In This Episode

Dan Ferris joins the Stansberry Investor Hour to tell you about the safest way to invest your money in the stock market. He and Porter recall the very first idea that launched Dan’s Extreme Value newsletter with a classic illustration of value investing which would make Warren Buffett and Benjamin Graham proud. Dan shows you why seemingly boring companies can be investments that allow you to sleep well at night, but also have the potential to double or triple your money.

John Gillin from the Stansberry NewsWire service joins Buck for a review of all the best and worst technologies he recently saw at the 2018 Consumer Electronics Show (CES) in Las Vegas. VR shopping, dual-screen cell phones, and autonomous vehicles were some of the big themes on display. John tells you when you can expect a driverless car to pick you up in front of your house, or see a long-haul truck on the highway with no one at the wheel.

Listeners write in about the false missile warning in Hawaii, the use of blockchain technology in the options markets, and the three cocktail recipes Porter and Buck can use for any occasion.


Featured Guests

Dan Ferris
Dan Ferris
Editor, Extreme Value
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John Gillin
John Gillin
John Gillin began his career as a sales trader in New York City at boutique investment bank Wertheim Schroder. After seven years at Wertheim, John was recruited to come work for Baltimore firm Alex. Brown and Sons Inc., where he covered some of the largest hedge funds in the world, as well as major mutual funds like T. Rowe Price and Wellington.
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Transcript

Announcer: Broadcasting from Baltimore, Maryland, and New York City, you're listening to the Stansberry Investor Hour. Tune in each Thursday on iTunes for the latest episode of the Stansberry Investor Hour. Sign up for the free show archive at InvestorHour.com. Here are the hosts of your show, Buck Sexton and Porter Stansberry.

Buck Sexton: Hey everybody, welcome to this week's edition of the Stansberry Investor Hour. I'm Buck Sexton and with us, as always, our fearless leader Porter Stansberry. Today we welcome to the show Dan Ferris, editor of Extreme Value and one of the original analysts to join Porter in building Stansberry Research back in the late '90s. Dan is here today to give you the latest update on his Extreme Value portfolio. You may remember Dan from Episode 21 when we did an American Consequences takeover with PJ O'Rourke and he told you all about how Wal-Mart may have an advantage over Amazon after all.

Porter Stansberry: Or not.

Buck Sexton: We look forward to hearing more about that from Dan today. We'll also check in with Stansberry Newswire senior analyst John Gillin, who was recently out in Las Vegas at the 2018 Consumer Electronics Show. We'll hear from John about the latest tech products that are about to hit the market and see what the biggest names in tech have in store for all of us in the next year. I want to send our thanks out to all the listeners who've been writing into the show leaving comments on the Stansberry Investor Hour iTunes and YouTube pages.

Search for "Stansberry Investor Hour" on iTunes or YouTube and you'll find each episode listed along with comments and discussion from listeners just like you. Check it out and plug into the conversation. You can also join our free weekly e-mail list by going to InvestorHour.com and entering your email. When you sign up you'll get access to all the show transcripts, a notification each week when we publish new content, links for what we talk about on the show, and much, much more.

All right, let's get this party started. Dan Ferris is the editor of Extreme Value and one of the original Stansberry Research analysts, joining Porter in 2000. Dan's research focuses on some of the safest and yet most profitable stocks in the market, great businesses trading at steep discounts. His strategy of finding safe, cheap, and profitable stocks has earned him a loyal following, as well as one of the most impressive track records in the industry.

In fact, Dan holds three of the top 10 all-time highest-returning closed positions in the Stansberry hall of fame: Constellation brands with a gain of 631 percent, Prestige brands with a 406 percent gain, and MDTL or MedisTech with a return of 333 percent. Dan is an avid guitar player and lives in the beautiful state of Washington. He's appeared on Fox Business as well as The Street with Paul Bagnell on Business News Network. Please welcome to the Stansberry Investor Hour Mr. Dan Ferris.

Dan Ferris: Hello. Thank you. Thanks, Buck, for the introduction.

Porter Stansberry: Thanks for joining us. Buck, I don't know how much time you spent with Dan Ferris or not, but he's our resident curmudgeon. He's been with us since the beginning unhappily. I always feel like Dan is a couple hours away from quitting, throwing his hands up in disgust and leaving it all behind. See, Dan actually really loves finance and investing and he hates marketing, but he works for a newsletter company and basically what we do is force him to market all the time and he pretty much hates it.

But he does write the only newsletter that we publish that I don't have any ground rules for in terms of new subscribers. We don't publish Extreme Value to make money. We publish Extreme Value because I really like Dan Ferris. So Dan has the catbird seat in our company. He's the only guy that doesn't worry about losing his job if no one reads his newsletter, and pretty much close to nobody reads his newsletter.

Dan Ferris: These days it's many fewer than it was a year ago.

Porter Stansberry: Dan, how many dedicated subscribers do you have now? What are you down to, 700?

