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How Big Business Is Hedging Against the Apocalypse (nytimes.com)
127 points by enraged_camel 4 days ago | hide | past | web | favorite | 65 comments





The title is misleading as the article doesn't really describe hedging. It gives examples of various individuals and groups who are placing increasing value on technologies and resources related to global warming. Their investments naturally reflect their assessments, which is actually a good thing. If global warming is happening, then price adjustments are needed to encourage conservation, the search for alternatives, and the advancement of needed technologies. This is a beneficial market mechanism where people are incentivized to drive prices up or down based on their best prediction of the future. The government's role should be to provide regulation, penalties, and incentives to prevent conflicts between profit and the public's welfare. As the article points out, the current government role in this area is haphazard and largely unproductive. This situation will surely persist until there is better political agreement on what is happening with our climate.

Global warming itself is an externality, it's not priced by the market. If you buy into solar for example, you profit from the energy it produces (which is disjoint from global warming) and/or from the price put on global warming by a government. The developments are absolutely dependent on the ongoing doomsday hype (the world ends in 12 years you guys!), not global warming itself.

The only thing that I can see the market re-pricing in regards to global warming is land, i.e. you could buy some land in Siberia now because it will be livable in the future. However, that future is so far away it doesn't make sense to buy in this lifetime. Furthermore you could be shorting any business that depends on a stable climate.


There is an enormous number of portfolios that can be constructed to be highly profitable if global warming becomes more widely accepted. There is no need for an actual apocalypse to occur. There just needs to be an increasing awareness that continuing on our current emissions path will lead to disaster if allowed to continue. Those who accept this hypothesis, and invest accordingly, will be helping to avoid an apocalypse. They are the ones who will help drive down the value of things that contribute to global warming, while driving up the value of things needed to combat it. If we are lucky, this process will play out quickly enough that we can avoid irreversible destruction of our environment. Governments could dramatically accelerate the needed changes through appropriate incentives/penalties to make long-term improvements/harms more profitable/unprofitable in the near-term.

Depending where you live, be sure that your homeowners insurance will cost you more. The repricing will happen quicker than you might think.

The US government is aware.

https://www.dni.gov/files/documents/Newsroom/Reports%20and%2...

Scientists employed by the US government leaked drafts of a climate change report out of fear of White House interference.

https://www.vox.com/2018/11/26/18112505/national-climate-ass...


I wrote a similar piece a few years ago:

https://www.bloomberg.com/news/articles/2013-03-07/investors...

There is no hedge against the apocalypse. But some people will create enormous shareholder value during the runup.


> We are, he says, in the midst of a historic period of mispricing. Because the global economy depends on hydrocarbons, practically every asset in the world relates in some way to oil and gas. Grantham believes hydrocarbons will be priced, or regulated, into submission. In light of that belief, not only oil companies’ stock but practically everything else on the market looks falsely inflated.

Good. Let their money burn.


Coal should be the starting point.

>Let their money burn.

Unfortunately, it will not be just "their money" if the economy has a hard time weaning itself off oil and gas. It will be everybody's money, and lifestyle.


Great, let our money burn. Will be worse for those with money to lose!

If only it were. Periods of economic upheaval fall much harder on the poor.

Bring it on, mate. Fucked is fucked, after a point all relativities are pretty meaningless. It would be worth it to see Teslas being reposessed and vacancies in SF high rises.

The flip side of this coin is that there are trillions of dollars of self-interest in ensuring that those resources get mined out and sold.

So if your portfolio depends on the apocalypse, don’t you now have an incentive in expediting it?

Hedging is like insurance against improbable events. Some people, though, have been known to commit insurance fraud.

Only if you look forward to living through it, or your offspring suffering more/sooner.

Your missing the point of view of a large component of GOP support in the USA - if one views the apocalypse as a desired result to per Revelations in the Old Testament, then the second coming of Jesus occurs and the apocalypse happening in Israel is a prerequisite. Cabinet members going back to the Reagan administration openly said this was why the EPA needed to expedite the extraction of mineral resources.

Except the elite won't suffer.

