The Scarcity Trend That's Impossible to Avoid

By Nathan Slaughter
October 26, 2011

It's something that will affect what we eat, where we travel, how we heat and cool our homes and it will even affect how much we save and spend.

While it's a factor that has already influenced our way of life today, its impact on our lives over the next ten years is likely to be felt more than ever.

I'm convinced that if you want to be a successful investor in the coming decade, you need to focus on a concept that can be summed up in one simple word:

Scarcity

You've likely read about it for years. I'm sure you've already felt the effects to some extent. Put simply, the world needs resources like oil, steel, coal, copper, and grain to survive. But they are becoming more scarce... and expensive.

Want to get a handle on the scale of this issue? Simply look at the world around you.

Every important trend we're seeing in the world -- record debt and deficits, soaring gold and silver prices, the weakening dollar, food shortages, riots in the Middle East and even global warming -- all have one thing in common.

These are all either caused because we have limited natural resources, or because these factors make the problem even worse.

I'll be blunt. That's not great news if you live in a country like the United States that's accustomed to cheap energy and food.

But it is good news if you're an investor in any of the hundreds of companies that are capable of delivering the raw goods and resources desperately sought around the world.

That's because there isn't a more attractive way to make money than to be on the selling side of a market desperate for your product.

Demand From Every Corner of the World

Here's an example of what I'm talking about.

Right now, half the cement used in the world is being used by one nation -- China. With that sort of demand, you have serious pressure building under prices.

And don't let the headlines fool you. China may have just posted its smallest GDP increase in two years, but it still grew at a 9.1% annual rate.

That means if China keeps growing at its current rate, in just five years its economy will be 55% larger... which, keeping things simple, means it will need roughly 55% more raw materials compared to today.

Even if it grows half that rate, demand would rise about 25%. That's enormous.

But here's the kicker. It's not just China.

Oil, coal, steel, copper, tin and other basic commodities are needed in every growing economy in the world. 

Suppliers simply can't keep up. And we're not talking about a few tiny third-world nations here. When China goes from exporting oil to being the world's second-largest importer, it's a big deal. Meanwhile, it's a similar story in India, Indonesia and Brazil. To me, that's a "buy signal" for resource stocks.

[If you're ready to start investing in commodities, we'll show you how in this step-by-step tutorial: A How-to Guide to Profiting From the Commodity Super Cycle.]

Emerging nations already gobble up more than half the world's resources. And their per person consumption is still amazingly low -- nowhere near what we use in the United States.

Now let me say, some commodities have sold off in the past few months. The fear of a second recession has hung heavily over financial markets.

But when you're considering natural resources, it's important to look at long-term trends rather than short-term movements.

So even though most commodities have experienced pullbacks in the recent months, looking back over the past decade tells another story. In the past 10 years:#-ad_banner_2-#

  • Copper prices are up over 400%, nickel is up 182%, platinum and tin are up over 350% each.

  • Gold has risen every year, smashing through its old record of $850 set in 1980.

  • Silver has risen over 600%, even after falling from its April highs of $49 per ounce.

  • Corn has spiked more than 200%, while wheat prices are up over 125%. And since beef, pork and dairy producers have to buy mountains of feed for their livestock, rising grain prices spill over into higher meat prices.

Food prices hit an all-time high in February of this year. The United Nation's Food Price Index set the highest prices since records began. Prices even rose above 2008's record levels that sparked food riots in 32 countries. Since 2004, food prices have more than doubled according to the United Nations.

However it's important to note, commodity prices may be volatile for some time to come. Until there's a clear sign of an economic recovery, prices could continue to swing wildly.

[InvestingAnswers Feature: 4 Factors That Made Gold This Decade's Best Investment]

The Investing Answer: So how can you get in on the explosive growth of the commodity market in the next decade? Two exchange-traded funds (ETFs), the SPDR Gold Trust ETF (NYSE: GLD) or the iShares Silver Trust ETF (NYSE: SLV) are investments that can be easily added to your portfolio if you want to ride the perfomance gains of gold and silver prices.

[For more easy ways to add silver to your portfolio, see our beginners guide: My Favorite Way to Own Silver Today]