Crisis Market Search
Recently, Nick Giambruno talked about the investing strategies employed at Casey Research. Doug Casey has long looked for crisis markets where he could find assets that he was sure would be around in 50 years.
During a time of crisis, these assets are usually trading or selling for way less than they are really worth. Thus, it provides an opportunity to buy at bargain-basement prices while everyone else is rushing to get out.
In 2013, the tiny European island of Cyprus had a banking crisis. Its stock market plunged 98%. It was one of the most significant financial crises in recent memory.
At the time, there were sound, productive, and well-run businesses in Cyprus making money and paying dividends. Some of these companies were trading for less than 50% of their book value…literally pennies on the dollar.
We recommended eight Cypriot stocks to our readers. One was a resort company that operates luxurious beachfront hotels in Cyprus. We made a 210% gain on that one.
Crisis Markets in Metals
But, the strategy doesn’t just apply to business. Nick suggests the following play in the platinum market:
You see, many people call platinum “the richer man’s gold.” That’s because it’s almost always more expensive than gold. There have only been a few times in the last hundred years that the price of platinum has dipped below the price of gold.
Priced in gold, platinum is at an all-time low.
At the very least, I expect platinum prices to revert to the mean.
Crisis Markets in Oil
He also suggests that the same opportunities are available in the oil market:
Oil prices have gotten crushed over the past couple years. They’re down more than 70% since 2014. And these low prices have put the industry in “survival mode.”
In the 1990s, the U.S. imported close to 25% of its oil from Saudi Arabia. Today, it only imports 5%. New methods like “fracking” are a major reason why. These innovations unlocked billions of barrels of shale oil and helped America become more energy independent.
The shale industry has more staying power than Saudi Arabia, which is already bleeding cash because of this “oil war.”
Key to Crisis Markets
The key in all of the examples is to find the places, companies, investments, etc., which are being sold well below their natural value. Within those areas, look for assets that are well run, generating good income, and are valued well below their value in terms of assets or replacement costs because the investors are in a panic.
As the old Chinese pictograph says depending on usage “chaos/opportunity.” In short, whenever or wherever there is chaos created by panic, there is an opportunity to buy assets that will provide huge gains once the panic has subsided.