Announcer: It's time for another episode of Stansberry Radio, the show that's too loud for radio. Here are your hosts, Porter Stansberry and Aaron Brabham.
Aaron Brabham: Welcome to Stansberry Radio. I'm Aaron Brabham.
Porter Stansberry: Hey, everybody.
Aaron Brabham: Back and reunited, I have Porter Stansberry in the house. Porter, how are you doing, man?
Porter Stansberry: Reunited and it feels so good.
Aaron Brabham: Last time we did a show together was Singapore, from your suite overlooking the beautiful downtown area.
Porter Stansberry: I'm back in the saddle. It's good to be here with you, ladies and gentlemen.
Aaron Brabham: It is tough to hunt Porter down during the Holiday season. He's all over the place. I mean you were Italy, then you were Singapore, and then you were hunting for opening season.
Porter Stansberry: Well, I was –
Aaron Brabham: In Miami too.
Porter Stansberry: It was Bimini. Then it was –
Aaron Brabham: That's right. Yeah, I forgot about the Bimini before.
Porter Stansberry: It was Bimini. Then it was Tuscany. Then it was Singapore. Then it was central PA, my hunting lodge. Yes, I did shoot a deer. If that makes you sad, listen to another radio show.
Aaron Brabham: Right.
Porter Stansberry: And then sail fishing in Miami. You know, it's a tough gig.
Aaron Brabham: God, I'm amazed I was able to keep the show together for that long. I forgot. That was like five weeks.
Porter Stansberry: It's a tough gig.
Aaron Brabham: All right, Porter, well, we've had a lot of good shows lately. I had Altucher on last week. We had a good time. Altucher's got a show. He joins Stansberry Radio, which is pretty exciting. I look forward to seeing what he can do. And, anyways, let's not hesitate; let's jump into some financial stuff.
Porter Stansberry: Okay. Let's do something that will benefit the readers, but before we get started I just want to say something real quick out there 'cause I'm sure there's a listener who goes, "Ah, geez, what an asshole. I don't want to hear all the places he's – all the fun he's been having, all the things he's done." And another thing is you've never even seen my wife.
Aaron Brabham: I'm sure it's not just one person that said it; it's probably hundreds that just said it.
Porter Stansberry: I married so far out of my league that I actually ask my wife like once or twice a week like, "Why the hell did you marry me?"
Aaron Brabham: I'll verify that.
Porter Stansberry: So the thing is, I just want – the reason I wanted to tell you these things is because – what now? – 15 years ago, right, I had less than $10,000.00 to my name, I had a car that wouldn't start, right. I was literally living in a ghetto apartment in Baltimore. But I had an idea for a business, and I dropped everything else in my life and I worked at that single mindedly for 70 hours a week, 6 days a week, for 10 years. And because I did that, now I get to enjoy the wealth I've created. And, by the way, I didn't just create it for myself. I made lots of other people rich along the way, a lot of partners, a lot of employees, and a lot of subscribers.
I tell you that just because, you know, it's the New Year. Next year, you can do anything with your life that you want to do, anything. It starts with finding a way to radically increase your income. You can do that with a business on the side. You can do that with moving into a position in your company where you're gonna paid on an unlimited basis, like a commission. And you can work harder than anybody else. You can do it. And then you save half of that. You invest it wisely. And, by the way, next year I believe that's gonna mean conservatively, 'cause I think next year's gonna be a bad year for stocks. And in ten years, you too can go to Bimini, and then to Tuscany, and then to Singapore, and then to your hunting lodge, and then to your – and then sail fishing.
Aaron Brabham: You too can be an overnight success 15 years later.
Porter Stansberry: Fifteen years later – that's right. I just want to encourage everybody. I want you to know. I was no different than you. I was no different. I just decided that I wanted something exceptional for my life and I just stuck to it. That's all you have to do.
Aaron Brabham: Yes. And, you know, your speech that you gave me – and I think we've talked about it on the radio, but maybe that was just one of our lunch conversations – your 20s are for learning, your 30s are for earning, and your 40s are for owning.
Porter Stansberry: That's right. Whatever it is you spend your 20s doing, that's what you're gonna spend the rest of your life doing. It's very, very unusual for somebody to actually make a career switch 10 or 15 years in, very unusual – so whatever it is you spend your time doing as you start your career. Now maybe you got started late, so maybe it's you earn in your 30s, right? Sorry, you learn in your 30s, you earn in your 40s, and you own in your 50s. But that should be your progression. Learn something that is valuable to other people. Learn everything about it, right? Then maximize your earning from that knowledge, and then start your own business. That's what you do if you want to become very wealthy.
Aaron Brabham: I'm taking all that to heart. I'm putting the plan in motion, and I'm fortunate to be one of your minority shareholders in One Blade. Thank you very much for that opportunity. Don't screw it up for me. That's what I'm already spending that money, Porter.
Porter Stansberry: Oh, no. That's not how it works. That's not the way it works.
Aaron Brabham: I'm totally kidding. I'm totally kidding, man. A lot ____ that. I've already picked out my boat. Now I'm gonna put next year's in two funds.
Porter Stansberry: Yeah, that's exciting for me. You know, this is my – it's gonna be my second significant venture. I've started a bunch of different businesses in publishing and in advisory, but this is a whole separate business. This is a consumer products completely, a luxury shaving tool, and we'll see how it goes, but it's exciting.
Aaron Brabham: I'm excited. All right, let's get some financial headlines. Porter, how are we gonna celebrate the 100 year birthday of the Federal Reserve?
Porter Stansberry: Hmm.
Aaron Brabham: You know, they actually are going to have kind of a celebration.
Porter Stansberry: Ridiculous.
Aaron Brabham: They actually still feel like they're doing a service.
Porter Stansberry: You know what, though? You've gotta give it to them. You really do. You have to hand it to 'em, because it's not really very often in history you find a paper currency that lasts, with as much inflation as they have had, for 100 years. It's really pretty incredible. I think that it's more of a reflection of the power of the US military than it is the savvy wisdom of the Feds chairman. But maybe that's just me being cynical.
Aaron Brabham: Yeah. In the latest SIA issue, you guys had a great write-up about the history of it and how it kind of came into existence.
