How to Get Inflation Rich

 
The gap between haves and have nots continues to widen.

If it’s priced in dollars... it’s likely headed higher.

Real estate prices here in Austin continue to balloon, with homes being offered 20-30% above asking price. We are now in the midst of the fastest rise in home price appreciation ever.

As Nick Hodge likes to say, that's a long time.

Who’s buying the homes? Cash-rich buyers or buyers with prime credit scores.

As first-time buyers get squeezed out of the real estate space, prime and super-prime credit profiles continue to leverage those credit profiles to pay top dollar for real estate.

Speaking of credit, did you know that student loan debt as a household debt class is now 11%, double what the credit card debt is at 5%?

Auto lending is on the rise and accelerating as the same people who used to live in cities continue to flock to the suburbs, which require transportation to move around comfortably.

As a household debt class, auto lending now makes up 9%.

The timing couldn't be better as chip shortages have made fewer new cars available, translating into a 50% increase in used auto prices. That’s not a typo.

But don’t worry, Jerome and Janet are watching inflation and will rein it in at the appropriate time. 
 
 
 
The chart below from the Conference Board Inflation Rate Expectation shows a 10-yr high in inflation expectations (with the exception of June 2020). 
 
COVID cases here in the U.S. continue to decline and consumers are eager to get back to a new normal by doing what we do best, spend.

I’ve made the comparison to the roaring 20s. There’s a good case to be made that we’re also in a period not too dissimilar to the mid-80s.

Not the mid-80s as I experienced it, as the son of immigrant parents who didn’t speak a word of english living in Chicago (not the nice part), working hard to try and create a better future. 
 

 

 

I mean the “greed is good” 80s. Gordon Gecko-style, baby.  

Still waiting on the sidelines by choice? In the words of the crypto bros and babes: have fun staying poor.

After months of consolidating, gold and silver are finally starting to look like they want to break out. The correlation between the 10-yr bond yield and the gold price remains intact.

Interest rates go higher, gold goes lower. Interest rates go lower, gold shoots higher. It’s that simple right now.

It doesn't mean we don’t get one last pullback (getting one today), but two months of rising prices is encouraging to say the least.

The volatility in the crypto space and mini-crashes in the overall indices is a reminder of the stability gold provides in these uncertain times.

Yes, it’s down 16% from all-time highs nine months ago. But I don’t worry about waking up to see gold down 40% from the previous day’s close.

It also isn’t hurting gold that real central bank interest rates look like this: 
 

 

 

On the silver front, the next month or two could provide some fireworks because there isn’t much resistance between $30-$50. 
 
And for anyone worried about the recent pullback in the copper price, some perspective is important. First off, it’s pulled back from all-time highs, which is healthy. 
 

 

 

The demand part of the supply/demand equation is in our favor and not slowing down anytime soon.

Consider that according to Benchmark Minerals there are now 211 total gigafactories. Of those, 156 are in China, 22 in Europe, and 12 in the U.S.
 
 
 
Those factories are producing batteries that require large amounts of copper.

It’s why the International Energy Agency (IEA) is recommending Western governments stockpile critical battery metals.

The demand projections from BloombergNEF are eye popping.
 
The IEA is correct in highlighting the geopolitical risks that come with sourcing these metals from unstable or unfriendly countries.

I touched on election uncertainty in Peru last month. We will have more clarity in less than a week about the near-term future as it relates to mining in Peru.

I wrote about the election surprise in Chile recently. You can view that here.

The #1 copper producer (Chile) and #2 (Peru) will not cease being top copper producers, but changes are afoot globally that won’t make it any cheaper to mine a metal with decades of projected demand.

Those changes will put a premium on deposits that are economic and in stable jurisdictions.

And owning those deposits is one way to widen the wealth gap in your favor.
 
 

Let's get it!

Gerardo Del Real

Gerardo Del Real
Editor, Daily Profit Cycle


For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Daily Profit Cycle, Junior Resource Monthly, and Junior Resource Trader. For more about Gerardo, check out his editor page.

*Follow Gerardo on Twitter.


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