In This Episode

Buck and Porter welcome Dr. David “Doc” Eifrig to discuss his market forecast for the next six to nine months: a mini-boom as people receive and spend their last checks from Trump and Congress. Doc also tells you the one thing you need to watch for that could start a long overdue default cycle in bonds, what his biggest fear is for investors today, and why he’s getting more interested in gold with each passing moment of a 9-year old bull market that’s on its last breath of debt-laden air.

Porter talks about bulletproofing your stocks against market risks and reveals his favorite category of equities with a laundry list of companies ready for you to research. Doc and Porter tell you what kind of stocks make a perfect “Hall of Fame” portfolio – investments that pay you ever increasing dividends every single year you own them.

Buck asks Doc how you should prepare your investments for the next bear market, and Doc reveals his “100 year” investment idea – an irreplaceable asset that will never go away. Porter answers listener questions about the bitcoin and crypto crash, Toys R Us bankruptcy, and if China and President Xi Jinping are gearing up to create a new world reserve currency.

Buck and Porter welcome Dr. David “Doc” Eifrig to discuss his market forecast for the next six to nine months: a mini-boom as people receive and spend their last checks from Trump and Congress. Doc also tells you the one thing you need to watch for that could start a long overdue default cycle in bonds, what his biggest fear is for investors today, and why he’s getting more interested in gold with each passing moment of a 9-year old bull market that’s on its last breath of debt-laden air.

Porter talks about bulletproofing your stocks against market risks and reveals his favorite category of equities with a laundry list of companies ready for you to research. Doc and Porter tell you what kind of stocks make a perfect “Hall of Fame” portfolio – investments that pay you ever increasing dividends every single year you own them.

Buck asks Doc how you should prepare your investments for the next bear market, and Doc reveals his “100 year” investment idea – an irreplaceable asset that will never go away. Porter answers listener questions about the bitcoin and crypto crash, Toys R Us bankruptcy, and if China and President Xi Jinping are gearing up to create a new world reserve currency.


Featured Guests

Dr. David Eifrig
Dr. David Eifrig
Editor, Retirement Millionaire,Retirement Trader,Income Intelligence
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Transcript

Announcer: Broadcasting from Baltimore, Maryland and New York City, you're listening to the Stansberry Investor Hour.

[Music plays]

Tune in each Thursday on iTunes for the latest episode of the Stansberry Investor Hour. Sign up for the free show archive at InvestorHour.com. Here are the hosts of your show, Buck Sexton and Porter Stansberry.

Buck Sexton: Hey, everybody. Welcome back to another fantastic episode of the Stansberry Investor Hour. I'm nationally syndicated radio host and former CIA analyst, latte drinker, Buck Sexton. And with me today is of course the founder of Stansberry Research, Mr. Porter Stansberry.

Today on the show we welcome Dr. David "Doc" Eifrig, lead editor and analyst of Retirement Millionaire, Retirement Trader, and Income Intelligence at Stansberry Research. Before joining Stansberry in 2008, Doc worked in arbitrage and trading groups with major Wall Street investment banks including Goldman Sachs and Chase Manhattan. In 1995, Dr. Eifrig retired from Wall Street, went to UNC Chapel Hill Medical School, and became an ophthalmologist. Now, in his latest retirement, he joined Stansberry Research full-time to share his experiences and ideas with readers. Doc is here today to give up his current market outlook and tell us what his team is up to in the latest editions of Retirement Millionaire.

All right. And, with that, we can get started. Mr. Big P, Porter, how you doing?

Porter Stansberry: Well, as I told you, I slipped on the stairs coming down to the studio and I triggered my turf toe. If you guys have ever had turf toe, it's like someone takes a hammer and strikes the knuckle in your toe with it. So I'm suffering from that. I'm also suffering because late last night I got a feedback e-mail from a subscriber who was accusing me of biting the hand that feeds me, complaining that I sometimes am critical of the federal government. Now, Buck, this is obviously a topic near and dear to your heart.

Buck Sexton: Indeed.

Porter Stansberry: You were formerly part of the machine.

Buck Sexton: I am the machine, Porter.

Porter Stansberry: "I am the machine. This is Russia" [in Russian accent]. You guys who know what I'm talking about know how funny that is. Those of you who don't, just google "I am the machine." You'll find it. Anyways, I was trying to explain to this guy, nicely, by the way – sometimes I can be a little short in the mailbag. Country Club Guy, you've seen that in the past.

Buck Sexton: I'm just wondering how a non-athlete gets turf toe. But we'll talk about that off the air.

Porter Stansberry: [Laughs]. Well, in my case, I was over-served one night late on my boat and it was slippery and I fell down some stairs, resulting in bending my big toe all the way back underneath my foot, which resulted in turf toe.

Buck Sexton: Okay. Good enough.

Porter Stansberry: Yeah. Anyway, so back on the topic that matters to somebody perhaps. This idea that there's a difference between our country and our government. And I was explaining to the guy, "Look, I am very grateful for all the advantages of being born in America." Buck, like you, I had parents that nurtured me, that taught me the importance of integrity, the value of the dollar. What I said is: my parents had the discipline to give me the opportunity to work hard doing chores so that I could earn some money. And that taught me the value of the dollar. And I knew a lot of kids, grew up with a lotta kids, Buck – probably as many or close to as many as you did – whose parents never had the discipline to make their kids work for anything. And as a result, they got a bunch of allowance as kids.

Buck Sexton: I've always told people, Porter, the biggest advantage that I know of in life is having two loving, concerned parents who do everything they can for their kids. Because I actually had two friends growing up who were incredibly wealthy, I mean, next-level wealthy. Both of them died of drug overdoses.

Porter Stansberry: That's what happens when you don't have any ambition, when you don't know what to do with your life because you've been given everything. That's my greatest fear, Buck, when it comes to my children. I can give 'em all the love I want but I just can't give 'em any money. because if I do, you're going to destroy their ambition, destroy their opportunity in life. And, of course, how much pride do you take doing things and succeeding because of your own work? That's the key to success. That's one of the big problems with welfare. But we're not going to go down that path today. I want to explain something else.

So, yes, I'm very lucky that I was born into the family I was born into, very lucky I was born into America. But I'm not lucky because of our government. I'm lucky because America is the current cradle of Western civilization. It's a country that has a culture that we would call civilization, but it involves common law; it involves respect for family; it involves a lot of bourgeois ideas like: you should work hard and provide for yourself and be independent and take care of your family. All those things are what makes America great. Not our federal government. And I was trying to explain that, the way I see it, our federal government is much more like a cancer on this accumulated wealth and tradition and knowledge that we enjoy as Americans. And I believe that America, the idea of America certainly, will far outlive our current regime.

And just a little bit of history for those of y'all who care. America was founded as country that was much more based on common law and much freer. So, for example, we explicitly didn't have a standing army. We explicitly outlawed income tax because we knew that would build the power of the central government. Both of those things: a standing army and an income tax – we said, "No, we don't want that. We want to have a free country, a country of civil institutions, not institutions based on coercion," which of course is what the government does. Buck was once an agent of that coercion [laughs]. Sorry, Buck.

Buck Sexton: Fair point.

Porter Stansberry: And so I don't think it's accurate at all to say I am disrespectful of our country or biting the hand that feeds me by criticizing our government. I think just the exact opposite. It wasn't until 1913 that we had direct election of senators. That was the end of our republic. It wasn't until 1913 that we had paper money. That was the creation of the Federal Reserve. And it wasn't until 1913 that we had an income tax. And all those three things combined have created the leviathan that we now have to deal with, a leviathan, by the way, that takes more than half of my income every year before I even see it.

I mean, imagine telling our Founding Fathers that the government that they created would end up with the world's most powerful and expensive army, with 800 military bases outside the United States in 70 different countries. Oh, and an income tax that takes more than half of the wealth of the successful citizens. Their heads would spin. And I don't think saying that that government is incongruent with our tradition of common law and representative limited government is biting the hand that feeds me. I think I'm standing up for the traditions that created the wealth that we still enjoy. Buck?

Buck Sexton: That government, by the way, is $21 trillion in debt too, the one that's taking half of your money, Porter. So I think that's also an important context for this discussion. It's not even enough. It's never enough.

Porter Stansberry: It could never be enough. But here's an interesting thing about that. Remember: we had the Boston Tea Party because we resented taxation without representation. Tell me what could be a better example of taxation without representation with the knowledge that you are burdening two, three, four generations of taxpayers, people how have not been born yet – you are burdening them with these taxes, which are debts, which must be funded by taxes sooner or later. How could there be a better example of taxation without representation? And I gotta say: there's all kinds of ways to look at how morally bankrupt our government is. But what could be more obviously morally bankrupt than leaving debts for your children? Does any family in America go, "Ooh, I got a great idea: let's not just spend all of the inheritance; let's go ahead and leave our children and our grandchildren and their children with our obligations"?

