It’s been a rough week for crypto investors…
After Bitcoin reached over $64,000 in April, the world’s most popular crypto has plunged as low as $30,000 on some exchanges earlier this week…
Dan opens the show with an update on the situation, and tells the listeners what he’s doing with his Bitcoin today…
Then on this week’s interview, Dan invites Dave Collum back onto the show for another great conversation. Dave is the Betty R. Miller Professor of Organic Chemistry and former Department Chair at Cornell University.
He’s also a staunch Libertarian, a fan of gold, the Austrian business cycle, and he’s not at all afraid to speak his mind.
During their conversation, Dave and Dan talk about a wide range of controversial topics, like how the inflation numbers from the Fed are completely bogus, how the climate change industrial complex became corrupt, and how a massive top is currently brewing in the market despite what you’re being told.
Then on the mailbag this week, a new listener to the podcast asks Dan his general advice for how to handle the current market environment…
Dan takes his time responding to the listener, explaining all the key places he believes you should have your money, plus a couple of helpful lessons to consider.
Listen to Dan tackle this great question and several more on this week’s episode.
Professor at Cornell University
David Collum is a professor and chair of the chemistry and chemical biology department at Cornell University. He authors an annual macroeconomic assessment titled "The Year in Review," which gives one of the best synopses of anything that mattered in the markets during the previous 12 months. His blog has appeared in popular websites such as Zero Hedge and Peak Prosperity.
1:21 – “I woke up this morning and looked at my cryptocurrency account, and last night it was something like $96,000, and this morning it was something like $64,000…”
3:31 – “You can see people are wanting to own gold, and they sold the daylights out of Bitcoin, you know, overnight… Do I think Bitcoin is a sell? Am I selling my Bitcoin? Absolutely not. No…”
8:05 – Another sign of the times… “Fidelity is coming up with these new accounts, they’re going to have no-fee, saving, spending, and investing accounts for 13–17-year-olds…”
14:49 – Dan shares his quote of the week, from a new book, Capitalism Without Capital: The Rise of the Intangible Economy… “Gross Domestic Product is defined as the sum of the value of consumption, investment, government spending, and net exports. Of these four, investment is often the driver of booms and recessions, as it tends to rise and fall more dramatically in response to monetary policy and business confidence. The investment element of GDP is where the animal spirits of the economy bark and where a recession first bites…”
18:08 – This week, Dan invites Dave Collum back onto the show as a repeat guest. Dave is the Betty R. Miller Professor of Organic Chemistry and former Department Chair at Cornell University. He’s also a staunch Libertarian, a fan of gold, the Austrian business cycle, and he’s not at all afraid to speak his mind.
19:39 – Dan asks, “What concerns you? What are you worried about right now?”… causing Dave to retort, “You mean besides 10% annual inflation?”
24:15 – Dave shares the long story of how his thinking evolved and he became skeptical of climate change… “I ran into very prominent physicists and geologists that were saying, no this story is total crap.”
29:58 – “We have massive inflation brewing, and we’ve got a government who now thinks every 6 months they should drop $2 trillion somewhere…”
35:21 – Dan and Dave discuss what to do when a top is likely on the way… “Here’s the irony of the top… the top represents the period of maximum optimism, people are willing to pay more, that means they’re more optimistic… so the market reaches the point of maximum optimism at the very instant that the justification for the optimism is zero…”
37:08 – “…The Fed feels unrestrained completely. There’s nothing that they can’t imagine doing now to try to protect the price of assets…”
41:14 – The mining industry can be a dangerous place to invest, but Dave explains how many miners are so beaten down and undervalued that some are starting to look attractive, “So I started buying some of the miners, and I found a real little gem that’s just phenomenal looking…”
46:54 – Dave thinks there’s a big opportunity in energy stocks today, “I’m betting long-term that the green world will finally realize, we gotta go nuke [nuclear energy]…”
52:10 – “…Michael Moore, the darling of the left could not get his video seen by the world, it’s called Planet of the Humans… Find it and watch it. It will show you that the climate change industrial complex is a massively corrupt organization at this point…”
59:24 – Dan and Dave discuss how out of whack the bond market is… “What interest rate would you demand to tie up money for 30 years?”… “MORE than 2.4% I’m going to guess…”
1:02:50 – Dave leaves the listeners with one final thought, “My final thought is that the market is in a massive bubble, no matter what they say, by 20 metrics it’s in a massive bubble…”
1:05:09 – On the mailbag this week, a new listener to the podcast asks Dan his general advice for how to handle the current market environment… Another longtime listener asks, does it seem that everyone is focused on quick gains today? And another listener asks Dan what are some of his personal favorite recommendations? Dan gives his take on these questions and more on this week’s episode…
Announcer: Broadcasting from the Investor Hour studios and all around the world, you're listening to the Stansberry Investor Hour. [Music playing] Tune in each Thursday on iTunes, Google Play, and everywhere you find podcasts for the latest episodes of the Stansberry Investor Hour. Sign up for the free show archive at investorhour.com. Here's your host, Dan Ferris.
Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm your host Dan Ferris. I'm also the editor of Extreme Value published by Stansberry Research. Today we'll talk with Cornell chemistry professor, market watcher, and climate skeptic and – how does one say – modern philosopher Dave Collum. It will be very interesting, I guarantee it. This week in the mailbag, a few questions about the recent down market and one about our Costco recommendation, which we made available to all Stansberry subscribers last week. In my opening rant this week I'll talk about this thing that's on everyone's mind. I wanted to talk about other stuff but I can't. That and more right now on the Stansberry Investor Hour.
Well, what's the thing that's on everyone's mind? Well, OK, I woke up this morning and I looked at my cryptocurrency account, and last night it was something like – I don't know – $96,000, and this morning it was something like $64,000. And I looked at that I thought, "Gosh, that's a lot less!" So there's pretty much no way I can talk about anything else right now.
But there's an interesting dynamic, though, right? Bitcoin and other cryptos are crashing as I speak to you, and gold has perked up a little bit. It's actually perked up a lot. It's in the $1,800s now, which is really cool. And, you know, we keep an eye on SentimenTrader – on Jason Goepfert's website sentimentrader.com, he's a very, very well-informed investor. He spends all his time and energy looking at just dozens and dozens of sentiment indicators and anything like a sentiment indicator. So one of those things is the 200-day moving average in gold and he says, "Look, when it gets above the 200-day moving average it behaves really well, and when it's below it, you know, not so much." And it popped back up above it recently.
So here we see for some time we've had people saying, "Well, gold is old-school. It's a has-been asset. Crypto is where it is, especially bitcoin is where it is, and that's all there is to it. It's all going to be different now." And, you know, I never – I mean, I'm a bitcoin bull but I never bought that. I thought it was stupid. And I've always leaned heavily on the argument that gold has the Lindy effect, right? It's got a 5,000-year history. And Lindy says anything we've been using as a store of value for 5,000 years, maybe we'll be using as a store of value for thousands of years more. There's a good chance of that, I believe.
So to pronounce gold is kind of dead and bitcoin as, you know, the up-and-coming replacement for it is a little silly to me. It's just a little silly. Bitcoin has, what, a 12-year history or something? It's just – it's a little silly. And you can see, you know, people are – they're wanting to hold gold and they sold the daylights out of bitcoin, you know, overnight as I'm speaking to you.
So do I think bitcoin is a sell? Am I selling bitcoin? Absolutely not, no. We said when we recommended bitcoin in the Extreme Value newsletter, we said it was a long-term holding. We said, you know, what you do is you take a small amount of money, something you can afford to lose, something that you wouldn't miss it, you know, just some small amount of money and you put it into bitcoin and just kind of leave it alone for – I don't know, maybe for the rest of your life, but for many years, not just for many months, OK?
