In this special mailbag episode of Stansberry Investor Hour, Dan and Corey delve into a wide range of questions from their audience. They shed light on prevailing market sentiments and offer valuable advice. But first, Dan debriefs Corey on his recent trip to Vail, Colorado for the VALUEx conference.
The event, which was attended by 40 handpicked value investors, offered a unique space for industry professionals to discuss investment strategies and exchange ideas. Dan notes a trend among the participants. Despite the challenges the financial sector has faced in the past year, these investors were focusing predominantly on financial investments, particularly bank picks. Additionally, Dan shares intriguing details about former Bridgewater Associates strategist Paul Podolsky's experience working alongside renowned investor Ray Dalio.
Then, Dan and Corey open up their mailbag to address various questions from frequent correspondents, new listeners, and longtime Stansberry Alliance members. One significant topic that emerges is the outlook for commodities stocks. Investors are particularly interested in understanding the energy sector's timeline and the future demand for essential resources such as oil, gas, copper, and silver. Corey believes that inflation will continue to be a dominant theme over the next decade, so commodities will play a vital role in this narrative...
Inflation will still be a significant story of the next decade. Commodities [go] along with that.
Another listener-submitted question raises concerns about the eroding middle class and whether it signifies an impending bubble burst. Dan and Corey engage in a thoughtful conversation, acknowledging the lingering impact of the pandemic on jobs and the subsequent effect on the core personal consumption expenditures index. While Dan maintains a bearish outlook on stocks, he highlights that the overall economy is in a better position than it might appear...
Higher interest rates will create many problems in a levered system like we have. But overall... things are truly better than they look.
This is a valuable conversation on investor sentiment that you won't want to miss. And it even provides insights that will help guide investors seeking to navigate the ever-changing financial landscape. Keep sending your thoughts and questions to [email protected] and let us know what's on your mind!
Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.
Corey McLaughlin: And I'm Corey McLaughlin, editor of the Stansberry Digest. Today, we'll talk with we have a very special mailbag episode where we take your questions. But before that, Dan will debrief us on his recent trip to Vail.
Dan Ferris: And please tell us what's on your mind. You can e-mail us at [email protected]. That and more right now in the Stansberry Investor Hour.
Yeah, just got back from Vail. Vail is nice in summer. I highly recommend it, by the way, and I learned something that is very practical and very useful that I'd like to share. It's 8,000 feet up there. I have a bit of trouble with the altitude. I'm not a mountain climber. I'm never at 8,000 feet. I go to 8,000 feet once a year in Vail.
So it affects me, and, I mean, I like to drink a glass of wine or two, and I'm telling you, you drink two glasses of wine and don't do anything and you're me, you wake up at 2 a.m. with the most godawful splitting headache of your life.
Corey McLaughlin: Oh, boy.
Dan Ferris: So I have found something that works, though, yeah.
Corey McLaughlin: I've been there, too, yeah.
Dan Ferris: Yeah, oh boy. "Oh boy" is right. What works for me is not just drinking water. Everyone says drink water because you're constantly losing moisture at that altitude, you're breathing so hard. What works for me is coconut water. I drank these little I don't even know if it was a 12 ounce. I think it was an 8- or 10-ounce bottle, little bottles of coconut water. I drank one whole one of those and I was normal, again. It was great.
So pro tip. If you haven't tried it and if water doesn't work for you, if drinking copious amounts of water doesn't seem to work for you as it does not for me, coconut water, highly recommended. Now I have to say that I left my coconut water out of the fridge and I smelled it and it smelled like rotten milk, so there's that, too. Anyway, just thought I'd pass that along.
But the conference was great this year and it's great every year. It's 40 guys, all value investors, invitation only, I'm afraid, who get together and exchange ideas for three days and then do fun things during the day, which I wasn't able to do this year because I had too much work to do. There were some great presentations. They don't like us to give the names out of the stocks picked. Sorry.
