In This Episode

Buck and Porter welcome Erez Kalir, CEO and co-founder of Stansberry Asset Management. Porter and Erez discuss four specific “mile markers” to watch for that will signal the end of the current bull run in stocks. Erez talks about a meeting with Peter Thiel where the famous venture capitalist reveals what he’s doing with his bitcoin investment. Porter asks Erez what’s the one stock he would buy if it was the only one he could hold forever.

Porter gives one last lesson on the big mistake Warren Buffett is making that could change Berkshire Hathaway forever. Buck breaks down the culture of the FBI and its influence on “Russiagate,” and Porter wonders why successful money managers and business people are often the target of politicians, while real criminals like those behind the 2008-2009 financial crisis just walk away.

Buck gives his account of the Facebook data breach that erased over $35 billion in investor capital in one day. Is the stock a buy or sell? Porter weighs in. A listener sends in a question about student debt forgiveness and what it would mean to Porter’s American Jubilee prediction.

Featured Guests

Erez Kalir
Erez Kalir
Prior to launching SAM, he co-founded and led Sabretooth Capital, an event-driven fund that invested in distressed credit and equities, and managed $1 billion in assets for investors including Julian H. Robertson, the Rockefeller family, and several highly regarded endowments. He also worked at Eton Park Capital Management, a large hedge fund spun out of Goldman Sachs, as the first analyst hired into the Special Situations Group.


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 Here are the hosts of your show, Buck Sexton and Porter Stansberry.

Buck Sexton: Hey, everybody, welcome back to another episode of The Stansberry Investor Hour. I'm nationally syndicated radio host Buck Sexton. With me today, the founder of Stansberry Research and sometime sport angler, Mr. Porter Stansberry. How was your most recent expedition, sir?

Porter Stansberry: Yeah, we had a great time with our two sons down at Chub in the Bahamas. Chub is a beautiful resort. The guy who sold the Eagle Ford oil field to Devon, I think he sold it for $6 billion — He bought the island about three years ago, and he's put maybe $100 million into it, and he's made it really nice.

Chub has been a famous destination for marlin fishermen for, I don't know, 50 years, and now it's nice because the power works and the plumbing works, [Laughter] and there's about 30 new houses you can rent. And so, I took my family there for spring break and the kids had a great time. My son traveled sort of for the first time. He's an 11-year-old, he was able to fish on his own — bait the hook, set the hook, reel the fish in, get the fish off the line. He loved it. He didn't ever want to come off the reef. And my younger son, as I was just showing you, he made friends with a manatee. [Laughter] And he spent one day on the beach riding the manatee. It was a great vacation. Everything was wonderful.

Just as I left my house this morning, my captain just sent me 60 pounds of fish that we caught and had been prepared for us, so if anybody needs some fish, let me know.

Buck Sexton: What kind of fish?

Porter Stansberry: We've got mahi, we've got snapper, we've got grouper, we've got some mackerel for fish dip.

Buck Sexton: Hey, Dan, how about, instead of a T-shirt next week, people who write in and their e-mails read over the air —

Porter Stansberry: We'll send you some fish.

Buck Sexton: ... we'll send you some fish.

Porter Stansberry: Sure. You can have some of Porter's fish. That could be a brand.

Buck Sexton: Or you could do a fish day instead of a meat day.

Porter Stansberry: Well, there's always fish on the meat day menu — absolutely. Always. I've got two Berkshire hogs we just harvested, I've got the kudu that I shot in Texas. [Laughter] I've got about 20 white tail from last fall, and now I've got, I don't know, with the fish I had in the freezer already, probably 100 pounds of fish. So, time to clean out the freezers — big barbecue at my house.

What about you, Buck? What's new in your life? Living in the city, living the dream. Always on Fox these days.

Buck Sexton: Yeah, a lot of that going on. Well, there's some stuff happening. As you know, there's a serial bomber running around Texas right now, so I have the unfortunate — believe it or not, I actually had some explosives training back in the day, and we did some explosives investigatory work, really having to do with IEDs, more so. But the problem with serial bombers — very, very hard to find them until they make a mistake. You're basically waiting until they mess up or someone comes forward, like, "Yeah, that's my neighbor so-and-so." Not a whole lot you can do up until then.

So, that's kept me very busy the last few days. And then also just Trump, Russia. Putin won, I'm sure you saw that. Big shock.

Porter Stansberry: Seventy-three percent of the vote?

Buck Sexton: But the funny thing is, whenever I have to explain to my journalist friends — which I do with some regularity, and I guess technically they consider me almost one of their own, although I'm really just a reformed spook. They don't seem to understand that Putin is somewhat popular in Russia. In fact, he —

Porter Stansberry: Of course he is!

Buck Sexton: Yeah! He's presided over the creation of a middle class and the Russian people, after the complete catastrophe, economically, of the downfall of the Soviet Union, feel like, "This guy's brought us out of the darkness." They like him! [Laughter]

Porter Stansberry: Oh, flash news alert, just sitting here, doing the show — Maryland high school shooting, three injured. Is it where you went to school in the control panel? A rival high school of yours, yeah.

So, Maryland has some of the toughest gun laws in the nation, and they apparently work. [Laughter]

Buck Sexton: Do you know there's another part of that story, Porter, that you're not going to hear much about? This is a school shooting, even though two were critically injured — I think three, actually, critically injured including the shooter — you won't hear much about this one. You want to know why?

Porter Stansberry: Because people defended themselves with weapons.

Buck Sexton: Correct.

Porter Stansberry: Aha!

Buck Sexton: People actually — yeah, in this case, a school resource officer was armed, got into a shootout with the shooter, took him down, stopped the school shooting.

Porter Stansberry: Bingo! That's what you have to do, folks! I'm sorry, but if you want to have any kind of weapons in our society, you're going to have to have weapons in the hands of people who can defend you. It's that simple. And I don't see anybody volunteering to put a sign in front of their house that says, "There are absolutely no weapons here." Who wants to put that sign in front of their house? Hell no! I put up signs all over the place around my house that are clues — there are lots of weapons here. Like, big gates and farmers running around with weapons hanging out of the back of their buggies and shell casings all over my lawn whenever we shoot skeet. [Laughter] Don't come here if you're armed and trying to hurt us, because we're going to shoot back!

Buck Sexton: So, just for a second, to give everyone a preview of what else we're going to be talking about, we have Erez Kalir, CEO and co-founder of Stansberry Asset Management on the show this week. In the summer of 2008, Erez found the first page of Porter's now-famous Fannie Mae issue of the Stansberry Investment Advisory on an abandoned copy machine at a Kinko's in New York City — this is quite a story. Erez was so curious about what he read that he tracked down Stansberry Research, became a lifetime subscriber, and is now co-founder of Stansberry Asset Management. Erez is here today to share his story and his current outlook on the markets.

And before we get started, we have a quick note of thanks to all of you that helped us make our TradeStops offer with Richard Smith such a huge success. If you missed Richard's interview, go back to Episode 40 and you'll hear how the TradeStops software he developed tells you when to cut your losing positions and how to let your winners run. In Episode 40, Richard also tells you the one thing you can do to your portfolio right now that will give you better returns without changing any of the stocks you own. Visit, that's, for the special Richard and his team put together just for Stansberry Investor Hour listeners.

And with that — Mr. Porter, what's on your mind?

Porter Stansberry: Buck, I've got something to tell you about. I'm sure you weren't following closely, but a couple weeks ago, I wrote an essay on the Friday Digest about what was going on at Berkshire Hathaway. And I pointed out something that I found very interesting, that no one else in the media had apparently noticed. Which was, Berkshire had accumulated about $100 billion — a little bit more, but $100 billion of investments in very marginal industrial businesses. And when I say marginal, I'm talking about returns on assets, return on equity.

