Why we decided to ‘go private’ after forty years of public spectacle
A little context for long sufferers and newcomers alike...
Ed Note: Please note that if you've already paid for a subscription to Bonner Private Research, the invitation to join up below does not apply to you. Paying subscribers will receive their first monthly research report from Investment Director Tom Dyson on Wednesday. Also look out for the addition of other Research Reports on our website regarding our main investment themes of 2022. And we've just added a free copy (for paying subscribers) of Bill Bonner's latest book (A Modest Theory of Civilization). More to come. And now, over to…
Bill Bonner, reckoning today from Youghal, Ireland...
Hallelujah and pass the Guinness!
Like the UK and Spain, Ireland has decided to go back to normal. Covid restrictions have been almost completely abolished. And on Saturday night there was general rejoicing. Curfews were lifted… and people gathered in pubs to celebrate. It was like the end of Prohibition in the US, with laughter and singing. Young and old were happy to be free at last… and able to raise a glass together without the feds threatening to arrest them.
Ireland followed a strict program of masking, vaccinating and contact tracing. Almost everyone is vaccinated. And it’s an island… which makes it a little easier to keep out unwanted visitors.
But that didn’t stop the Omicron from coming ashore. Cases soared. But so few died that the Irish government came to its senses, and saw no benefit in continuing to fight against it.
The war is over!
Meanwhile, back in the US… the war continues.
What was it Lenin said? ‘There are decades where nothing happens and there are weeks when decades happen.’
What a week. And what a weekend!
The Nasdaq is off to its worst start since 2008. Back then it fell 13.6% in the first 14 trading days of the year. By Friday’s close it was down over 11% year-to-date here in 2022. If things keep tracking this way, it will be the worst January since the inception of the index in 1971, according to Dow Jones Data.
Will Bitcoin save you? Maybe in the long-run. But in the short-run, the world’s biggest cryptocurrency is down 23.6% year-to-date and over 50% from its high near $70,000 last year. This kind of volatility is nothing new for speculative assets, although it IS unusual for an asset whose supporters claim it is also a store of value.
There is plenty of pain to go around. Look at the chart below, sent by our colleague Dan Denning over the weekend. Warren Buffett (the compounding tortoise) has caught up with Ark Invest’s Cathie Wood (the hare) and her racy Ark Innovation ETF (ARRK).
Ark shares sinking fast
Both Buffett and Wood are still up since the beginning of the pandemic in the first quarter of 2020. Both benefited from the Fed’s war against normalcy… with a huge expansion in the Fed’s balance sheet and much lower interest rates. The big question now is: what next?
If it’s a ‘super bubble,’ as Jeremy Grantham, the 83-year old founder of Grantham Mayer van Otterloo, says, the major indexes may fall by 50% or more. Grantham’s math is roughly the same as ours. About $35 trillion in ‘wealth’ will be wiped out.
In other words, the real bear market hasn’t even begun. Real bear markets last months and years, not days and hours. And by the time they’ve done their work, no one is trying to find the bottom any more. At the bottom of a bear market, no one wants to talk about innovation, NFTs, or decentralized finance.
Setting Sail for Greener Pastures
Grantham likes cash, gold, silver and some emerging market stocks and value stocks that have not been bid up to ridiculous multiples of sales in the last two years. We think he’s onto something. And so does our new Investment Director Tom Dyson.
But perhaps we should back up a second. Much has happened in the last month, since we set out on a new venture. It’s probably time for a fuller explanation. It’s not always clear to us what we’re trying to do… it may not be entirely clear to you, either, especially if you’re new to these Diaries
We began writing in 1998. Sometimes, these daily missives were hard to write. They must have been even harder to read!
Because, we’re like travelers who never know exactly where they’re going. Instead, we look, we wonder… What’s happening? Why? Where does it lead?
Sometimes the questions take us down blind alleys and waste our time. Often, they simply lead to more questions. Only occasionally do they guide us to useful insights. Rarer still, to actual wisdom.
The Benefit of Experience
We started our first newsletter, International Living, in 1978. In it, we hoped to show Americans how to retire overseas. It was a dream then. For many thousands since, it’s become a reality (and for some today, an urgent priority).
More than 40 years later, in the home stretch of our career, we are beginning a new project again. Fortunately, writing about money is one of the few métiers where age is actually a benefit. After all, you have to be over 70 to have lived through, as an adult, the inflation of the 1970s. You have to be at least in your 60s to recall how Paul Volcker stopped it.