But I can tell you that it was overwhelmingly financials, and banks, and things, a couple of banks, a credit-card company, sort of publicly traded, mini Berkshire Hathaway-type companies, a couple of those where they're just buying companies, and maybe holding them for a while, and selling them, or buying them and hanging on to them. And I found that very interesting because their value investors in the financial sector got creamed earlier this year, so it makes sense.
Corey McLaughlin: Is that from more so is the tone there more that the banks and the financials are the worst is behind it, and oversold, and that sort of idea, or something else?
Dan Ferris: We tend not to talk about anything top down at this conference which is another reason I love it. It's just bottom-up stock picking, and we don't waste time talking about whether or not there's going to be a recession or whether or not more banks are going to fail.
Corey McLaughlin: Gotcha.
Dan Ferris: But with the banks, for example, a couple of them, the basic idea would be something like, OK, all the banks aren't going to fail and this will pass. Therefore, what are the best-run banks? Because they all fell. And I looked up one of them this morning and the thing was, say, $5 a share in March, in the middle of the whole thing, and now it's $12. I mean, from $5 to $12. So, wow. I looked at it and I thought, "Damn it, I missed. I should have gotten that because it's a really well-run bank." So I made notes.
This is what happens to me with VALUEx. I see something like that... great presentation, great company, should have bought it, should have known... and so now I'm copiously collating my notes from the conference saying I need to be better. I need to do more value screening. I don't do enough of that. So it really fires me up. It's a great event.
And there was a guy from Bridgewater there named Paul Podolsky. He was talking about China, and I asked him if he wanted to be on the show, and he said yes, so hopefully, fingers crossed, everybody, that we can get him on soon because he was very insightful. And I don't want to spoil it. I don't want to spoil what his comments might be, but he's someone who ought to be listened to as a former Bridgewater Associates guy. We had one of those on recently, Bob Elliott, and it'll be cool to have another one on.
Speaking of that, one more thing before we move on. We had to ask Paul about working with Ray Dalio at Bridgewater, right? You just have to. And two things. He said Dalio has an iron work ethic. He just works constantly and he's constantly, when he travels, he's got one bag that's got five or six books in it because he never stops reading, and studying, and learning. That was one thing.
The other things was, he says Dalio can go in one minute he's at 30,000 feet and he's thinking about 500 years of history. In the next split second, he's from the bottom-up thinking about unit economics and how a particular situation will work out. And that's rare. That's very rare.
You don't even hear that kind of thing from Warren Buffett. Buffett generalizes but he does so as somebody who's looked at tens of thousands of companies over a 50-year career, not as a macro guy like Ray, but Ray does the bottom up, too. So hopefully, we'll get to talk more about that, but yeah, great event, as usual.
Corey McLaughlin: Yeah, that's great. I'm hoping, look forward to getting him on, if we can, to hear more, and yeah, glad you survived your wine, too, and discovered the coconut water. It reminded me of the first time I went out to Colorado. My brother moved out there, and I was up in the trees, in the forest, in the mountains. And as a slightly younger man, I had two margaritas, not one, two, and I was toast. So no coconut water for me. I was taking a nap.
Dan Ferris: Yeah. So let's do this thing. Let's check out the mailbag.
Corey McLaughlin: Sure. I was going to say you, because you've known Aussie Stu longer than I have and maybe have the better accent, so maybe you want to do this one.
Dan Ferris: OK, you're right. It's another e-mail from Down Under.
Corey McLaughlin: There we go. That's what I was waiting for.
Dan Ferris: He starts off, "G'day, Dan and Corey." There you go. That's the stuff. That's why they're tuning in. He said, "G'day, Dan and Corey." And I'm not going to do an accent for this whole thing because it's not that good. "G'day, Dan and Corey. Still enjoying my weekly investment hour and have learned from everyone. Also, welcome to Corey. I'm enjoying the addition to the show and like listening to you guys bounce ideas off each other.
