Stansberry Town Hall: February 2022

Our top analysts share their unscripted opinions on what's happening overseas... and what it means for your finances.

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Brett Aitken: Hello. My name is Brett Aitken, Publisher of Stansberry Research. When you joined our firm, we made you a simple promise... To provide you with the exact information we'd want if our roles were reversed. And in response to the geopolitical and financial events that have transpired over the past few days, I've asked a few of our top analysts to gather and share their unscripted, unedited opinions about the stock market right now. Please note – this is NOT a sales message. There's nothing to buy. Now, I know we've been glued to the news for the past few days… wondering and worrying about what might come next. It can be scary… confusing… and sometimes misleading. But at Stansberry Research, we're not just talking heads on a television set. You know our track record… you know our resumes… and you know we have no vested interests in the investments we're discussing. Our entire company and editorial team exist to serve YOU. That's it. Over our past 23 years in business, we've guided our readers through the dot-com bubble, the Great Recession, and every single dip and rally since 1999. But this is only the second time in our firm's history that we've hosted an all-hands Town Hall event like this. Our last aired in March of 2020… right as the world first learned of Covid-19 and what it might mean for our health and wealth. You might remember it. We hope to prove the same clarity today. While investor fears are rampant right now, that does NOT mean there aren't fantastic opportunities to grow your wealth… But please just keep in mind, you're going to hear from several analysts today… with varying outlooks and recommendations. We pride ourselves in having unique and unbiased opinions. That means some of our analysts might be bullish today… while others are bearish. We have never – and will never – adopt "group-think" when it comes to the market. At the end of the day, it's up to YOU to determine what's best for you and your money. But after this call, I'm confident you'll have the best up-to-date information available to do so. Whatever comes next, we'll be by your side, just like we always have. But please understand that we cannot give personal investment advice. Today's Town Hall will be moderated by our Director of Research, Matt Weinschenk. Our analysts are stationed all around the world… so please be patient if we experience any production issues. As the Publisher of Stansberry Research, it's my solemn vow to make sure we're seeing you through troubling times like this – today is only the beginning of what you can expect from us. Thank you for your time, and we hope you get some clarity from today's event. Matt, you can go ahead and kick things off from Baltimore.

Matt Weinschenk: Well, thanks, Brett. It certainly is a time for a townhall. As I'm sure you all know of, on Thursday, Vladimir Putin directed his forces to invade Ukraine. This is a major military action. And, of course, situations like these always run the risk of expanding and roping in other countries. And there's fears that it'll turn into a large-scale war between Russia and the West, and we don't know precisely what Putin will want to do next.

So with all that at risk, the S&P took a big slide on Thursday morning before climbing back by the end of Friday. Oil prices in the U.S. spiked above $100 a barrel before coming down to around 90. Brent Crude in Europe is still above 100. Over the month, gold's risen from $1,800 to $1,900 an ounce. The MSCI index of Russian stocks dropped from 700 to about 450. That was all as of Friday's close.

Now as of Monday morning when we're recording this, early indications are that the market is selling off again, risky assets are heading down, stocks are falling. If you want to look at what proper positioning can do for investors, four of our five portfolio solutions portfolios are doing better than the S&P 500 for their fiscal year, only the Forever Portfolio is lagging right now.

And the Defensive Portfolio is up 2.1% as of Friday's close. So no one likes to check their account balances and see them falling. And when you mix that with the fear and stress of a situation like this, we just wanted to reach out, talk to our readers and see what we can do to put your mind at ease. We're going to talk mainly about markets and finance and investments.

So I just like to say up front that the situation in Ukraine is horrific, and I think we all appreciate and understand that. But the best thing we can do is help you protect and grow your wealth. That's our job. So I hope you don't think we're cold or uncaring for talking about money in a time like this, but it's what we're here for.

We're going to ask our top analysts to answer the questions that we think you're probably wondering about right now. We're going to talk about some short-term trades, longer-term investments. We're going to talk about where the economy might go from here, and maybe even some bigger picture things about what this may mean to your life.

So let me introduce the panel we've put together today. In the studio here we have Scott Garliss, the editor of Stansberry NewsWire. We have Greg Diamond, editor of Ten Stock Trader, our technical advisory service, and I failed to mention that I'm Matt Weinschenk, the director of research.

Via zoom, we have Doc Eifrig, editor of Retirement Millionaire, Brett Eversole, the co-editor of True Wealth. Dan Ferris, the editor of Extreme Value and host of Stansberry Investor Hour. Matt McCall, the editor of The McCall Report. Kim Iskyan, our international editor at large. And we've also got Bill McGilton, one of our longtime analysts who lives in Ukraine in Kyiv. And I'll tell you more about that in just a moment.

Now, we don't have a time limit, we can just talk through everything. And we've got a great team here. I may address questions to one person or other, but please just jump in at any time and share any thoughts you've had. I think we're just going to talk through this the way we would talk about it here in the office and take our readers along for the ride.

So I do want to start with Bill. Bill was in Kyiv until a few days ago. We've been getting email updates from him every 12 hours or so, as he escaped the country. And I think he's made it out now to Moldova. So Bill, you're safe. You're out. Are you feeling good? How are you doing?

Bill McGilton: I'm feeling good. Thanks, Matt. I'm glad I made it, frankly. I did that little video that was in the Digest, I think on Friday or something. I was actually talking to Kim on the phone because he wrote me an email, and I gave him a call. And in the time I called him, boom. When it first happened on Thursday morning, I was sleeping. I'll just say like this, and all of a sudden, I just heard, boom.

And like six explosions from like, they were on the other side of the river, they were far away from me. But I knew like, wow, these guys are actually invading. Because until then, I would say most of the city didn't believe it. We were hearing things for like over a year. The Russian equipment was on the boards for over a year. And we just kept hearing these things, we kept hearing deadlines and stuff.

And after a while everyone just became numb to it. And we knew it got much more serious after Putin declared Donetsk and Luhansk independent republics, but we didn't expect that. After that, it was like we knew there was fighting. And people still were thinking it was just going to stop or something, but no. In the beginning, they weren't really targeting civilians or anything like that.

It was more about military targets, radars at airports and stuff like that. And then what started happening is by, I would say that was Thursday morning. And then from my perspective by, I think I was talking to Kim sometime Friday afternoon, I kind of lost track of time. Then I started seeing guys. Then we started getting reports that the Russian tanks were coming down from the North, they were fighting in Obelon.

And the Ukrainian tanks were starting to come up from the south, and they were going to meet in Kyiv. And then there were soldiers going in and out. I could see them in front of my house. But then instead of seeing like two soldiers here and there, all of a sudden, there was like 20, then there was like 40. And I'm like, something's going on.

I went downstairs and I'm just saying to these guys like, "Hey, what's going on?" And they're like, "Look, this is going to be the setup point." Because it was a landmark. So we're going to just start staging guys and start coming in. There was all these, you're talking like 14, 16-year-old guys coming in, they're given a machine gun. They're going to fight.

And you have a bunch of 20-year-olds with machine guns, let's say they're ready to fight. They were using the Metro to position people around the town where they had to bring them. I figured, OK, if these guys, the Russians, start hitting something, I could go underground because the Metro is super deep. It's the deepest Metro in the world actually.

But then I realized, wait a second. They're going to be fighting inside the Metros. And then the soldiers told me they're going to start setting. They closed off the government district where I live, about 10 minutes from there. That's actually where I work. I have an apartment, which is like my office where I work. And they were going to set up sniper spots all throughout the apartments.

And so at that point, I'm like, man, I got to get out of here. Because it's like, this is going to come fast. So I just had no time. My computer with all my stuff. It was in the other apartment. I couldn't even go back and get it because there's literally no time. There's no taxis working at this point. There's no rental car, there's nothing. So my wife's brother came. The guys let him through.

