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Special Client Report: March 24, 2022 – Dominoes are Falling

You undoubtedly have heard reports that the world’s supply of wheat and corn are in jeopardy due to Ukraine and Russia both missing this season’s planting window for obvious reasons (click the link in the sources section to read more details).

Did you know that Russia and Ukraine together supply

  • 30% of world’s supply of wheat
  • 17% of corn
  • 32% of barley
  • 75% of sunflower seed oil

You may not have heard; fertilizer, which is needed worldwide including the USA, is also in very short supply due to the war.

The falling domino fallout of the Russia/Ukraine war is eye opening to say the least.

Falling domino #1

In just the past four weeks, prices have skyrocketed sending

    • wheat up 21%
    • barley up 33%
    • fertilizer up 40%

Falling domino #2

Brazil and Texas are cutting back on their use of fertilizers.  As you can imagine, that action will impact this season’s crop size at harvest time.

Falling domino #3

With smaller crop yields, there will be less feed for livestock and poultry resulting in lower animal weight and thus less chicken, eggs, turkey, pork, and beef in stores.  You’ve already seen rising prices this year on gasoline, would it surprise you to see the same with your groceries?

Falling domino #4

Gasoline was mentioned above; so, let’s look at energy.  Since January 1st of this year

    • Oil is up 39%
    • Natural Gas is up 56%

Falling domino #5

Cars, computers, TVs, phones, etc. require precious metals.  Since January 1st of this year

    • Nickel is up 65%
    • Aluminum is up 56%
    • Steel is up 27%

As these and more dominoes rain down, prices and inflation will continue to rise.  Is it the worst idea to tighten your budget, set aside more money, and ready yourselves for a rough time ahead?

You may be worried about your investments and how they will fair amongst all of this chaos.  We too are taking precautions.  You’ll think we’re a bit mercenary or even morbid; however, we have positioned your accounts (our clients’ accounts) to benefit from this very sad and desperate situation.

You’ll find your accounts invested in commodities, metals, and energy.  As inflation rises and the war rages, these positions could be buoyed by rising prices and falling dominoes.  We may be wrong about the war’s impact and we hope we are; however, until we see otherwise, we’ll continue to position your assets in what we think offers the most opportunity for success while safeguarding against catastrophic losses.

If you wish to discuss this or any specific symbol in your portfolio, please do not hesitate to call.

All My Best,
J Thomas Knight, CFP®, CPA

P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

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