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Tune in each Thursday on iTunes for the latest episode of the Stansberry Investor Hour. Sign up for the free show archive at investorhour.com. Here are the hosts of your show, Buck
Buck Sexton: Hey everybody. Welcome to Stansberry Investor Hour. I am nationally syndicated radio host Buck Sexton. And with us, of course, founder of Stansberry Research, the man himself, Mr. Porter Stansberry.
Porter Stansberry: I don't understand this, Buck. Why am I the man? [Laughs] Reminds me of that TV ad back in the original Internet bubble where the little red-headed geek comes into his boss's office and said, "Let's light this candle," meaning the Ameritrade account. The get on his laptop and he starts typing away, and they're gonna trade stocks. And the little red-headed kid goes, "Let's stick it to the man." And the boss looks at him strangely, and he goes, "Oh, yeah. I forgot. You are the man." I'm not the man.
Buck Sexton: They're different iterations of the man, though. There's like, "Who's the man?" And someone's like, "He's the man." That means that you're running the show. Then there's also, the man is in the government or the police.
Porter Stansberry: I'm a radical, libertarian, financial publisher, doing my very best to give the average guy at home a fighting chance in the financial markets. How could I be the man?
Buck Sexton: No, but the man can be a cool thing. See, this is … you gotta talk to the kids about this one.
Porter Stansberry: And you're not the man, you're the young buck who's coming up with the alternative media. What I mean when I say alternative, I mean the technologically alternative media. You're the guy who's the master of the podcast. Pretty soon you're gonna have your own CNN channel, but it'll be distributed. It'll be like bitcoin CNN. [Laughs]
Buck Sexton: I love this idea. We gotta talk more about it. I'm in. I'm in. Sign me up. Can I just tell you, by the way, that I had a few days over the weekend in Los Angeles, a place where I have not spent much time. I know you were telling me before we came on air, you have a fondness for Miami. Los Angeles, I understand why people show up there, and they're like, "I'm gonna move here just for a little while," and then they never leave.
Porter Stansberry: Buck, it's where you belong. I could have told you that. I've spent a lot of time in LA, too, and it is a great town, especially if you're a car guy, which I am. In an alternate life, I had a house in the mountains in LA, because that's where I belong. Unfortunately, all my family is east coasters, and I could never make it work.
Buck Sexton: Yeah. I happened to be staying at a little boutique hotel, which was very European in feel and clientele. And we were up on the roof where they had a pool. And all of a sudden, there was a lot of ladies decided that topless was the maneuver. And I just … I was there with my girlfriend, so of course, I was averting my eyes the whole time. But LA knows how to party, Porter. That's all I'm trying to say. LA knows how to party.
Porter Stansberry: Oh yeah, Buck. So does Miami, as well. I lived in a building that had … a pool deck on the roof that was clothing optional. And I would go there and swim laps every day at lunch for a number of reasons. Mostly for my health, though. It was for my health.
Buck Sexton: Yeah. It's good for the heart. This week on the show we've got Danielle DiMartino Booth, author of Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America. Danielle is also the founder of The Money Strong newsletter, and she reaches over 100,000 readers each week with her articles on Seeking Alpha, NASDAQ, and LinkedIn. You may have seen her lately on CNBC. Anytime the Fed makes an announcement, she's become one of the go-to personalities for interpreting Fed-speak.
Porter Stansberry: Oh.
Buck Sexton: And a big thank you, again, to all of our listeners out there who have been leaving us comments and reviews on our iTunes page. Please keep it up, folks. We appreciate your feedback and help. The show is moving up the ranks, getting out there to more and more people all the time. If you haven't already, please subscribe to the podcast on iTunes or Google Play, or wherever you find the podcast, and leave us that review or comment when you get a second. And remember, you can get transcripts from the show, additional information about our guests, and be notified each Thursday when we publish a new episode by going to www.investorhour.com and entering your e-mail. Sign up and we'll give you a free account on the Stansberry Research website. So you can access everything you need to benefit from the Stansberry Investor Hour. And with that …
Porter Stansberry: Nice job, Buck. That's a lot.
Buck Sexton: Why thank you.
Porter Stansberry: Nice job.
Buck Sexton: One of the greatest jobs in the world has got to be to making money doing voice-over work. When I first got into radio I figured that this would be a revenue stream that one would have. No. It's like playing the lottery. Unless you are a Hollywood celebrity with a recognizable voice … everybody with an iPhone these days … now they actually have programs where you can do your audition directly into the phone. So voice-over work is … it's not what it used to be, Porter. It's not what it used to be.
Porter Stansberry: Oh. I'm so sorry about that. My favorite voice-over voice lately is Wags from the TV show Billionaire.
Buck Sexton: I've been hearing him, yeah.
Porter Stansberry: Wags is the best. I also think that Wags is dying for a spinoff, because we need the prequel to Wags. How did Wags end up at Axe Capital? 'Cause he's older. Wags is in his 50s, and the billionaire hedge fund guy is in his, looks like his mid to late 40s. So how did Wags become the major domo at Axe Capital, and what was his earlier career on Wall Street? 'Cause we've seen his battle with substance abuse and some other fun things. And he's not your average looking Wall Streeter. So I'd love it if we could go and have a prequel where Wags is in the … what is it? … the training program at Morgan Stanley or something, back when he was 23, and get the whole back story on Wags.
Buck Sexton: I think it's a great idea for a prequel. It certainly will work out better, in my opinion, than … [For example] I'm a big Breaking Bad fan. But I have not found Better Call Saul to be up to par. So, I don't know if you've seen that prequel and spinoff, but it was not what it should have been. So, I like the Wags idea, though. We should take that. Take that to HBO, Porter.
Can I ask you a financial question?
Porter Stansberry: Of course, sure.
Buck Sexton: The U.S. government, now over $20 trillion in debt. We are over 20T. Do people care? I feel like people should care, but not a lot of talk about this right now.
