Lots of folks wrote off concerns about inflation...
I wasn't one of those folks. Instead, I have been writing for months that we need to take inflation seriously.
Back in June, I wrote, "America is about to experience one of the greatest inflationary periods in our nation's history."
It was a bold statement, sure. But all indicators pointed to soaring inflation. Now, high prices are hitting consumers across the country.
The price of a dozen eggs is 29% higher than it was one year ago. Gasoline is more than 50% higher. Even something as basic as electricity is 5% higher compared with last year.
Inflation should be the No. 1 concern for many retirees right now. It's hitting all of our wallets hard.
Today, I want to give you some actionable advice that could help you profit from today's record inflation... (And by the way, I think we'll continue to see inflation for a long time.)
The common thought is that if you are in a time of inflation, you want to hold hard assets.
Something real and of practical use will skyrocket in value. And that's true.
Crises and inflation often send people to precious metals like gold and silver. History tells us they will do well if stocks turn down and people get fearful.
But do gold and silver really have a practical use? Do they provide anything for you and your family? And do they deliver any income while you hold them through normal times?
They don't.
If you think deeper about what fills a real need, it leads you to one of the best-performing assets of all time...
I'm talking about timberland.
Timber has been one of the longest-running, safest ways to build wealth. History shows it will return around 12% to 14% per year. Take a look...
Part of that comes from simple inflation. As prices in general go up, so does the price of lumber. And that's what we've seen today.
Another source of returns is the appreciation of the underlying land.
We saw a big boom in timber investment after the "Yale Model" – the idea that institutions should invest in "alternative" assets, not just stocks and bonds – got popular around the turn of the century. Timberland went from an asset that was run by, well, timbermen, to one with lots of Wall Street money behind it.
More timber assets are now being sold by institutions and bought by timber real estate investment trusts (REITs).
Finally, the best growth comes from the growing trees themselves. Timber sells by the ton, so if you leave a tree for a year or two, it'll get bigger, and you can sell it for even more.
Here's the basic framework...
A pine with a six-inch-diameter trunk can be used for pulpwood to make paper. That's worth about $9 per ton at today's prices. If you check in next year, that tree will be maybe 2% heavier, so you'll have made a return. (Of course, growth rates vary widely by species, geography, and weather.)
But if you wait a few years, it will grow large enough to hold a few boards – rather than just paper pulp. This is called "chip-n-saw lumber," and it's worth about $17 per ton. If you let it go for a decade or so and it gets to be 14 inches in diameter, it's considered sawtimber. That sells for $26 per ton.
No, money doesn't grow on trees... But it's close to the truth.
This means, unlike other hard assets, timber is a "flow" and not a "stock."
Timberland is not like an oil well. Cutting doesn't deplete the resource – you can just plant more small trees and the resource will grow back.
And perhaps better than anything is that you don't need to cut. If timber prices are low, you simply sit on your asset. You may not earn income that year, but as the trees grow, you're still building wealth.
Those benefits – like the extreme stability of this asset – accrue best to direct owners of timberland. But unless you plan on buying your own timberland, most folks will be much better served by investing in timber through a REIT.
Timber REITs are subject to the swings of the market. While the forest sits unperturbed, the REIT that owns it will see its price rise and fall. But the REITs do carry some of the safety from the forest to the market.
One timber REIT you should consider is Weyerhaeuser (WY).
Weyerhaeuser is the largest private owner of timberlands in North America. It owns more than 11 million acres of timberland, and that puts it in a class of its own.
Since Weyerhaeuser is structured as a REIT, it must pay out 90% of its taxable income as dividends. That makes it an attractive investment, with a yield of 1.8%.
Weyerhaeuser can be a staple in any portfolio. If you're wary of inflation, consider it today.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Editor's note: Inflation is here... And it's not going away anytime soon. That's why Doc recently published three reports to help his Retirement Millionaire subscribers deal with this threat. He takes a deep dive into what exactly inflation is... why it's happening now... and how you can protect and grow your wealth today. To learn more – including how to gain access to these reports – click here.
Further Reading
"Unfortunately, close-to-nothing returns are what you should expect out of most fixed-income investments today," Doc says. And when you consider your retirement account, earning a decent return is the only thing that matters... Get the full story here: Conventional Wisdom Won't Save Your Retirement.
"Thanks to record government stimulus and a recovering economy, inflation is here today," Doc writes. And even though the Fed is discussing raising rates, we should expect higher prices for the foreseeable future. That's why you need to own the right stocks today... Read more here: The Best Stocks to Own When Inflation Absurdity Strikes.
It looks like inflation isn't ending anytime soon. And one investment has major benefits as a hedge against rising prices...
THIS COMPANY RIDES THE 'TINY CHIP' TREND TO NEW HIGHS
Today, we're looking at a company that's profiting from the ever-growing demand for new tech...
Regular readers know the COVID-19 pandemic accelerated the shift to a digital world. We're relying on our devices for work, entertainment, and social needs. And semiconductors – the tiny chips that power those devices – have become even more crucial to our everyday lives. That's good news for today's company...
Advanced Micro Devices (AMD) is a $200 billion semiconductor developer. It sells computer processors and graphics cards to electronics manufacturers, who install them in their own products... And the company has big-name partners like Microsoft in its corner. With the constant demand for these tiny chips, business has been booming... In the most recent quarter, Advanced Micro Devices reported revenue of $4.3 billion – up 54% year over year.
As you can see, shares of AMD have soared more than 315% over the past two years... And they recently hit a new all-time high. As long as the world keeps advancing its technology, semiconductor companies like Advanced Micro Devices should continue to thrive...
