Episodes

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                                    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. Before we get into today's episode, don't forget, Trish Regan is now a part of the Stansberry family. Check out her podcast, American Consequences With Trish Regan. The link will be in the description of this episode.

                                    Today we will talk with Andrew Beer, who will tell us all about the second holy grail of hedge funds. Can't wait to find out what that means. This week in the mailbag, lots of e-mails, too many to read this week, but a few folks wrote in to tell us about the violent coups and insurrections they survived. One listener wrote in about that same topic and says, "My values have been co-opted by Trump cultists." You'll get an earful about all of this in the mailbag. In my opening rant this week, let's just talk briefly about what to do and how to survive the enormous speculative bubble we're in. That and more right now on the Stansberry Investor Hour.

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                                    All right. What do we actually do? I've talked your ear off for much of the past year about how expensive everything is, and lately I've written a couple of Stansberry daily Digests and talked on the program about what a speculative market looks like, all the call-option buying, and the buying of speculative stocks, and garbage zombie companies. And all the crazy speculative stuff people do. The action in Tesla. Even the action in bitcoin, which... I like bitcoin. But man, I told you it trades like a mining stock and it has not disappointed. It's just up and down and up and down like crazy. And I think all of that's going to continue.

And it can continue. That's the first point I want to make today: this can go on for much longer than you ever imagined. That's the first thing to get your head around, OK? Point No. 1. Write this down. This crap can go on for years. There were people – you remember in 1996, Alan Greenspan, the head of the Federal Reserve at that time – in 1996, he used the phrase, "irrational exuberance." 1996. The market peaked in 2000, right? And there were people saying it was a massive bubble in like 1998. Remember we talked about this a little bit too. So you can know that you're in a bubble, and everybody can be saying that you're in a bubble, and the bubble just goes on for another year or two or four or whatever. That's the first thing: this can continue.

So the second thing then becomes: what the heck do we do? And this is a real problem for people who really have lots of experience. Even some of my colleagues at Stansberry – and we had a little internal conference call yesterday, and some of them are like, "Man, this is really tough. I'm having trouble finding good long ideas right now." And I feel their pain because I'm having the same problem. But ultimately somebody did make the point... This can go on for a long time.

And another fellow, Alan Gula, who writes for the Stansberry's  Investment Advisory – he's a very smart guy, and if I had to bet on somebody having the right tone and the right ideas about this, I would bet on Alan because he's been very reasonable and the whole time he said, "This is not quite like 1999. There are some differences and you shouldn't assume that this is all going to crash very soon. You should be a little more reasonable than that." And that's been the right thing right up to this moment. So I've been bearish since 2017 [laughing] and mostly wrong. The market's been really choppy since then. But overall, if you just stayed invested and kept buying on all the dips, that was the right thing to do.

But what do you do? How do you behave? What do you do with real money when you know you're in a bubble, A, and you know that it can go on for years, B? You know you're in a bubble but you know it can go on for years. Well, let's see. If you know you're in a bubble that could go on for years, you could say, "I'm in a bubble,  I'm out, I'm selling on my stocks." Yeah, then you miss like – if you did that in 1996, you missed four years of 20% annual compounding. Or greater if you were in some of the big tech names. And you could've set reasonable trailing stops at like 25 or 30% and it would've been well worth staying in right through the top. You aren't going to call this thing. You aren't going to call this top. Get that through your head.

And what you really need to get through your head is that your job here is not to call the top – it's to make decisions that you will find it easiest to live with, once the bubble and the subsequent bear market have passed, which can take years. That could be 10 years from now, right? So what do you do today? Do you exit and take the pain of missing out on, possibly – if we get another thing like the late '90s and it's four years of just call it 15 to 20% a year? I think only one of those years wasn't quite 20% – it was like 19% or something. Do you do that? Do you stay in? Maybe keep what you have now in stocks, accumulate cash along the way, and wait till the market's down 20 or 30% at some point, buy all the dips? Do you maybe stay in, keep everything you have, buy stocks, but maybe you buy a few puts now and then when you think things are getting really frothy and crazy? That comes closest to what I'm actually doing.

What do you actually do? For most people, most people who have a good, long time horizon – if your time horizon is 10 years or more, you really don't have a reason to change what you're doing. If your strategy is based on being long equities and finding new long equity plays, and managing the risk however you do that with trailing stops and or position sizes and or whatever else you got for managing risk. We assume that you're doing that anyway. So do you change that? For most people, I just don't see it. For the overwhelming number of people who aren't professionals, and even most professionals, I just don't see them being able to really make enough extra money to make it worth the extra effort to try to time or trade around what may be the top of a – even if it's just like 15 or 20% correction, it can hurt.

I don't see it. I don't see the incentive to trade around this for most people. Because the expectation ought to be negative. And I talked about this before, right? I gave the example of Apple. I think it was the November 2017 issue of Extreme Value and we talked about how insane the action was trading around the top in 1998 and 2000. Realistically, you probably lost money whether you were long or short because of the whipsawing action. You know? A hundred percent down, 50% up, 80 down, 40. Just crazy stuff. That's brutal whipsawing action. And if we're right that this is a speculative bubble and that let's say it's got a year and a half to go or something before the top is in, do we have any reason to believe that it won't be really volatile and violent? I don't think so. And that's a nightmare trading environment.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      It can also be a nightmare environment to hold even if you're a long-term person with more than a 10-year time horizon. Because you watch your account falling and falling and falling in value. And it takes a real belief and understanding of what you're doing. You have to say, "I am investing for the long term. I contribute to my 401(k). I don't trade in and out. I have no reason to sell everything and head for the hills," etc. That's one thing I think you might want to take to heart. And obviously this is up to you. I don't know your style. I don't know your tolerance for risk.

But that, along with my recommendation to be truly diversified, right? Keep your stocks and bonds. Hold plenty of cash. Hold gold and silver. Maybe buy a few put options or not. Most people – you're going to lose the money you put into – if you buy put options, you should think, "I'm going to lose this money." Because that's what's most likely to happen. And it's hard. When you get that first – let's say you're right. I was loaded up with puts in September 2018. But I think I was out of the market by like mid-October or late October. I was out of the puts by mid- to late- October. So I missed most of the big drawdown into Christmas Eve of that year.

Because it's hard. It's hard to look at a 10% drawdown or even a 5% and say, "This is going to get worse so I'm going to hold onto this instrument that – it can fall in half if the market's up just a few percent tomorrow. Now that I've got a profit on my puts" – that moment is really difficult. You're not going to get it right. You're not going to make 50 times on your puts. The market would have to fall 40% one day for that to happen for most people. Because that first day they're like, "Oh, I got a profit – what do I do?" It's really hard.

