The Money Game

The wisdom in cardboard boxes... The money game... 'Adam Smith' lives on... A timeless description of fear, greed, and bull and bear markets... Know thyself... How to achieve investment serenity... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The wisdom in cardboard boxes... The money game... 'Adam Smith' lives on... A timeless description of fear, greed, and bull and bear markets... Know thyself... How to achieve investment serenity... --------------------------------------------------------------- Market wisdom often just shows up in our office unannounced... I (Corey McLaughlin) didn't ask why. But when a companywide message about "free books" went out in our Stansberry Research headquarters, I hustled over to a trio of giant cardboard boxes to see what might be available. It's one of the perks of working for the company... Piles of free books just show up sometimes, with no real explanation. And they tend to be good ones... This time, the titles were Nassim Taleb's Fooled by Randomness, Diane Ackerman's A Natural History of the Senses, and the one I'm going to talk about today... The Money Game by "Adam Smith." Written under an amusing pseudonym to protect the author and his sources, The Money Game was first published in the 1960s. The writer was an economist and journalist with keen insight about Wall Street, and he wrote like he was snickering about people at a dinner party. Shortly after the bestselling book was published, "Adam Smith" was revealed to be George Goodman, the Harvard-, Oxford-, and U.S. Army-trained editor of the monthly journal, The Institutional Investor, which is still published today. Goodman had a great ability to add human and anecdotal elements to discussions about the supposed "laws" of finance, economic debates, and behavior of Wall Street traders and portfolio managers... and how to find your way investing. In addition to writing and editing, Goodman hosted a long-running television show on public television, Adam Smith's Money World, from 1984 to 1997, which made economics accessible to millions of people. Goodman died in 2014 at age 83, but it's often the case with great authors or thinkers that their work lives on long after they stop walking this planet. That's the case with "Adam Smith," at least in my mind... thanks to the cardboard boxes I came across in our offices. A timeless description of fear, greed, and bull and bear markets... I could share a lot of excerpts and lessons from The Money Game (and I might share more – I haven't even finished the book yet). But given the state of affairs of the stock market this year, I couldn't hesitate to pass along one passage I just read over the weekend... Maybe you'll nod your head reading the words as I did... Or, if these are new ideas, perhaps they'll bring you a sense of comfort or realization. In a chapter titled "Identity and Anxiety," Goodman provides a timeless description of bull and bear markets and what drives them... The strongest emotions in the marketplace are greed and fear. Then he begins with a look at bull markets... In rising markets, you can almost feel the greed tide begin. Usually it takes from six months to a year after the last market bottom even to get started. The greed itch begins when you see stocks move that you don't own. Then friends of yours have a stock that has doubled; or, if you have one that has doubled, they have one that has tripled. This is what produces bull market tops. Obviously no one rationally would want to buy at the top, and yet enough people do to produce a top. [We've seen this again "this time"]( with all kinds of stocks and speculative assets in 2020 and into the start of this year. Notable examples have been the ARK investment funds, valueless cryptocurrency projects, and "meme stocks" like GameStop (GME) or AMC Entertainment (AMC). Goodman says this behavior – folks piling into certain stocks or assets at precisely the worst time – occurs because of folks' "unwillingness to be out of step," or differ from the crowd. It's human nature. When people do this, Goodman writes in The Money Game, they forget their time horizons or goals for investing... if they know them at all. Instead, they chase quick "easy" wins that often turn out to be anything but. As he writes... Investors can start out tentatively after a market bath, and they buy something they hope will go up 50 percent in eighteen months. But as the pace accelerates, 50 percent in eighteen months seems much too slow, when there are stocks around – owned by somebody else – that are going up 100 percent in six months. Finally it all turns into a marvelous carmagnole that is great fun if you leave the party early. I'm a simpleton in many ways, so I had to look up what "carmagnole" means. Turns out, it's a popular song and dance from the time of the French