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<\/p>\nThe world is on the cusp of a reboot \u2013 a realignment, one might say \u2013 of cultural and political-economic forces.<\/p>\n
The current ossified global situation, all tied together with Western currency and banking, is about to change in a big way, and BRICS will serve, in a metaphorical sense, as a geopolitical icebreaker.<\/p>\n
That is, the new, expanded BRICS entity will clear a path for its members and the rest of the world to move up the development ladder. Think of the possible future of Africa, with a large whack of South and Central America as well.<\/p>\n
Or look at it this way.<\/p>\n
In the past, when underdeveloped nations produced something \u2013 minerals, energy products, agriculture goods, or some other commodity-type item \u2013 the output was always priced in dollars, usually with the number set on one or another exchange in London, New York, or other Western venues.<\/p>\n
And the producing nation could take it or leave it.<\/p>\n
<\/p>\n
But with the new BRICS approach to international trade and using that organization\u2019s version of a currency unit, many goods produced in a developing nation will find price levels that are far more independent of Western manipulation.<\/p>\n
That\u2019s the idea, anyhow.<\/p>\n
Meanwhile, with a BRICS unit in effect to facilitate trade, more and more of present-day world commerce will not require dollars to set prices, let alone to buy or sell stuff.<\/p>\n
And many dollars that are currently overseas, serving as the underlying means for transactions, will migrate back to the U.S., where those Federal Reserve units will contribute to domestic monetary inflation.<\/p>\n
In other words, what happens overseas won\u2019t stay overseas. Because for over fifty years, the U.S. has routinely exported to the world the consequences of its inflationary domestic monetary policies.<\/p>\n
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<\/p>\n
Now we \u2013 that is, we in the U.S. and related economies \u2013 are about to confront a major reversal in monetary fortunes.<\/p>\n
So, stand by for a breakout in persistent inflation.<\/p>\n
How to Remain Ahead of the BRICS Developments and Inflation<\/p>\n
Okay, inflation is coming. What\u2019s your plan?<\/p>\n
Cash in the bank is always nice because you want to be able to pay the bills (and taxes, alas). But inflation will rob cash of purchasing power over time, and it\u2019s just a question of how much you\u2019ll lose every year. So, cash is a short-term salve, although having some feels good.<\/p>\n
Other standbys include real estate, but the adage of \u201clocation-location-location\u201d is critical.<\/p>\n
And what happens to the price mechanism of, for instance, U.S. land when the dollar inflates? What does \u201cvalue\u201d even mean when that happens, certainly when it comes to buying or selling?<\/p>\n
And don\u2019t forget about other \u201creal\u201d things, like tools, machines, and spare parts that may become quite valuable as global trade patterns shift, and some items become hard to find, if not unavailable in a transformed economy.<\/p>\n
This brings us back to hard assets like energy, precious metals, and related base metals critical to keeping the world running.<\/p>\n
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<\/p>\n
I\u2019ll round this out by discussing a more base-metal idea, mostly involving copper.<\/p>\n
I say \u201cmostly involving copper\u201d because most copper deposits are poly-metallic; that is, there\u2019s copper, plus (not uncommonly) associated amounts of gold, silver, and perhaps lead, zinc, molybdenum, and other elements. It all depends on geology and geochemistry.<\/p>\n
Copper has strong days ahead for all manner of reasons. Up front, I\u2019ll say that sure, if there\u2019s a near-term recession then the economy will slack off, and copper prices will fall; but on the other side of that, there\u2019s exploding demand, coupled with absolutely baked-in future shortages and higher prices.<\/p>\n
At the basic level, consider one thing: about three billion (billion with a \u201cb\u201d) people worldwide have access to no or minimal electric power.<\/p>\n
Eritrean town and market square; not a power line or light bulb in sight. BWK photo.<\/p>\n
Almost all of these souls live in developing lands like Eritrea (see above) or other similarly unprivileged locales across the globe. And just to string a few simple wires and light bulbs to these fellow earthlings will require immense volumes of copper.<\/p>\n
Indeed, and ironically, many places on earth with little or no electric power also happen to be areas where mining or other resource exploitation removes valuable products that ship out to the distant, developed world. So, you can get a feel for the resentment we see in the comments of future BRICS members.<\/p>\n
Meanwhile, the rest of the world is also on a development fast track, with everything you see in the YouTube videos, such as massive high rises popping up across China and sprawling urban landscapes from Mexico City to Lagos, Nigeria.<\/p>\n
And then throw in the developed world, with its focus on becoming \u201cgreen\u201d by taking gasoline cars off the roads and replacing them with electric vehicles (EVs). (And don\u2019t fret; for every barrel of oil that the West doesn\u2019t burn in its future car fleet, the developing world will find a use.)<\/p>\n
Along the foregoing lines, one figure I like is that your internal combustion vehicle has about 50 pounds of copper in it, give or take; it\u2019s used in the alternator, wiring, etc. But add it all up, and it\u2019s about 50 pounds.<\/p>\n
Now, take an EV apart, weigh everything, and get about 250 pounds of copper. This is for the traction motors, batteries, wiring, and everything else. An EV uses about five times as much copper as an old gasoline burner. And multiply that by tens of millions in terms of the projected output of new EV cars by the global auto industry in the years ahead.<\/p>\n
Right away, you can see that the world needs lots more copper and that copper miners have many good years ahead; well, many good years as long as they have access to copper resources and can mine ores, smelt them, and refine metal. And on this last point, you want companies with low levels of political risk.<\/p>\n
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<\/h2>\nI should also note that the market has been bidding up the share price for strong copper companies. So even now, the charts are on the high side. But I believe there\u2019s more upside ahead in the years to come.<\/p>\n
We\u2019re early in this part of the copper cycle.<\/p>\n
You\u2019re probably familiar with the names of a couple of the biggest big guys in copper.<\/p>\n
For example, there\u2019s Rio Tinto Group (NYSE: RIO). At over $100 billion market cap, it\u2019s global and diversified. It produces copper and many other metals, materials, and related products. Rio has a deep bench of technical talent and access to capital for operations and expansion.<\/p>\n
Then there\u2019s Freeport McMoran (NYSE: FCX). This one is large at about $65 billion market cap. And it\u2019s global, with many mines and various metals coming out of the facilities. Plus, many great people and access to capital.<\/p>\n
If you want a smaller company, look at Toronto-based Lundin Mining (OTC: LUNMF), with a market cap of about $7 billion. It has projects worldwide, in North and South America and Europe. It\u2019s well run, with a substantial upside from a lower capitalization level.<\/p>\n
Finally, I\u2019ll mention an advanced-stage developer that works in the copper space and is pioneering new technology in exploration and production, namely Ivanhoe Electric, Inc. (NYSE: IE). The market cap is about $1.6 billion, with a stellar list of projects in some of the best copper districts in the U.S. I won\u2019t go deep into details, but this one is a rising star.<\/p>\n
Note that these ideas are not \u201cofficial\u201d recommendations. But I do follow the companies. If you buy, use limit orders. Always take advantage of down days in the market. And never chase momentum.<\/p>\n
As we confront a fast-changing global economy, remember that \u201creal things” continue to make the world go round.<\/p>\n
And copper demand will play a significant role in both the developed and underdeveloped nations of the world. The days of \u201cNobody goes to Eritrea\u201d are ending.<\/p>\n
Author: Byron King<\/p>\n