These businesses are not at all like the kind of businesses that he had historically been known for buying. He had historically been known for buying businesses with outrageously large returns on net tangible assets. Companies like Coca-Cola, American Express, See's Candy — these are genius businesses, they're miracles of capitalism, and he was a collector of them. And so, he only bought the finest companies, and as a result, he made outstanding long-term returns. His long-term average returns as late as the late 1990s was about 24% annually, which is just unbelievable. That's the greatest accumulation of capital in the history of capitalism. It's the best ever.

But around 2000, he really changed the way he was investing. His insurance float continued to grow and became very, very large, and that insurance business is the best in the world. I'm not criticizing that. But what he did with that float money really changed. Instead of buying these really great businesses, he started buying a bunch of really lousy businesses that require lots of additional capital. So, for example, he brags in his letter that he's never taken any money out of his regulated utility company. Well, hang on a second! [Laughter] If you don't take any money out of it, if you don't take any dividends, what's the point? This doesn't make any sense. This is not at all how his business is supposed to work. The business is supposed to work where he buys a company and the company pays him ever-increasing dividends that he can recycle back into Berkshire and make that compounding return that produces those great long-term results.

And so, he was changing. And it wasn't just the regulated utilities, he spent, by my calculation, around $50 billion on a railroad, and returns from it have been abysmal.

So, I wrote about that, and there, lo and behold, about, what, 10 days later, jammer? The Economist magazine, in their weekly issue, comes out with the exact same argument, with almost the exact same calculations, citing the exact same issues. And I don't have any proof that the guy knocked me off, but I'm really proud of the fact that I definitely was the first person in the media to point out that Berkshire is very unlikely to beat the S&P 500 going forward, because it has fundamentally changed its investment model.

And subscribers out there have seen me commenting on this over many years, so probably over the last 10 years at least, talking about how Buffett's made a mistake by changing this model, and — anyway, if you've avoided Berkshire Hathaway because of us, let me know, because I'd love to hear from you. Because this is probably the most contrarian thing I've ever written. I mean, people regard Warren Buffett as a holy saint, and to say that he's not a great investor any more is, you know, blasphemy.

Buck Sexton: You're being mean to America's grandpa.

Porter Stansberry: I'm being mean. I'm being mean. A subscriber wrote in and said, "I hope you like beating up on 87-year-old men." [Laughter]

Buck Sexton: [Laughter]

Porter Stansberry: Well, listen—when 87-year-old control about $500 billion in capital, it's important for the media to keep an eye on what they're doing.

Buck Sexton: One would think.

Porter Stansberry: So that's what we did. What's up with you, Buck, besides — jeez, a crazy president — can you explain what's going on with the FBI stuff? Is the FBI really just a tool for the Democratic Party or are there actual Republican agents as well that we just don't know about?

Buck Sexton: The rank and file are a lot of Republican folks. It also breaks down quite a bit based on whether we're talking about analysts or field agents. You know, the FBI, for example, has an analyst cadre. It also has field agents. And this is going to be more detail than folks listening care to know, so I'll keep it brief, but all these places have their own cultures, Porter, and their own ideological proclivities, meaning CIA, FBI, DIA, you name a place — State Department. Oh, gosh, the State Department is just to the right of Karl Marx on a lot of things.

So, you look at the different agencies and you see the leadership cadre. And people need to remember that the FBI, the guys running it for the most part are lawyers who are friends with the president. I mean, that's who runs DoJ, which runs FBI, that's who runs the Federal Bureau of Investigation. And there were clearly some folks — McCabe, Comey, Brennan — I don't know if you saw Brennan, who was not actually my boss, because I left before he was in. But he was the CIA director, he wrote something about how Trump is not going to destroy America, America will triumph. I mean, this is like the ravings of a madman. This guy was running the CIA!

Porter Stansberry: Yeah, I think it's pretty scary that people Obama appointed in these positions are just as crazy as Trump, but in the opposite way.

Buck Sexton: Yeah, well, it's finally coming all together.

Porter Stansberry: And by the way, isn't it unseemly for the director of the CIA under the former administration to say anything about the current administration?

Buck Sexton: You would think so.

Porter Stansberry: Isn't there an etiquette to that? Like, historically, the former president doesn't say anything about the current president. That's protocol. That's tradition.

Buck Sexton: Yeah. I mean, that should be the protocol. And look, it used to be the case, Porter, that if you ran FBI, NSA, CIA, any of these places, maybe you wrote a memoir that was very heavily edited and combed over, but people generally didn't get involved in the political fight right away. That's completely changed, and that's really changed with Trump now. That's a difference from what you've seen before. All these guys—I mean, look at the list. Preet Bharara, what's the first thing that guy does, the U.S. Attorney for the Southern District of New York. The one guy who basically goes after insider trading, by the way — he runs to CNN right away and starts a podcast. What's the first thing that Comey does? He's now a bestselling author on Amazon. He's like number one for all presales, right? These guys all get into the political fight right away.

  • Porter Stansberry: That guy Preet is one of the grandest assholes of all time.

Buck Sexton: Comey's protégé, by the way.

Porter Stansberry: Somebody needs to write a book about what a gigantic asshole that guy is and all of the people who were subject to his prosecutorial abuse. I mean, I was just watching last night Netflix's Dirty Money episode about the payday lender guy, Scott — what was his name? Anyways, this is a guy who partnered with the Indian tribes to offer payday loans over the Internet, even in states where payday loans were outlawed. And the reason why he did it was very simple. The Indian tribes are sovereign nations. They don't have to follow state laws.

So, this guy found a very clever loophole as a way of offering people payday loans. And by the way, this is going to make me the second most unpopular man in America to say this, but I don't believe that there is such a thing as a predatory loan. I don't believe it for a minute. If you borrow money and you agree to the terms, you have to pay them back. It's that simple. If you don't want to agree to the terms, then don't take the money. It's a contract. Nothing could be simpler. And there's a clause in our Constitution that says the federal government does not have the right to abridge contracts. Everyone ignores that law, but it's there, it's part of the Constitution.

So, this guy had a contract with people all over the country where they borrowed money — it was a small amount, $300 , $500 —until their next payday, which was two weeks away, maximum lending time. So, all you had to do was pay him back. If you borrow $500, you pay him back $650 — that's a lot of interest. And as a result, a lot of people couldn't pay him, so they would roll the loans forward, and there was a $50 fee every two weeks to roll the loan. It's a great business if you're lending money at those rates.

And so, the Netflix show made a big deal about how some people borrowed $500 and had to pay back $3,000. Well, yeah. That was the terms of the loan!

Anyways, Preet prosecuted this guy. They fined him $1.2 billion and they threw him in jail for 16 years. In jail! And all he did was make people payday loans that they agreed to pay him back. Why does the federal government have anything to do with that? You don't want to pay $1,000 to borrow $500, then don't borrow the money!

And the real reason why they went after him — if you watch this Netflix episode, you'll see this — the real reason why they went after him was because he was successful and flamboyant. He started a Ferrari racing circuit. He came in third at Le Mans. He got written up in the Wall Street Journal as a guy who, in his mid-40s, started racing cars and how unusual that was. He tried to turn himself into a celebrity.

Buck Sexton: Oh, Bharara was a scalp hunter — big time.

Porter Stansberry: And he was deliberately flouting the law of the land. He had partnered with the Indians and they wanted to punish him. But the thing is, Preet didn't care about what the law was. This guy had the law on his side completely. He had a phalanx of lawyers who said, "Yep, this is legal. You can partner with the Indians and then you can do this." And of course, so all the prosecution is rear- looking. They changed the law and then they convicted him.

It's just incredible, incredible abuse. And for anyone who's a business person who's been subject to that kind of regulatory authority, you know how ridiculous it is. Look, it wasn't against the law when I did it. You can't go change the law and then convict me! And by the way, if you don't want Indian tribes to make payday loans, then change the law! But don't send me to jail just because I was clever enough to find a loophole.

And of course, the whole Netflix thing was, "This guy made money on the backs of the American working poor." Buddy, what do you think every cable company in America does? What do you think every cellphone company does? What do you think every grocery store does? Don't get fucking high and mighty because a payday loan guy is charging $150 for a $500 loan. The terms are clear as day. The person agreed to it.

