Guns and Butter: Two Bull Markets Worth Watching

Stocks went precisely nowhere yesterday. In fact, for all of 2010 so far, the Dow and S&P 500 have done just about squat – a 2-3% gain, at best.

Traders will say they’re all holding their breath for today’s FOMC decision, which, as our pal Peter Cooper forecast last week, might include a surprise rate hike. But really…stocks are boring these days. So let’s find a bull market somewhere else more traditionally boring.

Buy food, Chris Mayer told his Special Situations readers yesterday. “The world has an increasing demand for food,” he wrote, citing some nuggets from the CEO of one of Chris’ favorite ag stocks:

  • The UN’s estimate that world population will grow from 6.8 billion people to 9.1 billion people by 2050, with Asia and Africa making up 80% of the increase
  • The world will need to produce an additional billion tonnes of cereal crops and 200 million tonnes of meat. That’s a 70% increase in food supply
  • Global diets are shifting from one heavily weighted toward rice to one that includes more meat, which has an exponential effect on grain demand
  • Scarcity of arable land and clean water mean that most of the new production (about 80%) will have to come from increasing yields from existing farms.

“In that kind of world, a global agriculture powerhouse with a focus on bringing food to markets is the stock to own. This next chart shows you what the global trade flows for grain might look like over the next decade. Note the large import markets of South America, Africa and the Middle East and Asia.”

Global Trade Flows

Here’s another global bull market, this one a little more explosive – weapons. The average volume of global arms sales rose 22% over the last five years, the Stockholm International Peace Research Institute reports.

Interesting details in this report… The US, the great global police force, remains the world’s biggest exporter of arms. We are responsible for some 30% of the global trade. Russia’s bombs and guns are close behind, with a 23% stake.

The world’s biggest importers rank in this order: China, India, South Korea, the UAE and Greece. South America saw a stunning 150% spike in arms sales (ahem, Hugo Chavez). Exports to Southeast Asia, notably Vietnam, are up quite a bit, too.

And just how much money is the world spending on weapons? Heh, c’mon… Governments don’t disclose that information anymore. It’s none of your business anyway…right?

Addison Wiggin
for The Daily Reckoning

The Daily Reckoning