And we just jumped that with just the same clothes I've been wearing since Friday and just got in the car, eight of us in a Volkswagen Golf, and started leaving Kyiv. And as we were driving South, all I had was passports and money, some credit cards and a few gold coins. And luckily, my brother-in-law was smart enough to have three tanks of gas, because you couldn't get gas.

And then everything stopped working. And so we headed toward Western Ukraine. And on the way out, coming into the city, all is coming in is military. Going out, all there is is civilians. And then there's checkpoints. So you got to stop. These guys are like sandbags, guns, you got to go through that. If they don't like the way you look, they'll line you up.

Luckily, when we got to Zhytomyr, a city going out to Western Ukraine, we decided to take the back roads, which we were scared to do because you had Russian saboteurs blowing up bridges, you had Ukrainians blowing up bridges so the Russians couldn't bring in more equipment. And the whole time there's no information before, you don't know what is going on.

Because the news you're getting can't go by the West. The Western news is more accurate, but the problem is it's like a day late. So, the only way you can get good news is like through the social media, from the Ukrainian side, and from the Russian side. But both are just giving different information that might not be true, because they're trying to sway everything. So, no one knows what's going on.

So, you kind of got to go with your gut instinct on everything. And so, we decided to take the back roads in Zhytomyr, which was slow, bumpy roads, potholes. At one point, there was a checkpoint over a small little bridge. And there was a van in front of us, and they took these four guys, it was cold. It was like, I don't know, was 20, 30 degrees outside.

They had these guys stripped down to their underwear and t-shirts with AK-47s from the backs of their heads. I thought they were going to kill them right in front of us. I don't know what they did. I guess they were suspected of being saboteurs. I was wondering if these guys are going to come out with a grenade, someone's going to come help them, if something was going to blow up.

It was pretty crazy but it was good thing we did because if we waited in traffic to go over the bridge, they blew it up around the same time. So, all of the civilians on board got blown up. It was really nerve racking. And you get to a point where it's hard to trust someone unless you know him. You got to be careful who you're around. People can try to take something or do something, it was crazy.

So, we made it to the city called Ternopil and to a village outside of that. But still, the jets were flying all over the country. And so you hear constantly the air raid sirens because they're above, you could hear them. So, you got to pay attention like should you go out on the ground, should you go somewhere.

And then yesterday morning, we had no driver because there was no taxis, but we had to get out. And you can't trust the taxis or any service, because someone will just take you and put a gun to you and like, hey, get out of here. And you're just like in the middle of nowhere. So anyways, I mean, we are good.

My sister in law's mother knew someone who knew someone who was trustworthy. So he took us to this border and that's where I am now, in Moldova.

Dr. David Eifrig: I have a question for you, Doc here. Do you think your ability to get through checkpoints was you have an American passport you were showing?

Bill McGilton: The kids saved us. The kids. Because I have a 10-year-old, and I have a 1-year-old. And then my brother-in-law, he has a 1-year-old as well. And so when they saw the kids, the Ukrainian guys they looked at us and they just waved us through because they don't have time. There're so many people going through. It's so much traffic.

They don't want to hurt their own people. They don't want to hurt. What they have to be careful of, if there's not someone coming with a van or something and it's going to blow up the bridge, because in Ukraine, both sides are blowing up strategic bridges. And I'm talking, they've blown up some really big bridges. And people are suiciding themselves to blow up the bridges.

The kids calm the guys down. Like when we crossed yesterday the Dniester River, the guys told us before we crossed, there was like, I would say 15 on each side, they're like, look, we'll let you cross. But just know, if the bridge gets hit, it can get hit at any time. So you're going to take that risk and cross. And there's no other way to do it, you just got to take the risk.

Matt Weinschenk: What's your sense, Bill, of your future and your family's future? Is Ukraine going to be a place you go back to? Do you think there's going to be much left for you there?

Bill McGilton: It's sad, because like for me, every time I watch videos and I see something blowing up, I know that place or I might know someone who lives in the building. I know someone, depending, who's hiding somewhere. It's a place where my kid goes to school and I work there, I go home, I go to my office, it's my life. It's like these guys are destroying my life.

These guys are really brave. Whatever I lose, just imagine, you got like 14, 16-year-old kids. Most of the guys are probably in their early 20s or 30s, but there's these guys in their 50s too, they don't fear. You can go there, they'll give you a rifle, you'll fight. These guys are fighting rifles against tech armies and tanks.

I heard, and I don't know if this stuff is true, because I can't confirm it. Like the Chechens are coming in in ambulances. So they're using ambulance services, they're using ambulances, and they'll take like six ambulances and then they'll go somewhere and all of a sudden, the Chechens are these kind of people who don't know what they want.

Because the part of Russia that these guys have been fighting, it was fighting against Russia. And then Russia can't beat it, but now these guys are really hard on. And so when Russia sends them, they're also not good – and stuff. At first I would say they weren't trying to hit civilians or anything like that, really big remark.

If someone like snipe from his window, because there's a bunch of guys who would just take a gun and snipe from his window, but then Russian guys will take an RPG and take out the side of a building or something. And there's people actually throwing Molotov cocktails toward tanks out of their windows.

They put it on the website, how everyone can make a Molotov cocktail. Am I going to be able to go back to that? It just depends if they're going to be able to make peace soon enough. And I don't know if that's the case, because I don't see if Russia conquers Ukraine, which unfortunately is most likely, simply because they have so much firepower compared to – these guys are just fighting with their heart, basically.

And I just don't see how they can control, because they just don't. Look at it like this, even people who are in the eastern part of the country, who speak Russian, who are more geared toward Russia than they are toward Ukraine. These guys aren't like, hey, the Russian army is coming here. I'm going to join them. They're not joining them. It's like they don't want to be part of Russia.

And so these guys in Western Ukraine, in Kyiv, are fighting. They're going to fight tooth and nail and I just don't know what's going to be left when it's all gone.

Matt Weinschenk: I was going to say, it seems militarily, Putin has been surprised by the Ukrainian national identity and what looks to be a long-term insurgency, rather than a quick roll through right through Kyiv, like he was expecting. Kim, let me ask you a question. So, Kim is our international expert. And even within that, he's a Russia expert. I think he lived there for nine years, some former USSR countries at other times.

Ran a Moscow-based hedge fund. So Kim, when you look at history, I think you find most leaders act on unreasonable motivations. There's an occasional madman, but sometimes people do things that don't seem to make sense. And that really means you just didn't understand what their values were and what their goals were.

So I think when we look at this invasion, at least before it happened, it didn't really seem to make sense. It was going to be a huge economic cost, a huge political cost for Putin, so I didn't think it was going to happen. I thought he was going to bluff up until the end, because it's so costly for him. So what did I have wrong there, Kim? What is Putin looking for and why is this the path he's taking?

Kim Iskyan: Well, Matt, I think if we just step back for a moment and just look at where Russia stands and its relative economic position. If it were a U.S. state, it would be about as big as Florida. So, it'd be the fourth biggest U.S. state and Ukraine has about as many people as California, and it would be the 35th largest state, it's about as big as Nebraska.

And Russia has over the past six years, its economy has become something of a fortress because of all the sanctions from the 2014 annexation of Crimea, which was kind of a dry run. Not a dry run, but it was a preliminary test of what this war is becoming. So Russia has enormous foreign reserves, its debt to GDP ratio is very low. So it's not as reliant on foreign capital inflows as a lot of countries.

Its stock market is, well, as a few days ago was just 3.5% of the MSCI Emerging Markets Index. But on the other hand, Russia is the world's second biggest oil producer, as we know, the world's biggest gas producer. Delivers 41% of Europe's gas. It's also the world's biggest palladium producer, No. 2 in platinum, No. 4 in uranium, and it's a huge nickel producer, gold, silver, a lot of other inputs.

