Successful Investing in a Low Growth Economy: A Historical Perspective
The U.S. economy has grown about 3.5% annually from the 17th century until the late 20th century. Most of American industry and wealth can be attributed to significant technological advancements starting in the Industrial Revolution. Over recent decades, productivity has significantly dropped off with some estimates of the economy growing at 1.8% annually.
Returns from innovation appear to be entering a period of stagnation. Although the causes and implications of such events remain in question, it has become increasingly vital for investors to analyze performance across similar environments in history to successfully navigate uncertain markets.
Long term projections for Potash demand are stable and likely to moderately increase year-over-year. The quantity of high-quality arable land is decreasing. Human population is expected to increase by 3 Billion people in the next 37 years. There are no precise substitutes for potash. It is proven to considerably increase yield quantity and quality on almost all crops. The cumulative effects of the above factors will drive demand.
Mineral Royalty Stream Financing
Resource streaming, also known as volumetric production payments (VPP) or metal purchase agreements, provides commodity exploration and production companies the necessary financing to bring projects into production. This has become an attractive financing option due to the fact that VPP’s are cheaper than equity (no shareholder dilution) and safer than debt, making this a “win-win” for both the mine operator and financing company. Streaming agreements allow the mining company to capitalize on proven reserves before the operation becomes productive.
These diverse agreements are crafted to emphasize each party’s strengths and protect against the others weaknesses. The underwriting financier enjoys the resource upside while avoiding the downside risk associated from operations. Stream financing allows the mine operator to leverage proven reserves to fund production or expansion, while avoiding many negative side effects associated with traditional financing methods.
There is a great deal of debate regarding the size of the government. Many people argue the government is too large while others argue it is too small, but a good deal of this discussion is based on misinformation and guesses. This is why we created the Government Burden Index, Government Leverage Index, and the Cost of Government Index (COGI).