So we're a little over a year into our recommendation and it's doing – you know, it's still up, even though it's down – it was down as much as 30% overnight. And even though that happened, we're still up a couple hundred percent. And I think over time there will be a place for it in the global financial system. And technically speaking, of course, it's outside of that system, right? It's outside the global financial system. That's why it's so cool.
And, you know, I recently went on Sebastian Gorka, on his radio show, and he said, you know, "Dan, what the heck is bitcoin anyway?" And I just – you know, I thought I was half-joking. I said, "Well, nobody really knows." And I'm only half-joking with that because, again, it's this peer-to-peer cash system that was designed to eliminate the trusted third party in financial transactions, right? And that's what it is, a peer-to-peer cash system. It's like Napster of money.
So great – that's really great. That's a very specific kind of a definition. But when I say people don't know what it is, what I really mean of course is that we don't know where it will wind up in the scheme of things. We don't know if it will become – you know, if there will be some sort of, I don't know, bitcoin 2.0 or something, or crypto 2.0... completely new landscape of digital assets in the future compared to what exists today. And I mean, you know, talk about a brand-new thing in the world. I mean, 10 years ago, or we could go back to the time just before bitcoin, say 12, 13 years ago, this stuff just didn't exist, and now there's a whole bunch of it, of course. And it's a huge innovation that the uses are potentially far and wide – like, I can't even imagine what the world will look like in 20 or 30 years because it's that kind of a technology. It's like it's Internet-level innovation. You know, the Internet has changed so many things, and I think crypto could do the same.
And yes, if you're holding bitcoin you're going to have to ride out some, you know, 30% overnight drops. That's just the way it is. But we're not selling. I'm not selling mine and I'm not telling my readers to sell. Put it that way. And I'm still holding my Ethereum, too. Those are the only two I own, Ethereum and bitcoin.
So we have an interesting rotation sort of, a mini-rotation maybe, because I think bitcoin – the last I looked the chart was straight down and then straight back up, a really, really sharp V. So maybe we've already seen the body temporarily. I don't know, and I don't really care, right? I follow my own advice. If it goes to zero, who cares? Whatever. And that's the advice that I'm continuing to give. But I think it's really interesting. I never said sell silver. I never said sell gold. I never bought this, you know, gold is no good anymore, bitcoin is it, and gold is not it anymore – never bought any of that. And right now I'm really happy because my gold and silver are doing just fine, thank you very much, and you know, my bitcoin I believe will continue to do fine over the long term.
So that's all I have to say about that. Before last night happened, you know, the night before we're recording this, I wanted to mention what I think is kind of a typical sign of the time. Fidelity is coming up with these new accounts. They're going to have no-fee saving, spending, investing accounts for 13- to 17-year-olds, right? So it'll give parents or guardians, whoever, the opportunity to monitor the account. But otherwise, you know, the 13- to 17-year-olds will be able to save and spend and invest, like, in stocks through their very own account.
What do I think of this? Overall, I don't think it's a terrible thing at all. Now the fact that it's happening at a time when the most incredible bull market in history, certainly the most overvalued bull market in history by some measures is weakening and, you know, stocks are falling and the big asset of the day, bitcoin, is crashing, you know, you could say it's a sign of the top. But overall, you notice when I interview people, for example, I always ask, you know, "Were you one of these folks who bought their first stock when they were 10 years old or something?" And I think it's a good thing. I think the more people 13 to 17 years old that we have being interested in investing, I think the more it's just better for all of us, because yes, teenagers will be susceptible to animal spirits. But you know something? One in 10,000 or a 100,000 or 1,000,000 – I don't care – somebody out there is going to be the next Warren Buffett, buying their first stock when they're 13 because they got a Fidelity account, and that's going to be good for all of us. Warren Buffet's existence has certainly been good for all of us. He's taught us a lot. And I think there's another one out there, and if Fidelity's making it easier to find him maybe, or her – I shouldn't say "him." I should say "him or her."
The other thing that's similar to that that I want to talk about real quick is, you know, as a potential sign of the top, right, as a potential kind of sign of the times, an article in CNBC – and I've seen this other places but I'll just pick on this one article. The headline is "Banks To Offer Credit Cards to People Without Credit Scores." So what they're doing is they're going to take into account information from a credit applicant's savings and checking accounts which will, in turn, boost their chances of getting a credit card.
And look, you know, credit cards are not great. They're just not. But you know, I find it necessary to have one. My balance is like, you know, $200 or whatever and I'll pay that off in the next 15 minutes. But, you know, just for traveling especially and buying things online, you know, you get some free insurance along with most credit cards, it's just a good thing to have – if you manage it and use it responsibly of course, right?
And making credit cards more available – again, it's double-edged, isn't it? Because you make more credit available to more people who didn't have it before – well, a lot of them are going to misbehave, aren't they? They're going to abuse it. They're going to go bankrupt, right? But overall you're sort of greasing the wheels of commerce and you're making the world more available to more people.
So I think they are both – the Fidelity teenage account thing and this, they're both signs of the time, right? A few weeks ago we talked about the Goldman Sachs financial conditions index, and it was like financial conditions were looser than ever. It's easier to get a loan than ever, and this is a sign of that. But I've tried to learn to see things in a balanced way, and not everything means the market is going to crash tomorrow, OK?
So there's a lot happening right now, and it's probably really difficult to wake up every day – you know, to wake up one day and find your bitcoin down 30%. And stocks aren't doing great as I speak to you. Like, all of my – not all of them. Many of my put option positions, which the numbers next to my put options are always red, but many of them are green today as I speak to you. So it's a difficult time for a lot of investors. But you know, Chris Mayer, who I quote every now and then, just a friend of mine from a long time ago in the newsletter business, he likes to say, "Right now is always the hardest time to invest," and I think that's always true. And it gets harder when asset prices don't behave the way everybody wants them to.
But I don't think you should be doing anything different. I mean, what have I been saying? Well, make sure you hold plenty of cash. Make sure you hold some gold and silver. By all means, hold onto your stocks and bonds. You need to have a stake in the ongoing betterment of mankind, and that is what your stocks and bonds are. So, you know, I've always counseled this balanced portfolio, and I said also, you know, buy a little bit of bitcoin. So if you just bought a little bit you don't really care about down 30%. If you held plenty of cash you're really happy about that right now. Maybe you're looking to buy really great stocks today. That would not be a bad thing to do at all. And if you're holding your gold and silver, hey, they've come to life recently, too.
So you've got to learn – I think these times of ours with asset prices having been so elevated, you can't afford not to have that more nuanced, more balanced approach to your personal asset allocation. I've said that 100 times, so I'll say it once more. We've expected this kind of turmoil. I've been talking certainly about stocks and bonds not doing so well for some time, and that's happening lately. And, you know, I always said bitcoin traded like a biotech stock, and you know, it's trading like a biotech stock.
So none of this is really surprising to me or maybe to you as a listener of Stansberry Investor Hour. So it's worth talking about what's happened in the past couple of days, but it's also worth saying, "Hey, we're not surprised, right?" All right. That's it for now on the rant. That's all I got for you.
Before we talk to Dave Collum today I want to do my quote of the week. I was reading through a book called Capitalism without Capital: The Risk of the Intangible Economy by Jonathan Haskel and Stian Westlake, and I came across this one quote. It seems really simple but I think it's really important. It says, "Gross domestic product is defined as the sum of the value of consumption, investment, government spending, and net exports. Of these four, investment is often the driver of booms and recessions as it tends to rise and fall more dramatically in response to monetary policy and business confidence. The investment element of GDP is where the animal spirits of the economy bark and where a recession first bites." I'm going to say that last one again. "The investment element of GDP is where the animal spirits of the economy bark and where a recession first bites." That's by Jonathan Haskel and Stian Westlake from their book Capitalism without Capital.
