Check it out, this is a guest post written by a trading challenge student who just ingested a ton of schrooms…can you tell?
There have been a couple of post-apocalyptic shows and movies over the years. They raise some interesting questions, and as apparently everything that exists there are lessons for investors and traders. What good is gold or ownership in an office supply company at the end of the world. Do not be too literal, because the idea of brokerage accounts and shares at the end of the world is ridiculous. However, in all apocalyptic settings it is not shiny baubles that matter but things like food and water. However, action sells so in those fictional examples you see lots of bullets being used.
Food, water, and clothing will be important in a time like that. As will things like heating and cooking fluid. This is not about creating a survival bunker, but about finding exactly what it is that society needs and will continue to need. Even traders must set something aside for the long-term. Some of it can be in cash, but others should be invested in various ways. A trading account can really only be so large before it gets unwieldy, and even then using all your savings to trade seems a bit excessive.
However, all is not lost for people looking to the end of the world for trading advice. The great thing about a lot of this stuff is that unlike certain things like mobile phones these are heavily cyclical. And this is not the business cycle cyclical, except for maybe clothing, but time of year and other physical events that drive the cycle. This will be an overview of industries/sectors not something specific regarding trades. Trades are very fast, and the information gets dated as soon as it’s out there. Focusing on the big picture is better.
Everyone Needs to Eat
Food is extremely cyclical based on the economy and the weather. For weather it is not just things like rain and temperature. Sometimes just one bad day can completely wreck a harvest. A frost at the wrong time can kill a lot of crops.
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Corn is extremely volatile right now because of the potential for drought. The 2012 drought was extremely severe, and the market probably has not fully recovered from it. The drought could also continue in 2013. You do not need to get into commodities trading in order to make money from these things. There are plenty of ETFs like CORN that can stand in for the actual futures contracts. There are ETFs for sugar, soy, and other things.
Of course not all things need to go to the most basic levels. After all, it is not really the end of the world. There are fertilizer companies like Mosaic (MOS) that could present opportunities. Sometimes fertilizer is needed to boost yields in a tough growing year. This is not a narrow field and there are many other examples, but the level of interconnectedness for the stock market is huge.
If the growing season is even tougher then you might look at agribusiness that creates plants that can survive better. Monsanto (MON) does projects like this. Some people might call them monstrosities, but sentient plants or not it is big business. It is also subject to plenty of stumbles with PR, regulatory, and legal issues.
One thing that is not properly covered in all post-apocalyptic fiction is that it is difficult to feed a population. Even a couple of hundred people can go through immense amounts of food. Even stumbling onto a supermarket will only feed them for a few weeks, and even less if you consider that most things are perishable. Feeding even a town of a few hundred is an immense task that is taken for granted by most. Production, transport, and distribution on an at least weekly basis is a massive undertaking.
Mostly Water
The effort involved in food makes it the more difficult resource even though water is more important to life. There are lots of sources of freshwater. That is not true of most places in the world, but there the idea of mass food production is even a more distant dream. Investing in water is a bit trickier, because you are normally investing in the infrastructure. There is no problem with that, but they just do not rise to the top of the public consciousness. The reason is that you are investing in companies not water itself, unlike the corn ETF.
Water is an important resource and it will have times when it is important. The water infrastructure in the eastern part of the United States is extremely old and eventually something will need to be done about it. You can keep an eye on global water through the use of ETFs like PIO, PHO, and CGW. These ETFs function in various ways, and you can analyze their holdings to find specific information. Global water is a big issue, so keep an eye on it. The more international the better. The U.S. won’t be doing much infrastructure spending, even though it needs to. We are in a temperate climate so our water cycle is a bit better than some other parts of the world.
Conclusion
The world never ends but we need food and water. Civilization actually makes a mountain out of a molehill of a problem. If we grew a bit of wheat on a plot of land by a river we could live. No variety in food, and a marginal population. Civilization is a good thing, but it requires a ton of upkeep. Cherish it, and profit from its fundamental building blocks.
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