Business opportunity for warming denialists

by Chris Bertram on December 18, 2006

Reading an article about the current snow shortage in Europe’s ski resorts , I came across the following passage:

“Already banks are refusing to offer loans to resorts under 1,500 metres as they fear for their future snow cover.”

This surely presents a tremendous money-making opportunity for global warming “skeptics”. If the banks won’t lend these resorts money, then there’s a gap which the denialists could exploit and thereby make themselves rich. What could possibly go wrong?

{ 2 trackbacks }

Outside The Beltway | OTB
12.18.06 at 4:09 pm
a crank’s progress :: putting their money where their mouths are
12.18.06 at 4:43 pm

{ 23 comments }

1

Barry 12.18.06 at 2:01 pm

Aside from having to put up and risk their own money, rather than get paid. Ya gotta admit, being a pundit in the USA today is a sweet deal – not only does being wrong not damage one’s career, it probably helps it.

2

Doug 12.18.06 at 2:58 pm

And last winter? The Bavarian Alps got their first substantial snowfall in the first third of November (here in flatlant Munich is was ca. Nov 18) and there was snow on the ground almost continuously until close to Easter. It was one of the longest, coldest winters in quite some time. Half a meter of new snow fell in one day in Munich in mid-March.

If the assumption is that there will never be another snowy season in the European Alps, that’s probably a bad one, and the banks cited are being poor judges. (Not that this is unusual; bankers are herd animals as a rule.) If the resorts looking for money need many consecutive years of record snowfalls to hit their break-even, then of course it’s probably a bad risk. The devil will of course be in the details.

Then of course there’s the potential for global climate change to be hard and rapid enough to break the Gulf Stream, giving much of northern Europe a climate similar to Labrador, along with much, much more snow in the Alps. Maybe it’s the people who think change will be fast and furious who have an opportunity here.

3

Thales 12.18.06 at 3:33 pm

Calls for pundits to put their money where their mouths are are so . . . Julian Simon and Paul Ehrlich, er something. And why stop at loans to ski resorts–there should be a global warming skeptics investment fund (let’s call it the Ostrich Fund, just for a cute nickname). The Ostrich Fund would buy real estate exclusively in coastal areas that the rest of us are dumb enough to think will be flooded and bet against the scientific “wisdom” using funky weather and agricultural derivatives. Any other ideas for prudent, indeed socially responsibile investments for the Ostrich Fund?

4

SF 12.18.06 at 4:11 pm

Thales’ idea is a good one. I think I’ll start a non-profit for investment into warming-dangered areas and collect 50% in administrative costs. Ok, so who is with me?

5

Michael Sullivan 12.18.06 at 4:50 pm

Yeah, it’s cute rhetorically, but rather fails as a substantive argument. Actually, thinking about it, there’s way more investment opportunity for the global warming believers than the denialists, because it’s the believers who are predicting a massive change in the status quo. That’s where the real money is:

Think of all the cheap real estate in North Dakota, Canada, or Siberia. Sure, maybe the winters will stay just as (intermittantly) cold, but the summers are going to get nice, right? Get some land zoned for vacation resorts.

Alternately, find whatever relatively high-altitude land is near cities that are soon to be flooded out. That stuff’s going to be worth millions once everyone has to displace themselves from their current digs.

Short the insurance companies at the beginning of next hurricane season.

I don’t know, I think it would be silly to try to base an argument against global warming on Chris Bertram’s presumed failure to do the above.

6

Matthew 12.18.06 at 5:03 pm

On point 4, there has been quite a bit of investment in English vineyards based on improved climate hopes. I suppose Chris, it depends on what type of sceptic you are – those who don’t believe in warming at all, or those who believe it is happening but it is not caused (or can be changed) by humans.

7

SF 12.18.06 at 5:06 pm

Yeah, it’s cute rhetorically, but rather fails as a substantive argument.