If you're going to go after somebody, go after Montel Williams, right? That guy made all the money doing the ads for this guy. Remember Money Mutual? "Do you need $500 today?"

Buck Sexton: Oh, he was the guy?

Porter Stansberry: Yeah! That's the whole —

Buck Sexton: I remember those ads! Yeah!

Porter Stansberry: Yeah! And by the way, I don't think you should go after Montel Williams; he didn't do anything wrong, either. There's nothing wrong with lending money to people who don't have any collateral. That's what a payday loan is, and if you don't have any collateral, you have to pay a whole bunch of money in interest, because otherwise, no one's going to lend you the money. No one!

Anyways, it just very upsetting to me, and I thought about all these people. Rudy Giuliani was another guy from the New York Southern District who made a name for himself and almost became our president by targeting people who hadn't broke the law, but had been successful; most famously, the junk bond king.

Buck Sexton: Milken?

Porter Stansberry: Milken, yeah. Milken was a force for good in our economy. He created the cable networks. Those companies would've never gotten capital without his junk bonds, and he did all kinds of other things to reform Wall Street by enabling activist investors to take over companies and get rid of gross excesses in management. And those takeover efforts were funded by Milken's junk bonds.

So, Milken created a whole new asset class. I mean, Milken's junk bonds were the bitcoin of the day. He didn't do anything wrong, he didn't cheat anybody, but he was too successful, he upended the status in New York City, and as a result, Rudy went scalp hunting and convicted him on the biggest bunch of bullshit, ever. All of which was later thrown out, but it didn't matter, it made a name for Rudy. And Preet was doing the same thing, going after the biggest hedge fund managers by targeting the guy at the copy machine and telling him, "If you don't invent a crime that your bosses did, we're going to put you in jail forever."

That's how they went after SEC Capital. They started at the bottom of the barrel and they used their entire prosecutorial authority to scare these people into rolling over and inventing crimes that their bosses may or may not have done. Again, all those convictions get thrown out later, but in the meantime, these people — dozens of them — end up out of work, reputation smeared, ruined, and it's all bullshit. And who is Preet protecting by going after a hedge fund manager? Who is it that loses because of their ability to get information?

Buck Sexton: There's a good book that I'm reading called Black Edge, and the chapter I'm on right now is when Preet came into office and how he came in and the first thing he did was hold press conferences in the lobby, telling them who he's going after. And the stories you're talking about, he's doing at this point of the book right now. It's disgusting!

Porter Stansberry: It's disgusting.

Buck Sexton: Yeah.

Porter Stansberry: And they target these people because they're successful, and what nobody understands is, there's always somebody on the other side of these prosecutions. There's always somebody who wins because the prosecutor is going after that guy. And so, it's the more established hedge funds who are losing money in business to Stevie Cohen, and in the case of the payday lenders, right, it's the guys at the credit card companies. It's the Capital Ones of the world who lose out when the payday lenders do well. And so, who's better connected, Wells Fargo or Scott nobody from Kansas City?

Buck Sexton: Scott Tucker.

Porter Stansberry: Scott Tucker from Kansas City. And that's not the way that the country should work. It's not the role the government should play. The government should be an impartial referee, not a crooked NBA ref, which is what we've got.

Buck Sexton: You were the one who told me, Porter, because I did the work to figure out that Bharara and Comey were very close. And that it made no sense to me that Comey was making seven figures to be a consultant to, I think it was Renaissance, the big hedge fund. Renaissance never had anybody from the Southern District go after them. Hmm!

Porter Stansberry: Nope. It's a protection racket.

Buck Sexton: That seems curious.

Porter Stansberry: It's no different than the fucking mob. They just wear suits and they act — not parsimonious, they act sanctimonious, which is the thing that pisses me off the most.

Buck Sexton: If people only knew, by the way, I mean, I think it's banana republic stuff —

Porter Stansberry: It is!

Buck Sexton: That Paul Manafort, who now all of a sudden is like, is public enemy number one according to the media Democrats. You know he's facing — I'm being serious — 370 years in jail, Porter. Is this guy a mass murderer? Now, they've got him on, like, mail fraud and wire fraud, they say. And some tax evasion that they can't even prove — they're just going after him on the mail fraud and the wire fraud — and failure to register as a foreign agent, which they never prosecute other people for. They say, "Just register. Thanks." Three hundred and seventy years! They weren't even going to send Ted Kaczynski away for 370 years.

Porter Stansberry: They put this guy in jail for 17 years — 17 years for making people loans. By the way, did this guy ever sue any of the people who didn't pay him back? No.

Buck Sexton: I'm guessing no.

Porter Stansberry: He was the only guy in that business that never sued anybody to collect. [Laughter] He was the furthest thing from a problem in this industry, he was just the most successful. It's just shocking — shocking abuse.

Buck Sexton: Isn't that also, didn't they also go after Mozilo in the mortgage crisis? But he was the only one that they really went after, right?

Porter Stansberry: No, they never went after Mozilo. He was too rich and powerful. He had Sen. Dodd in his pocket.

Buck Sexton: Oh!

Porter Stansberry: No, that's the thing, right? This guy made something like $1 billion worth of payday loans over 20 years, okay? Fine. I don't think there's anything wrong with that. If you do — great. Don't borrow money from him. It's that simple. You don't need any government to protect you from a — what is it called — a predatory loan.

I can tell you, when I was starting my business, I would've been grateful for any predatory loan. [Laughter] Right? I mean, this is so ridiculous. It's just socialism, it's communism, it's class warfare. It's ridiculous! These people are not criminals! Scott whatever his name is, is not hurting anybody. He's offering the opportunity for you to get money if you don't have it. That's that simple.

And, I mean, think about what the state regulates and endorses — gambling. The lottery. You're telling me that the lottery isn't a tax on poor people? You're telling me that's not the biggest racket in the world? And then they're all sanctimonious — "This person was putting hardworking Americans in a position where they couldn't pay their car payments or their power bills." He didn't do any of that! He was the guy who was giving them money so they could make those payments, and then they wouldn't pay him back.

Let's move on. I'll be here all day.

Buck Sexton: Do we need to get to Erez, or do we have time for the Facebook discussion?

Porter Stansberry: Oh. Let's get to Facebook after Erez. Let's hold people in suspense.

But I just want to say something to everybody: What do you think happens to countries where the government starts printing money? Where contracts are not revered or respected? Where laws change on the whims of politics? And where the population — the vast majority of the population — now believes that somebody else should be responsible for them? For their health care, for their retirement, and soon, for their basic income?

What do you think happens to those societies? Do those societies become wealthier and happier, or do they end up in chaos and poverty?

Buck Sexton: Venezuela is a perfect experiment of this.

Porter Stansberry: It's amazing to me that more people aren't fleeing the United States, that more people aren't buying gold, that more people aren't going just nuts about all this stuff. It's just crazy how much our society has changed in just two generations. It's just bananas. I don't even recognize it.

Buck Sexton: We only have $21 trillion in debt, Porter. It's only $21 trillion.

Porter Stansberry: It's only $21 trillion, and we owe it to ourselves, Buck.

Buck Sexton: That's right. [Laughter] It's money we owe ourselves.

[Music plays]

Buck Sexton: Erez Kalir is with us this week. Prior to launching Stansberry Asset Management, Erez co-founded and led Sabretooth Capital, an event-driven fund that invested in distressed credit and equities. Sabretooth managed $1 billion in assets for investors including Julian Robertson, the Rockefeller family, and several major endowments. Erez holds a JD from Yale Law School and has completed advanced studies at Oxford and Stanford, but most importantly, Erez is a long-standing Stansberry Alliance member. Please welcome to the show, CEO and co-founder of Stansberry Asset Management, Erez Kalir.

Porter Stansberry: Erez, thank you very much for joining us today. I know you're busy running your asset-management business, and I want to catch up with you on that in a second.

