March 23, 2023

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Good Thursday. The U.S. makes up 4% of the global population. Can you guess what percentage the U.S. makes up of the global GDP? a. 8%, b. 16%, c. 24%. Follow the wave 🌊 below for the answer.

Here are today's money topics:

Copper prices — an economic indicator?
Does getting a mortgage mean getting life insurance?
The cost of food is down but groceries are up

INVESTING

Copper Prices — An Economic Indicator?

As you might expect, copper has a broad range of uses throughout the world, and therefore the economy. The world consumes about 25 million metric tons of the stuff every year, and the U.S. made use of over 1.9 million metric tons in 2022.

Copper is pretty much used in everything from household appliances to electric vehicles. It's primarily used in electrical applications, which make up 65% of its consumption, followed by 25% industrial usage, and 10% between transportation and other miscellaneous uses. Basically, it's a metal that is essential to everyday living and modern life.

So, how's the weather?

In general, rising copper prices have indicated strong demand and global economic strength. And historically, the price of copper has been strongly correlated with the price of gold, oil, the Chinese economy and world trade. Base metals like copper are often viewed as a hedge against price inflation and tend to do well as economic activity recovers.

And for a metal that's so closely associated with global expansion & growth, it's no surprise that the price of copper has been slightly higher but incredibly wobbly year-to-date. That means, investors are generally more bullish than they were in the second half of 2022, but fears of a global recession continue to make copper prices volatile.

Copper price chart per pound

as of 3-22-23

Source: Macrotrends.net

The big picture

Beyond near-term macro-economic trends, long-term changes such as accelerating cleantech and renewables projects, the decarbonization movement, electric vehicle adoption and the increasing potential for global infrastructure spending may bode well for copper in the long run. Some experts project that copper demand will nearly double to 50 million metric tons by 2035—that's more copper than the total global copper consumed between 1900 and 2021.

Take this related lesson and earn 🟡 Dibs:

Investing in Commodities

Advanced Investing

8 mins

FINANCIAL PLANNING

Does Getting a Mortgage Mean Getting Life Insurance?

Signing a mortgage is one of modern life's most popular milestones — it's representative of something much more than just a big monthly payment. For many, a mortgage represents a step toward the next stage of life.

Because of this, it's also true that having a mortgage can often stir up thoughts of securing your finances to protect your loved ones and their livelihood — things like life insurance.

But does a mortgage always mean it's time to pay up for this "what if" scenario? Let's weigh the costs.

Mortgages and life insurance

Life insurance 101: Life insurance isn't to protect you, but the lives of your loved ones in the event of a tragedy. If you have people who depend on your income to live, life insurance is there to make sure that if anything happens to you, your family is taken care of.
Kinds of life insurance: Generally, life insurance comes in two main forms — term and whole. Term LI is simple, it covers you for a set period of time for a set monthly premium based on your benefit. With whole life insurance, you're covered for your entire life, and these policies often come with a built-in "cash value" component where the insurer allocates some of your premium payments to "cash" where it's either invested or earns interest. Policyholders can receive this cash if they cancel the policy or make a withdrawal.
How common is it? Life insurance is most often utilized by folks with dependents, and the data bears that out. While about 50% of those in the U.S. have life insurance, only 34% of those ages 18-24 do, whereas 57% of those 65 and older have coverage.
Insurance and mortgages: Based on current home prices and interest rates, the average monthly mortgage payment in the U.S. is now around $2,150, an uncomfortably high portion of the average individual's monthly income. In the event of your death, it would likely be hard for your partner or children to manage to pay that mortgage along with other monthly expenses on their own, which is where life insurance comes in.
Alternatives: Aside from life insurance, which usually provides a lump-sum death benefit payment to the policy's beneficiaries, there is also mortgage protection insurance. MPI is like life insurance, except specifically for paying your mortgage. While the average life insurance premium is $26 monthly, MPI often comes in at a similar cost range.
Benefits of both: If you're an individual living on your own with a mortgage, defensive policies like these aren't likely a top worry for you. But if you have a mortgage and a family, the monthly costs of policies like these could be literal life savers if they're ever called upon.

Take this related lesson and earn 🟡 Dibs:

Life Insurance Fundamentals

Insurance

7 mins

ECONOMY

The Cost of Food is Down But Groceries Are Up

"If you give an inch, they'll take a mile." This phrase couldn't be more true than in regards to food inflation right now. Once prices have risen on necessities and consumers haven't let up in paying up for the things they need, it's unlikely these prices will come back down to where they once were.

That's why, despite an easing in the cost of underlying goods and ingredients, the cost of groceries continues to rise and stay there. In other words, it's up and it's stuck.

What's keeping prices high? The cost of groceries has risen by 9.5% since February 2022 despite the cost of their underlying ingredients continuing to fall. That's because even though the cost of goods is falling, the cost of services needed to produce them is as stubborn as ever.

Supercore at its finest: The Fed's recent obsession with "supercore" inflation is a direct manifestation of this. Supercore hones in on particular expenses of things, specifically the cost of services, like haircuts, trash collection, transportation, and delivery services, and everything supply-chain and labor-oriented.

Other reasons: Inflation is undoubtedly real and present, but it's also a great excuse for companies to raise prices in excess. Many believe that big brands we see on the shelves are taking advantage of how socially accepted inflation is right now, and using that to get away with elevating prices beyond what's necessary.

So what can we do? Now more than ever, we'll see greater price discrepancy on the same item. Doing more comparison shopping is one obvious way to tackle it. Also, consider switching or expanding the usual stores you go to, make a list before you go shopping, and consider generic brands that are usually more economical — some basics we may overlook when in a routine.

🌊 BY THE WAY

🌏 Answer: 24%. The U.S. makes up 4% of the global population, but 24% of global GDP, and 42% of the global equities market (Visual Capitalist)
🛒 From groceries to clothes, inflation-weary consumers flock to cheaper products online (CNN)
🍿 ICYMI. When it comes to buying stuff, beware the decoy effect (Finny)
📈 U.S. Fed hikes rates by a quarter percentage point, indicates increases are near an end (CNBC)
☂️ Finny lesson of the day. Not everyone needs life insurance. Given the topic today, if you don't have a policy, learn more about whether you need it or not:

To Life Insure Or Not?

Insurance

6 mins

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Finny is a financial wellness platform. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance, market trends and investing insights. Finny does not offer investment and stock advice.

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