Episodes

Intro:                           Broadcasting from the Investor Hour Studios, and all around the world, you're listening to the Stansberry Investor Hour.

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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 Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value, published by Stansberry Research. Today, we'll talk with Nick Sorrentino. He's from the Against Crony Capitalism websites, and that will be our topic – stick around and get angry about with us, man. This week in the Mailbag, we have a fantastic Mailbag with tons of great block-and-tackle investment questions about cash, gold, the insurance industry, stock buybacks, and more. In my opening rant, I'll give you two choices about how you can hold your savings, now that it looks like the Federal Reserve has thrown up its hands and told the whole world that it does not know what to do. That and more, right now, on the Stansberry Investor Hour.

So, here's the big news this week. Bloomberg is reporting that the Federal Reserve is likely to hold interest rates at zero for five years. Now, the Fed hasn't made this announcement, yet. In fact, by the time you're hearing my voice, maybe they may have made it, maybe not, I'm not sure. So, right now, it's in this kind of limbo where lots of serious financial people are taking this as gospel, but we haven't heard the official announcement. And you know this stuff leaks out, right? So here we are. But you know something? I have to believe it, because Jerome Powell, as a Fed chairman, is, like – he's the "let's throw it against the wall and see what sticks" guy, right? So I believe this.

I believe that they're going to try to signal to the market, "Don't worry about anything, we're going to keep rates low, near zero, for five years." I believe this. Even if it doesn't turn out to be completely true, like, you know, one, two, three, four, five years from now, whatever, it's still, it's the idea of believing that they intend this kind of signaling. Or something like it, right? And it's their way of throwing up their hands and saying, "We really don't know what to do." And you know something? There's honesty in this. We've talked about this, before, with the Fed – actually, we talked about it with the European Central Bank and the Fed, and, you know, remember?

We talked about Mario Draghi, and he said back in, god, it was, like, 2012 or something, he said, "You know, we'll do whatever it takes." And then he said, I think it was 2014 or '16 or something, whatever, years ago, he said, "Don't worry, you know, negative interest rates will not collapse the financial system." And we said it was Shakespearean, right? It's a kind of telegraphing of the truth, it has more truth than the actual truth. It has more truth in it than if Draghi had said, "This could result in a huge crash down the line, but right now, we don't know what else to do." And that's what this five-year Fed holding the interest rate near zero thing does, it's got more truth and more information in it than at first blush.

So, what does it mean? Well, it means a few things right off the bat, right? It's a signal, right off the bat. So, to savers, to people who save money – I have to give a little shoutout to Luke Gromen on Twitter. Luke wrote a really neat book called The Mr. X Interviews – say that 10 times fast – and, you know, it was all about his macro outlook. It's a neat little book. Basically, Gromen was saying, "Look, you can have your choice, if you're one of the creditors of the world, you get to hold your hard-earned savings" – reserves, whatever you want to call it – "you can hold it in something of finite duration and infinite issuance" – right? Treasurys, OK? Finite duration, you know, you're going to have to turn it over, there's no infinite maturity bonds.

"Or you can hold it in something of infinite duration and finite issuance." What would that be? Uh, how about bitcoin? How about gold and silver, right? Finite issuance. In other words, the Fed can't print gold, silver, and bitcoin, right? And it's of infinite duration: It's not a bond, it's not going to expire on you. And those are your choices, when the Fed says, "Well, you know, we're going to" – we've waged war on savers, right? What do governments do? What do governments do well? Big governments, you know, modern nation state governments, what do they do well? They wage war. They martial all the resources and they go, you know, command control, and they wage war.

Well, you know, we had these political wars in the United States, in addition to, you know, real hot wars. We've had the War on Drugs, and, you know, the War on Poverty at one point was the thing. We've got the War on COVID, right? And now, what we really have is the War on Savers, the War on People Who Are Wise With Money. And so, what's the flipside of that coin? Well, there's a message to borrowers, right, to people who don't save, and the message is: "Lever up, man. You know, we just made another beer run. This party's goin'. This party's goin' all night."

So, to savers, the Fed says, "The beatings will continue until morale improves," right? To borrowers, "The party's goin' all night, folks. We're fully stocked up." And I just feel like there is a wider implication, here, beyond the direct implications that we just talked about, to savers and borrows, and speculators, too, right? There is a widespread belief that, one way or another, when the Fed lowers interest rates or agrees to keep them low, that that spurs people to speculate in the market. Because they can't get any kind of a return on their savings, so, you know, what's left? They can't buy bonds, so then they go into the stock market. That's one argument for that.

And, you know, it's sound as far as it goes. It probably doesn't go as far as most people think, but it's sound as far as it goes, right? So there's these groups, you know, some people benefit, some people, it's a war against savings. But there's a wider implication, as far as I'm concerned, because remember, I'm the guy who says look at the Great Depression, study the Great Depression. Not because we're going to have another Great Depression, but because that, too, was – well, it was a huge downturn. We are living through the biggest downturn in the economy since the Great Depression, no matter what the cause, right? And I just think that those events, they cause governments to do a lot of stuff that they wouldn't normally do, they just, they go bonkers, they think, you know, "We have to do something right now, or we're not going to get elected," or reelected, or whatever they think.

And those actions have severe consequences. And I believe that the Hoover and Roosevelt administrations' actions deepened and prolonged the Great Depression, just made things worse for a lot of people, period. And if that's going to happen, you might want to prepare for it. So, to me, this says, you know, there are two sides, traditionally – traditionally – to the macroeconomic thinker. You know, he's have to think about fiscal policy, what the government does, and monetary policy, what the central bank does, pretty much. And on the fiscal side, of course, there's been trillions of, you know, stimulus – I don't know what you call it – it's not very stimulative when the economy has taken a huge hit. But there's – just call it stimulus, government laws that allow trillions of dollars of spending – you know, right?