Porter Stansberry: Yeah, we did. We did a little bit of work on that. We also did a lot of work on what's gonna happen with the taper. I really encourage everyone to read the last issue. I think it's pretty smart. The thing I would point out to folks who don't know anything else about economics, I would just – this is for me the biggest thing to understand about the Fed: the Fed steals from the average wage earner. That's what the Fed does. That's the whole role of the Fed. If you look and you think that – the price of gold in 1913 was $20.00 point something an ounce. Forgive me for not knowing the exact price. That probably means I'm not an official gold –
Aaron Brabham: Gold bug.
Porter Stansberry: Gold bug. But, oh well. It was $20.00 an ounce. And today, of course, it's $1200.00 an ounce. And you think to yourself what was the gain in productivity over the last 100 years. What happened to the price of everything else, right, all manufactured goods? What happened to the price of electricity? What happened to the price of aluminum? What happened to the – in real terms – what happened to the price? What happened to the prices of everything else?
The price in real terms of everything else fell. And when I say "in real terms," I mean adjusted for the Fed's inflation. The actual – for example, the amount of time you had to work to purchase an ounce of aluminum or an ounce of gold or car. In real terms the price of everything fell. But in nominal prices, in dollars, the price of everything soared.
And what is the consequence of that? That's what the Fed does. The Fed inflates prices. That's literally its purpose. And the reason it does that – it does that so that there's never again a run on the banks. It's designed to protect the banks. It's a cartel designed to protect the banks. So as long as there's inflation, there's never gonna be a run on the bank because the Fed can always print up the money that's necessary for the depositors. And that allows the banks to run on enormous leverage. That's why they only have reserves of eight percent or something. And that's why, if you ever go to the bank and you ask for all your money, you can't have it; it's not there. That's what the Fed does: the Fed protects the banks.
The consequence of that, the real consequence of that, though, is that it greatly reduces the real purchasing power of earnings. So if you look and you see where the dollar decouples from gold – which happened in 1971 – and you look at average real earnings and you look at productivity, they used to be linked up. They were the same. They were synonymous. So as productivity grew, the real value of your earnings grew because everything in the economy was getting cheaper and cheaper in real terms. But in '71 that's when the really big inflation started. That's when they broke the dollar from gold, and that's when the Fed just began printing money willy-nilly.
And if you look, you will see. Just trust me. You can look at it on the digest where I publish it. You can look in the issues where we publish it. But you can do the work yourself. And you can go to the FRED website, which is the Federal Reserve Bank of St. Louis, and you can measure increases in productivity compared to increases in real earnings. And it decouples in '71, and since then real earnings have fallen and productivity has continued to grow. So the only folks in our economy who are actually growing wealthier are the very wealthy, the rich. They're the folks whose asset base is soaring in value because of the Fed. Think about this: in the most recent inflation in the last five years, what prices have gone up? Ferraris.
Aaron Brabham: Yes.
Porter Stansberry: They've gone through the roof.
Aaron Brabham: Artwork. Collectibles.
Porter Stansberry: Artwork. Collectibles. Real estate. Stock prices. The size of the banks' balance sheets. All the rich people have gotten richer because the Fed has been doing this quantitative easing; they've been pumping the economy up with money and the rich people have access to it. What's happened to real wages? They're plummeting. So the average per capita GDP in the United States in real terms is down about ten percent since Obama took office.
That's the first time we've had a sustained decline in real per capita GDP in the history of the United States. It hasn't happened since the Great Depression. Sorry, not in the history of the United States; in the modern history of the United States. It hasn't happened since the Great Depression. So that's the lesson today about the history of the Fed. Happy anniversary, Fed, you [bleeped] bastards.
Aaron Brabham: I mean Obama has to know he is absolutely destroying the people that voted for him. Doesn't he? He can't be that dumb, right, Porter?
Porter Stansberry: Oh, that's the point. That's the whole point. That's what I love –
Aaron Brabham: I mean ___?
Porter Stansberry: That's the only thing I love about politics. People do not get what they expect when they vote for somebody. They get what they deserve. And my favorite point about this is the new health care stuff. It cracks me up every single day. You mean we're actually gonna pay more and get less? Well, sure. What did you expect from the government?
Aaron Brabham: Yeah. They're getting an all-you-can-eat buffet of it too. They're getting destroyed.
Porter Stansberry: They're getting what they deserve good and hard. And what I love about it is they're all so stupid; they're gonna vote for more of it.
Aaron Brabham: Well, the good news: Paul Ryan came out and put his mug on TV the other day and they found a solution to the debt ceiling debacle.
Porter Stansberry: Let me guess. The solution, according to the politicians, of the debt ceiling debacle is that we change the way we count.
Aaron Brabham: No. What they're gonna do is they're gonna increase spending for the next two years.
Porter Stansberry: Oh, we're gonna –
Aaron Brabham: And then in ten years, it's gonna save $23 billion, so over ten years it'll save money, but we're gonna put that on the people for then.
Porter Stansberry: We're gonna save money by spending more.
Aaron Brabham: Yes, yes.
Porter Stansberry: That's a real shock. I am just completely aghast at that. That's really shocking.
Aaron Brabham: They're really celebrating the fact that they're not gonna debate again.
Porter Stansberry: Hey, listen, all listeners out there that are tired of hearing us talk about politics, I just want to put this through your head, right? These people are such nincompoops. They are such retards. There is no way there can't be a complete economic collapse in our country, because the people who are deciding our fiscal and monetary policies are literally retarded. They have no idea what they're doing. They have no idea what they're doing. They have no idea of the risks they're taking.
They all still believe, of course, that deficits don't matter and that they can't print their way out of everything. And, for them, the last five years is just proof that it works because, in their mind, there hasn't been any great inflation yet. Never mind that real wages are collapsing. Never mind that the price of anything that's a financial asset is soaring. What could possibly go wrong? With biotech stocks, with the sector now we're at $600 billion. What could possibly go wrong?
Aaron Brabham: What could possibly go wrong with 47 million people on food stamps and 11 million on disability for life?
Porter Stansberry: What could possibly go wrong with General Motors issuing $11 billion in credit to subprime borrowers of automobiles?
Aaron Brabham: Or 90 million people permanently leaving the workforce? What could possibly go wrong?
Porter Stansberry: What go possibly go wrong with changing all the tax laws and going after Americans overseas, leading to 2,000 wealthy Americans a year returning their passports? What could possibly go wrong with forcing out all the wealthiest and most successful people in the country? Hmm.
