Peter St. Onge – Making Sense of the American Economy

He was making a ton of money during the dot-com boom and he kept selling too early and then the stocks would keep going up and he was calculating his millions of dollars that…

– Didn’t make?

– That he didn’t make.

– Which is not the same thing as losses.

– No. No. That he didn’t make. So he went to an island with no internet in Thailand. And when he came back, he lost everything.

– Yeah.

– That got him. He’s also a visiting fellow at the Heritage Foundation. Very sharp.

– Knows his stuff.

– He has an X account. You can find him @ProfStOnge, Prof St Onge, and his podcast is Peter St Onge, O-N-G-E, .com.

So I look forward to having him on. We’re going to talk a lot of economics, a lot of things that we would normally kick the show off of, of the consumer, inflation, money, and all that type of stuff.

So we’re going to skip the teaching part today and we’re just going to go straight to the interview.

– Well, before we get to Peter St Onge, which I want to endorse his podcast and his X account, his Twitter account. I listen to both and read his… I listen to his podcast and I read his X account every day. He is a really good thinker and he is sound. Very few people are ideologically sound. He is completely sound.

The other podcast that I want to point everybody to listen to is not just Peter St Onge, but I discovered the very best business podcasts I’ve discovered. Now, Peter St Onge is an economist, but this is a business thing, and it’s Acquired.

– Yes.

– It’s The Acquired Podcast. And I’ve been listening, this week, to several of their shows. They’ve got a great explanation of Hermés, of LVMH, of Microsoft, of Nike. If you are a fan of business, as I am, you will love this podcast, and it’s completely free. They do a fantastic job. Very impressed by their work.

But let’s go talk to Peter St Onge and get on with the show.

– All right, Porter, we have the legendary Peter St Onge.

– As I was saying earlier, he’s a real economist. He didn’t just sleep at a Holiday Inn last night.

– He’s not one playing an economist in the box that wings it.

– That’s right. Peter, how are you? Thanks for joining us.

– I am great. Thank you for having me on at last. We had a couple of dramatic twists and turns along the way, so I appreciate finally making it come together.

– Yep. We see the world the same way, through the lens of Austrian economics, but there’s a big mystery that I’ve always wondered, and that is how is it that the central banks have gotten away with this for so long? And by that, I mean since 1971, the constant increase to consumer inflation.

Do you know that total consumer debt in the United States has never declined since 1971? And now, the total debt worldwide, I mean, it’s astronomical. I don’t know the number off the top of my head. In the United states, it’s about 500% of GDP, total debt.

You’ve got these runaway inflations all around the world, but you have very little, relatively speaking, consumer price inflation. Obviously, there’s been more in the last five or six years. But how are they getting away with it? And where’s this… this eventually has to blow up. So when is that going to happen and what will be the catalyst?

– Yeah. So there’s actually been a lot more inflation than it seems. You want to keep in mind that when the economy grows, or just when the population grows, that should make things cheaper because…

– Absolutely.

– If you’ve got more stuff out there, you got more workers, you got more people producing things, then if your money’s not growing, then everything should actually get cheaper, right? So when you actually control for things like that, we’ve had inflation, meaning money printing, raising prices, we’ve had that on the order of like 6 or 8% for decades.

But the question is, how do they get away with it? And I think, really, it’s a combination of fantastic marketing. The finest marketers money can buy, the finest lobbyists money can buy, and then public education. So people have gotten demonstrably stupider.

You can go back and run State of the Union speeches through Flesch-Kinkaid scores, which estimates what the grade level–

– Yes. Yes, I know. I know all about that.

– We use that here.

– We write our newsletters to a fifth grade level.

– For sure. Right. So you can go back and look at the level of discourse back in like 1900, 1904 election, and they were talking to what would today be college students. Now remember, these are professional speechwriters who are aiming at the median American. So they’re a reflection of the electorate, OK. So it was like 13th, 14th grade back then.

Today, you look at presidential speeches and, I mean, especially Joe Biden, but even under Barack Obama, it was like eighth grade, sixth grade. Now, fourth grade. These are the same class of speechwriters who are still thinking that they’re talking to the median voter.

I mean, this is the top of the game if you’re writing presidential speeches. I’m going to take their word for it. The electorate has gotten extraordinarily stupid.