But let's start with the question I think everyone has, for folks who are in the markets with the level of detail and experience that you are, and that is, you know, how much longer can this bull market run and is this rise in volatility a canary in the coal mine? Is this the final end of this grand bull market?

Erez Kalir: I think that's a great question, Porter. You know, I would preface it by saying we believe, as I think you believe as well, that it always pays to remember that it's both a stock market and a market of stocks. And we at least try our best to avoid getting overly obsessed or preoccupied whether the market as a whole is rising or falling and instead to kind of sniper shoot what the best and sort of most favorable risk-reward opportunities we can find within whatever the market is offering us. It's usually the case that, within a stock market that's either rising or falling overall, you have individual securities, individual stocks, or even niches within the markets that are experiencing their own private bull market or their own private bear market. And we spend a fair amount of time, as I know you and your team do at Stansberry Research, trying to find those private bull markets and private bear markets within the broader sea of stocks.

That said, I think any realistic participant and observer in markets understands that, of course, it does matter whether the market overall has a tailwind or a headwind within it. And so, my own two cents is that, I'm probably with Steve Sjuggerud that we're in the late stages of a bull market, but this bull market still has some room to run. We're not kind of prepared to say it's over yet.

That said, as I know you know well and as your editors have written about, the complexion and character of a bull market in its late stages changes dramatically from what it's like in its earlier stages or even in its mid stages. And one of the characteristics of it is precisely the kind of increase in volatility that we've observed over the first couple of months of this year. So, you know, in a way, if one hopes to participate in and capture the rewards of the late stages of a bull market, one has to have a strategy, both a defensive and an offensive strategy to endure that volatility and capitalize on it.

Porter Stansberry: Well, as you know, I'm probably going to take the other side of that, Erez. I think we've seen a couple of interesting things that are, I think will become more and more significant over time, and looking back, people will say, "Why didn't everybody know?"

Three things for me that are interesting mile markers, if you will, on the decline of the bull market – so, I'm going to go four, and I'd love your feedback on all of these ideas, Erez.

Number one, the decline of crypto. That is, to me, very analogous to the 2000 collapse in tech that led into the bear markets of '01 and '02. This was the speculative bubble of this particular credit inflation. Just clear as day, that was a mania and that burst, and in my opinion, that is not coming back. Yes, I know blockchain technology will be very, very important. But I'm talking about the idea that a cryptocurrency that's backed by nothing is worth $20,000.00 a coin – that is going away.

The second thing that I think is very significant was the liquidation of Toys "R" Us. That is a shot across the bow in the corporate bond markets, and that's something I've been waiting to see since 2015. It's taken so long for this credit cycle to roll over, but I have no doubt that it has, and there will be an enormous repricing of credit risk because of the events of Toys "R" Us – of course, especially in the retail space.

The third thing is, the repression of volatility has been broken, and as volatility rises, Erez, as you well know, that will impact a lot of the leverage strategies that were being employed and cause a lot of the margin to decline.

And the fourth thing – what was it? Oh, boy. I think I forgot. It'll come to me in a minute. I'm like the presidential candidate who can't remember the institution of government he was going to get rid of.

Erez Kalir: [Laughter]

Porter Stansberry: So, let's just go back to those three, because they're definitely the most important. Erez, what do you think about the impact that crypto has as a leading indicator of speculative froth?

Erez Kalir: I'm totally with you on that, you know, Porter. You know, at some of the SAM events that we've held around the country, I often quote or paraphrase Warren Buffett's aphorism, "To be greedy when others are fearful, and fearful when others are greedy." And I ask the folks who come to those events, you know, "Does this seem more like a greed environment to you or more like a fear environment to you?" And to help sort of stoke their imaginations about that, I ask them to reflect on whether people are approaching the crypto opportunity with the mindset of fear or greed.

And to me, it seems pretty obviously the case that at least to date, it's been kinda greed all the way. You know, when you have sort of proverbial taxi drivers or casual sort of participants in the stock market boasting about the multithousand percent gains that they either have made or are going to make buying various kind of esoteric crypto assets within sort of a short amount of time, I don't know that it gets more extreme in terms of an advertisement for that being a greed environment.

So, yes, I agree with you about crypto being a lead asset class or a bellwether or a canary in the coalmine. The analogy to the tax bubble of a couple decades ago is a terrific and spot-on analogy that I agree with.

I guess where I may be a bit more agnostic or would push back is, it's not slam-dunk clear to me that we've seen the top in that asset class. We might have. It's certainly been a kind of brutal correction in bitcoin from—you know, from 20,000 or wherever it peaked back to roughly 7,000 or whatever it is today. That's, whatever, close to a 60% correction, so I get it. We may have seen the top.

At the same time, I was at an event in New York, The Economic Club of New York hosted Peter Thiel last week. As you know, Peter was the founder of PayPal, the first external investor in Facebook. He has a massive investment in bitcoin that he owned early on and he was asked if he's a seller. He's surely one of the most kind of sophisticated and accomplished technology and speculative investors in the world. And, you know, he said he's not selling, so I don't know.

You asked me about whether we've kind of seen the top in crypto currencies. That's really tough for me, personally, to say. To me, that's a kind of close to 50/50 percent call.

Porter Stansberry: Huh, interesting. Interesting take on that. I guess I would walk back part of what I said, only in one regard. There may be a higher price for bitcoin some day, but I don't think that some day is any time soon, and I think there will be a lot more pain before that happens, and I would point you to something like Amazon or Priceline or eBay or any of these things that became great companies, but you didn't want to own them between January of 2000 and late 2002. It was a long, brutal bear market where they all declined 90% or thereabouts. So, that would be my rejoinder to that.

More importantly, I know you follow capital structure very closely, and this is something that I think people who are considering investing with Stansberry Asset Management should know about you. One of the things that Erez can do that a lot of money managers simply can't because they don't have the experience, they don't have frankly, the intellectual firepower. When Erez is considering an investment, he doesn't just look at the stocks, he looks at the entire credit structure. So, he's looking at all the different bonds, he's maybe looking at the senior debt, maybe looking at the subordinated debt. He's trying to find the best vehicle to express his view on that particular business.

Now, if it's something like American Express, that's probably going to be equity, because you know, I think we're long-term believers in the quality of that business and want to be owners of it. But there's other things where we're not necessarily confident in the long-term future of the business, but we're very confident in the ability for a bond to be paid, and we want to earn money for 18 months or 24 months at a very high rate.

So, Erez, I know you really do specialize in corporate bonds, and I know you've studied capital structure for 20 years – what did you think of the events at Toys "R" Us? Was that liquidation surprising to you, or in your mind was that inevitable, and does that mean anything for the market as a whole?

Erez Kalir: I've sort of seen it coming. I do think it's been, to my mind, inevitable or close to inevitable. You know, and I don't know if I believe, Porter, that as a matter of cause and effect, it's a significant enough bankruptcy to trigger a kind of cascade of other domino effects in the credit market.

I do agree with you regarding its symbolic meaning. And I do agree with you that people may look back at it as a watershed or as an early kind of marker of a new era in which we transition from a kind of unnatural calm in the credit market where credit markets benefited from this artificial volatility suppression and money printing that has characterized the post-financial crisis era to a time when credit risk came back with a vengeance.

So, that part I kind of strongly agree with, and I think that one of the other – you're right to say, Porter, that we try and pay attention here to not just what's happening in equity markets, but also what's happening throughout credit markets. And it's been worrying and disturbing to us, out of the corner of our eye, to see, for instance, the LIBOR OIS spread really kind of blow out to levels that it has not seen since the heyday of the financial crisis.

So, I think we're – this is really me just saying there are other corners of the credit market that are, I think rightly, perceived as being indicators that are starting to show signs of a return of kind of credit stress that's unquestionably sort of worrisome to us.

