The Next Commodity Supercycle Is Upon Us

The gears of entrenched inflation are turning... What to do about higher prices now... 'Just in time' is done... The next commodity supercycle is upon us... The best 'asymmetric bet' in the world today... Our Financial Survival Program...

Farming is all the rage now...

After reading yesterday's mailbag, which included a lot of feedback on inflation and real-life examples of rising costs, Dan S., who has run a Wisconsin farm for years and wrote one of the letters we shared yesterday, got in touch again last night with an astute observation...

Wow! Three unprompted references to farming in one mailbag. That has to be a first.

When the price of primary inputs of production (metals, food, fuel, and timber) are all rising, their impact on inflation downstream is inevitable, and probably long lived. Buckle up.

I (Corey McLaughlin) happen to agree, Dan. And yes, the three farming references in one mailbag is the first I've seen at least. The point being... buckle up, indeed.

The gears of entrenched inflation are turning...

Take your pick of the catalyst...

Higher prices and too few goods and supply-chain problems stemming from a pandemic and a war... money supply, created by the Federal Reserve, that has grown 40% in the last two years... more than $4 trillion in fiscal stimulus over that span too...

Or the fact that some wages are going up, but generally they're still not keeping pace with rising prices not seen in four decades...

Each of these scenarios could cause significant inflationary pressures on its own. Put them together and, well, we'll get to that today...

Price pain is the most obvious outcome for most people, of course... But there's much more to the inflation story than that...

There's the part about an overlooked psychological shift in the economy playing out as we speak... which might be among several catalysts for a big moneymaking opportunity that many folks have been waiting decades for...

That is, if you know where to look, which we do. As I'll explain, it has a lot to do with rising costs on the farm – and everywhere – today.

Let's start here ‒ 'Price pain' stems from the most basic of ideas...

Longtime subscribers, perhaps forgive me for being too simple-minded, but I need to start at the beginning. Strong demand and big supply issues... It's Economics 101.

Sooner or later, on balance, this will result in higher prices... or the government stepping in and asking businesses not to raise prices out of the goodness of their own hearts, or at the expense of their own profits.

We could get into a lot of other nuances of inflation – such as how expectations are rising, which the bond market is telling us – and how the Fed royally screwed up policy moves over the past year that could have avoided worst-case scenarios...

That's another basic idea... Bad decisions. And, actually, we must and will go there, with something we wrote back in the February 23, 2021 Digest...

[Federal Reserve chair Jerome Powell] said he thinks inflation will be volatile but doesn't expect pandemic-opening price hikes "will be large and persistent."

We'll see.

We've now seen. Inflation is, in fact, large and persistent. The exact opposite of what Powell said a year ago.

But today, rather than saying "we told you so," – or wondering if the Fed actually wanted high inflation to eat away at the massive federal debt – the most useful thing to probably do here is to consider what to do about higher prices now when it comes to our investments...

In other words, let's explore what the current inflation situation is telling us about the economy now, and how the markets and certain stocks and sectors could respond moving forward.

It's all about expectations...

A good start is to read the Digest I just referenced from February 2021. In it, we shared the highlights of our colleague Dr. David "Doc" Eifrig's thoughts on inflation from the January 2021 issue of his Income Intelligence newsletter.

It's as relevant today as it was more than a year ago. Doc explained all he could about inflation and shared why his conclusion is that it is "mysterious, poorly understood, and difficult to predict."

Because of this, Doc said perhaps the most important thing you can do when thinking about inflation and how it plays out in the markets is to think about "expectations."

As Doc wrote in January 2021 and we can reshare word for word today...

The expectations for inflation will drive investment returns. When you expect inflation, you position yourself differently than you would if you expect deflation. And other investors doing the same thing will drive some investments to lead and others to lag.

For example, since near the end of 2021 – when the Fed finally signaled it was going to start raising interest rates to cool demand in the economy (and, it says, inflation) stocks, particularly growth names, have by and large sold off...

Even with the major U.S. indexes enjoying a bump today, the tech-heavy Nasdaq Composite Index is down 14% year to date... the small-cap Russell 2000 Index is off 10%... the benchmark S&P 500 Index is down less, but still a significant 7%... and the stodgy ol' Dow Jones Industrial Average is down 5% since the start of the year.

That's the 'slower economic-growth expectations' part of the story...

