The Truth About Private Equity and Economics

A former Managing Partner at Bain Capital, Edward Conard shares his thoughts on his friend Mitt Romney's economic ideas.

Former Bain Capital executive Ed Conard joins Stansberry Radio to discuss false economic chatter, the benefits of rising income inequality, and his friend Mitt Romney's run for President.

Porter then shares Leonardo Maugeri's latest research paper at Harvard. "OIL: The Next Revolution - The Unprecedented Upsruge of Oil Production Capacity and What It Means for the World," which can be found here: http://belfercenter.ksg.harvard.edu/publication/22144/oil.html

Another scumbag is named to the National Scumbag Registry, and Porter and Aaron respond to listener comments and voicemails.

Aaron Brabham: Welcome to another episode of Stansberry Radio. I’m Aaron Brabham. Porter, glad that you’re sitting across from me. How are you doing today?

Porter Stansberry: Good morning, everybody. Glad to be here.

Aaron Brabham: Today, we’re interviewing Edward Conard. Edward is a former managing partner of Bain Capital and is one of Mitt Romney’s closest business partners. He’s also the author of Unintended Consequences: Why Everything You’ve Been Told About the Economy is Wrong. We’ll bring him on in about ten minutes. Porter, we’ve been receiving a lot of feedback from our listeners. Look, last week with that show, you know, the why atheists can’t be real Americans.

Porter Stansberry: Yeah.

Aaron Brabham: We’ve officially out of the religion business.

Porter Stansberry: Yes. We gotta get out of it.

Aaron Brabham: I mean, look, you guys have spoken. We have listened. And blown up our mailboxes and our phone lines.

Porter Stansberry: And we’re going to go to church. Both of us.

Aaron Brabham: I’m kind of convinced that I might need to reevaluate my life a little bit. Even though I’m healthy. Maybe I need to get that spiritual aspect under control.

Porter Stansberry: My favorite is the people who threatened to kill us if we don’t believe in God.

Aaron Brabham: Yeah. The ones that are, when you’re burning in hell that’s when you’ll realize you were wrong. I love those.

Porter Stansberry: Such a charitable view.

Aaron Brabham: We’re not going to go down this road.

Porter Stansberry: All right. We’re not going down that path.

Aaron Brabham: All right. So guys, if you have any feedback, always email us at feedback@stansberryradio.com. Go to the website.

Porter Stansberry: Oh, there’s one more thing I have to say about it though.

Aaron Brabham: Okay. Of course.

Porter Stansberry: There’s just one more. We got a lot of accusations of arrogance.

Aaron Brabham: Yes.

Porter Stansberry: It’s so arrogant for you to say that you don’t believe in God or to mock this guy who was saying things like disease is caused by sin. If you don’t believe in God you’re not a real American. I personally think those statements are far more arrogant and offensive. Because as I say, God doesn’t whisper in my ear. It’s an admission of ignorance not a statement of certainty. I think it’s far more arrogant to say that there is a God and that you know how he feels or what He thinks than for me to say I don’t know. I’m trying to be rational in my choices. I’m trying to lead a life of empiricism. And I recognize that my understanding will always be incomplete. I don’t see how that’s arrogant. I think it’s actually very humble.

Aaron Brabham: On that note, feel free to call our hotline. 855-SARadio. That’s 855-727-2346.

Porter Stansberry: And we’ll never mention religion again on this program.

Aaron Brabham: Well, that’s not true. You know we will.

Porter Stansberry: Ever.

Aaron Brabham: But –

Porter Stansberry: Because Arbitron–

Aaron Brabham: We’re going to try not to attract religious guests.

Porter Stansberry: Arbitron says that our seven listeners have fallen off.

Aaron Brabham: We’re down to four.

Porter Stansberry: We’re down to four.

Aaron Brabham: And they sent in comments saying, “Hey, we liked it. It was refreshing. We may not agree with it.” Whatever. Porter, before we get to our guest we have a couple of minutes. I want to get your take on this. And I saw it today. This irks me. So, Barclays to pay $400,000,000.00 plus to settle charges that it attempted to manipulate and made false reports related to setting key global interests rates for the LIBOR.

Porter Stansberry: So, you’re telling me that there is a large bank that was conducting some kind of fraudulent or illicit activity to benefit itself at the expense of society.

Aaron Brabham: Yes. And I know for you this sounds absolutely normal.

Porter Stansberry: I am shocked.

Aaron Brabham: Here’s what bothered me about it. I remember when I worked at the mortgage company. We had all day loans.

Porter Stansberry: All set by LIBOR.

Aaron Brabham: Exactly.

Porter Stansberry: Of course, this determines what people pay on their mortgages every month. And this company is gaming that system illegally in order to increase their own profits at the expense of everybody else in the universe.

Aaron Brabham: Slap on the wrist. Pay a $400,000,000.00 fine, which is nothing.

Porter Stansberry: Nothing.

Aaron Brabham: At all. And by the way –

Porter Stansberry: Trade profits from last week.

Aaron Brabham: And every homeowner got hosed. Screwed. They’re not going to get anything back.

Porter Stansberry: No.

Aaron Brabham: They paid a ton of money to interest and it was just a game.

Porter Stansberry: But also, when you hear something in finance that just doesn’t make any sense, then don’t do it. So, for example, I’m agreeing to pay back a loan. Okay. That’s fine. That makes sense. I understand that. I borrowed the money. I pay it back. I’m agreeing to pay it back according to a rate that’s determined by the London Interbank Offered Rate, LIBOR. Well, what the heck does the cost of money in London have to do with the mortgage in Miami?

Aaron Brabham: Yeah, I agree with you. When I was writing loans –

Porter Stansberry: It makes no sense.

Aaron Brabham: It was ridiculous. I remember when I first loaned, when I lived in Houston, was a loan that was a variable rate tied to the 11th District of San Francisco Bank. And I was like, why. This is the most ridiculous thing.

Porter Stansberry: I can’t stand the big banks. I don’t know why anyone does business with them. I have said this about Goldman and JP Morgan and Morgan Stanley for at least a decade, ever since I understood what business they are really in, which is screwing their own customers. I’ve said it and said it and said it and said it. Of course, it makes no difference. People still contact me all the time. Gee whiz, Porter. I had a trust from my grandfather that was being managed by JP Morgan and I don’t know what to do because it’s gone from $3,000,000.00 to $300,000.00.

Well, first thing you shouldn’t have done is let these people in New York manage your money. It’s just stupid. It doesn’t make any sense. So now what do we do? Who cares now? It’s only $300,000.00. You might as well just go to Vegas and have a good time. But the other thing is for common, everyday people, don’t do things, do not agree to things that don’t make any sense to you. Don’t sign a contract that says I’m going to pay you back according to the London Interbank Offered Rate. Because I don’t know what that is. And by the way, neither do you, broker. You can’t tell me what that is.

Aaron Brabham: It’s a fact. I could explain it very well to him but as far as how they came up with the interest rates, it’s like a conglomerate of banks overseas. I don’t have any idea how they operate.

