Episodes

Announcer:                 Broadcasting from the Investor Hour Studios and all around the world, you're listening to the Stansberry Investor Hour. Tune in each Thursday on iTunes, Google Play, and everywhere you find podcasts for the latest episodes of the Stansberry Investor Hour. Sign up for the free show archive at investorhour.com. Here's your host, Dan Ferris.

 

Dan Ferris:                   Hello and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value published by Stansberry Research. Today, we'll talk with Matt McCall. Matt is my go-to stock picker, stock picker. He's got an incredible track record with 250 stocks that have returned 100% or more. He'll give us a lot of ideas, including the ticker symbol to one of his favorite new biotech picks. In the mailbag, lots of good stuff – including kudos for our most recent guest, Mark Putrino, and a question about selling – a topic nobody talks about near enough. We'll try to give it its due today.

And in my opening rant this week, I'll talk about what's crazy, what's semi-crazy, and maybe not so terribly crazy in the market today. That and more right now on the Stansberry Investor Hour.  I'm hard-pressed to really put all my ideas into one narrative this week. So what I'm going to do is, I’m going to go through what I'm looking at... and I think it comes together. But I'm not really sure. But there's a lot of cool stuff here. I promise you that. First of all, let's talk about what's kind of crazy in the world.

So one good place to check that out is our friend, Jason Goepfert, who we've had on the program. And he runs a service called Sentiment Trader. I love following Sentiment Trader on Twitter. Jason always comes out with some really good stuff. And he's got this thread on there about the options market because people are just buying call options like crazy. It's sort of like, you know – we think it's like retail. He says it's a retail momentum-oriented crowd. You know? They see options, call options specifically, as easy money. You know, when the market goes up, they sort of buy every dip, and they buy it with call options.

And he quoted an article. He says, "My take is, it's less SoftBank," – there's a big story about SoftBank driving the options market – "And it's more about the activity of retail momentum-oriented crowd." That was on September 14th. Also he said, "There is definitely demand from small investors who began to see this as a money machine. And then, he cited another article from the Wall Street Journal, also September 14th. And the article says, "In the week ending September 4th alone, small traders shelled out $11.5 billion this way," – that is for options – "An all-time high 9 times last year's average.

To put that week's bets in perspective, in all of fiscal 2019 Americans spent $91 billion on lottery tickets. So clearly there are a lot of folks gambling in the stock market, and they're doing it through call options. On September 12th, Jason posted, "Speculative options activity dropped off last week." He said, "That's the good sign. The bad sign? It's still higher than any other peak in 20 years." Right? Going back to dot-com days. So this is dot-com-like in many respects. We'll talk about another one in a second.

But certainly, in just small investors viewing the market, it's easy money. And dong it with like options is kind of extra-scary because of the reputed leverage there. The next thing I want to talk about is the Snowflake IPO. Snowflake is a – it's like a cloud-computing company. And it's the only tech IPO, I think, Berkshire Hathaway has ever invested in, maybe the only IPO. But Berkshire Hathaway owns some of it, and they're going to buy more of it at the IPO price. And MarketWatch has a good little blurb about it here. And I've read through the IPO perspectives, but there's a good little blurb here in MarketWatch that basically sums it up.

And it says, "Snowflake produces database software that uses the same standard as Oracle but can be used in the cloud and scaled up or down as needed with variable pricing to match. While large U.S. cloud providers like Amazon, Microsoft, Google offer similar services, Snowflake is the only standalone company offering such software to run on all of their cloud platforms." Yeah, it runs on their cloud platforms and only those platforms. And it says in the IPO perspectives, a substantial amount of their business is running on AWS – the Amazon Web Services platform.

And it also makes clear that it competes with those companies. Right? So it runs on their platforms. It's their customer. It's also their competitor. So I'm not going to make any predictions here. I think, you know, the IPO is priced at $120. That looks like about a total market value of something like $33 billion or so. It looks like about 55 times 2020 revenues. That's if I just take the first half of 2020 revenues multiplied by that first-half growth rate. You know, if I just take the whole of last year and multiple it by the growth rate for the first half of this year. I get around $600 million in revenue. Right?

So just roughly, I'm calling it 55 times revenues. Just, you know – it's a ballpark. It's a guess. But it's a big number. I think any credible way of figuring out that number is going to get you a big number. Right? That's the way these things work. It's a big, fast grower; no profits yet. But it could – at that growth rate, at 130% revenue growth, who knows? It could grow into that valuation. But that's the way these things roll. I'm not going to criticize a valuation. It's high, period. But my take on this is that I can't say I have confidence in what the business model looks like in five years. I mean, you know, the revenues are something like – I said maybe it'll be $600 million for 2020. And it says a significant amount of the revenue goes to Amazon.

So there's – a significant portion of their revenues come from their system working on AWS. So, you know, it's kind of dependent on them, right? They only exist because they run on these other three services – mostly Amazon. So, you know, if you're these other services, you say, "Well, sure. These guys are competing with us a little bit. But they're a big customer." And that’s weird to me because I don't know... if this thing really continues growing like this and becomes a huge business, it's a huge customer and a huge competitor. What does it look like in five years? Does Amazon hate it in five years, or do they love it, or somewhere in between? I don't know.

I don't want to guess at it, but there's uncertainty to me in how relatively kind of medium-term – I guess you could say – future looks like to me. But it is, right now, as MarketWatch points out, the only standalone company offering such software that runs on all of these platforms. So it's suggesting that it's kind of commoditizing this, right? Because I assume that if it's a competitor, it's going to undercut them on price. I'm just assuming that. Maybe it will, and maybe it won't. Obviously not looking too deep into it.

