It was a dark and stormy night…when I arrived at the secretive and secluded Stansberry Alliance Conference last Wednesday evening in stunningly beautiful Sea Island, GA.
Coincidentally (or not…?), Sea Island happens to be situated right next to Jekyll Island (yes, that Jekyll Island…oh, how I would have loved to make a side trip!)
Though we did not arrive by rail in the dark of night, this is not a place that is easy to get to by any stretch of the imagination…the nearest large airports are a 90-minute drive away in either direction (from Savannah, GA or Jacksonville, FL), forcing one to rent a car and navigate the many causeways and country roads that lead to the island from the interstate.
(Luckily, as a former small-town girl from what I will affectionately refer to as “the boondocks” of Northern Michigan, this was not a problem for me, and I made it to the island in record time.)
Of course, if you have the wealth and/or the connections, there is a discreet private airport located just minutes from the resort…maybe next year!
Despite its remote location (or because of it, depending on your inclinations), it is definitely a place worth visiting if you ever have the chance. I do not use the word “stunning” lightly—my “room” (apartment) could easily have slept another 6 people, and I’m quite sure mine was at or near the bottom of the barrel!
And the service was simply fantastic, one of the few places I have been where the service was included for everything—no tipping of bellmen, waiters, hostesses, etc…a luxury in and of itself (“no Miss Susan, that’s already been included, but thank you kindly for offering”). Very nice!
This service included chauffeuring me from my “room” (apartment) to the conference facility in a golf cart at a moments’ notice, offering up the finest cognacs and cigars in the fancy cigar room, opening up after-hours pool and ping-pong rooms for us even though it was far beyond closing, and more—simply outstanding service.
Just what is the Stansberry Alliance Conference?
You may not have heard of it…it is not your “typical” investment conference and is unlike any other conference I have attended in this industry. It is a special day-long event reserved exclusively in appreciation for Stansberry’s best customers—their “Alliance” members (yes, I am one).
In all honesty, I’m not sure whether that makes me a genius or a sucker because I do not have time to read each and every publication that the Alliance publishes, but the conference was awesome and I do love their research and education (yes, I read the Friday educational essays that apparently most subscribers hate…but those are my favorites!).
The best part for me was getting to meet so many of the Stansberry editors and staff members in person—they are tremendous people (and tremendously fun!) and it was a pleasure to get to spend time with them.
Onto the event itself!
I’m quite sure as the only investor-who-also-happens-to-be-a-journalist in attendance, I am not supposed to give away all of the “secret sauce” from the event.
However, I will give you examples and ideas and areas of interest and do my best to tell you what I can without stepping on any toes, and of course if you’re interested, you can look into becoming an Alliance member yourself and I’ll see you at next year’s exotic locale!
Each of Stansberry’s editors spoke and gave their best recommendations for the future, along with several other notable industry luminaries.
Steve Sjuggerud was up first, who writes True Wealth…this publication specializes in “safe, unique investments that have been overlooked by Wall Street”. Steve is a very smart guy, a terrific writer, and I can now say a great speaker, too. He knows his stuff—he is a former stockbroker and VP of trading at a $50 million international hedge fund and holds a doctorate in finance. In other words, no slouch!
Steve’s presentation was one of my favorites for two reasons:
1. I’ve been reading his essays for years and find him to be insanely smart and insightful
2. His talk was on “The Best Investments Outside of the Stock Market” which I am always all-ears for!
Sure enough, he didn’t disappoint. Steve believes that in the coming decade you have the chance to make 3x your money in real estate, 4x your money in U.S. stocks (I might disagree with him a bit there), and 10x PLUS your money in his favorite idea now, which I will disclose to you momentarily.
Steve believes that now is the best time in American history to buy real estate. He had numerous charts to back his assertion up:
+ The typical house needs to rise by $100K in order to get above fair value
+ Today’s 3.5% mortgage rates are the lowest in recorded history, in over 100 years’ worth of rates
+ In 1980 with a 15% mortgage rate you could expect to pay $710,000 in interest payments over the life of your loan, whereas with today’s 3.5% interest rate you will expect to pay only $125,000 in interest for the same loan amount
+ Home sizes are up 39% since the 1970’s…
+ Much more
Steve believes that stocks are undervalued by as much as 75% by one important measure, the forward earnings yield compared to the 10-year US Treasury bond yield. According to this measure, Steve said that the S&P 500 fair value should be around 6,000…and that in 18 months this will be priced into the market, but today it is not.