Besides, as you get older, you may become more vulnerable to the Covid, but you become more resistant to claptrap. You remember the WIN buttons… the lime-green leisure suits…and the Vietnam War. You’ve embarrassed yourself more often than you can remember…and you’ve heard too many something-for-nothing claims, seen too many new tech promises that didn’t work out, and voted for too many disappointing politicians; a grain of salt is no longer enough… you need tons of the stuff.
We bring this up because we think we are approaching a period of Peak Disillusion – when the silly pretensions of the governing class create a disaster for everybody. A good dose of geezer cynicism may be the only way to survive it.
Many of the trends we’ve been following for decades seem to be both accelerating and converging at the same time. The ‘new’ dollar – without gold backing – was introduced more than 50 years ago. When it came out, the old-timers preached doom.
Now, we’re going to see that they were right. No pure paper money has ever survived a full credit cycle. Our guess is that this dollar will be gone when interest rates reach their next top. Will it be replaced by something else? Just last week the Fed released a long-awaited research paper on a Central Bank Digital Currency. Is it coming soon?
Everything’s happening faster than it used to. Dan’s looking into the CBDC report for us. He will give us his take on it on Wednesday. That’s when the first monthly newsletter of Bonner Private Research will be published. Investment Director Tom Dyson will review his top investment idea for the month.
The Four Stages of Work
Looking back over our half-century of work, we see different stages. First, we thought we could change the world. Young people often think they have the answers; we did. And we were worried, in the early 70s, as now, about the growth of government.
The central competition in public life is not really between Democrats and Republicans or liberals and conservatives. It is between those who go about their business… helping each other… providing goods and services to each other… building wealth and families… and those who want to stop them.
It is the difference we described in much more detail in our book, ‘Win-Win…or Lose,’ between those who make… and those who take, between those who get what they want by honest, consensual exchange and those who use armies, sanctions, laws and regulations. It is the difference between violence and persuasion.
Still in our twenties, we were naïve and foolish. We believed the growth of Washington and the proliferation of laws and regulations was some kind of ‘mistake.’ People just failed to realize that ‘win-win’ was a better way to go.
But after seven years in Washington, heading up a group called the National Taxpayers Union, we finally had to face facts: a lot of people prefer power to prosperity… and that includes almost everyone within the DC beltway.
Information is not Wisdom
So, in the second chapter of our career, we left “public interest” and decided to focus on private interest. We couldn’t change the world, we reasoned, but at least we could help people get through it… and make some money for ourselves doing it.
We were supremely lucky. It was just the beginning of the financialization phase of the US economy. In 1971 the feds had switched to a paper money system, unconnected and unrestrained by gold. It was off to the races. Everyone wanted to know what horse to bet on.
We were, however, woefully unprepared for our new role. We didn’t understand much about economics or investing. So, we teamed up with people who did. Gary North, Mark Hulbert, Adrian Day, Doug Casey, Jim Davidson, John Dessauer, Porter Stansberry, Steve Sjuggerud, Alex Green and many others.
Sometimes they were right. Sometimes they were wrong. But we were always learning. And we are grateful to them all.
Then, in the late ‘90s, came the third stage of our career. The internet arrived. People said it would make ‘information’ available – free – to everyone. That would put us old-fashioned newsletter publishers out of business, they said.
But ‘information’ is worthless… less than worthless… without context… trust… training… preparation… circumstance and all the other things that give it value. “Imagine Napoleon on the retreat from Moscow,” we invited readers.
“His soldiers are freezing to death. Starving. Getting slaughtered by partisans. And then… as if by some miracle… someone hands him the plans for building a nuclear bomb! What value would that have had? Zero.”
Our point was that the precise ‘information’ you need, precisely when you need it, is extremely valuable. Otherwise, it’s just excess baggage. We went on to speculate that with the build-out of the internet, “the world may soon be stuffed with information… and starved for wisdom.”
In the following years, instead of fading away… our business boomed – thanks to the internet. Investors gorged on ideas, recommendations, revelations… about new tech breakthroughs… trading techniques… cryptos… pot stocks… and much, much more. Many of these turned out to be astonishingly profitable.
But your editor, who began writing a daily ‘blog’ in 1998, was a wet blanket. He doubted that these innovations would produce lasting wealth – after all, what did they produce at all? Many provided neither products nor services… and many lost money, year after year. As to the new tech, he urged caution.
In retrospect, his counsel turned out to be both good and bad. He eschewed investments in dot.coms… even in the most successful of them of all – Amazon.
He wondered aloud if the whole “information revolution” was anything more than a time waster. And he ridiculed many of the most sacred tenets of tech believers… including the doctrine that new technology always means progress and that progress will free humans from work, thrift and sin.
