Episode #179: Dan Ferris, “What We Do In The Markets, It’s An Unnatural Act…You’ve Got To Have Some Discipline”

Episode #179: Dan Ferris, “What We Do In The Markets, It’s An Unnatural Act…You’ve Got To Have Some Discipline”

 

 

 

 

 

 

Guest: Dan Ferris is the editor of Extreme Value and host of the Stansberry Investor Hour podcast. Dan joined Stansberry Research in 2000. He became editor of Extreme Value in 2002. Dan was among the few analysts to accurately describe the breadth and depth of the coming financial crisis in April 2008.

Date Recorded: 07/25/19

Run-Time: 1:10:22

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Summary: In episode 179 we welcome our guest, Dan Ferris. Meb begins with a discussion of Dan’s background as a guitarist, and his path into finance.

Dan then provides a high level view of his framework for how he thinks about investing. He discusses bottom-up value investing, and developing a powerful respect for the effect of cycles. When it came to evaluating companies, he took issue with traditional DCF analysis, and focused more on using DCF as a tool to provide guide posts to probabilities of various outcomes.

Next, Meb asks Dan to walk through the Extreme Value portfolio. Dan discusses there are 17 names with average days held of 1100, reflecting his thinking about equity as “permanent capital.” He covers names like Altius Minerals, Starbucks, and Dollar General. Dan also touches on his thinking behind the sell decision.

As the conversation winds down, Dan discusses some of the most influential books and passages he has read on investing: Chapter 20 of the Intelligent Investor, The Most Important Thing by Howard Marks, The Elements of Investing by Ellis and Malkiel, and more.

Don’t miss episode 179.

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Transcript of Episode 179:

Welcome Message: Welcome to “The Meb Faber Show,” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

Meb: Hey, podcast listeners, what’s up? Happy summertime. We’ve had a lot of great guests lately, and we’ve got another awesome show for you today. Today’s guest is one of my favourite writers, editor of the “Extreme Value Letter.” He’s also a host of the podcast, “Stansberry Investor Hour.” I got to listen to him just for his melodic voice. You’ll hear it in a minute. Welcome to the show, Dan Ferris.

Dan: Thank you. I’ve never heard anyone say I had a melodic voice. But I appreciate the compliment.

Meb: You know, I mean, even if I listened to you at 2x, which is my normal for podcasts, actually this morning, while at the gym listening to you, and another favourite writer and analyst, Mike Mauboussin, I always massacre his last name. But that was a fun podcast you guys just did, a really highly recommended one. He’s a bright mind.

Dan: Yes. I was really so thrilled when he agreed to get on. He’s one of my favourite people in all of finance. He has a very particular way of looking at the world. And at this point, he’s expanded from, you know, having a focus of making decisions about investing. I mean, his last two books got into just decision-making period, you know, sort of what Annie Duke might call “Thinking in Bets,” you know. Just thinking probabilistically and finding ways to make decisions. And it was awesome to talk to him.

Meb: Dan, we gotta do this. So you’re in southern Washington right now, what’s summertime like up there? Just you and the bald eagles and what else? What are you up to this summer?

Dan: Well, we don’t get a lot of bald eagles here in the suburbs.

Meb: That’s my Los Angeles like belief. Like when I think of like the Pacific Northwest, it’s just trees and forests and bald eagles.

Dan: Well, lots of trees. I mean, looking out my window here as I speak to you, I’m surrounded by 100 plus foot Douglas firs. So there’s lots of trees and lots of wildlife even in a regular neighbourhood. And it’s a beautiful place, that’s for sure. Just driving around town, you can see Mount Hood, and you can see… Usually, you can see Mount St. Helens. And every now and then you can see Mount Adams, but that’s kind of far away.

Meb: I love it. The nice thing about that is quite ways away from Wall and Broad streets, which is great, I think when it comes to markets. Even in Los Angeles, which is, you know, world global large city, you know, it feels like the main business here is still media, which is nice and refreshing. So anyway, I’ve known you for a long time, but a lot of listeners, your name may be new to them. How does a guy that at one point, loved just playing guitar ,end up in the financial markets? What was your background? Give us a little origin story, Dan Ferris origin story.

Dan: The Dan Ferris origin story was I… Let’s see, where do I start? Well, just start with just before I got into the business of giving people financial advice for a living. I had kind of dabbled around in the mining stocks. And I had actually been a subscriber to some newsletters that are published by the folks that I’ve been working for the last 21 years. And you know, stuff like old guys like Doug Casey and Jim Davidson, and what’s his name, Adrian Day, you know, sort of the old guard gold bug guys. So you know, I knew of the existence of this company, and I had actually made a little bit of money in gold stocks after reading some Doug Casey stuff.

You’re right, I was kind of screwing around in Baltimore, playing the guitar at a place called the Mean Bean Cafe, and other places, little joints around Baltimore, just playing classical guitar gigs and doing various things, doing local theatre and stuff. And actually, I hurt my back, was what happened and it kind of slowed me down. I had quit my job, I forget what I was doing. Oh, I was like waiting tables or something. And I quit my job because I had made some money in gold stocks. And I was gonna practice and try to get into the…enter the Guitar Foundation of America competition, which at that time, I think they held it in the LA area. They held it in Southern California.

And I was practicing like crazy and playing lots of guitar, and I was doing pretty well. I was like, wow, you know, who knows, maybe I’ll get past the initial round of this thing. And then one night, we were at the Mean Bean Cafe and I had played guitar, and I knew the owner and another friend of mine was there. And we used to close the place down and lock the door and raid the… You know, the owner was there so she let us raid the wine cabinet and stuff. And we cranked the stereo up. And we were dancing around and I was making people follow me around the couch like doing this crazy dance, you know.

And I was a skinny young guy, and they were all like kind of older, heavier people. So I thought it was funny to hop on one leg. By the end of that night, I had a searing pain in my lower back. And I had my first of two back surgeries one year later. And of course, I was screwed for the competition. And I remember recuperating out of my folks’ house, I wasn’t staying in my apartment after the operation. And I said, you know, I’m in my mid-30s here, maybe I’ll just be like a regular person and try to get some type of a job. You know, because the competition, it really just took the wind out of my sails for music, you know, and changed the whole…like, I didn’t get to play guitar. I didn’t play guitar for most of a year and a half. So that caused me to think twice about it.

And I wound up writing a letter. I had this friend of mine who lived across the street from me and I was sitting in her kitchen and she had just gotten a job at this publishing company. And she brought home all these newsletters and said, “This is what we publish.”

I was like, “I know this guy, that’s Doug Casey,” blah, blah, blah. And I took them home with me and I wrote Bill Bonner a letter. Bill Bonner, the founder of Agora, the publisher, and he actually hired me. He tells people that he hired me off the street, he says. So that’s it, that’s how I got into all this.