Buck Sexton: It is unfair. And, by the way, ruinous.

Porter Stansberry: Ruinous. And I don't think I'm biting the hand that feeds me. I think I'm just trying to get people to ask some very simple questions about what's going on in our country and why it really happens. That's all. Now let's talk about something besides politics. Unless you want to delve into this Facebook mess some more. I mean, I saw the guy with purple hair testifying in London today and it was just hysterical to me.

The whole reason why this quote/unquote "whistleblower" and this whole controversy exists is because these geeks can't believe that Trump was actually elected. This all comes back to – the Russia conspiracy, the Facebook conspiracy: it's all a gigantic witch hunt to explain why nobody liked Hillary Clinton. Trust me: Trump did not win that election. He didn't win the popular vote, for sure. But he wouldn't've won except for Hillary is such a douchebag. And even people who're Democrats will admit that she's just a complete turd. Can I say turd, Country Club Guy? I'll get the "edit it" sign.

Country Club Guy: Turd –

Porter Stansberry: "Turd"'s fine?

Buck Sexton: You can say it.

Porter Stansberry: I mean, nobody likes Hillary Clinton. Biggest turd in American political history. Any thoughts about that, Buck. Come on, you know way more about that stuff than I do.

Buck Sexton: So, if you were to do an analysis of all of the non-Hillary-related reasons that the media have come up with for why Trump won and Hillary lost, it's pretty astonishing. You have: it's James Comey's fault because he brought up the e-mails right before the election.

Porter Stansberry: It's the FBI, where the entire leadership in the FBI was doing everything they could to get Hillary elected, but it's their fault that she lost.

Buck Sexton: Correct. That's what gratitude is if you're a Democrat: when you have people who are throwing their careers and their reputations on the bonfire of bureaucratic ineptitude in order to help Hillary and then it's their fault when she loses.

Porter Stansberry: Yeah. Just imagine that: you lost your pension and Hillary lost and it's your fault.

Buck Sexton: And you have the whole Russia thing, which at this point is – I look at people now who really believe that the Kremlin had something on Trump – and by the way, Trump, who we're told can't keep a staff in the White House, has no organizational skills whatsoever, is a – this is what they're saying: total buffoon, doesn't know anything, but he was able to engage in an international conspiracy directly with the Kremlin, Porter that evaded –

Porter Stansberry: [Laughs].

Buck Sexton: – the most sophisticated surveillance machine on the planet. Think about that.

Porter Stansberry: Yeah.

Buck Sexton: I mean, we literally can look at every e-mail and hear every phone call if we want to.

Porter Stansberry: Trump is nothing if not savvy. I mean, let's give him that, right? I mean, he's [laughs]

Buck Sexton: This is the thing. But you have the same derangement under the Bush administration. You had people who were saying that Bush is literally the dumbest politician to have ever held office anywhere in the world; oh, but also, he's part of this conspiracy with Halliburton to enrich himself, and the Illuminati and all the rest. I mean, people actually believe this crap.

Porter Stansberry: That's the one thing I really do love about conspiracy theories: they all rely on some kind of incredibly intelligent, rational federal government that does not exist whatsoever, as you well know, having been part of that institution. It's a bunch of bumbling clowns most of the time.

Buck Sexton: It's incredibly hard to keep a conspiracy secret. It is actually much easier to overlook bureaucratic inefficiencies, blunders, and stupidity, because everyone's like, "Well, we don't want them to know what's really going on there." It's usually not the big scheme, folks. It's usually just that the bureaucrats don't know what the hell they're doing.

Porter Stansberry: I've got two more thoughts that I want to share with you guys about current events. They're both much briefer than the earlier ones so don't skip forward [laughs]. First of all, can you think of a politician who is less charismatic and more wooden in the Democratic Party at a senior level than Hillary Clinton? I can. I think I one time called him – I had a great name for him. He looked like a drunken Frankenstein? [Laughs]. I'm talking about our former Vice President who lost a very, very close election to George W. Bush. Anybody remember Al Gore? If you're having a contest to see who is the least-charismatic major Democratic politician in the last 50 years, Hillary and Al would be number one and number two.

There is no way any rational human being would say, "I'd love to have a beer with Al Gore" [laughs]. Massage rapist and – there was never a bad political idea that Al Gore didn't get behind, from the nuclear-freeze movement to greenhouse gases to creating the Internet. Hard to believe how he could be the head of anything. Hillary Clinton, I feel the same way about, right? Except for her commodities trading, she was a failure at everything she did in her life. And no one in their right mind would go, "Love to spend the afternoon hanging out with Hillary."

Buck Sexton: Hey, Porter, can you guys teach me how to take $1,000 on cattle futures and make it into $100,000 in a couple of months? because that would be awesome. Thanks. From Buck.

Porter Stansberry: You know, the one thing that Al Gore did do in business was he got put on Apple's board to get Steve Jobs' ass out of the fire for the options back-dating conspiracy stuff which was real. But never mind.

Buck Sexton: Just real quick, Porter: Hillary said that she made that money on the cattle futures by reading the Wall Street Journal, and the Wall Street Journal actually did not cover futures at that point in time. So that was really – she had a particular kind of magic going on.

Porter Stansberry: Yeah. There's all kinds of things in that closet that we never will get to know about. And they weren't nearly as salacious as the things that're going on in Trump's closet [laughs]. You know, the idea that it's news that Trump had an affair [laughs] – really?

Anyway, one other thing on current events. I do love the idea that the mainstream media has latched onto the fact that it's Facebook that was enabling the Russians; it's Facebook that was enabling Cambridge Analytica. It's Facebook now that can be blamed for Brexit. Anything the progressives don't like now is being laid at the foot of Facebook, which is hysterical because Facebook itself is made up with a whole bunch of liberal progressive people. In fact, the Obama team – in the 2012 election? – talked about how they were able to get Facebook to do things that Facebook wasn't supposed to do because quote "They're on our side."

So it's very interesting to me: as the media has become freed from the controls of the licensed networks – so, as you know, the government licenses the major networks and, as a result, those major networks have a very vested interest in not saying anything that's going to really upset Congress. But Facebook isn't licensed by anybody. And the things that people say on Facebook are not even edited or fact-checked or anything. So it's a Wild West kind of media. And it threatens the progressive establishment. And so even though Facebook itself is made up of progressives, Facebook has become the enemy of the folks who want to make sure that what you're fed is nothing more than approved propaganda. Thoughts about that, Buck?

Buck Sexton: Yeah. I think it's funny that people have woken up all of a sudden and realized that Facebook is a private entity that is leveraging your personal information for its own gain. It's not running some science experiment or some social experiment to let people find their ex-girlfriend from 20 years ago and see if she looks cute still or what her husband is like. It actually has a commercial purpose, and the purpose with Facebook is to take all of your stuff and use it so that people can sell products to you and use their platform to send you information, to message you. And that's not new, but the mass panic of the anti-Trump folks across the board is such that any explanation that sounds reasonable or scientific to them at first for how he cheated is acceptable, even when, if you took Trump out of the situation, you would think that it's completely absurd. It's the Trump effect or the Trump factor.

Porter Stansberry: All right. Let's move on, shall we, Buck, from current events to something that the folks can use to make some money? That's why we're all here. Not because of Trump. Although he's very entertaining.

Buck Sexton: Yeah. Can you help me make some money?

Porter Stansberry: Was it just me, Buck, or did you notice that Stormy Daniels' pupils were dilated to the size of quarters?

Buck Sexton: Yes. I was fixated on her pupils the entire time.

Porter Stansberry: You were just looking at her pupils, weren't you?

Buck Sexton: Just the pupils, Porter.

[Transition music]

All right. We got Doc Eifrig with us. He is the lead editor and analyst of Retirement Millionaire, Retirement Trader, and the Income Intelligence at Stansberry Research. Before joining Stansberry in 2008, Doc worked in arbitrage and trading groups with major Wall Street investment banks, including Goldman Sachs and Chase Manhattan. In 1995, Dr. Eifrig retired from Wall Street, went to UNC Chapel Hill Medical School, and became an ophthalmologist. Now, in his latest retirement, he joined Stansberry Research full-time to share his experiences and ideas with readers. Doc is here today to give us his current market outlook and tell us what his team is up to in the latest editions of Retirement Millionaire. Ladies and gentlemen, Dr. David "Doc" Eifrig.

David "Doc" Eifrig: Hi, folks. How's everybody doing?

Porter Stansberry: Boy, that was energetic. You're very glad to be here, aren't you?

David "Doc" Eifrig: I'm super excited to be here.

Porter Stansberry: "Hi everybody" [imitating deep, slow voice]. Well, I'm going to ask a question that I know'll make Doc very uncomfortable.

David "Doc" Eifrig: That's all right. I'm prepared. I've been up all night ready for uncomfortable questions.

