He discusses why in the essay below. We need to talk about true financial madness. It's something you do not see very typically. It can lead to the most incredible gains of your investing life. porter stansberry blueprint. Or it can destroy all of your wealth if you're swept up in it. I've just seen two bona fide investment manias.
I'm discussing genuine "one method" tradessituations that can only result in catastrophe - porter stansberry. Yet for some reason, everybody concerns see the trade as a sure way to earn money, not lose it. *** Let me introduce the concept with a real story. It's about John Templeton. You might have become aware of him in the past.
He developed a substantial mutual-fund business, Templeton Investments, which he offered in 1992 and made $440 million - porter stansberry review. His very first "huge trade" came right after Hitler got into Poland in 1939. Stocks sold, hard. There were 104 different stocks on the New York Stock Exchange that were trading for $1 or less (the battle for america porter stansberry).
His rationale was that throughout the Depression there was a surplus of whatever, and for that reason no revenues. During a war, which was undoubtedly coming, there would be a lack of whatever and big earnings - porter stansberry. Within three years he 'd earned a profit on all but four of the stocks. Over a years, the revenues on this trade were more than 10,000%. porter stansberry.
Innovation stocks had been on a tear higher since the mid-1990s, with business like Intel, Microsoft, Yahoo, and Qualcomm making substantial returns for financiers. Later on, though, the number and quality of the companies reaching the public markets began to decline substantially. frank porter stansberry net worth. And by January of 2000, the circumstance reached a peak.
Therefore, en masse, financiers started to think a lie that couldn't perhaps be real. porter stansberry wikipedia. It was the best financial mania the world had seen considering that John Law's South Sea Bubble in the early 1700s. *** I enjoy to report that we did an excellent job alerting individuals about what was actually taking place As Steve Sjuggerud composed in January 2000 (on the newsletter's front page): We are at the peak of probably the best financial mania that will ever be seen in our lifetimes and quite potentially the best ever witnessed (porter stansberry research).
If you remained in the marketplaces at that time, you surely remember a few of the most well-known disastersPets.com, Webvan, and WorldCom. These firms were backed by reputable investor and had company strategies that were at least plausible. However this wasn't simply a bubble. It was a mania - snopes porter stansberry. Even the most clearly useless ventures reached multibillion-dollar valuations.
It made generic software for web service providers, but never ever made a revenue. In 2002, Yahoo purchased the business for $235 million. It paid too much - porter stansberry debt jubilee. In 2009, the Inktomi software was donated to the public under an open-source license. Everybody can use it today totally free. Boo.com spent $188 countless investors' money and was worth more than $1 billion (on paper) (porter stansberry ge).
Pixelon was a digital-streaming company that launched operations with a $16 million party, featuring The Who and the Dixie Chicks. It failed in less than a year. It never ever produced any profits. And Lycos was a fourth-rate search engine. Spanish telecom operator Telefonica purchased it for $12.5 billion. In 2004, it sold it for $95 million.
Its owners assure that "brand-new Lycos" is coming soon (porter stansberry debt jubilee). It's traded in 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. Many stocks fell by 99%including U.S. Interactive, Pacific Gateway Exchange, Foundation Internet Solutions, and Worldwide Exceed Group.
The majority of the disclosures stated clearly that these companies had few, if any, customers. Most of them said they had no written arrangements or contracts. The threat disclosures explained, in plain English, that these weren't real companies and they had close to zero opportunity of remaining in business. And it didn't matter.
It was a real mania (porter stansberry debt jubilee). *** Templeton enjoyed the marketplace action quietly from his retirement house in the Bahamas. Lastly, on January 1, he understood that the mania couldn't go on much longer. The frauds were surpassing the genuine IPOs by 10-to-1. He called his broker in New york city and offered extremely easy guidelines: Short as many shares as you can get of every technology IPO that notes.
(The lock-up avoids experts from offering shares up until some period after the IPO, normally 90 days.) In the first half of 2000, Templeton ended up shorting 84 stocks, putting an average of $2.2 million into each of them. porter stansberry review. He made more than $100 million on the trade, in about a year (the battle for america porter stansberry).
Of the trade, Templeton informed Forbes publication: This is the only time in my 88 years when I saw technology stocks go to 100 times incomes; or, when there were no incomes, 20 times sales - porter stansberry investment advisory. It was ridiculous, and I made the most of the momentary madness (porter stansberry). I never ever believed I 'd see a mania like that happen again in my life.
This was a situation where financiers were totally overlooking the obvious fact that the frustrating bulk of these companies would fail and then bidding them up to totally insane costs. This wasn't overexuberance. It was madness. And over the next 24 months, investors saw $5 trillion of market price disappear (porter stansberry predictions 2014). porter stansberry debt jubilee.
It's a mania that has actually been produced (and is being sustained) by reserve banks and printing presses. Today, worldwide, something around $15 trillion in set income is trading at a price that ensures financiers will lose cash if they purchase the bond and hold it up until maturity. I wish to make sure you comprehend what's occurring due to the fact that the bond market and bonds are a mystery to a lot of individual investors.
How can that happen? It occurs when investors bid the existing cost of a bond so far above par that the remaining coupons to be paid will not cover the loss when the bond develops. So for instance, you might see a bond trading at $130, when it just has $29 worth of interest left to be paid before it matures 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/ |
Obviously, all financiers think that they will be nimble enough to offer before that happens. And all investors believe that the governments will continue to purchase these bonds or perhaps even stocks and do whatever it takes to keep the bubble growing. This circumstance is the meaning of an investment mania.
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