Why You Should Look for 'Lindy'

Our founder Porter Stansberry's shocking warning... An intangible asset you've never heard of... Aging in reverse... Comedians, Mandelbrot, and Taleb... Use 'Lindy's Law' to your advantage... Porter shares all...

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Editor's note: As you may have read in our Masters Series essays over the weekend, our founder Porter Stansberry is warning that the U.S. faces huge economic risks today that will catch most Americans completely off guard...

Specifically, despite the presidential election ending with Donald Trump's decisive win, Porter says battles are just getting started that will shake the financial system to its core – and pit two distinct sides of the country against each other in the years ahead.

The thing is, though, most Americans have no idea about what could come, both politically and culturally... and even fewer understand the consequences for their portfolios.

That's why Porter has put together a plan that he says will withstand the chaos... why he recently sat down with our Dr. David "Doc" Eifrig to explain the details... and why I (Corey McLaughlin) want to make sure to get the message in front of Digest readers.

In a brand-new sit-down interview, Porter describes exactly what has him concerned about our country... and the details of this shocking warning he wants to share right now...

He says this story will unfold "a lot sooner than anybody realizes." And, importantly, Porter also shares how none of these risks will matter to your finances... if you follow his straightforward plan for protecting and growing your wealth for years, even decades ahead.

Today, we share a taste of Porter's strategy with an essay adapted from the September 11 issue of Porter's Daily Journal from his boutique investment firm, Porter & Co. And tomorrow, we'll share another essay from Porter. Enjoy...

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Here's an odd question for investors to consider...

Do comedians have a limited amount of humor in their brains, or is the production of humor limitless in the human mind?

This question, which doesn't seem to be of much importance to investors, was of paramount importance to the stand-up comics of the 1960s. Stand-up comedy was booming, thanks to the emergence of national television shows, where they could be exposed to more people. But the growing demand for comics on TV led to a serious concern.

Writing comedy is extremely difficult. Performing it perfectly and getting the crowd to laugh for 30 minutes or more takes a lot of practice. Good comics might develop, test, and prove out two or maybe three hours of good material – in their entire careers.

Before the emergence of TV shows, this amount of material could carry them for a long time. A comic could go from club to club in New York City, night after night, without the same audience seeing him. He could repeat the material for a long, long time. As using the same routine for years was common, most comics believed that there was a finite amount of humor in their brains. Once it was used up, they thought, it would be gone.

In New York City, local comics would gather after their sets at Lindy's – a late-night deli at 51st and Broadway. Here they worried about this stark reality: if they took a high-paying TV gig, it would only be a matter of time before they ran out of jokes, and then their careers would be over.

At Lindy's they proposed a theory – "Lindy's Law."

They believed the length of their careers on television would be inversely proportional to the frequency of the broadcast... that is, the more exposure to the public, the shorter their professional lifespan. It was considered career suicide, therefore, to sign up for a weekly TV show, or even a regular monthly one. Instead, comics sought irregular specials or one-shot guest appearances.

But mathematician Benoit Mandelbrot hypothesized the exact opposite was true...

In the early 1980s, Mandelbrot famously predicted that all natural phenomena, like the talent of a human comedian, would be governed by a power law distribution. Mandelbrot hypothesized therefore, that the more frequently a comedian appeared on television, the more likely it would be for him to appear again... and again.

He defined this mathematically in his brilliant 1982 book, The Fractal Geometry of Nature.

Later, in 2012, another philosopher, Nassim Taleb, used these mathematical proofs to directly address Lindy's Law in his book, Antifragile: Things That Gain From Disorder.

According to Taleb, if something is inanimate (without a natural lifespan), its continued usage indicates it is more likely to continue to be used. For example, if a book has been in print for 40 years, then it's more likely than not to be in print for another 40 years. Taleb's key insight was: things that do not have a natural lifespan "age" in reverse. For nonperishable things, he said, every year that passes without extinction doubles the expected lifetime.

This idea, as it applies to corporations, holds valuable implications for investors...

If you're trying to produce (or protect) wealth with common stocks, the longer the business survives and continues to compound your wealth, the better.

Looking at the past, we see that most publicly traded companies don't survive past 20 years. They get acquired by another firm, they go private, or they go out of business.

Out of the 29,000-plus common stocks that were publicly traded in America between 1925 and today, only about 5,000 survived more than 20 years. And, as you'd expect from Mandelbrot's work and from Pareto's Law, (which I've discussed here), there's a huge "power law" in the stock market: most of the profits accrue to a very small number of companies.

Various studies show that about 1% of stocks will create about 70% of all the wealth. And what is the most important factor? Time.

Investors in the original Philip Morris turned every $1 invested into $2.6 million from 1925 until today, a 16% annual compound return for almost 100 years. No other business even comes close to generating so much wealth.

For reference, chip maker Nvidia (NVDA), which has created a huge amount of wealth, has so far "only" turned every $1 invested into $1,316, a compound annual return of 33% a year since 1999.