Porter Stansberry: Okay, I have two answers to this. I've got the responsible member of the media community answer. "Of course you should care. It's our duty to pay our government's debts. These debts are gonna be born by us, the upper class and the upper middle class, and we should organize and convince the government to stop doing this. They're going to bankrupt us. They're going to destroy our currency. Blah, blah, blah, blah, blah." Here's the simple reality, Buck. As long as taxes are as progressive as they are, as long as one percent of the country is paying for 30 percent of the government or more, you are never going to stop this, because Congress knows that somebody else is going to have to pay the bill. There is no incentive for them to stop.
Now look. It's really simple. If you wanted to stop this in the bud, you could do it immediately, overnight, with one changes, which is very simple. You tell Congress, "If you don't pass a balanced budget, or if there is a deficit in any year, the amount of money that we're short comes out of your pockets and out of your wealth. So any property you own, anywhere in the world, would be confiscated if there is a deficit in any year." You do that to the 435 people in Congress, and it's their responsibility to balance the budget. We would never have another deficit. And, by the way, think about how immoral it is to run up debts that you know that your children will have to pay. Or, forget that. Just how immoral is it that you run up debts that someone else has to pay? Buck, have you got a credit card anywhere that somebody else has to pay?
Buck Sexton: No. Wish I did, though. That'd be great.
Porter Stansberry: And if you did, you would never stop using.
Buck Sexton: Correct.
Porter Stansberry: So, no matter what I say, no matter what anyone says about how evil the deficit is, it's never going to change. And that brings me to what the number two answer, which is what I want to say, which is, "Go for it, motherfuckers. Act as irresponsible as you can, because the sooner that blows up, the better it is for anyone in this country who actually works and saves. Now unfortunately, along the way, a lot of people who don't understand economics are gonna get hurt. But that's okay. I'm doing everything I can to prepare them. If you are smart enough to own a little bit of gold, if you're smart enough to own a little bit of property, or even better, if you're smart enough to own companies that have a lot of economic good will and can successfully raise prices, there's nothing better that could happen to you, because those deficits and those debts are ultimately going to impoverish the middle class, and they're going to enrich anyone who was smart enough to own the right kind of assets, aka us.
Buck Sexton: I was reading Niall Ferguson, this professor of History at Harvard.
Porter Stansberry: Oh, indeed.
Buck Sexton: I took a little break from the party on the rooftop in LA for a while in order to dive into Niall Ferguson's The Ascent of Money. There's just one story after another, France, the U.K., couple of hundred years ago, governments run up big debts, they can't pay, bad things happen. Every time. It's never like they run up a huge debt and then everyone lives happily ever after. Just from a historical perspective … I love history. I'm not a finance guy. But if you know history, you know this doesn't end well.
Porter Stansberry: If you want to have some real fun, I would pick up Murry Rothbard's Economic History of the United States, and see chapter one. The Economic History of the United States begins with the colonists in Boston around 1700, figuring out that instead of saving for the winter and working hard, it'd be a lot easier to just organize a militia and go steal it from Toronto, or Quebec. I can't remember which city they raided. I might have my geography a little mixed up. Quebec City, Montreal, I can't remember. So they organized a raiding party, and they went up there to rob the French. And because, you recall, there was Napoleon and there was a war between the British and the French anyway. But the colonists were just using it as an exercise for treasure, to plunder.
So they go up there and the bad news is, they're defeated. So now, you've got a returning army that's been defeated and that's hungry, and there's nothing in the larder, there's nothing that's been saved to provide for them. So the government back in Boston doesn't know what the hell it's gonna do. So it says, "You know what we're gonna do? We're gonna print some money. And we're gonna pay the returning soldiers in this new script. And we're gonna make it law that everyone in this community has to accept this script at face value. But we solemnly promise that we will never, ever, ever do this again." [Laughs] What do you think happens next, Buck? You got three guesses.
Buck Sexton: I'm gonna go with, at some point they do it again.
Porter Stansberry: Of course. About five years later they go, "You know what? That had such a powerful economic impact in our community… Everyone boomed. There was a growth in aggregate demand, and there was more employment, and it seemed to work out fine." So they printed $5000 the first time. The next time around they printed $20,000. About 15 years later, the king of England forbade paper currencies in the colonies, because there was such a massive hyper inflation, that in part fueled the South Sea Bubble, and the Mississippi, both. There was an enormous bubble around the world because of all the paper currencies that were being printed in the early 1700s. And America led the way, starting with the Puritans of Boston.
My point is, the track record of paper money is unblemished by success. It has never been used anywhere successfully. And the way it fails is always and everywhere the same. The government suddenly printing huge amounts of money, aka 2009. Since then we've printed about $4 trillion, and promised to never do it again. "Oh, we're going to restrict the balance sheet of the Fed. Everything's gonna be fine. You can trust these dollars." But instead, the only thing that ever happens is more and more money is printed. The middle class is wiped out. The savings of millions of people are destroyed. And the elite, who were smart enough to get rid of the paper and get into something that's permanent … aka businesses, real estate, gold … they do very well.
So, I go back to my philosophical mentor, Ian Rand. And when asked about the poor, she was very clear. She said, "Don't be one of them."
Buck Sexton: I knew a very successful entrepreneur. He once told me … and he was borrowing for somebody else. And he said, "Look, man. I've been rich and I've been poor. Rich is better." So, I'm trying to keep that in mind. I've never tried rich, yet, but I'm working on it, Porter. That's why I'm here on the show. Gotta learn some stuff about finance.
Porter Stansberry: Rich doesn't happen overnight. It's a lot of important choices. And one of the biggest choices is where you keep your savings. I don't care how much income you have, if you don't learn to save, and if you can't learn to save well, you're never going to be rich. Think about how many doctors and lawyers you know who are in debt up to their eyeballs and cannot retire, 'cause they have no way of funding their retirement.
Buck Sexton: Yeah. I remember, there's a radiologist passing along to me the story of making more money in New York, year after year. Of course, New York is a hyper expensive place to live. That's where I live, so I'm familiar with how it goes here. I just spend more every year. I make more every year, I spend more every year. At the end … if he loses his job he's in the same, at least, immediate financial position as somebody with a much lower income because he spends everything he makes.
