In a rapidly changing world
Environment and social issues are shaping how policy makers, consumers, and corporate executives behave.
Therefore, investors also have to understand how these issues impact economies and financial markets. 🙂
In today’s post I’ll explain what those changes are, and what I’m doing to position my finances accordingly.
As usual I don’t plan to sell any of my existing holdings. I just rebalance by adding new investments to my portfolio.
There are 2 primary themes impacting global markets right now.
The world is transitioning away from carbon to address climate change. This means that people will use less oil and more copper.
Copper is used to build the underlying infrastructure needed to operate electric vehicles, wind mills, solar panels, and electric charging stations.
In terms of social issues, income inequality and populism are at the top of what’s driving policy changes. Unfortunately both issues feed off one another and create greater problems. A rising disparity between the haves and have-nots puts pressure on governments and corporations to level the playing field. This often leads to hasty decisions that appear well intentioned in the moment, but often have long term negative consequences.
Giving more money to the poor helps them right now. But usually after some time that money gets transferred in one way or another into the hands of the wealthy where it remains in their control and earns them interest. Plus, the printing of extra money without the goods/services/productivity to soak it up creates inflation.
This hurts the financially vulnerable the most because they are the least likely to afford a cost of living increase. This exacerbates inequality even more. Populism and division set in. The mentality is us vs them. New misguided policies are put in place to address the problem. Too bad it’s just about appearances, not what people actually need. And the cycle continues, debasing the currency further, benefiting those who are properly hedged (mostly rich people.)
Where to go from here
Given that I’m conscious of those environmental and social issues, investing in hard commodities makes sense.
The valuations for commodity based stocks are cheap compared to technology stocks.
And it’s a good way to hedge against inflation.
The last 18 months proved that mere monetary stimulus isn’t enough to keep the economy going.
Fiscal policy must also be used.
Infrastructure projects are a popular use of government spending. As more cash is created, base metals such as copper and nickel as well as iron ore will be in high demand.
This is why I have written a put option on Rio Tinto (NYSE:RIO), one of the world’s largest mining companies.
My put has a strike price of $55. The stock is trading at $61/share today.
Additionally I have recently bought some Copper Mountain Mining stock (CMMC) as well as Ivanhoe Mines (IVN). Both are on the TSX.
Copper Mountain primarily produces copper and gold in Canadian mines. The stock has fallen from its highs earlier this year, and insiders have been buying on the way down. That’s usually a good sign that the executives running the company are confident in its future growth. 🙂
Out of 10 analysts the lowest expected 12 month price target is $4.25/share. That’s a 15% positive return from today’s price of $3.70/share. And Morningstar’s research report calculates the fair value of the stock should be at $6.02/share today. CMMC’s 5 year average P/E ratio is 12. But it’s currently trading at only 10.
So overall this is not an expensive company to buy at the moment. 🙂 #valueinvesting
And of course it does have growing revenue and earnings over time.
However, it doesn’t have the consistent growth I usually like to see like from a BlackRock or National Bank.
Ivanhoe is more of a speculative pick. My biggest concern is the geopolitical risk in South Africa.
But it can really take off if the price of copper continues to climb.
Who knows? Sometimes it pays to take a risk, right? 🙂
Buying a new cryptocurrency
Speaking of speculation. I recently bought 1.2 million Floki Inu coins.
This is a YOLO trade. I don’t expect to make any money from it. However, there is a tiny chance it will 10 x over the next year or so, lol.
Named after Elon Musk’s new puppy, Floki has a lot of potential to gain popularity. Plus, it’s really cute. 🙂
Floki has arrived pic.twitter.com/2MiUKb91FT
— Elon Musk (@elonmusk) September 12, 2021
This isn’t just another meme coin… it’s a movement. At least that’s how they’ve marketed this thing, haha.
#FLOKI is my way to participate in the Web 3.0 space which is just starting to take off.
I’m also continuing to invest in the Ethereum network and Binance (BNB.)
You can buy Cryptocurrencies in Canada using Shakepay which I’ve written about here.
As usual, do your own diligence before making any investment decisions. I’m not an expert when it comes to picking out mining stocks or digital tokens. There are probably better alternatives to Copper Mountain, Ivanhoe, and Floki Inu out there. I’m just sharing what I’m doing personally, and the reasons behind my choices. 🙂
Asset allocation update
All the recent purchases are part of a larger investment plan to grow my net worth over time.
Here’s an update of my current asset allocation. This pie chart does not include my primary residence.
For a deep dive into my portfolio, you can watch my latest video here, where I describe each asset class in detail.
I also share the lessons learned building up this $1.8 million portfolio. 🙂
Random Useless Fact: