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Announcer:                 Broadcasting from Baltimore, Maryland, and all around the world, you're listening to the Stansberry Investor Hour.

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                                    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's program is very interesting. Our guest today is Bill Browder. He's got an unbelievable story to tell. You will not want to miss this one. We have some really great e-mails today to share. Listener Bill T. has a great question about a very important principle for anybody interested in holding gold for the long term. I'll help him refresh his memory about it. And, as always, my rant this week – I'll talk about some of the topics covered by Warren Buffett at the Berkshire Hathaway shareholder meeting last Saturday. That and more right now on the Stansberry Investor Hour.

1. Let's talk about Warren Buffett and his comments at the Berkshire Hathaway meeting. He talked for over four hours so I might not be able to get to everything. In fact, I'm just going to get to a few topics that really stood out. And, by the way, if you haven't listened to it, you can go listen to it. Just Google "Berkshire Hathaway shareholder meeting." Yahoo Finance has it and you can find it on YouTube. And it's worth it. It's worth listening to Warren Buffett talk for four hours once a year. It really is. Even if you disagree with every syllable that comes out of his mouth, it's still worth listening to.

                                    So I think one of the really big – perhaps the biggest topic that he covered – a couple weeks ago it came public that he started selling his position in the airlines. And he put one slide up at the meeting that showed the first-quarter purchases of equity securities by Berkshire Hathaway, including buying back their own stock. But they made investments in equities of $4 billion. They sold $2.2 billion of equities. And they bought back $1.7 billion of their own stock. Not really huge numbers for Berkshire. But then he put up a slide that showed, in the month of April – because the first quarter ends March 31, right? Month of April, purchases of equity securities: $426 million. Peanuts. Nothing for Berkshire. He was asked about it. He couldn't even remember what it was. And he said, "I might not've done it." It might've been his top capital allocation lieutenant, Ted and Todd.

He bought back zero stock. We'll talk about that in a little bit. And sold, in the month of April alone, $6.5 billion, including all the rest of the airline stocks. Why did he do this? Well, he put up the slide and he said, "That $6.5 billion was not 100% of what we sold in April but it was mostly – mostly airlines." He said, "I made a mistake." And he went through the history of the position. And if you look at the filings, he started buying these things in late 2016. He said, "We paid, oh, I don't know, $7 or $8 billion" – couldn't even remember how much – to own 10% of the four largest airlines, starting at that time. And then into 2017 he kept buying. And he figured that for $7 or $8 billion he was getting $1 billion worth of earnings that he thought was likely to go up over time.

And at that time he did an interview with Becky Quick of CNBC and he said, "The airlines have had a bad century, and they've had like over 100 bankruptcies, and it's been terrible, and they've consolidated into four big ones that're doing pretty well, et cetera. And we want a piece of it." And those four, those top four – American, United, Delta, and Southwest – accounted for like 80% of the domestic airline capacity. So right there it sort of felt to him, it seems, like when he bought the railroads, who had been through I don't know about a difficult century, but, yeah, pretty tough time over the past decades before he bought. And then it turned into a pretty good bet because they had consolidated down. They had been through restructurings. Same type of a situation. And they had some pricing power too.

And I remember hearing about that idea from the guys at Allegheny, a really well-run insurance company, publicly traded company, ticker symbol Y, the letter Y. And Allegheny was buying when Burlington Northern was like, I don't know, $12 a share or $10 a share or something like that, maybe even cheaper. And Buffett bought the whole thing of Burlington Northern for $100 a share. So, late to the party, but still thought it was a good bet.. And same thing: he said, "We treated it mentally as if we were buying a business, meaning as if we were buying 100% of a whole business."

And if you've heard him talk over the years, they like to buy 100% of the business, they like to buy as much as they can once they like the thing, and they like to hold it forever. That's their favorite thing to do. And this looked like an equity position that he might hold effectively forever. And he said the companies were well-managed and all that stuff. But now he blew out the whole position when the hold world – he sold into weakness, right? This is the guy who says, "Be greedy when others are fearful." Well, he's fearful when others are fearful. Because he's not buying anything and he sold this massive position and is not spending any of his giant $130-billion pile of cash.

So, you know, that's kind of unusual. And he said the airline business – I'll just quote a few little things. He says, "The airline business – I think it changed in a very major way. It's obviously changed." And he said, "These four companies – they're going to borrow $10 or $12 billion each. In some cases, they're having to sell stock or the right to buy stock. That takes away from the upside." Then a little bit after that he said, "I don't know that two or three years from now that people will fly as many passenger miles as they did last year in 2019." So, in other words, this business has changed so much and these companies are so deeply impaired that it makes no sense for him to continue to hold the equities.

He's held publicly traded companies through bankruptcy. At least one, right? USG. It was an unusual bankruptcy situation. So this really tells you that Buffett thinks that people have changed – their travel habits have changed and they're not going to fly as much, even when things are all opened up and – who knows? One would think, over this time period – he's talking about two, three years, whatever – that the coronavirus will be a thing of the past.  Nobody's worrying about it anymore. We'll see. But I just thought it was really interesting that we find Buffett just being really fearful, not deploying capital, and blowing out this position into weakness, having bought it in the first place – like I've never recommended an airline stock in Extreme Value and I never will. And I was shocked when he did it. And I always wondered: how's this going to work out? Obviously not too well.

So the airlines – and I hear where he's coming from. Because the airlines – I read today one article said they're burning $10 billion monthly as an industry. And they've already gotten something like $50 billion in bailout. There's another – there's more money that they're going after under this CARES Act law that was passed. But United – they got $5 billion and only $1.5 billion of that was a loan. The other $3.5 billion was a grant. A grant, yeah, you heard me. Taxpayer money just given to the airlines.

And of course they put stipulations on this thing but they've already found the loophole. And the stipulation was: "You can't fire anybody. You gotta keep all your employees. And you can't reduce anybody's hourly pay or you can't reduce anybody's salary." And I think you can't even buy back stock and other things. But they found the loophole, and you might've heard it already, and they're reducing people's hours. They don't pay them less per hour but they pay them less by reducing their hours. Which, as a business move, it makes sense with dramatically reduced demand for this service. But I can understand how nobody would want to get involved with the airlines. Who knows if the equity value is going to be anything like what it is right now, impaired as it is?

Let's talk about buybacks. Buffett talked about buybacks. He didn't buy back any shares in April at all. They bought back $1.7 billion in the first quarter, which is really nothing for them. And basically the important tidbit here is that the stock, to him, he says, was no more compelling around $250,000 a share than it was when he was buying it back at $300,000 a share. What does that mean? Well, it means exactly what you think it means. It means the intrinsic value of Berkshire Hathaway is impaired at least that amount, like roughly 17% I believe that is. Or more. Right? If it's not compelling at $250,000 no more so than it was at $300,000, that's a big deal.