So I think if you maintain your long-term time horizon and truly diversify and don't go crazy trying to think that you can predict or trade around this, I think you're going to come out OK in the end. I'm not saying it isn't going to be difficult. But if you can do those two things, to me, that's the sensible behavior that I can tell a huge audience, right? We're all different. We all have different styles and different risk tolerance, different portfolios, different time horizons. So off-the-shelf advice about this sort of thing is extremely difficult. But if you just keep a cool head about it all and know yourself as an investor and what you're trying to do and stick to your plan, you know, that's the best you can do.

1. That's all I have to say about that. And now let me just do my quote of the week and then we'll talk to Andrew Beer. I think this is going to be really interesting. My quote of the week is just kind of reasonable thinking about what it means to speculate and time purchase of securities by that most reasonable of folks, Benjamin Graham. It's from page 15 of the 1940 edition of Security Analysis, which is a giant – I think that edition might be like 900 or 1,100 pages or something crazy. It's doorstop material for sure. But there's a lot of really good stuff in it that is essentially timeless. And I think this quote is a good one.

He says, "Yet we cannot avoid the conclusion that the most generally accepted principle of timing – that purchases should be made only after an upswing has definitely announced itself – is basically opposed to the essential nature of investment. Traditionally the investor has been the man with patience and the courage of his convictions who would buy when the harried or disheartened speculator was selling. If the investor is now to hold back until the market itself encourages him, how will he distinguish himself from the speculator, and wherein will he deserve any better than the ordinary speculator’s fate?"

Right? So just generally speaking, be an investor. And I think that's good advice for how to handle yourself during a bubble. Be an investor. Look for good values. Look for great businesses that aren't necessarily dirt cheap, but that's not really what value investing is about. It's about finding great businesses that aren't priced for crazy losses. Just reasonable prices, great businesses. And if you continue with that, if that's your strategy and you continue with that and don't get caught up in the speculative froth, there's no reason why it shouldn't continue to work over the long term. If you behave like a speculator, how can you deserve any better than the ordinary speculator's fate? I think that's a great question that Ben Graham asked in 1940. And it's a great question to ask in 2021 too.

All right. Let's do it. Let's talk with Andrew Beer.

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Our guest today is Andrew Beer. Andrew Beer is a managing member of Dynamic Beta, an iM Global Partner firm. And he joined the hedge-fund industry in 1994 as a portfolio manager at Baupost for the legendary Seth Klarman. He later started hedge funds in commodities and the greater China region. Since 2007, his singular focus has been on the second holy grail of hedge funds. And that second holy grail is how to outperform hedge funds with shallower drawdowns, low fees, and daily liquidity. That sounds like a tall order. I can't wait to talk about that. His areas of expertise concentrate on the future of hedge funds and how the hedge-fund model can be improved from liquidity, access, and cost perspectives. Well, that'd be cool for a lot of people. Welcome to the program, Andrew. 

Andrew Beer:              Thank you very much. It's a pleasure to be here.

Dan Ferris:                 So I'm curious – I always have to start by asking folks in your business: how old were you when you bought your first stock and when you really realized that this was career direction?

Andrew Beer:              You know, it's interesting. I ended up in the hedge-fund industry in a very, I don't know if I would say roundabout way, but almost an accidental way. My expectation when I was – I started as an M&A banker in the early 1990s and then I worked for a very well-known guy in the LBO business when I was at business school. And I fully expected to go into the LBO business back then in the 1990s. And it was really just a chance meeting with Seth Klarman. He was hiring for the first time. I'd been told by some of my Harvard Business School professors that he was absolutely brilliant and did really interesting creative things. And that's really how I ended up in the hedge-fund industry.

                                    On a personal front, I do no stock trading. I don't evaluate companies anymore. Rather, I just focus on what we do as a core business, which is try to replicate hedge funds in a low-cost way.

Dan Ferris:                 Oh, that sounds really cool. But I'm curious if we can really drill down and kind of make it more concrete. What do you mean, replicate hedge funds in a low-cost way? What does that mean?

Andrew Beer:              Yeah. There's a lot of confusion around it. And I ended up starting this in 2007. And I'm not an academic by background. I almost went into academia. But the head of the doctoral program at the business school that I was at actually convinced me not to go into the doctoral program. He said I'd have more fun in business.

                                    But basically back around 2007, people realized that, as much as people talk about the magic of hedge funds, what really drives hedge-fund performance over time is what their asset allocation looks like. So, as much as a hedge fund likes to talk about owning a particular stock, if that stock is 5% of their portfolio, it doesn't have an enormous impact on P&L relative to, for instance, if they owned value stocks in 2000 versus tech stocks. Or if they owned emerging market stocks in the mid-2000s or quality stocks in the early 2010s, or tech stocks later.

                                    So the real kind of genius of the people who originally did this research was to find a way of not just understanding that these asset allocation decisions were really what drove performance but find a way to figure it out today and then turn it into an invested product, and that's when I got very interested in the business.

Dan Ferris:                 OK. And specifically this idea of the second holy grail of hedge funds – you're talking about three things here: shallower drawdowns, low fees, and daily liquidity. In reverse order, daily liquidity – boy, that'd be awfully different from hedge funds. What's normal hedge-fund liquidity these days? Like quarterly?

Andrew Beer:              So, most hedge funds – there are some hedge funds that're monthly. Some are quarterly. Some of the bigger and more popular funds have pushed it out much farther so it takes you two or three years to get your money back. I think one thing that – when you're investing in a hedge fund, you're investing in a vehicle, in an entity. And hedge fund is really just a term for the fact that you have very smart, talented investors who are investing not in a mutual fund, and so it gives them a lot more flexibility in terms of what they do. And it turns out that's very powerful. If you have a very smart guy who sees opportunities in a different area, they can move and pivot and shift into those areas – they're not subject to the typical bucketing that you might see for traditional asset manager. But the thing is though: when you invest in a fund to get exposure to these guys, the fund itself has restrictions on when you can get your money back.

What we decided to do was basically say, "Well, if we know that" – just to use an analogy, if you knew the 10 stocks that a particular hedge fund was invested in, you can buy those stocks directly. And if you buy them directly, you can get daily liquidity. It's not exactly what we do but it's a good analogy. And so the whole key of getting daily liquidity around hedge-fund strategy is actually not to invest in hedge funds but to replicate or copy what they do. And so all of our strategies are basically not investing in hedge funds but figuring out what they're doing and then investing it in low-cost liquid instruments so our clients can have daily liquidity.

Dan Ferris:                 Right. So I wouldn't expect you're investing in hedge funds if low fees is part of the holy grail. But you mentioned if you find a really talented person – talented people cost money. Is the emphasis away from security selection and towards asset allocation? Or that cost less? What costs less? How do you do that? How do you get a hedge fund-type performance with a lower fee?

