I’ve written about how to prepare for a stock market crash and use it to your advantage. Basically, we heed the warnings, take any necessary lumps, go to cash—and prepare to buy when there are stupid-cheap prices on great assets.
But come Doomsday, what would I actually buy?
At the risk of cementing the notion that I’m a gold bug, I would definitely load up on gold and silver. Getting hit by the urgent need for liquidity at a time when they should be soaring is exactly what set precious metals up for their record-breaking rise after the crash of 2008. By this I mean physical gold and silver bullion. I would also speculate on the best of the best gold and silver stocks, because they would give me leverage on the rebound.
That’s a given.
After the dust settles and there are signs of recovery beginning, I would also load up on the best stocks offering leverage to the industrial minerals modern life depends on. That goes double those that power the new energy paradigm that are in short supply.
That too is no surprise.
What longtime readers might not expect is that I’d love to see the FANG stocks (Facebook, Amazon, Netflix, and Google) and other tech giants go on sale. A market meltdown may or may not put old dinosaurs like GE or struggling high fliers like Tesla out of business. But profitable businesses that have years of growth ahead would be very appealing at historically low prices.
I’ve written that I’m planning to diversify into the tech sector; a market Doomsday would be a great opportunity to buy winners I’ve missed out on at prices I would otherwise need a time machine to get.
Would I really buy the FANG stocks? Maybe some. Any highly profitable business that gets stupid-cheap should be good for at least a “dead cat bounce.” The best could go on to deliver the kind of gains one normally has to speculate on much smaller companies to get.
On the other hand, I understand that I’m not a tech-sector veteran. I can hire consultants, but at the end of the day, I prefer to place my biggest bets on things I understand well.
I was just discussing this with a friend who invests heavily in tech stocks. She explained to me why she bought Nvidia and made 300% on her investment. (Check out the NVDA.Q stock chart—quite striking.) Basically, “chips go in everything” and that’s only going to increase over time. She’s right. From self-driving cars to smart refrigerators to home robots to, well, just about everything, the surging demand for silicon chips is a one-way street.
Barring a new dark age, this trend is set in stone.
That’s when it hit me… In the tech sector, a silicon chip isn’t just a product; it’s a raw material.
The Raw Materials of the Information Age
I may not have the experience needed to pick which new gadget-maker is going to be the next Apple. I don’t have the knowledge I’d want to have before hazarding a guess on which code shop is going to be the next Google. But I know how to assess a resource and speculate accordingly—with or without a crash.
What other tech “raw materials” are essential to the economy of the future?
I intend to find out. It’s a kind of research I can adapt to easily. I’ll save analysis of actual investments I make for The Independent Speculator, of course, but I will report on trends and ideas I come up with here.
I see a whole new field before me in which I do have a competitive advantage.
Friday, June 22, 12:45pm, EDT, 2018