Chris’ note: Longtime readers know that we’re contrarians here at Casey Research.
To succeed in the markets, you can’t be afraid to go against the crowd. You can’t be afraid to speculate on assets that others have left for dead.
It boils down to a proven strategy we use called “crisis investing.”
Our founder Doug Casey made millions using this strategy and speculating in beaten-up markets. His book, Crisis Investing, was a New York Times best-seller for 34 weeks.
His protégé, Nick Giambruno, has honed this strategy… and uses it every month to find explosive opportunities for his readers. It works. In fact, one of Nick’s crisis investing plays is up 440% in two years. Another is up 121% during the same timeframe.
I think every Dispatch reader should know exactly how it works… and how they can start implementing it today.
That’s why I got Nick on the phone to break it all down for me… and to share his No. 1 crisis investing opportunity right now…
Chris Reilly, managing editor, Casey Daily Dispatch: Nick, today I want to get into what you’ve called “the most powerful wealth-building secret in investing.”
Of course, I’m talking about crisis investing… the core strategy behind your elite newsletter. So to kick things off, can you first break down what “crisis investing” entails?
Nick Giambruno, chief analyst, Crisis Investing: Sure, Chris. Happy to do it.
Crisis investing is basically buying elite companies in beaten-up countries or industries. When there’s a crisis, most people only see danger. But it’s actually an opportunity. A crisis often allows you to buy a dollar’s worth of assets for a dime… or less.
Many of the world’s greatest investors have made their fortunes this way… but anyone can do it. You don’t need be rich or well-connected. You don’t even need to travel to do it.
In fact, if you have a regular brokerage account – and the courage to buy when others are fearful – you’re all set.
The courage part is key. You can’t be a successful crisis investor if you’re not willing to go against the crowd.
Baron Rothschild encapsulated this strategy best when he said, “The time to buy is when there’s blood in the streets.”
You’re looking for assets that have been made cheap by some sort of crisis.
Chris: What drew you to this unconventional strategy?
Nick Giambruno: I’m a contrarian by nature. I zig when others zag.
So naturally, I buy assets most people hate. Some of my close friends and family think I’m crazy for doing this… but that usually means I’m on to something. After all, it wouldn’t be crisis investing if I were going with the crowd.
I was also inspired by Doug Casey.
Doug is one of the world’s most successful crisis investors. He literally wrote the book on it. His book, Crisis Investing, was a New York Times best-seller for 34 weeks. He has also hit numerous “home runs” investing in crisis markets.
Doug is my friend and mentor. Over the years, he’s helped me hone this profitable investing strategy.
The name of my advisory, Crisis Investing, is a nod to Doug and the roots of Casey Research.
Chris: How do you know you’ve got a good crisis investment?
Nick Giambruno: Good question. You can’t just buy things that are automatically hated. You have to also make sure that there is a clear catalyst for upside. With all of our recommendations, we analyze the situation and look to see if there’s light at the end of the tunnel or if people are overreacting. Oftentimes, there is light at the end of the tunnel. And oftentimes, people in the media and Wall Street do overreact.
Ideally, I want to buy at the moment of maximum pessimism.
Now, it’s impossible to identify exact bottoms… but there are ways to tell if a market is near a bottom. That’s good enough to make you a lot of money.
One thing I look for is negative investor sentiment. The mass media can be a big help here. I steer clear of anything the financial media is in love with. On the other hand, scary headlines are often a clue that crisis bargains are available.
If a country or industry is getting nothing but bad press, it’s worth a look. It’s even better when a crisis makes the front page of world newspapers. That means most investors have given up. You can make a fortune buying these hated markets.
Chris: Got it. Now, what do you tell people who think this is a risky strategy?
Nick Giambruno: Well, risk is a function of price… and the lower the price of something, usually the lower the risk of a certain investment. So take that in contrast to assets that have very high valuations and very high prices. There is a lot of risk in that because these companies and these assets could go down.
But when is risk lower? It’s usually lower when the price is lower. So if something has been beaten up to death… and all of the sellers have sold… you’re actually looking at a situation with low risk and high reward.
People often misunderstand a good speculation and a good investment to be high-risk, high-reward. That’s actually not true. You want to look for something that’s low-risk and high-reward. That’s an ideal speculation. And that’s the kind of situation we look for in Crisis Investing. It’s all about taking advantage of mass distortions in the marketplace.
Chris: Thanks, Nick. Now, I want to show readers how they can start putting this strategy to work. So what’s one of your top crisis investing opportunities right now?
