This article was originally published on November 2, 2020, but the ad we’re covering has been updated with a new headline and some “Biden’s New Plan” lead-ins so we’re re-posting it here to help answer some reader questions — the meat of the ad, the “what you should do” part, seems largely unchanged, and what follows has not been updated since it was first posted on November 2.
Porter Stansberry is a very compelling storyteller. He’s also a thoughtful and smart guy, in my experience, and what I’ve seen of his analytical work is often rational and compelling… but he has built his (now huge) business mostly, I think, by being a great marketer, playing off of both greed and fear with strong narratives that suck you in.
And the ad we’re looking at today is another of those, the “Will You Be Left Behind?” pitch that is being used to recruit new subscribers to Stansberry Innovations Report ($49 first year, renews at $199/yr). The promo piece is a little less menacing than, but otherwise not so terribly different from, his widely-circulated “End of America” pitches that we saw over and over from 2011 to 2016 or so, and along a similar vein. The basic idea has usually been that terrible things are coming, and you need to act like the smart rich people and have a survival plan… which is a really, really appealing marketing pitch for a lot of people, particularly those who are also primed to believe that “something is wrong” (and as this nightmarish election season finally comes to a close, of course, that’s almost everyone).
The “End of America” survival plan, as I recall, was mostly about the collapse of the dollar and the collapse of urban society… get some gold, buy some farmland, buy only the safest “capital efficient” stocks. That evolved into the “American Jubilee” pitch a couple years ago, about another coming currency nightmare that might wash away asset values and crash the US Dollar as massive debt forgiveness programs take hold, and a pitch to keep your money safe and buy high-quality companies, “trophy assets” and silver.
Those and similar ads from other publishers over the years, particularly coming out of the last crisis eight or nine years ago, often strike me as “dystopian nightmare” fear-based marketing pitches… but the basic investment ideas Porter touted in “End of America” and “American Jubilee” were generally pretty rational and reasonable (they didn’t all work out, of course, but they weren’t high-risk or silly ideas). The risk was not necessarily in following Porter’s actual ideas, or those of others who sold the “doom” story well during times of uncertainty, the risk was in getting so scared by the stories of imminent collapse that you overreacted, hid your money or your gold coins under the mattress over the past decade, and missed an extraordinary bull market.
Nobody, of course, foresaw exactly what our real nightmare would be, a global pandemic that hits during an election year, creates a never-before-seen unemployment crisis, and politicizes the disaster response, but Porter’s basic spiel these days is about the inevitable crises that will come from the wild increases in “income inequality.” And that strikes home, to some degree…
“In regular places all over America, the ‘lights’ are going out.
“No, I don’t mean the street lights or any other kind of electrical gizmo.
“I’m talking about a vastly more important kind of light… the kind that comes from within. I’m talking about how, all over the country, Americans are losing hope in our most basic social agreement….
“There’s a reason so many Americans are losing hope — losing their sense of independence and their dignity. There’s a reason so many people are turning to the failed plans of socialism.
“It’s because most Americans are being left behind… in a way we’ve never, ever seen before.
“The gap between the rich and the poor has always existed. But never, ever, on this level. And never with this speed.
“Every day, thousands and thousands of Americans are ascending into an entire new level of wealth — something even beyond what millionaires could afford a decade ago. And, instead of plateauing, these changes are continuing to power this new class higher… turning millionaires into billionaires.”
That may be the reason for the appeal of things like student loan forgiveness and single-payer health care, rallying cries for young protesters, but that’s also, I’d say, the reason Donald Trump was elected — political sentiments and reasons for the anger differ, but a huge number of people on both sides of the political spectrum feel ignored and left behind, and both Donald Trump and Bernie Sanders, strange as that sounds, are beacons of hope as they promise to fight for that left-behind cohort.
The balance of power has shifted so far to asset-owners over the past 50 years, and become ever more concentrated in the hands of the super-wealthy as businesses become larger and often less entwined with community, that it’s easy for those who have not been able to build any wealth to lose hope — and to rally around blaming someone for that loss.
So I agree with Porter’s central point, that the primary problem right now is that the explosive improvement in efficiency of the computer age, coupled with a few financial crises that shook the lower income levels most viciously, have brought about a new era of massive and rising inequality — a “success” gulf between the wealthy and the eroding middle class that is only getting wider. He sees that leading to socialism and violent unrest, which are both great “fear” triggers for the demographic who subscribes to investment newsletters, and I don’t have the hubris to be that predictive, but that’s one possible outcome.
There is an investment point to Porter’s pitch, of course, so let’s shift to that now:
“While millions of Americans have been left behind so far, tens of millions more will be left behind in the coming decade if they don’t take the critical steps now.
“Meanwhile, anyone who understands what lies at the root of these trends can have a chance to profit in a big way. It’s not hard — if you truly understand what’s happening.”
The big “don’t get left behind” spiel here is really mostly just about technology… he talks about the critical impact that automation had in farming, helping to create an almost permanent wave of poverty across the South, and about the impact the microchip had in transforming society, or later optical networking to speed data transfer, and points at a few areas where there’s a clear risk of yet more massive job losses — like in trucking, for example, where autonomous highway trucks could erase what is the most common job in many states. The timing of those trends is not terribly predictable, and the reasons for historical shifts can be debated, but clearly technological change has created lots of winners and losers over the years.
So what’s next? More from Porter:
“If you think technology is leaving most Americans behind now, what’s coming next should terrify you.
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just click here...“The group I call the Digerati (the huge network of Americans who have been developing new technologies for decades, and growing ever richer as a result)… has built their own currency.
“And it lies completely outside the control of any government.
“This group and their new money are soon going to leave everyone behind. Every last person in this country… and every other country… in the entire world.”
OK, so that’s just bitcoin, which, along with the blockchain technology that bitcoin ushered into the world a dozen years ago, has certainly gotten the attention of a lot of folks…
“The smartest and richest people and companies in the world are learning everything they can and testing this new technology, because it represents a critically important new way for humans and machines to communicate, cooperate, and do business.