Porter Stansberry: So, don’t do it. That’s my advice to people. Do not sign contracts. Do not agree to terms that you do not understand. And if you will follow that rule, then you don’t have to worry about the shenanigans of these big banks.

Aaron Brabham: Now what Porter is not saying is don’t bother to learn how to be a good investor.

Porter Stansberry: Oh, I’m not saying that. It’s easy for me to understand what the London Interbank Offered Rate is. I can do the research and I can understand it. But what I can’t – and I have and I do know what it is. But what I can’t figure out is how that makes any sense for me to borrow against. That does not make any sense.

Aaron Brabham: No, it doesn’t. It doesn’t make any sense at all.

Porter Stansberry: If I’m going to borrow money in the United States, why would you not set my interest rate to whatever the prime rate is at the average of the 20 largest banks in the State of Florida, if I’m in Florida? Or in Tennessee, if I’m in Tennessee. Why wouldn’t your variable rate be tied to the variable rate of the economy where you exist?

Aaron Brabham: Let’s see. Because Barclays was buying these mortgages and therefore they wanted the LIBOR in because they could manipulate it.

Porter Stansberry: Exactly.

Aaron Brabham: That’s exactly why.

Porter Stansberry: Duh.

Aaron Brabham: Yeah. Exactly. All right, Porter. We’ve got our guest. Let’s go to Edward Conard now.

Porter Stansberry: Edward, hi. It’s Porter Stansberry. Thanks for being on our show.

Edward Conard: Hi. Thank you. Thank you for having me.

Porter Stansberry: Is it common to call you Edward or do you go by Ed?

Edward Conard: Ed.

Porter Stansberry: Okay. Very good. We’ll follow that then. So, Ed, I want to jump right into it. I know you’ve got a book coming out about all the stuff in economics that we’ve been taught, that’s wrong. What’s the main thing that most people believe about the way money and finance works that’s incorrect?

Edward Conard: Well, there’s many places I could start. I could start talking about the difference between the 1950’s and today, which has led to a lot of debate about income inequality. Or I could talk about the financial crisis and how I think people have got it wrong in the financial crisis.

Porter Stansberry: I like both those topics.

Edward Conard: I’m going to ask you where you’d like to start.

Porter Stansberry: I like both those topics. I’ve done a lot of work, myself, on income inequality. And I was the guy who led the heckling of boos when Steven Ratner got up at the big hedge fund conference a couple years ago and complained about income inequality to a bunch of real capitalists. So, he deserved –

Edward Conard: Maybe I should start there then.

Porter Stansberry: Yeah. Let’s talk about that. Why has income inequality gone up so much over the last 40 years? What’s your take?

Edward Conard: Yes. I think people don’t understand. I think in business you realize that even though there’s generalizable theory that circumstances are more important and that they, in some ways, overwhelm the application of the theory. People don’t recognize the difference between the economy of the 1950’s and the economy today. And why that has led to an increase in income inequality that we see. Think about the economy in the 1950’s. There was really two characteristics, two groups of characteristics, if you will, that make it very different than today.

One is there was 20 years of underinvestment from the Great Depression and the Second World War. There was a shortage of workers because there was a burst in the Great Depression. And then we killed a half a million men with a workforce that was half the size. We bombed the whole world’s infrastructure. We knitted our markets together with roads and television and created an enormous mass market before the rest of the world did.

And we educated our whole workforce with college because we had educated them in high school before the rest of the world. And so we had a unique set of advantages in the 1950’s and the 1960’s, which eventually was lost in the 70’s and 80’s as the rest of the world caught up to us. And the growth of that economy slowed down significantly. But I would say, for the sake of mankind, let’s hope a lot of those conditions aren’t repeated today. So, it’s a much more competitive economy.

The second thing you see is that that economy was a very manufacturing based economy that was capitalizing on the value of mass marketed goods. Think about automobiles. You need companies like Ford Motor Company. Big automotive manufacturing industry. You need Exxon to harvest the world’s oil. You have to pave a million miles of roads. You have to build 250,000,000 cars. That’s the era of big companies, big business, individuals matter less, large scale investments, funding investments is important, risk taking, and innovation is less important. You’re really just building capacity to meet demand. That economy slowed down in the 70’s and 80’s. We transitioned to a service economy because we’re in a world with a $1.00 an hour labor. That’s a much more entrepreneurial small business economy.

We can look at Europe and Japan and see that that economy slows down as well as it matures. And we alone have pumped up this economy with innovation since the commercialization of the internet. And so today 13 people can create Instagram, a billion dollars of value, in two years. We have singularly, relative to Europe and Japan, been the only economy that’s been able to harvest those unrealized investment opportunities. And it really becomes a question of innovation being a game of chance. You need lots of failure to find a little bit of success. Those successes are enormously valuable.

And what does it take to motivate people to take that kind of risks that produce the innovation that we see today. We see that Europe and Japan have been unsuccessful at doing this. We employed 40,000,000 people since the 1980’s. On a base of 100,000,000 workers, that’s a 40 percent increase. The rest of the world, Europe and Japan, have grown 15 to 20 percent. We brought 20,000,000 immigrants into our country. Provided our families with jobs. Educated our children. We put tens of millions of people to work off shore.

No other economy has done more for the middle class and the working poor than this economy, than the U.S. economy. No other high wage economy, anyway, had more for the working poor and the middle class. And yet, we look and say, geez, we don’t understand why there’s been a change in the distribution of income between today and the 1950’s when circumstances have changed radically today versus then.

Porter Stansberry: I agree with all of that. There’s one part of this that, I think, irks people that is harder to answer in the context of the reply you gave. And that is I don’t think people really would care so much about income inequality if real wages in America had been going up over the last 30, 40 years. And as you know, they really haven’t. After taxes, after inflation –

Edward Conard: Well, I think if you look at the data you see a little bit of a difference there.

Porter Stansberry: Have been stagnated down for 40 years. So, if the things you’re saying were – if it led to a general increase in the standard of living in addition to leading to vast wealth for a few, I think people in America would be more relaxed about this issue. But there’s one part of it that given your role in private equity, especially, I think you should speak to; and that is the key difference for the last 40 years has been the role of credit expansion and the role of inflation. And it certainly is easier for the very rich to leverage assets, to leverage things with credit in a way that allows them to capitalize on inflation while the average worker just loses to inflation.

Edward Conard: Well, let me take that question in a second and go back to what you started with, which is what has happened to middle class wages. Because I think it’s very important and you make, I think, a very good point. But if you look at the Pickade and Sayas data, which is what you’re really quoting from and the media has quoted extensively from. You find that it makes three peculiar assumptions that need to be adjusted and are adjusted by the Census Department and by economists who have looked at the data, including economists who have been refereed by those guys and published in serious economic journals.

The first is that you can’t look at tax units. You have to look at households. Because if people get divorced you end up with two households instead of one. And the household income goes down by half. But nothing has really changed except the people have gotten divorced. So, you have to look at families, the households, to adjust them for the number of people not tax PP units.

