One Simple Choice That Could Change Your Life
One simple choice that could change your life... Why the Stansberry Conference is unlike any other event... How to attend for a fraction of the usual cost... P.J. O'Rourke: What they don't teach you about economics in school...
Editor's note: Don't miss a brand-new piece from bestselling author and Digest contributing editor P.J. O'Rourke below.
In today's Digest, we'll discuss one simple decision that could change your life. And no, that is not hyperbole.
Regular readers know Porter personally writes the Digest most Fridays with just one goal in mind: To tell you, our valued subscriber, what he would want to know if your roles were reversed.
If you're new to our business, you may not realize just how rare this is. Why is that?
First, it's no easy task. While it often means sharing opportunities and strategies that can help you become a much more successful investor, it also requires some "uncomfortable" work...
It means sharing unpopular or controversial views. It means pointing out biases, beliefs, and behaviors most investors don't like to admit they have. And it means sticking his neck out and warning you when he sees serious dangers in the market, even if it means risking his reputation in the process.
Second, it's not exactly great for business... As Porter often says, it's no coincidence that Mondays often bring a huge wave of subscriber cancellations. But unlike many financial publishers, he would rather lose subscribers than bite his tongue or publish something he doesn't truly believe.
Today, I (Justin) will try to take up the mantle. Don't worry... your humble editor knows he has neither Porter's gift with words, nor his stomach for criticism. Fortunately, today's idea is easy to understand and unlikely to ruffle too many feathers.
In short, I simply want to highlight an opportunity to radically improve not only your investing life... but your entire life. And it's as easy as making one simple choice tonight...
You see, exactly one month from today, we'll be kicking off the 2016 Stansberry Conference and Alliance Meeting in Las Vegas. If you've never been, there's something you should know...
If you're like us, you've been to several investment conferences over the years... and you've probably been disappointed. The unfortunate truth is that most conferences aren't worth the price of admission... let alone the time and expense of traveling to get there. Most feature the same old speakers from the "circuit," rehashing the same speeches they've given at other conferences.
But the Stansberry Conference is different. From the beginning, we decided we would only host this event if we could provide real value that didn't simply recycle the same old ideas.
Instead, Porter and the Stansberry Conference organizers have handpicked world-class speakers who share concise presentations packed with brilliant ideas and advice that can truly change your life for the better.
But you don't have to take my word for it. Just take a look at what some of your fellow Stansberry Research subscribers had to say about last year's event...
"The educational aspect of these conferences goes above and beyond what you can read in the newsletters. It's got a more personal flavor and a more personal touch. Plus Stansberry tends to put on pretty good events." – Paid-up subscriber Michael R.
"What's really interesting about the conferences is that it's not just about investing... [Stansberry] does such a wonderful job of bringing in interesting people with interesting ideas and perspectives, that really are not, strictly speaking, investment ideas or even investment-based. It's just a great experience." – Paid-up subscriber Lee M.
"I've not participated in investment conferences before, but... the speakers we had were just awesome. And most of the speakers that I enjoyed have nothing to do with investing; they have to do with life experiences, what they accomplish, what they did. And it kind of opens your eyes to the rest of the world." – Paid-up subscriber Marvin F.
"This is my very first conference, and I'm very grateful to be here. The conference has exceeded my expectations. We've had many different speakers on a wide variety of subjects, a lot of them that I didn't know that I had any interest in... I've really expanded my horizons on what to invest on and in what specific areas." – Paid-up subscriber Kenneth S.
Longtime readers may recall last year's event featured presentations from a long and notable list of special guests, like former congressman Dr. Ron Paul, comic magician Penn Jillette, and entrepreneur Mick Ebeling, just to name a few.
But as incredible as last year's Stansberry Conference was, this year's event promises to be even better. For example, our 2016 speakers include...
- Steven Eisman – one of the main characters in Michael Lewis' bestselling book (and Oscar-winning film) The Big Short...
- Famed activist investor Andrew Left – founder of Citron Research – who recently made headlines for correctly predicting the collapse of Valeant Pharmaceuticals (VRX)...
- Todd Buchholz, a former White House director of economic policy under George H.W. Bush, managing director of the $15 billion Tiger hedge fund, and a Harvard economics teacher...
- Inventor (and double amputee) Hugh Herr, director of the Biomechatronics Research Group at MIT...
- Morgan Poliquin, President and CEO of gold-explorer Almaden Minerals (AAU)...
- Gregory Lang, President and CEO of Novagold Resources (NG)...
- Robert Edsel, bestselling author of The Monuments Men and one of the world's foremost advocates for art preservation...
- World-champion skier and risk-management expert Chris Davenport...
- Peter Churchouse, one of the world's most-respected analysts on Asian markets...
- Former Navy Seal and professional dog trainer Mike Ritland...
- Former Enron CFO Andrew Fastow, whose presentation on corporate fraud and malfeasance is sure to be one of the most controversial and informative of the entire event...
... and many more.
