Should Porter Be Fired? The Results Are In
Should Porter be fired? The results are in... Delinquencies are soaring... A fact about jobs you might not believe... It's official: The Fed's June rate hike is off the table... The next leg of the gold bull market could be starting now...
Well, it looks like Porter's job is safe for now...
We received a huge response to Porter's Friday Digest titled "Do You Think I Should Be Fired?"... And it seems the vast majority of our readers value Porter's "big picture" outlook.
Yes, he has often been early, but we can't think of another analyst who has made so many critical – and ultimately correct – market predictions over the years. He predicted the demise of Lehman Brothers, General Motors, and Fannie and Freddie... he was the first to predict the huge shale-oil and gas boom in the U.S... and the first to predict the crash in oil prices months in advance, among others.
We have no doubt he'll be proven right again about his warnings on the credit markets and a massive bear market in stocks. And as several subscribers pointed out to us this weekend, it's far better to be warned too early than too late...
Of course, we also received several e-mails from folks who disagreed... You'll find a small sample of subscriber feedback – including the good, the bad, and the ugly – in today's mailbag below.
What accounts for this difference of opinion? Why are some folks like Marty G. so upset about Porter's warnings? We suspect, in most cases, it's because they read his predictions, but ignored his advice.
You see, while Porter has warned of spreading troubles in the credit markets... new risks to the U.S. dollar... and the growing threat of a panic in stocks, he has also been crystal clear about how to prepare for these events.
Again and again, he explained that these warnings were not reasons to sell everything you own. Instead, Porter recommended raising cash by selling risky or overpriced assets, putting a portion of your portfolio in gold and gold stocks, and "hedging" your portfolio with a few short sales.
But he also recommended staying long high-quality, capital-efficient stocks... and has even continued to recommend putting new money into these stocks – as well as distressed stocks and bonds – when great opportunities arise.
In other words, he recommended positioning your portfolio to do well even if he was wrong...
Despite the name, our Bear Market Survival Program – which Porter launched earlier this year – followed this balanced approach.
This educational series was designed to show you how to set up a diversified portfolio of cash and gold, high-quality stocks, short sales, and distressed opportunities. And subscribers who followed those recommendations have done well, even though the bear market hasn't officially begun. They're up an average of 12.3% so far this year, including gains of 15.4% in capital-efficient stocks, 17.6% in distressed bonds, and 20.1% in gold.
Of course, this reality is different from what some angry subscribers have implied.
On Friday, Porter also highlighted several signs of additional stress in the credit markets...
He noted new problems in commercial real estate, the auto industry, and the retail sector... and a new high in the default rate for corporate bonds.
Today, we see another problem...
Data from the Federal Reserve Bank of St. Louis' FRED economic database show delinquencies on leases and loans at U.S. commercial banks are soaring. These are debts that are 30 days or more past due.
While the total amount of delinquent debt remains below the financial-crisis peak, delinquencies are rising at a remarkable pace. In fact, as you can see in the chart below, they're rising even faster than they did during the worst of the financial crisis...
As we've discussed before, these events are happening while the economy is still officially growing. What happens when the next recession appears?
Speaking of the economy, a new study from Lawrence Katz and Alan Krueger of Harvard and Princeton Universities suggests the job market isn't as healthy as government data might suggest.
According to official statistics, more than 9 million net new jobs have been created in the U.S. since 2005. But according to Katz and Krueger, all of these jobs have been in "alternative work."
These are temporary, on-demand, and/or independent-contracting jobs that pay less, provide no benefits, and offer fewer and less-reliable hours compared with traditional work.
These jobs have clearly filled an important need in recent years, but this trend is concerning. It shows companies are still struggling, unwilling or unable to hire full-time employees.
It's another sign the recovery could be more fragile than it appears. And if the latest data are correct, even the growth in these alternative jobs is now slowing...