Nick Giambruno: Well, I think the biggest crisis of our lifetime is going to be what happens between the US and China.
This is all about China’s overall rise to power… and how the US is going to deal with it.
I don’t think that many Americans or Westerners are aware that China used to be the No. 1 power in the world for many years in the past. China’s rise is a natural thing given its size, population, economy, and history.
And it’s on pace to be the world’s dominant power once again.
If you look at the trajectory of China’s growth, it’s on track to have an economy that’s not just equal to the US’… but double the US’ by 2030.
Now, either the US is going to accept being No. 2. Or, it’s going to go into some sort of shooting war, which is what happens historically when an established power challenges a rising power.
There was a study at Harvard about this dynamic (called “Thucydides’ Trap”) throughout all of human history. Out of 16 prominent examples, 12 of them (75%) resulted in a war.
Unless the US and China can find a way to resolve this peacefully and amicably, war seems to be an almost inevitable outcome.
No one knows how soon that will happen. But I would argue that this will come to a head sooner rather than later.
Now, this isn’t a good thing. It’s a terrible thing. But nonetheless, it’s the reality right now. And the US’ opportunity to act is very narrow.
And in the meantime, there’s a serious investing angle.
Chris: What’s that?
Nick Giambruno: As tensions rise between China and the US, it’s a near-certainty that rare earth elements (REEs) will come into play.
REEs are 17 elements mostly clumped together at the end of the periodic table. All of them are absolutely crucial to modern civilization.
They’re used to make key components for advanced electronics like iPhones, electric cars, flat-screen TVs, computers, sophisticated military equipment, and more.
The problem for the US is that China has a virtual monopoly on this industry.
China produces around 90% of global REE supplies. It also produces nearly all of the world’s more valuable heavy rare earths.
The US is totally dependent on China for rare earths. And if tensions rise, China may choose to play the “REE card” – meaning it’ll abruptly cut off REE supplies.
Chris: Interesting… Has it done that before?
Nick Giambruno: It sure did… and it triggered one of the most spectacular booms in recent memory.
Back in 2010, a Chinese fishing vessel was sailing in disputed waters when it ran into some Japanese coast guard patrol boats. This happened in waters claimed by both Japan and China.
The Japanese arrested the Chinese captain. China demanded his release, but Japan refused.
Things only got worse from there. In retaliation, China abruptly cut off all REE exports to Japan. It also cut global exports by 40%.
The average price of REEs skyrocketed by over 20 times. And over the next couple of months, companies in the industry went up many times higher.
This one incident caused a veritable mania in REE stocks that lasted for nearly a year.
Chris: Got it… But what makes you think China will play this card again?
Nick Giambruno: China’s already stated loud and clear that it won’t hesitate to do it again.
One notable example was an article in the People’s Daily – the largest newspaper in China and official media of the Communist Party – which included a rarely used phrase in Chinese that translates into something like, “Don’t say we didn’t warn you.” This specific phrase carries historical significance. It was used before China and India fought a war, and also before war broke out between China and Vietnam.
This is truly unprecedented. China has never openly threatened to restrict REE supplies to the US, much less with such harsh language.
Plus, earlier this year, President Xi Jinping made an unusual visit to a state-supported complex in Ganzhou, which is known as the “Kingdom of Rare Earths” for its rich REE deposits.
It’s not every day that China’s No. 1 shows up at a dirty mine in the middle of nowhere.
The timing of the trip was no accident. It was meant to send a message to the US.
Chris: Is there a way for readers to get exposure to REEs if they do take off?
Nick Giambruno: The best way to get exposure to rising REE prices is to invest in REE-related companies.
You can get an idea of what options are on the table by looking at the MVIS Global Rare Earth/Strategic Metals Index. This index includes the largest and most liquid companies involved in REEs.
The companies on this index must generate at least 50% of their revenues from rare earths and strategic metals. Or they have to run mining projects that have the potential to generate at least 50% of their revenues from these sources.
This index doesn’t include every single REE company in the world, but it does include most of them and gives us an idea of the options out there.
It’s a great place to start your research.
Chris: Thanks, Nick. Appreciate the time. Lots of good content here.
Nick Giambruno: My pleasure, Chris.
Chris’ note: For a more specific way to profit off REEs, Nick recently recommended an explosive play… and it’s your ticket to riding US-China tensions higher. Right now, it’s still under his buy-up-to price… but it might not be for much longer.
Learn how you can access this pick – and get the full scoop behind this urgent story – here.