That's good... but Philip Morris' results are 2,000 times better!

That's why I believe investors should understand Lindy's Law and seek to own businesses that have both excellent economics and long (at least 20 year) track records. It's these businesses that give you the best odds of producing substantial wealth.

Other notable long-term performers include (annual compound return since 1925): Vulcan Materials (VMC, 14%), Kansas City Southern (14%), General Dynamics (GD, 13% since 1926), Boeing (BA, 15% since 1934), IBM (IBM, 13%), Eaton (ETN, 13%), Coca-Cola (KO, 12.7%), Abbott Laboratories (ABT, 14% since 1937), Deere & Company (DE, 13% since 1933), The Hershey Company (HSY, 12.3% since 1927), Johnson & Johnson (JNJ, 15% since 1944), Northrop Grumman (NOC, 16% since 1951), Exxon Mobil (XOM, 11.5%), Caterpillar (CAT, 12% since 1929), Emerson Electric (EMR, 13.5% since 1944), Bristol-Myers Squibb (BMY, 12% since 1933), and Pfizer (PFE, 13.7% since 1944).

And more recent excellent long-term performers include: The Home Depot (HD, 25% since 1981), Microsoft (MSFT, 26% since 1986), and UnitedHealth (UNH, 24% since 1984).

For companies with excellent economics, a long history is a hugely valuable intangible asset – "Lindy's Law." Put it to your advantage.

Finally... to anticipate the angry rants in the mailbag...

Please, go ahead and tell me how you don't have 100 years to invest and how all of this Lindy stuff won't help you. Just keep in mind, Warren Buffett was born in August 1930. He began buying Coca-Cola (KO) stock following the market crash in October 1987. He was 57 years old. You can argue with me if you want, but the simple fact is, it's never too late to buy a great business that can compound your wealth at market-beating rates. And if that's not obvious to you, you're probably reading the wrong newsletter.

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Editor's note: "What does Porter think?" It's a question we've heard for years – and folks are asking it more than ever given today's global uncertainties.

Well, as I mentioned at the start of today's edition, Porter recently sat down on camera with Doc to share his latest thoughts right now...

You'll hear Porter's take on the election and why he believes the "country has hit a breaking point"... details about maybe the most serious warning he has ever issued... and, perhaps most important, Porter's tips for growing your wealth in the years ahead despite the risks he sees for the country and the economy...

This strategy, as you might imagine, includes owning shares of the type of high-quality "Lindy" companies described in today's essay. But that's just a part of it... He also notes other critical ideas that you should understand to truly protect your wealth over the long term. Click here to watch Porter's interview with Doc and learn more now.

New 52-week highs (as of 11/22/24): American Financial (AFG), Atmus Filtration Technologies (ATMU), American Express (AXP), Alpha Architect 1-3 Month Box Fund (BOXX), Clorox (CLX), Costco Wholesale (COST), Pacer U.S. Cash Cows 100 Fund (COWZ), Copart (CPRT), Salesforce (CRM), Enterprise Products Partners (EPD), Expedia (EXPE), Fair Isaac (FICO), Comfort Systems USA (FIX), Flutter Entertainment (FLUT), Home Depot (HD), iShares Convertible Bond Fund (ICVT), JPMorgan Chase (JPM), Lumentum (LITE), Masimo (MASI), Magnolia Oil & Gas (MGY), Markel (MKL), Altria (MO), ONEOK (OKE), Invesco High Yield Equity Dividend Achievers Fund (PEY), Packaging Corporation of America (PKG), Planet Fitness (PLNT), Construction Partners (ROAD), Roivant Sciences (ROIV), Starbucks (SBUX), Sprouts Farmers Market (SFM), Snap-on (SNA), SPDR Portfolio S&P 500 Value Fund (SPYV), Summit Materials (SUM), Cambria Shareholder Yield Fund (SYLD), Toast (TOST), Texas Pacific Land (TPL), Trane Technologies (TT), Twilio (TWLO), United States Commodity Index Fund (USCI), Invesco DB U.S. Dollar Index Bullish Fund (UUP), ProShares Ultra Financials (UYG), Viper Energy (VNOM), and W.R. Berkley (WRB).

In today's mailbag, feedback on Dan Ferris' Friday essay featuring a $6.2 million banana... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"[Dan's Friday essay] is one of the best articles I have read in a very long time. Beautifully written. Well researched and very interesting. Bravo! Some of us still believe the truth is out there." – Subscriber Deane K.

"A blank wall remains a blank wall. The Mona Lisa is still there, more or less as originally painted. The $6 million banana rots away over a period of a few days, just like the one that costs 30 cents at Safeway. So, my question is, 'to maintain your precious art's value, do you replace the banana every week with one authenticated by the artist to be a genuine art banana (at great cost to you, no doubt) with one you pick up at Safeway, or just let it rot and claim the art has appreciated?'" – Subscriber Kelly F.

Regards,

Porter Stansberry
Stevenson, Maryland
November 25, 2024