When you see endless stories of greed and speculation in the market…
And you feel in your heart something is wrong…
But stocks continue to rise higher and higher…
What’s an investor to do?
This week Dan sits down with Tradesmith CEO, Keith Kaplan, to help answer this difficult conundrum…
Before Keith came to Tradesmith, he worked as a software architect for many years…
But despite a great profession, a steady income, and a good head on his shoulders, he struggled with his investments…
During his quest to improve, he was stunned and frustrated with the general lack of available tools and financial literacy most investors have…
Now, he’s using his 25 years of experience as a veteran software architect to change that, by providing sophisticated but easy-to-use tools for the everyday retail investor.
During their conversation, Keith talks about some of the mistakes he made early in his investing career, and how his new software aims to eliminate those emotional errors.
He even shows Dan how Tradesmith’s software can reduce the risk in your portfolio by simple allocation…
But whether you use Tradesmith – or another system for your “buy” and “sell” signals – Keith and Dan both agree the most important thing is to have a plan and stick to it.
If you’re concerned about the possibility of an oncoming bear market, but are still holding stocks, this is a conversation you do not want to miss…
You can listen to Dan’s full conversation with Keith and much more on this week’s episode.
CEO of TradeSmith
Keith Kaplan, the CEO of TradeSmith, is a veteran software architect with 25 years of trading and investing experience. He is recognized for his work in financial technology bringing easy to use software platforms to the general public to gain an edge on investing institutions.
Keith speaks frequently to large groups of investors nationwide focusing on the psychology of investing and how our behaviors are the #1 factor in our investing success. He has set out on a personal mission to provide the tools and education that anyone can use to make smarter, potentially more profitable investing decisions.
1:27 – Dan shares his two biggest priorities for the rest of his career… “The first of those things, is to see you through what will potentially be a horrendous bear market…”
4:53 – By the time you realize it’s a bear market, it might be too late… “It creeps up on you… The bull market just emboldens you…”
10:18 – The quote of the week comes from Perth Toll, found in The Wall Street Journal… “Index providers say they don’t tell people how to invest, and fund managers say they have to track the benchmarks, so it’s this never-ending circle of nobody taking responsibility. Wall Street will twist logic and do mental gymnastics, but it’s investors who end up getting hurt…”
13:46 – This week, Dan invites Keith Kaplan onto the show. Keith joined Tradesmith after years of frustration with a general lack of available tools for regular investors… Now, he’s using his 25 years of experience as a veteran software architect to provide sophisticated but easy-to-use tools for the everyday retail investor.
17:57 – After analyzing thousands of portfolios, Keith has come to a startling conclusion… “It’s almost like it doesn’t matter what you buy… But when you sell is the most important problem to solve…”
21:07 – “Understanding when to sell something before you ever buy it, means that you can build a plan, so that way you don’t get emotionally attached…”
26:14 – Keith explains how Tradesmith’s software can help mitigate risk in your portfolio… “The cool thing is, you don’t have to know any math, to use this. You can literally say, I have $10,000. I want to buy Tesla and Microsoft, just tell me how much to put into each…”
31:40 – When Keith went all in on cannabis stocks, Tradesmith’s software helped him get out before the bubble burst… “When the cannabis bubble hit, I was one of the people thinking that this thing is just going to keep going up. And then I get the alerts… This stock went red, that stock went red… Okay, I’m going to sell it. There’s no emotional connection. There’s no believing my narrative over reality…”
36:57 – Keith shares why he failed in his early days as an investor… “I’m so good at math. I’m so good at computers. I’m even great at finance, but I was a terrible investor before I had this regimented system, because I just misbehaved based on my emotions…”
45:33 – How do you navigate between bull and bear markets? “I look at this market and say, my emotions are bearish… my technical indicators are bullish… So, I’m invested… And what that really does for me, is I take no liberty when I get those stop alerts. When I get a sell alert, I sell the stock.”
50:12 – Keith picks on billionaire investor, Bill Ackman… “He lost $4 billion of investor money on Valeant Pharmaceuticals… Our system, when it stopped out taking his initial investment, he would have made $1 billion… but instead he lost $4 billion…”
52:00 – Keith leaves the listeners with some practical advice as a final thought, “I really got into this industry because I felt like financial literacy in school was always missing. And it’s just simply this idea of understanding what debt, saving, and investing is…”
58:34 – This week we’ve got a ton of great questions on the mailbag. One listener calls into the listener feedback line and asks Dan his thoughts on defined-benefit pension plans… Another listener gives their view on comments Dan made about rioting… And another asks Dan what effect the debt ceiling debate could have on the stock market… Listen to Dan’s response to this and more on this week’s episode.
Announcer: Broadcasting from the Investor Hour Studios and all around the world, you're listening to the Stansberry Investor Hour. [Interlude plays] Tune in each Thursday on iTunes, Google Play, and everywhere you find podcasts for the latest episodes of the Stansberry Investor Hour. Sign up for the free show archive at investorhour.com. Here's your host, Dan Ferris.
Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value, published by Stansberry Research. Today, we'll talk with my friend Keith Kaplan from TradeStops. He's the one guy in the world who knows when to sell. I always say, "Nobody knows when to sell." Keith knows when to sell. In the mailbag today, listener Jim called our listener feedback line and left a question about defined benefit pension plans. Great question. I'll give my thoughts on it. And remember. The mailbag is a conversation, so do like Jim did and talk to me. Leave a message on our listener feedback line, 800-381-2357, and hear your voice on the show.
For my opening rant this week, I just want to talk about my two-part mission for the remainder of my career, for the rest of my career, I'm going to be focused on doing two things. And one of them is pretty urgent, in my opinion. That and more right now on the Stansberry Investor Hour. I've been at this investment advisory game for 24 years. Been writing newsletters and doing podcasts and presentations and speaking in conferences. And I figure I'll be at it for as much as – let's just say probably 10 more, maybe, at the most. And where I am right now, I was talking to somebody on the phone yesterday, which inspired this particular rant today. I realized that with my current views, I'm probably going to spend the rest of my career doing two things for listeners and readers.
The first of those things is to see you through what I think is a – will be a potentially horrendous bear market. Because we've got this just euphoric, ballistic bull market that we're in right now. And then, the second thing that I will do is, once that bear market happens and stocks are down – and I think we're looking at something like minus 60% on the S&P 500 over the next few years... or whenever it happens. You know, you know me. Prepare, don't predict. Once that happens, the second part of my two-part mission for the remainder of my career will pound the table until it breaks to get you to buy stocks when they're cheap. And that's going to be – those are the two big things I think will define most of what I do here on the podcast and in the Extreme Value newsletter and elsewhere.
At the Stansberry Conference coming up at the end of October, just every time I speak or write or anything. Those are going to be the two things that I'll have in mind. And look. I was bearish from, you know, 2017 right up until the moment of the COVID crash. And then for a brief window of time, [laughs] I pounded the table and said, "Buy stocks now. Buy great businesses now." And we're continuing to find – we have continued to find new ideas. But, man, we're struggling and it's getting really hard. And I think we're probably not going to recommend a new stock for the first time in a long time in Extreme Value this month. Because it is getting so hard.
