On this week’s episode of the Stansberry Investor Hour, Dan invites an incredibly special guest onto the show…
He’s a man who’s launched over 1,000 new products, acquired dozens of businesses, and employed thousands of people…
In a way, he’s largely responsible for helping Dan get to where he is today…
His biggest claim to fame is founding Agora Financial, now the largest independent research network on the planet…
The one and only Bill Bonner.
For those of you that don’t know, Bill was the one who interviewed Dan, way back in November of 1997, when he first set out to become a financial analyst…
The two kick off the conversation like old friends, recounting tales from the old days, and catching up on what’s new in life…
But the conversation turns gravely serious when Dan gets Bill’s take on some major developments happening in the world right now…
The two discuss the fast-developing Evergrande debt crisis, the rising inflation we’re seeing just about everywhere, and where we might see societal upheaval flare up next…
Bill explains what this all means for investors, and gives the listeners some key advice on how to protect yourself from that worst-case scenario…
If you’re concerned about what’s going on in America today, it’s a conversation you do not want to miss…
You can listen to Dan’s full conversation with Bill and much more in this week’s episode.
Founder, The Agora
In 1978, William Bonner created what is now known as Agora Inc. What began as a small publishing company based in Washington, DC, has grown to be one of the largest and most successful consumer newsletter publishers in the world.
Since founding Agora Inc. in 1978, Bill Bonner has worked steadily to turn it into a "minimultinational," with publishing offices in eight different countries on six different continents. Bill also founded The Daily Reckoning. The Daily Reckoning is published by Agora Financial and weaves information about the financial world, investing, and everyday life into an educational and entertaining format.
1:48 – “I think that inflation is a real risk. I think you have to be prepared for it, and moreover, as I’ve discussed in the past, you can barely point to any time since about 1914 – the start of WWI, the start of the Federal Reserve – where there hasn’t been a rise in the CPI…”
5:57 – Dan’s main message is simple… “It’s certainly a bad idea to base real investments on predictions. You will lose a lot if you concentrate a portfolio based on predictions. And that is my main message… don’t pretend that you know things that you don’t know.”
9:16 – This week’s quote comes from the book, The Hard Thing About Hard Things, by Ben Horowitz… “Embrace your weirdness, your background, your instinct. If the keys are not in there, they do not exist…”
11:41 – This week, Dan invites a close friend and publishing legend, Bill Bonner, onto the show. In 1978, Bill founded Agora Financial, which is now the largest independent research network on the planet. He’s started businesses all over the world, launched over 1,000 products, employs thousands of employees, and has authored many best-selling books.
11:57 – Dan tells the story of the very first time he met Bill, back in November of 1997, when Dan first interviewed at Agora…
14:56 – Dan shares a fact about gold that Bill saw coming years ago… “Since 2001, gold – the ultimate real asset – gold has indeed outperformed stocks, roughly 2 to 1, if you measure by the S&P 500, so nice call! What’s next?”
16:26 – Bill and Dan discuss how the Evergrande situation went wrong… “The Evergrande story is very enlightening because Evergrande invested very, very heavily in probably the surest thing in the world…”
23:25 – Bill explains what he thinks will happen next… “I expect their [China’s] goods and their apartments are all going to be marked down. Our money is going to be marked down. That’s what we’ve been producing… and it shows up in speculative investments…”
28:20 – Bill shares one thing he’s not prepared for… “The thing that I’m not prepared for, I have to tell you this, I am not prepared for a big bull market again. I just can’t imagine it, and I have not positioned myself for a runaway bull market…”
32:12 – Dan asks Bill if he has any serious concerns about societal upheaval… “How well prepared are you for the zombie apocalypse? You got guns and ammo over there in Ireland?”
34:37 – “When the next recession appears on the horizon, I presume that the politicians will do exactly what they did the last three times in this century. I presume they’ll come out with big, big money printing and big, big spending plans, and I presume that will lead to more of the inflation that the gold market has not yet anticipated…”
39:04 – Bill explains the key difference between monetary inflation and fiscal inflation…”That’s why we’re seeing prices rise now. It’s not so much the monetary inflation, it’s the fiscal inflation, and that’s what we’ll see a lot more of…”
42:06 – Bill leaves the listeners with some practical advice as a final thought, “The first thing, is that you have got to worry about yourself… Imagine the worst kind of zombie apocalypse you can, and then ask yourself if you’re prepared for it…”
46:40 – This week we’ve got a ton of great questions on the mailbag. One listener writes in with some questions about inflation from a previous mailbag conversation… Another asks Dan some in-depth questions about via negativa… And another asks Dan about the ‘buy low, sell high’ mantra when many stock recommendations are nearing record highs… Listen to Dan’s response to this and more on this week’s episode.
Announcer: Broadcasting from the Investor Hour Studios and all around the world, you're listening to the Stansberry Investor Hour. Tune in each Thursday on iTunes, Google Play, and everywhere you find podcasts for the latest episodes of the Stansberry Investor Hour. Sign up for the free show archive at investorhour.com. Here's your host Dan Ferris.
Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm your host Dan Ferris. I'm also the editor of Extreme Value published by Stansberry Research. Today we will talk with Bill Bonner. He is the founder of Agora Financial and he hired me and brought me into this financial world 24 years ago. We haven't spoke in a decade. It's going to be awesome... I promise.
In the mailbag today, questions about inflation, via negativa, which we've talked about a lot on the show, and buying low and selling high. And remember, the mailbag is a conversation, so talk to me. Leave a message on our listener feedback line, 800-381-2357, and hear your voice on the show.
For my opening rant this week, I'm going to talk about inflation sort of and some other ideas around it, and I'll let you know when I get to it. So let's get to it. Let's do that and more right now on the Stansberry Investor Hour.