And that, to me, that's the more important implication. The important implication is, OK, over in the monetary side, hands thrown in the air, no idea what to do, war on savers, borrowers, you know, "Go buy a house. Please, help us out, here. Do some – somebody do something. This is all we can do." And it's true, the Fed has limited means – it's kind of a not a great tool for getting the job done of goosing the economy and, you know, hitting it with the paddles and juicing it back to life. It's just not. But they do everything they can do, and if sending a signal to the market, "Hey, we're not going to raise interest rates much above zero, for five years," right?

That inspires longer-term viewpoints, and people get more comfortable, and they say, "Oh, oh, oh, OK, I don't need to worry about inflation," because people equate low interest rates with deflationary environments. And, you know, that's true – that's true. It's true until it's not, right? The Fed was accommodative in 1924, and in 1927, they bailed out the Bank of England, 1928, and stocks went nuts until, boom, the Great Depression started. So, you know, it's one of these, you know, it's the Thanksgiving Turkey conundrum, right? Life is good. I'm getting fed every day. I'm being taken care of by my overseers. I'm fat and happy. I'm in the best health I've ever been. Uh, maybe I could stand to lose a few pounds, but I'm pretty good.

And then, I get my head chopped off and eaten for dinner. So, I feel like that's the kind of environment we're in, especially with stocks pushing up against, you know, in the S&P 500, like, all-time high valuations. Oof, it's weird. It's weird and it's difficult. What to do about it? What you should do about it, right, this whole podcast is about trying to help people become better investors? It's really difficult. And the best thing I got, so far, is still the same, you know, I'm singing the same tune. I haven't learned a new tune in a couple of years, here, right: When you buy stocks, you buy – you don't overpay is the first thing, right?

Because a great business can be a terrible investment, if you overpay. And with interest rates down at zero, lots of people are overpaying for lots of businesses. Being on this side of March 2020, being on this side of, you know, the COVID downturn makes a bunch of businesses cheap, that might not otherwise be cheap – or cheaper, at least. So, that can be good for investors who are willing to take a long-term view. And I don't think you would've had that, without, you know, the COVID bear market and the situation that we're in today, so that's cool. And we've found things, in my newsletter, Extreme Value, that are, like, you know, haven't quite recovered, but they're phenomenal well-managed businesses that have been around for decades or 100 years or more.

And we think they're going to be around for, you know, decades more, or another 100 years, and they're extremely well-run. Many of them are very good acquirers, OK? I think that's a hint. Because in this environment, you know, capital markets tend to be really accommodative. And so, if your stock is really expensive and you're a really good acquirer, maybe you're going to use that highly valuable currency to pick up assets that are now cheaper relative to your currency, right? So, you know, this environment can work, for certain people. And the ones that I like are – I'm sorry, I can't name the names, because, you know, we just, we sell a newsletter that costs $1,500, so I can't go around telling you all the stuff we just told our readers to buy.

But I can tell you the industries, like, waste hauling, and alcoholic beverages, trucking, you know, insurance, things like that, where we find a really well-managed company that can acquire, OK? So, that is – remember, we said the Fed is at war against savers, but it's telling borrowers to party, and in general, capital users, right, to party. And some of these people, they're – it's not like they're partying, it's not like they're being sloppy, but like we said, with stocks expensive, interest rates near zero, capital markets are accommodative, they can put money to work. And they've done a good – the firms I'm thinking of have done a really good job of it. So, that's good, right? Maybe we can do that.

I mean, otherwise, look, those assets of infinite duration and finite issuance, you know, I'm going to pound on the table on those – I'm going to pound it and pound it, until it breaks, or until the situation changes – gold, silver, bitcoin, they're in finite supply, governments can't print them. And gold and silver, at least, have a 5,000-, 6,000-year history, and bitcoin, so far, out of the gate, first 10 years of so, here, is a well-managed medium. I hesitate to call it a medium of exchange, but that's what it is, I mean, businesses all over the world take it as payment. But certainly in this country, when you use it as payment, you pay taxes on it, right, it's like you're selling it.

Anyway, that's where we are, man. I just, I hope I'm not too repetitive, but when we're in the same situation, week after week, and we're just, you know, kind of coloring it with a little different piece of news, what do I got for you? Well, I got – the thing I can do is keep up with the ongoing situation, and hopefully try to help you – or at least just tell you what I'm doing, you know? Whether it works out well or not, we'll see in the end, but that's what I got this week. So, let's talk with Nick Sorrentino – this is going to be an interesting conversation. A little different than our usual fare, but a really smart guy with a lot of good things to say. Let's do that now.

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Today's guest is Nick Sorrentino. Nick Sorrentino is the cofounder of Against Crony Capitalism, and the editor of ac2news.com. A political and communications consultant whose clients have spanned the political spectrum, his work has been featured at Foreign Policy magazine, Chief Executive magazine, reason.com, npr.com, Town Hall, the Daily Caller, and many other publications. He has spoken at CPAC, the Commit Forum, the Atlas Summit, the U.S. Chamber of Commerce, the National Press Club, and at other venues. Sorrentino is the founder of Exolorix Consultants, and a senior fellow at Future 500. He is also the author of the book Politicos, Predators, Payoffs, and Vegan Pizza, which sounds utterly sinister, we'll have to get into that. A graduate of Mary Washington College, he lives just outside of Washington, D.C., where he can keep an eye on Leviathan.

Nick Sorrentino, welcome to the program.

Nick Sorrentino:         [Laughs] Thank you very much.

Dan Ferris:                 I want to find out, you know, how you sort of found this career path, and found your way to this theme of fighting crony capitalism. But I'm sorry, I just, I can't resist asking about the vegan pizza thing.

Nick Sorrentino:         So, that book is just a collection of some of my essays from between – I think it's 2012 to 2015, somewhere in there – I just kind of compiled them all. And during that time, Occupy was going on, and I spent a pretty good amount of time trying to learn about that whole phenomenon. And when Occupy New York was happening, or Wall Street, I remember seeing this tweet, and it was, you know, "Thanks for all the support from everybody in New York, but if you're going to send us free pizzas, please make them vegan."

Dan Ferris:                 That's perfect.

Nick Sorrentino:         [Crosstalk], "OK," and I just thought that that kind of summed up, you know, where in this country they were.

