Bloomberg News joins greens in talking down carbon fuels. Is that good or bad investment advice?

 

The news coming out of the COP 28 climate change conference in Dubai has been mixed.  Plenty of headlines have evinced green despair.  From a hardcore "fundamentalist" green perspective, the talks were a disappointment, even a disaster.  For instance, former vice president Al Gore thundered that the text, "reads as if OPEC dictated it word for word."    For sure, there were a lot of OPEC and oil types were at COP, including, of course, those from the host country, the UAE.  Sample headline from The Washington Post: "Oil, gas and coal interests swarm global climate summit in Dubai."  

Yet in the end, on December 13, COP gutted out a statement that seemed to please corporate greens, at least.  Here's the Bloomberg News writeup: 

While the outcome falls short of the specific fossil fuel “phase out” most countries wanted, it does break new ground: No previous COP text has mentioned moving away from oil and gas, the fuels that have underpinned the global economy for decades.

Whereupon Bloomberg wrote of "language pushing a decline in fossil fuel use [that] will send a signal to investors about the future of energy markets." Pressing the point was Jennifer Morgan, the German delegate:

We now tomorrow move forward in implementing this.  Every investor should understand now that the future investments that are profitable and long-term are renewable energy — and investing in fossil fuels is a stranded asset.

Can Germany make those words stick?  The country isn't anywhere near the economic and political power that it was even five years ago--and neither is the European Union.  All this green "Hobbit"-type thinking may improve the ecological soul, but it's hell on economic vitality.   (In the meantime, of course, Germany is burning more coal.) 

Morgan's words are more than just brave optimism--they are also expressly designed to talk down carbon-energy viability. That is, by applying the "wave of the future" framing tactic--you have to be on the right side of history! you can't fight the inevitable!--she and her allies seek to depress carbon-fuel investment and make the "stranded asset" prophecy self-fulfilling.  Morgan obviously has an ally in Bloomberg News. 

Will Morgan, and Bloomberg, succeed?  This author thinks not.  Why?  Because the value of all the oil, gas, and coal around the world is to be measured in the quadrillions of dollars (that's 15 zeroes).  And people tend not to overlook things of value--that's why capitalism works so well, and so efficiently: If it has a value, or could have a value, some capitalist is on it.

The Germans, gloomily processing their tortured history, might be happy becoming poor, and they might even drag the EU with them, but the rest of the world won't agree. The ROW includes, for sure, China and India, as well as other big countries in Asia and Africa.  Most of them, in fact, are still using coal. And #resistance to the long march to the green Finland Station probably also includes the United States, where substantial opinion now regards Al Gore-type greenery as a hoax, or at least a con.  (One needn't have an opinion on the science of climate change to nonetheless be a skeptic on the proffered solutions--most of which seem to involve subsidies to solar- and wind companies.)

So the Directional Investor sees this as a contrarian opportunity--go long on carbon fuels. Soon enough, the politics will catch up, as carbon fuels are protected.  Ideally, we'll have carbon capture, as part of a Grand Carbon Bargain.  With that, we'd have all the appurtenant industries that can come from carbon usage--carbon being, after all, a wonder element.  So a whole second industry of carbon capture could emerge alongside the ongoing industry of carbon extraction.  The value of all this would be in the quadrillions, too.  What goes up must come down--and a good thing.  Here's the circular economy.  

We could even use captured carbon to make islands, as argued here. In fact, there's a whole book, which I have co-authored with Dr. Joyce Starr, outlining the potential of carbon capture to build new things, including peace in the Middle East.  

 

“Go Full Republic” And Find a New Direction

Reacting to the news that the Democratic governor of New Mexico, Michelle Lujan Grisham, has issued an “emergency order” banning the open carry of guns in her state, on September 10, the tweet account TimOnPoint offered a startling prediction/suggestion: 

If the Governor of New Mexico can void the Bill of Rights, what’s stopping the Governors of Idaho and Texas from expelling the FBI and ATF, or Alaska allowing new energy production without the consent of the DoI, DoE and EPA. Let’s do this - go full republic.

That’s a powerful phrase: “go full republic.”  That is, reassert the small “r” republican features of our Constitution, implicit in the whole document, but spelled out explicitly in the Tenth Amendment.   And it’s full of investment implications.  

Imagine: If New Mexico can go its way—and for sure, that’s an if, based on any number of legal and political factors—then why can’t other states go their way?  Why can’t Idaho follow through on its aimed-for annulment of federal gun control laws?  Why can’t Alaska reclaim its sovereignty over energy matters?   Indeed, even if Lujan Grisham is slapped down—the Second Amendment is, after all, a part of the Constitution—what about other states to do other things that are more in the gray zone?   For instance, the regulatory power of the Bureau of Alcohol, Tobacco, and Firearms, and the Environmental Protection Agency is not in constitutional, their power is statutory and administrative—and those are lesser powers.  That is, for the ATF and the EPA, Congress passed a law, and the administrative state has taken it from there—to the point of excess, in the view of the Supreme Court in a quartet of recent decisions.

