In This Episode
Porter’s been a giant critic of General Electric for almost a decade. But is he changing his tune with the new massive disruption taking place at the longest standing company in the Dow 30? Porter wonders what kind of POTUS Trump could have been if he were only able to escape his own “negative charisma.” Buck explains the connection between the DNC, the Clinton Campaign, and the recently released Trump-Russian Dossier.
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 http://www.investorhour.com. Here are the hosts of your show, Buck Sexton and Porter Stansberry.
Buck Sexton: Welcome, everybody, to the Stansberry Investor Hour. I'm nationally syndicated radio host, Buck Sexton, and with us, as always, is the founder of Stansberry Research, Porter Stansberry, everybody. He's in the house.
Porter Stansberry: Buck, how are you?
Buck Sexton: I'm all right, you know? Things are coming along.
Porter Stansberry: I just finished up a long two-day stint. We were hosting P.J. O'Rourke at my farm, Meadowdale, in Maryland, and we hunted and we worked hard. Long days, long days. And I gotta tell you, P.J. is an excellent shot and a fantastic raconteur. He's old school.
Buck Sexton: He is, indeed. What were you guys working on, or is that top secret?
Porter Stansberry: We were working on our new magazine, American Consequences, and particularly, we were working on filming some television ads talking about our new project. There will be consequences, Buck.
Buck Sexton: I keep saying that the subheading needs to be, "Read It Or Else: American Consequences."
Porter Stansberry: [Laughs] I like that, "Read It Or Else." So anyways, it was a lot of fun. Do you know, one time P.J. was the face of British Airways? Yes, he has a long history of being a pitchman. I didn't know that either. I thought he was just a great writer.
Buck Sexton: Oh. Wow, I was unaware of that. Well, joining us this week on the Stansberry Investor Hour is entrepreneur and investor, Kevin O'Leary from ABC's hit reality TV show, Shark Tank. Kevin recently appeared with one of over 500 Stansberry readers at the annual Stansberry Conference in Las Vegas, where he shared the secrets of his favorite shark deals and the specific businesses and people he likes to invest in. O'Leary is back here today on the Stansberry Investor Hour for an exclusive interview with Porter to discuss his long-term approach to investing and what he's focused on today outside of the Shark Tank show.
For just a limited time, you can still see Kevin's Stansberry Vegas presentation, "New Investment Ideas for the Stansberry Analyst Staff," and inspirational business talks from over 30 excellent guest speakers by going to http://www.stansberryvegasvideo.com. That's http://www.stansberryvegasvideo.com. When you sign up to watch the 2017 Stansberry conference videos, you'll see the latest ideas from Porter, Steve Sjuggerud, Dan Ferris, and other special guest speakers like former Fed insider, Danielle DiMartino Booth, bond expert, Marty Fridson, and bitCoincrypto currency expert, Tama Churchouse, all whom we've interviewed for you on this podcast. This is the last time you'll be able to watch the 2017 Stansberry conference videos before we take the offer offline. Just go to http://www.stansberryvegasvideo.com before October 31. Sign up today and you'll have until the end of the year to watch the entire conference archive.
We want to send our thanks to everybody who has been writing in to the show and leaving comments on the Stansberry Investor Hour iTunes and YouTube pages, people like TexasRay, Buckeye2517, MaryP, and Induram, all leaving comments on the iTunes page – that helps us build the show – and kind-hearted listeners like Sean, Donnie, Tamla, and John giving us their feedback on the Stansberry Investor Hour YouTube channel. Your views and comments go a long way. We love reading them all. Just search for Stansberry Investor Hour and subscribe to the show on iTunes or YouTube or wherever you find us, and of course you can always write to us directly at feedbac[email protected]
All right. Now that everyone's stretched and ready to roll, we can hear some Porter wisdom. I've got a big question for Porter, but I want to let him start the noise this week.
Porter Stansberry: All right. Well, I'm watching GE. And there's some history here, Buck. Back during the period before and just after the last financial crisis – so this is, like, '06 through 2010 – I speculated, in print, that General Electric was one of the giants that inevitably would go bankrupt because of unsustainable debt loads. They had this business called GE Capital, and it was levered to the hilt, like, 50 to one, and lending on things like Polish mortgages, and also, Hungarian mortgages. And let's just say that this zloty and the Hungarian forint – I don't know if you have any forint tucked away, Buck – but let's just say those currencies are not –
Buck Sexton: They're next to my ducats.
Porter Stansberry: [Laughs] They're not the most reliable, and especially when you lend in dollars, it can be very hard for the homeowner to earn enough forint to pay off the dollar loan if the forint devalues.
So I knew that GE was taking a very large financial risk that very few investors understood, and it was doing so in just enormous quantities. The other thing that was very interesting, Buck, was they were using what's called the commercial paper market. So this is a market where you can go in as a large corporation with lots of collateral and borrow money for 30 days or 60 days or 90 days. And GE was just rolling billions and billions of debt this way, like, $50 to $60 billion, every month, they had to roll over. Well, that's really risky, and that – what they were using that capital for was to fund a credit card receivables portfolio. [Laughs] So they were lending over very long terms to very poor credits, and they were borrowing very short at very low rates to do so, which is a recipe for disaster if you know anything about financial history, which apparently, the people who were running GE did not know.
Anyway, when the crash came, GE would've been bankrupt within about 30 days except for the federal government said, "We will guarantee all of General Electric's obligations. Flat, we agree to cover everything." It was the biggest secret bailout of the bailout, and that guarantee lasted until 2012, which gave GE time to reorganize, gave them time to sell off much of their financial business. GE Financial's now a much, much smaller business.
Anyways, long story is, what I always thought would happen and why GE has always been on our shortlist – we've recommended selling it short several different times, but it's always been a company we've avoided – was that they had a giant bag of really low-quality assets, and the only way they could make money as a company wasn't by earning profits on those low-quality assets; it was – they could only make money if they – if there was a financial environment that allowed them to borrow against those assets and make a spread. And anyways, as the government has manipulated interest rates lower and lower, there's much, much less spread, so there's much less profit available for companies like GE. And so I just knew this company was gonna have a big, big, big problem, and if you look at the stock price, it hasn't gone anywhere for ten years. It's back down around $20 a share today, which is where it was in 2012. I mean, that's a long time without any progress.
And here's what I would love to know. They just made a CEO change. Do you remember the name of the former GE CEO, country club guy?
Country Club Guy: Immelt.
Porter Stansberry: Immelt, yeah. So Immelt was the hand-chosen successor to Jack Welch. So Immelt was at the helm from, I think, around 2006 timeframe, 2007 timeframe through the crisis, all the way until maybe a month ago.
And now there's a new guy who they've brought in, and the new guy seems really great. He is getting rid of 700 company cars, he's getting rid of all the airplanes – oh, Buck, you'll love this. Immelt not only had a – the company under Immelt had six private jets, which is a lot. But also – this is the fun part – whenever he traveled on the private jet, which he was required to do so for all travel for security reasons – whenever he traveled on the company plane, they sent an empty plane behind him to wherever he was going. So one plane wasn't enough for Immelt. He had to have two, and one of them was always empty.
Buck Sexton: It's like rolling around in a G12 instead of a G6.
Porter Stansberry: [Laughs] That's right. I hadn't thought of it that way, but that's very good.
Anyways, so this was a guy, in my mind, that really didn't – he ended up as the CEO because he was a great political infighter, not because he really knew anything about business or investing or how to make money, and he sat at the top of this company for a decade and accomplished nothing. They probably paid him something on the order of $100 to $200 million for him to do nothing but fly around in their two planes. It's really an extraordinary story of a loser CEO.
