Why would mining stocks beat the rest of the market?
First and foremost please don't turn this blog into a debate on hyperinflation.
Quick thought (as are my usual blogs)
I don't understand why people think that mining stocks are the best play on hyperinflation.
Yes, of course metals will rise in hyperinflation...everything would
Metals would rise, but so would the input prices for everything the miners used to get it out of the ground...labor, machines, oil, etc.
Sale price goes up 50% (2000 to 3000, to make up random numbers), input cost goes up 50% (1000 to 1500), that means profit goes up 50% (1000 to 1500)
The same is true for mcdonalds though...beef goes up, hamburger sale price goes up. Profit up 50%
Same goes for the actual commodity...price goes up 50%, no input price, no sale price
Now if you think there is manipulation in a certain commodity that is a completely different story.
Therefore, all commodities and all stocks should go up equally in aggregate.
The one thing that confuses this whole equation is that inflation can put some companies out of business due to bad projections, etc. This makes the commodity the safer choice.
Bad economy = less lending = less inflated stocks.
So, the commodity appears to be the winner over the stocks. Which is why
So....why should a mining stock go up more than the rest of the stock market in a hyperinflation scenario?