Porter Stansberry: This is a lot of fun for me. Now, you call your newsletter Retirement Millionaire, but are you actually a millionaire?

David "Doc" Eifrig: No.

[Laughter]

You're so funny. Why're you going to make me uncomfortable?

Porter Stansberry: He will not discuss –

David "Doc" Eifrig: I won't talk about sex, politics, religion, finance, personal stuff.

Porter Stansberry: No, you won't. You keep it tight to the vest. You know, one time I asked Jim Rodgers – I said, "Jim, I know you made a lot of money on the Quantum Fund, but that was a long time ago. Now I see you out hustling books and selling your speeches. If you were really successful in the markets, why would you do those things? How much money are you really working with?" "Oh, Porter," [imitating accent], he says, "You doing such a good job as a journalist. That is a good question. You know, no one's ever asked me that. But that is a very important question. People shouldn't be listening to me about their money if I don't have any, do I? Yeah, that's a good question. But, you know, my mother taught me: 'Never talk about your money.' So I'm not going to answer that question."

David "Doc" Eifrig: I can tell you where it came from too. My dad was a physician and there were a couple brands of cars that he absolutely refused to ever consider buying. One was a Cadillac. Because he didn't want patients to think he was a rich doctor. I mean, my dad was fairly academic, so I can say he really wasn't a rich doctor. And knowing his finances later in life when I was in New York, Wall Street, it was clear he wasn't really good with finance and wasn't [laughing] a rich doctor. But, yeah, I don't know, I don't like to talk about it. Just one of those things. I appreciate wealth and appreciate fine things like I did this past weekend on your boat, Two Suns, down in Miami Beach. Can I do a little schtick for his –?

Porter Stansberry: Doc, you're on the podcast. Just let it roll.

David "Doc" Eifrig: I love it. All right. So, folks, if you like fishing, if you like ornery captains, if you like mates that your wife will appreciate because he's young and virile, you need to go to Two Suns, do a charter. I think you've got some guys from – I won't name the state, but they're back now for their fourth or fifth year in a row. They have such a great time. You got some others that're coming out. A fantastic time. We stayed out of the Miami Beach Marina so just went out on Saturday. But what a great experience. And it's expensive but it's not that expensive. And if you've got money and you're interested in boating, man, I recommend Two Suns.

Porter Stansberry: TwoSunsCharters.com.

David "Doc" Eifrig: Check it out.

Porter Stansberry: All right. Thanks for the plug.

David "Doc" Eifrig: You're welcome, Porter. And you did not know that was coming, did you?

Porter Stansberry: No. But that's fine. No one's going to charter the boat. Everyone wants to and then we tell them it's $5,000 a day and they run away like scalded dogs. Meanwhile, if you understand what it costs to maintain a boat like that, you know that we're not making any money on the charter at all.

David "Doc" Eifrig: Yeah. That's for people that can afford that. But it's definitely worth $5,000 a day.

Porter Stansberry: It's a bargain compared to trying to do it yourself. So if you just want to go fishing once or twice a year, great. Perfect. Charter the boat. Now, let's talk about some money. Doc, my big concern in the markets right now revolves around two contradictory ideas, and that's one of the problems with markets: they're oftentimes paradoxical. So my biggest concern right now is with the credit cycle. I read some research out last week from Jim Grant talking about the size of the zombie economy inside the United States. And I don't want to quote the numbers because I don't know the exact number off the top of my head, but it was something close to 20 percent of all of the corporate bond issuance – the company in question is not generating enough cashflow to cover the interest payments.

David "Doc" Eifrig: Twenty percent of bonds.

Porter Stansberry: Twenty percent.

David "Doc" Eifrig: Outstanding bonds or current issuance?

Porter Stansberry: Current issuance.

David "Doc" Eifrig: So the last 12 months – stuff that's coming out –

Porter Stansberry: No. Sorry. I'm referencing a different amount. Total outstanding. And also I'm pretty sure it's total issuance, but it might only be the high-yield issuance. I can't remember. But what matters is: in terms of the cyclicality of these things, it's the same number of companies that are in trouble as we last saw back in – you name the period. '73/'74, '33. Big, big economic trouble coming because we've had so long since a good default cycle cleaned out that market, and you've got companies that were able to get financing because rates were so low that should've never qualified for financing. And the scope of these things is really large.

In addition, because companies have taken on so much debt, we're not at a new all-time high in terms of total corporate indebtedness versus GDP. And the last time that peaked was early 2007, an ominous amount of debt. Especially given the fact that interest rates are so low.

And then the third thing that goes in this worry is the fact that the double-B tranche, which is the lowest investment-grade tranche of debt – now that tranche is so radically larger than it ever was before. It's actually larger than the entire high-yield market. So you have the potential for an enormous increase in the amount of quote/unquote "junk bonds" during the next credit cycle, during the next default cycle. Because one downgrade and all of a sudden these bonds – and I want to get this right – there's something like $2 trillion in this tranche? So imagine $1 trillion in additional high-yield debt in a short period of time. There wouldn't be buyers for it because so many institutions are not allowed to buy debt that's not investment-grade. So you could have an enormous cockup in the corporate bond markets.

And that could happen in one of two ways. Just follow me here for a second. Let's say that my instinct is right – I'm a believer in the economist from Texas –

Buck Sexton: Lacy Hunt?

Porter Stansberry: Lacy Hunt. Thank you. I know he's going to be a guest on the podcast coming up next week, so we'll get the latest from Lacy. But I'm a believer in his research that shows: when economies get above a certain level of indebtedness that further stimulation of interest rates and deficit spending actually has a negative-multiplier effect because it increases the uncertainty in the economic stability of the country and causes people to save more, hoard more, and take less risk. So it actually ends up causing economic growth to slow when theory would tell you the opposite. And he's done a lotta work on that. He's going to talk with us about that.

But let's say he's right, just hypothetically, and let's say that we can't get our economy to reach escape velocity; we can't get growth above 2.5%. And year after year those long-term rates just keep falling. So you would see the ten-year back below two percent. Nobody thinks that's coming. You would see the 30-year back below 2.5%. Nobody thinks that's coming. You would see economic growth surprise on the downside. You'd see corporate earnings surprise on the downside. No one expects this. Currently the outlook is the opposite.

But if that were to occur, if growth was slower than expected and inflation was weaker than expected and profits were weaker than expected, you would see the default rate on the corporate bond rate go up again. You'd have a big spike in defaults, particularly in retail and particularly in oil and gas. And that default cycle could make it impossible for these over-leveraged companies to get additional financing, and that could start the spiral of the downgrade of the double-Bs, and the whole cockup that we thought we were seeing in 2015/2016 could actually happen now with losses in corporate bonds exceeding $1 trillion. That would be as bad as the outcome that happened in the mortgage bust in terms of the amount of capital being destroyed. Now, it wouldn't hit as broadly. It wouldn't be consumers. It wouldn't be banks. But it would still be a big problem, okay?

Now, that's one way. The other way this could happen is if Lacy Hunt's wrong, if the Trump tax cuts, if the commodity inflation that we have seen over the past two years is transformed into consumer price inflation, if the tax cuts spur economic growth. If we have a quarter where we grow by 5% in this country, you could see – Doc, rates could soar. I mean, you could see a 10-year go above 4% in less than 12 months if economic growth is very strong and inflation looks like it's kindling again. And if that were to happen, if rates were to go higher, well, as you know, that would make it impossible for these firms that have very weak businesses to get additional financing, also triggering a credit-default cycle.

So my question for you is: if you see a bad outcome if we have growth and if we don't have growth, what are the odds that we steer our economy through this patch where we've got to have growth that can't be higher than 3% and can't be less than 1.5% – how do we do that?

David "Doc" Eifrig: So, I'm a big believer in us staying in that range, so: below three and above one, and probably on the higher end towards three. But I don't spend a whole lot of time predicting that kind of macro thing. But, to your comments about bonds and the 20 percent, I didn't know it was that high, and that is –

Porter Stansberry: Don't quote me. We'll have to look at the data.

[Crosstalk]

David "Doc" Eifrig: Right. Definitely interesting. And the other part about this that I'm sure you're aware of is: a lot of this debt in the last couple years has gone covenant-lite.

Porter Stansberry: Very covenant-lite. You can pay or not pay.

[Crosstalk]

David "Doc" Eifrig: So the requirements – yeah. So we're going back to that same thing, the '07 era –

Porter Stansberry: Well that ends so well.

David "Doc" Eifrig: Yup. I'm a little more optimistic about things. I was out in Germany. I was just down in Florida. And I just feel like we're starting to see inflation creeping in in a lot of places but it's not in a large way. But I think it's inflation for the wealthy. Bear with me on this idea. When I'm traveling, the planes are full and up front is full, but the prices for in the back of the plane haven't changed in the last three, four years. The prices have doubled in the front of the plane.