“But again… because it’s still in its infancy, most people don’t yet fully recognize what’s happening…
“The sad thing is, as the lights go out for so much of America, everyone who has been left behind will turn on each other, creating a global crisis unlike anything the world has ever seen before.
“It won’t be a war of nationalism — between countries and big armies. It will be a war of the ‘Digerati’ — between people who understand how to use this new technology, and everyone else.”
Well, I suppose I might get left behind to some degree… I still don’t really understand bitcoin, (though I do own a little bit because currencies are built by social acceptance, and clearly bitcoin has continued to find greater acceptance), and while I understand the concept of the blockchain I still have a lot of trouble rationally valuing any company that claims to have built a better blockchain.
Here’s more of Porter on Bitcoin:
“You see, most people think that Bitcoin is ‘finite’ — that the last Bitcoin will be mined at a certain date in the future, around 2140.
“But they’re wrong.
“Bitcoin isn’t finite at all, not in an economically meaningful way. The last Bitcoin will never be mined, no more than the last barrel of oil will ever pumped out of Texas. I’ll explain to you why this matters, and why it’s such a big deal.
“And this new understanding of Bitcoin also portends a huge move higher in its price. Bitcoin could soon trade well above $100,000 per coin. And then well above $1 million per coin… all within the next decade or so.”
I’ll be curious to see whether this happens or not — it is possible, of course, because the coded-in scarcity of bitcoin will gradually mean that the competition to earn each bit of bitcoin that is created by mining will be fiercer, which, if the general idea of bitcoin continues to be accepted, will mean each coin should have substantially more value. As the river slows to a trickle, each drop of water becomes more valuable.
That’s partly guessing about human nature, of course, since we also can’t really know whether bitcoin will remain the “store of value” coin in the cryptocurrency universe, but I wouldn’t say it’s an irrational guess — once something achieves a level of acceptance, it’s hard to unseat it. Not impossible, trends and tastes change, but hard… gold has stuck around for a couple thousand years as a bedrock kind of currency, always accepted to some degree as rare and valuable, but it has also lost relative value for long periods of time as tastes and sentiment changed, sometimes for decades.
One more bit from the ad, just to get some details in here for posterity:
“And just as gold was the perfect ‘proof of work’ for the age of ever-increasing locomotive power of the industrial age, Bitcoin is the perfect currency and the best stable ‘proof of work’ (and money) for the computer age.
“The important thing for you to know right now, of course, is this:
“In the near future, Bitcoin will not be worth the $7,000 to $10,000 range it’s trading in today… it will be worth at least 10 times that amount.”
OK, so this ad is using some older data — Porter has been running similar ads for a while, (this particular one started with an August 2020 date), and the big picture trends don’t necessarily change that fast, but bitcoin is out of that range now, it was in the $7-10,000 range for most of the first half of 2020, but has been above $10,000 since late July and is at $13,500 or so at this point.
And he sees blockchain technology bringing about what is effectively a libertarian dream…
“The blockchain allows far more direct interaction between free and private individuals and they remove the need for virtually all of the functions of the state and the corporation.
“It’s all happening right now, probably even to people you know well. And you are being left behind.”
So… what do we do?
Porter lays out a few steps — the first one is “understand bitcoin better,” which you can go out and do on your own, or subscribe to his newsletter to get his bitcoin guide. But then he gets into some actual investment recommendations, which is always what we’re interested in…
“According to the Financial Times, the CEO of Microsoft says, “tech spending as a percentage of GDP is expected to double over the next decade, as digitization spreads.”
“This means you MUST now own what I consider America’s ‘Master Digital Currencies.’
“Over the next few years, there’s nowhere safer and more lucrative for your money.”
OK, so what are those “Master Digital Currencies?” Is he talking about actual cryptocurrencies, like bitcoin and ethereum?
Not really, he’s mostly talking up big tech companies…
“What I’m talking about when I say ‘Master Digital Currencies’ are the shares of the most dominant, fastest-growing companies that are fostering this digital transition.
“These are the companies that millions of other businesses are using to move from an analog world to a digital one. The companies I’m going to tell you about play a critical role in nearly all of the digital commerce in America today.
“In short: If you buy or sell something on the Internet, odds are, these companies have a hand in it… and make a big profit.”
OK, then… so what are the actual companies? Even if we don’t understand cryptocurrencies or have a lot of faith in a particular currency or token, we can at least understand some companies that profit from this continuing “digerati” revolution, right?
Here are the clues he drops:
“The first company provides the backbone – the most critical part of the digitization process – for more than 1 million businesses around the globe, including my business.
“Investors have earned gains of 500% over the past five years. Since the start of 2020, it’s up more than 65% this year alone… it just keeps going up and up.”
Thinkolator sez that’s almost certainly Amazon (AMZN), which is likely to be disrupted by blockchain to some degree if we see the extremes that Porter talked about in the pitch (after all, a perfect blockchain world would mean that marketplaces are unnecessary), but also essentially runs so much of the infrastructure of the internet through its Amazon Web Services that it is probably fair to call Amazon the “backbone” for businesses that are making a digital transition.
So I won’t disagree with that one — I waffle on whether I consider Amazon or Alphabet to be the most essential company in the world, but this has definitely been the year that reinforces the power of Jeff Bezos’ machine. And I added a bit personally last week, too, at prices above where it is right now, this is what I wrote in the Friday File a few days ago:
“Amazon (AMZN) beat the earnings expectations again, no surprise there in the wake of Shopify and everyone else in e-commerce shouting to the rooftops about how dramatic the move to online buying has been. The numbers for Amazon are just huge, they hit quarterly sales of $96 billion, well above their own guidance, and reported earnings of $12.37 a share (earnings are not really the target for Amazon, at least these days, and if they’re ever judged just on earnings and earnings growth investors should be ready for a “look out below!” moment, but they are growing so fast everywhere that some of that trickles through into profits. Their guidance for the fourth quarter was lower than investors had expected on the bottom line, probably because they’re spending so heavily to be ready for the holiday shopping blitz, but the sales guidance was higher than analyst averages, they expect $112 to $121 billion in revenue in the fourth quarter, which would be almost 30% growth. For a $1.6 trillion company. This is just nutty.
