Global Warming: Investment Implications 36 comments
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Dr. Michael Crichton was best known as an author whose books sold over 150 million copies worldwide. He was also the only artist to ever chart #1 at the same time in television, as creator of ER; in film, with the adaptation of his novel Jurassic Park; and in book sales, with Disclosure.
He was a scientist by training, by which I mean he was both curious about the world around him and empirical in his observations about it. In a world where uninformed opinion, shouted at ever-higher decibel levels on hot media like TV and YouTube, seem to carry the day, I submit that curiosity and empiricism are under-rated; loudness and loutishness are over-rated.
The Wall Street Journal reprinted parts of a lecture Dr. Crichton gave in 2003. I have excerpted a couple paragraphs of that Journal article below. It’s important to note that Dr. Crichton never claimed that global warming is not an issue -- merely that more research is needed before we draw definitive and arrogant conclusions that we can control the variables contributing to climate change.
I share Dr. Crichton’s skepticism. Skepticism is a necessary precursor to empiricism. After quoting his words, I’ll mention a few possible opportunities that investors may find worthwhile.
Dr. Crichton:
I regard consensus science as an extremely pernicious development that ought to be stopped cold in its tracks. Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled. Whenever you hear the consensus of scientists agrees on something or other, reach for your wallet, because you're being had...
Let's be clear: The work of science has nothing whatever to do with consensus. Consensus is the business of politics. Science, on the contrary, requires only one investigator who happens to be right, which means that he or she has results that are verifiable by reference to the real world…
To an outsider, the most significant innovation in the global warming controversy is the overt reliance that is being placed on models… As if they were themselves a reality. And indeed they are, when we are projecting forward. There can be no observational data about the year 2100. There are only model runs...
Nobody believes a weather prediction twelve hours ahead. Now we're asked to believe a prediction that goes out 100 years into the future? And make financial investments based on that prediction? Has everybody lost their minds?”
Clearly, a lot of people have. I was on the ground in the midst of Saddam Hussein’s temper tantrum at the conclusion of the First Gulf War, when he set ablaze all of Kuwait’s oil fields he could get a torch to. (“If I can’t have them, no one can.”) At the time, Eco-fringies declared this the last nail in the world’s coffin; that the carbon released from such a massive catastrophe would throw us all into (choose one) a global icebox or a global inferno.
Media personality Carl Sagan predicted those oil fires would produce a nuclear winter, a "year without a summer," and would whither crops around the world. It didn’t happen. Man’s puny efforts to match the earthquake every 20 seconds, the hurricane every few days, or the billowing sulfurous gases of a major volcanic eruption that Nature produces on this active and capricious planet of ours were as flimsy as gossamer.
To people who say they “know” that climate change will be catastrophic and who “know” that reducing one variable, man’s output of carbon, is primarily responsible for this upcoming catastrophe, and say they “know” what the world will look like in 50 years if we don’t spend all our resources to change this horrid and fearsome outcome, I say: they’re full of hooey.
They can’t even predict what their teenager will look like in 12 months. Will he have tattoos? A Mohawk? Wear pink lipstick and spike his hair? Of course, a single teenager is a complex organism. Sort of like an entire planet’s ecosystem we don’t have the faintest beginnings of understanding…
If you share Dr. Crichton’s skepticism, and mine, what might you do to invest wisely? There are no surprises here for frequent readers. I believe a burgeoning world population will need every energy source we can find and use.
That means building cost-effective wind and solar farms, finding more geothermal if possible, using hydroelectric where it makes sense, taking advantage of newer, safer, cheaper smaller nuclear plant construction designs, and drilling for oil and, especially, for natural gas -- the cleanest of the fossil fuels and one which Americans and Canadians have in abundance.
