Insight Investor
Porter Stansberry
friend or fraud?
Award-winning investigative reporter Brian Deer recalls his first encounter with Porter Stansberry, the Baltimore stock tipster, which triggered years of journalistic observation
Porter Stansberry had me scared. Hardly had I finished my last investigation of 2010 when an “investment advisory” from Stansberry Research dropped into my in-box from one of my many tipster investors and well-wishers around the world. And it hit me with bad news. We are doomed.
“If you live in an urban area,” Stansberry blasted to the million or so email addresses that he and his bosses at Agora Inc in Baltimore have in their servers, “I recommend making sure you’ve got somewhere you can go in case there are riots or food and water shortages.”
Bad as that, huh? Apparently so:
“Wherever you’re going to wait out the chaos,” he tells us, “I recommend you have basic food, water, and medical supplies to last you for at least six months.”
As an investigative newspaper reporter, I’ve kept my eye on investment newsletter editor Porter Stansberry, on and off, over many years. Securities and Exchange Commission investigators have even quizzed me. But this, as we say in England, takes the biscuit. So I resolved to take another look.
The document was a transcript of a video Stansberry had posted on the web. It aimed at frightening the pants off punters.
“What you are about to see is controversial, and may be offensive to some audiences,” this warned, like one of those TV announcements aimed at ensuring that you definitely watch the show. “Viewer discretion is advised.”
What followed was more than 12,000 words of what Porter Stansberry aficionados such as myself will recognise as his remarkable modus operandi for getting the attention of small-scale investors. Whether it’s gold, land, stock or derivatives, his narrative strategy is the same.
“I want to talk about a specific event that will take place in America’s very near future… which could actually bring our country and our way of life to a grinding halt.”
“Stock prices will likely plummet by at least 40% in a matter of weeks as a result of this event in the currency markets.”
“It’s all going to come to a head soon. Much sooner than most people think.”
So far, so Porter. But what’s behind all this? In one word – a buzz word – it’s:
China.
According to Stansberry’s (not-too-original) idea, China is poised to dump the greenback as a common currency of trade, and instead move to a basket of currencies, including its own yuan, the Japanese yen and the Euro.
Already, he says, “China is unloading as many dollars as they can, as quickly as possible.” Ah, so.
Drawing on a catholic range of snippets, all the way from the august New York Times to everybody’s favourite congressman, Ron Paul of Texas, Porter Stansberry comes to the conclusion that America is in deep, deep financial trouble. Hence the riots, food shortages and the need for a personal six-month stash of medical supplies.
So, how does this work? And what do we do about it, apart from stock up on beans and Viagra?
First let me tell you about my history with the investment advisor Stansberry, so you can judge all this better for yourself.
Porter and me
My name is Brian Deer, and, as I’ve said, I’m an investigative reporter. In the quarter century since I was yanked off the business desk and into the newsroom of The Sunday Times of London, I’ve trawled the world for tough, technical topics that need digging out the facts people need.
A lot of my stuff has been in biomedical fields, where the simplest story shields a morass of complexity. And almost always there’s been the threat of legal complaint. In one case, I was sued for two years (and won). So I know a few things about research and evidence. Which is how Porter Stansberry crossed my path.
This was way back in February 2003 – before he was prosecuted by the SEC for securities fraud – when the results of the “world’s first Aids vaccine”, eerily named “AidsVax, were unveiled in South San Francisco by a small-cap company called VaxGen. Given my biomedical interests, I’d investigated the prospects for this product, and wrote a six-page report in The Sunday Times Magazine.
Although times are changing in the newspaper business, back then it was pretty much money-no-object when it came to getting to the bottom of the story. I’d travelled to Bangkok, Thailand, where they were running a clinical trial, as well as California, where the company was headquartered, and interviewed just about everyone and anyone who could help me understand the science of the shot.
By the time I went to see the president of VaxGen, a guy called Don Francis, at times it seemed like maybe I knew more about his vaccine than he did.
The guinea pigs for their project were Bangkok junkies, who were not exactly 100% up on the science. But clever me had worked out that the vaccine proteins contained a wrong amino acid string, so there was little chance it would block HIV. Francis denied this, blathering science to silence Einstein, and told me what he said it was made of.
“It’s not,” I interrupted.
“Yeah,” he insisted.
“No it’s not.”
“It is.”
I rummaged through my papers and read him the amino acid strings from the V3 tip of the gp120 blob. It was not one hundred millionth the\par size of the infected cell, but not totally out of sight. “Here we are: Thai E strain is GPGQVF.”
“Right,” he agreed.
“The Thai B strain is GPGQAW,” I continued. “If you take the B vaccine sequence, it’s GPGRAF.”
The strings were all different. He was talking nonsense. “Okay, okay,” he acknowledged. I’m sorry.”
The point of all this was that, by VaxGen’s own logic, their world’s first Aids vaccine would fail. “If we’d had a TV crew here,” I told him, at the end of the interview, “you wouldn’t have a company tomorrow.”
And it wasn’t just this. I’d talked some of the best people it was possible to talk to on the subject. People such as Dr Robert Gallo, America’s pre-eminent retrovirologist and co-discoverer of HIV.
He told me: “It’s a waste of time.”
People such as Prof Andrew McMichael, Aids vaccine chief at Oxford’s Institute of Molecular Medicine.
He said: “I wouldn’t have the belief that this will work.”
And people such as Dr Jean-Paul Levy, head of France’s vaccine programme.
He spat:: “It forgets one century of science.”
But, after not so long passed, up popped Porter Stansberry, who noticed the VaxGen stock. And he had a different idea.
“Any day now, a Wall Street Journal story will make a handful of investors rich,” he shouted, from an online publication which he called Blast!
“I’ve uncovered a business currently worth $250 million that will soon be worth several billion.
“Today, you can buy it for less than $20 a share.
“In a matter of weeks, this stock will skyrocket when a story about it appears in The Wall Street Journal.
“When the article appears, this company could see its share price jump from less than $20 a share today to $50… $100… $150… or possibly much more.”
His pitch was for the announcement of the AidsVax results, which he reasonably figured the Journal would cover. “The only realistic chance to make 50 times your money in the short term… As soon as these trial results are announced – if they’re as good as we expect – this company could get immediate orders for billions of dollars worth of its product.”
Offering a $149 special report, which Porter Stansberry Associates would email you for the bargain price of $74.50, he would let you in on the action, to take your slice of what he called the “holy grail of medicine”.
Heady stuff. And what was the outcome?
You guessed. The company bombed. On the morning after the company unblinded one arm of the clinical trial, which was underway in the United States – and which showed no efficacy whatsoever – VaxGen shed a staggering $20 from its 52-week high, and more than $30 from its post-IPO peak.
It opened at $3.31.
And how did Porter Stansberry react to this calamity? He was not going to slink away quietly.
“I have stunningly good news to report,” he announced to his by-now confused subscribers, within hours. “AidsVax seems to work.”
Stansberry and investment advice
A bit of a spat developed between Porter Stansberry and me in the aftermath of the AidsVax debacle. I criticised his pumping of the VaxGen company’s stock, and he accused me of, well, alleging wrongdoing. And, as word got round to market watchers on the web,, people started to send me his stuff.
I couldn’t not now review it all. Life is too short. But, almost at random, I’ve just looked at another case. This is his plug for a revolution in the global oil business, presented in similar terms. This one stands conceptually mid-way between AidsVax and what may yet happen over his idea about China.