And it's really interesting because we talked maybe, I don't know, within the past month or two about how in the dot-com bust the market fell apart before the fundamentals underlying those businesses, before the growth. You know, it was a very growth-y investment _____, very similar to what we're seeing today, right? Hypergrowth companies like, whatever, Tesla or – I don't know, take your pick. There's too many of them. You know, hypergrowth companies that maybe even don't make money garner huge market caps, right, huge growth multiples, multiples of revenue, multiple of earnings, whatever. And they're obviously very, very overvalued.
But what happened in the dot-com with that phenomenon is that the growth multiples fell before the growth fell, right? And I think that may be what we are seeing right this minute as I'm speaking to you. We'll see. We'll see where the markets end up at the end of the year. Right now they're not doing so great.
Let's talk with Dave Collum. Let's do it right.
Every week I tell you I'm the editor of Extreme Value published by Stansberry Research, but I don't usually say anything more than that. Well, to my dedicated listeners who are looking to find incredibly valuable long-term investments, I'll tell you right now. My Extreme Value newsletter is a monthly publication that focuses on buying safe, cheap stocks only when the price is right, and I'm not overexaggerating. Extreme Value picks have earned one of the most impressive track records in the industry. Mike Barrett and I spend hundreds of hours each month poring over balance sheets and SEC filings to find stocks trading at huge discounts to their true worth, giving subscribers a large margin of safety on every pick. You can learn more about that or sign up for the newsletter at investorhourdan.com. So you can support the show and find some of the most profitable ways to invest all at once. investorhourdan.com, check it out.
Today's guest is Dave Collum, and I should welcome Dave back to the program because he's been with us before and I told him he'd be invited back, and here he is. Dave is the Betty R. Miller professor of organic chemistry and department chair at Cornell University. If there's such thing as a big-time chemistry professor, Dave is it. He's also a staunch libertarian, fan of the Austrian business cycle, and gold and other similar things. Dave, welcome back to the show. It's been too long.
Dave Collum: Hey, glad to be back. I'm no longer department chair, just for the record. I did four years and now I'm just an over-the-hill has-been.
Dan Ferris: Oh, man, I said you were big-time. You're not big-time anymore.
Dave Collum: Yeah, I'm overtime, overtime.
Dan Ferris: Overtime, all right. [Laughter] So, Dave, with other guests I feel the need to sort of home in on a particular topic and, you know, know a lot about him going on and do a lot of research. But with you somehow I feel, partially because we're birds of a feather on a lot of these topics, we're of similar mind – with you I feel like I can just start out by saying what is most on your mind these days? If that's too general a question let me know, but what concerns you? What are you worried about right now, anything in particular?
Dave Collum: You mean besides 10% annualized inflation? I've been obsessing a lot over authoritarianism. I think that when Biden was elected, his calling was to unify the country and try to get us to go back to being calm and collected, and I thought he'd pivot to the middle. I said so last year when I wrote about it. And he's done nothing of the kind, which I find deeply disappointing, and it feels like that they're putting into position all sorts of things to attempt to squash their opponents, their political opponents. It feels like a bit of a putsch. And so I've been worried about stuff like that.
Dan Ferris: Yeah, I've heard him called the most progressive president either in history or since FDR, both of those.
Dave Collum: Yeah. I'm not sure I'd call it progressive, but yeah.
Dan Ferris: [Laughter] Yeah, right. Progressive in quotes, right?
Dave Collum: Yeah, air quotes, yeah. So yeah, that's what's been bugging me. I had a discussion today about a guy. We were talking – we got into autism, and I'm a vaxxer. I'm a total vaxxer. Vaccines save lives. But I did run across some evidence that there could be a vaccine-autism link. And I got into a discussion – we got into a debate about, OK, let's say there does exist such a thing, and I'm not supporting it because I've literally been on this topic for 24 hours. How many sort of catastrophic autism cases do you accept as just part of the cost of making the populous in general healthy?
And what I said is, look, I don't know what that number is, but I do know that I don't want them lying to me. And if they know that there is a connection, even if it's a one in 250,000, I would like to hear that. I don't want authorities – I don't want to go to the CDC or the Mayo Clinic and have them say there's zero. And there could be zero. I'm not joining the vaxxer team yet, but I did get rattled by a video someone sent me so now I'm thinking about it. But I don't want the big lie. There's a lot of big lies right now and I'm getting exhausted by those.
Dan Ferris: What's one of the worst big lies that you see right now?
Dave Collum: Climate change.
Dan Ferris: Climate change.
Dave Collum: Yeah, climate change.
Dan Ferris: We can talk about that because I personally, you know, not a scientist, just put it out there, but the tone of it is so bad. I know it's irresponsible to suggest this, but still, the tone of it is so bad that it's kind of a tell. So that may bias me when I look into it, but the more I read, the more it seems like, you know, the key data sets have been screwed with or, you know, it seems like misinterpreted on purpose almost. And the whole thing – it just has this – and for example, the consensus issue, right? The consensus issue where they say 97% or 99% of scientists agree on this, it seems to go back to this woman Naomi Oreskes from Harvard who did what I consider really an irresponsible thing. She just read the abstracts of a few hundred papers and gleaned from the abstract alone that there was a consensus. That's it.
Dave Collum: Well, it was worse than that. It was worse than that because she took 11,500 papers and looked at just the abstracts, which I'm OK with. Who wants to read 11,500 papers?
Dan Ferris: Oh, right.
Dave Collum: So I'm OK with the abstract. But then she culled down those abstracts to papers that had a definitive statement about climate change, and that culled them down to 99 papers. And I don't know whether that included papers from the same author. I don't know, but let's say 99 independent authors, and 97 of them said climate change was a problem. Well, that's a terribly bizarre way to do it.
And so to backtrack, if you'd asked me three or four years ago – and I have an e-mail trail showing this. I actually wrote about it. I used it in one of my writings on it. If you'd asked me three or four years ago I would've said, "Yeah, sure climate change is real." I've over the years asked many people, "Well, what do you think?" because I was unqualified. I mean, I had no reason to think I knew. And they all would say, "Yeah, I think it's real and I think it's acute," and this and that, different fields, different scientists, that sort of thing.
And then I started to notice that, you know – so my brother pushed against me and said, "How do you know it's real?" And I said, "Ned, every scientist I know believes it. You know, what else can I say?" And then I had another guy sends me e-mails push back at me again and I gave him the same answer. And I said, "I don't think there's any credible scientists who don't believe it." And he said, "Oh, yes there are." And so he sent me a list of a bunch. So my first thought would be, "Well, these are going to be a bunch of guys from who the hell knows studying who the hell cares, and therefore I won't give a damn about their opinions," and it turns out it was not that. They were pretty elite-looking scientists – Harvard, MIT, Stanford, Princeton, Caltech.
And then I said, "OK, but here's what's going to be the case. They're going to be guys who picked on a climate model, as we all should do, and said this model's wrong and that's being interpreted as climate-denying." And so I started googling them, and that's not what I ran into. I ran into very, very prominent physicists and geologists and stuff who were saying, "No, this story is total crap."