And lately, this week as I speak to you, we've seen some more volatility return to the market. And this could be it. I won't predict this is it. I won't say the top is in because I don't do that. You know me. But what I will point out to you is this. I've said this before and I will say it again until a bear market actually happens. You won't know you're in a bear market until months after it has begun. I remember it distinctly in the dot com era and I remember it distinctly also in the financial crisis era. Right? End of 2007, beginning of 2008. Early 2008... spring, summer of 2008, we were all just saying, "Man. Stuff isn't looking so good." You know? But we weren't saying, "Oh, it's going to be the mother of all crashes, and the Fed's going to have to bail out all the banks," and all this stuff.
And that's the way it is. It creeps up on you. And what I think is the problem is that the bull market just emboldens you and it develops insight of your human psyche this feeling of invincibility and this feeling of disbelief that we could ever have another bear market. And so, it takes a lot of pounding and a lot of bear market action and a lot of stock prices falling over some period of time to really dislodge that belief. And it's not truly dislodged in most people's minds [laughs] until the bottom when they all despair and can't take it anymore and can't take the pain anymore and they sell out en masse. And that's what creates bottoms.
What creates bottoms is lots of people throwing in the towel and saying, "OK. Well, I guess I’m just going to lose 70% of all my money," or 60% or whatever it is. "But I’m not going to lose that remaining 30%," or 40%. And that's really tragic, man. I'm trying to help people avoid that. That's the first of those two things that I'm going to be doing for the rest of my career. And look. The way to make the most money in the stock market I'm convinced is like a coffee can portfolio approach. We had Kevin Duffy on the show a while back, and he writes a newsletter called the Coffee Can Portfolio. And he's a coffee can advocate. And the coffee can is just, you put in an equal amount of money into each new stock you buy and forget about it and never sell it.
And, sure, some of them will be 60, 70, 90%, but some of them will go, you know, 50, maybe 100X, and you'll make a lot of money. And that's the original coffee can story from Robert Kirby. You can google that – Coffee Can, Robert Kirby. And the story is, Kirby was talking about a client of his firm. So the client died, his wife survived him, and she wanted to combine their two portfolios. Their portfolios were identical in every respect except for one. She bought – they both bought all their investment advisers' buy recommendations, but the guy never followed their sell advice, and the lady did follow their sell advice.
And he outperformed her by – I think it was something like 8 to 1, I want to say. But I don't remember that. But he dramatically outperformed her, dramatically. Because he never sold and, you know, he had one stock that I think – it split a bunch of times and spun off a bunch of different companies, and it just created this huge lollapalooza effect. And you don't get the lollapalooza effect if you trade and sell. But the problem with this is, to be a coffee can investor you got to be a cyborg, man. Of course, she followed the firm's sell advice. She didn't want to do anything different than what people were telling her what everybody else was doing.
And the guy was like – you know, he was a cyborg. He was not a regular human. It's just too hard not to ever sell. People sell. People get, you know – they break into their – they break into their 401(k)s and take the hit on taxes and penalty just to cut the losses. You know, usually at the bottom. I mean, you can buy and sell in your 401(k) but some people, they panic. They want to get out of it. Right? So they just exit the whole thing and take a massive loss and pay taxes and everything else. And I don't want you to do that. I don’t want people to do that. I don't want you to sell out in a panic because you don't know when to sell.
And rest assured, nobody [laughs] knows when to sell I don't know, you don't know, nobody knows, and we're going to address this with today's guest, Keith Kaplan. He's the one guy who knows when to sell. He's got a whole system for it. And look. You're either a cyborg – which odds are against that – and you can hang on through all these big drawdowns. Through bear markets when the market's down 50, 60, 70%, or you got to have a plan so that you won't sell out in despair at the bottom. I think most human beings are going to do better if they just have that plan to sell earlier rather than later. I really do. And maybe you could even have a plan where you have a speculative portfolio and then you have your 401(k) or whatever that you never touch for 40 years. Something like that.
But if you've got your hand on the till and you're making those buy and sell decisions and you're actively managing your portfolio, man, when a big bear market comes, you're going to be a human being. It will astonish you how much [laughs] of a human being you didn't know you were. Right? So you got to have a good plan going into a big drawdown. I'm going to leave it there and we're going to talk with Keith Kaplan in a minute after I do my quote of the week. And the quote of the week, it comes from a Wall Street Journal article. And it's by someone named Perth Tolle, who was the founder of Life + Liberty Indexes and the creator of the Freedom 100 Emerging Markets, an exchange-traded fund that owns no stocks in China. And the quote is this. "Index providers say they don't tell people how to invest, and fund managers say they have to track the benchmarks." So it's this never-ending circle of nobody taking responsibility. Wall Street will twist logic and do mental gymnastics, but it's investors who end up getting hurt."
I'll repeat that last part, because that's the money shot. "Wall Street will twist logic and do mental gymnastics, but it's investors who end up getting hurt." Almost nobody who's paid in the financial world – in the whole, broad financial world – has an incentive to truly tell you what is best for you and to help you figure it out for yourself. because everybody's different. Everybody's got a different risk tolerance, different portfolio, you're a different age, different stage of life, different type of investor, whatever. But generally speaking, there's some prime tenets of sound investing that you need to adhere to.
And one of them is knowing when to sell: Knowing what your pain point is so that you don't wind up, you know, selling out at the bottom of a big bear market in despair. And there's very little incentive in the financial world at large to tell you how to do all that. And with that, we're going to talk to a guy in today's interview [laughs] who has all the incentive in the world. His incentive is straight to that thing that other people don't have incentive to do... is to tell you when to sell and how to prepare and how to be one of those investors who does not wind up getting hurt by Wall Street's twisted logic and mental gymnastics. OK? His name is Keith Kaplan. Let's talk to him right now. Let's do it. [Music plays and stops]
Look. It's been a bit frightening on Wall Street. On Tuesday, the Dow dropped 570 points. The Nasdaq notched its worst day since March and the S&P 500 fell by more than 2%. Your suspicions are correct. That kind of swing is not normal. And I believe it may very well be the first step toward a much bigger downturn on the near horizon. The decisions you make with your money in the coming days, weeks, and months – well, they could be the most pivotal of your entire lifetime. So if you're wondering, "Is it time to sell? Should I buy the dip? What should I do," then you should've watched Tuesday's Bull vs. Bear Summit where I sat down with my good friends Dr. Steve Sjuggerud and Dr. David Eifrig.