Revolution. But Goodman's point is plain enough... Bull markets, or the speculative frenzies like we saw over much of the past two years, are great if you take them for what they are: good opportunities to make money. Just remember... the good times that won't last forever. Because after these good times, the same thing happens in reverse... As Goodman writes... When stocks start down, the tendency is to wait until they come back a little before lightening up. They head down further, and the idea that you have made a mistake, that you have been betrayed by your own judgment, can be so paralyzing that you wait a little longer. Finally faith evaporates entirely. If stocks were down 10 percent yesterday, they may be down 20 percent today. One day, when all the news is bad, you have to get rid of the filthy things which have treated you so cruelly. Again, it all ends in a kind of paroxysm that is not fun unless you have anticipated it. Again, I had to look up a word: "paroxysm," which means a sudden attack or violent expression of a particular emotion or activity. Of course, the word choice and observation are terrifically true, and the advice is timely and timeless at the same time. Goodman was talking about how an individual can feel while watching a beloved stock go down in price over a long period of time. But the same can be said for Mr. Market in general, or the "crowd." To this point, faith hasn't evaporated entirely yet from the market... We see this with folks who are still counting on the Federal Reserve to "pivot" to easier monetary policy and easing interest-rate hikes, which hasn't happened yet (and doesn't appear likely). Quite the opposite... The Fed has raised rates more than projections consistently as it tries to address high inflation. We still see faith by the mere fact of folks predicting or searching for stock market bottoms. Admittedly, we've also been exploring the idea lately, but we've shown hard numbers suggesting why we're not at a bottom yet. (We'll pick up this exercise tomorrow, but for today just know the U.S. benchmark S&P 500 Index traded down again, to nearly the identical level it made at its most recent low on September 30. "Breadth" weakened... the dollar rose again... and bond yields increased, too.) For heaven's sake, even one journalist from the Wall Street Journal declared recently that the tech-heavy Nasdaq Composite Index was "officially in a new bull market." On August 10, after the index rallied 20% from a June low, Sam Goldfarb of the Journal wrote... Stocks have rallied in the past month after posting one of their worst first-half performances in decades, reflecting a popular bet on Wall Street that cooling inflation will permit the central bank to take a more supportive stance toward markets. This claim – which also confidently included that "the Nasdaq ended its longest bear market since 2008" – overlooked or deemphasized the critically significant detail that the Nasdaq was still down 18% from its previous high in January. It's down 18% more since August 10. Said another way, the paroxysm isn't here yet. Some modern-day folks call this moment "capitulation," when any of the remaining bulls finally throw in the towel and sell those filthy things that have treated them so cruelly, to put it in "Adam Smith's" terms. Our colleague and Ten Stock Trader editor Greg Diamond and Jeff Havenstein, an analyst on Dr. David "Doc" Eifrig's research team, described this capitulation moment earlier this year. While describing the anatomy of a bear market that we featured [in our Stansberry's Financial Survival Program]( back in April, Greg and Jeff sounded a lot like "Adam Smith." They wrote... Bear markets happen for a lot of different reasons. They each differ in why stocks decline for an extended period. But when you break it down, they also have a lot in common... There are four "phases" of a bear market that you need to be aware of: 1. Initial Decline – This sets in after a big run higher in stocks. It catches most off guard. 2. Relief Rally – This sets in motion a psychological state for most investors that phase 1, the initial decline, was just a correction, and the worst is behind us. 3. Panic – This is the worst phase of the bear market. Every sector of the stock market suffers large declines. 