So my real message this week is probably not something you want to hear me say too often, but if you've listened to the show for any length of time, you shouldn't be surprised. My real message this week is it's OK to say, "I don't know," because I think in many, many cases, I don't know, you don't know, nobody knows. And we can use inflation as a pretty decent example.
Now I think that inflation is a real risk. I think you have to be prepared for it, and moreover, as I've discussed in the past, you can barely point to any time since about 1914, the start of World War I, the start of the Federal Reserve, when there hasn't been a rise in the CPI, when there hasn't been some kind of price inflation. It's almost impossible. I mean, there's very, very few episodes when there hasn't been some kind of inflation even over the past decade. There's been inflation... it's just been muted by the traditional measures, OK?
And in fact, I read a really neat piece of research recently and it pointed out, hey, you know, from the end of the Napoleonic Wars in 1815 to the beginning of World War I in 1914, which was also the year the Fed actually began operation, that was the century of deflation. After that came the century of inflation, and I would say we may be in, you know, some type of a new century here. We'll see. It has yet to be seen, but I'm afraid that we're still in a century-plus, you know, maybe a century and a half, who knows, two centuries of inflation. But I don't know, and that's the real point.
So take a look, for example, at a chart I saw from the Bank of America Global Fund Manager Survey, and they tracked professional investor expectations of higher inflation. And to be fair, it's a fairly volatile chart. You know, it'll be zero and then it'll be 60%, and it'll be zero or 20%, or something like – and then it'll 80%. And today it's 0%, but very – like within the last several months it's been as high as 80%. So it's volatile, but right now it's 0%.
And looking around, you know, I've seen headlines recently that say things like, you know, that the bond market is signaling low inflation and investors are not expecting inflation. And of course the message from the Federal Reserve is inflation is transitory, right? It's just an effect of the post-COVID era and it really has more to do with low inventories of all kinds of things, from various grocery items to automobiles, and so the prices go up to sort of account for that. But it'll all be over soon, right? And I'm just looking at another headline: "Treasury curve flattening suggests declining inflation expectations." And the recent CPI print was lower than expected.
So on the one hand, there's a narrative of low inflation expectations. But on the other, stuff costs more. Like, why would you – the only reason people have to say this is because stuff costs more. And let's face it. Like I said, there has always been inflation. It's been a century, century-plus now of inflation. And I think what is really going on is that when people say they're expecting inflation, they mean something like the 1970s. That's what they're worried about. They're worried about double-digit inflation average over a decade or something like that. They're worried about getting shocked. When they go to a gas pump one day, they haven't been for a few days – whoa! The price of gas is up a dollar or two a gallon in a short period of time – that kind of thing, you know, like what we were seeing during the 1970s.
So I understand when people say, "Oh, inflation's not a big deal." But they really don't know. They have no idea because nobody was predicting what's happening now. And predictions in general I think are a mug's game. I don't think it's a good idea to say that you know what the price of gold will be in two years or where the stock market will be in a year or something like that. I think it's a really bad idea. It's certainly a bad idea to base real investments on predictions. You will lose a lot if you concentrate a portfolio based on predictions.
And that really is my main message. I don't know if I want to dilute it too much. Don't pretend that you know things that you don't know. It's not a very sexy message. I admit it. Like, I was sitting here – "Oh, come on, Dan, you've got to jazz this up." But maybe that's the point. You can't jazz it up. In fact, the best advice – I don't think – it's hard to jazz it up. Whole good stocks for the long term – oh, boy, that's really sexy, isn't it, you know? Buy great businesses and hold them for the long term. Make sure you have plenty of cash on hand. Make sure you own some gold. Own a little bit of crypto. We don't know how that's going to turn out, and if you just have a little bit, you'll lose a little bit if it turns out badly, but the potential is to make an incredible amount, much more than you'll lose. So the risk-reward proposition I think is still excellent, especially for the big ones: bitcoin, Ethereum. You know, like that's the sexiest thing I would have to say, is make sure you're holding a little bit of crypto. Otherwise, I think saying you don't know is really super important.
And I just – I keep coming back to this same list of advice, don't I? Make sure you're truly diversified. Prepare, don't predict. You know, truly diversified means you have some financial assets and then you have some assets that are sort of outside the financial realm, priced in dollars but not dollars themselves, right?
That's it, man. That's what I've got for this week. As Tom Cruise said in the film The Firm, "It's not sexy, but I promise you it's got teeth."
My quote of the week – I've been doing a little soul searching lately because I've been avoiding news and I've been avoiding – not all news. I looked at some financial news of course. I have to, right? But I avoid, like, you know, TV news and general news, and I don't let myself be led around by the nose, link after link, you know, by the news. I go in, I get what I want, and I'm out. So I avoid news.
I avoid social media – kind of been back on it the last couple days, but I can't stay more than a few minutes. I can't tolerate more than a few minutes anymore, you know, in a day. It used to be I was constantly going in over a period of hours in a day and feeling like I had to comment based on some new thing I felt I had learned. But now I'm hardly there, so I'm way down on news, way down on social media, and way down on shopping, you know? Just buying myself – I found myself sort of shopping for books especially – I'm always looking for books. So I don't do that anymore. I only go to Amazon when I know what book I want.
And it's been wonderful. It's really opened up my time and opened up my mind. And I was looking on my phone and I had saved a quote from a guy named Ben Horowitz, and you probably know him from Andreessen Horowitz. He wrote a wonderful book – Ben Horowitz wrote an absolute must-read book called The Hard Thing About Hard Things about his experiences as an entrepreneur, highly recommend it. And toward the end of that book he says this: "Embrace your weirdness, your background, your instinct. If the keys are not in there, they do not exist." One more time: "Embrace your weirdness, your background, your instinct. If the keys are not in there, they do not exist." That's Ben Horowitz.