So I wrote one year – I think it was in '18 – I write a little bit of an essay in one of my annual reviews that I do saying that I don't know, and if I had to guess I would say climate issue is real, but the consensus model is wrong. And I have colleagues who are as ignorant as me who seem unrestrained by this ignorance and willing to say, yeah, climate change is real. And so the populace who says, "Oh, Dave's a PhD in chemistry. He must know. Therefore he says climate change is real." I don't know anything. I didn't know anything. It was just my opinion was irrelevant. I told the secretary of energy I was agnostic on it and he flinched and I said, "It would take me 10,000 hours to figure that out."
So colleagues who I think were believers pushed me and said, "You've got a huge platform. You should dig into this." So in '19, I dug into it. I spent enormous amounts of time reading about climate change, and I kept running into just cockeyed narratives. It took me probably 20 hours of reading to figure out that something was wrong, and then hundreds of hours later I said, "There's just so much lying and so much conflict. There's a trillion-dollar climate industrial complex that won't exist if climate change is a dud."
And then you start running into all these famous scientists who are saying, "Look, there's no evidence to support this." I just happened this morning to be reading a Wall Street Journal op-ed saying that Facebook has squashed their book report on Steve Koonin's book on climate change. So who's Steve Koonin? Steve Koonin is a Caltech physicist, former provost, former Obama top scientific – Obama's top scientific adviser saying that when you read the climate change reports from the IPCC and you read the media talking about it, they're unrelated to each other. The reports do not tell a horror story. The IPCC reports do not tell a horror story. He said the media's telling the horror story.
And you just find just lie after lie after lie and after lie. I said, "This is crap. This is total crap." And every once in a while I get sucked into reading some more, but at this point, it would take kind of an act of Congress to convince me that this discussion is anything but a polluted swamp of crap.
Dan Ferris: It is a polluted swamp, and it seems to get worse. It doesn't get better. For example, you know, Facebook – you're talking about Koonin. Facebook squelched a Wall Street Journal review. I think you retweeted about this.
Dave Collum: That's right. That's the one.
Dan Ferris: Of Koonin's book. So I mean, when you're not allowed to review a book that leans a certain way – and sure, I understand, you know, Facebook is owned by Facebook. It's not the government or Fox News or whatever. But still, it's a huge platform.
Dave Collum: And we could even discuss that. Do they really have the right to squash something? And that gets to that whole Rule 230, and are they a media or are they a platform? And they can't be both and they're acting both. They're having their cake and eating it, too. So in any case, the climate change story is not going to go away. Koonin is having a terrible time getting even any face time. He's a Caltech provost, a scientific adviser to the president saying that it's not catastrophic and it won't be catastrophic and that the models are highly flawed. And he goes through in his book apparently – it's next on my reading list, but he goes through the models and says, "Here's how flawed they are." By the way, recently a Stanford physicist went through the models and said their projections have error bars that are five times the size of the projection. Scientifically that means it's an irrelevant projection.
Dan Ferris: It's worthless, yeah.
Dave Collum: It's worthless, yeah. It's worthless. And so – but this is going to be a multi-dozen trillion-dollar feed trough not unlike the kinds we're getting now, which leads us to the next concern I have. We've got massive inflation brewing and we've got a government that now thinks that every six months they should drop $2 trillion somewhere, and I see no reason why they're going to stop. I see nothing that will stop them because there's $2 trillion worth of recipients who are going to go, "Give us another. We love that."
Dan Ferris: Right. And my concern there is technically speaking, it's different when the Federal Reserve prints money or, you know as they say, marks up the account and simply swaps a dollar of reserves for a dollar of income security. That is one thing, right? That is one thing. It is another thing when those income securities are just wholesale dumped on the market by the government for the purpose of being mopped up by the Fed. That's monetization, and that's where we are. And we got there – we didn't just get there incrementally. We got there, boom, trillions' worth. In this short time frame that this situation has existed, people have begun to talk about inflation. But had this amount of – just call it "money printing" or "Fed balance sheet increase" or whatever you want to call it – occurred I believe over, you know, let's say five years, I think the narrative about inflation would be much louder, much louder.
Dave Collum: Well, we're currently sitting this morning looking at a situation where we've got 10% inflation and gas stations in the country out of gas. Tell me what decade that reminds you of, right? That sounds like the '70s to me. And we've got a Federal Reserve that's saying that inflation is going to be transitory and makes claims about it being 2%. No one, no one believes 2%. So the age-old question is are they stupider than a brick or pathological liars? I don't know which it is. I go with the combo platter – I think they're both.
And Bank of America came out – this is the most absurd thing I've ever heard. Bank of America analysts came out and said we're going to have transitory hyperinflation.
Dan Ferris: [Laughter] Yeah, I saw that.
Dave Collum: I go, "What is that?" And then I think, "Oh, right, Weimar, Germany's hyperinflation lasted about a year because it's a big mushroom cloud and it destroys the economy." Hyperinflation doesn't last long ever.
Dan Ferris: Sure. Hyperinflation – right, it blows itself up pretty quick.
Dave Collum: So if baby Bank of America is saying, "We're going to" – and then – then yesterday – and I think this must've sent a chill through Wall Street and through the Fed. Druckenmiller wrote a Wall Street Journal op-ed and he destroyed the Fed. He utterly took them right down to the studs. So if you guys haven't read the Druckenmiller Wall Street Journal op-ed, I mean, he – I could not have done a more ferocious job and I work very hard to criticize the Fed.
Dan Ferris: Yeah. I saw – actually I saw comments that he had made. I didn't read the op-ed yet but I saw comments that he had made. I think it was on CNBC, you know, that were extremely critical in the same way.
Dave Collum: Yeah, the op-ed's even worse than the CNBC interview.
Dan Ferris: [Laughter] OK. I'll just take a look at it and then maybe I'll talk to our listeners about it. You know, the funny thing about Druckenmiller, though, I do have to stay – he's a strange guy to listen to because while I always take him seriously, I also know that he's never married to a prediction or an opinion, and if the market changes on a dime he's changed on a dime as well, so.
Dave Collum: Yeah, but I think that's the trader in him. So I think that he has the flexibility of a trader, but I'm not sure that flexibility translates into his macro. So Druckenmiller can be one of these guys, sort of who's the ultimate of this? I think it must be David Tepper, and David will make a trade and it has nothing to do with whether he thinks it's good in any sort of medium term. He just knows that that thing's moving today. And so David Tepper will see something moving in the right direction. He has an unbelievable sense of market movements. And I think Druckenmiller has that instinct, too. So I think Druckenmiller can simultaneously say, "I'm bullish on stocks and the market's a bubble," and I think those are self-consistent on his time scales.
Dan Ferris: Yep, that's right. It is. Stocks are bubbling, therefore I'm wrong would be a classic –
Dave Collum: They're bubbling. They're bubbling. Yeah, don't miss the end of the bubble. It's heroic. It's spectacular. I don't do that. I can't do that.
Dan Ferris: Well, it's really hard. I demonstrated this once in my newsletter. Like, if you're trading around the top, you damn well better be Druckenmiller because usually, you know, in almost every case I've ever looked at the volatility is so ferocious. When you think you've gotten confirmation you're just about to get whipsawed back out in both directions. So – and you don't know. Nobody knows that it's the top. It's just a really volatile time.
Dave Collum: Yeah, so here's the irony of the top. The top represents, according to the pricing of the – let's call it equities, just – there's a top in bonds, too. But the top represents, as indicated by the price, the period of maximum optimism, right? So people are willing to pay more... it means that they're more optimistic. So there's this odd irony where on some fateful moment on a Tuesday afternoon at 2:03 p.m. that the market reaches the point of maximum optimism at the very instant that the justification for the optimism is 0.0. So those secular tops are invariably paradoxical, and it's the same with the bottom. The market reaches the point of maximum pessimism at the very instant when it's nothing but up from here. And so you can be right by going with the market in the middle, but when you're at the top the market by definition has it wrong, and when you're at the bottom, the market by definition has it wrong.
