Kiplinger's
If that sounds like you, events are leading us in an ominous direction.
Stretched thin
What economist Ed Yardeni calls TGGBOAT -- the greatest global boom of all time -- continues full tilt. In less than 30 years, China has gone from a feudal society to the third-largest economy in the world. Expectations are also rising in India, Brazil and just about everywhere else touched by capitalism. Others see the chance to live as we do in the U.S. I salute their ambitions.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The rub is this: Prodigious amounts of raw materials are the building blocks of these better worlds -- so much so that rapidly growing nations can't seem to buy enough oil, iron ore, copper and even cotton. The Wall Street Journal recently called price run-ups in commodities another bubble. I disagree. Prices of some commodities may be ahead of reality, but in other instances there's an auctioning of scarce resources, and the bidding is bound to go higher and higher.
Let's take oil as an example. Producers are pumping it out of the earth just as fast as they can yet they barely keep up with demand. As for demand, our country consumes almost one-fourth of all oil produced, or 24.5 barrels per person annually. By comparison, the Chinese consume just 1.8 barrels per person each year; the Indians, less than a single barrel.
Now suppose those two nations, with a combined population eight times that of the U.S., increased their per-capita use of oil by just one-fourth of a barrel per year. Within a couple of years, supply would fall far short of demand. Bidding wars would be horrific.
The same is true of copper. The last huge discovery of this metal occurred two decades ago, in Chile. Copper is truly a raw material of industrial production, and the global boom has made it precious. Even cotton is squeezed. It's the textile of choice as living standards rise, yet acreage is declining in the face of rising demand.
Volcanic eruption?
I'm not talking about demand merely outstripping supply. I'm talking about demand soaring so far beyond supply that a huge burst of inflation will result. At the moment, that potential burst is rumbling beneath the surface like a volcano. If allowed to get out, it could lay waste to your retirement savings. Couple that with a weaker dollar and a listless economy, and you have a recipe for stagflation -- the marriage of a stagnant economy and inflation. Your savings would rapidly buy less and less.
You don't have to just sit there. If commodities are fueling inflation, invest in them. One avenue is Pimco CommodityReal-Return fund, which mimics movements in the prices of a basket of commodities. We'll be discussing other ways to offset the inflation devil in the months to come.
-
The Shutdown Standoff Is Heading for Its Next Big TestA key mid-October deadline could intensify the shutdown fight in Washington, and the fallout could soon hit workers and your wallet.
-
Should You Buy Gold as It Tops $4,000? Here's What the Experts SayRate cuts, a weak dollar and macro uncertainty have helped create a "perfect storm" for gold this year. Should investors add exposure or is it too late to buy?
-
Apple Readies for AI Upgrade with New iPhonesThe Kiplinger Letter The tech giant has stumbled when it comes to artificial intelligence, but a new batch of iPhones will help it make headway.
-
Japan Enters a New Era of Risk and ReformThe Kiplinger Letter Japan has entered a pivotal moment in its economic history, undertaking ambitious policy and structural reforms to escape from decades of stagnation.
-
How Consumers Are Tinkering with Cutting-Edge AIThe Kiplinger Letter Companies launching artificial intelligence tools are jostling for consumer attention. Some products are already building a deep connection with users.
-
After Years of Stagnant Growth, Hope Emerges for EU EconomyThe Kiplinger Letter Can a German fiscal push outweigh French political peril?
-
Small Businesses Are Racing to Use AIThe Kiplinger Letter Spurred on by competitive pressures, small businesses are racing to adopt AI. A recent snapshot shows the technology’s day-to-day uses.
-
How AI Puts Company Data at RiskThe Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
-
AI Start-ups Are Rolling in CashThe Kiplinger Letter Investors are plowing record sums of money into artificial intelligence start-ups. Even as sales grow swiftly, losses are piling up for AI firms.
-
What is AI Worth to the Economy?The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?