And if you map out that decline in the level of discourse against the percent of Americans who attend public schools, not educated, public schools specifically, it’s like one-to-one. So absolutely, you go back to the 1900s, people are talking about money, they understand the issues, they understand the role of gold in limiting inflation.

They understand the so-called rubber dollar, where there were these constant inflationist cranks who were trying to push a flexible dollar in order to inflate. The electorate understood that graph.

[INTERPOSING VOICES]

And so when they saw evidence of it… yeah. Yeah. Right. Bingo. Exactly. And so when they saw inflation rising up, they knew exactly who to blame.

Nowadays, we got the marketers, we got the lobbyists, we got the public education. And so when inflation takes off, it’s… remember a couple of years ago, it was Mr. Putin’s war, it was people buying too much stuff on Amazon, it was global warming, as always, just every excuse under the sun.

And 100 years ago, people would have laughed them out of the room for that crap. Nowadays, the media sits here, they consider it, they’re of course, products of public education. So I think, fundamentally, the people are absolutely being gaslit. They’re being gaslighted into thinking that our wise economic overlords have things under control when actually they are causing the problem.

They are causing the business cycle, they’re causing the boom and bust, they’re causing this endless series of inflations, recession, inflation, recession, over and over.

Every so often, of course, it gets way away from them. So 1970s, just a couple of years ago, and inflation hits double digits. That’s when people finally start waking up and finally start asking how the system works.

Yeah. I felt sorry for the auto workers. They…

– Yeah.

– They’ve seen the real value of their wages fall in half over the last five or six years, but they got a 30% raise.

And I’m just wondering how many of them can do the math? Probably none. So it’s too bad for them.

Peter, an idea that’s occurred to me is that the handwriting is really on the wall for paper money in total. It’s in 10 years, it’s not going to be here. There’s just no way. There are too many advantages, too many cost advantages, efficiency gains, to be made by using digital ledgers of all kinds.

It’s going to really affect the banking system because the entire reason why you have a bank is because that’s the trusted intermediary that allows your company to pay you and allows you to exchange value all over the world. We don’t need any of that anymore. Your company can issue you a Bitcoin via your phone in real time immediately, no intermediary. None required.

And the efficiency gains are going to be so evident that it’s not going to be stopped. Now, you can say, they’re going to make a law against something like that. If they do, and I know that China has, it’s going to be such a huge impediment to their economy that they won’t be able to hold the tide for long.

Eventually, we’re all going to be using digital currencies. And the only currencies that will be safe to use are the ones that are truly… that don’t require an intermediary. They’re truly anonymous. All the stuff that you want in a money.

OK, so here’s my idea about all this is some combination of digital money, a.k.a. Bitcoin, and AI is going to finally render the entire central banking game impossible to sustain. Because everyone’s going to know the real intrinsic value of every currency in real time because that’s the way you evaluate cryptos. And if you put that same kind of analysis onto the dollar, you would never, ever own it.

And then there’s the Gresham’s law impact of all of this, which means that the good money, Bitcoin, will be hoarded and the bad money is going to plummet.

See the Continental during the Revolutionary War, see the greenback during the Civil War. No one’s going to want it anymore. And the change is going to happen so suddenly that there will be very serious winners and losers.

And then you look at a company like Microstrategy that’s borrowing the dollar at fixed rates and buying Bitcoin, and look at the stock price. And I just wonder how long that can go on. How long is the government going to be able to give a free path to prosperity from anybody who shorts the dollar efficiently?

– First off, I agree with everything you just said. You know, you’re seeing Gresham’s law in action right now. In fact, Bitcoin critics complain about it. They say, ah, you can’t buy coffee with a Bitcoin…

– Because they’re morons.

– Once people get ahold of Bitcoin, they spend dollars. They get rid of those crappy paper confetti and they hold on to the Bitcoin. And another aspect there, of course… another sort of knock on Bitcoin is that people say, no, no, no, it’s impossible because Bitcoin fluctuates too much.

Well, OK, so if you look at the dollar, you look at post Nixon, there have been multiple periods where the dollar has either doubled or dropped in half in a matter of two to three years since Nixon. Now, if you didn’t know anything about history, you would look at that and say, oh my god, gold could never be money.