Dan Ferris: Not that bad; 1,700. It's bad enough.

Porter Stansberry: That's pretty bad. So the average file size of a good newsletter is a lot closer to 100,000. So Dan is down there in the wrong end of the 1 percenters.

Dan Ferris: Yeah.

Porter Stansberry: So Dan, let's talk about that. Can you explain to Buck why nobody is interested in value investing? And when I say nobody, barring the 1,700 people that are smart enough to read your newsletter. What is it about what you do in finance that doesn't attract an audience?

Dan Ferris: Well you know value investing -

Porter Stansberry: A.k.a. How to Fail in Publishing 101.

Dan Ferris: Yeah, how to fail in publishing. Just say value investing is your beat and you failed. You're way ahead of the curve there. So if I had anything to say to Buck about all this, I could sum it up pretty well. If you say "value investing" to anyone reading newsletters, it's sort of like wetting your pants in a dark suit. It gives you a warm feeling, but nobody notices. It's sort of this always boring topic.

Porter Stansberry: And we wonder why Dan doesn't have any readers with metaphors like that.

Dan Ferris: Yeah. There's always at all times, all moments, no matter what's going on or what isn't going on in the world, there's always something sexier than value investing.

Porter Stansberry: That's the nature of it. It's the opposite of the headline indicator. So you guys know publishers, they figure out what you're greedy for and what you're afraid of and they put it on the cover of their magazine. So every magazine in the world right now is going to be all about bitcoin, and that tells you that there's a mania for bitcoin because bitcoin has gone up a ton and it's very exciting to people, and one of the reasons why it's very exciting is because no one understands it so it's completely novel.

Dan Ferris: In fact, Porter, that's a very important point. You can't make that kind of money that fast if something actually has value that people understand, and I know that better than anyone.

Porter Stansberry: That's right. So the thing about value investing is it's companies that are very easy to understand, that don't change very much, that have a very well-known cash-producing ability, and then you're buying that sort of plodding turtle of a company if you will because you know it's safe and you're going to get a good result as opposed to latching on to that hare, that bunny that's skipping forward and then it's going to crash and burn. So what's so funny about it is if you wanted to be successful in publishing you would never, ever publish anything that's about deep value investing because by its very nature it cannot work as a publishing enterprise because it is the opposite of exciting and new.

Instead it's old and boring, and if you ever go to a value investing conference you're gonna find that everyone there is over the age of 60 either in fact or at heart, and it's just the most stodgy, boring place in the world. But the flipside of that is it's actually a really great way to invest. So one of the reasons why we publish Extreme Value is not because we're making any money on the product,becauseunfortunately we're not, and it's not because we expected it to be popular; we know it never will be. We're publishing it because as hard as it is to believe, Dan and I actually really care about teaching people how to do this because it is by far the best and safest way to invest in equities.

So Dan, let's start at the basics. You recall our very first Extreme Value project. It was the old folks clothing company, the catalogue business Blaire. So Buck, there is this company called Blaire, it might still be out there. It was taken private, because it's no longer a public company. I don't know exactly what happened to it, but it was a catalogue business and they had a great business because they tracked people according to age. So they wouldn't send you a catalogue unless you were at least 70 years old. They had a dominant position in all the old folks homes, you know?

So if you're an older person, you're looking for different things and clothing than younger people are. You want staid fashions and they had those in great abundance. But what was nice about it is they didn't have to worry about fashion changing, so they could just make the same crappy clothes year after year after year, and they were selling them to the same nursing homes and the same retirement communities. So it was a very low-cost clothing and low-cost marketing operation, and the result was they were making something like $50 million a year in cash year in and year out, and we bought that company for around $100 million.

So it was like two or maybe three times the cash they were making every year, and Dan and I figured if nothing changes we're going to make a lot of money here. Of course we were right and some private investors followed us into that stock, bought us out for a quick double, and we were off to the races. The thing that we talked about doing was we wanted a newsletter where you could be so certain about the cash flows and the value of the business that if you had to put all of your money into one stock you could do it.

That's how safe and secure we wanted the stocks to be in Extreme Value, and that's why it's the only newsletter we publish that doesn't use any kind of trailing stop losses, which can cause some problems. We of course had mistakes and blowups, but I'd say the number one thing that sets Extreme Value apart from all the other recommendations that we make across Stansberry Research is that it has to be safe enough where Dan can envision putting his entire net worth into the company and owning nothing else for the rest of his life. It's got to be that good. So then the question is, well, how do you find those companies and how can you be so sure? That's where I've got to bring in Dan.

Dan Ferris: Well you know, I wouldn't absolutely say at this point that every single pick conforms to that description especially nowadays. It's extremely difficult to find them. But I do believe miracle of miracles at this moment in early 2018 with everything on earth so expensive that we actually have found another one of these and we just recommended it in the January issue, and it really is, if you only let me have one right now, that's the one I'd pick.

