Our Expert Weighs In On Energy, Gold, Crypto, And More…
Right now, we’re hearing a lot of talk about bear markets.
Depending on your views (and agenda), you may see analysts and pundits give all sorts of predictions and prognostications about the market and the health of the economy.
But the truth is, we don’t know what’s going to happen. All we can do is give it our best guess. And yet, we can find all sorts of data to reinforce our own notions.
For example, did you know the average bear market lasts 388 days? That doesn’t sound too reassuring.
On the other hand, the S&P 500 has only dropped by more than 20% (the definition of a bear market) on 11 occasions since 1950. That’s hardly a sufficient statistical example, don’t you think?
The important thing to remember is that this too shall pass. And on a long-enough time frame, it pays to be bullish.
That’s why instead of fretting about what’s not working in the market, we should be focusing on what is. For that, I turned to my colleague Jimmy Butts, Chief Strategist of Capital Wealth Letter.
Below, you’ll see what he had to say in our recent exchange. My questions are in bold…
We’re more or less at the halfway point of the year. Has it played out the way you thought?
I hate to say it, but yes.
Since the beginning of the year, I’ve been warning of more pain ahead. And we just closed out one of the worst first halves for the stock market… ever.
The S&P 500 finished the first six months of the year down 21%, its poorest start since 1970. The tech-focused Nasdaq lost nearly 30% of its value, its worst start since its debut in 1971.
Over at Capital Wealth Letter, our portfolio has weathered the storm well through the first six months. Although we haven’t exactly been spared. We trimmed some of our portfolio while loading up on a couple of gold miners and energy plays, for example.
Speaking of gold and energy, are you still bullish on these sectors?
We’ve seen a recent selloff in those sectors, but I think there are still opportunities…
On the gold front, the price of gold has slid below $1,750 an ounce, which is down from its peak of $2,050 in March. This has put pressure on our two gold miners. But inflation is soaring, real incomes are under pressure, investors are seeing unrealized losses in most of their investments, and confidence in the U.S. economy (and the Federal Reserve) is eroding.
I believe these conditions are setting up for a nice second half of the year for gold and gold miners. Gold is a tangible asset that has been used as a store of value for centuries. Owning gold has long been known as a great way to protect your wealth from inflation and serve as a crisis hedge.
This time won’t be any different.
As for the energy sector, although it sold off over the last month, it remains the only sector in the black this year (up 25% YTD).
Shares of our oil and gas midstream holding are still up 11% on the year, although it was up over 30% on the year in June. We also added a natural gas play in February this year, which got off to a great start — up over 50% at one point. It has also pulled back with the overall sector, though it’s still up double digits since we added it.
Investors continue to worry about a looming recession and its potential impact on the demand for oil and gas. The price of oil has slipped below $100 per barrel down from its peak of around $130 a barrel in March.
But I remain bullish and believe the energy sector is in oversold territory.
What’s another bright spot in the market that investors might not expect?
Times like these really prove why I love property & casualty (P&C) insurance businesses. They also happen to make great inflation hedges as valuable assets (homes, vehicles, boats, etc.) will always need financial protection against damage, theft, or complete loss. Accordingly, insurance premiums rise during periods of inflation to cover higher replacement costs.
It’s no wonder that insurance is the lifeblood of Warren Buffett’s empire. It’s one of the best business models you’ll ever come across.
Case in point, one of our insurance holdings is up 24% on the year, compared to the 18% loss for the S&P 500. (And we’ve made 143% overall…)
Our other insurance pick — American Financial Group (NYSE: AFG) — is up over 9%. And we’ve nearly tripled our money since adding it in August 2020. It’s also been handing out cash to shareholders left and right. We received a special $8 per share dividend in May, which was after the special $2 dividend we got in March, and on top of the regular quarterly dividend of $0.56 per share.
The crazy thing about AFG is that if you look at the stock’s dividend yield on most financial websites, it’ll show a meager 1.6% yield. But that doesn’t take into account any special dividends that we’ve received. The stock’s true dividend yield based on the last 12 months of payments is a whopping 28%. That’s not a typo… It has dished out $38.74 per share over the last 12 months.
Now, I don’t personally think these picks are “buys” at today’s prices. This just gives you an idea of what a “boring” business like insurance can do for your portfolio. But don’t worry, the market always gives us an opportunity to buy these wonderful businesses at fair prices. We just have to be patient.
Let’s switch gears. As we’ve covered before, you started dipping your toe in the water with cryptos this year over at Capital Wealth Letter at the beginning of the year. But prices have fallen recently. Are you still optimistic?
I would argue that now may be the most important time to buy crypto if you haven’t already.
I’ll admit it, I used to be a skeptic of bitcoin and cryptocurrencies. But a few years ago, after doing some research and thinking it over, I changed my tune.
Now, I don’t believe anyone can predict the future with a hundred percent certainty. But I firmly believe that the future lies in the blockchain and that a select few coins will have a place in the mainstream.
That being said, I’ve been very clear about saying that crypto will have its ups and downs. It’s important to remember that crypto is still relatively new. And like anything new, there will be growing pains. That’s why I never recommend betting the farm on these things.
But if you’re looking to take a calculated risk for the potential for life-changing gains, then you owe it to yourself to look into cryptocurrencies.
That’s what my latest special presentation is all about. I created it for investors who might be feeling like they “missed out” on the initial wave of crypto. Because that’s what I think the current market is offering investors… a second chance.
That’s why I urge our readers to check it out if they haven’t already. You’ll have the chance to get a full slate of reports that will walk you through everything, including:
– How to get started with cryptocurrencies (including how to open an account with an exchange)
– How to safely buy, secure, and store your crypto to protect it from bad actors
– The 3 coins I believe have the best chance of creating incredible wealth for investors
Editor’s Note: I want to thank Jimmy for joining us today. We covered a lot of ground, with more to come – including his analysis of the cryptocurrency world…
In the meantime, Jimmy has identified the best crypto investments available right now – and how you can profit…
Jimmy has pinpointed the three best ways for investors to cash in on crypto’s comeback in his latest presentation.