Looking through this week’s mailbag, two things jumped out…
One, Daily Cut readers are very sharp.
Two, the Cut audience has lots of questions about the electric vehicle (EV) revolution. (Catch up on our latest EV coverage here and here.)
But before we get to EVs, a faithful reader wants to know if we’ve been contradicting ourselves… And Dave Forest (International Speculator) is on hand to set the record straight.
Reader question:The Daily Cut has repeatedly been warning its readers about the probable market crash, while at the same time recommending buying gold, gold miner stocks, and gold ETFs.
Won’t the price of gold stocks and ETFs also drop significantly if there is an overall market crash?
– Craig M. (Legacy Research member)
Dave’s answer: Different metals behave in different ways during financial crises.
So where exactly should we position ourselves to protect and profit if another crash emerges?
To find out, let’s look at how five major base metals (gold, silver, platinum, palladium, and copper) performed in the last four major financial crises: the Japan meltdown (1990-1992), the Asian financial crisis (1997-1998), the dot-com bubble (2000-2002) and the Great Financial Crisis (2007-2009).
To give a clear picture, we plotted their performance during the three “acts” of each crisis:
One year prior to the crisis (the “good times”)
The period during the crisis
One year after the crisis (the recovery)
This showed us a few things.
First, it showed which metals did well in the boom time just before a crisis.
Second, it showed which metals were the best store of value during investor panic.
Third, it showed which metals are best to buy at the depths of a crisis in order to profit from the recovery that’s historically taken place the year following a crash.
Here’s how that picture looks… below is the average performance for those five metals during the last four big crises:
As you can see, gold was the only metal to increase before, during, and after the last four major market crises.
So what’s the investment takeaway here?
When markets are exposed to a significant correction or crash – like today – be very selective with exposure to the major base metals. The best strategy is to buy base metals firms that also hold significant precious metals exposure.
That’s why gold, gold stocks, and even gold ETFs are your best bet right now.
Gold isn’t the only metal Dave is excited about now…
After a 24-month investigation, Dave’s pulling back the curtain on what he says is “the single greatest discovery tool” he’s ever seen.
He calls it the Digital Treasure Map. And he believes it could single-handedly revolutionize the resource exploration business.
He’s traveled over 60,000 miles experimenting with it. And he’s already used it in five countries on three continents.
To see how it works, check out this presentation Dave put together.
And now, for your electric vehicle questions…
First up, a two-parter. E.B. Tucker (Strategic Investor) handles the first part, while Jeff Brown (Exponential Tech Investor and The Near Future Report) handles the second…
Reader question: A new battery that will revolutionize the electric car industry has been invented and patented. I would like to know where I can invest in this battery’s production.
Secondly, these cars have numerous sensors, and I also would like to know how I could invest in those.
– Dwight G. (Legacy Research member)
E.B.’s answer: Alternative energy is inevitable. But we don’t want to own alternative energy producers like wind farms, solar arrays, or cooking oil to fuel investments. They don’t produce reliable profits.
Where we’ll make a killing is investing in the links of the chain that tie all of these new sources of energy together.
I’m talking about the four essential metals that will benefit most during this massive power shift.
These are the “battery” metals…
Simply put: batteries will be the oil of the next century. And batteries can’t work without four critical metals.
The four metals that are set to soar during the years ahead are…
Silver
Copper
Nickel
Lithium
Jeff’s answer: The automotive market is one of the largest semiconductor markets in the world.
Today, most cars are loaded with semiconductors. In fact, the average midrange internal combustion engine (ICE) car has around $350 worth of semiconductors inside.
These semiconductors are used for everything – steering, airbags, collision warning, power doors and windows, entertainment and navigation systems, power systems, and sensors that assist with parking and automatic emergency braking.
And compared to hybrid electric vehicles (HEVs) and electric vehicles (EVs), this number is small. These cars use more than $700 worth of semiconductors on average.
With luxury cars, the number of semiconductors increases further. That’s because they include even more advanced electronics and features, like advanced driver assistance systems (ADAS), autonomous driving functionality, and various other features typical in high-end cars. These vehicles typically have $1,000 worth of semiconductors or more.
Given this, it’s not surprising that after the communications industry (networking, wireless networks, smartphones), the automotive industry is the second-largest market for semiconductors – around 25% of all sales worldwide.
As we move towards EVs and away from ICEs, the automotive industry will play an even larger part of the worldwide semiconductor industry.
And of that automotive semiconductor market, about 70% is microcontrollers (MCUs) and analog integrated circuits (ICs). So look for companies that specialize in supplying those to the auto industry.
Our next EV question is a great one that we haven’t seen anywhere in the mainstream media.
Luckily, Jeff Brown is on hand again with the insight that only a Silicon Valley insider like him could have…
Reader question: Great write-up on the future of self-driving cars that Uber and Lyft are looking into. One thing I noted that is sorely lacking in this email is who is providing the “security” for these self-driving cars?
Clearly this should be of concern with the software that will be embedded in these cars.
– Steve D. (Legacy Research member)
Jeff’s answer: The most interesting developments in automotive cybersecurity have actually been taking place within early-stage private technology companies.
The two most prominent companies providing solutions in this space are Argus Cyber Security and Karamba Security. Argus was acquired in 2017 by German Tier-1 automotive supplier Continental. Karamba remains private.
This remains an area that needs a lot more investment and will become even more critical in the era of self-driving cars and trucks.
Our last EV question concerns another area that no one else is talking about…
But, for the third time today, Jeff Brown comes through with the answers you won’t get anywhere else…
Reader question: Where is all the electricity needed to power all these electric cars going to come from?
– David B. (Legacy Research member)
Jeff’s answer: According to the California Energy Commission, 61.6% of energy used in the state comes from coal (fossil fuel), large hydro projects (damages natural habitats of freshwater rivers and lakes), natural gas (fossil fuel and California’s largest individual power source), and nuclear energy (radioactive waste). And only 29% comes from renewable sources, two-thirds of that being solar and wind.
That means nearly 62% of the electricity used to power an EV in California comes from fossil fuels and energy sources that are highly destructive to the natural environment.
Surprising, isn’t it?
And California is one of the best states in the country for generating renewable energy due to its sunny and, in some places, also windy climate.
Look at a state on the other coast, New York. The New York Times reports that 94% of its energy comes from natural gas (37%), nuclear (33%), and large hydro projects (23%).
That’s right, 70% of the electricity fueling an EV in the state of New York is “burning” carbon or a form of nuclear power.
That’s it for your EV questions…
But before we go, a follow-up question to Nick Giambruno’s (Crisis Investing and The Casey Report) comments about taxes in last Friday’s mailbag.
Reader question: I must say, I was very impressed and excited to read Nick’s response to a reader question (“Would a flat tax for all people and corporations help level the playing field?”) in last Friday’s dispatch of The Daily Cut. Respect brother! 100% agree!
Can you recommend any solid books on the subject of the criminality of income taxes? (In general, worldwide, as I live in New Zealand, not The States.)
I have been keeping an eye out for any book or article or whatever that would help me to understand the subject, so I can give an answer to anyone who raves on about the need for taxes to pay for the roads, healthcare, etc.
– Gareth V. (Legacy Research member)
Nick’s answer: I would recommend The Market for Liberty, which can be purchased or downloaded for free from the Mises Institute here.
That’s all for today. Have a nice weekend…
Regards,
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James Wells
Director