Aaron Brabham: Hmm. How's this gonna end? On the hotline we have our guest, Frank Holmes. Frank is CEO and chief investment officer of US Global Investors. Frank, welcome to Stansberry Radio.
Frank Holmes: Oh, it's great to be here, especially during this holiday season.
Aaron Brabham: A little chilly up where you are right now, isn't it?
Frank Holmes: And buckets of snow fell today.
Porter Stansberry: Oh, my God. We've had tons of snow too. It's been crazy. Frank, it's really great to talk with you. I've known you probably for at least a decade now, and you've always been one of the smartest guys out there when it comes to precious metals in particular. And it's a very interesting time right now in the metals markets, and I was on an e-mail thread yesterday with the guys from KC Research, with Doug and Marin, and they were talking about index levels, and they were noting that the index levels today are the same places where they basically were in '08 and then again back in '03. But in those times, the metals prices were much, much lower than they are today. So it suggested that there's a lot of value overall in these junior miners. I wondered if you feel that way, because the other side of the argument is that the balance sheets of a lot of these miners aren't as strong as they were five and ten years ago. What's your impression?
Frank Holmes: Well, I think the sentiment is very, very different, and it does have an impact on the sector, especially as you go down the food chain with junior companies. But they are offering extreme attractiveness because we're witnessing when takeovers take place – and it's not just mining; it's also in bigger cap oil companies – these are 80 to 120 percent premiums. So, basically, it's suggesting that the cheapest reserves and resources are listed, not in the ground. You don't need to go explore for them and have that risk capital. In fact, you can buy so many attractive companies, and today we saw another company being bought out at a huge valuation 'cause the average junior mining company is trading around $30.00 for an ounce of gold in the ground reserves, and you're getting these things taken over at $125.00 an ounce.
Porter Stansberry: Wow. Yeah, that's definitely a lot cheaper to buy it on the market than it is to find it. And the other thing that I'm concerned about – you know, these markets are very emotional – gold and silver, as you know, but particularly gold. I guess there's more of an industrial supply-demand metric for silver. But gold is really – the price of gold really is set by the emotions of folks who see it as an alternative currency, and so gold is one of those great, sentiment-driven markets.
And I always like to buy gold when I see other people, frankly, just wiped out by it. So I remember there were some famous suicides back in 2008 in October, right when gold bottomed. And I've been expecting, in this latest correction in gold, some wipeouts, some famous investors to get out of gold or – hopefully, no actual suicides – but sort of some telltale signs of a real bottom. Have you seen anything like that in Toronto? Have you seen enough investor wipeouts to suggest that we're getting close to a sentiment bottom?
Frank Holmes: We're getting close to it. I think everyone's antidepressants right now so as to deal with their numbness. And I would say to you that it seems that the bell has rung. There's an old expression: no one rings the bell at the bottom of a turn. But it appears to me that, after speaking at Mines and Money in London this last week, is that it has turned, and there's much more enthusiasm than what you feel and hear in Toronto, Vancouver. And recently when I spoke up in San Francisco gold show – same thing; the sentiment is quite pervasively negative.
But we've had a spectacular run this past 12 years, and we're getting one big correction mainly – it's painful – for two years now. But this is one – the year where gold is off net net for the year and, when we look back at our models, is extremely oversold based on all data points, fundamental analysis of the money supply in the same time price action.
But I think what's important is this love trade, and love trade is the jewelry demand and it's highly correlated to the GDP per capita of China, India, Thailand, Dubai – this region. And what we have seen for the past 18 months is the GDP per capita of India and China has been flat, so that is that extra demand that comes in that took gold to $1900.00.
The fear trade gets all the publicity, but we must not forget that, in the '70s, China and India – affectionately known as Chindia – had a global economic footprint of only two percent of GDP. Now we're at 22 percent, but still 40 percent of the world's population. And every time there's an uptick in their GDP per capita, which I think is now starting to turn with global PMIs – purchasing manufacturers' index – reflecting this sort of global growth is taking place.
And the US industrial production numbers that came out yesterday are another sort of validating factor; that when that takes place, you usually get a pickup in that demand. So I think 2014 is gonna be a great year for resources and the gold investors.
Porter Stansberry: That is a really interesting idea. I hadn't ever heard of the love trade before. That's fantastic. I like that, Frank. And I think the stat you gave about the increasing size of India and China as the global GDP is very important. And you know that China basically has driven all the commodities markets for the last decade at least, and if their economy heats back up, you'll see all commodity prices rebound. I agree with you completely there. What’s the –?
Frank Holmes: And I was just – and, Porter, I was just in India three weeks ago. And you know the data point that really blew me away? There's 600 million people under the age of 25. That's two Americas. And unlike previous decades, they're all hooked and wired on Facebook, they're all connected, and they all want that American dream, and there's a cultural affinity with that rising GDP to give gold. So I think that's an important data point for growth.
Porter Stansberry: Yeah. That is an enormous number of people striving for a better life. That is really, really an amazing number to think about – 600 million people under the age of 25. Holy cow. I wonder if any of them would like to write a newsletter, like Kadef?
Aaron Brabham: They'll write some good gold newsletters.
Porter Stansberry: I think that we could find – I bet you they'd be willing to work a little bit less than I'm currently paying.
Aaron Brabham: Probably.
Porter Stansberry: Frank, tell me, in your funds, what's the strategy now? How much cash would you carry into next year? How do you play a rebound in the commodities in 2014?
Frank Holmes: Well, it's a great question, and I think with our gold funds, we have US gold shares, the first no-load gold fund, and it invests only in producers. And the World Precious Minerals, it has more speculative leaning towards it, and it buys mainly juniors that are in the brown field, looking to go in production. And I would say approximately 15 percent of that portfolio is in the junior end. And the big bogey for them is to beat the GDXJ, which everyone wants to trade that ETF, and World has been doing that, so I feel good about beating that particular ETF.
Now, the bigger theme is Global Resources, and it has an exposure to food, energy, drilling companies, the whole – and I've written about this on my blog, about what's taking place in Texas in oil shale and what the opportunities are, and so I think that that's a more diversified portfolio, which has approximately ten percent of its portfolio in gold producers.