And finally, for the folks out there who are of the conservative bent like my friend Buck here, for a long time, Immelt's GE was referred to as the for-profit arm of the Obama administration. So I think that when you have a CEO that's heavily involved in politics, it's a good opportunity to look for a short candidate because maybe this guy just doesn't really know much about business. Maybe he's more into politics. And politics is rarely profitable.
Buck Sexton: How did he manage to pay almost – I forget what the specifics were, but this got on the radar of conservatives and people who follow politics that GE was paying, I think, zero income tax one year somehow, through all the – they have an army of accountants. This was the whole story. What was that all about?
Porter Stansberry: Well, when you make lots of really bad financial investments, you have lots of losses, and you can carry those losses forward to cover later gains. That's the reason.
Buck Sexton: That's the real reason.
Porter Stansberry: It's not really good when you're not paying income tax. I know there are ways that it does work, for example, if you've transferred all of your intellectual property in places like Ireland and you have that Irish subsidiary that ends up capturing all the profits, which is what Apple does. The bad way not to pay taxes is the way that Trump has always done it, which is to have enormous losses that you later use to cover your taxes.
Buck Sexton: Why do you think Trump hasn't shared his taxes, by the way?
Porter Stansberry: I think that –
Buck Sexton: 'Cause I know you'll give me the real answer.
Porter Stansberry: I think because he has not paid taxes in 20 years, is the answer. And he hasn't paid taxes because he had these enormous net losses carried forward, is what this is called, the tax term – from his serial bankruptcies. His casinos have declared bankruptcy three or four different times. Country Club Guy would probably know the exact number.
Buck Sexton: Harry Reed said that Mitt Romney hadn't paid taxes in ten years. That was a lie. Romney was actually paying –
Porter Stansberry: A lot.
Buck Sexton: – considerable taxes at the time.
Porter Stansberry: Yeah, for sure.
Buck Sexton: Yeah, that was just a lie. What's interesting is that Harry… well, no one's ever come out from the Senate floor and made the same accusations about Trump's tax returns. The media's been saying it, of course, a lot of other folks, but that would be – I guess that would be why.
Porter Stansberry: Well, listen, I want all of our listeners to put GE on their watch list because this company is being stomped in the head by investors right now because all the stuff that Immelt told investors would happen was a lie. The new guy's coming in and he is absolutely cleaning house, and I believe this stock will bottom in the next six to nine months as the new CEO throws out all the crappy businesses and begins to rebuild GE, and that could be a very important store for you to pay attention to and a very good business to invest in going forward. And for a lotta people, that's hard for them to understand. "Porter, how could you say GE is a good business to invest in or might become so after you've been trashing it for ten years?" Well, because when the facts change, I change my mind. What do you do? [Laughs]
So I'm very interested to see all the different changes that he can make. A lotta this stuff, it's just window dressing, all the cars and the planes and that kinda stuff. But the real question is, is he gonna get rid of their lousy core businesses, and what will he invest in that will be better? Immelt made the big decision to invest in the peak oil idea. So he started putting a lot of GE's money into the oil industry in about 2007. How'd that work out? Lousy. So I'm hopeful that this guy can buy some better industrial businesses and turn GE around.
And by the way, this is not just an academic exercise for me. My brother, Mills Stansberry, is a senior executive with GE Power Systems, which is, by far, their best business. Of course, 'cause my brother's involved. But you know, Buck, that's –
Buck Sexton: Stansberry empire.
Porter Stansberry: That's a little bit – that's enough right now for the finance stuff. What I want to know – this just came out very recently – is, apparently, it wasn't Trump who was being paid or paid off by the Russians or paying the Russians or whatever. It wasn't actually Trump. It turns out it's Mueller and Clinton. What?
Buck Sexton: Yeah. I know. It's a lotta stuff going on here. So for those who are not quite up to speed on this yet, a quick overview, starting from what we've learned the last week or so: You got two different things happening. You have the Uranium One deal, which has gotten a lot of attention, and you have the dossier, which has gotten a lot of attention. Those are both things you probably heard about before. Uranium One was written about by Peter Schweizer in his book, Clinton Cash. Have you read it, Porter?
Porter Stansberry: I missed that one.
Buck Sexton: Clinton Cash?
Porter Stansberry: I missed that one. Was it a book that explained how Bill and Hillary are crooked?
Buck Sexton: Yes, yes.
Porter Stansberry: Oh, well, yeah, I just went ahead and assumed –
Buck Sexton: Yeah, you could read the book or, you know, the newspaper, more or less, could give you a pretty good sense of where the Clintons are. But in Clinton Cash, he goes through, really, how the Clinton Foundation was a – just a giant slush fund, branding tool, and political influence checkbook for the Clintons, right? And it was a political action committee under the guise of a charity, which is pretty gross.
Anyway, what we've found out on the Uranium One side… this is complicated so I'm trying to find a way to get through this quickly without boring anybody. It's a company that had to do with uranium in the U.S. There's an American subsidiary of a Russian company. Hillary Clinton's State Department had to approve it. And when all that's going on, you have the FBI investigating corruption of the Russians in the nuclear sector in this company – totally swept under the rug – an FBI informant forced to sign an NDA, not able to come forward with the corruption – this is all under the Obama administration – of the nuclear energy sector at the time; and Hillary Clinton's husband, while she's Secretary of State and while she, therefore, sits atop a body that has to sign off on a uranium sale – a uranium-company sale to the Russians, her husband's getting paid $500,000 to give a speech by a Russian Kremlin-backed – or at least a company – a Russian bank with ties to the Kremlin, and also, huge amounts of money going from Russian interests into the Clinton Foundation.
So it's just dirty, dirty, dirty. And the new part about this is that the Obama administration kept this stuff very quiet. They charged only one person after this FBI investigation into corruption and money laundering and all kinds of crimes around the uranium industry, which, obviously, has national security implications in this country, and Porter, I think they brought the charge on the Friday before Labor Day and they took the plea bargain – I kid you not – 'cause I had a former U.S. attorney on my show last night – they took the plea bargain from this guy on Christmas Eve, which, you know, you could tell me that that just kinda happened because it was really lucky for him or you could decide that the government – the FBI and the DOJ under Obama didn't want anybody to know that they were just making this whole thing go away.
So that's Uranium One. How stinky does that sound to you?
Porter Stansberry: It sounds like classic government and Clinton operation. Sounds perfect to me. That's what I would expect to happen.
Buck Sexton: It's amazing. I mean, you know, the speaking circuit – you guys at Stansberry have some wonderful speakers that come to your events and some speakers, I know, can draw pretty considerable fees for their appearances, but the –
Porter Stansberry: Not half a million dollars.
Buck Sexton: Not half a million dollars. [Laughs] There's no such thing as a half –
Porter Stansberry: No, that's not a speaking fee; that's a bribe. But listen, I'll also tell you, my history with the uranium stuff goes back some time because it was me writing about government collusion and manipulation of the uranium markets in the United States that got me sued by the SEC originally. So –
Buck Sexton: Really?
Porter Stansberry: Oh yes, so I have a little bit of a track record with knowing how corrupt the government's regulation of the uranium business in the United States is. It's extraordinarily corrupt. And I wrote an article that revealed that, and I got severely punished as a result.
Buck Sexton: Huh.
Porter Stansberry: Yes.
Buck Sexton: All right. I did not know that. So then – so that's Uranium One, which is one of the big revelations, and then the dossier –
Porter Stansberry: The dossier.
