Nomi’s Note: The Federal Reserve has been whispering loudly about its plans to tackle rising inflation.
Tomorrow and Wednesday, it’s meeting to discuss next steps on this. So I’m keeping an eye on what it decides…
In the meantime, I want to share a conversation I had recently with my colleague Chris Lowe.
Chris and I talked about inflation. But we also talked about some ways to profit in this volatile environment… including one that is crucial for one of the biggest megatrends I’m tracking right now…
Now, usually, this interview would only be shared with members of Chris’ Legacy Inner Circle service. That’s an exclusive group made up of Legacy Research Group subscribers, which Rogue Economics is a part of.
But with everything that’s going on in the world right now, Chris agreed to let me share part of our conversation with you. Read on…
Chris Lowe: One of the big themes on folks’ minds at our recent subscriber summit in Washington, D.C., was inflation. It’s all over the news. And folks are feeling it when they put gas in their cars or go to the grocery store.
Living costs are now going up 8.5% a year. Were you surprised we saw even higher inflation in the most recent report?
Nomi: I wasn’t at all surprised. As I’ve been showing my readers, we’re in an uptrend in inflation.
The only person who didn’t see this coming was America’s top central banker, Jerome Powell. Last year, he kept claiming inflation was “transitory.” I never believed that.
There are a number of factors driving inflation higher.
One of them is the supply chain disruption coming out of the COVID-19 shutdowns. If you can’t get raw materials and goods from one point to another, supply shrinks. And if you spend more on fuel to transport materials, you pass those costs onto your customers.
Then you have all the stimulus money that governments and central banks have pumped into the economy.
That won’t stop. Markets are hooked on cheap liquidity. And the Fed knows it could provoke a recession if it turns off the money spigots.
That’s why I was quick to say inflation is here to stay. And it’s why I’m focused on helping my subscribers make money even as inflation soars.
Chris: You worked at several Wall Street investment banks, including Goldman Sachs. You’ve been using that expertise to help ordinary investors level the playing field with Wall Street investors.
How can our readers keep growing their nest eggs during this inflationary cycle?
Nomi: First, you have to admit inflation is a problem. Right now, you have to earn at least 8.5% on your investments every year to stay ahead of rising living costs.
Then you have to get out of a negative mindset. Inflation means a lot of money is sloshing around. So you have to ask yourself where it’s flowing.
That’s what I do for my readers. I home in on sectors that will surge as all that cheap money floods in.
And as I explained in an urgent video presentation I put together for my readers, one of them is what I call New Energy.
Chris: Can you tell us what you mean by New Energy?
Nomi: The energy landscape is changing forever. We’re transitioning from fossil fuels such as oil, coal, and natural gas to cleaner and more economic energy sources.
Today, renewable sources account for just 30% of the electricity we generate globally.
By 2050, they will be responsible for 85% of the electricity we generate globally, going by figures from the International Renewable Energy Agency. That will come mostly from solar and wind.
This will require overhauling our current energy production systems.
What’s more, the world will need a lot of copper to make the transition a reality.
Renewable energy systems such as solar, hydro, thermal, and air source heat pumps use up to 12 times more copper than traditional fossil-fuel-powered systems.
Right now, the world uses about 25 million metric tons of copper a year. But management consulting firm McKinsey estimates that could jump by as much as 50% over the next 20 years.
Chris: What confuses me is the oil price is also rising. A barrel of U.S. crude oil costs 55% more today than it did at the start of the year.
Why is the price of oil rising if we’re supposed to be transitioning away from oil and other fossil fuels?
Nomi: A lot is in flux right now. We’ve come out of supply-chain disruptions. We also have a war in Ukraine and sanctions on Russia. So Russia is exporting less oil. That pushes up the price of oil.
You won’t hear this much in the mainstream news. But on top of that, the trading desks of all the Wall Street companies are buying up futures and options in oil.
Futures and options allow investors to bet on rising oil prices without actually buying any oil. This further increases the price distortion.
Fossil fuels still drive the global economy right now. We’re also transitioning to new energy sources. The two things can coexist.
Chris: Let’s zoom in on some of the details. We heard a lot about electric vehicles (EVs) at the Legacy Investment Summit a few weeks ago. How do you see this playing out?
Nomi: I was at dinner with some friends the other night. We were talking about one friend’s EV.
It’s not a new-fangled one. It’s from 2015. But still, his commute costs a quarter of what it did when he drove a gas-fueled car.
Lower fuel costs are a massive incentive to switch from gas to electric-charged vehicles worldwide. High oil prices will make this contrast even starker and accelerate the transition.
Chris: What’s the best way to play the EV revolution?
Nomi: My top recommendation right now is copper. It’s the world’s most conductive metal, after silver. That makes it a key ingredient not only in EVs, but also in the more efficient power grids we’ll need to charge them.
And that puts copper right in the middle of this megatrend.
Then there’s what’s happening on the supply side. Just as demand is set to soar, copper supply is under threat.
Total global copper production is about 21 million metric tons a year. And there are about 870 million metric tons in global reserves.
Russia produces roughly 1 million metric tons of refined copper a year. That’s about 4% of global supply.
It also has 62 million metric tons of copper in its reserves.
That’s more than 7% of the total global copper reserves. And it’s about 30% more than the U.S. holds.
The problem is Russia’s copper could become unavailable.
Chris: Has the West sanctioned Russian copper?
Nomi: It hasn’t sanctioned or banned Russian copper… yet.
But with no sign of Russia calling off its war in Ukraine, it’s possible.
But even without a full-on ban, Russian copper exports are already affected.
Logistics companies’ self-sanctioning has thrown a wrench into Russia’s seaborne trade.
The bulk of its copper exports to China flow via the Black Sea or European ports such as Rotterdam, in the Netherlands. And these shipping routes are increasingly closing to Russian trade.
According to Goldman Sachs, this could remove up to 50,000–60,000 metric tons of copper from the market every month. That alone could push the copper market into a deficit.
It’s the perfect setup for higher copper prices.
Global supplies are under threat… just as all signs point toward higher demand. As we talked about, the energy transition is set to forge ahead.
And Russia’s invasion of Ukraine is a catalyst. Global governments are trying to reduce their dependence on Russian oil and gas. So they’re dashing into New Energy.
This means they’ll need much more copper – up to 50% more.
Chris: How should our readers play this setup?
Nomi: A great way readers can position themselves for rising copper prices is with the United States Copper Index Fund ETF (CPER). The fund closely tracks the price of copper. So it’s an easy way to profit as prices soar.
Maria’s Note: Maria Bonaventura here, senior managing editor at Rogue Economics. Recently, Nomi told readers about an even better way to play this set-up.
It’s based on what she calls “The Great Distortion.” And it involves a $150 trillion transfer of wealth that will completely transform the global energy market.
And it could transform your wealth, too, if you know where that money is flowing to. To watch Nomi’s briefing, just go here.