Porter Stansberry: Frank, do you have an opinion about the large mines out there that haven't yet begun production? And I'm talking about the Seabridge mine, the Pretium mine; talking about the Pebble mine. And there was one we actually just recommended in my newsletter, the Novagold properties, the Donlin mine. Do you have an opinion about what is likely to be the next big gold mine that actually gets put into production?
Frank Holmes: Now, that is a multiple question because each of these things are subject to so many external factors, from governments moving the goal posts or changing the tax regimes, or an environmentalist being used to delay or disappoint –
Porter Stansberry: Yeah, that's called the caribou factor.
Frank Holmes: The caribou factor? The third is sort of the socialist mindset that you get in many small communities in Latin America, and you get it sometimes in Africa, that they just – the DNA of envy seems to block some of these projects. And so one has to be – you know, censor that. I guess the big one would be – that looks like it could come on would be in Chile, which is Derail Barricks, a short-term year. I think that if the gold prices start to rise, that that's something that they would look for their growth profile.
But I think these other ones provide investors with what is called the optionality. And what we'd have to have is gold – for a lot of these places to be able to go onstream – gold at $2,000.00 an ounce. And you'd have to make sure that there's a stability agreement with the governments that – 'cause no one's now willing to make the commitment of capital for something that's long term if the volatility of taxes are added on top of the volatility of the commodity. And so I think you're gonna see actually shrinking supply of gold coming from the mines over the next five years.
Porter Stansberry: Yeah. Actually, I completely agree with you, and I think that's part and parcel of the mine and production cycle, which I know you know very well.
Frank Holmes: And the other thing I should share – I've written about many times – is try not to get caught up with the politics. I wrote a piece, "Did the Government Shutdown Help the Economy?" All the drama that took place in October, it appears now that it was planned. All the signs were organized. It was to try to embarrass the Tea Party and et cetera. Interesting enough, many of those government workers got paid twice, and they had free times on their hands, and car sales had record sales and the same with housing.
Porter Stansberry: Yeah. That's – you know, I can't tell you how many times I got asked to be on television news shows to talk about the shutdown. And I'm like, "No, I'm not gonna comment about any of that 'cause it's all a side show. It doesn't make any difference at all." So I agree with you completely.
Frank Holmes: Right. And follow the money. So the best presidential election cycles have always been with a Democrat president and a Republican Congress. And what are we seeing? Spectacular performance.
Porter Stansberry: Yeah, exactly. I can't argue that.
Frank Holmes: You've seen – oh, either Obamacare threatens or Obamacare – that America is such a dynamic nation; it adapts how it's using its capital. You're seeing that, for the big companies, stock options aren't being granted, but stock is. So when they grant you stock over five years, you get all the dividends up front. So now you're seeing all these senior S&P 1500 companies increasing the dividends, so the salaries don't look like they're rising, but the dividend income is supplementing that, and they're buying back their stock, so you have –
Porter Stansberry: And, of course, the dividend income is much lower tax basis.
Frank Holmes: Yeah, less tax basis and it's another way to supplement the overall compensation. But it better aligns the interests that you and I have in investing in a company than being diluted with ten percent stock option pollution. Now you're seeing them buy back ten percent of their stock and we all benefit. So I think that that thesis is going to continue overall in the stock market, and we've always been writing that 10 percent in gold stocks and 90 percent in the S&P and rebalance each year. And do you know that even with this big horrific correction over the past two years in gold and gold stocks, that model is still – has a positive rate of return by a net factor, so…
Porter Stansberry: Absolutely. And that's sort of the same song I sing as well. Frank, it's great to speak with you. Can I ask you for a favor on behalf of our listeners? Can you toss 'em a bone? Can you tell 'em one well-managed resource company that you really like for 2014?
Frank Holmes: What do I like? Now, if you wanted to go in – like if you're gonna look in gold, I would look at Franco-Nevada.
Porter Stansberry: Ah, very good. Royalty company.
Frank Holmes: [Crosstalk] higher than you're getting in two-year government bonds.
Porter Stansberry: Yeah. It's a high quality business.
Frank Holmes: And 70 percent – I just had lunch with one of the associates there, and they have over 70 percent gross margins, lots of cash.
Porter Stansberry: That's a pretty good business.
Frank Holmes: And it's a nice business. And it's highly – has a great beta to rising gold prices.
Porter Stansberry: Very good. Frank, have a great holiday and let's not – let's talk next time a little sooner than every three or four years.
Frank Holmes: Please. Happy holidays to you and all your listeners.
Porter Stansberry: Very good. Be well, Frank.
Frank Holmes: Bye.
Porter Stansberry: The guy's great. He's a real gentleman and absolutely knows everything there is to know about gold investing and resource investing. If you want a nice place to stash your ten percent allocation, you can do a lot worse than his funds. Just look him up. Aaron, can you give the contact info?
Aaron Brabham: Yes, certainly. And, actually, I've got the ticker symbols for his two funds. The Global Resource Fund that he was speaking of is PSPFX, and then he has the World Precious Minerals Fund, UNWPX. So, yeah, definitely check it out, and he does have a wonderful blog. I highly encourage you guys to visit that as well. He knows his stuff. I'd never heard the Chindia talk either, about the rise in GDP.
Porter Stansberry: I love the love trade. Yeah, that's really smart.
Aaron Brabham: Yeah. I was like, "Love trade? What the hell's he talking about?"
Porter Stansberry: I know. I wasn't quite sure where he was going with that.
Aaron Brabham: I was afraid he was gonna go to sunspot theories next, but he's wiser than that, so good talk. All right, Porter, let's jump into the rest of the show. All right, Porter, let's go to our topics – you just can't make this stuff up. I don't know about you, Porter, but I've only been in Baltimore – this is my third year, and I think it snowed once. But it's snowed three times this year already. Is it getting warmer or is it getting colder, Porter?
Porter Stansberry: Well, it's global weather change. It's global change.
Aaron Brabham: Oh, is that what they're calling it now?
Porter Stansberry: That's what's – because we –
Aaron Brabham: Global climate change? 'Cause it's not warming.
Porter Stansberry: No, it's not warming anymore. It's just changing a lot, and we're afraid of that because we believe Al Gore and his hockey stick.
Aaron Brabham: Yeah. Well, this idiot –
Porter Stansberry: But why do people believe any of this nonsense? Do we have to talk about this?
Aaron Brabham: No, we don't have to.
Porter Stansberry: Just stop it. This drives me nuts.