“It appears the only thing that can really slow Amazon down is government regulation at this point, but there are also probably just about as many Amazon Prime members in the US as there were voters in the 2016 elections (the vote count was around 130 million last time around, Amazon doesn’t regularly disclose Prime membership but it was reportedly over 110 million before the pandemic), so the people have, to some degree, chosen Amazon over either the Republican or Democratic parties (OK, that’s a stretch, I know). Given that popularity with customers, and with Amazon re-committing to being a massive hiring engine and paying a well-above-average minimum wage, I wouldn’t be surprised if the government’s bark is worse than its bite with Amazon (and, for that matter, with the antitrust suit against Google and the other pressure that legislators and regulators are trying to bring to bear on “big tech” in general).
“So with yet another Amazon-dominated holiday season upon us, and the relatively disappointing forecast that Amazon gave probably caused largely by one-time expense increases from COVID and from the fact that their low-margin Prime Day discounts came in the fourth quarter this year instead of the usual third quarter offering, I see no signs of faltering dominance here… nor any signs that Jeff Bezos will be able to spend fast enough to kill Amazon’s profitability even if he wants to. Earnings growth is not really the story for Amazon, they’re all about building a dominant platform and delighting customers to get them to stay, but they could also easily double their earnings from 2020 to 2022, and that’s truly remarkable for a $1.5 trillion company that would still, using those 2022 estimates, have revenue that’s lower than Walmart (WMT). I want to poke holes in Amazon here, it’s still trading at 50X those 2022 earnings estimates, but it’s hard to see a real competitor who can keep up, or a real reduction in demand for their products or services, so I added a bit more on this post-earnings dip.”
And what’s next?
“The second business is helping the digital transition of more than 230,000 businesses. This includes everything from construction companies and hospitals… to real estate firms and retail.
“This company has paid investors remarkable gains of 360% over the past five years.”
The Thinkolator isn’t as quick with an answer for that one. It sounds like Iron Mountain, to some degree, though it’s definitely not them — that data storage company which is becoming a digital storage company has not shown anything like 360% returns over the past five years (it has trailed the market quite considerably, in fact, despite a strong dividend it has returned about 20% over the past five years, versus more than 70% for the S&P 500 (and, yes, nearly 500% for Amazon)).
So… maybe Adobe (ADBE)? That’s actually up more like 420% in five years, as of August when this ad was dated, but you can find a roughly five-year period recently when it has gained “only” 360% (June 2015 to June 2020, for example). That’s probably not the match, since I don’t really have a connection to that 230,000 businesses hint… and yes, I know that sounds like a big number, but that’s just about the number of businesses that call New York City home (well, before the pandemic, anyway). Adobe has more than 230,000 businesses around the world using just its Magento platform (which is mostly an e-commerce platform, a Shopify competitor).
This could be lots of other companies, including gigantic Microsoft (MSFT), which has more than 230,000 businesses using just its Teams product and seems to collaborate with just about everybody in “digital transformation” to some degree. So in the absence of other ready clues, I’ll halfheartedly throw Microsoft out as “most likely” for you, but leave you to your own guesses… and yes, both Adobe and Microsoft are key players in the “digitalization” of the world and have been doing great, and they’re both priced like key players so you might want to get yourself in an optimistic mood before you look at their current valuation.
Similar to my thinking about Amazon, I won’t argue against owning either Adobe or Microsoft, though I don’t own either right now… but if you want to buy a stock that trades at 50X earnings, best to spend some time cuddling babies or frolicking with puppies first to get you in the right frame of mind. If you’re fearing the future, you won’t want to buy it, and you can only buy popular tech stocks if you want to prepay for a chunk of the imagined future. These are investments you make with hope and optimism, not with dystopian malaise.
If you’ve a better guess for number two here, please do share with a comment below… but we’ll move on…
“The third business dominates the world of Internet commerce… and either already dominates or is a major player in critical digitization technologies like: artificial intelligence (machine learning), personal storage, online videos, self-driving car technology, and more.
“Investors have doubled their money over the past five years… and the gains are likely to be extraordinary from here – it’s also soaring in 2020.”
That must be good ol’ Alphabet (GOOG). Again, not a surprising company, and clearly one of the strongest technology companies in the world even if it has “only” doubled over the past five years… and a stock I’ve been buying for more than 15 years now, so, again, I’m not going to argue with Porter on this one. As with Amazon, the biggest real threat in the near term is government regulation, though it’s a little more urgent with Alphabet because of the actual antitrust lawsuit just underway.
As an investor, Alphabet is still overwhelmingly an advertising company — they have a fast-growing cloud services division, and are trying to build up Waymo as the dominant service provider for autonomous driving, among many other initiatives, but most of their revenue comes from search advertising, their broad network of contextual internet ads (including here on Stock Gumshoe), and ads on YouTube. Here’s what I wrote following their earnings report last week:
“Alphabet (GOOG) this week posted probably the most dramatic ‘blowout’ quarter of the megacap tech stocks — investors are continuing to digest what the new antitrust lawsuit might mean about the future of Google’s monopoly-like businesses in the US, but right now the big news is that they’re recovering fantastically from the COVID slowdown in advertising. Which is probably good news for all companies in the digital ad space — if Google can beat earnings estimates this dramatically, then maybe we’re starting to make up for the sudden disappearance of those big travel and other COVID-impacted advertisers earlier in the year. Earnings came in at $16.40 per share, 60% growth over last year and 40% above what analysts were expecting… and the top line was pretty impressive, too, with 15% revenue growth (that’s quite a lot for Google, which reported $46 billion in revenue for the quarter after falling to $38 billion last quarter when ad budgets were slashed during the heat of the pandemic’s first wave), about 10% above what analysts had been forecasting. The growth was driven by advertiser spend for search and YouTube, which are Google’s two strongest businesses (YouTube is smaller, but growing faster that Google’s core search and web advertising business), but Google Cloud and the Google Play store are reportedly also growing well. And it also helped a little bit that they’ve reduced the share count by about 2% this year through buybacks, and still have something like $120 billion in net cash on the books — close to 10% of the market cap.”