I’m not sure I agree, but he certainly had some interesting data to support (and he is the expert finance doctorate—I am simply a lowly individual investor!).
With 1 billion consumers, India is its own market, and in particular, Steve believes that small cap Indian stocks are incredibly cheap right now. The Central Bank of India has held rates at 8% this year…(as opposed to nearly 0% everywhere else!).
India is cheap, hated, and in an uptrend…the perfect time to buy.
When does it all end?
Steve also weighed in on when it all ends (e.g. the ridiculous debt-ridden mess that we call our world economy right now…)—he said that when inflation hits 5%, look for the S&P 500 to tank. (And the U.S. to default on its debt…we can barely afford our interest payments at 0%!)
Next up was Frank Curzio, editor of Small Stock Specialist, an advisory that focuses on stocks trading for under $10, and editor of Phase 1 Investor, a very exclusive advisory that is not even included in the Alliance membership!
Frank is a fantastic and entertaining speaker and a really nice guy, and I was lucky to get to hang out with him and his equally awesome wife Karen a bit at the event.
Frank is a boots on the ground guy (my kind of editor!) and had just spent a week pounding the pavement (or rather, the oil fields) with Cactus Schroeder, whom I also met, a fascinating gentleman and a legend in the oil industry.
Frank gave us his two top picks for the speculative portion of your funds and said to be on the lookout for Nolan Watson, star CEO of Sandstorm Gold, and the former CFO of Silver Wheaton (disclosure: I own shares of Silver Wheaton), which he helped turn into a $10+ billion silver royalty streaming company (thank you, Nolan!).
He had a pick very similar to Sandstorm Gold…yet not Sandstorm Gold, and another interesting flake graphite pick. He reminded us to always ask the question, “how much money can you LOSE?” rather than what most of us tend to ask ourselves, “How much can we make?” and also advised us to buy in tranches…average in, and take profits when you have them!
So sorry, but I missed most of Jeff Clark…I had to go be interviewed myself so ducked out for a call!
Next was Joel Nagel, Founder and Managing Partner of Nagel and Associates, focused on international commercial transactions and immigration.
Joel, while seemingly an awesome guy and exceptional lawyer, gets the doom and gloom award for the conference—he put up this teensy-tiny lawyer-like spreadsheet that showed us just how AWFUL the upcoming expiring tax cuts will be for those of us in the highest tax bracket…and let me tell you, it’s not pretty.
The earned income top bracket is increasing from 35% to 40.5%, long-term capital gains taxes are increasing from 15% to 20%, qualified dividend income tax is increasing from 15% to 43.4%, investment income tax is increasing from 35% to 43.4%, the top gift and estate tax rates are increasing from 35% to 55%, and the amount that you can exclude from that has decreased from $5.12 million to only $1 million.
As for what you can do, sadly not a heck of a lot…you can focus on growth rather than income (but I’m not sure this makes sense for you other than for your tax situation) and you can look into exotic things like offshore life insurance.
Doom. And. Gloom.
David Dreman is a senior columnist for Forbes, where he has written a regularly published column called The Contrarian for 30 years. He also wrote the book (literally—we all received an autographed copy!) on Contrarian Investment Strategies: The Psychological Edge.
His main thesis is that over virtually every time period measured, stocks that were out of favor as reflected by their price/earnings multiple did significantly better than stocks considered to have more favorable outlooks.
He gave an interesting talk on the importance of Behavioral Finance (something yours truly finds immensely interesting and pertinent to becoming a good investor—hence the focus on “Master Your Mind”…) and on the powerful psychological forces that influence our decisions and tend to make us rather crappy investors.
He also proved that “out of favor” stocks (those with a low price/earnings, low price/book value, and low price/cash flow) consistently and predictably outperform the market.
(This, un-coincidentally, is the exact opposite of what and when most of us buy, by the way! The majority of us don’t get interested in say, Apple, until its share price has already climbed into the stratosphere.)
Dan writes Extreme Value, a monthly newsletter that focuses on great businesses trading at steep discounts, and is also the editor of the 12% Letter, focused on the best income opportunities in the market.
Dan recommended Sprott Resource Corp (SCP.TO) and gave a great talk on the difficult search for yield. He talked about the consistent profit margins of the popular REITS, (NLY, HTS, CIM)—they are yielding 12%, but warned that these yields will fall.
