The Road to Socialism Is Paved With Coronavirus

The road to socialism is paved with coronavirus... Porter checks in from the farm... 'The biggest overreaction in history'... The economy will be fine... Buy blue-chip stocks... A 'Black Swan' or vanilla problem?... Video: Crypto's coming out party...

'Welcome to permanent socialism in America'...

That's a real concern for our founder Porter Stansberry, if the Federal Reserve keeps going and politicians aren't held accountable...

Porter recently said as much in a brand-new interview, which we link to below.

As those who have read Porter's provocative "Big Lie" Digest a few Fridays ago know, he thinks the government response to the COVID-19 outbreak has been an undeniable overreaction...

In his words, who is a better judge of your health and if you should take a risk and go outside – the state governor, or you and your own doctor?

And Porter believes the political risks the country faces today because of this overreaction are a much greater and longer-term danger to everyday Americans than the economic impact and response.

As Porter wrote, as much as the heartwarming TV commercials like to tell us that "we're all in this together," when it comes down to it, we're not... And we never have been. From that April 17 Digest...

The strength and resilience of a free society is NOT based on the idea that we are all the same or should share the same goals – but upon precisely the opposite.

A free society recognizes a fundamental truth of nature: We are not the same. We do not have the same strengths, the same ideas, the same histories, or the same goals. There's no such thing as "The Public Good." There's a myriad of competing interests, as Adam Smith explained in The Wealth of Nations more than 200 years ago.

What we do share, however, is a common philosophy that champions the rights of the individual and limits the power of the State. We do not exist to serve the State. The State exists to serve us. That distinction lies at the very heart of what it means to be an American, and I think our leaders have completely forgotten this fact.

Based on the overwhelming reader feedback to Porter's essay, much of which we've shared in our mailbag section over the past three weeks, a lot of you feel the same way... And we've since observed more people around the country making a similar case.

Meanwhile, other folks... well, disagree, to put it mildly... to varying degrees.

Well, Porter's back again to talk about all this...

Live from his farm in Baltimore – where he has been spending a lot of time hunting foxes while stuck at home – Porter recently joined American Consequences magazine contributor Buck Sexton on his free "The Buck Sexton Show" podcast...

You can listen to their interview now here on Buck's website, Google Podcasts, or wherever you like to listen to your audio.

The episode you want is from April 30, titled "Justice for General Flynn"... Porter's interview starts around the 1-hour, 13-minute mark.

In it, Porter explains why, "This is a very different kind of recession we're in." And he details further why he's so concerned about the political ramifications of what's going on today – that "big lie"...

Porter explains that the bigger question to consider is what the world will look like six months from now... He expects the economy and markets to recover quick, unless the Federal Reserve keeps enticing people to "not work"...

If [unemployment] drops from 30 million to 10 million, I think our economy is going to be just fine.

If the answer is the Fed keeps spending tons and tons and tons of borrowed money and makes unemployment checks very attractive and people don't want to go back to work, then welcome to permanent socialism in America.

That's the bigger risk... What happens in the future because of how much power the government is exercising now and the role that it has taken in the lives of millions and millions of citizens...

'The biggest overreaction in history'...

Porter acknowledged that he's not a doctor, of course, but he's confident that when we look back on the government's response and the lethality of this previously unknown coronavirus, it will be clear that this "is the biggest overreaction in history," he told Buck.

Sure, a virus similar to severe acute respiratory syndrome ("SARS") with origins in China sparked this pandemic... and certain folks are more susceptible to dying from COVID-19 than others. And as he wrote in the April 17 Digest...

By all means, if you want to wear a mask, be my guest. And if you are older or if you have health problems, please, take sensible precautions. But those decisions are rightfully yours to make...

But the length of government overreach is what created a recession on the scale that we see today, Porter said in the interview with Buck – a former CIA officer whose name should be familiar to longtime Stansberry Research subscribers. More from the interview...

The government's going to print up a ton of money, we're going to get through this bump in the road, the economy is going to come roaring back, employment's going to surge in third quarter of this year. Those things are very obvious to me.

What isn't obvious is how long the government is going to act like a dictatorship and when will, if ever, the government admit that a lot of strategies that they have used over the past two months were enormously expensive and completely medically unnecessary...

The answer is so obvious that this is an unbelievable overreaction. Can our government ever really look back at these measures and do a better job next time?

[Because] there will be winners and losers from these measures and the people that are winners from these measures are going to insist on taking them again.

In the interview, Buck also asked Porter what small-business owners and individual investors can do to make it through today's market environment.

For investors, Porter reiterated his long-term bullish view that we shared here in the Digest back in March. That's when he launched the all-new Forever Portfolio... when stocks were down 40% from their February highs.

In short, because of the amount of money the Federal Reserve has injected into the economy today, Porter believes a "very strong recovery" will happen later this year...

