This week, Dan introduces a brand-new guest to Stansberry Investor Hour... But he's no stranger to Stansberry Research.
Dave Lashmet, colleague and editor of Stansberry Venture Technology, joins Dan for a fast-paced talk on innovation, technology, and, of course, investing. His Venture Technology service uses a "venture capitalist" investing approach and focuses on biotechnology firms. And according to Dan, Dave is "well known as a man who scours the Earth for great ideas," thanks to his boots-on-the-ground research and networking at countless conferences and meetings.
The two dive into Stansberry Research's history – including how founder Porter Stansberry actually hired Dave after meeting him in college... where Dave was Porter's professor. And Dave also regales Dan with tales of his former job as a self-described "mix between an engineer and a businessperson inside a tech company."
Dan also commends Dave for his recent recommendation to Venture Technology subscribers to sell their remaining stake in Nvidia (NVDA) for an eye-popping 1,400% return. And Dave gives an in-depth analysis of the biggest risks to the company, ranging from overseas geopolitical tensions to direct competitors like Intel (INTC).
He also offers insights on the dichotomy between venture capitalists and "angel investors" and reveals exactly what he looks for in a company. Finally, he shares what investors should watch out for when researching prospective portfolio candidates.
Editor of Stansberry Venture Technology
Dave Lashmet undertakes an intensive research process to discover under-the-radar technology, biotechnology, and medical companies poised for near-term growth. He was one of the first employees at Stansberry Research and is the editor of Stansberry Venture Technology. His unique insight into new technologies is responsible for some of the biggest gains in the history of the firm. Dave has spent 10 years teaching and writing about medicine and technology at major research universities, and he has done follow-up research at some of the most important facilities in North America, like Harvard Medical School, Johns Hopkins, MIT, and the Centers for Disease Control.
Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value published by Stansberry Research. Today we'll talk with my friend, technology analyst, entrepreneur, and inventor Dave Lashmet. In the mailbag today... questions about Russia and the European Union. I'll do my best, but I'm not making any promises about great insights. And remember, you can call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my opening rant this week, signs of a slowdown and what's next for stocks... I have an idea. That and more on the Stansberry Investor Hour.
Signs of a slowdown... Well, the one thing that caught my eye was this Barron's article about Mark Zuckerberg and what he's telling the employees of what used to be called Facebook, now called Meta Platforms. He says the company is facing one of the worst downturns that we've seen in recent history. That's a quote. And they've got almost close to 80,000 employees. He said like "I think some of you might decide that this place isn't for you, and that self-selection is OK with me." Realistically, there are probably a bunch of people at the company who shouldn't be here. Whoa. I mean, OK, sure. It's funny because you hear a lot of stories about startups firing people... large tech companies, in general, laying people off. But on the other hand, we had a report a month ago that Ford is hiring 6,000 union workers and they're ramping up capacity. They're investing $3.7 billion, and they were planning to build extra capacity to make their electric truck which has done extraordinarily well, better than they ever thought it would. But they were planning to expand the plant before the plant was fully built, so that's pretty cool for them but I mean, it's almost like a new economy, old economy, typical sort of a development that you get after you've had a huge bull market that focused on tech and downplayed old economy stuff.
And I've said that many different ways. Value versus growth, value was the old economy, growth was the new. Or commodities versus stocks, commodities are the old economy. And all those things, it's all reversed now. So oil is up, commodities are up in general, and there's all kinds of reasons to suspect that the prices will stay high. I mean, I know oil has come down a little bit lately, but it's still in an uptrend from early 2020. And there are reasons to believe that it could stay elevated because people are really shy – oil companies are really shy about investing because the government has told them they want them to go away forever. So you know, that makes you a little shy about dumping millions or even billions of dollars into the ground and investing in new oil production capacity.
So it's an odd time, and I said at the beginning of the show that I was going to say what's next, right? Signs of a downturn and what's next. And there's also the PMI numbers, the ISM manufacturing numbers. They came out, and apparently manufacturing companies, factories are now shedding workers, which that doesn't speak to a new economy, old economy paradigm. It's just a slowdown, right? And we've seen bond yields come down too. That generally happens when the economy slows down. So you know, I find that rather odd, and again, this points to potential for stagflation. Another thing that's coming down is housing. New listings shot up. I've noted that prices shot up 20% year over year, the biggest increase in the history of the Case-Shiller Housing indexes, but now the supply has finally responded and the new listings have shot up. And the pending deals, pending closing transactions, have declined. So sales are dropping, supply is rising, price is still fairly elevated. We'll see how that plays out. But you know, if it stays elevated, actually it wouldn't surprise me if the price of assets and goods and services and things stays elevated, I don't know if I'd be surprised. That's what you get with inflation. And of course, inflation causes people to tighten up their belts. They can't spend as much. They spend the same amount of money but they get a lot less for it, so they try to curtail their spending over here to make ends meet over there, etc.
