Porter Stansberry likes to be right. What investment tipster, mailing to millions and selling reports to many thousands, wouldn't want a record of good advice? But in recent years, controversy has continued to grow over whether or not he's accurate. Some say he takes a shot and hopes for the best.
"I have been a member only a few weeks," wrote investor Pat Smullen to Stansberry recently, copying me in. "So far, all my email from your concern consists of long dissertations trying to selling me something more, bragging about supposed gains and people, and giving no real information."
Famously, Stansberry claims to have spotted in advance the meltdown of 2008. "We warned investors to avoid Fannie and Freddie, Bear Stearns, Lehman Brothers and General Motors and dozens of other companies that have since collapsed," he claimed in 2010. "We even helped our subscribers find opportunities to profit from these moves by shorting stocks and buying put options. To my knowledge, no other research firm in the world can match our record of correctly predicting the catastrophe that occurred in 2008."
Brave talk, but this was after the fact. Indeed, analyst Peter Schiff checked this out. "I have read now all of the newsletters that Porter wrote and sent out to his clients," Schiff says. "And I can say, in no uncertain terms, that there is nothing in there that indicates that Porter Stansberry saw this crisis looming, even when he was right on the cusp of it."
Now, I'm a journalist, and I hold no investments. So I really don't mind who is right. But, having followed Stansberry for years, I thought I would perform a public service and monitor one of his boutique tips.
It's now in the past - as writing tends to be - but such lessons can last forever. And I hope to do more of such exercises in the future: case studies in investment advice. With regard to this tipster, I'll have snapshots of Stansberry, to report how things turn out.
So although you may be reading this some time from when I wrote it, there may be lasting lessons to learn.
Porter Stansberry goes gold
I felt it was important not to be wise after the event. That would make me no different to Porter Stansberry. So I selected in advance the investment I would monitor. That investment would be gold. Nice and simple. Sometimes described as "the world's most valuable asset in a time of crisis", its performance was booming at the time.
Then I waited on Stansberry to offer his advice. The tip I spotted came in October 2012. This was the month that Hurricane Sandy struck the eastern United States - then the second most costly storm in the nation's history - making landfall not far from Jersey City.
As Sandy first developed (from a tropical wave in the Caribbean) on October 22, Stansberry took the plunge on gold. During the previous months, bullion prices had continued into what pundits from Warren Buffet downwards had long been describing as a bubble, rising from a closing price of $1,572 an ounce, on July 21 2012, through $1,784 on September 22.
By the date of Stansberry's tip on October 22, the metal had cooled a fraction to $1,726. He said the time was right to gain from further rises, and hit the internet with advice to his followers. At the top of an article showcased at Steve Sjuggerud's "Daily Wealth" (a bulletin from their employers' Agora Inc of Baltimore, Maryland) the front end of the headline shouted:
Why you must buy gold...
Stansberry's argument was familiar, especially to gold investors. There was a sharply ideological quality. Governments were spending so much money they didn't have that paper currencies - fiat currencies - would inevitably devalue, making gold a sound store of wealth. Indeed, Stansberry went as far as to call gold a "real asset" in a time of relentless inflation.
"Many investors believe gold is a hedge against inflation," he argued in the article, but that's not the "real secret" of gold. What he then called the "real purpose" of gold was to "hedge against government hubris". It would help protect you from the storms that were to come.
So, the usual story: printing money, hyperinflation, savings destroyed. It was time to buy:
Back in 2006, with gold trading for around $650 an ounce, I set a target at $2,000 an ounce. We're nearly there.
But what would actually happen? Again, I tried to be scientific. I would wait six months before reporting. I set my calendar for a reminder, and on April 22 2013, I returned to check the charts...