Andrew Beer:              So, we cost less because we charge less. So, for instance, we manage these two ETFs. And one replicates 40 of the largest equity long-short hedge funds. Last year those guys collectively earned between 500 and 600 basis points. We charge 85 basis points. If John Vogel had set out to revolutionize the hedge-fund industry, he wouldn't've been talking about 75 or 100 basis points of mutual fund fees. He would've been talking about 500 basis points. So our whole idea is that if you can replicate the vast majority of what hedge funds do but charge a lot less, you tend to outperform over time.

                                    And I think the third point you mentioned was this idea of shallower drawdowns. And this is something that actually I wasn't aware of when I started in this business. But a lot of people who are invested in hedge funds have these frustrating experiences where a fund is just kind of going along at 5% per annum and all of a sudden it's down 20% and nobody really knows why. And that really – with actual hedge funds it comes down to two different things. The first is that if a lot of hedge funds own a particular stock and things start to go badly and everyone's rushing for the exit, those stocks tend to go down more than people would expect. And the other, as we learned in 2008, is if that hedge fund also owns things that are illiquid – privately traded bonds – and there's a liquidity crisis, those assets don't get marked down from par to 80 – they get marked down from par to 40.

                                    And so what we found was that actually, just investing in liquid futures contracts, we have a huge advantage during down markets. Because as liquidity is drying up in a lot of areas of the markets, it tends to flow into the futures markets. So even in last March when a lot of markets were freezing up, the things that we trade actually had trading volume doubled and sometimes tripled relative to the floor.

                                    So if I can touch on – maybe help explain what I mean by the second holy grail of hedge funds. Can I just address that for a second?

Dan Ferris:                 Oh, absolutely, yes. Please.

Andrew Beer:              So, back in 2007, when I started doing this, people would say, "What's the holy grail of hedge-fund investing?" I started working for Seth Klarman, who is a legend, in 1994. But he had started at Baupost in 1982. And so if you'd been invested with him from 1982 to 1994, you would've done extraordinarily well. And the same is true for most of the legends out there. So, Paul Tudor Jones and Louis Bacon and Bruce Kovner and George Soros and Julian Robertson. The problem is that nobody has found a good way to find those guys before they get big. So instead what you have people are saying: "Here's a guy who did extraordinarily well over the past decade or two," and they give him money when he already has $20 billion in assets.

                                    And if you've been in the business for a long time you know that managing $20 billion is very different than managing the $100 or $200 or $300 billion that they had when they were putting up spectacular numbers. So they used to say the holy grail of hedge-fund investing was: could you find these guys when they were young before they took off and then just ride their success? So if you've invested with Warren Buffett in the 1960s and just carried it through to Berkshire Hathaway, you would be at least a centimillionaire but probably a billionaire today. So people are still working on that one.

                                    But the second holy grail of hedge funds was basically – was more of the view of an asset allocator: that we want hedge funds in our portfolio because they dampen volatility. They can improve returns, particularly in bad market conditions. But investing in hedge funds, for some of the reasons that we describe, generally sucks. They are illiquid. You have very high minimums. The fees are egregious and generally consume about 80% of the alpha that they generate. And you take all that together... is there a way that you can get those diversification benefits but in a client-friendly package? And so that's what I've focused on now for nearly 14 years.

Dan Ferris:                 Certainly a worthy quest. I'm curious though about this idea of replicating these portfolios. I mean, you don't just call these people up and ask them what they're buying, do you? They're not exactly eager to share their secrets with the whole world. How do you get the conviction that you are indeed replicating someone's portfolio?

Andrew Beer:              It's a great question and it's one that people struggle with. So let me start with the easier of the examples of what we do. So there is a hedge-fund strategy called managed futures. And managed future strategies area basically model-driven strategies where if you walk into an office of a hedge fund that does this you'll see a bunch of guys sitting around with computers who are running models that will try to tell them whether: if gold has been going up, is it likely to keep going up? Is the 10-year Treasury yield going to keep rising, and if so by how much?

                                    And so it turns out the way those guys make money over time is largely by capitalizing on these trends. And they do so through futures contracts. So in the ETF that we manage, the way that we determine how those guys are invested today is by looking at the very recent history of a leading hedge fund index that covers them. And that index has daily data. And so we can statistically analyze the daily data – and this is where statistical models can be very powerful. We can statistically analyze the recent history of that index and get a very clear picture as to: are they long or short gold and by how much? Are they long or short the euro versus the dollar and by how much. So, in a sense, we don't need them to give us the data. We can simply infer it from how their fund has been doing.

                                    And it gets a little more complicated when you move into, for instance, equity long short, where we also manage an ETF. Because in equity long-short, they are buying individual stocks. But we're doing the same thing – we're using the historical data on hedge funds to deduce: are they long or short emerging markets versus the U.S.? Are they overweight small caps versus large caps? How are these changing? What does their overall equity weight look like?

                                    And so we're not trying to capture – in equity long short, we're not trying to capture 100% of what we do. But rather we think that those asset allocation decisions will explain 90% of what they do over time. And with hedge funds, because fees are high, if they make $10, you might end up with $5 or $6. And so if we can replicate $9 and charge less, we tend to do better over time.

Dan Ferris:                 So you guys sound like very sophisticated poker players almost. You're trying to figure out what's in everybody else's hand and you want to hold 90% of that over time. That's what it sounds like to me.

Andrew Beer:              It is. In a sense, we're a strange animal because in some ways imitation is the greatest form of flattery. But we also believe that you can pay too much for a great house or a great car. And a lot of what we've written on in hedge funds – hedge funds, for all the criticisms of hedge funds in the 2010s, they didn't really have an alpha generation problem – they had a fee problem. The alpha was there. But it was pensioners and pension funds investing with hedge funds were billionaires were getting much richer earning 3% a year. And so there is something within the industry that's very upside down. And the hedge-fund fee structure has been very much of a heads-you-win, tails-I-lose proposition for a lot of investors. And so we've really spent a lot of time trying to figure out how we can help to change that.

Dan Ferris:                 And, in fact, Andrew, the term hedge fund, if you go back to what's his name – A.J. Winslow, is that his name?

Andrew Beer:              Alfred Winslow Jones, yeah.

Dan Ferris:                 Alfred Winslow Jones, yeah, there you go. If you go back to that, the word hedge meant something. But nowadays, and maybe even since the '90s, it's like it's a fee structure. It's this fee structure, two in 20, and if you're renaissance, five in 50 or something, pasted on top of whatever they're doing: long only or managed futures or whatever it is. And it sounds like you're just kind of calling bullshit on that and stripping it out.

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Andrew Beer:              [Laughs]. There are a number of people who said if my car breaks down in Greenwich, Connecticut, lock the doors and call hostage rescue.

