First, a look at the current crisis, for this time we could go over the cliff. The best way to do this is through the eyes of someone who knows a thing or two about the White House and Capitol Hill – Hillary Clinton.
Last weekend I head Hillary Clinton speak at my son’s college in upstate New York. Secretary Clinton spoke well; regardless of her policies and your politics this is one savvy politician. Clinton spoke warmly and brought the audience back to the days when the Republicans, having shut down the government in 1995 and in 1996, would go to the floor of the House of Representatives and call her husband the devil incarnate — and then would come to the White House to talk and work out a compromise.
Yes, Newt Gingrich did this and he and President Clinton got along quite well. Each side welcomed discussions with the other. Hillary Clinton made the point that these kinds of discussion are not going on right now. This is why I am increasingly fearful this mess will go right up to the last minute — and prompt a slide in the market, albeit temporarily.
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So back to the question – what should investors look to?
If and when we get too close or over the debt ceiling cliff, interest rates will rise dramatically and many market professionals will avoid Treasurys or demand a higher interest rate on the Treasurys they buy. Investors leaving bonds will look to other income-producing vehicles, stocks whose fundamentals are insensitive to interest rates.
The sector that will benefit the most is energy. And when I think of energy, I think of fracking — extracting oil and gas from shale formations.
First, and this is very important, investors should shy away from speculative fracking plays. You cannot believe the low quality of the MLPs being issued based on tissue-paper-thin hopes and promises related to fracking.
Stick with real revenue-producing companies, some obvious, some not so obvious. The-not-so-obvious stocks have the most upside potential. Over time, Wall Street, often by accident, figures things out. Here are three stocks that fit the bill: