How I Accidentally Invested in Big Tobacco
Or: conclusive proof that betting against the world really does make you richer.
(Illustration: Sam Taylor)
If you want to invest in shares but you don't want to pick them yourself, good news: you can get a rich old white man to do it for you. They all have names like Neil or David, and they run investment funds, and you put your money into these funds, and they'll buy and sell on the world's stock markets, trying to make as much money as possible for their clients.
My grandfather died last year, and a chunk of his money had just landed in my bank account. On a whim I decided to invest it, like some sort of grown-up. I picked several funds that looked interesting and had a good track record, and used a well-known trading website to split my money between them to spread out the risk a bit. With everything set up, I waited. If everything went well, then maybe, one day, years from now, I'd be a rich old white man too.
After an hour or two I got really bored of waiting to get rich and decided to find out more about the funds I'd invested in. The website I used has a handy "X-ray" feature that can look inside the funds you've put money in and tell you which companies you have the biggest stakes in. The results were a bit of a shock.
In my top ten were BP, Shell Oil, British American Tobacco, Imperial Tobacco, GlaxoSmithKline and AstraZeneca. That's Big Oil, Big Tobacco and Big Pharma. All I needed to round out my evil capitalist portfolio were a couple of arms companies and a stake in News International.
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This is not what I had expected. I hadn't planned to do anything evil, yet somehow here I was. What puzzled me was… why? I could understand funds investing in pharmaceuticals – drugs are big business, after all – but surely tobacco and oil are both heading the way of the dinosaurs? How can they be good investments?
Oil makes sense, when you think about it. Sure, it's slowly running out, but we're going to be using it for a good few decades yet. In the meantime the price is likely to rise, and that's good if you're selling the stuff. Tobacco is more of a surprise: it's not just a good investment, it's one of the best. Ten years after Britain's public smoking ban, The Motley Fool recently declared 2017 "the year to invest in Tobacco stocks". Why?
It's true that smoking rates are falling, but more than a billion people still smoke. They're served by a small group of companies who have no new competition to worry about – nobody's starting a tobacco firm any time soon. They can forget about recessions, too, since addicts will keep smoking however the economy's doing. With smoking rates level in the US and growing in Africa, 2017 looks set to be a pretty good year for Big Tobacco.
Anyway, I ditched some of the more evil stocks and looked around for something a bit more ethical. Everything was going well. Then, a few days later, some great news came. Trump's attempt to repeal Obamacare and remove medical insurance from millions of Americans had fallen flat on its face. Brilliant! The next day I checked my account – I'd lost £40. What the hell?
"Something weird was happening. Every time good things happened in the news, I lost money. Every time bad things happened, I got richer."
It turned out that Trump failing was bad news for investors. Ever since the Picasso of bullshit artistry took office he'd been promising $1 trillion of spending on America's crumbling roads, bridges, airports and railways; share prices had already been climbing in eager anticipation of all that lovely money pouring into the economy. The failure of "Trumpcare", however, made people realise that the President's promises might not be so reliable, so stocks started to fall again, taking my not-so-hard-earned money with them.
Luckily, Theresa May triggered Article 50 a few days later. On a personal level this was terrible news – I'm a loud Remoaner who wants to stay in the European Union. For my bank balance, though, it was brilliant. Stock markets rebounded and I found myself regaining the money I'd lost over TrumpCare.
Something weird was happening. Every time good things happened in the news, I lost money. Every time bad things happened, I got richer. It was like I'd taken some weird bet against the world. And in a way, I suppose I had.
In my case the money involved was pretty small, but what about millionaires? They would have lost eye-watering sums of money over Trumpcare and gained thousands in the months since Brexit. It's hard to look at the stock markets – and the daily gains and losses due to political events – and not feel that there are some really perverse incentives there.
If you have any kind of pension, you probably have investments in the stock market. It would be nice if you run them ethically, but the truth is that it's probably impossible. Even if you don't directly invest in bad companies, the world is so interconnected that you'll probably benefit from them somehow anyway. All you can do is try to be as unethical as possible, and take comfort from the fact that the next time something terrible happens, it's probably helping out your retirement fund.