And for me, my life's journey has become more about trusting myself and trusting my instincts and trusting my learning and trusting what has worked for me, and just trusting what feels right. And I feel this quote speaks to this. And what feels right to me is never to pretend you know things you don't know, and you don't know the future. So that's how that sort of ties in with today's rant.
All right, let's talk with another guy who doesn't know the future, somebody who I've looked up to for a long time, who brought me into this business, who effectively indirectly, very indirectly, put me in front of this microphone right now. And his name is Bill Bonner. Let's talk with Bill Bonner right now.
We have entered a very strange and frankly dangerous moment in stock market history. Valuations are sky high, volatility could soar in the coming weeks, and investors around the world are asking, "What comes next?" and what you should do with your money to get ready. If you share those questions, I want you to mark your calendar for next Tuesday, September 28. On that night I'm teaming up with my colleagues, Dr. Steve Sjuggerud and Dr. David Eifrig, to bring you some much-needed answers about what's really going on in the stock market right now, a story I can almost guarantee you won't hear anywhere else in the financial media. Steve, Doc, and I rarely see eye to eye, but we all agree you need to be prepared for the worst now more than ever. So we're working together to show you the exact steps you should take to protect your wealth against what's coming. Our event is free for all my listeners, but a reservation is required. So I urge you to head to www.messagefromdan.com right now to add your name to the list. Again, that's messagefromdan.com. I look forward to seeing you there.
Bill, welcome to the show.
Bill Bonner: Thanks, Dan. It's a pleasure to be with you.
Dan Ferris: It has been so many years that neither one of us can figure out how long.
Bill Bonner: That's right. Our memories are failing.
Dan Ferris: I hardly know where to start. Maybe the best place to start is where you and I started. In November of 1997 we first met and we had a very short interview, and I remember it because your assistant said, you know, "Bill always throws these resumes and cover letters in the trash, but he liked yours so he'd like to speak with you."
Bill Bonner: [Laughter] Well, I can't remember your cover letter, but I remember you coming in the office. And I think I remember asking you, "Are you a financial analyst?" And you said something like no. And I said, "Well, is that the idea, is that you want to write financial analysis?" And you said yes. I said, "Do you have any experience that would qualify you for this job?" No. And I said, "Well, great! You can start tomorrow!" [Laughter] You were a Doug Casey reader as I recall.
Dan Ferris: That is exactly right.
Bill Bonner: Doug came to visit me just this past weekend.
Dan Ferris: Oh, nice.
Bill Bonner: Yeah, he's doing well, doing well.
Dan Ferris: He's based in, what, Uruguay or Paraguay or someplace now?
Bill Bonner: Uruguay, and lives part of the year in Virginia.
Dan Ferris: So with that auspicious beginning, here we are – it must be, what, 24 years later and haven't spoken for a decade or something. [Laughter]
Bill Bonner: Right.
Dan Ferris: But where I'm going with this is have your views on the world changed much during that time?
Bill Bonner: Yes. I mean, they've evolved, as you might expect. I mean, I feel that I understand better than I did then how things work. And by the way, they're working in a way that they weren't working then. I mean, a lot has changed. The last 20 years I think we've seen a lot of the things that we feared back in the '90s have come to pass, and we're seeing a lot of the things we kind of never thought we'd actually see, at least I never thought. I mean, they were theoretical problems, but now they're real problems. And what I see is the U.S. caught in the debt trap that Richard Russell warned about 30 years ago, [laughter] so it's all – it seems to me that it's all coming to pass. But I do feel like my understanding of it evolves, develops, and matures over time, too.
Dan Ferris: When we first got together, my first job was writing about real assets, you know, mining companies and the odd sort of real estate company and things like that. But really over the long term since then, an interesting thing has happened, at least since the dot-com crash which happened a couple of years later, after you and I first spoke. And that interesting thing is that indeed since this century, let's just say, since 2001, gold has indeed – the ultimately real asset has indeed outperformed stocks, roughly two to one if you measure by the S&P 500. So nice call. What's next?
Bill Bonner: [Laughter] Yeah, that's a good question. And I don't follow it really enough to know, but you know, everything surprises you. If it didn't surprise you, it really wouldn't be very interesting. So everything surprises you, and what now? It looks like we're coming onto a period of intentional disastrous government-driven inflation. So you'd expect gold to sense – you know, like animals before a tsunami, you'd expect it to be heading for high ground. And it's not. It's not really moving that much. So you have to wonder, well, is your theory wrong? That's not the way it works or what? And right now I'm still in the "or what" stage to that because I don't really know, except that when gold moved up so much in the first decade of the 21st century, it developed a powerful base.
And I've been thinking about this, too, the way this Evergrande thing is in the news, by the way. And the Evergrande story is very enlightening, because Evergrande invested very, very heavily in probably the surest thing in the world, which was that all those Chinese people who'd come from the rice paddies, they needed places to live. And the economy was booming, their salaries – I just saw the numbers. In 1990 I think the average – the GDP per capita of China was about $390... now it's $10,000.
Dan Ferris: Wow.
Bill Bonner: So the purchasing power of these people who came from the rice paddies has gone way, way up, and Evergrande correctly seeing this trend, borrowed money from just about everybody in order to build a lot of apartment buildings. And in fact, they actually sold something like 1.2 million apartments that they never built. [Laughter] You know, they planned to and they promised to, but they haven't done it yet. So in this story you see all the elements of a real boom-bubble situation, correctly seeing a trend, correctly investing for it, overdoing it, becoming irrationally exuberant, taking on too much debt, and then the bottom falls out and they can't pay the debt. So – but what happens then?