Dan Ferris:                 Yeah, yeah, it's a little odd. Talk about, you know, looking a gift horse in the mouth.

Nick Sorrentino:         Yes, indeed.

Dan Ferris:                 So, but I am curious, I want to ask you, like, I remember when I was maybe – I started getting, you know, a little political when I was in college. But there were kids in high school who were way into it, and the odd kid in, like, at junior high whose father was, like, you know, a lawyer or something. And I was one of those, my father had run for office in the state of Maryland. But how soon did you sort of find yourself attracted to politics?

Nick Sorrentino:         You know, it was pretty early on. My grandmother actually got me a subscription to the National Review when I was 12. [Laughter]

Dan Ferris:                 Wow.

Nick Sorrentino:         If that gives you any idea.

Dan Ferris:                 Yeah.

Nick Sorrentino:         So, yeah, so, I don't know, it just, it has just always been in my blood, you know, and it's never left.

Dan Ferris:                 So, Nick, your grandmother gets you this subscription to National Review, and, like, if my grandmother had done that, I would've been, "Oh, thank you so much," and I never would've probably read a word of it. But you took to it, like, you read it.

Nick Sorrentino:         Oh, I read it, definitely. I became a big fan of Jack Kemp, I learned about Milton Friedman, and of course learned about William F. Buckley. You know, family always have these weird kind of stories that go, you know, you never know exactly how it all worked out, but I believe one of my uncles worked at William F. Buckley's mayoral campaign – at least, that's the story. Yeah, no, I read it, and it influenced me deeply.

Dan Ferris:                 Wow, so at a young age, you were deeply influenced. How so? I want to ask.

Nick Sorrentino:         You know, I just naturally have always – I must say that I transcended kind of the whole – this is, you know, further on down the line, and I just, I realized I was less of a conservative. And that, you know, whatever that means now, I'm more of a libertarian. But the fundamental – like, I was one of those kids who just never fit in particularly well in the institution, let's just say. And I believe that – you know, I think – it took me a long time for me to figure this out, but I just, you know, deeply believed in the idea that, you know, people should be able to actualize their maximum capacity, you know? And I often felt that, in a strictly regimented sort of world, many of us wouldn't reach our potential.

And I certainly felt that way, so, you know, the angry young man, you know, kind of a punk rock ethic. But I was reading the National Review, so there you go.

Dan Ferris:                 Yeah. So, that's pretty cool to me, actually, that you found that direction so early in life. Let's just skip way ahead, then, and why focus on, you know, being against crony capitalism? I like – there's a line on your website, it says: "Against crony capitalism, the real problem with the economy." And of course, a million people have a million different ideas about what the real problem with the economy is, right?

Nick Sorrentino:         Sure.

Dan Ferris:                 So, I'm curious as to how you honed in on this particular one.

Nick Sorrentino:         Well, I have to say that the cofounder of Against Crony Capitalism, Hunger Lewis, who is a legendary investor, is the one who penned that subtitle. And really, I mean, it's exactly right, I mean, crony capitalism and Keynesianism, you know, they go together. And, you know, just, you know, we can get further into this, but, you know, it's the constant, you know, government intervention that, you know, that undermines our system, our economic system, our, you know, what should be a fairly free price system.

Dan Ferris:                 OK, so, you know, the average person who worries more about fairness might come back with, "Oh, but we need government to interfere and to regulate and to do all these things. How can you say that's a bad thing?"

Nick Sorrentino:         Well, I mean, it's certainly a reasonable perspective, and one I've heard before. You know, Hunter makes the point that the best regulator that there is is the market. And I totally agree with that. Now, are we advocating, you know, an anarcho-capitalist perspective? No, not necessarily. But we're trying to highlight how, in the name of fairness, you know, so much bad is often done. You know, it's easy to say, "Well, we need to solve this problem," or, "This isn't fair," or whatever, but, you know, when you dig just a little bit, it turns out that, you know, Bob Johnson's company is getting the contract for whatever this fair program is, you know? Which is not fair.

And so, you know, it takes a little effort to really get a grasp of the crony system, and why this government intervention is often quite bad. But we're willing to do the work for it, and we have, for almost a decade, now.

Dan Ferris:                 Yeah, and you actually – there's a great about page on your website, but on the about page, like, for example, there are very specific examples here, like, you say, for example, "Why can Goldman Sachs, the largest investment bank, speculate in markets using newly-printed government money that has been borrowed virtually for free? Crony capitalism." And yet, we're told that, like, the banking sector is highly regulated for the benefit of the consumer, et cetera, et cetera. But it doesn't seem like it's really regulated for the benefit of the consumer so much as for the bank itself. That's the essence of crony capitalism, right?

Nick Sorrentino:         That is it.

Dan Ferris:                 So, there's a lot of different topics addressed on your website. I just – you can click around there – you can click around there for hours, frankly. But I found, like, a pet-peeve topic of mine, which was, there was an article about the folks at the airport, that, you know, the rent-a-cops, the federal rent-a-cops at the airport, seizing people's cash without charging them with a crime, and just taking their money. This is a pet-peeve of mine, because I got to it by kind of reading a bit about drug prohibition, and reading a bit about gun control and about controls on cash. And, you know, anybody who thinks that these are good ideas and that they protect anyone is just – has no leg to stand on, as far as I'm concerned. And in fact, if I didn't know better – and I'm not sure whether I do or not – I'd say that the government was actually targeting the economically weakest segment of the population, because that's who it hurts the worst, all of these things, in my opinion.

Nick Sorrentino:         I think that your opinion is right on, in many respects. And it's not just TSA seizing cash, I mean, it's Chicago, where, you know, the poor get their cars impounded, you know, then they can't get to work, and then they have, you know, a $5,000 bill at city hall, to get their car out of the, you know, impound. Half the time, you know, it's somebody else that did something in their car, you know what I mean? And it is, and it's just preying on the people who have no power or no money. Now, there is an interesting kind of caveat, or, not a caveat but an interesting kind of different flavor to it in California, for instance. And there's an excellent interview with Adam Carolla and Tucker Carlson on February whatever, and Adam Carolla talks about how California has imploded.