Buck Sexton: Fusion GPS was the dossier. [Inaudible due to crosstalk] That was the other big news revelation from this past week, and here's what we know. So there was this – did you read the dossier, by the way, Porter? Did you see any of it? 'Cause –
Porter Stansberry: I did not read the dossier book.
Buck Sexton: – there's some stuff.
Porter Stansberry: I have to tell you that all that stuff – I just – it doesn't interest me. I'm glad that someone's out there explaining to people that folks who seek political power are all sociopaths. I'm glad someone does that work. But for me, I'm just like, "Yeah, I already checked that box. I already met those people. I already figured that out." I mean, I don't need to be reminded of how just awful it is.
Buck Sexton: So the dossier was this document that was originally published in the public domain by Buzzfeed.
Porter Stansberry: Buzzfeed.
Buck Sexton: A website better known, I think, for its viral cat videos – lots of little kittens going meow – and then they decide they also want to cover politics sometimes, too. But Buzzfeed – another left-wing side – they published the dossier. A lot of other news organizations knew about it, which will come back into our story here in a second. But it was opposition research involving a guy named Christopher Steele, who was a former British intelligence officer who had been paid by a company called Fusion GPS to pull together the nastiest stuff possible on Donald Trump when he was running against Hillary Clinton. The dossier was a compilation of Russian-sourced allegations about all sorts of connections and malfeasance and bad stuff going on with Trump and Russians on the financial side, and also, including things like prostitutes and then something about a golden shower – true story – in the dossier, some very, very salacious allegations in there.
So here's what we found out this week, though, Porter. Fusion GPS, this oppo research firm that's shady and they really operate almost like private intelligence companies, right? I mean, they're just pulling together whatever sources they can and doing dirty work on people. They wouldn't tell anybody what their funding sources were, and now the big story that broke – I think it was just The Washington Post and now everyone's jumping in on this – it turns out that Hillary and the DNC funded the dossier via Fusion GPS and they had been denying this – people tied into the DNC had been denying this repeatedly and effusively for the better part of a year now.
Porter Stansberry: Yeah, what I liked about it was that the Clintons were lying to their own fans in the media, and no one quite gets as angry or as venomous as the lovers spurned. You know, when the Clintons lie to the conservative media, the conservative media doesn't get upset about it 'cause they're expecting them to lie about it. But when the Clintons lie to their biggest supporters in the media, now you've got some real venom and anger coming forward, and I can't wait to see what happens with Trump. He's now got an excuse to fire Mueller without causing a constitutional crisis. Isn't that what's gonna occur? Or, stranger than fiction, what if Trump becomes a big fan of insisting, now, on an investigation into Russian meddling in the election because it turns out the Russian meddling in the election was sponsored by the Clintons?
Buck Sexton: Yep. This is what has happened this week, and this is why Democrats are very unhappy right now about this. I will say one other thing to keep in mind is that – and I jumped over this and you reminded me of it, Porter, 'cause there's a lotta layers and a lotta detail in these – particularly on the Uranium One story – and lots of names and Russian names and everything else. The Russian – I think it's Rosatom – the Russian corporation that has an American subsidiary to buy the uranium is based out of Maryland, and the FBI Director, when all that stuff was going on with the investigations into Rosatom and into the nuclear energy sector, was, in fact –
Porter Stansberry: Mueller.
Buck Sexton: – Mueller. And the guy who was looking specifically at the Maryland situation with the uranium company and Rosatom and all this was Rosenstein, who was the guy who also appointed Mueller as the special counsel. So there's some connections here, some stuff going on, that is striking a lot of people as very shady and way too convenient for some folks.
Porter Stansberry: Well, I know a lot about it. That Maryland company that's involved, that's the same company that used to be called USEC. It was originally spun out of the government in '96 under Clinton, I believe, and became a publicly-traded company instead of a unit of the Energy Department, and the Clinton administration treated it like a personal investment slush fund, and they would make announcements that drove down the price of the stock and then they would make announcements that drove up the price of the stock, and they did it – they continually played with that business.
And then that's what I wrote about. I wrote about how they – how the government constantly – the Department of Energy – the Clinton appointees of the Department of Energy continued to manipulate the stock to their own benefit, even under George W. Bush. And when I wrote that story – which I would reference everyone, they can look it up for themselves as Porter Stansberry and USEC, S-U-E-C – I called the company to find out what was going on and the Investor Relations Director – I told him I wasn't gonna recommend the stock 'cause I didn't really like the business after learning more about it, and he goes, "You don't know what you're talking about. You watch our stock on May 22. There's gonna be a new Russian summit with Putin, and we're gonna announce an incredible new pricing agreement. Our stock's gonna soar." [Laughs]
I mean, it was common knowledge at the company that the business was a front for manipulating investors by government officials in the Department of Energy, and –
Buck Sexton: Can I add one thing here? 'Cause – oh, go ahead, Porter.
Porter Stansberry: So anyway, I wrote the story up. I didn't trade the stock. I didn't – I've never brokered the stock to anybody. I just wrote the story up and I offered to sell what I knew to investors for $1,000 for a copy of the report, which is not abnormal in my business at all. And anyways, I was sued originally for insider trading, but the SEC couldn't discover any insider trading ('cause there wasn't any insider trading), and so then they switched the nature of the lawsuit and they sued me for securities fraud, for something called 10b-5 violation, meaning that I was underwriting a security and putting out false information about a new security offering.
But of course, I wasn't selling a security at all. I was selling a report. And by the way, if you didn't like the report, we gave you your money back. So there was no possibility of fraud. Either you found my sources and my information reliable or you didn't, and if you didn't, in which case, I gave you your money back. So where's the fraud in any of that? And by the way, even if there was fraud, it certainly wasn't a matter of security.
Anyways, unbelievably, I lost the case, and the reasons why are just too laborious to explain. But even The New York Times – not necessarily a conservative publication – wrote an article saying that this made absolutely no sense. So all I know is that there has been a long-standing tie between the Clintons and uranium, and they have done lots and lots of dirty stuff in that space, in particular, for decades. And it'll be interesting if any of this comes forward because now, finally, I think people are gonna actually believe me when I tell them how – what a complete sham and crock of shit all this was.
Buck Sexton: Peter Schweizer, whom I noted as the author of Clinton Cash, before that book was best known – and you made me think about this in your talk of the Clintons in this uranium business in the U.S. – wrote Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison, I still think a very, very small percentage of Americans – even people who are financially savvy, I think a very small percentage, Porter, would know that for a very long time – and it's gotten a little bit murkier, but until even a few years ago, there was a blanket exception for members of Congress to trade on inside political information. They could not be prosecuted for it. It was 100 percent legal.
Porter Stansberry: Yeah, I remember there was a big to-do about that 'cause 60 Minutes did a piece on it and they immediately put forth a new law so they couldn't do it, and then about two weeks later, when no one was paying attention, they repealed it. [Laughs]
Buck Sexton: Yep. That's right. So there was a – [laughs] – short-lived desire to clean up their house. Think about that. And if you know that a company's about to get – if you know that the vote's about to happen and a company's about to get a bailout or – I mean, you could go through any number of situations – you could literally get off – step off the floor of the Senate –
Porter Stansberry: Look –
Buck Sexton: – call your broker, say, "Load up on XYZ stock," and it was legal.
Porter Stansberry: Yeah. This is the opposite of regulatory capture. You guys know the theory of regulatory capture, that companies will lobby the regulator to protect them from their competition and to benefit them with new regulations.