That means tremendous buying opportunities right now in high-quality U.S. stocks, like credit-card giant American Express (AXP), or Coca-Cola (KO), for instance. As he said in the podcast...

I'm willing to bet 12 months from now there is no impairment whatsoever to the earnings of any major, high-quality, blue-chip American company.

If you haven't checked out our new Forever Portfolio, it's not too late... Now's a great time to do it. For a short time only, we've reopened our "Charter Membership" exclusively for Digest readers. Click here for more information.

Moving on from the 'cure' to the 'disease'...

Our international editor Kim Iskyan also has a few "big picture" thoughts on what has happened over the past few months.

Specifically, Kim has been pondering if the virus is a real "Black Swan" event or something of the more vanilla variety.

Reporting from his home base in Singapore, Kim takes today's Digest from here with his latest dispatch...

'Black swans'... or plain-vanilla bad surprises? You decide...

Subprime mortgage-backed securities blow up, and the economy collapses... You spill red wine on the boss's snow-white couch, and he fires you...

The chief financial officer of a big holding in your 401(k) quits "for personal reasons," and your retirement is pushed back by five years... My cat doesn't look both ways before crossing the street, and he gets hit by a car...

Some guy eats a bat in Wuhan (or a virus slips out of a lab), and – well, you know what happens next...

Nassim Taleb coined the term 'black swan' in his 2007 book of the same name...

The famed philosopher, mathematician, and investor used the description to label an event that's highly unusual, unpredictable, and catastrophic.

The idea stems from the long-held belief that all swans were white... until explorers in Australia in the 1700s discovered black swans, too. It blew everyone's minds.

Since Taleb published his book, the term has been perverted... Now, it's a sort of shorthand way of saying, "Gosh, couldn't have seen that coming, not my fault."

Said another way, no one could possibly have predicted Bad Thing X – and I didn't, either... so how can I be to blame for that awful unexpected thing, that black swan?

Of course, anticipating a "black swan" event is silly...

By definition, it's unpredictable, so trying to guess it is like trying to understand your unconscious mind...

The entire point is that it's outside your conscious awareness. What's more, the range of potential events is infinite, and our imaginations tend to be fenced in by what we've seen before.

Instead, we should spend more time – as Taleb explains in a recent interview with the New Yorker magazine – "building political structures so that societies will be better able to cope with mounting, random events."

Part of that is developing redundancies. In other words, prepare... have a backup plan... and allow for a comfortable margin of safety for when things (inevitably) go wrong.

Managing black swans is more difficult when we ignore the warning signs...

In October – not long before timed handwashing and toilet-paper shortages became a thing – the Johns Hopkins Center for Health Security in Baltimore held a "pandemic preparedness simulation."

Its aim was to help policymakers understand what could happen if a viral disease spread globally.

The simulation projected the spread of a pathogen that, within a year and a half, would kill 65 million people, cut the global economy by 11%, and cause stock markets to fall by 20% to 40%. The hypothetical virus used in the scenario was... you guessed it, a coronavirus – just like our now infamous "friend" COVID-19.

At the same time, smart observers from Bill Gates to The Atlantic magazine (July 2018 article, "The Next Plague Is Coming. Is America Ready?") to Foreign Policy magazine (September 2019 article, "The World Knows an Apocalyptic Pandemic Is Coming") were sounding alarm bells.

Taleb himself saw what was happening in real time... He co-wrote an article, published on January 26, called, "Systemic Risk of Pandemic via Novel Pathogens – Coronavirus: A Note." It warned...

We are dealing with an extreme fat-tailed process... making conventional risk-management approaches inadequate.

In other words, a pandemic was a rare event with very big consequences...

And we weren't remotely ready to deal with it in an effective way.

The article's spot-on (but politically difficult) recommendations, if implemented early enough, would have saved hundreds of thousands of lives, and trillions of dollars.

Mind you, there's a big difference between seeing the writing on the wall – and throwing analytical spaghetti at the wall and hoping that a black swan sticks.

I (Kim Iskyan) had a stock analyst boss in the mid-1990s who insisted for years that the price of oil would fall to the then-unthinkable level of $10 per barrel...

Eventually, in late 1998 – after years of being wrong – oil did hit his target, thanks to the global economic crisis. He rode the fumes of his prediction for the rest of the career.

A "stopped clock is right twice a day" guess isn't forecasting a black swan.

The bigger problem with anticipating black swans is what Taleb calls the 'Lucretius problem'...

As Taleb explains in his 2012 book Antifragile, Roman poet and philosopher Lucretius "wrote that the fool believes that the tallest mountain in the world will be equal to the tallest one he has observed."

This means that we consider the biggest object of any kind that we have seen in our lives (or heard about) to be the largest item that can possibly exist.