Together with nearly 95 years of combined investing experience, we shared our individual thoughts on today's market, what to expect next, and the No. 1 step you should take immediately to protect your hard-earned wealth. If you have any money in stocks, you need to carve out some time in your day while the presentation is still available since this update is downright critical for you. But even if you're sitting in cash thinking you'll be protected on the sidelines from another big crash, I urge you to think again. Because in these conditions, playing it safe could actually cost you money. The clock is already ticking, so head to messagefromdan.com for our full update. Again, that's messagefromdan.com. [Music plays and stops]
All right. It's time for our interview. Looking forward to this one, talking to my old friend Keith Kaplan. Keith Kaplan is the CEO of TradeSmith, LLC and a champion of the retail investor. Thank goodness. We can't have too many of those, can we? Keith has invested and traded in many different markets, bull and bear, over the last 25 years. Keith joined TradeSmith after years of frustration with a lack of available tools and financial literacy and is using his 25 years of experience as a software architect and evangelist to unleash the power of software for the everyday retail investor.
TradeSmith has expanded its mission to provide individual investors with sophisticated yet easy-to-use tools to help them make better decisions, risk less, and potentially make more with traditional stocks and even cryptocurrencies. Keith's mission is to continue bringing the power of investing and trading software and TradeSmith's core philosophy to the general public so they can be successful as individual investors. Thank goodness [laughs] someone is doing it. Keith, welcome back to the show.
Keith Kaplan: Thank you so much, Dan. It's great to be here.
Dan Ferris: Yeah. Yeah. It's great to see you again. It was nice to see you recently in Baltimore. And that's really what we should talk about – what we were doing all getting together in Baltimore and why we got together. It was you, me, Steve Sjuggerud was on the line, Doc Eifrig was there. You know, we were all kind of talking about the same thing, which is that, bullish or bearish, you better be prepared for a bearish event, really is what we were all talking about. And actually, I forget. I don't think you came down on either side of the bull or bear camp, did you?
Keith Kaplan: No. I mean, looking at our indicators I feel bullish, in a sense, of how the markets are performing for sure. I'm not as worried as some folks, but I also have a great plan to get out. And I think that's critical for the Main Street retail investor.
Dan Ferris: Right. Well, that's your whole kind of thing. That's your whole mission in life with TradeSmith, right? It's like everybody – like, nobody needs to tell when to buy or what to buy. Everybody's got a million ideas for what to buy. And even when to buy. But, like, nobody talks about when to sell.
Keith Kaplan: Bingo.
Dan Ferris: And I've said for years, like, "Nobody knows when to sell." You know? Like Buffett doesn't know when to sell. You know what I'm saying? Like, nobody knows when to sell. But if, you know – you know when to sell, really. Don't you?
Keith Kaplan: Yeah. And look. I've reviewed tons of portfolios. I can't tell you how many different charts I've looked at, portfolios I've looked at. And, you know, I hate to use the term, "We beat people at their own game." But typically what we find is that even the best investors in the world, the professionals, even Warren Buffett, there's a couple trades that go against them. They get so emotionally attached to these trades and they just sort of let them run and they have no plan for an exit. And every time we adjust their exit and we programmatically do it, we end up outperforming them at their own game.
And I'll never forget this one investor I was looking at. He had about a $4.5 million portfolio when he started and he whittled it down to $3 million. He lost about $1.5 million. And I think the time period was about four years. And we readjusted just when he exited his stocks, and we took the same exact buying decision he had. So the same stocks he wanted to buy, we bought them at the same exact time. We did not change how much money he put into each position. All we did was change when he exited.
And we used our system to determine when to exit when that stock has gone against you, it's in a confirmed downtrend, and our system tells you when to sell. By doing that, we turned a $1.5 million loss into more than a $300,000 gain. And when you think about it, it's not actually that impressive of a gain on $4.5 million. But he didn't lose money. And the joke with our team was, "It's almost like it doesn’t matter what you buy, and it may not even matter how much you put into it," which I do believe, you know, that's very important, is to blend your risk across your portfolio. But it's like, "When you sell is the most important problem to solve."
Dan Ferris: Well, Keith, yes. Look. We've come back to this probably dozens of times. I mean, I've interviewed like 100 or 150 people since I started doing the podcasts, and we've interviewed all these traders. We interviewed Jack Schwager, we've interviewed Market Wizards' Chris Camillo, Mark Minervini, Peter Brandt, and we always come back to this. You know, these people – like some of the best traders in the world. Brandt says he is positive – he makes money on trades around 40% of the time. So if he's losing money on most of his trades, obviously something else accounts for the outperformance, at least in addition, you know, to picking good trades. And that something, of course, is these people are ruthless with cutting losses.
Like, they're ruthless with exiting something that goes against them. And basically, your system – what you do at TradeSmith – is all about getting out of a position that's going against you. Because this freaks people out, right? It's like an unnatural act. It's like jumping out of an airplane whether you have a parachute or not. Right? It's like selling something. You know, when I'm up 300% but I'm only down about 20% off the peak or whatever – you know, whatever it may be. Unnatural act. And your mission in life is to teach people how to do this unnatural act. Right?
Keith Kaplan: Exactly. And I think it's all about the plan. And one of the special things about our system is we have this unique number for every single stock, mutual fund, index fund, ETF, and we cover – it's close to 150,000 different securities now in our system. But it's everything popular you can possibly imagine. And this one number is a volatility quotient. And what it does, by just looking at the number, you can tell if a stock is risky or not, how much risk is sort of built in. So the higher the number, the higher the risk. Tesla is in the 50-something. I think it's around 53, if I remember right. And what that says is that you have to sort of suffer through a lot of volatility with Tesla before you ever determine if Tesla should be sold, whereas Microsoft is in the low 20s.
So it's about one-third of the volatility built into Microsoft as you would expect with Tesla. So you would behave different when you buy Microsoft compared to Tesla. And it's not just understanding when to sell and if this volatility is more noise than normal and you should sell, but it's also how much you should buy. You would never put way more money into Tesla than you would Microsoft because Microsoft's more conservative in comparison to Tesla. But that No. 1 thing is knowing when to sell. And understanding when to sell something before you ever buy it means that you can build a plan so that way you don't get emotionally attached, you don't start to question whether it's worth selling at a profit because of taxes, you don't sit there and tell yourself, "This stock's going to come back." You know, you just say, "If this happens, I'm selling."
Dan Ferris: Right. But you brought up another important topic too, which is like allocation, like how much. We get these questions all the time. Right? "How much of X, Y, Z should I buy?" And, you know, as a firm I don't think a lot of us really spend a lot of time on that, because we know that different investors have different tolerances for risk. And in general, I think I've decided – actually, I know I've decided – like for Extreme Value, our maximum high convictions, biggest allocation's like 5%. Because we recommend tons of stocks. So 5%. And then, we also have a 4% category, 3% for lower conviction or whatever. And I've probably told people 1 or 2% for, you know, riskier things even so. How does your system address this topic? because you sounded like you were saying you do address this in TradeSmith.
Keith Kaplan: Yes. Yes. Absolutely. So what we're looking at is that volatility that's built into every single stock that you want to buy. And we have different position-sized calculators to help you determine how much you should buy of a stock. And it really depends on what you're doing. And what I mean by that is, if I'm just simply looking at one stock you can use our system to compare that one stock to the entire portfolio of stocks that you buy or to an entire portfolio stocks that somebody like you, Dan, recommend. And what we can do – and it's so cool because we do all of this math behind the scenes. But you just get the amount of shares you can buy.