Now, I love California, OK? But it is a disaster, at this point. And Carolla talks about why, you know, you have the super-rich, and then you have what he called the empty-bags, which are the homeless and, you know, mentally ill wandering all over the place. You know, and the cops, like, those people have no money, so they're just kind of ignored. But it's the middle class, what's left of the middle class in California, that is totally targeted, because they have money, you know? They're the ones who get the parking tickets, they're the ones who have to, you know, suffer through the DMV, they're the ones that have property taxes that are going to go up, it looks like, if Proposition 15 goes through, and so on, and so on.

So, there's that whole element to it, you know, the sweet spot is always the middle class. You can get, you know, if there's no blood in the – or no, you know – I'm about to mix five metaphors, but you know what I'm saying – can't get water from a stone, but the middle class still has some water in it, and it's getting squeezed.

Dan Ferris:                 Right, and they don't have the resources to fight back and buy influence, right, so it's –

Nick Sorrentino:         Exactly, they're not part of the club, and they don't have the time – and I say this as a child of the middle class – you know, they don't have the time and they don't have the money to fight, but they probably have just enough money to pay the fine and make it to the next fine.

Dan Ferris:                 Yeah, part of what I was wondering, when I told you about my view about drug prohibition and gun control and restrictions on cash is, I don't know how much – how much of a conspiracy theorist do I want to be about this, because it seems so targeted. Because people are, like we just said, people who are wealthy enough, they can get around anything, but the rest of us can't buy that influence.

Nick Sorrentino:         Well, consider that, you know, I mean, this – I don't know, necessarily, that there's some kind of grand conspiracy. It's just the way that a crony system tends to work itself out. You know, a great example of this, and, you know, it still kind of drives me nuts is, like, you know, if you fly commercial, you're subject to the TSA. But if you fly in a private jet – now, this may have changed, and now I'm thinking back, it may have changed in the past couple of years, but for pretty much forever, they didn't check you. You know, you just walked across the tarmac into your plan, you know? So you could fly with as much cash as you want. Just don't be that guy with $11,000, I'll tell you that, flying on Southwest.

Dan Ferris:                 Yeah, yeah, walking through TSA with it.

Nick Sorrentino:         Granted, that's probably not the smartest thing in the world, but still, it's wrong.

Dan Ferris:                 Right, but what strikes me in an episode like that is, you and I will agree, it's really not the smartest thing in the world, but that guy, to me, he's so innocent, isn't he? I mean, he didn't do anything wrong.

Nick Sorrentino:         No, he didn't.

Dan Ferris:                 And yet, you know –

Nick Sorrentino:         It's his property.

Dan Ferris:                 Yeah. Oh, Nick, what a quaint idea that is, right?

Nick Sorrentino:         Yeah, I know. I laugh because I can't cry.

Dan Ferris:                 Well, OK, so this is a reasonable time to ask, you know, what – is the solution, here, to, you know, you'd better damn well get yourself enough money and power to handle this? I mean, you know, what do the rest of us do?

Nick Sorrentino:         No, I mean, that is, I mean, an incredibly nihilistic sort of way of looking at things, and one could argue that, I suppose. But, you know, we would argue that, if one is to live, you know, a halfway decent, halfway honest life, you have to fight against crony capitalism. You have to do what's right. You know, when things are wrong and if you have a little bit of power and you have a little bit of money, maybe, you know, you make it clear that this is wrong. You know, there's no way to – we have a crony system, I mean, that is just a fact. But as Hunter often says, it could be reduced a lot. I believe that it'll be always be with us.

I think from the dawn of civilization there's been crony capitalism, but it's ebbed and waned. And what we need to do is make it a much smaller part of the equation, and that could be done. And it will take time and it takes effort, you know, but that is a laudable goal, and is one to which we are committed.

Dan Ferris:                 It is a laudable goal, and I just want to make clear, like, I'm not actually that nihilist, OK, so don't get the wrong impression. But I do – I think it serves a discussion to just take the simplest viewpoint rather than, you know – I'm not a Ph.D. in philosophy, so I'm not going to, you know, expound on that.

Nick Sorrentino:         Well, that makes two of us, so, there we go.

Dan Ferris:                 Yeah, so, you get it. So, I know one topic that pops up a bit on your crony news link is education and schooling. This issue irks me so much because it hits so close to home, and I still, I don't get, like, where's the revolt, you know? Where's, like, the parents saying, "Enough is enough. I want my kid to come out of school, you know, being truly competent in the three Rs, reading, [w]riting, and 'rithmetic, and I don't care if they learn about, you know, the global warming apocalypse from you," you know? I just, I have a hard time understanding how this thing developed the way it is. Maybe it's because of the education I got, which I think – I don't know, how the hell did we get here? How did teachers' unions get such a grip on something where the parents ought to have a lot more power?

Nick Sorrentino:         Well, when the family unit – now, I'm not a big social conservative, OK, you know, at least from a policy perspective, but I will say this. The family unit has been just decimated, you know? And so, you know, to large degree, parents just don't have time, you know? It's hard enough to get kids to school and so on, you know, and, you know, get to work and make sure the bills are paid, you know, it's – you know, and so, a lot of parenting has been pushed off onto, you know, what I would say, the state. And now, I mean, you can see it in the rhetoric from a lot of the teachers unions, and even from Kamala Harris – well, not even, but, I mean, unsurprisingly, from Kamala Harris, for instance.

You know, I mean, like, she wants a 10-hour school day – or at least she did before COVID happened. And basically, the idea is to provide, you know, daycare to kids, you know, writ large, you know? And to essentially, you know, outsource a lot of parenting to the state and the teachers' unions.

Dan Ferris:                 OK, so the answer to my question might start someplace like: the government says, "We're going to help poor people, in some way, with, you know, better schools and daycare and things, so that they can work and provide for their children." And then maybe the neighborhood next-door, where people are slightly better off, get a little ticked off and they want it. And then the one next-door to that, and it becomes – once you do it for one group, no matter what the justification, then, maybe it spreads. The idea that everybody should be helped by the government in these ways spreads, and they don't see how it's weakened them as a family – something like that.