And so I've been trying to figure out how to protect cash, and I've always been comfortable sitting on a large cash position for quite some time. And I've done fine because I've owned gold and I rode energy from '01 up. That was actually a pretty good call. It was just an inflation hedge for me but it worked.
But last year convinced me – the bailout packages convinced me and the Fed's actions convinced me that they feel unrestrained completely and that there's nothing that they can't imagine doing now to try to protect the price of assets. And so then the – but I think at one point the Fed was kind of predictable. You could say, "Look, when it gets frothy they'll start raising rates," and there were certain things you could kind of count on. I don't think you can anymore. I think those old metrics are gone. I think they now think that they can drop trillions and trillions without a cost. So they have no guardrails, and as a consequence therefore now my belief that a big cash position waiting to buy distressed assets when there's blood in the streets, dried up and blown away, whatever metaphor you like, is maybe not correct. So nominal returns could just keep going up while inflation ravages investments.
So I'm laboring over what to do with cash positions right now, a big one. I did the math this morning. I think I have – I must have 12 annual salaries in cash, and that's a lot of money.
Dan Ferris: That's a lot of cash. Yeah, cash is a difficult one when inflation has taken hold because you don't want to buy – you know, you don't want to buy the wrong assets either, right, because you'll get hit there.
Dave Collum: Right.
Dan Ferris: So – but if you want to get a steady return most people turn to bonds, maybe stocks. Inflation's bad –
Dave Collum: Well, those are gone now.
Dan Ferris: Yeah, right. Inflation is bad for business, inflation is horrible for bonds, so then what are you left with? It's difficult.
Dave Collum: Not only that, but the bonds – you not only look at capital loss in bonds. You're flat-out losing money. Your return is negative. The bond market is broken.
Dan Ferris: Sure, but you start from yields like we have now, right? [Laughter]
Dave Collum: Yeah, the bond market's completely and utterly been destroyed by artificially low rates. And so now your 60/40 portfolio, 40 is guaranteed to lose you money, in my opinion. We can have a deflation where it doesn't lose your money, but on the current path, it's guaranteed to lose you money. I would argue the equities are guaranteed to return very little, integrated over a long period. I think from these lofty valuations there's no way to hide.
So I'm looking at things like – there's a few things that I've bought lately in part to try to cut the cash back a little, even though this could be, you know – you know, Druckenmiller lost a billion and a half right at the end of the dot-com bubble because he held out, held out, held out, and then he lost his mind and said, "Goddammit, I've got to buy them." And he said he top-called it within hours of the top. He said he nailed the top within hours, and he lost a billion and a half with Soros and he ended up resigning. So the top is when Stan Druckenmiller gets sucked in, and so maybe this top is when – not to equate myself with him. Maybe I'm the last bear, and once I'm in the pool, they'll throw that toaster oven in. But I'm looking at things like Rio Tinto which looks pretty decently priced and it's kind of a play that the climate change guys will keep control and use a lot of resources trying to build crap. And it's a good dividend, no debt, things like that. Mining – I used to hate mining shares. I used to hate the miners because I think –
Dan Ferris: It's a terrible business.
Dave Collum: Well, it's a terrible business and guys who I really trust would say, "These things are dirt-cheap," and I'd look and there's no cash flow, they're not making money, and I go, "Well, how do you define cheap? I don't understand what you're talking about." And they'd start babbling about reserves. When I was at one of your conferences there was a CEO of one of the mining companies there and I told him. I said, "You guys totally screwed the pooch. Gold went up fourfold. Even though it regressed from $1,900 down, you sold a fourfold gain." The miners didn't do anything. They didn't make any money. How do you blow it that badly? And he said, "Yeah, we did a terrible job. The whole industry did a terrible job."
So I ignored miners. I haven't had miners for a long time. And then I was listening to Fred Hickey one day and he started citing some of the numbers on miners and I'm going, "Holy cow, these things sound like tobacco stocks now." So I started digging in, and you can find decently valued gold mining companies with cash on the balance sheet, net cash on the balance sheet and cash flows and dividends, and these things look like real value plays, not just "we have gold in the ground." I live on a lake. I fish in the lake. So what?
And so I started buying some of the miners and I found a real little gem that's just phenomenal looking. I've undersized it but it's a small-cap in Brazil that no one seems to know about. I've asked a bunch of people and they all say, "No, I haven't heard of it." And then I found out that Eric Sprott owns half of it and I go, "That's good." And Jim Grant recommended it and I go, "That's good." So – you know, so I'm finding some bargains in the miners.
Dan Ferris: Yeah, the industry actually got some religion –
Dave Collum: Right.
Dan Ferris: The end of this cycle. It's similar to what happened with – well, it happened to a certain degree with airlines and before that, it happened with railroads. You know, over time they do such a horrible job, they destroy so much capital, and then somebody figures out, "You know something? Not generating a dollar of free cash flow over 20 years even though a huge bull market in gold, it's kind of bad, so we need to fix that."
Dave Collum: It's horrible actually, yeah. But I think they are now. That's the key. I think they're – and again I'm going into energy. I'll tell you what tipped me off on energy. I've always kind of liked energy, right? You've got to fuel the world. I don't see how it goes away. And when they booted Exxon from the Dow I, like, sat right up and said, "Holy cow, that sounds like a bottom call, doesn't it?" It's like the magazine – Barron's cover that said, "Is Amazon a $12 Stock?"
And so I looked at the Dow and they booted them and they replaced them with Salesforce.com, which is just garbage. And I said, "Holy cow, energy really is being thrown out now." And so I did a little quick checking. It turns out the S&P was a little over 2% energy. That is one strange world, to have the S&P 2% occupied by energy companies. And so I started moving into energy as an inflation hedge again for the first time in quite a few years. And I'm a little nervous. If we have a secular bear I know I'm going to get beat up on the stuff I've moved into, so I'm doing it incrementally. Like, I'm positioning it – if these things run hard I'm not going to change my life because of them. I'm not doing a Texas Hold 'em on these things, but I am buying them incrementally. I might even play a little trading game. If I start to see what I think is a secular bear and the energies start to give out, I might sell out of them and say, "You know, if I have to get back into them later, I will." I don't know. I'm don't trade, though. I'm a 10-year guy.
Dan Ferris: Right. So when I hear energy I think oil, and when I think oil I think, well, in this country, two-thirds of the oil is used for transportation, and one of the implications of all this climate stuff that you're talking about, the trillion-dollar sort of climate industry is electric cars.
Dave Collum: Right.
Dan Ferris: And I have to give electric cars their due because on the face of it, whether you care about climate or not, there is something more efficient about reducing the number of moving parts by 99%. That's got to be a good thing overall –
Dave Collum: I guess so –
Dan Ferris: There's an efficiency there.
Dave Collum: Well, I guess so, but you have to convert energy to electricity to the movement, whereas from gasoline you go straight from energy to movement. And so part of my thought is what's the proper fossil fuel play to handle the electric car shift? My suspicion is it's – you know, one could make the argument it's a coal play, but I'm not sure we have it in us to do coal. I know China does and I know other places do. Natural gas strikes me, and I'm also buying – there's a mutual fund. I can't even remember the symbol for it, a small one, a boutique. The guy's Rozencwajg and – is this going to ring a bell with you? What's the – I can probably get it here. It's a boutique play that does natural resources with a strong emphasis on nuclear. And so I kind of have moved in, tiptoed my way into that company's mutual fund. There's a small-cap guy I really like, I've been in communication with for years that I've finally started to put some money into his fund called – a guy named Eric Cinnamond, and I think he's really good at looking under the hood of the small caps and finding the ones that really are well-priced. And he's not bashful about sitting on piles of cash if he doesn't find what he likes, so that's a good sign. The energy mutual fund is called Goehring and Rozencwajg Resources. It's GRHIX in case someone cares.