Meb: Well, there’s a lesson learned if you’re ever at the Bean Cafe, or is it Bean Cafe however you say it, always hop on two feet when you’re on the couch, not one.

Dan: Yeah.

Meb: All right, so gold stocks, I mean, that’s an interesting sort of introduction. Had you been interested in investing prior to that, or? You know, gold this summer 2019…you know, most of my listeners, we don’t talk that much about gold on the podcast. And I know you’re the big equity guys now. But gold seems to be creeping again up in price and starting to bring all the bulls out again. And what was the sort of transition, you start focusing on the mining sector? What was the kind of eventual runway there?

Dan: Okay, so when I first got hired, I had really only…the only equities I knew anything about at that point were gold stocks. And to me I wasn’t looking at individual stocks, I had bought a fund that I can barely remember the name back when U.S Global Investors was called United Services. I think they had a fund that was called the world gold fund or the global gold fund, something like that. And it was one of the only funds you could buy that actually had the small-cap stocks in it. Because I wanted that juice, that leverage to gold price. And this was in…there was a run-up in the mid-90s in gold and this was around that time.

That was the first thing, to me, it was a levered play on gold. So I was interested in it more about the…I was more interested in the commodity than the equities. But eventually, when I was hired by Agora, the first thing I wrote about were natural resources stocks. So it did effect a transition from, you know, before I did this for a living, you know, to when I started doing it. Totally focused in natural resources and that lasted for a few years. And then I started working for Porter Stansberry.

Meb: You know, it’s funny because so often you hear about people and their beginnings in investing and it’s almost like every single person is always attracted to the stuff that really moves. I mean, for me, it was, you know, I was coming of age in the sort of Internet bubble and biotech, you know. It’s like everyone that gets attracted to the stuff that really is volatile all over the place. You know, we hear time and time again. And you know, I think this generation, it’s probably crypto and who knows what else.

By the way, did they give you a pen or anything for the 20-year anniversary? I feel like you should have received some sort of, you know, jacket or a medal or something. Twenty years, that’s a long time to survive in our world.

Dan: I think the only person who noticed was Porter and that was because I wrote it in the Digest and hundreds of thousands of people saw it. He was the only one who noticed.

Meb: That’s like, you know, saying, like, “On my birthday yesterday,” you know, just making sure that everyone gets it. So, you know, I’ve been following your writing for a long time, I know kind of the answers to some of these questions, but would love for the audience to kind of work through it. Talk to me a little bit about what your framework for thinking about investing is now? And you can take this question as…feel free to tell it as an evolution from, you know, the mid-90s forward or just talk about it now. How do you think about the world of investing, and then we can start to get into some concepts, and ideas, and themes, and stocks and all that good stuff?

Dan: So I do have some thoughts about just the evolution of a few, bottom-up…more than a few bottom-up value investors or bottom-up fundamental type investors that I’ve met. And a lot of them, as you say, they started looking at things that move. They started looking at the biotechs or, you know, there was maybe a bull run on gold or some other thing, and they got into it the way you and I did.

And then, of course, it’s availability bias, the data point that you know anything about is the price in front of you. So you spend all your time believing and thinking that, well, there’s some way to predict where this is gonna go. And I’m gonna learn to read charts so that I can always predict and be right 100% of the time. You know, hopefully, you evolve past that. And rather than trying to go through all the steps, eventually, some of us wind up where I am, which is certainly a bottom-up fundamental one company at a time kind of an investor, but who has a powerful…has developed by experience and mistakes, a powerful respect for the effect of cycles.

So really, it’s mostly the bottom-up fundamentals. But because we…in the newsletter that we write “Extreme Value,” we definitely buy value when and where we find it no matter what the overall market is doing. But we’re more aware now of cycles, cycles in industries, and the overall market cycle. So, you know, there’s that piece of it.

And when it gets down to individual companies, we made a bit of a change from the traditional way. As you know, as maybe even listeners know, the traditional way of establishing the intrinsic value, which is what value investors do, right. They figure out what something is worth by figuring out the present value of all the future cash they’re gonna get out of a business or a particular asset or something. And then they establish an intrinsic value and they like to pay less than that.

The traditional way of doing that is something called discounted cash flow. And without going into all the technical details, basically, to do this model, you gotta predict things, you gotta just project revenues. At least revenues, margins, you know, maybe tax rate, a few other things, and you wind up with cash flows. And it irked me because I don’t know the future, Meb, and I don’t know anybody who does. So sitting around projecting, you know, into the future like that, it just always irked the crap out of me and I didn’t know what to do about it.

And then I read… You and I were talking earlier about Michael Mauboussin. I read Michael Mauboussin and Alfred Rappaport’s book called “Expectations Investing.” And, again, without… I don’t wanna get into all the hairy, ugly details of it. But the basic idea is, you plug in all that stuff, instead of projecting all those numbers and discounting them back to the present, you plug in whatever future projections you need in order to equal the current share price. And then you look at all the stuff you plugged in for the future and say, “Well, is that overly optimistic, or is it overly pessimistic, or right down the middle?” And if it’s overly pessimistic, and you like the business, you may have a decent investment on your hands.

Meb: And a great example of that, as he talks about…I imagine a real-world example today would probably be like Beyond Meat, which just hit I think 13 billion in market cap today, you know, and it has 50 million or 100 million in sales. And then what Michael would do is say, “All right, how many companies of this size have then grown revenues by 25%, 50%, 100% for this long to justify that sort of valuation?” And maybe it’s like, yeah, this has happened 1,000 times before. Or in some cases, you’re like, “No, they literally have to be the most successful company in history to just hit expectations.” And it’s a really nice, sort of anchoring framework to think about it.

My favourite example…I don’t know who to attribute this quote to, so apologies whoever said this. But it’s talking about discounted cash flows and it’s like the Hubble telescope. “If you change the inputs like if you move it an inch, you’re looking at an entirely different galaxy.” And that’s kind of, I think, to your point, one of the challenges with that is people feel like they’re running it out to the fourth decimal place. But you can really kind of come up with any input you want, or output you want of that model just by, you know, turning a few dials.

Dan: Exactly. And that thing you described, I think it was where you were describing how Mauboussin might think about this, you know, where he’d looked at other companies. How often has this sort of thing happened where the growth has gone through the roof like this and it’s turned out well. So that is actually… To our way of doing things, that’s a discrete piece, you know. That’s what I think Richard Taylor calls the “outside view,” right?

And Mauboussin…I think I really did learn about that from Mauboussin as well, the outside view, where you know, your bottom-up world, you can start to think there’s nothing else in the world, but this one company you’re looking at, right? And you’re looking at how it does versus its competitors and not much else. But then there’s that outside view.