Prices have doubled for nice rental cars. The cheap rental cars in Florida: you can still get the two-seater for a week for $120. But if you want the 530 or the X Beemer – it's like $600, $700, $800 for a week. First time ever out in Santa Rosa, California, in wine country – first time ever in 30 years no cars available up in Northern Sonoma at the Santa Rosa airport. Demand-driven pricing. So we're starting to see that. And the question is – we were talking yesterday about – and I do have some stuff on government debt that we've been working on. I don't see it ending in any kind of collapse. But I do fear this latent fear of folks who're going to hold onto capital and not invest it. And that makes me nervous. But we're still seeing – the S&P sales – if you want to think about macro things, I like to look at: S&P sales, top line, is up 7% year over year.

Porter Stansberry: That's good growth.

David "Doc" Eifrig: That's good growth. And I think you're starting to see some of that be put back into capex. I don't have capex numbers from the last six months, but I'm a little more optimistic maybe than you might be. But definitely I have emotions. My amygdala – that's the part of the brain that gets triggered when you fear you're on the wrong side of the group, not following the group. Before we had the melt-up yesterday in the markets, yesterday morning I was a little bit nervous and worried, like, "Should I get out of my stocks? Should I get out of my investments?"

Porter Stansberry: That's when you know it's time to buy. Hey, Country Club Guy, did you get any calls late last week when the market did a little tumble? Did any of your old trader pals call you with stories of woe?

Country Club Guy: They're all afraid for their jobs. They're not calling me anymore.

Porter Stansberry: Did they turn the frown upside down?

Country Club Guy: You know what? The risk is not on them because the more volatility, the more commission dollars for them. So they're not worried, up or down.

Porter Stansberry: All right.

[Transition music]

Doc, you got a whole bunch of charts there. And I know – I remember –

David "Doc" Eifrig: [Laughs]. Yeah, baby, 135 slides for you. You want us to go through 'em right now, shall we? Slide three [laughs]

Porter Stansberry: Buck, in Hong Kong one time, at the very bottom of the market in 2008 – so the first week of December 2008. Everyone's been shell-shocked, right? The stock market's down almost 50% from the highs, and stocks have been falling for over 12 months. So we're in Hong Kong, financial capital of Asia, and we're having our Alliance meeting. Normally at an Alliance meeting, what are there? How many people there? Five hundred people at Alliance meetings? There are 80 people in the room.

Buck Sexton: If that.

Porter Stansberry: Yeah. I mean, there're 80 people who signed up. I don't really know how many people showed up. Maybe 50. Not many people in the room because nobody wants to come to an investment conference when they don't have any money. And Tom Dyson gets up – I'll never forget this. Tom Dyson had come out early. He spent a week going around Asia at the market bottom. He just found all these incredible securities that were dirt-cheap. He found a parking garage business – just think about this: an Asian parking garage business – so parking spots in places like Singapore and Hong Kong: extremely good business. Yielding 22%. And he gets up at the podium and he says, "I just can't recommend you buy it. I just can't. I think the world's going to come to an end tomorrow."

David "Doc" Eifrig: Well, and remember: he had it handwritten in pencil on paper and he took a shot, and the screenshot – his notes were on of his notebook paper in pencil.

Porter Stansberry: It was such a classic market bottom where you have this guy who has been in and around the securities markets for 20 years. He's very knowledgeable. He's seen the greatest bargains of his life. In fact, that morning I had tea with Peter Churchouse, who's one of the greatest property investors in Asia ever, and Peter was explaining that unfortunately he was having to sell because his investors were liquidating his hedge fund. And so he's like, "Yeah, obviously I'd rather be buying but I can't because none of these people have any faith in the markets anymore. They've all been wiped out."

And I'm like, "What a perfect bottom." When Peter Churchouse has to sell, that's the definition of a market bottom, right? And then you've got a guy like Tom Dyson who really knows what he's doing saying, "I'm afraid." So I get up on the podium and I'm pounding the podium with my fist: "This is the best opportunity you're ever going to have as an investor. You should be buying with everything you can." And Sjuggerud later mortgages his house and starts buying. I mean, that's how good the deals were.

And Doc gets up – so this is after lunch. Everyone's a little weary. And he –

David "Doc" Eifrig: I had to go after Dyson.

Porter Stansberry: He brings up a PowerPoint presentation that, no exaggeration, had 142 slides.

David "Doc" Eifrig: That's an exaggeration.

Porter Stansberry: No, it's not.

David "Doc" Eifrig: Yes, it is.

Porter Stansberry: No. And the recommendation was Pacific Pipe.

David "Doc" Eifrig: Okay.

Porter Stansberry: [Laughs]. It's about the most boring [laughing] recommendation. There're all these incredible securities trading in pennies and we're recommending a pipe company in Seattle where it rains. They're going to need lots of pipes [laughs]. And then Doc proceeds to whisper for 45 minutes like he's treating a sick patient who's dying. He's got his bedside manner out. So he goes [imitating deep, quiet voice], "Well, I just want you to understand that stocks are as cheap as they're likely to ever be in your lifetimes. Here is a 30-year interest rate chart. Let's compare 1976 interest rates with where we are now and 1986 is a contrary indicator. Oh, am I talking to fast? Oh. I'll slow down."

[Laughter]

David "Doc" Eifrig: "Let me go back a few slides."

Porter Stansberry: And I'm telling you: I'm in the back of the room and I just see these people wilting like flies. They're just: wa-boom! Wa-boom! [Laughs].

David "Doc" Eifrig: So, Buck, you've known Porter long enough now to know that we call these kinds of stories Porterville. So the fact of the matter is that on the plane ride over I was sitting up front with Porter and I said, "Look, I've got 40 minutes to do this presentation. I've got 123 slides. Would you mind looking through them and let me know what you think?" So he said, "Sure." So he spent about 30 minutes, looked through my slides, and said, "This looks great, Doc. This looks fantastic." And then when the conference got going…

Porter Stansberry: And Doc didn't understand I was being sarcastic.

David "Doc" Eifrig: Yeah, no. You were not being sarcastic. So when the conference got going it go so disorganized that my time, from 40 minutes, was cut down to – I think I literally had 18 minutes. And so I was flying through the slides, cutting sections out. And it's hard for Porter to keep up sometimes with some of the things that I share because they're fairly complex and deep. So, anyway, he's still trying to make fun of me even though he approved the slide deck [laughing].

Porter Stansberry: What's hard to believe is that was ten years ago. How the hell did that happen?

David "Doc" Eifrig: But Northwest Pipe is up like fivefold since then, so –

Porter Stansberry: Yeah. Well, you're a great analyst. That was a hell of a story. We would've missed Northwest Pipe if it were not for Doc. So what do you have for us today, Doc?

David "Doc" Eifrig: These are just slides that I'd shared with some of the Stansberry Asset Management folks. It's just a bunch of things that're more on the optimistic side about inflationary pressure perhaps, purchasing, manufacturing, unemployment rates. These are at sort of all-time highs. Household debt adjusted by GDP or by U.S. population is not quite at all-times high but going this way. You know this: credit-card debt, automobile debt – these things are at all-time highs, and –

Porter Stansberry: So that can't be inflationary. That can't be optimistic for growth. When credit issuance is at all-time highs relative to GDP, relative to consumers' ability to pay.

David "Doc" Eifrig: Right. So I think that it's at the end of – it's almost like, in shotgun, you know, shooting, you've shot your wad. You've got nothing more – there's no ammo –

Porter Stansberry: And that's Lacy Hunt's argument: that going forward, economic growth is going to be slower because of the debt burden that we're under.

David "Doc" Eifrig: Yup. But so what I was going to say is: I'm somewhere in the middle. And right now because of the Trump tax cuts, I'm hearing people – friends talking about getting their checks back early. Lots of money, right?

Porter Stansberry: Yeah.

David "Doc" Eifrig: Oh yeah.

Porter Stansberry: Someone's shopping for planes and boats.

David "Doc" Eifrig: And boats [laughing].

Porter Stansberry: [Laughs]. By the way, that –

David "Doc" Eifrig: Bigger boats.

Porter Stansberry: The boat that I was looking at –

David "Doc" Eifrig: It sold?

Porter Stansberry: – it sold. Yup like that.

David "Doc" Eifrig: You know who bought it?

Porter Stansberry: I don't know who bought it. You bought it?

David "Doc" Eifrig: Yeah.

Porter Stansberry: Oh, nice. You bought Daytripper?

David "Doc" Eifrig: No [laughs].

Porter Stansberry: So we're looking at – I'm talking to the boys in the booth. We're looking at a new Two Suns, a slightly bigger Two Suns. And my captain's been looking at boats. Seriously, before he can even get to see some of them they're selling. Boom, boom, boom.

[Crosstalk]

David "Doc" Eifrig: But if they charter this year at $5,000 a day, you'll lock them in for the next five years at that rate, no matter how big your boat goes.

Porter Stansberry: No.

