Tuesday, March 20, 2007

The Coming Crises - Investing For the Future

So this weekend I listened to Bob Brinker's Moneytalk radio program and although I was aware of these issues before, I think that there is significant money to be saved and/or made on opportunities for the medium to long term investor when it comes to several major issues that are going to become pressing in the not-too-distant future. Without getting into too much detail in this post, I simply want to list them for you and provide a brief description. Finding opportunities around these issues is, of course, no small task.

Additionally, these issues are somewhat speculative. If you are planning for a disaster, you really are just hoping that one doesn't happen. So, I have to say up front that I hope none of these issues really develops into a catastrophe, but I also need to acknowledge that there is a strong likelihood that at least one of them will. Without further ado, I list the issues in my own subjective order: worst to not-so-bad.

1. Medicare - There is a huge, huge problem with the current medicare spending in the United States. Recent information that I heard on T.V. from the head of the US GAO indicates that the medicare problem is somewhere on the order of 5 to 6 times worse than Social Security. This problem is due to the fact that there are more and more old people and our medical system is getting better and better at keeping people alive for long periods of time. From a medical ethics standpoint, many people argue that we are now keeping people alive long after their lives are enjoyable. But this trend is likely to continue as we develop more medicines and cure diseases.

2. Social Security - This has about a 100% chance of being a major issue within the next 15 years. Politicians are scared to touch this and Medicare but like many financial issues, this is getting worse every day we don't do anything about it. I'm currently just hoping for about 50% of my estimated benefits when I retire, but even that might be overstating things.

3. Energy Crisis - Regardless of how you feel about Peak Oil and the theories that surround it, you cannot deny that we are facing an energy crisis. In part, this is because production is down in some parts of the world that we have come to rely upon. Vast amounts of research has been started, but there has been very little notable progress made by those researching biodiesel, wind-energy, or solar power. Increased demand in the Middle Easy and Asia due to burgeoning populations will drive the price up as the supply dwindles. The forth component in this crisis is increased demand from environmentalists for tighter restrictions on ozone and carbon-based emissions.

4. Global Warming/Climate Change - Let me state for the record that I believe in global warming. I think that the earth is resilient, but that there is a balance. And while I do believe that we are changing the earth, I also believe that the earth is changing on its own as well. But to be completely in-the-dark and oblivious to the fact that our climate and planet can and do change is just utter folly. I don't expect a 'day-after-tomorrow' scenario, but I do think that it might make sense to be aware of the longer term effects on coastline, fishing, and agriculture that could be affected as a result of even a minor climate shift.

5. Avian Flu - Statistically, there will be a new flu virus in my lifetime. Will it be a horrible strain of H5N1? I certainly hope not, but you never know. Some people but worst case scenarios of H5N1 pandemics at 50-60% mortality. This would change the face of politics, economics and literally shake our civilization to its foundations. I simply have to believe that this kind of worst-case scenario won't happen. But do I think that we could have a nasty airborne virus? I sure do.

What do you think about this list?
Do you have any that you are considering?
Would you rank these the same way as I do?


As I move forward I will start scouting for opportunities that will be based around these scenarios. Not just the worst cases of each, but also opportunities that might make money on people's preparation efforts. In general, I think that looking at some of these bigger issues is one of the more interesting ways to invest and make money.

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