Nick Sorrentino:         I think that's, yeah, I think there's quite a lot of truth to that. As with most of these questions, there are probably, like, three or four major threads that could be pulled apart, but that is certainly one of them when it comes to schooling, for sure.

Dan Ferris:                 Right, so, it's insidious. It's like, you know, the idea of crony capitalism, of gaining, or even – not even crony, but just the idea of having some kind of benefit from a federal government, you know, paid to you, "Well, hey, I pay in. I should get something back. Blah blah blah," and so, we tolerate greater and greater and greater interference into our lives. But at some point, don't we need to look at ourselves and say – like, who besides, like, you, me, and ten other people are going to look at ourselves and say, "Hey, you know something? Maybe we need less government. Maybe that's the answer." Nobody ever says that, nowadays.

Nick Sorrentino:         [Laughs] Well, I mean, you know, the Republicans are like, "Hey, money means nothing, right? Just, we can pay for everything." There are no consequences. There is a free lunch. I mean, that's all we have, right now. I mean, we are, like – yeah, as long as the taxpayers, you know, felt like, "OK, well, I'm going to get a school. Well, you know, I'm paying this amount in taxes," and there's, like, you know, x plus y equals z. Now it's, like, I don't know, like, over half of households get some kind of a government check in some form, you know? And who knows where the money goes. It's all amorphous and, you know, whatever. And that's where we're at.

Dan Ferris:                 So, I'm still stuck with what do I do? How do I, like – you know, at Stansberry, that's kind of what we're about, you know, we take a look at the world and we kind of assess what's going on. And then, we like to wind up with some kind of action plan, some kind of actionable advice that we can, you know, tell our listeners and our subscribers. You know, besides going to ac2news.com and reading every word, what do I do?

Nick Sorrentino:         We are of the belief that, basically, there is a remnant of adults, OK, there are people who do care, there are people who are grownups. And I'm sure your audience is probably full of grownups, so I probably don't have to preach this sermon. But, you know, stand up for what's right, you know, in how you conduct yourself financially and otherwise. Now, as far as actionable stuff, I mean, I think, you know, precious metals are always important, you know? Being aware of them, if you're not a gold or silver or platinum investor, learn about them, and maybe put your toe in and find out why they're so important.

Keeping tabs on what – you know, it's funny, this is a time of massive changes, as we discussed. I would say that, for people who are thoughtful, who are concerned about their investments, and so on, now is the time to be, if not hypervigilant, extremely vigilant on the international scene. What's going on in terms of the dollar as reserve currency, international debt, China, and so on, I mean, there are changes going on, right now, that are going to greatly impact the world over the next two to three decades. Now is that time. So, if you want to do something, figure out what's going on there, or at least be aware of it.

Dan Ferris:                 Right, so, generally, Nick, you're kind of – you know, and I'm not saying I didn't know this before we interviewed you, but – you're kind of in the same camp as me. Which is, by all means, you know, if you own, you know, you've got dollars and stocks and bonds or whatever. But also, get some assets outside that, you know, get some gold, get some silver, or whatever else, and become more macro aware.

Nick Sorrentino:         Absolutely. We now operate in a time where one can be educated far beyond what one could be, you know, not that long ago. Now, that means that one has to also temper all this information with wisdom, and that's easier said than done. But, you know, seeking to be a wise steward of one's assets – and I mean that in not just the monetary sense – is really the key, I think, in this time of chaos. It's hard to – you know, I don't play poker anymore, but I used to play poker a lot, and there were times when, you know, you just didn't have that great a hand. So, you know, you want to protect your stack, you want to look for opportunities, and then wait for the cards to turn. And that's kind of how I feel like, you know, where we're at right now, you know, in terms of society, in terms of the economy, and so on. Big changes are afoot; stay aware.

Dan Ferris:                 Well said. You know, Nick, we're actually getting towards the end of our time, here, and I usually ask my guests, my last question is always the same: If you could leave our guests with just one thought, today, what would it be? It sounds like you may have just done it for me, would you agree? I think you would agree.

Nick Sorrentino:         I would absolutely agree.

Dan Ferris:                 Well, thanks for being here. And, you know, I actually, I have two of Hunter's books, but I don't have your book about the predators and payoffs and vegan pizza.

Nick Sorrentino:         Yeah, well, it is only available on Kindle, and that was kind of an experiment of mine, which went reasonably well. We may be printing it here, shortly. I'm going to have another book, I think by the end of the year, you know, tentatively titled – ah, what did I call it – When America Went Nuts. And it'll be essays between 2016, after the election, to about 2018. It's pretty insane, looking back on what happened, it is absolutely crazy. So, look for that. I'll send you one of those, how about that?

Dan Ferris:                 Great, yes, I'll wait for that, I'll read it, and we'll get you back on the program, how about that?

Nick Sorrentino:         Great. It's been a pleasure talking with you.

Dan Ferris:                 All right, thanks a lot. Bye-bye for now.

OK, that was a lot of fun. As you know, I've often said, on the program, you know, I try not to be too political. But the thing is, I keep saying, "Study the Great Depression," right, as a guide to figuring out what's going on in the present. And with the Great Depression being, basically, the birth of modern macroeconomics, and macroeconomics is all about fiscal policy and central bank policy. So, it's basically impossible for me, at this point, not to inject some politics into the program. Look, I don't want to be Mr. Dogmatic Far-Right Far-Left guy – that's not what I'm interested in.

Obviously, I do support the idea of free markets, I am skeptical of too much government intervention into the economy, and, you know, it has economically bad consequences. Historically, that's not hard to prove. So, you know, that's where I am, and so, that's why we get guests like Nick on, and others who have been on, recently, Amity Shlaes, for example. We just want to know what happened and know what to do about it, right? That's the important thing for investors: Just know what happened, and know what to do about it. And, you know, if you feel strongly one end or the other of the political spectrum, try not to let that hurt you too badly, OK?