In fact, I can tell you at Stansberry we're contractually prohibited from putting money into the stuff we recommend, right? We stand and fall on our ability to pick stocks for you without any other conflicts whatsoever. I used to own this thing and I had to sell it in order to put it in the newsletter, and it was virtually my only equity position and it was fully invested in that one.

Porter Stansberry: Nice. That's a great story. So I don't want you to give away the new pick, but what is it about the business that gets you so excited?

Dan Ferris: There's a couple ingredients. That's the thing, it's the constellation, when it all comes together in one place. So when you get a really great cash-gushing business model that doesn't require a lot of capital to keep it going and keep it growing, you get a world-class management who you know well and you can count on their behavior in tough times. You can count on these people to allocate capital and do the right thing at the right time. And with a great balance sheet to boot, which is the product of course of a superior management.

You put all that together and you get the right – you pick the right moment when the thing is cheap and people don't like that industry and haven't liked it for some years now, and man, you just get these once-an-eon picks where you say yes, this is it, that's the one, and this is the one.

Porter Stansberry: Yeah, that's the other thing. There's no way to have a newsletter about this, but I always love Buffett's idea of the 20 punch cards.

Dan Ferris: Punch card investing. Absolutely.

Porter Stansberry: That you should only make 20 investments your whole life and if you could only make 20 investments your whole life, man, you'd choose them a lot more carefully.

Dan Ferris: Yeah, you would.

Porter Stansberry: And you'd hold on to them through thick and thin because you don't have any more.

Dan Ferris: Right. The holding through thick and thin is – as you say, it's very difficult, and in fact you describe me as this catbird seat guy in the business. I'd almost have to be to do this. I'd be out of business in a month or two if it weren't this way, but I'm grateful for that and Mike Barrett and I, we found a couple that are just that good.

Porter Stansberry: So I want to talk about one you can speak about, because I don't want you to give away your latest pick, unfortunately. Folks out there, this is a free podcast. If you want one of Dan's 10 best investment ideas of all time you're actually going to have to pay something. Sorry to break it to you, but we can talk about Altius for a minute. Altius is one of those companies you put into your 20 punch card selection I would wager.

Dan Ferris: Absolutely.

Porter Stansberry: It's been one of your top picks for several years now, and interestingly it didn't go straight up. It went down for a while and you had to suffer.

Dan Ferris: Absolutely. It peaked. I mean I've been covering this thing since 2009. It was $7.00 then and it had most of that $7.00 in cash. It was a totally different company. The royalty revenue at that time was $3 million, not $70 million. So I held it through thick and thin. I got to know the management. They're absolutely the best in the business, and they have built an incredible royalty company, and I counted on their behavior and they have not disappointed.

So when the stock roared up to Canadian dollars $16.00 and then collapsed in half, there's nobody else at our company who would've been in the thing at that point. But in fact I thought it was my job to know. If we're going to pick these kind of stocks and you're gonna publish Extreme Value this way, it's my job to know, yes, this is the one you can stay in, and I think I did a pretty good job, as good as you can do at being a rock of consistency in telling people don't sell this. They're growing the business.

They're fantastic at what they do. They work that business model better than anybody, and everybody in the industry knows it. When they talk about the prospect generation model they always say, "Yeah, look at Altius. They know what they're doing with it."

Porter Stansberry: Yeah, they do a great job. So you've been in that business for almost 10 years now, and what are the total returns if you'd bought originally with you in '09?

Dan Ferris: So if you bought originally in '09 you're double and then some and you're up about – I think the compounding at this point is around 8 or 9 percent a year, so it's pretty modest.

Porter Stansberry: That's pretty good. Double your money and now you're getting paid almost 10 percent to hold it.

Dan Ferris: Right. It's excellent and you had chances. You see, Porter, most people in the newsletter business, they got a string of recommendations a mile long and you hardly pay any attention to any one individual. But you've allowed me to say, no, this is the one to buy.

So with a great deal of credibility then I can go back and say, "I never told you to sell this. I always told you to buy it and you could've bought it a lot cheaper than it is today." And it went up and down. You could've gotten it really dirt cheap compared to what my maximum buy price is. So some people have done even better if they'd been able to buy more shares along the way.

Porter Stansberry: So give me one more example, not Altius, of a classic extreme value. It may not be a buy today because prices are high right now obviously in the stock market, but if the stock market were to have a bear market, if we were to see S&P go down 20 percent, we were to see small stocks go down 35 percent, we were to see volatile stocks go down 50-60 percent, another 2002, another 2008, what would be the number one thing on your buy list? What one of your 20 punch card stocks would you most like to have the chance to buy at half today's price?

Dan Ferris: Oh, at half todays' price?

Porter Stansberry: Yeah.

Dan Ferris: At half today's price I'd get back into Constellation brands in a heartbeat. What are people going to do, stop drinking beer and wine?

Porter Stansberry: Let's talk about that. How did you find that company and what was it that attracted it to you, and why did you buy it and then I think you sold it. Why did you sell it?