And he also mentioned – in the same breath, telling you why he wasn't buying the shares back, in the same breath, he mentioned the option value of cash, right? In other words: "I'd rather hold onto my cash than buy back my stock 17% off where I was buying it back before" [laughing]. Wow. He did this whole thing – he started out with this whole long thing about: "Never bet against America," and he went all through history and all this stuff. And he's got a great knowledge of history. It was fun to listen to it. But he says all this stuff about "Don't bet against America in the long term," and he – that was another thing he kept doing, saying, "Don't bet against America long-term," but he constantly, throughout his talk and answering questions – he was constantly differentiating from the long-term bet and the nearer term, a couple of years, two or three years.

What does that tell you? That tells you that he thinks that we are not out of the woods yet. And you can't call him bearish, but he's nothing like bullish. Some investors – Whitney Tilson commented. He was part of the presentation. And he commented and said – Whitney thought it was raining gold in March when the market was getting absolutely obliterated. Buffett obviously did not think it was raining gold, OK? That's really interesting.

So they bought back zero in April. That's the evidence there. And he said, "I would rather be holding my cash." And he also talked about the general idea of buying back stock because he was asked about it. One of the shareholders sent in a question about it. And he framed it in a really good way that I think you need to hear about.

He said, "Imagine that we were just partners in a business, a few of us, and we each put in a certain amount of money, and the business does well over time and goes up in value. And after many years of success, one of us wants to take money out of the business. Well, if your partner came to you and said that, you say, 'Well, that's perfectly reasonable.' And a way for that to do that would be for the other partners to buy a little bit of his stake. And so maybe he owns 33%... let's say there are three of you and he sells a little bit, and after that he'll own 30% or something. And then you'll each own a little bit more, right?" So that's the way he looks at share repurchases – as an individual partner can choose... an individual shareholder can choose whether or not they want to participate and sell the shares. Whereas if he issued a dividend, you're forcing cash down everyone's throat and they get hit with taxes and you're taking money outta the business off the table, right? I thought that was pretty interesting.

And he doesn't buy into any of the political – what he calls political correctness about share repurchases. He's like, "Most people do them wrong." He said that consistently for a long time. "You have to do them right and the right way to do it is to buy it back at a discount to the intrinsic value." And he even said, "You won't always be right when you're doing that. You'll make mistakes in doing that but you should still do it that way." And the mistake is probably: he bought it back at a higher price, $1.7 billion worth, and then he refused to buy it back at a lower price. So he might've even been talking about his own mistake in buying the shares back. But over time the right thing to do is buy it back at a discount, and you'll be right enough if you do it over a period of many years.

I found all that really intriguing, especially him telling us why he didn't buy back the stock. And he mentioned specifically that – he said, "For example, the airline position is worth a lot less than it was," just as one example. And of course the whole economy shut down and he's got dozens and dozens of businesses under one roof – there has to be more impairment than just that. And the part that isn't impaired in the cash. It's arguably worth more, right? So it's all making sense now, isn't it? Yes.

Another topic he covered which I found fascinating – it's a fascinating topic anyway, and he said that he thinks it's the most interesting question he's ever seen in economics, period, and that is the issue of negative interest rates. And somebody wrote in a question – they were like, "What the heck can you buy? Do you really want to be holding stocks if interest rates are going to be negative?"

And his first thing out of his mouth was he said, "If they're going to be negative for a long time, you better own equities, or something other than debt, of course." You can own stocks when interest rates are negative and it's not a terrible thing. But he freely admits – he's like, "We have no idea what the ultimate outcome is." He says, "We're doing things where we don't know the ultimate outcome. But there would've been extreme consequences that we know of if we didn't do them." Like extremely low – and, in some cases, in Europe and Japan, negative interest rates is what he's talking about there.

And he even referred – at one point in his presentation he referred to Mario Draghi saying, "We'll do whatever it takes." And he said, "Well, the Federal Reserve – in March they started doing whatever it takes squared." A lot of whatever it takes. And he just kinda left it open-ended, like he has no idea how this is going to turn out ultimately for anyone. And then I think he only mentioned it once the whole time, and he mentioned it during his negative interest rate spiel, and he said, "I was wrong thinking that you could have the developments you've had without inflation taking hold." Meaning he would've thought that surely negative interest rates would inspire lots of capital to be misallocated and push up asset prices of all kinds and make its way into the economy and push up wages and push up lots of other stuff. But he was wrong about that, as we all were.

And of course you and I – we've had this discussion between the two of us. People have written in and I've talked about it and we've had several guests on the program who explained it to us, folks like Mark Dow and Cullen Roche and others in the sort of macro category of investor. The macro investors have been helpful to us with this. So I found that really interesting that Cullen Roche gets it better than Buffett [laughs]. Buffett's still waiting for inflation from negative interest rates and low interest rate policy and quantitative easing and all the rest of it [laughing]. And Cullen Roche is like, "No, no, no." So, yeah, negative interest rates. Very interesting topic. Buffett's got basically nothing for us about it [laughs].

And the topic of inflation was kind of broached a little bit with a question about their capital-intensive businesses. The railroads are very capital-intensive, and the energy business, basically a giant energy utility that they own, is very capital-intensive. And he said, "You know, the returns over time might not even be good in real terms, in inflation-adjusted terms." And he said, "Just take an extreme example. If we get 10-to-1 inflation, we will earn a lot more dollars from the railroad and the energy business – the returns might not be great but we will earn a lot more dollars from them." Meaning they will adjust upward and inflation will not treat them too badly. But he said, "Over time, we want businesses that require no capital to grow and we don't want inflation. That would be really bad."

I found that interesting too because – and I think I may've even written about it somewhere over the years. I just found it interesting that Buffett was getting into these capital-intensive businesses. And I thought: "Maybe he's preparing for inflation. Maybe that's the message that we need to take away from that." And certainly he's as prepared as you can get, running the kind of conglomerate that he's running – he's as prepared as you can get for inflation I think. But it's probably unfair to say that he bought them for that reason. I think that's what he might say anyway. I don't know if I totally believe him [laughing] but I think that's what he might say.

You know, I just have to mention this guy – on the topic of inflation, if you don't mind a little digression here. I saw this piece in the news today. I think he's a history professor named Robert Skidelsky. Says he's afraid that we're going to have a big jolt of inflation from stimulus money and from people getting back to work. I just don't even know what to say. It's so dumb I can't even believe anyone said it out loud. Thirty million people outta work, shut down the global economy. That's as depressive and deflationary as it gets. And he's worried that a little bit of stimulus money and people getting back to work will cause inflation. It's insane. It's truly insane. This is a massive, massive deflationary event.