And when you click that button. So what we're doing is, we're looking at the volatility of the stock you want to buy, we're looking at the volatility of your portfolio and we're trying to equalize the risk of this new purchase you're going to make to your existing portfolio... is one of the ways we can do it. So let's say I want to buy Tesla and my portfolio risk overall is, I have a 15% risk built into my portfolio. Well, when I go to buy Tesla, I'm going to position-size it based on that 15% risk expectation so that I have the ability to lose the same amount of money on Tesla as I would a much more conservative position that I'm taking inside of my portfolio. And if this sounds complex, it's because it is. This is a very complex topic.
But our software makes it so easy to understand. You literally would just say, "I want to buy Tesla, and here's three scenarios. No. 1: If I put $10,000 into Tesla, how much am I risking and when should I exit?" And then the most extreme part is, "If my portfolio was in balance, how much of Tesla should I buy to keep my portfolio in this risk-balance position that I'm in?" And the reason you want to look at risk when you're buying positions and how much to buy is because you don't want to create a situation where you have an unmanageable loss in your portfolio because of one stock or two or three stocks. You want to risk the same amount of money on every single position that you buy.
Dan Ferris: Right. So given that the risk is the same amount of money... doesn’t mean put the same amount in, though. We should clarify that for the listeners, right
Keith Kaplan: Bingo! Yes.
Dan Ferris: Yes.
Keith Kaplan: Yeah, that's important. So let's just – I'm going to do math on the fly here, which is never beautiful. But I'm going to try to make it work. If I had $10,000 and I wanted to invest in two stocks – let's just say it's Microsoft and Tesla because I used that example earlier. And just to use equal math her and make it simple for me –
Dan Ferris: Right. This is hypothetical.
Keith Kaplan: Right, hypothetical. But I’m probably pretty close here. If Tesla is three times more volatile than Microsoft, I'm going to pout 3 times as much money into Microsoft than I would Tesla to equalize my risk. And so, if I have $10,000 that means I'm putting $7,500 into Microsoft, I'm putting $2,500 into Tesla. If both of those stocks fall by that risk number – that VQ – I will lose the same exact amount of money on both of them. So if both of them plunge and I have this exit point where I'm going to sell it, it fell by that number in our system called the VQ, the volatility quotient – which is how much you're risking – they're going to fall by the same dollar amount, but the percent is going to be much greater in Tesla.
But because I only put $2,500 in Tesla and I put $7,500 into Microsoft, I've equalized the risk. And the cool thing is, you don't have to know any math to be able to use this – you can literally say, "I have $10,000. I want to buy Tesla and Microsoft. Just tell me how much to put into each." Or you can say, "I just want to know the risk on Tesla and how much I should buy according to my existing portfolio." You could even say, "Dan Ferris has 50 stocks. They're all in our system, by the way, because we organize our newsletters in the system. So if you're a subscriber to Dan Ferris, you can say, "You know what? I want to buy all 50 stocks and I have $100,000," well I'm not going to put $2,000 into each stock. I'm going to just let the tool tell me in minute how much money I should put into every single stock."
Dan Ferris: Very cool. So this volatility quotient is a really important number [laughs]. It's basically the historical realized volatility of the stock, is it not? Or is there something more than –
Keith Kaplan: Correct. Correct. We have a formula that's looking at the history of that stock, how it's been performing. And then, we have two different VQ numbers in our system. But our system only uses what we call the current VQ. We're looking at what's happened over the past three years, how we've reacted to market conditions, and how that stock has moved up or down compared to market conditions and what's built into the stock. And we also have this historical average over time. And where that comes into play – and this is more behind-the-scenes in our system, but it's just really cool because I'm a total geek and I love this stuff. But what that does is, it tells us, "Is the current volatility of this stock different from the past and in which way? Has it cooled down or has it sped up?"
But also, we're looking at momentum of that stock. So let's say we have a stock that is trending up – and this is all purely technical. We don't care about the fundamentals of the stock, we don't care about the management teams, we don't care about the products, the services, how the company carries debt and so forth. We're just looking at these technical indicators. And when we see that a stock is rushing to the upside and its volatility is exploding, that's like moonshot territory.
Even if it's a tried-and-true all-time stock – Walmart... whoever – when we see that happening, it's such a great buying situation for us. And we can identify that very easily in our system. But then, we can also have that plan for the exit, so we don't get emotionally attached. We don't sit there and think, "I'm going to turn $1,000 into $100,000. I'm holding on to this thing for dear life." Your goal is just to make money as an investor, but to cut your losses and have that great plan for when to exit. And that's critical in an environment like we're in today.
Dan Ferris: Yeah. You know, I'm sitting here thinking... and I mentioned like the Market Wizards and people that we've interviewed on the show. And, I mean, really what you've done – like, over the years ever since the Market Wizards trader – many of them were called the turtle traders. This was like back to the '70s I think. You know? And these were the first of these people who kind of took Jesse Livermore's, "Cut your losses short. Let your winners run long," advice and systematized it. And so, after a while of course you would have people selling these systems. Right? And you really – that's really what you've done here. And plus, you know – plus. Right? So you've done that plus some more. And folks aren't paying like $50,000 for it either [laughs]. You know? It's not like some big Wall Street secret that only a few people can access, which is really cool.
Keith Kaplan: Yeah.
Dan Ferris: I often wonder what the world would look like – what would the market look like, not the world. What would the market look like if most people used this? And I think it would be a lot less prone to bubbles and euphoria and craziness, and I think there would be a lot fewer stories like the Wall Street Journal would run out of – half of its material to write about because, you know, people wouldn’t be losing tons of money and there wouldn't be these huge, wild swings from euphoria. You can get the euphoria. Right? You can buy – stocks can go up. People can all get this heterogenous view and push stocks to the moon. But they'd all be out when they're down 25 or 30% or whatever the trailing stock was set by the system. And I think the world would – the market would look a lot different.
Keith Kaplan: I agree. I mean, if you just think about something like cannabis stocks, you've got all this medical marijuana happening in the U.S. – and really abroad at these big companies' control. You've got recreational marijuana hitting the streets here. And you would've thought when those cannabis stocks were popping up that they would just go up and to the right forever. And what we've found was that that became a bubble and you're watching some of these stocks of these companies that you think should just take off to the moon drop 90% after they hit a high. And when I was – I just look at anything that's brand new, I want to invest in it.
But I always set my trailing stop and I'm using my system to figure out exactly when to get out. And when the cannabis bubble hit, I was one of the people thinking that "This thing's just going to keep going up." And then, I get the alerts. "This stock went red. That stock went red." "OK. I'm going to sell it." There's no emotional connection. There's no believing my narrative over what's the reality. There's no getting attached to this idea that this one stock can make me rich. It went against me at some point.
