The Biggest Short Trade in History

The biggest short trade in history... A one-way bet against manipulated currencies... The two ways governments always destroy their currencies... The final days of paper money...

As I'm sure you've seen... we're hosting a major meeting tonight.

I (Porter) honestly believe this is, by far, the most important meeting we've ever held. The Wall Street Journal inadvertently spelled out why in today's paper...

The 10-year German yield fell below 0.1% Tuesday, moving closer to the all-time low closing yield of 0.073%. The yield has fallen around half a percentage point since the start of the year, with even larger declines recorded for longer-dated bonds...

The turmoil of the first quarter has unsettled investors. Negative yields have become a common sight. German two-year bonds yield minus 0.49%, and Japan Tuesday auctioned a 10-year bond at a yield of minus 0.06%.

The best speculations aren't risky bets on new drugs... or an oilfield... or clever new electronics. Some (most) of those bets don't work out. There's a different kind of speculation I'd like to talk about today... it's a speculation that has a 100% win rate and has created the largest trading profits in history. I normally warn investors against speculations. But not this kind...

I'm talking about bets against bad government policies, bets that are rooted in sound economics and designed to profit as the inevitable finally happens.

Everyone knows that price controls don't work. Everyone knows (or should know) that printing money doesn't build wealth and, eventually, leads to much lower currency value. Ergo, everyone should know that doing both (manipulating interest rates by printing money and buying bonds) will eventually lead to a catastrophe. After all, these policies are combinations of the two ways governments always lose to economics.

There is no question the ongoing central bank policy regime will eventually lead to a catastrophe. Betting against these policies is both one of the smartest things you can do today... and likely to be one of the most lucrative choices you will ever make in your life.

Think about what's happening. You don't need to have a PhD to understand this. Who would ever own a government bond that's guaranteed to cost him money? Who would choose to engage in that deal for a two-year period? That's where the bond markets are today in both Germany and Japan.

These interest rates are nonsensical. They cannot possibly be real (or lasting), because they flagrantly violate the most basic rules of economics. Nobody willingly lends capital and pays the borrower for the privilege of doing so. The fact that these rates exist and that government bonds are trading at these nonsensical prices is proof that the entire paper money system is completely manipulated and corrupt.

This is what happens when governments go broke and cannot finance their obligations in legitimate ways. Thus, it's only a matter of time until similar policies show up in our government bond markets... and before the world's biggest collectors of capital are looking for a way out.

That's the point of the "Metropolitan Plan." And that's why we're holding a meeting tonight. This isn't about some stock to buy. This isn't about a normal speculation. This isn't about making 10-to-1 on your capital... or earning big dividends. This is something so much more important that it can't be compared with "normal" financial advice. This is about getting you, your family, and your savings out of the way of the biggest financial hurricane that has ever happened.

And if you don't believe that's exactly what's going to happen... then how in the world do you explain negative interest rates in two of the three most important currencies and trading blocks in the world?

Let me give you one example in actual trading terms of how negative interest rates are certain to lead to a collapse in the value of those currencies. Do you remember when billionaire George Soros "broke" the British pound in 1992? What did he do? He used the futures markets to place a massive, $10 billion-plus bet against the value of the pound versus a basket of other currencies.

The government was manipulating the pound in an effort to follow guidelines for the European trading block... an effort that failed (of course) because it violated basic economics. As Britain's economy slowed, its central bank had to spend more and more of its reserves to "defend" the value of the pound. Finally, it was forced to allow the pound to "float" in the market freely. As a result, Soros made a fortune. That was a sound speculation. It was a bet on rational economics opposing government manipulation.

Do you know how this actually works? To bet against a currency, you borrow it in huge quantities. Therefore, the cost to carry the position is based on interest rates. Likewise, you can execute a bet against a particular bond market by borrowing a lot of bonds and then selling them short.

The costs of these trades are all based on interest rates. A currency (and a bond market) with high interest rates is difficult to sell short. It's the same as a stock that pays a hefty dividend. The costs to carry the trade dissuade most short-sellers from betting against big dividend-paying stocks, high-yielding bonds, or currencies with high interest rates.

What do you think will happen when Japan, Germany, and the U.S. decide that they have to stop buying their own bonds? What will be the cost to short these currencies? What will be the cost to short these bonds? That moment will be the biggest "green light" in the history of financial speculation. After all, a bond that yields nothing costs nothing to borrow. And a bond that pays a negative interest rate would pay a speculator to short it.

Furthermore, what risk do speculators face by shorting these currencies and bonds? Not only are these governments broke... not only are their currencies "fiat" and backed by nothing but paper... but they have also run their bond prices to such a high point that they literally cannot go any higher. A bond that offers 0% interest will not receive a higher bid in a real free market. That means it can be shorted with total impunity, as losses are impossible.

Think about what that means...

There will be no interest rates to protect these currencies. Shorting them will cost speculators virtually nothing. And those will be "one-way" trades, since speculators who can short these currencies will face zero risk.

As a result, as soon as the government tries to back away from these huge manipulations, people will bet trillions of dollars against these currencies. And that includes our own, assuming negative interest rates reach our markets, too.

The only way to stop such an enormous catastrophe is something like the Metropolitan Plan. Something would have to be done immediately to stop speculators from freely betting against the dollar with total impunity. Something would have to be done to stop this incredible global run on banks. And whichever country is able to establish a sound currency first will be the one that the speculators will use to bet against all of the others.

I know what you're thinking... "The governments will simply come up with a bunch of rules against shorting." Or, "They're going to find some other way to punish the speculators." You're right, of course. They will try. But their efforts will all produce dozens of serious and unforeseen consequences, which will undermine the benefit of the free market and cause even more serious losses to their credibility and their currencies' values.

The only real and permanent way to stop a global run on banks like this is by backing major currencies with gold and defending the value of the currencies at a reasonable level. That's why I believe we will see the Metropolitan Plan occur.

It will be the end of the 1971-2016 grand experiment with paper money. It will be the end of the "great inflation." For many, many people... this will be a catastrophe. But not for you.

You can think of looming changes as problems, as a crisis... Or you can see the inevitability of our current system's imminent collapse. Rather than thinking of this as the end, you can choose to see it as a wonderful new beginning... a return to sound economic policies, low debt levels, high currency values, and less volatility. Replacing "bubble" economics with sound money and free markets shouldn't be something anyone fears. It should be a change we all celebrate.

And you will. But only if you know what to do, right now, to make sure you're one of the big winners in the coming monetary revolution.

I'm personally dedicated to making sure that you know everything I know about what's going to happen, when it's likely to occur, and how to best protect yourself. That's how I've always seen my job and my company's purpose. We are going to give you the information we'd want if our roles were reversed. If you've read us for any length of time, you must know how seriously we take this responsibility.

We know... the biggest legal exchange of wealth in history is about to occur. You can either be a beneficiary or a victim. It's up to you.

I hope you'll join us tonight to learn all of the details of our plan. The meeting is free. And you have my word that we will not waste your time. Like I've said, I genuinely believe this will be the most valuable meeting you ever attend.

Please, don't miss it. Reserve your spot here, and sign on 15 minutes before we get started at 8 p.m. Eastern time to make sure you're there.

New 52-week highs (as of 4/5/16): Nuveen AMT-Free Municipal Income Fund (NEA), Nuveen Premium Income Municipal Fund 2 (NPM), Nuveen Municipal Value Fund (NUV), Reservoir Minerals (RMC.V), and Seabridge Gold (SA).

We've received hundreds and hundreds of questions about the "Metropolitan Plan" and tonight's upcoming conference call. As always, we can't provide individual investment advice, but Porter has answered some of the most common questions below. Let us know what you think about tonight's call at feedback@stansberryresearch.com.

"If gold goes to $10,000 or more, what's to stop the government from just confiscating everyone's gold, like it did under FDR? Isn't that a big risk of owning physical gold today?"