Dan Ferris: I sold it because I'm stupid. Let's get that out of the way right away. Now it's extremely expensive. We're talking about 50 some odd times the maximum free cash flow that Mike Barrett and I can see the thing producing, but still sold it early. However, that was one of the early things that Mike Barrett brought to me, and it took him a month and a half to sort of beat my dumb ass over the head with it and he got through to me and I was like, wow, this is exactly what we should be doing.

It's this boring thing. People are always going to drink beer. At the time it was more of a wine company than a beer company, which it is now, and I thought, yeah, people are always going to drink. It's come off of a difficult time. They bought Mondavi and they paid a lot of money and they've had some debts.

Porter Stansberry: They got started as a stock promotion out of Vancouver and their first product was a really bad wine cooler. That's a true story.

Dan Ferris: Yeah, that doesn't surprise me, actually.

Porter Stansberry: And my friend at Rocker Partners, Cohodes, they were one of his first big shorts.

Dan Ferris: Oh, Marc?

Porter Stansberry: Yeah, Marc Cohodes shorted them until they wised up.

Dan Ferris: They did wise up.

Porter Stansberry: Then they got on the straight and narrow and they've been buying and building great brands in the alcohol business for 40 years now.

Dan Ferris: Yeah. It's incredible and there was an incredible moment there in 2011 to get the thing for like six or seven times.

Porter Stansberry: So how does their model work? What makes them so different than, say, a much more mediocre business like Coors was for a very long time?

Dan Ferris: With Constellation I feel like they kind of got lucky because what happened was they owned a stake in Crown Imports. They owned 50 percent of it, and then there was a deal between ABN Bev wanting to buy Groupo Modelo, and of course the antitrust people got involved.

Porter Stansberry: They had to sell something.

Dan Ferris: They had to sell something and they sold the other 50 percent of Crown to ABN Bev. That prompted ABN Bev to make a big investment in a new brewery in Mexico and it gave them the right to sell Corona, number one beer import in the United States, and to start other products under that name.

Porter Stansberry: You lost me. I think you maybe mis-said something. It was ABN Bev that had to sell Corona, wasn't it?

Dan Ferris: No, no.

Porter Stansberry: No? I've got it mixed up.

Dan Ferris: I'm sorry, yes, you're correct. ABN Bev – I might have misspoke. I meant Constellation. ABN Bev was the company that had to sell. Constellation brands got to buy the other 50 percent. I'm sorry, I misspoke. I meant the Constellation brands is the one that got to buy the other 50 percent, so now they own 100 percent of Crown. They made a huge investment in Mexico.

Porter Stansberry: And Crown owns Modelo and Corona.

Dan Ferris: Yeah. Corona is the one. That's the important one. So now here they are, they were this wine company for a long time and now they're this huge beer importer.

Porter Stansberry: Right. You say they got lucky, but they have been making smart acquisitions in the alcoholic beverage space for a really long time.

Dan Ferris: Sure, sure. Owning the first – owning Crown Imports at all and being in that position was obviously more than luck. By luck I meant it was finally time for ABN Bev to make a new acquisition and it kind of played right into their hand and they have jacked up the free cash flow. I mean, when we started, it was like a few hundreds of millions, and now we're looking at well over a billion a year that you can count on. Of course it's 50 times that, so it's not exactly dirt cheap.

Porter Stansberry: Yeah, well that was a homerun. What was your total return for subscribers, your hold of Constellation?

Dan Ferris: Boy, don't quote me here. I want to say 600 maybe.

Porter Stansberry: Around 600 percent, something like that.

Dan Ferris: Yeah, 680 I think, way over 600.

Porter Stansberry: And you say you're stupid for selling?

Dan Ferris: Well yeah, you know, to be fair to myself, it's a typical value thing, right? You buy early, you sell early. I can quote people like Baron Rothschild and all the other people over history that said, "I always sell early" and they were rich and I can say, well, that's what you do when you're a value investor, but one would hope that one could learn over time that maybe you won't make this mistake. Overall I have no regrets because we stuck with the pick for quite a long time, and let's face it, let's be honest here, in newsletter land this is unheard of to stick with things like this for years and years. I mean 2011 to -

Porter Stansberry: I've got Hershey. I've got a couple.

Dan Ferris: Sure. Well yeah, you and me and who else, right? This is the club right here in this room.

Porter Stansberry: I get what you're saying. What about this though, it seems like in your discussions about all of these businesses you keep focusing so much on management. Is there something about knowing and trusting the managers that's more important to value investing?

Dan Ferris: I think there is, because look, you're buying these things usually at a moment when everyone else hates them, and all the numbers that are published are a historical fact. Everybody knows them. So you have to have some reason why you're looking at the present and the future and saying, okay, the present may be bad, but we think the future is going to be better. And you can't just use numbers for that because as you know, you've done all this work on things like capital efficient companies.