The second thing you have to look at is non-tax benefits. So, there’s been a huge increase in healthcare costs. A lot of that is paid by either the government or by employers. It’s not paid by employees and their wages. And it’s not counted in those numbers because it’s taxable numbers. And the third is you have to look at taxes, how much people are actually paying in taxes. Because the U.S. has a much more progressive tax system than Europe and Japan has. The people of the south are paying a much higher percentage of the taxes and a much higher proportion of the taxes relative to their proportion of income.

When you make those three adjustments, median household income has grown 67 percent over the last 25 years-ish, 25 to 30 years, versus the Pickade and Sayas numbers, which would say three percent. And I make an adjustment in my book which also says there’s been a demographic shift in our workforce, relative to the workforces of other countries. So, we’ve had a lot of Hispanic immigrants who don’t have high school educations, are younger, on average, than the population, don’t have great English skills, are really just entering into our workforce.

They, obviously, are earning below the median wage. Every time we get a worker below, that pushes another worker above the median wage, which pushes the median wage down just algebraically. As well, you have a lot of working women who have entered the workforce. Who come in and out of the workforce because they also have to care for their children, their families, priority –

Porter Stansberry: That was a fantastic answer and I hadn’t thought about many of those things.

Edward Conard: And that has a 30 percent effect, not counting the healthcare.

Porter Stansberry: I’ll concede that the numbers are not accurately representative of the average experience of Americans over the last 40 years. I would say that with a little asterisks. There’s a lot of other measures, for example, like the average age of cars on the road and things like that that show there has been a stagnant standard of living. But I’ll go ahead and concede if you’ll get to the point about the role of inflation and credit availability.

Edward Conard: Yes. Okay. I think we’re really in some ways talking about the financial crisis. Prior to the financial crisis, we ran very large trade deficits, up to about six percent of GDP. And the Chinese are very big savers and they’re very risk adverse savers. They want to buy government guaranteed debt from the U.S. They don’t want to buy our goods. They want to buy our assets. They want to buy government guaranteed debt. That pushes risk adverse savers, who otherwise would have bought that debt into the private sector. And they shorten up their duration of savings. They want overnight, on-demand liquidity.

And so we end up with a lot of bank deposits, largely institutional bank deposits in money center banks, which are the banks that put those kinds of deposits to work. And so we have had this surplus, if you will, of risk averse, short term savings. And those savings have to get recycled back into the economy in order for us to be able to achieve full employment. And I think those have been recycled in two ways. They’ve been recycled in business loans and working capital loans and things like that. There’s been a lot more business investment.

There’s been a lot less dividends that have been paid out from companies. So there’s been a lot of funding of business investment that’s gone along, indirectly, as a result of that. And I think that it’s true that the owners of businesses have been the beneficiaries of that. But keep in mind that real estate, for example, captures a lot of the value from business investment. Because as wages go up, as earnings go up, as wealth goes up, so does the value of housing. We saw the value of U.S. housing rise. It didn’t rise much relative to the rest of the world’s family household income, if you will.

But we saw that rise worldwide as a result of real estate capturing a lot of that value. The second place were those savings really were used were in sub-prime finance. Which is we went to people with bad credit ratings and their housing went up 30 percent. We said how would you like to withdraw the equity from your house and spend it on consumption. And they felt like they hit the lottery and recirculate a lot of that money back into the economy.

Porter Stansberry: I love it. I love those folks who use their house as an ATM machine for 15 years and then claim that someone took their house away from them.

Edward Conard: Keep in mind, also –

Porter Stansberry: How do you think that happened, buddy? Who do you think really owns your home?

Edward Conard: Yes. I think there’s a lot of truth to that. But there’s also the case – and keep in mind there’s another part of this equation, which is people think the banks were making no money down loans to homeowners. And from the homeowner’s perspective, that’s true. But in securitizations, about 20 to 30 percent of the tranche are subordinated at the AAA tranche. That’s what makes something AAA. It’s 20 to 30 percent over collateral. And so through securitization, we found investors to make the homeowners down payment on behalf of the homeowner. And so from a AAA tranche, it didn’t really matter whether the homeowner made a 20 percent down payment or a subordinated lender made the 20 percent down payment.

Porter Stansberry: A hedge fund.

Edward Conard: Either way, the AAA tranche was protected from a 20 percent drop in real estate price.

Aaron Brabham: It was my friend, John Devaney, Key Biscayne making the down payments for them. Didn’t work out so well for him.

Edward Conard: That’s right. There was a 30 percent drop in real estate prices. There’s been about $300,000,000,000.00 of loses. But there’s been about $1.5 trillion dollars of withdrawals out of the banking system, despite the fact that there was $15,000,000,000.00 to $20,000,000,000.00 of government guarantees. Had the guarantees had been smaller the withdrawals would have been much larger.

Porter Stansberry: We have talked about these issues with our audience for many years. So, none of this is going to be surprising to them. But I want to focus in on one narrow aspect of the paper money and easy credit system that we have in the United States. There are certainly many advantages to it. I’m not ignoring the fact that really, in all intents and purposes, there’s unlimited credit available to the well-connected and the well collateralized in the United States. And that can be a good thing because at leads to higher rates of economic growth.

It leads to, as you said, the possibility of full employment. There are lots of positives. I understand that. But think about it from the perspective of the average blue collar worker. I have a very nice home on the Collins Canal in Miami, in South Beach. It’s about a $5,000,000.00 property. And since I bought it in cash I can go out to the bank right now and I can get at least $2,500,000.00 in a mortgage that will cost me less than four percent a year to carry. Meanwhile, I can go in the market right now and I can do a couple things privately.

But just for an example, publically, I can go to annually and I can get 14 percent a year through a leveraged loan business. Right? So, simple carry trade – this is a very, very simple example. But I can be making $600,000.00, $700,000.00, $800,000.00 a year. No problem. Risk free. I’ve got security I can sell immediately. And I’ve got long term fixed note loan. I’ve got free income just because the Fed has manipulated rates so low on the short term and there’s so much money to be made in these kinds of trades. Don’t you think that that plays a role in the large and growing amount of income inequality between people who are financially astute and have collateral and those who aren’t and don’t?

Edward Conard: Well, I think the quick answer to that is yes. How could it not be? But I would say this, think about what the Fed is doing. They dropped the short term interest rate to zero. They flooded the market with short term debt. And they’re daring anybody to use that short term debt. And you’re describing a scenario where, in fact, you use it. But what’s really happening in our economy is people woke up in 2009 and said there’s enormous risk of damage from withdrawals of that short term money from the banking system. And a lot of that money now sits idle, unused to protect the economy from that damage.