The fear ought to be – and the reason why you'd expect gold to go up along with the value of dollars is that the Federal Reserve tries to print and the government tries to borrow its way out of this and they print and borrow and print and borrow and print and borrow and it gets really bad and asset prices start inflating, and then it works its way into wages and prices and things. That is the rational version of that fear. Just saying, on the face of it, that _____ _____ stimulus money is going to cause inflation is just looney-tunes.

And I just want to say one more thing before I finish here. In the end, he was talking about the virus – Buffett talked all about the virus and the implications of that. You can go listen to it yourself. But what I see right now is that – Scott Garliss from Stansberry has a little thread about this. He's been sort of updating us internally and talking about it. He runs the Stansberry NewsWire. And basically the virus – and the reopening narrative right now is kinda driving the stock market. He pays attention to this stuff on a daily basis. Very smart guy. He's very in tune with the narrative and its influence on asset prices. So if Scott has this right, and I think he does, we get the market rising – and it has risen sharply off that bottom in late March. We get the market rising on a narrative that says, "Things are reopening and that's really good."

Well, I think when things reopen, everybody kinda mixes back together and a lot more people get the virus and we get a little spike or resurgence of some kind maybe. I'm not saying this is definite, but this could easily happen. And then that narrative will go into reverse, and then what happens to the stock market after its blistering, what, 20-odd percent, almost 25% rally or so off that March bottom? Blistering, classic-type bear-market rally action. Maybe we see another drawdown here into the summer. They say, "Sell in May and go away." Maybe [laughing] that's going to come into play here. I don't know. I'm not predicting. But I think to believe, "Hey, the stock market took a dive here and we all got worried but we're reopening and everything's going to be fine" – I don't think that's how it works.

So I understand Buffett's caution. I'm cautious too. But I think there are still things to do. And we're going to do one of them in the pages of Extreme Value this week. And readers'll find out about that. But, yeah, it's a time to be cautious. I agree. I'm going to leave you right there. I have no idea how it turns out, and I'm cautious, and that's that.

So the next thing we want to do is talk to an extraordinarily interesting guy named Bill Browder.

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Today's guest is Bill Browder. Bill Browder is the founder and CEO of Hermitage Capital Management, which was the investment advisor to the largest foreign investment fund in Russia until 2005, when Bill was denied entry to the country and declared, quote, "a threat to national security," as a result of his battle against corporate corruption. Following his expulsion, the Russian authorities raided his offices, seized Hermitage Funds' investment companies, and used them to steal $230 million of taxes that the companies had previously paid. When Browder’s lawyer, Sergei Magnitsky, investigated the crime, he was arrested by the same officers he implicated, tortured for 358 days, and killed in custody at the age of 37 in November 2009. 

Since then, Browder has spent the last five years fighting for justice for Mr. Magnitsky. The Russian government exonerated and even promoted some of the officials involved so Browder took the case to America, where his campaigning led to the U.S. Congress adopting the Sergei Magnitsky Rule of Law Accountability Act of 2012, which imposed visa sanctions and asset freezes on those involved in the detention, ill-treatment, and death of Sergei Magnitsky, as well as in other human rights abuses. This law was the first time the U.S.-sanctioned Russia in 35 years and became the model for all subsequent U.S. sanctions against Russia. Browder is currently working to have similar legislation passed in Magnitsky's name across the European Union.

Bill Browder, welcome to the program, sir.

Bill Browder:              Great to be here.

Dan Ferris:                 So, Bill, of course we will get to talking about the big topic that I suppose everyone wants to speak with you about. But before we do that, I did read your book, which I found – your book Red Notice, which I recommend to our listeners. It was really an excellent, thrilling – in all the wrong ways – story. But maybe before you got to all the events in the book, how old were you when you first realized that finance was going to be your career direction?

Bill Browder:              I was pretty young. And my ambitions came about from a very unusual set of circumstances. I come from a family of American communists. My grandfather, Earl Browder, was the head of the Communist Party of the United States of America from 1932 to 1945. He ran for president against Roosevelt as a communist in 1936 and 1940. He was imprisoned in 1941, pardoned in '42, expelled from the Community Party in '45, and then ultimately persecuted very viciously during the McCarthy era of the 1950s. So when I was going through my teenage rebellion I was trying to figure out the best way of rebelling from this family of communists, and I came up with this great idea, which was to put on a suit and tie and become a capitalist. And I became a capitalist at the age of 17.

And I eventually found my way to Stanford business school in 1987, graduating in 1989, which was the year that the Berlin Wall came down. And as I was trying to figure out what to do post-business school, I had this epiphany, which is that if my grandfather was the biggest communist in America, I'm going to try to become the biggest capitalist in Eastern Europe. And that led me to London and it ultimately lead me to Salomon Brothers, which doesn't exist anymore but is a famous – was a very famous Wall Street firm, probably the most famous Wall Street firm, immortalized in a book called Liar's Poker, which I recommend everyone read if you haven't read it already.

And that's when I became a financier. That's when I became a financier focused on Eastern Europe. And that led me to all the other dramas of my life.

Dan Ferris:                 Yeah. And those dramas are really quite substantial. Let's talk about the time just before – I'm curious about something her, Bill: the time just before you were expelled from Russia in 2005. In retrospect, when I look back at that, it really took you by surprise, and I suppose it took lots of other people by surprise. Because, against all expectation, at least as far as a provincial guy like me is concerned – put it that way – you staged successful activist campaigns against corporate corruption not in the United States but in Russia of all places. I would've guessed that you wouldn't have survived that then gotten as far as you did.

Bill Browder:              Well, it was an odd set of circumstances, again. So what happened was: after Salomon – I left Salomon Brothers. I moved to Moscow in 1996 and I set up an investment fund called the Hermitage Fund. I stared with almost no assets under management. But it eventually became the largest investment fund in the country, with $4.5 billion under management. And in the process of doing my investments, I discovered that every single company that I was investing in – and these were all publicly traded mostly oil and gas companies, a few metals companies, a few other bits and pieces, all publicly traded. I discovered that all of these companies were basically being robbed blind by the managements and the oligarchs who controlled the companies.

