In today's Exponential Investor...- How $275 trillion will be invested
- Industrialisation and urbanisation mean huge demand for minerals
- Conventional wisdom is wrong
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Think of the stuff we're going to need for
all the things we are going to do.
No, you didn't read that wrong. It's
that simple.
Today's letter isn't about one innovation or one trend.
Rather it's about the convergence of several trends which are going to create an unprecedented commodities super cycle…
… the kind most investors rarely get to experience in their lifetime.
We are talking about a multi-decade trend of extraordinary demand for the rocks beneath our feet – and the minerals that they contain.
And I'm here to show you how to be part of it.
A wall of money backs this trend
This isn't a doom and gloom kind of "hard assets" commodities story. I have a much more positive view. Over the coming decades, we are going to witness the birth of the commodities "super" cycle.
That all sounds a little but big picture, doesn't it? We're still not entirely sure if we're on the back end of the pandemic, and I've strolled into your inbox talking about something that won't happen for 30 years.
Or will it actually happen a bit before that?
You see, commodity cycles have a habit of catching most investors off guard. In past cycles, retail investors – people like you and me – only become part of the action as the big money was being pulled out. If we took part at all, we only did so at the tail end of the cycle, after the fortunes had been made.
However, this commodities cycle is only just beginning. How do I know? Two reasons: major hedge funds and investment banks have only just begun to litter the internet with their white papers on why a new bullish commodity cycle is here. The second reason is we simply don't have enough stuff in the ground to meet the trifecta of demand growing for resources.
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The trifecta of demand
This coming commodities cycle will be unlike anything investors have seen. So much so, some commentators are calling this one the commodities "super cycle", as there are key three factors driving it.
The first, and perhaps obvious one, is the energy transition. Some call say decarbonisation. Frankly… it doesn't matter what you call it. The world is moving to alternative forms of energy, and it comes complete with the financial backing of most governments.
The energy transition has an enormous wall of money behind. All so we can create a world that doesn't rely on fossils. A "net zero" economy will see more than US$275 trillion – yes, trillion – will be spent in the next three decades globally. Note, I only said "net zero". All that money will be spent and the globe will still be using fossil fuels, but just not reliant on them.
The second driver is the electrification of the world. This one is slower than decarbonisation, though no less important. An estimated 1.2 billion people – 16% of the global population – are still without electricity. On top of this, only 55% of the world's population live in urban areas. Several countries are setting out to change this.
India is looking to become a US$5 trillion economic powerhouse by 2024. Over the past two decades India has lifted its urbanisation rate to 34%, with a goal of getting near China's 58.5% urban population. Not to be outdone is Africa, with the continent expected to have 13 of the world's biggest urban areas in a few decades.
These are resources hungry events in themselves, yet they are butting up against our widening geopolitical fault lines.
Not all resources are concentrated to just a few countries, but globalised access to said resources underpin our just-in-time supply chain.
The Russian-Ukraine War has brought into focus some facts about metals. While Russia doesn't hold the power that comes from supplying all the metals and minerals, suspension (or cancellation) of Russian supply will have consequences.
These three key features are what separate this coming commodity cycle from past ones.
Previous bull markets have been driven by industrialisation. Often the growth was lopsided and occurred in different pockets of the world at different times. This time, demand for these commodities is synchronised.
The four most expensive words in history
"This time, it's different". Conventional wisdom is that these are the four most dangerous and expensive words in the investment world.
Conventional wisdom is that market cycles are fairly predictable and similar.
Conventional wisdom is that financial services visionaries who suggest otherwise are at risk of losing trophy wives, high performance cars in their garages, second and third residences and possibly more.
But, this time is different. It really is!
You see, today isn't
just a discussion about commodities. The boring old rocks are still there, full of minerals and layered under silt, sand and water deep in the Earth's crust. Pretty much every metal or mineral that we know of, is going to be needed to meet the future that we know to be coming. More to the point, there has been significant underinvestment in securing these precious resources.
Today's edition of
Exponential Investor is really a condensed story about opportunities. These are the kinds that future generations will study in depth. But you'll get the chance to live it.
Make no mistake: we are on the precipice of what could be the biggest commodities bull market of the modern era.
Unlike past ones – driven by industrialisation, urbanisation or speculation – this coming bull market is all three combined. And I've come onboard to Southbank Investment Research to show you to invest within it.
Until next time,
Shae Russell
Co-editor,
Exponential Investor
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