Dan Ferris:                 [Laughs].

Andrew Beer:              No. It's interesting. If you look at one of our – the most fascinating thing about what we do is that, since the great financial crisis, there have been hundreds and hundreds of products that have sought to take hedge fund strategies and package them into mutual funds, and in very rare cases into ETFs. And those products in general have done quite poorly. In our view they did predictably poorly because a lot of hedge-fund strategies simply don't work well in a mutual fund.

And so what you generally have is an area that's performed poorly but because most of the products are offered by firms that have extensive marketing forces, they might have three of four different products of which three have done poorly and one has done well. And their marketing guys will spend all of their time trying to sell that product, and as the Rumpelstiltskin, spinning straw into gold. And then invariably assets go into it and then performance suffers.

So the irony of what we do is that it's the one strategy we've been able to identify that actually does what it's supposed to do. It gives you the diversification benefits of hedge funds. And because we cut out all these fees and expenses, we actually do better. I've been writing something recently about this whole idea of reducing hedge-fund fees. If you reduce hedge-fund fees, as a lot of alternative mutual funds have done, but then you do worse than the hedge funds that you were trying to get exposure to in the first place, sort of what's the point?

But interestingly, even though we have a product that has worked better than anything else in the space, it's something that allocators have had a very, very, very hard time getting comfortable with. And it's because a lot of them view it as almost an extinction-level event. If you do this, if you embrace this, then it calls into question all of the activity around reallocating to hedge funds and selecting this hedge fund and picking that hedge fund. And so in that way people have said that it's almost like bringing index funds to the active management industry just in terms of the level of intense resistance we faced.

Dan Ferris:                 I'm fascinated by this. I really am. The whole idea of replication and lowering the fees and daily liquidity. Like with daily liquidity, for example, one of the things that I hear from people in the hedge-fund business is, "Well, you can only get your money out once a year" – whatever it is, some infrequent time. "You can only get your money out once a year because we really want permanent capital and it'll screw up our strategy if we're constantly having to pay out cash to our investors." And it makes me wonder: well, do you cross that divide by using futures, and it's so much more liquid that it doesn't matter? Is that part of it? How do you square that?

Andrew Beer:              So, that is a nonsensical statement by most hedge funds. I mean, hedge funds want permanent capital because they don't want people to pull capital when they're going through a bad period. And the allocation process in the hedge-fund industry is very broken. Let me take a step back. So, when an institution wants exposure to hedge funds and they hire a consulting firm or someone else to help them to make that allocation, the problem with hedge funds is that there is no S&P 500. There's no way of getting broad exposure. And with the S&P 500 where you have an investable low-cost index, you can make a decision: do I want to go with a guy who – I believe that he's picking the right value stocks? Or do I want to go with this guy who has more of a tech focus? Or do I just want to put it into the index? So the benchmark is investable.

                                    In hedge funds, there has never been an investable benchmark. You can't just buy hedge funds tomorrow. If you wanted to do that, you would have to take $100 billion and then give money to 500 different funds to get very broad-based exposure to the industry. So a lot of the hedge-fund industry in the allocation process is self-referential. Which means that they don't really have an investable benchmark because all they're really doing is comparing themselves to their peers. I think that needs to change. And I think one of the things that our products do is they create an investable low-cost alternative.

                                    So in terms of hedge funds and their liquidity, usually it's driven by supply and demand. And one of the mistakes that allocators repeatedly make in this business is they look at a fund who's done well – so I'll give you just a concrete example. The average equity long-short fund last year was up 17.5%. And so allocators look at that and say – and I agree with this – that this was a huge year for equity long-short hedge funds. They delivered nearly as much as the S&P 500 but with about half the risk. And if you run the numbers, it's about 450 basis points of alpha. I look at that and say, "But they didn't make 17.5. They made 24. They made 24 and you paid 6.5 in fees to get 17.5." So, in fact, was it worth it for you to make that – in other words, on a net-of-fee basis it may have been fine. But you could've done much better if you had had a better way of thinking about those fees.

                                    And so, incidentally, the ETF that we manage was up 23.4%. Because we captured everything that they were doing before fees – we just charged one-sixth of what they charged. And so 500 basis points of more alpha went back to clients. And, by the way, these guys picked – they caught the value rotation early, which is what we also saw in our portfolios. And that's part of what makes it fascinating running these portfolios: you get this very clear lens into how hedge funds are viewing the world. And so for years and years we had seen hedge funds have much more of a growth bias. It was originally a quality stock bias, then it kind of pivoted to a growth bias. But mid-last year we started seeing them pivoting back into value. And so by the time the value rotation hit in the fall, our portfolios were actually positioned for it so we did well with a tech bias earlier in the year and then well with a value rotation later. Fascinating.

Dan Ferris:                 That is really cool. You were talking about if your car broke down in Greenwich you would lock the doors and call 9-1-1, hostage rescue. Have you had conversations with these folks that you're replicating and had them kind of badmouth you and say, "What the hell are you doing?"

Andrew Beer:              So, what's interesting is actual hedge-fund managers – so I'm not a quant by background. I was actually a history major undergrad and I've always been a fundamental value guy. I spend a lot of time thinking about industry trends and so on and so forth. But I work with really good quants. When I was doing due diligence on this space back in 2007 – 2006, 2007 – I did what you would expect a fundamental investor to do, which is I went and I talked to a lot of hedge funds. It's very strange. For guys like you who I understand are kind of deep value guys, I don't know – I'd be sort of curious to get your reaction, but my sense is that quants who talk about things like the value factor don't spend a lot of time talking to people who actually pick stocks.

And so what I did back then was I basically went to a lot of hedge funds and said, "Hey, if I could kind of roughly figure out what your asset allocation is today using these kinds of models, how close would that come to your actual performance?" And one of the firms I went to was Baupost. And there was a friend of mine who was the head of risk at Baupost, and he – Baupost of all places, and he said, "Completely." He said, "I completely agree with that." Because he said, "Now, the markets that we invest in might be more esoteric than the markets that – so maybe we're not invested in through EM. Maybe we've got some more esoteric markets. But unless we have a five, 10, 20% allocation to a particular area, it's not really going to move the needle."

And he said, "We may spend our lives focused on what's going on in the footnotes of individual investment opportunities. But when you look at how we did at the end of the year, it's going to be driven by what're ultimately asset allocation decisions." So the idea that great security selection leads to alpha-generating factor tilts.

So hedge funds, themselves in general, I think agree with this. And I think they've always been comfortable with this idea. The people who have a big problem with it are professional allocators. Because – particularly fund-to-funds back in the 2007, '08, '09 period. Because they had told their investors that hedge funds did something different, that you needed to hire a fund-to-funds to help you find hedge funds who were doing all of these things that were so complicated and esoteric that you could never possibly find a way to invest in it in a lower-cost or more liquid way – therefore you needed them.

