With the massive pullback in cryptocurrency prices and the collapse of crypto exchange FTX, the term “crypto winter” is now in the headlines.
But Peter Schiff, CEO and chief global strategist at Euro Pacific Capital, doesn’t think that’s an accurate term to describe the situation.
“It’s not a #crypto winter. It’s implying that spring is coming. It’s also not a crypto ice age, as even that ended after a few million years,” he wrote in a tweet. “It’s the extinction of crypto.”
This is a terrible warning. But this isn’t the first time Schiff has sounded the alarm.
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Last year, when bitcoin hit $50,000 and upward momentum seemed inescapable, he said, “While a temporary move up to $100,000 is possible, a permanent move towards zero is inevitable.”
If you share the same opinion, you probably want to know where Schiff finds refuge in this lousy market.
Since Euro Pacific Asset Management has just released its latest 13F filing – a report that institutional investment managers file quarterly to disclose their holdings – let’s take a look at some notable themes from Schiff’s portfolio.
Gold
Schiff has long been a fan of yellow metal.
“The problem with the dollar is that it has no intrinsic value,” he once said. “Gold will retain its value and you can always buy more food with your gold.”
In fact, when Schiff tweeted about the extinction of crypto, he also mentioned that gold “will rise again to lead a new breed of asset-backed crypto.”
As always, he puts his money where his mouth is.
As of September 30, Euro Pacific Asset Management held 1.655 million shares of Barrick Gold (GOLD), 431,952 shares of Agnico Eagle Mines (AEM) and 317,495 shares of Newmont (NEM).
In fact, Barrick was the company’s largest holding, accounting for 6.8% of its portfolio. Agnico and Newmont were the third and sixth largest holdings, respectively.
Gold cannot be printed from scratch like fiat currency, and its status as a safe haven means demand typically increases in times of uncertainty.
If gold prices rise, miners like Newmont, Barrick and Agnico will likely see bigger profits.
Recession-proof income stocks
Dividend stocks offer investors a great way to earn a passive income stream, but some can also be used as a hedge against recessions.
Example: Euro Pacific’s second largest holding is cigarette giant British American Tobacco (BTI), which accounts for 5.3% of the portfolio.
Cigarette maker Kent and Dunhill pays quarterly dividends of 74 cents per share, giving the stock an attractive annual yield of 7.6%.
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Schiff’s fund also holds more than 157,766 shares of Philip Morris International (PM), another tobacco kingpin with a dividend yield of 5.4%. Cigarette producer Marlboro is Euro Pacific’s seventh largest holding with a portfolio weighting of 3.5%.
Demand for cigarettes is highly inelastic, meaning large price swings induce only small shifts in demand – and demand is largely immune to economic shocks.
If you’re comfortable with the idea of investing in so-called sin stocks, British American and Philip Morris might be worth investigating further.
Agriculture
When it comes to playing defense, there’s one recession-proof sector that shouldn’t be overlooked: agriculture.
It’s simple. No matter what, people still need to eat.
Schiff doesn’t talk agriculture as much as precious metals, but Euro Pacific owns 124,818 shares of fertilizer producer Nutrien (NTR).
As one of the world’s largest providers of agricultural inputs and services, Nutrien is solidly positioned even as the economy enters a major downturn. In the first nine months of 2022, the company generated record net income of $6.6 billion.
Nutrien shares are up about 3% in 2022, in stark contrast to the S&P 500’s double-digit decline year-to-date.
Given the uncertainties facing the US economy, investing in agriculture could reassure risk-averse investors.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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