The opposite of that is what the Clintons did. The Clintons did the opposite of regulatory capture. What the Clintons did was use the executive branch to spin off assets into the public sector – it's a hard thing. It's a public company, but you know what I mean. It's now privately owned by investors – so that, then, they could manipulate those investors. It's the exact opposite of regulatory capture, and it's how the Clintons have always viewed the world. They view the world as the government first. They want to do everything through the government. That's because they control the government.
But anyways, someday, someone will have to write the whole story of the Clintons and the uranium industry in the United States. It's a long and sorry tale.
Buck Sexton: So I want to ask you, Porter – and I know we got to get to the mailbag in a second, and also, we've got a big interview with you and Kevin O'Leary, but I think this would be a good transition into that because his compatriot or his comrade on TV – Kevin O'Leary and Mark Cuban – Mark Cuban says he might run for president. I want to ask you what you think about that prospect. I also want to ask what it would take to get Porter Stansberry to run for office.
Porter Stansberry: Well, I'm definitely not cut out for public service. [Laughs] Let's just say it wouldn't require a bunch of ex-CIA agents to put together a dossier on me that would make me immediately ineligible for office. You could just, you know, go through my most recent credit card receipt and find plenty to get me in trouble for. I do enjoy the finer things in life and I have negative charisma, which is the other thing. [Laughs] When people meet me, they like me less, not more. So that won't work.
But – and as far as Mark Cuban goes, you know, I've corresponded with Mark Cuban over many, many years, going back to the early 2000s. We've talked about various tech stocks and other things. For a long time, he was also involved in helping to out fraudulent businesses, and I would help him in those efforts as well. I think Mark is a very smart guy and I think he'd probably make a very good president.
But there's two things about that, that worry me. I worry that the presidency is becoming a contest of celebrity instead of a contest of ideas – that's one issue – so that the only way you can become president is if you are already a celebrity of some kind. And the second thing I worry about is it seems to me, in general, that businessmen make very poor politicians.
My wife and I talk about this all the time. She's like, "Look, you have to calm down. You can't have it your way all the time." And the fact is, I've been successful in business because I am never afraid to commit more energy and more will into shaping the market that I want to see develop. That's what makes an entrepreneur succeed. He never quits. He always keeps finding a way to push forward to get the results he needs for his investors or for his company or for his clients. And that doesn't work in politics.
In politics, it's the art of the possible. Politics is mostly about finding a way to compromise with the other side to get your thing done, even if it means they get to have three or four things done. And it seems to me that businessmen have a very hard time understanding that art, as opposed to the winner-take-all bully wins in business.
Buck Sexton: There we have it.
Porter Stansberry: So if Mark ran for office, I might support him. I don't know what his platform would be. But I would have concerns about the celebrity aspect of it and I would have concerns about how effective he could be as a politician. And I gotta tell you, it is absolutely amazing watching the Republicans completely fall apart. It is amazing.
And I was talking with P.J. O'Rourke this week at my house, who has followed politics closely for 40 years, and we were having a great discussion about it and I was like, "You know, the thing that upsets me so much about Trump – " I've always been entertained by Trump. I liked his book, The Art of the Deal. I read it 25 years ago. I thought it was very good.
He's a buffoon, of course, as well, but what bothers me about it was – his presidency is not that he's a buffoon; that's not a surprise. What bothers me about his presidency is it could've been so much more. He could have been a Reagan-esque figure. He could've been transformational in American politics if he had just only said 90 percent of the crap he says. If he would just dial down the crazy, he could've been someone who brought both sides of the aisle together, and instead, of course, he's wrecked his own party and the other side won't deal with him at all because he's such a buffoon. It's very frustrating. He could've been a tremendously effective president, and now, I think, more and more likely, it looks like he's gonna be a one-term president who not only isn't gonna accomplish anything, but destroys his own party.
Buck Sexton: You do have Flake and Corker bowing out of the – well, of running again for their respective Senate seats. Some people are saying, though, "This is Trump gets results." Essentially, he said he was gonna drain the swamp, and that's gonna mean that some Republicans are affected, too.
These are Republican establishment figures. Jeff Flake was very unpopular even among his own consistency in Arizona. He wasn't gonna win against – he's just trying to be an anti-Trump martyr, get some zeros on the book deal and the speaking fees as he's going out into private-sector life, maybe get a contributorship at MSNBC, where he can be the conservative who only bashes conservatives. There's a lotta job security in that, Porter, let me tell you. I've seen a lot of it going on.
But I think that with Trump now, he's established a paradigm in which if the Senate doesn't do anything, it's on them. And he gets to now blame all of the unfinished business and all the unkempt promises on McConnell and Paul Ryan and the Republican-majority Congress, and until they put something on his desk that he's supposed to sign and doesn't, I think it's an effective strategy for him.
Porter Stansberry: You might be right, Buck. You –
Buck Sexton: At least in Term 1.
Porter Stansberry: You know more about politics than I do. I'm just looking at the fallout. It just seems like it – it just seems nuts to me. And you think about how popular a charismatic outsider could have been – a Reagan, for example. Reagan was definitely a political outsider. He was definitely a celebrity. He was very popular, both with Democrats and Republicans in the same districts, in the same places, and for a lot of the same reasons that Trump is. But you looked how Reagan behaved and treated everybody all the time: with tremendous grace and style. It's the exact opposite of what you get from Trump.
Buck Sexton: Rough around the edges, I'd say. He's a little rough around the edges.
Porter Stansberry: And I –
Buck Sexton: I really wish I had – the people that I knew who
Porter Stansberry: Well, I was saying I have negative charisma, so I know the personality type, and I would just tell you that Trump makes my negative charisma look like a minor flaw compared to the giant chasm of unnecessary, boorish behavior.
Buck Sexton: Want to get to the Kevin O'Leary interview?
Porter Stansberry: Let's bring –
Buck Sexton: Let's bring Kevin on.
Porter Stansberry: Let's bring on Kevin, and I think he's gonna actually give listeners some really great advice about how to manage their passive investments in very well-run ETFs.
Buck Sexton: Up now with Porter is Kevin O'Leary. Kevin is a Canadian businessman, investor, writer, financial commentator, and television personality. He's co-founder and chairman of O'Leary Funds and the co-founder of software company, SoftKey. Kevin is an investor on the ABC reality television series, Shark Tank, and was a venture capitalist dragon on the CBC television show, Dragons' Den.
You might not know that by 1999, Kevin had acquired no less than 60 of SoftKey's competitors and then sold the conglomerate to Mattel for a staggering $3.7 billion, one of the largest deals ever done in the consumer software industry. To keep his money working hard, Kevin took control of his wealth from lackluster money managers and founded his own mutual fund company, O'Leary Funds. Kevin's "get paid while you wait" yield-oriented value investing philosophy is something that resonates at Stansberry Research, so we're glad he sat down with Porter for this exclusive interview. Kevin called Porter on his way to another speaking appearance, and this is what they talked about.
Porter Stansberry: Kevin, thank you very much for joining us today. How are you and where are you?
Kevin O'Leary: I'm on my way to Tampa, Florida. I'm in great shape. I'm keeping busy these days.
Porter Stansberry: Yeah, you've got a lotta irons in the fire. You're turning into an entire media brand. What role do you think the angry persona played in the success of your show and of your personal brand?
Kevin O'Leary: I don't think it's angry. I think it's differentiated between those that tell you the truth about business and those that don't. People say I'm angry; I'm just telling people the truth about business, which is binary. Either you make money or you lose it. And I think it's important in the context of people taking risks with their own money, particularly their family's wealth, putting into an idea that has no merit that will eventually go bankrupt, and I tell them the truth and they think that's angry? Not at all. It's the truth. And I think people appreciate that over time.
