3 Assets for This Inflationary Environment

Gerardo Del Real: This is Gerardo Del Real with Daily Profit Cycle. Joining me today is financier, consultant, friend, and one of the most respected voices in the resource space, Mr. Jeff Phillips. Jeff, how are you?

Jeff Phillips: I'm good, Gerardo. Thank you for having me.

Gerardo Del Real: Thanks for joining me again. You and I had a conversation last week, and we spoke briefly about the multi-trillion dollar stimulus packages that apparently get floated around every month now it seems, and how that was affecting the collectible space. And it was a good conversation. I'm glad to have you back on because I really wanted to get into hard assets — hard assets that you're exposed to and hard assets that you personally use as a way to preserve your wealth. I'd love your thoughts, if you care to share.

Jeff Phillips: Yeah, hard assets can be anything from land to your house that you own, real estate, obviously, farm ground that earns income, precious metals, base metals, anything that's a tangible asset that, again, tends to do well in inflationary environments and tends to do well over time.

Gerardo Del Real: And when you say inflationary, I'm assuming that you're meaning more dollars created out of thin air chasing finite resources, correct? Is that accurate?

Jeff Phillips: Correct. Correct. People confuse the definition of inflation. They say consumer prices aren't going up, so we don't have inflation, which is an argument for another day. But the fact of the matter is that's not what inflation is. Inflation is defined as increasing the amount of money in circulation. So clearly we have inflation. We're printing boatloads of money. We don't have consumer price inflation in certain areas, although we can say that there's plenty of inflation in assets, and we're starting to see it in underlying everyday products. So that's coming, absolutely.

Gerardo Del Real: Now I know that you're not a financial advisor, you don't give advice financially, but again, you are somebody that's done extremely well with your investments. So I'd love to get your take on some of the hard assets that you've used personally to protect that wealth of yours that you've worked so hard for.

Jeff Phillips: Well in this interview, like I said, I own everything from real estate up to farm ground, to income-producing properties. I think real estate has always been a great investment. 

You've talked to me in the past, because one of my areas of expertise is I consult and I'm a large shareholder in what we call the junior to development natural resource companies — so the underlying commodities. It’s high risk because you're betting on a company actually finding something or proving what they have is economic. And two, you're hoping that the underlying commodity that backs up whatever they're doing is not going in the wrong direction. It's a very risky business.

So I tend to look for companies and commodities. I look for companies that don't necessarily have to have higher prices in the underlying commodity, but could actually be beneficial and sold to a larger company that needs the production or needs the reserves to put into their own company. 

But the physical hard assets are the actual metals in that space, but sometimes these companies don't have physical assets or they've started to find something and you're trying to prove that it's going to be something that's economic, a bigger company wants. Very similar to biotech and starting with a clinical trial and then moving all the way to phase one, two, three, things, get revalued as you move along.

Gerardo Del Real: Are there specific commodities that you're bullish on right now?

Jeff Phillips: Yeah, I think uranium's cheap. It doesn't mean I think uranium is going to double tomorrow, but the simple fact is it costs more to mine uranium in most cases than it does to sell it. So if you can't produce something for what you can sell it for, that's a pretty bad business. You don't have to go get an MBA to figure that out. So uranium prices have to go higher, and with the green new deal that they're proposing and the infrastructure and all kinds of things that are coming down the pipe, I think people will continue to realize that uranium is extremely important in the nuclear energy aspect of clean energy.

And the fact is that nobody's secured long-term supplies of uranium. Most of the power generation companies are still waiting. They haven't stepped in. We've started to see uranium moving up. We're even seeing companies that once produced uranium buying uranium on the open market to resell it for a profit, because it's easier to buy it and sell it than it is to actually go out and mine it. So prices have to rise. Quality uranium companies are something I think are interesting.

Gerardo Del Real: Are there other commodities that you think will benefit from the money printing that's going on?

Jeff Phillips: Yeah, gold over time has always benefited from the money printing that's going on. Again, it doesn't mean it's the best investment in the world. It's a good store of value. I've always done well with it. So I obviously have physical gold at any given time. And I increase that percentage if I'm lucky enough to have my net worth grow, my overall asset base. So physical gold is something I really like. I sleep well at night knowing I have gold in different places and obviously I speculate in gold companies. Not that I think the things I'm speculating on are going to do well at $2,000 gold. I want to make sure they could do well at $1,500 gold. So if gold continues to go higher, it's even more icing on the cake.

Gerardo Del Real: With the electrification of everything and the pivot towards a greener future, are there specific metals in that space that you think will benefit disproportionately?

Jeff Phillips: Copper. It benefits with this money printing and all the infrastructure and everything that's going to be spent. Copper is going to do well. And on top of that, you've got the electrification of everything, and that's coming and we see it in electric cars. And a copper mine takes anywhere from seven to 10 years, if you're lucky, to get into production, and usually longer than that. So we're going to have a copper shortage here in the next several years, and prices take care of that. As prices rise, more stuff will come online, but there's an excellent opportunity in copper speculation right now, in the underlying companies that are either producing or looking for copper.

Gerardo Del Real: Uranium, copper, and gold. I would love to have you back on next week, Jeff, and see if we can't get a few names in each of those sectors from each of those commodities, companies that are either producing or looking to make a discovery, or in development. If you'll make some time, we'd love to have you back on.

Jeff Phillips: Yes, I'd love to do that, Gerardo. But again, those three areas that we talked about are just an overall portion of your hard assets. You should have real estate. I, even as we talked last time, have some art. I think art's a good long-term store of value. Not just something you buy down on the corner, but things that have been through auction over the years and continue to increase in price. I'd be happy to talk about the sector of my portfolio that's invested in those metals.

Gerardo Del Real: Fantastic. Looking forward to it. Thanks again for your time, Jeff.

Jeff Phillips: Thank you, Gerardo.

Click here for the second part of this interview.

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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.

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