David "Doc" Eifrig: Yes. I'm telling you –

Porter Stansberry: No I won't.

David "Doc" Eifrig: – you will.

Porter Stansberry: No I will not.

David "Doc" Eifrig: He will.

Porter Stansberry: No. The cost of chartering the boat is correlated to the operating costs of the boat.

David "Doc" Eifrig: No, come on.

Porter Stansberry: Yes, it is.

David "Doc" Eifrig: So, back to the economic stuff. I think that what we're going to see is a sort of boom, if you will, a little mini-boomlet, in the next six months, nine months, as people get their last check from the government, from the federales, the Trump tax-cut stuff. It's going to be an ugly Christmas, in my opinion. I think things are just going to fizzle, fizzle, and fade.

Porter Stansberry: Interesting.

David "Doc" Eifrig: There's no more –

Porter Stansberry: Now what about treasury issuance? This is one of my big concerns: the quantitative easing that we have enjoyed for the past almost ten years is now reversing. And so instead of – oh, you have some data. Please.

David "Doc" Eifrig: So I have a chart. What we did is we went and looked back to 2003, and we're looking back further. You and I started this discussion yesterday. So the green line is total outstanding treasury. You can see the huge increase over this last cycle.

Porter Stansberry: Right. So the treasury –

David "Doc" Eifrig: And the top is outstanding – all the growth.

[Crosstalk]

Porter Stansberry: The Federal Reserve now owns something like $10 trillion in treasury.

David "Doc" Eifrig: Yeah. There's $16 trillion outstanding treasury debt. That's the top green line. And the red is the percentage change of outstanding quarter over quarter. So you can see how that has been fairly stable the last five, six years, and not really associated with the two-year rate in the last five, six years. So that was one of the questions you were asking about U.S. debt. And even recently – and I'm sorry listeners can't see this, but we can share this with them. This change – you might've thought maybe there would be something here causing rates in blue –

Porter Stansberry: No, there's no relationship between those two lines.

[Crosstalk]

David "Doc" Eifrig: There's no relationship. And then we looked at – then the one question I was talking yesterday about, bid-to-cover – something we used to –

Porter Stansberry: Bid-to-cover, yeah, that's important.

David "Doc" Eifrig: – look at at Goldman. But you can see: there's maybe a little correlation in the two-year. If those widen out together or come together, that would be a sign. But it's really not. Or for the ten-year. So –

Porter Stansberry: It hasn't really – they haven't struggled yet to sell debt.

David "Doc" Eifrig: No.

Porter Stansberry: Doesn't mean they won't, but they haven't yet.

David "Doc" Eifrig: They haven't yet.

Porter Stansberry: Okay. But what about – what I'm curious about is: the Fed has been buying so much of the new issuance. Not the roll-off, but new issuance. They've been buying all of it and more for so long. And now the amount of new issuance is going to have to grow because of the tax cuts. The estimates are – let's call it an extra $500 billion a year, okay? So if our previous estimate of deficit spending was let's say $300, $400 billion, now we're going to double it or a little bit more. So you're talking about close to a new issuance of $1 trillion a year. And now the Fed is not only not buying, but they're selling the roll-off. So how much is – just round number: if new issuance is $1 trillion a year and if the roll-off is $1 trillion a year, how do we finance that?

David "Doc" Eifrig: When you say the roll-off, you're saying debt that's maturing that they're –?

Porter Stansberry: That they are not going to –

David "Doc" Eifrig: Put into the market to buy more debt.

Porter Stansberry: They're not going to buy it so they're selling it. So, as it matures, they're not buying it – they're not rolling it, and so the Treasury is going to have to issue another bond. Right? So if the Fed owns a two-year bond and that two-year bond matures, the Treasury has to go out and issue a new bond to pay off the maturing bond that the Fed holds, because they're not going to roll it for 'em.

David "Doc" Eifrig: Right. Again, looking back on this –

Porter Stansberry: So the number I'm trying to figure out is: in terms of how much debt the Treasury actually has to sell to a real buyer, not a central bank, what is the size of that market and how much is it going to grow in the next three years?

David "Doc" Eifrig: Yeah. So the challenge, Porter, is – in my Goldman days, the future, the U.S. 30-year future was tied to an 8% coupon. Like that was the defining piece. We haven't seen an 8% coupon in 14 years, 15 years.

Porter Stansberry: Longer. I don't think we've seen a 14% coupon –

David "Doc" Eifrig: No, I'm talking 8%.

Porter Stansberry: I'm sorry, an 8% coupon. I don't think we've seen it since the late '90s, since '97.

David "Doc" Eifrig: So we're sitting here. We've anchored to lower rates. And that's what I was alluding to yesterday. Yield is discrete. It could jump from two to five and never trade in between. I'm exaggerating, hyperbolic, but – so with this lack of demand, I think rates have got to go up. But getting a house, a mortgage, a ten-year at 5% or 6% – we thought 5% was too low, 4% was too low, 3%. So how much harm would it do – if the 10-year has to be bid at and we still see bid-to-covers at 2.5 – I don't know. There's people buying it.

And back to your original thing – and this I had a comment. I wrote "fiduciary." This is the key for our listeners. This is key for our subscribers. This is where I think Stansberry's going to make our money. We have to advise people. If they have their retirement and their pensions with these guys that don't feel they have a fiduciary responsibility to the owners of that money, they're going to buy this double-B that's going to collapse; they're going to buy treasuries at two percent and three percent. Get control of it yourself. Take back control. Take it away from these people that don't give a darn about what they've invested for you. They're reaching for yield, with high-yield, covenant-lite bonds, right?

Porter Stansberry: And my concern is about the stability of the bond market. Because, as you know, ten years ago, the banks made huge inventories of bonds.

David "Doc" Eifrig: Yes.

Porter Stansberry: So if the bond market was troubled for a quarter –

David "Doc" Eifrig: They made the markets.

Porter Stansberry: – they would make the markets. But they would hold the bond to maturity, and they had such large portfolios that even if a couple bonds defaulted, it wasn't going to wreck 'em because they would make profits on the other bonds and it would all be fine. But that has all gone away because of Dodd-Frank. And so now the market for bonds is controlled by ETFs. And so the inventories have gone out from the books of the banks and gone into these ETFs. And what scares me, and scares the bejesus out of me, is ETFs – they have daily liquidity. But as you well know, the price of a bond can change enormously overnight, and liquidity can completely disappear.

So, Buck, if a bond is trading routinely at, let's analysis 92 cents on the dollar, and it's trading back and forth and it's yielding 6%, and all of a sudden something happens in that company – there's an investigation that they've been leaking data to Cambridge Analytica, and all of a sudden we're not quite sure if the money's there or if they'll be able to pay us back – that bond, overnight, can go from 92 to 46. And now it's yielding over 10% and it's clearly a distressed bond.

And what'll happen is the people that own it will just say, "Well, I gotta hold the maturity. I cannot take this loss." But on the other hand, the guy who's getting a quote for – his mutual fund owns that bond, or maybe owns lots of bonds that've just done that, or an ETF where bonds have declined like that – those people have a right to sell. So you've got a bond dealer who can't sell because there isn't a market and you've got an ETF holder with the right to sell. How the heck – what's going to happen?

David "Doc" Eifrig: It's going to be a huge lockup, man. And it's going to be illiquid.

Porter Stansberry: So what I'm telling folks is: Be very very cautious about understanding what is in your mutual funds and in your ETFs if you own fixed income. We're talking about bond funds and bond ETFs. Make sure that you do not own high-yield bond funds or bond mutual funds. And look and make sure what the holdings are. Because a lot of these funds have dipped their toe, so to speak – in order to make their yields attractive, they have gone way down the quality ladder, and they own a bunch of garbage that they may or may not tell you about.

You remember in 2016, Doc, Third Avenue Value, which is one of the most respected investment firms on Wall Street – they had a bond fund this happened to and they had to halt redemptions. And it took them nine months or so to work it out. And so you know what's going to happen.

What'll happen is: Folks won't listen to us or they won't know what's coming, they're going to get trapped in these bond funds, and so then they're going to have to sell what can be sold to meet margin requirements. So you get in a crunch where all of a sudden that ETF or that bond fund stops trading. And let's say you have half your portfolio in it. It just doesn't trade anymore. And so now your broker's saying, "Hey, look, man, your stocks are falling over here. You're going to have to make some margin calls and we can't sell those bond things, so you're going to have to sell Disney and American Express and your high-quality stocks." And that's the contagion impact. And I think, Doc, in the last market debacle, we saw this happen in mortgages, but the coming market debacle is going to be in corporate bonds.

David "Doc" Eifrig: It certainly will be catalyzed by corporate bonds. And, to your point about margin debt, this is margin debt. I've got another graph here. This is slide 117 for today. Green is percent of nominal GDP.

Porter Stansberry: Yeah. So it's at a record high.

David "Doc" Eifrig: It's at all-time highs, yeah.

