Five ETFs For Doomsday Capitalism
The world is always ending, according to someone out there. The current environment is full of those who think the end is nigh–at least for the robust global economy to which we’ve grown accustomed. Let’s suppose that our economy is about to fall off a cliff, resulting in general chaos, what’s the average investor supposed to do? The answer is a bit of an oxymoron: profit from doomsday capitalism. Even the most pessimistic of the bunch can appreciate the investment options available at their fingertips which could pay off big time if (when?)our political and financial systems deteriorate [see Doomsday Special: 7 Hard Asset Investments You Can Hold In Your Hand].
Although most apocalyptic scenarios are dismissed for obvious credibility reasons, one financial expert proposes a compelling theory. Barton Biggs, former chief global strategist for Morgan Stanley for 30 years, is a renowned hedge fund manager who also bears the reputation as a doomsday capitalist. In his 2008 book Wealth, War, and Wisdom, Biggs shares his gloomy outlook for the economic future and even goes onto recommend that people “assume the possibility of a breakdown of civilized infrastructure”. This last quote reads more like a frantic, paranoid outburst that you would run across on a conspiracy blog of some sort, however, Biggs is no nut. In addition to correctly calling the technology bubble a year before it burst, Institutional Investor magazine has included Biggs in their “All-America Research Team” list on multiple occasions.
In his book, Biggs discusses the possibility that riots and rebellion could emerge when law and order break down. Although there’s only a few things we can actually do to survive in such a chaotic scenario, MarketWatch columnist Paul B. Farrell covers several investment opportunities to consider before we potentially reach the point of global economic collapse. In his recent article, Farrell highlights a number of intriguing asset classes that may allow for investors to favorably position themselves as certain macro-economic, long-term trends continue to play out.
Below we outline five ETFs which doomsday capitalists’ ought to consider for their portfolios:
Van Eck Market Vectors Agribusiness ETF (MOO)
Food price have a history of steady increases, while recent growth across emerging markets has drastically increased demand, further adding to the growing fear of an impending global food crisis. In fact, the United Nations have called the global food crisis a “silent tsunami”; billions of people living below poverty levels have limited access to food despite the impressive advancements in agriculture technology over the past decades.
Companies who operate in the agribusiness sector may be well positioned as food demand continues to grow across both developed and emerging markets in the coming years. MOO allows for investors to tap into this lucrative corner of the market; this ETF offers exposure to 47 publicly traded agribusiness companies. Top holdings include well-know industry behemoths such as Monsanto, Potash Corp. of Saskatchewan, Deere & Co., as well as Archer Daniels Midland [see MOO Fact Sheet].
iShares S&P Global Timber & Forestry Index Fund (WOOD)
It’s a well known fact that our natural habitats are shrinking, thanks to our rapid, and seemingly unstoppable, urban development across all corners of the globe. We are cutting down forests at an accelerating rate in order to accomadate unprecedented population growth; likewise, timber has become a precious natural resource that has long been overlooked by many.
For those looking to make a long-term bet on the timber industry, WOOD presents itself as a compelling choice. This ETF is linked to an index which tracks the performance of 25 companies engaged in the ownership, management, or upstream supply chain of forests and timberland [see also Global X Files For Farmland & Timber ETF]. WOOD holds a balanced portfolio of commodity producers and land management firms; paper & forest product producers account for roughly half of total assets, while timberland real estate investment trusts account for one third.
PowerShares Water Resource Portfolio (PHO)
Few people are aware that a significant portion of our limited global fresh water supply is being used for irrigation, domestic use, and industrial processes. Many are predicting that water will one day trade like oil futures as it become more and more scarce. With over a billion people lacking access to safe drinking water today, it’s hard to imagine how we will quench the thirst of our ever-expanding world population over the coming years [see Definitive Guide To Water ETFs].
PHO does not offer a direct solution to the problem; instead, it offers exposure to companies which are actively engaged in developing and providing water treatment technologies that may be in high-demand. This ETF focuses on 30 companies that are involved in the treatment of water and services directly related to water consumption. From a market capitalization perspective, PHO is dominated by mid and small cap stocks, although micro caps also receive a significant allocation, resulting in a lucrative risk/return profile.
Van Eck Market Vectors Global Alternative Energy ETF (GEX)
It’s hard to consider an end-of-the-world scenario without addressing the energy question. Simply put, our modern world is dependent on fossil fuels; the frightening realization is that our insatiable appetite for energy could end up hurting us if we don’t actively develop and adopt alternative sources while it’s still not too late.
Alternative energy companies are often times associated with sky-high levels of risk, although the evolution of the exchange-traded product structure surely offers a way around this challenge [see 25 Ways To Invest In Alternative Energy]. GEX allows for investors to gain access to a global basket of 30 companies principally engaged in the alternative energy industry. This ETF is focused on companies who are working to develop renewable energy sources; exposure is well diversified across solar power, bio fuels, wind power, as well as hydro and geothermal energy.
EGShares Dow Jones Emerging Markets Consumer Titans Index Fund (ECON)
Perhaps the biggest, and most obvious, obstacle in dealing with the above stated challenges is ourselves. Our rapidly increasing world population has proven to be a key headwind when it comes to achieving a favorable balance between us and the natural world. With more and more people inhabiting our planet everyday, the already insufficient resources are further dwindling down. While the population growth bubble is by all means concerning, if not frightening, doomsday capitalists know how to put a positive spin on the issue [see ETFs To Tap Into Emerging Market Consumers: Six Ways To Play].
People in emerging markets have demonstrated their ability and desire to mimic consumption patterns prevalent across the developed world. Emerging middle-class consumers across Latin America and Asia are moving into cities, buying cars, and spending more and more on food, electronics, and all sorts of personal & household goods. ECON allows for investors to profit from the population boom through a portfolio of 30 leading emerging market companies in the consumer goods and services sectors [see ECON Holdings]. This ETF is well-balanced from a country breakdown perspective; Mexico, Brazil, and South Africa are top holdings, although exposure to Chile, Malaysia, Indonesia, and China is also included.
Disclosure: No positions at time of writing.