And I made money on the way up, which was fantastic, and that's really thanks to that euphoria. But then, it crashed hard and I'm able to get out. And then, I'm able to wait till that stock turns healthy again in the system and that's when I'll re-enter. So I never have to give up on the stocks that I want to buy or the money I want to make but I certainly have to sell when it turns unhealthy. And then, I have to wait to buy back in once it's healthy again. And I think that's really important. And it's a good lesson to know for every single bubble out there.
Dan Ferris: Right. So I want to address a couple of things. First of all, I can just see listeners writing in and saying, "Well, Dan, if everybody sells at the VQ determined trailing stuff from TradeSmith, it'll be down a hell of a lot more than 25% or whatever the stop is." And I get that.
Keith Kaplan: Yeah.
Dan Ferris: But I think that's never going to happen, so don't worry about it. And the other thing... I want to push back a little bit here and see what you –
Keith Kaplan: Yeah.
Dan Ferris: Like, the best returns you can get aren't really from trading and using trailing stops. The very best returns you can get are like finding an Amazon and never selling it. Right?
Keith Kaplan: Yes.
Dan Ferris: And along the way, to be fair to the system, it would have us out when it was down somewhat and then back in when it had bottomed and gone up some – right?
Keith Kaplan: Yep.
Dan Ferris: So you'd make less because you'd be paying taxes, but you'd avoid a lot of – the point here is that you'd avoid that awful sense of just human beings... look. If you're holding a stock like Amazon, I think it went down 35 or 40% like 20 times [laughs] or something on its way to this huge return. And let's face it. It's just all too human to sell when you're down – when this thing is down the most, when it's down the most, that's when you feel the worst and that's when you're the most scared and that's when people sell, and that's what creates bottoms. And it's tragic. And that's why I keep saying that "If there's one product every Stansberry subscriber – every market-wise subscriber, right, Stansberry's parent company that owns all of these products, if there's one product they should all have, it's TradeStops. Because the one thing they're never going to be able to do that no product is going to be able to teach them to do, is not be a human being.
Keith Kaplan: Right [laughs].
Dan Ferris: And this solves that problem as much as it, you know, can. Right.
Keith Kaplan: Yeah. I agree.
Dan Ferris: It addresses it.
Keith Kaplan: I look at different stocks, and I think Amazon's such a great classic example because nobody knew it would be where it's at today, but in hindsight of course everybody knew. You know, everybody knew that they would create the best scalable, resilient web platform in the world, you know, a place that sold books. Right? And so, I'm with you. And if you could pinpoint that Amazon and know that it was a buy-and-hold forever, I mean, you'd be a billionaire. But the problem is that people feel like they're pinpointing those types of companies that they buy and hold forever, and then a lot of those companies go bankrupt, they go out of business, the stock goes to 0. And so, by using our system the whole idea is that you can sidestep those periods of major volatility and major concern.
And if you think about what we do as humans – and I know this is true because I've talked to so many people about these biases that we have – when we are losing and when we're down, we turn the other way. We get depressed, we don't want to talk about money, we don’t want to go to the movies, we don't want to spend money. We just sort of let it be. But when we do is, we talk about a winner. If somebody asked you about the stock market, "Hey, are you invested in the stock market?" 'Oh, yeah. I'm invested. You know, I bought Tesla when it was $5 and it went up to such-and-such."
Right? But what we do is, as human beings, we panic, we make totally irrational decisions... you know, even our buying decisions I think are terrible. If somebody says, "Hey, you should buy Apple," "OK, cool. Let me just go put $5,000 into it." There's no regimented process for figuring out the right way to buy it. And in our system, it takes a minute. And I don't mean to keep pushing the system, but it's because I'm not an expert investor. I know so many people are not expert investors, and this system helps me sleep at night.
It helps me not worry about my finances because I can look in the system, I can see where my portfolio is at and I can see a number that tells me the most I stand to lose today. Like, how beautiful is that where it's always like, "I'm taking on a level of risk because I'm buying a stock, but I know how much I stand to lose and I know exactly when I'm going to get out. And I know that if I get out I'll get an alert that tells me the next time I should get in." And that just makes me be at peace. I'm so good at math, I'm so good at computers, I'm even great at finance. But I was a terrible investor before I had this regimented system because I just misbehaved based on my emotions.
Dan Ferris: Everybody's terrible when they don't have a system that's the point. You're exactly right. People get hunches, they hear from their brother-in-law, they hear from somebody, you know, who they think knows something. They watch TV, whatever it is, and then they go off half-cocked with some kind of, "Oh. Well, I got" – it's like you say. "I've got, you know, $50,000 to my name. I'm going to put $50,000 into this crazy thing and then I'll have $1 million in five days," or something. So yeah. I mean, that is the point. And by all means, look. You're the CEO of TradeSmith. It's an affiliate company of, you know, the Stansberry podcast and it's a Stansberry affiliate company.
So we're not hiding that. You don't have to apologize for pushing the system. We know that's why you're here. But, you know, we're inviting you here because – especially me. You know, I got kind of worked up about this because for years I was like, "Eh. Trailing stops, whatever." And then, you guys did the work on the Extreme Value Portfolio and showed that the result would've been better and that I – like everyone else, like you, like we're saying Warren Buffett, everyone else – don't know when to sell. No one knows when to sell. So you have to have this regimented thing. Or – I'm going to push back again – or you can do the coffee can portfolio and listeners can google Robert Kirby Coffee Can Portfolio. But this is incredibly difficult too.
Keith Kaplan: Yes.
Dan Ferris: This requires, you know, just inhuman guts. Just requires guts because the coffee can portfolio is, you put an equal amount of money into every new stock you buy and you never sell. Try that on for size. I mean, that's personally what I do and it ain't easy. It ain't easy at all. You know? Because some of your positions will be down 90%. Some of them might be down 100% at some point.
Keith Kaplan: Yeah.
Dan Ferris: But you will get these long decades – you know, 30, 40 years of compounding in the big winners and will more than make up for the losers. But, you know, you really have to be a cyborg, and nobody is. I mean, nobody is. So then, we come – you know, nobody's a cyborg. Ergo, you will all need [laughs] TradeStops. You all need TradeSmith, period. It's like, "Just do it for god's sake. You know, learn to sleep at night." You want to know what to do – and we started out talking about this Bull and Bear Summit that you and me and Steve Sjuggerud and Doc Eifrig... all these different investors, different points of view. But we all agree on this. And that's really the point. We all have different views and we all agree, [Inaudible] there's a reckoning coming. I think we're in a bubble. You know? And I think Steve feels that way too, but he's like, "Look. We're in bull mode and that's all there is to it."
Keith Kaplan: Right.
Dan Ferris: I think you're in that camp too. You were saying earlier, "Every number you look at, every indicator," says we're in bull mode and that's where you are as an investor, period.