I'm a very conservative investor, actually, and I try and help people to stop them from making disastrous mistakes, and as a result, I say that I'm – look, if you think I'm tough on Shark Tank, for example, wait till you see the real world, what that's gonna do to you. I'm your best friend. I'm the only shark that tells you the truth.
Porter Stansberry: You know, a lot of the pitches I see on the Shark Tank, to me, sound a little fantastic, like the products are a little goofy or they're very niche, and I just wondered, can you think, off the top of your head, a product that you thought maybe was a little too niche or a little too goofy that ended up becoming a big success? Because one of the things that's so interesting about business to me is it's very hard to predict what will succeed and what won't. Even if you have a lot of experience, there's always times where you can't believe something wouldn't work and there's times when you can't believe something did work. What's one of those things that have come through that you thought would not work that has been successful?
Kevin O'Leary: Well, that's a good observation because you're right: you need diversification in your portfolio and you certainly need it in venture investing, but the one that I thought would never work that I actually ended investing in was called Plated. They were one of the first companies to say, "Look, we're gonna send out meal kits with just one portion in a box so that people that live in condominiums in metropolitan areas can order it up, have it come to their door, make one meal." I thought, "That's crazy. Why would that work? That sounds so inefficient."
And we just sold it to Albertsons last week for $300 million. It's the biggest exit in Shark Tank history and a 1,300 percent return for me, and that just goes to show you, you know, you never know what's gonna work, and that one's one that did, and they are – because of what Amazon did in buying Whole Foods, Albertson wanted to have something competitive, and they – so they bought Plated. Plated was one of the largest purveyors of meal kits, which I thought was a crazy idea when it came out two years ago, but boy was I wrong on that one.
Porter Stansberry: Yeah, that was a great deal. Congratulations. Talking about deals, what do you think matters more over the long term, finding the right deal or having the right structure?
Kevin O'Leary: I think it's a combination of both. I look at this in terms of when you put money at risk, when you put it in harm's way – my mother used to have a saying: "Never spend the principal, just the interest." And she was the same way on stocks. She wanted to get paid a dividend. Her whole premise was that when you invest in something, it has to provide an ongoing return in addition to potential capital gains over time, and I think that's a very good philosophy.
So the structure of what I do when I do venture investing is very much venture debt. I often will loan the company half a million dollars, take five percent warrants in their equity, have a royalty rate on all their sales to pay back my principal so that I have a structure in place that assures that I get my capital back under the majority of the time. And so I've learned over time that getting your money back is more important – preservation sometimes is more important than performance. Getting capital back, protecting it so you can fight another day ends up being paramount.
Porter Stansberry: I agree with you, Kevin. I've had a lotta success investing in apartments, and the two things about apartment deals that are just very attractive and very different than most equity is that you have such a great ongoing yield and you can also take 75 – 80 percent of your capital back after 18 or 24 months if the units perform. And I think that most individual investors don't think hard enough about the structure of the investments they make. They think their only alternative is just buying stocks.
There's one more – a question down this road I wanted to bring out. You're a huge fan, on the show, of getting royalties, and the one thing that I really love about royalties is, in particular, in commodity investments because, as you know, the commodity markets are very tough, very tough business, requires a lotta capital, and of course, the price of the product fluctuates wildly. In those kinda businesses, I feel like it's way more important to get an ongoing royalty stream than it is to own the equity. What other kind of businesses do you know that you really only want to focus on royalties if you're gonna get involved in?
Kevin O'Leary: Well, when I'm offered an opportunity to invest in a family business. Let me give you an example. Something as ubiquitous and non-proprietary as cupcakes, I own a cupcake company – or at least I have a royalty stream from one – called Wicked Good Cupcakes. It's the number-one cupcake company in America that FedExes high-quality cupcakes in mason jars as gifts to all across the country. Every time one of those is sold, I get $0.45. I do not own equity in the company 'cause it's family-owned – it supports 42 family members. It makes millions of dollars a month and I have a very comfortable relationship because our interests are aligned. I want them to sell more cupcakes, more pies – we now do pies in a jar, we do gluten-free cake, all kinds of different things. I spend a fair amount of my time promoting their business online to help them get more customers because it's in my economic interest.
So the point is you don't have to be an equity owner to align your interests with an entrepreneur. A royalty stream can do that, too. It's a pure play and they have total control over their business, but our interests are 100 percent aligned. Every time they sell a cupcake I get $0.45, and they sell a lotta cupcakes.
Porter Stansberry: Kevin, that's a fantastic answer. I hadn't thought about the dynamics of investing in a family business before, but you're exactly right. You don't wanna get into those management meetings. It's never gonna be run rationally. There's a lot of other dynamics. So take a royalty, you don't have to argue. They can run the business any way they want. You're still gonna get your capital. Love the answer.
Let's talk for a minute about individual investors in the equity markets. I know that you have a big new business in ETFs. Can you tell us generally where you are in that? How'd you get involved in ETFs and what are your goals in that business?
Kevin O'Leary: So the reason I got involved in ETFs is I'm a big believer in active management… In other words, having somebody determine which stock to buy, how much to own
So I thought to myself, was there a way to take a great active manager – and I'll give you an example. Let's say you want to invest in the S&P 500. There's many companies in there I don't want to own, 'cause my definition of quality is this: If a company is using sales accruals like Worldcom did, I don't want to own it. I don't care what sector it's in. When you sell something and you don't get cash, bad things happen. So that's something I'll never buy. So that excludes a whole bunch of companies.
If a company is using debt to grow or maintain its dividend like many utilities do, I don't wanna own it because it's not generating real cash. It's borrowing money and paying that out as a dividend, and that's gonna end badly one day. That's the second rule. And these are some of the rules that good active managers use all the time.
The third one that I really like is return on assets. If you have assets and you don't make any money on it, that's a bad business. So I like companies that have a high return on assets as opposed to ones who have a low return on assets, and if return on assets is slowing from quarter to quarter, that means bad things are gonna happen; it means products aren't selling. I don't want to own it. I just described three rules that I want to live by.
And a fourth and final rule: I don't like volatility because most of my capital is tied up in family, generation-skipping trusts, and I want that money to stay there. So I tend to not buy stocks that are volatile. Those are four rules.
What attracted me about ETFs – and I didn't know this till about six years ago when I started working on it – there is a way to take an active manager and turn those into rules, like the four I just gave you, and create an index or an exchange-traded fund that follows those rules so there's no style drift. There's no one individual making those decisions. The rules are the rules. And that's what I've created: a platform.
For the S&P 500, I use
I did the same thing for small-cap stocks, of which there's 2,000 in the Russell 2000. Nobody can manage that, but if you apply the rules, you get 339, which yield 3.2 percent, and they're the ones with
Porter Stansberry: And so you have your personal assets in those ETFs and you also recommend those ETFs to other investors. Is that correct?
Kevin O'Leary: I never recommend anything to anybody. I'm just telling you what I own. I'm just an investor. [Laughs] I look at it this way: How do I preserve my wealth? And I have enough of it, thank goodness, that I can create my own indices with people like FTSE Russell, and I use them. I just use it to maintain a distribution, a five-percent plus to my family and the charities I support and everything else. And I go to sleep at night not worrying about which stocks I own because they all have to pass the rules. So I'm not really an advisor; I'm just an investor.