Aaron Brabham: I was going to give a quote about this by a Democrat –
Porter Stansberry: Well, I tell you –
Aaron Brabham: – senator who's an idiot, about what he said.
Porter Stansberry: I know. Well, you can give the quote. You can give the quote.
Aaron Brabham: No, that's okay.
Porter Stansberry: I'll hold off on my rant.
Aaron Brabham: He says, "We see significant sports facilities, the palaces of sport that are at risk from storm, climate, and sea-level-rise effects of climate change."
Porter Stansberry: What is he talking about?
Aaron Brabham: He's worried about his kids going to games and getting flooded.
Porter Stansberry: Oh, my God. Well, I tell you what I love about global warming – or now they're calling it global change – what I love about that is it's the ultimate political problem because it scares the hell out of everybody. To do anything about it requires massive amounts of power, right? You're gonna – massive, massive. You're gonna tell people what kind of energy they're allowed to use, which essentially is telling them exactly how they have to live their lives. So it takes a massive amount of power and you can't measure it.
Nobody could tell you what the average temperature of earth was yesterday – nobody. Do you have any idea what a complex measurement that is? And what I love about it the most is that all the ground measurements – they're all screwed up. So like if you – it depends on where you have your temperature gauge, right? And if you have it like in the middle of a giant blacktop of airport runways, it's gonna be significantly hotter than if you have it on the back of a cool, white building somewhere, right? Duh. And so what I think is funny is that the satellites that measure atmospheric temperatures, they don't have any change in temperature at all. There's no change in average temperature since we've been able to track temperature extremely accurately with satellites.
Aaron Brabham: Seems like that'd be a better gauge.
Porter Stansberry: Obviously. A much better gauge. But it's funny because the more concrete we pour, then the higher average temperature around the measurement sites. Hmm. Global warming.
Aaron Brabham: Yeah, that's right.
Porter Stansberry: Global warming with a foot of snow in Baltimore before Christmas.
Aaron Brabham: Oh, it's crazy, man. I hate it.
Porter Stansberry: And then there's some guy out there who's saying we're a bunch of yahoos because we keep talking about the weather and he's talking about climate.
Aaron Brabham: It's ridiculous.
Porter Stansberry: There's a huge difference between the two, buddy.
Aaron Brabham: So, Porter, Bitcoin has been massively in the news lately.
Porter Stansberry: Yeah, it like soared to $1,000.00 and then –
Aaron Brabham: And now it's retreated back to $600.00.
Porter Stansberry: Six hundred. But that's still a lot more than it was.
Aaron Brabham: Still ___, yeah. We were reporting on it when it was like, I don't know, $75.00, $80.00 or something like that.
Porter Stansberry: And we were telling people not to buy it.
Aaron Brabham: I know. We're the idiots.
Porter Stansberry: We're the stupid heads.
Aaron Brabham: Last week Fidelity allowed clients to put Bitcoins in their IRA. Two days later they said, "No, we're not gonna do that." I wonder if they got heat from anyone from the government ___.
Porter Stansberry: Man, I tell you – listen to me and hear what I say. If you buy Bitcoin, you're going to get what you deserve, and it's not what you expect. It's just – but there's no inflation.
Aaron Brabham: No, there's none.
Porter Stansberry: There's no inflation.
Aaron Brabham: Which is why people love alternative crypto currencies and all kinds of wacky things.
Porter Stansberry: They love gambling. They love crypto currencies. Right? They love collectibles – because they want to get out of the dollar.
Aaron Brabham: Which apparently is why I love a bank account in Singapore so I can put some money into Singapore dollars and the yuan, which sounds crazy, but it's actually probably pretty sane right now.
Porter Stansberry: Doesn't sound crazy to me.
Aaron Brabham: All right, Porter, signs of the bottom in gold. According to Bloomberg, investors are dumping gold-backed exchanged-traded products at the fastest pace since the securities were created a decade ago. Do you see that as a positive?
Porter Stansberry: Yes. Yeah, call me crazy, but I like to buy things when everyone else wants to sell them to me. I don't really want to chase stuff higher. But, you know, I said at the beginning of the year that I would get interested in gold at $1200.00, and that's where we are.
Aaron Brabham: Yeah. We're right around there.
Porter Stansberry: So I'm interested. I'm interested but I'm not pounding the table yet. I will buy a lot of gold when there's something again like we saw in '99 and 2000. You probably don't remember this, but in 1999 the Financial Times put out an entire special section that was called "The Death of Gold" or something like that. It was "Gold, the Useless Relic," or something. And they were reporting on it, and they were reporting in a way that was laudatory. They were saying it was smart for all the central banks to dump their gold. And, for me, the touchstone was when the Swiss central bank announced that they were gonna sell 20 percent of their bullion.
Aaron Brabham: Yeah. That's counterintuitive to what the Swiss –
Porter Stansberry: When the Swiss say they're ready to sell gold, I'm a happy guy.
Aaron Brabham: You're in. You're back in.
Porter Stansberry: But I don't think we're there yet. I think there's gonna be some people dumping gold because they were leveraged into it and the pain has gotten too much. And there will probably be some central banks that are selling because the emerging market currencies have been hit this year a little bit, so there are probably some central banks had to sell some gold in order to support their local currencies. But think about what kind of trade that is; you're gonna sell gold and you're gonna buy Mexican pesos? Or you're gonna sell gold and you're gonna buy Brazilian real? Dum-da-da-dum-dum.
Aaron Brabham: No, thank you.
Porter Stansberry: No. I'll take the gold. Thanks.
Aaron Brabham: Chinese takeover, next section. The Energy Department sold off its $192 million guarantee to Fisker Automotive to the Chinese billionaire Richard Li for $25 million.
Porter Stansberry: Yeah. So we spent taxpayer money to invest $300 million in another dumb electric car company, and then we give all the technology and the brand and the models to a Chinese guy for $25 million.
Aaron Brabham: Yep.
Porter Stansberry: That makes a lot of sense. We keep doing that and I bet Americans are gonna get a lot richer.
Aaron Brabham: Oh, China.
Porter Stansberry: By the way, Fisker – I remember they had this huge party on the canal down the street from Villa Crono in Miami, where I lived last winter.
Aaron Brabham: I remember you talking about them. I didn't know the name brand 'cause you had said Tesla and you said – what's that other worthless one? Fisker? And then I looked it up, and I think –
Porter Stansberry: It was Fisker.
