By David Forest, editor, Strategic Investor
The latest inflation numbers are grim.
Last week, the Dallas Fed said prices are running hotter than ever. In March, things got 10.9% more expensive than a month earlier.
Over 10%. That’s a terrifying number.
That means a latte goes up 50 cents. A sink repair goes up $10. A new car goes up thousands of dollars.
All this while investors are making piddling returns.
Investors fretted this week about the Fed raising interest rates 0.5%. Target rates now run between 0.75% and 1%. That means the average person is losing 9% to 10% on their savings.
Hope is now fading that things will get better soon. This is the sixth month in a row that inflation rates rose over 6%.
(At Casey Research, we’ve been preparing for this for quite some time. In fact, you can check out my briefing on how to protect yourself and profit from inflation right here.)
So much for “transitory” price increases. This bout of inflation looks to be dialed in.
There’s a few reasons for that…
Lockdowns in China, for one. Major port cities like Shanghai are closed tight.
We don’t know yet what effect this will have on shipping. Sources say ships still sail daily. But that could change at any time.
If Chinese goods dry up, inflation runs even hotter. We’re already short of nearly everything. Losing more supply means appliances, clothing, and cars all get more expensive.
Even without COVID interruptions, we might be in trouble…
There’s a Shift in Manufacturing…
It hasn’t been widely reported, but China is changing the way they make things. They used to manufacture constantly. Today, they’re switching to a “just in time” model.
That means they only start making goods when orders come in. That causes more delays, waiting for an order to be filled.
Add that to COVID shipping closures, and it’s a powder keg for supply…
…And for prices.
The Bad News for Inflation Doesn’t Stop There
Bloomberg broke the story last week that something strange is happening globally. Companies producing the most basic goods we require are running short on supply.
I’m talking about mining companies.
The firms digging up and forging metals that build the foundations of our society.
European miner Glencore is one of the biggest metals suppliers on Earth. Last week, the company made a shocking announcement: It’s not able to get metal out of the ground.
Glencore’s copper production is way below target. The company said it will produce 40,000 tonnes less metal than it planned at the beginning of 2022.
Now, 40,000 tonnes of lost copper supply isn’t the end of the world. America uses about 2 million tonnes of copper yearly. So Glencore’s dip in supply is only about 2% of demand.
But here’s the thing. It’s not just Glencore losing output.
Almost every major mining company on the planet has struggled in recent months. Metals supply dropped at most of the world’s biggest mines.
Major miner BHP slashed production forecasts at the world’s biggest copper mine in Chile. Fellow majors Rio Tinto, Vale, and Freeport-McMoRan all said metals output ran short of plan.
Around the world, the story’s the same. From South America to Asia to the U.S., mines are coming up short.
That’s potentially devastating for inflation… because metals like copper, steel, and zinc go into almost everything we use.
A Shortage in Metals Leads to Higher Inflation… And the Cycle Continues
When metals run short, everything shoots up in price.
That’s a big part of the invisible push driving costs higher for average Americans.
Even worse, this creates a vicious cycle. Miners themselves are suffering because of high prices.
So inflation has caused many of the recent problems in metals supply…
Mines rely on basic goods like rubber tires, steel for milling equipment, and chemicals for processing ore. All those things have grown more expensive in recent months. That’s dragged down profits and production at the world’s biggest mines.
Some places, miners can’t get these things at all. Supply chain issues have run hot so far in 2022. Reports reveal mines are simply running out of critical supplies.
This all points to one thing: less metal, higher prices.
Fortunately, there’s a way to protect yourself – and profit – from this wave of shortages and soaring prices.
Shortages sent basic goods ripping higher in recent months. We saw metals like nickel spike up 200% in a single day.
This isn’t great for the world’s biggest mining companies. But it’s a perfect setup for smaller mining firms.
Those tiny companies develop new metals supplies. They seek rich new areas for copper, nickel, and iron. Then they sell them to major miners.
Now more than ever, big miners need all the supply they can get. That means billion-dollar buyouts are coming. We’ve already seen tiny juniors acquired for 10-digit sums in places like Canada.
My International Speculator advisory is jumping on those opportunities. My team and I have picked out the top juniors. These companies are poised to feed today’s supply shortages – and make shareholders big profits doing it.
Keep walking the path,
Editor, Strategic Investor