Market Musings 151022:
Ensuring Basic Needs - Food and Water, Energy, Communication
Focus on Maslow’s hierarchy of needs - focus back on basics!
SUMMARY
- Basic needs have become scarcer to source, and thus more expensive
- The focus on security (of food, water, energy, communications, infrastructure) will remain for a long time
- Cybersecurity is a particular investment need, given exponential increase in the number of cyber attacks
- Which related funds and ETFs to look at?
PODCAST
October Investment Strategy Update
- Why have you raised your recommendation on corporate credit to positive?
- Can you tell us more about the mini-budget announced in the UK?
- Why does the extreme level of investor pessimism offer a long-term buy opportunity?
- Why does the strong volatility in financial markets offer a long-term buy opportunity?
- Are you worried about the new Italian government?
We can’t take supply of basic necessities for granted
According to Maslow’s hierarchy of needs (click on link for details), our most basic needs are physiological in nature. These include our need for food and water, heating and lighting, and shelter and sleep.
Maslow’s Hierarchy of Needs
Source: verywellmind.com
The pressure on food, energy and shelter costs on the back of COVID-linked supply chain disruptions and the war in Ukraine has refocused investors’ attention back on these most basic necessities of life.
For many years, we have taken for granted a relative abundance of cheap food and energy in particular, with the share of food, water and energy costs of a typical Western household’s spending falling consistently for several decades.
An additional factor which has suppressed global food, energy, and goods prices has been globalisation - especially following China’s 2001 entry to the World Trade Organisation, when an avalanche of cheap Chinese exports effectively depressed goods prices around the world.
But since 2020, this has all changed dramatically. Global supply chain disruptions triggered by COVID-linked lockdowns and the surge in the cost of transporting goods around the world have put an abrupt end to this trend of lower goods prices.
World Food Prices Have Surged since 2020
Source: Food & Agriculture Organisation
Food prices have been driven higher by a number of factors: poor harvests linked to weather volatility (potentially linked to global warming), the higher cost of nitrogen fertilizers (whose manufacture is very energy-intensive) and also of potassium-based fertilizers…