Aaron Brabham: – like Justin Timberlake or somebody like that got one.
Porter Stansberry: Yeah, they had this huge party for all these celebs right next door to my house.
Aaron Brabham: Was that the one right on the corner of the –?
Porter Stansberry: Yeah.
Aaron Brabham: With that humungous house down there?
Porter Stansberry: It's the founder of Kmart's house originally, the Kresge family. And now – it's so funny the way that trophy properties change hands – guess who owns this trophy property in Miami Beach where they had the Fisker party last winter. You'll never guess who owns it now. It's not the family that used to own Kmart.
Aaron Brabham: I'm gonna say maybe like some kind of lobbyist or someone that's deep in with the government, that got awarded some kind of massive contracts or something like that.
Porter Stansberry: Call that kid a Cracker Jack. Yep.
Aaron Brabham: That's where all the money goes.
Porter Stansberry: It's the guy who builds all of the new top secret facilities in Washington, D.C.
Aaron Brabham: Perfect.
Porter Stansberry: He's the contractor who builds all the new NSA buildings. He's the guy who just spent $40 million on a house down the street from me in Miami Beach.
Aaron Brabham: I thought for a second he might be the guy who built the Healthcare.gov site for $700 million. Yeah, figure they pocketed a lot of that money.
Porter Stansberry: This guy – he's single.
Aaron Brabham: He is loaded.
Porter Stansberry: He's single. He's in his early 40s, and he throws some big parties.
Aaron Brabham: He throws some parties?
Porter Stansberry: I'm really sad he's never invited me.
Aaron Brabham: Yeah. What's the deal there, man? We got to get in over there.
Porter Stansberry: I'm his neighbor. Actually, you should invite me.
Aaron Brabham: But you know what? They can't really mess with the waterways. We'll just get the boat and pull it around and just anchor right there.
Porter Stansberry: He's got – you know how it is. This guy – he has a corner lot on this canal. It's the Collins Canal and it leads into Surprise Lake. If you guys are from Miami, you know what that is. He has a yacht on both sides, so he's – you know, one side is the canal, one side is the Collins Canal. He's got a yacht parked on both sides of his house.
Aaron Brabham: Why not?
Porter Stansberry: And you've seen it.
Aaron Brabham: Oh, I've seen it.
Porter Stansberry: It's models and bottles all day every day.
Aaron Brabham: It's my dream life that I'll never have. __ ____.
Porter Stansberry: The guy doesn't have – if you're not gonna get married and have a family, that's what you want; that's the alternative.
Aaron Brabham: Mine will have to be in like Vietnam or something on a budget. But I'll figure it out.
Porter Stansberry: But the sad part is that I just – it sounds so lame – but I just love my wife. She's gorgeous.
Aaron Brabham: I know. I know. But, you know, come on; let's just talk about my dream, not yours. Yours is already happening.
Porter Stansberry: And I got two cool kids [crosstalk].
Aaron Brabham: Yeah. You do have two cool kids.
Porter Stansberry: And if I had models and bottles every day, I would get really tired of it.
Aaron Brabham: Not me. All right, let's move on to Detroit. So a bankruptcy judge Monday is now allowing creditors to appeal his recent eligibility and pension rulings directly to the Sixth Circuit Court of Appeals.
Porter Stansberry: Yeah. They're gonna go to the court of appeals. The court of appeals is gonna turn 'em down. This stuff has been adjudicated for decades and decades and decades, and pensioners do not have the same rights as creditors. And people can say that's not fair, but that's just a fact. A pension is a contractual obligation. It's not a credit. It's not a debt. It's not the same. You gotta pay back the money you owe first. Then you can meet your contractual obligations. That's the way it goes.
Aaron Brabham: Well, this is – it's a big precedent that's being set, because there are a lot of –
Porter Stansberry: It's not. It's not a precedent that's being set.
Aaron Brabham: It's already set.
Porter Stansberry: It's already been set. It's just people –
Aaron Brabham: Now it's time to pay it.
Porter Stansberry: It's just people didn't believe that the government would follow the same rules. The pensioners thought the government would be different. The government's not different.
Aaron Brabham: A lot of municipalities are watching this.
Porter Stansberry: Detroit can't print money. Detroit can't raise taxes. I mean I don't want to exaggerate this, but something like half the people in Detroit can't even read.
Aaron Brabham: Watch Hardcore Pawn. That's a fact. I'll verify that.
Porter Stansberry: It's brutal.
Aaron Brabham: Saudi-America update. Exxon Mobil wants the United States to remove restrictions on exporting oil.
Porter Stansberry: Now, who –? Let's see. Who was talking about that would be changed? Who could that have been? Who was saying that a year from now there'll be cries to change the export laws? Hmm. Who would that have been?
Aaron Brabham: Hmm. I can't remember who that was.
Porter Stansberry: Oh, boy. We gotta call Chris Martenson soon because the last three weeks the United States has been producing eight million barrels of crude a day. The all-time record –
Aaron Brabham: It's insane – 8.9?
Porter Stansberry: The all time record is like 9.5.
Aaron Brabham: Or 8.6. Oh, is it – did it get to 9.5?
Porter Stansberry: Yeah. So we're – I bet we're about a year away from an all-time, new record production high. And here's the interesting thing: demand for oil in the United States continues to fall, mostly because people aren't driving as much as they used to.
Aaron Brabham: People are moving back towards the cities. People don't have jobs. A lot – telework, whatever. There's a lot of reasons for it.
Porter Stansberry: But, you know what? Obama's gonna change all that.
Aaron Brabham: Well, of course. I'm sure he is.
Porter Stansberry: He's gonna come out with the – there's the Obama phone, and there's the Obama EBT. And now there's gonna be the Obama gas card. "I got my gas card."
Aaron Brabham: I like it. It's like a pretty good – brilliant idea.
Porter Stansberry: "Obama got me a gas card."
Aaron Brabham: I like it.
Porter Stansberry: You watch.
Aaron Brabham: I like it. I think it's a good idea.
Porter Stansberry: Remember? We talked about third term?
Aaron Brabham: Yes.
Porter Stansberry: How Obama's gonna use all this new wealth, all this new crude oil. He's gonna find a way to stay in power. You watch.
Aaron Brabham: Well, it's all because of him. It certainly doesn't have anything to do with fracking or horizontal drilling or the independents coming out with this technology.