Anyway, I find this an odd time, and I was looking at a chart of the bear market from 1929 to 1932, and I noticed it starts out with this horrendous crash, then a rally, and then a very orderly decline down to minus almost 90% on the Dow Industrials. And I was like, "Well, we didn't have that." We had – maybe we're having the opposite because it has been a very orderly decline down these first – just call it 20% to the recent bottom on the S&P 500 – or I'm sorry, 25% and like 33% on the Nasdaq. Not – you know, no big horrendous crash to start out with like in 1929 but the opposite. And I'm thinking, "Well, put that together with what we learned about bear market rallies, the later bear market rallies tend to be bigger than the earlier ones, right?" It's an overall tendency. It's not all the time, but it did happen in the last two bear markets that we talked about. And I'm putting all this together, and I'm thinking, "Wow, the second half of this bear market, whenever it starts, this might be the first 25%, it might be the first third, I don't even know, first half, we don't know." But the latter portion of this could get really, really hairy. And if history means anything, and I think it does, there's got to be some kind of a bigger rally around here somewhere before we can say that we're in the latter stages, right?
So what the hell do you do? I mean, prepare, don't predict. I'm stuck with that. I can't find anything – I can't find a better paradigm for investing right now than "prepare, don't predict." You're still holding plenty of cash. You're shedding all the garbage you have that's – some of which is never going to come back, just garbage businesses that did not live up to their massive hype during the bull market and they're down 50%, 60%, 70%. The money's gone, it's not coming back, so you're raising cash that way maybe, you know, in addition to hopefully holding more coming into this. If you're holding gold and silver, people complain about gold, but if you put gold next to Nasdaq, long bond, like the TLT ETF for the long-dated Treasurys. So put Nasdaq, S&P 500, long bond, whatever you want next to gold, and gold kicked all their butts. So you know, continue to hold gold. And of course, bitcoin is in that list too. It kicked bitcoin's butt too, and now bitcoin is – looks like it's struggling to get back above 20,000. It can't quite do it. And you know what I've said. I think the bottom is between 3,000 and 12,000, so I think there's a further crash from here in bitcoin.
Rough times. It's difficult to get through a bear market. It's difficult to get through a brutal bear market and be an investor. And I'll have more to say about this in response to one of the feedback questions which, you know, it's just a comment but it's a very apropos comment, and that kind of comment needs to be recognized. And I'm not going to tell you. I'll tell you in the mailbag, but that's all I have to say right now. Prepare, don't predict. It's looking alternately very inflationary and alternately kind of downturnish and deflationary. And I think that's the way it's going to be. I think you're going to get this constant "OK, what's next?" Oh, maybe it's deflation. Oh, what's next? Oh, maybe it's more inflation. And it's going to be incredibly difficult. You know, it was easy in the bull market. It was easy. Just buy what's going up. In this bear, not easy. In all bears, not easy, but this one has some characteristics to it that make it unprecedented. I mean, 3% interest rates... just call it in the long bond and 8%, almost 9% inflation, and it looks like we're going into a downturn. This cocktail, as Stanley Druckenmiller called it, has never been presented to us before. So be careful, continue to be cautious, and that is what I have to say for you this week.
All right, so let's talk with my friend, Dave Lashmet, who is an inventor. I don't think I knew that before. In all the things that Dave and I talk about over the years, I didn't know he was an inventor. So let's talk about that and more with Dave Lashmet. Let's do it right now.
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Dan Ferris: All right, it's time for our interview. Today's guest is my friend, colleague of many years, Dave Lashmet. Dave is one of the smarter technology investors I know. He is the editor of Stansberry Venture Technology. This is a monthly advisory that takes a venture capitalist approach to investing in the stock market. Dave is well-known as a man who scours the earth for great ideas. Dave, welcome to the show. So glad that we finally got you on the show after many years of knowing each other. I think the first thing maybe since you're sort of new to our podcast audience, maybe you could just give them a little bit of background, you know, how you wound up in this business of ours.
Dave Lashmet: Yeah, sure. So long story short, I was Porter's professor and friend. He was a nontraditional student. He was older because he transferred from another college, and we were friends too. And I studied both medicine and economics, and when he wanted a biotech analyst, he tapped me, so I left a university position to come join Stansberry Research. At the time, Porter was your roommate, so we've known each other for about 22 years.
Dan Ferris: I remember well. In fact, I believe you were the first analyst Porter hired besides himself in the very beginning, correct.