Keith Kaplan: Yep. It's funny. I had this conversation with a couple of friends who saw our event the other night. And they were saying, "So, Keith, are you scared? Or are you fully invested?" And I said, "It's not, 'Am I scared?' or 'Am I fully invested?'" I'm both. So I can be scared of bubbles but fully invested because I've got a system behind me. And what you find is that, right now, the fear in the market is at pre-pandemic levels. Like back when we were dealing with COVID coming on the scenes. And so, people aren't really talking about stocks. They're not talking about cryptos. You know, they're sort of living their lives and they're ignoring this thing because they're so scared, but they keep watching it go up.
And Steve sees this is that it will Melt Up like in the dot com bust, where you just see these irrational valuations. And I'm sure you, Dan, feel like the market's very overvalued right now. But it doesn’t mean that this euphoria won't take us to the next level. Right? The market could double from here, and I don't want to miss out on that. I know exactly when I'm going to sell because I'm going to get an alert that tells me when to sell. And I think that's the key. I mean, I wish I had that for my house. So we think about real estate and I'm questioning – I used to think we were in a bubble a year ago, but now I'm like, "Is this here to stay? Are people in love with their homes finally?"
You know, they're moving, they're putting in pools, hot tubs. They're doing all this renovation and I think it's because they're falling in love with their homes because during the pandemic they felt like they would never leave, and they realized that they can place more value in that. People work remotely now and so forth. So for instance. We knew we were going to settle on our home, August 15 of 2020. And it was March of 2020 – and I said to my wife, "I have no idea what's going to happen, but we've got this contract on a new home we're going to move into in three-and-a-half months. I would actually rather try to sell our home now and be homeless if we were that lucky and just deal with that." When I say homeless, I mean living in an apartment –
Dan Ferris: That's exactly what we did, Keith.
Keith Kaplan: Yeah.
Dan Ferris: Same thing. I couldn’t take it, so we were like, "Sell this thing now." It sold in three days for above ask. I mean, it was crazy.
Keith Kaplan: Yeah. And ours sold above ask. And the funny thing is that when you think about the area that we live in – I live in Baltimore. People always think of Baltimore City, the crime and all of that. But I actually live 30 miles out of the city. I live in what's called the country of Baltimore where we have acreage, we have owls, we have deer, we have all this wildlife. It's a lot of fun out there. And, like, the biggest crime out by us is cow-tipping, you know, where people go push cows on farms. And I laugh about it. It's not cool to do, it's not good for the cows, but that's our biggest crime. But also, when you live in such a rural place that we live in it takes months to sell a house usually.
So here I'm panicking about what's going to happen to the real estate market and I'm thinking that we're going to have this situation where we're carrying two mortgages, "I'm not OK with that. I'm a low-deck kind of guy. I don't want to have two mortgages." And so, we put our house on the market. We had eight offers in one day. And I said to her – and we took not even the highest offer. We took the one that was 3% above asking thinking we would never get asking price because they had the best financing. They were using cash to finance. And I remember saying to my wife, you know, "How great is this? We escaped the bubble." You know? And of course, she was right. We shouldn't have sold so early. Being homeless was terrible, going from going to a hotel with kids and, you know, in the pandemic nonetheless... it was terrible.
Dan Ferris: Same experience. Awful. Yeah.
Keith Kaplan: And now, our home is probably worth – the one we sold is probably worth 10 to 20% more. And granted, our new place hopefully is as well. So it just goes to show you that you need this sort of regimented system. You need this way to understand what you're doing in life. And any time you can take advantage of that and take out the human emotion is just fantastic.
Dan Ferris: Yeah. I mean, obviously a home is a – it's a more personal kind of a thing. It's less – I think it lends itself more to other considerations. Like, we were near a big city that we wanted to get away from and we wanted to get back to where our grandkids live and all that kind of stuff. But there are people who buy and sell homes the same way people buy and sell stocks. So it's actually [laughs] a really good analogy. So you're in bull mode. I'm squarely in bear mode. I'm really getting more bearish month after month here. And what was it – I guess Steve is in bear mode. Doc Eifrig was – I'm sorry, Steve was in bull mode and Doc Eifrig, he's bullish too or no? I can't even remember. Why can't I remember?
Keith Kaplan: It's so funny. I felt like with Doc he's more of a neutral mode. You know? Doc's like a "Slow and steady wins the race." You know? And with him, he was sort of in this neutral mode. And I remember, you know – I listened to Steve, and I get super bullish. I listen to you, I get bearish. I listen to Doc and I'm sort of left confronting my own emotions saying, "I'm not really sure what I am anymore." You know? And I don't know if that's because Doc goes last when we were asking the questions of who's –
Dan Ferris: Yeah. He's so reasonable, though. Isn't it?
Keith Kaplan: Right. Right. But I just look at this market and I say, "My emotions are bearish, my technical indicators are bullish." And so, I'm invested. I'm in bull mode while I'm investing, but I'm in bear mode. And what that really does for me is, it means I take no liberty when I get those stop alerts. When I get a sell alert, I sell the stock. Whereas sometimes when we're in a clear bullish pattern, we're in a bull market and I'm invested in the stock and it goes against me, I'm really studying like, "Why did it go against me? Is it OK to stay in even though I got a sell alert?" But man. We're in the situation where it's like the market has already doubled since the bottom in March of 2020, which is just crazy to think of. You know? But the market has doubled. And clearly it can go way higher from here, but it can also crash. And when it crashes, its' going to crash hard. And so, for me it's like I'm so disciplined right now if I get a sell alert – no matter what my brain says – my fingers do the walking and sell that stock.
Dan Ferris: Yeah. That's the way to behave. It's funny. You know, I have an anecdote that I throw out every now and then. "Steve Sjuggerud and I actually went to visit one of those turtle trader firms – I won't say which firm it was – and we walked onto the trading floor. The vice president took us around. He said, "You know, here's my head trader." Blah-blah-blah. "I'm going to leave you in his hands for a few minutes," and the hedge trade explained a few things. And while we were there, their system kicked out a signal. And I remember it was cable, the British pound.
And it had fallen five days in a row or something or five sessions in a row. And that was a sell signal. Right? It tripped a stock. And the guy showed us, and he showed us the chart, he showed us the five days of down action. He said, "You know, that's where the signal kicked in." And we had been told by the vice president that not trading a signal is a terminable – a fireable offense. You would get fired if your trader doesn't trade the signal. And the guy showed us the chart and he looked at it. And then, he looked at us and he said, "But do you really want to sell after five days of this? Don't you want to wait?"
And I think he actually waited, and I hope he didn't get fired. But I thought, "You know, if the people who are known for their discipline – if the guys in the world who are known for having more discipline than anybody – are sitting here asking those kinds of questions, what hope do the rest of us mere mortals have?" You know, without getting an alert from something like TradeSmith or whatever, you've got no hope. You are not going to make a good decision.