Porter Stansberry: And finally, fundamentals here, talking about where we are in this cycle. We saw last year a record number of all-time lows hit, and the VIX, the volatility index, measures the premiums on put options across the S&P 500. And now, of course, that spread, that index was blown out, what was it, three weeks ago, four weeks ago? We saw these ridiculous inverse volatility ETFs just get hammered. One or two of them went completely to zero. And that trade has kind of disappeared, and we all knew it would.

About a year ago, Fortune or New York Times or somebody did a profile on a manager at Target in Ocala, Florida, who had amassed a $12,000,000.00 brokerage account by consistently buying the inverse volatility ETFs.

And so, from 2011 until last year, every year, volatility just went lower and lower and lower, and every month, he collected nice income from this strategy, which he, of course, was leveraged to the hilt in, and he did very well.

I don't know if he survived the collapse or not. This isn't about one person, this is about this idea that many investors came to see shorting volatility in one way or another as a one-way trade and as free money. And as a result, the VIX got all the way below 10, which has essentially never happened before.

So, it was just one of these trades that we all knew, professionals all knew, was simply inevitable. And Erez, I don't know if you saw this or not, but there was an institutional guy who was buying, I think it was $50,000,000.00 worth of calls on the VIX every month. Every single month. And of course, when it blew up, he hit the jackpot and made several billion dollars. It hasn't come out yet who that was, but my money is on Taconic. And you know that firm very well, Erez, and Taconic gave a presentation about that strategy exactly at the last Grant's conference last fall.

So, you know, it hasn't come out whether or not it was Taconic, but there were certainly a lot of very intelligent and wealthy people betting on a big spike in volatility.

In fact, I'm not that smart and I'm not that wealthy, but I was one of them, too. My strategy didn't work nearly as well. We were buying puts on highly indebted companies on the idea that once volatility spikes, it'll be much harder for these companies to get additional financing and then they would start going bankrupt. Whether that strategy will win or not, over the next year or so, we'll find out. But it really hasn't been a great strategy yet, so I'm still pursuing it, but if I had been smarter, I would've just bought call options on those inverse volatility ETFs. Dadgum it. It's always easier to invest in hindsight.

But Erez, the question is – do you think volatility returning back to a.k.a. normal – or maybe even a little elevated, I think the VIX was over 20 yesterday and the term spread got all whacked out again. Do you think that that, again, is something that is a precursor to a bear market? Meaning, a 20% decline in the S&P 500?

Erez Kalir: I think it's a precursor, Porter, I just don't know whether it's an immediate precursor or whether it's also kind of a precursor to a last and kind of significant leg up of a kind that would resemble Steve Sjuggerud's Melt Up thesis, because I think that it can look awfully similar both ways.

I'm surely, by the way, going to agree with you in our mutual respect for Frank Brosens at Taconic. I think he's one of the most exceptionallyhigh quality people and investors I've ever come across on Wall Street. And I also agree with you that, you know, it's sometimes fun and useful to play the parlor game of, you know, what's the biggest bubble in the world? What's the asset class of the security that's the biggest bubble in the world?

And my answer to that for a while now has been one of two things. They've traded off in my mind. One has been kind of the bubble in volatility or, if you will, sort of the bubble in shorting volatility, and the other has been the bubble in bonds. And I think they're clearly related to one another, because global central banks have used their financial repression and control of the bond market to in effect, to create an environment of artificially suppressed or low volatility. And I don't think that it's an accident that their attempt to – at least in the case of the Federal Reserve – their attempt to try and quote-unquote exit from those programs or see if they can unwind those programs or begin to unwind them has coincided with the return of volatility with some vengeance.

And I, for one, think that we're still in the really, really early innings of that. Like, to my mind, even what we saw in January, which was factually or historically pretty extreme when you saw, in the span of, I think, nine or 10 trading days, the benchmark S&P 500 dropped sort of 10% in – 10 or 11% in nine trading days. That is up there on the list in terms of the speed of that decline, the speed and magnitude of the decline. To my mind, that's just a blip relative to what we're likely to see before this is all said and done.

Porter Stansberry: And then the fourth thing that did come back to me – my mind's on a 10 minute delay – is, of course, the rising interest rate environment. But I want to just skip over that, because everyone understands rising interest rates and the potential impact that has for the multiple in the market. I don't need to go through those basics with you. You know, it's very uncertain about when that will matter, and it won't matter until it does matter, and then suddenly, it's going to matter a lot. And, unfortunately, the timing of that is very uncertain.

But what I would like to point out to people is, you've got an aging bull market here, and you've got a collapsing speculative bubble in cryptocurrencies, which is an asset class that didn't even exist in the last bull market – think about that for a minute. You've got a change in sentiment, certainly, in the corporate bond market, and of course in the volatility space, and you've got the Fed raising interest rates. None of those things sound like tailwinds to equity valuation to me, and that doesn't mean that you shouldn't invest in stocks, and that doesn't mean the stocks can't still go up. But it does mean, in my mind, that you're unlikely to see an environment where stocks go up 20%. Of course, stranger things have happened.

And that was the last part of what I wanted to get to in this interview with you, Erez, and that is, what I wanted to say about all this stuff is, we follow all these macro factors, because every now and then, they really do matter. They mattered in 2008 and they impacted my analysis greatly. They mattered in 2002 and they impacted my analysis greatly. At some point, all these things will matter, more than anything else. More than earnings, more than new technologies, more than demographics. They will matter, and they will be all the markets will focus on.

So, you have to kind of keep up with them, because when it matters, you have to know how to make changes to your portfolio if you want to succeed in that environment, and that's what we're hoping that we can help you do. But most of the time, this stuff doesn't really matter at all, and over the long term, it doesn't matter at all. It's completely irrelevant.

And that's what I wanted to get to next with you. I have this idea that if investors would stop – if they would completely ignore all macro factors and they would instead become connoisseurs of great businesses and if they could discipline themselves and learn how to only buy great businesses when, for whatever reason, they become unloved or unwanted. And I'll give you three quick examples.

In the mid-2000s – 2006, 2007 period – the market became obsessed with the idea that Hershey's chocolate – Hershey, the greatest chocolate company in the world, the company that invented the use of fresh milk and turned it into chocolate. I mean, this is Hershey's process. Still the only large chocolate company that uses fresh milk, by the way. That Hersey would no longer be successful because it couldn't compete globally with Nestlé unless it purchased Cadbury. And for various reasons, they couldn't purchase Cadbury because of the nature of their corporate structure and the charity that owns most of their stock and blah blah blah. I'm not going to get into the details.

But unless, I mean, Wall Street investment banks were pushing this idea so hard – unless Hershey buys Cadbury, it's going to be a loser. And the stock got all the way down to trading for below 10 years' worth of cash earnings. It was as cheap as it had ever been.

I recommended it. I recommended it in my newsletter – correct me if I'm wrong, somebody, but in December of 2007. Which was pretty much the worst time you could buy an equity in this lifetime, right? It was on the verge, on the cusp of the worst bear market of our careers. Stocks fell roughly 50% from top to bottom from November 2007 until the bottom in March of 2009. I recommended Hershey right at the peak.

But did it matter? No! You've made, I don't know, 200% or more gains, you've had your dividend increased every year, you're now earning close to 10% a year in dividends on the money you would've put into Hershey back in 2007, and you never stopped out. It never declined more than 25% from our original purchase price or more than 20% from any high price it's hit since. Low volatility, dividend growing, global business, world class business. And it didn't make any difference what happened in the macro space.

Another quick example: American Express three years ago. I'm writing about the problems that are going to break out in the credit markets. AmEx, one of its businesses is credit. Stock goes down.

By late 2015, it was trading at the lowest price it had been in 50 years in terms of multiples. AmEx, of course, is a great business. There's no question about that. It has one of the top five most valuable brands in the world. It has, unlike other companies, has three lines of business. It has network transactions, it has credit transactions, and has fees from customers, people – idiots like me pay American Express $500.00 a year just to carry their card. And, of course, I'm going to keep doing it, because the service I get is the best.