Porter Stansberry: All stuff he hates, right? Yeah, but it's what –
Aaron Brabham: Yes. But he's zipper-mouthed about that right now isn't he?
Porter Stansberry: Doesn't matter. It doesn't matter.
Aaron Brabham: No, it doesn't matter.
Porter Stansberry: He's gonna use all that oil. Now, what I love so much, Aaron, is that when I say these things, people tell me I'm crazy. Okay? But then guess what happens?
Aaron Brabham: It happens.
Porter Stansberry: Yeah. I've been saying since 2006 that there would be a renaissance in oil production and the US would be the leader. Since '06. "Aw, you're crazy. It's peak oil. We're gonna run out of oil." What's crazier – to believe that technology and innovation can solve a short-term supply issue, or to believe that actually we're all heading into a Malthusian crisis? 'Cause how do all those Malthusian predictions go so far?
Aaron Brabham: Haven't worked out.
Porter Stansberry: Yeah. And then how unusual is it to believe that the head of the political organization where there is a enormous energy boom is likely to extend his power? Sounds crazy, right? But isn't that exactly what happened in Russia? Wasn't oil production what powered Putin to keep hold of power? What happened in Venezuela? What happened in Argentina? All the same. Oil and gas was what kept the Kirchners in power. It's what kept – what was the guy in Caracas, the crazy guy? Chavez, right? And then what about in the US? "We don't have strong men in the US." Oh, really? We don’t?
Aaron Brabham: The Roosevelts.
Porter Stansberry: Well, who was the first person who ran for a third term for President?
Aaron Brabham: Teddy.
Porter Stansberry: Teddy. And what happened during his administration?
Aaron Brabham: He had one of the biggest – the biggest boom at the time in history.
Porter Stansberry: Spindletop.
Aaron Brabham: Spindletop.
Porter Stansberry: You might have heard of it, right? And then what happened with Franklin Delano Roosevelt, who did win a third term and a fourth a term? East Texas.
Aaron Brabham: East Texas.
Porter Stansberry: The largest oil field in the history of the United States, even to this date. So when you've got huge increases in oil production, you have enormous revenues pouring into the Interior Department, and you have very aggressive presidents who seek to extend their tenure. Now, is Obama gonna change the Constitution and actually run for president? I doubt it. He doesn't have to do that to stay in power, though. He just has to appoint someone to replace him and then buy all the next election. And you don't think he will do that? I think you're crazy.
Aaron Brabham: He's already got the percentage of the votes on the dole. He's gonna get it.
Porter Stansberry: And that's exactly what he's gonna do.
Aaron Brabham: He's gonna get it. He's gonna get it.
Porter Stansberry: The question is, is who is he gonna pick?
Aaron Brabham: Yeah. Who does he want?
Porter Stansberry: Is he gonna endorse Hillary?
Aaron Brabham: It might be Hillary. They endorsed him. He might do it.
Porter Stansberry: You know what? I don't think so. I think that Hillary's political organization and his political organization are more separate than the same. I could be wrong; I'm not a political expert. But I think he's gonna pick someone who's clearly his appointee, who will clearly do his bidding.
Aaron Brabham: Great. And others ___ corrupt.
Porter Stansberry: Eric Holder?
Aaron Brabham: Yeah. Someone super corrupt that is –
Porter Stansberry: Yeah. Eric Holder maybe?
Aaron Brabham: – clearly looking for power.
Porter Stansberry: Or maybe somebody – I don't know – maybe someone we haven't thought of yet.
Aaron Brabham: On the oil thing, you know when I was overseas I was reading an article on the Financial Times.
Porter Stansberry: Oh, guess who's not gonna win the next presidential election.
Aaron Brabham: Republicans not. There's zero chance of that.
Porter Stansberry: These people – they couldn't run a hot dog stand. They're so completely confounded and they're so divided, right? So you've got half the Republicans who just believe in big business and big military and they think that Snowden is a criminal, all this stuff, right? And then the other half of the people who are conservative are actually conservative and they want the government to get the hell out of their lives, get the hell out of their phone calls.
Aaron Brabham: And that doesn't work.
Porter Stansberry: Get the hell out of their pocketbook.
Aaron Brabham: No chance.
Porter Stansberry: It's awesome just watching them destroy themselves. I love it. I love it because, for so long, people thought Republicans were conservatives. It couldn't be further from the truth.
Aaron Brabham: No. During that Paul Ryan thing where he was gloating on TV, he must have said in a 2-minute clip 12 times Republicans just didn't want to cut the military; we just need to keep the military intact. It's very important for protecting our freedoms.
Porter Stansberry: Yeah. We're conservative, so we're gonna spend more money and go into more debt. Isn't that conservative?
Aaron Brabham: Yeah, it's great.
Porter Stansberry: How easy would it be, by the way, to be a Democratic political consultant guy?
Aaron Brabham: I think it'd be pretty easy.
Porter Stansberry: It'd be awesome. You could just point to the Republican and you can say, "They're not for less government. They're for more government, the kind of government that listens to you, that stalks you, that kills people, that destroys things and hates the environment." Right? "They're the evil white guy. Don't vote for them."
Aaron Brabham: Oh, absolutely.
Porter Stansberry: Vote for me. I'm the actual – I'm the guy here that's gonna cut the budget. I'm gonna make America a safer, better, kinder place. And I'm gonna send you a gas card.
Aaron Brabham: Yeah. Plus they have the whole liberally social issue working in their favor.
Porter Stansberry: Sure.
Aaron Brabham: You know?
Porter Stansberry: Me, I'm gonna make sure you get a higher minimum wage.
Aaron Brabham: With those other guys, they're gonna make you pray. They're gonna bring God into your house.
Porter Stansberry: Right. Exactly.
Aaron Brabham: I mean they could vilify.
Porter Stansberry: Oh, it's easy.
Aaron Brabham: They're not doing a good job of it, though, 'cause they could just hammer them. Actually, they don't need to. You called it. So much infighting, it doesn't even matter right now.
Porter Stansberry: It's easy. And the thing is, is that it's so – you know, the Democrats, they don't have to pretend to be something that they're not. They want more government to do more for the voters. They're gonna give everybody the Treasury. Who's not gonna vote for that?
