Welcome Back, Porter Stansberry – Where Have You Been?

Welcome back, Porter Stansberry – where have you been?... An introduction for new readers... The story of our unlikely success... The greatest risk most investors face... What's in store for this year... Apologies for my absence...

Dear friends, it's been a while... and quite a journey for me (Porter)...

Many of you – hundreds – have written in to our offices asking about my whereabouts and welfare. Thanks for your notes. (I've published a few examples in the mailbag below.)

Whether or not you wrote in, if you've been wondering "what happened to Porter?" then, please, read on...

I've written today's Digest to update everyone on what's been going on with me... and to tell you about the new projects I'm working on.

I hope you'll pour yourself something cold (or perhaps brown or red) and get comfortable. Yes, today's Digest is a little longer than normal and you'll even find a few links to content that's normally reserved for subscribers only.

You see... This is the year I've spent my life working toward.

Big changes are coming for Stansberry Research... changes that mean great things for our subscribers – especially our Alliance members.

Let me tell you what's happening and show you some of what we're doing...

First, an introduction...

We have several thousand new subscribers who probably haven't ever read anything about (or from) me. Even longtime subscribers might not know the whole story...

So, for those of you who don't know me, my name is Porter Stansberry.

As you've probably guessed, I founded Stansberry Research and its parent company, Stansberry Holdings. Stansberry Holdings – which includes Stansberry Research, Legacy Research, TradeSmith, InvestorPlace Media, Stansberry Pacific Research, and Empire Financial Research – is one of the largest independent financial publishers in the world.

It might be the largest, but that depends on how you measure such things. Stansberry Holdings has about 1 million paid subscribers in more than 170 countries. Counting the readers of our many free "e-letters" and our online magazine American Consequences, we have several million readers around the world.

By 'independent,' we mean we only serve one customer – our subscribers...

We're not a traditional "mass media" company. Our business model isn't based around advertising... It's based on subscriptions. Likewise, we're not a money-management firm or an investment bank. We don't write about securities to broker them. We write about securities to educate our readers (and sometimes to amuse them).

And we never allow our analysts to buy or own the stocks they write about.

Why not? Because that would introduce the potential for a conflict of interest, which our business model is designed to strictly avoid. We only serve our subscribers. We are truly independent. Or as I explain to new employees, our job is to give investors the information we'd most want if our roles were reversed.

We test these good intentions by publishing thorough "report cards" every year on the outcomes of our recommendations. (This year's report card will be published next week.)

And every year, I've tried to make the information we provide just a little better, just a little more comprehensive, just a little more useful, and just a little more insightful than the year before.

While this formula has proven to work, when I suggested this model in the mid-1990s to older, far more established publishers in the financial newsletter business, most folks laughed... One well-known writer (with one of the biggest newsletters in the world) told me conspiratorially, "Porter, I'm not interested in a fair game."

You see, back then virtually all newsletters were fronts for stock promotion or loss leaders for money managers. The New York Times wrote a wonderful article back in 1995 that accurately described the state of the industry back then – "compromising," the writer called it.

In short, our success in this industry couldn't have been more unlikely...

I started the company in 1999, when I was only 26 years old, using a borrowed laptop computer and sitting at my kitchen table. I didn't have any capital. I didn't have much experience. And my business plan – to treat our subscribers honestly and fairly – was woefully naïve.

I did, however, have one significant advantage. I knew a lot about the Internet...

I'd been using computer networks since the 1980s, back when websites were called "bulletin boards" and memory was stored on cassette tapes. And I grew up with some brilliant computer science engineers, who introduced me to things like Internet Protocol ("IP") telephony and e-mail back in the early 1990s. Long before anyone started getting AOL discs in the mail, I knew that the Internet was going to change the world significantly.

So, I wrote a letter (remember letters... with real envelopes and stamps?) to investors just like you, around the country – and later around the world. I told those folks there was a "new railroad being built across America," and that it would "make some people very rich."

The 'new railroad' was, of course, the Internet and the fiber-optic cables being laid across America...

And as unlikely as it might have seemed to some at the time, the Internet did change the world in vast and powerful ways. My newsletter followed these trends and helped investors make a lot of money in a few of that era's biggest winners.

But unlike many of the "tech gurus" of the Internet bubble, I wasn't only writing about risky, high-growth tech stocks...