All right, let's look at the Mailbag.

[Music playing]

When my friend and colleague Steve Sjuggerud talks, I listen. Steve predicted the rise of gold in 2003, the top of the dot-com bubble in 2000, and he even called the bottom of the Great Recession in 2009. Steve is once again pounding the table on a new prediction: He believes that a mania will hit the U.S. stock market and take most investors by surprise. He said that thousands if not millions of dollars will change hands as a result of the anomalies he found in the market. If you want to find out how you can profit from Steve's prediction, he has laid everything out in a video that just went viral. Go to www.investorhourtruewealth.com to watch the video and find out how you can profit in this rollercoaster of a market. I watched it, and what Steve found is astonishing. Again, that's www.investorhourtruewealth.com.

[Music playing]

OK, time for the Mailbag. In the Mailbag, every week, you and I get to 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 every word of every e-mail you send me, and I respond to as many as possible. I don't read crazy insane e-mails, e-mails that are too long, Russian spam, and who knows, there's probably another category out there I don't read. But we have a lot of good stuff today, and we're going to start with Jason A.

And Jason A. says: "Thank you for interviewing John Stossel, the other month. We had worried, in the past, when our children were returning from school repeating political nonsense. We had been wondering how we could teach our children many of the topics Stossel covers in his videos. His videos are brilliant, short, perfect to quickly watch and discuss with our children. I was thrilled, recently, when we asked our teenage daughter what she wanted to watch together, that evening, and she said John Stossel. Thank you for bringing this to our attention. We'll definitely have Stossel in the Classroom as part of our at-home curriculum. Kind regards, Jason A."

That one stands on its own. I'm glad he wrote in and said that. And since we have a lot of them, I'm just going to move on.

So, the next one is Diego I., and Diego I. says: "Hello, Dan. Thank you very much for the effort and the great work you do to keep communicating with your audience –" I think he meant to say. And he's got a couple items, here: "Number one: When you say keep 'a sizeable cash position, somewhere around 20% to 25%,' is this cash bills on hand on a bank safe box, or a hole in the ground, or in the bank account? The bank account may be a problem, if things get really bad. Number two: What happened if your position is a lot more than 1% to 2% in bitcoin?" Then it says, "How you back up with more gold and cash or stocks? Keep up the great job. It is a pleasure to listen to you, every Thursday. Diego I."

Thank you, Diego, I appreciate the kudos, there. I'm not sure about your second question. All I can tell you is, I recommended, you know, a small 1% or 2% position in bitcoin because, if the upside potential is fully realized, you can have a 50 or 100 or multi-100 bagger on your hands. And that will more than – it will more than hedge your entire portfolio, right? So, that's all I can say to address your second question – I didn't quite get it.

The first question, though, about where do you keep your cash. Look, I can't give individual advice. All I can say is, I personally have virtually all of my cash in brokerage accounts and bank accounts and – yeah, those two places, mostly. So, I don't know what to tell you, I mean, you're right, maybe things could get really bad and having cash in the bank means your cash will be unavailable to you. But, see, I think the bigger – the bigger for me is what will happen to the value of your cash. I don't think – I don't know this, look, I don't know everything, right? But I don't worry so much about losing access to my cash. Maybe I should worry about it more, but I don't.

I worry more about the value of it, that's why I want to hold gold and silver and bitcoin. So, that's pretty much all I got for you, Diego. It's a good question, it's a real question. Thank you for asking.

OK, next is Ricky H., and Ricky H. says, "Dan, I love the show and have listened, every week, for at least the last couple of years. I even love the rants. I am a retired retail investor and manage my own account. I learned a lot from your podcast, even though I know I am not sophisticated enough to understand some of the discussions." You and me both, Ricky – some of these guests we have on. Anyway, he continues, "I appreciate the insights into how to evaluate companies and how to be skeptical; those help me consider what to buy. But I really wish there were more discussions of sell decisions.

"I know if we buy wisely, we shouldn't be selling often, but some of my purchases have gone up quite a bit, recently, two to three times, and I don't know how to sell wisely. Should we let our winners run and sell the losers? Or perhaps sell half on a double and take a free ride? Watching stocks go up is fun, but we don't make money until we sell. I would love to hear your thoughts. Ricky H."

Ricky H., brilliant question. Not nearly enough people talk about this. A couple thoughts. The first one is from Howard Marx, who says, "Well bought is half sold." In other words, if you're up 2 or 3x really quick, you know, good for you, you got a good problem. And if you stick with a stock for a decade or two, and you're up, you know, 10, 15, 20x, whatever it is, good for you, you got a good problem. Selling is, like, a much better problem to have than losing money, right? So, well bought is half sold.

The other thing is, like you say, when to sell. I find most people's sell decisions – look, if you're running a strategy, you've got to have a sell strategy, too, right? If you're a value investor, maybe, you buy when things are cheap, you sell when they're expensive, and you rinse and repeat that strategy. If you're somebody who just thinks that, "Hey, the market's going to go up over the next couple of decades, starting right now, and I'm just going to keep buying a little bit, every month, in my 401(k), and I'm not going to sell for at least 20 years," that's another way to look at it. In other words, Ricky, I can't really answer your question too directly, because it depends on your personal strategy, you see?

You have to know what kind of investor you are. You have to make that decision. And the idea that selling is just based on recent price action, put it this way, that applies to a short-term strategy. That's for traders. So, in other words, if a stock goes up two or three times, well, is this a business that you thought you were going to – that you decided, before you bought it, you were going to be holding it for 20 years? Or did you just buy it because you thought it was going to go up two or three times in six months?

If you buy something because you think it's a multibagger in six months, and, hey, you make two or three times your money, then, you figure out what the good decision is, there. You see what I'm saying? There's more input, here, than simply telling me they've gone up quite a bit, recently, two to three times, and based on that, you want to know how to sell. And you said, "Should we let our winner run and sell the losers?" that's been great general advice, but in practice, it winds up not cutting it completely. Because then you have to say, "Well, how do I define a loser and how do I define a winner?"

