Outsider Q&A 6.28.19
Outsider Club's Weekly Reader Question
"Iran is getting really scary really fast. How is this going to affect my investments?"
— Bill M.
NICK HODGE | Founder
I can't say for sure how the situation in Iran is going to unfold. But no matter what happens, we're already seeing some effects in certain markets.
For starters, gold is sitting at a five-year high, and had technically broken out into a new bull market. Other factors are afoot here to be sure, including a decade of unprecedented global monetary experimentation that has led to negative rates globally. If rates are negative, gold has an infinitely positive yield by comparison. Bombs could fan the flames that have already ignited.
It's a similar case with Bitcoin, which has broken out to multiple highs in recent weeks. You can bet Iranians are racing to get their hands on gold and Bitcoin amid rising sanctions and the specter of war. Bitcoin trading volume in Iranian rial has been rising for weeks, and crypto trades have had to bounce around exchanges as sanctions have caused some trading platforms to disappear overnight.
More broadly, my inner contrarian voice is telling me the global string pullers wouldn't want a war unless a recession was fast approaching. Wars are their go-to stimulus when all else fails. With a bull market long in the tooth and the U.S. overdue for a recession, a war could make traditional safe havens doubly attractive. It's telling that oil hasn't gone higher.
JASON SIMPKINS | Editor
The situation with Iran is scary. But this is hardly a new development.
Rising tensions with Iran, North Korea, China, and Russia are the main reason I launched The Wealth Warrior, an investment letter focused on the defense sector, last year. In the very first issue of The Wealth Warrior, in May 2018, I explicitly warned that President Trump would pull the U.S. out of the nuclear deal and take us down this exact path.
In June 2017, before I even launched my service, I surmised that Trump might just flat-out nuke Iran. And the president's latest threat ("Any attack by Iran on anything American will be met with great and overwhelming force. In some areas, overwhelming will mean obliteration.") has done nothing to assuage my concerns.
The fact is, we are far closer to war than people want to admit and we have been for a long time. There's also a significant possibility that we could see the first deployment of nuclear weapons since WWII.
So yes, that's pretty terrifying.
As far as your investments are concerned, I can't tell you how they'll fare, because I don't know what they are.
I can only tell you that I'm heavily weighted toward the defense sector, and the returns have been strong. The SPDR S&P 500 Aerospace/Defense ETF has surged 6.8% in the past month compared to a 5.1% gain for the S&P 500. And the WW portfolio is currently sporting gains of 51%, 39%, 18%, and 13%.
And we're still at the very beginning of this conflict, with many analysts and the broader public still in denial about the very real risks we're facing. If war breaks out, it will appear sudden to many mainstream investors, such as yourself, but it won't be sudden to those of us who have been loading up on defense stocks for the past year in anticipation. We're going to be the ones who benefit the most from the bull-rush on defense contractors.
If you're already a Wealth Warrior subscriber then you know this. But if you're not, now would be the time to sign up. Like I said, I've been warning about this exact situation for more than a year now, and I have an entire portfolio curated to profit from it. You can find out more about that and my latest recommendation here.
To learn more about our editors, visit our website. And keep an eye on your inbox for Nick's (Wednesdays) and Jason's (Fridays) weekly articles.
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