                                    And so let's I owned 1% of a company. I didn't really have 1% of anything because the oligarch who owned 51% of the company was literally siphoning 100% of the profits out the back door for his own benefit. And so I decided to try to challenge that corruption, to fight the corruption. And I didn't have a lot of tools at my disposal. It wasn't like you could go to the Russian SEC and say, "Look at these terrible things. You need to prosecute somebody." Because Russian SEC was neither prosecuting anybody or even had the ability to. And I couldn't go to the police. I couldn't go to the parliament. I couldn't go to anywhere.

But the one interesting lever that I had was that I was good at doing research. I had a good team of investment analysts and I knew a lot of journalists in Moscow. And so we would research how they went about stealing the money. And it wasn't as opaque as you might think. Russia's an incredibly bureaucratic country, and all the bureaucracy gathers information and keeps it somewhere, and we just needed to figure out where they kept it. And eventually we found out where they kept the information. So we were able to figure out who was doing the stealing, how they were doing the stealing, when they were doing the stealing, and where it was going to. And then we'd take that information and I'd share it with the journalists that I had met and knew. And of course the journalists loved me because I saved them three months of their own work by doing this analysis for them. And they would publish these stories.

And it turned out that when we started publishing these stories and exposing the oligarchs, we were doing it at a really weird and opportune moment, which was – the moment that Vladimir Putin had come to power, he was fighting with the same guys that we were fighting with. The oligarchs were stealing power from him at the same time as they were stealing money from us. And I should point out: I've never met Vladimir Putin. I've never spoken to him in my life, neither then nor now or any time in between. But this was one of these situations where your enemy's enemy is your friend. So Vladimir Putin was busy fighting with the oligarchs because they were stealing power from him. I was fighting with the oligarchs because they were stealing money from me. And so every time I would come up with one of these scandals, he would step in in some kind of very heavy-handed way and stop them from doing what they were doing.

And so for a period of time, I had the most golden life you could ever imagine because I was cleaning up Russia, I was making money for my clients and myself hand over fist, and I was doing it in a much more powerful way than anyone could've ever envisaged because why would some guy from the South Side of Chicago have all this ability to get Putin to do stuff? Well, it just turned out to be this weird confluence of interests.

But the problem was that Putin wasn't doing this because he wanted to make Russia a better place. Putin was doing this because he wanted to defeat the oligarchs. And so he decided to go for broke at the end of 2003. In October of 2003, the richest man in Russia, a man named Mikhail Khodorkovsky, who owned the oil company Yukos, he was on his private jet, just landed in Siberia on his way to some business meetings for his oil company. His jet was surrounded by a bunch of secret policemen from Russia's FSB, which is the successor organization to the KGB. They arrested him. They brought him back to Moscow. They put him on trial. And they allowed the television cameras to come into the courtroom and film the richest guy in Russia on trial sitting in a cage.

And this had a profound impact on the other oligarchs of Russia, who thought to themselves, "Wait a second, I don't want to go sitting in that cage." And so they went to Putin in the summer of 2004, after Khodorkovsky was convicted and sentenced to 10 years in prison, and they said to Vladimir Putin, "Vladimir, what do we have to do so we don't have to sit in a cage?" And Putin said, real simply, "50%." Not 50% for the Russian government, not 50% for the presidential administration of Russia, but 50% for Vladimir Putin.

And at that moment Putin became the richest man in the world. And at that moment all of my interests were no longer in confluence with his but were directly in opposition. And as I continued to expose corruption, instead of going after his enemies, I was going after his own personal financial interest. And that was the leadup to November 5, 2005. As I was – let me – that was the leadup to November 13, 2005. As I was flying back to Russia, I was stopped at the border. I was detained in the airport detention center, arrested and put in the airport detention center, kept there for 15 hours, and then deported the next day, 15 hours later, and declared a threat to national security.

Dan Ferris:                 Wow. Before you were – in just the days leading up to that moment, did you get an inkling that something was up? Or did you see this meeting with Putin as a real potential problem? Or did this just blindside you?

Bill Browder:              Well, I wasn't trying to read the tea leaves for one simple reason: because if I had spent my whole life trying to read the tea leaves, I would've never gone to Russia in the first place. I mean, at every corner there was absolute sort of danger and menace. And so the only way that I could sort of survive psychologically doing what I was doing was effectively having to sort of sand off my risk censors on my risk antenna so that I just sort of barreled through life. And so I wasn't spending my time trying to figure out what was going to be happening at any one moment. And so I didn't see anything coming. It was a total and absolute surprise to me when I was arrested, detained, and deported.

Dan Ferris:                 You spent 15 hours just in a cell at the airport?

Bill Browder:              So, they put me in the cell, the airport detention center, and I didn't know at that point whether I was being arrested or deported. Nobody told me what had happened. They weren't communicating with me. I was just a detainee as far as they were concerned. And I thought, "Wow, maybe I've been pushing things too hard here in Russia. God, I sure hope that they don't send me to Siberia." And so my thinking at the time was: if they were going to be deporting me, they would deport me back to London, and the flight back to London the next day was at 11:00 a.m., the first flight back to London.

And so I thought to myself, at about 9:30 in the morning, after sort of sitting up there all night, "If they're going to deport me, they're going to come and get me at 9:30 for an 11:00 flight because surely they're going to have to process my papers" or do whatever one does in one of these deportation situations. And so I started banging on the bars at 9:30 trying to get their attention to take me to process me or whatever they're going to do. And the officers beyond the cell just ignored me. And I thought, "That's not good."

So about 10:00, I decided to sort of make similar noise and they continued to ignore me. And I'm starting to get really nervous. I think, "OK, I'm not going to be deported. I'm going to be going to Siberia." And 10:15 comes around, still nothing, 10:30. And at this point with adrenaline starting to really pump through my veins, I'm thinking, "Oh my god. I could be locked up for the next 10 or 15 years." 10:40, still nothing. And it's like 10:45 or so, they come into the cell, they grab me, and at this point I think they're grabbing me to take me for the paddy wagon down to the courthouse to then charge me and send me off to Siberia.

But instead they grabbed me, frog-marched me to the airplane. There was no data processing or paper processing at all. They just threw me onto the airplane. They found a middle seat that was empty. They threw me into the seat. And I didn't have my passport at this point but I wasn't going to complain. I figured when I got to London I would figure out what to do when I got to London. But I just wanted to get outta there. And when the plane took off – I don't know if you've ever watched the movie Argo. There's this great scene at the end of Argo where a bunch of Canadian diplomats are trying to get out of Iran. And when we took off I had the same feeling of just absolute and total relief, which was: "Whatever's going to happen next, at least it's not going to be happening to me in a Siberian prison."