I don't personally know how to play the uranium game. I know guys like Rick Rule love uranium and I like Rick. And so I'm betting long-term that the green world will finally realize we've got to go nuke.
Dan Ferris: Yeah, that seems like the greenest thing of all. I mean, and green – every time I say greenest, it's a nonstarter because if you really want to green the planet, you know, you'll fill it full of hothouses and get CO2 generators to crank it up to 1,000 parts per million.
Dave Collum: Absolutely. [Laughter] But the term green still has enough meaning to it – enough irrational meaning to still be able to use it. But you're right. CO2 is not a pollutant, right. CO2 is plant food.
Dan Ferris: Right. That's how the planet is greened. It is greened by CO2.
Dave Collum: It is getting greener, too. It turns out that the actual measured plant material is growing.
Dan Ferris: That's another one of the fake data bits, is they keep talking about some optimal level of CO2 like between 300 and 400 parts per million. And, you know, there's a reason why –
Dave Collum: They have not a clue, not a clue.
Dan Ferris: That's right. That's right. Nobody knows this.
Dave Collum: So I'm supposed to give a talk at an investment conference. I'm thinking of giving a climate change talk at the finish, trying to pull it together and say, "And this is what I think you ought to be buying." I'm nowhere near – I don't know this stuff well, so I'm kind of a sector player. So in 2001, I said energy – that's about as deep as I get. It'd be like _____ graduate buying plastics. And I can't read balance sheets to save my life. I can just look and say, "Oh, look. There's no debt. That's good." I can say, "Look, their payout ratio is 20%. That's good." Right? But I can't dig into a balance sheet and really find out about the cash flows in detail and stuff like that. So I just have to do kind of a Peter Lynch thing where I said, "Look, buy every damn bank," if you think banks are going to do well.
Dan Ferris: Yeah, that's right. That is a very Peter Lynch move, and especially with that sector. I know he's done that. We've talked about climate. We've talked about inflation, talked about the Federal Reserve. And real quick, I meant to mention to you, for me the dynamic with the Fed is it's an addiction dynamic, right? There was basically a trillion or so out of the financial crisis, and then now it's multiple trillions and they're pushing – you know, pretty soon they'll realize they're pushing on a string, and the more trillions you get, the less reaction the market will show them.
Dave Collum: But I do think there is a ceiling above them. I don't think they can do this forever because I do believe – you know, the Fed also babbles incoherently about inflation expectations, and if you look at some of the writings of Rogoff he talks about inflating away debt. And he says one of the critical things is you have to do it covertly because once the system picks up on the inflation and it starts adjusting for it, you just get more inflation and – because people start adjusting prices accordingly. Well, we're already there. The Fed has already lost that narrative completely. So they can say _____ _____ percent. Again, this morning's print was annualized 10%. And so inflation expectations are off the chart, almost to the point where you can say it's a bubble. We're going to get deflation from some bust, right?
But the Fed's losing its credibility in a very big way in my opinion, right up there with the CDC losing its credibility in a very big way. And I think we're in a crisis of authorities, and this is a conversation I have a lot. I like to like to ask people to name an organization, a three-letter organization that you trust what you say. So it's not the CIA, right? It's not the FBI. It's not the World Health Organization, right? You can go through a whole list, and someone finally gave me the answer I thought was really funny. They said KFC, and I said, "OK, KFC."
And so we really have a crisis. You reach a point where you say, "Well, how do you even know what's fact and fiction anymore?" because there's no authority. I can't go to the Mayo Clinic website and find out about the cause of autism. Again, this autism issue is 24 hours old for me. I completely ignored it. But if I go to the Mayo Clinic the one thing I know positively, no matter what the real story is, they will not say it's the vaccine. They can't say it's a vaccine. They can't even say one in 100,000 is due to the vaccine, and so where do you turn? Well, you end up watching off-Broadway videos and stuff from people saying it's a vaccine.
So we don't have a way to get facts anymore because the facts are getting so garbled up in narratives and articles by Steve Koonin about climate change are getting suppressed. And, you know, Steve – Michael Moore made a documentary about climate change and came to the conclusion it was the climate change industrial complex was the problem, and what happened? They booted it off YouTube. They suppressed all the writing about it – Michael Moore, the darling of the left could not get his video seen by the world. It was called Planet of the Humans. Find it. Watch it. It will show you that the climate change industrial complex is a massively corrupt organization at this point. But it's a crisis of authority. Who do you believe? I believe Stan Druckenmiller.
Dan Ferris: Yeah, yeah. When it comes to the Federal Reserve few people have watched it as closely as he has. But of course at this point, the balance sheet movement is so enormous. Like, you can only miss it if you're walking around blindfolded. I mean, you almost – you don't need an expert like Druckenmiller to tell you what's happening because if you can't see it, maybe get out of the house once in a while, right?
Dave Collum: Well, what I'll tell you is tricky, though, is to actually know the consequences of the Fed's balance sheet.
Dan Ferris: Sure, yeah.
Dave Collum: So I think what's more telling to me, for example, are metrics of leverage in the system. So the Fed's balance sheet could be high without a lot of leverage, and that just means that the reserve assets that they're putting into the system – so you hit upon this well, although I think a lot of people don't get it. When the Fed buys Treasurys, they're really not printing wealth in any way. Forget about the _____ not wealth, but they're really swapping a zero duration asset for a long-term duration asset. So now the bank, instead of having a Treasury – which is as good as money, essentially – have cash. The difference is the cash functions as a reserve for lending. They don't lend the cash. They lend against the cash. But it's a reserve, and Treasurys are not reserves, which is the odd thing. And I think they're even talking about making them reserves so the Fed can stop doing this.
But – so in theory the banks, when they have a wad of reserves, can lend a lot more. And then as soon as you lend it creates more reserves, and so the whole system levers up like crazy. But the banks seem to be not levering up as much as they could, but the leverage in the system is still I think unprecedented. It's very hard to track because you've got the shadow banking system that's hiding huge leverage. No one knew, for example, what's going on with Archegos or however you pronounce it. And the corporate debt problem is massive, and obviously the sovereign debt problem is massive.
So I think at some point all this debt will in some way unwind, either via transitory hyperinflation – [laughter] I'm not a hyperinflation guy. Hyperinflation really is about a failed state. It's not just inflation... it's where complete dysfunction has occurred. And that's a low-probability bet, especially with a first world country. Forget Weimar Germany. But high inflation sure as heck is coming, I think, if we don't get a big deflation. One of the two is coming, in my opinion.
Dan Ferris: Yeah, I would say that I don't like to get into the game of predicting the future at all, but –
Dave Collum: No.
Dan Ferris: You'd better have – if you're not prepared for inflation right now, you're making an enormous mistake.
Dave Collum: Right.
Dan Ferris: Yeah.
Dave Collum: And I am. So for those who – I have a large cash position but I'm also 30% precious metals. And I own a house that's about three times as expensive as I need but it's a life-changing existence. So it hangs off 100-foot cliff looking west right over Cayuga Lake. It's right at the lake edge, 100-foot-high, 350 feet of deck, a hot tub. I mean, I live like a king, and if it would ever warm up I would be sitting out on my deck really enjoying it. And that's a bet that the house can track inflation, not win, not beat it, not get – not make any money, but it's a – so it's kind of a real estate bet. Admittedly it's only – I did the math on this – like 8% of my assets, but it's more than I need.