There are lots of companies that get through that screen you wouldn't want touch with a 10-foot pole, with any screen, right? With the best screens you could find. The numbers just, when you're doing these high conviction kind of recommends like we do in Extreme Value, the numbers aren't sufficient. You have to look at the management behavior, and like you say, making lots of good acquisitions, that's one of the most visible kind of easy ways to look back and say, wow, they made a bunch of good decisions here and it's worked out until now and like I said, usually you're finding them when there's been a little glitch in the matrix so to speak.

So you look at that behavior, you say hey, it hasn't changed so much. It's a good business. We think it's going to be better and we can get it cheap now and away you go.

Porter Stansberry: If you want very thorough research into stocks that you can basically put all your money into and hold forever, that's the epitome of what we're trying to do with Extreme Value. Now every recommendation doesn't work that way, right? Every single recommendation can't be one of the best recommendations that Dan has ever made, but he does have the ability to point out to you, okay, this is a hall of fame one, and we have a hall of fame pick right now in the portfolio. I happen to know what it is, and they're the best operators.

If you want to talk about a management team, this is the management team in this space. Very few outsiders know of these guys. It's kind of an insider secret if you will, and no doubt in my mind this stock is at least to double in the next 12 or 14 months and a ten-bagger over five years or so. This will be one of the best recommendations that Dan has ever made. I know these things just like I told folks when we bought Hershey, this is gonna be the best recommendation I ever make.

It's a long-term thing. It's for your serious money. It's in the January issue of Extreme Value. I urge you to go get a copy of it. You can go to extremevalueoffer.com to see our best pitch. Extremevalueoffer.com to see our best current offer for Extreme Value. Let me just tell you, if you want really solid financial recommendations that you can take to the bank and that are boring as hell, Dan Ferris is your man. Dan, thanks for being with us here today on the podcast.

Dan Ferris: You're quite welcome. I'd love to come back any time you'll have me.

Porter Stansberry: Thanks, man.

Buck Sexton: All right, now we're gonna check in with Stansberry Newswire senior analyst John Gillin. John was recently out in Las Vegas at the 2018 Consumer Electronics Show. We're going hear from John right now about the latest tech updates that are about to hit the market and see what the biggest names in tech have in store for all of us in the next year. John, great to have you.

John Gillin: Buck, thank you. Great to be here, my friend. Where do we start? 2018 Consumer Electronics Show, mind-boggling, 180,000 of your nearest and dearest friends, representatives from I believe 150 countries. I got a little jammed up with the Mandarin but did my best. So what I started with is, Buck, the world has by and large been at peace for the last 73 years fostering economic growth. I don't know where I came up with that, but it seems very profound, and it's provided higher education opportunities, math, science, and engineering for countless folks.

So you see it in the Consumer Electronics Show. We do live in a diverse gifted world. So the things that really stood out to me in no particular order, but let's just go through them, autonomous driving. It's already here. There are dozens of companies that are all-in led by Ford, General Motors, Mercedes, Fiat, Toyota. Tesla wasn't even represented. Certainly they are on the forefront of this, but they have got a lot of competition.

The technology suppliers to this business took up acres of flooring. What really stood out to me, Intel's Mobile Eye, NVidia chip, Samsung, Panasonic, list goes on. Of course the Japanese and Chinese companies were absolutely dominant and then that's even leaving out what Alibaba and Google are working on, which is truly astounding.

Moving on to the connected home, applications was all begun with Amazon's Alexa, but Google's advertising was everywhere. You couldn't get near a Google booth and their "Hey, Google" brand was on the side of all the hyperloop cars that we'd seen. And then adding on to who else is in the mix, the Sony, LG, companies you've never heard of like Higher. Intel; Intel had an incredible booth. The stock has not been great, but I would definitely look at that as a long play as we get into the connected home, autonomous driving. They were in everything.

There were drones. Drones were ubiquitous, annoyingly so, and certainly the coolest companies were I saw FLIR and power egg drone. All shapes and sizes, practical uses for search and rescue, reconnaissance, and then I did sit next to a woman who worked for the FAA. She was out there strictly to meet with Uber, and Uber is working on a business right now to carry us everywhere. There's a 55-pound weight limit as we speak, but of course that's going go a whole lot bigger or you're not getting me around.

What else? Smart trucking was mind-blowing; hyperloops. Things that did not work were 3D printing. You also saw 3D TVs without goggles were scattered all over the floors, but they were just awful.

Buck Sexton: Wait, what's wrong with 3D printing? People have been talking about that one for years. I hear about it a lot in the gun debate, the whole separate discussion, but –

John Gillin: I look at them as spooky toys. I think it's much more about you're still making them with plastic. It's not copper. It's not steel. There's been a lot of talk how it's going play into the aerospace business. I just didn't see it.

Buck Sexton: 3D by the way, I think Avatar is one of the worst movies/visual experiences I've ever had in my entire life, so 3D TV doesn't sound exciting to me at all.