First question is regarding commodities stocks, mainly the energy sector. Stansberry has written a lot about the future needs of oil, and gas and all sorts of precious metals, too, that will be needed long term, such as copper and silver for a variety of reasons. It's clearly a slower-moving sector and I was wondering what sort of timeframe I should be looking at. Years? Decades? Would dips in prices like we were seeing in oil stocks recently, for example, be viewed as opportunities to add to positions? The investment theme seems like a reasonably good bet. Thoughts? Aussie Stu."
Thanks, Stu. So happy to have you as a listener. Always a good, thoughtful question. So let's just go through this in order. Well, you're mainly asking about timeframe. That's really the question. So years, decades, I'm going to say definitely years. I think we're looking at two to four years for a really meaningful move because I think I like the thesis that the emphasis on renewable energy and the sort of hostility especially toward the fossil-fuel sector has really dampened investment in new production. But the need for this stuff is constant, and greater, and so-called renewables, it's starting to be obvious that they're not nearly what they're cracked up to be.
Was it Sweden, recently, did you read this, Corey? Sweden says, "Screw renewables. We're just going with nuclear." I think it was Sweden. So because the renewables just don't really work as advertised and they're way more expensive. They're so expensive, not really reliable, and they foul the landscape. Windmills and solar panels, I mean, solar panels are made of toxic waste, for God's sake. Windmills are filled with gallons and gallons of oil and they're made of steel and stuff.
Corey McLaughlin: Yeah, I think more and more people are waking up to that fact these renewables are you've got to get them from somewhere. They don't just sprout and then be renewed. A lot of the base materials are just pulled from the ground.
Dan Ferris: Right, and including, as Stu mentioned, Copper, right. So I saw one estimate that said we're going to need a new Escondida copper mine, biggest copper mine in the world, basically, every year for 10 years, at some point, if they really roll out electric vehicles to the extent that the greenest green folks want. And when they start looking at those giant holes in the ground the size of a small city, they're going to be, "Oh, wait. Wait a minute." How's Greta Thunberg going to handle that? I don't think she'll like it much.
Corey McLaughlin: Right, yeah.
Dan Ferris: Anyway, Stu, years.
Corey McLaughlin: Yeah, I would say years, too, and I would decades, too, depending on how many decades you want to say. The next 10 years, I would say, or 20. That's where my head's at with commodities because these come in cycles. So if we're in the early stages or the next supercycle, which people who follow commodities like to say, is ahead, and there's evidence that there can be. Because despite what we're saying about the green energies and maybe the lack of understanding about where they actually come from, there is going to be a push for these things and we're seeing it already.
Ford just got a bunch of government money to produce their own EV car batteries, and it's small potatoes relatively speaking in the world, but there is a push for this stuff. So and if we're in early stages of a cycle, I think a lot of the recent behavior with oil prices and commodities in general, if you go back to June 2022, the prices have down for about a year, if you use a commodities index like DBC, which I like to follow. It's down 15% over the past year. I think a lot of that has to do with expectations for recession or slowdown and the demand side of it.
So if you get through that and those trends pick up again, from there, I think the trends are higher for commodities just based on supply, demand, and all the different forces you want to call. I think inflation will still be a significant story of the next decade, personally. So and I think commodities goes along with that.
Dan Ferris: Yeah, nothing to add to that. I agree.
Corey McLaughlin: All right. You want me to take this next one here?
Dan Ferris: So what's next? You bet.
Corey McLaughlin: All right, next up is Anne T. who wrote in with a good one. "I remain confused about the resilience of the economy to date. For instance, restaurants in my city, Raleigh, North Carolina, are packed. It takes a month to get a reservation. Hotels are charging crazy prices. People are paying. At the same time as your editors continue to write credit-card debt is up substantially. Car-payment defaults are creeping up. People can't afford necessities and the stock market is uncertain.