In times of upheaval, musical chairs will be played. As a group, the elite stand little to gain from that.

Except the elite enjoy the status quo.

If you're interested in this area, Oasis Loss Modelling Framework is an open-source effort by the insurance industry to try and understand the risks associated with climate change and other catastrophes: https://oasislmf.org/our-modelling-platform

Or Air Worldwide, or RMS, KatRisk, CoreLogic.

There is increasing recognition by institutional investors that climate change risk is a factor which must be measured and managed. While there are opportunistic trades to be had, the sheer volume of pension fund money slowly shifting to de-risk will have significant impact on industry.

How do I short Miami and New Orleans on a scale of 30 years?

You make a very big assumption - that people don't care about Miami, a city with global name recognition and so on...

I also assume you are not on Instagram, where Miami is huge - it's the 6th global instagrammed city, second US one (London, NY, Paris, Dubai, Istanbul, Miami, LA) - https://www.statista.com/statistics/655550/most-hashtagged-c...

Instead of shorting it you might want to long "defending it".


Please help me understand how care and instagram pictures are going to stop rising water?

The only thing that may help is quickly lowering CO2 emissions worldwide. I think no amount of care, willpower or even unlimited amounts of federal money can save Miami otherwise.


You say that as if Miami's current popularity will preserve through global climate change. I don't think Miami can "defend" against the earth's inevitable climate change for better or worse.

It's going to be pretty hard to defend it. It's built on porous limestone. So water's going to bubble up everywhere - not like defending NYC

I read an article the other day about how Miami residents are mostly not concerned and seem to hold up other places such as Rotterdam who are doing a good job dealing with these issues but not understanding that Miami's geology and hydrology is vastly different and is going to leave them seriously screwed.

I think he means invest in seawall manufacturing companies, as opposed to some bizarre financial instrument that allows you to profit from the demise of an entire city.

As parent mentioned Miami can’t be protected with sea walls because the geology allows water to seep up and will drown the first floor of buildings with any sea level rise

New Orleans has enough vital infrastructure that it isn’t going anywhere. As for Miami, maybe short some REITs based around there or whatever art you think cartel people like to launder money with when they’re done with the banks

Default swaps on state/city bonds (spoiler alert - you can’t)

Bring enough money to a bank with the trade and they’ll make you a market. Probably nothing with that kind of maturity on any exchange.

Explain why?

The thought is that rising sea levels and/or hurricanes will doom them.

Which is a ridiculous thought. Sea levels are going to rise in the span of hundreds of years. You can move the whole city in that time span.

Cities aren't just a collection of buildings. They're like your grandfather's axe.


You might be a little quick with your cavalier dismissal.

https://www.businessinsider.com/miami-floods-sea-level-rise-...

Miami is already being impacted by sea level rise. It is not ridiculous, at all, to think that in <30 years areas of Miami will be uninsurable, and therefore unmortgageable, and the water supply for the entire area will be threatened.


How is Miami being impacted by the 3" of risen sea levels over the past 25 years?

""thermal expansion" of the ocean has contributed about half of the 2.8 inches (7 centimeters) of global mean sea level rise we've seen over the last 25 years, Nerem said. Second, melting land ice flows into the ocean, also increasing sea level across the globe."


hundreds of years? No, by 2050 Miami will be uninhabitable. (https://www.miaminewtimes.com/news/united-nations-climate-re...) Rate of sea level rise is accelerating. (https://climate.nasa.gov/news/2680/new-study-finds-sea-level...) It is not a linear growth curve. Miami is a city scale game of musical chairs. The question is who will be left holding the land when there are no buyers?

In Bangladesh there won't be a place to move the cities to.

"Chaos is a ladder." ?

>Last April, Texas consumed about 25.7 million megawatts of power.

The state of journalism today. Even the august NYT can't afford fact checkers or editors any more.


I see this dichotomy which is really sad to me where many people with really good intentions who deeply care about the world just look at things like this as an opportunity to take pot shots from the sidelines about how evil industry and the capitalists are while thinking they are above it. They fail to understand that they are playing the game of capitalism whether they agree with it or not.