But when something goes public for 55 times revenues, you know, it's nice to just kind of dip in and find out what's going on. The next crazy thing is that, as I speak to you, Kodak is up 55% or 60% – again. I got nothing to say about that. I think that whole situation is insane. We went over it in detail several episodes ago, and it's no less crazy. Even if they do get their $760 million government loan, to believe that loan is going to produce some new, sustainable, profitable business of providing pharmaceutical ingredients to service the pandemic – like, pandemic-focused business models in pharma stink. That's not a sustainable business model.

So who knows? I mean, it's not a drug company. Whatever, I think it's crazy. I think it's just people, you know, on Robinhood bidding the stock up. Now, I rarely do this. But I have to get into some of the insanity in our culture. And I'll do it quickly. Because I couldn’t ignore – some stuff is too insane for me to ignore. There's an article on fox.com about how Beethoven's 5th Symphony – it says, "To many, Beethoven's most famous work is a symbol of exclusion and elitism."

And the authors of this are serious. They say, "Since its 1808 premier, audiences have interpreted the progression from struggle to victory" – you know, it starts out very ominous and ends up in a glorious major key melody at the end – "as a metaphor for Beethoven's personal resilience in the face of his own coming deafness." Right? Beethoven was going deaf. Personal resilience, coming out into music; one of the sublime works of art in all of history. It's a great narrative to just lay over top of this beautiful piece of music.

But these guys in this article, they say, "That's been the popular read among wealthy white men who embrace Beethoven and turned his symphony into a symbol of superiority and importance. For others, women, LGBTQ-plus people, people of color, symphony may be a reminder of classical music history of exclusion and elitism." This is the dumbest thing in the world. This article is too stupid for me to finish. But that's the world we live in now. We also live in a world where, in Seattle, they gave this guy and his little group $150,000 to call him a street czar.

And as best as I can figure out, they're paying him to negotiate with people who commit violence in the streets of Seattle. Look it up. You tell me. You tell me. His name is Andre Taylor, and his brother Che Taylor was actually killed by the police up there in 2016. So, you know, they're going to give this guy a bunch of money because he knows who to talk to, to keep violence from happening in the streets. So there's a lot that's crazy. IPO's at 55 times earnings that Berkshire Hathaway is buying? Whatever, crazy. To me, it's a little crazy. Kodak – people are buying Kodak again. Our culture is weird. It's a weird moment.

As I look around me, everything in the Pacific Northwest where I live is on fire. I saw a picture, and the sky was red. It looked like the sky was on fire. The cities burn at night when people are rioting. The forests are on fire because they mismanage them. It's a weird time. Come on, 2020 is a crazy year. Right? That’s not a controversial statement. However, there's a lot to be optimistic about. I read a really cool article by our former guest on the program. It was episode 100 – Morgan Housel.

And he wrote an article in August, almost exactly one month ago, called "When the Magic Happens." And he points to many technologies, like cars and airplanes are two of the biggest. And he says, basically, these things were invented, and nobody cared about them. They were little trifles, and people said, "Oh, well, that'll never be a big business. Nobody's ever going to care about your little airplane, Orville and Wilbur Wright." Or the automobile, "Oh, it's a horseless carriage. Isn't it cute?" These things were only developed into huge businesses because the military found them useful, and a huge crisis happened that required the mobilization.

And it required weapons and the ability to move weapons systems on the ground and in the air, so they were developed. The government poured money into them, and voila. Cars and airplanes became much more highly developed than they might have been otherwise. And he just pointed – the general gist of the article is that times of crisis do that. And he put up this one statistic. It's the total factor productivity growth. And in decades from – or actually, he's got 20-year periods from 1901 to 2007. Oh, I see there's different... he's actually got different lengths of time. There's 20 years, seven years, 10 years – just different lengths of time based on what happened in history.

So the period 1929 to 1941 was the highest total factor productivity – the highest productivity growth that we'd seen between 1901 and 2007 from all these periods that he's segregated in this chart. So in other words, when the chips are down, when we're in crisis – especially in a market economy – it kicks us into gear. And it spurs innovation and spurs us to be as productive as we possibly can. That makes a lot of sense. That's one of the great things about a market system. I wouldn’t say a free market system, but markets in the United States seem to be getting a little less free all the time.

And yet, they're still so robust. It's like you really, really have to try hard to hurt them. Point being this is such a time, and we've got all these bright minds right now working in biotech. They're trying to find a vaccine for coronavirus, for COVID-19. And that will produce – you can bet that'll produce some kind of really valuable innovation. I said a moment ago that the business model of pandemics – right, the pharma business model in pandemics – is no good because it's not sustainable. But it doesn't mean that that won't lead to other innovations that are more sustainable and will be of great benefit to humanity on a longer-term, more-consistent basis.

It's just how it works. You know? 10 years, 15 years from now, some yammering guy like me is going to be yammering about the wonderful things that we built and innovated and created during this time. I came across another article that made me – another two articles – in the Economist that made me really optimistic long term. I've mentioned a book a few times called The Mystery of Capital by Hernando de Soto. And there are two articles in the Economist recently. One of them's called "The Quest for Secure Property Rights in Africa," and the other one is called "Who Owns What: Enforceable Property Rights Are Still Far Too Rare in Poor Countries." Now that is true.

But the article points out that for – the one I just mentioned – "Who Owns What" – it points this out. It says, "Since his book The Mystery of Capital has published, its ideas have spread. Indonesia, Thailand, and Vietnam have produced vast titling projects. Mapping and registering millions of land parcels, India wants to use drones to map its villages. Ethiopia has registered millions of tracks. Rwanda has mapped and titled all its territory for $7 per parcel thanks to cheap aerial photography. Studies suggest the titling has boosted agriculture productivity, especially in Asia and Latin America. The World Bank wants 70% of people to have secure property rights by 2030. What a good goal...

