Ukraine in Your Heart, Your Hand on Your Wallet

Topics we can't avoid... The big, hairy risks that aren't priced in... World War III... Don't take their yachts... The three big cycles are still turning... If it ain't broke... Be careful what you wish for...

I (Dan Ferris) often tell Stansberry Investor Hour listeners that I like topics that can't be avoided...

I like to help investors see past these tough topics... Most urgent headline-worthy stories, no matter how scary they may seem, should be ignored from an investment perspective.

Reacting to headlines is not a valid investment strategy... It's a way to light money on fire.

Owning great businesses for the long term is a strategy. Executing a disciplined trading program is a strategy...

Stick with whatever you're doing to engage in long-term compounding. Avoid the toxic influence of scary headline stories...

I see every new crisis headline as an opportunity to remind investors that sensational news stories are not nearly as important to their portfolios and asset-allocation strategies as they seem...

The war in Ukraine presents another such opportunity...

The scary headlines are inescapable...

They're on top of every story on the homepage of the Economist... They're all over the Financial Times, Wall Street Journal, Bloomberg... Right now, in all the major news outlets, it's all Ukraine, all the time.

According to many of those headlines, the conflict is getting worse... One headline warned that Russian President Vladimir Putin told French President Emmanuel Macron that Russia's plan was to "take control of all Ukraine."

There's a massive humanitarian crisis brewing as the Russian army seeks to surround the city of Kyiv... cutting residents off from critical food and medical supplies, causing incalculable hardships on many innocent civilians.

I've heard news reports that the Russian army plans to execute prisoners in front of firing squads as they take each Ukrainian city.

Without seeming too cold or uncaring, we need to look at the events through an investor's eyes...

Wars have a long history of being inflationary, and this geopolitical conflict will be no different... But that's already been talked to death in the mainstream and social media. It's obviously being priced into markets every day.

I'd rather address the big, hairy risks folks aren't pricing in as a result of Russia's invasion of Ukraine...

Among the biggest, hairiest risks is the potential for World War III...

I realize the topic has been broached in the media, but it's clearly not priced into financial markets right now... That means investors mostly think it won't happen.

So naturally, I feel the need to think about why and how it might happen...

If you've spent any time near TV and Internet news sources recently, you've heard that President Putin wants to put the Soviet Union back together...

The Soviet Union was never a great economic power... Not at all. It was a brutal dictatorship that sent people to work and starve to death in Siberian gulags for reading banned books.

I still remember Jim Rogers writing about his three-year, round-the-world trip in a custom Mercedes-Benz 20 years ago... Rogers wrote about the hulks of old military machines discarded along the roads as he drove across the country.

It reinforced my idea of evil as corruption and weakness rather than strength and guile...

Putting the USSR back together strikes me as a desperate, pathetic plan, like a middle-aged man who wants to reunite his high-school rock band so he can feel young again.

If Putin really wants to put the band back together, he has a lot of work to do... The collapse of the Soviet Union created 14 independent countries besides Russia.

Belarus is already a Russian puppet. If Ukraine falls, that's two down, 12 to go. Moldova is just south of Ukraine... Is it next?

The republic of Georgia borders Russia on the eastern shore of the Black Sea... Latvia and Estonia border Belarus and Russia just northeast of Poland. They seem like obvious future targets if Putin is serious about his plan.

I find it hard to believe that Western governments would stand by and watch Russia take over Moldova, Georgia, and the Baltic states... though so far they're content to watch from the sidelines as it flattens Ukraine with missiles and tanks.

I realize it's complicated... The contractor who worked on my house is Georgian. He told me a few years ago of his home country, "They love Putin there."

I'm not saying WWIII is likely or that politics in and around Russia are simple, only that the market is unprepared for WWIII and that it could happen.

The U.S. keeping out of foreign entanglements is OK with me...

But I'm not talking about what I think is right... only what could happen based on how folks with political power tend to behave.

Though we clearly aren't there yet, at some point, protests, political pressure, and the rhetoric to stop Russia from reassembling the "Evil Empire" could reach politically intolerable levels... War helps distract voters from any unpleasantness going on at home.

Could Russian attacks on former Soviet states really bring the U.S. and its NATO allies into direct conflict with Russia? I don't see why not... but I also have no feeling for the probability of such an event.

Don't get me wrong... I'm not saying I know what will happen because I understand geopolitics. I'll be the first to admit I'm no geopolitical expert. I'm just sitting off to the side of it all, not quite sure what's happening... like a squirrel watching a bank robbery.

Maybe economic sanctions against Russia and financial sanctions against prominent Russians, including Putin and his pals, will be so devastating to the Russian economy that Putin won't be able to even keep control of Ukraine... much less invade Moldova or any other former Soviet state.

Or maybe those sanctions will make him desperate to show the world how strong his country is, causing him to speed up his timeline.

Or maybe Putin will be assassinated by the wealthy oligarchs who don't like having their yachts taken away... The only problem with that idea is that they might be grateful to have their boats taken away.

No one who takes a boat away as a punishment has ever owned one. A better punishment would be to make them buy another boat...