In my opinion, among the best of the natural gas firms are Chesapeake (CHK), Imperial (IMO), EOG (EOG) and Encana (ECA). In coal, I stick with the coal leasing firms, which have no labor costs or accident liabilities but simply own mineral rights under land which is leased to coal producers. My two favorites are Natural Resource Partners (NRP) and Penn Virginia Resources (PVR). All of the big oil companies are really big “energy” companies and I like a number of them, with Royal Dutch Shell (RDS.B) and Exxon (XOM) at the top of the heap.
In the pipeline arena, I can recommend Magellan Midstream (MMP), Boardwalk (BWP), Enbridge Energy (EEP), Kinder Morgan (KMR), Buckeye (BPL), Enterprise (EPD), Atlas Pipeline (APL), and SemGroup Energy (SGLP).
In nuclear, Cameco (CCJ) is the biggest producer of uranium and, unless we switch to thorium reactors, the biggest of the suppliers of essential fuel to the nuclear industry. Anglo-American (AAUK) is also a serious player in the business. So many others are just “guys with a story.” I’d stick with the biggies.
Full Disclosure: We are currently long small positions in ECA, IMO, CHK, NRP, PVR, MMP, BWP, and APL.
The Fine Print: As Registered Investment Advisors, we see it as our responsibility to advise the following: We do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.
Also, past performance is no guarantee of future results, rather an obvious statement if you review the records of many alleged gurus, but important nonetheless – especially so you are not over-impressed by the fact that our Investors Edge ® Growth and Value Portfolio has beaten the S&P 500 for 10 years running. What if this is the year we under-perform it?
It should not be assumed that investing in any securities we are investing in will always be profitable. We take our research seriously, we do our best to get it right, and we “eat our own cooking,” but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.
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carbon disxide gas is an essential part of the welding gas mix of argon and C02. the argon prevents oxidation of the alloys and carbon in steel during the elecrtical melt process. the carbon dioxide increases the ability of the weld melt to aborb heat and make a good fusion of the base metal and weld rod.
the same carbon dioxide absorbs atmosphereic heat and results in temperature rise.
why all dont talk about this is beyond me. i never realized it until i took courses in welding.
CO2 absorbs heat when it sublimates (dry ice to gaseous CO2).
Water absorbs heat when it evaporates (when you sweat or in evaporative coolers).
The CO2 that I exhale doesn't absorb heat (unless it's over 100 degrees out).
The people who know how to run your life better than you will always have these emotional arguments.
The earth is getting cooler ( remember that one in the 70's)
The earth is getting warmer
The earth is overpopulated
I used to be a big investor in CCJ as nuclear "would" be the best solution (if you believed the hype of GW) but that's not what it's all about anyway. A few years ago the spot price of Uranium was going straight up and CCJ was a good trade as plans for Nuke plants were popping up around the globe. I want to say about 2005 I made some decent money trading CCJ. Longer term Obama and his California Eco-terrorists are trying to kill the nuclear industry ( in America at least) and uranium is an extremely plentiful element on the earth.
Have your yellowcake and eat it too.
In the case of your welding application. I am sure the CO2 is at room temperature or close to it....or colder if its been compressed. The welding temperature is some thousands of degrees F.....of course the CO2 is going to absorb heat. Look at the difference between the two temperatures.
The missile supply will run dry around 2012-2013 from what I have read.....and the price of U235 will need to increase substationally.
On Aug 20 08:41 AM John Galt wrote:
> Global warming a hoax? Come on man, don't you watch the evening news?
> Evvvvverybody knows it's true? I don't even need to present facts.
> Everybody knows it. Can't you just feel it? It was pretty hot today?
> Why should we think objectively? Just trust the government and the
> scientists seeking to get their name in the newspaper and more fund
> money.
>
> The people who know how to run your life better than you will always
> have these emotional arguments.
