Business & Investment

Name your products and expect a boom

  1. Turn your head back and look up. More than that. Please come back soon. That’s how far you have to stretch to see the current arc of global LNG prices.

Bangladesh has just paid 30 mmBtu (British Thermal Unit) for freight, according to Reuters.

These were sold for 2mm Btu in the midst of a COVID panic.

What do you get?

economist When the world’s energy system runs into one or two problems, it indicates that the safety buffer is too thin.

And now, the approaching winter in the Northern Hemisphere is causing urgent purchases. Asia is sucking cargo.

Why do we care about this? Of course, the profits of gas producers who can profit from this will increase.

However, you can use the above scenario to reasonably predict what will happen with the product you want to name in the next five years.

The general underinvestment in the mining industry over the last decade almost guarantees that.

I recently saw iron ore in excess of US $ 200 per ton after Brazil lost supply and demand and soared. Nowadays, the same dynamic movement is seen in natural gas.

Which is next? Copper, nickel, or something else?

This will continue to happen as there is now so much demand around the world.

I noticed something on my watchlist this morning. Take a look at the following stock index chart …

Do you want to guess the country? No, it’s not in the United States.

It’s BSE30 — India!

Imagine it. The last time I checked in, mainstream news told me that COVID was devastating the place. Still, the stock market is booming.

Obviously, the continued expansion and rise of the Indian market will be product intensive. There are 1.4 billion people there!

A colleague in the United States says the Chinese car market began to explode when per capita income reached $ 2,500 at purchasing power parity.

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In the case of China, it happened in 1999 — and the beginning of a decade of product bullishness.

India’s per capita income today already $ 6,920. There are only 34 vehicles per 1,000 people in India. There are 207 in China today.

Indeed, India’s infrastructure is not that of China.

However, they may copy China’s guidance to use cheap labor to attract foreign investment and invest in the infrastructure around it.

China loses 40,000 factories annually as high wage costs push companies to places like Vietnam and India.

I literally bought a jumper from Amazon, and it was at my doorstep this morning. Made in Bangladesh!

The global supply chain is expanding as so many countries reach for the same supply at the same time.

Not many commodities-producing countries are known for their good governance and rule of law.

Take Brazil as an example. Some iron ore shows that Africa’s supply will be pushed down to the market in about five years (more on this later).

They may want to look at Brazil (the second largest exporter after Australia) first.

There are several major problems in the country. Since two-thirds of the electricity base is hydropower, large-scale droughts are driving energy prices soaring.

Inflation is at its highest level in 20 years. 600,000 people died of COVID.

And to conclude, the cost of shipping to China is at the highest level ever, as far as I know.

Now, Brazil’s iron ore industry may be able to overcome all of this.

But that doesn’t exactly shout at me a stable situation. Any kind of turmoil can shake the iron ore market again somewhere.

And even if you don’t invest in resource stocks, you have to be careful here.

The higher the commodity, the higher the manufacturer’s input cost, which results in lower margins or higher prices.

Fortunately, ASX is a resource investor’s paradise. Over the next five years, I think we can make a huge amount of money for the entire product. And Australia is full of them — more discoveries are coming.

nice to meet you,

Calm Newman signature

Calm Newman,
Editor, Daily Reckoning Australia

PS: Our publication The Daily Reckoning is a great place to start your investment journey. Let’s talk about the big trends that drive the most innovative stocks in ASX. Learn all about it here.

Name your products and expect a boom Name your products and expect a boom

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