On Friday morning, the U.S. Department of Labor reported employers added just 38,000 jobs in May. This was the weakest jobs growth since September 2010, and far below analyst expectations.
Following the news, the financial media widely reported that a June rate hike by the Federal Reserve was now off the table. Today, Fed Chair Janet Yellen confirmed that was the case. As she noted during a speech at the World Affairs Council of Philadelphia this afternoon...
New questions about the economic outlook have been raised by recent labor-market data...
Is the markedly reduced pace of hiring in April and May a harbinger of a persistent slowdown in the broader economy? Or will monthly payroll gains move up toward the solid pace they maintained earlier this year and in 2015?
The uncertainties are sizable, and progress toward our goals and, by implication, the appropriate stance of monetary policy will depend on how these uncertainties evolve.
Precious metals clearly liked the news...
Gold and silver both rallied more than 2% following the jobs report on Friday. Gold stocks – as represented by the VanEck Vectors Gold Miners Fund (GDX) – soared nearly 11%.
The sector opened lower today, but reversed course following Yellen's speech. Gold closed the day near the unchanged mark, while gold stocks gained another 0.5%.
As Porter noted on Friday, seeing gold stocks lead the sector higher is classic bull market action. It's an incredibly bullish sign for further gains, and suggests that the next leg of the gold rally could be starting.
New 52-week highs (as of 6/3/16): Becton Dickinson (BDX), Invesco Value Municipal Income Trust (IIM), Johnson & Johnson (JNJ), Altria (MO), Ritchie Bros. Auctioneers (RBA), and Silver Standard Resources (SSRI).
In today's mailbag, several subscribers answer Porter's question: "Should I be fired?" Send your letters to feedback@stansberryresearch.com.
"Yes you should be fired for yelling fire all the time hoping for self attention." – Anonymous
"Yes, Porter should let the door hit him in the ass on his way out. I have embarrassed myself on several occasions passing along to folks I care about his 'Chicken Little' rants only to be found wanting. No more. He has no credibility whatsoever in the arena of thoughtful cool–headed investors. Though I admire and follow the 'Two Docs', I am surprised and disappointed they haven't gone off on their own. He (Porter) must have corralled them with an airtight non-compete clause in their contracts. Otherwise I can't imagine they would wish to soil their reputations through their association with that investment terrorist." – Paid-up subscriber Thomas N.
"You should be fired if you make a prediction with a specific date on it, you're putting your ability and reputation on the line. You were wrong, absolutely wrong. This means your ability to predict is nothing more than an educated guess at best. Your word can not be trusted! If you are a prognosticator and a market timer, you can't be 'off' by 6mos or years. You put yourself in this predicament, now do the honorable thing, resign. Of course you won't. You can't even admit you were WRONG!!!!!! Rather, you come up with excuses and BS. Honor before pride." – Paid-up subscriber Forrest M.
"Not fired (yet) – maybe put on double-secret probation or have to wear a monitoring anklet..." – Paid-up subscriber G.M.
"How about firing the guy that forwards your newsletter to all his non-paying buddies?" – Paid-up subscriber J.F.
"Should Porter be fired? Not only 'no,' but 'hell no!'" – Paid-up subscriber Steve M.
"My opinion is that your job, Porter (and crew) is to be our scout on the investment horizon. That entails bringing your professional observations to our attention and allowing us to decide what fits our individual financial picture. Do I agree with you all the time? No, but boy am I aware of what is going on in the financial world, good and bad, and that's the approach I want. In January I took a 7% IRA distribution from a low seven-figure IRA and I have covered that takeout plus, while exposing only 40% to equities, accomplished with all Stansberry recommendations. To say the least I am mighty pleased. My vote stands." – Paid-up subscriber Don S.
