He describes why in the essay below. We need to speak about real financial madness. It's something you do not see very frequently. It can lead to the most unbelievable gains of your investing life. who is porter stansberry bio. Or it can ruin all of your wealth if you're swept up in it. I have actually just seen two bona fide investment manias.
I'm speaking about genuine "one method" tradessituations that can just lead to catastrophe - porter stansberry research. Yet for some factor, everyone pertains to see the trade as a sure method to make cash, not lose it. *** Let me present the concept with a true story. It has to do with John Templeton. You may have become aware of him in the past.
He built a huge mutual-fund company, Templeton Investments, which he offered in 1992 and made $440 million - porter stansberry american 2020. His very first "huge trade" came right after Hitler attacked Poland in 1939. Stocks sold, hard. There were 104 different stocks on the New York Stock Exchange that were trading for $1 or less (alex jones porter stansberry).
His rationale was that throughout the Depression there was a surplus of everything, and therefore no earnings. Throughout a war, which was undoubtedly coming, there would be a shortage of whatever and big revenues - porter stansberry research. Within 3 years he 'd made an earnings on all but four of the stocks. Over a years, the earnings on this trade were more than 10,000%. porter stansberry.
Technology stocks had actually been on a tear higher considering that the mid-1990s, with business like Intel, Microsoft, Yahoo, and Qualcomm making substantial returns for financiers. Later, however, the number and quality of the business reaching the public markets began to decrease significantly. porter stansberry end of america review. And by January of 2000, the scenario reached a peak.
And so, en masse, investors began to believe a lie that couldn't perhaps hold true. america 2020 porter stansberry. It was the best monetary mania the world had seen given that John Law's South Sea Bubble in the early 1700s. *** I more than happy to report that we did a good task alerting people about what was truly taking place As Steve Sjuggerud wrote in January 2000 (on the newsletter's front page): We are at the peak of more than likely the best monetary mania that will ever be seen in our life times and quite perhaps the best ever seen (porter stansberry america 2020).
If you remained in the markets back then, you certainly keep in mind a few of the most famous disastersPets.com, Webvan, and WorldCom. These firms were backed by highly regarded endeavor capitalists and had business strategies that were at least plausible. But this wasn't just a bubble. It was a mania - porter stansberry on alex jones. Even the most clearly worthless endeavors reached multibillion-dollar appraisals.
It made generic software for internet service companies, but never ever earned a profit. In 2002, Yahoo purchased the business for $235 million. It overpaid - porter stansberry review. In 2009, the Inktomi software was contributed to the general public under an open-source license. Everyone can use it today totally free. Boo.com invested $188 million of investors' money and deserved more than $1 billion (on paper) (porter stansberry youtube).
Pixelon was a digital-streaming company that launched operations with a $16 million party, featuring The Who and the Dixie Chicks. It stopped working in less than a year. It never ever produced any income. And Lycos was a fourth-rate search engine. Spanish telecom operator Telefonica bought it for $12.5 billion. In 2004, it offered it for $95 million.
Its owners guarantee that "new Lycos" is coming soon (porter stansberry). It's sold India, if you're interested. There were hundreds of IPOs like these. An index of dot-com business tracked by TheStreet.com fell 75% in 2000. Lots of stocks fell by 99%including U.S. Interactive, Pacific Gateway Exchange, Foundation Internet Solutions, and Worldwide Exceed Group.
Most of the disclosures stated plainly that these companies had couple of, if any, clients. Most of them said they had no written arrangements or agreements. The danger disclosures explained, in plain English, that these weren't genuine businesses and they had close to no opportunity of remaining in business. And it didn't matter.
It was a real mania (porter stansberry review). *** Templeton watched the market action silently from his retirement community in the Bahamas. Finally, on January 1, he understood that the mania could not go on much longer. The scams were surpassing the legitimate IPOs by 10-to-1. He called his broker in New York and offered really easy directions: Short as lots of shares as you can get of every innovation IPO that lists.
(The lock-up prevents insiders from offering shares till some duration after the IPO, typically 90 days.) In the very first half of 2000, Templeton ended up shorting 84 stocks, putting approximately $2.2 million into each of them. porter stansberry american 2020. He made more than $100 million on the trade, in about a year (porter stansberry book america 2020).
Of the trade, Templeton informed Forbes magazine: This is the only time in my 88 years when I saw technology stocks go to 100 times profits; or, when there were no earnings, 20 times sales - porter stansberry america 2020 pdf. It was ridiculous, and I benefited from the short-term madness (porter stansberry review). I never thought I 'd see a mania like that occur again in my life.
This was a scenario where investors were entirely overlooking the apparent truth that the overwhelming majority of these business would stop working and after that bidding them up to totally outrageous prices. This wasn't overexuberance. It was insanity. And over the next 24 months, financiers saw $5 trillion of market price vanish (porter stansberry investment). porter stansberry research.
It's a mania that has actually been created (and is being sustained) by main banks and printing presses. Today, all over the world, something around $15 trillion in set income is trading at a cost that ensures investors will lose money if they purchase the bond and hold it until maturity. I want to make sure you understand what's happening because the bond market and bonds are a secret to a great deal of individual financiers.
How can that happen? It happens when financiers bid the existing price of a bond so far above par that the staying vouchers to be paid will not cover the loss when the bond grows. So for example, you may see a bond trading at $130, when it just has $29 worth of interest delegated be paid prior to it develops at $100.
Best Value Stocks | ||
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Price ($) | Market Cap ($B) | |
NRG Energy Inc. (NRG) | 33.74 | 8.2 |
Vornado Realty Trust (VNO) | 36.21 | 6.9 |
MGM Resorts International (MGM) | 15.41 | 7.6 |
Type | Publishing company |
---|---|
Founder | Bill Bonner |
Headquarters | Baltimore, MD |
Parent | The Agora |
Website | agorafinancial.com/ |
Naturally, all financiers believe that they will be active enough to sell before that occurs. And all financiers believe that the governments will continue to buy these bonds or perhaps even stocks and do whatever it takes to keep the bubble growing. This situation is the meaning of a financial investment mania.
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