Attendees will also hear from some familiar favorites, including Dr. Ron Paul... bestselling author and political satirist (and Digest contributing editor) P.J. O'Rourke... resource legend Rick Rule... rare-coin expert Van Simmons... Meb Faber, who runs Cambria Investment Management firm... and noted short-sellers Carlo Cannell and Scott Fearon. These veteran hedge-fund managers teamed up for one of the most entertaining and valuable presentations at last year's event... so we've asked them to return this year and "up the ante."
And of course, as always, you'll also hear from your favorite Stansberry Research editors, including Porter, Steve Sjuggerud, Dr. David Eifrig, Matt Badiali, Jeff Clark, Dan Ferris, David Lashmet, and Ben Morris.
Stansberry Alliance members will also get access to exclusive Alliance-only presentations featuring all of our editors' best ideas for the next 12-18 months.
Unfortunately, it's too late for you to attend in person this year. Tickets to the 2016 Stansberry Conference and Alliance Meeting have completely sold out. But you're in luck...
With our special "Online Access Pass," you can experience all the great presentations and special guests for yourself... LIVE from the comfort of your own home... and for a fraction of the cost of attending in person.
Better yet, you can watch and re-watch your favorite presentations at your leisure, as often as you would like, for up to four weeks after the event.
There is no more convenient or more affordable way to see for yourself just how life-changing the Stansberry Conference can be. If you've been "on the fence" about attending – or if you've been disappointed by conferences in the past – we urge you to learn more.
We're certain you'll agree it is radically different from any other conference you've ever attended... and we guarantee you will walk away with actionable investment ideas, useful new skills, and an invigorated mindset.
Click here for all the details, including the full lineup of speakers and how you can reserve your online "seat" today.
Regards,
Justin Brill
Baltimore, Maryland
August 19, 2016
Teaching Myself Economics, Part II
As I said in "Teaching Myself Economics, Part I," I started out as a former college English major who, when it came to economics, couldn't tell bird poop from sugar frosting.
I tried learning the "basic principles of economics" by reading econ textbooks and discovered I was still smearing pigeon droppings on my cupcakes.
Then I found a few economists who made sense (read about them here, here, and here). And more important, I began to apply my own common sense and powers of observation to economic activity.
As it turns out, the basic principles of economics found in econ textbooks aren't very useful. But 10 "other principles of economics" are much more helpful. Here are my top 10...
1. The market is never wrong.
A thing is only worth what people will give for it.
Apple (AAPL) is a great company. If you have some Apple shares and try to sell them on the Nasdaq exchange for $1,000 apiece, you may be brilliant. Apple stock may be worth $1,000, easy. And all the people trading stock on the Nasdaq may be fools for valuing Apple at just $110 a share. A Mac is a much better computer than a PC. But smart as you are, and dumb as everybody else is, the market says your shares didn't sell. And the market is right.
(Also, a thing may be "priceless." You would rather die than trade your Mac for a Dell. But death is still a price, just a very high one.)
2. So you die. Things still cost what they cost.
There's no use in trying to fix prices. To do so, you have to have a product that can't be replaced, and you have to have complete agreement among all the people who sell that product. But the sellers are greedy, otherwise they wouldn't have gotten into the agreement. And greedy people will try to sneak out of that deal as soon as it benefits them.
Any drug dealer can tell you that to ensure a monopoly, you need force. To ensure a large monopoly, you need the kind of force only a government has. And it still doesn't work.
When the price of something is fixed below market level, that something disappears from the legal marketplace.
And when the price of something is fixed above market level, the opposite happens.
Say the customers at Wheat Depot won't pay enough for wheat. The U.S. government decides to buy that wheat at higher prices. Suddenly, wheat is everywhere. People have bushels of it in the attic. The government is up to its nose in wheat. The wheat has to be given away. The recipients of free wheat in the Inner City Wheatfare Program hock the wheat at traffic lights, and what they get for it is exactly what people are willing to give.
3. You can't get something for nothing.
Everybody remembers this except politicians. Lately, we've heard one American politician promise that government revenue (taxes) can be cut while government benefits (expenditures) remain intact. Benefits might even get larger. This will be done through increased "efficiency."
I discussed efficiency in the first installment of this series. Efficiency increases only as a result of technological breakthroughs, like James Watt inventing the steam engine. Donald Trump is not going to invent the steam engine. Neither is any other politician. (Although, to the extent that steam is hot air, maybe I'm wrong.)
Politicians have trouble giving up the idea of something for nothing – it's such a vote-getter. A government can try to give most people something for nothing by taxing the people with money. But there are never enough of them. As Margaret Thatcher (one of the few politicians who did understand economics) said, "Sooner or later you run out of other people's money."
A government can also try to give all people something for nothing by simply printing more money. This doesn't work either because it makes all the money worth less, the way it's becoming worth less right now all over the world.
Inflation is a tax on the prudent, who watch the value of their conservative bank accounts and bond investments disappear. Inflation is a subsidy for scam artists who can borrow money for harebrained speculative schemes and pay it back later with money that has no value. And inflation is a punishment to the old and the poor, who live on fixed incomes and can't expect to get a big cost-of-living adjustment retrieving soda cans from trash baskets.