All the while the amoral(note I'm not saying immoral) players in finance and industry(ie smart money) continue to clean house. And at the end of the day it's really not their priority to look out for the environment (nor is it even desirable to have environmental protection and regulations handled by industry).

And so 150 years from now when we're in the Mad max future the compassionate people will get to look back and say "i told you capitalism would destroy the world" while failing to see that it was their responsibility to play the game to make it better.


Capitalism destroys the environment by design. I mean the profit-and-loss equation literally works out to "sacrifice everything". Check out the coast of the Dominican Republic : https://gfycat.com/mistyacrobaticbonobo-r-sciences

The reason you often see images like this in third world countries, but not in first world countries, is that third world countries dump a lot of their trash in waterways/the ocean compared to first world countries. Maybe you already know this, but I think a lot of people see images like this as evidence of the first world fucking over the third world when it's really a local problem.

And, 1st world countries dump their trash in 3rd world countries. Also, they ignore that there 1st world status is fueled by unsustainable development over last couple of centuries.

What third world company do we dump our trash in? AFAIK we sell it to them.

Recently these countries have blocked the import of the trash because it absolutely destroys these countries. The "recycling" companies buy in mountains of trash, pick out a few bits that are profitable and dump the rest somewhere. Currently only a tiny part of recyclables actually gets recycled or downcycled because the rest is cheaper to pull fresh resources out of the ground.

>> AFAIK we sell it to them

That implies there are other buyers who are happy to pay money to take it, doesn't it? That doesn't seem to be happening though:

https://qz.com/117151/us-states-banned-from-exporting-their-...

I suppose some countries agree to take the trash in return for some kind of economic favor from the US?


Yes, not only the western countries dump it in developing countries, they get money for it.

He said nothing about third vs first world. The impact of consumerism is the same everywhere.

Well, no, the impact of consumerism is not the same everywhere - the first world has much more consumerism, but less environmental impact due to higher standards and regulations.

In many senses having an unpolluted local environment is a luxury good that many poorer communities "don't purchase" - i.e. a richer community would choose cleaner air while a poorer community would choose less restrictions on factories because they need these jobs; a richer community would implement proper wastewater treatment because they can afford to divert their resources to that infrastructure, while a poorer community would do without because they choose to spend their resources on more important things they're lacking.


The first world’s consumer goods come from the third world, and the first world trash gets “recycled” in the third world. First world is just exporting its environmental damage to the third world—and does it in a way that makes it look like it’s the third world’s fault.

Its also typical to look at a first world country with a low population and say they aren't the problem because india and china pollute way more without thinking about the fact that india and china pollute far far less per person than the people in first world countries.

consider ocean currents

Yeah, Milton Friedman totally said this and never said a word on effluent taxes.

Dominican Republic isn't exactly a model for capitalism. It scores relatively low by Heritage Foundation Economic Freedom Index:

https://www.heritage.org/index/country/dominicanrepublic


“we are seeing more opportunities than would have been there normally.”

Disaster capitalism at its finest. So the future in fact does look bright for profiting off the collapse where there will be another huge transfer of wealth to those with lots of capital laying around... from those who actually own productive assets and manage them.


I don't think it really hurts anyone that investors are increasingly interested in backing R&D for Zika vaccines or electric cars.

Or the world will wake up and trial those people ?

can't wait for it to happen. Tzar Russia and the French Revolution all over. except it won't be pitch and forks but high-tec weapons vs masses

Since the current world order is a result of those events, I'm not that sure a power shift from an elite to another would solve anything else than just raw hatred towards the privileged few of the day. I'm more inclined to think that a more gradual and evolutionary approach to wellbeing and social justice can be more effective.

Yeah, it was truly a power shift from landed aristocrats to bankers, merchants, and lawyers. Poor people more-or-less stayed poor. And think of it, the entire French Revolution juxtaposed with the Atlantic slave trade and colonialism.

I think you’re right. Progress is a marathon, every minute, every day. And it’s slow.


Those examples both ended way worse than the entity they replaced. Cheerleading for them is turkeys voting for Thanksgiving and psychopathic.

You may be underestimating the power of Guerilla warfare.



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