GUALFIN, Argentina – Here at the ranch, the skies have darkened, and the temperature has dropped sharply.
It’s that time of year. The first frost can’t be long coming.
At least we have time to think…
For instance, in the upcoming issue of our monthly publication, The Bill Bonner Letter, we try to figure out how the credit-money system really works.
After years of observation, heavy drinking, and meditation, we think we finally understand, more or less, what is going on.
To make a long story short: Funny money produces a funny economy.
And people don’t become better off in a funny economy. They get poorer.
Private, Not Public
More on that in future updates…
Today, we want to deal with the many questions Diary readers have sent in about our deal with top stock picker Chris Mayer.
As we began to explain earlier this week, we’ve been in this business for over three decades. During that time, our investment profits have been meager, but our skepticism has greatly increased!
The truth is, few people make much money from public market investing. You’re much more likely to make real money by buying a parking lot… investing in your brother’s new venture… or starting your own business.
Buying a stock on Wall Street… or worse, investing “in the stock market”… seems to us like a reckless gamble.
If there were real money to be made, why would the Wall Street sharpies let you make it?
The only possible answer: They make more money selling you shares than they would by buying them.
And look at the prices…
When you make an investment in a private company, you may pay only five or six times expected annual earnings. In the public market, a share in a company may sell for twice that much… and often much more.
Where does all that extra money go?
To lawyers, accountants, investment banks, venture capitalists – the people who wear Italian suits, drive German cars, and have houses on Long Island.
The way to make real money is to avoid those people… and focus your attention on something you can learn yourself.
That’s where the real payoff is.
If you expect your investment to grow, you have to fertilize it with private, not public, knowledge.
For example, everybody knows people are getting older. But if you want to make money, you have to know that the old timers need a place to park when they visit the clinic near you.
Then, you’re able to invest smart… in something you understand. That’s why real estate is often a good investment: It’s local… and understandable.
If you follow the local market closely, you’ll probably find some bargains… or know enough to stay out.
Mr. Smarty Pants
We had another deal proposed to us yesterday – a landmark building in Baltimore… 37,000 square feet… available for free.
We asked a shrewd partner in Baltimore to check it out. His report:
“Yes… it’s there. And there are tax credits that might make it free. But it won’t be free by the time you do what you need to do. Besides, it’s almost unusable space. Spectacular, but very inefficient.
“You’d have to set the rent so high it would probably remain empty for a long time. It might work in DC or New York. But in Baltimore, that ‘free’ building could cost you a lot of money.”
We decided to pass. You gotta know the territory.
This all sounds obvious. And of course, it is. But it probably invites the question:
Alright, Mr. Smarty Pants, why are you investing in the stock market now… when you think the stock market is generally a bad place to make money… and especially right now?
Mr. Smarty Pants answers:
We would prefer to invest in private deals. But we have a problem. Private deals take time. We have money to invest… but no time to figure out private deals.
Often, we get offered a good deal – from a friend, a family member, or a business partner – and we have to decline, simply because we don’t have the time to study it.
For instance, we were offered the opportunity to invest in colleague Porter Stansberry’s new razor company, OneBlade. We had to say no – even though it looked like a big winner. (More on Porter’s new venture next week.)
We just don’t have the time to pay attention to it. We’re too busy writing to you!
Our “One-Thirds” Strategy
That leaves us forced to put money somewhere.
Gold, yes. Cash, yes. But what if we’re wrong about the big picture? What if gold is made obsolete by Bitcoin… and inflation picks up, hurting our cash positions?
What if Mr. Smarty Pants isn’t as smart as he thinks?
As we told Bill Bonner Letter readers, that’s why we hedge our bets with a simple “one-thirds” portfolio. Broadly speaking, we put one-third of our money in cash, one-third in gold, and one-third in carefully selected stocks.
And we thought it would be interesting… and educational… to do it in plain view.
That’s why, for our allocation to stocks, we decided to follow the recommendations Chris Mayer makes to readers in his new advisory, Bonner Private Portfolio.
That way, you learn what we learn.
You see, we don’t regard money as an end. It is more a tool. With money, you can do things that you can’t do without it. And you learn things. You see the results.
So, even if you don’t subscribe to Chris’ new advisory, we’ll tell you how it turns out.
Further Reading: Bill is rightly distrustful of systems that promise you can beat the market with stock picking or market timing. But Chris’ track record proves it can be done.