He talked about how ridiculous it is that so-called “junk” bonds, and the junk bond ETF (JNK) is only yielding 6.94%…and that is supposedly “high yield” (usually you look for “junk” bonds to be in the double-digits to pay you for the added risk you are taking).
But it’s all relative… the PB DDX yields only 3.72%, MBB yields 2.5%, the 10-year treasury is 1.81%, US Bank savings account yields 0.09%, etc. A grim picture indeed.
And it’s crazy, because bonds absolutely suck right now, and yet…investors are pouring their money into (wait for it…) bond funds!
Dan called this phenomenon “The Bovine Investor” (as in herd mentality…moo…)
He pulled up a chart from the Federal Reserve Flow of Funds (F.120) that depicted this grim fact—the billions of dollars that have poured into bond funds, and out of equity funds.
Next was Morgan Poliquin, President and CEO of Almaden Minerals. He gave a great talk on gold, but I again apologize as I was pulled into an external conversation and so missed some of his talk.
David Lashmet then gave a talk on technology, pointing out that radiocosm is the next big trend and recommending a book by George Gilder called Telecosm: The World After Bandwidth Abundance. While that sounds very interesting (who isn’t in favor of bandwidth abundance? I have super-fast Internet and still could use more bandwidth…), I’ve heard mixed reviews on George Gilder in the past, but I will have to read his new book and decide for myself!
David’s talk was great and he pointed out several interesting technology trends—we are buying 25% fewer “real” books than just 5 years ago here in the U.S…the Kindle and iPad are really impacting the market for physical books!
Next was Gavin Beekman, founding partner of Pensam Capital, which was launched in 2009 to “take advantage of opportunities in the multifamily housing market”. He offered us a preferred equity opportunity to participate in, and gave an interesting talk on the state of the multifamily apartment market here in the U.S. Porter invests with him personally.
Speaking of Porter, let me get to the final speaker…Porter Stansberry himself!
Porter is the founder of Stansberry & Associates Investment Research, the world’s largest independent financial publishing company. He’s also insanely smart with a dry sense of humor, and would be a lot of fun to drink a beer and have a lively conversation with.
He reminisced a bit about the early days of S&A, including “Pirate Investor” and “The Fleet Street Letter”, and talked about some upcoming enhancements and new offerings to make S&A serve us better (hooray!).
Porter still believes that peak oil is a fallacy and that the price of oil will continue to fall to under $60 in the next 12 months (WTI).
He pointed out a few disagreements that he had with a few of the talks, saying that the earnings yield (reverse P/E) vs. the bond yield chart that Steve used should be thrown out the window because we are in an environment of negative real interest rates, and that a lot of so-called “normal” relationships are now wacky because they are being driven by monetary policy.
He had a few Porter-isms that I wrote down because he’s hilarious:
On our ludicrous monetary policy:
“If inflation were the key to wealth, then Zimbabwe would be Switzerland!”
On someone else’s newsletter:
“Never let the facts get in the way of a good story…”
“The only place there’s no inflation is at the Department of Labor’s Statistics Division!”
He pointed out that we’ve had stagnant real wages since 1973 (my birth year!) and discussed a bit about what does well in this type of environment (not much).
However debt is so cheap that private equity firms can mint money, and insurance is interesting, and he thought the gold industry presentation was terrific (of course, the one I missed!)
He’s most cautious on oil stocks and most bullish on gas stocks.
There was also a rousing panel discussion and the evening finished with a lovely cocktail hour and gala dinner, where I had a lively and awesome conversation with a financial industry luminary and a commercial real estate broker from California—good times indeed! (You know my favorite part of all of these conferences is always the conversations and cocktails!)
I hope this has been helpful…I’m sorry I can’t go into as much detail as my typical conference report-out but this is truly supposed to be a “secret”, “exclusive”, thank you event for Stansberry’s best customers…and if I tell all of the secrets I won’t be invited back!
But hopefully this will wet your whistle and you can check out some of their publications—obviously I think highly of them or would not be an Alliance member myself! (I’m unaffiliated — just a happy customer)
OH! I also got to meet the extremely talented Doc Eifrig in person, who has made me a lot of money with his put option strategy (thank you, Doc!). He is such a nice man.
That’s it for today…please let me know what you think in the comments, and have a fantastic night and stay safe!
To your financial success,
— Kung Fu Girl
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