Dan Ferris:                 Wow. That is harrowing. So this thing totally blindsided you and you had this awful experience getting thrown out of the country for 15 hours. And your lawyer, Sergei Magnitsky, he seems in a way to have been blindsided too. Rarely have I seen in my life a story of someone who stood on principle literally to the moment of his death and endured such horror and never recanted. I mean, this guy – he's like one of the great heroes of the century just on that alone. And my question I guess, Bill, is – it's similar to my question about: did you see any of this coming? That ability to stand on principle – it's kind of one thing in a typical Western country but it's another in a place like Russia, isn't it?

Bill Browder:              Well, I haven't seen a lot of principle in the West either. It's very unusual in any situation. So Sergei Magnitsky was my lawyer. After I was expelled from the country, the first thing we did was I evacuated my staff, which didn't include my lawyer because he worked for a foreign law firm. And we liquidated our portfolio, which we were able to successfully do strangely without any trouble. So we got our people out, got our money out, and I thought that was the end of the story. However, it wasn't.

Eighteen months after I was expelled, on June 5, 2007, 25 police officers raided my office in Moscow, and 25 more police officers raided the office of the American law firm that I used in Moscow. And they were specifically looking for the stamps, seals, and certificates for our investment holding companies that at this point were empty but the authorities didn't know that. They found them at the law firm, they seized them from the law firm, and the next thing we know, we no longer own our investment holding companies. They've been fraudulently reregistered using the documents seized by the police, and reregistered into the name of a man who had been convicted of manslaughter and let out of jail early – put his name on the documents.

So at this point I'm not worried about money because our money is safe in the West. But I'm worried that if the police are using killers and stealing companies, someday I'm going to be flying through some airport somewhere and be arrested on a Russian warrant, and I needed to find a way to untangle this mess, figure out what they were trying to do, who was doing it, and stop it so I didn't find myself in some world of legal trouble in the future.

And so I go out and hire the smartest lawyer I knew in Russia, a young man named Sergei Magnitsky. And Sergei worked for the American law firm that was raided. And he was one of these incredible people who could do like 10 things in the time it took others to do one. And I asked him to investigate, figure out what they were doing and why they were doing it, and then stop it. And so Sergei goes out, figures it all out, and he comes back to me and says, "There were two parts of the scam. The first part was they wanted to steal all of your assets but you successfully got your money out before they could do that."

He said, "However, their second part of the scam was that when you got your money out," the previous year when we sold everything, we had $1 billion of profit and we paid $230 million of capital gains tax to the Russian government. And what Sergei had figured out was that the people who stole our companies went to the tax authorities on December 23, 2007, two days before Christmas, and they said to the tax authorities, "There was a mistake made in the previous year's tax filing and these companies didn't make $1 billion. They made zero." And they came up with a complicated way of explaining that. "Therefore," they said, "the $230 million of taxes that was paid in the previous year was paid in error." And they said, "We want the $230 million to be refunded."

So they applied for a $230 million illegal tax refund using our stolen companies on December 23, two days before Christmas, and it was approved and paid out the next day. It was the largest tax refund in the history of Russia paid out in one day on a Fraud.

Now, Sergei and I had seen a lot of corruption in Russia. It's hard not to see it if you live there. But for us to imagine that Vladimir Putin would've been OK with his own people stealing nearly a quarter of a billion dollars of money from the Russian government – because that's what it was. It wasn't money stolen from us. We paid the taxes to the Russian government and these crooks stole it from the Russian government. But we figured Putin would've never allowed that because he's a patriot and a nationalist and a tough guy. And so we thought if we just publicized this and highlight it and bring it out into the open, then the good guys would get the bad guys and that would be the end of the story.

And so we wrote criminal complaints to every law enforcement agency in Russia. I went to the media, newspaper, television, TV. Sergei went to the Russian state investigative committee, their version of the FBI, and gave sworn testimony against the crooked police officers and various others. And then we waited for the good guys to get the bad guys.

It turns out that in Putin's Russia there are no good guys. And about five weeks after Sergei testified, instead of arresting the people who stole the money, the people who he testified against, the police officers he testified against, came to his home on November 24, 2008, and arrested Sergei Magnitsky and put him in pretrial detention, where he was then tortured to get him to withdraw his testimony. They put him in cells with 14 inmates and 8 beds and left the lights on 24 hours a day to impose sleep deprivation. They put him in cells with no heat and no windowpanes in December in Moscow so he nearly froze to death. And they put him in cells with no toilet, just a hole in the floor where the sewage would bubble up. They'd move him from cell to cell to cell in the middle of the night.

And the purpose of all this was to get him to withdraw his testimony against the corrupt police officers and then to get him to sign a false confession to say that he stole the $230 million and he did so on my instruction.

Now, they figured: here's a guy who wears a blue suit and a red tie and a white shirt, buys coffee at Starbucks in the morning, goes to a fancy Western law firm. They throw him in one of these horrible hell-hole prisons, and within a week he'll sign whatever they want him to sign. But it turned out that they had totally misjudged Sergei Magnitsky. Sergei Magnitsky might not've looked like a tough character but he was a man of absolute integrity. For him, the idea of perjuring himself and bearing false witness was more of a torture than the physical torture they were subjecting him to, and so he just refused. And in retaliation they just kept on upping and upping the torture and the pressure until the point when he started to get sick. He ended up getting terrible pains in his stomach, he lost 40 pounds, and he was diagnosed as having pancreatitis and gallstones and needing an operation, an urgent operation which was scheduled for August 1, 2009.

And about a week before the operation, they came to him again and they said, "Please sign this false confession," and again he said no. And so in response to that, they abruptly moved him from the prison that had a medical wing to a maximum security prison called Butyrka, which is considered to be one of the most horrific prisons in Russia. And most significantly for Sergei, they had no proper medical wing there. They put him in Butyrka. His health goes into a terrible downward spiral. He goes into constant, agonizing, ear-piercing pain, untreated. He and his lawyers write 20 different desperate requests for medical attention to every different branch of the criminal justice system. Every branch either ignores their requests or denies them in writing.

And on the night of November 16, 2009, Sergei Magnitsky goes into critical condition. On that night, the Butyrka authorities don't want to have responsibility for him anymore, and so they put him in an ambulance, send him to a different prison that had a medical wing. But when he arrives at the different prison, instead of putting him in the emergency room, they put him in an isolation cell, they chain him to a bed, and eight riot guards with rubber batons beat Sergei Magnitsky until he died. That was November 16, 2009. Sergei Magnitsky was 37 years old. He left a wife and two children.

Dan Ferris:                 Absolute horror. Absolute horror. And after that moment, what was your initial reaction, Bill? When did you really – did you just swing into action right away? I can't imagine that you weren't absolutely overcome at that point.

