'Live' from Las Vegas...
'Live' from Las Vegas... Highlights from Day One of the Stansberry Conference Series... Ron Paul on the U.S. dollar and the Federal Reserve... Steve Sjuggerud's contrarian advice... Two master 'short sellers' share their secrets...
This year's Stansberry Conference Series kicked off yesterday morning with a keynote presentation from former congressman and presidential candidate Dr. Ron Paul.
Dr. Paul's core message will sound familiar to longtime Digest readers...
He discussed the federal government's current role in our society, calling it "obscene." And unfortunately, the government's role is only getting larger.
He reviewed his stance on the U.S. dollar, comparing it with a "house built on sand"... noting there's "no foundation, it is all based on trust."
While he believes a crisis is inevitable, he admitted that predicting the timing of the crisis has been difficult... joking that when legendary newsletter writer Jim Grant was recently asked when he thought the crisis was going to arrive, he answered "1978."
Regarding the Federal Reserve, in particular, Dr. Paul explained why we would all be better off without its interference in our economy. He said the Fed isn't merely wrong in its philosophy, it's callous, too... the Fed's policies hurt the middle class at the expense of the wealthiest and most connected – something we've dubbed the "disappearing middle class."
Dr. Paul noted that he personally brought this to the attention of two Federal Reserve chairmen, asking them, "Aren't you cheating the people who are looking to take care of themselves... wanting to take care of their own retirement?" Both admitted, that yes, they are... because they need to take care of the "big picture."
Following several bearish presentations, True Wealth editor Steve Sjuggerud offered a "glass-half-full" look at the current landscape of the market.
Steve believes the current upside is so significant, you could virtually throw a dart at a list of asset classes and buy anything. (Of course, Steve says you should be sure to use protective stop losses.)
One area Steve thinks is a terrific place to put your money to work is residential real estate.
Single-family home prices are still cheap, sitting more than $50,000 below their fair value. Yields are significantly higher than what you earn in a savings account, and housing should do well in an inflationary environment. Plus, homebuilders are scrambling to build inventory now after years of underbuilding.
All of that adds up to potentially big upside in real estate. And Steve is putting his money where his mouth is... In his presentation, Steve said, "The most significant part of [my] net worth is in Florida real estate."
Of course, Steve is still bullish on U.S. stocks as well...
He noted that while folks are obsessing over the Federal Reserve potentially raising interest rates, higher rates aren't necessarily bad for the stock market. In fact, over the last 25 years, every time the Fed has raised rates, stocks have gone up an average of 14%.
More important, Steve believes that the extreme pessimism in investor sentiment right now could lead to 18 more months of upside in the market. Investors have only been this nervous about stocks four times since Black Monday in 1987.
Steve compared today's market environment with the market environment in 1998. As regular readers know, stocks had gone nearly straight up from 2009 until the recent pullback this past August.
In the 1990s, stocks had a similar big run higher with essentially no volatility. Following a significant correction in mid-1998, stocks recovered and the S&P 500 soared over the following 18 months.
In the latest issue of True Wealth, out today, Steve shared the full details on this extreme in investor pessimism... and told his subscribers exactly how to profit from the extraordinary opportunity he sees.
Another notable presentation came from hedge-fund managers Carlo Cannell and Scott Fearon.
Both Cannell and Fearon have made millions in their careers by short-selling questionable and bankrupt companies. Fearon has even published a book – Dead Companies Walking: How a Hedge-Fund Manager Finds Opportunity in Unexpected Places – explaining how he spots "doomed" companies, and highlighting dozens of stories from his 30-year investing career.
Cannell and Fearon started their presentation with an entertaining review of some of their most recent short-selling successes – most notably, a $100 million luxury pet airline company – but then shared some of their best short-selling advice for investors...
They explained that there are three main types of companies that go under: frauds, fads, and failures.
Both investors think it's generally a mistake to short a company simply because it's expensive, noting they'd rather short a "bad, cheap company" than a "good, expensive company."
In other words, they prefer to short companies that are nearly certain to go bankrupt... or "dead companies walking," as Fearon calls them in his book.
They noted that companies with share prices that fall to low single digits rarely recover. And most $1 or $2 stocks go to zero.
Both Cannell and Fearon invest on the long side in their hedge funds as well. And as you might expect, when it comes to buying stocks, they're very conservative.
They warned that investors should always be careful buying "story" stocks – speculative stocks with a great story but no earnings or profits.
Instead, they prefer companies that are already profitable, and preferably that pay a dividend. They also recommend staying away from stocks trading for less than $5 per share, saying these stocks are "usually cheap for a reason."
Finally, whether you're buying or shorting stocks, both Cannell and Fearon believe it's critical to let your winners run and to cut your losers quickly.
Fearon in particular has a "25% wrong and gone" rule... if any position moves 25% against him, he will sell it immediately.
That should sound familiar to regular Digest readers... It's nearly identical to the stop-loss strategy we always recommend.
Of course, this is just a small sample of the great presentations from the first day of the Stansberry Conference Series.
Attendees also heard from Stansberry Research analysts Dan Ferris (editor of Extreme Value) and Matt Badiali (editor of the Stansberry Resource Report), Tom Dyson (publisher of Palm Beach Research Group), Rudi Fronk (president and founder of gold firm Seabridge Gold), Penn Jillette (well-known magician, comedian, libertarian, author, and half of the duo "Penn and Teller"), renowned satirist P.J. O'Rourke, and many more.
New 52-week highs (as of 10/12/15): Activision Blizzard (ATVI), Expeditors International (EXPD), National Beverage (FIZZ), McDonald's (MCD), Altria (MO), and Constellation Brands (STZ).
We're still looking to hear how folks joining us in Las Vegas are enjoying their experience. Please send your notes to feedback@stansberryresearch.com.
Regards,
Justin Brill
Las Vegas, Nevada
October 13, 2015
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