And one more…
“The fourth business you should own immediately is going to be ultimately responsible for taking our world of paper contracts, agreements, and other documents, and digitizing them.
“This company already has around 550,000 business customers, and they own more than 60% of this market.”
Well whaddya know, that’s another favorite around these parts — those clues point at DocuSign (DOCU), the e-signature company that is trying to build up its “agreement cloud” that provides contract maintenance and management in addition to just electronic signatures. This has obviously been a fantastic year for DocuSign, since the push to make transactions and deals without breathing the same air as your counterparty has led to a natural surge in a business that was already doing really well. I did take some profits on my DocuSign position back when Zoom reported, two months ago now, because DOCU had a ludicrous move that day as folks were looking for the “next Zoom”, but it has since come down 30% or so from those highs so it’s a little easier to consider it again today. Here’s a little excerpt of what I wrote following DocuSign’s last earnings call, in early September when the price was right around where it is today:
“[T]he results at DOCU are still phenomenal and the pathway to possible future dominance is still there… it’s just that they weren’t as phenomenal as Zoom’s earnings. It was the epitome of a fantastic “beat and raise” quarter, with DocuSign’s business hitting new highs in every possible way. Some of that’s because analysts were not as aggressive as you’d think about raising their estimates this summer, but it’s still amazing.
“DocuSign reported revenue of $342 million for the quarter, roughly 45% growth from $236 million last year — and that’s not just accelerated growth from the past few quarters (which were 39%, 38%, and 40%), which to me is a huge sign of strength, it’s also the best single growth quarter they’ve ever reported as a public company. They’re now likely to be sustainably profitable with this larger revenue base, they posted an adjusted profit of 17 cents a share this quarter (well above the 7-8 cents expected), and they raised their guidance numbers by 15-20% for the balance of this year (they’re now halfway through their 2021 fiscal year).
“The big boost, in my mind, is in their billings number — that’s their ‘window’ into future revenue growth, and when the stock has occasionally been weak in past years its because that billings number was a little disappointing. That was certainly not the case this year — they upgraded their forecast for billings dramatically three months ago, guiding to expect billings to be around $340 million (roughly the same as last quarter, though last quarter included the bump up in billings from their acquisition of Seal Software), and the actual number for this quarter ended up blowing that away at $406 million, which is 19% sequential growth from last quarter and 61% growth from the billings number they reported a year ago. That’s a HUGE amount of future sales to add to the pipeline in a single quarter, and I find it very encouraging that their billings continue to grow faster than revenue.
“DocuSign is certainly the leader in e-signatures, and was already doing very well last year as they began to grow their new “Agreement Cloud” service for managing the contracts and agreements process — they were growing revenues at 35-40% a year before COVID, the impact of the pandemic has really just helped to accelerate that growth a little bit instead of seeing the growth naturally tail off a bit as the base becomes bigger. The reason I can continue to look forward with some optimism, despite the fact that this is a very richly valued company, is that it’s quite possible for them to grow much larger. Their addressable market is enormous, every company deals with signed agreements and contracts in some way, and this pandemic has accelerated the adoption of (and acceptance of) digital signatures by more businesses who might have otherwise resisted it for years, and, importantly, digital signatures and digital contract management are just better.
“That’s not always the case with Zoom Video and similar products, I’d argue. Online video conference calls are not inherently better than in-person meetings — they are more efficient, for sure, particularly when compared to business travel for meetings… but there is clearly something lost when you can’t be in the same space, and when we get back to work we will not all be working from home all the time and meeting remotely every time, even if it feels like that might persist as a general trend. But I bet we will still be signing more and more agreements online, and that real estate agents who adopted DocuSign for signing offers, for example, will not go back to pen-and-ink agreements. eSignatures aren’t just more efficient, they’re more popular and easier and they are usually preferred by everyone involved, without any real downside for any of the participants — I’m pretty sure that Zoom usage growth will tail off dramatically when the pandemic stops (it may not go down, but it should at least stop growing as fast), since some meetings will go back to being in person… but I don’t think much of the “market share” digital signatures have earned will revert to in-person signatures. With the stickiness of DocuSign’s offering, and the fact that it’s well-integrated with so many other systems that their customers depend on (Salesforce, etc.), I can justify holding the stock even at a very lofty valuation. That doesn’t mean I’ll forever hold all of my initial position, I’ve now sold off roughly a quarter of the DocuSign shares I bought in 2018 and 2019, since there are limits to how much exposure I can tolerate to a stock that trades at more than 20X next year’s sales… but I still like the company’s prospects even if the valuation is more challenging.”
DocuSign won’t be reporting for another month, and “sentiment about high-growth stocks” is clearly just as important to their share price over the next 30 days as is any assessment of their long-term potential, and they are certainly not the only provider of “e-signature” services (Adobe offers competitive service, for example), but I do think it’s quite likely that DocuSign will hold on to the customers it collected during the pandemic. Their huge market share in this niche has built up their network, and, importantly, that strengthens their brand, and in something as critical as signed agreements it seems very unlikely to me that upstart competitors will be able to take meaningful share from DocuSign just by offering slightly lower prices — the cost of an eSignature service or contract management system is almost immaterial to the amount of business that is being done with those signatures and contracts, but the cost of failure is very high, which makes going with the market leader and well-known brand the safe choice.
Sadly, that doesn’t mean DocuSign can’t fall by 50%. These “work from home” winners and cloud providers tend to trade together, so if sentiment shifts and they all fall hard, DocuSign won’t escape the collapse that takes down Zoom Video (ZM) or Salesforce (CRM) or Shopify (SHOP) or whoever else you want to point to as overvalued poster children for the pandemic cloud… but I’m pretty confident that they’ll continue to “win” in their space, and that their space will grow dramatically over the next decade. Analysts think that they’re going to grow their revenues by 30% a year over the next couple years, and get some economies of scale as a cloud software provider to generate earnings growth that averages almost 70%, so yes, things are moving in the right direction… but if you want to buy in today, you have to choke down a valuation of about 30X sales, 300X adjusted current-year earnings, and still more than 100X the earnings that are expected in 2-1/2 years.