Finally, a government can try to give us something for nothing by running a deficit, by borrowing money from us and then giving it back. This is obviously stupid and is exactly what we've been doing for decades in the United States.
Deficits are less immediately painful than high inflation or huge taxes, although eventually they lead to both. In the meantime, we aren't getting anywhere. If all our investment money is tied up in loans to the government, that money is going to be spent on government things, such as financing the Inner City Wheatfare Program. Our investment money can't be spent on research and development to create, for example, a genetically engineered wheat-eating squid to turn that worthless wheat into valuable calamari.
4. You can't have everything.
If you use your resources to obtain a thing, you can't use those same resources to obtain something else. That's called fraud (or having a credit card).
In economics, it's called "opportunity cost." When you employ your money, brains, and time in one way, it costs you the opportunity to employ them in another.
Opportunity costs fool people because they're unseen. When we observe money being spent, we're impressed. We gasp with awe at the huge new Federal Wheat Council headquarters in Washington, D.C. We don't admire the vast schools of genetically engineered squid feeding in our nation's wheat fields – because they aren't there. The main cost of government expenditure is not taxes, inflation, or interest on the national debt. It's opportunity.
5. Break it and you bought it.
Being fooled by hidden costs is the source of a lot of economic confusion. War is often spoken of as an economic stimulant. World War II "pulled America out of the Depression." Germany and Japan experienced "economic miracles" after the war. Somebody is not counting the cost of people getting killed and wounded. Besides, if destruction were the key to greater economic productivity, all the investors in the world would be investing in Syria.
6. Good is not as good as better.
Almost as bad as costs that go unnoticed are benefits that get too much attention. It's great if everybody has a job. But computers are taking jobs away. So we could guarantee full employment if we removed computers – and electricity – from the communication industry and hired people to run all over town and fly around the world, telling our friends and business associates what we want to say.
When James Watt invented that steam engine, thousands of 10-year-old boys who had been hauling coal carts were put out of work. However, this left them free to do other things, such as live to be 11.
7. The past is past.
Another thing that gets too much attention is money that has already been spent. In economics, this is called "sunk costs." It doesn't matter that you blew everything you made selling Apple at $1,000 a share on a scheme to genetically engineer wheat-eating squid. What matters is whether you can make any money off those squid now or convince people that the squid will make money in the future, so that those people will buy the fool company.
This is called "marginal thinking," and in investing it means the exact opposite of what we usually mean when we call somebody's thinking "marginal."
8. Build it and they will come.
It was Ralph Waldo Emerson who is believed to have said, "The world will beat a path to your door." He was referring to what would happen if you built better mousetraps. That tells us something about home hygiene and housing conditions in the 19th century.
The underlying notion is stated formally in economics as "Say's Law" (from the French economist Jean Baptiste Say): "Supply creates its own demand." More is better. Any increase in productivity in a society causes that society to get rich enough to buy the things that are produced.
This works even in an economy as screwed up as communist Cuba's. The communists have allowed limited free-market sales of food. This has increased food production. Despite the extreme poverty of Cubans, that food does not sit around unsold.
9. Everybody gets paid.
People want to get something for what they do, although what they want to get may not be money. What they want may be love or a sense of their own virtuousness or to be treated like a big shot at the local bar. Every activity is a business.
This is the "public choice" theory of economics. One of its founders, James M. Buchanan, won the 1986 Nobel Prize in economics for his work on understanding politics as an economic enterprise.
Politicians don't measure profits in cash. The gain that they want is an increase in power. Thus, socialists like Bernie Sanders turn out to be just as greedy – or even more so – than hedge-fund managers.
In order to increase their "power income," politicians have to pass more legislation, expand bureaucracies, and broaden the scope of government power. A politician who claims he is going to cut the size of government is saying he is going to creep up on himself and steal his own wallet.
10. Everybody is an expert.
Of all the principles of economics, the most important to making us richer (or more powerful, or whatever) is specialization, or as Adam Smith, who discovered the principle, called it, "division of labor."
Milton Friedman used a pencil as an example. A pencil is a simple object, but no single person in the world can make one from scratch.
The pencil maker would need to be a miner to get the graphite, a chemical engineer to turn graphite into pencil lead, a lumberjack to cut the cedar trees, and a carpenter to shape the pencil casing. He would need to know how to make yellow paint, how to spray it on, and how to make a paint sprayer. He would have to go back to the mines to get the ore to make the metal for the thingy that holds the eraser, then build a smelter, a rolling plant, and a machine-tool factory to produce equipment to crimp the thingy in place. And for the eraser itself, he would have to grow a rubber tree in his backyard. All this would take a lot of money... Yet a pencil sells for $0.17.
No. 10 in the list of "other principles of economics" makes it clear that if you're looking for expertise in economics, an econ professor isn't the right person to ask. For that matter, neither am I. The real expert about your economic situation is always you.
I'll tell you more about just how much of an expert you are in my next column, "Teaching Myself Economics, Part III."
Regards,
P.J. O'Rourke