Porter Stansberry: And I don't care what level of income you're at, there are always ways of saving money. And I tell my employees this all the time. I didn't have cable television until I got married. Now you don't need cable television at all, but take the modern equivalent of it, a big cell phone bill. I didn't have any of those expenses, because I was saving every penny, because I was hyper aware of the money that I saved in my 20s would be worth 50 times the money that I saved in my 40s. And I determined when I was about 12 years old that I really wanted to be rich. And I knew that 'cause I had a father who was a middle-class manager at Coca Cola company. Had a great job. We had a nice, middle-class lifestyle. And I had an uncle who needed a golf cart to get to his pool. I decided right away, I wanted to be more like that.
Buck Sexton: You like the uncle.
Porter Stansberry: Everybody needs a rich uncle to show you how the other half lives. And I thought, "You know, nothing wrong with the way my dad lives." This is what was comfortable for him. He could have made more money if he wanted to, but he chose not to. He liked that lifestyle. Fine by me. I'm going
Buck Sexton: Do you think it's fair to say that financial knowledge, especially for those who are trying to save and get started on their own, in some ways it feels like it's more necessary, and therefore also more valuable than ever before, because you used to be able to put money … I hear these stories. I never have really lived in a period where this is the case. You used to be able to get a decent return just on a savings account. That's just not the case anymore. In fact, I think over the long term, you …
Porter Stansberry: I think that's slightly exaggerated. You could … Real returns on savings accounts in America have never been more than two or three percent. What was higher then also was the rate of inflation. So, even though you're getting eight percent on your checking account, you had six percent inflation, or you had five percent inflation. So the real return wasn't all that good. It was certainly better than it is now, make no mistake. But the real path to wealth has always been, in America, through owning your own business, and/or owning parts of other people's businesses. Always has been. There are very few people who got rich by trading in and out of gold. There are very few people who got rich by savings accounts. But there are lots of people who got rich through real estate, having a business of their own, a rental income business.
There are lots of people who got rich through stocks. In fact, the guy's name has been forgotten to history, but his last name was Davis, and I'm forgetting his first name. Shelby. Yeah. Shelby Davis, he started buying insurance stocks in 1948, no, in 1938, with $50,000 that he borrowed from his wife's family. He bought 12 of them. He held on to those stocks until he died, and he died a billionaire. He's the only guy I know that actually became a billionaire solely through common stocks with no controlling interest. So Buffett, of course, is a billionaire. But he's always had controlling interest. This guy, Shelby Davis, just bought insurance stocks. He never sold them, and he became a billionaire. So, there are ways of becoming very, very wealthy by investing in your own business, or by investing in parts … meaning stocks … of other people's businesses. And it does not require huge sums of capital. Shelby Davis became a billionaire from a $50,000 investment.
There is no one in America who cannot save $50,000 by the time they're 25 if they just try to. No one. It can be done. I know. I've done it. And it's not hard. There's nothing special about me.
Buck Sexton: Well, I don't know about that. I don't know about that, Porter.
Porter Stansberry: I had plenty of fun. My rule … it was very funny to see what you're willing to disclose about this, 'cause living in New York, I'm sure is very difficult. But I have always saved at least half of my after tax income. Always. So when I was making $31,000 as an equity analyst in my first professional job, I saved half of my after tax income, which was about 10 grand. And now I, thankfully, I make considerably more, and I still save about half of my after tax income. Now, of course, it's a little bit more than half. And I'm defining saved broadly.
So, buying a car is not saving money. That's a depreciating asset. But buying property is savings. That's an appreciating asset. Buying other companies is an appreciating asset, usually, hopefully, keep your fingers crossed, four times out of five. My point is, it's not … I have never denied myself. I've always had plenty of fun. But I just … anything that … anything that I didn't think was worth the money I wouldn't spend it on. I would save it and invest it, and know that later it was gonna be worth a lot more, which it has been.
Buck Sexton: I want to talk a little bit about the Charlie Rose, Steve Bannon showdown over the weekend? Rarely, would I find 60 Minutes so compelling, but there was some interesting stuff. I loved it that Bannon had never done a TV interview, and his first shot out of the gate is 60 Minutes. And I don't know about you, but I find it very difficult to be on camera. It's not like talking to a person, at all. And you have to have some training and practice in order to appear normal on TV, 'cause it's such an awkward and alien experience the first time you try it. And I thought it was really… oh, it's a skill. People don't understand that it's a skill. It is something you have to do and learn. And if you don't believe it, just pay attention the next time somebody makes a first time… Now Bannon's a guy who's been in media for years and years. He's running Breitbart, and his whole, "I've never done a TV interview," he was hosting a radio show at Sirius for quite a while. So he's not a novice to media. You put somebody that you find an interesting, compelling person on TV for the first time who just doesn't really understand the … I know it sounds a little bit hokey … but the art of what is going on around him or her, and they will look like a fish out of water. That's just what happens. It actually takes some getting used to, because it is not natural.
Being yourself on TV actually doesn't work. In fact, most people that go on TV and try to just be themselves are really subdued and boring, 'cause that's how it comes across. This is why think tank people, there are all these brilliant think tank people who, name a subject, and I could go find you somebody in DC who this is all they do. They look at it all day. Why aren't they on TV all the time talking about it? Because they talk about their research project like this, and they don't move their faces, and they look … and that's, people change the channel.
Porter Stansberry: We've had a few of them on the podcast, Buck.
Buck Sexton: That's just the world we live in. I plea the fifth. So, tell me a bit about what you think when Bannon went to… There
Porter Stansberry: Well, hang on. Let me cut you off. Instead of talking about what he said, why don't we listen to what he said?
Buck Sexton: Yeah.
Porter Stansberry: But before we do… we have a couple clips… before we do that, I just want to give you my brief back story about my first TV interview.
Buck Sexton: Oh, my.
Porter Stansberry: Yeah. 'Cause I had no idea that there was anything difficult about being on TV… I learned this the hard way, that's how I know… that Bannon did a remarkably good job for his first TV interview. And I don't care if he's in the media or not. Someone sticks a bright light and a big camera in your face, it's very shocking and triggers a lot of anxiety, and it becomes very hard to stay on your game. So, Access Hollywood, believe it or not, one day came to my office. And they said, "We've got seven million viewers, and we think your 'End of America' ad is very interesting, and we want to talk with you about the finance and the economics of what you're warning people about." And this was right before S&P downgraded the US sovereign debt from AAA to AA, which I think was a pretty big deal, and which I predicted would occur.