Corporations are holding a lot more money sitting idle, which is in part why the long term rates are low. But people are holding a lot of that money sitting idle. The banks are reluctant to lend that money. Unless we recirculate that money back into the economy, we will end up with slower growth, higher unemployment. And I wouldn’t describe it as – the Fed just can’t create an unlimited amount of credit. What tends to happen is you have the money supply, you have the velocity of money and you have the pricing of goods. So, as they inflate the money supply, it’s true that the interest rate might go down.

But either the velocity slows down, which is what’s happened or the prices would have to rise in order to equalorate because at the end of the day, underneath is a real economy that’s producing real goods. But what they have done is they have said, we will flood the market with cheap credit and we’ll dare anybody to use this hair triggered money, as if nobody learned their lesson. The money sits idle, unused. The velocity slowed way down, if you will. And we end up with lousy growth and high unemployment.

Porter Stansberry: I have a question on that. Not a debate point but a sincere question. Do you think that the overall leverage level of the U.S. economy – I’m tracking total debt to GDP in America at about 376 percent. And that is, of course, off the charts, historically. Do you think that plays a role in the market place’s reluctance to put the cheap credit to work?

Edward Conard: I would say no.

Porter Stansberry: Surprising answer.

Edward Conard: I do address that number in the book. I think you have to be very careful with that number because there’s a lot of double counting. What it used to be, the depositor would put money in the bank. The bank made you a mortgage. Now it goes through many chains in the chain of mediation.

Porter Stansberry: But still, even so –

Edward Conard: You’re counting up all the debt but you’re not counting up all the assets on the other side of that trade. Debt has risen but not as much as it appears to have risen. If you look at the cost of debt – because the interest rates are low and have fallen since the early 1980’s – the actual cost of that debt, it’s about a 10 to 15 percent increase, not the increase that you’re actually describing. Because I think you’re describing with a set of numbers which are a little bit distorted.

Porter Stansberry: But surely you wouldn’t disagree that the U.S. economy has become far more leveraged over the last 30 years.

Edward Conard: I wouldn’t disagree with that. But think about what leverage is. I would caution this, is that finance does not trump the laws of physics. We cannot bring anything back from the future.

Porter Stansberry: You know they’re trying to do that with solar energy. It’s not working out too well for them.

Edward Conard: My point being, though, that even though you can create credit, underneath it all you have real savings. And the money is just in accounting. You’re maybe just saying there’s too much savings and I think there is too much risk over savings, if you will, and a shortage of equity. But I don’t think that the government is able to just get the economy to level up, if you will. What really happens is one of two things. One is that you grow assets relative to GDP. If you’ll look at the stock market, it’s about 100 to 125 percent of GDP. And historically, it’s been 40 to 60 percent of GDP. When the future cash flows are greater, you can split those cash flows into equity and debt.

Debt being what’s paid back first. Equity, what’s paid back later. And you could sell the debt to risk adverse savers if they’re available to buy it. And you can increase the amount of leverage. But you do that by increasing the amount of future cash flows or what people perceive as the value of the future cash flows, if you will. I don’t see why there’s any problem to splitting the future cash flows into debt and equity. And as a result, have debt rise relative to the GDP. When, in fact, assets, future cash flows and that present value future cash flows have also risen relative to GDP.

Porter Stansberry: Ed, its fantastic talking to you. Because, seriously, only someone who has spent a lifetime in private equity would be able to think that quickly about all these issues and speak so coherently about it. That was great. Let me throw one fly in your ointment that’s market based. Because you and I can have disagreements about whether or not there’s too much debt and the impact it has on the market sentiment. And obviously, you’re technically correct in all of the things you are saying, which I certainly recognize.

I’m not arguing with you about that. That would be a complete waste of time. But what about this fact? I find this fact to be a little bit troubling and it’s market-based. Since ’08, if you look at where credit is growing, it’s only growing in really two large categories. And that is it’s growing in student loans tremendously. And it’s growing at the federal level. And I would tell you that I think that those are the weakest borrowers in our economy.

Edward Conard: I’m not sure that would agree that they’re the weakest borrowers. But I would agree with you 100 percent, which is that the private sector is not willing to take risks, is not willing to recirculate the risk adverse savings. And the government philosophy has been to step in and do it themselves on the hope that will reenergize our economy. I think you would probably agree with me that there’s little chance that that’s going to do anything for our economy because that money is not really spent productively. And even in the case of student loans, as we give students more and more money all that happens –

Porter Stansberry: It just causes the price of college to go up.

Edward Conard: It just raises tuition higher and higher.

Porter Stansberry: Same thing with what’s going on in healthcare.

Edward Conard: And so the kids end up with more debt but the same education.

Porter Stansberry: Yeah. It’s silly.

Edward Conard: Professors have more money in their pocket. Has that increased our economy or has it increased our productivity? Not a wit.

Porter Stansberry: And so – sorry. Go ahead.

Edward Conard: No, you go ahead.

Porter Stansberry: I want to move onto a couple of other points because I think we’ve hashed those things out. I have basically three more questions for you. So, let’s try to move through them. One is a tough question to answer but I’m hoping you can make it succinct for us. And that is why do you think that Mitt Romney’s past as a private equity guy is seen as being controversial or negative? Because in my experience, I’ve been in finance almost 20 years, private equity, as I say, they’re the ultimate bad asses in the investment landscape. They’re the MMA of Wall Street. They take the most risk. They have private partnerships for a very long time. And they do the best job. Why is that bad that he was in the uber category of financers?

Edward Conard: I think that these Obama attacks on private equity are really attacks on business generally. And I think they want to pit employees against employers. It’s old fashioned union organizing. And they want to do this under the guise that private equity is doing something different than what business is doing. But we know that all the business is trying to make companies stronger and grow them faster. And one of the tricks to this argument that they’re making is that they present that the only thing that managers are doing is working for investors. And while it’s true, it’s only half true. Because we all know that companies are really working for their customers.

Customers decide which companies are going to be successful. They decide how much they’re going to pay for a product. They decide which products they’re going to buy. And ultimately, investors are the byproduct of those decisions. It’s not as though management works directly for the investors. They work directly for the customers and trying to benefit the investors. And when you take the customer out of the equation, it looks as if the bad employers are not giving the employees as much money as they could.

Because they could give the employees an unlimited amount of money if they wanted to or an unlimited number of jobs. Or that they never had to close a plant because it was never a customer who wouldn’t buy the product that was coming out of that plant because that plant was too high cost to be competitive in the marketplace. I think that’s how the argument works. It’s been used for a long time with unionization, which is you pit the employees against the employers. And make the employers out to be the evil guys who just are greedy and stingy and won’t give you more money.

Porter Stansberry: It’s the false argument against Wal-Mart. Hey, they’re doing such a good job that they’re providing lower goods for everybody and that’s bad. Of course it makes no sense.

Edward Conard: Sure.

Porter Stansberry: It’s the same thing as a Wal-Mart argument, just made against Wall Street.

Edward Conard: I think it works the same way. Yes.

Porter Stansberry: Second question before we let you out of here. You’ve been a fantastic guest. I’m really enjoying the conversation. I know you have a background at Ford Motor.