And so when we walked in – I mean, originally I thought they would be the buyers of this product because we all knew they had this massive asset liability problem, and ended up being really precipitating the demise of the business. But they were terrified when I walked in. Because they didn't want something in low cost and liquid because if it did better than their high-cost portfolios they were in trouble, and if it did worse for whatever reason the answer to the question would be, "Why did you do it in the first place?" So, yeah, no, we've had a very hard time in adoption but it's usually the guys who're allocating capital, not the guys who are managing it.

Dan Ferris:                 Interesting. How about that? I feel like you've given us a pretty good education here about what you're doing and why. And you've referred to your individual products a couple of times here. But let's just make it clear for the listener, if you wouldn't mind. What are your products? It sounds to me like you're running ETFs and mutual funds or something? Normal retail investors can access this stuff.

Andrew Beer:              Right. You mentioned in the beginning that we're an affiliate of a European institutional investor called iM Global Partner. They bought a stake in us in 2018. And they had spent about two years looking at the liquid alts world, and the CEO ended up reaching out to me and said basically, "You're the only liquid alts manager we found who's actually outperformed real live hedge funds. But on the other hand, you guys are working with a handful of clients and we think we have a way of taking what you do out to the other 99% of the investor community." So they built an ETF strategy.

And in 2019 they launched two ETFs around two of our strategies. The first is called DBMF and it replicates the pre-fee returns of 20 leading managed futures hedge funds. And then in December of 2019 they launched an equity hedge product called DBEH where we seek to replicate the pre-fee returns of 40 leading, equity long-short managers across value, growth, sector specialists, geographic specialists, et cetera.

So the vision for DBMF and DBEH is that if you're managing a client portfolio and you're looking out over the next 10 years and you have people like JPMorgan saying that hedge funds are going to be an essential component of managing portfolios the next 10 years but you don't have the ability to invest with 10 large hedge funds, the ETFs are really designed to allow you to put 5% in each and gave you exposure to strategies that you otherwise couldn't get.

Dan Ferris:                 I see. And these look – just looking up the tickers, DBMF and DBEH, net assets are, what, $36 million in DBMF and maybe $18 million in DBEH? So they're pretty small at this point.

Andrew Beer:              They're very small.

Dan Ferris:                 And the volumes are kind of low.

Andrew Beer:              Yeah. So they're very small. There's a big education process. So the current investors in the ETFs are predominantly family offices who use this as part of their portfolio. But now what we've been doing over the course of the past year is doing an extensive education effort with advisors. And now we're actually starting to see traction and interest pick up. So I think when you look back at these in two, three, or four years, obviously I think they'll be much bigger but I think you'll see people using them as just the easy default allocation in their portfolios as opposed to investing with a particular fund that did well last year but _____ _____ this year.

Dan Ferris:                 Yeah. I mean, I certainly wish you all the luck in the world with it. I think it's a really noble thing you're doing. I don't think there's much more to say. I mean, these things trade publicly. Anybody listening can just go in and buy them in their brokerage accounts. And I noticed they have the expense ratios listed. I'm just looking at a quote on Yahoo. I don't know if those numbers are good.

Andrew Beer:              Yeah. So, the expense ratio on each is 85 basis points. And the idea there really is that if these strategies can deliver 500 or 600 basis points of alpha before fees, over the next 10 years we want 80% of that to go back to clients.

Dan Ferris:                 Awesome.

Andrew Beer:              In hedge funds it's about 20% goes back.

Dan Ferris:                 Wow. 80/20 in both directions. Wow. I don't think I knew that. That is amazing. No wonder those guys are all billionaires.

Andrew Beer:              [Laughs].

Dan Ferris:                 So, Andrew, you're never going to get rich doing this, are you?

Andrew Beer:              We need to scale it. So my whole theory is, the whole liquid alt space is littered with failed products. And so investors who were early adopters really struggled. Because the whole space has done 2% per annum, one to two per annum after 200 basis points in fees. I mean, it's just been a lousy investor experience, particularly when passive investments have done as well as they have. But I think what's interesting is now when you look at where we are today, it feels a lot like 2000. It doesn't feel like 2010. I know you guys are value guys so you're probably looking back at the price-to-cash-flow multiples that you would've seen on some stocks back in 2009 and early 2010 and then comparing it to where you are today and say obviously we're at the end of an extreme bull run for a decade.

                                    And so I think as people are looking and saying a 60/40 portfolio, traditional, S&P, Barclays... 60/40 portfolio could be in a lot of trouble over the next 10 years. And we could see another lost decade. And unlike the 2000s, you could see it on both sides of your portfolio. So I think it's driving interest in different strategies. And there was a guy who had a great quote that I've been shamelessly repeating in which he basically said the 2010s were about asset classes and the 2020s are about strategies. And I think that's a message that is really starting to get disseminated.

Dan Ferris:                 Yeah. I think the timing for your message seems pretty good right now with the success of just kind of passive in general, and a lot of the appeal of that being much lower fees. And here you are saying you're going to be the Vanguard of the hedge-fund industry. I guess just like with Vanguard, everybody will hate you except for the clients [laughs]. And hopefully you'll grow the way they did.

Andrew Beer:              Until they love you. Until they find a way to use it. And I think the interesting thing to me is if you'd asked me 10 years ago I would've said, "Oh, why wouldn't every institutional investor use this? You've got a pension fund that does a quarterly rebalancing and wants to add $20 million to its hedge-fund portfolio. This is a way to do it." But there has just been incredible resistance from people who are hedge-fund allocators because it's an incredibly threatening prospect to have a sub-100-basis-point product that does better than high-cost products.

                                    And there are a lot of reasons for that which are kind of beyond the scope of this. But again, I started as a student of history and the winds of change I think are clearly in our direction. But boy, it can move slowly.

Dan Ferris:                 Right. Well, I'm fascinated by this, Andrew, and I definitely hope that we can talk with you again in a year or five years' time, or whenever it seems like the right moment to come back and tell us how you been doing. But I do have one more question for you, though, and it's my – I usually start out with the same first question and I always end up with the same last question for every guest, and that is this: if you could leave our listener today with just one thought, what would it be?

Andrew Beer:              Value's back.

Dan Ferris:                 Value's back. All right. A man after my own heart. I like that.

Andrew Beer:              And I'll tell you what happened last year is that about mid-year we started to see hedge funds – hedge funds did two things last year. They got more bullish about equities overall. So they raised equity risk. But they weren't adding it back to Google and Microsoft and Facebook. They started to add it to EM and small caps, and to a lesser extent international developed equities.

