Tunisian leader Zine El Abadine Ben Ali was in power for 23 years before widespread protests forced him to retire on January 14. Hosni Mubarak was president of Egypt for 30 years before resigning on February 11. And Muammar al-Gaddafi has been in control of Libya for a staggering 42 years, after taking power in a coup. Now, two of them are out of power, and the third is on the ropes. And people with similarly oppressive leaders are standing up to them across the Arab world. The contagious nature of revolutions stems from a sense of shared humanity. When people anywhere stand up and demand freedom and self-determination, it causes the oppressed everywhere to say, “Hey, we’re human too! We deserve the same rights as them!” And as communication speeds have increased to today’s near-instantaneous pace, the speed with which democracy movements follow each other has also increased. The French Revolution began six years after the American Revolutionary War ended; the Haitian Revolution began another two years after that. Today’s Arab protests have already toppled two despots in as many months. Ideally, the revolutions would be followed by the orderly institution of democratic, transparent, accountable governments. However, that probably won’t happen right away, at least not everywhere. It took Americans six years to elect a president after the end of the Revolutionary War. Romania erupted into violent protests after the people’s successful 1989 revolution against Nicolae Ceausescu, however, it is now considered free and democratic and is a member of the European Union. Indonesia’s 1998 ouster of dictator Suharto was likewise followed a tumultuous period, but the country eventually held its first direct presidential election in 2004 and is now a free republic. I hope the world continues to support the cause of self-determination and freedom in the Arab world even after the excitement of these first few weeks is passed. That may mean embracing global political instability and insecurity for some time—but some things are more important than political stability. And eventually, demanding democracy pays off. In fact, democracy’s progress over time has been not unlike the stock market’s—though halting at times, it is always upward over the long-term. Almost 60% of the world’s people now live in democracies, with 38% of all people living in “liberal” democracies that are also considered free and respectful of human rights and the rule of law. The graph below shows the number of countries that rank an “8” or higher on the Polity IV scale, which measures the democratic character of regimes (with a -10 being completely autocratic and a 10 being completely democratic.)
As you can see, democracy has been sweeping the world for decades, and picking up speed over time. It’s a very positive graph. It also looks interestingly similar to a chart of the Dow since 1900:
While the time scales don’t line up well enough to draw any conclusions (and correlation is not causation anyway), I don’t think it’s far-fetched to say that the spread of democracy benefits the entire world in many ways. Briefly, the second message I hope Americans take from the Arab protests is one of gratitude. We should all be thankful every day that we live in a country where we elect our representatives and they must respect term limits; where we have a free press and freedom of speech; where we can live and work where we like; where equal protection is both law and reality; and where the police and army both work to protect us and our security. Sure, America isn’t perfect—we often feel like we’re voting for the lesser of two evils; the government keeps more secrets than it should; unemployment is higher than it should be; women still earn less than men; and there are some corrupt people in law enforcement. However, we’re still far and away some of the luckiest people alive. Can you even imagine having the same president for 42 years?
Today’s Investment of the Week is a company benefiting from another kind of revolution sweeping the world—the communications revolution. An estimated 60% of the world’s people now own cell phones, according to a report from the United Nations. The infrastructure required to support that many cell phone users is colossal, and American Tower Corp. (NYSE: AMT) is helping build it. Gregory Spear, editor of The Spear Report, recommended AMT in the latest Dick Davis Investment Digest, writing: “Sales of mobile computing devices soared 85% in Q4, while wired-PC sales crept up less than 5%. In the developed nations, where wireless and cellular phones have a 90% market penetration, growth is likely to be relatively sluggish. However, the emerging world now accounts for 30%-45% of the mobile subscriber growth, depending on region. In fact, this week, the Obama administration lobbied for its campaign to expand wireless broadband services in rural America. Wireless infrastructure is now a bottleneck, however, and American Tower is the landlord on the wireless information super-highway. Demand for space on its towers is increasing as carriers promote their 4G mobile broadband services, which require new bolt-on equipment. In other words, to benefit from the new demand surge, AMT does not have to build tons more towers; it is going to reap the rewards of increased density on its existing inventory. It doesn’t get much better than that in the recurring revenue world. The company owns 32,000 wireless communications sites in the U. S. Mexico, South America and India. AMT recently added 3,000 cell towers in South Africa. Management is spending 25% of its income on capital expenditures, mostly in emerging markets. In the most recent reported quarter, AMT grew revenues 15%, but earnings surged 38%. Cash flow is excellent, debt to equity is just 11% and the company has the highest gross margins in the industry.” The stock got a little ahead of itself in advance of earnings, then underwent a multi-day correction. However, it has strong support at 51 and is already beginning to find stable footing again. If the recent weakness doesn’t scare you off, you could use it to buy at a discount. Click here to learn more about American Tower Corp. and other top stocks recommended inDick Davis Investment Digest.
Wishing you success in your investing and beyond,Chloe Lutts
Editor of Investment of the Week
