The Stock Option Writer
© Warren Kaplan 2011-2015
October 5, 2015
The following data was taken from Blumberg Business. Frankly, I am not concerned with the population of 2050. The reality is that in the year 2050, I will be 113 years old. That said, my wife who is younger than me would be only 112.
So my son will be 85 and my daughter will be 81. They will probably be alive in 2050. My grandkids will all be alive so it is their investments that will be impacted in 2050 and the estimated population numbers are meaningful to their investment programs.
The projections were recently released by the Population Reference Bureau located in Washington DC. That nonprofit group analyzes and disseminates demographic data and research.
So, lets look at the numbers and see some of the ways we can capitalize (make money) on it.
The following countries will likely face tremendous difficulties in supplying food, water, housing, and energy to their growing populations, with repercussions for health, security, and economic growth. This spells opportunity for long-term investment accounts. There is big political risk and the only sound way to handle this area of investment is via ETFs. And all USA based companies that sell into the growth areas, well food is, to me, the most obvious investment area and the old-line food companies that have been in business for a long time and have the expertise and know how can operate effectively in those growing regions. As a general statement, Africa and Southeast Asia are the obvious targets.
India will be #1. Their estimated population is expected to be 1,850,000,000 by 2050. The current population is 1,252,000,000. For prospective, our population is estimated at 318.9 million. India’s middle class currently exceeds our entire population. I have found that a big drawback on India is the socialist government. The ETF I found on India is
Next in line is China. Their population estimate for 2050 is 1,400,00,000 people. I think this is a low estimate and I do not know how the Population Reference Bureau in Washington DC came up with that number. The belief is that the Chinese government will be successful in driving down fertility rates. How naive. Next is the USA with 400,000,000 people followed by Nigeria with 400 million, Indonesia with 375 million and Pakistan with 350 million. Brazil should have 230 million followed by Bangladesh with 200 million and the Congo with 200 million last on their list is Ethiopia with 175 million. As a group, Africa is a risky area with 56 countries and lots of opportunities.
The only way to reasonably invest is through Exchange Traded Funds whose managers manage the investments and understand those respective countries. One thing you know, those people will need food and water and shelter. Roads will have to be built. Electricity will be needed. 35 years is a long time for humans and I am confident that all long term ETFs will succeed unless they are totally stupid. My suggestion is to stay with the largest ETFs, as there will be many errors made but a wide portfolio of stocks will prove to be beneficial. Dividends are a must and they should be reinvested using a dividend reinvestment program (DRIP). The 2008-09 crash wiped out stock gains in the USA that had taken place since 1998. The bearish attitude was everywhere. Now look at the market 6 years later and the stock market has hit new highs in 2015. Panic and forced selling had hit the stock market in 2009 and someday, certainly in 35 years, it will happen again. Probably a few times with varying degrees. However, the population increase will bring more demand for everything. My 16-year-old grandson who holds UPS and SDY thinks more toilet paper will be needed. He said to me that regardless of economics and who you are, you will always need toilet paper. He is right and this give me a chance to talk to him about values and prices to be paid to become an owner in a company that makes toilet paper. I told him to research which companies make toilet paper and we can discuss their values. By the way, he picked UPS and I picked SDY (an ETF).
In 35 years, he will be 51 years old.
As to the current market, a long-term investor has to look at the oil stocks. Yes, there are several oil and gas ETFs. One problem I have with ETFs is that their option markets are not really active except for SPY (the S&P 500) and a few others. What I do is decide on a price that I am willing to buy an ETF and how much I want for my premium based on the strike price and the time factor. Those premiums do add up. I have recently sold short-term call options on my Pfizer (PFE) with strike prices of $37-$39, sold put calls on US Steel (X) at $9.50, $9.00, and $8.50. Put options I sold at $10 expired worthless and I was able to keep the entire premium. For non-optionable stocks, I have been buying High Yield Closed Bond Funds like HIX, PHT and MIN for my IRA and Roth accounts and closed end muni bond funds for my trust accounts.
The reason I have not written about stocks for the month of September is because I was on a 24 day cruise from Amsterdam to Rome and the Western Mediterranean.
Next week I will give you some great option ideas.
Warren Kaplan has been writing options for 50 years. He has been a stockbroker, investment banker and brokerage owner. He currently owns and operates Kaplan Asset Management, a provider of financial assistance for small to middle market businesses. He has more than a half-century of experience in dealing with financial markets, giving guidance and consulting with management, and assisting in the development of business strategies and solutions. The Company has assisted and consulted many successful companies, such as Natures Bounty (NBTY) and Action Products International (APII), helping them to go public and trade on the NASDAQ stock exchange. His philosophy is to “do something with the profits.” “If you make $100 in the stock market, take 50 percent and invest it back into the market. Then, take the other 50 percent and buy yourself something.”
Additional disclosure: I am not a registered investment adviser and I do not give investment advice. Nothing in this article should be construed as investment advice. Investors are encouraged to do their own research and seek the advice of an investment professional before investing. Writing options is not for everyone. This article was written for informational purposes only.