And turns out what they were trying to do was some kind of a gotcha piece, because they were convinced, basically, that I was a crook. So they were hoping to catch me on film saying something that they could edit out or clip together and make me look bad. And so we go through this interview, and every time this … The woman they had interview me is a former Playboy model. And I did a little homework on my own, so I had researched her and knew what she was about. Meanwhile, I had my staff set up our cameras all around theirs, so that we would have a completely unedited version of the interview.
Buck Sexton: Very smart.
Porter Stansberry: So we're recording them recording us. And we're recording the fact that every time this girl has to ask a question she's got to go back to her producer to get the question and bring it to me and sit down and start taping again. So she's basically like a puppet for this producer guy, which is not unusual, but looks really funny, if you don't know that's what's really happening.
So they ask me a bunch of questions, and I answer sincerely and honestly, and I don't find any of it embarrassing. They ask me about the SEC lawsuit. I answer honestly and I don't find any of it troubling. I don't get defensive. So, they can't get the reaction they want out of me. So she starts calling me dude. And she keeps telling me that I need to own what I've done. I need to own it. And I look at her and I say, "I have no idea why you're calling me dude. I think that's very rude and condescending. And, as far as owning it goes, I publish everything under my own name. My name is
Buck Sexton: Porter's blaming _____ [0:24:25] to the nth degree. He just… did you catch that, everybody? He
Porter Stansberry: And shockingly, that interview never aired anywhere.
Buck Sexton: I believe it. This is one of the things about taped interviews that… I try to tell this to people as well, especially friends of mine who are experts, former government people who come out, who want to do a little TV here or there. The moment that you are on a politically sensitive issue, and also the moment that it's taped, you gotta watch out for the taped stuff more than the live stuff, 'cause it's like you're going into somebody else's house when you do a TV interview. And the producers, they've been sitting around with a team of people thinking all day about how to make that host look as good as possible, how to make the point look as reasonable or as compelling as possible, and, in many cases, that means making whoever you are, if you're a conservative, a libertarian, try to make you look like a doofus.
And when you go into a situation where it's taped, then you deal with not only the possibility of the various ambush tactics … and I dealt with this over at CNN for two years on air … but also, if you take the guy or gal to school, they just won't air it, which happened to me. I had a guy who knew nothing about counter terrorism try to get on my case about some of the language I used to describe a recent attack, and he just got annihilated because the information disadvantage he had on the issue was so apparent that he turned into a stuttering fool. That interview … he's a host. He has his own show … that interview never aired. Never saw daylight.
So whenever you do a taped interview, you're up against it. People think, "Oh, it's great, because it's not live. I won't stumble and have problems." Oh, no. When it's taped, they'll edit, they'll cut, and sometimes they'll just bag the whole thing, if you come out looking better than they want you to. So this is just the reality of doing television, no matter what you're talking about.
Porter Stansberry: I don't know that any of our listeners will ever have to deal with a TV interview. But if they do, my advice is make sure you understand who your host is, so you're ready to fire back at them. And, of course, make sure you keep a complete recording of it, which is, I guess, the basics in strategy. But listen, with the Bannon interview, you're gonna see there's something that comes up between him and Charlie Rose. And it's the same thing any time I'm interviewed by a mainstream media figure. And I think it's evidence of the gigantic divide in our country.
I can't tell you how many times the elite liberal media point to my background as a self made, hardworking person as something I should be embarrassed or ashamed about. If you go read the New York Times article about my SEC lawsuit, they bring up the pizza delivery thing, too. In the New York Times. This is … in a story about a stock researcher who's being sued in federal court for securities loss. The issues at stake were first amendment vs. the SCCE. They're big, important issues. What I did to pay for college 20 years earlier is completely irrelevant. But they find a way to bring it up. So did this interviewer for Access Hollywood, and so does anyone I talk to from that world, from that rarefied, New York, DC, ivory tower world. The idea that self-made or blue collar working jobs in America are somehow a stain of dishonor. It makes no sense to me. But the exact same thing happened in the Charlie Rose interview. Let's see if we pick up on that in these clips.
[Silence from 0:27:54 to 0:28:06]
Buck, you're wearing the Antifa outfit, today, I see, the black shirt.
Buck Sexton: I was in LA. I'm a hipster, now.
Porter Stansberry: So, do you think Bannon's right? Do you think it'll be populism in 2020?
Buck Sexton: I think that if Democrats are gonna learn the lesson of the last election, it will be. There is a growing chorus of people that seem to recognize that Hillary Clinton was a deeply flawed candidate, and this model of a supposed centrist technocrat leading the Democrat Party, while beneath the surface you've got all of this hard line, progressive ideology and all the culture war stuff that's going on, that's not a recipe for success. Obama was… whether you think he's the greatest or the worst… he was a once in a generation politician in a bunch of ways. Hillary Clinton is not. And Bernie Sanders was really where the heart and soul of the modern Democratic Party was in the last election.
So if you want to be able to compete against Trump, I think that that's where this is gonna go, and that's when you're gonna see a lot of talk about single payer. _____ [0:29:18] gonna be huge. People are gonna say more and more, "Look. Republicans talked about repealing ObamaCare for years. They wouldn't do it. They didn't do it. Now they're talking about fixing it, or ObamaCare lite. Why not just go with single payer?" That's … Also, we talked about student … or if you talk about student loans, student debt forgiveness is gonna be a huge issue. All these things are … it's just Santa Claus, Porter. Getting free stuff is popular. And Bernie Sanders wasn't the best messenger for this, but they might find somebody who's an even better one.
Porter Stansberry: Think about Zuckerberg, the Facebook guy. I'm not saying he's gonna run for President. He'd be crazy. But maybe he will. I don't know. But his platform is single payer, free college, and universal income. That's the ultimate in the progressive goal. You solve the wealth disparity by taking the wealth away from people and giving it to the masses. The Robin Hood plan.
