy. And that just sort of stuck. And then later, Jamison Miller – that's his name – he came to work with us full-time, and we just liked the nickname Country Club Guy because if you ever meet Jammer, you understand this. Jammer – he excels at all the country club sports. So he's a local squash champion. He's a fantastic – almost a scratch golfer, paddle tennis, ping pong.
Country Club Guy:And all of these things get me nothing in life. Except a few friends.
Porter Stansberry: [Laughs]. And he knows every single person at the country club because he's involved in every sport. So he knows everybody. So you go to the country club with him and he's like, "Hey, Bobby, hey."
Country Club Guy:"How're the kids? How you doing?"
Porter Stansberry: "Hey, Joey. Hey, Frankie."
Country Club Guy:Somehow I'm now a New Yorker.
Porter Stansberry: Yeah. Well, you can't go anywhere with him in Baltimore, especially at any of the seven country clubs, without 10 different people stopping you from the parking lot just to get your golf back. So he's the Country Club Guy.
Country Club Guy:Well, I've been stuck here for four-and-a-half years and I can't seem to leave. It's like The Firm around here. You can't get out alive. So that's why I'm here.
Porter Stansberry: It's a roach motel. We let you check in – we don't let you out.
Country Club Guy:That's right.
Porter Stansberry: Anyways, Jammer's – Jamison Miller, who we also call "Jammer," is pretty much my best friend in town, and it's fun to work with him.
Country Club Guy:"Pretty much?"
Porter Stansberry: And he's Country Club Guy. Well, it's because no one else'll be friends with me. Let's be clear about why that is.
Country Club Guy:True story.
Porter Stansberry: All right. Now, about position sizing – man, that is a fantastic question you asked. Should you match par values? Should you do equal amounts of money? Here is my advice. The most important thing is that you match risk. So with stocks, that's really easy because you can just look at the volatility. That's a good proxy for risk. And you would do your position sizing according to risk. And we have a software business that we invest in called TradeStops that will help you do that. And they can tell you the volatility of your portfolio, they can tell you the volatility of each position, and they can tell you exactly how many shares to buy so that you're investing in the same amount of risk in each position.
So obviously – maybe this isn't obvious to everybody, but it's obvious to me – a bond that has a yield to maturity of 55% is at least twice as risky as a bond that has a yield to maturity of 25%. So you'd want to adjust your position sizes accordingly. In other words, you'd want to invest the least amount of money in the bond that's yielding 55% and the most amount of money in the bond that has the lowest yield to maturity. That's the most basic advice I can give you. You want to risk the same amount of capital in each position.
Buck Sexton: All righty. Next up in the mailbag. No. 2 here, Steve T., writes in, "Hello Porter and Buck. Love the show and listen to the podcast weekly. I enjoy hearing a good Porter rant, and also learn a lot from the guests that you bring in every week. My question is to hear Porter's thoughts on selling put options to buy into the Stansberry recommended positions at a discount. And what percentage of an overall portfolio would you allocate to the big trade portfolio as an appropriate hedge? Thanks, and keep up the great work on the show, from Steve."
Porter Stansberry: Good questions as well. I love the idea of selling put options to buy into our recommended stocks. And that is essentially the philosophy we use in our Stansberry Alpha product. I think it's a great idea. So what you would do is you would sell an at-the-money put, Buck, and if the stock goes down, then you would get put the shares, which you wanted to buy anyway. So you haven't lost anything and you just got a better price than was available at the time you went to buy them. If you don't buy shares then you get to keep the put premium that you earned from selling the put.
And your downside here is that owning the stock could give more value to you than put premium. So, for example, a recent Venture Value recommendation, the stock went from below $15 to over $30 in about three months. It was a great recommendation. The total return there now is over 200%. So if you were selling puts on that and you would've made, I don't know, 15% or something, you'd feel pretty stupid. Because you would've just made a lot more money simply by buying the stock. But I think overall, through time, you're going to do better by selling puts at the money and then getting better prices when you buy and getting put premium when stocks go up.
So I like that idea. I endorse it for anyone who is – I think you have to be a Level 3 options trader to be able to sell options on margin. That's a great way of doing it. I applaud that. It's definitely a more sophisticated strategy but it's one I would endorse.
And then in terms of how much of your portfolio would go into the big trade, that completely depends upon your situation. I just can't answer that question sensibly for you, or for any individual really obviously. I don't know your situation. So it depends on how much you have in other safe things. So let's say, for example, you own 1,000 apartment units and you have a great regular income and your concern is that if there's a big correction you're going to loose half of your tenants in your apartments and you're going to suffer foreclosure. Well, in that case, you'd need a lot more insurance – you'd want to have a lot more exposure to the big trade because that's insurance against a downfall.