You better have a plan in place for when to sell. And I think we all agreed. I think we all agreed when we did the Bull and Bear Summit, which, by the way, you can see the Bull and Bear Summit if you go to messagefromdan.com. I'll repeat that a bunch of times later on. But we are sort of getting toward the end of our talk here. So messagefromdan.com. And then, you'll see the event that Keith and I are talking about with Doc Eifrig and Steve Sjuggerud and we're all talking about. Whether we're all bullish or bearish, and then Keith comes on and tells us, "It doesn’t matter. You're all idiots. Just buy – you know, I know when to sell."
Keith Kaplan: I think I said you all are humans, not idiots [laughs]. I would never say – no, I'm just kidding.
Dan Ferris: No, that's true. Keith is a gentleman, and he would never say that. That was just my interpretation. But it's true. Like, we all have that impulse that you described. We all think that even when we have a system in place, like, "Hmm. Maybe I can outthink this situation. Maybe I can outthink what the market is telling me according to my own system and, you know, I'll stay in, and I'll be super-duper rich." Never happened. Never happened. It's just never happened.
Keith Kaplan: Yeah. I'll never forget. You know, we study a bunch of billionaires in our system. We have 27 different billionaires in our system. We're tracking 2,000 of the stocks that they're currently invested in. And we do that because these guys are some of the best investors in the world, typically value investors like Warren Buffett. But they're the best investors in the world and you can see exactly what they're buying. You can see which stocks are healthy. You can figure out how much of them to buy. You can basically stand on their shoulders and buy what they're buying.
And I remember studying Bill Ackman who's a legendary hedge fund manager. He's returned more money than you can imagine. But he had this one trade on Valeant Pharmaceuticals. He lost $4 billion of investors' money on Valeant Pharmaceuticals. And I just want to remind you, though, to the people listening he's made a ton of money for his investors. I'm just picking on one trade. And he lost $4 billion, and he kept buying as it was going down.
And, you know, Valeant was a scam and unfortunately, he lost $4 billion. Our system, when it stopped out – taking in his initial investment – he would've made $1 billion by stopping out when our system said to stop out and then just watch the stock fall and been excited. But instead, he lost $4 billion. So there's a pretty big gap there in what he could've made and what he lost using the system. And certainly, he's made up for that over time. But as investors, we don’t want those types of losses. We don't want our emotions to get in our way of making money. It's about making money, it's about cutting the losses and really trying to build a portfolio that can help give you a great retirement, help your kids, help your grandkids and really be a legacy that you can pass on.
Dan Ferris: Sounds good to me, man. Sounds good to me. So, Keith, when I do these interviews I always ask the same final question. And that final question is very simply – I think I know what your answer might be, but I'm going to let you give it [laughs]. That final question's very simply, 'If you could leave our listeners with one thought today besides going to messagefromdan.com, what would the one thought be that you would leave our listeners with today?"
Keith Kaplan: Yeah. I think it's probably two things. And the first one is something that's near and dear to my heart. I really got into this industry because I felt like financial literacy in school was always missing. And it's just simply this idea of understanding what debt, savings and investing is. And, you know, for me it's been one of these things where I feel like people like myself are just sort of caught in the middle. Nobody ever taught us financial literacy, what debt means, what it means to be an investor in public companies, how to have the savings that can help keep you on a path in case something goes wrong.
You know, having a good, strong year of the most important bills paid in-advance, meaning, like, I have a savings account that can pay those bills for a good year and paying down debt because, you know, I don’t want to become somebody else's investment. I want to invest myself and build my future. So the first thing that I think is really, really important is that people take a hard look at the debt that they've amassed and make sure that it makes sense and figure out how to pay that down before they're trying to speculate on, you know, cryptos, buy stocks, whatever it might be. You know, get yourself into a really good financial position first. Pay down the debt, have a year of savings. Now go invest.
And when you invest – so the second part of this is, even if you don't use our system, create a system of record for yourself that tells you how you're going to buy the stocks – like how much you're going to buy – when you're going to buy them and when you're going to sell them before you ever place that trade. Have an exit plan at the ready before you ever place a trade. And if you don't want to buy a system to help you time it perfectly, then I would say employ something like a 25% trailing stop on every single stock that you buy and stick to the plan. You know? Don't sit there and tell yourself, "This one's different. I'm not going to stick to the plan." Stick to the plan. It will help you to take the emotions out, it will get you to be a much more regimented investor and hopefully you'll see your gains over time wildly exceed what you've done in the past. And that's critical as an investor.
Dan Ferris: When you get into the stock market, have a plan and stick to it. Brilliant, Keith. Perfect. That is such – it's a profoundly simple and powerful message. I mean, we could probably base this podcast on that, you know, for the next like five years or something every episode. And I will return to all those themes again and again and again. "Have a plan – know yourself." I'm always saying know what you're doing. I love that answer. I love that answer. Thank you for that.
So, you know, you will be invited back. And, again, we want everybody to know that Keith is a big part of the bull and bear debate that we had recently with Steve Sjuggerud, Doc Eifrig, and myself. And you can watch it all at messagefromdan.com. It's a good watch. It really is. I was super excited to be there, which I think you can tell by the way I'm [laughs] gesticulating wildly during the discussion. And Keith's message during that discussion was just profound, just like it was today. So mesasgefromdan.com.
Keith Kaplan: Thank you, Dan.
Dan Ferris: You bet. All right, Keith. You got to come back to see us sooner rather than later.
Keith Kaplan: Definitely. Any time.
Dan Ferris: Good. Glad to hear it.
Keith Kaplan: All right. Take care. Thank you so much [music plays and stops].
Dan Ferris: Well, like I said, I love talking with Keith because his message is simple and powerful. And it's humbling for me, I have to tell you. I don't think we spent any time on this, but the work that they've done at TradeSmith has been humbling to me because – like I said – they went through the portfolio of my newsletter – of all our newsletters but I'll just talk about mine. And the returns would've been a lot better. You know, significantly better. They're good. You know, we have a good track record, but it would be a better track record had we simply just systematically exited the way that the TradeSmith system indicates that you should do.
So it's super valuable and very humbling. We should all remember that we don't know when to sell and our gut will lead us wrong every single time. We will always be elated at the top. You know, if you get a stock that doubles, you'll be elated. You won't want to sell. It's making you happy. And then when you'll sell is when, you know, you've lost all that profit and you're down 50% and you're just despairing, and you want the bad feeling to stop. Human emotions are a bad guide for what to do in the stock market and TradeSmith solves that problem. All right. Let's take a look at the mailbag. Let's do it right now. [Music plays and stops]
So I need to talk to everyone seriously here for just a minute, because right now we're in this weird, emotional market with a lot of fear and greed controlling what the average investor is doing with their money. That's why we're seeing a lot of money pouring into crazy investments like NFTs and meme stocks and penny cryptos. People see the markets still near record highs and they're scared of getting left behind. They want to be part of all the hot moneymaking stories we're hearing right now. But really for most people, unfortunately, it's a bunch of crap. You're probably going to lose everything chasing speculative gains like that.