I have no idea how the war in Ukraine will play out, or what will follow it... nor do I believe anyone else knows. I just don't want you to get blindsided if it gets worse...

The performance of certain asset classes recently has reminded us how important it is to be aware of cycles...

As I've discussed more than once, big cyclical inflection points are upon us...

I've said value stocks were likely to outperform growth stocks... That has been happening since July, but it has picked up steam so far this year.

The Russell 3000 Value Index is down about 3% so far this year... But the Russell 3000 Growth Index is down 13%. That means value has outperformed growth by 10% in 2022. A long-value/short-growth trade would have generated a positive return of that amount.

I said commodities would likely outperform stocks... The S&P GSCI Commodity Index is up 33% so far this year, while the S&P 500 Index is down roughly 8%. A long-commodities/short-S&P 500 trade would be up 41% right now...

I also said emerging markets and other ex-U.S. stocks were more attractive than U.S. stocks... Again, the S&P 500 is down about 8%.

The iShares MSCI Emerging Markets Fund (EEM) is down about 6%. It's too early to tell if it's a sign of what's to come... It would be reasonable to expect emerging markets like Brazil, Chile, and other commodity producers to outperform the U.S. along with commodities.

I'm not saying I recommended all these long/short trades... This is just an easy way to show you that the cycles are turning, and we anticipated the outperformance of them here in the Digest.

I've consistently recommended owning gold, silver, and bitcoin...

Since the Russian invasion started on February 24, gold is up about 3%. Silver and bitcoin are both up about 5.7%...

Gold and silver have done what they're supposed to do in a crisis... They've each risen a few percent and maintained their value. They've acted like you'd expect 5,000-year-old stores of value to act... There's no reason to expect them to do much else for the next 5,000 years.

I've also recommended holding plenty of cash... which has no doubt helped calm the nerves of those who've done it.

The Ukraine war is a good stress test of the advice we've given here in the Digest (to Alliance members), to Extreme Value readers, and to Stansberry Investor Hour listeners...

But anybody can crow about past advice that worked over a short period of time... It's harder and more valuable to know what to do right now to best prepare for the long term.

I hope my advice doesn't fall flat, but here it goes...

The advice Mike Barrett and I have given our Extreme Value readers hasn't changed...

All the assets I've written about above are the components of the truly diversified portfolio I've recommended many times in the last couple years...

• Stocks
• Plenty of cash
• Gold and silver
• Bitcoin

Besides the financial benefits already discussed, the Ukraine situation reveals another advantage of holding this portfolio and refusing to make predictions...

Being well-prepared for whatever happens keeps you from feeling like you need to rapidly become an expert on some new and complex social or political development... I have my doubts that anybody can do so consistently.

Instantly boning up on every new headline-making crisis is not something you can master... It's more likely to leave you feeling like you know more than you really do, or that having a lot of newly acquired facts and figures is valuable to investors in a crisis. (Hint: It's not.)

Mastery only comes with time. It can only happen if you've chosen endeavors where luck has less influence over the outcome than competence and disciplined practice.

If you weren't an expert on war or Russia or Ukraine the day before the invasion happened, you're not one now.

Fortunately, it is totally unnecessary to become an expert to prepare your portfolio for such an event... But you can and should learn to master the art of preparing for a wide range of outcomes.

The range of outcomes is the definition of risk...

The wider the range of potential outcomes, the higher the risk... The narrower the range, the lower the risk.

Record equity and bond-market valuations, along with widespread speculation in relatively valueless assets like non-fungible tokens ("NFTs"), non-existent art, and dying companies like GameStop (GME) and AMC Entertainment (AMC) suggested to me that a wider range of outcomes than most folks were anticipating was on tap in the fairly near future...

I've issued numerous warnings about heightened risk in equity markets here in the Digest for more than a year...

Well, folks, that future is here... Russia and Ukraine are at war, the S&P 500 is down about 8%, and the Nasdaq Composite Index is down about 16% since January 3... West Texas Intermediate ("WTI") crude, the U.S. standard, is more than $100 per barrel, and gold recently surged to within less than 6% of a new all-time high.

I see no reason to do anything different... If it ain't broke, don't fix it. True diversification is really hard to beat when rising uncertainty augurs a wide range of potential outcomes.

As I've said earlier in this Digest and in previous Digests... we appear to be at a major inflection point in financial markets. The Ukraine stress test offers more evidence of that thesis.

Now, of course, nothing goes up in a straight line forever. After doing very well for the past year or so, the value/growth, commodities/stocks, ex-U.S./U.S. stock cycles might be due for a correction...

But these big cyclical inflection points tend to change the market for several years at a time... Even with a correction, there's more long-term upside potential in all three of the above cyclical trends.

You should stick with them... I'd view a correction in any of them as a buying opportunity.

Just as the cyclical trends are in early days, bitcoin is still a very young and largely untried asset that has seen an epic run-up in value since its inception just 13 years ago...

It remains to be seen if it'll become a truly reliable long-term store of value, but it's not too bad, so far, if its performance during the Ukraine war is any indication.

Time will tell if bitcoin delivers on its great promise as the new premier asset, but I view it as a must-have asset.