Porter Stansberry: All-time high. So, Doc, if you were to say to folks – is it a good idea to go ahead – especially if you're going to be entering retirement in the next five years or if you're already retired, good idea at the top of a eight-year bull market, nine-year bull market, with margin debt at all-time highs as a percentage of GDP, with consumer debts at near-all-time highs as percentage of GDP, with corporate debt at all-time highs as a percentage of GDP, and with the government running trillion-dollar or thereabouts deficits despite a lack of any real war or economic emergency? Does this sound like a good time to put all your chips into a very aggressive growth stock portfolio?

David "Doc" Eifrig: No.

Porter Stansberry: [Laughs].

David "Doc" Eifrig: It is not. You got me. I want to call my gold broker right away here, get some gold.

Porter Stansberry: Hey, I bought more gold at one time than I've ever bought in my life last December. So. I think Buck, and everybody else who's listening, one of the most important keys to being successful in the financial markets – and Doc has been great at this is whole life – is you have got to learn to be cautious when other people are being greedy and foolish, and you have to be willing to step up and act like a greedy fool when everyone else is terrified. And we have not seen any real lasting lows in sentiment or fear in almost a decade.

David "Doc" Eifrig: So I have a serious question. And it's public. It's your podcast. But if you felt in your heart, if all of us – let's say we ascribed to this idea: "Be fearful when everyone else is being greedy." What would we do with our newsletter advisory? Would we tell people to not do picks, not recommendation?

Porter Stansberry: You were in that portfolio meeting with me yesterday. You saw exactly what I told Austin. I said: I want at least half of our portfolio in things that're completely bullet-proof: cash, shorts, gold, and safe bonds in safe piles of bonds, meaning actual bonds and insurance companies that're great at bonds. And these are not high-yield bonds. This is not the stuff you and I are talking about. These are high-quality bonds. Difference.

And, by the way, that's the hardest thing to explain to people. The bond market is just as disparate as the stock market, right? There's growth stocks. There's value stocks. There's safe stocks. There's risky stocks. And there's everything in between. There's REITs. Well, bonds are the same way. There's all different kinds of bonds.

David "Doc" Eifrig: Except larger. Most people don't realize the bond market is –

Porter Stansberry: Much larger.

David "Doc" Eifrig: – multiples of the size of stocks.

Porter Stansberry: That's why we focus on it at Stansberry Research so much: because the bond market is the dog that wags the tail that's the stock market. But most people never look at the bond market. But let's just move on from that. The point is: Doc, I am not just talking this game about these concerns. I am implementing the strategy in our Total Portfolio. And bull market our bear market, our job as newsletter writers is to come up with good, actionable ideas every single month. We don't get to take a pass just because we think the market's not very attractive.

So my biggest idea – you saw recently – is Disney. Do I think that Disney is going to survive the next downturn? Oh, hell yes. And do I think that buying it throughout the downturn will work? Oh, hell yes. By the way, through the last downturn, Buck, I told everybody to buy Moody's. And buy NVR. Why? Because the big cockup in the market was in bonds, was in securitizations, was in mortgages. And the two companies that were going to get hammered are the company that does the bond ratings, Moody's, and the company that builds the houses, NVR.

But both their business models were so capital-efficient and their brands were so strong that I knew for a fact that they would continue to make money, quarter after quarter, throughout the entire crisis. And they did. So you never had to worry about them going bankrupt, and of course the returns have been ridiculous in both those things. NVR's gone from $400 to $4,000, and Moody's has gone from below $30. to over $200. So if you can find a great business that you know is going to survive, then who cares if there's a bear market? The only reason why it would matter to you is if you had to retire in five years or you needed your capital very quickly.

David "Doc" Eifrig: So I have another – this is slide 312 of my packet: inflation. I wanted you to comment on this. This is inflation going back to '95. And you can see back in the late '90s, inflation ran between four and seven percent, and then it's sort of really gone downhill ever since then. What do you make of that? You and I have had an ongoing – not debate, but intellectual discussion about what causes –

Porter Stansberry: Well, that's not inflation, by the way.

David "Doc" Eifrig: OK.

Porter Stansberry: That's the biggest problem.

David "Doc" Eifrig: You don't think it's a good measure of price inflation? I mean, this is not monetary inflation.

[Crosstalk]

Porter Stansberry: I think you've got it completely wrong. It's like looking at your gas tank and pretending like that is your speed. It's just not. The CPI does not measure inflation. Inflation can cause CPI to increase. Inflation can cause PPI to increase. But inflation can also cause wages to skyrocket. It can cause asset prices to skyrocket. It can cause the price of modern art to go completely bananas. It can cause bitcoin to erupt.

David "Doc" Eifrig: So why has there been a delay – or do you think that's what's finally happening? This monetary expansion and monetary inflation – your inflation – is going to cause –

Porter Stansberry: There's only one real definition of inflation, and it's very simple. Inflation is the creation of currency in excess of savings. It's that simple. So when you create more currency units, you're going to, somewhere, somehow, have an increase in prices. But if people want to put $1 trillion of inflation into military spending, or people want to put $1 trillion worth of inflation into real estate, or people want to put $1 trillion worth of inflation into cryptocurrencies, then it may not have any impact on the price of wheat, or the price of gasoline. And another interesting thing that can happen is: Inflation can actually cause the price of commodities to fall. So think about how much of the inflation between 2009 and 2015 went into oil-well drilling in America. Tremendous amounts of it. As a result, oil supplies increased.

So you cannot look at inflation in a very simple way. What you have to do, of course, is figure out how much the size of the currency is increasing – the total money in credit in the economy's increasing above savings. And in our case that's easy because there aren't any savings. So you look at the increase in credit; it's all inflation. And then you just look at where it's going and why it's going there. And if you're really good, you can ride the boom and then ride the bust.

So, look, stocks have gone from, what, 12 or 14 times earnings to 20 to 24 times earning? That's inflation. And think about how much money that is. Bonds: even bigger inflation, right? They've gone from providing a real yield to, in some cases, proving a negative nominal yield. Never seen that before. That is inflation. And how much currency did that? Lots. The cryptocurrencies, all that stuff. So, in the next bust, all that inflation is going to come off. And where is it going to go? It could very well go into commodities. It could very well go into gold. It could very well go into something that hasn't moved in a long time because people perceive that as being stable and safe.

David "Doc" Eifrig: My last slide is for Country Club Guy. I just wanted to show him what an amygdala looks like.

[Crosstalk]
[Laughter]

Buck Sexton: Hey, Doc. Isn't that like the lizard brain? Isn't that what they call it? The amygdala?

David "Doc" Eifrig: Yeah. Exactly, Buck.

Buck Sexton: It's like –

Porter Stansberry: Lizards all the way down.

David "Doc" Eifrig: See, I put you in a higher category of knowledge than these two yahoos I'm sitting here with.

Porter Stansberry: I don't know anything. Not about medicine. I can't even take care of myself.

[Transition music]

David "Doc" Eifrig: Buck, what questions do you have for me? You have anything?

Buck Sexton: Yeah. Sure. I'll ask some everyman questions. Now you're getting questions from up in the rafters from the cheap seats, so get ready for it. If you're somebody with – let's just pick a nice, round number. If you've got $200,000 in assets that you're managing and you've got it mostly in stocks and some bonds, how would you prepare for all the bad things you guys are talking about? In a way that's not an overly – you guys are very sophisticated and skilled. What about the small percentage of those who're listening to the podcast who want a pretty straightforward approach? You're going to put a lot of it in gold? What do you do?

David "Doc" Eifrig: Yeah, so, in my newsletter, Retirement Millionaire, we've talked about this from day one. Part of it's a function of your age. But, more importantly, you have to have a five-to-10-year outlook. And you have a mix. It's a mix of what I call fixed income, a mix of stocks or equity, there're some hedges in there, chaos hedges, and cash. So those are the four buckets that I consider.

But I would tell you, really, if you're in that position, you should call – I know it sounds like you set me up or I'm setting you up, but Stansberry Research has this product that's the Portfolio Solutions and manages it. The Total Portfolio is exactly what – we had the meeting yesterday, and Porter alluded to it, where we're setting up for that, where we're in a certain amount of cash, certain amount of fixed income, and a certain amount of stock. So that's kind of an easy way. Then you join in and you're part of the Stansberry club. Now, for others who're already a part of the Stansberry club and you don't have that product, then you should check that out. Yeah. I mean, that's kind of the simplest way.

If you only had $200 and starting out, I'd say you buy a Vanguard stock fund with $100 of it and probably Vanguard's bond fund or they have a fund, Wellington or Wellesley, that does that for you already, in low expenses. But that's sort of for starters and beginner – that's something you might give to your seven-year-old as a holiday or Christmas, Easter, Passover, whatever kind of gift. Graduation present. Does that help?