Is this a result in the erosion of the middle class? Is this a case of a wider divergence between the haves and have nots? Have people lost their minds?" Generally, yes, I think. "I just am bewildered as the charts and economic reports do not match what I see. Is this the sign of a bubble that is about to burst or have I lost my mind?"
Well, and I don't think you've lost your mind because that was a pretty great question that you put together there, which is a lot better than a lot of people can put together. So no to your first part. But, yeah, this is what we've been talking about for months here about the resilience of the so-called economy in the face of higher interest rates. And, well, it's kind of what we've been talking about with the Federal Reserve raising rates but yet the economy holding up.
To me, it comes down to the jobs market, I think. We saw the layoffs in tech last year, which were a lot of higher salaried positions, companies that grew a bit too much during the pandemic and the work-at-home boom. But at the same time, you're seeing with the quote, "real economy," those places have been trying to get workers to keep up with demand, and which I think people forget about. And it's those jobs haven't gone away, yet.
And so I think the economy is still being fueled by that pandemic-era stuff, including the stimulus programs, mainly, that are just now finishing. The last big one, the student-loan repayment pause, is just now elapsing, and so we haven't gone back to a non-stimulative environment yet until probably right around now. And at the same time, the Fed's been raising rates and now we'll see what happens when post-stimuli environment, what happens with this higher rates, I think.
So I'll be keeping looking at kind of the employment data, spending, consumer spending, how that shapes out the rest of the year.
Dan Ferris: Anne, you have not lost your mind. I almost said that you did just for a joke, but I thought better of it at the last minute. No, this is something I see often from the smarter folks that I follow in Twitter. And we've had David Cervantes and Bob Elliott on the show and this is a question they deal with, as well. I mean, I know where they stand and they're pretty clear on it.
The economy is doing better, I think, than the average bear thinks, but I think the reason for that is that inflation is more pervasive and certainly gone on if you look at core PCE, personal consumption expenditures. That's what the Federal Reserve looks at. So if you look at that core PCE inflation and that's why the Fed is still hawkish. And I just think that it is bewildering to a lot of people.
I was really concerned March to April. I thought, "Uh-oh, this is it. We're on the verge of something more serious." And I warned my readers you better prepare for a pretty good drawdown here. But it didn't really materialize the way I thought it might at all. And I think that's the basic mistake that folks will make is to think that, man, we're on the verge of catastrophe. I don't think that's true.
I think we're on the verge of a really rough sideways market for several years because when valuations get that out of whack like they were in 2021 and the very beginning and I mean the first few weeks of 2022, stocks tend to perform poorly. If something yields 10 bucks for every $100, and then all of a sudden, that same 10 bucks costs $500, or $700, or $1,000, you're getting nothing in return, and eventually, there's a correction.
So that's why I continue to be bearish on stocks. It's not like I think, well, the economy's a disaster, and so therefore, the stock market has to fall apart. I think the economy's better off than the stock market.
So what you're seeing, all this activity that you're describing is confounding a lot of folks and I think it's just because things are better than they expect them to be. If they suddenly turn south, will I be surprised? Well, you should never be surprised about being surprised, especially not after something like COVID. That was like a wartime type event and the repercussions will last for years and they'll come at us in waves. So it's my same old mantra, prepare, don't predict. Great question, though.
Corey McLaughlin: I will just quickly add, she mentioned credit-card debt up substantially, too. I would keep watching the credit market, too, because of the higher interest rate environment. I don't think we haven't gotten to a credit crisis yet, which was briefly delayed by all the stimulus thrown in March of 2020, but one of those is coming.
Dan Ferris: Yeah, so I saw a little thing on CNBC this morning. Here's a little quote. "Through June 22nd, there were 324 bankruptcy filings not far behind the total of 374 in 2022, according to S&P Global Market. There were more than 230 bankruptcy filings through April of this year, the highest rate for that period since 2010." Yikes.