Dave Lashmet: Exactly. Yeah, I think I'm employee No. 4, and he's employee No. 1.
Dan Ferris: Yeah, I think I'm – I don't know, I must be six or seven or something like that. It has been quite a ride, hasn't it? It has been quite an adventure. Did you ever have any idea that we'd be working for this big public company that has all these divisions those many years ago?
Dave Lashmet: You know, because I work on the IPO side of the universe, a lot of companies I study are right at that transition point. It isn't that unusual for me. Becoming an IPO, becoming a public company was weird because as a private company, we just did things, and once you start to go public, you have to do things legally. And there's layers and layers and layers of – they're not middle management. They're "keep us out of trouble" people, but we never had them before. And we were adding staff a lot quicker than we were adding analysts, and I'm like, "Huh, that's a lot of overhead."
Dan Ferris: Yeah. Yeah, it takes a lot to become a public company. Now, I don't want the listener to think that we were doing anything illegal before we became a public company. It is simply that there are so many regulations around being one that you could wind up violating some random law or other and not even realize it if you don't have that army of people that Dave was talking about. So OK, I sort of come at it from a different angle. Porter's success never surprised me. Like every time there was another level to it, somehow it never surprised me, which I think is odd because I never knew anyone like that before. I never had anything to go on, but it kept getting better and better, and I kept thinking, "Wow, OK, yeah, it makes sense." So here you are today, and you've done a few different things though over the years, haven't you? You haven't always had the focus that you have today, correct?
Dave Lashmet: Correct. So I left for six years and did actual high-tech work and invented things and marketed high-tech products. So I was basically a mix between an engineer and a businessperson inside a tech company. So that was really fun because the patent process is a whole different realm of legalese that doesn't have to make sense because it's based on case law. And it's based on hundreds of years of case law that literally isn't like criminal or civil. Even the Supremes tend to not touch it because it's too weird. And it was really fun to learn how it is that you protect an invention. That part was really awesome. And when I meet tech people and I go to tech companies, I can meet the engineering staff and say I'm also an inventor and have approved patents, and that counts as cred, which is good because then people actually talk to me instead of giving me that jungle cruise version of their company presentation.
Dan Ferris: So I don't even know the legality of these things. Can you tell us what you invented? Can you talk about it at all?
Dave Lashmet: Well, when I was inventing stuff, it was about 10 years ago, and the patents are already issued, so once the patents issue, they are public information, so I did stuff on virtual reality 10 years ago.
Dan Ferris: That's pretty cool. So is it accurate to describe you as one of the pioneers of virtual reality or no?
Dave Lashmet: What's funny is it has been reinvented a lot of different times. So the patent landscape on virtual reality is like – I mean, you could probably say that Jules Verne or Arthur C. Clarke or someone invented it, right? So it's much more specific about if you want software to track how a head moves, this is one way that you can do that. and there's other ways, and lots of people simultaneously invented stuff, and it's a massive patent minefield and also a patent graveyard. What my company had was tech that worked, and so we confronted real-world problems that pie-in-the-sky inventors never actually faced and didn't have to solve because they didn't have equipment that worked. Because our equipment worked, we could see where the weak parts were that we had to engineer around, and that's what we could patent.
Dan Ferris: Wow. Sounds like things have changed a lot in 10 years. I mean, if the guys whose equipment works, if that's the competitive advantage, I would – I'm going to guess that that has changed a bit in the last 10 years.
Dave Lashmet: Yeah. I mean, how things step up is much more sophisticated, but the fact that Apple has not yet produced a device means that there's not a super easy slam-dunk solution yet. We're on gen 2 for the Sony gen 2 for HTC valve, gen 2 for Facebook, and yet there's still not an Apple product, which means there's basically not an awesome simple solution yet. It's still a hard engineering problem.
Dan Ferris: Oh, I see. I see. So in other words, when Apple comes out with it, you'll know that that leap has been made and that the problems are being solved in a more elegant way, I suppose.
Dave Lashmet: Exactly. Yeah, the first successful MP3 player, there were MP3 players that worked, but nobody really used them because they were kludgy. They would lose songs or their button sequence was really weird or ergonomically they weren't laid out very well so you couldn't do what you wanted to while you were walking or running or riding a bike... as opposed to like the scroll wheel that came out on the original iPod, and then it's like, "Whoa, this is incredibly useful." It's like right until something's incredibly useful, it's less than incredibly useful.
Dan Ferris: Right. Right. that's an interesting way to think about Apple too. I like that. But let's talk about – one company that I have to talk about, if we're going to talk about a big tech company with you, we should really talk about Nvidia, should we not. So this has been, what, a six-year saga from when you first researched and recommended investing in the company, and you are finally – I think I saw a recent update, you're finally completely out of the position, and it's up something like 1,400%. So you know, kudos to you, and what did you like about it in the very beginning? What I'm most interested to hear is what did you like about it initially and how much, if at all, did that change over six years?