John Gillin: 3D TV was awful, and they're trying to bring a business out without goggles. That gave me a migraine and some vertigo as well. It just doesn't work when you have coins spilling out at you from a television into your audience. It did not go well and people were scattering.

Buck Sexton: What about AI? Any really interesting AI companies on display?

John Gillin: So virtual reality was everywhere. I counted 22 different companies who had headsets, and the technology is extraordinary. You are somewhere else. I do think that no one is going to leave the house because of virtual reality. Sophisticated semi-chips particularly coming from NVidia, AMD, and Intel were just astounding.

There was a company called XO Glove where the user wears a headset, also has got a sensor glove that's connected where you can operate heavy machinery. That blew me away. These operators can work remotely and that is something that should be on the markets by 2020. That was the general feeling, a year out, two years out for a lot of these businesses. Robots –

Buck Sexton: Can I ask you, John, if you were to go and buy one thing for your own use for your own home in 2018 you saw there, what would it be that's new?

John Gillin: The nano pixel television which is made by LG. It's a screen like nothing I've ever imagined. It was just perfect. So if you are a freak about your home theater –

Buck Sexton: AV?

John Gillin: Yeah, your AV, that was astounding. Another thing to talk about is retail. Retail in general is going through a wholesale chain. Retail bots were everywhere, so the adage is they're going to be more efficient than humans. Dozens of companies devoted to augmented retail solutions. So a company called Face Note allows the user to recognize customers and quickly download preference and styles, sizes, even your friends.

So VR shopping will be another reason not to go to brick and mortar malls. There's just no need to go to a mall particularly as we get into February. Again there were massive amounts of people gathered at these booths. Retail is going through wholesale change. Adding to that, let's talk smartphones for a second. Competition is overwhelming. I don't know how Apple maintains market share.

We've heard that too many times, but there's a company out there, Chinese, ZTE, which has got a double screen. If you want to watch your emails, you want to watch your feeds and watch a movie at the same time, you've got this double screen. You can then flip it backwards and forwards. It'll stand up as a pyramid. That was really cool and huge numbers of people were gathered there to check that out. So ZTE would be another name that stands out to me.

Buck Sexton: People have been talking about autonomous vehicles for a long time and we know it's going to happen. Did you get a better sense of when? When is somebody listening to this podcast going to walk outside their front door and, oh, there's an autonomous vehicle driving by?

John Gillin: The general consensus was about a year and a half, and it's not two years, it's a year and a half. The Ford display was extraordinary. They've already teamed up with Domino's, another reason no one's going to leave the house, and they're gonna have autonomous driving delivery and they forecast that by the end of 2019. There was a really incredible display. It was a long haul trucker cab that I saw, and the idea is it's autonomous driving, however you've got a human being who's sitting let's say in an office in Tennessee.

He taps in, gets into the seat. He's making sure nothing goes wrong while a truck may be rolling through Wyoming. The idea here is you put an eight-hour shift in, you get tapped out, man or woman jumps into your seat, drives another eight hours. 24 hours a day these truckers will be much more safely rolling around the country delivering goods and services. That was really cool.

Buck Sexton: All right, John Gillin everybody, Stansberry Newswire senior analyst on what he saw at the Consumer Electronics Show. John, where should people go to read more of what you're up to?

John Gillin: Buck, our Newswire app, which can be downloaded and we will put out emails to direct you once again to that area. We'll be writing about this for weeks. There's so much, so much to do and say.

Buck Sexton: All right, John, thank you so much, sir.

John Gillin: Buck, thank you.

Buck Sexton: All right, mail bag, let's do it. First up this week we have Jesse who writes in, "Hi, Porter and Buck. Happy New Year. Thank you for a great year of consistent, informative podcasts. Please continue to keep up the great work in 2018. So many of us longtime listeners rely on you guys to keep us updated on what's going on in the world of finance and just the world. Garrett Gunderson was a great guest and I just purchased his book via your email with all the links. Thank you to whomever has been keeping up with that.

Question for next show, what are your thoughts on the Hawaii false alarm over the weekend? Simple mistake or something a little more intricate than that? I'd love both of your perspectives. Looking forward to the next episode. Jesse." Porter, you first on Hawaii.

Porter Stansberry: Buck, I have no idea. I could tell you about landholding companies in Maui. There are some good deals out there. Alexander and Baldwin. I know about finance, man. I got no idea. I didn't even know there was a missile warning system. All news to me.

Buck Sexton: I and my lovely girlfriend in the air on a plane landing in Hawaii right around the time this whole thing went down, so that was an interesting first couple of Twitter messages that I saw on this. Look, it's very likely, Jesse who sent us this question, that this was just a poorly constructed system with an incompetent person using it. As crazy as that may sound, that's the most likely scenario here. Do not ever think that there is a level of incompetence that is beyond government bureaucracy state or federal.