That's a good point. All right, let's go to some e-mails. Of course, listeners, you can always send us feedback, [email protected]
Haven't had that many calls lately. We've had a few. We'll probably get some more voice mails next week. 855-727-2346. It's always available, always open. So let's get to the e-mails. We continue to receive a ton of feedback – actually, almost too much feedback, Porter – from your social security being a Ponzi scheme. I know that I forwarded several of them to you, and it seems that our audience is full of "I agree with you on social security, Porter, but –"
Porter Stansberry: "But." They got a lot of "buts."
Aaron Brabham: A lot of "buts." "I paid in. I deserve to get my money back."
Porter Stansberry: No, you didn't. You didn't.
Aaron Brabham: I wouldn't be able to –
Porter Stansberry: That's the whole thing: you didn't pay in, okay? That's the meaning of a Ponzi scheme.
Aaron Brabham: "But, Porter, that's what they told me. They told me this was for retirement." This is what we see on the feedback.
Porter Stansberry: Look, it doesn't matter what they told you. You had to pay it. It was the law. It's the law.
Aaron Brabham: It's a tax. The law.
Porter Stansberry: I got it that paying for it isn't an option. I have to pay for it. I pay for it for all my employees. I pay for it for myself. Okay? But I don't have to file to collect it. I don't have to be a part of the scheme. I don't have to deliberately steal and rob from the next generation of Americans. I'm under no obligation to participate as a recipient. And I'm telling you that if you want to have the only logical, moral position, that you should not take from Social Security, because it is a – you can't claim ignorance.
You can't claim that you don't know that it's not bankrupt. You can't claim that you don't know that you're gonna be receiving far more, on average, you're gonna be receiving far more than you ever put into it, and that all the difference is gonna come from the other folks who are getting robbed now. So you have to make a decision for yourself. Do you want to be part of the problem, or do you want to tell the government, "No, you can't co-opt me into your crime"?
Aaron Brabham: Yep. So keep sending your feedback, everybody. Sean has a question about orders. This is a very basic question, but we get it sometimes. Do you ever place market orders on stocks?
Porter Stansberry: No.
Aaron Brabham: Okay. And his other question –
Porter Stansberry: Hold on. This is the thing that kills me about this. Do you ever go to the grocery store and place a market order? Do you ever walk –?
Aaron Brabham: No. I know exactly what I'm gonna pay.
Porter Stansberry: Do you ever walk up to the meat counter and say, "Give me ten pounds of tenderloin"?
Aaron Brabham: At whatever – what's your range?
Porter Stansberry: No. You don't ever do that. You say, "How much is the tenderloin today?" Oh, it's $7.00 a pound. "Okay, then give me five pounds." These kind of questions, they drive me nuts. And they tell me that these people should absolutely, positively not be investing their own money. They should be with a full service broker at the very least.
Aaron Brabham: Mike has a question. He's a recent college grad. He says, "What is going to happen when the student loan bubble pops?" But I actually – I want to know what is it going to take for that to pop?
Porter Stansberry: I don't even know where to start with this one. What's gonna happen when the student loan bubble pops is that none of the people who are guaranteeing these loans are gonna get paid. And guess who all the guarantors of the loans are.
Aaron Brabham: Government.
Porter Stansberry: The government. So what's gonna happen? It's gonna be huge losses and the government's gonna paper them over by printing more money. So what's really gonna happen is the average American's gonna earn less because inflation's gonna eat away his wages. That's what's literally gonna happen. All these loans have been socialized. No private lender would make these loans, period. That's what's gonna happen.
Now, the worst part is that the laws are set up so that the students can't get rid of these loans in bankruptcy, so you've got a double problem 'cause you're gonna have a nonperforming loan that the government has to paper over, and then you're gonna have a student who can never get any other additional kind of credit and is always going to be officially outside the banking system because they're never gonna be able to pay these things back.
So you've got the worst of both worlds. It's kind of like when General Motors didn't actually go through bankruptcy. You've just got this zombie company, right, that really shouldn't have been able to get credit again, but did – which is shocking. Anyway, that's just – this is the worst possible outcome.
Aaron Brabham: Yeah. On a side note, driving to Atlantic City the other day, there's a beautiful new Sallie Mae building they're building.
Porter Stansberry: Oh, what a shock.
Aaron Brabham: I mean it was gorgeous.
Porter Stansberry: What a shock.
Aaron Brabham: I know.
Porter Stansberry: So the government builds – you see buildings everywhere? Well, that's shovel ready, Aaron. Those are shovel ready projects.
Aaron Brabham: We're getting jobs. We're creating jobs out there.
Porter Stansberry: It's jobs. It's jobs. That's right.
Aaron Brabham: They had to do it anyways.
Porter Stansberry: The other thing that's bad about – but people don't understand this about credit, so they think, "Oh, the government's great. They gave me a loan so I can go to school." All they really did, all they're doing by creating all that credit is greatly inflating the demand for expensive education. So instead of going to the local community college and paying $50.00 a credit hour and working your way through school, which is what I did –
Aaron Brabham: It's what I did.
Porter Stansberry: It's what Aaron did, right? Now, instead, people are gonna borrow $80,000.00 and go to either a for-profit school – where their degree, in my opinion, is gonna be worth almost nothing – or go to a state school where the degree is going to be worth actually nothing. Those are your two choices. You know, for my opinion, the for-profit model has got to at least teach you something useful 'cause they're trying to sell you more classes. The state is just giving you a piece of paper. I mean I can't even tell you how poor my education was, and I went to a supposedly good public school, right?
Aaron Brabham: Right. That's right.
Porter Stansberry: The University of Florida. It was supposed to be – "Oh, you know our incoming class has an average SAT of 1250." Well, sure, the kids that come in were smart, but what about the kids who left? What about the kids who went through your program? How did they compare to anybody else? They're worthless.
Aaron Brabham: Yep. That's it. All right, Porter, well, look, we're taking off our regular show next week 'cause it is Christmas time, so we want to wish everybody happy holidays and all that good stuff.
Porter Stansberry: Happy Kwanza.
Aaron Brabham: Happy Kwanza. Happy Festivus for the rest of us.
Porter Stansberry: Festivus for the rest of us, yeah. And Hanukkah.
Porter Stansberry: Hanukkah. So we'll see you guys when we get back from the break. Have a good one.
Porter Stansberry: Bye, everybody. Have a good New Year.
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