And to just indirectly address your question, I think one of the biggest impacts of the war in the U.S. so far will be a war tax of sources, prices rise for a lot of these inputs and then feeds through to the consumer. And also, I forgot to mention, Russia and Ukraine together make about a third of the world's wheat, and 20% of corn. So we might see bread prices going up.

Now, in the bigger picture, no one knows Putin's endgame. Probably he doesn't know his endgame. And as Bill was saying, the initial idea was probably to take over Ukraine, install a pro-Kremlin, a pro-Russian government so that Ukraine wouldn't join NATO. That would seal the deal for that, at least for a while. And that is looking a whole lot more difficult.

So the big challenge for policymakers, for NATO, for the White House and the U.S., is to have some sort of off ramp for Putin so that he can back out of the corner that he's painted himself into without losing total face domestically, as well as internationally. There's always a danger that doubles down. And there's Baltics which are part of NATO right there. Poland is right there.

There's always that risk of this becoming a much broader war. And, of course, we wouldn't even be having this conversation if Russia wasn't a nuclear power. There was that specter, which Putin has very, very intentionally raised. I think two things that we should really focus on in coming days to see where this goes is the domestic support for Putin.

He's been in power for 22 years. And there's virtually no opposition because, the Russian government, Putin is extremely effective at stamping it out. When you look at photos of protests or videos of protests around Russia, they're pretty small. Because whenever that happens, people are just hurled up and taken to jail or beaten. So Putin has been very effective at keeping the opposition at bay.

There's no one waiting in the wings to take over. And at this point, it'll take either massive sanctions that really crush the Russian population when they do rise up, which I find extremely unlikely, or someone from Putin's inner circle standing up and saying, OK, this isn't going to do. I find that unlikely too. It's difficult to see how it ends, at least from a Russian perspective without Putin backing down, which just is anathema to everything.

The other key issue, which I think we're going to address a little bit later, is China's stance, and whether China supports Putin and supports the Russian economy or if China says, look, this is going too far, you really got to ease down its back. So those are the two big issues that I think we should be keeping an eye on in coming days.

Matt Weinschenk: Yeah. And what's striking to me about these sanctions is this is sort of a new level of financial sanction that we haven't seen before. Putin decided to come back and essentially declare it an act of war and say he's ready for nuclear war, because we cut off his central banks access to the world. So that is something that hasn't happened before.

This, I think, is a new type of warfare that is really going to hamper Russia's ability to fund their war, if they can't access their reserves, they can't sell their oil, they can't do any of these things, their entire war plan could be out the window.

So my question, Kim, or for anybody really, is what are your worries about how much these sanctions are going to obliterate Russia's economy? What are they going to do to the U.S.? What are they going to do to Europe? How worried is anyone about this expanding in an economic sense?

Scott Garliss: This morning, both Germany and the U.S. said they can still buy oil and gas from Russia. So that concerns me a bit that it's defining the sanctions that are taken from a swift basis. Kim, did you see that the Russian foreign ministry on Friday warned both Finland and Sweden not to think about joining NATO, because if they do, there will be a similar consequence to what's going on in Ukraine right now.

And then, supposedly, the Russian u-boats off of Sweden have now become very visible, they're blocking the Balkans. And so I would think that would create concern around Estonia, Latvia, and Lithuania which are NATO nations, I believe. But if anything were to happen there that would take this all to a new level. Kim, any thoughts on that stuff?

Kim Iskyan: Yeah, I think the risk is that Putin, if he's backed into a corner, what do you do? You pounce and you push harder. And I think that that's the big risk certainly from military and security perspective. In terms of economical, I think the key risk is that a lot of this will fuel through to higher inflation. And I think the big reason that oil and gas are not part of sanctions is that Europe needs to keep the lights on and the heat on.

So that's really to limit the impact on people living in Europe. But I think that still, prices have been rising. And a lot of those commodities, a lot of those inputs, prices are rising, just because Russia is such a big producer of a lot of these commodities. I think that's going to be the biggest war tax on the U.S. and Europe.

Matt Weinschenk: Alright, I want to come back to inflation in a moment. But I want to turn to the market reaction for a minute. Scott and Greg, we do have recent examples not just of military actions, but actually invasions that Putin has run before. How does a trader or a macro-investor think about political turmoil like this in general? What's your playbook for a situation like this?

Greg Diamond: You go first, go ahead.

Scott Garliss: OK. So for me, what happened last week? So we've had two major overhangs in the marketplace. One is inflation, what the Fed is going to do in terms of rate hikes. The other is Putin invading Ukraine. So we've seen the market sell off because of the uncertainty there. But what has happened is, as Putin has invaded, you've actually taken one of those market overhangs away.

That's why you saw this cover rally late last week, the markets are bouncing back this morning. I think it's sort of the same. And one of the things people have said is the fact that they're still going to be able to sell oil and natural gas through all this. And now I think they're realizing after the comments from Germany and the U.S. this morning that even with these tougher sanctions, it is still the case.

I was reading overnight, some of the biggest Chinese banks are saying they won't do dollar transactions with Russia for commodities, but they'll do it in Yuan. So that's really interesting there. Two is, have Russia and China figured out a way to go around the SWIFT banking system, because it's a lot of dollar transactions and goes in a different currency. So that'll be interesting to watch.

Going forward, one of the other things I'm watching last week, there was a trillion dollars-worth of put stops. That was versus 800 billion in March 2020. We have options expiration the third week of March. So we just saw $2.2 trillion worth of options expire last week.

What's going to be really interesting is when those options unwind, and that all has to cover because dealers have to get short other things against that, are we going to see another rally? In terms of volatility, I would be cautious. Longer term, I think this is going to create a buying opportunity for you, but there's going to be a lot of noise to wade through over the next 12 months.

Matt Weinschenk: Yeah, Greg, what do you think?

Greg Diamond: I agree with Scott. And there's an old saying in the market, buy on the sound of cannons and sell on the sound of trumpets, which is basically buy when the war starts, and then sell when it's over. But to Scott's point about the amount of the huge notional amount of puts that we sold, it was something that I was looking at as a buy the rumor sell the fact type deal.

As you mentioned, there was a lot of uncertainty, and it kind of removed some of that uncertainty. Now the issue that I have going forward, or at least what I'm expecting, or trying to discount, or factor into, is how the Fed plays into this. Their meeting's up in a couple weeks. They have two things that they have to tackle. They have to attack at least inflation or asset prices and growth.

Which one? They can't leave it alone. If they leave it alone, inflation is just going to go through the roof. It's not like they can say, "Excuse me, Mr. economic cycle, just please stop real quick. We got to figure out this war situation." That's not how it's going to work. So which one are they going to let have a little bit more leeway? Is it going to be asset prices? Is it going to be growth? Or are they going to have to attack inflation?

They're going to have to attack one of them. So from a short-term, yeah, I think that. And I noted this in my Outlook this morning. It's probable we'll see a relief rally, we're already seeing it. The escalation happened over the weekend, but stocks aren't down as much as you might have thought. So to me, that tells me along with positioning that we'll probably see a rally into and after the Fed.

But then after that, I think that's where volatility is going to start picking up again. Could you put the first chart up, if you don't mind? So this is something that I've been tracking for a while, in terms of where we are within the cycle of the market cycle. I believe we've come to a significant inflection point.

And just looking at some of these growth stocks, a lot of these stocks, I had actually traded on the rally up because growth was rallying, the uptrend was there, and then all of a sudden, late last year and early this year, some of these stocks, Advanced Micro Devices down 39%, Adobe, DocuSign, Mehta platforms down 50, Netflix down 50, and Video down 40%. These are growth stocks, and they're down by huge double digits.

So the way I look at it is, this is signaling to me, regardless of what the major indexes are doing underneath the market, it's not very healthy. And so if you go to the next slide, and I'll go through this really quick. This is the other sort of roadmap that I've had and the market from, this is back in 1998 up to the 2000 crash, you had long-term capital management crash.