Porter Stansberry: Right, I'm sorry. I didn't mean that you're actually recommending these to anybody. I'm just trying to understand, do you have capital in these funds or are you the fund's owner, or both?
Kevin O'Leary: No, no, no. I have my family trust in them. I designed them for my family, and yes, I own the manager, that's true, but I also own – I guess I should say I eat my own cookie. That's probably the best way to do the analogy.
Porter Stansberry: That's what I was curious about.
Kevin O'Leary: Yeah. I don't pick stocks anymore. I let FTSE Russell, with these indices, decide, every quarter, what I'm gonna own because I know the rules were built to maintain and preserve my capital as best they can, and that's how these work. So there's no more individual stock picking for me. I use actively-managed exchange-traded funds:
Porter Stansberry: Kevin, I mean, that's a fantastic idea, and for people who either haven't been
Kevin O'Leary: Yeah, sure. They're 48 basis points. So if you look at a mutual fund, they tend to be more expensive. That's what I used to use. They're generally 90 to 120 basis points and 1.2 percent. Forty-eight is sort of right in the middle of where actively-managed exchange funds trade. You can get a lot cheaper indices, like you can buy ESPY, which is only 11 basis points. The trouble is there's no rules. You just own all the stocks, and two-thirds of them, I don't wanna own. I much prefer an active-managed strategy and I'm willing to pay a little bit more for it because the yield almost makes up for the difference. If you're only getting 1.8 percent in the S&P and you're getting 2.4 percent in an index like
Porter Stansberry: That makes sense to me, too. There's one risk with all index-based ETFs, and I wanted to get your opinion on it. Obviously, it must be a risk you're comfortable with or you wouldn't have your capital in these ETFs. The component that makes me a little worried is the volatility component, and I say that because I have seen, over the past five years, just a wall of money that has been shifted from either active management like a mutual fund or passive management like just the plain S&P. I've seen a lot of money moving into these kinds of ETFs, which are labeled smart beta in a lotta cases. I'm not saying that's exactly what you're doing, but allocating money strictly based on volatility can be a circular logic, a self-fulfilling prophecy, as so much money gets put into the high-quality, low-vol stocks. You see tons of similar names and lots of ETFs, lots of money flowing into them.
I'll give you a case in point. ExxonMobil is one of the most widely-held stocks across all ETFs of any style category, of any strategy because it has a high return on assets and it is low-vol, and I don't know if Exxon's in your ETFs or not and I'm not trying to say anything disparaging about your ETFs in particular. I'm just wondering, do you have any concerns about the amount of capital that is chasing low-volatility stocks?
Kevin O'Leary: Well, you make a good point and I agree with you. If you have a single factor like high yield or low volatility, that's a problem because let's take, for example, high yield. You could end up with a lot of broken stocks if their price has been cut in half and their dividend's gone from three to six or seven percent, and if all you were mining for or all you cared about was high yield, you'd end up with a lot of bad stocks you wouldn't wanna own. I don't like strategies that are single-factor 'cause nobody buys a stock on a single factor like low volatility. I don't agree with that, so in some ways, you're absolutely right.
What I prefer is to do what managers do. They look at a whole range of things that matter. For example, the rules I gave you are what is actually designed by an active manager, someone that I used to work with for years that cared about the quality of a balance sheet, so she didn't like to see debt being used to raise dividends. She didn't like volatility. She didn't like companies where asset returns were slowing, return on assets diminishing every quarter. You think about all that, that's a lotta rules, and there's – that's multi-factor or basically how an active manager works.
ETFs, themselves – and I agree with you on one factor. When you look at an ETF, it's not good enough just to say what are the factors or what are the rules. You have to understand what they own inside of them. If they own massive,
But you have to understand what you own. I prepare large liquid stocks. If I'm gonna own some Microsoft or some Apple in an ETF and I want to put $100 million to work, it's not a problem 'cause I'm only buying 40,000 shares of a stock that trades hundreds of thousands of shares a week. So I'm okay with that.
Porter Stansberry: Kevin, there's a lot of wisdom and it's been a really informative interview, maybe the most informative guest we've ever had on the podcast. You've given some great insight to our listeners and I'm very grateful. Can you answer just one more question for us? The Kevin O'Leary brand is blowing up all over the media and in lots of different ways. What's next for Kevin O'Leary? Besides the ETF business and Shark Tank, what do you have in the works?
Kevin O'Leary: You know, I'm getting very involved in financial literacy. As a matter of fact, my trip to Tampa's exactly for that. I like to talk to college students. I was at – in the last couple of months, I've been teaching at MIT, Notre Dame – what was it – Temple last week.
I'm trying to get kids in their early 20s to understand what it means to be an investor because think about this: The average salary in America is $52,000, and if you were just to take ten percent of your paycheck each week at the age of 21 and put it away and put it into the stock market and become an investor, the market gives you generally 6 or 7 percent, on average, over a long period of time per year, even
And then a few years ago, someone said to me, "Well, how can I do that, Kevin? If I only have $50 a week to invest and I wanna buy Apple that's $150 a share, how am I gonna do that?" And then it hit me: If we could do fractional-share ownership, we could allow people to put $20 or $30 or $50 to work each week and buy a fraction of Apple, a fraction of Microsoft, a fraction of a company they like, and they'd own the stocks and watch them grow over time and mark-to-market and watch them going up and down every day on their cellphones, because that's what those kids use.
And I've done that with an app called Beanstox, B-E-A-N-S-T-O-X. I partnered with DriveWealth, a dealer-broker, I put that together, it's become very popular in universities, and I say to the kids, "Put $5 to work this week. Put $10. Put $2. Put whatever you've got and start investing. There's 1,000 stocks on Beanstox, there's 200 ETFs. You can build an international portfolio $20 at a time." That's what I'm all about, and I tell these kids something: "If you start thinking this way now, every month, put something away, you'll be a millionaire when you retire, and that's the best thing you can do for yourself."
And one last thought for everybody, because this whole thing about Shark Tank, and every day, I get thousands of e-mails about this. I tell everybody, "What matters in life, whether it's your marriage or whether it's your business partners or how you treat people, just tell the truth. Because think about it in the context of this: you fall in love with your significant other. The first time you lie to them, you lose 50 percent of the equity in that relationship forever. Forever and ever and ever. You can never get it back to where it was. So why don't you just tell the truth every day, no matter how hard it is to say that?" And that's great advice. That's what my brand's all about.
Porter Stansberry: You know, Kevin, I told you that I had one last question, but you bring up this importance of telling the truth and you're talking about young people, and one other really important question comes to mind. I hope you don't mind if I ask you just one more, and that is: There is $1.5 trillion outstanding in student loans. Thirty percent of those loans have balances at over $100,000. It seems very unlikely to me that much of that money is ever gonna be repaid – I think far less than half. Do you think it makes sense for our country to have some kind of a "Debt Jubilee" or amnesty program for student loans?
Kevin O'Leary: I do, but I also think we have to fix the basic problem. When you take out a student loan – between $40,000 and $60,000 is the average range – you have to have a plan on how you're gonna pay it back. Either you work while you're in college or you think really hard what degree you're going after, because if you're going to go and borrow $60,000, it'd better be something you can pay back. So maybe – and I'm not against the arts and I'm not against taking history or English lit, but what's wrong with becoming a plumber or a welder or something in a craft that pays you $200,000 a year? We don't all have to have history degrees.
I think people and young people today should think really hard about what they're investing in when they take and borrow money from a bank to get an education. What are you educating yourself for? It's to get a job, and if you don't see the path of that and you're not willing to plunge yourself into debt for the rest of your life, think hard about where you're going. And that's my basic message.
