One of the sharpest investment minds in the world is Dr. Stephen Leeb. With the financial landscape in upheaval, I decided that now is an opportune time to interview him on topics of urgent concern to investors.

Stephen Leeb, PhD is the chief investment strategist of The Complete Investor and Real World Investing. Steve and I go way back. I first started working with him in 1990, and throughout the decades, his investment advice has proven consistently prescient…and profitable.

Dr. Leeb [pictured] received his Bachelor’s degree in Economics from the University of Pennsylvania’s Wharton School of Business. Within the following three years he obtained both a Master’s degree in Mathematics and a PhD in Psychology from the University of Illinois at Urbana-Champaign.

Below is a condensed transcript of our discussion.

Steve, when we first became colleagues, Bush senior was president, the first Gulf War was raging, the smartphone didn’t exist, the Internet was in its infancy, and the Soviet Union was dissolving. A lot has changed since then!

[Laughs] Yes indeed, John. But the need to make money never changes.

Let’s fast forward to 2022. The stock market so far this year has been one of the most volatile on record. What are the major reasons and how can investors ride it out?

For a long time, investors had it relatively easy. Opportunities abounded, risks were manageable, and most mistakes could be quickly rectified. But this dreamy investment landscape is receding in the rearview mirror as we enter far more treacherous investment terrain.

These days even the most stalwart investors are probably feeling seasick as market volatility continues. This volatility is a consequence of a market desperately seeking new guidelines for new times.

For the first time ever, the Federal Reserve confronts inflation in the context of a world in which the long-term availability of food and energy is a question mark. In recent testimony before Congress, Fed Chair Jerome Powell said the Fed lacks the tools to deal with rising food and energy prices.

Powell recognizes the new reality that policies to keep commodities in check, while feasible in the past, would wreak devastation today.

Getting to the central bank’s holy grail of 2% inflation would require measures that inflict intolerable hardships, including major job losses. My worry is that the Fed, in trying to fight an inflation that’s outside its control, will overreach. Dire economic consequence would likely follow.

I strongly suggest riding out the volatility with a focus on investments in commodities and in companies that can help solve today’s existential problems.

The commodities sector is in a “super cycle,” i.e., a sustained upward trajectory. What makes commodity plays appealing now?

Today, a juicy market sector consists of stocks leveraged to higher commodity prices, particularly miners and energy producers. Well-situated miners and commodity plays currently confer outsized potential.

For roughly the past 100 years, most commodity plays underperformed other financial assets, especially stocks. One reason is the historic volatility of commodity plays, which reflects their ultra-sensitivity to economic cyclicality.

But we’re entering a new world, in which resource scarcities will make commodities less volatile and better able to hold their own against other assets.

The world’s most valuable commodity remains crude oil, and elevated oil prices have been driving inflation. How do you envision the supply-and-demand equation for oil in 2023?

When oil prices rise, it triggers inflation along the supply chain. An increase in oil prices is essentially a tax increase. It reduces disposable income for households and profitability for businesses.

Even with recession worries and monetary tightening around the world, oil demand is widely expected to increase. The International Energy Agency (IEA), the Energy Information Administration (EIA), and the Organization of the Petroleum Exporting Countries (OPEC) are all predicting record oil demand next year.

OPEC’s projections are the highest: close to 103 million barrels per day. While OPEC seems confident that it is capable of providing the necessary supply, there is no room for error. This year the cartel has been persistently short of its output goals.

What are some of the harsh realities of the Russia-Ukraine war, and what do these realities mean in terms of investment choices?

The Ukraine war is solidifying the division of the world into two parts: North/West (NW) and South/East (SE).

The NW, which of course includes the U.S., has vast financial wealth, but lacks sufficient natural resources to maintain that wealth. The SE is poor in financial wealth, but rich in the critical natural resources the NW needs.

These disparities make it essential for the NW to work with the SE, which will require diplomacy. If we don’t recognize this in time, the NW will end up with the short straw.

For investors, the disparities mean that real assets, i.e., natural resources led by gold and silver, should be central to where you put your investment money.

Do Western sanctions against Russia make sense, and regardless, what are the ramifications for investors?

The market is dealing with something different: worldwide scarcities in energy and food. In this environment, what worked in the past can backfire. Monetary sanctions against Russia are proof.

Predictions of a mild Russian recession have replaced forecasts of a catastrophic decline. Meanwhile, food and energy prices have continued to rise, and the odds of recessions in Japan, Europe and America have increased.

The possible silver lining to higher energy and food prices is that they will push the world to come together and move faster to develop a sustainable economy. It is my profound hope that the war in Ukraine, terrible as it is, will be a wake-up call.

PS: When we’ve put the Russia-Ukraine war and other headwinds behind us, certain well-positioned technology innovators will explode on the upside. Our experts have come up with eight stunning next wave predictions for the future. The time to invest in these “megatrends” is now. Click here for details.

John Persinos is the editorial director of Investing Daily.

Subscribe to John’s video channel: