Sunday, February 26, 2017

Global Warming: The Future Is Now

26 February 2017

As I learned in high school 50 years ago, atmospheric carbon retains energy (in the forms of both heat and motion) on and near our planet's surface. Humans put the carbon there by subjecting carbon-containing materials to combustion. This is known as global warming, the present round of which is caused by human activity. Please go back to your high school science class if any of what I just said is not clear to you. (You do not need a post-high school education to understand global warming.) 

Besides causing melting glaciers and soggy lawns surrounding Florida condos (including the Trump family's wintering grounds), the current human-induced warming is creating a wetter and hotter north. 

Climate change doubles size of lakes in N.W.T. bison sanctuary

Bison are a common sight along N.W.T. Highway 3 between Fort Providence and Behchoko, near the Mackenzie Bison Sanctuary.

Due to other causal factors, global warming (and cooling) have happened many times before on a millennial-to-geological time scale, though never nearly so "exponentially." Many species, humans included, will have to adapt. 

Relocating coastal cities is going to prove very expensive, and northward migrating diseases and increased storm intensity will affect all of us. Shifting mass on continental plates even increases earthquake and volcanic eruption risks. 

Carbon credits and other bureaucratic schemes are equivalent to rearranging deck chairs on the Titanic. Global warming is not a reason to give new powers to governments, which most of us probably agree have too many poorly applied powers already. Obviously as a species, we need to build sturdier homes, invest in infectious disease research (impacting both plants and animals), and, as I do not tire of stating, convert our power grids to fusion energy.

Image result for fusion reactor

Due both to the accelerating rate of change and to positive feedback loops built into the system (which we are only beginning to understand), the impacts of the current warming cycle are becoming more dramatic year by year. You can be alarmed or you can be ready. I suggest that readiness is the wiser response. 

Denial won't make it stop. 

Reallocating our carbon resources to organic molecular synthesis would be a mark of intellIgence at the species level. We know most everything we need to know now to cut this current carbon-combustion cycle short, and we can figure out the rest! The future is now. 

Keep in mind that because we're discussing systems, the warming trend at this point will persist for some time, even if we cut carbon emissions to near-zero. 

Regarding fusion power development, investors wIth a 20-year time horizon for return on investment (profitability will take longer!) will ultimately be the most rewarded ever in history. The funding could possibly be arranged through an income trust structure, which, unfortunately, Mark Carney (the thankfully-departed former Governor of the Bank of Canada, now wreaking havoc on Britain's currency) eliminated in Canada. 

I don't think it would be that difficult to undo Carney's work and set up a specialized income trust to fund this, and Canada has prior experience with this strategy. 

Thus, Canada could become the world's leader in fusion power development. 

The one new ingredient required will be the two-decade time horizon, and some kind of political initiative will probably be required to enable an investment strategy of this kind.

Monday, February 13, 2017

It's Gold's Turn in the Waltz....

13 February 2017 - charts updated 13 July 2017

The ups and downs have been harrowing. There is no other word for it. While the S&P 500 has easily outperformed gold since 2011, the two have been at a draw since December 2015, and gold has more than doubled the SPX (S&P 500 broad US stock index) since 2001 (when the collapse of the tech bubble triggered a renewed search for value and wealth preservation). Further, at least this is my view, stocks are inherently risky in an uncertain world, whereas gold is not --- particularly if you have a longer time horizon. As for the direction from here, I think there is no question that gold will outperform over the next 1-5 years, perhaps dramatically. It's how the two of them dance, and at this point in the exchange, it's gold's turn to shine more brightly still. It's a little bit of a waltz, but there are crescendos................

Just to put it all in perspective, we know in retrospect that the gain in the S&P 500 from 2002-2007 was entirely a bubble (as was the 90s dust-up before that). How moderate does that now appear, in contrast to the Himalayan ascent from 2009 to now? I'm a little at a loss as to how to describe it... The S&P trades at 26x earnings in an era of virtually zero growth. I've seen it called the "everything" bubble. It is fuelled by mad moneyprinting and/or so-called "accommodative" policy (loaning money at near or below-zero rates) in virtually every corner of the world. How can that possibly end well?

As you can see, gold got a little ahead of itself in 2011, and took a breather from Sep 2011 through Dec 2015 (51 months). Gold is now running sprints again, and training for the next marathon. It is the favourite to win.

Keep in mind, the first chart presented shows the gold price divided by the price level of the S&P 500 index. You may or may not recall the fireworks, which were mostly set off between 2007 and 2011. As of right now, another launch is being prepared, and based on the intelligence I receive, this one may actually prove to be another lunar mission (along the lines of 1976-1980, but longer, stronger, higher and more enduring).

We are preparing now for blastoff of the second and stronger stage, possibly as soon as the second half of 2017. 

Image result for moonshot