Are you kidding? You can’t have a money that doubles in two years. Drops in half in two years. How would you ever have a functioning economy? Then you would learn about history and you’d say, well, wait, what happened here?

And the key there is that when something becomes a money, it is far, far more stable because it has this sort of ballast demand. This core demand, right. The overwhelming demand for money in general is for savings.

If you took a snapshot right now of all the dollars in existence… first of all, none of them are… you always see these images of dollars flowing. OK, there are no dollars flowing. Every dollar is owned by somebody, right. And if you took a snapshot of all the money right now, something like 80, 90% of dollars, they’re in savings account.

They’re in long-term storage. They may as well be buried in the yard.

Once a currency becomes monetized, once it is the dominant currency, whether that’s gold or whether that’s Bitcoin, that’s what happens to it. The vast majority of it is salted away. It’s not going anywhere. It becomes this ballast that stabilizes the fluctuation.

So over time–

The big question is when, right? Is this going to happen in 10 years? Is it going to take 30 years? And that’s a function of how much the clown show screws up in Washington, in Brussels, in Tokyo, and the rest of it. So that’s the key question, is the timing.

I think absolutely, on a long enough timeline, we know fiat is doomed. Paper money has died over and over. Typical lifespan is about 50 years. If we count that from Nixon, we’re coming right on schedule.

And so then the question is just, is it going to be gold, which, traditionally, when paper money dies, humanity goes to either gold or silver. So is it going to be precious metals or is it going to be Bitcoin?

If this is something that’s going to happen in the next three years, I think we’d probably go to gold. And the reason is that not enough people understand Bitcoin yet. The median person who understands Bitcoin is probably like 30 years old. They don’t have that many assets. They’re not in decisionmaking capacities in the financial system.

On the other hand, there are senior people in banks who actually have living memory of a gold-based financial system. So if we’re talking the next five years, I think we probably go to gold, and then Bitcoin, gradually, as people come to understand it, they shift from gold to Bitcoin.

On the other hand, if this is something that’s not going to happen for 20 or 30 years, I think we skip gold altogether, honestly, and we just go straight to Bitcoin. Bitcoin is a superior form of gold. It has, at this point, actually, lower inflation than gold does. In other words, less of it is printed per year. And Bitcoin has the killer app, the absolute advantage versus gold, which is that it cannot be seized.

That has been gold’s Achilles heel through history. When you praise gold to a fiat bro, they might say something like, well, if gold is so amazing, how come no country on earth uses gold? And, of course, the answer is that governments are very good at violence and gold is necessarily seizable.

Right, if I come out with a gold currency and I tell you it’s backed by gold, but it’s secret. It’s hidden. I can’t show it to you. OK, you’re not going to buy it, right?

It sounds like the Perth mint.

– Yeah.

– Bingo. So the only way that you can have a gold-backed currency is that you’ve got to have the gold stored somewhere. Where people know the address. Maybe it’s got a camera on it. Maybe you break it open every so often, make sure it’s not nickel on the inside. Governments can, of course, find that as well. They unfortunately know how to use the internet.

So it is eminently seizable. Over and over, gold has been seized throughout history. In fact, we have this cycle, right. So the government seizes gold, pumps out the paper money. That works for a little while because it’s prudent. Gradually, they kind of let it slip. Then you get hyperinflation, you go back to gold.

Cycle starts over and over and over. We get these long monetary cycles, something like 50 years. That is what Bitcoin can finally break is that cycle.

So once Bitcoin wins… like, we only have to get lucky once. They got to get lucky every single time. If Bitcoin wins one time, that’s it. Because you don’t need those intermediaries anymore.

There is no entry point.

– It’s like when people start using Bitcoin directly, it’s like the genie coming out of the bottle. There’s no putting it back in because there’s no seizing it, unlike the gold.

Let me ask you a different question.

Hope springs eternal. And in my entire life span, I’ve only seen Americans make worse and worse choices when it comes to freedom and liberty and economics. It’s been a very steady direction.

And every president that comes along that promises the return to freedom, like Ronald Reagan, like Donald Trump, like George W. Bush, they do the opposite. They get us into wars, they increase the size of government, they increase the size of the debts. There is no actual liberal choice in America. And you know what I mean by liberal choice. I mean the classic liberal choice of less government, more freedom.