Edward Conard: Yes.

Porter Stansberry: And I wonder, given your experiences on Wall Street and the private equity at Bain; what do you think about the government bailout of GM and Chrysler? Let me frame the question. I’m interested in your thoughts. I’m interested in knowing if you think there could have been a better outcome if the government hadn’t gotten involved?

Edward Conard: I guess I’d say two things. I think it’s always dangerous – excuse me for a second – to have a short term dislocation in the markets like we faced with the panic and the withdrawals from the banking system in 2008 and the beginning of 2009, which ended quickly in a couple of months. But that can leave permanent damage and does leave permanent damage in its wake. It could bankrupt the entire auto industry. So, do I think the responsible government would simply allow that to happen and do nothing? I think you always want to take steps which are going to optimize your long run competitiveness.

But we have to be very dangerous about the government taking any steps today because we know that nine times out of ten, they’re just like the private sector, by the way. They’re going to get it wrong except there’s no consequences in the public sector when they get it wrong. What do I think they did wrong in this case? I do think there was a role for the government, myself. I do think there was a role. But I think the very thing that makes those companies weak, which is unionization, very high wages, wages which are really just taxes on consumers who are buying the cars. Which those taxes are unsustainable when you can buy cars without union wages made in the south or made overseas.

I think that’s the very thing that makes those companies uncompetitive in the long run and makes them so fragile in a downturn. And then they exacerbated the problem by simply handing the companies over to the union labor without really taking the steps that were necessary to make those companies competitive in the long run. And that’s why they go bankrupt in the short run. Is because they’re not really competitive in the long run. Did the Obama administration fix that? No. Did they have an opportunity to fix it? They absolutely had an opportunity to fix it. So, am I very reluctant about government intervention? I’m extremely reluctant. I can see a possible role there but I think they did a terrible job in what they did.

Porter Stansberry: All right. Last question for you. I don’t know much about Bain. I know a little bit more about Blackstone. And I’m assuming that Bain has a private equity group that works in very similar ways to Blackstone. Is that correct?

Edward Conard: Yes. Of course, yes. That’s the foundation of Bain. Yes.

Porter Stansberry: The question is if Bain’s – I want to know how much skin in the game Bain’s partners had in their various private equity funds?

Edward Conard: Yes, about ten percent. If you go back, it’s been less over time because the funds have grown bigger and bigger recently. But if you go back to the 1990’s when Mitt was really involved heavily in the firm, it was over ten percent of all the money that was invested in the funds. Probably in the range of 20 percent – I have to be careful because I’m under confidentiality agreements – or checks written by the partners of Bain Capital. Then on top of that, I think you’ll discover that Bain had about three times as many employees working per dollar invested as other private equity firms at the time.

Porter Stansberry: I’m not trying to make any argument that – I’m not trying to get into the details. I’m trying to make a separate point about the big banks. I just wanted to examine, for our listeners, the way private equity works. And the way private equity works is the partners of the private equity firm put their own capital into deals. The deals that they discover and they analyze and they move forward with. And they invite other investors to invest in those deals. And then those deals are highly leveraged, which basically means they’re walking a tightrope.

If they don’t do everything right, if they don’t get everything right, those deals can blow up. And if enough deals blow up, the entire fund can blow up. And if the entire fund blows up, then the partners of Bain or of Blackstone or of KKR or of wherever firm it is, they take a huge hit. Not only do they lose cash, but as you well know, they lose reputation and then they can no longer be employed, which is a tremendous burden. Right?

Edward Conard: Yes, I think two things. Not only are they writing a check and then their pay is obviously linked to the success of the investment that they make. But the third point you make and the one that’s always overlooked is the net present value of their future cash flows, of their reputation of their business model is really what they’re putting at stake. And that’s why people want to get into the private equity business. Go try to borrow $100,000,000.00 from a bank to buy a business. See if they’ll lend it to you.

Porter Stansberry: No way.

Edward Conard: They won’t lend it to you.

Porter Stansberry: Of course.

Edward Conard: For the very reason that you’re describing. Which is they know that Bain is going to kill themselves to get that capital repaid because they have their business at stake.

Porter Stansberry: They will not default on a loan. They will not do that. The thing that I would like to point out in discussion with you is we have a continuing problem of maleficence in our large commercial banks. And the latest thing about Barclays coming out today about manipulating LIBOR; you know in your career in finance, you have seen this again and again and again and again and again. And I work on the equity side mostly. So, I remember in the early 2000’s reading these research reports and just wondering how you can even take any of this stuff seriously. You know that every big bank was accused of fraudulent investment research.

They were selling it to mom and pop individual investors who really believed that iVillage and eToys and – right? This was nothing more than fraud. And they all promised not to do it again. And, of course, they do it again and again and again and again. And you have all this constant maleficence. Even with Sarbanes Oxley, which you cannot tell me that the CEO’s of Fannie and Freddie at the very least did not criminally break Sarbanes Oxley by deliberately misrepresenting the value of their mortgage portfolios.

Edward Conard: Then they were found guilty of it, by the way. But, yes.

Porter Stansberry: But they were never charged criminally. And that was the whole point of Sarbanes Oxley. Anyways, I don’t want to digress in all this. But the point I’m trying to say is the main reason why the people at our largest financial institutions continue to allow such bad behavior in their entities is because there is no reputational risk to the entity. Right? Citigroup is still in business. Citigroup still has access to capital. Same thing with Morgan Stanley. Same thing with, you name the big bank.

Unlike private equity firms, if there is a problem, if there is fraud, if there is a blowup, their total future is on the line. Their capital. Their reputation. Their ability to function. So, what my suggestion has been constantly is why don’t we make the directors of these banks personally liable for the deposits. If you have to have a federal bailout of your depositors, sorry. You lose all your assets.

Edward Conard: I personally think it’s a bad idea and here’s why. Having run a lot of management –

Porter Stansberry: I thought I had you.

Edward Conard: As a director, I think what you discover is that managers look a lot like private equity firms. They have their reputations and their careers at stake. And if they make a mistake and they are pushed out of a company, they’re never going to get back in the game again. And so what they want to do is not take any risks. Now, I think that banks are inherently risky because you’re taking short term deposits, risk over savings, and recycling those back into long term loans. Because short term loans, financial speculation doesn’t do anything to increase employment. I think that the model is inherently risky.

And if you want highly capable people to step in and try to run those institutions, I think if you’re going to hold them as responsible as describing, I don’t think you’re going to get anybody serious to step in and take those jobs. Certainly, James Diamond, who could make a fortune running a hedge fund, much more than he’s making running that bank, is never going to run JP Morgan under those conditions. And I don’t know but I have my money in hedge funds. Most people have their deposits in banks. If I had my deposits in banks, I would want the most capable people running those institutions on my behalf. And me, with my money in a hedge fund, I say, yeah, go ahead.