I was also fascinated by how technology was eliminating long-entrenched, dominant U.S. companies. I could see that businesses based on old technologies – like Kodak and the original AT&T (the long-distance provider) – were doomed. And I advocated, just as I continue to do today, that investors "hedge" their risky tech-stock investments with short positions in these doomed companies. I called this approach to portfolio management "pirate investing."

I thought the metaphor helped explain how doomed companies were going to have their market share destroyed by technology...

Digital photography, for example, wasn't merely competitive with chemical film. It destroyed the market. Fiber-optic networks and IP telephony didn't merely offer better long-distance communication... they made distance irrelevant and destroyed the entire market for long-distance service. And they obliterated all of the demand for Lucent's big Class-5 telephone switches.

What happened to Lucent and Kodak? Within five years of missing its first earnings forecast (in January 2000), Lucent shares had fallen from more than $80 to around $2. One of America's strongest businesses (with 165,000 employees) was decimated by a technology – fiber-optic networking – that has produced huge amounts of wealth. And Kodak? It filed for bankruptcy protection in 2012.

I believed back then, and I still believe today, that the greatest risk most investors face is technological innovation...

In a free market, risk also means opportunity. Thus, innovation is also the best opportunity for investors.

That paradox is difficult for most investors to appreciate, but it has been one of our primary areas of focus since Day 1.

In fact, the first analyst I hired to help me build this business was Dave Lashmet. He was one of my professors in college. I thought he was one of the most brilliant and curious people I'd ever met. He knew more about the dynamics of technological innovation, in both medicine and computer science, than anyone else I'd ever met.

Watching Dave interact with Nobel Prize winners and the heads of research and development at major pharmaceutical companies (not to mention dozens of different start-up founders) is a hoot. By the time Dave has asked his third question, anyone else surrounding the "smart guy" might as well disappear. Dave will have completely captured the source's attention.

I can't tell you how many times Dave has been asked, "Who are you again?" The smartest folks in tech are routinely astonished that anyone outside of their narrow field of study could know so much about the long-term arc that describes the development of their new drug (or widget). But Dave often knows more about it than they do.

Of course, telling you about this isn't as effective as showing you...

For nearly 20 years, Dave has been giving our subscribers a massive advantage in some of the most lucrative investments possible...

Over the years, Dave has led investors into dozens of revolutionary new technologies, while the companies building them were still in their infancy. His discoveries have included Intuitive Surgical (recommended at $18 per share, sold for a 130% gain less than a year later), Illumina (recommended at about $5 per share, now trading for around $300), and Regeneron Pharmaceuticals (recommended at roughly $15 per share, now trading for more than $400), just to name a few.

And that wasn't a lucky streak... Over the last five years, Dave has produced 13 "doubles" among his recommendations, including a huge 250% return on graphics chipmaker Nvidia (NVDA).

But, all of the gaudy numbers in the world still don't do justice to his brilliance...

You have to see it for yourself. So, with Dave's permission, I've arranged to let you see one of his recent reports. It's about a company that's developing a new painkiller drug. (We've "unlocked" the issue right here.)

I hope you'll take the time to read it carefully. I know you'll learn a lot. And, while you're reading, I hope you'll remember, this was the first analyst I hired to help me build this company. Our business has grown because I've consistently sought to attract and retain the best analysts in the world.

Here's one more example, if you don't mind, to show why I believe we've been successful in this business...

I want to show you what we did about bonds...

There's no question in my mind that most individual investors should only own corporate bonds, not corporate equities (stocks). Corporate bonds are less risky, less volatile, and less subject to horrible management decisions. (If you're interested in learning more about why I believe most individual investors should only own corporate bonds, not stocks, please read this.)

It surprises many subscribers when they hear me say that most of them shouldn't ever buy stocks, only bonds...

Most investors tend to greatly overestimate their future returns and their ability to weather volatility. These dear subscribers think that bonds are "boring."

But the reality is different... Few people can stomach the normal volatility of the stock market. And few people understand bonds well enough to know that you can make a lot of money in bonds – even more than most people make in stocks.

The trouble is, getting information about bonds is difficult...

Only a lawyer would consider the typical bond prospectus to be English. Everyone else would guess it was written in Greek. Heck, just figuring out what the symbol is for the bond you want to buy is hard.

