With the massive pullback in cryptocurrency prices and the collapse of crypto exchange FTX, the term “crypto winter” is now making headlines.
But Peter Schiff, CEO and chief global strategist at Euro Pacific Capital, doesn’t believe that’s an accurate term to describe the situation.
“This is not a #crypto winter. That implies spring is coming. This is also not a crypto ice age, as even that came to an end after a couple of million years,” he writes in a tweet. “This is crypto extinction.”
That’s a dire warning. But it’s not the first time Schiff has sounded the alarm.
Last year, when bitcoin hit $50,000 and the upward momentum seemed unstoppable, he said “While a temporary move up to $100K is possible, a permanent move down to zero is inevitable.”
If you share the same view, you probably want to know where Schiff is finding refuge in this ugly market.
Since Euro Pacific Asset Management has released its latest 13F filing — a report that institutional investment managers file quarterly to disclose their holdings — let’s take a look at some notable themes in Schiff’s portfolio.
Schiff has long been a fan of the yellow metal.
“The problem with the dollar is it has no intrinsic value,” he once said. “Gold will store its value, and you’ll always be able to buy more food with your gold.”
In fact, when Schiff tweeted about the crypto extinction, he also mentioned that gold “will rise again to lead a new breed of asset-backed cryptos.”
As always, he’s putting his money where his mouth is.
As of Sept. 30, Euro Pacific Asset Management held 1.655 million shares of Barrick Gold (GOLD), 431,952 shares of Agnico Eagle Mines (AEM), and 317,495 shares of Newmont (NEM).
In fact, Barrick was the firm’s top holding, representing 6.8% of its portfolio. Agnico and Newmont were the third and sixth-largest holdings, respectively.
Gold can’t be printed out of thin air like fiat money, and its safe-haven status means demand typically increases during times of uncertainty.
If gold prices go up, miners like Newmont, Barrick, and Agnico will likely enjoy bigger profits.
Recession-proof income stocks
Dividend stocks offer investors a great way to earn a passive income stream, but some can also be used as a hedge against recessions.
Case in point: The second-largest holding at Euro Pacific is cigarette giant British American Tobacco (BTI), accounting for 5.3% of the portfolio.
The maker of Kent and Dunhill cigarettes pays quarterly dividends of 74 cents per share, giving the stock an attractive annual yield of 7.3%.
Schiff’s fund also owns over 157,766 shares of Philip Morris International (PM), another tobacco king with a dividend yield of 5.0%. The Marlboro cigarette producer is Euro Pacific’s seventh-largest holding with a portfolio weighting of 3.5%.
The demand for cigarettes is highly inelastic, meaning large price changes only induce small changes in demand — and that demand is largely immune to economic shocks.
If you’re comfortable with investing in so-called sin stocks, British American and Philip Morris might be worth researching further.
When it comes to playing defense, there’s one recession-proof sector that shouldn’t be overlooked: agriculture.
It’s simple. Whatever happens, people still need to eat.
Schiff doesn’t talk about agriculture as much as precious metals, but Euro Pacific does own 124,818 shares of fertilizer producer Nutrien (NTR).
As one of the world’s largest providers of crop inputs and services, Nutrien is positioned solidly even if the economy enters a major downturn. In the first nine months of 2022, the company generated record net earnings of $6.6 billion.
Nutrien shares are down about 3% in 2022, not nearly as bad as the S&P 500’s 20% decline year-to-date.
Given the uncertainties facing the U.S. economy, investing in agriculture could give risk-averse investors peace of mind.