Up 50%? In what period of time? Down 20%? Is that a loser? In what period of time down 20%, 30, 40, 50, whatever? So, you have – Ricky, you just have other decisions to make, that's really the only answer that I can give you. I'm going to move on, but I think you get it by now.

Jeremy R. says: "It's so sad people like –" a fellow who wrote in, last week, I won't name him – "are so naïve to think government is a net benefit to society. I would suggest him and other viewers who agree with him and don't understand your views read Economics in One Lesson –" by Henry Hazlitt – he didn't include the author, but it's Henry Hazlitt, Economics in One Lesson – "and John Stossel's new book No, They Can't. You do an amazing job and, honestly, a service to this country, by speaking the truth. Keep on. Jeremy R."

I recommend both of those books. Economics in One Lesson is one of the classic economics texts. If you want to get into economics, that's your first book – great book. John Stossel's book, No, They Can't, I read a pretty fair chunk of it – I'm not sure I finished it, though. But, look, you get halfway through it and you're, like, "wow," the message beats you over the head, and it's a very good message.

To be clear, government, in the abstract, government itself can be a net benefit to society, if it's run properly and kept in its place. But we haven't done that, not even close, and, you know, we're headed down the path of places like Europe and other places, where the economics are not growing so good. You know, we're going the way of all empires.

Andrew P. writes in and says: "Thanks for your fantastic weekly podcast and diligent work for Extreme Value. Stansberry calls insurance companies 'the best business in the world,' but in a world of 0% interest rates and overvalued markets everywhere you look, stocks, bonds, and real estate, aren't they at risk of losing significantly on their investment floats? Isn't it a possibility that they encounter significant investment losses that can make paying out obligations more difficult on them? Doesn't this everything bubble present a real and unquantifiable risk in investing in them? Choice subscriber, Extreme Value being one of my top choices. Andrew P."

Thank you for being an Extreme Value subscriber, Andrew P., and a Choice subscriber. OK, this is a reasonable question. I think the answer is, you know, take a look at Berkshire Hathaway: they're not going to have a problem paying out anybody, and over the long term, I think they're going to do just fine. And you look at all the good insurance companies – it's the best business in the world, potentially. In practice, not every insurance company is the best business in the world, by a longshot, OK? I mean, if you look at, I don't know, just pick any one, W.R. Berkley or something, last time I looked at their balance sheet, they had a lot of – they buy a lot of really kind of safe muni bonds and other things that probably won't get hurt too badly.

But, you know, overall, these people tend to be really good at playing it safe over the long term, and having some idea – like, they don't know, they don't know the future. But they build what you're talking about into, you know, the amount of capital that they have around. So, that's one reason why they're fantastic insurance companies. They're really good on the, you know, investment and balance sheet side, and they're really good on the underwriting side. I hope that's a good enough answer for you, because that's all I got, Andrew. Good question.

All right, got a couple more of these. Jared F. says: "Dan, keep up the great work with the podcast. I don't miss a single week's episode. What I like most is that you broaden our investment horizons with lessons from history, and with guests that bring unique perspectives even from outside the investment community." Yeah, our guy today, Nick, was one of those, wasn't he – man, really good. He continues: "I thought of a fantastic analogy to the debt-fueled stock buyback binge, and how this can distort enterprise value. If I borrow 80% of my $500,000 house, and then use that $400,000 loan to buy my wife's 50% share, is my house now worth $1.2 million, $400,000 alone plus $800,000 equity value?

"Of course not, so why does it seem to work this way with stocks? Aren't they just artificially inflating the value of the company? Best, Jared F."

I don't think they are artificially inflating the value of the company. I'm not – some people really have a problem with stock buybacks. I'm not one of them. All they're doing is, they're just – they're increasing leverage, for sure, especially if they're using debt to make the buybacks, which a lot of them do. But they're just taking equity out of the business, that's really all they're doing. I mean, they might be paying too much for it, so, you know, they – generally speaking, corporations are bad stock buybackers, stock repurchasers, they're bad at it, generally speaking. Why is that? Well, because they're like people.

And people, what do they do? When they get more money in their pockets, they spend more money. And when do corporations have more money in their pockets? Well, at the top of the cycle, when everybody has more money in their pockets and everybody wants to own stock. So they're just kind of piling into the market, buying expensive equity, like everyone else. And certainly, you know, in the short term, that can turn out really bad. In the long term, it's not great. They have to grow back out of that miserable decision.

But overall, a company can be a really good business, really well managed, you know, it earns high returns on its investments over time, and the capital that it employs over time. And it can be a kind of a crappy mediocreish share repurchase, and still provide a good return to investors. And to me, one of the reasons I think this is true is that, the more important thing about the share repurchases, and the dividends, too, is that they get the capital out of management's hands. So, instead of making the crappy acquisition that tanks the company, they just buy back the stock. And that doesn't touch the income statement, right, it doesn't touch the revenue, it doesn't mess up the moat if they have one, it doesn't screw up the business, you see?

It just gets excess capital out of management's hands. So, I don't think it does work the way you suggest, with stocks, and I don't think share repurchases are that bad. But it's a question worth asking, frequently, I think.

All right, Larry B. says: "I'm a longtime listener and Alliance member. First-time e-mailer." He says: "I'm thinking that the quality hotel REITs, aren't they the best speculative/value option, out there in this space? RHP is reporting more net bookings in the future than normal, for example. Once this COVID stuff is done, aren't these likely to soar, when people get back to normal life, assuming they have balance sheets that will get them through this? It just seems to me that any fundamentally solid business that is only down because of an overhyped virus is, by definition, an extreme value. Larry B."

I think this is good thinking. The problem with hotels, to me, is that they're like airlines. I just don't know when people are going to start using them a whole lot again, and like you say, they've got to have a balance sheet that'll get them through it. And the trouble is, we don't know how long they have to get through, and, you know, they all – look, it's real estate business, they all borrow money to buy hotels, right? And if they didn't borrow the money to buy them, they borrow it after, you know, they borrow against their equity. So, I think it's a more difficult proposition than what you represent, so, perhaps you're thinking, "It goes without saying that you have to do a lot of work." True, but I don't know, right now, if I were to own a lot of hotels. I don't know if I'm there, yet, with hotels, for the same reason, like I said, as airlines. But it's good contrarian thinking, isn't it?

All right, here's David L., and he says: "Thanks for the continued great content. It's always great to hear your thoughts, as we move through extreme uncertainty, and seemingly reality-disconnected times in the market. I think I already know your thoughts on the Buffett Indicator, as it seems to be in alignment with everything you've been saying for months, but I wanted to ask your thoughts on it. Do you think it's indicative of an impending crash? Or do you think the market will keep ignoring reality and move to continue at all-time highs?

"Also, if the market is up for another correction or crash, as inferred by the indicator, do you think BTC and gold will follow again, this time? Or do you think because we have a better understanding of the virus, this round, the safe haven assets will keep their places, alternates to the equities market? Keep up the great content. Thanks for always keeping the average investor in the loop. David L."

Thanks for the kudos, there. The Buffet Indicator, first of all, for everyone, is total U.S. market cap of equities to GDP, and right now, it's around 150%, 150 or low 150, 151, 152, something like that. And in general, historically, you know, the last time it was up way high was, like, you know, 1999 or early-2000 or whatever. So, it's generally a way to say stocks are really expensive. But remember, David, all I say is that you can't time based on valuation, and this is a measure of valuation. So, while I'd like to say, "Yeah, it means a crash is coming," I can't make that prediction.

Timing and valuation, they're just different. And as far as what bitcoin and gold are going to do, if we do get a quick correction or a crash, I think the more vicious and the more rapid the correction or crash, the worse those two perform. Because people get more scared and they just want to go to cash, no matter what. Even if they think gold and silver and bitcoin will hold their value for the long-term, they're too scared. But I would certainly be, depending on the environment, like, if I'm right about this Fed thing and they really do come out and say, "Yep, we're going to keep interest rates near zero for five years, at least," and if I'm right about the wider implication, that that means the fiscal side is going to go bananas and they're going to just print all they money they need to print to spend all they need to spend to try to goose the economy back to life, then, you know, bitcoin and gold and silver, they're going to be great, longer term.

And I think as long as I feel like the environment is like it is right now enough, I'm going to have to be a buyer, if we get a real fast crash and the price of those three things, gold, silver, bitcoin, go down. So, if the market crashes fast enough, I think that's what it's about, really. If it crashes kind of hard and fast enough, and people are scared enough, they'll sell everything, man. You know, everything correlates to one, right, in a scary enough crash, but it's a good question, and you should be thinking about that and you should be mindful of it. Yes, these things go down when the crash gets ugly enough, which is why we say? Hold lots of cash.

I will not let the Fed's War on Saving prevent me from saving and holding cash. I can't do it. Because there's nothing like cash, to diversify in that kind of environment. It's what everybody wants at that moment, so if you have plenty of it before that moment, man, when the moment arrives, you're like, "Hey, I can sleep, I can live, I can, you know, not be soiling myself every 10 minutes."

OK, huge Mailbag, right? One more, just one more: "Dan, thank you for your podcast. I listen to it every week, and I find it very entertaining and educational," says Gabe R. He continues: "I recently saw that there was a shakeup in the Dow Jones Industrial Average. Salesforce, Amgen, and Honeywell were added, and Exxon, Pfizer, and Raytheon were dropped. How bad is this for the companies that were dropped? Does a competing company like Chevron have any advantage over an Exxon because they are still listed on the Dow? Thank you. Gabe R."

Long-term, I don't think this means a lot, but, you know, kind of short- and medium-term, it switches the ongoing so-called passive – which is not really passive, but that's a discussion for another day – the ongoing passive bid switches from Exxon, Pfizer, and Raytheon to Salesforce, Amgen, and Honeywell. So, there's constantly a demand for those three stocks, that is no longer constantly there for Exxon, Pfizer, and Raytheon. And Exxon in particular, I know, is in a lot of indexes. It's in, like – you could find it in – I think it was in, like, value and growth indexes at the same time, that kind of stuff. And of course, in every Dow index, and in – it's still in probably every S&P 500 index, right?

So it's not in the Dow, anymore, so that part of the bid is gone, but, you know, it's still in, pffft, tons of other indexes, so the bid is under there. Pfizer and Raytheon I know less about in terms of where they are in indexes. Overall, I think the fundamentals still matter more than this. In the shorter term, while we have this phenomenon of so-called passive investing increasing its share of ownership in the market, that is supportive of Salesforce, Amgen, and Honeywell. So I guess, in the end, you know, it's not a huge negative, I don't think, for the three that were dropped, but it's a bit of a positive, for the time being, for the three that were added.

And when you say, "Does a competing company like Chevron have an advantage over an Exxon because they're still listed in the Dow?": If we're talking about the S&P 500, it might be different, but I don't think so, I really don't. Time will tell, but I'm guessing not. But it's a good question. And the question in general, Gabe, the reason why in included this is that people should be asking about the implications of equities in indexes, especially the big ones. And really, especially the S&P 500, that's the big one. You know, if these things get dropped from there, you know, when stocks are dropped out of the S&P 500, I think that that redirects more capital out of them than when they're dropped from the Dow.

I don't think that's a controversial statement, I realize, but, you know, in general, the question about passive flows is a very good one, and I'm glad that you asked it. And were very specific about it, too, Gabe. Thank you.

All right, told you I had a huge Mailbag. I hope that you found that as enjoyable as I did. I was really glad to see all the block and tackle investment questions about hotels and insurance industry and passive flows and just all the stuff – the share buybacks, all the stuff we talked about, holding cash, the Buffett Indicator – great stuff. Thank you for that.

All right, well, that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did.

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. Also, follow us on Twitter – our handle, there, 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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Outro:                         Thank you for listening to this episode of the Stansberry Investor Hour. To access today's notes and receive notice of upcoming episodes, go to investorhour.com and enter your e-mail. Have a question for Dan? Send him an e-mail: [email protected].

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