Turning Garbage into Money

What does a growing economy have to do with the bad Chinese leftovers sitting in your garbage can? A lot, actually, if you ask Wunderlich Securities. According to Wunderlich's analysts, "macro-economic trends are highly correlated to the waste industry. Volume is impacted by gross domestic product, construction spending, and population growth. Absolute pricing is sensitive to inflation and operating costs are impacted by employment trends, fuel prices, commodity prices, and weather." Sound crazy? Well, not entirely. In a recession, people tend to become more efficient with their consumption. Having lost or fearful of losing their jobs, they make use of every dollar they spend. This translates into less waste, as people keep their leftovers instead of cooking another meal or paying for another night out. Trying to wring out all the waste in their spending and prepare for (or survive through) rough times, this necessarily drives down the volumes of actual waste coming from households. Thus, the waste services industry suffers. As incomes rise, however, people tend to buy more in terms of consumption. But there's a limit to how much people actually use in a given time period, and the rest is generally thrown out. When the individual impact of each dollar spent means less, people tend not to scrutinize their habits and just throw things out. Moreover, when they're not as worried about money, they opt to replace old TVs, cars, appliances, etc. instead of trying to fix them. This inevitably creates more waste, and with it more demand for waste management services. So, as jobs return, GDP rises and the economic recovery picks up steam, expect American consumers to return to their historically wasteful ways. The Market Vectors Environmental Services Index ETF EVX, which tracks an index of publicly-traded companies engaged in waste management, disposal, etc., is likely a good buy if you believe the economy-waste correlation. EVX is up 1.39% today, as of 2:44PM and trading at $41.93. With an improving economy and the wasteful nature of the American consumer, EVX investors could start seeing a lot of green...and no, I'm not talking about the garbage.