If you tell Americans that the entire government spending to GDP ratio in 1930s was 3%, they won’t believe you. But, of course, that’s true. And, it was a much better country, a much better economy. As you know, government equals force. And the more force you have in the economy, the less efficient it’s going to be.

Now, all this is old news to you. But my point about this is I’ve only experienced America going in one direction, which is more government, more force, more intervention, more debts, and eventually, that will blow up.

America is a very exceptional nation. It has incredible natural resources, has incredible human talent, has had incredible technology. There are so many things that have propped up this giant government experiment.

But I still fundamentally believe that we will eventually take a turn the other way and move away from the precipice and return our country to some semblance of freedom. And I think that what you see happening in Argentina and El Salvador are the first real large-scale experiments where you’re seeing populations finally turn away from government solutions and adopting free market solutions. Is there any hope for America or should I be buying a passport in Malta and moving my banking to Switzerland?

– So I’m actually extremely optimistic about America. The dynamic that you’re talking about, I think, is the frog in the boiling water. And there’s two solutions to that, right? As the water gets hotter and hotter, the frog doesn’t realize it.

And then you take a snapshot. So back in 1913, the federal government was like 5% of GDP, now, government overall is like 50%. And you ask, how in the heck did we get here? Well, the answer is, it happened pretty gradually.

And there’s two ways out of that. One of them is that you get a crisis. So the most likely at the moment would probably be a banking or a fiscal deficits, like bonds collapsing or something. And in that case, the water boils all of a sudden. The frog realizes it and the frog jumps.

And that’s more or less what happened in Argentina and El Salvador. Things got so bad, the safety situation in El Salvador, the corruption in both countries, the inflation, of course, in Argentina, things got so bad that the frog jumped, right. In both countries, the population said, you know what? Screw these traditional politicians. I’m going to go for somebody who’s going to make radical change. So that’s one way to do it.

Now, the problem with doing it that way, of course, is that there’s a lot of victims along the way, right. So if you’re waiting for the crisis, the crises can take a lot of people down with them. You could theoretically have a crisis where the supply chains don’t work and people are starving.

So the other way to do it is my preferred method, which is that you highlight that the water is actually getting hot. You sit people down before people are starving in the street and you explain what’s going on. Here’s the bad things that are happening. If this continues, these terrible things are going to happen. What you’re trying to do is to get the frog jumping before the water boils.

So that, I think, is the preferred method. The key there is, of course, free speech. It’s people like you or I who have the ability to reach voters or to reach people who can politically organize, can intervene in the political process at the primary stage and whatnot.

– Hang on one second. What’s free speech? You have any idea how many times the government’s come after me for pure speech?

– Oh, for sure. Absolutely. And I think the thing that’s important there is that if we go back through history, there has never, ever been a period where dissidents have a level playing field on speech. But if you go back to the 1970s, for example, Murray Rothbard, he talked about how you could get the entire libertarian movement in a single living room in New York City.

– That’s right.

– And the way that libertarians… which was really the only small government party.

– And they were also all sleeping with each other. So it was a common living room.

– Well, they were all sleeping with Ayn Rand.

– Right. Yeah.

– It was the ’70s, what are you going to do? And the way that the movement, back then, spread the message was that like they would literally put books in anarchist bookstores where, I guess, they didn’t read them or they would put a send 20 bucks for a self-addressed stamped envelope, and then you would get like a mimeographed…

– Yeah, that’s the… that’s actually the origins of Agora Inc. That’s exactly how they started. Was that kind of publishing.

– Yeah. So if you consider… and that was the 1970s. The country was wealthy enough that you had some academics like Murray Rothbard who could sit around and think about these things and they could propagate their views.

You go back further and it’s even worse for the dissidents. I mean, in World War I, literally, they were throwing dissidents in prison for wrongthink.

– That’s right. Yeah.

– FDR. Yep.

FDR as well. So on the one hand, of course, we don’t have a level playing field. God bless Elon Musk but across the board, most Americans still… a lot of Americans still get their news from a little evening, local broadcast. And those are just overwhelmingly, we saw during COVID, those are all captured.

So, of course, it’s not a level playing field. But if you go back through history, it is a damn sight better today than it has ever been in, really, in human history.