Buck Sexton: Yeah. I think that would be effective.
Porter Stansberry: And against that, I think you could even see Trump reelected, 'cause I don't think most of America thinks that's a good idea.
Buck Sexton: There was a lot of polling from the last election that shows people that what Democrats seem to care about, or rather what the Democrats are supposed to care about, issues like climate change, for example, the American people overall, doesn't really move the needle. They care about economic issues. Bannon in this interview was saying, "Economic nationalism, whether it's true or not, whether a trade war with China is a good idea or not, you _____ [0:30:57] on all these different issues, you tell people that I am gonna do, as your President, or as the leader of your political party, everything in my power to expand our manufacturing base, protect American jobs, and raise real incomes in this country, you go to the top of the heap." And immigration, as an issue, is largely tied into that. That's what Democrats don't seem to understand. There are a lot of people who feel like competition from abroad by the means of immigration, as well as a whole bunch of other things, are the reasons that we have some of the problems we do economically. Whether it's true or not is not necessarily, unfortunately, it doesn't really matter. It's the perception.
Porter Stansberry: I've got bad news for people. There isn't an economist in the world who would tell you that immigration is bad for the economy, 'cause it's not. And there is no way of proving it to be so. So I know that Trump gets a lot of political backing and excitement by saying we're gonna stop people from coming to this country and taking your jobs. The reality is, the people that are coming to our country are not taking jobs from anyone else. They're building the size of the economy, they're increasing aggregate demand, they are contributing far more than they're subtracting. And if we're gonna do anything to solve the Social Security funding crisis, we need lots and lots more of them. So, I'm not talking about illegal immigration, I'm talking about the general prejudice that exists on the right side
Let's go to a clip where Bannon discusses Hillary Clinton.
[Silence from 0:33:05 to 0:33:16]
Buck Sexton: I gotta say I'm with him on this. I think she's one of the most overrated … I don't know what you could … public servants, public intellectuals. It just … We are told all the time that Hillary is brilliant. I've never heard her say anything brilliant, and I've never been aware of her doing anything that is brilliant. In fact, I've seen a lot of the … This is somebody who claimed, when she was Secretary of State, she couldn't tell what classified information was. That was the defense. You're pretty dumb if you can't tell what classified information is and you're Secretary of State. I could go on all day. But Bannon's at least willing to say it.
Porter Stansberry: I think there's a lot of evidence that Hillary Clinton is one of the dumbest people in the world. Think of it this way. She's still married to Bill Clinton. What more do you need to know? Listen, I would love …
Buck Sexton: What do you mean? That's a brilliant move.
Porter Stansberry: I would love to sit down and have a beer with Bill Clinton. I think he's a very interesting figure. But if I was his spouse, no way. Kick that guy out of the house 25, 35, 40 years ago.
Buck Sexton: [Attempt at Bill Clinton voice] "Porter, I would love to have a beer with you, too. Maybe we could get some ladies, and we go hang out with Buck up on that roof in Los Angeles with all those other ladies. Be great."
Porter Stansberry: That's not half bad. But my point is …
Buck Sexton: Thank you. I tried. It's not quite Ariana, but it's not bad. And then, how do you lose the presidential election to Donald Trump? You've got him saying all that crazy stuff and you still can't win. She's just a lousy politician, if nothing else. And I think America… especially American women, look at the vote… looked at her and said, "This woman doesn't represent me or my values. I'm not gonna vote for her."
I think that's true. She bought a house next
Porter Stansberry: That was very thoughtful of her.
Buck Sexton: I guess, yeah. Well, I'm sure they would charge. If Secret Service stayed there they probably would charge the government back for it. That's what these guys usually do. But yeah. That's how it goes.
Porter Stansberry: Well,
Buck Sexton: We'll see. Chelsea Clinton, I'm telling you, she is even more charisma-challenged than her mother, but they're gonna do something… they're gonna prop her up and, senator from New York. Just give it some time. They'll find some way to make this…
Porter Stansberry: What advice do you think Bill is giving to Chelsea right now?
Buck Sexton: I have absolutely … Right now I think it's probably, "Keep your head down." That would be the smart thing to do.
Porter Stansberry: What do you think Bill might be telling her?
Buck Sexton: [Bill Clinton voice] "Your mom is, she's out there and she's trying to sell some books and, I mean, heck. She got out to Wisconsin for the first time. Finally realized it's a state. So that's good news. She's drinking Chardonnay, taking long walks in the woods. I mean, what are we gonna do? I don't know."
Porter Stansberry: I would encourage everybody to watch the whole Bannon interview. I thought it was really very interesting and revealing. And I think that Bannon is a long way from being out of the fight. I think he's gonna keep bringing it.
Buck Sexton: Can I make a request for the next time, by the way, on the air here, which is that I would love to hear your take, and maybe even this is worth getting somebody in on as well who could bring some additional perspective. What does a trade war with China really look like? First of all, are we in the middle of a trade war with China and we just don't know it, and what would a trade war with China look like. We don't have time for this today, but could we hit that maybe another time? Can we put that out there? A little teaser?
Porter Stansberry: Absolutely. Sure. We can take that on.
Buck Sexton: I would love to hit that subject in the future. 'Cause Bannon says it's on. That's what we should do. We should just go to the mat with China on trade.
Porter Stansberry: Well, I think that would be a huge mistake, but we'll see what happens.
Buck Sexton: All right, joining us now on the Stansberry Investor Hour, we have Danielle DiMartino Booth. She is a former Federal Reserve analyst and author of Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America, an exposé of how the Fed has abandoned its responsibility to the American people. Her book is a call for change in how the Fed is run, and anti-Keynesian, criticizes the Fed's bias towards Wall Street, and the ways its policies have made housing unaffordable, stagnated wages, ballooned student debt, and failed to serve the American taxpayer. As a former advisor to the Dallas Fed president, Danielle saw firsthand how Fed leadership ignored the signs of trouble and pursued policies that fueled the looming disaster of 2008. She's also a full-time columnist for Bloomberg View, and frequently featured on CNBC, Bloomberg, Fox Business News, and many other major media outlets. Danielle DiMartino Booth, great to have you.
