Most investors, if they have any sense, stay away from gold and silver. The best evidence - which you will hardly see by daylight unless you are willing to pay for it - should be warning enough of the risks. In the long term, you will be lucky to break even on your investment. And in the short term, you would probably do as well to fly to Vegas, buy a gun and a bottle of whisky, ask room service for extra towels, and put your house and car on black.
But that doesn't mean investors should pay no attention to precious metals. Indeed, in my lengthy investigations into the rise of Porter Stansberry and his Stansberry & Associates Investment Research company, I've found that Porter's approach to giving advice on when to buy, hold or sell gold and silver to be among the most revealing indicators of his financial advice strategies. And I think that you might too.
First, I should explain just who I am, and how I came across Porter Stansberry. Way back in 2003, when summers were cooler and all but the very young were getting more sex than we are now, Frank Porter Stansberry was just starting on his road to success. At the time, I was working on a long investigation for The Sunday Times Magazine into a small-cap company called VaxGen. This enterprise claimed to have invented the "world's first Aids vaccine" - AidsVax - a pretty obvious scam to anyone who knew anything about it, but which Porter was assiduously promoting.
"AidsVax proves successful... Approach should lead to end of epidemic," was, for example, how Stansberry evaluated the putative product's prospects when VaxGen stock shed a staggering twenty bucks from its 52-week high - and more than $30 from its post-IPO peak - to settle at $3.31.
Porter Stansberry faces fraud prosection
A lot of people got burned in this debacle, and some still write to remind me. Porter Stansberry, meanwhile, got bogged in other woes, when he was prosecuted over a securities scam. I've written a lengthy account of the fraud case against him, so I won't go over it all once again. The gist, however, was that he had lied to investors and in 2007 was required to pay a hefty fine. Stansberry's conduct “undoubtedly involved deliberate fraud”, a district judge ruled, and “making statements that he knew to be false”.
For all the damage it has done him, Stansberry is not apologetic. In his view he was wholly innocent.
"The SEC attorney who originally brought charges against me accused me of insider trading, but I never traded the stock. So, the charges were later changed to securities fraud," he wrote to me recently. "Why was there such a huge institutional focus on this particular case, which didn't involve securities fraud at all?"
As I've said, this is the past. What about the present? And most particularly what about gold? Although this is far from Stansberry's central preoccupation, it is a topic that provides a window into his approach to business today. For, not only does he opine on the precious metals issues, but so do many others who work to his agenda at Stansberry & Associates Investment Research.