– That’s a good point. That’s a good point. And especially with the freedom of Twitter really does give me hope. The entire world saw President Milei’s speech at Davos, which was able to be translated in his voice, thanks to Google AI. I mean, that had an immediate impact all around the world. And it’s one of the greatest political speeches I’ve ever seen. And it’s incredible that it took place at Davos.

So maybe there is some hope. Maybe I shouldn’t buy the Malta passport just yet.

– You got to go back to the red pill, not the black pill.

– Peter, I’ve got one more question for you. And you’ve been really generous with your time so I’m also happy to open the floor if there’s any other message you’d like to promote. But I have an unusual view about how people should best handle the ongoing inflation. I think most people believe that buying property, that buying gold, that buying hard assets is the best way to deal with inflation. But I’ve never believed so.

And my belief stemmed from a 1983 letter that Warren Buffett wrote where he explained how investing in economic goodwill is actually the very best way to deal with inflation. And the reason why, of course, is that inflation makes the value of brands and other kinds of business advantage way more valuable and doesn’t require, oftentimes, capital.

So if you look at the expansion of the value of, say, Coca-Cola’s brand, yes, they’ve invested in advertising and all that stuff. But unlike a gold company, when they sell a Coke, they’re not liquidating their balance sheet. And so I’ve always believed that common stocks were the, now, hold on… high-quality common stocks that are very capital efficient, where they have lots of economic goodwill, which is brand value, which is sustainable market advantages, that don’t require equivalent economic investments.

So I’m not talking about the railroads, which is funny because Buffett later bought railroads, I’m talking about things like Geico, things like Disney, things like McDonald’s, things like property and casualty insurance companies. These things, royalty companies. Fantastic example of economic goodwill.

These things, I believe, offer people the very best hedge against inflation. And I think you can prove that to be true by looking at the market just nominally, but more importantly, looking at stock multiples. There’s a reason why stocks are trading at more expensive multiples today, and it’s because the money is so unsound. So therefore, when the divisor changes, the numerator increases.

– I think you’re absolutely right. Disney needs some marketing changes. But…

– Yeah, of course.

– But the value of the brand is still, it’s not…

– No, you’re absolutely right. When they straighten that out, the brand has immense value. Your broader point, which I think is missed a lot in the hard money crowd, is that equities, stocks, are inflation hedges.

– Yes, they are.

– You go back to the 1970s, stocks held up fine. If you go from 1970 to 1980, stocks kept up. Why? Because stocks are hard assets, right.

The ability of Coke to sell a beverage at a premium, that is a hard asset. It is not imaginary. It’s actually there. Coke has offices, they have employees, they have trucks.

Those are hard assets and people miss that.

In fact, if you go back to the hyperinflation in the Weimar era, people in the first couple of years, they were not talking about rising prices, they were talking about rising stocks because stocks capitalized future inflation. That’s what we’ve seen over the past couple of years, right. We’ve had double-digit inflation and stocks have exploded.

So absolutely. I’m a huge fan.

The most liquid form of hard asset… yes, you want to own some gold because gold is negatively correlated with inflation quite nicely. But definitely, you want to own equities. I’m a fan of property if the Fed is subsidizing capital, which it usually is. Right now, I’m not sure it is.

And plus, you can multiply your money.

But yes, I am absolutely a fan of stocks. I, myself, own stocks along with the other hard money assets. NVIDIA is my largest holding, which I’ve held for a while because I’m a momentum investor.

– Give that man a cracker jack.

– Yeah. No kidding. Wow.

– But yeah, I’m a huge fan of high quality stocks with economic moats, as you say.

– Just to be clear, Stansberry Research recommended NVIDIA in 2016.

– Yes, that is…

– Beautiful. Look at that.

– That is correct.

– Those help the averages.

– Yes. Yeah.

– Well, Peter, thanks very much for being with us. It’s fun to get to meet you and talk with you. I’m sure we’ll talk again soon. And however we can do business together, let us know.

– Yeah, absolutely. Looking forward, gents.

– OK. Bye bye, Peter.

– Bye bye now.

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– Man, I really like Peter. Sharp guy.

– Yeah, he’s great. He obviously knows what he’s doing and is a thoughtful person. I follow him on Twitter. X.

