What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing 2022 has gotten off to a rocky start for the stock market, with the nasdaq 100 falling more than 20 as recent trough, officially marking a bear market, The vix implied volatility index, which is often referred to as wall street's fear gauge also spiked to 36 its highest level in more than a year. These certainly seem like treacherous times with the fed saying they could accelerate interest rate hikes if inflation remains. Elevated and putin's ongoing invasion of ukraine has a potential to push oil and other commodity prices through the roof. When fear and uncertainty are high, many investors dump their stocks and hold cash to weather the storm.

However, legendary investors, including peter lynch and warren buffett, say that it's a fool's errand to try to time the market and, in the long run it's better to stay invested. This is even more true today, with inflation running at seven percent. Your cash holdings are effectively evaporating before your eyes, but if you can't hold cash, how should you invest in these treacherous times in this video we'll go over three of my favorite etfs, which i'm holding for 2022. The first factor to consider is the effect of the russian invasion on oil prices.

Russia produces about 10 percent of the world's oil supply. President biden already banned all imports of russian oil and natural gas, while most european countries have not officially banned russian oil imports. Many multinational oil companies, including shell, ap and others, have cut off ties with the country voluntarily. Russian oil exports will almost certainly diminish, which will put further pressure on the already tight market.

Crude oil has already increased to 112 dollars per barrel, a level not seen in more than 10 years, most analysts on wall street see oil prices going even higher, with morgan stanley having a 120 per barrel price target. For the summer, the french hedge fund manager, pierre ardernand, who specializes in trading oil, thinks that prices could go as high as even 250 dollars if russian exports are taken completely offline. What's even more crazy is natural gas russia supplies 45 of the eu's natural gas. In response to the invasion, germany has already halted the nordstrom 2 pipeline, which would have shipped more gas from russia, but currently the older pipelines are still operating.

The eu said that they plan to cut their imports of russian natural gas by two-thirds by the end of the year. European natural gas prices were already very high going into the war. If the eu makes good on its commitment to reduce imports, prices could rise even higher one of the biggest beneficiaries of high european energy prices will be norway, which is the second largest supplier of natural gas to europe after russia. Europe would love for norway to replace russia as their number one gas supplier, as this would greatly diminish putin's negotiating leverage.

Norwegian energy companies can benefit much more so than american companies because they already have the infrastructure set up to transport, natural gas, oil and natural gas. Combined account for about 40 percent of the country's exports and 14 of total economic output. As prices of both commodities rise, we will likely see a boom across the entire norwegian economy. One of the simplest ways to play.

This is with the ishares norway, etf, ticker, symbol. Enor, as you probably expected, the etf is dominated by the energy sector, which accounts for almost a quarter of its total holdings. The enor etf is usually highly correlated with the price of oil over the past few months, as oil has been skyrocketing, enor has lagged significantly. This indicates that enor may now be undervalued compared to oil prices and could see tremendous upside as this gap closes.

Despite the economic boom that norway is likely to see over the next year, the trailing price earnings ratio of the etf is only 14.. This is a 33 discount to the s. P. 500 p e ratio of 21..

This is because enor is heavily weighted to energy and financial companies, while the us has more tech. Companies which tend to trade at higher multiples enor's value tilt, should help it withstand the fed's impending rate hikes, which tend to hurt growth stocks more than value stocks. The next entry on our list isn't an etf, but instead an alternative asset class. Most individual investors are overweight stocks, because that's the only asset class you can easily invest in, but institutional investors and billionaires have increasingly been diversifying into alternatives.

One of the most interesting of these alternative asset classes is contemporary art. Contemporary art has a long history of strong performance, having grown at a 14 annual rate from 1995 through 2020, compared to just 9.5 for the s p 500. According to the investment bank nomura, it has a negative correlation with the s p 500, making it extremely valuable for diversification. For these reasons, billionaires have been increasing their allocations to art in recent years, for example, in 2020 jeff bezos spent 70 million dollars at an auction to buy two paintings for ordinary people.

Like you and me, there's no way we can participate in this asset class because, unlike bezos, we don't have tens of millions of dollars sitting under our couches. That's where our sponsor masterworks comes in. Masterworks has been a long time supporter of the channel and also sponsored this part of the video. Needless to say, i'm a big fan of what they're doing and personally use their platform to diversify my portfolio.

They created the only platform which allows ordinary investors, like you and me, to invest in iconic artworks that are worth millions of dollars. They employ a team of art market experts to identify the artists that they think have the most momentum. This includes big names like picasso, monet and banksy. They then go to auctions or otherwise try to acquire works from these artists at attractive prices once they acquire the paintings, they register them with the sec to securitize them into shares.

It's similar to how a company does an ipo. You can then browse through their artworks. You can look at the deal sheet for each painting explaining their investment rationale and if you really want to get in the weeds, you can look into the sec filings. When you find a painting that you like, you can buy shares which gives you fractional ownership, they aim to hold the paintings for three to ten years and eventually sell it once they sell it.

