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2010 EDITION
Much has changed; good investing has not
The Neatest Little Guide to Stock Market Investing, 2010 Edition
On April 22, I wrote an article called The Core Problem Is Overpopulation, which drew an angry response. Some readers felt I was elitist to point out that all global population growth in the next 40 years will come from developing countries and to write "Expect more fences" at the end. I responded to those criticisms in a follow-up article the next day, Is It Elitist To Mention Overpopulation?
The response to my second article was broad based, and overwhelmingly in my defense.
Sheldon wrote, "I agree 100% with your views." Lee wrote, "You simply stated facts, and your facts are correct." Harry said he was "glad to see someone finally having the guts to mention overpopulation as the underlying cause for many of the world's issues."
Mr. Shipley pointed out that I had just relayed facts about developing world population growth, and added:
Question is: Who solves the problem? Developed nations because we are squeezed by the growing Third World countries, or the Third World countries themselves so that their development is more rational?
The people offended by your article are probably the same idiots who think taxing my IRA capital gains for support of illegal immigrants in the USA is a good idea. It seems that government and taxes are the new charity organizations of the 21st century. I gather we can legislate morality through taxation and other laws limiting where and what I can speak, own, do, etc. Would giving all of our wealth to Third World countries solve their problems? I think not. What happened to teaching a man to fish instead of giving him a fish?
Jonathan wrote:
You pointed out that developing societies aren't helping their situation with rampant population growth, and immediately you came under fire for actually giving other humans, rich or poor, credit for having the basic sense not to engage in incontinent breeding should they choose. Either they are stupid, or they are responsible for their choices. Can't have it both ways.
Just as Americans have gotten the lousy government they deserve (even demand), downtrodden peoples the world over have their situations in part because they will not mobilize to have better situations. When they do (I seem to remember a Berlin Wall falling, and Robben Island becoming a museum, and Turkey deciding to be a secular republic, and Argentina growing up from fascism), situations do improve.
It's okay to accuse our fellow Americans of inaction, and to ridicule them for allowing the current state of U.S. affairs. But gods help us if we give the poor and wretched enough credit to suggest that if they limited their family sizes, or had done so before, they wouldn't be starving. Or that if they hate their crummy leaders, they should surround the capital, overwhelm the local police and burn the damned thing with the crooks in it.
That would be ascribing personal responsibility to everyone for his or her choices of how frequently to copulate, or what government to tolerate. And as we see, only developing countries' residents can be held responsible for anything.
By the way, smug 'Wall Street types' [as one angry reader called me] represent the best hope for developing countries. A glance at population growth figures for Germany and Austria in particular, and other advanced societies as well, will show that they have reached static or negative population growth. Evidence shows that this Demographic Transition, as it's called, is strongly correlated with prosperity. Simply put, make poor countries more affluent and they don't make as many kids. We do not know why, but it's hard to argue with the population growth stats. Only draconian measures like China's can allow a society to take a shortcut, and few societies have China's pervasive level of effective authoritarianism.
If making them richer would help, then how will poor countries gain in wealth? It won't hurt to have emerging market mutual fund managers, flush with new capital to invest, seeking opportunities and buying stocks and bonds. If you build an investible society, so to speak, the money will come. Only last year did T. Rowe Price start the first major, credible fund investing partly in Africa (TRAMX). I jumped in, not because I'm a social responsibility advocate but because I want to make money. I see Africa as the next/last big cheap labor source for Asia and the world. I wanted in.
And there will be more. Emerging market funds are out there, seeking returns, shopping for good investments. I would argue that if Shi'ite leftists really want to help the world's poor, they stop giving money to snotty aid agencies that race through AIDS-plagued African countries in white Land Rovers without giving half a damn for the wastage, and start investing so that locals in those countries can build real economies with real laws that go beyond "bribe my brother Mpongo and he'll take care of everything."
Charles had a humorous suggestion, but one that I violate daily:
Got an idea that could help deal with overpopulation: no more booze! Why are we using corn to make whiskey, barley to make beer, grapes to make wine, and rice to make sake? Everyone talks about the world being addicted to oil. What about their addiction to booze? Let's kick the oil and booze habits, and make this world a much better place! Tell them, until the world is fed, no more booze. Let's see how fast the world gets fed.
Expect starving people on my watch.
