As you can probably imagine, much of the recent discussion at Agora Financial is focused on what is going on with energy, commodities (soft and hard) and infrastructure. Prices for all of these items are on a tear.

Oil, for example, is flirting with $120 per barrel. Natural gas is over $10 per thousand cubic feet. Copper is about $4 per pound. Foodstuffs are up by double- and triple-digit percentage increases. (This is not a good thing for the billion or so people in this world who live on less than $1 per day.) And cost inflation in almost all infrastructure projects is roaring along.

What is Causing the Rise in Prices?

Well, a lot of it has to do with the decline in value of the dollar. Let’s look at one of the most commonly consumed substances in the world, rice.

Here is a chart tracking the price of 100 pounds of rice against the euro-dollar exchange over the past 12 months. The regression fit is 90%. It is not that a lot more people are eating a lot more rice. It is that more dollars are chasing the same bags of the stuff. And there is a similar relationship between the prices of rice and oil, demonstrating the rise in oil process against the depreciating dollar. Same thing with coal, iron ore and many other goods that trade on world markets.

Basically, the chart is just another data point confirming that the dollar has lost its status as a long-term reserve of value. So people from China to Chile are exchanging their depreciating dollars for things of value. Whether it is rice, oil, industrial metals, gold or silver, the prices are on a long upward trend.

What Should You Do as an Investor?

Hopefully that’s one of the reasons why you subscribe to Outstanding Investments . That’s exactly why Kevin Kerr and I write our articles. But here is our abbreviated list of recommendations:

1. Buy gold and silver
2. Own mining shares
3. Own energy plays. What forms of energy? All of them — oil, gas, coal, nuclear, wind, solar, geothermal, biofuels
4. Own energy service plays
5. Own infrastructure plays
6. Buy soft commodities, but only if you really understand how to do this (and you could have no better guide than Kevin Kerr).

In short, the OI portfolio is designed as a defense in times of a declining dollar. Yet it also offers the opportunity to participate in stock price gains as entire business sectors profit in the future.

Byron King

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!