You won’t guess who the U.S. is giving $100 billion to now.
Last year, the U.S. allocated this chunk of change to a specific recipient with the passing of the Inflation Reduction Act (IRA). In fact, the IRA approved the release of $3.3 trillion by the U.S. government, making it one of the largest spending bills ever signed into law.
So where is all this money going?
Today, I’m going to tell you about one of the biggest – and most surprising – winners from the U.S.’s spending binge. And how you can profit from it.
Outsourcing The Mining Process
The recipient I’m talking about isn’t even located in the U.S.
But that won’t stop our tax dollars from transforming Australia into a world superpower in a critical industry.
That’s right – the United States of America allocated $100 billion to Australia to outsource a not-so-glamorous process we desperately need to meet our clean energy goals.
And Australian Prime Minister Anthony Albanese was happy to oblige. Why spend your own money when you can spend someone else’s?
Albanese knows the “clean tech revolution” has a dirty problem. Mining.
And Australia knows mining. It’s the second-largest producer of gold and lead. And ranks third in black coal, cobalt, manganese ore, and zinc. It’s also a big producer of rare earth minerals and uranium.
And there is no transitioning to renewables without them.
And of all the minerals Australia mines, none are more critical to this transition than lithium.
Australia ranks #1 in lithium production. And lithium isn’t even a rare earth metal.
But environmentalists and others note that mining it causes major air and water pollution, among other problems.
And this puts the White House in a tricky situation. The IRA is a giant clean energy bill with lots of promises about a green future.
But that green future cannot be attained without a reality-based plan. And unfortunately, the reality is – there is absolutely no chance of success in the time frame they promised without a major increase in mining.
The Harsh Reality of the Green Energy Transition
In 2021, the world produced 130,000 tons of lithium.
By 2030, the International Energy Agency says we’ll need at least three times that. If electric vehicle (EV) production keeps growing, the need could be even higher.
The U.S. has plenty of capacity here at home, but can you imagine the pushback if giant, dirty mines started popping up around the country?
We’re already too reliant on China, which leads in rare earth metals production partly because it isn’t as concerned about environmental damage.
And as a result, China also controls 60% of “battery-grade” lithium refining.
This is where Australia comes to the rescue.
Thanks to the IRA and Prime Minister Albanese’s savvy negotiations, Australia will receive over $100 billion to “establish supply chains” for wind, solar, battery storage, hydrogen, and other clean technologies.
And in plain English, that means we are paying them to “conduct massive mining operations.”
Lithium output has grown 4x in the past 10 years.
Australia was responsible for 90% of that increase.
And whether people realize it or not, the green energy revolution rests on the shoulders of Australia’s mining industry.
So now you can understand why the U.S. quietly carved out over $100 billion in subsidies for Australia.
Those taxpayer dollars help secure steady lithium production for years to come. And from a reliable ally.
And when you take that much money from the U.S. government, there are always strings attached…
Now Australia must give preferential treatment to U.S. companies. And easier access to lithium gives the U.S. a huge advantage.
So how can you personally profit from this arrangement?
Well, most lithium goes into batteries, and nobody uses more batteries than automakers. A single EV can have over 3,000 of them. And one U.S. car company recently announced something exciting…
The Automaker You Can Profit From
On November 30, Ford (F) announced that profits for 2023 would be $5–5.5 billion. So far this year, adjusted earnings per share (EPS) is up over 26% compared to 2022.
And this year, with the Union Auto Workers (UAW) labor agreement behind it, Ford’s future is looking bright.
Many aren’t aware, but Ford is No. 2 in overall EV sales in the U.S.
Tesla is No. 1, but its stock isn’t far off 52-week highs and trades at a sky-high multiple. That doesn’t fit our style of investing.
Ford, on the other hand, is trading at a major discount.
And you can pick up shares today with an inflation-beating 5.7% yield.
A few months ago, the stock was trading above $15. Now it’s near $10 per share, so you have a 45%-plus capital gain opportunity if you buy it today at its current price.
One of Ford’s biggest challenges has been finding a way to make its EV division profitable.
And the IRA deal with Australia will do just that by keeping the cost of lithium under control for Ford. That’s a huge advantage compared to its European and Chinese competitors.
So don’t wait to buy it. Invest in Ford before the rest of the market catches on and Ford’s stock price shoots up.
Safe Investing,
Stephen Hester
Analyst, Intelligent Income Daily
P.S. If today’s Intelligent Income Daily brings to mind any questions about EVs or other profitable plays created by the Inflation Reduction Act, click here to reach out to us with your question(s).
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