At the same time, old reliable government bonds – which folks have considered a ballast for their portfolios for decades as a hedge against stock market risk – have sold off too, because of inflation expectations...

One way to gauge inflation expectations is to look at U.S. Treasury yields, which reflect demand for low-risk government bonds.

It's really counterintuitive... The less compelled people are to let money sit in a paltry yielding, even if "safe," government bond, the more likely they are to sell these bonds, and the more bond yields rise – since yields rise as bond prices fall, and vice versa...

Eventually, bond yields might become attractive enough to lure more money into bonds, on balance, but that's not happening yet with official inflation numbers still on the rise and continuing uncertainty about when they will slow, plateau, or fall.

Today, the 10-year Treasury yield sits around 2.9%, a number not seen since 2018 and a sharp 67% gain since March 7. For the typically "turtle speed" bond market, that's a hare-like move...

And it means that, by and large, bond investors aren't willing to let inflation eat away at that part of their allocation unless they get greater than a 3% yield for even a government bond, the lowest-risk assets most people can think of.

Stocks are down. Bonds are down. So, what's going up?...

Sometimes, when these big, slow-moving trends are in place, it can be more profitable to simply follow what's actually happening (and be truly diversified) rather than trying to predict what's going to happen.

Because big trends can go on longer than you think... And as individual investors we're not beholden to conventional wisdom – like the 60/40 stock-bond portfolio – which is losing money this year.

What if I told you there was one asset class that is up more than 30% in 2022?

You would probably be interested... especially if I told you the trend was still "up" and all the bullish factors haven't run their course yet... and these assets are some of the oldest, most in-demand resources on Earth...

I'm talking about commodities. This is the focus of the second module of the new Stansberry's Financial Survival Program, released to subscribers and Alliance members on Friday.

The 'real' stuff we all need to live...

Commodities can grow on a farm, like corn, soybeans, or wheat... or they can be mined from the ground, like the metals used to make any number of goods. They can be things people don't necessarily want but need.

Just like many people were reminded over the past two years, all the stuff we buy online has to come from somewhere – like container ships, which are piloted by real people – it's a similar story with the necessities of modern life.

As our colleague Bill Shaw wrote in the Financial Survival Program lesson on Friday...

Commodities are simply the basic goods and materials that society needs to function and thrive – such as wheat, coffee, copper, oil, and livestock. Investing in commodities isn't as "sexy" as buying the latest tech fad, but under the right circumstances, these can be incredible investments.

Today, Bill says we're seeing the right environment. We don't need to tell you about rising prices at the store... or on the farm... and you can see the rising prices on the big sign at the gas station.

That's the painful part for consumers like you and I. Higher prices stink for household budgets. But as our friend Dan S. pointed out in his original note to us that we published yesterday, when he puts his farming hat on, higher prices help him, too...

Fortunately, the prices for corn, soybeans, and wheat have risen, too, but that only means that the increases will come out of the consumer's hide eventually.

That's because demand for these essential commodities is so high, even amid continued global supply-chain issues and the shocks of the war in Ukraine...

The price of natural gas, for instance, is up 100% over the past year... The price of corn hit a nine-year high yesterday. We could go on and on...

It has gotten to the point that, after two years of dealing with a pandemic, supply-chain issues, and now a war in Eastern Europe and amid a tight labor market, premiums are being paid just to make sure you have goods at all... before they run out or can't get to you.

We might be living through a shift from "just in time" supply chains – where everything was designed to "get there" at the last minute to minimize inventory costs to a world where there is value in having access to scarce resources at all.

Ben Brown, a University of Missouri agriculture economist, said in a recent interview for the industry media website Brownfield Ag News...

For a long time, with no Black Swans, no issues, we wanted the cheapest product possible and the "just in time" system provided for that. We're now maybe saying, "We're willing to pay a little bit more to ensure the product is always there when we want it."

That's an important clarification. We as a society have changed our values when it comes to availability.

This changing psychology in the economy can't be understated...

And it's being reflected in commodity prices. The S&P GSCI Total Return Index – a benchmark of global commodity performance – is up more than 70% over the past year and has gained 46% in 2022.

This index is made up of 24 commodities, like energy, metals, and agricultural products. Now, you might say, "Of course those prices are up. Russia's a big exporter of all of those things, notably oil... and Ukraine is a big wheat producer, more than many people realize."

True, but a few important details...

