With the massive decline in cryptocurrency prices and the collapse of crypto exchange FTX, the term “crypto winter” is now making headlines.
But Peter Schiff, director and chief global strategist at Euro Pacific Capital, believes that this is not the right word to describe the situation.
“This is not #crypto winter. That means spring is coming. This is also not an age of cryptography, as even that ended after a few million years,” he writes in a tweet. “It’s a cryptic erasure.”
It’s a dire warning. But it’s not the first time Schiff has sounded the alarm.
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Last year, when bitcoin hit $50,000 and the upward momentum seemed unstoppable, he said “While a temporary move to $100K is possible, a permanent move down to zero is inevitable.”
If you share the same opinion, you probably want to know where Schiff is finding shelter in this ugly market.
With Euro Pacific Asset Management having 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 in Schiff’s portfolio.
Schiff has long been a fan of the yellow metal.
“The problem with the dollar is that it has no intrinsic value,” he once said. “Gold will hold its value and you will always be able to buy more food with your gold.”
In fact, when Schiff tweeted about the crypto extinction, he also mentioned that gold “will rise again to lead a new breed of asset-backed cryptocurrencies.”
As always, he’s putting his money where his mouth is.
Ace Sept. 30, Euro Pacific Asset Management held 1,655 million shares in Barrick Gold (GOLD), 431,952 shares in Agnico Eagle Mines (AEM) and 317,495 shares in 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 out of thin air like fiat money, and safe haven means that demand usually increases in times of uncertainty.
If gold prices rise, miners such as Newmont, Barrick and Agnico will likely enjoy higher profits.
Contraction-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: The second largest holding in Euro Pacific is cigarette giant British American Tobacco (BTI), which is 5.3% of the portfolio.
The maker of Kent and Dunhill cigarettes pays a quarterly dividend of 74 cents per share, giving the stock an attractive annual yield of 7.6%.
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The Schiff fund also owns over 157,766 shares in Philip Morris International (PM), another tobacco king with a 5.4% dividend yield. The Marlboro cigarette maker is Euro Pacific’s seventh largest holding with a portfolio weight of 3.5%.
The demand for cigarettes is highly inelastic, meaning that large changes in price cause only small changes in demand—and that demand is largely immune to economic shocks.
If you’re comfortable investing in so-called sin stocks, British American and Philip Morris may be worth investigating further.
When it comes to playing defense, there’s one recession-proof sector that shouldn’t be overlooked: agriculture.
It’s simple. Whatever happens, people still need to eat.
Schiff doesn’t talk as much about agriculture as precious metals, but Euro Pacific owns 124,818 shares in fertilizer producer Nutrien ( NTR ).
As one of the world’s largest providers of crop inputs and services, Nutrien is well-positioned, even if the economy finds itself in a severe downturn. In the first nine months of 2022, the company posted record profits of $6.6 billion.
Shares of Nutrien are up 3% in 2022, in stark contrast to the S&P 500’s double-digit year-to-date decline.
Given the uncertainty facing the US economy, investing in agriculture could provide peace of mind to 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.