Clamp down the compensation. Make it impossible for those managers. Hold them responsible for every risk that they’re exposed to. A lot of it is macro risks that they can’t get out of. And I think you’re going to have a very, very weak banking system as a result. Believe this, banks really have two risks. They face loan losses. And we got to hold them responsible for every dollar of loan loss so they don’t make unproductive loans. The second is that they have withdrawal risks. And if we hold them responsible for withdrawal risks, the money will sit on the sidelines unused.

And we will get slow growth and high unemployment. We’ve seen the movie twice before. We saw it in the 1930’s and we saw it in Japan in the 1990’s. Ten years of lousy growth and high unemployment. If you hold the banks responsible for withdrawal risks and not simply loan losses. We got to hold them responsible for loan losses and we do that with capital adequacy requirements. And we can do that with other things. I personally think that the government should be charging for the implicit guarantees that they’re making. And that they should be selling some of that insurance to the public so we can get a more accurate price. And that regulation should really be driven at bringing forward and making more visible the risks that banks are taking so that we can price that insurance more accurately.

Porter Stansberry: All right. How about this then?

Edward Conard: I think there’s a better answer, myself.

Porter Stansberry: Meet me halfway. How about the SEC requires them to make public what they’re spending on D&O insurance?

Edward Conard: Sure. I’m okay with that.

Porter Stansberry: Good. We got halfway there. We got halfway there. Because I guarantee you, if you knew that you could rank every public company in America by management risk very easily.

Edward Conard: I would say you could sort of see that because you can look at credit default swaps at all the banks. So, you can see how the market assesses the risk of each one of the different banks. And if I were the guy in charge I’d be using regulation to try to increase the visibility of those risks so that credit default swaps and other types of insurance like that are priced more accurately. And we would get the kind of signal that you’re looking for, which I think is a very important signal, by the way.

Porter Stansberry: Important signal. Let’s pimp your book. I haven’t read it yet but I’m going to go get it today and read it because I really enjoyed the conversation. You’re clearly a smart guy. By the way, has Mitt asked you if you’re interested in the VP role?

Edward Conard: No, he hasn’t. I don’t know that I’m the right guy for that job.

Porter Stansberry: I don’t want a government job either. But I’ll tell you what, if you were the vice president I would sure as hell vote for you guys.

Edward Conard: Well, thank you. Thank you. I worked hard to try to understand all this and put it into the book and try to clarify it for people. These are very sophisticated concepts that you need to understand. I’ve try to write them in plain English so that everybody can understand it if they want to take the time to learn.

Porter Stansberry: Aaron, tell the folks where to get the book.

Aaron Brabham: You can go to Amazon. Unintended consequences: Why Everything You’ve Been Told About the Economy is Wrong. And I am definitely picking up this book.

Porter Stansberry: That was a great conversation. Thanks very much.

Edward Conard: You can also go to www.edwardconard.com. Watch a lot of videotapes and radio interviews and read articles and reviews and things like that.

Aaron Brabham: We will post that link to our website.

Edward Conard: Thank you.

Aaron Brabham: You got it. Thanks for your time. We really appreciate.

Edward Conard: I appreciate it, too.

Porter Stansberry: Thanks, Ed. Come back again.

Edward Conard: Alrighty. Bye-bye.

Aaron Brabham: Everything you thought it would be? More? Less?

Porter Stansberry: I can’t find fault with anything he said. It’s very rare I argue with somebody who is that well prepared. He had me at every turn.

Aaron Brabham: I was watching your facial expressions. You had good questions. And then you would look up a lot because you were pondering all of his answers. It was so fast and so concise. You’re like, all right, I guess we’ll just move onto the next topic then and see what happens with that.

Porter Stansberry: The only thing is that he’s a very good debater. He simply ignored all the points that he couldn’t answer.

Aaron Brabham: He’s smart.

Porter Stansberry: Yeah. Very, very smart guy. I enjoyed the conversation a lot. Maybe next time we’ll get him to come and talk about which hedge funds he invests in. Because I have a feeling that readers could get a lot of good investment insight from that guy.

Aaron Brabham: Yeah. I’d like to have him back on. All right, Porter. Well, we’ve got a couple of minutes left in the show. We’re going to blast through this because we don’t want to run over 74 minutes. Because we have a listener that burns them onto a CD. And he mandated that we do it in under 74 minutes.

Porter Stansberry: Well, we’re not going to make it. I don’t think we’re going to make it today.

Aaron Brabham: No, right now we’re about 55 minutes.

Porter Stansberry: We got plenty of time.

Aaron Brabham: We got about ten minutes left.

Porter Stansberry: Hold on, though. I need a small diversion. It’s not on the schedule but I got to talk for a minute about the new report that came out from Harvard about oil supplies.

Aaron Brabham: Please do.

Porter Stansberry: Because you know I have a bet with Chris Martinson. 100 ounces of silver about whether or not America will reach a new peak in daily oil production. It’s basically a 10,000,000 barrels a day production rate in the U.S. And I’ve got ten years to win the bet. That puts us at 2022. Right?

Aaron Brabham: That’s right.

Porter Stansberry: There is a new enormous study out from a guy at the Harvard Kennedy School.

Aaron Brabham: Did you buy this, by the way, or is it free for everybody?

Porter Stansberry: It’s free.

Aaron Brabham: I’ll post that up –

Porter Stansberry: Put a link to it on Stansberry Radio.

Aaron Brabham: We should put it in the digest, too.

Porter Stansberry: And what this guy did, he was the head reserve engineer at ENI, which is the big state oil company in Italy. And his job was to understand production rates and decline rates at all of the major oil fields in the world. He has personally studied 140 of the largest oil fields in the world. And he retired from ENI and he landed at Harvard. And he published all these private databases that he built over his career. And so it’s a field by field estimate of reserves and production.

And he says America will be producing 11.3 million barrels of oil a day by 2022. I think I’m good with the bet. But more importantly, I think everyone should read this report and understand it. Because I’ve been talking about this for two years. But my window into the oil business is microscopic compared to this guys’. It’s the best exposition and the best data about soaring oil production around the world. And if you’re an oil investor, it’s a must read. So, I wanted to make sure and draw it to your attention.

Aaron Brabham: I’ll make sure to put a link in on Stansberry Radio under this episode as well as a link for the book for Ed Conard, because those are two great resources. Porter, let’s blast through this final segment. I have one nominee today for the Scumbag Registry. But I do have an update, also. I’m nominating Jesse Jackson, Jr.

Porter Stansberry: I’m seconding it.

Aaron Brabham: Are you good with that?

Porter Stansberry: Yeah. We’re good there. Yeah, he was trying to buy a Senate seat through Blago.

Aaron Brabham: You love Blago so I didn’t know if anyone tied to Blago, you still might stand up for.

Porter Stansberry: I don’t love Blago as a governor. I just love Blago as a character.

Aaron Brabham: He is a character.

Porter Stansberry: He’s like straight out of central casting for a corrupt Illinois politician. How many politicians in Illinois have been to jail in the last decade?