And we’ve learned a little bit to start thinking about that, too. And it doesn’t take a lot of thinking, does it? To really just get that extra data point. How many companies have grown like this, or whatever it is? And you can really…it’s like a razor, it can really help eliminate possibilities for you. And I think in the case of Beyond Meat, some possibilities are definitely eliminated by doing that kind of analysis.

Meb: Well, I did a poll on Twitter a while back, I’m not sure if it’s before right around when it went public. And the funny thing was, it was like 75% of the people prefer the Impossible Burger. But apparently the Beyond sausage is their best tasting one. But we got a vegan and vegetarian in our office, so we’re gonna have to do a taste test here. But I think the Impossible… I’m a big fan of the Impossible Burger, anyway.

Okay, so I interrupted you. So we’re talking about valuation frameworks, talking about some of these ideas, feel free to keep rolling with that. So how do you kind of incorporate some of these concepts into the investment process that you’ve grown to get comfortable with?

Dan: Let’s see. So I described the basic change that we made and the basic thing that we do. There are like these five metrics that are kind of traditional value metrics. That one of the things that people learn to do as value investors, too, is they start out screening for valuation, they’re looking for cheap stocks. But after a while, you know, you get burned on a few dozen of these and you start screening for good businesses, and things you can keep on your radar screen.

So we have these five, what we call the five financial clues, which is basically a screen. And, you know, it’s not like everything that this screen puts…it’s a screen. So not everything that it puts out is gold, right? You know, it’s the beginning of analysis, not the end. But we find these five things often go with the really, really great businesses. So gushing free cash flow, consistent margins, and it could be consistently razor thin. Like I think Costco’s net margin over time has been like, you know, 1.5%. And I think the gross margin is around 12%, or 13%, something like that and just consistently. But obviously, it is a wonderful business, you know, they turn a lot of inventory, you know.

So just as long as it’s consistent. And the reason for that is that we think in capitalism, a consistent margin should attract competition of some kind, and be winnowed away. But if it’s consistent over time, they’re obviously doing something, they’re competing well, you know. That could be a really good clue that they’re competing well, simply put.

So the next one is a good balance sheet. There are different types of good balance sheets, basically, we put them in two camps. The financial fortresses where you get more cash than debt, so they can pay off… I think, Microsoft, I looked at them the other day, they can pay off all their debts and still have like 57 or 58 billion with a “b” in cash, which is amazing, right? And Apple is a similar story, even larger.

So there’s that or there is the balance sheet where maybe they have, you know, more debt than cash or substantially more. But, you know, it could be a business like Walmart that turns over so much product and the cash just comes in the door, you know, every split second of every day for 24 hours globally. And they have decent, you know, interest coverage from their earnings. So, you know, it’s okay that they don’t have a mountain of cash to offset debt, so we look for those.

And then we also look for how they handle the prospect of a category that we generally call shareholder rewards, which you could quibble with the title, but we don’t need to do that. Just dividends and share repurchases. And we found that really good businesses will maybe not even consistently, but good businesses that we found can buy back shares, rather opportunistically at times when they’re cheap. I mean, sometimes, you know, you get a calamity, like 2008, or something, and everybody’s afraid the whole world’s gonna cave in, no, you know, everybody stops the buybacks, right.

But over time, you know, if we get a, you know, like an early 2016, late 2015 period, or something like that, or last fall or something like that, and you find a company that’s doing some buybacks, taking advantage of it, maybe you’re looking at a good capital allocator. And we like dividends too, a consistent dividend payer. And I’ve learned to think about dividends a little differently. I realized, like most businesses, they do one thing, right, they sell one, you know, it’s a retail company, or they make one kind of, you know, product or something. And if they’re really successful, there’s only so much cash they can make use of back in the business.

So we want them to regularly get that cash out of their hands because, you know, when you get a lot of cash in your pocket, it burns a hole in your pocket. And maybe you get used to making some bad decisions. So, you know, we like companies that have a really good business where they invest all they can and then the surplus is paid out to shareholders. And I don’t mind that it’s double tax, you know, Warren Buffett has a thing about that, that doesn’t bother me one bit.

And then the fifth thing is return on equity. So as long as a company isn’t too terribly levered, this can be a good indicator of, over time, over a period of time, if it’s a consistently decent return on equity, like, you know, maybe 20% or higher. This is like… You know, return on equity is like, if a business were a bank account, return on equity is what you make on all the money you leave in it, right?

So over time… And you know, that’s a Charlie Munger thing, you know, like returns on capital, returns on invested capital. There’s a few metrics you could use in that respect, but it gets you generally the same place over a long period of time. So you know, we make all that a part of the kind of business screening process. And you know, then at some point, you just have to look at what they do and decide if you think it has a future or not, right? It’s a qualitative decision.

And I think of all the things that help us quantitatively with the qualitative part of figuring out if the management team has their head screwed on right and all that, probably, you know, the acquisitions they make, the investments they make, how they handle the balance sheet. We got really attracted to Sturm Ruger a long while back because the management changed, and they started taking cash out of the working capital, which was bloated. And you know, that can be a real neat thing. It’s like a one-time effect, but it can reflect… As long as that management stays in charge, it can reflect a much tighter, leaner kind of view on how to run the business and it can be good over time

Meb: A lot of what you talked about are nice because they’re great as disqualifiers too. You know, it’s great to pick the cheap companies that are good stewards of capital, but also, you’re avoiding the ones that are consistently diluting you, or expensive. And so just kind of puts you in the right general quadrant of kind of where to look around for decent opportunities, you know.

I love your framing of the shareholder rewards idea because it’s so funny with a political discourse today about everyone hating on buybacks. And then Jason Zweig wrote an amazing piece where he’s like, you know, it’s funny, back in 70 years ago, or just in a different time, earlier in the 20th century, he said that the big concern was the opposite, was that the government and all of the populace was up in arms because they didn’t want the CEOs to hold on to the money. Because the CEOs would just empire build, and waste it, and acquire other companies and pay themselves tons of money.

So it’s like the exact opposite today, where you’re like…you know, the discourse is so…the politicians, you know, they wanna argue for whatever probably will help them get elected and stay in power. But it’s so funny how it’s changed in so little time.

Dan: Yeah, actually, that is an interesting debate, isn’t it? People have this crazy, weird idea that, well, you’re buying back your shares so you’re not…you know, they use these various phrases, you’re not investing in America, you’re not investing in your people, you’re not doing this or that. And it’s a little goofy because if you are buying back your shares, you’ve already done all of that. And you’ve done it so unbelievably well that you’ve got all this excess capital. And to say, well, you should use that excess to pay people more or whatever it is build daycare. It depends on, you talk to Bernie Sanders, he’ll tell you what they should do with it, right?

