When I started picking stocks as a hobby, one of my stated goals was to prove that a broad liberal arts education would work as well for the task as a business education.
It had dawned on me, and I had verified by paper trading, that much of my political opinion was "investible information" and much of what was popularly taken for opinion was in fact arithmetic.
I have moral limits to my investments, but none for trades, because trades simply do not benefit the corporations whose stock you are zipping in and out of to any significant degree.
So, I was reading a report this morning that had a prime example of investible information out of the headlines, in this case information about which I'm not really happy: "...if the militarization of the U.S. police force continues apace and every Podunk deputy in Hazard County uses his Homeland Security budget to buy one of these, you could see AVAV run like Taser (NASDAQ: TASR) in 2003, when it went from $2 to $29..."
"One of these" refers to drones, and the argument of the report is that the civilian applications of drone technology will far exceed military applications over time. AeroVironment (NASDAQ: AVAV) is one of two small companies in the business of making drones exclusively. Boeing (NYSE: BA) also makes drones, but that's not what stock pickers call a "pure play."
I have no plans to trade this information, but I think it's probably correct.
The current civilian uses of drone technology involve inspecting pipelines, keeping track of wildlife, and policing the border. There will be more. Bloomberg estimates drone spending at $89 billion over the next ten years. How intrusive they will be is a political question.
I should also add that, at least so far, civilian drones are not weaponized. Their only purpose is surveillance. Their eyes, unlike ours, can see at great distances, can see from great heights, and can see in the dark.
After playing the market for some years, it dawned on me that "investible information" also flows back in the other direction.
During the argument over exploitation of the tar sands in Alberta, some of my fellow treehuggers stated publicly that oil from bitumen took more energy to extract than the energy that it would produce.
Currently, the argument is made over Keystone XL that failure to approve it will drive costs of exploiting the tar sands up over what would be profitable.
The absurdity of these arguments could be clear to anyone who troubled to read the SEC filings of the major players in the tar sands. They have to be completely aware of their breakeven point at all times, and it adds no value to the argument to make up stories...the one about burning more energy in the extraction process than the amount produced being particularly egregious. These people do expect to turn a profit, y'know?
Killing Keystone XL may be politically doable, but whether it will change the carbon footprint of the tar sands undertaking is about arithmetic. Instead of a pipeline, the transport will be by rail, by tanker ships over the Northwest Passage conveniently opened by climate change, and by barge down the Mississippi River.
The carbon footprint of production remains the same. The carbon footprint of transportation will go up, since China's cut of the production will go up. Sinopec is in for the cash but they would rather have the product.
Spills will be, no pun intended, at least a wash and probably greater. Pipelines always leak. So do all the other methods.
Sometimes the policy drives the money; sometimes the money drives the policy.
In the case of private prisons, "if you build it, they will come." I do not invest in private prisons. It is to me a moral issue.
Drones? Many uses are plainly benign, and any limitations remain to be worked out politically. I'm not playing because I'm not interested.
Bitumen? I have no interest in the major players in the tar sands, now or in the future. I am interested in methods for recycling water in the oil patch. I have traded makers of rolling stock and pipeline operators and may again. Getting oil and gas from hither to yon is not immoral. It's absolutely necessary to the lifestyle we have chosen and until I, personally, give up fossil fuels, I'm in no position to rain moral opprobrium on those who provide them to me. It's like a heroin addict bad-mouthing the dealer. If you don't like what the dealer does, quit.
My point is that if the news pages can help you make money stock picking, it's also true that the business pages can keep you from making a fool of yourself in political debates, keeping you focused on the distinction between opinion and arithmetic.