Reminder for Thursday's big event; Beware of picking up pennies in front of a steamroller; Case studies: DWAC and 10-year Treasurys; Adding a new blog to my reading list; Sleeping in socks

1) A year ago, Stansberry Research launched a new system to see which stocks could double your money...

It took our company nearly two decades to create this (and at a cost of $10 million).

And so far, you could have doubled your money 19 different times and beaten the market with 91% accuracy, based on our back testing.

This Thursday, at 10 a.m. Eastern time, I'm going on camera to help reveal it to the public for the first time during a special broadcast. It's completely free to attend, but you must reserve a spot in advance – you can do so here.

See you on Thursday!

2) Longtime readers may recall that I first warned about Digital World Acquisition (DWAC) – the special purpose acquisition company ("SPAC") that hopes to merge with former U.S. President Donald Trump's media company that owns Truth Social – more than two years ago on October 22, 2021, when it hit a high of $175 per share.

On that day, I wrote: "This is one of the stupidest things I've ever seen and this stock is going to implode, likely within days."

Sure enough, the stock peaked that very day, had been cut in half within two days, and continued sinking toward DWAC's cash value of $10 per share through last April.

I continued to warn my readers about this stock – which I thought, and still think, is a toxic piece of garbage – in dozens of e-mails.

Yet in my e-mail on April 14, I told my readers that it was no longer a good short, writing:

So if you've been clever enough to short the stock, why do I suggest covering now?

Simply put: price.

The stock closed yesterday at $13.14 per share, only slightly above DWAC's cash. Given that I think there's almost no chance the deal to acquire Trump Media and Technology Group ("TMTG") goes through and it's likely too late to find another deal, DWAC is almost certain to liquidate and return $10 per share to shareholders.

In this case, anyone who's short the stock at today's price will pocket a gain of $3 per share, so why not stick around?

Because "almost certain" isn't the same as "100% certain" – and, as we've seen, this stock can trade almost anywhere, totally disconnected from its fundamentals.

I'm wary of picking up pennies in front of a steamroller, which I discussed at length in my January 20 e-mail.

No matter how likely the outcome, it doesn't make sense to risk losing tens of dollars (and possibly more than $100) per share to make $3...

Sure enough, DWAC soared 52% last week after Trump's win in the Iowa caucuses and a filing by the company that it could raise up to $50 million by issuing convertible notes or warrants.

At Friday's closing price of $26.38 per share, DWAC now sits at more than double the price at which I said it was no longer a good short.

3) For a much bigger example of the perils of picking up pennies in front of a steamroller, consider investors in the largest debt market in the world: U.S. Treasurys.

On March 8, 2020, amid the panic in the early days of the COVID crisis, the yield on the 10-year Treasury hit an all-time low of 0.318%. In other words, investors were willing to accept an interest rate close to zero for 10 years in exchange for what was perceived to be the world's safest debt instrument.

Except it wasn't safe at all...

Of course the U.S. government wasn't going to default. But if interest rates rose, the value of the bonds would plunge. That's exactly what happened, as you can see in this five-year chart:

In the next three and a half years, the yield on the 10-year Treasury rose to more than 5% by late October last year, causing the value of these securities to plunge by nearly 50%. This Bloomberg article from October 4 highlighted the situation: Long Bonds' Historic 46% Meltdown Rivals Burst of Dot-Com Bubble. Excerpt:

Losses on longer-dated Treasuries are beginning to rival some of the most notorious market meltdowns in U.S. history.

Bonds maturing in 10 years or more have slumped 46% since peaking in March 2020, according to the data compiled by Bloomberg. That's just shy of the 49% plunge in U.S. stocks in the aftermath of the dot-com bust at the turn of the century. The route in 30-year bonds has been even worse, tumbling 53%, nearing the 57% slump in equities during the depths of the financial crisis.

The extent of the losses is a stark reminder of the risk that comes with piling into longer-dated bonds, where prices are the most sensitive to changes in interest rates. That was part of the appeal of the securities as the Federal Reserve spent the better part of a decade cutting borrowing costs to near zero.

I've said it before and I'll say it again: Beware of picking up pennies in front of a steamroller!

4) Short sellers are among the smartest investors out there – they have to be to survive – so even though I no longer engage in it (and warn 99% of my readers to avoid it), I still follow more than a dozen of them closely.

In part, it's for learning and entertainment – they uncover the craziest stories! – but mostly to get a heads up on companies or sectors with warning flags I might have missed.

I'm adding Dirty Bubble Media, the blog of Dr. James Block, to my list after reading this Bloomberg article about him: Best Short Call of 2023 Belongs to Amateur 'Dirty Bubble' Sleuth. Excerpt:

The best short call of 2023 wasn't made by a ruthless hedge fund, a well-known activist firm, or any of the liveliest voices on the sell side. It was made by a first-year medical resident running a blog named after a SpongeBob SquarePants character.

James Block is a physician at one of America's top hospitals, but between shifts he moonlights as an amateur financial sleuth and writer. His personal mission: expose the cryptocurrency market for being what he describes as "a semi-decentralized pyramid scheme."

Plenty would dispute that characterization, and his quest looks increasingly like an uphill battle following the U.S. approval of spot Bitcoin ETFs this month. Yet the 31-year-old hobbyist has won notable victories – including last year's best bearish call.

Block (no relation to famous short seller Carson Block) stumbled onto Signature Bank during his investigations in the crypto world. The regional lender was doing big business with companies in the industry, working with multiple characters he considered suspect and with huge exposure to questionable digital assets.

"I saw just how careless they were being with who they were doing business with, with the amount of money that they were holding, the amount of uninsured deposits they had," Block says from his home office near Ann Arbor, Michigan.

That spurred him to publish a damning critique of Signature on his blog, Dirty Bubble Media, on Jan. 10, 2023. A little over two months later the lender was shut down, becoming at the time the third-largest bank failure in U.S. history.

He reminds me of another doctor who turned out to have a gift for company analysis: my friend Dr. Michael Burry, who nailed the housing bubble, as recounted in the book and movie, The Big Short...

5) I've written extensively on the importance of getting eight hours of sleep, especially as one gets older.

As such, this tongue-in-cheek-but-also-serious article in the Wall Street Journal earlier this month caught my eye: 'If You Sleep in Socks You're a Psychopath.' Health Tip Kicks Up Controversy. Excerpt:

Authorities, from the Cleveland Clinic to the University of Florida Health have expounded on the positives of sleeping in socks. (On its website, Cleveland Clinic writes, "Here's a bit of information that could knock your socks on," while UF Health heralds socks as "the unsung hero of undergarments.")

A study published in the Journal of Physiological Anthropology found that young men fell asleep 7.5 minutes faster, slept 32 minutes longer and woke up 7.5 times less often than those not wearing socks...

Chilly feet can raise the temperature by sending more blood, and heat, to core areas, according to the Cleveland Clinic, which explains: "So, what does adding in a fluffy pair of socks do? Those cuddly duds warm your feet, relaxing and widening blood vessels that constricted while cold. This improved blood circulation in your overall body helps release more heat through your skin."

I've always been prone to cold fingers and toes – the latter especially so since I froze my feet during the infamous 24-hour World's Toughest Mudder in 2018 when the nighttime temperatures dropped to 26 degrees. (Not frostbite – but close!)

As a result, my feet are often cold when I go to bed, which disrupts my falling asleep, so I'll sometimes put on a pair of wool socks. Maybe I should do this every night!

Best regards,

Whitney

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