Bill Browder:              It was by far the most horrible, life-changing, traumatic, soul-destroying news I could've ever gotten. Sergei Magnitsky was killed as my proxy. They killed him because they couldn't get to me. And he lost his life in my service and he would be still alive today if he hadn't been working for me. And he lost his life trying to do the right thing. And so when I was finally able to sort of cut through the fog and hysteria of heartbreak enough to think clearly, it was obvious to me what I needed to do, which was to put aside everything else I was doing in my life and to devote all of my time, all of my resources, and all of my energy to go after the people who killed Sergei Magnitsky and make them face justice. And that's what I've been doing for the last 10 years.

                                    And at first it didn't seem like we were going to get any justice. The Russian government completely and absolutely circled the wagons. Vladimir Putin got involved personally in the cover-up. They gave promotions and state honors to the people who were most complicit. In the most shocking miscarriage of justice, they put Sergei Magnitsky on trial three years after they killed him, in the first ever trial against a dead man in the history of Russia. They found him guilty. I was put on trial as his co-defendant in absentia. I was also found guilty. It was clear that we needed to get justice outside of Russia.

                                    And that's when I came up with this idea, which is that the people who killed him didn't kill him for religion or ideology – they killed him for money. They killed him for $230 million of money. And I know that the people who stole that money don't keep that money in Russia. They keep that money in dollars in the West. They keep it in New York banks and British banks and Swiss banks. They buy properties on the Cote d'Azur in France and Belgrave Square in London, South Beach in Miami. They send their kids to boarding school in Switzerland and their girlfriends on shopping trips to Milan. And I came up with this idea that if we could take that away from them, if we could freeze their assets and ban their visas, that may not be true justice for torture and murder, but it would hit them where it counts and it would be a lot better than the total impunity that they were enjoying up until now.

                                    And that idea of freezing the assets and banning the visas became known as the Magnitsky Act. And I first took this idea to Washington. And I took it to two senators, Senator Benjamin Cardin of Maryland, Democrat, Senator John McCain of Arizona, Republican. I told them the story that I've just shared with you today, and I said, "Can we freeze their assets and ban their visas?" And they said yes. And that became known as the Magnitsky Act. And in Washington, there's very few things that people agree on. There's partisan divide on almost anything. But the one thing they could agree on is that Russian torturers and murderers shouldn't be able to come to the United States.

                                    And in November of 2012, the Magnitsky Act passed the Senate, 92 to 4. It passed the House of Representatives with 89%. And on December 14, 2012, the Magnitsky Act became a federal law.

Dan Ferris:                 Wow. You can't bring a guy back from the dead but you sure had a big impact. That's pretty amazing stuff. So, where does it stand now, Bill? Are you still working on this? Or will this ever be behind you, do you think?

Bill Browder:              So, yeah, I'm working on it big time. The most immediate impact of the passage of the Magnitsky Act was that Putin went out of his mind. He got so angry. Because this is the first time that anyone has sort of stuck it back at him. Everybody just cowers in fear with this guy. And all of a sudden, we hit him back hard. And he's definitely a tough guy but he's not nearly as tough as he tries to make himself out to be. And all of a sudden we showed his weakness.

And he retaliated by banning the adoption of Russian orphans by American families right after the Magnitsky Act was passed, which is the most heinous thing he could possibly do because orphans were often the sick orphans that were being adopted and cared for in America and who would often die in Russian orphanages. So he was effectively sentencing his own orphans to death to protect his own corrupt officials. And he made repealing the Magnitsky Act and stopping it from spreading to be his single largest foreign policy priority.

And you may remember a famous meeting where a Russian female lawyer went to Trump Tower on June 9, 2016, to meet with Donald Trump Jr., Jared Kushner, and Paul Manafort. And that meeting was a representative of Putin, Natalia Veselnitskaya going to meet with Donald Trump Jr. to say that if his father becomes president – because this is before he was elected – could they repeal the Magnitsky Act?

Now, happy to say that that meeting didn't bear fruit, and nor have any of their other efforts. The Magnitsky Act has now been passed in Canada, in the United Kingdom, in Estonia, Latvia, Lithuania, in Kosovo. But the biggest prize is coming up in the European Union, which we're working on right now, which would get us 27 countries in one go. And then the other big prize is Australia. And so this is a life-long mission.

Now the Magnitsky Act has morphed into a piece of legislation not just for Sergei Magnitsky, not just for Russia, but for bad guys everywhere in the world. And so the Magnitsky Act is now applied all over the world, to death squads in Nicaragua, to generals in Myanmar that're doing the persecution and genocide of the Rohingya. It's being applied to bad guys in all sorts of places all over the world.

And every country is now starting to pick this thing up and it's really becoming probably the single most powerful new technology for dealing with human rights abuse and kleptocracy in the world. And it's named after Sergei Magnitsky. And we'll never be able to give Sergei his life back but his legacy is an enormous one, where his sacrifice and his death has led to this incredible tool which really upsets, scares, and deters dictators and kleptocrats and oligarchs from doing bad things. And for that is life wasn't a meaningless life... it was a meaningful life.

Dan Ferris:                 Bill, I'm curious about something. I'm curious about some of the mechanics of this. So if I'm Mr. Russian Oligarch and I show up at the U.S. border, I get off a plane somewhere in a big city like New York or something, there must be some sort of a database, or am I like the 10 most wanted?

Bill Browder:              Yeah, so it's really interesting how it works. You would never be able to get on the plane in the first place because you have to have a valid visa to get on a plane as a foreigner coming to America. And the way it works is that the U.S. Treasury, the Office of Finance and Control, OFAC, of the U.S. Treasury, publishes a sanctions list. And that sanctions list gets updated on a regular basis. And the sanctions list consists of terrorist sanctions, drug dealer sanctions, and Magnitsky sanctions, and they're all put together.

And any time someone gets added to that list, there are a bunch of databases that every bank in the world subscribes to. The most famous one is called World-Check. It's put together by Thomson Reuters. And World-Check updates the sanctions list, and every bank within seconds knows who's on that list, and those sanctions lists are cross-referenced automatically electronically with all client lists in all banks, and within seconds of a person being added to the sanctions list – doesn't even matter whether their accounts are in America or elsewhere – that bank no longer wants to do business with the sanctioned individual.

And if the money is in their bank already then they can no longer transfer it because the bank doesn't want to be in trouble with the U.S. Treasury. And if these people ever want to set up a new account, no bank will take them, and no multinational company would want to do business with them anymore because they don't want to be in violation of U.S. Treasury sanctions.

