Interview with Porter Stansberry; DWAC soars 88%; Study on hedge fund managers; The bull case for oil; Housing prices went up as mortgage rates soared
1) I really enjoyed this 91-minute interview with my friend and mentor Porter Stansberry – lots of interesting history about how he started and built Stansberry Research:
Here's an excerpt of the summary:
A few weeks ago, serial entrepreneur Tommy Humphreys tweeted at a rogue once-billionaire, Porter Stansberry. The tweet led to a phone call... and an invitation.
Join Tommy as he wanders Porter's sprawling farm estate... And dive headfirst into the secrets of how Porter turned $36,000 into a billion-dollar financial research empire with a genuine passion for helping investors.
And speaking of Porter, I'll be joining him on camera this Thursday to help reveal all the details about an investing breakthrough that has taken Stansberry Research nearly two decades to create.
In short, it's a powerful new way to see which of 4,817 different stocks could double your money. In fact, as we saw in our company back testing, it could have turned every $100,000 into $254,000.
Our broadcast on Thursday is free to attend – just make sure to register if you haven't already right here.
2) What crazy timing...
No sooner did I explain in yesterday's e-mail why 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 – is a bad short than it soared another 88% yesterday on basically no news.
The stock has now nearly tripled in the past six trading days.
This further underscores what I wrote yesterday: Beware of picking up pennies in front of a steamroller!
It also underscores one of the main reasons short selling is so difficult: you never can tell when a stock you're short for all sorts of good reasons might get caught up in a short squeeze or meme-stock mania and crush you.
Just ask Gabe Plotkin...
His excellent long-term track record at hedge fund Melvin Capital was completely upended in a matter of weeks by one stock, GameStop (GME) – a rollicking story told in the book, The Antisocial Network, and movie, Dumb Money, which I wrote about in my September 25 e-mail. Here's a picture of me with the book's author, Ben Mezrich, at the premiere of the movie:
3) Speaking of how hedge funds manage (or fail to manage) risk, here's an interesting study with unsurprising findings: Sensation Seeking, Sports Cars, and Hedge Funds. Here's the abstract:
We find that hedge fund managers who own powerful sports cars take on more investment risk. Conversely, managers who own practical but unexciting cars take on less investment risk. The incremental risk taking by performance car buyers does not translate to higher returns.
Consequently, they deliver lower Sharpe ratios than do car buyers who eschew performance. In addition, performance car owners are more likely to terminate their funds, engage in fraudulent behavior, load up on non-index stocks, exhibit lower R-squareds with respect to systematic factors, and succumb to overconfidence.
We consider several alternative explanations and conclude that manager revealed preference in the automobile market captures the personality trait of sensation seeking, which in turn drives manager behavior in the investment arena.
I'd give pretty good odds that Gabe Plotkin drives a "powerful sports car"...
4) A smart friend of mine – a former hedge-fund manager who now posts on X anonymously under the handle BeenThereDoneThat Capital – posted a thread on why he's bullish on oil... It's a view I share:
5) In Charlie Bilello's summary of his favorite charts of 2023, this one caught my eye because I never would have believed that housing prices would have soared 32% since January 2021, despite mortgage rates – a key determinant in the affordability of a house – spiking from less than 3% to nearly 8%:
It seems like whenever I start to feel overconfident, bizarre, counterintuitive things like this happen...
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.