Meb: Politicians will be politicians. So okay, that’s good starting point. And then, you know, you’ve probably been following names for a long time, you probably have your book of names that you kind of keep in the bullpen. But, you know, what’s the next step? How do you move from, say, you know, something being either attractive on the screen to actually becoming a recommendation? Are there any particular catalysts? Is it just getting comfortable with it? How do you think about actually tossing these into your portfolio?

Dan: Okay. So let’s take a current example. We haven’t thought a lot about this. We’re just, you know, kind of spitballing it between myself and the analyst, Mike Barrett, who works with me on “Extreme Value.” And I’m looking at Boeing here because, you know, I think the peak share price was like 440, and it’s in the low 3s or something. At this point, you know, there’s probably still more shoes to drop.

But the first thing I do is, you know, I ask Mike…Mike is sort of the keeper of the price implied expectations model that I described earlier that we got from Michael Mauboussin’s book. And I said, you know, what is… And it’s Price Implied Expectations, P-I-E, pie. So I say, you know, “What does the PIE say about Boeing?” And, you know, indeed, of course, the share price bakes in a fair amount of pessimism.

Now, you look at the recent quarter, and see the revenue down 30% or so, you know, maybe there’s a reason for that, right? The 737 Max was their absolute best-selling product of all time, and now it’s grounded worldwide, you can’t sell it. So that’s really bad for the business. And now the Department of Justice has expanded the inquiry to the 787 Dreamliner. So, you know, maybe we’re not interested yet.

But we could get interested at some point if we thought that maybe there was, you know, a point of maximum extreme worse than this pessimism. And that, you know, maybe they add another aircraft or two to the inquiry, and then that really, you know, ticks the market off and the stock goes down even more. Or, you know, there’s big fines to pay, they’ve taken a charge, I think it’s around 5…I’m gonna say 5 or 6 billion. I know, it’s 5 point something, I’m sorry, I don’t know the number. But just say 5 billion for compensating the 737 Max customers with discounts and cash payments and various things. Who knows if there isn’t more of that to come, right? There could be another one of those to come.

So it’s kind of early days, and you can take your time and just see how this thing unfolds. But we follow the… You know, Ben Graham has these principles. Ben Graham, the father of value investing, the father of security analysis. And he’s got this thing in his book “Security Analysis,” right from the very first edition. And he said, you know, “The untrained security buyer should never put money into a low-grade enterprise on any terms.” And in that, I would also say, a troubled enterprise, like Boeing. And you know, the trained security analysts…I don’t know how trained I am, because I taught myself all this stuff without anyone else teaching me, but I have learned certainly from others.

But the trained security analyst, he should be able to find almost anything is cheap enough at a given price and way too expensive at another. So Boeing can get cheap enough for us. Right now we’re just… It’s early days, we know we don’t have to be in a hurry. But we’ll keep running the PIE, you know, expectations versus what’s in the news and, you know, what’s in the press releases and various things, and what the Department of Justice is up to. And so that could go from radar screen to a pick one day if it gets cheap enough and we think the outlook isn’t as bad as what the share price projects.

Meb: Radar screen, no pun intended.

Dan: Yeah, I know. It’s on the radar screen. It’s an aircraft company.

Meb: Talk to us a little bit about the general sort of portfolio, is there a certain amount of names you typically keep in the bucket? How often are you holding these? Is it like a couple of months? Is it a couple of years? Talk to us a little bit about the way that that process looks, and then we’ll dive into maybe some more names.

Dan: Okay. So right now, in “Extreme Value,” we have…I can count them right in front of me here, let’s see, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 names and three of those are from the…we recommended DowDuPont prespin. And so now we have the post-spin DowDuPont and Corteva Agriscience. So there are 17 names altogether and, you know, we could probably go into the 20s, we could get close to 30 names, I think, and be comfortable. But the average days held is about 1,100 at this point. So yeah, I mean, for a newsletter, it’s like an eternity, right? Newsletters, you know, it’s like, well, maybe 1,000 hours, but not 1,000 days.

So yeah, I mean, when I think of equity, it’s permanent capital, in my mind. I was thinking about, you know, how hard it is to sell, right. Figuring out what to buy is almost like the easy part compared to what to sell, you know, when to sell. And I was thinking, you know, I don’t know how to sell and I don’t really think anybody knows how to sell. Warren Buffett doesn’t know how to sell. Because the nature of equity is this long-term commitment where you buy this business, and you know, if it’s run well, it pays you for a long, long time. And you keep this capital at work in something that the rest of the world finds useful. So I think that partially explains why we wind up a longer holding period than the average newsletter has.

Meb: Well, you know, it’s funny because there’s so many different ways to think about this. I think the way that most, you know, individuals in retail often get sucked into is they buy for all…could be good reasons but the sale process is like the final 1% of the entire process that they put effort to, but probably is equally if not more important to where they just say, you know, I’ll sell and usually get caught up in some sort of emotional situation, right? And I know maybe a lot of folks at your crew…and I think you’ve talked about this too, thinking in terms of having potentially one idea being trailing stops.

Another idea I heard is a private equity investor, so it’s a little different. But he basically says, “Look, my goal is to do like coffee-can to essentially never sell these positions,” which is another interesting way to think about it as well. Because it goes back to that old sort of Buffett if you only had, you know, 10 bullets in your chamber, you know, how would you allocate them and knowing that you may never be able to sell them. So talk to us a little bit about how you think about selling, what’s the framework? What’s the evolution? How do you put it into practice?

Dan: You know, over the years, I’ve made the classic value investor error about selling, right? We assess these things, and then we say, okay, it’s cheap enough to buy, it’s a good business, we’ll take it. And then we sell them when they get expensive. And that’s been a mistake. Now, there’s two things here, you know, none of this is easy, because I’m telling you this at the end of a pretty serious…not at the end. But after 10 years of a pretty serious run-up in equities. So any decision to sell a decent business in the last 5, 10 years has been a bad one.

But even so I think…you know, I recommended Microsoft in like 2006, I wanna say, and it was $20 or $25 or something like that. And I think we sold it in the ’40s. It’s like 120 or 130 or something now. And I realised that’s just a cash gushing business that is embedded in a billion people’s lives, at least. And I’m talking about Microsoft Office there. You know, it’s deeply embedded in our lives and I had no business selling the darn thing. And I was just guilty of that value investor, this thing looks kind of expensive to me selling. And I’ve done that a few times with things that proceeded to just continue to compound and compound and go up.

