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January
09
2015

Profit from the Panic: Golden Opportunities Emerge
Brittany Stepniak

Oil and Gold Prices in 2015

We told you 2015 was going to be a big year — a big year with a lot of blunders and bottoms.

As every action has an equal and opposite reaction, this year is also ripe with opportunity.

This week the price of oil fell below $50 for the first time since April 2009. The euro plummeted to nine-year lows and markets at large in Europe experienced major declines as well.

The entire globe is teetering on the brink of unravel and unrest, and the oil crash has been a massive contributor to this growing distress.

Big oil has lost $200 billion among the 10 largest oil and natural gas companies in the S&P 500 in the aftermath of 2014's epic oil crash. They lost ~half their value last year.

Simply put, there's just a glut of oil right now. In just a decade, extreme fears of peak oil have done a complete 180.

Oil's getting crushed and the little guys (aka: the small producers) are going to be out of business if prices don't improve soon.

In fact, the largest energy company in the world, ExxonMobil(XOM), bleakly watched its market cap plunge by more than $50 billion — nothing to scoff at, even for a dominant energy giant like Exxon. Currently trading around $90, it fell to its 52-week-low just a few short weeks ago.

For investors, there are two ways to play this: you can panic or you can profit.

Yes, super cheap oil is bad news (except for the average consumer benefiting from the nearly-forgotten luxury of cheap gasoline). Some experts have even suggested that oil may tank to $40 a barrel later this month.

The geopolitical consequences are, indeed, a little scary.

Jeff Gundlach, CEO and CIO of DoubleLine Capital, recently addressed the jittery financial markets, stating:

Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be — to put it bluntly — terrifying.

Gundlach certainly isn't alone in anticipating a crisis in the wake of oil's failures. And there's no denying that we're long overdue for a major market correction...

Keep in mind this is the guy that Faber was talking about back in September when he told CNBC that Gundlach “made a call that interest rates would fall rather than rise, betting that treasuries were undervalued, selling pressure on the dollar was likely over. Turns out he was right and it is paying off DoubleLine's total return for at least the last seven months.”

Might be worth paying attention to...

However, don't get so distraught that you're blinded by the bad and miss the silver lining.

Emerging Opportunities, 2015

You already know that a.) dips are the best buying opportunities and b.) energy is never going to go out of style. Which brings me to Exxon Mobil...

Just last week, Jason mentioned why Exxon is a strong buy this year. Even if (read: when) global markets begin to unravel, Exxon's still got a few good things going on to keep it afloat in dark times.

First and foremost, its dominance in the energy sector and prodigious size alone help protect its status amidst oil's ongoing blunder. And its management is smart and efficient. The company sits on some quality assets, safeguarded by strong diversification.

Even Bank of America analysts favor Exxon Mobil Corporation as one of the 10 best stocks for 2015 “given its lower sensitivity to oil prices compared to the rest of the energy sector.”

Another option when it comes to energy plays in 2015 is to capitalize on this opportunity by converting current debt of energy companies into equity.

Just today, billionaire Moroccan-American hedge fund manager and CEO of Avenue Capital Group Marc Lasry told CNBC that investors have an exciting opportunity to bank as much as 30% on energy debt based on the current price of obligations and the projected cost of oil over the next two years.

In today's “Squawk Box” interview Lasry said, "Three months ago, the debt of a number of energy companies was trading at par or higher, and today that same debt is trading anywhere between 50 cents and 70 cents on the dollar, so I think you can generate equity returns.”

That prediction is based on a general consensus that oil will be between $70 and $90 two years from now. If that proves true, debt purchased at 60 cents presently would yield 30% returns in two years.

Because smaller oil companies are super risky right now — as I mentioned earlier, many are in the red and run the risk of being extinguished entirely in the wake of rapidly depressing oil prices — it's not a bad idea to own some of these obligations instead.

This way, you'd either get your debt investment back or the opportunity to own equity. Of course, there is another course of action indirectly related to oil's ongoing woes...

Fiscal Stimulus Around the World: Time to Buy Gold

Gold is glistening again.

January has kicked off with a bang for gold bugs celebrating a banner start to the new year. They're the one group that couldn't be happier about sliding oil prices, stock prices, and a plunging euro to boot.

Another prestigious fund manager, Evy Hambro, believes this isn't just a temporary bump, but that precious metals are on the road to recovery in 2015. He says the market has “bottomed-out”, and is set to enter a “new stage.”

His reasoning is simple: fiscal stimulus methods are being instigated all over the world, with Europe playing a particularly critical role this time.

The European Central Banks is expected to soon print billions of euros in an attempt to ward off deflation... just like quantitative easing, European style.

Here's why investors should keep their eyes on gold in the aftermath of this pending transition... The Telegraph reports:

“In periods of uncertainty people reach out for gold as a safe asset. With this loose monetary policy around the world and fears around deflation, people will want to reach out for safe assets and gold is the natural place that people will move to as a store of wealth,” Mr Hambro said.

As the portfolio he manages buys shares in gold mining and other gold-retaled businesses — rather than the metal itself — this presents opportunities for profit over and above the rise in the gold price, he argues.

Remember, gold rises in times of government distress. And due to the latest situation in Greece (speculation that a Syriza party victory could result in Greece leaving the eurozone), gold is rising.

Regardless of a strengthened dollar and market optimism at home, Europe's trials and tribulations will undoubtedly keep gold in the limelight.

There's a perfect trifecta at play today: plunging energy and equities markets, global political distress, and new rounds of global fiscal stimulus.

So if you're looking for an “insurance policy” to safeguard your portfolio, be sure to check out some of the junior miners I outlined for you in recent weeks.

Farewell for now,

Brittany Stepniak Signature

Brittany Stepniak

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Brittany Stepniak is the Project Manager and Editor for the Outsider Club. Her “big picture” insights have helped guide thousands of investors towards achieving and maintaining personal and financial liberties while pursuing their individual dreams in lieu of all the modern-day chaos. For more on Brittany, take a look at her editor's page.

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