On the other hand, let's say you're not retired, you're not just a full-time investor, you've got a great steady job, you work for a reliable employee, and you're saving for retirement and you have a 30-year time horizon. Well, you might want no money invested in the big trade because you don't need any of that insurance. If the market falls, great – you're going to keep buying stocks over the course of your lifetime. You're going to get better prices on your stocks going forward. You're going to lose a little bit of the money you have today but that's okay because you'll make more going forward.
So I can't answer that question sensibly. It would just really depend upon how reliable your income is and how much of your asset base you have exposed to the market. So the less reliable your income and the more you have exposed to the market, the more insurance that you would need.
Buck Sexton: Third up here for mailbag we have David, who writes, "Dear Porter and Buck, thank you for the outstanding interview with Dr. Hunt. I've read some of his work but I sincerely appreciated hearing him explain his ideas on the podcast. Albeit I'll have to re-listen as some of it was way over my head. Again, thank you for the excellent show. By the way, I enjoy Porter's tutorials on valuation, his contrary ideas, etc. They're excellent. Sincerely, David."
Porter Stansberry: I have to admit: a lot of that went over my head as well [laughs]. Lacy Hunt, Dr. Hunt, is an extraordinary economist and he thinks about these things every day all day and he has for 40 years. So I think it's a little hard for him to come all the way down to the layman's understanding level. But if you do want to listen to it again, you can check it out. It's in episode 45.
Buck Sexton: And here I have a request for the mailbag, or maybe just for one of our shows. I want to do – because I'm very into this season of Billions, Porter. We have to get somebody – yeah, it's good. We have to get somebody on there who can tell – I want to do sort of the "What's real and what's not?" from the Billions stuff as to how the hedge funds at that level kind of work.
Country Club Guy:That's easy. We have a friend, Turney Duff, who –
Porter Stansberry: I have ninjas.
Buck Sexton: Yeah. We should get a ninja on, but specifically to talk about that. I think it'd be really – because I'm sure a lot of folks listening watch it.
Porter Stansberry: And do you remember the watch they profiled?
Buck Sexton: Yeah.
Porter Stansberry: My partners gave me that exact watch two years ago [laughs]. How ironic is that?
Buck Sexton: That's funny.
Porter Stansberry: By the way, I read in the Wall Street Journal this week that the hoodie that Damian Lewis wears in that show is made of cashmere and it costs $2,300.
Buck Sexton: Wow.
Porter Stansberry: Yeah. So, Buck, guess what you're getting for Christmas?
Buck Sexton: All right. I'll take it.
Porter Stansberry: Cashmere hoodie, buddie. You too can be like Axe.
Buck Sexton: His shirts are kind of tight. That's not really my thing.
Porter Stansberry: You know, we'll get you the right size hoodie.
Buck Sexton: Thank you. Appreciate that. So, yeah, anyway, at some point I'd like to have sort of a Billions: "What's real? What's not?" We could do it at the end of one of the shows. But I have a lot of questions, a lot of things –
Porter Stansberry: I love that show.
Buck Sexton: I'm reading Black Edge now on Country Club Guy's recommendation.
Porter Stansberry: I actually have sent my sons to baseball practice in a helicopter before as well.
Buck Sexton: Like a boss, Porter.
Porter Stansberry: No [laughs], I'm just joking. I'm just kidding. We only take the helicopter when we're going to the boat in Ocean City or going to the mountain house [laughs]. But it's one of my very favorite things about being rich. Helicopters are awesome.
I've got an idea for a segment I want to run by you. So we have a guy that works closely with Country Club Guy. His name is Left Lane, because everyone's have to have a cool nickname. And Left Lane didn't go to college, which I think is wonderful. If you know college is not for you, then don't stick around in college – go learn the way you learn. So he learned on the job. He ran a car dealership and he's done a lot of other sales jobs. He was in high-end jewelry and he was in automobile trading and he ran an auto dealership. And now he works for us. And he's a very salt-of-the-earth kind of guy. He's very very street smart. He races motorcycles. He does a lot of cool stuff but he never went to college, which, again, doesn't bother me at all. We're turning him into a good card player too. It's slow but he's getting it.
And, Buck, you on the other hand have had a very high-quality education. I forget where you went to college, but somewhere very impressive. I remember that.
Buck Sexton: Amherst. More CIA directors from Amherst than anywhere else actually.
Porter Stansberry: Yeah. Amherst is as WASP-y and elite as it gets. Fair?
Buck Sexton: Meh. They call it a "Little Ivy," you know? It's like the junior.
Porter Stansberry: Okay. So here's my idea. You are interested in becoming an investor yourself and you've been reading our stuff. And Left Lane is interested in becoming an investor himself and has been reading our stuff. And so what I want to do is I want to have the right side of the tracks and the wrong side of the tracks portfolios. So I want you guys to each pick five positions – it doesn't have to be a stock. It could be a bond. It could be an option. It could be cash. It could be gold. Only five. Because I don't want the bet to be about who can do allocation. I want the bet to be about who can pick investments. So you'll pick a portfolio and he'll pick a portfolio. And, by the way, you'll love him. He wears gold chains [laughs].
Buck Sexton: Is this my man Justin?
Country Club Guy:Yes. It is.
Buck Sexton: I know Justin.
Porter Stansberry: He wears his hat backwards. He does all kinds of great things.
Buck Sexton: He's my buddy.
Porter Stansberry: Yeah. So you got Amherst and Noherst [laughs]. And we'll do a once-a-month update. So you only can make trades once a month. And we'll see who can do this. Who's going to win? The CIA guy or the street smarts guy?
Buck Sexton: I like it. We could get this going.
Porter Stansberry: Yeah. Just little model portfolios. You don't have to put any real money into it if you don't want to. Or you can if you want.
Country Club Guy:There're some issues there, but we'll paper trade.
Porter Stansberry: Right. But the point is – because you guys are at sort of the same place in terms of beginning your own actual investment portfolios. You're old enough now. You're making enough money now. You can put some money away in stocks. And which ones are you going to do? And if we need a third one, I know that Cap'n Steve, my boat captain, who never went to college, went to the college of the Coast Guard, hard knocks college – his portfolio was up 31% last year, doing only my stuff. So two's enough to start. And then –
Country Club Guy:That'll be a Black Label show. We'll have Steve on in the boat or something.
Porter Stansberry: And then if Left Lane doesn't do a good enough job then we'll kick him out – we'll bring in the Cap'n.
Buck Sexton: Well, let's just say that I'm betting big on Sjug. He better know what he's talking about with China this year [laughs].
Porter Stansberry: All right. That's a good bet. Well, I think the readers'll be – the listeners rather would be really interested to see what happens. And maybe even I should throw in a portfolio for the podcast.
Buck Sexton: I like it.
Porter Stansberry: See if the boss can compete with the kids.
Buck Sexton: Yeah. So we could just set this up like a paper thing, right? And we don't actually even have to do the trades, but we could just set it up as: this is what we would pick with funny money.
Porter Stansberry: Yeah. We'll start out with $100,000. And you can only have five positions. because I want it to be very focused. I want there to be volatility in these portfolios. I don't want it to be –
Buck Sexton: So this is fantasy football –
Porter Stansberry: – who beat the S&P by a point? No, no, no, no. I want this to be: you're going for broke and did you make it?
Buck Sexton: All right. So it's fantasy football, Stansberry style, with money in the market.
Porter Stansberry: Fantasy football Stansberry style. But I love the idea of the Ivy League versus the, you know, minor league [laughs].
Buck Sexton: Always bet on the street-smart guy, everyone. But, anyway, yeah, let's do it.
Porter Stansberry: All right. Great. And that's it, I think, for today, Buck. Unless Arianna has any final thoughts.
Buck Sexton: [Doing an impression of Arianna Huffington]. She wants in as well. She has investment ideas. She hears big things about solar. She's been hearing them for 30 years.
Porter Stansberry: Yup. That's right, Arianna. Solar: it's the next big thing. Always will be.
Buck Sexton: Always will be. [email protected], by the way, if you got a question. If we use your question, we will send you Stansberry research goodies. Love us or hate us –
Porter Stansberry: Just don't ignore us. And if anybody would like any of my boat swag, we have a lot of Two Suns-wear.
Buck Sexton: There you go.
Porter Stansberry: We should have that up soon.
Buck Sexton: I want some Two Suns-wear. I have a lot of followers on Twitter. I want to show off a t-shirt or something.
Porter Stansberry: Oh, we'll get that done. We got some nice boat shirts.
Buck Sexton: And that's going to be it for this week everybody. We'll see you next time.
Porter Stansberry: Bye, everybody.
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This broadcast is provided for entertainment purposes only and should not be considered personalized investment advice. Trading stocks and all other financial instruments involves risk. You should not make any investment decision based solely on what you hear. Stansberry Investor Hour is produced by Stansberry Research and is copyrighted by the Stansberry Radio Network.
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