Sorry, but to me a day without hooch is like a summer without sunshine, so don't count on me in this scheme. There are three tools I consider essential to investing: a good calculator, a good internet connection, and a collection of shot glasses with full bottles to match.
An old friend of our family's in the Rocky Mountains of Colorado was asked if he preferred hiking drunk or sober.
He turned to his wife and asked, "Sober?"
"It means when you haven't been drinking," she explained.
"Oh, hell, I'm the wrong guy to ask about that."
Those are my people. Whenever I'm staring at a pile of grain, a pile of yeast, and a pitcher of water, and trying to decide what to do with them, I end up distilling whiskey every time.
But I digress.
Maria Fotopoulos from Californians for Population Stabilization at Capsweb.org wrote, "Overpopulation is absolutely at the root of problems, and we have to start talking about it again." She referred me to her own April 16 article about something missing in Earth Day activities, from which I took this excerpt:
The late Senator Gaylord Nelson, founder of Earth Day, knew that population was a significant element of environmentalism. "The bigger the population gets, the more serious the problems become.... We have to address the population issue.... It can be done."
Unfortunately, we have become increasingly reticent to discuss overpopulation and its concomitant environmental impacts, let alone actually address it. The 1970s when the population-environment linkage was always acknowledged and widely discussed are a distant memory. We now live in a time where for eight years the leader of the free world has failed to show any true top-down leadership by repeatedly denying funding for the United Nations Population Fund.
And within our country for the last 25 years, we have allowed a flood of immigrants to settle here essentially unchecked. Again to Gaylord Nelson, who also said, "In this country, it's phony to say 'I'm for the environment but not for limiting immigration.'"
Here in California, the population increased nearly 50 percent just from 1970 to 1990. Virtually all of the additional 500,000 people we've been adding annually in recent years is attributable to immigrants and births to immigrants. According to the California Department of Finance, the state's population may hit 60 million by 2050.
The impact of this population tsunami is felt everyday in congested roadways, overcrowded schools, poor air quality, stressed biodiversity and diminished quality of life. So it's difficult to imagine a California that would be better with a population twice the size of the current one.
We, as Californians -- as Americans -- must decide if we will choose to determine the direction of our country for those who will inherit it. In fact we need to decide if we have a moral responsibility to do so. Or, will we just let the future unfold with no regard to what will be wrought through overpopulation?
That's something to think about this Earth Day.
This discussion is timely. On Tuesday, USA Today reported that the U.S. population could reach 1 billion by 2100:
"What do we do now to start preparing for that?" asks Arthur Nelson, co-director of the Metropolitan Institute at Virginia Tech, whose analysis projects that the USA will hit the 1 billion mark sometime between 2100 and 2120. "It's a realistic long-term challenge."
The nation currently has almost 304 million people and is the world's third most populous, behind China (1.3 billion) and India (1.1 billion). China passed the 1 billion mark in the early 1980s.
Nelson's projection assumes that current fertility rates remain constant but that longevity and immigration will continue to rise.
Yesterday's article on overpopulation as the root cause behind the rising price of everything, global warming, the disappearance of wildlife, and rising casualty counts from natural disasters led a few readers to express their desire that the world have one less human on it by removing me.
One reader called me "elitist" and another wrote, "You smug Wall Street types make me sick. You sit there on your pile of money and look down on all the struggling, DYING poor around the world and say everything is their fault when any idiot can see that it's the fault of global corporations, which you support with your investment capital."
Martin wrote:
I just want to write my objection to what you wrote about overpopulation being the main source of a number of problems we see currently in the headlines.
This is a very dangerous line of thought and contradicts what you wrote about last week about how you survived cancer and about your mother's challenge to recover from her accident.
Life is precious, is a gift, and cannot ever be judged as a "problem." I'm sure all your readers were overjoyed and inspired by your cancer survival story and were moved to hear about your mother's terrible accident. Yet, if overpopulation is the problem, then in that line of thinking, the argument can be made that it would be better for people to die off and not hang around, as they only add to the problems we see in the headlines.
You must include yourself as part of the "overpopulation problems," not just some people struggling in some far off, Third World country. This is, of course, an absolutely wrong and an intolerable way to think. Sadly, we have had many examples of recent 20th Century History to show what happens when we think and act this way.