– Yep.

– And he’s always a great read.

– Yeah, what I like about it is his mission statement is, I want to break down complex economic topics that people can digest and understand in your real life, like what we do.

– It seems like exactly what we do.

– It’s exactly what we do.

– And not surprising, he thinks the same way about the world as we do because there is a firm foundation that all these other mirages are built on. And if you can learn to see through the mirages, you can do a lot better in life.

– Yeah, for sure. And I really enjoyed the conversation that you guys had about equities, about capital efficient equities and goodwill companies, because I think people are starting… especially the younger generation, they’re very scared to enter into equities because they think it’s all you should own is Bitcoin, all you should own are Gamestop, and AMC, these meme stocks and stuff like that. And they don’t understand.

– What you should own is a great businesses, and neither of those meme stocks are great businesses.

– You mean movie theaters?

– Not a great business.

– You mean physical locations for games that you can get everything online now?

– Not a great business.

– It’s like Blockbuster of games, basically.

– Yeah, exactly.

– It’s terrible. OK, Porter, let’s get to a few… you just can’t make this stuff up. There’s so much these days. I kind of get exhausted from it.

But this is where America is headed. The world’s headed.

– I don’t know what to make of it all but it’s just strange. It’s much like when we were in the middle of COVID and I said, how could anyone who knows the first thing about virology believe that wearing a cloth mask accomplishes anything? It’s the same thing as saying you’re going to keep out mosquitoes with a chain link fence.

It’s actually.. it’s the discrepancies are even larger. It will not work.

And yet you had every scientist in the world saying the opposite of what was true. It was just wild.

– And if anybody said anything different, they were immediately banned. That was a different X back then. That was a different Twitter. That Twitter was ruthless.

– Of course. And how about this? When Biden puts forward the most inflationary government budget in history, he calls it the Inflation Reduction Act.

– That’s right.

– It’s so Orwellian.

– Yep.

– And I think that what Peter does, and what I try to do with people, is let’s get back down to first principles, kind of the way that Elon Musk does engineering, and say, wait a minute, what are the actual facts and what is this policy actually going to achieve, not how it’s been marketed? And I wonder how many people reading our newsletters and listening to our podcast, appreciate that and understand that that’s what really makes us so different.

– I think a lot. And I think that the tide… I really do believe that the tide is turning. I’m on X all the time. I really enjoy it. And for example, if you have any post from the World Economic Forum or Bill Gates or anything like that, all you see is hate.

There’s not one support. Not one supporter.

Not only that, they end up just turning off the comments because they’re going to put out their propaganda, but they’re not going to allow people to actually have a voice. So I think there’s a lot. I think the tide is turning.

I see and talk to more and more “normies,” I would call them, that are pretty awakened. And I think that our work does do very well and I think the podcast does help.

So going back to the Canadian government, because the Canadian government is absolutely captured.

There’s no way about it. The whole truckers shutting down, the whole truckers protest. And then they later said, oh yeah, that was against their emergency authorization usage act for the first time, but nothing happens ever.

So the Canadian government’s 2024 budget proposes to increase the capital tax rate from 50 to 66%

– That’s going to work great.

– Yeah. Over corporations and individuals.

– Oh, and they’re also going to make it impossible to leave Canada now.

– That’s right. Now, you can’t. Yeah, you can’t. There’s exit tax.

– And America already has that, by the way. The land of the free.

– Yes, they do.

– Yeah, we’re free but if you leave, we’ll take half your assets. Thank you.

– That’s exactly right. So this is just…

– How is America going to take half your Bitcoin?

– Well, what do you…

Bitcoin? It fell over the boat.

– I haven’t seen it.

– My USBs landed in the water.

– Who knows?

– I don’t have it.

– Who knows what happened?

– Yeah, who knows?

– Good luck. Good luck enforcing those laws if there’s a real hyperinflation here.

– Yeah, for sure. But we’re going to see more of this tax madness. Biden’s proposed, the administration’s proposed 44% tax rates and all this other nonsense.

So, OK, this is kind of near and dear to me. Porter, you know, I fly up here.

I kind of don’t have a choice that America has chosen Boeings, we don’t have many airbuses. And I fly on Boeing 737 MAXs.

