The Incontiguous Brick

June 29, 2007

Booming Afghanistan investment opportunities

Filed under: Humor,Money,Ramblings — iknowkeith @ 11:49 pm


MSN money writes, “It doesn’t take a genius to soundly thump the market. Sometimes, it’s as simple as finding a stable, century-old dividend distributor to invest (and reinvest) in.” With this sage advice in mind, it didn’t take long for the Incontiguous Brick to find a real gem of investment opportunity.

Afghanistan has been a major opium producer since the mid-1800s. This long established industry has seen many ups and downs over the years but is clearly on the upswing with room to grow. According to Alfred W. McCoy, “In 1907, the first systematic survey of opium indicated that world production stood at 41,624 tons–over ten times the 1994 world illicit opium supply.” Today, Afghanistan produces 92% of the global opium supply. Now that is market dominance!

The United Nations Office on Drugs and Crime (UNODC) says illegal opium production in Afghanistan increased by 49% in 2006 compared to the year before. As seen in the chart below, that is a continuation of overall growth since 2001. With the continual trend towards increased globalization, it appears that the market for Afghani opium products will only grow.

The UN report also stated that early indications suggest Afghanistan could see a further increase in opium production in 2007. In fact, “developments in Afghanistan will continue to determine the levels of global opium production.” Sounds like the more they produce the more they will sell. This is an investors dream.

opium12.jpg

Don’t worry if it seems too difficult (or risky) to find a good opium fund to add to your portfolio. Except for those investors with off shore bank accounts it probably is too dicey to invest directly in a commodity like opium. That does not mean you can’t take this report all the way to the bank. Focus on the spin-offs.

To really capitalize on this boom you need to look to the supporting industries in the region. The growth in the opium market is complimented by an upturn in transportation, illicit shipping, sales, marketing, and law enforcement. A lot of money will be spent this year trying to stop the flow of opium and there will be an increase in spending to circumvent law enforcement. Consider investing in companies that provide shipping from Afghanistan to deliver opium to world markets. If banking is more your fancy, there should be a large growth in the opium financiers. Consider the Agricultural Development Bank of Afghanistan (established in 1959) or the Kabul Bank for long-term growth stocks.

The real guarantor of the Afghani opium boom is the American people. Persistent military pressure [in the region] to destroy opium production will continue to drive up the commodity prices. As the supply is weakened and demand remains constant it will only boost profits for the remaining producers, distributors, and spin-off industries. Just look at the oil company profits over the last couple of years.
03afghan.jpg

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