So there are problems and higher interest rates will create many problems in a leveraged system like we have. But overall, you're right, Anne. Things are better than they look and I think a lot of that has to do with inflation and stimulus still working their way through the system.
All right, let us move on. So now we have SC, who has a very specific question for me. He says, "Hi, Dan. Regarding your recent analysis of housing and homebuilders in The Ferris Report, No. 1, yes, supply is held down because 3% mortgages have value that sellers are reticent to give back," etc., etc." No. 2, yes, supply might also be held down because there might be less appetite to build spec homes at higher interest rates," etc.
Nos. 3 and 4 are where he really gets to it here. He says, "But I wonder if corporate funds holding residential homes may be under pressure to liquidate some inventory because they generally won't have FHA 30-year mortgages but will be financed with shorter-term loans. I don't know how much rents can rise to support higher interest rates in the case of a refinance. This liquidation may provide housing supply to the market. If this was discussed, I missed it.
And No. 4, the marginal price of homes is not the sale price but the monthly price of a mortgage. So even if the monthly mortgage price demand curve remains the same or goes up a bit and even if the supply of homes is reduced, the home sale prices can still go down 15 or 20%. I'm just wondering did you consider points three and four in your recent analysis of homebuilders. Thoughts?"
Yeah, so I would say that the corporate buyers of residential homes, this is a relative nonissue. I think the biggest one is Invitation Homes, has got 80,000 homes, and it's worth tens of billions or something and the whole housing market is worth trillions. And I got the numbers out this morning and it's roughly one-and-a-half tenths of a percent of the market, so that floods onto the market and it'll be gobbled up. We're talking about supply relative to demand.
So the demand is still there even with mortgages at 6%, 7%, which when the supply is that tight, it doesn't surprise me. So and I think you're going to have to flood it with a lot more than that. And Invitation is not going to sell every home that they own in a short period of time. I don't think that's going to happen.
And as a matter of fact, you imply the opposite of what I believe to be true. I think they have much better access to credit than people getting FHA 30-year mortgage, individuals. Invitation has a lot more options for financing than those individual 30-year mortgage buyers. So I don't necessarily see a problem there. And you said the marginal price of homes is the monthly mortgage, so even if the monthly mortgage price demand curve remains the same, even if supply of homes is reduced, home sale prices can still go down 15 or 20%. Actually, OK, 10, 15%, whatever.
What's that going to do? It's going to make them more affordable and the demand is still there relative to the supply. All right, let's just say that. So great question. Excellent question. Exactly the way to think about this, I believe, but that's my answer.
Corey McLaughlin: Yeah, I'll add that anecdotally on home building, the demand for new homes is strong. I mean, chronically underbuilt in America in terms of residential housing, new residential housing. If you go look for a starter home right now, your starting point might be, if you're younger and looking at a starter home, your starting point might be looking at a 100-year-old home, or a town home, or whatever new build you might be able to afford. So I understand a lot of the homebuilders focus on the higher-priced homes, but that doesn't change the supply-demand picture for everybody else.
Dan Ferris: Right, enough quickly enough.
Corey McLaughlin: Yeah, quickly enough. And if you can't afford a home, then you're renting, and we're seeing the impact of inflation on rents, and I don't know. The housing market to me hasn't changed a heck of a lot in the last decade other than the Fed lowering mortgage rates during COVID helping out people who already owned homes but making it harder for anybody else, discouraging other people now from getting in. Yeah, I'm with Dan. I'm not expecting home prices to go 20%, personally.
OK, before we get to the final question that I have, Dan, I think you have one.
Dan Ferris: Yes. Stansberry Alliance member Alan K. And Alan, this is pretty good stuff because it's very practical. It says, "Hi, Corey and Dan. How do the two of you do portfolio reviews to either raise cash or make room for a new idea? I often find myself fully invested probably due to too many ideas and stocks and having a process to only keep the best would really be good to have and use. I especially struggle across sectors like how do you even compare energy to home building, for example?