Buck Sexton: Yeah. That helps. I'm just wondering how heavy you are into gold in preparation for all the scary things you guys are talking about.

David "Doc" Eifrig: I'm getting more and more interested in gold. And yesterday's talking with Porter has gotten me more interested in it. And really because of this confluence of: The wad has sort of been shot here, and there's no more ammunition, there's no more shells. All these things are at all-time highs. It is a time to start to be fearful when people are starting to get greedy. And you are starting to see the greediness. I was sitting next to a guy who has made at least a half a million to a million in cryptocurrencies and he just took some out, paid cash for a Tesla. And he's giving me advice about what to invest in. And that's kind of the sign of, things are slowing down.

Buck Sexton: Yeah, no. I was here socially around Christmastime. People were all walking around talking to me about how they were all invested in crypto, people that had never invested in anything before that I know. That seemed to me to be a little disconcerting.

David "Doc" Eifrig: Yup. I walked into a friend of mine's place in California. Her daughter is a senior in high school and the boyfriend was laid out on the couch. You know, it's the new world. No one gets up to greet anyone. They're just chilling, probably smoked some weed that afternoon. And he's like, "Hey" –

Porter Stansberry: It's medical marijuana, Doc. They needed it.

David "Doc" Eifrig: Medical marijuana, sorry. They were with their – anyway. He's like, "Hey, Dr. Eifrig. Listen, I heard you know stuff about investing. I gotta tell you, the best place to invest is cryptocurrencies, man. We've made a couple thousand dollars in cryptos. You oughta be considering them." And of course his girlfriend's mom is a subscriber to a couple Stansberry things and she pays for it. She won't let me comp her on subscriptions. And she's like, "Yeah, should I be buying cryptos?" And I'm like, "OK, [laughs] no. You should stick with the portfolio solution that you've paid for and not listen to this high school guy who won't get up off the couch to greet me and thinks cryptos are the future." So that's where I come down on that.

Porter Stansberry: Buck, I have an even simpler answer for you. It's very very simple. You should build your portfolio around high-quality property and casualty insurance companies. As an example, go to our website, read about Axis Capital. A-X-I-S. I think that's how you spell it. Axis Capital. And Travelers is another name. Chubb is another name. American Financial Group is another name.

The reason why you want to own these particular kinds of insurance companies is because they have a long-established track record of underwriting profitably. So imagine, if you will, that you have a fund every year that's trying to beat the S&P 500. And, to do that, you have to spend some amount of money to raise capital, right? So you're a bank; you have to pay somebody a percent or so to have their money, and then you can invest it, and hopefully you can beat the S&P 500. Well, these companies have a huge advantage because they're going to make five to 10 percent on that money to start with because they're going to get an underwriting profit. So the idea is that, with them – WR Berkley, by the way, is probably my favorite out of all these firms.

David "Doc" Eifrig: And has been for years.

Porter Stansberry: And has been for years and years. So what you want to do is you want to build a portfolio around profitable underwriting property and casualty insurance companies. And we are one of the only firms in the entire world that calculates the value of these companies' float, that watches the size of their books, that makes sure they're still doing that. So you can go to our Insurance Value Monitor and you've got exactly which stocks to buy. So you should have between 20 and 40% of your portfolio in five or six of these names.

And you can scale into them however you want. You can buy them equally or you can have 5% in one and 4% in another and so on, based on our ratings. Any way you do it, you have to get exposure to property and casualty insurance, and you have to hold those stocks for at least 10 years. because any insurance can have a bad underwriting year. But they're not going to have a bad underwriting decade. It's not going to happen. OK? So that's the base of your portfolio.

From there, you add stuff when you have the opportunity to buy a great world-class business at an affordable price. So when you see Disney go on sale like it is right now, great. You can buy a 5% position in Disney and you sit on it forever. When you see Hershey go on sale, same thing. When you see American Express go on sale, same thing. And if you're reading our newsletters, you're going to see that once or twice a year we go, "Holy hell, here's a great business, and it is cheaper than it's ever been."

Right now in that box I would put Under Armour. Now, that's a little bit more speculative than we normally reach for because it's not a truly established business like American Express or Disney World. But it's a pretty damn good business. So maybe instead of a 5% position, maybe you'd go 2.5 into that. But the point is: over time, Buck, you want to establish your portfolio as this incredible hall-of-fame space. You don't need to make a lot of investments. You only need to make the best ones. So think about it. If you could – do you follow any professional sports? Basketball, football, baseball?

Buck Sexton: Yeah. NFL.

Porter Stansberry: Okay. NFL. So imagine you're playing fantasy league in the NFL but you have your entire life to fill out a roster. Are you going to pick Tom Brady? Hell, yeah. That's the best quarterback ever. All right. Great. But you don't need to pick a running back this year. You can wait. You know what I'm saying? But what you want is: Let's say you're 40 years old now – I know you're not, but let's say you're 40 years old. When you're 60 years old, the goal is you look down at your portfolio and you've got insurance companies that you bought 20 years ago that're paying you outrageous dividends, and you've got an entire hall of fame of great, great, great businesses. And all of those companies are going to increase their dividends every single year.

So your entire retirement is nothing but getting pay raises every year because your portfolio continues to spit out more and more and more dividends. That's all you have to do. You don't have to do any trading. You don't have to follow trailing stop losses. You don't have to buy any gold. You don't. You have to buy great businesses that're very capital-efficient and that're going to increase their dividend year after year after year after year after year.

Here's an example. Doc, if you had to put every single bit of your money that you won't talk about, every single penny into one publicly traded, listed equity, and you would never ever be allowed to sell nor would your children or your grandchildren – so a 100-year investment. And you have to buy it today, but the price, over 100 years, makes no difference really. So what do you buy? One stock. You can never sell it, and you have to keep it for 100 years.

David "Doc" Eifrig: So I was asked this question down at Stansberry Asset Management in Tampa two weeks ago, and my answer was Disney.

Porter Stansberry: Great answer. My answer is McCormick Spice.

David "Doc" Eifrig: [Laughs].

Porter Stansberry: Compared to salt, chocolate is a new and risky innovation. I guarantee you: No matter what happens in technology or nutrition, our children and grandchildren and their grandchildren will put salt on popcorn and, you know, a turkey sandwich. The guarantee. Salt has been –

[Crosstalk]

David "Doc" Eifrig: I mean, the salt metaphor doesn't really do it for me because Morton's is the salt –

Porter Stansberry: Salt has been a measure of wealth for all of recorded human history.

David "Doc" Eifrig: But the spice thing.

Porter Stansberry: And McCormick is the absolute world's leader in sourcing, packaging, and marketing spices. And has been for decades and decades and decades.

David "Doc" Eifrig: Right. We'll sidebar on this when we're done because I have an interesting thought to this. I want to ask Buck a question. Buck?

Buck Sexton: Yes, sir.

David "Doc" Eifrig: This is like a selfless plug, but are you a wine drinker?

Buck Sexton: A little bit. Wine and tequila. I'm actually celiac, so I can't drink beer, and I kinda stay away from the other grain-based spirits.

David "Doc" Eifrig: So I make a Cabernet Sauvignon. I want to thank you for inviting me onto your show, or Porter's show, or whoever's show this is, and send a bottle of my Cab to you. So look for that.

Buck Sexton: That sounds amazing. I'll take it. Miss Molly will drink it, my girlfriend, but I'll take it. Thank you.

David "Doc" Eifrig: Well, then it's for your girlfriend. Perfect.

Porter Stansberry: Yeah. And, by the way, if you had the capital and you could buy a first-growth Bordeaux vineyard, talk about another 100-year asset.

David "Doc" Eifrig: Exactly.

Porter Stansberry: That's a fantastic thing. So what you want to do, Buck, is you want to buy something that's as close to Latour as you can. You want an absolutely irreplaceable asset that's never going away. And Disney World is one of those. McCormick Spice is another one of those. We can argue about it, but I would say Coca-Cola is one of those. You want to buy these hall-of-fame businesses when, for whatever reason, every now and again they go on sale.

Buck Sexton: Can I ask you a quick question, Porter, about this, also? This is, again, kid's table. This is basic. So, for those of you who are experts, you're going to find this boring. But like McCormick you mentioned. I don't know – what's the stock price of McCormick?

Porter Stansberry: It's around $100, $110 today probably.

Buck Sexton: Is it possible that I could invest in McCormick today, in your mind, and the stock could stay at roughly $100 for the next 10 years? because in that case, don't I kind of just sit with what I've got?

Porter Stansberry: No. You're missing a big part of it. And I will tell you: I'll send you a spreadsheet that explains this after the show. So, let's pretend the McCormick Spice, for whatever reason, falls out of favor with investors in the next 10 years, and the stock price doesn't grow at all. Meanwhile, the company, for decades and decades and decades, has been able to increase its earnings, year after year, between 8 and 10%. Every single year. Why? Because they're the dominant provider or spice to restaurants and supermarkets all over the world, and they raise their prices. That is the hallmark of a great business.