So I take this as kind of a story that will help us understand what would happen, say, to the whole U.S. economy, because it's essentially the same thing. You know, we're getting a lot of money – and by the way, the source of the money was the same. The ultimate source of the Chinese bubble was the U.S. government taking away gold-backed currency and replacing it with a currency that they could produce at will, which had the effect of increasing Americans' purchasing power on the world market so they could buy Chinese goods, and then the money going into China ending up in U.S. Treasury bonds – anyway, it's a long story and we don't want to bore you and your listeners with it. But the source of the money is the same.
And so now we see it blowing up in China, and my guess is this blow-up is very similar to the blow-up in Japan in 1989. There, too, they had gotten a lot of money in by selling a lot of product to a lot of foreigners, and they had used that money in very similar ways. They used it to create additional industrial capacity. Those huge Japanese firms were just turning out all kinds of things: cars, TVs, and everything. And China playing pretty much by the same script, taking in all this money, borrowing more money, and investing in capital development projects, like 50% of its GDP or some number like that. It was just a phenomenal number at one point, unbelievable number. And when I went there – the last time I was there in 2014, you know, you could see it. It was all over. You know, the buildings – empty buildings all over, highways with no traffic on them, trains with no passengers in them. The capacity was huge, huge, huge.
All right, so now we get to the end of that trend. We get to the point where that kind of blows up, and people look around and say, "Well, where are the customers? Where are the revenues that you're going to use to pay this debt?" And by the way, Evergrande promised investors 11% return... 11%! Where were they going to get 11%? They had to sell a lot of apartments, which they didn't sell.
So now it blows up, so what happens? Well, like Japan – and I should say also like the United States in 1929, very similar, an economy which was the growth story of the world, producing automobiles like crazy, ventilator fans, refrigerators, all these things that the people didn't –
Dan Ferris: Radios.
Bill Bonner: Producing in huge quantity these things, and then the '29 crash comes along and what happens? Well, in Japan and in America in 1929, deflation happened. Deflation happened because they had invested hugely in capacity and then all of a sudden, they didn't need the capacity. They didn't have enough buyers. And my guess is that's what's going on in China now, a deflation in prices for apartments really, because that's what they built. They built enormous – and malls and cities and all those things, trains. All those things that they built they overbuilt, and now you'd expect a deflation in prices.
But in America, we don't expect a deflation, and so we have to wonder is that idea – is that idea wrong? And what is gold telling us? Is gold telling us that that idea is wrong? Is it telling us that we in America, the year 2021, are not that dissimilar from China 2021, Japan 1989, U.S. 1929 and that we should expect a deflation? Well, I think that, yeah, it is different, because while the Evergrande and the Japanese and the Americans in 1929 were investing huge amounts of money in capacity, America wasn't. That whole time, the whole – since we last saw each other, that investment in America has mostly been in stock buybacks. It's been in cryptos, you know, or it's been all over the place – you know, and the tech stocks are just phenomenal. But it's not been in capacity. We don't make things. You know, we don't have that kind of – we don't have that problem.
And by the way, housing has gone way down. The construction of housing – I saw this one amazing figure where in the 1950s we produced – I think I've got this right. The U.S. produced 6 million new houses – no, that was in the 1950s. In the 1960s it was maybe 7 million. In the 1970s it was maybe 8 million or something or other. And now it's something like 900,000. I mean, that's – I've got those figures wrong, but the sense of them is correct, that we now produce a fraction of the houses that we produced 50 years ago.
So it's not that America has overdone the house thing. We haven't overdone the house thing. And by the way, industrial net capital investment has gone down, which is the opposite of China. They were producing stuff, you know, goods and services and apartments and everything. We were producing money. Now guess what I expect? Dan, you can jump ahead of me, but I expect their goods, their apartments are all going to be marked down. Our money is going to be marked down. That's what we've been producing, and it shows up in speculative investments, not in industrial capacity, not in houses, not in the things that we would normally, after a period like this, expect to be deflated.
Dan Ferris: Right, so inflation is what we're talking about. And a lot of people have talked about it, especially since the financial crisis, and it hasn't really come to fruition as expected. I mean, you can point to various places where you see it. Certainly the cost of a private college education is inflated. The cost of other things are inflated. But overall, it just hasn't played out as expected. And lots of people smarter than me have dug into this and I feel taught me, but one of them being Lacy Hunt, a name you may be quite familiar with, which is simply, you know, one of the things we don't realize is all this money printing, as you watch those Fed balance sheet charts just go up and to the right to the stratosphere, you know, it winds up, well, those are bank reserves. And without the animal spirits to lend and spend, we just don't get that sort of "oh my God" moment at the gas pump or other places where things cost way more all of a sudden. However –
Bill Bonner: However.
Dan Ferris: We are now at a point where, by all appearances, the U.S. government has finally said, "We don't care about budget. We're just going to spend and spend and spend as much as we need to spend to really" – as far as I'm concerned, to look good and to look like we're doing something for the American people, you know. And I figure that's probably the match. You know, we're finally lighting that firecracker. But again, you know, we'll see. I've ceased predicting things, Bill. I never predict anything. I say prepare, don't predict. If your portfolio's prepared for deflation, if it's prepared for inflation, if it's prepared for anything in between including the stock market going up another 300%, you're good to go.
Bill Bonner: Yeah. Yeah, I think you're absolutely right. I do think, though, that this period of let's say still, calm inflation, this period where prices are going up, and in some places they're going up a lot, but they're not going up as we might expect for money printing the way it's going on. I think that this is a fakeout on the part of the whole system, that it leads the Democratic Party, and not just the Democrats, Republicans, too, to think that they can raise that debt ceiling one more time and keep spending, spending, spending. And I think you're right. That is their plan and nobody ever questions it. Nobody ever really questions, you know, "How does this work? I mean, where does this money come from?"
Dan Ferris: I know. Where are the loud voices of dissent about all this spending? They're gone.