Because, as de Soto points out, that's not just property. It's capital. Once you have clear title to your property, you know, it becomes capital. You can use it as collateral and borrow against it. There's a nice – in that article called "The Quest for Secure Property Rights in Africa," there's a great story about a grandmother in the outskirts of Cape Town, South Africa, who said the value... basically, what she's doing to her property, she's putting up eight studio flats in her backyard that she will rent for approximately $177 a month, and there's a startup called Bitprop that helped her do it and would get some of the revenue until they're paid back. That's really cool to me.

And she did this because she is capable of demonstrating the ownership to her property in a way that she might not have done before. Okay? That is really cool. It's also really cool to me, as Bespoke reports, the U.S. now exports more energy than it imports. Trade is good. If you're trading with someone, you're less likely to be fighting with them. So overall, more trade is a good thing. The next thing I think is good is going to knock your socks off. You're going to say, "You're an idiot. It's not good!" It's the next presidential election. If I'm correct, in 232 years – the 59th-such – very likely once again peaceful transition of power.

This is a big deal. We focus on the short term and the squabbling, and maybe this will be a, you know, contentious election. We're sort of gearing up for that. Who knows if it will or not? But it'll likely pass and be another peaceful transition of power. It's a peaceful transition of power even if the incumbent remains in office, right? Because you're holding an election, people are okay with the results of the election no matter how much they yammer about it on TV, and life goes on. And it's one of the ways that you get a peaceful society where you can get all this innovation happening during a crisis.

So I just think there's a lot to be optimistic about long term, and you don't want to lose sight of that. Is the U.S. dollar likely toast? Well, long run, sure. The Fed has – Jerome Powell gave a speech. His speech on August 27th, right? His Jackson Hole speech where he says... he admitted that inflation is bad for people. It's a burden. "Essential items like food, gas, and shelter," he said, "cost more." And especially people struggling with lost jobs and lost incomes, he said. "However," he said, "Inflation, inflation, inflation. Low inflation is bad," and he wouldn’t say why. He talked in circles after that.

And the truth is, low inflation is bad for his desire to see asset prices higher because that helps him and his rich friends. Period. That's the motivation. He's a human being. Don't assign him any different motivations than other human beings. He's just like the rest of us. So look. I understand all the worry. I do. And I have it, too. And, yes, I'm the guy who says, "Hold plenty of cash. Hold gold and silver. Hold bitcoin. And if you're doing those things, you're covered. Just hold them." But in the rest of your portfolio, look around in the world. Who knows? Maybe Snowflake is a really fantastic company.

And if I dive deeper, I will want to join Berkshire Hathaway and buy some at the IPO price. Whatever the case, in that other part of your portfolio, that's where you need to look around and see people getting up, going to work in developed, relatively still free economies, putting one foot in front of the other, innovating, creating, taking real risk. That's why I haven't said sell it all. I've only said basically hedge with these other assets. But don't sell it all. Humanity will ascend as it has since... you know, for hundreds of thousands of years now.

So that's my message for today. I said I was having trouble putting it all together, but I think it has come together. There's plenty to worry about at any given time, and I think you should reflect that in the assets you're holding now. But you should also reflect the good things that are going on in the world and that I believe will continue to go on in the world. That's the rant this week. Write in. Tell me what you think about each, all, none, whatever – any of these things that I've talked about – at [email protected].

And we'll talk about them again, I’m sure. I'm sure we'll talk about all of this stuff again. Now I can't wait to talk about a guy who is a great stock picker for exactly the sort of things I'm talking about. We couldn't have picked a better guy to talk with. Matt McCall. Let's do that right now.

 

Hey, guys. I wanted to let you in on an opportunity that my friend and colleague, Dave Lashmet, has found. Dave and I are among the very first people Porter ever hired when he started Stansberry Research more than 20 years ago. Dave is wicked smart and one of the premier biotech stock pickers on the plant.

Just this year, he recommended Inovio Pharmaceuticals to his readers before it soared 1,139% in just four months. He also showed his readers how to make 777% gains on popular chipmaker, Nvidia. Since 2015, Dave has had 19 picks in his portfolio double in price. But today, Dave says he's found a tiny drug company that's discovered a medical breakthrough that could dwarf all of those gains. He calls it his pick of the decade, with 20 times potential because it could have the power to cure a disease affecting millions of Americans.

And I'm not talking about COVID-19. This disease leads to 10 times more deaths than COVID-19 every year, and Dave says up to seven out of 10 Americans could be prescribed this new drug. This drug has the power to change the world and solve a global crisis that has been creeping up on Americans in particular over the past three decades. But Dave also warns that this breakthrough won't stay a secret for long. This small firm is going up against some big pharma companies. But the trial results of their drug are performing better, and they're primed to hit the market first.

Dave created a short video where he explains how one company a fraction of the size of other big pharma companies made this big discovery and how it could mean 20 times gains for you. Keep in mind, Dave's research isn't cheap, and it's not for everyone. But with the potential of 20 times gains, it's worth it. Go to www.investorhourtech.com where Dave gives you the full details. Again, that's www.investorhourtech.com.

Time for our interview today. Today's guest is Matt McCall. Matt McCall is the man behind several newsletters at InvestorPlace, Investment Opportunities, Early Stage Investor, Ultimate Crypto, and more. He has identified over 250 doubles in the last 12 years. That's 100% or more in the last 12 years. And over 20 stocks that have gone up at least 10 times. Matt is my multi-bagger guru. I can't wait to talk to him. He's also the author of two books and a former host of a Fox Business show. Matt, welcome back to the program.

 

Matt McCall:               Great to be here. Thank you so much, Dan.

