By Andrey Dashkov, analyst, Casey Research
 |
“It’s time to buy when there’s blood in the streets.”
It’s one of Doug Casey’s favorite quotes, and it still applies today.
I’m talking about the commodities sector. For several months now, some investors have been selling exchange-traded products that track their prices.
Are they right? Is now the time to cut your exposure to this sector?
No, it isn’t.
In a moment, I’ll show you why selling commodity funds and stocks may turn out to be a costly mistake…
The “Smart Money” Is Buying Commodities
Over the past three months, commodity funds have seen net outflows – according to BlackRock.
Investors sold over $11 billion in commodity exchange-traded products (or ETPs). That’s a record.
But under the hood, the picture is entirely different.
While individual investors cooled on the whole commodities sector, the savvy institutional ones have been buying.
Institutions tend to have a longer-term outlook than most individual investors. And they see the massive transformation that is taking place… which will continue supporting commodity prices.
The Commodity Megatrend Continues
The Inflation Reduction Act’s $369 billion investment in energy security and climate change is the latest confirmation of the commodity trend.
As a result of the bill, the U.S. will build one billion solar panels, 120,000 wind turbines, and 2,300 grid-scale battery plants by 2030.
These require many commodities… from silver to copper… aluminum and rare-earth elements… cobalt, graphite, and lithium… the list goes on.
What’s more, the legislation’s large investment is set to triple the size of the U.S. clean energy industry and trigger almost one trillion dollars in economic activity related to these projects.
In other words, if you look at the next seven to eight years in the U.S., there will be almost one trillion dollars of opportunities within the renewable energy industry.
And commodities will underpin it. You can’t build infrastructure without stocking up on the basic metals that go into its production.
The best part is… there’s a shortage of most of these commodities.
For example, copper demand is set to double by 2035, according to S&P Global. And supply can’t keep up, the company says.
When supply doesn’t catch up with demand, prices rise. That’s what’s been driving the prices of most commodities.
Copper is critical for electric vehicles, transmission lines, and wind and solar power installations.
Steel and other industrial metals are also under-supplied… There’s a deficit of pretty much anything you need for the clean energy transformation.
The market hasn’t realized that yet.
Yet some investors are heading for the exits when it’s the perfect time to buy.
What to Do Instead
Use the current weakness in the commodities space to your advantage. This is our “blood in the streets” moment.
Investors will eventually realize the massive, clean energy transformation happening right now. So this window of opportunity won’t stay open too long.
As we explained in this Dispatch…
It isn’t just one commodity that spikes. During Super Spike Windows, several hard assets surge higher.
It doesn’t all happen at once. We get a “rolling boom” when one hard asset spikes, then another.
You can learn about Super Spikes and how to profit from them in our dedicated monthly newsletter, The Super Spike Advisory.
But to get started in the commodity space, you could also take a look at this exchange-traded fund: iShares Global Clean Energy ETF (ICLN). It tracks the performance of global equities involved in the clean energy sector.
Good investing,
 |
Andrey Dashkov
Analyst, Casey Research