TDP - 'Dirty' Work Has Some Companies Cleaning Up

Career advice for 2008 college grads: Want to get filthy rich? Find a dirty job! Michael Rowe and the Discovery Channel stumbled across this goldmine of an idea three years ago with their surprise hit TV show Dirty Jobs. Lost, Survivor and Fear Factor are other TV hits that found similar success by offering viewers escape from their air-conditioned Dilbert cubicles with settings heavy in sweat, dirt, slime and bugs.

This counterintuitive media magic harkens back to the 1930s when motion picture-goers mired in the drudgery of Dust Bowl and Depression lived vicariously at the Bijou with the glitz and glamour of box office champs Fred Astaire and Ginger Rogers.

This would be a quirky showbiz footnote were it not for a similar phenomenon now roiling through the American economy.

'Dirty' jobs in demand

Stock market action the past 12 months provides some insight into which industries are shedding workers and which need to expand. Of the S&P 500 top 25 performing stocks (all up more than 44 percent) for the past year, 24 are related to the dirty work of extracting forms of carbon out of the Earth. Of the bottom 20 stocks (all down more than 66 percent), 18 are in the white-collar world of high finance.

It comes as no surprise that the world of high finance is now writing off assets by the tens of billions and laying off workers by the tens of thousands. Meanwhile, dirty industries from oil and gas to mining to steel mills to fertilizer production to row crop farming are enjoying their biggest boom in memory.

Such wide disparities in returns usually indicate serious mismatches between demand and capacity and that is the case here. The term "glut" fails to capture the magnitude of gross excesses in credit creation that are now piled up on the doorstep and back alleys of Wall Street and the major banks.

The boom in the dirty sectors of the economy is the flip side - too much demand from here and abroad and woefully insufficient capacity to meet that demand.

The 1970s saw the passage of the Clean Air Act (1970) and Clean Water Act (1977) and the creation of Environmental Protection Agency (1970) and Department of Energy (1977). In the intervening decades the quest to clean up America for both health and esthetic reasons has enjoyed extraordinary success.

Put on some overalls

The dirty little secret of economics version 2008 is that necessary parts of the economy are by definition messy and dirty. We outlaw, offshore or ostracize them at our peril and cost. Bugged about the meteoric rise in gasoline and copper prices? Try getting a permit to build a new refinery or copper mine. Over the past 30 years, there has been one new copper mine built in the U.S. and no new refineries.

Further complicating the "dirty" capital investment arena is the entanglement between the political legal and scientific communities over the contentious issue of climate change and global warming. In April of 2007, the U.S. Supreme Court in a 5-4 decision ruled that carbon dioxide was a pollutant and subject to regulation by EPA.

The key promoter of anthropogenic (man-made) global warming, which is the rationale for declaring carbon dioxide a pollutant, is the United Nations' Intergovernmental Panel on Climate Change. Yes, the same organization that mangled the Food for Oil program and seems incapable of paying its parking tickets in New York City is now angling to become the global manager of the world's supply of carbon dioxide. Citizens of the world, take heed.
All of which leads us to a brave new world of carbon offsets, carbon sequestration, carbon footprints and carbon credits. In an ironic twist to the "carbon cycle," carbon credit trading may breathe new life into the now moribund trading desks of Wall Street. The same folks whose financial engineering brought us securitized sub-prime mortgages may soon be cooking up for sale collateralized carbon credits. Caveat emptor.

Can our post industrial, Dilbert-cubicled economy find and release its inner Li'l Abner and Popeye? Can we don overalls, gulp down some spinach and tackle the dirty work that needs to be done? We have little choice: The planet's carbon-based ecosystem compels it.

Ashby M. Foote III is president of Vector Money Management.