In this segment, Financial News Anchor Jessica Borg interviews Senior Analyst Mike Larson, editor of Safe Money Report about protecting your nest egg, building capital in turbulent times and an alternative strategy for generating income.
You can watch the video segment or continue reading for the full transcript.
Jessica Borg (narration): As war rages in Ukraine, the ruble is plunging and markets at home are reacting to the conflict.
JB: Mike, many investors don’t know what to make of how they’ll be affected right now.
Mike Larson: Investors are clearly unnerved by the idea that Putin has invaded Ukraine.
You look at that as being right on the doorstep of some of these North Atlantic Treaty Organization (NATO) countries and you can understand why investors here in America and international investors are unnerved.
JB (narration): Senior analyst Mike Larson, editor of Safe Money Report, says this is the time to use every “Safe Money” strategy available.
ML: You have the Federal Reserve on the cusp of starting a rate-hiking cycle.
It’s not like rates are going to go instantly extremely high, extremely quickly, but you’re going to have what used to be a tailwind — falling interest rates, zero interest rates and so on, for the markets — to an environment where there’s going to be a little bit of a headwind.
Investors like nothing more than easy money, but that’s caused an inflation problem for this country.
JB (narration): Uncertainty in the East and shifting monetary policy in the U.S. is creating a more volatile market — one with investment opportunities.
ML: You’re seeing things like commodities — wheat, corn, oil, copper, gasoline — surging in price even more than they were due to the general inflationary environment.
JB (narration): Russia and Ukraine account for about a quarter of the world’s grain exports.
JB: Let’s talk about the energy sector. A rise in prices was already a trend we were seeing.
ML: Energy was already in a behind-the-scenes bull market for many, many months.
Some people say it’s just because of Russian President Vladimir Putin. But no, this is amplifying and accelerating a trend that was already in place.
There was already a picture where growth was strong enough that demand for energy was strong … especially coming out of doing the things we couldn’t do during the depths of COVID-19, like travel.
JB (narration): And now the U.S. has banned Russian oil imports, to take a tougher toll on the Russian economy.
ML: And that’s going to lop off hundreds of thousands of barrels a day in potential supply, so that’s just the icing on the cake, so to speak, and that’s why this bull market in energy has been so persistent and consistent.
JB (narration): Crude oil prices are soaring, and the Energy Select Sector SPDR Fund (XLE), which owns oil and gas companies, is an exchange-traded fund (ETF) that’s climbing.
It’s not the only sector benefitting from this climate. Prices are surging for so-called safe-haven assets.
JB: The precious metals market is getting a big boost right now. Tell us how you see the price of gold playing out over the next few months.
ML: What you want is stuff that’s powerful for multiple reasons — whether it’s inflation, whether it’s the purchasing power defense, whether it’s geopolitical uncertainty — all those things have aligned behind precious metals and that’s why I like that sector very much.
You want to own things like gold, silver and mining shares.
JB (narration): Mike recommends the VanEck Gold Miners ETF (GDX), which is on the rise.
Gold’s all-time high was nearly $2,100 per ounce in 2020.
It’s currently inching toward that.
ML: There’s some resistance, some technical resistance in this area, but if we are able to punch through that — and in my opinion that seems pretty likely — there’s not really a lot standing in the way of gold heading up to its old high.
JB (narration): He also says, in this low-yield investing climate, consider the options market to generate income.
As editor of Weekend Windfalls, he helps investors earn up to $1,000 each week, by using high-quality stocks to sell options.
He’s about to unveil a MasterClass to teach investors how to trade successfully on their own.
ML: You can sell options and you’ll take in premium. Basically, you’re selling stock insurance. A lot of people may own a stock, but they’re afraid it’s going to go down, so they’ll buy a put option, which allows them to sell that stock to somebody else at a certain price for protection. It’s something that protects them.
As an options seller, you’re basically providing that insurance, that protection, and you collect a premium, just like a car insurance or home insurance company would for insuring your car or your house.
It’s a different way of looking at the market. It’s a different approach that’s designed to put the odds in your favor, versus working against you, and we’re pretty happy with the results.
JB (narration): Solid results, no matter how market forces are evolving.
ML: Sometimes it’s good things that are impacting your portfolio and unfortunately, sometimes it’s bad things.
But regardless, you have to try your best as an investor to not only protect your capital, but to build your capital while you can.
You have to find ways to build your nest egg when inflation is trying to take that nest egg and shrink it.
So, that’s why so much of what I focus on is income, whether that’s in dividend-paying stocks or even things like the options market.
JB (narration): It’s a bit of consistency in the midst of chaos.
JB: Senior Analyst Mike Larson, always great to get your insight and takes on things, thank you so much for your time today.
ML: Thank you, Jessica. Have a good one.
Best wishes,
The Weiss Ratings Team