Look at the price of access to Disney World: Every year it goes up. The price of a Hershey's chocolate bar: Every year it goes up. The price of Coca-Cola, which is oftentimes more expensive than gasoline [laughs]: every year it's going to go up. And McDonald's cheeseburgers: same thing, right? So even though the stock price may not move, if you're a long-term investor, it shouldn't bother you at all. Why? Because every year they're going to increase their dividend. So for the last 32 years in a row, McCormick has increased its dividend by approximately 8 to 10%.

So if you invest – I'm making up a number just so the math is easy – you invest $1,000, your first year you're going to get an $80 dividend. But by increasing that dividend year after year after year, by 10 years your dividend's going to be $160. And by 25 years, it's going to be $400. And that's the magic of these kinds of businesses. Meanwhile, of course, by the way, the stock price will eventually go higher. But what you're really buying when you buy a company like McCormick or a company like Disney or a company like Coke – what you're really buying is a corporate bond that has an ever-increasing coupon. That is how safe it is. And that's the real magic.

No, look, if you invest routinely, you invest year after year, some years you're going to buy when stocks are really really cheap, and you're going to get great investments. And if you can, invest more that year. Right? And some years you're going to invest at average prices and some year you're probably going to invest when stocks are a little too expensive like they are right now. But the point is: If you're just a routine investor, all that over time is going to average out and it's not going to make any difference, and your returns are going to be great, and you're going to make between – if you do it right, you're going to make between 12 and 14% on your savings over the life of your investments. You can't do any better. And you don't need any help. I swear you don't. You don't have to pay fees to a broker. You don't have to pay fees to a mutual fund. It's not hard to do. Just buy great businesses and you're done.

[Transition music]

So, Buck, let's get to the mailbag. What have we got?

Buck Sexton: Well, we want to thank everybody for writing into us, people like Martin P., Larry B., Kathlyn M., Vaughn M., and Doug G. Your comments and questions are essential, folks. Keeps us motivated and moving here on the Investor Hour. Please write to [email protected] with whatever you think. Just keep it intriguing, my friends.

James K. is up first this week. He writes: "Porter and Buck, I was intrigued to hear you say that cryptos could be the big bubble for this credit cycle. I think you very well could be right about it. But then why hasn't the market in general followed suit with a 50% downturn? One large distinction I can think of vis-à-vis '08 is that the big banks weren't exposed to cryptos in the way they were to the real estate downturn. Assuming you're right, how will the crypto crash propagate to the markets in general? You guys are providing a lot of value to me on a regular basis and I truly appreciate it. James K." And thank you, James, for the nice and insightful note. Porter, you're up.

Porter Stansberry: Very, very quick answer here. I don't expect the crypto crash to lead to a banking crisis. Nothing like that. I expect the crypto crash, which I think is in full swing, to lead to a big increase in what I would call the risk premium in the market, a big increase in the volatility, which we've seen. The VIX spike has already happened. The resulting correction in stocks has largely occurred, a ten-percent decline from the highs. And I still think that the crypto crash will be seen as a precursor to the bear market that I expect.

But I should be clear: I don't expect a 50% crash in stock prices. I mean, it could happen. But my prediction has been that gold will outperform bitcoin this year. And I think that we're going to see a bear market, which is a decline of 20% in stock prices. Now, I don't know if that correction will happen this year. But I do believe that the crypto crash will be seen as a precursor to that bear market. And it's not about banking or links to banking. It's just about investor sentiment and a increase in fear and a decrease in consumer spending.

Buck, next question.

Buck Sexton: We got Willie, number two in the mailbag this week. "Porter, you've been talking about the Toys "R" Us bankruptcy as possibly triggering some stress in the credit markets for years. It seems that has come to pass and it was a non-event to the markets. What other heavily indebted companies should we be focusing on at this point in the credit cycle as the next 'canaries in the coal mine'?"

Porter Stansberry: Well, Willie, I'm going to disagree with you. I don't think it was a non-event. I think you have seen a big increase in yields and a big decrease in bond prices when you look at the lower-rated tranches across the credit spectrum. And as far as what's next, I would refer you to our Big Trade list, the 30. What do we call that list?

Country Club Guy: Dirty?

Porter Stansberry: The Dirty 30, yes, as folks that are just woefully poorly prepared for an increase in credit risk. I mean, look, if you think Toys "R" Us hasn't affected anything, just look at the share price of GE. Trust me: It has definitely woken up credit investors to the risks in this market.

Buck Sexton: Yes. And some of us invested at GE at a very inopportune time and learned an important life lesson.

Porter Stansberry: It wasn't me.

Buck Sexton: [Laughs]. It was definitely not you. All right. Next up here we have Brian who writes, "Hey guys, still loving the show. It's the best once-a-week podcast out there. He's my question. You mentioned during last week's show that the collapse of the corporate bond market is happening a few years later than you had expected. You referenced 2015. I've read that China is ramping up its currency to become a new reserve currency. Do you think that China has helped to keep this bull market running longer than is reasonable to get their house in order so that their takeover of the world will be successful? Thank you for the great show. Paid up subscriber, Brian." And he writes: "P.S.: Does anyone else find it interesting that a guy named Buck is cohosting a financially-oriented show? The Buck clearly starts and stops here every week." I like Brian.

Porter Stansberry: I really think China has absolutely nothing to do with the U.S. corporate bond market. I would point you in another direction, in fact. The Swiss central bank has accumulated, by my last count, $600 billion worth of corporate bonds in the last five years. So if you're looking for why the corporate bond cycle has lasted so much longer than I expected, look no further than the Swiss central bank. But really that's just one of major central banks that have been buying corporate bonds of all stripes.

It's the central banks that have promoted this incredible run in credit, and it has influenced corporate credit to the degree that, in Europe, junk bonds were trading with negative yields. So that is: Investors would buy a lousy company's credit and then have to pay for the privilege of owning it. Just try to wrap your head around that. So things have gone beyond insane in the world of corporate credit, particularly low-quality corporate credit. And sooner or later there will be hell to pay. I wish I could tell you exactly when. I do believe the Toys "R" Us bankruptcy is the first of many where there will be no recovery. And that will not be pleasant for investors or our financial markets.

Doc, any last words before we sign off?

David "Doc" Eifrig: Nope. Thanks for having me, you guys. Appreciate it. And look forward to listening next week and the week after.

Porter Stansberry: Country Club Guy, any parting shots?

Country Club Guy: No. I'll Google "pupil" when I get outta here.

Porter Stansberry: And I know next week we're having Lacy Hunt. Also next week some of us are heading down to the Masters golf tournament in Augusta, Georgia. If you see us walking around there with Stansberry Research hats or gear on, please say hello.

Country Club Guy: Please approach me first and then I'll see if it's OK to talk to Porter.

Porter Stansberry: Please do not look Mr. Stansberry directly in the eye. Please do not ask for his autograph. I'm just teasing. I'm happy to sign something, take a picture with you. Everybody loves taking selfies with me. And I'm like, "You know, I've got a face for radio. How about you let me sign something?" Buck, any spring plans for you? Any trips? Any fun? Or are you just going to have to do the TV circuit again and again and again?

Buck Sexton: Just a lot of TV, man. Lot of TV, lot of radio. That's pretty much what I got. I wish I could say I got something fun coming up.

Country Club Guy: Buck's favorite show is Outnumbered on Fox.

Buck Sexton: That is a true statement. Yeah. Outnumbered. That's right.

Country Club Guy: Is it Outnumbered? Do you know about this, Porter?

Porter Stansberry: Mm-mmm.

Country Club Guy: It's one male surrounded by four females.

Buck Sexton: Yes.

Country Club Guy: And he's on the couch with them.

Buck Sexton: I get to sit in the middle of the couch. It's quite fun. People should check it out.

Country Club Guy: Let that sink in.

Porter Stansberry: Is it your Time's Up moment? Are you being harassed? Anything like that?

Buck Sexton: Oh, no. The ladies are all consummate professionals.

Porter Stansberry: Ah, jeez.

Buck Sexton: Yeah. See –

Porter Stansberry: Maybe you should wear a T-shirt that says, "Harass me."

Buck Sexton: [Laughs]. I'm pretty sure you can't even get away with wearing a "Kiss me, I'm Irish" shirt on St. Patrick's Day anymore. So the world is a changed place.

Porter Stansberry: Jeez. The world's been a little too uptight. All right, Buck, listen, that was a lot of fun. Doc, thank you very much for being the guest and sharing some wisdom with us. I love batting around ideas with you, as always. Guys in the booth, thanks for the good time.

Buck Sexton: All right, everybody. Have a question for us, write to us at [email protected] If we use your question on the show, we'll send some Stansberry Research goodies. Love us or hate us, just don't ignore us. Thanks for listening, everybody. And we look forward to having you with us next time.

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

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