In my column for MoneySense this week, I look at the green commodities supercycle. Perhaps no cyclical sub-sector investment opportunity offers more tailwinds. And right in front of that tailwind is a windmill and other clean energy producers. Parked in front of that windmill (and plugged in) is an electric vehicle. The entire globe and the earth is behind this greener planet mission, and investment opportunity. It presents the opposite of the political risk that is involved in the oil and gas sector. We’re looking at the green commodities super cycle on the Sunday Reads.
Here’s the post – Making Sense of the Markets and the green commodities supercycle.
We will need incredible amounts of materials and commodities to reach our global net zero goals. From that MoneySense post …
The need for lithium and cobalt are expected to rise by a factor of six; copper demand will increase twofold; the nickel requirements will increase by four times. Much more silver will also be required, but not to the same degree as the aforementioned list.
It is a simple matter of supply and demand. I like investing in scarcity when it is in great demand. It’s the same story with the modern commodity, semiconductors.
Got chips?
The world runs on chips. You might add in semiconductors to the green commodities supercycle theme. I also have some exposure to the greenification by way of the Amplify BATT ETF – it plays the electric vehicle and battery ecosystem.
The MoneySense post offers an overview of the potential of a supercycle, and the post also looks into investment opportunities – how to own those green commodities. In my MoneySense weekly I also look at the risks of investing in oil and gas stocks. Don’t get me wrong, I’m still very much committed to our oily investments. But we should also recognize the risks.
And on that front and with some ironic timing, the new Omicron variant arrived to spook markets and take down oil prices. There is that economic risk.
I was also in the process of creating this post – a look back at the pandemic portfolio performance. That post from yesterday might be timely once again. On the new variant front … What do we know about Omicron? Not much according to the Atlantic. These are early days, it will take a week or two before we know the real risks.
The big mistake
As I’ve been suggesting not vaccinating the world with any urgency creates incredible risk, on a global scale. From that Atlantic post and quoting Boghuma Kabisen Titanji, an infectious-disease physician, virologist, and global-health expert at Emory University.
If we had ensured that everyone had equal access to vaccination and really pushed the agenda on getting global vaccination to a high level, then maybe we could have possibly delayed the emergence of new variants, such as the ones that we’re witnessing.
We need to realize that we are all in this together. And certainly, rich countries have a responsibility to help the developing nations get vaccinated as soon as possible.
We can’t leave people behind. The virus will catch up with us regardless of where you are, regardless of what country you’re located in. You may be fully vaccinated, you may have had your booster, but you’re not that disconnected from the person who lives in a country where only 2 percent of the population is vaccinated, and who doesn’t have access to any of the treatments. We need to have less of an inward-looking focus. Because otherwise we’re just going to prolong how long we stay in this pandemic.
And switching back to the complexity of the energy transition …
That is a brilliant and well-balanced piece in The Atlantic.
More Sunday Reads
From Bob at Tawcan some Christmas plans and some good reads from the personal finance community.
On My Own Advisor, Mark looks at the successful habits of successful investors – plus many more interesting reads.
And here’s the link to the successful habits post that Mark is referencing, it’s on the Freedom 35 blog. I was asked to contribute (and I did) on my ‘successful habits’. It starts with a stroke of luck.
Best retirement podcasts
From fiPhysician the best retirement podcasts from 2022. Great list.
Reaching those goals on the Million Dollar Journey
You’ll like this financial freedom update post on Million Dollar Journey.
The financial freedom goal of creating $60,000 in annual dividend income (after tax) has been reached, well ahead of schedule.
On that post you will see a list of holdings that offered dividend increases in 2021. And of course we’re waiting for the big Canadian banks to increase dividends again, starting with announcements next week.
Here’s the link to the ‘about him here’.
And while you’ll see Canadian dividend growth stocks listed, the investor does have international exposure. In fact, Mr. MDJ offers that iShares Core MSCI All Country World ex Canada Index ETF is his largest holding.
Adding that global equity ETF to a Canadian dividend growth stock portfolio is a very popular approach for Canadian self-directed investors who favour dividends. And here is an important consideration – what is the cost of your Canadian home bias.
Creating homemade dividends
When a retiree holds ETFs with a low yield, there is too much untapped value within the share prices. You could end up cheating yourself by an outrageous amount if you simply harvest those dividends for retirement. It may also create a tax hazard if one account type builds to an amount that is ‘way too big’.
You will be best-served by selling shares over time in the stocks or ETFs to create retirement income – those homemade dividends. But then, we will have to manage the sequence of returns risk.
Must read: How to create retirement income with exchange traded funds.
And that said, I do know that Mr. MDJ is aware of the tax consequences and how to create that tax efficient retirement funding plan. Stay tuned for a post on that topic – with funding model examples.
From that post (and from Mr. MDJ), here is a thoughtful and wishful thought for those who are early in the accumulation phase.
Not including dividends, the S&P500 has advanced about 23% and the TSX about 22% in 2021 thus far. While the extreme market returns are great for portfolio growth, it would be healthy for the markets to take a bit of a break – especially for investors still in the early days of accumulation.
Some new friends to follow
Here’s another example of the dividend wealth building process. Have a look at Dividend Daddy. Also check out Another Loonie – they’re “crazy about saving, investing and home ownership.”
And that’s a good segue for the latest Maple Money podcast –
How to use stocks and real estate together for growth, with Codey Yeh.
Here’s the week in review courtesy of Dividend Hawk.
And last but not least, on The Findependence Hub, Retired Money: is the retirement dream of retiring abroad still alive in the COVID era?
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Wow, thanks a lot for the share. Really appreciate it! Btw I loved that recent Maple Money podcast. Seems like he’s having quite a few option traders on lately – a new fad, perhaps? Seems a lot of people are doing it but not many in our sphere are writing about it yet.
My pleasure, and thanks for stopping by. I don’t know enough about options to do it myself. But of course there are always “ETFs for that”.
Dale