Just ask someone who bought AMC stock or a bunch of Dogecoin a few months ago. It's the exact opposite of how I approach investing. That's why I'd like for you to check out a new video I just posted online at extremevaluestock.com. In the video, I'm sharing details of a fantastic, risk-averse values tock opportunity that my research is showing could return about 200% over the next 24 months. I'd love for you to check it all out by heading over to extremevaluestock.com. But please hurry because the stock I'll be telling you about is getting close to exceeding my buy-up-to price recommendation. And once it does, I'll probably have to take the video offline.
So one more time. To learn the details, head over to extremevaluestock.com today. That's extremevaluestock.com. [Music plays and stops] In the mailbag each week, you and I have an honest conversation about investing or whatever is on your mind. Just send your questions, comments, and politely worded criticisms to [email protected] I read as many e-mails as time allows and I respond to as many as possible. You can also call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. Listener Jim did just that. He called our listener feedback line and has a question about defined benefit pension plans. Here it is.
Jim: Dan, this is Jim. I'd like to hear you talk about defined benefit pension plans and how they might be affected in times of high inflation or other financial discord and whether that be due to loss of purchasing power or other possible financial shenanigans.
Dan Ferris: All right, Jim. That is really a good topic. Now, there's really two topics here with defined benefit pension plans. One is the funding and the other one is inflation, which you brought up. I actually don't want to address the funding because it's better for you to like talk to your company and find out the details of how well funded your pension plan is. But defined benefit pension plans, people don't really hardly use them that much anymore because they guarantee an employee a certain benefit when they retire, a certain payout, you know, lump sum or regular payments based on how long they're with the company, how much salary they got, stuff like that.
And their age, you know, when they retire. And you're right, Jim, to worry about inflation and to talk about them as if they're bond-like. Right? Because that's the problem. Once they promise you this amount of payout, they have to go and make sure they get enough return on the pension assets. Right? They're saying, "We're definitely going to pay you this much no matter what the stock market does, no matter what the bond market does." So they have to make that payment happen. And in order to fulfill a guaranteed payment, they're going to wind up in bonds. Right? Because that's where you can – mostly in bonds. I think most of the time. But today, that's problematic because bonds don't pay anything. You know?
You promise people 1% for 30 years or something and it's just not going to cut it. So, you know, a lot of plans will wind up being underfunded and inflation will do some damage. And, I mean, you'll probably get your payout, but who knows? At some point along the way, the funding problems and inflation might create a problem for payouts. But I think if you are retiring now, you'll probably be OK. The problem is, interest rates are so low now and stock prices are so elevated how does it look going forward? You know? That's my best answer, Jim. That's all I've got. I think it boils down to you're absolutely spot-on to be worried about the funding and inflation.
Next comes Abe G. and he wrote in. He says, "Hey, Dan. Just to let you know, I chuckled at your comment about calling the rioting not-peaceful protesting in Portland as one of the reasons to moving out of there. While you called the January 6 riot in the Capitol a bunch of drunk people protesting. Interesting perspective when it hits home, right?" Abe G. So Abe's trying to say that I've got two separate... when I have an agenda, it's just drunk people protesting, and when it affects me personally it's rioting. And that is absolutely false. These two events have nothing whatsoever to do with one another and they don't resemble one another in any meaningful way – except for one. Right? Somebody got killed both times. People got killed. People were killed by rioters, peaceful protestors [laughs], at least once in Portland and in other cities around the country. And the one person who was killed on January 6 was killed by a cop – and was unarmed.
I mean, they were trying to break into the Capitol. Right? Those people weren't just protesting. And we said this at the time. They were guilty of vandalism and breaking and entering, and they were out of control. But to say that they were, you know – it was an armed revolt or an insurrection which the press jumped... it all was just stupid. Come on. It was ridiculous. But the two events are too different to compare so your comment is lost on me entirely, Abe. Steve M. writes in and says, "Hi, Dan. While in traffic a few months ago, I saw a car emblazoned with Zombie Apocalypse Response Vehicle. Right [laughs]?"
I guess that was a bumper sticker on the car. "Zombie Apocalypse response vehicle." "Obviously, I thought it was a joke," he says, "But it was clearly professionally painted. I chuckled, continued on my way, and have made no particular zombie preparations. Now even Bill Bonner and Dan Ferris are preparing for what I thought was fictional, so I had better get with the program. To get started, I googled Zombie Apocalypse and was taken to cdc.gov's Zombie Apocalypse Page. Really? I then went to cdc.gov and found the same page where humor was mentioned as a medium for engaging citizens. I wonder if that car had government plates. Regards, Steve M."
Yes, Steve. Bill and I are – I invoked the zombie apocalypse meme, which is really sort of what it is, in an attempt to do just what the CDC did, to use humor to address, you know, a serious topic. Which is, if you live in a city like we mentioned, Baltimore or any other kind of American city, where there's a lot of violence and where you should be afraid of a societal breakdown happening, you might want to think about getting out of there or where you'd go or how you'd get out." That was Bill's point. That was his answer to my final question. But I'm glad you brought it up and I – maybe you could send us a picture of this car, because it sounds like it was more than just a bumper sticker, professionally painted, you said. Good stuff, Steve. Thank you.
Next and last this week is Anthony H. He says, "Maybe an ignorant question. But with talk of increasing the debt ceiling, which seems to happen more and more often, if Congress doesn't get a limit increase and has to shut down, does that in any way affect the stock market?" From what I've heard the Fed is constantly purchasing bonds to keep interest rates down and keep the market functioning. Will this have any consequences to the market if government spending is temporarily halted or does this just pertain to government-funded agencies like national parks? Thanks. Love the podcast. Keep it up. Anthony H."
Anthony, I think that the debt ceiling limit stuff is noise. It's pure noise. They'll never shut down the government. You know, they do this thing where they say, "Well, you know, we're shutting this thing down for two weeks," and then they always raise the debt ceiling. What they really do is like do away with it, and the current amount of debt is – however much debt they need becomes the new limit. So it's just silly. It's theater. I wouldn’t worry about it at all, even if it seems like when the rhetoric ramps up, particular sectors related to the government – I don’t know, defense or something – might have a bad few days in the stock market.
But overall, I just don't... I think it's kabuki. I think it's theater. I don't think it's very meaningful at all. because they're not – you know, it's like, "Who has the political incentive to let things fall apart like that?" No one. Absolutely no one. Good question, though. I'm glad you asked so I could give an opinion about it. I meant to address it anyway, so thanks, Anthony. Well, that's another mailbag and that’s another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We provide a transcript for every episode. Just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript" and enjoy.
If you like this episode, send someone a link to the podcast and help us grow. Anybody you know who might enjoy the show, just tell them to check it out on their podcast app or at investorhour.com. And you can Subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow with a rate and a review. Follow us on Facebook and Instagram. Our handle is @InvestorHour. On Twitter, our handle is @Investor_Hour. Have a guest you want me to interview? Drop me a note, [email protected], or call the listener feedback line 800-381-2357. Tell us what's on your mind and hear your voice on the show. Till next week. I'm Dan Ferris. Thanks for listening.
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