 

Dan Ferris:                   Okay. So this is like – to me, this is the perfect time to talk to you. Because when I think of Matt McCall, I think of the true, you know, long-term stock picker, stocker picker. And obviously, we've just read about your track record. So, you know, there's plenty of evidence that I'm right about that. But right now is an interesting moment because we're less than two months away from an election that our readers are actually writing in and asking, "Should I sell everything? What should I do?" They're worried about the outcome because both sides might question whether or not the results are legitimate in this election, people think. And I think you're the perfect guy to talk to because – I'm just guessing what your answer would be. But what would you say to that reader? How would you answer that question?

 

Matt McCall:               Well, I'll tell you a quick story first, and then I'll answer it. The story has to do with when Obama was elected. I was working at Fox News at the time, and obviously they lean to the right. And a lot of my clients at the time at my money-management firm happened just to lean Right beause they found me through Fox, and it just... however, it worked. When in reality, I'm about as middle as they come. But I had a lot of clients call me the week after Obama got elected and said, "I want to sell everything and get out of market." They had no other reason to do it other than the fact they didn't like Obama.

What they failed to realize is, there's a major disconnect from politics and from the long-term return of the stock market. And if you look in history, actually Democrats do a little bit better as far as presidents when it's correlated to the return of the stock market. But to me it doesn’t matter because at the end of the day, the majority of the time, the president doesn’t have as much influence as many of us think. Maybe because of Twitter these days, our current president gets out there a little more. But, you know, you look back on the people that I had to talk off the edge that didn't like Obama.

But I said, "Hey, listen. The economy's still about to take off here. And if you would've sold when Obama became president, you would've missed out on eight fantastic years in the stock market." So you would've done that. Look at this year, Dan. You know, I really, truly believe it's a coin toss. And I think you're right. It's going to be contested no matter who wins, and that's going to be messy in the short term. However, the themes that I invest in do not matter who the president is.

And I think whoever wins, long term, it will still be good for the economy and good for the country and good for the stock market. Whether it's Biden or Trump, 5G is going to continue to expand. Whether it's Biden or Trump, there's going to be more electric vehicles on the ground than there is today. No matter who it is, there's going to be more artificial intelligence moving. Do you think the Internet of Things is going to stop connecting devices because Biden wins or Trump wins? No. Of course, there'll be certain sectors that outperform and do better under certain, you know, candidates. But at the end of the day if you're a long-term investor, you have to look past this BS. And if anything, any type of volatility in pullback's create great opportunities to buy into great long-term companies.

 

Dan Ferris:                   Matt, is there a dip you won't buy? I mean, you are the most optimistic, long-term guy I know. I mean, when does Matt say, "Oh, boy." When do you get scared? Do you ever get scared?

 

Matt McCall:               I think, yes – you know, it's funny because I'm a hypochondriac in real life. So I am scared 24/7. So I try to – and it's funny because I'm a hypochondriac in real life, and I'm very impatient in real life. But when it comes to the stock market, it's the exact opposite. You know, it's tough to really scare me, No. 1. And No. 2, I'm the most patient man in the world – which is crazy. Because if you ask anybody in my family, they would never agree with you. But there are times that I have been scared. And don’t get me wrong. During the February/March pullback, there were a few days there where you feel like it's never going to end.

But I had to keep thinking and reading back in history, looking at charts over the last 100 years, and realizing that this is more of a black swan event versus a more structural event. 2008 and 2009 was more of a structural event to me. So that scared me quite a bit. And we did raise a lot of cash in late 2008, and we started getting back in in 2009 – early 2009. But we didn't get back in fast enough, to be honest with you. We should've bought a lot more in early 2009, and we didn't.

So that was the last time I was truly scared, Dan. The 2000 pullback was – I just started working at Charles Schwab in May of 2000 in Denver. So I was still kind of green then. So I was so young I didn't get scared. But 2008 and 2009 was the last time... and I always tell clients that I'm okay to move to cash. I'm not going to be the guy to start shorting stocks. I’m okay to move to cash from reserve capital if I see something that's going to be a prolonged pullback on the horizon.

With what's going on now with the stimulus, with the Fed being on our side and central banks around the world being on our side... And I don't know if you saw the charts recently, Dan. The amount of total checkable deposits here that the Fed puts out has skyrocketed from like $2 trillion in the beginning of the year to $3.5 trillion; insanely up, over 70%. And when you look at the total savings deposits, up over $12 trillion. Even Canada. Canada, which normally has a savings rate in the low single digits, last quarter their savings rate was 28.2%.

So we have so much money in the sidelines right now, and we know what's going to happen with that. We should save it, but we know as Americans that we will spend that. It's going to go into the economy, it's going to create demand for new products and services which creates more demands for jobs. And it's a trickle-down effect. So to me, I think it's a great opportunity to buy into any type of volatility and pullbacks.

 

Dan Ferris:                   Wow. That's a great answer. Your excitement is palpable. It's really good. So is there any particular trend that you're particularly excited about for the next, you know – I don’t know – five, 10 years? Where is your highest conviction, is really what I want to know, in the stock market?

 

Matt McCall:               That's a great question. I have a lot of them. But I'd say, you know, No. 1 has to do with health care. In December of 2019, I put out my 2020 outlook, and I called it the "Year of Biotech." And we all know biotech's had a hell of a year. Even when the market was getting crushed, biotech was up. And I kind of changed my tune a little bit during my COVID-19. I said, "Actually, I'm wrong. It's the decade of biotech." I really think that the biotech sector and the future of health care, as I like to call it, is the way to go.

 

My Early Stage Investor – which is my small-cap newsletter that goes out once a month... It goes out on Wednesday nights – I was finishing up this week, and I was going through and writing, you know, our Chinese Biotech portfolio has four stocks in it. We always do baskets because I don't know what stock's going to be the best stock. That portfolio has been around now for a year and a half. It's, on average, up 125%. The future of Health Care portfolio has been around for just over one year. It's up 200% on average. That is where I'm seeing the biggest gains. Genetic Testing portfolio's up 143% on average. That is where it is.

