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Make Fear Your Friend, Part 2

Written by Brian Hicks
Posted April 15, 2020

Make Fear Your Friend, Part 2

It's been almost exactly a month since I issued my report "Make Fear Your Friend."

Let's take a look at the results so far.

If you remember, my core thesis in that report was this: This is a generational buying opportunity.

The linchpin of the thesis was "Don't Fight the Fed."

Now, the theory behind "Don't Fight the Fed" is simple: when the Federal Reserve is cutting rates and buying massive amounts of debt, the economy in general and the stock market, in particular, react positively.

Why?

Because the fed is trying to make it painful for you to keep your money in the bank, earning 0%.

So, to search for some kind of positive yield, the fed wants you to put your capital into the markets.

It typically works.

The only time it doesn’t work is when investors are more concerned with the “return of capital” versus “return on capital.” We saw some of that during 2007 and 2008.

But that’s not a big worry this time around, as I’ll explain.

During the Great Recession of 2008 through 2009, Federal Reserve chairman Ben Bernanke argued that the fed needed to do more, not less. He relied on this conclusion based on his years of academic research.

It was Bernanke’s economic dissertation, actually.

He’s an avid student of the Great Depression. In fact, the nation’s foremost expert on it. His argument was that had the Federal Reserve acted swiftly and aggressively in 1929, depression would’ve been avoided.

That was his playbook for 2008.

Philosophically we can argue whether this was prudent. But that’s for another gold bug conference for another time. Point is — the U.S. avoided a depression after 2008.

Fast forward 90 years. Here we are again.

If you remember at the time I released my report, Treasury Secretary Steven Mnuchin came out and said the federal government has unlimited financial resources to backstop the economy.

Hearing all of this, it was too easy to make a call that the markets would bounce.

Think about it.

Now I have an investor with a lot of money to pump into the economy.

And I have a White House that is full of businessmen who want to reopen the U.S. economy sooner rather than later.

So since then, the markets have responded positively.

Here are the results as of April 14, 2020 (from March 13):

Dow Jones           +13%

NASDAQ              +15%

S&P 500              +8%

Russell 2000        +0%

And gold is up 20%.

Gold and silver will be great investments for the next several years as the feds print money faster than ever before. (Silver is up 32% in the same period.)

As I write this, governors all across the nation are talking to each other about a staggered, coordinated reopening of the economy. And frankly, Americans are getting restless. Protests to “open up” are popping up everywhere.

If I were to bet, I would say the U.S. economy will reopen in the next couple of weeks.

You want to be positioned for that.

And you want to be positioned now if you aren’t already.

I’ve been nibbling on stocks for several weeks.

In fact, I just bought a company today that’s one of the most diversified companies on the planet. And it pays a dividend just shy of 5%.

One investment I’ve been adding to on weakness is the Gabelli Utility Trust (NYSE: GUT). A super diversified, global utility trust, it pays a dividend of +8%.

The downside is limited. But so is the upside. I own it for the dividend.

Take a look at it.

Brian Hicks Signature

Brian Hicks

Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily and Energy and Capital. Known as the "original bull on America," Brian is also the author of Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century, published in 2008. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox, and countless radio shows. For more on Brian, take a look at his editor's page.

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