Dave Lashmet: So when I was in tech world doing virtual reality, I was actually inventing video games as well that would play on hardware. So I know what a graphics card from Nvidia does. And Brett, who's currently our publisher, and I were in Las Vegas like six or seven years ago at the Consumer Electronics Show. And what Nvidia was trying to do was run a video game in reverse, look at the real world, and turn buildings into cubes that were on a one-point perspective that you were traveling along. And it's like I know Nvidia can do this in reverse because they can do this going forward from inventing the building and putting a character in a place and walking forward. So I knew that their graphics cards would be capable of this, and what they were doing was applying it to self-driving cars. And I'm like, "Yeah, it's going to work." It's going to work because the software is the same, but you're starting with an image and building a wire frame, not building a wire frame and starting with an image. But the compute is the same. Just like freezing natural gas is the same as thawing natural gas. Like Cheniere literally reversed the same process, and that worked to make an LNG export terminal in the U.S., although they originally built it as an LNG import terminal. So I knew – it's far more than intuitive. I knew with 10 years of background research that what Nvidia was going to do was successful, so we put them in the portfolio.
Dan Ferris: I just want to be clear about one thing. What we're saying here – I just want to make sure I understand it and also for our listeners' sake. What we're saying here is because you knew the technology could do essentially gaming, it could build that world from the bottom up, you knew that it could take the world as it is and build it the other way, right? It could go the other way. It could go from nothing to building the world in a software environment to the real world and translating that into a software environment. That's what you're telling me, right?
Dave Lashmet: Right. the only real change was an electric eye. So when a robot has an electric eye on an assembly line, it tries to find like basically originally in black and white the edge of whatever's coming down the assembly line that you want, even if it's a donut, right? it'll turn the donut into a bunch of little squares because its lenses are essentially squares. Its capture device is a series of squares or picture elements which we call pixels for short. So you'll see a pixelated donut going down. Well, if it doesn't look like a donut and looks like a shoe, then there's something wrong in your assembly line and the electronic eye stops the line and says this is not a donut. We don't know what it is. It might be a shoe, but it's definitely not a donut. So I knew that cameras had enough intelligence to see the edges of things. So really it's just adding cellphone cameras to Nvidia's card and you get self-driving. And that's literally what has happened.
Dan Ferris: Cool. Then go six years into the present, and what if anything has changed about Nvidia? I know that you're completely out of it now, so has something changed? Is there risk there now that wasn't there before? Or have they fallen behind technologically or anything like that? What has changed?
Dave Lashmet: So the big two – well, there's three. I listed three reasons, and the first one is that Intel is now trying to make graphics cards to compete directly with Nvidia. And before Intel left AMD and Nvidia to fight in that space, and Intel didn't want to enter it. But Intel brings its own manufacturing expertise that Nvidia was getting from overseas, and when you have a new competitor, then you're not splitting the pie two ways. You're splitting the pie three ways, and one of them is bringing something different to the table. So I knew that was going to be a threat moving forward.
The other threat was that Nvidia moved its manufacturing from Korea, South Korea at Samsung, over to Taiwan to get the newest cellphone-grade chip-cutting technology from TSMC. And in case you don't have a television set or a radio, China keeps threatening to take over Taiwan militarily. Well, if Taiwan is taken over militarily, there's no chips coming out, so Nvidia would face the risk of a crisis in the South China Sea that they have no figure product, unlike Apple, which also sells software, or Intel that makes its own chips. Nvidia had a new class of risk, which is that potentially, because of military events, it might not have any product, and that's disastrous if you only make all your money on product, on hardware, and none of it on software. So I don't know how to assess the risk but I also don't know how to assess the risk that my house catches on fire. But you know what I do? I buy fire insurance. I don't know if someone comes over and makes bacon and spills it on my wood countertops if they're going to burn my house down or not, but because I have fire insurance, I don't have to worry. So basically, getting out of Nvidia was a way to have fire insurance against Taiwan.
Dan Ferris: Well, I think it's interesting though that – how long has Nvidia been in Taiwan? I mean, if this is recent, you've got to wonder what they're thinking, right?
Dave Lashmet: So they started like June 1, so I sold before they moved so that I didn't have to worry about the risk of a fire, right? China's not going to check with us before it goes in Taiwan. It's going to do whatever it wants to whenever it wants to. So if you only look at China like you're an economist, you'll only see its economy. If you look at the fact that they divert money that could have gone to schools or hospitals and they build navy ships, you might recognize that China lost a navy war to Taiwan in the 1950s, and China doesn't like losing wars. As they get more powerful and they're diverting money from their national economy into the navy, they're doing it for a reason, and they're literally not going to ask American investors or economists if they can go to Taiwan. They'll go to Taiwan whenever they want to. Maybe never. Maybe somewhere. That's why it's like the risk of a fire.