>
> The earth is getting cooler ( remember that one in the 70's)
> The earth is getting warmer
> The earth is overpopulated
>
> I used to be a big investor in CCJ as nuclear "would" be the best
> solution (if you believed the hype of GW) but that's not what it's
> all about anyway. A few years ago the spot price of Uranium was going
> straight up and CCJ was a good trade as plans for Nuke plants were
> popping up around the globe. I want to say about 2005 I made some
> decent money trading CCJ. Longer term Obama and his California Eco-terrorists
> are trying to kill the nuclear industry ( in America at least) and
> uranium is an extremely plentiful element on the earth.
>
> Have your yellowcake and eat it too.
Crichton took so much heat for, in effect, asking everyone to step back and take a breath on this issue, that when asked if he was going to have anything more to say on the subject said (paraphasing) "I've done my share, now it's up to others."
That's a serious point that any investor should appreciate. It's all just guesswork.
Even if Chrichton was a graduate physicist his view on global warming was worthless. Of less value than mine in fact, because
I go along with the main men in the field - by which I do NOT mean Al Gore.
On the other side of the coin you have the potential for global catastrophe and the beginning of another dark age.
There are no credit default swaps to hedge global warming--no-bail outs possible. If it happens, we are stuck with the carnage.
So, do you feel lucky?
OR are you just planning on dieing before any of the real downside risk shows up?
> Actually.....of the current yellowcake demand and at the current
> price of the isotope U235....we meet something like 55% of demand
> from porduction....the other is met from decommissioned missiles
> from russia and other areas.
>
> The missile supply will run dry around 2012-2013 from what I have
> read.....and the price of U235 will need to increase substationally.
>
I haven't been following it like I used to, but that's how we were dealing with it before. A lot of former USSR warheads were providing the Uranium for utilities.
If Uranium really was such a scarce good, then maybe it would be a better investment but it's very plentiful, it just has to be mined. The miners and land owners were spec stocks and a lot of them were way overvalued circa 2005.
CCJ also has the problem with the flooding of their largest mine.
On Aug 20 10:20 AM Fred W wrote:
> The REAL answer is that we DON'T know the answer. But you must ask
> yourself, "What is the penalty for being wrong?" On one side of
> the coin you have the possible downside of dramatically slow economic
> growth and large shift toward efficiently using of resources.
> On the other side of the coin you have the potential for global catastrophe
> and the beginning of another dark age.
> There are no credit default swaps to hedge global warming--no-bail
> outs possible. If it happens, we are stuck with the carnage.
> So, do you feel lucky?
> OR are you just planning on dieing before any of the real downside
> risk shows up?
You use the words "legitimate evidence." The key is what you consider legitimate. For most of us the fact that CO2 is rising dramatically as has been since we dramatically increased spewing it into the world is legitimate. As is the fact that the ocean temps are rising. We have evidence from the polar ice going back thousands of years and what we discover is a direct correlation between man made CO2 producing activity and increasing CO2. That there are some lay folks that don't accept this as "legitimate evidence" does not change the facts. Quoting Crichton or even Sagan who have no expertise in the area does not make an argument.
On Aug 20 11:14 AM Dave Shafer wrote:
> @Swashbuckler:
>
> You use the words "legitimate evidence." The key is what you consider
> legitimate. For most of us the fact that CO2 is rising dramatically
> as has been since we dramatically increased spewing it into the world
> is legitimate. As is the fact that the ocean temps are rising. We
> have evidence from the polar ice going back thousands of years and
> what we discover is a direct correlation between man made CO2 producing
> activity and increasing CO2. That there are some lay folks that don't
> accept this as "legitimate evidence" does not change the facts. Quoting
> Crichton or even Sagan who have no expertise in the area does not
> make an argument.
Now the Federales will certainly interfere with laws and subsidies to one sector over another but I suspect they are going to avoid the overt price controls they have tried in the past other than to skim more taxes off the top.
Hey as I say it is a pretty good bet.
Disclosure: this is where most of my money is riding but I do have a favorite which is PetroBank (Canada PBG.to) with it's low environmental impact heavy oil recovery system THAI. Look it up for fun and profit.
Hey nothing's perfect but as I say it is a pretty good bet.