D DiMartino Booth: Great to be here. That was fantastic. That was a great introduction. Thank you.
Buck Sexton: I do what I can.
Porter Stansberry: Buck is a pro. Danielle, Porter Stansberry here. I'd like to start out this interview with a question I wonder if you've ever been asked before. My staff has some questions about your book, and I'll be happy to get to those. But I have a personal question for you which is, do you believe that capitalism, free market, unfettered capitalism is a moral system?
D DiMartino Booth: Is a moral system? Yeah, I actually think it's the most moral system that is out
Porter Stansberry: That's a very good answer. I share your sentiments. The follow-up question to that was, do you believe that what the Fed does is moral?
D DiMartino Booth: I do not. There's a lot of happy news on the wires that median incomes have finally surpassed their 1999 levels. And that's all good and well, except for the fact that Fed policy has led to record levels of wealth inequality. And to add insult to injury, for your average working American, it's fine that median incomes have finally surpassed prior levels, but the cost of housing has galloped way past that, negating the benefits of income gains, because it's a third of your income. And again, these are … housing is something that was terribly distorted by the Federal Reserve for two entire cycles. Now we have the cost to rent and to buy higher than it's ever been. No, I don't … I consider the central bank potentially to initially have been well-intentioned, but no longer. No, they're absolutely corrupt.
Buck Sexton: Regulatory capture is something that occurs across our society, in pretty much every government around the world. The primary beneficiaries of the Federal Reserve are whom? Who's captured that institution to their own advantage in our country?
D DiMartino Booth: Well, I would have to say that Wall Street has captured a lot of the
Porter Stansberry: Danielle, you're right on point. You're the only podcast guest I've ever had that was able to deliver meaningful answers quickly. We could get a lot done here.
D DiMartino Booth: Well, let's go. Let's do this. Let's …
Porter Stansberry: I'm on to that next. One last question about debts. One of the things that my mentor, Bill Bonner, talks about … I don't know if you know Bill. He's an independent economist who writes something called … for years it was called the Daily Reckoning, and now it's called the Bill Bonner's Daily Diary. But he's noted the growth in debt per capita, and of course even more importantly, total debt to GDP, meaning public, private debts all burdening our economy. And Stockman, David Stockman's books. I don't know if you're familiar with them. He's really written a lot about this idea, as well. But the question I have for you is, what role does the Fed play in allowing the total debt of our country, public and private to GDP now in excess of 400 percent. What role has the Fed played in allowing the banking system to expand to unprecedented size?
D DiMartino Booth: Well, in the current era, there's a lot of the right hand not knowing what the left hand is doing. We have an overabundance of regulators in this country. I'll give you one example from the book. On the day that the OCC was shutting down IndyMac during the height of the sub-prime crisis, Janet Yellen, San Francisco Fed, which she ran at the time, was attempting to extend it a line of credit. So there's a lot of confusion among our regulators. There's a lot of misunderstanding of the conventional vs. the shadow banking system.
And then you go back to what we were talking about earlier, and that is artificially low interest rates. We now have record levels of investment-grade corporate debt. We obviously have just surpassed $20 trillion. That milestone. But it's not a happy milestone in terms of U.S. government debt. And we have record levels of consumer credit outside of the mortgage arena. But in the current rendition, since the great financial crisis broke, much of it is in what I call unsecured debt. We're talking about automobiles that lose a huge amount of their value the minute they're driven off the lot, and a used-car price environment that is declining because too many people have bought more cars than they can afford, and student loans. Again, unsecured debt, as opposed to actually having something you might be able to liquidate and salvage some of the value, which is what happened in the aftermath of the subprime mortgage crisis.
Porter Stansberry: One last big structural question for you. What do you think would have happened in 2008 and 2009 if the Fed hadn't been able to radically expand its balance sheet?
D DiMartino Booth: Well, I think that we would have had a much nastier corporate-default cycle than we did. I think we would have potentially had an RTC type of solution to the mortgage crisis. And I think that there would have been a greater washout among investors, and less in the way of excessive and further moral hazard created due to the central bank riding to the rescue. Recall the liquidity measures that were put in place to unfreeze the credit markets by the New York Fed had squat … that's a technical term … diddly-squat to do with the Fed expanding its balance sheet. One did not have to go alongside the other. It was a liquidity freeze that needed solving, not the QE2 and QE3 that again just benefited a very small tony cohorts in this world, and Uncle Sam.
Porter Stansberry: I remember one of the big problems in '09 was the commercial credit log jam, lockup. That's what threatened
D DiMartino Booth: Again, I was there at the time when then Dallas Fed president, Richard Fisher asked me to get all of the
Porter Stansberry: Yeah. Cash for clunkers is probably the most idiotic economic policy I ever saw.
D DiMartino Booth: Oh, please.
Porter Stansberry: But there was a lot of silly things that were going on back then. So, you and I both know the lots of silly things were done that were not
D DiMartino Booth: Well, it's played a tremendous role. If you think in terms of QE2 and QE3, when I was jumping up and down, pounding the table saying, "You're going to hurt the people you're supposed to help, i.e. Joe Sixpack, Jane Q. Worker, on Main Street if you insist on distorting the cleaning out of the housing market. You have people buying homes to rent out who are multibillionaires, and they're price agnostic buyers playing with somebody else's money, making 2 and 20, and all they're gonna do is jack up rates, and lo and behold, a front-page Wall Street Journal story recently said that single family home rental rates are hundreds of dollars on a per home basis higher than they would be otherwise. It … and this, again, is hurting the average U.S. household who spends, give or take, upwards of a third, and up to 50 percent in major markets of their income after tax on housing. It hurts the most.
Porter Stansberry: So Danielle, you're telling me that having Blackstone own the largest amount of residential real estate in the country is not so good for us?
D DiMartino Booth: Well, that's a very gentle way of saying it, yes.