CNBC doesn't run a ticker on the bottom of the screen showing you bond prices. And many brokers will require you to call them on the phone to buy a bond. If you don't know the symbol, they usually won't give it to you.

So... why do brokers make buying stocks so easy and buying bonds so hard?

Well, remember, the financial-services industry doesn't exist to provide you with wealth. It exists because it's efficient at siphoning away your wealth.

Knowing what bonds to buy, what prices to pay, which bonds are safe, and which bonds will pay their coupons on time... all of this information can be extraordinarily valuable, far more valuable than knowing what stocks will go up. And that's why nobody is making it easy for you to get information on bonds or to buy them.

Nobody, of course, except us.

We've invested hundreds of thousands of dollars over several years to build a proprietary database of all the major corporate issues that trade in substantial volume – about 4,000 different corporate bonds. We give each of these bonds our own proprietary credit rating, using our own computer models.

Then we compare our rating with the major credit-rating agencies. Most of the time – more than 90% of the time – our ratings match theirs. But a few outliers exist...

Those are the situations we try to understand completely. We have two experienced accountants (former auditors and corporate controllers) and an experienced lawyer on our staff. They look at all the numbers and study the terms of each bond, paying special attention to the bonds' place in the capital structure and the collateral of underlying each bond.

We then provide all of this research to our subscribers...

If you've never seen any bond analysis before – or if you doubt my contention that it's possible to make far more money in bonds than most people make in stocks... I'd urge you to look at just one issue of our monthly bond research, Stansberry's Credit Opportunities. (Once again, I've "unlocked" an issue for you to read. You'll find it right here.)

So, I hope you'll understand...

Our business has been successful not because of anything I brought to the table back in 1999, but because of the things we've built since.

Whether it's Steve Sjuggerud's effort to discover the best market-timing models that actually work and monitor virtually every market in the world (True Wealth Systems)... or David Eifrig's efforts to systematically compare and rate every type of income investment that's currently available in the stock market – from "muni bonds" to real estate investment trusts ("REITs") – (Income Intelligence)... or any of the dozen or so other products we've launched in the last decade, we've consistently created new and far more comprehensive research products than were ever available from independent financial publishers before.

Just as important, we haven't only helped subscribers know what to buy... We've also been far better than most at helping people avoid some of the market's biggest catastrophes over the last 20 years. I wrote several detailed letters from the "Chairman of General Motors" explaining why GM's impending bankruptcy was inevitable, long before the financial crisis erupted.

But my most famous "short" recommendation was explaining why Fannie Mae and Freddie Mac (then the most powerful and largest mortgage banks in the world) were actually worth less than zero just a few months before they collapsed. Barron's picked up my work and published my conclusions in its lead column by the legendary financial writer Alan Abelson.

We also warned for years that a massive bubble was building in the oil industry. Our July 2014 open letter to the board of directors at Devon Energy was the ultimate summation of our work. We explained in extreme detail how much capital had been wasted in the pursuit of marginal oil resources and how those investments would be wiped out when oil prices plummeted – as they must, thanks to the fracking revolution that was then underway. Within six months, oil prices had fallen by 50%.

We're not content with only serving our subscribers with reports...

We've recently invested several million dollars building our own research terminal to compete against Bloomberg by providing access to our investment research, our own Stansberry NewsWire, and our incredible library of investment models and analytics, including our proprietary credit ratings.

The Stansberry Terminal is currently in beta testing with our Alliance members and will soon be available to all subscribers at a fraction of the price Bloomberg charges. Plus, our Terminal is accessed with an "app." You can use it on your computer, your smartphone, or your tablet. There's no expensive hardware to buy and no complex system to learn. It's just point and click.

A peek at the Stansberry Terminal.

So... that's who I am and what we've done with this company over the last 20 years...

I owe a huge debt of gratitude to the people who've built this special place with me and to our Alliance members who have put their trust in our work.

Our Alliance members enabled us to do these things and have cemented the unique culture of our business. Our first Alliance subscription sale in 2003 promised essentially all of our financial research at Stansberry Research, both now and in the future, for an initiation fee of just $2,700.

Today, the Stansberry Alliance costs $30,000 – but our original Alliance members never paid more as the price went up. Nor did any Alliance member who chose to subscribe as we continually grew our product offerings each year. The price they paid to join included all of our future products, too.