And then, the last example, current example – Walt Disney, right? Disney is now trading at a price that's, I don't know, about as cheap as it's been in 30 years, but it is very cheap relative to the S&P 500, and it's cheap for Disney. And of course, nothing's gone wrong with these businesses, right? The theme parks are more crowded than they've ever been. I talked to a guy who went a couple weeks ago, he said it was just nuts, and that's been the case every time I've been with my kids.

It has the best content, it has theme parks, it has movies, and of course, it has ESPN. And everybody is worried that ESPN is going to go into the toilet because people are cutting the cable and blah blah blah blah blah blah. And also because the guy running ESPN for the last five years is a maniac and a moron, and he turned ESPN into a political network, which it should never be.

All that stuff can be fixed. Disney is going to be here in 30 years, and the stock is very cheap today. That's why I wrote about it a couple weeks ago in the Digest – Erez, I'm sure you saw it.

The point I'm making, Erez, is I know for a fact that that is what Stansberry Asset Management is going to be focused on, and that's what it can do for people. It can keep you disciplined and keep you in the best long-term investments, regardless of what happens in the macro standpoint. And I just wanted to ask you about that. Is there anything that you're willing to talk about that you're buying in your managed accounts today that fits that bill, that you have a lot of confidence in and that you think investors should have in their portfolio?

Erez Kalir: This is the topic that I've enjoyed our conversations about over the years. It's been a topic of mutual fascination to us.

First off, let me just go back to something that you said earlier when you introduced this thread, which is that, the truly kind of great investors know when to get deep in the weeds and to focus on business fundamentals and security fundamentals of individual securities and when to pay attention to the big picture. That was the kind of signature hallmark that I remember from my old mentor, Julian Robertson, who ran Tiger. It was the characteristic that enabled him to generate triple-digit returns in his personal accounts in 2007, the last year of the great bull market before the financial crisis, and then to turn around and post another triple-digit up year going the other way in 2008 into his personal account. That was purely driven by his ability to accurately and decisively read when the big picture mattered.

And it's also something that I've always deeply respected and admired about you. I think it's quite unusual, you know? Folks usually are either good at one or the other. They're either sort of characterized or pigeonholed as big-picture guys or as in-the-weeds thought guys. And this has always been a facet that I've loved and appreciated about your newsletter that you're not afraid to stick your neck out and make a big-picture call when you do think it matters to your readers.

And you also, you're really kind of capable of doing some of the best fundamental, nitty gritty, bottom up work that I've ever seen, including the terrific work you've done on insurance companies and creating the Stansberry Insurance Monitor to figure out sort of which insurance companies are really kind of underwriting properly and where the value resides.

So, I just wanted to kind of mention all that by way of background. You know, with respect to your question about what are we buying now in the category of companies that one should be content to hold forever, I'll give two examples of my own that we earn on behalf of clients here at SAM.

One of them is one of the very, very first stocks that we bought for SAM clients when we launched about two years ago, and that's Boeing. You know, I think Boeing is really a truly kind of exceptional business. It's a duopoly, right? If you're an airline and you're in the business of kind of moving people or freight from one part of the world to another, there are really only two companies you can buy those planes from, and Boeing is one of them. It's probably the better one of the two, the better run of the two.

So, that's in its commercial airline segment. In the other part of its business, it's one of the country's sort of preferred defense contractors, which is also a highly, highly defensible and kind of moat business. And I don't know about you, Porter, but I certainly kind of think that we're entering an era geopolitically where defense spending in the U.S. is likely to go up, not go down.

So, Boeing, even after a kind of incredible run, has been the best performing stock in the Dow, I think, you know, the past kind of 36 months, it's increased several hundred percent over that time period. Still, you know, today, it can be bought for something in between a kind of 6 to 7 percent free cash flow yield with free cash flow likely to be growing double digits over the years to come. So, it's still an attractive kind of opportunity to own there.

The other stock that I'll kinda nominate in that category is very much in the vein of your Hershey's recommendation, and it's also based in Baltimore, and that's McCormick. What's the one thing that's better and more resilient than chocolate. And, you know, the answer to that is salt or spice, you know? So, that's the business that McCormick is in, and that's another, I think, incredibly resilient, high quality business that is almost certain to be here and making money hand over fist in the same way that it has in the past 50 years from now, so.

Porter Stansberry: Yeah, McCormick is really an incredible business, and I would encourage everybody to take a deep look at it. It's fun to study it and think about this. I mean, spices have been a great business and a sign of wealth and success for thousands of years. And I don't care how technology changes, that's probably not going to change. And if you study the spices that are out there, McCormick's are just clearly superior. They have a superior product, they have superior sourcing, they've got superior packaging, superior distribution, they've got a superior brand. It's the best spice company that there is.

And they've risen—they've grown their dividend, they've increased their dividend every quarter, every year for something like, some crazy number, 32 years or something nutty like that. It's one of the longest increasing dividend companies in the stock market, and it is the largest single position in the ETF, the—oh, what is it called? The dividend growers, the dividend royalty ETF?

Erez Kalir: The Dividend Aristocrats?

Porter Stansberry: Yes, that's it—the Dividend Aristocrats. It's the largest position in there. And it's the answer to one of my favorite tough questions to ask people in the money management business, which is—if you had to put all of your money into one stock, every single penny into one stock, and you were not going to be able to sell ever, so that, you know, as long as you live, you still have to hold it, which one would that be? Which stock is secure enough for all of your wealth?

And you don't have to do that, of course. You can diversify, and you should. I'm not suggesting that you should put all your money into one stock. I'm just saying it's a great mental exercise so you start thinking about what kind of businesses really has longevity and really is safe and really is going to be here. I'm pretty sure that my great, great, great, great, great, great, great, great grandkids are going to be using salt. And I'm also pretty sure that, you know, that you'd have be a really dumb monkey to screw up McCormick's business. Not that they can't find somebody. [Laughter] But one of the things that Buffett would always say is, "You better invest in companies that can be run by monkeys, because eventually, they will be." [Laughter]

So, Erez, listen, you've been so great with your time with us today, and I always enjoy our conversations. It's great to talk to someone as intelligent and as experienced as you, and I know it's great for our listeners. For folks who have more than half a million dollars and want to have a really, truly, professional, top-notch experience, world-class asset manager, Erez, has my endorsement.

This is especially important for people who love our newsletters but simply don't have the time or the wherewithal to implement the stuff that we write about. So, if you love what we do and you love our philosophy of building wealth, then go with Erez, because he follows our newsletters and so you don't have to. But when you talk to Erez and you talk to his people, you're going to be speaking the same language. They're going to be following a strategy that you admire and that you respect and that you can follow successfully.

Erez, for folks who want to reach out to you to discuss opening an account—again, your minimum currently is half a million dollars. Erez, of course, has a business to run, and he can't make enough money charging the fees he charges, which are very low, unless you have enough money to make it worth his while. So, please don't bother Erez if you're going to call him and say, "I've got $100,000. Won't you please take me?" Sorry, the answer is no. Come back when you have half a million dollars—that's why it's called a minimum.

So, anyways, Erez—please, tell the folks, how can they reach out and get in touch with you at Stansberry Asset Management?

Erez Kalir: So, thanks very much for that, Porter. Our website is www.stansberryam—the am is for asset management—.com. So,, and folks who prefer the phone, our main line is (646) 854-4370—again, (646) 854-4370.

Porter Stansberry: Very good, and I'm sure we'll put that information on an e-mail and send it to people, but one more time, the website is stansberry—that's my last name—S-T-A-N-S-B-E-R-R-Y— And that's not Stansberry morning, that's Stansberry Asset Management—

Erez, thanks again for being here, and good luck with the accounts.

Erez Kalir: Thanks so much, Porter. As ever, it's a pleasure and a privilege speaking with you.