Bill Bonner: They're gone. It's all become a political issue, not an economic issue. Nobody doubts that you can do this from an economics standpoint, but the question is whether you can get away with it politically, which is another whole issue.
Dan Ferris: Right. You know, Bill, it's going to work gangbusters because it's got a new name now, see? It's called MMT. Oh, you don't know about MMT? Oh, man! MMT – money printing by any other name, correct?
Bill Bonner: Yeah. It's amazing that anybody takes that seriously. The idea that you just print money and then, by the way, when prices start to rise, you just stop printing money.
Dan Ferris: Well, you tax. The MMT playbook is just raise taxes. It won't demoralize anybody. It'll be fine.
Bill Bonner: Right, it'll be fine. But people have – it's as if nobody ever read any financial history, nobody ever thought about how these things work. I mean, we had generations, hundreds of years of real thinkers, people who tried to figure out how these work, these things work. And I don't think these guys even bother to open the books. You know, they just think they know better and that's all there is to it. And, oh, they think they have the data. [Laughter] It's like –
Dan Ferris: They're data driven.
Bill Bonner: Yeah, data driven. It's like they are in another matter that we won't talk about. They follow the science. [Laughter] And the science tells them that they can get away with murder and they're going to do it.
Dan Ferris: Yeah. Meanwhile, scientific inquiry is not about anything like following stuff.
Bill Bonner: No, no. No, but it's going to be an exciting period, Dan. And like you say, you've got to be prepared for anything. [Laughter] The thing that I'm not prepared for – I have to tell you this. I am not prepared for a big bull market again. You know, I just can't imagine it and I have not positioned myself for a runaway bull market. So if we have one, well, it's going to leave me behind.
Dan Ferris: So, Bill, laying all your cards on the table now, where are you – since I've known you, were you ever prepared for a big bull market? I mean, honestly –
Bill Bonner: By the way, Dan, as I remind people and you just reminded us, that gold outperformed stocks. So even though I missed the whole boom, I was still OK. Thank you.
Dan Ferris: Right, right. You missed the '90s but since then you're gangbusters, so you're doing great. If I may ask, Bill, where are you living these days?
Bill Bonner: Oh, I live in Ireland.
Dan Ferris: Oh, you live in Ireland. I had not heard that. I thought you were in France.
Bill Bonner: Well, I had been there for many years when we were building our business. I used France as kind of a headquarters because it's central in Europe. But I'm not in that stage of life anymore and I've gone back to the land of my forefathers. [Laughter]
Dan Ferris: Really?
Bill Bonner: And it is kind of nice. I feel very much at home there and it's very calm. You know, they don't have the same kind of – well, you know, you know the streets of Baltimore. They're pretty rough.
Dan Ferris: Well, yeah. And Baltimore, just for listeners' sake, that's where Agora Financial is still headquartered, correct?
Bill Bonner: Oh, yes. That's where I am right now. I'm at the mothership. You know, I come every year and we work for a few months and then go about our business. But Baltimore is still our headquarters and it's very rough. I don't know how – you're in Oregon, right? You're still out in Oregon?
Dan Ferris: Correct, yeah.
Bill Bonner: Well, here it's very – it's very hard to do business because people don't want to come in the office, and so you have an empty office. We've got a lot of empty offices and, you know, we work like we're working with you, by Zoom, but it's not the same thing. You know, so many ideas need to be nurtured, developed, bounced back and forth. We're an idea company. We're always trying to figure things out and tell people what we think. But you need space to do that and time, and that's tough.
Dan Ferris: Yeah, and accidents. You need bodies bumping into each other in the hallways. I agree, and it is a shame, and I have felt the sense of isolation, I have to say, you know, being in Oregon of course. Now we've moved – we were in Washington for a while, across the river from the city of Portland, so that was – you know, it's a big city. And then my wife insisted that we move back to southern Oregon because we've got grandchildren now and she couldn't tolerate being more than a 10-minute drive away from them. And we had one, and then we came down here and now there are three and there's another one on the way. I mean, it's just like – there are two more on the way. It's just, you know, grand –
Bill Bonner: Wow! Congratulations.
Dan Ferris: Yeah. I mean, the production – talk about, you know, production ramping up.
Bill Bonner: Dan, are you in the dry part of Oregon or the damp part of Oregon?
Dan Ferris: Dry. Yeah, it's dry down here. We just went through a whole month or more, several weeks of – where it was so smoky outside because of the fires, you know, and the smoke just blows – it blows for hundreds of miles. I mean, it blew across the country a few years ago. My siblings in Baltimore complained about the smoke from California and Oregon some years ago. So yeah, really dry, and we had 115-degree temperatures back in the earlier part of the summer.
Bill Bonner: Oh, terrible.
Dan Ferris: Yeah, terrible. But it's a beautiful place, I have to say. And I live on a golf course now and I'm in paradise. It's really nice, which leads me to another thing. How well prepared are you for the zombie apocalypse? I mean, you got guns and ammo in Ireland? It sounds like you don't need them.
Bill Bonner: We don't need them there. I feel like we don't need the – the zombie apocalypse, we'll be fine in Ireland. You know, we're surrounded by farmland and dairy cattle and people who seem very, very pleasant. So I don't expect to need to be fully armed, locked, and loaded for the zombie apocalypse.
Dan Ferris: I'm talking about zombie apocalypse, which is kind of joking, but we moved from the Portland area because they were burning down the city every night and we were afraid that that was going to come over to our side of the river, and –
Bill Bonner: Really?
Dan Ferris: Well, I mean, my wife wanted to be near the kids, but for months before she came out with that, which was actually rather sudden, she was saying, "God, I don't know if I like being up here," because from May 2020 – the George Floyd episode on, there were fires and what I would call rioting, what some people call peaceful protesting, in the streets of Portland night after night for many, many months on end. And for the first time in my life I became a gun owner.