Talk about a virtuous circle. Our Alliance members believed in us and profited from our work, allowing us to build more and better products to serve them. As we grew, they got more and more from the relationship with us. And their support allowed us to invest heavily in building a better and better business.

That's the real secret to our success.

But no matter how much has changed about what we do, one thing has remained exactly the same: My goal today is the same as it was back in 1999. No, I'm not using a borrowed laptop computer anymore, but I'm still working just as hard to give investors the information I'd want most if our roles were reversed.

Here's what that means this year...

In 2019, Stansberry Research will break into new forms of media. We will release at least two feature-film-length documentaries – one that warns investors about the rise of socialism in America (hosted by P.J. O'Rourke) and one that explores the rise of China's massive economy (hosted by Steve Sjuggerud).

We will continue to roll out our new Stansberry Terminal, which will combine our research with a comprehensive set of tools to help you better understand our work, the market, and your portfolio. (It will also have a new way to communicate with your fellow subscribers.)

We're in the process of acquiring a major new publishing asset, which will strengthen our coverage of the mining industry – creating what we believe is the deepest and most comprehensive analysis of the sector.

Likewise, we're staffing up in the health care space with the addition of Tom Carroll, one of the most respected and longest-serving health care analysts on Wall Street. What happens when one of Wall Street's most knowledgeable analysts is free to write everything he knows about one of America's most important industries? Stay tuned to find out.

As for what I'm personally planning for 2019...

In just a few days, I'll be unveiling a new podcast that I'm producing that dives deep into the biggest and most important new ideas in finance. Our first topic: Exploring what really went wrong at General Electric (GE). It will reveal an entirely new part of that financial scandal that's never been in the public eye before.

We believe several former senior GE leaders will soon be arrested. We will show why. We'll also show you what no other journalists could possible tell you – what other U.S. companies are currently being managed with the same kind of accounting games that led to GE's demise.

Soon, I'll have another big announcement about a new research project I've been working on for months...

You might have heard something a few years ago about a French economist, Thomas Piketty, and his bestselling book, Capital in the Twenty-First Century. In the book, Piketty outlines his study of more than 200 years of tax-return data, "proving" a new theory of wealth inequality.

Yes, his logic suffers from some big holes... as plenty of critics have pointed out.

But he was on to something, too... something that's so simple most people overlook it. Yes, it's true – the rich frequently get richer. But what Piketty didn't explore is the more interesting question: How do the super-rich consistently earn higher returns than average? That's what I've been working on for the last couple of months. I'm excited to share what I've learned.

I think I've discovered an entirely new kind of investing. It's not growth investing. It's not value investing. It's an entirely different approach that takes the lessons of Piketty's research and applies it to corporations you can own.

These ideas are shockingly powerful. I can't wait to share them. Besides, what could be more fun than using the insights of a radical socialist to help figure out something new and important about how capitalism really works?

You're going to love it.

For those of you who have been worried about me over the last 90 days or so, I apologize for my absence...

After spending every day for 20 years focused exclusively on serving you, our dear subscribers, and trying to figure out what was coming next in the financial markets, I needed a sabbatical. I don't use the word "needed" lightly...

For years and years, I'd put our shared goals ahead of almost every other priority in my life, including my health. As a result, I'd suffered from some unusual health problems. Nobody likes to listen to other people's health gripes, but I'd been dealing with a range of serious issues – stuff that doesn't normally occur in otherwise healthy people.

Last fall, just after our annual Alliance meeting in Las Vegas, I got very sick. For privacy reasons, I don't want to go into exactly what happened to me this time, but I was in and out of hospitals for the next several weeks. As I recovered, I knew that if I didn't change things in my life, I wouldn't live to see my children get married... or ever meet my grandkids.

For the first (and only) time in my life, I was truly selfish...

I dropped everything. I put my career on hold. I asked my wife to look after our family. I didn't open my computer. I turned off my cellphone. I spent about six weeks meeting with doctors and working on my health. And I changed everything about myself. Everything.

It sounds so simple, but I realized that unless I put myself first (my health), I wouldn't be able to serve the other people that matter so much to me, especially my family. My sons are now 11 and 7 years old. My wife and I have been together for 20 years.

That's what really matters to me. Everything else has to come second.

My doctors and health problems convinced me that how I had been living was unsustainable. I needed to "reset" my entire life.