I'll start with the charges that it's elitist to note that overpopulation is the crux of our problems. I did not write yesterday that I'm sitting separate from my fellow man. In fact, I wrote just the opposite: "All of us are part of the problem even though nobody did anything wrong on an individual level."
I cited U.N. data showing that the population of developed countries is on the decline while developing nations are producing all of the 80 million net population gain each year that will see 10.4 billion people on Earth by 2050.
It must be the fact that world population growth is coming from developing nations that makes anybody pointing it out from a developed nation appear to be elitist.
But, what's elitist about it?
I didn't say I'm better because I don't have a house full of kids, or because I eat three meals a day, or because I'm American. I haven't produced a house full of kids, but I grew up in one. My family went beyond its replacement level, though to my mother's great credit, two of my brothers were adopted as infants from undesirable situations, an act that greatly improves society. Still, my mother gave birth to five children of her own, thereby contributing to the problem of overpopulation.
I know that, and I love my mother, and I don't think she did anything wrong. That's why I wrote yesterday that "nobody did anything wrong on an individual level."
So let's not paint a cliche picture of where I'm coming from. I'm not an indifferent, arrogant, rich white guy wishing for famine to wipe out the poor, or plotting a nuclear war to clear some space.
However, just as it's not the fault of those born into awful conditions that they're in them, it's not my fault that I was born into a good family with plenty of food and went on to study investing. That's who I am, and from that vantage point I'm looking at the raft of problems facing the world and I keep coming back to the fact that there are too many people. That I'm one of them does not change the data, and my sharing the data with you does not make me an elitist.
Martin wrote that life is precious and can't ever be judged as a "problem." I agree with the spirit of that statement, and would save the life of somebody in trouble the same as anybody else. I don't think there's one person, regardless of how familiar they are with overpopulation, who would see a mother and child in a burning car crying for help and think, "Oh, good, soon there will be two fewer mouths to feed." Of course not.
One life is a gift. A family of ten people is a gift. Even 7 billion people on our planet can be a gift if we figure out how to feed everybody. But can we agree that at some point, we'll have too many people? We don't need to name and point, but collectively there must be a limit.
Some might say that limit is 10 billion people, others 20 billion, maybe somebody out there thinks the Earth can support 50 billion people. Optimists have even suggested 1,000 billion.
It's an old question. Two hundred years ago, Thomas Malthus said population would race ahead of food supply, but he wasn't the first. The early Christian writer Tertullian said (around AD 200, in De Anima): "We are burdensome to the world, the resources are scarcely adequate for us... Truly, pestilence and hunger and war and flood must be considered as a remedy for nations, like a pruning of the human race becoming excessive in numbers."
That was when the population of the whole planet was maybe 100 million or so. We reached the first billion mark by about 1850. By 1950, it was about 2.5 billion. In less than one short lifetime, this figure doubled. It passed six billion in the late 1990s. Note that: humans took 150,000 years to get to the first billion. The most recent billion arrived in just 12 years.
Nobody knows how many people the planet could hold.
What we do know right now is that there are enough already here so that if everybody lived at American standards, we'd need another four Earths. Does writing that make me elitist, too? Selfish, at least?
It's a real issue at the very center of the environmental debate. China and India argue, rightfully, that the U.S. and Europe and others at the top got where they are by burning fossil fuels for the last 150 years, thereby packing the atmosphere with carbon close to the limit of what the Earth can support. Now that those nations are rich and happy, they want to limit the amount of carbon that other nations on their way up can emit.
China, for one, already flipped the bird westward on that topic. It said it has the right to grow its economy, and that doing so remains its priority.
Which would not be a problem if China wasn't home to 1.3 billion people. There it is again: overpopulation. We may never get to find out how many people the Earth can feed because the existing base of people will burn enough fossil fuels to end this whole experiment long before that.
So, China has a point, but are you willing to stop driving your car and tell your children to not have children so that Chinese families can live like Americans used to? Of course not. Which means that Americans will keep driving, Chinese will start driving, and the world will get a whole lot worse because there will be too many people driving. That's one reason I'm such a proponent of electric cars.
I wrote yesterday that there is no easy way to stop overpopulation. Martin is right that some awful things have come from the desire to control population growth. To state the obvious, I'm not advocating sterilization or genocide. I don't hope for a disease to somehow contain itself within the borders of developing countries until people there are gone while the developed world goes on undaunted.