Well, we could make the argument explicit like so
1. If global warming skeptics do not believe there is a global warming trend, then it is rational to for a global warming skeptic to believe that there are investment opportunities…
2. Global warming skeptics do not…
3. Therefore, it is rational for a global warming skeptic to believe that there are investment opportunities…(MP)
There’s a valid argument for you, but is it really necessary to spell such things out? The skeptics, and the wealthy industrialists that promulgate the view, should be consistent in their policy slant and their investment strategy. It’s only rational.

8

Michael Sullivan 12.18.06 at 5:31 pm

#7/sf:

It was hardly my point that Mr. Bertram had failed to be explicit about his argument: rather, that it’s a silly argument. Making the point (unecessarily) more explicit does not make it any less silly.

It’s no more damning for global warming denialists (who, for the record, I think are more wrong than right) to fail to invest in ski resorts than it is damning for Mr. Bertram to fail to invest Canadian real estate or, to take Matthew’s point, English vineyards.

9

Tom T. 12.18.06 at 8:09 pm

Cute post, but there’s probably a correlation between skepticism about global warming and skepticism about European entrepreneurialism.

10

Down and Out in Sài Gòn 12.18.06 at 10:10 pm

Michael Sullivan: actually, I suspect the real market would be for potentially productive agricultural land. It’s pretty cheap and there’s so much of it.

The BBC have a graphic showing the North American wheat belt in 2050. Hint: most of it will now be in Canada.

11

Ginger Yellow 12.19.06 at 5:22 am

Cute post, but there’s probably a correlation between skepticism about global warming and skepticism about European entrepreneurialism.

I would have gotten away with it if it hadn’t been for those communist ski resort owners?

12

Daniel 12.19.06 at 6:22 am

presuming that Chris is still a member of the Universities Superannuation Scheme, he has aquite a substantial allocation to a variety of investments which have been made on the basis of protecting the fund against the risk of climate change (the USS was even a founder member of the Enhanced Analytics Initiative aimed at helping to identify such investments). So where’s yer money noo, Sullivan?

13

Alex 12.19.06 at 6:51 am

As it seems to be rough consensus that the weather in Europe will get more variable around a warming trend, even the good ski winters like last year won’t help much. Think about it: after a crappy winter like this one, the tourists won’t come next year, and even if it does snow you’re out of pocket – and if they decide that it snowed last winter, and they’ll come for their next holiday, regression to the mean suggests they’ll be disappointed.

14

ajay 12.19.06 at 6:53 am

sullivan: Actually, thinking about it, there’s way more investment opportunity for the global warming believers than the denialists, because it’s the believers who are predicting a massive change in the status quo.

Not necessarily. Given that a belief in global warming is the conventional wisdom, it’s likely that the market will already have priced its effects in.

Similarly, I won’t be able to make millions by shorting natural gas for summer 07, on the belief that demand will drop because of the warmer weather. Even though I am a firm believer in this massive impending change in regional temperatures, I can’t profit from my belief, because it’s shared by everyone else.

15

John Quiggin 12.19.06 at 7:37 am

I was just about to post on the same lines as ajay. The report indicates the market has priced in global warming, and, assuming market efficiency, this applies just as much to British vineyards as to Swiss ski slopes (if not, there’s an arbitrage opportunity for anyone clever enough to cut the necessary deals, regardless of which way global warmign turns out).

So the only profit option here is for the skeptics, as Chris says.

16

Slocum 12.19.06 at 8:04 am

But, hey, wouldn’t that be a business opportunity for Kyoto optimists (who believe climate change will be successfully addressed by international agreements, thus sparing low-altitude ski resorts)?

Personally, I think warming is happening, but the effects will be much less severe than the nightmare scenarios. I further think that the chances of international treaties reducing carbon emissions globally and much more strictly than Kyoto are unlikely given the state of international and national politics. Kyoto signatories are largely missing their targets, and the EU countries are handing out carbon credits like they’re printing money thereby subsidizing their domestic industries:

http://www.iht.com/articles/2006/11/27/business/emit.php

The latest prediction is for huge windfall profits for European airlines:

http://news.bbc.co.uk/1/hi/business/6189025.stm

Does anybody really expect France, for example, to stop looking for ways to turn carbon policy to the advantage of its domestic economy and ‘national champions’?