Sometimes it has seemed as though federal power was a ratchet.  That is, once federal power was gained, it could never be lost.  That was the progressive party line.  But that’s been proven not to be true.   To be sure, federal power was most definitely on the upswing for much of the 20th century, but in the 21st century, governors have been reasserting their powers, on matters ranging from schools to abortion to climate change to sanctuary cities/states.  It’s worth emphasizing that it’s not just red states being anti-federal government, it’s been blue states, too.  As T.S. Eliot once wrote, there are no lost causes—and no won causes.  In the course of human events, everything is always in flux.   

But to say that there’s no ultimate direction—the arc of the universe doesn’t bend any particular way—is not to say that there aren’t directions.  That is, just because we can’t say that there’s a grand ultimate direction doesn’t mean that there aren’t directions in the meantime.  This is the point of Directional Investing: There are plenty of trends, and the trend is your friend.   These trends can be spotted, and sometimes perhaps shaped.  

This author has been writing writing for years that the trend of our time is going to be the further expansion of federalism—or, to be blunter about it, states’ rights.  That is, states making their own decisions, based on their heightened awareness that the federal government makes for a poor one-size-fits-all.   And yes, our small “r” republican government—our Constitution—makes that all the easier, as the states are the natural form of compartmentalization, enabling them to be, as Justice Brandeis wrote nine decades ago, “laboratories of democracy.” 

So what would happen if the states really went their separate ways?  Shaping their own destiny?   If New Mexico could make a ban on guns (at least open carry, although who should doubt that other states would go further if they could) stick?  And if Idaho were to go the opposite way?  And what if Alaska were to go all-out-Palin, on “drill, baby, drill”?  There’d be a lot of diversity, that’s for sure, and also, a lot of economic opportunity, as investors reacted to, and perhaps helped shape, the new rules.  It would help make the laboratories of democracy into laboratories of prosperity.  

To point to one salient opportunity, what if a state were to suspend the onerous regulatory strictures Food and Drug Administration, as I have argued, here and here?   At a time when public confidence in the public health establishment is at an all-time low, now could be the time to strike.   The country as a whole might not be emphatic in its loss of confidence in Big Health, but you can sure bet that many states are.  And that's the the genius of federalism: What's needed is the will of a single state, operating through democratic republican principles, to make a change.   There would undoubtedly be controversy and court challenges and , but then, today, there's controversy and court challenges about everything.  If a state could get out from under the wet blanket of the FDA, imagine the economic boom.  The state being to medicine and medical innovation as Nevada is to gambling.  If you build a medical enterprise zone, they will come. 

So why aren’t we doing it?  Well, maybe we’re in the process of doing that now.  Maybe we are opening our eyes.  Maybe it’s the process described back in the 16th century by the Frenchman Etienne de la Boétie, in his essay, “The Discourse of Voluntary Servitude.”  As the title suggests, the servitude is often in our heads.  One needn’t minimize the power of state power—soldiers, guns, prisons—to nonetheless see that a population suitably animated can find ways to stage a rebellion (hopefully peaceful) against tyrannic power.  As Boétie wrote:

Obviously there is no need of fighting to overcome this single tyrant, for he is automatically defeated if the country refuses consent to its own enslavement: it is not necessary to deprive him of anything, but simply to give him nothing; there is no need that the country make an effort to do anything for itself provided it does nothing against itself. It is therefore the inhabitants themselves who permit, or, rather, bring about, their own subjection, since by ceasing to submit they would put an end to their servitude. A people enslaves itself, cuts its own throat, when, having a choice between being vassals and being free men, it deserts its liberties and takes on the yoke, gives consent to its own misery, or, rather, apparently welcomes it. 

So there we have it.  Some people think the status quo is fine.  And perhaps, nationwide, they're a majority  (although I doubt it).  But the Constitution protects minority rights, and sees the states as a great bulwark of minority rights.  So if, in a state, we no longer consent to the current regime of petty suppression, if we no longer welcome it, we can, working through the states, end our subservience.   And that’s a cause worth winning.  And along the way, there’s be money to be made.  

Update: On September 11, the FDA once against gave an emergency use authorization for a new Covid vaccine.  That is, all the trials and red tape are waived.  It makes a difference that the FDA really believes in the urgency of vaccines, whereas other medicinal drugs, not so much.  

Directional Investing in Art

 The New York Times, August 23, recalls how the Wildenstein art dynasty added value to its product:

Upon Nathan’s death in 1934, Georges steered the family into an era of unprecedented prosperity by building an infrastructure around his artists’ markets. He organized exhibitions, edited an art journal and published definitive catalogs of works by artists in his inventory — Ingres, Fragonard, Chardin. (Daniel would later do the same with Monet, Manet and Gauguin.) The books were well respected and helped market their artists to museums.

This is a kind of Directional Investing.

Introduction to Directional Investing

Directional Investing is a new way of thinking about investing, derived from old and familiar components.  A key theme is the investment adage, “The trend is your friend.” Trends come in two categories: those that can be spotted, and those that can be shaped.  For instance, the blue-red division of the nation is a trend to spot, while the creation of a medical enterprise zone is a trend to shape.   Either way, passive or active, knowing the trend can be a moneymaker.