To me, the keystone for all this will be genetic testing. Because we can't have precision medicine or preventative medicine or gene therapy without genetic testing. And I believe that within the next five years all good health care plans will require you to get your genome sequence because it's gong to lower insurance costs, lower health care costs and truly help you live a lot longer. So anything to do with the future of health care, to me – Teladoc Health is one of the first stocks I bought in that realm back in early 2018.

And we all probably know about Teladoc now after COVID-19 because the stock's up huge... and actually bought one of my other favorite stocks, Livongo Health, and they're merging. So two of the stocks that are really telehealth and everything – and what we're seeing happening is, we all kind of knew the future of health care and biotech had just such amazing upside. But COVID-19 has brought that to light because there's a great potential we'll have a vaccine by the end of the year.

How did we get there so fast? Well, we were able to take COVID-19 and use genetic testing to break it down right away off the bat. As soon as it came from China, we were able to break it down within a week. Boom. We knew what it was. We knew what we were going after. And then from there, it shows how quickly we can actually come up with a vaccine. We have a company and a portfolio which uses – It was a software company. It's been around for decades now. Bill Gates is actually one of the investors in it. And it's shifting now to health care.

So it uses artificial intelligence of drug discovery to come up with drugs. It has done over 1 billion little tests this year alone. Think how long it takes a scientist to do that. I mean, in my opinion, in five to 10 years if something like COVID-19 comes along, within weeks if not a month we will have a vaccine ready to go at the latest. This will get rid of all future pandemics because of your matching artificial intelligence, machine learning, quantum computing with the data that we have to have the future of health care. It's going to be fantastic.

 

Dan Ferris:                   Wow. I'm so glad you talked about that because I started out the show today talking about how, especially in a relatively free market economy, during a crisis we marshal our resources and kind of crank up the innovation machine, and something great always comes out of it. So I thank you for kind of clueing our listeners into what that something great might be this time around. But I want to talk about something else. You did this video with our Stansberry colleague, Steve Sjuggerud. And you're my long-term optimist guy. But the topic of this video is the final bull market dot-com. And I'm just struck by how – when I think of Matt McCall, I think of the guy who never says final bull market because it's just, you're bullish on humanity for all of time. And I am, too. But tell me. What's the thought process – what does that even mean? Final bull market. Why is it called that?

 

Matt McCall:               It's probably a marketing thing, to be honest with you, Dan.

 

Dan Ferris:                   Yeah.

 

Matt McCall:               You know? It looks good for marketing. But no, seriously, so Steve and I, we're on the same page probably 90% of the time. We have similar views – you know, just like you, Dan, we're optimistic on the future. And we believe in America. We believe in the good in people and the good in companies and that long term, the place to be is in the stock market and not trying to time and trade and options and all that stuff. So I think we're very similar with that.

So Steve and I – I met him a couple years ago – we've always hit it off. So we've done a couple videos together. And the one difference is, Steve's Melt Up, he believes, maybe lasts a year or so – this last big rally before the current bull market ends. And if you take the blip from COVID-19, you can say we're still in a bull market. And I agree that we are setting up for a big, big rally for the next 12 to 18 months. As I mentioned, all that money in the sidelines, the stimulus, and the low interest rates all take hold, and just money rushes into the market. Where we differ is, I don't think it's the final bull market.

I think that we are entering what I'm calling the "Roaring 2020s." I think the 2020s will be very similar to the 1990s where, from 1982 to 2000 was truly a bull market. But from 1982 to 1990, we had about an eight-year bull market and then we had a bit of a pullback in the early '90s. We actually had a bear market; a blip. Not as deep as this one, but we were down just over 20%.

After that, we had a convergence of so many technologies coming together, and then that propelled the '90s to be the greatest decade in the history of the U.S. stock market. I think we're setting up for extremely similar where we just had a 10-year bull market, a little hiccup, pullback, kind of reset if you will, and then takeoff. So Steve and I both agree the next 12 to 18 months will be fantastic. At that point, he thinks that we could slow down. I think, yeah, we could have a natural correction. Typically about 1.5 to 2 corrections a year... pullback between 10% and 20%. That's normal. Those are buying opportunities, as you mentioned, for me.

But I think that the 2020s will be where, you know, I talk about 10-baggers, 20-baggers, 50-bagger stocks, and people think I'm nuts. But it's possible. As a matter of fact, we recommended Workhorse – which is probably seen in the news now – May 1st at $2.74 a share. And right now, we are closing in about 40 cents away from a 10-bagger in literally four and a half months. So it is possible to make these kinds of returns. And I think in the Roaring 2020s that these returns will be – I hate to say the norm – But all you need is a couple of them. And as you know, your portfolio is set because not all are going to be big. You're going to have losers. I realize that. But a couple of these big winners, and your portfolio is set. So long answer to your question, Dan, to me, the final means – the next 10 years. These next 10 years could be the most amazing of the bull markets we'll ever see.

 

Dan Ferris:                   Wow. You and I are definitely on a different page there. And to hear you talk, I’m sitting here going, "Hmm." You know? I'm more likely to think I'm wrong than you're wrong. Yeah. I mean, it's... well, maybe you can school me here a little bit. Like, to me I see exorbitant, higher-than-dot-com valuations just in the big indexes. But that is not a problem for you, is it?

 

Matt McCall:               No. I mean, you can look at specific stocks in the indexes, and the problem that's happened is, the indexes have become so heavily weighted on the big companies that they might be out of whack to me. But a lot of stocks and companies that I look for are more in the small- to mid-cap range where a lot of their valuations are still really attractive to me. You know, a lot of the stocks that I come up with, and you probably wouldn't agree with me, but I look at them as obviously growth place first.