I have more hope for technical changes, simply because they require no global political cooperation. Low cost, high efficiency solar power or new thorium reactor technology can spread across the globe and be adopted broadly without any politics.

But I don’t know how make a financial bet on all of the above — so I think I’ll stick with index funds for my 401K.

17

Alex 12.19.06 at 9:15 am

But, hey, wouldn’t that be a business opportunity for Kyoto optimists (who believe climate change will be successfully addressed by international agreements, thus sparing low-altitude ski resorts)?

No. As reducing CO2 emissions has a lag, you’d still be fucked – the market, after all, can stay irrational longer than you can stay solvent.

18

Grand Moff Texan 12.19.06 at 11:57 am

there’s probably a correlation between skepticism about global warming and skepticism about European entrepreneurialism.

Yes, and in Texas we refer to that happy affinity as “the trailer park.”

Also, can I just note the delicious “irony” (as in “not really irony”) of a poster named “Thales” commenting on flood-plain planning?

I can’t? OK, I won’t.
.

19

Michael Sullivan 12.19.06 at 12:40 pm

ajay:

Not necessarily. Given that a belief in global warming is the conventional wisdom, it’s likely that the market will already have priced its effects in.

Good point, though I think that there is always going to be a strong holdout segment that will play to the status quo, regardless of the popularity of theories of change. (The buggy-whip manufacturors, as it were).

So I guess the real money’s in believing in change that’s either more or less severe than the conventional wisdom, preferably more (and being right). That way, you’re going for investments that are undervalued by both the holdouts and the mainstream.

20

Grand Moff Texan 12.19.06 at 5:17 pm

Chris Bertram will also be interested in this.
.

21

Scott Ahlf 12.19.06 at 7:00 pm

Come now Ostriches, investments are going to be on the bottom of your list if the expected conditions emerge.
Entropy will be much more fascinating, and pertinent to your survival, along with hunter gathering skills–
Of course, we could have a “soft landing” and everyone will apply
reason, wisdom and intelligence to the situation, as Goldilocks gets the transition “Just right”–
What are the odds? Want to bet on that many feedback loops?
Scott

22

JH 12.20.06 at 7:19 am

I’m not sure this is really eveidence of global warming. Ski resorts in the European Alps

23

Michael E. Sullivan 12.21.06 at 8:39 am

Note: different Michael Sullivan here (I think I comment more often than the other guy). I’ll see if I can remember to put my middle initial into comments here to differentiate.

I don’t think my namesake is correct about alternative investments for non-skeptics for the reasons ajay and jq make clear.

But he’s still correct (IMO) about the lack of skeptic’s investments saying very little about the real belief in their claims.

Effects that far into the future have little relevance financially, given that we can make normal investments with expected returns in the 4-12% range. The future more than 30 years away is discounted to almost nothing. So warming would have to stall enough within the next 30 (really 10-20) years to convince alarmists for skeptic based investment made today to profit. How likely is that?

Also, the more reasonable skeptics are not particularly skeptical about warming per se, only about the most alarming predictions thereof, and damages therefrom, and about the value of pursuing proposed remedies in the present. These folks don’t really have much investment opportunity, since the most alarming predictions are not likely to be priced into the market.

The real money to be made if the (non-insane) skeptics are right is in the technologies which will make future cuts or remediation much cheaper than implementing Stern’s recommendations today. But those are either nonexistent or in their infancy today, and are thus both very risky and extremely difficult to bet on profitably without a great deal of domain knowledge.

Simple swaths of bets on the whole possible domain for climate tech at this point are likely to include organizations who are working the in wrong (according to skeptics) direction, and mostly those who will prove irrelevant to the issue.

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