You Can Profit From the Government's 'Corrupt' Banking Program

Episode #363 | May 28, 2024

Episode #363 | May 28, 2024

You Can Profit From the Government's 'Corrupt' Banking Program

In This Episode

On this week's Stansberry Investor Hour, Dan and Corey are joined by Chris DeMuth Jr. Chris is a co-founder and managing partner of hedge fund Rangeley Capital. He invests in mispriced securities with limited downside and corporate events that unlock value for shareholders.

Chris kicks things off by explaining what event-driven investing is, how he uses it, and how the concept of "counterparty selection" is involved. He also breaks down what demutualization and remutualization are and how there are numerous opportunities in the banking sector today to deploy these strategies. According to Chris, many small-cap community banks out there are attractive in terms of valuation versus large caps.

Next, Chris describes the U.S. Treasury Department's "inept, corrupt, and profligate" Emergency Capital Investment Program ("ECIP"). He gives two in-depth examples of ECIP bank stocks that were trading for far less than they were worth – Bay Community Bancorp and Ponce Financial. And he discusses why investors who got in early enough will profit from them greatly...

The government just... gave a bunch of money to a bunch of banks... They did it in the form of prefs [preferred stock issued to the government]. That's a liability on their balance sheet, but with a nod and a wink that they'll be largely or completely forgiven a nominal dividend/distribution payment that you can kind of easily avoid having to pay.

Lastly, Chris names three stocks that he's excited about right now and details the specifics of each one. The first is a tax-efficient real estate and financial-services conglomerate trading at a discount to its asset value. The second is a Russian-owned mining company operating in Venezuela that should soon benefit from litigation against the Venezuelan government. And the final one is a hospice provider with a lot of potential for a private-equity shake-up and then subsequent acquisition by a larger health care company. Plus, you won't want to miss Chris' answer to the final question, where he explains how you can gain an edge as an investor simply by researching topics you're genuinely interested in...

To me, it's all about finding an area where you have enough interest and expertise that you can be wildly, radically selective and have so much fun in the research process that [the time it takes to research is] not even downside.

Dan and Corey close the show by discussing Nvidia's recent blowout earnings, including its 262% revenue gain. Since the company provides the "picks and shovels" of AI, it's benefiting massively from the boom in this space. This leads Dan and Corey to compare AI stocks with Internet stocks during the dot-com bubble, speculate on what could happen next, and explore the disconnect between the markets and the economy. As Corey notes...

You have AI, Nvidia, that's one thing. But you have all these consumer-facing companies that are starting to report kind of all the same thing – people spending less on discretionary items... Nobody can afford a new house... There's this bifurcation with whatever the data says and whatever productivity enhancements that AI is supposedly going to have versus what probably 50% of the country is experiencing on a day-to-day basis.