                                    So in our world, if you think about it as a Venn diagram, those are much more value-focused markets – there's certainly a lot more value opportunities in those markets. And that we think was a very big deal. Because for years and years hedge funds had stayed away from those markets, and to us it was a big endorsement. Because hedge funds are like swing voters. They don't have to do it. And so if a guy who's been talking – a quant who's been telling about the value factors, about the bounce back for five years, he doesn't have the same credibility... a guy who steps up with fresh capital. So I think it's going to be great for you guys as well.

Dan Ferris:                 It would be most welcome after the decade I've had.

Andrew Beer:              [Laughs]. A long winter [laughs].

Dan Ferris:                 Yeah. I'm ready for spring. All right, Andrew. Thanks a lot, man. Thanks for being here. I've really enjoyed this. And I know our listener will too.

Andrew Beer:              It was great. Thank you so much for having me. And have a terrific day.

Dan Ferris:                 That was really cool. I've never heard of these funds, and I only just learned of Andrew within the past couple weeks. And I thought we were going to talk more about Seth Klarman but what he's doing is so interesting, I didn't even want to go there. This is really cool. And the fact that he has these two products that anyone can buy and they're getting these hedge fund-type returns with charging 85 basis points is really cool. I hope these guys succeed. Anybody who takes a look at the financial industry and wants to pull some of these egregious costs out of it to real investors, man, they've got my support all day long. Good stuff.

                                    All right. Let's take a look at the mailbag.

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                                    You know how I'm always saying that I don't want this show to be too political? Because, after all, it's a finance show. And some politics is appropriate but it can get too much real quick, right? Well, maybe you're interested in politics. Maybe you're interested in American and global economics and politics. If so, you're probably going to be pretty excited to know that Trish Regan, the famous finance and political journalist, is now part of the Stansberry team. And Trish Regan has a brand-new podcast. It's called American Consequences.

You can find it anywhere that you listen to podcasts: iTunes, Google Play, anywhere. Or you can just go straight to americanconsequencespodcast.com. And she's already had some huge names on the show like billionaire businessman John Catsimatidis and former U.S. Senate candidate Tom Del Beccaro. So check it out. It's available anywhere you listen to podcasts, or just go to americanconsequencespodcast.com.

[Music plays]

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.

1. Lots of good stuff today. First we're going to start with Michael O., and he says, "In an effort to always maintain intellectual integrity, one of the tasks I have set myself this semester while I am on sabbatical is to read up on MMT" – that is modern monetary theory" – and to try to understand the theory. Right now I am reading Stephanie Kelton's book, The Deficit Myth. I am honestly trying to read with an open mind but I am only a few chapters in and so far I keep thinking this must be satire. Keep up the great work on the show. I enjoy every episode. Michael O."

That's interesting, Michael. I want to hear what you think of that book. It was recommended to me I guess early last year by one of our former guests, Mark Dow, the macro investor who we really enjoyed having on the program. And I just haven't gotten to it yet. So I'm curious to hear what you think.

Next comes Tom S. And Tom S. says, "While I don't always agree with your libertarian opinions, I must say that your guest lineup includes some of the most interesting and brainiest people around. Your most recent episode which featured Mr. Mangan hit one out of the park. I had to give this too-short interview a more intense second listening, pausing and taking notes. I have much experience with virtually everything covered in Mr. Mangan's interview. I have put much effort in dealing with weight, control, and exercise over several decades. And I have found what works for me. I was also out of shape back in my 20s but am more fit now at age 66. I do about 25 weekly miles of mountain hiking year round, and can lift items that are nearly my own weight. Tom S."

And Tom includes an awesome picture of where he's hiking in the mountains. It's gorgeous. I just wanted to put that out there because if you haven't listened to last week's episode with P.D. Mangan, it's all about health, about exercise and diet, and he's got some radical simple ideas that I think are really great. And a lot of folks wrote in about them.

And we talked about stretching a little bit during the P.D. Mangan interview, and our next correspondent is Dr. Elliot D. He's a DPT. I guess that's a doctor of physical therapy. And he says, "Hey, Dan, love the show. I'm not a great investor but I am an expert on the human body. I have some input on the stretching portion of last week's show. Muscles don't stretch, at least no easier than you can make your steak three inches longer. You're made of raw meat and that's it. The only way to make a muscle longer in total length is to impart a strong enough force that over time your body makes more tissue. This can happen with repeated demand over time and much intensity, often years.

"That being said, you noted benefitting from stretching. That's good. Just note you're likely benefitting from deregulating your nervous system. Next time you go through your movements, think about electric current dropping to your muscles as your brain settles in on your task of movement rather than bungy cords being pulled. Thanks, Dr. Elliot D." Well, thank you Dr. Elliot. I appreciate that clarification on what's happening in the human body with stretching.

1. I've got one more comment about the health episode that we did last week with P.D. Mangan, and then we've got some stuff about gold, and then we're going to get into it about what I said about the assault on the Capitol not being a coup or an insurrection, including the definition of coup and insurrection which apparently I got wrong. So let's just do these couple and then we'll get into all that coup stuff.

First one is from Lodewijk H., and he says, "Hi, Dan, I must admit I'm a bit disappointed. Health? This is money investing show. You need to do an interview with George Soros. Skip politics. Talk money and investing. He's a legend. Lodewijk H." I hear you, man. We talk about a lot of stuff. And I was just so compelled by P.D. Mangan's story that I had to get it on. And a lot of people liked it. You were the only one who didn't like it. So I think overall it was a success. But I hear you. This is an investing show. I get it.

Next comes Hank C., and he says, "As an avid listener to the Investor Hour, I agree with your guidance for asset allocation in these troubled times. To wit, maintain a significant cash reserve and a significant investment in gold. But I have perhaps two dumb questions. One, what is cash? Two, what is gold? I used to think cash was my investment in money market funds. I recall when money markets yielded above 10%. But today money market funds are yielding essentially nothing. Consequently I've begun to think of ultra-short-duration bond funds as cash. They have yielded more than 2% over the last year and currently have a 30-day SEC yield of 0.5% – current duration 0.9 years – current 30-day SEC yield 0.5%. These days my cash is still earning something.

"I used to think that gold was a mix of physical metal and gold ETFs but in the last year or so I've come to think that the medium-to-long-term prospects of gold and silver are so good that leverage, that is stocks of major producers like Barrick and Newmont, along with junior miners like the ones recommended at Stansberry, should be added to what I consider gold. So do you think my new definitions of cash and gold are consistent with your approach to asset allocation? Or do you consider my redefinition too risky for most of your listeners? Thank you so much, and keep up the good work of your podcast. Sincerely, Hank C."