So I'm pretty hedged against inflation. Put it this way. If we get inflation and I get hit, I don't know what's going to happen to everyone else. The bitcoiners may be OK [laughter] and the Hodelers, as opposed to the Goldelers.
Dan Ferris: Right. I think the bet on the house is pretty good. Over time, you know, it has worked out that way.
Dave Collum: Well, Thornburg says you get about seven-tenths of a percent above inflation if you add in everything, you throw in absolutely everything into the cost of owning a house. You get about seven-tenths of a percent.
Dan Ferris: Seven-tenths of a percent plus an enormous amount of utility, so that's not –
Dave Collum: That's right, and that's what I bought. I did the math. I said, "Look, I'm going to pay three times as many taxes over 30 years. This is how much it'll cost. Are you OK with that?" Right? So that's the math I did, and I said, yeah, sure. This will be a nice way to spend the rest of my life, so I did it. And I also was in a huge cash position. I had no exposure to anything but the gold and the cash pretty much. I, by the way, have a fixed-income retirement account with quite a bit which I call cash. It's interesting. It's a guaranteed – be careful, Dave, but I think this is a pretty good bet. It's guaranteed 3%.
Dan Ferris: Three percent nominal – be careful with 3% nominal. [Laughter]
Dave Collum: No, I know, but try to get 3% nominal without going to Argentina, right? What's the Treasury going to give you? A 30-year Treasury gives you – you know, who in their right mind would buy a 3% Treasury for the coupon – a 30-year Treasury for the coupon? By the way, rates are rising this morning. I just noticed. They're not liking what they heard today.
Dan Ferris: Right, and yet to my point earlier about, you know, the speed with which the Fed balance sheet has grown in this episode, still – still here we are with rates rising today. You know, we're below 1.7% on the 10-year, still below, what? 2.4 on the 30-year. And both of those for yield bets, they're horrible, right?
Dave Collum: Horrible, horrible.
Dan Ferris: You're already – you're in negative territory, right, in real. So still, you know, why aren't we 5.6? That was part of Druckenmiller's bit when CNBC – he was like, you know, we get to 4.9 or whatever on the 10-year, I think he was referring to. You know, all of a sudden a third of the federal budget is interest payments, which is totally –
Dave Collum: Well, so the question I like to ask people is I say, "Imagine that there's a 30-year bet you can make, we'll call it a Treasury, that you are guaranteed you will be paid the interest rate. You're guaranteed you'll get your principal back, right?" Forget about whether this is true or not – guaranteed. "And that what you can't do is you've got to hang onto it for 30 years, and you can't hedge it, which is trying to get the bond traders out of my head. So you've just got to buy it and hold onto it for the coupon. What interest rate would you demand? Not knowing what the next 30 years are going to bring, what interest rate would you demand to tie up money for 30 years?"
Dan Ferris: More than 2.4% I'm going to guess. [Laughter]
Dave Collum: More than 2.4, and it would be in the very least high single digits.
Dan Ferris: Yeah, at the very least.
Dave Collum: And therefore the bond market is priced wrong. I don't – I know one guy who has said, "I think bonds at this price will pay off positively over the next 30 years." I know one guy – he's not a stupid buy, but everyone else says, "Oh, no, no. You don't hold bonds for that long. You don't own them. You just buy them until you sell them." I go, "That's just trading, dude. That's not investing."
Dan Ferris: Yeah, I'm waiting – I'm still waiting for Lacy Hunt's narrative to change.
Dave Collum: Lacy's so smart that I – boy, I pay attention to what he says.
Dan Ferris: Absolutely, absolutely, and he's still talking about deflation.
Dave Collum: I know. I know. He's one of the guys who called that pretty well, although we all seemed to think that the real inflation rate's higher than the stated rate, of course, and so I –
Dan Ferris: Right, but he was doing it for practical considerations and they nailed that trade, right? I mean, it's –
Dave Collum: Absolutely. At some point, Lacy will be wrong or he'll change his tune, but at some point, this 40-year bond bull market's going to end. And it's going to be an epic, epic turn of events. It won't necessarily be instant, right? But as we march back up, we don't have to march up very high before the system really starts breaking because there's so much leverage in the system. So where do you think – if I were to tell you, you know, two years from now the rates will be X%, what's the value of X that you would say we have had a catastrophe? How low could X be to say this would be catastrophic on the 10-year? Where would you say, "Holy cow, if I had a crystal ball that would that scare the crap out of me"?
Dan Ferris: How low would the 10-year have to go for me to be truly terrified?
Dave Collum: Yeah, where would the threshold be where you say the system will break if 10-year gets to X in the next two years? How low would that number be? Can it get to 4% without breaking?
Dan Ferris: Oh, I think a 4% 10-year would really be horrendous.
Dave Collum: Right.
Dan Ferris: And the faster it got there, the worse it would be.
Dave Collum: Two years is pretty fast. I think there'd be a lot of broken china on that one.
Dan Ferris: And the spreads would be a lot more than, you know, another – whatever it is, 350 basis points north of here, you know? The spreads would be I think, you know, double that or triple that or something.
Dave Collum: Right. Well, the spreads – that's where the breakage would appear, right? That's – you'd have, you know, the 20% of the S&P that are zombies that can't pay their interest payments on their cash flow, what a disaster, right? Those guys – those companies would get nuked, nuked. They'd be bankrupt.
Dan Ferris: OK, let's – we've been talking for a while, so I always do the same final question and I'm going to throw my final question at you and see what you do with it. If you could leave our listeners with one thought today, what would it be?
Dave Collum: Don't believe anything you read. [Laughter] They're all lying. I don't know. I don't know. I'm debilitated by that. My final thought – my final thought is that the market's in a massive bubble, no matter what they say. By 20 metrics, the market's in a massive bubble, and bubbles have never failed to resolve, never.
Dan Ferris: Amen. All right, Dave, well, listen, thanks for being here and thanks for your final thought. I think that's, you know, straight and to the point, and I've said it, you know, 10 times on this show, but it helps when I get backup from people like yourself. We'll definitely invite you back, of course.
Dave Collum: OK. Good to hear from you again. These are always fun.
Dan Ferris: All right, that was awesome. Listen, I love talking to Dave. I feel like when I have Dave on we should just skip the mailbag, skip the rant, skip everything, and say, "Hey, this is going to be a double episode," because what you don't realize is that we didn't get into five other topics that he's looked into fairly deeply. So he's just – he's that kind of a guy. He's like a modern-day Renaissance man, really cool.
All right, let's do the mailbag. Let's do it right now.
An unstoppable force is taking over our country's financial markets, and if you have any money in stocks right now, you could soon see the effects in your retirement account. You see, stocks have soared over 70% since last year's crash. It's been one of the greatest rallies in American history. But according to my friend and colleague Dr. Steve Sjuggerud, a far more dramatic financial event is on the horizon and it could blindside millions of Americans in 2021. Go online to www.2021bullmarket.com to hear exactly what he's predicting and what it means for your money in the coming months. That's 2021bullmarket.com, 2021bullmarket.com. Check it out.
In the mailbag each week you and I have an honest conversation about investing or whatever is on your mind. Just send your questions, comments, and politely worded criticisms to [email protected] I read as many e-mails as time allows and I respond to as many as possible. You can also call our listener feedback line at 800-381-2357. That's 800-381-2357. Tell us what's on your mind.
A light mailbag this week. First, we're going to start out with Jose A. Jose A. says, "Just a new member. I am worried on the recent down market. Would be glad," I think, "of your recommendations," he meant to say. "Would be glad of your recommendations." Thanks, Jose A.
