Since I left Wall Street in 2002, it has been my mission to do one simple thing…
Follow the money from Wall Street to Washington and back again… and help regular folks profit from that flow.
As regular readers know, thanks to the Federal Reserve’s rampant money creation since the financial crisis of 2008… and during the Covid pandemic…
The real economy and the financial markets have become permanently distorted. I call this The Great Distortion.
And today, this distortion is hitting three areas of the markets particularly hard. I call this the triple threat, or “3Fs” crisis. Let me explain…
The Whole World Is Feeling the Pinch
The first of the 3Fs is fuel.
I’ve always believed that the best way to really learn about an issue is to get stuck into the thick of things. I travel around the U.S. a lot. So I’ve seen how the energy crisis is affecting us all.
While traveling around England recently, it became clear to me that the energy crisis we see in the headlines here in America is very much a part of everyone’s lives across the Atlantic, too.
People in England are gathering firewood for the winter to heat their homes. And pubs fear they are just one astronomically high electricity bill away from having to close for good, after just making it through the pandemic.
In England, the average annual household energy bill increased by 54%. Ofgem, the U.K.’s Office of Gas and Electricity Markets, planned to increase charges by a further 80% in October. That would have brought the average household bill to about $4,000.
But earlier this month, the U.K. government implemented price cap measures. It is capping the October increase at 27%. This limits the average annual household energy bill at £2,500 (about $2,700) a year for the next two years.
There are currently no details of any support that might be made available to businesses.
Newly appointed U.K. prime minister Liz Truss’s plan will cost the British government about $172 billion.
Similar plans by Germany, Austria, and other European Union (EU) countries total around $330 billion. Together, that puts the cost of the U.K. and the EU’s cost of fighting rising energy prices at about $500 billion.
Here in the U.S., overall energy prices are up 19.8% compared to September 2021. That includes a 58.1% increase in the cost of fuel oil and a 33.1% increase in natural gas prices. So we’re all feeling the pinch…
But spiraling energy prices is just one piece of the 3Fs puzzle.
Global Food Insecurity Is on the Rise
The second F – the food crisis – is becoming a daily reality for many people around the world, including right here in America.
Russia and Ukraine are responsible for sending huge quantities of grains for breads and other foods across Europe, the Middle East, Asia, and Africa.
Together, they account for nearly one-third of the world’s wheat supply. And they produce 19% of the world’s corn.
But Russia’s war in Ukraine means these two “breadbaskets,” as they are called, haven’t been able to export enough grain to help meet global demand.
This is one of many factors impacting food supply chains around the world. Other factors include drought, insects, rising energy costs, and more.
But there are real people suffering the consequences of all these factors.
I first wrote to you about this back in July. At the time, the cost of food here in the U.S. was up 10.1% over the previous 12 months. This was the first increase of 10% or more since March 1981.
But the latest Consumer Price Index (CPI) figures released earlier today show that the overall cost of food is now up 11.42%. And the cost of food at home is up 13%.
Already in 2021, 13.5 million U.S. households were “food insecure.” This means they had difficulty at some time during the year providing enough food for all their members because of a lack of resources.
Unfortunately, with food prices rising, that figure is likely to increase.
Sadly, as global inflation and rising energy costs squeeze the world’s most vulnerable people, those numbers could get worse.
And that brings us to the final F – the fertilizer crisis.
What This Means – and What You Can Do to Protect Yourself
Fertilizers are critical for global food production. They nourish the plants that feed us.
But fertilizer’s main ingredient is ammonia… which comes from natural gas. And global natural gas prices have spiked this year.
Here in the U.S., they went up by as much as 205% this year. And in Europe, they were up by as much as 384% at one point.
So food producers have had to either reduce their use of fertilizers… and therefore, their crop yield… or increase their prices to consumers.
Added to that, supply disruptions from Russia and Eastern Europe due to the Ukraine war are impacting the supply of fertilizer.
Earlier this summer, Bloomberg reported that a quarter of Europe’s nitrogen fertilizer capacity was curtailed.
And since then, Russia has cut off the Nord Stream 1 pipeline to Europe, which supplies 45% of Europe’s natural gas imports. This will have a knock-on effect on fertilizer production.
Now, as grim as this triple threat is, I understand if you want to hide your head in the sand and ignore what’s happening.
But if you ignore it, and you don’t position yourself correctly, the 3Fs crisis could wreak havoc on your portfolio.
That’s why, on Monday, I’m going to share one move you can make today to protect your wealth – and even grow it – as this crisis plays out.
So stay tuned for more next week…
Editor, Inside Wall Street with Nomi Prins