Thanks for all you do to educate and entertain us. I have listened to the Investor Hour since the beginning and never miss an episode. All the best, Alan K., Stansberry Alliance member."
All right, Alan. We like to take care of our Alliance members. This, of course, it's not an easy thing to answer because you're asking multiple questions in one. Really what you're asking is you either raise cash or make room for a new idea. What you're asking is when do you sell. That really is it because do I sell something just to raise cash, in other words, or what do I do to make room for a new idea.
So I just, personally, because of the way things are structured, I'm not allowed to recommend the exact stocks that I pick in my newsletter. I wind up reading other folks' newsletters and buying some of theirs. But I tend to ignore sell advice from anybody and hold things longer rather than shorter. And if something really does not work out at all over time, usually there's plenty of other stuff that does. And so holding longer I think is better than holding shorter and the biggest mistake people make is being too active.
It sounds like you might already know that and you're addressing the specific issue of raising cash, making room for new ideas. That's tough because if you have a portfolio of winners that you don't want to touch but you're out of cash and you want to do something, that's tough. Hopefully, you're getting dividends, and I'd just let that money land in the account. That's the first thing. Just let the dividend land in the account.
Now you may be saying, "But no, I'm automatically reinvesting dividends." Hey, that's fair, but that's just an idea. I'm not saying you have to do it. That's an idea for how you can let some cash build in your account if building cash is really important. It sounds like it is. And you could be even selective about which ones you're reinvesting and which ones you're letting the cash land in the account. That's one idea.
Another one is if you've given something five-plus years to run and it's disappointing you, take a look at it and ask yourself what you think the next five years look like. And if you have a huge winner that you've been holding for years, ask yourself do you think it's going to continue to be that great of a business, and if it's even going to be pretty good, then you may not want to let it go. Generally speaking, we let our winners run and we cut our losers short. And for a long-term investor, this might happen in years instead of months, or days, or something.
Look at the performance of the businesses is what I would say. If you've been holding things for years, which is what you're implying here, you're holding things for years and you've got plenty of good stocks, but you want some cash to raise. Take a look at the businesses and see what you really think about each one.
The other thing is you could just be very mechanical about this. And if you want to make room for a new idea, it sounds like you've got a bunch of stocks, a bunch more stocks than you expected to have. So if you want to raise 5% cash, then just sell 5% of everything, maybe. I don't think that's going to hurt you. If you've got that many good ideas that you don't want to let go but you want to add a new one, it sounds to me like you could sell 5% of everything, you got 5%, you could put it into another one. because it sounds like you're a pretty good investor, Alan.
So those are just some ideas. Pick and choose among them as you like, but really this is one of the most difficult things to do and it's a very good question. I hope it comes up often.
Corey McLaughlin: Right. This is one of the more difficult things to manage as a do-it-yourself investor and it's, frankly, it's something most people don't even get around to thinking about who are doing this, so portfolio allocation, and you're already way ahead of most people, so that's a good start. But then as far as how to actually make portfolio management decisions, I mean, I could tell you what a lot of experienced people that do this over time and you've probably heard it from various guests here, even, timeframe.
What's the particular timeframe for whatever investments you have? And then if that has run its course, or if it hasn't, if you haven't gone through there yet, look at those and see if there's places you could sell from there, or stocks that you've forgot about, or don't have the same return potential, and that sort of thing. That could be a good place to start.
And then, also, like Dan was kind of alluding to, if you can sell a little bit of each or do half is something I've heard before from if you're frozen in decision making, just do half of what you were thinking, meaning you could sell half of something. You could buy half of what you were originally thinking. I think I've done this before and I think emotionally you just feel better that you've made the decision and you're expressing what you think you want to pursue with an idea. But you're also leaving with some wiggle room to if you're wrong, things are great. If you're right, things are great. So that can be one thing.