Over the last decade, his recommendations have outperformed the world’s greatest investor, Warren Buffett, by nearly two times. That’s why Bill is using $5 million of his family’s trust to follow Chris’ next picks.
And now, you have the first-ever chance to invest in them, too – before Bill. But this opportunity ends next Tuesday. So, if you’re interested in investing alongside Bill and the Bonner family, click here now to learn more.
BY CHRIS MAYER, CHIEF INVESTMENT STRATEGIST,
BONNER PRIVATE PORTFOLIO
If you asked most people which U.S. bank had the best investment record during the 1980s, you’d probably hear a lot of votes for Citibank, Chase, or Goldman Sachs.
They’d all be wrong.
That record belongs to Citizens Bank & Trust, based in Chillicothe, Missouri.
At the time, Forbes Magazine sent a reporter to find out who was the genius behind CB&T’s returns.
The unlikely hero was Edgerton Welch – a 72-year-old investor who didn’t know a thing about great investors or modern portfolio theory.
He was the investment world’s equivalent of a rube.
Asked how he did it, Welch said he had a simple system he consistently applied. He bought all the stocks ranked “1” by investment research firm Value Line that either Merrill Lynch or E. F. Hutton also rated as buys. (The “1” ranking is Value Line’s top rating.)
When a stock no longer met these conditions, he sold it.
That was it.
What’s the moral?
Keep it simple.
I’ll tell you, the older I get and the more investment scars I acquire, the more I respect simplicity.
My “CODE” system is simple. (CODE is the acronym I use to describe what I look for in an investment: a Cheap or undervalued stock… Owner-operators at the helm… Disclosures of good quality… and in Excellent financial condition.)
I try to stick with simple ideas where the value is clear. If I can’t explain it in one minute with a crayon on a napkin, I start to wonder.
Remember that next time you scratch your head over some imponderable research.
Keep it simple.
Chief Investment Strategist, Bonner Private Portfolio
P.S. I’ve walked away from a $950k-a-year offer from an investment bank… and have been asked to manage money by wealthy subscribers and hedge funds. But I’m hugely excited about my new project with the Bonner family.
Next week, Bill will begin following my recommendations with his family’s trust. If you want to learn about my top recommendations before Bill does… watch Bill’s online presentation here. (And don’t forget – this offer will end next Tuesday.)
Billionaire Investor: China Looks Like U.S. Before the Crisis
Veteran speculator George Soros warns that China’s debt-fueled economy resembles the U.S. in 2007-08 – right before credit markets seized up and triggered a global recession.
Repeat After Me: Negative Interest Rates Are a Tax
Central bankers think negative rates stimulate the economy. They’re dead wrong. Charging banks to keep money on deposit with central banks works just like a tax increase on banks.
This Long-Forgotten Sector Is Heating Up Again
Agriculture ETFs have been lagging behind their precious metals cousins through much of this year’s commodities surge. But that’s beginning to change. Is this the start of a new ag rally?
We kick off today’s Mailbag with some feedback on Chris Mayer’s new project, Bonner Private Portfolio.
Chris Mayer (and the entire staff there) – I just want to take a moment to say thank you! Finally, a team of advisors with a clear vision, great track record and a positive message…
I am thrilled to be onboard. And if we top 5% gains each year, you’ve got me as a subscriber and a loyal fan for life. Thank You.– Donald C.
And readers have also written in with kind words for Bill…
Bill’s Diary has energized me to start my own diary (mainly for myself). It will give me time to see the bigger picture more clearly and direct my thinking outside the “box”… and think about the things that give me real purpose in life outside my business.
I am leaving on a two-week cruise this weekend, and I have my new diary in my bag. There’s eight wonderful days for genuine meditation before reaching the island of Funchal just north of the Canary Islands.
Thanks for the inspiration.– Bob M.
I am just a little old lady Francophile from Georgia… a bit older than you.
Bill, you are the kind we need more of! Glad I know you, at least from all these years with Agora in one form or another. Please keep up my vicarious enjoyment with your family.– Lenoir Wells
In Case You Missed it…
Bill’s special web event with Chris Mayer last week was a huge hit with your fellow Diary readers.
More than 30,000 people joined us to learn the investing strategy that’s made Chris one of the top stock pickers in the business for more than a decade.
It’s not too late to catch up on what you missed. Bill has prepared a special online presentation to explain why he’s committing $5 million of his own family money to follow Chris’ recommendations. Access it here now.