Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Investors have ploughed billions of dollars into the quest to send earthlings into the stars. Astronomers’ discovery that a faraway planet teems with molecules usually produced by living organisms suggests it’s time to apply a non-zero probability to an alternative scenario: one where extraterrestrials come to us. The most important question, naturally, is how to position a stock portfolio accordingly.
First: plan for uncertainty. Initial contact will inevitably cause a rush for safe haven assets. As far as gold is concerned, an extraterrestrial arrival in the near future would be inconveniently timed, since the yellow metal has already risen 25 per cent this year. Treasury bonds, a traditional refuge, lately work less well than they used to. Makers of toilet paper — Procter & Gamble and Kimberly-Clark, say — are worth considering.
Beyond that, cleave to the ‘guns, germs and steel’ principle. Since the human race has done little to endear it to other species, defence stocks should be the go-to. Lockheed Martin and RTX are shoo-ins. Palantir, an enabler of lethal military systems that communicates in unearthly jargon, should be in the portfolio too. The same goes for innovative vaccine makers like the currently unloved Moderna.
Commodities, it’s true, could go either way. Potentially, future colonisers will copy earthly forebears and arrive bent on carrying away our minerals, which, if they pay for them, could be positive for prices. Then again, should they bring exciting galactic alternatives, the value of our own — oil, perhaps — could plummet.
The more forward-looking investor could do worse than consider consumer goods companies. Aliens have personal needs too, after all. Unilever, L’Oréal and Colgate haven’t seen a huge new market open up since China joined the World Trade Organization in 2001. And K2-18b, with perhaps 7 times earth’s surface, could present a 56bn-being market for toothbrushes, cans of deodorant and luxury handbags, depending on the number of mouths, armpits and hands of its residents.
There is a catch — besides the fact that life has not actually been discovered on K2-18b yet — in that the planet is 124 light years away. To factor in the time value of money, that will require investors to adjust their forecasts substantially, and be wary of companies’ excited ‘total addressable market’ claims. Assuming a discount rate of 5 per cent and alien mastery of light-speed travel, each $1 of future profit would be a fifth of a cent today.
Nonetheless, once investors see that the truth is out there, instantaneous portfolio effects would kick in. Proof of alien life would, if nothing else, be a sign that other science-fictional ideas, from nuclear fusion and humanoid domestics to mind-reading machines and eternal-life therapies, deserve a second look. Black swans are old hat — it’s time markets started thinking about little green ones instead.
