I like history.
I like travel.
I like politics.
And I like travel books.
Wrap those all together, and you’ve a Robert D. Kaplan book. “Monsoon – The Indian Ocean and the Future of American Power” is the latest book from this globe-trotting author. From the inside dust jacket:
On the world maps common in America, the Indian Ocean all but disappears. The Western Hemisphere lies front and center, while the Indian Ocean region is relegated to the edges, split up along the maps’ outer reaches. This convention reveals the geopolitical focus of the now-departed twentieth century, for it was in the Atlantic and Pacific Theaters that the great wars of that era were lost and won. Thus, many Americans are barely aware of the Indian Ocean at all.
Kaplan takes a swing up and around the Indian Ocean, from Oman to Pakistan, India, Sri Lanka, Bangladesh, Indonesia, Burma, China, and finally, back around to Zanzibar. As with his other books (“Surrender of Starve: Travels in Ethiopia, Sudan, Somalia and Eritrea” or “Balkan Ghosts: Journey through History”), Kaplan does the grunt work of hitting the ground with a backpack and a journalist’s knack for getting in to see influential people in government and business. He has a sharp eye for detail, a wide eye for future trends, and no discernible political axe to grind.
Monsoon was a quick and fascinating read. More than anything, it illustrated the non-violent struggle for power and influence in the Indian Ocean region between emerging powers India and China. China is building sea ports in Pakistan and Sri Lanka, India in turn is funding infrastructure development in Burma/Myanmar.
The massive harbor being built by the Chinese in Hambatota, Sri Lanka, makes very pragmatic sense. As US power wanes, a large harbor at the very southern tip of Sri Lanka is a great location for a re-supply depot and fuel bunkering station for the Chinese navy as it patrols and safeguards its merchant shipping on monsoon trade routes. It also came as a bit of a who-woulda-thunk-it surprise. Although a quick Web search brings up a 2010 NY Times article, this type of geopolitical great game is hardly front-page news.
Some readers may have heard of Robert D. Kaplan based on his notorious essay “The Coming World Anarchy“, published by The Atlantic magazine back in February 1994. In that essay, Kaplan panted a bleak enough picture of the future, where tribalism and resource depletion would to massive instabilities in areas of the world that are well, prone to instability. Areas like the shantytowns of West Africa, through which Kaplan traveled extensively by bush taxi. These travels provided the narrative for the book “Ends of the Earth”.
Kaplan’s article has been considered a seminal essay, both highly praised and widely critized for an excessively dystopian view of the near future. One passage though caught my eye:
Homer-Dixon points to a world map of soil degradation in his Toronto office. “The darker the map color, the worse the degradation,” he explains. The West African coast, the Middle East, the Indian subcontinent, China, and Central America have the darkest shades, signifying all manner of degradation, related to winds, chemicals, and water problems. “The worst degradation is generally where the population is highest. The population is generally highest where the soil is the best. So we’re degrading earth’s best soil.”
China, in Homer-Dixon’s view, is the quintessential example of environmental degradation. Its current economic “success” masks deeper problems. “China’s fourteen percent growth rate does not mean it’s going to be a world power. It means that coastal China, where the economic growth is taking place, is joining the rest of the Pacific Rim. The disparity with inland China is intensifying.” Referring to the environmental research of his colleague, the Czech-born ecologist Vaclav Smil, Homer-Dixon explains how the per capita availability of arable land in interior China has rapidly declined at the same time that the quality of that land has been destroyed by deforestation, loss of topsoil, and salinization. He mentions the loss and contamination of water supplies, the exhaustion of wells, the plugging of irrigation systems and reservoirs with eroded silt, and a population of 1.54 billion by the year 2025: it is a misconception that China has gotten its population under control. Large-scale population movements are under way, from inland China to coastal China and from villages to cities, leading to a crime surge like the one in Africa and to growing regional disparities and conflicts in a land with a strong tradition of warlordism and a weak tradition of central government—again as in Africa. “We will probably see the center challenged and fractured, and China will not remain the same on the map,” Homer-Dixon says.
So that takes us to the next section.
African Land Grab
On this blog, the topic of investing in food and farmland pops up from time to time.
As arable land and water resources become scarcer in China, Africa has been beckoning as the new land of opportunity for the deep-pocketed Chinese. Chinese agricultural companies have been leasing and buying vast tracts of prime and even marginal land in African countries such as Mozambique, Kenya and Tanzania.
Not to be outdone, India is joining the rush:
So, Indian ag companies are buying up farmland, trying to keep up with Saudi and South Korean and other companies with cash to burn and poor land resources at home. How does this tie back to the book Monsoon and investing?
Along with nitrogen and phosphorus, potassium is a component of inorganic NPK compound fertilizers. As the world’s population grows from a current 8 billion to an forecast 9 billion for 2025, food production will have to expand accordingly. Acres will be plowed and sown, and fertilizer will be spread, no matter where they are.
A few weeks ago I posted an interview with the CEO of Mesa Exploration (MSJAF). Since then, the company has acquired a nifty new property, the Bounty Potash Project. In geologist-speak, the potash deposit is “potash-rich brine aquifer hosted in near-surface sand-silt-clay beds. These types of deposits are well known and understood from an exploration, development and production perspective.” In non-geo-speak, brine deposits are fairly easy to mine (no shafts or open pits), carry low capital expenditures (no massive trucks or crushing mills), and are relatively low-impact to the environment ( at least as compared to other mining operations – no waste dumps or tailings).
This deposit is also close to Intrepid Potash’s (NYSE: IPI) Wendover operation, a brine potash operation with an annual production of 100,000 tons of potash.
So, what to do?
I already bought 1,500 shares of MSJAF at $0.44 a couple weeks ago. It’s since then floated to $0.53, and settled today back to $0.50. Really, I should have bought back when the interview aired, the stock was at $0.24, but such is hindsight.
I’m now looking hard at IPI. Growing profits (on the last Q4 report), little debt, and reasonable return on equity, and significantly beaten down from a high of $39 early last year. But that’s the subject for another day, this post’s already long enough.
By the way, if you’d like to hear more on the book from the Robert D. Kaplan himself, check out his his interview on Financial Sense podcast.