Bill Bonner: Oh, really? Huh.
Dan Ferris: Yes. So, you know, there is a serious question in the zombie apocalypse question. It sounds like you're not worried about that sort of societal upheaval in Ireland.
Bill Bonner: Well, I'm worried about it in Baltimore. I mean, I don't think it would take too much to set off a zombie apocalypse here. [Laughter] We've had that experience. You know, they have – after the – not George Floyd, but before that there was the guy in Baltimore who was killed in a police van, of all things. So there's always that kind of risk running around, and we presume that when thing start falling apart, which I presume they will – I mean, I presume that our theories are fundamentally right, that you can't spend money you don't have forever on things that don't work and produce kind of false pretenses and mistakes in market behavior and so on. You can't do that, and I presume that sooner or later you're going to have to pay for it, and I presume that when the next crack in the stock market comes and the next recession appears on the horizon, I presume that the politicians will do what they did the last three times in this century. I presume they're going to come out with big, big money printing, big, big spending plans, and everything. And I presume that that will lead to more of the inflation, which the gold market has not yet anticipated. So we will see. It should be interesting.
Dan Ferris: What do you make of the events in Australia? Have you seen what's going on there?
Bill Bonner: I just don't know what to make of it. You know, it sounds like the prison island there. It sounds crazy. And who would've thought – the Australians?
Dan Ferris: Of all people! I thought these were freedom-loving people!
Bill Bonner: That's what I thought, and they're not! They're – you know, they – I saw – somebody said Australia began as a prison colony and now it's ended as a prison colony, too, again.
Dan Ferris: Yeah. The police seem – you know, one of my great hopes for the world, for the country in the United States was I thought, "Well, mostly the police just kind of – you know, they really don't want to bother you. They want to have doughnuts and sit by the side of the road and fill out reports and live their lives and retire without any holes in their anatomy, you know, in the wrong places, made by bullets." And the police in Australia seem determined to get a raise or something. I mean, they're really stumping to be noticed as the best police in the world or something. They're just –
Bill Bonner: It's very odd.
Dan Ferris: So enthusiastic.
Bill Bonner: Yeah, we have one of our partners, one of our associates is Australian, not in Australia, but he keeps us up to date on it. And he says that one of his mates [laughter] went out for a bicycle ride. You're allowed – and I think this is in the Melbourne area. You're allowed one hour of exercise per day. And so he went out on his bicycle – he's fully vaccinated and everything. He went out on his bicycle, was in a park by himself, and a police helicopter appeared above him and said, "You've been out for an hour. Go back to your home." [Laughter] Wow. I mean, that's pretty hardcore.
Dan Ferris: Yeah, that one hour of exercise sounds familiar. Oh, yeah, that's solitary confinement.
Bill Bonner: That's what it is.
Dan Ferris: That's what you get, right? Solitary confinement in the United States' prison system is 23 hours in the cell and one hour of daylight. I think you go into a little room where the roof is open or something.
You're not ready for a bull market. You think that inflation is absolutely inevitable and that the current sort of calmness is a big fakeout. It's hard for me not to agree, except for this other thing that we've been talking about, you know, the outcome of – and you talked about this earlier – the outcome of borrowing too much money, even in a highly productive, you know, free or not – I don't know what kind of economy, so we have mixed economy – is that for additional dollar you borrow past a certain point, it's less and less and less and less productive. And tell me if I'm wrong here, but it becomes less and less productive, it starts looking very deflationary, depressive almost at times, and then the money printing begins, right? Because this generation of central bankers looked at what happened in the Great Depression and said, "You guys didn't print enough money!"
Bill Bonner: Exactly, exactly. That –
Dan Ferris: OK.
Bill Bonner: That is the theory promoted by Ben Bernanke. Ben Bernanke, you know, worked on that his whole life and he came to the wrong conclusion. [Laughter]
Dan Ferris: Right. But at some point, this would require a real change of regime with the Fed, because as we've seen, it's not enough for them to simply print money and create bank reserves, right? They buy securities, they exchange an income-producing security for a bank reserve – the money never really leaves the Fed. It just goes into the member bank accounts. And as we said, they don't have the animal spirits to do the kind of lending and spending that we need to get real inflation. So admitting that I can't predict anything, and you were nodding along when I was saying that, you know, what happens? Something has to change, doesn't it?
Bill Bonner: You're talking about monetary inflation, where the Fed prints up money and gives it to member banks and they put it in reserve accounts at the Fed. And there's not a whole lot of direct – the inflation that we talk about or care about is not monetary inflation. It's consumer price inflation, and that's what happens when the Federales go out and spend, and that's a whole different – not a whole different thing, but it's a greatly different thing in which the federal government gives money, those stimmy checks that so many people got, and those were a different kind of inflation. They got out and people spent them, and now that's why we're seeing prices rise now. It's not so much the monetary inflation. It's the fiscal inflation, and that's what we're going to see a lot more of, and the Democrats are promising it. They're hoping to get it together. Right now, they're being resisted by Republicans, but that resistance will fall immediately as soon as there's a crack in the system. Just wait for a little – you know, a 1,000-point decline in the Dow for a couple days running, and all of a sudden there are going to be people falling over themselves to try to figure out new ways to put money in people's hands. That money is not the same as the monetary inflation. It's fiscal inflation and it'll end up in prices I think pretty quickly.
Dan Ferris: Getting back to the central bank thing, so far the Fed has – you know, they've been buying Treasury securities to beat the band, and they buy mortgage-backed securities. One could say they're supporting the housing market that way. They've bought corporate bonds, but they haven't bought stock. They haven't gone full Bank of Japan and bought stocks yet.
Bill Bonner: Not yet. They will. I think they will.
Dan Ferris: They will.