– Oh, and by the way, landing in the mountains in Colombia is not easy.

– No. Yeah. It’s not that easy. And, you know–

– Weather is always bad. Fog.

– And we’ve been writing about Boeings for a long time.

– By the way, before anybody else.

– Yes. Yeah, when did you first start writing about Boeing?

– About two years ago, I predicted that Boeing was going to collapse.

– So what was it back then? What was the first catalyst that you saw?

– It was the GE leadership’s game plan. They were issuing tons and tons of debt and buying back stock. And then in the meanwhile, COVID hit and everybody stopped flying.

– Right.

– OK, that was strike one. Because why would you lever your balance sheet? If you owned this entire company, you would not behave this way.

– No.

– OK, so they’re doing something wrong. What else are they doing wrong? And then when I started writing about it, I got lots of Boeing engineers telling me the financial engineering is not the problem, the real engineering is the problem. And they were telling me that the 787 Dreamliner is going to split in half.

– Ooh. Ooh.

– And so we started saying that Boeing is going to have an enormous problem in that it will eventually go into some kind of receivership. Now, it’s such an important government contractor, I don’t know if it’ll technically go bankrupt. Which, by the way, Fannie Mae and Freddie Mac didn’t technically go bankrupt either. But what I’m saying is it’s going to be a wipeout for the common stock shareholders.

And that is progressing. They lost $4 billion in cash in the first quarter.

– Yeah, well…

– $4 billion in cash. And they have a virtual monopoly on airliners. How is that possible?

– Well, it’s becoming dangerous to be a whistleblower at Boeing. They had a second whistleblower recently that mysteriously died, again.

– By the way, I would like to go on the record. If they say I killed myself, know that I didn’t. I’m happily married. I have three young children. I have a beautiful farm. I have plenty of friends. I’m not lonely or sad.

– I was making that analogy to Boeing’s going to quickly catch up to the Clinton Kill List.

And by the way, I’m not saying any of that stuff either. I fly your planes.

I get on there and I hope that I make it in time. I buckle up. The seat belt doesn’t come off in case the door pops off. I don’t want to get sucked out of there. Don’t sit next to the emergency window anymore.

That used to be for more legroom, now you’re the first victim to get sucked out.

– Out the door.

– And by the way, I actually would propose if they allowed an upgrade, because they’d like to ding you on fees if they had a parachute, I would select that every single time.

– That’s a good idea.

– Every single time. Just let me strap one on the back for an extra $100. Take my money.

– You don’t get on a boat without a life jacket because you sink.

– Exactly.

– And by the way, if you’re on a plane, you’re going to sink too.

– Right. But if the doors pop off, I want I want to pull the rip cord. I want to have some kind of chance.

– You know what I’ve always wanted? I want an airline that advertises that you can bring any weapon you want on board. Because that airline would never have anybody be rude.

– Oh, no, there’s…

– It wouldn’t have any hijacking. Everyone would be very polite. We encourage you to bring your gun and wear it on your hip.

– Yeah. At the end it’s who’s got the biggest gun? That’s definitely the guy that…

– I can tell you, if you go to places where people carry guns, where everyone carries a gun, everyone is spotlessly polite.

– Yes. Yeah. I know you’ve been in gun stores. I’ve been in gun stores a lot.

– Everyone’s very well behaved.

– And nobody’s behaving poorly because all the guys behind the counter have guns and they know how to shoot it.

– You don’t see the, you know the videos where the people are getting into a fight at the fast food store?

– None of that.

– Where they grab stuff off the counter and throw it at the employees.

– Or jump across the counter on the other side.

– You don’t see any of that.

– No, that’s not going to happen. Although, I have seen a few like Darwin award winners where they thought it was wise to rob gun stores. Three of them come in and some 65-year-old cowboy blows them away.

OK, Porter, hey, we might have some new listeners out there. If we do, we have Porter’s biggest prediction as a free report. What’s the difference between us and other financial publishing companies when it comes to being on our email list?

– Oh, we don’t spam you ever.

– Never. We give you content.

– Content’s it.

– We give you a ton of education. Very interesting stories.

– Sure.

– Things that relate to your life.

– Yeah.

– And every week, we’re going to send you an important story from business and no spam.