No. 1... The reality is the conflict in Eastern Europe has shown no signs of a resolution happening anytime soon...

No. 2... The supply-and-demand dynamics for higher oil prices were already in place before the Russian military invaded Ukraine...

And No. 3... We don't have a ton of recent history to draw on. But once inflation cycles get going, they are hard to just "stop" without pain being felt somewhere...

Remember, what we're seeing now is the culmination of two years, a lot of large and small decisions that have added up... And really it goes back to the 1970s when the U.S. dollar was totally set free from its gold peg.

That set off an inflation spike in the U.S. that the economy hasn't had again until now... And ended with former Fed Chair Paul Volcker raising interest rates to 20% and inducing a recession to stop inflation. The move was widely hailed.

The point is, today, hundreds of millions of people are still going to need and want food and energy... inflation is with us in a way that has not been seen in four decades... and as we'll end with today, the timing is such that commodities, in general, are overdue for a big bullish run anyway...

As Bill writes in the Financial Survival Program, commodity prices tend to move as a group through long markets (bull or bear) called "supercycles."

I can't give away everything here, but I can say a little. The pattern goes back 200 years... and these supercycles have lasted an average of two decades... and are typically set off by a catalyst, such as war.

A bear market for commodities started in 2008. And the pandemic-inflation-war trifecta could certainly be the catalyst this time for another bull run... and it's an opportunity we don't want you to miss... to potentially make a lot of money and come out of this uncertain market in solid shape.

Commodities are up 30% this year alone, yes, but the average bull market in commodities the past two centuries has lasted close to two decades and gained around 250%...

The timing and context here are important...

Many market analysts have been calling for the next commodities "supercycle" for a decade... to great disappointment...

As our publisher Brett Aitken wrote in our annual Report Card for 2021, the benchmark Bloomberg Commodity Index had plummeted 54% since July 2008 through February of this year. As Brett wrote...

"Brutal" is one word to describe the performance in this sector. Other more colorful words likely come out of the mouths of those trying to make a buck or two in this space over the past decade.

There have been several fakeouts and false starts over that time, the recent bullish turn for commodities looks like the real deal start of a new supercycle. According to Bill...

Finally, the setup we've been waiting for is here.

When you compare commodities to stocks in particular, you're looking at a tremendous "asymmetric" setup, maybe the best in the world today. As Bill shares...

The following chart shows the price ratio between the S&P GSCI Total Return Index – a benchmark of global commodity performance – and the S&P 500 Index.

As the ratio falls, commodities are considered cheap compared with stocks. And as you can see, this ratio has been stuck at 50-year lows.

Even with the recent price spikes in oil, wheat, and corn this week, commodities are still incredibly cheap compared to the stocks in the S&P 500... And, as we said, bull runs for these hard assets on average have gained 250% over long periods of time...

In other words, even allocating a small amount today to commodities can pay off handsomely, especially in an inflationary world where stocks and bonds are losing value...

Here is lesson two from Stansberry's Financial Survival Program...

You might think I've already given away everything from the latest edition of our new Financial Survival Program, but what I've talked about today is really just the overarching idea of why you should consider commodities in your portfolio today.

Bill, who is the editor of our Commodity Supercycles newsletter, gets into more detail about the themes at work in the second module of our survival program... He details the history of bull and bear markets in commodities and more about what has led us to this key inflection point today.

And, importantly, he explains how you can use this information not just to protect, but to grow the value of your portfolio. Sure, you could go out and buy a commodities index fund and get some exposure that way, but you can also do more...

Bill says the shares of companies that produce and sell commodities can soar several times higher than the commodities themselves when prices rise...

The very best positioned companies are those that own and operate some of the most important "hard assets" on the planet, which offer leverage to rising prices in things that people need... no matter what happens in the world next.

Bill has hand-picked one such company for all subscribers in lesson two of our seven-part Financial Survival Program. Its shares rose nearly 1,000% during the last bullish commodities supercycle 20 years ago... and it's just as relevant to the global economy today.

This new research is a must-read. Hopefully you've picked up on that from our message today and will consider learning more. If you don't have access to our new Financial Survival Program already, click here to learn more about how you can get this new program today...

For what I consider a very reasonable price given the education and recommendations, you'll get access to seven all-new pieces of research designed specifically for today's market environment.

We've already published the first two... and five more are to come, each Friday for the next five weeks. And they are timely, designed specifically for today's volatile market.