So if the biggest building you've ever seen, experienced, or heard of is the Empire State Building (1,250 feet tall), then it's difficult to even think about Dubai's Burj Khalifa (2,717 feet tall).

In bad-stuff-happening terms, this means that we often figure that the worst-case event that has ever happened is the worst thing that can ever happen.

We mark off the high-water point of the worst flood ever – and use that level for our "worst-case scenario" planning for future floods.

The only problem – and it's a big one – is that today's "worst flood ever" was worse than the "worst flood ever" that happened before it. The worst thing that has ever happened surpassed the worst-case event that came before it.

That's bad news if you're a scenario planner – or an investor – because you're busy figuring out how to protect yourself from the last crisis.

The real 'black swan' is going to be something that doesn't even fit your definition of 'war'...

Taleb explains this point by citing the failure of the Fukushima Daiichi nuclear reactor in Japan in 2011, when a tsunami struck...

[The reactor] had been built to withstand the worst past historical earthquake, with the builders not imagining much worse – and not thinking that the worst past event had to be a surprise, as it had no precedent.

Being prepared for yesterday's nuclear meltdown – or the pandemic you imagine might happen – won't help much.

Take the Global Health Security Index. It looks at a wide range of indicators – from prevention measures to national health systems to the overall risk environment – in 195 countries to gauge disaster preparedness.

Last year's ranking put the U.S. as the No. 1 best-prepared country for epidemics and pandemics. It was followed by the United Kingdom.

In real life, either the index was wrong... or it was measuring the wrong thing.

More than 75,000 people have reportedly died of COVID-19 in the U.S. That's more than double the second worst-hit country... the U.K., which has roughly 30,000 deaths. In practice, the U.S. and U.K. look a lot closer to the index cellar dwellers, North Korea and Somalia.

What does it all mean?

There's a lot of "new" in what we're experiencing now with the coronavirus – and in the economic and market repercussions from it.

Just because someone labels this a "black swan" event doesn't let us off the hook for being ill-equipped to respond. Healthy societies know how to react and respond to unimaginable crises.

Going back to where I started...

Do your own research on mortgage quality, and before that, make sure your investing goals are clear... Get the boss a couch cover for Christmas, and drink white wine instead.

Diversify your portfolio and use proper position sizing, so a quitter CFO or Federal Reserve-fueled inflation doesn't kill you...

Buy high-quality, blue-chip stocks like the kind Porter and our Stansberry's Investment Advisory team have recommended recently...

And with rock-bottom interest rates and a "perfect storm" of inflation brewing, consider gold's place in your portfolio, like we have suggested over the past several weeks.

Keep your cat inside, too. And, finally... well, we're all still working on that coronavirus one.

Is This Crypto's Coming Out Party?

Crypto Capital editor Eric Wade joins our colleague Jessica Stone to talk about developments in the crypto world, including signs of more trust in "stablecoins" and Visa's (V) plans for a bitcoin rewards program...

To watch this video, click here. And after you're finished, be sure to subscribe to Stansberry Research's YouTube page for more free video content.

New 52-week highs (as of 5/5/20): Alamos Gold (AGI), DocuSign (DOCU), Electronic Arts (EA), Franco-Nevada (FNV), Barrick Gold (GOLD), Lonza (LZAGY), MarketAxess (MKTX), Rollins (ROL), Sea Limited (SE), Scotts Miracle-Gro (SMG), Belo Sun Mining (VNNHF), and Wheaton Precious Metals (WPM).

In today's mailbag, feedback on Mike Barrett's Tuesday Digest... more thoughts on gold's "price" versus "value"... and a timely stand-up routine from a comedy legend. What's on your mind? As always, tell us at feedback@stansberryresearch.com.

"Mike – From one commercial RE appraiser to another, touché. Excellent Digest!" – Paid-up subscriber Kevin L.

"I've always heard that an ounce of gold will buy a good suit. Not a Versace, maybe not a Men's Wearhouse either. I haven't priced either lately, but this has supposedly been the standard way of thinking about gold... Would you buy a suit today for $1700? What if gold goes to $3000? Moreover, think about this: If a suit costs $3000 in a year or two or three, how much is your milk, or a new car, or your streaming service? Do you think your paycheck will keep up?" – Paid-up subscriber Dave H.

This also reminds me of Dan Ferris' analogy of how markets respond to a sudden increase in volatility: "George Carlin: Fear of Germs." – Paid-up subscriber Bret R.

Corey McLaughlin comment: That's a great bit, Bret. A warning to all: This is Carlin, so there's foul language, of course. But there's also amazing "truth in humor" and lines like...

When I was a little boy in New York City in the 1940s, we swam in the Hudson River. We swam in raw sewage, to cool off... It strengthened our immune systems.

All the best,

Corey McLaughlin
Not swimming in the Inner Harbor (yet) in Baltimore, Maryland
May 6, 2020