So we try not to make that mistake. And I’ve held on to Automatic Data Processing, ADP, since I think it’s October of 2008, that one’s still in there. I’ve got Johnson & Johnson in there that’s been in for eons, I don’t even know how long. I’ve got a little company called Altius Minerals that’s been in since March of 2009. Johnson & Johnson, since October 2010. So, you know, I’ve kind of learned the hard way to keep holding on to some of these things that keep doing what you sort of bought them to do. And, you know, again, there, you’re asking me like when to sell, and I’m telling you, well, not yet, if it’s a really good business that continues to do what you bought it to do.

Otherwise, Meb, I have made an enormous change. The biggest change I’ve made is that, indeed, looking at research that shows that if “Extreme Value” had used trailing stops, it would have gotten better results. We use them, we don’t use them on every pick, but we do use them. So you know, that’s just something that we do now, that helps us exit in a really kind of cold mechanical fashion, which is probably not a bad idea for us, you know, emotional human beings.

Meb: Well, it’s a good…I mean, not just from a systematic standpoint, but I feel like an emotional standpoint as well, where it’s just a good cleansing, sort of… You know, we all become so attached to everything we own. But in particular securities and you start cheering for them. And you start, you know, trying to only find confirming evidence on whatever your position may be all day long. And you know, as analysts and PM, our job should actually be mostly doing the opposite, you know, trying to find holes in the stories. But we all become totally different approach once you own something and once you don’t. Listeners, if you don’t believe me, go look around your garage. I guarantee you wouldn’t buy all that junk tomorrow if you didn’t own it. And I’m just as guilty of that, my garage is a mess.

Okay, so let’s talk about a few names. You mentioned… You know, one of my favourite things about some of your writing is you combine, you know, some names that people would have been familiar with and have heard of, Boeing J&J, Mister Softee. But there’s a fair amount of names that probably people have never heard of, you just mentioned some mineral company. What’s the thesis there, you’ve owned it for a long time, what’s going on?

Dan: Altius Minerals, so originally, I bought that… We recommended it in… What did I say? March of 2009. And it was a Graham and Dodd net-net. Meaning that their net cash and liquid assets, cash and equities, you know, they had more net liquid assets than market cap. And I was like, well, you know, if they’ve got seven or eight bucks worth of cash, and the thing is trading for six or seven, I mean, how bad can it be? Plus at that time, they had this one royalty that was paying all their expenses. And then they had a portfolio of these exploration prospects.

So here’s this mineral company, their bills are paid, they’ve got a ton of cash. And they’re sitting on all these potential, you know, multi-baggers. And so I thought, “Well, okay, this is good.” Then over time, I got to know the management, and I saw their behaviour through the full cycle, and I’m amazed at them. In 2007, or ’08 or so they sat down and made a list of a dozen or so assets, royalty assets that they wanted to buy, you know, mineral royalties on copper mines, and iron ore mines and things like that. And they waited until 2014, five years to buy the first one.

And when you see that kind of patience… And I know the people inside the business were bugging the CEO and the founder, Brian Dalton, they were saying, “Are you sure we shouldn’t buy something now?” And he was saying, “Nope, not yet. Don’t worry, the market will turn.” And of course, the mining stock market turned in a big way, after gold topped out at, you now, 1,900 and all that stuff just started getting obliterated. And got obliterated for, you know, really four solid years there, and then some.

And, you know, on the way down towards the bottom, that’s when they started putting money to work. And they bought a portfolio of royalties, which is…there’s potash royalties, there’s actually coal royalties in there. And the potash royalties are just a thing of wonder because the resource, the potash, they have royalties, basically on 20% of the global potash production. And it’s all in Canada, in Saskatchewan.

And so it’s really high-quality stuff, the mines are enormous. The resource, some of it in these mines, there’s like, literally 1,700 or 1,800 years at current production rate worth of this stuff. And if they expand the mine, you know, it can wind up even more. So it’s really weird to think that you can have this asset that’s probably… You know, the models on this thing probably don’t go out more than 20 years. And it’s got 1,700 years of runway ahead of it, you know. So I’m pretty sure that some of that value is just not in the price. And the sentiment in potash has been poor because the prices were kind of pushed down.

But, you know, they own just a royalty on this so they don’t have to pay for any of the upgrades on the mine, you know. You buy that royalty and you’re done investing. And a royalty is a beautiful thing, it’s real estate interest, it’s off the top, the revenue. So, you know, you don’t have to pay your share of the wages and, you know, keeping the lights on and all that stuff. And you don’t have to pay your share of capital needed to expand the mine or anything else or maintain it. So you get a good royalty, and it’s just a beautiful thing. And those potash royalties are beautiful things.

And I think that the cash from that alone, you know, could really…it could attract a lot more investors than it currently is. People are very enamoured of precious metals royalties, but you know, you’re lucky if you find a gold mine that’s gonna make it more than 10 or 12 years. And these things are gonna be around multiple mines for hundreds of years. Some of them like a few hundred or 500, 900, you know, much more than 1,000. Just numbers, like that it’s crazy. So it’s a really cool asset.

And they bought others, you know, they have a bunch of royalties, they have iron ore and copper, and a few other things. And the latest guidance…I don’t even have it in front of me. I think it’s up in the mid 70 millions a year. And the market cap of this thing is like… Actually, let’s… As I’m speaking to you, Meb, I’m gonna type in and check the market cap right this minute. Because I think it’s around 400…it’s less than 500, I think, these days. Canadian, it trades in Toronto ticker symbol, ALS. Oh, 550 Canadian, sorry. So yeah, 550, you know, your single-digit multiple of royalties. And, you know, gold royalties, precious metals royalties routinely change hands at like 20 times. Twenty times royalties or, you know, 15, to 20.

So this thing has yet to really get the recognition I feel that it deserves, but it’s begun to generate the cash flow, that, you know, we always hoped it would. And there are many more… They have dozens and dozens of prospects, mineral prospects, and on each one of these things, they take a royalty. And you know, maybe they’ll put shares into a public company, and they’ll own a piece of the public company, plus they’ll get the royalty. So, you know, if the thing does well, they’ll have these shares that they can sell. And then they’ll always have the royalty if the mine actually goes into production. Most of them won’t go into production.

But the thing is all you need… I mean, to move the needle on a 500 million market cap stock, one royalty can be worth 50, 100, 200 million. So the day, you know, that one of these mines goes into production, you know, this thing will get a big lift. Until then, the downside is minimal because it’s so cheap versus the royalties that it has now.

Meb: What’s interesting about that is imagine being that CEO, and having that sort of patience. I mean that… Like most CEOs operate on the timeframe of quarters maybe on 10Q’s and 10K’s, certainly 5 years waiting on some of these projects. I mean, that’s a lifetime for some CEOs, that’s a hard careerist to do, but it’s what you want, you know. Same thing as a money manager, you know, you want people that have a long-term time horizon, rather than chasing deals that may not be as economical. That’s a really fun idea.