And then this huge rally, it's the same exact thing that happened with COVID-19. It's been this two-year rally and a top. So if you just go the next slide, you can see, this is another two year rally and top. And again, the price action is confirming this. We're seeing it on the underlying growth stocks that aren't growing anymore. And then you have to factor in what Putin is going to do, I don't know.

What's the Fed going to do? That's going to be the next big catalyst for me to say, alright, look, if the market can't rally because the Fed actually held back, are they pricing in more inflation? Or if they go to inflation, is this going to hamper growth? Then you throw in China, and it becomes a cocktail of a lot of uncertainty. So if the market proves me wrong, so be it, I'll adjust to that. But right now, this is the roadmap that I'm following.

Matt Weinschenk: So you would say military action, generally, a short-term buying opportunity, but there's a lot more layers going on now, that makes it harder to.

Greg Diamond: Scott mentioned earlier, what if Sweden and Finland, all of a sudden, they start getting bombed or invaded? There's a lot of uncertainties. I'm not a geopolitical expert by any means, but I think you have to start pricing that in because nobody knows what Putin's going to do.

Matt Weinschenk: That's why the put buying has gotten so high. Just for people at home, the put buying is indicative of institutions looking for protection. And the way you framed it, they were more scared of this than they were apparently of COVID-19, at least from a financial perspective.

Scott Garliss: Yeah, they were buying downside protection. So Abby, can you pull up that photo of the charts on what Greg was talking about with by the war. So you can see from recent past instances here, the majority of the time that the market tends to rally off of the sound of cannons, as Greg said. But yes, what you're talking about is, so institutions instead of unloading stock, sometimes what they do is they buy downside protection.

So they buy puts against their positions. And that way, if the market goes down, that the gains they're making on that, that put buying is offset by the losses, but that way, their portfolios aren't getting wiped out. The other interesting event we've been seeing, last month we saw this, versus October, the amount of retail put buying is actually double.

So retail is either getting very short, or they have a lot of downside protection too. So that needs to unwind at some point. So yeah, I think rallies are going to be short term in nature right now. But again, longer term, if we go back to say 1939, when Germany invaded Poland, and that was the beginning of World War II.

I looked out 12 months later, on a total return basis, which is dividends reinvested, you only lost about 1% in the S&P 500. Two years later, you're up about three. Five years later, you were up 100%. Now, I know, Greg and I were talking about this earlier, that was coming off the heels of the Great Depression. Times are certainly different. But I think with long-term resolve, it sort of helps you look through a lot of the noise and think about where you want to be.

Matt Weinschenk: Yeah. Well, I do want to go back to that inflation. And I know, Doc and Dan, among others, you've been big on inflation for a while now. And I think this really, forget transitory, this is really going to extend the timeline for rising prices. So, do you guys have any updates to your outlook, given these new inflationary pressures?

Dan Ferris: I don't. I still say prepared and predict, I don't need to use this as an excuse to start making predictions that I don't like to make anyway. So, if you're reading Extreme Value, you're following my advice, or listening to the podcast or whatever, this is just an example of what you're preparing for.

I think the portfolio will do well, even if we don't see these huge inflation prints month after month. And I'm curious that the comparisons get harder, like April, May, June into July and stuff. And I'm curious to see how that plays out. I don't need to predict it. I just need to be prepared for it in a way that doesn't hurt me if we don't continue to see 7%-plus. But, yeah, I'm steady as she goes.

Matt Weinschenk: Doc, what do you think? We've been debating whether that 7.5 CPI number was going to be the peak and the comparisons do make it difficult, but this really throws that, this is going to change the whole game. And also, there's really two types of inflation, there's inflation that shows up in CPI, and then there's what people experience.

And it's meant to be similar. But I think especially in times of crisis, or rapid change, those things really diverge and CPI doesn't do such a good job. But you've been on inflation for a couple of years, Doc, now. What do you think, when you see these energy prices going up even higher? How long can this last and how can it really affect people?

Dr. David Eifrig: Yeah Matt, thanks. What strikes me is, there's some components here that are critical to human existence, food, energy, and housing, sort of the basic fundamentals. And if you look at food, I think Kim brought it up. But Ukraine produces a good chunk of, I have a slightly lower numbers than Kim, but let's say it's 20% of the world's corn and wheat.

They had record exports last year of corn to China in dollar volume. So, corn to China is critical, and that chart has gone up off the charts. China's hurting, their pork prices are down, they've got a movement, politically, where they tell people what to eat. So they've demanded that pork producing go up. That's a huge problem for them.

If you got increased corn, you're supposed to be feeding your population with pork, pork price is down. That hasn't even rolled into because the harvest won't be until this spring for some of the wheat and corn in Ukraine. I think that if you look at housing, you've already seen one of the indicators, just a mortgage rate, if you look at that on a chart, is just spiked up.

That makes housing that much more expensive to get into. Then you have what's been pointed out by Greg Diamond there, what happens if you start to see Russia messing around with transportation, blow up a ship here and there, just as Putin's last ditch attempt, I've got an even worse supply problem. And then we've seen it in the high yield bond pricing.

And that spread has widened out. So that's means it is risky assets, before everyone was able to finance and refinance and kick the can down the road. So that's going to come to roost. I was thinking over the weekend and talking to some folks about the next step or this cycle.

And to me, the world has gotten to this place where hard goods, whether you want to call them commodities, but even things like building, you can't find someone that will wield a hammer and fix your front porch for months, nine months, 10 months to build a fence. Real hard physical things, yet I can find 10,000 different NFTs to buy corners of a picture of this and corners of a picture of that.

I don't know, I worry that there's a whole cadre of young folk who in past times went to war at this moment. Alright, let's get the military going and let's go help Europe, but they can't do anything physically. They can't wield a hammer, they can't cook, and won't wipe tables, won't work in restaurants, won't wash dishes. I don't know, I hate to be that old guy that says, I remember when people worked hard.

But it's a problem when the government says there's a crisis, and we'll just pay you and then we're going to tax the future. That's a problem if you can't get goods and can't get services. And that's real. Bill McGilton right there said thank goodness, his brother-in-law, I think you said Bill, decided to stock up and have three extra cans of gasoline. Otherwise, they wouldn't be here with us today.

I think the note you wrote, Bill too, you buried the lead on this. He left with diapers and gold and three cans of gas. And that's basic fundamental things. I don't think we'll get that bad in the United States, but I do see this problem where goods and services will still increase. I don't think we've seen a high print yet.

Matt Weinschenk: Yeah, I think everyone knows the energy situation with Russia and how much they supply. But we've seen how easy it is to break the supply chain with one ship. Getting stuck in the canal messed everything up. This is going to be that, at least 10 times that scale. So, the supply chain is already a disaster. So, this is only going to make it worse. And I think that's going to extend that inflationary picture.

Dr. David Eifrig: And just to interrupt too, Germany just shut down their last nuclear plant. That was a way around this and a clean way around it. Now the world is starting to think China's putting on, I don't know. Online, they've got another 20 nuclear plants coming online soon. So, they're going to get themselves out of the being tied to this energy flow. But we're behind the eighth ball on that one.

Matt Weinschenk: But you did bring up China and I want to ask Brett Eversole a question. You and Steve have two particular areas of interest here. And the first one, an area that you focus on is China and Asia and investing there. So where does China and the Chinese market stand in all of this.

China and Russia are fairly friendly. Then we also know, China has been eyeing Taiwan. And that seemed like as much of a risk as Ukraine for a while. So what do you see coming from China, politically and from a market perspective?

Brett Eversole: Sure. Thanks, Matt. I'm not a political expert. So I don't want to spend a lot of time there. One thing I will say is that what's going on in Russia and Ukraine is not a good situation. And it certainly has some global economic impacts. But I think if China were to make a move on Taiwan, I think that would be a much larger, especially to the west, impact on the global economy.