4. Bottom – This phase is marked with capitulation from most investors, extreme pessimism, and a general consensus that the future is bleak. Then they shared examples... from the behavior of the Dow Jones Industrial Average in 1929... to the dot-com bust from 2000 to 2002... and the S&P 500's 56% percent decline from 2007 to 2009 amid the financial crisis. As Greg and Jeff wrote... In each of these examples, the bear market lasted about two years with all of them losing more than half their value. Don't think it can't happen again, they said. And they offered a few ideas on how to actually profit from a market crash by making options bets on lower stock prices in the months ahead. That's exactly what has happened since... and still can. The lesson here today is short and sweet... In The Money Game, Goodman also gave practical advice to folks with money in the markets, or the "game," as he describes it throughout... No matter what role the investor has started with, in a climax on one side or the other the role melts into the crowd role of greed or fear. The only real protection against all the vagaries of identity-playing, and against the final role of being part of the crowd when it stampedes, is to have an identity so firm it is not influenced by all the brouhaha in the marketplace. In other words, know thyself. This should sound familiar to regular Digest readers... Know your goals and your timeline for a particular investment. What is this money for? Know your stocks and how they tend to behave. Are they volatile? Are they not? Think long and hard about betting the rent or mortgage payment on speculations. And if you're in this "game" for the long term, think about your portfolio that way. Is your portfolio truly diversified? Protect your wealth so you can grow it. There are times when the odds favor one over the other. In The Money Game, Goodman cited an essay on investing and anxiety – thus the title of the chapter I quote here – written by New York investment "counselor" Linhart Stearns. He noted that anxiety, or fear, is a threat to identity – and ultimately investing success. Stearns cited clients of his who had all number of fears. One of them wouldn't buy bonds because bonds reminded him of death, "an observation perhaps not so far wrong," Goodman wrote. Another client was a dress manufacturer who thought of stocks as dresses. He thought that they should be sold at a profit if possible, but also that they should be sold at the "end of the season" regardless, even if that meant at a markdown. As Goodman wrote, Stearns "must have been a soothing investment counselor to know," because his thesis was that... The end object of investment is serenity, and serenity can only be achieved by the avoidance of anxiety, and to avoid anxiety you have to know who you are and what you're doing. This might seem like heavy or pie-in-the-sky stuff, but it's practical... If you know who you are and what your portfolio is there for, going "against the crowd" might just come naturally at the best possible times – when everyone else is doing the wrong thing at the worst time. In the end and in the beginning, the decision to be greedy or fearful should fit with your plan for your money, not anyone else's. Figure that plan out, and there's a better chance you'll avoid getting caught up in the carmagnole or experience the potential pain of a paroxysm. Watch the Stansberry Conference Live Our annual Stansberry Conference is right around the corner. From October 24 to 26, our editors, special guest speakers, and many of our subscribers will gather at the Encore Boston Harbor resort for the 20th anniversary of our conference... In-person tickets are sold out, but if you haven't gotten one, we have good news... You can be "in the room" and watch all the presentations from the Stansberry Conference via our livestream – all from the comfort of your couch or office. [Click here for more details and pricing information](... A livestream ticket also includes access to on-demand recordings of our speakers, who include familiar names like Dr. David Eifrig, Eric Wade, and Matt McCall... and guests such as NYU professor of marketing Scott Galloway and hedge-fund manager Hugh Hendry. --------------------------------------------------------------- Recommended Links: [Warning: Prepare Now for 'Red October']( A "perfect storm" has already rocked stocks, bonds, commodities, currencies, and futures. But history tells us that the worst is actually dead ahead... and that the most brutal volatility of 2022 to date could kick off this month. Before the "month of market crashes" takes hold, [here's our No. 1 recommendation to prepare](. --------------------------------------------------------------- ['This Will Define My Legacy']( After four decades of preparation... Dr. David Eifrig stepped forward with the most important announcement of his life. If you've EVER followed his research – or simply don't want to miss what Doc calls "the biggest opportunity I've ever seen... in any market... any asset... anywhere" – you need to see what he has revealed immediately. [Full details here](. --------------------------------------------------------------- New 52-week highs (as of 10/7/22): short position in iShares U.S. Real Estate Fund (IYR). In today's mailbag, feedback on [Dan Ferris' latest Friday Digest](... and our conversation