And another is it sounds like you're trying to get to this point but to reiterate what Dan was saying was just always have some cash on hand for this reason, if there's really something that you want to put to work. If there's an opportunity that comes up, always have some cash. And right now, you could have cash growing at 5% in a one- or three-month T-Bill. So take advantage of the interest rates, and the low risk there, and let the cash grow in the meantime.
So I hope that helps a little bit, but yeah, time frame. Does your investment match the time horizon or do you even have a time horizon for these investments? Just generally speaking, I think it always helps me when I'm trying to make decisions on what to do.
Dan Ferris: All right. Sounds good. OK, so you have one final one that you want to get to. Let's do that.
Corey McLaughlin: All right, I got one more here from Jacqueline G. who asks, "I would like to see some more commentary as to how much value Stansberry's team feels the Fedspeak has. Is it all spitting into the wind or does it have any value simply because the people believe it has value?"
Dan Ferris: This is an interesting question, yeah.
Corey McLaughlin: I mean, listen, the Fed practically there's tangible value in what they do in terms of setting interest rates for banks and loans, which is essentially connects to everything in the economy in one way or another, some more directly than others. I always think of the Fed like in the middle of a tree and the tree rings around the Fed, proximity to the center. You got the banks closest. You got real estate, mortgages nearby. And then from outside, you got car loans and other type of loans. Then you got credit cards beyond that. And eventually, all of that is wrapped up in the cost of money which applies to businesses, how they operate, and again, loans that people have.
Dan Ferris: Yeah, but Corey, Jacqueline is very specifically addressing rhetoric here. She says, "I would like to see more commentary about how much value Stansberry's team feels the Fedspeak has."
Corey McLaughlin: Right. I was getting there. Sorry, that was a long-winded part. So I'm saying practically those are the things that the Fed can influence with interest rate-sensitive things with their interest rates. And then, yes, then there's the commentary, the Fedspeak, which, yeah, it is interesting. It's really about I think of the Fed, there's that saying, don't fight the Fed, because for a reason. They have an influence on the markets.
So I think of the Fedspeak as just another part of the market, really. It may be a big one, but I think of that as something you just need to consider when putting together, I think Enrique said this a couple of weeks ago, the mosaic of the economic picture or your investing outlook. I think it's a significant part of it, just what the cost of money is going to be moving ahead, and then in terms of the specific speeches and you're a Fed-hawkish analyzer, Dan, yeah, your personal analyzer, that sort of stuff.
I mean, that does have value in terms of plotting out the path forward for central-bank policy. It does. It kind of sets the backdrop for macroeconomic kind of discussion and decisions. A lot of times I don't think the Fed necessarily knows what's going to happen. They talk like they know what's going to happen and some people may actually believe them more than others. I don't know, but I think, in general, listening for the broad kind of message type easy, that sort of thing, just to give you a sense of what environment we're in.
Dan Ferris: So I would say that the Fed never knows what they're really doing and I think the best illustration that I found historically, and I know it's an extreme moment, so we don't get a lot of extreme moments, but just the shift in policy from Arthur Burns, William Miller, to Paul Volcker in the '70s. What are they like?
They're like people in a job interview who don't quite think they're qualified. They're always trying to impress you and they're always trying to pull out something that impresses you. And so they're trying very hard to suggest that they're in control and that they know what they're doing. They represent themselves as a group of very smart people with excellent tools. "We are like surgeons. We have precision instruments."
In truth, they are like a drunk sailor at a carnival playing whack-a-mole, and he can't even hit the board. I mean, he's hitting the ground and he's hitting himself in the leg. They really don't know. And that period in the '70s that I talked about, you could see the measured sort of approach that they tried to take and then you can see Paul Volcker just going crazy.
And I've mentioned this several times on the show, just going crazy, shoving rates up sometimes hundreds and hundreds of basis points up to 20%. Leaving it there for a little while... back down... oops, back up... oh, OK, back down... no, we're not done yet, back... And you can see the desperation and the fear. It's like somebody who they're in the dark. They're playing darts in the dark or something.