However, I do think we need to look carefully at the role birth control should play in shaping the planet we want in our future. I also doubt that it will work. We can't even prevent unplanned pregnancies in the developed world despite years of education and the availability of cheap birth control. Do we really expect developing populations to (A) agree with the idea and, even if they do, (B) implement it effectively? No.
Which is why I concluded yesterday that we should expect more fences. The developed population is not growing; the undeveloped population is growing wildly. Some will conclude that letting the poor overrun the rich will just make everybody poor, but they keep coming, so a sturdy fence will be the answer. Why that's hard to grasp is beyond me. We see it already within developed countries. Ever been to a gated community?
Optimists say technology is the answer. Maybe by 2050, Earth's 10.4 billion people will all be well-fed and peaceful thanks to abundant clean energy and efficient agricultural methods. We all hope so.
But, what are the chances?
We've had electric motor technology for 100 years, but you're still burning gas on the way to the grocery store. We've had nuclear power capabilities for 60 years, but you're still likely burning coal every time you flip the light switch. Biofuels are a great way to, oops, wait a second, they're the reason for the food shortage, never mind.
You get the point. Expect more fences -- and don't shoot me, I'm just the messenger.
Now that oil is at $117, gas is at $3.50, and rice is up from $100 per ton in 2003 to $1000 per ton now, people are paying attention. However, few have caught on to what's really the core problem.
Some say biofuels have taken food out of the mouths of the poor. Some say speculators are driving prices to the moon. Some say growing economies in China and India are to blame. Some say global warming is the culprit.
Typical is Paul Krugman's article in yesterday's New York Times:
...concerns about what happens when an ever-growing world economy pushes up against the limits of a finite planet ring truer now than they did in the 1970s.
For one thing, I don't expect growth in China to slow sharply anytime soon. . . . Meanwhile, resources are getting harder to find. Big oil discoveries, in particular, have become few and far between, and in the last few years oil production from new sources has been barely enough to offset declining production from established sources.
And the bad weather hitting agricultural production this time is starting to look more fundamental and permanent than El Niño and La Niña, which disrupted crops 35 years ago. Australia, in particular, is now in the 10th year of a drought that looks more and more like a long-term manifestation of climate change.
Right on all points, but what's driving each of them? Why is the growth of China so problematic? Why are resources depleted across the board? Why is the climate changing?
In a word: Overpopulation.
China's growth would not matter if it had only 100 million people. More Indians driving cars would not matter if just 80 million people lived there. The world liking to eat fish wouldn't matter if there were one billion people on Earth.
But there are 1.3 billion people in China, 1.1 billion people in India, and 6.7 billion people on Earth. Get the global population to 10 billion, a 50% increase, and we'll see our resource and climate troubles grow by 50% as well.
I mentioned this to Kelly Letter subscribers last weekend, and the rest of this article is adapted from that report.
Stand back from the headlines of expensive oil, expensive food, and many other modern issues and you'll see that all trails lead back to overpopulation. There are just too many people, which has led to:
Disappearing fish and other wildlife. From Overfishing.com: "Worldwide, about 90% of large predatory fish stocks are already gone. There are two serious problems: (1) We are losing species as well as entire ecosystems. Our oceans are at risk of collapse. (2) We are at risk of losing a valuable food source."
Increased pollution levels and the changing climate
Resource depletion across the board
Higher casualty counts from natural disasters
We'll see an endless flow of headlines reporting shortages of oil, food, and other commodities because there is no reasonable way to stop the population problem. Population growth is coming from developing parts of the world where birth control is either unknown or resisted. Much of the developed world is in a population decline.
It's hard for anybody to look at their own children and see them as the reason for food shortages in Haiti, but all of us are part of the problem even though nobody did anything wrong on an individual level.
The "go forth and multiply" drive will not recede easily, if it will recede at all.
According to the United Nations Population Division, world population reached six billion in October 1999. Since then, it has grown by some 700 million people. That's 2.5 times bigger than the population of Chicago, 1.8 times bigger than Los Angeles, and 84% the size of New York City. Each year, global population grows by 80 million people and all of the increase is happening in developing countries.
U.N. medium variant projections show that between now and 2050, the population of developed nations will decline by 10 million people while the population of developing countries will increase by 3.7 billion people.