I can justify that given what I think the long-term potential is, but, like so many other pandemic victors (Teladoc (TDOC), I’m looking at you), DocuSign was relatively appealing but on a much less steady growth path before March of this year, facing many more fits and starts in the share price, and dogged by questions about competition and the pace of adoption of new technologies. I think the world has changed permanently now to some degree, with several years of rapid technology adoption squeezed into the last six months, but that doesn’t mean those pandemic winners will be immune to fits and starts in the year to come.
So there you have it… Porter’s fear push now is a little less aggressive than his Jubilee or End of America pitches of the past decade, and is perhaps a little more hopeful in the “things will get ugly as the rich get richer, but at least maybe you can put yourself in that ‘rich’ category,” and I have a bit of sympathy for his big picture thinking even if I see the urgency of it as mostly marketing. He has become a true believer in bitcoin in recent years, and I’m probably behind him on that front as well, but have held some bitcoin for years and buy a little more from time to time, as a secondary currency hedge to my gold position… but his push mostly in this ad is for buying the companies who will continue to drive the transformation to our digital future, and I own many of those same companies so I can’t really argue with that.
Here’s my perspective, in case you want a bit more closing blather (to everyone else, thanks for reading this far!): Porter’s arguments about bitcoin and societal risk make sense, and surely we’ve seen the dramatic shift of wealth further up the food chain in the past couple generations… but the urgency he touts should probably largely be set aside as marketing, lest we be sucked into its gravitational pull and overreact. Trends that will likely play out over decades and centuries do not necessarily mean that you can predict the performance of particular investments over quarters and years.
That marketing probably worked well during this election season and will thrive in the election aftermath, I imagine — at some point in the next few days (or maybe in the next month, if counting is delayed or the results are unexpectedly close, and the courts have to step in), half of America will be partying in the streets at the salvation of the Republic, and the other half will be bemoaning the demise of the American Experiment and the end of an era, and extremely strong feelings are the easiest ones for a marketer to tap into in trying to sell a vision of the future.
When it comes to the US currency and deficit spending, though, and how that impacts things like bitcoin and gold, there probably isn’t much difference. There are no longer two parties when it comes to most big picture items… nobody wants to shrink the government or balance the budget, because those things are hard and unpopular and voters have made very clear for the last 20+ years that they do not care about balancing the budget. The safe bet is to assume that politicians will continue to promise us something for nothing, and that we’ll pass the bill along to another generation (at this point we’re no longer talking just about my kids having to choke on this debt, it will be their great-grandchildren), which really just effectively means that we’ll continue to devalue the dollar over time. Maybe that devaluation will be fast during some “black swan” crisis that comes along, but probably most of the time it will be slow enough to not get a lot of notice.
So yes, I know that many of us are primed to feel like “something has to give”… we just need to keep some perspective, and remember that a lot of people were very sure that “something had to give” in 1979, in 1983, in 1985, in 1991, in 2001, in 2004, in 2009, in 2013… there have been lots of moments when the status quo seemed unsustainable, and it would have been easy to assume that a revolutionary change was at hand. And yet, here we are, with an ever-larger debt and an ever-larger economy and an ever-higher stock market. The past is a lot easier to predict than the future.
OK, so that’s more of my opining than I’m sure you wanted. Sorry about that… it’s election week, and that lends itself to introspection and daydreaming about history.
What matters when it comes to your money, however, is what you think — are you expecting this next wave of blockchain and digital revolution to be as damaging to the middle class, relatively speaking, as the rise of automation and computers? See great or ghoulish things ahead for bitcoin, or for any of the stocks he hints at as favorites? Let us know with a comment below.
Disclosure: Of the companies mentioned above, I own shares of Alphabet, Amazon, DocuSign and Shopify, and I also own some bitcoin and gold. I will not trade in any company mentioned for at least three days, per Stock Gumshoe’s trading rules.
If you saw the movie 2001 Space Odyssey you get the feeling that technology is moving at a rate beyond comprehension
Indeed, we underestimate the best technology trends when we stay with comfortable linear forecasts from analysts…
But we also will
Overestimate a lot of unproven stories.
Travis
The following are NOT in the portfolio:
Adobe
Alphabet
Microsoft
Dear Travis,
I have bought shares in GBTC as I really don’t understand blockchain or having a digital wallet. In my 60’s, I have also purchased gold as a hedge. Hopefully both will be in the hands of my grandchildren one day as the world will have not gone off the deep end. Owning GBTC shares / units are still traceable to the owner. Is there Bitcoin for Dummies?
Thanks in advance
I have had the same experience but Coinbase has a pretty good primer on its website.
I think this explanation is pretty good: https://alexdanco.com/2019/03/18/a-technical-introduction-to-bitcoin-for-non-technical-people/
Do you understand SMTP/POP /IMAP to send an email? You don’t need to understand blockchain, just know it works to send something of value to someone else like you send information with email. It’s that simple.
Macrobody , are you saying don’t understand, just follow?
https://www.youtube.com/watch?v=g6iDZspbRMg
https://hex.com/
I considered buying GBTC for the same reason; unfortunately however, I learned in my research and consultation with others that these blockchain ETF and holding funds ALL have a large NAV premiums attached to them anywhere, i.e., from 18-30%. SO for example, you are paying GBTC $24 per share, when it ONLY holds $18 per share worth of bitcoin in its fund.
The ONLY way to purchase bitcoin, altcoin, and all cryptocurrencies at a 0% Nav premium is to buy the coins directly., so I’ve decided to spend more time learning the best ways to buy the coins and store them, and to stay away from all blockchain ETF and holding funds
As was pointed out previously, you recover the premium when you sell.
Not if the premium is long gone when you want to sell
Interesting post by hedy1234.
Travis, thanks for taking a crack at it. What should be interesting to readers is the recent crypto announcement from the PROC. They’ve defined their digital Renminbi (spelling?) and it is issued by the government of the PROC (what a shocker!). Outlawed, at the same time, are all other would be cryptocurrencies. This should give globalist corporate types like Zuckerberg pause before assuming that they can own the world’s crypto platform and juice it like they do advertising. It has been one thing to wipe out the entire advertising industry. It will be quite another to obsolete global bankers and their platforms.
This should also be a clear shot across the bow for those early adopters playing bets on tech company sponsored cryptos. With the stroke of a pen, central banks and their governments can wipe out these currency’s values and even make them illegal. Stansberry, about a year ago, was touting cryptocurrencies (Etherium) as a ‘must invest’ priority.
Powell and the Fed could literally destroy these cryptos should the money centered banks who own the Fed want to roll out their own for the US. Caution, IMO, is the watchword. You never want to be the first to arrive at the cannibal barbecue.
As for the Technology companies (AMZN, MSFT, ADBE, DOCU), they each have obvious strengths. The bigger question for them is always timing. Can/Will an investor step into these when the markets have lost their minds? Think March of 2020. I liked your comments about petting puppies before hitting the ‘Buy’ button. It is much easier to get into a trade on a correction than it is to hold it after buying at charts that look ‘toppy’.
As always, I appreciate your leg work to dig these trades out for us.
Regards,
Buck
“Powell and the Fed could literally destroy these cryptos should the money centered banks who own the Fed want to roll out their own for the US. Caution, IMO, is the watchword. You never want to be the first to arrive at the cannibal barbecue.”
I do not doubt the central banks will take this field.
See article in the Globe & Mail 18 october 2020:
“A group of seven central banks, including Canada’s, have issued a statement indicating they are working together on common principles and key features for a viable central bank digital currency, or CBDC.
The banks in Canada, Britain, the European Union, Japan, Switzerland, Sweden and the United States are getting serious about the threat that private digital currencies pose to the control of monetary policy. Just as importantly, the exclusion of China from the group signals that central banks are waking up to the threat to national sovereignty if they’re not in the official digital currency game or if China gets first-mover advantage.
Central banks have been monitoring the emergence of digital currencies (bitcoin, Facebook’s Libra and so on). But there is a new urgency because COVID-19 has accelerated the flight from cash. Private digital currencies are no longer a mere adjunct to normal “cash” transactions, but supplanting them. In Sweden, people using cash for their most recent purchases dropped to 13 per cent from 39 per cent 10 years ago. Experience differs from country to country, but the trend is clear.
Something else is now at play, however. Bank of Canada deputy governor Timothy Lane said it out loud. Official digital currencies can pose a strategic threat: “If one country introduces a central bank currency, then that immediately creates the potential for other countries to be affected … and that can create a whole other set of issues.” He likely has in mind China, where the People’s Bank of China is well down the road to going electronic.
The power to issue a CBDC has been getting higher on the list of “wants” by central banks around the world. A CBDC is an electronic version of legal tender (traditional banknotes and coins). It would be based on blockchain or other technology to keep it secure. The authority to issue a digital currency has moved suddenly from the “nice to have” to the “need to have.”
A number of factors are at play – the increasing attractiveness of private digital currencies including “cryptocurrencies” and “stablecoins” (such as Facebook’s Libra); concern about foreign control of digital payments platforms; the appeal of the anonymity that results from taking transactions out of normal, traceable channels; and concern over the loss of control over monetary policy. Add to this the fear that cash may be a vector for coronavirus transmission, as a recent Australian study has noted, and it’s a perfect storm.
No country can afford to lose control of its currency or blithely cede control of its payments system to foreign payments processors, sovereign or private. The writing is on the wall, or at least in the coding that is facilitating private digital payments. Cash is dead.
To do nothing is to abandon the field to cryptocurrencies. Bitcoin, the best known, is seen by central banks as having an underlying value too volatile to permit it to serve as a universally accepted unit of account to buy things, unlike cash or an official digital currency. Bitcoin is seen as more of a speculative commodity being traded in and of itself. Facebook’s Libra is only slightly more palatable because it is backed by real currency like the dollar, euro or pound.
Either way, central banks worry about their ability to track money transferred outside official channels. This impedes efforts to combat money laundering and other illegal activities. For China, private networks impede the ability to monitor the transfer of funds offshore…”
Physical gold
Stansberry makes agood presentation However, he does not take care of his customers very well. I just paid 499$$ for membership no response from him yet. I have tried a number of ways to get to him —no respose. I have now tried to cancel and yet no response. no log —-NOTHING!!!
Call your credit card company and put a hold on the payment.
I think most subscription services are BS. The guys who can really drill down stocks and markets, don’t need to sell subscriptions. Maybe not all of them, but most. Motley Fool seems on the level for the most part, but the rest are all huckster IMHO. Like anyone in a raging bull market like this, it can make anyone look smart.
Porter Stansberry is a criminal and connected to the murder of one of his employees, Rey Rivera, years back. I trust nothing that comes out of his mouth.
Stansberry: Yes he was convicted in 2007 for fraudulent stuff connected to his promoting a special report which was about USEC, which turned sour. He was fined 1.7 million.
he is indeed a master marketeer, but that is all he is. Caveat Emptor!
Lol, don’t trust, verify. Seth Rich was murdered and worked for the DNC. So in your logic Hillary Clinton is now connected to the murder of one of her employees. You can’t therefore trust anything she says. You might have a point!
Well said, that ‘There are no longer two parties when it comes to most big picture items… ‘!
I’ve long been saying the same thing, in different words.
It was reported that the 20’s trillion national debt could be taken care of if price of a ounce of gold was raised to $6,750 an ounce. Assumed/actual holdings at Fort Knox of 258.6 million ounces of gold in locked down storage. Would this raise the dollar value back to $ 1.00? Also, report stated an ounce of gold would have to be $ 143,850 to eliminate international debt?! Kind of far fetched at this point of time and beyond???!!!
If you go back on the gold standard, then the government loses much of its ability to spend and stimulate. Seems very unlikely to me.
Are you going to pay your bondholders with gold? If not then it really has no useful value.
LMAO Do you really think there is gold in Ft Knox… Good one, Hell the US can’t come up with the gold it stores for other countries. Thats because it is not there!!! Same thing that broke the goldsmith’s in the dark ages. When people finally wanted the gold they had stored with them, they found the criminals had sold it all! Only thing Ft Knox has is gold plated tungsten.
US Constitution Article I Sec 8. Among other powers listed; Is: Congress shall have the Power to Coin money, regulate the value of thereof and of foreign coin. If anyone believes The US Gov’t including Maxine Waters will allow this power to diminish you would be delusional. The coming soon to be, “cashless society means that the US Gov’t will be in control (via all banks, etc.) of all dollars transferred into electronic digits. The Gov’t then also, will be enabled to track and trace every electronic transaction. Other so-called cryptocurrencies will be a Ponzi scheme, and you prosper whatever tier you bought into when it crashes.
Not sure what Maxine Waters has to do with your point, but yes, I’d agree that government regulation is one key area of risk for cryptocurrencies. Probably China before the US, given their tight currency controls and full control of their internet, and thanks to the fact that many cryptos see most of their trading done in China, but there’s always meaningful risk that they could be further marginalized by law anywhere. Probably wouldn’t disappear, but would be much less likely to really go mainstream.
Come out from under the rocks.
Maxine Waters threatens Facebook’s cryptocurrency plans
By ZACHARY WARMBRODT 07/08/2019 02:07 PM EDT
Ah, I had forgotten about last year’s Libra fight. Still hard for me to envision anyone trusting Facebook to launch a payments system, but I guess anything is possible.
Not much different than Bezos running with Amazon Altcoins now. Anyway, if Altcoins aren’t really currency, but rather software that drives a part of the engine within blockchain, then there is no threat to fiat currency, which is a thing unto itself anymore since there is no gold backing it and hasn’t been since Nixon’s Administration when he took us off the gold standard. The redemption of Silver Certificates in coin silver, ended close to twenty years ago. The Government set a final date to cash them in, but did NOT advertise it well. Anyway, no one is really “minting” money, just software.
https://fortune.com/2020/08/26/cryptocurrency-bitcoin-jpmorgan-quorum-consensys-blockchain/
Thank you, Travis for all you do to help us that are not as learned in these uncertain times! I appreciate you and all of the wisdom shared by those who study the markets and take care of their own money and don’t get sucked in by all the marketing schemes that are truly making the marketers wealthy!
Thanks, I use to read your work all the time in the early 2000s. You have keen insight, you make this fun and have not lost a step. Keep up the good work. At $49 a pop, who can afford questionable recommendations. What a racket. It’s fun for those who have money to play with, just like a casino. Make casinos great again!
Solution to “Subscription “problems’ remedy is easy!CANCEL your credit card #
By claiming ,you have lost your card & require another one.The company will send another card w/ different #. Therefore the company in question will not be able to charge their dues/ charges!! I have tried the civilized way of calling up”CUSTOMER “
& cancel the dubious newsletters to no avail! So, I resort this technique successfully.
Bitcoin, Tech, and Super Rich and Stanberry’s will you be left behind bunch. Agree that the rich or getting richer and maybe they will deal in bitcoin or whatever. It is clear than the major majority of the population will not be dealing in bitcoin. Amazon, Wal Mart, Google, Microsoft, and so on will still need customers for income. If only the rich can be customers to all of these providers, they will need to charge hundreds of thousands more as they reduce the customer base by most of the population. We go back to a few people having all of the wealth but business and industry unable to sell products and services but to fewer and fewer people. For business to expand and prosper and create wealth, they need to have customer base that can afford the products and service. The super-rich will not be hurt, they can afford to do without ever making money. Capital will always find a home where the grass is greener (this means goodbye to America unless there is some change). The fall of empires (decline in moral value, political corruption, decay of cities, loss of technology to competitors (China), consuming more than is produced (unfavorable balance of trade), more and more of population depending on government for basic support, and the list goes on like it is describing the USA. Only hope is that other countries are doing worse. But it is obvious that the trillions being lost in the balance of trade is increasing each year. US can only print so many dollars until the currency is destroyed and the dollar is removed as world currency in favor of a much stronger one. Hopefully this is not the USA being described but it looks like a lot of the shoe fits. Of course, history shows that the USA has come out time and time again in its history from worse. Free markets have way of making corrections much better than governments, doom and gloom travels like wildfire and is why so many use it to their advantage.
My money is still on America.
How quantum computing could threaten Bitcoin. Check out this link. https://www2.deloitte.com/nl/nl/pages/innovatie/artikelen/quantum-computers-and-the-bitcoin-blockchain.html#:~:text=As%20long%20as%20it%20takes,safe%20against%20a%20quantum%20attack.&text=If%20a%20quantum%20computer%20will,blockchain%20will%20be%20inherently%20broken.
Hmmmmmm, now why would gold & silver bomb this morning?
https://finance.yahoo.com/quote/GC=F?p=GC=F
Quite simply, risk off.
With election settled, the markets are way up. Gold and silver are chaos hedges so lower prices in the short term are expected.
In the long run still headed much higher as we continue to have unlimited QE.
In the early 80s Regan pushed Trickle Down Economics. To make it work, he lowered the tax rate on the Uber Rich from about 73% to 28%, less than what most middle class people were paying. This was (Regan’s theory) to put more expendable cash in the pockets of the Uber Rich so that they would purchase more goods and services, particularly along the luxury items and real estate ends, which would then funnel money into the middle and upper middle classes pockets and subsequently it would trickle on down to the poor via this mid group. Didn’t happen. Now the Uber rich feel a threat, that of an increase in taxation, possibly back up to 70%. So to bypass taxes, they dump money into Bitcoin, Altcoins and precious metals. The metals are hoarded. No product on the market, nothing to sell/trade. That’s short term. Mining continues though. Hoarded metals create then a rise in cost for newly mined and processed metals. It’s rather a win win for them. How do you compete with that? It requires a diligent set of eyes focused on trading rather than investing. Just a thought.
Or you can by some precious metals and pm minets.
PM miners.
@frederick, I was trying to post a reply but it does not seem to be working. Thought I’d try the general comment instead:
Hi Frederick; If you purchase GBTC from a traditional exchange (Fidelity, TD Ameritrade, etc.), yes, that works just like regular stock.