Porter Stansberry: That reminds me of the South Korean plane that crashed at San Francisco's airport. It's a tragedy, but the funniest thing I ever saw in my life was when they revealed the names of the crew. Do you guys remember the names of the South Korean air crew that crashed at San Francisco about ten years ago?

The TV station called the FAA to double check, and they got the same intern who had sent out the list of names who confirmed who's on the list. So the pilot was Wi Tu Lo. One of the copilots names was Ho Li Fuk, and my favorite one was one of the stewards' names was Crash Bang Ow. And they read that on the local news in San Francisco. No one thought to question the teleprompter. I think that's the same thing here with this missile alert. It was old Ho Li Fuk back at the switch.

Buck Sexton: So you got the Porter answer there. All right, next we have Jason with number two in the mailbag.

Porter Stansberry: Hold on, Buck. I gotta jump in. We didn't get to do "What's on Buck's mind?" today. We jumped right into the Dan Ferris thing. I gotta ask you about the shithole Trump comment while we're talking about funny language. Have you ever seen the major media put in curse words like they have this week? It's just been everywhere. Buck, any thoughts?

Buck Sexton: Yeah, I've got a lot of thoughts on that one. A couple things. One of the earliest and most clear efforts that the media has made to delegitimize and destroy this presidency and this president specifically is to call him a racist, and so any opportunity that they can get to further that narrative, CNN, MSNBC, the Times, the Post, etc. they're all going to do it and they all have been doing it.

There's also though a very clear political rationale behind this and that is that you've got the DACA negotiation going on right now. They see this as leverage. I think you've even had some politicians come out in the last few days where they are willing to say that this is an opportunity for Trump to not be a racist, and so that then becomes part of the storyline.

Porter Stansberry: An opportunity for Trump not to be a racist? Wait a minute. I mean, I used to live in South Florida. Trust me, we do not need any more Haitian immigrants. We've got plenty of Haitians there already. We don't need anymore of those folks. What Trump is saying is that we as a country should have the right to decide what kind of people are qualified to come join the American story, and maybe that's not in the tradition of America, "Give us your poor, your downtrodden." OK, but –

Buck Sexton: That's a poem. That's a poem that was put on the Statue of Liberty, right? That has nothing to do with immigration policy. In fact, immigration policy is something that most Americans are wildly ignorant of. It was turned on and then turned off in terms of immigrants many times in our past.

Porter Stansberry: Right. Politically, do you think it is legitimate to say my view as a politician is that we should have high standards for who we accept as immigrants to America and we should control that process carefully to our advantage?

Buck Sexton: Yeah, of course. Got a few things here real quick. One is that every immigrant from every country in the world should be measured and assessed as an individual, and I think the whole focus on countries is a problem with the immigration system to begin with. I want a Haitian brain surgeon to immigrant to America the same way I want a Norwegian brain surgeon to immigrate to America.

Porter Stansberry: I'm not so sure I want a Haitian brain surgeon. I'm not so sure. By the way, I love the idea of calling people racist or whatever in the abstract. Just think about this for a second, Buck.

If you're going to have brain surgery, would you rather have your brain surgeon be a white upper-crust person from New England who went to Johns Hopkins and then Harvard Medical School and has 20 years of service at Boston General, or would you rather have it be affirmative action style we're gonna take an El Salvadorian immigrant who went to that really crappy med school in Granada or wherever where anyone can go and has spent the last 20 years doing brain surgery in let's say Puerto Rico? Which one are you going to go with if you have your choice?

Buck Sexton: Well if I knew all that information about someone's background, but again the resume that you actually -

Porter Stansberry: Hold on, does that mean you're a racist? Can't you just say obviously one guy has a lot better credentials and I've only got one brain so I'm going to go with the guy at Boston General?

Buck Sexton: Yeah, but you're speaking about brain surgeons and Johns Hopkins. For example, Dr. Ben Carson was the chief of pediatric neurosurgery at Hopkins for a very long time, so the answer is –

Porter Stansberry: I want him to operate on me. By the way, I didn't say anything about the guy's race. I just said he was upper crust.

Buck Sexton: I understand that. I'm saying if you can see someone's background, but that's the whole immigration discussion now is it should be about the individual's skills, resume, everything else they bring to bear, not as much of a focus on the nationality.

Porter Stansberry: Buck, I hear what you're saying, but I just wish the people who label everyone else a racist, I wish you could see what their choices actually are when there is something at stake for themselves. In other words -

Buck Sexton: Oh, I've got a great one for you.

Porter Stansberry: OK, go ahead.

Buck Sexton: Real quick here, Porter. You'll like this. There was I think the single most liberal council district in New York City is Dumbo in Brooklyn, right? Dumbo is a super hipster trendy area. There are two schools in Dumbo. One is almost entirely white, the other is almost entirely black, two high schools in that district.