Because if you're in violation of U.S. Treasury sanctions – let's say you're a bank and one of these people has $1 million in your bank – let's say $1 billion in your bank. Because there's a specific example of one who had $1 billion. They have $1 billion in your banks and they want to transfer it to let's say a Russian bank after they've been put on the sanctions list. The Western bank will say no. Because if they transfer it, they could be fined three times that amount by the U.S. Treasury. So they could be fined $3 billion. That's the downside. The upside is $150 transfer fee. And so, effectively, your money is no good if you're on the Magnitsky list anymore. Your money is stuck wherever it is. You become totally paralyzed financially.

Dan Ferris:                 And your movement – it sounds like you just can't move around the world anymore either physically.

Bill Browder:              No. Your visas get canceled. You can't go anywhere. So you're basically sentenced to life in Russia. These people are all ruining Russia... well, they can see it for themselves.

Dan Ferris:                 [Laughs]. Well, "good job" doesn't even begin to cover it. But wow. You've really done an amazing thing here. We're actually getting towards the end of our time. But there is one more thing – a couple more things actually I want to ask you. I know some people – I know value investors who every now and then get a little bit excited about buying something in Russia. I'm going to guess that you have a message for them. Or am I assuming too much?

Bill Browder:              The message is obvious which is that it's a totally uninvestable country. Because you're not buying value if there's no way that you can sort of have access to your assets if they're going to steal them from you at any point arbitrarily. And, moreover – and I was a value investor. I still am a value investor. When I started investing in Russia, and it was trading at a 99.7% discount, the idea was that it was at such a steep discount that you could make money if there's any kind of positive trajectory. If it goes from horrible to bad you can make a lotta money. Well, now we're nowhere near a 99% discount. We're probably at like a 60% discount. And it's deteriorating. And you never make money buying cheap stuff in a negative catalyst situation.

And so there's no logical reason as a value investor to invest in Russia unless you're just totally speculating on a short-term move in the market. Because as an investor – and trading and investing are two different things. But as an investor, you're looking for some type of rerating that's going to happen over some period of time. And what I would predict is there's going to be a derating that happens in Russia as the rule of law continues to deteriorate, your property rights are no longer there, and it doesn't matter how cheap stuff is.

Dan Ferris:                 I kinda figured you'd say exactly that. That's why I threw you a softball there. I wanted people to hear the answer. So, Bill, my last questions for all my guests is the same, and I'm really curious to hear how you're going to answer it. I always ask them: if you can leave our listeners with one last thought, one last idea – about anything: investing, life, Russia, corruption, anything at all – what would it be?

Bill Browder:              Well, it's an interesting question, and something which I'm going to say something very unexpected for an investor group listening, which is that I loved being an investor. It was very interesting, very exciting, stimulating beyond belief, and wonderful in a lot of different ways. But I can say that this new life of mine, which is a life of justice fighting – I would say that fighting for justice is dramatically and infinitely more satisfying than fighting for money. And I would've never thought that in a million years when I was fully engaged as an investor. But I kind of feel like that now, that what I'm doing now to get justice for Sergei – even though I make no money at all and just spend my money, I'm infinitely happier than I ever was before at every step of the campaign when we make progress.

Dan Ferris:                 Wow. That's a great answer, Bill. Thank you for that. I look forward to reading more about your progress as you continue to fight in the European Union. I hope we see a nice big headline about that in some of the financial papers. And very good luck to you. I hope it all turns out really well. And I hope you'll come back maybe and talk to us about it.

Bill Browder:              Thank you so much. I'm working on my second book, which will be coming out in the fall of 2021. So stay tuned and you can learn all about what's happened after my first story, Red Notice.

Dan Ferris:                 OK. Great. Yeah. I love a good book. I'll definitely be one of the first to buy that. Stay safe over there in London with yourself and your family, and wash your hands and keep your distance and do all that good stuff [laughing]. And we'll talk to you soon I hope.

Bill Browder:              Take care.

Dan Ferris:                 After a lot of interviews, I say, "Wow." And suddenly "wow" doesn't quite cover it, does it? Double wow? Extra wow? I don't even – the words really escape me here. But, man, read Red Notice. I read it years ago. A friend of mine who was a – he actually lives in London, and I think he met Bill once upon a time. We didn't talk about that. Turned me onto the book. And it's a page turner. You can't put it down. And the story – it's real and it's gut-wrenching but it's like something out of a political thriller novel or something. Highly recommend it. And when he comes out with the second book, I'm going to gobble that thing up.

                                    Wow. That was really something. And let's go and talk about some lighter subject matter and take a look at what's in the mail bag.

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Dan Ferris:                 All right. It's time for the mailbag. This is where you and I get to have a very frank conversation about investing or whatever else is on your mind. You write in to [email protected] with questions and comments and politely-worded criticisms, and I read everything you guys send me and I respond to as much of it as I can.

                                    This week we're going to start off with a note from Rudy F. And Rudy F says, "Dan, lately I've been able to listen to all your podcasts and have very much enjoyed them. My question concerns defaults and bankruptcies. If a debtor defaults, doesn't the money lost by creditors vanish, effectively shrinking the money supply? The amounts about to be lost in the oil patch, et cetera, may pale in comparison to the amount being created by our government but is there any balancing effect at all? Thanks. Keep up the great work. Rudy F."

                                    Rudy, I would say yes, there's a balancing effect. But I think what we get here is a deflationary push downward globally. We've talked about it before on the program. According to Ray Dalio, there's like a $5-trillion funding hole in the United States and there's a $15-trillion funding hole – he called it an income hole but I think it amounts to the same thing – outside the United States. So that's $20 trillion. That's a lotta trillions [laughs]. That requires a lot of printing.

And basically the problem is this: in the United States, we can print the money to pay debts with, right? So the United States, especially the government, can print all the money it wants and pay its debts. U.S.-dollar-denominated debts of course. We have no reason to denominate them in anything else because we're the world's reserve currency. But that puts other countries in a bad spot because they want dollars too and they borrow in dollars and they can't print. So these deflationary episodes treat them really horribly because they have a demand for dollars... can't print their way out – what the hell do they do?

So a lot of debt winds up being destroyed. And, really, if it's a little deflationary for us or even a lot, it's a lot more for them. So I think that, yes, there's a balancing effect. But I think it's way on the other side of this. And for right now, it's deflation city. Good question. Great question and great ongoing question. I hope you, Rudy, and others continue to ask it. Because we'll need to assess it all along the way.

