Live From Vegas
Our annual conference is underway... Michael Lewis and Porter Stansberry take the stage... The 'Moneyball winner' of homebuilding... Prison suits Sam Bankman-Fried... The path to permanent wealth... A dash of geopolitics... The folly of 'stepping aside'... Day 2 tomorrow...
We're live in Las Vegas this week...
Despite multiple visits here over the years, this city's offerings continue to amaze me (Corey McLaughlin)...
For example, on our way from the airport to check in at the Aria Resort & Casino yesterday, we drove by a billboard advertising the Australian Bee Gees performing at the medieval-castle-looking Excalibur Hotel. Who knew?
Then inside the Aria last night, I sought a quick dinner and found it by ordering a Smashburger and fries from a mobile kiosk. It was a very easy process that would have been impossible a few years ago. Interesting.
Those ideas ("who knew?" and "interesting") are both at the heart of what our annual conference is all about.
It's about exploring new investing ideas, opportunities, concerns, and perspectives you may not have heard before... It's about hearing great financial insights from our editors and special invited guests... and mingling with people and learning new things.
For example, Stansberry Research founder Porter Stansberry asked, "How does that work?" during his conference-opening presentation about his journey to discovering one of his favorite portfolio strategies that can compound your wealth for decades.
Here were a few highlights...
Acclaimed author Michael Lewis and Porter took the stage this morning...
Lewis is the author of terrific books like Liar's Poker, Moneyball, and most recently, Going Infinite, a tale about disgraced FTX founder Sam Bankman-Fried ("SBF"). He sat down to be interviewed by Porter this morning…
For about 50 minutes, Lewis and Porter engaged in a back-and-forth conversation about myriad topics, from goose hunting to Lewis' portrayal of Salomon Brothers, where Lewis worked in the mid-1980s, in Liar's Poker. And, of course, they talked about Moneyball and how the relatively low-budget, "small market" Oakland A's used analytics to field a winning major league baseball team while facing rosters of wealthier franchises.
Even if I wanted to share all the highlights (which I can't out of fairness to paying conference attendees and Livestream Pass viewers), they wouldn't fit in these pages. But here are two anecdotes...
Find and understand the 'wart'...
Lewis and Porter compared the "fat ankled" Oakland A's of the Moneyball era under general manager Billy Beane with an unloved business that might make great use of its capital.
Porter brought up homebuilder NVR as an example of a company he has liked at various times since the early 2000s.
NVR built homes on lots it didn't own, which made it unique and well positioned to survive a real estate crisis. It did just that amid the great financial crisis – while rewarding shareholders along the way who bought at cheap prices before it. As Lewis said...
It is like the baseball player who doesn't look right.
Eventually, Porter said competitors took on a similar asset-light business model, much like other professional baseball teams starting using the Oakland A's more data-driven methods of analyzing players. Lewis replied...
What people don't do when they invest is ask... They don't do this when they invest in baseball players. They don't ask, "Why am I getting this good of a deal?" It's a question everybody should ask.
Porter said...
What you need is a giant wart that you know doesn't matter. The fat ankles didn't matter. That NVR was in homebuilding made no difference. It was a supremely well-run business.
Lewis said it's "valuable to find what the wart is." That's why he's exploring them in his next project about the sports-gambling industry. He believes it isn't "good for the world" and said it hasn't generated nearly the amount of revenue for states as may have been expected.
About SBF...
Some critics chided Lewis' latest book, Going Infinite, as a sympathetic portrayal of Sam Bankman-Fried, who was found guilty of defrauding customers of his cryptocurrency exchange FTX. (For a refresher, we chronicled the story when it broke and its developments in 2022.)
Today, Lewis didn't sound like someone who was concerned about sounding sympathetic toward SBF, saying...
I think [he] had to go to jail for a little bit. Twenty-five years seems excessive to me... He wasn't a guy who had a record of defrauding people. He was this weird kid... It was a moment in his life, and it does seem a little crazy.
Having said that, I find myself wondering – because I got to know him quite well – why am I not more upset about it? The truth is, as long as he has an Internet connection, he's as happy in jail as he is outside of jail.
Lewis said he talks with SBF frequently and did just last week.
SBF is at the Metropolitan Detention Center in Brooklyn, New York. He has a bunk near Sean "P. Diddy" Combs and the former president of Honduras. SBF has given prison guards crypto recommendations and is helping other inmates with business plans.
"He sounds like he's having fun," Lewis said. "Jail seems to suit him."
The path to permanent wealth...
Before his talk with Lewis, Porter opened our slate of presentations with his most recent big idea about generating wealth in the long term: a twist on Harry Browne's Permanent Portfolio, which suggests 25% allocations to equities, bonds, gold, and cash.
Porter's version – which he has been sharing with his readers at his company Porter & Co. – includes high-quality stocks, yes, but includes the best "bond managers in the world" in place of a 25% allocation to bonds, "because who would want to own them?" with the way the government is printing money, plus a dash of bitcoin and gold stocks in addition to gold.
Porter cited historical returns in these allocations and told attendees to think about their assets in buckets beyond stocks. Finally, he said if you have more than 25% of your wealth in stocks, that's probably too much given the risks he sees today.
A dash of geopolitics...
Marko Papic, a geopolitical analyst at BCA Research, also took the main stage today. He started with a piece of advice you might not expect: "You should never, ever trade geopolitics," he said, or at least not bet on the popular view.
For example, war fears have a "very short half-life." Papic noted how oil prices are down 20% since Hamas attacked Israel on October 7, 2023, and how wheat prices haven't remained elevated amid the war between major producers Russia and Ukraine.
Papic explained how you should consider geopolitics in a long-term portfolio... and explored three big beliefs that have become "consensus" in the U.S.: that China is an enemy, that a green-energy revolution is needed, and that Russia is "evil."
The folly in 'stepping aside'...
True Wealth and True Wealth Systems editor Brett Eversole closed out the morning with a compelling presentation on the bullish case for stocks... and staying invested in the market despite any volatility you might see...
Brett likened it to how to win at tennis. While pro tennis players can win by being aggressive and playing better, amateurs tend to win by not losing or avoiding simple mistakes (like not hitting the ball over the net, or not getting your serve in the box).
For Brett, selling stocks in times of fear or volatility is a mistake for individual investors... "You are your own worst enemy," Brett said.
He showed a startling chart. It showed the returns of a $10,000 investment in the S&P 500 Index over the past 30 years if someone sold every time it fell 2% in a day and "stepped aside" for two weeks... versus whether someone simply bought and held.
As you can see, "buy and hold" clearly won. Why? Well, as Brett explained, down-2% days have happened about 10 times per year in the past three decades. So if you got scared out of the market on those days, you'd end up sitting out 25% of the year. "But you miss the best times to own stocks," Brett said.
That's because, perhaps counterintuitively, stocks returned a nearly 16% compound return during these same two-week periods of "stepping aside." That return is double the S&P 500's typical annual growth rate in the same 30-year period.
We see this all the time... After big down days in a bull market, stocks quickly snap back higher. We've already seen it a few times this year, like this past summer.
In short, good investment ideas don't matter unless you keep your emotions in check, and they're only valuable if you use them wisely. Brett suggested a few ways to "avoid panicking out of stocks"... like using trailing stops, proper position sizing, and diversifying across asset classes.
From there, he made a strong case for owning stocks. In the short term, Brett mentioned the rate-cutting cycle from the Fed. It's about "stimulus," not rescuing the economy. Plus, investment sentiment is better but still not at "euphoric" levels, which would be concerning.
Longer term, Brett still believes in a "secular" bull market that has many more years to run and that artificial intelligence will be a catalyst that will push the market to "incredible heights by the end of this decade."
So U.S. stocks fit Brett's buying criteria of being "cheap, hated, and in an uptrend." Yes, Brett said stocks are cheaper than you might think. Without giving too much away, it comes down to the fact that profit margins for American businesses are better than they used to be.
Brett also shared four of his favorite stock ideas related to the housing market, which he sees picking up as mortgage rates come down.
Summing up...
We heard some tried-and-true investing ideas and unique takes on the markets today, several stock ideas, and there are plenty more interesting picks and perspectives to be heard in the days ahead.
Tomorrow, I'm looking forward to hearing from several of our Stansberry Research editors, like Crypto Capital editor Eric Wade and Stansberry Venture Technology editor Dave Lashmet. Special guests are on deck, too, like artificial intelligence expert Zack Kass.
Brendan Ahern, the chief investment officer of KraneShares, will sit down for a fireside chat with Terry Branstad, the U.S. ambassador to China from 2017 to 2020 under Donald Trump, and David Adelman, a former U.S. ambassador to Singapore.
Authors Dave Barry, James Nestor, and Brody Mullins will also give talks tomorrow, and our Alliance Day arrives on Wednesday. So stay tuned to these pages for more highlights in the days ahead...
New 52-week highs (as of 10/18/24): Apple (AAPL), Automatic Data Processing (ADP), Agnico Eagle Mines (AEM), Altius Minerals (ALS.TO), Brookfield Renewable Corp. (BEPC), Alpha Architect 1-3 Month Box Fund (BOXX), BWX Technologies (BWXT), Cameco (CCJ), CME Group (CME), Pacer U.S. Cash Cows 100 Fund (COWZ), Cisco Systems (CSCO), Cintas (CTAS), CyberArk Software (CYBR), Donaldson (DCI), Expedia (EXPE), VanEck Gold Miners Fund (GDX), SPDR Gold Shares (GLD), W.W. Grainger (GWW), Honeywell International (HON), Intercontinental Exchange (ICE), iShares Convertible Bond Fund (ICVT), Intuitive Surgical (ISRG), Jack Henry & Associates (JKHY), JPMorgan Chase (JPM), Kinross Gold (KGC), Kinder Morgan (KMI), Linde (LIN), McDonald's (MCD), Medtronic (MDT), Newmont (NEM), NVR (NVR), Omega Healthcare Investors (OHI), Sprott Physical Gold Trust (PHYS), Sprott Physical Silver Trust (PSLV), Royal Gold (RGLD), Seabridge Gold (SA), Sprott (SII), Skeena Resources (SKE), iShares Silver Trust (SLV), SPDR Portfolio S&P 500 Value Fund (SPYV), Torex Gold Resources (TORXF), Toast (TOST), Travelers (TRV), The Trade Desk (TTD), ProShares Ultra Gold (UGL), Global X Uranium Fund (URA), Veralto (VLTO), Vanguard S&P 500 Fund (VOO), Wheaton Precious Metals (WPM), W.R. Berkley (WRB), and the short position in SolarEdge Technologies (SEDG).
One quick housekeeping note… There is no Diamond's Edge video today. It will return next week. As I write this note, Ten Stock Trader editor Greg Diamond is on stage talking about W.D. Gann's cycle analysis on the main stage.
A quiet mailbag today, so we'll offer a question... Are you watching our conference with a Livestream Pass? What did you think of Day 1, and who are you most looking forward to hearing from the rest of the week? Any presentation you'd like me to highlight? Let me know your thoughts at feedback@stansberryresearch.com.
All the best,
Corey McLaughlin
Las Vegas, Nevada
October 21, 2024