You get your prorata share of the proceeds based on your percentage ownership. So far, masterworks has sold three of their paintings. Every one of them has generated more than 30 annualized net returns for their investors. Obviously, past performance does not guarantee future performance, but their track record so far gives me confidence to invest on the platform.

If your portfolio is overweight stocks and you want to diversify, you should definitely check out masterworks masterworks partnered with us to let you skip their wait list. You can sign up and learn more about the platform by clicking the link in the description below the last entry on our list involves trading of etfs linked to the vix volatility index trading. Vix linked investment products is extremely risky, and this should not be construed as investment advice. I'm just explaining my own investment decisions and rationale.

The vix is an index which tracks the level of implied volatility on s p 500 options. It is calculated and published by a chicago board of options, exchange or cboe. They use this crazy equation to calculate it. But the important thing to know is that the level of the vix is a function of the premium on calls and puts the more volatile a stock is expected to be.

The higher will be the price of the option. This is because options have asymmetric payout profiles. If a stock goes up a lot, your calls will print big time if a stock goes down a lot. Your losses are capped at your strike price.

So for any given option the expected payout increases with volatility of the underlying stock options. Traders have long used the black shoals formula to determine the fair value of calls and puts based on their expectations of volatility. As it turns out, you can invert this formula to calculate the expected volatility of a stock based on the price of its option. This is called implied volatility, for example.

Gamestop currently has an implied volatility of about 140 percent. Apple is a much more stable stock and thus has an implied volatility of just 25. The vix is a measure of implied volatility for the s p 500. during market crashes.

The market becomes more volatile and implied volatility increases. This causes the level of the vix index to rise. If you look at the history of the vix, it had massive spikes during the coveted crash of 2020, the european sovereign debt crisis of 2012 and the 2008 financial crisis. You cannot directly invest in the vix, because it's not a stock.

It's just a number that the cboe calculates and publishes. However, you can still speculate on the price of the vix by trading vic's futures. The futures are contracts that give payouts based on the vix's level at some future date. Many investors take long positions on vix features to hedge, their stock portfolios when the market crashes, the vix spikes, and they can use the proceeds from their vix futures to buy the dip because of the vix's utility as a portfolio.

Hedge investors bid the prices of the futures very high. That means that on average, vix futures have a negative expected return, and this negative expected return can be extremely significant. The uvxy etf buys one month, vix features and rebalances every day. It also leverages up the position by 1.5 times over the past 10 years.

Its performance has been abysmal. It has declined so much that google rounds down the return to negative 100 percent. If you invested one point seven billion dollars into uv xy in 2011, you would have just fourteen dollars today, its share price has declined so fast that they frequently have to do reverse stock splits to keep the value above one dollar. Obviously this is not an etf.

You want to hold for the long term on the flip side, you could actually make a lot of money by shorting it. You borrow, shares and sell them today. You then benefit from the price going down, as this allows you to repurchase the shares at a lower price in the future. As we've all learned from the gamestop saga, shorting stocks is extremely risky because it has unlimited potential losses.

This risk is compounded by the fact that vix futures are so volatile during the covet crash of 2020 uvxy increased 8.5 times. In fact, this chart only shows discrete time intervals. If you look at the intraday high, the gain is far higher. If you were short uvxy with a large percentage of your portfolio, there's a good chance, you would be completely wiped out.

Your broker would give you a margin call and you would lose everything, but with the prospect of great risk, also comes the potential for great returns over the past five years. Uv xy has declined 99.56 percent. That equates to a negative sixty six percent annualized decline. That means that if you shorted uv, xy and rebalanced every year, you could have made a sixty-six percent annualized return, which would be a 12x of your money during a five-year period.

You might think 12xing your money in 5 years sounds too good to be true and you're right. It is if you went all in on shorting the vix. You would have been completely wiped out during the coveted crash of 2020 and if your account goes to zero, there's no coming back from that. Personally, i maintain a short position in uvxy representing less than five percent of my portfolio and also put in stop-loss orders to reduce the chances of a catastrophic loss.

But stop-loss orders are not perfect if a 911 or coveted type event happened over the weekend, uvxy could double or triple at the monday open. Your stop-loss orders will not protect you in such a scenario. One final factor you have to consider is the cost of borrow when you short a stock or etf, your broker will charge you a fee to borrow the shares, the fees change continuously, based on the liquidity of the shares. I use interactive brokers for my short selling and they currently charge a 14 per year fee to borrow uv xy after subtracting the 14 fee.

The annual profits from short uv xy over the past five years goes from 66 down to 52. This still would have, given you eight times your money, all right, guys that wraps it up for this video. What do you think about the investments we went over in this video? Do you have any ideas that you think are even better? Let us know in the comments section below as always. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.