Hard Assets for Hard Times: Why Tangible Investments Matter Now

• Invest in tangible assets like commodities and infrastructure to hedge against rising inflation.
• Gain exposure to precious metals miners, industrial commodity producers, and essential infrastructure operators.
• Many hard asset companies offer dividend income, helping investors maintain purchasing power over time.
• Diversify across various hard assets, from precious metals to global infrastructure, for robust inflation protection.

Are Your Investments Built on Sand? A Look at Hard Assets

Let’s be honest, shall we? For years, the people in charge of the world’s money have been behaving like a teenager with their first credit card. The printing presses, both real and digital, have been running hot, flooding the system with currency that seems to have less and less to do with actual value. I find it all rather concerning. When the very foundation of our financial system, the money itself, feels a bit wobbly, it makes you wonder what you actually own. Is it just a string of numbers on a screen, or is it something real?

The Allure of Something You Can Kick

This is why I find myself thinking more about ‘hard assets’. It’s an old fashioned idea, I grant you, but one that feels increasingly relevant. It’s the simple principle of owning things you can, if you were so inclined, physically touch. Things that cannot be summoned into existence by a committee decision. Gold is the classic example, of course. For thousands of years, when people have lost faith in their rulers or their currency, they’ve turned to that shiny, inert metal.

A company like Newmont Mining doesn’t just trade in abstract concepts. It digs actual gold out of the ground. When inflation fears rise and the value of a pound or a dollar feels uncertain, the price of gold often goes up. It’s a simple, almost primal, relationship. The same logic applies to silver, which has the added benefit of being crucial for industry, giving it a foot in both the monetary and the practical worlds.

More Than Just a Magpie's Treasure

But let’s not get fixated on the jewellery box. The world of tangible assets is far broader and, to me, more interesting. Think about copper. It’s the essential plumbing of our modern world. You can’t have an electric vehicle, a wind turbine, or a new national grid without vast quantities of it. Companies like Freeport-McMoRan, which control enormous copper mines, are essentially gatekeepers to the green energy transition. As governments pour money into infrastructure, the demand for these essential metals could remain strong, regardless of what’s happening in the abstract world of finance.

Then you have the infrastructure itself. The toll roads, the mobile phone towers, the pipelines. These are the boring, dependable workhorses of the economy. The beauty of these businesses is that their revenue is often directly linked to inflation. When prices rise, they are frequently allowed to raise their own prices, offering a potential buffer for investors. People will still need electricity and water, even when the economic weather turns foul.

A Sensible Spread of Real Stuff

Now, I’m not suggesting you rush out and fill your garden shed with copper pipes. Investing is never that simple, and anyone who tells you otherwise is probably selling something. Commodity prices can be notoriously volatile, and mining is a tough, risky business. A sensible approach, I think, is about diversification. It’s about owning a small piece of a lot of different real things.

You might look for a mix that includes precious metals miners, industrial commodity producers, and infrastructure operators. Spreading your exposure across different assets and geographies could help mitigate some of the inherent risks. A thoughtfully constructed portfolio of companies, such as the one found in the Hard Assets for Hard Times basket, is built on this very principle. It’s not about betting the farm on one commodity, but about building a defence from a range of physical assets. Of course, all investments carry risk, and past performance is no guide to the future, but the logic is compelling. In a world that feels increasingly virtual, owning a slice of the real one might just be the most pragmatic move you can make.

Deep Dive

Market & Opportunity

• Inflation concerns are driven by monetary expansion, supply chain disruptions, and geopolitical tensions.
• The transition to renewable energy creates structural, long-term demand for industrial metals like copper.
• Global infrastructure needs continue to grow, particularly in emerging markets, creating opportunities for companies that build and operate essential assets.

Key Companies

• Newmont Mining Corp. (NEM): A major global gold producer, offering direct exposure to gold prices which typically rise with inflation fears.
• Pan American Silver Corp (PAAS): A silver producer that benefits from the metal's dual use as a monetary hedge and an industrial commodity.
• Freeport-McMoRan Inc. (FCX): A dominant global producer of copper, a metal essential for electrical infrastructure and renewable energy systems.

Primary Risk Factors

• Commodity prices can be highly volatile.
• Mining operations are subject to operational challenges and increasing environmental regulations.
• Infrastructure investments can be affected by regulatory and political changes.
• International operations are exposed to currency fluctuation risks.
• These assets may underperform during deflationary periods or when economic growth is low.

Growth Catalysts

• Companies owning physical assets like commodities and infrastructure hold intrinsic value that cannot be created digitally.
• Infrastructure companies often have cash flows linked to inflation through contracts or regulatory mechanisms.
• Many tangible asset companies offer attractive dividend yields, providing an income stream to investors.
• Robust, long-term demand for industrial metals is supported by global investment in green energy and infrastructure.