And it’s interesting because of the size, but also that business model, like you mentioned, the streaming and royalties is a fascinating world, that you can even put together a portfolio, those sort of companies and ideas, I think is pretty interesting. I don’t think there’s any ETFs yet in U.S. on that. I have to look into it. You got time for another idea?

Dan: Actually, I want to talk about that one just a little bit more because I wanna emphasize the point that in mining, of course, the mining industry, it’s a highly capital intensive, you know, low margin, highly cyclical nightmare, right? Owning and operating a mine is kind of a terrible business, not kind of, it is a terrible business. But Altius Minerals is on the two ends of that, that make so much sense and are so highly capital efficient. They spend small amounts of money on a couple of dozen mineral prospects that they can do things with, very capital efficient. And they also, you know, make these investments in royalties. Which once you make that investment, like we said, you’re golden if you get a really good one.

So it’s really cool because here’s this cyclical industry that’s kind of ugly, but they’ve got the really attractive parts of it under one roof, and they do them both very well. I’ll tell you a little hint if people wanna know something about how to identify a good prospect generator. The prospect generator model is really wonderful. You do some original work, some original geological work, you stake out a prospect, usually for very little money. Then you get a partner, and you get them to spend money and earn in, you know, a majority share of it. And you know, it can wind up working out very well if they actually can develop it to the point where somebody wants to buy and make a mine out of it.

But a key thing to know about this model, and one of the foibles that companies get into is that they fall in love with one of their prospects, right, and they wind up with kind of a flagship project. That is a dead giveaway that they don’t understand the model. The model is do the work, stake the prospect, spend a little bit of money, maybe punching a hole or two in it, enough to attract a partner who wants to spend a lot more money to punch a lot more holes in it. And then you move on, right? Do your deal, move on, stake it out, do your deal, move on. And when you see a company that has very few prospects, and it’s kind of hawking one of them as a flagship, it’s a red flag, they’re not doing the model right.

Meb: Is part of that because they’re almost gambling or there’s a catastrophic risk of that one deal not working out, or what’s the main worry there?

Dan: Yeah, the main worry there is that you have to understand that this is a… You know, it’s an underwriting situation, right? You wanna underwrite as many…you know, you’re writing insurance, you want as many, you know, people, drivers of cars or owners of homes as possible. And you never wanna violate your underwriting parameters. And it’s the same way, you know, if you’re putting more capital into one project, I mean, it’s sort of… You know, in a portfolio, right, you have one stock in your portfolio, it’s a little riskier than if you have 20 of them, usually, you know, generally speaking, right?

So it’s the same thing, you’re putting all this money into this highly risky thing, and all the money you put in, it doesn’t make it any less highly risky, right? One in 3,000 of, you know, these mineral prospects a year is gonna become a mine. So, 1 in 3,000, keep that in mind, you know what I’m saying?

Meb: Interesting that world is so fascinating to me, but I’m 100% the dumb money there. So I love as a spectator following the entire space of natural resources. But I am absolutely not… And that’s a world that in many ways I think it’s defined by people like yourself who know the space and know some of the operators, or at least people that do and the business intricacies. Because it is certainly a minefield if you don’t because nothing…for some reason, nothing attracts shady people more than certain industries, and people love the natural resources world for some reason.

So I love that idea because it’s unique, it’s slightly different. It’s a great business model. It’s almost more like a hedge fund or a venture capital firm or financing sort of vehicle versus a traditional, like you said, exploration company. We got time for maybe another idea. Anything else that’s either particular interesting to you now or that you think is unique and different or something that you’re scratching your head about, anything come to mind?

Dan: Let’s see. Yeah, I mean, I’ll talk about a couple of things. First of all, I wanna brag about Starbucks, we picked this thing last August, it’s up almost 90%. And it had a good day today. So I was like, wow. And that one, it was very simple, we thought it was a great business, you know, it’s got a lot of customer loyalty. And we thought that people were too pessimistic on the business because they know how mature it is in the United States. And I asked Mike to run it through the Pricing Expectations model. And one of the ways he did that, it was like the market was saying, it’s just impossible for this thing to grow in the next four or five years.

And we thought that was silly because they’re building coffee shops in China. And the competition is not nearly as good as people think it is. That company, Luckin Coffee, just doesn’t do as well as Starbucks. Starbucks knows how to money running these things and Luckin hasn’t really figured it out yet.

Meb: And still a country of largely tea drinkers. You know, but I feel like once you have someone who probably drinks a pot, a morning habit, you know, once you come in with the hard stuff, it just seems like tea doesn’t stand a chance over the next 50 years.

Dan: I know. That’s right. They’re gonna start mainlining this stuff, man. But Starbucks… One of the things people don’t realize maybe in the U.S. unless they get over there, as I have in the past I guess…it’s been a couple of years now, is that Starbucks is like an iPhone, you know, people like to walk around with their Starbucks cup, and Luckin Coffee is like, who cares? You know, it’s like Nokia or something.

But Starbucks, you know, these people are becoming wealthy. And, you know, they like to signal just like every…they’re human beings, right. They love luxury goods, and they love Starbucks, and they love all kinds of things. I never would have get… They love Kentucky Fried Chicken for God’s sake. And a friend of mine, I go to the VALUEx Vail, it’s like one of this invitation-only kind of things of value investors that we do every year in Vail, Colorado. And this guy pitched Yum China, which owns Kentucky Fried Chicken, and he said, you know, “Biggest restaurant company in China and people love Kentucky Fried Chicken.”

And that just bowled me over. I was like, oh, it’s kind of like saying, you know, people in China love the U.S. flag or something, it’s just like not expected. But anyway, I’m bragging about Starbucks, but I did wanna mention Dollar General, which I think is a really neat business because, you know, they just remind me of Walmart. They run these dollar stores, actually, most of the things are $10, or under, you know, inflation and all that. And they run smaller stores, you know, like 50,000 square feet or so. So Walmart runs these behemoth stores with, you know, 150,000 SKUs, 150,000 items on the shelves.

And Dollar General runs a smaller store and mostly in a lot of rural and kind of more depressed communities. And they’ve got that market…like that’s how Walmart started out that way, you know. Sam Walton was like, “I don’t care, I want people in rural areas to get a good deal, and a good selection of merchandise and the big companies don’t want to come out here, they don’t think it’s worth it. So I’m gonna do it.” And then, of course, Walmart became this giant thing, and they had to go into everywhere they could go, you know, every market they could go.