If you don't own it... consider a tiny stake, perhaps a few thousand or even just a couple hundred dollars' worth. Make it an amount that could disappear ‒ and you wouldn't bat an eye.

I believe the opportunity for an enormous long-term multibagger with bitcoin is still on the table.

One last thing about taking Putin out...

What if the West's sanctions bring about the end of Vladimir Putin's reign as president of Russia?... Or what if the oligarchs succeed in assassinating him?

If history is any guide, it's more likely that a despotic leader will be followed by an even worse despot than by a benevolent one set on leaving people alone...

It's one of humanity's great mistakes that it believes a crisis requires "strong leadership"... Grown men and women mostly don't need strong leaders. Folks mostly need politicians ‒ and the crybabies and busybodies who support them ‒ to get out of their way...

In other words, if you're praying for Putin's rapid demise, be careful what you wish for... You just might get it.

Also not priced into markets is the most populous country in Europe and the 12th-largest economy in the world descending into political chaos amidst a sudden – maybe violent – transfer of power... from one dictator to another.

Once again, it's not possible to predict how things will turn out in the wake of Putin's possible demise... but you can prepare for it.

If Putin's ouster comes about suddenly, or perhaps violently, I suspect the truly diversified portfolio's inclusion of cash, gold, silver, and bitcoin will become important.

So stay the course... Stay truly diversified. Prepare, don't predict.

And when you read the headlines, keep the Ukrainian people in your heart and your hand on your wallet...

Urgent Town Hall: The War in Ukraine

Nine of our top editors and analysts sat down on Monday to share their unscripted, unedited opinions on what's happening overseas in Ukraine... and what the conflict means for your finances.

Don't miss this urgent Town Hall event. This is a free bonus for all Stansberry Research subscribers. We're not selling anything. This is simply the kind of information we would want if our roles were reversed...

Click here to watch, listen, or read the transcript of our Town Hall right now. And to catch all the videos and podcasts from the Stansberry Research team, be sure to visit our Stansberry Investor platform anytime.

New 52-week highs (as of 3/3/22): Alcoa (AA), AbbVie (ABBV), Altius Minerals (ALS.TO), Bunge (BG), Berkshire Hathaway (BRK-B), Freeport-McMoRan (FCX), Hershey (HSY), Cheniere Energy (LNG), Altria (MO), Mosaic (MOS), VanEck Vectors Oil Services Fund (OIH), Sprouts Farmers Market (SFM), and United States Commodity Index Fund (USCI).

In today's mailbag, feedback for Ten Stock Trader editor Greg Diamond... and a thought about what the biggest "winner" might be when fiat currencies fail... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"I love Ten Stock Trader and Greg's tactical, patient, trade-less approach. I agree 100%. Trade smarter, with higher conviction trades. If you plan it and it happens it is great. Planning also lets you build in the exit plan when the plan is not going as planned. Right on...

"Keep the updates coming and the trades will come as you say when they present themselves. I am 100% satisfied with trade less and keep paying the same. Goal is not increasing the velocity of money or more trades. Goal is to net more each year.

"Second, Ten Stock Trader complements the other newsletters that are more traditional list-based, less trading-based plans." – Stansberry Alliance member Shawn M.

"I find it very telling that when a currency collapses (the ruble), bitcoin was the clear winner. Gold and the dollar went up a little, but nothing compared to the 15%-plus of BTC.

"It's going to be very interesting to see what happens when the world reserve currency (aka the U.S. dollar) suffers a true crisis like the ruble has." – Paid-up subscriber Mike B.

Corey McLaughlin comment: Yes, it will be. Amid the ruble's collapse last weekend and earlier this week, bitcoin's price spiked by more than 15%... though it has since come down a little to around $41,000 per coin...

In the opinion of several of our editors, owning bitcoin is a wise bet on the devaluation of fiat currencies. Still, we hesitate to make too much of short-term moves and, as always, folks should be careful about putting more money into bitcoin than they can afford to lose.

Given the volatility of bitcoin, as our Crypto Capital editor Eric Wade said in a recent weekly video update, make sure "your risk appetite matches your portfolio."

All that said, don't forget about gold either...

Sentiment about gold has turned sour over the last year or so, and many folks in the markets have wondered why its price hasn't shot higher yet amid record inflation... But don't overlook it as a place worth stashing at least a portion of your wealth.

Dan just explained why today, and he is not alone...

I can tell you several of our editors are bullish on gold right now, like our colleague Dr. David "Doc" Eifrig in his Income Intelligence letter and most recently Dr. Steve Sjuggerud, who recommended a gold play just yesterday in his latest issue of True Wealth Systems.

In his March issue of True Wealth Systems, Steve makes the case for "gold's revival" and shares the bullish signal for the metal that is flashing today... He says that double-digit gains typically follow in as little as a few months...

Existing True Wealth Systems subscribers and Stansberry Alliance members shouldn't miss this issue. You can read it here. And if you don't subscribe to True Wealth Systems already, click here for more information on how you can get started.

Good investing,

Dan Ferris
Eagle Point, Oregon
March 4, 2022