Chris’ note: Last night, natural resource investing expert Dave Forest hosted his Super Spike Summit. It was all about recurring periods when commodities prices skyrocket across the board. If you missed the event, make sure to catch the replay here.
Then, read on below for a Q&A I did with Dave on what causes these Super Spikes, like the one we’re in now… and why they’re a perfect opportunity to fast-track your retirement.
Chris Lowe: When we spoke in March here at the Cut, you’d just handed your subscribers the chance to make a 1,110% gain off rising oil prices. And last year, you closed out wins of 194%, 284%, and 385% on three lithium mining stocks in the model portfolio at your Strategic Investor advisory. Lithium is a key metal in electric vehicle (EV) batteries.
Last night, you hosted The Super Spike Summit about the source of these profits. For folks just joining us, what’s a Super Spike?
Dave: It’s when commodities prices surge across the board. Super Spikes repeat throughout history. And they’ve been getting bigger – and more profitable – in recent years.
During Super Spikes, you get a rolling boil of profits. You can jump into one commodity… book huge profits… then jump into the next one that’s poised for takeoff.
Investors who position themselves early can make fortunes from Super Spikes. That’s why I put together last night’s presentation. I want as many Legacy readers as possible to benefit from this – especially as tech stocks and cryptos have been falling.
Commodities are one of the few bright spots in 2022. But most investors don’t have any exposure to them.
Chris: What causes Super Spikes?
Dave: I’ve broken it down into a handful of factors…
One is rising money supply.
The last time we had a Super Spike was in the lead-up to the 2008 crash. Between the start of 2007 and July 2008, the price of a barrel of U.S. crude oil surged 139%.
Then gold had a speculator bull run.
Washington created $1.5 trillion of new money after the subprime mortgage bubble collapsed and financial services firm Lehman Brothers hit the wall.
Between the start of October 2008 – right after the collapse of Lehman – and September 2011, gold surged more than 115%.
Silver did even better. Between the start of October 2008 and its peak in April of 2011, it climbed 309%.
Fast-forward to today…
In the roughly two years since the COVID-19 pandemic hit the U.S., Washington has spent about $8 trillion on stimulus.
That’s a major driver of inflation… and of the current Super Spike.
The next factor that causes Super Spikes is investor enthusiasm. We still don’t have widespread investor enthusiasm for commodities. TV personality Jim Cramer isn’t getting on CNBC and telling folks to become natural resource investors.
But interest in this asset class is ramping up. Super Spikes also often are born from major shifts in society – another factor. And we’re going through a major societal change right now with the clean energy transition.
Chris: It’s something I’ve written about a lot at the Cut.
Dave: Then your readers will know that the world is moving away from fossil fuels such as coal to energy sources that don’t emit carbon. These new sources include wind, solar, and nuclear power.
This is driving up demand for metals such as lithium, nickel, and cobalt.
They’re crucial to the rechargeable batteries in electric vehicles. And we need stationary versions of these batteries to store power from wind turbines and solar panels before feeding it onto the grid.
EVs, wind farms, and solar power plants also need a lot of copper because it’s one of the world’s best conductors. So they use it in their wiring.
The typical EV needs about 180 pounds of copper. That’s roughly four times the amount that goes into the typical gas guzzler.
A single wind farm needs 4 million to 15 million pounds of copper. And a solar power plant needs roughly 5.5 tons – or 11,000 pounds – per megawatt of power generation.
On average, one megawatt of solar power generates enough electricity to meet the needs of 164 U.S. homes.
Another driver of Super Spikes is what I call X-factor events – geopolitical shocks.
An example is the oil embargo Arab nations hit the U.S. and its allies with after the Yom Kippur War in 1973. This triggered the 1970s “oil shock.”
Russia’s ongoing war on Ukraine is another X-factor event. Russia is a major exporter of oil and natural gas. Due to the war, its exports are drying up.
This has knock-on effects on other commodities’ prices.
For example, aluminum prices have taken off – up almost 32% since March. You need a lot of electricity… and a lot of natural gas… to make aluminum from bauxite ore.
And the increase in crude oil and natural gas prices has piqued interest in alternative energy sources. That’s why we’ve seen uranium prices spike lately. Uranium prices have risen 58% over the past 12 months.
Even coal has had a spectacular run over the last couple of years. Coal prices have increased 400% since June 2017. Again, that happened because natural gas prices were too high.
All these commodities are linked. Their prices spike one after another. That’s a Super Spike.
Chris: All of us are feeling the pinch from inflation. And this Super Spike is the source of a lot of that inflation. The rising cost of oil is pushing up gasoline prices. As natural gas prices rise, so do home heating costs. Prices are also climbing for beef, wheat, corn, and other agricultural commodities.
Dave: I’m glad you brought it up. Obviously, people are worried about inflation. At the current rate of 8.3%, the buying power of your cash savings halves every 8.5 years.
The great thing about commodities is they go up as inflation rises. To a large degree, the rise in commodities prices is causing inflation. So by owning the stuff that’s going up in price, you can profit as inflation soars.
Chris: Isn’t this type of investing beyond most regular investors?
Dave: As an individual investor, it’s hard to buy commodities directly. Investing in commodities through stocks is easier for most folks.
Stocks also give you an advantage over commodities themselves. For example, if the price of lithium doubles… the typical lithium stock will more than double.
Plus, the dividend yields on many best-in-class commodities stocks are off the charts. At my new Super Spike Advisory, I just recommended an oil stock that pays a 9% dividend yield.
The S&P 500 yields 1.5%. So the dividend yield on this oil stock is six times what you’d get from the S&P 500.
Chris: You went into more detail on the current Super Spike last night during your summit. Folks can catch the free replay here.
But do you have a recommendation for readers looking for an easy, one-click way into commodities investing?
Dave: A simple way to get exposure to the extreme price spikes I see coming is the iShares S&P GSCI Commodity-Indexed Trust (GSG).
It gives you exposure to a broad range of commodities… with an emphasis on energy commodities.
It’s up 65% over the past 12 months. But those gains are just starting.
I urge your readers to first see for themselves why this Super Spike could be the biggest one yet by checking out last night’s summit.
Opportunities like this come around only once in a generation. They’re chances for regular folks to fast-track their retirements. So you don’t want to miss out.