BrettArends

BOSTON (MarketWatch)—Yikes.

Crisis in Ukraine. A Russian invasion—again. Panicky headlines, scary video clips, rumors on the Internet.

So what do investors need to know? What moves should we make in response to protect ourselves, and maybe even profit?

What does this crisis mean for our money? Does it mean anything at all?

There are some bold moves that active traders may want to make, and take their chances. More about those in a moment. But what does this crisis mean everyone else? What does this mean for those of us who want a quieter life, but who nonetheless want to make money—and, most importantly, not lose it?

Here are five implications:

1. This is why investors who want to sleep easily at night always hold some long-term Treasury bonds in their portfolio.

Long-term Treasuries are portfolio insurance. When everything goes to hell in a handcart, and everything else goes down, they go up. They even went up in 2008. And if this crisis becomes much bigger, it’s a fair bet that investors will rush to move money into U.S. Treasury bonds, sending prices up yet again.

That’s because investors believe that the U.S. government, for all its troubles, remains the world’s lender of last resort. Uncle Sam oversees the world’s largest economy and can pay its bills. The Treasury market is by far the most liquid bond market in the world.

No other U.S. bonds serve this purpose. Even AAA-rated corporate bonds went down in the crisis of 2008.

The Treasury bonds which provide the most crisis insurance for your investment dollar are long-term zero-coupon bonds, often known as “Zeroes.” These basically represent a single fat check that Uncle Sam promises to hand you in about 30 years’ time. In boom times, investors won’t pay much for zeros because they figure they will earn much higher returns over the next thirty years from riskier assets. When a crisis hits, suddenly everyone wants zeros. They basically doubled in the fall of 2008.

2. This is why investors who want to sleep easily also own natural resource stocks in their portfolio.

In recent months I’ve been talking to a lot of money managers about the perfect “all-weather” portfolio that I (or anyone) could just hold and forget about. I suggested that one ought to include natural resource stocks, including energy stocks and agriculture stocks, as a specific asset. Several money managers wondered why.

This crisis is the reason.

Ukraine is a major food producer. It has some of the best agricultural land on the planet. It’s the Iowa of Eastern Europe. Russia, meanwhile, is a major producer of oil and natural gas, as well as some other resources such as nickel and platinum.

War and conflict have always disrupted the supply of raw materials. Every war in the modern age has been a boon for cotton producers, farmers, oil and coal companies, and so on.

Someone who allocates some of their money to energy, mining and agricultural stocks through a fund has less to worry about than someone who just trusts to luck.

3. This is why gold isn’t silly.

I’ll confess I have always been in two minds about gold. It’s mostly useless and generates no income. On the other hand, it one of the few currencies in the world that is universally accepted and which is not controlled by any government. Diamonds, gold. bitcoins? (Hmmm).