Porter comment: Nothing prevents the government from doing whatever it wants, except the U.S. Constitution and, ultimately, the voting booth. I have no doubt that the government will go to whatever lengths are necessary to save themselves and the big banks if there's a real run on the dollar. The Constitution, however, prohibits "taking." So what I've heard is that rather than taking the gold, the more logical move is a windfall-profits tax on gold and gold stocks.

Think about it... Enforcing taxes against the "rich" and gold "hoarders" is likely to be far more popular than seizing gold from everyone.

How can you manage this potential risk? It's not easy. U.S. citizens are subject to global taxation on all income. Any information I can give you beyond that would probably put me in jeopardy. I'd urge you, however, to consult with a well-established foreign-asset-protection attorney. Nobody in the whole world knows how much gold I own... except for me. By the way... the idea that the government might not let you keep your profits isn't a good enough reason (in my view) not to own gold. I mean... you have to try, right?

"When gold is so expensive, won't the government nationalize the mining industry (amid public outcry about their windfall profits)? Isn't this a better way to seize monetary control? How will it affect our investments?"

Porter comment: How could I possibly know? I have no idea what the government might do in the event of a real global dollar panic. I do know it will do things no one else dreams is possible. So keep some physical gold in a safe place. Do your best to own some gold stocks, too... especially foreign ones. Those assets will be much harder for the government to take from you.

"If a run on the dollar drives gold to $10,000 or more... isn't it just because dollars are now worthless (and gold is merely more valuable in worthless-dollar-terms)?"

Porter comment: Of course. The intrinsic value of gold doesn't change much, if at all. The purchasing power of an ounce of gold has remained relatively stable for all of recorded human history. Meanwhile, I'd argue that the intrinsic value of the dollar has already collapsed. All of the shenanigans we're seeing in the markets now (negative interest rates, "quantitative easing," etc.) are all efforts to conceal that fact.

If there's a real dollar panic... and if the Fed has to exchange its paper assets for bullion, it will be because the market finally realized that the dollar wasn't worth anything, not because its value changed recently.

"Why did your source tell you this information? He must have a motive for telling you, knowing you were going to put the word out."

Porter comment: I don't know. I didn't ask him. But I think I've developed a pretty good global reputation for writing about these issues. Most investors around the world see my work. I know he cares about his reputation... and I know he cares deeply about our country. Getting the story out allows him to do something while still keeping his insider status.

"Shouldn't the price of gold be set against $20 trillion of total debt and not just the Treasuries held by the Fed... sending gold to more like $80,000 per oz.?"

Porter comment: No. The Federal Reserve Notes (that we use as currency) are backed by the Fed's balance sheet, not the U.S. Treasury's balance sheet.

"Do we know if the gold in Fort Knox is really even there? And if even so, hasn't it already been promised away to other countries?"

Porter comment: Get your tinfoil hat. Put it on. Why ask a question like that? If I knew the answer, I wouldn't tell. That would be a great way to end up dead. The question is pointless. If you're going to start questioning the government's own auditors... it's probably best to sell the dollar, right?

"What about silver? Is it as good of a chaos hedge? How high will it rise relative to gold?"

Porter comment: Yes, it's a great hedge. It's far more volatile than gold. And it's cheap (right now) compared with gold. It will definitely play a role in our precious metals portfolio.

"I don't know where to store [gold] that's safe. I'm thinking about buying GLD, but I'm worried about phantom 'paper' gold that's subject to manipulation. WHAT SHOULD I BUY? What should I do if I only have a few thousand dollars to invest and I'm not a fat cat like your other subscribers?"

Porter comment: I'll never understand this question. No financial asset in the world is easier to buy and sell than gold. I've seen people buy gold in the middle of Panama's Darien jungle (from native tribes, who were panning it) where there are no roads, no power, and no telecommunications – just satellite phones.

Surely, if I can buy gold from native tribes in a jungle, you can manage it here. You can go on eBay and buy a gold coin right now in less than five minutes. Or use a dealer you know locally. Or call one of our recommended dealers. No forms to fill out. No approvals required. Then, put it someplace safe. How hard is that?

Regards,

Porter Stansberry

Baltimore, Maryland

April 6, 2016