[Music plays 01:00:45 – 01:00:48]

Porter Stansberry: For the listeners out there, I want to make just one point very clear: Stansberry Asset Management is a separate business entity… completely different board of directors, completely different ownership group than my publishing company, which, as you all know, is Stansberry Research. And the two don't mix. Erez manages Stansberry Asset Management in New York, and I, of course, am involved in the management of Stansberry Research in Baltimore, Maryland. It's important for me to make sure everyone understands that Erez does not have any kind of early access to our newsletters. He is a subscriber, just like everybody else. And his management choices, his investment choices, are going to be different for each individual client… So it's not as though you get to invest in a newsletter if you put your money with Erez. He's a money manager who relies on our research, but there's no… it's not as though you're going to have Porter Stansberry or Steve Sjuggerud managing your money, because we don't do that. We just do research.

Buck Sexton: Want to get into some mailbag, Mr. Porter?

Porter Stansberry: Yeah, let's do, but let's talk briefly—I know we were running long, but let's just talk briefly about Facebook. Can you tell me, Buck, what Facebook did? I hear all this stuff and it goes right over my head. I have no idea what they're talking about.

Buck Sexton: Yeah, so the very short version of what's turned into a quote bombshell story—and I think it's wildly overhyped, and the people that I know and respect in this space who actually understand the social media metrics and the technology involved here also are saying this is really overhyped.

The basics are that you have this group, Cambridge Analytica, that says that they're the new hotness, they're the new hot sauce when it comes to pulling together all the information that you can get when you introduce a third party—essentially, a third-party app onto a social-media platform like Facebook. So, if I'm Cambridge Analytica, I work with a third-party company trying to get as much information as I possibly can, and then I sift through it to figure out what the trends are, right?

So, it's like, on your Facebook page, Porter, it'll say, you know, "Will you take this survey? And oh, by the way, we'll get access to your open profile information—your name, your network, all that stuff." And people click yes because they want to be a part of the survey or they want to play the video game or whatever it is, not understanding—well, now, you're actually giving your information in to a third party. And all this stuff, all the Facebook social media platforms are built on taking your information and monetizing it. Everyone thinks it's free, but they don't understand the exchange.

The problem that everyone's saying about Cambridge Analytica is, they don't like how they did it, this is not the way Facebook is supposed to operate. There was some fraud or deception and that your information was going to go to a third party. The reality is that the Obama team, the Obama digital team back in 2012 was bragging about this, and they—Facebook knew about it, that they were doing something very similar, and they said, "Well, these people are on our side," meaning the Obama team, "so, we're just going to let it go."

So, what you're seeing, really, is (1) people just don't understand how social-media networks work, and (2) there is an enormous—and I've been yelling about this for a while—enormous politicization that has occurred of social media that it used to be how you talked to your high school girlfriend 20 years, 10 years later or whatever if you wanted to catch up. Now, Porter, this is how people are building their businesses. And all of a sudden, Facebook will shut you down with your algorithm and say, "You can't sell on our site or on our portal any more," and that's it, that's end of story. So, there's a lot of politics involved in it, too.

It's a big, complicated discussion, but I think that's most of the important stuff.

Porter Stansberry: Yeah, but it's not like Facebook was stealing people's Social Security numbers—you know what I mean? It wasn't private information, it was whatever the public profile information is. And then these people are aggregating it and they're selling it to marketers.

Buck Sexton: And they're willfully given. To your point about signing a contract—

Porter Stansberry: Right.

Buck Sexton: - you're clicking, "Will you"—

Porter Stansberry: You agree to it.

Buck Sexton: - yeah. "Will you share your info with these people?" And what they're saying as "Well, we'll share it with ABC online company, but we don't want it to—we didn't know it was going to Cambridge Analytica." But you're sharing the data. I mean, and maybe they want more disclosure.

But the point is, this is just another version of fill in the blank, "Hillary didn't win because." Hillary didn't win because—fill in the blank. And now, it's, "Hillary didn't win because Trump hired this Cambridge Analytica." By the way, Cambridge Analytica is only such a big deal because of the Mercers, who are the billionaires working with Bannon and some of the other people on the right. And it was believed—and this is what the people who actually know what the heck is going on say—it was believed that if you wanted access to the Mercer's checkbook during the election, you had to work with Cambridge Analytica.

So, there was an access component of this, too, but Cambridge Analytica wasn't that good, and there are tons of people that are trying to do this already. So, it's a big tempest in a teapot.

There was some kid from Cambridge Analytica—I mean, kid, he's my age—but he's on TV saying that they weaponized psychological vulnerabilities. No! They just figured out, you know, you live in this area, you vote Republican, and you're a male 45 to 65 or something. Big freakin' deal!

Porter Stansberry: [Laughter] I got ya. Yeah, it's just a whole bunch of nonsense. Okay, great. Well, that's good to know. I still don't understand it, but okay.

Buck Sexton: It did crush the stock price, though, yesterday, as you know. I mean, that does matter, right? It went down—people lost, on paper, there's billions of dollars of value that disappeared because of this whole thing.

Porter Stansberry: None of that bothers me. We're long Facebook in my newsletter. Facebook is two things. First of all, it was the largest aggregation of private wealth in the shortest amount of time, ever. Second of all, it's the most capital-efficient company I've ever seen. And third of all, it's the greatest marketing engine that's ever been created. So, if the stock goes down, you should buy more. It's not going away.

Buck Sexton: There you have it.

[Music plays 01:06:37 – 01:06:40]

Buck Sexton: Mailbag this week—thanks to everybody for writing in, filling our inbox with useful feedback. People like Chris B., Jason W., Steve W., Emilo V., and Taylor L., just to name a few. Your comments and questions are an important part of the show. Keep 'em coming. Please do write to us at [email protected].

Alright, first up here from Michael E. "Dear Porter and Buck: I enjoy the podcast and look forward to listening every week. Regarding Porter's analysis of Berkshire returns and its stated failure to beat the S&P 500—where did he get his numbers? When I review their performance numbers on Morningstar for my Class B shares, it appears that the stock has beaten the S&P for the 15-year period, trailed for the 10-year period, beaten for the five-year period, beaten for the three-year period, and slightly trailed on the 1-year period. These returns look reasonable to me. Please advise"—from Michael.

Porter Stansberry: Great. Well, Michael, if you see the letter that Buffett publishes at the front of his letter to shareholders every year, you have the entire record. You see Berkshire's share price, Berkshire's book value, and the S&P 500. And so, the data is very easy to get.

What you may not realize is that Buffett himself, for many years, said that Berkshire will never, ever underperform the S&P 500 in any rolling five-year period. "And if it does, then we should begin to pay a dividend, because we're not doing you any favors by holding the capital."

And, unfortunately, in 2014, he didn't beat the five-year rolling returns of the S&P 500 for the first time, ever. And so, we expected that he would announce that Berkshire was going to begin paying a dividend. He didn't. He said, "Oh, no. Actually, five years is not the best period to measure. We're going to do six-year period measurements."

And so, the point that I'm making is that, clearly, Buffett no longer routinely can beat the S&P 500. He didn't over a 10-year period, he didn't over a five-year period back in 2014, and he didn't last year. Going forward, he's not going to be able to, I promise, because of the investments he's made in very marginal industrial companies.

And my advice is, he should split the company into two parts. There should be a company that owns the insurance firms—and that would be the one to own, by the way—and then there would be the one that owns all of the industrial firms and all the other companies, and that one should be conservatively managed and pay a very large dividend.

So, you can choose—do you want to have a safe income producing stock, or do you want to have a very high return but much more volatile stock? Because insurance is definitely going to be more volatile. And that way, the shareholders can choose. When you lump them together, what you get is sort of the worst of both worlds. You get a very high-performance insurance business and you get a whole bunch of laggards that are hanging off of it, and then you don't get a dividend.

Buck Sexton: Alright. Next up, we have Dan W. He writes, "Hey, Porter and Buck—love listening to you guys. It's like hanging out with a couple of old friends. Question about the Jubilee—let's say that student loans are forgiven. What do you think the outcome would be for a company like Navient, the student-loan company? Do you think it would get them off the hook? Take care, and tell Ariana that I'll be home soon"—I'll pass that along, Dan—"Kind regards."