Obviously, Taiwan is huge for semiconductors globally. So, I don't think that China could really use what's happening today as a smokescreen to do something in Taiwan. So, I think if people are thinking that, I don't really see that as a possibility. But talking about markets, Chinese stocks are always risky. They are an emerging market, and so they are always risky, are going to be more volatile than the market here in the U.S.

And we've seen that play out recently. But I think there's an incredible opportunity, say up in China. But to be specific there, I think it is setting up, I don't think we're there yet. Chinese large caps are trading pretty much at their March 2020 lows right now and Chinese technology companies are trading at about seven-year lows.

So, with those prices down so much, valuations are, in many cases, some of the best on record. So, you can look at that one or two ways. You can say, well, are those valuations cheap? But the economics are about to get really bad for those companies. Well, most of those companies operate pretty much wholly inside of China.

So, I don't think what's happening is really going to have a big impact on corporate profitability in China. Because of that, I think those valuations are legitimate and are really setting up a fantastic buying opportunity in China. But again, the problem here is that the trend is not in place.

I work with Steve, and from the get go of starting working with him over a decade ago, it's cheap paid in an uptrend. That's really what we look for, and that's how you can safely invest in what would otherwise be less safe markets, and China is certainly a market like that. So, the trend is not there, and we would definitely want to wait for that before we put any money to work.

And also, if you're going to put money to work in those places, you just got to be disciplined. That means waiting for the trend to buy and that means having and following stop losses on all those investments. Right now, in True Wealth, we only have one Chinese recommendation in the portfolio. I looked back, and two years ago, we had five recommendations that were based in China.

And we've gotten out of those because as that market's falling, we hit those stops and discipline and sold. So again, if you're going to invest in China, and I think there's a great opportunity to set it up, you got to do it from a discipline perspective. One thing that's interesting, though, I don't think a lot of people realize this, is that U.S. investors actually have been pouring money into China and are not really doing it in a disciplined way.

So that China large cap ETF has seen its shares outstanding double over the last year. And Chinese tech ETF has seen its shares outstanding go up 4X over the last year. So, U.S. investors have been buying that dip. And as it gets lower, buy more and more and more, and really pouring money into Chinese stocks in a way that really hasn't happened in the last seven to eight years, something like that.

So really, I think this is a great opportunity setting up. I think the valuations are there, but I'd like to see some of that optimism and interest from U.S. investors burn off a bit. And also, we just got to wait on the uptrend. So great opportunity, but it's just, we're not quite there yet.

Matt Weinschenk: OK, and if we have higher inflation, political turmoil, and the Fed raising rates and all these things, that's a challenge to the melt up. Where do you guys stand on that now? Is the melt up on? I'm sure our readers would love to hear.

Brett Eversole: Sure. Yeah, of course. Well, I think it's hard right now in 2022, seeing the difficult times we've had in the first two months of the year. But a little perspective, like last year, the market, the S&P 500 was up, I think 29%. And it was basically a volatility free move. Now, obviously, you look underneath the hood, and you see growth stocks getting crushed, and things like that.

But the S&P largest drawdown was about 5%. People have gotten used to that but that is not normal. That's not typically how markets work. So I went back and looked, since 1950, there have been 37 corrections, being at 10% or more fallen stocks. So over 72 years, that's about one over two years. What's interesting is that of those 37 corrections, only 11 of them turned into bear markets, that is a 20% fall or more.

So, what that means is 70% of the time when stocks fall 10%, they don't end up pulling 20%. So, corrections are very normal, bear markets are much less likely. What's also interesting is that when you end up in a melt up type environment, corrections become even more normal. So, in 1999, the Nasdaq almost doubled in value. But during that single year, it had five 10%-plus corrections all within a 1-to-12 month window.

So, it's just logical when you think about it, you can't have a situation where stocks can soar to unimaginable heights, but not have volatility. That's what happened last year. To a certain extent, we had a very strong year with no volatility. But that's not generally how it works out. And I think today's environment is more normal.

And what always happens is, when that sell off is happening, everyone starts to notice all of the issues that were already there that everyone ignores when stocks are going up. So right now, I think it's really easy to look around and find potential problems. But a lot of those problems existed three months ago, we're just only thinking about them now because stocks are selling off.

I think the melt up is still in a good place, and I think what's happening right now is normal. The other big issue that people raise is obviously, the Fed and the rate hike cycle that's coming. We've written a lot about this recently, but the stock market actually has a pretty good history of moving higher during Fed rate hikes cycles. So, we saw that in the last one a few years ago, in 2015, 2016, 2017.

It happened in the mid-2000s, where the market rallied through the, I think there were 17 rate hikes from 2004 to 2006. And then in the late '90s as well, the market rallied through that rate hike cycle. So, what we found in looking at the data is it's not really the rate hikes that are problematic, it's more the plateau and rates.

And that makes sense when you think about it as well, because the Fed generally is hiking rates to either slow down an overheating economy or tame inflation. Once they stop hiking rates that means they've done their job. They've started to slow down that economy, and that's going to then eke into profitability, and then that's going to hurt valuations, and then we're going to start to get that sell off in stocks.

So, it's really not the rate hiking cycle that's problematic, it's more of a plateau and rates. And we haven't actually gotten that first rate hike yet, or that first rate hike yet, and we'll probably be getting rate hikes for the next couple of years once it starts. So, I think there's still a lot of time for the market to run higher in the meantime. And just one last thing, just about the market.

Generally, I think, for the last 12 years, buying the dip has been the right move. And that obviously won't always be the case. But I think that idea is innocent until proven guilty. And again, when you're 10% of the little highs, it's easy to look around and find the next problem, it's going to take the market down another 5%.

And the problem after that, it's going to take it down 5% farther. But again, only 30% of corrections turn into bear market. So, most of the time that doesn't actually play out, and I think again, buying the dip is innocent until proven guilty. So, I think there's still opportunity.

Matt Weinschenk: In that vein, I want to ask you Matt McCall, you're sort of our eternal optimist. You can always see a bright future ahead and then you always have good reason for it. But 2022, the hits keep coming. How do you maintain that view? And what do you think is going to happen here? Again, I'm going to guess you're going to say buying opportunity, but I want to hear why you say that, because you always have a good logic.

Matt McCall: Yeah, I've been biting my tongue for like an hour now. Just want to jump in, but I was waiting my turn. In times like this, there's irrational thinking and suddenly, irrational things, they sound rational. Nothing against anybody, but we start talking about things, that the odds of them happening are so low.

I'm a numbers guy. What are the odds of Russia going after Sweden or Finland? 0.0001%? I mean, the odds of something like that, we can't live life like that and you can't invest like that, because you're never going to buy something. I remember 20 some years ago, my first time on Wall Street, this old timer came up to me.

And I said something like, why are we buying now, these four different reasons? He's like, Matt, I've been doing this for 50 years. I give you 30 reasons every day why not to buy stocks. But you look at a 30-year chart in the S&P 500, there's no better place in this country that anybody, the average American, can make money. So, you have to invest long term and you invest in strong companies.

What's going on in Ukraine sucks. My grandfather's from there, it's horrific. And I'm not pushing that aside but let's look at what's really going on. Corporate profits are going to be the highest level ever this year. What are stock prices based on over the long term? Making money. If it is at the best level ever, why are we arguing that stocks overvalued or interest rates are going to go up?

Historically, interest rates are still so, so low, borrowing costs are still low. We're not looking at a situation like, 0809, where companies are extremely leveraged. We don't have, that's exact opposite right now sitting on tons of cash. So, we have to sometimes take the view of the company we're buying, and what that company is going to be doing in 5 to 10 to 15 years from now.

In the short term, we're going to have different types of wars, we're going to have the pandemic. Let's go back just two years ago, when a pandemic was hitting, all the irrational thinking that was going on. A lot of it was propaganda by the government, but all that B.S. that was being thrown around, and people thought that was going to be the end of the world, basically.

