Junkyard Planet refers to a book by Adam Mintor which is about the scrap business in the world. At the lowest level the scrap or junk business has the least cost or barrier to entry and provides income for millions of people, at the large scale it is very capital extensive. The scrap/recycling/junk business is all about the getting the highest value for the material which is collected. If the costs are low for example all over the world, people collect bottles for income. If someone is collecting bottles, the costs are a bag and either shoes or a bicycle. As the material increases in value, for example primary metals such as copper, the cost of machinery to separate the material increases as the barriers of entry. Mr. Mintor follows the world’s recycling world/junk yards to find the reuse and recycling. There is a great deal of money involved in going through someone else’s trash. When someone throws something out because they no longer want it, what happens to it? At the moment it turns out many things being recycled in the US is actually processed in China. There is a very good reason – during the Christmas shopping the made in China label was easily found, China sends thousands of containers to the US at a cost of $2,400 a container. Once unloaded, the empty container is useless, resulting in the container company discounting the cost to sending the container back to China to a cost of $300. At that cost is makes economic sense to send the recycling to China, in addition the Chinese companies can bid more the materials. Mr. Mintor followed the stuff and his book is a very interesting read.

Linking to dividend paying stocks, at the low end, you would want to avoid companies because the cost to entry is very low. At the high end, there are a number of companies that benefit from high cost of recovery of stuff including basic commodities. To gain access to the metals, there is a higher cost of entry into the business. If the company is successful over a period of years, it is a consideration due to the consistency of its business. No matter what the industry, when you see high cost to enter the business, you should start asking questions about long term profitability and possible investments. The less glamorous the industry, often the more consistent are the returns.

There are more questions than answers, till the next time – to raising questions