And Dollar General is getting like that, they’re getting big enough to be that way. But I’m fascinated by the way they thrive in these poor communities. And the way, you know, they have this, like really bare-bones real estate strategy where, you know, you walk into one of these places, and it’s like, wow, you know, you didn’t spend any money on the building, did you? Or the fixtures or anything. And it kind of takes me back to, you know, the early days of Walmart, and I think it has a similar future ahead of it if they continue to run it the way they do. And they’re growing it quickly, which they can do at this point in their history.

Meb: And it seems like that business model, it’s like a duopoly or like, there’s only like two or three of those that seem to dominate the entire market, which usually ends up being in a pretty good place if you only have a few of those companies really competing.

Dan: Yeah, that’s right. And when you get into some of the places where there are…some of these tiny little communities have 1,000 people in them, there’s not room for a second one.

Meb: Interesting. So look, I got another two pages of questions. But we’ve already kept you for an hour. So I wanna definitely ask you about a few more things. But listeners, if you wanna hear Dan go on some of his famous rants or talk about Tesla, or there’s about 10 other things that he loves to talk about, definitely go check out his podcast, “Stansberry Investor Hour.”

But Dan, you talk a lot about historical books. And so I know you’re a big-time reader, part of that may just be you’re stuck in the woods of Oregon and Washington, and you know, there’s nothing else to do. But you said, I love listening to you talk about books because so many times it’s very specific. Like you’re like, you need to read page 20 of this and chapter 8 of this. I’ll give you free rein to this question, you can take it one of two ways, either would love to hear about some of the most influential books that have really made an impact on you and continue to do so. And/or you can answer both these, you know, what are some of the greatest books over the past few years that you’ve thought have been particularly great?

Dan: I’ll take on both of those, Meb. First one is the influential books and then, you know, you told me like, I refer to specific chapters and pages and things. And certainly, Chapter 20 of the “Intelligent Investor” is something that I have like a little alert on my phone to read it once a month. And I admit that I don’t… Like sometimes the alert comes up, and I like dismiss it and don’t read it, but most of the time I do. And it’s called margin of safety as the central concept of investment.

And that idea… Look, I’m only human. So what we do in the markets, it’s an unnatural act, it’s like jumping out of an airplane, you know, parachute or not, it’s an unnatural act. You know, the people who seem to be naturally good at it aren’t normal. And it requires…It’s like lifting weights, you know, you gotta work out and you gotta have some discipline. And that helps me have discipline and focus on the right thing.

And Graham has his four business-like principles in there. And you know, it’s simple stuff, know your business and, you know, run your business yourself, or have it run by somebody you trust. And you know, a couple of others, I can’t believe that I can’t remember all four of them off the top of my head. It’s amazing. So that’s been a big influential book to me, just because I keep going back to it, you know.

The other big one for me as an investor and an analyst and stuff was Howard Marks, “The Most Important Thing.” And I always chuckle about the title because Mark said he was in…you know, he says that he gets in these meetings with clients, and he winds up saying, “The most important thing is, you know, cycles.” And then the next client, he’ll say, “The most important thing is value.” And “The most important thing is risk. The most important thing is…” you know, whatever the next thing is. And so he said, he wound up with 18 most important things, so there’s like 18 things in this book.

And it just underscores how complex the process really is. And I like it when people don’t try to hide the complexity of something. And yet, Marks has taken each of those pieces that together constitute a complex undertaking. And he’s got some really good, simple principles and ideas about them that can help you. It’s really quite a tour de force, in my opinion. It’s called “The Most Important Thing” by Howard Marks. So those two like are really huge for me.

Another one I’ll mention real quick is a book called “The Elements of Investing” by Charlie Ellis and Burton Malkiel. And I opened this book up maybe six or eight years ago, whenever it came out initially, I forget. But the first chapter…it’s a real simple book, like anybody can read it, it’s for beginning investors. And it was the one book that started in the right place.

The first chapter was about saving money. And I realized that the discipline of saving money, it gets into everything you’ll ever do as an investor for the rest of your career as an investor. It’s amazing the way that discipline informs you and shapes you if you do it right. And that too is like a muscle, you just have to keep doing it and keep working out or you’re going to get flabby.

Meb: Well, and I think that one of the best hacks, as we’ve learned over the past few decades, with all the behavioural evidence, it’s almost like you have to automate it, you know. If you have the doughnut or the piece of pizza in the refrigerator like you’re going to eat it. So you know, go ahead and throw it in the trash or whatever it may be, you’re probably not gonna eat it.

And so this concept of automating savings, I think is so important. Because if you have to go write a check or transfer money to your retirement account every month, look, you may forget it, you may say, “Oh, well, you know, this came up, or I wanna go down to the Caribbean,” you know. It’s easy to get on that hedonic treadmill. But, you know, putting that stuff on autopilot I feel like it causes people to behave so much better.

And we often say this, you know, we say, look, we spend so much time on this podcast, so much time writing papers and books about the investment side. But I honestly believe the decision to save and invest in the first place trumps everything else down the line because you get that time of compounding and bigger amounts of money. So yeah, I think that’s a biggie.

Dan: And what I do… I do definitely believe in the automation too, I do that. But also, anytime I think of it, I will literally put like $50 or $100. I’ll transfer it from my checking account to wherever I want it in, you know, different accounts that constitute savings for me. And I realized it’s not about the amount, it’s about the constantly doing of it. It’s like practicing a musical instrument. It really is that important just to do it, and do it, and do it, and do it.

Meb: Well, it’s hard for people to think so far into the future. But we were talking about this on an old podcast with Paul Merryman where, you know, we said, look if you can compound for 50 years… You know, sorry for the old, no hairs in the audience. But maybe you can think about this in regards to your children and grandchildren. But 50 years at 10%, which is obviously incredibly good returns but that’s a 100x return.

So you know, thinking about, hey, I’m gonna put 1,000 bucks, you know, I go spend that on a new TV this year, or 50 years from now that’s worth 100 grand. You know that’s a really interesting construct on how to think about it. But the challenge, of course, is avoiding the temptation of getting your claws on and spending in the meantime.

All right. So we got three great classic books in pieces. Feel free to touch on any more that come to mind or anything particularly interesting you’ve been reading lately.

Dan: Yeah. So lately, there’s a couple of books that are really interesting to me. One of them is by a guy named Emanuel Derman, who is a Wall Street quant. He’s a physicist who went to Wall Street and made a career. And he’s got this book “Models Behaving Badly,” which… It’s a really deep…the guy is a really deep thinker. It’s got stuff from the Bible in there. And it’s got his experience with being raised in South Africa, so his experience with apartheid. And that’s a model, isn’t it? That’s a model for society. And he just discusses models from a point of view that we can all understand.

