By Andrey Dashkov, analyst, Casey Research
Prices are skyrocketing… from food… to gas… to housing…
Some “experts” say this surge will slow down or go away. They call it “transitory.”
They completely miss the point.
In fact, these “transitory” effects are here to stay forever… eating away at your income.
But there’s a way to balance the ledger in your favor.
And that’s by using an unfolding trend – in fact, the first gigatrend – to your advantage.
I’ll show you how in a moment…
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch, we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our in-house investing experts: Dave Forest and John Pangere. And from the founder of our business, Doug Casey.
You’ll Pay This Price Forever
Here’s how “transitory” inflation works.
Your rent is $1,000 a month. In a year, with the price of rent going up by, say 6%, you now have to pay $1,060 per month.
But then this surge stops and rent inflation is back to about 3% a year.
But guess what? Your rent will never go back to $1,000. After the “transitory” surge, it’ll keep rising. So after a “normal” year, you’ll pay $1,092, and then $1,125. And on, and on…
The short-term spike is no longer there. It’s been “transitory.” It’s gone, just like economists predicted…
But a growing part of your income will also be gone forever. Unless you find a job that pays more or you’re lucky enough to find a cheaper place, you will never go back to paying $1,000 a month.
In fact, we already predicted that there was no way inflation was as transitory as the Fed or other experts suggested. I quoted a research report back in July, saying:
Inflation is here to stay. In fact, by 2025, annual inflation could reach 4%. That means 1/6th of your purchasing power could disappear.
That may not sound like a big deal. But remember, this compounds over time. If you have $10,000 in your savings account, you’re looking at losing about $1,600 in purchasing power by 2025.
Can you afford that?
So far, our analysis has held up. Inflation is high, and there’s no going back.
However, there is a solution…
Fighting Fire With Fire
If rising prices are a problem, the solution should be raising your income with your investments.
Not to say that every investment is guaranteed to appreciate. As we say, nothing goes up in a straight line.
Certificates of deposit or short-term government debt could be a secure source of regular income… but the interest rates on CDs or short-term Treasurys are laughable.
The five-year CD rate is 0.27% right now. If you put $1,000 into an account like that, at the end of one year, you’ll end up with a whopping $1,002.70.
Buying a five-year Treasury is a better option. Its interest rate is about 1.27%. Over a year, it could turn $1,000 into $1,012.70. In other words, you’ll be up by about two trips to Starbucks.
And government bonds can go down in price, so your investment isn’t protected against a price drop.
Neither of these can beat inflation…
You need to fight a devastating trend with a trend that works in your favor.
And there’s one trend that, in my opinion, has the most potential to do that…
The First Gigatrend
It’s called ESG. “Environmental, social, and governance” investing.
ESG makes it easier for companies to attract capital and finance projects. ESG-linked debt is cheaper than its non-ESG counterparts… which means that you pay less in interest if you secure it.
On the equity side, billionaire investors are happy to finance ESG-linked projects on better terms than the ones with no link to sustainability.
For example, Elon Musk offered $100 million to the person or company that would create the best carbon capture and storage technology.
Jeff Bezos, whose net worth is over $200 billion, has created a $10-billion fund called the Bezos Earth Fund. Its goal is to provide grants (read: cheap or even free capital) to multiple green initiatives.
And they are not alone among the wealthy. A total of 40% of all ultra high-net-worth individuals with $30 million or more to invest said they are “highly interested” in sustainable products.
Not to mention, the companies that have a solid ESG standing are better protected from future problems such as environment-related regulations.
These companies have done their homework already.
And with over $100 trillion dedicated to ESG investing from the leading financial institutions… you’re in good company to get positioned in this trend.
That doesn’t mean that any firm talking sustainability is a great investment. Do your due diligence and see how it’s aligned with ESG standards. It may not be as ESG-friendly as it sounds. As always, use your common sense.
How to Balance the Ledger in Your Favor
There is a rising tide here, and it could lift a lot of boats. It’s a trend in the making, and it already involves trillions of dollars.
At Casey Research, we often talk about “megatrends.” But “mega” is a prefix in the metric system that means “million”… and it’s simply not big enough for ESG.
ESG is the first “gigatrend.”
To get exposure, use a diversified ETF (exchange-traded fund) like the iShares MSCI USA ESG Select ETF (SUSA). It holds a portfolio of stocks with good ESG characteristics. It’s a great start if you are exploring the ESG theme and want to get on it early.
Analyst, Casey Research
P.S. Wherever you stand on the “environmental” debate… there’s no doubt big money’s flowing into it.
And as I’ve explained, if you want to get on the right side of inflation, you need to raise the balance on the other side of your ledger…
My colleague Dave Forest has a basket of warrants in the EV space that could hit quadruple-digit gains. In fact, he’s already secured a 2,805% gain for his subscribers in this space before… and he’s ready to do it again. Check out how to get in on these extremely profitable investments right here.