We're never going to be able to go outside again. Look how irrational that was, look how much of a great buying opportunity that was, the MARK was up over 100% in less than two years. You go back to Kuwait in 1990. The MARK was down almost 19% or so again, the irrational thinking that was going on then, that was our troops going into the Middle East.

And that being a great buying opportunity. By February, the next year, we were back at a new high. So, I think what we have to do is look at this crisis as an opportunity not as much as – we could sit here and say worst case scenarios over and over, and I get it, there is a slim possibility of some of this stuff happening. But at the same time, let's look at the optimistic view that this is completely backfired on Putin.

This is completely. He was trying to tear apart NATO, tear apart the West. If anything, we've come together. This is going to be great. You look at a pandemic that accelerated so many of the themes I invest in, whether it be telehealth, whether it be AI. You look at this now, this is such a great opportunity for beaten down solar stocks, wind stocks, nukes.

I mean, nuclear energy, there's no way we can meet any of this net carbon zero, all this, whatever the hell how they want to achieve, without nuclear power, it's impossible. There's such opportunities. We just put a uranium stock out last week, I'm looking and it's up 8% today. I'm looking at my watch list, which has been beaten down, don't get me wrong.

The watch list, all green, except for one, on a day where the market – Nasdaq turned green, but the market itself is down and all this terrible stuff we just talked about. There is such great opportunity over nearly half of all Nasdaq stocks are down over 50%. So, you can look at it in one way and say, well it tells us things aren't good under the hood.

You could also look at it in another way that this has been priced into the stocks. We priced in the worst-case scenario, in my opinion. So, to me, there's great opportunity. And the last thing I'll say, Matt, is you look at innovation. I don't care if there's a war in Iraq, I don't care who the president is, I don't care if Putin dies tomorrow or whatever the hell happens.

You're going to tell me there's not going to be a million more, percentage more of EVs on the road in 10 years from now? Invest in that, nothing's going to slow that down. You're not going to slow down artificial intelligence and machine learning. You're not going to slow down clean energy expanding. So, invest in those companies.

And there will be a lot of ups and downs. And these downs are when you buy into solid companies. And again, and maybe I'm a cockeyed optimist, but I truly look at this right now as a great buying to do. I don't know if there's the bottom, I have no idea. I'm not a pretender, I don't have a crystal ball.

But I know that there's a lot of companies on sale right now. I have no exposure to Facebook, Meta, whatever they're called now, but that company is one of the leads. They're not going to stop bringing in advertising. It's 50% down. I mean, my God, what a great buying opportunity for a large company. So yes, Matt, you are right. I believe it's a great opportunity.

Matt Weinschenk: And that brings me, I want to talk about some specific investments and see what you guys think, where to make some moves here. As Matt mentioned, military actions, wars tend to actually be good buying opportunities. The Cold War sent defense stocks up for a couple decades.

Doc, back in 2017, you predicted rising conflicts between the U.S. and China, other big players, sort of large-scale war, and suggested people buy defense stocks. Hearing it now, that sounds obvious. But at the time, it was actually a pretty non-consensus view. So, defense stocks now, Doc, can we be buying them? Have they made their run? Do you want to still look at those over the long term? What do you think?

Dr. David Eifrig: Yeah, sure. I mean, as long as China, Russia, the United States are doing this dance and Russia – well, yes. As long as they're doing this dance, yes to defense stocks. Yes, yes, yes. I may be taking you off whatever script we have, I want to go back. I want to be that old guy. That old, old guy, came out of his cave for today to talk. And I want to say I'm nervous.

And I appreciate Matt McCall. I love your enthusiasm. And this makes this next few years a stock pickers environment. That's what we do. So, I'm excited. Right ever saw, in all due respect, looking back at Fed rate hikes and stock markets. I was young enough, I was a teenager, when I look back to 1972. If we can throw that chart up here.

What people will see is that when the Fed started raising the discount rate, then it took a couple years, right from the peak in '70 to 1974, the market was down 50%. CPI kept going up, up, up, up. And so, I go back 40 years. But yes, the data from 1990 says, hey, Fed rate hikes are good for stocks.

Except when I look back a little further in my history in my brain and my body, I'm nervous and shaky right now about overall markets and what could happen with both the CPI and rate hikes. But I don't believe in the power of the Fed, I think there are other factors and things in play that we have to pay attention to. But I just want to caution people for that time, and that was a weird time.

I can remember parents of my friends just all being depressed because of all the things they'd invest in the NIFTY 50, the Coca-Cola, the Clorox, and those were just grinding, down, down, down. So, I don't want to throw cold water and ice water on the party, but I want to caution, because I feel like we might be closer to that time than not.

But I don't know, like I said, I like this idea that Putin has made a mistake. Maybe the world comes together. The fact that this is the first time that we've got a war live. You can see it on TikTok, you can see it on your cameras from all over the place. Maybe this is the time the world gets more peaceful, because we back down Putin and say no, no, no.

And then there aren't ships that are attackers, and stuff that sees wild, low probability things. So anyway, I want to add a little pessimism, but yes to defense stocks, Matt, to get you back on track.

Matt Weinschenk: Well, I'm going to stay off track. I want to stay on your track now for a moment, D. And I want to ask Dan, because this is something that I struggle with, Dan. I can consider you a philosopher of big risks and thinking about things that can go wrong, because sometimes they do. I personally, am much more aligned with Matt. I'm optimistic.

I say, look, no, we're not going to have a nuclear war, whatever it may be, whatever people are scared of. But those things do happen. Any one bad thing is a low chance, but they do happen, and they surprise you when they do. And I think you could look at Bill's experience the last few days, and that's exactly what he's lived through.

So Dan, I don't know if you have an interesting thought on this or something to say, but I feel like, how do you put those big risks into your head? And what do you think about this thought that bad things tend to not happen and we can try and dance around them, what do you think?

Dan Ferris: Right, I think it was, was it Dimson? One of those three who wrote that book, Triumph of the Optimists, who said risk means more things can happen and will happen. My thinking on those risks you're talking about is just the nature of risk itself. Risk is a width of the probability of outcomes. If you think in terms of like, what is probably going to happen when you buy treasury bills?

Well, you're going to make a little bit of money and that's about it. You're going to get your principal back. What is the probability of the outcome of any given year when you buy the S&P 500? Well as Brett and a few other folks in this will tell you, most of the time is going to go up and you're going to make money, but sometimes it's going to go down, sometimes going to go down a lot.

And what is the width of outcomes if you buy biotech speculations and exploration mining stocks. Well, 10X to zero. OK, so that's how I see risk. And I just think there are times for the last year or more, however long it's been now, I just was driven by valuations and speculative fervor. And I thought, well, this is one of those times when I think the range of outcomes is a lot wider than a lot of folks.

A lot of us think that we're going to the moon with all these highly speculative plays, and even still COVID-19 plays and various things. That looked a little crazy and Doc mentioned NFTs, really crazy. And I thought to myself, well, we seem to have forgotten that these kinds of episodes, they don't end well.

And to a large extent, you heard Matt talking about stocks like Netflix and Meta or Facebook, whatever you want to call it, down 50%. Well, that was another thing that I was talking about. I admit, I've been talking about this stuff forever. I'm not a permabear but as a value guy, you're always early with everything, whether you're bearish or bullish.

So, I warned I said, "Look, you can lose half your money on a stock like Facebook." And I picked one, that one specifically, and Nvidia, I think I picked that one too. This can happen. And people just forgot about that for a while. But they're remembering it now, aren't they? So, my sense is you don't want to own the speculative garbage right now, you want to be really careful about that.

But you should still be buying great businesses that you find, that you think are priced for a really good return. Like I said before, I'm not doing anything any different. You buy great businesses priced for a good return, and continue to hold plenty of cash, hold gold and silver. All four parts of this have worked out for extreme value readers and other people who have listened to it.