I'll go in reverse order, Hank, with your question. Yeah, I think you have to acknowledge the higher risk in gold miners versus holding the metal itself. And they're both going to be volatile, right? I mean, during our lifetime, gold is like $35 to $850 back to $250, as high as $2,000. So it's volatile. But I think over time it has proven a good store of value overall. Acknowledging that volatility and that it moves in cycles, right? Timing means something with gold. But yeah, the leverage in those gold stocks is really cool. But I won't call it gold. Those are gold equities. They're not gold. So you and I kind of differ there.

As far as cash, with the ultra-short-duration bond funds, we said it was appropriate to put part of your cash reserve into such a vehicle. But yeah, short-term 30-day Treasurys or something like that – how bad are you going to get hurt? Probably not too bad.

Next comes James S. Now we're getting into all the stuff about coups and insurrections. And I said, "Hey, if you've ever lived through one, write in." And a bunch of people wrote in who have lived through these things. So I couldn't do them all but I did a few. James S. says, "During my Naval service, I commanded the U.S. South Atlantic force and circumnavigated the South American continent twice, working with the navies of South America. This was shortly after the Chilean military had ousted the socialist president and took control of the government under the junta of several military chiefs led by General Pinochet. A coup, or golpe, in Spanish, was successfully executed by mobilizing the armed forces, storming the principal radio and TV stations in the Capitol  and major cities, and simultaneously wresting control of the executive branch of the government, including arresting the president and other senior government executives.

"The military chiefs had to first ensure the loyalty of the military rank and file, followed by careful planning and timely action. In no way did those who crashed the capitol building show the basics of a coup or insurrection, terms obviously used to escalate the seriousness of the situation." That was my point. I agree. I think the terms coup and insurrection were used by the media just to get eyeballs on their stories.

Next comes Sean C. He says, "Hi, Dan. I grew up in the third world, 20 years, and experienced/lived through six revolutions/insurrections, three in Bolivia, one in Ceylon, two in Nigeria." Whoa. I'd say you have experience with this. He continues, "What happened at the Capitol was a farcical example of an unruly mob just looking for a selfie shot. Yet listening to CNN's Cuomo and Lemon – Don Lemon – sorry excuses for journalists, screeching insurrection, made me just shake my head. America is in desperate need for a third middle-of-the-road party. Love your work. Cheers, Sean C."

Next comes Mary W. B. And she says, "Hello, Dan. I've been a weekly listener for nine months or so and am a Stansberry subscriber. I thoroughly enjoy your podcast. It's high quality and objective thinking. You have opened my mind to many new ideas and people. I found myself in the middle of a coup d'état in June 1980 in La Paz, Bolivia. I traveled around South America and arrived in La Paz in time to see their Independence Day parade, including a strong military presence of equipment and personnel.

The next day, after a long walk, I approached the plaza in front of the presidential palace and noticed the empty and quiet square with men grouped together on some street corners. As I stepped into the plaza, a car sped by firing a stream of bullets around the plaza. I ran toward the palace but was suddenly facing a rifle pointed at me by a uniformed man shouting, "No pasé." I rapidly changed the route to my hotel. We were under 24-hour curfew for three days and nights enforced by the military who had captured the palace to remove the president and her cohorts before the incoming president could take office. All day and night gunfire filled the hours. Looking out the hotel's front windows we saw the local police staring back from inside their police station windows. They were included in the curfew."

And she describes a few more details. But definitely different than what took place at the Capitol. Then we have one from Cory S. Cory, you had a nice long thoughtful e-mail. I can't read it all. He says, "Hello. First-time listener and new lifetime Stansberry Research member. Very happy for the financial progress I have made with the recommendations. I'm a disabled Desert Storm war veteran who just happened to have survived the coup d'état attempt in Manila, Philippines while serving in the Air Force at Clark Air Base in 1989. I was performing a combat communications training exercise in the heart of Manila.

"There are a few main differences between what happened in DC compared to what happened in the Philippine coup d'état. First of all, there were no grenade-bearing militants and assault rifles. In the Philippine coup there were lots and lots of explosions and AK-47s spouting off all around us. Second, there were no aircraft involved. In the Philippine coup, there were World War II Tora Tora planes dropping bombs at the Manila capital building. Third, neither the Marines nor National Guard got involved immediately. In a true coup d'état, the Marines would've arrived in helicopters and dropped out in sequence as they surrounded the White House, fully armed, aiming outward and ready to kill anyone who approached.

"Fourth, during the coup the entire nation was gripped with fear. In America, we watched it on TV with a cup of coffee in our hand making fun of them and having no fear of government upheaval. So, from my personal experience, what happened at the White House was nothing like a real coup." But then he says, "P.S., on a completely different topic, what technology do you think will ultimately win the automotive race? Electric or hydrogen? Or will it be a hybrid of the two? I'm looking to invest in Nikola because I strongly believe hydrogen will be more widely accepted since it's just like gas: pump and go. I'm thinking the full-scale conversion will be easier with automobiles and filling stations than installing charger stations on every corner and waiting for a charge. What's your thoughts? Run from Nikola? Are there better hydrogen players out there? Thanks a mil."

The only question I'll answer is who's going to win. And I don't know. And I don't need to. If you want to speculate on that, just understand that Nikola is a speculation and that you are speculating on an outcome that you can't possibly know. And you probably have to do a ton of work, and even then, after you do your ton of work, you're still trying to predict the future. What I would suspect is the case – I would suspect that you're going to see a bunch of different technologies. Already we've got hybrid, electric, which is getting pretty big, and this hydrogen fuel cell idea which has been around for a long time. There may be others, and who knows what they'll be? It's hard to pick winners in this type of thing. That's all I'll say. Just acknowledge that you're speculating, OK? You can lose all of the money that you speculate with. So just size your bets accordingly.

Michael W. writes in and says, "Dan's quest to find someone who can opine on whether President Trump's egging on his supporters to descend on Capitol Hill constituted a coup attempt, please interview George Friedman at Geopolitical Futures. I think the point to consider is not simply whether the mob that attacked the Capitol were a bunch of drunks or frat boy equivalents or however one may choose to characterize them. Rather, into this cauldron the mob's actions should be considered in a context of the electoral process that was going on at the Capitol at the time, the threat to the ballots, the motives and intentions of President Trump, who either egged the mobs on or directed them to go there while the ballot counting was going on."

And, sorry, I couldn't read your whole thing, Michael. I bet if you listened to President Trump's whole speech, it's not a slam dunk that he incited violence. In fact, he said, "Go to the Capitol." When you have incitement, as I understand it legally, it has to be immediate. It can't be, "Go to the Capitol next week." It has to be, "Go to the Capitol right now," with people right in front of you who are near the Capitol, right? You can be on the other side of the world, say, "Go to the Capitol right now." You're on the other side of the world. But when the Capitol right up the street, "Right now go to the Capitol," maybe it's incitement. But then he immediately said right after that, "Do so peacefully." So I don't think it's a slam dunk on incitement.

