'As oil crashes, is it time to short solar stocks?’ Gosh, I wish I’d read that headline a year ago. The solar stock it tipped for doom in January 2015 has since plummeted from $19 to $2.65.
Yes, hindsight can be a wonderful thing. But what if there were an area of the markets which you knew to be grotesquely overvalued as a result of ignorance, dishonesty, and false sentiment? You’d be mad not to bet against it, wouldn’t you? It would hardly be gambling: more like plain common sense.
This is how I’ve felt for quite some time about the climate change industry. Very often when I read the expert commentators writing on the subject in the City pages, I’m shocked by how much more I know than they do. Invariably — and the same goes for financiers and big corporates — their opinions rest on assumptions that man-made global warming is real, that renewables are a viable alternative to fossil fuels, that the data hasn’t been fiddled, and so on. But if all these premises are false, what then?
Well that’s where my new hedge fund comes in. When I say ‘my’ hedge fund, I mean the start-up to which I’ve just ‘donated’ on the internet. It cost me $75 for a single share in its management company, which I don’t think is going to make me rich. But it’s the principle that matters. This, as far as I know, is the first investment vehicle explicitly to bet against the climate change ‘consensus’. And it’s about time — on the Big Short principle — that the good guys called this rigged market’s bluff.
Up until now the bad guys have made all the running. The annual climate change industry is worth roughly the same as the online shopping industry: $1.5 trillion. But where one performs a valuable service, giving people more of what they want, more cheaply and efficiently, the other does the exact opposite. It’s a racket, a form of state-sanctioned organised crime. Given the choice, no one — save perhaps the odd, bearded poi enthusiast — would spend a penny of their income on wind turbines, solar panels, research grants for dubious climate science projects, local council sustainability officers, et al.
Climate change is a Potemkin industry; it’s the very emblem of crony capitalism — entirely dependent for its existence on favours granted to rent-seeking troughers by the political class. As Warren Buffett famously said: ‘We get a tax credit if we build wind farms. That’s the only reason to build them.’
At the height of the scare, three main reasons were advanced to justify this outrageous scam. First, that the world appeared to be warming at an unprecedented and potentially catastrophic rate due to anthropogenic CO2 emissions. Secondly, that fossil fuels needed replacing anyway so as to give future generations a viable energy alternative. Thirdly — more on this in another column — that there was a phenomenon called ‘ocean acidification’ whereby carbon dioxide was apparently killing our seas.
Not one of these rationales holds up any more. There has been no global warming since 1998 (making a nonsense of all the computer models predicting there would be). The oil glut has shown that fossil fuels aren’t running out any time soon. Ocean acidification appears to be yet another alarmist junk science meme. What this means is that we have a $1.5 trillion global industry predicated on an entirely spurious proposition: that the harmless trace gas carbon dioxide is a menace that needs regulating out of existence.
If carbon dioxide is not a threat — and it isn’t — the implications are enormous. For one thing, it means all the (heavily CO2-weighted) computer models predicting what global climate is going to do next are fatally flawed. For another, it means the taxpaying public are going to grow increasingly impatient with green taxes, regulations and subsidies being hurled at a problem they can see is imaginary. Meanwhile, ‘developing’ nations like China and India are going to go on burning fossil fuels like there’s no tomorrow.
How then, if you were a canny investor, would you take advantage? Well I’m personally not qualified to make any recommendations. But here, as I understand it, is the fund’s strategy.
Part of it will be to take long positions in undervalued fossil-fuel stocks and short positions in overvalued renewable energy stocks whose price — in theory anyway — ought to plummet as the subsidies dry up. The fate of Solyndra — the US company which Obama subsidised to the tune of $500 million and which then collapsed — offers some encouraging precedent here. As does that of its Spanish near-equivalent, Abengoa.
Another, more complicated part will be based on enforcing due diligence through judicial review. Suppose — on the basis of demonstrably flawed science — a local council has declared a coastal area a no-build zone because of rising sea levels. Well clearly there’s a lot of hidden value there which could be realised if a court were to overturn the council’s decision.
Finally, there’s global cooling. If, as the Cool Futures Fund’s in-house experts believe, we’re entering a period of low solar activity akin to the Little Ice Age, then we’re in all manner of trouble: it will affect everything from the latitudes at which wheat can be grown to the kind of places we’ll wish to live in or go on holiday. But there will, of course, be opportunities amid the gloom: farmland will become more valuable; land reclamation in temperate zones will become a lucrative prospect; agricultural technology will become more pressing; and so on.
Look, it all may come a spectacular cropper, as so many hedge funds do. But if it does succeed, it will represent a massive triumph for the little man, not to mention honest science and free markets, over the dark forces of Enron-style post-capitalism. Check out their website and judge for yourself — it’s at www.coolfuturesfundsmanagement.com.