With the Fed’s December 2015 interest rate hike in the rear view mirror, savvy investors like you are coming to grip with its impact on their portfolios. Anyone paying attention knows this will potentially have significant effects on their bottom line.
Most immediately, the value of your long-term bonds will tumble.
A 1% rise in interest rates means that a 10-year bond will lose 10% of its value, unless held to maturity. The quarter point rate increase means a 2.5% loss of bond value, unless held to maturity.
Your equities won’t fare well either, especially if they depend upon growth through borrowing.
Eventually, corporate debt will have to be refinanced, and at a higher rate, decreasing profits. If you own stock of debt-ridden companies, you will be hurt.
Plus, the equity markets in general will take a hit as investors look to safe haven U.S. Treasuries. Whereas the government bonds already issued are subject to the loss of value mentioned above, the newly issued, higher yielding bonds may very well lure investors away from stocks and into Treasuries.
What about the dollar?
Pundits believe raising interest rates will inevitably weaken the dollar as well. We are a debtor nation and will be forced to pay more for our debt service. While ordinarily an increase in interest rates makes the dollar more attractive to foreign investors and therefore strengthens the dollar, our foreign lenders may pull back their willingness to extend our credit if higher rates increase the possibility of default through negative pressures on debt service.
What can you do to protect yourself from the impact of an interest rate rise and own an asset uncorrelated to market volatility?
Take advantage of the U.S. dollar’s strength. Take some strong dollars and diversify into tangible assets.
A Rare Strategic Metals program is now available in which you can own metals used in the manufacturing of 95% of products used today.
Among the variety of strategic metals offered is Hafnium, a metal that is rare both because very little is produced and because there are restrictions on its distribution. Consider trading some strong dollars for Hafnium today.
Hafnium is used in the manufacturing of nuclear control rods and aero and industrial gas turbine blades. It is also used in plasma-cutting equipment, which has been revolutionized by the properties of Hafnium. Other uses include Intel’s processors, blue lasers for DVD readers and critical film deposit applications – chemical vapor deposition (CVD) and physical vapor deposition (PVD) – for products such as semiconductors, composites, optical fibers and nano machines.
Hafnium is virtually always in short supply. The United States and France are the world’s major producers, with China and the Ukraine producing small amounts in less pure forms.
Distribution is also administratively difficult because, although Hafnium has commercial uses, it is also a critical nuclear metal. There are export and safety restrictions to certain countries under the provisions of the Wassenaar Agreement – a multilateral international agreement controlling the export of conventional arms as well as dual-use technologies and goods.
Prices for Hafnium are rising.
Hafnium prices rose 30-40% at the end of 2014, and pressure continued from super alloy manufacturers throughout 2015.
Industry analysts project a 20-30% rise in demand over the next 10 years from the aerospace industry alone.
In addition, orders from the nuclear arena are estimated to jump to 70-80% of demand (up from the current 25%), because of new reactors being built worldwide in the next three years.
Undoubtedly, Hafnium represents a very strong market, but a very small one.
Approximately 50 tons per year are produced, so there is not much to go around. Hafnium has been under the radar for over 30 years. It was first isolated in 1923. Afterwards, it had no practical use until the nuclear industry discovered its property of blocking neurons. But, it was only in 1970 when an alloy, MAR M 247, which contains 1.5% Hafnium, was patented by Martin Marietta Corporation for use in jet engines, that the demand for the alloy created a Hafnium investor following.
The supply of Hafnium is limited by a variety of factors.
It is difficult to extract Hafnium in practical quantities from anything but Zirconium sand. However, the majority of Zirconium is bought by the refractory industry for use in furnace bricks or liners. The Hafnium in Zirconium is usually left intact and never extracted.
It is wasted!
Even though the Hafnium is not of use to that industry, it is simply less expensive not to separate the two metals, and so a great deal of Hafnium is lost to the market place.
By contrast, Hafnium is separated from Zirconium in the nuclear industry as it uses both Zirconium and Hafnium for different purposes; but, the industry does not make their Hafnium available outside their industry. This leaves the aerospace industry and other users left with low supply, high demand and a willingness to pay a high price.
You can see, with great price potential coupled with its usual scarcity, a unique opportunity opens up when Hafnium becomes available to investors.
How do you take advantage of the U.S. dollar’s strength and Hafnium’s positive supply/demand situation?
If you have a source for Hafnium, it is a simple exchange of current strong value (dollars) for potential future strong value (Hafnium). And, we have access to just such a source.