Trade of the Decade
On the other hand, his one, very simple ‘Trade of the Decade’ – sell stocks, buy gold – turned out to be the best trade of two decades. Gold, at the end of the 1990s, was trading at $282 an ounce. The Dow was just over 11,000. Since then, gold has gone up about six times. The Dow is only up three times.
Investors who made our trade have coasted calmly through the three major crises of the 21st century… and are still way ahead. Our current Trade of the Decade, unveiled around this time last year, is doing well too.
The ‘short’ side isn’t complicated: the US dollar. The whole worldwide bubble is full of dollars. Stocks, bonds, real estate – everything is quoted in dollars. And while the Fed will be desperate to keep asset prices from crashing… it can only hope to do so by ‘printing’ more dollars to boost them up. It’s the “Inflate or Die” trap. Either asset prices decline… or the dollar does. The dollar will be sacrificed, we believe, to try to save a corrupt and doomed financial system.
We explored the ‘long’ side of the Trade in the ‘Winter Catastrophe’ event we organized at the end of last year. Paid up subscribers can listen to the hour-long conversation with our old friends Rick Rule and Byron King (a transcription is available if you prefer to print it out and read it).
That Trade is simple too. The ‘Energy Transition’ is asking for trouble. Demand for oil and gas is growing. Thanks to naïve or misguided public policy (and capital allocation) supply is not. Prices will rise. Dan will be updating this Trade for new readers in Wednesday’s newsletter.
Too Much Noise, Not Enough Signal
But now, we see a bigger challenge ahead… and the fourth and final lap for our career. After a quarter of a century of burgeoning internet-based investment advice… and all manner of opportunities – NFTs, cryptos, tech breakthroughs galore – investors are swamped by ‘information’ and opportunities. But wisdom? It seems to have disappeared.
Where it still appears in residual clumps, like survivors after a world-wide plague, it is furtive… fearful… and almost ashamed of itself. And it is completely upstaged by the gaudy claims of the tech futurists. One says a new “disruptive” tech will bring 10,000% gains. Another says a pharma breakthrough will allow children born today to live to 200 years old. Still another claims you can double your money overnight.
And maybe they’ll be right!
But we have our doubts. Nature is not so promiscuous as to give out her favors to every Tom, Dick and Harry who buys a newsletter subscription. She knows that real progress… and real wealth... require real work, real investment, real reflection and real self-discipline over what is generally a really long time.
So that is our goal. We’ve joined up with Dan Denning, Tom Dyson and Joel Bowman to plug our ears with wax, to tie ourselves to the mast… and resist the sirens of easy money and fast profits… luring us onto the rocks.
Subscribers will get weekly investment updates from Tom, including news and updates on the companies he’s adding to our portfolio (as he adds them). Then, Tom and Dan will collaborate on the monthly newsletter to give you the ‘big picture,’ where we try to connect the dots from the world’s financial markets. Tom will deliver his best investment idea each month.
We also hope to bring you more of the private conversations we’ve been having amongst ourselves for years. The live Zoom call with Rick and Byron is one example. We have more in the works over the next few months, Dan tells us. And we will be releasing some new Research Reports this month as well, on our key investment themes (The Dow/Gold Strategy, Where to Have Your Money in 2022, How the Dollar Dies… and more).
There’s a lot of work to be done! And by the way, Dan extends his apologies for any inconvenience you’ve experienced signing up for or accessing our research. If it’s been confusing, we’ll try to do better.
We’re using a new platform because it lets us focus almost entirely on writing and researching. That’s why you don’t find any offers for other services in these letters. All we have to offer you is ourselves… our research… our guesses and hunches. Sometimes right. Sometimes wrong. And always in doubt.
But like any new project, there are a few bumps in the road. We’re working on them. Thanks for your patience.
In the meantime, we’ll keep our eyes on the big prize. Yes, we search for the rarest and most precious thing in the financial world – wisdom. And while we may not find it, it won’t be for lack of trying.
P.S. We’ll continue to write in this space… to wonder, to doubt and to reckon daily. Our missives are free, and free for you to share with friend and foe alike. (Please do.) Our investment research, however, comes with a small fee… less than $2/week. We think that’s pretty reasonable, given what you get: access to our private investment network, one we spent the better part of four decades building, plus weekly and monthly updates and reports, our very best financial analysis, as well as podcasts, private Zoom calls, transcripts and much more. What you won't get are a lot of hype... and mixed messages. That's worth something too. As you see, it’s a whole new path we’re on. We hope you’ll join us…