Porter Stansberry: [Laughs] Speaking of malinvestment, one of the things we try to do over here at Stansberry Research is look forward to see how those malinvestments end up being resolved. And I would point to the two largest areas of malinvestment, credit excess if you will, today are in the … you touched on it … in the corporate-bond market, where you have had junk bonds trading at option-adjusted yields that are lower than investment-grade bonds, meaning there's an enormous inflation in the value of junk bonds. And there's been, therefore, way more of those issued than will ever be repaid, in my view. And two, the student loan area where, by my calculation, more than 40 percent of student loans that ought to be being serviced are not being serviced. That's a huge default rate, if anyone ever calculated it correctly. I just wondered if you had a take on that, and if you had any insight to how those two big bubbles will be resolved.
D DiMartino Booth: Well, I think that the Bank of International Settlements… and I do respect a lot of the work that they do… I think that some of the recent work that they've done that suggests that the over-indebtedness is going to be difficult to resolve against a backdrop of basically an emerging middle class in other parts of the world. We're gonna shift on a demographic dime pretty soon here, in large part because there are burgeoning middle classes in China and India, and there are more of them than there are us. This will collide with the debt that's been built up… and I promise I'm getting to the student loans. It will collide in the sense that debtor nations will be tried if they try to go too far down the path of debt forgiveness. And I think that that's the only… if you were to give any politician in America, regardless of their political affiliation, truth serum, I think that they would tell you that that's what they have planned, in order to maintain millennials as voters going forward, as baby boomers die off, it's gonna come down to the student-loan debt forgiveness. Which is just a great lesson to teach an entire generation.
Porter Stansberry: Are you familiar… just… I have a
D DiMartino Booth: Well, that's an interesting way to approach it. But I think, on a more fundamental level, A, education's overpriced, which started with cash out refinancings. People took money out of their homes and sent their children to school, which accelerated the pace tremendously, if you look at the chart of college tuition inflation. It really took off during the housing boom years. But B, and much more importantly, we're finally starting to see consolidation in colleges, the way we have seen in many inefficient industries. So we'll see a lot of them close. That's a good thing. I'm not saying that … I'm not disparaging of anybody's alma mater. But certainly, we need more vocation in this country. There is a reason… aside from outright currency manipulation via the euro … but there is a reason that the Germans have continued to excel since the great financial crisis. And a lot of it has to do with the fundamental structure of their higher education system, which does not attach a stigma to vocational education. So you're able to continue climbing up the manufacturing ladder, the manufacturing value add, going forward, in addition to having STEM and educating engineers. We don't need as many liberal-arts majors as we've got running around out there.
Porter Stansberry: That is for me and you, Buck.
Buck Sexton: I was gonna say.
D DiMartino Booth: I apologize if I offend.
Buck Sexton: Women's and gender studies degree is not valued in the marketplace the way I thought it would be.
D DiMartino Booth: I understand that Starbucks does offer health insurance. So, anybody can be a barista, right?
Porter Stansberry: I don't know. I've never tried. Danielle, I've got one last serious question for you. I want to get back to the other debt bubble that I spend a lot of time on, which is the corporate debt bubble. And I'm sure you're familiar with the name Martin Fridson, the dean, if you will, of high-yield debt on Wall Street.
D DiMartino Booth: Oh, absolutely. Marty is a good friend. Yes.
Porter Stansberry: And Marty is forecasting something on the order of $1.6 trillion in defaults by 2021 or 2022 or so, over the next three or four years, over the next credit-default cycle. Do you share that outlook? Do you think it'll be that bad?
D DiMartino Booth: I do, but it's not… he comes at this from the prism of the godfather of junk. And I come at this from the prism of investors in the same way they look the other way with subprime mortgages having
Porter Stansberry: I agree with that. I think the big surprise of the next credit cycle is not gonna be how much junk defaults, it's gonna be that the investment-grade default rate's way higher than people expect. Danielle, are you familiar with how the distribution curve of investment grade has become very, very crowded at the lower tranches?
D DiMartino Booth: Oh, absolutely. Of
Porter Stansberry: That's right. And… well, for investors out there, look for more of that from Stansberry Research. Danielle, it was a great pleasure having you on our podcast. I urge everybody to read your book, Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America. Also, I know, Danielle, you mentioned you're starting a newsletter, Money Strong, in partnership with Dennis Gartman. Congratulations on that! Look forward to endorsing that to my subscribers, as well.
D DiMartino Booth: Thank you.
Porter Stansberry: So thank you so much for your time.
D DiMartino Booth: Thank you. Have a great day.
Buck Sexton: Now listeners, remember Danielle will be joined by all the Stansberry editors and investment experts like Kevin O'Leary from ABC's Shark Tank, Chris Mayer from Bonner and Partners, the dean of high-yield debt himself, Marty Fridson, plus 30 other speakers and entertainers at the 2017 Stansberry Conference in Las Vegas later this month on September 27 and 28. You can no longer attend in person, but we've made a way for you to watch all the action on your computer, phone, or tablet right from the comfort of your own home. Just go to www.stansberryvegasvideo.com, that's stansberryvegasvideo.com. It's easy. You'll be able to live stream all the presentations and investment ideas from each of our speakers, and you can re-watch all the videos too, for up to 90 days after the conference, so you won't miss thing, even if you can't watch it live. Again, just go to www.stansberryvegasvideo.com for all the details.
Porter Stansberry: I wanted to encourage everybody to send us some feedback about the interview with Danielle, send us some feedback about whether or not they think Bannon acquitted himself well or poorly. Send us some feedback on whether you think that we're right, that Hillary is not a very intelligent person. And I'd love to hear feedback on the impersonation. How do you think Buck did as Bill Clinton?
