Will this be the best-performing asset of the 2020s?
“Natural gas is one of the most unloved commodities in the known universe.”
That line appeared in a column I wrote all the way back in 2011.
The topic of that column: An unloved asset was soon to be a golden child. And there were big profits awaiting anyone who could see this future.
I mention it here because a similar situation is playing out again today. Not around natural gas, but another unloved, misunderstood asset. And once again big profits await.
But first, back to natural gas…
Nowadays, American natural gas is one of the most sought-after commodities in the world. But it wasn’t always thus.
A dozen years ago, amid what was still the lingering hangover of the Great Recession, America had quietly emerged as the #2 global producer of natural gas, trailing only Qatar.
From 2008 to 2011, America’s proven reserves—known natural gas pockets beneath the land—had jumped to more than 330 trillion cubic feet from less than 240 trillion cubic feet, thanks to new technologies like fracking.
However, that huge boost to supply had only served to crush domestic natural gas prices.
While oil is priced globally, natural gas is priced regionally because it’s so difficult to transport. So, gas prices can vary wildly between, say, Europe and America.
The problem for the U.S. was, there was no way the economy could absorb so much additional natural gas, particularly in the troubled aftermath of the global financial crisis. Moreover, America didn’t have the facilities to liquefy natural gas—the process of cooling it to minus 260 degrees, making a liquid for easier shipping around the world.
A Nearly 3,000% Gain
Amid the glut of new supply, the so-called Henry Hub price—the benchmark for natural gas in the U.S.—plummeted to less than $2 per million BTUs (the traditional measure of gas). Three years earlier that prices was nearly $13 per BTU.
With prices collapsing, nobody wanted to invest in natural gas…
But I saw something different going on: Nat-gas demand was exploding overseas in countries that had no reserves to draw upon. I predicted U.S. supply was going to be a major player in the world’s thirst for natural gas.
And a big winner, I wrote at the time, was going to be a company known as Cheniere Energy.
Back then, Houston-based Cheniere was building one of the earliest facilities gas liquefying facilties in America.
I told my readers: “There is no question in my mind that Cheniere is on a winning path long term. The stock will ultimately go much higher.”
At that time, Cheniere’s stock price was about $5 per share.
What came of my prediction?
Well, in 2016 Cheniere became the first company to export liquefied natural gas (LNG) from America.
Today, the U.S. is the world’s #1 exporter of natural gas. It distributes more than 300 billion cubic feet of gas every month. That’s 100x what America shipped in February 2016, when Cheniere sent that first LNG cargo abroad.
And Cheniere’s stock price?
It’s gone from $5 to more than $150… a gain of around 3,000%. For every $1,000 you invested, you’d have collected $29,000.
Bad Times Always Birth Winning Investments
I tell you this story because I see a similarly huge opportunity emerging today… bitcoin.
We are once again in a troubled economy—far more troubled than we had exiting the Great Recession.
While unemployment is low, and while politicians and economists crow about America’s economic vibrancy, the reality is different inside the typical American family.
Credit card and household debt has become a noose as families struggle to keep pace with inflation even as incomes have stagnated.
Home values are on the decline in many parts of the country.
Corporate and personal bankruptcies are on the rise.
Banks are failing.
The dollar is in retreat against global currencies, which will have debilitating impacts on American wallets.
But the thing about crises is that they always birth winners. They birth the new guard.
Disney, Hewlett-Packard, FedEx, Charles Schwab, Microsoft, Revlon, Costco—they all launched amid the economic crisis of their day. In fact, Startups magazine reports that fully one-half of all Fortune 500 companies are the children of past crises.
Owning those assets has proven immensely valuable to investors who were able to see the silver lining in the dark clouds of the day… in seeing the Chenieres of this world.
Cheniere grew out of an overabundance of American natural gas and the world’s nascent but growing demand for LNG.
What I see now is an overabundance of another asset… American dollars.
Bitcoin Is Protection Against The World’s Debt Bomb
In the span of just three years, our government injected $7.3 trillion into our economy, creating what hedge fund manager Mark Spitznagel calls “objectively the greatest tinderbox-timebomb in financial history.”
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This has not only given us an abundance of dollars… it will make another unloved asset increasingly rare. In fact, I now believe this misunderstood asset will prove to be the best investment of the decade.
That asset is bitcoin, which I know you’ve read from me many times in the past.
But my job is to give you the most useful insights that can help protect your wealth, and bitcoin is that insight.
At some point, investors are going say enough is enough—that there are just way too many increasingly value-less dollars in the system. When that day comes, they will look for anything that helps preserve their wealth. In economically distressed Venezuela, people are trading digital tokens from an online game and using those as currency in an economy where the real currency is pointless.
The dollar will never be so pointless, but as its value erodes, investors will look to move into other forms of wealth preservation that have a limited, constrained supply. That’s gold… and that’s bitcoin.
Throughout history, gold has been the solution when a monetary crisis has struck a major global currency like the dollar because savers realize the government cannot control it. Thus, gold will again be a solution during the impending dollar crisis…
But now we have a digital alternative as well—bitcoin. And bitcoin offers numerous advantages over gold.
- It’s far more easily transported…
- it can be transferred digitally in seconds and for pennies…
- It’s infinitely more divisible than gold since you can trade and send the tiniest fractions of a bitcoin…
- And it’s far easier to spend since merchants have no way to make change for an ounce or even a gram of gold when you want to buy something small, like a Happy Meal.
So, bitcoin serves the same purpose as gold, while offering greater functionality, convenience, and security. Therefore, it has a far greater upside.
For Cheniere, the upside was a 30-fold price increase in seven years.
For bitcoin, I expect a 40-fold increase by the end of the decade… a symmetrically convenient seven years from now.
Sometimes, you have to go against the grain.
You have to buy Cheniere when everyone is saying natural gas will never recover from such a dramatic supply increase… that America will never be a major exporter of natural gas… and that natural gas companies have a bleak future.
It’s the same today.
You have to look to assets that some people malign, but which I predict will drive personal wealth creation across the remainder of this decade.