Dan Ferris: OK. So this is prudent risk management then. And you know, this is standard sort of emerging market "get the hell out before it all goes wrong" kind of risk management and very understandable. So this is like – you know, I just wanted to talk about Nvidia because it's like one of your all-time greatest picks, if not your number one performer. Is it your best performer in history for you?
Dave Lashmet: I think so. I picked a vaccine company at the start of COVID that was making COVID vaccine, and that did pretty well, like 1,200%. So we did good, but 1,400% beats 1,200%.
Dan Ferris: It does. It does, but you know, it's a couple awesome returns there. Tell me about – like if we're in a bar and I don't know you, tell me about what kind of investor you are. What does it mean to approach investing in public companies from a venture capital perspective? Venture capital is a private thing, so what does that perspective mean for you?
Dave Lashmet: You know, often at places where you and I might meet, there will also be doctors and dentists and others around us socializing, and people who make money in one field and try and branch out and spend money in another field sometimes get sucked into being angel investors. And that's like when you don't have your own venture capital firm but you have lots of money and you start to be an angel investor, you run into a bunch of problems. One, there's no liquidity to get out. Two, whoever you angel invested in, you're sort of emotionally invested in, and you're willing to give them even more money because whatever they're developing is so awesome that just given more time and more money, they're really going to pay off for you. And angel investors end up losing 300%, 400%, and 500% of their stake because they not only can't get out, but they throw more money at the same problem.
And so what we do is look for companies that have gone through their teething pains at the earliest stages, but we still get liquidity, so we still get a chance to get out, and we also still get most if not all the upside. And the reason is we've chosen from a collection of winners, not a collection of everything. If you just go in the winner's circle at a horse race or a car race, you're going to find better horses and better drivers than if you looked at the starting field. So we try and intervene basically on the last lap, and that gives us both a way in with a chance to make a lot of returns plus a way out if we need it because it doesn't always work out.
Dan Ferris: It's pretty cool to me that there's plenty of upside left in a public company of this sort when the typical thing is for the original VC investors to make an exit when the company goes public. But for you to actually be able to invest on a very similar basis as they're exiting, maybe, or getting some liquidity, I think that's awesome. It speaks to, I don't know, the vibrancy and dynamic nature of capital markets. There's just opportunity in places where I would not – where you just don't expect it. So most of these must be small-cap stocks then, right?
Dave Lashmet: So how we modified it over time was to look for the best medicine or best technology and try and give ourselves a 10-to-1 reward-to-risk ratio. So the company I picked yesterday, OK, is a stable $5 billion firm paying a 3% yield and paying a mix between dividend and buyback, and its P/E is like 16.
Dan Ferris: Whoa, I did not expect you to say anything like that. That's awesome.
Dave Lashmet: But it's P/E of 16 like each of the last 12 quarters it made steady profit of the exact same profit. So as far as Wall Street's concerned, that company's standing still. Well, for the last 18 months, we've tracked a government project that had three candidates and then two candidates. In April, they said they had one candidate, and June, this month, three weeks ago, they said this company, which is either the largest small cap or the smallest mid-cap, depending on how you define it, is the winner. And they get $300 million from the government for free to make a finished prototype of their design. And if they succeed, it's a $10 billion payoff, and they have no upfront cost. We literally have no risk because they make money like a frickin' metronome, so our downside is like 10%, right, because we don't control the global market or the national market. We know that there's always some risk in investment, but we know that if they get $10 billion more in revenue in a monopoly where they set the price, the stock's going to double. So we have 100% upside, 10% downside, and that fits our 10-to-1 speculation, and we understand the tech. We tapped a super high-end scientist to figure out the tech, and it worked, and we think it works, and that's the bet we're taking. But the downside risk is so low because historically, it's a "steady Eddie," and nobody even knows what the prospects of this brand-new technology mean except us because we look at it like it's VC.
Dan Ferris: That is so cool. This is one of the coolest things I've heard on the show in a while. You basically bought a 10-to-1 option. You know, you bought an option on a dividend paying like cash gusher. That is very cool. You don't find this often, do you? That's great.
Dave Lashmet: Yeah, thanks. Sometimes the risk is higher and the reward is higher, so we've said you can make 200% but we know there's 20% downside. We've said you can make 500% but we know there's 50% downside. The problem with actual venture capital and actual angel investing is that it's infinity upside but infinity downside. It's like yeah, we don't want to touch that. We can't compute infinity. We're much happier where we know what the downside risk is and then measure it against the upside risk. It's kind of all our job is, is due diligence, right? What's the risk, what's the reward?