But he does treat the topic specifically of financial models, but he gives you a context that is just rich and beautiful. And the book is only like 200 pages. And he bowled me over with what he packed into those 200 pages and how much fun it was to read it.

So that’s definitely a good one. But I think the one that really got me this year it’s called “The Formula” by Albert-László Barabási. And the subtitle is “The Universal Laws of Success.” So, Barabási is a network scientist, he actually started out as a physicist too, and he became a network scientist. And basically, he studies the ways that human beings interact. And he’s got a couple of other previous books, one of them is called “Links,” you know, how everything is…or “Linked.” And that’s how everything is connected. And you know, that’s a sort of an obvious way to think about networks.

And another one is called “Bursts,” it’s all about hidden patterns that basically amount to more network science, you know, just in our daily lives, or whatever. But “The Formula” is about these…what he calls The Universal Laws of Success. And it sounds like a cheesy self-help book, but I promise you it’s not. It’s amazing. It’s like I said, “László, are you telling me that, you know, this stuff is like the law of gravity? Because you know, you’re talking about the law of succeeding. And he tells the story of various, you know, sports figures and artists and people who succeeded. And he says, “Yeah, I genuinely believe that this stuff it’s not self-help, it’s real laws, like the law of gravity.”

And I’ll just tell you, like, for example, he talks about the difference between performance and success, right. So performance, if you look at Tiger Woods, like…Let’s just say he’s the best golfer, I don’t know, really, who is right now, but let’s just say it’s him. His performance is a little bit better than everybody else, but his success is like, much more than everybody else. Because, you know, he’s number one, so he attracts disproportionately more attention than the number two guy.

And so performance… So one of the laws is performance is bounded, success is unbounded, right. And the final law gives me hope, like he… Some of this stuff, you know, there’s not great news. Like the fourth law is while team success requires diversity and balance, a single individual will always receive credit for the group’s achievements. I’m like, oh, boy, that doesn’t sound great. But the fifth law is with persistence, success can come at anytime. And he backs all this stuff up with numerous, you know, real scientific studies and data. I mean, he has a whole team of people that help him study this stuff. And it’s a fascinating book.

Meb: I love it, that one is new to me, I’m gonna put that on my shelf, summertime reads. Dan, what are some more of your resources that you rely on, as far as you know, your process, anything that comes to mind that people can use? It could be websites, it could be conferences, it could be anything that you think is particularly interesting, that people may find of interest.

Dan: So for people, I go to YouTube and see if they’ve, you know, given a talk that’s been put up. You know, like, when I got into Michael Mauboussin I went to YouTube, and he’s all over YouTube. Nassim Taleb all over YouTube. So for people, that’s a good one. For companies, most people aren’t gonna wanna hear this, you know, especially individual investors. But nothing beats going to the SEC website and looking up the company’s 10K or 10Q. Especially the 10K, that’s the first thing you should read. Because otherwise, you’re highly in danger of just kind of getting a sexy story and having that influence you way too much.

But if the first thing you go to is, you know, this really dry kind of document, and I’m not saying there’s no hype in a 10K, right, it’s written by human beings. But there’s a lot of stuff in there. You know, there’s always a big list of risk factors that people should read. And there’s some interesting stuff.

I mean, in the filing documents, like the S1, the initial filing documents for the IPO on Beyond Meat that we mentioned earlier, there’s a fascinating letter in there by the CEO and founder that I would recommend anyone to read. It’s fascinating. And you know, just talks about the state of the meat market and it’s just…you know, I won’t ruin it for you. It’s really good. So, you know, those are a couple of things that we look at.

And you know, we have “Bloomberg,” I mean, it costs a fortune. Most people don’t wanna pay a fortune for it. But you know, other than that, just you know, I thumb through “The Financial Times,” and “Wall Street Journal” and all that kind of stuff, “Bloomberg.” Or even like crazy place like Zero Hedge or, you know, Reddit or something. You never know where you’re gonna find some ideas.

Meb: Yeah, it’s funny. That reminds me we just had on the podcast…you’ll probably remember this. But if you go back to the late ’90s, the founder of “RagingBull,” who’s now been running a very successful hedge fund for 15 years after running kind of the original message board. I don’t know what it is now because it was kind of like, “RagingBull,” then Yahoo, maybe Seeking Alpha. I don’t even know where people go to pick huge fights and pump stocks these days. But that’s funny. Are we gonna see you at the annual Stansberry Conference this year? I think I’ll be attending.

Dan: Absolutely.

Meb: Cool, we’ll definitely spend some time there. We’re gonna start winding down. Last question, what has been over the years your most memorable investment? Could be good, bad, in between. But the first thing that pops to mind, anything that’s particularly seared into Dan’s brain?

Dan: Yes, there is one that I will never forget. As soon as somebody asked me a question anything like the one you just did, I think about when I was a young man wanting to know how to make money in markets, the first thing I ever did was trade commodities. And I started with $2,000 and I ended up with $268, a number I will never ever forget. And you know, I paid early tuition payments on.

Meb: Do you recall what commodity you traded? Was it pork bellies? Was it orange juice? Any idea?

Dan: I started out trying to trade Eurodollars actually, you know, basically foreign interest rates, right, like dollar interest rates in foreign banks. And you know, just got… I think I actually traded platinum and gold too as well and, you know, I don’t think I ever made a profit on one trade.

Meb: That’s the crypto of our generation. That’s where when we wanted to find the juice, that’s where you went lever up the commodity futures. Dan, it’s been a blast. Where can people find everything that you’re up to, your writings, your podcast, the best place to keep up with your thoughts, where do they go?

Dan: So for the podcast, you can go to investorhour.com. You can read about me on stansberryresearch.com. And if you are interested in “Extreme Value,” we have a website called extremevalueoffer.com. I should know what that offer is, but they change it, and I’m kind of not in charge of whatever it is. So I don’t really know what it is.

Meb: I’ll talk them into giving a good discount for our podcast listeners, how’s that?

Dan: Yes, do that, yeah.

Meb: Well, Dan, I really appreciate you taking the time. It’s been a lot of fun. Thanks for joining us today.

Dan: Thank you, Meb, it has been fun. It’s been great talking to you. You and I we’re like ships that pass in the night at all these conferences and stuff. We should talk more.

Meb: We’ll do it all the time. Listeners, we’ll post show note links to all the things we mentioned today, the books, the conferences, everything that Dan was talking about, his podcast link, which I highly recommend. It’s a lot of fun, it’s in my queue every week. mebfaber.com/podcast, shoot us any feedback you have criticisms, comments, thoughts. Feedback@the mebfabershow.com. Subscribe to the show anywhere that good podcasts are sold. Thanks for listening friends and good investing.