Peter Zeihan argues the supply chain crisis extends far beyond semiconductors. Nearly all silicon for chips comes from a single North Carolina mine, while Russia's role in fertilizer and palladium exports reshapes global commodity access. Investors must shift from liquidity-driven strategies to regional scarcity models, targeting stable countries like France, Canada, and Australia.
Peter, what else do you want us to know? The book, it just covers so much, and it's excellent. By the way, what else do you want to say to our listeners and let us know about any component?
Sure. So since this is an investment show, I think the best way to do is to talk about a chapter that you haven't made it to yet. There's an industrial commodities chapter. So anything that goes into anything that's not energy and food. The Industrial Revolution did more than just introduce us to what we now consider to be electricity and manufacturing. It also took the lessons of the Renaissance and applied them at scale, first through the Germans and the Brits, and then eventually for the rest of the world. And we figured out all these components and elements that make up our world, and we figured out how to purify them and then recombine them in ways we found useful. What we have missed in the discussion of modern globalization and economic integration is their role. Because the very core of globalization is anyone can go anywhere to get anything. And when we talk about the breakdown of supply chains, we're thinking of semiconductors and tires and widgets. And that's true, but that's not the whole story. We're entering into a world where the raw commodity access that then goes into the process material, that then goes into the intermediate products that goes into the finished products, that very base first step that is no longer guaranteed. So we can look forward to large portions of the world losing access to the inputs that are necessary to attempt a modern lifestyle. And if you want to talk about the sexiest of all of them, silicon. Not for panels, silicon for semiconductors, because 95% of it comes from one mine in North Carolina.
Wow.
So it's one thing to control global food or global energy. It's another thing when you can control the only input that allows digitization to even theoretically happen. And the United States is going to have to figure out what to do that with that over the next decade.
Well, why are we going to have to figure out what to do with that? We're going to continue to mine and explore.
Will we sell it to everyone? Oh, we're entering into a world where there's not enough energy and there's not enough food.
Right.
And where we're going to prioritize our own manufacturing, These are all strategic choices that we're going to make either by choice or failure to make one. When you get to semiconductors, though, when it's all coming from one place, that's an entirely other level. Because if you can't get enough energy. Yes. Your car stops. Yes. The lights go out. This is bad. But if you can't get any microchips, you can't even pretend to catch up in any sector at all.
Yeah, well, that's why countries like Russia shouldn't do what they do.
The Russians have a very different definition for what modern quality. Quality of life means. That is one of their biggest negatives. That's one of their biggest strengths. It all depends upon how you're measuring it and what it is they're trying to do at the time.
Yeah, yeah. So what's the investment? I mean, what do you think's coming next in the economy? We, we alluded to that, of course, with the capital drying up and, and the worker shortage continuing and so forth. But just give us like the, the. What do we do with that?
Well, I'm not a cfa, so let me just start with that.
It's okay. Neither am I.
Let me rephrase that. Investing is world. I can tell you though that we are looking at chronic shortages and a lot of base materials that make up our world. Not just the industrial commodities I just kind of went through, but food. You know, we've. The world's top wheat exporter has invaded the world's number four wheat exporter. And the world's top wheat exporter also is the world's largest exporter of fertilizer and the components necessary so people can make their own fertilizer. So we're in the early ages of a multi year shortage in all things agricultural. Russia is also a big player in the aluminum market, or it was not anymore. They also are big in copper. That hasn't gone to zero yet. It's on its way down. Platinum group materials, for example, especially palladium, which does double time with silicon and semiconductors. The problem as you're looking at all of these, however, is that sourcing is critical. One of the biggest disservices in my opinion that the financial sector has done for us all over the last 20 years is become used to this environment where capital is flush and liquid and we can invest in everything and we don't have to be all that discerning. Because if the money is free, why the hell not? Well, the money's not free anymore. And so the financial sector has to actually provide value add in the old system. The entire developing world was in one exchange traded fund. That's asinine to think that India and Brazil and China and Russia have anything in common aside from size. Their markets are completely different. The Sectors they play in are completely different in investing in them, and it's completely different. And yet there they are all together. Same with frontier markets, which makes even less sense. Like, what in the world do Argentina and Vietnam have in common? Nothing. We have to disaggregate all that now. And that goes not just for the markets in general, but for the specific products. So, for example, if you want to invest in agricultural processing, that seems like the big business right now. It's probably going to get bigger. But all the major agricultural processes that operate in the economies that are not getting hit by these shortages, think France, Canada, Australia, the United States. They're also in Russia and Ukraine. So you really have to do your homework to carve out the parts of the world from your investment choices that just aren't playing anymore. And that means you have to remove companies that had been household names. I'm thinking just bungie here to pick one out of the air that is not inappropriate. If you want to take advantage of the kind of the this boom we're going to see in demand for those products in an area of scarcity.
How about building materials that's messy because.
A lot of them are closer to home? Overall, I think that's a great idea, but you have to be really, really careful of what the sourcing is and where the companies that are producing that material are selling into. So, for example, if you're selling into the United States, particularly in the Mountain west, the Southwest or the south, that is where the boom in the United States is going to be in residential real estate for at least the next years. People are moving there because it's warmer. That's the boomers. People are moving there because it's cheaper. That's the millennials having families. And nobody wants to be on a metro where they might get Covid again. So, you know, everyone's moving into those that kind of arc. That's as a rule, not how we decide where we get the stuff that goes into it. You either have local companies that are not publicly traded or you have international ones that are like bringing in wood from Canada. And untangling that mess requires a brain that's bigger than mine.