But, you know, I'm looking now for earnings and revenue projections out to 2024. So four years from now is where I take a look and try to model a potential target off that. And a lot of my stocks that I've been adding, you know, based on the growth of revenue, some of them are turning profitability soon, some may have just hit profitability... and based on 2024 prices, they're extremely cheap. They may be expensive price to sales right now, but I'm investing for the long term. And when you have high-growth stocks, historically speaking, they will be granted much higher multiples.

So I agree with you. I could pick a number of stocks – even Apple, which was cheap for many, many years and I own for clients, and we've owned for years, and I'll continue to own it – is now not cheap anymore. It’s not extremely overvalued, but it's not cheap by any means. And its growth is flowing. So yes, I agree with you, but I think there are enough stocks out there in some of these hyper-growth trends such as 5G, the future of transportation, the future of health care.

And they will be warranted much higher multiples down the road as well. You always find in a basket stock, that had very high multiples, it would be overvalued. I just don't see us being anywhere near the frothiness in general that we had back in 1999 and 2000. This week's a pretty interesting week. It's the biggest week for IPO's since Uber, which was about a year and a half ago.

And a lot of people were – I'd seen articles equating us back to 1999 and 2000 and, you know, all the IPO's that went out then, I said, "Listen, these companies are actually... they're great revenue. They're making money, a lot of them. This isn't Pets.com. It's a different world we live in." So I just think we have to look at things much differently right now. But again, hey, I may be wrong. We may be setting up for one of the greatest bear markets ever. But, you know, until then, I'm going to stay strong and long.

 

Dan Ferris:                   Matt, I didn't expect you to say anything else. It is an interesting phenomenon. Those five largest stocks are bigger as a percentage of the index than the five largest have ever been. So it really does distort things quite a bit. So I'm inclined to ask just a general question to you about macro. Do you care at all – like, do you care at all about the Federal Reserve? We know you don't care who's president, and that's an easy one in my opinion. That's a short-term thing. But what about the Federal Reserve? What about interest rates being pushed down to zero? You said earlier the Fed's on our side. Tell me what you mean by that.

 

Matt McCall:               Sure. I mean, at the end of the day, it's cheap money. And that's making things very good for corporations; granted, it's not great for savers because obviously you can go to the bank and get zero on your checking account or savings account. But it is good for people that are in the stock market. Historically, low interest rates will help your valuations of your stocks look better. You know, I'm not as much a fundamental guy, but obviously I know how to run the numbers.

And when you look at an interest rate basically at zero, that's going to help your valuations for equity. So I think the other thing when I say the Fed's on our side... that people keep saying they're out of quivers – you know, arrows to shoot. They'll come up with something else. You know? They will grease this economy as much as possible. Obviously, if Trump stays president, he's going to continue to grease the economy. I think we're going to have a really big infrastructure bill come out that's going to create jobs and tend to do really well. If Biden becomes president, he wants to keep this thing going, too.

So he's going to have the Fed stay on our side and have a big infrastructure bill and continue to grease it as well. So I just think the government and the Fed – I know they're independent – are behind us. And with low interest rates, where the hell do you go? You know, I've had clients come to me in the last couple weeks and say, "You know, I want to get income." I say, "I can build you a corporate bond portfolio and we ladder out, but it's held under lock too long because interest rates should go up, but will they go up? I don't know."

And with interest rates so low, I think you have to be – even the best-looking house on the ugliest block is still equity. So I think you have to look at equities at this point. And I know valuations here are stretched, obviously. But you look at emerging markets – which we have a lot of exposure to. You look at Europe. I know people are scared to death of Europe. Valuations are pretty damn attractive over there, too. So there are other places around the world that we can look in this situation where central banks are just as accommodative.

 

Dan Ferris:                   Okay. Speaking of places where central banks are just as accommodative... I sort of set you up here, Matt, because what I was thinking even when I asked the previous question was, "What about the example of Japan?" More than anybody else, they kind of demonstrated this sort of pushing-on-a-string phenomenon of a central bank working its tail off to stimulate an economy that simply will not respond. And that lack of response reflected in a huge, long bear market for many years. What are the odds you think that – obviously, you seem to be indicating you think the odds of that happening in the United States are poor. Right?

 

Matt McCall:               Yes. Yeah, I mean, I think it's poor. But, you know, there are a couple things here. You have to look at the currency, too. You know, if you look at the Japanese yen, through the late 2000s into like 2012, the yen was moving up; where we had the U.S. dollar moving down. And I think that's a good thing because it's great for our exports. So I think we're going to continue to see the dollar stay low. And that will be really good for exports. The other thing Japan had an issue with was aging population – which we do as well.

Don't get me wrong. Baby Boomers are aging as well. But now our largest population is the millennials... if they ever decide they want to work is. But their productivity in Japan really dropped. And I think productivity here will stay strong not only due to the fact that we have a little bit different attitude. I also believe that we're going to have a manufacturing what I call a "4.0" coming. And that is going to be built all around automation, 3D printing, robotics. And people say, "Well, it's going to kill jobs." Most studies show it doesn’t actually kill jobs. It creates jobs in different areas.

So I think productivity will stay very strong here. I don't want to really disconnect ourselves from the rest of the world. I think that's a horrible idea, personally. But I know we're going to see the supply chain change because we saw it happen with COVID-19. And with 3D printing and with automated manufacturing, we'll see the supply chain stay here in the United States. So I think we're going to see a manufacturing move here in the next 10 years. And that's going to make it much different than Japan, where we'll be able to rely on ourselves for many, many things.

 

Dan Ferris:                   Well, I'll tell you, Matt. You're convincing. I may not totally agree. I may not totally agree, but you're convincing. And I'm not the guy with the 250 doubles under his belt. So actually, we are getting close to the end of our time already. But if I were to ask you just to leave our listeners with a single idea – it could even be like a stock recommendation or a sector or just a single thought to leave them with today – what might that be?