Buck Sexton: Ariana's the real show stopper, but Bill, he's, as a second-fiddle guy, Bill's not the worst. Alright. Mail bag. Here we go. Porter, first up this week. This is from Mike in Houston. Porter, I've read your newsletter and heard you say in your podcast that the upcoming influx of used cars will be sending several companies' stocks tumbling when this car-
Porter Stansberry: Well Mike, I'm gonna give you a very straight answer, which is that 15 to 17 million new cars are sold every year in the United States, currently. Half a million or a quarter million, even if all of them are totaled, really isn't much more than a rounding error. So I don't think it's gonna make any difference at all to the global dynamics of the car business. And I'm talking the global dynamics. So. But there's another thing that I think you're missing that might be even more important. Look at Ford's stock. Go look at a chart of Ford. It's down 50 percent already since 2014. The car-
And I would go further and say that how many of those quarter of a million cars that you suspect might have been totaled, how many of those cars were paid for, is the bigger question. And beyond that, if they weren't paid for, how many of those cars had any equity in them? Because when your car gets flooded, and you owe more money on it than it's worth, all you do is mail the keys back to your bank. So, if there is a financial impact from this hurricane in regards to the auto market, I think it's gonna be larger losses on subprime loans, not any bailout of the demand for new vehicles.
Buck Sexton: All right. Number two this week in the mailbag for the Investor Hour. Porter and Buck, I've really enjoyed these first 16 episodes, and look forward to many, many more. I'm a longtime Alliance member, longtime, and long arm listener. In fact, I truly miss the black label episodes. But enough about me. My only suggestion for improvement is this. The interviews of late have been way too short. For people like Dennis Gartman, Richard Maybury, Bill Bonner, and Glenn Beck, the ten-ish minutes you are giving them is too little. I do very much appreciate that you let them speak, but please afford them more time. Thanks for a great show. Joe. You want to take this one, Porter?
Porter Stansberry: Buck, why don't you? You're the professional amongst us. I'm just the hack.
Buck Sexton: Well, I think one thing that the folks at home should know is that sometimes you get guests that come on, and them mention … I know Glenn very well, because I worked for Glenn for about six years. The time that we give them is a function of the time that they will give us. So it's not always a question of can we have this guest on for 45 minutes? It's, this guest is calling in or joining us for the period of time that they can, because people have a lot going on. In terms of the other… I had to think about how long we went with some of the others. I know we usually go more like 20 to 30 minutes. So maybe if it feels like it's 10 minutes, it's just 'cause it's going by so quickly, 'cause it's such exceptional content. But Porter, what do you think?
Porter Stansberry: I love the long interviews that I hear on the Howard Stern radio show. And I would love it if we could get a good guest to be with us for an entire hour, or even longer, as long as the guest is willing to discuss things. One of the things about Glenn Beck, for example, is he doesn't want to talk about his business. He doesn't want to divulge the size of his business, or how it's doing. And a lot of guests have those same restrictions. They don't want to talk about anything that people would be really curious about. And so you get into these hackneyed opinions about politics or finance that aren't really strong enough to drive an interview. So, on the one hand I clearly understand what the listener is listening for, and we can try to do a better job of providing it, but we really truly are at the mercy of our guests, how much time they will give us, and what they're willing to discuss.
Buck Sexton: Agreed. Alright. One more, here for this week's episode. Hey, Buck. Wow. Porter must have had too much venison over Labor Day. Okay, that's not possible. But he's way off on how to handle North Korea. Dennis Gartman has a much more realist philosophy, and not even on non-interventionist libertarian grounds. I agree that the US should get the hell out of the Middle East and focus on real threats. That's why we have warships and missile defense. If these don't work in defensive mode, I want my GD money back. Love the podcast. Bill.
Porter Stansberry: Well, there's a much easier way to defend our country, which is to turn North Korea into a large pile of obsidian.
Buck Sexton: I actually wrote a piece on The Hill which just went up this week on how the opinion of the American people as… now this is through polling and so take it for what it's worth… but it was a very reputable think tank and policy journal, spoke to close to 800 Americans. Ran through a sample size of, what would be your choice? 20,000 US soldiers killed, or a bombing campaign that kills 100,000 innocent civilians in Iran? And it was overwhelmingly kill 100,000 civilians in Iran. And then, what was your choice, 20,000 casualties, or a strike against an Iranian city that kills… this must be… I'm assuming a nuclear strike, unless we went with conventional munitions. But anyway, a nuclear strike possibly, that would kill 2,000,000 people in an Iranian city vs. 20,000 soldiers. Just shy of half of the Americans asked this question said, "Yeah, we kill 2,000,000 civilians." So, people… And this, of course, also, I think you can extrapolate it and apply it to opinions about North Korea at some level. You mess with America at your peril. We're a peace-loving country with moral people. But you don't want to play games with the American people.
Porter Stansberry: Look. I think that the… innocents are killed in every war. And therefore, everyone abhors war, and wants to avoid it at all costs. Look how many citizens, innocent civilians, died in WWII. Maybe 20,000,000. Something like that. There's no way to have a good war. And there really is no way to have a moral war. And I think you're fooling yourself when you believe any of those ideas. Likewise, I think it's foolish to believe that we can defend ourselves with warships and missile defense. I think it's just ridiculous. If there is a dog that threatens you, if every time you go out of your house, and you walk around the block, there's a dog that runs over and tries to bite you, you carry a stick. And the dog walks over and gets within range, you smack it in the head. And if that doesn't stop it, then the next time you carry a gun. You don't stop walking around your neighborhood. And if North Korea is crazy enough to allow their leaders to threaten us, then we have to destroy them. And frankly, I have two sons, a 10 year old and a 6 year old, and if you told me, in 10 years or so we're gonna ship those kids off to a land war in Asia, because North Korea won't leave us alone, hell no. I've been paying taxes. You've got nuclear weapons. Use them. I don't care about what happens to those North Korean kids. I care about what happens to my kids. And that's the way I'm always gonna feel.
Buck Sexton: Alright. I think we'll leave it there for this week, Porter. If you got a question for us, write to
Porter Stansberry: Just don't ignore us.
Buck Sexton: Next week we will be hosting Perma-Bear David Tice. Tice has been warning investors about the dangers of investing near the end of a secular bull market, and has debated nearly every bullish Wall Street strategist on CNBC's Nightly Business Report, and in his various writings for Barron's. Tice is also famous for his 1999 credit-bubble symposium in New York, created to alert investors and policy makers of the credit excesses in the U.S. financial system. So, have a great rest of your day, and great rest of your week, everyone. We will see you all again next time, here on the Stansberry Investor Hour. Thank you, Porter.
Porter Stansberry: Thanks, Buck.
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