I've met so many great entrepreneurs in my journey in the last 20 years with all of this Shark Tank stuff, and I realized an education is not a prerequisite for success. I've met plenty of people that never finished high school that are multimillionaires. But the point
Porter Stansberry: I think that starts with being honest with yourself. I think there are a lot of young people out there who enjoy the comfort of the lies that colleges and lenders are selling them, and it's a big problem for young people, and it's very hard to become a homeowner, much less an investor, if you're 25 years old and you owe $50,000 or $100,000. I don't know how people are gonna do it.
Kevin O'Leary: No, it's huge. That's the whole thing. In your 20s, you amass debt because you're growing and you're maybe taking a student loan and you're getting married and you're buying a house and all that, but in your 40s, you have to pay it all back. So by the time you're 65, you actually have a nest egg of some kind, which is why I'm such a huge advocate for really focusing on keeping debt low. You don't have to have a $40,000 wedding. You don't have to buy a house; you can rent one. Staying outta debt and amassing a nest egg is what it's all about for the next 50 years.
Porter Stansberry: Agree with that very much. Kevin, thanks so much for your time, good luck on your trip to Tampa and with all your future endeavors, and I hope you'll come back and see us again soon.
Kevin O'Leary: Thanks. I appreciate it. Take care, Porter.
Buck Sexton: All right. In the last week on the Stansberry Investor Hour, we've received a ton of kind praise and support in the mailbag from people that are learning a lot from the podcast and tuning in each week, people like Philip S., Keith L., Jose T., Kent E., Fred R., Dan M., Cory B., Brian, Mark, Kevin, Joe, Jacob, Carl – oof. A lot of folks. If you're listening today, guys, thank you for all the support and the feedback, and remember, if you send us a question and we use it on the show or if you send us a statement, whatever it is, for the mailbag, we can send you some Stansberry Research swag, which I saw quite a bit of.
I was down in the Stansberry offices in Baltimore. Very nice, very fancy. I have to say, I was impressed.
Porter Stansberry: You like the offices?
Buck Sexton: Yeah, it was very nice. Yeah.
Porter Stansberry: Well, it shows you, $20 million and a little bit of style gets you a nice office.
Buck Sexton: [Laughs] It's a very nice office space, I must say. I was like, "This is very impressive." All right, let's get into the mailbag. You have first –
Porter Stansberry: Well, hang on, hang on, hang on.
Buck Sexton: Oh, sure.
Porter Stansberry: One second. You gave me a very nice comment about the office, and by the way, I'm very proud of the office. What most people don't know is we spent 20 years working in a dusty basement, and that was an upgrade from where we started, which was an attic. So we've come a long way, and I'm proud of our offices. They are very nice.
I also want to say, Buck, you were a guest at my farm recently. I want to bring that to light. You came down and –
Buck Sexton: It's true.
Porter Stansberry: You came down and stayed at the guesthouse, which we call the bungalow, and we got some guns out and the dog, and we went and shot some birds, and I just want to tell everyone it's a very good thing that our mortal enemies of our countries are not pheasants because – [laughs] – if Buck had been trying to protect us all from pheasants – [laughs] – we would've been overrun years ago.
Buck Sexton: There was not a lot of successful shots taken by yours truly here when it came to the pheasants. I was lagging them a little bit. It's been a little time since I've gone bird hunting. Plus I may be, secretly a little bit of an animal rights freak, so we don't have to get into that right now. [Laughs]
Porter Stansberry: I think he was intentionally trying to –
Buck Sexton: I'll eat them, but I haven't shot anything.
Porter Stansberry: I think he –
Buck Sexton: I haven't shot anything in a long time.
Porter Stansberry: I think he was trying to miss. [Laughs]
Buck Sexton: Can neither confirm nor deny, can neither confirm nor deny.
Porter Stansberry: He looked very uncomfortable. Oh well…
Buck Sexton: I'm fine.
Porter Stansberry: You know, maybe –
Buck Sexton: I like the outdoors, and I love dogs.
Porter Stansberry: Maybe it was Ariana. Maybe it was the deep inside Ariana that didn't wanna put violence on the birds.
Buck Sexton: All I need is for http://www.slate.com or http://www.thehuffingtonpost.com to see some photo of me holding up a dead, bloody bird. I mean, they'll never forgive me, man. They'll be coming after me forever on that one. "Look at him, he's the pheasant mass murderer, Buck Sexton." [Laughs] That's –
Porter Stansberry: Yeah, or the four of us standing over a pile of dirty, dead birds covered in blood. Yeah, that'd play well
Buck Sexton: Yeah, I would've had to go deer hunting, for all of you listening, but I had to do a radio show for three hours instead. But otherwise, I probably would've been up to my elbows in deer guts at some point. Yeah, I haven't cleaned a deer – actually, I haven't cleaned a deer ever. Y'all call it cleaning or gutting or whatever it is you do?
Porter Stansberry: Yeah, we gut 'em and then we hang 'em up overnight and then we butcher 'em the next day. It's fun.
Buck Sexton: Well, venison is very tasty, though.
Porter Stansberry: Very.
Buck Sexton: I do love meat, which is just – I should probably learn to shoot my own. I'm gonna get out there, though. Once my dad here says – he's gonna say, "We gotta go out," and, "I taught you kids better than this," and I'm gonna have to get out on the sporting clays and do some shooting somewhere and check all that stuff out. And I'll come back down there and I'll be racking up dead birds by the hundreds.
Buck Sexton: Let's go shoot some birds, man. They're overpopulated in this area, Porter.
Porter Stansberry: He was holding the shotgun like he was afraid it was gonna bite him, you know? Like he was allergic to it or something. [Laughs]
Country Club Guy: And Buck, let me chime in. If you want to practice your sporting clays, make sure they're the size of Frisbees or bigger, 'cause I don't think you can hit the smaller ones.
Porter Stansberry: Yeah, we have the smaller ones. That'd be tough for you. But let's get to the mailbag. Sorry, but we just had to –
Buck Sexton: That's rough, that's rough. Wow. I'm
Buck Sexton: You make a guy go out in his office attire and boat shoes to go shoot some birds, you know, no practice shots, nothing, and this is what happens. I see how it is, I see how it is. But it's been a while, and I spend my time –
Porter Stansberry: Typical political guy. Got lots of excuses at the ready.
Buck Sexton: I told Porter, I said I'll bring my tennis gear. I said, "We're going shooting, I'm bringing tennis gear."
Porter Stansberry: I like tennis.
Buck Sexton: All right, fine.
Buck Sexton: No, tennis, I do play, actually. Tennis, I like. I need to learn – I actually don't know how to play golf, so I don't know how good of a – all right, I'm gonna be boring the audience with this. Let me get into
"Dear Porter and Buck – " this is from Steve. "In regard to the jubilee theory, I would appreciate a much further discussion of the idea. What would it look like? What would it feel like to the average citizen? How would it happen?" This is Porter. Go for it, Porter.
Porter Stansberry: You know what, I gotta put out a tease here. We are launching an enormous report on that very subject this week. So very shortly, in lots of different forms of media, you'll be able to watch a 40- or 50-minute presentation that I'm recording this afternoon about this very topic, and rather than spill all of our hard-fought intelligence about this matter, I'm gonna just ask you to watch the presentation when it comes out. Trust me, you will see it. It'll be everywhere, and the mainstream media is going to freak out about it and they're gonna call me a liar, a conman, all the stuff that they normally say. So just a couple days and you'll have an enormous, full report about that.