Aaron Brabham: All right. So, that’s a good question. I actually wrote down this. Blago was the fourth governor and one of at least 79 Illinois public officials to be found guilty of crimes since 1972. 79 found guilty.

Porter Stansberry: Found guilty.

Aaron Brabham: Found guilty. That’s the key one. 79 since ’72. Come on.

Porter Stansberry: So, what I wonder is, is it really just Illinois? Or is it just Illinois where the FBI has taken up –

Aaron Brabham: I think that’s what it is. They have offices there just to watch these guys.

Porter Stansberry: Yeah. It’s kind of like Ponzi schemes in Salt Lake City.

Aaron Brabham: It’s exactly right. Set up in the hub. Prosecute where the hub is. Porter, I do have one scumbag update. Nancy Pelosi thinks Obama should unilaterally eliminate the debt ceiling rather than negotiate with Congress to spend more money when the U.S. hits the debts ceiling this year. “I would like to see the Constitution used to protect the country’s full faith in credit as the Constitution does. The validity of the public debt of the United States shall not be questioned.”

Porter Stansberry: Well, unfortunately, she doesn’t know anything about the Constitution.

Aaron Brabham: Anything.

Porter Stansberry: Because actually it’s Congress that must approve all spending, period. And the president cannot constitutionally, unilaterally make any payments without Congress’ approval. So, she’s completely, of course, dead wrong. She’s also – it’s funny that you bring that up because I remember seeing her. She was asked by a reporter back when the public mandate for healthcare was being passed. This is the law that requires everyone in the country to buy healthcare insurance.

And a reporter stood up and asked her if she thought it was constitutional. And she acted like the guy was a complete moron. She was like, “Are you serious? Are you serious?” And, of course, now we are being told, at least the rumor in D.C. is that the public mandate and the healthcare law is going to be struck down by the Supreme Court for the very same reason that the guy was asking her. So, she has a history of not understanding anything in the Constitution.

Aaron Brabham: She’s still my favorite scumbag. I’m right there. She repeats herself over and over. You’ve got your list but she’s definitely a top one for me, a top runner. I hate the lady. She’s a witch.

Porter Stansberry: She’s just, I don’t know. I can’t generate that much animosity for her because she’s just such a bumbling fool. Somebody like Jesse Jackson that’s smart and calculating and evil, I don’t know.

Aaron Brabham: If Pelosi was a Republican, I would hate her a lot less. But the fact that she’s a Democrat and is gaming the system like crazy but yet feeding all this other information –

Porter Stansberry: I would hate her more if she was a Republican. Because if she was a republican, she ought to know better.

Aaron Brabham: Yeah, but none of them know better. That’s the thing.

Porter Stansberry: Republicans are supposed to act in the best interest of business and the best interest in the owners of the country. Right? And Democrats are supposed to act in the best interest of the workers. That’s the general gist of it. Well, of course, the fact is they all act in the best interests of themselves.

Aaron Brabham: Themselves.

Porter Stansberry: Right. But at least the Republicans ought to know better.

Aaron Brabham: That’s true.

Porter Stansberry: The Democrats are like Santa Claus. They want to give everything to everyone. They’re mostly bumbling and foolish. So they just don’t know any better.

Aaron Brabham: She’s just so two-faced that it drives me crazy.

Porter Stansberry: The Republicans do things like pass steel tariffs or run huge deficits. You know they know better.

Aaron Brabham: They definitely know better or they should know better.

Porter Stansberry: So, I hate them more.

Aaron Brabham: All right. Porter, a couple of you just can’t make this stuff up. GM’s in the news again.

Porter Stansberry: What a surprise. Shocker.

Aaron Brabham: GM is recalling more than 475,000 Chevy Cruise cars. Chevy Cruises are compact car that they use the Volt to kind of draw people into the showroom. And then they switch them to the Cruise.

Porter Stansberry: It’s the regular powered Volt. It’s Volt with a gas engine.

Aaron Brabham: Volt with a gas engine is exactly what it is.

Porter Stansberry: By the way, it costs like $22,000.00 compared to the Volt at $42,000.00.

Aaron Brabham: It’s virtually free.

Porter Stansberry: It’s not free but it just shows you –

Aaron Brabham: Well, it’s half off.

Porter Stansberry: How crazy it is to buy an electric car.

Aaron Brabham: GM knows of 30 fires caused by oil spilled onto a hot plastic shield below the engine when the oil is changed. The VP for GM said the car is safe and it’s the safe and durable car you purchased.

Porter Stansberry: It’s the safe and durable car you purchased. That’s like when Bill Bonner tells me that the newsletter is as good as any one I – I asked him about this newsletter I wrote once. And he said, “Yeah, it’s as good as anything else you’ve ever written.”

Aaron Brabham: You’re like I don’t really know what that means but okay.

Porter Stansberry: In other words, they’re telling people that the Cruise is what you thought it was, which is a piece of crap car built by a union dominated socialist experiment.

Aaron Brabham: Last week, Porter, we talked a little bit about Sears. Remember? We got in a discussion about that.

Porter Stansberry: This is another company I’m expecting great things from. Because this isn’t union dominated or socialist experiment; instead, it’s a guy from Wall Street attempting to prove how stupid he is.

Aaron Brabham: Well, I think the he might have hit the nail on the head of how stupid he can be. I’ve uncovered the niche revenue generator form. Are you ready for this?

Porter Stansberry: It’s going to save your company.

Aaron Brabham: Sears just announced Searsvacations.com.

Porter Stansberry: I can’t imagine anything that’s likely to be higher quality than a Sears' vacation.

Aaron Brabham: A travel site that offers – are you ready for this – breakthrough vacation packages that include flights, hotels, cruises and car rentals.

Porter Stansberry: Whoa. Who would have thought?

Aaron Brabham: Because nobody’s done that yet. Now here’s the kicker. It allows customers to put their vacations on layaway.

Porter Stansberry: That’s just what every resort wants. A bunch of layaway –

Aaron Brabham: Layaway that spends nothing when they get there. And the vacations can, of course, be purchased by using your Sears credit card with a 28 percent APR.

Porter Stansberry: That’s what everyone who lives in a trailer in America ought to run out and do. Purchase a Sears vacation which includes a rental car.

Aaron Brabham: Let me give you a little fun fact about Sears. This is my past life experience as a mortgage loan originator. I would say a good 80 percent of the people that we would pull credit from would have little dings that they could clear up to get their scores up so we could give them a better interest rate. In other words, so I could give them a better spread for myself. So, 80 percent of the people had Sears cards and 100 percent of those had errors.

They are the single worst reporting entity on earth guaranteed. We would laugh during consultations and be like, “Well, of course your score is 20 points lower because you have a Sears card.” And Sears is notorious for just doing a horrible job at service. No shocker. All right. Last one, Porter. The New York State Senate just passed the Public Assistance Integrity Act which will protect public assistance for welfare recipients from being used to purchase cigarettes, alcoholic beverages, lottery tickets and using your EBT card a casino ATMs and strip clubs. Just now –

Porter Stansberry: I got my EBT. Let’s go.