Plus, in module two, commodities aren't the only thing we talk about. Our in-house cryptocurrency expert and Crypto Capital editor Eric Wade also outlines why bitcoin and other cryptos also have a place in a portfolio today... for similar inflation protection reasons.

And Eric shares two specific recommendations for all investors that can earn 10% of steady income. Depending on how much money you put into these ideas, they could pay for themselves relatively quickly.

Again, click here for more information on how to access our new Financial Survival Program today... And existing subscribers and Alliance members, you can find everything at this link and you'll receive an e-mail to your inbox when each new lesson is published.

Gold Is the Ultimate Currency

"You can't make another gold," says Chris Mancini, senior analyst at Gabelli Funds. As he explains to our editor-at-large Daniela Cambone, the precious metal stands unique among all safe-haven assets... and we're about to see why again...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

New 52-week highs (as of 4/18/22): Altius Minerals (ALS.TO), Bunge (BG), Black Stone Minerals (BSM), Dollar General (DG), Freehold Royalties (FRU.TO), Huntington Ingalls Industries (HII), Kinder Morgan (KMI), Karora Resources (KRR.TO), Leidos (LDOS), Mosaic (MOS), Nucor (NUE), VanEck Oil Services Fund (OIH), Raytheon Technologies (RTX), Shell (SHEL), Sprott (SII), Suncor Energy (SU), Viper Energy Partners (VNOM), Westlake Chemical Partners (WLKP), and SPDR S&P Oil & Gas Exploration & Production Fund (XOP).

In today's mailbag, we take a brief break from our inflation discussion to share feedback on Dan Ferris' Digest yesterday on Elon Musk and Twitter (TWTR)... We'll pick things up on inflation tomorrow... In the meantime, do you have a comment or question? E-mail us at feedback@stansberryresearch.com.

"Dan Ferris, Thank you for your synopsis of the Elon Musk/Twitter situation. In a 20 minute read, you were able to clear through all the smoke, mirrors and vitriol that surrounds this topic.

"Listening to daily news radio programs and reading websites, I hear how he can save free speech or ruin it for those who do not have their free speech restricted by Twitter. Your analysis of how the board of directors have to accept Musk's offer or to keep it away from him was insightful.

"This kind of analysis is what I have come to expect from Stansberry Research and why I keep renewing my subscription." – Paid-up subscriber William E.

"I just wanted to express my appreciation for today's Stansberry Digest. I've been a subscriber to Stansberry since 2005, and a Lifetime member for the last few years. This is the first time I've felt compelled to comment on the Stansberry Digest.

"I am SO pleased... and, actually, relieved... that it supported the move by Elon Musk regarding Twitter. Without freedom of speech, our democracy, freedom, and access to greatness is denied.

"Please keep up your support with this... and all of us." – Stansberry Alliance member Mary C.

"LOVE IT, LOVE IT, LOVE IT!

"Thank you, Dan, for pointing out the elephant in the room!

"You are right; no social-media company, legacy media company, television company, or major entrenched bureaucrat wants the American citizen to have free speech. We are only allowed to say what agrees with their agenda... " – Stansberry Alliance member Michael P.

"Unbelievable! Another home run by Mr. Ferris. The first part of his analysis, the social and political intrigue, are a key front on the war to sustain our liberties. But the second part was a superb lesson in the laws of unintended consequences, especially for the social media crowd. Like Dan, I'm not a Musk worshipper. but I find his approach to social engineering scams refreshing. Thanks for a great read." – Paid-up subscriber Eric A.

"Once again, Dan Ferris 'clears the bases' with a brilliant Digest. Thanks for breaking this one down for the layman. Thanks for the detail, the humor and perspective. Keep them coming." – Paid-up subscriber Brady G.

"You write... 'Content moderation' refers to the rules Twitter uses to squelch political views it doesn't like. Mind you, Twitter is a private enterprise...

"What appears to be missing about all internet media discussions is that since it uses the airways, it should fall under the [Federal Communications Commission] and attempts to suppress free speech violates the constitution, and companies that do so should be terminated by the federal government. It is illegal for any private company that uses the internet to suppress any speech." – Paid-up subscriber Kendrick M.

"Psssstttt! Dan! Over here! Careful! They are listening." – Paid-up subscriber Randall B.

All the best,

Corey McLaughlin
Baltimore, Maryland
April 19, 2022