Dan Ferris: Sure, absolutely. Yeah, we're all underwriting risk with all of our research and recommendations. This has to be pretty rare for you. I think it's very, very cool, but just like can you give me – I don't know, is there like a ballpark of market caps that you generally find yourself within or are you just all over the map?
Dave Lashmet: I have earned my freedom, so I went to Paris before COVID. It was August 2019, and I had a lunch date. I live on an island in Washington. I think you know that. And one of my friends, like my in-laws' neighbor was in Paris at the same conference doing a marketing job and said, "Want to go to lunch?" And I go yep, sure, no problem. And to meet this guy for lunch, I had to pass 500 doctors in line trying to see a presentation. And I'm like what is that about? These are literally doctors voting with their feet, and each doctor sees 1,000 patients a year. And each doctor never has to pay for the medicines that they give to their patients, right? So I just walked past a line of like 500,000 prescriptions, and I'm like what company is that?
And it's Novo Nordisk. They were in line to see what Novo Nordisk was going to present, and Novo Nordisk at the time was like an $80 billion company. Guess what? It's a $160 billion company. It didn't have much risk because it's the number one insulin seller in the world, and there's some debate about how much insulin prices are, but they keep making a better insulin so that you don't have to take it after every meal but it can stay in your system for a week or whatever, right? So it's a better product than actual normal human insulin for people who have wiped out insulin in their bodies with Type I diabetes. So they have a stable business. There's some politicization about that, but we knew that, man, having walked past 500,000 prescriptions per year worth of product with that much demand that this company was going to make money, and it has. So although we're only up about 100% in Novo Nordisk, we had like no risk going in. so Novo Nordisk is a global company. It's based in Denmark, and it's big, but nobody else takes on foreign companies at all. But we're looking for a company that sells products globally, that manufactures at least part of its manufacturing system in the U.S. to make U.S. subscribers comfortable with, look, 50% of their staff's in the U.S., 30% of their research staff's in the U.S., 40% of their revenue comes from the U.S., so they're a global company but they're also very, very committed to the U.S. And yeah, they trade overseas. And yeah, they're a big-cap but we're going to make money because I saw a line of doctors that are going to make us money, and it has.
Dan Ferris: OK, so go to the other end of the spectrum for me and tell me about, you know, not the $80 billion company but, I don't know, the $80 million or $800 million company. You have an example of that?
Dave Lashmet: Yeah, that was a pretty fun story. So it was tiny. It's a Nordic company, and they have a drug that they don't know what to do with. So a lot of their doctors and management team are cancer doctors, OK. So they see themselves as a cancer company, but along the way, they invented a pill to treat and potentially cure osteoarthritis. Not rheumatoid arthritis, but osteoarthritis that affects virtually every senior eventually. And they don't know what to do with their asset, and it's like yeah, I know what to do with your asset. Finish the frickin' large-scale trials and make infinity money. Even in the U.S., we don't have socialized medicine until you're 65. Where do you think osteoarthritis clicks in? This is like old bone and old joint disease, right? It heavily targets older people who are on the federal medical plan, and in Europe, of course, it's also always already covered. So they're like in the sweet spot to make money, but they see themselves as a cancer company, and one of their cancer drugs had failed, so it hit Steve's criteria for cheap, hated, and not on an uptrend, but they're not really selling their story as an asset that they own that's a pill for osteoarthritis that clearly worked in trials. And so we could get it for a dime.
Dan Ferris: Nice. I assume you don't want to name it because it's for paying subscribers only at this point.
Dave Lashmet: Yeah. So you know, my subscriptions are more expensive, basically, for a reason. I can go to medical conferences all over the world. I can hire outside doctors, physicists, lots of university professors to get a second opinion and a third opinion from whatever my team thinks, and all that's really expensive so we don't give it away. Bill Bonner decided, right as you and I were starting, when paper newsletters went to the Internet that he was going to build a firewall and make you pay. Why? Because our stuff's valuable. So because it has value, we're going to charge for it. And our business has worked ever since then because we do know that our ideas are valuable.
Dan Ferris: Right. The price tells you a lot about the value, right? If it's free, maybe it's worthless. I think a lot of people have learned that lesson in the past 20 years. Fortunately, as you say, we got it right early on, which is why you and I live in the lap of luxury up here in the Pacific Northwest, among other reasons.
Dave Lashmet: Yeah.