So the Fedspeak tries to do one thing. They try to say that they're in control but they're really not. They're as reactionary as the most novice trader going to cocktail parties, and listening to stock picks, and running home, and buying way too much, and buying options, and so forth.
So when you ask is it all spitting into the wind, I wouldn't describe it as spitting into the wind. It's propaganda. It's a sales pitch and what am I being sold and why is the question. And you're being sold a level of control they simply do not possess. And then you ask, "Or does it have value simply because people believe it has value."
I think there's a lot of that and you can see market action just kind of go a little bit haywire each time the Fed statement drops at 2 p.m. on the second day of the two-day meeting schedule there. And then sometimes in the days following, you'll see some bearish action when they behave more hawkishly maybe than folks expected.
Good question. Deep. Deep question, Jacqueline . Very good.
Corey McLaughlin: Yeah, I like the analogy, Dan, of the drunken sailor. If the Fed is a drunken sailor, they're also usually the last one to arrive at the party or the last one to leave because all of their data is old. When they're making these statements, when they're putting together these press releases, essentially, their data is backward looking. They're forecasting what they think might happen but those forecasts, if you look at them over time, are literally always wrong.
I think part of this is people want to believe something, somebody in some position of leadership in the economy and markets has some sort of knowledge, or they want to believe in something because then you can attach to that, and then you can make decisions off of that. So I do think there's something to the question of does it have value simply because people believe it has value. Yeah, I do think that there is that. That's why the Fed makes headlines and is out talking all the time because they want to communicate this message and because people listen to it.
So if CNBC or Fox Business didn't have any of these Fed people on TV, would people care as much? Probably not, but at least the kind of that mainstream audience, but I think the other serious investors and institutional investors certainly would care about the cost of money and those various things. So, yeah, there's some practical parts of it and then there's some other parts of the Fed that are overblown and their influence is overemphasized by a lot of people but is still emphasized. You have to take that into account when thinking about the markets.
Many mainstream analysts are predicting that stocks will recover soon, but I say we'll instead witness a cash frenzy unlike we've experienced in 21 years before stocks recover. I'm urging Americans not to buy a single stock until they see it.
I predicted the Lehman Brothers crash in 2008, and I called the top of the Nasdaq in 2021. But this, this is the No. 1 most important thing to pay attention to for 2023. I'm not talking about another market crash or politics or inflation or any of these other things.
As all this unfolds, the financial consequences of what I'm talking about could last for several decades if you don't understand what's happening. There will be winners and losers, and now is the time to decide which one you'll be.
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All right. I'm glad we do this every now and then. We used to do it every single show and I was always afraid it was a bit too much, but I feel like we need to do it every now and then. And it turns out that even though folks know we're not doing it every show, they're still sending in great questions and they know we'll get to them eventually, which I love. I love that. We have a really great audience. And obviously, these questions were just I think they were first class, every single one.
So thank you, everyone, for that, really. Keep doing it. Keep writing in, [email protected], and let us know what's on your mind. Final thoughts, Corey, anything?
Corey McLaughlin: Seconded to all of those comments. Yeah, I love hearing from readers. Sorry, listeners. I'm also a writer, so that's stuck in my brain, but yeah, I love hearing from ya, taking questions, and telling us what's on your mind. So, yes, please keep them coming. Even if we haven't been answering them every episode, we will eventually, which is kind of what we've been doing here.
Dan Ferris: Right. All right, well, that's another episode of the Stansberry Investor Hour. We hope that you enjoyed it as much as we did. We do provide a transcript for every episode. Just go to InvestorHour.com. Click on the episode you want. Scroll all the way down, click on the word "transcript," and enjoy.
If you liked this episode and know anybody else who might like it, tell them to check it out on their podcast app or at InvestorHour.com.
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For my co-host, Corey McLaughlin, till next week, I'm Dan Ferris. Thanks for listening.
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