I've also written a book about it that is coming out shortly as well. So if you don't mind, just hold your curiosity and you'll have tons of information that's coming from us in the next couple of days.
Buck Sexton: All right. There you have it. Derek writes in with the following: "Dear Porter and Buck, not ignoring you – " okay. "Love the podcast, learning a lot, as I have with several Stansberry subscriptions over the years. Just bought into Tama Churchouse's Crypto Capital subscription. Didn't want to be left out of what could be a great opportunity. Now I can sleep easier knowing I didn't ignore what may be the wave of the future. Buck, I appreciate your patience with Porter's diatribes against all political sides and the occasional curse word. Keep these podcasts coming. I'm enjoying the education." That, from Derek. Crypto Capital subscription, very cool.
Porter Stansberry: And you can see Tama Churchouse's Crypto Capital presentation if you haven't yet by going to http://www.stansberrybitcoin.com. And if you're at all interested in learning more about crypto, I hope you'll tune in and see the presentation. The guests on that presentation include
Porter Stansberry: – Brendan.
Country Club Guy: Blumer.
Porter Stansberry: Blumer, yeah. Buck, Brendan Blumer's company has generated about a half a billion dollars in revenue in three months. He and his team programmed a new platform for blockchain applications. So it's like an operating system for blockchain. And they've sold capacity on this new system and they've made a fortune. And so it'd be like having Bill Gates on your podcast in 1980. He is the guy who is building enterprise-ready blockchain applications. So even if you never buy any kind of crypto asset, I really do hope you'll listen to this presentation because you're gonna learn the difference between a crypto currency and a crypto asset, and they're very different things.
Buck, I'm not kidding. You should listen to this. I'm not joking.
Buck Sexton: I'm going to.
Porter Stansberry: You really should.
Buck Sexton: I was gonna say, you would be proud. I have watched, now, four TED talks on blockchain so that I could become more familiar with blockchain, so it is a very interesting thing, by the way.
Buck Sexton: The more I learn about it, the more I'm like, "This is a big deal," as the kids say.
Porter Stansberry: This is a big deal. And this guy, Brendan, is a very nice guy and a very, very smart guy, and if you Google him and "financial times," you're gonna see that the Financial Times wrote an article about him claiming, essentially, that he was nothing more than a fraud and that anyone who was stupid enough to buy into his software was buying nothing. And it never occurred to the Financial Times that maybe they just didn't understand it. Believe me, $500 million was not spent by mistake, Financial Times. This is the smartest guy in the entire space and you just wrote an article saying that he's a moron or a fraud and that his investors are morons. You cannot imagine how behind the curve the mainstream press is when it comes to understanding crypto assets.
And I want to be clear: this is a crypto asset. It is not a crypto currency. There is a big difference, and if you don't understand the difference, you've gotta listen to Tama and Brendan and me discuss it. You'll learn a lot. You don't have to buy anything. It's free.
Buck Sexton: All right. Now we got one more this week in the mailbag from John. "Porter, I'm intrigued by how China educates their populace and would like to know how China plans on becoming the dominant force in the future when it appears the U.S. is the leader in innovation as opposed to reverse engineering by the Chinese. In addition, do you think the U.S. government will forgive the educational loans to those students of STEM careers to get colleges to rethink the type of degrees they offer as opposed to the feel-good degrees that these universities are now putting out there and graduating?" That's from John. Porter?
Porter Stansberry: Well, first of all, I really know very little about the Chinese education system so I can't speak to that, unfortunately. I do think that the American economy's capacity for innovation and for venture funding is a tremendous advantage, and it goes hand-in-hand with the unique property rights that you have in America. Just in the oil and gas industry, for example, the idea of mineral rights is something that only exists in the United States, the idea to separate the mineral rights from the surface ownership. It's a very important concept that doesn't exist in a lot of other countries' legal code. So that's a big advantage for America, and that's an example of why innovation plays such an important role in our economy and gives us such a big advantage over other countries. I don't know how much that has to do with the education, per se, or just the legal system – the ability to raise capital, the ability to declare bankruptcy. All those things are uniquely American, and they have provided us with a much more vibrant and innovative economy.
But I do have a very important thing to tell you about education and about STEM and about all that. As long as politics are involved, there's not going to be any useful incentives to go to college. The incentives are all gonna be designed by politicians, and those are gonna be designed to pay off the crowd and to get votes. It's not gonna be about making our educational system more efficient or more productive. It's just not. So you can forget about that. It's a good idea, but it won't happen.
The thing that I wanted to point out about education this week, though, was not about the government paying for the loans. It's the –
Buck Sexton: I have not.
Porter Stansberry: So Gradifi is a program that helps employers pay off their employees' student loans, and the advertisements that have been on TV about them, they show you this young woman in college and how hard she's working and how much money she has to borrow for everything – [laughs] – and then they show her in a conference room with someone who is supposed to be the owner of a company. So think for a second how many times the owner of a business sits in a conference room with a 25-year-old rookie employee at an enormous boardroom. And the owner of the company is sitting there, meeting one-on-one, working with this young, new college graduate at a business. I've never, ever seen that happen. [Laughs] But apparently, this new employee is so important to the organization that the owner of the company wants to pay off her student loans.
I can't imagine how this works or
The second thing I want to tell you about college, Buck, did you see what happened at Cornell last week with the Black Student Union?
Buck Sexton: I did not.
Porter Stansberry: So this touches on that issue that I'm very fond of that other people are very afraid of, which is the difference between race and culture. So the Black Student Union at Cornell – and Google this, folks, to make sure that I'm telling the story correctly – the Black Student Union has demanded that all the benefits of the Black Student Union, from the fees they get from the college students and that the college, then, gives to the Black Student Union for their support – I don't know what all that entails – the parties they throw, the hall they maintain, all that stuff – the Black Student Union has said to the college that they want to exclude people who are not, in their minds, the right kind of black, and specifically, they want to exclude foreign exchange students who are of African descent and Caribbean students who are of African descent, as well as new immigrants who are of African descent. To be a member of the Black Student Union of Cornell, they said, should mean you have had an American person of African descent of at least two generations in the country so that your family has suffered because of what they referred to as the black Holocaust in America.
So again, what I want to point out to people is that African American demands for things like "social justice" has nothing to do with race. It has everything to do with politics, economics, and culture. These are folks who feel that they have been marginalized and feel that they have been exploited and feel that they have been discriminated against, and in their minds, that entitles them to things, mostly money.
And so I think the actions of the Black Student Union is just Exhibit A that demands for social justice have nothing to do with race. I don't care what color your skin is. That makes no difference to me. I care about how you comport yourself. I care about the culture that you identify with. I care about whether you take responsibility for the outcomes of your life, where if you always are trying to blame your failures on other people. And those are cultural issues and issues of personal responsibility, not issues of race. And that's what I saw echoing at the Black Student Union at Cornell. They don't really want black people in their club unless they identify as victims.
Buck Sexton: And with that, I think that's our Stansberry Investor Hour for the week, Porter.
Porter Stansberry: All right. Great, Buck. Well, listen, it was a pleasure. I want to thank Kevin O'Leary for stopping by and I want to encourage everybody, like I said, to please check out our presentation on crypto capital. It's http://www.stansberrybitcoin.com. That's http://www.stansberrybitcoin.com. I promise you'll learn a lot.
Buck Sexton: Thank you, Porter. Have a great week.
This broadcast is provided for entertainment purposes only and should not be considered personalized investment advice. Trading stocks and all other financial instruments
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