Dan Ferris: Yeah us. So Dave, we're near the end of our time here, and I feel like we just scratched the surface of a few topics. I feel like we could have talked for hours, but I do want to ask you my final question, and I can't wait to see what you come up with. The final question is the same for every guest, no matter what the topic, even if it's a nonfinancial topic, always the same final question, and that is simply if you could leave our listeners with a single thought today, what would it be?
Dave Lashmet: I mean, for the last two years for COVID, I would have said be safe out there. Right now, because we're in a bizarre inflationary environment and COVID's mostly gone and certainly been dismissed from all of our minds, I'd say this about the rebound or the bull – the end of the bull and the start of the bear and the recovery. I would say this for investors. Companies that are shedding employees are in a lot more trouble than companies that are hiring employees. So one noted pundit said Netflix is going to come right back, and it's like Netflix is firing people. Even Netflix doesn't think it's coming back. If Netflix thought it was coming back, it wouldn't have just fired people. You know who's hiring people? General Dynamics. They're trying to build basically more submarines to fend off the Chinese and Russian threat, and they're hiring workers. They're hiring as many workers as they can hire. And if you had to invest in something for the future, do you want to invest in a company that's shedding employees or invest in a company that's hiring employees right now? That's my takeaway.
Dan Ferris: Well said. Yeah, thank you for that. All right, Dave, thank you for coming on the show. Like I said, I feel like we have a lot more to talk about, so we'll have to get you back on here sooner rather than later I would hope.
Dave Lashmet: OK, sounds great.
Dan Ferris: Always a pleasure to talk with my friend, Dave Lashmet. As you can tell, Dave is an extremely bright, extremely well-informed guy on complicated technical matters inside some of these companies. I love talking with him just for that reason. It's like every time you talk with Dave, you feel like you've earned a PhD in something new. It's really cool.
All right, let's take a look at the mailbag. Let's do it right now.
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Dan Ferris: In the mailbag each week, you and I have an honest conversation about investing or whatever is on your mind. Send questions, comments, and politely worded criticisms to [email protected]. I read as many e-mails as time allows and respond to as many as possible. You can also call the listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show.
First up, as I alluded to earlier in the show, is Greg N. And Greg N. simply says, "I have reached my uncle spot on pot stocks' nearly perfect downtrend." I hear you, Greg. I hear you loud and clear. I made a pot stock recommendation in the Extreme Value newsletter, and it has been obliterated. I can't even believe it. I mean, this sector has tailwinds, the stocks are absolutely dirt stinking cheap, they're well-run businesses, the fundamentals including the prospects for nationwide legalization of recreational marijuana are excellent, and it's preceding a pace among the states are legalizing one after another. And I just don't get why people are selling and selling and selling and selling and selling.
Having said that, it has been such an orderly downtrend that I think it has to – you know, it's got to bottom out soon. From the top, it must be like 80% by now, and so it looks like Nasdaq circa 2002 or something, you know, or Dow Industrials circa 1932 or something like that. I mean, just looks absolutely brutal. And I personally am inclined to stick with it because it just becomes more and more attractive every single day. You know, that's tough to stomach when you're down 50%, 60% I know, but I just – I really am having trouble letting go of this one. But you're right, Steve, if you reach your uncle point, you reach your uncle point, and there's nothing you can do about it. You have to admit it. And you can say, oh God, I've got to get rid of this, it's driving me nuts. I've lost too much money, and you know, you've got to do what you've got to do. I totally understand that, and you're right to point it out is why I included your comment today. You're right to point out and say can't take it anymore. A bear market is no time to try to fool yourself about what you can and can't handle.
All right, next comes Andrew P. I'm not sure I'm going to have much for you, Andrew, but I want to get the question out there because it's an interesting idea. Andrew P. says, "Longtime listener and frequent correspondent, but your talk with Steve Gorelik made me want to get your thoughts and his." Sorry, I was unable to get Steve's thoughts in time for the show. I'll try to do it for next week. Andrew continues, "I have been a longtime holder of the Russian ETF RSX. I bought more in the wake of the war breaking out as I have always thought of it as a deep-value commodity play. Sure, there's plenty of other industries covered, but mostly oil, gas, and metals. Price to earnings, price to book, and dividend yields were too cheap for me to pass up. Like all other Russian holdings, the ETF is halted. Clearly there are many possible scenarios for how this plays out. The war will at some point end, sanctions get lifted or not. Just curious your opinion on how this eventually gets worked out and if I'll ever be free to trade this ETF again, not that I have a choice, but for what it's worth, I still believe in my thesis and I'm comfortable holding this long term but wouldn't mind a more realistic price print in my brokerage account than the $5.65 it's halted at. Andrew P." And then he included something in his e-mail that showed that the individual components add up to something like $24 a share and it was halted at $5.65.
