Welcome to our Friday mailbag edition.
Every week, we showcase our analysts’ responses to the questions you’ve sent in for them.
And this week, we’re spotlighting colleague Nomi Prins.
She used to work on Wall Street. She held senior positions at Lehman Brothers, Bear Stearns London, and Goldman Sachs (GS).
But 20 years ago, she walked away to dedicate her life to helping regular investors harness the strategies Wall Street uses to make fortunes.
One of the main strategies is what Nomi calls “following the money”…
She tracks cash as it flows from Washington and Wall Street. As she says, “Where government money goes, private money follows.” And she’s zeroed in on five sectors that are set to soar the most from this spending…
Nomi answers questions on these themes every week at her e-letter, Inside Wall Street With Nomi Prins. If you don’t already subscribe, you can sign up for free here.
Today, Nomi addresses the threat of a digital dollar.
She also weighs in on the financial fallout for Americans if China invades Taiwan.
First, a reader has a question for Nomi after watching her video update from the Rule Symposium on Natural Resource Investing in Florida…
Reader question: Hello, Nomi. I have trusted your opinion for many years. Since you were at the Rule Symposium, I have a question for you. Natural resource investor Rick Rule is very bullish on uranium, like many other people.
I don’t remember you talking about this as an important source of energy for the future. What are your thoughts on it? Thanks in advance and keep up the good work.
– Yves E.
Nomi’s response: Hi, Yves. Thank you so much for writing in and following my work over the years.
Rick Rule is a proponent of uranium and its role in nuclear energy.
Uranium falls under my investment theme of New Energy. And as I wrote about last week, money is about to flood into New Energy courtesy of the Inflation Reduction Act that just became law.
Uranium is an important component in nuclear energy. That’s because in nuclear fission, atoms release lots of energy when they split. And uranium atoms split apart easily. That’s why it commonly powers commercial nuclear reactors that produce electricity.
While mining and processing uranium aren’t CO2-emission-free, nuclear power itself is.
According to a recent International Energy Agency report, nuclear power can play a major role in helping countries transition to New Energy economies.
Many countries around the world are realizing that… which is why I think we’ll see more nuclear power around the world in the coming years. This will bolster demand for uranium.
Case in point: the United Kingdom. It’s Europe’s second-biggest economy.
The nation recently announced plans to triple its capacity to generate nuclear power by 2050. That would entail eight more nuclear reactors, which run at existing sites.
It will allow the country to generate about a quarter of its electricity from nuclear power.
But it’s not only the U.K…
Japan is the world’s third largest economy. There, for the first time in more than a decade, most citizens now support restarting idle nuclear reactors, according to a poll in the country’s top business newspaper.
Ten of the country’s 33 operable nuclear reactors are already running again. That’s a major shift for a country that suffered one of the most devastating nuclear disasters in history, Fukushima.
Now, some countries are still pulling away from nuclear energy, and safety remains a top priority. But evidence shows that nuclear is a safe means of generating power.
Even in America, nuclear power is getting a new push because of challenges meeting clean energy goals. Politicians on both sides seek to prolong and expand reactor use.
This is an extensive topic that I’ll be writing about in the near future. So thank you for bringing it up.
Next up, a reader shares concerns about his money if China invades Taiwan…
Reader question: I am concerned that China is going to attack and take Taiwan. Do you have advice for your audience as to what to do to protect their assets against that eventuality?
– Tom B.
Nomi’s response: Hi, Tom. Thank you for your email.
First off, this has been a possibility for years. I discuss it in my forthcoming book, Permanent Distortion.
I don’t believe China will unilaterally attack Taiwan because it doesn’t want to deal with the same kind of sanctions countries imposed on Russia for attacking Ukraine.
However, if this were to happen, there would be more supply chain disruptions, notably in the semiconductor space.
Around 75% of global semiconductor manufacturing is in Asia. Mainland China and Taiwan are the largest share of that. Meanwhile, 12% of global semiconductor manufacturing is in the U.S.
The way to invest around potential disruptions in Asia is to take positions in U.S. semiconductor companies, such as Intel (INTC) or Advanced Micro Devices (AMD). But it’s important to understand that chip production doesn’t just ramp up overnight. So this would be a long-term investment.
I also suggest investing in rare earth and other similar commodities that the U.S. and its allies would look to source outside of China for economic and geopolitical reasons.
I’ve written recently about rare earth elements and have made a few suggestions for ETFs (exchange-traded funds) to get you started in this sector. Check out the April 21 Inside Wall Street for more.
And up next, a reader questions the government’s motives for pushing a digital dollar – or central bank digital currency (“CBDC”)…
Reader question: To provide some stability to the U.S. fiat currency, do you think pegging the U.S. dollar to gold at a price of $8,000 or $10,000 an ounce is a viable alternative to implementing a CBDC?
It seems to me that the real rationale for imposing a CBDC is more about providing the Fed with the ability to impose negative interest rates at will.
It would be far more honest and transparent if the Treasury Department and the Fed admitted that a primary reason they wish to put a CBDC in place is to monitor and control individuals’ use of money.
– Kevin C.
Nomi’s response: Thank you for your question and observations, Kevin!
Before we get to the Fed’s motives, let me answer your question about pegging the dollar to gold.
If you peg your currency to gold, you can’t print it on a whim.
That undermines central bankers’ power over the financial system and economy. That’s the last thing that the Federal Reserve – or any central bank – wants.
On the other hand, CBDCs help strengthen central banks’ power over the financial system. That’s because CBDCs will be highly centralized.
Yes, they’ll use a form of blockchain tech. This is the same as most decentralized digital assets, like bitcoin (BTC), use.
But CBDCs have a different motivation – power and control. That brings us to your other comments.
Many speculate that CBDCs’ centralized blockchains will allow central banks and other government agencies to track every transaction we make.
The possibilities and implications are limitless. They range from taxation to interest rates. But we don’t know for sure how CBDCs will play out.
What we do know is this:
90 central banks are planning to digitize their currencies
80% of global banks are exploring digital currencies
Overall, 105 countries are already exploring digital currencies
If you’d like to learn more about this, I just recorded an urgent video presentation to help you end up on the right side of this shift.
In it, I go into more detail on what a digital dollar could mean for our financial system, regular Americans, and our money. Watch it for free here.
Remember, you can join Nomi at Inside Wall Street by signing up here.
That’s all for this week’s mailbag.
Don’t forget, if you have a question for anyone on the Legacy team, send it to [email protected].
Have a great weekend.
August 19, 2022