So, I think about it, and you're right. I do try to philosophize a bit about those risks. But as I've gotten older, I've tended to say I'm not predicting anything anymore. I just want to be prepared for whatever happens, but I still want to get a good return. So, I balanced those two things and I wind up with the basic portfolio that I just described. That's where I am.

Matt Weinschenk: So, if I could try to marry those two views, I think the important thing here is if you're optimistic and you're using this as a buying opportunity, there's a good chance that's going to work out, but I think you want to realize what your outcomes can be.

And if you can handle a 50% drawdown, if you know that these things, you're not going to time it exactly right, which Matt obviously admits, you could be OK. I think individual investors, like our readers, have an advantage. Ideally, they're not margined. They don't have to get these things right, month by month or quarter by quarter.

They can handle things, they can wait them out if it takes a longer time to play out. So, I think we're probably closer to the same page, maybe than it sounds like. And I think that individuals who are prepared to ride those growth stocks can still do well if they do it at the right time. But you have to know what you're getting into.

Scott Garliss: And Matt, I think you hit on two really important subjects that everybody sort of misses. That's diversification and time horizon. But you can be in a very speculative place, just make sure that all your eggs aren't in that basket. And just think about, am I investing for tomorrow? That might be a problem.

Matt Weinschenk: Well, my next question was going to be, Dan, do you think it's too late for gold and silver here? You think they've served their function? But is there any more upside? But I feel like you said you're not going to give a prediction, and that was your last thought?

Dan Ferris: Well, I wouldn't sell them. For me physical gold and silver, just kind of permanent holdings. You never do own them. So, I think you can always buy those no matter what the CPI trends and how that develops over the next several months here. I don't want to be caught without those things. But you then ask what about the upside and the equities, gold, and silver equities.

Wouldn't sell those either here. I think we're near a bigger inflection point in commodities versus stocks. U.S. versus ex-U.S. equities and the value growth. And I think all those come together. You're never just buying one of those, I don't think.

Matt Weinschenk: And just to clarify you think non-U.S. is going to outperform U.S. on that dichotomy that you just mentioned.

Dan Ferris: Outperform or not overall, I think you can look at places outside the U.S. now and expect a better performance. Now, you might not want to go as far as Rob Barnett for research affiliates who I just interviewed. And I don't think we've even aired the interview yet, but he says 50% of his liquid net worth is in emerging markets value.

That's pretty aggressive. I wouldn't say to do that. But I think you should have some emerging markets value. And I think you should maybe even have some Japan, and another guy Marco Papa Choi I interviewed says he likes Chile and Brazil right now. So yeah, look outside of the U.S., it's a good time to do that.

Matt Weinschenk: From a technical or a trading perspective, anyone have an outlook on gold here, you think it's done its duty or you think there's still more room to go?

Greg Diamond: Well, I'll jump in there. It's been a little surprising, because inflation has been at 40-year highs, and then you have this geopolitical turmoil, and it's rallied, but it hasn't really taken off like one would expect. I'll also note that Bitcoin and Aetherium haven't been either an inflation hedge or a safe haven play. So those two things are where I stand with that technically.

I think like Dan said, I'm not going to sell them. Two big stocks to look at in terms of gold and silver stocks are the royalty stocks, Franco-Nevada for one, oil gold two. But also want to go back to what Doc pointed out in the 1970s. And this is something that I explained at our conference last year in Las Vegas.

And that was we've reached an inflection point, where inflation is either going to take off and stocks drop, like Doc said, 50%, or you have this 2011 scenario coming out of the Great Recession. Everybody was worried about inflation, and gold and silver rallied, stocks chopped around, and then everything was fine. Gold and silver went down, and then stocks continued to move higher.

That's why I think this next coming Federal Reserve meeting is so important, because it goes back to what I just talked about earlier, what is the Fed going to attack?

Is it going to beat inflation or are they going to allow it to do its own thing, because they're worried about what's happening in Russia, Ukraine, they back off? I think, to me, that is going to be a huge signal. And we'll find out whether we are in a '90s and '70s scenario, or whether we get that 2011 scenario and stocks take off again.

Matt Weinschenk: Yeah. Matt McCall, we paint you as a growth guy, but you've got a handful of value plays in there when they support your innovation thesis. You feel like you want to get more on the value side here or you think you want to be buying the growth?

Matt McCall: I'm looking at the growth. So I was just looking at a chart while you were talking. I was just looking at the CPI. I was trying to find, I did it the other day, but the CPI was down at like 0.2 or something a few years ago. And in that timeframe, obviously goes up to 7.5 and gold was up minimally in that timeframe. Meanwhile, the S&P doubles.

So just to show you, I think gold's a terrible investment. Personally, I think it's just absolutely dead money. But I'm not telling people to sell because everybody else here disagrees with me, but I just don't see it. I mean, yeah, I have gold that my grandpa gave me. What am I going to do with gold coin if the world's ending?

Am I going to take it, give me guns and ammo and fuel and food and water, I mean, come on, no offense, Bill, I know you have two gold coins with you. But I won't tell anybody where you are with those gold coins. I still look at growth, Matt.

But the thing is, some of these growth stocks that are in here that are projected to grow 30%, 40% next couple of years annually on top of bottom line, they still may, in my opinion, be value play. Maybe not along the lines that Dan looks at it, but their value based on historically where they've traded versus themselves.

Whether it's based on price of sales, price to book, etc. So, they have become values like Facebook, again, just using an example as a big name or Meta. The fact that's trading now, it's actually a value play based on its historical numbers. So ideally, in this situation, I would love to find stocks that meet my innovation, meet growth at the same time, or a good value based on where they trade in the past and where I think they will be in the future.

And one thing I forgot to say real quick, and it's off topic. But we talked about the innovation going forward. And just think about Elon Musk, what has happened. He came in, took the Starlink, moved it over Ukraine, and is now offering Internet service. That just shows when we have a crisis, what the opportunities are and then how people step up and how entrepreneurs step up in situations like this.

So again, that is why I'm so optimistic and bullish on the innovation stocks. And again, I think Dan said this, I want to invest in solid companies here. I'm not just throwing darts at some speculative company, because it's down to 80%, they're not at all. We're looking at companies that, very simple, I always tell people about on a podcast.

If you look at a company and you say, I think it's going to be much bigger in 5-to-10 years from now, it's probably a good investment. You're not always going to be right, but it's a very simple way to look at it. The company grows, the stock price will go up with it.

Matt Weinschenk: Kim, how about you? International perspective. U.S., non-U.S., what do you think is the place to be as this plays out?

Kim Iskyan: U.S. stocks have been on a massive outperformance run over the past 13 years, with just March 2020 being the blip. And it's just historically unprecedented. I've been thinking for a while that it's time for that equation to flip and for U.S. stocks to underperform. And we don't have to look back too far where we see an extended period of the S&P 500 not doing much for years.

I think that there are a lot of arguments to be made for international stocks. I know that's a very broad basket. But everything from Europe to Japan to emerging markets to really outperform. However, it's difficult to put such a broad blanket over all international ex-U.S. stocks, because for example, within emerging markets, you have commodity producers, and you have commodity consumers.

And that's a huge distinction. You want to be Brazil, you don't want to be Sri Lanka, you don't want to be Indonesia that imports. Indonesia, bad example. But a lot of emerging markets import a huge portion of their oil, they're crushed. Whereas Brazil, in other circumstances, Russia, are dancing to the bank. Just to go back to what Brett was talking about saying about China.

I think that what's happening in Russia highlights some of the reasons that emerging markets are historically, they trade at lower valuations in developed markets, so lower PEs. And a lot of investors tend to say, well, I don't really know what goes on there. I'm not sure about the politics. I'm not sure if corporate management is going to rip me off.

