In today’s Exponential Investor

  • 70% more WOOD
  • Stock up on your pints
  • $16.9 million NFTs

Got wood?

If you do, or you know how to access it – specifically lumber – then you might be in for quite the payday.

The price of lumber has skyrocketed this year. Last week lumber futures hit an all-time high of $1,733.50 per 1,000 board feet (the measure of lumber in the market).

But what does that really mean?

Lumber is expensive, so what?

Well to give you an indication of the impact, estimates are that in the US it’s pushed the price of the average house up by $36,000.

If you’d been savvy enough to jump into the iShares Global Timber & Forestry ETF (GBP), with the wonderful ticker symbol “WOOD”, you’d be up around 70% for the rolling year.

I’ll be the first to admit, lumber isn’t exactly my area of expertise. But it’s clear to see where the price pressures are coming from.

It’s a mix of extreme pent-up demand, inability to maintain supply to meet that demand, and the rampant pressure of inflation.

Ask any builder (maybe you’re one yourself) about the ability to source materials at the moment. See what the response is.

It’s hard to get materials right now. Not just lumber either, all kinds of building materials. Supply chains simply can’t match the demand current and pipeline building and construction projects are demanding.

This drives prices up, makes projects more expensive, lifts real inflation and we fast enter a vicious spiral of higher prices. This is the world you better get used to for some time.

If you’re planning a new building job, looking to build a new home or searching for a new build to buy, you better add a healthy variance to your budget.

Where to invest when the commodities rise

The price issues with lumber aren’t isolated either. Copper is surging higher, iron ore is surging higher… all commodities are surging higher.

Even the price of wheat is rising and that’s a real worry.

You see wheat is a common ingredient in beer. And if you’re worried about inflation, which you should be, then you also should worry about the cost of a pint.

About 54 pence per pint is duties that go straight to the government coffers. The rest is obviously the cost to make, and the profit margins from the place you buy it from and the manufacturers.

Depending on where you live in the UK, the price of a pint is going to vary. However, if commodity prices continue to soar, expect the price everywhere to soar.

If the cost of wheat rises 100%, what do you think brewers are going to do? You think they’ll absorb all those costs? Not a chance.

We’ve already started to see how this plays out. Coca-Cola recently announced it was hiking its prices because of rising commodity prices.

How long until the likes of AB InBev, Heineken and Diageo all start hiking their prices too?

The issue is while you’ll start paying more to live day-to-day, do you think your wages are set to rise as fast?

Wage growth needs to keep pace with or exceed inflation in order to have a functional economy. What happens is when wages growth doesn’t keep up, people spend less, because they have to. They then save less too.

Soon you find a reduction in deposits, a decline in borrowing, and quashed economic activity.

Runaway prices are no good for anyone. At least not while people aren’t earning more.

How do you fix it? How do you survive it? Well you’ve got a little bit of time left to tuck away a few extra quid, to bolster your wealth and find areas of growth that can help offset a rise in prices for everything.

Maybe even when the price of everything is soaring, the best place to stick that cash is in companies whose prices are soaring. Companies who sell the staples of day-to-day living.

Areas that are worth looking at would be, food and beverage, agriculture, the commodities themselves and perhaps ETFs that represent those commodities.

Expensive taste?

Another sign that inflation is here to stay and is almost getting beyond a joke is to look at some of the recent auction results from auction house Christie’s.

Last week Christie’s auctioned off a collection of nine CyberPunks.

CyberPunks are pieces of digital art which are represented by a non-fungible token (NFT).

They were started in 2017 and originally were just a bit of fun. They’ve now been adopted as the artistic representation of the rise in crypto attaining crazy values.

This collection of nine sold at auction for $16.9 million.

Yes, you read that right.

This is a clear sign that inflation is set in, here to stay and something you better get used to and get ready for.

Sam Volkering
Editor, Exponential Investor