Chris’ note: This year has been painful for most investors. Stocks, cryptos, bonds, and more have taken a beating. But at Legacy Research, we’re always looking for ways you can protect – and even grow – your wealth… no matter what kind of market we’re in.
So today, we’re sharing insight from Jeff Brown on four of his favorite ways to hedge against the current market chaos. He says the fourth is the best way he knows to build generational wealth in the years ahead…
Inflation is at a 40-year high. According to the Consumer Price Index (CPI), everyday goods are now 9.1% more expensive than they were one year ago.
Supply chains can’t keep up with demand, causing shortages of everyday goods.
Russia’s war on Ukraine is destabilizing the world’s oil and gas markets.
And stocks have been no help for most investors this year. All three major American indices are in or hovering around bear market territory (a 20% or more drop from a peak).
So today, I’m sharing alternative ways to protect and grow your wealth through this chaos. Here are four of my favorite strategies for thriving in the current market environment.
Interest rates have been rising. In June, the Fed raised its benchmark interest rate by another 0.75%… the biggest increase since 1994. That brings us up to a range of 1.5% to 1.75%.
The upside of this is it makes fixed-income investments more attractive. And one of the best plays here is convertible corporate debt, or convertible bonds.
A convertible bond pays a yield to its investors. Like a traditional bond, it delivers regular income and will return the whole principal investment at its maturity date.
As the name suggests, and unlike traditional bonds, a convertible bond can “convert” into shares in the company that issues it. This happens at a predetermined conversion ratio and conversion price. You can convert these bonds at any time.
My team and I are compiling a database of safe convertible debt offerings for tech companies. These have yields from 5% to over 7%.
Timberland is land with trees on it.
It’s not correlated with stocks.
Timberland is a “real” asset. Unlike fiat currency, these types of assets keep pace with inflation.
And it can produce a reliable income stream. We can harvest portions of a forest at regular intervals.
Income from these harvests can more than cover taxes associated with the land.
I recently had dinner with a colleague who purchased a large property in rural Michigan. He commissioned a forester to survey his land. The forester told him he could reclaim close to 30% of his purchase price by selectively harvesting trees on his land. And this didn’t mean harvesting all the trees, just “tidying up.”
Timberland investments can also produce large capital gains.
For example, timberland in the Pacific Northwest – according to the NCREIF Timberland Index – returned 14.4% last year.
There’s also something appealing about owning a plot of timberland and watching your investment literally grow in front of you.
Along the same lines as timberland, agricultural land can be a great way to insulate your wealth.
Just like timberland, agricultural land is a “real” asset. This land produces food and water – our most essential “assets” for life.
Sadly, I predict the war in Ukraine will put the world on the verge of serious food shortages. Developing countries especially could face famine in late 2022.
That’s because Ukraine and Russia together supply roughly a quarter of the world’s wheat. Ukraine has long been known as the “breadbasket of Europe.”
Russia is the world’s second-biggest natural gas producer. Ukraine is the 36th. Their war has caused a sudden supply shock in natural gas. This affects agriculture.
Fertilizer is key to promoting soil health. And it needs compounds like urea and ammonia.
Both come from natural gas and account for 40% to 70% of the cost to produce agricultural fertilizers. As natural gas has soared, the price of fertilizer has too.
The Green Markets Fertilizer Index tracks a group of North American fertilizer prices. It shows that the cost of fertilizer has rocketed 118% since this time last year.
All this suggests that prices for agricultural products are about to go higher… perhaps much higher. That means the value of food-producing land will rise as well.
All three of the ideas I’ve discussed so far are excellent places to start in this brutal market environment. But I ask you to pay special attention to my last idea.
Investors are looking for anything to help them meaningfully grow their wealth right now.
This was the only topic on readers’ minds at the annual Legacy Investment Summit earlier this year. Here’s what I told them…
My #1 recommendation is to turn away from public markets and towards the private markets.
Wealthy investors and family offices have nearly half of their portfolios in private investments. Endowment funds have more than half of their portfolios there.
Meanwhile, the average retail investor has nothing in private investments.
It may seem counterintuitive to invest in private companies in such volatile times. After all, private investments are not a traditionally conservative strategy.
And as a private investor myself, I can tell you it’s not for the faint of heart. Many private investments will deliver only small returns, while others will fail altogether.
But a handful will deliver truly life-changing returns.
This last group of “home run” investments can make an entire portfolio. It takes only small amounts of capital for the potential at outsized returns.
And these investments are the best way I know to build generational wealth in the years ahead.
That’s why tomorrow at 8 p.m. ET, I’m hosting a special investing event to share my favorite ideas in the private markets right now.
Even if you’ve never been interested in private investing, I encourage you to attend and hear me out.
Daily stock market volatility doesn’t affect these markets. So I view this as “set it and forget it” investing. I hope you’ll make the time to learn how it can help you preserve and grow your wealth.
You can sign up here to get free access to my special presentation.
Regards,
Jeff Brown
Editor, The Bleeding Edge