Saturday, July 5, 2014

Forget global warming, global cooling is the biggest contrarian bet of all time

I have always been a skeptic and in my investing and speculating I look for contrarian bets as I have found that the crowd is usually wrong. I am not going to get into the psychology of why this is so as many others have done a better job than I ever could. Charles Mackay's book " Extrordinary Popular Delusions" is an old yet good primer on crowd psychology and appears to be free on Kindle.

One of the biggest delusions in my view is the whole global warming scam. The view that man burning fossil fuels is irreversibly raising the global temperature and that this will lead to various catastrophes around the globe. Of course the promulgators of this ridiculous theory are government, politicians, and scientists that are funded by government. These are all people who stand to benefit by pushing this whether by accumulating wealth (Al Gore) or by suggesting that we need more government to address this issue. However a funny thing happened on the way to rising sea levels, melting ice caps, and polar bear die offs, the temprature has gotten cooler the last seventeen years. The article has a great quote:

Moreover, the now extended trend of no global warming is not turning around any time soon. That increasingly established trend is being produced by long term natural causes. Even rank amateurs among the general public can see that the sun is the dominant influence on the Earth’s temperatures. Even the most politicized scientists know that they cannot deny that solar activity such as sun spot cycles, and variations in solar magnetic fields or in the flux of cosmic rays, have contributed to major climate changes of the past, such as the Little Ice Age, particularly pronounced from roughly 1650 AD to 1850 AD, the Medieval Warm period from about 950 AD to 1250 AD, during which global temperatures were higher than today, and the early 20th century Warming Period from 1910 to 1940 AD.

That solar activity, particularly sunspot cycles, is starting to mimic the same patterns that were seen during the Little Ice Age, as I discussed in a previous column. As a result, outside politically correct Western circles, where science today has been Lysenkoized on this issue, there is a burgeoning debate about how long of a cooling trend will result.

Don Coxe, the famed investor and portfolio manager, has written about the sunspot cycle and its effect on agriculture for years. I thank Mr. Coxe for bringing this view to my attention through his writing and interviews. He is fond of saying that sunspot cycles and their investment implications are a page 20 item. This means it is buried in the back of the newspaper and no one is paying attention.

I recently read a book that coalesced my thoughts on this subject and what implications will come from lowered sunspot activity including economics, politics, and social changes. The book is called, "Twilight of Abundance: Why Life in the 21st Century Will Be Nasty, Brutish, and Short" by David Archibald. The description says it all;

Baby boomers enjoyed the most benign period in human history: fifty years of relative peace, cheap energy, plentiful grain supply, and a warming climate due to the highest solar activity for 8,000 years. The party is over—prepare for the twilight of abundance.

David Archibald reveals the grim future the world faces on its current trajectory: massive fuel shortages, the bloodiest warfare in human history, a global starvation crisis, and a rapidly cooling planet. Archibald combines pioneering science with keen economic knowledge to predict the global disasters that could destroy civilization as we know it—disasters that are waiting just around the corner.

But there’s good news, too: We can have a good future if we prepare for it. Advanced, civilized countries can have a permanently high standard of living if they choose to invest in the technologies that will get them there. Archibald, a climate scientist as well as an inventor and a financial specialist, explains which scientific breakthroughs can save civilization in the coming crisis—if we can cut through the special interest opposition to these innovations and allow free markets to flourish.

I do not necessarily agree with all of the predictions that are made in the book. Humans have shown that they are quite resilient and adaptive. Even during the mini ice ages that he discusses although there were famines the world went on regardless. Nevertheless, his view on some of the less developed countries futures especially the countries of the Middle East and North Africa are not good. Shorter growing seasons and lower crop yields will lead to less grain and that is not good for countries in the MENA that import well over 50%-90% of their grain. He predicts famine and massive die off in these countries, he seems to take glee in this, along with a militaristic China that will fill the void left by a declining United States.

How is this investable right now. Well I am long energy in a big way and I think that will continue to work out. I will continue to follow this meme and report as I get more ideas. Here is a website that has both real time and historical sunspot data. I plan on writing additional articles on what occurred the last time the earth experienced a low sunspot cycle.

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