This is a huge question mark, but it's very interesting to me because talk about buying when there's blood in the streets. I mean, you bought the literal blood in the streets of the Ukraine, and you know, it was $5.65, and now maybe it's worth $24 if you could get the money out of Russia, but the obvious of course is that this is one of the risks of what we might just call generally emerging markets investing, political risks that just take all the company fundamentals off the table and make them irrelevant. And how it'll play out, I have no idea, Andrew, and frankly, trying to figure that sort of thing out, to me, I have to admit it seems like a waste of time. If I owned this thing and couldn't trade it, I'd just write it off and I'd probably not even think about it again. And who knows, one day maybe you will get to trade it again. I have no idea. I would suspect – if I had to say right now, I would suspect it would be longer than we ever thought because we're seeing something happening before our eyes here in our world.
Two weeks to stop the spread became 2.5 years of lockdowns and utter economic worldwide devastation and major societal conflicts around freedom of movement, which is guaranteed. The freedom to peacefully assemble is guaranteed in the U.S. Constitution, but we didn't have it. And it was even worse in places like Australia, New Zealand, etc., all around the world where people were locked up – where healthy people were locked up. And in China, we saw this, people locked up in their apartments and losing their minds, as you would expect. The effect on children has been widely reported. I mean, it was horrible. And we started out with two weeks to stop the spread. So here we are with a short – Putin thinks it's going to take two weeks or whatever to conquer Ukraine, and that was February and now it's July, and the thing just goes on and on and on and on, and we don't know how deeply – like the U.S.is in it I won't say up to its eyeballs, but we're in it and we're involved enough, and I don't know. I think owning defense companies makes a lot of sense to me because the U.S.is now on a war footing economically, no matter what anybody wants to think.
But yeah, I wish I could – I wish I was the kind of person who could predict these things, but I'm really not, and I don't – I think hardly anybody is. I think the people who get these things right, they get one thing right and then they're known for making predictions, and they never make another good one. I mean, I could name names. It wouldn't be very fair to them, but lots – some people predicted a big crash in 2008 and a big crisis and a bubble and the popping of the bubble and widespread bank failures, blah, blah, blah. I wrote about that in the spring of 2008 that there were going to be a lot of bank failures. But you know, then some of those folks – again, I won't name names to be polite – they were known for all the predictions they got wrong after that. So you know, it's – predictions are just a thorny, thorny thing, and I feel like you're asking me to kind of make one here, what's going to happen, what could happen. I don't know. I don't know what the realistic outcome is, but I'm glad that you wrote in, you see, because thinking about all this is important. And I hope that the comments that I did have for you were useful.
Finally this week we have our faithful listener and longtime frequent correspondent Lodewijk H., who sent me a video. Love the video, Lodewijk. That's great. You should do all your questions that way. I loved it. But the question I got out of it was what's the best thing to buy to benefit from the collapse of the European Union or the euro?
Well, this is another "prepare, don't predict" type of a thing, isn't it? Because the collapse of the European Union or the euro, this is something that we cannot possibly fathom the mechanics of how it will actually play out if and when it happens. Who knows how it will happen? Are we going to wake up one day and there's a euro and a European Union, and then we wake up – you know, that's Monday and then Tuesday we're going to wake up and there's no more European Union and there's a French franc and a German deutsche mark and an Italian lira and all the other currencies back the way they were before? I find that hard to believe, but maybe. Who knows? I mean, we know which one we'd want to own, right? We'd want to own the German currency probably. And who knows, maybe the way to do this is to own assets that would be worth plenty of money in all the other currencies, you know, so high-end German real estate. I have no idea. I know I'd want to own gold. I don't care what anybody says. I'd want to own gold. You know, who knows, bitcoin might even do well in that scenario. The collapse of a major currency – this is a major, major currency, and if it really broke up, if the European Union broke up and the euro just collapsed and went away, I have to believe somebody would buy some bitcoin, but it's a tough question. And other than buy gold – dollars – I bet you dollars would go up. I bet you the U.S. dollar would go up because people would sell the daylights – the market would see something coming and they would sell the daylights out of the euro versus the dollar, and that would probably be a fantastic trade if you could get into it early enough, you know. Just short the euro dollar – the dollar-euro cross. Anyway, that's all I've got for you, Lodewijk. Good luck with that. I hope it doesn't happen. I hope you don't have to figure out what to do to benefit from that.
Well, that's another mailbag, and that's another episode of the Stansberry Investor Hour. Hope you enjoyed it as much as I did. We provide a transcript for every episode. Just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy. If you like this episode and know anybody else who might like it, 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. Have a guest you want me to interview? Drop us a note at [email protected] or call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. Until next week, I'm Dan Ferris. Thanks for listening.
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