Abe G. writes in and he's correcting me on the definition of coup and insurrection. He says, "According to the dictionary, coup is a sudden, violent, and illegal seizure of power from government. Insurrection is a violent uprising against an authority of government." So he's saying, "Hey, maybe this was an insurrection." And, sure. He said, "It was an insurrection, Dan, not a bunch of thugs going wild that drank too much, as you said." Yeah, except thugs going wild that drank too much – I think it does describe the tenor and the tone of their behavior. They were just wild maniacs who were getting in trouble.

And, yes, maybe they were seeking to do some violence against representatives. They had nooses and zip ties or whatever. But they're such a bunch of idiots. They were hard to take seriously and they didn't get anywhere really. They got inside but by the time they got inside everybody was gone. And I realize, yes, I've heard the story of people cowering in the next room and all that. But overall it was just a big, disorganized riot really.

1. Now we come to the last one, James W. And James thinks I'm an idiot about all this. He says, "I wish to take exception to too things you mentioned on your January 14 Stansberry podcast, the first being your seeming dismissal of the severity of the Capitol attack last week. While I agree that it was a pure excuse for a coup or insurrection, I think the intent of many of the instigators was clear. While it is clear that the mob was highly disorganized and without any significant amount of planning, it was clear that they as a mass intended to do grave harm to legislators and staff there. Even though I as a libertarian share your disdain for much of the media's typical portrayal of events and politics, in this case, I think the incidents have been relatively fairly presented, and indeed the whole situation was quite a serious threat to the lives and well-being of our representatives and to our democratic process, such as it is."

I'll just deal with that half before I get into the second one. Definitely not any kind of a threat to our democratic process. You're just wrong about that. It was a bunch of bozos who disrupted things for a day or so. Serious threat to the lives and well-being of the people involved? Yeah. That's why they evacuated them. Absolutely. It was a serious threat. And people died. I don't make light of that. But when I said frat boys gone wild, when frat boys go wild, people die too sometimes. But maybe that is too cavalier. It was a riot. You're right. It was a riot.

Next one that he takes issue with – remember he said he had two things. Next thing he says: "But of more concern was the implication you made that the cutting off of social media access to President Trump was of similar severity to that of Nazi roundups." Going to stop you there. I did not say anything like that. I'll continue though. "By quoting the paraphrasing of the Niemöller's quote by one of your listeners, I believe you drew a very offensive analogy. Certainly as a libertarian-minded individual you would agree that private companies that provide social media platforms are well within their rights to limit and control the uses of content." Hm.

"Whether it is advisable for them to do so is debatable and more properly a matter of concern to their shareholders, even if there is some political bias involved. But to imply that such private actions are a violation of any of our First Amendment rights, or even more absurdly, are even in the slightest bit comparable to genocidal Nazi roundups of the 1930s is patently offensive. Your fawning reading of the, in my opinion, poorly written paraphrase certainly gave the impression that you consider the two situations to be of similar threat to our lives and liberties. I've always respected and admired your opinions and willingness to openly state them. But I have trouble believing your value systems have been coopted by the extremist Trump cultists." He says, "So it ain't so." I think he means, "Say it ain't so, Dan. Respectfully, James W."

You're so all wet on this I don't know where to start. You need to read a history book. This is exactly how it begins. And, you know, libertarians tying themselves up in knots because these are private companies is stupid. Facebook, Twitter, Google, they are menaces to society. And do I think the government should do something about it? No. They'll make it worse. I never said the government should do anything about it. But yes, people are trying to speak out and they're making it impossible, and they're targeting people based on political bias. And you can tell me all you want to they're private companies, and I'll actually agree with all of that. But you can't tell me they're not menaces to society. They are, obviously.

The fact is Twitter and Facebook and all this stuff – millions upon millions upon millions, billions even, if you include Facebook – billions of people use this stuff to communicate. And when the people who own the platforms say, "You can't communicate because you said Donald Trump is good," that smells an awful lot like a violation of my First Amendment rights, even though I acknowledge that it's technically not so because it's a private company. But they're menaces to society, nonetheless.

What do we do about it? Stop using them. I don't know. Like you said, it's a matter for the shareholders. But for you to say that you can't touch this and that it's a private company... so what? It's a private company. It's a menace. That's what it is. And absolutely you need to read a history book. The whole point of the paraphrase and the original quote was that it starts out being distant and not affecting you. And it's no big deal and it's not violent and "They're not doing anything to me." Right? When they came for the trade unionists, I didn't care because I'm not a trade unionist. When they came for the Jews, I didn't care because I'm not a Jew. They're not coming for you and me but they're coming for somebody.

I mean, they murdered that guy on the streets of Portland because he was a Trump supporter who participated in a prayer group. And he was murdered by this lefty anarchist whatever kind of crazy – I don't know if it was – he had a BLM tattoo on his neck. Whatever. To ignore what is happening in our society is really stupid and you need to read a history book and understand that, yes, we're looking into the future by reading this quote. But that's the point. You look back at history and it enables you to look into the future. This is how these things start. Am I saying we're going to wind up with a Nazi genocide as you implied? I never said anything like that. I said: this is the time to think about this.

Have I been coopted by extremist Trump cultists? That's the dumbest thing I've ever heard in my life. Of course not. I'm not even close to anything like that. I think Trump's a bozo. I actually welcomed him when he got elected. I was like, "Well, at least he's different. Let's see what he does." But just a big government bozo like all of the big government bozos you people vote for. They're all the same. Trump is no different from Obama. Obama's no different than Bush. Carter, Reagan, Ford, Clinton, whoever. All of them. They're all the same. If they weren't the same they wouldn't get elected. People who can get elected are a certain type of person. That's who gets elected. All this quibbling about whether this guy is moderate or conservative or liberal and all this garbage – they're all doing the same thing. They all grow the government.

Telling me that the Nazi genocidal roundup thing is patently offensive – you're patently offensive. You're why those things happen. You are the reason those things happen. Because you don't take it seriously when the initial events that seem not so terrible start to happen. You are the exactly the type of person that causes these things to happen. People like me say, "Hey, look out. This can happen. Make sure it doesn't happen." People like you say, "Ah, that's patently offensive." I think you all get the point of how I feel about this [laughs].

All right. That's another mailbag and that's another episode of the Stansberry Investor Hour. Hope you enjoyed it as much as I did. If you want to hear more from Stansberry Research, check out americanconsequences.com/podcast. 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. You can also follow us on Facebook and Instagram. Our handle is @InvestorHour. Follow us on Twitter where our handle is @Investor_Hour. Have a guest you want me to interview? Drop us a note at [email protected]. Till next week, I'm Dan Ferris. Thanks for listening.

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