So, I did... I began to focus on three simple things each day: my diet, exercising, and getting enough sleep. That's all I focused on in November and most of December. Instead of studying business and finance, I read book after book about mental and physical health. I took a complete break from stress.

What happened? Well, after 40 days, I'd lost 50 pounds. By Christmas, I felt like a new human being...

Every year, my wife buys our family matching pajamas for Christmas Eve. This year, my pajamas were two sizes smaller than last year.

I'm different now. The deadlines that matter to me are my 7 a.m. workout... the 4:30 p.m. pick-up at my children's school... the "check ins" I'm doing with my wife every evening after dinner over a cup of warm tea... my consistent 9:30 p.m. bedtime... and the meditations I'm doing twice a day.

For the first time in decades, I can sleep at night. And I'm still losing weight – but at a much slower pace than before. I know I'm on the right path for vastly better health.

And as I think about the next 20 years of my career, I know I'd like things to change professionally, too...

For two decades, I've fought every day to build our company (from scratch) and produce something that was world-class for our customers. (If you want to see how far we've come, just go on our website and read some of our work from the early 2000s.)

Today, Stansberry Research has a huge amount of intellectual capital, thanks to the analytical team we have in place. And we also have the largest and most loyal group of subscribers in the independent financial press.

So what can we achieve together? Much more...

We can make Stansberry Research not merely a useful advantage for a relatively small group of savvy investors... We can make it essential to every investor, anywhere in the world. I believe that in another 20 years, we can make our research and our tools so essential to investors that no one would consider buying a stock or a bond without first checking the Stansberry Terminal to see how we've rated that investment and to discover what alternatives we suggest.

How will we become indispensable?

By constantly, year after year, giving our subscribers (and especially our Alliance members) a wider and wider advantage in the markets by hiring the best analysts, by building better and better economic models, and by providing better and easier-to-use digital tools.

Accomplishing these new, bigger goals won't be easy. They will require me to take on new roles at the company, beyond simply doing investment research and writing. So, don't be surprised to see less of my name on bylines as I play a bigger role in building new products and continuing to develop our business.

And here's the really good news (at least, to me)...

I now believe I'll be around for another 20 years to see this happen. To all of you who reached out to wish me well and to inquire about my well-being, thank you for your kindness, your thoughts, and your prayers. They were well received.

New 52-week highs (as of 2/14/19): Kinder Morgan (KMI), Lundin Gold (TSX: LUG), Nestlé (NSRGY), New York Times (NYT), O'Reilly Automotive (ORLY), Starbucks (SBUX), T-Mobile (TMUS), and Vanguard Real Estate Fund (VNQ).

I hope you will all check out my new projects this year and continue to send me your feedback. I'll read anything you send me: feedback@stansberryresearch.com. Be well...

"I have been wondering what happened to Porter? Maybe I missed something, or an update as to his status, but it seems the last time he wrote a Friday Digest was last October. And I have not seen any mention of his comments, or writing, for months. Is he okay??" – Paid-up subscriber Dana C.

"Where's Porter? Not that y'all ain't doin a good job, but I ain't seen hide nor hair of the Boss since he left the Bellagio. And I truly hope that nothing untoward has happened, but if he were in our position, he would want to know what's going down." – Paid-up subscriber Ed K.

"Hey guys, why's Porter gone vacant? Please let his fans know!" – Paid-up subscriber Patrick S.

"Hello, it seems like Porter has disappeared. I can't remember the last time he wrote a Friday Digest... I hope everything is ok. Just one subscriber wondering." – Paid-up subscriber Eric H.

"As a long-time paid-up subscriber, I am aware of how passionate Porter is about Stansberry Research and his leadership of this fabulous creation. Therefore, his absence over the past several weeks has aroused my concern.

"I just want you to know that if Porter is facing a health challenge or personal/family situation, I will keep him in my thoughts and prayers. I desperately hope this is not the case and that he is just occupied developing 'his next big thing.' In any event, we miss him... Please let him know we are all thinking about him." – Paid-up subscriber Steve P.

Regards,

Porter Stansberry
Baltimore, Maryland
February 15, 2019

P.S. The Stansberry Research offices will be closed Monday in observance of Presidents' Day. We'll resume our normal coverage on Tuesday. Enjoy the long holiday weekend.