starter in our mailbag at the end of last week... What's on your mind? Send your comments, questions, and observations to feedback@stansberryresearch.com. "Thanks for your valuable insight Dan. Retired and, although down for the year, have taken on little risk." – Paid-up subscriber Michael B. "You know it's funny how many so called financial wizards preach the 'you should buy this stock now' mantra while the bear market marches on with no clear end in sight. "I continue to hear 'don't sit on the sidelines in cash' because you will lose money. I have a response to that theory. "Color me stupid but 'Losing 8% on your cash due to inflation is a hell of lot better than losing 25%, or more, on a portfolio leaning heavy with stocks.' "Being heavy in cash, and I mean heavy as in 80% to 90%+ has clearly served me better than buying stocks at this point. "I have methodically sold down to 10% equities, most of what's left is from Ferris' defensive recommendations and I am down 11% YTD on a mid-7 figure portfolio. Not good and I'm sure many others have fared better, but it could have been a lot worse. "Other recommendations I bought this year have stopped out, so I have completely applied the brakes to buying anything until a sustainable uptrend begins, whenever that will be. "Being heavy in cash has at the very least minimized my losses, allowed me to sleep better and reduced my risk substantially while I wait for this mess to blow over. Better days are ahead as Dan says, but probably not for another 1-2 years." – Paid-up subscriber Larry H. "Corey M and Dan Ferris, I love your articles. I eagerly await receipt of your next article to get your daily insights in the markets. "I trade in and out of my Roth IRA at least every other day. And prior to, I always sink in every piece of financial guidance and acumen about the stock markets that you give to us daily. It has worked beautifully because in the last 8 months I have been very conservative, while my style is usually aggressive. You both have saved my retirement account taking a significant ruin. And I've even gained a bit during the bear market rallies when there appeared to be oversold conditions. I love you guys and Greg Diamond. Your insights have always guided me in my next move. "Please don't retire as I need you guys for the next 10 years at least!" – Paid-up subscriber Anita G. "Q: 'Is everyone too busy to send their comments?' "Yeah. Because in spite of the war in Europe, the angst in the markets, the utter nonsense here in Georgia regarding the upcoming elections, and the constant barrage from the media saying, 'Look here!', 'No, look at this, it's much worse!', 'No, this is truly Armageddon. Listen to me!' – in spite of all this, here in the ATL it is the most perfect fall weather, 75-80 degrees every day and sunny. "The fair is in town so we went last night to eat corn dogs, won a free insulated mug at a Chevy dealer's advertising booth and enjoyed a Sawyer Brown concert. Each day brings another delightful fall experience. Last weekend we hiked to see the wild yellow daisies over at the Davidson-Arabia Mountain Preserve (close to Stone Mountain)... The previous weekend we drove up into the North Georgia mountains... visiting nearly a dozen apple houses (apples, apple cider slushies, fried pies, fresh picked veggies), then hiked up in that area. "If COVID taught us anything worthwhile it was that 'seize the day' is more than an old saying. It's a good saying and we are living it even if the markets and Putin are going nuts. If I die tomorrow, I will not wish I had sat in front of this computer and worried more. "Because that's what I pay y'all to do! (wink)" – Paid-up subscriber Jacqueline G. All the best, Corey McLaughlin Baltimore, Maryland October 10, 2022 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 836.3% Retirement Millionaire Doc ADP Automatic Data 10/09/08 805.4% Extreme Value Ferris MSFT Microsoft 02/10/12 717.0% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 524.7% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 485.7% Stansberry Innovations Report Wade AFG American Financial 10/12/12 406.3% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 377.0% Retirement Millionaire Doc WRB W.R. Berkley 03/16/12 373.9% Stansberry's Investment Advisory Porter TPL Texas Pacific Land 11/05/20 302.8% Stansberry's Investment Advisory Porter FSMEX Fidelity Sel Med 09/03/08 291.8% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ETH/USD Ethereum 12/07/18 1,156.5% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,155.0% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,090.4% Crypto Capital Wade MATIC/USD Polygon 02/25/21 845.2% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 419.9% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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