There are specific crypto sites (Coinbase, eToro are both popular and trustworthy), it’s one step closer to not being under government control. Be VERY selective about the exchange you pick; they are getting hacked more frequently and if you leave your funds on that exchange (similar to a broker account), it’s possible it could be hacked and lost.
The non-traceable crypto exchanges aren’t generally available in the U.S. (I have yet to find one). While you do have to register and validate on these sites (valid ID, etc.) before you trade, you should then consider a cold storage wallet (like ledger NANO) which you would transfer crypto purchased from your exchange to your wallet (for simplicity’s sake it’s essentially an encrypted USB).
And yes, the exchange would know money came in from your bank account for the purchase, but the wallet (“cold storage” simply because it’s a physical device) is not traceable to a person. When you transfer any crypto from an exchange to your device. the system only recognizes it as “unknown wallet” since you do not register your device.
Hope that is helpful and good for you for being a forward thinker! Good luck.
@c0124w, you say the system only recognizes a physical device as “unknown wallet” since you do not register your device. But can’t the exchange identify the device “owner” using an IP address…say, if the IRS were to hold the exchange responsible for monitoring such transactions?
Hi Tom, yes in truth there is no REAL anonymous approach; a few exchanges that are truly anonymous are blocked from U.S. users specific to IP addresses. Many regulations already approved and in the works continue to focus on deeper tracking through every level of a transaction chain with many more stringent to come, I’m certain.
So yes, the government can (and would if worthy) trace to your IP but not the wallet device at the moment which I’m certain will change. In theory, this is good for everyone, however it’s the rotten apple (money laundering, fraud, etc.) that is driving the extremes IMHO. I get it, but the criminals and tax evaders will figure out how to find an open hotspot IP or heck, the public library (if we have any left!), and generate multiple IP’s in public spaces or who knows what. For every incredibly gifted developer out there, there’s another one around the corner whose intentions may not be good.
To self-clarify my anonymous comment(s), gains are taxed similar to stocks and I have no motive to hide from paying my share (and I can’t really), however, neither am I inclined to have the government (or anyone really) know whether I buy a new BBQ every year from Home Depot (which I don’t lol), or loaned some money to my neighbor (which I didn’t do that either :). This is their complex problem since now we’re all becoming ‘nodes’ in a complex blockchain network.
The other inherent and fundamental issue here is at what point does the general public no longer have a sense of privacy because of a few bad guys? Don’t get me started on contact tracing or AI surveillance :). There’s really no good answer at this time that is a balance of issues.
Back to the wallet; the purpose really is to put your crypto in a vault for safety. And to some extent currently, whatever you have or don’t have in a bank safe deposit box really should be no one’s business but even more importantly, is some protection against ‘modern day’ digital bank robbing.
On that note, whose to say if I’m being hacked and a daily withdrawal is $1 until I find out (if I do), and millions of other people? Many of these exchanges are bare bones simplicity and it’s really difficult to glaringly tell if that were to happen. It’s the classic credit card theft; spend $5 at the gas station, see if you get away with it, spend $20 at Safeway, and so on. Likely those of us at my age has had a credit card number stolen at least once.
So for those reasons, with an small extra step to protect yourself at about $60, it’s worth the effort to me.
Side note since I researched many of the wallet options out there, Ledger Nano is actually its own encrypted device with a hardware failure backup. If someone got hold of it, they would need the 24 words unique to that device to get access to your funds. Similarly, if you lose your 24 words, you can also never regain access.
Well, how’s that for a lengthy response that included more information you didn’t ask for?? 🙂
Criminals will always be ahead of crypto security. So much trouble and effort to secure a digital asset that is invisible and does not exist outside of electrons on a computer. I could buy 1 bitcoin or 1000 oz of silver. Seems like a no brainer to me. Silver is the 2nd most used commodity in the world next to oil. It has a track record of 5000 years. Plus I can keep it close to me. Silver does not have to compete with technology. It is what it is.
Let me start off by saying I own physical silver. IMO it’s not a “no brainer” for these reasons.
1. It has to be physically protected. What is your protected storage plan. Gun? Safe? Burial? Where? A 1000 ounces worth $25,000 weighs 62 lbs. Not the easiest thing to handle
2. Buying and selling is cumbersome. Do you have a selling plan that will not cost alot of your asset? If no, you need one. If yes, better test it now?
3. What will your heirs do? Have explained to them the who, what, where of how to cash it in?
4. All the above also applies to own physical gold as well.
Just saying there are some things to take into account when owning precious metals.
If hiding something in your home that weighs 62 pounds is difficult, you may lack imagination. If find it quite easy, but a good place to start is youtube. Buying and selling is more difficult, but everything in life worthwhile, may not be easy.
I dunno, if someone gave me 25,000 dollars of silver and I had to sell it I would find a way. Humans can be quite resourceful that way. I’m sure it will become more difficult to sell in the future with Fedcoin and total tracking of all transactions, but never impossible.
I was not saying silver/gold was the best investment, just better than any crypto IMHO. I know I have been wrong. One of several problems with bitcoin I have is not that the supply is limited (which it up for debate) but that the amount of OTHER cryptos is not. Technology always changes and damn fast too. What makes bitcoin superior?
I have read whitepapers on several other coins that seem far better than bitcoin. It seems the only thing holding it up is “faith”. When I base a investment on faith I would like to see it’s track record. Silver/gold = 5000 years roughly. Bitcoin?? Fedcoin may makes private transactions impossible soon, but silver/gold will always have value. Bitcoin?? Governments could wash it away tomorrow if they chose to.. They are just not ready yet.
Hedy, you are so right. I have mentioned the downsides of counting on precious metals after an economic collapse. There are many. Other than your comment I have never heard much from the negative side of this topic.
By the way, I just caught your name. Our daughter, age 46, is named Hedy after her maternal grandmother. She gets excited when we find another Hedy. We have a large floral oil painting in in our LR signed Hedy, Austrian painter Hedy Kugler.
This topic and the related comments are worth the price of my annual subscription. It gives me some good insight into this topic that I have increasing curiosity about. Thanks to all who have shared their thoughts.