This is the most liberal enclave in New York City that I can think of. I mean you're talking about the most progressive left-wing blue imaginable, and Porter, when it was raised at a City Council meeting that they wanted to mix some of the students from one school with students of another to see if they could raise the test scores, all these big left-wingers, these progressives, went crazy.

Porter Stansberry: Of course.

Buck Sexton: ... tests -

Porter Stansberry: Same thing, I mean where did Obama send his kids to school? Believe me, it wasn't the Washington Public Schools. Again it has nothing to do with race per se. Obviously Obama and his wife are mostly black. Obama is half-white. I think it's always very interesting, by the way. Everyone always identifies Obama as being black. He was my president too and he's half white.

I mean I don't really get that, but listen, the point of the matter is it's not about race, and any time someone has something at stake whether it's who's educating our children or who's going to do their brain surgery they want the guy who has the most and best experience who is the smartest and the most credentialed, and the same thing is fine with me if we do that in immigration, and I don't think that makes Trump a racist. That's my spiel.

Buck Sexton: I agree with all that part of it for sure, so then it's true. By the way, a great example for those who are wondering about the crap hole country theory. If I say that North Korea is a crap hole and South Korea is a vibrant democracy that's doing incredibly well and shows the brilliance of capitalism over a short period of time or what it can accomplish over a short period of time, I think that's a great example of it's not about being anti-Korean. North Korea is a crap country; South Korea is not, right? So we can be honest about this stuff.

Porter Stansberry: Yeah. I'm not so sure about South Korea, but I'm a tough judge. I mean Hong Kong -

Buck Sexton: Yeah, you're being real harsh there.

Porter Stansberry: Tokyo. Those are great places. I've never been to Seoul; maybe I'd like it. I can't say for sure, but you know, is Thailand a shithole country? I don't know. Is Myanmar?

Buck Sexton: Mail bag number two this week. "Porter, you've explained that blockchain technologies will be hugely disruptive to financial intermediaries such as banks, brokerages, and exchanges. For cases where the trade is the settlement I completely see your point. What about cases where the trade isn't actually final until some point in the future as is the case for options and futures?

Stock exchanges add value by calculating and collecting collateral to ensure that a given party to a transaction continuously has enough capital on hand to cover the option should it be exercised." How could this deferred settlement be disintermediated by blockchain? It seems like the fact that these trades are not completed at a single point in time means there will continue to be a need for a third party to provide a margin or collateral function to help minimize counter party risk. Love the new show. Paid up SIA subscriber for over 10 years, Jason."

Porter Stansberry: You know, Jason, the truth of the matter is I can't quite envision how that will be solved with blockchain, but I'm certain that it will be, because all the underlying technologies to maintain your clearing account, they can all be put onto the blockchain and they can all be updated continuously and that's really the nature of blockchain. It's a distributed registry. So everyone's qualifications can be distributed to the entire community in real time and it'll be a better solution than you have currently.

The guys who are really pioneering that technology is a company, a little tiny company called Medici. It's a subsidiary of Overstock.com and I would refer you to their technical papers. You can find all that stuff on their website.

Buck Sexton: Number three this week in the mailbag everybody, "Dear Porter and Buck, thanks again for another great podcast. I really enjoy your weekly commentary. I believe there are only three cocktails any gentleman needs to know: Crown Royal neat for cold days, Crown Royal rocks for warm days, Blood and Sand for any tropical location. Add ice if climate over 85 degrees. Recipe attached. Enjoy. Best regards, Marcus." I have no idea what Blood and Sand is.

Porter Stansberry: I don't drink brown liquor, so if there's a listener out there who has cocktail recipes that don't involve brown liquor, please submit.

Buck Sexton: All right, everybody, have a question for us, a favorite cocktail recipe perhaps, write to [email protected] If we use your question on the show we'll send some Stansberry Research swag. Love us or hate us, just don't ignore us, and remember if you want to get access to transcripts from the show, all the show highlights, and receive the Stansberry Investor Hour weekly update each Thursday, just go to InvestorHour.com and enter your email.

Next week we'll welcome Roger Lowenstein to the Stansberry Investor Hour. Roger reported for the Wall Street Journal for more than a decade and his work has appeared in Bloomberg, the New York Review of Books, Fortune, New York Times magazine, and other publications. His books include Buffett: When Genius Failed, Origins of the Crash, While America Aged, and The End of Wall Street. Thanks again for listening everybody and see you next time.

Porter Stansberry: Thanks for everything, guys. See you next week.

Announcer: Thank you for listening to the Stansberry Investor Hour. To access today's notes and receive notice of upcoming episodes, go to InvestorHour.com and enter your email. Have a question for Porter and Buck? Send them an email at [email protected] If we use your question on air we'll send you one of our studio mugs.

This broadcast is provided for entertainment purposes only and should not be considered personalized investment advice. Trading stocks and all other financial instruments involves risk. You should not make any investment decision based solely on what you hear. Stansberry Investor Hour is produced by Stansberry Research and is copyrighted by the Stansberry Radio Network.

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