– Exactly. So if you’d like to join us on our email, just go to porterspodcast.com.

– We should rename our free weekly e-letter. It should be called the No Spam Financial E-letter.

– I think people would probably sign up just for that.

– Yeah, it’s awful, the spamming these days.

– Yeah, it’s refreshing. And as a marketer, when I joined you, this was the thing that I was most excited about, was caring for the list and caring for the people on it. And really, I’m tired of being spammed, I’m tired of all the garbage, I’m tired of all that type of stuff.

– I had a crazy idea in business. That if you just treated your customers really well and gave them the information that you would most want if your roles were reversed, that enough of them would subscribe and you’d have a good business. It’s like the guy who signed up Michael Jordan at Nike. He’s like, if we just do the right things in terms of getting the right players and getting them the right shoes, we won’t be able to help making money.

And I can’t tell you how often in business it goes wrong by people believing that the intrinsic value of the business is created by the sale. It’s not.

The sale is the culmination of the creation of the intrinsic value. And the way you create that value is by serving the customer. It’s been very hard to get that message through.

– That’s what we do over here. And we’d love to have you join us. Go to porterspodcast.com. We’ll send you a free report for your email.

And we haven’t been getting that much feedback in the mailbag. I don’t know if that’s good or bad. I don’t know if we don’t have that many listeners these days. Actually, we do.

Our listenership is really good. Or we’re not controversial enough. Sometimes that’s good for you and I. Maybe we’ll get a little heat today.

Well, we’d love to get some emails, some feedback. You can go to [email protected].

That’s [email protected]. Porter, we appreciate all of our listeners, all of our subscribers.

– Sure do.

– This is our monthly show.

– You guys give us the best job in the world and we don’t take it for granted.

– Yeah, absolutely. And next show will be at the end of June, and we will have some tales from North Ireland for my 50th birthday golfing trip.

– Great. I got a couple of things to run by you in front of people. We’ve got to get some people to come and talk about my favorite kind of investing, which is distressed debt.

I swear, if people knew how to buy the right kind of corporate debt, they would never buy stocks again. And I think that’s a theme we’ve got to keep hammering.

– Yeah, I love that idea. And I’ll tell you what, let me do this. For anybody that writes into [email protected]…

– Holy moly, that’s quite an email.

– Well, that’s why it’s got to jump through a hoop.

– What it is now?

– podcastfeedback–

– podcastfeedback@–

– porterand–

– porterand–

– company.

– company. Spelled out?

– research.

– research.com. OK.

– It’s got to be the longest one.

– By the way, buying bonds is tough too. You have to use a Cusip number.

– Right. Here’s what I will do. I will personally send one of Marty Fridson’s, the Dean of High Yield’s, full issue to them. So they can read the work. But you got to send me an email.

– All right.

– I need to have a little bit of interaction here.

– OK.

– And along with that, I will happily give you Lance James’s phone number, which is our head of customer service, and we actually have an incredible deal… a deal for you to actually take a look at that work.

– Well, I’m very sincere about this. I hope that we can get people to understand the world as it is instead of as it’s portrayed. And the other thing I really hope I can do for investors is just teach you three things.

Teach you that there’s a big difference between stocks that have capital efficiency and stocks that don’t. If you know that, you can beat the market with your eyes closed. The second thing I want to teach you is, ironically, why you should never buy a stock, OK.

– Right.

– Why not? Well, if you’re going to buy equity, you should always sell puts first. And I can explain why. And the other reason is, if you know how to buy distressed debt, you’ll never want to buy stocks because you can make way more money in bonds than you can in stocks with less risk.

And these are things that kind of have been my mantra as an investor and as a finance guy for 20 years. And I’d love everybody in the podcast to understand more about both.

– Yeah, so write me. And by the way, there is nobody better on earth than Martin Fridson.

– No.

– Nobody.

– It’s amazing that he is on our team. He’s in his 70s. He has earned a fortune in finance and he still just loves writing about distressed debt.

– He loves it, and that’s his passion. He wants to help people out. So write in.

Porter, thanks so much. We’ll see you guys next month.

NARRATOR: Thank you for listening to the Porter & Co. Black Label podcast, with your hosts, Porter Stansberry and Aaron Brabham. We’ll see you soon.

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