This next one is from Ben F. And Ben F is referring to my discussion last week of the meat industry. He says, "The main reason for the animal depopulation is because of how terrible the meat industry is. A normal animal that is raised humanely would not need to be killed at a certain time. The animal's being killed is  because they are fed in such unhealthy ways in preparation for final slaughter that they would die from eating this way soon after. Enjoy your stuff but I really wish there were no bailouts because no one is learning a lesson from this except for the same lesson we've been taught for decades: that government is there to save you. What a terrible and incorrect lesson to learn. We have traded freedom for security and it is un-American. Thanks, Ben F."

I'm going to say I have to agree with you, Ben, all over the place here. Because I won't even comment on the meat industry. I think you're just spot on. And I think I alluded to that before but I just – you can't talk about everything all the time. You can't cover every aspect of every topic, I should say. And as far as the bailouts go, I agree: it's like an addict, right? Because the addict – he gets addicted and then the longer you stay addicted and the more you take, the worse it is on your body when you try to get off, right? And I think that's where we are. That really is where we are. And, in fact, you can heard it – you can hear this in the news reports. You can hear people saying things like, "Well, the government learned its lesson in 2008 and '09, and you go early and you go big with bailouts and stimulus, and whatever you have to do. And it'll all turn out OK because it turned out OK this time, didn't it?"

But I agree. Bailouts are problematic. In this particular case, I have some sympathy. I understand the impetus. Watching your fellow human beings suffer is really horrible. But the suffering was caused by the government intervention, right? And people could say, "Well, what else could we do? We had to shut things down or the virus, blah blah blah." I'm not so sure. I won't say I'm sure at all on either way. But I'm not so sure that a total shutdown was absolutely the only possible way to do this. And it's such a giant complex situation, it's hard to say. But I'll just leave you there. Thank you, Ben F. That's a great question, actually a great comment.

Next is Bill T. And Bill T says, "Hi, Dan. Long time fan here. I wanted to thank you and the rest of the Stansberry gang for recommending gold over the past year or so. I'm really glad I got in when I did. Question: what is the name of the law/principle/et cetera that says that the longer something has been considered a store of value, then the more likely it will be considered a store of value going into the future. I seem to remember you mentioning this on a podcast one time referencing gold I believe. But I've been unable to find the name despite many Google attempts. Thanks and keep up the great work. Bill T."

What you're looking for Bill is called the Lindy effect. And it comes from – I think it comes from Antifragile by Nassim Taleb. But, frankly, all his books run together in my mind so I don't know which one it came from really. But the Lindy effect is: "Yeah, gold's been a store of value for 5,000 years.,, Therefore, it is likely to be one for another 5,000." Doesn't mean it's guaranteed. It's just likely. And this is a tendency. It's not a law of nature really. It's a tendency, a general principle.

For example, the practice of bloodletting was people opening their veins because they thought it cured them of all manner of illnesses. That was practiced into the 19^th, and there may even have been a case in the 20th century of it happening. But well into the 19th  century. And for maybe 1,000 or 2,000 years, long, long time. So obviously – let's say it was like 2,000 years – at the 1,000-year mark, you were spot on thinking it was Lindy, right? Bloodletting. But eventually we kinda got past that. So it's a tendency. And I think it's a very good tendency to assume with gold because of its track record as a store of value. Very good question. Very good principle.

And it applies to other things too, like, we've been reading the Bible for a couple thousand years so it's likely that we will continue to publish it and read it for another couple thousand. We've been listening to great music by, I don't know, let's just say J.S. Bach from the early middle of the 18th century. Therefore we will continue doing so into the next couple centuries, right? I hope we will. I love Bach [laughs]. Good question, Bill. I'm glad you sort of gave me a chance to refresh us on that.

Next one and the last one for today is by Brian L. And Brian L asks about another principle from Nassim Taleb which I wrote about recently. But first he says, "Dan, hi, I'm a new listener to your podcast and enjoy them well. They've been a great supplement to my workout sessions at home. Some of your tips on being bearish on the market helped confirm a play I made last April 30." And then he says this little trade that he did with these VIX ETFs or something and it made some money for him. Good. Glad to hear it, Brian.

He says, "I recently read your article, "The No. 1 Secret of Investing (and Life)," which was a Stansberry Digest recently, "and I wanted to have a deeper context of the application of via negativa. As you know, in Stansberry, there's a whole lot of information for a Total Portfolio or Alliance subscriber. And if you were to apply the via negativa thought, would you already just omit from the get-go looking into publications that don't interest you? Or is it still worthwhile to dive deep into each publication, then only decide later what you want to admit? I just wanted to get clarify or confirmation on your thoughts on this. Thank you very much, Brian L."

So, Brian, you're never going to hear me tell you not to take Stansberry advice. But the via negative principle, for those who don't know, it's the negative way. It's Latin. It's the negative way. And Taleb sums it up brilliantly. He says, "The learning of life is about what to avoid." And all the great investors agree here.

Warren Buffet says, "Rule No. 1 is don't lose money. Rule No. 2: see rule No. 1." Charlie Munger, Buffett's partner, says, "It's amazing how well people like us have done by just not being stupid rather than trying to be very clever." Right? Avoid being stupid. And other people like Ray Dalio – he said some good via negativa stuff over the years. "Most people need to know when not to take a bet," he says. And he also says, "I know that I don't know a lot." He's negatively defining. And I think George Soros counts too when he said, "The secret of my success is that I'm wrong. I'm always wrong. But I fix my mistakes." So they're defining things negatively in general and they're focusing on what to avoid, right?

And that is the via negativa and it's very powerful. In fact, the whole scientific endeavor as I see it, strongly under the influence of Karl Popper here, is an attempt to falsify, to find out what's wrong more so than what's right. It's hard to – you can't ultimately once and for all find out what's right but you can ultimately once and for all find out what's wrong. So falsification is a very important habit to get into and important skill to have. And it's important for investors. There are whole industries that you probably want to stay away from. It's a really useful principle in life and in investing.

And, Brian, whatever you choose to do, whatever Stansberry advice you choose to avoid, just know this: every Stansberry editor, everybody giving advice who's published by Stansberry – they all do this exercise. They all want to avoid risk. They all have the via negativa built into every recommendation they make anyway. So that was really what I was trying to say with it, not that there are certain publications you should avoid. That's for you to decide. Every investor is different and has a different style. And you have to know your personality. That's how you determine what to focus on and what to avoid. Hope that's useful for you. That's all I have on that. But I thank you for the question. We will be talking about via negativa probably for as long as I do this show.

And that is another show. That is another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. Do me a favor: subscribe to the show in iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow with a rate and a review. Like us. Rate us. Review us. You can follow us on Facebook and Instagram. Our handle is @InvestorHour. And if you have a guest that you'd like to hear me interview, I want to know about it. E-mail us with that information at [email protected]. Until next week, I'm Dan Ferris. Thanks for listening.

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