3 Things 11-8
11/08/2021 Although MAS is a financial services company, not everything published herein will be about numbers or investing. But no matter the topic, we hope for three things: 1) That you find the time you spend engaged worthwhile. 2) That you’ll reach out to us for help in any of our areas of expertise if something we discuss creates an urging in you to do so. 3) That you’ll share this with somebody new each time you read it. Thing One Keep The Big Picture In Mind The excerpt below from investopedia.com recounts the crash of ’29: “The first day of the crash was Black Thursday. The Dow opened at 305.85. It immediately fell 11%, signaling a stock market correction. Trading was triple the normal volume. Wall Street bankers feverishly bought shares to prop it up. The strategy worked. On Friday, October 25, the positive momentum continued. The Dow rose 0.6% to 301.22. On Black Monday, October 28, the Dow fell 13.47% to 260.64. On Black Tuesday, October 29, the Dow fell 11.7% to 230.07.2. Panicked investors sold 16,410,030 shares.” As of Friday, November 5, the Dow was over 36,000. That’s a long way from 305. The chart/big picture below documents the journey from there to here. In doing so it reminds us that, over time, the stock market tends to go up, but not without some drops - sometimes big ones - along the way. That’s in its volatile nature. But if you have the patience (or the guidance from an outside source that you trust) to stick with it when everything in you is telling you to bail out or fire your advisor, you’ll likely benefit from the compounded, inflation-beating returns that long term investing tends to produce. And you would do well to remember that we all need those returns to ensure that we have something left for ourselves and the ones we care about as we get closer and closer to the end of the road.
Some Climate Math
The United States accounts for roughly 15% of the world’s carbon emissions. Of those emissions here in the US, the broad categories of energy production, manufacturing, and transportation each account for roughly one-third of the total. That means the US transportation sector, which includes personal and commercial cars, planes, trains, trucks, ships, and automobiles, accounts for roughly 5% of the world’s carbon emissions (one-third of fifteen percent). And it also means that our energy production and manufacturing sectors are each 5% as well.
In an extreme hypothetical then, where we assume we have some miracle technology that would allow us to do so, we could completely shut down say, the transportation sector in the United States, and we would only have a five percent impact on global emissions. Keep in mind that would have to include not only personal vehicles but everything that moves something.
The same thing goes for the other two sectors considered separately. Shut them down or radically overhaul them and only reduce emissions by 5%. But in the real world, we don’t have any miracle technology yet we are getting more and more extreme in our climate solutions. If everyone drove an electric car in the US beginning tomorrow it would have a minimal impact on global emissions but the purchase price (even with the government subsidy) would rise dramatically.
In a practical example, Germany has been on the extreme end of converting to green energy production for years with marginal climate impact. They have, however, achieved the distinction of being the highest-cost electricity provider in the world. According to the chart below, the German consumer pays more for electricity than any consumer on the planet (at 37 cents per kWh versus 15 cents in the US it is almost 2.5 times more). Yet we have loud advocates making the case for following Germany’s path. Writing in the Wall Street Journal recently, Andrew Fillat and Henry Miller offered a different perspective worth considering:
“Politics seems to have become inimical to critical thinking, and nowhere is this more obvious than climate change. Politicians peddle apocalypse and demand that Americans accept skyrocketing gasoline and home heating costs, rolling blackouts and brownouts, endless subsidies for uneconomic vehicles and power generation, and on and on.
Wishful thinking and flawed assumptions are the order of the day. Climate models assume that humans will fail to adapt to changing conditions, instead allowing floodwaters to rise unabated, wildfires to burn, and farms to fail. The U.S. contribution to global greenhouse-gas emissions is substantial but falling. By 2025, it could be 14% to 18% below 2005 levels. The U.S. should not put on a self-destructive show for the rest of the world.”
To that I would add that nobody wants the world to become uninhabitable – someday - due to human neglect. But nobody should want the world's citizens to needlessly suffer – today - due to supposed mitigation policies that are extreme and shortsighted in practice while appearing to be rational and visionary as they are uttered in emotional, attention-grabbing soundbites.
(Note the statistics in the first paragraph above were taken from a book called Unsettled written by a climate scientist named Steven Koonin)
Thing Three Just A Thought “Don't be afraid to see what you see.” - Ronald Reagan