When you look at the Russian stock market over the past 20 years, it's traded at a huge discount. Been one of the cheapest markets in the world for a long time. And guess what, now we know why. Now we see what was really being discounted into all of that. And I think that's one of the risks of the Chinese market, is that valuations just are structurally lower.

And investors say, wait a second, look what Russia did now. Obviously, Russia and China are completely different animals. But when we consider an authoritarian regime, where the government has a great deal of leeway to do whatever the hell it wants, I think there are some similarities, and I think there might be some concern.

And people say, well, yeah, Chinese equities are trading at long-term lows, but should they be trading anywhere higher, given all the regulatory risk, and arguably the elevated political risk. And also, China is a net commodities importer for a lot of commodities. So, there will be macro pressure if commodity prices stay high.

Matt Weinschenk: Dan, I think you had a thought. We're still trying to figure out if bitcoin is a risk asset or a defensive asset here. The story is kind of defensive asset, but it seems to behave like a risk asset. Do you have any thoughts?

Dan Ferris: Yeah, so we talked with Mike McGlone from Bloomberg on the podcast, and he insisted that 2022 is going to be the year when bitcoin is no longer this sort of risk on speculative things. And it turns into a real risk off asset like gold has been recently and for the last 5,000 years. And so far, that hasn't happened. I watched this, because I don't have any prediction about when that's going to happen.

I expect it to happen if things work out over the long term, but I watch this. As soon as the invasion of Ukraine hit the headlines and hit the markets, I was like, well, OK, stocks are down 2% or 3%. And bitcoin is down 7% or 8% or 9% or whatever it was like right away. Well, it hasn't happened yet. It's still just a speculative long risk on speculative assets.

And I've even been watching, just looking at my phone as we've been talking and basically, a couple of the big indexes went from red to green and Bitcoin went right along with it. I think it will be from a store of value over time. But timing here yet, Matt. It's still just a long, it's like a speculative tech long.

Matt McCall: And jump in real quick Matt, because I take the opposite side. I think it's going to be there sooner rather than later. It will be a store of value and it comes down to simply supply and demand. There's only ever going to be 21 million miners and over 90 million mined already. There's speculation 4 to 5 million of those already lost forever.

So, it is a simple supply and demand because supply coming online is very little right now. Demand is increasing at a higher rate, so over time that simple economics, supply-demand tells you prices will go up. I think there's a large portion of the crypto market that will not be around in a few years, just like marijuana stocks years ago, whatever the trend was happening years ago.

But I do believe Bitcoin will be around and it will be a true store value. And greyscale does a great paper on taking gold versus Bitcoin and you take any situation and Bitcoin has a bit of a slight advantage if not equal with gold, and especially the fact that nobody really my age or younger, even knows where gold is or never buys gold. They're going to buy Bitcoin for a store value. So as the old folks start dying off, it's going into Bitcoin.

Dan Ferris: Maybe one day, we'll have a little debate about this. But gold's a 50 bagger since 1971, [crosstalk] it's been around for 5,000 years. Nothing special about it. The currency went this way, gold went that way and made a new high only recently. It's actually done really well, it's outperforming the S&P 500 this century, hasn't it? So, it's actually done great. It's done exactly what we thought it would do.

Matt McCall: So, you think a year from [crosstalk] to 3,000? You think that that's a possibility at any time in the near century?

Dan Ferris: Of course it is. Of course it is. And I also think not you or me or anyone on this call knows really what Bitcoin is or what it's going to do. It's not even 20 years old yet, it's not even 15 years old yet.

But it's worth owning because of its characteristics. But is untried. As a store of value, it is completely untried and unknown. Gold, on the other hand, is not untried or unknown. And it's done really well over the long term. In another 5,000 years we'll still be owning gold [crosstalk].

Matt Weinschenk: OK, I'm going to go back to Bill, and then we're going to check in just to see if anyone has the last thing to add. Bill, most of our readers are in the U.S., and we're fortunate to live in a place that is stable and safe. And I think you were pretty comfortable in Ukraine, and you didn't expect this really to happen.

So, do you just want to share anything with our readers? How does it feel when real trouble comes to your door? And is there anything people should be ready for or should be thinking about to keep themselves safe?

Bill McGilton: The U.S. obviously, is probably the most stable country in the world with Britain and probably France or something like that, I guess. But Ukraine and the former Soviet countries, for most part are pretty stable, too. They have events and stuff, it's like in American history, we have events, but people are very stable.

I think this event, unless it gets stopped soon, it's going to turn into something far bigger than what we fear, because there's 15 active nuclear reactor plants in Ukraine. And what Kim was saying earlier about giving Putin an off ramp, that's the whole key, because I've been studying, I'm looking at their side, the Russian side, of what their point of view was.

I don't agree with it. I'm a lawyer by background and I always look at the other side, what the other side is saying. And for them, this is not just about Ukraine, it's about security guarantees, meaning they don't want buildups on their border. So, I think these guys will push it to a place that we're not even prepared for yet.

This is not ending here, unless they make some deal, which is more than as much as anybody hopes. But I just think this has the potential to turn into something that most people don't even realize. But from their perspective, they're cornered. Even though for us, we don't see it that way, they have a different look of the world, like they own Ukraine.

Obviously, Ukrainians don't want to be owned by them. But that's their view, and I just don't know how far they're going to go. Because they're getting dirty all over there. I'm hearing they're targeting civilian places now, just to show force, to say, look, we're going to take it. Unless there's somehow, via a miracle, they could work something out, this could get really, really bad, unfortunately, I think.

Matt Weinschenk: Well, Bill, please stay safe over there. I don't know if you're going to get further away or what your plan is. But please take care of yourself and your family. And before we sign off, does anyone have closing thoughts, something they felt our readers needed to hear or anything to add? Doc, I see your hand.

Dr. David Eifrig: Yeah. I just, I'm reminded when I listened to Dan and Matt McCall. And then earlier came into my mind as well. I just want to express this one thought about investing in anything. And it has to do with liquidity. And there's obviously a scale of things that are illiquid, like my farm in northern California where I grow grapes, is very illiquid.

And on the other extreme, super-fast option markets that can be created out of thin air instantly. People invest in things and make a mistake a lot, I think, believing price is a continuous curve. And I just want to remind folks that it's not. This stuff can make discrete jumps and moves. And just to be aware of that when you think about price, with this as a time to buy or this is the time to sell.

And I don't know why I want to share that, other than I want to share it with our subscribers. And I want people to think about that, because I think it's missed whether Bitcoin stores value, it clearly is making these large, discrete moves still, gold much less so. And it may be a difference between that. Might be supply and might be volume. Anyway, I just wanted to share that. It's those things where I want to express that.

Dan Ferris: Yeah, Matt, it's funny he says that. I just wrote a digest about that. In fact, the title of it was called, something like, I think we call it, Prices Leap, They Don't Just Glide. And that's it exactly. And liquidity that Doc just mentioned, it comes and goes. It's not static. So, yeah, I agree. I think Doc's message there was timely.

Matt McCall: I was just going to piggyback, I wasn't going to say anything, but those are great points both of you made. And the same thing I always tell people, look, if you had a value of your home, like the stock market, and went up and down, imagine people that would be selling their home when it went down to move to another neighborhood. It would be crazy. So sometimes you have to just not look at it and look away and know you're investing for the long term.

Matt Weinschenk: Alright, well, everybody rest assured, we'll be keeping you informed on how this all plays out in markets through the Stansberry Digest and our various publications. There are a lot of different ways to survive and thrive during upheaval. So, a short-term trader may make one decision, a long-term investor another.

But we always provide the relevant information to you and explain our investment thesis and strategy so you can understand how it all works together. You can expect to hear more from each of our panelists, the rest of our analysts in the coming weeks, again, through the Digest one of our publications. We'll be covering all this for you. So, thanks to our team that was here for all your insight and thank you at home for watching.

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