 

Matt McCall:               Sure. Man, I have so many stocks I'd like to share. It's tough. But I'll share with you one that you've probably never heard of. And it's going to go back to the biotech that I talk about. But it's a Chinese biotech company. I first revealed this in Beijing when I was with one of our producers – Justin – over there. And this is called Zai lab. Symbol ZLAB. So it trades here in the states. This is an example – the reason I'm bringing this up is because it's an example of the growth potential of a company. It's about a $5.8, $5.9 billion company right now.

And as you know, with biotech's a lot of times you won't see revenue for the first couple of years. Well, last year this company had revenue of like $13 million. So obviously very, very little. But if they meet where I think they're going to, four years from now, they should be generating close to $1.3 billion dollars in revenue. So that's what you talk about growth. You're looking at annual revenue, growth going out in the next couple years about 62%; earnings looking to have about $6 a share by that time. And again, it's a stock that's $81.

But if you're trading at $6 a share and you're growing like that in a biotech sector, you're probably trading at 40 times. And I'm not saying that that's normal, but you should be trading at probably 40 times. You know, 40 x 6 – you do the math – you're looking at a triple from here. So that's the kind of company that I try to find. And it's great because a lot of people don't know about it. Once the big hedge funds, everybody finds out about this type of company... it's fantastic. And they've just gotten recently a lot of approvals.

And what's nice is, it's not just in China. They have drugs in the pipeline here in the United States as well which we're seeing for the first time ever – companies from China actually coming here with drugs. The amount of data they have over there and the artificial intelligence they're using to come up with new treatments is fascinating to me. So that's one. And one other last thing – you know what's hot right now? And I'm sure you gotten a lot of questions about this, Dan, is SPACs: special purpose acquisition companies. They're like the hottest thing in the world right now. And I own some for clients. I own some for myself. I own some for subscribers. And a lot of them are electric vehicles. Let me just put it like this... I think the future of IPO's will be in SPACs because I use to own equity crowd-funded company to help companies go public.

 

These investing firms fleece companies, fleece investors. It's ridiculous. The SPAC way is so much more efficient and cheaper and better for the investors – and for the companies, in my opinion. So they will be around. That being said, there's a lot of hype on them right now. For every amazing SPAC out there, there are three terrible ones. So don't just buy blindly. You have to make sure you know what you're getting into when it comes to that.

 

Dan Ferris:                   Okay. And I also just want to remind all our listeners again to check out www.finalbullmarket.com. It's a video with Matt McCall and Steve Sjuggerud, and they're discussing what – I think, like Matt said, probably the marketing guys are calling the "Final Bull Market." And both Steve and Matt – like Matt said – they agree 90% of the time. So if you want a reason to be really bullish and find out, you know, specifically what to be bullish on, www.finalbullmarket.com. All right, Matt, it's always a pleasure to talk with you. I certainly hope we'll be doing it again sooner rather than later.

 

Matt McCall:               Thank you, Dan. It's always a pleasure, and I need to get you back on my podcast very, very soon. And let's do that, you know, as soon as we can. But it's always great talking to you. It's always great, you know, talking to somebody who's open to my crazy ideas. So I appreciate it.

 

Dan Ferris:                   Oh, not crazy at all. And very open. Absolutely, Matt. So we'll see you again soon.

 

Matt McCall:               Okay. Thanks, Dan.

 

Dan Ferris:                   That was really great. I love talking to Matt. Obviously, any investor should love talking to a guy who has had such success in the stock market over a long period of time. He gave us some really great ideas, even a specific one – a specific ticker symbol, ZLAB. $ -billion market cap company, but as Matt discussed, it's got pretty big potential if it gets discovered by a new class of investors. Pretty cool. All right. Let's check out the mailbag. In the mail bag 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 every word of every e-mail you send me, and I respond to as many as possible. Thank you for all the e-mails about the passing of my mother. I really appreciate it. I love the relationship we have on this program. I talk to you, you talk to me, we interact. It's great. One thing I will tell you... I was talking about how a personal crisis like this can sort of – it upends you. And even though it's sad and tragic, it's a normal part of life. And it's valuable, therefore. Right? It's a normal part of life. And therefore, dealing with it is valuable.

And one of the things that has changed for me a little bit – and I admit it's an ongoing change as I get older, I'll be 59 in a couple months here – one of the things is that, at some point in your life, you just kind of say, "This is my life. This is who I am. This is what I am." And if you've noticed, I started out saying, "We're not going to be that program where the host foams at the mouth and criticizes the listener too much.

But I've broken through that a couple times, haven't I? I've kind of – I just couldn't stand it because people were accusing me of things I thought I wasn't doing, or they were saying things that were... I thought were just too foolish that were usually critical of something I was saying. And I broke down a little bit. And so, from now on, increasingly, you may hear that kind of stuff. I'm not saying you will, but you may, because this is who I am. And you're stuck with me. If you sign up for the Stansberry Investor Hour podcast, for now, you're stuck with Dan Ferris and that's what you get. Okay?

First e-mail this week is from Michael L. He says, "Hi, Dan. Longtime subscriber to Extreme Value. I wanted to share how much I enjoy your show – particularly this last episode with Mark Putrino. I wonder if in your recommendations, can you also describe what condition you would sell in addition to the 25% trailing stop? Thanks, Michael L." Michael and listeners in general, never stop asking this question about selling.

Because you don't make anything... everyone wants to know what to buy. You don't make anything when you buy. That's when you spend. That's not when you gain. You gain on your holding and your selling. Right? That's when the money is made. It's made in the holding, and it's collected in the selling. And if you don't sell, you can lose what you made. So the conditions under which I would sell... most of the stuff we do in Extreme Value – let's talk about that first. This is a really good business that we've been keeping an eye on.