Jose, first of all, there's no such thing as just a new member of the podcast audience, man. We're grateful for each and every one of you, including you. Thanks for signing up with us. Yeah, you're worried about the recent down market along with everybody else. Everybody's always worried in a down market. But my recommendation has not changed. Hold plenty of cash – if you're holding plenty of cash, if you're holding gold and silver, a little tiny bit of bitcoin that you could afford to go to zero, and of course your stocks and bonds, right? If you're holding all those things – and maybe you've got something else. Maybe you've got some land, you know, some real estate, rental properties, whatever. Maybe you've got a collection of Ferraris or vintage guitars or something that you know a whole lot about. Continue doing that. That is my recommendation. You know, my recommendation is always specific to you. Know yourself, know what kind of investor you are, and work that. That's your strength. Your self-knowledge as an investor is your strength. It's a good question, though, and everybody's worried about the down market. Everybody wants a recommendation and that's mine.
Ludwig H., our longtime listener and very frequent correspondent, he says, "Is a long-term vision not something which is problematic in the investment world or real life? After all, does it seem that we are all focused on quick gains? Best regards, Ludwig H." Yeah, it does seem that we're all focused on quick gains. In the last couple days, that's not working out too well, is it? [Laughter] Yeah, a long-term vision is hard. It's really hard. I mean, if you look at – gosh, you could look at – look at Warren Buffett's track record, you know, 50 years of, like – I think he's slightly under 20% a year. I mean, wow, and you can't point to a lot of other people who've done that, right? It's just rare, and it's difficult. It's difficult to hold on when asset prices fall. You really, really have to have a lot of conviction to go against the crowd. That's when you're going against the crowd. Most of the time you're just buying assets, you know, and the market is not the most exciting place in the world, and then all of a sudden, whoa, the bottom's falling out and you've got to make a decision.
Part of the problem is that people don't know what kind of investor they are. It's an old adage that, you know, traders become long-term investors in a bear market because people just don't like to sell. They don't like to take that loss. But traders take losses all the time. That's their job. It's the job of a long-term investor to know they're a long-term investor going in and to be able to hold. You know, you have to know yourself. There is just no way around it. Like, you can't straight-up just follow anything. You have to know yourself to some degree.
So you know, you have to make your own decisions, and if you're a long-term investor, be a long-term investor. Don't change... because long-term works. It works in the stock market. We know that for sure. It works when – you know, if your long-term vision is to own lots of great businesses that just pound out money and compound capital at high rates of return year after year for decades and decades, yeah – yeah, long-term is hard but it's good. Good question, man, just a basic question, really good. Thank you.
Next is Don B. Don B. says, "Dan, I never miss your podcast. Keep up the great work. Will you ever share a pick of yours? Regards, Don B." And Don B., his whole – the rest of his e-mail was about Rick Rule and Rick Rule was sharing lots of picks with us when we talked to him on the program. And Don is saying, "Hey, you ever share a pick of yours?" Actually, Don, I've shared a lot of them. I think I've told everybody once or twice on the podcast and elsewhere that in Extreme Value we're recommended Waste Management, the waste-hauling company, Starbucks – I know I went public with that one at one point. And just recently this past Friday in the Stansberry Digest, which eventually becomes free and after a while, they'll let anybody read it, but at first when it first comes out it's just for paying subscribers. We made our Extreme Value Costco recommendation public. We just published the whole thing, just as it was published in Extreme Value. So everybody, every paying Stansberry subscriber this past Friday got that report for free, exactly as it appeared in the newsletter. We got a lot of compliments on it from all kinds of folks, and I thought, "Well, if everybody really likes it that much, you know, I just want to show the world," so we did.
Which leads us to our next question – oh, also, Don, remember I've talked about Altius Minerals a zillion times and it's been doing great lately, ever since they spun off Altius Renewable. And there are others that we've talked about. I just can't call them to mind at the moment. So yeah, yeah, I've shared lots of picks and will probably continue to do so over time.
All right, next is Jeff K. Jeff K., he's our last question this week and he says, "Good evening, Dan Ferris says to buy Costco. Louis Navellier of your corporate affiliate InvestorPlace has it listed as one of 10 stocks to sell immediately. How am I supposed to know who to believe? Jeff K." Jeff, that is up to you, right? Obviously an organization as large as Stansberry that publishes all kinds of different people and different advice from different people using different strategies – I promise you, what Louis Navellier is doing has nothing to do with what we're doing in Extreme Value. They're two completely different strategies. So it's up to you to figure out what to do with Costco based on what you know about the kind of investor that you are. If you think that, you know, Louis's view of the world is more like your view of the world, eh, maybe you're not bullish or maybe you're actually bearish on Costco. But if you think your view of the world is more like what we publish in Extreme Value, then hey, maybe you're more bullish on Costco. It's all about you, man. It's up to you, Jeff. It really is. You have to know yourself. You have to know what kind of an investor you are.
I've gotten questions like this. I've been getting questions like this the whole time that I've been published by Stansberry. I remember the very first conference I ever went to – I forget what the stock was. I think it was POSCO. That's funny. We're talking about Costco and that was POSCO, the Korean steel company. And I think I was still long the stock. It did pretty well. We got a triple-digit gainer out of it. And I think maybe Steve Sjuggerud had recently sold it because he was trading and cutting losses and doing the thing that he does, and I was buying value and holding for the long term and doing the thing that I do. And a guy at a conference walked up to me and says, "What's with POSCO? First, you bought it, then you sold it. Then you bought it, then you sold it." You know, he went back and forth and I said, "No, no, no. I've never sell it and Steve has bought and sold. He's traded it." And he said – and he just walked away mumbling. He said, "Yeah, you bought it and you sold it and you bought it…."
So in other words, people have a hard time figuring out that Dan Ferris is not Steve Sjuggerud or Louis Navellier, and Louis is not Dan or Steve, and Steve is not Dan or Louis. You get it? So you can't – you know, you can't say what the Stansberry view is. The closest we have to that are the portfolio products run by Austin Root. If you want to know what the Stansberry view of a given stock or bond or something is, look for it in those portfolios. And if it doesn't appear maybe Austin doesn't like it enough to include it right now, or maybe he sold it recently, or something, right? So that's the closest we come to the Stansberry view of a particular stock at a particular time. Otherwise it's up to you. You know yourself. And who knows how many different subscriptions to Stansberry Research services you may have? You know, the decision is yours. It's up to you to look and see what we say and think about what you want to do with your money at any given time.
I hope that's a good enough answer for you, Jeff. I often feel like when I give this answer to this question – like I said, I've had it many times over the years – that it's unsatisfying. But it is what it is. I can't change the reality of the situation. It's a great question, though. I hope people continue to ask it.
All right, that's another mailbag and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We provide a transcript for every single episode, but sometimes it takes a week or so to get it done. Just go to www.investorhour.com, click on the episode you want, and scroll all the way down and then click on the word transcript. It may take a week or two for that to appear.
If you liked this episode, send somebody else a link to the podcast so we can continue to grow. Anybody you know who might enjoy the show, just tell them to check it out on their podcast app or at investorhour.com. And do me a favor. Subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts, and while you're there help us grow with a rate and a review. Follow us on Facebook and Instagram. Our handle is @InvestorHour. Follow us on Twitter. Our handle there is @Investor_Hour. Have a guest you want me to interview? Drop me a note at [email protected] or call the new listener feedback line, 800-381-2357 and tell us what's on your mind. That's 800-381-2357. Till next week, I'm Dan Ferris. Thanks for listening.
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