Aaron Brabham: By the way, that’s definitely going on the resource page.

Porter Stansberry: How about this? Out in Baltimore County there’s some crab houses I go to that are now advertising on the front of the crab house, “We accept EBT.” So, in other words, you can go spend $100.00 a dozen on crabs in Baltimore. $100.00 for crabs and put it on your ETB card. So the taxpayers can treat you to crabs.

Aaron Brabham: It’s unbelievable. I mean, literally they just now are banning using your EBT card to pull out cash, which I didn’t know you could do, at strip clubs and liquor stores. Didn’t know it was an ATM machine.

Porter Stansberry: What’s wrong with taxpayers funding strip clubs and liquor binges?

Aaron Brabham: Absolutely nothing.

Porter Stansberry: I think we should all – you know what? As an American, I have the right to Sunday afternoon liquor binges at the strip club. That’s my right. That’s in the Constitution. And Aaron, you should pay for it.

Aaron Brabham: I should.

Porter Stansberry: You should.

Aaron Brabham: I should give extra.

Porter Stansberry: Because if you don’t believe in liquor binges in strip clubs, you’re not a good American.

Aaron Brabham: By the way, Porter, you turned me onto this video. I’m going to tell everybody right now. Open a new browser. Type in Youtube.com. If you don’t know how to do that, Google YouTube, which is the same thing. And then type in, “It’s free swipe yo EBT.” It almost has a million views now. I think when you showed me it may have had like 80,000; 90,000.

Porter Stansberry: 20,000.

Aaron Brabham: Yeah. 20,000. Just watch the video. It’s the most highly produced video on YouTube that is paid for –

Porter Stansberry: It’s free, yo, it’s EBT.

Aaron Brabham: It’s free. Swipe your EBT.

Porter Stansberry: It’s all about how if you want money, all you have to do is have intercourse. But they don’t use the word intercourse. They use a different slang word.

Aaron Brabham: Watch it, guys.

Porter Stansberry: That I’m not allowed to use on the radio.

Aaron Brabham: Watch it but I think you might have to have a little warning on there.

Porter Stansberry: It’s free, yo. All you have to do is intercourse.

Aaron Brabham: Swipe your EBT. Oh, that’s right.

Porter Stansberry: That’s the lyrics.

Aaron Brabham: That’s the hook.

Porter Stansberry: It’s free, yo. All you have to do is have intercourse.

Aaron Brabham: That’s it.

Porter Stansberry: And have lots of children. You’ll like the video.

Aaron Brabham: Tim, fire up. We got a couple voicemails. And then we’ll bounce out of here.

Steve Gudail: Hi, it’s Steve Gudail. I found your broadcast enlightening as usual. The reason that I called to register my satisfaction with what you were saying and how you said it, was so you could hear the smile in my voice. I find Porter and Aaron, you guys are a total delight. And hit lines of nails up down and around the corner of the coffin of poorly considered ideas over and over. Keep doing more of it. Thoroughly enjoyable.

Porter Stansberry: He’s making me blush.

Aaron Brabham: I had to put one positive one because we had 9,000 negative ones. And I need to hear that we actually do a decent job every now and then.

Porter Stansberry: So, our four listeners must have called in using a couple different names, a couple different aliases.

Aaron Brabham: Fortunately, he’s still one of the four listeners.

Porter Stansberry: He’s one of the four listeners. We have some ex-listeners.

Aaron Brabham: All right, Tim. You got one more or is that the only one?

Bill: Hey, my name is Bill. I’m calling from Lakewood, New Jersey. I agree with they shouldn’t be able to be forced to have to pay union dues and card carrying. But in the same instance, as a shareholder, I don’t believe that the money that I invest in a corporation should be spent to fund political campaigns. Now, I believe a more fairer way would be to take away the possibility of any private money going into political campaigns and all of it being funded by the federal government. And strictly monitoring how much money is spent. And open up the airwaves to anybody who is in the race. I believe that all this money needs to get out of the campaign. We shouldn’t be having people controlling our lives. I don’t believe in being forced to paying union dues. And as a shareholder, I don’t believe that the money that I invest in a corporation should be spent on politicians.

Porter Stansberry: Okay. Fine with me.

Bill: I like your show.

Aaron Brabham: I like how you’re having a conversation with –

Bill: Thank you and have a good day.

Aaron Brabham: You, too. You have a good day.

Porter Stansberry: I just don’t want my taxes to be used to fund political campaigns either. But that’s fine with me if there was a law that says corporations can’t make political donations. Fine with me. Public companies can’t make political donations. Fine.

Aaron Brabham: Fine.

Porter Stansberry: I’d sign up for that. No problem.

Aaron Brabham: We received a Tweet from Steve. “Hey, Porter. I love the podcast. Try drinking coconut water after red wine. Should help you function the next day.” I think I’ll pick up a six-pack of that and give that a shot.

Porter Stansberry: Good insight. Good insight.

Aaron Brabham: Well, that’s our show for today. Again, we want to thank Ed Conard. He was a fantastic guest. Next week, we have Mike Mish Shedlock. He runs one of the most popular financial and economic sites on the web, Mich’s Global Economic Trend Analysis.

Porter Stansberry: Is that next week?

Aaron Brabham: That’s next week.

Porter Stansberry: That’s July 4th.

Aaron Brabham: Well, July 2nd we’re running the show but I think you’re not going to be able to make that show.

Porter Stansberry: I don’t know if I’ll be here or not. July 2nd, I can probably do it.

Aaron Brabham: It’s July 2nd. If not, we have the fantastic Dan Farris that will sit in for you. The ever optimistic Dan Farris.

Porter Stansberry: The self-flagellating Dan Farris.

Aaron Brabham: Which will be great because I can set him up for topics and just let him go nuclear on everything, which will be interesting. Thanks for listening to our show today. Go to Stansberryradio.com. Put in your email if you haven’t yet. We send you all kinds of fantastic things. Check out our mp3’s. Go to Twitter, Stansberry Radio Facebook, Stansberry Media on YouTube. We have a bunch of videos up. We also put all of our interviews up. And always, 24/7 hotline, 1-855-SA Radio. That’s 855-727-2346. If you feel like you got anything out of our podcast today, please pass it on to 1,323 people. Please.

Porter Stansberry: 1,323 people.

Aaron Brabham: Maybe it’ll stick in their head and they’ll at least forward it to one.

Porter Stansberry: That’s a good try.

Aaron Brabham: I don’t know. Bye, guys. We’ll talk to you next week.

Porter Stansberry: Ultra specific, one of the firm rules of copywriting. Hey, guys out there. Everybody out there make some money this week. Do some trades. Have a great week.

Announcer: Stansberry Radio is a purely public broadcast and is not intended to be personalized financial advice for any individual specific situation. Each individual’s financial situation is unique and Stansberry Radio should not be relied upon and/or –

[End of Audio]

The Truth About Private Equity and Economics

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