"Since I began my very basic membership in a few of your services last August, I am amazed as to how well my portfolio has performed. I don't have a single losing position on this date and through this process I have been very well educated. However, my expectations for future major events includes you being extremely specific by giving your subscribers not only the exact date, but the exact time of day the event will occur. (Seconds are optional.) Instant email/text notifications should be sent to each subscriber and the predicted time should be calculated for that subscriber's correct time zone, so no confusion will occur. It would be further great assistance if you could hold my hand while I execute the trade(s), but I suspect that may be asking for too much. I look forward to subscribing to additional services your company has to offer and I appreciate all you and your great team accomplish every day." – Paid-up subscriber Karl
"To the subscriber who thinks Porter should be fired: You have no idea how good Porter's calls are. In a business that is fundamentally non-linear and unpredictable, I defy you to find a newsletter writer with a better track record. And here's the thing, you don't have to trust him. You can just read his thorough analysis on the problems with the economy, then read a few others with pretty good records. Then you can, fancy this, come to your own reasoned conclusions and position yourself to weather various outcomes.
"At one point I was up 20% for the year doing exactly that. I'm so happy to have my short book on, even though I'm down on many of my positions right now. Go read 'Fooled by Randomness' before you lose any more money thinking you can invest blindly on ANYONE'S advice. Keep it up guys. I only regret that we don't hear enough from Porter." – Paid-up subscriber C.C.
"As far as I am concerned you should run for President." – Paid-up subscriber David S.
"Porter, what you give your subscribers in education, guidance, and in uncompromising excellence and integrity is invaluable. But above it all, you Porter are the real treasure. Your character and leadership is what keeps the ship on the right course. You've surrounded yourself with likeminded people who complement your commitments. You follow the Golden Rule of doing unto others what you would have them do unto you. You've never disappointed my confidence in you, have persistently exceeded my expectations, and have always made me feel like you hold your clients welfare as a sacred trust. Be not discouraged. Stay the course. Give yourself a raise!" – Paid-up subscriber Ricky V.
"Porter, among the gurus I know of, you stand out with an uncanny long-term perspective – the kind that confidently recognizes mega-trends early on, and who has the courage to call them as you see them. That quality makes you extremely valuable, much more so than competitors with shorter-term perspectives. They may occasionally time their recommendations better – but they are also more likely to suffer nasty surprises when long term trends catch up with them by destroying their favorite biases about what is important and what is not.
"Should you be fired? Hell no. When a major storm hits the markets – as eventually it will – you will be left standing. It does not really matter that you are sometimes early in calling a trend. What matters is that you see the trend coming. So will your readers – if they have sense enough to listen and take notice, even if – and especially if – they don't believe you at first. Chances are that you are right, or will turn out to be right, over the long haul. In our world full of 'experts' with 'grasshopper minds' and flawed judgment (such as by normalcy bias) you will emerge as the winner – not at 'random walk' in-out investing but at sensible forward-looking investing... Congratulations on your call on world finances (gold.) Not only are you right on substance... You also got the initial timing right. And there is likely to be much more to come." – Paid-up subscriber G.O.
"You should most definitely be fired... by anyone who receives no value from your publications. It is my understanding all we have to do is ask you to cease and desist and you'll gladly not only stop blessing us with your 'outrageous' predictions and suggestions for profits, but you'll happily refund any monies due. We have truly become a nation of whiners! Instead of taking responsibility for our own actions we perfunctorily point the finger of blame. Poor old Marty G., whom ever he be, must have been ridiculed and blamed by his friends [when] he attempted to enlighten [them] by passing the wisdom of the Stansberry group on to them. When things didn't turn out the way they interpreted them in their time frame, they flippantly lashed out! I hope he feels better now! I sure do!
"My portfolios have nearly doubled since early January thanks to the diligence and painstaking efforts of everyone at Stansberry Research... One more thing – Porter, I trust you'll continue to be early rather than late with your predictions. I always regret having been late to a party! Thank You!" – Paid-up subscriber Chuck T.
Regards,
Justin Brill
Baltimore, Maryland
June 6, 2016
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