Bill Bonner: Yeah, I think it's a natural thing. You know, they've got to support the stock market, and at a certain point that – and oh, by the way, they've run out of bonds, too. They're going to be so eager to buy stuff. And if they run out of bonds to buy, it pushes the rates into negative territory and that creates other problems. So my guess is that they will buy – broaden what they're buying when they start buying a lot. But who knows? You know, I think just anything's possible. It's just that they are set up to believe that they need to fix the system, and they're partly right because they created the system as it is, and when they see it falling apart, they're going to do – in the famous words of Mario Draghi, "Whatever it takes." [Laughter]
Dan Ferris: Whatever it takes, right.
Bill Bonner: Whatever it takes, and it's going to take a lot, is my guess.
Dan Ferris: Maybe they should hire Mario.
Bill Bonner: Yeah. Well, he's now a president of Italy. I mean, he's doing damage on another front.
Dan Ferris: Let's ask you my final question then, which is the same for every guest on the podcast. If you could leave us with one thought today, what would it be?
Bill Bonner: One thought? One thought. Gee, I don't know one thought. I mean, this is an investment program, so people hope to leave with some useful advice and useful advice I normally don't have. [Laughter] But we've been telling – Denning and I have been saying, you know, the first thing is you've got to worry about yourself. You know, money is one thing, but if things really fall apart and they get in the zombie apocalypse situation, you do not want to be living in West Baltimore. That – you know, that's not a good idea. And by the way, historically there are places you just don't want to be at the wrong time. You did not want to be in Saint Petersburg in 1917 – nope. You did not want to be in Germany during the 1930s and 1940s. There are places you just don't want to be. And so you've got to think about – and you've already done this. You moved from next to Portland down to southern Oregon.
And so we keep saying, Dan and I, "Well, first make sure you've got that part figured out. You know, where are you? Are you among friends? Will you be able to live comfortably and well even when things start to fall apart?" And they probably will start to fall apart, and eventually there'll be problems – right now we're having what they call supply chain problems, but those supply chain problems can get much, much worse, to the point where you go into the supermarket and what you're looking for isn't there. And so you have to be comfortable in the way that you've set up your life, the place you've set up your life and the way. It's not just a question of money. So if I could give you one thought, it's think about it in terms – imagine the worse kind of zombie apocalypse you can and then ask yourself if you're prepared for it. [Laughter]
Dan Ferris: OK. Perfect, yeah.
Bill Bonner: And by the way, and we all hope that that zombie apocalypse will never happen and we'll all feel perfectly happy to say we were wrong. No zombie apocalypse? Great. I'm happy with that. I was wrong.
Dan Ferris: Ditto. I'm very happy – I'm very happy to have gone way too far in preparation for such a thing and have it not happen. But it's been great to talk with you and thanks for –
Bill Bonner: Good to see you, Dan, and good to see you looking so well, and I'll look forward to catching up later.
Dan Ferris: Yeah, we'll have to do this again.
Bill Bonner: OK, great. Thank you.
Dan Ferris: Wow. Really great to catch up with Bill Bonner. I haven't seen him in literally I don't know how long. It may be 10 years or more. As I say, he brought me into this business. He brought me into this world of finance and publishing and research, and I will always be grateful to him for that because it's been a really fun, wonderful ride since the first time we saw each other 24 years ago. And to me, he's just a very interesting – he's always been a very reasonable guy, but as you heard, you know, he's always kind of skeptical about the stock market and he always wants to hold gold and real assets and things. But of course, you know, his business is publishing financial research. I mean, the companies that he has started publish hundreds and hundreds of stock picks a year. So let's acknowledge that. He's in this up to his eyeballs whether he wants to be or not, you know, this bull market and financial assets.
I hope you take his advice to take care of yourself to heart as much as you can, right? I understand some people think, "Well, you know, I live in a pretty peaceful place and I don't think things are going to go so bad. You know, I live in Montana, in the suburbs... I'll be fine," or something like that. And it really is a personal decision based on your location, your physical location, and what you really expect things to be like in the next five, 10, 20 years, for the rest of your life.
But I think it's worth thinking about. That is the real point. You must think about that and make a real decision and say, you know, "Do I need to own a gun? Do I need to have food stored? Do I need some kind of a generator? Do I need to move to another state, move out into the country?" You've got to ask yourself these questions and come up with real answers.
So yeah, man, that was fantastic. All right, let's do the mailbag. Let's do it right now.
In the mailbag each week, you and I have an honest conversation about investing or whatever is on your mind. Just send your questions, comments, and politely worded criticisms please to fe[email protected] I read as many e-mails as time allows and I respond to as many as possible. You can also call our listener feedback line: 800-381-2357. Tell us what's on your mind and hear your voice on the show.
We have some good stuff this week. Michael B. is first up and Michael says he enjoyed the interview with Cam Harvey, and if you haven't listened to that, go back a week or so again and take a listen to Cam Harvey. It's really good stuff. But Michael B. wants to respond to a previous listener who wrote in and asked about inflation, right? So he was asking about the hidden benefits of inflation, and Michael B. is saying, "The real hidden benefit of inflation in the long run is ultimately forcing people to leave the centralized banking system out of necessity. Inflation is forcing people to look at the basics. For example, what do I get for my money, dollars? What do I get for dollars? What are the alternatives? How can I preserve the value I have created with all my hard work?" And then Michael B. says, "I think he," that previous listener, "meant that in the broad picture, looking back on this historically from the future, the policy of inflation will be the engine that forced the creation of a new monetary system that actually works. Inflation as an economic and political policy will ultimately be the demise of centralized control of money. It's forcing capital to find a new home."
He makes sure to say, "Please understand I despite inflation. I think it is the most insidious tax ever created." And he said some other things, but he finished up with this comment that a friend of his said: "The government is the only institution in the world that could take a perfectly good commodity like paper and make it worthless by printing on it. Have a great weekend. Regards, Michael B."
