Keep Ukraine in Your Heart and Your Hand on Your Wallet

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 […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Keep Ukraine in Your Heart and Your Hand on Your Wallet By Dan Ferris 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... --------------------------------------------------------------- Recommended Links: [Why you should listen to Steve Jobs' 'Final Prophecy']( Steve Jobs' ability to predict the future was remarkable – now his "Final Prophecy" is coming to life, with huge implications for you and your money. And that's exactly why investing legend Joel Litman has just prepared the most fascinating and useful analysis I've seen in many years... [Click here to view](. --------------------------------------------------------------- [The Biggest Innovation of the 21st century - Steve Jobs (Hint: Not Apple)]( Just before his death in 2011, the founder of Apple said that the biggest innovations of the 21st century will be at the intersection of biology and technology. Exactly a decade later, one little known company is doing just that. The company already has million dollar deals with fortune 500 companies. And Steve Jobs' biggest rival, Bill Gates, has already invested millions in this company, which has the potential to become "[America's Next Big Monopoly]( --------------------------------------------------------------- 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 said to my readers 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 6% so far this year... But the Russell 3000 Growth Index is down 18%. That means value has outperformed growth by 12% 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 43% so far this year, while the S&P 500 Index is down roughly 12%. A long-commodities/short-S&P 500 trade would be up 55% 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 12%. The iShares MSCI Emerging Markets Fund (EEM) is down about 12%. 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 my colleagues and I anticipated their outperformance. I've consistently recommended owning gold, silver, and bitcoin... Since the Russian invasion started on February 24, gold is up about 6%. Silver is up about 8% and bitcoin is up about 4%... Gold and silver have done what they're supposed to do in a crisis... They've each risen a few percentage points 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 my colleagues and I have given... 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... 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 to my readers for more than a year... Well, folks, that future is here... Russia and Ukraine are at war, the S&P 500 is down about 12%, and the Nasdaq Composite Index is down about 19% since January 3... West Texas Intermediate ("WTI") crude, the U.S. standard, is well over $100 per barrel, and gold []recently surged near 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 essay and in previous ones... 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. Regardless, I recommend you 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... Regards, Dan Ferris March 8, 2022 Editor's note: To help investors stay prepared, Dan recently went public with his strategy for this dangerous market... as well as the details on how to set yourself up for 1,500% potential upside with what he calls "the best stock idea I've ever found in more than 20 years." [Learn more here](. If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 601 Lexington Ave., 20th Floor, New York, NY 10022 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](