And for some reason, the share price is down. And it dips into a valuation that is more attractive to us. And what we usually – our analysis usually comes up saying something like, "The market is pricing in flat, zero, or low growth." And we think this company has a lot more growth in store over the next five or 10 years. So we think it's too cheap right now. You know, that's our buy thesis. So the sell thesis is, we were wrong about the business period, or we were wrong about the growth trajectory. I won't tell you... it's one of our big recommendations.

And I like to keep as much of Extreme Value just for readers as possible because they pay a lot of money for it. But I will tell you one of our big recommendations from a while back. We have put a hard stop on it, and we think that the growth prospect is not nearly what it was. So that is a classic example. It winds up being a classic example of, the revenue is just not there that we thought was going to be there, and then that lower valuation that we saw was actually quite well-justified. And it went even lower, actually.

So "when your thesis breaks" is the generalized answer to that. When your thesis is broken, you have to either come up with a new one, but most of the time there is no new one. And what you really should do is sell. And coming up with a new one, you're biased in that direction. Right? Because you don't want to admit a mistake and take a loss. But that's the general condition under which to sell. Good question. Great question. Epic question. Thank you for it.

Next, Terry W. says, "Hello, Dan. Thank you for producing a consistently insightful program with wicked smart guests. I am a high-net-worth accredited investor with a vast majority of my assets outside of traditional stocks and bonds," I'm going to skip ahead here, Terry. "My question is" he says, "I am now interested in building a value-oriented, global stock portfolio. My question is, who would you choose to manage the equity portion of your portfolio if you were in a similar position to myself? Thanks in advance for your response. Terry W."

Well, my first choice is a guy who I just love to death: me. I love that guy. He's great. And I can't shake him. He's always with me. He's frequently annoying, sometimes entertaining, and, you know... not such a bad guy. If I were to answer your question more seriously, I would just generally say somebody like Vitaliy Katsenelson would be a good choice for me. I'm not saying it's a good choice for you. Somebody like Chris Mayer would be a good choice for me. You know, Tony Deden if he'd take my money. Anthony Deden, he would be a good choice for me.

They're all value-oriented, long-term people who don't really care what's happening in the, you know, with the index. Right? If the index is going up or down, it doesn’t mean anything to them. But those would be some choices of mine. I'm not advertising for them. I'm not saying, "You should give them your money at all." But you asked me if I were in a position, what would I do? And those are some of the answers I might entertain.

Bill B. is our next e-mail. He says, "Hi, Dan. I'm a new subscriber to Stansberry Research over the past few months. And your Extreme Value newsletter has become perhaps my favorite for advice and recommendations." Thank you, Bill. "I really respect and enjoy your perspective on investing and managing risk. I am concerned about the upcoming election and the almost guaranteed contesting of the results by perhaps both sides – leading to a huge mess going through possibly the end of the year."

"I have had some good success with your recommendations over the past four months and wanted your opinion regarding perhaps jumping out of the market prior to this mess to let the dust settle and avoid the almost certain volatility that is coming. I know you believe in owning good value companies and holding for the long term. But do you feel it would make sense to avoid this tumultuous time for a few months? Bill B."

No, Bill. This just is not my style. And let's say I said yes to your question. Let's assume that. What would I be saying? I'd be saying, "Yes. Sell it all, take the tax hit, wait for the election to be over, and maybe all those things will be cheaper, but maybe they'll all be more expensive. And you and I have no idea." We're talking about a time frame that's like, what, two months, Less than two months now? There's no way you can predict the movement of securities prices over that time frame. I'm sorry. You just can't do it. Certainly not reliably enough to sell out your entire equity portfolio. You know?

And like you said, I believe in owning good-value companies, holding for the long term – oh, but on this one election, I'm going to sell it all and wait? No. It just doesn't work that way. And like I said in my opening rant, overall, sure. I mean, look at the action around the 2016 election. If you stayed up that night as I did and watched the future's market, your jaw was on the floor. The S&P futures were down like 5% at one point, and then they came ratcheting back. And I think they were actually flat at the open the next morning. And the Mexican peso took a huge dive.

So there were profits – there were trading profits to be made. I'm not saying there aren't. But that isn't what I do, and that's not really what you're talking about either. You're talking about selling out of a long-term portfolio because of this one election and then, you know, getting back in afterward? I just – sorry, can't do it. Can't go there. Not my style. I don't think it's wise at all. But a good question, and I'm glad you asked it because I would bet money a lot of people are thinking the same thing. I think it's a mistake. Last question by REM. REM writes in, and he says – he or she – says, "Dan, love the interview with Mark Putrino a couple weeks ago. That hour just flew by. It was kind of like listening to an episode of Billions," which is a TV show about – it's a fictional TV show about finance.

"Very interesting and entertaining. Thanks so much. REM." I agree. I think Mark Putrino is a very knowledgeable guy. And, you know, go to investorhour.com and just search – it's actually just within the last couple weeks. So it's going to be right there on the home page when you go to investorhour.com. If you haven't listened to it, click on it. Mark is a wise fellow. He's worked for some heavy hitters in the finance world, and he knows what he's talking about. And he's talking about things that a lot of other people don't talk about which are sort of behind-the-scenes kind of trading stuff. Really, really good stuff.

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 where our handle is @Investor_Hour. You can follow me, too. I'm @DFerris1961.

If you have a guest you want me to interview, drop us a note at [email protected], and I'll seriously think about it. I actually got two suggestions this week that I forwarded to our producer because I do want to have them on the show. I think they are good ideas. I've never done that before. I've gotten a lot of suggestions, but these are the first two that I've said, "Yeah. Let's get them on." So please drop us a note, [email protected] if you have an idea for an interview guest. That's it for this week. Till next week, I'm Dan Ferris. Thanks for listening.

 

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

 

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