Porter Stansberry: Jeez, that's a great question. And the answer is, unfortunately, I have nothing intelligent to say about it, because we just can't know what in the heck a real Jubilee would look like.

The way Jubilees have been done in the past would be a nightmare for Navient, because in the past, the government just says, "You don't have to pay them back." That's it. There's no—there's no compensation for companies like Navient that own these bonds that are packages of student debt.

So, it could easily be a wipeout for Navient. On the other hand, if the government says, "You don't have to pay them back, and what we're going to do is give you treasury bonds in exchange for your student loans to Navient"—well, then, yeah, it would be a boon for Navient. Because all of a sudden, the quality of their debt has gone up exponentially, right? They own a bunch of lousy student loans and now they own treasury bonds.

So, I can't—unfortunately, I can't know. I just can't know. What I can tell you is that before that occurs, there is going to be a very long period of uncertainty that's going to be very tough for investors to survive. And however it goes, if you start forgiving trillions in debt, you're going to have a massive—a massive inflation.

So, I think the thing to do is to be conservative and probably to own some things that are going to do well during an inflationary period.

Buck Sexton: Number three up this week comes from Dennis. He writes, "Gentlemen, I must commend you on having by far the most interesting podcast I have listened to. It really shines a flashlight into the shadows to see what is going on. My two questions are—one, it was obvious when Treasury Secretary Don Regan told Ronald Reagan to speed it up the way the President wasn't a supreme commander, but just a Wall Street puppet. Was Reagan the first president to be a Wall Street lackey? And two, do you feel that the U.S. will ever have a government that isn't looking out for Wall Street and the industrial military complex? Best regards, Dennis."

Porter Stansberry: Ah. Well, I have a very brief answer to that question—every president has been a Wall Street lackey since the creation of the Central Bank, because every politician needs the Central Bank desperately. Every president has to have the Central Bank, especially now that we're $20,000,000,000,000 in debt. Without the Central Bank, we can't finance that. If we can't finance that, the lights don't turn on in the government. That's cats and dogs living together, that's real chaos. Every politician is going to avoid that no matter what.

And that's why, when the Treasury Secretary came to Congress in late 2008 and said, "You have to pass this bailout. You have to, or else the Central Bank is not going to help us print away these bad mortgages," Congress did what it was told. Period.

You remember Congress had the one vote that failed? The TARP originally failed?

Buck Sexton: Yeah.

Porter Stansberry: And the stock market fell, like—I don't know, 1,000 points the next day, and they called them all back in and they said, "You're going to pass this," and they did? I mean, that just shows you the power of the Central Bank and the power of Wall Street and the power of what has become a financial lead zeppelin, if you will. I mean, we're all tied into this together because we can't survive without it now, and we're not in control of it any more. And so, for me, after the creation of the Central Bank in 1913, every president has been a Wall Street lackey.

And then, the second question, I'm sorry, was about—

Buck Sexton: "Do you feel the U.S. government will ever"—

Porter Stansberry: Oh, that's easy. So, Eisenhower, right? Ever since Eisenhower, every administration has been subject to manipulation by the industrial-military complex. And what I love about that is, you know, declaring war was just too much of a hurdle for those guys, so we don't even bother doing that any more. We just send the troops everywhere and keep arming everybody.

Buck Sexton: Overseas-contingency operations now, Porter.

Porter Stansberry: Oh, contingency operations—yes. What's your bet, what's your best guess today for who the Austin bomber is? Is it (a) a foreign terrorist group, is it (b) a Mexican drug lord, is it (c) an angry white man who fits the profile of a Trump voter, and who the FBI will begin looking for first?

Buck Sexton: Um, I would put my money right now on it being an angry, psychotic, lone male, probably Caucasian, who has a personal grudge, and might even have a personal grudge against the state of Texas, specifically. I would be looking at former Texas state employees, but it could just be somebody who worked for a company and things went bad, things went south. But, I'm talking mad bomber with a personal grudge. I do not see terrorism, I do not see cartels, I do not see any of that tied into this. And there might be some anti-government manifesto, but it would come out of a personal—a perceived personal slight. That's what I see.

Porter Stansberry: Alright. And then one other question about all this—you were an analyst at the CIA, so you have some idea of maybe not the specifics, but certainly the scope of these numbers that I'm going to ask you. So, just a brief question. Over the last, let's see, almost 20 years—so, since the buildup to the first Gulf War, so almost 30 years ago, correct?

Alright, so over the last 30 years, how many people do you believe the U.S. Armed Forces have given enough training to so that one of them could be this bomber?

Buck Sexton: I mean, if you're wondering how many people have a—I mean, I have basic explosives training, right? I mean, it's not hard to do.

Porter Stansberry: No. It's also not hard to find out more specifics on the Internet.

Buck Sexton: Yeah, exactly.

Porter Stansberry: Just pretending that the introduction was done by something in connection to the U.S. military or the other shadowy military like things like the CIA—how many people are we talking? Ten thousand a year, 25,000 a year, 100,000 people a year?

Buck Sexton: Huge—huge amount. Huge amounts. Because of IED familiarization alone—

Porter Stansberry: Right.

Buck Sexton: - which, IEDs were the single biggest threat in Iraq and Afghanistan by far—

Porter Stansberry: I know.

Buck Sexton: - half of U.S. casualties from IEDs—so, yeah, you're going to have a lot of people with a lot of explosive familiarity bouncin' around. But again, you're asking me—I don't see it. I would be surprised if this person had any actual experience with U.S. military explosives training.

Porter Stansberry: Oh, no—it's a lock for me. It's a lock.

Buck Sexton: Really?

Porter Stansberry: Has to be—has to be, has to be. It absolutely has to be. But the problem is, you're never going to find them by going through those people, because there's too many of them. Everybody who was in the military in Iraq or Afghanistan knows something about these weapons and, of course, can figure out how to build them with just a little bit more work, even if they weren't taught directly.

My point is that, this is one of these things, it's the dogs of war. You as a country getinto a war footing, you start teaching your people how to murder and maim, and you're going to have more problems in your own society. This is the classic blowback. This is a form of it.

Buck Sexton: We'll see. I mean, Metesky and Kaczynski didn't have any military training and they're probably the two most well-known serial bombers.

Porter Stansberry: Yeah, but they weren't using tripwires and building mines, right? They were using fertilizer and oil. I'm not saying that you can't build a bomb if you haven't had military training. I'm saying that these particular kinds of bombs, in my opinion only—and you know way more about it than I do—speak to someone with a military background. That's all I'm saying.

Buck Sexton: We will see. But by the way, we might not see for a long time. The history of searches for serial bombers spans not even just months or years, but sometimes decades. And if the person doesn't make a dumb mistake?

Porter Stansberry: Mueller handled the anthrax thing so well. I'm sure the FBI is going to be right on top of this, and I'm sure they would never let a political bias influence their stellar work as investigators.

Buck Sexton: Yes, indeed. So, we'll see. Maybe we'll have an update—I mean, hopefully, they'll find this guy by the next time we're on the podcast, we'll see. It's a guy, though. Mad bombers are always dudes.

Porter Stansberry: Any more mailbag, or are we done?

Buck Sexton: We're dunzo.

Porter Stansberry: Oh, okay. Well, I don't know. I don't know if it was a good show or not. You guys will have to let us know. Love us or hate us, just don't ignore us.

Buck Sexton: Exactly. Feedback at, people—keep it comin'. Even the ones we don't read on air get sent to Big P and me, so send them along, [email protected]. If we use your question, we'll send you some Stansberry Research goodies. Thanks again, everybody. Thank you, Porter.

Porter Stansberry: You're welcome, Buck, and thanks, everybody, for listening. We'll 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 and enter your e-mail. Have a question for Porter and Buck? Send them an e-mail 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 risks. You should not make any investment decision based solely on what you hear. The Stansberry Investor Hour is produced by Stansberry Research and is copyrighted by the Stansberry Radio Network.

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