Well, thank you, Michael, and I get what you and the previous listener are driving at, and I didn't mean to push back too hard. I just – you know, like, the idea that there's anything good about inflation is probably wrong because everything's a trade-off. There's always a silver lining somewhere, right? But, man, I would – you know, we'd all rather not see it. I guess we acknowledge that. But your comments are well-taken and I think the basic idea is right. When something goes wrong, then rather than come up with a new system, I think you fall back on what has real value. And I think that's gold, and it may be – the new part may be crypto. We'll see how it all plays out. You know me. Prepare, don't predict. I own some crypto, I own some gold, but we'll see. Good thoughts, though.
Brett R. is next, and Brett R. says, "I was reading some philosophical material and some of your Investor Hour segments popped into my head. Specifically you have referenced Nassim Taleb several times, and specifically talked about defining something by what it isn't. I'm going to take a break right there, Brett, before I read the rest. Yes, I have talked about via negativa, and Taleb alternately says, you know, the learning of life is about what to avoid. And this has a direct correlation in – at least in investing in financial assets, and I would say in investing in anything. You know, the people who are most successful at investing in financial assets are best at avoiding losses above all else, are best at avoiding the bad situations above all else. And you see like Buffett and Munger, probably the most famous investors of our time, some of the very most successful, say, you know, we get a lot of result by avoiding doing stupid things. We haven't learned how to solve complex financial problems... we've learned how to avoid them. OK?
So, Brett R. continues, "Mathematically speaking, as that is Taleb's wheelhouse, this can be done through proofs. However, philosophically speaking, and more to the point, metaphysically speaking, it is dangerous to think this way and rely on such a manner of conceptualization. To define something by what it isn't is to run away from the goal which you set for yourself." And I'm going to stop it there, and Brett acknowledges this e-mail is the wrong platform to really dive into things in more detail. "Keep up the great work, Brett R."
So, Brett, I see where you're going, and the idea if I take your meaning properly is that if you have in mind what you don't want to do, you're going to wind up doing that, right? Race car drivers who drive around oval tracks say, "Don't look at the wall. You'll wind up driving straight into it." And they drive like an inch away from the wall at 200 miles an hour.
So I get what you're saying... however, time and experience have taught me that this is how it works. It's more about avoiding losses than it is about being a financial genius, you know? Investing in the stock market and making a lot of money in the stock market or trading options or trading futures or anything you care to name is more about avoiding losses than it is about being a genius and picking all the right trades. I mean, a really great trader can make a lot of money being right 40% of the time. That's less than half the time. That means he's mostly wrong. So obviously making a lot of money as a trader is about something other than picking the right trades, right? It has to be. If you mostly pick the wrong trades and you're still making a ton of money, there has to be something else involved, and that something is avoiding losses, cutting losses short. And we've talked about that many, many times. We wind up back on this topic so many times from so many angles. I understand what you're saying but, Brett, it just doesn't seem to work that way. I have to leave it there.
Next and last comes Chris D. Chris D. says, "Hi, Dan, longtime listener, love your show." Thanks, Chris. And he continues, "I just subscribed to TradeSmith along with a few other newsletters. The advice I hear constantly is to buy low, sell high, but it seems that all the recommendations I see in Stansberry and other e-mails occur is when a stock is at an all-time high. Can you explain? Why don't we get recommendations just after the lows? Thanks so much, Chris D."
Chris, I won't speak for anything but myself, OK? So the recommendations that you may see in the Extreme Value newsletter that I write for are based not on what chart pattern or whether they've made a new low or a new high. Sometimes when a stock falls we'll – and we've had it on our radar screen, we'll get real interested, and we've shown that and we've demonstrated that just within the past year. It doesn't mean they're making new 52-week lows or they're down 70% or anything like that. It just means that they've fallen into a range that looks attractive to us, and that's the point. What's attractive to me is simply a calculation of price versus value, and the price versus value doesn't care about whether it's low or high in terms of a chart pattern, right? And we've recommended stocks that are bumping up against new highs because we believe that the market is actually underestimating the growth over the next five years. We've found stocks that are bumping up against new highs or, you know, within a very low percentage, like within 10 or 20% or something of new highs. Like, they're not way down like I feel you're implying. And yet if you do the math that we do and use the model we use, they're priced for zero growth or something for the next three, four, five, or more years. And that looks like a really cheap stock to us, right? So if you're focused as we are on really high-quality business, they're mostly not going to collapse in price the way I feel you're implying.
It's a good question, though, and as I say, I can only answer for myself and for Extreme Value readers. I can't answer it for anyone else in Stansberry. But I'm going to take a wild guess that their answer is similar. And, Chris, if I could generalize about what the other folks at Stansberry are doing in relation to your question, I would say this. They're looking at the fundamentals of the business and the industry and they're putting a lot more weight on that than where the stock price has gone recently. That's all I'm going to guess, but I won't purport to be able to answer for them. But it's a great question. It's a very good question. Thank you, Chris.
Well, that's another mailbag, and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We provide a transcript for every episode. Just go to investorhour.com, click on the episode you want, scroll all the way down, and click on the word transcript, and enjoy. If you liked this episode, send somebody a link to the podcast and help us grow. Anybody you know who might enjoy the show, just tell them to check it out on their podcast app or at investorhour.com. And do me a favor: Subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts, and while you're there, help us grow with a rate and a review. Follow us on Facebook and Instagram. Our handle is @InvestorHour. On Twitter our handle is @Investor_Hour. If you have a guest you want me to interview, drop me a note at [email protected] or call the listener feedback line, 800-381-2357. Tell me what's on your mind and hear your voice on the show. Till next week, I'm Dan Ferris. Thanks for listening.
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